Mercadeo Education

8/12/2019 Mercadeo Education

1/15

Mercadeo

Education

Case StudySubmitted by:

Himansu Sekhar Kisan F-029

Rahul Raj F-124


2/15

1 | P a g e

Table of Contents

Mercadeo Education - Company Profile ....................................................................................................... 2

Main Issues ................................................................................................................................................... 2

SWOT Analysis: ............................................................................................................................................. 6

Porter Five Competitive Forces Analysis: ...................................................................................................... 6

Emerging Market Conditions & backdrop vs. Global scenario ..................................................................... 7

Competitor Analysis: ..................................................................................................................................... 8

Teaching Note ............................................................................................................................................... 8

Course Positioning: ................................................................................................................................... 8

Introduction .............................................................................................................................................. 8

Teaching Plan ............................................................................................................................................ 9Assignment Questions .............................................................................................................................. 9

Solutions ................................................................................................................................................. 10

Answer 1: ................................................................................................................................................ 10

Answer 2: ................................................................................................................................................ 11

Answer 3: ................................................................................................................................................ 11

Case Synopsis .......................................................................................................................................... 11

Subject area: ........................................................................................................................................... 11

Study Level/Applicability:........................................................................................................................ 12

Case Overview:........................................................................................................................................ 12

Expected Learning Outcomes ................................................................................................................. 12

Practical Implications .............................................................................................................................. 13

Social Implications .................................................................................................................................. 13

References .................................................................................................................................................. 14


3/15

2 | P a g e

Mercadeo Education - Company Profile

Mercadeo meaning marketing in Spanish is the brain child of Sheela Chauhan,Director-

Mercadeo Education Pvt. Ltd., while she was working on a project to increase marketing channel

efficiency for one of the FMCG Company in India. She realised that, though the concept of

marketing channel is an integral part of all b-school curriculum, there is definitely a disconnect

between what the book teaches and what a freshman faces in the field.

In July 2012, Sheela took up this issue with few of her teachers at IIM Lucknow and her friends,

who were into sales and distribution. She found that most of the top b-schools recommend and

follow foreign authored books on Marketing Channel, which is very good from academic point

of view but they lack the understanding of the ground reality in India. She decided to bridge this

gap by introducing an e-learning and certification program, for the students.

They have amalgamated their experiences & learning to evolve a combination of certification

program, Chartered Sales Force Analyst (CSFA), which is going to be a benchmark in the

industry. The CSFA courses with an innovative initiative have been carefully designed to bring

out the best in each and every student. It will definitely help the students to face the grand

challenges of sales and marketing world. The objective of the course is to familiarise the students

with concepts and tools related to sales and marketing and enable them to apply these techniques

in business decision making.

Main Issues

The management at Mercadeo Education wants to get an overview of the financial aspects of

their business model. They want to estimate the expansion of their business across the country

and get the financial projection over the period. So, they want a model which will give them the

estimated number of students in the upcoming 5 years, the revenue projection, and the differentsources of other income. At the same time they want to get the overview of the different costs

mainly advertising cost, administrative cost, raw materials (printing etc.), and infrastructure cost

etc. And, our task is to finally build a financial model which will give an overview of the above

mentioned parameters and arrive at the profit of the company and also the breakeven point of the

company. This model will help the management decide in its strategy, source of funding etc. At


4/15

3 | P a g e

the same time, the management wants to focus on the business model of other companies

involved in the educational certification domain.

The objective of this case is to build a cash flow projection of the companys business model and

also do the peer analysis to build the companys strategy.

So, we have looked at the business model of CFA Institute which offers the Chartered Financial

Analyst (CFA) designation, the Certificate in Investment Performance Measurement (CIPM)

designation, as well as the Claritas Investment Certificate. It provides continuing education

conferences, seminars, webcasts and publications to allow members and other participants to stay

current on developments in the investment industry. CFA Institute also oversees the CFA

Institute Research Challenge for university students and the Research Foundation of CFA

Institute.

