Practice Case

Phospho Co.

Case type: Interviewer-led

Problem type: Revenue Growth
Structure difficulty: 3/10
Math difficulty: 3/10
Exhibit difficulty: 5/10
 Instructions for the interviewer

The interviewer should read the following information before giving the interview

1) This is a detailed case that should be used as a practice exercise

2) All of the necessary information is contained in the “Additional Information” pages

3) Whenever a candidate asks for information that isn’t contained in this case, ask them why they need it and say that
it is not relevant for this case

4) Boxes like this: are to be read to the interviewee. Boxes like this: contain the possible answers

5) The only page you share with the interviewee is the exhibit (which can be found at the end of this PDF)

6) Use the Case interview grading key to mark the interviewee throughout the case
7) Note that this is an Interviewer-led case type, in that there will be questions asked directly in the following
sections:
• Defining the problem
• Structuring your approach
• Analyzing exhibits
• Performing calculations
• Synthesizing takeaways

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 Summary of the case for the interviewer

This case is about a fertilizer company trying to enter a new market

• Phospho Co. is a large fertilizer producer

Company
background • They have been very successful over the past 5 years and are a market leader in their own
region

The central
• Phospho Co wants to enter a new market to grow it’s sales and profits
problem

• Market size
Key issues the
interviewee • Barriers
Labor costs have gone up
to entry
should • Methods
Sales have
of remained
entry flat
discuss
• Profitability

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Beginning of the case
 Defining the problem

Your client, Phospho Co, is a large chemical company producing fertilizer. They were a medium sized producer for
most of the time they were in operation but with the arrival of a new CEO 5 years ago, they have gone on an
aggressive expansion campaign. Over those 5 years they have managed to capture the lion’s share of the local
market. The CEO feels that one of the main reasons for their success has been their focus on rewarding and
retaining the best people in the organization. Looking forward, the CEO thinks that they have captured all that they
could have in their immediate region and are looking for other areas that could fuel the growth of the company for
the next 5 years. They have come to you to help them decide on how to approach this problem.

Question 1: What factors would you want to consider when thinking about this problem?

Allow the interviewee to ask a few questions to make the problem statement clearer and then give them at most 120
seconds to create their framework for solving the problem

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 Additional information

Information to share if asked for:

• To double revenue over the next 5 years

Objectives
• To expand geographical coverage and enter new markets

• Current revenue is $4B

• The firm has 2 large plants, one on the east and one of the west coast of the US
• The company produces 3 different types of fertilizers
Operations • The firm currently distributes their products by selling directly to large farms with account managers
responsible for certain geographical areas
• The success resulted from hiring, retaining and training good account managers
• They do not have any operations outside North America and their sales there are negligible

• The fertilizer industry has had a volatile decade but has been growing for the last 2 years
Industry • Most of the competitors are large multinational companies that dominate in their own regions but
also have significant market share in neighbouring regions

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 Structuring your approach – potential solution
Potential Revenue

Region 1 Size of market Size of agricultural sector

Propensity for fertilizer use

Growth of sector
An example of prioritizing a
branch; you can prioritize any
Where can of the branches in your
Phospho Co structure and build them out in
expand to double more detail to show depth of
its revenue, from your structure
$4B to $8B, in the
next 5 years? Captured share Our fertilizer brand awareness

Farmer sales channels

Price competitiveness

Farmer/crop/methods preferences Infrastructure

Region N Supply-demand imbalance Production capacity
Prioritize and expand further
Raw resource
Approach: availability
1. Identify potential regions for expansion
2. Determine the size of each region for fertilizer use
3. Estimate the potential share of the market that can be captured
4. Calculate the potential revenue generated from each region over the next 5 years
5. Consider the barriers for entry and costs of entering the regions that meet revenue growth requirements

This is one of many different frameworks that could be used to analyze the problem. Look for the interviewee to cover all of
the important areas of the market entry approach, and to have good breadth and depth in at least one branch.
Be sure to probe the interviewee on at least one branch of their framework after they have shared their approach with you
After some discussion around their approach move forward onto the next section of the case

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 Performing calculations

Now that the interviewee has structured the approach, direct them to calculate something related to the overarching
problem

Question 2: The overall market for the fertilizer in the world is growing, possibly presenting new
opportunities for Phospho Co in markets where the company does not have presence. The client is
wondering if they could estimate the current global market size by figuring out total annual use of fertilizer
in the world. How would you estimate this?

NOTE: This is market estimation question and the interviewee can take an approach which could be
completely different from the proposed possible solution. However, as long as their approach is sensible, it
should also be acceptable.

