The Duke MBA
Consulting Club Casebook
2020-2021
DMCC 2020-2021 Sponsors
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A Note from the Editor’s
Welcomestudents:
The Duke MBA Consulting Club (DMCC) is proud to present the 2020-2021 DMCC Casebook. This year we have included
13 brand new cases. The objective of this book is to help you prepare for your upcoming consulting case interviews. Case
interviews are an integral part of the hiring process for consulting firms. These interviews give you the opportunity to
showcase your communication, client, creative and analytical skills to your interviewer. This book was developed to
complement the Duke MBA Consulting Roadmap curriculum. We hope that using both will help lead you to success during
the upcoming recruiting season.
Included are industry one pagers to give you an overview of each industry. Although we cannot prepare you for
everything you might encounter during your case interviews, we went to great lengths to diversify the case content. Current
cases cover a wide variety of topics from healthcare to travel, across several problem types. Finally, we have included a
resource page and feedback form to help you prepare and help us improve the casebook.
This casebook could not have been completed without all of the wonderful cases submitted by your classmates. We
would also like to thank our friends at other MBA programs for sharing with us their old casebooks to supplement the
cases herein.
We wish you luck with your preparation and would like you to remember that your fellow DMCC members are here to
help! Please reach out to anyone on the cabinet if you feel that you are not “cracking the case”. Lastly, to the students of
other top MBA programs using this casebook during their preparation, we warmly welcome you to “Team Fuqua.”
Good luck!
Amy Schafer and Ryan Sabo
The DMCC 2020 Casebook Team
Acknowledgements
This casebook would not have been possible without the case contributions from the following
second year students: Kritika Shah, Caroline Queen, Aicha Ndiaya, Kevin Lampley, Linda Ly, John
Finol, Taylor Williams, Lee Foster, Jig Patel, Lilian Onyekachi Izuorah, Christiana Chen, Ryan Sabo,
Amy Schafer, Austin Ray, and Collin Skousen.
As well as our excellent team of reviewers: Aimee Hechler, Adam Janus, Utkarsha Bhardwaj, Dan
Watts, Snigdha Shankar, Ben Jimenez, Beth McKenna, Jamie Ciocon and Antonio Perez Senande.
Please email dmcccasebook@duke.edu with any case-specific feedback, questions or improvements.
Thank you!
Casebook Overview
• The first section provides key industry one pagers followed by a case table of
contents and practice cases.
• Qualitative and quantitative case difficulty is identified within the case table of
contents; difficulty is rated as easy, medium and difficult. Medium is considered to be
at the level of a typical case interview.
• Ask the behavioral questions EVERY TIME you give a case! This cannot be stressed
enough, and you will thank us later.
• Most cases are adaptable, so familiarize yourself with the case prior to giving it.
There is nothing worse than an unprepared case-giver.
• Print exhibits before giving the case or be prepared to share digitally (we tried to
ensure that all exhibits are effective when printed in black and white, but recommend
double checking your print outs to be sure!)
• HAVE FUN!
Tips for Virtual Case Interviews
1
Keep papers and notes organized as you would in an in-person case
2
Over-communicate when presenting your framework, brainstorms, math, etc.
and rely on structure! Practices by casing over the phone – it forces you to
explain your thinking clearly
3
Familiarize yourself with the technology that firms may use for virtual
interviews (WebEx, Zoom, Google Hangouts)
4
Practice casing and receiving feedback virtually
5
Remember to smile, make eye contact, and remain engaged as you would
in-person!
Industry Overviews
Oil & Gas
Products/ Services
Products are categorized along the value chain as upstream, midstream, or downstream
Upstream: Identify, extract, or produce raw materials. Also called exploration and production
Midstream: Link upstream and downstream through storage and transportation services
Downstream: Anything related to the post-production of crude oil and natural gas
*The closer an oil and gas company is to supplying consumers, the further downstream it is
Revenue
Volume of goods sold; Price is generally determined by global indices; Products can include diesel, natural
gas, gasoline, heating oil, propane, etc.
Costs
It is important to note that this is a high fixed cost industry, resulting in a significant barrier to entry. Other
costs may include extraction costs, COGS (i.e., oil), labor, technology, transportation, and licensing
Competitive Landscape
(Competitors,
Substitutes, New
Entrants)
Upstream: BP, Shell, Aramco, Exxon Mobil, and China National Offshore Oil Corporation
Oilfield services: Schlumberger, Halliburton, Baker Hughes
Downstream: MPC, PSX, COP, BASF, Dow, SABIC; Any oil refinery, natural gas distributor, or retail outlets
Customers
Governments, CPG producers, Utilities companies
Distribution Channel(s)
Wholesale to customers: in large quantities
Traders: in smaller quantities
Suppliers/ Supply
Chain
Products are mostly transported in large quantities by vessels and require long lead times.
Recent Trends & Key
Concepts
Oil prices have been volatile over the past few years. The recent American shale oil boom, & slowdown
have been the result of high oil variance.
COVID-19: There was a surplus of oil causing many refineries to halt operations. The oil price went negative
as a result of a lack of storage for oil. It is important to understand the current state of OPEC, and if there
have been any recent agreements to cut production.
Key trends
8
Consumer Packaged Goods (CPG)
Products/ Services
CPG companies provide consumers with items used daily by average consumers that require routine
replacement or replenishment. These items include cleaning agents, beauty products, food, beverages, pet
food, clothes, tobacco, makeup etc.
Revenue
Volume of goods sold; Price premium on branded goods
Costs
Sales and Marketing (branding, discounting, trade spend); COGS (raw materials, packaging, and
processing), shipping/distribution, product development, product testing
Costs can vary depending on how horizontally integrated the CPG company is within the supply chain
Competitive Landscape
(Competitors,
Substitutes, New
Entrants)
Procter & Gamble (P&G), Unilever, Clorox, Mondelez, PepsiCo, Frito Lay, Chobani, Casper, Philip Morris
USA, Coca-Cola, etc.
Private label products, home remedies, small mission-driven niche brands
Customers
Walmart, Sam’s Club, Costco, Target, Grocery stores, Convenience stores, Consumers
Distribution Channel(s)
Wholesale to customers (Walmart, etc.)
Direct-to-consumer (limited web distribution through Amazon and others)
There has been a wave of CPG companies attempting to go D2C to avoid the middleman
Suppliers/ Supply
Chain
Supply chain varies widely by product and region; plants are owned/operated or contract manufactured
Recent Trends & Key
Concepts
Activist investors push cost cutting and selling non-core brands; emphasis on sustainability; direct-toconsumer movement; CPG subscription kits (i.e., Dollar Shave Club, Blue Apron); CPG product
personalization; private label products and small niche brands stealing market share from the larger CPG
companies
COVID-19: Many CPG companies have benefitted from COVID-19 as consumers have stocked up on CPG
products. This has especially benefitted traditional CPG companies as consumers have a greater ‘trust’ in
their products. During COVID consumers have been less conscious of the environmental impacts of the
products they buy, and more focused on the value the product delivers
Key trends
9
Manufacturing
Products/ Services
Includes companies in the business of mechanical, physical, or chemical transformation of
materials/substances/components into new products
Revenue
Volume of goods sold; Price premium on branded goods; Revenue is generated by selling the finished
goods. These may be sold to other manufacturers to produce more complex products, or to wholesalers,
who then sell them to retailers.
Costs
Process efficiency, supply chain management, labor, raw materials; commodities, channel management,
marketing, capital investment
Competitive Landscape
(Competitors,
Substitutes, New
Entrants)
General Motors, Chrysler, Ford, Toyota, Honda, Boeing, Airbus, GE, Phillips, Siemens, Caterpillar,
Honeywell, Dow, Corning, HP, Intel
Customers
Varies by industry and position in supply chain, can be consumers or raw goods to businesses
Distribution Channel(s)
Direct Distribution: The manufacturer sells straight to the customer and uses no intermediary
(Manufacturers selling their products through their own retail chains)
Indirect Distribution: Utilizing intermediaries to get the product to the end user (a product manufacturer
utilizes Costco to reach and sell to their target market)
Suppliers/ Supply
Chain
Supply chain varies widely by product and region; plants are owned/operated or contract manufactured;
Supply chains are typically comprised of geographically dispersed facilities and capabilities, including
sources of raw materials, product design and engineering organizations, manufacturing plants, distribution
centers, retail outlets, and customers, as well as the transportation and communications links between them.
Recent Trends & Key
Concepts
Increased automation; Trump has been pushing to re-shore manufacturing supply chains
COVID-19: COVID has forced some companies to re-evaluate “just-in-time” manufacturing processes; some
companies are looking to diversify the steps of their manufacturing processes, and build up ‘emergency’
inventory; Many manufacturing companies shifted production to support the shortage of masks
Key trends
1
Financial Services
Products/ Services
Retail banking, commercial banking, investment banking, deposit-based services, credit cards, consumer
loans (personal and commercial/business), payments, insurance, mortgages, securities, private wealth
management, underwriting for IPOs, retirement accounts, real estate loans
Revenue
Net revenue is the spread between bank’s borrowing cost and the interest rates charged to borrowers;
underwriting fees; commissions; insurance companies generate revenues from premiums received;
Costs
Overhead (branches, administration, compliance), salaries, bad debt expense, marketing
Competitive Landscape
(Competitors,
Substitutes, New
Entrants)
Large national players (Wells Fargo, Bank of America, Citi) compete with regional banks. The largest
players’ services extend well beyond commercial banking to investment banking, securitization, proprietary
trading, etc. with services that are increasingly opaque
Fintech is increasingly becoming a player within financial services
Customers
Individual consumers (with the emergence of FinTech these services are now more accessible to the
underbanked community)
High net worth consumers (priority segment as result in higher profits)
Small/medium businesses without sufficient size for larger investment banking financing services; private
companies going public looking for underwriting
Distribution Channel(s)
Face-to-face presence with bank branches, tellers, etc.
ATM services, online, mobile, robo-advisors (COVID-19 is increasing the use of these services)
Banks increasingly offer credit cards, home loans, etc. as means to increase asset base
Suppliers/ Supply
Chain
Deposits from individuals and corporations
Fees from services conducted
Recent Trends & Key
Concepts
Consolidated, mature industry with primary growth through acquisitions
Demographic shift (baby boomer aging) creating large market for retirement products
Offshoring of various functions to reduce expenses (e.g. call centers, back office functions)
Customer intelligence and the ability to act in real-time to customer needs
Digitization of services (fewer customers visiting bank branches); zero-commission trading
COVID-19: Since COVID many consumers have reduced visits to the bank and further relied on digital
services; Many banks underwrote PPP loans to businesses seeking government support
Key trends
11
Healthcare (Provider)
Products/ Services
Care provided to patients in doctor’s offices/clinics, urgent care facilities, emergency departments, acute
care facilities, etc. Providers may be for-profit or non-profit.
Patients typically are billed for the facility fees (ex. hospital beds, medication, etc.) as well as for physician
services received
Revenue
Net Patient Service Revenue: revenue for care provided minus expenses for providing services
Academic institutions and other health systems often receive philanthropy
Most providers receive the actual money from insurance companies and tend to generate greater margins
on elective surgeries
Costs
Corporate shared services (admin, IT, finance, legal, billing, etc.), salaries (physician groups often
contracted), pharmaceuticals, research, capital expenditures for large facilities, equipment, etc.
Competitive Landscape
(Competitors,
Substitutes, New
Entrants)
Consolidation among smaller regional health systems or by acquisition of larger health systems; Increased
emergence of urgent care facilities (ex. CVS Minute Clinic) and Telemedicine service providers; Decreased
power from smaller organizations to negotiate favorable rates with payers
Customers
Any one in need of health care services (growing as the US population continues to trend older)
Inpatient (stay in hospital) vs. outpatient (DO NOT stay in hospital)
Distribution Channel(s)
Hospitals (acute care), clinics, doctor’s offices, emergency departments, urgent care, telemedicine providers,
large health systems, IDNS (Investor-owned), regional health systems, academic institutions urgent care
facilities, specialized pediatric facilities, rehabilitation facilities, hospice care, etc.
Suppliers/ Supply
Chain
Suppliers to healthcare providers: pharmaceutical companies, technology providers (ex. radiology
equipment, healthcare IT)
Recent Trends & Key
Concepts
Pay for performance; expanding and aging populations; increasing numbers of people with chronic, longterm conditions; potential changes to healthcare coverage depending on the November election (i.e.,
healthcare for all); increase in technology (telemedicine, electronic medical records and protection of data,
wearables, predictive technologies, etc.); focus on preventative care
COVID-19: CARES Act; Since COVID more providers have relied on delivering their services virtually.
Voluntary procedures have halted at hospitals (these tend to generate the highest margins for providers).
