Case Interview Cliff Notes Julia Otis, Matt Schmitt, Tracy Shepard, Karina Totah, John WhitneyJulia
Otis, Matt Schmitt, Tracy Shepard, Karina Totah, John Whitney (Yale
SOM Students) Competitive Strategy – MGT 525
Sonia Marciano
December 10th, 2011 Case Interview Cliff Notes
There are many excellent resources to help students and professionals prepare for case interviews
at management and strategy consulting firms. These include books1, websites2, private coaches,
seminars and career development offices at most universities and business schools that help
candidates translate their professional and academic experiences into the “language” of case
interviews. Larger consulting firms also usually offer instructions and practice cases on their
websites. The reality is that the majority of candidates who receive offers from top consulting
firms will have taken full advantage of these detailed resources. You should too—there is no
shortcut to case interview success and you need to understand the concepts taught by these
resources (not to mention by business schools).
What is not readily available, however, is a guide to the critical frameworks that candidates should
commit to memory to ensure case interview success. Case Interview Cliff Notes intends to fill that
void and to be the one resource candidates carry with them everywhere they go in the months
leading up to interviews, including into the waiting room of the consulting firm of their choice.
Case Interview Cliff Notes
Case Interview Cliff Notes
IS NOT…
IS…
…business school on paper. This guide will not
teach you fundamental business concepts.
…the resource you pull out of your pocket
while on the bus, eating your lunch or
daydreaming through pointless presentations
(you want to change careers… right?).
…a substitute for comprehensive case
interview guides. This guide assumes you
know the format of case interviews, when
you’re allowed to ask questions, how to present
your recommendations, etc…. If you don’t,
that’s what comprehensive guides are for.
…for practicing business consultants or
executives. This guide is intended for students
and others interested in acing consulting
interviews.
…a way of organizing the bounty of
information you’ve learned in business
school and in your professional career into
frameworks useful for landing a job in
consulting.
…the one resource you should commit to
memory. With this guide as a base, you can
build nuanced, complex case analyses that
are sure to impress your interviewers.
1
Case in Point: Case Interview Preparation by Marc P. Cosentino, Crack the Case: How to Conquer Your Case
Interviews by David Ohrvall, and Vault Case Interview Practice Guide by Rajit Malhotra et al.
2
www.caseinterview.com, www.managementconsulted.com, and www.acethecase.com 2 Why case interviews?
Interviewing for a consulting position is a two-part process: a casing portion and a behavioral
portion. In the casing portion, firms try to determine whether you have the specific analytical
abilities needed to evaluate data, solve problems, determine effective strategies and communicate
those strategies to clients. Indeed, case interviews are designed to test your ability to:
• Structure business problems
• Think analytically
• Synthesize conclusions into actionable recommendations
• Communicate your thoughts clearly and confidently
In the behavioral portion of your interviews, firms try to assess whether you are a good cultural
fit with the company. Here, your interviewers will be wondering:
• Can you represent the firm in a professional manner to clients?
• Are you a leader?
• How do you handle conflict?
• How are your people skills?
• Would I want to be staffed on a project with you? Are you someone I would appreciate
having around during 17-hour work days?
• Are you responsible, hard working, dedicated and smart enough?
• Do you fit with the general culture of our firm? (Brainy? Social? Fun? Creative?)
The key to acing consulting interviews is to give equal attention to both of these elements,
although this guide will only help you with the casing portion. Nevertheless, you must practice
for the behavioral portion of your interviews. Many students spend the bulk of their time
preparing for case interviews, only to flounder on the behavioral questions. Not only should you
be internalizing frameworks, brushing up on arithmetic, and practicing live cases, but you should
also be researching companies, speaking with employees and trying to understand what your
target firms value in a candidate (both in terms of intellectual abilities and personality). Above
all, write down answers to possible behavioral questions3 and practice delivering your answers.
3
Many of the resources listed earlier in this guide list common behavioral questions. Common sense, Google, and
people who have gone through the process before can also help you generate lists of questions.
3 A few tips before we begin…
In our experience, there are several common mistakes that candidates make in case interviews.
Here we will list a few key tips you should always keep in mind.
