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Introduction
One of the biggest challenges companies face is the
ability to grow or expand into new business markets. Our
clients need to identify whether their prospective
markets can sustain additional entrants and whether
their organization has the abilities to enter new
territories.
These endeavors can be costly in terms of the required financial and labor resources,
and often times the expertise or knowledge is not
available internally. The
Shpigler Group specializes in providing the necessary
assistance, gainful knowledge, and proven results when
evaluating new opportunities in new markets.
Situation
Our client, a competitive local exchange carrier, was
considering a large market expansion strategy by
extending services beyond its focus in enterprise
telecommunications services to the residential
access field. A strategic partner was engaged and a plan
was put forth to enter a new portion of the market.
Complication
While the business potential was strong, the market
entry would entail taking on significant risks. The
carrier had never had any prior experience in the retail
broadband arena, and this endeavor would require a new
set of marketing and customer capabilities. Furthermore,
the financial requirements needed to fund the deployment
would be high and would require strategic external
financing.
Research
In order to better evaluate the market potential, the
overall service territory was segmented into over 100
individual submarkets, each with its own set of market
characteristics. To develop a complete understanding of
each segment of the service territory, our analysts
embarked on a campaign to gather detailed demographic
information on both the residential and business
communities. At the same time, we embarked on a research
campaign to understand the competitive intensity within
each region. Finally, we conducted a market research
study to develop a view on the likely penetration rate
for each submarket under review. By viewing the
projected penetration rates matched against market
density, we were able to identify the areas that offered
the best chance for success.
Analysis
Once the details of the service territory were gathered
through an extensive market research and data collection
effort, it was then time to turn our attention to the
business case. The overall market potential was immense
-- but so was the potential investment
required to cover the entire area. To justify the
capital investment to the client’s executives and Board
of Directors, analysis was required to
quantify the revenue potential and then to determine if
the customer activity could justify the level of capital
and operating expense needed. By combining a detailed
deployment plan with our market research, we were able
to quantify the likely market potential over time.
Problem Solved
While projecting customer counts was a start, it was not
enough to justify the business case; we needed to
evaluate all of the elements of the operation of the
business. This involved a detailed analysis of all of
the elements of the business: revenue, operating
expense, capital investment, financing issues, and
others. A detailed business model allowed us to identify
the optimal market approach -- one that offered the
company’s investors an opportunity to generate activity
projected to create $72 million in value.
Result
Once the value was found in the market approach, the
client made the decision to move forward with plans to
enter into the retail broadband market. A senior
executive who was experienced in the consumer ISP market
was brought on board, and an entire team was formed to
pursue the opportunity. The opening of local sales field
offices was combined with a splashy marketing campaign,
resulting in customers lining up for service. By
choosing markets wisely, this telecommunications
provider had a large waiting list of customers
interested in the service. Plans to enter new markets
are proceeding, and the relationship with their
strategic partner has allowed for lower deployment costs
and rapid market entry.
To receive more information on this topic, please visit
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