wharton case book 2009
TRANSCRIPT
WHARTO
N C
ONSULTIN
G C
LUB
CASEB
OOK
September 2009, © W
harton Consulting
Club
Contents
�Introduction
�Consulting Industry Guide
�Industry O
verview
�Firm
Ove
rviews (10 Firms)
Section
3 6
Page #
2
�Firm
Ove
rviews (10 Firms)
�Interview Preparation
�Interview O
verview –
Fit + Case
�Sample Framew
orks
�Industry Sna
pshots
�Practice Cases
�14 Practice C
ases
�Links to Other Cases
�Cases from Firm W
ebsites
�Sug
gested C
ases from other Casebooks
18
50
126
Note to the
reader
Dear Consulting Club Member,
This casebook is m
eant to provide you with a brief ove
rview of co
nsulting
recruiting
and
interview prepara
tion as well as a num
ber of pra
ctice cases. Please note tha
t this
is m
eant to sup
plement the
excelle
nt w
ork done
by our and
other scho
ols in earlier
casebooks, so w
e strong
ly encourage you to not make
this yo
ur sole reference. W
e have
indicated w
hich other ca
sebooks w
e foun
d particularly useful at different points in this
casebook.
3
casebook.
Good luck!
-2009 Wharton Consulting Casebook Editorial Team
BIG
PICTU
RE: C
ONSULTIN
G REC
RUITIN
G INVOLV
ES
LOTS
OF LITTLE THIN
GS…
THER
E IS N
O SILVER
BULLET
Gather Info,
Network &
Decide
•Is consulting
wha
t yo
u want to do?
•W
hich firm do you want to join?
•W
hy do you want to join a certain
firm
?•Connect the
dots (pre-M
BA to M
BA
to consulting
)
•MBACM in
dustry cha
ts•Firm
websites / Vault / W
etFeet
•Coffee cha
ts•EISes
•Seco
nd Years / First Years from firms
•Speake
rs on ca
mpus
Your objective
What resources you will need to use
4
Apply
Interview:
Cases
Interview:
Fit
•Get invited to interview (prepare
good resume and
cove
r letter)
•MBACM resume review
•Re
sumania
•Seco
nd Years (at least 2 reviews)
•Demonstrate ‘fit’
-Le
adership
-Team-p
laye
r-W
ell-rounded persona
lity
•Prep ‘F
it’ que
stions tho
roug
hly
•MBACM m
ock interviews
•Interviews with Seco
nd Years
•Re
ad W
SJ, Eco
nomist…
something
•Ace
Cases
•Case books &
Ind
ustry Primer Series!
•Core courses
•Pra
ctice extensively w
ith First Ye
ars
•MBACM m
ock interviews
•Interviews with Seco
nd Years
•Re
ach out to consulting
firm bud
dies
Contents
�Introduction
�Consulting Industry Guide
�Industry O
verview
�Firm
Ove
rviews (10 Firms)
Section
3 6
Page #
5
�Firm
Ove
rviews (10 Firms)
�Interview Preparation
�Interview O
verview –
Fit + Case
�Sample Framew
orks
�Industry Sna
pshots
�Practice Cases
�14 Practice C
ases
�Links to Other Cases
�Cases from Firm W
ebsites
�Sug
gested C
ases from other Casebooks
18
50
126
Industry ove
rview –
Mana
gement Consulting
Mana
gement consulting
invo
lves solving complex business problems and
offering
reco
mmend
ations to companies
Overview of management consulting
•Problem-solve complex and
unstructured
business problems
•W
ork closely w
ith senior mana
gement on
Interview Process
•Case interview –
invo
lves solving a
business case; ca
ndidate expected to
drive
tow
ard
s a solution and
ask for
6
•W
ork closely w
ith senior mana
gement on
the clie
nt side
•Intelle
ctua
lly stimulating
work and
ability to build a strong
set of skills
•Constant tra
vel (depend
ing on office
loca
tion and
consulting
firm) ca
n pose
significa
nt cha
lleng
es
•Industry (prior to eco
nomic dow
nturn)
was ex
pected to grow at 8.8% in 2009
•Most firms ha
ve a global presence and
offer internationa
l project opportun
ities
drive
tow
ard
s a solution and
ask for
releva
nt data; focus on structure;
•Fit interview –
numerous beha
viora
l que
stions focusing
on prior ex
periences
Typical Career Path
•Consultant/Associate
•Senior Consultant/Associate
•Mana
ger/Project Leader
•Associate Partne
r•Pa
rtne
r
Industry ove
rview –
Accenture
Accenture is a leading global mana
gement consulting
firm w
hich is kn
own for offering
co
mprehe
nsive solutions, includ
ing techno
logy services, to its clie
nts.
Accenture O
verview
•2000 consultants
•Global bra
nd reco
gnition due
to
solutions outside m
ana
gement consulting
Interview Form
at
•2 roun
ds of interviews
•Ro
und 1: 2 45-m
inute in
terviews
•Ro
und 2: 3 45-m
inute in
terviews
7
solutions outside m
ana
gement consulting
•3 broad services areas (m
ana
gement
consulting
, systems integra
tion co
nsulting
and
techno
logy consulting
)•Re
giona
l staffing m
odel
•Comprehe
nsive solutions, bey
ond
stra
tegy, offered to clie
nts
•Ro
und 2: 3 45-m
inute in
terviews
Career progression
•Consultant
•Mana
ger
•Pa
rtne
r
Industry ove
rview –
A.T. Kearney
A.T. Kearney
is a leading global mana
gement consulting
firm w
hich is kn
own for the
implementation focus of its projects/results.
A.T. Kearney
Ove
rview
•1700 consultants
•51 offices worldwide
•34 coun
tries
Interview Form
at
•2 roun
ds of interviews
•Ro
und 1: 2 45-m
inute in
terviews
•Ro
und 2: Re
gular ca
se +
fit interviews
8
•34 coun
tries
•12 in
dustry group
s•7 broad services areas
•Global staffing m
odel
•Pa
rtne
rs actively involved in ca
ses
•Re
cently w
ent priva
te w
hen co
mpany
was boug
ht back from EDS
•Ro
und 2: Re
gular ca
se +
fit interviews
Case presentation (60 m
inute
prep, 20 m
inute presentation &
10 m
inutes for Q&A)
Career progression
•Associate
•Mana
ger
•Principal
•Pa
rtne
r (V
ice-President)
Industry ove
rview –
Bain &
Co.
Bain is a global mana
gement consulting
firm. It is co
nsidered one
of the top firms in this
industry and
is kn
own for its focus on delivering
results and
office-centric work m
odel.
Bain O
verview
•3100 consultants
•39 offices worldwide
•26 coun
tries
Interview Form
at
•2 roun
ds of interviews
•Ro
und 1: 2 40-m
inute in
terviews
•Ro
und 2: 3 40-m
inute in
terviews (2 case
9
•26 coun
tries
•Office-specific staffing m
odel
•14 ind
ustry group
s•11 fun
ctiona
l pra
ctice areas
•Office-centric work m
odel
•Culture considered to be colle
gial
•Ro
und 2: 3 40-m
inute in
terviews (2 case
+ 1 fit)
•Office-specific interviews
•“A
nswer-first” approach
•Fo
cus on creativity and
structure
Career progression
•Consultant
•Case Team Leader
•Mana
ger
•Pa
rtne
r
Industry ove
rview –
Booz & C
o.
Booz is a global mana
gement consulting
firm. It is co
nsidered one
of the top firms in this
industry and
was rece
ntly boug
ht out from Booz Alle
n Hamilton, w
hich is govt. focused.
Booz Ove
rview
•3300 consultants
•57 offices worldwide
•30 coun
tries
Interview Form
at
•2 roun
ds of interviews
•Ro
unds 1 &
2: 2 45-m
inute interviews
10
•30 coun
tries
•Re
giona
l staffing m
odel
•16 ind
ustry group
s•8 fun
ctiona
l pra
ctice areas
Career progression
•Consultant
•Mana
ger
•Pa
rtne
r
Industry ove
rview –
Boston Consulting
Group
BCG is a global mana
gement consulting
firm. It is co
nsidered one
of the top firms in this
industry and
is kn
own for its intelle
ctua
l approach and
diverse w
orkforce.
BCG O
verview
•4500 consultants
•66 offices worldwide
•40 coun
tries
Typical Interview Form
at
•2 roun
ds of interviews
•Ro
und 1: 2 45-m
inute in
terviews (cases)
•Ro
und 2: 3 45-m
inute in
terviews (cases)
11
•40 coun
tries
•Re
giona
l staffing m
odel
•15 ind
ustry group
s•14 fun
ctiona
l pra
ctice areas
•Pe
ople considered to be friend
ly
•Ro
und 2: 3 45-m
inute in
terviews (cases)
•Gene
ral 1stroun
d and
office-specific 2nd
roun
d in
terviews
Career progression
•Consultant
•Project Leader
•Principal
•Pa
rtne
r
Industry ove
rview –
Deloitte
Deloitte is a leading global mana
gement consulting
firm w
hich is kn
own for offering
co
mprehe
nsive solutions, includ
ing techno
logy and
tax services, to its clie
nts.
Deloitte O
verview
•Global bra
nd reco
gnition due
to
solutions outside m
ana
gement consulting
•18 in
dustry group
s
Interview Form
at
•2 roun
ds of interviews
•Ro
und 1: 2 30-m
inute in
terviews
•Ro
und 2: 1 60-m
inute in
terview w
ith 2
12
•18 in
dustry group
s•5 broad services areas (enterp
rise,
human ca
pital, outsourcing
, stra
tegy &
opera
tions and
techno
logy integra
tion)
•7 fun
ctiona
l areas within stra
tegy &
opera
tions
•Re
giona
l staffing m
odel
•Comprehe
nsive solutions, bey
ond
stra
tegy and
opera
tions, offered to clie
nts
•Ro
und 2: 1 60-m
inute in
terview w
ith 2
partne
rs
Career progression
•Senior Consultant
•Mana
ger
•Senior Mana
ger
•Pa
rtne
r
Industry ove
rview –
L.E.K. Consulting
L.E.K. is a global mana
gement consulting
firm. It is co
nsidered one
of the top small firm
s in this industry and
is kn
own for its ana
lytica
l rigor.
L.E.K. Ove
rview
•900 consultants
•20 offices worldwide
•Strong
presence outside US
Interview Form
at
•2 roun
ds of interviews
•Ro
und 1: 2 30-m
inute in
terviews (little
fit, some cases were bra
instorm
ing type
13
•Strong
presence outside US
•19 ind
ustry group
s•6 fun
ctiona
l pra
ctice areas
•Kno
wn for its ana
lytica
l rigor
•Cases usua
lly sho
rter (6 to 8 w
eeks)
•Provides im
mediate m
ana
gerial
resp
onsibilities to its M
BA hires
•Pa
rtne
rs actively involved in ca
ses
fit, some cases were bra
instorm
ing type
que
stions)
•Ro
und 2: 3 30-m
inute in
terviews
•Po
tential ca
se on NPV ana
lysis
Career progression
•Associate Consultant
•Consultant
•Mana
ger
•Pa
rtne
r
Industry ove
rview –
McK
insey &
Co.
McK
insey &
Co. is a global mana
gement consulting
firm. It is co
nsidered one
of the top
firm
s in this industry and
is kn
own for deve
loping le
aders and
strong
culture.
McK
insey O
verview
•8500 consultants
•92 offices worldwide
•52 coun
tries
Interview Form
at
•2 or 3 roun
ds of interviews
•Command
and
Control ca
se interviews
•Office-specific interviews in all roun
ds
14
•52 coun
tries
•Nationa
l/global staffing m
odel
•18 ind
ustry group
s•7 fun
ctiona
l pra
ctice areas
•Office-specific interviews in all roun
ds
(tho
ugh Northe
ast offices pilo
ted common
initiative
)•Fit interviews focus on structure, specific
actions and
headlin
es for stories
Career progression
•Associate
•En
gagement M
ana
ger
•Associate Principal
•Pa
rtne
r•Director
Industry ove
rview –
Monitor Group
Monitor is a leading global mana
gement consulting
firm w
hich is kn
own for its thoug
ht
leadership and
focus on kn
owledge tra
nsfer to its clie
nts.
Monitor Ove
rview
•1500 consultants
•30 offices worldwide
•18 coun
tries
Interview Form
at
•2 roun
ds of interviews
•Ro
und 1: 2 interviews (case +
fit)
•Ro
und 2: Group
business case exe
rcise
15
•18 coun
tries
•15 ind
ustry group
s•3 broad services areas (advisory,
capital-building &
capital)
•Global staffing m
odel
•Fo
unded in
1983 by the
likes of Micha
el
Porter
•Ro
und 2: Group
business case exe
rcise
Role play interview
Feedback in
terview
Career progression
•Case Team M
ember
•Module Leader
•Case Team Leader
•Global Accoun
t Mana
ger
Industry ove
rview –
Oliver W
yman
Oliver W
yman is a global mana
gement consulting
firm. It is co
nsidered one
of the top
firm
s in this industry w
ith a significa
nt presence outside the
US.
Oliver W
yman Ove
rview
•2900 consultants
•40 offices worldwide
•16 coun
tries
Interview Form
at
•2 or 3 roun
ds of interviews
•Ro
und 1: 2 30-6
0 m
inute w
ith ca
se and
fit
16
•16 coun
tries
•9 ind
ustry group
s•7 fun
ctiona
l pra
ctice areas
•Global staffing m
odel
•Fo
rmed from a combination of Mercer
Oliver W
yman & M
ercer Consulting
fit•Ro
und 2: 1 Fit interview w
ith tw
o case +
fit interviews
Career progression
•Junior Consultant
•Senior Consultant
•Junior Mana
ger
•Senior Mana
ger
•Pa
rtne
r
Contents
�Introduction
�Consulting Industry Guide
�Industry O
verview
�Firm
Ove
rviews (10 Firms)
Section
3 6
Page #
17
�Firm
Ove
rviews (10 Firms)
�Interview Preparation
�Interview O
verview –
Fit + Case
�Sample Framew
orks
�Industry Sna
pshots
�Practice Cases
�14 Practice C
ases
�Links to Other Cases
�Cases from Firm W
ebsites
�Sug
gested C
ases from other Casebooks
18
50
126
Contents: In
terview preparation
�A typical consulting
interview
�Gene
ral tips
�Fit interview preparation with sa
mple que
stions
�Case in
terview preparation
�W
hat is a case? Case types and
interview m
ethods
18
�W
hat is a case? Case types and
interview m
ethods
�Problem solving –
wha
t is it?
�Ove
rall flow
of a case
�Tips to stand
out
�Sample Fra
mew
orks
�Common Industry Sna
pshots
�Tips for giving cases
�Other resource
s
�Industry sna
pshots
A typical co
nsulting
interview
Proce
ss
•W
ait in
hosp
itality suite
with other ca
ndidates /
recruiters
•Interviewer may
give persona
l background
•Interviewer will start case
•Keep tra
ck of time so tha
t yo
u by w
hen yo
u are
•Yo
ur cha
nce to ask
que
stions
•W
alk back to hosp
itality
Meet & G
reet
The Case
The Fit
Wra
p-up
19
You should
•Interviewer asks for yo
u by name
•Hand
shake
/ greeting
•W
alk to interview suite
/ small talk
•Que
stions about
resume /
experience
you by w
hen yo
u are
expected to reach a
conclusion
•W
alk back to hosp
itality
suite w
ith interviewer
•Appear warm
, co
nfident, p
rofessiona
l•Convince
interviewer that yo
u are fit for the firm
•Pa
ss the
“airport
test”
•Maintain confident,
controlle
d, u
pbeat
demeano
r
•Not ask stock que
stions
•A good cha
nce to get to
learn about the
interviewer’s persona
l ex
periences at the firm
Gene
ral tips
�Make
a great first im
pression
�Professiona
l appearance
�Preparation
�Have
needed sup
plie
s
�Plenty of pens/pencils
20
�Plenty of pens/pencils
�Graph/
plain paper
�Serviceable portfolio
�Project confidence from start to finish
�Re
lax (ha
rd to appear co
nfident if not)
�Be yourself (ex
tremely hard
to be confident if not)
Wha
t is “fit”?
�Opportunity to project “co
nsultant” during the
interview
�Inquisitive, logical, co
nfident, friend
ly, drive
n, happy
�W
hen yo
u describe yourself:
�Fo
cus on a set of skills that the company
wants
�Commun
ication
�Le
adership/Mana
gement
21
�W
ork und
er pressure / ability to deal with co
nflict and
ambiguity
�W
hen yo
u describe your fit:
�Don’t repeat slogans; most firms do the
same thing
s
�Fo
cus on wha
t the firms co
nsider to be the
ir u
nique
factors (e.g. McK
insey’s
internationa
l reach, BCG’s tho
ught leadership, Bain’s office culture etc.)
�Fo
r in-d
epth probing on leadership que
stions (typical of McK
insey)
�Prepare a 5-1
0 w
ord
‘ne
wsp
aper he
adline’ that encapsulates the story
�Prepare beforeha
nd a 1-2
minute description that quickly lays out the
contex
t, the
actors and
the
complication
�Fo
cus on yo
ur actions and
tho
ught proce
ss and
the
impact of yo
ur actions tha
t led to
the solution / eve
ntua
l success
Tips on the Fit Interview
�Alm
ost eve
ry single interview involves at least some fit-
interview type que
stions
�Applicants ha
ve been turned dow
n from the
top consulting
firm
s for no
t ha
ving
cleared the
fit portions of interviews
�Very basic steps go a long
way
22
�Very basic steps go a long
way
�Smile
�Maintain eye contact
�Be hone
st and
heartfelt
�Have
a succinct story
�Practice can make
perfect
�InterviewStream
�Mock fit in
terviews
Tips on the Fit Interview (co
nt.)
�Do
�Establish co
mmon ground (geography, family, interests, sports, etc.)
�Ask the
interviewer friend
ly que
stions
�Be confident in
your answers
�Ta
lk about something other than yo
ur qua
lifications (yo
u’re in
teresting, so
23
�Ta
lk about something other than yo
ur qua
lifications (yo
u’re in
teresting, so
talk about it)
�Don’t
�Discuss something controve
rsial
�Complain about a
nyth
ing
�Make
up elaborate que
stions you know
the
answer to
�Re
peat co
mpany
slogans, m
ottos, tag-lines, etc.
�Fo
cus only on yo
ur business qua
lifications and
experience
Sample fit que
stions
�Ta
ke m
e throug
h yo
ur resume
�Tell me about a tim
e w
hen yo
u ex
hibited leadership
�Tell me about a tim
e w
hen yo
u ha
d to solve a problem
�Tell me about a tim
e w
hen yo
u fa
iled
�Tell me about a tim
e you ha
d impact
�W
hat kind
of leader are you?
24
�W
hat kind
of leader are you?
�W
hy Firm X?
�W
hy City Y?
�W
hy consulting
?
�W
hat is your greatest accomplishm
ent?
�W
hat would you say your biggest w
eakness is?
�W
hat are your long
-term
goals?
�How
do you like school?
�W
hat is your favo
rite class at scho
ol?
�W
hat did you do last sum
mer?
�W
hat do you do for fun?
Case types and
case interview m
ethods
�W
hat is a case?
�A business issue
/problem company
is fa
cing
in a few
sentences
�Ta
kes about 25 m
inutes; has lim
ited data w
hich is usua
lly provided if asked for
�Approach to solution is m
ore important tha
n the final solutio
n
�There are two common ca
se in
terview m
ethods:
‘Go with the flow’ cases (typical of most firms) –
You will determ
ine w
hich
25
�‘Go with the flow’ cases (typical of most firms) –
You will determ
ine w
hich
areas to explore and
lead the
discussion, i.e. drive
the
case
�Command and control (typical of McKinsey) –Interviewer guides the discussion
and
case has he
avy
bra
instorm
ing compone
nts and
qua
ntitative
work
�Common ca
se types* (no
t a comprehe
nsive list):
�Profitability
�Market En
try
�Acq
uisition
�Organiza
tion
�Industry Ana
lysis (incl. no
n-profit)
�Market Sizing
�Capacity Expansion (incl. outsourcing
)
�Inve
stments
*Note
: one
case
could span
multiple case
typ
es
Ove
rall flow
of a case
Und
erstand
the que
stion
Plan yo
urapproach
Probe for
inform
ation
Assert a
conclusion
•Listen actively
•Ask clarifying que
stions
•Ta
ke ju
dicious notes
•Mention yo
u will take
a
minute to plan yo
ur
approach
•Fo
llow your plan!
•Ask specific que
stions
to test hypothesis
•Drive
the
case to a
conclusion before tim
e
expires
~3 m
in.
~3 m
in.
~12-1
5 m
in.
~1-2
min.
26
•Ta
ke ju
dicious notes
•Organize
notes as slides
•Fo
rmulate an initial
hypothesis about
possible solutions
•W
rite dow
n ke
y
que
stion
•Dra
w out a fra
mework
as checklist of topics to
explore
•Select 3 to 5 m
ajor
topic areas
•Identify releva
nt sub
-topics
•Present plan of attack
to in
terviewer –start
with the m
ost im
portant
to test hypothesis
•Adjust hypothesis and
plan as data emerges
•Organize
notes as
slides
•Highlight in
sights from
any
num
erica
l ca
lculations
•Note conclusions
•Answer the que
stion
•Ta
ke a definite stand
•Make
best conclusion
with data on ha
nd
•Make
reco
mmend
ations
and
follo
w the
m w
ith
supporting evidence
•Address “risks” and
“nex
t steps”
Tips: Commun
ication, N
otes & M
ath
�Commun
ication
�Ex
plain your tho
ught-p
roce
ss w
hen presenting your plan
�Make
hypotheses whe
n asking que
stions/reque
sting inform
ation
�Go bey
ond
verb
al co
mmunication
�Be eng
aging! Enjoy the
case problem and
work together to solve it!
