CASEBOOK 2021
Acknowledgement
We are thankful to all those who have contributed to the journey that has culminated in developing this
comprehensive resource for preparation for Consulting. As enthusiasts of the eld, it has been an
educational experience for us to put together this casebook and we hope it aids the preparation of future
batches.
We are deeply grateful for the continued support of our esteemed Director, Prof. Debashis Chatterjee. We
would like to thank the alumni batches of Konsult – the Consulting Interest Group at IIM Kozhikode, for
providing us with guidance and initiating the process of collating this casebook. We also wish to
acknowledge members of the current batches at IIM Kozhikode as well as our alumni who contributed to the
book by sharing their case experiences and helped us in capturing a realistic aspect of case interviews. We
would also like to thank Himanshu Shekhar for overseeing the designing of the casebook.
The process of developing this casebook was greatly facilitated by the constant support and encouragement
of our faculty coordinator, Professor Nycil George, and the college administration. We thank our friends,
alumni and batchmates for their rich feedback and reviews.
Regards,
Team Konsult – 2020-2022
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© 2021, Konsult – Strategy & Consulting Interest Group, IIM Kozhikode. All rights reserved
Pic Credit: Sanjay S.
MEET THE TEAM
DARPAN BAFNA | NAYANIKA KULSHRESHTHA | SARTHAK SHARMA
NIKITA AGGARWAL | ASHWIN AMBALA | THANUSHA TAMARANA
Table of Contents
Serial
Particulars
Page No
Page No
6
Frameworks
7
8
Telecom
49
Case Interviews
8
16
E-Cigarettes
51
17
E-Commerce
53
Market Entry
1
Budget Hotels
22
18
Food Delivery Service
54
2
HR Service Provider
24
19
Automobiles (New Business)
56
3
InsureGo
26
4
Jet Leasing (Cost Reduction)
27
20
Helicopter
58
5
Indian Handset Manufacturer
29
21
Vistara Airways
60
6
IT Service rm
31
Growth
Pricing
Unconventional
22
Vision for Swiggy
61
7
Medical Device Manufacturer
33
23
Employee Productivity at Public Sector Bank
62
9
Pharma - Diabetes Drug
37
24
Reverse Accumulation at Energy Sector
64
10
Cab Aggregator - Uber
38
25
Inadequate pro ts for Interest Payment
65
11
Printing Plates
40
26
Steel Manufacturer
67
12
Appliance Distributor
42
13
Fibre Manufacturer
45
27
Robotics
68
14
Air Conditioning Company
46
28
Cement Industry
69
15
Energy Sector
48
29
Airport
71
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Particulars
Introduction to the Book
Pro tability
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Serial
Due Diligence
*For better experience use Microsoft Edge or any web browser
Table of Contents
Serial
Particulars
Page No
Guesstimates
Serial
Particulars
Page No
46
Telecom
103
30
Water Consumption in Kozhikode in a day
74
48
Technology
105
31
No. Of Pizzas Domino’s Sells per day
75
50
Media & Entertainment
107
32
Pizzas ordered in a day
76
33
Pro t by typical Teas stall in a day
77
34
Sanitary Napkin use over a month
78
35
Revenue PVR plaza of India makes in a day
80
36
CoVID Vaccines for frontline worker in Delhi
81
37
No. of deliveries by Swiggy in a day
82
38
No. Of AC’s sold in a year in India
83
Industry Analysis
39
Automotive
85
40
Aviation
87
44
Banking
89
41
E- Commerce
91
42
Energy
93
43
FMCG
95
45
Healthcare
97
47
Hospitality
99
49
Steel
101
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*For better experience use Microsoft Edge or any web browser
INTRODUCTION TO THE BOOK……
It gives us great pleasure in bringing to you the IIM Kozhikode Case Book 2021. The objectives of preparing and publishing this book are as follows:
• Provide a detailed view of the various frameworks
• Enable the students to capitalise on the interview experiences of the alumni with various rms.
• Detailed review on Guesstimates and Case questions
Some of the cases have detailed dialogue between the candidate and the interviewer. This has been done to provide a realistic transcript of an
actual case interview experience. For some cases, we have listed the main areas to be explored. As you can guess, due to varying levels of interest
and recollection, the case solutions have different depth.
We have also provided in-depth industry analyses for a thorough and concise review of the major trends across different industries as well as for
aiding in understanding the fundamentals of how organisations in these industries typically operate.
Case practice is an essential tool for cracking Consulting recruitment processes. Additionally, it also helps in the development of structured thinking
tools that aid in the general practice of Consulting as well as other management domains. Few tips before you start preparing for consulting interview:
- Practice to absorb and not to memorise: It is very important to practice and one cannot undermine the learning it brings but refrain from nding
‘the best answer for any type of problem’. Focus on sharpening your approach than the answer because as you all might know – a thousand roads
can lead to the same goal.
- Work in non-homogeneous groups: This is the best way to maximise your learning from the diverse experience everyone offers. Challenge
yourself to work with people you haven’t before; don’t spread your preparation time with a homogenous group because you might end up risking
the width and depth that a non- homogenous group can offer.
- Maintain individuality: Companies come to hire ‘individuals’ because they offer perspective that is not shared by everyone alike. Hence, it is
important to focus on how you as an individual t best into a particular role, in a particular culture, rather than following a group and get into a role
that is not for you.
There are no right answers as far as cases are concerned. It is very much possible that you might think of different, more comprehensive or even
better ways of solving the cases that we were asked. Another point we want to convey is about the solutions given for the cases listed.
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FRAMEWORKS
CASE INTERVIEWS
GUESSTIMATES
INDUSTRY ANALYSIS
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Solving a Case
03
S O LV I N G A C A S E
TYPICALLY HAS THE
FOLLOWING FOUR
STEPS
Understand the company and its business. You
should be able to create a mental image of the
company & its business, & gure out where it is
operating. What does the company do?
• Analyze EVERY WORD of the problem
statement and ask clarifying questions w.r.t.
that.
• Understand what caused the problem and
what has been the impact.
• Keep the 3Cs (Customer, Company and
Competition) and 2Ps (product and price) in
mind at all times when solving a case.
Whenever you’re stuck, revisit these.
Think along basic cuts like:
A. Internal vs. external .
B. Short term vs. Long term .
C. Current state vs. desired state (desired state
can be understood through objectives/
goals/motivations of the management).
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• Develop a hypothesis for where the
problem might lie. Then ask questions
and collect more information to prove/
disprove it.
• Make it a collaborative process. Do not
treat it like an interview. It’s not meant
to be that. Treat it like a real project and
that you’re working with a colleague on
the project.
• Ask for numerical data at every level of
structure before going deeper. This is
required until you gure out whether
it’s a numerical problem or not.
• Speak with conviction and bring
creativity into your solution.
• In case of numbers, take your time. Do
not sacri ce accuracy for speed.
De ning & Scoping the
Problem
01
02
Analysis
Segmentation & Structuring
Segmentation is one of the most crucial and often overlooked steps. Always break the
problem by company segments before applying any standard framework.
Understand which part of the business the problem lies in. For example think along
the below segments:
A. Customer segments B. Product segments C. Geographic segments D. Segments
in terms of different parts of the value chain E. Different channels of distribution
At this point, you should’ve a pretty good hold of de ning what the actual problem is.
It helps to paraphrase or summarise the problem statement more tangibly at this
point. Structuring is done as follows:
1. Build out a quick approach of what the key issues are that we need to tackle, and
what is the sequence you intend to follow :
2. Communicate this approach to the interviewer.
3. Then build out a MECE structure .
04
Synthesis/Summary
It is effectively an answer to the
client’s problem. Make your
recommendation and provide 2-3
strong supporting reasons for it.
Follow it up with considerations /
risks that may be involved with the
strategy. Overall synthesis should
not exceed a minute ideally.
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Case Frameworks
Pro t or Pro tability
Pro t or Pro tability cases operate on the basic framework where Pro t is taken as
the difference between Revenue and Costs, while Pro tability is de ned as the
Pro t per unit Revenue. A decline in Revenues/Pro ts/Pro tability often forms the
basis of the most common cases given in case interviews
Market Entry
For Market entry cases, there are two main questions to address- 1. Should we enter
this market? And if yes, 2. How should we enter?
While the below framework determines the market attractiveness for Question 1 in
terms of an economic analysis, the entry agenda can also be contingent to several
other factors that may involve other factors.
CAS
FRAMEWORKS
Frameworks can act as useful tools to
structure thoughts during a case interview.
Moreover, they ensure that you ask the
right questions and help you reach the
answer fast. By using frameworks, you will
seldom miss solutions to ‘standardised’
cases such as Pro tability, Market entry etc.
Growth Strategy
Growth Strategy cases require brainstorming in order to expand the scope of a
company/client, keeping in mind their speci c objective. This can be long-term/
short-term growth, increasing pro ts or market share etc. This growth can be
achieved via organic or inorganic methods
Due Diligence
DD is an extensive process undertaken by an acquiring rm in order to
thoroughly and completely assess the target company's business, assets,
capabilities, and nancial performance. There are several aspects that
are analysed for an actual Due Diligence analysis
Guesstimate
Guesstimates are quantitative in nature where an estimate for a gure is to be
arrived at using logical thinking to formulate reasonable assumptions, and ef cient
calculations to arrive at the solution in a time bound manner. A sanity check at each
step is vital
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PROFIT
Basic Pro t / Pro tability Framework
Premise
This problem is very vast and can come in various dimensions. It’s very important to
scope the problem in the beginning itself – so that you do not solve the wrong problem.
Pro t
De nition
Please help me understand what exactly do you mean when you say that pro t is down?
• The aggregate pro t or pro t margin?
• {If interviewer says pro t margin or Pro tability}
• Ask: Is it gross margin/operating margin or net margin which is facing the decline?
• Product Mix: is the decline in pro tability in all the products or speci c products in the
mix?
Revenues
Volume
X
Costs
Prices
Variable
+
Fixed
Comparison /Trend
• Since when has this trend in low pro ts been visible and by how much?
• How has the industry performance been over this time frame? – benchmarking.
• Anything particular which changed - did you launch some product/slash prices/
competitor did something/ macroeconomic aspect?
De ne Success
• Say that this is a broad based question- How would the client de ne success?
• What kind of increase in pro t do you want to achieve- what will be ideal?
First Principle: The major components of Pro t/Pro tability are as followsPro t = Revenue – Cost
Pro tability = (Revenue – Cost)/Revenue
Say: There are two drivers – Revenue and Cost. Which one would you want me to start off
rst?
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COST
• Ask what % of unit cost is Variable vs. Fixed – this would help
you understand some key trends
• In a high xed cost business there is very high temptation of
price wars
• Remember it can be a product speci c problem or a product
mix problem something such as that we are selling more of
higher cost product.
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Case Frameworks - Profit / Profitability
Case Frameworks - Profit : Value Chain Analysis
A pertinent method to track down costs across the operations is to do a Value Chain Analysis:
Raw
Material
R&D
Inbound
Logistic
Warehousing
Manufacturing
Outbound
Logistic
Distribution
After-Sales
Basic Value Chain Framework
Utilising the Value Chain Framework :
• Explore each head one by one
• What is the percentage split of costs across these different processes?
• In case one particular head has highest % say 50% or more than you can ask the interviewer that you would want to look at this head to start with.
• Many a times there might not be one major head and there could be two heads with 30%-30% split. In these cases, you’ll need to explore both
heads and also see that the pro tability decline could be partly because of one and partly because of another
• Broadly at any point there are two issues
• Price at which you operate or you get (vis a vis Competition)
• Your ef ciency (Any wastage due to ef ciency problem in terms of people/process/technology)
Basic Value Chain Framework
Raw Material Cost
• Start by asking type of good (Perishable/durable)?
• Where does Competitor source from – does it get better prices?
• If says same price, ask about ef ciency – conversion ratio/wastage/ef ciency for then?
• If the problem is higher price or higher overall procurement cost then?
Resolutions:
- Better Negotiation/Bulk Order
- Time of Sourcing (Opportunistic) – order when cheap
- Currency Hedging – Use forwards/futures if prices are expected to rise. Also use
call or put options for the variable part of future demand.
- Substitution (Different Raw Material)
- Value engineering (Use lesser Raw Material)
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of same type of good
- Same supplier - bulk order/syndicated demand?
- Cheaper material - indigenisation/rationalisation?
- Cheaper supplier – From alternative geographies like China?
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- Standardisation of Parts Backward Integration – ordering more
Case Frameworks - Profit : Value Chain Analysis
Inbound Logistics
•
•
•
•
Do you and your competitor use the same Mode of Transportation?
Do you incur the same rates and same overall cost?
Explore Distance Travelled – could be that the rates are same but your factory is further away from the supplier base.
Are you ordering at the Economic Order Quantity (EOQ) – Trade off between Set up cost, holding cost and expected demand
Warehousing & Manufacturing
•
•
•
•
Explore Labor cost and ef ciency vis-a-vis competitor.
Inventory Cost (EOQ)
Overheads such as Electricity/Rent-same or higher?
Machine Utilisation:
- % Downtime - High?
- Machine broken? Maintenance/spare cost? Power outage?
- Labor unavailability?
- Total availability will be a function of % of time labor, % time
machine available, % Idle time
• Resolution – additional dimensions:
- Outsource
- Economies of Scale/Learning curve
- Labor cost arbitrage
Distribution/Outbound Logistics
•Explore same as Inbound Logistics
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Case Frameworks - Profit : Value Chain Analysis
After-Sales
• Installation
• Service or Warranty cost ?
Some
noteworthy
instances
and
thethe
relevant
details
to to
drill
into:
Some
Noteworthy
instances
and
relevant
details
drill
into
• Gross margin is same but Operating margin has reduced:
- Marketing & Administration – SGNA
- R&D cost
- Restructuring cost
- Licensing and regulatory costs
• If NOPAT (Net Operating Pro t After Tax) is down
- Depreciation & Amortisation
- Interest Expense
- Tax rates – which geographies (VAT) does our company operate in?
- Inventory Write off
- Gains/losses or external investments
- Loss due to some catastrophic event
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Case Frameworks - Profit: Revenue
REVENUE
As per the basic framework, revenue is the product of price times volume. Pro ts can be increased by increasing revenue, which in turn is increased by
increasing the prices, or volumes, or both. Keep in mind:
• Explore Price and Volume and ask the interviewer for preference to explore which one rst
• Caution: Remember it could be that your Prices, total volume and total cost everything is same but the revenues are down because you are selling
more of the less priced product – Product/Marketing Mix problem
Ansoff Matrix - Product Market Expansion
Revenue enhancement can be done by either increasing
volumes, which can be done by capturing more share in
the existing market, or volumes can be increased by
exploring new markets. It is also essential to analyze the
competition to understand newer opportunities that can
be explored.
Market Penetration
(Acquiring New
Customers in existing
Market)
A good place to start
Framework to get an
problem statement. It
external and internal
streams.
NEWER MARKETS
Prices can be increased by developing premium products,
however it is essential to increase the Contribution Margin
from sales of the product rather than just revenue. Using a
better product mix can also contribute to better margins
per unit sold. The adjacent Ansoff matrix displays several
Product-market Expansion opportunities
is to use the Business Situation
all encompassing view of the
is also essential to analyze the
factors impacting the revenue
Market
Development
(Reaching out to new
Markets/Geographies to
get more customers)
Product
Development
(Enhancing product to
charge premium &
increase pro t Margin)
Diversi cation
(Extending Product line
& exploring new
markets to enhance
sales)
NEWER PRODUCT
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Business Situation Framework - 3CP
Revenue Segmentation
A good place to start is to use the Business Situation Framework
to get an all encompassing view of the problem statement. It is
also essential to analyze the external and internal factors
impacting the revenue streams.
Business Situation Framework
Customer
Company
Competition
Product
Pricing Strategy
A company can use different of pricing strategies when selling a
range of their products or services. Arriving at the most ef cient
pricing strategy for the company depends on developing
segment-wise strategies for all offering, identifying the
company's pricing position, pricing segment, pricing capability
and their competitive pricing reaction strategy.
Segmentation according to different “cuts” or categories can also help in
determining where the root cause of weak performance lies and make the
solution more speci c and actionable. Useful revenue segmentation includes:
By
Product Type
By
Distribution Channel
By
Geography
By
Customer Type
Using the above major buckets to nd the weak link in the interview, proceed
to dive deeper in the speci c segment (discovered from the above
segmentation cuts) and explore the opportunities to improve revenue in
terms of increasing volumes and improving pricing position.
Sales can also be enhances by speci c techniques like cross-selling, upselling, bundling, loss leader/captive pricing, improved promotion/
packaging, and enhancing customer awareness.
Cost Based Pricing
Pricing Strategy
Cost based Pricing
Competition Based
Pricing
Value Base Pricing
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It is the practice of setting
prices based on the cost of
the goods or services being
sold. A pro t percentage or
xed pro t gure is added
to the cost of an item, which
results in the price at which
it will be sold.
Competition Based Pricing
It is a pricing strategy in
which a company sets the
price for its products after
observing the competition.
This strategy does not cover
initial costs and only takes
into account the selling price
of the rivals' products
Value Based Pricing
It is a pricing strategy which
sets prices primarily, but
not exclusively, according
to the perceived or
estimated value of a
product or service to the
customer rather than
according to the cost of the
product or historical prices.
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Case Frameworks - Profit/Profitability
Case Frameworks - Market Entry
For Market entry cases, there are two main questions to address- 1. Should we enter this market? And if yes, 2. How should we enter?
While the below framework determines the market attractiveness for Question 1 in terms of an economic analysis, the entry agenda can also be
contingent to several other factors that may involve factors like cultural attractiveness, technological opportunities, etc. These are also highly dependent
of the timeframe of the entry. Using the previously discussed business situation framework should guide the perspectives of the different stakeholders
while entering the new market.
Basic Market Entry Framework
Market Entry
Market Attractiveness
(Should we enter ?)
Overall economic attractiveness can be
determined by calculating the NPV,
Payback period, IRR etc. of the project.
Entry Feasibility
(How to enter ?)
Operational Feasibility
Market Share
Market size
Calculate via a
Guesstimate
Volume
Demand /Supply
Decide per:
Interviewer intimation/
Past entries in other markets/
Competitor entry in current market.
Growth Prospects
In terms of CAGR, market
liberalisation, and the company’s
timeline for the venture
Value Chain analysis
Degree of partner/own
stake
Strategic
Mechanism
Self-Startup
Acquisition
Joint Venture
Pricing Estimates
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Build-OperateTransfer
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Case Frameworks - Market Entry
In order to determine several factors in considering entering the new market, proceed with the following line of questioning:
• Ask if this ts the company’s mission/culture – main reason
for entry:
• Invest excess cash ow
• Increase market share
• Decline in existing market (shrinking sales, higher costs, lower
margins)
• Assess the rm’s resources and capabilities:
• Economies of scope and scale
• Ability to leverage current value chain components (infrastructure
needed)
• Capital, labor, and capacity constraints
• Evaluate market conditions
•
•
•
•
Size and growth rate of new target market
Competitive pro le/trends and likely competitive responses
Barriers to entry (and how to overcome them)
Regulatory and legal considerations
• Consider complements with current product/markets:
• Potential issues of cannibalisation, and market cross-elasticities
• Analyze cost - bene t of new market entry:
• Niche vs. large market share
• Consider methods of entry (e.g., JV, direct investment, exporting,
acquisition)
Market share estimate can be made by utilising the 4P framework.
4P’s of Marketing
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Price
Promotion
Place
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Case Frameworks - Growth Strategy
The below framework provides an outline to approach cases where the interviewee is asked to provide general growth strategy for the organisation. Given
the broad nature of this ask, it is essential to clarify the interviewer’s growth objectives and practice effective segmentation to remove all options that are
not of interest. Tools like the Multifactorial analysis Matrix and the Growth Share Matrix are used to segregate the different products/services/business
units of the company in terms of their market share and market growth in order to identify focal points for developing the growth strategy.
Growth Strategy Framework
How to Grow?
Organic Growth
Expansion (Existing
Revenue Streams)
Diversi cation (New
Revenue Stream)
Inorganic Growth
Invention/ Innovation
M&A’s
Joint Venture
Increase Volumes
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Increase prices
Strategic alliances
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Due Diligence
Guesstimates
(DD) is an extensive process undertaken by an acquiring rm in
order to thoroughly and completely assess the target company's
business, assets, capabilities, and nancial performance. There
are several aspects that are analysed for an actual Due Diligence
analysis. For cases on Due Diligence, the following framework
can be taken as a base:
Guesstimate questions in interviews ask the candidate to estimate a number
based on very limited information. Successfully answering these questions
relies on a combination of mental math, logical thinking, problem-solving
skills, and sound assumption-making.
It is essential to note that the nal numeric answer is NOT important, it is the
approach taken to arrive at it that matters. However, a sense check for the
nal answer is necessary to corroborate the answer.
Guesstimate problems can be solved through three methods (with certain
other variations):
1.Top Down Method 2. Bottom Up Method 3. Employing a proxy
A guesstimate can be asked in multiple ways, even while solving a normal
pro tability case. Once you have completed the guesstimate then try to
include the following to make your analysis much richer:
1. Veri cation of data – Identify a few sources from where you can get the
right numbers to further re ne your estimate
2. Sensitivity Analysis – Conduct a basic sensitivity analysis and identify the
most critical assumptions you made
Due Diligence
Market
Analysis
Competitive
Benchmarking
Technology
Assessment
Internal Analysis
(Ops/Fin/Portfolio)
Upside Opportunities
Exit Options
Typically. there are two ways any M&A can generate value –
• Value of Control
• Value of Synergy
Synergy determination and risk analysis for a good t are very
important and the following framework can be used:
Cultural
Operational
Strategic
Fit
Synergy
Bottom Up Method
Market
Size
X 330 Mn
population of USA
X 4 Brushes /
Person/ Year
Financial
Organisational
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1 Brush/Person X Average
price of 1 Toothbrush
1.3 Bn Population of
India
Demographic, Economic &
regional % Splits
X Smartphone
Penetration by
segment
= No. Of
Users
Top Down Method
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Case Frameworks - Due Diligence & Guesstimates
FRAMEWORKS
CASE INTERVIEWS
GUESSTIMATES
INDUSTRY ANALYSIS
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INTRODUCTION TO CASE INTERVIEWS……
Introduction to Case Interviews:
Case interviews are tools used to estimate an interviewee’s ability to apply logical thinking in a familiar or unfamiliar situation in order to arrive
break down a problem statement to smaller, detailed components to asses the different possible solutions/sources of problem in the same, and
their ability to present the ndings in a cohesive and structured fashion.
For example, a case interview can be initiated with a simple statement such as:
An international pharmaceutical company wants to enter the Indian Oncology market. Devise a strategy for them.
Do’s for case interviews:
• Active Listening: Focus on what the interviewer emphasises & build your strategy accordingly
• Con dent communication: Speak with clarity & conviction to drive across points effectively
• Neat paperwork: Keep an A4 sheet handy to draw out your structure in a presentable manner
Don’ts for case interviews:
• Reckless assumptions: Do not discard aspects based on wide assumptions & personal biases
• Losing the forest for the trees: Always keep the big picture in mind even as you explore details
• Being mechanical: Introduce an individual avour to you answer over the typical approach
• Panicking: Maintain a smile and keep your cool even irrespective of how the case is going!
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Profitability
Budget Hotels
Our client is in the budget hotel business but does not own any properties. The pro ts have
been declining for the past few years. Figure out the cause and give a recommendation.
Sure, sir. So, the key problem is that I need to focus on nding the issue with declining
pro ts of our client which is into a budget hotel business. Is there any objective I need to
keep in mind?
No, please go ahead.
I will start with some preliminary questions. How many hotels we have and is it spread out
over all the properties?
The number of hotels are irrelevant here but the problem is being faced by all our hotels.
Is the problem being faced by our client only? Are the competitors located in that region
also facing the similar issues?
No, the problem is being faced by our client only.
Alright, I think the classroom training is not as effective as on-the-job training and leading
to the decline in number of customers coming at our hotels. I would like to do a costbene t analysis on the same.
Good point. We can skip the cost-bene t analysis but can you please provide some
suggestions to rectify it?
I can think of the following steps:
Provide on-the-job training to all the employees so as to enable them better
understanding the needs of the customer and thereby assist them ef ciently.
Set up a pricing system for the customers to avoid any confusion in the minds of reception
manager and facilitates the smooth functioning of our client’s hotels.
Thank you. These are reasonable recommendations.
How much have the pro ts declined by? And for how long has the client been
experiencing this decline?
The decline is 25% and the issue is persistent for a year now.
Understood, since the issue is regarding the pro tability, I would like to analyze the trend
of cost and revenue streams of our client over the last year.
Okay, the costs have grown at a steady rate but the revenues have declined at a higher rate.
Noted, I would like to analyze the revenue side rst. The decline can happen because of
two reasons: increase in price or decrease in number of customers arriving at our hotels.
Can you also give me some information regarding the pricing structure of our client vis-avis with other competitors?
The pricing structure is similar to competitors’ structure while our client has faced a decline
in number of customers but an increase in competitors.
Okay, now I would like to analyze the factors which can be responsible for such decline.
There can be some internal factors like marketing, quality of our services, occupancy and
pricing. Provided that these are budget hotels, there is not much differentiation regarding
the price structure. Can you please help me with the mentioned buckets?
The marketing and service quality is comparable to the client’s competitors. But the
occupancy of the hotel also depends upon the discretion of the reception manager, who
makes on the spot decisions about room pricing.
Okay, so the prima facie, the issue seems to be that of the decisions made by the
reception manager regarding the price of our hotels. And that leaves us with the issue
with the way our client is training its staff. I want to understand the current training
methods used by our client and its competitors.
