Indian Institute of Management (IIM), Lucknow
Your seniors at Indian Institute of Management (IIM), Lucknow helped you with their notes. Now they're helping you with their placement interview questions. 🙏
Indian Institute of Management (IIM), Lucknow
Your seniors at Indian Institute of Management (IIM), Lucknow helped you with their notes. Now they're helping you with their placement interview questions. 🙏
I applied via Campus Placement
Our client is a packaged tea manufacturer. He has two factories, say Factory 1 and Factory 2 located in Noida with maximum production capacity of 100 tons per month each. Assume earlier the demand was the summation of production capacity of two factories, that is, 200 tons per month. However, client has forecasted that in coming months the demand is going to fall to 150 tons per month. Devise a production allocation strategy for the client.
[Please note that I stands for Interviewer and C stands for Candidate]
C: Where are the two factories located?
I: Assume both factories are in the same industrial park in Noida.
C: Okay. The production allocation decision will depend upon the total cost that will be incurred during the manufacturing process. Are both the factories owned by us?
I: No, only Factory 1 is owned by us. We buy the end product from Factory 2.
C: Do we have any data on what is the total cost or cost per unit incurred in both factories?
I: Yes. (Interviewer then gave the data about fixed and variable cost of both factories.)
Factory 1 - Rs 300 per ton. It can be divided into 3 parts - labor (Rs 100 – 80 fixed, 20 variable); utilities (Rs 100 per ton); fuel (Rs 100 per ton).
Factory 2 – Rs 225 per ton.
C: Okay. From the data given by you, Factory 1 has fixed cost of Rs 80 per ton * 100 tons = Rs 8000 and variable cost of Rs 220 per ton.
Assuming we produce x tons in Factory 1. Then we will be producing 150 – x in Factory 2. Max value of x can be 100 tons. Total cost would come around to be 8000 + 220x + 225(150 – x) => 41000 – 5x. Hence from the cost equation, we can infer that keeping x as 100 that is, running factory 1 at full capacity will give us the minimum cost C: Good. Can you think of why production in our own factory with outdated machinery is preferrable as compared to buying product from factory 2 which employs better production techniques?
I: The variable component of labor cost is the major factor. If the split would have been 60:40 instead of 80:20, we would have come up with a totally different answer.
We have been approached by a global publisher of legal & accounting books. They are planning to expand into India by buying a print & paper based local publisher of similar kind of books. Can you help them size the market? Also, what do you think are the risks of digital disruption?
[Short case -15 to 20 min]
(Started with questions to probe the problem statement.)
[Please note that I stands for Interviewer and C stands for Candidate]
C: Okay, just to reiterate, the client is a legal & accounting books publisher looking to buy a print & paper-based publisher in India.
I: Correct.
C: What is the objective behind buying out this new publisher?
I: They are looking for geographical expansion.
C: What is the timeline that the client is looking forward to?
I: No timeline as such. They just want to know what the potential market size of the industry is.
C: Okay. To start with estimating the market size, can you help me understand where all legal and accounting books are used? From my understanding, educational institutions, and people working in this profession might refer to these as well such as lawyers, accountants.
I: Yes, you are right. Let us consider only educational institutions for the case.
C: In educational institutions, we can have schools as in India, senior secondary education has subjects on accounts, as well as colleges/universities for these domains.
I: Consider only educational institutions for undergraduate & post-graduate studies.
C: Okay, my strategy here would be to estimate the demand of new books in a period of one year. This can be calculated by estimating number of colleges that we have in the country and the books required by students of each year, i.e., freshers, 2nd year students etc.
I: Go on.
C: (followed standard guesstimate procedure starting with Indian population, estimating the number of students opting for accounts and law post their schooling and then estimated the number of students for each year in their undergrad. Assumed the number of books required by each student in a semester and estimated the total number of books required. Took some time here and hence could not move to risks for digital disruption in the sector.)
I – Okay. I think we are running out of time. Can you quickly list down what can be the potential risks that the legal & accountings books publishing industry faces due to digital disruption?
C – Yes, due to the increasing popularity of eBooks, hard copies are not preferred much because they are bulky. Whereas eBooks can be accessed anywhere on phones, laptops. That is a potential risk that the industry faces. Also given the rise in educational tech and coming up of startups in the EdTech domain, the hard copies of textbooks are becoming redundant as most of the information is provided digitally.
I – Sure, makes sense. Thank you Rishabh for your time.
MP Government is facing an all-time low in tourism and entertainment industry due to COVID-19. Suggest some ways in which MP Government can tackle this problem.
[Short case – lasted 10-15 min]
[Please note that I stands for Interviewer and C stands for Candidate]
C: Okay, just to reiterate, MP Government has reached out to us because it is facing a decrease in revenues in tourism & entertainment industry and we have been asked to provide solutions in which it can tackle this issue.
I: Right.
C: Do we have any budgetary constraints?
I: No constraints as such.
C: What is the timeline we are looking at? Is the government looking for solutions in the short term or in the long term?
I: You can go ahead and give solutions for both short term and long term.
C: [After this the discussion was on the lines of what potentially comes under tourism & entertainment – tourist sites, cinema theatres, sports events, fairs (melas), theme parks. After this, discussion shifted to potential sources of revenue for a theatre. Employing how exactly a customer would go about watching a movie in a theatre, I laid down the journey and potential sources of revenue for the theatre such as parking fees, ticket sales and snacks & beverage sales. After this there was a similar discussion on revenues that the government can generate from hosting sporting events in the state.]
