Sjmsom Iitb Casebook - 2021

ConSIG – The Consulting Club, Shaliesh J.
Mehta School of Management, IIT-Bombay
Shailesh J. Mehta School of Management, IIT Bombay
Casebook 2021
ConSIG - The Consulting Club

of SJMSOM, IIT Bombay
(C) ConSIG Club, SJMSOM, IIT Bombay 2020-21 1

ConSIG – The Consulting Club, Shaliesh J. Mehta School of Management, IIT-Bombay
FOREWARD
Consig, the consulting club of SJMSOM, IIT Bombay is proud to present the second edition of its Casebook. The casebook aims to
provide aspiring consultants a range of cases and guestimates that are integral parts of any consulting interview. It draws on from the
interview experiences of past students who appeared for consulting interviews, and also consists of general frameworks for a few of
the commonly asked case types.
The solutions to the cases discussed in this book are just one of the many ways of solving cases and they are only intended to give
students an idea of what to expect in a typical case interview and how to proceed with the solution. Each candidate has his/her own
way of solving cases and hence we would encourage you to come up with alternate ways of solving the cases keeping the given
solution as a reference. We have put in our best efforts to cover all the commonly asked case types in the interview. We request the
students to make the best use of it.
How to use the Casebook?

Well, we suggest students to start with the standard frameworks given in the first section of the book. We have listed out general
pointers that can help you to start the case with but do make sure not to confine yourself to the given list. Once you are comfortable
with the frameworks, move on to the cases and guestimates which are best solved in a group of students.
There is also an additional section on Industry Knowledge wherein we have compiled revenue and cost centers, facts and figures and
SWOT analysis that can help you in cases as well as Group Discussions!

CONTENT
Foreward…..…………………………………………………………………………………………………………………………………………………………........02
Frameworks……………………………………………………………………………………………………………………………………………………………….. 07
Profitability Framework ………………………………………………………………………………………………………………………………………………….08
Market Entry Framework…………………………………………………………………………………………………………………………………………........11
Pricing Strategy Framework………………………………………………………………………………………………………………………………............. .17
Value Chain Framework.………………………………………………………………………………………………………………………………………………….23
Merger & Acquisition Framework…………………………………………………………………………………………………………………………...........27
PESTLE Analysis……………………………………………………………………………………………………………………………………………………………....29
BCG Matrix………………………………………………………………………………………………………………………………………………………………………30
Porters 5 forces analysis…………………………………………………………………………………………………………………………..........................31
Igor Ansoff Matrix………………………………………………………………………………………………………………………….......................................................32
4 P Analysis………………………………………………………………………………………………………………………….........................................…..33
Case Interviews …………………………………………………………………………………………………………………………………………………………
Profitability Cases.…………………………………………………………………………………………………………………………...................................34
Case 1…………………………………………………………………………………………………………………………………………………………………….……..35
Case 2………………………………………………………………………………………………………………………………………………………………….……..…38
Case 3………………………………………………………………………………………………………………………………………………………………….………..40

Contents
4…………………………………………………………………………………………………………………………………………………………………………….42
Case 4………………………………………………………………………………………………………………………………………………………………………….44
Case 55…………………………………………………………………………………………………………………………………………………………....................45
………………………………………………………………………………………………………………………………………………………….................47
Case 66…………………………………………………………………………………………………………………………………………………............................48
…………………………………………………………………………………………………………………………………………………..........................50
Case 77…………………………………………………………………………………………………………………………………………………………………………….51
…………………………………………………………………………………………………………………………………………………………………………53
Case 88..…………………………………………………………………………………………………………………………………………………………………..……..53
…………………………………………………………………………………………………………………………………………………………………………55
……………………………………………………………………………………………………………………………………………………………………………56
Case 9 …………………………………………………………………………………………………………………………………………………………………………58
Cases………………………………………………………………………………………………………………………………........................................58
M & A Cases……………………………………………………………………………………………………………………………….......................................60
Case 1…………………………………………………………………………………………………………………………………………………………………………..61
1…………………………………………………………………………………………………………………………………………………………………………….59
…………………………………………………………………………………………………………………………....................................................63
Case 2 …………………………………………………………………………………………………………………………....................................................65
Case 3 ………………………………………………………………………………………………………………………………………………………………………….71
……………………………………………………………………………………………………………………………………………………………………………69
Market Entry Cases………………………………………………………………………………………………………………………………………………………..74
Cases………………………………………………………………………………………………………………………………………………………….72
1…………………………………………………………………………………………………………………………………………………………………………….73
Case 1…………………………………………………………………………………………………………………………………………………………………………..75
Case 22…………………………………………………………………………………………………………………………………………………………....................76
…………………………………………………………………………………………………………………………………………………………...................78
Case 33…………………………………………………………………………………………………………………………………………………............................79
…………………………………………………………………………………………………………………………………………………...........................81
Case 44…………………………………………………………………………………………………………………………………………………………………………….81
…………………………………………………………………………………………………………………………………………………………………………..82
Case 55…………………………………………………………………………………………………………………………………………………………………………….84
…………………………………………………………………………………………………………………………………………………………………………..85
Case 66…………………………………………………………………………………………………………………………………………………………………………….88
…………………………………………………………………………………………………………………………………………………………………………..89
Miscellaneous Cases……………………………………………………………………………………………………………………………………………………....92
Cases………………………………………………………………………………………………………………………………………………………..91
Case 1……………………………………………………………………………………………………………………………………………………………………………93
1…………………………………………………………………………………………………………………………………………………………………………….92
Contents
2……………………………………………………………………………………………………………………………………………………………………………..94
Case 2……………………………………………………………………………………………………………………………………………………………………………95
Case 33………………………………………………………………………………………………………………………………………………………….....................96
…………………………………………………………………………………………………………………………………………………………...................97
Case 44………………………………………………………………………………………………………………………………………………….............................98
…………………………………………………………………………………………………………………………………………………...........................99
Case 55…………………………………………………………………………………………………………………………………………………………………………...100
…………………………………………………………………………………………………………………………………………………………………………101
Guesstimates ……………………………………………………………………………………………………………………………………………………………...102
…………………………………………………………………………………………………………………………………………………………….103
Guesstimate 1………………………………………………………………………………………………………………………………………………………………104
1………………………………………………………………………………………………………………………………………………………….……..103
2………………………………………………………………………………………………………………………………....................................105
Guesstimate 2………………………………………………………………………………………………………………………………..................................106
Guesstimate 3……………………………………………………………………………………………………………………………….................................107
3………………………………………………………………………………………………………………………………....................................106
4………………………………………………………………………………………………………………………………....................................108
Guesstimate 4………………………………………………………………………………………………………………………………..................................109
5…………………………………………………………………………………………………………………………………………………………………110
Guesstimate 5……………………………………………………………………………………………………………………………………………………………..111
6………………………………………………………………………………………………………………………………....................................111
Guesstimate 6………………………………………………………………………………………………………………………………..................................112
………………………………………………………………………………………………………………………………………………………..……...112
Guesstimate 7 ……………………………………………………………………………………………………………………………………………………………..113
Guesstimate 8………………………………………………………………………………………………………………………………..................................115
8………………………………………………………………………………………………………………………………....................................114
9…………………………………………………………………………………………………………………………………………………………………116
Guesstimate 9………………………………………………………………………………………………………………………………………………………………117
10……………………………………………………………………………………………………………………………………………………………...118
Guesstimate 10…………………………………………………………………………………………………………………………………………………………...119
Guesstimate 11………………………………………………………………………………………………………………………………................................120
11………………………………………………………………………………………………………………………………..................................119
Guesstimate 12…………………………………………………………………………………………………………………………………………………………...122
12……………………………………………………………………………………………………………………………………………………………....121
Industry Overview……………………………………………………………………………………………………………………………………………………124
Overview……………………………………………………………………………………………………………………………………………………….123
E-Commerce Industry…………………………………………………………………………………………………………………………………………………..125
Industry……………………………………………………………………………………………………………………………………………………..124

Contents
Industry………………………………………………………………………………………………………………………………....................................126
FMCG Industry……………………………………………………………………………………………………………………………….................................127
Insurance Industry ………………………………………………………………………………………………………………………………………………………129
………………………………………………………………………………………………………………………………………….……………….128
Agriculture Industry……………………………………………………………………………………………………………………………………………………..131
Industry……………………………………………………………………………………………………………………………………………………..….130
Industry………………………………………………………………………………………………………………………………………………....132
Pharmaceutical Industry……………………………………………………………………………………………………………………………………………….133
Industry…………………………………………………………………………………………………………………………………………………………..134
Education Industry………………………………………………………………………………………………………………………………………………………..135
Industry……………………………………………………………………………………………………………………………………………………..........136
Telecom Industry…………………………………………………………………………………………………………………………………………………..........137
Industry………………………………………………………………………………………………………………………………………………………….....……138
Steel Industry………………………………………………………………………………………………………………………………………………………………..139
Industry………………………………………………………………………………………………………………………………………………………..…….140
Banking Industry……………………………………………………………………………………………………………………………………………………………141
Industry…………………………………………………………………………………………………………………………………………….………….142
Automobile Industry……………………………………………………………………………………………………………………………………………………..143
Textile Industry……………………………………………………………………………………………………………………………….................................145
Industry………………………………………………………………………………………………………………………………...................................144
Aviation Industry……………………………………………………………………………………………………………………….........................................146
ConSIG’21 Team.…………………………………………………………………………………………………………………………………………………………..148

CASEBOOK 2020
FRAMEWORKS

PROFITABILITY FRAMEWORK
A profitability case could deal with revenue side, cost side or both. Identify the key revenue and cost heads and isolate the problem areas
• Share of Volume (Awareness) SOV – Promotional spending, promotional mix, channels, content, promotional efficiency
• Share of Mind (Likeability) SOM – Product quality, price, usage, services, customer relationship management
• Share of Distribution (Accessibility) SOD – Partners, routes, trade mix, inventory, transportation
Profit is a function of Revenue and Cost. It is a good practice to have a look at both the sides to determine the cause for decline in profits.
Profit
*Note : Before proceeding further, again it is a

good practice to inform interviewer of both the
Revenue Cost approaches and your logic for choosing one
above the other
Average Price Volume Approach 1 Approach 2
Value Chain
Product Mix Cost of Mfg. Market Size Market Share Fixed Cost Variable Cost
Analysis
▪ Analyse whether the prices of all variants have ▪ If the market size is shrinking, it‘s a problem for the ▪ Under Variable Costs, analyze heads ▪ Analyze the costs incurred at each
increased or the problem is with a particular whole of the industry. This can due to changes in like node of supply chain
variant demand or supply or both • Material costs • Sourcing
▪ Analyse whether the prices of all Raw • Demand side: have a look at alternative product, change • Workforce expenses • Manufacturing
Materials/Packing Materials has increased in customer preference, product obsolescence. • Shipping costs • Warehouse and Inventory
• Supply side: have a look at availability of raw materials, • Marketing expenses
across Industry • Outbound and Inbound
supply chain disruption ▪ Under Fixed Costs, analyze heads
Logistics
▪ Market share is internal to the company, use the like
4P’s concept to analyze the problem • Capacity Utilization
• Pricing - Unattractive pricing strategy, price elasticity • Depreciation/Amortization costs
• Product – product quality, substitute products, after sale • Cost of raising capital
services
• Promotion - Product awareness, marketing strategies *Please refer to the Value Chain Analysis
• Place – Market penetration, distribution network section to know more

Before deep diving into the case, it is always a good practice to know more about the company, the product, its customers & competitors in
detail. Following are some of the questions that can help you get started
Company Product
✓ What are the core skills and capabilities of the company? ✓ Type of product and its features/ benefits – the product mix
✓ What is the company good at/competitive edge? ✓ What is the product value and pricing?
✓ How is its financial situation e.g. liquidity/ reserves/ leverage? ✓ What is the products' competitive edge?
✓ How is the company structured/ organized? ✓ Where in the market is the product positioned?
✓ What are its strengths and weaknesses? ✓ Which distribution/ channel is required?
✓ Type of industry and position of the company ✓ Are there cross-selling opportunities?
✓ Key trends across the industry supply/value chain ✓ How is the earning potential?
✓ Key regulatory bodies/policies affecting the company
Customer Competitors
✓ What are the different customer segments? ✓ What is the competitive scope e.g. market share, earnings?
✓ What are the needs of each segment? ✓ What is the growth potential of competitors?
✓ How to characterize each segment? ✓ Competitor strategy e.g. pricing, products, distributions
✓ What distribution channel does each segment prefer? ✓ Best practices - are they excelling at something we don’t?
✓ What price does each segment prefer? ✓ Learning practices – what can we learn from the competition?

MARKET ENTRY FRAMEWORK
Market Development Product Development Diversification

Entering a new geography Entering a new product category Entering a new geography with a
CLASSIFICATION e.g. – Uber entering the Chinese e.g. – Apple launching an customized product
market electric car e.g. – Mondelez launching a
sweetened Oreo to suit Indian palette
1 2
BASIC
Decision – Should the client enter the market? Mode of Entry – How to enter?
CONSIDERATIONS
Timeline & target for Favourable to LOB and

Motivation behind entry
profitability existing business model
• Reasons for entering into • Target market share? • Are there any synergies
PROBLEM new industry? • Target revenue or being created from the
DEFINITION • Why into this particular profits? move?
industry? • Breakeven timeline? • Improvement in
corporate/organization
structure?

SUCCESSFUL
Market Entry
Fulfils Goals
Market Attractiveness SUCCESSFUL
Define Motive/Goals for Market Entry
Market Entry is not advisable if the objective of any rung in the hierarchy is not achieved – move from lower echelon to higher echelon

DEFINE MOTIVE/GOALS FOR MARKET ENTRY
Strategic Goals Financial Goals
Competitive advantage Short term impacts

Cost benefit & Breakeven Long term impacts
PARAMETERS
Geographic Expansion IRR vs. Cost of Capital
Diversification Revenue
Vertical Integration Profits
Pre-empting Competition Need for capital

MARKET ATTRACTIVENESS
Fundamental Attractiveness
Barriers to Entry Competition Buyer Value Chain

✓ Government Regulation ✓ Fragmented Market ✓ Segment Growth ✓ Switching Cost (Network
✓ High Capital ✓ Market Share ✓ Distributor Channel Effects) of Buyers and
Requirements Distribution (among Preference (Outbound Suppliers
✓ R&D – IP/Patent competitors) Logistics) ✓ Threat of Backward
✓ High Brand Equity ✓ Supplier/Distribution ✓ Demand – Supply Gap Integration (competition
✓ Human Capital – High Channel – Contractual (Market Needs) might acquire vendors to
Costs Customer Lock-ins ✓ Price Sensitivity control supply of raw
✓ Economies of (Ascertains whether to materials)
Scale/Scope go for premium pricing
✓ Distribution Network strategy)
✓ Availability of Substitute
Products

MARKET ENTRY FULFILS GOALS
Relative Competitive Positioning
Brand Equity Strategic Goals Financial Goals
✓ Economies of Scale ✓ Short Term – Synergy with ✓ IRR exceeds Cost of Capital
✓ Supply Chain/Distribution Existing Operations ✓ Growth in Revenue/Profits
Synergies ✓ Short Term – Achieve Tactical ✓ Meets Breakeven Timeline
✓ Market Share Gains Advantage ✓ Achieve Other Absolute
✓ Patent/Proprietary ✓ Long Term – Create Barriers Financial Goals
Technologies for Entry/Exit
✓ Long Term – Create Customer
Lock-ins
✓ Achieve Other Absolute
Strategic Goals


Now, for case solving purpose, one should plot the graph between Fundamental Attractiveness vs. Relative Competitive Positioning and mark the client’s position
(as perceived from the analysis) on the graph to determine whether the client should enter the market or not
MODES OF ENTRY
Alternatives ➢ Financial (Investment, Profits, Litigation support)

PARAMETERS ➢ Operational (Management Control, Supply Chain co-ordination, Product Design)
Greenfield ➢ Cultural Fit
Franchise
M&A ➢ Strategic Vision
Joint Venture ➢ Risks (Financial Risks, Technology Risks, People Risk)

PRICING STRATEGY FRAMEWORK

1 2 3
Ask about the company Ask about the product/service Choose a pricing strategy
• What’s the name of the client’s company ? • How does the client’s product differ from Based on the answers of the first two questions
competition? What is its Unique Selling Point (USP)? the pricing strategy is chosen:
• What are the products that the company
sells? • What are the alternatives or substitute products in • Cost Based Pricing
the market?
• Where the company stand in the • Competitor Based Pricing
respective markets in terms of volume or • At what stage of the product lifecycle is the
quality or both? (Example:- Is it a market product? (Introduction/Growth/Maturity/Decline) • Value Based Pricing
leader?)
• Are the supply and demand foreseeable?
• How does the market look like? (Red
Ocean or Blue Ocean)
• How many competitors are there in the

market?
• What is the company’s objective? To have

profit? Or to capture the market? Brand
positioning?

Types of Pricing Strategies
Scope: This pricing strategy is effective when the client company’s target is the premium segment
Questions:
Value based • What's the next best alternative to the product we are offering? (e.g. other similar luxury products)
pricing • What features make our product the best in the market?
• How much are people ready to pay for these additional features? (This is applicable if the client company is updating some of the
features of the previous product, e.g. Apple’s iPhone XR launch)
Scope: This method is opted when the client company’s product is similar to that of competitors and client’s objective is to increase the
market share. In this strategy, the price of the product is based on the price client’s competitors charge
Competitor Questions:
based pricing • Are there comparable products/services?
• If yes, how do they compare to the client’s product?
• How are they priced?
Scope: Cost based pricing should be used when the objective of a company is to break-even or earn a given % of profit within a given time
period
Cost based Questions:

pricing • What are the fixed costs of the company? (Cost of renting, staffs etc.)
• Allocation of the fixed costs to the product under consideration vs other products? (If the company produces more than 1 products)
• What are the variable costs for the product?
• What is the desired % profit or the time required for break-even?

Examples of Pricing Strategies
• Amazon sells Kindle at 0% profit margin. They use Kindle as the entry point & they earn a huge amount of profit by selling e-books to the customers
• Apple, being a premium company, sells it product at higher price to the early buyers. Then they reduce the price of the product to target the next set of buyers
who are more economic as compared to the first category. This pricing strategy is called skimming strategy
• Netflix’s revenue comes from the monthly subscription fees from its customers. The cost incurred are mainly – licensing cost, production cost, marketing cost ,
R&D cost etc. Thus the profit = (# Customers X Subscription fee) – total cost

GROWTH STRATEGY
Ask relevant questions to determine the nature of growth that your interviewer is looking for (focusing on product, division, or the entire
company)
Step 1 • What are the company’s different product lines? Assess the importance of different lines of business and the importance of each line to
the overall business. Ask about the market share in each line and the most profitable line. Also check if there are any loss leaders
• Who are their customers?
• Where does it operate? (Geographical location)
• How is its access to cash/financing resources?
• About its competitors – competitive position of the company in the overall market in terms of market share
Choose a growth strategy

• Organic Growth (Preliminary Questions to be asked) –
⁰ How is the business currently doing?
Step 2 ⁰ How much money are they making? (Current revenue and Profit margin)
⁰ What percentage of their product line portfolios are being captured in terms of market share?
⁰ What has been their growth rate for the past 2-3 years?
⁰ What is the industry growth rate?
⁰ Is there any specific data available that might be helpful to identify the portfolio that has the potential to grow?
• Inorganic Growth (Preliminary Questions to be asked) –

⁰ Current competitors and their respective market share
⁰ Geographies in which they operate
⁰ Financial risks associated
Recommendation – Look at M&A Framework
Organic growth strategy

1 2 3 4
Pricing New product
Distribution optimization Geographic expansion
lines/diversification
Factors to be considered – Factors to be considered – Factors to be considered – Factors to be considered –

• How is the pricing currently done for • What are the current • What are the current • Financial Capabilities
the different products sold/service distribution channels? operational geographies?
offered by the company? (Strategy • Availability of Expertise in area
used : Value based Pricing, Cost • What is the penetration? • Is there a particular market not
based pricing, Competitor based being captured in terms of • Current market scenario -
Pricing) • Industry Benchmark? geography? Growth and Size, Competition
• How have the competitors priced Recommendation : Expand the Recommendation: Market Entry • Synergies with the existing
their products/Services? existing network, Provide Research business
commissions and monetary • Financial Factors → Revenues
• What is the elasticity? privileges to distributors and Investments Recommendation : To be
considered only if the financial
• Non – Financial Factors → capabilities are available
Relationship with the suppliers,
Availability of cheap labour,
Adequate Infrastructure,
Regulatory relationship,
Competitors
• Risks/Opportunity Costs

Organic growth strategy

5 6
Increase sales Sales force performance
improvement
• Step 1: Ask probing questions to gather information about the market and Sales force performance can be measured in broadly three parameters
our product line • Ability
⁰ What are the existing capabilities?
• Step 2: Determine a strategy to increase your sales ⁰ Ways of improvement : trainings, skill development
⁰ Increase volume
⁰ Increase revenue from each sale (make buyers buy more) • Motivation to work: There are two aspects to be looked at under this –
⁰ Increase prices ⁰ Are adequate efforts being put in. Are these efforts able to meet
⁰ Create seasonal balance the expectations of the employer.
(Possible reasons for not being able to meet expectations – lack of
skill, lack of goal/objective clarity, issues with modes of
communication/signalling within the organisation)
⁰ Outcome based motivation of the sales force –
✓ Incentives
➢ Tangible : Salary, Bonus, Perks
➢ Intangible : Professional development in terms of
growth, research opportunities, learning and training
facilities etc.
✓ Performance Metrics evaluation
• Opportunity
⁰ Proper sales force allocation, providing equal opportunity,
Note: Inorganic growth strategy involves Joint Ventures, Merger and Acquisitions and hence adequate recognition measures
follow the M&A framework here
VALUE CHAIN FRAMEWORK
Value Chain Framework is a model that helps to analyze specific activities through which firms can create value and competitive advantage. The basic idea here is
to understand different parts of the value chain and look for abnormalities/inefficiencies at each leg of the value chain.
Steps involved:
❑ Ask relevant questions about the company: ❑ Ask about the problem and objective ❑ Analyze the Value Chain and suggest
appropriate strategy
I. What are the products that company I. What is the problem that the company
produces? is facing?
I. Who are its customers? II. What objective the company wants to
II. Who are the its competitors? achieve?
III. What is the USP of the company?
IV. What differentiates its products?
A general value chain structure is as follows (some parts may not be relevant for certain industries):

Questions:
• How volatile is demand?
Demand • What is the method used for high demand and high volatility raw materials?
Forecasting • Recommendations – Careful estimation of raw material quantities for high profit margin and high variability products
✓ Supply:
• Price – Negotiation, Long term/future contracts, Volume discounts
• Suppliers – Supplier rationalization(alternate suppliers, consolidation, etc.), backward integration
✓ Demand:
Sourcing • Reduce wastage – Operational improvement(value chain analysis)
• Substitutes
• Change specification – raw material specs, finished goods specs
✓ Transportation Costs:
• Price (Negotiation, long term contract/futures contract), network optimization
• Supplier rationalization - Mode of transport, Efficiency of transport (TAT, load factor, quantity transported per trip, etc.)
✓ Are warehousing costs significantly higher than the industry average?