The competitors are holding on-the-job training for the staff and it has been observed that
the client is following classroom training for its employees.
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Indian Institute of Management, Kozhikode
Profitability
Budget Hotels
Our client is in the budget hotel business but does not own any properties. The pro ts have been declining for the past few years. Figure out
the cause and give a recommendation.
Approach / Framework
Pro t and Budget Hotels
Revenues
Costs
No. of Customers
Marketing
Service Quality
Prices
Occupancy
Training to Employees
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Indian Institute of Management, Kozhikode
Profitability
HR Service Provider
A back end HR service provider has a dip in pro tability. You have been approached to nd
the problem and suggest changes.
and not later. And data storage costs keep increasing as the volume of data stored
cumulatively keeps increasing.
As I understand, our client needs to determine the reason behind a dip in pro tability
and want me to provide suggestions for the same. I need to start with some preliminary
questions. What kind of activities are they involved in?
Set-up Costs and Salaries are high initially and they drop over the life of the project. The
revenue per employee is increasing due to in ation and data storage cost is increasing.
Salaries is the major cost head – 70% of the project
Large corporates outsource their back end HR activities like Attendance, Leaves,
Reimbursements, etc. to such players. Recruitment and performance management is
obviously not outsourced and is done internally
Revenue and cost are connected. Lot of new projects getting launched and large old
projects are in their nal stage is the problem. As the pro tability in a year is a weighted
average of individual projects with their respective pro tability curves, the proportion of
new projects with low pro tability is greater than the number of old projects with high
pro tability leading to an overall drop in pro tability in the current year.
Who are our typical clients?
Banking, Financial Service players, consulting rms, etc.
Are these services offered for the long term? Are there any other differentiated solutions
that we offer?
Yes, typically for 5-7 years and solutions are the same across clients.
Alright. What do you mean by pro tability - Pro ts/sales or Pro ts?
Pro tability is pro t/sales, for this case let’s consider it as pro ts.
Yes, that’s correct. Can you provide some reasonable recommendations on the same?
1. Separate KPIs for new and old projects
2. The client should look for extending all the projects which are in the last year since
pro tability is highest in the nal year of the project. And the extension would ensure high
pro tability from the same project.
Sounds good. That’s all about the case.
Are we in losses or is it just a drop? What is the quantum?
The pro tability has dropped from 28% to 22%.
Is this drop in pro tability across all projects or in speci c verticals?
It is measured as an aggregate.
Are competitors facing a similar problem?
There are few players in the industry and only we are facing this issue.
What is the pricing mechanism?
Price per employee basis @ INR 400 for a year and a yearly increase which matches the
in ation rate.
Okay. Given with this information, I would like to split the pro ts into Revenue and Cost.
Revenue: #Clients X #Employee per Client X Revenue per Employee
And Cost :
Fixed Cost – Salaries, IT set up cost, Data storage cost, Maintenance cost, other indirect
costs
Variable cost – Processing cost
There were no changes in the revenue side. Lots of projects were ending and new projects
were starting but the total costs were going up.
Salaries, IT set up costs and data storage cost are the major cost buckets; whether these
costs have increased recently?
What do you think how these costs behave in the project lifespan of 5-7 years?
The salary goes down as productivity improves (due to learning curve) in such back end
operations leading to lesser man power per project. Also set up costs are for the rst time
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Indian Institute of Management, Kozhikode
Profitability
HR Service Provider
A back end HR service provider has a dip in pro tability. You have been approached to nd the problem and suggest changes.
Problem
Approach / Framework
Pro tability
Revenues
Projects
New Project
Costs
Old Project
Fixed Costs
Low Pro tability
High Pro tability
More in numbers
Less in numbers
Variable costs
Processing Costs
Salaries
IT Setup Cost
Data Storage Cost
Maintenance Cost
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Indian Institute of Management, Kozhikode
Profitability | Cost Reduction
InsureGo
Your client is InsureGo, an Insurance company primarily operating in the US Market. Their
Annual Net income is $6 Billion which is 2% less than last year. They have all kinds of
insurance within their portfolio. You need to analyse the reason for the decline.
That looks good. Can you summarise your recommendations.
Okay. Is the decline only in this year or has it been the case for previous years too?
2.
The decline is since the last 5 years.
1.
Offshoring can be considered as a possible alternative to reduce costs from the
of ces in high-rent areas
The company can make use of Automation to quickly perform some of the tasks
which are repetitive
Higher executives can manage more juniors and they can be transferred to teams
where more decision-making is required
Is there a similar trend being observed in the industry as well?
3.
No, in fact, the trend in the industry is the opposite of what is being observed in case of our
client.
Thank you. All the best for further rounds.
Okay, since there is a decline in income it could be a Revenue or a cost problem. I’ll rst
start with the Revenue side. Is that okay?
The Top line is improving. You can start looking at the Cost side to identify the problem
We’ll divide the Costs into Fixed and Variable buckets. The Fixed Costs include Rent and
other infrastructure-related costs. The major cost drives in case of Variable costs would
include Human Capital, Insurance Pay-outs, marketing costs. Is there any particular aspect
that you like me to explore?
Approach / Framework
Cost Reduction
Are there any other xed costs that you would like to explore?
I cannot think of any other xed costs at this moment.
Okay. So, one of the issues here lies with the human resources part of the company. Can
you think in that direction?
So some of the possible avenues in this case can be their salaries, commissions (since it’s
an insurance company), their working hours/ ef ciency.
So I’ll present you a chart with this data and you can then give me your possible solutions.
Excel sheet:
1. Data related to the working hours of employees and the number of employees
managed by their superior
2. Rent costs for some of the teams (Finance, Marketing, Admin) and of ces
So we can see that in Team A & B, the employee-supervisor ratio is extremely high i.e.,
there are too many supervisors per employee. We can reengage some of the higher-level
employees to other teams and thus reduce the costs for these teams. Further, some of
these of ces are based out of some of the densely populated cities which cost a lot in
terms of rent. We can use offshoring as a possible situation for some of these cases which
would help in reducing the Rent costs. Some of the teams like Sales and Marketing have
a more on eld job and hence they would need to be near client locations but other
teams like nance with majorly backend work can stay in offshore locations where the
Rents costs are lower. Automation of some menial work can also be considered as a
plausible solution.
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Infrastructure related costs
Variable Costs
Human Capital
Insurance Pay-Outs
Miscellaneous
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Indian Institute of Management, Kozhikode
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Profitability | Cost Reduction
Cost Reduction - Jet Leasing
Your client is a $10Bn manufacturing company whose pro ts are coming down. They are
looking to run a cost program to reduce G&A expenses of $1Bn. There is an emergency
request to gure out what to do with the corporate jet as the lease is expiring in a week.
Recommend what the client should do.
What is the jet being used for?
-
I will go for 8 seaters with a leasing cost of 1 Mn, bringing in the savings of 0.5 Mn
Option 3 --- Commercial ights
Consider the following data:
It is being used for business purposes, going to customer meetings, site visits.
Wanted to clarify about the expenses i.e., $1Bn amount.
Yes. You can focus only on costs related to the jet.
Sure. The costs can be divided into xed (lease, maintenance, salaries) and variable (fuel
costs)
Look at this stacked bar chart, what are your thoughts?
I can infer the yearly cost of the jet ($2Mn) and its different components. Leasing costs
are about 75% of the total cost.
What should we do with the jet given the situation?
We can look at the following options:
• Let go of the jet:
• Use alternative mode of travel
• Use commercial ights (option 3)
• Keep the jet
Lessor:
• Get a new lessor with better rates (Not possible, only lessor)
• Renegotiate contract with existing lessor for longer duration (option 1)
Jet related:
• Consider use of jet for other purposes (No alternative use)
• Capacity reduction-- get a new plane with smaller capacity (option 2)
• Seasonality of visits, if any, so sublet it to other company (Not possible, will
reduce exibility)
Airports
Trips
Price
A
100
1200
B
50
600
C
50
1400
Number of trips in an year * Number of people ying * Average price of the ticket
Number of people ying every time assumed to be 5: 1.1 Mn cost, Savings of 0.9 Mn
Which option would you recommend?
Looking at the pros and cons, I would recommend option 2 for the following reasons:
1. Flexibility and convenience
2. Status symbol, what the jet means to employees (He was looking for this point. As the
employees might have felt demotivated among other cost cutting measures that were
being taken)
That’ll be all. Thank you!
Option 1 - Longer duration contract. Look at this exhibit, what are your thoughts on this?
Looking at the durations and discounts available - 2 years @ 5%, 3 years @10%, 4 years
@20%, I will select the maximum discount of 20% for 4 years.
20% discount on 1.5 Mn = 0.3 Mn Savings
Option 2 --- Capacity reduction
Interviewer: What data should you require for calculating # passengers travelling every
time?
7+ passengers -- 20% , 4-6 passengers -- 60% , 1-3 passengers -- 20%
Look at this data regarding costs and capacity and tell me which one would you choose.
4-seater has 0.5 Mn cost, 8-seater has 1 Mn, 12-seater has 1.5 Mn
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Indian Institute of Management, Kozhikode
27
Profitability | Cost Reduction
Cost Reduction - Jet Leasing
Your client is a $10Bn manufacturing company whose pro ts are coming down. They are looking to run a cost program to reduce G&A
expenses of $1Bn. There is an emergency request to gure out what to do with the corporate jet as the lease is expiring in a week.
Recommend what the client should do.
Approach / Framework
Cost Reduction
Variable Costs
Fixed Costs
Lease
Maintenance
Employee Salary
Fuel Costs
Reduce Lessor Fee
Jet related
Lessor
Long Duration Contract (1)
Capacity Reduction (2)
New Lessor
Sublet
Options Available
Keep the Jet
Let go off the jet
Reduce Lessor Fee
Commercial Flight (3)
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Indian Institute of Management, Kozhikode
Profitability
Indian Handset Manufacturer
An Indian mobile handset manufacturer facing decline in market share in the last 1 year.
Find out the underlying reasons and recommend actions to turnaround the situation.
I wanted a little more clarity on what exactly the client does? Who are our customers?
The client product portfolio has all products from low-end to high end. So the customers
also range from lower middle class to rich people.
Okay. Can you tell me who are the major competitors and are they also facing the issue?
And also is this industry wide problem?
You are doing well so far.
In short term, I recommend to increase retailer margins, employ communication channels,
spend on TV and in store advertising and launch speci c schemes for the of ine medium
to increase sales. Once the sales pick up, the client can reduce the discounts to make
margins.
Thank you. That’ll be all.
Our major competitors are Chinese manufacturers and yes, they too are facing the issue.
We cannot say its an industry wide problem as the premium segment players like Apple
and Samsung are doing well.
As revenue is decreasing, I wanted to know about pricing. Is it done correct or should I
focus there?
The pricing is done correct. But the client gives out huge discounts to stay competitive.
Okay. Can you tell me about the sales channels and sales carried out through each
channel respectively?
So 70% of sales are done through Online channels and remaining 30% through of ine
channels.
Are the discounts for both channels same? And how do they differ across each SKU?
Discounts through online channel are more than in of ine channel.
Okay. How are the sales of different SKUs through these channels? Is there any pattern of
sales?
Majorly the sales of high-end products are done through of ine channels.
As they are majorly done through of ine channels. I assume there aren’t deep discounts
on these products. How are the sales?
Yes, you are correct. The client has actually seen a dip in the sales of high-end products.
Okay. Give me a moment to gather my thoughts.
Summarise whatever you’ve gathered till now and provide recommendations if any for
short term.
Okay. I see two reasons why there can be a dip in the sales.
1. The competition in the high-end products is high from Apple and Samsung. And as
they are not seeing any dip in their pro ts, its safe to assume they are making good
sales and hence the dip.
2. The client sustained till now on his huge discounts. So customers might have also
expected the same discounts in high-end category too.
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Indian Institute of Management, Kozhikode
Profitability
Indian Handset Manufacturer
An Indian mobile handset manufacturer facing decline in market share in the last 1 year. Find out the underlying reasons and recommend
actions to turnaround the situation.
Approach / Framework
Decrease in Pro ts
Revenues
Price/Unit
Costs
#Units Sold
Cost/Unit
Online Sales
Of ine sales
Providing huge discounts
Lesser discounts compared to
online
#Units
Dip in High-End Product Sales
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Indian Institute of Management, Kozhikode
30
Profitability
IT Service Firm
An IT services rm has been losing its margins in the recent past. Identify the problem and
provide recommendations.
I guess 5% seems to be a required number for the incoming projects and is this the
industry standard?
What are the geographies the rm operates from?
Yes. No. of billable employees is not the correct bucket. You need to think more.
They have of ces in USA, Europe, India and Japan.
Okay. I’d like to replace it with no. of projects and divide projects into billable and nonbillable employees. Is this okay?
What is the split of the clients they have?
80% of the clients are from USA and 20% are from RoW. But 90% of the work is done from
India Of ce.
Yes. Now identify the non-billable employees.
What are the services they offer?
You’ve identi ed the problem. Now provide your recommendations.
There are three broad categories: implementation, development and digital strategies.
The client can hire SME on contract basis or getting SME billable by negotiating with the
clients. They can hire SMEs that need to contact the clients less frequently based out of
India to lower the costs. Also they can merge Senior Management and Client Relationship
team. They can come up with a metric which would compare the revenue generated in a
project v/s the number of senior management tagged to the project (using industry
standards and their historical data) – for optimise allocation of senior management
What is the revenue split between these categories and margins earned respectively?
Development generates most revenue and Digital strategies generate more margins. But
revenue from digital strategies is the least.
What are the growth opportunities in digital strategies and the market outlook?
The market outlook is really great.
Just wanted to clarify whether you meant pro ts when you said the
margins?
There’ll be Subject matter experts, senior management and client relationship team
rm is losing its
Yes.
Okay. As the problem lies with margins, we can look at the revenue and costs. The rm is
making biggest margins from least revenue stream so I wanted to look at costs. Is that
okay?
Yes. Sounds good. Please go ahead.
I’d like to list the following cost heads: Labour, Infrastructure and Software Licensing
Which one amongst these costs do you think would be the highest contributor?
As it is a services rm, labour costs will be the highest.
What info do you require in labour costs?
So the Labour costs will have two branches – no. of employees and cost per employee.
Under Cost per employee, we’ll have xed salaries, variable component and overheads. I
would like to start with no. of employees.
You can focus only on this as the other arm is optimised.
What are the percentages for the following questions: 1) Employees on bench 2) No. of
billable employees 3) Working in admin 4) Working in internal functions
The bench strength is 5%. You can ignore employees working in admin and internal
functions.
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Indian Institute of Management, Kozhikode
Profitability
IT Service Firm
An IT services rm has been losing its margins in the recent past. Identify the problem and provide recommendations.
Approach / Framework
Reduction in Pro ts
Costs
Revenue
Software Licensing
Labour
Infrastructure
Cost/Employees
#Employees
% Working in Admin
% on Bench
% on Projects
Non - Billable
SME
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Indian Institute of Management, Kozhikode
Senior Management
% working in Internal Function
Billable
Customer Relationship Team
32
Growth Strategy
Medical Device Manufacturer
Client is Pharma medical device manufacturer. They manufacture one product that is in
high demand and complex to make. Say capacity is 100 and it cannot be currently
expanded. Till 2018, they were working in only India but later they started exporting. They
want to know the optimal mix for domestic and foreign sale.
Alright, so the case is about obtaining the optimal mix for domestic and foreign sale for a
Pharma medical device manufacturer. I would like to start with some scoping questions.
Sure, go ahead.
Okay so what is the objective of the company?
What do you think can be the objective?
Considering that it has started exporting and it’s a supply side constraint, the objective
should be to increase pro ts.
You’re right. Let’s dive into that.
I’d would like to look at the following three points:
a. Domestic and export margins
b. Competition in both these markets
c. Regulations
So that means the prices would be signi cantly higher in other markets. And the growth
would be higher considering that the market is going to grow to 1.5x the size outside
India.
Yes, the prices are signi cantly higher and the growth is also higher in the other countries
where we are not present yet. How do you think the client should plan their sales if we sell
40% in India and export 60% of our products?
The client should target the markets which are poised to grow at a higher pace and have a
higher price. As far as the mix is concerned, if there are no regulatory barriers, they should
export all the products that they produce. Moving out of stagnant markets can be an
option or the supply should be xed to maintain relationships and move better part of the
sales to other countries. If there are regulatory concerns, the prices in India are
signi cantly lower and considering the experience of the company in India, the prices
should be increased in India. We can try to stay relevant here and try not losing the base
country.
Ok. That sounds good.
Let’s focus on the margins, the Average Selling Price in India is $20 and the total cost is
$10. While the average selling Price outside India is $30 while the total cost is $15.
That sounds interesting. The percentage margins are same at both the places but the
overall pro ts are higher abroad. However, considering that we are looking into demand,
we need to look around multiple aspects. What is the stability of demand in India and
abroad, what is the ripple effect if we stop supplying medicine to a customer on the
relationships, who are our competitors and what is the average price in the market?
So the demand in India is 300 and is expected to grow to 2x in the next 5 years. The
average price in India of the 2 competitors ranges from $35-50. In overseas market, the
demand is 3000 which is expected to grow to 1.5x in 5 Years. The average price in those
markets is $60-70.
That’s interesting, our price is signi cantly lower in both markets. Should I look into it?
Yes, let’s go ahead with that.
So for India, there can be different type of consumers served, places where they are sold,
quality of the product leading to lower price or marketing related issues. For international
markets, we need to analyze the markets where client is present.
The client feels that the brand is not too strong to sell the product at higher prices in India.
Hence it is a conscious decision to sell the product at a lower price in India. In the
international markets, we are there in 14 countries where we have around 50% share but
the market size is more or less stagnant and the prices are comparable to the competitors.
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Indian Institute of Management, Kozhikode
33
Growth Strategy
Medical Device Manufacturer
Client is Pharma medical device manufacturer. They manufacture one product that is in high demand and complex to make. Say capacity is
100 and it cannot be currently expanded. Till 2018, they were working in India only but later they started exporting. They want to know the
optimal mix for domestic and foreign sale.
Approach / Framework
Optical Mix in Domestic & Foreign Market
External Factors
Internal Factors
Marketing
Service Quality
Training to Employees
Regulations
Market
Facts
Domestic
Low Margin High
Growth
Foreign
High Margin Low
Growth
Indian Institute of Management, Kozhikode
Fixed Demand
34
Market Entry
Telecom
The client is a Swedish telecom company with good investments in 5G, they are scoping to
enter the Indian market. Should they do it?
What is the competitive landscape for telecom in India?
Makes sense. Please go ahead.
Population*No. of phones per person -> Filter for smartphones -> Filter for 5G enabled
phones -> Filter for SIMs per phone -> New users and existing users-> Within existing
users, people who would switch to 5G within their own telecom operator or take 5G from
another player-> People who would take 5G would either port out of the existing player
or buy an additional sim.
Assumed that new users wouldn’t generally directly go to 5G services so early on. Within
existing users, the two large telecom players have strong brand loyalty as they give a lot
of value-added services- such as Jio suite of services, Airtel Payments Bank and so on so
forth, therefore it might be dif cult for the client to compete with them. I assumed,
therefore for our client the target market would be people who would buy an additional
SIM to get 5G services.
My nal number came to 3.5 million. Thus applied a 20% lter (the player will enter into
metro circles as 5G adoption in non-metro areas would be dif cult) bringing the number
to 0.7 million.
Two large players- Jio and Airtel with around 40% market share each and Vi with 20%.
Do you think they would be able to get this number?
The way I would like to approach this problem is to look at economic viability,
opportunity and operational feasibility. In the economic viability, I’d like to see the
investment opportunities and under operational feasibility, internal and external factors
and market sizing under opportunity.
TRAI regulations state that a new entrant can undercut existing players without the
incumbents being allowed to retaliate as was seen in the case of Jio. Thus by right pricing
strategy, they would be able to gain market share.
Existing competitors might also be late adopters of 5G given that there is a signi cant
CapEx involved and they are not very pro table and highly debt-laden right now.
The new entrant will also be taking over only a small chunk of subscribers which would
make incumbents unlikely to retaliate.
Sounds like an interesting case. Do they want to enter for a speci c spectrum or they
want to be there across 2G, 3G, 4G or 5G spectrums?
They want to enter in the 5G market only.
What is their objective in entering the market- is it market share, pro tability?
The number of subscribers in their existing markets has stagnated. They want to get as
many subscribers as they can, pro tability is not a concern at this stage, they will eventually
become pro table.
Do they have any timeline in mind?
They want to enter by the mid of 2022.
Have they entered any other market recently?
No.
Let’s start of with the market sizing that you mentioned.
Great! There are two ways of going about it- demand and supply. Within demand we can
look at the need for 5G among customers. In the supply side, we can look at how many
phones will be 5G enabled and calculate the market opportunity for our client using that.
Given that there is a strong supply constraint of 5G phone I believe that would be a more
relevant approach.
Let’s proceed with that.
Given that they would only get a small fraction of the market, should they enter the market?
The recommendation will be to enter the market. Even though they are getting only a
fraction of the market, this fraction represents a huge delta of around 15% from their
existing subscriber base and thus will help them tackle stagnating growth.
Currently around 10% of phones in India are 5G enabled. I assume that the number
would be 30% by the mid of 2022.
How do you justify 30%
Most of the smartphone players are global players who also exist in markets such as
Europe high cost for geography speci c 5G and non 5G manufacturing of the same and
North America which are already making a shift to 5G. Given that a lot of these variants
sold by Apple and Samsung in India are same as those sold in Western countries, they
will also be 5G enabled given that they are the same variants and manufacturers would
incur a variant.
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Indian Institute of Management, Kozhikode
Market Entry
Telecom
The client is a Swedish telecom company with good investments in 5G, They are scoping to enter the Indian market. Should they do it?
Approach / Framework
New Market Entry
Opportunity
Feasibility
Visibility
Market Sizing Target
Market share
customer segment.
PESTEL Analysis
Regulations Strategic
Barriers
Investment
Opportunities Human
& Physical Resources
Competitors
share Major Players
Strength & Weakness
Value Chain Analysis
Vertical & Horizontal
Integration
Timeframe
Revenue Generation
Product Existing USP
Pricing
Entry Strategy :
JV/Acquistion/Merger
Poll Entry Risks :
Cannibalisation,
Culture & socio factors
Visions
Goals
Objectives
Indian Institute of Management, Kozhikode
36
Growth Strategy
Pharma (Diabetes Drug)
Your Client is Pharma Company and wants to increase its India Top Line and we would also
look at market sizing in between the case.
Sure Sir, could you tell me a little more about the company, where it operates, what’s the
product line.
Its an MNC that operates across the globe and also has a robust India business, for the
case we would be focused on the India market. We have drugs for two ailments: 1)
Diabetes 2) Haemophilia
Good, so could you also tell me the revenue share of both the drugs, so we can decide
which one to focus on rst and also what kind of growth targets we have in mind.
Great Question, 80% of our share comes from Diabetes market, and we don’t have growth
target in mind; but our current focus in on increasing the Top line of the diabetes drug.
Sure, let's focus on Diabetes could you tell me a little more about the disease and
treatments methods, my understanding is limited to the fact that it’s an ailment of
reduction in insulin levels.
Rightly, so Diabetes is of two types Type 1 and Type 2 and it’s not curable, it’s a condition
that has to be managed, the management usually involves two methods: 1) Pills 2) Insulin
Injection. We produce insulin
Right so our focus is on increasing the Revenues from the Diabetes Drug in the India
Segment, as you wanted me to do a market sizing so should we start with it?
Absolutely, I want an Equation from you in form of A X B X C, and feel free to ask me any
numbers you would require.
Sure. Equation: Population X %Age Target Age Group X Diagnosis Rate X Prescription
Rate X Dosage Frequency X Price
on Diagnosis Rate,
This number would be impacted largely by the availability of health care facilities and as
we know the Health care facilities in India has lower penetration in rural population, we
can focus on that. The way to go forward would be through a partnership with govt, health
care infrastructure and providing testing supports and running diabetes check-up camps.
Absolutely Right, that’s something that can be looked into, ok move on to the next factor.
Sure, next is the prescription rate, so as we discussed earlier that this can be managed
though either pills or insulin, I would rst like to understand what mode is prescribed
when there is a medical premise.
Right, so as you know in India Injecting yourself is considered a stigma and hence pills are a
preferred mode of treatment however scienti cally insulin injection is better mode of
managing a disease.
So this looks like an awareness issue. We have two stake holders: The Patients and
Doctors
For doctors we would have a direct channel though our sales persons and we should start
a campaign to get doctors to switch from pills to insulin and also get them to make
patients aware of the bene t of insulin injection vs pill.
For Patients we should run awareness campaigns on both mass media and social media,
we should also place info- materials at major clinics and centres that lists the bene ts of
insulin vs pills.
Great Points, you did great. All the best for further Rounds.
Good, that’s almost perfect I will give the numbers why don’t you compute the market size.
Population: 1.3 - %Age: 55% (20+) - Diagnosis Rate: 11% - Prescription Rate: 7% Dosage: .15 units per day per Kg weight, Average weight 70 Kg - Cost: 8 Rs
Sure, give me a few minutes, 168 Bn Annually
That’s about right, the market is around 170 Bn, and our client is a market leader with 60%
share, we are essentially looking to grow the whole market, I would like you to look at the
factors we used in the above exercise and tell me are there any levers we can work with.
I would will like to evaluate each of the factors with the Following 3 categories
1. Can this factor be increased ?
2. If yes, then what are the drivers that in uence this number
3. What actions can be taken to favourably impact the drivers to increase the factor
Sounds Good, Go ahead.
Population and Age group can not be impacted by our actions, rstly we should focus
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Growth Strategy
Cab Aggregator (Uber)
You are Operations head at Uber and want to beat your competitor (Ola) in terms of
market share
Can you throw some light at the current market scenario for Uber and our competitor
Ola?
