McKinsey, BCG & Bain
Free Case Interview Prep
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Free case prep
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Table of contents
Part 1: Case interview basics ............................................................... 3
Part 2: Case interview questions ...................................................... 10
Part 3: McKinsey vs. Other cases ...................................................... 17
Part 4: Preparation plan .................................................................... 21
Part 5: How to make the most of cases in the PDF.......................... 24
Case #1: Thailand Lottery (McKinsey case) ...................................... 26
Case #2: Star Production (McKinsey case) ........................................ 39
Case #3: Joe’s Cookies (BCG, Bain case) ............................................ 49
Case #4: Indian nappies (BCG, Bain case) ......................................... 58
How to actually get an offer .............................................................. 62
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Part 1: Case interview basics
1.1 What are case interviews?
Strategy consulting firms like McKinsey, BCG or Bain use case interviews in their
recruiting process for new hires. Case interviews last about 30 minutes during
which you will analyse and solve a business problem. These cases are usually
inspired from past consulting projects your interviewer will have worked on.
The objective of a case interview is to recreate the conditions you will face in a real
consulting project so that your interviewer can get an idea of how you will perform
on the job. Case interviews have been used since McKinsey has been created in
1926 and really look like they are here to stay!
Here are a few typical examples of case interviews you could come across in your
consulting interviews:
•
"Your client is Coca-Cola, and their profits have been declining in recent years.
Can you help find the root-cause of the profit decline and turn the situation
around?"
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•
"Your client is Nike, and it wants to launch a new line of sneakers in Europe. How
would you go about advising the CEO what new product to launch?"
•
"Your client is the UK Department of Foreign Affairs who is seeking to restructure
its organisation. What are the different elements you would consider to make a
recommendation?"
Most consulting firms give a few good examples of case interviews on their
website. McKinsey, BCG, and Deloitte have the most interesting ones in our
opinion. In addition, you can also take a look at our Free Case Interview Prep.
Now that you know what case interviews are used for, let’s turn our attention to the
intensity of the competition to get into top consulting firms.
1.2 What is your probability of success?
Case interviews are notoriously hard to crack. Every year, 200,000 people apply for
McKinsey, but only 2,200 of them get a job offer according to the firm’s managing
director. That’s a ~1% success rate. The selection process is therefore more
competitive than at Harvard University for example, which has a 5% acceptance
rate.
This might sound a little bit intimidating at this stage, but don’t worry. The purpose
of this case interview guide, is to prepare you to break into consulting and be part
of this 1%. It's actually more feasible than it looks like at this stage so keep reading
:)
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There are about 26,000 employees at McKinsey at the time of writing. So that
means the firm replaces 8.5% (2,200 hires / 26,000 staff) of its staff annually.
Assuming that staff turnover at other consulting firms is similar than at McKinsey,
we estimate that top consulting firms hire about 6,000 people every year.
In our experience, the first step to beat the odds and get an offer in consulting is to
understand what skills consulting firms are actually looking for. Once you
understand that, you can then signal you have these skills in your interviews.
1.3 What’s the process and skills tested?
Luckily, consulting firms are all looking for more or less the same skills. If you take a
close look at McKinsey’s and Bain’s websites for instance, you’ll notice that although
they describe the skills they look for slightly differently, they are essentially looking
for the same attributes:
What McKinsey says
What Bain say
What they mean
Problem solving skills
Problem solving
You’ve shown strong intellectual
abilities at university / work
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What McKinsey says
What Bain say
What they mean
Personal impact
Results delivery
You’ve shown dedication to
achieving great results in all
circumstances
Entrepreneurial drive
Passion
You’ve shown that you can take
initiatives and start new things
Leadership abilities
The ability to lead
You’ve shown that you can lead
teams and develop yourself
It’s important to keep these four skills in mind because consulting firms will grade
you along these dimensions at each step of their recruiting process. Top firms
typically use four tools to make their assessment:
•
Resume and Cover letter
•
Maths and logic tests
•
Case interview questions
•
Behavioural interview questions
In the graph below, we have mapped how recruiting firms use these different tools
in their recruiting process to test you along the four dimensions we have laid out
above.
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The first step of the recruiting process is the resume and cover letter screening.
During that step consultancies will analyse whether you are showing promising
signs across all four dimensions they care about.
If you do, they will then invite you to take a maths and logic test. For instance,
McKinsey uses the McKinsey Problem Solving Test and BCG uses the BCG Potential
Test. Not all firms use such tests but most of them do. The objective of this step is
to analyse whether you meet a minimum threshold in problem solving skills.
If you pass that second hurdle, you will then be invited to interviews. During these
interviews you will need to answer two types of questions: case interview questions,
and behavioural interview question.
As mentioned above, case interview questions test your ability to solve tough
business problems your interviewer will have come across in the past. But they also
start testing how you behave and whether you are really striving for great results in
how you approach the problem you are given.
Finally, your interviewers will also ask you behavioural interview questions such as
“Tell me about a time you lead a team”, or “Tell me about a time you had a strong
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personal impact on a situation”. These questions aim at testing your personal
impact, entrepreneurship and leadership skills.
Now that you know what skills you will need to demonstrate during the recruiting
process, let’s turn our attention to how exactly consulting firms make their hiring
decisions.
1.4 How is the final decision made?
As you have probably guessed by now the process is lengthy. First you resume
needs to be selected and you need to succeed at a maths and logic test (e.g.
McKinsey PST, BCG Potential Test). And once that’s done, you will usually have to go
through two rounds of interviews.
Both rounds of interviews will involve case questions and behavioural interview
questions. In each round of interviews, you will meet 2 to 5 interviewers. So, in total,
you will have between 5 and 10 interviews before getting an offer.
The candidates who prepare with us often ask if the second round of interviews is
different to the first one. The answer is that it’s not in terms of format. But the
people interviewing you will be different.
First round interviewers are typically junior or senior managers with 3 to 5 years of
experience. But second round interviewers are usually partners of the firm and
therefore much more senior.
At the end of the process, all your interviewers will get together in a room and
make a decision about your application. Partners are typically more outspoken than
managers. And your performance in the second round will therefore end up being
more important than in your first round.
So how can you make sure you impress both managers in the first round of
interviews as well as partners in the second round? Read the second part of this
guide to find out!
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Part 2: Case interview questions
2.1 Develop a consistent method
As we mentioned in the first part of this case interview guide, consulting firms tend
to give you a LOT of interviews before extending you a job offer. The most difficult
thing about consulting interviews is therefore to consistently perform at a high level
– interview after interview.
This might sound a little bit intimidating at first, but consistently cracking case
interview questions is definitely possible. Here is how: the key to consistency is
to always use the same step-by-step approach to answer them.
Indeed, if you improvise a new way of answering questions for every interview, at
some point you will get unlucky and underperform in one of your interviews.
Unfortunately, this could cost you the job given consulting interviews are so
competitive.
But if you develop a robust and consistent method to answer case questions, and if
you always use that method, then cracking interview questions will become a habit.
Consistency should therefore really be your objective as you prepare for cases.
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Another way to put it is that preparing for cases is a little like learning to drive. It’s
difficult at first. There are many new things you need to pay attention to.
Accelerating, braking, turning, signalling, looking in your mirrors and the list goes
on and on. It feels overwhelming initially.
But eventually, after you have repeated the same movements over and over again,
driving becomes second nature. After a while you don’t even think you are driving
anymore. You can drive, plan your weekend and listen to the radio all at the same
time.
So, the question is how do you get to the same place for case interviews?
2.2 Seven types of questions
Well, in our experience, the answer is simpler than you think. We have analysed
hundreds of case interviews over the past few years. And our conclusion is case
interviews are all made up of the same 7 types of question.
•
Situation
•
Framework development
•
Framework exploration
•
Quantitative question - Data provided
•
Quantitative question - No data provided
•
Creativity question
•
Recommendation
The key to success is therefore clear. If you learn how to consistently crack each type
of question individually, then you will be able to consistently crack case interviews.
This is what we have been teaching in our McKinsey Case Interview Training
Programme and our BCG & Bain Case Interview Training Programme over the past
few years. And this approach has yielded extremely strong results: more than 80%
of people who have used it so far got an offer at their target firm.