• Warehouse capacity sufficient?
Warehousing • Is warehouse optimally utilized?
• Visibility of SKUs?
• Automated vs Manual operations
✓ Recommendations – apply EOQ to reduce inventory costs, manpower rationalization, layout modifications etc.

✓ Benchmark with industry average

• Price (Negotiation, LTC/ futures etc.)
• Network optimization
Logistics • Supplier rationalization (consolidation, alternate suppliers etc.)
• Mode of transport
✓ Efficiency of transport (TAT, load factor, quantity transported per trip etc.)
✓ Benchmark all costs with industry average

• Direct Labour
• Direct Material
• Overheads
Manufact ✓ Reason for higher costs?
-uring • Process (process parameters, sequence of operations, utilization etc.)
• People (Incentives, skill, motivation etc.)
• Technology (obsolete, inefficient etc.)
✓ Recommendations – Make vs buy (outsource?), Consolidate manufacturing capacity (Economies of Scale and Scope), upgrade technology,
people management and training, process redesign etc.
✓ Penetration (no of distributors)

Distribution • Shelf space (% of own items vs % of other’s items)
✓ Recommendation – look at distributor commission structure (push), discount schemes (pull), expand distributor network etc.

✓ Service time, quality and cost

• Variety of services
After Sales • Accessibility/Availability
Service • Benchmark with industry average
✓ Recommendations – improve the metric (time, cost and quality) which is most important to the customer, open more service centers,
relocate centers, acquire other service centers, outsource etc.
Economies of scale
Capacity Utilization
Degree of Vertical Integration

Cost drivers
associated with value Timing of Market Entry
chain activities
Geographic location
Institutional factors(regulation, union activity)
Firm’s policy of cost or differentiation

MERGER & ACQUISITION FRAMEWORK
M&A framework
Financial Non Financial
Organizational
Benefits Costs Regulatory
&
fit
Cultural fit
Target Company Integration

Synergies Price paid
Value costs Organizational Cultural
synergies synergies
Cost Revenue
Cost Revenue

MERGER & ACQUISITION FRAMEWORK

• Undervaluation
• Control
• Synergies
• What is the value of the individual and
combined entities?
• Are there cost synergies (e.g.: duplication of
roles, stronger buying power, etc.)? Purpose? • Are both companies (buyer / target) in the same
• Are there revenue synergies (e.g.: product markets (e.g. geographies, customers, etc.)?
cross-selling, using the target's distribution • How big is the market? And how fast is it
channels for the buyer's products, etc.)? growing?
• What are the biggest risks that could make • How profitable is the market? And is its
the acquisition fail (e.g. culture fit, regulation, Synergies and The Market profitability stable?
etc.)? risks
• How profitable is the market? And is its
Why M&A? profitability stable?
• How heavily regulated is the market? Are there
barriers to entry?
• What is the current and future financial position of the

• What's the acquisition rationale? target (e.g.: revenues, profits, etc.)? Is it under /
Undervaluation, control, synergies or a The Buyer The Target overvalued?
combination? • Does the target own any assets (e.g.: technology,
• Can the buyer easily finance the acquisition? Or brands, etc.) or capabilities (e.g.: manufacturing know-
will it need to lend money? how) that are strategically important to the buyer?
• Does the buyer have any experience in • What's the quality of the current management? Do we
integrating companies? Was it successful in the believe we can add value by getting control and
past? running the company better?
• Is this the right time for the buyer to acquire • Is the target company's culture very different? If so, are
another player? Does it risk losing focus? we confident it could still integrate well with the
buyer?
PESTLE ANALYSIS
When to use? –
Can be used to analyze and monitor the macro-environmental factors that may have a profound impact on an organization’s performance. This tool is especially
useful when starting a new business or entering a foreign market.
POLITICAL Government policy, Political stability or instability overseas, Foreign trade policy, Labor laws, Terrorism and military
considerations, Environmental laws, Funding grants and initiative, Trade restrictions, Fiscal policy
EOCONOMICAL Economic growth, Interest rates, Inflation, Disposable income of consumers, Disposable income of businesses, Taxation,
Interstate taxes, Wages rates, Financing capabilities
SOCIAL Population growth, Age distribution, Health consciousness, Career attitudes, Customer buying trends, Demographics,
Industrial reviews and consumer confidence, Organizational image
TECHNOLOGICAL Producing goods and services, Emerging technologies, Technological maturity, distributing goods and services, Target
Market communication, Potential Copyright infringement, Increased training to use innovation, Potential return on
investments
LEGAL The decline of raw materials, Pollution and greenhouse gas emissions, Promoting positive business ethics and
sustainability, Reduction of their carbon footprint, Climate and weather, Environmental Legislation Geographical location
and accessibility
ENVIORNMENTAL Health and safety, Equal opportunities, Advertising Standard, Consumer rights and laws, Product labelling, Product safety,
Safety standards, Labour laws, Future legislations, Competitive legislations

BCG MATRIX
When to use? –
Can be used to help with long-term strategic planning, to help a business consider growth opportunities by reviewing its portfolio of products to decide where to
invest, to discontinue or develop products.
• Dogs – Hold low market share compared to competitors and operate in a slowly
growing market, not worth investing, generates low or negative cash returns.
Strategic choices: Retrenchment, divestiture, liquidation
• Cash cows – Most profitable brands, the cash gained should be invested into stars to
support their further growth; corporates should invest in cows to maintain their
current market share.
Strategic choices: Product development, diversification, divestiture, retrenchment
• Stars – Operates in high growth industries and maintain high market share, both cash
generators and cash users; stars are expected to become cash cows and generate
positive cash flows.
Strategic choices: Vertical integration, horizontal integration, market penetration,
market development, product development
• Question marks – Brands that require much closer consideration, hold low market
share in fast growing markets consuming large amount of cash and incurring losses.
Strategic choices: Market penetration, market development, product development,
divestiture

PORTERS FIVE FORCES ANALYSIS
When to use? –
Can be used to understand where
“power” lies in each situation—
the analysis tells you where you
are in relation to your
competitors, and ultimately, the
chances of your own profitability
in your business situation
compared with those of your
rivals.

IGOR ANSOFF MATRIX
When to use? –
Can be used to develop strategic options for businesses. The matrix will give managers four possible scenarios, or strategies for future product and market
activities.
• Market Penetration –Focuses on increasing the volume of sales of existing products in the
organization's existing market.
Questions asked:
How can we defend our market share?
How can we grow our market?
• Product Development – Focuses on reaching the existing market with new products.
Questions asked:
How can we expand our product portfolio by modifying or creating products?
• Market Development – Focuses on reaching new markets with existing products in the portfolio.
Questions asked:
How can we extend our market?
Through new market sectors?
Through new geographical areas?
• Diversification –Focuses on reaching new markets with new products. Diversification can be either
related or unrelated.
Related Diversification: The organization stays within a market they have familiarity with.
Unrelated Diversification: The organization moves into a market or industry they have no
experience with. This is considered a high-risk strategy.

4P ANALYSIS
When to use? –
Can be used when one is planning a new venture, or evaluating an existing offer, to optimize the impact with your target market. It helps us to understand what
the product or service can offer and how to plan for a successful product offering.
Product Place
WHAT – what are the expected benefits for customers to solve issues related WHERE – Definition of places and accesses for:
to: • Physical and online channels for service, business research area, location
• Variety, sizes, colours, quality, design and brand, packing and features, of stocks
guarantees, exchanges and support services, convenience of use, • Distribution and transport of goods, differentiation of local competitors
handling and deliveries
Price Promotion
HOW MUCH – How to make the solution accessible in relation to: HOW – Marketing strategies for:
• List pricelist, discounts given, Terms and means for payment, Criteria in • Visual identity of product and categories
gaining credit, cost v/s profit compared to the market • Production online content, press office, disclosure advertising
• Customer attraction and targeting

CASEBOOK 2020
CASE INTERVIEWS
1. PROFITABILITY

Case 1 : Profitability – A magazine publishing company is facing declining profits despite low but steady increase in subscription
Transcript of interview process of how some question are being asked by the candidate and the responses given by the interviewer :-
1. Firstly, I would like to know the demographics and region of operation of our consumers?
Ans. The region of operations is in USA and the demographics of our magazine is it is suitable to all age groups and gender.
2. I would like to then understand the recent industry trends over the last 5 years. Is the decline in profitability specific to our Magazine or is it an industry wide
phenomenon?
Ans. Our Magazine specifically has been facing the issue of decline in profitability.
3. What has been our market share and what is the trend?
Ans. The market share has been growing as the number of subscriptions have been increasing.
4. What has been market size; is it constant, increasing or declining ?

Ans. The market size is constant and has remained the same over the years.
5. Since this is a profit problem, I would begin by splitting it into revenue and cost. Are we observing rising costs or declining revenues?
Ans. Costs have been same. Revenues have been declining.
6. As costs have been same so we will further deep dive into the revenue side and leave aside the cost side. Revenue for our Magazine business can be divided
into two parts: 1) Subscription Revenues 2) Advertising Revenues. Is this correct?
Ans. Yes, its correct.
7. As the subscription revenues is a component of Price and No. of Subscribers and can be written as Price*#of subscribers. Have we observed a change in any of
these components or across all?
Ans. Prices have remained the same and # of subscribers have increased.

8. What has been the trend for our competitors for the above-mentioned components
Ans. Prices have remained same for all our competitors and # of subscribers have almost remained same for all the competitors.
9. Since the subscription revenue has been increasing and costs have remained same and our profits are going down it means that our Advertising revenues
have been declining. I would like to understand the channels of our and competitor's distribution.
Ans. Currently we are an offline publishing magazine and our competitors have moved on to the digital channel.
10. Are there any reduction in No. of advertisers advertising through our magazine and what has been the rates charged per advertisement.
Ans. The advertisement charges have remained same. No. of Advertisers have decreased.
Final recommendation:- That’s the main problem our advertising revenues have been decreasing as we are losing our advertisers owning to omni-channel
offline channel approach.

Profitability framework
Profit
Revenue Costs
Subscription Advertising Variable Fixed
Price # Subscribers Price # Advertisers Cost per unit # Units
This is a profitability case where cost has remained same and total revenues have declined even as the # of subscribers have increased. We should split profits
into revenues and costs, identify key drivers and value chain, segment and develop recommendations.
Recommendations:
Revenue side:- Cost side :-
Since we have already seen increase in the # of subscribers. We can do the following- So as the costs have remained same, we don’t need to deep dive and
1. We can expedite our R&D activities & launch our magazine on digital channels explore into the cost side.
2. We need to enhance our presence in both the channels online & offline to further
increase our market share
3. We need to tie-up with new advertisers looking to promote their products online to
the young and tech-savvy consumers
Case 2 : Profitability – A candy manufacturing company has been facing decline in profit margins
Discuss Industry drivers of profitability – Market size and growth, Customer trends. Explore Competitors, Profitability of the company, Revenues (price and
volume), Costs (fixed and variable), revenue and cost by customer segment or product type :-
1. What do you think are the general trends in the industry?

Ans. The business is declining due to more health-conscious players. It is a competitive space. Industry profit margins has been more than client.
2. What products do we sell and what has there been a change in the pricing strategy?
Ans. We are into niche category with candy liked by adults and teen alike. We make healthy candies. Pricing strategy has been steady and so has the sale.
3. Do we charge a premium price?

Ans. Yes. Our competitors offer candy at 10% lower price than ours. Chart Title
4. Is the cost of production of candies same as the competitors?
Ans. Competitor’s cost is 20% lower than us.
10%
Calculating profit margins of competitors relative to our client 20% Client cost
Raw material
Profitability of our client – Assume our client’s price is $1.00. 70% Equipment
Labour cost
•Hence, our client’s profitability is: $1.00 times 0.10 (10%)= $0.10.
•This means that our client’s cost is: $0.90
Profitability of our competitor –

•Competitor’s price is 10% lower than our client: $1.00 * 0.90 = $0.90.
•Competitors cost is 20% lower than our client $0 90 * 0 80= $0 72 : $0.90 * 0.80= $0.72

Case 2 : Profitability – A candy manufacturing company has been facing decline in profit margins
•Competitors profit is: $0.90 – $0.72= $0.18

•Competitors profit margin: $0.18/ $0.90= 20%
The competitor’s profit margin is 20%, 2X higher than our client. The difference in cost makes us looking profits.
5. Can you share the split of the cost structure

Ans. Raw material – 70%, Equipment – 20%, Labor cost 10%. What could be the reason for Raw material to be higher to us than our competition?
6. By approximately what percentage would raw materials cost have to be decreased to match our clients’ competitors’ profit margins?
Ans. Supplier bargaining power: Function of supplier concentration relevant to number of customers. Volume purchased per given supplier: Function of total
costs and the number of aggregate suppliers client uses for a particular product
Our competitors’ profit margins are 20%. For our clients’ sales price of $1.00, that means that the new profits needs to be $0.20 and hence, costs $0.80.
Current costs are $0.90. So we need to reduce costs by $0.10.
Raw materials cost is 70% of total current costs. $0.90 * 0.70= $0.63. So, we need to reduce this by $0.10 so that would be
a $0.10/0.63= ~16% decrease
They would need to reduce raw materials costs by 16% which seems a reasonable target , which seems a reasonable target.
Recommendation – reduce raw materials costs by 16% gradually to make the cut.

Case 3 : Profitability – An automobile manufacturer whose profitability has decreased
Use the flow chart in the next page to pin point the main contributor to the drop in profitability.
1. Is this an industry-wide occurrence? Are our competitors affected the same way?
Ans. Not really, our closest rival has managed to increase their profits in the same period
2. Well, the decrease in profits can be due to a reduction in revenue or an increase in cost. Do we have data on this?
Ans. Revenue streams have remained the same, however the costs have increased
3. Costs can be fixed or variable. For fixed costs, we have plants, machinery and equipment and for variable costs, we have raw material and labor. Do we have
an idea which of these has increased?
Ans. Well yes, the raw material costs have increased
4. For a car, I think the primary raw materials are steel, auto parts, tires, electrical parts and glass. Did I cover them all? If yes, which of these are contributing to
the increasing costs?
Ans. Yes. The costs of auto parts have gone up while the rest of the costs are more or less similar
5. Till now, my diagnosis is the rise in the price of auto parts is costing us the profit. But to be sure, I need to know auto parts as a % of total costs.
Ans. It’s around 45-60% roughly. (it's always good to recheck, had this % been low say 5-10% we might not have concluded the above statement with conviction)
6. Well, if this is the case, then the rise in cost of auto parts is the main reason. This can be because we’re buying more parts per car, or we’re paying more for
each piece bought. Which can it be?
Ans. Yes, we’re spending more on each part bought. Any hypothesis on why this could be happening?
7. It could be due to two causes: Either we switched to a new supplier who is more expensive or we’re still sticking to our old suppliers. In the latter case, it
might be that these old suppliers have increased their margins somehow, or their costs have gone up, maybe due to the unavailability or scarcity of material.
Ans. Interesting! Yes, their margins have gone up, what are the possible reasons?
Case 3 : Profitability – An automobile manufacturer whose profitability has decreased
8. Well, it can be that the major suppliers have probably merged or unionized and have created a monopoly and hence can charge a higher price now
Ans. Okay! That seems to be the issue then. Is there anything else you’d like to add?
9.Yes! The supplier issue is something that should affect the whole industry, but despite that our competitor has managed to increase profits. That is what is not
adding up for me. Is there any other segment where they have cut costs?
Ans. Well, yes! They have state of the art production facilities which we too were planning to implement.
I see. I think there lies the main competitive advantage of the rival company- my recommendation to the client would be to try and implement similar
production techniques
Average price
per car Parts and Raw Materials
Revenue
• Steel
• Auto Parts
No. of cars sold
• Glass
• Electrical Parts
Profits • Tires
Factory
Fixed Plants and Equipment
Land
Costs
Parts and Raw Materials

Variable Labour

Case 4 : Profitability - The client is a watch manufacturer and has been facing declining profits for the past few years. The client wants to know why
About the client:

The client is into manufacturing mainly luxury watches for all the segments you mentioned – children, men and women. The profits have been declining for all the
segments.
1. Can you tell me something about the client?

Ans. The client is into manufacturing mainly luxury watches for all the segments you mentioned – children, men and women. The profits have been declining for all the
segments.
2. Since this is happening for all the segments, my hypothesis is that there must be some client specific internal factor that is causing the profits to decline. Can I also know
what part of the value chain does the client operate in? Do they only manufacture? Or are they also involved in the other parts like distribution etc.?
Ans. The client manufactures the watches, distributes it and sells it through both its own shops as well as other retail shops.

3. Okay. So I would also like to know if the profits have been declining for both client’s own stores or through other retail stores?
Ans. The profits have been declining majorly while selling through client’s own stores
4. I see. Are these stores located pan India?

Ans. The client sells through its own stores in tier 2 cities or not so developed cities. For tier 1 cities, the client sells mainly through other retail shops.
5. So can I focus on the sales which are happening through tier 2 cities and through the client’s own stores?
Ans. Yes please. Go ahead
6. In order to understand better what is the reason for declining profits I would like to go deeper into the profit drivers. There are only 3 possible cases – the
revenue is going down, the cost is increasing or both are happening simultaneously. I would like to go deeper into the revenues first, do you want me to focus
on the cost side instead?
Ans. No, let us not focus on the cost side.
7. So we have seen that product mix is not an issue. In that case, if the revenues are going down either the prices have been decreasing or the volumes are
going down. My hypothesis is that the volumes are going down. Can I proceed?
Ans. Yes, correct. The prices have remained the same. The volumes have gone down.
8. In that case, I would like to look at volumes from both the supply side (client) as well as the demand side (from the customer). Can I assume that there are no
issues from the supply end and that the client has been able to supply the watches in these tier 2 cities?
Ans. Yes, there are no issues from the supply side.

9. This means that the demand from the customers seems to be falling. Here, I would like to look at both the internal and external reasons. The internal reasons
could be the location of the store, the perceived quality/image of the brand, the customer experience at the stores, the repair service etc. The external reasons
could be the presence of competitors, other falling. Here, I would like to look at both the internal and external reasons. The internal reasons could be the
location of the store, the perceived quality/image of the brand, the customer experience at the stores, the repair service etc. The external reasons could be the
presence of competitors, other macro trends specific to tier 2 cities, declining trend of watches etc. Have I missed out on any important factor?
Ans. No, I guess you have covered most of the factors. Let me tell you that there are no issues with the internal factors that you have listed– the client has
been doing well than its competitors on all the fronts including brand image, customer experience, after sales service etc.
10. Okay, this means that the fall in demand is due to some external factor. Has the competition increased?
Ans. No, the competitors have remained the same. However, customers are not coming to buy from our client. Can you think of some possible reasons why
this must be happening?
11. Since the client issue is happening mainly through its own stores in tier 2 cities, there must be some external trend that is making the customer not visit the
stores in these cities. One trend that I can think of is that the sales through ecommerce websites like Flipkart, Amazon etc. have increased significantly over the
past few years in even the tier 2 cities. People are starting to trust these players and are buying through these websites rather than physically going to the
store.
Ans. You are correct. Our client is not currently selling the watches through ecommerce players in these cities. I am glad you figured out the problem. We will
not go into the recommendations. This is good enough. Thank you!

