CASE LEVEL:

BEGINNER
Case 1: Market Growth Strategy in Retail
Banking

Source: Wharton 2007

Prompt
Question (posed by interviewer):
A bank based in a developing country in Southeast Asia has hired us to determine how it
can grow in the local market, specifically in retail banking. What are the factors you
would look at to assess the situation? What is your recommendation for our client?

Interview Guidance (general information to be given if asked):

Competition/Competitive Landscape:
• Market Share by bank and product
o Client is one of the top three market share leader. Show Exhibit 1 & 2.
Observation: Client maintained market share in deposits but lost market
share in credit cards. Client lost share in auto loans but is doing very well in
home loans.
• Product and pricing competitiveness
o All products are priced competitively at market level
• Brand name and reputation or customer awareness
o Client has good brand name reputation and recognition
• Branch and ATM prevalence or distribution of branch network
o Client has wide distribution of branch and ATM network

Macroeconomic Trends:
• Employment rate or population growth
o Number of people coming into employment age is at an all time high in the
coming 5 years
o Foreign investments are projected for healthy growth with increase
investments in Business Process Outsourcing
• Interest rate trend
o Interest rate has declined dramatically in the last 5 years from over 10% to
the current level of 4%
 • Disposable income or GDP trend
o 40% of the population lives at or below poverty line. Another 40% makes
less than $500 per month. Top 15% makes less than $2,000 per month.
Remaining top 5% is the richest population in the country whose lifestyle
resembles those of upper-middle class in developed countries.
o Disposable income and GDP is projected to continue growing at about 11%
per annum
• Home/car ownership and real estate development growth
o Home/car ownership and real estate development is expected to increase
in the coming 5 years
• Rural to urban migration
• Migration rate is stable

Products:
• Types of products
o Products include savings, checking, time deposit, credit cards and loans
• Profitability or revenue by product, including consideration of price and volume
o Most profitable products are credit cards and loans
• Product penetration in population
o 30% of population has deposit accounts. 6% of population has credit cards.
1.5% of population has bank loans.

Client Capabilities:
• Sales and marketing
o Sales efforts are traditional and conservative. Client does not conduct direct
marketing activities to sell credit cards. Sales force is stretched and training
is lacking.
• Information technology
o Information on customers is often out-dated
• Research and development/innovation
o R&D is competitive and client is a market leader in product innovation for a
few products
Customers:
• Customer mix by number of bank products purchased/Customer mix by value of
customer – measured in terms of average daily balance of deposit account
o Refer to Exhibit 3. Observation: Majority of customers only purchase one
bank product. Large majority of customers also have <100K in average daily
balance in their deposit accounts
• Retention or attrition rate
o Attrition rate is in line with market average

Possible growth drivers: 1. Steal share from competition; 2. Increase retention of current
customers; 3. Cross sell current products to current customers; 4. Up sell current
products to current customers; 5. Develop new generation of customers
Exhibit 3
Percentage of total number of customers

2,905,275

# of prod ucts owned by

Average Number of Products Across Avg. Deposit Balance

Average
¥ of
Products

0
=10f/ 10 =1 OO f/ 100 '2”Of/ uM ' PM 1 0 '2DM 20 - =2*M 2ñM UP
*”Ann a Depo sitBaIan*e
Possible Answer

Logical Conclusion:

1. Growth efforts should be concentrated in cross selling more profitable products to

current customers since average number of products held by customers is low. 2. Client
should adopt more aggressive sales and marketing techniques to gain more market
share in credit cards. 3. Client should partner with or market to employers to capture a
new generation of bank customers fueled by employment growth, and partner with real
estate developers, as well as car dealers, to finance future home and car purchase.

Successful Roadmap:

Candidate should spend most of his time brainstorming all the factors that should be
considered to understand the situation. He will locate problems and potential solutions
by probing interviewer for information. After all, or most of the information is given,
candidate should make his best guess on what the potential recommendations should
be for the client. Any logical recommendations supported by information given or any
assumption he may make will be accepted. A good candidate should be able to
summarize his understanding and make a logical hypothesis on potential
recommendations.
Case 2: Kicks
Source: Tuck Consulting Club

Prompt
Apparel manufacturer is considering entering the sneaker market.