So, the market has only two big players- Ola and Uber. Ola holds 60% of the market share
and Uber holds 40% of the market share
Are we talking about the market share in terms of dollar value or no. Of customers?
We are talking about market share in terms of total no. Of trips
Do we have any target geography or target timeline in mind for achieving our growth
target?
Yes, we want to achieve our target in 1 year and are particularly interested in Lucknow.
Ok. Lastly, I would like to understand about what all services we offer currently in
Lucknow?
We only operate Uber cabs in the region. For this case we can ignore the share cab market
Ok. For achieving the growth target, we can either do it organically through modifying
our current business model (like introducing new services-Uber moto, Uber auto) or
increasing penetration through current business model. We can also look at inorganic
growth through a Joint Venture or acquiring any other rm. However, since we have 1
year target and are looking at increasing share by 10%, we should focus on exploring
organic growth as JV or M&A can be a time taking process. Do you think this is fair?
Yes, you are right. We can focus on organic growth through increasing penetration by
current business model
Sure! For that we can either focus on increasing number of customers or increasing trips/
customers
Lets focus on increasing number of customers
Interesting! I will like to further break this problem into four parts- Fleet Size, Area of
operation, Request routing mechanism, Driver Response. Do we know how we fare
against our competitor on these aspects
Yes, so our eet size is small as compared to Ola. Also, we have seen this problem in
particularly some speci c areas. The other two parameters are not an issue. How do you
think we can increase our eet size?
To solve for small eet size – Suggested 4 solutions and marked them in a 2X2 matrix of
Effort and Time -> Purchase eet (high time, high effort), Acquire local transport agency
(small time, medium effort), Incentivise individual drivers to come to Uber(high time, high
effort), Scheme for people to rent out their vehicle to Uber when not in use(high time,
high effort).
That makes sense. Why don’t we focus on low hanging fruit, i.e. option 2. How do you think
we can asses how many additional cars we might need to add to our eet to achieve our
target?
I think we should identify bottleneck area and bottleneck time to estimate max eet size
we need to acquire. This bottleneck can be identi ed basis two metrics - % booking
leading to “No Cab” status and % booking resulting in cancelation from customer
because of large waiting time.
After nding out bottleneck areas, we estimate footfall on the place-> Divide into Upper,
middle and low income people (Low income people will opt for public transport, Upper
middle and High income people will opt for Cabs). We get an estimate of max bookings
that can be done. Since we need to capture at least 50% market share, we consider half of
that demand and estimate # cabs that will be required and compare it with current no. of
cabs in the region.
That was very insightful. I think we can stop here and all the best for your next rounds.
For increasing customers, I would like to look at customer journey for Uber and
benchmark it against Ola to see where we are lacking. I will divide the customer journey
into three parts – Pre Ride Experience (App usability, waiting time) -> During Ride
Experience (Cab condition, Driver behaviour)-> Post Ride Experience (Complaint
redressals). Do we have any data on where we stand against our competitor on these
fronts?
Yes, in general Uber customers have to face double the waiting time as compared to ola
customers. Other parameters are not an issue as our app and customers services are top
notch
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Growth Strategy
Cab Aggregator (Uber)
You are Operations head at Uber and want to beat your competitor (Ola) in terms of market share.
Increase Market Share
Organic growth
Inorganic Growth
Current Business Model
#Trips/Customer
Pre - Ride Experience
• App Usability
• Waiting Time
Fleet size
•
Purchase new fleet
•
Acquire loyal players
•
•
Service areas
New Business Model
#Customers
During Ride Experience
• Cab Behaviour
• Driver Behaviour
Requesting routing algo
Post - Ride Experience
• Complaint
• Redressal
Driver response
Incentivise individual
drivers
Scheme for individuals
to rent their cars
Indian Institute of Management, Kozhikode
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Growth Strategy
Printing Plates
Your client is a manufacturer of plates of printing press which is a consumable in the
industry and has annual turnover of Rs. 1500 cr. It’s a promoter driven company. It’s
revenue is growing by 5%, Gross pro t by 5% and the PBT by 2%. Clients wants to grow the
PBT at 10%.
That’s interesting. The PBT is growing at a lower pace. This means that there is a problem
in the admin, n and other expenditure of the company and rstly the analysis should be
done around the inef ciencies and then around increasing the full gure to 10%.
However, I would want to know about the geography of the business and also want to
know about the printing plates
So the geography is India and the printing plates are used mainly for commercial printing.
One plate is made when minimum 100-200 copies are need to be made. Typically used by
Newspapers and other commercial uses. The design is made on AutoCAD and the plate is
made using the design
So the margins in the ink industry is 5% and the client is considering to enter the same.
Should they do that?
The same should be compared to the current margins and also the growth should be
looked into through the lens of ef ciency of production, distribution and pro tability
that we would be able to generate. Normally 5% margin is low for companies especially
in the chemical Industry and hence the company should be looking for an unrelated
diversi cation, if possible, for a product where the margins can be higher. The growth
would be better in that case. This is assuming that the 5% margin is low and there are
better ways to achieve the growth.
Okay. That should be it.
Ok thanks a lot for the details. Do we have any information on the market share and the
competitive landscape of the company?
The client has a 80% share in the Newspaper market and 70% share in the other
commercial Printing plates market. The rest of the market is served by cheap imports. The
company is also in the chemical markets where it has a 50% share and the rest 50% market
is fragmented.
So is this chemical market related to the Printing industry? Do we have any scope of
increasing the market share in any of these industries?
Yes it’s a complementary product. And the market is saturated and there’s no scope for
increasing market share in any of these industries
So there are two ways to increase the pro ts. One is adding a high margin product from
the same industry or a high margin product from a different industry. Do we have any
information on the same?
The newspaper industry has 40% expenditure of Paper/Pulp, around 30% expenditure of
Inks, 20% in the plates and products that we sell and 10% is the other expenditure for
them.
Considering that we are in the chemicals market, ink would be some kind of chemical, a
market we are present in, we can tap that market because we can sell the material to the
same customer and hence the selling expenditure is low. However keeping the objective
of the client in mind, we need to look into the margins of the product to identify if it is a
good product to enter into
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Indian Institute of Management, Kozhikode
Growth Strategy
Printing Plates
Your client is a manufacturer of plates of printing press which is a consumable in the industry and has annual turnover of Rs. 1500 cr. It’s a
promoter driven company. Its revenue is growing by 5%, Gross pro t by 5% and the PBT by 2%. Clients wants to grow the PBT at 10%.
Approach / Framework
Growth Target (PBT -10%)
Inef ciencies
Increase Pro ts
Market Share
Newspaper
Market (80 %)
Commercial
Printing Plate
Market (70%)
Adding High Margin Product
Same Industry
Chemical Market
(50%)
Paper
Ink
Margin - 5%
Different Industry
Plates
Others
No
Suf cient
Yes
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Growth Strategy
Appliance Distributor
Your client is a premium appliance distributor in India. The client wants to increase pro ts
by $300mn in 3 years
Wanted to get some clari cation around the objective of our client. Has our client been
facing any decline in pro ts, stagnation or in general has a growth objective? Also, what
is our current base of revenue and pro ts?
The client is already a market leader and has been growing at a constant rate. The current
revenue is $1,500mn and pro ts of $500mn.
No problem on cost – already ef cient. Please focus on revenue
Sure – revenue can be increased either through existing business or new business. Within
existing business network, we can look at increasing penetration of existing product mix.
Within new business, we can explore new products, new geographies, new channels and
new customers. As for existing market, we can increase volume intake by retailers or
increasing price subject to price elasticity.
How can you increase volume?
Understood. We are trying to increase pro ts by 60% over the current base and revenue
by $900mn assuming the rate of pro tability. Do we have any supply constraints? Are we
growing at the pace of the industry or slower and what is our market share?
No constraints on supply. we do not have data on growth. How would you calculate that?
Volume is a function of number of retailers*average ticket size*frequency in a year. Push
strategy needs to be employed. More incentives need to be provided by tweaking one or
more of the following – type, level or speci city. Better inventory management as well as
access to working capital can also be looked into.
There could be three broad ways of computing growth by looking at the following, of
course making some assumptions on similar inventory levels:
1. Sales data of premium appliances to customers tracked by retailers
2. Sales of competitors
3. Sales by manufacturers of premium appliances – exclude any sales made directly
through owned stores
Let’s say our competitors can ful l on average 65% of the needs of their retailers while we
can ful l only 50% of our retailer’s needs. If we improve the incentive structure, we could
match the performance level of our competitors. How much of our objective will be met
through this?
Assume growth is in line with the industry or a little more perhaps. Why do you ask about
the market share?
In order for us to grow by 60% over the next years, we need to understand whether there
is scope to increase by that amount. If we already hold say 80% market share, increasing
revenue within the same line of business would be dif cult unless the base also
increases. Also, what does the competitive landscape looks like?
That shouldn’t be a problem. Don’t worry about the competitors. There are say two
competitors A and B with similar market share.
Could I get some visibility on revenue streams – Are we only selling premium appliances?
My understanding of the value chain is that we procure appliances from manufacturers
and distribute to retailers.
Yes, it is a traditional distribution business. There are two product lines – premium
appliances (80%) and xtures (20%). Focus on premium appliances for this case given they
earn higher pro ts. Why don’t you start working on the problem?
Thank you for the information. Given that 80% of our business is driven by premium
appliances, the revenue share of such products would be $1200mn. Increase in revenue
would be $360mn (1200/0.5*0.65-1200). Pro ts equate to one third of revenue and
therefore increase in overall pro ts would be $120mn. $180mn to go.
You mentioned about geographical expansion. How do we go about that in India?
Sure. Perhaps, we could divide the regions into 5 – North, East, West, South and Central
and look at our penetration rate.
We have 150 branches overall and no presence in South. It is a complete white space for us
to enter. How many branches would be required to ful l our objective?
Looking at our existing operations, we are almost earning $10mn through each branch
(including xtures - $1500/150). We need to ful l the remaining objective of earning
another $180mn of pro ts or $540mn of revenue. Therefore, on average 54 similar
branches would be required.
Would you be able to earn this amount of revenue by opening 54 branches within three
years?
Sure. Please give me a minute to put the structure in place. To increase pro ts, we can
look at increasing revenue, decreasing cost or both.
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Indian Institute of Management, Kozhikode
Growth Strategy
Appliance Distributor
Immediately, no. This was a ballpark number but several variables need to be evaluated.
First, are the consumption patterns in South similar to an average region in which we
operate in terms of income level (this will dictate whether people can afford premium
appliances or not). Second, if this a white space why have other competitors not entered
and how are end consumers accessing premium appliances otherwise – of ine
manufacturer owned stores or online?. Third, if there are any supply chain/operational
constraints in the region that affect feasibility of opening branches.
How would you evaluate how much would an average branch earn?
I could analyze the demand side from end customer consumption patterns and evaluate
how much revenue can be earned by a particular branch in a particular area. <<<Started
breaking down the population in different income levels>>>
Wait. What are you trying to evaluate? Why don’t you take assumptions on supply side and
proceed?
I was trying to gauge how many people would actually buy premium appliances and
then how many of these would actually buy from retail stores we supply to. The retailers
would in turn place orders with us. However, from supply side we could assume
capturing market share on the basis of previous data on which regions we have entered
and how much market share have we been able to capture or if this is not available, any
data on entry by a player in the same industry.
Make your own assumptions
Initially in the rst year, we could gain say 10% of the market share. With stable
operations and greater incentives, we could double the share to 20% in the second year.
The growth would stabilize in the following years – say reach 25% in the third year
Thank You. That would be all
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Indian Institute of Management, Kozhikode
Growth Strategy
Appliance Distributor
Your client is a premium appliance distributor in India. The client wants to increase pro ts by $300mn in 3 years
Approach / Framework
Increase Pro t by $300nm in 3 years
Supply Constraints
Fixture
Premium
Revenue
Increased Volume
Volume = No. of Retailer *Avg Ticket
size*frequency in a year
Computing Growth
Competitors
Costs
New Business
Existing Business
Increased Penetration
Industry Growth
Revenue Streams
New Products
New channels
New geographies
Increased Price subject to price
elasticity
1.Sales data of premium appliances to
customers tracked by retailers
2.Sales of competitors
3.Sales by manufacturers of premium
appliances – exclude any sales made directly
through owned stores
Increased no. of Retailers
More incentives to be provided
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Growth Strategy
Fibre Manufacturer
Your client is a wood pulp based bre manufacturer and has been running into loses. The
operations are majorly in Europe and Asia (India and Vietnam). The client wants you to nd
the cause and provide recommendations.
Okay. I wanted to know if our client also distributes the product? If yes, who are the
customers?
Approach / Framework
Yes, the client supplies to the customers who are cloth manufacturers. The bre is majorly
used to make shirts.
Okay. So I wanted to divide the possible factors into two categories: External and
Internal.
Go ahead.
Firstly, I wanted to know if there are any substitutes available in the market?
Reason Cause for making Loses
Yes, most cloth manufacturers use polyester and other better quality bres.
So it looks like the substitutes dominate the market. How was the competition in Europe
and Asia? Are they making loses too?
External Factors
The client has three major competitors in Europe and two in Asia. Europe competitors are
also making loses in recent years. Our major competitors in Asia are doing okay.
Internal Factors
Ok. This looks like a industry wide problem in Europe. Are there any new government
regulations that led to the loses in Europe? Also how’s Asian market doing overall?
Market Growth
Pricing
No. There weren’t any new regulations. Asian market as overall is doing okay but Chinese
market is growing since past few years.
Competition
Marketing
Now I wanted to look at internal factors:
1. Is the pricing done right?
2. How good is their marketing team and their efforts?
3. Also how’s the service quality?
Government Regulation
Service Quality
The client has competitive pricing and they have good marketing campaigns. But
irrespective of that, they couldn’t push the sales. There are no issues on this front.
Okay. Give me a moment to gather my thoughts.
You are on the right path. Summarise whatever you’ve gathered till now and provide
recommendations if any.
Okay. So it looks like the market for wood pulp based bre in Europe is decreasing as the
competitors are also making loses and Asian markets are doing decent. The client cannot
do much in the existing markets so they can consider expanding to Chinese market. And
this can be done by starting from scratch, by an acquisition or by a joint venture. I would
recommend joint venture as it will allow the client to tap into existing infrastructure of the
company which makes the market entry a little easy.
Thank you. All the best for further rounds.
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Indian Institute of Management, Kozhikode
Air Conditioning Company
The client is an air conditioning company which is currently operating in India. The growth
rate for the client is 10-15% and they want to grow 5 times in 5 years. Recommend a
growth strategy for the client.
Okay. When you growth, are we talking about growth in terms of volume or pro ts?
In terms of volume.
Okay. Can you tell me who are the customers, competitors and in what regions do the
client operate?
List down the points which can help the client to decide a new product launch in the
market.
1. Whether existing market can be exploited.
2. Introduction of new product should not cannibalise the sale of existing products.
3. Cost in terms of human resources, manufacturing units and distribution strategies.
Thank you!
The client has his operations throughout India. No strong competition as of now. 90% of
customers are in residential sector and 10% of customers are in commercial sector.
Can you brie y tell me about the value chain?
The client manufactures and supply it to distributors, who then sell them to customers.
So typically, a company can grow through their existing business or through new
business. First I’d like to analyse options in existing business. Is that okay?
Sure. Go ahead
In the existing business, the client can look at increasing the number of customers or
increasing the basket size. So I wanted to know a little more about customer base. Is
there any speci c class to which the client caters to?
The client majorly caters to middle class segment.
As, the client was currently catering to middle class. They can cater to a new segment i.e.
premium segment and can increase the price also.
Sounds good. But how do you propose to increase the price?
There are two options in which it can be possible:
1. Adding value added services like free delivery and installation services
2. Providing after sales service
If the client enters the new segment, what can be the potential concerns?
There can be threat from competitors operating in this space because there’ll be addition
in costs due to value added services and the client needs to come up with new marketing
strategies.
Okay. Now move on to new business ideas.
The client can consider the options such as geographical expansion, increasing product
line, diversifying into new business, or by acquiring/merging with a new company.
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Indian Institute of Management, Kozhikode
Growth Strategy
Air Conditioning Company
The client is an air conditioning company which is currently operating in India. The growth rate for the client is 10-15% and they want to grow
5 times in 5 year. Recommend a growth strategy for the client.
Approach / Framework
5X Growth in 5 Years
Existing Business
Increase in volume
New Business
Increase in Price
New
Geographies
Increase Customers
Increase in Basket Size
Current Market Segment
New Market Segment
Middle -Class
High-End
Value Added Services
Indian Institute of Management, Kozhikode
Increased Product
line
Diversifying into
new Business
Acquiring/Merging
with other companies
After Sales Services
47
Growth Strategy
Energy Sector
Our client is an energy sector player in Mumbai. They are into the business of providing
LPG to the households. They have an annual pro t of INR 500 crores. Over the years, the
money has accumulated and we have been hired to suggest how the client can put this
money to use.
Where does our client lie in the overall value chain?
Our client sources liqui ed gas from market players and supplies it to households. The
client owns the entire infrastructure required for operations
Why has the client been accumulating so much money? Is it a public sector entity?
Yes. It is a public sector entity. Initially, they were funding their infrastructure needs through
their pro ts but since the required infrastructural investments are practically nil, they have
been amassing this wealth for some time. As to why exactly they haven’t thought of putting
it to use before is unknown to us.
Ok. What are the aspirations of the client from this excess cash? Do they have any speci c
target/ outcome that they want to achieve?
Not really. The issue is that they don’t know what to do with this money. We can practically
explore anything under the sun.
I shall look at 2 investment avenues for the client:
Investment to grow existing business
Investment to enter new markets/ businesses etc.
Financial investments?
Yes. Go ahead. Tell me what all types of projects would you consider in each of these
options?
I would consider the following:
Investment to grow existing business:
• Investments to improve operational ef ciency – The client can consider investing in
improving operational ef ciency which would lead to even higher pro ts in the future,
which we can nd ways to put use to.
• Expanding within Mumbai – The client can consider investing in expanding its
infrastructure in and around Mumbai to expand its customer base, again leading to
even higher pro ts for future use.
Investment to enter new markets/ businesses etc:
• Investment in new markets – The client can consider investing in new geographies to
supply liqui ed gas. Since the client already has capability in that area and liquid gas
supply industry is in its nascent stage, the client can become very big in this sector.
Given the excess cash, the client can look at directly acquiring an existing player or can
aggressively bid for new tenders.
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I would consider the following parameters to decide on which project should the client
choose:
• Criticality of the project to the business (sustainability, immediate requirement etc.)
• Initial investment required and our current cash position
• NPV of the projects
Let's say all the projects have positive NPV. Also, the client has enough cash to fund any of
these projects initially. All the projects also have similar criticality for the business. (Data
given: Project wise initial cash requirements, their NPVs and existing excess cash)
As I can observe from the data, the client is not in a position to fund all the projects
simultaneously but can start with any of the projects, I would look at the timings of the
future cash ows to suggest a speci c sequence of projects to the client.
I will estimate future cash ows of the projects. Post that, I shall start with the project with
the highest NPV. Since, it also has highest cash out ow and no other project can be
funded simultaneously, I will look at cash ows and see when next best project can be
funded or at what sequence will the NPV for the client would be highest. In general
called Capital Budgeting.
You can also choose to call it an excel optimization problem. I think we can close the case
here.
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Okay. Let’s say that the client has 4 projects as options across these buckets. How would
you go about selecting and recommending a project?
How would you do that?
There is one avenue which is missing. Can you think which one?
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• Investment in new businesses – Since there is lots of talk about green energy and
reduction in carbon footprint, our client is in a good position to enter some new
business and build capabilities overtime to ensure that their future position is secured.
Financial investments: The client can hire an investment management company to
manage its excess cash by investing in capital markets and can then look for investments
in the future.
Market Entry
Telecom
The client is a Swedish telecom company with good investments in 5G, they are scoping to
enter the Indian market. Should they do it?
What is the competitive landscape for telecom in India?
Makes sense. Please go ahead.
Population*No. of phones per person -> Filter for smartphones -> Filter for 5G enabled
phones -> Filter for SIMs per phone -> New users and existing users-> Within existing
users, people who would switch to 5G within their own telecom operator or take 5G from
another player-> People who would take 5G would either port out of the existing player
or buy an additional sim.
Assumed that new users wouldn’t generally directly go to 5G services so early on. Within
existing users, the two large telecom players have strong brand loyalty as they give a lot
of value-added services- such as Jio suite of services, Airtel Payments Bank and so on so
forth, therefore it might be dif cult for the client to compete with them. I assumed,
therefore for our client the target market would be people who would buy an additional
SIM to get 5G services.
My nal number came to 3.5 million. Thus applied a 20% lter (the player will enter into
metro circles as 5G adoption in non-metro areas would be dif cult) bringing the number
to 0.7 million.
Two large players- Jio and Airtel with around 40% market share each and Vi with 20%.
Do you think they would be able to get this number?
The way I would like to approach this problem is to look at economic viability,
opportunity and operational feasibility. In the economic viability, I’d like to see the
investment opportunities and under operational feasibility, internal and external factors
and market sizing under opportunity.
TRAI regulations state that a new entrant can undercut existing players without the
incumbents being allowed to retaliate as was seen in the case of Jio. Thus by right pricing
strategy, they would be able to gain market share.
Existing competitors might also be late adopters of 5G given that there is a signi cant
CapEx involved and they are not very pro table and highly debt-laden right now.
The new entrant will also be taking over only a small chunk of subscribers which would
make incumbents unlikely to retaliate.
Sounds like an interesting case. Do they want to enter for a speci c spectrum or they
want to be there across 2G, 3G, 4G or 5G spectrums?
They want to enter in the 5G market only.
What is their objective in entering the market- is it market share, pro tability?
The number of subscribers in their existing markets has stagnated. They want to get as
many subscribers as they can, pro tability is not a concern at this stage, they will eventually
become pro table.
Do they have any timeline in mind?
They want to enter by the mid of 2022.
Have they entered any other market recently?
No.
Let’s start of with the market sizing that you mentioned.
Great! There are two ways of going about it- demand and supply. Within demand we can
look at the need for 5G among customers. In the supply side, we can look at how many
phones will be 5G enabled and calculate the market opportunity for our client using that.
Given that there is a strong supply constraint of 5G phone I believe that would be a more
relevant approach.
Let’s proceed with that.
Given that they would only get a small fraction of the market, should they enter the market?
The recommendation will be to enter the market. Even though they are getting only a
fraction of the market, this fraction represents a huge delta of around 15% from their
existing subscriber base and thus will help them tackle stagnating growth.
Currently around 10% of phones in India are 5G enabled. I assume that the number
would be 30% by the mid of 2022.
How do you justify 30%
Most of the smartphone players are global players who also exist in markets such as
Europe high cost for geography speci c 5G and non 5G manufacturing of the same and
North America which are already making a shift to 5G. Given that a lot of these variants
sold by Apple and Samsung in India are same as those sold in Western countries, they
will also be 5G enabled given that they are the same variants and manufacturers would
incur a variant.
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Market Entry
Telecom
The client is a Swedish telecom company with good investments in 5G, They are scoping to enter the Indian market. Should they do it?
Approach / Framework
New Market Entry
Opportunity
Feasibility
Visibility
Market Sizing Target
Market share
customer segment.
PESTEL Analysis
Regulations Strategic
Barriers
Investment
Opportunities Human
& Physical Resources
Competitors
share Major Players
Strength & Weakness
Value Chain Analysis
Vertical & Horizontal
Integration
Timeframe
Revenue Generation
Product Existing USP
Pricing
Entry Strategy :
JV/Acquistion/Merger
Poll Entry Risks :
Cannibalisation,
Culture & socio factors
Visions
Goals
Objectives
Indian Institute of Management, Kozhikode
50
E-Cigarettes
Market Entry
Your client is a US based E-cigarette company is looking to introduce its product in Indian
market.
Why do they want to expand in India?
They are facing a lot of regulatory issues in US because of underage consumption of their
product, resulting in stagnant growth. Hence, want to expand in a country with a growing
economy.
What type of competition they might face in Indian E-Cig market?
There is no big player although there are some small players with Chinese products.
Can you provide some speci cations about the product and type of customers the client
wants to target?
Product speci cations and type of Customers – 1 device with 4 cartridges and 1 cartridge
lasts as long as 1 pack of cigarettes (20 cigarettes). Device lasts for ~5 years. Customer can
purchase pack of 4 cartridge pack separately after that. Ideal target customers are
premium cigarette chain smokers.
Is there any speci c objective regarding market share or pro tability that the client wants
to achieve?
The client wants to capture maximum market in less amount of time.
I would like to approach this problem statement through 4 buckets :
A. Understand market attractiveness – Size and growth prospects along with Porter 5
force analysis.
B. Understand pro tability aspects – Potential Market share, Initial investments, pricing
of product and overall pro tability
C. Operational Feasibility
D. Mode of Entry
I would now like you to suggest what price should the client quote for the product.
Sure. To suggest a price, I would like to come up with a price band between which we
could price the product. Do you want me to suggest a price for the device and cartridge
separately?
Yes. Suggest a price for a pack of device + 4 cartridges, and a price for only a pack of 4
cartridges.
Ok sure. Continuing my previous approach, I would like to estimate the lower limit of
price band through cost-based price and upper price band through a combination of
Substitute based and value based pricing. For that I would like to understand the cost that
our client will incur in manufacturing and distribution of the product.
Ok. Cost incurred for the device is $27 per unit and cost for cartridge is negligible.
Ok. Taking a conversion factor of 70, cost in INR for the device would be ~INR 1900. Since
cartridge cost is negligible, the lower limit for our price band stands at INR 1900.
