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Case Crack
Case Crack
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Disclaimer
All the content and concepts used in this deck are accurate to best of our knowledge.
Any data, definitions or inspiration from the Internet have been acknowledged, wherever possible.
This guide was prepared by the undergraduate student team at Consulting & Analytics Club, IIT Guwahati.
If you find some discrepancy in the material, feel free to contact us at cac@iitg.ac.in
The Consulting & Analytics Club, IIT Guwahati proudly presents our 2021 edition of the “Krack the Case” Consulting Guide.
We’ve aimed to make this an all-in-one guide to cater to all skill levels, and aid your induction into this omnipresent sphere.
We hope that the material we’ve created and curated aids you in your journey to ace consulting and PM interviews!
Created by the undergraduate student team at C&A IITG, this guide draws examples from discussions, talks, and peer
learning sessions organised within the club. As such, we’ve tried to recreate the bottom-up system of discussion that goes
from the grassroots to more complex fundamentals, to make the content accessible to a wide range of skill-levels. We’ve
ensured our curated material is up to industry standards, and included the names of our sources at the end – in case you
wish to delve deeper.
We at C&A have always strived to create communities of learners and teachers. This spirit of peer-assisted learning reflects in
both our in-house and open-to-all events, bolstering outputs through collective motivation and healthy competition.
On that note, we’re thrilled to introduce to you our annual Winter Consulting course! This free 4-week consulting
bootcamp has no pre-requisites, and includes projects, certification, industry webinars, and meticulously-curated content.
Stay tuned for this year’s reveal on our social media handles!
We hope this guide is an enriching read and an invaluable resource to consulting & PM aspirants out there. Do feel free to
reach out to us at cac@iitg.ac.in with any comments, feedback, and/or corrections!
Contents
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A Peek into
Consulting
Role of a Management Consultant
1. 3.
2. 4.
• Communication skills would be of utmost importance. While solving the case, think out loud!
• Do not get stuck on calculations! Round off numbers, and use them quickly and efficiently.
• Ask clarifying questions in the beginning. Asking the right questions increases chance to come up with
an accurate solution.
• Do not make any assumptions unless necessary, even if you do make sure to communicate with the
interviewer to get them validated.
• Whenever a framework is used, communicate the approach of solving the case rather than mentioning
the exact framework.
• Keep communicating with the interviewer to let them know of your thought process. In most cases, the
interviewers will help you get back on track if they see you going in the wrong direction.
• Mutually Exclusive part means that the smaller pieces of the issue tree cannot overlap, thus creating
more efficiency as no two parts overlap. Hence there is no repetition.
• Collectively Exhaustive means creating an issue tree such that when all sub-classes are taken
together it sums up the entire possibilities. This ensures that it does not miss any new ideas or
possibility.
• While creating MECE, one should also ensure that the sub-objects that the issue is divided into belong
to the same class and one should not use too many sub-objects to make the division.
Identify causes
efficiently
Identify Root
Find all root using
cause reason.
cause and hypothesis
Not the
reasons and data given
symptoms
in the case.
Start with the root cause of problem and divide it into sub-problems keeping in mind the MECE approach.
Clarifying Questions:
What is the current ad revenue structure?
We include full page ads in our magazine and get paid for it by the company whose
ad it is. Today, we sell 1M copies. Each magazine has 100 ads. Each ad costs $50 per
1000 copies.
Subscription
What exactly do you mean by targeted ads?
New Ad
We have data on our customers based on which we would send relevant ads to Revenue
them.
News stand
Broadly, what are the categories based on which you want to target
ads?
We have premium brand ads and non-premium brand ads today. The proposal talks
about sending
Premium brands ads → upper class/ premium customers
Non-premium brand ads → economy customers
Creating Issue Trees
• Considering basic division of News Ad revenue as: Premium
Customers
- Subscription Based
- News Stand
Subscription
• Further division can be constructed on basis of:
- Premium Customers
- Economy Customers Economy
Customers
New Ad
• Assuming: Revenue
Cost of ads
Subscription
New Ad # of magazine
Revenue
Economy # of ads per
News Customers magazine
stand
Cost of ads
Guesstimates
Definition and Scope
The term “guesstimate” is a portmanteau of the words “guess” and “estimate”. As such, a guesstimate question aims to test a
candidate’s qualitative and quantitative skills, as well as capacity for thinking on-their-feet.
Demand-side
Clarify ambiguities
Pinpoint users/uses
Spot constraints
Identify the scope
These steps should ideally be done relatively quickly. These are essential
for the structure of the solution but are erroneously missed by candidates.
General Approach (2/2)
Assume/ask
This represents the meat of the solution. This calls for an above-average
business sense and quantitative aptitude, so practice is key!
Sample Guesstimate #1
What is the market size of sofas in India?
Pre-Structuring Checklist:
Ambiguities
• Does market size here refer to volume or value? (Ans: INR value of sofas sold in a year.)