Key trends
12
Private Equity Investments
Products/ Services
Equity that is not publicly traded
Common forms include Leveraged Buyouts (LBOs), Venture Capital (VC), Mezzanine Capital,
Distressed Investments, and Growth Capital
Revenue
Return on investments (carried interest) and management fees
Levers pulled to increase revenue (value-creation): timeframe, identifying efficiencies, new management,
acquisitions
Costs
Investment expenses, legal, technical assistance to firms, administrative expenses, travel, labor is very
costly (few and highly paid employees), taxes
Competitive Landscape
(Competitors,
Substitutes, New
Entrants)
Supply of capital in the market is greater than demand. This has resulted in PE firms having a lot of ‘dry
powder’
Large (e.g. KKR, Carlyle, Blackstone, TPG), Mid ($250M to $5B), and Small Market PE shops
Customers
New customers of PE deals may be corporations
Institutional investors
Customers can range from small family-owned companies to large corporations
Distribution Channel(s)
Leveraged Buyouts: controlling interest (of equity) is acquired through borrowing a lot of money
Venture Capital: investors give cash in exchange for shares/control; typical with start-ups
Mezzanine Capital: financing that contains equity-based options and subordinated debt
Growth capital: financing to expand, restructure, or enter new markets with little change in management
Distressed Investments: investing in financially stressed companies
Suppliers/ Supply
Chain
Private investors, large corporations, foundations
Recent Trends & Key
Concepts
Larger amounts of equity required for each deal; Startup financial performance not always meeting high
valuations; Healthcare and tech are seeing most of the activity; Increased focus on value-creation rather than
financial engineering to generate investment targets
COVID-19: PE firm exits have halted and there has been a focus on supporting existing portfolio companies
Key trends
13
Pharmaceuticals
Products/ Services
Brand name drug manufacturers produce original, patent-protected (for a certain period) drugs for human
and animal diseases. Generic drug producers produce ‘copy-cat’ drugs (with the same medical result) at a
lower development cost when the originator drug’s patent expires.
Revenue
Determined by: size of specific treatment area/level of competition; buy-in from doctors that will prescribe;
speed to market (1st to market is important); dosage and frequency
Revenue can come directly from patients, but most is received from third party insurers
Costs
VC: sales and marketing (doctor visits, sponsored studies)
FC: R&D (drug discovery, formulation, clinical trials; a lot of this is now outsourced; generic companies only
need to perform clinical trials and are therefore fast to come to market once a patent expires)
Competitive Landscape
(Competitors,
Substitutes, New
Entrants)
Success is contingent on drug effectiveness, adoption/buy-in from doctors, coverage approval from private
and public insurers, patient adherence and ease of use.
US, Europe and Japan are the largest markets although emerging markets are growing (e.g., China, India,
Brazil)
In the US, the Food & Drug Authority (FDA) needs to approve all drugs before sale. Generic drugs are
treated as substitutes and usually receive more favorable reimbursements and coverage by insurers.
Customers
Doctors who prescribe these medicines
Insurance companies (i.e. private insurers, Medicare (over 65), Medicaid (low-income/disabled))
Patients/consumers who need these drugs/medicines
In some emerging markets officials (provincial and central government) may control channel access
Distribution Channel(s)
Over the counter (“OTC”, can be sold without prescription); Retail outlets – CVS, Walgreens; Mail order/online;
hospitals; pharmacies; doctor’s offices; Emergence of prescription delivery; B2B: Distributors/intermediaries
Suppliers/ Supply
Chain
Drug manufacturer –> Drug wholesaler/distributor –> retailer/pharmacy/doctor’s office/hospital –> patient
Recent Trends & Key
Concepts
Price competition from generic drug manufacturers. Increasing pressure from health insurance companies
and hospitals to reduce prices. R&D challenge of finding high revenue drugs (‘Blockbusters’ have annual
sales > $1B). Weaker investments in R&D in recent years. Loss of patent on key drugs for many large
pharma companies, especially for specialty biologic drugs in the next 5 years;
COVID-19: COVID has disrupted pharma supply chains (especially involving China)
Key trends
14
Airlines
Products/ Services
Air transportation for passengers and cargo
Revenue
Ticket sales, baggage fees, food and beverage sales, freight fees, new classes (Economy Plus as well
as Economy “Basic”), seat allocation, in-flight entertainment, in-flight WIFI, frequent flyer programs, consumer
credit cards
Costs
Fuel, food and beverage, ground crew, air crew, aircraft lease/payments, airport fees, IT/admin
fees, frequent flier program fees, marketing and sales, offices, hangars, insurance
Competitive Landscape
(Competitors,
Substitutes, New
Entrants)
Legacy carriers (Delta, United, American, Lufthansa, Air India, British Airways) compete with each other and
are also competing with low cost carriers (Southwest, Allegiant Air, Frontier Airlines, Eurowings, Gogo Air).
New entrants are more common in the low-cost model. Barriers to entry include available gate space / airport
leasing agreements and extremely high startup costs
Customers
Individual passengers, corporate travelers, travel agents/websites, freight/cargo shipping companies
Distribution Channel(s)
Direct from the airline (website, at the airport, over the phone), travel agents (website, in person, over the
phone), through other providers as a bundle (cruise and flight bundle, hotel and flight bundle etc.),
increasing number of tickets sold through trip aggregators (Kayak, Priceline, etc)
Suppliers/ Supply
Chain
Aircraft manufacturers, avionics manufacturers, aircraft leasing companies, fuel providers, airport
operators, flight training providers, catering providers, aircraft maintenance providers
Recent Trends & Key
Concepts
Metrics: Available Seat Miles (Total # seats available for transporting) * (# miles flown in a period), Revenue
Passenger Mile (RPM) = (#Revenue-paying passengers)*(#miles flown in a period), Revenue per Available
Seat Mile = (Revenue) / (# seats available), Load Factor = % of available seating capacity which is actually
filled with passengers
737 MAX: Due to multiple crashes from a malfunctioning flight control, this plane has been grounded since
March 2019, and is still in the process of getting reapproval for passenger flights (negatively affected Boeing)
COVID-19: Significant reduction in passengers resulting in fewer flights; many airlines have laid off employees
and/or declared bankruptcy; airlines have offered vouchers for cancelled flights; as passenger flights were
cancelled, the cost of sending cargo by air increased; industry experts anticipate it will take many years for
demand to reach pre-COVID levels.
Key trends
15
Media
Products/ Services
Media sector includes print, audio, and video content generation & distribution
Revenue
Advertising is a key revenue driver. Additional revenue sources are subscriptions, one-time purchases (video
on demand, DVD purchase), and licensing fees. For online portals (Netflix, Hulu, etc.) the key value driver is
content.
Costs
Production costs (salary, technology, location fees etc.), distribution costs, marketing and advertising,
promotions, capital costs (studios, equipment etc.)
Competitive Landscape
(Competitors,
Substitutes, New
Entrants)
Highly competitive with a few major players owning most of the market.
The fight over content exclusivity is a big issue among legacy players (Netflix, Hulu) and content providers
(Disney, etc.). Content providers have begun to launch their own media platforms.
Traditional cable companies are facing issues resulting from web-based solutions providers and cord
cutting.
Customers
Two main customers: End customer (i.e., the viewer) and advertising companies (i.e., to whom the media
provider sells ad space). The more end customers the platform has, the more they can charge advertising
companies.
Distribution Channel(s)
Online streaming is the fastest growing channel, but traditional distribution still exists. Additional distribution
channels include theaters and ‘live’ events.
Suppliers/ Supply
Chain
Technology providers (internet service providers are becoming particularly important in allowing high-speed
streaming), actors, artists, and musicians
Recent Trends & Key
Concepts
Online streaming and cord cutting is changing the industry. There is a large focus on creating and
controlling content. Companies such as Netflix and Yahoo are creating original content to remain
competitive. Ad-supported video is increasingly becoming the dominant model of delivering streaming
video to consumers.
COVID-19: Since COVID many companies have suspended movie and television production, causing
delays in release dates. Social distancing has generated a boost in digital media including video and music
streaming and downloads, as well as online publications.
Key trends
16
Technology
Products/ Services
Broad industry consists of PCs, servers, semiconductors, internet service providers, communications providers,
IT services, software and application development, and internet companies. Technology plays a role in every
other industry, and there has been a push for companies to become more ‘digitized’.
Revenue
Revenues vary by type of product. PC revenue: primarily from sales of PCs and subsequent support; internet
mobile applications revenue: driven by ad clicks; IT services revenue: tied to staff utilization per employee
Costs
Costs vary by type of product. For software, the initial R&D costs are high but the marginal cost for production
is negligible. For PCs and servers input costs include component costs, labor costs, distribution and support
For semiconductors it is important to note these companies have high fixed costs, but are constantly
improving their products (i.e., Moore’s Law).
Competitive Landscape
(Competitors,
Substitutes, New
Entrants)
There are a few large competitors in the PC and server space, but many competitors in the software and
application development space.
Internet companies have low barriers to entry, resulting in a highly competitive industry. It is common for
smaller players to be acquired by the internet giants.
Customers
Varies by type of product: ranges from individual customers and corporations for things like PCs or software;
Also could be companies looking for advertising channels.
Internet companies tend to be B2C, while companies such as IBM, Oracle, Cisco focus on B2B.
Distribution Channel(s)
Distribution through retail outlets and B2B channels for hardware, online distribution through app stores/
websites for software. Limited distribution of software through physical media.
Suppliers/ Supply
Chain
Hardware: various suppliers include raw material providers, semiconductor manufacturers, machine and
technology providers
Software: supply chain includes software testing houses, and distribution channels such as App Stores
Recent Trends & Key
Concepts
Acquisition of talent and technology by established industry players. ”Freemium” and ad-driven revenue
models for software. New technologies entering the business segment: Internet of Things, cloud computing,
big data (predictive) analytics, mobile (computing everywhere), 3D printing, machine learning.
COVID-19: Remote work, online education, and social distancing has generated demand for products and
services delivered by the tech industry. Tech companies have achieved historic valuations and are driving
historic stock market prices; Tech continues to get scrutinized regarding their data security processes
(especially with upcoming election)
Key trends
17
Resources & Feedback
Fuqua Casing Resources
Prior DMCC and other schools’ casebooks are accessible at:
https://fuquaconnect.duke.edu/organization/the-duke-mba-consulting-club/documents
Feedback
Every year, the DMCC prepares a casebook for Fuqua students. Many of these
cases are new and therefore may still have small edits or areas for
improvement. Your feedback is welcome on any case and is particularly helpful
for next year’s casebook team.
To submit feedback, please email Amy Schafer (Amy.Schafer@duke.edu) or Ryan
Sabo (Ryan.Sabo@duke.edu)
18
“New for 2021” Case List
Case #
Name
Industry
Qual
Quant
1
XY Inbev
M&A
Easy
Easy
2
Paper Pricing Predicament
Consumer / Retail
Easy
Easy
3
Take, Inc
Tech
Easy
Med
4
A-Plus School District
Education
Med
Med
5
Mischief Managed
Finance
Med
Med
6
East Oak
Consumer / Retail
Med
Med
7
Roll ‘n Grind
Manufacturing / Industrial Goods
Med
Difficult
8
Keep-it-Fresh
Agri-business
Difficult
Med
9
Plaque to the Future
Healthcare
Difficult
Med
10
Goals for Growth
Non-profit
Med
Med
11
New York Shmankees
Sports / Entertainment
Med
Easy
12
Pencils & Backpacks
Strategy
Difficult
Difficult
13
Dreaming A Better Future
Strategy
Difficult
Difficult
19
“Greatest Hits” Case List
Case #
Name
Industry
Qual
Quant
18
Queen Bae
Consumer Products
Medium
Medium
19
Nautical Nonsense
Consumer Products
Medium
Easy
20
High Strung
Entertainment
Difficult
Medium
21
Sardine Airlines (‘16-17)
Transportation
Medium
Medium
22
Fringe Science (‘17-18)
Healthcare
Difficult
Medium
20
Outsourced Favorites Case List
Case Name
School
Year
Industry
Qual
Quant
Fireproof
Darden
2018-2019
Manufacturing
Medium
Medium
Copier Co
Darden
2018-2019
Consumer
Easy
Difficult
Dark Sky
Kellogg
2018
Aerospace & Defense
Medium
Medium
Health Coaches
Kellogg
2018
Heathcare
Difficult
Difficult
Winter Olympics Bidding
Kellogg
2018
Media
Medium
Difficult
Chic Cosmetology
Kellogg
2018
Education
Difficult
Difficult
Sell Oil & Co
Tuck
2018
Oil & Gas
Difficult
Difficult
Museum Of Fine Arts
Tuck
2018
Non-Profit
Difficult
Difficult
Nutters of Savile Row
Tuck
2018
Consumer
Difficult
Medium
Refrigerated Foods Company
Tuck
2018
Consumer
Medium
Medium
21
XY Inbev
Industry:
Food & Beverage
Case Type:
M&A
Led by:
Interviewee
Quantitative Level: Easy
Qualitative Level: Easy
22
Behavioral Questions
Question 1:
• Tell me about a time you disagreed with your manager. What did you do?
