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About Us

The BITS Pilani Consulting Club is a student run club which was formed with the
intention of improving the BITSian presence in the management consulting
sector, and also to help budding consultants in finding their way into a top tier
consulting firm.
Most students on campus see the consultancy sector as an escape destination
from their core fields. But, fact of the matter is that consultancy is one such
domain that involves a multi-disciplinary knowledge application.
Consulting companies are not interested in a mathematical wizard or a codingczar or a brute force machine, but an overall smart, well aware and hardworking
person who is ready to learn. But the selection process for a top tier consultancy
firm is a herculean task, which students realize only when they reach their
placement season.
Hence, as an initiative of the club, we have decided to set up a Consulting Case
Book to help the student body in our campus to prepare well in advance for
consulting interviews. The Case Book would contain cases from various sectors so
that it would be helpful for students from all the branches. It would also contain
several frameworks and strategies that would guide a student in solving a case.
This book contains 18 solved solutions of cases that we came across through
different sources. We do not claim that the given solutions are the best
approaches to solving the case. They are based on our experience, several
iterations with our peers and feedback from other Seniors/Alumni who are (or
have been) in consulting firms. An important point to remember is, as long as
every step you take while case solving is supported by logic and a few underlying
principles (you shall encounter these during your prep), you are doing well.

Best of luck for all your future endeavors!

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About the Team

BITS Pilani Consulting Club (BPCC) takes a lot of pride in their successful alumni in
various consulting firms. The casebook team dedicated its efforts in compiling the
best cases on campus. Their cases were then edited to the standard case study
format to facilitate better understanding.
Senior members including Ankur, Kaustabh, Rishabh and Divya ensured the
quality of the cases was maintained, while also contacting new alumni for cases.
They also headed the revamping team of first and second years to ensure that the
cases can be presented in the most lucid way possible.
The revamping team - Hari, Keshav & Saniya paraphrased the interviews
conducted. They also went through the older cases to include variety.
The team hopes that reading this casebook is as enjoyable as it was to compile it!

Akshit & Neel


Manager, BPCC Casebook

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We dedicate this book to our Alma Mater, BITS Pilani.

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ACKNOWLEDGEMENTS

We would like to thank and express our sincere gratitude to all the people who
helped us any way possible in completing this casebook.
We would like to thank our club seniors whose continuous support and
encouragement gave us the confidence to pursue and complete this casebook.
We thank them for taking out time from their busy schedule to help us out in our
endeavor.
We would also like to thank all of our peers and campus seniors and our peers
from other colleges who have assisted us throughout the preparation of the
casebook and without whom, we would not have the content to finish this
casebook
Finally, we would like to thank our Professors in-charge, Prof. R. Raghunathan and
Prof. NV Murlidhar Rao Sir, for their continuous support and motivation.

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Table of Contents
Case No

Content

Page No

WILP

7-11

Electronics Manufacturer

12-15

Samsung

16-22

OLA Cabs

23-25

ABC Corporation

26-29

Watch Manufacturer

30-33

Coca-Cola

34-36

Adidass acquisition of Reebok

37-40

Merging Anganwadis with Primary Schools

41-45

10

Edvice (startup)

46-49

11

Consumer Packaged Goods (Cosmetics)

50-53

12

Ganga Store

55-57

13

Contact Lens

58-60

14

Airport Development Co.

61-62

15

Highway Tender

63-66

16

McDonalds

67-69

17

Drone Technology

70-71

18

Furniture Manufacturer

72-74

19

Oats and Muesli

75-76

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CASE 1: WILP
The Work Integrated Learning Programme (WILP) division of BITS Pilani offers
degree programs for employed professionals to enhance their academic
qualification while working at their respective employing organizations. WILP
division had always been the cash cow for BITS Pilani, contribution heavily to the
top and bottom line.
But over the past few years it has been found that the growth rate for this division
has actually declined, in fact it was negative last year.
As a consultant to Director, WILP BITS Pilani, investigate the reasons for this
degeneracy in growth and formulate the growth strategy for this division.
___________________________________________________________________
Candidate: I would like to start by ask few clarifying questions.
Interviewer: Go on.
Candidate: I guess that our objective for the case is to stop the degeneracy of the
growth and bring the company back on growth trajectory.
Interviewer: Thats correct.
Candidate: I assume that the growth being talked about is the growth in the
profits.
Interviewer: Correct.
Candidate: Can you tell me which geographies are you operating?
Interviewer: We are operating in the whole of the country and target individuals
who seek to do advanced learning with/without working in industry to hone their
skills.
Candidate: Okay. My overall strategy for the case would be to divide profits into
Revenues and Costs and then dip drill into both these segments and aim towards
revenue growth and cost cutting.
Interviewer: Alright. Assume the cost cutting is not possible in this case. Hence
focus on the revenue growth part only.
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Candidate: Fine. Revenues would essentially be No of enrolled students*Average


Fee charged per enrollment.
Interviewer: Continue.
Candidate: Firstly I would like to know about the average fee charges per user.
Has there been any increment or decrement in that?
Interviewer: Fee has actually increased by 12% year on year due to inflationary
pressure.
Candidate: Thats interesting because even after fee increment the profits have
declined.
Interviewer: Correct Observation. How would you explain this?
Candidate: This may be due to the fact that costs increment is more than revenue
increment.
Interviewer: Correct. You should have asked about aggregated revenue and costs
figure in the starting of the issue tree.
Candidate: Yes. I guess I made a silly mistake there.
Interviewer: Fine. Now when you have identified this anomaly you can continue
back with you analysis.
Candidate: I would like to do a mini synthesis just to confirm everything.
Interviewer: Fine.
Candidate: (*Synthesis*) I would like to refine my overall strategy once more.
Looks like we cant cut on increasing cost and revenue growth has been
insufficient to cater good profits. I looks like a more robust growth in revenues
looks like the only option to put the company back on growth trajectory.
Interviewer: Fine.
Candidate: I would now continue with my branching. I wish to know the data on
number of enrolled students.
Interviewer: The number of enrolled students have seen a fall of 5%.

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Candidate: Thats interesting. So the overall revenue increment must be coming


due to increase in enrollment/tuition fee rather than organic growth in the
enrollment figures.
Interviewer: Correct.
Candidate: I would like to divide the enrollment into two parts. One those who
renew their enrollment for continuing their degree and secondly the new
enrollments. Can you give me data on these two fronts?
Interviewer: That was a logical bifurcation. On the data front, people continuing
has reduced and so has new admissions.
Candidate: Alright. I hypothesize that number of people continuing their
enrollment has reduced because the new admits have been lower for past few
years just like this year. So the total enrollment circle is actually contracting.
Interviewer: Thats a correct observation.
Candidate: This means that we have not been able to attract new enrollments.
This looks like the pain point for our falling profits.
Interviewer: You seem to have identified the pain point perfectly. Continue with
the analysis.
Candidate: I wish to jump from this profitability framework to more general
business situation framework to analyze the issue more deeply. In this, I would
like to know the segmentation of the enrollments.
Interviewer: We have three kinds of enrolling students. First one are independent
students those who enroll for our coursework irrespective of wherever they are
working. Then there are individuals who are sponsored by their employers we
call these industry sponsored enrollments. Third is the niche category of
programs like orthopedics, Marines Science and few others.
Candidate: I wish to know the share of these three in our enrollments figure.
Interviewer: The first two are 45% each while the third one contributes 10% to
our enrollments figure.
Candidate: Fine. I would like to prioritize here (80/20 rule). Since the major chunk
of our revenues is coming from the first two categories I would like to work
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towards increasing our revenues from there first. If the time permits I would focus
upon the third and final category.
Interviewer: Thats totally fine.
Candidate: After Customer segmentation I would like to know more about the
product.
Interviewer: As told earlier, we basically * explains the product*
Candidate: I would like to know more about substitutes. I guess this would
include similar programs run by other universities. Though I should have asked
earlier but do you have any data on the industry as a whole?
Interviewer: We dont have any data but independent reports have pointed that
lots of private universities have entered this sector and are growing fast.
Candidate: Fine. I hypothesize that increased competition is draining us of our
market share.
Interviewer: Thats correct. How do you aim to tackle this competition?
Candidate: I would like to jump to the product front once more. Can you tell if we
have any competitive advantage over our competitor in terms of cost leadership
or product differentiation?
Interviewer: Our product is differentiated by our brand value. We believe that we
provide more brand value to the students and charge premium for it.
Candidate: Has the company tried reducing pricing in past to cash in more users
and so increasing the overall revenues?
Interview: Company in fact has tried this but this lead to no increment in to
overall revenues.
Candidate: Okay. Has the company tried to differentiate more in its product like
adding e learning and individual doubt removal sessions?
Interviewer: Company has an e-learning portal called Taxila as well as doubt
removal through e mails and correspondence. Developing new products would
take expertise beyond our present expertise.

