BCG Technology Case Study: Electronics Retailers

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In this BCG mock case interview, Erick walks through a technology case study. In the case, an electronics retailer is facing intense competition and is feeling the pressure to understand the future of the industry and what the winning retail model is. Watch as Erick dives head-first into the tech case study to show the interviewer why he would make a top consultant at BCG.
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◈ “How do I prepare for a BCG case interview?"
◈ "How do you pass a BCG case interview?"
◈ "How to solve a candidate-led case?"
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Timestamps:
0:16 - Intro to the case
0:54 - Case recap
6:12 - Building a framework
34:10 - Final recommendation
36:32 - Feedback by the interviewer

[@dimitrispapadimitriou3547]

Given you actually have 2 equations with 2 unknowns you dont actually need extra information to solve the net income problem. You find fixed costs as a function of revenue using the NI=0 equation and then substitute this into your new NI with double revenue and the 1.75 fixed costs. Thus you have an equation with NI and Revenue. Dividing by Rev. gives you the profit margins. No need to actually have data on the revenue and the fixed costs.

[@akshatbhandari827]

exactly my thoughts. She said we need the ratio of net income to revenue. And we can get that

[@twobeastsstudio]

would anyone please elaborate more on the math question?

[@TheFreakout66]

Happy to help to the best of my understanding!
Here's what we were given:
Gross Margin: 25% (this % remains flat into year 2)
NI: $0
Fixed Costs: Do not scale up 1:1. Meaning, if revenue was $100M in year 1, and $200M in year 2, fixed costs do not also double to $50M. Instead, they are 75% of that value, so in this case 75% of $50M = $37.5M for year 2.
Here's what was needed:
Current Revenue: $100M
Year 2 Revenue: $100M doubled = $200M.
Calculation (Year 2):
Revenue: $200M
COGS: (Not needed, but after we find G.Margin ($50M) we could do $200M-$50M to find COGS of $150M)
Gross Margin (25% of Rev) / Gross Profit : $50MM
F.C: $37.5M (75% of 50MM)
Net Income: Gross Profit - F.C = $12.5MM
There was mention of Operating Profit (EBIT): $25M. If you wanted to find net income from this, you'd need to subtract interest and tax.
This was my best understanding of the math!

[@twobeastsstudio]

@@TheFreakout66 thanks a lot for your help, i was confusing on the part of operating profit actually. so it's clear now!

[@shubhamawasthi5331]

Is this channel and podcast named Strategy Simplified the same?

[@Managementconsulted]

Shubham, the podcast is Strategy Simplified and the channel is Management Consulted!

[@omarmalik3277]

Would this really be a pass?

[@mayank410mathur2]

How old is this case? What year was this conducted in?

[@aneleintech]

Great question, some of the interviewee's responses are VERY outdated

[@HipHopGalaxyZA]

As a former commercial manager in a national retail chain this was painful to watch

[@johnanon372]

The BCG partner was really patient... 14:46 This is when she gave up and just decided to down-scale the entire case...

[@reemfahim1798]

you dont really need the revenue and fixed cost data to reach the net income % ... i find the way the case is solved rather confusing than helping.

[@alimassoudi2035]

This was really painful …

[@stanvanillo9831]

Sounds like they should open an NFT marketplace

[@ThomasSullivan3]

The interviewee says “you know” over 200 times in this case. This is his replacement for “um” or a breathe pause. This is problematic because he’s literally telling the client “you know” when it’s obvious they don’t know. This is a VERY difficult speech problem to fix unless someone is working with you to break it. “You know” is also subliminal when used so often and can cause unpredictable effects when communicating.

[@nandakishorev5898]

😐

[@Lulu-ky5xx]

I didn't get the net income part I want to cry 🥺😖

[@cook4jinn69]

The interviewee actually does NOT need to know other variables to get the right answer, except GM%(25%), Fixed cost%(25%), and the Fix cost percentage increase ratio(75%).
Before doubling the revenue:
We are told that Net profit= 0
so we know GM(25% of revenue) = fixed cost(25% of revenue)
After doubling the revenue:
Fixed cost%= 25%*75% =18.75%
(we are told the fixed cost does not grow in proportion to sales, only 75%)
So we know the Net Profit= GM(25% of revenue) minus fixed cost( 18.75% of revenue)=6.25%
Hope it helps you.

[@casscass7764]

Hi @@cook4jinn69 , please can you explain further?
- Where does the equation "Net Profit = GM - Fixed Costs" come from? I can't find this equation when I look online.
- If fixed costs grow by 75%, then surely you should do 0.25 * 1.75 not 0.25 * 0.75?

[@Ansh.Varma.Career]

​@@casscass7764 Hi! Just came across this.
He is right, we don't need to know the exact numbers but my approach was literally to assume the same numbers as the ones the candidate had to ask for, just for simplicity.
I also agree that it makes sense to do 1.75* 25% to arrive at your new FC, and it could be one way to go about it. If you were to come up this approach in an actual interview, the interviewer would also agree that it is a sound approach, unless he/she has a solution in front of him/her, in which case they would slightly nudge you just to arrive at the same number as the solution, but you wouldn't get any points taken off for that since your approach makes sense :)
Hope this helps.