�Body lang
uage (ey
e contact, gestures, posture); smile
often but do not ove
rdo it
27
�Body lang
uage (ey
e contact, gestures, posture); smile
often but do not ove
rdo it
�Fa
cial ex
pressions (Maintain composure at all times)
�Notes
�W
rite legibly, ang
le it such tha
t the case-g
iver ca
n see your w
ork
�Use a new
page for each the
me you are exploring
�Circle/box
insights for use in reco
mmend
ations
�Math
�Draw m
ath out clearly (esp
ecially
for market sizing
)
�Ex
plain any
assum
ptions (be reasona
ble w
ith assum
ptions)
�W
alk throug
h yo
ur logic aloud
and
tie the
result to the
case
7 Tips to help you stand
out in the case interview
�Ask que
stions tha
t he
lp clarify the
sco
pe of the case and
the
exact que
stion to be
answered
�Dra
w out as “M
ECE” (Mutua
lly exclusive
, co
llectively exha
ustive
) a fra
mew
ork / tree
as possible
�Ta
lk about the
most important bra
nche
s first and
explain w
hy the
y m
ay be the
key
drive
rs; don’t just follo
w the
seque
nce in which you wrote the
m
28
drive
rs; don’t just follo
w the
seque
nce in which you wrote the
m
�W
hen asking que
stions or for more data, p
refa
ce the
m w
ith co
ntex
tual a
nalysis, or
eve
n a hypothesis as to w
hat yo
u ex
pect the
data sho
w
�W
hen doing m
ath, relate the
num
bers qua
litative
ly to the
case, and
identify/ve
rbaliz
e
the take
aways from your ana
lysis
�‘Bra
instorm
in bucke
ts’: If asked to bra
instorm
, take
a m
inute, identify the
broad leve
rs
that ca
n answer the que
stion, and
run
-riot with ideas. Structure and
a logical approach
is always appreciated.
�W
hen presenting reco
mmend
ation –take
a position! Be concise and
top-d
own in your
reco
mmend
ation (i.e. reco
mmend
ation first with supporting arg
uments, tie in nu
mbers if
possible). The
n, m
ention the risks tha
t inva
lidate your reasoning
A note about framew
orks
�Th
ere are an un
limited num
ber of framew
orks that ca
n be succe
ssfully
applie
d in
case
interviews…
�…
but kno
wledge of a few
solid
fra
mew
orks will go a long
way (profitability, market
entry, go/no
go investment, etc.)
�Sample fra
mew
orks ca
n be foun
d in the follo
wing place
s:
�W
harton, Ross, Stern, Tuck, Kello
gg, and
other scho
ol ca
sebooks ava
ilable on web
cafe
29
�David O
hrva
ll “C
rack the
Case” and
Mark C
osentino“C
ase in Po
int”
�Yo
ur kno
wledge from m
ana
gement, marketing
classes and
prior work experience –
read the
CORE CONNEC
TORpub
lishe
d by the
Wha
rton Consulting
Club too
�Yo
ur own logical problem-solving abilities
�Cosentinoand
Ohrva
ll both offer “systems,” but the
se systems are essentially
co
mbinations of individua
l ca
se-type fra
mew
orks
�Use w
hat(1) Yo
u are comfortable w
ith, and
, (2) works for yo
u. Be as original as
possible: DEV
ELOP A FRAMEW
ORK THAT IS RELEV
ANT TO
THE CASE PROBLEM
QUES
TION AND INDUSTR
Y!
�Some sample fra
mew
orks are provided in the nex
t few slid
es. But the
se are just meant
to get yo
u started –
do deve
lop your own framew
orks for each case!
Sample framew
ork 1: Increase profits
Overview
Sample
Framew
ork
•Clie
nt’s earnings / profits (or ‘bottom-line’ in Inco
me Statement) ha
s declined or stopped growing
•Yo
u ne
ed to reco
mmend
ways to increase profits
Market
Revenues
Costs
Customer / Channel
30
•Industry
-Growth (g)
-Re
venues (R)
-Profits (
Π)
•Competition
-C1 m
arket share (s1
)-C2 m
arket share (s2
)-Etc.
Market
Revenues
Costs
Customer / Channel
•Product mix
-Po
ints of Pa
rity /
difference our
products and
co
mpetition prod.
•Pricing (P)
-Competitive
parity in
price
s-Can we ↑
price
s?•Volume (Q)
-W
hat’s our m
arket
share?
-Enoug
h ca
pacity to
meet demand
?
•Client cost structure
(Fixed / Variable)
-PP&E (Property,
Plant &
Equipment)
-Ove
rhead
-SG&A
-La
bour
-Materials
-IT / Systems
•Benchmarks
-How
do our costs
stack up vs. others?
•Supplier power
•Customer Segment
-W
hich segment do
we serve?
-Are the
y m
ost
profitable?
•Channels
-Current sales mix?
-Are the
y low
-cost
channels?
-Do the
se cha
nnels
attra
ct high marg
in
customers?
-Ince
ntive structures /
perform
ance
Sample framew
ork 2: Market entry; Inve
stment
and
new
techno
logy
Overview
Sample
Framew
ork
•Clie
nt is considering
entering
a new
market. Your goal is to reco
mmend
whe
ther or no
t they
sho
uld enter it
•Fo
r these types of ca
ses wha
t is common is tha
t the company
is co
nsidering
spend
ing m
one
y to get some kind of
eco
nomic return. In addition to seeing w
hether the decision is financially
soun
d, yo
u ha
ve to test:
-Like
lihood of im
plementation success based on industry cond
itions and
firm capabilities
-Do a risk assessment
31
•Why are they thinking of
market entry?
-Growth?
-Mature current m
arket?
-Re
sponse to competitor move
?•Resources and capabilities
-W
hat does the firm have
tha
t make
s them think the
y can be
successful?
�Bra
nd�Pa
tents
�Lo
cal e
xpertise/partne
rs
Strategic Logic
•New
market conditions
-Total R
eve
nues (R)
-Total P
rofits (Π)
-Growth (g)
•Competition in a new
market
-C1 m
arket share (s1
)-C2 m
arket share (s2
)-Etc.
•Economics
-Inve
stment required
-Ex
pected sha
re of reve
nues
-Ex
pected sha
re of profits
-Profitable? Pa
yback period?
Economics of decision
•Execution/entry barriers?
-Cha
nnel a
ccess?
-Re
gulatory barriers?
-Does firm
have
$ to m
ake
inve
stment?
•Risks
-Im
plementation risk
-Po
litical risks?
-Currency risk?
-Macroeco
nomic risk?
Risks / Others
Sample framew
ork 3: M&A deal
Overview
Sample
Framew
ork
•Clie
nt is considering
an M&A tra
nsaction
•Yo
ur goal is to reco
mmend
whe
ther or no
t to do the
deal
Strategic Fit
Deal Economics
Risk Assessment
32
•Basic deal rationale
-Cost syne
rgy-focus?
-Re
venue-syne
rgy
-focus?
-Ea
rly-stage co. being
acq
uired for techno
logy?
-Re
sponse to competitor
move
?•Type of deal
-Vertical integra
tion
-Horizo
ntal
-New m
arket entry via deal
-Diversification move
Strategic Fit
•Valuation (Know basic
DCF!)
-Re
venue &
Costs
-CAPEX
& W
orking Capital
-PBT (profit before tax)
-Ta
xes
-PA
T (profit after tax)
-Cost of ca
pital (R)
-Value =
(PA
T / r)
•Deal Price
•Synergies
-Cost and
Reve
nue
-New Firm value
•New
Value > Deal Price
Deal Economics
•Has the company done
acquisitions before?
-Capability test
•Organizational cultures
-Compatible (high % of
M&A deals destroy value
as cultures are not
compatible)
•Need to manage PMI (Post
merger integration process)
•Can investors not diversify
by themselves
Risk Assessment
Sample framew
ork 4: Outsourcing
Overview
Sample
Framew
ork
•Clie
nt is considering
outsourcing
an opera
tion
•Yo
ur goal is to reco
mmend
whe
ther or no
t to do the
outsourcing
•Do N
OT make
a reco
mmend
ation on co
st saving
s alone
–ex
plore areas like customer service
impact, p
remium customer segment im
pact etc
Strategic logic
Decision Economics
Risks / Others
33
•Why are they thinking of
outsourcing?
-Cost saving
s?-Market entry in
to BRIC/other
markets?
-Ea
rly-stage co. being
acq
uired for techno
logy?
-Re
sponse to competitor
move
?•Customers affected
-W
hich segments?
-W
hat are the
ir needs?
Strategic logic
•Current costs (in-house
operation)
•Outsourced costs
•Initial investment
required
-Outsourcing
consultants
-IT/System in
vestments
•Net cost savings
Decision Economics
•Risks
-Im
plementation risk? Po
litical risks?
-Currency risk?
•Partner capabilities
-Qua
lity of service
-Le
ad tim
e-Techno
logy
-Customer service
•Stakeholder mgmt.
-Stake
holders –
job loss issue
s etc.
-Mana
ge m
edia &
community
Risks / Others
IMPORTA
NT: Sometimes interviews might m
ake
a difference betw
een Outsourcing
and
Off-sho
ring
: form
er refers to fun
ctions tha
t are
done
outside firm’s boun
daries. Latter refers to outsource
d fun
ctions done
in a distant loca
tion such as India or Ireland
.
Sample framew
ork 5: Non-profit organiza
tions
Overview
Sample
Framew
ork
•Clie
nt is a non-profit organiza
tion
•Yo
ur goal is to solve the
specific problem for the organiza
tion
•Im
portant to display tha
t yo
u understand
tha
t no
n-profits have
fundamentally
different drive
rs
beside ju
st the
eco
nomics of a particular decision
Strategic Rationale
Deal Economics
Other
34
•Mission of non-profit
-Health
-Ed
ucation
-Po
verty alle
viation
-Etc.
-Re
sponse to competitor move
?•Stakeholder opinions and likely
reaction
-Dono
rs-“C
ustomers” –those w
ho bene
fit
from the
non-profit’s services
-Volunteers
-Pa
id staff
Strategic Rationale
•Planned investment
-W
hat will it co
st?
-Do w
e have
the
mone
y?
•Returns, if any
-W
ill w
e be getting back
mone
y?
-W
ill organiza
tion make
/ lose
mone
y on this?
Deal Economics
•Required capabilities
-Does no
n-profit ha
ve w
hat it
take
s to do this well?
•Risks
-How
will m
edia perceive this
decision?
-Critica
l to factor in
stake
holder reactions –
will
this alie
nate dono
rs, v
olunteers
etc?
Other
After deve
loping a framew
ork, p
roblem solving
requires sm
art follo
w-up que
stions &
insights
Examples
�Wide variety of decisions
businesses fa
ce
�W
here possible, y
ou will be
guided to quantify
improvement (i.e. to do
some basic applie
d m
ath)
•Sho
uld clie
nt enter new
market? W
hat is N
PV?
•Sho
uld clie
nt do M
&A? Post-m
erger integration risk?
•How
can client increase profits? Q
uantify in
crease.
•How
can client reduce costs? By how
much?
•Sho
uld clie
nt m
ake
new
investment? W
hat is N
PV?
•How
can client increase share? Q
uantify in
crease.
•How
can client grow revenues? Q
uantify in
crease.
•Sho
uld clie
nt outsource? Compare/va
lue alternative
s.
35
Some
solution
drivers
Strategic
analysis
Economic
analysis
Customers /
channels
Catch-all /
Other
•W
hat are industry trends?
•Info on competitors/m
arket shares?
•Strategic rationale und
erlying decision?
•W
hat products? Prices?
Volume?
•W
hat’s the
cost structure?
•Profit impact for client?
•W
hich customer segments?
•W
hat are customer needs / wants?
•W
hat channels? Sales force?
•Any
regional/geographic concerns?
•W
hat are the
risks?
•Any
regulatory issues?
•Any
organizational beha
vior issues?
�Not all issues/drive
rs w
ill
be releva
nt but list should
let yo
u quickly zone
in on
key to problem
�Fo
r these drive
rs, think
about:
a.Cha
nges ove
r time?
b.Compare clie
nt w
ith
competition etc.
�This is meant to be a
thoug
ht starter –no
t a
comprehe
nsive list
Tips for giving cases
One
sho
uld broadly follo
w the
se steps whe
n giving cases to fello
w students
�Re
ad the
case tho
roug
hly
�Don’t give a case tha
t yo
u ha
ve not
stud
ied yourself
Prepare yourself
�Make
the
experience as close to
real a
s possible
�Be serious during the
case eve
n if
you give the
case to your best friend
Make
it real
�Introduce the
problem statement
�Allo
w 3~5 m
insfor ca
ndidate to
gather he
r thoug
hts
Step w
ise approach
36
�Have
any
exhibits ready for use
during the
case
�Be ready to take
notes
�Be toug
h –test cand
idate’s ability
to deal with a negative
vibes from
interviewer
�Control the tim
e. D
o not ex
ceed
30-3
5 m
inutes for the case portion!
�Answer any
que
stions tha
t ca
ndidate m
ay have
�Guide the
cand
idate accord
ingly if
she is digressing from key
issue
Ask que
stions
Guide only w
hen ne
cessary
Provide hone
st feed back
�Best w
ay to m
ake
cases interesting
to provide nece
ssary hints ind
irectly
-for ex
by asking related que
stions
�Fo
llow the
case flow as provided in
the original form
at –It helps in
objective assessment
�Give out inform
ation only w
hen
right que
stion is asked
�Idea is to let ca
ndidate stretch
herself and
get a feel for real
situation
�Go back to your notes and
think
of
both streng
ths and
weakn
esses
�Be specific –W
hat was the m
istake
and
wha
t’s the
right approach
�Be Hone
st –
its in cand
idate’s best
interest to m
ake
mistake
with yo
u and
learn from the
m
Remember that there is no one answ
er to any case! A candidate can be creative enough to take a new
approach towards the problem.
Other references: Case prep
�Th
ere are a num
ber of other resource
s to learn
about case prep. W
e foun
d the
follo
wing
particularly useful:
�Kello
gg 2004 Casebook –Pa
ges 5 to 44
37
Kello
gg 2004 Casebook –Pa
ges 5 to 44
�Ro
ss 2007 Casebook –Pa
ges 3 to 25
�Older W
harton Casebooks
Remember, ca
ses are about problem-solving
abilities, not whe
ther yo
u are an industry expert
Background
•Case in
terviews sp
an a broad rang
e of industries. You may encounter eve
rything from
Fina
ncial S
ervices to M
ining to Education to Form
ula 1
•Those of yo
u who
have
not worked as co
nsultants before w
ill likely not ha
ve any
background in
most of these in
dustries
•This document can give you a very high level view of some ‘typical’ in
dustries that
cases focus on
•Yo
u MUSTattend
the
ind
ustry primer series led by partne
rs from various firms as they
will capture key
insights and
latest trend
s in tho
se in
dustries that tend
to be popular in
38
Important
Warning!
Our belief
cases
•W
e belie
ve tha
t ha
ving
a very basic overview of an industry helps to more
effectively tackle a case
•At the very le
ast it he
lps yo
u co
nstruct a fra
mework tha
t is m
ost applicable to tha
t particular problem contex
t. Examples:
-Consum
er goods: branding is an important driver of success
-Pha
rma: generics manufacturers pose a major competitive threat
•Do not attempt to master industry specifics or memorize industry data
•Yo
u primary objective ove
r the nex
t few w
eeks/months is to master case-based
problem solving… not to become an industry expert
• Spend
ing a little tim
e inform
ing yourself about the
basics of a few key
ind
ustries should
improve
your problem-solving ability. The
follo
wing pages will help in this end
eavo
r.
Airlin
es
•Airlines provide air tra
nsport services for passeng
ers and
/or freight
Ove
rview /
Products &
Services
•Consolid
ation -
multiple high-profile m
erg
ers
•Fa
re competition –airlines co
mpete to und
ercut one
ano
ther on co
mpetitive
routes
•Lo
w-cost ca
rriers -
rece
nt entra
nce by smalle
r ca
rriers trying to replicate Southw
est Airlines’ lo
w-cost m
odel
Key
Trend
s
39
•Establishe
d le
gacy
carriers (e.g., Delta, A
merica
n, United) co
mpete w
ith each other and
with low-cost opera
tors on
multiple domestic routes; price
is usua
lly the
major co
mpetitive
factor. Some domestic carriers also opera
te
internationa
l routes, placing
the
m in co
mpetition with ove
rseas airlines
Competitive
La
ndscape
•Individua
l consum
ers
•Corp
ora
tions/sm
all businesses
•Trave
l web sites/reselle
rsCustomers
•Internet –airline w
ebsites, online ticke
t reselle
rs•Te
lepho
ne –
airline call ce
nter agents
•Trave
l agents
•Ove
r-the-counter –walkup
s at airports
Cha
nnels
•Reve
nue: Ticket reve
nues, exce
ss/ove
rsize baggage fees, food and
beve
rage sales
•Costs: VC: fuel, food and
beve
rage, g
round crew/ho
urly employees FC
: aircraft le
ases, airport gate leases, IT
/admin
costs, salaried employees (i.e., pilo
ts)
Profit
Sum
mary
Consum
er Pa
ckaged G
oods (CPG)
•CPG companies provide consum
ers w
ith a rang
e of ho
useho
ld products etc. soaps, pet supplie
s, sna
ck foods etc.
Ove
rview /
Products &
Services
•Lifestyle/co
nsum
er beha
vior e.g. a
ging population, social n
etw
orks, online adve
rtising, g
o green, eco
nomic downturn
•New products critica
l to succe
ss•Completely new, slightly improve
d, p
roduct line extensions
•In addition, companies driving
‘outside-in’ product inno
vation (from outside of R&D division)
•Product mix and
Bra
nd m
ana
gement are critica
l to C
PG companies
•Em
erg
ing m
arkets –
India &
China
–seen as im
portant source
of future growth
Key
Trend
s
40
•Proctor and
Gamble (P&G); Unilie
ver, C
lorox, K
ello
ggs, Campbell’s, Frito Lay, ConA
gra
Foods, C
olgate-Palm
olive,
L’Oreal, Estee Laud
er
Competitive
La
ndscape
•Individua
l Customers
•Disco
unt W
holesa
lers (Sam’s Club, C
ostco
)•La
rge box retail (W
al-mart ,T
arg
et, Safeway)
•Convenience Retail (7-1
1, R
ite-A
id)
Customers
•Retail
•W
holesa
le•Direct (web and
mail ord
er)
Cha
nnels
•Reve
nue : V
olume of goods sold; Price
premium on bra
nded goods
•Cost s: Bra
nding, S
ales and
Marketing
, COGS (co
mmodity costs –ra
w &
packaging m
aterial)
Profit
Sum
mary
Fina
ncial S
ervices: Consum
er Bank
ing
•Provide deposit-based services, credit card
s, consum
er loans, p
ayments etc.
•Broad rang
e of fina
ncial products are sold by banks who
se m
ain function is to colle
ct m
one
y from tho
se w
ho have
sa
ving
s and
loan mone
y to tho
se w
ho need it.
Ove
rview /
Products &
Services
•Credit crisis / financial meltdown threatene
d solvency of industry due
to illiquid assets difficult to value
•Consolid
ated, m
ature in
dustry w
ith primary growth throug
h acq
uisitions
•Demogra
phic shift (baby boomer aging) creating
larg
e m
arket for retirement products
•Offshoring
of va
rious functions to reduce expenses (e.g. call ce
nters, b
ack office functions)
Key
Trend
s
•La
rge nationa
l players (Bank of America
, Citi) compete w
ith regiona
l banks.
