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.
Suggested case structure:
To determine whether the client should launch the new magazine, the interviewee should first outline a structure to estimate the magazine’s potential first-year revenue. At this stage, the candidate should start with an issue tree rather than estimating numbers.
Information that can be shared on the interviewee’s inquiry:
Main revenue streams:
After the interviewee has brainstormed potential revenue streams, share the revenue estimation tree (Diagram 2).
If the interviewee’s estimates are differing considerably from the given suggestion, you should decide whether you want to use the case-suggestion or the version of the candidate.
After laying out a structure, the interviewee should consistently follow it. To calculate revenue, the interviewee should begin with the end-nodes (the nodes at the bottom of the tree) and estimate values to calculate the nodes’ values from the bottom to the top of the tree.
Since we need the total number of units sold to calculate the first two branches (retail and subscription sales) let’s start by branch number 3 (advertisement).
If they ask for the following information, have them estimate first. If their estimates are very different from the following numbers, you must decide whether to follow their estimates or to ask them to use the following numbers.
Information that is given:
Percentage of men between 30 - 60 who buy magazines: 10%
US population: 300 million
Share Table 1 and Diagram 3/4/5 containing background information for the calculation, if the interviewee inquires it.
But ONLY share Diagram 3 if the interviewee has problems calculating the size of the target market.
(3) Advertisement revenue
(2) Retail sales revenue
(1) Subscription revenue
Total annual revenue
The revenue in the first year is then estimated to be ≈$17 million.
Based on the estimated first-year revenue alone, the CEO of the publishing company should launch the new magazine.
The estimated potential first-year revenue is 16% higher than the CEO’s targeted first-year revenue ($15 million).
However, before giving a firm recommendation, the following factors should be investigated.
- To verify whether 5% market share is a realistic first-year estimate, we should better study the competitive landscape.
- To verify whether 10% of men between 30 and 60 years old really buy magazines, we should further investigate our target demographic.
- Does the publishing company have competencies in this new market?
- Do we need to hire new writers for this magazine?
- We need writers who specialize in this target market
- We need more writers because of a higher workload
- Can we synergize with our current existing magazines?
- Selling advertisement across different magazines
- Featuring magazines across each other (advertising)
- Reporters working on different magazines
- Easier research for reporters due to bigger network