案例手冊(cè)2008小灶計(jì)劃

ROSSSCHOOLOFBUSINESS

Casebook2008

RossConsultingClub

Note:ThisdocumentisfortheuseofRossConsultingClubmembersonly.ReproducingortransmittinganypartofthisdocumentinanyformorbyanymeanswithouttheexplicitpermissionoftheRossConsultingClubBoardisprohibited.

Case1:FilmProduction,Bain&Company 2

Difficulty:medium

Case2:OfficeVendinServices,Bain&Company 6

Difficulty:hard

Case3:RetailBrokerage,McKinsey&Company 14

Difficulty:hard

Case4:SlotCity,Bain&Company 18

Difficulty:medium

Case5:PlastiCo,TheBostonConsultingGroup 21

Difficulty:medium

Case6:SmallDrugManufacturer,Bain&Company 24

Difficulty:medium

Case7:FastFoodChain,TheBostonConsultingGroup 29

Difficulty:medium

Case8:ApacheHelicopters,Bain&Company 31

Difficulty:hard

Case9:ElectronicWarehouse,McKinsey&Company 34

Difficulty:medium

Case10:GroceryChain,McKinsey&Company 36

Difficulty:medium

Case11:PaperCompany,Accenture 39

Difficulty:medium

Case12:PharmaAcquisition,McKinsey&Company 42

Difficulty:medium

Case13:NationalMagazine,TheBostonConsultingGrou 44

Difficulty:easy

Case14:WindTurbines,Booz&Company 46

Difficulty:hard

Case15:EngineManufacturer,Accenture 50

Difficulty:medium

Case16:TaxPreparer,DiamondManagementConsultants 52

Difficulty:medium

Case17:StateSocilaServices,Bain&Company 54

Difficulty:medium

Case18:MutualFund,McKinsey&Company 57

Difficulty:medium

Case19:AcquisitionDiagnostics,SiemensManagementConsulting 59

Difficulty:medium

Case20:CasinoGame,Accenture 61

Difficulty:easy

(Source:InterviewcasefromBain&Company,Round1)

Context:

Theclientisalargefilmproductionstudio,FilmCo,whichdevelopsanddistributesfull-lengthfeaturefilmsfortheU.S.andinternationalmarkets.

FilmCoisplanningonreleasingitsbigbudgetfilmoftheyearninemonthsfromnowandisconsideringanewreleasestrategy.Thefirstcomponentofthestrategyistoreleasethemovieinheatersonthesamedayaroundtheworld.ThesecondcomponentofthestrategyistoreleasetheDVDofthemovieday-and-date(meaningreleasingtheDVDthesamedayasthetheaterrelease).FilmCoisinterestedinknowingwhetherthisisthebestreleasestrategyforthismovieand,ifnot,FilmCowouldthenliketoknowwhatitsreleasestrategyshouldbe.

ThemainquestiontoanswerisifthenewstrategyFilmCoisconsideringisbetterthantheusualreleasestrategyinthemovieindustry.

ToassessthisweneedtoseewhichofthereleasesbringsmoreprofitstoFilmCo.

RegularStrategy:Weneedtoestimatetherevenuesthatcouldbegeneratedandcostsinvolvedwiththistypeofrelease(whichisfrommyknowledge:theaterreleaseintheUSfollowedbytheaterreleaseinternationally,DVDreleaseinternationally).Inordertoestimatetheexpectedrevenues,Iwouldlookatsimilartypeofmoviesandtheireconomics

Newstrategy:Iwouldstartbycheckingifthisstrategywaseverusedandtheresultsitbrought.ThenIwouldestimatethechangesinrevenues,costsofthisstrategyversustheregularone.

Finally,Ibelieveweneedtocheckifthereareanyregulationregardinginternationaltheaterreleaseandhowtheseregulationswillaffectournewstrategy

Itcomesdowntodecidingbetweentwooptionsontwodimensions:

ReleasingtheDVDtogetherwiththemovieorseparately

ReleasingthemovieinthesamedaygloballyorinfirstintheUSandthenaroundtheworld

Informationprovideduponrequest:

FilmCohasdoneasimultaneousglobaltheaterrelease,butneversimultaneouswiththeDVDrelease.

OnlyonemoviehaseverbeensimultaneouslyreleasedtheatricallyandthroughDVD,anditwasbyasmall,independentfilmcompany.

