Strategy And Consulting

IIFT Case Book 2020-2021 Edition

Socrates, The Consulting and Strategy Club, IIFT

Case Book Index Serial Number (#)

Case Book Topic

Page Number (#)

01

Case Interview Themes

3

02

Consulting Firms Overview

4

03

Interview Question Flow

5

04

Case Frameworks

6

05

Solved Cases

12

06

Practice Cases

43

07

Sample Cases (IIM Ahmedabad)

54

Case Interview Themes Profitability The problem could be either falling revenues, rising costs of both. Therefore, the challenge here is to identify potential sources of profit decline and ways to improve profitability

Market Entry/Sizing

Growth Strategy The problem deals with either increasing revenues or market share. It could be either for a product

3

category, a business unit, or the firm as a whole

Industry Assessment Analysis of the health and attractiveness of industry to advise client’s decision

The problem deals with either Market Development (existing product in a new market) or Market diversification (new

2

1

products in a new market)

4

5

Acquisition/Sale The problem deals with analysis of target companies for vertical integration (acquisition of upstream or downstream suppliers) or horizontal integration (direct competitors)

Interview Question Flow 01 – ABOUT YOURSELF

What have you done?

02 – WHY CONSULTING

Understanding of a firm’s culture, functional expertise and working style

03 – ABOUT A TIME WHEN

•

Who/where you are now?

What you are interested in going forward

Highlight experiences you want to gain and value you bring to the table

?•

to demonstrate Past instances leadership ability, drive – taking initiative, and professionalism Challenge->Action->Result

Consulting Firms Overview 01. Strategy Consulting • Deals with broad problem statements at corporate level viz. long-term vision, portfolio of businesses, market entry, pricing etc. • Client SPOC: CEO, President of a division of the company, and occasionally the board of directors • Firms: McKinsey & Co, BCG, Bain & Co, Ronald Berger

01

03. Implementation Consulting

03 • Deals with the implementation part of the problem i.e. they determine how to do it and facilitate in implementation • Client SPOC: Functional Heads, VP of a division, Business executives • Firms: Big 4 consultants, IBM, Capgemini, Accenture

02

02. Operations Consulting • Deals with problem statements at functional level viz. throughput of a plant, reducing costs, increasing productivity etc. • Client SPOC: Functional Heads, VP of a division • Firms: McKinsey & Co, BCG, Bain & Co, Big 4 consultants

Frameworks

Frameworks Growth Strategy Overview

Client’s revenue (or “top-line” in Income Statement) has declined or stopped growing You need to recommend ways to increase revenue Cross-selling

Sample Framework Volume per customer

Loyalty programs

Price

Bulk discounts

Revenue Growth

Revenue per customer

New geographies

New markets

New customer segments New product launches

Number of Customers Improve marketing Existing markets

Improve access/distribution

Frameworks Market Entry (New Product) Client is aiming to introduce a new product in a new market or a new product in an existing market

Overview

Sample Framework New Product Introduction

Establish Value Chain

Initial Investment

Internal resources

Debt financing

Equity financing

Production challenges

Distribution challenges

Profit and Breakeven point

Marketing challenges

Units sold

Price/unit

Variable cost/unit

Fixed cost

Frameworks Market Entry (New Market) Overview

Client is aiming to enter a new market. Analyze if it aligns with the company’s overall objectives Analyze the feasibility of market entry

Sample Framework

Customer – New Market

Needs

Product

Customer Expectation

Segment Profiling

Industry

Product offerings

Competitor and Share

Resources (Capital, Technology, Labour)

SWOT

Strengths and Strategic Assets

Barrier to entry/exit

Market Share

Estimate of market share

Available Products

Size and Growth Client’s target market share

Company

Gap between the above

Frameworks Industry Analysis Overview

Client is aiming to enter a new industry and would like to know about the complexities of making such entry Analyze the forces at work in the overall industry using

Sample Framework Given industry

Objective of analysis

Entry into the market

Decision on expansion/ growth

Opportunity Identification

Need-gap

Synergies with existing business

Identify risks

Regulatory

Substitutes

Verdict on attractiveness

Entry/Exit Barriers

Current Macroeconomics

Frameworks Profitability (Cost Reduction) Client is aiming to increase profitability by reining in costs Identify various cost component and recommend how the firm can become more cost efficient

Overview Sample Framework Research and Development

Raw Material

Processing

Storage and Transportation

Sales and Distribution

Marketing

Customer Service

Equipment

Cost of raw material

Machinery

Inbound logistics

Sales Channels

Marketing Channels

Repairs

Human Capital

Cost of Finance

Contract and bulk deals

Factory rent

Quantity used

Labour wages

Substitutes

Capacity utilisation

Outbound logistics

Inventory costs

Sales Force Training

Strategy

Spare parts

Returns

Solved Cases

Case List Prompt: How many gallons of white house paint are sold in India every year?

Guesstimates THE "START BIG" APPROACH: It is advisable to start with the basic assumption that there are 1 billion people in India, perhaps half of them live in houses (or 500 million people). The average family size is about three people, so there would be 170 million houses in India. Let's add another 10-20 percent to that for second houses and houses used for other purposes besides residential. So there are about 200 million houses. If houses are painted every 10 years, on average (numbers are used as per convenience), then there are 20 million houses painted every year. Assuming that one gallon of paint covers 100 square feet of wall, and that the average house has 2,000 square feet of wall to cover, then each house needs 20 gallons of paint. So 400 million gallons of paint are sold per year (20 million houses x 20 gallons). (Note: If you want to be fancy, you can ask your interviewer whether you should include exterior and interior walls, double coating on walls as well!) If 80 percent of all houses are white, then 320 million gallons of white house paint are sold each year. (Ubiquitous questions fetch brownie points) THE "START SMALL" APPROACH: You could also start small, and take a town of 100,000 (about 1/10,000 of the population). If you use the same assumption that half the town lives in houses in groups of three, then there are 17,000 houses, plus another 10-20 percent, then there are really 20,000 houses to worry about. Painted every 10 years, 2000 houses are being painted in any given year. If each house has 2,000 square feet of wall, and each gallon of paint covers 100 square feet, then each house needs 20 gallons - and so 40,000 gallons of house paint are sold each year in your typical town. Your interviewer may then ask you how you would actually get that number, on the job, if necessary. Use your creativity - contacting major paint producers, primary research would be smart, or even conducting a small sample of the second calculation in a few representative towns is possible.

