Bain & Company: Case Interview

Introduction

Take notes Ask questions Structure your analysis

Drive towards a recommendation

Case Question: Entertain Me Music retailer: cassettes, CDs, and videos

Business Activities
Mail orderrecords and tapes Went public Expanded retail stores to 400 mall-based stores Recent focus on Internet Mail order channel was allowed to die

Issue: Declining revenue and margins

Structure your approach

Wrong: Always use the same framework regardless of the business issue Better:
Clarify the primary business issues Evaluate options
Explore broader issues to determine if channel segmentation is appropriate during analysis
Same product competing in overall market Channels may have cost advantages

Framework Cost of Goods Sold (COGS)

Multi-channel approach in order to increase volume and decrease unit costs

Sales, General & Administrative (SG&A)

Retail: sales people Mail Order: call centers Internet: promotions, ads, program development These channels may share general overhead, but it is important to explore points of differentiation:
Activities Customers Competitors

Competitors & Customers Online competition is highly fragmented

Mail Order: historically have focused on this channel; now moving online Retail stores: off-line consolidation; moving online Internet: Many Internet-only retailers

Customer demographics for various channels differ

Channels
Explore each channels revenue and margins individually

Retail: Adequate, consistent with industry standards

Mail Order: May have been a cash cow even if market growth was declining Internet: Drive profitable growth

Strategic Issues
Level of differentiation
Reputation Mall stores: easy returns, advice from entertainment associates

Metrics
Revenue
+10% in 1997 +2% in 1998 - 10% in 1999 compared to 50+% market growth

Cost Performance
Structure: How does this overall cost structure compare to the cost structure within each channel?
60% COGS 10% distribution SG&A up 5% over last 2 years

Revenue Analysis Decline in prices

Lack of differentiation
Easy product returns to mall stores Cross promotions to create loyalty effect Recommendation engines

Decline in volume
Customer demographics for various channels Key volume drivers
Visitors to the site Purchase frequency Average purchase volume Repeat purchases Compare to mail order channel and online competitors

Recommendation
Leverage assets across multiple channels Encourage existing mail order customer base to move online
Direct mail to build awareness of the site Communicate with customers to mitigate online security concerns

Cross channel promotions

Virtual coupons in direct mailer Long-term coupon plan to build repeat purchases Friends & family programs

Integrate offline assets

Easy returns at over 400 stores nationwide Professional advice from entertainment associates

Recommendation
Consider alternatives

Target new customers with trials and promotions Adjust product line to focus on niche market Strategic alternatives
Merger Divestiture