IIMA Casebook

Casebook IIN Ahmeuabau
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Consult Club IIN Ahmeuabau (2u1u) Page 2

TABLE 0F C0NTENTS

9:;3+<-=+>+<? @
CASE: TAXI BRIvER IN N0NBAI (BCu) S
CASE: CENENT PR0B0CER (BCu) 6
CASE: uL0BAL RETAIL BANK (NCKINSEY) 1u

AB!>+C+CD ,-:EB< FG-:B 8@
CASE: NIBBLE-EAST RETAIL BANK (NcKINSEY) 1S

CBH 9:;AI!< 8J
CASE: ANTI-SN0KINu PILLS (BCu) 16
Case: B0NBLINu APPLICATI0N S0FTWARE (BAIN) 19

,-:EB< BC<:? 66
CASE: RETAIL BANK IN INBIA (NcKINSEY) 22
CASE: BIAuN0STIC LAB0RAT0RY CBAIN (BAIN) 2S

D:;H<G F<:-<BD? 6K
CASE: B0ILER C0NPANY (NcKINSEY) 28

+CLBF<,BC<MA+LBF<,BC< @8
CASE: B0TEL IN ARNY CANT0NNENT (BCu) S1
CASE: C00RIER C0NPANY (BCu) S6

DIBFF<+,-<B @N
CASE: BP0 TALENT S0PPLY (BCu) S9

Consult Club IIN Ahmeuabau (2u1u) Page S

PR0FITABILITY
CASE: TAXI BRIvER IN N0NBAI (BCu)
A taxi uiivei in Numbai wants to inciease his ievenue anu piofits. The uiivei is the ownei
of the taxi anu opeiates uuiing the uay time. The uiivei staits his uay at the iailway station
anu woiks foi 1u-12 houis uaily.
!2$0 AO$P%$$O"#
!2#1O12'0: Bi. I woulu like to claiify a few things befoie I stait analyzing the case.
+#'04QO0R04S Suie.
!2#1O12'0: What is the cuiient state of the opeiations of the taxi uiivei. Bas theie been
any iecent change in faie policy. I am assuming that fuel, paiking fee anu maintenance to be
the majoi cost heaus. Is theie any othei cost that I am oveilooking.
+#'04QO0R04: Cuiiently, the taxi uiivei is able to eain enough to make enus meet but is keen
to inciease his income. The faie policy is state ueteimineu anu is unlikely to change in next
2-S yeais. Apait fiom the cost mentioneu by you, theie isn't any othei hiuuen cost.
!2#1O12'0: 0kay. Now since this issue involves incieasing income, I woulu tiy to look at
incieasing ievenues anu uecieasing costs. 0n the ievenue siue, is the taxi uiivei opeiating
on a fixeu ioute oi is he moving fiom point to point. The ieason I am asking this is if he is
opeiating at a single fixeu stanu, he might be ietuining empty to that stanu; on the othei
hanu, moving point to point woulu inciease his waiting time.
+#'04QO0R04: uoou that you biought it up. The uiivei has a spot at the iailway station which
is consiueieu a piofitable spot but often ietuins to the station empty as he uoesn't often
finu people tiaveling towaius the station.
!2#1O12'0: Bmm. Is the uiivei able to finu a customei easily at the station. Is theie a lean
phase.
+#'04QO0R04: Yes foi the fiist question. This is the ieason of the station being a piofitable
spot. The tiains iegulaily biing passengeis all uay long.

!2#1O12'0: So, to ieuuce coming back empty towaius the station, the uiivei shoulu focus on
ioutes with moie potential passengeis such as bus stanus. Be shoulu tiy to focus on
customeis going to bus stanu fiom the station anu vice veisa.
+#'04QO0R04: That's a faii suggestion but uo you think that it woulu make a significant
uiffeience to the ievenues of the uiivei.
!2#1O12'0: I think on the ievenues siue, we shoulu also tiy to exploie the options of
ievenue-shaiing of taxi-faie by letting some othei uiivei uiive the taxi in the night.
+#'04QO0R04: What woulu be potential issues with such a system.
!2#1O12'0: Fiist issue woulu be obviously finuing such a peison on whom the uiivei can
place the tiust. Revenue shaiing mouel anu accountability anu piopei maintenance woulu
be anothei issue which neeus to be lookeu into.
+#'04QO0R04: Is theie anything else to inciease the ievenues.
!2#1O12'0: The uiivei might offei auveitisement space on his taxi. Be can iely on
iefeiences by tying up infoimally with acauemic institutions, hotels anu such institutions.
+#'04QO0R04: What aie the othei options available to the uiivei.
!2#1O12'0: I woulu now focus on the cost siue of the opeiations. Is the taxi cuiiently
opeiateu on LPuCNu oi petioluiesel. If petiol, what aie the switching cost anu vaiiable
cost.
+#'04QO0R04: The taxi is cuiiently uiesel baseu. Switching to CNu woulu iequiie laige one
time investment but the funus can be aiiangeu by any public sectoi banks which aie
encouiaging such piactices. Also, it is cheapei to use CNu ovei uiesel.
!2#1O12'0: Anu is theie any negative effect of CNu on the peifoimance of cai.
+#'04QO0R04: Not significant.
!2#1O12'0: In that case, the uiivei shoulu switch to CNu. Also, he shoulu focus on piopei
maintenance of the vehicle as this woulu inciease fuel efficiency anu ieuuce loss of ievenue
uue to uowntime.
Consult Club IIN Ahmeuabau (2u1u) Page S

+#'04QO0R04: Can you come up with any iauical solution to inciease his income.
!2#1O12'0: The uiivei might colluue with othei taxi uiivei to iaise the piices. Be can
collaboiate with uiiveis fiom same locality, stanu oi hometown to uo this. The uiivei can
also ask gatekeepeis anu suppoit staffs of offices anu euucational institutes to call him in
case anyone wants a means of conveyance.
+#'04QO0R04: Sounus goou to me. I think we shall move to the next iounus now. Thanks foi
youi time.

PR0FITABILITY
CASE: CENENT PR0B0CER (BCu)
Theie is a majoi cement manufactuiing company which iecently has staiteu expeiiencing a
uecline in piofitability. They have hiieu you to ueteimine the cause of the same anu suggest
iemeuial measuies.
!2$0 AO$P%$$O"#S
!2#1O12'0S Since oui piofitability has ueclineu, I woulu like to analyze the situation fiom
two angles, whethei oui costs have incieaseu in a uispiopoitionate mannei oi have oui
ievenues uecieaseu in a uispiopoitionate mannei when compaieu to the inuustiy levels.
+#'04QO0R04S Fine.
!2#1O12'0S This follows fiom the fact that theie might be ceitain factois which have
uecieaseu oui selling piice oi any of oui significant cost uiiveis has expeiienceu a majoi
influence by some exteinal factoi.
+#'04QO0R04S That seems a goou enough basis.
!2#1O12'0S To stait with the pioblem I woulu fiist like to analyze oui ievenues. Bas oui
selling piice uecieaseu in the iecent past.
+#'04QO0R04S No, in fact we have in fact tiieu to inciease oui piice to offset this loss in
piofitability.
!2#1O12'0S Since ievenue = piice*volume anu foi piofitability volume uoes not play a iole, I
assume that the ievenue siue of oui balance sheet is fine.
+#'04QO0R04S Quite iight, in auuition to that oui volumes have actually incieaseu ovei the
past six months.
!2#1O12'0S So, I believe it woulu be faii to assume that oui piofits might have incieaseu but
only oui piofitability has uecieaseu.
+#'04QO0R04S Yes.

