案例手册2008 2009小灶计划

DardenConsultingCasebook

2008-2009

Acknowledgements

Thefollowingindividualscontributedcasestothecasebookandwithouttheirtimeandeffortthiscasebookwouldnotbepossible.

GordonAvery–Classof2009

ArupBhattacharjee-Classof2009

MatthewConnor-Classof2009

MatthewHeim–Classof2009

Arnon(Arnie)Katz–Classof2009

JamesMitchell–Classof2008

MichaelMurphy–Classof2009

ShankarRaja–Classof2009

AnandRao–Classof2009

Yuan(York)Zhong-

Classof2008

2

CONSULTINGCASEINTERVIEW

BikeDVDRentalServiceinNYC

LevelofDifficulty(Selectlevelofdifficulty)

3

Question

Youfriendhasapproachedyouwithabusinessideaandwantsyouradvice.HewantstoopenaDVDRentalserviceinNewYorkCity,specificallyManhattan.DVDswouldbedeliveredtocustomersviadeliverypeopleonbicycles.Whatwouldyoutellyourfriend?

Note

Thiscasecombineselementsofwhatastudentmightseeinboth1stand2ndroundinterview.

ClarifyingQuestionsandAnswers

Providethefollowinganswersonlyiftheintervieweeasksthecorrespondingquestion.

Question

1.Whatkindofcompetitionexists?

Answer

AssumethatNetflixandcomparableservicesarenotavailable.Pushthestudenttocomeupwithlargechains(Blockbuster),localvideorentalstores,movietheaters,livetheater,etc.

Hewantstobreakevenwithin1year.

2.Whatisyourfriend’sacceptablebreakevenperiod?

5.WherewilltheDVDsbestored?

Theywillbestoredinyourfriend’sapartment(hehasplentyofspaceforthecollection).

Plan

ThisisaprimarilyaMarketSizingandProfitabilitycase,butalsoincludesotherelements..Theanalysismayinclude,butisnotlimitedto,thefollowingareas:

1.MarketSizingAnalysis(Detailsshowsinexcelsheetatend)

a.

EstimatethepopulationofManhattan–Pushthestudenttopickanumberaround2millionpeople.

EstimatetheaveragehouseholdsizeinManhattan–Pushthestudenttopick2(lowerthanthe3personaverageforthecountryduetoahighernumberofsingles)

EstimatetheportionofthehouseholdsthatyourfriendwillbeabletoservebasedonhavingonecentrallocationfortheDVDs–Pushthestudenttopick25%ofthepopulation.

Estimatethepercentageofthemarketthatyourfriend‟sservicewillcaptureinthefirstyear.–Pushthestudenttopickanumberaround1%.

b.

c.

d.

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e. Estimatetherentalspermonth.Therecanbesomeflexibilityhere,butpushthestudenttomakeassumptionsthatyieldaround2,000movierentals/monthforyourfriend‟sbusiness

ProfitabilityandBreakeven

a. Givethefollowinginformationwhenasked

2.

i.

AssumeyourknowsomeonewhohasasizeableDVDcollectionthattheyarewillingtoselltoyouto$10,000.

Assumeyouhaveafriendwhocansetupawebsiteandmaintainitforyouforaone-timefeeof$10,000

VariablecosttodeliverDVDis$4(paybicycledeliveryperson).Assumeaninfinitesupplyofbicycledeliverypeople.

Chosepricesbetween$5and$8andcalculatethebreakeventimeinmonths(seeexcelsheetatend)

ii.

iii.

iv.

3.

Operationsanalysis

a.

b.

c.

Whattimeandwhatdayswouldyouoperateyourservice?

HowwouldDVDsbereturned(likelydroppedoffatcentrallocation)Howwilltheservicefunctioninthewintermonthsorwhenitrains?

4.

MarketingandAdvertisingAnalysis

a.

b.

c.

Whatisthecompetitiveadvantageofthisbusiness?Howwouldyouattractcustomers?

Howcanyouadvertiseeffectivelyandinexpensively?

