IIMA Casebook 2016-17 (3rd Edition).PDF

CASEBOOK CONSULT CLUB IIM AHMEDABAD SEPTEMBER 2016

Issue Details and Copyrights Casebook, Consult Club, 3/e ©2014 by Consult Club All rights reserved. Notice No part of this publication may be reproduced or transmitted in any form or by any means – electronic or mechanical, including photocopy, recording or any information storage and retrieval system – without permission in writing from the Consult Club, IIM Ahmedabad. First edition: July 2014 Second edition: August 2015 Third edition: September 2016

What is this year’s IIMA Casebook all about? Foreword Building on the 1st and 2nd editions of this publication, the Consult Club of IIM Ahmedabad is proud to present the 3rd edition of the IIMA Case Book. This edition leverages the 1st and 2nd editions and feedback from alumni and the student community. The objective of the Case Book is to give the reader a comprehensive view of the basic frameworks covering multiple industry horizontals and solution verticals. The broad framework is then followed by specific interview experiences through both a transcript and a crisp format. Throughout the Case Book, we have tried to ensure enhanced readability while retaining the comprehensiveness of the cases. Structure of the Case Book This Case Book covers an extensive range of Conventional cases to build the basics of frameworks and their usage. However, since real life problem solving may not involve deploying specific frameworks, we have incorporated a host of Unconventional cases which may involve deploying multiple frameworks or no framework at all. •Each of the 8 conventional frameworks has one page explaining the basic framework followed by cases based on those frameworks •Conventional Cases: For each conventional case there are 2 pages: an interview transcript page to show how the case interview could go, and an outline of the solution process including interviewee notes, case facts and recommendations, which provide the reader a detailed step-by-step process for case solving. The direction taken by the interviewee in the interview has been highlighted in the basic decision tree here. •Unconventional Cases: The unconventional cases have the solution process page only; the emphasis is on solving these cases in a logical and structured way. •Annexures: Resources (datasheets, framework glossaries, solved case-sheets and evaluation metrics) have been appended at the end of the casebook for easy reference. How to make the most of it? While reading this Case Book, we would suggest the reader should use the interview transcripts to set up a case between 2 people(or groups), and after solving the case, the solution process sheet should be looked into to gain a broader understanding of the approach and areas of improvement. The frameworks are there to give a direction initially to new case-solvers and should not be treated as a fixed boundary, but could be utilized by the reader to cover any case which comes up their way according to their own logical structure. Also, the reader should leverage the Recommendations, Tips, and Suggestions to apply learnings from one case to another. Remember, the journey is as important as the destination. Case preparation is a combination of group exercise and individual selfpreparation.

Enjoy the process of preparation and let’s crack the case! (C) Consult Club, IIM Ahmedabad

Acknowledgements We would like to thank Ankur Garg, Shrey Agrawal & Samarth Yadav (PGP 2015-17, Consult Club) for leading the Case Book initiative, and putting together this third edition of the IIMA Case Book. They have ensured breadth, and depth in the cases to give the reader a comprehensive view of the kind of cases they may be administered. We would also like to thank members of the PGP 2015-17 batch of the Consult Club who have contributed through cases, thoughts, comments and feedback. We would also like to acknowledge the efforts of Aayush Agarwal, Ravikumar Swaminathan and Soumyo Madhab Mitra (PGP 2016-18, Consult Club) for volunteering to help the Club put together this case book. We are also grateful to the alumni of the Consult Club, IIM Ahmedabad for their feedback on the cases which has helped us further enhance the overall quality of the book. We would like to extend a special acknowledgement to the contributors of the previous editions of the IIMA Case Book on which we have built the Third Edition. Copyright © 2016 Consult Club, IIM Ahmedabad Vastrapur, Ahmedabad 380015

(C) Consult Club, IIM Ahmedabad

Table of Contents CONVENTIONAL CASES SERIAL NO. FRAMEWORK/CASE 1. COST REDUCTION – Overview Telecom Billing Process Biscuit Manufacturer Retail Store Otis Elevators Steel Manufacturer 2. INDUSTRY ANALYSIS – Overview Insurance Consumer Appliances E-Commerce 3. NEW MARKET ENTRY – Overview Lock Manufacturer Retail Banking Diagnostic Chain Household Furniture 4. GROWTH STRATEGY - Overview Telecom Market Boiler Company 5. NEW PRODUCT ENTRY – Overview Anti-Smoking Pills Automobile Service Station Application Software and Bundling 6. SALES GROWTH – Overview B2B Telecommunications Provider Software Product Company Retail Apparel Chain 7. PRICING – Overview Proprietary Light Bulb World Spacelines Diagnostic Laboratory Chain Healthcare Space


PAGE NO. 8 9 11 13 15 17 19 20 22 24 26 27 29 31 33 35 36 38 40 41 43 45 47 48 50 52 54 55 57 59 61

SERIAL NO. FRAMEWORK/CASE 8. DIVERSIFICATION – Overview Pharmaceutical Company Oil Marketing Company Mobster

PAGE NO. 63 64 66 68

Table of Contents (Continued) UNCONVENTIONAL CASES, GUESSTIMATES, APPENDICES SERIAL NO. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34.

CASE Help a Painter Customers for an F.S. Product US Airline Entry into China Market Sizing for a Notebooks Co. Declining Response in a Competition Pricing Strategy for Portkey Call Operator Vernier Calliper Manufacturer School’s Deteriorating Performance Partner Late to Office Dip in Profitability of C.T. Higher Costs faced by S.E. Asian Bank Turn around a Copper Mining Company Toffee Manufacturer Restaurant Open Plot of Land Football Team – Diagnostics Elementary, Dr. Watson Merger and Acquisition Pencil Manufacturer in India Airline Petrol Pump losing Business Local Hospital Hotel Mini Fridge Robbery Planning Consult a Consulting Company Paint Manufacturer in India Restaurant in Paris PPP for Metro in Bangalore Shahrukh Khan’s Net Worth Inventory Management in a Milk Company English Music Magazine Entry of Home Furniture Maker Surviving the Ad-Blockers


PAGE NO. 71 72 73 74 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105

SERIAL NO. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44. 45.

CASE Testing a New Feature Understanding the Customer Hats in London Books in IIM Ahmedabad Case Interview Assessment Sheet Full Case: Business Expansion – Telecom Video Project Mini Case: Strategic Fit/ Merger Feasibility Dilemma Appendix 1: Framework Glossary Appendix 2: Datasheets Appendix 3: Sample Worksheets Appendix 4: Sample Evaluation Metrics

PAGE NO. 106 107 108 109 110 112 115 116 119 121 124

Conventional Cases Overview Interview Transcripts Solutions to Cases


Cost Reduction - Overview In a cost reduction case, a company is likely to aim for becoming more profitable by reducing their bottom line. An interviewee is expected to first identify various cost component, followed by validating them, identify major cost drivers along with levers affecting their values, and finally recommend how the company can change it’s ways to become more cost efficient. Approach/ Framework (High Level) for the Case Type R&D

Equipment

Human Capital Cost of finance

Raw Material

Processing

Cost of raw material Contract & bulk deals

Machinery

Quantity used

Labor hours

Factory rent

Storage & Transportation

Transport to warehouse Storage (Rent, Labor, Inventory) Transport to customers

DistributionSale force

Customer Service

Marketing

Sales Channel

Marketing channels

Repairs

Sales Force

Strategy

Spare parts

Training

Returns

Technology Capacity utilization Packaging

Framework Summary A company can reduce cost and become more efficient across its components. The best way is the look at the journey of a product/service right from the time its raw materials are bought to the time it is delivered to the customer and he is happy after the post sale support etc. This is called a value chain analysis as each step of the process adds some value to the initial raw material and accelerates its journey towards the final product. At each of these stages, we expect to find some levers which can be tweaked to make the process more efficient.

Tips • •

Clarify objective, especially the cost buckets the interviewer wants you to delve into Cost cases are generally very streamlined till the time you are identifying places where cost can be reduced. Creativity comes into play when recommendations are asked by the interviewer.

Key Questions • • • • •

Is this particular company facing the problem of high costs or is it something that the industry is facing as a whole? Chalk the value chain and then ask if it is the correct way to do it? Or should it be done by splitting fixed and variable costs? What are the last 3 year trends in growth for the organization? Any major shifts in cost over time? Does any of these cost seem out of line?


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Cost Reduction - Telecom Billing Process– Interview Transcript You have been approached by the CEO of a telecommunications provider company. He is worried about the high expenditure in their billing process and wants your help in identifying areas where you can reduce costs.

What are the different ways in which the client’s company send out bills to the customers? There are three ways in which the bill can be sent to the customer. Through post, internet and by sms. For this interview just concentrate on post and internet. Since sending bills thrugh internet would involve minimalistic cost, focusing first on snail mail and looking at different cost component involved in the value chain. Sure. Go ahead and list down various cost components. There will be cost involved in buying raw material, printing bills, sending bills to customers. And fixed cost involved will be the infrastructure renting cost and the employee cost. Assume both rental cost and the employee cost to be optimal. OK. So, let’s begin by evaluating the first component of the value chain. Raw material for printing are paper and ink. Let’s take paper first and try to reduce paper cost followed by ways to reduce the cost of ink. Sounds reasonable. Go ahead.

That’s interesting. How else can you reduce the cost of sending the bill to the customer? Apart from this we can reduce the frequency of sending out the bills to the customers. Here, the tradeoff is between the cost saved in mailing the bills and interest forgone from the money recieived a month earlier.

Let’s reduce the frequency of sending bills from one per month to one per two months. When do you think this will become feasible? Okay. To analyse this I would want to understand the approximate cost in sending out one bill by mail/courier. Sure. You can assume that one time cost of sending the bill by mail is around Rs. 20. And for all practical purposes, take the interest rate to be 10% annually.

By not sending the bills every month, The client will save Rs.20/bill. Assuming the rate of interest to be approximately 1% per month, the bill amount should be above Rs.2000 for the client to be making losses by reducing frequency of sending bills. i.e. if the bill amount is more than Rs.2000 then the bill should be sent every month, But the majority of bill value in India would be much less than even Rs.500. So, in that case, reducing the frequency becomes a cost saving option. Can you think of a way in which you can reduce the costs overall?

We can bring down the paper cost by using thinner paper, by using smaller size of paper, by printing on both sides of the bill, by leaving lesser margin, may also use a recyclable paper. To reduce the cost of ink used, reduce the number of words on the bill by eliminating unnecessary details. Reduce the font size and only print a black and white bill to save on the coloured ink. Should I move ahead and explore ways in which the client can save cost in sending the bills to the customer?

I think sending the bills through internet or sms would lead to massive reduction in overall cost. How much does it currently cost to send a bill through internet?

Yes. Why don’t you help the client in reducing their expenditure in sending the bills by snail mail.

Interesting. How do you plan to do that?

OK. So, the total annual cost in sending bills by courir will be equal to = No. of bills sent/month* Frequency of sending bills* (Base price for mail+ (Price/km)*No. of kms) Let’s start with Price/km first. To reduce this, switch to a cheaper mail/courier service. This can be achieved by using regional courier services as well. Next, I would want to understand the base price for mail. How many hubs does the client have to send out the bills to the customers?

In the intitial phase we can target those customers who use internet to pay their bills. We ce shuld incentivize them by telling them about the benefits of sending bills online. A few of them are1.Prompt delivery of bills 2.No losses- no fudging of content, it wouldn’t get lost during transit, lesser chance of a bill going to the wrong address 3.Convenience of having a bill online. You can check it whenever you want and there’s no hassle of storing them carefully. 4. Incentivize people to use internet to pay bills by giving some discounts in the initial phase.

As of now, the client has one facility in Mumbai and the bills are mailed all across India from the Mumbai hub itself.

Around 5 paise. Okay, so our aim should be to encourage the customers to start using internet as a medium to pay bills/ view bills.

Ok. Another way in which we can optimize this is have smaller facilities in cities like Delhi, chennai, Kolkata and send the bills to customer sin that region from there. It would serve the purpose of lower base price as well as quicker and timely delivery of bills with lower bill loss rates.


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Cost Reduction – Telecom Billing Process You have been approached by the CEO of a telecommunications provider company. He is worried about the high expenditure in their billing process and wants your help in identifying areas where you can reduce costs. Interviewee Notes

Case Facts

• Reduce cost of bills • A cost benefit analysis for each mode of sending bill • Reducing the cost of preparing bill itself

• 3 ways of sending bills- SMS, internet & Snail mail • Internet and SMS are optimized, possibility only in snail mail • Rental and employee cost are optimal • Only one billing hub in India- in Mumbai and bills are sent all over india from Mumbai • Cost of sending a bill by snail mail=Rs. 20 • Cost of sending a bill though internet= 5 paise • Rate of return annually= 10%

Approach/ Framework Raw Material

R&D

Processing



Marketing

Customer Service

Equipment

Cost of raw material

Machinery

Transport to warehouse

Sales Channel

Marketing channels

Repairs

Human Capital

Contract & bulk deals

Factory rent

Storage (Rent, Labor)

Sales Force

Strategy

Spare parts

Cost of finance

Quantity used

Labor hours

Transport to customers

Training

Returns

Technology Capacity utilization

Quantity of ink Fewer words

Black only

Small font size

Packaging

Move to cheaper option

Quantity of paper No. of bills

Size of paper

Transport to customer Reduce frequency

Increase ticket size

Hubs at shorter distance

Utilization

Recommendations • • •

Reduce the unnecessary expenditure on paper and ink. This being an inelastic good, customers won’t be bothered by smaller size or lesser words until relevant info is present Explore the alternate route of sending the bill to the customer. Keep in mind the new evolving technology and try to push customers towards using it Highest cost component of snail mail can be brought down by reducing the frequency of sending bills to one bill per two months. Only when bill amount is less than Rs.2000

Interview Summary This is a cost reduction case where the interviewee should quickly establish the major cost buckets after discussing with the interviewer. Also, instead of probing into each bucket, ask the interviewer if he has a particular cost bucket in mind.

Observations/Tips/Suggestions • • •

Each cost component should be broken down into multiple cost levers to ensure that nothing is being missed out Breaking down cost of snail mail into components helped the interviewee to analyze each one carefully Further having to shift the customers to the low cost option is also relevant and important to bring down cost drastically and for having convenience in the future


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Cost Reduction - Biscuit Manufacturer - Interview Transcript Your client is a biscuit manufacturer. Over the past couple of months it has seen a decline in profits. Diagnose and recommend solutions.

The inventry losses in our case are high because of the presence of high percentage of expired biscuits.

I would like to ask a few clarifying questions before I begin to analyse the case. I would want to understand the client’s business. What kind of biscuits does the company make?

The client’s warehouse has a lot of expired goods which keep sitting in the warehouse for longer duration and hence lead to higher storage costs. Reasons for this might be poor demand prediction, delay in supply of goods to the warehouse or incorrect process for inventory management. Does the client have a system in place to predict the demand of biscuits?

The company makes only 1 kind of biscuits. Which country is the client based out of and how many factories do they have? I want to understand the scale of business and extent of coverage.

Yes, the client owns a software which takes into account the demand in the previous intervals and then predicts the demand for the next interval.

The biscuit company is based in one state of India with three factories spread uniformly across the state.

Since the problem of expiry is uniform across the warehouses, delay in supply to the far off warehouses can be ruled out. Therefore, the biscuits might be getting expired due to inefficient inventory management system.

Ok. So the company manufacturers biscuits in a particular state of India. To understand about the distribution process, to whom does the company sell the biscuits and are they based pan India?

What are the different ways in which an inventory can be turned over and what might be going wrong here?

The supply of the biscuits is done to the wholesellers who can be from any state in India.

An inventory management system can be First in First out or it can be Last in First out. The problem of expiry might arise if the inventory management system is of LIFO type.

That’s very helpful. Now since they supply the biscuits to these wholesellers across the country, are their warehouses also located pan India? Yes.You are correct. The warehouses are also spread uniformly across the country. I would urge you to focus only on the cost side of their business. I would want to analyse this problem by looking at various components of the value chain in biscuit manufacturing. According to me, this can be broken down into raw material procurement, processing costs, storage & transportation, marketing & promotions. Do you think I have missed out on any cost bucket?

Yes. You are correct. At present the biscuit cartons which enter the warehouse last are the ones which are sent to the retailers first. The company has employed two different transportation agaencies to take care of moving biscuits from factory to warehouse and then from warehouse to the retailers. Due to the lack in coordinaiton between these two entities, a lot of biscuits were getting spoilt. Now that we have zeroed in on the problem area, how do you propose to solve this? As per my understanding, the cartons of biscuits which come in last are placed near the gate of the warehouse and the transportation company which takes them to the retailers just picks it up from there for the sake of convenience. Is that correct?

No. I would like you to focus on stoarge and transportation cost for the purpose of this problem.

Yes. Please go on.

Ok. Looking into the storage costs first. Is the storage cost/packet of biscuit higher for the client as compared to the avergae market? And is this trend uniform across all the warehouses belonging to the client?

To ensure that FIFO is followed, either give the job to the same transportation company. Second solution could be to place the cartons that come in later behind those which have been lying in the warehouse for some time. Everytime, some of the boxes are taken away to retailers, the boxes kept at the back should be moved in the front. This will ensure that lesser biscuits get expired.

Yes, the overall cost of storage/unit is higher for the client as comparred to the competitors. Storgae cost is one area where we can reduce costs for the client. Storage cost can be broken down into rental cost, labor wages and inventory losses. Do you want me to look into a particular component or should I go ahead and explore all of them? Focus only on inventory losses for now.

Okay. So, inventory can be damaged because of three factors. First one is due to spoilage (Breakage, pest infestation, warehouse conditions like moisture). Second one is due to inefficiency in turning over the inventory due to which it might get expired. Third might be because of pilferage.


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Cost Reduction - Biscuit Manufacturer Your client is a biscuit manufacturer. Over the past couple of months it has seen a decline in profits. Diagnose and recommend solutions. Interviewee Notes • High storage & warehouse costs • Makes 1 type of biscuits • Warehouses spread uniformly across the country whereas factories only in one state • Supplies biscuits to wholesellers

Case Facts • 3 factories concentrated in one state • Higher storage cost/unit in all warehouses as compared to the competitors • Different transport company used for bringing biscuits form factrory to warehouse and from warehouse to the retailer

Approach/ Framework R&D

Raw Material

Processing



Customer Service

Marketing

Equipment


Machinery


Sales Channel

Marketing channels

Repairs

Human Capital

Contract & bulk deal

Factory rent


Sales Force

Strategy

Spare parts

Cost of finance

Quantity used

Labor hours


Training

Returns

Technology Storage

Capacity utilization

Rental

Labor

Inventory Losses

Expiry

Spoilage

Packaging

Pilferage

Poor demand prediction Poor inventory management Late supply


Use the same transport company to move the biscuit from the factory to the retailer Placement of the biscuits which come later should be done so that the ones which have come earlier remain visible and in the front Move the biscuits at the back to the front as soon as the biscuits kept in the front are being taken away for delivery


Observations/Tips/Suggestions • •

Each cost component should be broken down into multiple cost levers to ensure that nothing is being missed out Always list down few possible options and then clarify with the interviewer if you’ve missed out on anything. Also, Ask him to whether he wants you to delve into a particular bucket


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Cost Reduction - Retail Store - Interview Transcript The CEO of a retail company has approached you with the problem that his company is burning cash. He wants you to provide suggestions to improve his business.

Sounds good. The store is rented. The cost of leasing is fixed. Can you think of something to reduce that?

Sir, I would like to understand the question better. By burning cash you mean to say that the store is incurring losses.

Sir, we can go in with the arrangement wherein the cost of leasing can be made a direct function of the variable component of sales

Yes

Ok.

Sir, before I analyse the reasons for this loss, I would like to understand the business better. What kind of retailing are they into?.

Sir, I can make the salaries of the employees also variable and link them to the sales generated. That would spur sales. Also are the cloth procurement costs stable and comparable to competition?

They are in apparel retailing. I would like to know the region of operation of these stores and the number of stores that they have.

Yes they are similar. Can you think of something else that could affect this cost?

So they have 12 stores across India. Out of these 2 are profitable and 10 others are in loss..

Sir, there might be damages related to the clothes. The clothes that are on display get damaged generally. Is there a cost related to them?

As I understand the market conditions in different parts of India would be different and hence it would take different analyses for them. I would have to group the stores region wise and understand what causes them to be in profit or loss.

Yes we do have to sell such clothes at a 20% discount. Also, the number of customer returns the store has been experiencing has been increasing at a steady rate

Sounds good. Let us concentrate on the Bombay city region..

Sir, within the Bombay region I would like to know the number of stores and the kind of segment they are targeting. Also I would like to know the kind of competition we have. So, they have 1 store in Bombay which is situated in a suburban mall. We are a value for money store. There are 2 similar stores in the mall which target the same segment. Sir, the decline of profit may depend on external or internal factors. If the profit of all the stores in the region is dropping then it may be due to a drop in demand or some regulatory issues. Internal issues will consider the operation side of the business.

We can ensure that such clothes are sold off quickly. AT the same time, we might want to add resources in the preliminary inspection & training front to reduce the number of returns incidents. Well, that’s fine. The store has also been experiencing greater costs on account of loss of merchandise. Can you think any which way this might be happening? This could either be on account of either stealing by external or internal customers(pilferage). This could easily be prevented by having better security measures in place such as CCTV recordings, employee frisking etc.

There have been no external factors as you say. In fact the business of the competitors has been growing steadily In order to understand the loss I would like to consider the revenue and costs aspects of the business. So, have the costs of our business been increasing? Yes they have been. Let us focus only on the cost end. Fine. The costs can be divided into fixed and variable costs. The fixed costs components would include the rent of the store if it is not owned, maintenance, lighting etc. The variable costs would include the procurement cost of clothes and the salaries of the employees.


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Cost Reduction - Retail Store

The CEO of a retail company has approached you with the problem that his company is burning cash. He wants you to provide suggestions to improve his business. Interviewee Notes • Limited to apparel retailing business • Value for money store • Focus only on reduction of costs (may have revenue stream problems too) • Rented Store with a fixed cost of leasing • Stable costs of cloth procurement

Case Facts • They have 12 stores across India. Out of these 2 are profitable and 10 others are in loss • Higher storage cost/unit in all warehouses as compared to the competitors


Raw Material

Processing



Marketing

Equipment


Machinery


Sales Channel

Marketing channels

Human Capital


Factory rent


Sales Force

Strategy

Cost of finance

Quantity used

Labor hours


Training

Customer Service

Repairs Returns Spare Parts

Technology Storage

Capacity utilization Packaging Pilferage

Inventory Losses

Rental Costs

Damages

Spoilage

Labor (Wages)

External Customers Employees


Exploring the possibility of linking the rental costs and the employee wages as variable components of sale rather than as fixed components Countering Pilferage by investing in security measures Customer returns issue should be traced back to the procurement end of the chain with better monitoring & inspection systems in place.



Each cost component should be broken down into multiple cost levers to ensure that nothing is being missed out In case of chains, for problem simplification always look for possible clustering /segmentation. This also suggests clarity of thought Issues may link across the value chain. For example a Customer returns issue in this case may have been primarily triggered at the procurement stage itself.


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Cost Reduction/Problem Identification – Otis Elevators – Interview Transcript Otis, the elevator maker, was facing losses/drop in profits as compared to Mitsubishi, even though the price points of both were in the ratio of 100 to 80. An average elevator cost about $100 and there was a service AMC involved for about $20 per year for 10 years, with corresponding figures for Mitsubishi in the ratio above. Help them figure this out.

Otis is responsible for all repairs, whatever they may cost. The owner just pays for the AMC.

Was there a marked difference in the cost structures of the two lifts? Or has there been any recent changes in the same for either of the two companies? For instance, changes in the way the elevator is manufactured, where the raw material is sourced from, etc.

Exactly. Otis elevators break down more often than Mitsubishi ones. And the revenue cost mismatch means that they actually spend more than they earn, leading to the drop in profits.

No, the average cost is the same for both. There have been no recent changes. Okay, let us look at segments. I am assuming that there will be different classes of elevators – premium, high speed ones for business buildings; normal ones for residential buildings, and maybe supersized ones for hospitals, etc. The margins for all them would be different, and it could be that the company is selling more of low margin lifts as compared to the high margin ones. While you are right about the kind of lifts, there hasn’t been significant change in the sales numbers across product lines as such. Any changes in sales across geographies? Since there is a flood of infrastructure development in India and China, it could be that low priced elevators in these areas are dragging overall margins down. Good line of thought, but not what the problem is here. Okay, tell me what the requirements for an elevator would be, according to you.

So since the amount that Otis gets as revenue is fixed, I surmise that they have to spend more on every elevator for the same AMC amount. That is, Otis elevators cost more to fix than Mitsubishi elevators, or they simply break down more.

Whoa, hard to believe that Otis elevators have a quality issue! Agreed. Nonetheless, it did happen. Okay, now that you have got to the root of the problem, what do you suggest Otis should do? Since they have a proper AMC in place, I assume they keep proper records of breakdowns and fixes. They should profile the key problems in their elevators and institute a fix to be implemented in all new elevators manufactured. Of course, they should see if the problem is across all models, manufactured batches, etc., so that if there is a particular problem in a plant or model it can be looked at closely. For elevators already sold, there should be a retrospective fix that they should immediately apply, in order to prevent further costs. Even if it costs more than actually waiting for a complaint before fixing it, they should go ahead and do pre-emptive maintenance to prevent further damage to the Otis brand. Good. Thank you for your time.

Well, an elevator must have certain qualities – speed, reliability, an elevator is something that should last as long as the building… Precisely. What would that entail? It would mean that the lift should last long. There should be minimal breakdowns. Okay, so now we shift to the service part of the contract. Could you tell me how the servicing is done? Say, the lift owner calls up Otis to have a look at the problem, a repairman comes and has a look. Right. So once the problem is identified, I assume some of the elevators must be fixed with just minor adjustments, while some might need more extensive repairs, like replacements of parts. Very true. Okay, could you tell me who pays for the replaced components? Does the owner pay for all replacements or are they covered under the service contract, to be paid for by Otis?


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Cost Reduction/Problem Identification – Otis Elevators Otis, the elevator maker, was facing losses/drop in profits as compared to Mitsubishi, even though the price points of both were in the ratio of 100 to 80. An average elevator cost about $100 and there was a service AMC involved for about $20 per year for 10 years, with corresponding figures for Mitsubishi in the ratio above. Help them figure this out. Interviewee Notes

Case Facts

• Two product offerings: elevators and AMC • A cost vs revenue analysis of both the products needed • Costs – value chain analysis • Revenues – across segments • Products • Geographies

• • • •

Elevator costs $100 AMC costs $200 over 10 yrs Mandatory AMC, for full period Mitsubishi is priced lower, but still similar costs (lower margins)

Approach/ Framework

R&D

Equipment Human Capital Cost of Finance

Raw material

Processing

Cost of raw Materials

Machinery

Factory Rent Manufacturing Distribution, etc.

Labor Hours Technology


Transport to Warehouse Storage Transport to Customers

Distribution Sales Force

Customer Service

Marketing

Sales Channel

Marketing Channels

Sales Force

Strategy

Service Contracts Repairs

Training

Spare Parts Returns

Capacity Utilization Packaging

Recommendations •

Focus on improving quality of elevators – zero in on where the failure actually happens, both in terms of use, and also whether it is a manufacturing problem in a certain model or batch/factory.

Interview Summary

This was more of a problem identification case, where it was important to zero in on the problem. Once it was identified that costs were in general not the issue for elevators, move to the revenue side of things. Similarly, establish that revenues for the AMC are constant, while costs go up drastically.


Focus on quickly running through each of the cost and revenue levers for both kind of offerings It is crucial to note that the AMC actually cost more ($200 vs $100), so should have been the first line of attack as such. Time was essentially wasted by approaching the elevator side first.


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Cost Reduction– Steel manufacturer– Interview Transcript You have been approached by the CEO of a steel manufacturer. He feels that the costs last year were of transportation of steel in last year was too high. He needs your help to figure out whether hypothesis is correct. Sir, before I analyse the reasons for this loss, I would like to understand the business better. Where is the manufacturing plant located? There are two units, one in Jamshedpur and one in Orissa, although we are worried about the logistics cost for Jamshedpur plant. What all products are transported by the Jamshedpur plant? The plant produces and transports two varieties of steel rods and one variety of nails. For transportation, packs of rods of a particular type are bound together. The nails with cumulative weight of 5 Kg are kept in a box and transported. The size of the box is relatively small. What are the destinations? The client primarily serves wholesalers in four major markets: Pune, Chennai, Delhi and Kolkata. Is the client worried about the costs for any particular market?

