Future profit calculation question

Question

After calculating the future cost after transferring all BAs and DVs to Australia. Why the profit calculation considered the benefit 80M (80% of business) although collocation of everyone to Australia will make the benefit 100% of business (100M) ?

Answer 1

Hello there,

You should consider that “benefit of colocation” as a 10% boost of the revenues of that specific office, if IT sources will be placed in the same country.

Since the business size of Australia is 800M$, you have to consider that as baseline to calculate your “benefit of colocation”.

Your choice is to put 100% of your IT sources in Australia, that does not mean that 100% of your business will come from australia too (in other words you will still have 200M$ from Indonesia).

I hope that now it's more clear, otherwise I think that Ian will be happy to help you further

Best,
Luca

Answer 2

Hi there,

First of all, congratulations on reviewing your cases so thoroughly!

This is indeed an interesting question which is probably relevant for quite a lot of users, so I am happy to provide my perspective on it:

I would advise you to consider that “benefit of colocation” as a 10% revenue increase of that specific office in case IT will be placed in the same country.
Moreover, since the business size of Australia is $800m, I would advise you to consider this business size as the baseline to calculate your “benefit of colocation”.
Lastly, I would advise you to think about that even if your choice is to put 100% of your IT sources in Australia, that does not mean that 100% will come from Australia either (i.e. you will still gain $200m from Indonesian business).

In case you want a more detailed discussion on how to best approach quantitative questions during case interviews, please feel free to contact me directly.

I hope this helps,

Hagen

Answer 3

Well, it appears Luca knows my case well :P

He's exactly right. Customers don't change when we move support functions.

Especially in today's world, location of operations/business doesn't “matter” to top-line revenues. Here, we're purely focused on better serving the business from whichever location is optimal!

Answer 4

COuldn´t have said it any better than Luca!

Answer 5

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Answer 6

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Answer 7

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