5

Calculations

MarketAnalysis

Assumptions:

DVDs/Monthforyourfriend

2000

6

MarketBreakdown

Size

DVDs/Month

LowRenters

500

1

MediumRenters

250

2

HighRenters

250

4

PeopleinManhattan

2,000,000

People/Household

2

HouseholdsinManhattan

1,000,000

%ofpopulationthatcanbeserved

25%

%ofpopulationthatrentsregularly

40%

%ofmarketthatwecancapture

1%

MarketPotential(Households)

1,000

ProfitabilityAnalysis

Recommendation

Therecommendationshouldincludethefollowing:

1.

Theanswer–Basedonthemarketandprofitabilityanalysisalongwithmyfriendstargetofbreakingeveninlessthanayear,Iwouldrecommendthathegoesforwardwiththebusiness.

Thenumber(s)–Atapriceof$5,thefriendcanbreakeveninapproximately10months

Risksorconsiderations–Demandmightnotmaterialize,delivering60+videosviabicyclemightnotbepractical,andcompetitionsuchasinternetmoviescouldmaketheserviceobsolete.

Nextsteps–Purchasethevideocollection,setupthewebsite,andstartadvertising.

2.

3.

4.

QuestionstoFurtherChallengetheInterviewee

1.Whatchallengeswouldbefacedifyourfriendwantedtoexpandtheservicetoservemorecustomers?

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Price/DVD

Breakeventime(months)

$5.00

10.0

$6.00

5.0

$7.00

3.3

$8.00

2.5

DVDCapitalCosts

10,000

WebsiteCosts

10,000

VariableDeliveryCosts

$4

CONSULTINGCASEINTERVIEW

DryWallCompetitiveThreat

LevelofDifficulty(Selectlevelofdifficulty)

8

9

Question

Ourclientisadrywallmanufacturerandisconcernedaboutanewplayercomingintothemarket.Thenewplayerisperceivedtobealowpriceplayerandourclientisconsideringloweringitspriceby10%.Theclientseeksouradviceregardingitsoptions.

Note

ThiscaseissimilartoacasethatastudentmayreceiveinafirstorsecondroundinterviewwithBCG/Bain.

ClarifyingQuestionsandAnswers

Providethefollowinganswersonlyiftheintervieweeasksthecorrespondingquestion.

Question

Howmanyproductsdoestheclientproduce?

Isthenewcompetitor’sproductsimilartoours?

Answer

One

Forpracticalpurposeswecanassumethatourproductissimilartothenewcompetitor’sproduct.

Forouranalysisassumeallthe“dry-wall”productsinthemarketaresimilar.

3.Howare“dry-wall”productsdifferentiated?

Plan

Thisisastrategy/competitivetypecase.Acomprehensiveplanshouldincludethefollowingareas:

5.

6.

7.

Client‟simpactofreducingpriceby10%

MarketStructure(Intermsofnumberofcompetitorsandtheirshare)Customer–

a.

b.

c.

Whoareourcustomers?TheirPreferences

PriceSensitivity

8.

NewCompetitor

a.

b.

c.

SizeStrength

Weaknesses

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9.OurClient‟sposition

a.

b.

c.

MarketPosition

HowlongweareinthemarketBrandStrength

Question:Afterthecandidatelaysouthisorherplan,askthecandidatetoanalyzetheimpactof10%pricereductiononourclient‟sbottomline.

Whenthecandidateasksprovidethefollowinginformationregardingrevenueandcostsforourclient:

Numberofunitssold=100,000SellingPricePerUnit=$10VariableCostPerUnit=$3

AllocatedFixedCostPerUnit=$2

KeyAssumption:

Ifthecandidateasksregardingthevolumechangewiththepricecut,statethatthevolumewillremainsamewiththepricecut.Ifthecandidatedoesnotaskaboutthevolumechangeitisexpectedthatthecandidateexplicitlystatetheassumptionbeforeproceedingtothecalculation.

ExpectedCalculation:

TotalFixedCost=$100,000*$2=$200,000

Thisisakeyinsight,theallocatedfixedcostneedstobeconvertedintototalfixedcost.

