Mck math # interpretation incos pens

Question

In the Incos pens case, the global profits of disposable pens were 30M and the profits of launching a premium pens was 0.84M from EU (not global). Compared to the global profits this is tiny, so on the one hand you could argue that it doesn't seem like a worthwhile venture. But on the other hand could I also interpret it saying that although it is small, it is still a profitable segment and a differentiation to our current offering (where sales have been flat and is unlikely to grow much given disposable pens are a commoditized product) so there is a potential to explore premium pens further by looking at the segments long term growth prospects and level of competition? Is this a fair interpretation?

Answer 1

Hi there,

If I offer you $50 for your $10 would you take it?

Absolutely!

So yes, even if this isn't a huge needle mover, if the ROI/NPV is attractive (as in, this is the most optimal way for our company to spend its money) then yes we'll do this, but we'll also look at other opportunities! In short, yes, you're thinking about this corrently.

Answer 2

You could argue both ways. In fact, you will impress your interviewer by looking beyond the numbers i.e. put the marginal profits in perspective to the global numbers first and then follow with a good “However,…”.

Consider what the vision of the company may look like and what other strategic objectives there may be, other than short term profit. That’s McKinsey level thinking.

If you can articulate a reasonable case for pursuing this venture, then go for it - just don’t forget to highlight your assumptions, risks, and blindspots that need attention.