Case Study Questions for EFA Guesstimate

7/25/2019 Case Study Questions for EFA Guesstimate

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Case Study Questions for EFA

Guesstimates:

1. Please estimate the number of passenger car tires sold

each year in India.

Answera! Information to be assumed

• About 1"# new cars are sold each year

• Cars last about $ years before needing replacement

• %ires last &'( miles

• People dri)e 1'( miles* yr.

• Assume people purchase new tires when needed

• Assume no growth in +installed cars,

• -/0S /ew cars get ' tires includes spare!2 old cars get

& new tiresb! #ethodology

3 %here are $"# cars on the road4 5"# old cars and 1"#

new cars3 %ires last three years3 5"# installed cars * 6yrs 7 8"# cars need new tires each

year3 8"# 9 & tires :"# tires3 1"# new cars ;& tires * car &"# tires ;' tires * car '"# tires3 %otal tires sold each year 7 18"# tires no spare! and

16"# with spare!8. <ow many gas stations can a town support=

Answer >ou are e9pected to ma?e assumptions about factors that youfeel are important in arri)ing at an answer. In this @uestion2there are two distinct approaches the demand side approachand the supply side approach.

%he demand side approachAssume the town has a population of '""2""". et,s say thea)erage family has two adults2 two children2 and one car. %his

implies we ha)e '""2""" * &!B1 7 18'2""" cars. Assume eachcar is dri)en an a)erage of '" miles a day and you can get 1"



miles per gallon. %his means daily consumption is '" * 1"! B18'2""" 7 58'2""" gallons. Assume each gas station has &pumps on a)erage and each pump2 when in use2 can pump at arate of ' gallons per minute. Assume further that out of an

a)erage 184hour day2 pumps are busy :" of the time. %hismeans that each gas station can produce 18B.:B5"B'B& 7112'8" or appro9. 182""" gallons per day. Since dailyconsumption was 58'2""" gallons2 we need 58'2""" * 182"""or appro9. '" gas stations.Demember that the numbers are not important the process ofbrea?ing down the problem and sol)ing it is.

%he supply side approach %ry putting numbers to this yourself. Assume prot margin and

price of gas. Estimate amount of gas that a station needs to sellto ma?e a decent prot. Estimate daily consumption of gas.Combining the two estimates2 arri)e at the number of gasstations.

6. <ow big is the Indian mar?et for -and4Aids= the brand!

• -and4Aids are used to co)er up minor cuts. Assume that

-and4Aid holds $' of the Indian mar?et for bandages. %he mar?et can be segmented into two main categories of users ?ids15 and under who tend to get cuts more often2 and adultso)er 15 who are more careful. Assume that the a)eragelife of a person is :" years2 and the population is e)enlydistributed.

•

%hat means that ?ids 15 and under represent 15*:" 7 8"of the population.

• Assume that they get a cut once e)ery two months on

a)erage. If the Indian population is 1"" crores2 8" e@uals8" crore ?ids. nce e)ery two months e@uals si9 times peryear2 for a total of 8" crore 9 5 cuts 7 18" crore bandages.

• Assume that it ta?es three days on a)erage to cure a cut

and bandages are replaced once a day. %hat ma?es for65" crore bandages.

• %he adults represent :" of the 1"" crore people in thecountry.



• Assume that they get a cut once e)ery si9 months that

lasts three days2 with bandages being replaced e)ery day. %hat is 8 cuts per year 9 6 days per cut 9 :" crore people7 &:" crore bandages.

• %he total number of bandages2 then2 is 65" G &:" 7:&"crore bandages.

• Assume there are appro9imately 8" bandages in a

pac?age2 and a pac?age sells for Ds.'". %he total siHe ofthe mar?et e9pressed in dollars is therefore 16:" crores *8" 9 '" which is appro9imately 6&'" crores.

• -and4Aid holds $' of this mar?et which is e@ual to 8'""

crores.

&. Suppose you are ying on a plane with the CE fromE99on and you want to sell a consulting engagement. <ehas Just left to use the la)atory and you ha)e about )eminutes to estimate his yearly re)enues from personalautomobile gasoline sales in India e9cluding commercialtruc?s2 boats2 etc.! <ow would you go about coming upwith this estimate=

Answer

• Assume the population of the India is 1"" crores.• Estimated number of people per household is 8.'2 ma?ing

&" crore households.

• Estimated number of cars per household is 12 which gi)es

&" crore cars in India.

• Assume each car gets lled up once per wee? or '" times

per year to use simple numbers!

