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OnlineGo

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Intermediate
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Case Prompt

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.

I. Background

II. Quantitative Analysis – Annual Net Income

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?

II. Quantitative Analysis – Pricing

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

II. Quantitative Analysis – Elasticity of Demand

What is the elasticity of demand for this market?

II. Quantitative Analysis – Number of Online Purchases

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

II. Quantitative Analysis – Minimum Purchases

How much would each subscriber have to buy to allow the firm to break even (in the $10/month scenario)?

II. Quantitative Analysis – Minimum Purchases

How many subscribers would OnlineGo need to gain in order to break even (in the $10/month scenario, $1,800 in purchases)?

III. Quantitative Analysis – Fixed cost reduction

How can the fixed costs of investment be reduced?

III. Quantitative Analysis – Investment

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

IV. Conclusion

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

Further Questions

Are there any other risks or benefits the client should consider?

Very open-ended question based on the candidates own ability to brainstorm ideas.

16.5k
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Intermediate
Difficulty
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