•La
rgest players services extend
well beyond
commercial banking to investment banking, securitiza
tion, proprietary
Competitive
41
•La
rgest players services extend
well beyond
commercial banking to investment banking, securitiza
tion, proprietary
trading, e
tc w
ith services that are increasing
ly opaque
Competitive
La
ndscape
•Individua
l consum
ers
•High ne
t worth co
nsum
ers (priority segment)
•Small/
medium businesses witho
ut sufficient size for larg
er inve
stment banking financing services
Customers
•Still larg
e face
-to-face
presence w
ith bank bra
nche
s, telle
rs, e
tc•Increasing
use of ATM
services, online banking
•Banks increasing
ly offer credit card
s, home loans, e
tc as means to increase asset base
Cha
nnels
•Reve
nue: N
et reve
nue is the spread betw
een bank’s borrowing cost and
the rates charg
ed to borrowers; fees
•Costs: O
verhead (bra
nche
s, administration, complia
nce); Salaries; Bad D
ebt Ex
pense
Profit Sum
mary
Fina
ncial S
ervices: In
surance
•Insura
nce is fundamentally
about und
erw
riting
various types of risks. Customers m
ake
regular payments (premiums) to
the in
surer for co
vera
ge w
hen unforeseen eve
nts, e.g. car crash; fire damage; death; credit defa
ult) occur
•The in
surer inve
sts premiums to gene
rate sufficient in
come to m
atch future assets w
ith future liabilities
Ove
rview /
Products &
Services
•Credit crisis / financial meltdown threatene
d solvency of industry due
to illiquid assets difficult to value
•One
of the global leaders (AIG
) na
tiona
lized in
credit crisis, empha
sizing
the
importance of monitoring
investment
portfolio
•US nationa
l he
althcare policy cha
nges co
uld completely cha
nge the
land
scape of the health insura
nce m
arket
•Companies focused on mana
ging risk and
controlling
costs
Key
Trend
s
•Seve
ral larg
e, integra
ted players opera
ting
across m
ultiple parts of the ind
ustry (AIG
, Prudential, etc)
Competitive
42
•Seve
ral larg
e, integra
ted players opera
ting
across m
ultiple parts of the ind
ustry (AIG
, Prudential, etc)
•Some niche
players focusing
in a particular segment (Geico)
Competitive
La
ndscape
•Individua
l consum
ers seeking
to m
ana
ge risk at ho
me / on the road
•Small/
medium/larg
e businesses seeking
to m
ana
ge risks of property damage, liability, etc
Customers
•Insura
nce agents (sales force) still m
ana
ge m
uch of the front-end
sales proce
ss to businesses/individua
ls•Online sales beco
ming easier with better websites and
aggressive m
arketing
•Direct m
arketing
to employees via in-office demonstrations (Aflacsupplemental insurance, etc)
Cha
nnels
•Reve
nue: N
et reve
nue is the spread betw
een premiums co
llected and
claim
s/payments made ove
r time
•Costs: O
verhead (administration, complia
nce); Salaries; Sales Commissions; Marketing
Profit Sum
mary
Manu
facturing
Ove
rview /
Products &
Services
Key
Trend
s
•Manufa
cturing sector includ
es co
mpanies that are in
the
business of mechanica
l, phy
sica
l, or chemical transform
ation of
materials/substances/co
mpone
nts into new products
•Sub
sectors in
clud
e: textile, p
aper, che
mical, co
mputer/electronics, tra
nsportation equipment, machinery
•Manufa
cturing is highly cyclical in m
ost sectors
•US m
anufa
cturing, traditiona
l streng
th of US eco
nomic growth, ha
s suffered due
to highe
r co
st structure (labor in m
any
ca
ses) as co
mpanies outsource
manufa
cturing to lo
wer-co
st regions of the w
orld
•Gene
ral M
otors, C
hrysler, Ford
, Toyota, Hond
a
43
Competitive
Land
scape
Customers
Cha
nnels
Profit Sum
mary
•Gene
ral M
otors, C
hrysler, Ford
, Toyota, Hond
a•Boeing, A
irbus
•GE, Phillips, Siemens
•Hone
ywell, Dow, C
orning
•Varies by ind
ustry, can be end
-consum
er, O
EM (original e
quipment m
anufa
cturer) –
B2B
•Automotive
: Primarily end
consum
er; M
etal: airplane
, automotive
, tool/die m
anufa
cturing; Apparel: End
Consum
er;
Plastics: medical industry, machinery m
anufa
cturing; Infra
structure/Machinery: Gove
rnment, Utilities, Rail opera
tors;
Che
micals: pha
rmace
utical, proce
ss techno
logy, semicond
uctor manufa
cturing
•Retail (A
utomotive
, Apparel –
industries whe
re end
-consum
er is primary customer)
•W
holesa
le –
B2B (Plastics, Che
micals, P
harm
ace
uticals, Metal, Machinery, Semicond
uctors, Computer Hard
ware –
Industries whe
re the
customer is ano
ther business)
•Reve
nue: diversity of customers, v
olume (automotive
: high, airplane
manuf: low), emerg
ing m
arkets, a
djace
nt ind
ustries,
new techno
logies/products, e
nd-consum
er demand
s•Cost: outsourcing
(potential qua
lity), proce
ss efficiency, sup
ply cha
in m
ana
gement (inve
ntory turns), la
bor (unions), raw
materials/co
mmodities, cha
nnel mana
gement (ie. A
uto dealers), m
arketing
, ca
pital inve
stment
Media
•The m
edia sector includ
es print, aud
io and
video content gene
ration and
dissemination. The various sub
sectors are
unique
yet ha
ve m
any
ove
rlapping attributes. Primarily an adve
rtising-sup
ported in
dustry, the
media space
face
s unprece
dented cha
lleng
es as online m
edia continue
s to disrupt traditiona
l business m
odels.
Ove
rview /
Products &
Services
•The digitization of media has required considera
ble capital investment by m
edia content gene
rators. The rapidly
improving
speed of the w
ired in
ternet and
wireless device
s creates que
stions about how m
edia w
ill ultim
ately be
consum
ed –
via internet, via cable, via m
obile
? Service providers m
ay converg
e ove
r time. The
prolifera
tion of
“free” co
ntent has ha
rmed content gene
rators but created opportunities for ne
w cha
nnels.
Key
Trend
s
44
•Varies by sub
sector. Media players gene
rally
compete for aud
ience interest in
ord
er to gene
rate m
ore adve
rtising
reve
nue. La
ndscape is very competitive
with a few m
ajor players owning
integra
ted portfolio
s across the
entire
media unive
rse (Disne
y, V
iaco
m, News Corp
, etc)
Competitive
La
ndscape
•W
hile in
dividua
l co
nsum
ers seem to be the
customers, in reality consum
ers are part of the product. Aud
ience reach,
rating
s, circulation measures are utilized to sell adve
rtising. Potential adve
rtisers are the
real customers in
tra
ditiona
l models altho
ugh individua
l co
nsum
ers m
ay be the
customers for some sub
scription models.
Customers
•Print: tra
ditiona
l paper product & online / m
obile
•Te
levision: tra
ditiona
l broadca
st / cable / satellite &
online / m
obile
•Movies: tra
ditiona
l the
atres, rentals &
online (to a growing extent)
Cha
nnels
•Reve
nue Drive
rs: adve
rtising, sub
scriptions in
some cases (the
re is talk about m
oving
to highe
r subscription model for
premium content)
•Cost Drive
rs: V
C: p
roduction co
sts (salaries of staff, techno
logy); FC: ca
pital co
sts (studios, printing presses);
ove
rheard
, marketing
& adve
rtising
Profit
Sum
mary
Pha
rmace
uticals
•Bra
nded/ Ethical/ O
riginator drug producers produce original p
atent-p
rotected (for a certain period of time) drugs
for human and
animal diseases
•Gene
ric drug producers produce ‘copy-cat’ drugs (w
ith the same m
edical result) at a lower deve
lopment cost w
hen
the originator drug’s patent expires
Ove
rview /
Products &
Services
•Price
competition from gene
ric drug m
anufa
cturers
•Increasing
pressure from health insura
nce companies and
hosp
ital cha
ins to reduce price
s•
R&D cha
lleng
e of find
ing high reve
nue drugs (‘Blockbusters’ h
ave
annua
l sa
les > $1B)
•Lo
ss of patent on ke
y drugs for many
larg
e Pha
rmaCos. around 2010-1
1
Key
Trend
s
•Key succe
ss factor co
mes down to one
thing
: products
45
•Key succe
ss factor co
mes down to one
thing
: products
•Products targ
et va
rious treatm
ent areas (TA): cancer, card
iova
scular, psychology etc
•US, E
urope and
Japan are la
rgest m
arkets altho
ugh emerg
ing m
arket opportunity (eg. China
) is growing
•Fo
od &
Drug Autho
rity (FD
A) ne
eds to approve
all drugs before sale
Competitive
La
ndscape
•Doctors w
ho prescribe the
se m
edicines
•Insura
nce companies that pay for them
•Patients/co
nsum
ers w
ho need the
se drugs/medicines
•In some emerg
ing m
arkets, v
arious officials (ho
spital, provincial and
centra
l gove
rnment) may control channel access
Customers
•Ove
r the counter (“OTC
”, can be sold w
itho
ut prescription): R
etail outlets –
CVS, W
algreens; Mail ord
er
•Prescription drugs: Hosp
itals; pha
rmacies
•B2B: D
istributors / interm
ediaries ; ho
spitals; pha
rmacies
Cha
nnels
•Reve
nue Drive
rs: S
ize of sp
ecific treatm
ent area / leve
l of co
mpetition; Buy
-in from doctors tha
t will prescribe; Speed
to m
arket/ expertise in
difficult products (for gene
rics)
•Cost Drive
rs: V
C: sales and
marketing
(doctor visits, sp
onsored studies); FC
: R&D (drug disco
very, form
ulation, clinical
trials; a lot of this is no
w outsource
d; gene
ric co
mpanies only need to perform
clinical trials)
Profit
Sum
mary
Priva
te Equity (Go/No G
o Investments)
•Eq
uity tha
t is not pub
licly tra
ded
•Common form
s includ
e Leve
raged Buy
outs (LBOs), V
enture Capital (VC), M
ezzanine
Capital, Distressed In
vestments,
and
Growth Capital
Ove
rview /
Products &
Services
•La
rger amounts of equity required for each deal
•Potential wave
of deals failing
in the coming years
•Buy
ing and
selling
of current PE co
mmitments likely to increase ove
r the next few years
•Growing need for PE firm
s to have
cash m
arg
ins
Key
Trend
s
•Deal v
olume has sharp
ly declined rece
ntly
Competitive
46
•Deal v
olume has sharp
ly declined rece
ntly
•La
rge (e.g. KKR, C
arlyle, B
lackstone
, TPG), M
id ($250M to $5B), and
Small Market PE shops
Competitive
La
ndscape
•New customers of PE deals m
ay be corp
ora
tions
•Institutiona
l investors
•Customers can ra
nge from small fa
mily
-owne
d companies to larg
e corp
ora
tions
Customers
•Le
vera
ged Buy
outs: co
ntrolling
interest (of equity) is acq
uired throug
h high borrowing
•Venture Capital: inve
stors give cash in exchang
e for shares/co
ntrol o
f inve
sted company
; typical w
ith start-ups
•Mezzanine
Capital: fina
ncing tha
t co
ntains equity based options and
sub
ord
inated debt (e.g. co
nvertible loans)
•Growth capital: fina
ncing to expand
, restructure, o
r enter ne
w m
arkets w
ith little cha
nge in mana
gement
•Distressed In
vestments: in
vesting in fina
ncially
stressed companies
Cha
nnels
•W
hat fina
ncial leve
rs can be pulled to m
ake
this more profitable (va
rious w
ays to access cash, cap structures, etc)?
•W
hat opera
tiona
l leve
rs can be pulled to m
ake
this deal b
etter (m
ore efficiencies, new m
ana
gement etc)?
•W
hat return on inve
stment is required to m
ake
this inve
stment w
orthw
hile?
•W
hat is the
tim
eframe of return on this investment?
•Is the
re a better (m
ore profitable) inve
stment w
here m
one
y sho
uld be spent?
Profit Sum
mary
Techno
logy
•The techno
logy ind
ustry broadly consists of the systems (PCs, servers), semicond
uctors, communications equipment,
software, internet and
IT services subsectors.
Ove
rview /
Products &
Services
•Increasing
M&A A
ctivity: A
s growth has slowed in
certain sub
sectors (systems, software), le
ading vend
ors have
utilized
M&A for growth, o
ffering
customers a one
stop sho
p proposition (ieHP/Compaq, O
racle/Peoplesoft)
•Co-opetition: Leading vend
ors co-exist as co
mpetitors and
colla
bora
tors. This is a key cha
racteristic of the ind
ustry
and
has beco
me eve
n more so as players m
ove
into adjace
nt sub
sectors. Ex
amples includ
e: Microsoft/Intel,
Ora
cle/IBM
•Cloud
Computing: O
ffering
IT as outsource
d utility has im
plications across sub
sectors
Key
Trend
s
•Systems: IB
M, Hewlett-Packard
47
•Systems: IB
M, Hewlett-Packard
•Semicond
uctors: Intel, Samsung
, Toshiba, T
exas Instruments
•Communications Equipment: Cisco
, Nokia, Samsung
•Software: M
icrosoft, IBM, Ora
cle / Internet Software: G
oogle, Yaho
o!, Microsoft
•IT Services: Accenture, IBM, HP/ED
S
Competitive
La
ndscape
•Releva
nt splits:
•By size: Enterp
rise, S
MB (sm
all/
medium businesses), R
etail
•By type: B
usiness vs. consum
er
Customers
•Varies by customer focus. Business/Enterp
rise-focused players tend
to rely on direct sales force.
SMB/Retail/
Consum
er tend
to rely on indirect cha
nnels.
Cha
nnels
•Systems: Lower marg
in (COGS m
ana
gement key to profitability)
•Semicond
uctors: H
igh fixed costs (capex) and
highly cyclical; m
anufa
cturing utilization
•Communications Equipment: Manufa
cturing utilization
•Software: license/maintena
nce versus sub
scription service m
odel; rene
wal rates; high gross m
arg
ins, but high R&D
expenses
•IT Services: staff utilization; reve
nue per employee
•Internet: reve
nue per click
Profit
Sum
mary
Teleco
mmun
ications / M
obile
•Te
leco
mmunications is a m
ammoth ind
ustry, comprising
companies that make
hard
ware, p
roduce software, a
nd provide
services. Hard
ware in
clud
es a vast rang
e of products tha
t ena
ble communication across the
globe, such as broadca
sting
satellites, telepho
ne hand
sets, fiber-optic ca
bles etc. Services includ
e running
the
switches that co
ntrol the pho
ne system,
Mobile
and
Internet access, a
nd configuring priva
te netw
orks by w
hich internationa
l corp
ora
tions cond
uct business.
Software m
ake
s it all work, from send
ing and
rece
iving e-m
ail to relaying satellite data to controlling
telepho
ne
switching equipment.
Ove
rview /
Products &
Services
•The in
dustry has grown and
evo
lved at an incredible pace
for the last 20 years. M
obile
pho
ne pene
tration
approaching 50% globally
; Mobile
broadband
sub
scribership has topped 200 m
illion worldwide; rollo
ut of 3G
netw
orks in emerg
ing m
arkets causing m
obile
broadband
sub
scribers to outnumber fixed-line broadband
sub
scribers.
•Many
househo
lds are giving up the
ir land
line, preferring to use a cell pho
ne or VoIP services (Sky
pe, Vona
ge) on their
computer.
Key
Trend
s
48
•La
ndscape is very competitive
and
wireless carriers have
und
erg
one
a w
ave
of co
nsolid
ation: In rece
nt tim
es, C
ingular
acq
uired AT&
T W
ireless; Sprint joined N
extel; and
ALLTEL acq
uired W
estern W
ireless.
•Big 4 cellular players are AT&
T, V
erizo
n, T-M
obile
and
Sprint N
extel
•Cable companies attempting
to capture w
ireless customers throug
h wireless service offering
s of their own (or in
partne
rship) e.g. C
omca
st in
troducing W
iMAXservice in
Portland
, Ore; COX w
ill offer ce
ll pho
ne service late ’0
9.
Competitive
La
ndscape
•Individua
ls, companies and
gove
rnments.
Customers
•Carrier-owne
d stores and
leading retaile
rs like
Wal-Mart, R
adioSha
ck and
Best Buy
are significa
nt cha
nnels for
mobile
pho
ne sales and
service.
•Major ca
rriers have
online stores for pho
ne and
service purchases. The
y are joined online by all of their retail
competitors (Best Buy
, W
alm
art, R
adioSha
ck) as well as amazo
n.co
m, wireless specialty retaile
rs like
letstalk.com and
W
irefly.
Cha
nnels
•Reve
nue Drive
rs: Sub
scriptions, d
ata services (SMS, email and
internet access on ce
ll pho
nes), mobile
adve
rtising, a
pp
stores.
•Cost Drive
rs: V
C: m
arketing
& adve
rtising, salaries; FC: ca
pital co
sts (equipment, infra
structure –
cell towers, n
etw
ork
maintena
nce, stores); ove
rhead
Profit
Sum
mary
Contents
�Introduction
�Consulting Industry Guide
�Industry O
verview
�Firm
Ove
rviews (10 Firms)
Section
3 6
Page #
49
�Firm
Ove
rviews (10 Firms)
�Interview Preparation
�Interview O
verview –
Fit + Case
�Sample Framew
orks
�Industry Sna
pshots
�Practice Cases
�14 Practice C
ases
�Links to Other Cases
�Cases from Firm W
ebsites
�Sug
gested C
ases from other Casebooks
18
50
126
List of Practice Cases
�Case 1: McK
insey –
Mex
ico C
ity Airport Taxi Services
�Case 2: Bain –
Franchising
Gyms
�Case 3: BCG –
Greeting
Card
Manu
facturer
�Case 4: Bain –
UK A
sset Mana
ger
�Case 5: McK
insey –
Mighty M
ining Company
�Case 6: Bain –
The Reel Deal
Case Description
51
56
63
68
74
79Page #
50
�Case 7: Le
novo
–Pub
lishing
Company
�Case 8: BCG –
Retirement Apartment C
omplexe
s
�Case 9: Bain –
Big Yello
w Bus
�Case 10: A.T. Kearney
–Car Company
�Case 11: Bain –
Blood Bank
�Case 12: McK
insey -
EasyNAV
�Case 13: A.T. Kearney
–Manny’s M
anu
facturing
�Case 14: Bain –
Zenith Hotels
82
86
92
98
102
106
115
120
Case: Mex
ico City A
irport Taxi Services
McK
insey, Round: 1
Ove
rview for interviewer
Inform
ation to be provided upfront (ha
nd cand
idate
attached exhibit)
The autho
rities of the M
exico C
ity airport have
decided to issue
2,500 new
taxi perm
its for $1,000 each. Th
ese perm
its autho
rize
a
taxi to service arriving passeng
ers. Yo
ur clie
nt has a taxi fleet in the
city but does no
t service the
airport. He has ex
cess
capacity
(meaning
he has ca
rs and
drive
rs ava
ilable). He has asked you to determ
ine if he
sho
uld buy
tho
se new
perm
its. If so, ho
w m
any
should he buy
?
Problem statement narrative
51
This is a profitability case, so the
form
ula P =
R-C
sho
uld be
broug
ht up by soon in the
discussion and
guide any
framew
ork proposed by the
cand
idate.
Use the
discussion to guide cand
idate tow
ard
s determ
ining
the possible reve
nue to be m
ade and
to talk about costs to
determ
ine profitability.
After the cand
idate presents his/he
r framew
ork, give
cand
idate the
hand
out containing inform
ation ne
eded to
solve the
case. Th
e cha
lleng
e w
ith the hand
out is that it
contains a lot of inform
ation which the
cand
idate w
ill need to
proce
ss quickly to be able to use throug
h the case.
Case Type: Profitability / O
perations
Case Style: Command
& Control
All the inform
ation is given to cand
idate on the hand
out. If
cand
idate asks data again refer him/he
r to the
hand
out.
•Airport hand
les 42 m
illion passeng
ers yearly.
•The
re are 5,500 taxis operating
in the airport.
•On ave
rage a taxi take
s 60 m
inutes to drive
passeng
er and
return to airport for ne
xt pick up
.•O
n ave
rage a passeng
er pays $200 cab fare via
regulated rates.
•On ave
rage 40% of domestic flig
hts passeng
ers and
80%
of internationa
l flights passeng
ers use taxis.
•30% of daily
demand
occurs betw
een 6:00 a.m
. and
10:00
a.m
., 40% occurs betw
een 6:00 p.m
. and
10:00 p.m
.•A
ssum
e each passeng
er uses one
cab.
•On ave
rage each taxi requires $8,000 yearly on
maintena
nce.
•Taxi d
rive
rs keep 50% of the fare.
attached exhibit)
Potential Issue Tree &
Approach to Solving the
Case
Key
elements of ana
lysis to solve the
case
Estimate the
num
ber of passeng
ers
arriving each day
Estimate passeng
ers tha
t will require
taxis
Is this demand
being m
et?
Estimate daily
demand
for taxis
Estimate possible reve
nue
List possible costs: perm
its, car
maintena
nce, drive
rs salary, gas, car
repairs, etc
P =
R –
CEstimate possible profits
Demand
not being m
et daily
: 500 passeng
ers in the m
orning
+ 8,000 passeng
ers in the eve
ning
= 8,500 passeng
ers needing service
x $200 =
$1,700,000 daily
reve
nue
52
Is this demand
being m
et?
P =
R –
CProfit = Reve
nue –
maintena
nce repairs –
drive
r co
mmissions –
perm
it cost
P =
571,200,000 –
($8,000 x 2,000
taxis –
285,600,000 –
($1,000 x 2,000
taxis) = 267,600,000
Possible follo
w-up and
guidance
to in
terviewer
Possible follo
w-up and
guidance
to in
terviewer
Possible follo
w-up and
guidance to
interviewer
Tell ca
ndidate to consider only perm
its
costs, car maintena
nce and
drive
rs
salaries (the
num
bers for these costs were
given to cand
idate at the beginning
of
the case interview on a piece
of paper)
x $200 =
$1,700,000 daily
reve
nue
Yearly Reve
nue =
$571,200,000
See follo
wing slid
e.
Assum
e tha
t passeng
er vo
lume is
equa
lly distributed throug
h the year /
week/ day.
Assum
e tha
t 50% of passeng
ers are
from domestic flig
hts and
50%
internationa
l flig
hts.