No. The client feels that transportation costs are high for all the four markets. Oh ok. So the problem is with transportation. Is the cost problem only with transportation or should I delve into the entire value chain? The problem is only in transportation. Ok. Is the transportation outsourced?

Good one! Yes, the transportation is outsourced to a local contractor who takes care of transportation to all the four destinations. He uses trucks for transportation and charges in per Km basis, taking to and fro distance. Are different varieties of trucks used?

Let’s assume all the trucks are similar. Got it. We can divide the total cost for transportation of steel in a year into two parts: cost per truck, multiplied with number of trucks plying in a year. Where should I delve into first?


Let’s start with number of trucks plying in a year. Ok. The number of trucks plying in a year can be broken down into: total volume in the year divided by full volume per truck; and the resultant multiplied with capacity utilization. The problem is with capacity utilization. Currently they are using only single variety in a truck, which can be rectified by combining the products in a single truck when necessary. Ok. Good. The client also believes that the cost per truck is high. How can you prove his hypothesis? There are two ways: either benchmark with rest of the contractors in the same local area or understand the logistics provider’s costing structure and general margins. The client feels that all the contractors are colluding. Ok. I will then understand the costing and margins. The various costing heads are: depreciation of trucks, depreciation of tyres, diesel, maintenance and toll cost. Maintenance can further be broken into daily washing and regular services. Let’s take the example of Delhi. The distance between the two, for the sake of calculation, is 1,000 Km. Let’s delve into the calculations now. In a year, one truck makes 30 trips to Delhi. Ok. Assuming a Rs 30 Lac truck has a life of 10 years, the depreciation per year is Rs 3 Lac, and per trip is Rs 10K. In a round trip 2K Km are covered. Therefore, the depreciation is Rs 5 per Km. Assuming 10 tyres and each tyre costs Rs 10K, with a lifetime of 20K Km. Therefore, tyre depreciation is Rs 5 per Km. Assuming diesel price is Rs 50 per L and mileage is 5 Km per L. Diesel cost is Rs 10 per Km. Assuming maintenance charges of Rs 10K per trip. Therefore maintenance charges are Rs 5 per Km. Lastly, assuming toll booth for every 100 Km. So there would 20 toll booths. Say Rs 100 is charged per toll both. So, toll charge is Re 1 per Km. So, in total, the cost would be Rs 26 per Km. Good. But the problem is, the contractor is charging Rs 25/Km. What could be the reason? Wow. The contractor might be serving another customer in Delhi to transport his material to or on the way to Jamshedpur, so essentially, is unnecessarily charging me for the return trip. Another reason, which calls for a change in calculations, is that the biggest cost element is diesel cost, which is not the same for to and fro journey. When Going to Delhi, the diesel cost would be more since the truck is heavy with steel while coming back, the diesel cost would be less. Therefore, the total cost would go down.

Nice! Thank you, that will be all.

2016-17

17

Cost Reduction– Steel Manufacturer You have been approached by the CEO of a steel manufacturer. He feels that the costs last year were too high. Diagnose.

Interviewee Notes • High cost of storage and transportation • Transportation/logistics outsourced

Case Facts • 2 production plants – problem in Jamshedpur plant • 2 varieties of steel rods and 1variety of nails • 4 markets – Pune, Chennai, Delhi, Kolkata


Raw Material

Processing



Marketing

Customer Service

Equipment


Machinery


Sales Channel

Marketing channels

Repairs

Human Capital


Factory rent


Sales Force

Strategy

Spare parts

Cost of finance

Quantity used

Labor hours


Training

Transportation cost per Km

Technology Truck depreciation


Tire depreciation

Packaging

Returns

Transportation to customers Cost per truck

Number of trucks plying in a year

Diesel

Steel volume

Maintenance

Truck capacity

Toll charges


Recommendations • •

Low capacity utilization can be increased by using same truck for multiple types of steels and nails Proof of over-charging by the outsourcing partner

Interview Summary This is a cost diagnosis case where the interviewee should utilize the help of the interviewer to quickly boil down to the transportation bucket, instead of probing into each bucket. Thereafter delve into the reasons for the CEO’s hypothesis of high cost charged by the contractor by calculating its costs.


Transportation cost element should be mathematically broken down into components to arrive at the problem of low utilization Calculation of costs through numerous assumptions and then hypothesis for mismatch


2016-17

18

Industry Analysis - Overview A company is looking to enter/expand into an industry and wants to know about the industry. The candidate is expected to elucidate the relevant characteristics of the industry and decide whether the industry is attractive for the client or not. Approach/ Framework (Broad) for the Case Type Analyse a given industry

Entry into the market

Verdict on attractiveness

Opportunity identification

Objective of analysis Decision on expansion/ growth

Synergies with existing business

Need-gap

Identify risks Industry fundamentals Regulatory

Substitutes

Entry/Exit barriers

Current Macroeconomics

Framework Summary Industry analysis is usually required in most types of cases, where the candidate usually begins by analyzing the industry. Depending on the exact problem statement, parts of the framework may be used to analyze the industry.

Tips The interviewer will expect the candidate to know about certain aspects of particular industries. For e.g. the value chain for an industry might be very obvious and the candidate should avoid asking about it and make their own assumptions. On the other hand, it might be detrimental to make assumptions about the market situation and the candidate should extract as much information on that as possible from the interviewer.

Key Questions • • • •

Is this industry synergetic to our current business? Are there barriers to entry? Are substitutions available? How will we price our products and services?


2016-17

19

Industry Analysis - Insurance - Interview Transcript A financial services provider wants to understand the insurance industry. Can you analyse the industry for them? Sure Sir. So I have to analyse the insurance industry from a market-entry point-of –view. Is that correct?

Yes. So can I begin by asking some clarifying questions? Are we looking at the insurance industry as a whole or certain specific verticals under it like life insurance, home insurance or health insurance? I would like you to analyse the broader industry first, we can narrow it down later. Do we know the current status of the industry? About its recent performance as a whole? What do you think? On what factors will the industry performance depend? On a broader level, I think the top-line of this industry will be defined by the number of policy holders. People will buy insurance policies only if they have some disposable income. This means that the number of policies will be in some ways proportional to the economic status of the country. Thus I am assuming, as more and more countries are becoming economically advanced, more policies must have been bought over the years. Coming to the bottom-line, we need to look at how insurance companies make profits. As per my understanding, insurance companies make money by investing the premiums collected into government securities and other investments. Hence, their profits will be determined by the interest rates prevailing in the market. Do we know how the rates are in the market, currently? That will depend on which market we are looking at. Let us focus on the Indian market for now. So interest rates in India have been historically on the higher side. This would mean that the industry is structurally attractive in India at first glance. But we will have to look at several other factors before arriving on a verdict. And I think these factors will differ significantly on which sector within insurance we are focusing at. Do we know which sector is the client looking at? You need to advise on that. Which sector makes more sense for our client For this I would first like to know a little bit more about the client. What all financial services does our client provide currently?

The client has been in business for past 10 years and has grown to capture 10% of the market share in the asset management space, which is significant considering there are 50+ competitors. But recently, the share has stagnated and the company is finding it difficult to acquire new customers. India, due to its large population, will be offering a large market to tap into for financial services providers. But considering that there is only a limited population will have disposable income, I believe the client is looking to sell other products to the same customers rather than trying to acquire new customers. I think this makes sense in the long run. Also, since there are so many competitors and it might be difficult to make the customers switch their service providers, the client should definitely look at other avenues. Yes that is correct. Also, since our client is having 10% share, this means it will have already have a large customer base. Coming to the sectors within insurance, I believe there are 3 major sectors- Life, health and property insurance. Is that correct? Partially. Property insurance is a part of the larger liability insurance area . This can also include insurance for automobiles, business mishaps and other miscellaneous insurance apart from property insurance. So, among these the client should venture into property insurance first. There are two major reasons for this- first, our client already has the knowledge of asset management and hence will be able to locate lucrative investment opportunities. Second, since the customers for life and health insurance will be individuals while those for liability insurance will be both individuals and corporates. Our client has a customer base of large conglomerates which will like to insure their property and the like. That is a good way to look at it. Any other thing you think the client should know about the insurance industry?

I feel in the insurance industry, as is the case with the larger financial services sector, the role of regulations is very large. The client should carefully study all the regulations in place and analyse how they will affect their current business as well as their future in the insurance industry before entering into this industry. Also, I believe this industry should continue to grow in India as more and more people are entering into the medium-income groups. Okay. Thank you for your time.

The client has major interest in asset management and corporate treasury management for some large conglomerates in India. Okay. So our client has experience in handling the assets of large companies, which indicates they already have the knowhow of investment and liquidity management. This means it will not be that difficult for the client to enter into insurance. But may I know how the client has been doing in their business currently?


2016-17

20

Industry Analysis - Insurance To analyze the insurance industry for a financial services provider Interviewee Notes

Case Facts

• Market entry into insurance industry • Client currently in financial services • Top-line- no. of policies, bottom-line- interest rates • Look at broader industry first, then narrow down on area. Tell about industry fundamentals, depending on synergies choose the area. • Ask about the current status of the industry • Which area within insurance? • Risks

• Interest rates high in India • Client in the market for 10 years; holds 10% share in current market • Client in asset management and corporate treasury • Customers are large conglomerates • 3 areas- Life, health and liability

Approach/ Framework Analyse insurance industry






Need-gap

Area within the industry

Identify risks Industry fundamentals Regulatory

Substitutes

Entry/Exit barriers


Top-line, bottom line determinants


Should focus on liability insurance Should leverage the current user base Should be mindful of the regulations

Interview Summary The candidate did a good job in figuring out the fundamentals in terms of the factors on which the top-line and bottom-line of the industry depend. Identifying liability insurance as the target area was the easiest part. She seemed to know the basics of the finance industry and it could have been difficult for someone oblivious to those basics. Overall a good performance.

Observations/Tips/Suggestions Since the client was already present in an allied industry, the question was designed to judge the candidate’s knowledge about the industry fundamentals. The interviewer must have been impressed by her knowledge of the industry and the overall logical consistency.


2016-17

21

Industry Analysis - Consumer Appliances - Interview Transcript Our client is looking at investing in the solar energy business, and would like us to advise him regarding the attractiveness of the industry So, our client would like to advise him about the attractiveness of investing in the solar energy business. Is that correct?

Considering that our client is a consumer electronics manufacturer, it could focus on the commercial side of the industry, as there could be synergies with its existing products. Also, its existing infrastructure, such as manufacturing and distribution network, may facilitate that. It could expand its current portfolio to include solar-based products such as solar cookers, lamps and water heaters.

Yes

And how could it do that?

So, I would like to begin by asking a few preliminary questions about our client. What business is it currently engaged in? What geography does it operate in? What are the products that it sells?

It could do that in three ways. First, it could invest in technology to build new products. Second, it could acquire a company which manufactures such products. Third, it could enter into a joint venture with a solar company to manufacture solar-based products.

The client is a consumer appliances manufacturer, with a strong presence in most of the top Indian cities, and some sales in Sri Lanka, Bangladesh and Malaysia. It manufactures various household products such as ovens, food processors, vacuum cleaners, air coolers etc Why is it looking at investing in solar energy? Also, is it looking at investing in India, or abroad? Our client has significant cash reserves, and is looking at investing in emerging industries. It has been told that solar energy is an industry with a lot of growth prospects, and it would like to get a piece of the action. It wishes to focus on India Alright. Could you tell me a little about the solar energy industry in India? What is the current installed capacity? What are the growth prospects? Well, India is well-positioned to exploit solar as a potential energy source, due to the abundant sunshine that it receives. It has a current installed capacity of 34000MW, and solar energy accounts for 1% of India’s total energy mix. The government recently unveiled a plan to boost capacity to 100,000 MW by 2022. What are the different components of the industry?

And what are some of the factors it will have to keep in mind before investing?

Should it go for in-house development of solar-based products, it will have to develop technological capability, which may require developing R&D facilities and hiring capable engineers. It will also have to consider the rate of return on investment and the time taken to recover its investment. It may need to look at new markets, such as the rural market, and may need to invest resources in developing distribution channels, if they do not currently exist. It may also need to look at the regulatory scenario around investing in the sector Alright. Could you please summarize our discussion? Our client, a consumer appliances manufacturer, would like to invest in the solar energy industry. We looked at the different applications of solar energy and thought that, keeping in mind synergies with the existing business, it could focus on the commercial side, such as solar cookers, water heaters etc. Regarding mode of entry, it could go for in-house development, acquisition of a smaller company or a joint venture. However, it would need to consider R&D capabilities, rate of return on investment and regulatory aspects before taking any decision. That’s good. Thank you for your time.

Can you hazard a guess at the different applications of solar energy? Sure. We can classify the applications of solar energy into two main components- industrial and commercial. Under industrial, we can have solar energy used for generating electricity to replace thermal power plants, or for agricultural purposes, such as water pumps for irrigation. Under commercial, you could have different applications such as lighting, solar water heaters, cookers etc

That sounds like a good classification of the applications. What could our client focus on?


2016-17

22

Industry Analysis - Consumer Appliances To analyze the solar energy industry for a consumer appliances manufacturer Interviewee Notes

Case Facts

• Similar to market entry case • Queries about client; later used to identify synergy areas • Structured approach to laying out applications of solar energy • Market entry framework- inhouse development/acquisition/JV for mode of entry

• Client among top 5 consumer appliances manufacturers in Indiamakes ovens, food processors, vacuum cleaners, air coolers etc • Presence in top Indian cities, Sri Lanka, Bangladesh, Malaysia • Solar energy- installed capacity of 34000MW, govt plan to boost capacity to 100,000MW by 2022







Need-gap

Mode of entry Identify risks

Industry fundamentals Regulatory

Substitutes

Entry/Exit barriers


Applications


Test structuring approach of candidate (Eg: describing applications of solar energy) Test ability of candidate ideate (Eg: factors to keep in mind before investing) Direct toward synergistic link between current business and target area

Interview Summary The candidate did a good job in laying out the framework. Through her preliminary questions about the client, she was able to later establish a connection which helped in narrowing down focus area of investment. She laid out the approach to market entry quite well, and was able to identify certain key issues to be kept in mind for the investment


2016-17

23

Industry Analysis - e-Commerce - Interview Transcript Our client is a watch brand, who wants to move into the online space. However, he has no understanding or experience of the e-commerce space, and wants us to conduct an industry analysis. Can you help him with that? Sure sir. So, just to clarify the question, our client is a watch brand which wants to move into the online space, and wants us to analyse the e-commerce space. Is that correct? Yes.

To start off, I’d like to ask a few clarifying questions about our client. What sort of watches does he sell, and in what proportion? Does he sell both men’s and women’s watches, and if so, what is the percentage of each? Our client sells wrist-watches in two main segments- luxury and midrange. He sells both men’s and women’s watches, in a 40:60 ratio What is the proportion of sales and profits of each of the segments? What is our market share in each segment? Well, the luxury watches account for 20% of sales and 30% of profits. We have 26% market share in the mid-range segment and 24% market share in the luxury segment That’s great. I’d also like to understand a little bit about our competitors. How many competitors do we have in each space? What are their market shares? In mid-range, segment, we have two main competitors, Arya and Sansa, with 30% and 18% market share respectively. In the luxury segment, there are three other major players, Riordan, Vance and Le Guin, with 29%, 26% and 18% market share each.

Sure. Let me take a couple of moments to gather my thoughts. Our client could build its online presence in two ways- standalone website or e-commerce portal. If it goes for a standalone website, it will need to drive traffic to it, by means of advertisements and SEO activities. If it goes the e-commerce portal way, it can do one of three things- put its entire product portfolio online, have only the bestselling products sold online, or have initiatives like flash sales such as those conducted by Xiaomi, to generate publicity, especially for new watch variants. That’s good. Say our client goes in for the e-commerce portal option. Which of his segments would you suggest he focus on? The mid-range segment accounts for most of the sales and profits. Also, online shoppers are quite price-conscious and are always looking out for the best deals. It may be easier to offer discounts on the mid-range segment, as doing so for the luxury segment may dilute brand equity. So I would recommend that it sell some or all of his mid-range watches online. That’s good. Anything else? Well, our client can use its offline stores to develop its online presence, maybe through promotion activities in the stores which direct customers to the online store. Apart from the major e-commerce portals, it may also choose to look at the niche websites, which cater to a particular category of products, where it may be able to get better traction. However, it will have to look at differentiating with respect to its competitors on aspects other than price, and communicating the value of its products to customers Great. Thank you for your time.

And do any of these players have a presence in the online space? Arya and Sansa have their own online retail stores, and sell a few of their watches on major ecommerce websites such as Flipkart and Amazon. Of the luxury watch makers, only Riordan has its own online store. So, do you have any ideas as to how the client can develop an online presence?


2016-17

24

Industry Analysis - e-Commerce To analyze the e-commerce industry for a watch brand Interviewee Notes

Case Facts

• Understand client and current market situation properly • Use general knowledge about e-commerce to make recommendations

• Client sells two types of wrist watches- luxury (24% market share) and mid-range (26% market share) • Mid-range competitors- Arya (30% market share) and Sansa (18% market share) • Luxury competitors- Riordan (29% market share), Vance(26% market share) and Le Guin(28% market share) • 17 stores across 10 cities in India






Industry fundamentals

Need-gap


Competitor assessment


Category to focus on for e-commerce option Explore niche websites for greater traction Could have explored more sales growth options

Interview Summary This is a strategy case where some knowledge about the existing e-commerce environment would be helpful in making targeted recommendations.


Do Keep a tab on industry happenings Further brainstorming to come up with challenges if the interviewer asks, “Anything else”?


2016-17

25

New Market Entry - Overview

Market Entry, Analyze and recommend entry strategy Approach/ Framework (Broad) for the Case Type

New Market Entry

Vision

Customer – New Market

Product

Company

Segments

Customer Expectation

Product Offerings

Needs

Available Products

Resources – Capital, Technology & Labour

Profiling

Identify Gaps of above 2

Goals Size & Growth

Objectives

Client’s Target market share

Our Strengths & Strategic Assets Market Share

Entering Strategy?

Industry Competitors & Share SWOT Analysis

If Yes, How?

Barrier to Entry/Exit

Start from Scratch

Our Estimate of Market Share

Acquisition

No

Joint Venture

Framework Summary Understand what the company ‘s objectives and expectations are. Does it make business sense for them/ Does it align with the overall firm strategy. Analyze the feasibility of market entry by considering 4 different buckets. Then recommend whether they should enter or not. If yes, how should they do it.

Tips Not every aspect of the framework mentioned will be applicable to all cases. But try to cover as much as you can, so that you get a good idea of the industry and the client current status. It is very important to identify where the client would stand in the industry compared to the existing competitors and what measures should be taken to mitigate competitive edge of incumbent.

Observations Most of the times interviewer will be satisfied if you analyze and suggest, whether to enter or not. But it is always good to take an extra mile by giving a high level plan on how to enter and capture the market.


2016-17

26

New Market Entry - Lock Manufacturer – Interview Transcript Our client is a leading lock manufacturer in India. He wants to enter the Nigerian market. Nigerian market has a lot of oil refineries. He has approached us to know how he should go about entering the market. Reiterating my understanding of the question. Can you tell me a bit more about the Nigerian market? I am unable to get the connection between the oil refineries and the lock manufacturers. Basically, locks are used for both the residential purposes and industrial purposes. What kind of locks are we in? Do we manufacture some hi-tech number locks or simple vanilla locks? We basically manufacture simple door locks. We also provide industrial purpose locks to safeguard oil and other industrial products. These are similar to door locks. One final question: Has our client already decided to enter the Nigerian market. Or does he want us to analyse this as well? No he is yet to decide whether to enter this market or not. He wants our advice regarding whether to enter or not? And if entry, how to go about entering this market? Now the candidate comes up with a framework which captures industry parameters, client’s competencies, financials and mode of entry Let’s just focus on the industry part. This is the data available on the parameters you mentioned.. I would like to focus on how we sell our products. I assume we would be selling residential products through a distribution channel comprising of distributors and retailers while the industrial products would be sold directly to the clients.


Yeah that’s true. Focus on residential aspect as of now Next, I would like to focus on our customers. Do we know the buying behaviour of our customers? Ok good, now you are coming to the point. Nigeria is a land where you see a lot of thefts happening in broad day light. As a result, customers purchase locks not to protect their goods but to delay the theft. They lock their houses with some 10-20 locks in order to delay the theft.

Ok, that is interesting. Now I assume if this is the case, then primarily 2 things would drive the purchase – a) Price b) Availability I assume quality of the product won’t drive the customers. Yes, the customers are not at all quality conscious. They buy local China locks. How different are we on the price point? Our locks are 40% expensive than the local China locks. Is there any specific reason why our locks are so expensive? Yes, we provide premium quality locks that last for 15 years compared to Chinese locks. But, I assume customers don’t bother much about the quality. Yes, that is true. So, now what you recommend? The 2 most important factors for customers are price and availability. On the price point, we are expensive compared to the competition but superior in quality. But, the customers don’t bother much about our quality. On the availability front, it would take us huge time and investment to build up a distribution network. Based on this, I am a bit apprehensive of going forward in the residential space in this market.

2016-17

27

New Market Entry - Lock Manufacturer Client wants to enter into Nigerian market. The objective is to analyze the market and recommend the client an entry strategy Interviewee Notes • Noted down client industry and the target market • Clarifying questions on client industry and target market • Trying to understand client product portfolio • Questions on purchase pattern to understand customer behaviour Broad-approach • Considered 4 different buckets to understand market dynamics, competition, entry strategy and financial strength • Identified purchase drivers – Price and availability

Case Facts • Client manufacture both simple

Approach/ Framework

locks and industrial purpose locks for oil refineries etc., R

I

Size

400m

100m

Growth

12%

6%

Lifecycle

Growing

Growing

low

high

3 major players

8 major players

Profitability Competiti on

•Lot of thefts happen in Nigeria, hence customers buy 10-20 locks to delay theft •Customers are not quality conscious •Client locks are 40% expensive than china locks •Client lock are premium quality which last for 15 years

New Market Entry


Product

Segments


Needs

Available Products

Profiling


Company

Product Offerings

Industry

Competitors & Share If Yes, How?

Vision

Goals Size & Growth

Objectives


Entering Strategy?


SWOT Analysis

Our Strengths & Strategic Assets


Market Share


No

Start from Scratch

Acquisition

Joint Venture

Recommendations •

Client’s product did not match the customer requirements in the market. The client also had to invest heavily on new distribution channel. Hence going ahead with the client’s product in this market is not attractive

Interview Summary The interviewer was happy with the overall analysis. But the candidate could have consider all possible solutions.


Interviewee did not consider other possibilities such as customizing the product based on customer needs. Customers tend to buy locks in bulk, this market could be a great way of getting into a new product portfolio Always come up with all possible solutions and eliminate based on feasibility Try to back up the entry strategy with cost benefit analysis


2016-17

28

New Market Entry - Retail Banking - Interview Transcript A UK based banking giant wants to enter the Indian market. They have hired you as a consultant to guide them with this decision and advise them on various aspects of this move. Foremost, I’d like to know more about the client to evaluate their entry into the Indian market. Is the client an investment bank or a retail bank? The client is into Universal banking i.e. they have both investment and retail banking arms. Can you tell me more about the core strong business areas of the client? The client has a strong presence in the retail banking business. It is the market leader in retail banking in UK, Belgium, Netherlands, Luxembourg, Germany and Austria. Personal loans and business loans for small and medium enterprises has been a big driver of its growth globally. Alright, in that case, I believe that the client should probably enter the Indian market with an initial focus on retail banking. The client clearly has a lot of expertise in this segment and can efficiently leverage on its strengths to make an impact in the Indian market. However, I’d also like to look at the Indian market before making this recommendation and first gauge whether entering the Indian market in itself makes good business sense.

The industry is characterized by significant competition from numerous public sector banks, domestic private banks and other international banks like the client; besides the numerous smaller scheduled and co-operative banks throughout India. That’s not very encouraging for the client as it might significant barriers in penetrating the market. However, this does not necessarily mean that the competition is fierce in all services. As I understand, most of the business in the retail banking industry is currently generated out of corporate and consumer loans where banks primarily cater to the larger corporate and the upper classes of the society. Would you agree with me? That’s right but I am not quite sure where this is leading. Please make your point. Sure. I was trying to explore was the presence of untapped opportunities for the client in the market. As you had mentioned earlier, the client has a strong presence in the personal and business loans business for small and medium enterprises. However, the other banks in the Indian banking industry focus primarily on the larger enterprises. This means that the client can strongly leverage its core expertise in the Indian market and tap into the huge market of SME enterprises

Okay, that sounds reasonable. How would you ascertain the attractiveness of the market?

Okay, I follow your arguments now. Do you see any other roadblocks besides competition for the client’s growth prospects?

Foremost, the market should have attractive growth prospects in the near future. Can you help with an estimate of the growth projections in the Indian retail banking industry?

I believe the existing regulations in the banking sector significantly restrict the number of branches foreign banks can operate and it is very difficult for them to get the authorization for every new branch. This would pose a serious bottleneck to the client’s growth

The retail banking industry is booming ever since the liberalization of the economy was initiated. The industry is expected to grow at a CAGR of 28% to touch a figure of INR 9,700 billion by 2010.

So would you recommend the client to enter India?

The industry shows quite promising growth prospects and definitely looks attractive for the client to enter. Can you tell me something about the degree of competition in the industry?


Yes, I believe the Indian retail banking business holds immense potential and based on this discussion about the market, the competition and the clients existing core businesses and strengths, I’d make a favourable recommendation. The regulatory restrictions exist but the presence of numerous other international banks like HSBC, Standard Chartered Bank, Citibank; I believe the opportunities surpass the threats. Also, I might sound too pragmatic but given the pace of India’s liberalization and development, I would definitely expect the regulatory restrictions to get relaxed in the near future.

2016-17

29

New Market Entry - Retail Banking UK based banking giant wants to enter Indian market. Objective is to asses the market and to advise an entry strategy Interviewee Notes • Clarifying questions on client industry and core competencies • Questions on market trends to understand future prospects of the industry • Assessed the competition by seeking information on existing players in the market • Touched upon regulatory issues in the market Broad Approach: • Covered four major aspects such as target industry segments and growth prospects, competition, client core competencies, Entry barriers

Case Facts •Client into universal banking i.e. both investment and retail banking •Market leader in retail banking business in UK, Belgium, Netherland, Luxembourg, Germany and Austria •Client has core competencies in personal and business loan for small and medium enterprises •CAGR of retail industry is 28% •Highly competitive industry with presence of public, private and foreign banks

Approach/ Framework

New Market Entry


Product

Segments


Needs

Available Products

Profiling


Company

Product Offerings

Industry

Competit ors & Share If Yes, How?

Vision

Goals Size & Growth

Objectives


Entering Strategy?


SWOT Analysis



Market Share


No

Start from Scratch

Acquisition

Joint Venture


As the core competency of client is retail banking, they should first focus on leveraging that in Indian market Competitors largely focus on loans to large scale enterprises, Client can leverage their core competency by providing loans to small and medium scale enterprises Enter the market focusing on retail banking and leverage expertise on personal and business loans for small and medium enterprises

Interview Summary Identified opportunities in the target market, mapped it to the core competencies of client. Assessed competition and suggested focusing on services which does not majorly overlap with competitors.

Observations/Tips/Suggestions

After making a recommendation to enter to the market always suggest a full blown strategy on how to establish in the market, how the client should attract the customers, additional services to mitigate competition etc., This will further strengthen your recommendation.


2016-17

30

New Market Entry - Diagnostic Chain - Interview Transcript Interviewer: A diagnostic laboratory chain based in America wishes to enter the Indian market. What are the factors which you would look into in order to advise them?

Interviewer: That sounds interesting. Tell me something more about the fixed costs and other details the company should consider before launching services in India.

Candidate: Before I start, I would like to know more about the kind of operations this lab undertakes. For instance, is it a general-purpose health laboratory or does it specialize in certain areas of health?

Candidate: Well, the sourcing of the technology will have to be thought of, as also the regulatory regime regarding investment in health infrastructure in India. Tie-ups with big hospitals will need to be explored as the first step toward gaining a foothold in the diagnostic laboratory industry, since trust would be of paramount importance when it comes to health-related matters. Subsequent to that of course, the client may want to extend operations to capture higher volumes.