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So, let’s dive in and try to understand what each of these 7 types of questions is
exactly.
2.2.1 Situation
As mentioned in the first part of this guide, the objective of case interviews is for
you to solve a business problem. At the start of consulting interviews, interviewers
will therefore layout the situation of the company you are trying to help. Your job in
that part of the interview will be to make sure you understand the situation
correctly by listening carefully and asking the right follow up questions.
Example - Situation
Your client is a car manufacturer whose profits have been going down. The
CEO hired you to help turn the situation around.
In this example, you might want to confirm by how much profits have been
declining and since when. Have they been declining at 1% per year for the past 5
years, or is it a recent and sudden 20% drop? In addition, you could also be asking
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what the CEO’s objective is. Is she aiming to just stop the profit decline or does she
want to reverse the trend?
The answer to these questions will significantly influence how to solve the case.
This part of the case interview aims to test your listening skills and whether you are
taking the time to make sure you understand a problem before trying to solve it.
2.2.2 Framework development
Once the situation has been established, the second step of consulting interview
questions is for you to develop a framework. The framework is a list of areas you
will analyse to solve the problem the company is facing.
Example - Framework development
What are the different areas you would look at to identify the cause of
declining profits and turn the situation around?
For instance, in the car manufacturer example, your framework could have one
branch on revenues and one branch on costs. Indeed, profits will have gone down
either because revenues have decreased, or because costs have gone up, or
because of both. And you need to look at both sides of the equation for your
analysis to be comprehensive.
A common mistake a lot of candidates make is to learn frameworks by heart and to
reuse them as is in their interviews. Interviewers immediately spot and penalise
candidates who do this because the objective of the framework question is to test
your creativity and business acumen – not your ability to memorise frameworks!
You should therefore focus your energy on learning to develop your own
frameworks using the information you have gathered from your interviewer when
talking about the situation as well as your experience from past case interviews.
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This might sound a little bit intimidating at first but becomes easy with practice.
How to create good frameworks is one of the many things we teach in our case
interview training programmes. You can read more about our point of view on
frameworks in the following blog post: case interview frameworks – a
comprehensive guide.
2.2.3 Framework exploration
Once you have set up your framework, your interviewer will sometimes ask you to
explore the different areas you have identified to find the root-cause of the issue
faced by your client. This is what we call the framework exploration question.
Example - Framework exploration
Can you explore your framework to find the root-cause of the profits issue
faced by the company?
This part of the case interview aims to test whether you are able to find the rootcause of an issue in a structured way. The best method you can use in this situation
is to explore your framework using a hypothesis-led approach.
For instance, you might start by saying: “My initial hypothesis is that the profits
issue faced by the company is driven by revenues”. You would then investigate the
revenue side of your framework to identify if that’s where the root-cause of the
issue is. If revenues have been stable and are not the cause of the issue, you would
then update your hypothesis and move on to the cost side.
For an example of how to use a hypothesis in case interviews you can watch the
BCG & Bain live case interview extract video we have listed below.
Finally, one important point to note is that not all case interviews include a
framework exploration question. This will only apply when you are looking for the
root-cause of an issue. For other types of cases such a market entry or a new
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product launch, your interviewer will jump into quantitative questions straight away
as you will not be looking for the root-cause of an issue.
2.2.4 Quantitative question - Data provided
At various points in your case interview, you will likely have to solve quantitative
questions to crack the business problem you are facing. The aim of these questions
is to assess how comfortable you are solving problems with data. Broadly speaking,
there are two types of quantitative questions.
The first one is questions where you will be provided with data. This data usually
comes in the form of graphs and tables or can also be provided by your interviewer
orally.
Example - Quant question: Data provided
Data provided: table with volume and price for top cars sold by company
What do you think is going with revenues based on the data available in this
table?
2.2.5 Quantitative question - No data provided
The second type of quantitative questions is where you are not provided with any
data. This type of question tests similar skills as the first one, but the additional
difficulty is that you will need to make assumptions to solve the problem at hand.
Example - Quant question: No data provided
Could you estimate the market size for cars in the US making assumptions?
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2.2.6 Creativity question
At some point during your interview, you will also be tested on your creativity. This
type of question is very open-ended. There is no right or wrong answers to them.
They aim to test your ability to generate new ideas to generate solutions or to find
drivers of problems by brainstorming.
Example - Creativity question
Now that we know that the profit decline is driven by a decrease in number of
SUVs sold, what are some of the ideas you have to turn the situation around?
2.2.7 Recommendation question
The last step of every case interview is the recommendation question. As its name
indicates this is the part of the interview where your interviewer will ask you to
summarise what you have found out and what the client should do.
Example - Recommendation question
The CEO of car manufacturer gives you a call and asks you for your final
recommendation. What would you say?
For instance, your recommendation might be that your client launches new
products to improve revenues and therefore solve the profits issue it is currently
facing.
2.2.8 Variations in questions asked
As you have probably guessed, these seven questions will not always get asked in
the same order. Some cases won’t have framework exploration questions. Others
will have two quantitative questions instead of one. But broadly speaking this is the
type of questions you should prepare for.
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Part 3: McKinsey vs. Other cases
Now that you know what type of questions you will come across in case interviews,
you need to know that there are important differences between McKinsey cases
and cases at other firms such BCG and Bain.
Let's dive in and explore the top 3 specificities for each type of case. The
paragraphs below are a summary. For more details you should read the following
two blog posts:
•
McKinsey interviewer-led cases
•
BCG & Bain candidate-led cases
3.1 McKinsey specificities
First, during McKinsey cases, you will find that your interviewer is more active than
at other firms. Most of the time they will be leading you from one question to the
next and will also be challenging your results a bit more than at other companies.
They will control the pace of the interview and sometimes even interrupt you to go
to the next question. This is why McKinsey interviews are sometimes called
interviewer-led cases.
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Second, McKinsey case interviews are a lot more structured than other case
interviews and the flow of questions you will get is usually quite standard. In fact, it
closely follows the list that we have laid out in the case interview questions part of
this guide.
Third, as you probably guessed the bar to get into McKinsey is higher than at other
firms. This is why we insist so much on developing a consistent approach to solving
case interviews. This consistent approach will really make a difference by helping
you perform at a high-level interview after interview.
3.2 BCG, Bain and other firms’ specificities
Let's now turn out attention to case interviews at other firms than McKinsey. We
loosely refer to these firms as BCG and Bain. But in reality, this applies to ALL other
consulting firms you could be applying for including for instance: LEK, Oliver
Wyman, Roland Berger, Deloitte, etc.
First, cases at BCG, Bain and other firms are often called “candidate-led” cases. This
is because you will be expected to play a much more proactive role in the
interviews at these firms than at McKinsey. Your interviewer will let you decide in
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which direction to take the case. And they will only intervene if you are going
completely off-piste.
Second, the fact that you are leading the case means you will sometimes need to
take a hypothesis-led approach. As mentioned in the previous part of this guide,
making a hypothesis is particularly helpful in framework exploration questions
when you need to find the root-cause of an issue. This is a technique you will need
to use at BCG, Bain and other firms but not so much at McKinsey.
Third, while the flow of questions at McKinsey is pre-determined, this won't be the
case at other firms. Instead, the flow of questions is much more variable because
you are leading the case and the interviewer will therefore adapt their questions to
what you are doing and saying. You will still come across the seven types of
questions that we discussed in this guide, but their order might sometime be
slightly unconventional!
3.3 Get a feel for the difference
When they first learn about the difference between McKinsey cases and cases at
other firms, a lot of candidates ask us to help them tailor their preparation to each
type of firm. This is why we have put together the McKinsey Case Interview Training
Programme and the BCG & Bain Case Interview Training Programme.
Each programme is tailored to master the specificities of the firms it targets. One of
the components of these programmes is live case interviews where you can watch
a best-in-class candidate solve cases. As mentioned previously, this is a great way to
train to solve cases by yourself using a consistent method. And remember, a
consistent method is really what will enable you to nail interview after interview :)
If you would like to get a feel for McKinsey interviews, as well BCG & Bain interviews,
you can watch the two extracts below. We hope you will find them helpful.
