Question 6

Question

Hello,

Regarding the answer to question #6 : "Wages will decrease by (25%*0.85)=21% to about 4% of total costs when moving production to China" what is the logic behind it? ( Multiplying it with .85 and then stating that 4% is the answer?

Thank you so much.

Answer 1

Hello Anonymous,

The key here is to understand that both the 21% and 4% are relative to total cost.

Here it goes:

Current wages are 25% of total costs.

In China, wages are only 15% of what they currently are. Hence you save 85%.

By moving to China, wages will become approx 4% of total cost (= 25% * 15%).

Said differently, you will save approx 21% of total cost (= 25% * 85%).

Does this make sense?

Best

Stephanie.

Answer 2

Stephanie gave a great explanation. I would just add that the wages will be the 4% of the original total costs.

If we refer to the new amount of costs, producing in china, the incidence of the wages will be

4% / (100 % - 21%) = 5%

Hope it helps,
Luca

Answer 3

Let me take a crack at this (in English) since no-one has addressed this. Top consultancies typically want the best... (read entire answer)

Let me take a crack at this (in English) since no-one has addressed this. Top consultancies typically want the best people regardless of their background. Yes, some roles are... (read entire answer)

Answer 4

Hi Jasmijn, The focus of the first round is more on your personal fit and individual behavior combined with a case... (read entire answer)

Hi Jasmijn, The focus of the first round is more on your personal fit and individual behavior combined with a case interview. In the second round you will probably have two fu... (read entire answer)

Answer 5

My favourite approach (there are many as Guennael highlighted) is similar to Michael's: demand driven. Why is it be... (read entire answer)

My favourite approach (there are many as Guennael highlighted) is similar to Michael's: demand driven. Why is it better than going for a more top-down one? Because it uses bui... (read entire answer)