DAG Slides FINAL

DAG Slides FINAL - HUID 305 4924 4024 CONFIDENTIAL DAG Case...

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CONFIDENTIAL Document Date This report is solely for the use of client personnel. No part of it may be circulated, quoted, or reproduced for distribution outside the client organization without prior written approval from McKinsey & Company. This material was used by McKinsey & Company during an oral presentation; it is not a complete record of the discussion. HUID 305 4924 4024 DAG Case Key Exhibits 305 4924 4024 Wednesday, August 08, 2001
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Unit of measure Annotation * Footnote Source: Sources HUID 305 4924 4024 Evaluation of potential along four key dimensions People • Both Harvard MBAs • Val sold finance background • Both learnt a lot about dry cleaning thru in depth field study and part time jobs • Limited real world business experience • Contacts in industry quite limited, a few friends from conventions & a VC • Lots of enthusiasm, but may be overly interested due to time invested so far • Overall, I think this is a high energy team with the more than the necessary business acumen and contacts to get the job done • They should however recruit an additional person with more operational experience ASSESSMENT OF P, C, O, D • Despite the fragmented nature of the industry and the intense (and sometimes irrational) competition, a “turnaround” deal could be highly attractive if financial risks are limited • Furthermore, the potential to develop national brand/franchise is attractive Pros Cons Overall Assessment Context Large industry size > $4bn p.a. Low barriers to entry so easy to enter Highly fragmented Mixed business moddels being used Few national chains, only DryClean USA + a few others • Low barriers to entry means competition is intense • Many unprofitable stores and lack of cost controls by competition mean threat of “irrational competition” • Location of good sites is difficult and time consuming • Overall, despite the large market size I think the context is poor • The low barriers to entry mean that competition is intense • Furthermore, much of the value in the the “retail” business accrues to the owner of the site, not the dry cleaner – since that is the scare asset Opportunity Potential to establish national chain and charge premium prices Potential to buy out an existing player and reduce financial risks substantially by using a note Customer loyalty is high once you get them • Low barriers to entry means competition is intense • Many unprofitable stores and lack of cost controls by competition mean threat of “irrational competition” • Location of good sites is difficult
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This note was uploaded on 10/14/2009 for the course IEMS 395 taught by Professor Bob during the Winter '09 term at Northwestern.

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DAG Slides FINAL - HUID 305 4924 4024 CONFIDENTIAL DAG Case...

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