Interview Question – Introduce yourself

Hi, I am ABC. I hail from a background of Professors – my parents are professors, my sisters used to be Professors at the University of Delhi. I have done by B.Com (H) from Hansraj College, followed by a year of trying out a venture with my graduation friends. Post that, I have done my MBA from IMI, Delhi.

Academically, I have had interest in finance and marketing. I work as a Team Lead and have completed 4.5 years at KPMG, working with the Deal Advisory and Strategy teams. In terms of my hobbies, I have a creative frame of mind, and have interest in graphic designing.

I have worked on assignments covering a range of industries, including Technology, FS, Healthcare, Infrastructure, Consumer Markets etc. The typical projects have included strategy formulation, assessment of market landscape, industry analysis, competitive benchmarking etc.

Current affairs, Business awareness, Indian/global markets

Politics

America’s secretary of state visited Saudi Arabia – King Salman and his son
- Prince is under scrutiny for death of journalist Jamal Khashoggi in Istanbul
- Murdered by team of Saudis with link to Prince
A house in southern Israel was hit by a rocket fired from Gaza Strip
- Israel jet countered it by striking 20 targets at Gaza Strip
Public health emergency over Ebola outbreak in Congo
- Claimed lives of 140 people out of 181 confirmed cases
America killed 60 jihadists in an air strike in Somalia
#MeToo campaign in India
- M.J. Akbar resigns as junior foreign minister
French President reshuffled his cabinet after a struggle with PM

M&A / Strategy

IBM is chasing Amazon in the Cloud with a US$33 billion purchase of Red Hat
- following the trend of Cloud
- playing catch up with Amazon and Microsoft on Cloud
- declining revenues in hardware, software
Ibibo founder launches INDwealth – an AI powered wealth management company
Xiaomi and Huawei CEOs argue over best camera
Sears filed for bankruptcy – the company that revolutionised shopping with its mail order catalogue and pioneered shopping malls
Big banks report bumper earnings – JP Morgan rose 24%, BoA and Wells Fargo grew 33%
- Asset manager Blackrock saw decline in stock – institutional investors pulled money amid pricing war in investment industry
- Denmark’s Danske Bank was rejected CEO by the regulator. The bank is embroiled in a money-laundering scandal which led to resignation of previous CEO
America’s federal budget deficit amounted to US$779 billion for FY ending Sep 30th, increase of 17% from previous year – 3.9% of GDP
Britain – wages grew 3.1% – fastest since financial crises – last year growth of consumer prices outstripped wages
China’s producer of vaccines – Changsheng Biotech was fined US$1.3 billion by government in relation to faulty data on vaccines for rabies
Facebook to tackled spread of fake news by removing c.800 politics-related pages and accounts from its network
Uber is firming up plans for an IPO within next six months that could see a valuation of US$120 billion
Netflix grew its subscriber base to 137 million, by adding 5.9 million international customers and 1.1 million US subscribers in Q3 (July-Sep) – plans to spend US$8 billion on original content
Google fined US$5 billion by European Commission for abusing the market dominance of Android, comply by allowing smartphone makers to install all of its apps separately, rather than as a bundle
Google withdrew from US$10 billion contract to provide Department of Defence with cloud computing services, citing ethical concerns on how Pentagon may use its technology. Amazon said it must make right decision even when its unpopular

Reason behind why would you like to join the company and role

The people
The impact
The knowledge
The opportunities
Over communicate, learn from others

I saw the Mega-trends video by Alison and I realised that trends is something that forms a major portion of the advisory services that I deliver
The BCG matrix has been embedded in the back of the mind since MBA. In almost every engagement, we do look at the industry growth and try and determine where in the product life cycle does it lie – intro, growth, maturity, decline.

Delist in US and resist in China

First wave – 1990s – major SOEs
Second wave – 2000s – SOEs like China Telecom
Third wave – late 2000s – private companies like Alibaba, Baidu, Focus Media

3SBio – 600% gain, Focus Media – 100% gain, China Mobile Games and Entertainment- 45% gain, Qihoo – 500% gain

Problems in US

US investors distrust of Chinese entity – lack of transparency, inadequate reporting of transactions
Costs of being a US listed entity – compliance, IR, HR, audit
Experience in the US – lawsuits

Reasons for problems

Structures of Chinese entity – VIE structure – Alibaba – owners of ADRs have limited control and rights
Backdoor listing – acquired an entity
Lack of experience in reporting

Reasons for overvaluation in China

Qualifying for state contracts
China’s efforts to draw companies home
Changing rules in China
Information availability

Premiums in China over HK

Composition of stock market – in China, 80% retail and in HK, 23% retail
Differential risk preference – short term profits on speculation
Exposure to asymmetric information – future predictions

