This action might not be possible to undo. Are you sure you want to continue?
This is a case study based on a real case that OC&C worked on in 2005, trying to gain an idea of the global market for Burger machines. This is typical of an ‘analytical’ case study that you will get asked – requiring sound numerical skills (the ability to competently use a calculator), the ability to come up with some sensible estimates and some commercial awareness. Excellent candidates differentiate themselves by the quality of the answer, but also the time taken to respond – some of the later, more advanced questions will only get touched upon if a candidate has ‘aced’ the earlier questions.
Our client is responsible for the sale and manufacture of burger machines that produce the meat patties that populate the ever-popular hamburgers, sold worldwide by the likes of McDonald’s and Burger King. OC&C have been approached to help them think about their international expansion strategy, and in particular the opportunity posed by developing markets, such as China, India etc. Your specific task on this case is to scale the opportunity – i.e. how many Burger Machines could this company expect to sell into China in the future.
Market estimation methodology
First question: how would you estimate the market for burger machines? The good candidate explains that the market for burger machines is clearly driven by the fast food market, so we need to consider the total number of burgers that are likely to be sold, the number of burgers that a machine can produce and divide one by the other. The excellent candidate points out in addition to the above that we need to consider the effect of different population centers and transport on the likely configuration of manufacturing plants. We also need to consider the effect of importing on the local demand for burgers, as well as any existing infrastructure that may be capable of meeting manufacturing demand.
Second question: given that a burger machine can produce 90,000 burgers an hour, and is worth £250k how much do we think the market for burger machines is worth? Now this gives you a couple of the vital data points that you need to work out the market size, but also leaves some key information that you need to estimate or make assumptions on. Good candidates will work through the logic piece by piece, whilst the excellent candidates will lay out methodology and information required upfront and then work through them systematically. Fundamentally however we need to work out the number of burgers sold and divide it by the number of burgers a machine can produce to give us the number of machines. The good candidate thinks about number of burgers consumed per person given benchmarks from western society (data point provided here that the average American spends $350 per year on fast food). Estimates a reasonable number per Chinese person and comes up with a total number of burgers consumed. Next, takes the given 90,000 burgers per hour, and then calculates the number of burgers that a machine can produce given 24 hours per day, 365 days per year. Possibly considers different total working hours or utilization rates for the machine but doesn’t expand on this thinking or rationalize assumptions made The excellent candidate contemplates the proportion of people in urban centers likely to be the target for fast food sales, uses western benchmarks, adjusted for Chinese society and comes up with an estimate. Next, the candidate uses 90,000 burgers per hour but quizzes interviewer on number of hours worked per day. Pursues debate on how many hours you would work per day (see next question) conclude and then calculate capacity. Raises issues on utilization rate given potential mechanical downtime, impact of geographic dispersion and other, and second order effects.
Burger machines – page 1
extra cost of getting people to work overtime. there is an expectation that the candidate will be able to calculate the numbers correctly. except if new regions are being developed. and problems of trying to operate machinery 24 hours / day. The excellent candidate identifies that a critical trade off is extra labour cost associated with operating a night shift versus extra capital cost of having to buy more machines if working less hours. who have managed to get through the case quickly. In all of these calculations and discussions.Subissue: machine utitilization Third question: how many hours a day would you operate the machines: What are the potential operating models and what will influence which of these you choose? The good candidate considers 24 hour a day operation versus 8 / 12 / 16 hour operation with key considerations being ability to find staff to work all night. The key impact of this will be enhanced investment in R&D Burger machines – page 2 . Consequently technological improvements and changes in the manufacturing processes possible with the machines will drive new purchases. This does not mean that if you make a mistake you have failed. There is also an expectation that where you are forced to make estimates they are vaguely sensible – assuming that all Chinese people eat 1 burger per day is just clearly not very realistic! Conclusion The final task in the market sizing question is to calculate the total number of machines required and multiply through by the value of each machine – it is always surprising to see how many applicants forget what the original question was and stop at the number of machines. and what the likely drivers of the US market are. and what impact would this have on your domestic strategy? The excellent candidate is very unlikely to get all of the items below but should be able to generate some interesting and non-obvious issues for discussion). like: Growth in basic demand zero. we then go on to contemplate the size of this market in relation to the US market. using a calculator. but that you can identify when you have made mistakes (execute that all important sanity check) and ultimately arrive at a sensible and correct answer. rationalizes working 24 hours given likely cost of local labour versus high capital cost of (Western manufactured) machinery. Market will be largely driven by replacement of old machines (interesting to reflect how this will be impacted by economic cycle) … … or by market innovation. Additional question Fourth question: if the US fast food market is not growing. In the majority of cases the interview will finish at this stage – both interviewer and interviewee being generally exhausted and out of time. what will be the key drivers of burger machine sales. so sales of machines are unlikely to be driven by capacity expansion. For exceptional candidates.
