Hi! Thanks for taking out the time to put this out- here is some feedback on this case overall and how you could improve them=. I didn't enjoy this case because there were many things that were amiss: On the interviewer's side: 1. I think the biggest issue is that the initial question/ ask from the client was not clear at all. 2. the test for whether the interviewer is clear or not is if the candidate can reduce the ask to 1, single-line question- in this case, the ask was all over the place and too broad. On the interviewee side, i think there was a general issue of business acumen: 1. the framework never expressly mentioned profitability- this is key 2. the framework never expressly mentions the break-even point, nor was there a discussion on this 3. there is no mention of potentially producing the drill via. JV agreement Generally, in the analysis between in-house and outsourcing, some key considerations were missed: 1. Execution risk- can we execute on this? - financially - do we have the talent for it? - Have we done something similar in the past with our R&D - Timeline and how long it takes to develop the technology 2.In-house proprietary tech - at some point, others will want to get into this ore mining and will need to excavate similar mountain - if we develop this tech, we cant patent it and protect it - we can also open a new revenue stream by licensing this technology to others (like how Mercedes makes engines for Renault despite being competitors.) Overall, i dont think this interview should get more than a 2/10. This is not a judgement on the candidate, but since this is Bain style, there was no leadership from the interviewee.
The first thing that came to my mind was: If they don't think they could profitably mine at the mountain, they should find another company that already has the technology to profitably mine this mountain. Craft an attractive deal for this company so that they will buy the mountain. This will involve putting themselves in that company's shoes and arguing how they could make profits from ownership of this mountain (something which they on the other hand couldn't do). Meanwhile, at the negotatiation table, they should try to hide the fact that they know that they can't profitably mine the mountain, because if they don't, they will have less negotating power. They should sell the whole mountain to this company for as much profit as they can (but it will probably be a small profit, because the recipient company probably knows that they are trying to dispose of this mountain because they can't do much with it anyways) to cut their losses. Furthermore, to increase our negotiating power, I woudln't just contact one company that would be able to profitably mine the mountain but as many as I can. Get these companies to bid against each other, and I will be able to sell the mountain for a higher price. After all this, the money gained by selling the mountain can be used to increase revenues in another way. This is better than having a sunk-cost fallacy mentality whereby they try to mine the mountain at a loss. Or just sittinig there with an untouched mountain. A lesson for the future: check if your drills can drill the mountain before buying any mountain. A miscellaneous revenue idea: If the drill that is to be manufactured in house works and is good, it can be marketed to other companies who need a strong drill. I would get the client to explain in more detail to me these doubts about the profitability of the mining operation. I wanna hear the reasoning grounding these doubts. It will get technical, but technicalities are important THE BIG QUESTION, which requires innovation: If minign the mountain currently can't be done profitably, HOW can we mine it profitably? 18:22 material and labor costs also, generally you want to try and do something inhouse first, before outsourcing. with this knowledge of how to do things, you can instruct the people who you outsource it to, to do as you say, and pay them less. 21:31 How do you guys determine how many drills you need? Don't assume that the quality of the drills if they were produced overseas would be the same as the quality of the drills produced inhouse. Also, since drills produced overseas last about 2 years, whereas those produced inhouse last about 4 years, this will influence the number of drills that need to be obtained. If you decide to build drills inhouse, you will require less drills.
The mining company bought this mountain because of the metal ore deposit. Imagine telling your client to sell the mountain right after they bought it. I doubt your interviewer would extend an offer to someone who suggests that!
The sale of the mountain would most likely be at a loss. While there are cases where this is the only way out of a tough situation I believe for the mining company there are much better solutions.
I think as the interviewer was explaining the numbers she just accidently started saying 30 years instead of 20, but all the calculations were based on 20 years.
The drill technology might be worth more than the ore in this particular situation. You can either sell the patent or manufacture the drill and sell. If you really want to maximize market share of mining you can either manufacture or outsource the drill for exclusive use and then buy up other mining sites with similar issues. Since other companies do not have access to the technology those sites would be at bargain prices as they would be considered unusable. Too much time was spent on the costs of mining for ore. I would expect the mining company already did a cost/benefit analysis before making such a large purpose but hit a road bump of finding out that the mountainside would be extremely difficult to mine after the purchase. It wouldn't make sense for them to have purchased the mountain if they already knew that they currently did not have the means of extracted any ore.