• Are single-seated armchairs included here? (Ans: By definition, no.)
• Sofas sold or produced? (Ans: Consider only the sofas sold in India.)
Users/uses
Sofas are, of course, needed in homes. Other possible uses are – in offices, airports, waiting lounges, cafeterias, hotels.
Since India is a country with lots of households, the lion’s share of sofas is for residential purposes.
(An adjustment may be applied to the final answer to account for the rest of the possible users – say 30%).
Demand or Supply?
Since the problem requires the value of sofas sold in a year, it is useful to assume that there is no bottleneck on supply. Thus,
an approach from the demand side would be the most useful.
Sample Guesstimate #1
What is the market size of sofas in India?
Indian population
Structure:
Total # of sofas # of households ÷
People/household
Sofas replaced ÷
Average sofa
lifespan
x
# of sofas sold/year
+ Sofas/household
Total # of sofas
Market growth x x
Growth rate
Sofa market
size in India
x Penetration rate
Average cost/sofa
Standard sofas x
% of market vol
Average price/sofa +
Average cost/sofa
Premium sofas x
% of market vol
Sample Guesstimate #1
What is the market size of sofas in India?
Assumptions:
We start backwards from the last level of the tree.
Level 5
• Population: ~125 crores, population of India
• People/household: An average of 5 people per household seems like a fair estimate.
• Sofas per household: Higher income households may have more than one sofa. On average, assume 2 sofas/household.
• Penetration rate: Consider the 30:70 split of urban:rural populations in India. Let’s say this applies to households too.
Assume 30% urban and 1% of rural households buy sofas. This amounts to approximately 10% penetration.
Level 3
• Average sofa lifespan: Assume sofas get replaced every 10 years on average.
• Growth rate: Assume the sofa market grows parallel to population growth. Thus, 1% market growth.
• Sofa pricing: Standard sofas may cost INR 20k, with a 75% market volume. Premium sofas may cost 5 times as much.
Sample Guesstimate #1
What is the market size of sofas in India?
Pre-Structuring Checklist:
Ambiguities
• Is any other beverage served? (Ans: Assume only coffee is served at this point.)
• How is the coffee made? In a coffee maker or vending machine? (Ans: A coffee maker. Everyone makes their own cup.)
Users/uses
Some people are staunchly opposed to the idea of coffee. Thus some of the employees consume only tea, and the others are
okay with coffee. We also note that since the coffee takes some time to prepare, the employees need to be on a break.
Demand or Supply?
This isn’t relevant here, however, we assume supply of coffee is limitless. This by default merits a demand-side approach.
Baseline Assumptions
We assume that the office building contains offices on all floors. For the sake of efficiency and cost reduction, architects will
seek to make every floor uniform and thus equal numbers of employees sit on each of the floors.
Additionally, each floor has a coffee maker, and employees get an hour of lunch break.
Sample Guesstimate #2
Estimate the number of cups of coffee consumed in a MNC office in Mumbai on a typical 9-5 day.
Structure:
# of hours
# of breaks
Probability of
break/hour + Medium productivity
x
+ Low productivity
Coffees per floor # of employees/floor
# of hours
x
Cups of
coffee
x
consumed Probability of
Coffee penetration % Breaks in 2nd half x break/hour
Number of floors
Fatigue factor
Sample Guesstimate #2
Estimate the number of cups of coffee consumed in a MNC office in Mumbai on a typical 9-5 day.
Assumptions:
Level 5
• Productivity: Assume that the office has a 3:2:1 proportion of high, medium, and low productivity workers respectively. Also
assume that they take breaks with probabilities of 0.1, 0.25, and 0.4 respectively.
• Fatigue factor: As the end of the working day comes closer, employees are likely to get fatigued and thus be more likely to
take breaks. We assume this factor to be 2 – i.e. they are twice as likely to take a break in a given hour in the 2nd half.
• Employees per floor: 20 is a fair guess for this, as this includes both full-time employees and support staff.
• Coffee penetration %: The problem talks about an office environment. It is fair to assume around ~50% drink coffee.
Calculations: 3 hours
3
0.6 breaks x 6
× 0.1
2.2 breaks/employee 2
0.2 breaks/hour + 6
× 0.25
x 1
+ 6
× 0.4
22 coffees/floor 20 employees/floor
4 hours
220 x
coffees
x
consumed 50% 1.6 breaks x 0.2 breaks/hour
10 floors Sanity Check:
2
Assuming the cost of a cup is INR 10,
the office spends INR 2200/day on
coffees, or ~INR 8 lakh/year. In an
office of this scale, this is reasonable.
Practice Guesstimate
Estimate the size of the online dating market in India.
Pre-Structuring Checklist:
Ambiguities
• Does market size refer to number of users or value?
• Are matrimonial sites to be included?
• What is the time period for which market size is to be considered?
Users/uses
Almost entirely urban folk. Cheap internet access precludes certain barriers, but we are interested with users who purchase
premium services.