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Candidate: So this strategy also seem futile. It looks like we can do little on the
product front. I would like to shift from here to the company front.
Interviewer: Fine.
Candidate: I would like to know more about our value chain staring with the in
house material preparation team.
Interviewer: We have a team of 50+ individuals who continuously update the
coursework as per the needs industry.
Candidate: Has there been any feedback on our coursework not up to the mark?
Interviewer: No such complaints.
Candidate: Coming to the distribution and customer pull aspect. Can you tell me
how do you actually attract new enrollments?
Interviewer: We put our advertisements in relevant magazines. Besides we have
a business development team to scout for industry adoption of our programs.
Candidate: This business development looks like a very important part of whole
value chain. I wish to know more about it. Has there been any change with
business development team in the past few years?
Interviewer: Looks like our team of 10 in the business development has been
working with us for the past 10 years and no one has actually left it.
Candidate: I would like to do a competitor benchmarking here. Any data on
business development work by our competitors?
Interviewer: All the competitors seem to have a big business development teams
with young executives straight out of top B schools.
Candidate: I guess this is the pain point. I hypothesize that we need to reframe
our whole business development division. It appears that there has been a lot of
inertia in our team and we need to recruit fresh talent and may be link
performance with bonus for business development work.
Interviewer: These look like fine suggestions.
Candidate: I would like to know more about business development policies to
come up with detailed plans on how to reframe the whole division.
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Interviewer: Lets leave this at that and wrap up the case. You did a fine job with
the case.
Candidate: Thank You

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CASE 2: ELECTRONICS MANUFACTURER


Your Client is an electronics manufacturer. They are in a B-B business where they
sell their finished products to firms like Dell, Lenovo etc. Recently they had
experienced a decline in their profits and have approached you to help them out.
How would you proceed?
------------------------------------------------------------------------------------------------------------Candidate: I would like to begin by asking a few clarifying questions.
Interviewer: Sure, go ahead.
Candidate: By how much have the profits reduced and in what time frame?
Interviewer: Profits have reduced by 10% over the last 1 year.
Candidate: Ok, so now I would like to analyze the profitability structure of the
firm to figure out why the profits are declining.
Interviewer: Sounds good. Go ahead.
Candidate: In order to understand the drop in profits, I would like to analyze the
Revenue and Cost aspects of their business.
Interviewer: Since the total cost involved hasnt changed significantly over the
past 1 year. So you can concentrate only the revenues side.
Candidate: Ok. Now, to understand the various revenue streams for the
company, I would like to know their product segmentation. Do we have data on
that?
Interviewer: Yes we do. The company caters to 4 main product categories
% Revenue
1.
2.
3.
4.

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Laptops
Desktops
Servers
Spare Parts

25
25
25
25

%Growth
1
3
2
-16

Since the first 3 categories have remained fairly profitable, I want you to
concentrate only on the spare parts division. Also, note that the selling prices has
remained the same over the past several years.
Candidate: Okay. Since we have figured out where our problem lies, I would now
like to concentrate on the customer base of this segment. So do we have data on
the customer segmentation?
Interviewer: The client has over 140 customers to begin with. But, based on the
amount of revenue generated from each customer, they can be classified as:

Sales

20%

20%

Dell
Lenovo
Sony
Hp

20%

20%

Others

20%

Candidate: Given this data, I would now like to figure out which segments have
seen a drop in sales over the last one year. Do we have data on that?
Interviewer: The client has observed that the drop in sales has been uniform over
all the customer segments.
Candidate: Ok. This could have occurred due to the following reasons12 | P a g e

The entire spare parts industry on a whole has gone down over the
past year
All of our customers are slowly moving away towards our
competitors as they might be offering some kind special service
which we are not.
Interviewer: Both of your points have been spot on! The entire spare parts
industry has gone down by 7% over the past one year due to a very gloomy
market. Our competitors have not only snatched away a few of our clients, but
they have also remained profitable during this period.
Candidate: So clearly our competitors are doing something that we are not. Are
they offering a higher quality of product than us at the same price?
Interviewer: No. The Spare Parts Industry is highly standardized. So the quality of
the product remains the same irrespective of the supplier.
Candidate: Ok. Since all, of clients are corporate, they would be buying are
product in bulk. Do we offer any discounts for bulk orders?
Interviewer: Yes, we do offer discounts. For any order size greater than 100,000
units (irrespective of the type of spare part) we offer a 5 % discount.
Candidate: Sounds good, and what do our competitors offer for a similar order
size?
Interviewer: Our competitors offer a 7% discount for an order size greater than
100,000 units.
Candidate: That sounds interesting. So our competitors are offering a higher
discount for the same order size. This could be the reason why our clients are
shifting to our competitors. They are taking advantage of the higher discount rate
offered to them by our competitors.
So next question would be, why are we offering a lower discount rate?
Interviewer: Since our manufacturing process is more efficient than our
competitors, we can deliver an order size of 100,000 units within 20 days while
our competitor take 30 days to deliver the same. This is why we offer a lower rate
of discount.
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Candidate: Ok. Given all the data I have and based on the analyses that Ive done I
think Im ready to present my final solution.
Interviewer: Go ahead.
Candidate: The fall in profits for the firm were caused due to the lower sales in
their spare parts division. This was due to a sluggish industry over the past year
and also due to our customers moving away towards our competitors.
The reason our customers were moving away from us was due to the higher
discount rate offered by our competitors. Although we offered a faster delivery
option, our customers were not interested in it this year due to the slow sales
faced by them in their industry.
So my recommendation would be, our client should offer the same 7% discount
rate to retain its customers.
Interviewer: Sounds like a reasonable recommendation. I think we had a nice
conversation. Thank you and all the best.

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CASE 3: SAMSUNG
The quarterly profits of Samsung electronics have fallen by 37 % YoY in Q4 of year
2014. What should the company do?
__________________________________________________________________
_

Clarifying Questions & Answers:


Is the decline of quarterly profits an industry wide trend?
From the information and numbers available, there is nothing to suggest
that the industry is going through a slump.
So I am assuming that the problem is just confined to Samsung electronics.
That would be a fair assumption.
Okay, so can I get a picture of what the product mix of Samsung electronics
looks like?
Sure. Samsung is a global electronics giant with a diversified product line that
pretty much covers everything ranging from electrical appliances, feature
phones and Smart phones, PCs, tablets and solid state devices like
semiconductors etc.
Okay, so I will make that the starting point of my hypothesis. My next question
would be, what is the revenue mix of Samsung electronics?
If we go by the Q4 numbers, about 60% of its operating profits came from the
Device solutions division (semiconductor and display panel businesses), 37 %
from the mobile communication and information division, and the rest from
the consumer electronics segment.
Hmmthen I am going to focus on the two major profit making segments as
of now i.e. the device solutions and the mobile communications division.
Fair enough. How do you want to go about it?

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I would like to know the standing of profit levels of each of these two segments
with respect to Q4 2013.
Sure. The profits of the device business increased by 46 % with respect to Q4
2013. And that of the mobile business decreased by 64 % YoY.
Okay...so there seems to be a visible profit problem with the mobile business.
Now I would like to know more about costs and revenues associated with this
division.
Sure.
Before I dig deeper into the problem, I would like to know what types of cell
phones are sold by Samsung electronics.
Well Samsung sells both feature phones and smart phones. But just to make
things a little less complicated, you can consider only smart phones into
account.
Okay. What are the major fixed and variable costs involved with the mobile
business?
Well fixed costs mainly involve R&D costs and software installation costs.
Variable costs involve warehousing and transportation costs, labor
surcharges etc.
Okayhas there been any change in any of the fixed and variable costs?
Not really.
Fine. So it seems like a revenue side problem. How has the sales fared as
compared to the previous year?
Sales have decreased by 21 % YoY.
Hmm. I am hypothesizing this to be a revenue side problem. I would now like
to know more about the volumes.
Sure. The sales volume of Samsung mobiles shows a decline of 18.5 % YoY.
Okayhas there been any changes in the pricing scheme?
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Yes. Samsung has re-aligned its product line a bit and targeted the mid-range
and low end market.
So it has focused both on low cost smart phones and lost volumes correct?
Yes.
Okaynow I would like to know which countries are the biggest markets of
Samsung mobiles are.
Sure. China and India form two of the biggest markets of Samsung mobiles.
Okayso as far as sales are concerned, considering the Chinese market first,
what is the standing of Samsung after Q4 2014 wrt Q4 2013?
So going by the market share, Samsung is currently at fifth with a market
share of about 8 %. It was the market leader after Q4 2013 with a market
share of 19 %.
Hmm...There seems to be a drastic decrease in sales of Samsung in the Chinese
market. And how does the picture look like in India?
Well Samsung is the market leader in India after Q4 2014 with a market share
of 22 %, down from 38 % it had about the same time a year back.

Okayit looks like our client has lost a significant market share in two of its
biggest markets over the past year. So can I know a bit more in detail about
the industry structure, as in who are the major competitors of our client in
these two markets?
So let me start with China first. The main competitors of Samsung there are
the homegrown Xiaomi, Lenovo, Huawei and Apple. In India, Samsung mainly
competes with the local Smartphone maker Micromax. Homegrown
companies like Intex, Lava and a host of other Smartphone makers including
Xiaomi form the rest of the market.

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Okay. So let me consider China again first. Have the market shares of all the
competitors increased significantly or is it just one particular company?
Good question. So in China, Xiaomi has upstaged Samsung as the market
leader, increasing its market share from 6 % (Q4 2013) to 14% (Q4 2014).
Any similar observations made in India?
Sort of. Micromax has increased its market share from 8 % (Q4 2013) to 18
% (Q4 2014).
Okay...so let me summarize this. Our client has lost out on its market share in
two of its biggest markets, and its competitors have significantly gained over
the past year in both of these countries. I would now like to know about
Samsungs product line, marketing and pricing strategy, distribution network,
the core features of its phones etc.
Cool. So Samsung created its Galaxy sub-brand of smart phones to have a
distinguished brand identity, separate from its consumer electronics
business. It has historically focused on selling budget smart phones targeting
the low end and mid-range of the spectrum. The phones are sold through
retailers, with Samsung forging working relationships with them that allows
it to access even the remotest parts of a country. Samsungs phones typically
have larger screens, faster processors, higher quality cameras, and have been
first movers with technology like the 4G. Also Samsung is typically faster than
its competitors to bring out newer products into the market. Unlike
competitors like Apple, it does not have tie ups with large wireless service
providers, and relies on ad campaigns to market its product.
OkayI will now deal with Samsungs main competitors on a case by case
basis. Picking Xiaomi first, can I know a bit more about its product line,
pricing strategy, distribution network etc.?
Sure. So Xiaomi typically sells smart phones in the low cost segment, with
most of its phones costing as low as half the price Samsungs with comparable
features. Its phones typically have a metal body. It uses what it calls as the
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flash sales on the e-commerce platforms to sell its products. Most of Xiaomi's
marketing is done through social media or word of mouth. It mainly focuses
on markets like China, India, Indonesia and avoids the West.
Is there any particular strategy that Xiaomi uses to keep its prices down?
Xiaomi maintains a small Smartphone portfolio, and takes as long as 2 years
to release a new model (as opposed to industry practices of 6-8 months). That
way it gets to use cheaper components for its phones in the later stages of
their selling horizon.
I would like to know the same about Micromax, as in the product line, pricing
strategy etc.
Sure. Well Micromax particularly targets users who are switching to smart
phones for the first time. It focuses mainly on the low cost and mid-range
market segments, and also goes for online flash sales over e-commerce
platforms. It also goes for new releases on a frequent basis.
What is the current share of smart phones in the Indian cellular phone
domain?
The share of smart phones users in India is just over 35 % of the total
number of cell phone users.
Okayso do Micromaxs phones carry any unique or innovative features?
Its phones have features such as availability of multiple local languages
catering to customers in different parts of the country. Also large screens are
a typical feature of its phones. Rest all features are pretty customary to the
industry.
Hmm Interesting. I will now take a minute to collect my thoughts, and after
that I will follow up with my synthesis and recommendations.