Case List Prompt: What is the size of the market for disposable diapers in India?

Guesstimates India’s Population: 1.3 Billion ~ 1B Because the population of India is young, a full 600 million of those inhabitants might be of child-bearing age. Half are women, so there are about 300 million Indian women of childbearing age. Now, the average family size in India is 3-5, so it might be 2 children, on average, per family. Let's say two-thirds of Indian women have children. That means that there are about 400 million children in India. How many of those kids are under the age of two? About a tenth, or 40 million. So there are at least 40 million possible consumers of disposable diapers. To summarize: 1 billion people x 60% childbearing age = 600,000,000 people 600,000,000 people x 1/2 are women = 300,000,000 women of childbearing age 300,000,000 women x 2/3 have children = 200,000,000 women with children 200,000,000 women x 2 children each = 400,000,000 children 400,000,000 children x 1/10 under age 2 = 40 million Final Answer= 1.3* 40 million ~ 52 Mil

Case List Prompt: How many promotional emails should a company send?

Guesstimates Questions to be asked from the interviewer :Type of Promotional email ? Which customer segment is targeted? Strength of CRM ? Form of Market ? Industry Competition? Assumptions: • • • •

Consider customers who have subscribed to e-mails. Information about promotional events will be sent only to customers who have used the services at least once. Email will inform customers about new and existing products or services. Assume 20% of the customers use 80% products, it is safe to assume they will be interested in the entire range and will be willing to use. So, Send more mails to them, around 10.

For regular users, the number of mails sent will be around 5-7 per month as it is less likely for them to go for only this particular range of products (Their interest may vary). For rare users, 4 mails will be sent per month (weekly) as they seldom use the company's products. Total number of Mails (per month per customer) will be the weighted average = 0.2*4 + 0.6*7 +0.2*10= 7 Alternate Solution: A survey can be conducted to ask the customers about the amount of information (on company’s products and services) they think should be provided and what should be the frequency of e-mails being sent to them.

Case List Prompt: Estimate the mobile phone sales in India for the next year

Guesstimates Choose family as a basic unit for estimation. Analyze the distribution among families depending upon their place of residence.

Indian Population (1.3B)

Urban (30%)

Towns (25%)

Has a Mobile (70%)

Assumptions and CalculationsMetropolitan : Family size of 4 consisting of 2 children and 2 parents. Adult in the metropolis changes a mobile phone every 4 years and a child changes it every 2.5 years.

Rural (70%)

Metropolitan (5%)

Has a Mobile (100%)

Suburban (10%)

Has a Mobile (70%)

Village (60%)

Has a Mobile (40%)

Suburban and Urban families: Family size of 5 consisting of 3 children and 2 parents. An Adult change a mobile phone every 6.5 years and a child changes it every 5 years. The probability of a person buying first phone is assumed to be 0.2. Rural families : Family size of 6 consisting of 4 children and 2 parents. The average adult buys the handset every 10 years and a child shall end up doing so in nearly 6 years. The probability of a person buying first phone is assumed to be 0.15.

Case List Prompt: Estimate the mobile phone sales in India for the next year

Hence the net expected sales of mobile phones in India next year is = 11.39 + 2.43 +6.08 + 2.11 = 22.01 cr

Guesstimates Urban Total Urban Population=(25/100*130)cr=32.5cr Total Adult Population=0.4*32.5=13cr Total Child Population=0.6*32.5=19.5cr Mobiles changed by adults in one year=1/6.5 * 13=2cr Mobiles changed by children in one year=1/5*19.5=3.9cr But only 70 % have mobile phones, So number of mobile phones sold = 5.9 * .7=4.13cr Remaining mobiles sold are those which are bought by people who have no mobile yet =0.2*32.5*.3 = 1.95cr Total mobile phone sales =4.13+1.95 =6.08cr

Metropolitan City Total Urban Population=(5/100*130)cr=6.5cr Total Adult Population=0.5 * 6.5=3.25cr Total Child Population= 0.5*6.5= 3.25cr Mobiles changed by adults in 1 year= .25 * 3.25 =.81cr Mobiles changed by children in 1 year= .40 * 3.25 = 1.30cr

Suburban Total Suburban Population=(10/100*130)cr=13cr Total Adult Population=0.4*13=5.2cr Total Child Population=0.6*13=7.8cr Mobiles changed by adults in one year=1/6.5 * 5.2=0.8cr Mobiles changed by children in one year =1/5*7.8=1.56cr but only 70 % have mobile phones.

Villages Total Village Population=(60/100*130)cr=78cr Total Adult Population=0.4*78=31.2cr Total Child Population=0.6*78=46.8cr Mobiles changed by adults in one year=1/10 * 31.2=3.12cr Mobiles changed by children in one year =1/6*46.8=7.8cr But only 40 % have mobile phones.