Demand or Supply?
There are no constraints on the sale of premium virtual services. A demand-side approach is the obvious choice.
Possible Approaches
The population can be divided into buckets as per their age, gender, income situation etc. Conversion rates from free to
premium accounts will likely differ according to those factors. There are multiple apps to consider, and the distribution of users
across them can be analysed. It might also be worthwhile to explore the average lifetime of users on the app(s).
Previous Year Guesstimates
• How many hotel-sized mini bottles of shampoo and • Calculate the number of watches that people currently
conditioner are produced each year around the world? own in Delhi region alone.
• How many people in Uganda have no access to • How many cups of tea are sold in all of India every
Electricity? week?
• How Many Mazda Dealers Are There in the U.S.? • Estimate the number of flying cars that would be sold
in 2025!
• How to Estimate the Size of Chewing Gum Market in
the U.S.? • How Many Penguins Can Live in Antarctica?
• What is the number of mobile phones used in the world? • How Many Dogs Are There in the United States?
(Google)
• What is the market size of blue car in your native city?
• What Is Annual Demand for Sugar in the United States?
• How many cricket balls will fit into a Boeing 747? (Applied Predictive Technologies)
• Estimate the revenues of any outlet of Haldirams in 1 day. • Can you guess the size of the grocery market in India?
• (Flipkart)
• Estimate the number of ATM machines in Delhi.
Previous Year Guesstimates
Other Consulting Firms
• Estimate the average revenue of DTC buses in a day. (KPMG)
• How many gallons of ice cream are sold in the United States each year? (PwC)
• Estimate the number of customers Flipkart gained due to the Big Billion Day sale. (Accenture)
• How Much Paint Does It Take to Paint United Airlines’ Fleet? (Capital One)
• What Is Market Size of Hand Knitting Yarn in the U.S.? (E.Y. Advisory)
Strength Weakness
Internal
Opportunity Threat
External
Helpful Harmful
SWOT Analysis
SWOT is a great tool to capture the current state of your organization, it helps in setting of objectives for strategic planning
and identifying core competencies of the firm. It analyses whether or not to embark on a strategy.
• Strength:
1. What is our competitive advantage?
2. What resources do we have?
3. What products are performing well?
• Weakness:
1. Where can we improve?
2. What products are underperforming?
3. Where are we lacking resources?
• Opportunities:
1. What technology can we use to improve operations?
2. Can we expand our core operations?
3. What new market segments can we explore?
• Threats:
1. What new regulations threaten operations?
2. What do our competitors do well?
3. What consumer trends threaten business?
SWOT Analysis Example - Apple
Strength Weakness
1. Apple has established itself as a trustable brand 1. Expensive Product Range which acts a barrier
over time, and it’s the world’s most valuable for expanding in developing countries.
company by market value. 2. Closed-source components that prevents
2. Innovation: Apple keeps to deliver a set of cross-device compatibility.
products that provide a better UX. 3. Apple Products are always known for blocking
3. Apple has always identified itself as a brand third-party repairs.
that focusses on Privacy as its key value.
4. Loyal Consumer Base.
Opportunity Threat
1. Governments requesting Apple to open
1. Expansion in AR, autonomous technologies. backdoors.
2. Providing extensive streaming options for price 2. A number of pending lawsuits- including that
sensitive markets. against its anti-competitive practices.
3. Globalisation to reduce prices and escape 3. Apple, usually known for its late-moving
higher tax regimes in countries. policies, could experience disruptions in sales
due to better technologies/ products being
sold by its competitors.
PESTEL
PESTEL Analysis
P T TECHNOLOGICAL
POLITICAL
Political factors such as Govt. Includes changes in digital
policy, Foreign trade policy, Tax transformation, automation and
Policy, Labor Law R&D, innovation, technological
awareness
ECONOMY
Factors such as economic
growth, interest rates,
inflation, exchange rates, E E ENVIRONMENT
PESTEL
Climate, recycling procedures,
employment and how they carbon footprint, waste disposal,
affect your business i.e. how sustainability
profitable they are.
SOCIAL
Keep up with the changing family LEGAL
S L
demographics, cultural trends and Employment legislation,
lifestyle changes, age distribution, consumer laws, health and
career attitudes, Health safety, trade regulations,
Consciousness copyright & patent laws
Why PESTEL?
• When is it best of use?
• Excellent mobile app for • Fuel usage may • Need to prevent ban in
users increase many countries.
• Using social media and • Traffic congestion is a • Need to follow labor and
other electronic media concern. employee safety laws
well for promotion • Copyright laws need to be
looked at.
Porter’s 5 Forces
Porter’s 5 Forces
• Understand your industry of interest. • Use this model where there are at least three
competitors in the market.
• Identify attractive vs less attractive
• Consider the impact that government has or may
industries/markets. have on the industry.