Case 5 : Profitability – Our client is a dairy company that launched their ice-cream brand recently. However, they are reporting a drop in profits and
want you to figure out the reason
Preliminary Questions Interviewer Responses

• Since when has a drop in profits been observed? • The drop in profits has been seen for the last quarter,
i.e. April onwards.
• Can you shed some light on the company and its • The company offers processed milk, curd, dairy drinks
product offerings? and ice-cream
• Who are the target customers? Which customer • All customers. The primary consumers are same as
segment is the primary consumer? that of other ice-cream companies
Case Framework
Change No Change
Observed Observed

1. Has there been a drop in profits for all firms across the industry?
Ans. No such trend has been observed. The problem is restricted to our company only
2. Since the drop in profits has been a trend for the last quarter, was it observed for the last year as well? Is this a seasonal trend?
Ans. The dairy company launched ice-cream as its product only recently in August last year. So, we do not have any historical data for validation
3. Alright. Can we say that the profits have dropped during the summer months?
Ans. Yes – that would be a fair observation to make
4. Let’s analyze the value chain. Where does the client operate in the value chain?
Ans. The client is a manufacturer which sources most of its own raw materials. Inbound Logistics consists of suppliers for sugar and flavoring ingredients.
Outbound Logistics can be further divided into distributors and retailers
Customer
Inbound Logistics Manufacturing Distributors Retailers Sales & Marketing
Service
Outbound Logistics
5. Is there an issue with the supply of raw materials in Inbound Logistics?
Ans. No
6. Has there been any changes in the production process or any labor or production issues?
Ans. No

7. Is there any problem with cold storage of product during the summer leading to obsolescence of inventory?
Ans. No
8. Is there an issue with product packaging exposed during summer months as a result of the ice-cream melting?
Ans. Yes, it seems to be the case. We can end the case with any recommendations for solving the issue
Final Recommendation:- The company can utilize thermal insulated paper imported from China so as to have a heat-resistant packaging for ice-creams

Case 6 : Profitability – Our client is a transport company providing logistics services across India. Increasingly, they are seeing a decline in their profits.
Analyze the problem and provide solutions.

• Who are its customers? • Its main customers are e-commerce companies who
use its services for transporting goods across all states
of India.
• Does it provide road and/or air freight service? • It provides freight services through land only.
Case Framework

1. (Interviewer) Can you walk me through your approach for tackling the case?
Ans. Essentially, the company could be facing reduced profits because of two things – either a decline in sales or increase in operating expense. Reduction
in revenue is a function of price, volume and increase in costs could be due to a variety of external factors.
(Interviewee) - Can I take a moment to gather my thoughts and list the possible factors for both?
(Interviewer) - Sure, go ahead
Decline in sales could be due to the following reasons: Competitors – competitive pricing, substitutes to road freight services - Air Cargo, Railways,
increase in price due to change in regulatory environment like increase in cross-state border taxes leading to reduction in the demand for the company's
services and lastly revision of contracting terms might have led to loss of customers.
Increase in operating expenses may be due to rise in fuel costs, road tax, relying on sub-optimal routes due to temporary construction work/new toll booth
installations, increase in labor expense/labor union strike etc., and increase in maintenance costs of the truck due to depreciation
2. Do you want me to delve into both sides of the problem?

Ans. I want you to concentrate on the revenue angle
3. Okay. Have we slashed our prices? Have we lost our customers to competitors - hence a possible reduction in volumes?
Ans. No, our rates have remained the same and we haven't lost our customers
4. For logistics companies, pricing rates are based on tonnage of weight and distance travelled, that is INR X price per ton per km. A possible reason for the
reduction in revenue is that, even though we may have retained all our customers, we might be getting more orders for shorter routes and lesser tonnage. Is
that the case?
Ans. (Interviewer) - Do you think the pricing system you mentioned is viable for the logistics company? Is it profitable for the company to send a single half
ton carton across the country?
(Interviewee) - No sir. Charging on the basis of weight and distance constitute only the variable aspect of the pricing. Usually, a fixed component is
charged for each trunk

5. (Interviewer) Could you write down the pricing equation and explain how this could be impacting profits?
Ans. Two fully loaded (in terms of physical space capacity) trucks may be generating different revenue for the same distance as one might be carrying
lesser weight owing to the design of the consignment. For example, carrying two wardrobes will engulf the space in the truck but with respect to weight, it
might be much lesser than a truck carrying neatly stacked cartons of chocolates. Therefore, while the cost of fuel and labor remains the same, decrease in
revenue impacts profits
6. (Interviewer) Well, that is exactly the issue, due to increasing variety and shape of consignments from various e-commerce companies, there has been a
sub-optimal utilization of truck space. What are your recommendations for the client?
Ans. Final Recommendations:
[Recommendation #1] - Revising the pricing strategy and providing different pricing options
[Recommendation #2] - Combining B2B consignments with B2C consignments which may act as filler to the air spaces and provide an additional revenue
stream
[Recommendation #3] - Development of a standard operating procedure for optimal stacking of the trucks

Case 7 : Profitability - The client manufactures IC chips and has come out with a new IC chip. The client wants to sell it for a lesser cost.
.
Before going further into the solution, we try to understand what exactly is new about the new product, how was the pricing earlier, what price are they expecting
from the market, what amount of investment have they made and how much time are they aiming to breakeven in
1. Can you please tell me more about the product. What was being manufactured and sold earlier and what’s new about the IC being launched now. Are there any
changes in terms of manufacturing cost or pricing?
Ans. Okay, so the cost incurred to the company for selling one IC earlier was Rs 1000, the new IC is 10 times faster and the client wants to cut some costs. The
client wants to make this happen. There is no issue of investment made or no rush to achieve breakeven. The client wants to get competitive.
2. May I know what costs are involved in manufacturing 1 IC? Is there a difference between manufacturing and distribution process of the old IC and the new IC?
Ans. The manufacturing plants have been setup in South Korea. Raw material is brough in from China. Once manufactured, the IC chips are then transported to
a warehouse and then to different distribution centers that the company owns or rents in various countries. The new IC will have a similar process. The raw
materials required are similar and the changes in the style of manufacturing require no additional costs.
3. Okay, Is there any reason why the company holds so many warehouses? And how would you describe the percentage break up for different costs involved in
manufacturing one IC chip right from raw material to delivering the finished product to the customer.
Ans. There is no particular reason for holding warehouses. That’s how company works on its distribution services. 30% of the cost goes to logistics, the company
keeps a 20% profit margin and 40% of the selling price is the manufacturing cost and 10% are the miscellaneous costs of marketing etc.
4. I am assuming that the manufacturing costs will remain the same since the process is still the same. The company can make some changes to its distribution
system. The warehouses are not necessary in all the places. There are a lot of competitive 3PL partners that the company can now rely on and at very nominal
costs.
Ans. Why do you think so? Would the 3PL partner not charge the same amount? Will that approach be reliable?

Case 7 : Profitability - The client manufactures IC chips and has come out with a new IC chip. The client wants to sell it for a lesser cost.
.
5. 3PL companies cater to several companies for their logistic needs. The cost they incur in transportation is much lower. Even choosing the most renowned 3PL
company will cost us much less.
Ans. Ok, assuming we were able to save costs and now logistics only accounts for 25% of the total cost. How will we reduce further?
6. I would also want to look into the inventory part of the supply chain. How much inventory does the company keep? What kind of methodology does it follow?
Ans. As of now we manufacture at full capacity and keep our warehouses and local inventories stocked up incase there is a spike in demand.
7. We can save up on a lot of space if we make the right estimate of demand. Instead of going for a push based model, we can go for a pull based approach. And
since our IC is new, there is still a cloud of uncertainty on the response that it will receive from the market. Hence introducing the new product in a small region,
gathering demand estimates from that region and then extrapolating it will be a better method to save costs on manufacturing additional units and saving on cost
of holding inventory.
Ans. I think this makes sense. Would you sum up the case for me?
8. Since we don’t have any changes in the manufacturing process, we focused on reducing logistics and cost of holding inventory. We came up with a solution
where letting go of the ownership of warehouses in several places and deploying a suitable 3PL partner could help save costs. At the same time, focusing on a pull
based supply chain model by manufacturing the right quantity could help us save costs significantly.

Case 8 : Profitability - Your client is a small airline operator based out of Europe. They fly roughly 20 different short haul flights and 2 long haul flights
to US. Profits are falling and you must find out why?
Remarks: This is a profitability problem which can be solved by breaking profit into revenue and costs. But let’s see how this can be solved by using Porter’s Five
forces
i. Power of Suppliers: The predominant suppliers in the airline industry are aircraft providers, fuel suppliers, food and beverage suppliers and other services.
Here the relevant questions to ask are “Are the costs of inputs increasing?”, “Are suppliers driving up the costs?”
ii. Barriers to Entry: There are huge barriers to entry for airline companies due to initial capital costs but in this case our client is already established. In fact
high barrier means new players can’t easily enter the market and less of competition
iii. Power of Buyers: Passengers these days have a lot of choices. A lot of low price carriers have come up and combine that with internet and availability of
information, passengers have lot of buying power as they pick and choose from diff. airlines. Questions to be asked are about demand levels and
occupancy rate.
iv. Threat of Substitutes: Substitutes involve road, rail and water ways.
v. Competitive Rivalries: There are a no. of budget airlines operating at low costs and this allows the passengers to hop from one airline to other based on
the cheapest price. You can ask about the customer loyalty and retention, market share of the client, whether industry is fragmented or has any strong
player etc.
Remarks: Out of the points suggested above, you are told that competition has increased in the last couple of years and also the occupancy level has come
down
Now you have narrowed down the problem to issues with demand and occupancy rate due to increased competition. You are told that airline requires 75%
occupancy to break even and over last year on an average they had 77% capacity leaving them short of min. capacity of 82%. Now you need to suggest the ways
to increase revenues and decrease costs which can be done in following ways:

Power of Buyers
Bargaining leverage
Price Sensitivity
Buyer volume/information
Product Differentiation
Substitutes available
Brand Identity
Barriers to Entry Threat of Substitutes

Absolute cost advantages Degree of Rivalry Price Performance trade off
Access to inputs Industry Growth substitutes
Govt. Policy Industry concentration Buyer inclination to substitute
Economies of Scale Product differences Switching costs
Switching costs Diversity of rivals
Access to distribution Brand Identity
Power of Suppliers
Supplier Concentration
Differentiation of inputs
Threat of forward integration
Cost relative to total purchases in industry
Presence of substitute inputs
Importance of volume to supplier

i. Reduce the no. of flights to consolidate costs

ii. Reduce the no. of managerial and administrative staffs to reduce costs
iii. Increase the price of ticket but risk further lowering demand
iv. Reduce the price of ticket to increase demand and cut costs in other operations
v. Enter into alliance with other airlines
Remarks: Now you can be asked to further deep dive into any of the above points. Let’s say interviewer wants you to explore more about the last option. He
wants to know what all factors to be considered before entering into any alliance.
Some of the points to consider could be
i. No. of airlines in the alliance
ii. Any costs to join the alliance. Initial or ongoing
iii. Expected benefits of alliance. Tangible or Intangible
iv. Can you exit the alliance at any time
v. Who manages/controls the alliance
vi. Detailed rules and policies of member airlines
With this discussion, you can wrap up the case here.

Case 9 : Profitability - Your client is a company who makes expensive specialist batteries for mobile homes (motor homes) in USA. The battery is very
powerful, long lasting and of high quality. New industry conditions are occurring and motor home dealers are starting to use a cheaper battery as the
factory standard in an attempt to lower the overall price of motor homes. Your client’s product is now only offered as an added feature for which the
customer must pay an extra $500. Discuss how your client should go about maintaining profits given these new market conditions.
Remarks: This is strategy based case and you should come up with the ideas and discuss with interviewer. Some of the possible ideas could be as follows:
i. Differentiation: As the battery is of superior quality, the client can think of differentiating the existing product into other product markets such as motor
boats/yachts, trucks, buses/coaches etc. Though initially this is a costly exercise of setting up contacts, finding sellers, marketing etc., in long term it can
give profits.
ii. International Markets: The client could export the existing battery to overseas markets such as Europe and Asia for use in mobile homes.
iii. Enhance/Improve Service: Stick with the current situation but offer a greater product warranty on the battery to entice customers to upgrade to the
better battery for the extra $500
iv. Dealer Incentives: The client could offer the dealers selling the motor homes a 5-10% commission on any of their batteries sold. Thus the dealer’s
salesmen would act as direct promoters of the battery.
v. Produce cheaper lower quality battery: The final option may be to compete directly with the battery manufacturer who has now become default supplier
by producing a new lower quality cheaper battery. This might be costly and not very effective.
Remarks: After the above qualitative analysis, the CEO may ask you to do some simple mathematical calculations. For ex: The CEO wants to know what the fall
in the profit will be given this new competitive situation if they do nothing.
• The battery sells for $5000
• Fixed costs - $50mn
• Variable costs - $3000 per unit
• Sales – 50,000 units per year
Case 9 : Profitability - Your client is a company who makes expensive specialist batteries for mobile homes (motor homes) in USA. The battery is very
powerful, long lasting and of high quality. New industry conditions are occurring and motor home dealers are starting to use a cheaper battery as the
factory standard in an attempt to lower the overall price of motor homes. Your client’s product is now only offered as an added feature for which the
customer must pay an extra $500. Discuss how your client should go about maintaining profits given these new market conditions.
Calculations: Current Scenario Calculations: If sales drop by 50%
Battery = $5000 Battery = $5000

Fixed cost/unit = 50mn/50,000 = $1000 Fixed cost/unit = 50mn/25,000 = $2,000
Variable costs = $3000/unit Variable costs = $3000/unit
Profit/unit = 5000 – (1000 + 3000) = $1000 Profit/unit = 5000 – (2000 + 3000) = 0
Total Profit = 1000 * 50,000 = $50mn Total Profit = 0
Therefore, the client must act given the new market conditions or they will only break even
Remarks: Now, CEO says if they reduce the price of battery by 5%, the sales would drop only by 25%. What would be the profit in this scenario?
Battery = $5000 * 0.95 = $4,750
Fixed cost/unit = 50mn/(50,000 * 0.75) = $1,333 Recommendation: Though the final scenario gives $15mn profit, it
doesn’t come close to the goal of maintaining initial profits. Therefore, the
Variable costs = $3000/unit options proposed earlier should be considered.
Profit/unit = 5000 – (1,333 + 3000) = $417
Total Profit = 417 * 37,500 = $15.6mn

CASEBOOK 2020
CASE INTERVIEWS
2. Mergers & Acquisition

Case 1 : M&A – Merger of State Bank of India with its 5 associates? What are the 5 key points you would put in front of the management to justify it.
1. Firstly, I would like to know the reasons for going for this M&A? Is it Undervaluation, Control, Synergies.
Ans. There is a lot of common things between the associate banks and each one is a leader in its geography. We are looking to enhance Synergies.
2. I would like to then understand the recent industry trends over the last 15-20 years. Is the industry witnessed similar phenomenon and was it successful?
Ans. Yes the industry has seen similar trends in the past. The most recent one was merger of State Bank of Indore and State Bank of Saurashtra with SBI in
2008 and 2011 respectively. The similar events have seen success in the past.
3. Since this is and M&A problem we would like to analyse all the areas like Market, Target, Buyer and finally Synergies and risks. Are both companies the
(buyer and target) operate in same geographies and have same customer base?
Ans. The market in the banking sector is regionalized and the regional banks have hold over the respective markets and consumers.
4. What has been market size is it constant, increasing or Declining ?

Ans. The market size is increasing over the years.
5. How profitable is the market ? And is its profitability stable?

Ans. Operating Costs have been increasing leading to decline in the profits.
6. How intense is the competition?

Ans. Banking sector has been more and more competitive with RBI giving licenses to Payments banks and other Digital Apps also coming up. It is heavily
regulated by the RBI and GOI.
7. How has been the performance of the target associate banks over the past years . Are they overvalued/Undervalued?
Ans. The target associate banks have been doing well as they have the trust of the consumers in the region they operate. They are undervalued.

8. Does the target own any assets (e.g.: technology, brands, etc.) or capabilities (e.g.: manufacturing know-how) that are strategically important to the buy
Ans. Yes the associate banks have certain product lines which are very popular amongst customers and profitable.
9. Is the target company's culture very different? If so, are we confident it could still integrate well with the buyer?
Ans. No, the culture of the target banks is similar to our organization.
10. Can the buyer easily finance the acquisition? Or will it need to lend money?
Ans. Yes as it’s an internal transaction as the parent group of the all the associate banks is SBI only so we don’t need to lend any money for the M&A.
11. Does the buyer have any experience in integrating companies? Was it successful in the past?
Ans. Yes SBI has the experience of a successful merger in the past ; State Bank of Indore and State Bank of Saurashtra with SBI in 2008 and 2011 respectively.
12. Is this the right time for the buyer to acquire another player? Does it risk losing focus?
Ans. Yes as the market size is growing and with the increasing regulations by RBI it’s the right time to acquire the associate banks. No it will enhance and
propagate our trajectory to achieve our long term vision and goals.
13. Are there cost synergies (e.g.: duplication of roles, stronger buying power, etc.)?
Ans. Yes.
14. Are there revenue synergies (e.g.: product cross-selling, using the target's distribution channels for the buyer's products, etc.)?
Ans. Yes
.
15. What are the biggest risks that could make the acquisition fail (e.g. culture fit, regulation, etc.)?
Ans. As such the management sees no risk.
Final recommendations:- Looking at the following advantages we should go ahead for the merger of SBI with its associate banks:
1. Cost synergies – It will reduce the OPEX and CAPEX as SBI is a National bank and it happens sometimes that Associate Bank and SBI are having nearby
branches thus we close one of the nearby branches and saving the rent, electricity, water etc. bills for one building. We can layoff certain staffs and merge
the other staff of both the branches helping in increasing customer satisfaction by solving the problems of the customers.
2. Revenues synergies – It will increase the consumer base for the parent organization and provide a pathway to select the most popular regional products of
each associate bank and introduce it on a pan India basis.
3. Revenue synergies – The increase customer base will lead to more opportunities for cross selling the products of subsidiaries like SBI Life Insurance, SBI
Mutual Fund, SBI Capital; which will further increase the profits of the company.
4. Cultural synergies – As of know in spite of being from same parent organization the staff of the associate banks feel discouraged as they think they are the
clones of the SBI staff. This integration will lead to parity amongst all the staff members in all aspects like Promotions, Increments, Base salary etc.
5. Lastly it will improve the image of the bank and it will have a huge base of consolidated assets which will take care of the NPA’s and clear the balance sheet
of the associate banks. This will lead to improved ratings by Rating agencies like Moody’s, CRISIL, CARE etc. which will further instill confidence in the
customers. It will further propagate the agenda of the GOI to promote digitization drive and of Financial inclusion by opening new branches in remote and
unique locations.

M&A framework
M&A
Organizational
Regulatory
Benefits Costs &
fit
Cultural fit
Target
Integration Organizational Cultural
company Synergies Price paid
costs synergies synergies
value
Cost Revenue
Cost Revenue

Case 2 : M&A – Evaluate the BioFuture acquisition and advise on its strategic fit with GlobaPharm's biologicals strategy
Case details: - Our client is GlobaPharm, a major pharmaceutical company (pharmaco) with $10 billion a year in revenue. Its corporate headquarters and
primary research and development (R&D) centers are in Germany, with regional sales offices worldwide. GlobaPharm has a long, successful tradition in
researching, developing, and selling “small molecule” drugs. This class of drugs represents the vast majority of drugs today, including aspirin and most blood-
pressure or cholesterol medications.
GlobaPharm is interested in entering a new, rapidly growing segment of drugs called “biologicals.” These are often proteins or other large, complex molecules
that can treat conditions not addressable by traditional drugs. R&D for biologicals is vastly different from small-molecule R&D. To gain these capabilities,
pharmacos have three options: they can build them from scratch, partner with existing start-ups, or acquire the start-ups.
Since its competitors are already several years ahead of GlobaPharm, GlobaPharm wants to jumpstart its biologicals program by acquiring BioFuture, a leading
biologicals start-up based in the San Francisco area. BioFuture was founded 12 years ago by several prominent scientists and now employs 200 people. It is
publicly traded and at its current share price the company is worth about $1 billion in total.
1. Firstly, I would like to know the reasons for going for this M&A? Is it Undervaluation, Control, Synergies.
Ans. Yes, it is for Control and Synergies.
2. I would like to then understand the recent industry trends over the last 15-20 years. Is the industry witnessed similar phenomenon and was it successful?
Ans. Yes the industry has seen similar trends in the past and the similar events have seen success in the past.
3. Since this is and M&A problem we would like to analyse all the areas like Market, Target, Buyer and finally Synergies and risks. Are both companies the
(buyer and target) operate in same geographies and have same customer base?
Ans. GlobaPharm is dealing mainly in small molecule drugs worldwide whereas BioFuture is into biologicals and operates in USA.

4. What has been market size is it constant, increasing or Declining ?

Ans. The market size is increasing over the years.
5. How profitable is the market ? And is its profitability stable?

Ans. Market is quite profitable for the new type of biological drugs and the first mover strategy will have an upper hand.
6. How intense is the competition?

Ans. There are certain other competitors who have already started building similar kind of drugs.
7. What is the timeline to successfully test and launch a particular drug?

Ans. It normally takes upto 4-5 years to successfully develop, test and launch a particular drug combination.
8. Does the target own any assets (e.g.: technology, brands, etc.) or capabilities (e.g.: manufacturing know-how) that are strategically important to the buy
Ans. Yes the target will let us to increase our presence across USA and hence increase the customer base, further the target has certain patents/copyrights for
biological drugs which will be an asset for our company and as they are already into the production phase of the drugs they have well established R&D. They
also have established distribution channels which will also be an asset for our company.
9. Is the target company's culture very different? If so, are we confident it could still integrate well with the buyer?
Ans. Yes, the cultures are different. But as we are a global brand with our presence all over the globe hence we are a multi-cultural organization and the
integration will be smooth.
10. Can the buyer easily finance the acquisition? Or will it need to lend money?
Ans. Yes we can easily finance the acquisition and we don’t need to lend any money for the M&A.