Your client is a shoe and clothing manufacturer (“Dering Co.”) that has over $500MM in
sales. Dering Co. has been successful in its traditional market for apparel and men's
casual dress shoes, but growth is slowing in this market and margins are declining. The
company is U.S. based, but has a manufacturing facility in a low-cost SE Asian country.
Several board members, who have backgrounds in the athletic shoe industry, believe
that your client should, broadly speaking, enter the athletic shoe market. The athletic
shoe market in total is $20 billion today. You have been hired to address this question.

Overarching question: How would you think about this athletic shoe opportunity?

Question and Possible Answer

Question 1: What market segment looks more or less attractive and why?

Info to be given as case progresses:

• Offer Exhibit 1 to interviewee with market size, growth, and margins
• [see sheet below with answers for interviewer]
• Questions to prompt interviewee in right direction (interviewee should be
able to move through this logic on his/her own)
o What are projected industry revenues?
o What are projected segment profits?
o What does this mean/any insights?
o What are the most attractive segments?
o Do margins (%) or profit ($) matter the most?
Assume the following data, what market looks more or less attractive, and why?

Size % Rev Growth Margins Rev Profit Rank

1 Basketball 4.0 20% 100% 10% 8.00 $ 0.800 4
2 Running 4.0 20% 50% 20% 6.00 $ 1.200 1
3 Cross Training 5.0 25% 30% 10% 6.50 $ 0.650 5
4 Walking / 3.0 15% 50% 20% 4.50 $ 0.900 3
fashion
5 Court 3.0 15% 50% 25% 4.50 $ 1.125 2
6 Soccer 1.0 5% 20% 40% 1.20 $ 0.480 6
$ 20.00 1.00 $ 30.70 $
5.
16
Margin 17%
Rev
CAGR

Info to be given if asked:

• Growth is total growth (not annual or compound annual growth rate)
projected over the next 5 years
• Margins are projected EBIT margins in 5 years

Exhibits
• Offer Exhibit 1(market size, growth, and margin data) at outset

Question 2: Which segments are the most attractive based on competitive data?

Info to be given as case progresses:

• Offer Exhibit 2 to interviewee with vendor/segment market shares
• Questions to prompt interviewer in right direction (in particular, be sure to
ask the last question, as it has a specific answer)
o What does this mean?
§ Fragmented markets are most attractive (i.e., Run, Cross, Walk,
and Court)
o Which markets look most attractive?
o How can you relate this back to the big picture?
o What other information would you like to know?
Info to be given if asked:
• What is included in Other? Wilson controls 45% to 50% of Court market
(contained in Other category). In all other cases Other contains players with
very small market shares.

Exhibits
• Exhibit 2: Vendor / Segment Market Shares
Question 3: After the following additional information, what is your conclusion?

Info to be given as case progresses:

• Additional research indicates the following:
o BASKETBALL – highest price points in industry, but high sales &
marketing costs which related to branding (why EBIT margins are
lower despite higher price points)
o RUNNING – high price points relative to industry average. R&D and
technology in shoes is significant for the high end portion of this
market (60% of the market)
o CROSS-TRAINING – from initial industry conversations, no great
insights were found
o WALKING / FASHION – consumers wear these shoes w/ casual clothes
frequently, which tends to indicate they are a bit more “style” and
“fashion” conscious about how these shoes look
o COURT – 65% of court shoes are bought thru specialty retail stores
that are different from general retail stores that sell basketball,
running, ct, etc. (tennis pro shops, etc. are examples). Wilson controls
45%-50% of the market for court shoes and high % of court apparel
market.
o SOCCER – 75% of soccer shoes are sold thru specialty retail stores (like
court shoes) that are soccer only stores

• Questions to prompt interviewee in right direction (in particular, be sure to

ask the last question, as it has a specific answer)
o Any insights?
o What is your conclusion?
 EXHIBIT 1: Market Size Statistics

