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=) a power outlet. Case #6. Bain. 2020. Banknote manufacturer Our client is a manufacturer of banknotes for the government. There are two major players in the field (incl. our client). They hired © you to increase their revenue. How would you start thinking about the client's request? [Please, provide the candidate with Chart #1.] For interviewer. Please provide this information only upon request. * 183B banknotes were issued in 2019, 11% of which were manufactured by private companies for governments celta * The commercial banknote production market is at $3-4Bn and is information expected to grow by 3-5% annually over the next four years * The client’ competitive advantages are shorter banknote replacement lead time and higher security level for banknotes Typically the candidates are expected to: * Restate the prompt to make sure they are on the same page with the interviewer Comments + Ask 2-3 clarifying questions (e.g. about client’s business model, revenue goals, geographic footprint, etc.) + Ask for a couple of minutes to structure their approach This is a candidate-led case. Expected time is 25-30 min. Case #6. Bain. 2020. Banknote manufacturer Case questions (this is a candidate-led case) fe]t Cafes How would you structure your approach? What is the market size for U.S. banknote production in 2020? CITES En E22 (based on the Chart #3. U.S. paper currency circulation data) How price-sensitive do you think the governments are? What will ouestonbas) happen if we change the pricing? [No numbers are provided.] Celt ifE-2 | What revenue growth opportunities can you suggest to the client? a Our client would like to expand into two other adjacent businesses fe]tT-i «fyi e- 2-1 — passport production and credit card production. What are the pros and cons of each of them? The client just entered the room and they would like to know you! Question #6 recommendations. Chart #1, Chart #2, and Chart #3. a a Case #6. Bain. 2020. Banknote manufacturer Chart #1. Typical value chain of banknote production Supplies Production Inspection and quality Delivery to = Banknote control Central Bank paper = 10 production Eaui th stages quipment to = Quality double- = Ink check the heck = Equipment of quality: cnec = Foil precise , = Storage application printing, — Visually 9 (security micro- ; — Through . Entry into strips) lll magnetic circulation = Chemicals cumting, Etc. fields — Mechanically Note: This is for the candidate's information. No insights are expected. To be given to the candidate before framework. Chart #2. Information on the major banknote manufacturers 2"4 major player Foundation year 1813 1852 Countries served (today and in the past) 141 countries 145 countries Share of the banknote production market 27% 23% Number of employees 2,750 11,600 globally v 1 UK Germany Note: Please provide this chart to the candidate if they ask for market shares or other data points from the chart. Case #6. Bain. 2020. Banknote manufacturer Chart #3. U.S. paper currency circulation data Currency in Projected Bill Printing costs, circulation - volume to be denomination cents per note volume, Bn of | printed in 2020, notes Bn of pieces Lifespan, years $2 10 1.3 0.0 N/A $5 iS Shil 0.7 47 $10 15 2.0 0.5 5.3 $20 15 9.4 il? 7.8 $50 15 1.8 0.1 12.2 $100 20 13.4 11 22.9 Case #6. Bain. 2020. Banknote manufacturer Q2. Math exercise — prompt and calculations Que: What is the market size for U.S. banknote production in 2020?* J (based on the Chart #3. U.S. paper currency circulation data) c] For interviewer. Please provide this information only upon request. = We expect the printing costs to remain the same for 2020. = Projected volume for 2020 includes the replacement of old/damaged banknotes and the increase in demand for currency from domestic and international customers = Printing costs are all the banknote production costs that Federal Reserve pays Printing costs for $1 and $2 $0.10 (x) (1.6+0.0) (=) $0.16B Printing costs for $5, $10, $20 and $50 7 $10, $0.15 Y(.74+.541.24.1Q 40.388 Printing costs for $100 $0.20 & 11 © 40.228 Market size (total printing costs) 16+.38+.22 GQ —$0.768 = The answer is $760M. *In the U.S. only the Treasury Department prints banknotes. In other ies private companies produce banknotes for the Case #6. Bain. 2020. Banknote manufacturer Q3. Key purchasing decision making criteria How price-sensitive do you think the governments are? What will uestion #3 ri _ P Q happen if we change the pricing? [No numbers are provided.] = The price of banknote production isn’t the only factor that the governments consider. Given that a high-quality banknote producer might have a lot of advantages, the governments might not be that price-sensitive. Some of the purchasing criteria to consider are: Financial analysis = Price of banknote production = High level of banknote security: Operational risks * Lifespan of banknotes o Contributes to the consumer = Lack of capacity to meet the = Expected capex to upgrade case confidence and improves the needed production volumes processing equipment in the business climate = Long lead times (e.g. from order economy (mostly in banks) o Decreases criminal rate of to production and delivery) = Potential price increases for counterfeit and leads to * Banknote quality control issues future banknote production (to savings from fewer prosecution * Storage and transportation replace old/damaged bills and and anti-fraud measures _ Security issues meet higher demand for = Top-notch design of banknotes Financial risks . A banknotes) might become part of citizens’ . Meg ciotion ener for fut. pride and a good PR:story for the orders given just one banknote ry supplier = Banknote producer might go bankrupt Note: This is just one of many potential ways to brainstorm. Please treat this example only as a reference point and develop your own style. [The candi- date is usually expected to generate at least 4 ideas. The best practice is 8+ ideas, structured approach, and on-the-fly delivery without taking notes] Case #6. Bain. 2020. Banknote manufacturer Q4. Revenue growth opportunities What revenue growth opportunities can you suggest to the cient | Increase share of the banknote market Launch new products = Invest in relationship building with the = Develop new optional security and/or central banks (e.g. more events, optical features to up-sell dedicated account managers) = Explore entering adjacency markets in = Select, train, and highly incentivize top- B2G: passport/ID production, document notch sales people security consulting services, anti- = Adjust pricing to offer various discounts counterfeit excise tax stamps, etc. = Increase efficiency of PR/marketing to = Explore entering B2B market: anti- strengthen credibility and brand counterfeit labels for packages, banknote = Ensure state-of-the-art quality and cutting paper, security features for credit cards, edge security of banknotes cash processing machines, etc. Note: This is just one of many potential ways to brainstorm. Please treat this example only as a reference point and develop your own style. [The candi- date is usually expected to generate at least 4 ideas. The best practice is 8+ ideas, structured approach, and on-the-fly delivery without taking notes] This is a typical Ansoff matrix approach covered in the e-course, however two buckets (geo expansion and new customers segments) are left out. Case #6. Bain. 2020. Banknote manufacturer Q6. Recommendation The client just entered the room and they would like to know your Question #6 . recommendations. Recomme Based on our analysis we recommend to enter the passport production dation and credit card production markets. ¢ First, the growth potential of the banknote space is limited given slow growth rate of the market (3-5%), fairly high competitive pressure from almost equally sized 2" player, and long sales cycle. . + Secondly, passports and credit cards are presumingly attractive Reasoning markets comparable in size to the banknote space and can offer new growth opportunities to further expand to adjacent segments. * Thirdly, it is where our client can leverage their core capabilities in producing anti-counterfeit solutions with high level of security. We should consider some market entry risks though like potentially tough competitive landscape, lack of expertise/credibility in the domain, and unreasonable assumptions in projected market share and costs. As for the next steps we would suggest to build a risk mitigation plan, Next steps conduct a comprehensive due diligence of the passport/credit card markets and design a go-to-market strategy. Note: This is just one of many potential ways to make a recommendation. Please treat this example only as a reference point and develop your own style. [The candidate is usually expected to structure their conclusion as RRRN (recommendation, reasoning, risks, and next steps) and keep it under 1.5 min] 