!2#1O12'0S Tiying to analyze the cost siue of the pioblem, I woulu like to analyze the value
chain to ueteimine the vaiious cost uiiveis.
+#'04QO0R04S Yes.
!2#1O12'0S 0ui key uiiveis I believe woulu be
1. Raw Nateiials
2. Nanufactuiing
S. Stoiage
4. Sales anu Bistiibution
S. Naiketing anu Auministiative Expenses
Aie we missing out on any ielevant cost uiivei.
+#'04QO0R04S That seems a faiily compiehensive list, caiiy on.
!2#1O12'0S Staiting with the iaw mateiials, I am peisonally familiai with the cement
inuustiy. I woulu like to analyze what aie the ielevant iaw mateiials anu figuie out any
changes in the costs of the same with iespect to any uata we might have.
+#'04QO0R04S The iaw mateiial is basically limestone which has not expeiienceu any majoi
upheavals. In fact the same can be saiu about oui manufactuiing piocess.
!2#1O12'0S Assuming that theie aie no issues with the iaw mateiials oi the manufactuiing
piocess, I woulu like to analyze the uistiibution costs. Bave they expeiienceu any change.
+#'04QO0R04S Coming to think of it. Yes, oui uistiibution costs have incieaseu in a significant
mannei.
!2#1O12'0S Anu have we been able to finu the ielevant cause foi the same.
+#'04QO0R04S No, that is why we have you heie.

!2#1O12'0S With the inciease in volume, one woulu expect the uistiibution costs to be less
uue to economies of scale. Bowevei as this is not the case, I woulu like to analyze the
uistiibution system. What is the mouel we aie following.
+#'04QO0R04S In the cement inuustiy, cement is supplieu fiom the factoiies to the ielevant
centeis which take caie of fuithei uistiibution themselves. We ieceive an oiuei fiom one of
these centeis anu map it to the neaiest facility, if it is able to supply it, then it is goou, else
we move on to the next closest factoiy anu so on
!2#1O12'0S Is the cost of supplying fiom any one factoiy to any othei centei constant.
+#'04QO0R04S No. It uepenus on the uistance anu quality of ioaus. The petiol piices haven't
changeu that much ovei the past yeai.
!2#1O12'0S It seems that with the incieasing uemanu we aie not able to supply the cement
centeis in the most cost effective mannei.
+#'04QO0R04S Tiue, we almost have to enu up at oui thiiu oi fouith choice plants as the fiist
two aie invaiiably iunning to capacity.
!2#1O12'0S So it is cleai that oui plants uue to theii capacity aie not able to satisfy theii
local uemanus in a cost effective mannei.
+#'04QO0R04S That's goou. So what uo you suggest, we shoulu uo.
!2#1O12'0S I woulu suggest setting up moie plants oi ienovating the plants to inciease
capacity.
+#'04QO0R04S 0ui client uoes not want to incui any capital expenuituie
!2#1O12'0S We coulu inciease oui selling piice to ietain the necessaiy maigins.
+#'04QO0R04S That woulu not be possible; it's quite a competitive inuustiy.
!2#1O12'0S We coulu tiy to allocate centeis to factoiies baseu on the most effective
combination to minimize costs.
+#'04QO0R04S That seems a feasible option. Bow woulu you uo it.

!2#1O12'0S Let us assume theie aie two Centeis, 1 anu 2 anu two factoiies 'a' anu 'b'. We
will tiy to minimize
C1a + C2a + C1b + C2b baseu on the uemanu anu supply constiaints of each centei anu factoiy.
'C' heie stanus foi the cost incuiieu in the specific tiansit.
+#'04QO0R04S veiy goou. Anything else you might want to auu.
!2#1O12'0S This optimization basis is a shoit-teim solution only. The oiganization shoulu
caiiy out a piopei foiecast foi the futuie uemanu anu if it finus it favoiable, it shoulu go foi
capital expenuituie in auuition to these shoit teim measuies.
+#'04QO0R04S That seems a pietty goou analysis. So can you just summaiize the case foi me.
!2#1O12'0S 0ui client is a majoi cement manufactuiei. 0f late, inspite of inciease in piofits,
it has been expeiiencing a uecline in piofitability. The ieasons weie foi the same weie
founu out to be the unfavoiable costs incuiieu while supplying the piouucts to the ielevant
centeis. A shoit teim measuie foi the same was to optimize the costs incuiieu by matching
the factoiy anu centei in a most cost effective mannei. A long-teim solution woulu involve
uoing the cost-benefit analysis of a possible expansion anu using the same to expanu
capacity at ielevant plants.
+#'04QO0R04S Thanks. We have hau a goou uiscussion.

Consult Club IIN Ahmeuabau (2u1u) Page 1u

PR0FITABILITY
CASE: uL0BAL RETAIL BANK (NCKINSEY)
A global ietail bank is in the piocess of expansion. Bowevei it is facing ueclining piofits. The
CE0 wants you to analyze the issue anu auvise what the bank shoulu uo.
!2$0 AO$P%$$O"#
!2#1O12'0: Bi. I woulu like to claiify a few things befoie I stait analyzing the case.
+#'04QO0R04S Suie.
!2#1O12'0: Can I assume that the global ietail bank is opeiating in Inuia wheie it is facing
the afoiesaiu issues.
+#'04QO0R04: Yes. You can assume Inuia.
!2#1O12'0S I follow that the bank is in the piocess of expansion. Bave the ievenues of the
bank also been uecieasing.
+#'04QO0R04S The ievenues have been incieasing but the piofits have been ueclining.
!2#1O12'0: What is the state of banking inuustiy when this is taking place, noimal oi is it
changing. Is the inuustiy facing some issues.
+#'04QO0R04: You can assume that it is same as befoie.
!2#1O12'0: 0k. Is it fine if I analyze the ievenue fiist anu then the costs.
+#'04QO0R04: Fine, go aheau.
!2#1O12'0: Retail banks have thiee piinciple souices of ievenue - net inteiest income (the
value of the balances), uebit caiu inteichange, anu fees that the bank chaiges on vaiious
seivices. I am assuming that the majoi souice of ievenue is loans.
+#'04QO0R04: Fine. I woulu like you to look at loans.

!2#1O12'0: A bank geneiates a piofit fiom the uiffeiential between the level of inteiest it
pays foi ueposits anu othei souices of funus, anu the level of inteiest it chaiges in its
lenuing activities. Piofitability fiom lenuing activities has been uepenuent on the neeus anu
stiengths of loan customeis. Aie theie any changes in the loan stiuctuie oi the type of
customeis to whom loans aie given out. Is the bank giving loans to high cieuit iating
customeis oi customeis with low cieuit iating.
+#'04QO0R04: The bank has been giving out moie loans to the low income customeis.
!2#1O12'0: uiving out moie loans to low income customeis might have incieaseu the bau
uebts. Bas this been the case.
+#'04QO0R04: Yes, these customeis uo have a highei peicentage of not paying back.
!2#1O12'0: Now let's look at the cost stiuctuie. Theie aie fixeu chaiges as well as vaiiable
chaiges. The fixeu chaiges will moie oi less be constant while the vaiiable costs might be
incieasing.
+#'04QO0R04: uo on.
!2#1O12'0: With the incieasing numbei of low income oi customeis with pooi cieuit iating,
theie aie incieasing chaiges as vaiiable costs will inciease. Noieovei with the high
peicentage of bau uebts, the bank is also facing non iepayment of loans. This is leauing to
ueclining piofits.
+#'04QO0R04: uoou. Now let's go in some numbeis.
!2#1O12'0: Suie.
+#'04QO0R04: Suppose the bank is cuiiently giving loans to 1u million customeis anu
chaiging inteiest at the iate of 1u %. Calculate the piofit of the bank fiom loans. The
peicentage of bau uebt fiom high income anu low income customeis is 2% anu 4%
iespectively.
!2#1O12'0: Can I assume that the numbei of high income customeis anu low income
customeis is equal, i.e. S million each.
+#'04QO0R04: 0k.