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McKinsey Live Case Interview Extract
https://youtu.be/fXLZjCLE7d0
BCG & Bain Live Case Interview Extract
https://youtu.be/oaIWurgCxsU
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Part 4: Preparation plan
4.1 How to prepare?
Preparing for consulting interviews does not have to take forever. We have worked
with hundreds of candidates over the past few years to minimise the time required
to master consulting interviews and have summarised what we have learned in
the McKinsey Case Interview Training Programme, and BCG & Bain Case Interview
Training Programme.
As we mentioned in the introduction to this guide, more than 80% of candidates
who use these programmes end up getting an offer. We know this because we give
half their money back to people who don't.
Many candidates have asked us how the training is structured in these
programmes and we have therefore decided to share this step-by-step approach
here so that you can use it in your own preparation. The most efficient way to
prepare in our experience is to take a four-step approach:
•
First, develop fast and reliable maths skills
•
Second, master a consistent method to crack cases
•
Third, practice case interviews
•
Fourth, work on fit / PEI interview questions
Let's step through each stage of the preparation plan to give you more details
about what you should do in each.
4.2 Develop fast and reliable maths skills
The first step of your preparation should be to develop fast and reliable maths skills.
Virtually all case interviews involve maths. As a consequence, doing maths quickly
and accurately is essential to have good chances of success.
To be clear, you don't need to become a maths PhD to crack case interviews. You
just need to be able to do basic maths extremely efficiently. Our advice is to
proceed in two steps here.
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First if your maths is really rusty, you should review how to do basic operations
such as additions, subtractions, divisions and multiplications mentally. This might
sound very basic, but 80% of the maths mistakes people make are basic calculation
errors. You can avoid this by spending sometime upfront making sure you have
solid maths fundamentals.
Second, you should spend some time learning slightly more advanced techniques
that can greatly increase the speed at which you do maths calculations. This
includes techniques such as how to apply growth rates over multiple years, or how
to factorise / expand maths expressions efficiently. The following blog post covers
some of these interview maths techniques. It is focused on the McKinsey PST but
applies to case interviews too.
4.3 Master a consistent method to crack cases
The second step of your preparation should be to master a consistent method to
crack case interviews. On the day of your interview, you will likely be extremely
stressed. Being able to fall back on a consistent method you have mastered will be
therefore invaluable.
As we mentioned in the second part of this guide, there are 7 different types of
questions in case interviews. In our experience, the best way to consistently crack
cases is to learn how to consistently crack each type of question in isolation first.
This makes the whole learning process much more manageable. It means you can
more easily measure your progress and focus your preparation on the areas of
consulting interviews you are less comfortable with. For each of the 7 question
types you should therefore develop a step-by-step method that you always use.
4.4 Practice case interviews
The third step of your preparation should be to apply the method you have
developed in actual case interviews. The best way to do this is to find peers to
practice with either at University or online. You can also ask friends who are not
necessarily preparing for consulting interviews to help and give you a few cases. If
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you know any former consultants you should also not hesitate to ask them to do
one or two interviews with you.
In addition, it can also be helpful to practice case interviews by yourself. This is one
of the top reasons people use our case interview training programmes. They
include live case interview videos which are structured so that you can listen to the
interviewer's question, hit pause, and answer the question as if you were in a real
interview. This is an extremely efficient way to progress quickly.
4.5 Fit / PEI questions
Finally, one of the most common mistakes candidates make when preparing for
consulting interviews is to focus too much on cases, and to neglect fit / personal
experience interview questions.
We recommend putting about 25% of your preparation time aside to prepare good
answers to common fit and PEI questions. We are currently working on adding a
section about this specific topic to this guide. In the meantime you should read this
blog post on frequent McKinsey PEI questions how to answer them.
4.6 A proven approach
If you would like to fast track your case interview preparation and maximise your
chances of getting an offer at McKinsey, BCG or Bain, come and train with us. 80%
of the candidates training with our programmes end up getting an offer at their
target firm. We know this because we give half of their money back to people who
don't.
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Part 5: How to make the most of cases in the PDF
Our sample cases are based on past McKinsey, BCG and Bain case interviews to
ensure you train with the most realistic materials possible. Here are important facts
and tips to make the most of this Free Case Prep:
1. No calculator
The cases in this document are designed to be completed by yourself or with a
partner interviewing you. In both situations, you should aim to solve the full case
without a calculator and without looking at the answer key.
2. Do cases out loud
If you are practicing by yourself, you should both play the role of the interviewer
and of the interviewee and you should speak out loud. This might sound a little odd
but candidates who force themselves to use this technique are progressing much
faster than others because it better reproduces the conditions of the interview.
Trust us, do it!
3. Complete the case in 30 to 40mins
Interviews at McKinsey, BCG and Bain usually last between 45 and 60 minutes. The
personal experience part of the interview takes 25% of the time on average and the
case interview takes the remaining 75%. We therefore strongly advise you to
complete each of the following cases in 30 to 40 minutes.
4. Study the answer key carefully
After completing each case, you should study the answer key in details. You need to
pay attention both to the content of the answers and to the way it is communicated.
Most candidates are only focused on the content and whether they got to the right
answer. But in reality, your interviewer will also evaluate you on how you
communicate. Do not hesitate to repeat parts of the answer out loud. This will help
you develop a habit of communicating in a structured way.
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5. Do cases multiple times
Finally, do the cases multiple times. You might think that you will remember the
answers, but if you wait a couple of days you probably won’t remember them very
well. In our experience, it is better to do 20 cases and to learn a lot from them than
40 cases without spending time analysing the best way to answer them.
Doing cases a second time will enable you to keep track of your progress and to
double check that you are not making the same mistakes twice. We also
recommend that you keep a notebook where you write down what you've learned
at the end of each case. You can then refer back to it when you do a case for the
second time.
Finally, we are here to answer any of your questions, so if you get stuck trying to
understand the explanations in the answer key, just drop us a line
at: support@igotanoffer.com. We’ll be happy to fill any gaps!
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Case #1: Thailand Lottery (McKinsey case)
1. Situation
Your client is Thailand Lottery. It is the only business allowed to organise a lottery in
the country. Despite this advantage, Thailand Lottery’s sales have been declining
over the past ten years as a result of the emergence of new competitors such as
online sports betting websites.
The CEO wants to increase sales by launching a new product and has hired your
team to help design an expansion plan. He is considering two options:
•
Start a transnational lottery with three other lottery organisations. This new
game could offer a larger jackpot than the lottery in individual countries, as
more people would play the same game.
•
Create a scratch cards product. Players would buy cards coated with an
opaque layer and scratch them to find out if they won a prize.
2. Framework development
What areas would you investigate to determine which product Thailand Lottery
should start?
3. Quantitative question – Data provided
Question 3.a.
Your team assessed the purchase intentions of the Thai population for both scratch
cards and the transnational lottery. They asked the following question to a
representative sample: “Which of the following six options would you be most likely
to purchase?”
Each respondent answered the question both for scratch cards and lottery tickets.
What insights on customers’ preferences can you draw from the survey results?
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Purchase intentions distribution for scratch cards
Scratch card option #
1
2
3
4
5
6
$1
$1
$2
$2
$3
$3
Jackpot
$10,000
$20,000
$20,000
$40,000
$40,000
$80,000
Chances of winning jackpot
0.010%
0.005%
0.010%
0.005%
0.008%
0.004%
10%
15%
13%
27%
15%
20%
Price of one scratch card
Purchase intentions
Purchase intentions distribution for lottery tickets
Lottery ticket option #
Price of one ticket
Jackpot
1
2
3
4
5
6
$1
$1
$2
$2
$3
$3
$1m
Chances of winning jackpot
Purchase intentions
$5m
-6
$5m
-7
$10m
-7
-7
$10m
-7
$20m
1 x 10
2 x 10
4 x 10
2 x 10
3 x 10
2 x 10-7
5%
10%
9%
20%
13%
43%
Question 3.b.
After your initial analysis, the CEO has decided to focus on the transnational lottery.
