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AQUALINE

A manufacturer of small power boats

BACKGROUND INFORMATION

Our client is Aqualine, a manufacturer of small powerboats–high-speed, engine-driven boats under 25 feet in length. It designs, manufactures and sells its premium-quality boats, which are priced at $30,000 per unit, through a dealership network on the East Coast of the United States.

Aqualine has historically boasted double-digit growth, but despite a good profit margin and stable cost structure, its sales have slowed and begun to flatten at $120MM. Its CEO has hired Oliver Wyman to determine the factors behind this slowdown and identify sales growth opportunities.

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9 Questions Remaining

  • This sample case was designed to simulate a real Oliver Wyman interview. Due to time constraints, you may not complete the entire case in a real interview setting. Most important is that you demonstrate your ability to think in a structured, analytical, and creative way.

    As is true of most business problems, many questions have more than one solution. We are most interested in your thought progression and reasoning. Please bear in mind that a real interview is much more interactive, and you are encouraged to ask questions. You may want to have a pen and paper on hand to take notes. You do not need a calculator.

    Directions

    You will be presented with a series of questions. Answer each question, then click "next" to view the suggested response and subsequent question.

    Note

    You cannot go backwards once you've clicked on "next". When you've completed the case study in its entirety, you will be able to print out a final document and compare your answers to the ones we're looking for.

    Time limit

    30 Minutes

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  • Background information

    Our client is Aqualine, a manufacturer of small powerboats–high-speed, engine-driven boats under 25 feet in length. It designs, manufactures and sells its premium-quality boats, which are priced at $30,000 per unit, through a dealership network on the East Coast of the United States.

    Aqualine has historically boasted double-digit growth, but despite a good profit margin and stable cost structure, its sales have slowed and begun to flatten at $120MM. Its CEO has hired Oliver Wyman to determine the factors behind this slowdown and identify sales growth opportunities.

    Get Started

  • QUESTION

    1

    Your case manager has asked your team to begin thinking about Aqualine's situation. What background information would you like to gather to begin structuring your assessment of growth strategies for Aqualine?


    YOUR RESPONSE

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    YOUR RESPONSE

    You did not submit a response.

    ANSWER

    Understanding the following key areas will help you examine Aqualine in the context of the powerboat industry and frame your analysis. The diagram below depicts one way to structure your thinking.

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  • QUESTION

    2

    Your team has chosen to first explore industry trends and has collected some data on the U.S. powerboat industry. For ease of comparison, all data has been converted to a percentage of its 2007 value. What implication can you draw from this data?


    YOUR RESPONSE

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    YOUR RESPONSE

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    ANSWER

    Although Aqualine's market share is declining, its overall revenues are increasing. For this result to hold, the powerboat industry must be continuing to grow. Aqualine's growth problem is apparently not reflective of a larger issue facing the industry.

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  • QUESTION

    2a

    Your team conducts further research on the industry, and uncovers the following facts on the powerboat market. For ease of comparison, all data has been converted to a percentage of its 2007 value. What conclusions could you potentially draw from this information?


    YOUR RESPONSE

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    YOUR RESPONSE

    You did not submit a response.

    ANSWER

    As hypothesized, the overall powerboat industry is exhibiting strong overall growth, with revenues increasing by 50% from 2007 to 2011. The number of powerboat customers also increased over the same time span. However, the increase in the number of customers is insufficient to account for the growth of the industry as a whole. Some other factor beyond new customers must be driving the increase in industry revenues.

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  • QUESTION

    2b

    Your team receives some new data from a market research provider. For ease of comparison, all data has been converted to a percentage of its 2007 value. Based on this new information, your manager asks you to draw a chart of the average price per powerboat. What would you predict for the overall trend in prices?


    YOUR RESPONSE

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    YOUR RESPONSE

    You did not submit a response.

    ANSWER

    The average purchase price per boat is likely increasing over time. Because the growth in customers and powerboats is equal, each customer is purchasing one boat. This means that the extra growth in revenue is not occurring from an increase in the number of boats owned by a customer. We also know that the growth in the number of registered powerboats is lower than the growth in total revenues. This implies a higher amount of revenue associated with each boat sold.

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  • QUESTION

    2c

    Your team holds a brainstorming session to discuss what factors could be driving this increase in average purchase prices in the industry. What ideas would you offer to the team?


