MTN Group to Set up a Call Center in Baviaans

Case Type: operations strategy; organizational behavior, human capital.
Consulting Firm: Huron Consulting Group 2nd round full time job interview.
Industry Coverage: telecommunications, network.

Case Interview Question #01225: Our client MTN Group (JSE: MTN )is a multinational mobile telecommunications company headquartered in Johannesburg, South Africa. Operating in many African, European and Asian countries, MTN Group recorded more than 230 million subscribers across its operations as of June 2016. Although MTN operates in over 20 countries, one-third of its revenues come from Nigeria, where it holds about 35% market share.

The client MTN Group is planning to set up a call center in South Africa. They are considering one of 5 different cities: Baviaans, Cape Agulhas, Ikwezi, Hantam, Laingsburg. Your consulting firm has been hired to advise them on this project. They would like your advice on which city they should go for. What would you tell them?

Possible Answers:

1. Information Gathering

Additional Information: (to be provided to candidates upon request)

* Our client MTN Group is a major telecom company providing fixed line, mobile, cable and internet services.
* The purpose of the call center is to (1) offer general product support and (2) promote products.
* The call center will serve the client MTN’s customers all over the world.
* The call center will be open 24 hours a day, 5 days a week.
* Call center employees will work 6 hour shifts a day and 5 days a week.
* Our client MTN Group is willing to pay up to $1.5/hour per employee.
* Exhibit 1: Details of call services
* Exhibit 2: Survey of workers in 5 different cities
* Exhibit 3: Cable/internet users and suppliers in the 5 cities

Exhibit 1: Details of call services

Exhibit 2: Survey of workers in 5 different cities

Exhibit 3: Cable/internet users and suppliers in the 5 cities

2. Suggested Framework (any reasonable one is acceptable)

Choosing call center location.

a. Company
* Location
* Facilities

b. Call Center
* Costs
– Labor
– Capital
* Revenue
* Customers
– Population
– Frequency of calls

3. Detailed Analysis

Interviewer note: ask the following questions sequentially and provide Exhibits when prompted.

Question #1. What factors does our client MTN Group need to consider in choosing a location for the call center?

Possible Answer:

This is a brainstorming question; the candidate should list all factors they can think of. See above “Suggested Framework” section — a good structure is key to solving this case correctly.

Tell the candidate that the focus of this case is on the supply of labor, then ask the following:

Question #2. What is the minimum number of employees needed at the call center?

Possible Answer:

From Exhibit 1, the candidate can calculate the following:

* For service calls:
– one employee answers 60 mins / (10 mins/call) = 6 calls/hour
– 600 service calls/hour means that 600/6 = 100 employees are needed per hour

* For retail calls:
– one employee answers 60 mins / (6 mins/call) = 10 calls/hour
– 300 retail calls/hour means that 300/10 = 30 employees are needed per hour

* In total, 100 employees (service) + 30 employees (retail) = 130 are needed per hour
* There are 24/6 = 4 shifts a day, so in total, 130*4 = 520 employees are needed per day at the call center.

Question #3. In which cities can our client find enough employees for the call center?

Possible Answer:

From Exhibit 2, the candidate can calculate the number of employees who are willing to work for each listed wage/hour. The most efficient way is to calculate the numbers under the $0.5 column, then use those numbers to extrapolate to the other data points. Calculated numbers are given below:

Conclusion:
* The cities of Baviaans (at $1.5/hour) and Hantam (at $1/hour) will have enough interested workers for our client’s call center.
* Setting up call center in Hantam will be less costly (at $1/hour).

Question #4. What are some reasons other than wage that people may reject a job offer made by our client?

Possible Answer:

This is another brainstorming question; some examples of answers are listed below:
* Lack of job security
* Lack of benefits (health insurance etc.)
* Poor working conditions, e.g. lack of air conditioning in the summer
* Inconvenient shift hours

Question #5. Our client MTN Group currently doesn’t provide service in the 5 cities (Baviaans, Cape Agulhas, Ikwezi, Hantam, Laingsburg). They think it might be a good idea to set up cable/internet services in the same city as the call center. Considering this, what city would you say is the best option?

Possible Answer:

The candidate can assume number of cable/internet users will stay constant. Provide Exhibit 3.

* In Baviaans, 7,200 people currently use cable/internet. There is 1 competitor, so if our client enters now, they will have 7,200/2 = 3,600 customers (assuming market share will be split evenly in the long term)
* In Hantam, 6,000 people currently use cable/internet. There are currently 2 competitors, so if our client enters now, they will have 6,000/3 = 2,000 customers (assuming market share will be split evenly in the long term)

Now tell the candidate that each potential customer generates $30/month.

In Baviaans,
* Revenue = 3,600 * $30 = $108,000/month
* Labor costs for call center = 520 employees * $1.5/hour * 120 hours/employee/month = $93,600/month
* Profit = Revenue – labor costs = $108,000 – $93,600 = $14,400/month

In Hantam,
* Revenue = 2,000 * $30 = $60,000/month
* Labor costs for call center = 520 employees * $1/hour * 120 hours/employee/month = $62,400/month
* Profit = Revenue – labor costs = $60,000 – $62,400 = -$2,400/month

Conclusion: Baviaans is a better choice because revenues are much higher in Baviaans, although labor costs are slightly lower in Hantam.

4. Conclusion & Recommendation

Question #6. Ask the candidate to summarize his/her findings and make a final recommendation to the client.

Possible Answer:

I recommend that our client MTN Group sets up a call center and also provide cable/internet services in the city of Baviaans.

Our client can potentially get a lot more customers in Baviaans, allowing them to generate much more revenue than in Hantam, although labor costs would be slightly lower in Hantam. Major risks include competitor response and possibility of new market entries. Moving forward, our client should establish a solid customer base and offer promotions in the initial stages of market entry to attract customers.