So we have studied the detailed CFA Institute model, their financial statements, revenue sources

and expense allocation etc. and come up with the following:

1. The revenue can be sourced from two strategic areas Education (including Curriculum

and scholarship) and Engagement. Education will include the different program

registrations, conferences, curriculum and scholarships. Engagement will include

Member Dues and publications advertising. Ethics training and publications can also be

included.

2. The expenses can be allocated in the areasEducation, Enablers, Engagement and Ethics

3. So, mainly the revenue will come from the new Program registration and the Institute

members.

4. Cash flows will directly depend on the registration and exam cycle during the year.

5. The different items in Education will mainly include Examinations and Candidate

Products. The former will include the exam registration fees etc. and the latter will

include the study material cost.

6. The different items in Engagement will mainly include Marketing and Communication

and Society Services.

7. The Enablers section will include Information Technology, Financial Operations,

Facility Operations and Human Resources. Significant resources need to be allocated to


5/15

4 | P a g e

Information Technology, including investments to strengthen website performance and

increase the customer relationship management capabilities to track outreach efforts.

8. CFA Institute and the Foundation are exempt from U.S. federal income taxes under IRC

501(c)(6) and 501(c)(3), respectively, except for unrelated business income.Mercadeo may also apply under similar scheme in the Indian context.

Summary of sample income statement

Year 1 Year 2

Operating Revenues

Certification and certificate programs

Educational products

Member dues and otherContributions

Total Operating Revenues (A)

Operating Expenses

Operating expenses: Program services

Certification and certificate programs

Educational content and products

Marketing and communications

Member and society services

Standards and financial market integrity

Scholarships

Operating expenses: Support Services

Information technology

Financial operations and executive

Facility rent, planning and operations

Human resources

Office of general counsel

Publishing and content services

Travel support and event management

Fundraising

Other support services

Total Opearting Expenses (B)

Income from Operations (A)-(B)


6/15

5 | P a g e

Mercadeo Education launched its certification course on 25th August 2013 and is currently

providing CFSA Level 1 Exam registration. The fee has been kept US$120 with reduced fees of

US$100 for students registering in the first month post the launch i.e. 24 Sep 2013.

Income Statement Projection

2014E 2015E 2016E 2017E 2018E

Top 50 B-School Seats 13,000 13,650 14,333 15,049 15,802

Marketing Specialization 4,333 4,550 4,778 5,016 5,267

CSFA Program Registration 1,733 1,820 1,911 2,007 2,107CSFA Program Registration Fee(USD) 120 120 130 130 130CSFA Program Study Material Fee(USD) 10 10 10 10 10

Exchange Rate: USD-INR 60 62.5 65 67.5 70

Operating Revenues (INR)

Certification and certificate programs 1,24,80,000 1,36,50,000 1,61,47,950 1,76,07,476 1,91,72,585

Educational products 10,40,000 11,37,500 12,42,150 13,54,421 14,74,814

Total Opearting Revenues (A) 1,35,20,000 1,47,87,500 1,73,90,100 1,89,61,898 2,06,47,400

Operating Expenses (INR)Operating expenses: Programservices

Certification and certificate programs 32,72,315 35,79,095 42,09,016 45,89,446 49,97,397

Educational content and products 31,08,122 33,99,508 39,97,821 43,59,163 47,46,644

Marketing and communications 16,60,171 18,15,812 21,35,395 23,28,402 25,35,371

Member and society services 12,90,085 14,11,031 16,59,372 18,09,354 19,70,185Standards and financial marketintegrity 6,05,271 6,62,015 7,78,529 8,48,897 9,24,354

Scholarships 7,080 7,744 9,107 9,930 10,813Operating expenses: SupportServices

Information technology 13,27,335 14,51,773 17,07,285 18,61,597 20,27,072

Financial operations and executive 11,39,895 12,46,760 14,66,190 15,98,711 17,40,819

Facility rent, planning and operations 5,28,954 5,78,543 6,80,367 7,41,862 8,07,805

Human resources 3,21,652 3,51,807 4,13,725 4,51,119 4,91,219

Office of general counsel 2,34,683 2,56,685 3,01,862 3,29,145 3,58,402

Publishing and content services 1,31,957 1,44,327 1,69,729 1,85,070 2,01,521Travel support and eventmanagement 1,30,578 1,42,820 1,67,956 1,83,137 1,99,416