Interviewer: Well, it basically tests patients’ blood and urine samples for diseases as wide-ranging as cancer, AIDS, diabetes, hepatitis etc. So you can refer to it as being fairly general in its operations. Candidate: And what is the nature of technology used in the labs? Interviewer: They use the latest technology, the very cutting-edge. Candidate: Okay. And lastly, what is the modus operandi of these labs by way of getting clientele. Do they advertise or are they prescribed to patients by doctors in hospitals when the former need tests to be performed? Interviewer: These labs are fairly high-end and use the latest technology. So the main source of revenues from us is the hospitals which recommend patients to us. Candidate: Okay. To start my analysis, I would try and look at the nature of health services industry in India and compare it what exists in the United States. In the course of so doing, I would need to examine and compare the demographics, purchasing power and health infrastructure of the 2 countries, amid other factors. Does that sound okay to you?

Interviewer: That sounds right. All I want from you is an enumeration of the various factors you would want to consider, just that.

Interviewer: What about rural areas? Candidate: In rural areas, there is huge scope for such labs because of two reasons. One- the large number of people residing in rural areas. Two, the huge investments that rural health-care has seen in the last few years. However, there are certainly problematic issues as regards operating a diagnostic laboratory in the rural areas. Firstly, for such labs to be successful, strong backward and forward linkages with key infrastructural elements covering health as well as other fields are required. For instance, if there are no functioning hospitals, the labs will be of no use to patients. Similarly, the sourcing of technical equipment, medical supplies etc. to labs requires well-functioning roads, communication networks etc. Secondly, and perhaps most importantly, the nature of health services which would be in demand may be very different from that of the services demanded in America. Interviewer: Different in what way? Candidate: Typically, the nature of health ailments people in rural India will face will be very different from that of those faced by Americans because of the vast difference in lifestyles. So, the client will need to gauge if it is capable of catering to these widely different needs in a cost-effective manner. Interviewer: Good. That will be all.

Candidate: Okay. In keeping with what I said just now, I would like at the following. First, I would look at the kind of market India possesses as far as diagnostic laboratories are concerned. In relation to this, I would divide the market into urban and rural markets. In urban areas, I would examine the kind of labs which currently exist and the nature of clientele they cater to. I would try and explore how the patients are recommended to these labs viz. is it by the hospitals/doctors or is word-of mouth ‘publicity’ important. Interviewer: Okay. What other things? Candidate: I would also look at prevailing competition from the point of view of the nature of services that they offer. Such analysis will help in figuring out the competitive advantage our client enjoys by way of tests not performed by other labs. Also, it would be important to find out about the range of incomes we would cater to. For instance, we could depend on high volumes based on low margins or on high margin low volume based services. While in the former, specialized services would not be required and the client’s core competencies would not be the revenuegenerators, the high fixed costs of opening labs makes me believe that a high volume model may in fact be feasible. On the other hand, the lab could service high-end clientele and use its expertise in health matters relating to ‘rich’ and upwardly mobile lifestyles.


2016-17

31

New Market Entry - Diagnostic Chain Client wants to enter into Indian Diagnostics space. The objective is to analyze market in terms of cultural, regulatory and customer preparedness Interviewee Notes • Identify current client location and market • Clarifying questions on client industry and target market • Understand technology, operations, market positioning • Questions on purchase behaviour to understand customer behaviour Broad-approach • Considered 4 different buckets to understand market dynamics, competition, entry strategy and financial strength • Identified purchase drivers – Price and availability • Analysed competition and demography of customers • Understand cost structure • Study mass market vs niche playing position • ID cost structures & BEV

Case Facts • Client is cutting edge latest technology in the US • Tests blood and urine samples for diseases – Cancer to Aids, hepatitis etc. •Mass player in blood test, no niche as such •Rely on hospitals to promote testing and acquire customers

Approach/ Framework

New Market Entry


Product

Segments


Needs

Available Products

Profiling


Company

Product Offerings

Industry


Vision

Goals Size & Growth

Objectives


Entering Strategy?


SWOT Analysis



Market Share


No

Start from Scratch

Acquisition

Joint Venture

Recommendations •

This case did not have a definite solution, more of capturing factors to be considered before entry. Candidate did a good job to capture most factors in terms of influencers, purchase frequency, market segments willingness to pay.

Interview Summary The interviewer was happy with the overall analysis. But the candidate could have consider all possible solutions.

Observations/Tips/Suggestions • • • •

Niche positioning or acting as technology partner with existing players or hospitals could have been considered as an entry point Always come up with all possible solutions and eliminate based on feasibility Try to back up the entry strategy with cost benefit analysis The candidate could have given an high level entry strategy and idea of implementation which would have added more value to his arguments


2016-17

32

New Market Entry - Household Furniture - Interview Transcript

Our client is a manufacturer of furniture sold to corporate offices – he wants to move into the household space. Guide him as to whether this is the right move or not.

Suffices to say that the household market is pretty large and is growing rapidly. There is not a lot of difference in the actual products sold to the 2 markets. However, household customers like to view the furniture exhibited in a retail store before buying.

Reiterated my understanding of the question. First up, I would like to understand the objective of entering the household market

Since our present model is door delivery, I shall assume that we do not have a retail presence. However, these retail stores can be set up by making investments. Is the client capable of making such an investment?

The objective is to increase revenues

Yes, the client’s financials are in good shape. What else do you think can impact entry?

I’d also like to know more about the client – business model, scale of operation and geography. The client is a mid-level regional manufacturer – majority of clients are in Mumbai. Business model consists of both manufacturing and door delivery.

I think that the client’s core competencies will not be of much use in the household market – there is not much scope for usage of relationships built. Prevalent of high competition in metropolitan cities such as Mumbai can also be a factor.

Is there any core competency that the client has developed in his operations?

That’s right. In light of the points you mentioned, what would you recommend?

Yes. Core competency is reliability – has built trust and reputation through good working relationships

I would recommend against entering the market mainly because of 3 reasons – non-usability of competencies, significant investment needed to set up retail stores and presence of high competition.

I would like to structure this problem as follows: identifying new market’s customer segments, need gaps, presence of client capabilities to plug this need gap and impact of competition

Good. That will be all.

Let’s focus on the first two buckets that you mentioned. Right. How big is the household market and how is it growing? How different are the products sold to corporate customers and households? Is there a difference in service delivery?


2016-17

33

New Market Entry - Household Furniture India based corporate furniture manufacturer looking to enter the household furniture market. Objective is to evaluate entry. Interviewee Notes • Clarifying questions on client objective, client industry and core competencies • Questions on market trends to understand future prospects of the industry • Assessed the competition by seeking information on existing players in the market Broad Approach: • Structured the problem into evaluating presence of demand gap and supply capabilities on the part of the client; integrated competitor presence into framework

Case Facts •Furniture manufacturer in Mumbai – sold to corporate clients •Objective is to increase revenues •Current business model is based on low cost manufacturing and door delivery (no retail presence) •Core competency is reliability – has built trust and reputation through good working relationships

New Market Entry


Product

Segments


Needs

Available Products

Profiling


Company

Product Offerings

Industry

Competit ors & Share If Yes, How?

Vision

Goals Size & Growth Objectiv es


SWOT Analysis



Market Share



Entering Strategy?

No

Start from Scratch Acquisiti on

Joint Venture


Moving into household furniture would require setting up of retail stores – which involves significant restructuring of business model Working relationships (core competency) do not count for much in the household space as repeat business has a longer time cycle Therefore, recommended not to enter the market

Interview Summary Identified the differences in customer preferences between the 2 markets, required changes in business model and the relevance of core competency in the new market .

Observations/Tips/Suggestions The major question here was that of core competency – once that was asked and applied to the new context, the case was half solved.


2016-17

34

Growth Strategy - Overview Growth strategy cases are generally open ended and have enough room to test the candidate for both creativity and comprehensiveness of approach. Approach/ Framework (Broad) for the Case Type Cross-selling Increase volume per customer Increase revenue per customer

Loyalty programs

Bulk Discounts Increase price New geographies

Revenue Growth New markets

New customer segments New product launches

Increase number of customers

Improve marketing Existing markets

Improve access / distribution channels

Framework summary

Key Questions

The growth in revenues is broken down into growth in revenue/customer and number of customers and then further methods like increase of prices, new products, new geographies etc are utilized to achieve the desired growth

•

Tips • •

Always ask probing questions immediately around time-frame, and quantification of impact. E.g. If the case interviewer states “XYZ wants to increase it revenues quickly.” The first questions should be “What magnitude of increase is being envisaged?” and “What is time-frame to achieve this impact?”


• • •

What are the major revenue streams, and what percentage of the total revenue does each stream represent? Does anything seem unusual in the balance of the percentages for this firm compared to the industry? Have the percentages changed lately? What are the companies trends in terms of revenue over the last 3 years?

2016-17

35

Growth Strategy - Telecom Market - Interview Transcript

The client is a telecom service provider and wants to grow in a saturated telecom market. How would you go about this? I would like to start by understanding the telecom market in India, looking at the revenue drivers and advise the client on which ones he could use. I understand that the telecom sector works by hiring its services from tower operators and then use their own brand name and services to generate revenues.

Interviewer: True. Our client too hires such service at market rates. Okay. Then I shall explore the meaning of saturated market. Has the client explored all geographies? Like the whole of rural market? I recently read that we have about 680 million telecom connections. So, I believe there is still some untapped market to explore.

Right. There is an untapped market. Let us go on and say the rural market has been penetrated to the extent possible and they have probably done what they could in that respect. Okay. So assuming a saturated market, we should look at increasing revenue from existing consumers. We could analyse the existing calls being done and could think of schemes like STD call rate packages, local call packages, local and STD SMS packages that suit to the area to increase per user usage. The idea would be to have lower rates more than compensated by higher usage.

Good, what else? We could look at various value-added services like revenues through internet services on mobiles. Having different plans and offering better speeds, we can get more consumers to use internet on their mobiles. Also, with 3G technology, mobile internet will surely be a huge source of revenues.

Good. Anything else? Also from games and applications. There are many businesses coming up in the area of mobile gaming and product development of applications. We could buy them and use them as sources of additional revenue. Okay, thanks for the inputs. We will now move to the next interview. Thanks for your time.


2016-17

36

Growth Strategy - Telecom Market The client is a telecom operator in India and wants to increase his revenues and grow in this saturated market. What would your recommendations be? Interviewee Notes

Case Facts

• How does the telecom market in India is performing? Is it growing? • What are the possible revenue drivers for the client? • What is meant by saturated market? Maximum penetration or saturation in economy or any other factor? • Rural market has been penetrated to the maximum extent

• Client operates by hiring services from tower operators and provides various services to earn revenues • Rural market has been penetrated to the maximum extent possible

Approach/ Framework

Increase revenue/ user

Increase Revenue

Cross-selling

Tying up with mobile manufacturers and so on

Increase usage/user

Loyalty programs

Loyalty benefits, free talk-time, discounts etc

Increase price

Bulk and other Discounts

Discounts on high usage, benefits on referrals etc

New geographies

Rural/urban India, lowlypenetrated states, outside India etc

New customer segments-

Age based(Youth, old), Usage based: Loyal vs first timers etc

New product launches

Value added services, games and applications, internet etc

Improve marketing

Celebrity endorsements, innovative ad campaign etc

Improve channels

Strategically located stores, better availability in existing stores

New markets Increase # of customers Existing markets


Client needs to increase revenue from existing customers which can be done through analyzing services like STD calls & SMS packages to increase usage/customer Offering value added services like high-speed internet services, 3G could be a huge source of revenue Generate additional revenue sources by buying businesses concerning mobile gaming and application development

Interview Summary This is a revenue growth case where interviewee should eliminate the option of increasing market penetration by asking directed question about the meaning of a saturated market in the beginning itself. This tests candidate’s ability to quickly come up with new methods of revenue growth in a saturated market.

Observations/tips/Suggestions • • •

Candidate should have clarified upfront the potential targets and time period for revenue growth Increasing revenue by expanding in new geographies could have been discussed by asking the client’s objective of growth in the beginning as pertaining to just India or other geographies Multiple options for increasing usage/customer s could have been mentioned in addition to just mentioning analysis of STD calls and SMS packages


2016-17

37

Growth Strategy - Boiler Company - Interview Transcript You’ve been approached by a boiler company and they want your help in devising a growth strategy.

I’d like to confirm that the company wants to increase its sales drastically and preferably its profits too.

Now that we have eliminated some of the options, I would like to focus on current market and consolidation of the existing product line. Specifically, I would like to know the individual products on offer, margins to be made on each of them and their individual growth potential.

I think you have figured it out. What would you like to suggest to the company?

That’s right.

Before we take a look at the company specific information, I would like to know more about the industry – current trends, any new technological advances, nature of competition etc. Boiler companies typically have a line of products based on capacity and fuel used. There are no new advances in recent times. 80% of the market is organized and main customers are the thermal power plants.

In my opinion, company should focus on the products which promise growth and also offer higher margins. Possibly, they are currently providing a standard capacity type or a fuel type to most of the customers. They should rather look at the individual customer needs and design their offer accordingly. This benefit to customer would also enable them to command a greater margin on each product sold. Sales force incentives could also be aligned with customer-centricity in terms of correct product requirement assessment and supply. In short, focusing on the right product is the key for growth for our client.

I think the analysis is sufficiently thorough. We can stop here. Thank you. A company can grow either by expanding market share in its existing market, entering new geographical markets, coming out with new products or by acquiring another company. I would like to know more about this company. What this company’s products are? Who are its customers are? Where does it operate? Its access to cash/financing resources? Its competitors?

It’s a medium size firm – about $100 MN in sales, operates primarily in India. It’s the biggest player in the organized segment which is approx. 80% of total market. Its main customers are thermal power plants, etc. Products can be classified on the basis of capacity and fuel for the boilers. It doesn’t have much cash or technology. It’s a midget compared to global players in the same industry

Well, not being cash-rich restricts the firm from exploring various growth options. For instance, new product development seems to be out of question given no access to technology advances. Similarly, exploring new geographical markets, even overseas markets, would be out of reach presently as there is dearth of capital. Acquiring another company is a possibility if synergies exist that can to offer significant benefits out of the merged entity. But, we also must keep in mind the results realization lag in case of a merger. Again, M&A activity presently does not seem feasible.

Sounds reasonable


2016-17

38

Growth Strategy - Boiler Company You’ve been approached by a boiler company and they want your help in devising a growth strategy. Interviewee Notes

Case Facts

• Industry analysis – current trends, any new technological advances, nature of competition etc. • Understand client business • Low on cash – restricts new product development, M&A not possible

• 80% of the market is organized and main customers are the thermal power plants. • Medium size firm – about $100 MN in sales, operates primarily in India. It’s the • biggest player in the organized segment which is approx. 80% of total market. Its main customers are thermal power plants, etc. Products can be classified on the basis of capacity and fuel for the boilers. It doesn’t have much cash or technology. It’s a midget compared to global players in the same industry

Approach/ Framework

Increase revenue/ user

Increase Revenue

Cross-selling

Machines/devices across value chain

Increase usage/user

Loyalty programs

Discounts for repeat purchase for new plants

Increase price

Bulk and other Discounts

N/A

New geographies

New markets beyond India

New customer segments-

Diversify into unorganized segments

New product launches

Customized and tailored solutions

Improve marketing

Highlight USP in markets

Improve channels

Build relationships with purchase managers

New markets Increase # of customers Existing markets


Company should focus on the products which promise growth and also offer higher margins look at the individual customer needs and design their offer accordingly Sales force incentives could also be aligned with customer-centricity in terms of correct product requirement assessment and supply

Interview Summary This is a revenue growth case where interviewee should give a broad framework with different options before filtering down to the recommended option.


Candidate should have clarified upfront the potential targets and time period for revenue growth Candidate should have broadly tested each option with the interviewer instead of simply mentioned them all.


2016-17

39

New Product Entry - Overview In a new product entry case, a company is likely to aim for introducing a completely new product in a market or expand its existing product’s reach in a new geography. A interviewee is expected to first align on the product’s viability to succeed in the market followed by identifying the correct price point and target market and finally recommend levers that can drive product success in the market. Approach/ Framework (Broad) for the Case Type New Product Introduction Establish Value chain

Initial Investment

Self Financed

Debt Financed

Equity Financed

Production challenges

Profit and Break even point

# Units sold

Distribution Challenges

Price per unit

Variable cost per unit

Marketing challenges

Framework Summary

Key Questions

Establish Value Chain

A company can either introduce a product in a market where it has no presence or can extend product line in its current market. Launching a product in a market with no presence pose not only operational challenges but viability of product’s success in the market also needs to be explored. Extending the product line in current market may require looking into cannibalization while doing a feasibility check of product in the market and how the current value chain can be leveraged in making the product available to its customers.

•

• • •

Tips

• • •

• •

Clarify objective, especially focus area of a new product entry case New product entry cases might involved multiple issues linked to it and hence both depth and the breadth needs to be covered for exhaustiveness


• • •

Fixed cost

What is the purpose of the new product introduction – capture increased market share, entry into a new business line, profits, build brand? How big is the market for the product? Segments in the target population? What is the price at which the product has been introduced?

Are there any barriers to entry into the new areas? Number and type of competition? Market share? For distribution etc. do you do it in-house or contract it out?

Profit or Break Even Point •

Expected time before break even? Should not be too long a time

Initial Investment What is rate of interest? Do sales cover the interest expense? Expected period of payback?

2016-17

40

New Product Entry - Anti Smoking Pills - Interview Transcript The client is in the business of making anti smoking pills - the way we have those patches and lozenges in the market to curb the urge to smoke. The client wants to sell it at a premium price. You have been hired to find out if the product can be introduced in a country like India - and if so - what is the expected target market, market share and a feasible price at which the drug should be sold. I would like to confirm if I have understood all the critical aspects of the client’s situation. Our client is in the business of making anti-smoking pills that reduce the urge to smoke for smokers. We need to do see if the product is feasible to be launched in India and evaluate the market characteristics such as size and client’s share based on the price. That’s right. Now that you’ve understood the situation well, how do you propose going about the solution? Since this is a new product launch, I would like to structure my discussion around the product characteristics (development and customization) for the Indian market and then move on to the launch (competition, distribution and promotion) part of the case. This sounds fine to me. Also, please note that this product is not entirely new; it has been introduced in other countries already. Ok, that experience should definitely help us. To start with, can you tell me something more about the product? How is it different? Unlike the lozenges or patches, this product is completely nicotine free - it is 5 times more effective as proved by lab results and 50% of the test results responded to the pill (which in this industry is an extremely high number thus indicating success). Moreover, it is a drug that cannot be sold over the counter – it requires a prescribed dosage given by the doctor. It is to be taken for 3 months daily, 3 times a day. That is good. It gives us the advantage to position our product as superior due to the higher efficacy of treatment. I would like to know take up the competitive scenario next so that we can decide the price before determining the overall market size. That’s a fair point. So, there is no similar product in the market. Cheaper products like lozenges exist but they contain nicotine and sell for Re. 1 per unit.

Hmm… that is good. In our case, let us assume we did this and came up with Rs. 8 per unit. You think that sounds reasonable? I think a price of Rs. 8 per pill is feasible because of the lab results - people will be convinced that it is a medically prescribed drug and since it is a pre-scheduled dosage for 3 months, results are guaranteed. We can also stress on the on nicotine bit and indirectly position this as a life saving drug. Ok, let’s estimate the market size assuming we decide to price it at Rs. 5 per unit. Let’s take Delhi as a base case. Population: 150 lakh. Target segment: 40% of them smoke * 20% of them would want to quit smoking * 75% can afford (Rs. 8 * 3 * 90 = Rs. 2160 drug to quit) = 9 lakh people or INR 9 * 2160 ~ INR 200 crores. We can now assume that this drug will reach out to 25% of the population across India (urban + rural since its effective and one-time payment to quit smoking), which means the total market is 200/150 * 0.25 * 10,000 lakh = INR 3,333 crores. Very interesting. What will drive the market growth our market share? Candidate: The market growth rate will be affected by the sales and distribution coverage, willingness of people to quit smoking and addition of new smokers who would want to quit after sometime. We can look to capture about 80% of this market eventually, assuming no major competitor enters the market, which can be prevented by IPR support. Since this is a prescription drug, the bulk of the promotion costs in this industry are in targeting the doctors and chemists via direct sales agents or Medical Representative to convey the pros and cons for them to a) prescribe the drug and b) keep it in their pharmacies. This will drive our market share from the potential market size. Good. What about the other 20%? Candidate: I am assuming that the remaining 20% will comprise of smokers who are unwilling to quit smoking (10%), perceive the price to be high (5%) or are not aware of the product (5%). This percentage can decrease as we move further in the product life cycle and the product becomes well established through marketing and promotion efforts. Good. Any other costs/concerns that you would like to address?

What are the other countries where the product has been introduced? How receptive have the customers been in those countries? The other countries have smokers who are quite similar to the Indian consumers. The product has been quite a success. Ok, this means that the target audience will be receptive to the product and we can assume that there is a strong market for the same. I will now proceed with the estimation of the price and market size. There are two ways that we can price a new product in a non-competitive market: Cost based and ‘willingness-to-pay’ based. In the first, I would calculate the cost to company and charge a margin on the same while in the second case; I would calculate the propensity of the consumer to pay for this drug. This would vary with my target segment chosen. Ideally, we should be able to calculate the optimal profit case by considering the trade-off in sales volume vs. price for various price points. The solution will also be influenced to an extent by the growth rates of the different target segments overall, say movement of people to upper-class from lower-middle class.


The training costs for the direct sales agents will also be critical as this is a new product and local agents would need an in-depth understanding of the product. No. of sales people can be calculated by total workload method: Assuming Doctor/Population ratio and say 3 doctors per day and repeat visits every 2 months; and Chemist/Population ratio and 3 chemists per day and repeat visits every 15 days. The supply chain will have to be considered - the warehousing, distribution network, retail chains etc. We can perform the cost benefit analysis for using middle distributors v/s direct distribution. Good, I think we have covered the different aspects of the case. Thank You.

2016-17

41

New Product Entry – Anti Smoking Pills The client is in the business of making anti smoking pills - the way we have those patches and lozenges in the market to curb the urge to smoke. The client wants to sell it at a premium price. You have been hired to find out if the product can be introduced in a country like India - and if so what is the expected target market, market share and a feasible price at which the drug should be sold. Interviewee Notes

Case Facts

• New product launch – Anti smoking pills • Country - India • Premium product- requires premium price • Product characteristics (suitability for Indian market) & Product launch (competition, distribution and promotion) • How is the product different from existing? products • What is the competitive scenario in the market • Product has already been introduced in some countries

• Client is in the business of making anti-smoking pills • Client wants premium price for its product • Client wants to find product’s potential in India – target market, market share and feasible price

Approach/ Framework Introduce Antismoking pills in India Initial Investment

Profit and Break even points

Establish value chain Distribution challenges

The drug cannot be sold as OTC and would require prescription. Medical representative and direct sales agents need to be hired who can push the product to the doctors who in turn will prescribe it to the patients. Client needs to invest in training of its sales reps so that they can convince doctors with product’s value proposition

Product marketing

Potential Revenue Target market size

Cost

Price

Filters

Number projections

Population base (Delhi)

150 lakhs

% population who smoke % smokers who want to quit % quitters who can afford the product

40% 20% 75%

Potential customer base Potential revenue

150*.4*.5*.75 = 9 lakhs 9*2160 = 200 Cr

Revenue projection across India (25% penetration)

200/150*0.25*10000 = 3333 Cr


Price point should consider both customer’s willingness to pay and product’s incremental value proposition over existing products in the market IPR/ Patenting the drug can prevent competitors to enter market and facilitate capture of market share Spend more on training the medical representatives and direct sales agents to push the product to the doctors who in turn will prescribe it to the patients

Interview Summary This is new product entry case where the interviewee should not only check products success viability in market but also touch upon operational issues


Marketing of the product can be briefly discussed since the product charges a premium price to its customers Long term product goals and ways to improve product penetration across its lifecycle could have been discussed Candidate should have clarified upfront if the product has already been launched in other countries


2016-17

42

New Product Entry - Automobile Service Station - Interview Transcript You are having tea with Mr. Ratan Tata. He has just returned from Germany where he saw third party car service stations which were doing very well. So, he is thinking of opening a chain of such stations in India. You need to give him your thoughts and make a pitch from our side for helping him with the project.

Ok. Now I want you to make a grid of the dimensions that you’ve mentioned and figure out where our competitors lie and where we should go. (Starts drawing a 2X2 matrix)

I’m not very sure of what you mean by third party service stations. Can you explain a little? Let us club convenience with quality. To service a car there are service stations. They can be authorized stations like the chain that Maruti has or they can be local garages. The third type, which is currently missing in India, is an independent chain of service stations which will service any brand. These are third party service stations Ok. This is a new business that Tata would want to enter. I’d like to look at a few things while considering the new venture : •Tata’s final aim - do they have a target profit /market share/return on assets as their target from the venture •Market scenario – growth & size, competition •Tata’s capabilities – financial capability, expertise in area, synergies with other businesses Tata is a big & profitable company, they want as high profits as possible from the venture. Also, they have no constraints with regards to finances. They build automobiles as you know and have authorized service stations for their automobiles. So, the aim of Tata is high profits and they have sufficient finances and expertise in the automobile area. I’ll go on to look at the automobile maintenance market. Currently in India there are 2 kinds of garages – the local ones and authorized service stations. So, when we enter the market, would we be servicing all kinds of brands and providing a full range of services? Yes. All brands and full range of services. We would need to differentiate ourselves from the 2 kinds of competitors that we have in order to get customers. Ok. How would you do that? I’ll look at why a customer goes to a service station and why he chooses a particular station to go to. A car would be taken to a service station for regular check-ups/services, in case of an accident and maintenance when it breaks down. Ok Now when an owner chooses a service station he would want : •Quality – In terms of genuine parts if replacements are done, trained mechanics, the car being treated properly, delivery on time •Cost – He would want the service to be as cheap as possible •Convenience – The service station should be close or should have a pick & drop service. There would be a segment of customers who would lay a lot of emphasis on cost while another segment would lay emphasis on quality. In case of an accident or break-down convenience would play a big role. Local garages will have low quality and low cost while authorized service stations will have high quality and high cost. Also, local garages are generally more in number so would be more convenient to reach in most cases.


We’ll just analyze the situation based on 2 parameters. Now, Tata wants to start a third party chain of service stations which will serve all brands. If Tata targets low quality, local garages will beat them since these garages can service all brands and charge very low unbeatable prices. Also, they would be built at strategic locations which Tata may not be able to acquire, coming late into the market. On comparing Tata stations with authorized service stations, Tata could stand a chance. They could ensure quality by sourcing parts from manufacturing companies and employing well trained mechanics. Since such a service station will service all brands it will be a convenient place to come to for high quality services. However, the price charged will be high. Do you think anyone will come to such a service station when they can go to a Maruti or Hyundai authorized service station? In India a majority of cars are Maruti and Maruti has a very good chain of service stations which are convenient to reach and high quality. Hence, Maruti cars will definitely not come to Tata’s stations. Other brands like Hyundai would come since their service stations are few and far apart. If Tata offers the same quality at the same price; it might be cheaper and more convenient for consumers if Tata’s chain has numerous stations at strategic locations. Maruti has almost 50% of India’s car market share. Now do you think it is beneficial to set up Tata’s third party service chain? Owners of other brands will prefer to go to their authorized service stations as they would be more trusted. And given such a lopsided market in favor of Maruti, it will be difficult for us to compete with Maruti directly. So, the number of cars coming to Tata’s stations might be too low for the venture to be viable. But, if there are expectations that many new brands will enter India as some already have, then Tata’s venture could be viable given that these firms would not want to open a service chain of their own due to small numbers and newer vehicles could mean that the local garages might not be well-equipped to deal with all kinds of problems with the vehicle. What would your final recommendation be? My final recommendation would be to not start such a venture currently since Tata would not be able to beat competitors on any dimension - cost or quality. However, in the near future this could turn sustainable so an eye should be kept on this market. Ok. Thanks.

