Case Study

Question1
We have a large broking firm ABC Ltd which has pioneered the online broking industry
and has been a market leader in terms of its diverse products mainly Equity, Mutual
Fund etc. The company has a customer base of around 4 million customers with PAN
India presence of about 500 employees in about 300 branches across. It has a big sales
force which acquires roughly 33K customers monthly. ABC Ltd also provides advisory
services to its customers regarding investments.
Over the years, the Company grew and moved from pure online player to brick and
motor model and developed a lot of products in-house. Customers liked the product and
services offered by this Company but found the brokerage charges pretty high. Over the
years, there has been no one to challenge the Numero Uno tag of this broking
Company. In recent times, the products and services took longer to hit the market. ABC
Ltd is currently charging brokerage of 0.45% in the delivery segment from its customers.
In recent times, another company XYZ Ltd has made an entry and captured the market
big time with offerings like Zero brokerage for the transactions done in different
products. In a short period of time, the company with complete online business model
has kept the costs minimal and acquired big number of customers. However, it does not
offer any financial advice or research advice to the customers. It has been able to lure
young customers in fast growing emerging markets. It has no marketing budget and
relies on word of mouth to attract new users.
The age wise distribution of customers for both the firms are given below. A customer
is considered active if he has conducted at least one transaction in the last 6 months.
ABC Ltd

Age Cust Count % Cust Active Cust

0-35 6,00,000 15% 1,00,000
35-50 21,60,000 54% 4,00,000
>=50 12,40,000 31% 2,00,000
Total Customers 40,00,000 100% 7,00,000

XYZ Ltd

Age Cust Count % Cust Active Cust

0-35 7,20,000 60% 5,00,000
35-50 3,00,000 25% 2,00,000
>=50 1,80,000 15% 1,00,000
Total Customers 12,00,000 100% 8,00,000
The active customer base of ABC Ltd and XYZ Ltd are given below :

The customers of ABC Ltd and XYZ Ltd use the following modes to transact

What are the steps that ABC Ltd should take to remain competitive in this
market?
Question 2
The NLC Co. of Kyoto, Japan, employed several thousand men and produced 500,000
pieces of lacquer tableware annually, with its Chrysanthemum brand becoming Japan's
best known and bestselling brand. The annual profit from operations was $250,000.
The market for lacquerware in Japan seemed to have matured, with the production
steady at 500,000 pieces a year. NLC did practically no business outside Japan.
In May 2000, (much to your chagrin!) the ambitious and dynamic, Mr. X (Chairman,
NLC) received two offers from American companies wishing to sell lacquer ware in
America.
The first offer was from the MKV Co. It was the largest manufacturer of good quality
dinnerware in the U.S., with their “Rose and Crown” brand accounting for almost 30% of
total sales. They were willing to give a firm order for three years for annual purchases of
400,000 sets of lacquer dinnerware, delivered in Japan and at 5% more than what the
Japanese jobbers paid. However, X would have to forego the Chrysanthemum
trademark to “Rose and Crown” and also undertake not to sell lacquer ware to anyone
else in the U.S.
The second offer was from SSW Co., Chicago, the largest supplier of hotel and
restaurant supplies in the U.S. They perceived a U.S. market of 600,000 sets a year,
expecting it to go up to 2 million in around 5 years.
Since the Japanese government did not allow overseas investment, SSW was willing to
budget $1.5 million for the next two years towards introduction and promotion. X would
sell his “Chrysanthemum” brand but would have to give exclusive representation to
SSW for five years at standard commission rates and also forego his profit margin
toward paying back of the $ 1.5 million.

What should Mr. X do?

Suggestion 2
Options:

 Reject both: React both the offers and concentrate on the domestic market
 Accept MKV offer: Accept the Rose and Crown offer and supply the offer by cutting
down on supplies to the domestic market or through capacity expansion or both
 Accept SSW offer: accept the SSW offer and meet it through cutting down on supply to
the domestic market or through capacity expansion or both. Negotiate term of supply.
Evaluation of Options:

 Reject both: This option would not meet the primary criterion of profit maximization.
Further, the objective of growth would also not be met. Hence, this option is rejected.
 Accept MKV offer: The RC offer would assure net returns of $283,000 over the next
three yeas. It also assures regular returns of $240,000 per year. However, X would have
no presence in the U.S. with its Chrysanthemum brand name The MKV offer would
entail capacity expansion, as it would not be possible to siphon of 275,000 pieces from
the domestic market over three years without adversely affecting operations there. At the
end of three years, Mr. X would have little bargaining power with RC as it would have an
excess capacity of 275,000 pieces and excess labor which it would want to utilize. In this
sense the offer is risky. Further, the offer is not flexible. Long-term profit maximization
is uncertain in this case a condition that can be controlled in the SSW offer. Hence, this
offer is rejected.
 Accept SSW offer: The SSW offer does not assure a firm order or any returns for the
period of contract. Although, in its present form the offer is risky if the market in the U.S.
does not pick up as expected, the offer is flexible. If Mr. X were to exhibit caution
initially by supplying only 300,000 instead of the anticipated 600,000 pieces, it could
siphon off the 175,000 required from the domestic market. If demand exists in the U.S.,
the capacity can be expanded. With this offer, risk is minimized. Further, it would be
competing on its own brand name. Distribution would be taken care of and long-term
profit maximization criterion would be satisfied as this option has the potential of $1
million in profits per year. At the time of renewal of the contract, Mr. X would have
immense bargaining power.

