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# Deloitte Case question

Deloitte
New answer on Apr 09, 2021
6.8 k Views

Hi all,

I'm trying to solve one of Deloitte cases about retail strategy.

Please see in attachment the actual case and exhibit. The question I'm puzzled with is "What is the expected overall market size for Club Co., regardless of the business model selected?". The answer provided by Deloitte is \$8.8M, due to 88% usage rate out of current 10M visitors. I would agree with the answer with 8.8M wouldn't have a dollar sign, meaning there are potentially 8.8M clients who might buy the product. However, those 8.8M members are not equal \$8.8M in potential revenue! I'm sure I'm missing something, could someone advise if I'm wrong in my logic?

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Hi.

I have a question with the same case. I am not sure how they have the following solution to the question:

Using the provided data, model a P&L for both business model options for year one. Calculate operating profit (ignore interest, taxes, and depreciation) and round dollar amounts to the nearest \$100K.

Model A – Carrier 1 only total revenue: \$6.5M

Model A – Carrier 1 only total costs: \$1.7M

Model A – Carrier 1 only operating profit: \$4.8M

Model B – Multiple carriers total revenue: \$6.9M

Model B – Multiple carriers total costs: \$2.3M

Model B – Multiple carriers operating profit: \$4.6M

Could someone please elaborate how they arrived at those numbers? I can't even find the revenue answer correctly. Thank you so much!

Regards,

Did u find them?

I found the answe for Model A: 6.5=(100+30)* 5% penetration rate(see tips) I cannot understand though how they reached to 6.9M in Model B. Any idea anyone?

Hi Nick,

honestly, given the data I believe there is a flaw somewhere in the case. Why not contact them to find out?

Best regards

(edited)

Hi Jakob, thanks for reply. That's what I'm thinking to do, but to be on a safe side posted here first, in case I'm wrong.

Hi Nick, I am struggling with the same case - did you manage to find a solution? Many thanks in advance :)

The correct answer for the revenue side of things is as follows:

Total Market = 10million members

Post-paid users = 80%
2-year contract so only half will be after a contract = 50%
Market penetration = 5%

Total penetratable market each year = 10m * 80% * 50% * 5%
= 200,000

Model A units sold = Carrier 1 share = 30% * 200,000 = 60,000
Model B units sold = Carrier 2 + 3 + 4 share = (25% + 15% + 10%) * 200,000 = 100,000

Accessories revenue per phone = 20% * \$30 * 1.5 = \$9

Revenue = (Postpaid revenue + Accessories revenue) * units sold

Model A revenue = (\$100 + \$9) * 60,000 = \$6.54m
Model B revenue = (\$60 + \$9) * 100,000 = \$6.9m

(edited)