Problem Statement

Our client is AluShip, a leading French shipyard that builds aluminium boats for public sector clients, primarily police forces, lifeguard organisations, the Coastguard, and the Navy. AluShip currently sells to various European countries through a shipyard in France and North American countries through a shipyard in Canada.

They are looking to expand their business by opening operations in east Asia and have narrowed down their choices to Malaysia and Japan. The COO of AluShip has asked OSG to help identify which market, if any, they should enter.

Tips: Have a pen and paper with you to write down any important information. Feel free to ask the interviewer to explain anything that is unclear to you or for additional information.

Question 1 - What factors would you consider in selecting which market to enter?

  • Some factors to be considered may include:

    • Consumers

      • Market demographics (size and budget of police force, navy etc.)

      • Demand characteristics (preferences, loyalty, WTP etc.)

    • Competitors

      • Number/size/market share of competitors

      • Own USP vs USP of competitors

      • Barriers to entry

    • Company

      • Non financial (production capacity to meet expansion needs, required skills & capabilities e.g. languages)

      • Financial (production costs, desired ROI, cash flow , short vs long term profitability)

    • Other factors

      • Regulations

      • Political stability

    Tips: Take time to organize your thoughts before answering. Develop an overall approach before diving into details.

Question 2 - The client has estimated the upfront investment required for building a shipyard in each country and has done some broad analysis of the market. In which country would you recommend they build the shipyard and why?

Please refer to the following information for Question 2:

  • Total cost of construction from Figure 1:

    • Malaysia: [(8,500,000 + (30 x 150,000)) x 1.1] = 14,300,000 Ringgits = 14,300,000 x 0.2 = 2,860,000 Euros

    • Japan: [2,200,000 + (15 x 100,000) + 300,000] x 1.25 = 5,000,000 Hundred Yen = 5,000,000 x 0.6 = 3,000,000 Euros

    From Figure 2, Japan has a higher upfront cost, higher tax environment and more expensive labour. The market is also more saturated with competitors and has a lower growth rate.

    However, it also has more political stability and less financial risk ( as evidenced by shipyards going bankrupt).

    Therefore, Malaysia offers a higher risk environment with better potential for growth and a smaller initial investment. The ultimate decision depends on the client’s preferences over risks, costs, growth and profitability.

    Tips: Calculators are not allowed in case interviews. Take time to look at the data before going into the calculations. Write out your calculations on paper and talk your interviewer through your steps and thought process before reaching the answer.

Question 3 - The client has chosen to move forward with your recommendation and will be entering into your chosen country. What are some ways they can increase profitability when making this move?

  • Two potential ways to increase profitability are to increase revenue and decrease costs:

    • Increasing revenue

      • Expand production (e.g. also sell to private sector and nearby countries, expand product line to suit demands in new countries)

      • Partnership with complementary businesses (eg. companies selling ship navigation systems, selling anchors, life vests etc.)

      • Cross-Border marketing, if more global shipyards are opened better reputation and so better business for existing shipyards, can coordinate marketing efforts to different governments

    • Decreasing cost

      • Potential partnerships with local players on procurement/ R&D/ marketing etc., potentially across borders

      • Streamline supply chains between shipyards in different countries by buying raw materials in greater bulk, centralising mass production of ship parts, producing in lower regulatory environments and shipping to other countries etc.

    Tips: Take time to organise your ideas before answering the question. Develop an overall approach before diving into details.