Cases for Solving

For IIM PGPEX VLM Graduates December 16, 2013

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Case 1: Warner Bros. to Do Simultaneous Global Release for Batman 3

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Warner Bros. to Do Simultaneous Global Release for Batman 3 (1 of 2)

!! The client Warner Bros. Studios is an American producer of film, television, and music entertainment. The company is a subsidiary of media and entertainment conglomerate Time Warner (NYSE: TWX), with its headquarters in Burbank, California and New York City. As one of the major film studios, Warner Bros. develops and distributes full-length feature films for the U.S. and international markets. !! Warner Bros. Studios is planning on releasing its big budget film of the year six months from now and is considering a new release strategy. The first component of the strategy is to release the movie in theaters on the same day around the world. The second component of the strategy is to release the DVD of the movie day-anddate, meaning globally releasing the DVD the same day as the theater release. !! Warner Bros. is interested in knowing whether this is the best release strategy for this movie and, if not, Warner Bros. would then like to know what its release strategy should be. How would you go about analyzing this case and helping the client make a decision? !! Warner Bros. has done simultaneous global theater releases for other movies before, but never simultaneous with the DVD release. !! Only one movie has ever been simultaneously released theatrically and through DVD, and it was by a small, independent film company. !! The new film, The Dark Knight Rises, is the third movie of a superhero action series known as the Batman Trilogy. The previous two films were produced by another studio, so we have no financial data on them. !! The simultaneous theatrical and DVD release is expected to cause a 20% decrease in revenue from theater ticket sales and a 25% increase in DVD sales. !! The marketing campaign for the movie is expected to be $50 million, while the marketing campaign for the DVD is expected to be $5 million. With the simultaneous release, no DVD marketing campaign is required. !! Pirating movies accounts for a 20% loss in total theater revenue. A simultaneous global theater release will cut this down by 25%.

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Warner Bros. to Do Simultaneous Global Release for Batman 3 (2 of 2)

!! Additional Exhibits !! 1. Revenue from theatrical releases of big budget films (last year) !! Category !! Blockbuster !! Success !! Breakeven !! Failure !! Category !! Blockbuster !! Success !! Breakeven !! Failure 1 8 Number of films 4 10 $500M $250M 15 $50M Gross revenue $100M Gross revenue

!! 2. Revenue from theatrical releases of third sequels of action films (last 5 years) Number of films 14 3 $500M $250M 2 $50M $100M

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Case 2: Cummins To Reduce Warranty Claims for Diesel Engines

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Cummins To Reduce Warranty Claims for Diesel Engines (1 of 2)

!! The client Cummins Inc. (NYSE: CMI) is a Fortune 500 corporation that designs, builds, distributes and services engines and related technologies. Headquartered in Columbus, Indiana, United States, Cummins sells in approximately 190 countries and territories through a network of company owned and independent distributors and dealers. The company manufactures and markets a complete line of diesel and natural gas-powered engines for on-highway and off-highway use. Its markets include heavy and medium-duty truck, bus, recreational vehicle (RV), light-duty automotive and a number of industrial uses. !! Recently, Cummins has designed a new diesel engine with significant new technology and significant new content. It will meet all federal guidelines for at least 10 years. The client has spent significant research and development (R&D) money on this new engine and expects to be able to charge a premium price to recoup the investment. However, the clients largest customer, representing 60% of all sales, has been complaining about the quality of the new diesel engine. !! Our preliminary research has shown that although our client Cummins promised their customers in terms of soot emissions less than 3,000 ppm, but they are currently seeing 20,000 ppm (1 ppm = 1 parts per million). What is wrong and what should the client do to rectify the situation? !! 1. Product Design !! The design process was unchanged for this new diesel engine. All testing was done the same as with historical products. However, the FMEA analysis (Failure, Modes, and Effects Analysis, used to identify and assess the ramifications of possible product defects) was skimped on. The significant new technological components of the diesel engine were developed according to the clients standard process. !! 2. Manufacturing !! Cummins manufacturing plant uses a highly skilled and educated workforce. There is no learning curve associated with the assembly of this new product. !! 3. Service !! The client Cummins utilizes field technicians at the customer site. They are the ones reporting the warranty data to the client. They are all well educated on the product.

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Cummins To Reduce Warranty Claims for Diesel Engines (2 of 2)

!! 4. Sub-assembly procurement !! Traditionally, the client Cummins used few suppliers who delivered large subassemblies. Now, in an effort to save costs, they have sourced many more suppliers to get the best price for each component and are choosing to do more of the assembly themselves. However, all of these suppliers are delivering products that meet the specifications delivered by engineering. !! 5. Defect Details: See the chart below detailing the frequency of top warranty issues
!! !! !! Leaks : High Tubes : Medium Loose Parts : Low

!! 6. Customers : Customers are concerned mostly regarding the quality of emissions.

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Thank You

Raghu Venkatnarayan
+91 98846 55515 Raghu.v@leapridge.com LeapRidge Advisors LLP Chennai | Mumbai | New Delhi

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