Now considering price for substitute – One pack of premium cigarettes cost on an
average INR 300. Since, one cartridge lasts as long as 1 pack, hence pack of 4 cartridges
will be equivalent to 4 packs of cigarettes, which stands at INR 1200.
Hence a pack of 4 cartridge can be priced at INR 1200. We can also charge a premium on
this, since our device will be much more portable, stylish and will have a status symbol
attached to it.
So what is your nal recommendation?
To capture maximum market, we should price the device+4 cartridge just at cost, i.e. INR
1900. We will earn pro t by selling cartridges at >INR 1200 (INR 1500) since cost incurred
for manufacturing cartridge is negligible.
The approach sounds good at an upper level. Why don’t we start by estimating the total
market size.
I would like to follow a top-down approach for this, starting with the total Indian
population (also depicted in owchart):
• Indian Population -> Urban (40%) and Rural (60%) | Removed Rural branch as
consumption of tobacco in the form of Cigarette is less
• Age Split -> <18 years (30%), 18-60 years (50%) , >60 years (20%) | Removed <18 years
for being underage and >60% for low smoking rates because of health concerns
• Male (50%) and Female (50%)
• Income Split -> Low Income (30%), Middle Income (50%), High Income (20%) |
Removed low income branch as premium cigarette consumption will be negligible
• Considered 40% smokers in Males and 20% in females. All High Income population
considered as premium brand smokers. Upper Middle Class (50% split in upper and
lower middle class) population considered as premium brand smokers
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E-Cigarettes
Market Entry
Your client is a US based E-cigarette company is looking to introduce its product in Indian Market.
Market Sizing
Approach / Framework
Indian Population
Urban
<18 Years (30%)
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>60 years (20%)
18-60 Years (50%)
Female (50%)
40% Smokers
20% Smokers
•
•
•
•
•
•
•
Middle Income (50%)
High Income (20%)
Upper Middle Income
(50% split in upper and
lower middle class)
considered as premium
cigarette smokers
All high income
considered as premium
cigarette brand smokers
Indian Institute of Management, Kozhikode
Pro tability
Aspects
Operation
Feasibility
Mode of
Entry
Rural
Male (50%)
Low Income (30%)
Market
Attractiveness
Market Sizing
Market Growth
Supplier Power
Customer Power
Threat of new
entrant
Threat of substitute
Competitive
Landscape
•
•
•
•
Market Share
Initial Investment
Product Pricing
Profitability
•
Setting up Value
Chain
•
•
•
Start from scratch
JV
M&A
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E-Commerce
Market Entry
Currently our client, South East Asian Fast Fashion E-commerce business (specialising in
Apparel. Footwear, and accessories for both men and women) operates in 5 countries:
Indonesia, Vietnam, Singapore, Malaysia, and Thailand. How would you evaluate whether it
should enter India or not?
Sounds great. Let me recap, our client which is into E-commerce Fashion Business is
currently operating in 5 countries and wants to expand in India. I need to evaluate this
option. I have a few clarifying questions before we evaluate the market entry.
Yes , go ahead.
I would like to evaluate 4 areas here. Firstly, I would like to see if the market for Fast
Fashion in India is attractive. Secondly, I would like to evaluate how will we operationalise
the venture in India. Here I would like to evaluate various options that we have. Thirdly, as
this is a foreign venture, I would like to evaluate any risks or challenges that we might
face. Finally, I would like to see what is the Return on Investment that we might be able to
generate.
Seems good. Could you elaborate each of the areas that you have mentioned.?
Sure. To see if the market is attractive, I would like to understand the market size and the
market growth. I am assuming since e-commerce is growing rapidly in India, the growth
would be robust and in double digits, but if we have any hard numbers around these it
would be great. Then I would like to evaluate our competitors and what are the points of
differentiation that we bring with us in terms of product lines, customer targeting, and
scale economies that we can leverage to compete in India. Finally based on this I would
like to understand what is the market share that we can gain in the initial few years.
That looks like a good approach. Can you let me know what are factors you will look at in
order to operationalise the venture?
To evaluate how we will operationalise our venture, I would look at 4 factors:
(i) Getting the necessary licenses and permissions from the govt.
(ii) Setting up the supply channels in India,
(iii) Setting up the distribution networks viz. warehouses, delivery channels, customer
service.
(iv) Launch strategy in terms of pricing, marketing and promotion, and initial product
lines.
Based on the above 4 factors I would evaluate what options do we have. I presume we
can evaluate 2 options here: a ground up green eld strategy or acquiring an existing fast
fashion e-commerce.
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How will you evaluate the risk and challenges faced by this venture?
I will evaluate risks and challenges under 3 categories: regulatory risks, operational risk,
and nancial risks (listed a few speci c risks under each bucket).
Finally, I would like the venture to have a positive Return on Investment over the long term
otherwise it would not make sense to enter India. There is a minimum ROI threshold that
any business has. If the business in India is exceeding that threshold, we are good to go.
Seems comprehensive. Let’s stop here and move to other problem that we are facing. Our
pro tability is suffering as there is a high inventory wastage of 30%. We source from our
suppliers in China and send it to 5 above-mentioned countries. There is huge wastage in
Vietnam and Malaysia whereas stock out in Singapore. How would you reduce the wastage
in Inventory? Also, we cannot move inventory from one country to another as the double
taxation across countries makes it unviable to move inventory from, say, Singapore to
Malaysia. Thus, we either throw the remaining inventory or provide deep discounts.
Let’s, look at it from 2 aspects. Short-term and Long-term solutions. Under short term
solution, we could work on (i) need based shipments with a smaller order size, or (ii) We
can have minimal customisations at Chinese factories. The required customisation can be
done at the destinations which would help in reducing the wastage by improving the
scope of usage of the product.
In Long term: (i) We have to work on better demand forecasting mechanisms to predict
the inventory requirement and (ii) Establish country level manufacturing facilities. This
would be contingent upon the Economies of scale that we can establish there
Interesting. Suppose we are sending 1000 materials to these 5 countries. Would you be in
favour of sending 300 materials in the same proportion to these 5 countries.
Let’s look at the bene ts and the indirect costs that we might face if we are reducing the
order size from the Chinese factories.
Bene ts: Reduced wastage, lower inventory holding costs.
Costs: Stock out (opportunity cost), customer dissatisfaction (longer delivery time if we are
sourcing the order after the customer has made the purchase) leading to higher customer
churn.
Here the costs are higher than the bene t, so I would not recommend reducing the order
size by 70%.
That’s answer my question. Thank you.
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Food Delivery Services
Market Entry
Our client is an Indonesian food delivery giant. It is looking for growth opportunities
outside its own country. It has identi ed India as one possible destination for expansion.
However, they will enter India only if the unit economics make sense. This is their only
criteria for entry. Could you evaluate if they should enter?
Interesting case. Let me reiterate to be on the same page, our client is an Indonesian
food delivery is looking for expansion in India. I need to evaluate this option in the light
of unit economics. I would like to ask a few clarifying questions before I begin.
Yes , go ahead.
What is the objective of the expansion? What about the competitors?
The client believe that India has a potential market which is expected to grow substantially
in the coming years. Talking about the competition, there is high penetration; so many
companies have already ventured into food delivery segment.
Given variable cost per order = INR 30(Customer related charges), the contribution per
order is INR 50(80-30). As the salary of delivery person is INR 25000 per month, we would
need to deliver 25000/50 = 500 orders per month to break even on the unit level.
If the number of working days is 25 per delivery person, each delivery person would need
to deliver 500/25 = 20 orders per day. Thus, the unit economics do not make sense here.
Great, could you suggest what are the metrics that we need to optimise to ensure that the
unit economics make sense?
Let’s divide the metrics in two aspects:
• Customer related metrics: Ticket size/Customer, LTV/customer
• Delivery person: Number of Deliveries/day, idle time/total working time.
Great, that would be all.
Okay, Do you want me to evaluate market attractiveness as well, or we should just
evaluate the unit economics?
No, jump straight to unit economics.
As we are considering just the unit economics, let's ignore the xed cost for the time
being. We can consider it afterwards if needed. We should consider 2 aspects here,
Revenues per order and Costs per order. For revenues, we would charge a commission to
restaurant partners per order and would charge a deliver fees to the customers. On the
cost side we would have customer acquisition costs that would be spread across the
orders and the delivery charges in terms of rider commission per order and fuel costs.
Great I think we are good with all these costs. Let me give you some numbers for this.
Delivery person salary: INR 25000/month (inclusive of fuel)
Other customer related charges: INR 30
Commission from the restaurants: 20% of the ticket size
Delivery charges: INR 20/order
Alright, What I will do now is to evaluate what are the number of orders that could be
delivered per delivery person and compare it with the breakeven number of orders.
To calculate the number of orders delivered, let’s assume that the delivery person works
for 10 hours and takes around 40 minutes (justi ed this by considering, average distance,
traf c situations, etc.). Thus, a peak delivery of 15 orders per day could be done. We need
to factor in the idle time during the afternoons, and lunch time and take 10 orders.
Now, to calculate the breakeven orders, we rst need to calculate the average ticket size
per order to calculate the commission (Considered 3 segments: Bachelors, Couples,
Large Family; and then applied weighted average to arrive at INR 300 per order). Thus,
the commission that we can charge per order is 20%*300 = INR 60.
Thus, the revenue per order is 60 + 20(Delivery charge) = INR 80.
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Food Delivery Service
Market Entry
Our client is an Indonesian food delivery giant. It is looking for growth opportunities outside its own country. It has identi ed India as one
possible destination for expansion. However, they will enter India only if the unit economics make sense. This is their only criteria for entry.
Could you evaluate if they should enter?
Approach / Framework
Growth opportunity in India for food delivery
services
Evaluate Market Attractiveness
Pro t/Loss and Break even points (Unit economics)
Actual Cost
Potential Revenue
Particulars
Actual Delivery per day
Average ticket size per order
Thus, unit
economics do not
make sense here.
Commission per order
Revenue per order
Projections
10 per day
INR 300
300*20% = INR 60
60 + 20 (Delivery Charge) = INR 80
Salary of delivery person
INR 25000
Number of working days
25 days per delivery person
Required delivery per day
20 per day
Particulars
Amount
Variable cost per order
INR 30
Salary of delivery person
INR 25000
Need to deliver orders per month INR 25000/50 = 500
to break even on the unit level
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You are having tea with Mr. Ratan Tata. He has just returned from Germany where he saw
third party car service stations which were doing very well. So, he is thinking of opening a
chain of such stations in India. You need to give him your thoughts and make a pitch from
BCG’s side for helping him with the project.
Can you elaborate a little on what exactly do you mean by third party service stations?
To service a car there are service stations. They can be authorised stations like the chain
that Maruti has or they can be local garages. The third type, which is currently missing in
India, is an independent chain of service stations which will service any brand. These are
third party service stations
Ok. This is a new business that Tata would want to enter. I’d like to look at know Tata’s
nal aim - do they have a target pro t /market share/return on assets as their target from
the venture
Tata is a big & pro table company; they want as high pro ts as possible from the venture.
I also wanted to know if there are any constraints on nancing, expertise in area and
synergies with other businesses
They have no constraints with regards to nances. They build automobiles as you know and
have authorised service stations for their automobiles
So, the aim of Tata is high pro ts and they have suf cient nances and expertise in the
automobile area. I’ll go on to look at the automobile maintenance market. Currently in
India there are 2 kinds of garages – the local ones and authorized service stations. So,
when we enter the market, would we be servicing all kinds of brands and providing a full
range of services?
Yes. All brands and a full range of services
Now I wanted to look at the competition in the market. We would need to differentiate
ourselves from the 2 kinds of competitors that we have in order to get customers
Ok. How would you do that?
I’ll look at why a customer goes to a service station and why he chooses a particular
station to go to. A car would be taken to a service station for i) Regular check-ups/
services ii) In case of an accident iii) Maintenance when it breaks down
Ok
Now when an owner chooses a service station he would want
1. Quality – In terms of genuine parts if replacements are done, trained mechanics, the
car being treated properly, delivery on time
2. Cost – He would want the service to be as cheap as possible
3. Convenience – The service station should be close or should have a pick & drop
service.
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There would be a segment of customers who would lay a lot of emphasis on cost while
another segment would lay emphasis on quality. In case of an accident or break-down
convenience would play a big role. Local garages will have low quality and low cost while
authorized service stations will have high quality and high cost. Also, local garages are
generally more in number so would be more convenient to reach in most cases
Ok. Now I want you to make a grid of the dimensions that you’ve mentioned and gure out
where our competitors lie and where we should go.
Let us club convenience with quality. We’ll just analyse the situation based on 2 parameters
Now, Tata wants to start a third party chain of service stations which will serve all brands. If
Tata targets
1. low quality, local garages will beat them since these garages can service all brands
and charge very low unbeatable prices. Also, they would be built at strategic locations
which Tata may not be able to acquire, coming late into the market
2. On comparing Tata stations with authorized service stations, Tata could stand a
chance. They could ensure quality by sourcing parts from manufacturing companies
and employing well trained mechanics. Since such a service station will service all
brands it will be a convenient place to come to for high quality services. However, the
price charged will be high.
Do you think anyone will come to such a service station when they can go to a Maruti or
Hyundai authorized service station?
In India a majority of cars are Maruti and Maruti has a very good chain of service stations
which are convenient to reach and high quality. Hence, Maruti cars will de nitely not
come to Tata’s stations. Other brands like Hyundai would come since their service stations
are few and far apart. If Tata offers the same quality at the same price, it might be cheaper
& more convenient for consumers if Tata’s chain has numerous stations at strategic
locations
Maruti has almost 50% of India’s car market share. Now do you think it is bene cial to set up
Tata’s third party service chain?
Owners of other brands will prefer to go to their authorized service stations as they would
be more trusted. And given such a lopsided market in favour of Maruti, it will be dif cult
for us to compete with Maruti directly. So, the number of cars coming to Tata’s stations
might be too low for the venture to be viable. But, if there are expectations that many new
brands will enter India as some already have, then Tata’s venture could be viable given
that these rms would not want to open a service chain of their own due to small numbers
and newer vehicles could mean that the local garages might not be well-equipped to deal
with all kinds of problems with the vehicle.
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Market Entry | New Business
Automobiles
Market Entry | New Business
Automobiles
What would your nal recommendation be?
My nal recommendation would be to not start such a venture currently since Tata would
not be able to beat competitors on any dimension - cost or quality. However, in the near
future this could turn sustainable so an eye should be kept on this market
Ok. Thanks!
New Services
Available Services
Customer Expectations
Quality + Convenience
Local Garages
Cost
Authorized
Quality
TATA should launch
in this space
High
Local Garages
Low
COST
Authorised Service
Station
High
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Low
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A company is starting a Heli Taxi Service between Pune and Mumbai. You need to advice
your client on the price it should charge from the client.
I would like to ask a few clarifying questions. What is the objective of the client?
The client just wants to break even in one year and there’s no other objective
Can we know about the details of the company and the business model? Do they have
any experience in the industry?
The company does not have any experience in the industry. The company has leased 7
helicopters for the project.
Does any competitor run on the same route? How much time does it take?
No. This is a new route that we are launching. The total time for one ride is 1 hour. This
includes all the times from check-in till check-out.
So the pricing can be done using 3 approaches – Cost Based, Value Based and
Competitor Based. Which one should I look into?
Start with Cost Based. How would you go about it?
I would divide the costs into xed and variable. The Fixed costs would include the
Salaries, Leasing Charges, Airport and Hangar Charges. The Variable costs would include
the Fuel cost and any other VAS costs for the customers.
That sounds fair. The Salary is 2 Crores per year, Leasing – 1 Crore per Helicopter per year
and Hangar and Airport charges are 2 crore per helicopter per year. The Variable costs are
20,000 per trip.
Okay. In order to go ahead, I would also want to know about the operations of the
company. How many hours does it work in a day?
The helicopters are in operation for 10-12 hours a day and can do 10 trips a day on an
average.
That brings us to 21000 trips a year assuming that the helicopters work for 300 days in
the year (300*7*10), leaving aside the holidays and the helicopters being grounded for
maintenance. I would want to further look into the number of seats that would be utilised
in the whole year. I would want to divide the trips into Peak (2 round trips) and non-peak
hour (3 round trips) with 80% and 60% occupancy respectively. Does that sound fair? Can
you please con rm the size of the helicopter?
Does that look ne to you?
Let me recheck. Sorry I didn’t consider the number of helicopters in Leasing and Hangar
costs. The Total Fixed cost is 23(2+(3*7)=23 crores) Crores and hence the total cost is 66
crore.
That’s right.
So the cost will be between 9,000 and 10,000 (66 crores/72000). Should I calculate the
exact cost?
No, we are done with this approach. What are the other methods that you were talking
about?
We can start with the value-based approach. There are two types of values that the
helicopter service will add; Time and Flexibility. Time is value of time of the top executives
of the companies and the time they save using our service. The time saved will be
considered using the time taken between the originating point and the destination by car
and the same points using the helicopter including the commute to the airport. The
exibility can be a little lower if the departure times are xed.
There is no problem with the exibility. You were talking about another approach as well.
Yes. We can also use Competitor based pricing. Because we are the rst to start a service
between Mumbai and Pune, we can look for services with similar distance or similar kinds
of services at another location.
We have a service in Bangalore where they take 3K-3.5K for a 15 minute journey.
A crude calculation would bring the price to 12K-14K for a similar experience but we
would also consider the value of the service within the city and the value of the service
when ying between cities and also the different kinds of traf c faced in these cities and
the types of customers taking these services. Also one competition can also be the
corporate jets for Mumbai to Pune as the people in big corporates paying 10,000 for a
helicopter ride may even have a corporate jet to enable travelling across cities.
That sounds okay. The helicopter can seat 6 people including the pilot.
Thank you for the information. That brings the total seats sold to approximately 72000.
[seats sold per day (34) x #helicopters (7) x 300 days]. It was 21000 trips with maximum
available seats at 105000, considering the occupancy rates, 72000 looks right. Should I
move ahead with the costs?
Yes that’s correct. Please move ahead with the costs.
The total fuel cost is 42 crores while the Fixed cost is 2+2+1 i.e., 5 crores.
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Pricing
Helicopter
Pricing
Helicopter
A company is starting a Heli Taxi Service between Pune and Mumbai. You need to advice your client on the price it should charge from the
client.
Approach / Framework
Pricing Method for Heli Taxi Service
Cost Based
Variable Cost
Fuel cost and any other
VAS costs for the
customers.
Indian Institute of Management, Kozhikode
Value Based
Competitor Based
Fixed Cost
Salaries, Leasing Charges,
Airport and Hangar
Charges
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Pricing
Vistara Airways
You would have travelled Vistara in the past. Let’s say that they want to price their Premium
Economy and Business Class services. How would you go about doing that?
There are three ways of pricing – Cost-based, Competitor-based and Value-based. Since
it is a premium service, cost-base doesn’t make sense. To get a pricing oor, we can use
the prices of normal economy class. We cannot do competitor-based pricing as well since
Jet Airways has gone out of business and Air India’s business class is not really a
competitor of Vistara. Currently, Vistara serves only India and hence, Air India is the only
competitor. I would look at Value-based pricing.
Okay. Can you please de ne value for me?
Value is what price a passenger is ready to pay for extra services like priority check-in,
priority boarding, free upgrades, last minute cancellation and all other bene ts.
Pricing
Okay. With that de nition, how would you go about measuring this ‘value’?
I would look at conducting customer surveys. After ying with Vistara, we always get an
SMS to rate various services. We can also include how likely the customers would be
willing to avail these services and at what price.
Do you think that people would explicitly mention on the survey as to what price would
they be willing to pay?
Cost based
Competitor Based
Value based
I agree that there would be tendency for people to quote very low prices, even 0,
because nobody would want to directly put a price to these services. But we can look at
the frequency-of factors that people favour the most.
What else can you do to measure ‘value’?
I can look at the value of time that the passengers would save by because of services like
priority check-in. For example, if a person saves half an hour due to priority check-in, I can
calculate the value of that half an hour for that person and come up with an individual
value for this service.
But that would give you very vast range of answers. For example, value of half an hour of a
wealthy business tycoon would be very high compared to others.
Yes. And that is why I would look at speci c cohorts of people who actually travel through
these airlines. Wealthy business people would mostly have their own private jets and
would not be using services of Vistara.
Ok. Good. I think we can end the case here.
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Assume I am the CEO of Swiggy, and I am asking you to devise a Vision for Swiggy and
based on that come up with the Vision statement. Could you help me?
That’s Interesting, thank you. Just before we delve into this, I would like to understand
what do we mean by Vision here. I believe, vision is something that you aspire to reach
and your strategy is formulated based on this statement. Am I correct in assuming this?
That seems to be correct. But consider this as well. It captures the aspirations of all the
stakeholders of the rm.
Perfect. So, something like True North that a rm aims to reach and which motivates all its
stakeholders. Got it. I think the question is pretty clear.
I would like to derive the Vision using 4 sequential steps. Firstly, what would be the
market that we would be targeting in the long term. I would like to analyze this by
evaluating our core assets (tech, manpower, captive customer data). Secondly, what are
the capabilities that we need to develop, to capture those markets. Thirdly what key
challenges and risks we might face based on the analysis of the rst 2 buckets; and
nally, what would be nances required to reach our goal and how would we mobilise
the funds as we are not publicly traded currently.
the platform should be smart enough to understand the needs of the customers and
upsell or cross sell the items.
I think you have all the words that would help in devising a good vision statement. Could
you synthesise your elaborations and come up with a concise vision statement now?
To pioneer the food delivery business and connect each and every restaurant in India to
the customers.
That’s all. Thank you.
Good. Using this we would be able to understand the tangible aspect of vision. But vision
is something intangible. For e.g., Dunzo’s vision is on the lines of bridging the logistics gap
between the users. How would you capture this intangible aspect?
For this we can understand the needs of the stakeholders as you have highlighted earlier
as well. The stakeholders here are the founders, investors, employees, and the customers.
Are you missing an important stakeholder here.
Okay got it. As this is a 2-sided platform, restaurant partners are also an important
stakeholder.
Now think of a statement that would make all the stakeholders happy.
Based on the stakeholders, the vision could be to build the best food delivery ecosystem
in India that maximises the value for the customers and partners.
Will that motivate my employees. Will they be willing to wake up every day and be inspired
to work at Swiggy?
No. Let’s think what motivates the employees. It’s the monetary and non-monetary
aspects. Let’s ignore the monetary aspects as the vision would not directly address that.
However, employees would be motivated if we are pioneering the industry and building
something that no other player is building viz. drone delivery.
Good. What would make my restaurant partners happy?
There are 2 things that would make them happy. Getting more and more customers and
a higher ticket per order. To achieve the rst, the restaurants should have an equal
opportunity to be featured on the list of restaurants in Swiggy. To achieve the latter,
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Vision for Swiggy
Unconventional
Employee Productivity at Public Sector Bank
Client is a public sector bank and they have been facing low employee productivity. You
are required to diagnose the problem and come up with recommendations.
Sure, sir. So, the key problem is that our client is facing low employee productivity. I am
required to diagnose the problem and provide some recommendations. I would like to
ask some preliminary questions.
Okay. Go ahead.
Does the client have a pan-India presence?
Yes.
Since how long has the client been facing this issue?
It’s been there for a very long time. Due to change in management, the client wants to
focus on this problem now.
What does a client mean by employee productivity and how do they measure it?
A more robust mechanism on region-wise data collection should be put in place to
identify appropriate targets.
2. Employees should be made part of the target setting process with a caveat that the
targets which they select will have a direct bearing on their overall rewards
Percentage of targets achieved.
With that, you can move to the rewards.
What are the employee targets?
What type of R&R policies does the client have?
Targets are a mix of loans, xed deposits, savings accounts etc. Basically, everything that an
employee can sell in a bank branch.
Employees have a xed and a variable salary. Apart from that, there are some employee
recognition mechanisms wherein employees with the highest sales numbers are given
some award price.
Is there any speci c geography that the client has been facing this issue?
This is a pan India problem.
Why is our client saying that their employee productivity is low? What are they
comparing it to?
1.
How is the variable pay determined?
Though the client’s employee productivity is not as bad when compared to other public
sector banks, due to change in management, the new benchmark that the company is
looking at is private sector banks. In comparison to private sector banks, our client’s
numbers are very low.
As per employee targets, a level-wise variable pay matrix is created. Ratings are assigned as
per completion of the targets.
I would like to start with the rst bucket. How are targets set currently?
Each employee is given targets as per their previous year targets, irrespective of whether
they were achieved or not.
That also creates a problem because as discussed, some regions have potential for more
business and some employees are more skilled than others which can lead to different
levels of motivation for achieving those targets.
What are the other aspects considered in target setting?
How do you suggest solving this problem?
The process is usually driven by the managers of the employees. You can assume that it is
largely a top-down approach.
As we discussed before, individual targets should be a function of regional potential and
employee capability. The variable pay policy should follow a cohort system wherein
employees taking up higher targets are rewarded differently vis-à-vis employees taking
up lower targets.
Do some geographies complete their targets vis-à-vis others?
Yes. For example, in Mumbai, some of the branches are doing much better while others are
unable to meet their targets.
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Okay, so prima facie, the issue is with the target setting process in itself. I can think of the
following aws with the process:
1. No external input to target setting. For example, if a region is experiencing slow
growth in general, it is unrealistic to set targets that would be nearly impossible to
achieve.
2. Target setting should also take into account branch-wise inputs to decide on what the
branch can achieve in the coming year.
3. Individual employee capabilities need to be accounted for when setting individual
targets.
This is what we also observed as problems. How would you go about addressing these
issues?
Is the same variable pay matrix used across India or is it tailored to each geography?
The matrix remains the same.