Thefilmisthethirdmovieofanactionseries.Theprevioustwofilmswereproducedbyanotherstudio,sowehavenofinancialdataonthem.

ThesimultaneoustheatricalandDVDreleaseisexpectedtocausea20%decreaseinrevenuefromtheaterticketsalesanda25%increaseinDVDsales.

Themarketingcampaignforthemovieisexpectedtobe$50M,whilethemarketingcampaignfortheDVDisexpectedtobe$5M.Withthesimultaneousrelease,noDVDmarketingcampaignisrequired.Piratingmoviesaccountsfora20%lossintotaltheaterrevenue.Asimultaneousglobaltheaterreleasewillcutthisdownby25%.

(TheinterviewershouldthencalculatetheexpectedrevenuefromthetheaterreleaseandfromtheDVDreleaseusingsecondandthirdslidesandotherinformationthathe/shegathered)

20

Estimatedtheaterrevenue=$500M?14+$250M?3+$100M?2+$50M?1

EstimatedDVDrevenue=$400M*30%/60%=$200million

=$400million

(todecidebetweengoingsimultaneouslywiththetheaterandDVDreleaseversusgoingseparatelythecandidateneedtocalculatetheprofitsgeneratedbythetwostrategies)

Simultaneous

Separate

Theaterrevenue

$400M*80%

$400M

DVDrevenue

$200M*125%

$200M

(Marketingcost)

$50M

$55M

Profit(beforeothercommoncosts) $520M $545M

(todecideiftheyshouldgogloballyforthetheaterreleaseorsimultaneous,thecandidateneedstocalculatetheimpactonpiracy)

$400M=revenueearned(80%oftotalpossiblerevenue)

Unearnedrevenues(lossesduetopiracy)intheregularstrategy:$400M/0.8-$400M=$100MUnearnedrevenues(lossesduetopiracy)inthenewstrategy:75%*$100M=$75M

(Agoodcandidatewillmakearecommendation)

IrecommendFilmCoshoulddoasimultaneousglobaltheaterreleasebutadelayedDVDreleasebecause:

DelayedDVDreleasewouldgenerate$25Madditionalrevenue

Simultaneousglobaltheaterreleasewillsave$25Mbydecreasingpiracy

Howevertherearesomerisksinvolvedwiththisstrategy.WithglobalreleasewecannotreducespendingincasethemoviefailsintheUS.Therearealsorisksregardingtheproblemsthatmaybecausedbygovernmentsimpedingordelayingthereleaseintheirrespectivecountries.

Weneedtoinvestigatefurthertheseaspectsbeforegoingforwardwiththeplan.

(Source:MockCaseInterviewfromBain&Company)

Context:

OfficeVendingServicesInc.(OVS)isthemarketleaderinofficevendingmachineservices.Thebusinessservicesprovidedincludesalesanddeliveryofproduct,restockingofmachines,andrepairoffaultyequipment.Profitsaresubstantiallydowninthebusiness.

TheCEOofOfficeVendingServicesneedsBaintoassesstherootcausesoftheprofitabilitydecline

GoodFramework:

Therearemanywaystogoaboutsolvingthisproblem.Keypointstobringupinaframeworkinclude:

WhatishappeningwithOVS’srevenueandcosts?

Canaskinterviewee–whatdoyouthinkarethemajorcostbucketsforafirmlikeOVS?

(examples–deliverycosts,SGA,COGS,etc.)

Customers–Arewantsandneedsbeingmet?

Competition–Howisthecompetitiondoing?Aretherenewentrants?Bigrivals?Substitutes?

Keyslidetake-away-s

Ex1–OVSrevenuedecreasingpast2-years;rateofdecreaseisincreasing;Down8%from’96–’97;down13%’97–’98.(Intervieweeshouldbegintothinkaboutwhatthedriversoftherevenuedecreaseareandmayaskforifarevenuebreakoutisavailable)

Ex2–OVScostsdecreasingpast2years;rateofcostdecreaseisincreasing,butisnotkeepingpacewiththerateofrevenuedecline;Down4%from’96-’97;down7.5%’97–’98.(Intervieweeshouldbegintothinkaboutwherethecostreductionsarecomingfromandwhatthedriversare.MayaskforacostbreakoutforOVS.)