I: We can end the case now. So, what do you think how did the case go?
C: Since the case ended soon, I could have jumped quickly and elaborated on the solutions for tackling the issues instead of majorly focusing on what all the problems can be.
I: No issues, I think you listed the sources of problem well. Thank you for your time.
I applied via Campus Placement
Let us say there is a manufacturing company A, selling small containers to a tyre manufacturing company MRF. MRF is packing their tyres in those small containers and sending them to a car manufacturing company, Maruti. Maruti is using those containers and sending back the containers to the manufacturer A while receiving the containers, A found that they are receiving damaged containers which is increasing their product cost. What incentive scheme company A could apply to reduce the damage rate of receiving the container?
[Please note that I stands for Interviewer and C stands for Candidate]
C: May I know at which end the containers are getting damaged?
Option 1: While travelling from A to MRF end
Option 2: While travelling from MRF to Maruti end
Option 3: While travelling from Maruti to A
Option 4: At Maruti’s end itself.
Option 5: At MRF’s end itself.
We can have a ranking system, where ranking will be based on the damage rate of the containers. High damaged containers pack will have a lower ranking and low damaged containers pack will have a higher ranking. Based on the ranking of the containers pack received company A will give a discount to MRF, which will do the same when they will start receiving the containers at a lower cost. As soon as Maruti will notice that they are receiving discounts not to damage containers and it is reducing the product cost at their end so they will start handling the containers more safely and also try to introduce a quality check before the containers leave Maruti.
I applied via Campus Placement
The client is a PE firm and would like to evaluate an Indian asset portfolio of roads, railways, highways, ports etc. We have received the cash flow position from target company. Suggest a list of risks to the cash flows.
[Please note that I stands for Interviewer and C stands for Candidate]
I: The client is a PE firm and would like to evaluate an Indian asset portfolio of roads, railways, highways, ports etc. We have received the cash flow position from target company. Suggest a list of risks to the cash flows.
C: Asked about the firm, its location of operations, any particular asset they would like me to look at first and where does the firm lie in terms of its value chain of managing the assets (i.e., whether the client is involved in building assets, maintaining the assets, etc.).
I: The client is an established PE Firm, operates Pan India, and no particular asset is a priority at the moment. In terms of value chain, the client bids for an asset, and once the contract is won, client is responsible to construct the asset (say a highway or a port), then maintain it for a certain period before handing it over to the government in about 35 years.
C: Could you give me a moment to structure my thoughts?
I: Sure, go ahead.
C: We can start by looking at multiple factors that could affect the operating cash flows. The factors could be external to the firm and beyond its control, such as any regulatory changes by the government (since one of the major stakeholders in the contracts is the government), contractual changes, any substitutes to the assets that come up (alternatives to highways, roads, etc.) or could be internal to the firm, such as efficiency in managing traffic, maintenance of assets (allowing more users), rates of tolls (if any), etc.
I: Good. What would be the operating inflow and outflow of cash for acquiring or maintaining an asset, say a highway?
C: Sources of inflow of cash would be toll collection, lease money for renting out area in and around the highway, for instance - for petrol pumps, small restaurants and leasing out advertising spaces. Sources of outflow of cash can be looked at by considering the value chain. We would pay out the bid money, outflow of cash for buying raw materials and machinery, hiring labor to construct the highway and the regular maintenance costs of the highway until the asset is handed over to the government.
I: Good, now let us consider that we won a bid for a highway between Mumbai and Hyderabad. It has been 5 years since construction. We have projections of the cash flow for the next the 25-30 years. Evaluate the risks to this cash flow in term of
revenue from toll.
C: The way I would calculate the revenue would be as follows - Number of cars x Frequency of visit x Toll per visit.
I: Would only cars be paying the toll?
C: No, the vehicles would include passenger cars, cabs, buses, trucks, and two wheelers.
I: Right. Let us focus on trucks. What are the risks to toll revenue from trucks?
C: Could you give me a moment to structure my thoughts?
I: Sure.
C: Toll revenue would be a function of number of trucks and the toll charges. We could have direct and indirect factors impacting the toll revenue from trucks. In case of direct factors, we could have any alternate routes available to the truck drivers (could be another highway) affecting the number of trucks taking the highway. Changes in toll charges could also have an impact on the revenue. Since the trucks are travelling between two cities (Mumbai and Hyderabad), they would primarily be serving as inbound and outbound transportation for the companies. So, the indirect factors could be inter-state taxes, cost of raw materials within the two cities, and regulatory & legal requirements especially with respect to transportation of trucks (for e.g.- timings within which trucks can operate).
I: Take two industries - agriculture and automobile. Trucks supplying to these two industries contribute maximum to the toll revenue, about 40%. Inter tax rates between the states have increased, toll revenue from trucks supplying to which industry would be impacted the most?
C: It is hard to switch supply from one source to another in case of agriculture industry since its dependent on climate, soil, etc., while for automobile industry it could be relatively easier to shift the source.
Client is a financial institution (FI), estimate the number of loans the FI would disburse in one month to customers buying a product online via e-commerce platforms.
