OnlineGo

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Exhibit 1

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

Revenue each year is $2.4B from subscriptions (10 million subscribers x $20 per month x 12 months) and commission will be $540M (10 million subscribers x $1,800 per year x 3% commission), for a total revenue of $2.94B .

Fixed costs are equal to $1B annually, and variable costs are $1.1B (10 million subscribers x $110/year).

Therefore, profits are $840 million and the annual profit margin is 28.6%.

The interviewee might calculate the total revenues for OnlineGo and then subtract the total annual costs

If this was done, yearly revenues from subscription would drop to $1.2B (10 million subscribers X $10/month X 12 months), and commission would remain unchanged. The new revenue would be $1.74B, therefore OnlineGo would make a loss of $0.36B.

The elasticity is highly elastic, which means that OnlineGo will not capture enough market share if it charges $20/month.

As costs remain unchanged at $2.1B, revenue will also be held constant at $2.94B. With $10/subscription, revenue from subscriptions would be $1.2B. To remain at $2.94B revenue, commissions must be $1.74B. With 10 million subscribers each one needs to generate $174/year of commission. To keep profits at $840M, subscribers need to purchase $5,800/year.

Annually, each subscriber would have to purchase $3,000 worth of products online, which is also unrealistic.

Each subscriber brings in $174/year and a profit of $64. These profits must cover the fixed costs of $1B/year so 15.62 million customers must be brought in.

• Outsourcing capacity
• Leasing networks
• Working in particular geographical areas
• Many other acceptable responses

• Potentially, OnlineGo could do this to enter the internet retailing market and increase its number of subscribers, but it is not a long-term solution based on the calculations.

• There is not one definitive answer, everything is reliant on the interviewee's own ability to explain themselves and their reasoning. Initially, this seems like an attractive market to enter - but if OnlineGo is to expand into North America, they need to find a way to gain much more subscribers or differentiate its product.

In a stellar case interview, the quantitative part will be executed solidly with an intuitive understanding of the questions posed. A very good interviewee will display a solid business acumen with an overview of the implications and costs of the venture and will deliver strong, verified arguments to invest or not invest.