Consulting Wiz

First Round Rules

The consulting aptitude test contains questions from case analysis, finance, operations, marketing and logical reasoning The duration of the exam is 45 minutes The test is of MCQ format. You are required to mark only 1 option in each question Kindly mention the correct option for each question on the answer sheet attached at the end of the paper Remember to fill in your details on the answer sheet as well as the first page of the question paper There are a total of 3 sections and 24 questions in this paper. o Section 1 Fundamental questions on strategy o Section 2 - Case analysis o Section 3 Longer Case Questions Each section has different set of instructions and maximum marks. These are indicated in the instructions given at the beginning of each section There is no negative marking

Name: Section 1

Reg No:

(Q 1-6 is for 1 point each. Select the best option amongst the choices)

1. A small company has come up with a new high quality version of a Pickle. However, the market is dominated with bigger players with very little volumes left for the smaller ones. The company however is confident in its product but is unaware how to go about promoting it. The company intends to launch only in a major metropolitan city initially and then expand later. Where would you suggest the company should promote its products? a) b) c) d) Television Internet Local Newspaper At the point of purchase Answer: D

2. Your client has come up with an innovative product but it can be copied easily by competitors even after the patents. He approaches you to find out when competitors will actually enter into the market. If the product has no competitors today and has high entry costs, when do you think competitors are most likely to enter? a) As soon as they are aware of the product b) Once the product is launched c) As soon as the product starts showing growth d) When the product has established itself in the market Answer: C 3. Your client has come up with a new product that provides a cheaper alternative to the existing product in the market. However, he is unaware of how to go about launching it. You conduct a research which shows that the demand for the product lies only in Southern India. However there are some customers in other parts of the country that may buy your product if you add some additional functions. But this would put the cost at par with your competitor. What would you suggest to your client? a) Add the additional functionalities and launch all over India b) Launch only in Southern India without the additional functionalities c) Launch without the additional functionalities in Southern India and with the additional functionalities in the rest of the country d) Launch the low cost product throughout the country Answer: B

4. Pizzahouse, an American pizza giant is thinking of entering the Indian market with its products. It is known for its exotic vegetables. The company approaches you in order to find an optimum pricing strategy. Your research shows that the market is highly competitive with very low customer loyalty. Due to this the margins of all players are under pressure. Which pricing strategy would you suggest to your client? Adopt a Market Penetration Strategy (Start with a low price and increase with time) Adopt a Market Skimming Strategy (Start with a high price and decrease with time) Adopt a Cost Plus Strategy (Price = cost + profit) Price the product similar to the existing products. Answer: B 5. Your client is the worlds largest supermarket and he is concerned about where he should locate basic necessities for which majority of the customers enter the store. Your research shows that there are 2 opposing views. The first suggests that customers might feel irritated if they have to walk too much inside the store to purchase a single item and hence will prefer to go to other stores. The other suggests that if we keep it deep inside the store, we can push additional products onto the customer. What would be your suggestion after hearing these views? a) b) c) d) Try to find a mid way solution Discuss with the client, share with him your dilemma and let him decide what he wants to do Try to push the additional products Do not try to push the additional products and keep those goods at the entrance Answer: D 6. Your client is thinking of entering the steel manufacturing industry. He is concerned where he should locate his plant. He furnishes you with the following details about the industry. I) There are two main raw materials, coking coal and iron ore II) The extraction ratio of coking coal is very low and it is a bulky material to transport compared to iron ore III) Iron ore is where the steel is extracted from IV) According to volume equal amounts of coking coal and iron ore is required in the manufacturing process V) The per unit cost of iron ore is double that of coking coal Based on the above information, where would you suggest your client to set up his plant? a) b) c) d) Near the coking coal supply Near the Iron ore Supply Near the market for steel Ask the client for more details Answer: A a) b) c) d)

7. A market with which of the following characteristics would generally be less competitive? a) High Barriers to entry b) Lots of potential substitutes exist c) Strong bargaining power among buyers d) Strong bargaining power among suppliers Answer: A 8. An example of a "threat" to a firm discovered by a SWOT analysis might be: a) Cost advantages present because of advanced technology b) The chance to acquire firms with needed technology c) Likely entry of new competitors in the industry d) Too narrow a product line for the firm Answer: C 9. A firm can reduce the bargaining power of suppliers by: a) Designing standardized components so that many suppliers are capable of producing them b) Threatening to integrate backward into supply c) Seeking new sources of supply d) By pursuing all of the above options Answer: D