•
•
•
•
•
•
Be hypothesis driven: Consulting firms are looking for candidates who can assess a
business situation, form a hypothesis about the central problem and gather information to
test that hypothesis. As such, you should always clearly state the hypothesis you are
looking to test. Simply having a hypothesis is not a enough. If you don’t state it, you will
appear unstructured.
Walk the interviewer through your thought process: Your interviewers are testing you
on how you think. Help them. What’s your hypothesis? How will you test it? With those
results, what do you conclude? If you demonstrate a structured thought process, you will do
well regardless of the accuracy of your answers. If you do not demonstrate a structured
thought process, you will do poorly regardless of the accuracy of your answers.
Stay structured throughout the interview: Candidates often draw an initial framework,
but then begin to lose focus as the case progresses. Being a structured thinker means
always thinking in a structured manner. Use your initial framework as a map of your
intended process: as you progress, continually refer back to where you are on your map.
When asked to compare pros and cons, draw lists of each and address each list in turn.
When presenting recommendations, draw a bullet for each and speak to each in turn.
Poise matters: Your interviewers are trying to determine whether they could trust you in
front of clients. You need to appear confident (but not arrogant), relaxed (but not bored)
and friendly (but not a pushover). Sit up straight, don’t fidget and make eye-contact. Vary
your tone to match what you’re saying. Don’t appear flustered (even if you are flustered).
So what?: You may be calculating the ROI of a project because your interviewer asked
you to, but you need to pretend that you care about the answer. When you finish your
calculation, YOU ARE NOT DONE! You must put the answer in context. Don’t just say
“1%.” Instead, say, “The ROI is 1%, which is quite low. Our client would be better off
investing in a different project.” Don’t make your interviewer ask “so what?”
Summarize results, not process: Most cases will end with you giving a 1 or 2 minute
“summary” of your recommendations. This is not a summary of your process but of your
results. Do not restate everything you talked about. Do use the following pneumonic:
RRRN, or Recommendation(s), Reason(s), Risk(s), Next step(s). First state your
recommendation, then the reason you believe this is the best course of action, then the risks
you identify with this course, and finally the next steps you would take (to verify this is the
best course, to assess and mitigate the risks, or to implement your plan). 1-2 minutes is not
a long time, so be brief and memorable.
4 Math practice
Doing math in front of an audience can be nerve-wracking and you probably haven’t done long
division since high school. There are no shortcuts here… you need to practice. But here are a few
tips that can help.
• When multiplying or dividing numbers with many significant digits, use exponential
notation. 7,500,000 becomes 7.5E6 and .125 becomes 125E-3. Add exponents when
multiplying and subtract them when dividing.
7.5E6 x 125E-3 = 937.5E3 = 937,500
7.5E6 / 125E-3 = .06E9 =60,000,000
• Round numbers when appropriate, but be careful. Adding is far more robust to
rounding than multiplying. With multiplication, rounding on smaller numbers tends to
produce larger percentage changes than rounding on big numbers.
• Pay attention to units, write them down and trace-cancel them in calculations. Even if
you can keep units in your head, you interviewer wants to see that you can organize
information and convert units if necessary.
5 “Mini” Frameworks
Before we turn to the frameworks you will use to “solve” case interviews, we present you with
several “mini” frameworks. These are most often used as components of the larger frameworks
needed to answer complex case questions, or they may be used in response to smaller standalone
questions. These frameworks are particularly well-known, so beware of using them verbatim as
interviewers will immediately recognize them (i.e. do not say “Now let me walk you through the
4P’s.”). Instead, it is good to develop your own nomenclature or put your own spin on these
standard frameworks.
The 4Ps of Marketing
When considering a marketing campaign, think about each of the “4 Ps” in turn.
6 Pricing
When setting the price of a good or service, consider the minimum price you can accept (the
floor) and the maximum price your customers would ever be willing to pay (the ceiling). The
floor is determined by your costs of production and your cost of capital. The ceiling is
determined by customer lifetime value. Perform a competitive analysis to determine the price
between the floor and the ceiling that maximizes profits (or achieves other goals, such as market
share).
