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Case - BCG 1st Round Case Water Flows NEW
Case - BCG 1st Round Case Water Flows NEW
Case - BCG 1st Round Case Water Flows NEW
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Case Prompt
Our client is a German-owned water provider company based in the southwest of the
United States. As the biggest water provider in the region, they serve the majority of the
southwest region.
Profit growth has slowed down considerably in recent years, and the company is finding it difficult
to continuously grow profits. Hence, the client would like you to develop a profit improvement
strategy.
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Exhibits
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Part 1 – Case Opening
Additional Information
After presenting the prompt, wait for the candidate to ask clarifying questions and/or present
the structure.
The candidate should ask clarifying questions and present the structure.
The client derives its revenues from providing residential, commercial, and public buildings
with water
Billing is done monthly according to the consumption of the customer
Profits have been growing at a 1-2% pace for the past 3 years, and 0% growth is expected
going forward unless something is done
There are no problems to fix with the current business, the client simply wants us to help
them grow profits further
The goal of the client is to increase profits by 10% in three years
The client’s most recent profit was $500M
The client has a budget of $100M to implement any initiatives
Solution
GOAL CLARIFICATION
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An excellent candidate would clarify the objective in terms of absolute amount and time
frame, budget constraints, and better understand how the client makes money.
STRUCTURE
The candidate may include additional elements, but there should be a rationale related to the
objective of the client.
COMMUNICATION
An excellent candidate should present clearly the different areas in a structured way.
Moreover, the candidate should clearly present the rationale for why he/she wants to
explore a particular point, connecting the answer to the objective of the client.
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Suggested score
Recommended score calculation: starting from 2, decrease the score by 0,5 points down to 0
for any of the following:
The candidate did not clarify the objective (timebound and quantified)
The candidate missed points 1, 2, or 3 in the structure (not including risks and next steps is
tolerable)
The candidate included several useless elements in the structure (i.e., boiling the ocean)
The candidate communicated the structure in a disorganized way or without a clear
connection to the goal
Additional Information
If the candidate suggested looking at the options for improving profitability, let them
know they can start from there. If they didn’t, direct them toward this analysis.
The objective here is to test the candidate’s business sense as well as their ability to
drive a case and navigate through a structure. Guide the candidate to narrow down
potential options, giving feedback for each idea, until he/she arrives at launching a
variation of our current offering (e.g., bottled water or water filters).
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Information to be shared only under request or when relevant:
The client engaged us for a cost-cutting exercise several years ago which resulted in the
client becoming the most cost-efficient water provider in the United States; we believe that
there are no more attractive cost-cutting opportunities
It is difficult to change the pricing structure due to government regulations
Due to rising sustainability awareness, average water consumption per capita is expected to
slowly decline over time
The number of residential, commercial, and public buildings are expected to grow in line with
population growth (if asked, US population growth is less than 1%)
The vast majority of buildings in the southwest are already attached to a water provider and
switching is unlikely due to the complications involved
Expansion into other regions is difficult due to regulatory concerns since the client is involved
in the public utility business. Furthermore, the client’s German ownership also complicates
matters
In terms of new offerings, the client prefers something closer to their core business
Solution
The client should look into expanding into new offerings such as bottled water or water filters. This
is because:
In terms of the next steps, the candidate should suggest evaluating the new offering idea in more
detail to determine whether we should go ahead.
Suggested score
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3. Identify growing into adjacent offerings as the best option, presenting his/her rationale in a
clear way
4. Propose the next steps related to evaluating the adjacent offering strategy in more detail
Recommended score calculation: starting from 2, decrease the score by 0.5 points down to 0
for any of the following:
The candidate did not shortlist ideas in a structured and well-communicated manner
The candidate did not demonstrate business sense when prioritizing ideas
The candidate did not identify growing into adjacent offerings as the best option
The candidate did not properly present his/her rationale for growing into adjacent offerings
and related next steps
Additional Information
If the candidate suggested looking at factors that might influence the attractiveness of
launching new offerings, let them know they can move on to that part. If they didn’t, guide
them toward this analysis.
"Following your suggestion, the client has decided to expand into selling
bottled water. What factors would you consider?"
The client intends to build a bottling plant to bottle water from its existing water sources
The bottled water will be sold throughout the United States; expansion outside the United
States is not yet considered
Solution
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Example of an excellent answer (score: 2)
The candidate may include additional elements, but there should be a rationale related to the
objective of the client.
Suggested score
Recommended score calculation: starting from 2, decrease the score by 0.5 points down to 0
for any of the following:
The candidate missed points 1 or 2 in the structure (not including risks and next steps is
tolerable)
The candidate included several useless elements in the structure (i.e., boiling the ocean)
The candidate communicated the structure in a disorganized way or without a clear
connection to the goal
The candidate did not properly contextualize the structure in terms of the water bottle
business (e.g., not highlighting specific risks or synergy opportunities)
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Additional Information
If the candidate suggested looking at how much market share the client can capture in
Year 1, let them know they can move on to that part. If they didn’t, guide them toward
this analysis.
Show Exhibit 1.
For simplicity, the client can assume that the 5% profit margin takes into consideration both
fixed and variable costs, and that margin does not increase after ramping up production
The $95M investment includes everything from factory construction costs to the costs
associated with launching the bottled water brand
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The expected market shares are for the first, second, and third years of actual operation (i.e.,
after the 1-year plant construction period)
Solution
The client will only be operational a year from now, so the 1.5% expected market share in
Year 3 is beyond our horizon
Approach:
The profit from launching the bottled water business ($88M) is more than our 3-year profit target
of $50M; furthermore, the investment cost is below our budget of $100M. Therefore, this
opportunity is attractive financially and we should look into whether we have sufficient
capabilities to launch this business as well as whether we can cope with the associated
risks as a next step.
Suggested score
Recommended score calculation: starting from 2, decrease the score by 0.5 points down to 0
for any of the following:
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The candidate did not communicate the approach before beginning with the computation
The candidate made mistakes in the computation
The candidate did not contextualize the final profit figure
Part 5 – Recommendation
Additional Information
Solution
“Our client asked us to help develop a strategy to grow profits by 10% in 3 years.”
“Based on our analyses, our preliminary recommendation is that they should expand into the
bottled water business. This is because:
The expected profit in the first 3 years is $88M, which is above the target of $50M;
The necessary investments fit within our budget of $100M; and
Opportunities to grow profits within our existing business or from geographical expansion are
limited."
“Nonetheless, there are some key risks associated with such a move, the main ones being:
The $95M investment for such a business is only slightly below our budget of $100M; any
cost overruns might force us to source additional capital and potentially impact the business
case
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We have limited knowledge/know-how on running a bottled water production business
despite there being some overlaps with water provision
Therefore, we would like to analyze additional elements before making a final recommendation,
such as:
Assessing our client’s financial and non-financial capabilities to ensure they can successfully
run such a business
Conducting a more rigorous risk analysis and coming up with mitigation strategies for the
identified risks
Double check the business case and potentially develop worst-, base-, and best-case
scenarios”
Suggested score
Recommended score calculation: starting from 2, decrease the score by 0.5 points down to 0
for any of the following:
Final Remarks
If so, you can click on the link below and then on the envelope near “Book a coaching”, I will
reply within 12 hours.
https://www.case.tools/profile
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Best,
Francesco
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