Good. That is what we also recommended. What else?
Contextualise R&R policies to the region to ensure that employees get recognised at the
right forums.
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Employee Productivity at Public Sector Bank
Unconventional
Okay. Anything else you want to consider?
I would like to analyze the problems related to organisation culture and other softer
aspects. I will consider multiple aspects here:
• Organization support
• Organization culture and employee motivation
• Employee capability and skills
Okay. That looks good.
Starting with employee capability and skills rst. What sort of training and development
initiatives are provided by the client organisation?
There is regular employee training. They are kept up to date with the latest changes in
product offerings as well. In one of the surveys, the client found out that the employees
were actually very happy with the efforts that the organisation was putting in with respect
to the training.
I will tackle the other 2 together. What sort of support is provided by the top
management?
What do you mean by that?
In terms of sales process and knowledge sharing, how does the organisation support its
employees?
Knowledge sharing is very common in the organisation. Top management is usually always
to provide all the necessary support. However, there are employees who are willing to work
towards achieving their targets. What sort of additional support do you think the
organisation can provide?
The organisation can have technological systems to support the sales process.
The client already has a state-of-the-art technology system in place. What else?
The organisation can make its R&R policies more transparent and to communicate the
upside of performing well to the employees.
That can be done. But how can organisations additionally support the ones who are ready
to work harder?
The organisation can make an app that helps these employees track their targets on a
daily basis and can correspondingly check their variable pay. That would keep them
motivated regularly.
Exactly. That is what we also recommended to our client. The development of that app is
underway as we speak. Good job.
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Unconventional
Reserves Accumulation at Energy Sector
Our client is an energy sector player in Mumbai. They are into the business of providing
LPG to the households. They have an annual pro t of INR 500 crores. Over the years, the
money has accumulated and we have been hired to suggest how the client can put this
money to use.
That’s interesting. I would like to start with some clarifying questions. Where does our
client lie in the overall value chain?
Our client sources liqui ed gas from market players and supplies it to households. The
client owns the entire infrastructure required for operations.
Why has the client been accumulating so much money? Is it a public sector entity?
Yes. It is a public sector entity. Initially, they were funding their infrastructure needs through
their pro ts but since the required infrastructural investments are practically nil, they have
been amassing this wealth for some time. As to why exactly they haven’t thought of putting
it to use before is unknown to us.
Noted. What are the aspirations of the client from this excess cash? Do they have any
speci c target/ outcome that they want to achieve?
Not really. The issue is that they don’t know what to do with this money. We can practically
explore anything under the sun.
Alright. I shall look at 2 investment avenues for the client:
• Investment to grow existing business
• Investment to enter new markets/ businesses etc.
player or can aggressively bid for new tenders.
• Investment in new businesses – Since there is lots of talk about green energy and
reduction in carbon footprint, our client is in a good position to enter some new
business and build capability overtime to ensure that their future position is secured.
3. Financial investments – The client can hire an investment management company to
manage its excess cash by investing in capital markets and can then look for investments
in the future.
Okay. Let’s say that the client has 4 projects as options across these buckets. How would
you go about selecting and recommending a project?
I would consider the following parameters to decide on which project should the client
choose:
1. Criticality of the project to the business (sustainability, immediate requirement etc.)
2. Initial investment required and our current cash position
3. NPV of the projects
Let's say all the projects have positive NPV. Also, the client has enough cash to fund any of
these projects initially. All the projects also have similar criticality for the business.
I would look at the timings of the future cash ows to suggest a speci c sequence of
projects to the client.
How would you do that?
There is one avenue which is missing. Can you think which one?
Financial investments?
Yes. Go ahead. Tell me what all types of projects would you consider in each of these
options?
I will estimate future cash ows of the projects. Post that, I shall start with the project with
the highest NPV. Since it also has the highest cash out ow and no other project can be
funded simultaneously, I will look at the cash ows and see when the next best project can
be funded or at what sequence the NPV for the client would be highest.
Great. I think we can close the case here.
I would consider the following:
1. Investment to grow existing business
• Investments to improve operational ef ciency – The client can consider investing in
improving operational ef ciency which would lead to even higher pro ts in the future,
which we can nd ways to put use to.
• Expanding within Mumbai – The client can consider investing in expanding its
infrastructure in and around Mumbai to expand its customer base, again leading to
even higher pro ts for future use.
2. Investment to enter new markets/ businesses etc.
• Investment in new markets – The client can consider investing in new geographies to
supply liqui ed gas. Since the client already has capability in that area and the liquid
gas supply industry is in its nascent stage, the client can become very big in this sector.
Given the excess cash, the client can look at directly acquiring an existing
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Inadequate Profits for Interest Payment
The client has a sea-port, currently operating 10 mn tons of cargo but has a capacity of 25
mn. He is charging $100 per ton and earning a revenue of $1000 mn. Out of this, variable
cost accounts to 200 mn and xed cost as 400 mn. The rest is the EBITDA Margin
amounting to 400 mn. The client is required to pay an interest payment of $1000mn yearly.
Devise a turnaround strategy for the client.
This seems like an interesting problem. To better understand it, I would want to begin
with some preliminary questions.
Is a client has an all-India presence or operates in any speci c region? Also the problem
being faced by competitors in that region?
Being national or regional presence is irrelevant here. The problem is speci c to the client’s
sea port.
Unconventional
So, what can you inference from this data points?
The revenue for the client has increased and they are in a better position to pay off the
interest payment if compared with the previous target.
Great. Do you have any recommendations for the client?
I’ll like to give following recommendations:
1. Improve the service quality as to attract more consumers
2. Provide discounts in case of bulk quantities
3. In long-term, the client can open sea ports in another region to increase the pro ts
4. They can sign ling-term contracts with some of the business houses and corporations
Sounds good. I believe we can wrap up the case here.
Okay. Can you please provide me some more detail about the competitors? What is their
operational capacity and what price are they charging?
There are 2 other ports which are currently operating in 90mn tones and charging $90 per
ton.
Alright. Who are the customers?
The client only deals with business houses and corporations.
I would now like to deep dive into the problem. The turnaround strategy for the client
should be to increase the revenue as to make timely interest payments. I can think of
doing it through organic strategy (same or additional portfolio of services) and inorganic
strategy (through diversify into new business, penetrate into new market, etc.).
Okay. Inorganic strategy is not feasible for our client at this particular time. You can focus
on the organic strategies.
Noted. The organic strategy can involve either by increasing the customer base or
increase the price charged by the client. But since the competitors are already charging a
lesser price, the client should decrease the price in order to gain the competitive
advantage and increase the customer base.
This seems feasible. Hypothetically, take the price as $80mn which will subsequently
increase the operating tons from 10mn to 20mn.
Okay. With this price, the revenue of the client will increase to (80*20) $1600mn. Fixed
cost will remain the same, i.e. $400mn. Variable cost per unit is (200/10=$20 per ton) and
total variable cost for 20mn tons will be (20*20) $400mn. Hence, the total cost is
(400+400) $800mn.
EBIDTA is basically deducting cost out of revenue. Therefore, in this case EBIDTA would
be (1600-800) $800mn.
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Unconventional
Inadequate Profits for interest Payments
The client has a sea-port, currently operating 10mn tons of cargo but has a capacity of 25mn. He is charging $100 per ton and earning a
revenue of $1000mn. Out of this, variable cost accounts to 200mn and xed cost as 400mn. The rest is the EBITDA Margin amounting to
400mn. The client is required to pay an interest payment of $1000mn yearly. Devise a turnaround strategy for the client.
Approach / Framework
Inadequate Pro ts for Interest Payment
Revenues
Organic Growth
Same Portfolio services
Inorganic Growth
Addition of Portfolio services
Measures to increase Quantity
Increase Price
Decrease Prices (Price Elasticity)
Improving Quality of Services
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Unconventional
Steel Manufacturer
The client is a steel manufacturer who is facing decline in pro ts. You need to gure out the
issue and provide recommendations.
Here, is the decline due to decrease in revenue or increase in costs? And since how long
have they been facing the issue?
As per my knowledge, there are 5 broad steps involved in the process: Raw material ->
melting -> adding alloys -> rolling (incorporating the speci cations/dimensions) ->
logistics. Please correct me if I missed anything.
Looks good!
The client has seen a decrease in revenues since past three years.
Are there any problems in any particular above mentioned steps?
Given that it is an issue on the revenue side, is it because of the decrease in volumes or
price per unit?
We have no such idea
The issue lies with the volumes.
I would like to know is the issue speci c to the company or is it an industry wide issue?
Competitors are doing well.
So, we can conclude that the issue lies with the company. I wanted to know product
portfolio and who are the customers? Can you also tell me about where are they located
in India and how many manufacturing plants do they have?
The client operates in the eastern part of India (raw material easily available) and
distributes all across India. They have only 1 plant. Customers include all types of industries
from heavy vehicles to medical instruments. There are nearly 10,000 SKUs (types of steel)
which is slightly higher than the industry standard.
As the problem is delivering wrong product, is there any issue with machinery used for
rolling process or human error involved in the process?
There’s no problem with either the machine or labour. Deep dive a little more into
manufacturing process.
Okay. I want to know about the batch size. Do they have a xed batch size or does it
differ with the demand?
So if there is a demand from one customer of 10 units and the batch size is 50 units, the
client waits for more demand to come in and starts manufacturing only after they have a
certain threshold of demand because the inventory costs are too high and hence do not
want to store their products. This was the reason for the delay in delivery.
Got it. But what is the case when the batch size is 60 units?
Before moving ahead with the problem, can I know if the problem is with demand or
supply?
They send the 50 units from one batch and again wait for more demand to come in for the
rest of the 10 units which was the reason for the incorrect quantity of supply.
They are facing the issue with the demand.
Okay. The client has also registered complaints regarding wrong product. Does it also
have to do with the batch size or should I look at other things?
Considering the issue is from demand side, I would like to categorise the problem into 3
broad categories: 1) Are customers not satis ed with the product? 2) Any better
substitutes available in the market? 3) Are competitors doing anything better than us in
terms of quality of product or better reach? Can you tell me if the issue lies in any of the
above mentioned categories or should I explore further?
Okay. The client has been receiving complaints from customers on various things like: 1)
Product is incorrect 2) Product of wrong quality 3) Delivery not on time.
I wanted to look at the wrong product rst. What do you exactly mean by wrong product?
Can you elaborate on that part?
Sure. The product is slightly different in the speci cation asked for but still could be
adjusted and used by the customers.
The problem was that if they produced 50 units of x but the demand is 25 units of x and 25
units of x+1, they just sent x to both as the difference in speci cations was minimal.
Give me a minute to structure the information and provide some recommendations.
Sure
As we have identi ed the problem lies with batch size, the client can revise the size by
considering the historical data. They can also work upon the 10,000 SKUs part by
negotiating with players from the same industry and try pushing for a standardised
product so that the 10,000 number can be reduced.
These recommendations sounds reasonable. Thank you!
Okay. I wanted to look at the process of obtaining speci cations from the customers and
feeding the data into the plant. I wanted to check if there’s any chance for human error or
loss of information during the process.
The whole process is automated and there’s nothing wrong with the process. You can
explore manufacturing process.
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Due Diligence
Robotics
Your client is a PE rm and is evaluating a start-up that manufactures an automated
warehouse management robot and you have to evaluate the market and give a
recommendation.
Sure sir, could you give me a little more information about the product and also about
what kind of return period is the PE form looking at, and some information about the
portfolio of the PE rm.
Sure, the PE rm is looking at a short-term investment for 2-3 years, and evaluate the
investment as stand alone so the portfolio is not important, the product is a small
automated robot that helps loading and unloading of inventory in a ware house, so
essentially now this is either done manually with help of mechanical tools such as fork lifts
etc, A robot essentially costs around 20,000 and would be able to replace 2 FTEs. The startup has been operating for two years and is the only one in India right now and has sold
over 1000 robots. So why don’t you start by assessing the market size, say how many
robots will be sold in say in next 2/3 years I am essentially not looking for numbers but
more along the lines how would you evaluate? (Assume the per day cost of FTE in India is
$15 )
Alright. I would rst start by evaluate the product considering the cost of the product that
is 20000 dollars and negligible maintenance costs, and Cost of an FTE in India is about
15 dollars a day, that essentially puts the payback period from 2 – 3 years. Hence the
product de nitely gives a cost arbitrage helping its case for adoption.
To understand the market size, I would like to start with the total number of warehouses.
Yes, we are going to focus on the medium and large warehouses; Medium ware house in
40,000 sq. ft. and large is around 100,000 sq. ft. and each of these have a total space of
around 1500 million sq. feet.
So, we have a target market of 37,500 (1500mn/40,000) medium warehouses and
15,000 (1500mn/100,000) large warehouses.
I want to evaluate target industries rst, warehouse management for heavy and large
industries would require specialised tools, safety measures and also the ow of material
is a factor we should consider, along with that the weight capacity and product
speci cations.
Right, so we have two products speci cations one with 100 kg payloads and 500kg
payloads.
Next its important to look at what kind on penetration rates we would be able to achieve
in each of target industries , this essentially needs to be done using some intelligent
estimates based on what kind of acceptance the industry has seen towards change, and
also what industries we have been able to sell before and what sales channels will the
company employ , what kind of interest the Customer decision makers are taking in the
project and warehousing cost reduction at the movement.
Then we essentially would have the number of target warehouses we will be able to sell
in 2-3 years, based on industry / size of warehouse we can look at the number of FTEs
employed in each warehouse divide the number by 2 and Multiply by 20,000 dollars to
get the market size.
Yes, now suppose we did that and the market turned out be under whelming, not a half a
billion or a billion-dollar market but a meagre 20-million-dollar market, on what other
things you will look at and go to the client with.
Yes, rstly I will look at the short and long term, as the market is unattractive in 2-3 years;
there is a possibility it explodes in the medium and long term.
Then we should also look at the competition, right now we are the only player in the
market but if the market explodes, we would see a lot of competition especially from
China.
We should also look at the risks involved, as India is a labor-intensive market, we should
also evaluate risks of resistance from the labor unions and any labor law regulations.
We should also do a complete evaluation of all aspects of the company, this would
involve the Financial, Operational and Cultural evaluation. Apart from this we also
should look at Alternative Uses of the technology
And lastly evaluate exit options. This will not only consider other PE rms, but also a few
strategic buyers like large logistics rms, or rms that sell a suite of warehouse
management software and would like to integrate the product in their offering.
That’s very good, you hit a lot of points that we actually looked at during the evaluation;
but could you tell me why did you forget pro tability.
Yes sir, pro tability should have been the rst thing I should have evaluated, but once you
told me that the market size is disappointing, I started looking for other factors.
Ok no problem, it was great. Thank you.
Yes, so essentially heavy industries are out of the picture and as we are looking at
automation we would also like to focus on industries with high volume, hence our focus
market is industries with high volume and low weights i.e., FMCG, e-commerce, small
machine part manufactures, apparels etc.
That’s sounds good. What are you going to look at next?
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Due Diligence
Cement Industry
A cement manufacturing company is looking to acquire or organically get into the paint
industry. What are the factors to be considered?
Before starting the case, I would like to ask some questions for a better understanding of
the problem. Why our client is looking for an opportunity in the pain industry and what is
the objective of the company?
The company is looking for growth and pro tability. They see a lot of scope in paints.
Alright. Does our client operate in any speci c region or pan-India? What is the valuechain and who are our customers?
The company has a pan-India reach. Cement is distributed to dealers and then it is sold to
the retailers. The client has two type of customers – 1) large clients who purchase in bulk. 2)
Contractors & individuals who buy in small quantities.
As I understood that the question is whether to go for Acquisition or organically
establishing the value chain for paints, I want to do a cost bene t analysis for both the
options and decide which is the best option.
Okay. Can you list down all the factors that you would consider for acquisition alone?
I can think of four categories: Market, Value addition, Risks and Financial Analysis to be
considered for acquisition alone.
Starting with the rst category, I would like to estimate the market share of the company.
Can you please help me in the gures here? Also, I want to understand about the target
company’s growth vis-à-vis the industry.
Okay. What about the other two categories?
I would wish to split risks into internal and external.
• Internal – The distributors will lose margins if they get into cross selling activities, as the
cement distributors can sell paint and not vice versa. So, some distributors from the
target company will be agitated if a lot of volumes of paint are pushed through the
cement value chain. There is huge nancial risk owing to huge debts and operation risk
as well if we are rationalising our resources across the value chain.
• External – Here, I would like to do a PESTLE analysis and observe the reactions from the
competition and customers.
For the Financial Analysis, I want to evaluate the company on the basis of their ability to
generate future cash ow and decide the amount we are willing to shed to acquire this
company through NPV analysis.
I think this is comprehensive. We can skip the PESTEL and NPV analysis. Is there anything
else in your mind?
The client can create a 2X2 matrix of market attractiveness Vs Ease of doing business and
check where our target company lies and if both factors are promising we can go for
acquisition. Market Attractiveness can include – Market and results from nancial analysis
and Ease of doing business can include – synergies and risk.
Sounds great. We can wrap the case here.
The size of the market is meagre 50 crores. The target is growing as per industry but are in
losses.
Understood. Now, I would like to analyze the second category i.e. value addition postacquisition. It can be split it into Revenue, Cost and Financial synergies.
Revenue - cross-selling, bundling possibilities
Cost – Given the fact that both the companies are not in the same category, is there any
common raw material for both paint and cement? This question is relevant because both
material is used in construction work and I wanted to know if we can expect to reduce any
redundant resource due to this acquisition.
Financial – What is the value of debt and cash in both acquisition and target company?
There is a common raw material as an ingredient for both paint and cement and one of the
plant is being closer to the client. And on the nancial aspect, the acquiring company and
the target company both has huge debts.
There is a possibility of getting bulk discounts because of scale and having a focused
factory ( a factory inside a factory – possibility of eliminating the plant that is closer to the
client). Also, post-acquisition, the company will get advantage in distribution because of
economies of scale and scope which will lead to reduced storage and transportation
costs.
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Due Diligence
Cement Industry
A cement manufacturing company is looking to acquire or organically get into the paint industry. What are the factors to be considered?
Approach / Framework
Pro t and Budget Hotels
Revenues
Competition
Market Size
# Per unit
Medium and Large
Warehouses
$ 20,000
Target Markets
Risks
Financial Operational
Cultural
Exit Opportunities
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Due Diligence
Airport
Client is a large conglomerate with portfolio spanning across ports, power plants and coal
plants. The client has recently won a bid that gives access to operate 6 airports currently
under AAI. These airports are in state capitals. Airports serve both domestic and
international ights. The bid gives access for 50 years. Two-part case:
i) Top 5 key issues/risks that the client should worry about on Day 0 (think of keeping lights
on and business continuity)
ii) Maximize ROCE (in this case take EBITDA as proxy) over the next 5 years
I would like to understand the objective of the client behind bidding for airports
provided the current business portfolio does not include airports.
The client believes this business is familiar because the portfolio businesses are also
capital intensive. Operating airports is very close to working as a monopoly. Lastly, the
client wanted to diversify its existing portfolio.
Understood. Before we move on, I’d like to understand how the business model works.
Please correct my understanding that all types of revenue would accrue to the client in
exchange for an upfront fee to the government? Please help with the location of the
airports as well because I understand these airports are in state capitals but how
populated and connected are the cities under question?
3) Operational: Look at value chain and focus on what may interrupt the ow.
• Talent (Hint: People aspect out of People, Process and Technology): We have experience
with capital intensive businesses but not airports explicitly. Therefore, answering whether
we have the required talent is a question mark. For this, we need look at internal
workforce capabilities and external availability of required talent – may have to even
poach from other private players. Such dearth of experience or talent may delay transition
and hamper ef ciency.
On revenue – yes the client would receive all types of revenue and would have to pay a
convenience fee per passenger to the government. The client won the bid for quoting the
highest convenience fee. The convenience fee is higher for international passengers than
domestic passengers. On location – these state capitals are populated and well connected
but not metropolitans as such.
4) Marketing
• Branding: In case there is low traf c due to location issues, the company may have to
spend more on branding the location as a lucrative travel destination to bring higher
traf c/footfall. Could entail offering services at low cost to attract passengers.
Sure. Thank you for the background. With the information available with me, I’d like to
address the rst part of the case problem i.e. to identify key issues/risks on acquisition.
And the bidding has already happened and hence evaluating whether to bid or not is out
of scope.
I would break down risks into four buckets and take it from there.
1) Administration
• Stakeholder management: Our client is a private player and may have to deal with
government authorities/bureaucrats which may be cumbersome. Their working style
and ours would be different and thus there is possibility of con ict. This is a highly
regulated industry as well meaning there can be interference and legal compliances.
• Cultural differences: Our working environment may be different from that of AAI. The
employees who would now work for us may face dif culties to cope up with new
policies and procedures.
2) Financial: Mostly focus on major factors affecting revenue and costs.
• Domestic vs international mix: We have already bid the highest which is why we won
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This is very comprehensive. Let’s move on to the second part of the problem to maximize
EBITDA. Please focus on revenue side. What are the different streams of revenue for an
airport?
Major sources of revenue can be classi ed into ve:
1) Revenue from airlines: Passenger handling charges and aircraft related charges
(terminal access fee, parking, baggage/freight handling and others)
2) Lease: paid by stores (Here the interviewer hinted to include lease from surrounding
areas as well. There lease paid by stores inside the airport and parties surrounding the
airport. The space surrounding the airport can be occupied by corporate of ces, hotels
and/or shopping arenas.
3) Parking
a) Passenger/normal cab parking
b) Exclusive parking slots given to cab aggregators (Gave example of Delhi airport where
Ola is given a designated spot where you can sit in any of the cabs and enter destination
later)
4) Advertisements: Could be paid by inside stores or external advertisers
71
Indian Institute of Management, Kozhikode
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the bid. If the international passengers from the airport are higher than domestic, the
out ow to the government would also be higher and thus higher costs. We may need
higher level of working capital to meet payment obligations.
• Location and size: Many airlines follow hub and spoke strategy where the hub usually
represents high demand metros. The traf c at these hubs is much higher. Given that this is
not a hub, the revenue may get affected due to limited traf c be it retail or corporate. If
the size of the airport is small, it will act as a supply constraint. Also, the capability to offer
premium ying slots or direct plane access facilities (no need for airport shuttle) would be
limited and therefore the revenue will get impacted.
Due Diligence
Airport
5) Vending machines: A small share of revenue but vending machine sales would also
accrue revenue to the airport either in the form of percentage of sales (if owned and
operated by airport) or a lease like arrangement.
If I were to ask you to focus on maximising revenue from any two streams, which ones
would you choose and why?
I would choose lease and advertisements because:
• Lease – The proportion of revenue generated from leases would be high. Furthermore,
an airport is like a monopoly and the area inside as well as outside the airport would
provide exclusive access. Corporate of ces, hotels and shopping arenas would enjoy the
bene t of higher accessibility and would be ready to pay high premiums. For corporates,
having of ces near airports is not only strategic but also a matter of reputation.
• Advertisements – Airports attract traf c not only from within the city/state but also
outside. The passengers accessing the airport would have diverse pro les. Also, there is
high visibility on traf c in a functional airport. Advertisers can not only target such
passengers but also have higher certainty on number of eyeballs watching the
advertisements. People also tend to have layovers and have bandwidth to look at the
advertisement in the free time.
What is the reason for not taking other revenue streams?
Why not these factors?
• Airlines – There are supply constraints around working with airlines be it in terms of
slots or location or size. Incremental bene t if any may not be as high. Airlines anyway
promote their offerings to increase passenger traf c. Passenger travelling decision is
also based on affordability, accessibility, awareness and likeability which the airline
would already be working on. Our effort would not create a huge impact.
• Parking – Directly dependent on passenger traf c (similar argument as above). While
one can enter into an arrangement with a cab aggregator (refer 3b above), this may not
help beyond a point.
• Vending machine – Price per product in a vending machine is low and therefore
revenue accrued through this source would also be very low unless volumes are very
high. Low price goods would also translate to lower margins. Not a major source of
revenue in the rst place.
Good, that’s about it.
72
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Indian Institute of Management, Kozhikode
FRAMEWORKS
CASE INTERVIEWS
GUESSTIMATES
INDUSTRY ANALYSIS
Indian Institute of Management, Kozhikode
73
Guesstimates : Water Consumption in Kozhikode in a day
Estimate the water consumption in Kozhikode in 1 day?
Preliminary Questions :
Water
Should I consider water intake alone?
- Yes
Should I include Industries?
- Let's ignore that for now. Focus on
the daily household consumption
Can I neglect the effect of COVID-19?
- Yes
Low Consumption
level 20% = 0.6 Mn
- Population of Kozhikode= 3 million
- 70% of the population comes under
-
-
Approach :
- Water intake happens through
-
direct water consumption,
beverages- alcoholic & Nonalcoholic, and through food.
Number of household =
Population / Avg household size
Consumption of water = Per meal
water usage * Number of meals
Indian Institute of Management, Kozhikode
High Consumption level
20% = 0.6 Mn
Non -Alcoholic
Beverage
Assumptions :
drinking age group of 21-60.
Average water consumption is 4L.
Average household size is 4.
Average alcoholic consumption is
0.75L for which 66% water is used I.e.
0.5L & average non-alcoholic
consumption contain 50% water.
50% Males & 33.33% females
consume alcohol in a day.
Non alcoholic Consum. : < 21 yrs, 0.5
ltr ; 21-60 yrs, 1 ltr ; < 60 yrs 0.25 ltr
Medium Consumption
level 60% = 1.8 Mn
Total Population
=3 Mn.
