CLUB COMPANY

A CASE INTERVIEW AT A MANAGEMENT CONSULTING COMPANY

 • Club Co., a warehouse club retailer, has asked you to
assess options for offering members mobile phones,
INTRODUCTION service and accessories.
 • Our client, Club Co., is a warehouse club retailer with
revenues of $10 billion in the latest fiscal year. Club
Co. operates 200 warehouse clubs in 15 eastern and
midwestern states and currently services 10 million
BUSINESS members who pay for access to Club Co. stores. Club
SITUATION Co.’s value proposition is offering high quality, brand
name products at the lowest possible price; they also
focus on selection, offering almost twice as many
products as competing warehouse clubs.
 • Based on a recent strategic review of their electronics
category, Club Co. has prioritized offering members mobile
phones, service, and accessories. Club Co. will partner with
a third party who will manage the wireless business inside
each of Club Co.’s 200 stores. The third party will occupy a
kiosk in Club Co.’s electronics space and sell wireless
products, services, and accessories to Club Co.’s members.
The partner will manage all staff inside the kiosk and own
BUSINESS the relationships with the wireless carriers.
SITUATION • Club Co. and the third party have identified two business
(CONT.) models:
• Model A would entail offering one wireless carrier’s
products and services
• Model B would entail offering three carriers
• In both models, Club Co. would earn a set commission for
every phone sold with a two-year activation as well as a
percentage commission on every wireless accessory sold
(e.g., cases, Bluetooth headsets, etc.)
 • Club Co. has asked you to help assess each option
PROBLEM and determine how lucrative each would be.
STATEMENT
 Question 1
• What are the advantages of using a third-party
CASE QUESTIONS
vendor to manage the kiosk versus managing it in-
house?
CASE QUESTIONS

Question 2 (see data in Exhibit 1)

• What is the expected overall market size for Club Co., regardless of the business
model selected?

Question 3 (see data in Exhibit 1)

• What factors should Club Co. consider when determining the market share that it
would be able to capture in year one?
CASE QUESTIONS

Question 4 (see data in Exhibit 1)

• Using the provided data, model a P&L for both business model options for year one.
Calculate operating profit (ignore interest, taxes, and depreciation) and round dollar
amounts to the nearest $100K.
 Question 5
CASE QUESTIONS • What are the advantages and disadvantages of
offering multiple carriers versus only one?
 Question 6
• What would you recommend Club Co. do? What
CASE QUESTIONS
other data would you want, or questions answered,
to make a decision?
EXHIBIT 1