So, number of mobile phones sold = 2.36 * .7=1.65cr Remaining mobiles sold are those which are bought by people who have no mobile yet =0.2*13*.3 = .78cr Total mobile phone sales =1.65 + .78 =2.43cr

So number of mobile phones sold = 10.92 * .4= 4.37cr Remaining mobiles sold are those which are bought by people who have no mobile yet =0.15*78*.6 = 7.02cr Hence total mobile phone sales in villages =7.02 + 4.37 =11.39cr

Total mobile phone sales = 2.11cr

Case List Prompt: Your client is National Logistics; a large transportation and logistics company that delivers freight to all areas of North America. Over the last five years, the company has experienced rising costs due to increases in wages resulting from a shortage of truckers. The client is now looking to reduce operational costs in the business. How would you advise the client?

Market Sizing Interviewer’s guidance What is the client’s primary goal? National express is looking to boost profitability by any means Are other competitors facing the same issue? Yes, the entire transportation industry is feeling the wage pressure Does the client have a profitability target? No, the client just wants to improve profitability from their current state Are there other costs that have been influencing profitability? Yes, steadily rising fuel prices have also been hampering the company’s profits Is the company running at full capacity? Yes, the only thing limiting the company’s revenue growth is finding drivers to drive their trucks Has revenue also been in decline? No, revenue has been rising steadily over the last 5 years but is only capped by lack of drivers to fulfill deliveries Exhibit 1: Cost of Operation Financial Metrics Purchase Price

Standard Hybrid Truck Truck $100,000 $150,000

Maintenance / Yr.

$5,000

$8,000

Insurance / Yr.

$2,000

$3,000

Avg. Miles Driven / Yr.

60,000

60,000

10

20

MPG Vehicle Lifespan

10 Years

10 Years

*National Express pays an average $3.00 per gallon for fuel

Case List Prompt: Your client is National Logistics; a large transportation and logistics company that delivers freight to all areas of North America. Over the last five years, the company has experienced rising costs due to increases in wages resulting from a shortage of truckers. The client is now looking to reduce operational costs in the business. How would you advise the client?

Market Sizing Framework Guidance Profitability

Investments

Revenue:

• Buy new fuel-efficient trucks • Add energy saving technology

• Prices: Can we raise them? • Delivery Mix: Prioritize more expensive freight? • Use double trailers per delivery instead of single trailers Costs: • Fuel: What are fuel prices? Can we hedge? • Depreciation: What are the depreciation life-span on trucks? • Overhead: Can we reduce admin staff?>Outsource: Contract labor • Load per Truck: How full are the loads per delivery?

rs, drag resistant wheels,

spoilers, speed limite Innovation • Develop dro ne delivery capabilities • Explore autonomous trucks

Other • Explore other Thehigh candidate should mention “more fuel-efficient trucks” (or margin something similar) markets e.g. in his/her framework. If they don’t, press them until theyairfreight, mention it. Once included in the framework, mention that: the client was interested in exploring that option. shipping, Move on to question 1. railways, etc.

Case List Prompt: Your client is National Logistics; a large transportation and logistics company that delivers freight to all areas of North America. Over the last five years, the company has experienced rising costs due to increases in wages resulting from a shortage of truckers. The client is now looking to reduce operational costs in the business. How would you advise the client?

Market Sizing Question 1 The client is interested in purchasing more fuel-efficient hybrid truck fleets that use both batteries and diesel fuel. What are some of the cost considerations the client should be aware of in making this decision?

Answer The candidate can list any number of factors to consider, but it is crucial for the candidate to list these five cost considerations below. Press the candidate if he / she is missing any of the following five factors. • Price/cost of truck • Maintenance • Insurance • (Fuel usage) miles per gallon (MPG) • Depreciation

Case List Prompt: Your client is National Logistics; a large transportation and logistics company that delivers freight to all areas of North America. Over the last five years, the company has experienced rising costs due to increases in wages resulting from a shortage of truckers. The client is now looking to reduce operational costs in the business. How would you advise the client?

Market Sizing Question 2 We ran two cost scenarios for the client to compare the cost of operating a hybrid truck vs. a standard diesel truck. What are the potential cost savings (if any) from switching to a hybrid truck?

Answer Standard Semi: Maintenance + Insurance = $7,000; Depreciation = $100k / 10 years = $10,000; Fuel = 60,000 Miles / 10 MPG = 6,000 x $3.00 per gallon = $7,000 + $10,000 + $18,000 = $35,000 Annually per truck Hybrid Semi: Maintenance + Insurance = $11,000; Depreciation = $150k / 10 years = $15,000; Fuel = 60,000 Miles / 20 MPG = 3,000 x $3.00 per gallon = $11,000 + $15,000 + $9,000 = $35,000 Annually per truck

Case List Prompt: Your client is National Logistics; a large transportation and logistics company that delivers freight to all areas of North America. Over the last five years, the company has experienced rising costs due to increases in wages resulting from a shortage of truckers. The client is now looking to reduce operational costs in the business. How would you advise the client?

Market Sizing Question 3 Given the results of the analysis, would you recommend for National Logistics to invest in hybrid trucks? Why or why not?

Answer There is no right or wrong answer (except “I don’t know”). This question is meant to judge how well a candidate can make a decision and justify their decision during moments of ambiguity. Possible answers could include: Yes. Possible rationales: The savings can be even more if gas prices continue to rise; the company can extend the useful life of the hybrid trucks to reduce depreciation expense; the company can explore negotiating maintenance costs down; Hybrid trucks are better for the environment and may have tax reduction implications; Switch insurance providers or negotiate on costs No. Possible Rationales: Gas prices may fall, this making the standard trucks cheaper to operate; the purchase doesn’t meet the company’s primary goal of reducing costs; tying up resources in new trucks creates an opportunity cost against more potentially profitable projects Many more sound rationales can be used to explain the candidate’s choice. It is up to the interviewer to judge whether the candidate’s judgement I sound

Case List Prompt: Your client is National Logistics; a large transportation and logistics company that delivers freight to all areas of North America. Over the last five years, the company has experienced rising costs due to increases in wages resulting from a shortage of truckers. The client is now looking to reduce operational costs in the business. How would you advise the client?