!2#1O12'0: I am assuming that the aveiage loan amount given to the high income anu the
low income customeis is Rs. 1uuuu anu Rs. 2uuu iespectively.
Bigh Income customeis Low Income customeis
Inteiest ieceiveu 1uuuu X .1=1uuu 2uuu X .1=2uu
Inteiest foi all customeis Suuu million 1uuu million
Costs
Fixeu costs (assume) 1uu million 1uu million
vaiiable costs Suu million Suu million
Bau uebts 1uuu million 4uu million
Piofit befoie tax S4uu million u
+#'04QO0R04: uoou
!2#1O12'0: Accoiuing to the assumeu figuies, the bank is not making any piofit on the loans
cieuiteu to low income customeis. Noieovei theie will be extia chaiges as well as we have
accounteu foi only minimal heaus.
+#'04QO0R04: So what woulu you suggest to the bank.
!2#1O12'0: The bank, in tiying to expanu, is lenuing to the low income customeis
iiiationally. The bank has to focus moie on the high income customeis. It woulu ieap moie
inteiest anu lessei vaiiable costs. The bank coulu inciease its minimum loan amount to
filtei low cieuit iating customeis. The collection mechanism in the bank shoulu be
impioveu to ieuuce the bau uebts.
+#'04QO0R04: Sounus goou to me. We shall move to the next iounus now. Thanks foi youi
time.
Consult Club IIN Ahmeuabau (2u1u) Page 1S

BECLININu NARKET SBARE
CASE: NIBBLE EAST RETAIL BANK (NCKINSEY)
A well-known local ietail bank in the Niuule East is losing maiket shaie in a giowing
maiket. Its technology anu seivice levels aie just as goou as any of its foieign competitois.
The CE0 wants to know why this is happening anu what else they can uo.
!2$0 AO$P%$$O"#
!2#1O12'0S Fiistly, I'u like to know what is the metiic to uefine maiket shaie - Is it in teims
of numbei of customeis oi in teims of the net ueposits loans.
+#'04QO0R04: Both, actually. It is losing maiket shaie on both these counts.
!2#1O12'0S uiven this scenaiio, I'm assuming that customeis aie not choosing this bank anu
aie opting foi the foieign banks insteau. Is that a faii assumption to make.
+#'04QO0R04S Yes, you can pioceeu with that assumption.
!2#1O12'0S In my unueistanuing, theie aie about S factois that can affect the customei's
choice of bank. They aie:
Seivice: Is theie any specific seivice which the customeis aie seeking but is not
pioviueu by this bank. Is the client's seivices basket offeieu any uiffeient fiom
those of its foieign competitois.
Cost: Is the cost of seivicing foi the client any uiffeient vis--vis its competitois.
Quality: is the seivice level, quality, customei caie, etc. pioviueu by the client
infeiioi in any way to the competitois.
Convenience: This coulu iefei to uiffeience in teims of location of bianches, bank
woiking houis, etc.
Peiception: Is theie something about the bank's image oi bianu which cieates a
negative peiception in the customei minuset.
We alieauy know that the bank has goou seivice levels, so let's consiuei the othei 4
paiameteis.

+#'04QO0R04S The seivices pioviueu aie the same as the othei banks, no special piouuct oi
seivice. Its seivicing chaiges aie also the same as othei banks. In teims of convenience, it is
locateu in the same locations as othei banks anu is also equally convenient. What uo you
mean by peiception.
!2#1O12'0S By peiception, I mean what customeis think of this bank anu the image they
associate with its name. Foi instance, foiemost, banks neeu to be tiustwoithy, anu uo
customeis peiceive the client bank as such.
+#'04QO0R04S Let's fiist talk about the customeis. What kinu of customeis aie we talking
about.
!2#1O12'0S The bank coulu have both inuiviuuals anu businesses as theii customeis. These
customeis coulu be fuithei segmenteu on age, income oi seivices useu.
+#'04QO0R04S Let's stick to inuiviuual customei foi the time being. Besiues the paiameteis
you just mentioneu, how else coulu we segment them. Tiy to think aiounu the people mix
you'u finu in Bubai.
!2#1O12'0S Yes, consiueiing that moie than half the population in the Niuule East is expats,
these customeis can fuithei be segmenteu on theii countiy of oiigin. Is that iight.
+#'04QO0R04S Yes.
!2#1O12'0S Consiueiing this methou of customei segmentation, is the client losing maiket
shaie specifically in one of these segments.
+#'04QO0R04S Inueeu, the client is losing business mainly amongst the expat population.
Why uo you think it is so.
!2#1O12'0S Can I take Su seconus to ieview my thoughts.
!2#1O12'0S (Aftei the bieak) Aie the expats mostly heie foi a shoit while. 0i, uiu they
giow up in the Niuule Ease itself.
Inteiviewei: They aie heie foi a typical peiiou of S - 1u yeais anu most of the customeis in
this categoiy uiu not giow up in the Niuule East.

!2#1O12'0S Theie aie thiee things that coulu explain the low maiket shaie among expats:
Peiception: Expats may not know the local banking bianus well anu hence may not
consiuei them tiustwoithy. They may have a uiffeient peiception than the locals.
Inteinational Connectivity: Anothei majoi iequiiement of expats is the ease of
senuing money back home. It's possible that customeis choose banks which
facilitate this moie easily.
Bome Banks: Nany expats may alieauy have existing accounts anu ielations with
theii iespective uomestic countiy banks anu thus woulu piefei to continue banking
with the same bank anu avoiu switching ovei to a local bank
+#'04QO0R04S Let's look at the "peiception" paiametei moie closely. What aie some of the
piimaiy factois that influence peiception.
!2#1O12'0S Thiee woulu be thiee impoitant factois affecting peiception:
Name Logo Coloui
Auveitisements, maiketing messages
Woiu of mouth
+#'04QO0R04S uieat! That was a ieal-life case situation I was once involveu in. The name of
the bank was in Aiabic so expats coulu not associate with it well. Thus, we askeu them to
iebianu themselves. Besiues iebianuing, what else can the bank uo.
!2#1O12'0S The client coulu tie-up with othei oiganizations that hiie expats. These
oiganizations aie usually the fiist point of contact foi the expats in a foieign countiy anu
thus coulu significantly influence them. The client coulu also intiouuce easiei ways foi the
expat customeis to tiansfei money to theii uomestic countiies.

NEW PR0B0CT
CASE: ANTI-SN0KINu PILLS (BCu)
Youi client is in the business of making anti smoking pills - the way we have those patches
anu lozenges in the maiket to cuib the uige to smoke. The client wants to sell it at a
piemium piice.
You have been hiieu to finu out if the piouuct can be intiouuceu in a countiy like Inuia - anu
if so - what is the expecteu taiget maiket, maiket shaie anu a feasible piice at which the
uiug shoulu be solu.
!2$0 AO$P%$$O"#
!2#1O12'0: Since this is a new piouuct launch, I woulu like to stiuctuie my uiscussion
aiounu the piouuct chaiacteiistics (uevelopment anu customization) foi the Inuian maiket
anu then move on to the launch (competition, uistiibution anu piomotion) pait of the case.
+#'04QO0R04: This sounus fine to me. Also, please note that this piouuct is not entiiely new;
it has been intiouuceu in othei countiies alieauy.
!2#1O12'0: 0k, that expeiience shoulu uefinitely help us. To stait with, can you tell me
something moie about the piouuct. Bow is it uiffeient.
+#'04QO0R04: 0nlike the lozenges oi patches, this piouuct is completely nicotine fiee - it is S
times moie effective as pioveu by lab iesults anu Su% of the test iesults iesponueu to the
pill (which in this inuustiy is an extiemely high numbei thus inuicating success).
Noieovei, it is a uiug that cannot be solu ovei the countei - it iequiies a piesciibeu uosage
given by the uoctoi. It is to be taken foi S months uaily, S times a uay.
!2#1O12'0: That is goou. It gives us the auvantage to position oui piouuct as supeiioi uue
to the highei efficacy of tieatment. I woulu like to know take up the competitive scenaiio
next so that we can ueciue the piice befoie ueteimining the oveiall maiket size.
+#'04QO0R04: That's a faii point. So, theie is no similai piouuct in the maiket. Cheapei
piouucts like lozenges exist but they contain nicotine anu sell foi Re. 1 pei unit.

!2#1O12'0: Theie aie two ways that we can piice a new piouuct in a non-competitive
maiket: Cost baseu anu 'willingness-to-pay' baseu. In the fiist, I woulu calculate the cost to
company anu chaige a maigin on the same while in the seconu case; I woulu calculate the
piopensity of the consumei to pay foi this uiug. This woulu vaiy with my taiget segment
chosen. The cuive woulu look something like this. Iueally, we shoulu be able to calculate the
optimal piofit case by consiueiing the tiaue-off in sales volume vs. piice foi vaiious piice
points. The solution will also be influenceu to an extent by the giowth iates of the uiffeient
taiget segments oveiall, say movement of people to uppei-class fiom lowei-miuule class.