which was a fast growing business in an emerging market about 10 years ago and had experienced tremendous success – an annual growth of over 30%. offering sponsorships on events and volume rebates in return for exclusive or preferential sales on-premise. but considering also the life-cycle and upgrade path for consumers as well as the aging of brand image The client has been using the same advertising campaign for 5 years and has not been able to come up with new concepts – Aging brand image impairs ability to recruit new consumers as well as keeping existing consumers – Lack of aspiration for consumers to up-trade to more premium SKUs Category life cycle is short as consumers tend to go less to bars/discos as they age and the first batch of recruits are leaving the market at this moment Second question: What is driving profitability down? The Good Answer: one needs to understand the forces in the market that affects the bottom line of luxury consumer goods Competition has driven prices down (or limited room for price increase) and has limited the margin growth Competition has driven up costs in trade marketing costs as outlet owners have more bargaining power to choose which manufacturers to partner with and demand more sponsorships and rebates Imported goods are subject to currency fluctuations Imported spirits – page 1 . the next objective is to explore a range of strategic options for the company to rebuild its growth platform. Once that has been completed. Background The client was a first mover in promoting imported whisky in bars. The client penetrated the channel with whisky through aggressive marketing and partnering with top/key outlets in cities.IMPORTED WHISKY IN AN EMERGING MARKET – BUSINESS STRATEGY Introduction This case involves a real life consulting assignment with a manufacturer and distributor of whisky. which is peaking as the number of bars and discos are no longer increasing – The category has reached a high share of throat in the channel and is unlikely to grow by increasing penetration Competitors saw the opportunity and started to invest following the client’s success – Competition has eroded some share from our client The Excellent Answer: all of the above. i. discos and karaoke clubs. The key task is to describe and understand the reasons for the recent slow down and fall in profitability. The growth has slowed down in the past few years to about 10% per year and profit margin is also declining. there will be no numbers. Solving the case First question: What information would you require to help explain the slowing down of growth? The Good Answer: one needs to understand what has been driving the slow down of the business.e. This is a typical “conceptual” case. You would need to consider the market and competitive environment for whisky. The tremendous growth the client experienced was driven by the growth of the bar/disco channel. only problem Identification and idea generation will be tested.
smaller and weaker outlets (with lower return on investment) began to partner with the client as competitors were also aggressively seeking outlets. but consider also the profit per outlet aspect As the business expanded. making price competition irrelevant Seek opportunities in rural areas and invest strategically to capture less competitive markets Explore new channels such as in-home or restaurant consumption to catch consumers who leave the bar/disco channel Innovate to improve on delivery and create competitive advantage Improvements in outlet selection Additional Discussion Creative / resourceful candidates may discuss one or two: Counterfeit eroding sales and hurting brand equity in emerging markets The company can invent Innovative ways like new drinking rituals to increase consumption (drink more per occasion) Imported spirits – page 2 .The Excellent Answer: all of the above. driving down the overall return Third question: What are the potential strategic options? Here are options that can be explored: Revitalize brand with new campaign to improve competitiveness Premiumize the market (given revitalized image) and encourage consumers to up-trade to higher value products (better margin and higher turnover without increasing volume consumption).
