Thursday, 23rd January, 2020


Chai wallah hires McKinsey to find out if he should sell Omelets and Maggi too

16, Apr 2010 By Pagal Patrakar

Ahmedabad. Rambhai, the famous tea stall owner outside IIM Ahmedabad campus, has decided to hire global management consultancy firm McKinsey & Company to advise him over his plans to sell Omelets and Maggi alongside tea and cigarettes. Rambhai has been mulling over diversifying his portfolio of products and services for quite some time now, and finally decided to take the route usually taken by astute business managers.

“My product matrix was looking the same for many years now and I wished to change it. There was no scope for a forward integration in tea or cigarettes business as I was pretty much at the end of the value chain, whereas a backward integration would have meant getting into tea or tobacco farming, which is usually controlled by mafia. The only choice left was to diversify into other products and services.” Rambhai explained the rationale behind his decision.

But since any diversification, or for that matter any business decision, should be backed by sound logic and PowerPoint presentations to prove that the step would lead to lower risk and higher yields, Rambhai decided to engage McKinsey.

“I have seen students cross over the road to eat omelet and Maggi. They can buy it from my stall without undertaking the risk of being run over by a vehicle while crossing the road. In fact, that makes me eligible to charge a risk premium; but I won’t do that.” Rambhai provided a sound logic, but expressed helplessness to make a PowerPoint presentation.

“That’s where McKinsey will help me.” Rambhai said.

Decision Tree
Something similar will help Rambhai in going ahead with his decision

McKinsey & Company, usually very secretive about their clients and services, have confirmed the deal and have expressed happiness to serve Rambhai, who has earlier served many of their leading consultants when they were MBA students at IIM Ahmedabad. Achal Gupta, a senior consultant with the firm would be the on-site manager for the project.

“Given that India’s GDP is poised to grow at 8% over the coming years, the outlook for egg-based pancakes and its value-added variants is promising.” Achal said, agreeing with the logic of Rambhai, adding, “Maggi too is a good idea, but we have to take into consideration the brand loyalty and elasticity for noodle consumption among the potential consumers.”

Achal would be staying at Fortune Landmark Hotel and would be making daily visits to IIM Ahmedabad to collect primary data such as number of students and probability distribution of eggetarians and noodlephiles among them across future batches, number of competitors, secondary reports on IIM Ahmedabad campus life, forward exchange rates of USD, and carbon emissions from cooking omelets.

“All these will help me analyze the whole business proposition from a wider perspective. It would also help me estimate and forecast the demand for omelets and Maggi and suggest quantities of eggs and Maggi packets that Rambhai should order daily, and also the price at which he should be selling the omelets and Maggi to realize an optimal return on investment.” Achal said.

Achal refused to divulge if the consultancy fees charged by the company would be considered as a part of the investment and would be to be recovered from the consumers through the final suggested price of the products. He also denied the possibility that the project could become untenable on grounds of a prohibitive final price.

“The client is ready to invest and has made up his mind. Our job is to work on numbers and presentation and help him with his decision. We can always find a way out.” Achal expressed confidence of the project adding value to Rambhai’s decision.

McKinsey will make a final presentation to Rambhai on 1st May at IIM Ahmedabad’s auditorium.