Market Sizing Question 4 The client also wants to get our thoughts on how they can reduce their shortage of truckers. Brainstorm some ways National Logistics can reduce their shortage.

Answer Internal

External

Pay & Benefits (call out that these reduce profitability) • Offer starting bonuses • Increase salaries • Offer more vacation • More Flexible hours • Better healthcare coverage

• Hire contract drivers part-time during peak seasons • Sponsor international drivers with visas • Invest in autonomous truck technology • Form delivery partnerships with competitors • Look into heavy duty drones for short routes

Reduce employment restrictions • Lower education restrictions • Low work experience Get help internally • Have overhead employees drive during peak seasons

Case List Prompt: The CEO of Fire Proof Inc. wants to find new ways to diversify her revenue and product line. Currently, Fire Proof only sells fire resistant jackets, gloves, hard-hats, and tools to government sponsored fire departments nationwide. The CEO believes the company can expand their operations to make equipment for other industries. How would you advise Fire Proof Inc.?

Market Sizing Interviewer’s guidance How does Fire Proof Inc. make money? They sign contracts with municipalities and cities to supply fire proof apparel to fire departments How large is Fire Proof Inc.? Fire Proof Inc. does $500M in annual sales and has been growing at 4% yearly over the last 5 years How many competitors do they have / Market position? Fire Proof is number 1 in the fire equipment market but they have 3 main competitors that compete for government contracts How diversified are their competitors: Fire equipment makes up no more than 25% of all 3 competitor’s revenue. Why haven’t Fire Proof diversified their business before? The company focused on mastering what they knew and improving their operations in building fire equipment

Exhibit 1: Cost of Operation Police Equipment Officer Uniforms Hand Cuffs Police Badges Bullet Proof Vests Weapon Holsters Riot Shields Body Cameras

Market Size Market Growth* # of Competitors $1.5B 5% 3 $300M -2% 8 $100M 3% 4 $600M 10% 20 $300M 5% 12 $450M 12% 6 $250M 50% 25

* Annual market growth over the last 3 years

Case List Prompt: The CEO of Fire Proof Inc. wants to find new ways to diversify her revenue and product line. Currently, Fire Proof only sells fire resistant jackets, gloves, hard-hats, and tools to government sponsored fire departments nationwide. The CEO believes the company can expand their operations to make equipment for other industries. How would you advise Fire Proof Inc.?

Market Sizing Framework Guidance Internal Capabilities

Product Similarities

Market Attractiveness

• Manufacturing capacity Can we build it?

• Raw material overlap-Can we use the same materials

• Supply chain capacity - Do we have the network?

• Customer Overlap-Are the customers similar? (government)

• How many competitors are in the new industry? • What is the size of the new market? • Is the new market growing? • Are there high barriers to entry?

• Industry knowledge - Do they have the talent to make a good product? • Financial resources - Can Fire Proof afford investment required?

• Production overlap-Is the manufacturing process similar?

Financials • What is the investment required to enter new market? • Do you acquire a company or build internally? • What are the new profit margins Fire Proof can achieve? • When can the company break even?

Case List Prompt: The CEO of Fire Proof Inc. wants to find new ways to diversify her revenue and product line. Currently, Fire Proof only sells fire resistant jackets, gloves, hard-hats, and tools to government sponsored fire departments nationwide. The CEO believes the company can expand their operations to make equipment for other industries. How would you advise Fire Proof Inc.?

Market Sizing Question 1 Which product market is the most & least attractive for Fire Proof to enter? Why?

Answer After looking at exhibit 1, candidates should be able to identify and call out the following: The most attractive markets have 1. High production overlap 2. Large market sizes, 3. High growth 4. Higher number of competitors (fragmented market) Most attractive: Bullet Proof Vests –Why? 1. High production overlap, 2. Second largest market size 3. Double digit growth 4. Fragmented market for easier penetration Least Attractive: Police Badges –Why? 1. Low production overlap 2. Smallest market & Low growth 3. Highly concentrated market

Bonus call outs: Uniforms look interesting because of its large size and overlap, but the high concentration of competitors makes for a difficult market entry Body Cameras look interesting due to the high growth and market fragmentation, but this should be avoided because it is out of Fire Proof’s area of expertise (as illustrated from the low overlap) Riot Shields are a close second place to bullet proof vests because although it has a faster growth rate, it also has fewer competitors (more concentrated market)

Case List Prompt: The CEO of Fire Proof Inc. wants to find new ways to diversify her revenue and product line. Currently, Fire Proof only sells fire resistant jackets, gloves, hard-hats, and tools to government sponsored fire departments nationwide. The CEO believes the company can expand their operations to make equipment for other industries. How would you advise Fire Proof Inc.?

Market Sizing Question 2 Our team has done some internal analysis and have identified that Fire Proof can realistically capture 30% of the bullet proof vest market in 3 years. What is Fire Proof’s projected revenues for bullet proof vests in year 3? * Supply only when asked: Assume that the market will continue to grow at 10% each year over the next 3 years Answer Math analysis: (10% of 660) Year 1: ($600M x 1.1) = $660M; Year 2: ($660M x 1.1) = ($660 + $66M) = $726M; Year 3: ($726M x1.1) = ($726M + $72.6M) = $798.6M ~round to $800M Fire Proof Revenue = $800M x 30% = $240MIn 3 years

Case List Prompt: The CEO of Fire Proof Inc. wants to find new ways to diversify her revenue and product line. Currently, Fire Proof only sells fire resistant jackets, gloves, hard-hats, and tools to government sponsored fire departments nationwide. The CEO believes the company can expand their operations to make equipment for other industries. How would you advise Fire Proof Inc.?