Leisure clubs – page 1 . etc. increases in popularity of sports not offered at health clubs may have a negative effect (e. As part of a broader strategy review. assessing the market for Leisure Clubs as part of a strategy review for a major UK hotel chain. One is that people are getting more obese because they are not exercising (i. Trends in obesity – if the population is getting more obese. swimming pool. The health clubs are large out-of-town sports centers offering a gym. or maybe acquire another player? Your specific task on this case is to look at the market trends and assess competition in the leisure clubs industry. because people who buy Slim Fast are the type of people who would use leisure clubs”. demand for leisure clubs is likely to decline The Excellent Answer will name most of the above factors. “sales of Slim Fast would be a good indicator of what has been happening to demand for leisure clubs. with some (prompted) discussion of the associated issues: Trends in society towards more or less participation in sport – Whilst more participation in sport generally may be positive for demand.g. if the population as a whole is getting older. Trends in available leisure time and money. they are likely to use health clubs more. there are two possible implications of this. alongside hotels and casinos (which are not the focus of this case). often it is at this point in the case study where excellent candidates differentiate themselves. They are relatively expensive. Demand for leisure clubs The first key question is – what factors might you analyse to determine what is going to happen to demand for leisure clubs? (In consulting terminology. Jacuzzi. The alternative interpretation is that an increasingly obese population will create demand for facilities to exercise more. Demographics – Younger people are more likely to be members of gyms. If people have more spare time. we are looking at the ‘drivers’ of demand in the industry) The Good Answer will name some of the following factors. This is typical of a ‘data interpretation’ case study that you may be asked to attempt – requiring analysis of data presented to you. with more explanation of why they are important. Case Background Our client runs a major chain of health clubs in the UK. and may include other sensible suggestions e. An excellent candidate will also be able to defend sensible answers when questioned or pushed on why a particular factor is important. people may play football instead of going to the gym).LEISURE CLUBS – DATA INTERPRETATION Introduction This is a case study based on a real case that OC&C worked on in 2007. alongside some creative and logical thinking.g. for which demand will decline if there is a recession. rapidly build more clubs (if so. Therefore. National income / state of the economy – leisure clubs are likely to be a luxury good.e. about £30-40 per month for an individual membership. the client wants to know what they should do with their leisure clubs division – should they sell it. what sort). declining demand for leisure clubs).
the other three charts would not provide useful information but serve as ‘distraction’) for interpretation by the interviewee. Leisure clubs – page 2 .Interpretation of data – demand factors The interviewer would then present five charts (including the two charts below. This means that demand for leisure clubs will increase. from the first chart it is not clear whether people are becoming more obese because they are not exercising enough (which would indicate declining demand for leisure clubs). The Times Exhibit 2: Percentage of UK people who would exercise more regularly if they wished to lose weight Income group AB C1 C2 D E Total Source: Mintel Percentage 71% 69% 68% 59% 38% 63% Second question: what is likely to happen to demand for leisure clubs? The good answer: “The charts clearly show that obesity has increased rapidly over the past two decades. you can see that most people are likely to exercise more if they wished to lose weight. If I combine the two charts. who would be asked to explain what the data showed. we can say that an increasingly obese population will create increased demand for leisure clubs”. however. Exhibit 1: Obesity in the UK Proportion of UK population classified as obese – 1980-2015E % 35% Percentage of population 30% 25% 20% 15% 10% 5% 0% 1970 1980 1990 2000 2010 2020 Source: Department of health. and this trend is forecast to continue. or whether an increasingly obese population will exercise more and hence create increased demand. and this trend is forecast to continue into the future. as people will have an increasing need to exercise. and what that meant for the demand for leisure clubs. and this is particularly true of wealthy people (who are likely to be our target customer anyway). On the assumption that most obese people want to lose weight. However.” The excellent answer: “The first chart shows that obesity has increased historically.
and will elaborate more on each. and thus be protected from potential pressure to lower prices. etc. female-only.e.” Leisure clubs – page 3 . In this situation. Applying our segmentation to the 350 clubs. prefamily (~20-30 year olds). however. even though in later years there may be excess supply at a national level. as supply grows faster than demand. fitness fanatics. The excellent candidate would say: “The important question is whether supply in 2010 is greater than demand (i. the candidate should come to the conclusion that demand for leisure clubs is likely to be strong for the next few years.g. since clubs differ based upon price. with maybe some others (e. and considered where we should build our new clubs. whereas in town clubs are likely to appeal because they are ‘convenient’ (e. Council-run gyms costing £2 per visit). which may make the business unprofitable.g. sports offered). but so is supply. So we started to think about the geographical dimension.g. Because you have built your club first. we need to understand what differentiates leisure clubs? (This may be phrased in consulting jargon as “How might we think about segmenting the leisure club market?”) The good candidate will point to some of the following: Price – the type of customer who uses a premium club (£50 per month) is unlikely to switch to a budget club (e.Interpretation of data – market outlook Having seen the data. family-oriented.g. premium price. not all of the 500 clubs will compete with our client – we need to differentiate between different club types. you will insulate yourself from competition. you will have local monopolies.e. because they will see that there are not enough ‘available’ customers for their club to be profitable. He will then be shown a chart showing the competitors’ plans for building clubs.” Market Segmentation Fourth question – In order to better understand the competition. there are more spaces available in leisure clubs than can be filled by people wanting to visit clubs). which only had populations large enough to sustain one leisure club. Hence. to office workers). we recommended that our client build its clubs in smaller towns. Conclusion (This phase will probably only be reached by excellent candidates) So we know that demand for leisure clubs is growing. Why do you think this was? The excellent candidate: “By placing your club in the smaller towns. they will not build in that town. and they know it would be difficult to attract customers away from your club. Customer Group – different clubs are designed to attract different types of customer e. The competition was planning to build in the large cities. Third question: what is the critical issue for our client? The good candidate would indicate that their market may become saturated. so clubs in London do not compete with clubs in Sheffield. When the competition considers where to build their next club. However. for example – In town / out of town – out of town clubs may be ‘destinations’ (primarily aimed at families. there is likely to be price competition. Location – Geographic – customers will only travel a limited distance to go to a club. similar target customers). target customer and location. we found that most of them do fall broadly into our segment (i. We know that not all of the 350 new clubs will compete with our clients’ business. demonstrating that the number of leisure clubs is forecast to rise from 150 today to 500 in 2010. for example). you will attract members who will then be loyal to your club. The excellent candidate will name all the above factors.
