Bain

1
Bain CompanyCase Interview
2
Introduction

• Take notes
• Ask questions
• Structure your analysis
• Drive towards a recommendation

3
Case Question Entertain Me

• Music retailer cassettes, CDs, and videos
• Business Activities
• Mail orderrecords and tapes
• Went public
• Expanded retail stores to 400 mall-based stores
• Recent focus on Internet
• Mail order channel was allowed to die
• Issue Declining revenue and margins

4
Structure your approach

• Wrong Always use the same framework regardless
  of the business issue
• Better
• Clarify the primary business issues
• Evaluate options
• Explore broader issues to determine if channel
  segmentation is appropriate during analysis
• Same product competing in overall market
• Channels may have cost advantages

5
Framework

• Cost of Goods Sold (COGS)
• Multi-channel approach in order to increase
  volume and decrease unit costs
• Sales, General Administrative (SGA)
• Retail sales people
• Mail Order call centers
• Internet promotions, ads, program development
• These channels may share general overhead, but it
  is important to explore points of
  differentiation
• Activities
• Customers
• Competitors

6
Competitors Customers

• Online competition is highly fragmented
• Mail Order historically have focused on this
  channel now moving online
• Retail stores off-line consolidation moving
  online
• Internet Many Internet-only retailers
• Customer demographics for various channels differ

7
Channels
Explore each channels revenue and margins
individually

• Retail Adequate, consistent with industry
  standards
• Mail Order May have been a cash cow even if
  market growth was declining
• Internet Drive profitable growth

8
Strategic Issues

• Level of differentiation
• Reputation
• Mall stores easy returns, advice from
  entertainment associates
• Metrics
• Revenue
• 10 in 1997
• 2 in 1998
• - 10 in 1999
• compared to 50 market growth
• Cost Performance
• Structure How does this overall cost structure
  compare to the cost structure within each
  channel?
• 60 COGS
• 10 distribution
• SGA up 5 over last 2 years

9
Revenue Analysis

• Decline in prices
• Lack of differentiation
• Easy product returns to mall stores
• Cross promotions to create loyalty effect
• Recommendation engines
• Decline in volume
• Customer demographics for various channels
• Key volume drivers
• Visitors to the site
• Purchase frequency
• Average purchase volume
• Repeat purchases
• Compare to mail order channel and online
  competitors

10
Recommendation
Leverage assets across multiple channels

• Encourage existing mail order customer base to
  move online
• Direct mail to build awareness of the site
• Communicate with customers to mitigate online
  security concerns
• Cross channel promotions
• Virtual coupons in direct mailer
• Long-term coupon plan to build repeat purchases
• Friends family programs
• Integrate offline assets
• Easy returns at over 400 stores nationwide
• Professional advice from entertainment associates

11
Recommendation
Consider alternatives

• Target new customers with trials and promotions
• Adjust product line to focus on niche market
• Strategic alternatives
• Merger
• Divestiture