2016-17

43

New Product Entry - Automobile Service Station You are having tea with Mr. Ratan Tata. He has just returned from Germany where he saw third party car service stations which were doing very well. So, he is thinking of opening a chain of such stations in India. You need to give him your thoughts and make a pitch from our side for helping him with the project. Approach/ Framework Open chain of third party service stations Initial Investment


Establish value chain Distribution challenges

Product marketing

Potential Revenue Target market size

Customers

Cost

Price

Competition

Quality High

Low

Authorized Service Station

TATA would need to be somewhere here to compete Local garages

High

• Client wants to open third party car service stations in India • Service similar to one existing in Germany • Independent service station which can service any brand

Low

Case Facts

• New product launch – third party car service station • Country - India • Independent service stationbrand agnostic • Service needs – Regular check-ups, accidents, maintenance • What is the client’s long term and short term goal • What is the competitive scenario in the market • 50% car market held by Maruti whose service stations have extensive coverage

Cost

Interviewee Notes

Maruti has 50% share of the car market and has extensive reach with service stations. If there are expectations for new car brands to enter into the Indian market, Client can tap into the market with high service quality


Current market is too consolidated for a new player to establish itself by beating competitors on cost or quality dimensions Opportunity available for the client in near future with entry of more number of brands and thus making the market fragmented

Interview Summary This is new product entry case where the interviewee should clarify long term and short term objectives of the client


Service level differentiations could have been discussed to explore opportunities for the client in the current market scenario Success factors in Germany could have been talked about before arriving at the recommendation for the client Candidate should have clarified upfront the long-term and short-term objectives of the client


2016-17

44

New Product Entry - Application Software & Bundling – Interview Transcript The client is a software manufacturer that offers shrink-wrapped software application products and has grown over the last few years – mainly through multiple acquisitions. In the recent times, their stock price has declined significantly. The sales have declined but their customer service department has shown impressive growth in revenues over the last few months. The CEO has an offer from OEMs (Original Equipment Manufacturers) to bundle his product with their products and he’s unable to decide what to do. You have been hired to help him analyze the situation and charter the path ahead. Before I begin analyzing the case, I would like to clarify a few aspects of the case.

I see. One of the objectives of software design is to keep it simple and intuitive with in-built easy-touse help. It appears to me that the company’s products could improve on this dimension. I suspect that some of this is the result of integrating technology from aggressive acquisitions that we have made in recent years. I see broadly three ways to integrate acquisitions. First, the company can simply add an acquired product as a new standalone offering in its product portfolio. Second, the new technology from acquired companies could be utilized to add new features to the existing products of the company. Third, the existing products of the company could be replaced by superior acquired products. Can you help me understand what approach out of these has the company taken for integration?

Sure, go ahead.

That’s a good way to think about it. In this case, the company has primarily followed the first two approaches. There has been both a portfolio expansion as well as product enhancements.

You mentioned that the sales have declined recently but the customer service revenues have shown significant growth. How significant has the decline in sales been? Also, does the company have other sources of revenues besides product sales and customer service?

I suspect that the rising customer service revenues actually point to poor integration of the acquisitions. There are two separate aspects to a successful integration. First, the product portfolio has to be rationalized at a technical level. If the company offers multiple offers to accomplish the same goal, it tends to be confusing for the customer. Similarly, products need to have a consistent look and feel so that it is easy for customers to navigate and configure various features. Second, the sales and marketing team needs to be well trained about the company’s evolving product portfolio. They should be able to help customers make good choices for their needs. Based on the type of customer service incidents, it appears that there is scope for improvement on both fronts. Customers are finding it difficult to configure and navigate the company’s software products. Also, acquisitions should have led to an increase in sales. But stagnant sales point to deficient sales and marketing function. I think without addressing these integration issues, it would not be meaningful to pursue the OEMs offer. It might lead to further dissatisfied customers.

The sales have not declined by much but they have been stagnant amidst a growing sector. The customer service revenues have been increasing steadily over the last year or so, though. These are the only two sources of revenue for the company. Thank you for the clarification. I would also like to understand the type of offer that OEMs have made. What is the revenue sharing model going to be, will there be a fixed payment or will it be based on profit sharing on per unit basis? The OEMs are desktop and laptop computer manufacturers who are offering a pre-installation of trial versions of the company’s software on some of their product lines. In return, the company will have to pay a fixed fee to the OEM for every new pre-installed computer sold and a 20% commission for every user who moves from the trial version and purchases a full version of the software. I understand. This implies that the OEMs’ proposal can help us expand our sales volume, though at lower margins. To be sure that this helps address the core issue that we are facing, I’d like to analyze the current profitability situation of the company. As you mentioned, the customer service revenues have been rising. Do we have any data on the types of customer service incidents that are commonly seen here?

So what would your advice to the CEO be?

I would recommend that the sales force be effectively trained. There needs to be a strong mandatory training program for the sales staff to make them fully conversant with the company’s products. I’d also recommend that the redundancy in the product portfolio be reduced so as to alleviate customers’ confusion. A technical push should be launched to make the software look and feel consistent across products. This should improve customer satisfaction, drive repeat business and improve sales. As for the OEMs offer, I would advice to hold off until these core issues are addressed. That seems fair. I think you have identified the main issues in the case and provided crisp recommendations. We’ll close here. Thank you.

I do not have specific numbers on customer service requests. However, I can tell you that a major category of service requests is for software configuration issues. Sometimes, the company’s software applications provide multiple ways to accomplish the same goals. A significant number of callers seek help on how to navigate different softwares.


2016-17

45

New Product Entry - Application Software & Bundling The client is a software manufacturer that offers shrink-wrapped software application products and has grown over the last few years – mainly through multiple acquisitions. In the recent times, their stock price has declined significantly. The sales have declined but their customer service department has shown impressive growth in revenues over the last few months. The CEO has an offer from OEMs (Original Equipment Manufacturers) to bundle his product with their products and he’s unable to decide what to do. You have been hired to help him analyze the situation and charter the path ahead. Interviewee Notes

Case Facts

• New product launch – Bundled product (hardware and application software) • Why is the new product being developed? • Will be the current problem of declining share price be resolved by introducing the new product? • What are the other potential solutions for resolving the current problem? Software simplification and efficiency in service delivery

• Client is in the business of offering software application products • Client wants to prevent its share price from declining • Client wants to explore the potential in offering a bundled product, along with the OEMs

Approach/ Framework Introduce bundled product Initial Investment


Establish value chain

Potential Revenue

The bundled product may result in additional sales for the client but it will also lead to increased costs. The resulting lower profits will not resolve the problem of declining share prices.

Fixed fee per installation

Cost

20% commission per conversion

The client needs to re-align its acquisition process to create simpler software solutions and invest in salesforce training.


Product improvement: The various software solutions need to be integrated to offer a simplified and easy-to-use software to the customers Service improvement: The sales force needs to be trained through mandatory programs to further improve customer service levels and drive repeat purchases

Interview Summary This is a new product entry case where the interviewee should test the need and feasibility of launching the new bundled product


There is scope for greater analytics for unit economics e.g., expected additional sales from bundled product, additional costs, contribution margin relative to unbundled product and the resulting impact on profitability The link between share price and profits should have been mentioned up-front The objective (improve profits to increase share price) should have been clarified


2016-17

46

Sales Growth - Overview In a Growth scenario, a company is likely to aim for XX% YoY growth. An interviewee is expected to first align the growth targets, followed by validating them, identify pillars that can support the growth targets, and finally recommend how the company can leverage/show go about these pillars. Approach/ Framework (High Level) for the Case Type Grow Sales by 20% in 1 year Explore Existing Business

Increase Volume

Increase Customers

Increase Prices (contingent on elasticity)

Explore New Business

New Geography/ Market

Increase Product Line

Diversify into New Products/Services

Acquisitions/ Mergers

Increase Basket Size

Framework Summary A company can grow either in its existing business (provided there is scope), else explore new business. Growing in existing business may be due to market growth and/or increased market share, hence both situations need to be explored. If the company is venturing into a new business, a feasibility check from an operational, financial, admin etc. needs to be performed in the end.

Tips • •

Clarify objective, especially growth % and time period Growth cases involve have a larger creativity component, keep options open while checking operational feasibility

Key Questions: •

What is the expected growth of the industry. Are we targeting growth more/less/on par with that?

Existing Business • •

Do we have existing capacity in the plants/services to meet the increased volume or would investments need to be made? What is the price elasticity in the market? (what is the relevance of this?) – to see whether an increase in prices in an option or not

New Business • • • •

Are there any barriers to entry into the new areas? Number and type of competition? Market share? Effect of substitutes and complements Products of scope with the existing product line we have?


2016-17

47

Sales Growth - B2B Telecommunications Provider - Interview Transcript You have been approached by the CEO of a telecommunications provider company. She is looking to grow the sales revenue. You are hired as a Consultant to identify opportunities and recommend a plan of action for the same

Your understanding is correct. Our wires extend to certain hubs from where they reach select buildings. Each building may have more than one customer.

In order to quantify the objective, does the client have any growth targets and time horizon in mind?

Have we sold to all such customers?

Yes, they want to grow sales by 4x in one year

Ok, so prior to looking at the company specific information I would like to know more about this industry, customers, and competitors. Sure. In this industry B2B telecommunication provide 2 kinds of products/services. Data centre options and wired lines. Data centre options include providing real estate space, power, HVAC systems, connectivity, monitoring systems etc. to a customer’s data /web/application servers. Through wired lines, customers are provided with services such as internet, ethernet, AV services etc. Great. Thank you for that information. So typically a company can grow through either its existing business and/or new business. In existing business, we can look at increase number of customers, basket size and pricing, while in new business I am thinking of options such as geographical expansion, increasing product line, diversifying into new business, or by acquiring/merging with a new company. To identify the best option I would like to know more about the company – specifically its products/services, customers, current geographies, financial health, and competitors. It is a medium size provider - about INR 300Cr. in sales, and operates primarily in Indian metros. It sells the products mentioned earlier to businesses which may include banks, insurance firms, and any company that may have a server requirement and/or wired line requirements. The client is cash strapped. It is the market leader in wired line services and 3rd in market share in data centre services.

OK. So being cash strapped limits some of the growth options such as geographical expansion and mergers/acquisitions. Also, in an competitive environment, price increase may not be a good idea. Sounds reasonable.

Actually no. We have sold only to a few customers. OK, so as I see it. There is a potential market in the buildings that we currently cater to. Also, since these are business customers, they may have more than one branch in a city or across cities. Have to sold our services to all their business centers? No, these can be good potential growth opportunities though. We can do a market sizing if time permits. I would like you to also explore the new business options. Sure. For this I would like to understand what kind of products/services our competitors are providing? So a customer can either have their own real estate for their servers (captive) or they can rent a space (colocation) and purchase the necessary hardware & software. One of our major competitors provides these services. Ok. So one of the ideas that comes to my mind is providing the customer with the option of completely outsourcing their IT requirements to us (i.e. hardware, software, management etc.). This way not only can we sell this as a pioneer product where customers can focus on their core business, but we also get a clear competitive advantage which can help us churn out some customers from our competitors. That seems to be a good idea, especially given that we already have the necessary real estate space and hardware/software purchases would not cost us much. But do you see any concerns with launching a new service? Yes, I can foresee that since this is a technical product, it may be difficult to capture customers who already have purchased the hardware/software. Also, our current sales force may not be fully equipped to sell this kinds of a service. Yes, absolutely. Good. Your analysis has been thorough and recommendations are innovative. Thank you. Thank you

After eliminating some options. I would like to focus on the remaining options of growth. I would like to know the growth potential of individual products in terms of # of customers, basket size. Sure. There is potential for growth in wired line services which I would like you to think about. However, there is very limited growth potential in data centre services with our current portfolio. OK. So let us start with wired line services. As I understand, the client has laid down physical wires in the cities that it operates in. It leverages these wires for providing wired line services. Is my understanding correct? Also, could you help me with understanding the coverage of customers through these lines.


2016-17

48

Sales Growth - B2B Telecommunications Provider You have been approached by the CEO of a telecommunications provider company. She is looking to grow the sales revenue. You are hired as a Consultant to identify opportunities and recommend a plan of action for the same Interviewee Notes

Case Facts

• 4x growth in 1 year • Understand existing product and service offerings clearly • Clarify client’s value proposition (needed for churn strategy)

• Current revenue = INR 300 Cr., Geographical sales force distribution • Client provides real estate, power, AC, racks etc. to store customers’ data servers in Mumbai, Delhi • Additionally client provides telecommunication services (internet, AV products etc.) through wired lines • Leader in telecom (80%), 2 major competitors in data centre business – reduced potential for growth • Basket size for telecomm. is not a short term solution. Why? • Geographical expansion is not feasible due to limited management bandwidth

Approach/ Framework Grow Sales by 4x in 1 year Explore Existing Business

Explore New Business

Telecomm unication Increase Customer s

Wired Lines Laid & customer has 1 PoP Wired Lines Laid & customer has >1 PoP

Data Center

New Geography/ Market

Increase Basket Size Client’s Existing Customers

New Customers

Lowest Priority

Highest Priority (scope for sizing)

2nd

Priority

Client’s Wired Lines Not Laid

3rd

Priority

Not an option

Broaden Product Line

Diversify into New Services

Client can install its own servers and sell that space to customers (same space can be sold to multiple customers over a given period of time) Client can also sell software security services for safeguarding data Implementation Plan


Sell wired services to new customers located in proximity of existing wired lines; also sell to existing customers’ all PoPs Offer hosting services to customers with data center requirements – client takes care of real estate, hardware, software etc, and charges management fees for these services Churn strategy can be formulated to churn out customers from competitors and lock them with client

Interview Summary This is a strategy case where interviewee should quickly eliminate options with limited growth opportunities and use creativity to come up with atleast one new product offering idea


A market sizing exercise can be done for new customers and conversation can be lead in that direction Diversification was ultimately the preferred option as it contributed almost 70% to the revenue growth Further brainstorming on implementation of new services (e.g. sales force training, incentive structure etc.) can be touched upon briefly


2016-17

49

Sales Growth - Software Product Company - Interview Transcript Your client is an online software provider. And this company had grown fairly well on the past, but this particular year they’ve really flattened out, unable to grow beyond the particular barrier. And the company’s CEO has asked you for help to grow this business beyond the $110,000 in revenue per month. So let me recap, so this is an online software as a service company with about $110,000 a month in sales, and its sales have been flat. It is looking for ways to increase sales, is that right? Yes, that is correct. Ok. I’d like to know where do the sales come from today – whether that’s different products, different customers – what are the components that comprise $110,000 in sales? Sure. Let’s start with the product – the company provides a software as a service, and their software does website analysis for companies that are doing business online. And their tools help them figure out what their customers are doing online, ultimately with a purpose of figuring out how to improve the websites. So these companies doing business online can either make more money or accomplish whatever goals they’re trying to accomplish. Got it. Who are the company’s customers? The company currently gets sales from two different types of customers: small business customers, as well as Fortune 500 customers. Do we know what amount of sales came from each particular kind of customers? Yes, it turns out that small companies, small businesses contribute or generate $100,000 a month in sales from the company and Fortune 500 companies drive $10,000 a month in sales

It sounds like sales have been flat overall versus prior years. I’m curious, have sales – for the company overall – have sales for the competitors changed? So I’m trying to figure out if this an industry problem or if this is a company specific problem. Do we have any information on that? Well, it turns out this company is the only company in the market. So this is not a competitive issue but an issue more with either the company itself or with customers. Do we have any data for each customer segment – the small businesses or the Fortune 500 –how have the sales changed for each of those customers over time? Sales for Fortune 500 have increased while for the small business segment it has decreased. Ok. Now the sales are driven by average price per customer or price times the quantity or number of customers. And so do we have any breakdown as to how many customers there are and what’s the pricing of that? The hypothesis I’m trying to test is, has the pricing change driven down revenues or are we actually having fewer customers, but each customer we do have is paying the same price. Sure, the data is provided in the table . The prices have remained constant for both the customer segments. The prices are like subscription fees paid per month. So your revenue is the price times new customers you bring in this month subtracting out how many leave. What I’d like to do is actually break that down and look at the number of customers that are added each month versus subtracted each month. Do we have any data on that for – let’s start with the small business segment. Sure. The data is provided in the table (refer to the tree in the previous slide).

Yes. I’d like to repeat the same analysis for the Fortune 500 segment, to see if a similar pattern is happening on that side. Do we have – of the ten clients we have this month – do we have any data that indicates how many clients we had in the prior month, how many of them were new and how many did we lose? Sure, similar data is provided in the table (refer to the tree in the previous slide). So we have a huge attrition problem in the small business segment and at the same time, we don’t seem to lose any customers on the Fortune 500 side. I would like to investigate more on why this might be happening. I would like to find out if we are selling the right product to the right segment. For this I would like to know what customers in the two segments are looking for and how our product is helping them. Sure, so the first segment is small mom and pop businesses that are trying to dabble in e-commerce, and they’re looking to make more money online. However, they want to maximize the number of visitors to their website. Ok, and how is our product helping them do that? So it shows which users are visiting which parts of this website and are they shifting from the free content portions of the website to the e-commerce portions of the site where you can actually transact and generate a sale. This product is very good at just tracking those behaviours and figuring out where people go, and has a number of tools to really help the company – the small business in this case –optimize the layout of the website, change how information is presented to the end user to really improve the ratio of visitors to buyers on the website Okay, it sounds like this is a kind of a process improvement type tool to get more people who visit the website to buy more often or to make them more likely to buy. It also seems like what we offer as a company, as a current product, is not really designed to solve what the customer really wants, and they certainly want to make more money. But first I guess it sounds like they need more visitors to the website in order for this particular product to be of value to them. Does that seem reasonable? Yes, actually it does. Ok, now we can do a similar analysis for Fortune 500 customers. Do we know what they are looking for ? These customers want to measure their RoI so that they can show their CEOs that the e-commerce division is achieving its objectives. These directors are worried that if they can’t prove or rely on return on investment that their division might actually get shut down, and it seems that this product seems to be useful in measuring return on investment. Great. So I can draw two conclusions here – one, small business segments –what they want and what we offer – this shows a complete mismatch, and two - I think that the Fortune 500 is a better fit is because the problems they have are exactly the problems we solve. Ok. So what is your recommendation? To answer the question of how to grow sales for this particular client, I would recommend that the company exit the small business market and focus all its resources on serving Fortune 500 clients. Very good. Thank you.

So it means that we’re losing 1,800 clients a month and then adding 1,800 clients, so our net change is always zero. Is my understanding correct? Did I do that right?


2016-17

50

Sales Growth - Software Product Company The client is a provider of an online software product and is witnessing flattening sales. You are asked to help grow the sales beyond its current $110,000 per month (pm) figure. Approach/ Framework

Interviewee Notes

Case Facts

• • • • •

• Product – online software that does website analysis for the client’s customers i.e. which users visiting which website, are they shifting from free content portion to e-commerce portions • Sales grew earlier but plateaued recently; not an industry trend • Revenue model – recurring monthly sales • Assume no competitors

Online software provider Flattening sales Customer segments # and $ of each segment Understanding product features • Segment profile and product proposition

Customer Data

Small Business

Fortune 500

Price pm

$50

$1,000

# cust. pm

2,000

10

Sales pm

$100,000

$10,000

# cust. trend

Decreasing

Increasing

Profile

mom-pop stores; want to maximize # visitors

e-commerce of large company; want to show RoI

Product Suitability

Helps improve user experience

Helps track and improve sales; gives RoI

Grow Sales >$110K pm

Explore Existing Business SMB Sales

Explore New Business New Geogra phy

Fortune 500 Sales

# customer s

Price

New = 1800

Renewal = 200

Price

# customer s

Churn = 1800

New = 1

Value Prop Doesn’t Match (X)

Value Prop Matches

Renewal =9

Expand Product Line

Diversify

M&A

Churn = 1

Market and Sell to Fortune 500 Explore Sales Force & Marketing Resources


The client should exit the small business segment It should focus all its resources on the Fortune 500 customers

Interview Summary This case was focused on identifying the root causes of flattening sales through a customer segmentation approach. Growth opportunities are sought in 4 ways (# customers and prices in each segment). Deeper investigation reveals under-allocation of resources to the target customer segment.


In a single product case, understanding customer segments, their needs and the products’ value proposition is critical. Comparison of any sales data wrt. either time or industry/competitors is essential to understand where the problem lies


2016-17

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Sales Growth - Retail Apparel Chain - Interview Transcript Your client(La Moda) is a retail apparel company that designs, manufactures and sells (through its own retail chains) high-end men’s fashion clothing. The client’s primary objective is to grow retail sales. In order to do this the client is considering expanding its distribution by partnering with a high-end department store(Tendenza). What do you think would be the major factors to consider in evaluating this partnership? Sure, in order to get the objective right, I would like to know what do you mean by retail sales. Retail sales being defined as the total amount the consumers spend on their products, which is different from what they may bring in as a client. Thank you. Let me recap and make sure I am getting the objective correctly. As you mentioned, the client right now designs and manufactures men’s clothing sold. There is a high-end chain of outlets and it has reached out to our client to try and carry our product. That is the overall theme. The big question is: what are the big things we want to look at, given the objective of growing retail sales? Is that right? Yes. Okay, do you mind if I take a minute to jot down some ideas? Not at all. Okay, I think there are three broad areas that I would want to look at to try and figure out if it makes sense. The first one is the overall ability of Tendenza to sell client’s items, and there are a couple of things I believe will determine whether Tendenza will be able to do that. 1. One would be very simply the location of Tendenza outlets. Where are they in relation to La Moda? 2. Second is the type of items and type of customers that Tendenza services – how do those fit or not fit, versus what La Moda is currently servicing? 3. Another thing that would determine Tendenza’s fit as someone to carry La Moda items, I think, is what is Tendenza generally known for? As in, what is its image in the mind of the general public, compared to what La Moda is. Apart from fit, the other thing I would look at is the economics of such a deal. You mentioned the big objective of this distribution expansion is to grow retail sales, and I would interpret that as La Moda would be willing to accept any deal where they are at least not losing money on the deal, basically. And the big thing that I would want to look at, therefore, from an economic standpoint, is: what would the economics of a deal with Tendenza involve, in terms of the costs and benefits to us financially? I would also look at potential cannibalization in back of such a deal to our own sales. So that is all economics.

Great, that sounds quite reasonable. Let’s take your point around the economics of the deal, and cannibalization in particular, what specifically would you be looking for and why? How would that be important? I see. Very simply, I think there are a couple of things I would want to look at, to identify whether cannibalization becomes a problem. So four broad areas I would look at under cannibalization – one is location. I understand we talked about location earlier, and I feel location also drives cannibalization in this context, primarily because if you have two stores beside each other, and one of them starts carrying La Moda – if both stores carry La Moda, that obviously impacts the sales across both stores. Sure. The second is similarity of offering between the two. I’m not— depending on how the deal is structured, if they are selling the exact same clothes, then that obviously has an impact on the sales of your current La Moda outlets. I would also look at relative price points. For example, if the deal is structured where Tendenza sells the clothes at a 20% premium versus what it is sold at La Moda right now, that paints a very different picture than say if they are both selling at the same price points, or Tendenzawas underselling, under cutting prices versus La Moda. The fourth thing I would look at is marketing, and in terms of how much effort does Tendenza put into pushing these items, and how are they positioning these items versus how La Moda is positioning these items? That seems to make sense. One point you mentioned – I think it was your third point – was comparing the price point that the products will be sold at through Tendenza versus La Moda’s own stores, and you mentioned one scenario where if Tendenza were to sell at a 20% premium, that has different implications than if the price were the same. I’m curious, what would the potential implications be if the price were higher, lower or the same as the price point in the La Moda stores? The cannibalization impact would be different. The relative pricing I think creates an image in consumers’ minds – a perception as to how to interpret it. Broadly, what I feel is that the cannibalization impact to La Moda would be higher, the lower Tendenza’s price point is. For example, if Tendenza prices at 80% versus La Moda– so if Ftendenza sells its clothing at $80, and La Moda sells at $100 – that creates a much larger cannibalization impact. As opposed to if Tendenza were to sell at $120, and La Moda were to sell at $100. That would be my hypothesis. This is a thorough analysis. I would have liked to discuss the economics of the deal in detail. However, we can end the case here due to time constraints. Thank you.

Good so far. Anything else that you would like to consider? The third thing I would look at is risks associated with— any potential risks associated with such a deal. I think there are three big ones that come to my mind. One is the risk associated with implementation. Say, for example, Tendenza might not stock our items as effectively as they should, and that ends up hurting our brand image, would be one. Another one I would see is management, and the impact to management and sales force time for La Moda. How much time is management going to divert away from its current operations to focus on this expansion? I think the third thing would be some form of a dilution, which may occur due to a possible difference in the scale of operations of these companies.


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Sales Growth - Retail Apparel Chain The client is a retail apparel chain looking to grow retail sales by expanding its distribution network via a partnership with a department store. She wants you to enumerate the factors you would consider to evaluate the partnership Interviewee Notes • Clarification of retail sales • What are we selling v/s partner is selling? • Where are we v/s partner located? • Does partner have sufficient resources? • Will the partner cooperate fully? • What do the economics of the deal look like?

Approach/ Framework

Case Facts

Evaluation of Partnership

• Product – high end men’s apparel • High-priority cities identified Ability to Sell

# High Priority Cities

140

# La Moda Retail Stores

30

# La Moda Retail Stores in High Priority Cities

30

# Tendenza Stores

90

# Tendenza Stores in High Priority Cities

60

Location

Product Fit

Economics

Custo mer Fit

Image Fit

Benefits

Risks

Costs

Implementation

Mgmt Bandwidth

Dilution

Cannibalization

Location

Similarity of Offering

# Tendenza Stores in Same 20 Cities as La Moda Stores

Relative Prices

Relative Marketing

Price Elasticity


Ability of partner to sell client’s products, economics of the deal and potential risks of partnership have to be evaluated Risk of cannibalization is applicable on similar offerings, and may not be a risk if there is geographical exclusivity of stores

Interview Summary This interview is focused on a deep-dive into factors to consider while locking down an option for sales growth. This interview witnessed a good opening, good structure and numbered presentation of ideas. Economics of the deal (though not talked about in detail) can be worked out based on the case facts provided.


A sales growth case can be open to a deep dive into one option. Keep concepts such as price elasticity, cannibalization, pricing and distribution network always handy in sales growth case Numbered presentation of thought is well received by the interviewer. So think through, number your ideas and then present to the interviewer.


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Pricing - Overview In a pricing case the objective is to determine a methodology for pricing of any product. The product could be a new invention, it could have other competitor products in the market etc. The student should determine the objective of the company, understand the product features and market environment and then apply a relevant methodology to price the product.

Framework Value-based Pricing / Price Skimming Pricing a Product

Radical Invention

Modification to existing product

Competition Exists

- Willingness to pay of buyers - Opportunity cost of no product - Supply vs. demand tradeoff

Similar to existing product

Pricing w.r.t. another product

Cost-plus pricing (Penetration Pricing) - R&D costs - Manufacturing/Servicing costs - Break-even costs, WACC

Competition doesn’t exist

Comparable / Parity Pricing

- Existing product with similar features - No similar product  NPV of substitute - Supply/Demand trade-off

Framework Summary It is imperative to consider the objective of the company, since it directly affects the pricing strategy to be followed. Then the student should understand the product characteristics and the market environment to apply a prudent pricing methodology. In case the pricing needs to be done for an old product (rare scenario), the utility of the product w.r.t a new product and the depreciation/salvage value need to be taken into consideration.

Tips A supply vs. demand tradeoff approximation is always helpful in such cases (best when demonstrated graphically)

Key Questions • Which industry are we talking about? • What is the objective of the company? • What are the product features? • How big is the market? What is the target segment? • Who is the customer in the supply chain (margin to stakeholders)


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Pricing Strategy - Proprietary Light Bulb - Interview Transcript

Surya electrical company has invented a new bulb that never burns out. It could burn for more than 500 years and would never blink. The director of marketing calls you into her office and asks “How do you price this.” What would you tell her? Alright. So before we figure out the appropriate price for this new light bulb, I would like to ask a few questions about our company, this product, the potential customers and the competition. Go ahead What is the objective of the company regarding this product? To gain as much as possible. Ok. I would like to know more about the product now. Is this a completely new product or has our company/ any other company introduced something similar in the past? No this is a completely new product that we have developed. ( the product is new: follow that branch) In that case, is the product patented? We have a patent pending, and no one else is trying anything similar.

Ok go on. So how much have we spent on R&D for this? ₹120 Cr. for this light bulb. For a conventional bulb it costs us 4 rupees to manufacture, we sell it to the distributor for 10 rupees, the distributor sells to the store owner for 14 rupees and he sells it to the customer for 18 rupees. This light bulb costs ₹400 to manufacture. Ok so if the manufacturing cost is 100 times, then accordingly the customer will have to pay ₹1,800 for one light bulb. On the up side this is a bulb that will never burn out, so say the people will buy it once for the next fifty years and are essentially paying for 100 bulbs that they would have used in the next 50 years. (considering a bulb change twice in a year) So? Will the customers agree?

