Cookie and Privacy Settings

This website uses cookies to enable essential functions like the user login and sessions. We also use cookies and third-party tools to improve your surfing experience on preplounge.com. You can choose to activate only essential cookies or all cookies. You can always change your preference in the cookie and privacy settings. This link can also be found in the footer of the site. If you need more information, please visit our privacy policy.

Data processing in the USA: By clicking on "I accept", you also consent, in accordance with article 49 paragraph 1 sentence 1 lit. GDPR, to your data being processed in the USA (by Google LLC, Facebook Inc., LinkedIn Inc., Stripe, Paypal).

Manage settings individually I accept
expert
Expert with best answer

Anton

100% Recommendation Rate

4 Meetings

1,088 Q&A Upvotes

USD 179 / Coaching

3

I am preparing for an interview at McKinsey

Hi!

During the preparation I’ve faced the following case: your “takeaway coffee point” is a monopolist in a small city near London.

What could be the impact on your market share if a new competitor enters the market? What is the best structure for this case?

Hi!

During the preparation I’ve faced the following case: your “takeaway coffee point” is a monopolist in a small city near London.

What could be the impact on your market share if a new competitor enters the market? What is the best structure for this case?

3 answers

  • Upvotes
  • Date ascending
  • Date descending
Best Answer
Book a coaching with Anton

100% Recommendation Rate

4 Meetings

1,088 Q&A Upvotes

USD 179 / Coaching

Hi,

This is a very typical case, which could be solved via table structure.

Let’s say you know, that your client sells 1000 cups of coffee for takeaway at the price of 1 GBP each. And there are 4 market segments (by income) in this town: mass, mass affluent, affluent, HNWI.

Now lets draw a table with the following structure:

Columns: market segment, segment revenue pool, segment price sensitivity, segment coffee quality sensitivity, segment geo location sensitivity, your offering, competitors offering

Lines: mass, mass affluent, affluent, HNWI

The next step is to fill this structure:

Market segment column - names of segments

Segment revenue pools

  • Mass - 100 pounds
  • Mass affluent - 400 pounds
  • Affluent - 450 pounds
  • HNWI - 50 pounds

Segment price sensitivity

  • Mass - High
  • Mass affluent - Low
  • Affluent - Low
  • HNWI - Low

Segment coffee quality sensitivity

  • Mass - Low
  • Mass affluent - High
  • Affluent - High
  • HNWI - High

Segment geo location sensitivity

  • Mass - Low
  • Mass affluent - Low
  • Affluent - Low
  • HNWI - Low

Your offering

  • Same for all lines: 1 GPB per cup, high quality, center location

Competitor’s offering

  • Same for all lines: 0,5 GPB per cup, medium quality, center location

Now we can see that your competitor offers a cheaper product with lower quality. This might only affect the mass clients as they have higher price sensitivity and care less about the quality.

What does it mean in terms of market share?

You might loss is 100 GPB revenue pool, which is equal to 10% market share (10% share in current market terms, but you have to take into account, that the whole market will be 950 GBP).

I used random assumptions in this solution to illustrate the approach.

I have a few ideas how to add sophistication for this case and draw a more detailed table. However, I can't attach it here. Message me and I will send it to you.

Good luck with your preparation!

Anton

Hi,

This is a very typical case, which could be solved via table structure.

Let’s say you know, that your client sells 1000 cups of coffee for takeaway at the price of 1 GBP each. And there are 4 market segments (by income) in this town: mass, mass affluent, affluent, HNWI.

Now lets draw a table with the following structure:

Columns: market segment, segment revenue pool, segment price sensitivity, segment coffee quality sensitivity, segment geo location sensitivity, your offering, competitors offering

Lines: mass, mass affluent, affluent, HNWI

The next step is to fill this structure:

Market segment column - names of segments

Segment revenue pools

  • Mass - 100 pounds
  • Mass affluent - 400 pounds
  • Affluent - 450 pounds
  • HNWI - 50 pounds

Segment price sensitivity

  • Mass - High
  • Mass affluent - Low
  • Affluent - Low
  • HNWI - Low

Segment coffee quality sensitivity

  • Mass - Low
  • Mass affluent - High
  • Affluent - High
  • HNWI - High

Segment geo location sensitivity

  • Mass - Low
  • Mass affluent - Low
  • Affluent - Low
  • HNWI - Low

Your offering

  • Same for all lines: 1 GPB per cup, high quality, center location

Competitor’s offering

  • Same for all lines: 0,5 GPB per cup, medium quality, center location

Now we can see that your competitor offers a cheaper product with lower quality. This might only affect the mass clients as they have higher price sensitivity and care less about the quality.

What does it mean in terms of market share?

You might loss is 100 GPB revenue pool, which is equal to 10% market share (10% share in current market terms, but you have to take into account, that the whole market will be 950 GBP).

