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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