Age<21
(30%) = 0.9 Mn
Age: 21-60
= 60%= 1.8 Mn
Age > 60 =
10% = 0.3 Mn
Beverage
Age<21 (30%)
Alcoholic
Beverages
Food
No. Of Households
3Mn/4 = 0.75 Mn
Men
= 50% =1.05 Mn
Legal Age >21
=70% = 2.1 Mn
Water Consumption = 0.6 Mn *3L+ 1.8 Mn*4L + 0.6 Mn*5L = 12 Mn Lt.
Alcoholic Beverage = (0.525 Mn +0.315)* 0.5L = 0.42 Mn Lt.
Non Alcoholic Beverage = (0.9 Mn *0.5 L+ 1.8 Mn *1L + 0.3 Mn * 0.25) *(1/2) =2.325 Mn Lt.
Household Water Consumption = 0.75 Mn*4L*3 Meals = 9 Mn Lt.
Total Water intake by Kozhikode per day = 12+0.42+2.325+9 = 23.745 Mn Lt.
Women
= 50% =1.05 Mn
74
Guesstimates : Number of regular size Pizzas that Domino’s sells in India per day
Estimate the number of Pizza’s that Domino’s sells in India per day.
Assumptions :
Consumption :
Timings :
- Domino’s Opening Hr = 11AM to 12
Midnight (13 Hrs)
Peak Hour Timings
Hours
Lunch Time
12:30-2:30
2 Hrs
Dinner Time
8:00-11:00
3 Hrs
5 Hrs
Store :
- Total Area of India = 3.2 Mn sq.
Km. ~ 3 Mn Sq. Km.
- 10 % of the area is urban.
- Each 200 sq. Km. Of urban are is
served by a single store
- No of stores
= (3,00,000 Sq. Km/200 Sq.Km.)
= 1500 Stores
1. No of customers visiting onsite
in peak hours is 15/Hr. And each
customers consume a single
regular pizza.
2. No of customers ordering for
home delivery in peak hours is
20/Hr. And each customers
consume a single regular pizza
3. Consumption during Non-Peak
hours is 30% of Peak hours for
dine In and 50% for Peak hours
for Home delivery.
Dine In
(75+40) ~ 110
Non -Peak Hour Consumption
= (N. Peak Hour * Consm. Rate)
= (8*0.3*15)
=40
Domino’s
Pizza
Single store Consumption:
Peak Hour Consumption
= (Peak Hour * Consm. Rate)
= (5*20)
=100
= (Dine In + Home Delivery)
= (110+180)
= 290 Pizzas /Store
Total Consumption
= (No.of Stores * Consm. Per store)
= (1500*290)
= 4,35,000 Pizzas
Indian Institute of Management, Kozhikode
Peak Hour Consumption
= (Peak Hour * Consm. Rate)
= (5*15)
=75
Home Delivery
(100+80)~180
Non Peak Hour Consumption
= (N. Peak Hour * Consm. Rate)
= (8*0.5*20)
~80
75
Guesstimates : Pizzas ordered in a day in India
How many pizzas are ordered in a day in India ?
2
1
Rural
Assumptions :
- Population of India = 130 Cr
Population
91 Cr
70%
Urban
39 Cr
30%
Upper Income Group
50%
Cr
10%
5-60 Years
16 Cr
80%
3
4
< 5 Years
10%
Percentage
<5 Years
60+ Years
Urban
Percentage
Rural
Urban Population
Population
Lower Income Group
50%
5-60 Years
80%
60+ Years
10%
5-60 Years 80% - 16 Cr
10%
1. People in rural areas don’t
consume pizza.
2. Pizza is luxury so people from
the lower income groups can’t
afford it.
3. People above 60 years old don’t
consume pizza
4. People below 5 years, don’t
consume pizza
5. A single pizza is shared by 3
people
Don’t consume Pizza
(30% ~ 4.8 Cr)
Consumes Occasionally
(30% ~ 4.8 Cr)
No. Of Pizza Consumed in 3
months ~ 4.8 Cr/3 = 1.6 Cr
Consumes frequently
(30 % ~ 4.8 Cr)
Consumes regularly
(10% ~1.6 Cr)
No. Of Pizza Consumed in
1 months ~ 4.8 Cr/3 = 1.6
Cr
No. Of Pizza Consumed in
1 months ~ (1.6 Cr*2)/3
~1Cr
No. Of Pizza Consumed in a
month ~ 1.5/3 = 0.5 Cr
Pizza/mth ~ 3 Cr
Pizza/day : 3 Cr/30 = 10 lakhs/ day
Indian Institute of Management, Kozhikode
76
Guesstimates : Profit a typical Tea Stall makes in a day in Delhi
How much pro t does a typical tea stall make in a day in Delhi?
Assumptions :
Consumption :
Timings :
- Domino’s Opening Hr = 6 AM to 8
PM (14 Hrs)
Timings
Demand
High
6 AM- 10 AM
160
Low
10AM - 4 PM
120
High
4 PM - 8 PM
160
Total Demand
~ 450
Preparations :
- In case of high demand, the
capacity utilisation is full. Let us
say the tea maker can make
around 20 cups of tea at a time ,
that take around 30 minutes to be
consumed by customers. So, the
tea cups made in high demand
are 40 Cups/hr.
- In Noon, Let's say only 50% of
capacity is utilised. So the tea
maker makes only 20 cups/hr.
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Indian Institute of Management, Kozhikode
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1. Consumption of tea across all region of Delhi are uniform.
2. Demand of tea is high in the morning & Evening, low in the
afternoon.
Raw Material
Rate
Used/Cup
Cost for 450 cups per day
40/L
30ml
(450*30*40)/1000 ~ 540
Tea Leaves
200/Kg
1 tea spoon/4 gm
(450*’4*200)/1000 ~ 360
Sugar
20/Kg
1.5 tea spoon/4 gm
(450*1.5*4*60)/1000 ~ 160
Masala
Fixed
Rs 2/Cup
2*450 ~ 900
Gas Cylinder
Fixed
—————
100
Disposable Cup
Fixed
Rs 2/Cup
900
Total
~ Rs 3000
Milk
Revenue from selling tea at the rate of Rs 10/Cup = 450*Rs 10 ~ Rs 4,500
Total Cost = Rs 3,000
Pro t = Rs 1,500
77
Guesstimates : Sanitary Napkin use over a month in India
Estimate the number of women who use sanitary napkin in India over a month.
Indian population: 130 crores
Assumption: 50% are women = 65 crores
Let’s say that the Age group of women who menstruate: 13-50 years
% of women under the age group 13-50 years: Let’s say 25% women are below 13 years and 15% above 50 years (Statistictimes.com -> 25% upto 14 years)
So, women under menstruation age: 60% of 65 crores = 39 crores
Net market size: ~ 40 crores
Therefore, the market size for sanitary napkins is 40 crores
The ideal menstruation cycle is 28 days. Taking it 30 days, we assume there are 12 cycles in a year.
Note: We consider 10% women have 10 cycles/year and 10% women who have 14 cycles/year. It again averages to 12 cycles/year.
Now, to subtract the pregnant women, let’s say there are 2 crore births per year in India
Note: The above assumption can be made based on discussion with the interviewer.
It implies, 2 crore women are pregnant at some time in a year.
Let’s assume these women were pregnant for 6 months in a year on average.
So, out of 40 crores,
2 crore women have menstruation 6 times/year , So 1 crore women/ month
And 38 crore women have normal menstruation, 12 times/year i.e. once per month
In total, 39 Crores, is the new target market size.
(Since, the no. is less, the interviewer may ask you to neglect)
Indian Institute of Management, Kozhikode
78
Guesstimates : Sanitary Napkin use over a month in India
Considering the urban-rural divide.
30% women in urban areas. Let’s say 75% of them can afford sanitary napkins,
40*0.3*0.75 = 9 crores
70% women in rural areas. Let’s say 25% of them can afford sanitary napkins,
40*0.7*.25 = 7 crores
Total women who can afford = 16 crores
Let’s say 10% of them prefer to use other options like menstrual cups, tampons,etc = 1.6 crores
No. of women who use sanitary napkins per month = 16-1.6 crores = 14.4 crores
Indian Population (3.2 Cr)
<13 Years (25 %)
Female (50%)
65 Cr
Male (50%)
13-50 Years (60%)
~ 40 Cr
>60 years (15%)
Rural (70%)
Urban (30%)
Afford
(75%)
Indian Institute of Management, Kozhikode
Can’t Afford
(25%)
Afford
(75%)
Can’t Afford
25%)
79
Guesstimates : How much a typical PVR Plaza of India make in a day.
How much revenue does a typical PVR plaza of India make in a day ?
Assumptions :
Timings :
- PVR Opening Hr = 9 AM to 3 AM
(18 Hrs)
Revenue :
Movies and Food outlets are the only
source revenue
Capacity :
PVR has 3 movie halls on average each
hall can have 6 movies/day with an
average capacity for 300 people.
Variation Assumption :
- The demand is not varying based on
-
type of movies.
The demand is uniform on all days.
Taking the price of all seats at the
same
Pricing Assumptions :
Timings
No. Of Slots
Price/Ticket
9 AM-12 PM
1
100
12 PM - 6 PM
2
250
6 PM - 12 AM
2
400
12 AM - 3 AM
1
300
Revenue Assumptions :
Revenue in Weekends : Fri-Sun
Revenue in Weekdays : Mon-Thu
Timings
Capacity
Revenue
9 AM-12 PM
35%
300*0.35*3*1*100 = 31,500
300*0.6*3*2*250 = 2,70,000
12 PM - 6 PM
70%
300*0.7*3*2*250 = 3,15,000
70%
300*0.7*3*2*400 = 5,04,000
6 PM - 12 AM
80%
300*0.8*3*2*400 = 5,76,000
50%
300*0.5*3*1*300 = 1,35,000
12 AM - 3 AM
60%
300*0.6*3*1*300 = 1,62,000
Capacity
Revenue
9 AM-12 PM
25%
300*0.25*3*1*100 = 22,500
12 PM - 6 PM
60%
6 PM - 12 AM
12 AM - 3 AM
Timings
9,31,500
10,84,500
Revenue from the Movie/Day = ( 9,31,500*4 + 1084500*3 ) / 7 = Rs. 9,97,072
Assuming 20% of people in each slot buy from PVR food outlet paying Rs. 300 on an average
= [( Capacity on a week day *4*300 ) + ( Capacity on a day of a weekend *3*300)] /7
= (475200 +639900) /7
= 159300
Revenue Per Day = Rs 11,56,372 ~ Rs 12 Lakhs
Indian Institute of Management, Kozhikode
80
Guesstimates : Number of COVID Vaccines required for frontline worker in Delhi
Number of Covid vaccines required for frontline workers in your state (Delhi) .
Frontline Workers are the personnel from State & Central Police Organisation : Armed forces ; Home Guards & Civil defence
volunteers including Disaster Management volunteers & Municipal workers (Excluding HCW’s), Prison staff, Revenue of cials
engaged in containment & surveillance activities, e.t.c.
We are considering Medical staff & Police department
Calculating Medical Staff
Calculating personnel in Police Department
Area (in sq km)
1500
Number of constituencies
70
Average number of police stations
2.5
(But in other states like Tamil Nadu, Haryana - the
number of police stations are 2 on an average)
Total number of police stations
175
Personnel in one department
100
(Considering more numbers in headquarters)
Total police workers
17500
Assumptions: CRPF workers, traf c police, VVIP
security, IB, Women helpline
52500
Total
Area (in sq km)
1500
Number of Hospitals (Public+Private) in every 5 sq. Km.
2
In 1500 Sq. Km.
600
Av. Numbers of Doctors (/Including Nurses, helpers) in Hospitals
400
Total number of Doctors
240000
Number of Clinics in every 5 sq. Km.
4
In 1500 Sq. Km.
1200
Av. Numbers of Doctors (/Including Nurses, helpers) in Clinics
20
Total number of Doctors
24000
Total
264000
Rounding to 270000
270000
70000
Number of Covid vaccines required for a single dose
340000
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Indian Institute of Management, Kozhikode
Guesstimates : Number of deliveries done by Swiggy in a day
Number of deliveries done by swiggy in a day
Approach
Assumptions :
1.
Considering that only the urban
population uses food delivery platforms
in India
2. There is one restaurant/ eateries/ cloud
kitchens etc. per 400 people and 30%
of these restaurants are with
aggregators like Dunzo, Swiggy,
Zomato etc. and 20% is with Swiggy
(exclusive and along with other
aggregators)
3. For estimating number of delivery
partners available on an average day,
consider the average of peak (100%)
and non-peak (50%) days is (1 lacs + 0.5
lacs)/2 = 75,000 . On a daily level, a
delivery boy can take 2 deliveries in 60
minutes and work for 10 hours a day.
Indian Population (130 Cr)
1
Rural (70% ~90 Cr ) = Nil
Urban (30% ~40 Cr)
2
No. Of restaurants/eateries (1 per 400 people) =10 lacs
No. Of restaurants/eateries with swiggy (20%) =2 lacs
For every 2 restaurants there will be 1 delivery partner
Total delivery partners = 1 Lac
3
75000 delivery partners available (Check assumptions)
on an average day & working 10 hrs a day & deliver 2
orders in an hour (assumed)
Total number of ideal deliveries =20 ( due to the
constraints like idle time, traf c, fuel and vehicle related
issues, consider 15 deliveries in a day.
Total number of deliveries done by swiggy in a day =
15*75,000 = 11.25 lacs
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Indian Institute of Management, Kozhikode
82
Guesstimates : Number of Ac’s sold in a year in India
To calculate the number of ACs sold in a year, do I need to consider both household and commercial demand
- Consider only household demand, discount commercial demand for now
Assumptions :
Indian Population (120 Cr)
Average life of AC = 10 years
Growth Rate = 5%
Approach
No of Households (120/4 = 30 Cr)
There can be two approaches for this guesstimate: Demand side
i.e., population-based and Supply side i.e., number of
manufacturers of air conditioners in India
Urban (30% ~9 Cr)
For this case, I would like to take a demand side approach which
includes both new demand and replacement demand.
New Demand = Growth rate * Market Size
Replacement Demand = Current Market Size/Life
Rural (70% ~21 Cr ) = Nil
Income Wise Distribution
Rural (~20 Cr)
Urban (~10 Cr)
Poor (20%)
4 Cr
2 Cr
Middle Class (40%)
8 Cr
4 Cr
Upper Middle Class (30%)
6 Cr
3 Cr
Rich (10%)
2 Cr
1 Cr
Rural
Urban
Nil
Nil
Middle Class
5%*8 = 0.4 Cr
30%*4 = 1.2 Cr
Upper mIddle Class
30%*6 = 1.8 Cr
60%*3 = 1.8 Cr
Rich
80%*2 = 1.6 Cr
100% *1 = 1 Cr
Total Market Size for air conditioners = 7.8 cr
New Demand = Growth rate * Market Size = 5%*7.8 = 0.39 crores
Replacement Demand = Current Market Size/Life = 7.8/10 = 0.78 crores
Total Demand = New Demand + Replacement Demand
= 0.39 + 0.78 = 1.17 crores
Penetration Rate
Poor
83
FRAMEWORKS
CASE INTERVIEWS
GUESSTIMATES
INDUSTRY ANALYSIS
Indian Institute of Management, Kozhikode
84
Industry Analysis- Automotive
3% CAGR
$2.8 Tn
3% CAGR
Overview
• India is 5th largest market globally in 2020 with ~3.5 Mn vehicles sold
• World’s largest 2-wheeler, 3-wheeler and tractor manufacturer
• Contributes ~7% towards India’s GDP and ~4% towards India’s exports
• Generated employment for ~35 Mn people, contributed ~40% to global R&D
• Society of Indian Automobile Manufacturers (SIAM) - Local industry body.
$3.8 Tn
Global Market
Commercial
Vehicle (CV )
2 - Wheelers
(2-W)
$3.8 Tn
Global Market
Business Model
Classi cation
Passenger
Vehicle (PV )
$1.1Bn
3 - Wheelers
(3-W)
Quadricycles
Manufactured ~26 Mn vehicles during
FY20
2-w & passenger cars ~81% and 13% market share response,
generating overall sale of ~20.1 Mn vehicles in FY20
Passenger car sales dominated by
small & mid-sized
PV sales of 2.80 lakh units in Mar’21 vs 2.18 lakh units in Mar’20,
a growth of ~28%
Exported ~4.77 Mn vehicles in FY20 CAGR of 6.94% (FY16-20)
2-w comprises of ~74% of total vehicles exported, PV at 14.2%,
3-w at 10.5%, CV at 1.3%
Manufacturing & Sale of
vehicles
Earning margin between
the vehicle selling price and
the overall cost in sourcing
and assembling the
components
Vehicle sharing service –
Commission based revenue
generation
Cost Drivers
Vehicle subscriptions
A type of subscription
business model where a
customer pays a periodic
fee for the use of one or
R&D cost
Equipment/ Component
purchase & assembly costs
.
more vehicles
Technology integration & IT
Infra costs
After sales services –
Providing warranty service,
training or repair &
maintenance services
Marketing, Advertising &
Promotion expenses
PV Key Players
Auto Component
Supplier
Original Equipment
Manufacturer (OEM)
Distributer
Market Share*
Customer
After Sales Service
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Indian Institute of Management, Kozhikode
Others
Retail Outlets/
Resellers
50%
17.4%
7%
5.8%
15.6%
CV Key Players
Market Share^
Others
37.26%
29.4%
12.79%
5.12%
15.43%
85
Industry Analysis- Automotive
Growth Drivers
2-W Key
Player
•
•
•
•
•
•
•
Others
37.04%
Market Share
25.58%
14.43%
11.97%
15.6%
Availability of skilled labour at low cost
Robust R&D centres
Low-cost steel production
Government support & initiatives
Rise in middle class and young population
Potential in shared mobility
Local and foreign investment in ows
• Low vehicle penetration compared to developed
markets, expected to increase
• Infrastructure development
• Advancements in technologies
• Increasing disposable income of people
• Reducing gap between rural and urban cities
• Favorable startup ecosystem spurring innovation
Regulatory Environment
FLI
Market Share
Motor Vehicles Act & relevant amendments
100% FDI allowed under automatic
route (~$26 Bn investment has been
made from Apr 2000-Mar 2021)
FDI
Production-Linked Incentive (PLI)
Scheme (outlay ~INR 55,000+ Cr.) bolstering manufacturing capabilities
export potential
Goal to develop India as global
manufacturing centre, R&D hub. Under
NATRiP, Govt. planning to set up R&D
centres (cost of ~$390 Mn)
Risk & Challenges
National Electric Mobility Mission Plan 2020 & Charging
infrastructure guidelines
Government
schemes &
Initiatives
FAME - started in 2019 for promoting sales of EV, extended by 2
years to Mar 2024. FAME-II fund requirement of INR 10,000 Cr.
approved for FY20-22. 11 cities shortlisted for intro of EVs in
public transport systems
Other Trends :
•
•
•
•
•
Govt. planning to set up incubation centre for start-ups
working in EVs space
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Disruptive impact of technology – Could throw players off
guard if not kept abreast
Climate change accelerating adoption of EV, posing potential
supply chain challenges for existing players
Emerging Trends
Indian EV market likely to increase at
CAGR of ~36% till 2026 (India Energy
Storage Alliance), expected to reach 6+
Mn unit annual sales by 2027
Growth of 20% in EV
sales (excl. E-rickshaws),
reached 1.56 lakh units in
FY20 driven by 2-w
Bharat Stage VI and future norms
Voluntary Vehicle Fleet Modernisation Programme (V-VMP)
GST rates’ impact which could contribute to increase/reduction in overall cost structure
Emergence of Mobility as a service and shared mobility
Innovation towards Ethanol based vehicles and their roll-out
Indian Institute of Management, Kozhikode
Competition from existing players and potentially from global
digital giants
Dynamic regulatory environment
Transitioning towards electric vehicles:
CEEW Centre for Energy Finance study
highlighted $206 Bn opportunity for electric
vehicles in India by 2030, EV industry expected to
create 5 Cr. direct and indirect jobs by 2030
Rapidly evolving customer expectations – Shifting preference
from owning a vehicle to on-demand mobility as a service
2- and 3-wheelers
expected to contribute
majorly towards higher
electri cation of the vehicles
Indian EV nance industry expected to reach
INR 3.7 lakh Cr. (~$50 Bn) in 2030 (NITI Aayog and
Rocky Mountain Institute), EV battery market
projected to expand at CAGR of 30%
Autonomous Vehicle Ecosystem (Platforms, Sensors, Data, Mapping etc.)
Increasing digitisation in dealership models
Growing used car market, due to shifting consumer preferences
Uptick in trend of telematics
Advanced driver-assistance systems (ADAS) and penetration of other technologies
86
Industry Analysis- Aviation
12% CAGR
India Aviation Passenger Traf c
Overview
Overview
17%
• Indian passenger traf c stood at 341.05 million in FY20, CAGR rate of 11.13% between the year FY16-20
• By 2024, Civil aviation market is projected to be 3rd-largest world’s aviation market in terms of air passengers
• As of 2020, India has 153 operational airports and aviation industry contributes around $72 billion to GDP
• To cater to the rising air traf c, GOI plans to increase operational airports to 190-200 from 153 by Year 2040
• Airport Authority of India owns 125 Airports, 78% of Domestic and 22% of International Passenger traf c share
• The number of complaints for every 10,000 passengers carried for the month of Jan 2020 was around 0.62.
$341 Mn
$226 Mn
Air Passenger Tra c - India
Scheduled Air
Transport
Based on
Transport
Classi cation
Domestic & Int.
Airlines
Non-Scheduled Air
Transport
Charter & AirTaxi Operations
Air Cargo Services
Transportation of
Cargo & Mail
Inbound
Logistics
Supply chain,
Selection of route,
Passenger service
system, Flight crew
scheduling, Facilities
Planning, Fuel
Ticket Counter
Operations, Gate
Operations, Aircraft
Operations, Baggage
Handling, Ticket
Of ces
Cost
Drivers
Cost
Drivers
Passenger Ticket Sales
On-board passenger services like meals
Cargo and freight charges
Off-board services like seat booking
Low-Cost Carrier (LCC)
Frequent Flyer
Programs, Travel
Agent Programs,
Promotions and
Advertising
Services
Feedback, Complaint
Redressal, Lost
Baggage Service,
Baggage Tracking
System
Full-Service Carrier (FSC)
• Minimises operation costs to offer the cheapest
tickets possible. While low ticket prices are a
main characteristic of LLCs, they shouldn’t be
confused with FSC economy class tickets.
• Full service airlines charge a at ticket price, and
theoretically, everything is included, although that’s
fraying a bit around the edges at some full-service
airlines.
• What makes LCCs “low-cost” comes from how
they operate.LCCs skip big expensive airports for
secondary airports, frequently located further out
from the cities they y to.
• It’s a portfolio approach to revenue generation that is
designed to protect the airline should one aspect of
its operations underperform across a period of time.
87
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& Sales
Classi cation
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International
Business Model
Revenue Streams
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Baggage System,
Flight Connections,
Rental Cars,
Passenger Hotel
reservation systems
Domestic
Business Model
• Aircraft maintenance and purchase
• On ground Cost of handling
passengers, cargo and aircraft.
• Labour and fuel cost
• Airport charges
• Advertising & Selling expenses
•
•
•
•
Outbound
Logistics
Operations
83%
Industry Analysis- Aviation
Major Player
Market Share
Growth Drivers
Growth
Drivers
GOI is planning to
invest US$ 1.83 Bn for
development of airport
infrastructure along
with aviation navigation
services by 2026
48%
17%
India’s aviation industry
is expected to witness
Rs. 35,000 crore (US$
4.99 billion) investment
in the next four years
Regional Connectivity
Scheme (RCS) will
Boost air connectivity
to smaller cities & NE
states.
12%
Government
Initiatives
7%
100% FDI allowed in MRO for
maintenance and repair
organisations via automatic
route
10%
Regulatory
Environment
Challenges
Fuel Price
Over Capacity
Labour Unrest
Lack of
Manpower
Fuel price remains the biggest concern of the airline industry. High costs have
led to many airlines imposing fuel surcharges on customers.
Rock bottom fares due to overcapacity of airlines have directly lead to a major
loss of revenue among the airline carriers.
Lack of Manpower led to a push of working above standard working norms
leading to Pilot and staff walkouts resulting in losses
Growth in industry is quick it is not able to maintain itself with an appropriate
number of staff for smooth operations in Maintenance.
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Indian Institute of Management, Kozhikode
Rising disposable
incomes will aid
passenger traf c
growth in the coming
years.
Government lowered the
custom duty from 2.5% to 0%
on components or parts for
manufacturing of aircrafts by
public sector units of the
Ministry of Defence.
Huge Potential of
increase in penetration
among the growing
middle-class
population
Airport Authority of India
plans to abolish royalty & offer
steep discounts in lease rent
to encourage MRO units to set
up facilities at its airports.
Air travel penetration is
less than 3% in India
and stands at 0.1 trips
per person per year
compared to 2 in the
US
100% FDI allowed in
green eld and brown eld
projects for Airports
Emerging
Trends
Emerging
Trends
Increase in shorter, more cost-effective regional ights to enable faster and better door-to-door
transport of people and goods
Push towards carbon neutrality through a combination of Carbon-Offset Programs and
sustainable aviation fuel (SAF)
The idea of ying taxis to get rid of the road traf cs, congestions and take the passengers to the
terminals quickly and conveniently.
Wi at 40000 ft – seamless In ight Connectivity to digitise
the experience and keep the passengers stay relevant.
Offering personal training to non- experienced mechanics to attract young people to work in
the aviation maintenance industry
88
Industry Analysis- Banking
9% CAGR
•
•
•
•
•
•
2020
2016
$2.2 Tn
$1.6 Tn
Total Asset Bank - India
Overview
Overview
The Indian banking system consists of 12 PSUs, 22 private, 46 foreign, 56 regional rural banks
The distribution channel of the Indian banking industry is 14.72 branches per 100,000 adults
As of November 2020, the total number of ATMs in India increased to 209,282.