Ex3–Volumeofdeliveriesaredroppingoverthepastfewyears.Whatisthedriver?CanhaveIntervieweespeculate.

Ex4–Averagepriceperdeliveryhasremainedstable;sorevenueperdeliveryhasnotdropped.

Ex5–OVSisdominantplayerinmarketbuthasbeenlosingmarketshare–20%overthepast2-years.Intervieweeshouldbeabletoestimatethecompetitors’marketsize,aswellasthepercentageofthemarketOVScurrentlyhas.

OVSRevenue:$200M(40%ofmarket)

VendInt.Revenue:$130M(26%ofmarket)

Candy&PopRevenue:$110M(22%ofmarket)

OtherRevenue:$60M(12%ofmarket)

ItisalsoimportantfortheintervieweetoseethatVendhasgrownthefastestat40%.ItwillbeimportanttounderstandhowVendhasgrown–whatdoesVenddowellthathasallowedthemtobesosuccessfuloverthepastfewyears?

Ex6–ShouldseewhatattributesareimportanttocustomersandhowOVSranksversustheircompetitors.Thetop2forcustomers(PriceandDeliveryReliability)arewhereOVSscoresthelowest.Conversely,Vendscoresthehighestinthesetwocategories.Additionally,OVSscoresverywellinProductVarietyandMachineService/Repair,yetthesearenotnearlyasimportanttocustomers.

IntervieweeshouldbegintomakelinksbetweenwhathasallowedVendtogrow(meetingcustomerneeds)whileOVSlosesmarketshare.

Ex7–SameasEx6,justingraphicalformat;samekeyinformationshouldbeobtained.

Ex8–Therearemanytake-away-sformthisslide.

First,intervieweeshouldseethatOVS’sCOGS,SGAandRepaircostsaresignificantlyhigher(roughly100%)thanthecompetition.Additionally,OVS’scostsfordeliveryareinlinewiththeircompetitors,despitehighermarketshare–whichwouldcorrelatetothepoorcustomersatisfactionwhenitcomestodelivery.ThismaybegintosuggestthatOVScouldreducecostsinCOGS(reduceproductvarietysinceitisn’tasimportanttocustomers;getbetterpricesifbuyinglargervolumesoffewerproducts),reducerepaircosts(again,notasimportanttocustomers)andreallocatesomeofthistodeliverytoincreasecustomersatisfaction.SGAmayalsoseeaslightreductionascomplexityinordering,laborandotherlineitemsasfewerproductsareorderedandrepairsarereduced.

Also,intervieweecancalculateeachfirm’sprofitmargininordertocomparetheminamoredirectmanner.

OVS:200/200=0%

Vend:117/130=10%

Candy:98/110=11%

ThisclearlyshowsthatOVS’sprofitmarginisnon-existentandthattheircompetitorsarerunningamoreefficientoperation.

Ex9–OVS’scostperdeliveryis9.5%higherthanthecompetition.Also,thebreakoutoftheoverallcostswithineachdeliverydiffers:

OVS’sCOGSandSGAperdeliveryarehigher(roughly70%oftotaldeliverycostversus50%)

OVS’sdeliverybucketoftheoverallcostperdeliveryisroughlyhalfthecostofthecompetition–again,notmeetingcustomers’needandspendinglessthanothervendors.

Ex10–OVShasbeenreducingcostsacrosstheboard,butthelargestreductionhascomefromdeliveries–whichisclearlyimpactingtheoverallbusiness.Thesmalldecreasesintheotherlargebuckets,hasnotsignificantlyimpactedoverallcosts.

Conclusion

Whatistheoverallissuewithprofitability?

Profitmarginiscurrent0%comparedto10%and11%fortwolargestcompetitors

OVSisreducingcosts,butrevenueisdroppingfasterthancostsare

OVShasreducedcostssignificantlyinDelivery,yetthisisthemostimportantattributetocustomers

OVShasnotreducedcostsmuchinCOGS,yetPriceisveryimportanttocustomers

Notmeetingcustomers’needs:

PriceandDeliveryarethemostimportantbutOVSscoreslowestinthesecategories;competitorsaremeetingcustomers’needsandarestealingshareawayfromOVS

OVS’sspendingonProductVarietyandRepairaresignificantlyhigherthantheindustryspendsandareinareasthatcustomersdonotvalueasmuch–needtoreallocateandreduce