SYNTHESIS:

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Our client Samsung electronics has been experiencing declining profits for five
consecutive quarters now, owing to the reverses it has suffered in the smart phone
industry in two of its biggest markets - China and India. In both these countries,
Samsung is facing stiff competition from homegrown companies like Xiaomi and
Micromax who are selling cheaper smart phones with similar features. The
dependence of Samsung on its retailer network and the absence of an online
selling platform also seems to be hurting its sales, with an increasing fraction of
consumers now opting for the latter. Periodic product launches in the Chinese
market is not helping Samsungs case, with its rival Xiaomi cashing in on longer
average selling time per unit and cheaper component costs to manufacture its
phones and keep them low priced. Whereas the scenario in India is contrasting
with Samsung struggling to keep up with the frequent product launches of
Micromax.
RECOMMENDATIONS:
CHINA
The client should trim down its product portfolio in China, which would help it
capitalize on aggregation, and employ economies of scale while manufacturing
phones, that will help it reduce the inventory costs. It should also focus on
increasing the time span between its product launches, which would help it
utilize cheaper components for its phones, and keep its manufacturing and
subsequent product costs lower.
Since a larger fraction of consumers are now turning online for buying smart
phones, the client should explore the possibility of setting up an online
platform for selling its phones, that can come up with added features like preordering of yet-to-be-launched products, payment through EMIs etc. It should
also go for an active usage of social media for promotions and marketing, and
consider strategies like the live airing of product launches over YouTube.
It should also consider the possibility of relooking into the choice of materials
for manufacturing the body of its phones, and remodeling the look that would
help it go for a combination like a sturdy, light weight smart phone with a large
screen and a metallic look.
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INDIA
Since smart phones just form about 35 % of the Indian cell phone market, the
client should go for a two-pronged strategy to target both these sections of
mobile phone users: To target customers who are shifting from feature phones to smart phones,
Samsung should realign its product line to deliver low cost smart phones with
a user friendly interface whose attributes mimic feature phones, and include
perks like providing user controls in multiple local languages; the marketing of
which can be done through celebrity ad campaigns.
The client should explore the possibility of providing phones that come up with
factory installation of social media apps like Whatsapp, Instagram, Zomato etc.
for the first year after purchase, a move that has the possibility to attract both
the first time users and the youth.
To target the experienced smart phone users, the client can consider
establishing a separate sub brand of smart phones that has the capability of
launching new products on a rolling basis, and also explore setting up an
associated online platform to sell its phones. It should also tap into the social
media to promote its products.

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CASE 4: OLA Cabs (Cab service Firm)


OLA Cab Company runs a cab service. CEO has approached you with a problem
that his company is burning a huge amount of cash and still is in loses. So he needs
suggestion to improve his business.
___________________________________________________________________
Candidate: Since when the company is in loss?
Interviewer: The Company has never listed a profit.
Candidate: In which geography does the company operates?
Interviewer: The Company operates in more than 47 major cities.
Candidate: Are there any particular cities where the company is incurring loss?
Interviewer: No. The problem is uniform in all cities.
Candidate: I want to know if the problem is industry wide. Are the competitors
generating profit?
Interviewer: Most of our competitors like Uber cabs, Meru cabs etc. are not
generating any profits. However the market leader Mega cabs have generated
some profits.
Candidate: I would like to study the profit structure of Ola Cabs Company in
Mumbai to understand what the problem is and then proceed to suggest
recommendations.

Profit

Revenue

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Cost

Candidate: What is market share covered by Ola cabs?


Interviewer: Most the industry has not been tapped by any of the companies.
However we are among top 3 companies in the present market.

Candidate: I would like to know more about revenue model. How does the
company generate its Revenue?
Interviewer: Ola cabs charges the taxi owners a 10-15 percent commission on an
average. It does not own any vehicle of its own. It connects customers to taxi
drivers. The customers are charged INR 10 per kilometer.

Candidate: What is average distance covered by any cab per day?


Interviewer: it is approximately 150km.

Candidate: How many such taxis do we have contracts with?


Interviewer: There are approximately 300 taxis per city. On an average there is
addition of 1 taxi per city every day.

Candidate: Any other sources of revenue?


Interviewer: We charge the taxi owner INR 5000 per month for providing the
service. And also we get funded from various investors.

Candidate: The Revenue side looks okay except that you dont have enough
market share. I think you need to increase your market share. Now I would like to
look at Cost side. What are major segmentations of cost incurred by company?

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Interviewer: There are four major segments: Salaries of employees, marketing


and other administrative expenses, installation of GPS and various accessories in
newly recruited cabs to make it up to mark with Ola cabs and to Drivers that are
not earning more than INR 2000 we pay the amount left so that every driver
earns at least INR 2000 every day.

Candidate: Do you have specific Data on how much is spent in each of the
segments?
Interviewer: 40% of the amount is spend on paying drivers who earn less than
INR 2000 per day, 20% on installing various accessories in newly recruited cabs,
15% on salaries of employees and 5% on marketing and other administrative
expenses.

Recommendations:
Now to make profits we need to increase Revenue and decrease Costs incurred.
These could be done by:
To Increase Revenue: You need to increase the market share. So you must invest
in marketing to attract more customers. You can also buy small market players to
increase your market share.
To Decrease Cost: You can decrease the amount of rupees that you give to
drivers. Company could also recruit only those cabs that have GPS already
installed in it along with other necessary accessories. More could be spent on
marketing to get a long term profit.

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CASE 5: ABC Corporation (Manufacturing Firm)


ABC Corporation is an MNC having various consumable products. We have hired
you as a consultant because we feel that we are not cost effective. What
recommendation you can give to turn this around?
___________________________________________________________________
Candidate: Are your profits down?
Interviewer: No we are making profits.
Candidate: So the basic objective is to figure out where we can cut the cost right?
Interviewer: Yes
Candidate: What all products does the company manufacture?
Interviewer: The company manufactures biscuits, chips, chocolates, cold-drink
and 11 more consumable products.
Candidate: The various cost elements will be manufacturing cost, supply chain
cost, distribution cost & other administrative cost. Manufacturing cost will be
again subdivided into procurement cost, raw material cost and labor wages.
Do I need to consider any other cost element and do I need to take all these
factors differently for different products?
Interviewer: No, these elements are enough. Consider factors for all products to
be same like all factories are at different locations but nearly at same distance to
warehouse. Start with supply chain.
Candidate: Can you give information regarding company such as how many
manufacturing plants it has? Do all plants manufacture different products?
Interviewer: We have 15 manufacturing plant of which 10 are third party
manufacturing plants and 5 plants of its own. Each plant manufactures only one
type of product. Supply chain is common for all.
Candidate: Can you please explain the structure of distribution channel.

25 | P a g e

Interviewer: Raw material from suppliers is supplied to factory where production


is done. Then through transport, finished product is transferred to warehouse.
Then from warehouse products are delivered to retailer.
Candidate: As supply chain consist of inbound and outbound logistics. There will
be various raw materials for production of various products. Tell me the cost
aspect involved in raw material.
Interviewer: Focus on other issues.
Candidate: I will focus on transportation cost first. Where are the factories
located and how are the finished products transferred from factory to warehouse
and then to retailers?
Interviewer: Factories are located in remote locations & transportation is done
through trucks.
Candidate: As factories are located in remote locations, therefore there would be
no train connectivity. This means trucks are the only feasible option. Is it so?
Interviewer: Yes.
Candidate: What is the transportation cost and distance from factory to
warehouse?
Interviewer: Transportation cost is Rs 15 /unit/100km & average distance
traveled by trucks for transportation is 500km.
Candidate: Are the Transportation Company charges same to the major
competitors and what is the average distance traveled by trucks for
transportation for our major competitor?
Interviewer: Transportation charges are same for all & average distance traveled
by trucks for transportation for them is approximately 300km.
Candidate: Total Transportation Cost for ABC:
Transportation cost/unit/100km = Rs 15
Average distance traveled by trucks for transportation = 500 km
Total unit transferred in a month (Assumption) = 100,000 units
26 | P a g e

Transportation charge for 500km = Rs 15*5


= Rs 75/unit

Total transportation cost = 75*100,000


= Rs 7500,000

For Major competitor:


Transportation cost/unit/100km = Rs 15
Average distance traveled by trucks for transportation = 300 km
Total unit transferred in a month (Assumption) = 100,000 units
Transportation charge for 300km = Rs 15*3
= Rs 45/unit
Total transportation cost = 45*100,000
= Rs 4500,000
Difference in charge for ABC & major competitor due to different location
= 7500,000 4500,000
= Rs 30, 00,000/ month
So as from the figure it is evident that we are spending heavily on transportation
i.e. Rs 30 lakhs more than our major competitors so this is the actual reason for
high costs. So here we can cut the cost by relocating warehouses.
Interviewer: Fine enough
Candidate: Now I would like to focus on inventory management. How much
inventory do you store in your warehouse? What is the mechanism?
Interviewer: Around 1 month in advance. Usually every week, product is being
transferred depending upon the demand. Different products from different

27 | P a g e

factories are unloaded in the warehouse. Then according to the demand by


retailer we load the truck with different products and deliver it to them.
Candidate: Did you ever get shortage of inventory?
Interviewer: No.
Candidate: Though the system of sending mix blend of products to retailer is
better than sending different trucks delivering a single product, I believe
inventory in warehouse is quite high. If we reduce it then it would be very cost
effective. We can use the concept of cross docking i.e. unloading materials from
an incoming semi-trailer truck and loading these materials directly into outbound
trucks with little or no storage in between. This will streamline the supply chain,
reduce or eliminate warehousing cost, reducing inventory handling cost & reduce
the risk of inventory handling.
No need for large warehouse areas
Reduced time to reach customer.
Transportation has fuller loads for each trip and therefore a saving in
transportation costs while also being more environmentally friendly.
Products are moved more quickly through a cross dock.
Cross docking terminals are less expensive to construct than your average
warehouse.
Products destined for a similar end point can be transported as a full load,
reducing overall distribution cost.
So my recommendations are:
Proper inventory management
Cross docking
Interviewer: Well thats good approach. I think we have covered all major points
of the case & it was a nice conversation. Thank you & good luck.