Market Sizing Question 3 Our team has identified that Fire Proof will need to invest $100M in capital expenditures to configure their plants to make bullet proof vests. If the company has a target ROI in 3 years of at least 15%, will they meet their goal?

Answer Supply only when asked: Estimated market share by year: Year 1: 10%, Year 2: 20%, Year 3: 30% Average yearly net profit margin: 25% Math analysis: (2 x 10% of 66; 1/2 x 10% of 66) Year 1: Revenue = 10% x $660M = $66M Net Profits: (25% x $66M) = $13.2M + $3.3M = $16.5M Year 2: Revenue = 20% x $726M = (72.6M x 2) = $145.2MNet Profits: (25% x $145.2M) = ($14.52 x 2) = $29.04M + 7.26M = 36.3M Year 3: Revenue = 30% x $800M = $240MNet Profits: (240 / 4) = $60M Total net profit over 3 years = $16.5M + $36.3M + $60M = $112.8M ROI = ~$113M / $100M = ~13%

Case List Prompt: The CEO of Fire Proof Inc. wants to find new ways to diversify her revenue and product line. Currently, Fire Proof only sells fire resistant jackets, gloves, hard-hats, and tools to government sponsored fire departments nationwide. The CEO believes the company can expand their operations to make equipment for other industries. How would you advise Fire Proof Inc.?

Market Sizing Question 4 Beyond just the police department, what are other markets and/or products that Fire Proof can consider to diversify their revenue stream?

Answer

Conclusion

Military Equipment

Medical Accessories

Military vests Weapon Harness Military uniforms

Medical coats Stethoscopes Gloves Tunics

Construction

Recreational Gear

Hard hats Construction jackets Safety visors / glasses Hammers, pick-axe, etc.

Hiking Boots Heavy duty jackets Sleeping bags Thermal gear

Should Fire Proof diversify their product stream to make bullet proof vest for police departments? (Yes/No & why? Mention: What makes the market attractive / not attractive? What are the financial implications? Risks: (If yes): Could include -Cost overruns to $100M projected investment, competitors fight back hard; thus, eroding profit margins, competitor relationships with customers may be strong, government budgets could change, etc. (If No): Potential lack of other alternatives, another competitor enters bullet proof vest market first, company is still undiversified

Case List Prompt: A provider of broadband Internetenabled PC labs for use in schools in the US is looking to enter the UK market. The company has developed a somewhat innovative business model, whereby secondary schools are provided with up to 15 PCs linked to the Internet via broadband.

Market Sizing Interviewer’s guidance The PCs come fitted with e-learning software, which is structured and indexed by subject matter and level of education – e.g., GCSEs, Advanced Level, etc. The main source of revenue relates to advertising revenues generated through the display of banner ads on the screen. These ads are displayed when the PCs are in use during the school day. Advertisers in the US include McDonald’s and the US Army. The company has developed long-term leasing arrangements with the main hardware suppliers (e.g., Dell, HP, etc.) and is therefore able to offer the kitted-out PC lab at no or a very minimal cost to schools.

Case List Prompt: A provider of broadband Internetenabled PC labs for use in schools in the US is looking to enter the UK market. The company has developed a somewhat innovative business model, whereby secondary schools are provided with up to 15 PCs linked to the Internet via broadband.

Market Sizing Question 1 Our first requirement was to determine the extent of the revenue opportunity for the company’s proposition in the UK. What are the key inputs and assumptions that we would need to consider in order to determine potential revenues in Year 1? Answer There are a number of key inputs that interviewees should consider. Good candidates will also show evidence of sound commercial judgement when thinking through any key assumptions. The key inputs or drivers of revenue are as follows: 1. The population of secondary schools that the company would sign up in Year 1. Let’s assume that there are 10,000 secondary schools in the UK and in order to keep the math simple, we will assume that 10% are signed up in Year 1. We also assume that these 1,000 schools are customers from the start of the year. 2. The number of PCs per school. Each school will be fitted with one PC lab, with each lab having 15 PCs. 3. The average daily use of each PC. Let’s assume 5 hours per day – useful for identifying utilization rate. 4. The number of ads displayed in a day. Here, let’s assume that each ad lasts on average, 30 seconds. 5. The price of each ad. Let’s assume a rate of £10 CPM (cost per mile) or £10 per 1,000 ads displayed. 6. The number of weeks each year when the school (and therefore the PC lab) is open. Here, let’s assume 40 weeks per annum (or 200 days, assuming a 5 day school week).

Case List Prompt: A provider of broadband Internetenabled PC labs for use in schools in the US is looking to enter the UK market. The company has developed a somewhat innovative business model, whereby secondary schools are provided with up to 15 PCs linked to the Internet via broadband.

Market Sizing Question 2 What revenues would the company generate in Year 1?

Answer The approach to follow here is as follows: Average daily PC usage = 5 hours No. of PCs = 15 Total daily PC usage = 5 x 15 = 75 hours No. of 30 second slots per 5 hour day per PC = 600 No. of 30 second slots per 5 hour day per PC lab = 600 x 15 = 9,000 No. of 30 second slots per 5 hour day when ads are running (based on 50% utilization) = 9,000 x 50% = 4,500 No. of 30 second slots per annum when ads are running = 4,500 x 200 days = 900,000 (assumes 200 day school week – i.e., 5 day week and 40 week year). Yearly ad revenue per school at £10 CPM = 900,000 x 0.01= £9,000 Total ad revenue in Year 1 = ad revenue per school x no. of schools or £9,000 x 1,000 = £9MM in Year 1.

