Full Name: _________________________________________________________________________________

Phone: ___________________________________ e-mail: __________________________________________

College: ___________________________________Course: _________________________________________

Graduation date: Jul 2015 Dec 2015 Jul 2016 Dec 2016 Jul 2017
Dec 2017 Jul 2018 Dec 2018 Jul 2019

Other _____________________ Date:________________

Test Duration: 60 minutes

Business Case
Case I Case II
1 A B C D E 8 A B C D E

9 A B C D E
2 A B C D E
10 A B C D E
3 A B C D E
11 A B C D E

4 A B C D E 12 A B C D E

13 A B C D E
5 A B C D E
14 A B C D E
6 A B C D E
15 A B C D E
7 A B C D E 16 A B C D E

Critical Reasoning Questions

17 A B C D E 19 A B C D E

18 A B C D E 20 A B C D E

Basic Instructions

1. Please write your personal details in capital letters

2. You cannot use a calculator
3. Only answers in the answer sheet will be considered valid
4. If there is erasure in the answer sheet, the answer will be annulled
5. Unless explicitly noted, drawing are for illustration only not drawn to scale

A.T. Kearney | 36/17954/dtp_Admission tests 2017 1

Case I: Paper Co.
Paper Co. is a multinational paper merchant company. The company buys paper from pulp &
paper producers and then distributes to large retailers or, in some cases, directly to end-
consumers.
Paper Co. was founded 50 years ago and quickly became a European paper supplier. Thanks
to consecutive acquisitions, the company gained a significant presence throughout Europe:
Portugal, Spain, France, Germany, Switzerland, Italy and, more recently, Greece.
The company has just reported its last year consolidated results and profits have declined (for
3 years in a row now). Sales reached 800 million EUR and total costs account for 850 million
EUR. Distribution costs account for 30% of sales: transportation costs (i.e., truck drivers, fuel
and truck leasing, depreciation and maintenance) represent 10% of sales while facilities costs
(i.e., warehouse maintenance, rent, utilities and warehouse personnel) represent
20% of sales.
The CEO has called A.T. Kearney to help him understand the reasons behind the decrease in
profitability amid steady growth in revenues. He states that this trend is not completely
unexpected as he is aware the company has not fully optimized its supply chain network and
that the consecutive acquisitions of small companies across Europe created an unintegrated
distribution network with rising costs and inefficiencies.

1. Which of the following statements best summarizes why the CEO called
A.T. Kearney?

A) The CEO wants A.T. Kearney to investigate how recent acquisitions have led to a
decrease in profitability
B) The CEO wants A.T. Kearney to investigate why the distribution costs have
increased over the last years despite steady growth in revenues
C) The CEO wants A.T. Kearney to investigate the decline in profitability because he is
not sure on what might be causing it
D) The CEO wants A.T. Kearney to investigate the decline in profitability but would not
be surprised if it has something to do with the rise of distribution costs
E) The CEO wants A.T. Kearney to help him understand how can the company grow by
acquiring small companies while properly integrating target companys distribution
network

2. How much would the transportation costs need to decrease in the next year for the
company to breakeven (i.e. make a profit of zero), considering that all other costs
remain unchanged in EUR and sales increase by 5%?

A) 1%
B) 5%
C) 10%
D) 13%
E) 15%

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The team decides to investigate in greater detail the distribution efficiency by looking at the
relation between distribution costs and sales in the different countries. Some preliminary data
on this is summarized in Exhibit 1.

Exhibit 1 Paper Co. distribution efficiency across Europe

3. Based on the data provided in Exhibit 1, which of the following statements is a

valid conclusion about Paper Co.s distribution efficiency?

A) Greece has the lowest distribution cost to sales ratio

B) Germany has the highest distribution cost to sales ratio
C) The distribution cost to sales ratio in Portugal is twice the distribution cost to sales
ratio in Spain
D) The distribution cost to sales ratio in Italy is higher than the one in Switzerland
E) The difference between the highest and lowest distribution cost to sales ratio is 20
percentage points

4. If the Portuguese subsidiary wants to reach the average efficiency of Spain and
France, by what percentage would its current distribution cost to sales ratio have
to decrease?

A) 5%
B) 10%
C) 35%
D) 50%
E) 80%

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5. Which of the following statements, if true, would be per se a valid reason for the
difference in unitary transportation costs across countries?

A) In some countries the transportation activity is outsourced

B) In some countries clients tend to make larger orders at a lower frequency
C) In some countries major clients and suppliers tend to be more disperse across the
countrys territory
D) In some countries Paper Co. has a large truck fleet
E) In some countries all transportation costs are variable (directly linked to the amount
of paper packages distributed)

The Head of Supply Chain of Paper Co. stated that the company is already taking some
actions to improve its distribution network bringing down transportation and facilities costs.
She noted that for the company to improve its profit in a sustainable way, distribution costs
would need to decrease 20% per year over the next two years and 10% on the two following
years, before reaching a steady-state point in year 5.

