OnlineGo

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Style:
Interviewer-led (McKinsey style)
Topics:
Market analysis , Market entry , Profitability analysis
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Problem Definition

The client, OnlineGo, is a European Internet Service Provider (ISP) that is contemplating entering the North American market. Currently, they hold a dominant position in the European market with two streams of income; a subscription fee and taking a percentage of all e-commerce transactions done by subscribers. After studying the North American market, OnlineGo has concluded that the market is very divided and it is the perfect time to enter. You have been asked to calculate some figures to determine the potential profitability of entering the North American market.

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Question on the case: OnlineGo

Breakeven

OnlineGo
Most recent answer on Aug 14, 2019
The best answer (on Aug 14, 2019) is from:
Paul
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Project Leader at BCG - 5 years consulting experience|Coached 300+ candidates |Interviewer at BCG | 2nd Session free
Paul
Expert
 gave the best answer on Aug 14, 2019
Project Leader at BCG - 5 years consulting experience|Coached 300+ candidates |Interviewer at BCG | 2nd Session free
Hi, breakeven (sales) = Sales it takes to make Profit = 0 (all cost included) therefore (Unit Price - Unit Variable cost) X (Breakeven Quantity) = Other (fixed) costs Therefore Breakeven quantity = Other fixed ... (read entire answer)
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Question on the case: OnlineGo

Having trouble with Question 4 - Can Someone Please Explain?

case math First Time Case Interview! Help Appreciated! HelpASisterOut OnlineGo
Most recent answer on Jan 16, 2020
The best answer (on Jan 16, 2020) is from:
Clara
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Content Creator
McKinsey | Awarded professor at Master in Management @ IE | MBA at MIT |+180 students coached | Integrated FIT Guide aut
Clara
Expert
Content Creator
 gave the best answer on Jan 16, 2020
McKinsey | Awarded professor at Master in Management @ IE | MBA at MIT |+180 students coached | Integrated FIT Guide aut
Hello! Before putting the numbers, might help u to solve it "theoretically". Write both equations from both situations (revenue - fixed cost - variable cost) and outline which is the factor you are missing, since that ... (read entire answer)
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Question on the case: OnlineGo

What's the difference between Q4 and Q5?

OnlineGo
Most recent answer on Feb 01, 2020
He asked on Feb 01, 2020
look like all ask what's the amount for each customer to annual purchase to meet the break-even.
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Exhibits

Industry Information

  • 10 million subscribers
  • $20/month subscription fee
  • $1,800/year of online spending at 3% commission
  • Fixed costs - $1 billion
  • Variable cost - $110/year per subscriber

1. Calculate the annual net income in North America, given the current model and all assumptions. What is the annual gross mark-up, measured as a percentage?

2. OnlineGo found that a new entrant is charging $10 per month to gain market share. Can our client do the same?

3. What is the elasticity of demand for this market?

4. Due to high market elasticity, OnlineGo will charge less than $10/month. What would the amount of online purchases have to be made by each customer to maintain the same level of profit as at $20/month?

5. How much would each subscriber have to buy to allow the firm to break even?

6. How many subscribers would OnlineGo need to gain in order to break even?

7. How can the fixed costs of investment be reduced?

8. Is there any reason to continue with an investment even if it will lose money?

9. How would you summarize the situation and what are your recommendations?

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