The big four banking rms (in terms of assets) in India are SBI, HDFC Bank, ICICI and PNB
Bank credit was the most pro table segment in quite a fragmented banking industry in 2020
There were 1.89 deposit accounts per adult, but only a minority of people possesses a bank account
Marketing
Investment
Deposits,
Securitizaton,
Credits
Acquisition,
Offering,
Multi tech
Management
Advertising,
Branding,
Sales Support
Transactions
Products
Sales
Funding
Services
Credits,
Securities,
Financial
products ,
Corporate
Investments
Account
Management,
Asset
Management,
Issuance/IPO,
M&A, Advisory
Reserve Bank of India
Commercial Banks
Nationalised
16%
9%
Payment,
Trading,
Clearing
Settlement,
Custody
•
•
•
•
•
Cost of Borrowing
Operation Expense
Risk Management & Compliance Cost
Provision & Write offs
Marketing Expenses
Revenue Streams
Revenue
Streams
•
•
•
•
Intrest Earnings
Bank Credits
Trading Assets
Inter-bank loans
PV Key Players
Cooperative Banks
Private
ShortTerm
Development Banks
LongTerm
Exim
Agricultural
Credit
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41%
Market Player
Classi
Classication
cation
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34%
Regional Rural
PSU
Private
Foreign
CostDrivers
Driver
Cost
Value Chain
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Breakup of Banks in India 2020
Urban Credit
Industrial
Market Share*
24%
7.7%
6.3%
5%
Deposits
24%
8.5%
5.7%
4.7%
Agricultural
Credits
23%
9.6%
6.3%
5.5%
89
This is a new model of
bank operates at a small
scale, It can carry out most
banking operations but
can't advance loans or
issue credit cards
NBFC’s
Banks setup with an
objective of furthering
nancial inclusion by
primarily undertaking
basic banking activities to
un-served and
underserved sections
Payment Banks
These do not have
to comply with any
RBI Regulations
Small Finance Bank
These are
accounted for in
RBI Act and
governed by
general rules like
CRR Requirements
Scheduled Bank
• Rising Rural Perception
• Increase in working population
• Growing disposable incomes
• Government push towards
nancial Inclusion
• Accessibility to digital banking
Non-Scheduled Bank
Types
Types
of Bank
of Banks
:
:
Growth
Growth
Drivers
Drivers
These are
accounted for in
RBI Act and
governed by
general rules like
CRR Requirements
Emerging
Emerging Trends
Trends
Risk
Risk &
& Challenges
Challenges
Losses due to Low Interest Rate : Decreasing pro ts for industry players due to large
reduction in interest rates by central banks, with an aim to increase borrowing during 2020;
this alone was not enough to offset the losses experienced due to the ultra-low interest.
High costs of compliance : Banking being a highly regulated industry, banks must meet a
set capital adequacy ratios and maintain morality and transparency in terms of their practices,
which entail high costs of compliance
Frauds impact consumer con dence : In 2012-2017, Indian banks faced nearly 23,000
cases of fraud, with total losses estimated at $10.8bn. These Issues impact consumer
con dence and reputation of banks
AI solutions will enable smarter
lending and will help nancial
institutions move past credit scores
based on credit repayment history and
utilize alternate data instead.
Customer experience (CX) and
Operational ef ciency will be important
drivers of digital transformation as
COVID-19 has reshaped customer
expectations
Banking-as-a-service (BaaS) which is
an end-to-end process that enables third
parties to directly connect with banks’
systems will emerge so that they can
build products on top of the banks’
regulated infrastructure.
Information security will become of
paramount importance due to The growing
popularity of remote operations, resulting in
an increased exchange of sensitive
information, between banks and customers
on the cloud.
Blockchain technology is emerging as
a critical enabler of information security
and can be leveraged to verify customer
data at multiple touchpoints.
Personal touch will be key in
maintaining valuable relationships
alongside the evolving technologies. Going
forward, any organization that will have both
the capabilities of being ‘high-tech’ and
‘high-touch’ would be a winner.
Lack of product differentiation: The minimal product differentiation in the banking
industry makes it dif cult for banks to retain their customers.
Investment: The amount of investment in infrastructure, particularly in distribution
networks (e.g. setting up a branch network) and IT systems, as well as the marketing
expenditure for brand building is signi cant, even for established rms
Government Initiatives
Government Initiatives
Government has smoothly carried out
consolidation, reducing the number of public sector
banks by eight.
To maintain regulatory capital requirements and
nancial growth the Government of India will invest Rs.
48,239 crore in 12 PSUs in FY20
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Industry Analysis- Banking
Government’s agship nancial inclusion drive
Pradhan Mantri Jan Dhan Yojana (PMJDY) reached
41.75 crore and deposits stood at more than Rs.
1.37 lakh crore as of Jan, 2021
The Finance Ministry announced its plan to
infuse Rs. 14,500 crore as capital infusion in
PSUs in the 4th quarter of FY21
90
Industry Analysis- E-Commerce
$4.89 Tn
2021
• APAC, North America (NA) led brick-and-mortar & e-commerce sales, followed by Western Europe (WE)
• Due in part to China's dominance, APAC gained signi cant lead (62.6% share) [NA (19.1%), WE (12.7%)]
• Indian e-commerce market expected to grow at 27% CAGR (2019-24), projected to reach $99 Bn
by 2024, $200 Bn by 2026, Grocery & fashion/apparel would be the key drivers
• Indian e-commerce orders’ volume rose by 36% in Q4’20, Personal care, beauty, wellness - Bene ciary.
$6.39Tn
Global Market
27% CAGR(19-24)
Overview
Overview
9.33% CAGR
2024
Consumer Electronics
Apparel
Furniture & Others
Food & Grocery
Business to Business B2B
2020
2024
Indian Market
Jewellery
Consumer to Consumer C2C
7%
7% 6%
40%
Consumer to Business C2B
40%
Government to Business G2B
Drivers
Cost Driver
Drop shipping – Not required
to maintain inventory to sell. It
purchases the product from a 3rd
party and had it shipped directly
to the customer
Private labeling –
Outsource manufacturing
and sell products under
their brand name
Warehousing – Purchase
products from manufacturers/
wholesalers, maintains inventory
in their warehouse and facilitate
delivery
White labeling –
Purchase generic products
made for various
companies and sell under
their brand name
D2C – Selling products to
consumers directly, without any
3rd party middlemen
involvement
Subscription Service –
Deliver products against
periodic subscription by
users
Business to Consumer B2C
Government to Consumer G2C
$99 Tn
Business
Model
Business
Model
Classi cation
cation
Classi
By Participants
$30 Bn
IT Infrastructure and Platform
support cost
Logistics & Distribution cost
Inventory Management costs
Payment processing
expenses
Marketing, Advertising &
Promotion expenses
Value Chain
B2C E-Commerce
Platform
Distribution & Logistics
Manufacturer/Supplier/
Wholesaler/Retailer
E-Commerce
Platform
Market Share*
3.3%
1.9%
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B2B E-Commerce
Platform
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31.2%
Customer
Value Added Services, Customer Services
fi
31.9%
Industry Analysis- E-Commerce
Key E-Commerce platforms across segments
Key Metrics
Growth Drivers
Gross Merchandise Value (GMV
Travel, Mobility
Ola, Uber, MakeMyTrip,, Cleartrip, Goibibo
Logistics
BlackBuck, Delhivery, Rivigo, Shadowfax
No. of users
Social Comm.
Meesho, DealShare, Mall91, BulBul
Average Revenue per User (ARPU)
Gaming
Dream11, Mobile Premium League, Octro
Conversion rate, Retention rate
• Rise in consumers in middle income
• Increase in video consumption, social media
usage driven by cheaper mobile data
• Reducing urban-rural divide
• 3/5 orders from tier-2 and smaller towns,
target of ~200 Mn online shoppers by 2025
• Digital payment infrastructure development
• Government support & initiatives
Regulatory
RegulatoryEnvironment
Environment
100% FDI allowed in B2B ecommerce, 100% FDI under automatic
route in marketplace model of ecommerce
FDI
FLI
In Union Budget 2020-21 - allocated
$1.24 Bn to BharatNet Project providing broadband services to 150,000gram panchayats
Market Share
E-commerce Rules 2020 - effective
competition and ef ciency in e-commerce
market by highlighting R&R of
marketplace and sellers
RiskRisk
& Challenges
& Challenges
Government e-Market Place (GeM)
National Retail Policy
Government
schemes &
Initiatives
• Growth of logistics, warehousing facilities
• Shifting consumer preference, especially
after Covid-19 induced lockdown
• Rise in digital and technological acceptance
• Consumers started experiencing bene ts convenience, discounts, time saving
• Favorable startup ecosystem spurring
innovation
• Local and foreign investment in ows
Online security breach & cybersecurity issues
Competition from digital giants venturing into the space and
brick and mortar retailers
Digital payment & 5G support
Digital India, Start-up India, Skill India, Innovation Fund
Consumer Protection Rules, 2020
Data Privacy concerns – customer trust issues
High dependence on platform & underlying technology
Country speci c concerns around the future dominance of
some major players
Emerging
EmergingTrends
Trends
Omnichannel Presence – Of ine channels
embracing online medium; online platforms
opening experience stores
Rise in corporate India’s ambition to build
“Superapp”. Superapps ~4-7x ARPU than single
purpose e-commerce
Technological innovations – analytics driven
customer engagement, personalized digital
advertising
Indian e-commerce $10 Bn investments in last
decade ~60-70% of total PE/VC investments. 11 out of
52 unicorns in India are e-commerce companies
D2C – With increasing brand reach and
rising traction in niche product categories. D2C is
$100 Bn+ market opportunity by 2025. India
houses > 800 D2C brands
Increasing penetration and acceptance of
M-commerce and Social commerce. Social
commerce GMV ~$ 2 Bn in 2020, to reach $20 Bn
by 2025, and to $70 Bn by 2030
Increase in growth of Hyperlocal delivery
market, last-mile delivery. Online grocery, epharmacy, social commerce expected to boom in
2021
RPA, AI, IoT, Cybersecurity will be the key focus area
for the industry incumbents, amid increasing
competition in the space
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92
Industry Analysis- Energy
Overview
Overview
3.8% CAGR
$1.34 Tn
2021
$1.53 Tn
2026
Global Market
•
•
•
•
•
India Energy Mix^
India is 3rd largest producer & 2nd largest consumer of electricity globally
India’s installed power capacity of 373 GW (Oct 2020), renewable capacity 94 GW (Feb 2021)
Fossil fuels like coal, oil & natural gas, dominates global energy mix - constituting over 65%
70% of India’s electricity generation from thermal (234 GW), coal contributing ~86%#
~50% of India’s power to be generated by renewables by 2030 (Central Electricity Authority)
Conventional
Wind
Oil & Natural Gas
Solar
Non- Conventional
Bio-Waste
Hydro
Nuclear
Natural Gas
Oil
Global Energy Consumption
Mix by 2050*
Hydroelectricity
Nuclear energy
Renewable Energy
Coal
Electricity Generation
Hydro
Nuclear
CostDriver
Drivers
Cost
Energy generation &
supply
Contract with transmission
companies or businesses (for
direct captive use) - xed
charges per unit
consumption
Energy generation & storage
on site
Energy supply on customers’
site. Example, solar cells, wind
turbines, bio waste plant
directly supplying power and
providing excess storage
capabilities
Energy infrastructure
providers
Providing infrastructure
facilities to generation
companies, corporates,
households etc.
Energy as a service –
Customers pay for energy
service without any capital
investment – subscription for
electric devices
Value
ValueChain
Chain
Evaluation &
Processing
RE
Business
Model
Business
Model
Classi cation
Classi
cation
Coal & Lignite
Thermal
Infrastructure Setup Cost
Equipment, machinery costs
Running expenses –
Manpower etc.
Repair and Maintenance costs
License and other regulatory
expenses
Key Player
Players
Transmission
Distribution
Power Players
Customer
Renewable
Energy
Infrastructure, Energy Services, Electricity devices & Appliances
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000
Installed Energy Capacity in India (Feb’21)
Central
Growth Drivers
Drivers
Growth
25.37%
27.33%
State
Private
47.30%
Private
State
Central
• Infrastructure development
• Advancements in technologies
• Climate change driven shift towards renewable
sources of energy
• Changing lifestyle & preference for convenience
• Reducing gap between rural and urban cities
•
•
•
•
•
Rise in demand for electricity
Changing mix of energy consumption
Increasing per capita usage of energy
Government support & initiatives
Soaring demand from the industrial and
domestic sectors
• Local and foreign investment in ows
• Favourable startup ecosystem spurring innovation
Risk
& Challenges
Risk
& Challenges
RegulatoryEnvironment
Environment
Regulatory
FDI
Budget
One Nation, One Grid
100% FDI allowed in power sector for generation (except
atomic power), transmission, distribution (~$15 Bn investment
has been made from Apr 2000-Sep 2020)
Union Budget 2020-21 allocation of ~$42 Bn – results-based,
new power distribution sector scheme over next 5 years
Restricted supply of raw material - erratic domestic supply of coal,
uctuations in international coal prices, shortage of natural gas
Saubhagya Scheme
Government
schemes &
Initiatives
Ujala Scheme
Weak infrastructure of the transmission and distribution (T&D)
system - leading to transmission and distribution losses
Dynamic regulatory environment – Tariff structure, PPAs
Ujwal Discoms Assurance Yojana
(UDAY)
NIP
National Infrastructure Pipeline: Energy sector projects
accounting for ~24% of total Capex of INR 111 lakh Cr.
Transitioning towards Non-Conventional source of Energy
Target of 175 GW renewable energy setup by 2022, of 450 GW of
installed renewable energy capacity by 2030 – about 280 GW (over
60%) expected from solar
National Electricity Policy (NEP)
2021
Climate change accelerating shift in energy mix from traditional
to non-conventional sources, posing potential supply chain
challenges for existing players
Emerging
Trends
Emerging Trends
Solar energy – largest renewable power source in FY 2021 with installed capacity of
~40 GW vs wind energy having installed capacity of 39 GW in 2021
Development of ‘green city’ in every Indian state,
powered by renewable energy:
- Mainstream environment-friendly power through solar
rooftop systems on all houses,
By 2029-30, the share of renewable energy generation increase
from 18% to 44%, thermal expected to reduce from 78% to 52%
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Industry Analysis- Energy
India’s rst renewable energy InvIT in 2021 - KKR backed Virescent Renewable
Energy Trust
- Solar parks on city’s outskirts,
- Waste to energy plants,
- Electric mobility-enabled public transport systems
94
Industry Analysis- FMCG
Urban
Rural
45%
Overview
Overview
55%
`
Rural Urban Revenue FY 19- India
•
•
•
•
•
FY19 Segment Wise Revenue
Global FMCG market size valued at $10,020bn in 2017, projected to grow by 5.4% to $15,361.8bn by 2025,
In India it is expected to grow at a CAGR of 23.15% to reach US$ 103.70 bn by FY21 from $ 68.38 bn in FY18
It is the 4th largest sector in the Indian Economy & India is likely to be the 5th largest FMCG market by 2025
In the last few years, the FMCG market has grown at a faster pace in rural India compared with urban India
The rural market reached US$ 23.63 bn in FY18, and it is expected to grow to US$ 220 billion by 2025.
9%
27%
Household &
Personal Care
Tobacco products
45%
Food & Beverages
19%
Health care
Business
BusinessModel
Model
Classi cation
Food &
Beverage
19%
Healthcare
31%
Based on Products
Household &
Personal Care
50%
Cost
Driver
Cost
Drivers
•
•
•
•
•
•
Logistics
Packaging
Commissions
Employee Costs
Marketing costs
Promotions and discounts
Revenue Driver
Revenue
Streams
• Sale to end customers
• Corporate tie-ups
• Occasion based offers - Bundled sale
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Indian Institute of Management, Kozhikode
Business Models
Modern Trade
Traditional Trade
Traditional trade builds on interpersonal relations between the
customers and the retailers.
Traditional trade is less organised
than modern trade and is more
likely to run out of stock or push
alternative products to customers.
Eg : Kirana Stores
Modern trade outlets are chains or
groups of businesses. Retail
operations are more planned andoperations use a more organised
approach to inventory management,
merchandising and logistics
management eg hypermarkets,
supermarket chains and mini-markets
Distribution Channels
Manufacturing
Online Trade
Online Marketplace allows the
customers to search, select and
purchase the products, services
and information remotely over
the Internet and get it delivered
at their home. Eg : JioMart,
Amazon Pantry
Retail Chain Like Super Markets
Marketing
Agents
Wholesalers /
Distributors
Unorganised
Retailers
Customers
Public Canteens/ Government
Purchases
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Industry Analysis- FMCG
MarketPlayers
Players
Market
Rural consumption
will increase, due
to combination of
increasing incomes
and higher
aspiration levels,
there will be an
increased demand
for branded
products in rural
India
Easy Access
Low penetration
levels of branded
products in
categories like
instant foods will
attract investors
as the FMCG
products have
demand
throughout the
year.
Rural Consumption
Organised sector
growth is expected
to grow with
increased level of
brand
consciousness.
Growth in modern
retail will augment
the growth of
organised FMCG
sector.
Increased Penetration
Organised Market
Growth
Drivers
Growth Drivers
Internet and
different channels
of sales has made
the accessibility of
desired product to
customers more
convenient at
required time and
place
Major Players
Market Share
14%
12%
3%
3%
ROE
82%
23%
102%
32%
Inventory
Turnover
14%
6%
10%
16%
Challenges
Emerging
Trends
Emerging
Trends
Brand Consciousness
Organised sector is expected to grow
as the share of unorganised FMCG
market has seen a fall with increased
level of brand consciousness.
E-Commerce
Focus on strengthening ecommerce
engagement, around 72% Indian
consumers are most likely to shop
online locally for premium products
Smart Packaging
Packaging used to stimulate consumer
engagement, provide a customised
experience, and boost value and
service. eg Presence of QR code
Customer Experience
With the growing demand for
convenience, companies strive to
improve customer experiences with
help of AR,VR and Gami cation
Increasing challenge to balance market penetration and logistics cost as in order to
increase penetration among consumers, companies offers small pack sizes. However
smaller pack sizes mean higher packaging and logistics costs.
Non-availability of robust Infrastructure of Cold chains and continuous power
adversely affect certain product segments dependent on it eg : Ice cream market.
As logistics service providers are not cost effective and not in a position to offer
economies of scale, most companies manage their own logistics.
Dealing with Counterfeits products which accounts for loss of sale worth more than
Rs 300 billion for the FMCG sector
Government
Initiatives
Government
Initiatives
Food Security Bill : FSB reduces prices of food grains for Below
Poverty Line (BPL) households, allowing them to spend resources on
other goods and services, including FMCG products. This is
expected to trigger higher consumption spends, particularly in rural
India, which is an important market for most FMCG companies.
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Indian Institute of Management, Kozhikode
SETU SCHEME : Government has initiated Self Employment and
Talent Utilisation (SETU) scheme to boost young entrepreneurs.
Government has invested US$ 163.73 million for this scheme.
Relaxation of License Rules : Industrial license is not required for
almost all food and agro-processing industries, barring certain items
such as beer, potable alcohol and wines, cane sugar and hydrogenated
animal fats and oils as well as items reserved for exclusive manufacture in
the small-scale sector.
96
Industry Analysis- Healthcare
8.9 % CAGR
2018
•
•
•
•
•
$11.9 Tn
$8.5 Tn
Global Market
39 % CAGR
Overview
Overview
2022
Indian Hospital industry ~80% of total healthcare market, $132 Bn by 2023 – CAGR of 16-17%
Indian Digital healthcare INR 884.5 Bn by 2025 from INR 144.59 Bn in 2019, CAGR of 33.92%
Indian Telemedicine market projected to reach $5.4 Bn by 2025 – growing at 31% CAGR
National Digital Health Blueprint can provide bene ts of ~$200 Bn over next 10 years
India’s healthcare advantage lies in its skilled manpower and cost competitiveness
$194 Bn
2020
Business Model
$372 Bn
Indian Market
2024
Cost Drivers
Classi cation
Healthcare delivery – Hospitals, clinics,
nursing home charging patients for the
healthcare services – consultancy,
diagnosis, treatment, surgery etc.
Primary
Biotechnology
Secondary
Healthcare Delivery Hospitals
E-Pharmacy – Delivering medicines and
healthcare supplies, earning margins over
cost of procurement. Offers subscription
services as well
Pharmaceuticals
Tertiary
Diagnostics
Biotechnology – Technology
breakthrough resulting in
patentable drugs which can
provide revenue streams over the
tenure of the patent
Operational expenses – Professional fees,
support staff
R&D cost, clinical research expenses etc.
Medical Tourism – Providing patients with opportunity to receive quality
medical services in foreign countries at reasonable cost as compared to
developed markets
Medical Tourism
Medical Devices
Value Chain
Licenses and other regulatory expenses
Key players
Healthcare Delivery
Institute
Hospital
Pharma Companies
3rd Party Administrator
Insurance Companies
Hospitals
Clinics
Equipment suppliers
Pharma
Customer/Patient
Diagnostic Chain
fi
Indian Institute of Management, Kozhikode
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Infrastructure setup cost
Equipment, machinery, medical supplies’
cost
Telemedicine
Home Healthcare
Medical College & Training
Institute
Telemedicine – Charging for the
tele consultation, home care
services
97
Industry Analysis- Healthcare
Key
Statistics
& Facts
Key
Statistics
& Facts
5 Beds/ 10,000 Indians
155/167 Rank Globally
8.6 Doctors/ 10,000 Indians
Life
Expectancy
69.7 Years
GrowthDrivers
Drivers
Growth
• About 60% of hospitals are in cities, where only
32% of India’s population resides
• 70,000 Ayushman Bharat centres are operational
in India – providing primary healthcare services
• Cost of surgery in India is ~1/10th of the cost in
USA or European nations
• Non-Communicable Diseases account for ~50%
of India’s disease burden and 60% of all deaths
• Growing middle class along
with rising burden of new
diseases
• Rise in demand for affordable &
quality healthcare
• Better health awareness
• Rise in medical tourism
• Advancements in technologies
– AI, IoT, RPA
• Spending on medical Infra
~$200 Bn by 2024
• Increasing access to insurance
• Local and foreign investment
in ows
Risk
Risk&&Challenges
Challenges
RegulatoryEnvironment
Environment
Regulatory
FDI
% of GDP
National AYUSH Mission
100% FDI - automatic route - Green eld projects. Upto
100% FDI - government route - Brown eld projects. FDI
in ows for drugs & pharma sector $17.7 Bn (Apr’00-Dec’20)
Public expenditure on healthcare 1.2% of GDP. GOI to
increase spending on public health to 2.5% of GDP by 2025
Vision 2035: Public Health
Surveillance in India
Government
schemes &
Initiatives
High premium is putting insurance out of reach from many people
of the country
Availability of quality healthcare professionals remain a challenge
– we have ~1/5th of cardiologists, paediatricians, and clinical
psychologists than required
Ayushmann Bharat
National Digital Health Blueprint
Covid
• Life expectancy projected to exceed
70 years
• Indian companies getting higher
ANDA approvals
• Favorable startup ecosystem
spurring innovation
• Government support & initiatives
Govt. allocated INR 35,000 crore for Covid-19 vaccines in
2020-21. Approved vaccines: Covishield, Covaxin, Sputnik V, in
pipeline: Covovax, Biological E etc.
National Health Mission,
Mission Poshan 2.0
Patient experience has not been up to the mark owing to several
reasons like doctor’s absenteeism, wrong diagnosis, exorbitant
expenses etc.
Infrastructure ramp up remains a major challenge; private and
organized players could aid in improving the state, given the support
from concerned authorities
EmergingTrends
Trends
Emerging
Usage of AI for providing the best
treatment to patients and for maintaining
health records. AI-based drug discovery,
clinical decision support, genetic analytics,
healthcare administration, personal health
Indian Bio-tech sector is presently around $70.2 Bn and is
expected to reach $150 Bn by 2025. Comprises of:
•Bio-Pharma
•Bio-Services/CRO
•Bio-Informatics
•Bio-Agri
•Bio-Industrial
Surgical robotics market in India is
expected to reach $350 Mn by 2025 – growing
at a CAGR of 20%
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Indian Institute of Management, Kozhikode
Plans to create 1 Mn skilled healthcare providers by 2022
•Emergence and growth of new-age health tech startups,
focusing on telemedicine, e-pharmacy, diagnostics etc.
•No. of PE/VC deals in health-tech sector increased to 34 in 2020
from 15 in 2016
~$200 Bn is expected to
be spent on medical
infrastructure by 2024
•Telemedicine could replace ~50% of in-person outpatient
consultations by 2025
•Data and analytics-enabled apps could improve diagnosis, help
people in tracking their vitals etc.
Life expectancy
projected to exceed 70
years, paving way for more
healthcare services
98
Industry Analysis- Hospitality
6 % CAGR
$3.5 Tn
2020
M&E Sector - India
No of Jobs in Tourism Sector
Overview
Overview
•
•
•
•
•
•
$5.3 Tn
2025
India ranked 10th among 185 countries in terms of travel & tourism’s total contribution to GDP in 2019
Hospitality sector primarily thrives on tourism, an important source of foreign exchange and employment
It continues to be one of the worst hit, yet-to-recover and in survival-mode industry due to covid-19.
Revenue in India tanked by 30.3% in the Q4 2020-21 after plunging by over 50% in the quarters of 20-21.