Exhibit 2 shows several scenarios for the evolution of Paper Co.s distribution costs in the
near future.

Exhibit 2 Scenarios for Paper Co's distribution costs over the next 6 years

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6. According to the Head of Supply Chain, which of the scenarios presented in Exhibit
2 would satisfy Paper Co. requirements?

A) Scenario A
B) Scenario B
C) Scenario C
D) Scenario D
E) Scenario E

7. If in year 6 sales and non-distribution costs were both 20% higher than in year 0,
and assuming scenario B of exhibit 2, which of the following values best
approximates Paper Co.s profit margin in year 6, as percentage?

A) 2%
B) 6%
C) 12%
D) 20%
E) 25%

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Case II: Call Corp.
Call Corp. is a major European-based third party service provider, specialized in call center
services. Its clients, major European companies needing a customer service front, outsource
Call Corp. for both outbound and inbound services. Outbound services are mainly used for
telemarketing, market research and solicitation of charitable donations. Inbound services are
provided for product support and information inquiries from customers of Call Corp.s clients.
Established more than 10 years ago, Call Corp. is recognized for its service quality and
reliability, a strategy adopted since its early days to try to differentiate itself from its
competitors.
Its business model is quite straightforward: clients hire Call Corp. to perform inbound or
outbound call center services for them, for which they pay an annual fee. This annual fee has
two components: (1) A fixed fee, calculated on an annual basis, based on the expected
number of calls received/made and; (2) Contingent fee, dependent on the achievement of
pre-agreed Service Level Agreements (SLA). SLA are pre-defined performance targets that
Call Corp. should achieve, such as average waiting time in line, donations obtained, client
satisfaction/complaints and so on.
Since its foundation, Call Corp. has consistently presented a strong growth, both in revenues
and profits, closing up on the 500 million EUR revenue mark. However, in the last 2 years,
profits have stagnated, affecting the companys profit margin (profit as a percentage of
revenues) and unsettling Call Corp.s management.

Table 1
10 years ago 6 years ago 2 years ago Today
Revenues (million EUR) 80 160 320 480
Profits (million EUR) 12 24 48 49

The CEO of Call Corp. is concerned about this recent trend, and hired A.T. Kearney to help
him understand the reasons behind this situation. He is especially apprehensive given the fact
that Call Corp. competitors, mainly operating in Asia and North America, are not facing the
same problem.

8. Which of the following, if true, would BEST explain the stagnation in profits?

A) Market saturation led to lower revenue growth in the last couple of years when
compared with the historical trend
B) Variable costs as a proportion of total costs have significantly increased over the last
two years
C) Labor costs have increased due to recent European legislation
D) Call Corp. recent strategy involved the offshoring (changing location) of the call
centers to countries with more cultural background variety, in order to facilitate multi-
language recruiting
E) An economic recession in Europe led to expenditure constraints from most of Call
Corp. clients, negatively influencing profits

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9. Which of the following statements is TRUE based on the data in Table 1?

A) Profits margin turned negative in the last 2 years

B) Adjusted for inflation, revenues grew by more than 20% in the last two years
C) Profits margin declined in the last 2 years
D) Profits growth rate have been negative in the last 2 years
E) Last two years presented the same revenue growth of 25% per annum

10. If revenues grow by 10% over the next year, by how much should the costs grow so
that the profit margin reaches similar levels to the ones presented 10 years ago?

A) 0%
B) 2%
C) 4%
D) 7%
E) 9%
When talking to the Head of Strategy, he expressed some concerns regarding the
discrepancy in the cost structures of the different countries in which Call Corp. operates.
In terms of geographical footprint, Call Corp. has call centers spread over 6 different
European countries, which are treated as independent Business Units with most of the
management decision taken at a local level. The costs incurred by Call Corp. can be divided
into three major items: Labor costs (i.e. wages paid to call center agents), Rents (i.e.
buildings rents and associated utilities including water, electricity and communications) and
General and Administrative costs (i.e. computers, phones, IT maintenance, office supplies,
training, marketing and other costs).

After looking into the Head of Strategys concerns, the team presented Exhibit 3 showing the
revenue breakdown for the different countries in which Call Corp. is present.

Exhibit 3 Todays revenue breakdown for Call Corp.

8%
4% 5%
Profit 12% 16% 10% 16%
16%
General and
15% 34%
Administrative 18%
32% 37%
Rents 28% 38%
36%

63%
54% 49%
Labor costs 45% 41%
30%

-5% -2%

Country A Country B Country C Country D Country E Country F

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11. Which of the following statements is TRUE, based on exhibit 3?

