Full Interactive Consulting Interview Case (Market Entry) | Case Interview Prep - "Mike Apparel"

hey everyone it's jake and scott with case binge today we're running a full market entry case called mike apparel thanks for the ross consulting club for giving us this case it's a super good intermediate case for you to run we put pauses in the video to make the case interactive so you can use this as your actual case practice and remember to stick around for the feedback at the end of the video you can grab a pen and paper or just sit back and watch you got this you're gonna do great let's get into it great let's get into the case that sounds good perfect okay so our client Mike apparel is a large apparel and sporting goods company and the client is interested in entering the women's golf apparel market and is looking for guidance on whether or not this is a good idea okay is there any specific reason that women's golf barrels what we're looking at right now so that's a good question our objective is to invest extra cash we don't know exactly how much into a profitable project so got it trying to put this cash somewhere okay um do we operate globally re within the US us okay so just to recap we were working with Mike apparel mm-hmm large sporting goods store apparel think of something like an academy they're looking into entering the women's golf apparel market yeah and basically their whole goal is just to invest extra cash that they already have on hand into something profitable and we only operate within the United States all right there any other objectives I should be aware of no that's it okay do you mind if I have a few moments you're scouting my thoughts of course great thank you you all right so taking I feel like I can see this from a few different angles so first there's the women's golf apparel market hmm I think it's important that we look at the size of this market trends you know is it growing is it shrinking and who the customer base is for the ones called a federal market we also want to look at our own company who are our customers for for our client for Mike apparel what kind of production do we have in place or any processes is it going to be easy for us to ramp up to women's golf apparel or use entirely new processes again I I suspect it's probably fairly similar because we're doing other apparel already but something to look into for sure and then cost center we have to figure out what research development has to be done in order to design these products and produce them whether there's any specific technologies that we have to include in the production as well and then also just be the cost of acquiring customers hopefully that wouldn't be too dramatic knowing people already come to us for apparel and so it's a natural next step to come to us for women's golf apparel but Sonia we shouldn't ignore my hypothesis though is is that it's it's probably best to focus on the ones Golf market primarily on size and trends just because that's gonna have the biggest impact on the profitability on how much revenue can we actually achieve to offset our costs and make this a good news for extra cash yeah so our client actually does want to look at the market so that's a perfect place to start and specifically we're trying to estimate the total size of the women's golf apparel market and so we think you know given where a large apparel and sporting goods company that we can capture 20% of the market okay and so given that 20% number I want you to just try to estimate based on your assumptions how large is this market interesting okay that's funny I have yeah always just like it's qualitatively felling about you know which my friends play golf but it's an interesting question of you know how much how many people nationwide actually will play golf and so um I guess a way to think about it I would think about you know the total US market uh-huh and then I would want to figure out from that narrow it down to a total number of women in the US and then from that those kind of in the age range obviously you want to exclude people that are you know very small children and then you want to exclude people that are you know elderly and so narrowed down to you know us women within the right age range and then a golf is definitely more expensive sport I know some sports are pretty easy to adopt for anyone you know basketball you just go get the basketball you find out you know a local hoop golf is a bit different I know in my own experience I've only gone a few times and usually have been kind of upset about how much I had to pay and so I know there's definitely a limiting factor of people that are willing and also just able to pay for clubs for memberships for even just a single round of golf and so then that I would kind of want to look at the kind of those without economic barriers hmm and then from that not everyone who can play golf who fits in the Adrian's etc actually plays and so I'd want to narrow that down to those that actually play and then after that I would apply the capture rate of 20% and so just to start kind of zooming back out to the very top is it fine to assume about 300 million people in the United States okay so if they're about 300 million people in the United States safe to assume about 50 percent of them are women so that narrows that down to 150 million women in the United States it's been interesting to guess who is not in the age range granted I've seen some pretty small children play golf and so I think the age range on the bottom end is a little bit lower even though I naturally think and then lots of people play golf well into their you know 60s and maybe even 70s and so would be safe to assume about 80% of people that's a good number great so if about 80% of people fit within the age range we just do 150 million times you know 80 and so 15 times 8 5 times 8 is 40 carry that over and that will be 12 and so about 120 million women in the United States in the age range that we're looking and then this is where it is gonna be more of an assumption right there who economically is able and willing to pay it's like all like I mentioned there's cost for country clubs but then only even the smaller and with my you know friends go play around you know they find the cheapest course but it's still fairly expensive you know would be I figure among the people I've been around I guess kind of even in in the college atmosphere maybe 20% of people are willing and able to pay on a consistent basis to play and that might be you know a little bit overblown because the college demographic tends to skew a little bit more toward the wealthy side than in general what do we find if I assumed about 10% of people economically are willing and able to play yeah 10 percents a greater number okay and so that would bring us from a hundred twenty million down to ten million or 12 million apartment and then the actual number of those that play you know not everyone actually wants to play any given sport I feel like if people I know who you know physically are in an age range where they're able to swing a club you know willing to spend