[Please note that I stands for Interviewer and C stands for Candidate]
C - By products being purchased on an e-commerce platform, do you mean a platform like Flipkart and Amazon?
I - Yes, for simplicity, assume it to be Flipkart.
C – Okay. Are we focusing on any particular region or is it Pan India? Do we have any specific criteria for disbursing the loan?
I - Nothing specific.
C: Okay, just give me a moment here.
I - I would like to calculate the number of online purchases and then find out the proportion of purchases for Flipkart and finally the proportion of loans disbursed by the FI. So, number of online purchases = Population (130 Crore) x Rural / Urban (~7:3) x Internet penetration (30%) x Income Classes (40% of middle/lower middle class) x Age (35% - 15-35 years) x Proportion of online purchasers (assumed 30%) x Frequency of high-cost purchases (Once in 6 months) x Factor for mode of financing (EMI, Loans, self-finance), Then, Loans for purchases on Flipkart = number of online purchases x Market Share of Flipkart (~30%)
Finally, Number of Loans for FI in one month = Loans for Purchases of Flipkart x Market share of FI (For market share of FI, I asked the interviewer if we had information on the market share directly or if we knew the number of FIs in the sector. The interviewer told me that there were 3 close competitors, hence I could assume 1/4th of the market share for simplicity.)
I applied via Campus Placement
Client is a local clothing retailer with a well-established regional brand. Got multiple retail shops across India. In the advent of COVID they want to make a move into the online platform. Suggest ways to make the transition effectively.
[Please note that I stands for Interviewer and C stands for Candidate]
I: Tell me about yourself.
C: Gave my introduction and mentioned about my past work experiences.
I: Alright, let us do a case. Client is a local clothing retailer with a well-established regional brand. Got multiple retail shops across India. In the advent of COVID they want to make a move into the online platform. Suggest ways to make the transition effectively.
C: I would like to ask a few clarifying questions. What are the regions the client operates in?
I: We have our presence pan India.
C: Do we have any monetary constraints and what is the timeline we are looking at?
I: No budget constraints and we are looking at 6 months’ timeframe.
C: Has there been constant growth in revenue or was it saturated?
I: There has been decent growth until COVID hit. Now you can proceed to provide the suggestions.
C: There are two major options available.
First one is the existing online channels. We can leverage existing online platforms like Myntra, Amazon, Flipkart etc. to market and sell the products.
The second option is to establish a separate website and market accordingly to lure new customers and continue ties with loyal customers.
The first option is more preferred as it requires lesser time to adapt and has the potential to capitalize on the massive traffic in these existing platforms. We can offer discounts to mark the entry into the online mode and can establish more hybrid models down the line.
I: Okay, sounds good. Let’s do a quick guestimate: Size of airport terminal building in a Tier 1 city like Patna.
C: I used Supply side approach to calculate potential traffic and converted it into space required in peak hours, considered 60 % area for footfall and remainder for other areas.
Client is a FMCG good manufacturer. Has had a lot of product returns lately. What are the probable reasons?
[Please note that I stands for Interviewer and C stands for Candidate]
C: What are the different types of products?
I: We have dairy products like paneer, curd, milk etc. You can make your assumptions and go ahead with the suggestions directly.
C: Firstly, since our client deals with dairy products, they will have relatively less shelf life (max of 1 week).
So, the following reasons could be attributed to the return:
1. Delay in delivery – constraint in logistics
2. Not storing them in the right temperature, while transporting
3. Low customer demand, retention of product with retailer
4. Inadequate testing - Lack of R&D
I was given a case based on my work experience. Digitization in the construction industry, how would you implement Industry 4.0?
CV preparation helped me ace this interview. The in-depth knowledge of the construction sector came into use.
Client is an apparel manufacturer (clothing only) and wants to double their revenues in a 72 span of 4 years –how should they go about it?
[Please note that I stands for Interviewer and C stands for Candidate]
C: I would like to ask a few clarifying questions. What is their current mode of operation and where are the current operations based out of?
I: Operations are currently based out of India. They are a subcontractor in the value chain and have cotton-based apparels such as tops/ t-shirts, undergarments etc.
They have 10 factories in Coimbatore, Andhra and Punjab and supply to H&M, Gucci, M&S (biggest client), VS and other local brands. They cater to both Indian and global market.
C: Do they have both online and offline presence?
I: The client does not have any online operations. Offline channels are well established through contracts.
C: Are there any budget or time constraints?
I: No constraints. Their current revenue is Rs. 2 Bn.
C: We can explore 4 different options:
• Expand our product line and introduce curtains, bedsheets, mats.
• Start own brand and market as high-quality, low-cost product (wholesale margin reduced) and sell online (Amazon, Flipkart, Myntra).
• Increase reach through online and offline channels and advertisement to reach out to more people.
• Increase capacity of manufacturing plants. It currently operates at 60%, possibility of increasing it.
I applied via Campus Placement
Our client is in the IT industry, primarily working in the USA, with $1Bn of annual revenue
(75% from the USA itself). They operate software development, maintenance, and data
center management for BFSI clients, which provides 80% of the revenue. They have recently
acquired a software company working in the USA for five years, and its revenue has been
constant at $20 Mn. We must decide whether we should sell this company and invest further
in it.
[Please note that I stands for Interviewer and C stands for Candidate]
C: Understood. There are a few questions I have with respect to the problem statement itself as well as some clarifying questions. Why did we invest in this specific company? Were we looking for any synergies?