Section 2
(Q10-12 are for 2 points each. Select the best option amongst the choices)

10. The client is in the business of manufacturing fibers and has had sales of $1 billion. Their concern is that the sales have been declining steadily over the past two years. Their objective is to identify new lines of business with total revenues of $100-300 million utilizing existing capacity. They have come up with a new fiber that has very good absorbency, something like 10times its weight, which is a breakthrough in the industry. The client is looking to enter the urban pet care market in the U.S. with this new high-absorbency fiber. They want to manufacture pet diapers for pets in urban areas. The client would like to evaluate the potential of this idea. Additional data Their brand is pretty well known, but not necessarily directly by the end customer. They deal largely with distributors, who in turn sell the products to retailers. The client prefers to continue using the intermediaries. They are reluctant to try things that they are not necessarily experienced in. Assume that the customers would want to replace the diapers every other day. There is no major national brand currently.

What would be your recommendation to the client? a) Dont launch the new product, identify the products where the sales are declining and reduce costs by production assembly optimization. b) Launch a brand awareness exercise to build customer relationship. c) Undertake a market research to determine the customer need for the new product. d) Revamp their value chain by opening their own retail outlets hence cutting down on the retailer margins. Answer: C 11. The client is a well-established regional retail bank in North East US with 3 million customers and an acquisition strategy that has been reasonably successful. Recently, it has begun facing threats from Internet-based financial services firms and other non-traditional firms. Deposits are declining and the bank has approached you to recommend a long term strategy to grow the bottom line. What would be your recommendations? Additional Data The bank is known for trust and security among its customers. The bank has chosen to remain a regional bank and consequently customers are quite loyal. Competition has intensified from regional banks as well as non-traditional firms. Client is a laggard in eBanking and not expected to compete with eBanking. The bank offers a range of products including deposits/savings accounts, small investments, credit cards and mortgages.

I) II) III) IV) V)

Identify key product lines/services different potential channels available to the customers from the bank. Plot a value vs convenience chart to help figure out what services can be offered via what channels to achieve maximum benefits. Eliminate unprofitable customers. Increase revenue/existing customer. Increase revenue/existing customer as well as expand the customer base.

a) I, II and V b) I, II and IV c) II, III and V d) I, IV and V Answer: A 12. A large food conglomerate has a small plant in Nagpur that produces orange juice from one specific type of orange which is grown locally. The orange juice is premium priced and positioned. The company bought the plant from a local farmer cooperative a few years back with the hopes that the company could increase the plants capacity through better management. The plant is currently operating at full capacity. There was an accident at the plant recently where a worker broke his hand. This incident prompted a review by the Occupational Safety Agency of India. It has informed the company that an additional Rs2Crore investment is needed to bring the plant up to current safety standards. You have been hired by the company to help it decide what it should do. The orange juice product is breaking even for the company. There are several other premium orange juice brands. The competition is stiff. There is a raw material constraint. The demand for the orange juice is strong. Consumer demand is only limited by the availability of supply. The strength of the demand stems from the uniqueness of the product. Producing a concentrate for the juice will not work for this plant (too costly to convert machinery and this specific kind of orange does not lend well to such a use). In other words, you cannot grow more oranges or stretch more out of the current supply. The companys competitive advantage is its marketing expertise and distribution system.

a) Invest the minimum necessary to meet the Govt regulations. b) Work out a joint partnership with the local farmers cooperative responsible for plant operations and the company responsible for marketing and distribution. c) Invest enough to not only meet the Govt regulations but also launch a campaign advertising the safety standards of the workplace building confidence. d) Shut down/ sell the plant.

