Case Interview Workshops
#3 – Understanding Business Situation
The Johns Hopkins Business & Consulting Club
1
Goals to achieve today
1. Understand the business situation framework
2. Do a business situation market entry case
2
Types of case interview question could vary
a lot…
1. Growth:
a. Top-line (revenue) growth
b. Bottom-line (profitability) growth
2. Business Situations
a.
b.
c.
d.
e.
New products or services
Market entry
Competition
Pricing and valuation
Operations
3. Merger & Acquisitions
3
Business Situation Framework
Customers
Product
Company
Competition
• Who?
• Segment size and growth?
• Preferences? – wants, price points, distribution
• Advantages/disadvantages
• Substitutes
• Why is it useful? Does it match customer needs?
•
•
•
•
What does client do well?
Capabilities?
Financials – profitability (R, C, market share)
Brand reputation
• Who?
• Size? By market share, revenue, etc.
• What do they do well? – best practices
4
The good news - the format is almost same
for all cases!
1. Establishing Background:
1. Listening to the case
2. Understanding objectives
5 min
3. Clarifying questions
2. Structuring Approach:
1. Structuring in a MECE way
2. Hypothesizing
3-4 min
3. Prioritizing
3. Analysis
1. Quantitatively analyzing
15-20 min
2. Qualitatively analyzing
4. Recommendation
1-3 min
*Interviews can also be interviewer-led or interviewee-led
5
Business Situation Case:
Market Entry
6
Case Prompt
De Beers, one of the leader diamond exploration companies in the world,
is thinking about entering the retail business Should De Beers do so?
Wharton 2008 Case Book
7
Establish Background:
Ask clarifying questions
De Beers, one of the leader diamond exploration companies in the world,
is thinking about entering the retail business Should De Beers do so?
1. What is involved in diamond exploration business?
2. What is involved in diamond retail business?
3. What is client trying to achieve with this? Increased profit, market
share, or revenue?
Wharton 2008 Case Book
8
Establish Background:
Ask clarifying questions
De Beers, one of the leader diamond exploration companies in the world,
is thinking about entering the retail business Should De Beers do so?
1. What is involved in diamond exploration business?
2. What is involved in diamond retail business?
3. What is client trying to achieve with this? Increased profit, market
share, or revenue?
It is crucial to understand De Beers’ value chain: exploration – extraction
– distribution – polishing and finishing – jewelers – retail. De Beers is
currently in exploration, extraction, and in distribution and would like to
enter retail. They won’t, however, enter polishing or jewelling. Basically,
De Beers wants to take advantage of their brand equity to sell finished
diamonds. They would continue selling raw diamonds to polishers and
they would then buy finished diamonds from jewelers.
Wharton 2008 Case Book
9
Establish Background:
Ask clarifying questions
De Beers, one of the leader diamond exploration companies in the world,
is thinking about entering the retail business Should De Beers do so?
1. What is involved in diamond exploration business?
2. What is involved in diamond retail business?
3. What is client trying to achieve with this? Increased profit, market
share, or revenue?
It is crucial to understand De Beers’ value chain: exploration – extraction
– distribution – polishing and finishing – jewelers – retail. De Beers is
currently in exploration, extraction, and in distribution and would like to
enter retail. They won’t, however, enter polishing or jewelling. Basically,
De Beers wants to take advantage of their brand equity to sell finished
diamonds. They would continue selling raw diamonds to polishers and
they would then buy finished diamonds from jewelers.
Wharton 2008 Case Book
10
Structuring Your Approach
What areas are important for this case?
Customers
Product
Company
Competition
• Who?
• Segment size and growth?
• Preferences? – wants, price points, distribution
• Advantages/disadvantages
• Substitutes
• Why is it useful? Does it match customer needs?
•
•
•
•
What does client do well?
Capabilities?
Financials – profitability (R, C, market share)
Brand reputation
• Who?
• Size? By market share, revenue, etc.
• What do they do well? – best practices
11
Structuring Your Approach
What areas are important for this case?
Customers
Product
Company
Competition
• Who?
• Segment size and growth?
• Preferences? – wants, price points, distribution
• Advantages/disadvantages
• Substitutes
• Why is it useful? Does it match customer needs?
•
•
•
•
What does client do well?
Capabilities?
Financials – profitability (R, C, market share)
Brand reputation
• Who?
• Size? By market share, revenue, etc.
• What do they do well? – best practices
Hypothesis: It is a good idea to enter the retail diamond business if it is
profitable for De Beers and there are low barriers of entry.
12
Structuring Your Approach
Is there an opportunity?
Customers
Competition
13
Structuring Your Approach
Is there an opportunity?
Customers
Competition
• Who buys diamonds? – wealthy/excess income
• Why? – gifts or personal use – special occasions,
engagement, etc.
• Spending habits? seasonal?
• Segment size and growth?
• Preferences? Location? – large metropolitan areas
• Who are the largest players? - Jewelry stores: Jared,
Kays, family owned, Designer names
• Industry? – healthy, growing
• What do they do well? – best practices
14
Structuring Your Approach
Can our client?
Company
Product
15
Structuring Your Approach
Can our client?
Company
Product
• Is it profitable?
• Potential new revenue - How are diamonds sold and
priced?
• Cost investment for a retail venture
• Capability – space, labor, marketing force
• Brand reputation – well known for diamonds
•
•
•
•
Quality of our diamonds vs. others?
Substitutes – cubic zirconia, other gems
Designs of jewelry
Stores - # stores, location – want customer access
16
Structuring Your Approach
Should our client?
Barrier to
Entry
Risks
How?
17
Structuring Your Approach
Should our client?
Barrier to
Entry
•
•
•
•
Investment costs
Any regulation on diamond sales?
Do we have the capital?
Sales force
Risks
• Competitive response
• New area
How?
• Do by themselves?
• Acquire a retailer?
• Partner with an existing retailer?
18
Qualitative Analysis:
Discussing points in the structure
1. Market
2. Customers
3. Barriers to entry
4. etc.
19
Quantitative Analysis:
NY, high end store, $300 per square meter, 5000 square meters
Cost per year: $300*5000*12 = $18M
How many diamonds do you need to break even?
Ask for revenue data
Breakeven means P=0, so R=C
(#diamonds)(price/diamonds) = 18M
20
Quantitative Analysis:
NY, high end store, $300 per square meter, 5000 square meters
Cost per year: $300*5000*12 = $18M
How many diamonds do you need to break even?
Ask for revenue data
Breakeven means P=0, so R=C
(#diamonds)(price/diamonds) = 18M
Is this realistic to reach? Per year? Per day? Per hour?
21
Recommendation
Action recommendation – answer question
◦ Yes or no, DeBeers should (not) enter market
3 reasons to support why
1. Qualitative conclusion
2. Quantitative conclusion
3. Other issues discussed/conclusions
Reiterate yes/no answer
Next steps: What would you like to know to be more confident in
conclusion? What is unexplored?
22