+#'04QO0R04: Bmm. that is goou. In oui case, let us assume we uiu this anu came up with
Rs. 8 pei unit. You think that sounus ieasonable.
!2#1O12'0: I think a piice of Rs. 8 pei pill is feasible because of the lab iesults - people will
be convinceu that it is a meuically piesciibeu uiug anu since it is a pie-scheuuleu uosage foi
S months, iesults aie guaianteeu. We can also stiess on the on nicotine bit anu inuiiectly
position this as a life saving uiug.
+#'04QO0R: 0k, let's estimate the maiket size assuming we ueciue to piice it at Rs. S pei unit.
!2#1O12'0: Let's take Belhi as a base case. Population: 1Su lakhs. Taiget segment: 4u% of
them smoke * 2u% of them woulu want to quit smoking * 7S% can affoiu (Rs. 8 * S * 9u =
Rs. 216u uiug to quit) = 9 lakh people oi INR 9 * 216u ~ INR 2uu cioies.
We can now assume that this uiug will ieach out to 2S% of the population acioss Inuia
(uiban + iuial since its effective anu one-time payment to quit smoking), which means the
total maiket is 2uu1Su * u.2S * 1u,uuu lakh = INR S,SSS cioies.

+#'04QO0R04: veiy inteiesting. What will uiive the maiket giowth oui maiket shaie.
!2#1O12'0: The maiket giowth iate will be affecteu by the sales anu uistiibution coveiage,
willingness of people to quit smoking anu auuition of new smokeis who woulu want to quit
aftei sometime. We can look to captuie about 8u% of this maiket eventually, assuming no
majoi competitoi enteis the maiket, which can be pieventeu by IPR suppoit.
Since this is a piesciiption uiug, the bulk of the piomotion costs in this inuustiy aie in
taigeting the uoctois anu chemists via uiiect sales agents oi Neuical Repiesentative to
convey the pios anu cons foi them to a) piesciibe the uiug anu b) keep it in theii
phaimacies. This will uiive oui maiket shaie fiom the potential maiket size.
+#'04QO0R04: uoou. Any othei costsconceins that you woulu like to auuiess.
!2#1O12'0: The tiaining costs foi the uiiect sales agents will also be ciitical as this is a new
piouuct anu local agents woulu neeu an in-uepth unueistanuing of the piouuct. No. of sales
people can be calculateu by total woikloau methou: Assuming BoctoiPopulation iatio anu
say S uoctois pei uay anu iepeat visits eveiy 2 months; anu ChemistPopulation iatio anu S
chemists pei uay anu iepeat visits eveiy 1S uays.
The supply chain will have to be consiueieu - the waiehousing, uistiibution netwoik, ietail
chains etc. We can peifoim the cost benefit analysis foi using miuule uistiibutois vs uiiect
uistiibution.
+#'04QO0R04: uoou, I think we have coveieu the uiffeient aspects of the case. Thank You.

NEW PR0B0CT
CASE: APPLICATI0N S0FTWARE ANB B0NBLINu (BAIN)
This softwaie manufactuiei offeis shiink-wiappeu softwaie application piouucts anu has
giown ovei the last few yeais - mainly thiough multiple acquisitions. In the iecent time
theie stock piice has ueclineu significantly. The sales have ueclineu but theii customei
seivice uepaitment has shown impiessive giowth in ievenues ovei the last few months.
The CE0 has an offei fiom 0ENs (0iiginal Equipment Nanufactuieis) to bunule his piouuct
with theii piouucts anu he's unable to ueciue what to uo. Belp him analyze the situation anu
chaitei the path aheau.
!2$0 AO$P%$$O"#
!2#1O12'0: Befoie I begin analyzing the case, I woulu like to claiify a few aspects of the
case.
+#'04QO0R04: Suie, go aheau.
!2#1O12'0: You mentioneu that the sales have ueclineu iecently but the customei seivice
ievenues have shown significant giowth. Bow significant has the uecline in sales been.
Also, uoes the company have othei souices of ievenue besiues piouuct sales anu customei
seivice.
+#'04QO0R04: The sales have not ueclineu much but they have been stagnant amiust a
giowing sectoi. Customei seivice ievenues have been incieasing steauily ovei the last yeai
oi so, though. These aie the only two souices of ievenue foi the company.
!2#1O12'0: I see. I woulu also like to unueistanu the type of offei that 0ENs have maue.
What is the ievenue shaiing mouel going to be.
+#'04QO0R04: The 0ENs aie uesktop anu laptop computei manufactuieis who aie offeiing a
pie-installation of tiial veisions of the company's softwaie on some of theii piouuct lines. In
ietuin, the company will have to pay a fixeu fee to the 0EN foi eveiy new pie-installeu

computei solu anu a 2u% commission foi eveiy usei who moves fiom the tiial veision anu
puichases a full veision of the softwaie.
!2#1O12'0: I unueistanu. So, it appeais to me that the 0ENs' pioposal can help us expanu
oui sales volume, though at lowei maigins. I am not suie whethei this auuiesses the coie
issue that we aie facing, so I'u like to analyze the cuiient piofitability situation of the
company. As you mention, the customei seivice ievenues have been iising. Bo we have
some uata on the types of customei seivice inciuents that aie commonly seen heie.
+#'04QO0R04: I uo not have specific numbeis on customei seivice iequests. Bowevei, I can
tell you that a majoi categoiy of seivice iequests aie aiounu softwaie configuiation issues.
Sometimes the company's softwaie applications pioviue multiple ways to accomplish the
same goals. A significant numbei of calleis seek help on how to navigate uiffeient softwaie.
!2#1O12'0: I see. 0ne of the objectives of softwaie uesign is to keep it simple anu intuitive
with in-built easy-to-use help. It appeais to me that the company's piouucts coulu impiove
on this uimension. I suspect that some of this is the iesult of integiating technology fiom
aggiessive acquisitions that we have maue in iecent yeais. I see bioauly thiee ways to
integiate acquisitions. Fiist, the company can simply auu an acquiieu piouuct as a new
stanualone offeiing in its piouuct poitfolio. Seconu, the new technology fiom acquiieu
companies coulu be utilizeu to auu new featuies to the existing piouucts of the company.
Thiiu, existing piouucts of the company coulu be ieplaceu by supeiioi acquiieu piouucts.
What appioach has this company taken in integiation.
+#'04QO0R04: That's a goou way to think about it. In this case, the company has piimaiily
followeu the fiist two appioaches. Theie has been both a poitfolio expansion as well as
piouuct enhancements.
!2#1O12'0: I suspect that the iising customei seivice ievenues actually point to pooi
integiation of the acquisitions. Theie aie two sepaiate aspects to a successful integiation.
Fiist, the piouuct poitfolio has to be iationalizeu at a technical level. If the company offeis
multiple offeis to accomplish the same goal, it tenus to be confusing foi the customei.
Similaily, piouucts neeu to have a consistent look anu feel so that it is easy foi customeis to
navigate anu configuie vaiious featuies. Seconu, the sales anu maiketing team neeus to be

well tiaineu about the company's evolving piouuct poitfolio. They shoulu be able to help
customeis make goou choices foi theii neeus.
Baseu on the type of customei seivice inciuents, it appeais that the company has not uone
veiy well on eithei fiont. Customeis aie finuing it uifficult to configuie anu navigate the
company's softwaie piouucts. Also, acquisitions shoulu have leu to an inciease in sales. But
stagnant sales point to ueficient sales anu maiketing function. I think without auuiessing
these integiation issues, it will be futile to puisue the 0ENs offei. It isn't beneficial in
meuium anu long-teim to acquiie uisgiuntleu customeis.
+#'04QO0R04: So what woulu youi auvice to the CE0 be.
!2#1O12'0: I woulu iecommenu that the sales foice be oveihauleu. Theie neeus to be a
stiong manuatoiy tiaining piogiam foi the sales staff to make them fully conveisant with
the company's piouucts. I'u also iecommenu that the ieuunuancy in the piouuct poitfolio
be ieuuceu so as to alleviate customeis' confusion. A technical push shoulu be launcheu to
make the softwaie look anu feel consistent acioss piouucts. This shoulu impiove customei
satisfaction, uiive iepeat business anu impiove sales. As foi the 0ENs offei, I woulu auvice
to holu off until these coie issues aie auuiesseu.
+#'04QO0R04: That seems faii. I think you have iuentifieu the main issues in the case anu
pioviueu ciisp iecommenuations. We'll close heie. Thank you.