I do not think so. However we have spent ₹120 Cr. on the project and it is a very useful invention. Let us broaden the scope for the product a little and think more about the customers. I think various city councils are our customers too as they need to provide lighting for the streets and public places. There may be around 3000 street lamps and another 1000 bulbs at various stations, hospitals etc. Ok, what are you proposing?

Can you tell me if the product has any disadvantages? Does it use more energy? Or is it harmful to the customers in any way? No it is safe product ready for the market. It also doesn’t use more energy I see. I was thinking we could either price the product at a price comparable with the competition or base it on the costs that we have incurred we can also look at the price the consumers might be willing to pay. Since you have mentioned there is no competition I shall rule that out and focus on what costs we have incurred for this.

These customers incur an additional expense of maintenance and changing of the light bulbs and maintaining staff for it etc. If we can sell this product to them, they will save on these additional costs and will not have to worry about maintenance at all. Estimating that these bulbs are available for ₹500 to the city, upon which they need to pay labour charges of ₹200 each to two workers needed to change the bulb, it still costs them ₹900 per bulb, twice a year. We can have a mark-up over this and sell each bulb at ₹4,000 each. They would recover the amount in two years and we can use this price based costing to get a very good profit. It is important that we make a good profit on this product because for every sale of a new technology based bulb, we are losing the sales for 100 conventional bulbs. Good point , thank you.


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Pricing Strategy - Proprietary Light Bulb Surya electrical company, has invented a new bulb that never burns out. It could burn for more than 500 years and would never blink. The director of marketing calls you into her office and asks “How do you price this.” What would you tell her? Interviewee Notes

Case Facts

• New product in the market with a distinct longevity feature • Other utilities are similar to a common bulb • This is a modification to an existing product yet comes with an advantage that no bulb in the market has. • The objective is to gain as much as possible

• The invented light bulb lasts for 500 years • No threat of competition in the near future • R&D cost is ₹120 Cr. • Conventional bulb costs ₹4 to manufacture • The new bulb costs ₹400 to manufacture

Approach/ Framework

Pricing a Product

Radical Invention


Competition Exists





Since the manufacturing cost is 100 times that of conventional bulb, customers would ideally have to pay ₹400 for us to recoup costs. This is improbable since customers would not shell out a huge amount for a bulb and the longevity benefits are difficult to be perceived by the average customer. However, this innovation can be useful for public places such as streets, stations, hospitals etc. where additional staff is required for maintenance. A long-life bulb in such areas would be extremely useful as maintenance costs would be largely reduced. Hence, such customers should be targeted for this product.

Interview Summary This case is for pricing of radical invention. The student should be able to approximately determine the price based on manufacturing and R&D costs. In this case, the price estimate leads us to carefully consider the customer segments, their willingness to pay for the product and carefully tailor the segment to achieve the company objective.


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Pricing Strategy - World Spacelines - Interview Transcript

ISRO has developed a rocket-boosted shuttle that can take passengers on a tour of Space while the take-off and landing are like a conventional airplane. ISRO wants to take passengers on a sixhour tour of Mars. They have built a prototype which cost them ₹3000 Cr. Determine what price they should charge for a ticket considering only the Indian market. I’m assuming we want to build a successful business. Any other objectives that I should be aware of? No Are there any competitors and do we have a patent on our technology? There are currently no competitors and we have a patent which should safeguard us for around 3 years.

How many passengers does the plane hold and how many trips per day are we planning?

Ok, so how much would you charge per trip? In this case I could follow a cost-based pricing and hence ₹1 lakh would probably be a good margin, however, this is a special invention offering customers a travel close to fantasy. Hence, I think value-based pricing would be a more prudent approach. So, how much would you charge? I would like to figure out the market for ₹4 lakhs a ticket. Let’s assume that ~0.2% of 1200 milllion Indians make over a hundred lakhs a year and hence can afford a ₹4 lakh vacation. So that is 20 million people. Out of them let’s assume ~20% would want to do it. So that is ~4 million customers. Also, we can carry around 72,000 customers a year. Hence for 3 years, before competitors set in we can make ~₹2880 Cr. million with a cost of ~₹400 Cr. which is a great profit margin for such an invention. Post that we will need to drop our prices depending on the market scenario. Good, thank you very much.

100 passengers and 2 trips I will first try to estimate the market size which would majorly depends on the price. If we charge ₹100 the market size will be almost the whole of India, but if we charge ₹6 Cr. the market will be much smaller. Before I figure out the price, I will also try to estimate how much it will cost us per passenger. How long is the life of the plane? The life of the shuttle is 20 years and the costs can be allocated uniformly. What do you think the major costs are? I think the major costs would be cost of shuttle (including on-board and administrative costs), maintenance, fuel airport fees, insurance and marketing. Good, the total costs incurred per year would be ~₹200 Cr, excluding the fuel costs, which I would like you to estimate. The moon is around 300 km from the surface of the earth, so I’ll take a rough estimate of 600 km as the total length of the trip. So 10 litre per km times 600 km equals 6000 litres, times ₹50 per litre is ₹0.3 Mn. per trip. Also there would be 2 trips per day and hence ~₹200 Cr in yearly fuel costs. So total costs are ₹400 Cr. Assuming 720 flights per year with 100 passengers per flight, the cost per passenger would be ~₹50,000.


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Pricing Strategy - World Spacelines ISRO has developed a rocket-boosted spaceplane that can take off and land like a conventional airplane, but can also fly through the atmosphere and orbit earth. ISRO wants to take passengers on a three-hour tour of space. They have built a prototype which cost them ₹3000 Cr. Determine what price they should charge for a ticket considering only the Indian market. Interviewee Notes

Case Facts

• This is a radical invention with no present competition • The objective is to run a successful business • Market-size in India needs to be estimated

• • • •

The prototype cost is ₹3,000 Cr. Per trip time is 3 hours The patent will last for ~3 years The space-plane can carry 100 passengers per trip and 2 trips can be planned per day • Life of the plane is 20 years • Total costs other than fuel is ~₹200 Cr. (annual)

Approach/ Framework

Pricing a Product

Radical Invention


Competition Exists





The cost-based approach indicates that charging ~2000 per trip will give us a profit margin of ~100% However, this is a radical innovation and hence the perceived value for the customer can be much higher than what the cost suggests. Hence a value-based approach with a price of ~$10,000 can help us gain a good potential of this innovation until competitors arrive and there needs to a reduction in prices.

Interview Summary Since this is a radical invention, estimating the costs are critical to arrive at a lowest price threshold. However, the nature of the benefits offered to the customer also need to be taken into consideration and in this case it allows us to gain a tremendously high profit margin. Of course, the passenger carrying capacity and timing of competition arrival are critical to keep in mind.


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Pricing Strategy - Diagnostic Laboratory Chain - Interview Transcript A diagnostic laboratory chain based in America has decided to enter the Indian market. They want your help in deciding how they should price their products. Ok, so before we move on to deciding the price for the products I would like to know more about what kind of products the laboratory chain has to offer, the potential geographies in India that they are looking at and the competition.

I see. I was thinking we could either price the product at a price comparable with the competition or base it on the costs that we have incurred. We can also look at value based pricing, and price according to the willingness of the customers to pay. Since you have mentioned the technology is the same as that of the two biggest competitors and they have a huge share of 85% , I shall focus on pricing it in such a way that the price is lesser than the competition so that it helps us gain a presence in the saturated market, that is, penetration pricing.

Go ahead Alright, go on. So is this a general purpose health laboratory or do they specialise in some tests for specific diseases?

It tests blood and urine samples- simple blood tests to various disease specific tests ranging from tests for diabetes, cancer, hyperthyroidism, hepatitis etc.

We can go for cost plus pricing and have much smaller margins than the competitors. As the sales are made through doctors, I think we can build a good client base by offering prices which are much lower than the competition. Over time we will increase our prices when we have a loyal customer base of doctors. Can you tell me on an average what is the price of one test offered by the competitors? On an average the tests are priced at Rs 2000 per test.

Ok. I would like to know more about these tests. Is the technology the same as that the competitors are using in India of is it very new? They use the latest technology, but the closest competitors are also using the same technology. So the tests that the lab offers are the same as that of the competitors. Can you tell me more about the competition. How many competitors are there, what geographies do they operate in and what are their margins. So there are two main competitors that use the same technology as we do. They mainly operate in the Tier 1 and Tier 2 cities. The chains have minimal presence in rural areas. The two competitors have 85 % of the market share between them in these geographies and the remaining is stand alone pathology labs. The margins for the two competitor chains are as high as 60 to 70 %. Alright. Can you tell me who our customers are; do the doctors recommend our tests or do we incur additional costs in advertising to all the patients?

Ok. So for the labs, I believe the fixed cost for the machines and the set up would be high. There will also be significant overheads for rent, salary of the personnel in the laboratory and the promotion and advertising costs. We have to keep in mind to cover these costs and the variable costs. Accordingly, we will have a price which is lower than the competitors but with which we are able reach the break even point in a reasonable period of time, say 2 to 3 years. So with Rs 2000 as the average price and taking 70% as the margin, the costs are Rs 600 per test. If we decide to price it at half of that of competition, then at Rs 1000, we have margins of 40%. Also, if promotion is good enough, we will have more sales at the price that we are deciding and hence the break even point will be reached even faster. Alright, this is about the urban market. What about the rural areas. I think once we decide on a price that is lower than the competition in urban areas, we should follow the same in the rural areas. As of now, I think for the kind of latest technology that we offer, customers from the rural areas would come to the cities. So it will not be wise to have a higher price in the rural areas just because the closest competitors do not operate there. However, just like in the cities, the prices should be increased incrementally once a loyal customer base is formed. Ok, that will be all.

We sell the lab tests to the doctors. They in turn prescribe the tests.


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Pricing Strategy - Diagnostic Laboratory Chain - Solution Process A diagnostic laboratory chain based in America has decided to enter the Indian market. They want your help in deciding how they should price their products. Interviewee Notes

Case Facts

• US based company into Indian market- technology is latest, but tests similar to competition’s tests • General tests, not specialised, not much difference between them and existing competition • Sold through doctors

• The company is a labs chain • Has two big competitors, they have 85% market share • Costs for machines, advertising and promotion are high • Competitors on an average have 60 70 % margins

Approach/ Framework

Pricing a Product

Radical Invention


Competition Exists





Since the product is similar to what the competition is offering, and we do not really have a strong POD in a saturated market, Penetration pricing is the best way . We have to keep in mind that the fixed costs will be high and they will be recovered over a longer period of time if we price our products lesser than the competition. But This strategy will help us gain a foothold in a new country and new market.

Interview Summary This case is for pricing of a product similar to existing products. The student should be able to identify fixed and variable costs. In this case, the price estimate will be based on the competitors’ prices and we will see how much lower a price can we offer to the customers. Once the company is an established name, the margins will be increased.


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Pricing Strategy- Healthcare space Your client is the CEO of a large multinational corporation in the healthcare space. He has produced a wonder drug that would make a patient free of risk from cardiac arrests.

And how do you plan to do that?

Alright, I would first like to know more about the client’s company. Does the company have any core competency that it is famous for?

Let’s say it costs around $10,000

The company is known for it’s R&D capabilities and the large scale of investments

For that I’d like to know the average market price for a pacemaker today.

What is the life of the pacemaker?

What is the objective of the client in pricing the drug?

Let’s say it has to be replaced once every ten years.

The client wants to maximize lifetime revenues from the drug, with a minimum of 50% profit margins from market sale of the drug

Great. Assuming that an average heart patient starts using a pacemaker by the time he turns 50, and his/her average life span to be 80 years, that amounts to three cycles of pacemaker usage.

Alright. Let me now move on to the drug itself. Could you tell me more about the form of the drug, its consumption mode, frequency and duration?

Where are you getting at?

The drug is a tablet that has to be had thrice a month, for 5 years in order to fully mitigate the risk of cardiac arrests

The total cost of alleviating a risk with the next best alternative is $30,000

Are there any side effects to consuming the drug?

Why is this relevant?

Good that you asked for it, but no. There aren’t any observable side effects. What are the associated R&D costs towards making the drug?

With the pill, thrice a month amounts to 36 times a year. For five years, this amounts to 180 pills. With $150 for each drug, that amounts to $27,000.

Do you think these costs are relevant?

Therefore?

Actually, I’d like to treat them as sunk costs, since they shouldn’t influence my client’s future decisions. Good. Move on. What is the cost associated with making the drug?

For a customer to value the pills as much as a pacemaker, the ceiling theoretically sums up to $30,000/180 = $166 Is that the final number?

Each tablet cost $100 to make, inclusive of commission paid to intermediate channel partners

Before arriving at a final number, I want to know if the drug is patented and if there are any market regulations on the price.

Alright. Given my client’s objectives, I should price the drug from $150 dollars upwards to my immediate channel partner.

The market regulations prohibit pricing of the drug above $180. And no, the drug is not patented. Why is that relevant?

Is that it?

It is relevant if the drug is easy to replicate by competitors

The ceiling of the price would depend on key factors: my competitors, substitutes, regulators and most importantly, customers Good. Proceed. Are there other competitors who currently sell equivalents of the drug? No, they don’t. Are there any substitutes for the drug today? Can you think of any? I can think of pacemakers as a distant substitute, although I’m not too sure it’s apt. Let’s say it is. What now? I’d like to look at the value that a customer/patient ascribes to a life free of cardiac risks.


It isn’t. As I mentioned earlier, the core competency of our client is their technical superiority, which would ensure that the formula can’t be replicated from the drug. Then, I believe the client could command a premium on two counts. And they are? • •

The pill is a non-invasive procedure and therefore a more desirable cure Our drug is hard-to-copy and therefore unique.

So what would you recommend to our client, finally? Taking into consideration the client’s objective and the market scenario, the client should • price the drug on the higher end of the $150-180 • patent the drug to prevent competition and duplicates in the market • push the drug deeper and wider into distribution channels and end-market based on testimonials and endorsements from popular first-adopters of the drug That is reasonably comprehensive. That would be all.

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Pricing Strategy- Healthcare space Your client is the CEO of a large multinational corporation in the healthcare space. He has produced a wonder drug that would make a patient free of risk from cardiac arrests. He wants you to help him decide the price for this product. Interviewee Notes

Case Facts

• R&D capabilities and the large scale of investments • minimum of 50% profit margins

• Drug is a tablet; frequency 3 times/month for 5 years • No side effects • Cost of each tablet- $100 • No direct substitute • Cost of pacemaker- $10,000; lifetime 10 years • Market regulations prohibit max. price at $180 • Drug is not patented

Approach/ Framework Pricing a product

Value Based/ Skimming

Radical Invention


Modification to Existing Product


Cost Plus/ Competition does not exist

Competition Exists

Penetration

Comparable/ Parity

•Willingness to pay of buyers •Opportunity cost of no product •Supply vs. demand tradeoff

•R&D costs •Manufacturing/Servicing costs •Break-even costs, WACC

•Existing products with similar features •No similar product->NPV of substitute •Supply/Demand tradeoff


Price the drug on the higher end of the $150-180 Patent the drug to prevent competition and duplicates in the market Push the drug deeper and wider into distribution channels and end-market based on testimonials and endorsements from popular first-adopters of the drug

Interview Summary The key to solving the case was understanding the context through sharp preliminary questions, which, in this case were bucketed under the heads of Company, Product, Customer, and Industry. Post gaining context, the candidate arrived at a price band, decided by the client's objectives, mark-up potential due to differentiation over competitors/substitutes, market regulations and cost concerns.

Observations/Tips/Suggestions • • • • •

Sunk cost is considered irrelevant while pricing a product The downside to filing a patent would be full disclosure of technology, which could lead to similar variants in the market More often, the key is to identify the mark-up potential in product pricing (for example: guesstimating the mark up for the non-invasive pill, etc.) Take some time off at the start to mentally jot down sharp preliminary questions. Take some time off in the middle of the case while deep diving/coming up with creative solutions. When asked to summarize, aim to do so in 4-5 sentences with just the key details.


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Diversification - Overview In a diversification case, the key is to understand the need to diversify. Only after that is it possible to ascertain the soundness of the strategy proposed. The case may often require out of the box thinking, and due to the large number of varied factors that could affect or be affected by a particular form of diversification, breadth is considered to be more important than depth.

Approach/ Framework (Broad) for the Case Type

Current Business

Reason/Need for diversification

Core Competencies

Market Structure

Competition

Regulation

Synergy Analysis

Sizing

Trends

Diversification Strategy

Cost Benefit

Tips Remain MECE and be ready to think on your feet Candidates often make mistakes in cases where there are multiple reasons for diversification. It makes sense to understand the client’s priorities and proceed accordingly

Key Questions: • • • • •

What are our current capabilities? What are the future capabilities we want to have? Does diversification to the new company help us achieve the objective? What are the expected revenues? Revenue Streams? Expected cost of diversification? Any barriers to entry during diversification?


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Diversification - Pharmaceutical Co - Interview Transcript A pharmaceutical company has discovered a by product of its manufacturing process which can be used in the FMCG food industry. What should it do with this discovery?

I would like to know who the current suppliers of this agent are., what price they are selling it at and how much it costs them to make it.

Sir, the first thing that I would want to understand is the current business, next I would want to understand the by-product, and lastly explore opportunities for potential use.

Currently this is produced by specialised companies the market is highly fragmented. The total estimated demand is 500 tons and the product sells at $50/ton in the market. Growth is forecast to grow at 20% year on year. It costs them $20/ton to manufacture.

That sounds great. Currently the pharma company is into generic drug manufacturing and manufactures 10 different types of salts. What else would you like to know?

Ok so that makes a margin of 150%. Also, if we can offload all of our production in the market, it will meet 20% of the demand of the product. I would now like to explore the various options in front of us. Currently I see 3 avenues – disposal, selling to existing FMCG players and diversifying out business to the food FMCG segment.

I would want to understand the size of the business, the year-on-year growth and which area they operate in. Fair enough. So they have a $100mn business with an 8% CAGR and operate out of Baroda. Thanks. I would not like to understand the by-product, what exactly it is and what we currently do with it.

Ok, it’s a non-calorific sweetening agent and currently it is a total waste which costs $10/ton to incinerate because of environmental regulations. Last year we produced 100 tons and estimate production to increase with a CAGR of 8% Ok sir, I think I have a good understanding of the product and would like to understand the potential opportunities other than disposal. The first one you mentioned is FMCG and the other is any other potential uses. Is there any you would like to start with? Yes, let’s start with FMCG and ignore the other potential uses for now. It can be used in the production of sugar-free biscuits, mints and gums. Who are the players in this industry who use this agent? Currently there are 5 major players in the FMCG market who contribute to 60% of the market and the rest is fragmented


We want to avoid disposal in anticipation of government sanctions. Also, we cannot sell to existing players because they have long term off take agreements with their current suppliers. Which leaves us with diversification as the only option. What are the various things you will look at?

Firstly, I would like to understand the value chain required. The basic components I see are the raw materials and inbound logistics, technology, equipment and production, and finally the marketing and sales aspect. Also I would like to know about the capital and regulatory clearances.

The raw materials are commodities, the technology is fairly standard and the capital requirements can be met fairly easily. Regulatory hurdles exist but are not insurmountable. What do you think about the marketing and distribution requirements?

Though both businesses are B2C in nature, I believe that the distribution channels would vary significantly and I would like to know our competency in dealing with operators in relevant channels. Excellent, you’ve hit the nail on the head. When we researched, we realised that the channels are completely different and it would be unwise for our client to foray into this business. Any other thing you would have liked to look at? Sir, as our competencies fail at the marketing stage, perhaps we could act as private-label manufacturers for one of the major FMCG players. Excellent! Welcome to the company!

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Diversification - Pharmaceutical Company A pharmaceutical company has discovered a by product of its manufacturing process can be used in the FMCG food industry. What should it do with this discovery? Interviewee Notes •

Relatively tough case. Stay calm and solve it. Also a friendly interviewer is recommended for practice

• •

Case Facts • • • • • • • •

10 different salts currently manufactured $100m turnover, 8% CAGR By product is focus FMCG potential as sweetener 60% FMCG dominated by 5 players Product demand: 500 tonnes @20% CAGR, $50/tonne Current manufactured at @20/tonne by fragmented players with long term agreements Distribution does not gel well with our competencies

Approach/ Framework

Current Business Reason/Need for diversification

Core Competencies

Market Structure

Competition

Regulation

Synergy Analysis

Sizing

Trends


Cost Benefit

Recommendations •

Not to diversify in true sense, but move into “limited” diversification

Interview Summary • •

Good interview. The interviewer enjoyed it. Covered all verticals nicely. Got brownie points with the final recommendation

Observations/Tips/Suggestions •

Most diversification cases entail width rather than depth. Make sure you are MECE and cover relevant points


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Diversification - Oil Marketing Company - Interview Transcript Hi! Our client is a downstream oil marketing company who wants to foray into renewable energy generation. Please evaluate whether this idea holds merit. First. I’d like to understand what our client does currently.

Also, as you mentioned 10% of 450 is 45 GW, and given that India currently generates close to 5 GW in solar, there is huge potential. I believe the world is moving towards stricter environmental norms there will be a good demand for renewable energy by 2025. I would like to analyse whether this is a viable option using a cost benefit analysis. Okay, lets start with wind. What are the factors you will consider?

Our client operates in India and is the third largest player with a market share of 20%. It has two refineries, in Mumbai and Vizag. It buys crude oil and finished petroleum based products and sells them through its extensive distribution network.

First I would like to look at the availability and suitability of land for setting up the wind farm. Then I would like to look at the technology involved. After that, I would like to figure out capex, opex and revenue generation potential and do an NPV analysis.

I’d also like to understand what type of renewable energy does our client have in mind, and are they any preconceived hypothesis for doing the same?

Great! However, lets look at solar energy. Can you do a payback period analysis for me?

Lets restrict ourselves to wind and solar energy. Also, the market for renewable energy generation will have a high demand because of a government mandate which requires 10% of all energy production to be renewable by 2025. Next I’ll like to understand the energy market in India. What is the current size and expected trends?

Why don’t you estimate the market size?

Sure. For that I’ll require some basic things. First I’d like to understand the fixed costs involved with setting up – the land, solar panels and connections to the grid. Next, I’d like to understand the operating expenses and tariff. But first I would need to understand the capacity in mind and the availability of land required for the same. The basic idea is that we have excess land around our refineries which means that there would be no additional cost to acquiring the land. Also, our technical experts tell us that we will be able to generate solar energy for 10 hours a day, for 300 days a year. Generally, it costs about 25cr per MW to set up, but as we have the land, it will only cost us 15cr per MW. You can ignore operating expenses and the government has announced a 10 year tax holiday for large solar energy plants. The tariff that we will propose in the tender will be Rs. 10 per KWh So would I be right in saying the payback period is close to 5 years?

Okay. This seems like an interesting problem. So we come to approximately 150 GW. Yes, but this is the energy generation. India has a 20% energy deficit which leads to an approximate market demand of 180 GW. Oh! Yes that is correct. We should factor that in. So if we assume a reasonable growth rate of about 10% p.a. we get a market of about 450 GW in 2025.

Yes, I think that is satisfactory. Is there anything else that you would consider?

As a part of our implementation strategy, I would like to assess our technical knowledge, ability to attract personnel, availability of capital and grid accessibility. Is there anything else I should consider? No, I think this is pretty exhaustive. Please have a toffee.

Great that sounds like a very good number. Let’s proceed.


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Diversification - Oil Marketing Company A downstream oil marketing company is considering foraying into renewable energy generation. Evaluate whether the company should. Interviewee Notes

Case Facts

• Involves estimation of India’s energy demand and a back-of-the-envelope financial analysis • Sectoral knowledge not necessary • Moderately difficult case • Friendly interviewer not necessary • Broad-approach is to understand options, narrow down on the basis of interviewer’s requirements and perform cost-benefit analysis

• India has a 20% energy deficit • Client is 3rd largest oil marketer in India, located in Mumbai and Vizag • Government aims to have 10% of all energy production from renewable sources by 2025. 10 year tax holiday. • Client has sufficient surplus land • 300 days * 10h a day of solar energy can be produced per year • Assume solar plant set up cost = 25Cr/MW with land being 10 CR/MW. • Tariff fixed at Rs.10 per Kwh for 10 years

Approach/ Framework

Current Business Reason/Need for diversification

Core Competencies

Market Structure

Competition

Regulation

Synergy Analysis

Sizing

Trends


Cost Benefit

Recommendations •

Solar energy project feasible financially. Must explore other dimensions before final recommendation


Financial leverage and government incentives have a huge role to play in final outcome Make sure your options are MECE and be calm when doing the guesstimates, financial analyses


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Diversification - Mobster - Interview Transcript You have been approached by a mobster who wants to enter politics. How would you advise him? So, firstly I would like to understand what exactly he does now and why he wants to enter the political arena. Also, does he want to stand for elections, or earn a nomination, or just be a part of a political organization? His business currently comprises the ‘hafta’ system and gold smuggling from UAE. He is based in a suburb in North East Mumbai and his total turnover is ~200cr with a 40% margin. The reason he wants to diversify is that he believes he can earn money and fame through standing for elections either with a party, or as an independent. What exactly is he looking for – money, or fame? While he would like to earn money as well, fame is his primary motive. He has a healthy bank balance. Great. So assuming that fame is our primary motive, we will proceed, however we will also look at the monetary aspect. Also, I believe that looking at the current lines of business, our client’s core competencies would be human resource management, persuasive negotiation skills, and be a shrewd businessman. Also, having a hafta system would give him a strong local presence and he would be well known in his localities. Most importantly though, we need to make sure he satisfies the eligibility criteria in terms of past criminal records, age, etc. Perfect, sounds like you have some experience in this matter. While he has some cases registered against him, they are unlikely to have a conclusion any time soon. He satisfies all criteria. Haha, thanks. Next, I would like to look at his ambitions and the timeline he has in mind. As you can imagine, our client is extremely ambitious. However, he is open to suggestions. I believe that politics can be entered at any of three levels – the national, state and local municipal levels. Since he wants to stand for elections, I would want to factor in when these elections will take place. The national elections actually just concluded last month so you can exclude them from consideration. The state elections are due sometime early next year and the local elections a month after that. So I will focus only on state and local elections. Given that he operates in a particular area, would he like to stand from that area or another area in the state or municipality? Personally I feel he may have a better chance if he stands from the area in which he operates. That’s a fair assumption. Please proceed.


Next I would like to understand who the current MLA and municipal representatives are and what their ambitions are. Great question. The territory under consideration has 1 MLA and 2 municipal corporators. The current MLA is a party veteran who has occupied the seat for nearly 30 years. However, there are rumors that he may not stand for elections this year. The municipal corporators are young, dynamic, popular and have announced their candidacy for their seats once again. All three are from the same political party and one of the MLAs currently has business ties with our client.

Also, I would like to do a quick financial analysis to see if any one option can be preferable in terms of potential earnings. Would I be right in assuming that if he stands for elections, he would be unable to devote as much time to his current businesses and would lose some fraction of revenue from them? Good observations. You can assume that if he becomes an MLA, he will have to get a partner in to run his business and therefore will get only 50% of the proceeds. However, the business turnover is estimated to jump 1.5x within his tenure due to enhanced reach. If he becomes a municipal corporator, he can continue as head of the business but revemues could drop by 20%. While the government salaries would be negligible, could you devise a formula to help him estimate his earnings per annum in each of the roles? Make assumptions that you think fair. Okay sir. So I believe that the earns will be highest at the start of the tenure and linearly decrease as the number of years remaining reduce. Also, should he be elected to a subsequent term, his influence and thus his earnings will exponentially increase. If I am to assume that he would earn 5cr in his term as MLA, and every term would double this figure, the formula this boils down to is : (5-n+1)x 2^(n-1) And I think we can safely assume would not earn more than one-fifth as a municipal corporator.

That sounds great. Something else I would like you to consider is that the recent polls indicate that the party in question will win with an overwhelming majority. What else would you look at? Sir, other aspects important according to me are a synergy analysis and a strategy for entry. I feel the fact that his lack of experience in politics, coupled with his henchmen and provides services to this party which is expected to do well are concrete reasons for him joining it. This coupled with financial muscle, good negotiation skills and human resource management are key for doing well in politics. As for entering the arena, our client can look at either joining the party he has ties with. This is because I believe he can make a strong case for replacement of the existing MLA who may not stand for elections this year. In case he does decide to stand I would like to either see if any other MLA seat can be taken or look at the constituency not currently being ruled by this party in the BMC. Of course I would need a lot more data for this analysis. Don’t worry, that should be enough. Let’s hope our client becomes a MLA and then Chief Minister a few years down the line!