OriginalCase

Revenue=$10*100,000=$1,000,000VariableCost=$3*100,000=$300,000

ContributionMargin=$1,000,000-$300,000=$700,000Profit=$700,000-$200,000=$500,000

PriceCutScenarioNewPrice=$9

Revenue=$9*100,000=$900,000VariableCost=$3*100,000=$300,000

ContributionMargin=$900,000-$300,000=$600,000

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NewProfit=$600,000-$200,000=$400,000

Impactonbottomline=[(NewProfit–OldProfit)/(OldProfit)]

Impactonbottomline=($400,000-$500,000)/$500,000=-$100,000/$500,000=-20%

Thecandidateisexpectedtostatethattheimpactonthebottomlineis20%andthusismagnifiedcomparedtothe10%pricecut.

Question:Nowaskthecandidateifourclientmaintainsthepricehowmuchvolumeitpotentiallyneedstolosetomakeitequivalenttocuttingthepriceby10%.

Ifthecandidatetakestheinitiativeandexploresthisquestionthenitneedstobenotedandencouraged(thisdifferentiatesaverystrongcandidatefromothers)

ExpectedAnalysis:

Letthenewvolumeofunitstheclientsellsbe“x”.

Soiftheclientsells“x”units@$10,theprofitwouldbe:

Revenue=10*xVariableCost=3*xFixedCost=$200,000

Profit=10x-3x-$200,000

Aclassicmistakeistotakethecontributionperunitas$5(effectivelytreatingtheallocatedfixedcostasavariablecosttoo)andusing$5*xastheprofit.

Soforthisoptiontobeequivalenttocuttingthepriceby10%theequationwouldbe10x–3x–200,000=400,000

7x=600,000

x=600,000/7=85,700approx

Lossinmarketshare=(85,700-100,000)/100,000=14.3%

Itisexpectedthatthecandidateexplainswhatthis14.3%numberrepresents;expectedanswerwouldbethatthe14.3%isthemaximummarketshareourclientcanaffordtolosebeforetheoptionofcuttingpriceby10%appearstobeabetterchoice.

Acandidatecandifferentiatehimselforherselfbystatingthatkeyistoestimatehowmuchtheclientcanpotentiallyloseifitdoesnotreducepriceby10%.

Question:Nowaskthecandidatethatifourclientneedstomakeachoicebetweenthesetwooptionshowyouwouldhelpourclientmakethechoice.

Nowthecandidateisexpectedtomakeuseofhisorherplantohelpmakeadecision.Ifcandidateasksthefollowingquestionsprovidethefollowinginformation:

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WhatistheMarketStructure?(Intermsofnumberofcompetitorsandtheirshare)

Answer:ShowExhbit1,withtheshares

WhatissizeoftheCompetitor?

Answer:Theyareasmalltomidsizeplayer

Whoareourcustomers?

Answer:Theyareprimarilycontractors/smallbusinessowners.Theybuydirectlyfromus.

WhatareourCustomer‟sPreferencesorhowpricesensitivetheyare?

Customersusuallybuybasedonrelationshipsandtheybuildpreferenceonaparticularbrand.Wedonothaveanyinformationregardingpricesensitivity.

Howdoweselltoourcustomers?

Wesellbasedontheirorders.Therearenolongtermcontracts.

Whatarethestrengthsofthenewcompetitor?

Answer:Notmuchinformation,theyareanewplayerinthemarket.Theyhavepresenceinothermarketourclientdoesnotcompetein.

Whataretheweaknessesofthenewcompetitor?

Answer:Notmuchinformation,theyareanewplayerinthemarket.Theyhavepresenceinothermarketourclientdoesnotcompetein.

Whatisourbrandstrength?

Answer:Asanumber3player,wehavestrongbrandpresenceandwehavebeeninthemarketforasignificantperiodoftime.

Howlongwehavebeeninthemarket?

Wehavebeeninthemarketforasignificantperiodoftime.

Istheremuchdifferentiationintheproduct?

Notmuch,forpracticalpurposesconsiderallproductstobesimilar.

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KeyExpectedInsights

Basedontheinformationprovidedthecandidateisexpectedtocomeupwithatleastthefollowinginsights:

Drywallmarketisaveryfragmented,andweareadominantplayer

Consideringthesizeofthecompetitor,theywouldbeoneofthesmall30+1playersThatwouldmeanonanaveragethenewcompetitor‟smarketsharewouldbearound

o70/31=2.3%approx

NewCompetitorassumingfairsharedrawwouldtake2.3%ofourvolume,althoughonecanarguethattheymaynottakeanyvolumeandcompetewiththeothersmall/midsize30players

Question:Nowaskthecandidatetomaketherecommendation.

