Market Attractiveness actually given?

Question

Hey,

the solution stresses several times that the market is attractive regarding size.

However the market is 100% saturated. All 500k caskets demanded each year have a company delivering them. We have no indications about growth.

So based on the information given, entering the market results in cutthroat competition. Each market percentage gained is lost by another player. Thus high marketing expenditures and resistance from existing players should be expected.
Shouldn't the takeaway from this be that the market shows low potential to win?
Or does the size and profitability justify the risk of entering?

Kind regards

Answer 1

Hi Richard,

Be careful here. You can't just say "all 500k caskets demanded each year have a company delivering them". This isn't how economics or supply/demand works...it's a scale.

Rather, 500k caskets are currently produced and sold at x price.

If a new entrant comes in, they'll either sell at the same price but take over market share from someone OR they'll sell at a lower price and raise the supply/demand meeting point (to, say, 600k).

The market is not "100% saturated" in this case.

Answer 2

Hey,

I agree with Ian, the market is not 100% saturated - at the beginning of the case solution you can see that the current usage of caskets is 50%, that actually means thath there is another 50% untapped that a new entrant could target, investigating why they are not using caskets now