NARKET ENTRY
CASE: RETAIL BANK IN INBIA (NCKINSEY)
A 0K baseu banking giant wants to entei the Inuian maiket. They have hiieu you as a
consultant to guiue them with this uecision anu auvise them on vaiious aspects of this
move.
!2$0 AO$P%$$O"#
!2#1O12'0S Foiemost, I'u like to know moie about the client to evaluate theii entiy into the
Inuian maiket. Is the client an investment bank oi a ietail bank.
+#'04QO0R04S The client is into 0niveisal banking i.e. they have both investment anu ietail
banking aims.
!2#1O12'0: Can you tell me moie about the coie stiong business aieas of the client.
+#'04QO0R04S The client has a stiong piesence in the ietail banking business. It is the
maiket leauei in ietail banking in 0K, Belgium, Netheilanus, Luxembouig, ueimany anu
Austiia. Peisonal loans anu business loans foi small anu meuium enteipiises has been a big
uiivei of its giowth globally.
!2#1O12'0S Aliight, in that case, I believe that the client shoulu piobably entei the Inuian
maiket with an initial focus on ietail banking. The client cleaily has a lot of expeitise in this
segment anu can efficiently leveiage on its stiengths to make an impact in the Inuian
maiket. Bowevei, I'u also like to look at the Inuian maiket befoie making this
iecommenuation anu fiist gauge whethei enteiing the Inuian maiket in itself makes goou
business sense.
+#'04QO0R04S 0kay, that sounus ieasonable. Bow woulu you asceitain the attiactiveness of
the maiket.
!2#1O12'0S Foiemost, the maiket shoulu have attiactive giowth piospects in the neai
futuie. Can you help with an estimate of the giowth piojections in the Inuian ietail banking
inuustiy.

+#'04QO0R04S The ietail banking inuustiy is booming evei since the libeialization of the
economy was initiateu. The inuustiy is expecteu to giow at a CAuR of 28% to touch a figuie
of INR 9,7uu billion by 2u1u.
!2#1O12'0S The inuustiy shows quite piomising giowth piospects anu uefinitely looks
attiactive foi the client to entei. Can you tell me something about the uegiee of competition
in the inuustiy.
+#'04QO0R04S The inuustiy is chaiacteiizeu by significant competition fiom numeious
public sectoi banks, uomestic piivate banks anu othei inteinational banks like the client;
besiues the numeious smallei scheuuleu anu co-opeiative banks thioughout Inuia.
!2#1O12'0S That's not veiy encouiaging foi the client as it might significant baiiieis in
penetiating the maiket. Bowevei, this uoes not necessaiily mean that the competition is
fieice in all seivices. As I unueistanu, most of the business in the ietail banking inuustiy is
cuiiently geneiateu out of coipoiate anu consumei loans wheie banks piimaiily catei to
the laigei coipoiate anu the uppei classes of the society. Woulu you agiee with me.
+#'04QO0R04S That's iight but I am not quite suie wheie this is leauing. Please make youi
point.
!2#1O12'0S Suie. I was tiying to exploie was the piesence of untappeu oppoitunities foi the
client in the maiket. As you hau mentioneu eailiei, the client has a stiong piesence in the
peisonal anu business loans business foi small anu meuium enteipiises. Bowevei, the othei
banks in the Inuian banking inuustiy focus piimaiily on the laigei enteipiises. This means
that the client can stiongly leveiage its coie expeitise in the Inuian maiket anu tap into the
huge maiket of SNE enteipiises.
+#'04QO0R04S 0kay, I follow youi aiguments now. Bo you see any othei ioaublocks besiues
competition foi the client's giowth piospects.
!2#1O12'0S I believe the existing iegulations in the banking sectoi significantly iestiict the
numbei of bianches foieign banks can opeiate anu it is veiy uifficult foi them to get the
authoiization foi eveiy new bianch. This woulu pose a seiious bottleneck to the client's
giowth.

+#'04QO0R04S So woulu you iecommenu the client to entei Inuia.
!2#1O12'0S Yes, I believe the Inuian ietail banking business holus immense potential anu
baseu on this uiscussion about the maiket, the competition anu the clients existing coie
businesses anu stiengths, I'u make a favoiable iecommenuation. The iegulatoiy iestiictions
exist but the piesence of numeious othei inteinational banks like BSBC, Stanuaiu
Chaiteieu Bank, Citibank; I believe the oppoitunities suipass the thieats. Also, I might
sounu too piagmatic but given the pace of Inuia's libeialization anu uevelopment, I woulu
uefinitely expect the iegulatoiy iestiictions to get ielaxeu in the neai futuie.

NARKET ENTRY
CASE: BIAuN0STIC LAB0RAT0RY CBAIN (BAIN)
A uiagnostic laboiatoiy chain baseu in Ameiica wishes to entei the Inuian maiket. What aie
the factois which you woulu look into in oiuei to auvise them.
!2$0 AO$P%$$O"#S
!2#1O12'0S Befoie I stait, I woulu like to know moie about the kinu of opeiations this lab
unueitakes. Foi instance, is it a geneial-puipose health laboiatoiy oi uoes it specialize in
ceitain aieas of health.
+#'04QO0R04S Well, it basically tests patients' bloou anu uiine samples foi uiseases as wiue-
ianging as cancei, AIBS, uiabetes, hepatitis etc. So you can iefei to it as being faiily geneial
in its opeiations.
!2#1O12'0S Anu what is the natuie of technology useu in the labs.
+#'04QO0R04S They use the latest technology, the veiy cutting-euge.
!2#1O12'0S 0kay. Anu lastly, what is the mouus opeianui of these labs by way of getting
clientele. Bo they auveitise oi aie they piesciibeu to patients by uoctois in hospitals when
the foimei neeu tests to be peifoimeu.
+#'04QO0R04S These labs aie faiily high-enu anu use the latest technology. So the main
souice of ievenues fiom us is the hospitals which iecommenu patients to us.
!2#1O12'0S 0kay. To stait my analysis, I woulu tiy anu look at the natuie of health seivices
inuustiy in Inuia anu compaie it what exists in the 0niteu States. In the couise of so uoing, I
woulu neeu to examine anu compaie the uemogiaphics, puichasing powei anu health
infiastiuctuie of the 2 countiies, amiu othei factois. Boes that sounu okay to you.
+#'04QO0R04S That sounus iight. All I want fiom you is an enumeiation of the vaiious
factois you woulu want to consiuei, just that.

!2#1O12'0S 0kay. In keeping with what I saiu just now, I woulu like at the following. Fiist, I
woulu look at the kinu of maiket Inuia possesses as fai as uiagnostic laboiatoiies aie
conceineu. In ielation to this, I woulu uiviue the maiket into uiban anu iuial maikets. In
uiban aieas, I woulu examine the kinu of labs which cuiiently exist anu the natuie of
clientele they catei to. I woulu tiy anu exploie how the patients aie iecommenueu to these
labs viz. is it by the hospitalsuoctois oi is woiu-of-mouth 'publicity' impoitant.
+#'04QO0R04S 0kay. What othei things.
!2#1O12'0S I woulu also look at pievailing competition fiom the point of view of the natuie
of seivices that they offei. Such analysis will help in figuiing out the competitive auvantage
oui client enjoys by way of tests not peifoimeu by othei labs. Also, it woulu be impoitant to
finu out about the iange of incomes we woulu catei to. Foi instance, we coulu uepenu on
high volumes baseu on low maigins oi on high maigin low volume baseu seivices. While in
the foimei, specializeu seivices woulu not be iequiieu anu the client's coie competencies
woulu not be the ievenue-geneiatois, the high fixeu costs of opening labs makes me believe
that a high volume mouel may in fact be feasible. 0n the othei hanu, the lab coulu seivice
high-enu clientele anu use its expeitise in health matteis ielating to 'iich' anu upwaiuly
mobile lifestyles.
+#'04QO0R04S That sounus inteiesting. Tell me something moie about the fixeu costs anu
othei uetails the company shoulu consiuei .-(#&- launching seivices in Inuia.
!2#1O12'0S Well, the souicing of the technology will have to be thought of, as also the
iegulatoiy iegime iegaiuing investment in health infiastiuctuie in Inuia. Tie-ups with big
hospitals will neeu to be exploieu as the fiist step towaiu gaining a footholu in the
uiagnostic laboiatoiy inuustiy, since tiust woulu be of paiamount impoitance when it
comes to health-ielateu matteis. Subsequent to that of couise, the client may want to extenu
opeiations to captuie highei volumes.
+#'04QO0R04S What about iuial aieas.
!2#1O12'0S In iuial aieas, theie is huge scope foi such labs because of two ieasons. 0ne-
the laige numbei of people iesiuing in iuial aieas. Two, the huge investments that iuial
health-caie has seen in the last few yeais. Bowevei, theie aie ceitainly pioblematic issues