– Be specific
– Use linear structure to tell story
– Clearly articulate YOUR contributions
– Prove strong performance via results
Question 2:
• Tell me about a time you had to persuade people under challenging circumstances.
– Use the CAR Framework: Challenge – Action – Results
23
XY Inbev
Prompt #1:
• Your client, XY Inbev, is a multinational drink and brewing company. About a decade
ago, XY acquired a large competitor that made the company the market leader, but
also left it with a massive debt. Today, XY’s growth strategy of acquiring competitors
is nearing its limits as no large rivals remain to be taken over without goading
competition authorities. The CEO has asked you to brainstorm some new strategies
for the company.
Case Background:
• Company information:
– Headquartered in Belgium. XY has extremely established brands in developed markets, but less established
brands in emerging markets.
– Owns entire supply chain for all products.
– Debt from the acquisition is estimated to be $90M. Investors’ concerns about debt have caused company
shares to steadily decrease over the past three years.
• Industry/Competition information:
– XY is the market leader by a long shot and generates half the industry’s global profits.
• Product information:
– XY’s beverages include both alcoholic drinks (beer, cider, hard seltzer ONLY) and non-alcoholic drinks
(energy drinks, sodas ONLY).
– XY’s most popular beverage line is beer; it sells ~650 beer brands in 150 countries.
24
XY Inbev
Framework Example Buckets:
Internal
Improvements
- Value chain review
of key strengths &
weaknesses (ex.
marketing, sales, HR)
- Operating model
review (cost savings,
operational
efficiencies)
- Minimize Debt (ex.
adjust dividend
payments, divest
assets)
External
Growth
- New beverages (ex.
tea)
- New industry (ex.
food)
- New customer
segments or channels
(B2B, B2C, online)
- Partner with another
company to expand
into Emerging Markets
Risks / Other
Considerations
- Government
regulation blocks
(federal/international)
- New Dis-synergies
(ex. lost customers)
- Brand fit
- Competitor response
to change
- Acquire small startups
entering the space
25
Exhibit #1
XY Inbev Beverage Lines
50
Percentage of XY Total Profit
45
Beer
40
35
30
25
20
Energy
Soda
15
10
Cider
Hard Seltzer
5
0
0
5
10
15
20
25
30
35
40
45
50
55
60
65
70
Projected Annual Growth Rate (%)
Note: Bubble size corresponds to percentage of global consumption of beverage.
26
Interviewer guidance on Exhibit #1
Exhibit #1 Guidance:
Analysis:
• The CEO has decided to prioritize reducing the
company’s debt and wants to divest some
brands within one of the five main beverage
lines.
• Exhibit #1 represents each of the beverage
lines’ percentage of total profit, projected annual
growth rate (in revenues), and percentage of
global consumption.
• If the candidate asks, XY has many brands
within each of these beverage lines. The actual
numbers are irrelevant here.
• If the candidate asks, the CEO is mainly
focused on the $90M debt from the prompt.
• Candidate should recognize general trends can
be realized without calculations but may ask if
calculations are necessary.
• Ideally move on when candidate asks for more
information on the breakdown of beers by profits
• Basic:
– Although beer makes up the greatest % of XY’s
profits, it has the lowest projected growth rates.
– Hard seltzer has the highest projected annual
growth rate and decent global consumption, so XY
should not consider divesting here.
– Soda makes up the least of XY’s profits, but has a
relatively decent amount of global consumption, so
it could be another area to continue exploring.
• Second Order Insights:
– There is a sizable gap between beer’s projected
annual growth rate and the rest of the beverage
lines. From the prompt, we know the CEO is
concerned about future growth strategies, so the
beer beverage line is worth exploring.
– Even though beer makes up the greatest % of
profits, we should explore divesting some non-core
brands that are underperforming. Candidate may
ask for profit margins by beer brand to determine
underperformers.
– Candidate may tie trends together by hypothesizing
that slower beer growth rate could be in part due to
consumers replacing beer with substitutes like hard
seltzer.
27
Exhibit #2
XY Inbev Beer Brand Valuations
35
.9
36
.95
1.0
0.9
0.8
30
24
25
0.7
24
0.6
20
0.5
15
0.4
.2
10
5
0
.1
Brand 1
0.3
.2
7
0.2
3
Brand 2
Brand 3
Brand 4
Brand 5
Acquisition Premium
Current Value of Brand ($M)
40
0.1
0.0
Acquisition Premium
Current Value of Brand
28
Interviewer guidance on Exhibit #2
Exhibit #2 Guidance:
Analysis:
• Once candidate has asked for more
information on XY’s beer line, provide
Exhibit #2.
• Basic:
• XY’s internal strategy team has identified
five beer brands they are open to
divesting. The CEO wants to divest as few
brands as possible.
• Exhibit #2 provides a deeper dive into
XY’s beer line. It shows the five identified
beer brands’ current value and acquisition
premium.
• If candidate is unsure, tell them that the
acquisition premium represents the
increased cost of buying the brand.
– This exhibit requires the candidate to calculate the
expected value of each brand.
– Allow candidate to round.
– To calculate, multiply the current value by
acquisition premium + 1:
1: $36M * 1.1 = $39.6M
2: $24M * 1.2 = $28.8M
3: $24M * 1.2 = $28.8M
4: $7M * 1.9 = $13.3M
5: $3M * 1.95 = $5.85M
• Second Order Insights:
– If candidate is not careful, he or she might try to
multiply the current value and the acquisition
premium. This is incorrect because this would
mean that the brands are discounted.
– Brands 2 and 3 are worth the same, do NOT recalculate.
29
Brainstorming
Prompt:
• What are some risks that XY faces in
divesting?
Analysis:
Ideas may include:
• Internal Strategy
–
–
–
–
Change in cost structure (ex. stranded costs)
Additional administrative costs
Loss of talent
Negative impact on employee morale
• External Strategy
–
–
–
–
–
–
Loss of strategic business
Loss of scale/scope
Loss of market share / position in market
Negative market reaction
Negative press coverage
Regulatory constraints
30
XY Inbev
Recommendation
• The CEO needs your recommendation for her meeting with the Board now. What are
your findings?
Risks and Next Steps:
• Recommendation: XY Inbev can resolve the $90M outstanding debt from a major
acquisition by divesting Beer Brands 1, 2, and 3 for ~$100M.
• Risks include stranded costs, failed deals, loss of scope, market reaction (clients,
customers, etc.)
• Next Steps include establishing a sell-side team to strategize timing and
implementation steps needed to maximize value, meeting with investment banking
team to find the best buyers and planning for de-integration.
31
Evaluation Criteria
Candidate Level
Average Candidate
Assessment
Candidate forgot to address CEO’s debt concern in
framework and needed interviewer prompting
throughout each exhibit to get to key insights.
Candidate may need coaching to determine the
appropriate calculation. This is good practice to make
sure candidate is coachable and doesn’t become
flustered.
Good Candidate
Candidate addressed CEO’s debt concern in
framework. Candidate multiplied numbers in Exhibit 2
or needed prompting to get through Exhibit 2.
Gets to most second-level insights. Structures the
brainstorm similar to framework.
Excellent Candidate
Candidate addressed CEO’s debt concern in
framework, quickly drove to beer as a beverage line to
investigate, and solved Exhibit 2 without prompting.
Quickly gets to second-level insights. Introduced
creativity and personal experience in both framework
and brainstorm.
32
Paper Pricing Predicament
Industry:
Retail
Case Type:
Profitability
Led by:
Interviewee
Quantitative Level: Easy
Qualitative Level: Easy
33
Behavioral Questions
Question 1:
• Tell me about a time you drove a creative solution to a problem.
Question 2:
• Tell me about a time you had to build consensus on a team.
34
Paper Pricing Predicament
Prompt #1:
Complete Foods, a leading supermarket prominent across the U.S., is planning to
release a private label line of paper towels. They currently sell fresh and shelf-stable
grocery products as well as some common household items such as hand soap and
kitchen supplies. Some of these products are brand names and some are private label.
The CMO has asked your team to think through the pricing strategy for the new line.
Case Background:
• Complete Foods has 50 stores across 10 metropolitan areas, scattered across the
United States.
• Complete Foods only stocks products that are free from artificial colors, flavors, and
preservatives.
• Last year, Complete Foods brought in revenue of $200M.
• Compare Foods already produces private label grocery products but no private label
household goods.
• Private label means products that are produced by the same company that is selling
the products. These paper towels will be produced by Complete Foods and only sold
in Complete Foods stores.
35
Paper Pricing Predicament
Framework Buckets:
An example framework could be as follows:
• Who are the competitors? (Competitors) (Hand them exhibit #1 if the interviewee asks about the market landscape
or the competitors)
– Who are the other brand name competitors
– What are the price points for the brand name competitors
– Reactions from competitors having a new private label brand on the shelf
• Potential lost sales
• What is Compare Foods concerned about? (Company)
– Cost of supplies (Paper, cardboard, plastic)
– Number of varieties that will be offered
– Supply Chain
• Establishing a new household goods supply chain separate from existing grocery supply chain
– Sourcing
• Having to establish new supplier relationships separate from grocery suppliers
• Who are the customers? (Customers)
– Total market size of paper towels
– Elasticity of paper towels
– Customer preferences for non-artificial ingredients in their paper towels
36
Exhibit #1
+
Paper Towels Market Landscape
$5.00
Brand 2
Price (per 75-sheet two-ply roll)
$4.50
$4.00
Brand 4
$3.50
$3.00
Brand 3
$2.50
$2.00
$1.50
Brand 1
$1.00
$0.50
$0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
Brand Perception Score*
*Brand Perception Score comes from a third-party survey across the CPG industry.
+Only focused on 75-sheet two-ply paper towel rolls
37
Interviewer guidance on Exhibits
Exhibit #1 Guidance:
• This is a scatterplot where the:
– X-axis represents the brand perception score (if the
interviewee asks, the scores come from a
nationally distributed CPG brand perception survey
that the firm has access to)
– Y-axis represents the price for one roll of two-ply
75 paper towels (assumed that these are the prices
at one store)
– brands are ones that are sold at Complete Foods.
– Size are the dots are all the same so there is no
analysis in the size of dots.
Analysis:
• The current market landscape of Complete
Foods’ offerings of paper towels is 4 brands,
split in terms of price and quality. 2 brands are
cheaper and have lower brand quality
perception scores while the other two are more
expensive and are perceived to have higher
brand quality.
• There is a direct correlation between brand
perception and price.
• The interviewee should recognize that there is
room for a mid-range brand quality perception,
moderately priced in between the bottom two
brands and the top two brands.
• After recognizing where Complete Foods’ brand
can fit in, the interviewee should move on to
figuring out the costs and markup for the new
product.
38
Exhibit #2
Producer
Production Cost
(per sheet)
Quality
Paper Producer AA
$0.02
LOW
Paper Producer BB $0.035
MEDIUM
Paper Producer CC $0.04
MEDIUM
39
Exhibit #2 (For Interviewer)
TO BE READ ORALLY TO THE INTERVIEWEE IMMEDIATELY
Producer
Production Cost
(per sheet)
Quality
Paper Producer AA
$0.02
LOW
Paper Producer BB
$0.035
MEDIUM
Paper Producer CC
$0.04
MEDIUM
ONLY PROVIDE THE FOLLOWING INFO ONCE ASKED FOR BY THE INTERVIEWEE
Packaging
Producer
Production Cost
(per roll)
Quality
Producer DD
$0.19
HIGH
Producer EE
$0.16
MEDIUM
Producer FF
$0.12
LOW
Shipment Company
Shipping Cost (per
roll)
Shipment Company GG
$0.05
Shipment Company HH
$0.025
Shipment Company II
$0.08
Average Industry
Markup per roll:
30%
40
Exhibit #2
Interviewee should only focus on medium or high-quality producers rather than all suppliers.
Paper Producer BB
+ Shipping
Company HH
$2.625 + $0.025 =
$2.65
Paper Producer CC
+ Shipping
Company HH
$3.00 + $0.025 =
$3.025
+Tube
Producer DD
+ $0.19 = $2.84
+Tube
Producer DD
+ $0.19 = $3.215
+Tube
Producer EE
+ $0.15 = $2.80
+Tube
Producer EE
+ $0.15 = $3.175
Final Price Recommendation: $2.80 x 30% upcharge (1.3) = $3.64
41
Interviewer guidance on Exhibits
Exhibit #2 Guidance:
• ONLY SHOW THE ONE TABLE TO THE
INTERVIEWEE AND KEEP THE FULL
EXHIBIT TO BE READ ORALLY.
• This information should give everything the
interviewee needs to calculate the product and
shipping costs to Complete Foods as well as the
average markup which will result in the
recommended price that Complete Foods
should charge.