Recommendation

Therecommendationshouldincludethefollowing:

5.

Theanswer–Clientshouldnotreduceprice,becausethisisnotaseriousthreatandcuttingpriceinthismarketwouldleadtoapricewarwhereeveryonewouldlose.

Thenumber(s)–Reducingthepriceby10%wouldimpactprofitby20%.20%impactonprofitisequivalenttolosing14.3%marketshareatthecurrentpricelevelsandatmosttheclientcanlose2.5%volume.

6.

7.

Risksorconsiderations–

Wemightunderestimatethesizeorstrengthofthenewcompetitor(newcompetitormightbeboughtbyabiggerplayer)

Oneofthemajorcompetitors(AorB)mayhaveakneejerkreactionandreduceprice

Nextsteps–

Tomitigatesomeoftherisksourclientshouldaggressivelystrengthenitsclientbaseby

Providingadditionalservices

Tocreateabarrierforthenewcompetitortopoachourclient‟scustomers

Clientcanenterintolongtermcontractswithitscustomers

8.

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c. EvenifAorBreducesitsprice,ourclientshouldmaintainpriceandaggressivelyprovidevalueaddedservicestothecustomers.

Exhibits

(CaseExhibitsshouldbeonaseparatesheetofpaperandincludedorattachedtotheendofthisdocument.Iftherearenoexhibits,includeanydatathattheinterviewermustprovide.)

120%

100%

12%

10%

8%

80%

A

60%

B

40%

Client

30otherplayers

70%

20%

0%

1

DryWallMarket

Exhibit1

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CONSULTINGCASEINTERVIEW

OrganDonationCase(McKinseylike)

LevelofDifficulty(Selectlevelofdifficulty)

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Note:ThiscaseistypicalofaMcKinseystructuredcaseinterview(thoughitisnotarealMcKinseycase).Theinterviewershoulddrivethediscussionthroughthefivesectionsbelow.Boldtextindicatesinstructionsfortheinterviewer.Theinterviewershouldthoroughlyreviewthisdocumentbeforegivingthecase.

CaseSetup

OneofthemanyfunctionsoftheNewYorkStateHealthCommissionistocoordinateorgandonationamongstthestate’smanyhospitals.Inrecentyearsthedemandfororganshasbeengreaterthanthesupply.Asaresult,manypatientsdieeachyearbecausetherearenotenoughorgandonations.TheHealthCommissionhashiredMcKinseytohelpitdeterminehowtoincreasethenumberofannualorgandonationsinNewYork.

Forthepurposesofthiscase,assumethatonlyNewYorkresidentsareinvolvedasdonorsandrecipients.

Question1

WhatarethefactorsanddriversthatdeterminethenumberoforgansdonatedinNewYorkeachyear?

Note:Thecandidateshouldaskclarifyingquestionsatthispointandshouldfeelfreetotakeaminutetoconstructaresponse.Thefollowinginformationshouldbegiveneitherwhenaskedfororwhenthecandidategetsstuck.

Information:InNewYork,organswillbeharvestedfromterminallyillorinjuredpatientsjustbeforedeathonlyiftheyarearegisteredorgandonororifthehospitalreceivespermissionfromthenextofkin.NewYorkresidentsmaychoosetoregisterasorgandonorswhentheyapplyforadriver’slicense.

Sampleanswer:

(Terminalpatients*%Registereddonors*organs/donor)+(Terminalpatients*%Notregistered*%Familyconsent*organs/donor)=organsdonated

“Thenumberoforgansdonatedisdeterminedbythenumberofterminalpatientstimesthepercentwhoareregistereddonorstimesthenumberoforgansperperson,plusthenumberofterminalpatientstimesthepercentthatarenotregistereddonorstimestherateoffamilyconsenttimesthenumberoforgansperperson.