General
Task Environment
Internal
Environment
Environment
• Technological
• Customers • Employees • Natural
• Competitors • Culture • Sociocultural
• Suppliers • Management • Economics
• Labour Market • Legal/Political
• International
The TASK Environment
• The Task environment includes all the things that effect a firm’s business model including forces that
come from within the company as well as from outside the company.
• These depend heavily on the competitive positioning of the firm, its leadership and its goals. These
factors are how the firm interacts with the external factors and are somewhat in the firm’s control.
• The Internal Environment is the firm . To evaluate it we consider the properties directly under its
control like employees, culture and the management.
• The General Environment can be analyzed using the PESTEL Analysis which shows us the factors
which are a part of the external environment.
• There is not much which the internal environment can do to change the PESTEL analysis as most
factors are beyond the firm’s control.
Value Chain
Analysis
Value Chain Analysis
PRIMARY ACTIVITIES
Value Chain Analysis - Example
Handles all of the procurement for its own coffee beans,
PROCUREMENT which is one of its competitive advantages.
Price elasticity
Customer inclinations
Consumer loyalty
Benefits of the product
Value
based Willingness of
Value of the product
customers to pay
Business Situation
Our client, a global MedTech company, has recently developed drugs for
COVID patients. The company needs your help in making strategic pricing
decisions given the evolving clinical and competitor landscape.
Approach
Approach and Prelim
& Preliminary Questions
Questions
Approach
We will first analyze the company, and its goals,
and then make a pricing decision. For pricing, we
will perform a cost-based and value-based
analysis
Pre-case Clarifications
o What is the economic/demographic value of
our product to the customer?
Keep in mind that different customer segments will
have different willingness to pay.
Substitutes in the
Market Priced Lower
Features
Brand Image
Fast-tracked
production
Product
Innovative Lab
Product USP technologies
Limited COVID
related drugs in the
market
Similar brand
Substitutes/Alternatives in image
the market
Customers want to
Price elasticity
pay- Lower
Customer inclinations
Tend to migrate
Consumer habits
towards lower costs
Better accessibility
Limited variety of
Benefits of our product COVID drugs available
in the market.
Willingness of
Value of our product
customers to pay Relevance of High requirement during
Product pandemic
FinalLOOK
FINAL Look
AT PRICING CASES
QUANTITATIVE DATA
Try gaining as much quantitative data as possible from the interviewer.
THE COMPANY
Make sure to understand the goal or objective of the company.
ANTICIPATE
Always anticipate the consequences of the price point you set, with respect to the
market and your competitors.
Market Entry
Framework
Market Entry Framework
Entering Strategy
Customer Product Company Industry
New Market Entry
Complementary assets such as marketing and distribution, are often more important
Complementary Assets factors for success, than core assets. One should perform a value chain analysis to
understand the problems and risks involved at each step of the chain.
While first movers have the advantage over others in some settings, this may change
Order of Entry
upon the time of entry chosen in most cases.
The life cycle stage of an industry is easily determined and greatly influences
Industry-life-cycle stage opportunities for success. Companies entering early in an industry’s life cycle have
greater odds for success than those entering near the shakeout
When a high level of superior information is necessary to innovate, incumbents have
Degree of Technological a major advantage over new entrants. Innovative entrants are likely to succeed by
Innovation staying small in niches that dominant players ignore rather than by expecting to
compete with them as equals.
Business Situation
Our client, Paccar, is a Dutch technology company and a premier commercial vehicle
manufacturer in Europe. Paccar is a worldwide quality leader in the design and manufacturing of
premium light, medium and heavy-duty commercial vehicles.
The company, in wake of Government of India’s newly announced Production Linked Initiative
and reduced tax schemes for EVs, plans to introduce its range of electric trucks and buses in India.
You have been hired to find out if they should introduce these vehicles in India.
Market Entry Example
Approach
We will analyse each of the core values and then present a solution in line with the company’s motives.
Net. Annual Revenue : $ 18.7 Bn. Net. Annual Income : $ 1.4 Bn. Total Assets : $ 28.4 Bn.
The company enjoys consistent profitability, a strong balance sheet, and excellent cash flow.
CAGR of 48% 3 Major / Existing Players, 4-5 Potential Entrants High Exit Costs
The central government has assigned 35.45 billion INR ($486 million) as incentives for the deployment of
Industry
Initial Investments as high as INR 13,500 Crores Proper infrastructure for support is missing
SWOT Analysis
• Profitability refers to multiple ratios like the EBIDTA Margin, Net Profit Margin, Gross Profit Margin
• Profit Margins provide a better picture of the business performance of the company
Customer Segmentation,
Market Share, New Markets,
New Products,
Fixed Cost = SG & A, Rent,
R&D, Depreciation, Labor(fix
contracts), Marketing,
Interest
Price per
unit
Revenue X
-
Number of
units sold
Profit Fixed Cost
Fixed Cost SG & A, Rent, R&D,
+
Depreciation,
Labor(fix contracts),
Costs Marketing, Interest
Cost Per Unit
Variable Cost
Variable
Cost X COGS: Raw
Materials, Transport,
Energy, Labor
SG&A : selling, general & administrative expenses Units Produced
COGS : cost of goods sold R&D : Research and development
Profitability Framework
Our client is consumer good electronics’ manufacturer (mainly kitchen appliances). Their profits have declined over
the last year and they want you to figure out the cause and suggest suitable remedies.