• The first table details the price per sheet of
paper towel by producer and by quality. In order
to calculate the price per roll, the interviewee
should recall we are looking at 75 sheet rolls so
they should multiple the cost/sheet by 75.
• The following two tables should only be
provided once the interviewee asks for
information about the paper towel packaging,
shipping costs and the average markup per roll.
Analysis:
• The interviewee should only focus on
medium and high-quality suppliers as we
assessed in the market landscape.
Besides that qualification, it is safe to
assume they should go with the cheapest
option.
• Advanced interviewees will understand
there may be other factors we are not
considering in this analysis, such as the
speed of the shipment companies.
• The final recommended price should be
$3.64 for one 75-sheet paper towel roll.
42
Brainstorming
Prompt:
• What other considerations outside of price
should Complete Foods think about when
introducing a new product line into their
stores?
Analysis:
• Analysis of brainstorming could look like
the structure below but there are many
ways to build this out.
– Internal considerations
•
•
•
•
•
How to promote the product
Types of sales promotions (if any)
Making shelf space for the product
Making space in storage warehouses
Ability to make other products with the same
value chain (toilet paper, printing paper, etc)
– External considerations
•
•
Contracts with competing brands
Ordering quantities from competing brands
now that there is an additional brand
43
Case Name
Recommendation
• The CMO requests an update on the status of the project and would like to hear
some preliminary thoughts. What is your recommendation?
Risks and Next Steps:
Risks:
• Manufacturers may not be able to support the volume that Complete Foods is requesting.
• There may be unassessed differences in the suppliers, like supplier speed or reliability.
• Competitors may be upset that the brand is moving into their product line and taking up shelf
space.
Next Steps:
• Get additional data points from the suppliers to continue to differentiate and ensure reliable
service.
• Start planning shelf space agreements with other brands.
• Start working on marketing and sales plans.
44
Evaluation Criteria
Candidate Level
Assessment
Average Candidate
• Assumes they understand unfamiliar terms and asks few clarifying
questions
• Framework is generic and does not address any specifics about the
grocery or CPG industry
• Struggles to connect the key relevant details across the exhibits such
as how many sheets are in a roll or quality of product but understands
the missing pieces once told.
• Calculates every combination of suppliers’ costs and does not narrow
only to medium quality suppliers.
Good Candidate
• Asks some clarifying questions about unfamiliar prompt and terms
• Framework includes some specific items relevant to the grocery and
CPG industries
• Understands the different pieces that go into the paper towel roll
production process and asks for the missing pieces to the calculation
• Able to brainstorm a few other considerations after launching the paper
towel line.
Excellent Candidate
• Constantly asks clarifying questions to understand unfamiliar terms
such as private label
• Candidate is very industry and product specific, drawing from personal
experiences to inform business considerations.
• Able to quickly recognize the missing pieces to the calculation of costs
and then upcharge % to come to a clear recommended price.
45
Take Inc.
Industry:
Tech
Case Type:
Profitability
Led by:
Interviewer
Quantitative Level: Medium
Qualitative Level: Easy
46
Behavioral Questions
Question 1:
• Tell me about a time that you had to make a decision without complete
information/enough data.
Question 2:
• What is your proudest accomplishment to date?
47
Take inc.
Prompt #1:
Hyper is a mobile application that connects drivers with passengers. Launched
successfully in 2010, it has been experiencing declining profitability for the last year.
The COO of Take has requested your services to understand why.
Case Background:
Background information:
Client/Company information – Headquartered in California; Services all of North
America
Industry/Competition – One new entrant, Elevate, entered the market in 2013
Product information – Mobile phone application for all operating systems that needs
to be downloaded by passenger to link up with drivers in the neighborhood
Value Chain – Pricing is based on a proprietary algorithm which looks at supply of
drivers, demand of passengers and length of demanded trip; Drivers are not permanent
employees of the Take, simply contractors
Revenue – Ride fares and transaction fees
48
Take inc.
Framework Buckets:
Ride Revenue
Price/Fare
• Algorithmbased
(supply,
demand, ride
length)
• Qualitybased pricing
Quantity
• # of rides: by
length, time,
area
• # of
passengers:
by location /
customer type
(business,
leisure)
Macro factors
Take inc. Costs
Fixed
Variable
• New
investments
• Commission
paid to
drivers
• Corporate
office space
(rent)
• Tech
infrastructure
costs
• Marketing
and
advertising
to acquire
new
customers
and drivers
•
Inflation
•
Weather/Climate
•
Economic Downturn
•
Competition (direct,
public transit, scooters)
•
Regulatory issues
• Salaries
• Insurance
49
Exhibit #1
Take’s financials since launch1
140
500
450
120
400
100
350
300
80
250
60
200
150
40
100
20
50
0
0
2012
1
2013
2014
2015
2016
Costs
Revenue
2017
Profit
2018
2019
2020
Quarterly Revenue
Costs, Revenue, and Profit Figures are in Millions of Dollars
Legend
Winter
Spring
Summer
Fall
50
Interviewer guidance on Exhibits
Exhibit #1 Guidance:
• Interviewer should ask candidate to
calculate number of rides undertaken by
Take in 2014
– (DON’T PROMPT – Candidate should ask
for the following details)
• Average price of rides in 2014: $15
• Interviewer should ask candidate to
calculate the total number of customers
who have taken rides in 2014
– (DON’T PROMPT – Candidate should ask
for the following details)
• Average number of rides taken per
customer in 2014: 50
• Interviewer should ask candidate to
calculate the total number of customers
who have taken rides in 2016
Analysis:
• Candidate should point out that:
– Basic: Profits are flat because:
• Costs continue to rise
• Revenues grow a slower rate after
2014
- Second order insights:
• Costs are rising at a constant rate; this
rate is the same rate that revenues are
growing from 2014
• Slower revenue growth in 2014 could
be attributed to new entrant Elevate
• Public Math analysis:
– # of rides taken in 2014: 300,000,000/$15 =
20,000,000
– Total # of customers who have taken rides
in 2014: 20,000,000/50 = 4,000,000
51
Interviewer guidance on Exhibits
Exhibit #1 Guidance:
• Interviewer should ask candidate to
calculate number of customers who took
rides in 2018
– (DON’T PROMPT – Candidate should ask
for the following details)
• Average price of rides in 2018: $10
more than in 2014 ($25)
• Average number of rides per customer
in 2018: Remains the same (50)
Analysis:
– Total # of rides taken in 2018:
400,000,000/$25 = 16,000,000
– Total # of customers who have taken rides
in 2018: 16,000,000/50 = 3,600,000
– Second order insights:
• Decrease in number of customers by
20% compared to 2014 10%
• Compare number of customers to total
population to understand penetration
rates
• Candidate should hypothesize that the
$10 price increase likely impacted
volume negatively
• Candidate may also wonder if new
entrants have undercut them in price,
causing Take to lose customers
52
Brainstorming
Prompt:
Analysis:
• After further analysis, the
COO concluded that it
was losing customers to
Elevate and needed to
find a solution to retain
customers. How can Take
accomplish this?
Keep Existing Customers: Loyalty/Rewards/Points Program;
Access to special offers or deals (X rides for $Y); Credit card
partnerships; personalized deals based on customer profile/data
Gain New Customers: Location-based targeted advertising;
Referral program w/ unique codes; discounts for students,
corporations, launch in new cities
Example Bucket #1: New vs. Existing Customers
Example Bucket #2: 4Ps of Marketing
Advertising (Promotion): Targeted based on location/customer
profile/media type; advertising campaigns against Elevate
Pricing: Discount codes; referral discounts; loyalty program;
partnerships with bars, events, etc. Competitive pricing
Product: Accessibility on more operating systems (Android,
iPhone); feature updates and enhancements
Placement: Expansion into other cities, countries.
Second Order Insights: Include risks such as competitor
retaliation, price wars, increase costs of customer
acquisition costs and marketing and potential low ROI
53
Take inc.
Recommendation
• Based on this information, the COO of Take is ready for your recommendation.
Risks and Next Steps:
Take has seen a declining profitability due to a 10% decrease in ride volume by losing
customers to Elevate. Recommendation is to implement a marketing campaign to
acquire new customers and recurring revenue from existing customers.
• Risks
– Costly to implement marketing and advertising
– Long-term sustainability, potential entry from against other new entrants
– Lack of internal technological infrastructure to implement solution end-to-end
• Next steps:
– Understand costs related to launching marketing plan and explore grassroots or organic
(unpaid) options
– Synergy mapping to decrease costs in other ways
54
Evaluation Criteria
Candidate Level
Assessment
Average Candidate
-
Framework included Revenues and Costs
Cleared exhibit with first order insights
Math was directionally correct
Detailed brainstorm
Good Candidate
-
MECE Framework covered Revenue, Costs and Other considerations
Asked relevant clarifying questions
Related prompt back to personal experience with ride hailing
Cleared exhibit with first order insights
Math was precise and correct
Detailed brainstorm with MECE buckets
Synthesized all parts of the case for recommendation with risks and next
steps
Made recommendation case specific
-
Excellent Candidate
-
MECE Framework covered Revenue, Costs and Other considerations
Asked relevant clarifying questions
Cleared exhibit with second order insights
Math was precise and correct; drew out implications and second order
insights
Detailed brainstorm with MECE buckets, with a focus on how to
implement each brainstorm idea
Synthesized all parts of the case for recommendation with risks and next
steps
Made recommendation case specific
Drove case with minimal prompting
55
A-Plus School District
Industry:
Education
Case Type:
N/A
Led by:
Interviewer
Quantitative Level: Medium
Qualitative Level: Medium
56
Behavioral Questions
Question 1:
• Tell me about a time when you had to persuade a team to take a specific action.
Question 2:
• How would you describe your leadership style? How do you want to grow as a
leader?
57
APSD
Prompt #1:
• Your client is A-Plus School District (APSD), a large public school district in the
Southeast United States. A-Plus’ superintendent has been concerned about
complaints from parents and community leaders regarding unacceptable student test
scores on the end-of-year exams. The superintendent has engaged your firm to
recommend changes to improve student test scores and ensure all students are
academically successful.
Case Background:
– APSD School District serves a little over 38,000 students
– The superintendent wants to implement changes as quickly as possible
– Students in 3rd-10th grade take end-of-year exams to determine their proficiency
in reading, math, and science
– Proficiency is defined as student meeting 70%+ of the learning objectives for
their grade-level
58
APSD
Framework Buckets:
In School
• Teacher quality – experience,
certification, training completed
• Student teacher ratio
• Student schedule optimization
• Tutoring program
• Discipline issues
• Curriculum quality
• Student absenteeism
• Optimize spending – focus on items
that impact student learning directly
• IEP/Disability accommodations
• ESOL/language considerations
Outside of School
• Internet access for students
• Parental involvement
• Understanding of content
• Helping with homework
• Community organization
involvement
• Student commitments (i.e.
needing to take care of
family/siblings, job, etc.)
• Sports, arts, religion, other extra
curriculars
59
APSD
Prompt #2:
• The superintendent’s office has shared student achievement data from the last three
years. What insights could you draw to help APSD?
Case Background:
• Students in kindergarten, 1st , 11th , and 12th grade do not take end of year
assessment
• The school configuration is as follows: elementary school (1st-4th grade), middle
school (5th-8th grade), and high school (9th – 12th grade)
60
Exhibit #1
Grade
Reading
Math
Science
2018
2019
2020
2018
2019
2020
2018
2019
2020
3
90
91
89
81
87
83
79
70
81
4
89
91
97
76
80
78
76
75
80
5
89
78
57
67
64
60
78
74
73
6
76
55
52
67
65
65
70
71
65
7
67
60
45
50
56
45
40
56
35
8
68
67
57
66
61
61
56
50
55
9
90
87
91
78
79
81
78
78
79
10
89
87
92
98
89
91
87
88
89
% of students scoring proficient or advanced on end-of-year exams, APSD 2018-2020
Interviewer guidance on Exhibits
Exhibits Guidance:
• This exhibit allows the participant to
determine which grade is seeing major
issues with test scores.
• Calculation is not necessary; however the
candidate should be able to digest large
quantity of information quickly to draw
inference.
• It’s important for the candidate to have a
structured approach to walking the
interviewer through the exhibit. For
example, they could go through each
grade one at a time and determine low
performance, or they go through each
content area one at a time.
Analysis:
• Analysis for the exhibit has two parts –
– Basic:
• Basic response should highlight
grades 5-8 having performance
issues with a hypothesis to
investigate further.
– Second order insights
• An advanced candidate will
determine that grades 5-8 is likely
a school configuration so their
hypothesis will focus on systemwide next steps. For example,
comparing student teacher ratios
for grades 1-4, 5-8, and 9-12.
62
APSD
Prompt #3:
• Based on the student enrollment and the number of teachers per grade band, what
inference could you draw? The interviewer should not have to ask this question
directly to the candidate who is doing a good job driving the case. Provide Exhibit # 2
as part of “next steps” from Exhibit 1.
