The Entry Decision Tool A process for identification and evaluation of new business areas

Abstract: Ever since Scalado was founded in the year 2000, the company has grown remarkably fast compared to other mobile software companies. Today the company has a turnover of about SEK 150 million and is one of the largest middleware companies in the mobile phone industry. Scalado’s core business lies within mobile imaging solutions and their technology is present in more than 600 million mobile phones. Aggressive growth plans in combination with a strong technology and a unique position in the industry eco‐system made Scalado realize that there were significant opportunities in entering new business areas. However, a company usually has limited resources and cannot enter all possible new markets at once. As a consequence, the company was in need of a way to identify, evaluate and select new business areas. It was in this context that this master’s thesis came to being. There are numerous aspects that are necessary to take into account when making an entry decision. By creating a structured process with clear phases, including instructions and well‐defined input and output for each step, the risks to miss out on important aspects decrease. Thus the entry decision reaches higher quality. The entry decision tool was created to fulfill this goal and consists of five steps starting with a situation analysis. This step generates a general understanding of the company’s capabilities and its business environment. In the second step a workshop is conducted, where key employees generate concepts and sketch on business models for new business areas. After this is done, the business models are evaluated and analyzed. In step three the industry specific factors are accounted for, answering the question: is the targeted industry attractive at all? Step four, accounts for company specific factors, answering the question: does the company have a chance to successfully compete in the new market, given its current resources and competences? The last step focuses on which strategic approach the company should choose on the new market, given that entry would be favorable. The question of entry into a new business area is often a complex one. This tool provides a structured approach to the problem with the main goal to identify and evaluate possible alternatives. The tool pinpoints key areas and factors affecting the possibility of success on the new market. The outcome of the five‐step process is a desired strategic position on the new market, including key strategic elements of this position. It will not include how this position should be reached. Due to the complex cause effect relationships in this kind of questions, the analysis in each step will be of qualitative character. Even though this tool was developed with Scalado as the studied object, it is intended that the tool should be applicable on any arbitrary company. Since the decision process is based on a generic decision model and each step is developed using literature in the field of strategy and the entry problem in general, this tool is believed to be generic and applicable on any company.