He has held talks with the Philippines, Malaysia and Indonesia. They agreed, among
other things, on how sales and costs should be split between the four
organisations.
All tickets are to be sold at the same price in each country. For each ticket sold, the
national lotteries contribute a fixed amount per ticket to the jackpot. This jackpot is
then equally shared between the draw’s winners.
Summary of the different items discussed during the meeting
Item
Price of one ticket
Value
$3
Variable costs in Thailand (excluding jackpot)
$0.2 / ticket
Fixed costs in Thailand (excluding jackpot)
$20m / year
# Lottery draws / month
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4
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Forecast distribution of the population by frequency of purchase
Frequency
Thailand
Philippines
Indonesia
Malaysia
Total
Once a week
2%
1%
1%
1%
1%
Once a month
2%
1%
3%
1%
2%
Once a year
4%
5%
4%
6%
5%
Never
92%
93%
92%
92%
92%
Population
65m
100m
255m
30m
450m
Thailand Lottery wants to achieve a minimum profit margin of 15% in the first year
of the transnational lottery. Is it feasible for the company to aim for a transnational
lottery with a jackpot of $20m (Option 6)?
4. Creativity question
The average age of Thailand Lottery’s customers has been growing from 35 years
old to 45 years old over the past decade. The CEO is worried that the new product
might not attract new young customers, and would therefore not significantly
increase revenues. How could the company halt or reverse the aging for their
customer base?
5. Recommendation
What is your recommendation to Thailand Lottery’s CEO?
Copyright © IGotAnOffer Ltd.
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Answers
1. Situation
To avoid any misunderstandings, you should ask follow up questions that will help
you get a better grasp of the situation. For instance, you could ask:
•
I understand that the transnational lottery makes it possible to offer higher
jackpots. But how would the revenue from ticket sales be shared? I would
assume that 100% of ticket revenues generated in the Philippines would go
to the Philippines, is that right?
•
I understand that the CEO wants to launch only one new product. Is there
any particular reason why?
Prior to diving into the framework question, it is also advisable to further define the
objective of the case. Examples of questions you could ask include:
•
I understand the CEO wants to increase sales. Do we know by how much and
by when?
•
Are sales the only metric the CEO is interested in or is profitability important
to him too?
IGotAnOffer special tip:
Asking clarification questions and defining the objective of the case at beginning
are essential steps to set you up for success. If you are not 100% clear on what the
objective of the case is you simply cannot get to the right answer.
This is something partners at McKinsey, BCG, Bain and other firms always do at
the beginning of projects to make sure they understand the problem they are
solving for their client inside out. Doing this might sound straight forward but it is
a critical part of any consulting project, and any case interview.
Copyright © IGotAnOffer Ltd.
29
2. Framework development
In this situation, the following areas could be analysed:
A. Revenue potential
1. Total market size
a. Customer demand: For each product, how many potential
customers are there? How fast is the customer demand for each
product growing over time?
b. Spending per customer: How much do we expect customers to
spend on each product every year? Is this spending per customer
expected to grow / shrink?
c. Distribution: What is the total market size by distribution
channel (online vs. physical)? How much of the revenue would be
captured by Thailand Lottery vs. its distributors?
2. Market share potential
a. Competitors: How many competitors also offer scratch cards?
What is the distribution of market shares between existing
competitors?
b. Customer satisfaction: Are the customers of competing
products satisfied with the existing offering?
c. Customer base overlap: For each new product, what is the
overlap with Thailand Lottery’s current customer base?
B. Regulation
1. Regulatory constraints: What are the regulatory constraints for each
product? To whom could the product be sold (e.g. age restrictions) and via
which distribution channels (e.g. online)?
2. Regulatory approvals: Would Thailand Lottery need any regulatory
approvals for the different products considered? How long would it take
to obtain these approvals?
3. Policymaker view: Do we know if Thailand’s policymakers are
favourable to an expansion of Thailand Lottery or if they are likely to try
to slow it down?
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Thailand Lottery should first find out which product offers the best opportunity to
grow sales. Then, it should analyse the feasibility of each product from a regulatory
standpoint.
IGotAnOffer special tip:
During your interviews you should draw your framework on a piece of paper and
present it to your interviewer. If they are sitting across from you, you could even
turn your piece of paper around so that it is easier for them to read. And you
could also point at the different parts of your framework with your pen as you
step through them.
Turning your piece of paper and pointing with your pen will help grabbing your
interviewer’s attention and it will show that you are a strong communicator which
is one of the skills consultancies look for in candidates.
3. Quantitative question – Data provided
Question 3.a.
The survey question was: “Which of the following six options would you be most
likely to purchase?” Each respondent answered the question for both scratch cards
and lottery tickets. As a consequence, purchase intentions add up to 100% in each
table and the data therefore indicates customers’ preferences in terms of product
features (price, jackpot, chance of winning). However, it does not directly enable us
to say which product customers prefer.
Let’s first try to understand the correlations between purchase intentions and the
different product features:
•
For a given ticket or card price, purchase intentions are highest for the
alternative that offers the highest jackpot. Customers therefore seem to be
attracted by high jackpots. For instance, options 1 and 2 for scratch cards
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have got the same price but option 2 has got a higher jackpot and a higher
purchase intention.
•
For a given jackpot, purchase intentions are always highest for the cheapest
ticket / card. Customers therefore also seem to take the price of the ticket /
card as a secondary consideration. For instance, options 2 and 3 for scratch
cards have got the same jackpot but option 2 has got a lower price and a
higher purchase intention.
•
There does not seem to be a clear correlation between purchase intentions
and chances of winning. The chances of winning therefore only influence
customers’ decision to buy a ticket / card marginally. For instance, options 2
and 4 have got the same chances of winning (0.010%) but very different
purchase intentions (15 vs. 27%).
In summary, purchase intentions are primarily driven by the jackpot and price
levels, not so much by the chances of winning.
Let’s now analyse which option performs best for each product:
•
For lottery tickets, the highest purchase intention is for the highest jackpot
option which is option 6. However, for scratch cards, the highest purchase
intention (option 4) is not for the highest jackpot. This could be due to the
fact that jackpots are lower for scratch cards and therefore the card price
could be a bigger driver of customer choice for this product.
•
The largest share of purchase intentions for lottery tickets is 43% (option 6),
which is more than 50% higher than the largest share of purchase intentions
for scratch cards (27% for option 4). This relatively high level of purchase
intentions reveals a very strong interest for option 6.
In conclusion, the data provided does not directly enable us to say if customers
prefer scratch cards or lottery tickets. However, it indicates that the transnational
lottery could be a good option to explore further for three reasons:
•
Option 6 for lottery tickets is by far the one that received the largest share of
purchase intentions. The large jackpot therefore seems to be generating a lot
of interest among customers.
Copyright © IGotAnOffer Ltd.
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•
Customers consistently show a preference for large jackpots for the lottery
but not for scratch cards. By pooling resources between countries, the
transnational lottery will be in a position to provide large jackpots to
customers.
•
Thailand Lottery’s objective is to maximise sales. The survey indicates that
customers are less price sensitive in lottery tickets than in scratch cards. We
cannot conclude that sales will be higher for the lottery based on that
information only but it constitutes a good initial indication.
As a next step, we should calculate the potential sales for each product in Thailand.
This will enable us to make a more informed decision about which product to
choose.
IGotAnOffer special tip:
When your interviewer provides you with data, you should take a few seconds to
decide how you are going to analyse it. A lot of candidates dive in the data straight
away and miss key insights because they have not planned a comprehensive way
of analysing the data.
For instance here, we have analysed correlations between purchase intentions
and product features first and we then moved on to analysing which options
works best for each product. Planning this in advance has enabled us to not miss
any insights in the data.
Question 3.b.
We know that:
Profits = Sales – Fixed & Variable costs – Jackpot costs
It therefore follows that:
Jackpot costs = Sales – Profits – Fixed & Variable costs
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Here is a potential calculation plan we could follow. All the metrics below should be
calculated per year.