“Thenumberofterminalpatientsisdrivenbytheageofthepopulation,changesinlifespans,medicaltechnology,thesizeofthepopulation,theoverallrateofnaturaldeath,plustherateofaccidentaldeath,suchascaraccidents.Thepercentageofregistereddonorsisdrivenbyawarenessofthedonorprogram,theeaseofregistering,whetheritisopt-inoropt-out,awarenessofthebenefitsoforgandonationandpersonalthingssuchasreligiousbeliefs.Therateoffamilyconsentisalsodrivenbyawarenessofthebenefitsoforgandonationandthingssuchasreligiousbeliefs,alongwiththeinformationprovided

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bydoctorsinatimeofgreatgriefandassurancethatorganswillonlybeharvestedafterdeathiscertain.Thenumberoforgansdonatedperpersonisdrivenbytheaveragenumberofhealthy,usableorgansinadonor.

Whilewe’veidentifiedanumberoffactors,it’simportanttonotethatwecanonlyreallyinfluencetherateofregistereddonorsandtherateoffamilyconsent.”

Note:Thisquestionseekstotestacandidate’sbreadthofthinking.Agoodanswerwillbelogicalandstructured.Itwillexaminethefactorsasanequation,thoughnotnecessarilyexactlyaspresentedhere.Itwillbethoroughandshouldinclude3-4driversforeachfactor.Agreatanswerexaminestheimplicationsoftheanalysis–ie.Thereareonlytwofactorsthatwecaninfluence.

Question2

Theteamhasdecidedtofocusonincreasingthenumberofregistereddonorsandisspecificallyinterestedinkidneysdonations.TheHealthCommissionknowsthatitneeds9,200kidneysperyear.WhatpercentofNewYorkersneedtoberegistereddonorsinorderfor9,200kidneystobedonatedinayear?

Theteamhasalreadycollectedsomeusefulinformation:

ThepopulationofNewYorkis10million.Thepercentageofpeoplethatbecometerminallyillorinjuredeachyearis.1%(one-tenthofonepercent).Thepercentageoffamiliesthatgiveconsenttoharvestorgansis10%.

Sampleanswer:Thecandidateshouldsetupandsolvethefollowingequation.

RD=PercentofNewYorkerswhoareregistereddonors.

(10,000,000*.001*RD)+(10,000,000*.001*.1*(1-RD))=4,600(10,000*RD)+(1,000*(1-RD))=4,600

10,000RD+1,000-1,000RD=4,600

9,000RD=3,600RD=3,600/9,000RD=.4=40%

Note:Settheequationequalto4,600becausetherearetwokidneysperperson.4,600*2=9,200.

Note:Thereareotherpossiblewaystosetuptheequation.What’simportantisthatthecandidatetakesastructured,analyticalapproachtotheproblemanddoesn’tpanic.Thecandidateshouldwalktheinterviewerthroughthemath,eitherasshesolvestheequationorafterwards.Ifthecandidategetsstuck,giveappropriatehints.

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Agreatanswerwillincludeimplicationsofthedata.Forexample,theymayconcludethat40%seemsreasonablebasedontheirpersonalexperiencesknowingpeoplewhoareregistereddonors.Anythingtoshowinitiativeandcriticalthinkingwithoutpromptingisgood.

Question3

WhatareallofthethingsthattheHealthCommissionshouldconsiderdoingtoincreasethenumberofregistereddonors?

Sampleanswer:“First,weshouldconductbenchmarkingstudies.Internalbenchmarkingwillrevealwhattheyarecurrentlydoingwelltodriveregistrations,andexternalbenchmarkingofotherstatesorcountrieswilluncovernewwaystoincreaseregistrations.Second,weshouldconductasegmentationofcurrentandprospectiveregistrants.We’llwanttodeterminethesegmentswherewearestrongsowecancontinuetocultivatethem,andatthesametimefindnewsegmentswherefewpeopleareregistering.Third,weshouldconductaseriesofmarketingcommunicationteststodetermineappropriatemessagingandchannelstoincreaseawarenessanddriveregistrations.WeshouldconsidertestingmediasuchasTV,radio,online,directmail,andmayalsobeabletoleveragethewordofmouthofourcurrentcustomers.We’llalsowanttodevelopmessagingthatincreasestheawarenessofthedonorprogram,thebenefitsofdonationandthesafeguardsthatareinplace.Finally,weneedtooptimizeourdistributionchannels.Currently,peoplecanonlyregisterwhentheygettheirdriver’slicense.Weshouldaddwaystoregister,suchasanytimesomeonegoestothedoctororhospital.Weshouldalsomakeiteasiertoregister.Forexample,ifNewYorkcurrentlyrequirespeopletoexplicitlyopt-in,wecanchangetoanautomaticopt-inwithanexplicitopt-out.

