#3 understanding business...

Case Interview Workshops

#3 – Understanding Business Situation

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The Johns Hopkins Business & Consulting Club

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1. Understand the business situation framework

2. Do a business situation market entry case

Goals to achieve today

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Types of case interview question could vary a lot…

1. Growth: a. Top-line (revenue) growth

b. Bottom-line (profitability) growth

2. Business Situations a. New products or services

b. Market entry

c. Competition

d. Pricing and valuation

e. Operations

3. Merger & Acquisitions

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Business Situation Framework

• Who?

• Segment size and growth?

• Preferences? – wants, price points, distribution Customers

• Advantages/disadvantages

• Substitutes

• Why is it useful? Does it match customer needs? Product

• What does client do well?

• Capabilities?

• Financials – profitability (R, C, market share)

• Brand reputation

Company

• Who?

• Size? By market share, revenue, etc.

• What do they do well? – best practices Competition

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The good news - the format is almost same for all cases!

5 min

3-4 min

15-20 min

1-3 min

*Interviews can also be interviewer-led or interviewee-led

1. Establishing Background:

1. Listening to the case

2. Understanding objectives

3. Clarifying questions

2. Structuring Approach:

1. Structuring in a MECE way

2. Hypothesizing

3. Prioritizing

3. Analysis

1. Quantitatively analyzing

2. Qualitatively analyzing

4. Recommendation

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Business Situation Case: Market Entry

Wharton 2008 Case Book 7

De Beers, one of the leader diamond exploration companies in the world,

is thinking about entering the retail business Should De Beers do so?

Case Prompt




1. What is involved in diamond exploration business?

2. What is involved in diamond retail business?

3. What is client trying to achieve with this? Increased profit, market

share, or revenue?

Establish Background: Ask clarifying questions







share, or revenue?

It is crucial to understand De Beers’ value chain: exploration – extraction

– distribution – polishing and finishing – jewelers – retail. De Beers is

currently in exploration, extraction, and in distribution and would like to

enter retail. They won’t, however, enter polishing or jewelling. Basically,

De Beers wants to take advantage of their brand equity to sell finished

diamonds. They would continue selling raw diamonds to polishers and

they would then buy finished diamonds from jewelers.


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Structuring Your Approach What areas are important for this case?

• Who?




• Substitutes



• Capabilities?



Company

• Who?



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Structuring Your Approach What areas are important for this case?

• Who?




• Substitutes



• Capabilities?



Company

• Who?



Hypothesis: It is a good idea to enter the retail diamond business if it is

profitable for De Beers and there are low barriers of entry.

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Structuring Your Approach Is there an opportunity?

Customers

Competition

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Structuring Your Approach Is there an opportunity?

• Who buys diamonds? – wealthy/excess income

• Why? – gifts or personal use – special occasions, engagement, etc.

• Spending habits? seasonal?


• Preferences? Location? – large metropolitan areas

Customers

• Who are the largest players? - Jewelry stores: Jared, Kays, family owned, Designer names

• Industry? – healthy, growing

• What do they do well? – best practices

Competition

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Structuring Your Approach Can our client?

Company

Product

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Structuring Your Approach Can our client?

• Is it profitable?

• Potential new revenue - How are diamonds sold and priced?

• Cost investment for a retail venture

• Capability – space, labor, marketing force

• Brand reputation – well known for diamonds

Company

• Quality of our diamonds vs. others?

• Substitutes – cubic zirconia, other gems

• Designs of jewelry

• Stores - # stores, location – want customer access

Product

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Structuring Your Approach Should our client?

Barrier to

Entry

Risks

How?

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Structuring Your Approach Should our client?

• Investment costs

• Any regulation on diamond sales?

• Do we have the capital?

• Sales force

Barrier to Entry

• Competitive response

• New area Risks

• Do by themselves?

• Acquire a retailer?

• Partner with an existing retailer? How?

Qualitative Analysis: Discussing points in the structure

1. Market

2. Customers

3. Barriers to entry

4. etc.

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Quantitative Analysis: NY, high end store, $300 per square meter, 5000 square meters

Cost per year: $300*5000*12 = $18M

How many diamonds do you need to break even?

Ask for revenue data

Breakeven means P=0, so R=C

(#diamonds)(price/diamonds) = 18M

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Quantitative Analysis: NY, high end store, $300 per square meter, 5000 square meters

Cost per year: $300*5000*12 = $18M

How many diamonds do you need to break even?

Ask for revenue data

Breakeven means P=0, so R=C

(#diamonds)(price/diamonds) = 18M

Is this realistic to reach? Per year? Per day? Per hour?

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Recommendation Action recommendation – answer question

◦ Yes or no, DeBeers should (not) enter market

3 reasons to support why

1. Qualitative conclusion

2. Quantitative conclusion

3. Other issues discussed/conclusions

Reiterate yes/no answer

Next steps: What would you like to know to be more confident in conclusion? What is unexplored?

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#3 understanding business...

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