1. Calculate the potential number of tickets sold by Thailand Lottery
2. Calculate total sales for Thailand Lottery, given the price of a ticket
3. Calculate fixed and variable costs for Thailand Lottery
4. Calculate the minimum profit to be achieved by Thailand Lottery
5. Estimate the total jackpot available across the four countries
Let’s now do each calculation:
1. Number of tickets sold every year by Thailand Lottery
•
“Once a week” customers
= 2% x 65m x 4 weeks x 12 months = 62m
•
“Once a month” customers
= 2% x 65m x 12 months = 62m / 4 = 16m
•
“Once a year” customers
= 4% x 65m = 2.6m
•
Total = 62 + 16 + 2.6 ≈ 81m
2. Total sales = 81m tickets x $3 per ticket = $243m
3. Fixed and variable costs
•
Variable costs = 81m tickets x $0.2 per ticket = $16m
•
Fixed costs = $20m
•
Fixed & Variable costs = $20m + $16m = $36m
4. Minimum profit to be achieved
= 15% x total sales
= 15% x $243m
= $36m
5. Maximum jackpot cost
= Sales – Minimum profits – Fixed & Variables costs
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= $243m - $36m - $36m
= $170m.
To achieve a 15% margin, Thailand Lottery can give away a maximum of
$170m in jackpot prizes over the course of a year. Thailand has got a
population of 65m, so that’s an average jackpot of 170m / 65m = $2.6 per
person per year.
The question is whether it is feasible for the company to aim for a transnational
lottery with a weekly jackpot of $20m (Option 6). We have calculated the annual
jackpot just for Thailand. We therefore need to convert that number to a weekly
number for all countries participating.
The population of the four countries together is 450m. Assuming that the three
other countries allocate the same jackpot per inhabitant, then the total jackpot
available across the four countries for the year is $2.6 x 450m = $1,170m per year.
There is a lottery draw every week so about 50 draws per year. On average each
draw could therefore offer a $23m jackpot (1,170 / 50).
As a conclusion, aiming for an average jackpot of $20m (Option 6) seems realistic. A
next step in the analysis could be to investigate the implementation of the new
product: regulation, distribution of the tickets, etc.
IGotAnOffer special tip:
For questions involving a lot of calculations, you should feel free to simplify
numbers to make calculations easier. A good rule of thumb is that it’s ok to round
numbers up or down by about 5% to 10%.
If you don’t simplify calculations you have got a higher risk of making maths
mistake. Your default behaviour should therefore be to round numbers up and
down as you make calculations. Interviewers will be ok with this as long as you
respect the 5% to 10% rule of thumb.
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4. Creativity question
To reverse this trend, and to ensure that the new product successfully attracts
young customers, Thailand Lottery could look into the following four areas:
1. Product distribution
a. Make it possible for customers to buy tickets for the new lottery online
and via a mobile application, as these are distribution channels used
by younger people
b. Sell lottery tickets in locations where young customers tend to spend
time (e.g. bars, cafes, etc.)
2. Product design
a. Add a social media component to existing and new products by
enabling customers to share notifications saying they have played the
lottery with their network of friends
b. Choose themes that are attractive to young customers when
developing new products (e.g. sports)
3. Refresh brand image
a. Run advertising campaigns for the new product specifically targeted to
younger customers
b. Recruit celebrities that are famous among young people to be brand
ambassadors for Thailand Lottery and to promote the new lottery
4. Refresh company culture
a. Hire younger employees familiar with new technologies and the needs
of younger customers for the team in charge of developing the new
lottery
b. Review the list of external marketing and advertising agencies the
company is currently working with
Thailand Lottery should start by distributing existing products via new channels
(online and mobile) as it is a relatively easy change to make and will have a strong
impact. Over the long run, it could work on refreshing its image and company
culture as well as designing new products. However, along the way, Thailand
Lottery should be careful not to lose its older customers.
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5. Recommendation
Based on our initial analysis I would recommend that Thailand Lottery creates a
transnational lottery for the following reasons:
1. The survey carried out shows that a transnational lottery with large jackpots
generates a lot of purchase intentions (43% for $20m jackpot). Based on
initial discussions with the three other countries, this level of jackpot seems
to be a realistic option.
2. Thailand Lottery could achieve $243m in sales and a 15% profit margin in the
first year of launching the transnational lottery.
3. Given Thailand Lottery’s monopoly, there is no other company in the country
that could launch a transnational lottery. This new product should therefore
provide a strong and sustainable revenue source to Thailand Lottery.
However, there are further areas that the firm should explore before actually going
ahead and launching the new product:
1. Thailand Lottery should make the necessary changes to its teams and brand
image to ensure that the new product will attract young customers
2. The company should make sure that the transnational lottery is feasible from
a regulatory standpoint and that Thailand’s policymakers are favourable to
the idea
3. The company should find ways to minimise the cannibalisation between the
new transnational lottery product and the other main national lottery
products
4. Finally, the company should make sure it is able to secure the financial
resources it needs to launch this new product.
IGotAnOffer special tip:
Make sure you clearly state what your conclusion is in the final part of the case.
Here for instance we clearly say in our first sentence that we recommend for
Thailand Lottery to create a transnational lottery. It is critical that you pick a side in
your recommendation and clearly state what you would do based on the
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37
information you have.
Once you have laid out your recommendation you then need to support it with a
series of two to four arguments. Finally, you should also outline next steps at the
end of your recommendation. This is something partners at McKinsey, BCG, Bain
and other companies always do as this is a way for them to sell the next project.
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Case #2: Star Production (McKinsey case)
1. Situation
Star Production is a start-up that produces low-cost movies. Two university friends
created the company after watching “Paranormal Activity”, a low-budget movie that
attracted a larger-than-expected audience.
Very few low-cost movies end up being very successful. Star Production is hoping to
generate profits by producing a large number of low-budget movies and betting
that some of them become very successful. The company forecasts that most of its
movies will be loss making but that a few of them will be big financial hits.
Considering the high up-front cost of production, and the low probability of success
of low-budget movies, the two friends are evaluating the best ways to finance the
company. They have hired you to help them develop a business plan that can
convince investors that their model is sustainable.
2. Framework development
What areas would you look at to determine if Star Production’s business model can
be sufficiently profitable to recoup initial investments in the short term?
3. Quantitative question – Data provided
Question 3.a.
Your team analysed the cost structure related to movie production and
summarised its results below.
Copyright © IGotAnOffer Ltd.
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Cost of producing and promoting a low-cost movie
Type
Expenditure area
Min cost
Max cost
Cost of sound and light equipment / day
$50
$200
Cost of camera / day
$50
$10,000
$1,000
$100,000
Salary of actors / day / actor
$100
$1,000
Salary of other crew members / member / day
$100
$300
Food and travel expenses / person / day
$100
$500
Cost of renting movie studio / day
$10
$100,000
$100,000
$200,000
$1,000
$100,000
Salary of director / movie
Production
Post-production
Cost of postproduction / movie
Marketing
Cost of marketing campaign / movie
In addition, your team also studied the correlation between a movie’s cost structure
and its revenues using a sample of 1,002 movies released in the past 2 years. The
results are shown in the table below.
Correlation between a movie’s revenues and different types of costs
Cost type
Production
Post-production
Marketing
Correlation with revenue
0.15
0.20
0.75
Which cost areas should Star Production aim to minimise in priority in order to
generate high profits?
Question 3.b.
After this initial analysis, your team concludes that each movie would cost on
average $250k to produce and distribute. In addition, the company’s overhead
would amount to a yearly fixed cost of $500k.
In order to evaluate how much profit the company could generate in its first year,
your team also did some research on the total revenues generated by recent
movies.
The table below breaks down the average revenue generated in the first year after
movies were released, including revenues from theatre tickets, TV rights, and home
distribution (DVD and on-demand).
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Distribution of movies by total revenues generated
Revenue category
Average revenue
# of movies
0 - $100k
$30k
759
$100k - $1,000k
$330k
198
$1,000k - $10,000k
$3,300k
41
> $10,000k
$40,000k
4
All categories
NA
1,002
On average, how many movies does Star Production need to produce every year in
order to break even?