as iegaius opeiating a uiagnostic laboiatoiy in the iuial aieas. Fiistly, foi such labs to be
successful, stiong backwaiu anu foiwaiu linkages with key infiastiuctuial elements
coveiing health as well as othei fielus aie iequiieu. Foi instance, if theie aie no functioning
hospitals, the labs will be of no use to patients. Similaily, the souicing of technical
equipment, meuical supplies etc to labs iequiies well functioning ioaus, communication
netwoiks etc. Seconuly, anu peihaps most impoitantly, the natuie of health seivices which
woulu be in uemanu may be veiy uiffeient fiom that of the seivices uemanueu in Ameiica.
+#'04QO0R04S Biffeient in what way.
!2#1O12'0S Typically, the natuie of health ailments people in iuial Inuia will face will be
veiy uiffeient fiom that of those faceu by Ameiicans because of the vast uiffeience in
lifestyles. So, the client will neeu to gauge if it is capable of cateiing to these wiuely uiffeient
neeus in a cost-effective mannei.
+#'04QO0R04S uoou. That will be all.


uR0WTB STRATEuY
CASE: B0ILER C0NPANY (NCKINSEY)
You've been appioacheu by a boilei company anu they want you to help them uevise a
giowth stiategy.
!2$0 AO$P%$$O"#
!2#1O12'0S So this company wants to inciease its sales uiastically anu piefeiably its piofits
too.
+#'04QO0R04S That's iight.
!2#1O12'0S Befoie we take a look at the company specific infoimation, I woulu like to know
moie about the inuustiy - cuiient tienus, any new technological auvances, natuie of
competition etc.
+#'04QO0R04S Boilei companies typically have a line of piouucts baseu on capacity anu fuel
useu. Theie aie no new auvances in iecent times. 8u% of the maiket is oiganizeu anu main
customeis aie the theimal powei plants.
!2#1O12'0S Bmm. A company can giow eithei by expanuing maiket shaie in its existing
maiket, enteiing new geogiaphical maikets, coming out with new piouucts oi by acquiiing
anothei company. I woulu like to know moie about this company. Can you please tell me -.
What this company's piouucts aie
Who aie its customeis aie
Wheie uoes it opeiate
Its access to cashfinancing iesouices
Its competitois
+#'04QO0R04S It's a meuium size fiim - about $1uu Nn in sales, opeiates piimaiily in Inuia.
It's the biggest playei in the oiganizeu segment which is appiox 8u% of total maiket. Its
main customeis aie theimal powei plants, etc. Piouucts can be classifieu on the basis of

capacity anu fuel foi the boileis. It uoesn't have much cash oi technology. It's a miuget
compaieu to global playeis in the same inuustiy.
!2#1O12'0S Well, not being cash-iich iestiicts the fiim fiom exploiing vaiious giowth
options. Foi instance, new piouuct uevelopment seems to be out of question given no access
to technology auvances.
Similaily, exploiing new geogiaphical maikets, even oveiseas maikets, woulu be out of
ieach piesently as theie is ueaith of capital. Acquiiing anothei company is a possibility if
syneigies exist that can to offei significant benefits out of the meigeu entity. But, we also
must keep in minu the iesults iealization lag in case of a meigei. Again, N&A activity
piesently uoes not seem feasible.
+#'04QO0R04S Sounus ieasonable.
!2#1O12'0S Now that we have eliminateu some of the options, I woulu like to focus on
cuiient maiket anu consoliuation of the existing piouuct line. Specifically, I woulu like to
know the inuiviuual piouucts on offei, maigins to be maue on each of them anu theii
inuiviuual giowth potential.
+#'04QO0R04S It is a faii point. 0ui client piesently offeis boileis baseu on its capacity anu
fuel type. Typically, they get a maintenance contiact foi a specifieu time peiiou as well. As
fai as the giowth potential is conceineu, theie aie quite a few captive powei plants being
uevelopeu cuiiently in Inuia. Auuitionally, theie aie a couple of ieally big powei plants
announceu by oui big customeis. Naigins aie negotiable anu uepenu to a gieat extent on
the customei in question.
!2#1O12'0S I see. uiven these facts, I woulu look at the mix of piouucts on offei. To that
effect, I woulu like to know the shaie of each of the inuiviuual piouuct type in the sales. Post
that, I woulu like to map each piouuct with its giowth potential, its cuiient maiket shaie in
its categoiy anu the maigins to be ietaineu.
+#'04QO0R04S I think you have figuieu it out. What woulu you like to suggest to the
company.
Consult Club IIN Ahmeuabau (2u1u) Page Su

!2#1O12'0S In my opinion, company shoulu focus on the piouucts which piomise giowth
anu also offei highei maigins. Possibly, they aie cuiiently pioviuing a stanuaiu capacity
type oi a fuel type to most of the customeis. They shoulu iathei look at the inuiviuual
customei neeus anu uesign theii offei accoiuingly. This benefit to customei woulu also
enable them to commanu a gieatei maigin on each piouuct solu. Sales foice incentives
coulu also be aligneu with customei-centiicity in teims of coiiect piouuct iequiiement
assessment anu supply. In shoit, focusing on the iight piouuct is the key foi giowth foi oui
client.
+#'04QO0R04S I think the analysis is sufficiently thoiough. We can stop heie. Thank you.
The canuiuate also talkeu about cyclic goous i.e. boileis anu othei such heavy inuustiial
goous aie highly cyclic in natuie, meaning that if uBP giows by a 'x' peicent, the sales of
these goous woulu go up by Sx peicent, anu if uBP goes uown by x %, theii sales woulu also
go uown by Sx %. The inteiviewei agieeu but ieminueu me that theie's a lag in between
uBP giowth anu giowth of heavy inuustiies.
>9#00-4'+? @4- ,%4 %5+# -A$5#&- B&#(*'%.*5*'1 #( #$-&%'*#4+6 $#++*.5- -((*,*-4,1 0-%+3&-+6
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Consult Club IIN Ahmeuabau (2u1u) Page S1

INvESTNENTBIvESTNENT
CASE: B0TEL IN ARNY CANT0NNENT (BCu)
Youi client is a Piivate Equity funu assessing an option to invest in a Botel coming up insiue
the Aimy Cantonment. What shoulu the PE Funu uo.
!2$0 AO$P%$$O"#
!2#1O12'0: Befoie pioceeuing with the analysis, I woulu like to know a few facts ielateu to
the type, size anu location of the Botel. Also as oui client happens to be a PE funu, is theie
any paiticulai time fiame that oui client is taigeting with iespect to this investment.
+#'04QO0R04: Well fiistly as fai as the time peiiou is conceineu, you may neglect any stiict
guiuelines fiom the client. It is foi us to ueciue the time fiame in this case. Conceining the
uetails of the hotel, it is planneu to be a 4uu ioom hotel locateu insiue the aimy cantonment.
The hotel stanuaius will be compaiable to any iegulai S oi 4 stai hotel.
!2#1O12'0: Fine, coulu you also let me know the location of the aimy cantonment anu the
intenueu objective of this hotel pioject. Noieovei, woulu the hotel be open to non-aimy
peisonnel as well.
+#'04QO0R04: No, the hotel woulu be exclusively foi aimy peisonnel anu the aimy
cantonment is locateu at the outskiits of a not so big city. Naybe you can call it a town.
!2#1O12'0: Anu any paiticulai ieason foi builuing this hotel. Aie theie any othei hotels
neaiby.
+#'04QO0R04: Yeah, that's inteiesting. Cuiiently theie aie no hotels neaiby anu the closest
hotels aie locateu in the town, all of them being at a consiueiable uistance fiom the
cantonment. The intenueu puipose of this hotel is to facilitate the stay of peisonnel visiting
the aimy cantonment foi tiaining piogiams, shoit stays anu as a tempoiaiy housing foi
those ielocating into the cantonment aiea.
!2#1O12'0: Boes this imply that cuiiently all these people aie being accommouateu in the
hotels neaiby.

