Expert case by Gaurav

Laundry Chain – Revenue Increase

Laundry Chain – Revenue Increase Laundry Chain – Revenue Increase
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4 (< 100 ratings)
100+
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Problem Definition

CleanAll, a privately held company based in Nigeria, runs laundry outlets in 5 regions across the country. The company is engaged in 3 businesses:

  • Machine based cloths washing

  • Hand washing of delicate cloths

  • Cloth ironing

The company owners are concerned because of slow down in company’s growth. For the last 2 years, CleanAll’s growth has plateaued. They have called you to advise them on possible growth avenues.

Short Solution

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.

Paragraphs highlighted in orange indicate hints for you how to guide the interviewee through the case.

Additional information for the candidate, if asked:
  • Company owners are looking for growth initiatives that will increase their topline at least by 10% year on year for 3 to 5 years

  • 5 years back, there were only 5 players in the market, however recently a lot of new age laundry startups have sprung up and have eaten up shares from the traditional players like CleanAll

1. How would you structure your approach to the problem?

Possible structure:

1. Industry analysis

a. Recent trends

b. Revenue growth, profitability benchmarks

2. Internal analysis

a. USP and other capabilities of CleanAll

b. Individual service level analysis of the growth

3. Growth avenues

a. Increase customers

  • Target new customers
  • Launch new services

b. Increase value per customer

  • Increase prices
  • Increase laundry volume per customer

2. Where would you like to start?

Candidate should start analyzing the industry. In case he chooses to start from another branch of the issue tree, direct him to the industry analysis and share the following information with him.

Your team has done some industry research which suggests that the laundry industry landscape in Nigeria is changing rapidly. The new-age startups entering the laundry industry are introducing several value-added services and luring the customers. The following exhibit lists key value-added services that emerged out of the research.

Share Exhibit 1 with the candidate.

3. According to you, which value-added service initiative, CleanAll should invest in?

Candidate should analyze the data and come to the following conclusion.

On the basis of the growth target that the CleanAll owners have in mind, only Free pickup & drop service qualifies.

4. How will you evaluate whether a free pick up and drop service launch would be a good idea for CleanAll?

Possible structure:

  1. Attractiveness

    1) Revenue impact
    2) Profit impact
  2. Feasibility

    1) Financial ability (to invest in Capital Expenditure and to absorb operational profit reduction)
    2) Operational capability to run this initiative.

Given that attractiveness part is already discussed in the exhibit above, and assuming that CleanAll is able to handle the financial commitment, direct the candidate to operational capability.

CleanAll already has a pickup & drop service but it is chargeable. If the pickup & drop is to be made free for the customers, CleanAll needs to cut the cost of pickup & drop drastically. Currently, the cost of one delivery (i.e. either pick up or drop) is $15. CleanAll has also sought quotations from companies that specialize in delivery. The quotations are as follows:

Share Exhibit 2 with the candidate.

5. Should CleanAll continue to run their own pickup & drop or outsource it to one of these agencies?

Candidate should study the numbers and:
  • Mention that he would need daily pickup data in order to the calculations – provide the following data point – CleanAll needs 8 trips per delivery boy over the weekday, over the weekend the workload doubles

  • Clarify that, calculations will only give us which company will be able to deliver at the lowest cost, however, the service quality still needs to be evaluated

Calculations by the candidate should result in the following numbers:

Per delivery cost - Agency A – $11.66

Per delivery cost - Agency B – $11.08

Per delivery cost – Own delivery network – $15

So, the candidate should conclude that Agency B should do the pickup & drop.

6. What is your recommendation for the CleanAll owners?

Analyzing the recent industry trends, it is emerging that, CleanAll should start free pickup & drop service

  • Free pickup & drop is likely to increase the CleanAll revenue by 10%, year or year

  • CleanAll looks comfortable on capital expenditure and profitability impact coming out of making the pickup & drop free

To further sharpen the analysis, we should

  • do the due diligence on Agency B to ascertain their capability to deliver laundry

  • analyze the other value-added services emerged out of industry analysis in detail

Exhibits

Exhibit 1

Exhibit 2

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100+
Times solved
Beginner
Difficulty
Do you have questions on this case? Ask our community!

Exhibits

Exhibit 1

Exhibit 2