I used random assumptions in this solution to illustrate the approach.

I have a few ideas how to add sophistication for this case and draw a more detailed table. However, I can't attach it here. Message me and I will send it to you.

Good luck with your preparation!

Anton

(edited)

Book a coaching with Sidi

99% Recommendation Rate

423 Meetings

4,089 Q&A Upvotes

USD 449 / Coaching

Hi!

This is a nice exercise in top-down thinking. Let me give you a step-by-step description.

  1. Define your objective/focus metric. Market Share is not universally defined, so you need to define it before you can structure the problem. --> The most common definition for Market Share is (Our Revenue) / (Market size). Hence, a loss of market share mathematically means that the numerator becomes smaller relative to the denominator. Or in other words, our revenue becomes smaller relative to the market size. So losing market share happens if either (a) our revenue grows slower than the market, or (b) our revenue declines faster than the market.
  2. Identify how the market entry impacts each of the two drivers of market share (i.e., our revenue and the market size). It is not very plausible to expect the market size (the denominator) to grow because of a new player emerging. This means that most probably, you will have to check whether this new competitor will cause our revenue (the numerator) to decline.
  3. In order to run this check, we disaggregate revenue into its numerical drivers (e.g., number of coffees sold and average price per coffee), and then analyze how each of these drivers could be affected by a new competitor. This is where qualitative and contextual information comes into play during the analysis! The most obvious impact would consider the quantity of coffees sold - especially if the coffee quality and the accessibility of the new competitor is good. But it could also impact the price point that can be realized, if this competitor offers structurally lower prices. All of these points need to be discussed with the interviewer during the analysis.
  4. Now that you have identified the principle mechanism, you can try and estimate how much each driver would be affected, and substantially derive a quantification of your expected market share loss. Here, it might make sense to work with scenarios.

I hope this is helpful. :)

Cheers, Sidi

Hi!

This is a nice exercise in top-down thinking. Let me give you a step-by-step description.

  1. Define your objective/focus metric. Market Share is not universally defined, so you need to define it before you can structure the problem. --> The most common definition for Market Share is (Our Revenue) / (Market size). Hence, a loss of market share mathematically means that the numerator becomes smaller relative to the denominator. Or in other words, our revenue becomes smaller relative to the market size. So losing market share happens if either (a) our revenue grows slower than the market, or (b) our revenue declines faster than the market.
  2. Identify how the market entry impacts each of the two drivers of market share (i.e., our revenue and the market size). It is not very plausible to expect the market size (the denominator) to grow because of a new player emerging. This means that most probably, you will have to check whether this new competitor will cause our revenue (the numerator) to decline.
  3. In order to run this check, we disaggregate revenue into its numerical drivers (e.g., number of coffees sold and average price per coffee), and then analyze how each of these drivers could be affected by a new competitor. This is where qualitative and contextual information comes into play during the analysis! The most obvious impact would consider the quantity of coffees sold - especially if the coffee quality and the accessibility of the new competitor is good. But it could also impact the price point that can be realized, if this competitor offers structurally lower prices. All of these points need to be discussed with the interviewer during the analysis.
  4. Now that you have identified the principle mechanism, you can try and estimate how much each driver would be affected, and substantially derive a quantification of your expected market share loss. Here, it might make sense to work with scenarios.

I hope this is helpful. :)

Cheers, Sidi

Book a coaching with Ian

100% Recommendation Rate

201 Meetings

16,372 Q&A Upvotes

USD 289 / Coaching

Hi there,

Also important is context for this. Do you understand the 4 main types of competition and how they affect firms' behaviour? Do you also know what industries (and brands) fall into each?

If not, the following two articles provide a nice summary:

1) https://bizfluent.com/info-7904519-types-competition-economics.html

2) https://saylordotorg.github.io/text_exploring-business-v2.0/s05-05-monopolistic-competition-oligo.html

The key differences in each of these markets fall along the following lines:

  • # of competitores
  • Price competition
  • Product differentiation (relates to price competition)
  • Substitutability of products (also relates to price competition)
  • Margins
  • Barriers to entry (natural and legal)

Hi there,

Also important is context for this. Do you understand the 4 main types of competition and how they affect firms' behaviour? Do you also know what industries (and brands) fall into each?

If not, the following two articles provide a nice summary:

1) https://bizfluent.com/info-7904519-types-competition-economics.html

2) https://saylordotorg.github.io/text_exploring-business-v2.0/s05-05-monopolistic-competition-oligo.html

The key differences in each of these markets fall along the following lines:

  • # of competitores
  • Price competition
  • Product differentiation (relates to price competition)
  • Substitutability of products (also relates to price competition)
  • Margins
  • Barriers to entry (natural and legal)

Related BootCamp article(s)

Interviewer-Led vs Candidate-Led cases

Case Interviews can be led by the candidate or by the interviewer: In Candidate-led cases the main challenge is the structure. In Interviewer-led cases the main challenge is to adapt quickly

Getting Up to Speed

In order to repeatedly demonstrate prerequisite skills under the pressure of a real case interview, you need to learn the basics and practice cases.