11. Does the buyer have any experience in integrating companies? Was it successful in the past?
Ans. No we don’t have prior experience in any sort of M&A in the past.
12. Is this the right time for the buyer to acquire another player? Does it risk losing focus?
Ans. Yes as the market size is growing and with the increasing demand for biological drugs it’s the right time to acquire the target. No it will enhance and
propagate our trajectory to achieve our long term vision and goals.
13. Are there cost synergies (e.g.: duplication of roles, stronger buying power, etc.)?
Ans. Yes.
14. Are there revenue synergies (e.g.: product cross-selling, using the target's distribution channels for the buyer's products, etc.)?
Ans. Yes
.
15. What are the biggest risks that could make the acquisition fail (e.g. culture fit, regulation, etc.)?
Ans. Expected probability of the successful testing of drugs.

Final recommendations:- Looking at the following advantages we should go ahead for the merger of SBI with its associate banks:
1. Cost synergies – It will reduce the OPEX as the well-established R&D can be used to develop the new drugs and will also reduce the time to launch.
2. Revenues synergies – It will increase the consumer base for the parent organization and provide a pathway to select the most popular regional products
and launch across different countries globally.
3. Cultural synergies – As of know Globapharm is an MNC with its presence all over the globe hence have a multi-cultural environment. This will smoothen the
process of integration.
4. The existing marketing and sales team capabilities along with the existing distribution channel of BioFuture in USA can be used to expand the consumer
base for Globapharm.
5. Lastly, we need to evaluate the expected probability of success of a particular drug.
GlobaPharm believes that the likelihood of success of BioFuture’s primary drug candidate can be improved by investing an additional $150 million in a larger
Phase II trial. The hope is that this investment would raise the success rate in Phase II, meaning that more candidate drugs successfully make it to Phase III and
beyond. By how much would the Phase II success rate need to increase in order for this investment to break even?
If the drug is successfully marketed and sold, it would be worth $1.2 billion

Breakeven calculation:-
1. If a candidate drug passes Phase II, then it has a 50% x 90% = 45% chance of being successfully marketed and sold. Since a successful candidate drug is
worth $1.2 billion, a candidate drug that passes Phase II is worth 45% x $1.2 billion = $540 million
2. To break even (that is, to make the $150 million investment worthwhile), the value of the candidate drug that passes Phase II would need to increase to
$540 million + $150 million = $690 million. This means, the probability of combined success in Phase I and II would need to increase by (150/540) = 28
percentage points
3. So the current probability of Phase I and II, that is, 70% x 40% = 28% would have to increase by 28 percentage points, to 56%. In order to come up to 56%,
Phase II probability would have to increase from 40% to 80% (70% x 80% = 56%)
Conclusion:- This seems like a very big challenge, as an increase by 40 percentage points means that the current probability of 40% needs to double
As the Investment would need to increase the probability of success in Phase II from 40 to 80 percent (that is, increase of 40 percentage points) which is
practically not feasible hence the acquisition of BioFuture is not a good option for GlobaPharm even though the other parameters are in favour.

M&A framework
M&A
Organizational
Regulatory
Benefits Costs &
fit
Cultural fit
Target
Integration Organizational Cultural
company Synergies Price paid
costs synergies synergies
value
Cost Revenue
Cost Revenue

Case 3 : M&A – Evaluate for CHEMBRO’s acquisition of POA and assess their future prospects
Case summary –
Evaluate for CHEMBRO, a major chemical producer, the feasibility of acquiring another major player in the industry, Plastics of America (POA). Both are bulk
commodity chemical producers. Analyse the future prospects of POA major product line, a chemical used in the production of plastics. Should CHEMBRO
acquire POA?
There are two issues in this case that should be addressed separately in the suggested order –
• What issues need to be addressed in evaluating an M&A proposal? (Qualitative)

• What is the valuation? (Quantitative)
1. What strategic issues need to be addressed in evaluating an M&A proposal?

Ans. We need to recognize the internal factors (synergies and economies of scale) as well as some external factors (opportunity costs and industry
attractiveness). Major parts of the framework are as follows –
▪ Market Attractiveness / Industry Potential

▪ Operational Analysis (Synergies/Economies of Scale/ Network Externalities)
▪ Organizational and cultural compatibility
▪ Capability to enact acquisition: Financial, legal, and perceptual barriers
Market Analysis
Ans. The following conditions are taken into account –

▪ End-users come primarily from the automotive industry
▪ Market size has been slowly declining over the last five years

▪ Within the last couple of years, prices have declined rapidly
Competition / Industry Analysis
There are 10 major producers; the largest one with a 35% share; number two has 25%, and POA is third with 20%; the remaining share is divided amongst
others
▪ The two largest competitors earn a small return; POA is slightly above break-even; the rest are operating at break-even or at a loss
▪ Relative capacity utilization in the industry is 60 to 70 % and has been so for the last 3 years. POA is also currently working at 75% of capacity
▪ The two largest competitors are highly diversified with this particular product line representing no more than 20% of their revenues
▪ Highly regulated industry with expensive pollution control equipment
▪ High barriers to entry because of the low profits and high investments required
Product value proposition / brand portfolio
▪ The price has been driven by self-destructive cuts from the leaders to gain temporary share points
▪ We do not foresee the development of any significant by-products.
▪ Other possible uses: None.
▪ Complementary Assets: 50% of POA‘s sales are to the automobile industry
Finance and Operations
▪ Cost is based on size/efficiency/age of plant, etc. Within the industry, POA is in an above average position.
▪ There are several operational improvements that could be implemented, and management has not been aggressive in its pursuit of quality and cost
controls.
▪ Great economies of scale exist in marketing and transportation. (Not quantifiable)
▪ Operational synergies could represent an additional $30 million in profits

Do the NPV Calculations (Use 10% rate of return and not 9% (12% Return on Capital – 3% Growth Rate) –
Ans. NPV analysis: Based on the information from Exhibit, the net present value of the target company is
→ $90M / (10%) = $900 million (assume perpetuity), which is less than the purchase price tag of $950 million
Industry Attractiveness: not particularly attractive, unless the larger competitor can use economies of scale and dominant position for economic gain.
A more comprehensive NPV would include the new cash flow from synergies, as well as the previously calculated NPV.
Therefore the $900 million + [Synergies 30million/(12%-3%) = 333million] = $1,233million value of target > 950 price tag.
In addition to the cash flows expected from synergies, the potential economies of scale and tax advantages from funding the acquisition with debt could be
seen as other sources of revenue.
Purchase Price $950 M
Annual operating
$90 M
income before tax
Cash $30 M
No. of employees 2000
Return of capital 12%
Market risk premium 7%
Growth rate 3%
Tax rate 40%
These considerations further improve the deal.

▪ Competitive and regulatory responses to block the merger are reasonable to assume due to concerns over industry concentration.
▪ Benchmarking the value of the POA acquisition to other similar M&A in the industry.

CASEBOOK 2020
CASE INTERVIEWS
3. Market Entry

Case 1 : Market Entry – A budget airline company Fly-Cheap is considering entering a new market to cater to economy class within Europe
1. Discuss major factors that needs to be considered during a market entry.

Ans. Major influencing factors for the airlines to launch into get into cheap of quality business class airlines are as follows –
• Customers variety and preferences – a. Business Travelers, b. Luxury Tourists, c. Diplomats, d. How price sensitive are these groups, and what niche would
offer them value?
• Competition in the sector – a. How will incumbent airlines react to this?, b. Are alternatives such as train travel serious competition?, c. Can they position
themselves as competition to other airlines’ economy offerings?
• Capabilities of Fly-Cheap organisation to launch and adopt in new section – a. Will their budget brand be a limitation or an asset?, b. What capabilities
do they have as a budget airline that are particularly useful? Do they have access to landing slots?, c. What do they not currently do that they will need to
be good at?, d. New staff and luxury aircraft?
• Entry Mode in the new market – a. Can this simply be launched as another route with a different service?, b. Whom could they partner with? Is an
acquisition or partnership a viable option?, c. Should they consider setting up a new company (with a new brand)?
2. Fly-Cheap has determined that it cannot simply offer another version of the current service offerings in the market. The company is looking to carve out an
innovative niche for itself by serving high-class customers in a different way. What ideas do you have for Fly-Cheap?
Ans. The basic Ideas that can be carved out for Fly-Cheap for low cost airline –
• To fly a scheduled service of planes to the high-end holiday resorts over weekends and weekdays
• Partner with luxury hotel chains and travel companies to offer packages
• Fly from regional airports and include a chauffeur to get passengers there
• Set up a scheduled service for government officials
• Charter to luxury cruise lines to offer passengers flights to the ship

• Do not fly scheduled flights, but focus on one off flights to key European social events – Monaco Grand Prix, Paris Fashion Week
• Offer packages including entry to these events
• Run on board events, such as wine tastings
• Offer ‘experience flights’ e.g. over the North Pole
• Use a subscription model for unlimited flights in a given period
• Partner with corporations and governments who want the use of a private jet but don’t want to buy one
3. Fly-Cheap is looking at Vienna for its first destination. Before we jump into the calculation, what are the main costs you anticipate Fly-Cheap faces?
Ans. Main costs that can be included will be –
• Getting customers on the flight – a. Aircraft or Leasing the aircraft, b. Fuel, c. Marketing and other overhead, d. Slotting fees for the gates and use of
airport
• Caring for customers on-board – a. Labour - pilots, stewards, crew, b. Servicing, Cleaning the aircraft, c. On-board refreshments and services
4. Verbally provide the following costs (you can state them in dollars). How much does Fly-Cheap need to charge per passenger to break even on this flight if
25/32 seats are filled? (omit the price of fuel if you want to provide an added challenge)
Ans. Revenue → 25 Passengers → $12500 costs → $500 per passenger
$500. Business class seats could be far more expensive than that. Thus, Fly-Cheap has a great profit opportunity here.
5: Now that we have talked through Fly-Cheap’s options, would you recommend launching an all-business class service? What are the important things to keep
in mind?
Ans. Yes, an all business-class service looks profitable so this is worth pursuing. A quick brush up on the financials also gives a positive indication to go ahead
with the new venture,

Recommendation
It is advisable to go ahead with the plan. However the following factors needs to be kept in mind –
• Brand: launch a new brand or partner.
• Niche: come up with something new that our customers would pay for.
• Capabilities: make sure we are trained in luxury customer service.

Case 2 : Market Entry – A Leading Japanese Tech Company wants to enter the Indian market
Ask Clarifying Questions, to have an in depth understanding of the client and the product.
1.What type of business does the company deal with? What are there core areas of business?
Ans: The client is a leading tech company that deals with renewable energy sources. Their products are mainly in the areas of solar, hydro and wind energy.
2.What is the product/service they are planning to launch in India?

Ans: They are planning to launch a solar powered flashlight in India
3.Can you tell me a little bit more about the product?

Ans: It’s a renewable substitute to the ordinary flashlight. It can be recharged using the solar cells- takes about 1-2 hours to charge and can be used for 12
hours on the go.
4.Okay, that’s interesting. How can I help the client in this matter?
Ans: Well, they are evaluating if this is a feasible, rather profitable idea for them- to venture into the Indian market.
5.Okay, got it! What will be the client’s strategy for this product? Will it be targeted to urban areas or rural areas?
Ans: That is undecided as of now, but we were planning to target the rural segment
6.And what is the primary objective of the client? Is to improve brand awareness/loyalty or to just maximize profits?
Ans: To maximize profits
7.Finally, what is the price of the product?

Ans: Around INR 5000

2: Profitability Analysis:
Has <3 hours of
outage (70% or
95mn)
Urban Doesn’t have
(30%) frequent power Has >3 hours of
cuts (~75% or outage (30% or
Pop of India= 135mn) 40mn)
1.3 billion Target Customers
Assuming 5 persons per household
Rural
180mn Off the power
(70%)=
households grid (25%) or
900mn
45mn
households
8.We start with the population of India and break it off into urban and rural. Since we are targeting the rural segments we ignore the urban population for the
analysis. Within rural we assume an average household of 5 giving us 180mn households. Of these there will be 2 cases- those that are connected to a power
grid and doesn’t have frequent power cuts (75% of 180mn= 135mn) and those households that are off the grid (25% of 180mn=45mn). Of those that are
connected to the grid, there will be a segment who has more than 3 hours of power outages and hence can be a customer for the product. Assuming this to be
30% of 135mn~= 40mn. Hence our target customers are 40mn+45mn= 85mn who are ideal for buying our product.
The next analysis I’d do is affordability analysis on how many can actually afford the product- for this I’d divide them into upper class, upper middle, middle,
lower and poor classes and understand how much of their monthly income they can spare for expenses like these.
Ans: Well that’s a fair analysis, assume that ~40% of the 85mn are able to afford our product i.e. 34mn households.

9.Okay, but there will be other alternatives to our product. For e.g. higher income groups might go for inverters and generators while lower income groups might
go for cheaper lanterns and conventional flashlights. Also as our product is a bit expensive there is a risk for potential ‘me-too’ products and cheap spinoffs. Also
I want to confirm that the sale of these flashlights are the only source of revenue
Ans: In that case assume that 30% of these households go for our product i.e. 10.2mn households and yes the sale of these flashlights are the only source of
income
10.Got it. Can you also give me a break-up of the cost of the flashlight?
Ans: Well it requires parts and labour around 4500 for each flashlight. We are also planning to buy land and set up factories in India which will cost us 500mn
and some basic advertising and trade promotions that will cost us around 200mn
11.However, in the first year itself not all of these customers will buy the product, assuming a 20% adoption rate
Considering 0.2*10.2mn= 2.04mn flashlights
Total Revenue= 2.04*5000= 10,200mn
Variable Costs=2.04*4000= 8,160mn Fixed costs= 500mn + 200mn= 700mn Total Costs= 8,860mn
Expected profits= 1,340mn
Interviewer: What are your recommendations?

This seems to be a profitable venture. The client needs to decide if they are fine with the amount of profit, given their capital investment. The other thing we
need to decide is the operating model that we’ll adopt: if we’ll own all parts of the value chain from manufacturing to distribution and sales or only some parts.
To increase profits we can reduce losses through potential cheap spinoffs by hallmarking our product. We can also consider launching another model in the
economy range to increase adoption

Case 3 : Market Entry - Client is diversifying into hyper local newspaper and planning to run a pilot. How will you choose an area within Chandigarh?
1. Before proceeding into the case, can you explain what exactly the hyper local newspaper is for? Is the company already into the business or does it have to start
afresh?
Ans. The newspaper is primarily to cater to the local needs of Chandigarh. It would be a weekly newspaper. The company is new to the business.
2. This is how I would like to proceed into the case analysis. First, I would identify the qualities that the company is looking for in its audience; identify various
sources of revenue, the type of paper to be launched and such existing newspapers if any. Starting, What other hyper local newspapers are already there?
Ans. Nothing as such. There is only one running at present which is also a weekly paper.
3. May I ask what kind of advertisements does it run? Are there any specific qualities that the company is looking for in its audience?
Ans. The newspaper mostly features local real estate and rental advertisements and job openings. What are the qualities that you consider are important?
4. Weekly Newspapers are normally categorized by the affordability, the population reach, their preferences and age - like retired people, housewives, and may be
youth. We already have a hyperlocal newspaper catering primarily to the youth as its focus is on job openings and real estate. It is extremely important for the
company to target such a sector where you maximize the revenues as the revenues for such kind of newspapers are through advertisements and they depend on
the reach and circulation, Is this assumption right?
Ans. Go ahead.
5. When we target an audience of retired people and housewives, the revenues can come from supermarkets, fashion outlets, coaching centers, wellness centers,
health clinics and restaurants in the area.
Ans. What do you think retired people and housewives look for?
6. Housewives might look for offers on household items, recipes, for discounts on fruit juices etc. - jewelry, some coaching centres and tips regarding health and
education for their children. The retired people might be looking for events like concerts that they can indulge in during their free time.
Ans. Alright, so which area to target?

Case 3 : Market Entry - Client is diversifying into hyper local newspaper and planning to run a pilot. How will you choose an area within Chandigarh?
7. We shall identify the area which has a lot reach in Chandigarh, an area which has lot of retail stands where the newspaper circulation would be maximum, an
area which has good infrastructure – good roads, restaurants, clinics, stores, etc. where businesses would be maximum.
Interviewer: What are your recommendations?

The question in the problem statement seems to be about identifying the right audience for our venture. Because, a hyper local newspaper will sell well if it is
successful in targeting its audience, Our focus should not only be on advertisements, reach and circulation, but it should also be on the audience we want to reach.
Through our discussion, we observed that there is a major segment of retired people and housewives who can be catered to through our venture. So, We should
target them in order to maximize our revenue and publish our content as per their preferences and routine.

Case 4 : Market Entry – Our client is Tesla. They want to enter in the Indian Market through electric cars. Should they do it?
• What is the client’s objective while entering the Indian • The client’s objective is to become the market leader
market and what is the timeline they are looking and the timeline is asap.
forward to?
• Since electric cars are new to Indian market, my • Yes. You can ignore the competition
assumption is that currently competition is minimal. Is
it a fair assumption to make?
Case Framework

Case Narration
1. (Interviewer) Can you walk me through your approach to tackle the case?
Ans. I have structured the problem as follows (Refer: Case Framework). Walked him through my buckets. I want to start with market attractiveness and
analyze it both quantitatively and qualitatively. If the market seems attractive, I would move on to analyze the client capabilities and how it can be
leveraged to enter the market either through greenfield investment or partnerships. I want to start with the market size estimation
2. Is the flow okay or do you want me to focus on any other bucket?

Ans. It’s fine. I want you to do market estimation, you can take growth rate as 15% and market share as 100% ignoring competition. Ignore profit per unit
3. Sure, Market size, I would estimate as Sales = Volume * Avg. Price. I would first consider the pricing part since being a luxury good it will drive the volume.
Do you have an estimated targeted price, or do you want me to estimate it?
Ans. I want you to walk me through your approach of estimating the price
4. Sure. Could I take a minute to list down all the factors?

Ans. Yes. Go Ahead
5. If one has to price an electric car, it can be done in three ways. One, look at the cost incurred and apply profit margin over it. Other would be to price
based on competitive scenario. Finally, it could be based on the price customer is willing to pay based on the value he/she is getting. I want to start with cost-
based pricing. Do you have any data regarding the same?
[Note: The interviewer always appreciates simple language instead of using marketing jargons. The candidate didn’t say cost-based pricing or value-based
pricing. Instead he/she explained him the three pricing strategies]
Ans. I want you to look from competitive scenario
[Note: It is always good to list down all the factors even though some of them might not be meaningful based on the information gathered. In this case, the
interviewer told it was fine to ignore the competitive scenario, but now he wants the candidate to look from the competitive lens as well]

Case Narration
6. Okay. Can you let me know at what price are competitors pricing electric cars at both manufactured in India and also imported vehicles?
Ans. Sure. Currently Mahindra sells it at ₹22 lakhs if domestically manufactured and price for imported electric cars is 48 lakhs
7. (Interviewer) Can you tell me who would be the consumers of electric cars?
Ans. Sure. Being a luxury good, consumers would be mostly upper-end income segment people, who are willing to pay the high price and tech-savvy
consumers who are like early adopters or innovators
(Interviewer) - Absolutely right. We can end the case now. Thank you!
(Interviewee) – Thank you, sir
Final Recommendation:- Tesla can have the first mover advantage in the future in a huge potential market such as India. However, the current luxury
segment sales would not be enough to offset the large investment required to develop EV infrastructure (like charging stations network) in India

Case 5 : Market Entry – Our client is Burger King. They want to open an outlet inside IIT Bombay campus. Should they do it?
Preliminary Questions [3CP Framework] Porter’s 5 Forces – Market Attractiveness

Strong
Entry barrier -> Neutral
• Company: Burger King is a retail outlet chain for Exit barrier -> Weak
Threat of
burgers, fries and beverages providing delivery and
New
dine-in services Entrants
• Customer: All segments – presence in Tier I and a few Competitors – Eateries

Tier II cities. Preferred by consumers below the age of (Gulmohar) and Night
30 years food canteens
• Competition: McDonald’s, Domino’s, Pizza Hut and a

few other local restaurants Supplier Competitive Buyer
Power Rivalry Power
• Product: Low, middle and high-priced standalone
burgers, combos and meals
Neutral Neutral Weak
• Market Entry Success: Breakeven within 1 year
Once a burger retail outlet is

Threat of opened, McD’s or Domino’s
Substitutes or any other F&B outlet may
target opening store or
delivery centre
Strong
Case Framework
Market size
Market Attractiveness
Profitability of the market
Presence of other burger dine-in outlets in campus No

Closest McD outlet in Andheri, and
Market Entry Competitive Advantage Presence of other delivery outlets in vicinity
Domino’s outlet in Hiranandani Gardens
Entry barriers 1) Institute Permission

2) Real Estate construction
Offering aligns with customer need
Satiates Customer Needs
Repeat customer likelihood
Case Narration
Market size Good

# students + # teachers = 10K
Assuming 10% population are teachers on campus living with their avg. family size of 4 members,
Therefore, total population = 13K
Now, miscellaneous population = school students + contract workers + visitors = 2K

Assuming that 50% of teachers, contract workers and visitors do not contribute to the market size,
Market Size = 15K – 500 – 500 = 14K