Recommendations:

 Negotiate terms of offer with SSW: The terms would be that NLC would supply
300,000 pieces in the first year. If market demand exists, NLC should expand capacity to
provide the expected demand.
 Action Plan: In the first phase, NLC would supply SSW with 300,000 pieces. 125,000 of
these would be obtained by utilizing excess capacity, while the remaining would be
obtained from the domestic market. If the expected demand for lacquer ware exists in the
U.S., NLC would expand capacity to meet the expected demand. The debt incurred
would be paid off by the fifth year.
  Contingency Plan: In case the demand is not as expected in the first year, NLC should
not service the U.S. market and instead concentrate on increasing penetration in the
domestic market.

Question 3
Verizon Communications (NYSE: VZ) is an American multinational telecommunications
conglomerate and a corporate component of the Dow Jones Industrial Average. The
company is based at 1095 Avenue of the Americas in Midtown Manhattan, New York
City. Its Verizon Wireless subsidiary is the largest U.S. wireless communications service
provider as of September 2014, with more than 100 million mobile customers.
Wind Mobile Inc. is a Canadian wireless telecommunications provider headquartered in
Toronto, Ontario. Founded in 2008, Wind Mobile was one of several new mobile carriers
launched in Canada in 2008 after a government initiative to encourage competition in
the wireless sector. With more than 600,000 active wireless subscribers (as of the end
of May 2014) in urban areas of Ontario, British Columbia and Alberta, it is Canada’s
fifth-largest mobile operator.
Your client Bell Canada is a major Canadian telecommunications company
headquartered in Montreal, Quebec. It is the incumbent local exchange carrier for
telephone and DSL Internet services in most of Canada east of Saskatchewan and in
the northern territories, and a major competitive local exchange carrier for enterprise
customers in the western provinces.

The year is 2014. This past June, Verizon announced that it was seeking to buy Wind
Mobile and thus enter the Canadian market. Your client, the CEO of Bell Canada, has
hired you to answer three questions. First, what impact will this have on the Canadian
telecommunications market? Second, how should they respond to ensure profitability in
the long term? Finally, what strategies can we implement aside from our response to
Verizon to improve profitability and reassure our shareholders?

Question 4
Two companies (Your client and its competitor) are the only players in an industry and
produce exactly the same product. Your client is the pioneer in the industry and has
controlled 70% of the market for many years. Their competitor (with 30% market share)
has always followed price changes 

initiated by your client. Recently though, the competitor has aggressively lowered prices
by 15% and has cut into your client’s market share reducing it to 60%. Your client’s
profit margins are only 14%, so they are hesitant to match the price cut, but they are
afraid that they will continue to lose market share if they don’t.

Assume that there is no threat of new competitors entering the market and that there
are no substitute products. All inputs are commodities and are readily available. The
end-users are sophisticated and make their purchasing decisions based mostly on
price. How has the competitor managed to cut prices so dramatically and still make
money? And what would you advise your client to do in response to competitor’s price
cut?

Suggestion 4
This is a closed plan for dragging my client in a WAR PRICE , that will make us lose market share so
quickly compared to the years of profit we have accomplished.
Therefore , we will play a price war BUT in another form . One option is to decrease price first 10% but we
will do another form of package like buy one and get another item free (cost is same as 10% cut of price),
we will continue to a certain time where we can freeze the competition , then we can move to 15% cut if
needed and add a new idea of BUY THREE GET ONE FREE.
Another solution is bring the product from another manufacturing country source (let’s say original is USA
made and we have manufacturing in China , where cost is lower) , and introduce this product in a Lower
price than competition in market , and keep our original product USA made in its higher price untouched ,
and we start to market the new china product (same brand but made in china) with new price to kill
competition , and we segregate our original USA product into another market indication , in which we can
focus on by brochures and flyers to position our brand in another totally perception for the customers ,
where we keep our CHINA brand make the war price on competition.

Question 5
Our client is a large tire manufacturer in Vietnam named “VieTire Inc.”. For more than a
decade VieTire has been the only player in that market due to high tariffs on imports.
They dominate the tire industry in Vietnam. As it stands, the tariff is 50% of the total cost
to produce and ship a tire to Vietnam.

Recently, however, due to the forces of globalization and lower consumer prices, the
Vietnamese government has just decided to lower the tariff by 5% a year for the next
ten years. VieTire is very concerned about this change, as it will radically alter the
landscape of the tire industry in Vietnam. They have hired your consulting firm to assess
the situation and to advise them on what steps to take. What would you recommend?