Case Background:
• Hiring a new teacher would cost $50K/year
• Assistant superintendents for each grade bands control the budget for their
respective grade band
• Rose Bud and Silver Springs are considered comparable school districts
63
Exhibit # 2
1st-4th grade
5th-8th grade
9th-12th grade
# of
# of
# of
# of
# of
# of
students teachers students teachers students teacher
APSD
12000
600
12650
550
11400
570
Rosebud
Silver
Springs
10250
500
10200
510
11000
550
14400
720
13400
670
15000
750
64
Interviewer guidance on Exhibits
Analysis:
Exhibits Guidance:
• This exhibit allows the candidates to
determine student-to-teacher ratio, one of
many indicate that could be used to
determine education quality in K-12
schools.
• Candidate should divide the number of
students by the number of teachers for
each grade band for each school districts.
Calculation results:
1st-4th
APSD
Rosebud
Silver
Spring
5th-8th 9th-12th
20
23
20
20.5
20
20
20
20
• For this exhibit, the candidate should be
quickly be able to compare the student to
teacher rations for each of the school
district and grade bands to determine that
APSD has a very high student-to-teacher
ratio. The next step that could be
proposed could be:
– Examining how teachers are
distributed across grades in APSD
– What budgetary changes need to be
made to hire new teachers for 5th-8th
grade
20
65
APSD
Prompt #4:
• Provide Exhibit # 3 as next step from Exhibit 2. If they don’t ask for budget dollar
amounts, they should be provided. Also, candidate should mention risks associated
with moving budget around, but they might need to be prompted.
Case Background:
• Hiring a new teacher would cost $50K/year
• Assistant superintendents for each grade band control the budget for their respective
grade bands
• Rose Bud and Silver Springs are considered comparable school districts
• Annual budget for each grade bands with APSD:
– Grades 1-4: $60M
– Grades 5-8: $60M
– Grades 9-12: $57M
66
Exhibit # 3
Budget Category
1st-4th grade
5th-8th grade
9th-12th grade
Academics
20%
17%
15%
Teacher salaries
50%
45%
50%
Administration
10%
17%
10%
Athletics
1%
1%
8%
Arts and activities
5%
5%
5%
Transportation
10%
9%
10%
Building/maintenance
2%
2%
0%
Building construction
0%
2%
0%
Other
2%
2%
2%
Total
100%
100%
100%
67
Interviewer guidance on Exhibits
Exhibits Guidance:
There are multiple ways to approach this exhibit.
One possible method: for 5th-8th grade, take 7%
of admin budget and move it to teacher salary
• Calculations: ($60M)(0.07)=$4.2M additional
funding for teachers
• Each new teacher costs $50K so the # of new
teachers that could be hired =
• $4.2M/$50K=84
• New student to teacher ratio =
• 12650 students/(84 new teachers + 550
current teachers) = 19.95:1 (rounded at 20:1)
• Note that the candidate may suggest other
possible methods including raising APSD’s 58th grade budget from 45% to 50% to match
other grades. Prompt them to think about
whether this would be enough of a budget
change to make an impact on student to
teacher ratio.
Analysis:
• Analysis for the exhibit to have 3 parts –
– Basic: Basic response will mention
moving budget around to increase
spending on 5th-8th grade teachers.
They will need to prompted to
determine if it’s feasible to bring down
the student to teacher ratio to 20:1.
– Second order insights: Candidate
should ask for raw $ amount and use
it to calculate the number of teachers
that could be hired to bring down the
student to teacher ratio to 20:1. They
should also provide risks associated
with doing this. Risks could include:
more discipline issues with fewer
admins, teachers won’t get feedback
as frequently as they should, schoolwide issues take longer to be resolved
68
APSD
Recommendation
• You bump into the superintendent at Starbucks and she asks for your
recommendation.
Recommendation, Risks and Next Steps:
Recommend that APSD move 7% of the budget from admin costs to hire 84 new teachers. This will
help bring down student to teacher ratio from 23:1 to 20:1.
• Risks:
– Impact of reducing admin budget (layoffs, slowed operations)
– Supply and quality of teachers (it might be really challenging to find those to teach 5-8th
grade)
– Timing – how quality can we find, hire, and train
• Next steps:
– Determine which admin positions could be terminated without adverse impact on student
learning
– Work with the school board to approve hiring plan
69
Evaluation Criteria
Candidate Level
Assessment
Average Candidate
Average candidate attempts to use traditional
consulting structure to solve the case. They need to be
prompted to calculate the number of teachers that
could be hired through budget changes. They provide
good conclusion, but the risks or next steps aren’t case
specific.
Good Candidate
A good candidate will attempt to use a unique and
context specific framework. They will drive the case
from the beginning to the end, but will need prompting
to consider risks associated with making changes to
the education system.
Excellent Candidate
An excellent candidate uses a context specific
framework. They drive the case from the beginning to
the end and discuss unique risks associated with
making changes within a school district. They also
provide solid top-down conclusion using numbers from
the case, and provide context specific risks and next
steps.
70
Mischief Managed
Industry:
Finance – Private Wealth
Case Type:
Growth Strategy
Led by:
Interviewer
Quantitative Level: Medium
Qualitative Level: Medium
71
Behavioral Questions
Question 1:
• How do you maintain balance in your work and personal life? What strategies have
been successful in helping you organize your time?
Question 2:
• Give me an example of a time that you showed resilience in your previous role? What
was the situation and how did you persevere?
72
Mischief Managed
Prompt #1:
• After successfully servicing the needs of ultra-high net worth individuals in the Atlanta
area for ten years, our client, Smith Wealth Management (SWM), is looking to
expand geographically. Specifically, the CEO of SWM has brought you in to
recommend a plan of action for evaluating potential expansion opportunities. How
would you approach both sizing the market and making a final recommendation on
an expansion strategy?
Case Background:
• Background information to be divided into these categories:
– Client/Company information
•
SWM provides holistic wealth management services, including fixed income, public and private equity investing. Unlike some
of their competitors, they do not provide ancillary legal or tax services.
•
SWM has $10B AUM (assets under management) across 500 clients. They have a minimum of $5M investable assets and
the average account size is $20M (candidate should also be able to quickly calculate this).
SWM’s charges an average advisory fee of 1% ($10B x 1% = $100M in annual revenue)
No clear revenue or AUM goal but candidate should be able to contextualize the opportunity size to decide if expanding is
worthwhile.
•
•
– Industry/Competition information
•
The wealth management space is highly competitive, with both large players (ex: Goldman Sachs, JP Morgan) and smaller,
more niche and local firms competing for the same clients.
– Product information
•
SWM offers access to fixed income and equity mutual funds, ETFs, and separate accounts, as well as alternative investment
vehicles such as hedge funds and private equity funds.
73
Mischief Managed
Framework Example Buckets:
Opportunity
Size
Competition
Demand for wealth
management
services
# of existing
wealth
management firms
# of potential clients
Market share
Average per capita
wealth
Market
Similarities
Geographical or
demographic
similarities that
indicate one market
could make more
sense than others?
(For ex, Dallas and
Atlanta share similarities
in size and lifestyle that
NYC and Atlanta do not.)
Regulations
Financials
Potential revenue
(average account size,
client fees)
Investment/start up
costs (ex: hiring costs,
legal fees, marketing
expense, etc.)
On-going costs /
overhead (building
rental/lease, salaries,
manager fees, advisory
fees, etc.)
Interview Guidance
At its core, this case is about evaluating a new opportunity, while taking into account multiple
factors that could make entry into a new region more/less attractive. Sample buckets and
considerations are above.
74
Exhibit #1
Metro
Population
(M)
% HNW
Individuals
Demand for
PWM
Services
Est. Average
Account Size
($M)
Dallas
7
3%
5%
10
Nashville
2
3%
15%
4
San Francisco
5
5%
5%
7
1.5
2%
10%
12
City
Raleigh
Demand for PWM Services given as % of HNW Individuals
75
Interviewer guidance on Exhibit #1
Exhibit #1 Guidance:
Analysis:
• Analysis for the exhibit to have 2 parts
• The interviewer should place the exhibit in
front of the candidate and note that SWM has
– Basic
identified several potentially attractive markets
• There are clear differences in all factors:
population size, demand for services,
considering the statistics shown in the table
and estimated avg. account size
• Candidate should analyze the data to calculate
• Should be able to immediately eliminate
the opportunity size in each location
Nashville as a potential option given
smaller population and low average
• Once the candidate identifies Dallas and San
account size
Francisco as attractive opportunities, move
• After calculating, should be able to
into the brainstorm (what other factors should
recommend Dallas given it has the
largest opportunity size
be considered when expanding into a new
– Second order insights
market)
• Dallas, Nashville, and Raleigh all share
• Math guidance:
Metro
Population x
Dallas
7,000,000
Nashville
2,000,000
San Francisco 5,000,000
Raleigh
1,500,000
% HNW =
3%
3%
5%
2%
Demand for
PWM
Potential
#HNW
x Services = Market Size x
210,000
5%
10,500
60,000
15%
9,000
250,000
5%
12,500
30,000
10%
3,000
Avg.
Account
Opportunity
Size
=
Size
10,000,000
105 B
4,000,000
36 B
7,000,000
87.5 B
12,000,000
36 B
•
some geographic or demographic
similarities, that could make any of these
a more natural choice than San
Francisco regardless of market size
Calls out other factors that could
influence opportunity size: average fee
charged per account, number of
competitors, population growth, etc. à
this should lead into the brainstorm!
76
Brainstorming
Prompt:
Analysis:
• Although Dallas and San Francisco seems • Analysis of brainstorming to have 2 parts:
to be attractive opportunities, what other
– High level structure of the
factors should be assessed when entering
brainstorming, some potential options
into a new market?
include:
• Internal vs. External
• Note to interviewer: The candidate should
• Revenue vs. Cost
mention the competitive landscape in their
– Specific details
brainstorm, after taking them through the
• Internal: Capacity to expand, hiring needs,
full brainstorm, come back to this to move
management structure, potential revenues
to Exhibit #2.
and costs
•
•
•
External: Competitors in market, expected
population growth, health of economy overall,
increased competition from “robo-advisors”,
feasibility of traditional wealth management
model
Revenue: fees charged per account (do they
differ across locations?), expected market
share, competitors, etc.
Costs: Overhead, expansion costs,
regulations, etc.
77
Exhibit #2
Competitive Landscape
Dallas
Raleigh
22%
50%
13%
5%
10%
Firm A
Firm B
Firm C
Firm D
Other
5%
30%
8%
17%
23%
10%
8%
70%
Firm A
Firm B
Firm C
Other
Nashville
San Francisco
17%
12%
Firm A
Firm B
Firm C
Firm D
Firm E
Other
10%
8%
7%
64%
3% 3% 5%
Firm A
Firm B
Firm C
Firm D
Firm E
Firm F
Other
78
Interviewer guidance on Exhibit #2
Exhibit #2 Guidance:
Analysis:
• After the candidate mentions competitors in the brainstorm, give
the interviewee Exhibit #2
• The candidate should realize they need to analyze the
competitive landscape in each location, strong candidates will
also recognize that they should tie this information into the
opportunity size values from Exhibit #1
• Additional information to provide: This market is highly
competitive and onboarding a client can take up to a year;
SWM believes they can capture 1% of the available market
in their first two years after opening a new office
• Note to interviewer: “Other” is a further indicator of opportunity
size and indicates potential market share not currently covered
by a competing firm
• Math guidance:
• Analysis for the exhibit to have 2 parts
– Basic
–
In Dallas, $525M represents a ~5% growth opportunity based on SWM’s current AUM
of $10B
Dallas
Nashville
San Francisco
Raleigh
Available
Opportunity
Market
Size
x (rounded, %) =
105 B
50%
36 B
65%
87.5 B
20%
36 B
70%
Available
Market ($)
x
52,500,000,000
23,400,000,000
17,500,000,000
25,200,000,000
1% Market
Capture
525,000,000
234,000,000
175,000,000
252,000,000
•
•
•
Each market has a different number of
competitor firms so it’s necessary to do a
competitive analysis
San Francisco is clearly not an attractive
market, as there are a number of
entrenched competitors that dominate the
market
This confirms Dallas is an interesting
opportunity for SWM, 50% of the market is
still up for grabs ($1.8B based on previous
calcs.)
– Second order insights
•
•
Although San Francisco has the second
biggest opportunity size (in $ terms),
Raleigh could also be interesting as there
are very few competitors with a large
market share
Nashville has the most competitors but no
one firm has managed to secure more than
10% of the market, could this imply
something deeper about the
difficulty/feasibility of entering into this
location?
79
Mischief Managed
Recommendation
• Your team is preparing to brief the CEO on your findings when she stops by the
office a day earlier than anticipated, how would you summarize your findings to her?