• Assume the a)erage ll4up is 6" liters. '" K 6" is 1'""

liters per car.• %otal gallons sold is 1'"" K &" crores 7 5"""" crores.

• If a)erage price is Ds.5"2 total re)enue from 0.S.

automobiles is Ds.65""" crores.

• Estimated mar?et share of E99on is 8"

• Calculated total re)enues for E99on from the 0.S.

household automobile mar?et2 therefore2 is Ds. $8""crores.



Case Study Round:

K>L P ha)e been retained by a tele)ision networ? that istrying to decide how much to bid for the rights to broadcast the8"1: lympic Mames in South (orea.

%he Ninter lympics lasts for 15 days• %he rst day2 a Friday2 is ta?en up with the pening

Ceremonies 6 hours of broadcasting! from :411 P#

• %he games themsel)es are the held during the ne9t

fourteen days 1" hours of broadcasting per day!

• ur client will broadcast lympics wee?day co)erage from

O a.m. to noon2 84' p.m.2 and $411 p.m.

• ur client will broadcast lympics wee?end co)erage from

11 A# to O P#

• %he nal day2 a Saturday2 is ta?en up with the ClosingCeremonies 6 hours of broadcasting! from :411 P#

ur client is a broadcast tele)ision networ? that recei)es nosubscription re)enue. It will2 howe)er2 be able to ?eep 1"" ofits ad)ertising re)enue2 without sharing any with its aliates.Ad)ertising rates are estimated to be &""2""" per 6"4secondad for prime4time programming and 8""2""" per 6"4secondad for non4prime4time programming

• Slot. 7 6" seconds of ad)ertising time



• Prime %ime 7 #4F from $ P# 4 11 P# Sat4Sun all day

• /on4Prime %ime 7 #4F all other times

#ar?et research has shown that consumers * watchers can ta?eno more than 1" minutes of ad)ertising time per hour of

tele)ision they will stop watching if there is more ad)ertisingthan that. Assume a four4year lag time between payments ofour rights fees in early 8"1& and the receipt of re)enues inearly8"1:. Also2 Assume annual compounding and i7 8R1*&! 1.

Questions

• Nhat are the tangible factors to be included while ma?inga decision=

• Nhat are the intangible factors to be loo?ed at=

• <ow much would you bid=

Answers

%angible Factors1! Production * Administrati)e Costs8! pportunity Cost <ow protable would the other

programming that would be airing on our networ? be=6! %ime Talue of #oney due to the four year lag in payment&! De)enue Menerated

Intangible Factors1! %his might gi)e us access to )iewers that we would

otherwise not ha)e.8! %here is prestige associated with this e)ent.6! Ne can use some of the air time to promote our other

programming.

-id

%he candidate should be as?ed to calculate the total re)enuefor this proJect2 which are O8: million. %he re)enue mathcalculations are as follows

Prime %ime De)enues

Nee?day #4F! 1" wee?days 9 & hrs*wee?day 9 1" min*hr 9 8slots*min 9 &""2"""*slot



7 68" #illionNee?end Sat4Sun! & wee?end days 9 1" hrs*wee?end day 9 1"min*hr 9 8 slots*min 9&""2"""*slot 7 68" #illion

pening Ceremony 6 hrs 9 1" min*hr 9 8 slots*min 9&""2"""*slot 7 8& #illionClosing Ceremony 6 hrs 9 1" min*hr 9 8 slots*min 9&""2"""*slot 7 8& #illion/on4Prime %ime De)enuesNee?day #4F! 1" wee?days 9 5 hrs*wee?day 9 1" min*hr 9 8slots*min 9 8""2"""*slot7 8&" million

%otal De)enue 7 68"# G 68"# G 8&# G 8&# G 8&"# 7

$928 million

Costs

Production Costs 4 &8:2"""2""" %o be gi)en!

pportunity Cost 1 million per hour and 1&5 hours ofbroadcasting e@uals 1&5 million per hour

So2 the rele)ant protability analysis isDe)enues G O8:2"""2""" in 8"1:Actual Costs 4 &8:2"""2""" in 8"1:pportunity Costs 4 1&52"""2""" in 8"1: 4444444444444444444444444444 7 6&52"""2""" in 8"1: Ui)ided by 8 %a?ing time )alue of money into account

! 7 1$$2"""2""" in 8"1& Appro9imate -id! Could be moregi)en the intangible benets.

PT 7 FT * 1Gi!Rn 7 K * 1G 8R1*&! 41!R& 7 K*8

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Case Study Questions for EFA Guesstimate