Fundraising 470 514 604 659 718

Other support services 470 514 604 659 718


7/15

6 | P a g e

Total Operating Expenses (B) 1,37,59,038 1,50,48,948 1,76,97,563 1,92,97,150 2,10,12,452

Income from Operations (A)-(B) (2,39,038) (2,61,448) (3,07,463) (3,35,253) (3,65,053)

SWOT Analysis:

Porter Five Competitive Forces Analysis:A. Buyers/Customers Power:-

This will be low for the students, as the certification course and study material are provided at a

certain fixed terms and conditions. However, they may avail bulk discount in case of joining and

Strengths

Highly Required- No

certification course forSales & Marketingcurrently exists in market

High demand- Should seea large appreciationamong students

Weaknesses

Success depends on Brand

value which requires a lotof time and qualityperformance

Certification not asrelevant in marketing ascompared to Finance,Operations

Opportunities

By delivering excellenentmaterial and quality

product ,it hasopportunities ofexpanding into the BSchools througout thecountry

Threats

Competitors- Being a low

capital intensive businessand having a wide scopewill attract new playersresulting in increasedcompetition


8/15

7 | P a g e

associating along with a large group. Also there are discounts and scholarships for meritorious

candidates.

B. Suppliers Power:-

Since Mercadeo is a start up and trying to build its brand among the B School students, it will

have a low power in the initial stage. Hence, the certification initially is offered at low fees.

However, as it builds a brand for itself and reaches out to a larger pool of students, it will have

some power in pricing the fee structure and study material costs.

C. Rivalry among Competitors:-

As already pointed out, currently there is no similar player in the Sales & Marketing domain in

the market, so it should go well for the company.

D. Threat of New Entrants:-

However, as time progresses, the success of Mercadeo will encourage other players to enter into

the market. Also, the business model being low capital intensive should not be any constraint.

E. Threat of Substitutes:-

There is not any kind of substitute available, as the aspiring students look for certification which

can add value to their CV and help them in their career. There is no substitute for that.

Emerging Market Conditions & backdrop vs. Global scenario

CSFA is definitely a much needed one for the people who wants to make their mark in the field

of Sales & Marketing. This course will help the people to understand the nuances related to sales

& help them to realise their potential fully. CSFA will not only help in building CV but also help

in while facing the job interviews. During ones work area years of having implemented sales

effectiveness solutions at clients in FMCG, B2B and services, one can see that a large part of the

sales effort is focused on matching the numbers on the sales target, though not w/o a reason. But

most customers today are no longer satisfied with simply buying a product or service.

Increasingly, they have higher-order needs that involve improving their overall economics in the


9/15

8 | P a g e

use of a product. They want to improve operating efficiency, or reduce their risks, or help their

own customers grow revenues. As customer needs grow more complex and demanding, sales

programs cannot rely on incremental improvements to product quality, delivery time, and other

basic competencies. Successful selling efforts are the result of smart moves on a number offronts: tailoring the message, product mix, and price to the highest value customer segments;

delivering that message with an efficient sales process; developing the right tools for properly

trained staff; and aligning incentives to drive value rather than volume.

Sometime not all of this is covered in the B-school courses and this course should be a good

learning curve for the budding marketing and sales managers.

Competitor Analysis:

As of now, there is no direct competitor in the Indian market.

Teaching Note

Course Positioning:

This case can be used for the following courses:

Post graduate program in Management. The students can be introduced to

entrepreneurship.

MBA/Post graduate program in project planning, analysis and management. It can be

used to teach students the importance of constant innovation to deter the threats.

Introduction

The students should be made to learn the importance of constant innovation in a knowledge

based industry. With an introduction to the e-learning industry the students can learn about the

key players in the sector and the market dynamics. They should be able to acknowledge the

threat of substitute and its consequences.


10/15

9 | P a g e

Teaching Plan

The students have to be told to read the case before coming to class and they should be asked to

read up about the e-learning industry in India. Also, they should be given the assignment

questions as home work in order to have a detailed discussion in the class.

