case interviews

Acing the Case Interview

MIT Careers OfficeRoom 12-170

Agenda

Introductions Business Case Interview Overview Types of Cases Frameworks Example Case Case Interview Tips Case Practice in Groups Questions

Source: Deloitte, 2005

Business Case Interview Overview

Q What is a Business Case Interview?

A A Business Case interview is an interactive experience where you will be presented with a business problem / scenario and asked to work through the solution based on the information available. The case interview is used to evaluate how you think and how you approach a problem. There is typically no right or wrong answer. A business case interview normally consists of a challenging question with incomplete information. Sometimes, business case interviews are based on actual client engagements.

"Remember that the best leaders never stop learning."

Abraham Lincoln


Consulting Companies Use Business Case Interviews to Assess:

Logical / analytical thought processesCommunication skills CreativityBusiness insightsPerformance under pressureGeneral knowledge Problem solving with incomplete information

Objectives

1

2

3

4

5

6

7


Types of Cases

3. General Business

Typical general business cases include the following subjects:

Falling Profits, New Product Introduction, Entering a New Market, Where to Locate a New Facility (Site Selection), Mergers and Acquisitions

2. Brainteasers

Puzzles or questions that challenge a candidates ability to think creatively.

Examples:

Why are manhole covers round?

Why do fashions change every year or two?

1. Market Sizing

Determine how big a particular problem is, or how many of X products are used.

Examples:

How many golf balls are made in the US each year?

How many cans of paint are needed to paint the Delta fleet?


How many new golf balls would be used in the US in a given year?

Market Sizing

Possible Approach:

Number of golfers in the US

250 million people in the US, 20% of population plays golf

Number of balls they use per round

2 to 3 balls per round

Number of rounds they play per year

Average of 10 rounds per year

~ 1.25 billion golf balls

~ 50 million people play golf in the US

~ 2 to 3 balls per round

~ 10 rounds per year


Best Buy has asked you to develop an expansion strategy

General Business

Possible Solutions:

Increase number of stores

Increase revenues within existing stores

Build new brands

Acquire competitor

Add products and services


Use of Frameworks

Frameworks can help logically structure problem solving

Many different methodologies exist, for example: Porters 5 Forces (Suppliers, New Entrants, Buyers/Customers,

Threat of Substitutes, Industry Competitors) S.W.O.T. (Strengths/Weaknesses, Opportunities/Threats) 4 Cs (Customer, Costs, Competitors, Capabilities) 4 Ps (Price, Promotion, Place, Product)

Dont blindly follow a framework! Choose a framework based on the problem you are solving, and use the framework to organize your business case analysis

It is better to not apply a framework if you are unsure of how to use it. You dont need to use a framework as long as your response is well structured and your solution is sound


Porters Five Forces is useful for understanding the competitive intensity and overall attractiveness of an industry.

Framework: Porters Five Forces

Leverage of suppliers over buyers

Supplier Power

Bargaining power of customers

Buyer Power

Rivalry among existing competitors

Industry Competition

Threat of substitute products and services stealing share from existing competitors

Threat of Substitutes

Threat of new entrants entering the market and stealing share from existing competitors

Barriers to EntryDescriptionForce


Likelihood of entrance of new competitors

Changing consumer trends Economic upturn Changes in government regulation New technologies

Framework: S.W.O.T. AnalysisThe S.W.O.T. analysis is a useful framework for understanding a companys core competencies and shortcomings at a high level.

Sustainable distinctive competitive competency

Acknowledged market leader Adequate financial resources Cost advantages Management assets

Strengths

Obsolete facilities, products or services

High debt, low equity Lack of management depth Too narrow (or wide) product line Myopic promotion strategy

Weaknesses Market saturation Inflation or recession Threat of national security Natural disaster Trade restrictions

Threats

Opportunities


Framework: The Four Cs

Demographics Purchasing Criteria Sales and go to market strategy Segmentation

Customers (Examples)

Competitive Advantage Market Share Perceived Value Price

Competitors (Examples)

Economies of Scale Inventory and other holding

costs Labor Leverage over suppliers

Acquisition of Raw Materials Production Strategy Organizational Strategy

Capabilities (Examples)

The Four Cs are a useful tool for understanding retail and sales oriented cases as well as for analyzing new product introductions.

Costs (Examples)


Important Product Attributes Selection Criteria Value added

Product

Advertising Discounting Incentive Programs

Promotion

Predatory Pricing At Market Pricing Premium Pricing

Price

Distribution Strategy Location Organizational Strategy

Place

Framework: The Four Ps

The Four Ps are a useful tool for understanding marketing problems.


