For CBS 2007 Case: Refrigerator in India, I don't quite get it

Question

For CBS 2007 Case, I don't quite get it: why from every 7 years people change the refrigerator, you can get the market size?

CBS 2007 Case: Refrigerator in India AAdditonally, I don't understand their breakeven here:

COGS of 80% over price does not seem to be completely out of what we would expect in a manufacturing company. I would worry about COGS being just 25%, which will signal that reducing price by 20% is not a good idea to attain 30% more sales.

Casebook link: https://www.andreadd.it/appunti/post-laurea/BusinessCase/ebook/CaseBook-Columbia2007.pdf

Answer 1

Hi!

Well, this is a funny definition of Market Size anyway. Market size normally refers to the volume of transactions/sales/customers over a defined time frame (e.g., a year). But it is NOT the total number of items that are in use. So to me it seems that this case has been devised by a person which has a very shallow understanding of business mechanics.

Unfortunately, this is quite common in case books. Therefore I am very clear to mentees on the following point:

Studying Case Book solutions is a colossal waste of time - and very often it is even harmful!

They can well use the cases for practicing, but the solutions provided in the boos should be ignored. Once my mentees have learned how to properly think through strategic issues, their own approaches are usually far better and more robust than the book solutions anyway.

Cheers, Sidi

Answer 2

Hi there,

I completely agree with Sidi.

This is a very odd market sizing example. I don't agree with the approach. Given it is such an old casebook, this might be why.

All that said, I actually think casebooks have immense value. However, the point of them is much less about learning each specific answer and much more about learning how to think, how to approach problems, how to drive forward with a hypothesis, how to parse through lots of information quickly, etc. etc.