Case

BearingPoint Case: Digital Business Model of a Parking App

Problem Definition

A car park and parking lot operator pursues the strategic goal of exploiting new sources of income via digital business models. As part of this initiative, a MVP (Minimal Viable Product) was developed for a parking app that enables users to search and pay for paid parking spaces.

The managing director approaches you with the request to carry out a comprehensive analysis of the parking app. First, the digital business model of the parking app will be analyzed. After the strategic consideration, a financial evaluation of the parking app will be carried out. On this basis, a clear recommendation will be made as to whether the app should be rolled out throughout Germany or not. Finally, an analytics-driven expansion strategy should be considered.


Comments

This case is mostly interviewer-led. The questions should be used to guide the interviewee.

The challenge of this case lies in the structured handling of the following three task areas:

  • Identification of the business model
  • Calculation of the business case
  • Analysis of an analytics-driven expansion strategy

Short Solution (Expand)

Detailed Solution

The candidate could proceed as follows:

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 on how to guide the interviewee through the case.

Warm-up Questions

  • Did you get the case so far?
  • Can you explain how the app should work?

The interviewer should either lead the candidate to understanding by asking questions or provide the following information.

Information about parking app: The parking app is to be embedded as a white label solution in a digital ecosystem (B2B2X environment), made possible by...
  • compatibility with existing software and hardware from car park and parking lot operators – without geographical restrictions
  • intuitive user interface that can be fully adapted to all mobile operating systems

Task 1 – Business Model in the Business Model Canvas

As digital business models are still unknown to the managing director, the first step is to gain an exact understanding of the parking app's business model. To do this, your client asks you to map the business model in the Business Model Canvas.

The Business Model Canvas is a tool for displaying business models. Company or product offerings (what?), customers (who?), infrastructure and finances (how?) are analyzed using nine building blocks.

Table 1 can be shared with the candidate.

Exemplary Solution

Once the applicant has defined his solution, Table 2 can be shared with him.

Task 2 – Business Case Calculation

Now the business model of the new idea of the parking app is fixed. Consequently, a business case is to be calculated. To calculate the profitability of the business idea, it is necessary to calculate different parameters. These include:
  • the expected turnover and costs in a)
  • additional key figures such as EBITDA, EBIT, annual surplus, cash flows and net present value in b)

a) (i) The client wants you to make a precise estimate of the sales potential of the parking app and asks you what information you need to do this. The first step is to create a list of the information you need.

At this point Exhibit 1 serves as comparison

(ii) The client has provided you with the requested information. In order to give him an overview of the turnover he can expect, the client asks you to first calculate the market potential on the basis of the given data.

Solution

Once the applicant has defined his solution, Table 3 can be shared with him.

(iii) After you have provided the client with an overview of the market potential, he wants to know how many potential customers use the possibility of mobile payment and what turnover is attributable to the parking app service. Please calculate the turnover of the parking app.

Solution

Once the applicant has defined his solution, Table 4 can be shared with him.

At this point Exhibit 2 serves as an overview of the expected costs.

b) In order to operate the parking app business, various costs are incurred annually for the company. Please help your client to calculate his annual surplus (profit after tax). In the first step, determine (i) EBITDA, (ii) EBIT and then (iii) annual surplus for the years 2019 - 2023. Use the following table and assume a tax rate of 30%.

Solution

Once the applicant has defined his solution, Table 5 can be shared with him.

(iv) After you have calculated the annual surplus, the client is interested in how much money he has left at the end of the year for investments, the repayment of his debt financing as well as dividends for shareholders and investors.

Help him determine the Free Cash Flow (FCF). Show how you can calculate the FCF with the given information in direct and indirect ways. Use the following additional information for the calculation:

  • The CapEx (investment expenditure) in 2019 amounts to 550,000 €
  • Depreciation is planned for 10 years
  • The required net working capital amounts to 5% of the turnover

Solution

Once the applicant has defined his solution, Table 6 and 7 can be shared with him.

(v) Your client continues to wonder whether his investments will generate a positive return or whether he might be able to generate better returns by investing in the capital market. You offer your client the opportunity to examine this issue immediately. You know from your studies that you can use the Net Present Value method to determine the present capital value of future investments. Please calculate the present value of the Free Cash Flows and then determine the net present value. Assume a Weighted Average Cost of Capital of 10%. Can you take your client's concerns away?

Solution

A positive NPV means higher returns than would be possible on the capital market. Therefore, the client's concerns are unfounded.

Once the applicant has defined his solution, Table 8 can be shared with him.

Task 3 – Analytics-Driven Expansion Strategy

Leap into the future: After one year, the launch of the app has proven to be a complete success on the market. The parking app is able to participate in the business of its competitors through the fees charged by the car park operators. In view of this positive development, the operator of the parking app is aiming to expand its own car parks. To this end, the company wants to identify regional gaps between parking supply and demand on the basis of the user data recorded via app. On this basis, attractive regions for the opening of new car parks are to be identified and prioritized.

A friendly senior manager with many years of project experience in the area of Big Data & Analytics provides you with a best practice reference model on request. You can use it as the basis for developing a procedure model for the parking app.

At this point, Exhibit 3 serves as visualization.

Please answer the following questions using the framework:

a) What could the three steps Data Sources, Data Processing and Data Analysis look like for the described use case?

b) What pitfalls must the operator of the parking app expect for each level?

Exemplary Solution

I. Data Sources

The operator can use the following sources as data sources, for example:

  • Mobile location data (via app)
  • Personal information (provided by users via app)
  • External data: Rent index, middle income level
  • Locations of existing parking garages of the parking app operator and the competition

Pitfalls:

  • Data security regulations (GDPR) may require anonymization and/or
  • Pseudonymization
  • Data procurement, especially with regard to competitor information, possibly time-consuming

II. Data Processing

Decisions to be taken include, for example:

  • What is the analytical unit (definition of geographical regions)?
  • Which identifiers can we use to intersect the data?
  • How do we aggregate the data per unit of analysis?
  • How do we form our target variable, according to which we optimize (e.g. expected sales or (better) profit)?

Pitfalls:

  • Useful size of geographical regions
  • Unstructured data
  • Dealing with missing and erroneous data

III. Data Analysis

Possible procedure (other possibilities conceivable):

  • Analysis of the average parking demand per region in relation to the average available parking spaces
  • Regions with a particularly large disparity may be potential candidates for new parking spaces
  • In addition, factors such as the representative list of rents can be taken into account in order to prioritize the regions

Pitfalls:

  • Not all car park users use the app, so it only gives an inaccurate picture of demand
  • No transparency on parking openings planned in the near future by competing car park operators
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Case exhibits