Approach for Solving a Business Case Study

Use this 5 step approach for solving a business case study:

Understand the problem

Obtain more information

Apply Frameworks

Present Conclusion Recommend

As the case is being presented, the interviewee should write down key facts.

The interviewee will need to ask questions in order to gain clarity and insight into the problem.

As more questions are asked, it can be helpful to structure thoughts in an appropriate framework.

After all of the information has been analyzed, the interviewee should develop and present a conclusion.

Once the conclusion has been made, the interviewee should offer a recommendation and present their insights.


Cracking the Case

Listen and understand the business case situation Determine your structure up front Communicate to the interviewer the issues you plan to evaluate If the Interviewer redirects you, dont fight them they may be trying to

pull you back on track Perform the appropriate calculations Ask questions that support or refine your framework Check your progress Wrap it up!

> Based on the facts you have gathered, draw a conclusion that answers the interviewers question

> Be prepared to wrap it up even if you run out of time


Example Business Case - Background

Client:Drug Co, a major North American Drug / Convenience store has been

losing market share for three years. They have asked us to determine the cause for this trend and to recommend solutions to regain market share.

Background:Drug Co has 3000 stores in metro, suburban, and rural areas. Along

with prescription drugs, Drug Co sells food and beverages, and health and beauty aides.

Financial Snap Shot:Over the past three years Drug Co sales have increased at a

compound annual growth rate of 3%. During that same period, market share has declined from 10% to 5%.


Step 1: Understand the Problem

Client: Major Drug Retailer (Drug Co) Locations: 3000 Stores in metro, suburban, and rural areas Products: Prescription drugs, food and beverages and health and

beauty aides Financial: 3% Growth in sales 50% decline in market share Objective: To determine why market share has declined and to offer a

recommendation on how to reverse this trend

As the interviewer presents the case, you should write down key facts. You will need to recall these facts later on in the case study.


Step 2: Ask Questions and obtain more information

Financial: 3% Growth in sales and a 50% decline in market share What does the industry growth outlook look like What are the competitive characteristics of the industry

Products: Prescription drugs, food and beverages, and health and beauty aides

What is breakdown of Drug Cos revenue by product Which products have the highest and lowest growth

Locations: 3000 Stores in metro, suburban, and rural areas What is Drug Cos geographic foot print Where has Drug Co experienced the greatest growth


In order to solve the case, you will need to ask questions which will add clarity and structure to the problem.

Step 2: Ask Questions and obtain more information

Over the past 3 years, the retail drug store industry has experienced a CAGR* of 7%. This growth has been fueled by:

More price sensitive consumers Discounting and other loyalty programs Growth in certain geographic segments

There are three types of competitors: National Drug Store Chains, e.g., CVS National Discount Chains, e.g., Wal-Mart Online Drug Store

Some cases will present qualitative as well as quantitative information.

Product % RevenueCAGR Last 3

Years

Prescription Drugs 20% 11%

Health and Beauty Aides

50% 1%

1%Food and Beverages

30%

Drug Co Revenue & Growth by Product

Region % RevenueCAGR Last 3

Years

Metro Area 40% 2%

Suburbs 20% 7%

2%Rural Area 40%

Drug Co Revenue & Growth by Region

* CAGR is the average annual growth rateSource: Deloitte, 2005

Step 3 Apply Frameworks

What are the barriers to expanding in each geographic region

What is the threat of substitutes from online stores such as drugstore.com

What is the rivalry between existing firms in each market

How much choice do consumers have in where to shop

What is Drug Cos relationship with its suppliers

As you think of questions it is important to structure your thoughts by applying an appropriate framework that you are comfortable using.

Region % RevenueCAGR Last

3 Years

Metro Area 40% 2%

Suburbs 20% 7%

2%Rural Area 40%

Porters Five Forces

Drug Co Revenue & Growth by Region

Product % RevenueCAGR Last

3 YearsPrescription

Drugs20% 11%

Health and Beauty Aides

50% 1%

1%Food and Beverages

30%

Drug Co Revenue & Growth by Product How do prices differ from competitors

What kind of promotional incentives exist, e.g., loyalty programs, discounts

How are products distributed to the stores within the different regions

How important are cost and convenience to consumers

The Four Ps


Step 3 Apply Frameworks - ContinuedThe Four Ps is a useful framework to apply when analyzing the marketing effectiveness of a companys product.