1 Q&A

Related case(s)

Bain case: Asian lubricants producer

Solved 154.0k times
Bain case: Asian lubricants producer LubricantsCo, a very successful Asian premium producer of lubricants in their native region, would like to further increase their revenue and profit. The product range ranges from lubricants in the automotive sector (e.g. motor and gear oil) to industrial applications (e.g. fats, heavy-duty oils). According to preliminary examinations, further growth potentials in the Asian core market are rather limited. Thus LubricantsCo would like to investigate options to internationalize in the passenger car business – also outside the premium segment which is given priority. Therefore your consulting firm was instructed to elaborate a market entry strategy for the European market.  
4.6 5 29354
| Rating: (4.6 / 5.0)

LubricantsCo, a very successful Asian premium producer of lubricants in their native region, would like to further increase their revenue and profit. The product range ranges from lubricants in the automotive sector (e.g. motor and gear oil) to industrial applications (e.g. fats, heavy-duty oils). ... Open whole case

Oliver Wyman case: Full Electrons Ahead

Solved 97.5k times
Oliver Wyman case: Full Electrons Ahead Your client, large automotive OEM WyCar, has developed its first fully electric vehicle (EV) and introduced it as a pilot on the Austrian market last year. However, sales have been far below the expected numbers. The management has engaged you to support them in understanding the reasons and advise them on how to adjust the product offering.
4.6 5 6434
| Rating: (4.6 / 5.0)

Your client, large automotive OEM WyCar, has developed its first fully electric vehicle (EV) and introduced it as a pilot on the Austrian market last year. However, sales have been far below the expected numbers. The management has engaged you to support them in understanding the reasons and advise ... Open whole case

Roland Berger case: Light on!

Solved 74.6k times
Roland Berger case: Light on! LumCO, a company producing injection-molded components for lighting applications, has operated successfully in its native European market. The company wants to open up one production facility each in China and the United States and establish their own distribution network in both countries to serve as a hub for the entire region. The products LumCO manufactures can be categorized into Specialties, which are designed and produced by LumCO according to customer specifications (e.g. head lamp casing and lenses in vehicles, luminaires for design lighting applications) and Standards, which encompasses an assortment of components for multiple lighting applications for different industries (fixtures, lenses, luminaires). Based on the only slight but stable growth outlook in Europe, LumCO is eager to establish the production sites in China and the U.S. as soon as possible and also to begin to distribute their products directly. As a consultant, you are asked by the board of management to assess this plan considering your knowledge of each region and the lighting market in particular.
4.6 5 14547
| Rating: (4.6 / 5.0)

LumCO, a company producing injection-molded components for lighting applications, has operated successfully in its native European market. The company wants to open up one production facility each in China and the United States and establish their own distribution network in both countries to serve ... Open whole case

Deloitte Consulting case: Footloose

Solved 70.1k times
Deloitte Consulting case: Footloose Duraflex is a German footwear company with annual men’s footwear sales of approximately €1 b. They have always relied on the boot market for the majority of their volume. In this market they compete with three other major competitors. In the fall of 2019, Badger – one of Duraflex’s competitiors – launched a new line of aggressively priced work boots. The strong success of this line has caused Duraflex’s management to re-evaluate their position in work boots. With limited additional resources, the management must now decide if they should focus their efforts on competing with Badger in the work boot sector, or allocate their resources on further strengthening their position with casual boots. The management team approached you and asked for your advice. In order to advise them on their future work boot strategy please prepare first some insights regarding market size and competitive landscape.
4.5 5 13166
| Rating: (4.5 / 5.0)

Duraflex is a German footwear company with annual men’s footwear sales of approximately €1 b. They have always relied on the boot market for the majority of their volume. In this market they compete with three other major competitors. In the fall of 2019, Badger – one of Duraflex’s competitiors – ... Open whole case

DHL Consulting case: Books & Codes

Solved 63.6k times
DHL Consulting case: Books & Codes A friend of yours recently got promoted to the position of director of a university library. Yesterday, your friend received a call from the Ministry of Education, who offered him to be part of a national RFID pilot with his library. As your friend is unsure if he should pursue this option, he asks you for your advice. Your task is to assess the RFID technology for his library. How would you approach such a request?
4.6 5 4893
| Rating: (4.6 / 5.0)

A friend of yours recently got promoted to the position of director of a university library. Yesterday, your friend received a call from the Ministry of Education, who offered him to be part of a national RFID pilot with his library. As your friend is unsure if he should pursue this option, he asks ... Open whole case