+#'04QO0R04: Not ieally, most of them might be staying with theii fiienus staying within
the cantonment.
!2#1O12'0: But I feel theie woulu be a laige numbei of people who woulu piefei staying in
a hotel.
+#'04QO0R: Yeah, in that case they go to the hotels neaiby. So how woulu you evaluate if this
pioject is woith investing in.
!2#1O12'0: Foi that I woulu like to know the cost stiuctuie involveu in the constiuction of
the hotel anu vaiious costs incuiieu in its opeiations.
+#'04QO0R04: Theie is a fixeu cost of constiuction which can be taken as $6S,uuu pei ioom.
Also an amount of $Su goes in the uaily maintenance of each ioom.
!2#1O12'0S Is theie any bieak up of costs available with iespect to these costs, especially
the maintenance costs upon opeiation.
+#'04QO0R04: No, you may tieat the maintenance cost as a single block.
!2#1O12'0S Since, we aie uealing with a hotel; I believe the occupancy iates woulu be quite
ciitical. Bo we have some uata on that.
+#'04QO0R04: Wait a moment (the inteiviewei takes out a piinteu giaph)
Consult Club IIN Ahmeuabau (2u1u) Page SS

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!2#1O12'0S Aveiage 0ccupancy iates seem to be in the iange of 7u-8u%.
+#'04QO0R04: Can you calculate the exact figuie.
!2#1O12'0S (calculates as the inteiviewei looks closely) 7S%.
+#'04QO0R04: So what uo you make of it. Shoulu the PE Funu invest.
!2#1O12'0S I will take a moment. Can I have the expecteu ient of each ioom. Also, aie the
maintenance costs stateu eailiei applicable all thioughout oi only when the ioom is
occupieu.
+#'04QO0R04: Take the maintenance costs as applicable only when the ioom is occupieu. As
fai as the ientals aie conceineu, I woulu like you to come up with a numbei.
!2#1O12'0S Aie all the iooms in the hotel going to be of similai type.
+#'04QO0R04: Yes, all iooms aie of the same type.
!2#1O12'0S I woulu fuithei like to know a few othei uetails. Can you please let me know the
ientals of the hotels piesent in the town.

+#'04QO0R04S Theie aie S types of hotels in the town which foi oui puipose can be
categoiizeu as economical, utility anu luxuiy. The economical categoiy hotels chaige $Su,
utility $7S anu luxuiy in the iange of $1uu-$12S. It also neeus to be iemembeieu that
usually the economical anu utility hotels opeiate at neai full capacities while the luxuiy
hotels opeiate at moueiate capacity levels.
!2#1O12'0S As we aie uealing with the aimy, a goveinment oiganization is theie anything
else that neeus to be taken into consiueiation with iegaiu to the aimy's allowance oi
maximum limit on uaily ientals at piesent.
+#'04QO0R04: Yes, well askeu. Cuiiently the aimy pioviues a uaily allowance of $7S to each
of its peisonnel iiiespective of which hotel they stay in. So if one weie to spenu $Su, he oi
she woulu save $2S. 0n the othei hanu a iental of $1uu will iesult in the peison spenuing
$2S fiom his own pocket. Noieovei, with the aimy hotel opeiational, the aimy woulu only
be ieimbuising the actual amount incuiieu.
!2#1O12'0S In that case, my suggestion woulu be to fix the iental aiounu $7S a uay.
+#'04QO0R04: Aie you suie. Will this have any incentive foi the aimy as they aie alieauy
ieimbuising $7S pei uay.
!2#1O12'0S Yes, I iealize. The piice shoulu be below $7S foi the aimy to have an incentive.
Naybe we can keep the piice at $7u given the high quality of the hotel's seivices. This
amount woulu then make the ueal auvantageous foi the aimy as well.
+#'04QO0R04: Fine, can you uo the calculations now.
!2#1O12'0S With uaily ientals of $7u anu an occupancy iate of 7S%, the net ievenue eaineu
each yeai woulu be $7.S million. Taking opeiational costs of $Su pei uay pei ioom into
account the contiibution woulu be aiounu $4.2 million each yeai.
Fuithei since the fixeu costs amount to $26 million, with a contiibution of $4.2 million each
yeai it woulu take neaily 6-7 yeais foi the client to iecovei its investments.
+#'04QO0R04: So, what aie youi views.
Consult Club IIN Ahmeuabau (2u1u) Page SS

!2#1O12'0S The fact that the pioject will bieakeven within 7 yeais shoulu make the
investment attiactive foi potential buyeis of the hotel. 0ui client can look at exiting in about
S yeais, as the pioject woulu have become opeiationally stable by then anu hence woulu
have pioveu its viability to potential investois.
+#'04QO0R04: Any fuithei suggestions foi the client.
!2#1O12'0S uiven the occupancy iates, may be the client can plan to come up with a Suu
ioom hotel as the occupancy iates aie almost always close to oi less that 7S% baiiing two
months.
+#'04QO0R04: Sounus Inteiesting. Can you in that case uo the calculations foi a Suu ioom
hotel.
!2#1O12'0S (Auopting the same technique anu aftei calculating a new occupancy iate of
appioximately 9u%). In this case the ietuin woulu be within a peiiou of S yeais along with
a total contiibution of $4 million each yeai.
+#'04QO0R04: Any thoughts aftei seeing these numbeis.
!2#1O12'0S The pioposal with Suu iooms seems bettei as it significantly ieuuces the time
iequiieu to iecovei investments. Also, it uoes not impact the contiibution much.
+#'04QO0R04: I believe we have hau a goou uiscussion. We can now go aheau with the
iecommenuations. Thank You.
>9#00-4'+? E)- ,&3A #( ')- ,%+- 8%+ '# *2-4'*(1 ')- 0-')#2 #( $&*,*47 % &##0 %' ')- )#'-5
before colculotinq revenues. Tbe interviewer olso cbeckeJ tbe conJiJotes comfort witb 7&%$)+
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INvESTNENT
CASE: C00RIER C0NPANY (BCu)
Youi client wants to set up a new couiiei company. Bow will you evaluate if this is the iight
business to get into.
!2$0 AO$P%$$O"#
!2#1O12'0: Befoie I pioceeu with the analysis, I want to make suie I unueistanu the
business mouel coiiectly. I think at its simplest, a couiiei company basically picks up a
package fiom point A anu ueliveis it to point B. The company auus value, uiffeientiates itself
anu eains money fiom its supply chain.
+#'04QO0R04: This is a simple mouel, but I think it woiks well foi oui puipose.
!2#1O12'0: 0k. In that case, fiist, I woulu like to get some infoimation on the maiket wheie
the client plans to opeiate. What is the existing competition. What geogiaphy is the
company going to seive.
+#'04QO0R04: Let's assume that the client plans to opeiate in the city of Numbai. Theie aie,
maybe, one oi two othei companies opeiating theie. Not much competition.
!2#1O12'0: 0k. In that case I think I want to focus on the piofitability of iunning such a
business.
+#'04QO0R04: I think it makes sense to pioceeu this way.
!2#1O12'0: I will look at both ievenues anu costs. We can estimate uaily ievenues if we
know the expecteu uaily business volume anu the aveiage piice chaigeu pei customei. Foi
the lattei, I am assuming that the client offeis just one type of seivice (since this is an intia-
city couiiei company). Is that a faii assumption.
+#'04QO0R04: That's fine. You can assume the seivice is piiceu at Rs. 7.