Potentialnextsteps:

LooktoreduceCOGS,SGAandrepaircosts

AreductioninproductvarietycoulddecreaseCOGSthrougheconomiesofscale–OVSwouldpurchasehighervolumesoffewerproducts,lowercost/unit

Reductioninvarietymayalsoreducecostsofdeliveryastherewouldbefewerproductstocarryinvehicles(moredeliveriespossible)andmayreducethetime/complexityofrefillingamachine

Increasespendondeliverytoimprovecustomersatisfaction(moreresearchneeded)

Moredrivers

Bettervehicles

Moreefficientdeliveryroutes

OfficeVendingServicesrevenues

Source:OfficeVendingServices,Inc.FinancialStatements

CHI

2

Ex1:OfficeVendingServicesrevenue

OfficeVendingServicescosts

Source:OfficeVendingServices,Inc.FinancialStatements

CHI

3

Ex2:OfficeVendingServicescost

Volumesold(deliveries)

Source:OfficeVendingServicesFinancialReports

CHI

4

Ex3:OfficeVendingServicesvolumesold

OfficeVendingServicesaverageprice(perdelivery)

Priceperdelivery

Source:OfficeVendingServicesPricingData

CHI

5

Ex4:OfficeVendingServiceshistoricalpricing

Totalmarketsales

Total:3%

17%

Others

22%

Candy&PopCo

VendInternational

44%

OfficeVendingServices

(20%)

Source:MarketResearch;CompanyAnnualReports;OfficeVendingServicesFinancials

CHI

6

Ex5:OfficeVendingServicesmarkettrend

OfficeVendingServices

VendInternational

Candy&PopCo.

ProductVariety/Selection

10

Customerratingofimportance/performance

10

ImportanceCand&PopCo

VendInternational

OfficeVendingServices

Importance/Performance:1=Low,10=High

Source:BainCustomer/MarketResearchforOfficeVendingServices(n=3500)

CHI

8

Ex7:Customersatisfaction

Ex8:Competitorcomparison(1998)

Competitor Revenue

OfficeVending$200MServices

Vend $130M

International

Candy& $110MPopCo.

Source:FinancialStatements&AnnualReports

Costofgoodssold

SG&A

expense

Directlabor(delivery)

Directlabor(repair)

$30M

$17M

$15M

CHI

Othercosts

$70M

$60M

$30M

$10M

$35M

$30M

$30M

$5M

$32M

$22M

$23M

$6M

9

Costperdelivery

Other

RepairDelivery

SG&A

COGS

Source:FinancialStatements&AnnualReports

CHI

10

Ex9:OfficeVendingServicescostperdelivery(versuscompetitors)

Costs

Total:(11%)

Repair

0%

(14%)

Delivery

(25%)

SG&A

(8%)

COGS

(7%)

Source:OfficeVendingServicesFinancialStatements

CHI

11

Ex10:OfficeVendingServicescoststructure(historicaltrend)

(Source:CaseInterviewfromMcKinsey&Company,Round1)

Context:

OurclientisaretailBrokeragefirmwithannualrevenuesof$5B.TheyareoperatingthroughouttheUSwith200branchesopened.Halfofthesebranchesarecorporateandhalfarefranchised.

Interviewer:Whataretheeconomicsofthisbusiness?

Agoodanswerwillidentifythefollowings:

InordertoanalyzetheeconomicsofthebusinessIneedtofindmoreinformationabouttheirrevenuesandcosts.ThenIwouldliketolookintowhatcompetitionisdoingonthemarket,howsegmentedthemarketisandwhoaretheconsumersandwhataretheirneeds.

Ontherevenueside,Ineedtounderstandwheretheirrevenuesarecomingfromandthenbreakitintothetwocomponentspriceandquantity

Onthecostside,Iwouldliketolookatthefixedandvariablecosts:

Fixedcosts:

SG&A

ITsystem

Marketing

Variablecosts:

Labor

Othercostrelatedtocommissions,fees

NextthingthatIwouldliketolookintoiswhatcompetitionisdoing:howmanycompetitorsdowehave,aretherenewcompetitorsinthemarket,havetheystolensharefromus,aretheyofferingservicesthatwearenot

Wealsoneedtounderstandhowtheoverallmarketisdoing:isitgrowingorshrinking;howsegmentedthemarketisandiftherearespecificitiesrelatedtoregions

Further,theconsumer:whoarethey,whatdotheywanthowourclient’sproductsmeettheirneeds

Informationtobeprovideduponrequest:

Revenuescomefrom2differentdivisions:

Trading:$3B

AssetManagement:$2B

Tradingmeansthatbrokersdospecifictransactionsaspertheircustomer’srequests.Therevenueinthisdivisionwouldcomefromafixedfeeof$10pertransaction.

