Bain & Company: Case Interview. Introduction Take notes Ask questions Structure your analysis...

Bain & Company:Case Interview

Introduction

• Take notes

• Ask questions

• Structure your analysis

• Drive towards a recommendation

Case Question: Entertain Me

• Music retailer: cassettes, CDs, and videos

• Business Activities – Mail order—records and tapes– Went public– Expanded retail stores to 400 mall-based stores– Recent focus on Internet– Mail order channel was allowed to die

• Issue: Declining revenue and margins

Structure your approach

• Wrong: Always use the same framework regardless of the business issue

• Better:– Clarify the primary business issues– Evaluate options

• Explore broader issues to determine if channel segmentation is appropriate during analysis

– Same product competing in overall market– Channels may have cost advantages

Framework

• Cost of Goods Sold (COGS)– Multi-channel approach in order to increase volume and decrease

unit costs

• Sales, General & Administrative (SG&A)– Retail: sales people– Mail Order: call centers– Internet: promotions, ads, program development– These channels may share general overhead, but it is important to

explore points of differentiation:• Activities• Customers• Competitors

Competitors & Customers

• Online competition is highly fragmented – Mail Order: historically have focused on this channel;

now moving online

– Retail stores: off-line consolidation; moving online

– Internet: Many Internet-only retailers

• Customer demographics for various channels differ

Channels

• Retail: Adequate, consistent with industry standards

• Mail Order: May have been a cash cow even if market growth was declining

• Internet: Drive profitable growth

Explore each channel’s revenue and margins individually

Strategic Issues

• Level of differentiation– Reputation– Mall stores: easy returns, advice from entertainment associates

• Metrics– Revenue

• +10% in 1997• +2% in 1998• - 10% in 1999• compared to 50+% market growth

• Cost Performance– Structure: How does this overall cost structure compare to the cost structure within each

channel?• 60% COGS• 10% distribution• SG&A up 5% over last 2 years

Revenue Analysis

• Decline in prices– Lack of differentiation

• Easy product returns to mall stores• Cross promotions to create loyalty effect• Recommendation engines

• Decline in volume– Customer demographics for various channels– Key volume drivers

• Visitors to the site• Purchase frequency• Average purchase volume• Repeat purchases• Compare to mail order channel and online competitors

Recommendation

• Encourage existing mail order customer base to move online– Direct mail to build awareness of the site– Communicate with customers to mitigate online security concerns

• Cross channel promotions– Virtual coupons in direct mailer– Long-term coupon plan to build repeat purchases– Friends & family programs

• Integrate offline assets– Easy returns at over 400 stores nationwide– Professional advice from entertainment associates

Leverage assets across multiple channels

Recommendation

• Target new customers with trials and promotions

• Adjust product line to focus on niche market

• Strategic alternatives– Merger

– Divestiture

Consider alternatives