Rotman Case Book
Rotman Case Book
Rotman Case Book
Interview Guidance
Since this is an advanced case, try to provide as little guidance as possible as the interviewer. Push the candidate to include non-profitability elements into
their structure if they don’t naturally do so.
It may prove beneficial to use the discussion around risk as a brainstorming question to be conducted either before the recommendation was given or
after. The candidate should be able to provide at least 5 risks and ideally put them into a MECE structure (this is not straightforward and will require some
time).
179
#29 – New Rubber Plant Investment (II of VII)
180
#29 – New Rubber Plant Investment (III of VII)
Sample Framework
This is an operations case mixed with cost-benefit analysis. The analysis may include, but is not limited to, the following areas:
Basic Structure:
Analyze the financial benefits of the investment:
• Analyze ROI [revenues vs costs (upfront investment, recurring costs such as transportation, materials, etc.]
• Other non-financial considerations:
• Risks: threat of terrorism, timely delivery, labour shortage, etc.
• Non-financial benefits: economic development, employment
Advanced Structure:
• Analyze the financial benefits of the investment:
• Analyze ROI [revenues vs costs (upfront investment, recurring costs such as transportation, materials, etc.]
• Examine value chain for the rubber plant and identify the bottleneck:
• Raw Materials → Manufacturing → Distribution
• Analyze production capacity of plant. Given the equipment capacity is 10M lb. per month, production is probably limited by supply and
distribution
• After drawing the value chain, the candidate should clearly identify that there is a transportation element
• Identify the other benefits associated with this investment considering this is a government investment:
• Employment
• Economic development
• Identification of risks
• Assess risks in the investment (timely delivery, terrorism, labour shortage, etc.)
After the candidate lays out the plan, ask the candidate to calculate the payback period, if not already identified.
181
#29 – New Rubber Plant Investment (IV of VII)
First Step: Identify Bottleneck Second step: Identify revenue and cost
A common mistake is to assume 10M lb per month as production level Information to be provided upon request
(10M lb per month is the maximum production capacity, but not • Labour: $8M per month
necessarily the plant’s production level)
• Fixed overhead costs: $10M per month
Ask the candidate to calculate on monthly basis. Assume 25 days in a • Cost per train round trip: $40K (both inbound and outbound)
month. Show exhibit #1 upon request for train information
• Sell the rubber at $20 per lb.
Outgoing Train Calculation • Gum resin costs $5 per lb.
182
#29 – New Rubber Plant Investment (V of VII)
183
#29 – New Rubber Plant Investment (VI of VII)
184
#29 – New Rubber Plant Investment (VII of VII)
Outgoing Incoming
Bogies/train 8 10
Containers/bogie 25 25
185