the money and I feel like even among that it's maybe about a quarter of the people one out of every four actually end up playing and so if I take that assumption that bring us down to about three million people in the total market size but again you know asked what could we actually capture if we have a capture rate of twenty percent and three times two is gonna be you know six and so bring us down from three million down to six hundred thousand people in our specific capture bull market size for women's golf barrel great okay yeah so we have this six hundred thousand number now that we have this market size I want to look at the revenue potential as well as the breakeven so I have some numbers I'm going to give you Scott and okay this kind of goes over some financials and I want you to go ahead and tell me how much money we could make per year given these financials and then how long is it going to take for Mike apparel to break even [Music] great thank you so much so taking a look at this okay it looks like we're primarily just selling two item shirts and hats which makes a little bit simpler for us right now yeah and it looks like right here we have buying frequency if you know people buy two shirts per year and in one half per year and then the selling price and the variable costs so if we are looking at shirts it looks like is it fine already if I go ahead and jump to to profit potential I guess a four you know annual profit versus just annual revenue yes I think okay and so looking at that I'm gonna go ahead and start on the per item level and so shirts sell for $60 but have $15 variable costs we're making forty five dollars of profit per shirt and then on hat side $80 with $20 off of the costs is what I made $60 per hat and now we want to think about this from an average customer standpoint so that way we can apply it to the 600,000 you know average customers in our market and the average customer it sounds like buys two shirts per year so that'd be $90 worth of profit mm-hmm and only one half per year so $6.00 profit there which means the average customers gonna bring us in $150 a profit annually mm-hmm which sounds really encouraging right off the bat that is one thing I know is nice about some of the more expensive sports is that for those that are selling the products it's not actually more expensive to produce them as you see our variable costs are pretty low but people are usually willing to pay more for it so that is encouraging to see that $150 per profit per customer and now I want to multiply that by our 600,000 mm-hmm and so 15 times 6 right there that's 30 ok that's 90 and so you know that would be 90 million annually and so we could have a 90 million an annual profit but that doesn't take into account these numbers right here and so right there it looks like our fixed costs we've already you know attributed the variable costs in the per item basis and so when we take out our 5 million dollars of annual fixed costs on an annual basis we pulling in 85 million dollars in annual profit of course you asked also for the break-even and in order to figure that out we want to look at the research and development costs there's really only cost listed as initial startup costs I want to take that 255 million and divide that by you know how much annual profit we'll get each year and so that's divided by 85 million mm-hm and so thinking eighty-five you know eight times two is sixteen that's definitely be more than 2 years and 8 times 3 is 24 and then yeah the 5 times 3 is 15 and so that's actually fits in perfectly hmm and so 3 years is the exact break-even time in which we will go from recovering our initial startup costs to actually just generating a profit on top of it it would by 85 million dollars a year yeah thank you for walking me through that so 3 years so now that we have that 3 year number tell me about that what do you think is that a lot of little walk me through your thoughts I definitely haven't looked at what the break-even is for other divisions of sporting goods stores but three years does strike me is fairly quick yeah our hope would be that this I assume would be a pretty large division I think about anything to walk into an academy or any source similar to that and we might not be identical but there are a lot of sections but each section is pretty substantial I mean you have basketball you have baseball you have football you have softball you have golf men's golf women's golf and so for one of our major you know one of our major kind of product types to be able to recover all of our costs in three years sounds really encouraging and having eighty-five million dollars annually build up after that and profit is really I think a good sign especially considering we haven't haven't taken to account any growth rate I would love to know as I mentioned earlier any information about trends of is women's golf growing is women's golf apparel growing mmm and maybe even aside from the market growth in general maybe we can just do a better job of acquiring customers than we're projecting right now and steadily increase our capture rate mm-hm and so all this looks pretty promising I think that number that jumps out to be the most though as you mentioned the very start we're looking to take our extra cash and use it for a profitable project this is looking like a very profitable project but two hundred and fifty five million dollars to start off it's a lot of cash I don't know I know you mentioned we don't have a specific number of cash that we're looking to invest right now but that is something that does give me a little bit of pause in an otherwise really promising situation yeah so I agree that 255 does seem like a big numbers so let's say maybe Mike Apparel is trying to strategize ways to they want to enter the market the women's apparel market but they don't want to spend that much money what are some ways that you go about that and so do they have to spend that within specifically golf or just some some other injury the market that accomplishes their purposes um let's just start specifically with the women's apparel okay so within women's apparel I think there's a few routes you could go if they don't want spend two hundred and fifty five million dollars to in start-up cost they could go with a more kind of niche sport that you know might be a little bit cheaper to produce but my edit a ssin with that way that's a women's rowing or wins lacrosse or wherever it might be either in some ways it might even be more expensive to do the development just because it's it's not something that has as many similarities with their other sports and so niche sports is an idea that they should look into but I do think actually I mean this is proven to be just from our numbers right off the bat really profitable within women's golf and there might be a way to enter the ones golf market without going and really to the full extent immediately that might let us test the market and see you know are we actually having a returns that we expect how is the market growing because we're gonna have six hundred thousand people you