Offerings Prescription Drugs Health and Beauty Aides Food and Beverages

Price Premium pricing. Prices typically 20% higher than market

Market pricing. Prices typically 10% higher than discounters

No promotion or loyalty program for consumers

Meant to be a follow on sale after customer has filled prescription order

Tier 2 status with consumer products companies

Quantity discounts with vendors less frequent

Customers value price and availability of desired products

Market pricing. Prices typically 20% higher than discounters

Promotion Free personal consultations with pharmacist

Prescription database which allows a customer to pick up a prescription in any store

No promotion or loyalty program for consumers

Meant to be a follow on sale after customer has filled prescription order

Place #7 buyer of prescription drugs

Relationships with all of the major drug producers

Tier 2 status with consumer products companies

Quantity discounts with vendors less frequent

Product Customers value the ability to purchase prescriptions at one location

Customers value price

The Four Ps


Step 3 Apply Frameworks - ContinuedPorters Five Forces is a useful framework to apply when assessing the attractiveness of a certain customer segment or channel.

Porters Five Forces

Region Metro Area Suburbs Rural

Barriers to Entry High real-estate costs Lack of space for prime

locations

Moderate real-estate costs Prime locations available in

sprawling communities

Online drug stores and grocers moderately used

Territorial. Stores serve a particular geographic niche

Buyer has a some options within a particular region. Choice often made based on proximity to home

Suppliers are global pharmaceuticals and consumer goods companies

Building awareness Lack of high foot traffic

areas

Threat of Substitutes Online drug stores and grocers are widely used and are taking away share from traditional brick and mortar stores

Online drug stores and grocers moderately used

Industry Competition Intense. There is a drug store on every corner

Biggest threat from discounters such as Target and Wal-Mart

Buyer Power Buyer can buy similar products in many different stores

Buyers have few options to choose where to shop

Buyers constrained by budgets

Supplier Power Suppliers are global pharmaceuticals and consumers goods companies

Suppliers are global pharmaceuticals and consumer goods companies


Step 4 Present ConclusionUse your analysis to develop a conclusion.

Drug Co is losing market share for two principle reasons Incorrect geographic footprint

Incorrect product strategy

Problems with Drug Cos current footprint Losing share from online drug stores in the metro areas

Losing share from discount stores in the rural areas

Not capturing growth opportunities in the suburbs

Problems with Drug Cos product strategy Too little emphasis on selling prescription drugs

Lack of customer loyalty program for health and beauty aides and food and beverages


Step 5 Structure RecommendationPresent a well-structured and comprehensive recommendation.

What Drug Co should do to improve market share Concentrate on expanding in suburban areas

Sell more prescription drugs

Why Drug Co should expand in suburbs Moderate to low real-estate costs

Low penetration from online drug stores and discounters

Strong growth opportunities and prime locations available in developing suburbs

Why Drug Co should sell more prescription drugs Prescription drugs were the highest growth products for Drug Co

Build brand identity as the leading provider of prescription drugs in order to reinforce customer loyalty program


Case Interview Tips Preparation

Practice! Grab a friend and practice some cases with him/her Wet Feet Press and The Vault have good practice cases on their web sites Check out Case Interview Resources tip-sheet from the MIT Careers Office Contact alumni in the Consulting field for insider tips Bring paper and pencil to the Business Case Interview

Execution Relax. The interviewer wants you to succeed as much as you do. Maintain your composure. Pretend you are having a conversation rather

than an interview Dont jump to an answer. Take your time and explain how you arrived at

your answer Ask questions, but if you need to make an assumption, state it and move on


Things NOT To Do In A Case Panic or become emotional Guess Ramble Say I have no idea Change the subject or lose focus Make the problem more complicated Jump to conclusions


Acing the Case InterviewAgendaBusiness Case Interview OverviewObjectivesTypes of CasesMarket SizingGeneral BusinessUse of FrameworksFramework: S.W.O.T. AnalysisFramework: The Four CsApproach for Solving a Business Case StudyCracking the CaseExample Business Case - Background Step 1: Understand the ProblemStep 2: Ask Questions and obtain more informationStep 2: Ask Questions and obtain more informationStep 3 Apply FrameworksStep 3 Apply Frameworks - ContinuedStep 3 Apply Frameworks - ContinuedStep 4 Present ConclusionStep 5 Structure RecommendationCase Interview TipsThings NOT To Do In A Case

case interviews

Documents

business case interviews

business case analysis

business problem scenario

new golf balls

golf number of balls

new market

round number

use of frameworks frameworks