Que
stion 1 –
Math
Estimate the
num
ber of passeng
ers arriving each day:
•42million/
12 m
onths =
3.5 m
illion passeng
ers m
onthly
•3.5 m
illion passeng
ers / 4 w
eeks =
875,000 passeng
ers w
eekly
•875,000 passeng
ers / 7 days = 125,000 passeng
ers daily
Estimate passeng
ers tha
t will require taxis:
•62,500 domestic passeng
ers x 40% of domestic use taxis =
25,000
Ove
rall approach, g
ood sho
rtcuts &
solution
Inform
ation ne
eded to solve case is
given on the hand
out, which sho
uld have
been given to cand
idate early in the
caseInform
ation to provide up front
Math Q
uestion
Estimate the
daily
demand
for taxis. Is this demand
being m
et? If not, how
many
more taxis are needed?
53
•62,500 domestic passeng
ers x 40% of domestic use taxis =
25,000
•62,500 internationa
l passeng
ers x 80% of internationa
l use taxis =
50,000
•Total p
asseng
ers demand
ing taxis daily
= 75,000
•6am –
10am =
22,500 passeng
ers need a taxi (=
75,000 x 30%)
•6pm –
10pm =
30,000 passeng
ers need a taxi (=
75,000 x 40%)
•Non-peak ho
urs = 22,500 passeng
ers need a taxi (=
75,000 x 30%)
Is this demand
being m
et?
•From 6 to 10am, each taxi make
s 4 trips (ave
rage trip take
s 60min). If w
e have
5,500 taxis operating
the
n ca
pacity serves 22,000 passeng
ers. Ex
cess demand
=500
passeng
ers. 250 domestic x 40% =
100 passeng
ers +
250 internationa
l x 80% =
200 passeng
ers for a total of 300 passeng
ers needing a taxi / 4 rides per ho
ur =
125 taxis needed to m
eet ex
cess demand
.•
From 6 to 10pm, using the
same logic capacity m
eets 22,000 passeng
ers: 5,500 taxis
operating
thu
s ex
cess demand
= 8,000 passeng
ers (ne
ed 2,000 taxis).
•During non-peak ho
urs (16 hours) 22,500 passeng
ers w
ill need a taxi. W
ith 5,500
taxis in operation there is ca
pacity to serve 88,000 passeng
ers during tha
t time. In
that time period the
re is ex
cess capacity.
To service demand
not being m
et in the
morning and
night periods 2,000 taxis are required.
Provide in
form
ation if asked
Assum
e tha
t passeng
er vo
lume is equa
lly
distributed throug
h the year.
Assum
e tha
t 50% of passeng
ers are
from domestic flig
hts and
50%
internationa
l flig
hts.
Assum
e all ex
isting
taxis can run during
peak ho
urs and
tha
t maintena
nce is a
minim
al tim
e commitment.
Mex
ico City A
irport Taxi Fa
cts & A
ssum
ptions
�Airport hand
les 42 m
illion passeng
ers yearly
�Th
ere are 5,500 taxis operating
in the airport
�On ave
rage a taxi take
s 60 m
inutes to drive
passeng
er and
return to
airport for ne
xt pick up
.
�On ave
rage a passeng
er pays $200 cab fare via regulated rates
54
�On ave
rage a passeng
er pays $200 cab fare via regulated rates
�On ave
rage 40% of domestic flig
hts passeng
ers and
80% of
internationa
l flights passeng
ers use taxis.
�30% of daily
demand
occurs betw
een 6:00 a.m
. and
10:00 a.m
., 40%
occurs betw
een 6:00 p.m
. and
10:00 p.m
.
�Assum
e each passeng
er uses one
cab
�On ave
rage each taxi requires $8,000 yearly on maintena
nce
�Ta
xi drive
rs keep 50% of the fare
Sample Reco
mmend
ation
Clie
nt sho
uld buy
2,000 perm
its based on the potential ye
arly profit of $267,600,000 from excess
demand
at the airport.
Reco
mmend
ation
Possible retalia
tion from other tax companies, such as entering
other markets w
here the
clie
nt operates
and
stealin
g clie
nts. Th
ere is no gua
rantee airport w
ill not allo
w additiona
l perm
its in the
future w
hich
could in
crease the
num
ber of taxis at the airport.
Risks
55
There is no gua
rantee tha
t all ex
cess demand
will be
serviced by clie
nt cars, esp
ecially
beca
use if he
is
buy
ing only 2,000 perm
its, ano
ther taxi co
mpany
can
buy
the
remaining 500 perm
its and
compete for the
exce
ss demand
tha
t isn’t being currently served.
An option would be to buy
all 2,500 perm
its, and
using only 2,000 taxis (blocking ano
ther tax company
from buy
ing 500 perm
its) tha
t would reduce profits to
$267,100,000 (just sub
tract from profits the
cost of
buy
ing the
additiona
l 500 perm
its).
BONUS
Case: Franchising
Gyms
Bain, R
ound 2
Your clie
nt is a gym franchisor. The
clie
nt focuses on sm
all gyms (approxim
ately 3000 squa
re feet) w
ith stand
ard
fitne
ss equipment,
but no classes or lockers. The
gyms are typically
loca
ted in loca
l strip m
alls. The
y are open 24 hours per day; members enter the
gym via an access card
. Staffing at the gym is minim
al to none
(depend
s on each ind
ividua
l franchisee).
This business is growing very rapidly. How
eve
r, there is no
w a new
competitor offering
a sim
ilar franchising
opportun
ity. To m
ake
our clie
nt’s franchising
opportun
ity m
ore attractive, our clie
nt w
ould like
your inp
ut on ho
w the
profitability of its franchises ca
n be
improve
d.
Problem statement narrative
56
This is a straight-forw
ard
case. An ideal walk-throug
h (presented in the sub
seque
nt slid
es) w
ould include the
follo
wing:
•Breake
ven ana
lysis based on un
derstand
ing of
reve
nue and
cost structures
•Brainstorm
ing of ne
w reve
nue opportun
ities
•Brainstorm
ing of co
st cutting
opportun
ities
•Ana
lysis of pros and
cons of market segments
•Conclusion / Reco
mmend
ation
Case Type: VariousOve
rview for interviewer
See follo
wing slid
es for furthe
r detail.
Inform
ation to be provided upon reque
st
improve
d.
Potential Issue Tree &
Approach to Solving the
Case
Cand
idate m
ay propose ana
lysis / action in:
•Key
reve
nue streams
•Key
fixed and
variable costs
Profit Structure (Re
v and
Cost)
•Size of the m
arket
•Growth expectations
•Key
customer segments and
differentiating
qua
lities
Market Opportunity
•Key
competitors
•Amoun
t of co
ncentration or
fragmentation
•By customer segments
•Key
differentiating
features
Competitors
57
•Key
differentiating
features
Possible follo
w-up and
guidance to interviewer
Possible follo
w-up and
guidance to interviewer
Possible follo
w-up and
guidance to interviewer
•Sho
uld lead to nex
t slide (the m
ath
que
stion)
•Ove
rall market ex
pected to grow
slightly faster than GDP given
healthier liv
ing trend
s•$10 billion in reve
nue last year
•Re
leva
nt segmentation (loca
tion):
•Urb
an
•Sub
urban
•Rural
•Key
competitors offer essentially
the same franchising
opportun
ity
client does
•Not a key
asp
ect of the case;
deempha
size
Que
stion 1 –
Breake
ven Ana
lysis
How
many
members m
ust each gym loca
tion ha
ve to breake
ven? Th
is is a key
metric for potential
franchisees
Que
stion
•Identify the
reve
nue per member, fixe
d and
variable costs for a gym
•Monthly Reve
nue
•Membership due
s: $40 / m
onth
•Vend
ing m
achines (net): $5 / m
onth
Ove
rall approach, d
ata required and
solution
•Guide cand
idate to the
approach
•W
alk throug
h each category (reve
nue
per member, fixe
d and
variable costs),
brainstorm
ing each of the potential
Inform
ation to provide up front
58
•Vend
ing m
achines (net): $5 / m
onth
•Pe
rsona
l training (ne
t): $15 / m
onth
•Total: $60 / m
onth
•Variable C
osts: N
one
(or too m
inim
al to m
atter)
•Fixe
d Costs
•Re
nt: $
24 / squa
re feet / year (or $6000 / m
onth)
•Eq
uipment: $
144K initial co
st, 3 year depreciation, $0 salvage value
(or $4000 / m
onth)
•La
bor: 40 hours / w
eek @
$20 / hour (or $3200 / m
onth)
•Utilities: $400 / m
onth
•Franchise fee: $300 / m
onth
•Marketing
: $100 / m
onth
•Total: $14000 / m
onth
•Breake
ven ca
lculation
•Contribution marg
in: $60 / m
onth
•Fixe
d Costs: $14000 / m
onth
•# of members to breake
ven = $14000 / $60 =
233
brainstorm
ing each of the potential
associated line items
•Do N
OT automatica
lly provide each
piece
of data (such as sa
lvage value for
depreciation)
•Po
tentially
tricky parts:
•Using
consistent m
etric
(monthly, yearly, etc.)
•Re
venu
e =
contribution
marg
in beca
use the
re are no
variable costs
•Asking for equipment salvage
value
•Ta
keaway: By any
measure, breake
ven
of 233 m
embers is ve
ry low
Que
stion 2 –
Reve
nue G
rowth O
pportun
ities
Wha
t are potential reve
nue growth opportun
ities the clie
nt can pursue?
Que
stion
•Price
: •Increase current reve
nue stream pricing
•Tiered m
embership based on accessibility (time, equipment, e
tc.)
Potential resp
onse
59
•Tiered m
embership based on accessibility (time, equipment, e
tc.)
•Consider multi-p
eriod contracts with disco
unted pricing
•Qua
ntity
•Increase #
of gyms franchised
•Increase #
of members per gym (assum
e w
e have
not hit a utiliz
ation sa
turation point)
•Create new
product / service offering
s•
Juice bar
•Sell clothing, timers, lig
htweights
•Lo
ckers for rent
•Pa
rtne
r with full-service gyms to offer disco
unt for classes (like yoga, sp
inning
)
•Other •
Increase m
arketing
efforts
Que
stion 3 –
Cost C
utting
Opportun
ities
Wha
t are potential co
st cutting
opportun
ities the clie
nt can pursue? W
hat opportun
ities are m
ore
actiona
ble?
Que
stion
•Re
cognize
tha
t rent, equipment and
labor and
the
largest expense categories, so start the
re
•Re
nt
Potential resp
onse
60
•Re
nt•
Re-negotiate current contracts
•Move
to less optimal loca
tions
•Actiona
bility: Low
•Eq
uipment
•Use the
equipment lo
nger (thu
s increasing
the
depreciation period)
•Consider purchasing
used equipment
•Consider renting equipment
•Consider co
nsolid
ating
equipment purchases to few
er ve
ndors
•Increase buy
er pow
er by m
aking
purchases across m
ultiples gyms
•Actiona
bility: Moderate
•La
bor (currently comes in 8 hours per day, M
-F, to answer gene
ral que
stions)
•Decrease the
num
ber of ho
urs staffed
•Utiliz
e pho
ne sup
port
•Po
st m
ore FAQs on the w
alls
•Actiona
bility: Moderate
Que
stion 4 –
Segment A
nalysis
Which segment offers the
greatest opportun
ity on a profitability basis? W
hat are the
key
factors?
Que
stion
Potential resp
onse
Costs for
Franchisee
Gym Space
Location
Availability
Convenience
for Members
Segment
Fitness Interest
Segment Spare
Income
Competition
61
Franchisee
Availability
for Members
Fitness Interest
Income
Competition
Urb
an
High (�
)Low (�)
High (☺
)High (☺
)Medium
High (�
)
Sub
urban
Medium
Medium
Medium
Medium
Medium
Medium
Rural
Low (☺)
High (☺
)Low (�)
Medium
Medium
Low (☺)
•Key
Take
away
•Rural segment is ve
ry attractive, beca
use of the lo
wer co
st (rent, labor), high ava
ilability of gym space
and
low
co
mpetition
•Competition is the
surprise factor; very few
gyms ha
ve place
d loca
tions in rural areas due
to very high
breake
ven membership requirements for fully
-loaded, traditiona
l gyms
Sample Reco
mmend
ation
•Clie
nt business m
odel allo
ws for low breake
ven membership point for franchisees
•To improve
profitability, client sho
uld consider reve
nue growth opportun
ities (give best examples) and
co
st saving
opportun
ities (give m
ost actiona
ble items)
•Clie
nt sho
uld also focus on the rural market segment, primarily due
to a lack of significa
nt competition
Reco
mmend
ation
•Adding new
services (ie reve
nue streams) w
ill m
ake
clie
nt gym offering
s less distinct from traditiona
l gyms
•Cutting
costs at a bare m
inim
um gym m
ay cause customer service issue
sRisks
62
•Ex
ecute on reco
mmend
ations
•Also consider M&A opportun
ities, primarily to gain sca
le and
improve
cost structure
Nex
t Steps
Case: Greeting
Card
Manu
facturer
BCG, M
ock Interview
Ove
rview for interviewer
Inform
ation to be provided upon reque
st
A greeting
card
manu
facturer ha
s ex
perienced decreased profit. Th
e CEO
has asked you to figure out w
hy.
Problem statement narrative
63
This case involves a discussion of both the
reve
nue and
cost
drive
rs of profit. Greeting
card
companies operate w
ith a
unique
reve
nue system, and
this will also affect the
cost side
of the company.
Case Type: Profitability
Ove
rview for interviewer
The greeting
card
s are stocked at groce
ry stores and
pha
rmacies like CVS
Greeting
card
s are good for one
season only –
if a card
does no
t sell by the
end
of the season, it will be shipped
back to the
manu
facturer at their expense and
disca
rded
The greeting
card
ind
ustry has ex
perienced m
oderate
growth ove
r the years
Competitors have
experienced steady or slightly increased
profit
Inform
ation to be provided upon reque
st
Potential Categories of Cand
idate’s Framew
ork
Notable comments / potential discussion points
Industry Ana
lysis
•Greeting
card
s market: growing, shrink
ing, stable?
•Competitors: market share, growth rate
•Consum
ers: ne
eds, brand
perception, differentiation?
Profit drive
rs•Re
venu
e •Fa
ctors tha
t affect sales vo
lume
64
•Fa
ctors tha
t affect sales vo
lume
•Card
selection
•Card
sup
ply
•Is it better to ove
rstock or stock just the right amoun
t?•Ove
rstock: customers like cho
ices; it looks bad w
hen there is only one
card
on the she
lf –
creates more goodwill w
hen there are additiona
l ca
rds eve
n if the
y w
ill not all sell
•Just the
right amoun
t: do not incur additiona
l shipping costs to send
unsold card
s back to the
manu
facturer; do not incur va
riable costs for un
sold card
s; w
hy m
ake
more tha
n yo
u ca
n sell?
•How
does the greeting
card
manu
facturer earn reve
nue? W
hat are the
reve
nue streams?
•Costs •W
hat are the
fixed costs?
•W
hat are the
variable costs?
•Is the
re any
thing special about greeting
card
costs?
The cand
idate m
ust figure out how
the
greeting
card
manu
facturer earns reve
nue as well as ho
w costs are incurred.
Potential Issue Tree &
Approach to Solving the
Case
Key
elements of ana
lysis to solve the
case
How
is the
greeting
card
ind
ustry
doing?
How
are competitors perform
ing
compared to our company
?Are the
re cha
nging trend
s?
Industry Ana
lysis
Wha
t fa
ctors affect sales vo
lume?
Wha
t are the
repercussions if a
customer walks into a retaile
r and
the
ca
rd she
lves are empty?
Is it better to ove
rstock or stock just the
Reve
nues
Wha
t are the
fixed costs?
Wha
t are the
variable costs?
Costs
65
Are the
re cha
nging trend
s?Is it better to ove
rstock or stock just the
right amoun
t?W
hat are the
reve
nue streams?
Possible follo
w-up and
guidance
to in
terviewer
Possible follo
w-up and
guidance
to in
terviewer
Possible follo
w-up and
guidance to
interviewer
•If she
lves are empty, the follo
wing
repercussions are possible:
•Lo
se the
sale entirely, result in
poor brand
awarene
ss; lose
customers to competitors;create
poor relationships with retaile
rs•Manu
facturer rece
ives payment only
whe
n ca
rds are SOLD
to consum
ers.
Unsold card
s are shipped back at the
manu
facturer’s ex
pense
COGS: $1.50
SG&A: $
0.25
Shipping: $
0.05 (only in
curred if the card
is unsold)
Fixe
d Costs: $200,000 (printing presses,
plants, admin)
•Th
e greeting
card
ind
ustry has
remained stagna
nt throug
hout the
ye
ars due
to threats such as e-card
s•Competitors have
experienced stable
or moderate increases in profit
•Our company
’s card
s ha
ve
continuo
usly sold out in retaile
rs as
compared to competitors
Que
stion 1 –
Breake
ven
Break eve
n = Fixed Costs / Unit Contribution
Ove
rall approach, g
ood sho
rtcuts &
solution
N/A
Inform
ation to provide up front
Math Q
uestion
If greeting
card
s are sold at $3.00 per ca
rd and
fixed costs are $200,000 per ye
ar, ho
w m
any
card
s must the greeting
ca
rd m
anu
facturer sell to break eve
n?
66
Fixe
d Costs = $200,000
Unit Contribution = $3.00 -
$1.50 -
$0.25 =
$1.25
Break eve
n = $200,000 / $1.25 =
160,000 card
s
COGS: $1.50
SG&A: $
0.25
Shipping: $
0.05 (only in
curred if the card
is un
sold)
Fixe
d Costs: $200,000
Provide in
form
ation if asked
Sample Reco
mmend
ation
The greeting
card
manu
facturer should improve
reve
nues by ensuring a w
ide selection and
sup
ply of
card
s at each retaile
r while also keeping in mind the
num
ber of un
sold card
s at the end
of the selling
season. Th
e in
crease in goodwill and
brand
awarene
ss among
retaile
rs and
consum
ers outweighs the
added variable costs from unsold card
s.
Reco
mmend
ation
Sup
plying extra card
s may not be profitable if the qua
lity of the card
s are lacking compared to
competitors’.
Risks
The m
anu
facturer should perform
additiona
l research regard
ing how
consum
ers cho
ose greeting
card
s and
determ
ine if un
sold card
s may be re-used in any
fashion (salvage value).
Nex
t Steps
67
and
determ
ine if un
sold card
s may be re-used in any
fashion (salvage value).
Nex
t Steps
The num
ber of ca
rds sold during the
year depend
s on
the num
ber of ca
rds shipped to the
retaile
r. If these
are the
expected sales nu
mbers, which one
sho
uld the
manu
facturer choose?
Shipment Q
uantity: 2,000, Sales Volume: 1,900
Shipment Q
uantity: 2,500, Sales Volume: 2,200
Shipment Q
uantity: 2,700, Sales Volume: 2,300
Profit = ($1.25 * 2,200) –($1.8 * 300) = $2,210
BONUS
Case: UK A
sset Mana
ger
Bain, M
ock Interview
Our clie
nt is a priva
te equity firm tha
t is looking
at a potential acq
uisition target. Th
e target is a UK asset mana
gement firm
that
has seen a 33% drop in AUM in the past 18 m
onths. O
utside of a valuation ana
lysis of the target (assum
e this ha
s been done
by
the clie
nt), w
e need to determ
ine w
hether or no
t this is a good acq
uisition.
Problem statement narrative
68
The clie
nt is a priva
te equity fun
d tha
t wants yo
u to
determ
ine the
acq
uisition prosp
ects of an asset mana
gement
firm
based in the United Kingdom. The
interviewer should
allo
w the
interviewee to deve
lop 1) a tho
roug
h framew
ork
on ho
w the
y w
ould eva
luate the
problem, 2) an ove
rall
reco
mmend
ation to the
clie
nt regard
ing the
acq
uisition, and
3) ne
xt steps that offer to eithe
r dig deeper in a particular
area of ana
lysis or offer ways in w
hich the
target co
mpany,
once acq
uired, co
uld be improve
d.
Case Type: Inve
stment (Go/No-G
o)
Ove
rview for interviewer
Explain AUM as total assets und
er mana
gement w
ithin the
asset mana
ger’s portfolio
of three broad investment types:
retail, in
stitutiona
l, and
alternative
fun
ds (~
75% in retail and
institutiona
l fun
ds)
Specific inve
stments within retail and
institutiona
l fund
s includ
e m
utua
l fun
ds (comprised of equities, bond
s, m
one
y
market fund
s, and
others); alternative
fun
ds includ
e hedge
fund
s and
priva
te equity investments (sho
w Exhibit 1 here).
The fun
d operates predominantly in the UK w
ith a m
uch
smalle
r presence in Germ
any
and
Spain.
Inform
ation to be provided upon reque
st
Potential Issue Tree &
Approach to Solving the
Case
One
possible fra
mew
ork
•Market size
and
how
this
has chang
ed ove
r time by
segment, g
eography, and
product mix
•Und
erlying drive
rs for AUM
•How
compare across the
Market
•Target’s m
ajor co
mpetitors
•Competitor market share
and
how
this ha
s chang
ed
ove
r time
•Reputation, product
offering
, AUM size,
Competitors
•Key
segments and
purchasing
criteria
•Major institutiona
l customers
•Major chann
el partne
rs (e.g.,
bank
s, financial advisors)
•Do customers invest in
Customers/Cha
nnels
•Profitability
-Fee structure (reve
nues)
-Compensation structure
(costs)
•Portion of AUM declines due
to m
arket declines vs. fund
Company
69
•How
compare across the
different business segments
offering
, AUM size,
customer mix, g
eographic
focus, etc.
