Case

Best Tablets Company

Problem Definition

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.


Comments

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)


Detailed Solution

Paragraphs highlighted in green indicate diagrams or tables that can be shared in the "Case exhibits" section

Paragraphs highlighted in blue can be verbally communicated to the interviewee.

Paragraphs highlighted in orange indicate hints for you how to guide the interviewee through the case.

I. Background

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.

Company Characteristics:

  • 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:

Competition:

  • The company has many competitors in the market, but until recently they did not affect its profit.

Profit Factors:

  • 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)


Hints on how to start the interview
  • 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.


II. Analysis

Performance history of the company

Diagram 1 should be presented to the interviewee after introducing the case.

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

Hints for a better response from the interviewee
  • 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:

Diagram 2 should be presented to the interviewee for a few moments to understand it, followed by diagram 3.

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.

Key Insights:

  • 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


Profitability factors

Diagram 4 and Diagram 5 should be shared with the interviewee.

Hints
  • 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.

Key Insights:

  • 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.

An excellent interviewee would first talk about the R&D before mentioning the other profitability factors of the company, and they would take the time to think about the different diagrams before giving any answer. They would also mention in their recommendation that Best Tablets should leave the operating software system section behind and also concentrate more on the development of the categories in which they are already market leaders.

III. Recommendation

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.

Difficult Questions

More questions to be added to test the knowledge of the interviewee.

Related consulting question(s)
Vlad gave the best answer on Feb 16, 2018 - 4 answers
McKinsey / Accenture / Got all BIG3 offers / More than 300 real MBB cases / Harvard Business School

Hi! It depends very much on the industry. In some cases (Growth strategy) I will use a broad structure, in others (e.g. “how to increase the excessive luggage revenues for an Airline”) I will use P... (more)

Francesco updated the best answer on Mar 27, 2018 - 1 answer
#1 Expert for coaching sessions (2.100+) | Ex BCG | 1.000+ reviews with 100% recommendation rate

Hi Elisey, I would personally not recommend to use a single framework for all the so-called business situations (M&A, Entry, New product, Operations etc). Although this would help to more easil... (more)

Vlad gave the best answer on Apr 03, 2017 - 2 answers
McKinsey / Accenture / Got all BIG3 offers / More than 300 real MBB cases / Harvard Business School

Hi, 1) You proactively ask in the beginning, even before drawing the structure (something like "What kind of products / revenue sources do we have) and then split the structure into price, qty,... (more)

Sidi gave the best answer on Aug 13, 2018 - 1 answer
McKinsey Engagement Manager & BCG Consultant | Interviewer at McK & BCG for 7 years | Coached 60+ candidates secure MBB offers

Hi Kay, this is indeed one of the fundamental things that you need to learn in order to rigorously disaggregate the value drivers of a business. The driver tree allows you to identify the numerical d... (more)

Vlad gave the best answer on Feb 26, 2018 - 4 answers
McKinsey / Accenture / Got all BIG3 offers / More than 300 real MBB cases / Harvard Business School

Hi, I would start with either market sizing or with profitability cases since they are much easier: 1) In market sizing cases I would try to understand the basic approach: How to structure... (more)

Related BootCamp article(s)

The Value Chain

The Value Chain - as e.g. by Porter - is a classic framework to structure the activities of a business and add value to products by transforming resources.

3 Comment(s)

CAGR - Compounded Annual Growth Rate - CAGR

The Compounded Annual Growth Rate (CAGR) Is a theoretical steady growth rate over a specific amount of time, not the average of the Y-o-Y growth rates. It can mask sub-trends within the period

5 Comment(s)

Profitability Case

Learn to crack Profitability Framework Consulting Cases, which are the number 1 reason for real consulting projects and hence are an important case type.

9 Comment(s)

Growth Strategy

Growth questions are among the most common questions in consulting case interviews: gather the necessary Information about volume and price to find the best growth lever

8 Comment(s)
4.0 (19 ratings)
4.0 5 19
Case exhibits


1. What information can you extract from the diagram?




2. What three main points are important to mention?


3. Please identify the products in diagram 3.



4. What observations can you make from the diagram?


5. What recommendations can you make for Best Tablets company?