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Medium Market Entry Revenue Forecasting Policy Analysis

Sisha: Just Blowing Smoke?

#Non-profit #Government/Public Sector #Consumer Goods #Taxation
ProHub Comment

This is a culturally sensitive market entry case that requires candidates to balance revenue optimization with ethical considerations around tobacco legalization in an Islamic country. The case tests quantitative modeling skills (licensing structure comparison, revenue projections) alongside strategic thinking about social and health implications of legalizing a previously banned product.

Estimated Time 26 minutes
Difficulty Medium
Source Darden
10 / 100
Over the past five years, the government of Saudi Arabia has been focused on reducing economic dependence on oil by diversifying the domestic economy. As part of this effort, the government has evidenced a willingness to relax certain social norms. As part of the diversification initiative, the government hired us to forecast the potential revenue impact of taxing shisha consumption.

Clarifying Information

  1. What is shisha? Shisha is an instrument for vaporizing and smoking flavored tobacco. In the Arab world and Middle East, people smoke waterpipes as part of the cultural traditions.
  2. How will the Saudi government make money off of shisha? Institutions must apply and pay for an annual license to sell shisha. Additionally, sales tax and import tariffs are levied by the government as appropriate.
  3. Is there a specific revenue target in mind? No, the Saudi government only wishes to maximize revenue over a 3-year period.
  4. How much revenue does the Saudi government currently earn? 2.5 trillion Saudi riyal annually. Tobacco and other related products currently generate 500 million SAR in revenue.
  5. Are there any social norms we should be aware of? Islam is widely practiced by Saudis citizens and governs their personal, political, economic and legal lives. Additionally, public consumption of shisha is currently banned but is widely consumed at home.
Mock Interview
Interviewer

Over the past five years, the government of Saudi Arabia has been focused on reducing economic dependence on oil by diversifying the domestic economy. As part of this effort, the government has evidenced a willingness to relax certain social norms. As part of the diversification initiative, the government hired us to forecast the potential revenue impact of taxing shisha consumption.

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...
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Practice this case with AI Mock Interview

Saudi Arabia seeks to diversify its economy by legalizing and taxing shisha consumption. Candidates must determine the optimal licensing structure (comparing Qatar, Jordan, and UAE models), forecast three-year revenue from restaurant licenses, and consider broader implications including public opinion, health costs, and international reputation.

Key Insights:

  1. Jordan’s licensing structure (3,000 SAR one-time + 500 SAR monthly) maximizes revenue compared to alternatives, generating 21,000 SAR per business over three years
  2. The projected Year 3 domestic revenue impact of 85.5 million riyal represents a 17.1% increase to current tobacco-related revenue (500 million SAR)
  3. Critical risks include heavy dependence on adoption rate assumptions and potential healthcare costs from increased tobacco consumption
  4. The case highlights the tension between economic diversification goals and social/religious considerations in Saudi Arabia’s Vision 2030 reform agenda
  5. Candidates must recognize that calculated licensing revenue is conservative and excludes sales tax and tariff revenues