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Mckinsey: Problem Solving Assignment-1: Case 1: Save-A-Penny

The document discusses problem solving and outlines a 7-step process: [1] Define the problem specifically and measurably [2] Break into smaller issues [3] Analyze, identify solutions [4] Eliminate non-key issues [5] Gather supporting data [6] Create implementation plan [7] Communicate to stakeholders. It then provides two case studies on companies facing issues - a supermarket with declining non-food sales, and a hypermarket chain needing a 3.5% operating margin. Solutions are mapped out using "Issue Trees" to increase revenue or reduce costs through various approaches.

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Rajdeep Banerjee
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253 views3 pages

Mckinsey: Problem Solving Assignment-1: Case 1: Save-A-Penny

The document discusses problem solving and outlines a 7-step process: [1] Define the problem specifically and measurably [2] Break into smaller issues [3] Analyze, identify solutions [4] Eliminate non-key issues [5] Gather supporting data [6] Create implementation plan [7] Communicate to stakeholders. It then provides two case studies on companies facing issues - a supermarket with declining non-food sales, and a hypermarket chain needing a 3.5% operating margin. Solutions are mapped out using "Issue Trees" to increase revenue or reduce costs through various approaches.

Uploaded by

Rajdeep Banerjee
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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McKinsey: Problem Solving Assignment- 1

Pritha Gupta (DM22254)


The process of problem solving is a holistic approach which involves first determining the
causes of a problem, then identifying, selecting and trying out alternatives for an appropriate
solution and finally implementing the selected solution. Good problem-solving abilities help
in using time and resources effectively in the process of us becoming good managers. Our
session with McKinsey on the 5th of September, 2020, was a push for us in this new field of
structured problem solving which will help us think logically for the benefit of the
organization in face of any and every problem and finally take the appropriate solution.
There are three ways to approach a logical form of problem solving in order to achieve the
maximum impact: Impact- driven, Focused and Fact- based. For maximum benefit, the
process of problem solving has been broken down into seven steps:
1) Defining the problem- The first step is to debate, discuss and come to a conclusion as
a team regarding the problem that the organization is facing. A good problem
statement must follow the acronym SMART i.e. it must be Specific, Measurable,
Action-oriented, Relevant to the key problem and Time bound.
2) Break the problem into issues- The next step will be to break down the large problem
into smaller issues so that it becomes easier to tackle and solve.
3) Conduct analysis and identify solutions- Once the problem has been identified, it must
be analyzed to understand the implications. Next, we must deliberate and decide on
possible courses of action in order to tackle the issue.
4) Eliminate all non-key issues- All issues which are not inherently intrinsic to the
solving of our existing problem must be eliminated in order to achieve an
environment dedicated only to solving of the particular problem.
5) Pull together findings and build arguments- The next focus is to gather data and past
recordings to support for or against arguments.
6) Create executive plan- Once the solution has been created, we must decide on the way
to implement the solution in order to guarantee maximum effect. This work plan again
has to include the objectives, identifying priorities, laying out a detailed initiation
plan, specifying targets and clarifying individual roles.
7) Communicate to stakeholders- Lastly, the decision must be communicated to the
stakeholders in order to receive recommendations.
Finally, we use a completely new insight into the process of Problem Solving, i.e., the
usage of ‘Issue Tree’ and consequently we try to solve the two cases allotted to us.

Case 1: Save-a-Penny
Save-a-Penny is a double supermarket as it dedicates 50% of its space to food and the
remaining to non-food. Till recent times, Save-a-Penny was a market leader in this category,
which has been now taken over by Value 4U. While the food division continue to showcase
profits, the non-food division is clearly lagging behind and is the reason behind the declining
profits for the company. Using the techniques mentioned above, we can define our problem
statement:
‘What opportunities exist for shareholder Mr. R to increase the revenue from Save-a-Penny’s
non-food division and make it the market leader it was in 2012?’
The various solutions are enumerated below in the Issue Tree:
Home delivery of
products
New platforms to try
out
Online app for purchase
Increasing customers
Push: Store level
marketing campaigns
Existing platforms for
improvement
Pull: Store level
Increasing sales from Affecting price levers discounts
existing customers for non-food items

Direct discounts on Easy access to non-food


Increasing non-food items
non-food items
sales

Indirect discounts on Highly trained staff in


non-food items the stores

Availability of non-food
items

Affecting non-price Proper instructions in


levers for non-food and out of the stores
items for a seamless
customer experience

Proper market research


to understand if there
is a problem with the
brand image of the
non-food items

Higher quality of
products

Case 2: Good Foods


Good Foods is the hypermarket division of Nature Group, a Spanish regional retail chain,
which controls 3% of a 74 Euro billion Spanish retail industry and Good Foods’ revenues
comprised approximately 700 million Euros of that. But recently, Good Foods has been
facing falling revenues due to domestic and international players gaining a foothold in Spain
by rapidly gaining shares. Changing consumer demands also play a huge role with
regulations restricting hypermarket development hindering any scope for major change.
Regulated market prevents expansion in size of stores while pricing below cost is not
permitted. In such a situation, the problem statement can be defined as:
‘What set of actions are required over the next five years to attain a 3.5% operating margin?’
The various solutions are enumerated below in the Issue Tree:
Actions GoodFood may take to
attain 3.5% operating margins?

Increase
revenue Reduce costs

Reducing fixed Reducing variable


Increase total Increase average costs
number of costs
basket size
purchases /
month

Manufacturing
Raw materials cost costs
Increase percentage of shoppers
Increase penetration of Increase basket size in making purchases from each
Increase conversion rate each department department
the brand among
by identifying the stage
customers
where customers leave
Distribution costs Retail costs

Increase
frequency of
visits

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