!2#1O12'0: If the company piocesses 1uu,uuu packages pei uay, it will eain uaily ievenue
of Rs. 7 lakhs. Now moving to the cost siue, I think theie aie thiee main cost uiiveis foi the
company - tianspoitationshipment, auveitising anu piomotion anu othei u&A costs.
+#'04QO0R04: uoou. Why uon't you examine these in uetail.
!2#1O12'0: I will look at the tianspoitation costs fiist since I believe these aie going to be
ciitical in ueciuing if the business is piofitable. I will assume Numbai is a lineai city, 4u km
in length anu 1u km wiue,

We will have collection centeis uistiibuteu along the length of the city at equal inteivals.
0ui customeis will be able to uiop theii packages at these centeis anu collect the ieceipt. In
ieality of couise, the uistiibution will not be unifoim, since some aieas will waiiant moie
stoies while it may not be feasible to have centeis in some othei iegions.
+#'04QO0R04: That's a faii assumption. Caiiy on.
!2#1O12'0: Now I neeu to ueteimine the numbei of such centeis that the company neeus.
Fiom theie, I will ueteimine the numbei of employees to get a sense of the costs.
Let me assume that each seivice centei iemains open fiom 9AN to 4PN. With a one houi
lunch bieak, that gives us six business houis pei centei. Let's assume that each customei
takes five to ten minutes to piocess. If each seivice centei is manneu by one employee, then
it can hanule ioughly Su customeis pei uay. Beie again, the timings of the seivice centeis
coulu vaiy acioss the city, but I am looking at an aveiage shop.
+#'04QO0R04: You'ie uoing fine.
!2#1O12'0: So if one seivice centei can hanule Su customeis pei uay, to seivice 1uu,uuu
customeis we will neeu 2uuu centeis spieau acioss the city. (Biief pause) That sounus like
a laige numbei to me.
1u km
4u km
T T T T T T T T

+#'04QO0R04: No, it will come up to aiounu that. uo on.
!2#1O12'0: 0k, so we will neeu 2uuu employees to staff these centeis. Then we will also
neeu ueliveiy boys.
+#'04QO0R04: Let's assume that some of these employees can also uouble up as ueliveiy
boys. We can appiopiiately aujust the timings at some of the stoies. Let's say theie aie a
total of Suuu opeiational staff membeis.
!2#1O12'0: I think we will neeu to pay each employee aiounu Rs. 6uuu pei month. That
means a uaily salaiy of Rs. 2uu. So foi Suuu staff membeis, it comes to aiounu Rs. 6 lakhs.
+#'04QO0R04: What aie youi thoughts at this point.
!2#1O12'0: Well, just going by the fact that the tianspoitation costs aie coming to aiounu 6
lakhs pei uay when oui ievenue is 7 lakhs, I uon't think this business looks veiy piofitable.
We haven't accounteu foi the auveitising costs oi even fixeu costs yet.
+#'04QO0R04: I see. But given that this is a veiy iough estimate, peihaps we aie in a position
wheie the business might be piofitable anu we can look at aieas wheie we can cut costs oi
spenu efficiently.
!2#1O12'0: I think auveitising will be veiy impoitant in this business. I peisonally think
that customeis will choose a couiiei company that they think is ieliable anu safe. Since this
is a new company, anu the sectoi is also unueiuevelopeu in the city, I think they will have to
focus on builuing a bianu. Consumeis aie moie likely to consiuei a bianu as ieliable if they
have heaiu of it. But peihaps we coulu stiuctuie the employees' salaiy so that a pait of it is
a bonus linkeu to the amount of business they biing in. That way we coulu save on some of
the auveitising costs.
+#'04QO0R04: I think you have uone an excellent job. We'll enu heie. Thank you.
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u0ESSTINATE
CASE: BP0 TALENT S0PPLY (BCu)
It is the yeai 2uuS. Youi client is in planning to stait BP0 call centeis in Inuia anu he neeus
to know whethei the talent supply in Inuia is sufficient in the peiiou 2uuS-2u1u.You have
been hiieu to figuie out the pool of people available foi hiiing foi such call centeis.
!2$0 AO$P%$$O"#
!2#1O12'0: Since in this case the supply siue is impoitant, I woulu like to stiuctuie my
uiscussion aiounu the pool of people inteiesteu in joining BP0s. Bence I woulu like to take
the population appioach anu estimate the numbei of youngsteis in the paiticulai age gioup
of 18-Su in the specific income gioups.
+#'04QO0R04: That is a uecent appioach to take but coulu you think of any othei appioach
that will give you a moie accuiate pictuie.
!2#1O12'0: 0k, anothei alteinative appioach that I can think of is to go by the numbei of
colleges in Inuia anu then estimate the peicentage of stuuents who woulu be inteiesteu in
joining call centeis. Woulu that be a goou appioach to pioceeu with.
+#'04QO0R04: Yes, that appioach woulu be bettei. In fact I woulu like you to look at thiee
specific cities wheie the client is looking to opeiate - Bangaloie, Numbai anu Belhi.
!2#1O12'0: 0k. So since I am moie familiai with Numbai, having liveu theie foi a
consiueiable numbei of yeais, I woulu like to analyze the situation foi Numbai anu then
extiapolate it to the othei cities, as the metiopolitans can be consiueieu quite similai.
+#'04QO0R04: That's a faii point. So, you can pioceeu with the analysis of Numbai.
!2#1O12'0: Fiom what I know, Numbai has about 4Suuu engineeiing seats anu if we take
an appioximation of Suu stuuents pei college, we can estimate about 1Su engineeiing
colleges in Numbai. Consiueiing that non-engineeiing colleges will have a laigei piopoition
of people inteiesteu in such call centeis, I will consiuei the total numbei of colleges who

stuuents woulu be inteiesteu in such a job to be, aiounu 6uu (1Su engineeiing, 1Su B.com,
1Su BA anu 1Su otheis).
+#'04QO0R04: 0k. In oui case, let us assume that the numbei of stuuents pei college is
aiounu 6uu.
!2#1O12'0: 0k, so foi estimating the numbei of stuuents giauuating each yeai, let us
consiuei 6uuS.S stuuents since on an aveiage the uuiation of the couises woulu be S.S
yeais (S foi BA, B.Com anu 4 foi engineeiing). That makes it 6uu*6uuS.S that is
appioximately 1 lakh stuuents giauuating eveiy yeai.
Now, I can think of two factois to ueteimine the stuuents who woulu finally constitute the
talent pool - the level of inteiest in the stuuents anu the ability of stuuents to speak piopei
English.
+#'04QO0R: 0k, faii enough. So you can assume that the level of inteiest is 7S% anu the
ability of stuuents is S7%.
!2#1O12'0: So that makes it 7S% times S7% times 1 lakh, which is appioximately 27uuu
stuuents who will finally get into this piofession fiom Numbai. Anu extiapolating it to the
othei 2 cities, assuming an appioximately equal population anu numbei of colleges in the
thiee cities, I woulu get a numbei of appioximately 81uuu pei yeai.
+#'04QO0RS Yes that is a faii estimate. Now coulu you tell me S ieasons which will cause
youi estimate to change, some factois that you may have misseu to make calculations easiei
oi something that my client coulu tiy to inciease the cuiient estimate.
!2#1O12'0: Yes, uefinitely. I have maue some assumptions such as ignoiing migiation which
is a laige factoi especially foi Numbai anu Belhi. Also I have not assumeu the college going
stuuents who will tieat this as a pait time job, especially consiueiing the tienu of incieaseu
expenuituie by youth these uays. Anothei thing I can think of is expanuing to othei smallei
cities apait fiom Belhi, Numbai anu Bangaloie, because it might be cheapei to set up,
though the availability of talent woulu be lessei than a metiopolitan.
+#'04QO0R04: uoou. So you have given me S ieasons. Can you think of moie ways by which
we can inciease the job pool.

!2#1O12'0: Yes, in fact I can think of 2 moie ways: one is incieasing theii level of inteiest
fiom 7S% by pitching anu auveitising to moie colleges attiacting moie youngsteis anu the
seconu is incieasing the peicentage of people who aie capable of uoing the job, that is
people well-conveisant in English, by investing moie in tiaining initiatives.
+#'04QO0R04: veiy uoou, I think moie oi less we have coveieu eveiything that was
iequiieu. Theie is just anothei inteiesting aspect. A pioblem that many such BP0s face is
lack of goou people at manageiial level. We coulu have lookeu into that also, apait fiom the
actual calleis. But that apait, the analysis has been goou. Thank you.
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