In a 60 minute class, the following plan should be followed:

Instruction Time

Discussion of key facts regarding the case 20 minutes

Discussing limitations and industry analysis 10 minutes

Question 1 10 minutes



Assignment Questions

1. What are the challenges for the new entrants like Mercadeo Education into the e-learning

business to establish as a reliable brand?

2. How does the e-learning market offer scope for new players like Mercadeo Education?

3. How does the Threat of New Entrants and Threat of substitute play an important

factor in a knowledge based industry?

4. So, we have built a financial model for Mercadeo Education for 5 years, projecting the

five year financial statements. As pointed out above, we have used the CFA financial

model as our base. So, we have made the following assumptions in the model

a. Revenue has been forecasted for 5 years period. We have included the top 20 B-

Schools in India, and also followed that on an average 33% i.e one third specialize

in marketing. And further we have assumed that 40% of the marketing students

will pursue the certification course (as financial certification ratio is similar for

the Finance Students). We have further assumed a 5% increase in the seats in the

top 50 B-Schools each year.


11/15

10 | P a g e

b. The revenue sources have been included mainly from two areas Certification

and Certificate programs and Educational products i.e study materials etc. As

stated out earlier, the certification fee has been kept $120 for 2014 onwards. We

have used the figure of $120 for years 2014, 2015 and $130 for years 2016-2018period.

c. The different cost allocation have been kept the same as in the CFA business

model, as both the companies are involved in the same line of business and will

have similar items under their financial statements. We have used the main

sources of Cost as the Operating Expense further classified into Program Services

and Support Services. Regarding the proportionate allocation of different

expenses, we have further calculated the same from CFA Institute financial

statements average expenses as proportion of sales for the 2011-2012 period, and

assumed the same for Mercadeo education.

Solutions

Answer 1:

The e-learning market is highly competitive and a new entrant like Mercadeo Education has to

face a lot of challenges, which are summarized as:-

1. High Initial Cost: The initial cost is usually high as the new entrant needs to build the

infrastructure and technology, which has to be at par with the industry standard.

2. Access to capital.

3. Constant Innovation: Its a knowledge based industry and product stagnation will result

in attracting competition. Constant innovation and industry affiliation will help in

building brand which will deter new entrants.

The key factors determining the success of a new product like Mercadeo Education will include

product value, branding, price model and Timing of the certification program.


12/15

11 | P a g e

Answer 2:

The scope of growth for MEPL is very high as it has a niche product which is in demand and

there is no existing player in the market. MEPL has a first mover advantage and to leverage this

it should be aggressive towards promoting the brand and the product to its target group.

In future, MEPL needs to innovate and get industry affiliation so as to deter new entrants. Word

of caution: New entrants affiliated with a bigger brand/s can dominate the market

instantaneously.

Answer 3:

In a knowledge based industry, nothing is constant. Threat of new entrants is also high as the

barrier to entry is low. The only way one can stay ahead is by:-

1. Periodic re-evaluation of existing courses

2. Designing new product

3. Industry affiliation and

4. Industry acknowledgement

The product will sell as long as the consumer perceives that the certification adds value to his/her

profile and helps with their career growth.

Case Synopsis

Subject area:

The case lays out the foundation of a start-up company Mercadeo Education Private Limited.

The company is entering into the business of educational certification in the domain of Sales &

Marketing. This market offers tremendous business opportunities in this segment, as this is

almost a first of its kind. Business education is that part of education field which deals with

business experiences both for specialized occupation uses and for general uses. Business

educations, of recent, have developed into more complex kind of learning which required theknowledge of other subjects. It is more complex with increase in technology and computerized

society; a professional must equip himself with all forms of skill. For a startup to excel in this

industry the company has to focus on improving its accessibility across the esteemed colleges

and effective marketing strategy. Building a business financial model with sales and cost

projection and cost control is an important consideration in this regard.