A) Country E presents the strongest savings potential in labor costs

B) Country B has the highest General and Administrative costs
C) Country E is negatively contributing to Call Corp.s profit margin
D) Country E and F are the main reasons for the stagnation of profits over the last
couple years
E) Despite negative profits, country E is the one with the highest revenue

12. Which of the following statements, if true, would BEST explain the discrepancies in
labor costs across countries, assuming employees handle the same number of
calls per hour?

A) The number of working hours per week varies across countries

B) Average hourly wage fluctuates from country to country depending on each labor
legislation standards
C) Minimum wages vary significantly across countries
D) The bargaining power of labor unions in some countries imposes a maximum
working week period and require certain wage levels
E) The average employees education level differs across countries

13. Country A has 80 million EUR revenues and country B has 60 million EUR
revenues. If, on average, each employee of both countries handles the same
number of calls and are paid the same wage, how many more calls (in %) are
handled in country A than in B?
A) 50%
B) 80%
C) 100%
D) 110%
E) 200%

14. Which of the following strategic decision would BEST help tackling the concerns
identified by the Head of Strategy?

A) Report revenues and costs in a consolidated basis, in such a way that distinction
between countries is not possible anymore
B) Standardize as much as possible all kind of contracts and centralize sourcing
activities
C) Impose minimum profit margin targets across all countries
D) Adopt performance bonuses for employees, linked to the number of calls
successfully handled
E) Increase footprint in Eastern European countries

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15. If, in Country D, 10 employees take, on average, 5 calls per minute, how many
employees are necessary to take 50 calls in 10 min?

A) 5 employees
B) 10 employees
C) 15 employees
D) 20 employees
E) 25 employees

Virtual call centers, where employees work in a home-base regime, are a recent development
in the call center industry. This business model allows for considerable lower costs as rent
costs, one of the main expenditures of a call center, are almost zero. The CEO of Call Corp.
asks A.T. Kearney to further investigate the characteristics and trends of virtual call centers,
and its potential impacts for Call Corp.

16. Which of the following trends would be the LEAST important to address the CEOs
question?

A) Virtual call centers are estimated to be able to reduce costs by approximately 30%
B) Recent research shows that companies would be willing to hire virtual call centers,
despite being viewed as a less reliable service, as long as the price is low
C) In Europe, only a few call center service providers are starting to shift to a virtual
operation model
D) Although the costs to start a virtual call center are not higher than the ones for a
regular call center, the costs of changing from a regular to a virtual call center can
be significant
E) Developing countries will be the ones most harmed by the penetration of virtual call
centers

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Critical Reasoning Questions

17. An islander on Truth & Untruth is either a Truth-tellers who always tell the truth or a
Lying-liars who always lie. You come across three islanders and ask them, "How
many Truth-tellers are there among the three of you?". The one lying down
responds first, but she talks softly and you don't understand what she says. The
one seated beside her says, "My friend just said that there is one truth-teller among
us." But then the standing one counters, "Don't believe that, he's lying!"
What can you determine about the seated and standing inhabitants?

A) They are both Truth-tellers

B) They are both Lying-liars
C) The seated one is a Truth-teller, the standing one is a Lying-liar
D) It is impossible to tell what they are from this conversation alone
E) The seated one is a Lying-liar, the standing one is a Truth-teller
18. Three positive integers a, b, and c are such that their average is 20 and a b c. If
the median is (a + 11), what is the least possible value of c?

A) 23
B) 21
C) 25
D) 26
E) 24

19. The Strongbridge Hardwood Company is a major employer in the Strongbridge

area. New environmental regulations have recently made it so expensive for
companies to log in the area that the Strongbridge Hardwood Company will have to
move its operations to another state if it does not receive the financial assistance it
has requested from the local government. In order to prevent a dramatic increase in
local unemployment, the Strongbridge government is considering granting the
companys request.
Which of the following would be the most important for the Strongbridge company
to determine before making the decision?

A) Whether the wood produced by the company is sold within the Strongbridge area
B) Whether the company has any outsourcing plans for any of its important divisions
C) Whether the new environmental regulations present any clear benefits to
Strongbridge residents
D) Whether the Hardwood Company will use a small portion of the financial assistance
to update its safety procedures
E) Whether other hardwood companies are facing similar challenges following the new
environmental regulations

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20. Some people believe that the exhaustion of a long road trip poses the biggest
threat to a drivers safety. Other driving situations, however, are far more
dangerous. The sense of relaxation evoked by familiar neighborhoods induces
drivers to rely more on muscle memory and less on active input from their
surroundings. Such major lapses in attention are the reason most car accidents
occur near home.
Which of the following, if true, most seriously weakens the argument?

A) Most automobile travel is local

B) Residential streets are often more congested than country roads
C) Wet pavement accounts for about 16 percent of vehicle crashes
D) Studies have shown that drivers are far less likely to recall details from their daily
commutes than from long road trips to unfamiliar settings
E) There were fewer car accidents last year than in previous year

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