Note:Thisquestionisdesignedtoevaluatethecandidate’sdepthofthinking.Theaboveplanisasampleonlyandthereareotherapproaches.AgoodplanwillbeMECE,withdiscretecategories(ie.“Benchmarking”)andmultipleitemswithineachcategory.Theplanshoulddemonstratecommonsenseandsoundbusinessjudgment.

Question4

TheteamconductedacustomersegmentationandyourEngagementManagerhasaskedyoutodrawsomeinitialconclusionsfromthedata(givecandidatethedatahandoutfromtheendofthecase–candidateshouldclarifythatthedataareinmillionsofpeople).

Whatwouldyoutellher?Followupquestion:WhichsegmentrepresentsthebestopportunitytoincreaseRDs?

Sampleanswer:“ItlooksliketheCaucasiansegmenthasthelargestnumberofpotentialnewregistrants,butatthesametimeisalreadyhighlypenetrated.TheAfrican-Americansegmentistheopposite:low-penetrationbutlowupside.TheHispanicsegmenthasaslightlyhigherpenetrationthanAfrican-American,butisabiggerpopulation.Basedon

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thisdataalone,IwouldtargettheHispanicsegmentbecauseofthelowcurrentpenetrationandlargepopulation.Someoftherisksincludeovercomingthelanguagebarrieranddealingwithculturaldifferences.”

Note:ThedatatableisdesignedtopresenttheCaucasian,African-AmericanandHispanicsegmentsasstrongpossibletargetsfordifferentreasons.Thecandidateshouldreasonthroughthepros/consoftargetingeachsegmentandcometoafirmhypothesisbasedonthisdata.It’smoreimportantthatthecandidateselectsatargetforgoodreasonsandlessimportantthatsheselectsHispanic.

Question5

TheteamhasdecidedtofocusonincreasingtheregistrationrateamongHispanics.WhataresomethingswecandotoincreaseregistrationsofHispanics??

Note:Thisquestionisdesignedtotestacandidate’screativity.Hence,asampleanswerisnotprovided.Itislikelythatthecandidatewillsuggestthingssuchascommunityoutreach,Spanishlanguagemarketingmaterials/registration,etc.,classicconsumermarketingtactics,havingvansdrivearoundHispaniccommunitiesencouragingpeopletoregister,etc.Agoodanswerwillhavealonglistofideasthatincludetypicalbusinesstacticsalongwithcreative,interestingsuggestions.Theinterviewshouldpushthecandidatebyrepeatedlyasking“Whatelse?”,untilthecandidatecannolongerthinkofthings,andtodeterminehowtheyrespondtopressure.

Question6

TheheadoftheHealthCommissionjustwalkedinandwantsarecommendationforwhatheshoulddotoquicklyreachHispanics.What’syourrecommendation?Starttalkingnow.

Sampleanswer:“Clearly,thereisabigopportunitywithHispanics.We’veidentifiedanumberofthingswecandotoincreaseregistrations,andsincewe’refocusedontheshortterm,IrecommendthatwedoX,Y,andZ,becauseofAandB.”

Note:Agoodanswershouldbeshort(20seconds),organizedandforceful.Thecandidateshouldbefirmandnothedgeheranswer.TherecommendedstepswilllikelybethingsdiscussedinQuestion4,andagoodanswerwillchoosetacticsthat,logically,willmakethebiggestimpact.

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Handout

21

RegisteredDonors(M)

Population(M)

Caucasian

2.600

5.500

African-American

0.075

1.500

Hispanic

0.250

2.500

Other

0.100

0.500

CONSULTINGCASEINTERVIEW

CentralPower

LevelofDifficulty(Selectlevelofdifficulty)

22

Question

Ourclientisaregionalelectricitymonopoly.Duetoregulation,itsmarketwillbeopenedtocompetitionnextyearonJanuary1.Therearenoactualcompetitorsatthistime;however,theclientwouldlikeideasonactionstotakeintheshort-terminordertobetterprepareforpotentialcompetitors.Theyhavenocontroloverpricingandcost-cuttingduringthistimeperiod.