•Distribution
adva
ntages/disadva
ntages
•Do customers invest in
fina
ncial institution or
individua
l investment
mana
ger?
•Customer stickine
ss
Possible follo
w-up and
guidance to interviewer
Possible follo
w-up and
guidance to interviewer
Possible follo
w-up and
guidance to interviewer
•Total U
K asset
mana
gement m
arket £3.4T
•AUM drive
n by: market
perform
ance,
GDP/wealth, and
net
capital flow
s•UK fun
ds market: 75%
institutiona
l, 25% retail
•Major co
mpetitors include
bank
s, in
surance companies,
and
other fund
mana
gers
•Target is 10thin both inst.
and
retail and
both are
highly fragmented m
arkets
•No notable differences in
reputation, product
offering
, mix, o
r distribution
•Target lost the
mand
ate from
a la
rge institutiona
l inve
stor in
2008, accoun
ting
for much of
its ca
pital/AUM outflow
s for
that ye
ar
to m
arket declines vs. fund
redemptions?
•Asset mana
gers/ke
y
personn
el
•Perform
ance against
benchm
arks/co
mpetitors
Possible follo
w-up and
guidance to interviewer
•Sho
w Exhibit 2 w
hich sho
ws
-greater outflow
s than the
market
-about equa
l perform
ance as
the m
arket
70
Exhibit 1: Ta
rget’s Total AUM by Fun
d Type
15
£20B
15.7
16.3
18.1
12.0
12.1
WCC Case -2009 -UK A
sset Mana
ger
Note: Fiscal year ending December 31 except for 2009 data which is as of June 2009
05
10
2005
2006
2007
2008
12.0
2009*
12.1
Retail
Institutional
Alternative
71
400
£500B
476
-3.4
1.9
2.0
4.4
-114
367
3.1
6.3
0.0
3.4
7.6
402
UKfundsmarketflowoffunds
(Dec'07-June'09)
AuM
Netoutflow
Netinflow
Market
~1% capital
inflows
10
£15B
13.4
-0.9
-0.2
0.0
0.0
Target'sflowoffunds
(Dec'07-June'09)
AuM
Netoutflow
Netinflow
Market
~25% drop in asset
value in 2008
~24% drop in asset
value in 2008
~8% capital
outflows
Mutual Fund Performance
Exhibit 2: AUM Sum
mary
0
100
200
300
12/07
Equities
Bond
MoneyMkt
Other
Market
12/08
Equities
Bond
MoneyMkt
Other
Market
06/09
~3% capital
inflow
05
10
12/07
Equities
Bond
MoneyMkt
Other
Market
-3.3
12/08
9.0
Equities
-0.1
Bond
-0.1
MoneyMkt
-0.1
Other
0.1
Market
0.2
06/09
9.1
Note: Excludes alternative investm
ents
~1% capital
outflows
outflows
Que
stion 1 –
Math
The cand
idate w
ould bene
fit from kno
wing the
“rule of 72” (ie,
Ove
rall approach, g
ood sho
rtcuts &
solution
Ann
ual returns of 4.5%
Inform
ation to provide up front
Math Q
uestion
Given that the target’s fun
ds un
der mana
gement are ave
raging 4.5% returns ann
ually, h
ow m
any
years w
ould it take
for the fun
ds to
doub
le?
72
~72 divided by the
rate of interest w
ill give approxim
ate
period of time needed for initial a
moun
t to doub
le)
OR
Sho
uld realiz
e absolute amoun
t is unimportant (strictly depend
s on rate)
------------
Solution: 72/4.5= ~16 years
If asked, give current fun
ds AUM of £9.1B
Provide in
form
ation if asked
Sample Reco
mmend
ation
Assum
ing no issue
s with va
luation, reco
mmend
against clie
nt acq
uiring
the
target. Th
e target, on
ave
rage, has simila
r fina
ncial perform
ance to ind
ustry peers but its clie
nts are w
ithd
rawing capital
faster than the ind
ustry ave
rage. W
hile the
motiva
tion is unclear, there could be uncove
red problems
with client service and
/or client m
ix.
Reco
mmend
ation
Sho
uld valid
ate valuation. Th
e valuation of target may be attractive desp
ite being a poor perform
er
compared to the
market. Th
e redemption problems, largely drive
n by one
key
clie
nt in 2008, co
uld be
behind
the
m.
Risks
Ana
lyze
alternative
investments as well as Germ
an and
Spanish m
arkets.
73
Ana
lyze
alternative
investments as well as Germ
an and
Spanish m
arkets.
Ana
lyze
perform
ance of fund
mana
gers in ord
er to determ
ine w
hich m
ana
gers can be replace
d
(compare perform
ance against benchm
arks).
See if ove
rall portfolio
’s relative
und
erw
eighting in
institutiona
l ve
rsus retail segments matters.
Nex
t Steps
Case: Mighty M
ining Company
(inspired by) McK
insey, Round 2
Ove
rview for interviewer
Inform
ation to be provided after actions id
entified
Your clie
nt is a global mining company
with a loca
tion in South Africa. This particular loca
tion is perform
ing below ave
rage
fina
ncially
. McK
insey has been hired to identify the
problem and
make
reco
mmend
ations to address it. W
hat would you do first
toapproach this problem?
(Note
to int
erview
er: Th
is lea
doff
que
stio
n is m
eant
to focu
s on
actio
ns o
ne w
ould take
bef
ore
diving int
o the
fra
mew
ork
–actio
ns suc
h as co
llecting d
ata
, visiting
the
loca
tion
to o
bse
rve
oper
ations
, inte
rviewing e
mplo
yees
, et
c)
Problem statement narrative
74
This que
stion is intentiona
lly vague
, as many
Partne
r leve
l ca
ses ca
n be, to encourage the
cand
idate to ask que
stions at
this stage.
This is command
and
control, so start w
ith the first que
stion,
then provide the
detail to the
right and
ask for a full ana
lysis
(framew
ork). After the framew
ork is deve
loped by the
ca
ndidate, dive deeper into cost and
operations and
ask
follo
w-up que
stions.
Case Type: Operations
Case Style: Command
& Control
Ove
rview for interviewer
The proce
ssing plant is loca
ted 160 m
iles inland
and
it uses a
fleet of large trucks to transport m
inerals from the
plant
(which is loca
ted near the m
ineral source
) to a port city. Th
e
minerals are the
n loaded onto barges and
shipped to clie
nts
aroun
d the
world. The
plant needs to operate at maxim
um
capacity to m
eet customer demand
.
The m
inerals produced are commodities with low m
arg
ins.
Inform
ation to be provided after actions id
entified
Potential Issue Tree &
Approach to Solving the
Case
Key
elements of ana
lysis to solve the
case
Revenue: explore
historica
l data,
trend
s, product sp
ecific data
Benchm
ark against competitors and
other co
rporate loca
tions.
Reve
nues
Explore operationa
l issues that might lead
to poor perform
ance such as interrup
tions
in operations (is plant operating
at full
capacity, is it runn
ing 100% of the tim
e or
are the
re pow
er outages or other
Opera
tions
Costs: explore fixed costs (PP&E,
ove
rhead) and
variable costs (m
aterial,
labor)
Transportation: considering
this
product is a commodity, transportation
Costs
75
other co
rporate loca
tions.
are the
re pow
er outages or other
disruptions, are the
re loca
l protests, is
theft or loca
l un
rest impacting plant),
employe
e skill leve
l, employe
e m
orale, etc
Possible follo
w-up and
guidance to
interviewer
If the
interviewer gives a vague
resp
onse
such as “I w
ould w
ant to und
erstand
the
loca
l market co
nditions” then push for
specific ex
amples of operationa
l issues
that would impact a plant in the m
iddle of
South Africa.
It is important tha
t the cand
idate identify
gene
ral o
perating
issue
s and
loca
lly
impacted issue
s.
Possible follo
w-up and
guidance
to in
terviewer
Altho
ugh im
portant to m
ention, the
focus of this case is co
st and
operations
so don’t let the cand
idate spend
too
much time here.
product is a commodity, transportation
make
s up
a large portion of the
product co
st and
sho
uld be separated
out.
Possible follo
w-up and
guidance
to in
terviewer
If the
cand
idate has no
t already done
so, a
sk the
m to identify the
key
cost line
items on the income statement and
elaborate on the COGS for this
industry.
COGS: La
bor, Materials,
Shipping/Lo
gistics
Operating Expenses
Administrative
, Ove
rhead, D&A
Follo
w-up Q
uestions
Resp
onse sho
uld cove
r a rang
e of ideas as the interviewer is looking
for out of the box
think
ing. Some id
eas might be: the
plant is
Guidance for interviewer:
Follo
w-up que
stion #1
In gathering
data from the
clie
nt, yo
u find
tha
t transportation co
sts are significa
ntly highe
r as a portion of COGS tha
n any
other
African plant loca
tion. W
hy m
ight this be? (If the
160 m
ile trip from plant to port has no
t been mentione
d, inform
interviewerof the
transportation details here)
76
send
ing trucks that are not full increasing
trips ne
eded, drive
rs are not going directly to the
port (poor route plann
ing, sleeping on
the jo
b, etc), trucks are hija
cked along
the
route, drive
rs m
ust pay bribes to get throug
h ce
rtain road blocks.
Follo
w-up que
stion #2
You co
llect historica
l data on the ave
rage tim
e it take
s a truck to m
ake
the
200 m
ile trip from the
plant to the
port, wha
t should you
expect the
graph to look like?
Interviewer: (Th
e graph should be a norm
al distribution) Yo
u ex
pected the
graph to be norm
ally
distributed but your data reve
als
the follo
wing graph. W
hat ca
n yo
u draw from this data?
The cand
idate sho
uld identify tha
t the first peak is expected (per the norm
al distribution) but the
seco
nd peak ne
eds to be ana
lyze
d.
Ask for ideas of wha
t might cause the
seco
nd peak. Th
ese could include certain drive
rs taking
too m
any
breaks, traffic patterns, etc.
Guidance for interviewer:
Mighty M
ining Trip Tim
e D
istribution
1000
77
Total roun
d trip tim
e (ho
urs)
0
# of trips
24
Fina
l Que
stion and
Sample Reco
mmend
ation
Follo
w-up que
stion
You disco
ver that the port closes at 10pm and
any
truck tha
t does no
t arrive by 10pm m
ust wait until the port opens again at 4am
to
drop off its load and
return to the
plant. The
minim
um roun
dtrip trave
l time is 7 hours and
the
plant owns 20 trucks; how
eve
r, a
barge needs 30 truckloads to reach capacity and
ship out. W
hat would you reco
mmend
Mighty M
ining to do about this situation?
Remember: the
plant m
ust operate at max capacity to m
eet customer demand
Rather than crun
ch num
bers aroun
d optimization, it is sufficient tha
t the cand
idate identify tha
t there are
seve
ral bottlene
cks in the
sup
ply cha
in (trave
l time, port hours of operations, ca
pacity of trucks versus
78
seve
ral bottlene
cks in the
sup
ply cha
in (trave
l time, port hours of operations, ca
pacity of trucks versus
barge) and
reco
mmend
potential solutions tha
t may be considered:
•In the
sho
rt term
, the company
needs to identify the
latest a truck can leave
and
still arrive by 10pm.
They
could use employe
e incentives to encourage drive
rs to reduce rest stops along
route to m
ake
the
10pm cut-off. Drive
r shifts sho
uld be rearrang
ed to optimize m
aterial delivered to the
port.
•In the
long
term
, see if they
lobby tha
t 24 hour port operations is more profitable for all parties.
•Evaluate the
costs of setting up a storage facility by the
port for night deliveries against purchasing
more trucks.
•Ana
lyze
costs of up
grading fleet to larger size
trucks.
•Consider leasing
trucks vs. purchasing
.
Sample
Reco
mmend
ation
Since
loca
tion already is poor perform
ing, must ana
lyze
cost of ca
pital to ensure tha
t inve
sting in
capital im
prove
ments is highe
st N
PV alternative
(ship from other better plants?).
Cha
nges in customer demand
could lead to an inve
stment tha
t is not ne
eded long
term
.Risks
I would ana
lyze
the
se options and
present a final reco
mmend
ation for the clie
nt including ju
stification
for any
investment needed by the
company
to m
itigate the
risk of senior mana
gement not wanting to
inve
st.
Nex
t Step
Case: Th
e Reel Deal
Bain, R
ound 1
Ove
rview for interviewer
Inform
ation to be provided upon reque
st
A m
ovie studio clie
nt has an ex
tensive library of hit movies from prior ye
ars. As part of yo
ur effort to find new
source
s of profit for
the company, yo
u are to assess the
viability of digitizing the
movie reels and
making
the
m ava
ilable online for a fee.
Problem statement narrative
79
This case is intend
ed to test the
cand
idates ability to react to
a broadly w
ord
ed sce
nario, determ
ine the
key
data needed
to m
ake
a decision and
navigate seve
ral basic but
potentially
tricky m
ath que
stions. Th
e in
terviewer should
begin by asking the
cand
idate w
hat inform
ation they
will
need to ana
lyze
the
problem and
make
a reco
mmend
ation.
A brief discussion on industry ana
lysis (including consum
er
trend
s and
competition) as well as co
mpany
position
(including m
arket share and
firm specializ
ation) is
appropriate, BU
T this is a m
ath case focused on profitability
(other data is irreleva
nt). The
interviewer should quickly get
to the
data and
ultim
ately offer any
inform
ation (see right
pane
l) tha
t is not asked for.
Case Type: Profitability / M
arket En
try
Ove
rview for interviewer
Exp
ect
ed
re
ven
ue
s: $
20
0/c
lip
10
0 c
lips
pe
r m
ovi
e
50
/50
re
ven
ue
sp
lit p
er
clip
(5
0%
go
es
to r
oya
ltie
s fo
r o
the
r
pa
rtie
s)
Stu
dio
est
ima
tes
the
re w
ou
ld b
e a
25
% y
ea
rly
uti
liza
tio
n
rate
Inform
ation to be provided upon reque
st
Case Q
uestions
Key
elements of ana
lysis to solve the
case
Wha
t would be the
reve
nue per movie
per ye
ar?
Calculate expected reve
nue
Say the
studio only had fixed costs
(once the
movie w
as digitized, any
reve
nue is pure profit). It costs $30M to
complete. T
he studio w
ould like to see a
positive
return on any
investment w
ithin
Breake
ven ana
lysis, part 1
The studio realiz
es up
keep of the digital
files and
service for the online business
would have
additiona
l va
riable costs of
$18 per utilize
d clip
. W
ill the
y be able to
break eve
n in 2 years?
Breake
ven ana
lysis, part 2
80
positive
return on any
investment w
ithin
2 years.
break eve
n in 2 years?
Possible follo
w-up and
guidance
to in
terviewer
Possible follo
w-up and
guidance
to in
terviewer
Possible follo
w-up and
guidance to
interviewer
($200*.5)*100*.25 =
$2500 per
movie per ye
ar
Give demand
whe
n asked: ano
ther
stud
io w
ith simila
r offering
s is seeing
demand
of 8,000/ year
…$30M/$2500 =
12,000 customers
to break eve
n. Assum
ing w
e can get
close to the
competitor’s demand
of
8,000/yr, we can break eve
n within 2
years.
$100-$
18=$82 C
M per ye
ar per clip
($200*.5)*82*.25 =
$2050 per movie
per ye
ar
$30M/$2050 =
14,634 customers to
break eve
n …
still achieva
ble w
ithin 2
years based on 8,000/yr foreca
st.
Sample Reco
mmend
ation
Based on the data provided, all scena
rios suggest the
digitization move
is a prudent end
eavo
r.
Reco
mmend
ation
Gene
ral competitive
threats; ne
w techno
logy m
aking
this strategy obsolete; assum
ptions do not ho
ld
true
; some m
ovies are m
ore popular than others; partne
rs m
ay demand
highe
r roya
lty payments.
Risks
Altho
ugh no
t ce
ntral to the
case reco
mmend
ation, potential ne
xt steps co
uld include: deeper co
mpetitive
ana
lysis, determ
ination of a specific techno
logy platform
, any
nece
ssary legal agreements
Nex
t Steps
81
ana
lysis, determ
ination of a specific techno
logy platform
, any
nece
ssary legal agreements
Nex
t Steps
Disregard
ing any
ancillary inform
ation provided
earlier, wha
t risks ex
ist in m
aking
this decision based
on demand
seen by a competitor?
Some potential answers:
•Competitor ha
s large m
arket share, making
entry
difficult
•One
year of demand
data does no
t allo
w trend
ana
lysis
•Data m
ay not be accurate
BONUS
Case: Pub
lishing
Company
Leno
vo, R
ound 2
Ove
rview for interviewer
Inform
ation to be provided upon reque
st
Your clie
nt is Putter, a company
tha
t pub
lishe
s romance nove
ls tha
t they
sell to bookstores. Typically, Putter reim
burses itscustomers
at the end
of the year for any
unsold inventory. Now
, one
of Putter’s customers, a retail bookstore, ha
s co
me to it with an offer for a
deal. In return for a 10% disco
unt on who
lesa
le price
s, the
bookstore w
ill no long
er send
back any
books at the end
of the year.
Sho
uld Putter do the
deal?
Problem statement narrative
82
This is primarily a calculations, marg
in case. Make
the
ca
ndidate explore the
calculus in the case first and
foremost;
discussion of business and
strategic alternative
s ca
n co
me
later.
Case Type: Operations / Profitability
Case Style: Command
& Control
Ove
rview for interviewer
Putter’s clients ha
ve to sell at a price
we dictate, no
che
aper.
Inform
ation to be provided upon reque
st
Potential Issue Tree &
Approach to Solving the
Case
Key
elements of ana
lysis to solve the
case
Marg
in calculationsMath
•Re
duction in operationa
l co
mplexity
•Good w
ill m
eeting
customer/chann
el
reque
st•Open up
new
business m
odel –may
lead to additiona
l distribution
Opportunities
•Cash Flow (with ne
w m
odel, get lesser
cash flow upfront-problem in this
eco
nomy)
•Market Sha
re (assum
ing few
er un
its
sold)
Threats
83
lead to additiona
l distribution
chann
els?
sold)
•May affect other clients’ cho
ices as well
(iefirst of many, no
t isolated case)
•Re
lationship w
ith client (supply the
m w
ith
less, the
y view you as less important)
Possible follo
w-up and
guidance
to in
terviewer
Possible follo
w-up and
guidance
to in
terviewer
Possible follo
w-up and
guidance to
interviewer
•Don’t forget sa
lvage value
•Ex
plore rationa
le for # of books
ord
ered (directiona
lly up, dow
n or
flat), more in ne
xt page
•W
hen mentioning
cash flow, h
ave
ca
ndidate do the
calculations. Previously
get $100,000 upfront, no
w only get
$67,000.
Que
stion 1 –
Good D
eal?
Don’t forget sa
lvage value.
Ove
rall approach, g
ood sho
rtcuts &
solution
•In 2008, Putter sold 10,000 books to this bookstore
Inform
ation to provide up front
Math Q
uestion
Does this m
ake
sense on a profit basis?
84
Calculations:
Pre-cha
nge: profit = 8,000 * (10-5
) –2000 *5 =
$30,000
Post-cha
nge: profit = 7,500 * (9-5
) = $30,000
Pre-cha
nge: ca
sh-flow: 10,000 * $10 =
$100,000 upfront
Post-cha
nge: ca
sh-flow: 7,500 * $9 =
$67,500 upfront
Pre-cha
nge: market share at 8,000 books
Post-cha
nge: market share at 7,500 books
Solution: T
he expected profit is the
same, but initial cash flow is
lower and
market share is lower. The
re does no
t seem to be a
direct financial ince
ntive to take
the
deal.
•It costs Putter $5 on ave
rage to m
ake
a single book
•Putter previously sold books to the
bookstore at $10
•Note to interviewer: M
SRP not releva
nt
•Putter’s Salvage Value for un
sold books =
0•Ro
mance nove
l sa
les ha
ve been flat for a deca
de,
expected to remain so in the coming years
•In 2008, the retail bookstore sent back 20% of its books
•Have
interviewee explain how
he/she w
ill gue
ss at a
figure of ho
w m
any
books the
bookstore w
ill ord
er, then
give the
projected num
ber of 7500
Provide in
form
ation if asked
Sample Reco
mmend
ation
The deal does no
t seem attractive on a financial or strategic basis. Th
e expected profitability is the
same but cash flow and
market share w
ill decline. Such problems are complicated by the
fact tha
t others in the ind
ustry m
ay follo
w the
lead of the first bookstore. Re
commend
ation is not to accept the
deal.
Reco
mmend
ation
By not accepting
the
reque
st of yo
ur clie
nt, yo
u risk alie
nating
the
bookstore if other pub
lishe
rs shift
business m
odels.
Risks
Consider the differences in “blockbuster” books vs. low
er-vo
lume books. Perhaps ne
w business m
odel
(at different pricing
) may m
ake
sense for some titles.
Nex
t Steps
85
(at different pricing
) may m
ake
sense for some titles.
