Best Tablets is one of the important companies in the world of high technology and communications. However, they have been witnessing a continual decrease in their profit for the last years and they want to come up with a strategy to get them back on track.
This case study is candidate-led. With assistance from the interviewer, the interviewee should identify the main factors for the decrease in profitability.
Short Solution (Expand) (Collapse)
The interviewee should have a basic idea about the problems of the company making it possible for the interviewer to give him or her some information about the background of the company.
- The company is a leading example in the technology market, but it suffered a decrease in profit due to unsuccessful investment in the R&D.
Information to be given when asked for:
- The company has many competitors in the market, but until recently they did not affect its profit.
- The company and the other competitors in the market have similar profitability factors such as COGS or SG&A. (In the case of R&D, it should not be mentioned except when the interviewee specifically asks about it)
- The interviewee should be aware that this is a case of a company suffering from a decline in profits and they should enquire about the profitability history of the company, and the market position of the company. Also, they should realize that the main problem is the high expenses on the R&D.
Performance history of the company
1. What information can you extract from the diagram?
Based on diagram 1, the interviewee should examine the history of the performance of the company and specifically make notes about:
- The annual revenue from 2007-2016
- Changes of the costs and profits in that same period
- CAGR of the company over the period of 9 years
- An interviewee should not only ask about the current state of profitability of the company. If this is the case though, the interviewer should guide them to ask about the historical trends.
Competition and market dynamics:
2. What three main points are important to mention?
The interviewee should state that the X axis indicates the different values of Absolute Market Share (AMS) of the company and that the Y axis is about the Relative Market Shares (RMS) which is the relation between Best Tablet's MS with its closest competitor's MS, after that they should interprete this info:
- If the client's RMS is higher than 1, this means they are the market leaders, if it is less than 1, they are not. This would be compatible with the information from diagram 2 regarding the importance of Best Tablets in the worldwide market.
- The "Total Revenue" of Best Tablets in the different categories is shown by the diameter of each bubble.
3. Please identify the products in diagram 3.
The interviewee should be able to identify the products when they do an accurate analysis of both diagram 2 and diagram 3.
- The interviewee should be able to identify that: Product 1 is Custom Applications, Product 2 is Tablets. Product 3 is Telecom equipment, Product 4 is Satellites and Product 5 is Operating Software
- These two last diagrams should be presented to the interviewee only if they previously identified R&D as one of the profit factors of Best Tablets company
4. What observations can you make from the diagram?
From analyzing diagram 4 and then diagram 5, the interviewee should be able to make these observations:
- Diagram 4 should show that in usual cases, the degree of technical leadership should go higher as the investment in R&D increases. However, it is not the case for Best Tablets company, as they are investing in R&D more than their competitors and gaining less recognition for their technical leadership from their customers.
- Diagram 5 should show that Best Tablets is spending money on developing features that hold not much interest for the customers, not enough to make them willing to pay for them.
- Diagram 4 shows that the R&D expenses of Best Tablets are less than the "normative band" which is not the case for the other competitors. Best Tablets is spending more than the other companies in the market, but they are gaining less than the competitors.
- Diagram 5 is about the overall expense of Best Tablets on R&D. The company has large expenses on elements that customers are not interested in paying for.
5. What recommendations can you make for Best Tablets?
The interviewee should mention these recommendations:
- Cut the R&D and the unnecessary expenses
- Keep the R&D but change the work strategy: spend money on features that customers will be ready to pay for.
- Divest the small operating software business as it will lead only to more expenses and not enough gains.
More questions to be added to test the knowledge of the interviewee.