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CASE 6: Watch Manufacturer


A Major Watch Manufacturer in India has been experiencing losses and also losing
its market share for the past 10 years. The CEO has hired you, to help him gain
profits and ultimately increase its market share.
It was the undisputed market leader a few decades back.
The watch manufacturer has been offering Mechanical watches
predominantly, along with quartz watches, since mid 1980s.
Preliminary Questions:
Can I know about the trend in watch industry?
Indian watch market is growing very well, with 25 million sales every year.
Did the company experience any significant decrease in revenue in the last
10 years related to any reduction in number of customers or the selling
price?
Yes, the revenues have decreased, due to reduction in number of customers
(demand).

On the cost side, has there been any significant increase in cost in the last
10 years related to any additional fixed or variable cost?
No, costs have been steady, more or less.

What about the competition. Have there been any new entrants on the
scene?
Actually, competition has increased. A couple of players have entered the
industry, eventually capturing the highest market share.

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Did the sales decrease for the watch industry overall?


No, there has been a general growing trend in the last few years. There
certainly has been increasing demand for the product.
Have the customers tastes & preferences been constantly changing, for the
past few years?
Yes, they have. The present day customers tend to buy quartz watches, with
latest designs.
Has there been any predominant target segment, the watch company has
been catering, since its inception?
Yes, it is the market leader in mechanical watches which serves to the lower
segment of the society.
Did the company, increase its product variety over the years, according to
customers tastes?
No, it did not pay much attention to aesthetics and design, while its
competitors kept innovating their products.
Did the company follow any marketing or promotional strategy effectively?
No, it couldnt keep pace with the changing consumer trends through product
advertising and promotions.
Has their production/manufacturing process been efficient?

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Yes, the company has good manufacturing and production units, which
enables effective production process.
Did the company use any technology, to reach its customers, over the years
as a part of marketing strategy?
No, its not been active as a website and also not been part of any social
networking site.
Key Findings:

Brand equity: The Company has a very strong brand image, because of its
quality and reliability.

The watch manufacturer did not give importance to R&D and design: It did
not pay much attention to aesthetics and design, eventually couldnt meet
the changing customer demands.
It was the market leader in mechanical watches which predominantly served
to the lower segment of the society.
The company couldnt implement effective marketing and promotional
strategies, to reach their customers.

Recommendations:
The watch manufacturer needs to capitalize on the strong brand equity it
has, and continue to serve the customers of lower segments (tier 2 and
rural).

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As it has good production and manufacturing units, it must capitalize on the


current trend and make rugged quartz watches according to the market
demand, at affordable prices.
As a strategy focused on the rejuvenation of the brand, the company has to
implement effective marketing (renovating outlets, making more efficient
distribution channels etc.) and advertising (celebrities, discounts, sponsoring
events etc.) activities.
Targeting niche market, the company should promote Mechanical Watches,
which is their strength - -mentioning its benefits (class, quality, precision and
historical value)

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CASE 7: Coca Cola (Soda Drink manufacturer)

The president of Coca Cola is worried about the falling sales of carbonated sodas
in US market. He has approached you to figure out what his company can to do
improve their sales. How would you approach this problem?
Candidate: Is selling carbonated sodas (Coca Cola) the primary business of the
company in terms of revenue generation?
Interviewer: Yes, it is the only business.

Candidate: Where does the client primarily operate?


Interviewer: The client operates in all major towns and cities of the US.

Candidate: Where do we lie in the value chain? Do we manufacture it and sell it


to distributors?
Interviewer: Yes, Production is in house.

Candidate: Since when have we been experiencing this decline in profits? How
much is this drop?
Interviewer: There has been a constant decline for the past 10 years and a rather
sharp one last year.
Total sales volume fell 3 percent in the previous year, which was the ninth straight
year of decline and the lowest since 1995. Soda sales fell 1.2 percent in 2013 and
1 percent in 2012.

Candidate: Is there a particular geography giving us trouble?

33 | P a g e

Interviewer: Sales have declined primarily in all metropolitan cities and major
towns.
Candidate: How is the rest of the soda selling industry doing in the country?
Interviewer: Soda sales in the United States grew throughout most of the 1990s,
before beginning to slow in 1999. Since then, there has been a decline and all
major competitors seem to be facing reduced profits as well.

Candidate: Are their losses as deep as ours?


Interviewer: Losses seem to uniformly harm the industry as a whole in terms of
percentage decline in sales.

Candidate: How are competitors outside of carbonated soda manufacturers such


as non-aerated drink manufacturers doing?
Interviewer: Stats show they arent suffering significant losses.

Candidate: Have they come up or have significantly increased their reach in the
past 2-3 years?
Interviewer: In fact, they have been seen to do quite well in recent years
according to their financial reports and stock prices. Seemingly due to healthoriented marketing campaigns, sales of non-aerated drinks increased by 3 percent
in the previous 3 years.

Synthesis:
Thats interesting. The reaction of the customers in general to carbonated sodas
has been on the down side, which in turn may have boosted sales of non-aerated
drinks. Additionally, it implies the problem might not be within the firm internally.

34 | P a g e

Articles from various sources such as the likes of Bloomberg state that constant
rumors of the presence of carcinogenic substance Aspartame in sodas have led
to people constantly avoiding carbonated drinks in the last few years. That may
be the cause of falling sales of Coca Cola. Moreover, an increase in socially
cautious awareness campaigns on social networking sites, popular blogs and
health magazines in recent years may have made the rumor very widespread in
the previous year. It seems logical that these campaigns saw greater response in
major towns and metropolitan cities, where the decline in sales were
geographically more prominent than other regions. That accompanied by the fact
that non-aerated beverages such as juices and energy drinks saw greater market
penetration and health consciousness of the masses of the USA has been steeply
increasing by the year.
Recommendations:
d. Being a giant in the carbonated beverage industry for more than a decade,
the client should primarily make sure whether the rumor is logical or
maybe just an anti-campaigning attempt by an unfair player.
If background checks show that carcinogenic substances are used in soda
production, it would be morally incorrect for the client to continue usage of
carcinogenic substances. Searching for quality substitutes should be the clients
immediate objective, if so is the case.
2. Perhaps not everyone in the industry is using such substances. If the client is
one of them, a socially awakening marketing campaign could be launched
addressing the immediate myth. Reports showing results of verified laboratory
tests advertised in newspapers, social networking sites and/or news channels
could prove to be very useful. Greater emphasis should be given on metropolitan
cities if budgets allow us. The word could spread from there to neighboring
towns.
3. Reducing the serving of each beverage bottle/can so as to abide by a maximum
permissible aspartame limit as per health laws.

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CASE 8: Adidas acquisition of Reebok


In early 2006, Adidas bought Reebok for $3.8 billion. Sales declined steadily in the
three years following the takeover. By refocusing Reebok on its 1980s market
strength selling aerobic shoes to women Adidas managed to turn the brand
around. But that turnaround could prove short-lived. Lately, Adidas has been
suffering losses too.
Preliminary Questions:
1.

What were the objectives of Adidas with respect to M&A?


Merger between Adidas and Reebok was an attempt to gain more market
share in US and to give a tough competition to Nike (No. 1 in the industry)
and Puma (No. 4) (Tribune LA).

2.

Which were the objectives that the M&A could not fulfill? What could the
possible reasons be?

3.

How big was the market? What were the markets growth figures?

4.

Who were the key competitors in the market? How profitable were
the competitors?

5.

Was it tough to bring both the companies under the same management
and/or manage the required work force to make the company streamlined
in the operations?

6.

Since both the brands share the global markets, did the companies face a
problem of cannibalization?

36 | P a g e

Synthesis
1. Were there any major changes that were made post the M&A? What were

they?
Adidas jumped on the bandwagon and started to sell its products online
leading to channel-conflicts with the retailers.
2. Has the cost of production changed? Which are the factors responsible for

it?
The company is facing higher raw material and wage cost (BBC Online).
This is one of the key threats to Adidas. Adidas has been thinking of closing down
some stores.

3. How did the external condition affect the companies?

Adidas made 5million Euros of net profit during the first quarter of 2009 which was
169million in 2008. Adidas blamed economic downturn as a basic cause for this.
BBC Online (2009)
4. Who else are the companies facing a competition from?

Apart from Nike and Puma and the fact that the market has been predicting a
merger soon, counterfeit products seem to plague this industry. The products
resemble the genuine products and end up deceiving some customers or becoming
a much attractive resort to the ones looking for the exact same product at a much
lesser cost. This has become a key threat to Adidas over the past years.
5. Culture is an important aspect when it comes to M&A. How smooth was the

transition?

37 | P a g e

Adidas needs to integrate Reebok in its business culture so that the two become
culturally fit. This might involve organizational change of either of Reebok or
Adidas.
Key Areas to look upon:

Market penetration:
Increased brand visibility globally-opening up of more stores in the emerging
markets like India and Sri Lanka.
More focus on Ads/sponsors for both the brand names. Adidas is not into
advertising on Indian television and hence the visibility is totally restricted.

