A hardware company's accessories line does Rs 34 crore of revenue at 9% gross margin, against the core product's Rs 210 crore at 41%. Accessories consume 30% of support tickets and 25% of engineering time. Forty per cent of accessory buyers are also core-product customers. A survey suggests 15% of core customers say accessories availability influenced their purchase. Discontinuing would free engineering capacity equivalent to six people and write off Rs 6 crore of inventory.
Write a one-page memo recommending whether to discontinue the line. Lead with the decision and answer the strongest objection against it.
100 points, 60% to pass.
The gross margin comparison is the obvious argument and the weakest one, because it ignores the attach effect. The real question is how much core revenue the accessories defend: 15% of core customers claiming influence is a stated preference, not a revealed one, and a memo that takes it at face value is being led. Strong answers separate the two claims and propose a test — discontinue the weakest SKUs, or a region — rather than treating it as an all-or-nothing call. The strongest objection is the 40% overlap, and it deserves an answer, not a dismissal. Whatever the recommendation, the Rs 6 crore write-off is sunk the moment the decision is made and should not drive it.