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Two parcel delivery companies: what scale does to cost and price

You run the case. Read the prompt, answer questions from the notes below, and share data only when the candidate asks for it or gets stuck. Score at the end.

Case timer

00:00

Target length:

1. Read the prompt aloud

Read it slowly, then pause. Let the candidate ask questions before they structure.

Illustrative numbers, fictional companies. Two parcel delivery companies in the United States each charge USD 7 a parcel and spend USD 4 a parcel on drivers and fuel. BigPost runs a national network of hubs and software costing USD 60 million a year and delivers 30 million parcels. SmallPost runs a smaller network costing USD 20 million a year and delivers 8 million parcels. What is each one's cost per parcel and profit, and what happens if BigPost cuts its price to USD 6.50?

2. Answers to clarifying questions

This case has no scripted clarifying answers. Answer from the prompt, and say "assume what you think is reasonable" if the prompt does not cover it.

3. A model structure

Compare the candidate's structure with this one. A different split can be just as good if it is clean and fits the problem.

Profit = parcels x (price minus cost per parcel)
- Cost per parcel = variable cost + fixed cost / parcels
- Compare the two, then test a price cut

4. The working, step by step

Each step shows how a strong candidate works it out. Share a new fact from it only when the candidate asks or is stuck, and let them do the math: the result in the dark box is what they should reach.

Step 1: BigPost cost per parcel
What a strong candidate does: USD 4 of driving and fuel, plus USD 60 million spread over 30 million parcels.
BigPost cost per parcel (USD): 4 + 60 ÷ 30 = 6
Step 2: SmallPost cost per parcel
What a strong candidate does: USD 4, plus USD 20 million spread over 8 million parcels.
SmallPost cost per parcel (USD): 4 + 20 ÷ 8 = 6.5
Step 3: BigPost profit at USD 7
What a strong candidate does: USD 1 a parcel on 30 million parcels.
BigPost profit (USD millions): 30 × (7 - 6) = 30
Step 4: SmallPost profit at USD 7
What a strong candidate does: USD 0.50 a parcel on 8 million parcels.
SmallPost profit (USD millions): 8 × (7 - 6.5) = 4
Step 5: BigPost cuts to USD 6.50
What a strong candidate does: BigPost still earns USD 0.50 a parcel.
BigPost profit at USD 6.50 (USD millions): 30 × (6.5 - 6) = 15
Step 6: SmallPost at USD 6.50
What a strong candidate does: SmallPost now earns nothing on each parcel.
SmallPost profit at USD 6.50 (USD millions): 8 × (6.5 - 6.5) = 0

The recommendation to listen for

At the end, say: "The CEO walks in. What is your recommendation?"

BigPost has a scale advantage of USD 0.50 a parcel, all of it from spreading its fixed network cost over almost four times as many parcels. At the same price it earns USD 30 million against SmallPost's USD 4 million. If BigPost cuts its price to USD 6.50 it still earns USD 15 million while SmallPost earns nothing, so SmallPost cannot win a price war. SmallPost's way out is to grow volume on its existing network, or to serve a niche where BigPost's network gives it no edge.

Risks a strong answer names: If SmallPost could reach 30 million parcels, the gap would vanish; The cost advantage only matters if customers choose mainly on price.

Score the candidate

Score each criterion from 1 to 5. A 2 or a 4 sits between the descriptions.

This case has no exhibit. Score Exhibit reading on how the candidate used the data you gave them: did they pick out the number that matters and say what it means?

Structuring

1: No clear structure, or a memorized framework that does not fit the problem.
3: A sensible structure, but with some overlap, a gap, or no clear priority.
5: A structure built for this problem, with no overlap and no gaps, a stated hypothesis, and a clear first step.

Math

1: Frequent errors, no units, or needed heavy help to finish.
3: Right answers but slow or messy working, or one error caught late.
5: Accurate and clearly narrated, with units, a sense check, and what the number means.

Exhibit reading

1: Read the chart aloud without finding the number that matters.
3: Found the key number but gave only part of the so-what.
5: Pulled the right number quickly and said what it means for the case.

Synthesis

1: Summarized what was done, with no clear answer.
3: Gave an answer, but with weak reasons or no next step.
5: Answer first, then two or three reasons with numbers, the main risk, and next steps.

Communication

1: Hard to follow: long silences, no signposting.
3: Clear most of the time, with some rambling.
5: Calm and concise, signposted each step, and checked in with the interviewer.

Total

0 out of 25

Score all five criteria to see the band and the feedback template.