IntheAssetManagementdivision,thefirmisadministeringthecustomer’smoneyandtherevenuescomefromapercentagefromthetotalamountadministeredassetswhichis1%

Costs:

Fixedcosts:$1B

$800M–IT($700MfromTradingand$100MfromAM)

$100M–Marketing

$100M–SG&A

Variablecosts:

Trading:

Commissiontobrokers:40%ofrevenues

Othercosts:$2pertransactionAssetManagement:

Commissiontobrokers:40%ofrevenues

Feetoanoutsourcingfirmthatismanagingtheassets:0.4%

Intervieweeshouldnowdothecalculationsfortheprofits:

Profits=Revenues–Costs

Tradingdivision:

Revenues=$3B

FixedCosts=$700M(IT)+$60M(Mkt.-proratedfromtherevenues)+$60M(SG&A-proratedfromtherevenues)=$820M

Variablecosts:

Commission:40%ofthe$10fee=$4pertransactionOther=$2pertransaction

Numberoftransactions=$3B/$10=300MVariablecosts=$6*300,000=$1.8B

Assetmanagementdivision:

Revenues=$2B

FixedCosts=$100M(IT)+$40M(Mkt.-proratedfromtherevenues)+$40M(SG&A-proratedfromtherevenues)=$180M

Variablecosts:

Commission:40%ofthe$2Brevenue=$800M

Feefortheoutsourcingcompany=0.4%ofthe$200Btotaladministeredassets=$800MTotalassets=$2B/1%=$200B

Variablecosts=$1.6B

Profits:

Tradingprofits=$3B-$1.8B-$0.82=$380M(12.66%)

AssetManagementprofits=$2B-$180M-$1.6B=$220M(11%)

AgoodcandidatewillalsoobservethatAssetManagementisslightlymoreprofitablethantrading.

Interviewer:Nowwearealmostinaneconomicdepression.Whatwouldhappentothisfirmifaneconomicrecessionwouldhappennextyear?Calculatebyhowmuchtheyneedtoincreasethenumberoftransactions/assetsmanagednowinordertobreakevenineachdivisionincaseofrecession.

InordertodothatIneedtoknowwhathappenedwiththisfirmatthelastrecessioninordertotrytobenchmarktheeffects.

(iftheintervieweedoesnotaskforpastrecessioneffectsasktobrainstormonhowtheycanestimatetheeffectsoftheincomingrecessiontilltheygettothisanswer)

Interviewer:

Numberoftransactiondecreasedby50%Assetsmanageddecreasedby15%

ForTrading:

Ifx=numberoftransactionneedednow

#transaction*revenuepertransaction=fixedcosts+#transaction*variablecostpertransaction(50%

*x)*$10=$820M+(50%*x)*$6x=410M

Theywillneedtoincreasethenumberoftransactionby~35%[(410M-300M)/300M].Idon’tthinkthisisfeasibleinashortperiodoftime,especiallyjustbeforearecession.

ForAssetmanagement:

Ify=amountsofassetsneedednow

Amountofassets*%ofassets=fixedcostsforassetmanagement+variablecostsforassetmanagement(80%*y)*1%=$180M+[(40%*1%*y*80%)+(0.4%*y*80%)]

y=$112.5B

Thereisnoriskofbecomingunprofitableinthisdivision.

Interviewer:Howcantheyaddresstheriskoftherecession(howcantheykeeptheprofitabilityatcurrentlevels)?