Answer: B

Section 3
(Q13-17 are for 3 points each. Select the best option amongst the choices) 13. Company X is a leading producer of a product Y in India with largest market share. The demand of companys product is more than the company can currently supply. This is because its only plant in Gujarat is running at full capacity utilization. You have to advice the company whether it should go for capacity expansion and/or build a new plant or not. What should the company do? The cost structure for the product is as follows: Raw materials: 28% Labor and allocated fixed costs: 16% Distribution: 26% Sales and overhead: 18% Pre-tax profit: 12% Raw materials are purchased from a government-owned company, and prices are set by a yearly contract with the government. The plant is unionized, and extra shifts are not possible. The fixed cost of plant capacity augmentation is about the same as the cost of a new plant of the same capacity. The transport vehicles are owned by the company, and transport all products directly to the customers throughout the country. Customers pay for transportation by the mile. The companys selling prices are set by prevailing market prices in India. Land is available to expand the current factory; there is also a suitable site in Haryana, about 700 miles to the north. Approximately 80% of the customers are within 100 miles of the current plant.

a) Expand the capacity of current plant in Gujarat b) Construct a new plant in Haryana c) Do not go for any capacity expansion or construction of a new plant d) Expand the capacity of current plant as well as construct a new plant in Haryana Answer: B 14. A not-so-well-known company in India has been successful in developing a new type of filament for bulbs. The company is ready to sell the technology to a large bulb manufacturer for the production of filament at a large scale. You have to predict the effect of this development on the light bulb industry. Which of the following statements are correct?

Additional Information: The light bulb industry is dominated by two multinational producers X and Y. The two companies sell their products side by side for essentially the same price in similar outlets internationally. There are a several small local players in various regions of the world who produce local brands and some private store brand light bulbs. There have been no technological innovations in light bulbs for many years. X buys the new technology and patents it. I) II) III) IV) The industry is expected to become monopolistic in long term. The new permanent technology will become industry standard in long term. Industry size by volume is expected to grow by significantly larger pace in short term as well as long term. The profit of X would increase in short term and decrease in long term.

a) I, II, III b) II, IV c) I, II, III, IV d) I, II, IV Answer: D 15. A cement company is considering acquiring a small local firm. Following additional information is available regarding the current situation of industry and both the firms. What would be your recommendation? The target firm is currently profitable, with margins of 8% while clients margin is 20%. Your client attributes its higher profit margin to economies of scale in trucking and mixing, and a stable labor force. Both companies compete in the geographical market. Your clients customers are large construction firms and contractors generally in the office and commercial building construction business. The smaller firm sells mainly to other small businesses and contractors. (Swimming pool installation firms, patio builders, etc.) Additional research shows that the smaller customers for cement are growing, while the major office building construction market is stagnant. The smaller firm has strong contacts with many local customers, and is often the preferred supplier due to their customer responsiveness. Your client is not able to fund the acquisition internally, but could obtain bank financing at a rate of 7%. Similar acquisitions generally are made for three to four times current sales of the target firm.

a) The acquisition is financially viable and hence the client should go forward with it. b) The acquisition is financially unattractive and hence the client should go forward with it only if it can exploit the economies of scale to improve profit margins of target firm. c) The acquisition is not advisable because of the difference in the kind of customers both firms serve. d) None of the above is correct. Answer: B

16. A Malaysian oil company wants to expand its business into South East Asian countries. The company, besides drilling and refining crude oil, owns retail petrol/diesel stations. The company wants to expand the presence of its retail outlets into other countries of South East Asia. What should it do? The market in countries like Indonesia, Thailand etc are attractive to enter. There are a few competitors and the marketing strategy used in Malaysia is expected to work well elsewhere too. The firms management has never invested abroad before and it cannot supply new outlets abroad with its existing refineries. The firm wants to enter into these markets fast. However, capital investment funds are limited

a) It should go for an acquisition of another oil firm with presence in SE Asia. b) It should opt for a joint venture with another oil firm with presence in SE Asia. c) It should go for an organic growth, building its business by itself, in SE Asia. d) It cant / shouldnt enter the SE Asian market outside Malaysia. Answer: B 17. A company C produces a preservative used in bottled food items. The patent of preservative expires next year. What do you think will be the effect on the profitability of the product after the patent expires? a) b) c) d) This is the only product of its kind, in terms of safety (lack of harmful health effects) as proven in lab tests. The brand name of the product has slowly become a common household word. The largest two customers (75% of your sales) are two worldwide food packaging companies. The companies feature the brand name of the preservative on their product, and consider it a sign of quality. The cost of the preservative represents 1.5% of their total costs. The costs to manufacture the product are extremely low (about 20% of the price of the product). Currently, the margins on this chemical are almost 40%.

The profitability is expected to fall significantly. The sales volume is expected to fall significantly. Both (a) and (b) are true There would not be any major change in Profitability or Sales volume. Only a small decrease might be observed. Answer: D