Case

Ocean's Pearl

Solved 8.9k times

Problem Definition

Your client is the captain of the pirate ship Ocean’s Pearl. He currently discovered declining cash reserves.

The recent operations of his ships are not meeting his requirements and he is looking for options to generate additional cash.

He wants us to solve two problems:

  • Assessing the reasons why the cash reserves are declining.
  • Coming up with strategies to refill the cash reserves.


Comments

This case is made to be interviewer-led. Therefore the interviewer should guide the interviewee through the interview. The questions should be read out and shared with the candidate.

The case is split into two parts:

The first part describes more qualitative problems and has more open questions that should make the interviewee think about the problem and its solution.

The second part is more about quantitative problems and calculations. Here the interviewee should try to make his own calculations and solve the questions.


Short Solution

  • Improve the fleet
  • Search for additional business opportunities

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.

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

The following framework/structure provides an overview of the case:

I. Background

1. What are the possible reasons for the decline of the cash reserves?

Possible answers:

Decrease of revenues

  • Fewer ships to plunder
    • All potential ships are plundered
    • Merchants moved to other modes of transportation
    • More safeguards against piracy
  • Less revenue per plunder
    • Ships carry less plunder
    • Value of plunder (gold, etc.) is declining
    • Other pirates have stolen from ships Ocean’s Pearl is attacking

Increase of costs

  • Operating costs
    • Labour, food, maintenance, cannonballs, parrots, etc.
  • Decreased efficiency of sailors
  • Too luxury lifestyle of the captain
  • Debt payments are due on equipment
  • Rebellions

II. Revenues

2. What do the following graphs reveal about the business?

You should share Diagram 2 with an overview of the revenues.

Possible answers:

  • Revenues overall are increasing
  • Most areas are growing relatively steady
  • Revenues of slave sector are the only segment stagnating.
  • The growth of slaves revenues might be affected by the growth of the population.

Growth in revenues gained from slaves should be adapted to the growth rate of the other sectors.

3. What are the required additional revenues from slaves?

You should share Table 1 with a detailed overview of the revenues.

The interviewee should start calculating

First of all the interviewee should calculate the growth off all sectors excluding slaves from 1857 – 1859.

This growth rate should then be applied to the slaves sector in order to determine the necessary revenue increase in this segment.

Let the candidate present the structure first. The theoretical approach is more important than calculating the exact numbers.

Growth of sectors from 1857-1859 excl. slaves revenue:

Increased revenues from slaves:

= $10m * (1 + 0.4268) = $14.27m

Additional revenues from slaves:

= $14.27m – $10m = $4.27m

Main conclusion

The revenue generated by the slaves sector has to increase by $4.27m over the next two years.

III. Costs

4. What is the expected value per plunder regarding the following information?

Information that should be shared:

  • $40,000 is spent per successful plunder (on average).
  • $60,000 is spent per unsuccessful plunder (on average).
  • The average revenue per successful plunder is $600,000.
  • The plunders are successful in 30% of the time.

Expected value per plunder

Main conclusion

The expected value per plunder is $126,000.

Costs for unsuccessful plunder increased to $100,000.

5. By how much per cent has the chance of a successful plunder to increase in order to achieve an expected value per plunder of $150,000?

Expected value per plunder

Main conclusion

37.88% of all plunders have to be successful in order to provide the increase in the expected value per plunder.

IV. Conclusion

6. What is your recommendation to the client about possible strategies?

Suggested answer:

  • The captain should try to increase the capacity and equipment of Ocean’s Pearl. This would create additional costs in the short-term, but could lead to higher profits and higher chances of successful plunder in the long-term.
  • The client could try more lucrative businesses like shipping goods and services, targeted plundering or expanding to new markets.
  • The slave segment should be further investigated and ways should be found in order to increase the profit from this sector.

Difficult Questions

How could your client increase the revenue generated by the slaves segment?

Possible solutions:

  • Expand to new markets with a higher share of population.
  • Train the crew in order to increase their skills in capturing slaves.
  • Capture only “high-quality” slaves that can be sold for more money.

More questions to be added by you, interviewer!

At the end of the case, you will have the opportunity to suggest challenging questions about this case (to be asked for instance if the next interviewees solve the case very fast).

Related consulting question(s)

Two frameworks here: 4 Ps (= price, place, product, promotion), or the Ansoff Matrix (grow with existing or new products in existing or new markets). Both are quite MECE. Word of caution however --... (more)

Best answer so far:
McKinsey / Accenture / More than 300 real MBB cases / Collected all Big 3 offers / Harvard Business School

Hi, 1) Youproactively 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)

Best answer so far out of 2 answers:
BCG Consultant / Interviewed 80+ applicants at BCG / Received offers from McK (US) and BCG (DE)

Hi Anonymous! Both are valid approaches. As a rule of thumb, 1) is more suitable for a quantitative assessment (e.g. "By how much has profit declined?"), while 2) seems like a good approach for a... (more)

Best answer so far out of 3 answers:
McKinsey / Accenture / More than 300 real MBB cases / Collected all Big 3 offers / Harvard Business School

Hi, Focus on the most common industries in the followingpriority (sorted by probability of geting a case): 1-retail and CPG; 2-airlines; 3-Telecom; 4-banking; 5-natural resources; 6-tech There a... (more)

Related BootCamp article(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.

1 Comment(s)

Growth Strategy

Growth questions are among the most common questions in consulting case interviews: gather the necessary Information about volume and price to find the best growth lever

4 Comment(s)

CAGR - Compounded Annual Growth Rate - CAGR

The Compounded Annual Growth Rate (CAGR) Is a theoretical steady growth rate over a specific amount of time, not the average of the Y-o-Y growth rates. It can mask sub-trends within the period

5 Comment(s)
4.5 (181 ratings)
4.5 5 181
Case exhibits


Ocean's Pearl revenues


Detailed revenue overview