4. Creativity question
The founders expect that a large share of their movies’ revenues will be generated
many years after the movie was produced. As a result, they are worried that the
company might fail to attract investors who expect to rapidly generate returns on
their investments, and that it might run out of cash before becoming sustainable.
How could Star Production accelerate its revenue generation?
5. Recommendation
The founders of Star Production give you a call and ask for your recommendation
regarding their business model. What would you tell them?
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Answers
1. Situation
To avoid any misunderstandings, you should ask follow up questions that will help
you understand the situation better. For instance, you could ask:
•
How many movies does the client plan to produce every year?
•
Has Star Production started making any movies yet? If so, how successful
have they been?
Prior to diving into the framework question, we also recommend that you clearly
define the objective of the case. For example, you could ask:
•
How does the client define a “sustainable business model”? Is this equivalent
to a profitable business? If so, how profitable?
•
I understand the client is a start-up company. Has it already made any
significant investments we should be aware of?
2. Framework development
Once you have clarified the situation, you can prepare a framework to analyse the
question. Since the main focus of the company is on profitability, the following
areas could be analysed:
A. Revenues
1. Revenue from theatre tickets
a. Units sold: On average, how many tickets does Star Production
expect to sell per movie?
b. Unit price: What is the average price of a ticket? What share of
the ticket price will Star Production receive?
2. Long-term movie distribution (TV, Streaming, DVD, etc.)
a. Units sold: Which channels can Star Production use to distribute
its movies? How many TV deals, DVDs sold and streaming views
does the company expect to achieve?
b. Unit price: How much revenue can Star Production generate
from each TV deal, DVD sold and streaming view?
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3. Revenue from licensing
a. Units sold: If the movie is successful, how many licenses does
Star Production expect to sell for merchandising (e.g. T-shirts or
accessories)?
b. Unit price: At what price can the company expect to sell those
licenses? Alternatively, what share of the revenues from
merchandises does the company expect to receive as royalties?
B. Costs
1. Upfront costs: What upfront investments will Star Production need to make
to start producing movies? Will it need to purchase professional filming
equipment, studio space, or post-production equipment?
2. Fixed costs: What are the fixed costs associated with running Star
Production? What would the administrative costs and fixed labour costs be?
3. Variable costs: What is the average variable cost of producing a movie? In
this category, we should include the salary of actors and staff, movie studio
rental, the cost of film and other equipment.
Both areas of this framework are equally important to analyse in order to get a
sense of the potential profitability of the business.
IGotAnOffer special tip:
The profitability framework is often used in cases where you need to analyse the
profitability of your client’s business. When you use it you should make every
effort to adapt it as much as possible to the company you are looking at.
Otherwise you run the risk of your interviewer thinking that your framework is too
generic. This is what we have done here by breaking down revenues into revenues
from theatre tickets, movie distribution and licensing.
3. Quantitative question – Data provided
Question 3.a.
Here are some insights that can be obtained by reading the first table horizontally:
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•
On the production side, keeping the costs of the director’s salary and the
studio rental low could save as much as $99k per movie and $100k per day,
respectively. These costs are therefore worth keeping under control if the
company wants to minimise costs.
•
The other production costs offer fewer opportunities for large savings, as the
range of costs is narrower.
•
Finally, keeping post-production and marketing costs low also offers a good
opportunity for cost reduction as it could save up to $100k and $99k per
movie respectively.
More generally, in the first table, we can also notice that:
•
Six expenses out of nine are proportional to the number of days it takes to
produce the movie. As a result, producing the movie over a short period of
time could allow the company to control costs.
•
Three expenses out of nine are proportional to the number of members in
the team. As a consequence, hiring a small team will also help keeping costs
low.
From the second table, we can learn the following:
•
Production and post-production costs are weakly correlated with revenues
generated. As a consequence, it seems safe to keep the director’s salary,
studio rental costs and post-production costs low.
•
However, marketing spending and movie revenues seem to be strongly
correlated. As a result, decreasing the amount spent on marketing could hurt
revenues in the long run. Star Production should therefore consider keeping
a large marketing budget for its movies.
•
Finally, it should be noted that correlation does not imply causation. If Star
Production spends a lot on marketing, it is still possible that its movies will
not generate a lot of revenue.
In summary, there seem to be various ways to keep costs low. For instance, up to
$100k per day could be saved on studio rental costs by choosing the low costs
options. However, Star Production should be careful with reducing marketing
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spending as it is tightly correlated with the revenues generated by the movie. As a
next step, it would make sense to look into long-run revenues to make sure Star
Production is able to make a profit on its low cost movies eventually.
Question 3.b.
Here is a potential calculation plan to find out how many movies are needed to
break even:
1. Calculate the average revenue per movie
2. Calculate the operational profit per movie (revenue per movie – variable cost
per movie)
3. Calculate the number of movies required to cover fixed costs
Let’s now do the calculations and simplify the numbers when possible.
1. Average revenue per movie
•
The average revenue per movie is the average of revenues by categories
weighted by the number of movies in each category
•
Average expected revenue per movie
= (Revenue 1 x #Movies 1 + … + Revenue 4 x #Movies 4) / (Total # movies)
= ($30k x 759 + $330k x 198 + $3,300k x 41 + $40,000k x 4) / 1,002
= ($23m + $65m + $135m + $160m) / 1,002
= ($383m) / 1,002
≈ $383k
2. Average operational profit per movie
•
The average cost of a movie is $250k
•
The average operational profit is therefore $383k - $250k = $133k
3. Number of movies required to cover fixed costs
•
Star Production has got fixed costs of $500k per year
•
Four movies should therefore be sufficient to cover fixed costs (4 x $133k
= $532k) and to be profitable for the year
With four movies per year Star Production would have a high chance of being
profitable over multiple years. However, four movies per year do not guarantee
that Star Production makes a profit every year. Indeed, for a given year, it is
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45
possible that the four movies it produces are not successful and only generate $30k
in revenues (the lowest average revenue) for example, in which case the company
would make a loss.
To minimise the risk of losing money in a given year, Star Production needs to
increase the number of movies it produces. The next step in this analysis could be
to find ways for Star Production to increase the chances of success of each of its
movies.
IGotAnOffer special tip:
If you are stuck trying to answer a quantitative question because you don’t know
how to approach it, it helps to go back to the definitions you know. Here, you
probably know that breaking even means having revenues exactly cover costs.
Write down a formula to calculate revenues and costs and see where the number
of movies produced appears. This will show you how to calculate the number of
movies to break even.
4. Creativity question
To accelerate revenue generation, three categories of innovative ideas come to
mind:
1. Before the movie making
a. Star Production could crowdfund its movies. Fans would back the movies
they like in exchange for small rewards such as signed copies of the DVD
of the movie, branded T-shirts, etc.
b. It could also auction a dinner with the movie’s actors and director
2. During the movie making
a. Star Production could sell tickets for people to attend selected parts of
the movie making
b. It might also be able to let fans play small roles as extra in the movie in
exchange for a fee
3. After the movie making
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a. Star Production could distribute the movie through new channels. For
instance, it could sell the movies on its website and set up a referral
programme to encourage people to recommend the movie in exchange
for a discount
b. It could also set up a website to enable artists to design merchandising
items (T-shirts, posters, etc.) themed after its movies and share the
revenue with them
Given Star Production is getting started it makes sense to develop the “Before
making the movie” ideas first as they correspond to the phase of development the
company is in. As the company progresses it can then develop the “During the
movie making” and the “After the movie making” ideas. These ideas should allow
the company to generate additional revenues in the early stage of the production
cycle and to provide early return on investments.
IGotAnOffer special tip:
One way you can generate new ideas for creativity questions is to think about
recent business stories you may have read about. What are the latest product
innovations you have heard of? Were they successful? How could they be applied
to the business you are looking at?
5. Recommendation
Based on the initial findings from our analysis, we can present a strong case to
investors for financing Star Production:
1. First, an average of four movies per year could be enough for Star Production
to be profitable. Producing four movies per year seems manageable
2. Secondly, there also seems to be plenty of opportunities to keep costs low,
such as minimising the number of actors and the number of days to make
the movies
3. Finally, we have identified potential sources of additional revenues that could
help make the business model even more attractive to investors. These
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include crowdfunding the development of movies as well as auctioning
dinners with the movies’ actors and director.