7 Market Sizing
Market sizing questions do not test your knowledge of a particular market’s size. Rather, they
test your ability to think through a problem logically and to support your reasoning. Thus, it is
important that you develop a logical, sequential framework to arrive at an estimate, and make
sure to verbalize your methodology. If you are performing calculations on a piece of paper, tell
the interviewer what you are calculating and why as you work through the math.
Occasionally a “market sizing” question can be a case in and of itself, but this is somewhat rare.
Market sizing more often surfaces as part of a broader case issue. If, for instance, you are
evaluating whether a company should enter a new market, you may want to begin your analysis
by figuring out the size of the market to determine if it is worthwhile to enter.
Key Tips
•
•
•
•
•
Determine whether the question is about a population, households, individuals, certain
age groups or something else (weight, distance).
Break the problem down into small, digestible pieces.
Clearly state any assumptions you make and why at each step of your process.
Use estimates that make your calculations easier. Reasonable, ballpark estimates should
suffice. You may be asked to explain why you chose a certain number to work with.
Write all numbers down and walk your interviewer through every step.
8 Case Frameworks
This section will provide you with some basic frameworks that will help you analyze case
interview questions. With enough practice, you will be able to internalize these lists and
frameworks, and draw out the most relevant factors in a given case question. There are two key
points to remember when studying these frameworks:
1. Framework should be unique and tailored to each particular case: Interviewers know
that if you did any real preparation for your interviews, you probably studied various
frameworks from guides like this one or Marc Cosentino’s Case In Point. As a general
rule, it is not be a good idea to use any framework verbatim because it shows little
creativity on your part. The standout candidates will pick and choose elements of several
frameworks and create a customized one that best suits each case.
2. Frameworks should be Mutually Exclusive and Collectively Exhaustive (MECE):
A framework for a single problem can be organized in a multitude of different ways.
While creativity is encouraged in designing a framework for your case, you need to ensure
that there are no overlaps among the sub-branches of your framework and that the
aggregated sub-branches do not leave anything out.
Whichever framework you choose, remember to refer back to it throughout the case. This will
make your analysis seem logical, deliberate and structured. You should also quickly revisit your
framework before synthesizing and delivering your final conclusions, which will help you
contextualize everything you have learned throughout the interview.
9 Profit Tree
Profitability problems are by far the most common cases used in consulting interviews. Often, you
are asked to determine the cause of a profitability decline and then to suggest solutions, which can
involve increasing revenues, decreasing costs, or both. Mini “profitability cases” are also often part
of larger cases. As a result, the Profit Tree is probably the single most useful framework to know.
Fortunately, it’s also very straight forward. To identify problems, begin on the left and move to the
right, gathering information at each node to determine whether that branch contains the problem. If
so, dive deeper to isolate the problem. When offering solutions, start by fixing the specific problem
and then consider broader profit-generating actions.
Notes: When isolating problems, consider different revenue streams independently (a different
revenue branch for each). You also want to be as fine-grained as possible (keep moving right)
when isolating problems.
10 Industry Analysis
Many consulting interview cases depend on your ability to perform a back-of-the-envelope
industry analysis. Some cases simply ask you to asses an industry, while others may want you
determine the best way to enter a market, which competitor to acquire, etc…. For all of these, you
should begin by considering the industry and external contexts in turn. How deep you dive into
each topic will depend on the particular question and time available. At the very least, use the
following as a checklist of topics to consider.
Notes: This framework is an extremely abbreviated version of Porter’s 5 Forces. You should
understand the concepts in Porter’s, but it is unlikely you will have time to perform a complete
Porter’s analysis. Nevertheless, we include Porter’s here for your review.
11 Entering a New Market
When considering whether (or how) to enter a new market, you should first assess what the
company hopes to accomplish in this expansion. With this information, you can more effectively
evaluate the industry and determine how its attributes align with company goals. Finally, if
entrance seems favorable, you need to articulate how the company might conduct this expansion.