Volume sold
(20% decline)
Profit Government Tax
(20% Decline) Fixed Cost
(same) Raw Material
Maintanence
Profitability Framework
Our client is consumer good electronics’ manufacturer (mainly kitchen appliances). Their profits have declined over
the last year and they want you to figure out the cause and suggest suitable remedies.
Unit Sold
(-22%) Root Cause Found
Due to one of our
Toasters competitors decreasing their
(90%) toaster price many middle
class families have shifted
Price to that company.
(same)
Revenue
Unit Sold
(same)
Others
(10%)
Price
(same)
Making Amazing
Slide Decks
Guide to Amazing Presentations
Consistent Storyline
and flow
• Story Telling is the foundation of a good slide • As a good Consultant or Product Manager, the
deck. main aim should be to present an extensive report
on user as well as sector research. It can be
• Make the presentation into a cohesive unit, achieved as
where it ceases to be individual slides or
separate ideas. • Identify the problem
• Viewing your presentation as a story that has • Correctly recognize the relevant factors
clear characters, conflict, and resolution will help
generate a through line in your presentation and • Gather the right type of information, using
solidify it as a cohesive unit. On each slide, secondary research or surveys
consider how the information is moving the story
forward and figure out how one slide leads into • Analyze the information gathered and find out
another. insights
• Try using specific tabs at the bottom or sides of • Make the right conclusion
the slide to depict flow.
Guide to Amazing Presentations
Design And Visual Appeal Executive Summary and Appendix
• Maintain constant formatting and margins in the • The executive summary slides should only be 5%
entire deck. — 10% of the entire presentation's length. Make
the executive summary focused and simple by
• Keep it light on text! using short paragraphs or bullets and subheadings
• Try an use pictures/chart to express your data or • Summarize the story by introducing the client and
ideas. Graphics and charts explain the insights it’s pain points. Summarize your solution and the
better than words. flow of the presentation
• Keep the content directional. • Highlight the key results, including 1 or 2 statistics
that drive home the takeaway message.
• Use Selective Bolding to stress upon an
important term and ensure to use clear • Mention the source in the footnotes and include
headlines for the readers’ convenience Appendix to show all the research, calculations
and basis of insights.
Glossary of
Useful Terms
Useful Terms
Return on Investment(ROI)
ROI indicates the total growth of an
investment over a set time period. The net
profit expressed as a percentage of the initial
investment is the ROI.
A Product Manager’s role is user and product-focused. It is easy to find questions, criticism, or feedback about a product.
Users are usually very vocal about issues or shortcomings they find within the product. The million-dollar question here is:
how will you improve the product?
A PM makes around 20-25 calls per week to identify with and fully understand the problems faced. Once they reach a deeper
understanding of the issues, they work on strategising a solution to the problem.
Tech Business
What does a PM do?
The Pre-requisites:
• Ability to pitch to and influence people
• Clear written and verbal communication
• Technical and business/sales acumen
• Eye-for-detail and quick-thinking
• Can assume ‘ownership’ of the product
Additionally, a prior PM intern, or projects showcasing your problem-solving abilities, or even managerial or decision-making
experience is a plus.
The Process:
General layout:
• Guesstimate*
• Product/Business case study
• Strategy based problem (Pertaining to a new product/market, or growth)
• Metrics-based questions
• Product Critique
• Technical round (occasionally)
- SQL-related question
- Techstacks of projects on your CV
First Principles:
Clarify. Don’t rush off into solving the problem without gaining some context.
Let’s assume the task is to improve engagement on the LinkedIn mobile app by 5% over the quarter (Here, engagement
refers to average # of posts created in a unit span of time).
• Draft user personas of the major LinkedIn users. Prioritise 1 persona and their story.
• Utilise the job-to-be-done (JTBD) framework, i.e. retrace the consumer’s thought-process in selecting the given product to
fulfil their intended job.
Product Critique
Q. What would you change/improve in your favourite app (e.g. LinkedIn)?
Solutions:
Let’s say your focus group is college students.
Finally, the solution(s). College students wish to share their upskilling experiences with their network. To enable them:
• Set-up campus-wide communities on LinkedIn, allowing students to showcase their talents and experiences.
• Create a featured editorial every week/month, featuring a selection of these communities and giving them exposure.
• The RICE framework* (Reach, Impact, Confidence, Effort) helps achieve this.
• User research is the methodic study of target users—including their needs and pain points.
• Create 3-5 unique and detailed • Gather Data and make sense out
personas with consistent of it to fill in the gaps of knowledge.
layouts. • Try to answer the questions in
• Emphasize user’s motivation our Objectives.
and pain points.
