## Problem Definition

Our client is a BlissOttica, an Eyewear Manufacturer that is looking to reach a 10% increase in profits. How would you help our client?

Expert case by Francesco

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Our client is a BlissOttica, an Eyewear Manufacturer that is looking to reach a 10% increase in profits. How would you help our client?

This case is a** variation of a Bain 1st round case**.

The case aims to test the ability of the candidate to:

**Interpret graphs and compare them**to derive insights**Perform correctly math**related to graphs**State hypotheses and define a structured approach**based on them

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To keep a structured approach in assessing the performance of the candidate, **it is recommended that the interviewer uses a scoring system to evaluate the 5 parts of the case** presented below. This will help the candidate to understand his/her level of readiness for the actual interview.

A possible grading system for each part is the following:

**0 – Bad answer.**The answer is wrong, largely incomplete or anyway incomprehensible for the interviewer due to lack of good communication**1 – Average answer.**The answer includes part of the correct solution, however it is missing a few relevant points. Alternatively, it is complete but not communicated well**2 – Great answer.**The answer is complete and well communicated

A possible evaluation grid is the following:

**8-10 points:**clear pass**6-8 points:**potentially pass**6 points and below:**did not pass

You can adapt the grading system and the evaluation grid according to your needs.

The text presents the questions to ask, the proposed optimal answer and the suggestions to score a candidate performance in each area.

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

After presenting the prompt, wait for the candidate to ask clarifying questions and/or present the structure.

Information to be shared **only under request:**

- BlissOttica offers high-end eyewear for both sunglasses and prescription glasses. It is one of the largest manufacturers worldwide
- The target market for expansion is the US
- The timeline for the goal is 1 year
- Profitability is standard in the industry at 5% and cannot be realistically increased
- Revenues come 80% from retail and 20% from online sales (this piece of information is not useful in this particular case)
- Current revenues of the client are $1.2B
- The client can invest $50M in the new growth strategy

The information about revenues at $1.2B and profitability stable at 5% should lead the candidate to deduct we will have to reach an additional $120M in revenues to reach the goal.

If the candidate proposes to analyze costs, explain the 5% profit margin cannot be increased and redirect him/her to focus on revenues only.

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An excellent candidate would **clarify the objective** in terms of current profits, budget and time constraints and **understand the source of revenues**.

A great candidate would include in the analysis the following elements:

**Segmentation of profit sources**for the client**Identification of areas not performing**, if present**Analysis of revenues and costs**for that area**Analysis of possible reasons for bad performance**in revenues and costs**Strategy to increase revenues and/or decrease costs**

The candidate may state a hypothesis when presenting the structure.

The candidate may include additional elements, but there should be a rationale related to the objective of BlissOttica.

An excellent candidate should **present clearly the different areas in a structured way.**

Moreover, the candidate **should clearly present the rationale why he/she wants to explore a particular point**, connecting the answer to the objective of the client.

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An excellent candidate should:

- Clarify the goal of the client
- Include the main elements in the structure as presented above
- Communicate the structure in a clear way

**Recommended score calculation: **starting from 2, decrease the score by 0,5 points down to 0 for any of the following:

- The candidate did not clarify the objective
- The candidate did not include two or more of the areas described above
- The candidate included multiple useless elements in the structure (ie boiling the ocean)
- The candidate communicated the structure in a disorganized way or without a clear connection to the goal

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Once the candidate asked for information on the current profits, show the following graphs.

Show **Exhibit 2 and 3**.

If the candidate explains that he/she would like to start the analysis from costs, redirect the candidate to think about revenues first, providing the information on the 5% profit margin if not mentioned before.

If needed, clarify that the split in age segments is the same for each region.

The graphs show low performance in the North and for age segments 0-20, 41-50 and 51-60. However, there is no comparison with the industry performance. It may well be the North and some age segments are structurally more competitive and there is no option to grow there.

If the candidate suggests to prioritize the North region, ask him/her *“Do you think the client performance is the only element to consider here?”*

After the candidate asked for Industry information for a comparison, present the following Exhibits.

Show** Exhibit 3 and 4**.

Once received the exhibits, the candidate should present the hypothesis that the most promising segments where to focus are the **South** and the **segment below 30 years. **However, that will depend as well on the size of the market and the expected increase in market share in the relevant segments.

The candidate may state hypotheses on different age groups as promising (eg 61+), but should still ask for data to verify that.

The candidate should then ask for information on size and expected market share to verify the hypothesis.

An excellent candidate would ask for information on the **market performance**, in order to compare the results of the company with the market.

