Should We Enter a New Market? The ₹500 Crore Expansion Decision

A consulting case study on market entry, TAM/SAM/SOM, competitive analysis, investment decisions, break-even, and strategic thinking

The Case

You are sitting in the office of the CEO of BrewVista, one of India's fastest-growing premium coffee chains.

The company currently operates 420 stores across India.

The business is profitable.

Revenue is growing.

The brand has strong customer loyalty.

Now the CEO wants to take the company international.

The proposed destination?

Dubai, UAE

Management believes Dubai could become the company's gateway to the Middle East.

The CEO has one question:

"Should we invest ₹500 crore to enter Dubai?"

Your consulting team has been given four weeks to make a recommendation.

There is no obvious answer.

Dubai has:

• High disposable income
• A strong café culture
• Large expatriate population
• Significant tourism
• Premium retail locations

But it also has:

• High rents
• Strong competition
• Expensive labor
• Established international coffee brands
• Different customer preferences

Your job is not to prove that Dubai is attractive.

Your job is to determine:

Is the opportunity attractive enough to justify ₹500 crore of investment?

Part 1 — Don't Start With "Yes" or "No"

An inexperienced consultant might say:

"Dubai has lots of coffee shops, so let's enter."

That's not enough.

We need a structured framework.

Our issue tree:

                 MARKET ENTRY
                      │
       ┌──────────────┼──────────────┐
       │              │              │
    Market          Economics      Competition
       │              │              │
   Size/Demand     Investment     Existing Players
   Growth          Revenue        Differentiation
   Customers       Costs          Market Share
       │              │
       └──────────────┼──────────────┘
                      │
                    Risks
                      │
               Recommendation

We will answer five questions:

1. Is the market attractive?
2. Can BrewVista win?
3. Can the business make money?
4. Is ₹500 crore justified?
5. Should management enter?

Part 2 — Understand the Market

Before investing ₹500 crore, we need to understand the opportunity.

Our research team estimates the relevant premium café market in Dubai at approximately:

₹4,000 crore annually

Suppose BrewVista believes it can realistically capture:

5% market share

Then potential annual revenue is:

₹4,000 Cr × 5%

= ₹200 crore

At first glance, that doesn't look particularly exciting.

You are investing:

₹500 crore

to eventually generate:

₹200 crore annual revenue.

But revenue isn't profit.

So we need to go deeper.

Part 3 — TAM, SAM and SOM

This is where consultants use one of the most important market-sizing frameworks.

TAM — Total Addressable Market

The entire theoretical market.

For example:

₹10,000 crore

if we include every type of coffee and café customer in the broader region.

SAM — Serviceable Available Market

The portion BrewVista can realistically serve.

Suppose premium cafés represent:

₹4,000 crore

That's our SAM.

SOM — Serviceable Obtainable Market

What BrewVista can realistically capture.

If management believes it can achieve:

5%

then:

₹4,000 Cr × 5% = ₹200 Cr

Therefore:

SOM = ₹200 crore annual revenue

This distinction is critical.

A common business mistake is saying:

"The market is worth ₹10,000 crore."

That doesn't mean your company can generate ₹10,000 crore.

Part 4 — How Many Stores Do We Need?

Now the CEO asks:

"How many stores would we need to reach ₹200 crore?"

Suppose an average mature BrewVista store generates:

₹2 crore revenue per year.

Then:

₹200 Cr ÷ ₹2 Cr

= 100 stores

So the strategy would require approximately:

100 stores

to reach the ₹200 crore revenue target.

But opening 100 stores isn't cheap.

Part 5 — Calculate the Investment

Suppose the estimated investment per store is:

For 100 stores:

₹2.5 Cr × 100

= ₹250 crore

But management has budgeted:

₹500 crore.

Why?

Because the remaining investment is expected to fund:

• Regional headquarters
• Marketing
• Supply chain
• Warehousing
• Hiring
• Technology
• Initial operating losses
• Contingency
• Corporate overhead

Now the economics become more interesting.