Market Development:
Targeting the emerging markets by shifting focus.(Adidas is still seen as a
Europe-centric brand)
Product Development:
The brands need to use some cutting-edge technology to come up with new
products.
Reeboks easy-tone was a huge hit initially but it ended up paying $25 million
dollars as customer refunds when its claims regarding the easy-tone shoes
were struck down.
Reebok used to be a lead innovator in the fitness industry 30 years ago but
since then, Reebok and Aerobics, both have lost their sheen.

Diversification of Products:

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In countries like India, Soccer is not very popular as compared to Cricket. It


should Venture into Athletics, Cricket, Hockey and casual footwear to cater
to a wider population.

Recommendations:
The poor performance of Reebok continued from the very time that it was
acquired. In March 2007, Adidas admitted to the merger not being as successful as
it had hoped it to be.
Adidas blamed Reebok to be the basic reason as the group had 3.6% drop in the
overall gross margins by the end of 2007 (Marketingmagazine.co.uk).
Reebok has continued to struggle as part of Adidas and in 2012 was replaced as the
National Football Leagues apparel supplier.
Adidas may be better off selling it than trying to revive the brand.
After turning in the worst performance in Germanys benchmark DAX Index this
year, breakup estimates show that Adidas could recover at least 15 percent by
selling off Reebok and other businesses. At its current price, Adidas is getting no
credit for Reebok, the Taylor Made golf line, Rockport comfort shoes and CCM
Hockey skates.(Source: Bloomberg.com)

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CASE 9: Merging Anganwadi with Primary Schools


What is the size of primary education market in Anganwadis? What are the
financial costs and benefits of shifting kids studying at Anganwadis to government
(public) schools?
Note: Anganwadis were set up by the Integrated Child Development Services in
1975. They provide supplementary nutrition, non-formal pre-school education,
and health education, immunization, health check-up and referral services.
Unlike in formal public schools, anganwadis do not provide formal curriculumbased-pedagogy. They are most similar to day-care centers where basic hygiene
and moral education is imparted.

INTRODUCTION
In the present scenario, some of the criticisms of the ICDS system are that the
centres are often in the centre of town making travel distances large, food stocks
are often inadequate or of poor quality, the anganwadi workers are not trained
well enough to impart pre-school education to 3-6 year old children-leading to
increased dropout and there is a lack of coordination and monitoring of
Anganwadis at the district level.
Also, only 32% of Anganwadis have electricity connection, only 45% have access
to drinking water within their premises, 20% cook supplementary food in an open
space, and only 43% have access to toilets.
However an important service that the Anganwadis cater to is pre-natal care and
post-natal nutrition and immunization through designated Auxiliary Nurse
Midwifes (ANMs). Other social objectives include
Restraining child trafficking and child marriages.
Preventive care for diseases such as HIV-AIDS.
Addressing the problem of missing girl child.
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Market Sizing:
111Total Population
1.2 Billion

0-18yrs [15%]

18-25yrs [35%]

=54 mn

=126 mn

Urban (30%)

Rural(70%)

360 million

840 million

25-60yrs[40%]
=144mn

6080yrs[10%
]
=36 mn

018yrs[15%
]
=126mn

18-25yrs[35%]

25-60yrs[40%]

=294mn

=336mn

4 mn
0-6 yrs[33%]

0-6 yrs [33%]

=17.82mn

=41.58 mn

Anganwadi
&/Or
School=17.82

UC=10%
=1.782mn

No
school=0%

MC=30%
=5.346mn

Villages
with schools
=90%
=37.422mn

LC=40%
=7.128mn

Total=41.58mn

BPL=20%

=3.564mn

UC=10%
=4.158mn

41 | P a g e

Villages
without
schools=10%
=4.158mn

MC=20%
=8.316 mn

LC=38%
=15.8004mn

BPL=32%
=13.3056mn

2580yrs[10%]
=84mn

Stakeholder analysis:
1. Parents and children

Benefits:
Increased future salary earned by more literate children.

Costs:
1. Increased expenditure on education
2. Opportunity cost in wages earned by the children working in family
businesses/ on the fields.
Since the Govt. provides subsidy on books and uniforms. The expenditure on
education is fairly low till the secondary level education. In addition, the midday
meal scheme ensures that the child gets a balanced diet at least once a day. Also,
there is a huge difference between the opportunity cost of a child not going to the
field with what the child could possibly earn after completing his/her education.

2. Government
Benefits:
1. Educated workforce in future will lead to broader tax base, thus resulting in
greater flow of tax revenue.
2. Economies of scale will bring out better utilization of the resources employed
in Anganwadis as more number of people will now be benefitted of its
facilities due to greater proximity of primary schools as compared to present
Anganwadi centers.
3. This will help reducing the fertility rates, as more awareness will be there
among the population about contraceptives and it will also help reducing the
gender gap if school will impart gender sensitization classes.
4. It will help bring down the infant mortality, malnourishment rates as parents
42 | P a g e

will now rely on better monitored health care facilities and medicines and
diagnosis.
Costs:
1. Increased budgetary expenses on formal health care workers because of the
payments of retirement benefits unlike informal Anganwadi workers.
2. Increased expenditure on education in form of School Tuition Fee waiver,
increased quantity in mid-day meal meals, and few others.

3. Government Schools
Benefits:
1. Increased Primary Enrolment ratios- economies of scale of public schools in
reaching out to greater masses. The governments objective to attain 100%
primary education through public and private schools can only be achieved
by reaching out to the children in their preliminary stage.
2. Increased Retention ratios (reduced drop-out)-better child tracking through
attendance, smooth transition from pre-school to the first grade in the same
school. A parent allowing his child to receive an informal education in an
Anganwadi reflects his inclination towards child education. Therefore, it will
be less likely that these students will drop out after their pre-school.
3. Better Quality tracking- Standardized learning levels and curriculum in all
pre-primary schools. Anganwadi fails to offer a systematic curriculum to its
students. The syllabus varies widely from one Anganwadi to another.
Costs:
1. Wages of additional formal, Permanent Teachers. Unlike Anganwadi,
government school requires a permanent staff. If interpreted in a different
way, this can be seen as an opportunity to create jobs and increase
employability in India. Considering the qualification that is needed for a preprimary school teacher, it wont be tough to create such jobs.

43 | P a g e

2. Additional classrooms, maintenance and cleaning, electricity and water


supply, extra toilets (Infrastructure fixed costs). Since, we are planning to
initiate new classes altogether, it will require space, more maintenance
charge and will lead to increase in fixed costs.
3. Per child reimbursement of notebooks, textbooks and stationery, school
uniforms, chalk, blackboard etc. (Daily variable operating costs). Certainly,
such a strategy will result in greater operating costs which are difficult to
optimize.

Recommendations:
1. The government should exercise the scheme in regions where schools have
adequate space and decent amount of reserves to accommodate new
students without much hindrance. The scheme should be kept on hold in the
regions where schools fail to provide the necessary utilities.
2. The government, on a pilot scale, should target the regions that suffer from
weak primary enrolment ratios, retention ratios or an unpopular curriculum.

3. Merging the primary schools and the Anganwadis would ensure that the
food stocks are of good quality and it will make the transition from pre to
primary school easier. Thus, reducing the dropout rates.
4. The Govt. should also make arrangements to supply adequate amount of
electricity to the primary schools as it would serve the purpose for the
Anganwadis as well.
5. Government should decentralize the Anganwadis in the villages without a
primary school as it will create employment opportunities for widows and
single mothers and will also reduce the travel distance for the children.
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CASE 10: EDVICE


Edvice is a start-up that caters to engineering aspirants in Std. XI and XII. The
primary objective is to facilitate students with instant tutoring on the mobile
platform. Similar services already exist on the web medium. Considering the
potential of Indian market, what pricing strategy do you suggest?
Candidate: To start with, I would like to know the objectives of the company?
Interviewer: The Company is mainly looking for a major market share and trying
to achieve breakeven in 1 year.
Candidate: Okay, now I would like to take some time to synthesize the data.
Interviewer: Yeah sure.
Candidate: As you said that Edvice caters to the engineering aspirants, so do we
have any data on the number of consumers of this market?
Interviewer: Yeah, last year 15 lakhs students appeared for the JEE Mains
Examination.
Candidate: So even if we consider other students who appear for regional exams,
lets multiply the given number by 1.2
Interviewer: Sounds reasonable.
Candidate: So considering a market of 18 lakhs students, I would like to know
more about the product we are offering?
Interviewer: Okay, so its basically an instant tutoring service where the student
can ask doubts to the tutors and they will be answered in a short time.
Candidate: As we are looking into the business situation of the company, I would
like to know more about the company.
Interviewer: Okay. The company is in the nascent stage right now. The initial
capital cost is not that large.
Candidate: So as you just said that the initial capital cost is low, do we have any
quantitative data on how much the cost is?
Interviewer: Yeah the initial capital costs are 22 lakhs.
45 | P a g e