13/15

12 | P a g e

Study Level/Applicability:

The applicability of this work touches upon the revenue projection and cost control measures at

all levels of the value chain. It examines the financial business model of a start-up company to

get the management an idea of the financial aspects. It will help in decision making along withthe financial estimation of the different parameters. This case provides deep understanding on the

various cost objects in a value chain. The related cost drivers are also an interesting find. The

certification course given by the company provides a critical understanding not only of the

theoretical and practical aspects of the managerial functions within firms but also of the

integration and synthesis of these functions within the complex environmental settings that they

operate.

Case Overview:

The management at Mercadeo Education wants to get an overview of the financial aspects oftheir business model. They want to estimate the expansion of their business across the country

and get the financial projection over the period. So, they want a model which will give them the

estimated number of students in the upcoming 5 years, the revenue projection, and the different

sources of other income. At the same time they want to get the overview of the different costs

mainly advertising cost, administrative cost, raw materials (printing etc.), infrastructure cost etc.

And finally building a financial model which will give an overview of the above mentioned

parameters and arrive at the profit of the company and also the breakeven point of the company.

This model will help the management decide in its strategy, source of funding etc. At the same

time, the management wants to focus on the business model of other companies involved in the

educational certification domain.

The objective of this case is to build a cash flow projection of the companys business model and

also do the peer analysis to build the companys strategy.

Expected Learning Outcomes

The case presents an opportunity to learn in various ways including:

a. The cash flow projection in an organization

b. Analyzing the different revenue sources, cost allocation and subsequently finding thepresent value of the company and also the breakeven period and amount

c. Discuss what effective sales management constellations comprise, how they come about,

and under which conditions they perish

d. Explain the role of incentives in sales behaviour and performance


14/15

13 | P a g e

e. Compare and contrast why certain sales structures are better suited to certain types of

services and/or environments than others

f. The growing up of start-up firms and business ideas behind entrepreneurship

Practical Implications

The present case has significant practical implications. It involves the startup of an educational

certification company and can serve as a model for any new company to enter into the market

and also build a portfolio and at the same time have a cost management approach which will

ensure profit margins early in the short run. The company is almost first of its kind, which is

entering into such a domain. Various certification courses are currently available in other

domains, for example in Finance, we have CFA, FRM, FLIP, CFAT and then there are the Six

Sigma Certification in Green, Black and Yellow Belts in the domain of operations. But currently,

there is lack of any reputed and significant certification in the domain of marketing. Hence,

Mercadeo is an initiative which will present as displaying the highest quality technical and

career-oriented education through selected degree and certificate programs which use the most

current technology, preparing students for immediate entry into a career. Hence, other

educational certification companies in not only sales & marketing but also other operational

areas can look forward to this case to build a growing business model which can promote the

continuous improvement of quality in sales, marketing and management education training,

research and development and ensure early profitability and be cost optimizing at the same time.

Social Implications

Coming to the social implications, the company focuses on the young & bright students who

want to build a career in the sales & marketing domain. It will definitely help them to face the

grand challenges of sales and marketing world. The objective of the course is to familiarise the

students with concepts and tools related to sales and marketing and enable them to apply these

techniques in business decision making. Hence, the certification course will motivate students

and urge them to explore their talent and abilities through the courses the company is offering.

The rapid growth of the company will also encourage other enthusiastic entrepreneurs in the

society who can look to the rising needs of the aspiring students and build an organization

catering around that.


15/15

14 | P a g e

References Mercadeo Education Pvt Ltd -http://www.mercadeoedu.org/

https://www.cfainstitute.org/Pages/index.aspx

https://learnwithflip.com/

https://www.educorporatebridge.com/
http://www.mercadeoedu.org/http://www.mercadeoedu.org/http://www.mercadeoedu.org/https://www.cfainstitute.org/Pages/index.aspxhttps://www.cfainstitute.org/Pages/index.aspxhttps://learnwithflip.com/https://learnwithflip.com/https://www.educorporatebridge.com/https://www.educorporatebridge.com/https://www.educorporatebridge.com/https://learnwithflip.com/https://www.cfainstitute.org/Pages/index.aspxhttp://www.mercadeoedu.org/

Mercadeo Education

Documents

Transcript of Mercadeo Education