User Persona Categories
- User behaviors.
- Needs.
- Motivations.
Methods to Analyse
- Observation techniques
- Task analysis
- Feedback methodologies
- Experiments
- Surveys
- Questionnaires
- Interviews
- Case studies
Example showing User Survey on Before and After pandemic Purchasing.
Case Examples
Case #1
I would like to break the revenue into volume and price to understand the That seems fair. The decline in revenues is due to fall in volumes. What will
decline in revenues you do next?
Having known this, I would like to know the geographical segments, the The company operates primarily in Western India. The issue is specific only
company is operating in. Also, is the issue company specific or industry wide to the company
Okay. Is our product differentiable from the products offered by the The company’s product is superior in terms of quality as compared to
competitors in terms of features and price? competitors, but the price is almost comparable to them
If the product is superior in quality and yet affordable and there is no Yes. That’s correct.
industry wide issue, it should be in demand amongst the consumers. Can I
therefore assume that product is unavailable in sufficient quantity ?
In that case, company’s distribution channel needs to be analysed. Do we Company sells its products through distributors, who then sell them to
have data on the distribution channel of the company? retailers and is thereby made available to consumers.
I would like to assume that company is facing some problems with its Correct. Distributors feel that the margins offered by the Company is less as
distributors. Is my assumption correct? compared to competitors. Hence, they distributors have gradually reduced
Do we have details on the margins offered by us and by the competitors? Yes. We offer 4% margin whereas competitors offer 7% margins. How will
you solve this problem
Clarifying Questions (2/2)
Questions by Interviewee Answers by Interviewer
Can we consider increasing the margin for distributors and absorbing the Consider the following data and then decide: Assume that the number of
increased expense in our income statement? units sold will be back to original levels if margin is made comparable to
competitors
Particulars FY2017 FY2019
Units Sold 100,000 90,000
Price to dealer 18,000 18,000
Expense per unit 14,000 14,000
Based on the numbers, Company made a profit of INR 40 Crs in FY 2017 and Yes. That would be a fair assumption.
INR 36 Crs in FY 2019. In case, the price is reduced by offering margin of 7%,
the revised price shall be approximately INR 17,400. The resultant profit
shall be INR 34 Crs. That would mean we would be worse-off than current
situation if margins are increased
Do we have data on the number of distributors and their geographical Currently, Company has 5 distributors. 2 distributors handle Gujarat region
spread along with the approximate number of retailers and their while remaining 3 handle Maharashtra region. There are 200 retailers in the
geographical spread? Western region, with 50 in Gujarat and 150 in Maharashtra. All the retailers
are widely spread across the two states
Also, is the Company exploring any other distribution channels such as e- Company itself has minimal presence on e-commerce portals. The products
commerce? are often sold by distributors on such portals
Approach (1/2)
Your client is an Air Conditioner manufacturer who is facing a decline in profits. He wants you to figure out the reason
for the same
Observations / Suggestions
Interviewee Notes Case Facts
• It is important to think
• Decline is because of lesser • Targets upper middle class
about distribution channels
demand from distributors on customer
which often goes unnoticed
account of lower margins
in profitability framework
• Market leader in the segment
• Profits will decline further if
• It is important to
comparable margins are offered to • Revenue and profits have seen a
understand how long the
distributors decline of 10% over 2 years
problem has been going on.
In this case the problem
• Retailers are widespread across • Company product superior to
started around 2 years ago
the western region competitors and pricing at par
which means that
something must have
• The problem is in the lower • Sale through distributor and
changed during this period
availability of the product retailers
which has led to a decline in
profits
Approach (2/2)
Your client is an Air Conditioner manufacturer who is facing a decline in profits. He wants you to figure out the
reason for the same
Recommendations
Profits
• Start direct transactions
Revenue Cost with retailers by on-
boarding a factoring agent
to handle invoicing and
Price Quantity collection
• Start selling on
Customer Ecommerce portals directly
Need Awareness Accessibility Affordability
Experience from company.
Distributor
Margins
Channel
Case #2
• Since the competition is also • While moving from one phase • Since the Taj Mahal has been
facing decline in profits, it is likely of the customer journey to obstructed from view, the hotel can
to be an industry wide issue. But another (say from pre phase to provide differentiated ambience with
higher decline with the client the during phase), one should local Agra’s feel, value added
suggests client specific issues as confirm from the interviewer if services and open a paan counter
well. she has covered all the to try replacing the paan shop
aspects. This ensures that one experience.
• Before proceeding ahead with the doesn’t move back and forth
decrease in revenue, it is the phases of the customer • Since there has been a decrease in
important to understand if it is a journey. offline advertising through agents,
demand or supply side issue. we can look at our increase in
• Structure the recommendation offline advertising through tie ups
• Specifics about the Agra city and do not give a laundry list of with hotels, maintaining good rating
should be kept in mind to suggestions. on food apps etc. We can have
customize the arguments. strategic ads near prominent areas
in Agra.
