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Medium Growth Strategy Market Entry New Product Development

Who Needs Flight Simulators?

#Aerospace & Defense #Manufacturing #Simulation Technology
ProHub Comment

This is a classic three-vector growth strategy case requiring the candidate to diagnose market saturation, then evaluate growth through new products and new markets using quantitative analysis. The case tests ability to structure growth options, perform breakeven analysis, and identify the revenue-maximizing combination of segments from a matrix of projected revenues.

Estimated Time 26 minutes
Difficulty Medium
Source Queen's
10 / 100
Your client is CAE Inc., a Canadian manufacturer of flight simulators for private airlines and several countries’ militaries. However, growth in this market has begun to slow, especially in the military segment. The CEO has hired you to devise a strategy to put them back on the path of growth. The CEO wants to focus on ways to profitably grow revenues, rather than cutting costs.

Clarifying Information

  1. Civil flight simulators growing at 3% CAGR – CAE growing at 5%
  2. Military flight simulators declining at -10% CAGR – CAE declining at 8% CAGR
  3. CAE achieves better than market growth rates because of its brand name. Market research indicates we will not be able to increase growth rates any further
  4. Four segments have expressed interest in simulators designed by CAE: medical, architectural, geological and electrical
  5. CAE has the resources to enter two of the four new segments at most. Assume that the costs of serving the segments are the same. Further, revenues are the only focus, not costs. Assume entering one segment only will cost the same as entering two.
  6. Current clients would be willing to pay $500 monthly fee for training service
  7. Cost of training services: $100 labour/customer/month, $500,000 machines – depreciated over 10 years, $100,000 for marketing and $90,000 for administration
Mock Interview
Interviewer

Your client is CAE Inc., a Canadian manufacturer of flight simulators for private airlines and several countries' militaries. However, growth in this market has begun to slow, especially in the military segment. The CEO has hired you to devise a strategy to put them back on the path of growth. The CEO wants to focus on ways to profitably grow revenues, rather than cutting costs.

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
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Practice this case with AI Mock Interview

CAE Inc., a flight simulator manufacturer, faces slowing growth in its traditional civil and military markets. The candidate must devise a revenue growth strategy by evaluating new product offerings (aviation training) and entry into four new markets (medical, architectural, geological, electrical), with resource constraints limiting entry to two segments. The analysis requires breakeven calculations and matrix optimization to maximize revenue.

Key Insights:

  1. Growth strategy must address three levers: increase sales to current customers, create new products for existing customers, and find new customers/markets
  2. When existing markets show saturation (evidenced by market research and company already outpacing market growth), expansion must focus on new products and new markets
  3. Breakeven analysis is critical for new products: with $500 monthly fee, $1,200 annual labor cost, and $240,000 fixed costs, 50 customers are needed to break even
  4. Matrix analysis reveals that entering two segments simultaneously can yield synergies: the Architectural & Geological combination generates $1,775,000 in revenue—more than entering either segment alone
  5. The diagonal of the revenue matrix represents single-segment entry; off-diagonal values show combined entry scenarios, helping identify optimal market combinations