Market Intelligence Competitor Intelligence

Capturing customer request
Develop a work plan
1. Build an issue tree and prioritise per scope (Issue – where should CS capability reside organisationally – Sub-question – What are prevalent CS org designs? – Which option is most prevalent for a large multi-product company – What are key industry trends – What are trade offs between each option)
2. Define deliverables and key activities
3. Define timeline, approach (secondary, primary – insight alpha, GLG) and owners
Establish a calendar and milestones
Develop ghost deck
Refine approach

Project flow

Problem statement / Issue
Build issue tree and prioritize
Generate hypothesis
Tested analysis as planned

Kind of approaches / research used to create strategies

Top down approach
- Global market and its growth projections
- China market and its growth projections
  - Trends and drivers for the market
  - Government regulations favouring the market
  - Challenges faced by the market
  - Competition in the market
Issue tree approach
- Issue – Lucrativeness of CM hospital in HK
  - Overview of CM in HK
    - Current providers – Overview of current providers of CM in HK (clinics – govt, University, private)
    - Charges – Overview of respective charges for such services in HK
    - Trend – Chinese-Western medicine integration pilot
    - Education – Chinese medicine UG and PG study in HK, research programs
  - Summary of current trends and provision of CM services in other markets
    - South Korea – CM hospitals, Services offered, Diseases treated, Recent features of the market
    - Taiwan

SCR Approach – Assist an Asian energy player in its market entry strategy in South America, covering analysis of key geographies – Brazil, Chile, Columbia and Peru

Situation (S)

Entry into South America market

Complication (C)

Where to enter?

Resolution (R)

Country outlook –

Chile – 29th rank macroeconomic environment
- Decline in GDP – copper prices decline
- Euler Hermes – A2 rating
- GCI – 37 rank globally – quality of electricity supplied
- Govt control
  - Generation de-regulated
  - Distribution and transmission is regulated and has defined tariff
  - MoE regulates laws
  - CNE regulated prices
Peru – positive outlook – least country risk
- Euler hermes – BB1 rating
- GCI – 65 rank globally
- Govt control
  - Strong legal and regulatory control
  - Private investment has a supervisory body
Colombia – less favourable – 32nd rank macroeconomic activity
- GCI – 70 rank globally
- Govt control
  - Generation de-regulated
  - Transmission and distribution is fully regulated
  - MME and UPME regulates laws
  - CREG regulated tariffs
Brazil – less favourable – 117th rank macroeconomic activity
- Issues relating to corruption, tax system
- Positive – bankruptcy law in the making
- GCI – 91 rank globally
- Govt control
  - Mix of private and state-owned companies
  - Distribution is private, transmission and generation are moving towards private

Investment outlook

Chile
- FDI Investments
  - Increase in foreign investment – energy sector focus – access to markets, free remittance of profits and capital
  - Increasing investment in renewable – aim to generate 20% by 2025
  - Engie entered in transmission
Peru
- FDI investments
  - Transmission CAGR 57% generation 17% distribution 9%
  - Investment environment is expected to see oversupply of electricity
    - capacity exceeding maximum demand by 50%
    - Increased price and profitability pressure on suppliers
Colombia
- FDI Investments
  - Declining by 29%
  - Unfavorable macroeconomic conditions, high cost of operations
  - El Nino, attacks on infra by guerrilla groups, low rainfall, operational troubles, delayed government focus on renewable – no auctions
Brazil
- Power supply expansion plan
  - Primarily hydro oriented
  - Wind and solar to draw investments
- FDI investments
  - Chinese electricity company purchased CPFL Energy for US$4.5 billion
  - Reverse auctions
    - Financially distressed firms holding licenses for power projects could return their licenses by making “exit payments” lower than potential fines

Value chain

Chile
- Competitive generation – 3 players holding 63% market
- Transmission – 3 players – 80% market
- Distribution – 3 players – 71%
Peru
- Generation – four players – 57%
- Transmission – 4 players – 41%
- Distribution – two players – 56%
Colombia
- Generation – lots of players – 15 state owned, 40 private, 85 mixed ownership
  - 3 players – 60%
- Transmission – 3 players – 55%
- Distribution – 3 players – 66%
Brazil
- Competition exists in generation and transmission segment – energy players free to negotiate prices
- Transmission and distribution are natural monopolies
- Generation > Transmission > Distribution > Regulated customers + Free customers

Generation

Chile
- Net capacity – 23,000 MW
- Total electricity generation – 82 TWh
- Power generation
  - Hydro (28%), Coal (21%), Gas (15%), Crude oil (15%)
Peru
- Net capacity – 14,000 MW
- Total electricity generation – 52 TWh
- Power generation
  - Thermal (46%), Hydro (53%)
Colombia
- Net capacity – 16,000 MW
- Total electricity generation – 74 TWh
- Power supply
  - Hydro (79%), Gas (15%), Carbon (10%)
Brazil
- Net capacity – 147,000 MW
- Total electricity generation – 626 TWh
- Power supply
  - Hydro (65%), Small hydro, biomass, wind and solar (19%), Thermal (14%)