Nex
t Steps
Case: Re
tirement Apartment C
omplexe
sBCG, R
ound 1
Ove
rview for interviewer
Inform
ation to be provided upon reque
st
Th
e c
lien
t o
wn
s a
nd
op
era
tes
25
re
tire
me
nt
ap
art
me
nt
com
ple
xes
for
the
55
-75
ye
ar
old
de
mo
gra
ph
ic in
th
e s
ou
th-e
ast
an
d
sou
th-w
est
sta
tes
of
FL,
CA
, N
M a
nd
AZ
. B
y a
nd
larg
e t
he
ap
art
me
nt
com
ple
xes
hav
e a
sim
ilar
de
sig
n a
nd
am
en
itie
s. S
ho
uld
th
e
clie
nt
com
pa
ny
’s C
EO
co
nsi
de
r e
xpa
nd
ing
to
oth
er
No
rth
ern
cit
ies
or
con
tin
ue
to
fo
cus
on
th
e S
ou
th?
Problem statement narrative
86
Even thoug
h this case starts out w
ith a m
arket entry problem
que
stion, the
cand
idate sho
uld eve
ntua
lly realiz
e (with or
witho
ut guidance) that the case is about profitability,
specifica
lly costs as there is clearly an un
met market in the
North and
hence reve
nues wouldn’t be an issue.
Ultim
ately, the
cand
idate sho
uld use some m
ath to determ
ine
that the financial justification for ex
pand
ing in the N
orth vs.
South is roug
hly equiva
lent, so strategic bene
fits and
risks
should guide the
clie
nt’s focus.
Case Type: Profitability/ M
arket En
try
Ove
rview for interviewer
cand
idate sho
uld probe deeper to und
erstand
the
market in
the N
orth and
why
the
clie
nt w
ants to consider ex
pand
ing.
•Any
specific fina
ncial goals? –maxim
izing profitability
throug
h ne
w apartment existing
properties.
•W
hat make
s the clie
nt think
tha
t there is demand
in the
North? –
Surve
y cond
ucted 2-3
years ago in states
such as NY, N
J, M
A and
IL reve
aled tha
t the pre-
retirees /retirees want sim
ilar fa
cilities in tho
se
underserved (he
nce no competition ex
its) m
arkets so
that they
can stay closer to the
ir families and
friend
s.
•A pilo
t apartment complex w
as erected in dow
ntow
n Chica
go 2 years ago w
ith more amenities than its sister
properties in the
south.
Inform
ation to be provided upon reque
st
Potential Categories of Cand
idate’s Framew
ork
Notable comments / potential discussion points
Most cand
idates will tend
to examine reve
nues and
costs once the
y realiz
e this ca
se is about m
axim
izing profitability. W
hile this is
the eve
ntua
l course of action it is im
portant for the cand
idate to und
erstand
the
current m
arkets tha
t the clie
nt operates in
and
glean
key le
arnings. Remember –if the
cand
idate had asked the
financial goal que
stion, the
clie
nt w
ants to m
axim
ize profitability throug
h ne
w or EX
ISTING
properties.
Potential p
oints include, but are not lim
ited to:
Industry ana
lysis
87
Industry ana
lysis
•firm
position / m
arket share
•trend
s•co
mpetition
Profit drive
rs•reve
nue
•co
sts
Potential Issue Tree &
Approach to Solving the
Case
Key
elements of ana
lysis to solve the
case
Whe
n dealin
g w
ith apartment
complexe
s, examine the
follo
wing:
•Num
ber of properties
•Num
ber of un
its per property
Market Size
Identify source
s of reve
nue from
apartment complexe
s:
•Re
nt•Utilities, if mana
ged by building co.
Reve
nue
Identify cost bucke
ts and
disting
uish fixed
from variable compone
nts
•Maintena
nce
•Amenities
Cost
88
•Num
ber of un
its per property
•Occup
ancy Rates
•Utilities, if mana
ged by building co.
•Premium for amenities, if any
•Re
tail reve
nue, if any
•Maintena
nce or other fees
•Amenities
•Le
asing
/Marketing
•Utilities
•Property Taxe
s
Possible follo
w-up and
guidance
to in
terviewer
Possible follo
w-up and
guidance
to in
terviewer
Possible follo
w-up and
guidance to
interviewer
If the
cand
idate has no
t ye
t asked for
the current apartment complexe
s in the
Southe
rn states, give her/him details:
•Competition is strong
in the south;
easy to build new
apartments.
•Occup
ancy rates typically
start out at
90%+ but eve
ntua
lly settle at 80% as
new complexe
s are built.
•3-5
% growth eve
ry year fed by new
people w
ho m
igrate to the
south
Reca
ll that the Chica
go property pilo
t provides residents with additiona
l amenities co
mpared to properties in the
south. The
cand
idate sho
uld examine this
asp
ect to accurately compare costs.
Que
stion 1 –
Math
Math Q
uestion: W
hich is more profitable –
north or south?
1.
First co
mpute occup
ancy leve
ls and
reve
nue. Fo
r this discussion all apartments in a given region ca
n be considered equiva
lent.
South: 800 units/bldg * 0.8 occupancy rate * $500 rent/mo = $320,000 per mo (let ca
ndidate kno
w tha
t rent includes
maintena
nce, amenities, utilities; each property gene
rates identical reve
nue so leave
calculations on an individua
l property basis)
North: 400 units * 0.9 occupancy rate * $1,000 rent/mo = $360,000 per mo
Rent in
clud
es amenities charges for a 24 hr. on-site m
edical fa
cility tha
t residents bene
fit from in a hug
e w
ay
89
2.
Nex
t co
mpare costs (per month)
Cost Item
North
South
Maintena
nce
400 units * $200 =
$80,000
800 units* $125 =
$100,000
Amenities
$54,000
$48,000
Utilities
$45,000
$38,000
SG&A
$60,000
$80,000
Medical Fa
cility
$60,000
$0
Total C
ost per mo
$299,000
$266,000
TotalR
eve
nue per mo
$360,000
$320,000
Profit per mo per bldg
$61,000
$54,000
Que
stion 1 –
Math, co
nt’d
Math Q
uestion co
nt’d…
3.
Nex
t ca
lculate profitability for both loca
tions by using
the
form
ula
Profit per mo per building
÷Total Revenue per mo
4.
Turns out tha
t the south and
north are equa
lly profitable at 16.8% approx.
90
The key
to this que
stion is not to stop at ca
lculating
profit and
jump to a conclusion then. A good cand
idate w
ill take
the
nex
t step to calculate profitability and
realiz
e tha
t the South and
the N
orth are equally profitable relative to revenue
generated.
Now
the
cand
idate sho
uld consider the profitability relative to
the cost to implement various initiative
s. Is it more expensive to
open in the
North or South? W
hat is the
incremental co
st of
constructing
medical fa
cilities in the
south (relative
to increased
earnings)? W
hat is the
cost of enh
ancing some amenities in the
South to gene
rate highe
r rent? H
ighe
r NPV is the goal.
We w
ill not ex
plore the
capital co
st in this case, but a return on
cost ana
lysis should be part of ne
xt steps.
Ove
rall approach, g
ood sho
rtcuts &
solution
N/A
Inform
ation to provide up front
At this point the cand
idate m
ay ask about the
market
size
in the
North or the cost to open ne
w facilities in the
North (or the cost to reno
vate / alter fa
cilities in the
South). T
here is no
additiona
l data ava
ilable, but for the
purposes of this discussion we can assum
e tha
t the return
relative
to cost is also comparable in North vs. South.
Provide in
form
ation if asked
Sample Reco
mmend
ation
To im
prove
sha
reho
lder return and
maxim
ize profitability, the CEO
of the Retirement Homes should
consider ex
pand
ing in the north to capture unm
et demand
and
be the
first m
ove
r in this area. To increase
profitability in the South the follo
wing could be considered:
1.
Increase reve
nues by opening
medical ce
nters in all apartment complexe
s and
increase the
rent. W
e
have
seen that people w
ill pay for the convenience of such an amenity.
2.
Decrease costs using best practices with the Chica
go site, re-negotiate contracts, etc.
The key
here is that the cand
idate sho
uld m
ake
a strategic arg
ument for the reco
mmend
ations he m
ake
s.
Given that the financial measures are roug
hly equiva
lent here (profit marg
in per region, profit relative
to
Reco
mmend
ation
91
Given that the financial measures are roug
hly equiva
lent here (profit marg
in per region, profit relative
to
capital inve
stment (NPV) per region, strategic intuition will drive
the
clie
nt’s decision.
cand
idate sho
uld m
ention risks such as co
st of ex
pansion in the
North, the
commercial real estate issue
s fa
cing
the
ind
ustry how
eve
r, pullin
g this business insight from the
inform
ation provided during the
case
interview w
ill disting
uish a good resp
onse from an insightful one
-90% occup
ancy is no
t sustainable in the
long
run
given wha
t ha
ppens in the South.
Risks
Evaluate cost to open ne
w buildings in the
North and
cost to reno
vate in the South.
Size demand
in major Northe
rn cities and
, co
st of ex
pansion no
twithstand
ing, co
nsider ex
pand
ing rapidly
to secure demand
.Ex
amine how
best practices ca
n be applie
d to existing
properties North to South and
vice versa.
Nex
t Steps
Case: Big Yello
w Bus
Bain, R
ound 1
Ove
rview for interviewer
Inform
ation to be provided upon reque
st
Your clie
nt is a priva
te equity fun
d considering
the
acq
uisition of Big Yello
w Bus Co, one
of the leading m
anu
facturers of scho
ol
buses in the
US. Th
e clie
nt has eng
aged Bain to help determ
ine w
hether or no
t to proce
ed w
ith the investment.
Problem statement narrative
92
This is a classic go/no
-go investment case w
hich sho
uld use a
command
& control form
at if the
cand
idate does no
t hit the
right path quickly. The
cand
idate sho
uld first deve
lop a
framew
ork, w
hich w
ill id
eally
include assessing the
market,
the company, and
the
transaction. As part of the m
arket
discussion the case tests the cand
idate’s m
ath w
ith a m
arket
sizing
que
stion. After this point the case sho
uld m
ove
on to
the competitive
land
scape, w
hich w
ill test the
cand
idate’s
business intuition. Ex
hibit 1 sho
uld be provided to the
ca
ndidate w
hen the case m
ove
s to this juncture.
Case Type: Inve
stment (Go/No-G
o)
Ove
rview for interviewer
•BYB is the
#1 playe
r in the
market by reve
nue, #
2 by
volume.
•Th
ere are only 3 competitors in the m
arket with relative
ly
equa
l sha
re but BYB w
as the clear leader 5 years ago.
•BYB’s price
s are 20% highe
r than its co
mpetitors
•Th
e m
arket ha
s a fairly steady long
-term
3% growth rate
drive
n by G
DP / population growth.
•Market growth has been 6% ove
r the last two years as
loca
l towns rush to buy
buses prior to new
emissions
regulations coming into place.
•Th
e customers are alm
ost exclusive
ly loca
l cities and
tow
ns
in the
US.
Inform
ation to be provided upon reque
st
Potential Issue Tree &
Approach to Solving the
Case
Key
elements of ana
lysis to solve the
case
•How
sizable is the m
arket for scho
ol
busses?
•W
hat is the
growth potential?
•W
hat does the competitive
land
scape look like?
Market
•How
does BYB stack up relative
to
peers?
•How
is the
financial perform
ance?
•How
do BYB’s trend
s look relative
to
peers?
Company
•W
hat is the
likely pricing
? W
ill it meet
our clie
nt’s return hurdles?
•Can the transaction be financed?
•W
hy are w
e the
right buy
er?
Transaction
93
land
scape look like?
peers?
•Is the
company
well-positione
d?
•How
effective is mana
gement?
Possible follo
w-up and
guidance
to in
terviewer
Possible follo
w-up and
guidance
to in
terviewer
Possible follo
w-up and
guidance to
interviewer
•Have
the
cand
idate size the
market
(see nex
t slide).
•After sizing
the
market talk about
growth potential (hopefully
ca
ndidate addresses it directly). Ta
lk
throug
h the rece
nt growth
acceleration and
whe
ther it is likely
to persist.
•As part of co
mpetitive
land
scape
discussion reve
l the M
arket Fina
ncial
Sum
mary and
wait for the
cand
idate’s reactions.
•If nece
ssary direct the
discussion to
reve
al tha
t:•BYB is the
high-price
option
•Competitors have
co
nsiderable procurement
adva
ntage given ow
nership
•Case w
ill not focus he
re, altho
ugh
consider whe
ther the priva
te equity
fund
owns sim
ilar businesses that might
have
ove
rlapping needs (such as other
heavy
equipment / auto m
anu
facturing
companies in the
portfolio
.•Assum
e pricing
can be attained at
reasona
ble leve
ls –
focus on strategic
streng
ths / w
eakn
esses.
Que
stion 1 –
Market Sizing
Ove
rall approach, g
ood sho
rtcuts &
solution
If cand
idate begins dow
n the w
rong
path, redirect to
population proxy. Th
is is m
eant to test basic math skills.
Inform
ation to provide up front
Math Q
uestion
How
large is the m
arket for scho
ol busses in the
US? Follo
w-up: Is the m
arket attractive?
US Population
~320M people
Life Expectancy
~80 years
94
Cand
idate can make
his own assum
ptions or ask for inputs.
•~33% of scho
olchildren take
buses to school
•~50 students ride each bus
•Ancillary busing needs (sporting eve
nts, field trips, etc)
are absorb
ed alm
ost entirely by the
norm
al fleet
Attractive m
arket?
•Market growth is traditiona
lly G
DP/population-drive
n at 3% per ye
ar; last 2 years have
seen 6% growth
•Pull-throug
h demand
ahe
ad of chang
ing
emissions regulation
Provide in
form
ation if asked
Life Expectancy
~80 years
People per Deca
de
~40M people
School A
ge C
ommuters
(~15ye
ars)
~60M children
%Ta
king
Buses
33%
School-Age Children Ta
king
Buses
~20M children
Children per Bus
~50
BusesRe
quired
400K buses
Ave
rageLife of Bus
10 years
Buses Sold
per Ye
ar
40K buses
Exhibit 1 –
Competitive
Land
scape in US Bus M
arket
Big Yellow BusCo
CompetitorA
Competitor B
Market Sha
re A
nalysis
Market Sha
re ($)
38%
34%
28%
95
Market Sha
re (units)
34%
36%
30%
Marg
in A
nalysis
Reve
nue
100%
100%
100%
Gross M
arg
in25%
35%
36%
Operating
Marg
in15%
25%
26%
Que
stion 2 -
Competitive
Land
scape
There are two m
ajor take
aways:
1)
BYB’s sha
re of reve
nue is highe
r than its share of vo
lume
•W
hy? Its price
s are highe
r than peers by 20%
•Does this m
atter? –
YES
•Commodity product and
highly price
-sensitive customer (loca
l cities & tow
ns)
•5 years ago BYB’s m
arket share w
as 60%
Wha
t does the Competitive
Land
scape Data imply?
96
•5 years ago BYB’s m
arket share w
as 60%
•Low-cost competitors are gaining sha
re…
2)
BYB’s cost structure is high relative
to peers
•W
hy? •Gross m
arg
in is the big differentiator
•Cand
idate sho
uld address COGS for bus company
•Materials, labor are largest (no
t just commodity m
etals –
specialty m
achinery
compone
nts)
•BYB has significa
nt m
aterials procurement disadva
ntage
•Competitor A &
B are not stand
-alone
firms –they
are owne
d by large in
dustrial
trucking
firms with some cha
ssis and
eng
ine ove
rlap
Sample Reco
mmend
ation
We do not reco
mmend
proce
eding w
ith the investment of BYB. Even if pricing
of transaction is
attractive BYB is in a difficult competitive
position. BYB is losing
sha
re to two low
er-co
st competitors w
ith
significa
nt built-in co
st adva
ntages given their owne
rship structures. Fu
rthe
r, co
st is the biggest drive
r in
the m
arket as buses beco
me increasing
ly commoditized and
loca
l cities & tow
ns beco
me m
ore price
sensitive in
the
face
of bud
get deficits. Ove
rall, not an attractive investment.
Reco
mmend
ation
Econo
mic decline / immigration patterns co
uld actua
lly accelerate demand
bey
ond
3% growth going
forw
ard
, but eve
n in this ca
se BYB is still at a cost disadva
ntage.
Risks
97
forw
ard
, but eve
n in this ca
se BYB is still at a cost disadva
ntage.
Risks
Make
sure PE fund
does no
t ow
n related portfolio
companies that might allo
w for procurement
syne
rgies with BYB along
the
lines of wha
t is achieve
d by competition. Assum
ing the
re are none
, move
on.
Nex
t Steps
Case: Car Company
A.T. K
earney
, Round 2
Ove
rview for interviewer
Inform
ation to be provided upon reque
st
Frank
is 65 years old, and
for his entire w
orking career, ha
s ow
ned a m
anu
facturing company
which m
anu
factures un
ibodyca
r frames. He has always ha
d one
contract w
ith one
vehicle O
EM, ho
weve
r this year that OEM
has decided not to rene
w its contract.
Wha
t should Frank
do?
Problem statement narrative
98
This is a high-leve
l strategy case. The
interviewer should
guide cand
idate into exploring
Frank
’s various options and
ultimately w
eighing
each option to determ
ine w
hich he
should take
. Various framew
orks co
uld be used to explore
Frank
’s options in the ind
ustry , including, b
ut not lim
ited to a
Value Cha
in Ana
lysis or Five
C’s.
Case Type: Market Strategy
Ove
rview for interviewer
The reason Frank
’s long
time customer ha
s decided to end
their contract w
ith Frank
is beca
use a new
type of welding
techno
logy is being used to m
ake
unibodyframes, and
Frank
’s plant does no
t support this techno
logy.
This new
welding techno
logy w
ill soon be m
and
ated for ca
rs
by gove
rning regulatory body.
Frank
’s company
is priva
tely owne
d, 100% by him
, with an
ann
ual contract reve
nue of $5M.
Frank
has won nu
merous production efficiency and
sup
plie
r qua
lity award
s.
His sup
ply cha
in is alm
ost fully optimized, h
oweve
r he
could
source
some m
aterials elsew
here and
save
$100K / year.
Inform
ation to be provided upon reque
st
Potential Categories of Cand
idate’s Framew
ork
Notable comments / potential discussion points
How
eve
r the cand
idate cho
oses to address Frank
’s options, he
sho
uld reco
gnize
tha
t Frank
’s reve
nue has been elim
inated in
its
entirety so his focus must be resp
ond
ing / repositioning
in ord
er to survive
:
Value Cha
in Ana
lysis (w
here can Frank
gain adva
ntages to low
er his co
st base or better meet customer demand
s?)
•Design / R&D
•Sup
ply Cha
in M
ana
gement
•Production
•Distribution
99
•Distribution
•Customer Mana
gement
Profit Drive
rs•
Revenue (Can Frank
provide his product to other customers, ca
n Frank
adapt his plant to m
anu
facture products for other
customers, Can Frank
lease out his facilities to others?)
•Costs (W
hat will it co
st Frank
to upgrade his facility? W
hat will it cost Frank
to m
anu
facture other products? W
hat will
Frank
have
to invest to gain new
customers?)
5 Cs:
•Customers
(Frank
currently has one
customer, ca
n he
expand
tha
t?)
•Costs(W
here can Frank
cut costs W
hat will it take
for him to upgrade his facility and
adapt the new
techno
logy)
•Competition(W
here is Frank
’s competition positione
d? Are the
re others in his position? Are the
re m
arkets w
here Frank
ca
n ex
plore tha
t are m
ore profitable?)
•Company(W
hat are Frank
’s companies streng
ths? Can that be adapted to ano
ther market/customer?)
•Context( W
hat is causing the
cha
nge in customer beha
vior? Can Frank
do any
thing to sha
pe the
regulatory env
ironm
ent
or get ahe
ad of future cha
nges?)
Potential Issue Tree &
Approach to Solving the
Case
Key
elements of ana
lysis to solve the
case
•Design & R&D
•Sup
ply Cha
in M
ana
gement
•Production
•Distribution
•Customer Mana
gement
Value Cha
in (Profitability)
While cost is co
vered in va
lue cha
in
discussion, the
other “C
’s” ca
n he
lp
determ
ine potential alternative
s:
•Customer
5 C’s
While cost is co
vered in va
lue cha
in
discussion, the
other “C
’s” ca
n he
lp
determ
ine potential alternative
s:
•Customer5 C’s (Continue
d)
100
•Customer Mana
gement
(Basic Math sho
uld be done
to determ
ine Fra
nk
will not be profitable if he
upgra
des since
Frank w
ants to see a return on any
investment
within 2 years)
•Customer
•Company
•Competition
•Contex
t
•Customer
•Company
•Competition
•Contex
t
Possible follo
w-up and
guidance
to in
terviewer
Possible follo
w-up and
guidance
to in
terviewer
Possible follo
w-up and
guidance to
interviewer
For Frank to invest and
upgra
de his facilities he
will have
to in
vest $10M. H
is current (soon to
be expiring contra
ct is $5M and
all-in costs are
$4.5M). If Fra
nk w
ere to reloca
te, his up
gra
de
costs would remain the
same (patented
techno
logy w
ould still ha
ve to be purchased.)
Frank can make
a few cuts in his sup
ply cha
in
and
save
$100K. Fra
nk cannot sa
ve in
distribution and
end
customer co
sts as the O
EM
he serves is right next door. Frank has won
numerous production award
s for being a lean
plant.
Customer: It w
ill be difficult for Frank
to
find
new customers for his current techno
logy
since tha
t techno
logy is being replace
d per
regulations. If he w
ere to upgra
de his plant,
potential new O
EM customers have
signe
d
long
-term
contra
cts with Frank
’s competition.
