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Analysis Question

Russell University - Fresh Attacker on the Online Education Market (McKinsey 1st round)
New answer on Dec 06, 2023
2 Answers
319 Views
Anonymous A asked on Dec 05, 2023

Hello, thanks for this interesting case..

 

I have few questions regarding analysis question.. Isn't it supposed to be basic breakeven analysis? why did we divided 48k/12k students? and not making a core equation of: Profits = Intl. + Local Profits? 

It would be something like: 

48M = (12k*price*50%(PM)) + (18k*9250*PM) PM on the second one, was not mentioned and I assumed it to be the 50%? 

 

Thanks

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Ian
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Content Creator
replied on Dec 06, 2023
#1 BCG coach | MBB | Tier 2 | Digital, Tech, Platinion | 100% personal success rate (8/8) | 95% candidate success rate

Hi there,

Could you please help us help you? Can you be more clear in exactly where this section is and where your question relates? (screenshot helps a lot)

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Anonymous A on Dec 06, 2023

Hello, thanks for your answer truly appreciated! So let me clear it out. On the 5th Questions, on step 2.. I am wondering why we divided the 48M in Profit by the 12K International Students? What was the idea of that? Shouldn't we basically make a simple breakeven analysis with a core equation of: (Profitability = International Students Profits + British Students Profits) Thanks and I hope it is clear!

Ian on Dec 06, 2023

Hey! Looks like we already have an answer above :) Thanks for breaking down the question more clearly!

Cristian
Expert
Content Creator
replied on Dec 06, 2023
#1 rated MBB & McKinsey Coach

Hi!

Happy to clarify this as I'm the author of the case. And grateful to hear you found it interesting. 

Basically, what is happening at this point in the case is that we are investigating alternatives for the client. We're looking into whether they could generate revenue from just increasing their tuition fees rather than selling online courses through the acquisition of Eduline.

In order to make that happen, we want to figure out what is this additional profit that we should be getting for each international student. Thus we want to divide the profitability that would come from Eduline (48M) by 12K which is the number of international students. 

That leads to 4K, which is the profitability increase per international student that we would need to get to a similar profit level as that of generating profit through Eduline. 

This 4K is profit, not revenue, and since we know that we have a 50% margin on tuition fees, the revenue needs to be double = 8K. This is then the additional amount we should be charging international students in order to reach the same total profitability as the one we'd have after acquiring and running Eduline.

Hope this clarifies your question. If not, reply to this comment and I'll get back to you. 

Best,
Cristian

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Ian

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