Transmission and distribution

Chile
- Consumption – 75 TWh
  - Industrial – 62%
  - Commercial – 23%
  - Residential – 15%
- Forecasted CAGR: 5.2%
- Distribution is fully privatised – 3 players holding 71%
Peru
- Consumption – 46 TWh
- Forecasted CAGR: 5.6%
Colombia
- Transmission lines = 24,000 kms
- Consumption – 65TWh
  - Residential – 66%
  - Industrial – 20%
  - Commercial – 12%
- Forecasted CAGR: 3.4%
Brazil
- Transmission lines – 125,000 kms
- Consumption – 518 TWh
  - Industrial – 44%
  - Commercial – 25%
  - Residential – 24%
  - Other – 5%
- Forecasted CAGR: 2.5%

Major regulators

Chile
- MoE – policies
  - SEC – supervision and control
    - CNE – monitors functioning
Colombia
- MME – policies
  - UPME – planning unit – research
    - CREG – tariff
Brazil
- CNPE – policies
  - MME – executing of policies
    - EPE, ANEEL, CMSE – ensuring access and quality of services
      - CCEE – holding auctions, ONS – coordinating and monitoring operation

Tariff regime

Auctions and PPA

Recent projects

SCR Approach – Advise a global automotive player in its go to market strategy for New Energy Vehicles in China

Situation (S)

Electrification is a promising solution to address vehicle pollution and reduce fossil fuel vehicles. EVs are expected to account for 20% of global vehicles (26 million) by 2030, with China accounting for half of that (13 million).

China EV market has grown rapidly with an exciting value chain. Several industries stand to benefit from EV value chain expansion – batteries, auto parts, and EV automakers.

China accounts for more than c.25% of total global Greenhouse Gas (GHG) emissions, with transportation forming a major portion of the emissions. Power generation and transportation are the key culprits of GHG emissions.

In 2017, a million EVs were sold worldwide, with China accounting for 40% share.

A key driver of EV development is China is the government’s spending billions of yuan to incentivise NEV companies to embark on development.

World’s top selling EVs

Nissan Leaf
BAIC EC Series
Toyota Prius
BYD Song
Tesla Model S
BYD Qin
JAC iEV7S/E

Drivers

Falling battery costs, from 50% of vehicle cost in 2016 to 20% in 2030
Dual credit policy (minimum EV quota and carbon credit scheme) – credit points to be generated equivalent to 10% of total vehicles by 2019 and 12% by 2020, and corporate average fuel consumption (5L/100km) by 2020
Excess credits can be 100% transferred within the auto group
EV purchase tax waiver – 10% vehicle tax exemption, tax exemption covers BEV, PHEV, Fuel cell vehicles
Easier access to car plates and no restriction on EV usage during peak hours

Sales of EVs have grown from 2,000 units in 2009 to 777,000 units in 2017 – passenger 75% commercial 25%

BAIC 100,000 units, BYD 92,000 units, Geely 80,000 units
Beijing 58000 units, Shanghai 55000 units, Shenzhen 40,000 units
Infra – 445,000 charging units 213,000 charging units by BEV infra promotion alliance – tier 1 / tier 2 cities and 231,000 by private entities

MNCs eyeing China

Tesla is interested in setting up assembly factory
Non-traditional car company NIO debuted its EV car in Shanghai

Metal demand

Copper – metal for electric conductivity – BEV uses more copper since reliant on battery than a PHEV which has a battery that gets charged from plugging into external electric power source
- Copper demand to grow from 200,000 tonnes in 2017 to 1.9 million tonnes by 2030
- Infra also uses copper – 0.8 kg for slow, 8kg for fast charging infra
Aluminium – lightweight material

Hypothesis

Does it make sense to enter Chinese EV market?

Automotive megatrends

Mobility
Autonomous driving
Digitization
Electrification

New mobility business models are poised to disrupt car ownership, personal mobility and goods logistics. The share of NEV in new mobility (ride hailing, car sharing) may range from 10-15% in US to up to 35% in China

Timeline for level 4/5 autonomous keeps accelerating as necessary economics, regulations and technology fall in place: Penetration rates for autonomous cars may reach a leave of between 5-26% in 15-20 years

Level 1 & 2 (Driver assistance and partial automation)
- Collision warning
- Night vision
- Lane departure warning, Lane keeping assist
- Adaptive cruise control (Automated emergency braking – pedestrian detection)
- Parking assist
- Traffic signal recognition
- Driver monitoring
Level 3 (Conditional automation)
- Parking with app
- Highway chauffeur
- Traffic jam pilot
Level 4/5 (High / Full automation)
- Remote valet parking
- Highway pilot
- Exot-to-exit
- Urban pilot