– A good recommendation will include the following actions: move forward with expansion into
Dallas (if interviewee can justify a different city or not expanding at all, that’s ok too)
– Interviewee should identify Dallas as the most attractive market and quantify the opportunity
size ($525M in additional AUM, or 5.25% of current $)
– Should also comment on the competitive analysis and how this confirms/changes the
recommendation
Risks and Next Steps:
• Risks
– Feasibility of gaining new clients and capturing market share from entrenched competitors
(unlikely to gain all 50% of available market share)
– This case focused on sizing the market, we have not yet assessed cost implications, could
this analysis potentially change our recommendation?
– Threat from low-costs “robo-advisors”, will people still want/need human advisors in 20
years?
• Next Steps
– Assess feasibility of expansion: costs of setting up new operations (overhead, labor, etc.) vs.
expected revenue (number of expected clients * account size * fee charged to client)
80
Evaluation Criteria
Candidate Level
Average Candidate
Assessment
•
•
•
•
•
Good Candidate
•
•
•
•
Excellent Candidate
•
•
•
May ask some clarifying questions about the industry but afterward can put together a
solid framework
Needs prompting or significant correction on math calculations in Exhibit #1
Brainstorm is good but not case-specific, only addresses typical market entry factors
Conclusion does include recommendation, but doesn’t effectively tie in both market
size and competitive landscape
Conclusion lists risks and next steps, but is not tailored to SWM specifically
Identifies important areas to explore when considered a new market entry and drives
the case forward from the framework
Understands how to pull the information from Exhibit #1 together to calculate market
size with no prompting
Brainstorm is tailored to finance/private wealth management and adequately lists
several factors to consider, especially the competitive landscape
Conclusion references information from both exhibits appropriately
Creatively addresses all potential factors in a market expansion and drives case
forward with little interviewer prompting
Calls out less-obvious factors that are private wealth specific: will SWM be able to
charge the same fees to clients in each location? Are there additional factors such as
age, employment, etc. that we haven’t fully considered yet?
Appropriately quantifies the opportunity within the context of SWM’s business, at
$3.6B, this would represent roughly 10% growth over the firm’s existing AUM, is that
worth it?
81
East Oak
Industry:
Case Type:
Led by:
Quantitative Level:
Qualitative Level:
eCommerce
Growth Strategy
Interviewer
Medium
Medium
82
Behavioral Questions
Question 1:
• Consulting is a very demanding and challenging job. How do you think you’ll deal with
the demands of the work, and how has your experience prepared you for this?
Question 2:
• What has been your biggest accomplishment to date?
83
East Oak
Prompt #1:
Your client, East Oak, is a fast-growing retailer of modern home goods and furnishings.
The company has seen tremendous growth over the past 5 years and is considering
ways to continue this growth.
The CEO is looking for our team to provide recommendations for how to achieve this.
Case Background:
• Existing Distribution Channels: Online-only, no physical brick-and-mortar stores
• Value Chain: Fulfillment method is 100% dropship (does not own any inventory,
purchases items from manufacturers and ships directly to the customer)
• Competition: Some big box stores like Target and Amazon, but mostly higher-end
retailers like West Elm and Crate and Barrel
• Annual Revenue: $240M per year
• Goal: Increase revenue by 10% (or $24M)
• Marketplace: Currently only ships in the U.S.
• Timeline: No specific, just as soon as possible
84
East Oak
Framework Example Buckets:
Revenue Growth for East Oak
Furniture Price
•
•
•
•
Product margins
Price increases
Shipping
Range of products (low to high)
Product Volume
• Product mix / quality of
assortment
• Variety and product types
• # of suppliers
• # of styles
• Top selling products
• Product availability / stock
Other
• Improve user / customer
experience
• Web design
• Faster shipping
• Better customer service
• Return policy
• Virtual reality / AI
• Brand partnerships,
marketing
Interviewer Framework Guidance: A basic revenue framework can look like the above or include a four P’s
framework. Costs should not be included in framework since the prompt specifically asks about revenue growth.
Candidate should pick where they would like to go next – interviewer can inform the candidate that we have more
information on how East Oaks compares to competitors in Exhibit 1.
85
Exhibit #1
Consumer Ratings
Dimension
East Oak
Competitor 1
Industry
Average
Product Quality
4.8
3.4
4.4
Customer Service
4.2
3.9
4.1
Product Selection
2.7
4.3
3.9
Price
3.3
3.4
3.8
Availability
4.1
4.7
4.3
Shipping Options
4.0
5.0
4.0
Average consumer rating (1=bad, 5=good)
86
Interviewer guidance on Exhibits
Exhibit #1 Guidance:
Analysis:
• Hand exhibit #1 to the interviewee
and ask which dimensions East Oak
should focus on.
• Basic Insights
– Candidate should immediately notice the
three opportunity areas to be price, product
availability, and product selection. East Oak
is below competitor 1 and the industry
average for these dimensions.
– Candidate should also notice that East Oak
succeeds at product quality and customer
service
– Candidate should realize a low score for
price indicates that shoppers believe items
are priced too high
• Second Order Insights
– Candidate may wonder if poor ratings for
selection and availability are tied together
and may propose solutions for how to
improve those two dimensions
87
Brainstorming
Prompt:
Analysis:
• What are some ways in which East Oak
can improve on product selection and
availability?
•
Brainstorm should be structured and
include some of the following:
Existing Supply Chain:
– Working with suppliers to procure
more product and reduce out of
stocks
– Hold inventory in warehouse
– Use technology to improve inventory
management
– Increasing number of suppliers
New Supply Chain:
– Begin manufacturing own
merchandise
– Private label
– Purchase a furniture supplier
88
Exhibit #2
Investment Options For East Oak
Tech. investment for inventory management
Acquire furniture manufacturer
11
9
3
10
25
Build manufacturing facility
Acquire competitor
13
Private label products
14
20
17
4
NPV
Project cost
*Numbers are in millions
89
Interviewer guidance on Exhibit #2
Exhibit #2 Guidance:
Analysis:
• Hand exhibit #2 and tell
interviewee that the team has
collected financial information on
several options for improving
product availability and selection.
• If candidate did not ask earlier,
he/she may ask the goal: 10%
increase in revenue (or $24M)
• The candidate should calculate a profitability ratio by
taking NPV/cost of project
• The candidate should then prioritize the projects and see
which investments will reach the goal
Calculations: (correct answers bolded)
•
•
•
•
•
Technology for inventory management: 11/3 = 3.66
Acquire furniture manufacturer 9/10 = 0.9
Build manufacturing facility: 25/20 = 1.25
Acquire competitor = 13/17 = 0.76
Private label products = 14/4 = 3.5
• Candidate may ask if there are any A very good candidate will immediately recognize that
acquiring a furniture manufacturer or competitor will not get
capital constraints: No
a positive return, therefore those options can be passed
over.
Candidate should recommend moving forward with a
technology investment for inventory management as well as
creating a private label to capture an additional $25M
An excellent candidate will continue driving the case by
identifying any risks such as funding the investment (cash,
debt)
90
Brainstorming #2
Prompt:
Analysis:
• The CEO agrees with your
recommendation to proceed with a
technology investment for inventory
management as well as creating a private
label. She is particularly interested in
private labeling. What are some of the
risks associated with this investment?
Brainstorm should be structured and include
some of the following:
Manufacturing Risks:
– Difficulty getting exclusivity rights to
products
– Will competition copy?
Financial Risks:
– Lower prices
– Could potentially cannibalize sales of
other higher margin products
– Increase marketing spend $
Operational Risks:
– Quality – might be lower
– Design capabilities/expertise
91
East Oak
Recommendation
• You log on to Zoom happy hour early and the CEO joins immediately after. The
happy hour starts in two minutes and she asks how your evaluation is coming along.
Risks and Next Steps:
[Resist the urge to give candidate a minute to collect thoughts]
Strong recommendations include the following items or similar reasoning:
East Oak should prioritize private labeling and a technology investment for inventory
management to capture an additional $25M in revenue, which only slightly exceeds the
goal of a 10% increase by $1M.
Risks include:
– Estimated return being lower than expected and potentially not meeting the $25M goal
– Having enough cash or access to capital to fund investments
– Potentially not seeing the return on investment as expected
– Competitor response
Next Steps/Mitigation:
– Exploring suppliers for private labeling and technology platforms for investment
– Sensitivity analysis on NPV and cost calculations
92
Behavioral Questions
Question 1:
If you’re hired at our firm, what would be your ideal first case?
Question 2:
Tell me about a time that you took a challenging situation and turned it into a positive
one.
93
Roll ‘n Grind
Prompt #1:
Your client is Roll ‘n Grind (RNG), a manufacturing company that specializes in industrial roll
grinding and servicing. The company prides itself on its strong reputation and commitment to
customer service, but recently its clients have raised numerous complaints about on-time delivery
of their rolls. The CEO has asked you find out what RNG should do to fix delivery time in order to
maintain its reputation and client retention rates. [show photos on next slide]
Case Background:
• The interviewee will likely be unfamiliar with roll grinding and should ask for more information
regarding the product and value chain. Additional background information:
– Client/Company information: Roll ‘n Grind currently operates four plants in the eastern
United States but serve a global client base. They are a privately held company that has
been in business over 50 years.
– Industry/Competition information: N/A
– Product information: RNG manufactures large, metal rolls that are used by many industries
for processing products, such as paper, paint, steel, textiles, and rubber. The rolls’
measurements must be extremely precise – up to a twentieth of an inch in accuracy – and
require servicing to maintain these requirements over time.
– Value Chain/Revenue information: RNG’s revenue streams include manufacturing new
rolls and servicing rolls in use (which are shipped back to RNG for service). RNG has
experienced customer complaints for both new and serviced rolls.
94
Roll Examples
95
Roll ‘n Grind
Sample Framework Buckets:
• There are many possible framework options. The interviewee should include both the supply
chain as well as key factors in the manufacturing process.
• Sample Framework #1: The candidate could do an internal/external framework, separating the
internal issues into the two key components of the value chain: servicing and manufacturing:
RNG (Internal)
Manufacturing
Servicing
Raw materials sourcing
Labor
Custom vs standard rolls
Workshop layout and
operations efficiency
• Delivery methods
• Customer service
• Pick up and delivery
times
• Materials and
equipment needed for
servicing
• Labor needed for
servicing
•
•
•
•
Macro/Policy Factors (External)
• Shortage of truckers available for hire in the
industry
• Location of plants to meet demand from
customers
• Hiring issues or high turnover with low
unemployment rates
96
Roll ‘n Grind
Sample Framework #2:
• Sample Framework #2: Given that this is potentially an operations problem, the interviewee
could outline the manufacturing process and indicate key considerations along each step
Supply Chain
• Raw materials inventory
and delivery time
• Number of suppliers
• Geography of deliveries
and customer complaints
Manufacturing
• Plant layout
• Number of jobs assigned to
each plant
• Labor hours required
• Bottlenecks in production
Delivery
•
•
•
•
Number of trucking partners
Distance traveled for delivery
Customer service
Automated tracking
information
97
Exhibit #1
Total Number of Rolls by Month
Serviced
Manufactured
18
9
January
Historic Average Number of Days Spent
Per Roll, by Plant
February
20
8
March
19
10
22
April
Manufacturing
Servicing
8.2
7.7
8.2
7.9
4.2
2.9
PA
GA
11
May
24
7
June
24
8
24
8
6.1
6.8
July
KY
AR
August
16
18
September
October
9
10
16
November
14
December
13
9
8
7
98
Interviewer guidance on Exhibit 1
Exhibit #1 Guidance:
Analysis:
• Read: The client sent over some data • First Graph: The candidate should recognize that
servicing takes less time than manufacturing. There is
from its four plants and corporate
also more variation in servicing than manufacturing.
office.
However, this makes sense given that servicing jobs
• Interviewer Guidance: The candidate are not as standard or predictable as manufacturing
should notice that they can calculate
new rolls.
the total number of days used each
• Second Graph: The candidate should notice that
month for servicing and
servicing does more volume than manufacturing. The
candidate should also recognize that they have
manufacturing.
enough information to determine the capacity of the
plant. If not, push them until they mention capacity of
the Plant.
99
Math guidance on Exhibit 1
Math:
Average Number of Days Per Roll:
• Servicing: (4.2 + 2.9 + 6.1 + 6.8)/4 = 5
• Manufacturing : (8.2 + 7.9 + 7.7 + 8.2)/4 = 8
Analysis:
• The candidate should notice that during the
summer months, the plant is maxing out its
capacity, likely the cause for the delays.
Capacity for Manufacturing
• 30 days / 8 days = 3.75 rolls per plant, per
month
• 3.75 rolls * 4 plants = 15 rolls per month
Capacity for Servicing
• 30 days / 5 days = 6 rolls per plant, per month
• 6 rolls * 4 plants = 24 rolls per month
100
Brainstorming
Prompt:
Analysis:
• What are some factors the
company should consider to fix the
capacity issue?