Could someone explain the $60.6M and $73M in costs? Did she mention drill capacity somewhere that would indicate the client uses more than 1 drill at a time? I can almost make the numbers work if I use the 30-year time horizon she mentioned at the end (even though that's not what revenue was based on), but they're still off. I get $60.75M for in-house, and the only way I get $73M for outsourcing is if I add the fixed costs for in-house manufacturing, which shouldn't be relevant.
I suppose, that the missing part is that in-house drill is able to excavate 500 tons per year, while the outsourced drill is excavating 400 tons, it means that we need 106 in-house drills (500*4= 2000 tons per drill; and 212K tons divided by 2K is 106) with 100K dollars price for each one or 212 outsourced drills (400*2,5=1000 tons per drill; and 212K devided by 1K is 212) with 250K dollars price for each one. So, taken this, in-house option costs are 30M+20M+10,6M (106*100K)=60,6M; and outsourced option costs are 20M+53M=73M.
The math for outsourcing the drill vs doing it in house seems very off. Not sure if there was additional information that she didn't provide, but a break-down of that math would be very helpful.
I think there's an information missing about how many drills are needed to extract those amounts. She never got into that during the case. Maybe this is the missing piece of information - and that would place your costs at the higher levels mentioned
Hi, thankyou for posting the video. I am still bit confused about the math structure for calculating rev. I thought it should be as follows. Years Total US production Client share New total market Tons mined by client (12000 ton cap) 1-5 64000 10% 64000+6400 = 70400 64000*0.1=6400 6-10 70400 15% 70400+10560 = 80960 70400*.15=10560 for rest of the year 20% and 25% would produce excess of 12000 so we can just assume 24000 for that period. So the total production would be 6400+10560+24000. Any insight would be really appreciated!
The client is not mining 10% from the previous existing market, but from the market in which it plays a part. Therefore, (64000 + x)*10% = x -> (64000 + x)*1/10 = x -> 64000 + x = 10x -> 9x = 64000 -> x = 7111
Hi! Thanks for taking out the time to put this out- here is some feedback on this case overall and how you could improve them=.
I didn't enjoy this case because there were many things that were amiss:
On the interviewer's side:
1. I think the biggest issue is that the initial question/ ask from the client was not clear at all.
2. the test for whether the interviewer is clear or not is if the candidate can reduce the ask to 1, single-line question- in this case, the ask was all over the place and too broad.
On the interviewee side, i think there was a general issue of business acumen:
1. the framework never expressly mentioned profitability- this is key
2. the framework never expressly mentions the break-even point, nor was there a discussion on this
3. there is no mention of potentially producing the drill via. JV agreement
Generally, in the analysis between in-house and outsourcing, some key considerations were missed:
1. Execution risk- can we execute on this?
- financially
- do we have the talent for it?
- Have we done something similar in the past with our R&D
- Timeline and how long it takes to develop the technology
2.In-house proprietary tech
- at some point, others will want to get into this ore mining and will need to excavate similar mountain
- if we develop this tech, we cant patent it and protect it
- we can also open a new revenue stream by licensing this technology to others (like how Mercedes makes engines for Renault despite being competitors.)
Overall, i dont think this interview should get more than a 2/10. This is not a judgement on the candidate, but since this is Bain style, there was no leadership from the interviewee.
How about making our own drill so that we can patent it and sell it to other mining companies that encounter other mountains with hard rock?
The first thing that came to my mind was: If they don't think they could profitably mine at the mountain, they should find another company that already has the technology to profitably mine this mountain. Craft an attractive deal for this company so that they will buy the mountain. This will involve putting themselves in that company's shoes and arguing how they could make profits from ownership of this mountain (something which they on the other hand couldn't do). Meanwhile, at the negotatiation table, they should try to hide the fact that they know that they can't profitably mine the mountain, because if they don't, they will have less negotating power. They should sell the whole mountain to this company for as much profit as they can (but it will probably be a small profit, because the recipient company probably knows that they are trying to dispose of this mountain because they can't do much with it anyways) to cut their losses. Furthermore, to increase our negotiating power, I woudln't just contact one company that would be able to profitably mine the mountain but as many as I can. Get these companies to bid against each other, and I will be able to sell the mountain for a higher price.
After all this, the money gained by selling the mountain can be used to increase revenues in another way.
This is better than having a sunk-cost fallacy mentality whereby they try to mine the mountain at a loss. Or just sittinig there with an untouched mountain.
A lesson for the future: check if your drills can drill the mountain before buying any mountain.
A miscellaneous revenue idea:
If the drill that is to be manufactured in house works and is good, it can be marketed to other companies who need a strong drill.