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Diversification - Mobster A mobster has decided that he would like to enter politics and has hired you as a consultant. Interviewee Notes • No sectoral knowledge required, just some common sense • Ensure you remain professional, no matter the case • Out of the box cases are designed to test your ability to think on your feet • The reason for diversification is the driving factor here. Important to understand the primary and secondary objectives • ‘Hafta’ system is protection money

Case Facts • Current turnover is 200cr with 40% margin • Area of influence corresponds to 2 Municipal Corporator and 1 MLA seat • Revenues will increase 1.5x if client becomes an MLA and drop 20% if he becomes a municipal corporator

Approach/ Framework

Current Business

Reason/Need for diversification

Core Competencies

Market Structure

Competition

Regulation

Synergy Analysis

Sizing

Trends


Cost Benefit

Observations/Tips/Suggestions • • • •

In case of multiple objectives of the proposed diversification don’t forget to ask the primary objective At the same time don’t forget to consider the secondary objective(s) Reasonable assumptions are expected A child tells his dad he wants a career in organized crime. The father nods and asks, “Public or private sector?”


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Unconventional Cases Technology Cases Guesstimates


Unconventional Case (Pricing case)- Help a Painter A painter wants your help to sell off a painting. Help him get the best price. Interviewee Notes

Case Facts

• Focus is on prospective buyers first • Somebody who would appreciate a war painting and would pay a high price • HNWs, museums and commercial owners can pay and have space to display it • Few museums in Europe have a dedicated war section and Kalinga war painting could find a space there

• Painter is famous in India- Along the stature of M.F. Hussain • He is famous amongst the painter, dealer and collector community • He generally makes oil based paintings • Last painting that he sold was for 50 lakhs • This painting is an oil based painting • It depicts Kalinga war and is encased within a beautiful frame

Approach/ Framework

Help the Painter

Price determination

Prospective Customers Individuals High net worth

Others

Local

Institutions

Profit on top of cost

Museums (domestic, International) Offices (small, med, large)

Market research

Methods to sell Painter’s network

Past painting’s value Competitor’s value

Dealer network

Institution

Bidding

Online

International Commercial (Hotel/Airport)

Recommendations •

A museum in Europe which can pay good price (no dearth of money)

Interview Summary The candidate did a good job in laying out the framework. Through her preliminary questions about the painter, the painting, he was able to correctly gauge the value of the painting and aspirations of the painter. It is very important to be MECE while laying out the structure. Even if the interviewer doesn’t implore you to dig deeper into all branches, it’s always a good practice to lay down two levels of the structure especially in cases like these.


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Unconventional Case(Strategy) - Customers for an FS Product A financial asset management fund (AMF) wants to launch a new offsetting product for forex trades. You are asked to find the potential customers and suggest pricing models for the product. Interviewee Notes

Case Facts

• Offsetting product – nets the daily level currency pair txns • Value proposition of product • Current pricing structure on a per $ basis

• AMFs charge their customers on each currency txn on a % basis e.g. a $1 fee on a selling $100 and buying equivalent INRs • Offsetting product combines all the transactions and nets them e.g. buying $100 in the morning and selling $105 in the evening leads to net position of $5 sell. • The new product will net the txns and charge on the netted value. • Customers with largely one-sided txns will not benefit as their gross position and net position is the same; speculative traders will lose profits if they adopt the product • Key inference – if customers profit, the fund loses money. How can they create a win-win situation? • A win-win is created when customers bring in txns done by fund’s competitors to the fund itself.

Approach/ Framework Offsetting Product – Customer Segments

Customers with buy-sell txns

Customers with largely 1-sided txns

3

Customers largely transacting with the fund

2

Customers transacting with both the fund and competitors

Speculative Traders

1

Customers transacting only with competitors

Pricing Strategies

Fixed Annual Fee Based on number of txns

Variable Fee

Based on $ value of netted txns

Based on $ value of gross txns (annual)

Based on % of profits the product generates


High value customers are those who do large number of buy-sell transactions with competitor funds, next pitch to customers whose fund portfolio includes our client Pricing scenarios can be generated, and final model should be chosen based on value to customer – value to fund analysis for the target customers

Interview Summary This is a strategy case where the candidate should understand the offsetting product very clearly. This leads to a clear value proposition. This case requires a bit of trading knowledge to identify the three customer segments. Once this is done, the candidate should crack the point that if the customers benefit then the fund will lose money since the product is against their revenue model. The win-win situation of bringing in competitors’ transactions then follows easily. Pricing model generation can be tricky if the candidate misses out the first case fact. If she remembers that fact and the fact that it is a netting product, the models would then flow smoothly.


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Unconventional Case - US Airline Entry Into China An international airline carrier is contemplating entering the Chinese market. You have to help the client evaluate the various factors to be considered while deciding. In case of green, should the client use the same aircrafts? Interviewee Notes

Case Facts

• Market entry case • Market sizing & breakeven analysis may be required; Growth prospects? • Competitor scenario? • Regulatory factor? • Financial and operational feasibility? • Entry options (JV, Acqui., Captive) • For market sizing – demand estimation, customer segments? Conversion? Utilisation?

• Airline current operates on US-UK route • Has two aircraft models in the fleet – 150 seater and a 600 seater • Competitor scenario is favourable • China customer segment mix – expected to 70% business, 30% leisure • Some of the airports in China do not allow large aircrafts to land due to runway constraints

Approach/ Framework Enter China?

Market Size

Competitor Scenario

Operational Feasibility

Regulatory Factors

Financial Feasibility

Entry Options

Business Customers

Route

Foreign Airlines

Partnership with Chinese

Leisure Customers

Airport constraints

Airport Regulations

Acquisition of Smaller Player

Fleet Size

Set-up Own Brand

Ground Force

A fleet size/shape modification may be desirable to increase seating capacity. This makes sense since Chinese flyers may differ from US-UK flyers in physique

The split of business-economy seats can be chosen to reflect to proportionate demand and utilisation.


Based on market sizing, growth analysis and break even analysis, the first go ahead should be given We should select the most attractive route followed by an operational feasibility check Immediate decisions would include entry options, route selection, fleet modification and procurement

Interview Summary This is a classic market entry case with a flavor of airline industry. The interviewee should keep in mind the specific concepts such as customer segments, long-medium-short haul flights, operational challenges, capital investment, and entry options. Cracking the demographic difference and aircraft modification point would definitely be appreciated by the interviewer.


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Market Sizing – Notebooks Co.– Interview Transcript

Can you help me size the notebooks market in India? Sir, first I would like to clarify what is the scope of the market we are considering. While I shall be looking at the notebooks used by school-going kids and college students, do I also look at the market for diaries and journals used by professionals? No, for now, only look at the market for simple notebooks similar to those used by school going children

Great! I would first like to segment the market based on use –academic and non-academic. I would like to start with trying to estimate the size of the market of notebooks used for academic purposes. Ok, go ahead, but before you start thinking of numbers, can you lay down a structure for me?. Sure. So this is how I am thinking of the problem. I will look at the Indian population and segment it according to the class in which the students are likely to study. Then I will estimate the number of books used by these segments and an average price point for them based on the rural urban divide. Lastly, I will top up the estimate to account for people studying in adult literacy programs. Does this sound ok? Yeah, this sounds fair and comprehensive. Please go ahead with the same

Right, so the population of India is 1.2 billion. I am going to assume a 70-30 Rural urban divide. I think I need to split it as urban rural first because the enrolment rates, and usage patterns will be starkly different in these two segments. Also, I am assuming that the population is uniformly distributed by age from 0 to 60 years.

I would like to divide the young population into two age groups. First are children from kindergarten to Class X or 3-15 years. The next are the young adults in Higher Secondary school and college, from 16-22 years of age. Ok, this sounds reasonable. Go ahead. The Next step would be to estimate the number of students among this population, which can be done through the assumption of enrolment rates. Knowing that the urban population has higher enrolment rates, I will take them to be 80% for school upto Secondary (Class X) and 60% for Higher Secondary and college. Similarly for the rural population, I will assume enrolment rates of 50% and 20% respectively. Okay, that sounds ok. How will you use these estimates? The overall Market size may be seen as the Number of Users x Quantity consumed per year x Cost of Units. Hence, the next step is to assume reasonable numbers of notebooks used every year. For a school student, I would take 10 notebooks including those for class work and homework for an average of 5 subjects. However, in rural areas, we can expect the numbers to drop to 5, on account of a less rigorous curriculum and teaching methods. College-goers tend to use fewer notebooks due to fewer requirements, say 6 in a year in urban areas. On account of fewer classes and absenteeism in lower-tier colleges, I would estimate an average of 3 notebooks for students from rural areas. There are many gross assumptions there, especially considering how many students move from rural to urban areas for higher studies. However, lets sacrifice these considerations for simplicity of calculation. Let’s go to the next step. The next step is to estimate average price paid by a student per notebook. Urban students, are generally able to afford more expensive, higher quality notebooks. Also, college students buy larger notebooks tend to spend more per unit. Hence, we can assume Rs30 and 20 for school students in urban and rural areas. Similarly, Rs. 50 and 35 for college students.

Why would you say 60 years? Also, is the uniform distribution assumption fair? Ok. Go ahead.

Sir, I think the average life expectancy in India is around 65 years, I took 60, to simplify calculations. Also, you are right, India has a higher proportion of younger people than older people. Would it be fine if I go ahead with a uniform distribution assumption and then increase the segment size by a say 10%?

Multiplying The number of students, consumption per student and price of each notebook for each of the 4 segments… we get Rs. 3700cr. This looks like a reasonable number. We may add another 5% for Non-academic notebooks, taking it to a total of Rs. 3885 crore.

Yeah, I think that can be a workable approximation. Go ahead

Ok, I agree that the number is in the right ballpark. That will be all, thank you.


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Market Sizing – Notebooks Co.

Interviewee Notes

Case Facts

•

• No information!

Need to focus only on Notebooks used by school and college children. Not professional journals

Approach/ Framework

Academic Notebook Market India Population: 1.2bn

Urban:30%

Segmentation: 1. Rural-Urban 2. Age: Assuming 60yrs Life Expectancy, Children 3-15yrs Young Adults: 16-22 yrs

Children: 78mn

Young Adults: 42mn

Children: 182mn

Young Adults: 98mn

Enrolment ratio in Schools/Colleges

80%: 62.4mn (Urban School)

60%: 25.2mn (Urban College)

50%: 91mn (Rural School)

20%: 19.6mn (Rural College)

Notebook used annually

10

6

5

3

Avg Price of Notebook

Rs 30

Rs 50

Rs 20

Rs 35

Notebook Mkt Size (Rs)

1872cr

756cr

910cr

206cr

Total

Academic: 3700cr

Rural: 70%

Non-Academic: 5% extra

Total: 3885cr


Since the product is similar to what the competition is offering, and we do not really have a strong POD in a saturated market, Penetration pricing is the best way . We have to keep in mind that the fixed costs will be high and they will be recovered over a longer period of time if we price our products lesser than the competition. But This strategy will help us gain a foothold in a new country and new market.

Interview Summary This case is for pricing of a product similar to existing products. The student should be able to identify fixed and variable costs. In this case, the price estimate will be based on the competitors’ prices and we will see how much lower a price can we offer to the customers. Once the company is an established name, the margins will be increased.


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Unconventional Case - Declining Response in a Competition You are the executive advisor to the Campus Branding team at ABC Ltd. ABC has launched its case study competition at premier b-schools. However, despite the overall increase in the number of students, the response from the students is lukewarm. ABC has asked for possible reasons and ways to increase the response rate amongst students. Interviewee Notes

Case Facts

• Defining ‘response’ – registrations? Submissions? Response on social media? • Likes have decreased in the first week itself (this is a major problem) • Competitor scenario?

• Last year 1300 students enrolled, out of which about 600 registered, and 200 submitted • ABC has a FB presence which saw 500 new likes last year (spread over 2 weeks after launch of competition). This year it is 100 likes in the first week. • ABC is an old recruiter at these schools and has been having this competition for about 4 years now. • A major competitor has also launched a case study competition at the same time with a prize money double that of ABC • ABC’s prize money has not increased • Marketing efforts are the same as last year • The number of likes on the social network has not grown in proportion to the number of students (scope for number work here)


Approach/ Framework

Awareness

Student Response Stages

Incidence

Channels Covered

How is it measured?

Activities on Each Channel

Sites have sufficient visibility?

Registrations

Marketing Budget

Submissions

Team Size Constraints

Format

Competition Timeline Problems

Timeline

Prize Money

Queries

Portal Usability, Uptime

Competitor Events

A fleet size/shape modification may be desirable to increase seating capacity. This makes sense since Chinese flyers may differ from US-UK flyers in physique

The split of business-economy seats can be chosen to reflect to proportionate demand and utilisation.

Incentive Strategy(this year): Since the prizes for this year have already been communicated through the marketing efforts, additional rewards in terms of goodies and PPIs can be communicated as a branding strategy for this year. Incentive Strategy (future): ABC should focus on not only the quality of the competition (difficulty, scheduling, etc.) but also on rewards being more competitive Marketing Strategy: ABC should aggressively market the case study competition on social networks to catch the students early. It should also schedule its competitions well ahead of its competitors to lock in participation. Further, students’ schedules of exchange programs in certain b-schools should be considered. Providing support systems in the form of buddies, interaction forums, etc. can go a long ahead in giving a competitive edge to ABC.

Summary & Observations

This question involved seeking clarification on certain definitions such as ‘response’ and ‘lukewarm growth’. It is essential to narrow down these broad terms to specific pointers using which the ‘lifecycle – approach’ can be deployed and the significant links can be identified. If a question revolves around conversion, one can think of the ‘lifecycle – approach wherein, various stages of an agent’s or activities lifecycle are enlisted. For e.g., in a purchase lifecycle, customer goes through a decision making stage, followed by purchase which is then followed by servicing and customer satisfaction, and finally repeat purchase. In this approach, different stages of conversion are listed and a weak/broken link is identified. A lifecycle approach also ensures MECE steps.


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Unconventional Case - Pricing Strategy for Portkey Your client has one of a kind (in the entire world) transportation machine which can take you anywhere on the globe within 5 seconds. Develop a pricing strategy for the client. Interviewee Notes

Case Facts

• Important to figure out multiple ways in which the machine can be milked not limited to running the machine.

• No such machine is prognosticated to be produced for the next 40 years • The Machine can carry 50 individuals at 1 time • The machine needs at-least one hour of maintenance works • Works on electricity, though extremely high power consumption • Assumption of a fixed price and continuous demand when running the machine independently.

• Since it is an unconventional product, full knowledge about all facets of the product is essential • Start analysis from running a machine to have a preliminary cost benefit analysis. This analysis could be used to determine pricing in selling and renting scenarios

Approach/ Framework Pricing

Sell the Machine

Customers

Rent the Machine

Run the Machine

Revenue Model

Governments

Initial LumpSum

Scientific Community

Profit / Benefit Sharing

Costs

Operational Costs

Fuel Costs

Revenue

NonOperational Costs

No. of tickets sold in 40 years

Rent centers Price/Ticket

Operator Costs

Annual Maintenance

Recommendations The client could look at all 3 possibilities for deriving the maximum out of the transportation machine. The rough costs, based on client data has been formulated and assuming the required profit percentage pricing has been determined.

Interview Summary The candidate did a good job in laying out the framework. Despite the fact that the problem was somewhat unorthodox, the candidate put in a good effort to structure the problem. Though the pricing strategy could have directly implied running the machine, the interviewee sought other possibilities for the client. Also, the rough Cost-benefit analysis done helped come up with a reliable figure to base arguments on.


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Unconventional Case - Call Operator Our client runs a multi-cuisine delivery only restaurant chain across the country. They had hired a call operator company for taking delivery orders since the past 3 years. However for the past 4 months the revenue from the home delivery have suddenly taken a plunge. Help the client Interviewee Notes

Case Facts

• Focus is on first clarifying • There have been no changes from and deriving information the company’s end in terms of from the problem statement marketing, operating standards, to understand the roles and prices etc. sequence of step followed during telephone ordering • The consumer target group has roughly remained the same with • Factors for Reduction in no other major outlets or “trends Customer Inflow derived in consumption” emerging from the basic branches of management namely Operations, Marketing, Consumer Psychology

Approach/ Framework Revenue Decline

Average Revenue / Customer

No. of Consumers

Reduction in Customer Inflow

Reduced Quality

Food

Delivery Services

Reduced Marketing

Other Competitors

Reduced Marketing Expenses

Customer Relations

Reduced Customer Conversion

Changing Consumer Attitude

Input

Operator

Processing

Communication Medium

Inefficiency

Change in Telecom Connection

Lack of training to handle customer/ Software

Faulty PhoneLines

Software for info. Relay to restaurant

Restaurant’s Info Reading Systems

Recommendations

The problem lay in the reduction in Customer Conversion which was due to the problems in the new operating software that had been installed by the call operator company 4 months back. It is essential that there is a quick rectification of the software problem to get back the revenues to previous levels

Interview Summary The candidate firstly did a good job clarifying the role of all the parties involved. She then followed a simple yet exhaustive structure eventually leading in the Processing branch of the Customer Conversion Problem. Could’ve looked at existing and new customers in isolation for better clarity.


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Unconventional Case - Vernier Calipers Manufacturer A Vernier calipers manufacturer has for the past 2 months been seeing 100/1000 Calipers being produced are defective. Help him. Interviewee Notes

Case Facts

• Focus is on first clarifying and deriving information from the problem statement namely kind of defect, single lot/continuous problem

• The problem is in the etching / marking process with uneven marking for 100 calipers

• Understanding of the production process in as much detail as possible to realise areas where the process may be faltering

Approach/ Framework

Manufacturer

• The factory is operational for 10 hours everyday • The defective pieces are produced in one continuous process which is everyday from 3-4 PM

Supplier Change

Raw Material

Intra-Factory Logistics

Material Change

Quality Inspection Change

Production Process

Internal

External

Process Change

Labour (Shifts / Breaks)

Electricity Variation

People Change

Machines

External Construction (Vibrations)

Recommendations The defects are happening due to construction of a bridge that happens in the vicinity everyday about 3-4 PM. One simple way is to provide rubber pads beneath the machines to damp the vibration effects

Interview Summary The candidate did a good job in laying out the framework. The initial set of questions on Vernier Calipers, kind of defect and defect frequency throughout the day helped in eliminating the need for going in depths of possible problems. Consideration of external factors to the production process was the key to solving the case which was extremely well thought out.


2016-17

79

Unconventional Case - School’s Deteriorating Performance A school principal has consulted you because the school has not been doing good. Find the reason and suggest solutions? Interviewee Notes

Case Facts

• What is the meaning of not doing good? Profit/performance/Image employee satisfaction? • Which kind of school? Location? Classes? • Time period of bad performance

• • • • • •

This is a private school Located in Patna, Bihar Nursery-12th Recent dip Middle-class students mostly Situated in a densely populated region • Close enough to residences • No. of students enrolling has decreased and students are also leaving

Approach/ Framework School not doing well

Internal Profit decreasing

Perf. Academic Extra and cocurricular

Revenue decrease

student?

Enrollment ? Students leaving

Image affected?

Cost increase

Fees/

# students decreased

External

Mgmt. employees

Stakeholder satisfied? Teachers

Competition increase

Customer preference

Students, parents Infra+ transportation

Teaching expertise/attention

Ext. Infra. Changes Illegal noisy factory Polluted Environment Severed Access

Fees

Recommendations The solutions proposed to the problem created by the recently cropped up illegal factory could be short term and long term. Long term solution could be taking them to the court but it would have some negative impacts of cost too. Some short term solutions could be talking to factory administration, trying to negotiate. Diversification to other locations or using some sought of sound-proofing technology are a few far-fetched solutions as well.

Interview Summary This was a very broad case with the very question having the possibility of being interpreted in multiple ways. A good idea is to lay down all the possible meanings of not doing good and ask for the interviewer’s direction to move forward. A process driven or stakeholder driven approach is a MECE way to look at things here. Recommendations could be as creative as one can think of.


2016-17

80

Unconventional Case - Partner Late to Office A consulting firm partner has been coming late to office since the past 2 weeks. Figure out what is the reason for the same? Interviewee Notes

Case Facts

• Partner late to office: How late? Is that consistent since the past two weeks? • Where? What is the setting location? • 2 weeks only- eliminate long term events from the analysis to follow • Internal factors- Habits, personal life, vehicle? • External factors- home, route, destination?

• The partner lives in South Delhi and his office is in Gurgaon • Mode of transportation is his car and this has not changed since the past two weeks • Personal life and habits have remained the same • No change in home or office location

Approach/ Framework Delay

Internal factors Habits Family

External factors Home

Route

Location change?

Traffic

Car related issues

Obstructions Constructi on etc

Speed breakers

Office Traffic signals

Toll booths

Location change?

Infra(new lane) New hires/tech. PricingYES

Recommendations There was a on the recently built highway. The prices of the toll have been recently changed from Rs. 20 to Rs. 21 and now, owing to the extra time which it takes for the drivers to search for change, the line moves slowly as compared to what it was earlier. Hence, the partner has been reaching the office 15 minutes late everyday since the past 2 weeks.

Interview Summary The key to this case was to ensure that you start structured, instead of asking random questions which pop in your head the very first time. Since, the solution was very unconventional, the interviewers would be more impressed by the approach to the problem, rather than the actual answer. Also, a MECE framework from the beginning, makes sure you cover all the aspects and are able to reach the final answer.


2016-17

81

Unconventional Case - Dip in Profitability of CT The owner of CT has mentioned that they have witnessed a dip in profitability since the last 2 months. He needs your help in figuring out why. Interviewee Notes

Case Facts

• Profitability changes can be due to revenue and costs • Since revenue and costs have both increased, costs have certainly increased more than revenues • A product portfolio change indicates either additions or deletions or both to the menu • As maggi has been added while the number of customers have gone slightly up, it indicates that the profitability of maggi is lesser than the average profitability of other products

• Both revenues and costs have increased in the last 2 months • Environmental factors and competition has not changed • # of customers has slightly increased • Operational costs have not changed • Product portfolio has changed • Maggi has been introduced 2 months earlier

Approach/ Framework

Profitability

Costs

Revenues

Environmental factors

Competition’s costs

Firm

Economy

Raw material prices

Operational Costs

Product Portfolio


As the decrease in profitability is due to maggi, we might want to benchmark its prices with other competitive outlets selling maggi Since, CT is confined within the IIMA campus there might be collusion opportunities on the price of maggi, with another 1 or 2 outlets selling maggi within the campus

Interview Summary

This is a classic case of profitability and should be solved from first principles. A general oversight is that when we realize that costs have gone up, we tend to focus on aspects such as R.M. prices and other operational costs rather than considering the product portfolio as well.


2016-17

82

Unconventional Case - Higher Costs Faced by SE Asian Bank A south-east Asian retail bank, which is present in multiple geographies, is facing costs 20-25% higher than the competitors. What needs to be improved? Interviewee Notes

Case Facts

• Since operational costs are the main issue • Salaries are a function of number of employees x avg. salary • The number of employees for cash/cheque transactions are higher • This can be due to paucity of ATMs or lack of ATM cards • All employees are not getting cards on account enrolment • Employees specifically need to opt-in for an ATM card • The default option for this bank is opt-out while for other banks it is opt-in

• We are discussing a retail bank • Costs are 20-25% higher than competitors • Operational costs are an issue • The cost problem is further confined to clerks who are in charge of cash/cheque transactions • Number of ATMs is not an issue • Average number of customers having an ATM card is lower than that of customers in other banks

Approach/ Framework

Retail bank costs

Interest rates

Borrowed money

Transaction costs

Deposit costs

Operational cost

Overheads

SG&A

Salaries

Management

Advertising

Foreign exchange

Equipment

Admin

Clerks


The default feature should be changed from opt-out to opt-in for card allotment. Also, emailers for opt-in/ in-house recommendation during customer visit for card enrolment should be given to current customers

Interview Summary This case tests the idea of cost heads for a retail bank. Deep-dive into the clerk salaries is a slightly challenging aspect which needs the student to think about what kind of missing alternatives can lead to more customers gathering for cash/cheque transactions. Further it is important to think not just about ATMs but also the availability of ATM cards with customers.


2016-17

83

Unconventional Case - Turnaround a Copper Mining Company An Indian copper mining and smelting company is incurring losses for 5 years. Prepare a turnaround plan for the firm Interviewee Notes

Case Facts

• For a plant and machinery company, it is good to look into fixed and variable costs separately • Coal extraction (operational) costs dependant on quality of extract and the difficulty of extraction • Labour and machine utilization are important parameters in the operational costs • Technology used should also be benchmarked • Interest rates/taxes should be checked upon in case debt of the company is an issue

• The client has been in the industry for 15-20 years • Coal prices are regulated and hence revenues cannot be modified • The mining and smelting plants are near the coal resource site • Mining sites are determined as per the coal block allocation

Approach/ Framework

Value Chain Mining

Smelting

Outbound

Company Profits

Costs

Revenues

Fixed

Variable

Rent

Direct mat.

Machinery

Direct labor

Electricity

Operational

Plant maint.

SG&A

Indirect mat.


The plant distribution currently is that we have 2-3 small plants across a narrow geography. Consolidating these into one large plant can help in leveraging economies of scale, especially in a capital intensive company Labor and machine utilization can be optimized as they form a large chunk of the operational costs

Interview Summary This is a very open-ended case which tries to gauge the spectrum of thinking that an individual has. Following a good structure along with covering most of the cost heads is the most important part of the exercise. Moreover, progressing via a value chain can help in understanding the various processes and cost heads involved.


2016-17

84

Unconventional Case – Toffee Manufacturer A toffee manufacturer is seeing its revenues reducing suddenly since past 2 months. Why? Interviewee Notes

Case Facts

• Focus on eliminating components of profit margin one by one

• Leading manufacturer • Most of the revenues through 1 product, e.g. Chlormint • Decline has been sudden and significant

Approach/ Framework

Revenues

Price

Rise of competition

Quantity

Substitutes

Change in quality

Customer preferences

Buying behaviour

Recommendations The toffee was usually purchased as substitute for loose change along with purchase of cigarettes. However, with the price of cigarettes now being rounding off to a round number, toffees were no longer purchased in lieu of loose change.

Interview Summary The key to this case was to ensure less-frequently encountered options (such as customer preferences) are also covered. Arriving at the final solution requires lateral thinking and ability to connect real life experiences to the case.


2016-17

85

Unconventional Case - Restaurant A restaurant is witnessing a dip in its revenue since last 2 months. What is the possible reason? Interviewee Notes

Case Facts

• When analysing the offering, go beyond the obvious – in this case the offering is not only the food but the service, ambience and layout

• The decline in revenue has been sharp and persistent • Restaurant plays in the premium price segment – ambience one of they highlights • External environment in terms of competitive intensity, catchment area characteristics, cuisine preference trends etc.

Approach/ Framework Revenues

Price

Quantity

Rise of competition

Substitutes

Personnel changes

Change in product

Cuisine Change

Layout change

Customer preferences

Changed from multiple 2 seater tables to 4 seater tables resulting in decline in couples

Recommendations The restaurant had couples as a key segment of their customer base. However by changing the layout and increasing the number of 4 seater tables, they were unable to cater to this customer segment.

Interview Summary It can be easy to miss certain unconventional options, hence having a MECE mindset at every level of the tree is imperative.


2016-17

86

Unconventional Case - Open Plot of Land Your client has a large plot of land in Mumbai. He wants you help him figure out what he should do with it Interviewee Notes

Case Facts

• Selling the land will not achieve objective 2 and 3 • Regulation prevent industries • Residential land rate = 50,000/sq-ft • Commercial lease rate = 1000/sq-ft/year • NPV = Annual lease rate * 30 yrs • Entering any commercial activity on its own is feasible due to competitive advantage • Client could also develop and lease a combination of commercial and residential space type projects

• Client has 3 major objectives in order of preference - Maximize profits, brand recognition, Philanthropy • 1000 acre land surrounded by homes, offices, schools and restaurant etc.; Prime location • Textile mill present in the land which could not run profitably and hence was shut down • Client’s procurement manager, operations manager and sales manager have decided to follow the client in its future venture

Approach/ Framework Overall Objective Residential Apartments, homes, bungalows NPV = 50000/sq-ft

Commercial purpose

Iconic buildings, Niche attractions, luxury apartments, corporate offices, celebrity homes

Profits Brand Philanthropy

industries and factories

Sell the land

NPV = 30,000/ sq-ft

Enter a commercial activity

Develop and lease

Develop brand

1. 2. 3.