know I guess three million people in the u.s. that fit into this range and we think we can capture twenty percent of them it doesn't mean we would only capture ten if we're only providing half the products you know and so we still would have six hundred thousand people that we could sell a shirt to even if we're not selling the shirt and the hat so I would definitely look at you know would that cut our start-up costs down significantly to just you know kind of provide only half the offerings that we maybe would want to in a full launch and do a smaller lunch and maybe even if we want to do a very small test launch things like women's golf gloves that I know are crucial to the game and and probably would cost a lot less than two hundred fifty five million to start up but would help us test how able we are to actually reach that market yeah those are all really good ideas and so now Mike Apparel CEO walks in what are you gonna tell him or so we should enter the woman's golf barrel market with the information that we know right now this is looking like a very profitable venture we can expect to make about eighty-five million dollars in annual profit and that will recoup all of our setup costs within just three years and then after that you know build up 85 million per year and we might even be able to grow that if we can increase our capture rate over time or if the market continues to grow there are some concerns though obviously we want to look at what we're pushing off the shelves in order to bring this onto the shelf and is that gonna cannibalize some of our current sales and then on the other side it's just pretty expensive again I would want to know more about does Mike apparel have two hundred fifty five million dollars worth of cash spend if so this is a great venture if not maybe we should in the short term look at and doing a smaller beachhead into the women's golf apparel market with gloves or with gestures or with just hats and then a long-term I think it's really important for us to consider how do we increase our capture rate 20 percent is a really good capture rate but if we already are you know well-established large sports apparel brand people are already used to us and maybe we can establish ourselves is the long-term leader in women's golf apparel such that that's perhaps are our highest capture rate among any of our product divisions thank you so much really appreciate it all right everyone great job you're done now let's hop into the three minute drill for some feedback there are three things that I thought Scott did really well in this case asking clarifying questions charting a path for his math and remaining focused on the overall question let's dive into each point more specifically so Scott asked really good clarifying questions after I explained the case to him this showed me that he thought of this case as a real-world business problem really for any market entry case you want to ask why this company is trying to enter this market in the first place the answer you get will ultimately help keep you focused throughout the case and in your final recommendation it's also good to ask in any type of case what other objectives you might need to be aware of here's a look at how Scott asked his clarifying questions is there any specific reason that women's golf peril is what we're looking at right now all right there any other objectives everywhere when I asked Scott to do the market sizing he did a great job of staying organized and showing me how he was planning to solve it it involved a lot of steps in assumptions so he could have easily seemed lost but by laying out his process ahead of time he was able to maintain control and make the math easier on himself let's watch how he starts the math by doing this I would think about you know the total US market and then I total number of women in the US and then from that and last Scott did a great job of keeping the overall objective of the case in mind this really helped him focus on what was most important without getting off track it helped that Scott wrote those big questions at the top of his page and he could consistently look back at them throughout the case so then he could relate each part of the case to those questions and make sure that he was answering them in the conclusion here's a great example as you mentioned the very start we're looking to take our extra cash and use it for a profitable project thanks Jake two ways I could have improved on this case include being more concise when explaining my framework and better structuring my thoughts during the brainstorming section well it is good that I explained my framework and why I wanted to approach the problem that way I spent more time explaining each part than I needed to this made me seem less confident because I acted like I needed to justify everything that I was doing a great explanation of the framework will include a quick high-level overview and then do a better job of explaining my hypothesis or my best guess at where we should start the case when Jake asked me to give my thoughts on different ways to enter the women's apparel market he was basically asking me to brainstorm while brainstorming can be unstructured and off-the-cuff - ooh I love the place and more structure would have actually been helpful it's okay to ask for a few seconds to gather your thoughts and might help you to write down a few words to keep you focused before explaining your ideas awesome for the last part of the three minute drill let's look at an intangible that Scott demonstrated that you could really benefit from focusing on one intangible Scott showed well was his curiosity about this case if you've solved a few cases before you might have thought this Mike Apparel case is pretty straightforward but Scott took this to the next level by including personal references from his life and asking me questions that showed me that he was thinking about this problem deeply this is also gonna make the case feel way more conversational which will leave me as an interviewer way more impressed with you here's a few examples of what I'm talking about golf is a bit different I know in my own experience I've only gone a few times and usually have been kind of upset about how much I had to pay it's a lot of cash but that is something that does give me a little bit of pause alright that wraps up the three minute drill before we head out though we have two quick pieces of advice to ask from you all number one what types of cases do you want to see us run number two what do you find hardest about cases that you want more advice on Jake and I read and discuss every one of our comments and so make sure to comment down below thank you all so much for watching we believe case prep shouldn't be stressful so we're gonna do everything we can to make sure you're feeling good if that sounds helpful to you make sure to subscribe and have a great day number one what type [Music]

Channel: CaseBinge

Views: 23,782

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Id: uA8KuM67lEw

Length: 20min 58sec (1258 seconds)

Published: Wed Jun 03 2020