A great candidate will state the hypothesis that the l**argest opportunity for the client is in the South area and below the 30-year segment**. This however should be checked by analyzing the size of the market and the market share achievable in those segments.

An excellent candidate would **move to analyze the size of each segment **and** the market share that may be expected there.**

An excellent candidate should:

- Ask for information on the market performance
- Identify the ideal segment as “South” and “Below 30 years”
- Propose next steps related to quantify the additional revenues that could be generated in that area

**Recommended score calculation: **starting from 2, decrease the score by 0,5 point down to 0 for any of the following:

- The candidate did not ask for additional information on the market performance
- The candidate spent several minutes analyzing the information in the graph without identifying the key trends
- The candidate did not state a hypothesis on the optimal segments
- The candidate did not suggest to move to the next steps analyzing the size and market share obtainable in each segment

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The candidate should have proposed autonomously to move to the next steps and calculate the size and market share available for each segment. If not, ask the following:

Once asked, mention the following:

"*Assume* *each region has the same market potential. How would you estimate the expected revenues if we reach the average market share in the geographic areas where our performance is currently below average?"*

Some candidates will start to perform the math immediately without presenting a structure upfront. An ideal candidate will explain step-by-step the math theory, then move to the numbers.

Note that the candidate doesn’t need to calculate the revenues for each age group to answer the question, but only calculate the additional revenues for the region. If the candidate starts to analyze age groups, redirect him/her accordingly.

The candidate should identify the new revenue potential as $160M, according to the math in the solution below.

An excellent candidate would **ask for information on the size of the segments and the expected market share to be achieved**.

A great candidate would** identify that the optimal process involves calculating the new size for the South market**.

An excellent candidate would **clearly present the math formula **before performing the actual math.

The correct formulas to use are the following:

**New market share in the South:***Equal to the Industry one***Proportion of Market Share of BlissOttica over Total Market Share**=*Sum of Market Share of BlissOttica /Total Possible Market share***Total Market Potential:***Current Revenues/ Proportion of Market Share of BlissOttica***South Market:***Total Market Potential / Number of Markets***New Revenues:***South Market*(New Market Share-Old Market Share)*

A great candidate would **perform the math correctly,** aligning with the interviewer and avoiding computations for options not feasible. Following the previous formula, the math computation is the following:

**New market share in the South:***25%***Proportion of Market Share of BlissOttica over Total Market Share**= 0,75/4 = 0,1875**Total Market Potential: $***1.2B/ 0.1875 = $6.4B***South Market: $***6.4B / 4 = $1.6B***New Revenues:**$*1.6B*(25%-15%)=$160M*

An excellent candidate would **conclude that reaching the target is possible** with an expansion in the South, since keeping the same profitability at 5%, a 10% increase in profits means a 10% increase in revenues, that is $120M, which can be achieved in that region. The candidate should then propose an analysis to organize the expansion in the South, in order to reach the desired level of revenues.

An excellent candidate should:

- Ask for information on the expected market share and size of each market
- Present the structure upfront before performing the math
- Correctly calculate the size of the additional market available in the South
- Identify that the market in the South is sufficient to reach the target and propose to look at the best way to expand there

**Recommended score calculation: **starting from 2, decrease the score by 0,5 point down to 0 for any of the following:

- The candidate made assumptions on the expected market share and size of the market without verifying them
- The candidate did not present a structure before performing the math
- The candidate did mistakes performing the math
- The candidate did not identify that the additional revenues would allow to reach the goal

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Following the solution in the previous part, ask the following to the candidate.

A great candidate would ask for the market dimension of each age group, and the expected market share that we may reach there. If the candidate doesn’t do so, mention the following:

Once asked, show Exhibit 5, explaining that the client may reach the average market share per segment when the current one is lower.

Show **Exhibit 5**.

The candidate should calculate the segments with the highest potential in two steps:

- Calculate the market size of each segment
- Calculate the revenues that can be achieved there

The candidate should identify that the best segments to enter are 0-20, followed by 21-30 and 61+. Having to choose 2 segments the 0-20 and 21-30 seem the most logical, given that they probably share synergies. However, the candidate should recognize that it is necessary to enter three segments, as two won’t allow to reach the minimum target of $120M.

An excellent candidate would **ask for information on the size of each age group and the expected market share to be achieved**.

A great candidate would identify that the optimal process involves (i) identify the market size for each segment (ii) estimate the old and new revenues that could be generated (iii) choose the 2 segments with the highest additional revenues.

An excellent candidate would **clearly present the math formula **before performing the actual math.