Note

ThiscaseissimilartoacasethatastudentmayreceiveinasecondroundinterviewwithMcKinsey,BCG,orATK.Thereisn‟tmuchdata-it‟sanexerciseinimaginationtemperedbyconvergentthinking.ItwouldbesimilartoafirstroundMonitorGroupcaseifithadasurplusofdata,ratherthanadeficit,requiringdiscriminationratherthanimagination.

ClarifyingQuestionsandAnswers

Providethefollowinganswersonlyiftheintervieweeasksthecorrespondingquestion.

Question

Doweknowofanypotentialcompetitors?

Doyouhaveanyinformationonpricing?

Answer

Noneatthistime.CentralPowerisfacingthethreatofmarketentry.

Notreally;pricingiscontrolledbyagovernment,soitisbeyondourcontrolandwillbethesameforanycompetition.

Noneatthistime.Ourengagementisfocusedontheirhomemarket.

CentralPowerhasthreedivisions:

SalesandGeneralAdministration

GenerationandTransmission

MaintenanceandRepairAboutoneforevery1000customers.No,theytreateveryoneequally.

ArethereothermarketsCentralPowercanenter?

HowisCentralPowerorganized?

Howmanyemployeesareinsales?

Doessales,customerservicetreatcertaincustomersegmentsdifferently?

Ifthereisapoweroutage,doesMaintenanceandRepairfixindustrialclientsfirst?

HasCentralPowereveradvertisedorhadamarketingcampaign?

IsCentralPowerundertakinganycapitalinvestment?

No,theydispatchintheorderofthecalltheyreceive.

Notinrecentmemory.

Notinthenextyear.

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Plan

Thiscaseisaboutcustomerretentionwithinthehomemarket.Sincetheclientisamonopoly,marketshareis100%andcustomeracquisitionisirrelevant.

Theanalysismayinclude,butisnotlimitedto,thefollowingareas:

10.BarrierstoEntry

a.

b.

c.

Thereisnoactualcompetitiontospecificallytarget

Thegovernmentisderegulating,sotherearenopossibleexternalbarriers

Internalbarriersarepossible,suchasincreasingswitchingcostsandcommercialattractivenesstocustomers

AnticipationofCompetitiveAttack-Oncethecandidateseestheexhibitandrealizeshowattractivetheindustrialclientsare,theycananticipatehowarationalcompetitorwouldenterthemarket.

MarketInformation

Revenue

CustomerSegmentation

StakeholderReaction-Howwillemployees,unions,orlocalgovernmentleadersreacttoourchanges?(Thereisnosetanswertothis,justaskthecandidatewhattheythinkandseeifitislogicalandstructured.)

Strongplanswillanticipatetheneedtobecompetitiveanddrawonanalogouscompaniesorsituations.

Lessexperiencedcandidatesgravitatetowardsissuesofpricingandcost-cutting.Thisisnotaprofitabilitycase.Weakcandidateswilloftenexploregrowthoutsidethehomemarket,suchasexpansionintoadjacentmarkets.Whileinteresting,thisdoesnotaddresstheprimaryproblemofwhattodointhehomemarketbeforederegulation.Avoidthesetangents.

Steerthecandidatetocustomerretention.

Thecasehastwomainphases.

Phase1:QualitativereactionandquantitativeanalysisofrevenuedataPurpose:

1.Testrapidunderstandingofabasicchart

Mostcandidatesaskaboutrevenueveryearly.Showthemtheattachedexhibitandimmediatelyask,“Whatisyourreactiontothisdata?”Strongresponsesnoticethedifferencesbetweenthecustomersegments.

The“historicaldata”isirrelevant.Ifacandidatestartstoaskaboutitordiscusstrends,informthemthatisafactororpopulationandgovernment-determinedprices,whicharebothbeyondthecontrolofthecompany.

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2.Testbasicarithmetic

Testbasicmathbyaskingthecandidate(iftheyhaven‟talreadydoneso)tocalculatetheshareoftotalrevenuepersegm