Company: The
streng
ths of Frank
’s company
lie
s in the
R&D and
design of the unibody
frame techno
logy. Frank
’s company
does no
t sell any
thing else, n
or does it have
high
bra
nd reco
gnition other expertise.
Competition: Fra
nk’s competitors have
signe
d contra
cts with other OEM
s and
some
have
diversified portfolio
s. All ha
ve adapted
the new techno
logy.
Context: Frank is 65 years old and
would
like to spend
more tim
e w
ith his gra
ndkids.
He could consider lobbying the
regulatory
body for a freeze
on the cha
nges, but this
would require a long
er-term
, dedicated
effort.
Sample Reco
mmend
ation
Based on ana
lyzing
Fra
nk’s value cha
in/profit drive
rs, the
streng
ths/weaknesses of his co
mpany
, the
market, Fra
nk
should exit the
current m
arket as he
is currently the
sole proprietor and
quickly aging. Th
e costs of im
plementing the
ne
w regulatory techno
logy are high, and
it does no
t appear that Frank
would be able to reco
up the
m in
his required
2-year turnaroun
d. Th
erefore Fra
nk sho
uld begin to deve
lop an exit strategy, w
hich m
ay in
clud
e a sale to a strategic
buy
er that ca
n make
use of his existing
assets and
/or ha
s more patience to m
ake
long
er-term
inve
stments.
Reco
mmend
ation
If Fra
nk w
ere to close his company
, he w
ould need to consider closure costs, in
clud
ing any
long
-term
sup
plie
r co
ntra
cts,
outstand
ing debt, w
arranties, union fees, potential ill will in
the
commun
ity.
Risks
Frank sho
uld further explore if any
of his current equipment, techno
logies ca
n be adapted to m
ake
new products and
the
costs/reve
nues, altho
ugh initial signs (his co
mpany
’s streng
ths are not in new techno
logy) indicate this may be difficult.
Nex
t Steps
101
costs/reve
nues, altho
ugh initial signs (his co
mpany
’s streng
ths are not in new techno
logy) indicate this may be difficult.
Frank sho
uld explore salvaging current assets and
/or selling
the
business outright.
Nex
t Steps
BONUS
Who
may be potential buy
ers for Frank’s business?
•Strategic buy
ers / competitors: F
rank’s und
erlying
techno
logy m
ay still be attra
ctive in some w
ays.
•Fina
ncial buy
ers: p
robably not given difficult growth
story, b
ut perhaps as part of an industrial roll-up
stra
tegy of simila
r businesses.
Case: Blood Bank
Bain, R
ound 2
Our clie
nt is a blood bank
tha
t ha
s operations spann
ing four states. Th
ey operate m
any
sites from w
hich the
ir staff go out to
different loca
tions (e.g., scho
ols and
offices) in ord
er to colle
ct blood samples. Nex
t, the
blood is transported to centraliz
ed
proce
ssing centers for testing, treatm
ent, etc. (the
re is one
proce
ssing center per state). Fina
lly, the
blood is transported from the
testing centers to the
hosp
itals tha
t ultimately use the
blood. The
blood bank
face
s co
mpetition from other blood colle
ction
organiza
tions. Only 80% of ho
spital demand
for blood is currently being m
et. As a result, ho
spitals often ha
ve to sha
re blood by
transporting it betw
een different hosp
itals, which is costly. The
re are no sub
stitutes for hu
man blood (synthe
tic substances or animal
blood).
Problem statement narrative
102
This is a basic profitability case but has a twist in tha
t the
cand
idate is asked to prioritize
among
the
different possible
mechanism
s by w
hich to improve
profitability. This means
that they
will have
to use the
ir business jud
gment to assess
the feasibility of different options.
Case Type: Profitability
Ove
rview for interviewer
See follo
wing slid
es for furthe
r detail.
Inform
ation to be provided upon reque
st
Their profitability has been slow
ly declining for some tim
e and
the
y are w
orried beca
use new
regulations are coming out tha
t will
require the
m to invest in an ex
pensive new
techno
logy. Th
e CEO
wants to investigate potential areas to look at in ord
er to improve
profitability and
wants to kno
w how
to prioritize
among
the
m.
Sample Issue
Tree &
Qua
litative
Ana
lysis
Cand
idate m
ay propose ana
lysis / action in:
•Reve
nues –opportunities to grow our top line?
•Price
–is the
re any
flexibility in
term
s of the price
we’re
currently cha
rging hosp
itals?
•Qua
ntity –
We kno
w tha
t there is unmet demand
so how can
we in
crease the
volume of units of blood w
e sell to hosp
itals?
•Costs –opportunities to cut costs?
Internal O
pera
tions
•Customers (ho
spitals) –wha
t’s their elasticity of demand
? W
hat
criteria do the
y use w
hen purchasing
blood?
•Sup
plie
rs (dono
rs) –How can we increase the
volume of dona
tions?
Increase #
of dono
rs or freque
ncy of dona
tions?
•Competitors –
are our competitors profitable? Are the
y doing
something w
e’re not?External M
arket Fo
rces
103
•Costs –opportunities to cut costs?
•Variable costs –opportunities to improve
procurement/labor?
•Fixed Costs –opportunities to cut ove
rhead/gain efficiency?
something w
e’re not?
Possible follo
w-up and
guidance to interviewer
Possible follo
w-up and
guidance to interviewer
Price
–Given wha
t we kno
w about the
market, w
hat is your hypothesis
in term
s of our ability to raise our price
s? Cand
idate sho
uld realize
that unmet demand
gives client pricing
power.
Qua
ntity –
Cand
idate sho
uld quickly reco
gnize
tha
t there is unmet
demand
the
y can easily fill if the
y increase the
size of their dona
tions.
Costs –Cand
idate sho
uld probe in
this area and
give ideas for cutting
costs, but interviewer should tell ca
ndidate tha
t the clie
nt has already
been doing the
se and
has cut co
sts as much as possible.
Customers –
A typical opera
tion co
sts the hosp
ital $
40K and
requires
an ave
rage of 2.5 units of blood. Blood costs $100/unit.
Cand
idate sho
uld realize blood is relative
ly lo
w cost for ho
spitals.
Interviewer ca
n share tha
t blood is seen as a commodity by hosp
itals.
Sup
plie
rs –
Cand
idate sho
uld explore possibilities for increasing
blood sup
plie
s to m
eet unmet demand
. A
good cand
idate w
ill come
up w
ith multiple w
ays to increase sup
ply. In actua
lity, most have
been tried in
real life and
have
not worked. Sup
ply is essentially
fixed.
Competitors –
No additiona
l info is kno
wn.
Que
stion 1 –
Math
How
can we tell if w
e are breaking
eve
n?Fo
llow-up after answer: If we’re losing
mone
y, w
hat price
do w
e need in ord
er to break eve
n?Fo
llow-up after answer: Do you think this price
is achieva
ble?
Math Q
uestion
Ove
rall approach, g
ood sho
rtcuts &
solution
NoneIn
form
ation to provide up front
104
Fixe
d Costs = $15M
Contribution Marg
in =
$100 (Price
) -$80 (va
riable costs) =
$20
Break Even Volume =
$15M/$20 =
750K units
The blood bank
is no
t reaching the
ir break eve
n point (400,000 units).
To solve the
seco
nd que
stion, hold volume and
fixed costs co
nstant and
solve for
contribution marg
in:
$15M/400K units =
$37.50 The
y need to raise price
s by $17.50 per un
it. This is
an increase of ne
arly 100%.
To solve third
que
stion, eva
luate the
price
impact on the hosp
itals:
An operation co
sts $40K, blood costs are currently 2.5 x $100 =
$250. Blood costs
are approxim
ately 0.625% of total co
sts ($250/$40K). Th
ere sho
uld be ample
room to increase the
se costs.
-Ove
rall fixe
d costs are $15M a year
-Variable costs are $80 per un
it-Sales price
is $100
-Current volume is 400K units
-Typical operation co
sts ho
spital $40K
(also provided earlier)
-Typical operation requires ave
rage of 2.5
units of blood (also provided earlier)
Provide in
form
ation if asked
Sample Reco
mmend
ation
First and
foremost, raise price
s to improve
marg
ins. Th
ere is unm
et demand
and
blood represents a
small portion of co
sts.
Seco
nd, continue
to look for ways to increase qua
ntity in ord
er fill un
met demand
.Fina
lly, continue
in efforts to keep costs minim
al.
Reco
mmend
ation
Risks are low
, since blood is essential, ha
s no
sub
stitutes and
the
re is un
met demand
.Risks
Immediately im
plement price
increases
Inve
st new
profits in ord
er to try to increase dona
tion leve
lsNex
t Steps
105
Inve
st new
profits in ord
er to try to increase dona
tion leve
lsNex
t Steps
Case: Ea
syNav
McK
insey, M
ock Interview
EasyNAVis a m
ulti-nationa
l third-p
arty fun
d accoun
ting
company
based in New
York. A
sset mana
gers, such as Fidelity or other
smalle
r inve
stment sho
ps, often outsource
the
calculation of their daily
fun
d price
s to third
-parties such as Ea
syNAV. The
se fun
d
price
s, calle
d N
et Asset Values, or “N
AVs,” represent the
per-share price
of the fun
d, which the
n beco
mes pub
lishe
d to the
gene
ral
pub
lic, e
.g., in the
Wall Street Journa
l. G
iven the high fina
ncial stake
s, asset mana
gers require EasyNAV
to be both highly accurate
and
tim
ely in their N
AV calculations. Th
is is still a highly m
anu
al p
roce
ss due
to the
num
ber of data source
s required to colle
ct this
inform
ation and
inconsistency in data form
ats delivered to EasyNAV. Altho
ugh business growth has been strong
ove
r the last five
years, Ea
syNAV
has seen its co
sts rising
more quickly tha
n its reve
nues. At the current trajectory, co
sts will exceed reve
nues within
the nex
t deca
de, and
something m
ust be done
. W
hat are
the
caus
es o
f Ea
syNAV’s
rising
costs, a
nd w
hat ca
n be
done
to red
uce
them
?
Problem statement narrative
106
The in
itial p
roblem statement specifica
lly asks the cand
idate
to explore EasyNav’srising
costs. Th
erefore, the cand
idate
should ig
nore typical Profitability framew
orks that ex
plore
Reve
nues in addition to Costs.
After the cand
idate deve
lops a framew
ork the
interviewer
should m
ove
on to the
sub
seque
nt que
stions.
Case Type: Profitability / O
perations
Case Style: Command
& Control
Ove
rview for interviewer
Steps Ea
syNavuses to calculate N
AVs:
1.
Verify the
num
ber of shares of each security tha
t is held
within the fun
d2.
Verify the
num
ber of outstand
ing sha
res of the fun
d itself
3.
Rece
ive and
confirm the
market-close price
s of each
security in the fun
d (must wait) for the equity m
arkets to
close; 4pm EST)
4.
Use all ava
ilable data to calculate N
AV and
send
to
requisite pub
lishe
rs –
Wall Street Journa
l, Fina
ncial
Times, etc. (m
ust submit by 6pm EST)
Inform
ation to be provided upon reque
st
the nex
t deca
de, and
something m
ust be done
. W
hat are
the
caus
es o
f Ea
syNAV’s
rising
costs, a
nd w
hat ca
n be
done
to red
uce
them
?
Potential Issue Tree &
Approach to Solving the
Case
Key
elements of ana
lysis to solve the
case
How
does Ea
syNAV
operate?
•Workflow
proce
ss•Balance of labor
Company
Who
are the
y?
•Influx
of sm
all asset mana
gers
•Shift in customer mix
Customer
Wha
t are the
ind
ustry trend
s & norm
s?
•Shift to w
ider rang
e (and
complex)
inve
stment products
•Techno
logy adoption rates
Industry
107
Possible follo
w-up and
guidance
to in
terviewer
Possible follo
w-up and
guidance
to in
terviewer
Possible follo
w-up and
guidance to
interviewer
•Bottlene
ck of waiting for market-close
price
s will cause EasyNAV
to have
to
staff to this peak period of ca
pacity
demand
, leaving
periods of time
earlier in the
day tha
t are left w
ith
slack capacity.
•Dedicated fun
d accoun
tants who
proce
ss each accoun
t from start to finish
are m
ore costly tha
n functiona
lizing
roles along
the
value cha
in.
•Smalle
r asset mana
gers have
sim
pler
systems leading to ad hoc/
manu
al
methods of delivering
data to.
EasyNAV, w
hich in
creases labor & cost
•Greater business from new
customers
vsex
isting
customers requires greater
expense in
initial accoun
t setup.
•Shift from typical mutua
l fund
s to
deriva
tive
s add to complexity and
are
more difficult to price.
•Fe
w third
-party fun
d accoun
ting
co
mpanies relying on techno
logy to
calculate N
AVs resulting in high labor
costs.
Que
stion 1 –
Cost Reduction
Que
stion
EasyNAVha
s 125 fun
d accoun
tants today (the FTE
s who
calculate N
AVs) w
ho typically
are assigne
d 3-6
fun
ds each, which the
y w
ork
with from m
orning until end
of business. The
se fun
d accoun
tants tend
to be very busy during the
end
of the day in ord
er to m
eet
submission deadlin
es. Separately, Ea
syNAV
also has a staff of 25 fun
d administrators w
ho deal mainly w
ith the pub
lishing
of
qua
rterly and
ann
ual prosp
ectuses (i.e. a report of fund
perform
ance). In addition to its operations in up
state N
ew York, Ea
syNAV
has fund
accoun
ting
operations in Melbourne
, Australia
, which hand
les some internationa
lly domicile
d fun
ds. W
hat are some possible
ways for Ea
syNAV
to improve
the
ir w
orkflow
and
reduce costs?
108
None
Inform
ation to provide up front
None
Provide in
form
ation if asked
Possible solutions:
--Functiona
lize p
iece
s of the value cha
in to properly alig
n resource
s with
work lo
ad. For example, instead of one
fund accountant follo
wing a fund
from beginning
to end
, break up
the
steps to calculating
a N
AV.
--Rebalance funds across different fund accountants to ensure tha
t the m
ost
complex funds are hand
led by the
best fund accountants (load balancing).
--Utilize the
fund administrators group
to help proce
ss funds during the
peak end
-of-day period. Since
the
ir w
ork output is on a qua
rterly basis,
they m
ay have
capacity to assist the fund accountants during crunch time.
--Utilize all loca
tions (U.S., Lo
ndon, Ind
ia) to better load balance w
ork
throug
h time zone
arb
itra
ge. For example, end
-of-day activities for
Lond
on would take
place
during quieter morning/no
on times for the U
.S., so
exce
ss capacity in the U
.S. co
uld be used to help Lond
on during peak times.
--Utilize potential low-cost regions of the globe for additiona
l offshoring
.--
Increase use of techno
logy to reduce m
anual proce
sses
Ove
rall approach, g
ood sho
rtcuts &
solution
Que
stion 2 –
Productivity Loss
Math Q
uestion
Due
to m
arket chang
es, the
team belie
ves that productivity per FT
E ha
s dropped ove
r the past five years. Beca
use m
ore complex
fund
s take
more m
anp
ower to proce
ss, Ea
syNAVno
rmaliz
es the difficulty of each fun
d by assigning
fun
ds a “co
mplexity point score,”
which allo
ws a fair fun
d-to-fun
d comparison (e.g., a fun
d w
ith co
mplexity sco
re 15 take
s three tim
es as long
to proce
ss as a fun
d w
ith
complexity sco
re 5). Th
e team needs to determ
ine the
leve
l of seve
rity of this productivity drop. To do this, data in Ex
hibit 1 has
been co
llected. Using
this data and
any
other data you might deem nece
ssary, wha
t is the
percentage drop in productivity ove
r the
past five years, whe
re “productivity” ca
n be expressed as co
mplexity points per FT
E?
109
Exhibit 1 sho
uld be provided after problem statement is read.
Inform
ation to provide up front
-La
rge funds ha
ve an ave
rage of 10 complexity points each
-Small fund
s ha
ve an ave
rage of 20 complexity points each
-Num
ber of larg
e funds ha
s grown 25% ove
r the last five years
-Num
ber of sm
all fund
s ha
s grown 120% ove
r the last five years
-Num
ber of fund
accountant FTEs ha
s grown 150% the
past five year
Provide in
form
ation if asked
Solution: 20% drop in productivity
Ove
rall approach, g
ood sho
rtcuts &
solution
Que
stion 3 –
Resource
Allo
cation
Math Q
uestion
After meeting
with Ea
syNAV
mana
gement, the team is asked to explore potential sa
ving
s by utilizing fund accountant downtim
e in one
geogra
phy
to assist
ano
ther geogra
phy
during the
ir peak time betw
een 4-6
pm. Specifica
lly, they w
ould like us to examine how the
Melbourne
loca
tion co
uld assist the N
ew York
loca
tion. Additiona
l inform
ation unco
vered:
--Melbourne
is 16 hours ahe
ad of New York
--Due
to natura
l va
riances in w
orkload per day, a lo
cation’s ave
rage
--FTEs are paid an equiva
lent of USD $50,000 per year
utiliza
tion ca
nnot exce
ed 80% of the total ava
ilable FTEs. That is,an
--New York has 100 FTEs staffed throug
hout the
day, Melbourne
has 60 FTEs
ave
rage safety cushion of 20% FTEs is required all times of the day to
--Utilization of FTEs varies throug
hout the
day based on the amount
allo
w for ve
ry busy days. Both loca
tion’s full-staffing leve
ls reflect
of work required at that time of day. A
vgutiliza
tion in Exhibit 2.
the nece
ssary staffing to m
eet this requirement (e.g. 100 employees in
110
Exhibit 2 sho
uld be provided after problem statement is read.
Inform
ation to provide up front
Utilization is a m
easure of ho
w m
uch of a lo
cation’s total ava
ilable
FTE resource
s are being used (demand
ed) at any
given time, e.g., if a
loca
tion ha
s 5 FTEs on ha
nd, and
the
utilization is 60% at no
on, the
n the demand
for work is 3 FTEs at that time.
Provide in
form
ation if asked
of work required at that time of day. A
vgutiliza
tion in Exhibit 2.
the nece
ssary staffing to m
eet this requirement (e.g. 100 employees in
New York to m
eet the ave
rage need of 80 employees in peak ho
urs).
If all ava
ilable slack capacity in Australia
could be diverted to help w
ork on New York-p
roce
ssed funds during the
ir peak activity period of 4-6
pm, ho
w m
uch
could be save
d in labor expense by reducing the
New York staffing requirement?
See follo
wing slid
e.
Ove
rall approach, g
ood sho
rtcuts &
solution
Que
stion 3 –
Solution
Math Solution
Solution: EasyNAVwill save $750,000/yr, or about 15% of total New York FTE spend
-Time zone
conversion: 4-6
pm peak period in
NY is 8-1
0am in Melbourne
-Ava
ilable resource
s in M
elbourne
: -From the
exhibit, a
vera
ge utilization in M
elbourne
from 8-1
0am is 60%, the
refore the
re is 20% capacity before reaching the
80%
threshold (ave
rage utilization ca
nnot exce
ed 80% during any
period of the day)
-The
refore, 2
0%*6
0 FTE =
12 FTEs ava
ilable to assist NY
-New resource
requirement in
NY by utilizing M
elbourne
: -D
uring the
peak time of 4-6
pm, N
Y has an ave
rage of 80% FTE utilization, m
eaning
tha
t 80%*1
00 FTEs = 80 FTEs ne
eded/working
111
-During the
peak time of 4-6
pm, N
Y has an ave
rage of 80% FTE utilization, m
eaning
tha
t 80%*1
00 FTEs = 80 FTEs ne
eded/working
during this time
-By utilizing M
elbourne
, EasyNAVca
n reduce the
80 FTE demand
by 12: 80-1
2 =
68 FTEs required in
New York
-Saving
s due
to reduction of FTE requirements in N
Y:
-EasyNAVca
n reduce staff in
NY so tha
t the 68 FTEs required during the
peak time represent 80% staffing requirements
-The
refore, 6
8 FTEs/80% =
85 FTEs
-FTE saving
s of 100-8
5 =
15 FTEs
-Dolla
r sa
ving
s of 15 FTEs*$50,000 =
$750,0000
EasyNAVEx
hibit 1
112
EasyNAVEx
hibit 2
113
Sample Reco
mmend
ation
EasyNav’sprimary cost drive
r is the
mismatch betw
een FT
E resource
s and
demand
. The
clie
nt can
reduce the
se costs by utiliz
ing slack capacities betw
een New
York and
Melbourne
. Such an
arrang
ement w
ill allo
w EasyNAV
to reduce its labor by 6 FTE
, a saving
s of $300,000/ye
ar.
Reco
mmend
ation
Trade-offs to m
axim
um efficiency (e.g. potential loss of qua
lity or less-skille
d labor in offshore
agreements, loss of ow
nership, e
tc)
Risks
EasyNAVmay bene
fit from greater automation of manu
al p
roce
sses and
, in addition, can work w
ith its
clients to m
and
ate stand
ard
ized data sub
missions to streamlin
e N
AV calculations.
Nex
t Steps
114
clients to m
and
ate stand
ard
ized data sub
missions to streamlin
e N
AV calculations.