Philanthropy

Marker Size

Free schooling, hospitals, free space to NGOs

Market Share

Trusted managers

Competitive advantage

Prime location


Opportunity exists for the client to either develop and lease a combination of residential and commercial space or enter into a commercial activity on its own To develop brand client can consider building iconic building with niche attractions. It can have dedicated space for corporate offices and celebrity homes Client can either partner with an NGO or open up free schools and hospital to realize its philanthropic objectives

Interview Summary This is a open ended unconventional case where it is important for the candidate to clarify objectives before getting started Observations/Tips/Suggestions • •

Candidate asked the right background questions at the start to understand the case better and move in the right direction Candidate was very prompt in clarifying the discrepancy in the lease amount of residential versus commercial space


2016-17

87

Unconventional Case - Football Team - Diagnostics The owner of a professional football team has approached you because it has been underperforming on the field. Help them diagnose the issue. Interviewee Notes

Case Facts

• Focus is the team. Strengths weaknesses and factors that could affect performance. • Should cover all aspects of performance including internal and external factors

• Renowned team, supporters have high expectations • Squad size of 25 with 10 world class players and 15 very good ones • Team dynamics good • No particularly weak position • Conservative transfer policy • Several injuries in the last few years to key players • Players and staff properly incentivized • World class ancillary services and facilities • Scouting team excellent. Onfield tactics satisfactory • Diagnostics indicate team lagging competitors on Key Metric of “World Class players per game” not due to lack of such players but due to fatigue related injuries • Intelligence indicates other teams give more recovery time in between training and practice sessions

Recommendations •

Approach/ Framework Football Diagnostics Ancillary services

Team

Strengths and weaknesses

Coaches

Physios

Tactics

Scouts

Facilities

Competition

Environmental

On field

Strengths and weaknesses

Externalities

Transfer market

Past performance

Supporters

Dynamics

Methods

Methods

Methods

Training

Incentive structure

Experience

Experience

Experience

Practice

Rivalries

Corruption

Transfers and Attrition

Incentives

Incentives

Incentives

Analytics

Tactics

Distractions

Recovery

Incentives

Fitness Levels

Fitness

Sufficient recovery periods recommended in between training sessions

Interview Summary The candidate did a good job in laying out the framework. The focus was rightly on the team, but any business is incomplete with the plethora of ancillary and support staff it relies on to perform to its potential. It is very important to be MECE while laying out the structure. Even if the interviewer doesn’t implore you to dig deeper into all branches, it’s always a good practice to lay down two levels of the structure especially in cases like these.


2016-17

88

Unconventional Case - Elementary, Dr. Watson You stay in 222B Baker Street. Your friend Mr. Holmes is on holiday, and in his absence Dr. Watson is attempting to solve a case. He’d love your help Case facts • Mr. Brown was found dead in his apartment by his neighbour at 10am • His wife has been on holiday for a month • Watson has narrowed down to 3 suspects – neighbour, old friend and business partner • One guard was on duty, not a suspect • Brown was found dead in his bedroom • In his study, two glasses were found, only one of which had a few drops of alcohol in it • Traces of a rare poison were found in that glass (and in the wine bottle), which causes the victim’s heart to stop beating 3 hours after ingestion • The cause of death was heart attack • The poison molecule is produced as a byproduct of a pharmaceutical process • Friend is recovering alcoholic who came to Brown to borrow money to pay off gambling debts. He was visiting Brown for the third time in a week, before that hadn’t met him in years • The neighbour was in love with and having an affair with Mrs. Brown

More case facts

Approach/ Framework

• Brown and his business partner run a pharmaceutical company which has seen a decline in profitability of late. However, they have recently developed a product which can cure a type of cancer. The catch is that there can be adverse side effects. Mr. Brown didn’t want to launch this product but the partner did and they argued over this, often aggressively. The partner was known in the industry as an unethical and overly dominating man • When the neighbour found Mr. Brown dead, he had come to confess • Mr. Brown, the Old Friend and the Biz partner were in college together. The old friend and business partner were still in touch • The guard tells us that the old friend visited Mr. Brown the night before from about 8pm10pm with a bottle of wine as a peace offering • The coroner puts the time of death at about midnight • Biz partner has not visited Brown’s home in months • Old friend’s gambling debt had suddenly been paid off

Man found dead in apartment

Death

Suspects

Cause of death

Relationships

Timeline

Motives

Crime scene

Alibis

Witnesses

Recommendations •

Business partner has committed crime in collusion with old friend. Business partner had paid the old friend’s debts, and given him the poison. The friend had come to meet Mr. Brown with the poisoned wine. As he was a recovering alcoholic, he had an excuse not to drink it himself.

Interview Summary Even in unconventional cases, structured thought is very important. There must be a logical flow to ensure no detail, however minor, is missed out. It is good practice to summarize the facts occasionally in such cases, as they can lead you closer to the final answer


2016-17

89

Unconventional Case - Merger & Acquisition After a hard day’s night as a second year student in a well known institute of management in western India, you have decided to open your own consultancy firm. It’s a long and winding road ahead, and you’ll have to work seven days a week. For now, you have to help your first client - a first year student from your dormitory, who wants a girlfriend. Will he get a little help from his friends, or should he just let it be? Interviewee Notes

Case Facts

• First thing first, what is he REALLY looking for? WHY does he want a girlfriend? Can whatever he really wants be obtained by any other means? If yes, analyse each alternative. This case structure laid out assuming he insists on getting a girlfriend. • Follow M&A structure for the rest of the case. Not as unconventional as it sounds.

• NA

Approach/ Framework

Client

All you need is love

Due diligence

Competition

Price of girlfriend acquisition

Action Plan

Objectives

Porter’s 5 forces

Presence of competitors

Cost – benefit analysis

Method of approach

Needs

Market Size

Competitive response

Resource availability

Norms

Competencies

Market Segments

SWOT analysis

Past experience

Shortlisting parameters

Milestones and timelines

Interests

Actual shortlist

Exit strategy (if required)

Competitive strategies

Legalities and Moralities Possible synergies

Interview Summary Determine the objectives of the client. Start from the basic - Try to address what the client needs, which may be slightly different from what he has described the problem to be. Next, understand the market and the alternatives. Shortlist the ones worth pursuing, and understand what unique synergies and benefits v/s costs each would offer. Opportunity cost must be considered. Next, an action plan must be decided along with milestones, goals, and if required, exit strategies


2016-17

90

Unconventional Case - Pencil Manufacturer in India The profits of pencil manufacturer in India is going down. Find out the reason and give recommendations to overcome the decline Interviewee Notes • Is this a industry wide trends? • How any new competitor has entered the market? • What are the products we are currently selling? • Who are our customers? • Has there been a price change recently? • Is there a reduction in quantity sold? Broad-approach • Get a idea of industry and the client before probing into the reason behind decline in revenue • Breakdown revenue into price and quantity • Drill down into each aspect individually

Case Facts • Not a industry trend • No new competitors •Two kinds of products, one costly pencil and other cheap pencil •No change in price •After going though all the possible reasons behind reduction in quantity, it was mentioned there is no change in quantity sold •Both the products are targeted at school children •No increase in any of the cost involved

Approach/ Framework Industry/ Company

Profit

Current Trends

Revenue

Cost

Competitors

Market Share

Product Offerings

Revenue/ Unit (price)

Quantity sold

Quality

Service Customer Segments Convenience

R&D

Equipment Human Capital Cost of finance

Perception

Raw Material


Processing

Machinery

Storage & Transporta tion

Distribution - Sale force


Sales Channel

Marketing channels

Sales Force

Strategy

Factory rent Contract & bulk deals

Labor hours Technology

Storage (Rent, Labor, Inventory)

Marketing

Customer Service

Repairs Spare parts Returns

Training

Quantity used Capacity utilization


Cost Packaging

New Entrants Substitutes

Recommendations There was no change in price of the product and the quantities sold. But the client was getting more profit margin in costly product and low profit margin in cheap product. The client sold more of the product with low profit margin. Even though the demand was good for their costly product and not much difference in production cost between the two products. It was advised that the client should focus on manufacturing more of their costly product and sell it to increase their profits.

Interview Summary In this case the problem was neither in revenue side nor in cost, But it was related to current product mix of the client

Observations/Tips/Suggestions The traditional way of solving the case would not have assisted the interviewee in identifying the solution (C) Consult Club, IIM Ahmedabad

2016-17

91

Unconventional Case - Airline An airline company has started witnessing margins lower than that of the industry. Diagnose why? Interviewee Notes

Case Facts

• Focus on eliminating components of profit margin one by one • Keep asking questions, to quickly eliminate options before drilling into a specific option

• Pricing of tickets is at par with the industry so revenue side can be eliminated • Cost structure can be decomposed as running costs, maintenance and parking costs • Wages and other SG&A components are within industry averages

Approach/ Framework Profit margin

Revenue

Cost

Flying Costs – Fuel

Maintenance Costs

Parking Costs

Sourcing at higher prices

Not hedging prices – while competitors do

Recommendations The airline is not hedging its fuel purchases unlike its competitors thereby unable to reflect an improvement in margins despite a fall in fuel prices

Interview Summary The key to this case was to quickly go through the standard profitability elements to hit at the right component and think a little unconventionally to reach the answer.


2016-17

92

Unconventional Case - Petrol Pump Losing Business Your client is a petrol pump owner. He has recently seen losses in his businesses. What might be going wrong? What are your recommendations? Interviewee Notes

Case Facts

• Decline in profit of an isolated petrol pump in DL-CN highway • Decline primarily due to decreased transactions • Industry wide issue • Decline primary due to lower traffic • Dip in petrol business more than diesel business – implies car traffic has reduced considerably • Decline in car traffic primarily due to alternate route or alternate transport • Traffic shift to an alternate air route • A new freeway route going to open soon

• Client owns 50 petrol pump out of which one has a problem. It is located in Delhi-Chandigarh highway • All petrol pumps in the area have reduced profits • The issue is recent – past few years • The petrol pump sells petrol and diesel- both businesses have suffered

Approach/ Framework Decline in profits by 20% Decline in Revenue Decline in Revenue per transaction

Decrease in # of transactions

# of vehicle using highway

Cars

Total cars in DL/CN

Increase in Cost

% filling the pump

Trucks

Buses

% travelling between 2 cities

% taking the highway

Alternate route available

% market share

# Transactions = (Vehicles in area OR passing through the area) x (% filling petrol) x(% Market share)

Alternate mode of transport available


Since alternate route (freeway) is going to open soon, a further decline in traffic is expected The client should close down the petrol pump and either sell or look to set up alternate business in the area The client should explore opportunity to open up a petrol pump in the new freeway

Interview Summary This is decline in profitability case where a structured approach is used to pin point the reason in decline and further opportunities for client is explored Observations/Tips/Suggestions • •

Candidate followed a very structured approach- breaking down each block into its components to drill down to the real problem Candidate was very prompt in catching up an important fact of new freeway coming up and suggesting business expansion plan


2016-17

93

Unconventional Case - Local Hospital A hospital’s profitability is decreasing since the past few years. The hospital is a local medical unit and has a single branch. Most of the patients come from near by areas. The hospital primarily caters to elderly citizens and offers treatment for bone diseases. Most of the doctors are experts in curing diseases related to old age. Interviewee Notes

Case Facts

• Focus is on elderly patients • In particular, old-age patients with bone diseases • The average number of stay per patient is variable i.e. it can be decided by the doctor • The profitablity (rate of increase in profits) is decreasing • The revenue model of the hospital – fixed registration fee per patient and amount per day for hospital stay

• The hospital caters primarliy to elderly citizens • Most of the doctors are experts in treating bone diseases • Most of the patients come from nearby areas • The hospital is a local medical unit and not a major brand • The treatment duration is at the descretion of the doctor i.e. it can range from 2 weeks to a month

Approach/ Framework Reduce decline in profitability

Revenues

Price/Fees

Costs

# of patients

Rent, Utilities

Equipment

Salaries

Registration fees

Elderly patients

Doctors

Per night spend per patient

Other patients

Admin


The number of days spent per patient needs to be reduced The resulting increase in new patients will result in higher collections from registration fees thereby preventing the decline in profitability

Interview Summary

The candidate did a good job in laying out the framework. It is also important to highlight that the candidate understands the difference between profits and profitability. The current framework would enable the candidate to realize that the issue is the high number of days spent (per patient) in the hospital and the resulting loss in registration fees from prospective patients. There are other areas also that need to be mentioned viz. marketing, catering to other target segments, alternate revenue sources, cost optimization, etc.


2016-17

94

Unconventional Case - Hotel Mini Fridge A hotel wants to increase the profits from consumption of mini-fridge items in rooms. You are required to analyze the costs and revenues and suggest optimal solutions Interviewee Notes

Case Facts

• Focus is on consumption of mini fridge items and not any other revenue source • There are three categories of customers- families, friends and corporates • The same mini fridge is installed in all rooms • The items in all mini fridges are the same • There is scope for stocking different items in mini fridges in different rooms • The past consumption data for different customer categories is available

• The hotel is a 5 star hotel with properties in key metro cities • There are various revenue sources but the focus is on mini fridge items’ consumption • The customers include families out on vacations, friends out on vacations and traveling corporates • The consumption of mini fridge items varies according to type of customers

Approach/ Framework Mini fridge items’ consumption

Revenues

Alcoholic beverages

Avg. price per item

Costs

Non alcoholic beverages

Avg. price per item

# of items consumed per room

# of items consumed per room

# of rooms

# of rooms

Installation

Items’ cost

Staff

Recommendations •

The hotel needs to customize the items in the mini fridges depending on the customer category – for families, the mini fridge should stock more cold drinks; for friends and corporates, the mini fridge should stock more alcoholic beverages. This is based on the past consumption data available with the hotel.

Interview Summary The candidate did a good job in laying out the framework. The revenues from mini fridge items is driven by consumption of alcoholic beverages, implying that the two revenue streams (alcoholic consumption and non-alcoholic consumption) need to be analyzed separately. This distinction is clearly shown in the framework drawn out by the candidate. Next, the items in the mini fridge should be as per the preferences of the customers. This is achieved by having different items in the mini fridges in different rooms based on the past consumption patterns of the customers.


2016-17

95

Unconventional Case - Robbery Planning A thief in WIMWI Land is planning on his next robbery. He has shortlisted his options to 3 possible prospects- Chaipoint tea house, Archies gallery and Supreme furniture shop. Help me choose where to rob, why and how? Interviewee Notes

Case Facts

• Any legal restrictions? • Is the thief alone or with a team? • When is the robbery planned? How much time he has to plan? • What resources he has? • How much skillful he is?

• Assume normal police risk which he wants to avoid as any thief • He has been in this business for long • He does the robbery alone • He has a car which he can use if he has to

Chaipoint

Approach/ Framework Which place to rob?

Benefit Archies Galley

8am-9pm

Supreme Luxury furniture shop

Time of operation

6am-8pm

Customers

20/hour

16/day

2/day

Avg. purchase /customer

Rs.60

Rs.900-1500

Rs.30K

Payment method

All cash

40% credit, 60% cash

Only card, no cash transaction

Money

Risks

Accessibility

Security

Exit options

Additional cost req.

8am-9pm

Chaipoint

Archies

Supreme

16800 cash

Roadside

2 attendants

Direct by the side of road

Not really

<=14400

Open shopping

No guard, 2 people in shop

Near a road

Not really; open to candidate’s creativity

0 (60k by card

Situated in a shopping mall

No camera, security guard present

In a mall

Not really; open to candidate’s creativity

Recommendations The recommendation would be between the tea shop or the gallery depending on the risk assessment and creativity of the candidate to suggest robbery tactics.

Interview Summary This is quite unconventional , open-ended and creative case. The trick here is to ask the payment method since otherwise, the candidate misses the entire objective of the thief to maximize his monetary returns. This case can take quiet unexpected and creative routes to robbery plans depending on the candidate’s creativity, out of the box thinking and the interest level of the interviewer


2016-17

96

Unconventional Case - Consult a Consulting Company Your client is ABC consulting company. Recently, they have been faced with declining profits issue. The client is very concerned and has hired you to diagnose the problem and recommend corrective measures. Interviewee Notes

Case Fact

• Is revenue declining? Or is cost going up? Or is it the both? • Is this an industry wide issue or is it specific to this consulting company? • Are we getting less business or have we started to charge less? • Are we losing out on repeat business or the new one? • Is this loss across all sectors?

• Cost has remained the same. Declining profits is an issue for this consulting company only • We are getting less business • We are losing both repeat as well as new business • No, only Pharma and IT have been losing business • Partners in Pharma & IT have left ABC resulting in lower reputation and network with these clients

Approach/ Framework

Deliverables on time, quality recommendaition, relations

New clients

Network (Place)

Reputation of ABC, relationship with partners, principals, reach

Repeat Clients

Negotiation (Promotion)

Skillful pitch in response to RFP, showcasing the brand ABC

Amount

Higher than industry

Structure

100% is fixed fee, clients go to competitor

Clauses

The clause to get 100% variable fee isn’t performance dependent

Implementation

Clashes b/w client and company for deciding the % compensation

No. of clients

Revenues

Curtailing Attrition Cause for attrition

Service Quality (Product)

Fixed Fee Make them stay

Workplace culture

Increase profit sharing

Low compensation

Better division of work

Look to Hire Fees/Client

Variable Fee

Relaxed deadline


Client needs to find out the reasons for attrition of partners A plan to retain the partners should be prepared quickly Plugging the hole of vacancy is utmost important. Reaching out to clients in Pharma and IT and ensuring them of the same skill set team and leader to maintain their confidence in ABC

Interview Summary This case tests how well can the candidate adapt to a completely different business model. This is based on Human resource based service provision to customers. The product that sells here is the intelligence/effectiveness of the human brain.

Observations/tips/Suggestions • •

It is very important in a services industry to not forget about the repeat businesses. 60% of consulting clients are repeat clients Ask the interviewer about the nuances of the industry instead of making random assumptions about it. For e.g. here, the fee is typically broken down into a fixed fee and a variable fee paid when certain pre-decided and promised deliverables are completed and implemented successfully.


2016-17

97

Unconventional Case - Paint Manufacturer in India A paint manufacturer in India is facing a decline in revenue and profit margin. You need to identify the reason for the same. Interviewee Notes • Is this an industry wide trend or our client is facing the issue? • Who are our current competitors and how is the market share distributed among them? • What is our current customer base? • Is there any change in price? • Makes a list if possible cost drivers that could affect the margin Broad-approach • Get a idea of industry and the client before probing into the reason behind decline in revenue • Profit margin depends on price and cost • Drill down into each aspect individually

Case Facts • Decline in margin is an industry wide trend , but rate of decline is more for the client • There are lots of players in the market. Four major players accounts for 90% of the industry market share • Client has the second highest market share • Client used to be a market leader, now dropped to second •Three customer segment 1) PRO – Professional Industry (construction) 2) Trade – Targeted at large tier 1 cities (Retailers – Customers) 3) Bharat – Targeted at tier 3 cities (Large retailers/wholesalers – Retailers – Customers There is a decline in revenue generated in the professional industry segment


Profit

Current Trends Revenue

Cost

Competitors

Market Share Product Offerings Customer Segments

Revenue /Unit (price)

Quantity sold Quality Service Convenience Perception

R&D


Raw Material


Processing

Machinery


Distribution - Sale force


Sales Channel

Marketing channels

Sales Force

Strategy




Marketing

Customer Service


Training



Cost Packaging


Recommendations The decrease in profit margin is due to the increase in transportation cost. The decrease in revenue in the professional industry segment is due to decrease in quantity sold. The customers in PRO segment perceive the client product as low quality compared to the competitors. But our client product is on par with the competitors product in terms of price and quality.

Interview Summary The interviewer wanted the candidate to identify the major reason for the decline in revenue and profit margin. The candidate identified the reason but probing into each branch of the above mentioned framework. Overall interviewer was happy with the analysis of the candidate. Due to lack of time constraint , there was no recommendation given. The reason behind the recent change in the perception of the client product was not discussed in detail. It would be a real value add if the candidate could come up with various reason for the same.

Observations/Tips/Suggestions All the aspects of the framework of covered. If the candidate could have provided few quick decisions/ recommendations to overcome the issue. It would have been a real value add.


2016-17

98

Unconventional Case - Restaurant in Paris The revenue of restaurant in Paris is going down. Figure out the reason behind the fall in revenue. Interviewee Notes • Is there any change in price? • Is there any change in quantity sold? • What is the current industry trend? • Any new entrant in the market? • Is there any change in quality or service? Broad-approach • Get a idea of industry and the client before probing into the reason behind decline in revenue • Breakdown revenue into price and quantity • Drill down into each aspect individually

Case Facts • No change in price • No new competitors • Industry is not going through a decline in revenue • Familiar/ Regular customers are missing • Ambience of the restaurant has been changed recently • The restaurant layout was changed from 2 per table to 4 per table • As the number of people sitting in a table has increase, it affected the ambience of the restaurant and the customers felt the place is less romantic now especially for couples • Number of couples visiting the restaurant decreased


Profit

Current Trends

Revenue

Cost

Competitors

Market Share

Product Offerings

Revenue/ Unit (price)

Quantity sold

Quality

Service Customer Segments

Convenience Perception

R&D


Raw Material


Processing

Machinery

Storage & Transporta tion

Distributio n- Sale force


Sales Channel

Marketing channels

Sales Force

Strategy




Marketing

Customer Service


Training



Cost Packaging


Recommendations The intention behind having more number of seats is to maximize revenue without expanding the size of the restaurant. As the result of this bad decision client lost their regular customers. Hence it is advisable to have two different types of dining facilities with separate demarcations. Candle light dinners on one side and family dinner facilities on the other. The client can also host corporate dinners, birthday parties etc.,

Interview Summary The interviewer wanted the candidate to identify the major reason for the decline in revenue. The candidate went ahead and suggested few recommendations to overcome current situation.

Observations/Tips/Suggestions Interviewee did not ask questions on current customer base of the client which might have helped him to arrive at the solution much earlier. In most of the case interviews of this nature, interviewer would be satisfied if the candidate can identify the reason behind the decline in revenue. But it is advisable to come up with few recommendations to overcome the issue. This could act as a differentiating factor. 2016-17 99 (C) Consult Club, IIM Ahmedabad

Unconventional Case - PPP for Metro in Bangalore The client has entered into PPP with the government of India to build a metro system in Bangalore. To make it lucrative for the client, Government of India has allocated land around the metro stations. Help the client make the best use of the land. Interviewee Notes

Approach/ Framework

• Is maximization of Revenue the objective? “Yes” • How can the given land be used so as to get the maximum price? • What are the possible revenue drivers for the client? • What are the pros and cons of various options

Sell/Rent the land

Interview transcript (After diagnosis) Offline search

Advertisement in newspaper, hoardings

Buyer/Renter

Online search

Put on online portal like 99 acres, housing, magicbricks

Price/ Rent Determination

Land Value

Nearby property prices, NPV of total rental

Residential

Willinness to stay next to metro will be low

Office/Public (Schools)

Noise, commotion, safety etc. will lead to low willingness

Commercial

Malls- High inflow/outflow of people during the day

Parks

Jogging track, children/amusement park, OAT for movie/play

Parking

Charge for parking (continuous income source)

Revenue Sources Buildings Develop the Land Open Spaces

After identifying malls as the best revenue source, how will you ensure that people spend a lot in the mall? • Advertise about the latest offers in the metro • Passage to go out is through a winding route inside the mall • Enable shoppers to use the same card to make purchases & metro ticket booking • Offer schemes of free travel on purchase of certain amount


Client should develop the land by making commercial shopping complexes/ malls Push & pull strategy can be applied simultaneously to increase the expenditure per customer

Interview Summary This case tests whether the candidate can come up with very basic uses of a product. Land could not just be developed, but also sold or rented. It’s important to evaluate all options rather than just saying we can build houses on it. Once, developing the land has been identified, breaking it down again helps in further evaluation.

Observations/tips/Suggestions • • •

Clarify the regulatory constraints of a land parcel near metro Understand the clients capabilities and expertise. If he is a developer, then he can build the mall and then rent out the shops. Once the possible option has been identified, further drilling down into how to make the best use of it is recommended- So, try and provide how to extract maximum out of a mall


2016-17

100

Unconventional Case - Shahrukh Khan’s Net Worth SRK feels that his acting career is nearly over. He has a net worth of $100 million and thinks that it may not be enough for his kids. Suggest ways for him to increase his net worth Interviewee Notes

Case Facts

• Opportunity for blue-sky type brainstorming • Follow-up question: Choose one idea worth investing and develop a 30-second elevator pitch to convince SRK to invest in it

• None

Approach/ Framework Increase SRK’s net worth

Non-film

Film/TV

Produce more movies

Launch music record label

Acting school

Host more TV shows

Invest in sports team

Real estate investment

Branded products

Clothing

Accessories

Others

Personal grooming


Even during brainstorming, try to bring some sort of structure; will be appreciated Be prepared for the case to go in any direction If asked to prepare a pitch, take some time to think, form a structure putting together all the main points

Interview Summary The candidate came up with a number of options based on existing knowledge, and then structured them as best as possible. In the follow-up question, demonstrated her ability to put together all the facts and come up with a coherent pitch

Observations/Tips/Suggestions The candidate came up with a lot of ideas based on existing investments done by movie actors. She could have explored further to come up with unconventional ideas such as angel investing etc.


2016-17

101

Unconventional Case - Inventory Management in a Milk Company A milk company is considering a proposal for improving its operations management. As of now, the company has a three day inventory cycle i.e. it places an order once in three days. It is planning to shift to a one day inventory cycle. You are required to analyze the implications of this proposal on the business’ profits and operations management. Interviewee Notes

Case Facts

• The product is a perishable commodity implying that the storage period needs to be optimal • The reduction in inventory clyce days will have an impact on the business’ costs (inventory management) • The operations need to be optimized – balance stock outs and spoilage

• The company is in the business of selling milk • It currently follows a 3 day inventory cycle • It is planning to reduce that to 1 day • The objective is to improve operational efficiency, while analyzing impact on profits

Approach/ Framework Changing the inventory cycle

The ordering costs will increase due to increase in # of trips

Handling costs

Ordering costs

Transport

Utilities e.g. telephone

Cost per truck trip

# of truck trips

The variable handling costs may decrease

Procurement costs

Utilities e.g. electricity

Price per packet

Space (rent)

# of packets

Staff

The volume discounts may reduce, impacting price per packet

Recommendations •

The milk company should consider switching to a one-day inventory cycle if the pros in terms of reduction in spoilage and inventory storage outweigh the cons of reduction in volume discounts and stock-outs.

Interview Summary The candidate did a good job in laying out the framework. It covers all vital aspects of inventory management – ordering costs, handling costs and actual costs of procuring the product. The impact of changing the inventory cycle will can be analyzed by focusing on the mentioned three types of costs, thereby ensuring that the framework is mutually exclusive and collectively exhaustive. The candidate will analyze whether the various costs would increase, decrease or remain unchanged as a result of the new proposal.


2016-17

102

Unconventional Case - English Music Magazine An English Music channel wants to launch an English Music magazine in India. Analyze the viability of this venture. Interviewee Notes

Case Facts

• Guesstimate- can use the current user base as a benchmark • Population- Metro and Tier II- Age Groups- Interested Population • Target area is niche, no major competitors • Good content is very important for this product • Initial pricing can be high to add premium feel • Initially outsource manufacturing to test the waters

• Client not looking for immediate profits • The Music Channel well established • The audience is niche but loyal

Approach/ Framework New Market Entry


Product

Segments


Needs

Available Products

Profiling


Company

Product Offerings

Industry


Vision

Goals Size & Growth Objectives


Entering Strategy?