However, there are further areas that Star Production should analyse before
launching:
1. First, it should calculate how much money it will need to raise to launch the
company and what share of the company the founders are willing to give to
external investors
2. Then, it should build connections with actors, directors and movie
distributors in order to make and distribute the movies
3. Finally, it should recruit a team with the right skills to execute the strategy
developed.
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Case #3: Joe’s Cookies (BCG, Bain case)
1. Situation
Joe’s Cookies is a small cookie manufacturer and seller based in California. Joe
bakes the cookies himself in a small workshop. And he then sells them directly in
schools where his employees either bring a cart or stock cookies in the school’s
cafeteria.
Sales have been flying since Joe launched the business with 10 schools back in
January. However, he has noticed that sales are growing slower at Millbrook, one of
the schools he is working with. Joe has hired you to help him figure out why
Millbrook is growing slower than other schools and how to turn the situation
around.
2. Framework development
What are the areas you would look at to identify the root-cause of the slower sales
growth in Millbrook vs other schools?
3. Framework exploration
As you discuss the framework with your interviewer, you find out about the
following information. Which parts of your framework can you cross out as a result?
•
Joe sells exactly the same cookies at the same price in all schools. The quality
of the cookies he bakes for Millbrook is the same as for other schools.
•
Millbrook is the only school where cookies are sold in the cafeteria by school
employees. At all other schools, one of Joe’s employees brings a cart every
day and sells directly to students.
•
The cafeteria at Millbrook does not sell any other cakes or direct substitutes
to Joe’s cookies. And it gets as much footfall if not more as Joe’s carts in the
other schools.
•
The number of students and staff has remained unchanged in Millbrook
since Joe launched there. All the schools where the company is present are in
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the same area. Joe therefore does not think there is a strong difference in
student preferences and disposable income between schools.
4. Quantitative question – Data provided
Joe summarised sales volume data for you in the following table since his January
launch. What are some of the conclusions you can draw from this data?
Millbrook - Average number of cookies sold per day
Avg sales per day
Jan
Feb
Mar
Apr
May
Jun
Chocolate
50
63
78
98
100
100
Chocolate chip
60
75
94
100
100
100
Ginger
40
46
53
61
70
80
Oatmeal
30
35
40
46
52
60
Other schools - Average number of cookies sold per day
Avg sales per day
Jan
Feb
Mar
Apr
May
Jun
Chocolate
15
19
23
29
37
46
Chocolate chip
20
25
31
39
49
61
Ginger
10
12
13
15
17
20
Oatmeal
10
12
13
15
17
20
5. Creativity question
Joe confirmed that at the moment he is sending 100 cookies of each of the four
flavours every day. Millbrook must therefore be running out of Chocolate and
Chocolate chip cookies. What are some of the things Joe could do to help accelerate
cookie sales at Millbrook?
6. Recommendation
You are meeting Joe to give him your final recommendation on the problem he is
facing. What would you tell him?
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Answers
1. Situation
To avoid any misunderstandings, you should ask follow up questions that will help
you understand the situation better. For instance, you could ask:
•
How much slower are sales growing in Millbrook vs other schools? Has it
always been the case or is it a recent trend?
•
How does Joe sell cookies in Millbrook? Using one of his carts or stocking
them in the school’s cafeteria?
Prior to diving into the framework question, we also recommend that you clearly
define the objective of the case. For example, you could ask:
•
What are Joe’s objectives for Millbrook’s sales? To grow in line with the rest of
the other schools?
•
Can I confirm that revenue is the only metric Joe is interested in here?
2. Framework development
Once you have clarified the situation, you can prepare a framework to analyse the
question. Since the main focus is on finding the root-cause of the slower sales
growth in Millbrook, the following areas could be analysed:
A. External factors (not controlled by Joe)
1. In-school competition: Are there any substitutes or competition to Joe’s
cookies (e.g. vending machines) in Millbrook that are not in other schools?
2. In-school visibility: Are Joe’s cookies as visible in Millbrook as in other
schools? Do they get as much footfall?
3. Students and staff number: Has the students and staff number at
Millbrook changed during the period?
4. Students and staff profile: Is the population in Millbrook very different
to other schools? Does it have as much disposable? Is it more healthconscious and less prone to eating cookies?
B. Internal factors (controlled by Joe)
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1. Cookies sold: Does Joe sell the same range of cookies (e.g. chocolate chip)
in Millbrook than at other schools? Are the cookies sold of exactly the
same quality?
2. Cookies pricing: Does Joe sell the cookies at the same price in Millbrook
as in other schools? Do they feel more expensive in Millbrook because
other food items are much cheaper than at other schools?
3. Cookies availability: Does Joe send the same quantity of cookies to
Millbrook than to other schools? Are cookies always available? Or does Joe
tend to run out of cookies and not be able to meet the demand from
students?
Both areas of this framework are equally important to analyse in order to get a
sense of what is driving the slower sales in Millbrook.
3. Framework exploration
We can cross-out the following parts of the framework based on the information
provided:
•
In-school competition can be crossed out because you are told that “the
cafeteria at Millbrook does not sell any other cakes or direct substitutes to
Joe’s cookies”.
•
In-school visibility can be crossed out because you are told that
Millbrook “gets as much footfall if not more as Joe’s carts in the other
schools”.
•
Students and staff number can be crossed out because you are told
that “the number […] has remained unchanged in Millbrook since Joe
launched”.
•
Students and staff profile can be crossed out because you are told that
Joe thinks there is no “strong difference in student preferences and
disposable income between schools”.
•
Cookies sold and Cookies price can be crossed out because you are told
that “Joe sells exactly the same cookies at the same price in all schools.
The quality of the cookies he bakes for Millbrook is the same as for other
schools.”
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52
That leaves us with Cookies availability as the only area of the framework which has
not been crossed out. At this stage your hypothesis should therefore be that the
lower sales growth in Millbrook is driven by lower availability.
IGotAnOffer special tip:
Framework exploration is a step that is specific to cases where you are looking for
the root-cause of an issue. This type of cases is frequent at BCG & Bain but less so
at McKinsey.
The best way to explore a framework is to make a hypothesis at the very
beginning of your exploration and to then test that hypothesis. For instance here
you could have said “My initial hypothesis is that the slower growth is driven by an
external factor. Let’s test this hypothesis. Would we happen to know anything
about competing products at Millbrook?”
This is a good way to get the conversation going with your interviewer in a
structured way. You should update your hypothesis as you collect more and more
information. So for instance here, once you have crossed out all the parts of your
framework in the external category you could say something like: “That’s
interesting, so it looks like we have ruled out all the external factors here. So my
new hypothesis is that the problem is driven by an internal factor. Let’s now look
at this part of the framework”
To get a good sense of how to explore frameworks, we would recommend
watching the BCG & Bain live extract that’s part of this Free case prep course.
4. Quantitative question – Data provided
The two tables list the average number of cookies sold per day broken down by
different flavours and months. The first table is for Millbrook and the second table
is an average for all other schools. Let’s focus on the Millbrook table first and then
analyse the second one.
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There are three interesting trends emerging from the Millbrook table:
1. The total number of cookies sold in January was 180 cookies, and in June
341 cookies. That’s an additional ~160 cookies in 6 months. The number
of cookies sold in Millbrook therefore grew by ~90%. Growth in other
schools should therefore be higher than 90%.
2. Chocolate and Chocolate chip are the most populate flavours. Sales for
these flavours started higher than for Ginger and Oatmeal in January. But
have both plateaued at 100 units. The fact that they both plateau on
exactly the same number strengthens our earlier hypothesis on the fact
that the cafeteria might be running out of cookies.
3. Finally, Ginger and Oatmeal cookies have continue growing while
Chocolate and Chocolate chip cookies have been flat. This illustrates there
is still demand for additional cookies in the school. And it confirms the
hypothesis that the cafeteria probably only stocks 100 Chocolate and
Chocolate chip cookies and runs out every day.
