Wharton Casebook 2007-2008

Wharton Casebook 2007-2008

(Parte 4 de 5)

All products are priced competitively at market level

Brand name and reputation or customer awareness

Client has good brand name reputation and recognition

Branch and ATM prevalence or distribution of branch network

Client has wide distribution of branch and ATM network

Macroeconomic Trends: Employment rate or population growth

Number of people coming into employment age is at an all time high in the coming 5 years

Foreign investments are projected for healthy growth with increase investments in Business Process Outsourcing Interest rate trend

Interest rate has declined dramatically in the last 5 years from over 10% to the current level of 4% Disposable income or GDP trend

40% of the population lives at or below poverty line. Another 40% makes less than $500 per month. Top 15% makes less than $2,0 per month. Remaining top 5% is the richest population in the country whose lifestyle resembles those of upper-middle class in developed countries.

Disposable income and GDP is projected to continue growing at about 1% per annum Home/car ownership and real estate development growth

Home/car ownership and real estate development is expected to increase in the coming 5 years Rural to urban migration

Migration rate is stable

Products: Types of products

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Products include savings, checking, time deposit, credit cards and loans Profitability or revenue by product, including consideration of price and volume

30% of population has deposit accounts. 6% of population has credit cards. 1.5% of population has bank loans.

Client Capabilities: Sales and marketing

Sales efforts are traditional and conservative. Client does not conduct direct marketing activities to sell credit cards. Sales force is stretched and training is lacking. Information technology

Information on customers is often out-dated

R&D is competitive and client is a market leader in product innovation for a few products


Customer mix by number of bank products purchased/Customer mix by value of customer – measured in terms of average daily balance of deposit account Refer to Exhibit 3. Observation: Majority of customers only purchase one bank product. Large majority of customers also have <100K in average daily balance in their deposit accounts Retention or attrition rate

Attrition rate is in line with market average

Possible growth drivers: 1. Steal share from competition; 2. Increase retention of current customers; 3. Cross sell current products to current customers; 4. Up sell current products to current customers; 5. Develop new generation of customers

Logical Conclusion:

1. Growth efforts should be concentrated in cross selling more profitable products to current customers since average number of products held by customers is low. 2. Client should adopt more aggressive sales and marketing techniques to gain more market share in credit cards. 3. Client should partner with or market to employers to capture a new generation of bank customers fueled by employment growth, and partner with real estate developers, as well as car dealers, to finance future home and car purchase.

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Successful Roadmap:

Candidate should spend most of his time brainstorming all the factors that should be considered to understand the situation. He will locate problems and potential solutions by probing interviewer for information. After all, or most of the information is given, candidate should make his best guess on what the potential recommendations should be for the client. Any logical recommendations supported by information given or any assumption he may make will be accepted. A good candidate should be able to summarize his understanding and make a logical hypothesis on potential recommendations.

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Exhibit 1

Deposits Credit Cards

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Exhibit 2 Note: $Currency is in Millions

Page 25 Exhibit 3

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D. Practice Case #4 – Retirement Homes

Question (posed by interviewer):

Our client is a company that owns and operates retirement homes in US. They just opened a new retirement home in Chicago about a year ago and they have concerns about its profitability. So, we were hired to fix the problem.

Interview Guidance (general information to be given if asked): Location:

The new home is located in downtown Chicago and all the previous ones were located in outside of Miami

***Interviewee should ask for the information that is presented in the table step by step and interviewer does not show the table***

***after giving interviewee the data above, ask what they think***

Revenues don’t pose a problem, (demand is high and price is relatively high). Explore costs

Client owns land in all of the retirement homes. What do you think costs of operating retirement homes should be?

***Interviewee should ask for the information that is presented in the table (on the next page) step by step and interviewer does not show the table.***

Revenue elements OLD (typical) retirement home NEW Units 800 400 Revenue/unit $ 500 $ 1000 Total available revenue $ 400 0 $ 400 0 Vacancy 20% 10% Actual revenue $ 320 0 $ 360 0

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Information to be given if asked (cont’d):

(Parte 4 de 5)