Profitability of the market Good
In hostels, there are usually a couple of days where hostel students want to eat-out. We can increase our volume of sales by offering unique promotions by
providing offers to different hostels on different days of the week.
Prospective customers view Burger King as a great place for burgers, and is liked by the customers
Fixed Real Estate (Infrastructure)

Costs Labour, Raw materials (sourced in the same manner as Andheri outlet, so no additional costs – assumed
to be 20% of sales), Transportation (neglecting fuel costs from Andheri outlet to IITB campus), Delivery
Variable
(delivery cost low – time to deliver lower than other eateries), Packaging (considered to be 10% of sales
including paper and napkins), Electricity and Water charges (neglect)
Breakeven Calculation
Fixed cost = ₹100 L (1000 – 2000 sq. ft. area) + ₹60 L (land lease) Estimating daily sales to be equivalent to 1200 burgers,
600 meals (avg. cost = ₹ 150)
Marketing cost (including promotions) = 20% 600 single burgers (avg. cost = ₹ 100)
Hence, estimated daily earnings = ₹ 90,000 + ₹ 60,000 = ₹ 150,000
Raw material costs = 20%
Let X be the no. of days the store is operational
Packaging cost = 10% Therefore, (1 – 0.5)^^ * ₹ 150,000 * X - ₹100 L - ₹60 L - 6000 * X - 4000 * X = 0
i.e. 75,000 * X = ₹160 L
Employee wages: i.e. Breakeven point X ~ 215 days
Day (4 store + 2 delivery personnel) = ₹ 1000/day/employee Thus, MARKET ENTRY SUCCESSFUL (the outlet achieves breakeven within a
Night (2 store + 1 delivery personnel) = ₹ 1300/day/employee year)
^^ Excluding marketing expenses
Repeat customer likelihood Strong

Reasons:
• 24 hour operations
• Promotional campaigns such as giving special discounts by “name of the week” (For example, 50% OFF up to ₹ 100 for students with names starting
with “Raj”)
• Promotional offers to students of specific hostels on days when their mess food is perceived as bad (based on general intelligence garnered or
customer survey)
Offering aligns with customer need Strong

Reasons:
• Burger-loving population in store vicinity
• Night food needs can be fulfilled by 24 hour operations providing quality food at value prices where students can hangout at night
Final Recommendation:- Burger King should open an outlet inside IITB campus because the market seems attractive and the objective of the payback
period being within a year is being successfully attained

Case 6 : Market Entry - Your client is an Indian automobile manufacturer. They have recently doubled their production capacity but are not happy with
their sales in the Indian market. Their market share has fallen from 20% to 12% in the last few years and India is a stagnating market. Please suggest
what factors you would look at while expanding to overseas markets
Remarks: The question looks long but this is a simple market entry analysis. Always clarify the objective by repeating the problem statement with the interviewer
and proceed to solve.
1. What kind of automobiles do they manufacture?
Ans. For the purpose of this case, only consider commercial 4-wheelers.
2. And in the Indian market, are there any particular regions where they have a very strong presence (North, South etc.)? This will help in understanding if
expanding in India is also an option for reviving sales
Ans. They have a strong national presence. And no. I don’t want you to think of ways of expanding in India. Just focus on expanding to foreign markets. What
are some of the factors that you will consider? Give a generic approach first.
3. Alright to assess the attractiveness of any market, I would want to look at 4 key things:
1) Understanding the Market: i) What is the size of the market?
ii) What is the growth like?
iii) Are there any trends?
2) Customer Analysis: i) Which segment am I going to target?
ii) What is my value proposition and what are the possible substitutes?
3) Competitor Analysis: i) The number and size of all competitors
4) Barriers to entry: Government Regulations, Suppliers, distributors, Capital required etc.
Now assume that we have market data available (population, number of automobiles sold, trends in the automobile industry, regulations) for all the major
countries in the world. How will you go about identifying the right country to enter? Assume that the client only wants to enter one market/country right now.

4. What is the size of the market. In the sense I would want to know whether the demand in the market is large enough for us to enter. Can you tell me what our
current production capacity is and how many cars are we looking to sell overseas?
Ans. Assume that 2 million cars are sold in India every year. And that our initial production capacity was 200,000 cars a year.
5. Alright. Can I assume our market share will stay constant at 12%?
Ans. Yes we expect it to stay at that level in the foreseeable future.
6. Okay. So that means 12% of 2 million. We should be able to sell some 240,000 cars in India. Our production capacity is now double and stands at 400,000.
Would it be fair then to assume that we wish to sell around (400,000 – 240,000) = 160,000 overseas?
Ans. Yes. How will you proceed further?
7. Since we’re an established player in India and have 12% market share, optimistically, even if we capture 5% of a new market, we would have done extremely
well. So I’d only look at markets that are greater than 20 times 160,000 (automobiles sold per year)
Ans. 5% is a little too optimistic but I like the approach. Okay now assume only 5 markets are big enough. – U.S. UK, China, Japan and Australia. How will you
decide now?
8. We should look at our target segment of consumers? What kind of price range do we want to play in. Also look at what competitors exist in that segment
Ans. Assume that we sell cars in a variety of price ranges and all markets are equally competitive. Would you want to consider anything else?
9. I’d take a closer look at barriers to entry. What kind of government regulations exist and what are my supplier options.
Ans. The U.S. and Australia have left hand drive vehicles only and we don’t want to modify our production lines to accommodate for that. In the U.K. , you
have to set up your own manufacturing facility is you want to sell cars. In China, there is no such restriction but you have to procure 50% of the parts from
local Chinese suppliers. In Japan it’s the same except you only have to procure 20% of the parts from local Japanese suppliers
10. I guess that rules out U.S. and Australia completely. I guess it doesn’t make too much sense to set up a completely new manufacturing facility just now right
after we just doubled our capacity so that rules out U.K as well. Procuring 50% parts from China may just bring down our manufacturing costs but it might upset
our relationships with suppliers in India. I guess with this information, Japan seems like the most feasible target market right now
Remarks: The other alternative to solve this question would have been to start with barriers to entry (especially government regulations first). That’s the first
and most important filter that should be applied because it could completely rule out some markets that are probably big enough or have the correct target
consumers but are just not feasible to enter because of regulations. So we won’t waste any time analyzing size and trends when it’ll eventually be pointless. Then
rest of the discussion can be done.

CASEBOOK 2020
CASE INTERVIEWS
4. Miscellaneous

Case 1 : Miscellaneous – For L'Oréal, map out their value chain and highlight points where you feel that there could be an intervention of technology,
which technology would you use at what stage and explain why/justify?
1. Firstly, I would like to map out the value chain of L'Oréal?
• Inward Logistics • Outward Logistics • Marketing • Sales

• Warehouse • Warehouse
Ans. Yes, it is correct.
2. I would like to take it step by step and highlight the points where technological intervention may be helpful. Firstly we’ll take the Sourcing and Procurement
stage:-
• Here the installation of centralized ERP to track real time data of sales in the showrooms will help to monitor the demand.
• The use of RFID tags will make the storing and tracking of the goods easier.
• ERP and AI which will monitor the sales data will help in developing a demand forecast and hence place the orders automatically and it will lead to better
inventory management and hence better utilization of the warehouse.
• RPA can be used to automate the storage and tracking of the goods in the warehouse.
Ans. Ok it seems good and fine.
Case 1 : Miscellaneous – For L'Oréal, map out their value chain and highlight points where you feel that there could be an intervention of technology,
which technology would you use at what stage and explain why/justify?
3. Next I would like to take the distribution stage:-
• Here the AI and Machine Learning algorithms can help us in finding the shortest paths for distributing the goods to our other warehouses and branches
saving transportation costs.
• Block-chain can be used to track our outbound consignments and hence check for abnormality if any.
4. Next I would like to take the demand generation stage:-

• Digital app integrated with AI to provide personalized solutions to the customers which will help in accurate demand prediction, lower the costs and also
improvise after taking customer feedbacks.
5. Lastly I would like to take the retail operations stage:-

• Big data analytics to generate reports and formulate future trends for better budget forecasting.
• ERP to integrate the data across all the departments facilitating the other departments and the management to track the situation on a real time basis.
• POS machines and POS system to integrate the collections and receivables data for the Finance department. It will also help to analyze the customer data to
helping us the generate knowledge about the customer buying patterns.

Case 2 : Miscellaneous – You have invented the world’s patented first everlasting light bulb. The current light bulb industry is a global monopoly. So how
much is your patent worth?
1. Upon initial series of questioning the following information is availed from the interviewer –
Ans. Assume that the patent is for eternity. You are valuing the PATENT not an individual light bulb. This is a domestic light bulb only so has no commercial
applications such as offices or cars.
• There are 7billion people in the world. You can assume that only 4billion people have access to electricity. You can assume that there are 8 people on
average per household.
• Conventional light bulbs price – $2. Everlasting light bulbs will be priced at $5. You can assume that conventional bulbs last 2 years. Assume everyone
switches to everlasting in year one.
• The phase of the transition will have little impact on the eternal patent value. Assume a profit margin of 20% on conventional and everlasting bulbs. Can
assume a 5% discount rate.
2. Market size for domestic light bulbs –

Ans. Starting with 7billion people in the world, assuming, say, an average household membership of 8. Assume only 4billion people have electricity-supplied
houses. Therefore, there are 500million household in the world. Assume there are 5 rooms in the global average household. Therefore, there are 2.5billion
domestic rooms.
Assume 2 bulbs on average so 5billion domestic bulbs globally. With $2 per bulb, amateurs then say the industry today is worth $10billion pa. But bulbs last
for 2 years. Therefore, the industry today is worth $5billion. With a 20% margin, current profit is therefore $1billion pa.
3. Do you think people will switch to the new bulb?

Ans. Yes. $2 every two years or $5 one-time is a no-brainer decision for the consumer to make. The everlasting bulb will pay for itself in a mere 5 years
4. Can you evaluate the value of this new industry?

Ans. Well, you only buy one everlasting bulb.
Therefore, 5billion bulbs * $5 = $25billion. 20% margin so $5billion one-time profit.
The everlasting bulb will destroy an industry pumping out $1billion pa profit for the monopoly and cause a $5billion bonanza for the scientist.

Case 2 : Miscellaneous – You have invented the world’s patented first everlasting light bulb. The current light bulb industry is a global monopoly. So how
much is your patent worth?
5. So how much is the patent worth? (The interviewer tries to trick the interviewee). Its worth $1billion pa in profit so at 5% discount rate in perpetuity it’s
worth $20billion right?
Ans. Interviewee argues as follows – But if it’s worth $5billion in a one-off bonanza to the scientist, the monopoly should pay $15billion or less, right?
6. Interviewer agrees with $14.5B. Why not buy and lock it in a safe? If the patent is bulletproof it’s only worth $5billion, i.e. the standalone value to the
scientist, right? Alternatively, aren’t you a monopoly? So you are the only potential buyer right? An external buyer would only pay $5billion (the value of the
standalone patent). So why not pay $5billion and one cent?
Ans. I believe 1/3rd of the $15billion was the proposal a while ago. But the scientist has no expertise in any other field. So he has no sales and marketing
infrastructure. So it’s worth less than $5billion according to me. That just assumed a 20% steady state profit margin but he has no infrastructure. So assuming
$500million sales cost it’s only worth $4.5billion.
7. So it’s worth $4.5B and one cent, right?

Ans. Yes. I believe that is the worth of the patent and it must be locked at it for the world's first everlasting light bulb.
Notes:
Candidates often panic at the start as no real framework exists to answer this, except for the simple market sizing at the start. It is a great conceptual thinking
decision flow chart what-if style question that rewards candidates for confident thinking on their feet. It can be a very hard case.
The best candidates remain composed while bombing certain sections. This test of this case is to show grace under fire. The role of discounting is also very
unrealistic for most cases.

Case 3 : Miscellaneous – Your client is a consulting company planning to visit IITB campus for hiring and wants you to minimize the time to reach
This is an example of an unorthodox case which can be asked to throw the student off the track. More often than not everyone is prepared for profitability and
market entry cases, and these type of cases can prove difficult, so it’s always best to ask clarifying questions.
1.Where are they located currently? Are they in Bombay or any other city?
Ans: Let’s assume they are in Bangalore
2.I am only considering frequently used transport like bus, train, flight, cab etc. I am not considering private jets or helicopters. Is that fair?
Ans: Yes go ahead
The way I see this is Time= Distance/Speed.

I will now take the following combinations and figure out the fastest way to reach the campus:
Flight from Bangalore, then bus till campus Train from Bangalore, then bus till campus
Flight from Bangalore, then train, then auto till campus Train from Bangalore, then train, then auto till campus
Flight from Bangalore, then train, then cab till campus Train from Bangalore, then train, then cab till campus
Flight from Bangalore, then cab/auto till campus Train from Bangalore, then cab till campus
Bus from Bangalore, then bus till campus Cab from Bangalore till campus
Bus from Bangalore, then train, then auto till campus
Bus from Bangalore, then train, then cab till campus
Bus from Bangalore, then cab till campus
3. Assuming this starts at 9 a.m. on day 1, can you tell me the timings of the next flight, bus, train and cab to Mumbai
Ans: The next flight is at 4 p.m., the bus is at 11 a.m., train at 12 p.m. and cab is available in the next 10 mins. Assume you have tickets to all these and you
can reach all of the stations/airports before the next bus/train/flight departs.
Assuming the distance of 1000 km between the two cities, and calculating the time lapsed from 9 a.m. on day 1
Case 3 : Miscellaneous – Your client is a consulting company planning to visiting IITB campus for hiring and wants you to minimize the time to reach
Flight from Bangalore Train from Bangalore Bus from Bangalore Cab from Bangalore
Wait till Flight= 7 hours

Flight time= 2 hours Wait till Train= 3 hours Wait till Bus= 2 hours Wait till Cab= 0 hours
Luggage Claim = 30 mins Train time= 20 hours Bus time= 20 hours Cab time= 20 hours
Route Rejected Route Rejected Route Rejected

Time=6.30 pm and hence there will be peak traffic
Bus till Campus= 2 hours
Train till nearest station= 1 hour
Auto from nearest station to campus=30mins
Cab from nearest station to campus=45mins
Cab from airport to campus= 1hour 30 mins
Auto from airport to campus= 1hour
Again, we’d need to consider nuances like if any of the recruiters do not want to fly or prefer to take another
Hence, the fastest would be to take an auto till mode of conveyance.
campus from airport, however it’s unlikely the
recruiters would want to travel by auto We’d also need to factor in if there are any other issues like weather issues or frequent delay or cancelling
of flights. Also, a buffer time factor needs to be considered which needs to be higher for trains and flights
Hence, fastest would be Cab from airport to and lower for cabs as it depends on the probability of that mode of conveyance getting delayed
campus: 1.5 hours
For this it’s better to pre-book local cabs as the
drivers would better know the routes and also the
intermittent waiting time is reduced
Time Lapsed= 11 hours

Case 4 : Miscellaneous – A computer manufacturing company, with a 30% share wants to increase its share and understand the avenues of growth
it can expect in the next 2-3 years
1.When you say computer manufacturing companies they might be dealing with desktops, laptops and software/hardware parts and components. Do we have
more information on which segments the client specializes in?
Ans: Yes, the client is a major laptop manufacturer. So we can assume that most of their business comes (and will continue) from the sale of laptops
Within Laptops, we can further segment based on price:
a. Basic Models
b. Intermediate Models
c. Specialized and Advanced Models
2. Which of these do the client currently play in?

Ans: Currently the client operates in Basic and Intermediate models, catering to offices and also in the B2C market selling directly to consumers
3. What are some of the core competencies of the client? What does the brand stand for in the market?
Ans: It stands for good quality systems at an affordable rate. It has a history of creating durable and quality systems over time
4.Currently I see 4 major areas of opportunity that the client can target: (try to follow the matrix)
a. Venturing into the hardware and software parts market
b. Increase market share in current market
c. Enter into the specialized and advanced models market
d. Enter the rural Market
Does this seem fair, or am I missing anything?
Ans: That’s fair, how’d you justify these areas?

Case 4 : Miscellaneous – A computer manufacturing company, with a 30% share wants to increase its share and understand the avenues of growth
it can expect in the next 2-3 years
▪ Trying to increase market share may be a futile attempt because I believe the market will be
saturated and trying to increase market share would lead to a lot of cash burning without a
desirable ROI.
▪ Venturing into newer products is good as the client can leverage their brand promise of
delivering durable products in the market.
▪ The specialized models can also be priced a little lesser than the competitors to still appeal to
a larger section of this growing market.
▪ For Rural areas, we need to evaluate our potential customers before entering based on
Purchasing power and Need for laptops. Villages near major cities/metros have a lot of
interconnected businesses that can benefit from the use of Laptops.
▪ Also, more affluent villages in the states of Punjab and Gujarat can afford laptops. With
growing Connectivity and affordable internet services this is the most lucrative option.

Case 5 : Miscellaneous - Our client is an IT service provider and they have hired us to cut down on their costs. What all can be done to improve the
situation?
Remarks: Start with asking preliminary questions to know more about the company, its objective here and is the problem specific to client or industry wide
1. Just to get more perspective, is there any reason behind the client’s strategy to reduce costs. Have the costs increased in the past or the industry has become
price competitive
Ans. That’s right, in the recent couple of years, many competitors have increased and the price points have gone down. The client is looking to bring down
costs to maintain its margins.
2. Major costs in software development include hardware costs, employee costs, SG&A costs, rent/lease etc. I believe hardware and employee costs form the
major portion of the company cost sheet.
Ans. Let us look into the employee costs
3. I would like to ask if some analysis has been done to assess if the client has optimum number of employees in the organisation basis the number of projects in
pipeline
Ans. The CEO communicated that there are 60 projects already in pipeline and they are falling short of bandwidth to complete them. So, briefly summarizing
here the client has a pipeline of projects which it is unable to take up and it is also hurt by high employee costs.
4. Is the company able to deliver projects in time. If no, then there is some issue with the productivity of the employees.
Ans. Good! The client has faced significant delays in its project delivery.
5. Can I assume that manpower utilisation as the metric to evaluate productivity of companies in the sector? Also, I wanted to know if other competitors in the
industry are facing a similar issue with delay in projects. If it is a client specific problem then by improving the utilisation cost per project can be controlled and
more projects can be completed per year.
Ans. No, the industry is in its growth stage and there is no delay of projects. The productivity of our client is lesser than competitors and our client wants to
know how they can improve the utilisation and churn out more projects annually. Yes, you can use the utilisation matrix to analyse the productivity.

Case 5 : Miscellaneous - Our client is an IT service provider and they have hired us to cut down on their costs. What all can be done to improve the
situation?
6. Do we have any information on the current productivity levels of the organization, # of employees in the organisation and the time required to complete each
project
Ans. Yes. There are 60 employees who are divided into S1, S2 and S3 categories. Every employee is well versed with each stage of software development and
a project can be allotted to anyone.
7. On what basis is the division of employees made? Are the productivity levels same for all 3 groups?
Ans. The division is based on the no. of years of experience with S1 having highest exp. and S3 having least. Last year, a lot of fresher's were hired whose
productivity has been low.
8. So, low productivity of S3 category of employees is hurting the company and I have following recommendations
a) Invest in the training of the S3 class of employees to improve their efficiency
b) Allocate projects based on the competency of individuals to increase efficiency of the employees.