Overall Athletic Footwear Market Size $ Billions = 520 Billion Today

% Rev Growth Margins

1 Basketball 20% 100% 10%
2 Running 20% 50% 20%
3 Cross Training 25% 30% 10%
4 Walking / fashion 15% 50% 20%
5 Court 15% 50% 25%
6 Soccer 5% 20% 40%
100%

EXIIIBIT 2: Market Sbare

Relative
Market

Cross Walk / fas hio n Court SOCCOf

Run

Nik ida Ree ok ther

Note: Figures do not reflect actual market share.

Recommended Solution:

Question 1 Detail: Which segments are the most attractive?

• Interviewee should quickly proceed through analysis of Exhibit 1 by
calculating the market size (using the growth rates) and then multiplying by
the profit margin for each segment to calculate the projected profit pool for
each segment [table is again listed below]
• Segments should be ranked based on the size of the profit opportunity, not
based on the size, growth, or % profit margin
• RUNNING, COURT, and WALKING/FASHION are the top three segments

Assume the following data, what market looks more or less attractive, and why?

Size % Rev Growth Margins Rev Profit Rank

1 Basketball 4.0 20% 100% 10% 8.00 $ 0.800 4
2 Running 4.0 20% 50% 20% 6.00 $ 1.200 1
3 Cross Training 5.0 25% 30% 10% 6.50 $ 0.650 5
4 Walking / 3.0 15% 50% 20% 4.50 $ 0.900 3
fashion
5 Court 3.0 15% 50% 25% 4.50 $ 1.125 2
6 Soccer 1.0 5% 20% 40% 1.20 $ 0.480 6
$ 20.00 1.00 $ 30.70 $
5.
16
Margin 17%
Rev
CAGR
Question 2 Detail:
• Which markets look most fragmented and attractive?
o When entering a market, fragmented markets are more attractive
because they have less intense competition or more room for a new
entrant than an industry that is controlled by a few big players
• Which markets look most attractive?
o On first blush, markets are attractive based on fragmentation in the
following order (most to least): Court, Walk/Fashion, Cross, Run,
Basketball, Soccer
• How can you relate this back to the big picture?
o If we combine market size/profit pool conclusions with market share
data, we come up with the following results:

Segment Profit Pool Rank Fragmentation Rank

Basketball 4 5
Running 1 4
Cross Training 5 3
Walking / Fashion 3 2
Court 2 1*
Soccer 6 6

* Wilson is contained in other and controls 45% to 50% of Court market, making it much
less attractive from a fragmentation stand point.

Combined rankings (profit pool and market share/fragmentation) show that

Walking/Fashion and Court are most attractive

• What other information would you like to know?

o The interviewee should ask what is contained in the “Other” segment
of the market, which reveals that Wilson controls 45% to 50% of the
Court market— this is an attention to detail question, the interviewee
shouldn’t just assume that “other” is small players
Question 3 Detail:
• What is your conclusion based on additional information?
o BASKETBALL – low margins
o RUNNING – high price points but there is a high and a low end. Might
be an opportunity in the low-end that is more casual/fashionable and
consistent with core apparel business (40% of running market)
o CROSS-TRAINING – No additional insight
o WALKING / FASHION – Fashion conscious consumers, likely overlap
with core apparel customer base
o COURT – Controlled by a few big players, distribution through specialty
stores
o SOCCER – Distributed almost entirely through specialty soccer stores
Overall conclusion:
• Walking/fashion is the most attractive market for the following reasons:
o 3rd largest profit pool at $900MM with 20% margins
o Most fragmented in terms of competitor market share (when adjusted
for Wilson’s presence in Court)
o Strong overlap with core business in terms of both customers and
distribution channels

• Interviewee could also make a case that the low-end of running may be
attractive but would need to know margin and competitive data for that
segment of the running market

A good answer includes:

• A structured approach to answer the market entry question
• A quick and correct analysis of the projected profit pools
• An understanding of the relationship between fragmentation/
concentration and how it relates to market entry

