Invite
partner
Case

Telephony Technology Warehouser

Solved 2.1k times
4.2 5 257
Difficulty: Intermediate | Style: Candidate-led (usual style) | Topics: Profitability analysis, Market analysis

Problem Definition

We are a warehouser (B2B) and have been facing a decline in profits since past 2 years. We would like you to figure out why this is happening and provide recommendations to reverse this trend.

Comments

The case is designed to be presented to the candidate by an interviewer, who plays the role of a representative of a telephony technology warehouser.

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.

I. Background

The candidate should ask for more market information. The interviewer should provide all available information & data to candidate and it is up to candidate to define the issues that should be looked into based on the data/info provided.

Share Diagram 1 with candidate if deemed necessary.

As a warehouser, we purchase telephony technologies from manufacturers, and then sell them to a group of resellers, who in turn sell them to end consumers.

We are the largest company in the industry. Apart from one competitor who is almost as large as us, there are several small players in the market. In recent years we have not seen any new market entrants and all firms sell at industry-wide prices.

The reseller market can be divided into Value-Added (largest), Corporate (medium), and E-tailer (smallest) segments.

Please share Table 1 with the candidate.

II. Solution

After looking at the table, the candidate should be able to come up with the following observations:

  • The overall industry has shrunk
  • The client's overall market share has declined
  • Value-added is the largest segment and the firm has lost market share in this segment as well

From the above observations, the candidate should be able to make the following conclusion:

  • It is a bad business to be in as the overall industry has shrunk, both on price and volume basis

Since the overall volume has decreased, it could mean that the client and competitors are getting cut out from the value chain - the manufacturers maybe directly selling to the resellers or to the end consumers.

Falling prices can be a result of the price wars which are happening because of the shrinkage of the industry. We can see that the industry is rapidly ageing. Since there are no opportunities of product differentiation, there is little the firm can do to increase profitability. The firm should recognize this and look for options for exiting the industry.

III. Concluding Observations

The industry looks mature and is rapidly approaching obsolescence. There is little the firm can do to increase profitability. The firm should recognize this and look for options for exiting the industry.

Difficult Questions

What kind of options could the firm consider for exiting the industry?

  • Diversify into another industry
  • Sell the firm
  • Close the firm
Download case
Related consulting question(s)
pricing Case Interview Framework profitability
Best answer so far:
McKinsey / Accenture / Got all BIG3 offers / More than 300 real MBB cases / Harvard Business School

Hi, The general framework for pricing is: Cost base - Value based - Competitor based - pricing strategy 1. Cost based - you actually check what are the costs and apply standard industry / target... (more)

View in detail
10.4k Views
Case Interview profitability analysis
Best answer so far out of 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)

View in detail
13.8k Views
business situation growth strategy expansion Market sizing market entry Consumer Psychology competitive response Framework 4C Framework
Best answer so far:
#1 Expert for coaching sessions (1800+) | Ex BCG | 900+ 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)

View in detail
4.0k Views
expert exit startup exit options
Best answer so far:
Currently non-active expert
Expert

Frankly, exit options are quite broad (excerpt of what I remember my fellow alumni doing): Large companies (typically after advising the industry), often "strategy department" or in-house-consul... (more)

View in detail
3.4k Views
Framework profitability profitability analysis MECE issue tree market questions
Best answer so far:
McKinsey Engagement Manager & BCG Consultant | Interviewer at McK & BCG for 7 years | Coached 50+ 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)

View in detail
1.1k Views
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)

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.

8 Comment(s)

Product Life Cycle

See how the concept or the product life cycle can help you in your consulting case interview

3 Comment(s)
4.2 (257 ratings)
4.2 5 257
Case exhibits