SWOT Analysis



Market Share


No

Start from Scratch

Acquisition

Joint Venture

Recommendations The product should be launched considering the synergies with the existing services. But a full fledged launch should be avoided as the acceptance of such a product is not known beforehand

Interview Summary While the candidate covered all the relevant points related to the launch, they sought very little information from the interviewer. They could have asked about the current user base to get an idea about the popularity of the channel. They also did not follow a very structured approach to the solution. The focus of the interview was more on the Launch Strategy portion. The interviewer wanted to know the aspects the client should keep in mind while designing the content, the marketing, pricing and distribution strategies


2016-17

103

Unconventional Case - Entry of Home Furniture Maker A traditional home furniture maker wants to enter into office space. Should they enter or not? Interviewee Notes

Case Facts

• Can use Porter’s for analysing the industry • Are the two markets too different? • Target customers different in the markets • The value proposition will have to be different • Need to conduct extensive market research before attempting to launch the new products

• Currently offering dinner tables, sofas and beds • Client catering to low-end of the market • Good hold in the low-end segment • Manufacturing processes not automated, carpenters produce the furniture in workshops • Market leader in the low-end segment • Office furniture a $500 mn industry in India

Approach/ Framework New Market Entry


Product

Segments


Needs

Available Products

Profiling


Company

Product Offerings

Industry


Vision

Goals Size & Growth Objectives


Entering Strategy?


SWOT Analysis



Market Share


No

Start from Scratch

Acquisition

Joint Venture

Recommendations In the current market, the client is offering low cost products, which might not be of very high quality. To enter into office space, quality will be the biggest concern. Therefore, they should first expand in their current market by targeting other segments and then look towards other markets.

Interview Summary The candidate was quite exhaustive in covering all the aspects relevant to the case.


2016-17

104

Unconventional Case - Surviving the Ad-blockers An advertising company wants to avoid evident threat from ad-blockers. Help them out! Interviewee Notes

Case Facts

• Figure out why users use ad blockers. Why didn’t they use them earlier? • Focus on the core competencies of the company. • Identify other areas where the company can foray into, using its core competencies.

• The company has search as a core offering and advertising is its major source of income. • The company has lost a significant amount of money due to the rise in the use of ad-blockers. • It had to pay billions to the ad blocking companies to get the ads whitelisted. • But this has resulted in more ad blocking companies coming into the picture. • The company can foray into new businesses while the ad blockers slowly eat away the revenues – so that it can still be alive. • The company’s core competency is advertising, huge IT infrastructure and tech-savvy employees are the asset to the company. • It has the history of setting up standards in the industry – both performance-wise and technologywise.

Approach/ Framework Surviving the Ad-blockers

Reasons for Using

Ads Started Annoying People

New Businesses

Build Platforms using Core Competencies

They get into the way in the User Experience

Waiting Times

Spam

Build the go-to Adblocker and Dominate AdBlocker Market

This may look conflicting, but promises the user that only irrelevant ads are blocked.

Setting Up New Ad Standards Create Ads that Don’t interfere with the UX Create Ads that the Users don’t mind seeing

Recommendations •

Create ads that don’t interfere with the UX, and at the same time build platforms using the core competencies to have a backup.

Interview Summary The candidate did a good job in laying out the framework. Through her preliminary questions about the company, its core competencies, revenues and latest happenings she was able to correctly understand the company’s problem. After thoroughly understanding what the company can, and how its actions may be perceived, the candidate recommended an ideal recommendation.


2016-17

105

Unconventional Case - Testing a New Feature Your client is a tech company that wants to launch a new feature into market. It wants to get it right the first time. Please help! Interviewee Notes

Case Facts

• Focus on the traffic of the website. • Also note that the company has tried introducing a feature earlier and lost 40% of its visitors. • It is really important for the company to get this feature right, the first time. • So it makes sense to test out the feature on a representative set of visitors to minimize the risk, and if successful can be rolled out to everyone.

• The company has a recipe search engine. • It wants to launch a new feature of buying ingredients directly from the search result. • It has previously done such a feature addition attempt and lost 40% of the visitors. • The current feature is really important to the company as it would open the avenue for revenues to the company. • The company estimates that this feature, if worked the first time would get 20% more visitors, and if failed, 50% of the visitors might leave the site. • The company’s search engine currently has a traffic of million users per day. • The company has another version of the same feature as a backup if the first one fails.

Approach/ Framework

Testing a New Feature

Usability Testing

Feedback

Analytics

A/B Testing

Very Tedious

Customers Won’t Like Writing a Lot

In-page Analytics to Figure out Behaviour

Testing Two Versions on Two different Representative Populations

Might Vary with Individual

Skewed or Non-Serious Feedback is Possible

But No In-depth Analysis Possible in Case of Failures

Can be Used if Sufficient Customers are Available

Recommendations •

Do a series of A/B tests to figure out what the customers like and what they don’t. Over time, a strong feature could be developed minimizing the risk of losing out visitors.

Interview Summary The candidate did a good job in laying out the framework. Through her preliminary questions about the company, its previous attempts, the feature details & the stakes at place, the candidate understood the company’s position and figured out that given the huge traffic and ready availability of two versions, A/B testing is the way to go since it is a very powerful tool that throws in ample insights.


2016-17

106

Unconventional Case - Understanding the Customer An e-tailing company wants to understand the customer & recommend products, like Amazon does. Interviewee Notes • Recommender Systems: Collaborative, ContentBased & Hybrid. • Collaborative systems are based on what similar users do. Not scalable & have long Cold start periods. • Cold start is a phenomena in recommender systems, when the system behaves abnormally due to skewness in the data. Over time, this ideally subsides. • Content-based systems are based on what the user did. • Hybrid is both contentbased & collaborative. • Many companies use Hybrid • If the company is already established, figure out a way to use the existing collected data to avoid cold start. • Understanding = contextaware

Case Facts • The company is an e-retailer. • The company has started its operations back in 2010. • It didn’t realize the importance of recommender systems back then, so didn’t collect any data, except order data and the user profile data. • The website is content-rich, with almost a million product listings. • There are million users using the site. • A user hardly reviews / rates 10-20 product listings

Approach/ Framework Understanding the Customer Recommender System type Collaborative Filtering

Collect Data and Analyze User Behaviour

Content-based Filtering

Issues Cold Start

Explicit Implicit

Not Scalable

Match with User’s Past Behavior Ideal for Content Rich Platforms

Device a Data Collection Plan

Started Operations

Hybrid

More effective

Collected Data Earlier

Pre-process Data to Align with the New Collection Plan

Yet to Start Operations

No Data Collected

Deal with the Cold Start

Extract Usable Data from Server Logs

Recommendations •

Build a context-aware hybrid recommendation system with the data extracted from server logs for better accuracy & to avoid cold start.

Interview Summary The candidate did a good job in laying out the framework. Through her preliminary questions about the company and it’s existing data collection plan, she was able to correctly identify the company’s requirement. To address the issue here, the candidate came up with a framework where she has to decide on the recommender system type first, and then recommend a data collection plan accordingly. Also, to make the system relevant at the earliest, various possibilities of data extraction have been examined.


2016-17

107

Guesstimate To estimate the number of wizard hats in London Interviewee Notes

Case Facts

• This question stemmed from a discussion of the candidate’s hobbies (reading fantasy fiction) • Asked questions about situation (real world/fantasy); was told to assume whatever she wanted

• None

Approach/ Framework Number of wizard hats in London

Institutions

Individuals

Adults

Children Schools

Readers

Fantasy fiction lovers

Drama institutions

Nonreaders

Nonfantasy lovers


Take some time to create the structure; take interviewer through it, then possibly put numbers Know some facts; make reasonable assumptions

Interview Summary The candidate brought structure to an out-of-the-box question. By categorizing the hats into individuals and institutions, she showed ability to think beyond the obvious.

Observations/Tips/Suggestions Candidates should not get flustered when faced with unconventional questions. It is ok to take some time to work through the question. Take the interviewer through your thought process at every stage


2016-17

108

Guesstimate To find the number of books in IIM Ahmedabad Interviewee Notes

Case Facts

• Clarify type of books (here, notebooks, casemats, magazines excluded) • Number of books with professors (10 areas, 10 profs each, average 5 years experience, 5 books added per year) • Library: 3 floors, 10 racks per floor, 5 shelves per rack, 30 books per shelf)

• None

Approach/ Framework Number of books

Individual’s textbooks

Library

Professors

Students

PGP-1

Novels

PGP-2

FPM

Others


Should first create structure, then put numbers to it Make reasonable assumptions, clarify with interviewers at each stage Be prepared to justify your assumptions at each stage

Interview Summary The candidate clarified the scope of the case; did not make assumptions. Where she did not know, she made reasonable assumptions which she could justify.

Observations/Tips/Suggestions Should be careful with numbers; silly calculation mistakes could be harmful. Case could have more layers, by including casemats etc


2016-17

109

Case Interview Assessment Sheet

Some tips for your interviews. You can also use this sheet for feedback and as a checklist during your case preparation interviews: · Did you repeat the question? (It is important to solve the right question, that’s the first step).Did you clarify the client’s objective(s)(there could be more than one) ? · Are you writing down the important details legibly? · Are you asking the right clarifying questions (about the client, company, industry, product etc.) at the right time? · Are you being creative and conversing while taking hints at the right time? (Remember, it should not be a monologue) · Are you being MECE and structured in your approach?

· Are you getting bogged down by numbers/details or using them to your advantage? · Are you thinking out aloud without being too verbose? · Are you ready to go back and correct a mistake you did? · Are you summarizing it all in the end?


2016-17

110

FULL CASE Business Expansion – Telecom Video Project


Business Expansion – Telecom Video Project You have been approached by the Chief strategy officer (CSO) of a telecommunications service provider for advice on options to improve the economics and performance of it’s recently introduced video strategy Interviewee Notes

Case Facts

• Focus in on client’s options to quickly gain scale in video services • Analyze the benefits and deficiencies associated with each option • Appropriate the value of a video subscriber, along with the incremental value of a triple play subscriber • What is the value of scale in video to the client?

• Business Situation • Our client is an integrated wireline and wireless telecommunications services provider that recently began offering wireline video services in a portion of its geographic footprint in response to competitive pressure from cable operators offering triple-play bundles with video, broadband and voice services. • Thus far, complexity, technology and cost issues have limited the rollout and adoption of this service and reduced our clients ability to effectively counter the competitive threat. Some terms key to understanding the client are as follows: • Video offerings: Our client currently offers video services across its wireline footprint in partnership with a national satellite operator (DBS); the satellite operator is the largest source of new subscribers to our client’s wireline geography. • Buildout costs: Cost of putting in place the delivery infrastructure that must be incurred before service is delivered to that neighborhood. • Programming costs: Cost of procuring and packaging content. • Installation costs: The cost to connect a subscriber to the delivery infrastructure. • ARPU: Average Revenue Per Unit • Churn: Loss of customers as they switch to other service providers

Miscellaneous Information Client’s subscribers

50 Million

Buildout costs

$1500/household

Programming cost

25% above competition

Installation cost

$500/new subscriber

Video ARPU

$75/month

Triple play ARPU

$120/month

% of new video subscribers who take triple play 90% % of triple play customers who churn relative to voice only 50% less

Market Information US TV Market Total US Households Total US TV Households Total US MVPD Subscribers1 (HH) MVPD Penetration in TV HHs Total Triple play Subscribers

116.2 M 111.2 M 98.0 M 88% 9.7 M

Client Video Services Client video buildout households passed Client total video subscriber monthly churn rate2 Client Consumer access lines Annual % change in client Consumer access lines

31.3 M 2.75% 36.4 M -4%

Competitor programming cost per subscriber/month = $20.63 1. MVPD = Multichannel video programming distributors; MVPD subscribers pay a monthly fee to a MVPD provider (e.g., cable company, satellite company) 2. Video subscriber monthly churn = Total disconnects for the month / average subscribers for the month


2016-17

112

Business Expansion – Telecom Video Project : Interview Transcripts What are your client’s options to quickly gain scale in video services?

Sounds good. Can you please walk us through your calculations?

The client can look out for both organic or inorganic growth options, with preference to inorganic due to the desire to acquire scale rapidly

 • • •  • •  • • •

Can you please elaborate on both these options? Sure. By Inorganic, I meant to acquire current satellite distribution partner, cable operator (e.g. Comcast), or disruptive competitor (e.g., Vudu, Veoh, etc.). While the organic strategy can involve Increasing the speed of video build out/rollout schedule for client video offering and/or offer significantly lower promotional pricing for video services to increase penetration in available markets

What are the benefits and deficiencies associated with each option? Please detail them out.  Acquire current satellite distribution partner: • Benefits: provides a large number subscribers quickly, national footprint, expanded footprint to new geographies and savings on cost of installation • Deficiencies: price, potential loss of distribution from other telcos, integration challenges (not wireline)  Acquire cable operator: • Benefits: expands footprint to new geographies, wireline video offer • Deficiencies: price, potential mismatch in geographic coverage, savings on cost of installation  Acquire disruptive competitor: • Benefits: lower price, national coverage, rapid roll-out • Deficiencies: may not be considered a true substitute to traditional video services, may require higher speed connections  Rollout owned service faster: • Benefits: lower operating costs due to one network / optimal network design • Deficiencies: time to market, proof of success at scale  Lower pricing: • Benefits: increase penetration in target markets, rapid implementation (only in areas where service currently offered) • Deficiencies: margin implications, devaluing service in customer perception, risk of churn when prices rise, competitive response

•

Contribution per Month Monthly Revenue = $75 Monthly Service programming cost = $20*1.25 = $25 (Pull 25% from Misc. Info table) Contribution per subscriber/month = $75-$25=$50 Expected Lifetime Annual Churn Rate=2.75%*12=33% Expected life in years=1/33%=3 years Lifetime Value Installation Cost = $500 Contribution/year = $50*12 Cost of Capital: NOT PROVIDED – Should make an assumption e.g. may choose 10% for easier calculations DCF = -$500 + $600 + $600/1.1 + ($600/1.1*1.1) = -$500 + $600 + $545 + $495 = $1,140

Makes sense, on another note additional assumptions could have been made regarding other costs not provided (e.g., cost of sales, cost of care, etc.) that would alter the lifetime value calculation. But, we are good with your explanation. So, moving on can you try figuring out the incremental value of a triple play subscriber?  • • •  • •

Incremental life of triple play customers Annual churn rate of triple play customers = 2.75%*.5*12=16.5% Expected life in years = 1/16.5% = 6 years Incremental life of triple play customers = 6 years – 3 years = 3 years Incremental value due to triple play Incremental lifetime value = (600/1.1^3)+(600/1.1^4)+(600/1.1^5) = $450 + $410 + $373 = $1,233 Adjust for 90% triple play = 90% * 1,233 = $1,110

Any thing else, that you may considered as incremental value? The value drivers related to scale can be summarized as : • Increased bargaining power with video programmers • Retention benefits from triple play subscriptions leading to fewer access line losses • Faster realization of video revenue streams Any thing else, that you may considered as incremental value? As a part of our implementation strategy, I would like to assess our technical knowledge, ability to attract personnel, availability of capital and grid accessibility. Is there anything else I should consider?

On another note, getting people to sign up for triple play if they currently have nothing might be even more expensive than converting the households currently with MVPD.

Please try quantifying some of these drivers.

That was a good take. Moving on, how would you estimate the value of a video subscriber?

Value of scale can be estimated as follows: • Programming cost benefit: $5 * 12 months = $60 per subscriber per year [$5 is difference between estimated $25 programming cost and $20 cost for competition] • Retention benefits from fewer access line/broadband losses: $45*12 = $540/retained subscriber/year [$45 is the difference between the $120 and $75/month ARPU]

We can do it by lifetime value analysis. I’ll start it by calculating contribution per month per subscriber and the corresponding expected lifetime


2016-17

113

MINI CASE Unconventional Case – Strategic fit/Merger feasibility dilemma


Unconventional Case – Strategic fit/Merger feasibility dilemma Our client owns one of the largest global card payments networks. As of 2007, the consumer card payments business had reached maturity in the US and Europe, with stagnation in annual revenue growth. The client has identified a small start-up, currently a provider of payment service in the e-commerce industry, as a potential acquisition target. You have been called in to evaluate the potential acquisition, and provide guidance on the integration of these two companies, should the merger occur. Interviewee Notes

Case Facts

• How should a large organization such as our client evaluate this acquisition opportunity? • What data would you need and what analyses would you conduct to develop a recommendation? • The client does not have a track record of acquiring and successfully integrating small, innovative companies. • What cultural differences will the client have to overcome? How would you advise the client to overcome them?

• E-Commerce has been identified as a key growth driver, as the industry has grown at 20% and is expected to grow at a 15% CAGR over next 5 years. •PayPal, Amazon 1-Click and Google Checkout dominate the industry, controlling over 50% of the market share. Our client’s Senior Executives feel that they need a capability in E-Commerce, an area where they have historically lagged. •The small start-up identified as the potential acquisition target has an innovative business model and has grown rapidly. It is a provider of micro payments for social networks, which is used to pay small amounts to publishers of online content and for downloadable media. •Industry leaders such as PayPal find it inefficient to manage these small transactions and charge disproportionately high fees, making traditional online payments unfeasible.

Approach/Framework •Data Requirements •Some data that can be used to structure analyses includes: •information about the size and history of the target; growth rate for the target •information about the leadership and culture of the target •financials about the level of commitment and level of gain, and whether this could even "move the needle" from a growth perspective Assess Strategic Fit Business Elements Revenue & Costs

Market Size & Growth

Synergies Qualitative aspects (strategic fit)

External

Growth Options in core payments business

Customers Analysis

Same/ Similar

Competitive Reaction

Different/ New

Recommended Thought Process Fit with existing business: Can a company focused on security and reliability successfully integrate with a start-up focused on peer-to-peer payments, which are notorious for fraud? How similar are the business models (i.e. both generate revenues as a percentage of transaction amounts)? • Overall business case: Growth in target revenues, possible synergies in external settlements, options for cross-selling with existing business, obtaining deep consumer behavior insights in a segment of current “non-users,” organizational synergies. • Qualitative aspects: Can the entrepreneurial spirit of a start-up be combined with the client’s behemoth organizational bureaucracy? What will be the keys to success? (May include holding the company as a separate unit, or giving it complete autonomy for a finite period) • Customer analysis: Will the combined company serve more customers, or the same customers in different ways? The target’s customers are typically younger, but may be in households with the client’s existing customers. • Technology considerations: Is the new technology for micro-payment clearing compatible with the Client’s payment systems, and can they be settled profitably on the Client’s network given the small size of the transactions (and, hence, small per-transaction revenues)? (C) Consult Club, IIM Ahmedabad

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Appendix 1 – Framework Glossary A glossary of the most popular frameworks used in case interviews Business Situation Framework (3C’s or 3C & P) Used for assessing the firm’s current position, or for evaluating the market for a new product, market entry, growth etc. Customers

What are the market segments, what is the consumer’s behaviour, their values, demographics etc. Identifying target customers.

Competition

What is the size of the market, market share, how are competitors performing, their likely behaviour in the future etc.

Company

What are the firm’s goals, and what strategy has it employed to achieve them? What are its competencies?

Product

What is the nature of the firm’s product or service? Does it meet the customers’ requirements? Substitutes and complements?

Marketing Mix Framework (4P’s & 7P’s) Used for identifying the value stemming from a product’s offering in the market by combining various factors. Product

What value does the product offer the client? What are its attributes? How does it measure up when compared with competitors?

Place

What is the distribution channel for the product (retail, wholesale, online etc)? Are the locations of the client’s outlets appropriate?

Promotion

What marketing message should the client deliver? Are discounts, coupons, special offers etc. relevant for the product or service?

Price

How much is the client charging? How price sensitive are the customers, and how are competitors pricing similar products?

For analysing a service instead of a product, the mix can be expanded to include the following 3P’s. Physical Evi.

Is the service intangible? What cues does the customer have to understand the benefit of the service?

People

Who are the people delivering the service (ex. waiters, cooks, receptionists for a restaurant)? What are their capabilities?

Process

What are the protocols in place to ensure quality in the service? Processes convey the image of dependability for a service.

Profitability Framework (Profit Equation) The good old “Profits = Revenues – Costs” framework, used for identifying factors influencing profits and profitability. Revenues

Average Price × No. of Units Sold | Capacity × Occupancy % × Average Price| No. of Customers × Frequency × Ticket Size etc.

Costs

Can be classified into fixed and variable, and then analysed further. (Some long-term variable costs can be fixed in the short term)


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Appendix 1 – Framework Glossary Ctd. A glossary of the most popular frameworks used in case interviews Value Chain Analysis This framework lays down the series of activities that the firm employs to deliver a good or service Inbound Logistics

The process of sourcing and warehousing raw materials, and transporting them to where they are needed.

Operations

The core function of the company where the bulk of value addition happens (varies from manufacturing to data processing).

Outbound Logistics

The delivery of the product or service to the customer. Used to analyse distribution channels (retail/wholesale/agents etc.).

Marketing and Sales

Activities used to promote the product. Can include advertisement, promotional offers and also market research.

Servicing

Any of the ancillary services that assist in the main value chain, including customer care, and after sales services.

Mergers & Acquisitions Framework This framework can be used to analyse the viability of a merger with a target firm Stand-alone Value

Value of target firm independent of client’s firm. Consider tangible and intangible factors (ex. revenues and brand value).

Synergy

How do the capabilities of both target and client’s firm synergise together?

Other Factors

Literally, just a bucket for other factors. (Read: regulatory hurdles, culture clashes etc.)

Smaller Frameworks These frameworks work well within larger structures, useful for when you’re drilling down into a specific bucket of analysis Internal/External

What factors affect the scenario within the company, and from the environment (market conditions, competition etc.)

Qualitative/Quantitative

What factors can you quantify (revenues, costs), and what factors do you need to describe (marketing strategies)?

Costs/Benefits

What are the advantages and disadvantages; pros and cons that must be evaluated before making a recommendation?


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Appendix 1 – Framework Glossary Ctd. A glossary of the most popular frameworks used in case interviews McKinsey’s 7S Framework The 7S Framework is useful for analysing the alignment of a firm to the achievement of its goals. These are the “3 Hard S’s” Strategy

How does the firm intend to achieve its goals? What is its unique selling proposition? How does the firm create value?

Structure

Organisation of departments within the firm (functional/divisional), structure of teams, and hierarchy. How do they coordinate?

Systems

What are the protocols in place? (Similar to ‘process’ for the 7P framework). How does the firm evaluate progress?

And the “4 Soft S’s” Shared Values

What are the firm’s values and culture? How strong are they, do they influence the employees, do they need to be reinforced?

Skills

What are the skills of the firm’s employees? Are there any gaps in the skills required? How are skills assessed and developed?

Style

What style of management or leadership has the firm adopted? Is it appropriate in the context? Do teams cooperate or compete?

Staff

What are the positions within the firm? What positions need to be filled?

Porter’s Five Forces

BCG’s Growth Share Matrix

Bargaining Power of Suppliers

Level of Rivalry within Industry

Market Growth

Threat of New Entrants

Bargaining Power of Consumers

Threat of Substitutes

Question Marks

Star Performers

Dogs

Cash Cows

Market Share (C) Consult Club, IIM Ahmedabad

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Appendix 2 – Datasheets A compilation of data that will be useful for solving guesstimates. Most of these numbers are approximations, but they should be good enough for a guesstimate scenario. Table 1: Population Distribution in India (Gender and Urban-Rural) Total Population

Table 2: Life Expectancy and Population Growth Statistics

1200

Overall Expectancy

69 Years

Males

620

Male Expectancy

67 Years

Females

580

Female Expectancy

73 Years

Sex Ratio

0.95*

Birth Rate

22* 7.5*

Urban Population

350 (30%)

Death Rate

Rural Population

850 (70%)

Pop. Growth Rate

Figures are in millions * 950 females for 1000 males

Urban

Rural

5

5

5

75,000

1,00,000

50,000

-

30%

20%

Expenses (Food)

50%

45%

55%

Expenses (Travel)

10%

10%

10%

Expenses (Others)

40%

45%

35%

Annual Household Income % Savings

Poverty: Approx. 25% of the population lives below the poverty line ($1.25 or ₹75 ) (C) Consult Club, IIM Ahmedabad

1.25%

Population (%)

0-14 Years

350 (30%)

15-24 Years

250 (20%)

25-34 Years

200 (15%)

35-44 Years

150 (10%)

45-54 Years

150 (10%)

55+ Years

150 (10%)

Figures are in millions Note: Median age for India is 25 (50% of Indians are below 25, 65% are below 35)

Table 5: Class Distribution by Annual Household Income

India

Size of Household

Age Spread

* Figures are for every 1000 individuals

Table 4: Income and Expenditure Data Head

Table 3: Age-Wise Break-up of Population

Annual Income of Household

Percentage

Low Income (Household Income < 45,000)

20%

Middle Income (45,000 to 1,80,000)

60%

High Income (Household Income> 1,80,000)

20%

Table 6: Demographics by Religion Religion

Hindu

Muslim

Christian

Others

80%

15%

2%

3%

Population 2016-17

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Appendix 2 – Datasheets Ctd. A compilation of data that will be useful for solving guesstimates. Most of these numbers are approximations, but they should be good enough for a guesstimate scenario. Table 7: Population Spread of Metros City

Population

1. Mumbai

12.5

City

Table 8: Sector-wise Employment Distribution Population

Sector

India (%)

Urban (%)

Rural (%)

6. Ahmedabad

6

Agriculture

40%

5%

60%

5

Industries

10%

20%

5%

Services

50%

75%

35%

2. Delhi

11

7. Kolkata

3. Bangalore

8.5

8. Surat

4.5

4. Hyderabad

7

9. Pune

3

5. Chennai

7

10. Jaipur

3

Figures are in millions  Population of top 10 Cities: 66 Million  Population of next 50 Cities: 66 Million  Population of next 100 Cities: 45 Million


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Appendix 3 – Sample Worksheets (Case 1: Radio Taxi)

Client is a big congl. trying to start a radio taxi business. Identify # of vehicles to start with.

Location: Mumbai

No. rides/year 1.8 0.85 0.1 2.75 crore rides No. rides/taxi/year 9 × 360 = 3240

2 crore ppl

50 lac households

8k or less

30% (not targets)

8k – 16k

40% - 20 lac – 20 lac people

16k +

30% - 15 lac households

Office – goers – 1.80 crore rides Misc. travellers – 85 lac rides Night traveller (5%) – 2.5 lac (households)

80,000 x 12 ≈ 10 lac No. taxis needed 2.75 crores / 3240 ≈ 8500 taxis

10 hours of operation 30% idle time 70% active time =>7 hours/day 45 mins/ride => 9 rides/taxi/day


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Appendix 3 – Sample Worksheets (Case 2: Watch Maker)

Client is a watch brand wishing to move into the online space. Help him with an industry analysis. •Selling watches online luxury •2 segments 24% mid-segment 26% •17 stores across 10 cities •Little sales from Amazon and Flipkart

Luxury – 20% of revenues – 30% bottom-line Mid-Range – 20% of revenues – 30% bottom-line E-Commerce Market Arya Sansa Mid-Range (75% of mkt) 30% 18% Both have online stores X Y Z 29% 26% 18% X has an online store

Customer Exp.

Luxury (25% of mkt)

Reach Domain name Google SEO

Look & Feel Products Sold


Tie-up with Flipkart

Tie-up with store for delivery

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Appendix 3 – Sample Worksheets (Case 3: Agri. Equipment)

Large agri. equip. manufacturer: line of tractors is losing money. Identify the reason. Profits Revenues Price

Costs

No. of Tractors

Supply

Distribution

R&D Labour Utilities Capital Raw Materials Sourcing

× × ×

×

Demand Competitor (substitutes) Quality Price

Service Operating costs The client is supplying tractors of such high quality as is not required by his customers.


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Appendix 4 – Sample Evaluation Metrics A breakup of what firms look for when they evaluate a case interview. To be taken with a pinch of salt. Sample 5 point grading scale Preliminary questions and recap: 1. Candidate does not clarify problem statement (no recap of initial information) 2. Candidate clarifies with problem statement with too much detail (no prioritizing of important information 3. Candidate recaps the problem statement but without sufficient structure; candidate asks for detailed information too early 4. Candidate recaps the problem statement and covers key points but does not display comprehensive understanding of client 5. Candidate provides a concise and structured recap of the problem statement, and asks a couple of relevant clarifying questions Breakup of the Interview • Preliminary questions and recap • Laying out an appropriate framework for structuring the analysis • Aptitude for quantitative analysis • Aptitude for creativity (in analysis and recommending solutions) • Summarizing the case • Extent of overall structured response • Aptitude for problem solving • Communication skills Each of these metrics may be evaluated on a five point scale as above. Among other things, the candidate will also be evaluated on the solutions/recommendations for the problem.


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IIMA Casebook 2016-17 (3rd Edition).PDF

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