    YOUR RESPONSE

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    YOUR RESPONSE

    You did not submit a response.

    ANSWER

    A number of possible factors could be driving up average purchase prices in the industry, including an increase in technological content, higher manufacturing costs, or a change in the product mix. It turns out that a shift towards larger sized boats is the primary driver of the change in the average powerboat price.

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  • QUESTION

    2d

    As part of your competitive research, you come across a small boat company called Sunset. Sunset has managed to generate superior profit growth over the past few years. A benchmarking study reveals parity with Aqualine's costs, and customer research reveals that Sunset captures a higher amount of total customer spending on boating. Your manager asks you for your ideas on how Sunset has been able to accomplish this feat. What would you suggest?


    YOUR RESPONSE

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    YOUR RESPONSE

    You did not submit a response.

    ANSWER

    Based on the information provided, you should have focused your ideas on new revenue sources, not cost reduction. In this case, Sunset has expanded its offerings to its boating customers to move beyond just the powerboat. It is now offering accessories and related services to its boating customers. These new offerings are helping Sunset to capture a larger share of total customer spending and to drive profit growth.

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  • QUESTION

    3

    Based on your findings, your manager asks the team to list possible growth strategies for Aqualine. Think about the assets and capabilities Aqualine has to leverage. What growth ideas can you identify?


    YOUR RESPONSE

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    YOUR RESPONSE

    You did not submit a response.

    ANSWER

    A few suggested ideas are listed below; you may also have come up with many other ideas that are not on this list.

    After your team presents its ideas to the CEO, he asks your team to investigate the following two areas:
    - Introduce an extended warranty service contract (Capture revenue outside of boat sales)
    - Launch a mid-sized boat line (Expand boat sales market reach)

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  • QUESTION

    4

    Aqualine management is considering a plan to unveil a mid-sized Cruiser boat next year priced at $50,000, a $20,000 price increase from their current small boats. Market research indicates that current Aqualine customers, who are extremely brand loyal, are the most likely set of customers to purchase from this line by upgrading their current boats. As a result, your manager asks your team to estimate the net sales from existing Aqualine customers only.

    How might you estimate the number of potential Cruiser customers from Aqualine's existing customer base? What information would you need? (Hint: Think about how you would segment the customers.)


    YOUR RESPONSE

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    YOUR RESPONSE

    You did not submit a response.

    ANSWER

    A few suggested ideas are listed below; you may also have come up with many other ideas that are not on this list.

    How many customers are in the market for a new boat?
    To determine how many customers will upgrade their boats next year, you need to factor in the length of boat ownership and boat lifetime. Boat owners become progressively more likely to consider replacing and upgrading their boat as it approaches the end of its useful life.

    What type of boat are they planning to buy?

    A good way of tackling this issue is to develop a customer segmentation scheme

    Existing customers in the market for a new boat include
    - Owners who want to upgrade to mid-sized or larger boats
    - Owners who are undecided about size
    - Owners who want to purchase another small boat

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  • QUESTION

    5

    Customer survey results reveal the following trend of current owners planning to purchase a new boat, which has a lifetime of 10 years. What is the net sales gain for the Cruiser next year? Should Aqualine pursue this initiative?


    YOUR RESPONSE

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    YOUR RESPONSE

    You did not submit a response.

    ANSWER

    One way to calculate net sales is to compare projected sales with and without the Cruiser:

    Calculate the number of customers in the market for a new boat
    (2.5% * 4000*1) + (5%*4000*1) + (10%*4000*3) = 1500 existing customers
    100 + 200 + 1200

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  • QUESTION

    6

    Should Aqualine pursue the mid-sized boat initiative?


    YOUR RESPONSE

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    YOUR RESPONSE

    You did not submit a response.

    ANSWER

    Based purely on net sales, Aqualine should pursue the mid-sized boat line initiative. However, before implementation, Aqualine should consider a few other issues, including:

    Profitability
    How profitable are the new boats versus the existing product line?

    Investment timeline
    How much investment is needed and how long is the payback period?

    Distribution network
    How willing are Aqualine's distributors to carry a new product line?

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  • YOU HAVE COMPLETED THE

    Aqualine Case Study


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