Let’s now move on to the second table. There are two interesting trends there:
1. The total number of cookies sold in January was 55 cookies, and in June
147 cookies. The number of cookies sold in other schools therefore
almost trebled in 6 months which is faster growth than in Millbrook as
expected.
2. The number of cookies sold at other schools seems to be growing quite
regularly for all flavours – not just Oatmeal and Ginger. Again this
illustrates the Chocolate and Chocolate chip cookies problem identified is
specific to Millbrook and does not impact other schools.
The conclusion from analysing these two tables is that Millbrook seems to be
running out of Chocolate and Chocolate chip cookies which is preventing it from
growing as fast as it has in other schools.
As a next step, it could be great to double check that this assumption is correct with
the Millbrook staff and to also develop ideas to solve this problem.
5. Creativity question
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For sales to grow faster at Millbrook Joe needs to meet the demand for additional
Chocolate and Chocolate chip cookies or convince customers to buy the other type
of cookies. There are a few different ways in which Joe can achieve these objectives:
1. Use existing space more efficiently
a. He could change the mix of cookies he sends to Millbrook and increase
the number of Chocolate and Chocolate chip cookies while decreasing the
number of Ginger and Oatmeal cookies.
b. He could ask the Millbrook staff to pack cookies tighter on their shelves so
that he can send them more Chocolate and Chocolate chip cookies.
c. Similarly, Joe could change the size and shape of his cookies so that they
take less space on the cafeteria shelves and the employees are able to
stock more of them in the same space.
2. Find more space at Millbrook
a. He could ask the school for extra space or shelves in the Cafeteria so that
he can send more Chocolate and Chocolate chip cookies every day.
b. If the school cannot offer more space in the Cafeteria, Joe could send an
additional cart that would sit at the cafeteria entrance and would be
stocked with additional Chocolate and Chocolate chip cookies.
3. Change customer demand
a. Joe could modify the demand curve for his cookies by pricing flavours
differently. For instance if he prices Chocolate and Chocolate chip cookies
higher than the Ginger and Oatmeal ones this will give an incentive to
customers to switch to Ginger and Oatmeal. This might help to increase
overall sales.
b. Finally, when customers ask for Chocolate and Chocolate chip and they
are not available anymore Joe could authorise the Cafeteria staff to give a
discount on the Ginger and Oatmeal ones to continue boosting sales.
In terms of prioritisation, Joe should start by making the most of the space available
to him in the Cafeteria currently and change the mix of cookies he sends every day.
If this is not sufficient to meet customer demand, then he should look into some of
the other options such as asking for more space or packing the cookies more
densely on the Cafeteria shelves.
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55
IGotAnOffer special tip:
You will sometimes come across creativity questions that look simplistic at first
sight. This is the case here where you might think that the answer is simply to
increase the number of Chocolate and Chocolate chip cookies that are sent to
Millbrook every day. In these cases, you should challenge yourself and still find
two or three categories of things you could do to solve the problem at hand and
then break those down.
We are trying an experiment. If you got this far it shows you are really motivated and
we feel like you should be rewarded for powering through these cases – great work :) To
encourage you to go even further, here is a secret 20% discount code on our case
interview training programmes: 0PTKKBNHCGQZ_FreeCaseSecretCode. But be quick,
only the first 10 people to find this code will get the discount!
6. Recommendation
Our analysis suggests that sales have been growing slower at Millbrook because the
cafeteria is running out of Chocolate and Chocolate chip cookies on a daily basis.
This is confirmed by three data points:
a. First, the data we have been provided with shows that both Chocolate and
Chocolate chip cookies sales suddenly plateau at 100 cookies per day.
b. Second, 100 cookies per day is the exact number of cookies that Joe sends to
the Cafeteria every day.
c. And finally, the growth in Ginger and Oatmeal cookies has continued in April
to June which suggests there would be enough demand for additional
Chocolate and Chocolate chip cookies if they were available.
In addition, we recommend that Joe looks into a mix of the following steps to turn
the situation around and accelerate growth at Millbrook:
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56
a. First, he should immediately look into whether it’s feasible for him to change
the mix of cookies he sells to the Cafeteria every day and replace some
Ginger and Oatmeal cookies by Chocolate and Chocolate chip ones.
b. Second, he should look into setting up a process to collect feedback from the
cafeteria and know what cookies he runs out of / does not run out of. This
would enable him to adapt his daily deliveries and maximise sales.
c. Finally, Joe should explore whether it is possible to get more space in the
Cafeteria to stock and sell more cookies.
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Case #4: Indian nappies (BCG, Bain case)
Situation
Our client is a large disposable nappies manufacturer in the US. They are thinking
about entering the Indian market.
Quantitative question – No data provided
The client has asked you to estimate the market size for disposable nappies in
India. Can you estimate that number for them?
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Answer
To answer quantitative questions where no data is provided, you should follow the
same approach as for regular maths questions.
•
Map out the calculations you are going to do
•
Present your plan to your interviewer to get feedback before starting the
calculations
•
Do your calculations and simplify the numbers when possible
•
Sense check your results
If a plan does not come to you naturally when trying to answer the question, it is ok
to ask your interviewer for a few seconds to gather your thoughts.
Here is a potential plan you could have shown your interviewer for this specific
question:
1. Estimate the number of kids of the right age to wear nappies in India
2. Estimate the percentage of those kids actually wearing disposable nappies
(as opposed to non-disposable)
3. Estimate how many nappies kids wear per day and then per year
4. Estimate the market size in number of nappies and value
Let’s now do the calculations and estimate the market size.
1. Number of kids of the right age to wear nappies in India
• There are 1.3bn people in India. Let’s assume that life expectancy is 80
and that the population is distributed evenly across age buckets to keep
things simple.
• Kids wear nappies from when they are born to when they are about 3
years old. So all kids under the age of 3 should be part of the addressable
market.
• Number of kids under 3 = 3 x 1.3bn / 80 ≈ 50m
2. Percentage of kids actually wearing disposable nappies in India
• Not all parents in India will be able to afford disposable nappies for their
kids. The penetration of disposable nappies is close to 100% in countries
like the US or the UK, but lower in India. Let’s assume a 50% penetration.
• Number of kids under 3 wearing disposable nappies = 50m x 50% 25m
3. Number of nappies per kid per year
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Disposable nappies need to be changed multiple times per day. Newborns need to be changed more frequently than older kids. Let’s assume
kids get changed six times per day in their first year and three times in
their second and third year. So on average that’s four times per day.
• Number of nappies per kid per year ≈ 4 per day x 350 ≈ 1,400
4. Market size in volume and value
• The market size in volume is simply the number of nappies per kid per
year times the number of kids wearing nappies.
• Market size in volume = 1,400 nappies per kid per year x 25m kids = 35bn
• Regarding the market size in value, families in the US spend about $20
per kid per month on nappies. This budget will be lower in India as
nappies will likely be cheaper. Let’s assume $10 per month which is $120
per year.
• Market size in value = $120 per year x 25m kids = $3bn
•
A good way to sense-check this result is to calculate the price per nappy. Let’s divide
the market size in value by the market size in volume: $3bn / 35bn nappies is less
than 10 cents per nappy which is reasonable.
Once you are done carrying out your estimate, you need to:
• Relate the result back to the initial question
• Suggest next steps in the analysis
Our estimate suggests that the market size for nappies in India is $3bn, or 35bn
nappies per year in volume.
An important next step here would be to refine some of the assumptions we used.
In particular, finding out the exact percentage of kids wearing disposable nappies in
India seems important as this is the assumption that feels the most uncertain at
this stage.
IGotAnOffer special tip:
You won’t always have a good number on top of your head for an assumption. For
instance here, you might not have known that kids wear nappies until they are
three years old and use an average of four per day. This is completely fine.
In these instances, you should simply share your best guess with your interviewer
and ask them if it “sounds about right”. If your ingoing assumption is wildly off
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your interviewer will let you know and nudge you in the right direction.
Finally, a good way to give authority to your assumptions is to back them up with
some form of evidence. For instance, here you could have said, “I don’t have kids
but I know from my little cousins that kids wear nappies until they are 3 years old
and use about 4 nappies per day.” This is a great way to ground your assumptions
in real life.
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