Case List Prompt: A provider of broadband Internetenabled PC labs for use in schools in the US is looking to enter the UK market. The company has developed a somewhat innovative business model, whereby secondary schools are provided with up to 15 PCs linked to the Internet via broadband.

Market Sizing Question 3 Determine the size of the advertising market targeting teenagers in the UK. Teenagers were the primary target demographic group (given the focus on secondary schools). Given the background, what methodologies could be used to size the teenage advertising market Answer Method 1 – Different Media 1. Types of media used for advertising to teenagers - TV, Magazines, Radio, Newspapers, Internet, Billboards. 2. Focusing on the magazine sector, review a sample of teenage magazines (our sample represented ~45% of all teenage magazines in circulation in the UK). 3. Calculate the total revenue generated by ads in these magazines (based on rate cards (which indicate the cost of an ad based on size of ad) obtained from ad agencies). Our research suggested that this was £54MM. Note that rate cards are not entirely helpful as actual rates are almost always at a discount to the rate card. 4. Factor this total revenue figure up based on sample size. This equated to £120MM. 5. Determine the proportion of total teenager advertising found in magazines. For example, how much time do teenagers spend reading magazines, compared to watching TV, surfing the web, etc. We estimated that magazines make up 815% of the total media mix. 6. Running the numbers suggests that the total teenage ad market is worth £800MM - £1,500MM

Case List Prompt: A provider of broadband Internetenabled PC labs for use in schools in the US is looking to enter the UK market. The company has developed a somewhat innovative business model, whereby secondary schools are provided with up to 15 PCs linked to the Internet via broadband.

Market Sizing Question 3 Determine the size of the advertising market targeting teenagers in the UK. Teenagers were the primary target demographic group (given the focus on secondary schools). Given the background, what methodologies could be used to size the teenage advertising market Answer Method 2 – Advertising as a % of Spending This approach is based around the total amount spent by teenagers in the UK. Key steps are as follows: 1. Determine the number of teenagers in the UK. Teenagers represent ~11% of UK population or ~7MM teenagers. 2. Determine average annual spending by teenager. We considered pocket money, earnings, cash gifts, etc. and reached an average of £4,700. 3. If total teenage spending is £32B, what is the advertising ratio – i.e., the amount spent on advertising by advertisers as a proportion of total spending? Definitely less than 10%. Let’s say 5%. 4. Total teenage market is about £1,500MM The analysis of the teenage advertising market provided a useful sense check of the Year 1 revenue estimate, which at £9MM, represented a relatively small proportion of the overall teenage ad market.

Case List Prompt: An 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?

Pricing Strategy Interviewer’s guidance 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

Case List Prompt: An 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?

Pricing Strategy Framework guidance

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

Pricing Strategy

Invention

Product Facelift Competition Exists

Similar Product

Competitor Pricing

Predatory Pricing

Penetration Pricing

Market Type Pricing

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

Competition Doesn’t Exist

Perfect Competition

Monopoly/ Duopoly/ Monopolistic

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

Case List Prompt: An 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?

Pricing Strategy Answer We can price the product at a comparable price or basis the cost incurred in manufacturing the product. Since there is no competition, we can focus on the cost incurred only. Amount spent on R&D is 120Cr and manufacturing cost is 400. A conventional bulb works for average 6 months and takes about Rs. 4 to manufacture, sold to distributor for Rs. 10, Distributor sell to store owner for Rs.14 and he sells it to the customer for Rs.18. So, the price of the product be linear relation become Rs.1800. The amount is equivalent to 100 conventional bulbs, approx. for 50 years. The customer might not accept the product. Let’s broaden the horizon of customers, 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. 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 markup 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.

Case List Suppose you are a nongovernmental organization, who wishes to enter India. He has come to seek your advice as to how to go about it.

New Market Entry Interviewer

Candidate

Interviewer

Candidate

Suppose you are a non-governmental organization who wishes to enter India. He has come to seek your advice as to how to go about it. So, our client is an NGO who wishes to enter India. What exactly is the objective of our client? What is the geography in which they currently operate? Which sectors are they currently operating in? Why do they particularly want to enter India? They are currently operating in health and education sector in US. They want to maximize Socialwelfare. They have no financial constraints and hence I would not like you to look the problem from financial perspective. They want to enter India as they saw an opportunity of social welfare considering the situation of India. Okay. So, since the objective is to maximize social welfare, I would like to first look into the sectors in which the client can enter, then evaluate all the sectors and then decide the sector to enter keeping in mind the objective of maximizing social welfare. Then I would like to discuss different ways in which our client can enter Indian market.

Case List Suppose you are a nongovernmental organization, who wishes to enter India. He has come to seek your advice as to how to go about it.

New Market Entry Interviewer

Candidate

Interviewer

Candidate

Okay. Go ahead. There are multiple areas in which the client can enter. It can be health, education, environmental protection, urban planning, waste management, electricity, regional rural bank, etc. Now I would like to evaluate each option in terms of number of lives impacted, the extent of impact and the feasibility of entering in that particular sector. Sure. The health and education sector will directly affect many lives but at the same time there are multiple governmental and non-governmental organizations working in these areas. Environmental protection is much needed but quick and direct impact of it's activities would not be seen. Feasibility can be checked in terms of government regulations, support of local

Case List Prompt: There is a iron mining group consisting of Country X, Y, Z, and W. Every year the four governments get together to decide how much to produce according to demand forecasts, and allocate the production quota evenly among them. Now, Country X is thinking about leaving the group. What will you suggest to X?