CASEBOOK 2020
GUESSTIMATES

Guesstimate 1: Estimate the revenue generated by bullet train in a year
Preliminary Questions:
1. Can the route of Mumbai _ Ahmedabad be assumed? (Ans: Yes) Operating revenue:
2. Can I assume number of coaches in a rack to be 8 (Ans: Yes) My strategy is to divide the operating hours into peak hours (5 AM to 9 AM),
3. Can I assume no. of seats in a coach to be 100 (Ans:Yes) (7 PM to 11 PM) as these will be the peak business hours and rest operating
4. What should be the average price of a ticket (Ans: Assume for end to end hours will be normal hours where the frequency of the trains will be normal
journey Rs. 3000 and other in between destinations Rs. 2000) My first assumption will be number of major stations between Mumbai to
5. Operating hours (Ans: Take 5 A.M. to 11 P.M.) Ahmedabad = 5
6. Advertising cost per coach per year (Ans: Rs. 2.1 Cr) Frequency of trains in peak hours is 2 trains per hours
7. Can I assume occupancy rate of 70% passengers booking tickets from
source to destination and remaining 30% for the in between stations Frequency of trains in normal hours is 1 train per hour
Note: By asking the above questions, you have defined the scope of the Using the concept of TSD, Maximum # of trains we can run without
problem. It has following advantages: overlapping will be: (5*2)-1 = 9 in one prime time slot
• Identifying the constraints under which you will we working
• Interviewer becomes aware that you can think about multiple aspects As there are t prime time slots, therefore total trips during peak hours = 9*2
= 18
To simplify the problem and calculations, I would like to estimate the Total trips during normal hours = 10
revenue for bullet train from the following sources.
Total # of trips during peak = Trips during peak hours + trips during normal
hours = 18 + 9 = 28
Total passengers travelling in a day = (# trips) x (# seats) x (# coaches)
= 28*100*8 = 22400 per day

Guesstimate 1: Estimate the revenue generated by bullet train in a year
Within this 70% of passengers will be travelling from source to destination =

22400*0.7 = 15680
Rest 30% of the passengers will be onboarding and de-boarding between the
intermediate stations = 22400*0.3 = 6720
Revenue generated in a day: {(# passengers travelling from starting source to

destination * respective fare of Rs. 3000) + (# passengers travelling to other
intermediate stations * respective fare of Rs. 2000) }
Revenue generated in a day = (15680*3000) + (6720*2000) = Rs. 6.048 Cr
Yearly revenue generated = 365 days * Rs. 6.048 Cr = Rs. 2207.52 Cr

Advertising revenue:
Assuming the total travel time is 3 hrs
Maximum rack of trains = (3*2)*2 + 1 =13
Total revenue from advertising = # of coaches* # of racks * 2.1 Cr
= 8*13*2.1 = Rs. 218.4 Cr
Total revenue earned from bullet train = Operating revenue + Advertising
revenue
= Rs. 2207.52 Cr + Rs. 218.40 Cr = Rs. 2425.92 Cr

Guesstimate 2: Estimate the price of a seat for spaceship travelling to space
Preliminary Questions: Breakeven Fare:

1. Do we need to find the price of the 2-way journey? (Ans: Yes) My strategy is to find the price of each ticket at which we will be at breakeven
2. Can I assume number of seats in a spacecraft to be 10 (Ans: Yes) (no profit-no loss stage) and then do a markup pricing to arrive at the
3. Can I assume no. of trips per year to be 1 (Ans:Yes) estimated price for each ticket
4. What are the fixed cost associated with the spacecraft (Ans: Assume the
fixed cost to built the spacecraft to be $100 Bn, assume other variable costs
like fuel and other miscellaneous costs to be $10 Bn per trip) Breakeven point-
5. Operating lifecycle of the spacecraft (Ans: Take 8 years) FC+nVC = TR
6. How much profit we are planning to make? (Ans: Take Profit margin as 10%)
Where FC is the total fixed cost, VC is the variable cost per trip, n is the no. of
Note: By asking the above questions, you have defined the scope of the total trips and TR is the total revenue generated from the spacecraft.
problem. It has following advantages:
• Identifying the constraints under which you will we working $100 Bn + 8*$10 Bn = X*8*10
• Interviewer becomes aware that you can think about multiple aspects
Here X is the breakeven price per ticket
To simplify the problem and calculations, I would like to estimate the breakeven
price for each ticket of the spacecraft. Total trips during normal hours = 10
Solving the above equation gives us X = $2.25 Bn
Using markup price to arrive at 10% profit margin:
X*1.1 = $2.25 Bn * 1.1 = $2.475 Bn
Hence the price of each ticket to earn a profit margin from the spacecraft is
$2.475 Bn

Guesstimate 3: Estimate the number of downloaded gaming apps in India at present
Age wise distribution of users →
1. Should I calculate for only smart phones or regular mobile phones too?
(Ans: Only Smart phones)
2. Should the apps be downloaded or transferred too? (Ans: downloaded)
Age (% users) Internet Active gamers (AG)
3. Should the smarts phones be android and IOS? (Ans: Calculate for android penetration
smart phones) (46.79%) →
Internet users
Strategy – Mobile penetration and internet penetration gives smart phone 15-30 15% → 46 Mn 22 Mn 70% → 15.4 Mn
users (android + IOS) → Use age-wise user bifurcation and internet 30-45 30% → 92 Mn 43 Mn 50% → 21.5 Mn
penetration to get active games users → download frequency of games on
PlayStore→ Total gaming apps downloaded 45-60 30% → 92 Mn 43 Mn 35% → 15 Mn
60-75 15% → 46 Mn 22 Mn 5% → 1.1 Mn
Population of India = 134 cr 75+ 5% → 30 Mn 14 Mn 5% → 0.7 Mn
Mobile phone penetration = 48.5% → 650 million
Total = 53.7 Mn
Smart Phone penetration = 52.3% → 340 million
Regular phone users = 650 – 340 = 310 million
Assuming total no. of apps available on PlayStore to be 26 million
Smart phones → 90% Android users + 10% IOS users Assuming – 20% of the apps are games = 5.2 million
Android smart phone users → 0.9*340 = 306 million

Guesstimate 3: Estimate the number of downloaded gaming apps in India at present
5.2 Mn
Games
Moderately
Popular apps Popular apps Unpopular apps
Popular apps
(10%) = 0.52 Mn (30%) = 1.56 Mn (30%) = 1.56 Mn
(30%) = 1.56 Mn
(1 download/ 50 (1 download/ (1 download/
(1 download/
AG) 100 AG) 1000 AG)
500 AG)
Total no. of downloaded apps =

((.52*53.7/50) +
(1.56*53.7/100)+(1.56*53.7/500)+(1.5
6*53.7/1000)) *10^12 → 16.4 billion

Guesstimate 4: Estimate the annual revenue of a multiplex
Preliminary clarifications – 4. Food & Beverage= (Average footfall per show)*(% people buying)*No of
shows/day)*(Average ticket size)
Include the substantial revenue streams =200*0.5*4*150=Rs 60,000
Footfall depends on whether it is a weekday or weekend
Price can be considered different to weekday or weekend, but average price Average daily revenue/screen =Rs 4.2lac
is taken Total Revenue = Average daily revenue/screen*No of screens*No of days
If the revenue from advertising primarily comes from billboards and digital =4.2*4*300 = 5040 lacs =50.4 Cr
ads between movies (Taking into account some days when the footfall will be extremely low)
Average revenue per screen multiplied by number of screens will give

revenue of the multiplex.
Average daily revenue/screen

1. Ticket Sales Revenue per day=
(Average footfall per day)*(Average price per show)*(No of shows/day)
= 200*250*4=Rs 2,00,000
2. Revenue from parking per week:

(Average footfall per show)*(% people using parking)*No of
shows/day)*(Average ticket size)
=200*0.5*4*50=Rs 20,000
3. Advertising Revenue= Assuming it is 10% of the total revenue

Guesstimate 4: Estimate the annual revenue of a multiplex
Weekend Weekday
Seating capacity 300 300

Average 60% 75%
occupancy rate
Average Footfall 180 225
Average footfall per day → (180*4+225*3)/7~200

Guesstimate 5: Estimate the earnings of a pick pocket working in a mall in Mumbai
1. Duration to calculate earning? (Ans: Annual) Footfall p/hr Conversion
Total
2. How long does the pick pocket work daily? (Ans: Time Slots Density (assumed, where Rate Trials Successful
Footfall
10 am to 10 pm i.e. 12 hours p/day) x=1000) (Assumed)
10am-12pm Low 0.5x 1000 0.25 2 0.5
Total Earnings= Earnings per day * No. of days 12pm-5pm Moderate x 5000 0.5 10 5
worked
5pm-9pm High 2x 8000 0.75 16 12
Assumptions 9pm-10pm Low 0.5x 500 0.25 1 0.25
The day is broken into 4 slots, where footfall of each

is assumed (0.5x for low, x for moderate and 2x for Hence there is a total of 17.75 or ~20 successful pick pockets per day.
high, where x= 1000)
Net earnings per day= 20*500=10,000
The person tries to pick a pocket once for every 500 Assuming he works ~150 days a year, annual earnings= 15,00,000
people
Also, adding in the factor that he gets caught and has to bribe cops/officials an amount of ~25% of
Conversion Rate is 0.25 for low, 0.5 for moderate and his earnings
0.75 for high density, as it is easy to pick when
crowded and difficult when less crowded Hence, total annual earnings= 0.75*15 lac= 11,25,000
Average successfully picked wallet has Rs. 500

Guesstimate 6: Estimate the number of Burgers sold in a typical McDonalds Outlet
Preliminary Questions: Assuming there are 50 seats in a typical outlet

1. Are we considering dine-in and take away? (Ans: Let’s consider Dine-In)
2. Should I consider, deliveries as well? Through Swiggy, Zomato etc.? (Ans: Assuming that 75% of the customers go for one burger, 20% go for two
Let’s leave that out for now) burgers and 5% do not consume burgers at all, this gives a weighted average
3. Is it on a holiday? (Ans: Not necessarily, can be any typical day) of 1.15 burgers per person
Dine-In
For slot 1= 50*0.75*1.15*3*4= 517.5~= 520
No. of burgers= No. of seats * % occupancy * No. of burgers consumed per
For slot 2+ slot 4= 50*0.5*1.15*3*5=431.25~= 430
person*no. of customer cycles per hour* no. of hours
For slot 3= 50*0.9*1.15*3*3= 465.75 ~= 470
Each customer typically spends ~20 minutes in the restaurant, hence the above
formula gives the no. of burgers sold in 20 minutes, hence number of customer
Hence the total number of Burgers sold in a typical day = 1420
cycles per hour = 3
Now, as it can be any day including holidays, weekends etc. we can assume
Considering the outlet is open from 10am to 10 pm, the following slots can be
that on these days the sales are up by 20%
assumed
Time Slots Density % occupancy No. of weekends + holidays per year= 52*2+25= 129~=130
10am-2pm High 75% Weighted average of burgers sold on a typical day

2pm-6pm Moderate 50% = (130*1.2*1420+235*1420)/365= 1521 burgers per day
6pm-9pm Very High 90%
9pm-10pm Moderate 50%

Guesstimate 7: Estimate the number of aircrafts in Indian skies at any given point of time
Assumptions:
• The number 12 comes from
assumption 3.
• 6 comes from assumption 2
• 0.5 is 50% from assumption 5
Iteration 1 (1st Hour) 36 + 18 + 18 + 48 + 24 + 24 + 30 + 30 = 228 Iteration 3 (3rd Hour) 114 + 228 + 18 + 24 = 384
st
In the 1 hour, we sum up all the flights from the above tree. Flights from iteration 1 that are 3 hrs long would still be flying plus the 2 hr
and 3hr long flights from iteration 2 plus new take offs from Iteration 3
Iteration 2 (2nd Hour) 18 + 18 + 24 + 24 + 30 + 228 = 342
nd
In the 2 hour 228 more planes will take off. Plus the planes in iteration 1 that Another iteration will give us the same number i.e. 384
have the flying time of 2 hrs and 3 hrs Adding international flights – (3 x 6) + (1 x 24) = 42 Total = 426

Guesstimate 7: Estimate the number of aircrafts in Indian skies at any given point of time
Assumptions:
1. We are creating a starting point. Assuming that there are no aircrafts in the skies in the beginning.
2. There are 6 major airports in India, 24 tier 2 airports and 30 tier 3 airports.
3. A flight takes off from tier 1 airport every 5 minutes. A flight takes off from tier 2 airport every 15 minutes. A flight takes off from tier 3 airport every 30
minutes.
4. The maximum time a flight travels in India is 3 hours, the minimum is 1 hour.
5. Off Total flights taking off in a hour 50% of the flights are 1 hour long, 25% are 3 hours long and 25% are 2 hours long.
6. All the flights take off from each airport at the same time
7. Tier 1 has 3 international flights taking off every hour and tier 2 has 1. tier 3 has none. – we are considering peak hours
8. Every international flight flies in Indian skies for maximum 20 minutes
9. Same number of flights take off every hour from all the airports.

Guesstimate 8: Estimate the market size of diapers in India
Assumptions:
1. The population of India is 133 Cr. On an average 44 crore families
2. 20% of India’s population is youth and will not be starting a family. 40% of families could be having a baby. 10% of the total population constitutes of
babies. And 10% off the 40% families are going to have more babies at a given point of time.
3. Out of all the income groups, Families and babies in low income groups are 20%
4. Families and babies part of Lower and upper middle income groups are 30% respectively
5. Families and babies part of high income groups are 20%
6. Babies and families of Lower middle income groups and above can afford diapers.
7. Lower middle income group affords 1 diaper a day
8. Upper middle income group and high income group families can afford 2-3 diapers a day. In a ratio of 1:1
Guesstimate 8: Estimate the market size of diapers in India
Out of 44 families (40% of 44) 17 families are about to have a baby.
Lower Middle-income group diaper consumption = 4 cr (existing) + 5 cr (New) = 9 Cr
Upper Middle group diaper consumption = 5 cr (New) + 4cr (existing) = 9Cr x 2 (2 diapers a day) = 18 Crores
High Income group diaper consumption = 3Cr (New) + 2.6 Cr (Existing) = 5.6, (2 x 2.8 + 3 x 2.8) = 14 Crores
Daily consumption = 41 Crore Diapers
Diaper Market is 150 Billion units large consumed yearly

Guesstimate 9: Estimate the number of units of Dr. Fixit sold in India per year
Private Homes, Small Households, Apartments and Hotels:

My strategy is to estimate the no. of such buildings based on the
1. What is the use of Dr. Fixit? (Ans: It is used as an additive for cement concrete)
occupancy of each of such building. Once this estimate is attained, I
2. What proportion is the mixture of Dr. Fixit and cement? (Ans: 200ml Dr. Fixit in
would estimate # cement bags used to construct or renovate each
1 bag of cement)
construction, and thus reach at the packets of waterproofing solutions
3. Can I assume no waterproofing solutions are used for construction in rural
needed as per total cement bags. Finally, I would use Dr. Fixit's market
areas? (Ans: Yes)
share as a multiplier to arrive at the number of units of Dr. Fixit sold
per year.
Note: By asking the above questions, one has defined the scope of the problem.
It has following advantages: My first assumption will be that private homes and small households
• Identifying the constraints under which one will be working consist of an average of 4 people
• Interviewer becomes aware that one can think about multiple aspects
# private homes/small households = (20% of 408M) /4 = 20.4M
To simplify the problem and calculations, I would like to branch out the kinds of Assuming 1 apartment building comprises of 5 storeys having 4 houses
buildings constructed into Private Homes, Apartments, Small Households, Hotels on each storey,
and Commercial Buildings (Blds) 1 apartment building = 20 households
# apartment buildings = (50% of 408M) /(4 * 20 households) = 2.55M
Population of India = 1.36B Assuming 1 hotel houses 100 guest rooms and 200 guests,
Urban & Suburban population # hotels = (10% of 408M) /200 ~ 205K
= 30% = 408M
Let’s assume that cement requirement for 1500 sq. feet area concrete
Rural population = 70% = 952M
is 10 bags. Also, following are the estimated areas for each kind of
building:

*Commercial Buildings do not house any population. However, the # commercial buildings is assumed to be same as the # hotels
Guesstimate 9: Estimate the number of units of Dr. Fixit sold in India per year
1 private home = 3000 sq. feet Assuming the life cycle of a building to be 8 years, 12.5% of such
1 small household = 750 sq. feet constructions or renovations take place in a year.
1 apartment = 1500 * 25 (# households) = 37,500 sq. feet (25% more for
constructing other areas than households) Therefore, # waterproofing solution packets sold in a year =
(12.5% of 1660M) /5 ~ 42M
1 hotel = 1500 * 125 = 187,500 sq. feet (25% more for constructing other
areas) [assuming volume of 1 waterproofing solution packet to be 1L, 5 bags of
cement will utilize 1 packet]
Assuming the number of commercial buildings to be same as the number of
hotels, and each having the same area as the hotels. Is that a fair Lastly, assuming Dr. Fixit has a 75% market share in waterproofing solutions
assumption? market (given that it is by far the leading firm in the space), the number of
(Ans: Sure. That seems reasonable.) units of Dr. Fixit sold in India per year = (0.75 * 42M) = 31.5M
# commercial buildings ~ 205K

1 commercial building = 187,500 sq. feet
Total Cement bags =
(Area/1500 * 10)private homes * (# private homes) + (Area/1500 * 10)small
households * (# small households) + (Area/1500 * 10)apartments * (# apartments) +
(Area/1500 * 10)hotels * (# hotels) + (Area/1500 * 10)commercial buildings * (#
commercial buildings)
= (20 * 20.4M) + (5 * 20.4M) + (250 * 2.55M) + 2 * (1250 * 205K)
= 408M + 102M + 637.5M + 512.5M = 1660M

Guesstimate 10: Estimate the market size (# of cars sold/year) of 4-wheeler electric passenger car if it is launched in 2025 at a price of ₹15 lakh
(NPV = ₹12 lakh) in India
Preliminary Questions: Income Class

1. Will it be fair to assume that India will have adequate number of electric
vehicle charging stations by 2025? (Ans: Yes)
2. Can I assume that 10%-20% people will shift up their income group Affluent Upper Middle Lower Middle Poor
classification? (Ans: Yes)
2020 5% 25% 40% 30%
Note: By asking the above questions, one has defined the scope of the
problem. It has following advantages: 2025 10% 35% 35% 20%
• Identifying the constraints under which one will be working
• Interviewer becomes aware that one can think about multiple aspects
Therefore, population which can afford an electric passenger car = (10% + 10%)
My strategy is to estimate the population in 2025 that can afford a car worth ₹15 of 1.43B = 286M
lakh. Once this estimate is attained, I would apply the diffusion of innovation Now, applying diffusion of innovation for identifying the share which will be
theory to arrive at the final estimated market size of 4-wheeler electric interested in adopting an electric passenger car in 2025,
passenger cars in India. Population share interested = 2.5% (Innovators) + 13.5% (Early Adopters) = 16%
Thus, the estimated market size of an electric passenger car = 16% of 286M ~
Current Population of India = 1.36B 45M
Assuming 1% population growth YoY,
Population of India in 2025 = 1.36 * (1.01)^5 = 1.43B
Redistributing income group classification for India in 2025,

we can say that an electric passenger car priced at ₹15 lakh will be affordable
for all of affluent class and 30% of the upper middle class.

Guesstimate 11: Estimate the no. of cigarettes consumed per day in India
Solution:
The best way to solve this question is to divide the overall population into diff. segments and then arrive at your target group.
Overall population of India – 130 cr
Divide the population based on the age groups. Key here is to select the appropriate age brackets
1. 0 to 18 years – This constitutes around 35% of population. Legally this group is not allowed to smoke. So, remove it.
2. 18 to 25 years – Around 15% i.e. ~20cr. This age group mainly consists of students who would just have begun to smoke. The group can be divided further
based on gender.
1. Assuming 20% of males smoke and 5% of females smoke
2. Assuming male to female ratio to be 60:40
3. Male smokers = 20% of 60% of 20cr = 2.4cr
4. Female smokers = 5% of 40% of 20cr = 0.4cr
3. 25 to 50 years – around 25% i.e. ~32cr. Consists of working people with more percentage of smokers
1. Assuming 25% of men and 10% of women smoke.
Note: It’s advisable to know population spilt by age group. Nevertheless, you can always confirm with the interviewer in case of you aren’t aware.

Guesstimate 11: Estimate the no. of cigarettes consumed per day in India
4. 50 to 75 years – around 25% i.e. ~32cr. Consists of aged people who quit smoking because of health reasons.
1. Assuming 10% of men and 5% of women smoke.
Total smokers = 11.44cr
Out of this, we can assume 60% would be daily smokers consuming around 5-6 cigarettes per day = 6.86cr * 5 = 34.3 cigarettes/day
Rest would be occasional smokers consuming around 1-2 per week = 4.57cr * 0.28 = 1.3 cr/day
So overall we got 34.3 + 1.3 = 35.6cr cigarettes per day

Guesstimate 12: Estimate the amount of beer consumed per capita in India in one year
Solution:
The solution to this question has 2 parts – One find out what percentage of population drinks and second how much each one on an average drinks.
Variables to consider here are age, gender and drinking preference. Religion can also be considered as certain religion disapprove of alcohol consumption.
However, we are not considering here.
Overall population of India – 130 crore
Divide the population based on the age groups. Key here is to select the appropriate age brackets
1. 0 to 18 years – This constitutes around 35% of population. Legally this group is not allowed to drink. So, remove it.
2. Above 65 years – Around 5% of the population. They can be eliminated too because of health concerns.
3. 18 to 65 years – Around 60% of population. This is the age bracket that likely consumes any form of alcohol
So, from the above analysis around 78cr Indians are likely to consume alcohol. Note that all the people in this group might not consume alcohol. You must
consider a subset of this group.
Now you must factor in second variable i.e. gender as drinking habits especially in India depends a lot on it.
Assume a male to female ratio of 60:40 i.e. 47cr men and 31cr women in drinking age. It’s safe to assume that around 50% of men and 30% women drink.
So that makes 23.5cr men and 9cr women who drink. There are several options available like wine, beer, champagne etc.
Since, beer is usually consumed widely compared to other substitutes, you can safely assume 50% of people consume it.

Guesstimate 12: Estimate the amount of beer consumed per capita in India in one year
Remarks: Note that you can always cross check these numbers with the interviewer. What is more important here is how broadly you can think considering
multiple factors and structure it.
So, that makes around 12cr men and 4.5cr women who drink beer.
Now you need to estimate how much each person drinks. You can classify the group into small, average and heavy beer drinker in the ratio of 40:30:30.
You can assume small beer drinker will consume 2 beer/week, average drinker around 5/week and heavy 10/week.
Let’s assume each beer measures around 0.5lt
Small drinker : 0.4 * 16.5cr * 2 beer/week * 52 weeks * 0.5lt = 343cr liter/year
Average drinker : 0.3 * 16.5cr * 5 beer/week * 52 weeks * 0.5lt = 643.5cr liter/year
Heavy drinker : 0.3 * 16.5cr * 10 beer/week * 52 weeks * 0.5lt = 1287cr liter/year
So, that means 2274cr liters of beer is consumed in India/year.
Per capita consumption = 2274cr / 130cr = 17.5 liter.

