growth possibility on centralized segments?

Ah, I love this question!

As Francesco notes, you can really make the case for either. Ultimately, a consolidated market isn't inherently good/bad. Ultimately a fragmented market isn't inherently good/bad.

You need to:

1. Take clues from the case
2. Take clues from the interviewer
3. Present a view and support it
4. Be flexible (i.e. ultimately do what the interviewer wants)

Again, remember that one is not necessarily more attractive than the other!

The best thing to look at, in realitty is expected margins, expected market share, and cost/difficulty to enter. That's what really matters. That said, there are a few pros/cons with each...

CONSOLIDATED MARKET

Cons:

• Presumably very high barriers to entry
• When entering you will have low buyer + seller power compared to the dominant players
• Prone to "bullying" by incumbents

Pros:

• Incumbents are likely "weak". I.e. they're not operating as effeciently as possible (High Costs)
• Incumbents are prime for disruption (Missing out on Revenues)
• If you win, you dominate

FRAGMENTED MARKET

Cons:

• Unlikely to "win" outright
• Expensive to win/stay in the market
• Constant competition...if you reach the top, you may not stay there
• Low margins likely

Pros:

• Low barriers to entry
• Huge opportunity to dominate via market size gain...either through aggressive organic growth or M&A
• Market is likely in the growth phase, representing opportunity for strong future profits

Hi Mersedeh,

Thanks for solving my case! In terms of your question:

Q: Why not focusing on capturing the market from the fragmented segments where AV market share is less?

The concentrated segments (0-20 and 21-30) are the ones where the client has the lowest market share compared to the average player. Consequently, a candidate could formulate the hypothesis that these segments could be the most attractive if it is possible to match the gap.

On the other hand, as mentioned in the case, a candidate may also state the hypothesis that some of the fragmented segments could be promising (eg the 61+).

Whatever the hypothesis, as indicated in the solution, in order to verify it the candidate should ask about the size and expected additional market share that could be achieved in the segments.

Hope this clarifies,

Francesco

The answer to this is the core of strategy. It really depends. If the source of competitive advantage is the same across segments, definitely yes. If it is not… it may be easier (and more profitable) to double down and completely capture those segments.

I've worked for a company that decided to completely own a couple of specific niche segments. They created a incredible “cash cow” by doing so. They invested more than competitors and drove them out of the market. 

The same investment trying to “catch up” in other segments would never produce the same kind of outcome.

In other instances, it could be possible that 40-50% is a real ceiling in that market, and focusing on other segments makes more sense.