In part 2 of our Wildfang case discussion, we will sharpen our thinking on Wildfang’s options with some quantitative analysis. As a reminder, here are the prep questions from part 1 of our Wildfang discussion, which focused on how the two options affected Wildfang’s overall business model.
You do not need to submit answers to the questions below; use them to help structure and sharpen the analysis and insights that support your decision.
Key Decision Question: Which business model option should McIlroy choose to further grow Wildfang?
Recommended Supporting Questions and Analysis
- Using the spreadsheet model above as a starting point, build an “optimistic” customer lifetime value model for each growth option, in which all the inputs are drawn from the assumptions and estimates in the case.
- NOTE: IGNORE THE ASSUMPTION OF 45% MARGIN FOR THE MULTI-SIDED PLATFORM OPTION AT THE BOTTON OF PAGE 10 AND EXHIBIT 5. Instead use the qualitative information in the case to make any adjustments to the percentage of retail orders by revenue model. Since the case was written, accounting standards for calculating service revenues through third-party resellers have changed, making these margin calculations noncomparable.
- Prioritize assumptions for each growth option based on your conceptual and quantitative analysis. What are the riskiest assumptions? Are there risky assumptions that span both options?
- Copy your customer lifetime model and adjust it to build a “pessimistic” customer lifetime value model for your selected growth option, that takes into account key risky assumptions.
- What sort of tests might Wildfang plan to test its riskiest assumptions?