Non-profit entrymarket sizingcapacity expansion incl

Good luck!

- 2017 Wharton Consulting Casebook Editorial Team

Case types and case interview methods

6	~3 min.	~1-2 min.	~12-15 min.	~3 min.
		Plan your	Probe for	Assert a
	the question	approach	information	conclusion
			• Ask specific questions to test hypothesis
	• Ask clarifying
			• Adjust hypothesis and plan as data emerges	• Take a definite stand
				• Make best conclusion with data on hand
	• Formulate an initial hypothesis about
	possible solutions• Write down key question	• Present plan of attack to interviewer – start with the most important
			Wharton Casebook 2017	6

Table of Contents

○ Where is it made?

○ Competitive product?

Market:
o The retail market has been stable, no economic downturns, etc.

Revenue:
o Price: average product price is ~$40. This is in line with mid-tier competitors such as American retailer Bap and a bit below European retailer Mara

● Revenue
○ Price: average product price is ~$40. This is in line with mid-tier competitors such as American retailer Bap and a bit below European retailer Mara
○ Sales:
■ Market sizing: The retailer has a US presence comprised of three mall stores plus one flagship store on 5th Avenue. Have candidate attempt to calculate annual sales based on intuition.

● Three mall stores:
○ Sell on average 1,375 items per day
○ Have candidate calculate: 1375 items * $40 = $55,000 per day○ $165,000 per day all mall stores put together
○ $60,225,000 annual revenue from mall stores

Costs

$85,000/week, $4.42 M per year

Now that we have all of the revenue and costs, let’s work on making the company more profitable. Have the candidate brainstorm and then guide them through the below:
● Costs
○ Manufacturing- We are already producing our clothing in the cheapest manner possible.

Shipping- We could cut 5% of our COGS by shipping the clothing by boat instead of ○
air

● Revenue
○ Have candidate brainstorm how we can improve revenue
■ Train the sales staff better to sell- No, they’re pretty well trained
■ Lower prices- No, it wouldn’t solve our margin issue
■ Online store- We are not ready to make that investment at this time
■ Turns out that American customers don’t love the styles and have some trouble with Asian sizes (the styles tend to be too conservative, the colors are too muted, our clothing tends to run small for the US market)
■ Adjusting design and sizes and continuing to manufacture separately for the American market will cost us $12M annually, but it will provide $23M additional revenue per year
● Incremental revenue: $11M annual
● Total incremental income
○ $1.75M + $4.5M savings
○ $11M incremental revenue
○ Total $17.25M→ makes up for $13M deficit

Currently we are seeing revenues of $125M annually, but costs of $138M, meaning we are $13M in the red. However, we have studied the cost and revenue structure of your retail operation and found that there are a few actions you can take at this time. On the cost side, we recommend changing your means of shipping from air to boat, a change we have found will bring $4.5M in annual savings. Additionally, we recommend seeking a partner to share your rent/space at the flagship store. We believe, for example, that placing a coffee shop within the store would save you 25% in rent, for a savings of $1.75M annually and perhaps encourage your customers to shop more. Finally, we recommend revamping your inventory for the American market by adjusting designs and sizes to better meet demand. We estimate this will drive $11M in additional annual revenue. Together, these measures will more than make you profitable, breaking even and making $4.25M in profit. Potential risks of this plan include having an unreliable retail partner at the flagship store, making products that the American market still doesn’t like, and delaying inventory stocking through the new shipping method. For this, we recommend a study into whom the retail partner should be, engaging in extensive market research to produce the correct SKUs for the market, and adjusting US warehouse operations and lead times to ensure that stocking is not

Opening Framework and Clarifying Questions Sample of Strong Framework