Company X is a local telecom company and is facing a decline in profits over the p ...
Company X is a local telecom company and is facing a decline in profits over the past few years. BCG has been engaged to drive improvements in profitability. One of the hypotheses under consideration is the introduction of handset leasing. Handset leasing works by renting new phones to customers for a monthly fee instead of selling phones to customers at a discounted upfront cost. Customers lease phones for a fixed term (usually 12 months), before they swap their used phone for a new model. Some telecom companies bundle phone leasing plans with lower-priced sim only mobile plans. This allows customers to change their phones more frequently without incurring upfront costs of buying phones through retail, or affecting their mobile plans. For the telcos, this reduces their need to hold inventory, and reduces their financing costs, both of which can help profitability. The Principal, Elisse, held an initial team meeting to discuss the various initiatives, including handset leasing. After discussion with your team, you have identified the need to do some market research and find out the impact of handset leasing on telco profitability in other markets. Elisse wants an email with your recommendation on whether the team should explore this idea further for the client. -------- Your first task today is to do some research and identify markets in which handset leasing has already been introduced. Look for analyst reports on the impact on revenue and profits for the telecom companies operating in those markets, and summarise your findings in an email to Elisse, stating whether this is an attractive business model for the team to explore further. Elisse has sent you a few reports that might be useful (they are included in the resources section below). --------- #3 HERE IS THE BACKGROUND INFORMATION ON YOUR TASK Note: please complete the previous task (Data Analysis - Foundations) before commencing this task. One BCG expert sent some financial data. The market he suggested is at a similar stage of development to Company X’s home market. There are two main operators who form an effective duopoly. Company A launched handset leasing 2 years ago, but its competitor, Company B, did not. This allows us to isolate the impact of handset leasing on profitability. Elisse hands you a partially completed Excel model and some financial statements from the two companies, and asks you to complete the analysis. Within the workbook, Elisse has also added in a guiding sheet for you to follow. If you find yourself stuck, you may want to refer to the sheet for guidance on how to complete the tasks. There is also a list of the technical terms you learned in the previous exercise - in case you need to remind yourself. HERE IS YOUR TASK Part A: Analyse the data from Company A and Company B to determine the impact of leasing handsets on financial performance. State and apply your own assumptions, and identify the metrics you would use to perform a financial forecast for Company X. Part B: Apply the metrics and performance impacts you have identified to forecast the upside in terms of the key metrics for Company X. To do this, first assume that Company X will grow at industry average, then assume it will grow at the same rate as Company A, which introduced leasing. Comparing the two forecasts will allow you to calculate the net impact of leasing. -------- #4 HERE IS THE BACKGROUND INFORMATION ON YOUR TASK During the case team meeting, the team reviewed the different initiatives that have been evaluated. The handset leasing option passed the initial screen, and now the team needs to determine how the client might implement the new handset leasing pricing models. Together with the client’s strategy team, we have created a handset leasing consumer offer that is broadly similar to the existing mass market offer, and now need to assess if it will be attractive. HERE IS YOUR TASK Sub-Task 1: We now need to evaluate whether the new option would be attractive to customers. Brainstorm and shortlist criteria that customers may use to evaluate competing offers. What data points would help us decide if the new offer is attractive to consumers? Sub-Task 2: Your team has now collected data via online surveys with consumers. Given the data your team gathered, fill in your evaluation matrix and identify the target segment for this plan. Sub-Task 3: Given the target segment, identify changes to the offering that would make it more attractive for them. Also come up with a product name that you think will appeal to the segment. Please use the information in the resources section below to complete this task. -------- #5 HERE IS THE BACKGROUND INFORMATION ON YOUR TASK The client wants a quick update on project progress. The project leader, Richard, wants you to draft an executive summary of your findings so far. HERE IS YOUR TASK Develop an executive summary slide synthesizing all the findings from the project so far. Use our best practice slide below to assist you with this task! -------- #6 HERE IS THE BACKGROUND INFORMATION ON YOUR TASK Having come to our initial recommendations on the handset leasing model, we now need to work with various departments within the client to share our findings and get their buy-in to implement the new plans. We are preparing for a major meeting with all the functional heads to present our recommendations. We have heard from the client team that, based on what they heard, we should prepare to address some concerns/objections from their colleagues. However, they didn’t provide more details on who might have objections, or what those objections might be. HERE IS YOUR TASK We will now need to develop our plan for the discussions with the relevant departments. Your project leader, Assaf, has shared with you the client organisation chart, and has asked you to: Identify two departments you think may have the greatest concerns/objections What their specific issues might be How we can address/mitigate those concerns Prepare an email summarizing your thoughts for your project leader, Assaf.