CASEBOOK 2020
INDUSTRY KNOWLEDGE

Ecommerce Industry
1 22
Strengths Weakness REVENUE
• Growing demand – India is the fastest growing market • Customer service – Lack of after sales customer service
SOURCES
at CAGR of 51% and is expected to grow from $39 Bn initiatives to solve their grievances and complaints
in 2017 to $120 Bn in 2020 • High operating costs – Heavy, bulky and perishable
• Policy support – 100% FDI allowed in B2B E-commerce, goods are expensive to ship • Number and types of customers
100% FDI under automatic route is permitted in • Experience – Showrooming has somewhat blunted the • New product lines
marketplace model problem of shoppers’ inability of customer to touch • New channels
• Product line – Offering a wide variety of niche and the merchandise with shoppers looking at merchandise • Advertisements
other products in stores and then using their mobile phones to place • Tie-ups with other payment partners
an order with an online seller • Big-data selling data to companies like Neilsen
4 Opportunities Threats 33
COST
• Easy Funding – A lot of India’s blue chip PE firms are • Infrastructure – Lack of infrastructure to provide safe
looking for opportunities in this sector environment free from online frauds
CENTRES
• Increasing investments – E-commerce and consumer • Competition – Increasing number of players in the
internet companies in India received more than $7 Bn sector making the market a lot more competitive as the
• Cost of raw materials
in private equity and venture capital in 2018 barriers to entry are very less
• Labor costs
• Digitization – Increased penetration of internet across • Logistics & Packaging costs
India and with the advent of Digital Payment methods • Marketing costs
are collaborative agents for spurring the growth in the • Defected / returned products
sector • Taxes
• Licenses
Key Players
Outlook and trends of the E-commerce Industry in India

• The Indian e-commerce industry has been on an upward growth trajectory and is
expected to surpass the US to become the second largest e-commerce market in the
world by 2034
• The E-commerce market is expected to reach Rs 13,97,800 crore (US$ 200 billion) by
2027 from Rs 2,69,076.5 crore (US$ 38.5 billion) in 2017
• India's e-commerce market has the potential to grow more than four folds to Rs
10,48,350 crore (US$ 150 billion) by 2022 supported by rising incomes and surge in
internet users
• Online shoppers in India are expected to reach 120 million in 2018 and eventually 220
million by 2025. Average online retail spending in India was US$ 224 per user in 2017
• Online retail sales in India are expected to grow by 31 per cent to touch Rs 2,28,540.3
crore (US$ 32.70 billion) in 2018, led by Flipkart, Amazon India and Paytm Mall. Online
retail is expected to contribute 2.9 per cent of retail market in 2018
• A young demographic profile, rising internet penetration and relative better economic
performance are the key drivers of this sector
• The Government of India's policies and regulatory frameworks such as 100 per cent
foreign direct investment (FDI) in B2B e-commerce and 100 per cent FDI under
automatic route under the marketplace model of B2C e-commerce are expected to
further propel growth in the sectors.
• As per the new Foreign Direct Investment (FDI) policy, online entities through foreign
investments cannot offer the products which are sold by retailers in which they hold
equity stake
• In February 2019, the Government of India released the Draft National E-Commerce
Policy which encourages FDI in the marketplace model of e-commerce. Further, it
states that the FDI policy for e-commerce sector has been developed to ensure a level
playing field for all participants. According to the draft, a registered entity is needed
for the e-commerce sites and apps to operate in India
• Government also proposed the National E-commerce Policy, set up the lawful agenda
on cross-border data flow, no data will be shared with foreign government without any
prior authorisation of Indian government
FMCG Industry
1 2
• Growing demand – India’s contribution to global • Small scale sector reservations limit ability to invest in
SOURCES
consumption is expected to get double to 5.8% by technology and achieve economies of scale
2020 • Several “me-too’’ products which illegally mimic the
• Policy support – Initiatives like Food Security Bill and labels of the established brands, narrow the scope of • Number and types of customers
direct cash transfer subsidies reach about 40% of FMCG products in rural and semi-urban market • New product lines
households in India • New channels
• Well-established distribution network extending to
rural areas
COST
• Increasing investments – Many players like Patanjali, • Intense and increasing competition from local as well as
HUL, ITC, Dabur, Nestle, Marico are planning to expand MNC players
CENTRES
into new geographies and categories • Steadily rising fuel costs, leading to increased distribution
• Increasing Disposable Income – Increase in disposable costs. The declining value of rupee against other
income in rural India and low penetration levels in rural currencies may reduce margins of many companies, as • Cost of raw materials
market offer room for growth Marico, Godrej Consumer Products, Colgate, Dabur, etc. • Labor costs
• Large domestic market- a population of over one who import raw materials • Logistics & Packaging costs
billion with large untapped rural market • Marketing and advertising costs
• Defected / returned products
• Taxes
• Licenses
Key Players
Outlook and trends of the FMCG Industry in India

• Fast-moving consumer goods (FMCG) sector is the 4th largest sector in the Indian
economy with Household and Personal Care accounting for 50 per cent of FMCG sales
in India
• Growing awareness, easier access and changing lifestyles have been the key growth
drivers for the sector
• The urban segment (accounts for a revenue share of around 55 per cent) is the largest
contributor to the overall revenue generated by the FMCG sector in India However, in
the last few years, the FMCG market has grown at a faster pace in rural India
compared with urban India. Semi-urban and rural segments are growing at a rapid
pace and FMCG products account for 50 per cent of total rural spending
• The Retail market in India is estimated to reach US$ 1.1 trillion by 2020 from US$ 840
billion in 2017, with modern trade expected to grow at 20 per cent - 25 per cent per
annum, which is likely to boost revenues of FMCG companies
• Revenues of FMCG sector reached Rs. 3.4 lakh crore (US$ 52.75 billion) in FY18 and
are estimated to reach US$ 103.7 billion in 2020. The sector witnessed growth of 16.5
per cent in value terms between July-September 2018; supported by moderate
inflation, increase in private consumption and rural income
• The government has allowed 100 per cent Foreign Direct Investment (FDI) in food
processing and single-brand retail and 51 per cent in multi-brand retail. This would
bolster employment and supply chains, and also provide high visibility for FMCG
brands in organised retail markets, bolstering consumer spending and encouraging
more product launches
• The sector witnessed healthy FDI inflows of $ 14.67 Bn, during Apr 2000 to Mar 2019
• The Government of India has drafted a new Consumer Protection Bill with special
emphasis on setting up an extensive mechanism to ensure simple, speedy, accessible,
affordable and timely delivery of justice to consumers
• The Goods and Services Tax (GST) is beneficial for the FMCG industry as many of the
FMCG products such as Soap, Toothpaste and Hair oil now come under 18 per cent tax
bracket against the previous 23-24 per cent rate. Also rates on food products and
hygiene products have been reduced to 0-5 per cent and 12-18 per cent respectively
Insurance Industry
1 2
• As a vast emerging economy and a country with more • The market is dominated by state-owned insurers and
than 1bn people, India is too large to ignore, even if the progress to open up the market is glacial. In the
SOURCES
the present barriers to entry are high current political climate there is even less support for
• A democracy with functioning governance and a change • Money in cash deposited and saving account
regulatory framework familiar to Western • The non-life penetration rate is among the lowest in • Short term assets
corporations, even if it is overloaded with bureaucracy the world, and even though it is growing it will remain • Interest revenue payouts earned
• The economy is growing quite strongly and will extremely low throughout the forecast period • Common instruments includes treasury bonds,
experience less of a slowdown than a number of other • Life density is low and the market has been growing high grade corporate bonds and interest bearing
emerging markets only slowly cash equivalents
COST
• The long-term potential of an emerging economy with • The political environment is not conducive to
more than 1bn people is unmistakable constructive change or sound economic management.
CENTRES
• While GDP per capita remains low, there is an • The dominance of entrenched players makes it possible
emerging wealthier group, loosely referred to as that the industry will stagnate
'middle class', and an elite group of extremely wealthy • The legal framework, bureaucracy and financial
• Marketing and sales support
Indians infrastructure worsen the insurance business
• Operations – policy serving, insurance, claim
management
• Various economic forces will probably force the environment
government to relinquish ownership of major insurers
• IT support system
• Tied agents, brokers, Branches, telesales
• Sales channel, Product mix
Key Players
Outlook and trends of the Insurance Industry in India

• Gross premium reached Rs. 5.53 trillion (US$ 94.48 billion) in FY18, with Rs. 4.58
trillion (US$ 71.1 billion) from life insurance and Rs. 1.51 trillion (US$ 23.38 billion)
from non-life insurance. Overall insurance penetration (premiums as % of GDP) in India
reached 3.69% in 2017 from 2.71% in 2001
• The Indian Insurance Sector is divided into two categories – Life Insurance and Non-life
Insurance both governed by the IRDAI (Insurance Regulatory and Development
Authority of India). The role of IRDA is to thoroughly monitor the entire insurance
sector in India and also act like a custodian of all the insurance consumer rights
• LIC, New India, National Insurance, United insurance and Oriental are government
ruled entity that stands high both in the market share two specialized insurers –
Agriculture Insurance Company Ltd catering to Crop Insurance and Export Credit
Guarantee of India catering to Credit Insurance
• In September 2018, National Health Protection Scheme was launched under
Ayushman Bharat to provide coverage of up to Rs. 500,000 (US$ 7,723) to more than
100 million vulnerable families. The scheme is expected to increase penetration of
health insurance in India from 34 per cent to 50 per cent. Over 47.9 million famers
were benefitted under Pradhan Mantri Fasal Bima Yojana (PMFBY) in 2017-18
• The overall insurance industry is expected to reach US$ 280 billion by 2020. Life
insurance industry in the country is expected grow by 12-15 per cent annually for the
next three to five years
• Exchange Rate Used: INR 1 = US$ 0.0159 as on March 31, 2019
• In India, the four largest state-owned insurance companies, New
India, National, United India and Oriental, remain dominant and collectively account
for about 60% of the premiums written in the non-life segment
• Life Insurance Corporation of India (LIC) accounts for nearly 75% of life
premiums. ICICI Prudential and Bajaj Allianz are the next largest players.
• BMI's Insurance Business Environment Rating for India is 55.8

Agriculture Industry
1 2
• Huge natural resources • Lack of infrastructure facility
SOURCES
• Sustainable geographical conditions for agricultural • Low quality of raw material
products • Complex export procedure
• Availability of raw materials • Political interferences • Income derived from sale of replanted trees,
• Ability to export • Lack of finance seeds
• Strong traditional knowledge • Lack of professional management • Sale of agricultural produce or activities.
• Additional employment generations • Traditional approach • Income from dairy farming, poultry and bee hiving
• Improvement in product quality • Lack of modern technology • Exports of crops
• Good labor supply, Large domestic demand
COST
• Increasing market span • Global competition in the agricultural sector
• Export in other countries • Unorganized sector
CENTRES
• Value addition of crops and milk based products • Bad trade practices in the sector
• Entrepreneurship development in rural areas • Price fluctuations due t geographical conditions
• Seed, Pesticides, Fertilizer, Insecticides
• More employment generation opportunity • Political biasness
• Labor cost
• Proper utilization of natural resources • Huge cost of modern technology
• Interest paid on agricultural loans
• Water cost and irrigation
• Transportation
• Storage costs, Duty paid
Key Players
Outlook and trends of the Agriculture Industry in India

• 46 of the 60 soil types in India, is the largest producer of spices, pulses, milk, tea,
cashew and jute; and the second largest producer of wheat, rice, fruits and vegetables,
sugarcane, cotton and oilseeds
• In 2017-18 crop year, food grain production is estimated at record 285.01 million
tonnes. In 2018-19, Government of India is targeting food grain production of 283.37
million tonnes. Production of horticulture crops in India is estimated at record 313.9
million metric tonne (MMT) in 2018-19 as per third advance estimates. India has the
largest livestock population of around 305 million with around 31% of world
population
• India is among the 15 leading exporters of agricultural products in the world.
Agricultural exports from India reached US$ 38.54 billion in FY19 and in FY20 (till
August 2019) US$ 14.37 billion
• Exports of ready to eat items from India reached Rs. 4,766.14 crore (US$ 681.95
million) in FY19 from Rs. 4,821.71 crore (US$ 689.80 million) in FY18. India's exports of
processed food were Rs. 31,111.90 crore (US$ 4.45 billion) in 2018-19
• Growth in Gross Value Added (GVA) by agriculture and allied sectors grew at 2 per cent
in Q1 2019-20. Agriculture, Forestry and Fishing’ sector grew by 2.0 per cent in Q1
2019-20 as compared to growth of 5.1 per cent in Q1 2018-19
• The Government of India has introduced several projects to assist the agriculture
sector. They are Pradhan Mantri Gram Sinchai Yojana: The scheme aims to irrigate the
field of every farmer and improving water use efficiency to achieve the motto `Per
Drop More Crop’. As per the Ministry of Agriculture, during 2019-20, Rs. 1.50 crore
(US$ 0.13 million) has been allocated to state of Andaman and Nicobar as a central
share for implementation of per drop more crop component of Pradhan Mantri Krishi
Sinchai Yojana (PMKSY)
• Paramparagat Krishi Vikas Yojana (PKVY): The scheme aims to motivate groups of
farmers to take up organic farming and as per the revised estimate for 2018-19,
government had allocated Rs. 77,752 crore (US$ 11.12 billion)

Pharmaceutical Industry
1 2
• Cost competitiveness in terms of Labor and Raw • Low investment in Research and Development
material • Limited knowledge of product liability and offshore
SOURCES
• Established manufacturing base warranty handling
• Qualified and skilled man power • Limited domestic market for various components • Sale of Drugs to consumers directly through over
• Growing domestic automotive industry inhibiting capacity creations. the counter (OTC) or through customers
• Manufacturing capabilities with international quality • Comparatively poor infrastructure for supply chain and (doctors, hospitals)
standards exports • Sale of medical instruments and services
• High operational efficiency • Lack of experience in system integration • Pharmaceutical Exports
• Competition from other low cost countries like China, COST
• The growing need to outsource Taiwan, Thailand etc.
• Huge opportunity in the tier- 1 and tier 0.5 • Free Trade Agreements / Preferential Trade CENTRES
• Continuous pressure on global OEMs and Tier 1s to Agreements
reduce cost and source from low cost countries • Expansion of the European Union-inclusion of Hungary,
Czech Republic Poland etc. which are major exporting • Research and Development
• Higher frequency of introducing of newer models by • Clinical Trials
automakers countries to western Europe
• Appreciation of Rupee • Patents and Trademarks
• Global market opportunity itself is the ultimate • Marketing and Sales, Sales Rep Compensation
opportunity provided by auto industry. • Developments of new technologies like fuel cell,
hydrogen powered vehicles, which may affect the auto • Events and conferences
• Acquisition in foreign markets
component industry
Key Players
Outlook and trends of the Pharmaceutical Industry in India

• India is the largest provider of generic drugs globally. Indian pharmaceutical sector
industry supplies over 50% of global demand for various vaccines, 40 per cent of
generic demand in the US and 25 per cent of all medicine in UK
• The country’s pharmaceutical industry is expected to expand at a CAGR of 22.4 per
cent over 2015–20 to reach US$ 55 billion. India’s pharmaceutical exports stood at
US$ 17.27 billion in FY18 and have reached US$ 19.14 billion in FY19
• The Union Cabinet has given its nod for the amendment of the existing Foreign Direct
Investment (FDI) policy in the pharmaceutical sector in order to allow FDI up to 100
per cent under the automatic route for manufacturing of medical devices subject to
certain conditions
• Between Jul-Sep 2018, Indian pharma sector witnessed 39 PE investment deals worth
US$ 217 million
• In 2017, Indian pharmaceutical sector witnessed 46 merger & acquisition (M&A) deals
worth US$ 1.47 billion
• Investment (as % of sales) in research & development by Indian pharma companies
increased from 5.3 per cent in FY12 to 8.5 per cent in FY18. The exports of Indian
pharmaceutical industry to the US will get a boost, as branded drugs worth US$ 55
billion will become off-patent during 2017-2019
• The National Health Protection Scheme is largest government funded healthcare
programme in the world, which is expected to benefit 100 million poor families in the
country by providing a cover of up to Rs. 5 lakh (US$ 7,723.2) per family per year for
secondary and tertiary care hospitalization
• The Government of India unveiled 'Pharma Vision 2020' aimed at making India a global
leader in end-to-end drug manufacture. Approval time for new facilities has been
reduced to boost investments
• Medicine spending in India is projected to grow 9-12 per cent over the next five years,
leading India to become one of the top 10 countries in terms of medicine spending

Education Industry
1 2
• Responsible for the creation of human resource • Heavy dependence on government funding
SOURCES
• New education reforms have made the sector more • Political interference in university administration,
lucrative student bodies and other activities
• 3.6 million teachers are working in India on a full time • Limited scope of extra curricular activities like fine arts • School/college fees, tuition fees
basis and sports • Coaching fees
• Highly subsidized and hence accessible to the poor • Lack of equality of educational opportunities • Online Subscriptions
• Several institutes such as the IITs, IIMs, NITs are • Multiple entrance tests for similar courses causes in • Sale of books and other education materials
recognized globally and also setting up campuses overburdening the students • Career Counselling
abroad
COST
• Inflow of foreign students increasing revenue • Colleges and schools witnessing high growth may focus
• FDI in education helping the Indian students get on profit making rather than quality education
CENTRES
education at a cheaper cost • Professional Education is commercialized
• Universities can be made to react at pace with the • Students are studying traditional courses out of
global changes in other sectors compulsion rather than interest • Administrative Fees
• Education can be integrated with other sectors like • Art Education and other niche courses can be wiped out
• Cost of acquiring and training teachers/coaches
health care, poverty alleviation to make education the due to low number of students
• Cost of creating content
key to national development
• Payment of professionals like teachers and
coaches
• Use of technology to reach to a larger population
• Marketing and promotional activities
Key Players
Outlook and trends of the Education Industry in India

• India has the world’s largest population of about 500 million in the age bracket of 5-24
years and this provides a great opportunity for the education sector. The education
sector in India is estimated at US$ 91.7 billion in FY18 and is expected to reach US$
101.1 billion in FY19
• Number of colleges and universities in India reached 39,050 and 903, respectively in
2017-18. India had 36.64 million students enrolled in higher education in 2017-18.
Gross Enrolment Ratio in higher education reached 25.8 per cent in 2017-18
• The country has become the second largest market for e-learning after the US. The
sector is expected to reach US$ 1.96 billion by 2021 with around 9.5 million users
• Indian education sector witnessed 18 merger and acquisition deals worth US$ 49
million in 2017. Of all the startups in India, 3,500 are catering to the education space.
These startups received close to US$ 700 million funding in 2018
• India has signed a loan agreement with World Bank under 'Skills Acquisition and
Knowledge Awareness for Livelihood Promotion' (SANKALP) Project to enhance
institutional mechanisms for skills development
• The Government has laid foundation of 141 universities and 7 IITs in the past four
years
• With an aim of promoting innovation and entrepreneurship among secondary school
students in the country NITI Aayog, Government of India has launched the Atal
Innovation Mission (AIM)In June 2018, 3,000 additional Atal Tinkering Labs were
approved, taking the total number of labs to 5,441
• In 2030, it is estimated that India’s higher education will:
• Adopt transformative and innovative approaches in Higher education
• Have an augmented Gross Enrolment Ratio (GER) of 50 per cent
• Reduce state-wise, gender based and social disparity in GER to 5 per cent
• Emerge as a single largest provider of global talent, with one in four graduates
in the world being a product of the Indian higher education system
• Be among the top five countries in the world in terms of research output with
an annual R&D spent of US$ 140 billion
• Have more than 20 universities among the global top 200
Telecom Industry
2
1 2
• Strong demand – World’s second largest in terms of • Intense competition – Cut-throat price war among SOURCES
telecom subscribers (119 crore), internet subscribers telcos has led to consolidation in the industry as well as
(51.2 crore) as well as app downloads declining overall profits for last couple of years
• Increasing data usage – India is one of the largest data • Debt and finances – Incumbents are currently having • Service Subscriptions
consumers (an avg. 1GB data per day per user) unsustainable debt levels owing to intense competition • Telephony/Data sessions exceeding
• Good telecom infrastructure – Large investments on in the industry subscriptions
network infrastructure to improve customer experience • Late adoption of 4G and advanced wireless technologies • Mobile Value-Added Services
• Fast-tracked reforms allow growth – National digital – Due to regulatory uncertainties and delayed spectrum • Digital Services
communications policy, 2018 aims to attract $100 auctions, India were late to the 4G
billion worth of investments in the sector by 2022
COST
• Mobile penetration – Unique mobile subscribers to the • Interconnection charges – Interconnection charges will
total population is expected to reach around 63% in be zero effective Jan 1, 2021 from current rate of 6 CENTRES
2025 from 58% in 2018 paise/min. This would impact the revenues of
• Increase in internet users – Decline in data costs is incumbents
expected to add 500M new internet users • Competition – Increasing number of players in the • Cost of spectrum
• Untapped rural market – Rural tele-density reached sector making the market a lot more competitive as the • Rentals & permission for infrastructure like BTS,
58.8% and 44.6% of the total wireless subscribers are barriers to entry are very less fiber cables, etc.
• Exploring adjacent businesses in an evolving • Hardware & Software
environment – Moving to wider digital consumer space • SG&A and Marketing expenses
like content and mobile banking solutions • Support for hardware & software procured
• Interaction costs with int. ISPs
Key Players • Rental of infra from other SPs