Profitability Sample Interview What are the relative production costs of each of the countries? Countries X and Y have a 10% cost advantage over countries W & Z. What volume does each country produce and sell, historically? Last year, Country X and Y both produced twice as much as countries W&Z What is the demand curve facing the producers? A basic downward sloping demand curve We should derive the price implied by the supply and demand curves. The impetus to this question is to derive the world supply curve. Supply curve is the sum of MC curve of all producers. Since there are only four producers, the supply curve will be a step function and can compare the price with X's marginal cost. Based on X's cost position on that supply curve, we can conclude that X will be better off leaving the cartel.

Wrap-up / Recommendations for client: We recommend that country X go it alone, based on their favorable cost position, and the fact that the remaining countries did not have enough leverage overpowering X for leaving the cartel.

Case List Prompt: 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.

Profitability Framework Guidance

Case Insights

Pricing Factors

Sell

Customers

Government

Scientific Research

Operational Cost

Rent

Revenue Model

Value Based

Lump-Sum

Cost

Operational

Revenue

Non Operational

Fuel

Rent Centre

Operator Cost

Maintenance

No. of Journey s Price per ticket

• No such invention will be available in the next 50 years • Machine can carry 100 individuals in 1 journey • 1 hour of maintenance is required everyday • Works on electricity and extremely high-power consumption • Assume fixed price and continuous demand when running the machine independently.

Case List Prompt: The CEO of a telecommunications provider company. Is looking to grow the sales revenue. You are hired to identify opportunities and recommend a plan of action for the same.

Sales Growth Framework Guidance

Case Facts

4X Growth

Existing avenues

Telecom

Increase Customer base Increase Basket Size

Data Center

New Avenues

Product Diversification Install servers and space to customers

Implementation Plan

Product Width

Market Entry

• 4X Growth Expected • 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 majors competitors in data center business –reduced potential for growth • Basket size for telecom. is not a short term solution. Why? • Geographical expansion is not feasible due to limited management bandwidth

Practice Cases

Case List Practice Cases 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. Your client is a biscuit manufacturer. Over the past couple of months, it has seen a decline in profits. Diagnose and recommend solutions. To analyze the insurance industry for a financial services provider 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? A Vernier calipers manufacturer has for the past 2 months been seeing 100/1000 Calipers being produced are defective. Help him. An airline company has started witnessing margins lower than that of the industry. Diagnose why? A Vernier calipers manufacturer has for the past 2 months been seeing 100/1000 Calipers being produced are defective. Help him.

Case List Practice Cases Your client is the vice president of sales for a major fitness company. She has asked you to help her determine why sales productivity is down over the last year. How would you go about answering the question? You own a microbrewery in Seattle. What are some of the issues you would need to think about if you were interested in expanding your brand nationally? The number-three athletic shoe manufacturer has hired your consulting firm to determine why its profits are declining while the profits of its two competitors are growing. Where do you start? Your client has hired you to investigate and recommend an accounting and billing software package. You have to finish the project with a recommendation in 1 month. What should you do? The food-service spice division of a major food manufacturer has had flat or declining sales and profits over the past 5 years. What should it do to improve its performance? A beer manufacturer is thinking about manufacturing a green beer. It has hired you to help it decide what to do. What kinds of things would you think about to help it make the decision? A large integrated steel manufacturer is contemplating entering the specialty stainless steel market. Should it? What should it think about to make its decision? A large food manufacturer with dominant market share in rice cakes wants to increase the profitability of the product line. It is trying to decide whether to raise or lower the price. What are some of the things you would think about?

Case List Practice Cases Drinkya, a major bottled beverage manufacturer and one of Glycolia’scurrent customers, heard about your interest in the green MEG. Drinkyais very interested in producing environmentally friendly bottled drinks using your green MEG, so it offered Glycoliato sign an offtake agreement for 5 years, where Drinkyawill buy all of Glycolia’sgreen MEG for 35% premium. What should Glycoliado? What strategic considerations to be kept in mind? Founded in 1984, your client, Pushman Potties, is a major US manufacturer of portable toilets, commonly referred to as “portapotties”. Pushman Potties’ porta-potties are typically found in construction sites, agricultural fields, and other industrial settings. However, over the past several years sales of Pushman’s standard porta-potties have stagnated, so the management team has approached your firm for help. With this in mind, what are some potential avenues for revenue growth? Pullman is primarily interested in entering the luxury porta-potty market. Such units feature all the amenities that are found in stationary public restrooms, including running water (both hot and cold), mirrors, lighting, and air conditioning. How would you approach estimating the size of the opportunity for such a product? A British company has hired our consulting firm to evaluate its recent diversification into a new market. The firm has been a producer of car batteries in the domestic market for thirty years and is currently the quality leader throughout the United Kingdom. A few years ago, the product line was expanded to provide batteries for forklifts and other motorized loading trucks. The initial entry into this market was successful, but since then, sales have decreased steadily every year. What recommendations would you have for this company?

Case List Practice Cases Case Question: A beverage company is a top three producer of soda beverages. They are thinking of launching a new product called O-NaturalFlavored Bottled Water. They are looking to distribute directly to retailers. What are the key risk factors they should be looking at and should they launch? Instruction to the interviewer: The objective of this case is - To see if the candidate can determine the major concerns of a new product launch - To see if the candidate understands the relationship between manufacturer and retailer Sample Structure: - Current product mix - Larger market trends and growth trends - Complications and risk factors Case Facts to Give: - They currently have five plants and sell a broad array of carbonated and non-carb beverages Question 1: What are some other channels they could sell this product through, besides supermarket retailers? Question 2: What do you think would be most profitable to market: small quantities at higher prices or larger quantities at bigbox retailers? Question 3: What concerns would you have with Refresh Now launching a new product?