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 Possible approach: Performing the calculations
SETUP – here the candidate should be creating a formula to solve the problem and
1
sharing it with you
Initial setup:
1. Assume supply exceeds demand, therefore we will look at the demand side
2. Estimate for US and then scale to the world

Equation:
𝑈𝑆 𝑝𝑜𝑝 ∗ 𝑈𝑆 𝑝𝑜𝑝 𝑑𝑒𝑛𝑠𝑖𝑡𝑦 ∗ % 𝑎𝑟𝑎𝑏𝑙𝑒 𝑙𝑎𝑛𝑑 ∗ % 𝑢𝑠𝑒𝑑 𝑓𝑜𝑟 𝑓𝑎𝑟𝑚𝑖𝑛𝑔
∗ % 𝑎𝑐𝑡𝑖𝑣𝑒𝑙𝑦 𝑓𝑎𝑟𝑚𝑒𝑑 ∗ % 𝑢𝑠𝑒 𝑓𝑒𝑟𝑡𝑖𝑙𝑖𝑧𝑒𝑟 ∗ 𝑘𝑔 𝑜𝑓 𝑓𝑒𝑟𝑡𝑖𝑙𝑖𝑧𝑒𝑟 𝑝𝑒𝑟 𝑠𝑞 𝑘𝑚 Information to shared when asked for
∗ 𝑤𝑜𝑟𝑙𝑑 𝑠𝑐𝑎𝑙𝑒 = 𝑘𝑔 𝑜𝑓 𝑓𝑒𝑟𝑡𝑖𝑙𝑖𝑧𝑒𝑟 𝑢𝑠𝑒𝑑

Assumptions:
• US pop = 300M • Kg per sq km = 1000
• US pop density = 100/sq km • World scale = 1/5
• % arable land = 30%
• % used for farming = 50% • Have the interviewee make reasonable
• % actively farmed = 80% assumptions for any figures which they
• % use fertilizer = 90% need for the estimate

EXECUTE – this is where the candidate should get to the numeric answer and be
2
walking you through their calculations as they go
300𝑀
𝑻𝒐𝒕𝒂𝒍 𝒂𝒏𝒏𝒖𝒂𝒍 𝒇𝒆𝒓𝒕𝒊𝒍𝒊𝒛𝒆𝒓 𝒖𝒔𝒆 = ∗ 0.3 ∗ 0.5 ∗ 0.8 ∗ 0.9 ∗ 1000 ∗ 5 = 𝟏𝟔𝟐𝟎𝑴 𝒌𝒈
100
1620𝑀
𝑆𝑎𝑛𝑖𝑡𝑦 𝑐ℎ𝑒𝑐𝑘 = = ~200 𝑔 𝑝𝑒𝑟 𝑝𝑒𝑟𝑠𝑜𝑛 𝑝𝑒𝑟 𝑦𝑒𝑎𝑟
8𝐵

REFLECTION – this is where the candidate should state the answer, link it to the
3
central problem, and proposed next steps to strengthen the analysis or test hypotheses
• Sanity check gives a reasonable number so our estimate should be in the ballpark

Next steps:
• Research the distribution of demand and where there is a shortage of fertilizer

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 Analyzing exhibits

Question 3: What can you conclude from this exhibit?

What does it say – the candidate should provide a very brief but meaningful
1
overview of what the exhibit is showing
Exhibit A: Fertilizer supply and demand • Exhibit A shows that the demand for fertilizer is not evenly distributed around
balance over next 5 years the world
• Regions 3, 5, and 6 have shortage of fertilizer over the next 5 years

Fertilizer 1 Fertilizer 2 Fertilizer 3 What does it mean – the candidate should share what insights this exhibit
2
20000
contains related to the central problem

15000 • There is an opportunity for the client to enter regions 3, 5 and 6 to grow their
business
10000
thousands of tons

5000
Why is it happening – the candidate should hypothesize drivers of the
3
insights or further opportunities/risks that could impact the central problem
0 • The shortage in some of the areas could be due to two reasons:
• Shortage of production facilities/infrastructure to produce locally
-5000 • Rapid population/affluence growth

-10000
What to do about it – the candidate should share next steps to test the above
4
-15000 hypotheses or solidify the insights
Region 10
Region 1

Region 2

Region 3

Region 4

Region 5

Region 6

Region 7

Region 8

Region 9

Analysis:
• Calculate potential revenue that could be generated for each region
• Investigate each region to determine the competitive landscape
• Evaluate the cases for shipping and/or setting up local production in each of
the regions

Client:
• Determine the level of investment the company is willing to commit and the
level of risk they are willing to take on

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 Performing calculations

Now that you have pushed the analysis past the exhibits, direct the interviewee to calculate something related to the
exhibit or something related to the overarching problem

The client want to enter Regions 3 and 5. They think that they will be able to capture 10% of the production shortage
in the region over the next 5 years.
Question 4: What impact will this have on their revenue?