We also need to consider worries on counterfeit goods by Chinese consumers and the lack of trust between buyers and sellers online would require adjusting the online model from the West to fit the unique market situation in China. Market estimation methodology First question: how would you estimate the market for online high-end fashion? The good candidate explains that the market for online high-end fashion is driven by the size of the overall high-end fashion market. Good candidates will work through the logic piece by piece. government data or derive a Online fashion – page 1 .ONLINE LUXURY FASHION – MARKET SIZING Introduction This is a case study based on a real case that OC&C worked on in 2007. The excellent candidate does not just guess those numbers. OC&C have been approached to help them think about their online strategy in Asia Pacific.e. Next. the likelihood of internet users buying fashion online. whilst the excellent candidates will lay out methodology and information required upfront and then work through them systematically. how much do you think the market for online high-end fashion is worth? We provide you with some data points to work out the market size. surveys. Excellent candidates differentiate themselves by the quality of the answer. the internet penetration rate). The good candidate thinks about the internet penetration rate among high-end fashion shoppers in China (data point provided here that the overall internet penetration in China is around 12%) and estimates how many of them would shop online for fashion.e. but you also need to figure out what are the missing links and how to make reasonable estimates or assumptions on such missing information. Market estimation Second question: given that the addressable high-end fashion market for our client in China is €400 million. with particular focus on the business opportunities in China. This case study requires sound numerical skills. the ability to come up with some sensible estimates. Your specific task on this case is to scale the opportunity – i. and the share of their online spending as a percent of total spending on high-end fashion. but can justify where those numbers come from by drawing reference to statistics. sizing the potential of the online luxury fashion market in China. the number of internet users in China (i. The excellent candidate points out in addition to the above that we need to consider the impact of Chinese people buying high-end fashion abroad while they are travelling. Case Background Our client is a leading high-end fashion retailer in Asia. Finally multiply all these parameters with the addressable market size for our client to get the answer for the market for online high-end fashion in China. how big is the current market size of online luxury fashion in China and how many potential buyers currently exist in the market. the logic and methodology in estimating the parameters used in the calculation and some understanding of the China e-commerce market. estimate the share of online spending as a percent of total spending on fashion. some awareness of consumer behaviour and online knowledge. Fundamentally however we need to work out a ratio to split up the existing market into online and offline portion by making assumptions on the online purchase behaviour.
adjusted for the high-end segment of the population to come up with an estimate on internet penetration for high-end consumers. what are the points of differentiation our client need to build in order to succeed in the market? The excellent candidate is very unlikely to get all of the items below but should be able to generate some interesting and non-obvious issues for discussion. we then go on to contemplate what are the key value propositions that our client need to have to successfully establish an online business in China. when estimating the internet penetration rate among high-end fashion shoppers. counterfeit.rational approach for the estimation. delivery. but that you can identify when you have made mistakes (execute that all important sanity check) and ultimately arrive at a sensible and correct answer. low credit card penetration and usage. In all of these calculations and discussions. there is an expectation that the candidate will be able to calculate the numbers correctly. Sub-issue: key hurdles for online purchase Third question: What are the key hurdles for online purchase of high-end fashion in China? The good candidate considers obvious factors that counterfeit products. would affect the online shopping behaviour and create potential hurdles for online shopping. The candidate should also raise the issue on how the existing state of e-commerce infrastructure. Additional question Fourth question: If our client decided to enter the China market. The excellent candidate also identify more subtle issues such as young age profile of internet users. Online fashion – page 2 . For example. There is also an expectation that where you are forced to make estimates they are vaguely sensible! Conclusion The final task in the market sizing question is to calculate the number of potential buyers in China. who have managed to get through the case quickly. Provide special product selection. unique merchandise or latest products that customers cannot find elsewhere. For exceptional candidates. etc. Provide loyalty programme and superb customer service to increase repeated purchase. etc. In the majority of cases the interview will finish at this stage –both interviewer and interviewee being generally exhausted and out of time. such as magazines or internet websites for high-end consumers and leverage presence of physical stores to emphasize that it is a credible real business. Provide user generated content and community features in the website to enhance stickiness of the website. online security. Offer a risk free shopping environment to customers by providing free exchange and return. unreliable delivery system. etc. poor online payment system. uses urban statistics. an edited offer with unique brands. lack of credible or branded online retailers. the excellent candidate contemplates the proportion of people in urban centres likely to be the target for high-end fashion. like: Build a credible brand name by advertising on target media. not just a virtual store online. To estimate the number of potential buyers in China. This does not mean that if you make a mistake you have failed. credit card availability. such as online payment. lack of consumer protection. you need to come up with an estimate on the average purchase value per customer and divide the market size by that number.
