0 ROSS SCHOOL OF BUSINESS Casebook 2008 Ross Consulting Club Note: This document is for the use of Ross Consulting Club members only. Reproducing or transmitting any part of this document in any form or by any means without the explicit permission of the Ross Consulting Club Board is prohibited. Table of contents: 1 Case 1: Film Production, Bain rate of decrease is increasing; Down 8% from 96 97; down 13% 97 98. (Interviewee should begin to think about what the drivers of the revenue decrease are and may ask for if a revenue breakout is available) Ex 2 OVS costs decreasing past 2 years; rate of cost decrease is increasing, but is not keeping pace with the rate of revenue decline; Down 4% from 96 - 97; down 7.5% 97 98. (Interviewee should begin to think about where the cost reductions are coming from and what the drivers are. May ask for a cost breakout for OVS.) Ex 3 Volume of deliveries are dropping over the past few years. What is the driver? Can have Interviewee speculate. Ex 4 Average price per delivery has remained stable; so revenue per delivery has not dropped. Ex 5 OVS is dominant player in market but has been losing market share 20% over the past 2-years. Interviewee should be able to estimate the competitors market size, as well as the percentage of the market OVS currently has. OVS Revenue: $200M (40% of market) Vend Int. Revenue: $130M (26% of market) Candy same key information should be obtained. Ex 8 There are many take-away-s form this slide. First, interviewee should see that OVSs COGS, SGA and Repair costs are significantly higher (roughly 100%) than the competition. Additionally, OVSs costs for delivery are in line with their competitors, despite higher market share which would correlate to the poor customer satisfaction when it comes to delivery. This may begin to suggest that OVS could reduce costs in COGS (reduce product variety since it isnt as important to customers; get better prices if buying larger volumes of fewer products), reduce repair costs (again, not as important to customers) and reallocate some of this to delivery to increase customer satisfaction. SGA may also see a slight reduction as complexity in ordering, labor and other line items as fewer products are ordered and repairs are reduced. Also, interviewee can calculate each firms profit margin in order to compare them in a more direct manner. OVS: 200/200 = 0% Vend: 117/130 = 10% Candy: 98/110 = 11% This clearly shows that OVSs profit margin is non-existent and that their competitors are running a more efficient operation. Ex 9 OVSs cost per delivery is 9.5% higher than the competition. Also, the breakout of the overall costs within each delivery differs: OVSs COGS and SGA per delivery are higher (roughly 70% of total delivery cost versus 50%) OVSs delivery bucket of the overall cost per delivery is roughly half the cost of the competition again, not meeting customers need and spending less than other vendors. Ex 10 OVS has been reducing costs across the board, but the largest reduction has come from deliveries which is clearly impacting the overall business. The small decreases in the other large buckets, has not significantly impacted overall costs. Case 2: Office Vending Services -hard- Bain competitors are meeting customers needs and are stealing share away from OVS o OVSs spending on Product Variety and Repair are significantly higher than the industry spends and are in areas that customers do not value as much need to reallocate and reduce Potential next steps: o Look to reduce COGS, SGA and repair costs A reduction in product variety could decrease COGS through economies of scale OVS would purchase higher volumes of fewer products, lower cost/unit Reduction in variety may also reduce costs of delivery as there would be fewer products to carry in vehicles (more deliveries possible) and may reduce the time/complexity of refilling a machine o Increase spend on delivery to improve customer satisfaction (more research needed) More drivers Better vehicles More efficient delivery routes Case 2: Office Vending Services -hard- Bain Company Annual Reports; Office Vending Services Financials 0 100 200 300 400 $500M Total market sales Others Candy how segmented the market is and if there are specificities related to regions is doing: how many competitors do we have, are there new competitors in the market, have they stolen share from us, are they offering services that we are not - Further, the consumer: who are they, what do they want how our clients products meet their needs Information to be provided upon request: Revenues come from 2 different divisions: - Trading : $3B - Asset Management: $2B Trading means that brokers do specific transactions as per their customers requests. The revenue in this division would come from a fixed fee of $10 per transaction. In the Asset Management division, the firm is administering the customers mo