If you have ever been in Bangkok, you would have noticed these motorcycles transporting people from A to B as an alternative means of transportation. These motorcycles typically transport people on short distances such as nearby train stations, supermarkets or food stalls.
Your job is to estimate how much profit a motorcycle can generate in a month’s work meaning that you have to estimate both revenue & cost to be able to estimate profit.
Since this is a candidate-led case, the candidate should drive the case from start to finish.
This is a fairly simple case, but candidate will receive a lot of info & data verbally, so the case is meant to test a candidate's ability to remember info & data provided verbally and if they can summarize it and use it.
This case also helps the candidate to practice note-taking & listening effectively.
Short Solution (Expand) (Collapse)
Suggested case structure:
- First, candidate should explain his approach by saying that he wants to estimate revenue first, then costs and then profits.
- If candidate isn't familiar with the country or business, he should ask questions to get more information or data.
- The candidate should also think about the data or information he needs to calculate profits.
To start the case off, candidate should ask for more background information on this motorbike business. If he already knows about it, he should still ask for background info so he doesn't make any wrong assumptions.
Candidate should ask for data & information to calculate revenue & costs. Below is the information that can be shared upon request:
Working hoursEach driver works 14 hours a day from 06.00 AM to 08.00 PM. Drivers work 7 days a week. On Friday & Saturday night, drivers work until midnight to benefit from entertainment traffic.
Lead-timesEach ride takes about 10 minutes including the empty return-drive to point of pick-up/assigned station.
Rush hours & capacityMorning rush-hours on weekdays are from 06.00 AM to 09.00 AM - drivers work at 100% capacity. No need to wait in line. Evening rush-hours on weekdays are from 05.00 PM to 08.00 PM - drivers work at 100% capacity. No need to wait in line. Off-peak hours on weekdays and weekends drivers work at 50% capacity due to limited demand. Rush-hours on friday/saturday-nights from 08.00 pm to midnight, drivers work at 100% capacity. Remember that driver benefits only from morning or evening rush, not both. If a driver benefits from morning rush, his/her evening rush is similar to off-peak hours, so operating at 50% capacity.
RevenueEach ride costs $0.50 cent.
CostsMonthly installment payments are $30. Monthly permit fees are $50. Monthly gas expenses are $100.
Calculating number of rides:
Assuming our driver benefits from morning rush hour, we can calculate the number rides during:Peak-hours on weekdays. Off-peak hours on weekdays. Peak-hours on weekend-nights. Off-peak hours on weekends.
With this formula we can calculate number of rides for one week for each time-segment.
Calculating total monthly revenue:
Total rides per week: 387 rides.
Total rides per month: 387*4=1,548 rides.
Total revenue per month: 1,548*$0.50=$774
Calculating total monthy cost:
Installment fee+permit fees+fuel costs=$30+$50+$100=$180.
Calculating monthly profit:
- Would you consider the total profits as a realistic number?
- If yes, why?
- If no, why?