I: This new company is operating in an emerging industry, with a lot of potential. We acquired it at a reasonable market price and were looking for long-term profits and not synergies.
I: Is the company profitable? Did we focus on improving the revenue in the last five years?
I: Yes, it's profitable, and we haven't made any investment till now.
C: Can I know about the market landscape in terms of market share and revenue growth?
I: The market is dominated by 5-6 large players having 70% of the market share. They are growing at the industry growth rate of 7-8%.
C: I would also like to understand this new company we acquired, specifically their business model and major revenue streams.
I: Let's not focus much on the company because the IT sector and the company will be very new to you, but to give a basic understanding, this new company provides core software solutions to insurance clients in the USA, helping them to serve the clients. (He talked about CRM/ERP, which I could not follow up on completely).
C: Should I also exclude the product-related aspect and take it up further in the case?
I: Yes, you can assume a standardized product for the time being.
C: Also, who runs this company, separate management?
I: Yes, they are run independently as a subsidiary.
C: Since it's in B2B, what are the primary customer segments we are serving?
I: We price the product at a premium. There are four major customer segments: Large private players (50%). Govt (20%), regional players (20%) and local players (10%). We primarily serve the local players, which are geography-specific, which have a niche client need.
C: I think I have a fair bit of understanding of the business problem.
My decision to invest or not invest will be based on three factors: Current market value of the firm, future market value with investment, future market value without investments but with better management or operations.
I: Okay, and how will you go about doing this?
C: I will try estimating the revenue/incremental revenue under each of this category and compare it with the additional investments.
I: Okay, Emil, that's a sound approach. Let's focus on the investment bucket, assuming the current market value is only $18 Mn. How will you proceed with the same?
C: Also, I want to understand the quantum of investment we are making because it will affect my future value and growth.
I: Let's take a step back here, Emil. If you exclude the investment amount, how will you approach this?
C: I will look at the future value and growth potential. What are the avenues for the firm to increase the revenue in the future specifically?
I: Yes, perfect. Let's focus on this.
C: I think we can focus on our current operation, looking at the revenue from the existing and new clients, or looking at new operations concentrating on new products or new geographies.
I: Let's exclude the new geographies since we want to focus on the USA. What do you mean by new products?
C: New products for our current customers or targeting a new customer segment.
I: Okay, and would you like to add anything?
C: Can I take a few moments to think through this situation?
I: Yes, take your time.
C: For our current clients, we can focus on any cross-selling opportunity with respect to our parents' offerings, bundling of our products, and customization.
I: Yes, useful suggestions, let's focus on new clients now.
C: We can focus on new customers from the current segments or try serving govt or large private players. For the former, we can focus on S&M techniques along with better product differentiation. For the latter, since there are larger players than us, it won't be easy to compete. We need to look for a niche product/space we can enter initially.
I: Okay, make sense. Let's assume we have decided to enter the larger private players segments. How will you go about doing this?
C: I will approach this from the demand and supply side. From the supply side, I will look at my current and potential capabilities in terms of servers and software developments, R&D and the quality of my employees, sales team and their reach, and marketing techniques. I will focus on these larger clients' product and price requirements from the demand side, offering customized/niche products, value-added service and long-term contracts, and differentiation from current market players.
I: Good points. Now let's try estimating the value of the company if we incorporate all these suggestions.
C: Do you want me to estimate the future revenue of the company?
I: Let's try focusing on your approach here first, specifically for the new segment we are entering.\
C: To estimate revenue, I need to know the price, the product mix/range of offerings, and the number of clients we will have. For estimating the price, I will look at our competitors' current market price, our cost of entry, and the future price growth/bargaining power using inflation, GDP growth rate, and industry growth rate as proxies. Also, due to the Covid outbreak and boom of the insurance sector, we might be able to price our products better in the future. To estimate the number of clients, I will start calculating the total number of local insurance players in the local market by assessing the need for insurance products (using proxies like population, age, income, insurance affinity, average customer base per insurance player) and multiply it by expected market share.
I: Emil, this is the bottoms-up approach. Let's focus on the top-down approach, and for the new segment we are entering, the potential market or the projected market share.
C: I will start with the current market for large private players and estimate how much we can acquire while competing with other similar B2B players. Since there are large established players in the market, it won't be easy to get a fair market share initially. I would like to look at proxies that will help me understand the market we can capture.
I: What are those?
C: Since IT is a sales team-based industry, revenue/employee can be one metric. Also, the server capability or any patent-related information can be useful. Marketing expenses can also indicate how aggressive the competitors are. And finally, since we are looking for at large players, data regarding long-term contracts and customer retention is critical.
I: Thank you, Emil. Can you explain the approach you have taken to solve the problem?
C: Yes (I then summarized the case, and the interview ended there).
Our client is a manufacturer of nets used in the fishing industry, agriculture, and construction. Their revenue has been growing at the rate of 3-4% for the last five years.
They would like to accelerate their growth to 15% YoY. Can you help them?
[Please note that I stands for Interviewer and C stands for Candidate]
C: Why precisely 15% here? Does the client think they have the potential to grow at this level in the future?
I: That's something we must decide internally. So, you have a dual problem here: understanding our company's potential and finding out ways to grow the revenue! Also, let's focus only on the fishing net industry for the time being.
