FoBo Inc

Case of Declining Profitability

Team The Strategists
Deep Zanzrukia
Dnyanesh Katakdaunde
Kunal Bindra
 Agenda
Engagement Understanding
Breaking up the problem statement
Key drivers/ possible reasons for decline profit
Engagement Timelines and Deliverables
Resource Requirement and Cost

1
 Engagement Understanding
The Problem
Identifying the key drivers of
profitability which are
responsible for decline in profit
even after increase in revenue
significantly for a period of
2010-2015.
The Solution
Identifying the reasons causing
decline in profit & depending on
these reasons develop a
systematic plan for mirroring
increasing revenue trend for
profit
2
 Breaking up the problem statement
# of units
1 Procurement Hiring Sales
BeveragesPersonnel
Look out for
Merchants
Analysing Rate per
unit
Revenue # of
Is supplier power driving Are the new sales
Merchants # of units
purchase cost up? Or hires efficient? Or Setting up of
new
Frozen are piling up costs Merchandise
Customer power driving SP
Foods Rate per
Revenue Revenue per down How
unit far
are the
Merchant new merchants
# of units
located? Delivery of
Are too many returns Juices
and Material -
How diligently
Rate per are the
inventory write offs from Logistics
merchantsunit
maintaining
merchants adding to the
2
Proportion of each cost?
the refrigerator?
# of units
Analysing
Decline
segmentintoquantity orAdvertisement
total sales? Others
Returns & Regular repair
pressure on prices ? & Promotion Rate per
Cost allowances
policy unit
& maintc.

3
 Key Drivers / Possible reasons of decline in
profitability
The # of merchants are on an increase however the revenue per merchant is not
increasing at the same rate.
This is indicative of inefficiencies being piled up in the system.
Below are our hypothesis and we would like to discuss the same with the client to better
understand which of these is driving the lower margins ::
Supplier & Customer power
Bargaining power of supplier and customers would effect FoBOs margin.
Efficiency of Sales executive
The number of merchants a sales executive adds per spent would demonstrate the
efficiency of sales staff.
.contd

4
 Cost of maintaining a merchant
Include cost of repairs and maintenance at the Merchant, as also the allocated cost of Spoke*. Demonstrates
efficiency in terms of utilization of FoBos assets (ROI).
Logistics cost
In case the outbound costs for moving the goods to the merchants are within FoBos preview, on adding
merchants at distant locations company might loose freight consolidation advantages.
Returns
Returns from merchants in accordance with company policy, would entail additional costs in terms of
logistics as also increasing risk of inventory write off.
Sales promotion, Advertising and Branding
Discounts and incentives given to merchants, advertising and brand promotion costs need to be viewed in
alignment with sales.
*cost of the Spoke will be allocated to the number of merchants it is managing.

5
 Engagement Timelines & Deliverables
Timeline

Identifying Key drivers of profitability 1

Identifying area of problem for decline in profit 2

Deliverable

Defining roadmap for increasing profit 1

Implementation of recommended actions/changes 3

Support and Handhold 1

0 1 2 3 4 5 6 7 8 9
Weeks
We would like to have a 1 hour discussion with the client team during our week 1 to better understand the
business and areas which might be prone to problems. This discussion would involve the PwC
engagement manager & associate.
6
 Resource Requirement & Cost
For this engagement 4 resources will be used. Details of these resources
along with role and cost is mentioned in below table.
Details Resource 1 Resource 2 Resource 3 Resource 4
Name ABC CDE FGH IJK
Role Associate 1 Associate 2 Relationship Manager Partner

Cost / Hr 100$ 100$ 250$ 450$

No of Hrs 180 180 10 5
Overall Cost 18000$ 18000$ 2500$ 2250$

Total cost is $40,750. Overall cost in Rs = 27 lac (1$ = Rs 66 approx)

7
Thank You
8