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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.
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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!
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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
37-40
41-45
10
Edvice (startup)
46-49
11
50-53
12
Ganga Store
55-57
13
Contact Lens
58-60
14
61-62
15
Highway Tender
63-66
16
McDonalds
67-69
17
Drone Technology
70-71
18
Furniture Manufacturer
72-74
19
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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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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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?
__________________________________________________________________
_
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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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Profit
Revenue
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Cost
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: 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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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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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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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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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: 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.
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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: 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.
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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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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?
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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.
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?
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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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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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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%]
=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
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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
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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.
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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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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
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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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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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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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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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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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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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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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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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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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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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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,
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?
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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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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