Approach (2/2)
Your client is a cafeteria owner who is facing a decline in profits. It wants you to figure out the reason for the same.
Case #3
Market Entry
Our client is a Telecom operator. They are looking
to diversify their presence in India and wish to
enter the electronic home security market. They
want you to estimate potential profits and want
you to suggest how to capture a significant
market share.
Clarifying Questions (1/2)
Questions by Interviewee Answers by Interviewer
What market share is significant enough for the company? In how much About 5% in the first year.
time they wish to achieve this target?
So our objective is to estimate potential profits along with having a strategy Correct.
to achieve a 5% market share at least
What are the products we’re talking of in the home security business? There is essentially one product. It’s an alarm system which is installed in
the home along with sensors. Whenever someone is trying to burgle the
house, the alarm goes off
What part of the value chain are we looking to enter? We have not decided but generally industry players manufacture and use
third parties to distribute and retail
What geography are we looking to sell in? Anywhere in India where there is a market
We will have to do a guesstimate to find the market size currently Good let’s say we do this analysis and find that the market size is 15mn
household. Let’s move on from there.
Just to put this number in perspective what is the market share of the The industry is highly fragmented with mainly local players. The largest
largest player? player has a market share of about 5%
I want to understand what drives local dominance? Well, the industry is such that majority of costs are concentrated in
transportation of the fragile equipment. Lesser the distance from factory
lower the cost. Since manufacturing is cheap and transportation is not,
factories are set up close to markets.
And, what is the growth rate of the industry? It is about 10%.
Clarifying Questions (2/2)
Questions by Interviewee Answers by Interviewer
There are two ways to enter the market, displacing existing players or taking We don’t have a product of our own. We plan to enter with the same type
a slice of the growing market. However, because of the fragmented nature of products that already exist at the same prices.
of the industry, if we have to capture a significant market share through
either path, we will need to have a competitive edge in our product. I would
like to benchmark our product with competitors to see if we have an
advantage. I’d like to do it on basis of price and other product parameters.
If our product is going to be the physically the same, then to capture a a) We don’t even have internal ability to produce this type of equipment
significant share in such a fragmented industry, can we get an edge on b) Lowering transportation cost has been looked into and is difficult. Also
a) Production front leading to lowered cost and hence lower prices because the market is very competitive we cannot afford to pay higher
b) Distribution front leading to lower transportation cost and distributors margins to distributors
favoring to push our products over competitors c) Consumers are price sensitive, do not care much about product brand.
c) Marketing
This means independently we cannot have a significant share. Then the only Yes, we do
remaining options to capture a 5% market share are through a Joint Venture
or by Acquiring existing players. For that however we would need enough
capital, do we have that?
I would like to know the price of existing products since that would be our They are generally priced between Rs. 5,000-15,000. The margin earned is
price as well 10% of the revenue. There is a servicing package which is bundled. Usually
Rs. 200 per month is charged, and a margin of 25% is earned in servicing.
Why is there a range in price of the product? Is it due to difference in No there is no difference in quality. Each product has a main alarm system
quality of product or brand? along with sensors placed in different parts of the rooms. The price
increases as the no. of sensors required are more.
Approach (1/2)
Our client is a Telecom operator. They are looking to diversify their presence in India and wish to enter the
electronic home security market. They want you to estimate potential profits and want you to suggest how to
capture a significant market share.
Hence total profit on a product is 1000+600 = 1600. Hence our expected profit
= (Market size) x (Market share) x (Avg Profit per unit)
= 15mn x 5% x Rs. 1600 = Rs. 120 crore
Case #4
Market Entry
The client is in the business of making anti smoking pills -
the way we have those patches and lozenges in the market
to curb the urge to smoke. The client wants to sell it at a
premium price. You have been hired to find out if the
product can be introduced in a country like India.
Clarifying Questions (1/3)
Questions by Interviewee Answers by Interviewer
I would like to confirm if I have understood all the critical aspects of That’s right. Now that you’ve understood the situation well, how do
the client’s situation. Our client is in the business of making anti- you propose going about the solution?
smoking pills that reduce the urge to smoke for smokers. We need to
do see if the product is feasible to be launched in India and evaluate
the market characteristics such as size and client’s share based on
the price
Since this is a new product launch, I would like to structure my This sounds fine to me. Also, please note that this product is not
discussion around the product characteristics (development and entirely new; it has been introduced in other countries already
customization) for the Indian market and then move on to the launch
(competition, distribution and promotion) part of the case
Ok, that experience should definitely help us. To start with, can you Unlike the lozenges or patches, this product is completely nicotine
tell me something more about the product? How is it different? free - it is 5 times more effective as proved by lab results and 50% of
the test results responded to the pill (which in this industry is an
extremely high number thus indicating success). Moreover, it is a drug
that cannot be sold over the counter – it requires a prescribed dosage
given by the doctor. It is to be taken for 3 months daily, 3 times a day
That is good. It gives us the advantage to position our product as That’s a fair point. So, there is no similar product in the market.
superior due to the higher efficacy of treatment. I would like to know Cheaper products like lozenges exist but they contain nicotine and
take up the competitive scenario next so that we can decide the price sell for Re. 1 per unit.
before determining the overall market size.