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 Possible approach: Performing the calculations
SETUP – here the candidate should be creating a formula to solve the problem and
1
sharing it with you

𝑁𝑒𝑤 𝑟𝑒𝑣𝑒𝑛𝑢𝑒 = 𝑅𝑒𝑔𝑖𝑜𝑛 3 𝑆ℎ𝑜𝑟𝑡𝑎𝑔𝑒 ∗ 10% + 𝑅𝑒𝑔𝑖𝑜𝑛 5 𝑆ℎ𝑜𝑟𝑡𝑎𝑔𝑒 ∗ 10% ∗ 𝑝𝑟𝑖𝑐𝑒

EXECUTE – this is where the candidate should get to the numeric answer and be Information to shared when asked for
2
walking you through their calculations as they go
• The company would consider entering
with all 3 types of fertilizer
𝑅𝑒𝑔𝑖𝑜𝑛 5 𝑆ℎ𝑜𝑟𝑡𝑎𝑔𝑒 = ~20,000 𝐾 𝑡𝑜𝑛𝑠
𝑅𝑒𝑔𝑖𝑜𝑛 3 𝑆ℎ𝑜𝑟𝑡𝑎𝑔𝑒 = ~ 15,000 𝐾 𝑡𝑜𝑛𝑠 • Price = $1000 per ton

𝑃𝑟𝑖𝑐𝑒 = $1000 𝑝𝑒𝑟 𝑡𝑜𝑛

𝑅𝑒𝑣𝑒𝑛𝑢𝑒 = 20,000 + 15,000 ∗ 10% ∗ $1000 = $3.5𝐵

REFLECTION – this is where the candidate should state the answer, link it to the
3
central problem, and proposed next steps to strengthen the analysis or test hypotheses

• Capturing 10% of the shortage in regions 3 and 5 would yield $3.5B revenue
increase for the client
• This is still $500M short for the goal that the client is trying to achieve
• Potential next steps:
• Investigate how to capture a greater share of the shortage to meet the client
target
• Determine whether the client has the capacity to produce this amount of
fertilizer and/or what investment would be required to build up capacity
• Analyze the profitability of entering these new regions

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 Creativity Question
Now that you have pushed the analysis past the exhibit and calculations, direct the interviewee to brainstorm some
creative approaches to helping solve the problem

Question 5: The client is thinking that they will have to set up local production plants in regions 3 and 5 to be
able to meet the demand there. What are the different factors which they will have to consider when deciding
how to approach this?

After the interviewee gives you the list, probe for an explanation as to why he or she picked those particular things

Possible solution:

• # of suppliers for raw materials?

Raw materials • Can we get the raw materials to the sites?
Inputs
• Can we hire qualified people?
People
• What are local regulations for labor?

• Can we access the right equipment?

Equipment
• Can we get service for the equipment?
Manufacturing
• Can we effectively transfer knowledge?
Training/Working • Can we effectively manage the local employees?

• Are there shipping companies to bring out product to market?

Logistics • How effective/cost effective are they?
Outputs
• Is there local infrastructure to support the development?
Infrastructure • Will the government help build new infrastructure?

Any other relevant message or media is acceptable – the interviewer is looking to assess the interviewee’s
ability to generate customer-centric and creative ideas
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 Synthesizing takeaways

This is the final section of the case. It is now time to push the interviewee to come to a conclusion

Question 6: The CEO of Phospho Co is going to be talking to the Board of Directors and wanted to know what the
findings were so far.

Possible solution:
• Focus on entering Regions 3 and 5

• Evaluate the feasibility of 10% market share capture

• Determine how to enter those markets and where to set up production facilities

• Determine profitability for new markets

It is important to note that there are many possible solutions

The structure to the solution is more important than the solution itself

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Conclusion of the case
 Exhibits to share
Exhibit A: Fertilizer supply and demand balance over next 5 years

Fertilizer 1 Fertilizer 2 Fertilizer 3

20000

15000

10000
thousands of tons

5000

-5000

-10000

-15000
Region 1

Region 2

Region 3

Region 4

Region 5

Region 6

Region 7

Region 8

Region 9

Region 10
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