Case

Telephony Technology Warehouser

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Problemdefinition

We are a warehouser (B2B) and have been facing a decline in profits since past 2 years. We would like you to figure out why this is happening and provide recommendations to reverse this trend.


Kommentare

The case is designed to be presented to the candidate by an interviewer, who plays the role of a representative of a telephony technology warehouser.


Kurzlösung

Key Question 1: Why is the firm facing a decline in profits?

Answer: The industry looks mature and is rapidly ageing. It is bad business to be in.

Key Question 2: What should the firm do?

Answer: The firm should recognize that there is little the firm can do to increase profitability in the current market conditions. The firm should look for options for exiting the industry.


Detaillierte Lösung

Paragraphs highlighted in green indicate diagrams or tables that can be shared in the “Case exhibits” section.

Paragraphs highlighted in blue can be verbally communicated to the interviewee.

I. Background

The candidate should ask for more market information. The interviewer should provide all available information & data to candidate and it is up to candidate to define the issues that should be looked into based on the data/info provided.

Share Diagram 1 with candidate if deemed necessary.

As a warehouser, we purchase telephony technologies from manufacturers, and then sell them to a group of resellers, who in turn sell them to end consumers.

We are the largest company in the industry. Apart from one competitor who is almost as large as us, there are several small players in the market. In recent years we have not seen any new market entrants and all firms sell at industry-wide prices.

The reseller market can be divided into Corporate (largest), Value-Added (medium), and E-tailer (smallest) segments.

Please share Table 1 with the candidate.

II. Solution

After looking at the table, the candidate should be able to come up with the following observations:

  • The overall industry has shrunk
  • The client's overall market share has declined
  • Value-added is the largest segment and the firm has lost market share in this segment as well

From the above observations, the candidate should be able to make the following conclusion:

  • It is a bad business to be in as the overall industry has shrunk, both on price and volume basis

Since the overall volume has decreased, it could mean that the client and competitors are getting cut out from the value chain - the manufacturers maybe directly selling to the resellers or to the end consumers.

Falling prices can be a result of the price wars which are happening because of the shrinkage of the industry. We can see that the industry is rapidly ageing. Since there are no opportunities of product differentiation, there is little the firm can do to increase profitability. The firm should recognize this and look for options for exiting the industry.

III. Concluding Observations

The industry looks mature and is rapidly approaching obsolescence. There is little the firm can do to increase profitability. The firm should recognize this and look for options for exiting the industry.

Schwierige Fragen

What kind of options could the firm consider for exiting the industry?

  • Diversify into another industry
  • Sell the firm
  • Close the firm
Verwandte Consulting-Fragen

Frankly, exit options are quite broad (excerpt of what I remember my fellow alumni doing): Largecompanies (typically after advising the industry), often "strategy department" or in-house-consult... (mehr)

Beste Antwort bisher:
McKinsey / Accenture / Collected all Big 3 offers / Harvard Business School

Hi, 1) Youproactively ask in the beginning, even before drawing the structure (something like "What kind of products / revenue sources do we have) and then split the structure into price, qty,... (mehr)

Hi there, Let me chime in here. First, try to think of this problem in terms of the expected value of the candidate drug: Expected Value = Likelihood of success * Present Value (in case of su... (mehr)

Responses to your 1-3 in-line I have heard that most consultants leave after like 2-5 years. Why is this usually the case? Can it be seen as negative when you stay longer than that?... (mehr)

Bisher beste Antwort von 2 Antworten:
Xabi
Experte
McKinsey Senior Associate and IESE MBA

Simon-Kucher is a boutique firm, focused in Revenue and market growth whereas Accenture is a general strategy firm. If you want to focus on marketing, sales, etc choose Simon-kucher. In general I w... (mehr)

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Case-Exhibits