Answer Keys for Case BCG-001

NAVAL EXPANSION

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Question 1 of 7

QUESTION TEXT

To help plan the Royal Navy's naval expansion plan, the team must first analyze where the Royal Navy stands among the carrier navies, in terms of short-term
carrier-related capabilities. Which statistics about each navy should the team gather?

(note: short-term is considered by the Royal Navy to be 10 years into the future)

Select the fewest number of options that would adequately answer the question.

A. Number of aircraft carriers currently in service and available within 10 years

B. Current number of shipyards
C. Carrier-building budget estimations from 2020 to 2030, in dollar amount
D. Percentage of GDP set aside for carrier-construction from 2020 to 2030
E. Number of cargo ships currently in service
F. Number of shipyards capable of handling carriers at present
G. Total military budget for each country in 2020, measured in dollar amount
H. Naval budget, measured in percentage of total GDP
I. Number of carrier-suitable shipyards that can be made operational in 10 years
J. GDP per capita, measured in dollar amount

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Question 1 of 7

EXPLANATION

This is a Structuring/Information question, multiple-select multiple-choice answer format.

To answer this question, we follow a 2-step process:

• Step 1: Structure the problem, using options as suggestions

• Step 2: Rule out options that does not fit within the structure / comes with wrong measurements / covered by other options

Applying these steps to this question:

• Step 1: Looking at the options, we can draw this issue tree/table:

Present (1) Short-term future (2)

Number of carriers (A) A1 A2

Number of suitable shipyards (B) B1 B2

Dollar-amount carrier budget (C) C1 C2

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Question 1 of 7

EXPLANATION (continued)

• Step 2: Analyzing each options by plugging them into the issue tree:

Option Correct Wrong type Explanation

A Yes n/a This option covers cell A1 and A2 in a MECE way.

B No Too broad This option covers cell A1 but does not fit within the table since it also covers shipyards not suitable for carriers.

C Yes n/a This option covers cell C1 and C2 in a MECE way.

This option covers cell C1 and C2 in a MECE way, but is measured by an inappropriate unit (e.g., dollar amount would be a better metric in this
D No Wrong unit
context, not % of GDP)

E No Irrelevant This option does not cover any cell in the table (cargo ships are not relevant to carrier capabilities)

F Yes n/a This option covers matches cell B1

G No Too broad This option covers cell A1 but does not fit within the table since it also covers shipyards not suitable for carriers.

This option covers cell C1 and C2 in a MECE way, but is measured by an inappropriate unit (e.g., dollar amount would be a better metric in this
H No Wrong unit
context, not % of GDP)

I Yes n/a This option covers matches cell B2

J No Irrelevant This option does not cover any cell in the table (GDP per capita is not relevant to carrier capabilities)

CORRECT ANSWER(S): A, C, F, I

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Question 2 of 7

QUESTION TEXT

The five "carrier navies" form two rivaling alliances: the Western navies (Columbia, Britannia, Teutonia) and the Eastern navies (Cathay, Ruthenia).

Currently, the Western navies are taking the lead when it comes to the size of their aircraft carrier fleet. However, Cathay is currently outbuilding both Britannia and
Teutonia. The Royal Navy worries that the Eastern navies may quickly catch up.

If all current reserve and under-construction carriers are brought into active service, how many percentages of the current active carrier fleet size lead do the
Western navies lose, assuming that: Fleet size lead of Navy A over Navy B = (Fleet size of A - Fleet size of B) / Fleet size of B?

(The answer should be rounded to the nearest first decimal point, with the % sign omitted; for example, if your answer is "12.3456%", write "12.3")

Exhibit 1: Comparison of number of aircraft carriers of carrier navies in 2020

Rank Navy Active Reserve WIP Note:

• Active: carriers currently in
1 Federal Navy of Columbia 10 5 5 active service
2 Royal Navy of Britannia 4 0 2 • Reserve: carriers not in service,
but can be reactivated
3 People's Navy of Cathay 2 0 4 • WIP: carriers currently under
4 Republican Navy of Teutonia 1 0 1 construction
5 Imperial Navy of Ruthenia 1 0 1

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Question 2 of 7

EXPLANATION

This is a Quantitative question, short-text answer format

To answer this question, we need two data points:

• The current Western-Eastern active-carriers fleet size lead
• The Western-Eastern active carrier lead if reserves and WIPs are brought into service i.e., the current all-carriers fleet size lead.

To figure out the first data point, simply add up the number of active carriers for each side.
The current Western-Eastern active carriers fleet size lead is: (15 - 3) / 3 = 400%

To figure out the second data point, we must first calculate the total number of carriers for each navy (active, reserve and WIP) at present. Then, add up the
number for each side. The current Western-Eastern all-carriers fleet size lead is: (28 - 14) / 14 = 100%

Putting these numbers together, if all reserves and WIPs are brought into active service, the Western side will lose (400 - 100) / 400 = 75% of the original active-
carriers fleet size lead.