C: What is the timeline for the same? Also, any specific budgetary constraint I should keep in mind?
I: Probably as soon as possible. Also, we have enough cash in our account.
C: Understood. Where does our client operate in the value-chain? Do they have their production and distribution facility?
I: Yes, the client operates across the value chain, from production to distribution through 3rd party dealers. Retailers buy it from them and sell it in the market.
C: What are the major product segments we are having?
I: We are into all product categories that the industry requires.
C: How is our product priced with respect to our competitors?
I: There is a 5% premium on our product, mainly because of the quality. It is the best in the industry in terms of quality.
C: What is the market share of our company? And what has been the industry growth rate?
I: We are the market leaders with 70% of the market share. The rest of the market is captured by the unorganized sector. The industry is also growing at a rate of 3-4%.
C: What are our primary customer segments? I believe organized fishers buy the products from the dealers and unorganized fishers from retailers in rural areas.
I: Yes, this is how the industry operates.
C: The approach I want to follow is to look at our company's potential in terms of production and supply chain specifics to see if we can support a 15% YoY revenue growth (focusing on the volume part) and looking at the current capabilities and capacity utilization. And then try to understand avenues available for us to increase the revenue through organic and inorganic routes.
I: Let's focus on revenue maximization first and focus only on organic growth.
C: I want to focus on three aspects here: Customers, dealers, and logistics/supply chain.
I: Let's focus on customers first.
C: There are two kinds of customers: Bigger organized players and smaller unorganized ones. For the more prominent players, we can look at establishing a long-standing relationship with them. Customize nets according to their needs, in-house maintenance and repairing of the nets, bundling of the products, or discounting since purchasing in bulk quantities.
For the smaller players, we can try getting closer to the end-user, probably the D2C model. For them, word of mouth matters a lot and bases their purchase decision on historical purchase experience and usage. We can set up small retail shops along the coastal lines, trade fairs or discount periods during the major festival season, and some engagement activities for the local people sponsored by us.
I: Anything else?
C: Since our product is at a premium price, there is an internal trade-off we must make between price and quality. Since the customer and the local players are price-sensitive, we can help them buy the net with suitable price incentives like EMI, partnership with local panchayats or banks, and replacement of old nets.
I: Okay, agreed. What about the distributors?
C: We can integrate forward to have our exclusive distributors or increase our presence in areas where we are not a market leader.
I: How do you assess and bridge the gap in the current distribution network?
C: For assessing the gap, we can look at proxies like the number of dealers per area or the number of retail customers per dealer. Also, revenue per dealer or total orders served, along with the growth rate in orders, can be used here.
For bridging the gap, you can look at the hub and spoke model, like having regional centers on major shores. Also, you can focus on an exclusive dealership, a better incentive structure for the dealers to push our products and focus on areas where we currently don't have any presence.
I: Okay, that is it, Emil. How will you estimate the annual revenue for the client?
C: After taking time to structure my thoughts, I gave my approach to estimate the total units sold per year.
I started from the total population and then used filters like age, average employment rate, and percentage of workers in the primary and fishing industries. Then I took an estimate of people working as fisherman among the people working in the value chain. Then I estimated the total number of fishing boats by segmenting the customers into organized and unorganized. I also incorporated product lifecycle and reserve nets per boats within the model.
He was also looking for the numbers and my rationale for each assumption I made.
I applied via Campus Placement
Our client is a sports manufacturer, and their business has been affected by the ongoing pandemic. They sell fitness products and accessories to the customers. What would be your strategy to increase the revenue of the client?
Used profitability and growth framework to identify ways to promote the business in pandemic.
Our client has 20 fitness outlets in semi metro areas in USA. The company has been observing a decline in revenue from last 5 years. Try to analyze the case and find the potential solutions to improve the situation.
[Please note that I stands for Interviewer and C stands for Candidate]
C: To reiterate, our client has been facing decline in revenues for that last 5 years, and as their consultant you want us to find the reasons and some possible solutions for the same.
I: That is correct.
C: Since when are we experiencing this decline in revenues and what has been the quantum?
I: The decline has been for 5 years and the decline is >20%.
C: By fitness outlets do we mean a setup like a gym?
I: Yes.
C: How many such outlets do we have and where are they located?
I: We have 20 such outlets in the semi: metro areas. (Used profitability and growth framework & used CPCC to get the basic understanding of the problem) Divided problem in Revenue and Cost parts. Discussed on multiple components from both the branches. Identified multiple bottle necks in the costing part. After having a discussion for around 15 minutes, we could cover all the potential problems.
I was then asked to provide a short term and long-term solution and once I answered that, I was asked to perform A/B testing on 10-10 fitness outlets. It was asked mainly to check what all factors I was able to come up with.
I applied via Campus Placement
I was asked to figure out subscription plans for a new OTT platform.
The questions went into certain technical aspects of OTT platforms, like Netflix's success story, Why Amazon came out with Prime and others?
As for the case, I asked a lot of questions as I went ahead with the case.
That is a very important aspect of case solving. It might not be possible for you to solve a case but if you ask intelligent questions, it works in your favor. It worked in mine.
The case, though, came very late in the interaction. The round again had questions on my career choices and HR. The interaction lasted for about 30 minutes.
I applied via Campus Placement
Guesstimate the footfall of tourists in U.P. in a year. What can be done to increase the number?
