Information that should be shared if inquired by the interviewee:
FibOp’s customers are segmented as key accounts clients (customers with huge orders) and retail clients (customers with little orders).
Sales to retail clients this year have increased by 20% compared to last year.
4 years ago FibOp has signed a contract of exclusivity in the Mobile Telecom industry where only D-Com, a big national mobile network provider, would have the right to buy from FibOp. The contract was signed with 5-year duration and gave FibOp the chance to serve the biggest client it ever had. D-Com in turn had the guarantee of a fast and local provider of their optical fibres.
Note for Interviewer
This is key for cracking the case!
Only tell candidate if he/she asks for it!
D-Com had a 3-year infrastructure expansion plan where its transmission capacity would grow from 6 KTs (kilo terabits per second) to 15 KTs. This expansion endedlastyear, therefore D-Com made onlyorders for maintenance of the installed capacity this year.
Having uncovered all the available information, the interviewee should conclude that the problem is notindustry-wide, and is not caused by the general market, which is increasing by 2 digits yearly.
The strategy to sign an exclusivity contract in the mobile industry to capture a heavy-weight customer was good. However the customer’s demand should have been betterplanned and discussed since the beginning, so that the FibOp could find other big clients in other industries to replace D-Com’s interrupted demand smoothly. Another option could have been agreeing on a minimal yearly order throughout the 5 years of the exclusivity contract.
Offering FibOp’s free capacity to competitors that might be losing orders because of lack of capacity.
Selling spools to other competitors so they resell it under their label.
Finding otherheavy-weight customers in other industries.
Trying to cancel the contract with D-Com (based on the interrupted demand) and looking for other mobile network clients.
Trying to differentiate the product somehow (e.g. by making the optical fibre thinner, thus increasing its use scope).
Suppose D-Com’s capacity is today of 15 KTs. The usage is however only 5 KTs.
Assuming that the usage doubles every 18 months and that there has to be a free-capacity margin of 20% (for quality reasons), how much should the capacity grow (in percentage) in 4.5 years compared to today?
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