Outlook and trends of the Telecom Industry in India

• Market Segments:
▪ Mobile - Comprises establishments operating and maintaining switching and
transmission facilities to provide direct communications via airwaves
▪ Fixed-line (wireline) - Consists of companies that operate and maintain
switching and transmission facilities to provide direct communications through
landlines, microwave or a combination of landlines and satellite link-ups
▪ Internet Services - Includes Internet Service
Providers (ISPs) that offer broad band internet connections through consumer
and corporate channels
• $ 33.97B FY2019 Revenue: 6% revenue growth over last decade. Expected to grow by
7% due to stabilizing tariff wars
• 119% YoY growth: Total wireless data usage grew by 119% in India YoY in Q4 FY19. Avg.
data usage per smartphone stands at 9.8GB per month
• 45.74% CAGR: Internet subscription rising at a run rate of 65M users per year during
FY06-FY19 to reach 636.7M in 2019
• 58.68% Rural Subscribers: Rural subscribers form 56.68% of total telephone
subscribers in FY19, compared to 33.35% in FY11
• 90.1% Tele-density: India is currently the 2nd largest telecommunication market. Tele-
density grew from 18.2% in FY07 to 90.1% in FY20
• 57.93% CAGR: Broadband subscriptions stood at 594.6M with wireless broadband
subscriptions at 576.2M during June 2019
• The Indian Mobile Value-Added Services (MVAS) industry is expected to grow at a
CAGR of 18.3% during the forecast period 2015-2020
• To encourage cashless economy, Indian government announced to provide free Wi-Fi
to more than 1,000 gram panchayats. The value of Unified Payments Interface (UPI)
transactions grew to more than ₹ 82 crore ($ 11.73M) in July 2019
• The expenditure on telecom infrastructure and services by government of India grew
six-fold to ₹ 60K crore ($ 8.31B) between 2014-19. Telecom equipment market is
expected to reach $ 30B by 2020

Steel Industry
2
1 2
• Large deposits of rich iron ore (approx. 23 bn. tonnes) • Limited resources of coking coal leading to high cost of SOURCES
• Availability of skilled and cheap labor manufacturing
• Rising demand for steel on the back of improved GDP • Systemic deficiencies such as long time for getting land
growth and government projects in affordable housing clearances, etc. • Finished/Semi-finished Steel consumption
and infrastructure • High cost (interest) of capital and low labor productivity • Alloys – Stainless steel, Silicon electrical steel
• Developed transport and shipping system • Lack of innovation and R&D to develop suitable (commonly used material for electrical machines)
technology for efficient utilization of raw materials and High speed steel (commonly used as cutting
• Inability to adopt technological advancement with ease. tool material)
Dependent on foreign suppliers for technology and • Sale of recycled steel scrap
automation • Retail steel business (doors, windows, modular
housing)
3
• Unexplored rural market and other untapped sectors • Price sensitivity and demand volatility due to auto COST
• Increase in demand owing to export penetration in sector slowdown CENTRES
South-East Asia and Middle East countries • Cheap imports of steel from China and CIS countries
• Low per capita consumption and increased allocation • Protection measures in the developed countries
on infrastructure spending has potential to achieve a affecting India’s export • Production costs (major share includes raw
significant lift in demand • Slow industry growth material costs for coke, iron ore and limestone)
• A global competitive industry with increasing capacity • Inventory costs
and adoption of latest technologies • Transportation/Freight expenses
• SG&A and B2B Marketing expenses (primarily
inbound marketing)
• Recycling costs
Key Players
Outlook and trends of the Steel Industry in India

• The steel sector contributes over 2% to the GDP of the nation. Also, it employs
500,000 people directly and 2.50 million indirectly
• Total crude steel production in India has increased at a CAGR of 6.4% during FY08–19
period, with country’s output reaching 106.4 million tonnes per annum (MTPA) in
FY19. Steel manufacturing output of India is expected to increase to 128.6 MT by
2021, accelerating the country’s share of global steel production from 5.9% in 2018 to
7.7% by 2021
• India surpassed Japan to become the world’s second largest steel producer in 2018,
with crude steel production of 106.5 million tonnes
• Moreover, capacity has increased to 137.98 million tonnes (MT) in 2017-18 while in
the coming ten years the figure is anticipated to rise to 300 MT of steel
• The Government of India raised import duty on most steel items twice, each time by
2.5% and imposed measures including anti-dumping and safeguard duties on iron and
steel items. An export duty of 30% has been levied on iron ore to ensure supply to
domestic steel industry. Also, 100% FDI through the automatic route is allowed
• National Mineral Development Corporation is expected to invest US$ 1 billion on
infrastructure in next three years to boost iron production and increase the iron ore
production 75 million tonnes per annum (MTPA) until 2021 indicating new
opportunities in the sector
• In India, as per Indian Steel Association (ISA), steel demand to grow by over 7.2% in
both 2019-20 and 2020-21.
• Domestic players’ investments in expanding and upgrading manufacturing facilities are
expected to reduce reliance on imports. In addition, the entry of international players
would provide benefits in terms of capital resources, technical know how and more
competitive industry dynamics
• Domestic players’ investments in expanding and upgrading manufacturing facilities are
expected to reduce reliance on imports. In addition, the entry of international players
would provide benefits in terms of capital resources, technical know how and more
competitive industry dynamics
Banking Industry
1 2
• A leader in economic growth: It has fostered economic • High NPA’s: Rise in Retail & corporate NPA’s (Non-
growth & has improved financial trade, financial performing assets) is the single major issue this sector
SOURCES
stability, and financial security is going through worldwide
• Diversified services: Banking industry offer services • Structural weaknesses such as restrictions on capital • Interest on loans
from CASA to insurance, to loan, to investment availability & deployment, weak corporate governance, • Investments in govt. and rated securities
• Source of employment & GDP growth: Financial Political pressure & ineffective regulations • Forex operations
system contributes to economic growth through either • Can’t reach to Under-penetrated market: Financial • Commission on 3rd party products like insurance &
a supply-leading (financial development spurs growth) inclusion has been a major problem & even PMJDY mutual funds
or a demand-following (Pradhan Mantri Jan Dhan Yojna) hasn’t been fruitful • Fees for services offered to customers like issuing
drafts, bills of exchange, collecting cheques etc.
COST
• Expansion: Penetrating to the rural markets & bringing • Recession: Traumatic shock of Economic crises &
the rural masses under the purview of organized collapse of the several businesses can affect the banks
CENTRES
banking and vice-versa
• Rise in private sector banking: Private sector banks has • Stability of the system: Failure of some weak banks has
• Non Interest expenses: Operational expenses
enabled structural & functional changes mainly due to often threatened the stability of the system.
incurred on daily running of banks
the adaptation of the advanced technologies • Competition: Competition from NBFC’s (Non-banking • Occupancy & IT costs
• Changing Socio-cultural & demographic factors: This financial companies) like insurance companies & mutual • Fee for legal services
has led to enhanced institutional capabilities and fund companies can affect the business of Banks • Interest Expenses: Cost on borrowed funds like
service levels from banks • Short and long term loans
• Trading account liabilities
Key Players • Deposits and bonds

Outlook and trends of the Banking Industry in India

• The Indian banking system consists of 12 public sector banks, 21 private sector banks,
49 foreign banks, 56 regional rural banks. PSBs own almost 80% of market share.
• Over last decade, total lending increased at a CAGR of 10.94 per cent and total
deposits increased at a CAGR of 11.66 per cent
• Off late, Indian banks are plagued by the problem of rapidly increasing NPA. A loan or
advance for which the principal or interest payment remained overdue for a period of
90 days is classified as NPA
• According to RBI, the gross non-performing assets in Indian banks are valued at around
• Rs. 400,000 crore 90% of which is accounted by PSBs
• Banks lent extensively during the boom phase in 2000-08 but after the financial crisis
in 2008 corporate profits decreased, infrastructure sector – power, iron, and steel –
slowed down leading to stress on the loans
• To tackle NPA, govt. enacted Insolvency and bankruptcy code in 2016 with a mandate
that an insolvent asset must be resolved in 270 days and if not the asset should be
liquidated at the minimum value assessed by the resolution professional managing the
asset
• As per latest reports, out of the 1,484 cases admitted for the corporate insolvency
resolution process (CIRP), 586 have been closed till December 2018. That marks a hit
rate of about 40%
• RBI sets the repo/policy rate in India. It is the rate at which RBI lends to commercial
banks against the govt. securities. Currently, it stands at 5.15%
• Monetary Policy Committee(MPC) of the RBI meets bi-monthly to decide the repo rate
while maintaining price stability and economic growth. It is mandated to maintain
inflation at 4% with a tolerance of 2% on either sides
• In the wake of weakening economy, RBI has cut rate by 135 bps starting from February
2019 till the year end in five successive steps. The rate cut makes the loan cheaper and
thus spurs the private investment
• Other commonly used instruments of RBI include Cash Reserve Ratio – the min.
balance that each bank is expected to maintain with RBI; Statutory liquid ratio – min.
balance that a bank is required to maintain in safe and liquid assets
Automobile Industry
1 2
• Continuous product innovation & technological • Cars recalled : Recalling vehicles on account of some
advancement : are increasing R & D expenditure to technical dis-functionality or non-abidance to govt. led
SOURCES
drive the next phase of growth through use of rules is becoming very common
renewable sources of energy • Bargaining power of consumers : Availability of large
• Increasing demand for VFM vehicles: Developing number of variants, competition between them has • Selling to govt. or private fleet owners
economies have high demand for VFM products (value given power to customers to choose whatever they • Direct leasing through contracts
for money) because of their fuel efficiency, high like • After sale services and maintenance
mileage • Regulations like excise duty,, decreasing number of
validity of registration period & volatility in the fuel
prices affect growth rate
COST
• Market expansion : Entering new markets like Asian & • Volatility in the fuel Prices : Fluctuations in the fuel
BRIC nations will result in upsurge in demand of prices, government regulations relating the use of
CENTRES
vehicles alternative fuels is affecting the inventories
• Strategic Alliances : helps manufacturers • Sluggish Economy : Macroeconomic uncertainty,
to differentiate their offerings by using specialized Recession, un-employment etc. pose a challenge for
capabilities & partnering with other companies sales • Raw materials like Steel, glass, aluminium
• Changing lifestyle & customer groups: with the • High fixed cost and investment in R & D : has led to • Marketing – Brand building & advertisement
increase in nuclear families there has been increase in reduced profit margins for manufacturers • Research and development – Quality Assurance
demand of two-wheelers & compact cars and Quality control
• Consumer relationship management
Key Players
Outlook and trends of the Automobile Industry in India

• The automobile industry in India is world’s fourth largest contributing 7.5% to the
country’s GDP and 49% to the manufacturing GDP and employing 37mn people
• As per Automotive Mission Plan (AMP) 2016–26, its contribution is projected to
increase to 12% and India is expected to emerge as the world’s third-largest passenger
vehicle market by 2021
• Domestic automobiles sales increased at 6.71 per cent CAGR between FY13-18 and is
expected to sell 18 trillion cars by 2026
• Five per cent of total FDI inflows to India from April 2000 to June 2019 went into the
automobiles sector
• The last 1-1.5 years has been extremely tough for the sector experiencing plunge in
sales for 10 straight months till Aug’19
• Factors like general slowdown in the economy, the disruption caused by the Ola and
Uber facilities, the confusion around BS6 emission standards, difficulties in getting a
loan in the aftermath of the IL&FS crisis have played their roles
• Given the situation, the passenger vehicle segment’s goal of reaching the 5-million
domestic sales mark by 2020 looks distant at the moment, as it is set to shrink to
around 3 million units in FY 2019-2020, down from about 3.4 million units in FY 2018-
2019
• Measures were announced recently to boost sales such as lifting ban on purchase of
vehicles by government departments, and allowing additional 15 per cent depreciation
taking it to 30%
• Finance minister also announced measures like allowing BS IV vehicles bought till
Mar’20 to remain operational for entire period of registration, deferring one time
registration fee till Jun’20
• Also there is a growing clamour for reducing the GST on automobiles from 28% plus
additional 15% cess on most of the vehicles. However, till now it’s been reduced to 5%
only on Electric vehicles
• There is also a plan to sell only EVs and hybrid cars in India from 2030 onwards by
offering subsidies for a couple of years

Textile Industry
1 2
• India is one of the largest exporters of Yarn in • Indian Textile Industry is highly Fragmented Industry
SOURCES
international market and contributes around 25% • Industry is highly dependent on Cotton
share of the global trade in Cotton Yarn • Lower Productivity in various segments
• The Apparel Industry is one of largest foreign revenue • Lack of Technological Development that affect the • Sales of Yarn, fiber and processed fabrics/Apparel
contributor and holds 12% of the country's total export productivity and other activities in whole value chain • Sales of hand spun yarn and hand-woven textiles
• Industry has large and diversified segments that • Infrastructural Bottlenecks and Efficiency such as, • Sales of processed apparels to international
provide wide variety of products Transaction Time at ports and transportation Time apparel companies
• Unfavorable labor Laws
• Higher Indirect Taxes, Power and Interest Rates
COST
• Growth rate of Domestic Textile Industry is 6-8% per • Competition from other developing countries, especially
annum China
CENTRES
• Large, Potential Domestic and International Market. • • Continuous Quality Improvement is need of the hour as
Product development and Diversification to cater there are different demand patterns all over the world
global needs • Threat for Traditional Market for Power loom and Hand • Labor costs
• Elimination of Quota Restriction leads to greater loom Products and forcing them for product • Costs of maintaining retail outlets
Market Development diversification • Cost of raw materials
• Market is gradually shifting towards Branded Ready- • International labor and Environmental Laws
• Maintenance of sophisticated mills
made Garment
Key Players
Outlook and trends of the Textile Industry in India

• The textile and apparel industry can be broadly divided into two segments - yarn and
fiber, and processed fabrics and apparel. The domestic textile industry in India is
estimated to reach US$ 223 billion by 2021F from US$ 150 billion in November 2017,
while cotton production in India is have reached 32.3 million bales in FY20 (first adv
est.)
• Textile and apparel exports from India are expected to increase to US$ 82 billion by
2021. In FY19, India's textile and apparel exports increased 1.66 per cent to Rs.
251,387 crore (US$ 35.96 billion) as compared to Rs. 247,277 crore (US$ 35.381) in
FY18. Manmade garments remain the largest contributor to total textile and apparel
exports from India
• Under Union Budget 2019-20, the government has allocated Rs. 700 crore (US$
100.16 million) for Amended Technology Upgradation Fund Scheme (ATUFS). In May
2018, textiles sector recorded investments worth Rs. 27,000 crore (US$ 4.19 billion)
since June 2017
• Under Budget 2019-20, the National Handloom Development Programme will get Rs.
456.80 crore (US$ 65.35 million) and the Integrated Processing Development Scheme
will get Rs. 3.50 crore (US$ 0.50 million). Khadi Express train will be run to create
awareness about the Indian khadi and Khadi and Village Industries Commission (KVIC)
may soon open its first foreign venture in Bhutan
• The Directorate General of Foreign Trade (DGFT) has revised rates for incentives under
the Merchandise Exports from India Scheme (MEIS) for two subsectors of Textiles
Industry - Readymade garments and Made ups - from 2 per cent to 4 per cent. As of
August 2018, the Government of India has increased the basic custom duty to 20 per
cent from 10 per cent on 501 textile products, to boost Make in India and indigenous
production
• Cumulative FDI in the Indian textiles reached US$ 3.19 billion between April 2000 to
June 2019. Under Union Budget 2019-20, Government of India allocated around Rs.
4,831.48 crore (US$ 691.29 million) for the Ministry of Textiles. Integrated Wool
Development Programme has been allocated Rs. 29 crore (US$ 4.14 million) under
Union Budget 2019-20
Aviation Industry
1 2
• The growth in individual incomes increases the • The development of infrastructure has been very slow
number of people utilizing the carriers to fly to their thus unable to keep up the pace of growth of the
SOURCES
destinations aviation sector.
• Growth in tourism has led to a significant increase in • Aircrafts are very expensive and running an airline • Cargo and mail services
the number of domestic and international passengers requires a very huge capital outlay. • Passenger carrier services
with a 50% growth in the number of domestic flyers • An airline may find it very difficult to compete with • Revenue from sponsors
and a 25% increase in international. other carriers due to their low fares. • Merchandizing
• Air travel has a marked safety record and has been • Airlines have to maintain a huge work force which is
generally accepted as a safe and fast way to travel. spread over an outsized ecological area and which
requires constant communication and monitoring.
• New airlines are likely to crop up and this will lead to a
COST
• Introducing mailing services for delivery of mails and
parcels across the globe and introducing special fare
strain on the available pilots, and airport staff. CENTRES
• With the increasing number of airlines and aircrafts,
packages for those travelling to certain destinations for there is likely to be a marked shortage of airports and
pleasure or business. airport facilities. • Aircraft maintenance and leasing
• An airline can rely on information technology to offer • The greatest hurdle facing many airlines today is high • Ground support staff and in-flight crew
more customers friendly services like internet while fuel prices. A huge upward surge in fuel prices can • Airport parking fee
travelling which would become value added services. destabilize an investment in the aviation industry. • Commissions to travel agents and ticketing
• Minimized delays would mean less refunds and websites
minimal compensation due to inconveniences made.
Key Players
Outlook and trends of the Aviation Industry in India

• India is the world’s third largest domestic aviation market and third largest aviation
market. By 2024, India’s overall aviation market is expected to become the third
largest globally.
• To cater to the rapidly growing demand, airline operators have been expanding their
capacity. Capacity available in India’s domestic flights, as measured by Available Seat
Kilometres, stood at 155,033.4 million kms while demand, as measured by Revenue
Passenger Kilometres, stood at 136,631.4 million kms in FY19 (up to Feb 2019).
• Capacity available in India’s international flights, as measured by Available Seat
Kilometres, stood at 126,054.2 million kms while demand, as measured by Revenue
Passenger Kilometres, stood at 111,620.4 million kms in FY19 (up to Feb 2019).
• Domestic passenger traffic stood at 275.22 million and expanded at a Compound
Annual Growth Rate (CAGR) of 13.65 per cent over FY06–19. International passenger
traffic posted a CAGR of 9.11 per cent over FY06-19. Freight Traffic grew at a CAGR of
7.44 per cent over FY06-19. Freight Traffic is expected to grow at a CAGR of 7.27 per
cent to reach 4.14 million tonnes in FY23.
• During FY20 (April--September’19), air passenger traffic stood at 170.02 million. Out of
which domestic passenger traffic stood at 136.28 million while international traffic
stood at 33.73 million. Total freight traffic handled in India stood at 1.7 million tonnes
during the same time period. As of March 2019, there are 103 operational airports in
India. As of July 2019, 643 airplanes were in-service in the fleet of scheduled Indian
operators. Due to rise in demand in air travel, India will need 2,380 new commercial
airplanes by 2038. India is expected to have the largest number of aircraft flying by its
scheduled airlines latest by December 2019. India plans to open 100 additional
airports by 2024. As on October 2019, 55 AAI airports were declared as Single-Use
Plastic Free Airport Terminals.
• The Government of India has launched regional connectivity scheme named UDAN
(Ude Desh ka Aam Nagrik) to make flying affordable for common man.

ConSIG’21
Suraj Mankani (Head) Nikhil Sanwal (Member)

suraj.mankani@sjmsom.in nikhil.sanwal@sjmsom.in
+91-7406144124 +91-7897208637
Rishabh Singh (Member) Santam Baul (Member)

rishabh.singh@sjmsom.in santam.baul@sjmsom.in
+91-9199134101 +91-8240690863
Aakanksha Mishra (Member) Sahil Jain (Member)

aakanksha.mishra@sjmsom.in sahil.jain@sjmsom.in
+91-9967228688 +91-7696220988
We would like to thank Prof. K.S. Momaya (Faculty Coordinator, ConSIG Club, SJMSOM, IIT Bombay) and ConSIG’20 team for their constant support, guidance and inputs.

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ConSIG – The Consulting Club, Shaliesh J.

Mehta School of Management, IIT-Bombay

Shailesh J. Mehta School of Management, IIT Bombay

ConSIG - The Consulting Club

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How to use the Casebook?

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*Note : Before proceeding further, again it is a

Average Price Volume Approach 1 Approach 2

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MARKET ENTRY FRAMEWORK

Market Development Product Development Diversification

Timeline & target for Favourable to LOB and

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MARKET ENTRY FRAMEWORK

Market Attractiveness SUCCESSFUL

Define Motive/Goals for Market Entry

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MARKET ENTRY FRAMEWORK

DEFINE MOTIVE/GOALS FOR MARKET ENTRY

Strategic Goals Financial Goals

Competitive advantage Short term impacts

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MARKET ENTRY FRAMEWORK

Barriers to Entry Competition Buyer Value Chain

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MARKET ENTRY FRAMEWORK

MARKET ENTRY FULFILS GOALS

Relative Competitive Positioning

Brand Equity Strategic Goals Financial Goals

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MARKET ENTRY FRAMEWORK

Alternatives ➢ Financial (Investment, Profits, Litigation support)

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PRICING STRATEGY FRAMEWORK

• How many competitors are there in the

• What is the company’s objective? To have

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Types of Pricing Strategies

Cost based Questions:

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Examples of Pricing Strategies

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Choose a growth strategy

• Inorganic Growth (Preliminary Questions to be asked) –

Organic growth strategy

Factors to be considered – Factors to be considered – Factors to be considered – Factors to be considered –

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Organic growth strategy

VALUE CHAIN FRAMEWORK

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VALUE CHAIN FRAMEWORK

✓ Are warehousing costs significantly higher than the industry average?

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VALUE CHAIN FRAMEWORK

✓ Benchmark with industry average

✓ Benchmark all costs with industry average

✓ Penetration (no of distributors)

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