you would need to consider the market and competitive environment for snowboarding equipment – in particular whether competitors were also suffering price pressure. Then we can investigate if we could reduce costs and prices to increase our sales.5% 2006 90 10 11. financial performance has changed as follows: Total business. in volume terms. Also. £m Revenue Profit Profit margin (%) Clothing. We will now turn our attentions to the boards division. and how much marketing we do compared to the competition. i. and extending our distribution to more shops.SNOWBOARDING – BUSINESS STRATEGY Introduction This case involves a consulting assignment with a producer of snowboarding equipment. price levels. but considering the performance of the board division and the clothing division separately. and how their price levels and quality compare to ours. at around 5% per annum. the objective is to develop a range of strategic options for the company. Solution: the key to a good understanding in this situation is to break down the problem into manageable chunks. At the top level. We also need to understand the level of marketing activity in the industry.2% Solving the case First question: What information would you require to help explain the change in profitability? The Good Answer: you need to understand what has been driving the cost increases in the business. Our volumes and price are static. £m Revenue Profit Profit margin (%) 2005 60 15 25% 2005 20 -5 -25% 2006 60 15 25% 2006 30 -5 -17% 2007 60 15 25% 2007 60 -10 -17% We can now see that the board division is relatively flat in revenue terms. with two distinct major product ranges: boards and clothes. clarity of thought and idea generation are more important than the detailed numbers. However. Background The initial task is to describe and understand the reasons for a recent fall in profitability. What additional information do we need and what sort of things could we do to improve our performance? The good answer will consider some or all of the following points: we need to know who the competitors are. If we consider the two divisions separately a much clearer picture emerges: Boards.e. is losing money. the clothes division. perhaps by looking at volumes vs. This is a typical “conceptual” case. despite growing rapidly. which will lead to a return to profit growth. The Excellent Answer: all of the above. Second question: What are the strategic options available for the boards division? The context given for this is as follows: The market for snowboards is growing slightly. but brings in constant profit. Snowboarding – page 1 . Our client is clearly not sharing in this growth.1% 2007 120 5 4. or by splitting fixed and variable costs. We would also consider doing more marketing. but prices are rising much more quickly. Once that has been completed. £m Revenue Profit Profit margin (%) 2005 80 10 12.
merchandise. although separate. What are the different types of board available – e. Third question: What can we do with the clothes division? The good answer will consider some or all of the following points – Why is the division not making money currently? What options do we have to manufacture more cheaply? Should we pull out of clothing manufacture? The excellent answer would also include that the business is growing quickly and that some of the costs may be temporary. but excellent candidates often discuss one or two: Potential for opening some owned shops. are intertwined. Additional Discussion Fourth question: what else could we consider doing with the business? It is unlikely that there is time to consider many of the following. reviews. Also. such as sponsoring professionals and / or tour events. top of the range versus standard? What makes customers choose a particular make of snowboard? Once we understand these issues. music etc Investigation of potential mergers and take-overs to improve competitive position Expansion into other product areas – e.The Excellent answer would also consider the need to understand how the market works in practice.g. that the two businesses. we can devise more appropriate strategies. surfing merchandise Outsource clothing production to another company and licence use of brand name Snowboarding – page 2 .g. and that the clothing business will benefit if the profile of the boards business is increased through funding of tour events etc. dedicated to retailing our own products E-business opportunities around snowboarding destination site – holidays.
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue reading from where you left off, or restart the preview.