12 Mergers and Acquisitions
You should approach questions about Mergers and Acquisitions by first assessing the overall
attractiveness of the market and the company in question. While the attributes measured in each
of these analyses do not perfectly map onto one another, there are some similarities (profitability,
size and market share). Once this first stage is complete, you can discuss the competitive
landscape in greater detail, followed by acquisition logistics and an exit strategy.
13 New Business/New Product
Cases about starting a new business or launching a new product are usually “if” questions. If your
industry analysis suggests there are excess profits to be made, then consider whether your
company is well positioned to capture those profits. If your company is well positioned, then
consider who the customers are and how you will reach and retain them.
14 Company Growth
Cases about growth are similar to cases about starting a new business. You must begin by
identifying your goals and asking if it’s a good idea, or even possible, to grow in your particular
industry. Then, considering your goals and capabilities, you should choose the most appropriate
strategy or strategies.
15 Turnaround
You should approach company turnaround cases by in two stages. First, you should conduct an
analysis of the key drivers affecting the company’s performance: the industry, internal
environment and macroeconomic trends. Second, you should synthesize this information and
derive key insights that help you articulate a targeted turnaround strategy.
16 Sample Cases
Shop Fresh
This case tests a candidate’s ability to analyze
competitive advantage and innovation in the grocery
industry.
Relevant Frameworks
Industry Analysis (Porter’s 5 Forces)
Profit Tree
**Note: This is a 4-part case with a sequence of questions
Case Scope Provided by Interviewer:
Shop Fresh is an older regional supermarket chain with relatively strong sales. Its stores are
average size—sometimes on the smaller side, they tend to be located in strip malls and many
serve mixed-income populations. In the past, they’ve enjoyed geographic monopolies in most of
their respective communities.
Recently, Shop Fresh stores in the Smithtown area have seen declining profitability and are
facing competition from many types of new grocers. Shop Fresh is considering how to
increase profitability and regain its competitive position. You have been hired by Shop Fresh
to lead the study.
Question 1: What factors around profitability should Shop Fresh consider first?
Question 2: A Walmart with a grocery in-store has opened a few miles away. How does that
affect Shop Fresh’s competitive advantage and how should it respond?
Question 3: A specialty grocery store, Trader Joe’s, is considering opening a location in the
neighborhood. How would a Trader Joe’s, as opposed to a Walmart, affect Shop Fresh’s
competitive advantage and how should it respond?
Question 4: Given a sense of the landscape of competitors in the grocery industry, can you draw
a bar graph showing the (relative) margins of these three types of players (Shop Fresh, Walmart,
Trader Joe’s)? What does this mean for the future of stores like Shop Fresh?
17 Additional Information Provided After Appropriate Questions:
Question 1
•
Price wars are common in the grocery industry. Shop Fresh tries to price competitively
and often offers discounts on certain items in order to drive additional sales. The results
of past promotions are as follows:
Question 3
•
Supplier Power/Trader Joe’s: Distribution in the grocery industry is based heavily on
relationships. There tend to be fewer distributors than retailers, which contributes to
supplier power. Similarly, most grocery employees are unionized, which means that
workers can bargain and exhibit power as suppliers of labor. Therefore, most grocers are
subject to strong supplier power. A prime example of a grocer that holds strong power
over suppliers, however, is Trader Joe’s, a specialty grocer that offers a limited selection,
and the majority of its goods are private label. Moreover, Trader Joe’s employees are not
only not unionized, but 70% are part-time. Their turnover is very low at 4%.
18 Retailer
SKUs
Average Supermarket
Trader Joe’s
50,000
4,000
Goods that are Private
Label
16%
80%
Question 4 [X-axis is only illustrative]
Key Insights
•
•
•
•
Identify at least 2-3 of the most relevant factors of Industry Context / Porter’s forces
(Rivalry, Supplier Power and Barriers to Entry).
Supplier power is strong. Traditional grocers try to provide many goods and branded
goods—this leaves them at the mercy of suppliers, to a certain extent. Also, grocery
workers can be heavily unionized, which is another source of supplier power.
Competitors like Trader Joe’s have countered supplier power and become more price
competitive.
Price elasticity of demand. Shop Fresh should adjust prices on inelastic goods to capture
a greater margin.