A better answer includes:

• All of the above
• Interviewee incorporates the internal capabilities of Dering Co.
into recommendations (apparel/fashion company) and provides
insight on how that would affect Dering Co.’s success in the
different sneaker segments
• Recognizes that it is important to understand the details behind
an analysis and asks what is in “other” market share category
• Identifies Walking / Fashion as most attractive segment

A superior answer includes:

• All of the above
• Interviewee quickly recognizes that Walking / Fashion as most
attractive segment
• Interviewee also picks up on further segmentation of Running
market and mentions in recommendations that it would be
worth further exploring the low-end segment to understand
profitability, size, competitors, etc.
Case 3: Go to China

Source: Tuck Consulting Club

Prompt
An office furniture manufacturer is considering entering the Chinese market.

You are hired by a European furniture manufacturing company, who enjoys a significant
market share in the middle to high end office furniture industry in Europe. The client is
considering entering China’s market and would like to know the addressable market size
and how they may approach this market.

Question 1: How large is this market opportunity (estimate the market size)?

Question 2: Suppose the client has decided to enter China’s market. What are the
options for the client to enter this market? What are the pros and cons of each option?

Optional Question 3: Which one do you recommend? Why?

Question and Possible Answer

Question 1: How large is the market size?

After the interviewee gets the number, ask what he/she thinks about it, conservative or
optimistic?

Info to be given as case progresses:

• The client is the market leader in Europe in the middle to high end office
furniture market. It offers all types of furniture in office settings.
• The client views China as an integrated market, thus want to know the total
market size of China (excluding Hong Kong and Taiwan).

Info to be given if asked:

There are different approaches to get the number. The interviewee is supposed to make
certain assumptions and estimate some numbers. In case the interviewee can not figure
out any clue or go down the wrong path, you may want to provide some of the following
information to guide her/him.
 • The client is targeting customers in China who need high-quality foreign
brand office furniture. (multi-national companies plus some local
companies)
• There are six major cities where most multi-national companies have local
offices. The interviewee can estimate the market size of one city and get the
total size by multiplying it by six.
• Over 80% of Fortune 500 companies have set up offices in China. One can
estimate over 1000 multinational companies actively operating in China. An
office with average size is estimated to accommodate about 100 employees.
• In these offices, the average spending on office furniture per year per
employee is estimated to be around $500. (any number between $200-
$1000 should be fine)

Some interviewees may want to get the market size by finding how many office
buildings in a major city. With average spending per floor/square foot, they should come
up with a quite similar number in the end. It is a valid approach as well.

Some may want to differentiate the companies who are setting up new offices in China
and the companies who have offices set up already, thus only need regular replacement
of office furniture. This approach is very practical and the interviewees need to make
more assumptions accordingly.

Question 2: What are the options for the client to enter the market? Pros and Cons?

This is an open question. The interviewees are encouraged to come up with any
possibilities regardless of any constraint. After they list all the options, ask them to
analyze the pros and cons of each option.
Recommended Solution:

Question 1 Details
• Assume there are 1000 multinational companies in China as our targeted
customers. (could be more if include large local companies and government,
NGOs etc.)
• 6 offices with 100 employees in each. Average spending on office furniture
is around
$500 per year.
• 1000*6*100*$500= $ 300 million
• The number is quite conservative and any number falling in the range of
$200 million to $1 billion should be fine.

One of the alternative approaches: 6 major cities*50 office buildings in a city*20

floors/building* $50,000 spending/ floor=$300 million.

Question 2 Details
• Main options include:
§ Direct investment to build their own plant,
§ Joint Venture with local companies,
§ International Trade without local production.
• The analysis of pros and cons of above options should include the following
key elements
o control of product quality,
o brand management,
o distribution network,
o cost advantage,
o amount of investment,
o regulatory environment/entry barriers,
o speed of starting the business.
Overall Recommendations

A good answer includes:

• Check the approach with the interviewer and make necessary assumptions.
• Get the overall number right.
• List major options of market entry.

