Practice With Profitability Analysis Cases
Music Streaming - Market Sizing
Your friend is an aspiring artist and is asking for your consulting advise on a problem that he has been struggling with. Your friend (the artist) is trying to understand how many hours people listen to the number one music streaming platform (the one with the green logo) in total and on average per year. How would you approach this problem to help your friend answer his question?
Smart Meters
The municipal utility Hamburg Energized is a local energy retail (power and gas) and distribution grid company active in the city of Hamburg. The majority of shares of Hamburg Energized is held by the city itself. As the distribution system operator of Hamburg, Hamburg Energized is responsible for the operations and maintenance of the gas and electricity grid on customer level.
In the course of the energy transition in Germany, the responsible board member for the technical grid operations, Jan Bremer, thinks about deploying Smart Meters in the gas and electricity grid. He approaches you with the request to conduct a feasibility analysis and to give a clear recommendation whether or not Hamburg Energized should use Smart Meters in its gas and electricity grid in the future.
The Madhouse Animation Crisis
Your client is Madhouse Studios, one of the largest anime producers in Japan. The anime-industry is flourishing. Originally revenue was generated mainly in Japan but the trend is that revenues outside of Japan are growing at a steady rate of 15% a year as more and more non-Japanese people enjoy anime. Despite this rapidly growing new segment, Madhouse lost $6m in profits at the end of 2017 even though profits were growing steadily the years before.
Madhouse has given you the objective to find the root cause of the loss in profitability and to advise them on how to proceed from here.
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Barb's BBQ Booth
One day you are grocery shopping when you are approached by Barb B. Queue, the owner of the supermarket’s deli shop. Facing serious competition from other supermarkets and fast food chains, Barb is worried whether his shop is working alright, as lately profits have been stagnating. He had figured that you work in a renowned consultancy and seeks your advice. Because you are a consultant from the bottom of your heart, you agree and sit together with Barb and have a look into his books.
A DSL Provider
Your client is a large company in the Polish telecommunication sector, providing and maintaining the infrastructure for telephony and ADSL and offering services like phone & internet subscriptions and televison to consumers. As in most countries, the regulator has ruled that new entrants must be given access to the infrastructure to offer their own services. For competitive reasons, the company asked you to assess whether under the current environmental conditions a competitor (let's call the hypothetical competitor NewCorp) could run a profitable business offering consumer ADSL services.
Ahoy, Black Gold!
Do you remember that one friend in school that always asked you to help him out with homework? Well, things never change and as this friend learned that you are a consultant now, you receive a call. The friend’s grandfather, who was a captain, passed away and left an oil tanker behind. As your friend wants to be sure for tax reasons, exactly how much worth the tanker is, your help is needed – again!
Coffee pads
Your client is the CEO of Wiehle, a major household appliance manufacturer. It has been decided that a coffee machine should be added to the product line. The question is how this coffee machine should be designed: either to exclusively use Wiehle pads or to be compatible with the pads of existing third-party providers as well?
Airline Economics
We are an airline major operating out of India. We want to increase the number of passengers on all our flights. Could you please calculate the financial return of adding one more passenger per flight?
OnlineGo
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.
Recruitment of Junior Attorneys
We are a reputed law firm. We are thinking of hiring associates right out of college at $120,000 per year. Do you think it is a good idea?
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Toothbrush disruption
We are a global toothbrush producing company. Our portfolio consists of two kinds of toothbrushes - 'manual' that sells for $5 and an electric 'rechargeable' that sells for $60.
Last year, a competitor introduced a battery-powered electric “spinbrush” that sells for $8.5 and now has 2% of the toothbrush market.
We don't have a similar offering and would like you to tell us whether we should develop a similar product or not.
Telephony Technology Warehouser
We are a warehouser (B2B) and have been facing a decline in profits since past 2 years. We would like you to figure out why this is happening and provide recommendations to reverse this trend.
Canada Bus Operator
We are a Canada bus transport service operating between major cities. We have been losing money for the past 5 years. Our new CEO thinks that we need to aggressively cut costs in order to return to profitability.
We also suspect the over-operated routes as well as the new routes to be the cause of the loss. How do you suggest we should face this problem?
Incos Pens
Incos is a global manufacturer of writing products with divisions in North America, Europe and South-East Asia. Their global sales are $60 m and their profits amounted to around $30 m. Their European division who manufactures and sells disposable pens is experiencing flattening sales and a decreasing profit.
The client hired you to help him come up with suggestions to get profits back on track.
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Unified Health
Our client is Unified Health, a health care company in the US. It insures patients and provides health care services. Employers pay a premium to UH for their employees and UH covers all necessary medical costs. UH has 300,000 patients enrolled. It has 300 salaried physicians covering 6 health centers which aren't owned by UH, but UH contracts local hospitals. If a patient needs medical care not covered by a UH physician, the patient is reffered outside the network and UH pays for all costs.
Over the past 6 months UH has suffered declining profitability and you are hired to figure out what is wrong.
Central hospital
Our client, Central hospital, is a 350-bed hospital based in a medium-sized city. The company has normally seen strong financial results with a 1-4% operating gain each year for the last five years. However, this year they are projecting a $14 m operating loss and the situation is expected to worsen in the future. The CFO expects to be out of cash in 2 years if not resolved.
They hired you to identify the cause of this loss and how they can hit break-even again. However, since they are an important employer, laying off staff is not an option.
Online travel booking
An online travel agency earns a 10% commission on all of its bookings. Currently, their profits before taxes are $1 m, while the industry average is around $2.5 m. The client wants to know why they're making less than the industry average?
Superfix
Our client, Superfix, is a mid-size chain of auto-service garages that has been doing well for the past ten years with 30 stores. However, since management felt that the business was saturating, they expanded with an additional 15 stores in other geographical areas. However, the expansion came with negative effects and falling profits.
You're hired to figure out why the company is losing profit despite its 15-branch growth over the past few years.
Universal TV
Our client is a Canadian TV company, Universal TV. They recently entered the US market in the northeast to expand its market share and capture a large part of the 4 m consumers in a market that has little competition. However, in the past few years, Universal TV has been unable to realize a profit.
You are hired to figure out why this is the case and what their next move should be.
Laos Tire
A manufacturer of tires in Laos has had a monopoly in the market for years due to high tariff on imports. If foreign producers wanted to import tires, they would have to pay a high import tariff which makes up 40% of the total cost to produce and ship to Laos. The Laotian government has now decided to lower the tariffs by 4% each year for the next ten years to open up the market to foreign companies and achieve lower consumer prices.
Our client is concerned this move will affect their market position and hired us to investigate the effects and help them decide what to do.
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