Nex
t Steps
Case: Manny’s M
anu
facturing
Insp
ired by A.T. Kearney
, Round 2
The cand
idate sho
uld first determ
ine the
profitability of the
Ove
rview for interviewer
Products are sold only in the U
nited States
Inform
ation to be provided upon reque
st
Manny’s M
anu
facturing is a U.S. based company
tha
t produces a consum
er packaged good. It currently has manu
facturing facilities
in the
U.S. and
an idle plant in South America
. The
exe
cutive
team at Manny’s M
anu
facturing is trying to determ
ine the
health of its
business and
whe
ther to use the
South America
n plant.
Problem statement narrative
115
The cand
idate sho
uld first determ
ine the
profitability of the
North America
n plant by looking
at reve
nue and
costs.
He/she w
ill m
ost likely do a m
arket size
ana
lysis to assist
with this. H
e/she w
ill the
n eva
luate potential profitability of
the South America
n plant and
finally
explore some of the
qua
litative
issues that co
me w
ith operating
internationa
lly
(additiona
l taxe
s, env
ironm
ental concerns, proxim
ity of
distributors, product qua
lity, lack of techno
logical
adva
ncement etc). Th
e cand
idate m
ay decide to use the
S.A.
plant, sell the S.A. plant, or maintain status quo
. D
epend
ing
on the cand
idate’s assum
ptions, different answers m
ay apply.
Be sure tha
t the logic is soun
d.
Case Type: Profitability, Market Size, Strategic A
nalysis
Products are sold only in the U
nited States
North America
profitability ana
lysis:
1.
Market Size ana
lysis
1.
U.S. P
opulation: 300M
2.
% of population demand
ing the
product: 10%
3.
# of products demand
ed per person: 20
4.
Price
of product: $ 0.50
5.
Manny’s M
arket Sha
re: 5%
6.
Market is m
ature and
not expected to grow
significa
ntly. C
ompetitive
market, but difficult to steal
market share
2.
Costs with N.A. plant (see Q
uestion 2)
3.
Costs with the S.A. p
lant (see Q
uestion 2)
4.
Capacity: N
.A. p
lant can make
50M goods; S.A. can make
20M goods
5.
The same product with the same qua
lity can be produced in
S.A. o
r N.A.
Que
stion 1 –
Market Sizing/ Reve
nue Ana
lysis
Wha
t is M
anny’s Reve
nue?
Un
ite
d S
tate
s
Un
ite
d S
tate
s P
op
ula
tio
n (
giv
en
)3
00
,00
0,0
00
Pe
rce
nta
ge
of
the
po
pu
lati
on
de
ma
nd
ing
th
e p
rod
uct
(g
ive
n)
10
%
To
tal P
eo
ple
de
ma
nd
ing
th
e p
rod
uct
(3
00
M *
10
%)
30
,00
0,0
00
-No inform
ation is to be given up
front. Sim
ply ask
how the
cand
idate w
ould do m
arket share ana
lysis
Inform
ation to provide up front
116
To
tal P
eo
ple
de
ma
nd
ing
th
e p
rod
uct
(3
00
M *
10
%)
30
,00
0,0
00
# o
f p
rod
uct
s d
em
an
de
d b
y p
ers
on
on
ave
rag
e (
giv
en
)2
0
To
tal M
ark
et
Size
(#
of
pro
du
cts)
(2
0*
30
M)
60
0,0
00
,00
0
Pri
ce p
er
pro
du
ct (
giv
en
)$
0.5
0
To
tal M
ark
et
Size
($
) ($
0.5
0*
60
0M
)$
3
00
,00
0,0
00
Ma
nn
y's
Ma
rke
t Sh
are
(g
ive
n)
5%
Ma
nn
y's
Pro
du
cts
De
ma
nd
(5
% *
60
0M
un
its)
30
,00
0,0
00
Ma
nn
y's
To
tal P
ote
nti
al R
eve
nu
e (
$0
.50
* 3
0M
)$
1
5,0
00
,00
0
-Market Po
pulation = U.S.: 300M
-% of population demand
ing the
product: 10%
-# of products demand
ed / person: 20
-Price
: $0.50
-Manny’s M
arket Sha
re: 5%
Provide in
form
ation if asked
Que
stion 2 –
Cost Structure
Wha
t are M
anny’s costs to opera
te each plant?
Co
sts
for
N.A
. P
lan
t
Fixe
d C
ost
s$
5,0
00
,00
0
Va
ria
ble
Co
sts
Ra
w M
ate
ria
ls (
$0
.10
pe
r p
rod
uct
)$
3,0
00
,00
0
Tra
nsp
ort
ati
on
($
0.0
5 p
er
pro
du
ct)
$
1
,50
0,0
00
Oth
er
VC
$
4
,00
0,0
00
-No in
form
ation is given up
front. Th
e cand
idate sho
uld
ask for each of the num
bers.
-If the
cand
idate asks for “V
ariable C
osts,” ask
him/he
r to give examples of V.C.
-Ask the
m to explore w
hat co
uld be in the O
ther V.C.
bucke
t (labor, va
riable ove
rhead, etc)
Inform
ation to provide up front
117
Oth
er
VC
$
4
,00
0,0
00
To
tal C
ost
s$
13
,50
0,0
00
Co
sts
for
S.A
. P
lan
t -
ass
um
ing
op
era
tin
ga
t 1
00
% (
20
M g
oo
ds
wh
ich
is
no
t e
no
ug
h t
o
sati
sfy
10
0%
of
de
ma
nd
)
Fixe
d C
ost
s$
4,5
00
,00
0
Va
ria
ble
Co
sts
Ra
w M
ate
ria
ls (
$.0
5 p
er
pro
du
ct)
$
1
,00
0,0
00
Tra
nsp
ort
ati
on
($
0.2
0 p
er
pro
du
ct)
$
4
,00
0,0
00
Oth
er
VC
$
4
,50
0,0
00
To
tal C
ost
s$
14
,00
0,0
00
-Fixe
d Costs for N.A. are $5M
-Ra
w M
aterial Costs for N.A. are $0.10 per product
-Transportation Costs for N.A. are $0.05 per product
-Other V.C. in N
.A. are $4M
-Fixe
d Costs for S.A. are $4M
-Ra
w M
aterial Costs for S.A. are $0.05 per product
-Transportation Costs for S.A. are $0.20 per product
-Other V.C. for S.A. are $4M
-Manny’s capacity in N.A. is 50M
-Manny’s capacity in S.A. is 20M
Provide in
form
ation if asked
Issue Tree: Qua
litative
Factors
In addition to the
previous qua
ntitative
slid
es, cand
idate can ex
plore various bucke
ts
-Is there a larger env
ironm
ental impact
associated w
ith transportation from
S.A.?
-Do the
same env
ironm
ental
regulations apply to the
S.A. plant as
Environm
ental C
oncerns
-Are the
re stricter/looser laws in S.A. or
N.A.?
Legal C
oncerns
-Is it possible to expand
to other markets?
-W
hat are the
tax implications of
internationa
l expansion?
Internationa
l Expansion
118
regulations apply to the
S.A. plant as
the N
.A. plant?
Possible follo
w-up and
guidance
to in
terviewer
Possible follo
w-up and
guidance
to in
terviewer
Possible follo
w-up and
guidance to
interviewer
-Carb
on footprint is something the
co
mpany
has been extremely concerned
with and
would like to keep emissions as
low as possible. Shipping from S.A. w
ould
dra
stically
increase the
carb
on footprint
-Environm
ental regulations are not as strict
in S.A., particularly w
ith waste disposa
l and
factory cleanliness. T
his co
uld tarnish
the company
’s image
-W
hile laws are stricter in the
U.S.,
Manny’s is not willing to use any
of the
loopho
les in S.A. to gain a competitive
adva
ntage for fear of damaging its
image.
-Have
the
cand
idate explore the
option by
asking follo
w up que
stions
-How m
uch ca
pacity is ava
ilable?
-Which m
arkets sho
uld M
anny
expand
to and
why
?-W
here w
ould M
anny produce the
goods to expand
?-There w
ill be import/export taxes, but for
ease, a
ssum
e the
y fall within other V.C.
Sample Reco
mmend
ation
Manny’s M
anu
facturing sho
uld continue
to produce in the United States and
sell the South America
n plant if an attractive opportun
ity arises. Th
e reason to continue
producing in the U.S. and
not in S.A. are
1) Manny’s w
ould actua
lly lose m
one
y on sa
les to the
U.S. from S.A. ($10M reve
nue -$14M cost at full
capacity utiliz
ation in S.A.); 2) It is cheaper to produce in the U.S. mainly due
to transportation co
sts; 3)
The env
ironm
ental impact of producing in the U.S. is significa
ntly low
er; and
4) S.A. does no
t ha
ve the
ca
pacity alone
to m
eet demand
in the U.S. and
the
refore the
N.A. and
S.A. plants would both need to
be run
ning
meaning
Manny w
ould incur the
fixed costs at both loca
tions.
Reco
mmend
ation
-Manny’s m
ay not find
a buy
er for the plant or may m
iss opportun
ities to expand
in S.A.
-Manny’s m
any
eve
ntua
lly reach capacity in the U.S.
Risks
119
-Manny’s m
any
eve
ntua
lly reach capacity in the U.S.
-Try to increase demand
in N.A. to get the N
.A. plant fully utiliz
ed
-Ex
plore internationa
l ex
pansion
-Find
potential buy
er for S.A. plant
Nex
t Steps
Wha
t would it take
to m
ake
the
S.A. plant m
ore
appealin
g?
-Increased capacity
-Lower transportation co
sts
-Increased demand
(the N
.A. factory is no
t runn
ing at
100% utiliz
ation currently)
BONUS
Case: Zenith Hotel
Bain, R
ound 1
Ove
rview for interviewer
Inform
ation to be provided upon reque
st
Zenith Hotel is a global ho
tel chain w
ith 50 hotels in 20 coun
tries. Th
e company
is eva
luating
the
construction of a new
hotel in the
Baha
mas. Zenith has co
me to us asking w
hether it sho
uld and
can move
forw
ard
with the project.
Problem statement narrative
120
This case is ex
tremely straightforw
ard
and
open end
ed. The
interviewer read the
problem statement and
waited for the
cand
idate to drive
the
rest of the case. N
o exhibits were
introduced.
This w
as primarily a case about feasibility, so the
discussion
should focus on an internal / external ana
lysis of the
company
’s plans w
ith tw
o m
ath problems to solve.
Case Type: Market En
try
Ove
rview for interviewer
The hotel w
ill have
400 rooms
Inform
ation to be provided upon reque
st
Potential Issue Tree &
Approach to Solving the
Case
Key
elements of ana
lysis to solve the
case
•Capabilities
•Start-up costs
•Ex
pected profits, drive
n by reve
nues
(volume * price
) and
costs (broke
n dow
n by fixed and
variable)
Internal
•Competition
•Consum
er demand
•Re
gulatory/other issues
External
See m
athematica
l detail on follo
wing
pages
Feasibility
121
dow
n by fixed and
variable)
Possible follo
w-up and
guidance
to in
terviewer
Possible follo
w-up and
guidance
to in
terviewer
Possible follo
w-up and
guidance to
interviewer
•Ask the
cand
idate to w
alk throug
h the
costs that the hotel would occur on an
on-going basis
•Make
sure tha
t insurance and
marketing
costs are included
•Re
gulatory/co
untry-specific issues
are not a concern
See m
athematica
l detail on follo
wing
pages
Que
stion 1 –
Breake
ven
•Costs ove
r 5 years =
$500M +
10*2
0M =
$700M
Ove
rall approach, g
ood sho
rtcuts &
solution
•Start-up costs are $500M
Inform
ation to provide up front
Math Q
uestion
How
much would Zenith need to cha
rge on ave
rage per room to break eve
n?
122
•400 rooms * 350 days/ye
ar * 10 years =
1.4M room days
•$700M/1.4M =
$500 per night
•Th
e hotel w
ould cost $20M a year to operate
•Assum
e tha
t we are eva
luating
a ten ye
ar ho
rizo
n
•Assum
e 350 days in a year at co
nstant rates
Provide in
form
ation if asked
Que
stion 2 –
Market Sha
re
•400 rooms * 75% occup
ancy =
300 rooms
Ove
rall approach, g
ood sho
rtcuts &
solution
•Ave
rage occup
ancy is 75%
Inform
ation to provide up front
Math Q
uestion
Wha
t is Zenith’s implie
d m
arket share?
123
•300 rooms * 3 people =
900 people at any
given time
•900 people per week * 4 w
eeks/month = 3,600
people/month
•3,600 people per month/
50,000 people per month = 7.2%
market share
•Baha
mas rece
ives 50,000 visitors per month
•Assum
e 3 people per room
•Assum
e 7 day ave
rage stay
‘
Provide in
form
ation if asked
Sample Reco
mmend
ation
Zenith sho
uld proce
ed w
ith the construction of the hotel. A
s a global ho
tel chain, gaining a 7% m
arket
share in the Baha
mas seems like a reasona
ble goal.
Reco
mmend
ation
It seems ove
rly aggressive to assum
e tha
t ho
tel rooms will be occup
ied 350 days a year for the
breake
ven ca
lculation.
Risks
Examine consum
ers’ willingne
ss to pay $500/night for a Zenith hotel room in the Baha
mas.
Nex
t Steps
124
Nex
t Steps
Contents
�Introduction
�Consulting Industry Guide
�Industry O
verview
�Firm
Ove
rviews (10 Firms)
Section
3 6
Page #
125
�Firm
Ove
rviews (10 Firms)
�Interview Preparation
�Interview O
verview –
Fit + Case
�Sample Framew
orks
�Industry Sna
pshots
�Practice Cases
�14 Practice C
ases
�Links to Other Cases
�Cases from Firm W
ebsites
�Sug
gested C
ases from other Casebooks
18
50
126
Reco
mmend
ed cases from company
web
sites (1/3)
Firm Name
Case Name
Case Type
Link to Case
McK
insey
Great Burger
Acq
uisition
http://www.m
ckinsey.co
m/ca
reers/ho
w_do
_i_apply/ho
w_to_do_well_
in_the_intervie
w/ca
se_interview.asp
x
McK
insey
Magna
Health
Profitability
http://www.m
ckinsey.co
m/ca
reers/ho
w_do
_i_apply/ho
w_to_do_well_
in_the_intervie
126
_i_apply/ho
w_to_do_well_
in_the_intervie
w/ca
se_interview.asp
x
BCG
GenC
oRe
venue
improve
ment
http://bcg
.com/ca
reers/interview_prep/d
efa
ult.html
BCG
Sug
ar Cereal
Distribution
http://bcg
.com/ca
reers/interview_prep/d
efa
ult.html
BCG
Jet Fighter
Profitability
http://bcg
.com/ca
reers/interview_prep/d
efa
ult.html
BCG
Disco
unt Re
taile
rCompetitive
strategy
http://bcg
.com/ca
reers/interview_prep/d
efa
ult.html
Reco
mmend
ed cases from company
web
sites (2/3)
Firm Name
Case Name
Case Type
Link to Case
Bain
Persona
l Care
PE Firm
Acq
uisition
http://www.jo
inbain.com/apply-to-
bain/interview-
prepara
tion/
defa
ult.asp
Bain
Office Vend
ing
Profitability
http://www.jo
inbain.com/apply-to-
bain/interview-
127
bain/interview-
prepara
tion/
defa
ult.asp
Oliver W
yman
Wum
ble
World
Theme Park
Profitability
http://www.oliverw
yman.co
m/ow
/479
7.htm
Oliver W
yman
Aqua
lineBoats
Reve
nue
improve
ment
http://www.oliverw
yman.co
m/ow
/479
7.htm
L.E.K
Case 1
Market Sizing
http://www.le
k.co
m/Careers/mba_ca
se_interview.cfm
Reco
mmend
ed cases from company
web
sites (3/3)
Firm Name
Case Name
Case Type
Link to Case
AT Kearney
Case 1
Growth
Strategy
http://www.atkearney
.com/shared_res
/pdf/interview_ca
sebook_
S.pdf
AT Kearney
Case 2
Growth
Strategy
http://www.atkearney
.com/shared_res
/pdf/interview_ca
sebook_
S.pdf
AT Kearney
Case 3
Distribution
http://www.atkearney
.com/shared_res
128
AT Kearney
Case 3
Distribution
http://www.atkearney
.com/shared_res
/pdf/interview_ca
sebook_
S.pdf
AT Kearney
Case
4Competitive
threat/resp
http://www.atkearney
.com/shared_res
/pdf/interview_ca
sebook_
S.pdf
AT Kearney
Case 5
Outsourcing
http://www.atkearney
.com/shared_res
/pdf/interview_ca
sebook_
S.pdf
AT Kearney
Case 6
Sha
red svcs
http://www.atkearney
.com/shared_res
/pdf/interview_ca
sebook_
S.pdf
Reco
mmend
ed cases from C
asebooks (1/7)
Firm Name
Case Name
Case Type
Casebook / Reference
Bain
Giant Bank
Profitability
2007 Ross M
ichigan / #
13
Bain
Acm
e Packaging
Priva
te Equity
2007 Ross M
ichigan / #
14
Bain
Mattress M
ake
rMarket Entry
2007 Ross M
ichigan / #
15
129
Bain
Mattress M
ake
rMarket Entry
2007 Ross M
ichigan / #
15
Booz
PCB M
anufa
cturer
Sup
ply C
hain
2007 Ross M
ichigan / #
16
AT Kearney
Electronics M
eter
Manufa
cturer
Profitability
2007 Ross M
ichigan / #
17
Food W
holesa
ling
Profitability
2004 Kello
gg / #
1
Reco
mmend
ed cases from C
asebooks (2/7)
Firm Name
Case Name
Case Type
Casebook / Reference
GOTO
Net
Market Entry
2004 Kello
gg / #
2
Main A
pples
New
Product
2004 Kello
gg / #
3
Syzy
gy
Profitability
2004 Kello
gg / #
5
130
Syzy
gy
Sup
ercomputers
Profitability
2004 Kello
gg / #
5
Winter Olympics
Bidding
Determ
ining
Value
2004 Kello
gg / #
6
Retail Banking
Growth
2007 W
harton / #
3
Retirement Homes
Profitability
2007 W
harton / #
4
Firm Name
Case Name
Case Type
Casebook / Reference
Bain
Airplane
De-Icing
Outsourcing
2006 Ross M
ichigan / #
4
Booz
Gard
ening
Retaile
rProfitability
2006 Ross M
ichigan / #
10
ZS Associates
Cleaning
Sup
plie
sSalesforce
2007 Ross M
ichigan / #
20
Reco
mmend
ed cases from C
asebooks (3/7)
131
ZS Associates
Cleaning
Sup
plie
sSalesforce
2007 Ross M
ichigan / #
20
Booz
PCB M
anufa
cturer
Sup
ply C
hain
2007 Ross M
ichigan / #
16
Chicken Po
xNew
Product
2006 Tuck / pg. 34
Fine
China
Profitability
2006 Tuck / pg. 50
Firm Name
Case Name
Case Type
Casebook / Reference
Kicks
Market Entry
2006 Tuck / pg. 66
Splat!
Profitability
2006 Tuck / pg. 83
New
York Taxi
Profitability
2006 Tuck / pg. 99
Reco
mmend
ed cases from C
asebooks (4/7)
132
New
York Taxi
Drive
rProfitability
2006 Tuck / pg. 99
Consum
er
Electronics
Portfolio
Strategy
2006 W
harton / pg. 27
Bain
European
Motorcycles
Priva
te Equity
2005 C
olumbia/ #
12
BCG
Eye Surgery
Market Entry
2005 C
olumbia/ #
14
Firm Name
Case Name
Case Type
Casebook / Reference
BCG
Institutiona
l Asset
Mana
ger Fe
es
Market Entry
2005 C
olumbia/ #
18
Bain
Gum
by’s Pizza
Priva
te Equity
2005 C
olumbia/ #
19
New
Eng
land
Profitability
2005 C
olumbia/ #
23
Reco
mmend
ed cases from C
asebooks (5/7)
133
New
Eng
land
Re
tail Bank
Profitability
2005 C
olumbia/ #
23
Bain
She
ep Auction
New
Product
2005 Ross M
ichigan / #
16
Bain
Security Systems
Market Entry
2005 Ross M
ichigan / #
17
BCG
Sand
wich Bags
Sup
ply C
hain
2005 Ross M
ichigan / #
28
Firm Name
Case Name
Case Type
Casebook / Reference
McK
insey
Maldovian Coffins
Determ
ining
Value
2005 W
harton / #
1
Bain
Hard
HeatHelm
ets
Priva
te Equity
2005 W
harton / #
2
Mercer
Verizo
n Security
Market Entry
2005 W
harton / #
3
Reco
mmend
ed cases from C
asebooks (6/7)
134
Mercer
Verizo
n Security
Services
Market Entry
2005 W
harton / #
3
Bain
ABC Cong
lomerate
Portfolio
Strategy
2005 W
harton / #
4
McK
insey
H Health
Profitability
2005 W
harton / #
9
Booz
H Hotel
Pricing
2005 W
harton / #
10
Firm Name
Case Name
Case Type
Casebook / Reference
Butcher Sho
pSup
ply C
hain
2004 H
BS / #
2
Trave
l Agency
Profitability
2004 H
BS / #
10
Regiona
l Je
t Profitabiliy
2004 H
BS / #
16
Reco
mmend
ed cases from C
asebooks (7/7)
135
Regiona
l Je
t Corp
oration
Profitabiliy
2004 H
BS / #
16
Helicopter
Market Entry
2003 W
harton