Digitization, AI offers limitless possibilities wile connectivity-enabled technologies are reaching mainstream application. Within 10 years, all cars will have some connectivity

Momentum of electrification is building among OEMs due to increasing regulatory pressure and technology advancement. Share of EV cars in 2025 range from 8-20% in US, 20-32% in Europe and 29-47% in China

Scenarios

China

High EV scenario (Oil price is high, Battery cost is low)
- 47% EV vehicles (17% BEV, PHEV 6%, FH/MH 25%)
Mid EV scenario (Oil price is medium, Battery cost is medium)
- 38% EV vehicles (13% BEV, 4% PHEV, FH/MH 20%)
Low EV scenario (Oil price is low, Barry cost is high)
- 29% EV vehicles (11% BEV, 3% PHEV, EH/MH 15%)

SCR approach – Advise a European healthcare player in its strategy formulation for China, by analysing market trends, investment trends and opportunities for growth

Situation (S)

The situation is that China healthcare expenditure is growing at a rapid pace, largely being driven by an increasing life expectancy leading to an ageing population, changing lifestyles leading to rising prevalence of chronic diseases (cancer, diabetes, hypertension) and higher disposable incomes.

The government is also aiming to reduce the out-of-pocket healthcare expenses by promoting commercial healthcare insurance in the country.

A market size of US$109 billion for Pharma (Generic 63%), US$19.6 billion for medical devices (Diagnostic equipment 32.5%) and 28,500 hospitals in China.

The market is seeing trends of

Pharma – large oncology and infectious diseases – biggest concentration of cancer patients, especially lung cancer (30%) while market is small (4% of global); growing focus on biotech – biotech in cancer treatment, promoting foreign capital – national reimbursement drug list – additions
Medical devices – Use of AI – remote care, assisting diagnosis; encouragement to foreign capital – easy registration, reduced takes; strengthening rural markets
Healthcare services – opportunities for healthcare IT market – national digital database for all information, medical records, health profiles; opportunities for private health insurance – commercial insurance to cover wide range of medical costs

Complication (C)

Where to focus on? Which sub-market to enter in?

Resolution (R)

We looked at investment trends – collaborations

Largely oncology (43%) – Oncology players in-licensing CAR-T (Chimeric Antigen Receptor T cell) treatment from Chinese players in their pre-clinical / clinical development stage – Janssen Biotech (US) in-licensed CAR-T from Legend Biotech (China), I-Mab (China) in-licensed cancer treatment from Genexine (South Korea)
Infectious (12%)

VC/PE

Service (33%) – elderly care services
Diagnostic (28%)

M&A

Drug (57%) –
Service (27%) – china cord blood

IPO

Drug (64%)
Service (16%) – Ping An Healthcare – online platform for services like consultations

Pharma manufacturing

API – preclinical – phase 1,2,3 – registration / approval – production – distribution

Trend

Shift from API to complex and innovative drugs
Rise in ageing population and chronic diseases

SCR Approach – Advise a US based education operator in its market entry strategy in China

Situation (S)

China is promoting private sector participation in Chinese education. Furthermore, a rising per capita income is encouraging Chinese middle class families to increase their spending on education.

In China, primary and middle school (upto 15 years of age) is compulsory education, and it is characterised by non-profit institution.

The industry is witnessing some trends – a) an increasing preference for private schools, b) wealthier families / rise of middle class population, c) students going abroad for overseas education in higher studies

Trend

International schools are growing due to a growing preference of English language, diverse curriculum and lesser limitations for student backgrounds
Chinese per capita income is growing led by improving living standards and expanding middle class population
China eased its one-child policy to allow two-children per family which is expected to drive kindergarten schools

The growing trend of overseas education in higher studies is demanding the knowledge of English language and therefore, the demand for English schools

Complication (C) in the situation

If you create an international curriculum school, you can only take in foreign students (school for children of foreign nationals). If you create a local language school, you can take in both Chinese and foreign nationals. However, ideally what we want is a school for locals and with international curriculum.

Resolution (R)

There can be a third kind. Bilingual education schools – they are schools providing both Chinese and foreign curriculum and that can take both Chinese and foreign nationals.

Sino foreign cooperative school – school started by foreign player in cooperation with Chinese entity
Domestic school offering foreign curriculum – domestic school in partnership with an international school

The structure

It has to be governed domestically, with profits going out as service fees to an offshore entity using contractual agreements, as a non profit entity cannot give out dividend
There can be a Variable Interest Entity structure with an offshore vehicle being used to repatriate profits as service fees