Minimum efficient scale and low cost structures. Hypermarts, like Walmart, are posing
serious threats to traditional grocers with their economies of scale and inventory
management systems.
19 Sample Sequence:
The candidate should begin with an industry analysis using a slim version of Porter’s 5
Forces.
Question 1: Rivalry (Porter’s); Competition and Profitability/Margins (Industry Context)
• Identify: A quintessential highly competitive industry. The goods grocers sell fill basic
needs of consumers, so they are generally in high demand. For average supermarkets,
however, the industry is concentrated, costs structures are similar, buyers have very low
switching costs, and firms can adjust prices instantly and announce that with ease.
• Identify: Shop Fresh can respond to high rivalry by:
o changing prices
o improving product differentiation
o creatively using channels of distribution
o exploiting relationships with suppliers
• Recommendation #1: Candidate should notice that discounts drive more sales on some
items (ones with many substitutes) and have little effect on others. That means there is
likely an opportunity to capture greater margins on less price-sensitive/elastic goods, like
eggs and cigarettes.
• Recommendation #2: The candidate could also suggest differentiation. Since Shop
Fresh is a smaller store, it could try to introduce a niche submarket into its offerings—
ethnic, health food, premium products, etc….
Question 2: Threat of Entry (Porter’s); Barriers to Entry/Exit (Industry Context)
• Identify: New entrants have to be relatively large to operate at an efficient scale (or need
to offer a differentiated product on a smaller scale). It’s an industry with similar products,
no proprietary technology or government regulations, and open access to distribution
channels, so entry is fairly easy.
• Identify: The hypermarts have been able to leverage their low cost structure and apply it
to the grocery business. They capitalize on (1) the relative weakness of supplier power in
their business model and (2) the innovative inventory management system already part of
their operating model to supply grocery inventory in bulk.
• Recommendation: Shop Fresh cannot compete on price. It must compete on
differentiation and spend on advertising/marketing to attract customers, promote its
quality and freshness, and establish loyalty programs.
Question 3: Supplier Power (Porter’s & External Context).
• Identify: Managing supplier power, in the form of distributors and employees, is key to
competitive advantage in the grocery industry. A specialty grocer like Trader Joe’s is
successful because of its limited selection, which allows it to achieve high volume on a
few goods (vs. moderate volume on many goods in conventional supermarkets). It also
does not bear the higher cost of union wages, and it is able to retain more employees,
•
20 which limits recruitment and training costs. That means Trader Joe’s is able to exhibit
power against suppliers of goods and labor and, therefore, be more competitive on price.
• Recommendation: Shop Fresh needs to differentiate from Trader Joe’s while avoiding
competing with Walmart on price. Shop Fresh could create a value proposition based on
convenience by increasing its selection of goods and offering other services, such as instore banking, to become a one-stop-shop for consumers, responding to their demands for
convenience.
Misc: Substitutes (Porter’s).
• Identify: Although most consumers purchase groceries from supermarkets like Shop
Fresh, other food purveyors may be lowering Shop Fresh’s sales, such as farmer’s
markets and restaurants
Misc: Buyer Power (Porter’s).
• Identify: Buyer Power is low. While groceries represent a moderate expense for
consumers, each customer’s purchase does not represent a large fraction of grocer’s
revenues. Volume of buyers is thus key to the move to warehouse or specialized niche
models.
21 Tracy’s Safaris
This case tests the candidate’s ability to perform a relative
cost analysis and analyze human capital management
strategies.
Relevant Frameworks
Turnaround
Profit Tree
Case Scope Provided by Interviewer:
Our client, Tracy, runs a safari company in a national park in Zambia. From 2007 to 2010, she
enjoyed a monopoly on tours in the park with her fleet of 9 jeeps. Recently, a competitor began
offering safaris in the same park. This competitor, Mike’s Safaris, has a fleet of 7 jeeps and has
been gaining market share because he offers customers safaris for $775, versus Tracy’s price of
$1,250 per safari. Mike faces the same market conditions as Tracy. What should Tracy do?