CORRECT ANSWER(S): 75%

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Question 3 of 7

QUESTION TEXT

The Royal Navy divides its carrier construction into three phases:

• Phase I begins with the Royal Navy laying out the design specifications i.e., what they want the battleship to be like. Architects and engineers would draw up,
test and change various design iterations until they meet the specifications.

• Phase II involves numerous factories simultaneously producing modules of the ship, which are then transported by rail or ship to be assembled at a specialized
shipyard. Even if design changes are made during the process, under-construction ships are not rolled back unless the change is to rectify a critical design failure
(i.e., preventing the ship from performing its basic functions) Once the ship has reached a "sea-worthy" state, it is pushed out to sea (i.e., launching) to free up
the shipyard for the next ship.

• Phase III involves assembly of the final modules, sea-going trials, and refinement. Once the ship is deemed combat-ready, it is "commissioned" into the Navy.

According to the given information, which of the following events will prolong the construction process?

A. Owners of a civilian shipyard refusing to use their yard to build aircraft carriers
B. Train accident causing 2-month late delivery of a module meant for a ship under construction in the shipyard
C. A delay in budget allocation preventing the Royal Navy to pay for the ships in advance
D. The ship design's engine replaced by a 5% more powerful alternative, when one ship is already under construction
E. Sea trials showing that aircrafts cannot takeoff even with helping devices installed onboard
F. Refusal of Britannia's allies to lend the Royal Navy a carrier of their own
G. A workers' strike at the factory responsible for producing the carriers' engine
H. Sea trials showing that the ship's decks might be a little wetter than desirable for sailors

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Question 3 of 7

EXPLANATION

This is Critical/Logical Reasoning question, multiple-select multiple-choice answer format.

To answer this question, we grade each option on the True (T) - Inconclusive (N) - False (F) spectrum.
Then, if the question calls for a specified degree of certainty (with qualifiers such as "must be", "always", "surely"), we grade each T/F option based on its degree of
certainty.

Since this question do not contain any qualifiers, there is no need to differentiate between levels of certainty for T/F options.

Analyzing the given options, we have the following table:

Options Correct Type Explanation

A No F It is already mentioned that carriers require special naval shipyards, so civilian shipyards are irrelevant from the start

B Yes T Slow delivery of modules will cause delays since these modules are necessary for the completion of the ship

C No N It is not clear whether the Royal Navy must pay in advance for the ships to be built

D No F A performance difference of 5% is likely not a critical design failure, so this will likely not result in a roll-back

E Yes T Aircrafts must be able to take off for the carrier to perform its basic function, i.e., this is a critical failure that necessitates a roll-back

F No F Whether the allies lend Britannia a carrier or not does not affect the construction process of domestically-built ships

G Yes T The engine is a critical component of a ship, so its slow delivery will cause a delay

H No F Sailors being somewhat wetter than desirable is likely not a critical design failure that necessitates a roll-back

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Question 4 of 7

QUESTION TEXT

Aircraft carriers are state-of-the-art warships that only the largest, most economically advanced countries can build. It also has no synergy with any civilian or even
other military-industrial sectors. That means if a country does not build carriers consistently, they will lose this capability.

It has been 50 years since the last carriers of the Royal Navy were built. As such, many technologies have become obsolete, and experience has been lost.
This means the new naval expansion program is particularly vulnerable to cost overruns and delays, especially in the R&D phase.

They want to investigate a few short-term, reliable measures to keep the costs down and minimize delays.

Which of the following options are most feasible for the Royal Navy?

A. Order whole carriers from allies, such as Columbia

B. Issue government bonds to raise funds from Briton citizens
C. Design new, cost-effective kind of ship to replace the aircraft carrier
D. Embark on joint development programs with allied navies
E. Outsource shipbuilding to developing countries to lower labor costs
F. License an allied carrier design to produce in Britannia
G. Lobbying to raise additional fundings from the government

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Question 4 of 7

EXPLANATION

This is an Intuition/Insights question, multiple-choice, multiple-select format.

To answer this question, you need to grasp the basic business concepts and develop an understanding of the case context.

By now, it should be realized that the aircraft carrier-building endeavor of the client is heavy on R&D.
Which means, to reduce costs, the client will need to take advantage of the economies of scale or find ways to spread out the R&D expenses.

Analyzing the given options, we have the following table:

Options Correct Explanation

A Yes Ordering carriers from allied countries will take advantage of economies of scale, help bring down R&D as well as production costs.

B No This will help the Royal Navy raise funding, but it will not help minimize costs or delays.

C No This would be an extremely risky investment - the R&D costs will likely be high and there is no guarantee of results.

D Yes Joint development programs can cut design/development costs effectively (since it is shared between participants).