Part 6 — Revenue Isn't Profit

Suppose mature stores achieve a:

20% EBITDA margin

At ₹200 crore revenue:

₹200 Cr × 20%

= ₹40 crore EBITDA

The CEO invested:

₹500 crore

to generate approximately:

₹40 crore annual EBITDA

That's an 8% EBITDA yield on the investment before considering taxes, depreciation, financing costs, and other factors.

Is that attractive?

We need more information.

Part 7 — The Break-Even Question

The CEO asks:

"When do we recover our investment?"

If annual EBITDA reaches ₹40 crore:

₹500 Cr ÷ ₹40 Cr

= 12.5 years

That's a very long payback period.

But this calculation is simplistic.

Stores don't become fully mature immediately.

Let's model the ramp-up.

Part 8 — Store Ramp-Up

Suppose stores perform like this:

New stores need time to reach maturity.

This means the company won't immediately generate ₹200 crore revenue.

That's why timing matters.

Part 9 — Competition

Now we investigate the competitive landscape.

Dubai already has:

• Global coffee chains
• Premium independent cafés
• Specialty coffee brands
• Local café concepts
• Hotel cafés
• Convenience-driven coffee outlets

BrewVista cannot simply enter and say:

"We also sell coffee."

The consultant asks:

Why would customers switch?

Possible differentiation:

Option A — Price

Compete on affordability.

Option B — Premium

Compete on quality and experience.

Option C — Indian Identity

Build a premium Indian-origin café brand.

Option D — Technology

Create an extremely convenient digital ordering and loyalty ecosystem.

Option E — Hybrid

Combine premium coffee with Indian flavors.

Part 10 — The Positioning Question

Suppose BrewVista's research identifies three major customer segments.

Trying to serve everyone is dangerous.

The consultant recommends initially targeting:

Professionals + coffee enthusiasts

Why?

They have:

• Higher spending capacity
• Higher frequency
• Stronger willingness to pay
• Greater potential lifetime value

This gives BrewVista a more focused entry strategy.

Part 11 — The Hidden Problem: Rent

The financial team identifies a major concern.

Premium locations have extremely high rent.

Suppose store economics look like this:

EBITDA:

20%

The business works.

But what happens if rent rises?

Suppose rent becomes:

20%

instead of 15%.

EBITDA falls from:

20% → 15%

At ₹200 crore revenue:

₹200 Cr × 15% = ₹30 Cr EBITDA

Now payback becomes:

₹500 Cr ÷ ₹30 Cr

≈ 16.7 years

The investment case is becoming significantly weaker.

Part 12 — Sensitivity Analysis

This is where consultants become more useful than simple forecasts.

We don't ask:

"What is our forecast?"

We ask:

"What happens if our assumptions are wrong?"

Consider three scenarios.

Now the CEO can see the range of outcomes.

The investment isn't simply:

"₹500 crore → ₹40 crore."

It could produce dramatically different results depending on:

• Market share
• Store productivity
• Rent
• Labor costs
• Pricing
• Customer adoption

Part 13 — What If We Don't Open 100 Stores?

This is where strategic thinking becomes interesting.

Instead of immediately investing ₹500 crore, what if BrewVista tests the market?

Pilot Strategy

Open:

10 stores

Initial investment:

10 × ₹2.5 Cr = ₹25 crore

Plus:

• Marketing
• Headquarters
• Supply chain
• Hiring
• Technology

Suppose total pilot investment:

₹50 crore.

Now the company can test:

• Customer demand
• Pricing
• Store locations
• Menu
• Product-market fit
• Customer acquisition cost
• Store economics
• Brand positioning

before committing ₹500 crore.

This dramatically reduces risk.

Part 14 — The Real Option

The pilot creates something valuable:

The option to invest later.

BrewVista doesn't have to make:

₹500 crore decision today.

