Case Interview Practice Case #2: Ride Sharing App Market Entry

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This is a case interview practice case that you can do on your own without a case interview partner. This case is an international market entry case, one of the most common types of first-round interviews at consulting firms such as McKinsey, BCG, Bain, LEK, Deloitte, and Accenture.
In this consulting practice case, you'll develop a case interview framework, solve quantitative problems, and answer qualitative business before delivering a case recommendation.
This case comes from Hacking The Case Interview’s comprehensive online course. If you find this case interview exercise helpful, check out our full case interview course.

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[@nish3978]

How did you guess the market share ???

[@jbw6351]

I nailed this one! My framework was nearly 1:1 with what you described and my methodology for solving the quantitative questions was spot on. Thanks for the help

[@samatsayakov611]

Population density could be a reverse factor for a ride-sharing app because it may mean two things: 1) There are a lot of traffic jams making the public transport more favorable to travel 2) The distances are usually shorter making taxi less attractive

[@yiannislinardakis1832]

Then why is taxi service so popular in New York?

[@ianpatrick23]

This is a great explanation of the market entry framework. Thank you for making this available!

[@simitometi6219]

Such an awesome video, so helpful !

[@payalverma2924]

Amazing approach

[@rogerhahn6626]

I feel you overlooked an array of Variable Costs for the startup and operation. First off, IT infrastructure costs are not fixed -- they scale based on usage; the more drivers/riders, the greater the IT costs.
Other variable costs would include: customer support (more customers & drivers = more issues reported; also need to also consider cost of supporting new native languages - French and possibly other European languages); paying for underlying software as a service such as maps API; taxes.

[@srishti1870]

Love the practice case interview videos!

[@HackingtheCaseInterview]

More to come!

[@popya1925]

great video! love this channel.
but how did you come with that potential framework? i mean how did you arrange it?

[@akhgh07]

much appreciated

[@Priya-fd3gl]

like the other commenter said -- in the 30% chance you lose all the revenue, you are still incurring the variable cost you owe to the driver. The person of this case should have clearly stated that no variable cost is incurred to the driver in the event all revenue has to be given up to the government.

[@jhizzle244]

Great video! Why would it be a 30% you lose your entire initial investment? I looked at it as calculating the B/E point which was 2 years and dividing that 30% chance by 5 (Since it says in the next 5 years that's the likelihood of banning) meaning that there would really only be a 12% of losing your 600M but there is a higher likelihood that you may lose the net margins of the next 3 years since likelihood of banning increases by 6% YoY. Thoughts on that approach?

[@JTgolf]

It says that if the regulation comes in then they would have to give up all revenues. I took that to mean even any revenues made up to the point at which the regulation comes in. Which also makes sense in terms of what they're likely to be looking for in the answer IMO. But yours is definitely sound logic.

[@KarmaFXOfficial]

I thought we only had 60% of the market share in the suburban area. Making its 500 x 60% x 60%. Since its 60% for the market share and 60% for the margin.

[@khelliscott8277]

How did you calculate the expected market share percentage when deciding the customer segment to target ?

[@elijahcota6331]

(% chance of losing * - amount) + (% chance of gaining * amount)

[@ataur31394]

It was a given

[@saritamohan80]

I dnt understand how you calculated the Fixed cost and Variable cost %? Did you jyst assume?

[@sertacgezer1026]

the result of this case changes when you take into account expected market share of 60%

[@SHIVAJI_NARASIMHA]

Where there is less demand for rides

[@rinkeshverma2880]

If i can perfectly solve these cases. Do you guys think that i can become consultant ?. Please share your opinioin

[@arishaffar2765]

Wouldnt the company loose all its Variable Cost too. shouldnt the real equation be (900.000*.7)+(.3*(-600,000-1,000,000)

[@azaryruthperpetua7658]

Thank you for the really great video. However, I still don't get the part when you calculated the expected value when government regulation applied (in the next 5 years). Why did you divide the equation by 30% and 70%? And what $450 M means?
Because, I thought that there will be only 2 condition if the government regulation prevailed; 1. the company lost $600 M or 2. the company gains $900 M.

[@stephenchew1665]

If you look at the equation at 7:25, you'll see that he multiplied the probability of the event happening times the cost/benefit of the event. So, after he calculated that the 5 year profit of $900M, he multiplied that by .7 because there is a 70% chance the government won't ban all foreign companies. He then had to subtract the fixed cost of 600M times .3 because there is a 30% chance that we would lose out on all fixed costs if the government bans all foreign companies.

[@Literal-Illiterate]

@@stephenchew1665 It still doesn't make much sense. The prompt says that it'll be 30% to lose ALL revenue some time within the 5 years. I'm failing to understand why the net profit will then be $450M if the 30% chance becomes true, assuming that within the first year it's a 30% chance that they can't operate in Paris, which leaves the fixed cost presumably higher within the first few years due to sunk cost in infrastructure. The expected value seems to be fishing Paris to be a viable solution when it's really not.

[@matcor90]

@@Literal-Illiterate i think the video assumes all fixed costs are spent on day zero and regulation is also assumed to come then. personally i would assume equal probability of regulation over 5 years and take into consideration profits made in the years prior. i.e. regulation comes in year 2 but we get some profits from operating in year 1

[@samuelputrab.2635]

@@Literal-Illiterate We can calculate the expected value by multiplying the probability of a case and the value of a case, for all cases. I.e. if 50% chances to get $100 and 50% chance to get $10, then the overall expected value will be 0,5*100 + 0,5*10 = $55. The concept is clear, but I do agree that it is a strange way to justify such case and does not clearly show that there is a possibility the business will experience loss.