Practice Case Study
Case Study Example
Blood Glucose Monitoring
Situation: Our client is currently a market leader in manufacturing and selling imaging equipment (e.g., MRI, X-Ray machines) to hospitals and would like to enter the consumer products market. They have asked us to evaluate the attractiveness of the self-monitoring blood glucose market. Diabetics use blood glucose monitors to measure and help regulate insulin levels. To begin, please determine the size of this market.
Additional notes:
- Diabetes is not an equal opportunity disease; it affects a greater percentage of the aged population
- Diabetes can be segmented into two types:
- Type 1: Results from the body’s failure to produce insulin
- Type 2: Results from insulin resistance (a condition in which the body fails to properly use insulin), combined with relative insulin deficiency
- For the purposes of this case, we will be considering only the US and can assume the population is ~320M people
*Please keep in mind that there are innovation factors and market dynamics that continually change everyday and that this is a practice case study example from the past.*
Question 1
What is your estimate for the total number of diabetics who would use blood glucose monitors in the US?
Suggestion:
An opportunity for candidates to showcase their ability to make meaningful estimates, to ask appropriate questions to gather relevant data, and use opportunities to simplify.
Example data requests include:
Population age distribution (Assume population can be ~distributed into four equal generations between ages 0–80)
o Ages 0 – 20 = 80M people
o Ages 20 – 80 = 240M people
Disease rate
o <20yrs Old - 0.2% US pop. 80 Mx 0.2% = 160k diabetics
o >20yrs Old - 10.0% US pop. 240M x 10% = 24M diabetics
Segmentation Data
o Type 1 = 10% of diabetes patients
o Type 2 = 90% of diabetes patients
o Type 1 = 100% use BG monitors
o Type 2 = 25% use BG monitors
Suggestion:
An opportunity for candidates to showcase their ability to make meaningful estimates, to ask appropriate questions to gather relevant data, and use opportunities to simplify.
Example data requests include:
Population age distribution (Assume population can be ~distributed into four equal generations between ages 0–80)
o Ages 0 – 20 = 80M people
o Ages 20 – 80 = 240M people
Disease rate
o <20yrs Old - 0.2% US pop. 80 Mx 0.2% = 160k diabetics
o >20yrs Old - 10.0% US pop. 240M x 10% = 24M diabetics
Segmentation Data
o Type 1 = 10% of diabetes patients
o Type 2 = 90% of diabetes patients
o Type 1 = 100% use BG monitors
o Type 2 = 25% use BG monitors
Question 2
How would you estimate the value of the blood glucose self-monitoring market?
Suggestion:
An opportunity for candidates to showcase their ability to structure a problem and recognize multiple revenue streams.
Additional note:
Before jumping into valuing the market it is relevant to know how self-testing currently works. First the diabetic must draw a small amount of blood. This blood is then collected on a disposable chemically treated strip. The BG monitor then analyzes the strip to determine the diabetic’s current glucose level. Candidates should be able to provide a rough estimate for the total sales associated with self-BG monitoring in a year, and recognize the different patient segments, the different revenue streams, and their relative value.
Examples of problem restructuring:
Recognize the two revenue streams (strips, monitors), which will look different for the two types of diabetes patients
Resolve sales pattern for each stream
o Alternative monitor might be purchased every few years
o Multiple strips are used daily
o Different disease types could potentially have different sales patterns
Typical market price data:
• Monitor - $100.00, every two years
• Strips - $0.50 each, with Type 1 at five per day and Type 2 at one per day
Suggestion:
An opportunity for candidates to showcase their ability to structure a problem and recognize multiple revenue streams.
Additional note:
Before jumping into valuing the market it is relevant to know how self-testing currently works. First the diabetic must draw a small amount of blood. This blood is then collected on a disposable chemically treated strip. The BG monitor then analyzes the strip to determine the diabetic’s current glucose level. Candidates should be able to provide a rough estimate for the total sales associated with self-BG monitoring in a year, and recognize the different patient segments, the different revenue streams, and their relative value.
Examples of problem restructuring:
Recognize the two revenue streams (strips, monitors), which will look different for the two types of diabetes patients
Resolve sales pattern for each stream
o Alternative monitor might be purchased every few years
o Multiple strips are used daily
o Different disease types could potentially have different sales patterns
Typical market price data:
• Monitor - $100.00, every two years
• Strips - $0.50 each, with Type 1 at five per day and Type 2 at one per day
Question 3
Given these potential revenue streams, what is the range of business models our client should consider? What are the pros or cons of each?
Suggestion:
An opportunity for candidates to showcase their business acumen, ability to structure an abstract question, and grasp the bigger picture.
Examples of multiple potential business models in this situation include:
• Sell both the monitor and the strips (e.g., iPod and iTunes model)
• Give away the monitor and charge for the strips (e.g., razor, razor blade model)
• Typical consumer good model where they are bundled and purchased together
Suggestion:
An opportunity for candidates to showcase their business acumen, ability to structure an abstract question, and grasp the bigger picture.
Examples of multiple potential business models in this situation include:
• Sell both the monitor and the strips (e.g., iPod and iTunes model)
• Give away the monitor and charge for the strips (e.g., razor, razor blade model)
• Typical consumer good model where they are bundled and purchased together
Question 4
Given our client has traditionally focused on diagnostic imaging (different customer base, large capital expenditures), what do you think about our client entering the self-BG monitor market?
Suggestion:
An opportunity for candidates to showcase their scope and breadth of business insight (opportunity cost), risk and challenges associated with entering a significantly different business, and the ability to reference the analysis of the broader challenge with advantages and disadvantages to expanding the business in this manner.
Example advantages:
• Begin serving a new, growing customer base
• Business (cash flow) may be less “choppy” than current business focused on large, capital purchases with a long buying cycle
Example disadvantages:
• Different customer base creates a marketing model and customer support requirements that will stretch the current organization’s capabilities (how will they be built or acquired?)
• A broader set of sales relationships will need to be established and maintained, potentially increasing SG&A as a proportion of sales
Suggestion:
An opportunity for candidates to showcase their scope and breadth of business insight (opportunity cost), risk and challenges associated with entering a significantly different business, and the ability to reference the analysis of the broader challenge with advantages and disadvantages to expanding the business in this manner.
Example advantages:
• Begin serving a new, growing customer base
• Business (cash flow) may be less “choppy” than current business focused on large, capital purchases with a long buying cycle
Example disadvantages:
• Different customer base creates a marketing model and customer support requirements that will stretch the current organization’s capabilities (how will they be built or acquired?)
• A broader set of sales relationships will need to be established and maintained, potentially increasing SG&A as a proportion of sales
Question 5
What other types of analysis would you recommend in considering the attractiveness of this acquisition?
Suggestion:
An opportunity for candidates to showcase their scope and breadth of business insight (market share of competition, profitability vs. competitors, pricing trends, projected disease growth, assessment of other potential new business opportunities, etc.) and unique insight of potential next steps.
Suggestion:
An opportunity for candidates to showcase their scope and breadth of business insight (market share of competition, profitability vs. competitors, pricing trends, projected disease growth, assessment of other potential new business opportunities, etc.) and unique insight of potential next steps.