It can make:

₹50 crore decision today.

Then, based on evidence:

Go → Scale

or

No-Go → Exit

This is often much better than making a huge irreversible investment immediately.

Part 15 — The Consultant's Recommendation

After analyzing:

• Market size
• Customer segments
• Competition
• Store economics
• Investment requirements
• Break-even
• Risks
• Sensitivity
• Pilot economics

we recommend:

DO NOT INVEST ₹500 CRORE IMMEDIATELY.

Instead:

Enter Dubai through a ₹50 crore controlled pilot.

Open approximately:

10 strategically selected stores

over 18–24 months.

Then evaluate predefined KPIs.

Part 16 — The Pilot Scorecard

Before opening the first store, management should define what success means.

For example:

Store Economics

• Revenue/store ≥ ₹1.8 Cr
• EBITDA margin ≥ 18%
• Payback period ≤ 5 years

Customer

• Repeat customer rate
• Average order value
• Customer acquisition cost
• Loyalty membership

Operations

• Labor cost %
• Food cost %
• Rent %
• Delivery contribution

Brand

• Customer satisfaction
• Social engagement
• Brand awareness

If the pilot meets the thresholds:

Scale.

If it doesn't:

Stop or redesign.

Part 17 — The Final Boardroom Answer

The CEO asks:

"So, should we enter Dubai?"

A weak consultant says:

"Yes, because Dubai is a growing premium market."

Another weak consultant says:

"No, because competition is too high."

The strong consultant says:

"The market appears attractive, but the economics do not justify committing ₹500 crore upfront. We recommend a ₹50 crore pilot across 10 stores. If the pilot demonstrates the required store-level economics and customer adoption, we should scale toward the larger investment."

That's a much more defensible recommendation.

The Consulting Lesson

The question wasn't:

"Is Dubai a good market?"

The real question was:

"Can our company profitably win in Dubai at an acceptable level of risk?"

That's a completely different question.

Framework to Remember

For a market-entry case, remember:

              MARKET ENTRY
                   │
        ┌──────────┼──────────┐
        │          │          │
      Market    Economics  Competition
        │          │          │
      TAM        Revenue    Players
      SAM        Costs      Positioning
      SOM        Margin     Advantage
        │          │          │
        └──────────┼──────────┘
                   │
                  Risk
                   │
              Entry Mode
                   │
          Pilot / Scale / Exit

Then ask five questions:

1. Is the market attractive?

2. Can we win?

3. Can we make money?

4. What could go wrong?

5. Can we test the hypothesis before making a massive investment?

That final question is often overlooked.

Case Interview Challenge

Now it's your turn.

Imagine an interviewer tells you:

"A successful Indian restaurant chain with 300 outlets wants to enter London. The CEO is prepared to invest ₹300 crore. Should they do it?"

Before reading the solution, try to structure the problem yourself.

Ask:

Market

• How big is the market?
• Who are the customers?
• How fast is it growing?

Competition

• Who are the competitors?
• What is our differentiation?

Economics

• Revenue per restaurant?
• Food costs?
• Labor?
• Rent?
• EBITDA?

Investment

• How much does each restaurant cost?
• How many stores are required?

Risk

• What if demand is lower?
• What if costs are higher?

Strategy

• Full-scale launch?
• Pilot?
• Partnership?
• Franchise?
• Acquisition?

And finally:

Go, No-Go, or Pilot?

That's how you should approach a market-entry case in a consulting interview.

What You Learned From Case 02

This case introduced:

• Market sizing
• TAM
• SAM
• SOM
• Revenue forecasting
• Store economics
• EBITDA
• Break-even analysis
• Sensitivity analysis
• Competitive positioning
• Customer segmentation
• Pilot strategy
• Risk management
• Go/No-Go decisions

The deeper lesson is:

A good strategy isn't just about maximizing upside. It's about creating upside while controlling downside.