tradeoffs (strategy) Flashcards
qualit. - pro/con quant - profitability, etc
framework
a
Q: How to recognize question of this type?
“Should company do x?
Tradeoff vs other types (eg:NIE/NGE, M&A):
Sometimes tradeoff “should company do X” and NIE/NGE are similar. Because sometime the question is “should company enter new industry/new market or buy Y company?” So ask interviewer if you would like me to assess the pros and cons of the tradeoff decision OR would you like me to assess WHICH factors I would look into like a traditional market entry question (mc3 + FOM)
Q: what to do before arriving at pro/con?
Brainstorm all possible points
Q. what are the most common tradeoffs?
revenue: additional revenue (eg: additional revenue from ads), lost revenue (eg: lost revenue from lost sales), impact on conversion rate, impact on retention rate, profit
customer:
customer experience positively impacted, customer experience negatively impacted, cluttered UI, customer satisfaction, customer distraction,
Brand:
AF awareness, favorability, fit
relationship with suppliers/distributors/partners:
long list of possible tradeoffs organized by type? (gm3c + fom)
5
Should amazon have Display ads on amazon.com? Dc 135
ads on website -amazon considering display ads on its website DC 135
pros:
positive customer experience (if amazon out of stock, ads can direct customer to find item)
additional revenue
strengthens relationship with sellers/manufacturers
- eg: seller might want to advertise to increase awareness of his product
Cons:
distracts customers
cluttered UI - lower customer satisfaction
could reduce conversion rate (short term) and retention rate (long term): as customers look for less cluttered UX
brand negatively impacted
ads may steal business: in future, customers may end up first going to the retailer/competitor shown in the ad.
should amazon sell groceries from neighborhood market where customers pick up their groceries (different from amazon fresh delivery)? Dc 148 (this also falls under type: NI
7
Should Microsoft build an app for the Apple TV? pmi 270
8
in early days only buy on amazon, then amazon decided to allow people/companies to sell on amazon. Was it good decision? Pmi 253
9
should apple have had an exclusive partnership with att? (type: tradeoff and type: partnership)
a
An engineer comes to you and tells you that they just created a display brighter than anything they have ever created. What are the questions you’d want answered from him? Now you go speak to your operations manager. What are the questions you want answered from him? How about marketing? What are the questions you’d want answered? What is your go-to-market strategy?
a
Groupon is assessing whether to allow for advertisements on their website. Walk through the pros and cons. How would you go about incorporating ads onto the Groupon website?
a
Should Amazon provide Kindle app just on Kindle, or across other devices as well?
paid app vs free app for kindle (kt 59)
Type: binary decision – pro/con list or benefit/risk list
Type: Decision to be made in which 2 choices involved: paid app vs free app for kindle
Framework: qualitative: pros/cons list, quantitative: cost-benefit calculations
FIRST CLARIFY What is overall goal?
A. Get customers on platform OR
B. short term revenue.
I recommend we should focus on a. getting cust on amazon platform
QUALITATIVE: PRO-CON LIST
Pros of kindle app for free on all platform
Increased Revenue:
revenue from ebook sales by providing kindle app free will be more than revenue from paid kindle app or the potential increase in kindle hardware sales. Plz can you confirm this is true. (Razor and razor blade strategy)
Cross sell/up sell :
opportunity to crosssell/up sell customers acquired through free kindle app such as kindle book subscription, audible, prime, shipping app, etc
establish ourselves on the Platform which is the distribution channel:
opportunity to develop relations with major platforms (iOS android windows) and establish ourselves on this platform
Network effect:
providing kindle app for free means access to more customers which in turn means more authors/publishers incentivized to join platform which attracts more customers (amazon flywheel)
Improved customer UX:
more customers on kindle platform means more reviews, more recommendations, more sharing, more data to introduce more features later on such as commonly highlighted passages in books
Lower prices:
more number of customers will make it worth it for the publisher to provide a kindle version of the book. More customers means more volume of sales which gives us leverage to lower prices on kindle leading to better customer UX. (Amazon flywheel)
Cons of free kindle app
Forfeiting/lost revenue
that would have been gained from a paid kindle app. Or additional revenue that would have been gained from sale of more kindle tablets because of kindle app.