Candidate: Okay so now knowing about the consumers, product and the company
I would like to know about the competitors?
Interviewer: Yeah as I have said earlier, mainly the competitors are web based, so
rendering service on a mobile application gives us a competitive edge.
Candidate: So it seems that it being a mobile platform, adds to instant nature and
high convenience factor of the service, thus being the USP of the company.
Interviewer: Yeah.
Candidate: Do we have any data on the competitors revenues and market share?
Interviewer: No, we dont.
Candidate: As it seems that I have reached a dead-end here I would like to recreate my hypothesis and look at the market segmentation, and see which market
we should concentrate the most.
Interviewer: Okay, sounds reasonable.
Candidate: So considering a market of 18 lakhs students, I would like to know
about the segmentation of the market?
Interviewer: Yeah the market is mainly divided into three segmented on the basis
of students. The major market, constituting 85% of the market share are the
metropolitans and the city Kota, 10% to Tier 2 cities and 5% to Tier 3 cities.
Candidate: I would like to create a hypothesis that tries to look at the pricing
strategy of the company in the three segments, as it seems that price
discrimination is going to come in use here.
Interviewer: Yeah, sure.
Candidate: Our potential market share will be different depending on the
resources available to students. For an estimate, I would assume the share in the
tier1 cities as 1%, in tier2 cities as 2% and in tier3 cities as 5%. So as we can see
that our major market is tier3 cities as there is less resources in those cities
because consumers in the tier3 cities may not be having mobiles or they might
not be having fast net connectivity in their mobiles, so one of the
recommendation can be to collaborate with the cyber hubs in these cities and try
to improve the market share. Also, we can hold seminars in these tier 2 and tier 3
46 | P a g e

cities to increase awareness among the interested students and let them know
that they have the resources to assist them pursue their interests.
Interviewer: Okay, they are nice suggestions.
Candidate: So now as we know the percentage of consumers in the three
segments that is 1 % of the (85% of 18 lakhs) makes it 15300 and 2 % of (15% of
18 lakhs) makes it 5400 and 5% of (5% of 18 lakhs) which makes it 4500. So in
total there are 15300+5400+4500 = 22950 no. of students. I shall now assume a
reasonable monthly usage of our service by each student. In tier 1 , taking into
consideration the fact that they have many other resources, so they have
relatively less usage, that is, 0.5 hr./student/month and in tier2 cities
1hr/student/month and in tier3 cities 1hr/student/month.
Ill ask you for a minute and do the calculation so that considering the facts that
we might have to pay the middlemen for the cyber hubs and the costs involved in
holding the seminars in tier2 and tier3 cities so that we can achieve the breakeven
in 1 year and increase the market share.
Interviewer: Okay, go on.
Candidate: As we know that the initial costs of capital are 22 lakhs and
guesstimating the overhead costs for the cyber hubs and seminars to be 10 lakhs
that are total costs involved will be equal to 32 lakhs. Now I shall focus on the
price discrimination strategy. Seeing the trend on purchasing power of people in
different regions, I would price the service highest in tier1 and lowest in tier3.
Keeping the ratio 1:2:4, I would like to recommend 25paise/min to tier 3 cities,
50paise/ min to tier2 cities and Re 1/min to tier1 cities. This can be proved by the
following calculations that are taking three cases here, starting with
Tier10.5(hr/student/month)*12(months)*Rs1*0.0306(lakh students)*60(minutes) =
Rs12.96 lakhs
Tier21 (hr/student/month)*12(months)*Rs0.5*0.036(lakhstudents)*60(minutes) =
Rs12.96 lakhs
Tier 31 (hr/student/month)*12(months)*Rs0.25*0.036(lakhstudents)*60(minutes) =
Rs6.48 lakhs
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So adding the three revenue sources we get 12.96+12.96+6.48 = 32 lakhs (


48pprox..)
So we are achieving the breakeven in 1 year and we are trying to establish the
market first in the tier 2 and tier 3 cities and then expand further in the tier1
segment on the basis of the publicity received in the other two tiers.

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CASE 11: Consumer Packaged Goods (Cosmetics)


Your client is a global cosmetics player with operations across 100 countries. It has
been experiencing a decline in revenues over the past 3 years and have approached
you (McKinsey) to help them out. How would you proceed?

Candidate: In order to solve this, we would have to get some further information
and clarification. Who is the target audience for the product across various
geographical locations?
Interviewer: We operate in 100 locations with manufacturing base in US and we
focus on group consisting of both male and female population, selling to them via
multi-level marketing.
Candidate: Now, I would like to approach this problem via profitability framework
as we go along. First bifurcating the revenue into two parts i.e. number of units sold
and the revenue generated by selling each unit.
Candidate: I would now like to ask whether the number of units sold have gone
down or up, or have remained stagnant? Kindly give the breakup across various
regions.
Interviewer: Assume that the no. of units sold have gone down since last year.
Candidate: Is there a demand side constraint or supply side constraint? Has the
revenue per unit sold gone up, down or remained stagnant?
Interviewer: I would like you to focus on the supply side issue. Assume
revenue/unit to be constant. What are the different kinds of segmentation that you
would like to delve into?
Candidate: The segmentation strategy that I would like to use is as follows:

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Interviewer: Which area would you like to focus upon?


Candidate: I would like to focus specifically on the distribution channel and the
customer segment.
Interviewer: Alright.
Candidate: Since there is a problem on the supply side, our product is not able to
reach the appropriate amount of audience.
Interviewer: Correct.
Candidate: This means that the first problem is with the accessibility of the product.
Is our product a high end one in the developing countries?
Interviewer: Yes. As mentioned earlier, we follow the multi-level marketing model
and therefore, the product is relatively expensive in a few countries.
Candidate: So our product only caters to the upper class. Are the customers
satisfied with the product, I mean, is it effective and attractive?
Interviewer: Yes. But there are no statistics available.
Candidate: Have we made any kind of changes in the product in terms of packaging
or composition?
Interviewer: No.

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Candidate: Alright. This implies that the revenue decline has nothing to do with the
quality of the product as that has been maintained constant over the years. But
since the sales of our product have gone down, we can assume that the customers
are not loyal towards our brand.
Interviewer: Go on.
Candidate: According to my analysis, the major problem lies with the distribution
channel because of which our product is not very affordable and accessible.
Secondly, the customers in the developing countries like India are preferring a
product which might be lesser in quality but is more suitable in terms of cost.
Interviewer: We want to understand our clients data in-depth. Could you have a
look and suggest whats happening?

Total Revenue
United Kingdom
Netherlands
Germany
Indonesia
Phillipines
India
Revenues (USD, mn)

Market Growth
United Kingdom
Netherlands
Germany
Indonesia
Phillipines
India
Market Growth (%)

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Profitability
United Kingdom
Netherlands
Germany
Indonesia
Phillipines
India

Profitability (%)

Candidate:
It seems that 80% of the revenues are obtained from 20% countries. Since
these countries have long tails in the revenue chart, it is recommended that
the client should shrink his expansion by exiting from the regions where
there is low market growth, low revenue and low profitability. For example,
Germany and Netherlands.
The data also infers that the markets of Philippines & Indonesia have high
profitability, therefore, we should retain operations despite earning average
revenues.
Indian & South African markets are growing very rapidly, hence, we should
invest into sales & marketing department to tap into the future growth
potential.
Interviewer: Our client wants to predict the revenues for the India & South Africa
markets. What all data would you need to go about the same?
Candidate: We would be needing information about their respective current
revenue, current market share, market growth rate and client growth rate relative
to market growth rate.
[Devising the formula to calculate projected sales:
Projected Revenues = Projected Market Size * Projected Market Share
= [Market Size * (1+Market Growth Rate)] *Projected
Market Share
= [(Current Revenues/Current Market Share) *
(1+Market Growth Rate)] * [Current Market Share* (1+ CGMG*)]
* client growth rate relative to market growth rate]

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Interviewer: Here are the above data points, as requested. Kindly calculate the final
figure.
South Africa: Market Growth Rate=10%, Current Revenue= 10 million USD,
Current Market Share=30%, CGMG=5%
India: Market Growth Rate=6%, Current Revenue= 5 million USD, Current
Market Share=10%, CGMG=5%
Candidate: Projected Revenues for South Africa = 11.55 mn USD, India = 5.565 mn
USD.
Interviewer: Sounds like a reasonable prediction. I think we had a nice
conversation. Thank you!

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CASE 12: GANGA STORE


M/s Ganga Shoppe is a small privately owned retail shop in Pilani .There is a cut
off in majority customer base of M/s Ganga that led to massive fall in the
revenues.
As a consultant to Mr. Raju the owner of Ganga Shoppe, how would you go
about advising him to increase revenues in his new business environment?
Candidate: Sir, I would like to know about the business better. What kind of
retailing they are into?
Interviewer: Its a retail shop in Pilani that deals with sale of daily use
commodities, packed food, stationary and mobile recharges.
Candidate: I would like to know about the region of operation of the store.
Interviewer: The store is located just outside the BITS Pilani campus gate, thus
easily accessible for the students.
Candidate: Who are the customers they cater?
Interviewer: Customers are the residents of Vidya Nagar and students of BITS
Pilani.
Candidate: Do we have any data about customer wise sales distribution?
Interviewer: We dont have any numerical data on this, but its just that, majority
of its sale was from BITS students only.
Candidate: How many competitors do they have?
Interviewer: There are not as such any major competitor located near to the
store. Some small stationary shop and canteens are there, which are distributed
across the campus of BITS Pilani and some retail shops are there at Connaught
place.
Candidate: As I understand, the store had the location advantage, as college
students had an easy access to the store. Do we have any other advantages over
the competitors?
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Interviewer: We are having a cost leadership i.e. we are able to sell products at
lower rates than the competitors, especially in stationary and packed food items.
Candidate: Do we have any data about past performance of the store?
Interviewer: Nothing specific, we just know that revenues have decreased by 2530%
Candidate: Are competitors also facing these declining sales?
Interviewer: No their sales are rather increased.
Candidate: Alright this means that the market demand has not decreased.
Rather the customer are shifting from the ganga store to the other competitors.
So, we need to find out a reason for this.
I would like to ask if there is any change in prices or the product mixture at the
ganga store?
Interviewer: Prices and product mix are nearly same.
Candidate: New business environment. What do we mean by this?
Interviewer: As we have mentioned that store is located near the campus gate
but due to some unidentified reasons that gate is not open any more. So,
students have to take longer route to get to the store.
Candidate: Despite of having a cost-leadership and also the constant market size,
I guess the decrease in sales is only because, the gate near the store is closed due
to which the college students are not able to access the store facilities.
Interviewer: This looks alright.
Candidate: Now in this situation, I think our main concern should be finding an
alternative to reach students. I would like to look at each of our product
separately to get a better understanding of the situation.
So, I would like to know if there is any outlet near the institute which has the
same location advantage.
Interviewer: Yeah. There is one S9 shop and some redis with same location
advantage.
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Candidate: What kind of products they sell?