I narrowed down the guesstimate by asking scoping questions.
I asked whether I had to calculate the number for Indian tourists or international (as I was required to give recommendations as well).
Further, I asked which sites have to be considered.
They asked me to consider both national and international tourists. I asked them if I could start from estimating Taj Mahal's footfall then adjust numbers for different sites.
I took 52 weeks in a year, bifurcated it into weekday and weekend.
Then, I took the capacity approach by considering area of Taj Mahal and its operation timings.
Further, I suggested 4-5 famous places and adjusted the number.
Under suggestions I highlighted easy visa availability, better connectivity, improvement in transport facilities, infrastructure and women safety.
A bank wants to expand its credit card facility to small and medium enterprises in India.
Calculate potential market size. Give reasons which could stop SMEs from adopting credit cards.
I tried different approaches, but I could not come to the number. In end he asked me to summarize and answer the second half of the case. I stated all sort of socio-economic issues and myths which could lead to low adoption of credit facility.
Calculate the income given to housemaids in India in a month.
I took the household approach and considered tier-1, tier-2 and tier-3 cities. I incorporated the income of households and number of maids required. For each tier, I used my personal experience of living at different places (which seemed to work in my favor).
I applied via Campus Placement
The client is a billion-dollar IT services player (application and infrastructure management). They have been lagging behind in profitability and need help with this problem.
[Please note that I stands for Interviewer and C stands for Candidate]
C: What is the quantum of the lag in profitability? Is there any data available for how short is the company falling of its targets? Also, since when has the company been facing this issue?
I: Yes, the company has been clocking 12-13% EBITDA compared to a 15-16% expectation. The issue has come to light in the last 3-4 years.
C: Thank you. As I am not too aware of the concerned industry here, could you help me understand what do we exactly mean by ‘application and infrastructure management’ services?
I: Application services are simply app development and maintenance while infrastructure management services range from cloud-based data management to ERP solutions to core system maintenance and a few other add-ons.
C: I would like to know a bit about the client to establish some context here. Can you help me the following details? Location, Areas of operations (client bases), age/maturity of company, size of the company (in terms of workforce- as it is an IT services company).
I: Sure! The company is based in India and has offices in Bangalore, Chennai, Pune, and Trivandrum. It is a mid-90s company and has approx. 2500 employees. 80% of the client base is in US.
C: Sounds good. To understand the offering better, is it safe to assume that the company offers customized solutions to every client given different scales of client firms?
I: Yes absolutely. The requirements of every client would differ based on its scale and specific solution needs.
C: Also, I would assume that there would be a fair amount of competition in India in this industry. Can I get some information on the competitive landscape here?
I: Yes, that is correct. There are 3 tiers of companies serving as good competition. Tier-I would be the likes of TCS & Infosys, we would be a part of Tier-II followed by smaller local players.
C: Thank you. I have sufficient information to dive into the issue. As the company is experiencing a profitability issue, I can define profits as Revenues - Cost considering a single stream of revenue which is service fees.
I: Yes, ignore revenues for now, let us look at costs for the client.
C: Sure! As it is an IT services company servicing mostly US-based clients, people’s costs would be a major component of total costs for the client apart from other operational and non-operational costs like.
I: Yes, ignore other costs for now. Let us focus on personnel costs which forms 80% of total costs.
C: To ascertain personnel costs, I would like to use the following equation = No. of offices x No. of projects x Avg. no. of people per project x Avg. CTC.
Moreover, Avg. no. of people and CTC will be different for different tiers of employees.
I: Yes, that seems fine but on what other ‘lever’ would the costs depend?
C: Further, the projects would have different tiers of personnel and their CTCs will be different based on level of skill/seniority.
I: Yes correct. Can you think of any other ‘lever’ that could vary costs in this context?
C: I have a few questions which I need more clarity on. Is the employee structure top-heavy or bottom-heavy? Moreover, could efficiency of certain tiers of employees also be a cost driver here?
I: In such a firm, the structure is almost always bottom-heavy. Also, what do you mean by efficiency, can you explain your thought process behind this. You can also consider the office space available as a factor of personnel costs in this context.
C: Sure. By efficiency I meant the amount of time that an average team would take to complete a project and benchmarking that with that of other competitors, we could get an idea about the relative efficiency of the workforce. Also, I think I missed the space aspect earlier. Different office locations would have different office space available and hence, the costs could vary across these locations. Would you want me to explore this further?
I: Yes, that sounds good. How would you benchmark the efficiency of employees when projects are customized and not uniform across various clients in different industries?
C: Yes, I agree that benchmarking would not be fully accurate, but it is just to get an idea of relative costs. If we take a hypothetical project and allocate a group of employees and compare across competitors for the same, we might be able to assess if we are less or more efficient than them and get an idea of relatively higher/lower costs.
I: Alright, that makes sense but like you said, it is not possible to have this data and hence is a hypothetical scenario. Also, we have ¾ mins. left with us. Can you quickly think of some additional points that could drive personnel costs?
C: I have a few more points which could be cost drivers. Firstly, we could look at benchmarking the salaries of different tiers of employees with that of the competitors. Secondly, we can compare the utilization of employees per annum and compare it with that of competitors.
The client is a specialized chemicals manufacturer and is facing issues with its profitability. They need us to help them figure the problem and recommend solutions.