E No This would not tackle the R&D part of the program, and it is unlikely that developing countries have the facilities to build carriers anyway.

F Yes Purchasing a design can save part of the development cost and shorten the design process.

G No This will help the Royal Navy raise funding, but it will not help minimize costs or delays.

CORRECT ANSWER(S): A, D, F

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Question 5 of 7

QUESTION TEXT

The Royal Navy decides to take a "hybrid" approach with carrier construction - the ship hull will be built in Britannia, while non-critical weapon systems might
be sourced from allies. One of the systems that is brought into consideration is the Close-In Weapon System, or CIWS for short. The Royal Navy is looking to
replace their now-obsolete "Rearguard I" CIWS..

Three options are presented to the Royal Navy:

(1) Develop a replacement model, called the "Rearguard II"
(2) Purchase license to product the "Hoplite" CIWS from Columbia
(3) Import whole units of "Hoplite" CIWS from Columbia

Exhibit 2 displays relevant figures around each option.

For every percentage increase in per-suite costs, which option delivers the highest increase in per-suite hit rate?

Exhibit 2: Comparison of CIWS options presented to the Royal Navy

CIWS Type Effectiveness Costs Note:

Effectiveness is the chance for one
Rearguard II (as designed) 0.50 £20,000,000
CIWS suite to successfully intercept
Hoplite (licensed) 0.33 £14,000,000 one single missile, size 1x1x1m,
Hoplite (imported) 0.33 £12,000,000 flying at 340 m/s, at sea level.
Rearguard 0.15 £5,000,000

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Question 5 of 7

EXPLANATION

This is a Quantitative question, single-select multiple-choice format.

To answer this question, first calculate the percentage increase in costs of each option compared to Rearguard I.
Then, calculate the percentage increase in effectiveness of each option compared to Rearguard I

For example, Rearguard II has a 300% increase in costs and 233.3% increase in effectiveness compared to Rearguard I, so for every 1% increase in costs, it gains
0.8% in effectiveness.

Similarly, the Licensed Hoplite gains 0.7% in effectiveness and the Imported Hoplite gains 0.9% in effectiveness for every 1% increase in costs.

As such, the Imported Hoplite is the most cost-effective upgrade.

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Question 6 of 7

QUESTION TEXT

Britannia is an island nation with centuries-worth of maritime tradition, and strong public support for the Navy. As such, the Royal Navy wants to tap into this
tradition by issuing bonds to raise funding for the naval expansion program. Before this happens, however, the Navy wants to get an idea of how much this would
help the budget problem - i.e., how much they can raise from the public.

What is your approach to estimate such figures?

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Question 6 of 7

EXPLANATION

This is an STR question, LT format

To answer this question, try to structure the problem on a scratch paper before transferring onto the message box
An answer to this question should be 3-5 lines long, containing:
• Brief description of the issue tree, in bullet list form
• Data necessary to test the branches of the issue tree
• How to gather the necessary data

For this question, we may structure the problem using the following table

1 - Citizens 2 - Organizations

A - Number of A1 A2

B - Average navy bond investment per B1 B2

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Question 6 of 7

EXPLANATION (continued)

A sample answer might be as follows:

We may divide the Briton public into two segments: (1) citizens, and (2) organizations

The value of bonds that might be raise from the Briton public is the sum of value of bonds to be raised from each of these segment.

To figure out the value of bonds to be raised from each segment, we multiply (A) its numbers (i.e., number of citizens, of organizations) with (B) how much each
individual citizen/organization is willing to invest into Navy bonds
• A can be estimated/extracted from official census and relevant registries - all of which are likely publicly available
• B can be estimated using primary data from surveys, which might be conducted by market research firms, or secondary from previous research on past Navy
bonds, if available

The next step for the team is to contact the relevant authorities or conduct quick press research to collect the necessary data.

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Question 7 of 7

QUESTION TEXT

During a meeting, the Chief of Staff has mentioned that the King of Britannia is major fan and supporter of the Navy.
If the Navy ever appeal to the King for donations, the King will likely agree to help fund the Navy through the Royal Treasury.

What are the possible benefits of a Royal donation?

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Question 7 of 7

EXPLANATION

This is an Intuition question

For this question, you can brainstorm for ideas on a scratch paper, the group them into MECE categories before presenting.
Try to grasp a good understanding of the case context, and keep in mind the insights from previous questions.

A sample answer might be as follows:

Possible benefits of a Royal donation include:

1. Direct benefits on naval expansion program

1A. Ship acquisition: the donation may allow the Navy to buy more ships or associated equipment
1B. Infrastructure expansion: the donation may allow the Navy to enhance its infrastructure to speed up the shipbuilding process

2. Indirect benefits on naval expansion program

2A. Encourage citizens and organizations to donate or invest in the Navy
2B. Put pressure on the government to increase funding for the Navy

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