The correct formulas to use are the following:

**Market size for each segment:***South market size*Age group market share***Old revenues per segment:***Market size segment* Old market share from Exhibit 2***New revenues per segment:***Market size segment * New market share from Exhibit 4***Additional revenues:***New revenues – Old revenues*

A great candidate would **perform the math correctly,** aligning with the interviewer and avoiding computations for options not feasible.

Following the previous formula, the math computation is the following:

**Market size for each segment:**- 0-20: $1.6B*10% = $160M
- 21-30: $1.6B*10% = $160M
- 31-40: $1.6B*15% = $240M
- 41-50: $1.6B*20% = $320M
- 51-60: $1.6B*20% = $320M
- 60+: $1.6B*25% = $400M

**Old revenues per segment:**- 0-20: $160M*10% = $16M
- 21-30: $160M*25% = $40M
- 31-40: $240M*35% = $84M
- 41-50: $320M*15% = $48M
- 51-60: $320M*10% = $32M
- 60+: $400M*5% = $20M

**New revenues per segment:**- 0-20: $160M*40% = $64M
- 21-30: $160M*50% = $80M
- 31-40: $240M*35% = $84M (current market share is higher)
- 41-50: $320M*20% = $64M
- 51-60: $320M*15% = $48M
- 60+: $400M*15% = $60M

**Additional revenues:**- 0-20: $64M-$16M = $48M
- 21-30: $80M-$40M = $40M
- 31-40: $84M-$84M = 0$M
- 41-50: $64M-$48M = $16M
- 51-60: $48M-$32M = $16M
- 60+: $60M-$20M = $40M

Ideally, the candidate will build a table like the following to keep information organized (this is not strictly necessary though):

An excellent candidate would **conclude that the ideal segments are 0-20 and 21-30 or 61+.** Between 21-30 and 61+, the candidate should formulate the hypothesis 21-30 may be easier to penetrate given the fact the segment is closer to 0-20.

However, the candidate should also notice that **reaching the target is not possible** with just two segments. The client will need to target three segments to be able to successfully reach at least $120M. The candidate should thus suggest to analyze the possible ways to reach this target.

An excellent candidate should:

- Ask for information on the expected market share and size of each segment
- Present the structure upfront before performing the math
- Correctly calculate the additional size of each segment
- Identify that the ideal segments are 0-20, 21-30 and 61+, and notice that the client will need 3 segments to reach its goal

**Recommended score calculation: **starting from 2, decrease the score by 0,5 point down to 0 for any of the following:

- The candidate made assumptions on the expected market share and size of the market without verifying them
- The candidate did not present a structure before performing the math
- The candidate did mistakes performing the math
- The candidate did not identify the correct segments or that the client will need to expand in three segments to reach the goal

An excellent candidate would start with a small recap of the objective:

*"Our client asked us to understand the best strategy to reach an increase in profits of 10% - or $6M"*

A great candidate would provide and answer-first approach to the question asked.

*"In order to reach this target we would recommend to growth in the South segment in the 0-20, 21-30 and 61+ segments, for the following reasons:*

*The profitability is expected to remain at 5%**We will be able to reach a total of $128M in revenues, additional to the current ones – the most of any other segments in the market, thus generating $6.4M in profits**Covering less than 3 segments would not allow to reach the minimum target of $120M in revenues or $6M in profits”*

An excellent candidate would mention risks and next steps to take:

*"As for next steps, we would like to analyze the following:*

*Are the capabilities that we have ($50M) enough to implement the plan**Can we reach the desired results already in the 1st year**We need to define a structure for an implementation plan to help the client to execute the expansion*

*We would be happy to support you with all these 3 areas and present a plan to achieve the target in the next few days”*

An excellent candidate should:

- Recap the objective of the case
- Present the results of $128M revenues / $6.4M in profits and the need to enter 3 segments
- Propose next steps related to the original structure and to implement the suggested approach

**Recommended score calculation: **starting from 2, decrease the score by 0,5 point down to 0 for any of the following:

- The candidate did not have an answer-first approach and presented the conclusion in a disorganized way
- The candidate did not provide reasons why the selected segments are ideal for an expansion
- The candidate did not have next steps and/or risks as part of the recommendation
- The candidate spent more than 1,5 minutes to deliver the recommendation

Thanks for completing the case!

**Do you have any feedback or questions on the case or on your preparation? **

If so, you can click on the link below, click on the arrow near “Book a coaching” and click on “Send a message”, **I will reply within 12 hours.**

https:/bit.ly/ProfileFR

Best,

Francesco

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1.4k

Times solved

Beginner

Difficulty

Do you have questions on this case? Ask our community!