What are the other countries where the product has been introduced? The other countries have smokers who are quite similar to the Indian
How receptive have the customers been in those countries? consumers. The product has been quite a success.
Clarifying Questions (2/3)
Questions by Interviewee Answers by Interviewer
Ok, this means that the target audience will be receptive to the product and Hmm… that is good. In our case, let us assume we did this and
we can assume that there is a strong market for the same. I will now came up with Rs. 8 per unit. You think that sounds reasonable?
proceed with the estimation of the price and market size. There are two
ways that we can price a new product in a non-competitive market: Cost
based and ‘willingness-to-pay’ based. In the first, I would calculate the cost
to company and charge a margin on the same while in the second case; I
would calculate the propensity of the consumer to pay for this drug. This
would vary with my target segment chosen. Ideally, we should be able to
calculate the optimal profit case by considering the trade-off in sales
volume vs. price for various price points. The solution will also be
influenced to an extent by the growth rates of the different target segments
overall, say movement of people to upper-class from lower-middle class.
I think a price of Rs. 8 per pill is feasible because of the lab results - people Ok, let’s estimate the market size assuming we decide to price it
will be convinced that it is a medically prescribed drug and since it is a pre- at Rs. 5 per unit.
scheduled dosage for 3 months, results are guaranteed.
Let’s take Delhi as a base case. Population: 150 lakh. Target segment: 40% Very interesting. What will drive the market growth our market
of them smoke * 20% of them would want to quit smoking * 75% can afford share?
(Rs. 8 * 3 * 90 = Rs. 2160 drug to quit) = 9 lakh people or INR 9 * 2160 ~
INR 200 crores. Assume that this drug will reach out to 25% of the
population across India (urban + rural since its effective and one-time
payment to quit smoking), which means the total market is 200/150 * 0.25 *
10,000 lakh = INR 3,333 crores.
Clarifying Questions (3/3)
Questions by Interviewee Answers by Interviewer
The market growth rate will be affected by the sales and distribution coverage, Good. What about the other 20%?
willingness of people to quit smoking and addition of new smokers who would
want to quit after sometime. We can look to capture about 80% of this market
eventually, assuming no major competitor enters the market, which can be
prevented by IPR support. Since this is a prescription drug, the bulk of the
promotion costs in this industry are in targeting the doctors and chemists via
direct sales agents or Medical Representative to convey the pros and cons for
them to a) prescribe the drug and b) keep it in their pharmacies. This will drive
our market share from the potential market size
I am assuming that the remaining 20% will comprise of smokers who are Good. Any other costs/concerns that you would like to
unwilling to quit smoking (10%), perceive the price to be high (5%) or are not address?
aware of the product (5%). This percentage can decrease as we move further
in the product life cycle and the product becomes well established through
marketing and promotion efforts.
The training costs for the direct sales agents will also be critical as this is a Good, I think we have covered the different aspects of the
new product and local agents would need an in-depth understanding of the case. Thank You.
product. No. of sales people can be calculated by total workload method:
Assuming Doctor/Population ratio and say 3 doctors per day and repeat visits
every 2 months; and Chemist/Population ratio and 3 chemists per day and
repeat visits every 15 days. The supply chain will have to be considered - the
warehousing, distribution network, retail chains etc. We can perform the cost
benefit analysis for using middle distributors v/s direct distribution
Approach (1/2)
The client is in the business of making anti smoking pills - the way we have those patches and lozenges in the market to
curb the urge to smoke. The client wants to sell it at a premium price. You have been hired to find out if the product can be
introduced in a country like India
Introduce Anti
Smoking Pills in
India
Potential
Distribution Marketing Cost
Revenue
• New product launch – Anti • Client is in the business of • Price point should consider both
smoking pills making anti-smoking pills and customer’s willingness to pay and
• Country – India wants premium price for its product’s incremental value
• Premium product requires product proposition over existing products in
premium price • Marketing of the product can the market
• Product characteristics (suitability be briefly discussed since the
for Indian market) & Product product charges a premium • IPR/ Patenting the drug can prevent
launch (competition, distribution price to its customers competitors to enter market and
and promotion) • Long term product goals and facilitate capture of market share
• How is the product different from ways to improve product
existing products? penetration across its lifecycle • Spend more on training the medical
• What is the competitive scenario could have been discussed representatives and direct sales
in the market • Remember to use comparable agents to push the product to the
• Product has already been from similar launches by same doctors who in turn will prescribe it
introduced in some countries company or competitors to the patients
References
• Guesstimation 2.0