Theycaneithertrytoincreasetherevenuesordecreasethecosts:

Increaserevenues:

Changetheproductmix–getmoreassetmanagementbusinessbecauseitismoreprofitable

Advertise

Incentivizebrokerstogetmoreassets

Offermorebenefitsforcustomerscomingtousinsteadofcompetition

Extendofficelocations

Offernewproductsforcurrentcustomers

Putinplaceafieldsalesteamofbrokerstogetmoreassetsortradecustomerseitherbyattractingmoreandrichercustomersorbymakingthecurrentonesputmoremoneyin

Getmore,richercustomers

Increasethefeepertransactionorthepercentagefortheassetmanagement

Segmentthemarketanddifferentiatedependingoncustomer

Decreasecosts:

Fixedcosts:

ITseemstobethehighest:outsourceitbecauseitcanalsobringsomeotherbenefitslikeexpertisefromanITfirm,riskdispersionifitbreaksdown

Usecheapersystems,lessqualifiedlabor

Variablecosts:

Decreasethecommissionforbrokers

Gettheassetmanagementinhouse

Linkthecommissionofthebrokerstotheperformance;createanincentivesystemtoactuallymakethembringmorebusiness

(Source:CaseInterviewfromBain&Company,Round1)

Context:

GameCo.currentlyownsfourcasinosinSlotCity.CompetitorsarecontemplatingopeninguparivalcasinoinLibertyville.

GameCohashiredBaintoassesstheramificationsofacompetitoropeningacasinoinLibertyvilleandGameCo.’sstrategicoptions

Initialfacts:

CurrentlytherearenocasinosinLibertyville.TherearecompetingcasinosinSlotCitybuttheyarenotrelevantbecauseitisamaturemarket.

SlotCityhasa25%taxonrevenue.Libertyvillehasa50%taxonrevenues.

Question1:WhataretheramificationsforexistingrevenueifacasinoopensinLibertyville?Question2:WhatareGameCo’soptions?

ForQuestion1:

InordertoassesstheimplicationsofanewcasinoinLibertyvilleonGameCoweneedtounderstand:

Revenues:WhataretherevenuesofGameCoandwherethisrevenuecomesfrom(typeofservices,etc)

Geographiclocation:whereisLibertyvillelocatedinrelationtoSlotCity.WherearetherevenuesfromSlotCitycomingfromgeographically

Customers:WhoarethecustomersofGameCoandhowthiscustomersmayconsidergoingtocompetitioninLibertyville;howmanyaretheyandhowmanytheycanlosetocompetition

Interviewer(informationprovidedonlyonrequest):

GameCo.revenuesare$1.2B

Majorityofrevenuescomefrom4cities:SlotCity,Libertyville,GardenCity,MotorCity(showslide)GardenCityandMotorCityarenearby,approximately1hrfromSlotCity.Theyareboth~2hr.fromLibertyville.Libertyvilleis~1hrfromSlotCity.TherearenocasinosinMotorCityorGardenCityduetocityregulations

Customerbaseis1.8millionperyear.

(customersegmentationisakeyinsight)

(donotletthecandidatebecomeboggeddownintocalculatingcostsandestimatingprofits)

GameCo.Revenue

40%

35%

30%

25%

20%

15%

10%

5%

0%

MotorCity

SlotCity

GardenCity

Libertyville

Percentageofrevenue

Chartsgivenuponrequest:

Customersegmentation

PlugandChuggers:HardCoregamblerswhoonlywanttogambleandcaremostaboutconvenience(assumecasinopayoutsareidenticalacrosstheboard)

Vacationers:wantto“getaway”andleavetheareaforaweekorweekend

Experiencers:wanttolivethecasinoexperience(lights,shows,action,etc.)andareinterestedinthecasinoitselfandwhatithastooffer

Otherinformationgivenuponrequest:

Allcustomersareevenlydistributedacrosscities

Conversioninformation:(beforegivingthisinformationaskthecandidateforhis/heropinions)PlugandChuggerswillshunSlotCityforthenew,closercasino(100%conversion)VacationerswanttogetawaysowouldnotgototheLibertyvillecasino(0%conversion)

Experiencersmaytomaynotgosomewhereelse–arangeofanswersisacceptedbutassume50%forthecalculations

Important:assumetheadditionaldrivetimefromMCorGCtoLVwilldeteranysignificantnumberofthosecustomersfromdefectingtoLibertyville

Q1calculationsandinsights:

ForQuestion2:

TheoptionsthatGameCohasare:

Donothing

OpenacasinoinLibertyville

(Candidateshouldunderstandthatitismoredesirabletocannibalizewithinthecompanythantoallowoutsidecompetitorstostealtherevenue)

Recommendation:

GameCoshouldopenanewcasinoinLibertyville.ThenewcasinowillonlyaffectthecustomersinLibertyvilleduetothegeographicarea.Thecustomersdependingonthesegmentwillreactverydifferentlytotheopeningandalltheseneedstobeassessed.Howevertherearesomerisksassociated:competitoropensthecasinofirstandgetsthe1stmoveradvantagebyopeningtheircasinoearlierandtheremaybehighcostsofconstruction/operationofthenewcasino.