Hospitality contributed nearly 13.68 lakh crore to the GDP in FY19 as per WTTC’s Economic Impact,
Hospitality industry is expected to grow at a rate of 6.9% to reach Rs 35 lakh crore by 2029
Recreational
establishments focus
on relaxation and
entertainment of
guests. Properties
such as movie
theatre or
amusement parks
fall into this category
Travel & Tourism
Recreation
Food & Beverages
Lodging
The largest sector in
hospitality, is made
up of properties
delivering food,
snacks, drinks for
immediate
consumption, on- or
off-the premises.
It comprises means
of transportation to
move travellers from
one place to another.
Airlines, cruise ships,
buses, trains fall into
this category.
Business
Models
:
Business
Model
Company owned,
Company operated
– COCO Model
Company owned,
Franchise operated
– COFO Model
Franchise owned,
Company operated
– FOCO Model
oCOCO, in this the
company owns, makes
investments and also
operates the entire
business at a particular
location.
•COFO here the
company does capital
expenditure, site
selection etc. And the
franchisee takes care
of additional
operational costs like
salary, electricity, and
sundry expenses
oThe franchisee owns
the property and does
the other capital
expenditures. While,
company manages the
store/outlet operations
helps them to manage
quality.
fi
Indian Institute of Management, Kozhikode
FY 2020
$ 53 Mn
FY 2029
Government Initiatives
Classi cation of Major Segments in Hospitality :
Luxury palaces,
boutique hotels, bed
and breakfasts,
camping grounds,
hostels… the
lodging sector
covers an extremely
diverse spectrum of
properties.
$ 39 Mn
Under Swadesh Darshan Scheme
ministry of tourism are developing
several theme-based tourist
circuits.
Ministry of Tourism developed
SAATHI (System for Assessment,
Awareness & Training for
Hospitality Industry)
Cost Drivers
Franchise owned,
Franchise operated
– FOFO Model
•In this model, the
company gives its
brand name. The
franchise provides for
capital , expenses, and
manages everything
within the guidelines
set by the company.
•
•
•
•
Maintenance cost
Upgradation cost
Fixed rental expenses
Employee expenses
Revenue
RevenueStreams
Streams
•
•
•
•
Accommodation
Banquet services
Loyalty programs
Food and beverage
The Ministry of Tourism
launched the NIDHI portal to
understand the geographical
spread of the hospitality sector, its
size, structure and existing
capacity in the country
The Ministry has set up Hospitality
Development & Promotion Board
to monitor and facilitate hotel
project clearances/approvals.
99
Competitive Landscape
Competitive Landscape
Growth Drivers
Increasing disposable incomes to allow consumers to increase spending on recreational
Hospitality sector is highly fragmented industry
.
Economic Growth
.
Niche Offering
Niche offerings such as medical tourism & eco-tourism expected to create more demand
Geographical
Diversity
India offers geographical and cultural diversity, attractive beaches, 37 World Heritage sites, 80
national parks and 441 sanctuaries is a major crowd-puller for tourists across the globe.
Travel & Tourism
The food services
industry is again a
largely unorganised
sector apart from a few
Quick Service
Restuarant(QSR) brands
like Domino's, Café
Coffee Day,
McDonald's,etc.
Increasing popularity of Hospitality apps and social Hospitality to propel growth.
Travel and Tourism is
moving towards digital
and online travel agents
like MakeMyTrip,
Goibibo, Yatra, Cleartrip,
both to book tickets,
destinations, hotel
rooms and leisure
activities.
Recreational & Leisure
Lodging
Dominated by
unorganised sector &
numerous non-star
hotels, guest houses,
inns lodges etc. The
Leading organised hotel
groups are Marriott, Taj
Group, Raddison, ITC
and OYO, AirBnB.
Food Services
activities such as Hospitality
Changing Consumer
Hospitality Habits
Inox Leisure (premier
multiplex chain), Delta
Corp(Casino), and
Future Gaming And
Hotel Services (lottery
company) are some key
leisure and
entertainment players in
India.
Challenges
Challenges
High xed cost
industry with high
operating as well as
nancial leverage
makes it dif cult to
manage cash ow in
case of negative
impacts.
The traditional
players need to
upgrade constantly in
order to survive as
Innovative new techoriented start-ups
such as Airbnb, OYO
Rooms etc. are giving
tough competition.
Business travel
driven revenue (cashcow) faces a possible
structural long term
shift as Covid
induced restrictions
made people travel
less and do most of
their work online.
Tourism industry
major part of
hospitality industry
is known to exhibit
seasonality thus it
has a direct impact
on the Hospitality
sector.
The industry involves
employees/workers
to work day/night
and even on
weekends along with
lower wages leads to
shortage of Skilled
labour and High rate
of attrition.
Emerging Trends
Restricted
Corporate Level
Organizations, going
forward are likely to embrace a
hybrid work environment and
Corporate travel is expected to
permanently remain below the
pre pandemic levels
Rise of E-Tourism
Ancillary Revenue
Hospitality supply in Tier
II and Tier III locations will
increase based on the
untapped potential of the
domestic commercial and
leisure demand
The internet has modernized
the face of travel industry and its
impact on the tourists. People
prefer online bookings,
reservations and virtual tours
now-a-days
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Indian Institute of Management, Kozhikode
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Industry Analysis- Hospitality
MBA & Rebranding to gain
Momentum
Last 5 years 230+ hotels have
been converted from a standalone
property to a brand. This is
expected to gain considerable
momentum as businesses aim to
tide over the current downturn.
Potential of Tier - II &
Tier -III
Ancillary revenues will be key
focus area to improve the
topline, thus making every
enhancement in customer
experience payable.
Longevity & Wellness
tourism
Development of wellness
tourism is being accelerated with
hike of healthcare costs in
advanced countries & lack of
proper health care facilities in
developing countries
100
Overview
Overview
5% CAGR
•
•
•
•
•
•
100 MTPA
81.5 MTPA
Steel Consumption (India)
Steel Production (FY 19-20)
India is world’s 2nd largest producer of crude steel in January-December 2019, producing 111.245 Million Tonnes
The steel industry contributes slightly more than 2 percent towards the India’s Gross Domestic Product.
India’s steel industry employs more than 25 lakh people and is expected to grow to generate 36 lakh jobs by 2031
Crude steel production grew at 7.6% annually (CAGR) from 88.98 MTPA in 2014-15 to 110.92 MTPA in 2018-19
With an 81% share, the Private Sector, led crude steel production compared to the 19% contribution of the PSUs.
Export of total Finished Steel (alloy + non-alloy) during 2020 stood at 10.15 MT as compared to 5.902 MT in 2016
Total Production :111 MTPA
20%
20%
80%
80%
PSU
Private
Business Model
Business Model
End Use
Consumption
Non-Alloy Steel
Alloy Steel
High Carbon Steel
Med. Carbon Steel
Low Carbon Steel
Form
Rail Steel
Crude Steel
Liquid Steel
Structural Steel
Construction Steel
Stainless
Mini-Steel Plants
Integrated Steel Plants
Steel
Finished Steel
Ingots
Flat
Semis
Non -Flat
• Integrated steel plants put
together the whole process from
converting the iron ore to
production and manufacturing of
steel and nished and seminished products
• There is a need for integrated
steel plants to be located near the
mining sites of iron ore, coal and
limestone otherwise the
transportation cost is too high
• Mini steel plants use pig iron or
leftovers from integrated steel
plants to make alloys.
• Mini steel plants have no such
location restrictions. There are
around 650 mini steel plants in
India.
Silicon electrical
High Speed
Revenue Streams
Revenue
Streams
• Sale of Flat/Long Products
• Iron ore pellets
• Pig iron sale
Indian Institute of Management, Kozhikode
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Industry Analysis- Steel
Cost Drivers
Cost
Drivers
•
•
•
•
•
•
Raw Material – Iron ore, Coal
Payroll and Salaries
Fuel cost
Repairs & Maintenance
Advertising & Selling expenses
Transportation cost
000
101
Industry Analysis - Steel
Growth
Drivers
Growth
Drivers
Competitors
Competitors
% Share of Steel demand
FY 16-20
FY 21E
Building
Construction
3-4%
(5-7) %
5-6%
35-40%
Infrastructure
6-7%
(8-10)%
8-10%
25-30%
Automobile
Manufacturing
(2-3)%
(12-14)%
9-10%
8-10%
Engineering
& Packaging
4-5%
(18-12)%
4.5-5.5%
20-25%
FY 21-FY25P
Major Player
Transportation Cost
Steel plants are located inland,
creating a signi cant need of time
and expenses for transporting raw
materials & nished goods.
Raw Material procurement
Eighty- ve percent of the coking
coal( key raw material in steel
manufacturing) that Indian steel
plants require is imported..
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Indian Institute of Management, Kozhikode
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Utilisation
94%
89%
16.2
8.6
96%
73%
Emerging
Trends
Emerging
Trends
Vehicle Scrappage Policy: Recycled vehicles to be used as raw materials to reduce Cost
component and help companies becomes cost competitive.
Input Price shock
Small & medium-size companies
are vulnerable to shocks in input
prices since raw materials are 58% of
their revenues as opposed to
40% for large producer
Government introduced Steel
Scrap Recycling Policy to reduce
import
Government Initiatives
14
Capacity in MTPA (million Tonnes Per Annum) | FY 19-20
Challenges
High Financing Cost
makes it dif cult for domestic
players to operate capacity
expansion plans.
Capacity
Lack of R&D Spending
A comparison of Indian steel producers
with global peers highlights an 80% lag
in R&D spending leading to poor
product quality
Cheaper Chinese Imports
Even after imposition of various tariffs of
government of India on imports and
cheaper impacts the domestic industry,
Export duty of 30% on iron ore
to ensure domestic supply
Capacity expansion: companies in the industry are undertaking modernisation and
expansion of plants to be more cost ef cient
Emphasis on technology innovations: MOS issued directions to the steel companies
to take up R&D projects by spending at least 1% of their sales turnover to facilitate
technological innovations.
Substitution: Coal and natural gas substitution with hydrogen as a reducing agent will
reduce emissions
Impact of Electric vehicles: Indian government is putting a signi cant thrust on
electric vehicles, which will require less steel as these vehicles have fewer auto
components.
Allocated Rs. 39.25 crore to
the Ministry of Steel in Budget
2020-21
National Steel Policy 2017
Implemented to encourage the
industry to reach global benchmarks
Policy allowing 100% FDI (via
the automatic route) to boost
investments
102
Industry Analysis- Telecom
5.4% CAGR
$1.7 Tn
2021
Overview
Overview
$2.5 Tn
Global Market
2028
Indian Tele Density
• APAC captured the largest share of >32%, expected to witness signi cant growth from 2021-28
• India is world’s 2nd largest telecom market - 1.16 Bn subscriber base; INR 68,228 Cr. revenue
(Q3FY21)
• Expected 920 Mn unique mobile subscribers by 2025, including 88 Mn 5G connection in India
• Average wireless data usage per subscriber in India ~11GB per month (FY20), ~18GB by 2024
• India’s contribution to GDP is expected to reach 8% in 2022 from ~6.5% presently
Network
Services
Telecom
Equipment
Access
Cable & Broadband
Services
Mobile services – Fixed
charges to the users on the
basis of consumption of
voice and/or data services
Internet
Prepaid
1,198.5 Mn
Telephone Subscriber Base
Broadband Subscriber Base
98.2 %
Wireless
97.1 %
1.8 %
Wireline
2.9 %
Application & Content
Providers
60.22 %
Rural
Postpaid
780.27 Mn
Subscription
based services – Periodic
subscription for various
value added services, addons
Contribution
towards
Employment
Cost
Drivers
Cost
Drivers
Broadband services –
Packages for offering
broadband internet services
Network installation &
maintenance
Revenue sharing with partner
platforms, websites
Spectrum license cost
Equipment manufacturing and
providing of infrastructure
Providing payment related
and other nancial services
through UPI, wallet
Value
ValueChain
Chain
Infrastructure &
Equipment provider
Urban
BusinessModel
Model
Business
Classi
Classi cation
cation
Infrastructure
140.04 %
4 Mn
Infrastructure development &
IT upgradation charges
Employee bene ts and other
expenses
Key Players
Players
Key
Telecom Service
Providers
Retail Distribution
Telecom
Operator
Market Share
35.06%
24.26%
29.34%
10.72%
ARPU* (As of
March 2021)
138
107
145
N/A
Customer
Value added service Providers
103
000
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Indian Institute of Management, Kozhikode
Active Internet Users
Internet Use Case
622 Mn
900 Mn
2021
Maharastra
Highest internet
Penetration
2025
Bihar
Lowest internet
Penetration
GrowthDrivers
Drivers
Growth
~96% of users access internet for
entertainment
Around 90% use it for communication
Approx. 82% use to access social media
platforms About 45% have used the internet
to do some sort of online transaction
~28% are estimated to regularly shop online
• Rise in demand for cellular
services
• Increasing data consumption
• Uptick in consumption of VAS
• Increasing per capita income
of people
• Advancements in
technologies
• Infrastructure development
• Local and foreign investment
in ows
• Government support &
initiatives
PM-WANI
100% FDI allowed – 49% through automatic route, 49% under
govt. route. 3rd largest sector in terms of FDI in ows. In ows
~$37.62 Bn (Apr’00 – Dec’20)
FDI
Budget
Budget 20-21, allocation of INR 14,200 Cr. for telecom infra.
In 20-21, DoT allocated INR 58,737 Cr. – 56% revenue
expenditure, 44% capital
National Digital Communications
Policy
Government
schemes &
Initiatives
Production linked incentive scheme for manufacturing of
Telecom & networking products ~INR 12,195 Cr. Scheme
outlay
Lower penetration of xed-line and connectivity with high-speed
bre networks, lower availability of spectrum compared to other
mature markets
Low realization of revenue from users, declining ARPU
JAM trinity
Regulatory body: TRAI
PLI
• Changing lifestyle &
preference for convenience
• Reducing gap between rural
and urban cities
• Favorable startup ecosystem
spurring innovation
Risk&&Challenges
Challenges
Risk
Regulatory
RegulatoryEnvironment
Environment
Bharat Net project – Optical
bre cables
Dynamic regulatory environment – High dependence of
operators on government for spectrum auction, uncertainties around
taxation, AGR dues etc.
High competition from new age tech players and digital giants
whose are providing substitutable services
Emerging
Trends
Emerging Trends
•5G Tech is projected to contribute approx.
$450 Bn (2023-2040)
•5G subscriptions to reach ~350 Mn by 2026
contributing to 27% of all mobile
subscriptions
•5G radio products to be manufactured in
India for global and domestic need
•IoT will help in connecting a large no. of devices on the
network and will play a pivotal role in the 100 smart cities
project of India
•BSNL partnered with Skylo tech India for NB-IoT (Narrow
Band-Internet of Things) – providing access and connectivity
to millions of unconnected machines, sensors and industrial
IoT devices
By Dec 2022, DoT is targeting:
•100% broadband connectivity in the villages,
•55% berization of mobile towers,
•Average broadband speeds of 25 MBPS
•30 lakh kms of optic bre rollouts
Sustainable practices being adopted by operators, infra companies
- lowering their energy consumption
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Indian Institute of Management, Kozhikode
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Industry Analysis- Telecom
•Data analytics through AI,
ML helps telecom operators
in implementing automation,
cutting down on network
costs, and boosting the
performance of network
•AI powered conversational
platforms
104
Overview
Overview
5.3% CAGR
2020
Global Market
12.9%
CAGR
Indian Tele
Density
•
•
•
•
Globally, North America dominates with 34% share, followed by APAC at 32%
Indian IT contributed to ~8% to GDP in 2020, expected to reach 10% of GDP by 2025
Indian domestic revenue ~$44 Bn and export revenue around $147 Bn in FY20
BFSI major contributor to revenue of Indian IT, adoption of new emerging tech accelerates
growth
• Indian IT companies have delivery centres spread across the globe – US, Europe etc.
$4.1 Tn
$3.7 Tn
2022
Devices &
Hardware
IT Services
Communication
Services
Enterprise
Software
IT Services
Data Center System
Cloud Services
W
Application development & Maintenance
SaaS
IT infra & Installation
IaaS
Business Process Outsourcing
PaaS
Assurance Services
FaaS (Function)
Enterprise Solution
Fixed Price: Pre-determined
price for the service contract
Transactional Model: Pay a
xed price per unit of
hardware/service provided
Time & Material (T&M):
Charge out rates in
accordance with the
resources involved
Subscription Model: Pay a
xed fee per unit of time/
resource, receive in return a
xed number of units of the
product/service
Value Chain
Infrastructure,
Equipment & Hardware
Providers
Software Providers
Systems Software
$ 191 Bn
2020
Business
Model
Business
Model
Classi cation
Application
Software
$ 350 Bn
Indian Market
2025
Cost
Drivers
Cost
Drivers
Licensing Model: Pay a
royalty or license fee to use,
sell or copy the product
within a given period of time
R&D and innovation cost
Infrastructure set up, delivery
center costs
Employee bene t expenses
Other business models:
•Freemium model
•Bundling model
•Razor blades model
•Crowdsourcing model
Product development expenses
Other operating expenses
Key Players
Players
Key
Operations & Support;
Other Professional Services
Service Delivery
Centers
IT & ITeS
Cloud Service
Providers
End Users
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Indian Institute of Management, Kozhikode
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Industry Analysis- Technology
105
000
Industry Analysis- Technology
Metrics
Metrics
SaaS companies commanding higher valuation than traditional IT-ITeS players.
Reasons for higher multiple could be:
- Recurring revenue ! Annual recurring revenue
- Fast growth ! Client growth %
- Easier scalability, Larger market via the cloud ! Client and geographical
penetration
- Higher lifetime value of customers via long-term contracts ! LTV vs CAC
- Proprietary technology and IP ! No. of proprietary tech. patentable processes
- More deal activity in the industry ! Funding raised, investors’ interest
• Growth in Data Centers (2nd
Largest driver of IT spending),
Enterprise Solutions (Largest
driver of IT spending)
• Indian AI market valued at $6.4 Bn
(Aug’20) - IT and services has
41.1% share, tech sector
(software, hardware) has 23.3%,
BFSI has 9.6%
Meghraj Policy
100% FDI (Indian IT - 2nd major destination in
FDI), FDI in ows $62.47 Bn between Apr 2000 Sep 2020
Budget
NOFN
Allocated INR 53,108 crore (US$ 7.31 billion) to
the IT and telecom sector in Budget 2021
National Optical Fibre Network (NOFN) to
connect all 0.25 Mn Gram Panchayats in India with
high-speed broadband
Digital India
Government
schemes &
Initiatives
• SaaS growing at fast pace - frugalness
of operating in India, given the lower
manpower cost required to create a
large pool of diversi ed skilled talent.
• Increasing number of internet users
• Adoption of remote working
(increasing need of infra for storing
humongous volume of data)
• Covid reinforced tech-enabled
organizational transformation
• India’s highly quali ed talent
pool of technical graduates
• Cost advantage to India – about
5-6 times cheaper than US
• Incremental focus on
digitisation
Risk
&&Challenges
Risk
Challenges
Regulatory
RegulatoryEnvironment
Environment
FDI
Growth
GrowthDrivers
Drivers
MyGov; Focus on e-Governance
High Competition among new-age startups, technology giants – leading to
similar product and service portfolio
Revenue concentration across clients, geographies, >50% revenue of Indian IT
industry coming from US
Information & Cyber security; data protection & privacy
Information Technology Act, 2000
MEITY’s policies
Personal Data Protection Bill, 2019
Given the positive sentiment around the potential of technology, valuation
multiples of many companies have peaked
Due to emerging tech, companies may have to revisit their business
model and come up with new product offerings
Emerging
EmergingTrends
Trends
3C – Cloud, Collaboration, Cybersecurity, will drive the sector
Covid-19 pandemic induced major shifts –
acceleration in the pace of digital
transformation and hybrid work model,
changing the dynamics of the workplace and
the service delivery
IoT will help in increased transparency and ef ciency
in logistics management, data management and
infrastructure. Global industrial IoT market expected
to reach $949.42 Bn by 2025
High penetration of Industrial Revolution 4.0
technologies; Blockchain, AI, ML, Big data will
see enhanced use cases
SaaS market is expected to reach $219.5 Bn by 2027
from $68.2 Bn in 2020, CAGR of 18.2%.
fi
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Indian Institute of Management, Kozhikode
Changing business
models will be
witnessed amid
heightened digital
innovation across the
various industries
Cloud market is expected to grow from $371.4 Bn in
2020 to $832.1 Bn in 2025, CAGR of 17.5%
Cybersecurity - Spending on cloud security tools
projected to increase from $5.6 Bn in 2018 to $12.6 Bn
by 2023
106
Industry Analysis- Media & Entertainment
Overview
Overview
17 % CAGR
$ 2.23 Tn
$1.38 Tn
2020
M&E Sector - India
2023
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Advertising Spends FY 20
Media and Entertainment industry is projected to increase at a CAGR of 17% between 2020 and 2023.
M&E industry grows and falls faster than the GDP due to the given discretionary nature of advertising.
Advertising key source of revenue, but lately revenue from subscription & value added services are increasing
India’s subscription revenue is projected to reach Rs. 940 billion in 2023, from Rs. 631 billion in 2020
We have 550 million television and smart phone consumers today, we expect a billion screens by 2025
Despite a slowing economy, there was a robust growth in digital segment which posted a 26% increase in FY20
Television saw a 22% fall in advertising revenues due to highly discounted ad rates during the lockdown
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Website
Platform Maintenance
IT systems
Content making/buying
Distribution & Licensing
Salaries, Copyrights
Revenue Streams
Revenue
Streams
• Advertising Revenue
• Subscription revenue
• Value added services
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Television
Films
Print
Radio
Online Gaming
Out of Home (OOH)
Music
Digital & OTT
Animation & VFX
FY 2020
44 %
Others
10 %
Television
Digital & OTT
3636
%%
10 %27
%
27%
27 %
27%
Value
ValueMap
Map
ValueChain
Chain-- Value
Classi
Segments
Classication
cation &
& Major
Major Segments
Cost
Drivers
Cost
Drivers
Total Ad Spends - Rs 726 Billion
Print
FY2023P
41 %
18 %
Television
16 %
Print
13 %
18 %
Digital &
OTT
11 %
Films
15 % 15 %
10 %
Others
Business Model
Transaction Model
It’s a classical model
were revenue is
generated by directly
selling an item or a
service to a customer
Subscription Model
This model is based
on access to content
for a period of time
that’s recurring.
Access to pool of
content than one
content
Licensing Model
Content created and
then earn through
licensing its rights to
that another media
company handles
marketing and
distribution.
Content Marketing
Content Marketing is,
simply put, using
content as a tool to
market some other
product or service from
which you make money
Advertisement
Model
Advertising is most
common model, here
companies pay media
outlets to place their
ads in between/
beside their content.
Production and programming of content
across all mediums
Distribution of content and information,
representing nal touchpoint with end user
Engagement with and consumption of
content
Source : Accenture
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Indian Institute of Management, Kozhikode
107
Industry Analysis - Media & Entertainment
Growth Drivers
Competitors
Television
Key demand drivers included rising
demand for content among users
and affordable subscription
packages.
India’s per capita income at current
prices grew 11.0% to reach Rs
141,447 (US$ 1,960.46) in FY19AE
will increase consumer spends.
Growth has been driven by
personalisation and customisation of
content to regional languages
Widening of the consumer base
will also be aided by the expansion
of the middle-class, increasing
urbanisation and changing lifestyles
Elite af uent, aspirers & next billion
income class are expected to grow at
CAGR of 11%, 9% 5%, & 2%,
respectively by 2025 & will drive
growth in M&E
The number of suppliers of content
will increase due to low barriers to
entry and cheaper internet facilities &
free-of-cost social media platforms
Print
Film
Music
Challenges
New Tariff Order
Lack of Trust & Loyalty
The New Tariff Order (NTO)
implemented during February 2019
increased end-customer prices for
television content, reduced the reach
of certain genres of channels and
resulted in a 6% reduction in time
spent watching television during the
second half of calendar 2019
With the in ux of fake media and
making headlines, media outlets must
also look to establish credibility with
viewers. Misreporting the facts or
misrepresenting what was said can hurt
the network’s credibility overall.
Piracy
Battle for Space
Online piracy of lm and TV content is
rampant in India and investments in
preventive technology need to be
made robust if this is to be checked.
With social media and commerce
players increasingly investing in original
content or licensing more traditional
media players nd the economics of
content creation and acquisition
increasingly challenging.
Emerging Trends
On the back of increased wireless
and wired broadband connections
and proliferation of low-cost smart
television sets, they smart sets will
increase from 4 to 40-50 million by
2025
In FY20, TV penetration in India
stood at 69% driven by DTH
market. In FY20, DTH registered a
market share of 37% to the total TV
market against 34% in FY19
Government Initiatives
Consumption of regional content is
expected to grow over the next few
years. Currently it comprises over
50% of Tv viewership, 44% of lms,
43% of newspaper circulation and
30% of OTT consumption.
In 2020 rising number of consumers
switching to mobile/tablet/laptop
screens for entertainment increased
paid video-on-demand subscriptions
increased by ~60% YoY
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With consumers willing to pay for content
and extra services, the subscription
segment is going to play an important
role in the post-digitisation era.
·FDI in ows in the information and broadcasting sector
(including print media) stood at US$ 9.4 billion
between April’00 and December’ 20
Indian Institute of Management, Kozhikode
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The addition of another 100 million
smart phones and continued
conversion of 2G and 3G connections
to 4G, online gaming segment will drive
a 3x growth in this segment by 2022
·In February 2021, (IAMAI) nalised a code of
conduct to form the basis for self-regulation
code for OTT content.
·The Government of India
increased the FDI limit from
74% to 100%.
·The NTO 2.0 seeks to protect
consumers by capping tariffs for channel
bouquets, price composition of the NCF.
108
Copyright : Vineet Bajaj