Case List Practice Cases Case Question: Our client is the owner of a gas station between towns A and B –10 miles to each town. He is wondering if it would make sense to add a convenience store to the gas station. Clarifying Information: Note: Provide this only if corresponding questions are asked. There are no other gas stations in town A or B Gas is 75% of revenue (10% profit margin) and the gas station also offers car washes (25% of revenue, 20% profit margin) Criteria for “making sense” –1) making profit, 2) having a better chance to hold off new competitors enter the market, 3) diversifying income The gas stations current customers are residents of town A and B; there are no other customers. Question 1: How profitable is the current business? Question 2: How profitable would the convenience store be on an ongoing basis? Given that, what is the NPV of opening a gas station? What does the NPV of 0 mean for our client? What happens to the NPV if a convenience store competitor enters the market? Question 3: The client also asked us to provide him with a list of things to consider in this decision. What would you tell him?

Case List Practice Cases Case Question: Client is a $2.5B Fortune 500 worldwide provider of leading-edge transportation, logistics and supply chain management solutions. Product offerings include: LM, which provides leasing and programmed maintenance of trucks, tractors and trailers to commercial customers; SC, which manages the movement of materials and related information from the acquisition of raw materials to the delivery of finished products to end-users; and DCC, which provides a turn-key transportation service that includes vehicles, drivers, routing and scheduling. The focus of our discussion today is the LM group. The growth in the overall number of truck registrations has slowed, 2.2% CAGR. The LM market is declining. However, the client’s revenues within the LM market have been flat. The client has asked your help to put together a growth strategy. (On slight probing) The client is looking at achieving significant growth over the next 2 years and is looking for some major improvements. Question 1: what are the different ways to achieve organic growth? Question 2: What are your thoughts on the current market dynamics facing the client? Taking this into account, please recommend an organic growth strategy. Question 3:What are some of the key challenges with introducing an additional new product (especially one that is lower priced)? Question 4: How would you go about formulating what product to offer to the private customers? What process or steps would you follow? Question 5: If the client captures 1% of the private market by introducing this new product, at what rate will his overall revenues increase?

Case List Practice Cases Case Question: Your client is a U.S.-based manufacturer of branded cookies (cookies that carry the name of the manufacturer.) Recently private label cookies (those carrying the name of the retailer) have emerged and threatened branded cookies. Private label cookies are made by the same manufacturers who make branded cookies; they are just sold under the name of the retailer. Private Label Information • Private label cookies emerged five years ago • Two and one-half years ago they made up 10% of the overall cookie market (brand being the other 90%) • Today they make up 20% of the overall cookie market (i.e., there has been a steady, linear increase of the private label portion of the overall cookie market during the past five years) • The overall cookie market has been relatively flat over the past five years Competitive Landscape • Your client, who makes only branded cookies • A second major player, that makes both branded cookies and supplies cookies for private labelers • A collection of small outfits, that make both branded cookies and supply private labelers Distribution Strategy Distribution occurs primarily through one of two types of outlets: • Grocery outlets: all grocers sell branded cookies, most also carry their own private label cookies which represents 90% of total cookie sales • Mass merchandisers (e.g., Wal-Mart, Sam’s): sell only branded cookies Question 1: How large would you estimate the overall U.S. cookie market to be in $ terms? Question 2: How large of a threat do you believe the trend in private label cookie sales to be to your client? Question 3: Upon assessment, what is an appropriate strategy for your client to follow?

Selected Sample Cases from Other Sources 1. The Consult Club Case-Book, IIM Ahmedabad

Sample Cases from Other Valuable Sources(Courtesy: IIMA CaseBook) Case Type 1: Revenue/Profitability/Cost Cases

Case 1: Beer Manufacturing

Case 2: Banking

Case 3: Telecom Billing Process

Case 4: SpiceJet vs Indigo

CASE TYPE 2: PRICING: Case1: Helicopter Prices

CASE TYPE 3: MARKET ENTRY Case 1: Retail Bank Portfolio Management

Case 2: Kids Entertainment Channel:

Case Type 4: Growth Strategy / Case 1: Ice Cream Vendor

Case 2: Ecommerce Firm

Case 3: Midstream Oil and Gas Company

Case 4: Movie Theatre Chain

General Recommendations Case interviews are much more about structured thinking which comes only with immense amount of practice. Any general consulting interview is done in three stages: Guesstimates, Case Interview round and HR Round. The cases provided here are sample cases and there are multiple different types of cases. However, the structured approach provided in these cases are sufficient to provide an idea of how to approach a case interview. Students are advised to refer this but not restrict themselves to the contents of this casebook. Few of the reference content are as listed below: Case in Point: By Marc P. Cosentino ISB Consulting Casebook Case Interview by Victor Cheng (Youtube) : https://www.youtube.com/channel/UC-YKX7L2GNNA-IHrhMpwzWA Bain and Company Case Interview Video: http://www.bain.com/careers/interview-preparation/case-interview.aspx BCG Case Interview Video: https://www.bcg.com/en-in/careers/path/consulting/practice-interview-cases.aspx IIM Ahmedabad CaseBook :www.iima.ac.in Using the ideas and inherent concepts of the class-taught models is encouraged but avoid using the names of these models in front of the interviewer as they want to test the thinking capability of the candidate and not their memory of the standard models. God Speed! -Team Socrates, The Consulting and Strategy Club, Indian Institute of Foreign Trade IIFT