• Sample brainstorm
– Servicing
•
•
•
•
•
Consider on-site servicing for rolls with small
maintenance issues
Re-evaluate geography / which plants receive which
rolls for servicing
Space out servicing across the entire year instead of
summer – provide incentives for customers to select
new time frames that are different than what they’ve
done in years past
Forecast servicing needs at least one year in advance
to accommodate traditional servicing as well as rolls
that need servicing outside of traditional time frames
Rent space from a similar company or competitor to
deal with overflow in the summer months
– Communication
•
•
•
Improve tracking system visibility for clients
Set flags in internal platform to create more accurate
servicing time estimates for customers
Proactively reach out to customers about rescheduling
sending rolls in for maintenance if issues arise
101
Roll ‘n Grind
Prompt #2
• The team wants to explore renting out additional space during the spring/summer
months. You’ve collected the following information. Which option is most the most
sense financially?
To be read to candidate:
Option A
Option B
Monthly rent: $10,500
Additional delivery fees: Waived
Fee per job: $2,000 per job
Utilities per month: $5,500
Estimated jobs per month: 8
Monthly rent: Half of option A’s rent
Additional delivery fees: $5,000 (total)
Fee per job: $1,000 per job
Utilities per month: $2,250
Estimated jobs per month: 8
102
Roll ‘n Grind
Math Guidance for prompt #2
Option A
Monthly Rent: $10,500
Fee per job: $2,000 per job
Utilities per month: $5,500
Estimated jobs per month: 8
Calculations based on 4 months of use:
(10,500+5,500)*4 = $64,000 in rent and
utilities
+
$2,000*8= $16,000 in job fees
=$80,000 total cost
Option B
Monthly Rent: half of option A’s rent
Additional delivery fees: $5,000 (total)
Fee per job: $1,000 per job
Utilities per month: $2,250
Estimated jobs per month: 8
Calculations based on 4 months of use:
(5,250+2250)*4 = $30,000 in rent and
utilities
+
$1,000*8= $8,000 in job fees
+
$5,000 delivery fees
=$43,000 total cost
Guidance for prompt #2
Candidate should recommend moving forward with Option B since it is less expensive.
A strong candidate will begin to question if this investment is if there is enough cash on
hand to afford this or what the return on investment is.
103
Roll n’ Grind
Recommendation
• The RNG CEO is walking in the door. They want to know what you recommend to
resolve the numerous customer complaints.
• Candidate should recommend fixing the bottleneck issues by renting out space for
$43,000 to handle overflow jobs during peak months.
Risks and Next Steps:
• Risks:
– Quality of jobs that are completed in the rented facility
– Competitor conflicts of interest
– Return on investment of renting space
• Next steps:
– Calculate return on investment of renting space
– Execute contracts with facilities and arrange proper hiring and training
104
Evaluation Criteria
Candidate Level
Assessment
Average Candidate
General framework that highlights issues including
delivery, manufacturing, and communication with
customer. Needs additional prompting to calculate
capacity and may struggle with the calculation.
Good Candidate
Drives to calculating capacity with some assistance
from the interviewer. Framework and brainstorm are
case-specific.
Excellent Candidate
Creates a framework that is tailored to roll grinding.
Drives to (without prompting) calculating the capacity of
the plant using the information provided, and
recognizing the bottleneck in the summer months.
Candidate finds creative ways to fix the capacity issue
and provides a clear recommendation with next steps
and risks.
105
Keep-it-Fresh
Industry:
Agri-business
Case Type:
Sustainability
Led by:
Interviewee
Quantitative Level: Medium
Qualitative Level: Difficult
106
Behavioral Questions
Question 1:
• Tell me about a time you had a disagreement with your manager.
Question 2:
• Tell me about a time you dealt with an uncooperative team member.
107
Keep-it-Fresh
Prompt #1:
Your client is Keep-It-Fresh, a leading fresh fruit and vegetable wholesaler based in
Atlanta, GA. Keep-it-Fresh has recently been acquired by a major impact investor, and
has been asked by the new owner to improve its sustainability profile. The CEO of
Keep-it-Fresh has asked your team to identify the key sustainability issues the
company should be working on.
Case Background:
– Client/Company: Keep-it-Fresh is a vertically integrated wholesaler that operates farms and
sells its fresh products to professional clients: supermarkets, restaurants and hotels.
– Industry/Competition: Keep-it-Fresh is a top 3 US fresh produce wholesalers, with annual
revenue of $300M.
– Goal: The new owner wants to keep up the good financial returns, but is also concerned
about the environmental and social footprint of its investment. Keep-it-Fresh already enforces
best-in-class social practices (wages, paid overtime, health insurance, etc.), but nothing is
done in terms of environmental sustainability
– Timeline: Investor expects to see any sustainability plan to be implemented and show
positive impact ASAP
108
Keep-it-Fresh
Framework Example Buckets:
Farming
Storage +
Warehousing
Crops: type used
(organic/GMO),
resistance to
climate
Energy usage:
Electricity, fresh
produce
refrigeration
Water: water
usage, sources of
water, groundwater
pollution
Waste: Produce
waste due to
ineffective storage
Land use: use of
pesticides, use of
fertilizers, land
pollution
Sales +
distribution
Other
stakeholders
Transportation:
fuel consumption,
atmospheric
emissions, in-truck
refrigeration
efficiency
Regulation:
environmental
regulations around
pesticides, crops,
emissions
Lost sales from
unsold fresh
produce not
accepted by clients
(misfit fruits and
vegetables), or from
incorrect orders
Activists and
NGOs: rising
concern for
environmental
issues in agriculture
Framework Notes and Guidance:
Keep-it-Fresh already has best-in-class social practices, therefore, strong frameworks should
focus on environmental sustainability. Possible breakout of environmental issues along the value
chain include Farming, Storage & Warehousing, Sales & Distribution, Other Stakeholders.
Once the interviewee has covered potential environmental issues, hand out exhibit 1
109
Exhibit #1
Keep-it-Fresh’s Materiality Map
High
Level of Stakeholders’ Concern
(external)
A
C
B
D
E
F
A
CO2 emissions
B
Produce waste
C
Pesticides usage
D
Groundwater
pollution
E
Climate-resisting
crops
F
Water usage
Low
Low
Current or Potential Impact on
business (internal)
High
Impact on business: potential effects of an issue on the company’s financials and/or operations. High impact means the
issue we’re looking at is very important as it can change the company’s business model.
110
Interviewer guidance on Exhibits
Exhibit #1 Guidance:
• The interviewee should be able to gather
the information provided by the materiality
map:
– Materiality of a sustainability issue depends
both on stakeholders’ level of concern and
potential impact of the issue on the
company’s business
• If asked, interviewer can provide the
following clarifications:
– Produce waste refers to fresh fruits and
vegetables lost, either during storage and
transportation, or unsold
– CO2 emissions are for the entire value
chain: farming, storage, distribution
• Once material issues are identified, move
on to brainstorm #1.
Analysis:
• The interviewee should recognize that
issues at the top right corner are the
most important ones
• Analysis for the exhibit to have 2 parts –
– Basic: Pesticide usage and Produce waste
are the most important environmental
issues for both the company and its
stakeholders.
– Second order insights: interviewee should
also identify CO2 emissions and
groundwater pollution as material issues,
but recognize that they should focus on
pesticides and produce waste first
• The interviewee should realize that the
client can tackle each material issue
identified in various ways. Strong
candidate will begin to brainstorm without
being prompted.
111
Brainstorming
Prompt:
• The CEO agrees with your analysis and
has decided to focus on Pesticide usage
and Produce waste. He asks your team to
brainstorm ideas.
• Interviewer asks the following questions
to candidate, sequentially:
– How can Keep-it-Fresh reduce pesticide
usage in its farms?
– How can Keep-it-Fresh limit produce waste
across its value chain?
• After brainstorm, give Exhibit #2.
Analysis:
• The interviewee could mention several
ideas focused on the two themes,
including but not limited to:
• Pesticides usage:
–
–
–
–
Use natural pesticides
Stop using pesticides
Forbid usage of the most harmful pesticides
Use resistant crops that do not need
pesticides
• Produce waste:
– Donate unwanted produce to non-profit
– Smart harvest to extend produce life after
harvesting
– Sell misfits instead of discarding them
– Sell unwanted produce for animal feeding
– Use unwanted produce for composting
• Strong candidate will point out difficulties
of each solution.
112
Exhibit #2
Projects
Sustainability
Rating
NPV (in
$M)
Preparation
time
(weeks)
Roll-out
time
(months)
Project 1: Switch to
natural pesticides
Medium
7
20
12
-6
6
0
High
Project 2: Donate
unwanted fruits and
vegetables to non-profits
Project 3: Market misfit
fruits and vegetables to
avoid waste
Medium
5
12
3
Project 4: Stop
pesticide usage
High
2
20
18
Project 5: Use unsold
fruits and vegetables as
compost
Medium
3.5
10
2
Preparation time is the time Keep-it-Fresh needs to assemble a team, find partners, check legal requirements, make
budget available, etc.
Roll-out time is time needed to see first positive effect of the project
113
Interviewer guidance on Exhibits
Exhibit #2 Guidance:
Analysis:
• Keep-it-Fresh has gathered information
about selected projects to tackle the most
important environmental issues it has
identified. A rating agency has provided
sustainability ratings for each project.
Which project would you advise Keep-itFresh to implement?
• If asked, provide the following clarifying
information:
• The interviewee should keep in mind that
the investor wants to see results ASAP.
• The interviewee should also note that
preparation time is in weeks and roll-out
time in months.
• The interviewee should take into account
NPV, timeframe and sustainability rating
to select a project. Potential analysis
include:
– Sustainability rating measures the social and
environmental impact of the proposed project (job
created, number of beneficiaries, CO2 emissions
avoided, etc.). The methodology behind the ratings
is not relevant for this case.
– A month is 4 weeks
– Project 2 with negative NPV should be
eliminated immediately.
– Project 4 has high sustainability rating but
low NPV and long timeframe
– Project 1, 3 and 5 all have medium
sustainability rating. Comparing timeframes
and NPV, choose project 3 ( remember
client wants results ASAP)
• A strong interviewee would consider other
implications of choosing Project 3.
114
Keep-it-Fresh
Recommendation
• The CEO of Keep-it-Fresh has asked you to present your sustainability plan to the
impact investor. What is your recommendation?
Risks and Next Steps:
• Recommend getting misfit fruits and vegetables to market (project 3) with NPV of
$5M and a 6 months timeframe (12 weeks + 3 months)
• Potential risks include FDA regulation, cannibalizing current product lines, convincing
current clients to buy produce they did not want before, finding new clients for the
misfit fruits and vegetables
• Next steps include sizing the market for misfit fruits and vegetables, quantifying the
amount of misfit produce the company has on hand, building sales and marketing
capacity
115
Evaluation Criteria
Candidate Level
Assessment
Average Candidate
The interviewee creates a framework that covers
limited potential sustainability issues and/or issues that
are not specific to the client’s industry.
Good Candidate
The interviewee focuses on environmental issues but
need prompting to get through exhibits and
brainstorming. The interviewee confidently reason
through exhibit#2, but omits risks and next steps in final
recommendation.
Excellent Candidate
The candidate confidently analyses potential
sustainability issues in his/her framework, demonstrate
creativity when brainstorming ideas, and argues
confidently his/her recommended project choice. The
interviewee identifies potential risks and next steps.
116
Plaque to the Future
Industry:
Healthcare
Case Type:
Growth Strategy / M&A
Led by:
Interviewee
Quantitative Level: Medium
Qualitative Level: Difficult
117
Behavioral Questions
Question 1:
• Tell me about a time when you were thrown into a unfamiliar situation and had to
learn quickly.
Question 2:
• Discuss a time when you had to deliver difficult news in a professional environment.
118
Plaque to the Future
Prompt #1:
• Your client is the CEO of Bright Smile, Inc., a family-owned regional dental services organization
(DSO), with annual revenue of $20M. Bright Smile has 40 dentist offices and provides a variety of
services – annual cleanings, crowns, bridges, and limited orthodontic treatment. Over the last
three years, growth has stalled and competition has stolen market share.
