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BCG Hard Cost Reduction Profitability

Save the job of an INSEAD alumnus!

#Technology
ProHub Comment

This is a comprehensive turnaround case requiring candidates to integrate financial analysis (profitability tree, margin calculations) with strategic decisions (M&A, divestment, cost-cutting). The case tests both quantitative rigor and strategic boldness, with the interviewer guide emphasizing that great candidates must present multiple options with clear trade-offs and implementation considerations rather than a single recommendation.

Estimated Time 36 minutes
Difficulty Hard
Source ICC
50 / 100
The client “Techking” is a 5bn€ multi-national IT provider based in Germany that provides technology and related consulting services to clients from a variety of industries. Revenues have been next to stagnant for years and profit margins compared to competitors is low. The CEO – an INSEAD alumnus - has asked you to come up with options on how to turnaround their business and improve profit margins. He advised you that all previous Consulting companies were “not bold enough” and this is the time for some “big changes” as he otherwise will lose his job.

Clarifying Information

  1. Client’s offerings includes a wide range of technologies incl. provision of computing power of their data centers, hardware for employees (e.g. laptops) and Software and Consulting
  2. Client operates all over the world, but focus is Europe
  3. Client has already executed several smaller initiatives to cut down costs, but impact was minimal
  4. Client targets at least 15% profitability in 3 years latest and would take a cut on revenue if necessary – current profitability has to be calculated by candidate later
  5. Profit margins of competitors are between 15% and 25%
  6. Client is open to M&A activities
Mock Interview
Interviewer

The client "Techking" is a 5bn€ multi-national IT provider based in Germany that provides technology and related consulting services to clients from a variety of industries. Revenues have been next to stagnant for years and profit margins compared to competitors is low. The CEO – an INSEAD alumnus - has asked you to come up with options on how to turnaround their business and improve profit margins. He advised you that all previous Consulting companies were "not bold enough" and this is the time for some "big changes" as he otherwise will lose his job.

You

Thanks. Before analyzing, I'd like to clarify a few key questions...

Interviewer

Good question. Let me provide some background information...

You

Based on this, I suggest analyzing from these dimensions...

AI Score
Structure Analysis Communication Business Sense Quantitative
Practicing...
Score coming soon
Practice this case with AI Mock Interview

🤖 AI Summary: An INSEAD alumnus CEO of Techking (5bn€ IT provider) needs strategic options to improve profitability from ~8% to 15%+ or face job loss. The company lags competitors in growth (3% vs 12-31% CAGR) despite having no M&A activity, while product profitability is highly uneven (ranging from -20% to +40% margins across four segments). Candidates must identify the divestment/restructuring opportunities while assessing implementation risks.

💡 Key Insights:

  1. Current profitability of 8% (375m€ on 5bn€ revenue) is far below competitor range of 15-25%, creating urgency for transformation
  2. Strong correlation between M&A activity and revenue growth across competitors (Matec: 33 acquisitions, 31% CAGR vs Techking: 0 acquisitions, 3% CAGR) suggests M&A is strategic lever
  3. Product portfolio shows classic portfolio imbalance: Segment A (30% of revenue) has -20% margin, while Segments C and D have 25-40% margins, presenting clear divestment opportunity
  4. Divesting Segment A would increase profitability to ~20% (sufficient for CEO to keep job) while reducing revenue to 3.5bn€, requiring candidate to articulate revenue-profitability trade-off
  5. Case requires integration of data from three exhibits and assessment of non-financial risks (M&A cultural issues, operational complexity of divestment), testing both analytical and strategic thinking