Additional Information Provided After Appropriate Questions:
Simplified Income Statement Comparison (all numbers in 000s)
Tracy’s Safaris Mike's Safaris
625
310
Revenue
140
112
SGA Expense
95
22
Wages Expense
38
35
Advertising Expense
108
63
Depreciation Expense
25
6
Energy Expense
Net Income
•
•
219
72
The higher energy cost is likely due to the age of the computer system Tracy’s Safaris
utilizes to track the movement of animals across the park. As part of their anti-poaching
efforts, the Zambian government tracks the “Big 5” animals in the park (elephants,
leopards, lions, giraffes and cape buffalo) with electronic collars. Tracy purchased a
computer system 15 years ago to track these signals and provide her with data on the
location of the animals so that she could tell her guides in the field where to find them.
Mike’s Safaris has a newer computer and tracking system which uses far less electricity.
Mike’s system cost $44,000.
Tracy’s high depreciation cost is due to her more expensive jeeps that she uses to
accommodate elderly and disabled passengers—an important customer segment for
Tracy’s business.
22 •
•
•
Tracy believes her increased labor costs are due to her superior customer service, which
is an important differentiator between her company and other companies in other parks.
Tracy employs 5 guides, each of whom lead tours in a different area of the park. They are
paid Zambian minimum wage, plus a bonus based on customer satisfaction. Mike’s
Safaris enjoys similar levels of customer satisfaction based on review websites, despite
his guides being paid a flat wage about twice the Zambian minimum.
Through a conjoint analysis of customer satisfaction surveys, it is clear that customer
satisfaction is affected primarily by two factors: the knowledge of the guide, as
demonstrated by their ability to communicate interesting facts about the animals, and the
number of sightings of the “Big 5”—elephants, leopards, lions, giraffes and cape buffalo.
The northeastern part of the park has a waterhole which is frequented by predators, thus
providing a significantly higher than average number of sightings in the area. The guide
in charge of tours in this area therefore typically gets large bonuses. Guides are assigned
to different areas of the park on a rotating basis.
Key Insights
•
•
•
•
•
Tracy should not compete on price. Such a strategy is likely to spark a price war and
destroy profits in the industry. Additionally, Mike’s prices are so low that to price at his
level, the number of safaris Tracy is selling would not cover her costs and she would
have to operate at a loss.
Cost differences should be identified as originating from either operational inefficiencies
or strategic differentiations.
For Tracy to justify her strategic differentiation, she needs to prove that it increases
willingness to pay more than that it increases costs.
Performing the calculations is not enough; the candidate should provide actionable
recommendations for further analysis.
Bonus: A superior candidate would identify a suboptimal employee incentive structure in
which rewards are based on exogenous factors instead of solely on effort.
23 Sample Sequence
•
•
•
Request sales and cost data (the interviewer may choose to dole these out one-by-one as
asked, or simply hand the candidate the income sheet comparison).
Divide sales by price to determine number of safaris sold by each company.
Divide each cost by number of safaris to determine per-unit costs.
Price
# of safaris
Wage/safari
Energy/safari
# of jeeps
Depreciation/jeep
•
•
Reason
Recommendation
Strategy
Task marketing to prove ROI. If the
specialized jeeps increase willingness to
pay more than they increase costs,
continue with this strategy.
Wages
Strategy
Task HR to prove ROI. If the incentive
system increases customer satisfaction,
and in turn increases willingness to pay
more than it increases costs, continue
with this strategy.
Energy
Inefficiency
Invest in upgrading the computer system.
Depreciation
•
•
$775
400
55
15
7
9
Probe for information on the differential costs: energy, wages and depreciation.
Based on this information, determine whether cost disadvantages are due to operational
inefficiencies or differentiation strategies.
Cost
Disadvantage
•
$1,250
500
190
50
9
12
Given that customer satisfaction does not seem higher than for Mike’s Safaris, probe
further. Ask what factors determine customer satisfaction.
Ask if the number of sightings of the “Big 5” are directly related to the skill of the guide.
Conclude that the guides are being compensated based not merely on their effort, but on
exogenous factors as well. Correcting this strategy by correlating pay for the guides more
directly with their effort (in this case, communicating their animal expertise) should
create a better reimbursement system and reduce costs.
24