QUANTITATIVE ANALYSIS: (COST-BENEFIT CALCULATIONS)
Costs:
Lost/forfeited revenue
= number of customers paying for kindle app * price of kindle app
= [amazon users * % smartphone users * % who use kindle * % adoption rate (that is % who will pay for kindle app)] * price of kindle app
= 300M * 50% * 10% * 50% * $1 (https://www.statista.com/statistics/267346/average-apple-app-store-price-app/) NOTE: average price of an app is $1
= 7.5M * $1
= 7.5M
Benefits:
Greater Revenue
= Number of customers acquired from free app * LTV of amazon user (including all potential cross-selling/up-selling opportunities)
= amazon users * % smartphone users * % who use kindle * % incremental adoption rate (that is % who will pay for kindle app)] * [revenue/yr * %CM * number of years – CAC]
https://www.fool.com/investing/general/2014/04/21/whats-a-prime-member-worth-to-amazoncom.aspx
= [300M * 50% * 10% * (90%-50%)] * [$600 for non-prime customer * 10% CM * 20 years life – 0 CAC]
= 6M * 1,200 dollars ltv of non-prime amazon customer
= 7.2B
To summarize I recommend a free kindle app for the increased revenue from additional ebook sales, opportunities to crosssell and up sell, developing relationships with major platforms, positive network effects, improved customer UX, lower ebook prices.
a. Should we give Office away for free to educators?
b. If you decide that best decision is to give it away for free, how would you convince the CFO to give up that near-term profit?
Ask clarifying questions:
understanding how the education business model works as it’s unique.
Ask questions around the overall objective of this move for the unit and
education’s role in the overall Office portfolio.
Do pro-con list or cost-benefit analysis (GM+3c + FOM)
Pros/benefits
Strategic Goal:
There is a focus on increasing usage at MSFT right now (eg: Microsoft office is free on ios/android right now)
Microsoft’s strategic priorities right now: increase usage
Eg: usage focused strategy has been implemented elsewhere in the company. (eg: Microsoft office is free on ios/android right now)
Market
Trends: consumerization of IT,
Customer: capturing mindshare and usage in critical years of a consumer’s life
Competitor: defensive play as Google/Apple are making a push into education with Google Spreadsheets/Apple pages
Cons/costs
losing revenue in an important category,
losing share to Google for Work,
Recommendation:
pilot in specific regions of the US to
a. minimize risk and
b. b. determine impact on usage of Office in order to convince the C-suite
how would you convince the CFO to give up that near-term profit? (Get other ppl, get data, pilot test)
gain advocates,
have pre-meetings,
test your hypotheses to get solid data,
roll-out with pilots, pilot in specific regions of the US to
minimize risk and determine impact on usage of Office in
order to convince the C-suite
key elements———
1) Microsoft’s strategic priorities and
2) Your ability to structure
The interviewer is looking that you understand Microsoft’s
priorities right now and cite examples of where a usage focused
strategy has been implemented elsewhere in the
company. (eg: Microsoft office is free on ios/android right now)
3.
Understand competitors and what they are doing in the
marketplace as well
- Demonstrate knowledge around influencing and persuading
with the last part of the question. Talk about how you would
gain advocates,
have pre-meetings,
test your hypotheses to get solid data,
roll-out with pilots, pilot in specific regions of the US to
minimize risk and determine impact on usage of Office in
order to convince the C-suite
–
Detailed Answer
1. Ask clarifying questions: Start by understanding how the
education business model works as it’s unique. Ask questions
around the overall objective of this move for the unit and
education’s role in the overall Office portfolio.
2. Outline costs and benefits: This is a go/no go type of case.
Which means you have to weight the pros/cons of each
decision. Sample tradeoffs include capturing mindshare and
usage in critical years of a consumer’s life, losing revenue in
an important category, losing share to Google for Work, etc.
3. Demonstrate industry knowledge: this case is a perfect place
to talk about trends like the consumerization of IT, premium
on increasing usage at MSFT right now, competitor products
and feature comparisons, etc.
4. Make a recommendation with a roll-out plan and supporting
facts. I suggested a pilot in specific regions of the US to
minimize risk and determine impact on usage of Office in
order to convince the C-suite
key elements
1. This case tests two key things: 1) Your understanding of
Microsoft’s strategic priorities and 2) Your ability to structure
an approach to a very ambiguous problem
2. The interviewer is looking that you understand Microsoft’s
priorities right now and cite examples of where a usagefocused
strategy has been implemented elsewhere in the
company.
3. Understand competitors and what they are doing in the
marketplace as well
4. Demonstrate knowledge around influencing and persuading
with the last part of the question. Talk about how you would
gain advocates, have pre-meetings, test your hypotheses to
get solid data, roll-out with pilots, etc.
Currently, Groupon offers free returns for Groupon Goods. Groupon estimates that this costs the firm roughly $XX. The company is
considering changing the policy on free shipping. How would you assess and decide whether to change the free return policy?
a
