Gaming Company

C: Is there any specific objective that the client is looking to achieve in the new market?

I: They want to quadruple their top line in the next 3 years

C: Okay, I'd like to ask a few questions about the client. What function exactly does our client perform? What kind of games are we talking about? Where are they currently based out of and since when?

I: They are involved in the entire pipeline from ideation, development to last leg marketing of the games. The games are all mobile applications. You can take the example of candy crush, temple run etc. They currently operate in Australia.

C: Have they launched their application in Australia? If yes, how is it performing. How competitive is the market?

I: They have launched. They are among the top 5 in terms of rating.

C: Lastly, what is their target customer base? Are they paid applications?

I: Its not particular, basically everyone who has a smart phone. They are partly paid.

C: Got it. To enter a new market, there'll be a variety of factors that need to be considered. First and foremost, the regulations and any upfront barrier in entering the market say for the technology used or the platform used for accessibility.
Next, I would like to look at the market attractiveness by evaluating the market size (of the desired population), our potential market share (basis the existing competition in that country) and the market growth.
Once this seems attractive, I'd like to evaluate the operational and financial feasibility of this opportunity. Lastly, it is also important to consider the risks- social, political, technological, economic etc

I: What kind of economic and social risks are you talking about?

C: In economic risks, I intend to highlight aspects like foreign exchange risk which would matter even more when these applications are paid, inflation, tax policy, purchasing power to name a few.
About the social risks, we should consider factors like cultural difference (in case the games have any unintentional bias against someone/something), customer perceptions, demography, lifestyle etc.

I: Is there anything else you would like to consider?

C: For mobile applications as mentioned, customer loyalty is a really important factor. Besides, market survey about existing games and the public response to them should be considered.

I: Okay. How would you estimate the market size?

C: There can be multiple ways to go about it. Since its already an established market in most countries, we can take proxy figures from existing competitors in those countries. Else, we can eiher estimate for a city/ state and extrapolate that to the entire country or estimate for the entire country as well.

I: Let’s say you have to estimate for the country, what factors would you consider?

C: I can use two methods- one is supply side approach where we can deduce through existing data. The other is demand side approach where we can follow a top down approach. I would start with Population density, divide them on the basis of areas they live in- typically rural and urban. Bifurcate that on the basis of age, accessibility to smart phone, internet and electricity penetration, games installed and lastly the different kinds of games. Once that s done, we can see what kind of games meet our match and that will give us the market size.

I: Okay so you have shortlisted two countries, say X and Y. I have some data. Use that to deduce your conclusion
In X, 200 mn people play games of which 35% pay for them. The same is 100mn and 25% for Y. The average amount paid per year per person is $300 and $25 respectively and the growth rate for the next 5 years is 15% and 40% respectively.

C: Alright. I would like to calculate the potential revenue for our client in each of these countries. Since our objective was to raise top line in the next 3 years, I would consider the growth rate for 3 years only.
In X, Revenue is 200mn*.35*300*(1+.15)^3 = 31,938 ~ 32,000 and for Y, revenue is 100 mn*.25*25*(1+.4)^3 = 1715 ~ 1700
Hence, clearly the financials are stronger for country X.

I: Anything else you want to add?

C: Once we have decided which country to enter, we can look at the various options in which we can do the same- organically or inorganically. That would mean exploring options like Joint venture, partnership, merger or acquisition and so on.

I: Sure, thanks a lot.