case1-2
TRANSCRIPT
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1. Leaving on a Jet Plane
A major airline is considering the purchase of 24 new planes. They are unclear how this purchase will
affect their business performance in the short term as well as the long term. You are the Senior
Consultant, meeting with the Operating Committee for the first time. I am the Chief Operating Officer
of the company. What would you need to know from me in order to assess the situation?
Here is a good example of a directed question combined with a role-playing
exercise. Not only will the interviewer be assessing your analysis and
deductive abilities, but she will also be evaluating your poise and
professionalism in front of a senior executive. In many cases, consultants
find themselves in front of key client personnel who are older and more
experienced in the industry, so your ability to cope with this type of situation
is essential. How will you actually go about assessing the situation and
finding information once you arrive at the client? (This case was given to an
MBA-level candidate.)You: What is the planned delivery cycle of the new aircraft?
Will it be staggered, serial, or all at once?
Interviewer: Aircraft will be delivered as they are manufactured over
the next five years, at approximately four per year.
You: How many planes are in the current fleet? Are there any
plans to sell off older aircraft as the newer aircraft are
delivered?
Interviewer: There are 120 planes in the current fleet. There are no
plans to get rid of our older aircraft as the new ones
arrive.
You: What is the current average cost per flight-hour of the
fleet?
Interviewer: It varies by aircraft type. The range is anywhere from
$1,000 to $5,000.
You: Do you have any frameworks in mind for assessing this
situation?
Interviewer: No. What would you suggest? (This is a tough response
because it asks you to put a stake in the ground.)
You: Well, in many cases I have used a companys cost of
capital, relative to the average cost of capital in the
industry, industry-specific metrics like the cost per
flight-hour, as I already mentioned, and depreciation
method choice. I would also want to assess the new
efficiencies brought about by your purchase, as in fuel
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You: Do any of your competitors manufacture overseas?
Interviewer: Our number one competitor produces all of its
appliances in Indonesia. (Heres your clue
manufacturing outside the country significantly lowers
costs.)
You: It probably suffices to say that some of your decline in
profit can be attributed to the increased costs you are
facing relative to older manufacturing techniques and
higher costs associated with manufacturing
domestically. This is especially troublesome in a mature
market where consumers are mostly aware of the
product category and the product may be considered a
commodity. (A commodity marketplace is one in which
customers make their purchasing decisions largely on
price. For example, toilet paper is largely a commodity
market, where consumers buy whatevers on sale.)
Lets talk about market share now. Can you tell me
about any recent market research you have regarding the
strength of your brand, price, your products position,
and any promotional activity you have had?
Interviewer: Our market research department has told us that
consumers are confused about the product category, that
they do not understand the differences between our
brand and our competitors brands. We sell to all majorappliance retailers in the U.S. We promote aggressively
twice a year and have smaller promotions once a quarter.
(This is consistent with the description of a commodity
product. The ways of breaking out of commodity
markets include promotions and making value-added
differences in the brand like, in the case of toilet paper,
introducing new designer colors and specially quilted
cotton-blend paper.)
You: What form does your promotional activity take?
Interviewer: We offer a price discount to consumers twice a year. We
regularly advertise in major magazines targeted to our
consumer, and we have an active outdoor campaign
underway.
You: It would appear you are competing in an undifferentiated
marketplace, and there may be an opportunity to capture
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additional share through an aggressive brand
differentiation effort. I believe it would also be worth
investigating the efficacy of your current promotional
programs, relative to your competition. The consumer
may be responsive to other types of promotions that
havent been utilized by the company as of yet.