A better answer includes:

• Define the target customers very carefully.
• Provide comprehensive view about the different options.

A superior answer includes:

• Offer insight about the dynamics of the market, e.g., as more and more
foreign companies are entering China’s market (as the client is), the market
size is growing very fast. Further, the new offices to be set up will spend
much more than average spending of the existing offices.
• Conduct complete and thorough analysis about the pros and cons of each
option. Define the most critical factors for the client, e.g., the speed to
capture the growing market. Finally provide your recommendations
accordingly.
Case 4: Home Security Systems – The
Right Move?

Source: Tuck Consulting Club

Prompt
Our consulting firm has been engaged by a long-time client of ours, Big Telecomm
Company, to help them think through their growth strategy. The CEO of Big Telecomm
(or B.T. for short), wants to diversify into the home security system market. They’re
looking at growing through acquisition and have identified several appealing companies.
However, their first priority is to figure out if entering the market is something they
should even be doing in the first place.

Question 1: What should we consider in trying to make the market entry decision?

Question 2: Should we recommend this course of action to our client?

Question and Possible Answer

Question 1: What should we consider in trying to make this decision?

• Is this market attractive?

o Size of market
o Barriers to entry
o Competition & other market characteristics
• Are there any other benefits to entering the market?
Question 2: Should we recommend this course of action to our client?

Info to be given as case progresses:

• This is a very open ended case so you should just start with the introduction
and question. No additional data is needed in the beginning

Info to be given if asked:

• The home security market is a growing market in the US
• The industry norms are as follows:
o equipment & installation
§ $500-$1500 (1 time fee)
§ Average 10% margin
o Monthly service
§ $20/month (retail)
§ Average $5 margin
• There are 10 million hh that currently have home security systems
Recommended Solution:

Question 1 Details
Market Size for Home Security:
300 million people
3 people/households (hh)
=100 million hh

Currently, 10 million hh have home security systems, which implies a penetration rate of
10%.

Market is growing to an estimated potential penetration rate of 20 million hh (based on

demographic factors like aging population, increased disposable income, etc.)

Annual revenue/hh =
Monthly service = $20/month or $240/year * 20 million hh = $4.8 billion in revenue
Monthly service margins = $5/month or $60/year * 20 m hh = $1.2 billion profit

Equipment & installation is one time fee so not going to get $$$ from all customers each
year. Estimate % churn for customers – 10% year (exact # doesn’t matter but it should
be based in logic. i.e. high switching costs so low churn rate)

So, 10% new customers each year out of 20 m hh = 2 m hh

Equipment & installation to be $1000 (average of $500 & $1500. = $1000 * 2 m hh = $2

billion in revenue

Equipment margins are 10% = $200 million profit/year

Market size/year in revenue = $4.8B from service + $2B from equipment & installation =
$6.2B Market size/year gross margin = $1.2B from service + $200M from equip. &
installation = $1.4B Benefits to being in home security market
• Possible economies of scale (materials purchasing, advertising, employee
hiring)
• Increased switching costs for customers -> Lower churn rates -> Lower
marketing/advertising costs
• Lower acquisition costs for customers (for each business since can draw
from each others existing customer base)
• Compatibility between technologies (R&D benefits to customers, lower
defect rates, decreased need for service & repairs)
• Call center staffing – both companies need – can combine and save $$$ in
facilities, hiring, training, staffing
• Similar business models – i.e. one time equipment & installation fee and
then monthly revenue from service. Potential for combined service
packages (phone, cable, internet, home security)

Overall Recommendations

A good answer includes:

• market size for home security market (potential revenues)

A better answer also includes:

• Listing of synergies between two industries and possible areas for cost
savings (potential costs)

A superior answer includes:

• Things that B.T. should consider when evaluating different home security
companies (i.e. should it be a national company, or local; should it have a
national brand name, or not)
• [A superior answer should also include the efficiency with which the
interviewee moves through the case—don’t get hung up on details that
aren’t central to the primary business issue]