Interviewer: S9 is primarily a Photocopy shop while the redis provides you
general canteen food but they do not focus much onto packed food items.
Candidate: Well, in that case these outlets can be used to our advantage.
As you said that S9 is primarily a photocopy shop, thus choosing it as an outlet for
our stationary items will complement his photocopy facilities thus result into
more customers for both.
Similarly, for our packed food items we can choose these redis. Because of cost
leadership our products can attract more students to these redis and thus both
will be benefited from this collaboration.
Candidate: As you have mentioned we also have mobile recharge facilities. Can
you tell me more about this, as in how it operates?
Interviewer: For mobile recharges customers have to come at shop, where either
they can buy recharge coupons or get their mobiles online recharged by giving
their mobile numbers at the shop.
Candidate: As the problem being identified I would like to give some suggestions
for increasing its revenues
1. The store can try to change its product mixture, like focusing on groceries
which are consumed by the local residents so that it can compensate for its
decreased students demand.
2. Also they can make their facilities available for students inside the campus
itself. Like, for mobile recharges they can have student representatives.
People who wants to recharge, can give their numbers to these
representatives who will further pass it on to the shop. The revenues can
be collected weekly from representative.
3. As the store is having a cost leadership, they can try to collaborate with
some other shops inside the college campus and can have the business on
the profit sharing basis.
4. Also they can try to have their food stall during a college fest which can
help them to gain a huge market share.

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Apart from these, I would suggest our client to approach the authorities and
negotiate with them to open the gate for some fixed duration if not for the whole
day.

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CASE 13: CONTACT LENS


Our Client, Cryzal Ltd, is a leading supplier of Eye health care products in India.
They have recently come up with a special kind of Contact Lens which would
prevent the user from gaining myopic eye power. Should they sell this in the
market?

Candidate: I would explore the following areas and in the process hopefully
would get insights to whether or not this Contact Lens sounds like an attractive
option for our client. First, Id like to learn more about the client. Then Id like to
understand the market potential, then assess competitive trends and finally focus
on the particular product in question and the clients ability to execute with
regard to bringing this product to market.
Interviewer: Sounds good. Go ahead with it.
Candidate: Can you give me a few more details about the client.
Interviewer: They are an established Eye health care products manufacturer.
Their core competency is to manufacture superior quality eye care products. Their
annual profit for the year 2014-15 was Rs 1250 Cr, so they are a fairly large
company.
Candidate: Do we know how strong their brand is in the customers mind? How
strong are their marketing skills? The reason I ask is to understand whether or not
our client is best suited to bring this product to market, if there is demand for it.
Interviewer: Their brand is pretty well known, but not necessarily directly by the
end customer. They have not done any marketing in the traditional sense and
have no advertising experience at all.
Candidate: Oh, I see. If they traditionally have not interacted directly with the
customer, how does their value chain look like?

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Interviewer: Good question. They deal largely with distributors, who in turn sell
the products to retailers. The retailers handle the relationship with the end
customers.
Candidate: Great. I would now like to explore their value chain a little further.
How powerful are these intermediaries, and would the client want to continue to
use them in bringing this new product to the market?
Interviewer: The client prefers to continue using the intermediaries. They are
reluctant to try things that they are not necessarily experienced in.
Candidate: Interesting. Now I would like to concentrate on the market potential.
Do we have any data on the Market Size?
Interviewer: Not really but how would you go about sizing the market?
Candidate: I start off by asking the selling price of the product so that I can figure
out the correct customer segment.
Interviewer: The company plans to sell each pair for about Rs 10,000/-.
Candidate: Wow, thats a lot of money for a pair of lens. Ok, so based on this
price I think I have a good idea of who the customers are going to be.
The customers who can afford this price would be High Net worth Individuals and
would belong to the top 2% of the population. Assuming Indias population to be
1 Billion, which gives us 20 million people who can afford it. Now I would divide
this segment by age.
20 Million

0-10
25%

25
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10-20
25%

20-45
25%

>45
25%

We can directly ignore the 0-10 and > 45 age groups as the former age group
would not use contact lens and in the latter age group Hypermetropia sets in.
So now we are let off with 10 Million, of which we can assume that 40% have eye
related issues. That gives us 4 Million people. They can be further classified based
on gender as Women would prefer Contact lens more than Men due to
appearance, profession etc.
Interviewer: Lets not dig any further. Go ahead with the 4 Million figure.
Candidate: Ok. So our Market Size would be 4 Million pairs. Assuming that we can
target a 20% market share, we would generate Rs 8 Billion in revenues.
Interviewer: Okay. What else would you want to look at before you can make a
final recommendation?
Candidate: Id like to evaluate the costs involved with this product launch. One
thing to make sure is to ensure the product makes a profit. Also, let me try to
understand if there are any competitive products in the market, how they are
priced and if indeed there is a demand for these products.
Interviewer: That would be a good thing. Anyway, looks like we are out of time.
Have a nice day!

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CASE 14: AIRPORT DEVELOPMENT CO.


Our client is an airport development company, which wants to design a new fuel
system for an existing airport. Suggest ways on how you will reduce the cost.
Candidate: So our client an airport development company and it wants to design
a new fuel system which will bring down the cost of an existing airport. I have to
suggest ways to do it.
Interviewer: Yes
Candidate: I want to know the current fuel system very well, then I shall identify
avenues to cut costs. Then I shall try to estimate how much money we will have to
invest, and in how much time that money can be recovered.
Interviewer: Yes, that sounds like a good plan.
Candidate: To start, may I know the current fuel system? How is fuel transported
to the airplanes?
Interviewer: Currently, fuel is transported from the source to the tanks through
pipes, from where the tanks carry it to the airplanes.
Candidate: So, the cost is mainly from these sources tanks, pipelines. Pipeline
costs were only the initial cost involved to set them up, so we need to find ways
of reducing cost in other areas. Now, major reduction in costs can be done in the
tanks. Is it possible to get low cost tanks from other sellers?
Interviewer: No, the current seller provides the best quality tanks at a relatively
lower cost.
Candidate: Well, may I know the exact cost of such tanks? And how many such
tanks do we have?
Interviewer: One tank costs Rs. 10lakh, and we have 10 such tanks feeding 400
airplanes.
Candidate: What is the operating cost of such tanks?
Interviewer: Each tank needs 2 workers with a salary of Rs.20,000 each, and Rs.
5000 worth of fuel; and needs 40 trips per day.
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Candidate: Can we reduce the number of trips?


Interviewer: No, as the airport is one of the busiest airports, that much amount
of fuel needs to be supplied.
Candidate: Do we have any data on the capacity of the tank?
Interviewer: Each tank has a capacity of about 20,000 liters.
Candidate: If we buy tanks of capacity 40,000 liters, we can cut down on the
number of trips required, and hence the labor cost. So, we are basically halving
the labor cost required, as well as the time to refill the tanks. Labor costs can also

Costs

Pipes

Tanks

Number of
tanks

Operating
cost per tank

be reduced by optimizing the amount of labor used based on the traffic (11pm5am = low traffic, 5am-11am = medium traffic, 11am-11pm = high traffic).
Candidate: So, may I know the cost of these bigger tanks?
Interviewer: Its around Rs.16 lakhs.
Candidate: Well, we can cut down on that cost also by optimizing the height,
thickness, paint, material used. Let the resale value of the current tanks be Rs.7
lakh. Then, by selling them, we get Rs. 70 lakh, and by buying 5 bigger tanks, we
pay Rs. 80lakh. The difference of Rs. 10 lakh can be easily covered by saving
labour within 10,00,000/40,000 = 25 months, which is roughly around 2 years.
Interviewer: Well done, crisp and to the point.

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CASE 15: HIGHWAY TENDER


Our Client is a private road-construction company. Recently a government tender
has been issued for constructing a Delhi-Gurgaon Highway. What should be the
bid?
Preliminary questions
Which model should I go for?
Assume Build-Operate-Transfer model. Here, the government bears the cost for
land acquisition, license and legal clearances, a certain percentage of project cost
and provision of other amenities to the constructor. The constructor gets the
return on investment through government subsidies and revenue from toll
collection within a certain concession period.
Whats the desired profit?
Take it 40% of investment. Assume depreciation to be accounted herein.
Whats the stretch of road between Delhi and Gurgaon?
30 km
Whats the government subsidy?
The government shall bear 20% of the construction cost.
Whats the concession period?
Its the period of time during which the constructor earns from the service by
charging a certain toll amount from each vehicle. You may take this period as 10
years and assume round trip.

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ISSUE TREE:
Profits

Project
Cost

Revenues

Govt
subsidy

Toll
revenue

Labor

Raw
materials

Id assume the construction cost for 1 km stretch of highway lane is Rs. 1 cr. Is this
reasonable?
Yes
This makes the project cost to be 30 cr and returns expected (40%) to be 12 cr. The
government overs 20% of project cost, i.e. 6 cr. Thus, revenue from toll collection
over the period of 10 years shall be found.
Profits = Revenue- Cost
12 cr = (6 cr + Toll revenue) 30 cr
Toll revenue = 36 cr
OK. Where are you headed now?
I shall now proceed with the estimation of vehicular traffic on the highway. Id
exempt two wheelers, rickshaws and other slow moving vehicles from the toll
charge. From the numbers estimated, I would suggest toll charge for cars and light
passenger vehicles (I.e. buses). Is there any prominent origin of traffic in the
vicinity?
The layout seems good. Yes, there is an international airport located in Gurgaon
that will be the major source of traffic.
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I would now segment the problem on the basis of traffic.

Traffic

From Airport

Domestic
passengers

Office goers
(Eg. Airport
staff)

International
passengers

School goers

Bus

Cars

Assumptions:
A domestic flight arrives every 1 min and an international flight arrives every 2
mins.
Each flight carries 75 passengers.
There are no other buses running other than the school buses.
On a daily average, 750 cars cater to office goers.
There are 5 schools in Gurgaon that require commuting from Delhi. Thus on an
average, 5 buses and 100 cars cater to school goers daily.
I would now estimate the traffic originating from the airport.
OK. Put thought into traffic diversion enroute.
Assumptions:
International passengers contribute to higher usage of highway as Delhi is the
node to reach any major tourist destination (eg.Taj Mahal, Agra).
Each cab is pooled by 4 passengers.
Using 300 operating number of days in a year.