[Please note that I stands for Interviewer and C stands for Candidate]
I: Focus only on structure and idea generation.
C: Sure! Since how long has the client been facing these issues? Also, I would like to know a bit about the client and the industry it operates in and the timeline in which the client is looking to resolve the issue.
I: Let me help you with some initial information. The client manufactures chemicals used further to produce plastics, paints, textiles, and leather goods. It has 400 different SKUs and clocked revenues of INR 160 Cr. last year. They require quick solutions which can be implemented within a 2-3-week period.
C: Thank you for that information. (Made some assumptions and confirmed with the interviewer: B2B clients pan-India and business model/value chain were from Sourcing-Manufacturing-Sales & Distribution). Asked a few more questions about the competitive landscape.
I: Yes, you can go ahead with that understanding. Ignore the competitive landscape. Although could you tell me the kind of clients this company could have?
C: Yes, I would assume consumer durables, apparel, lifestyle brands to be key clients. Is that a good assumption?
I: Yes, that sounds good. Go ahead!
C: I will break down profits into Revenue-Cost. Assuming multiple revenue streams and cost centers for 4 different types of products, would you like me to focus on any of these specifically or can I explore each one by one?
I: Yes, that is a good point. Leather products are driving down the profitability primarily. Can you explain about the cost structure/heads of this company?
C: Sure. On the nature of costs, I could divide them into Operational & Non-operational costs. On the basis of behavior, I could use a Fixed, Variable & Semi: variable classification.
I: Good. Name a few operational & non-operational costs here and let us proceed with it then.
C: Under operational costs, I would list down raw material costs, labor costs, in-bound logistics cost, production process costs, warehousing & storage costs and distribution costs including outbound logistics, R&D costs, Administrative costs, and technology costs. Under non-operational I would consider depreciation and finance costs.
I: Alright, let us move to the revenue aspect now. How would you proceed?
C: Before I dive into it, could you help me with an SKU distribution across all 400. This is to determine how heavy is the leather products’ SKU share among the overall SKUs offered.
I: Sure. Consider it as 50, 70, 120 & 160 SKUs for plastics, paints, textiles, and leather goods, respectively.
C: Thank you. As we can observe that leather goods for the highest share of the overall SKU mix, the top line can be majorly affected by leather goods. Following this, I would break the revenue as no. of leather goods’ units produced avg. price of leather SKUs. Do we have any information on the quantity produced or the pricing policy/trends that the client has observed for their goods in the past?
I: Good observation. So, the client follows a cost + mark-up pricing model. The quantity of production has not changed. Anyway, can you quickly suggest some ideas for a company like this to improve profitability?
C: As we have a short timeline to improve profitability, I would look at the SKU mix offered. We would have to increase sales effort on certain SKUs and reduce or phase out a few. Producing and selling larger SKUs could reduce carrying costs and packaging costs. Since our clients are all B2B, if the smaller SKUs are not truly relevant, we could look at reducing sales of these and reallocate resources towards larger SKUs. Would that be a fair suggestion?
I: Yes, although the cost of producing the primary material is the same across all SKUs, the other product costs could be tweaked. I like the idea of pushing large SKU sales although phasing those out would not be recommended as there are certain buyers for its who would not purchase beyond a certain limit due to many reasons. If phased out, the revenue and profits from that segment could get totally wiped out.
I applied via Campus Placement
Your client is a Brick Manufacturer. A new player has entered the market and slashed the price by 10%. The client is asking us what they should do.
[Please note that I stands for Interviewer and C stands for Candidate]
C: To understand our client better, can you tell me how old is the company?
I: The client is an old company in this line.
C: Does the client also have other lines of business?
I: No. The client only manufactures bricks and sells it directly to customers.
C: As we are selling directly to customers, can I assume that most of our customer base is builders?
I: Yes. Most of our customers are small builders.
C: Okay. Where is the Client located? Also, what is our scale of operation?
I: The Client is located in East India. It has a single plant in a catchment. It is one of the biggest players in East India.
C: Who are our competitors? Also, is it a fragmented industry?
I: Yes. It is a fragmented market with 30 odd players in the market. There are 2-3 big players in the market and our client is one of them.
C: Okay. What is the price that we are currently charging for the brick? Is that the price that our competitors are charging as well?
I: We are currently charging Rs. 10 per brick. Yes, the price throughout the market currently is more or less similar. However, the new player has entered and cut price by 10%.
C: As we have to decide if we should cut the price by 10% or not, we can consider the following before taking a decision. Our Market Share in the current market, the current pricing of the product, the process of manufacturing, our customer base and their perception of a price cut, the quality of our product vis a vis our competitors.
I: This sounds good. Let us look at the market share but I want you do a few calculations for me first.
C: Sure.
I: Let us say we are selling 100 thousand bricks. Should we reduce our price? Is it feasible?
C: I would like to decide the feasibility of price reduction on the basis of our profitability. To understand more about it, do we have any information about the costs incurred for production as well as the fixed costs?
I: Yes. The variable costs are around Rs. 3 per brick and the fixed cost is Rs. 20000 currently.
