Mckinsey

PRACTICE VERSION – ADVANCED PROBLEM SOLVING TEST
McKinsey & Company
January 2001

1

Instructions for candidates. (Consider your answer to each question carefully, as accuracy is important as well as amount completed. ¶ The test contains 1 business case. The case has two “teams”, each with five questions, making a total of ten questions in the test. Ensure that you read the background tothe case carefully. ¶ The questions are multiple choice. You must select one correct answer for each question. ¶ Mark your answer by circling it on the answer sheet provided. Ensure that you are using the correct answer sheet for the particular case you are working on. ¶ calculators are allowed in this test. Paper is provided for workings out. ¶ You have 45 minutes to complete this test.

2Case I – Fiji Cola
As part of a two very lucky McKinsey teams, you are sent to Fiji to work on a project for Fiji Cola, which is sold only on Viti Levu, the main island of Fiji, but is the leading brand of cola on this island. Fiji Cola’s sales have been dropping in recent years due to the entry of several rival brands of soft drinks into the market. As a result, Fiji Cola are consideringexpanding sales to the other islands in the Fijian archipelago. The aim of Team A is to work out the potential amount of cola that could be sold in the whole of Fiji and investigate how Fiji Cola is currently sold, while Team B will investigate and aim to improve production efficiency for Fiji Cola.

TEAM A

83%

81%

75% 62% 51% 48%

1985

1988

1991

1994

1997

2000E

Fig 1: FijiCola’s Market Share in Viti Levu 1985-2000(Estimate)

Total Cola Sales in Viti Levu

1985 $2.72m

1988 $2.77m

1991 $2.71m

1994 $2.81m

1997 $2.88m

2000E $2.90m

3

1. Here are some pieces of information which the Managing Director of Fiji Cola says he could obtain for you: I II III IV V The number of Cola-producing factories in the entire Fijian archipelago The average numberof litres of cola produced per factory An estimate of the average consumption of cola per person in Viti Levu The results of a marketing survey on Fiji Cola performed in 1998 The population of Fiji

Which of the following sets of information would be most useful to you in working out how much cola could be sold in the whole of Fiji? A B C D E I, II IV, V I, II, IV III, V I, II, III

2. Ininvestigating some of the specific reasons why competitor brands are winning market share from Fiji Cola, Bob Sunshine, Fiji Cola’s sales analyst, suggest the following reasons: I II III IV V More effective advertising by competitors Cheaper prices from competitors Competitors have state of the art production facilities Better distribution by competitors Competitors are more “with it”

Which of theabove would you consider valid reasons? A B C D I, II, III I, II, IV I, II, V II, III, IV 4

E

All of the above

3. By how much, in $m, did Fiji Cola’s sales revenue fall between 1985 and 1997? A B C D E $0.1m $0.71m $0.79m $0.87m $0.35m

Fiji Cola is sold via a sales force who visit stores in Fiji and negotiate a price per litre with the store. The store will then sell the cola at ahigher price to the end customer. The sales force are given a minimum price per litre to obtain from the store, below which they receive no incentive. For any price they obtain above the minimum price, they receive 10% of the difference. Currently the minimum price per litre is $1.12. The following table shows the average store price (to the end-customer) and volume of cola sold in the variousregions of Viti Levu last year. North Average store price per litre Litres sold to end customers $1.50 0.5m South $1.45 0.4m East $1.55 0.4m West $1.50 0.6m

5

4. Tom Paradise, Fiji Cola’s sales manager, tells you that all sales were made above minimum price last year, and that average prices obtained by the sales force in the North, South and West last year were $1.22, $1.22 and $1.27...