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Daily Traffic
from Airport

Domestic
(24*60*60)s * (1
flight/60s) * (75
passengers/ flight)= 1.08
lac passengers

50% use
highway

50% diverted

International
(24*60*60)s * (1 flight/120s)
* (75 passengers/ flight)=
0.54 lac passengers

80% use
highway

20% diverted

Average Daily estimateNumber of people coming from airport using the highway= (1.08 lac * 0.5) + (0.54
lac * 0.8) = 0.972 lac
Number of resulting cars on the highway= 0.972 lac/4= 24,300
Total daily vehicular traffic= (24,300+ 750 + 100) cars + 5 buses
= 25150 cars + 5 buses
Total yearly traffic= (25150*300) cars + (5*300) buses
= 75 lac cars + 1500 buses
Total traffic in 10 years = 750 lac cars + 15000 buses
Toll tax on car = Rs. x/ round trip
Toll tax on bus = Rs. (x+2)/ round trip
750 lac * x + 1500 * (x+2) = 3600 lac
The calculations yield the toll tax on car as Rs. 5 and on bus as Rs. 7

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CASE 16: McDonalds in Pilani


BITS Pilani is situated in a village, with the closest city being 200 km away. In spite
of its small size, it provides a huge teenage populace, with various Birla schools
and the university present in the village. The only eateries in Pilani are local
restaurants, with not a single food chain being present here. To try and take
advantage of this situation, Mr. Shah, the Rajasthan head of McDonalds has hired
you as a consultant to see if they reach a break even in 4 years if they open a
franchise in Pilani.
Objective: To see if Break-even point is reached in 4 years from opening.
Break Even Point= Revenue Costs
= {Revenue Variable Costs} Fixed Costs
COSTS:
1) Fixed Costs
(a) Cost for getting franchise= Rs.10,00,00,000
(b)Machinery Setup Cost+ I= Rs. 1,00,00,000
The total fixed cost is Rs. 11,00,00,000
2) Variable Costs
(a)Inventory Cost for 4 years= 30,00,00,000
(b) Maintenance of Machinery for 4 years= Rs. 50,00,000
I Employee Cost
Average number of employees in one Mcdonalds restaurant = 100
Average Employee salary= Rs. 1,00,000 p.a.
Employee cost = Rs. 1,00,00,000
Assumption no increase in salary
(d) Operating Costs ( Electricity Cost)
Cost of 1 unit of electricity = Rs 7
Number of units used in a month= 25000 KWh
So cost for one year = Rs. 25000 x 7 x 12
= Rs. 2100000
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So cost for 4 years = Rs.8400000 (ideally)


But we must account for hike in electricity rates, so assuming 4 % increase per
year, the cost for 4 years= Rs. 90,00,000
Total Variable Cost = Rs 32,40,00,000
REVENUE:
Revenue per annum
(Number of Customers) x (Average amount spent during one visit) x (Number of
visits made) x12
*All above classes are monthly basis.
Customers
Ideal Customer Base (SAM) =Serviceable Available Market
People in the age group of 10- 25 years will serve as the customers.
Dividing into two categories:
Age group 10-18 years
Number of Schools: 17
Average strength of 17 schools= 17x(number of classes )x(number of sections )x(
strength of section)
= 17x 8 x 4 x 30
= 16320
Age group 18-25 years
Number of Colleges: 4
Average strength of 4 colleges= 4x( 4000)
= 16000
So SAM is 32320.
Actual (Real) Customer Base (SOM) = Serviceable Obtainable Market
From the Ideal Customer base, only 70 % will actually be our customers, due to
various factors like
location, expenses, non- acceptance of the brand (mentality).
70% of 32320= 22624
SOM = 22624
Number of customers served: 22,624
Average Amount spent in one visit : Rs 100
Number of visits made : 3
Revenue for one year= 22624 x 100 x 3 x 12
= Rs. 8,14,46,400.
Revenue for 4 years = Rs 32,57,85,600

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Now Revenue for 4 years, will be calculated by assuming no gradual growth rate
in the four years.
Also 4 % of revenue is given to McDonalds as a rule
So Actual Revenue to consider= Rs 31,27,54,176
Now (Revenue Variable Costs) Fixed costs
31,27,54,176 32,40,00,000- 11,00,00,000= - Rs 12,12,45,824
Conclusion:
As the calculations shows a heavy negative value, it means that in 4 years, the
Mcdonalds restaurant will not break even, and still be in a loss.

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CASE 17: DRONE TECHNOLOGY


You are a scientific innovator who has come with drone technology to deliver
products for an e-commerce website. Evaluate whether you would sell it for $200
Million to a P.E firm or should you start your own business.
This is a typical question based on valuation framework. Such questions are
special type of business guesstimate in which the target variable is the value of
the firm. We would have to follow the same set of steps involved in a typical
guesstimate with a few extra technical concepts. In such type of questions, the
Interviewer would not expect you to do a precise valuation analysis. Instead, you
would be required to find out the worth of a business or a product line.
There are 2 basic approaches to solve such cases: Discounted Cash Flow Method
and Industry Multiple Method. (Please go through these concepts from relevant
sources)
Approach:
Identify Cost Drivers of the Business:
1. Raw Materials
2. Fuel
3. Employee/Labor Cost
4. Real Estate: Buildings and Warehouses for storage and development of
the product
Work out a guesstimate of the total costs incurred to the company or the
initial investment of the company:
- Raw Materials- Lets say that the raw materials required for building the
product are wires, motors, micro controllers etc. The normal mechanics
(rods, joints and physical parts) would not cost more than $100 to $150.
Cost of Motors = $100. Cost of Micro-controller = $100-$150 (All these
values are based on preliminary research of the market prices).
Therefore, the average cost of raw materials for building one unit of the
product is around $400.
- Fuel- Electricity Cost = $ 200 - $250 per month.

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- Employee- Salary = $70000-$80000 per annum (For researchers in the


field of robotics and computer science)
- Rents/ Real Estate Cost= $ 30000 per year
- Lets assume that the company has taken about 3 years of research to
come up with the product.
Total Cost= 400*200(average number of units produced in the period) +
250*12*3 (fuel cost for three years) + $75000*3*10 (Average labor cost)
+ $ 30000 * 3 (real estate cost)
= $2429000 = approximately $2.5 million
From the above guesstimate we see that the initial investment in the
business is much less than that we are receiving from the PE firm ($200
million)
That seems like a fair deal for the business but in the recent years the
drone technology has proved to be very beneficial in different spheres and
businesses.
Also, there has been an unprecedented increase in the profits of
technology based business and ecommerce startups. In the past 4-5 years
there has been an average growth of 150% in technology and ecommerce
startups.
Therefore, the company certainly has a great scope doing great in the
logistics business.
Also, since the firm is the innovator of the drone technology for delivery of
products it will also get the advantage of being the first entrant and
product differentiation in the Logistics Segment.
The firm should not sell the technology to the PE firm and start with its own
business as that is much more profitable in the long term.
Further calculations can be shown with the estimations of projected
revenue and profitability of firm in future years.

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CASE 18: FURNITURE MANUFACTURER


A manufacturer-cum-retailer of furniture, Lakdi ki Kathi, wants to enter into
supplying to the institutional segment. Currently, a majority of its clients are in the
retail segment. What all factors do you think the CEO must consider before making
the big move.
Preliminary Question
Where does the company lies in the supply chain in sourcing raw materials,
manufacturing, distribution, retailing, after sales servicing and repairing?
We manufacture, distribute and retail all our products.

Can you tell me a little more about the furniture we are currently sellingWhat is its USP? And what all do we currently manufacture

We currently make home furniture including sofa sets, tables, chairs, beds,

home cabinets. We are aiming to woo some of the larger multi-national


companies at BKC to supply office cabinets to them.

Are we planning to stick to a particular region/city or expanding operations


across India?

For the time being well be restricting our operations to Mumbai only.

What are the objectives we have in mind while going for this expansion?

We want to increase the profitability, and grab a sizeable market share by

expanding horizontally into a large segment of the furniture market that has
been growing rapidly in the recent months.
Hypothesis
Lakdi ki Kathi must invest to supply to office/schools and other institutional
customers.
Synergy:

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1. Do we have the expertise in making office cabinets? Do we have established


supplier links , distribution networks and customer relataions?
In the very beginning we will need to hire professionals from fellow
competitors or through other sources that specialize in this segment.
Supplier links will be done from scratch but customer base would not be that
big a problem since we have been doing fairly well in the retail segment.
2. Do we have spare capacity? If not, what is the investment required to ramp
up to meet the new demand
We do not have a spare capacity since we were dealing with lesser quantity
of products and now we are dealing with bulk. A considerable investment
would be required and a part of that would be financed through loans.
3. How visible is our brand to the customers at BKC? Do we have the right kind
of client-facing managerial organization to serve institutional rather than
retail clients?
Hasnt been tried yet but since we have a good rapport in the retail segment,
it will be possible to get clients.
Risks:
1. How many competitors do we have and what is their market share? What

are the switching costs for our client?


There are 5 competitors in this segment and each of them having a sizable
market share. These include big brands as well. The only reason why a
customer would reach out to us would be because of cost advantage and
better quality of service.
2. Can we differentiate about cabinet in terms of quality, durability, price, range

of products and the maintenance?


The finishing and the entire product quality would be largely dependent on
the specialists that we are able to hire. But looking at our retail segments,
they do match and are even better than that of the competitors.
Conclusion :
We should go ahead with the investment because of the following 3 points
1. The barriers to entry to supply to offices in BKC are low, and the client's cost
of changing their current cabinet suppliers is also low.
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2. We have sufficient ability to differentiate our cabinets to suit the needs and
tastes of our clients .
3. We are able to recover our cost of investing within the payback period and
are also able to meet profit numbers.
Caveats :
1. We should scenario-test our numbers with a more conservative market
share estimate, keeping a check for threat of new entrants.
2. We should look for technological solutions that can help reduce the marginal
costs, thus boosting our profits numbers.
3. For our clients at BKC, we might want to have a look at our organisational
structure and set up separate sales and marketing, finance and legal teams.

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THANK YOU!

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