C: (Asked for some time for calculating profit) Currently, we are selling a 100 thousand bricks at Rs. 10 per brick. Thus, our sales are Rs. 10 Lakhs. The variable cost of producing 100 thousand bricks is Rs. 3L. Contribution is 10L minus 3L i.e., 7L. The fixed costs are 2L thus our profit is Rs. 5 Lakh. We have a profit margin of 50% currently. If we reduce the price 10% per brick for the same sale quantity, the sales would be 9L and the profit would be 4L. Although our profit margin would reduce from 50% currently to around 45%, it still seems a feasible option.
I: Sounds Fair. How many bricks will I have to produce and sell if I still want to earn a profit of Rs. 4L without reducing the price by 10%.
C: In this scenario, the price of the brick is Rs. 10. We need to earn a profit of Rs. 4L. The fixed costs will not change due to change in quantity of sales and production. Thus, the contribution will be 6L. Per brick contribution is Rs. 7, thus, I will have to produce and sell around 85,000 bricks.
I: Yes, that makes sense. What does the contribution signify?
C: The contribution is that portion of revenue which is not used up by variable costs and used to cover the fixed costs. Contribution is also considered while calculating the break-even quantity essential to keep the business running in the short term.
I: Good. All the factors you listed while considering a price cut make sense. However, as we are short of time, can you tell me why would you consider customers while deciding a price cut?
C: As we are an established player manufacturing since many years and amongst the Top 3 players, can I assume we would be having a specific loyal customer base since many years?
I: Yes, we do have some loyal customers who value our quality.
C: Customers might perceive price cut as reduction in our quality of bricks. It can create a lower perceived value for the product and buyers might consider our product less valuable.
I: That sounds fair. So, what do you think should we do?
C: As currently the pricing in the market is more or less similar, 10% reduction by one player will affect the pricing of other competitors as well. Based on the calculations, a 10% price reduction will affect our profitability by 5%. We are a big player in the market, and we have the capacity to reduce our prices and focus on increasing our volume to compensate for the reduction in profit. Also, since most of our customers are small builders, a 10% saving in brick cost might also be an attractive opportunity for them to shift to another manufacturer since the product offered by all players is similar. Thus, we can also go ahead with reducing our price by 10%.
I: Correct. Seems good. That will be all.
Your Client is the manufacturer of fishing nets. These nets are used in agriculture, fishing, and construction. The growth has slowed down. It wants to grow at 15%.
[Please note that I stands for Interviewer and C stands for Candidate]
C: (Clarified the problem statement). What is the current growth rate of our client? Has there been a fall in our growth rate?
I: The client is currently growing at 5%. It is a well-established player and was growing at 10% earlier but the growth has gradually reduced to 5% over the last few years.
C: What is time period within which we need to achieve this target of 15% growth?
I: We need to achieve this target in the next 3 years. Let us only consider the fishing industry for this problem.
C: Okay. I would like to understand at what rate is the fishing industry growing.
I: The industry is also growing at 4-5% and our growth currently is in line with the growth of the industry.
C: Okay. Where is the client located? Also, what is the distribution channel that the client uses?
I: The client is located in India. It operates through dealerships and has a distribution network all over India.
C: I would like to understand a little more about our competitors and their share in the market.
I: We are one of the major players in the market. Our market share is about 70%. We have not been able to grow much as the market has now stagnated.
C: Okay. In order to grow at 15%, I would like to explore the existing market and also explore new geography or businesses.
I: Let us consider the existing market for now.
C: While exploring the existing market, I would look at increasing the volume of sales or increasing the price of our nets.
I: I would like you to look at increasing the volume of sales first.
C: The volume of sales can be increased by increasing our customer base or increasing the quantity sold to a particular customer.
I: Can you help me estimate the size of the market for fishing net?
C: Sure. Fishing net can be used for sea water as well as freshwater fishing. I would divide the population of the country on the basis of access to coast or river and those with no water body around for fishing.
I: Let us consider only seawater fishing here. Since we are short of time, tell me the approach first and then you can calculate.
C: Sure. I would divide population of India who live along the coast and those who live in landlocked areas. Out of the people living along the coast, I would divide them into those living in rural areas and those in urban. The population practicing fishing as a profession in urban areas would not be much thus, I would first look at the professions practiced in rural areas along the coast. On the basis of their professions, I would divide the population majorly between agriculture/farming, poultry/animal husbandry, fishing and other. Out of the population that practices fishing, I would consider the number of households here and divide the population assuming 5 people per household. This would give me a number of fisherman and assuming every fisherman buys his own net, that would be the number of nets required. However, the fishermen would not buy a new net every year so we also need to factor in the number of years after which they would buy a new net.
I: This is a good approach. Can you also tell me what other strategies can we look at to grow in the existing market?
C: Firstly, we can increase the overall distribution network that we have. Currently, we are only selling through dealership. We can increase our distribution channels and also venture into setting up our own retail stores. Or we can also increase the number of dealerships we have within the same channel.
Second, we can analyze the current market and try to onboard more customers.
Third, we can diversify our product. We can introduce different sizes for the fishing net. We can also introduce a variety in the shapes of the mesh.
Fourth, we can market our product better. As most of the customers we are targeting are from rural areas, we can market our product through radio or local bazaars and trade fairs.
Fifth, we can also consider acquiring other players in the market. However, that depends on two factors – their willingness to sell and our capacity to buy.
Sixth, we can look at the pricing of the product.
I: This sounds good. I think you have covered all. We can stop here. Do you have any questions for me?