Bonusquestion:

HowcanGameCo.makeupforthelostrevenues?

Possibleanswerscaninclude:

Chargeanentrancefee

Eliminatesamenities(e.g.freedrinks)

Increaseotherrevenuestreams(food,hotel,etc.)

Stimulatenewcustomerdemandthrough:

Loyaltyprograms

Promotionalgiveaway-s/Increasedmarketing

TargetingcustomersincitiesnearLibertyvillebutfarfromSlotCityorviceversa

StealsharefromexistingcasinosinSlotCitythroughsimilarmeansaslistedabove

FUNFACT:BasedonarealcasewithSlotCity=AtlanticCity,Libertyville=Philadelphia,MotorCity=NewYork,GardenCity=NewJersey

(Source:CaseInterviewfromTheBostonConsultingGroup,Round2)

Context:

PlastiCocurrentlysellsthinlaminationfilmusedtomakeadvertisementsandsigns(thinkadsonthesideofthecitybusses,buildingsorbillboards)–soldinallmannersofcolorsandfinishes(matte,gloss,shiny,etc)

PlastiCocurrentlysellsitsmaterialintheUSAat10cents/sq.ft.

AEuropeancompetitorhasjustfinishedbuildingalaminationfactoryinLosAngelesandisapproachingourcustomersandofferingtosellthemproductat9cents/sq.ft.

PlastiCohiredBCGtohelpthemfigureoutiftheyshouldmatchthecompetitor’sprice.

Establishingthecaseandaskingformoreinformation

SoourclientisfacingcompetitionintheUSfromaEuropeanmanufacturer.Ourtaskistoevaluatethisthreatandadviceourcustomeronastrategytomatchornotmatchthecompetitor’sprice,BeforethatIneedsomemoreinformationonwhataretheproductsourcustomersellsandwhoarethecustomersofourclient.

Interviewer:

Thisplasticfilmismanufacturedingiantrollsandcannotbeeconomicallytransportedbyairandcannotsurvivetheharshconditionsofshipmentbysea.

Currentlythemajorityofsalesaretoindependentregionalsuppliers.Thereminderofsalesisshippeddirectlytomajoraccounts(majorAdCompanies,HomeDept.,etc).

Agoodstructureshouldincludethefollowing:

Therearetwooptionsforourclient:matchingthecompetitor’spriceornot.

Forassessingthefeasibilityofeachoftheoptions,Iwanttoinvestigatethefollowingareas:

theprofitsinbothcasesandthelongtermimplicationsofeitherapproach

Inordertodothat,weneedtolookattherevenuesandcosts.Weneedtoanalyzethetypeofproductsourcustomersellsandatwhatprice.Thenweneedtoassessthevariablecostsalongwiththefixedcosts

themarket:

marketsize;

themarketshareofourcustomerandhowmuchofitwouldbethreatenedbytheEuropeancompetitor

Interviewer:(informationgivenonlywhenrequested)Marketsize=1billionsq.ft.

Currentmarketshare=100%-IntervieweeshouldimmediatelyrealizethatitisaMonopoly

Thislaminationfilmisessentiallyacommodity(thecandidateshouldimmediatelyknowthatitmeansthatthecustomersaresensitivetopriceandwouldswitchtoacheaperversion)

Thenewcompetingplanthasonlycapacitytoproduce250millionsq.ft.peryear(25%ofthemarket)

75%ofPlastiCo’sproductscanbemanufacturedbythecompetitorwithnodiscernabledifference.Thecandidateshouldrealizethat25%oftheproductsaredifferentiatedproductsb/cituseshightechcoatingprocessthatpreventscolorsfromfading.

Additionalcandidateinsights:

BecauseitisaMonopoly,ourclientshouldattempttopriceashighaspossibletoconsumeallcustomer’swillingnesstopay.

Ourclientshouldconcentrateonthe25%