I would get the client to explain in more detail to me these doubts about the profitability of the mining operation. I wanna hear the reasoning grounding these doubts. It will get technical, but technicalities are important
THE BIG QUESTION, which requires innovation:
If minign the mountain currently can't be done profitably, HOW can we mine it profitably?
18:22 material and labor costs
also, generally you want to try and do something inhouse first, before outsourcing. with this knowledge of how to do things, you can instruct the people who you outsource it to, to do as you say, and pay them less.
21:31
How do you guys determine how many drills you need?
Don't assume that the quality of the drills if they were produced overseas would be the same as the quality of the drills produced inhouse. Also, since drills produced overseas last about 2 years, whereas those produced inhouse last about 4 years, this will influence the number of drills that need to be obtained. If you decide to build drills inhouse, you will require less drills.
The mining company bought this mountain because of the metal ore deposit. Imagine telling your client to sell the mountain right after they bought it. I doubt your interviewer would extend an offer to someone who suggests that!
The sale of the mountain would most likely be at a loss. While there are cases where this is the only way out of a tough situation I believe for the mining company there are much better solutions.
The initial time period for market share estimate was 20 years, towards the end 30 years is being used as the reference. What did I miss?
I think as the interviewer was explaining the numbers she just accidently started saying 30 years instead of 20, but all the calculations were based on 20 years.
@@dinocollins720 Thanks! Just wanted to confirm.
@@apoorvaawasthi8498 Of course! Definitely got a little hard to follow there for a while lol
Yeah and unfortunately we couldn’t know how the overall industry was growing so final revenue was a little difficult to relay to, but got the idea.
The drill technology might be worth more than the ore in this particular situation. You can either sell the patent or manufacture the drill and sell.
If you really want to maximize market share of mining you can either manufacture or outsource the drill for exclusive use and then buy up other mining sites with similar issues. Since other companies do not have access to the technology those sites would be at bargain prices as they would be considered unusable.
Too much time was spent on the costs of mining for ore. I would expect the mining company already did a cost/benefit analysis before making such a large purpose but hit a road bump of finding out that the mountainside would be extremely difficult to mine after the purchase. It wouldn't make sense for them to have purchased the mountain if they already knew that they currently did not have the means of extracted any ore.
What was the year of the interviewee? Was she an undergrad student? An experienced professional? An MBA student?
Could someone explain the $60.6M and $73M in costs? Did she mention drill capacity somewhere that would indicate the client uses more than 1 drill at a time? I can almost make the numbers work if I use the 30-year time horizon she mentioned at the end (even though that's not what revenue was based on), but they're still off. I get $60.75M for in-house, and the only way I get $73M for outsourcing is if I add the fixed costs for in-house manufacturing, which shouldn't be relevant.
I suppose, that the missing part is that in-house drill is able to excavate 500 tons per year, while the outsourced drill is excavating 400 tons, it means that we need 106 in-house drills (500*4= 2000 tons per drill; and 212K tons divided by 2K is 106) with 100K dollars price for each one or 212 outsourced drills (400*2,5=1000 tons per drill; and 212K devided by 1K is 212) with 250K dollars price for each one. So, taken this, in-house option costs are 30M+20M+10,6M (106*100K)=60,6M; and outsourced option costs are 20M+53M=73M.
Just curious, how would this interview be graded out of 10.
Around a 5. So, not a pass, especially at MBB.
@@Managementconsulted well now she's at bain so
The math for outsourcing the drill vs doing it in house seems very off. Not sure if there was additional information that she didn't provide, but a break-down of that math would be very helpful.
I think there's an information missing about how many drills are needed to extract those amounts. She never got into that during the case. Maybe this is the missing piece of information - and that would place your costs at the higher levels mentioned
Hi, thankyou for posting the video. I am still bit confused about the math structure for calculating rev. I thought it should be as follows.
Years Total US production Client share New total market Tons mined by client (12000 ton cap)
1-5 64000 10% 64000+6400 = 70400 64000*0.1=6400
6-10 70400 15% 70400+10560 = 80960 70400*.15=10560
for rest of the year 20% and 25% would produce excess of 12000 so we can just assume 24000 for that period. So the total production would be 6400+10560+24000. Any insight would be really appreciated!
we need to compound for every year ? no ?
The client is not mining 10% from the previous existing market, but from the market in which it plays a part. Therefore, (64000 + x)*10% = x -> (64000 + x)*1/10 = x -> 64000 + x = 10x -> 9x = 64000 -> x = 7111