• Our client has asked us to determine a growth strategy to make them the leading “full-service”
dental organization
Case Background:
• Additional information given to candidate if asked:
– “Full service” à offering checkups, filling, implants, bridges, crowns, cosmetic dentistry,
including orthodontic treatment (such as Invisalign) and teeth whitening
– Bright Smile offices are located in southeastern United States
– Historically, Bright Smile has focused only on organic growth, building new offices
– Revenue Mix: 25% hygiene (cleanings), 55% restorative work (crowns/bridges), 20%
orthodontia
– Market: Orthodontic treatment growing at 30% Y/Y in U.S., general dentistry flat Y/Y
– Bright Smile’s board of directors does not want to build any new offices
– No current information on current profitability
– Goals:
• Primary: Grow profit 2X in 3 years
119
Plaque to the Future
Framework Buckets:
• A good framework will include better understanding of the current dental market and
competitive environment, current company operations, and assessing organic and
inorganic growth strategies:
– Market and Competition: market size of dentistry (both general and orthodontics), key DSO
competitors and market share, macroeconomic factors, dental insurance coverage
– Company Operations: Current product offerings, customer demographics, office personnel,
existing marketing efforts, trended P&L, geographic locations
– Organic Growth: Increase prices, add new products (e.g., teeth whitening, oral surgery,
etc.), increase orthodontic treatments, increase customers, build new offices
– Inorganic Growth: Acquisition of new dentist offices, joint ventures/partnerships with leading
dental companies or dental schools
– Risks: Regulatory, dental insurance, cyclical business, limited knowledge of new markets, no
M&A history, telehealth gaining popularity
• Once candidate has explained framework, provide Exhibits 1 and 2 at same time.
• Exhibit Goal: Candidate should be able to see that larger competitors have bigger Orthodontic
businesses and they should be able to calculate last year profit to help clarify goal of 2X profit is
+$8 million in new profit in 3 years.
• With clear understanding of both exhibits and other background information, candidate should
desire to focus on organically growing Ortho business first.
120
Exhibit #1
Dental Services Organization – United States Market1
200
5%
Number of Offices2
150
SmileLand
Denistry Inc.
Plaque Corp
100
Whiten
BrushClean
50
Flossier
Root LLC
Happy Tooth
Bright Smile
NewDental
0
0
10
20
30
Bubble size
indicates
revenue %
that comes
from
Orthodontic
care3
60%
40
50
60
70
80
90 100 110 120 130 140 150
Total Revenue (USD $M)
1
The dental service organization industry averages 30% of their revenue from orthodontic products.
The larger industry players (>100 office locations) are all backed by private equity firms and have grown their market share through
acquisitions. They have not built any offices organically.
3
Orthodontic care products include metal braces, clear aligners, and retainers.
2
121
Exhibit #2
Bright Smile, Inc. Company Overview
Office Geography1
XXXXX
Trended Revenue
XXXXX
19.5
7.0
20.0
20.0
5.5
5.0
Product Profitability
XXXXX
90
80
70
60
50
11.5
11.0
10.5
40
30
20
2.0
3.0
2017
2018
Orthodontic
1
Each dot represents 2 Bright Smile locations.
4.0
2019
10
0
2017
Restorative
2018
2019
Hygiene
122
Interviewer guidance on Exhibits
Exhibit #1 Guidance:
• Additional guidance if candidate asks:
– Smaller DSOs do grow their footprint
organically
– Orthodontic care includes metal braces,
clear aligners, and retainers
– All DSOs’ dentists have providers that are
“in network” for all major insurance plans
– General dentists can do orthodontic
treatments
Analysis:
• Good candidate will notice that:
– Larger DSOs have (a) more offices
and (b) higher percentage of business
from orthodontic care
– Bright Smile is at lower end of market
in offices and revenue
– Top DSOs tend to be PE-backed
• Great candidates will notice that:
– Bright Smile’s ortho business (20%) is
less than industry avg (30%)
– Client does $500K in revenue per
office while most competitors are
between $750K and $2M per office
123
Interviewer guidance on Exhibits
Exhibit #2 Guidance:
• Additional guidance if candidate asks:
– Hygiene – annual cleanings
– Restorative – crowns, bridges, implants
– Orthodontic – metal braces, clear aligners,
retainers
– Profit represents operating profit percentage
(after COGS and OPEX but pre-tax)
– Bright Smile has no offices outside the SE
U.S.
– Revenue is presented in USD millions
– Far right graphic y-axis is margin %
Analysis:
• Good candidate will notice that:
– Offices are all located in southeast
– Ortho profitability higher than other products and
only one growing year-over-year
– Revenue relatively flat, all growth from Ortho rev
• Great candidates will notice that:
– Offices concentrated near large cities
– Ortho business expanded from ~10% to 20% of
business
– Ortho is 20% of revenue but ~40% of profitability
– Hypothesize that competitors have better margins if
their ortho mix is higher than Bright Smile
(leveraging Exhibit 1)
• After assessing the exhibits, candidate
should want to calculate total company
profitability and determine that case goal
is +$8 million in new profit in 3 years
• Based on exhibits, candidate should want
to explore organic growth impact of more
orthodontic treatment.
• Calculations shown on next page
124
Interviewer guidance on Exhibits
Exhibit #1 and #2 calculations
• Once finished with calculating current profitability and with other background info, candidate
should want to organically increase Ortho business
• Push candidate in this direction and if needed, ask candidate “If Bright Smile could
organically shift its mix to industry Ortho average, what is impact on profit?”
• Candidate could structure the math in the following way (okay to round if asked):
– Assume revenue growth flat and 2019 profitability for next three years; candidate could combine hygiene and
restorative in forecasted years given profitability is same for each segment (Exhibit 2)
Hygiene
Restorative
Orthodontic
Total
Hygiene
Restorative
Orthodontic
Total
$
$
$
$
2017
7.0
10.5
2.0
19.5
$
$
$
$
2017
2.8
3.2
1.5
7.5
$
$
$
$
2018
5.5
11.5
3.0
20.0
$
$
$
$
2018
1.9
3.5
2.4
7.8
$
$
$
$
Revenue
2019
2020
5.0
$
4.4
11.0
$
9.6
4.0
$
6.0
20.0
$ 20.0
$
$
$
$
Profitability
2019
2020
1.5
$
1.3
3.3
$
2.9
3.4
$
5.1
8.2
$
9.3
$
$
$
$
2021
4.4
9.6
6.0
20.0
$
$
$
$
2021
1.3
2.9
5.1
9.3
$
$
$
$
2022
4.4
9.6
6.0
20.0
$
$
$
$
2022
1.3
2.9
5.1
9.3
• After assessing that organic growth does not help company achieve growth goal (only $1.1M of $8M
needed), they’ll want to refer back to framework on strategies.
• Steer them to M&A as next direction if they don’t go there on own.
125
Exhibit #3
Ortho
Park
Root Canal
LLC
Happy
Smile
Family
Dental
California
Dental
Geography
Canada
MA, NY, CT, RI
LA, AL, MS
NC, VA, TN,
WV, KY
CA
Total Revenue
$20M
$9M
$10M
$8M
$6M
Office
Locations
60
30
25
20
10
General or
Ortho
Ortho
General
General
General
General
Number of
Employees
5K
1K
2K
1.5K
0.5K
Forecasted
CAGR
30%
5%
20%
25%
30%
Profit %
30%
10%
25%
40%
50%
Family
Owned?
No
No
Yes
Yes
Yes
Ortho Rev
$18M
$1M
$2M
$3M
$2M
126
Interviewer guidance on Exhibits
Exhibit #3 Guidance:
• Now that candidate wants to focus on M&A, ask
“Which company would you want to pursue
for acquisition?”
• Additional guidance if candidate asks:
– Revenue is 2019 revenue
– General means hygiene and restorative dentistry;
general dentists can do orthodontic treatment
– CAGR = compound annual growth rate; projected
3-year CAGR provided
– Profit is overall business profitability
– Board of Directors only want to purchase one
organization
• Do not provide guidance on which
categories are most important, let candidate
narrow down which targets they want to
focus on
Analysis:
• Good candidates will first want to narrow down
their acquisition targets after reviewing data.
Potential reasons for elimination:
– Ortho Park because of Canada locations,
Ortho dominant practice, larger than Bright
Smile
– Root Canal LLC because of low growth
rate, low profitability, lowest Ortho business
• Candidate could drive to other acquisition
targets, but push candidate on clearly stating
why they came to decision
• Great candidates may also focus on and
calculate “Ortho Revenue as % of Total” and
“Revenue per Location” metrics for narrowing
targets
• Candidate will want to calculate 2022
profitability of remaining three targets
– Calculations on next page
127
Interviewer guidance on Exhibits
Exhibit #3 calculations
• Candidate could structure the math in the following way (okay to round if asked):
– Assume CAGR is 3-year revenue annual growth and that profitability remains same in 2022
– Candidate does not need to calculate Ortho Park or Root Canal LLC, but provided below in case they do
Ortho Rev % of Total
Rev per Location
2020 Revenue Est.
2021 Revenue Est.
2022 Revenue Est.
2022 Profit Estimate
$
$
$
$
$
Ortho
Root Canal
Happy
Family
California
Park
LLC
Smile
Dental
Dental
90%
11%
20%
38%
33%
333,333 $ 300,000 $ 400,000 $ 400,000 $ 600,000
26.0 $
9.5 $
12.0 $
10.0 $
7.8
33.8 $
9.9 $
14.4 $
12.5 $
10.1
43.9 $
10.4 $
17.3 $
15.6 $
13.2
13.2 $
1.0 $
4.3 $
6.3 $
6.6
• Prior Gap: $6.9M of $8.0M needed
• After math, candidate should notice that none of core M&A targets achieve the
remaining gap; however, two targets are very close (Family Dental and California
Dental)
• Candidate should choose one of these to pursue. Push them on why they chose it
• Next: Candidate will want to hypothesize other ways to achieve goal; initiate
brainstorm if they don’t mention synergies on their own
128
Brainstorming
Prompt:
• Given that Bright Smile will be short of
their profitability goal with the acquisition
(either $0.3M or $0.6M dependent on
which target they acquire), what are
ways they can best capitalize on
potential synergies from acquiring
these new offices?
Analysis:
• Candidate could structure the brainstorm
in several ways. Good candidate
example:
– Revenue synergies
•
•
•
Increase orthodontic care % (sharing best
practices to existing offices)
Additional customer base in new market
Complimentary geographies or customers
– Cost synergies
•
•
•
•
•
Consolidate corporate overhead (Finance,
HR, Legal, etc.)
Supply chain efficiencies (better procurement
of dental equipment)
Shared IT systems
Lower salaries/wages; fewer employees
Sales and Marketing efficiencies from
economies of scale
• Push candidate to keep coming up with
new synergies several times
129
Plaque to the Future
Recommendation
• The CEO of Bright Smile wants an update from the team on proposed growth
strategies. Please provide her with your recommendation(s).
– Recommendation: Organically grow Orthodontic business to industry average and acquire
Family Dental to expand customer base
– Result: Grows profitability by $7.4M in 2022; slightly below goal but cost synergies could
achieve remaining gap to $8M target
• Great candidates will succinctly summarize their recommendation, impact for Bright
Smile, and bring in info from the prompt, framework, or exhibits into recommendation
Risks and Next Steps:
• Risks:
–
–
–
–
–
No history of M&A
Integration issues with another family-owned business in new market
Synergies not realized
Patients focus on direct-to-consumer and telehealth dental care in future
Mindset shift of general dentists to do more orthodontic care
• Next Steps / Mitigation Strategy:
– Additional due diligence on Family Dental
– Ortho training and education
– Additional consumer marketing to target audience
130
Goals for Growth
Industry:
Social Enterprise/Sports
Case Type:
Growth strategy
Led by:
Interviewee
Quantitative Level: Medium
Qualitative Level: Medium
*Note to interviewer: Please review this case thoroughly in advance.
131
Behavioral Questions
Question 1:
• Why Fuqua?
Question 2:
• What achievement are you most proud of?
132
Goals for Growth
Prompt #1:
• Your client is Ligas Femininas F7 (LF7), a non-profit soccer league for women in Peru. Founder Alexandra
Herrera (Fuqua ’20) set out to create a space for women to play recreational soccer, which didn’t exist anywhere
in Peru prior to LF7. LF7’s mission is two-fold: 1) provide a safe space to women to play soccer and 2) to reduce
harmful biases against women in Peru at large.
• LF7 has been successful with revenue generation in its first few years; however, they need to increase their
annual revenue by 20% to achieve their growth goals. The client is also interested in hearing your general
thoughts on how to maximize the fulfillment of their mission given their resources. How do you recommend they
achieve that goal?
Case Background:
• Background information to be divided into these categories
– Founded 3 years ago—Founders are in place and provide leadership stability.
– No notable direct competitors
– LM7 facilitates regular season-long leagues, special leagues, and other activities.
– Current revenue comes from 3 areas: player fees, sponsorship, and grants
– They need to achieve the 20% revenue growth in the next 2 years. (ex. If revenue now is $1M they need to
get to $1.2M two years from now.)
– If the interviewee asks for more details on current revenue or “maximize their impact,” indicate there is no
guidance on that at this time.
– Please assume the general economy is normal (i.e. no pandemic)
133
Goals for Growth
Framework Buckets:
The interviewee should produce a revenue framework. Ideally the candidate will also do a second framework around
most impact. Items in the framework(s) should be prioritized.
Revenue
• By business lines: Regular leagues, special leagues, other activities + something new e.g., Partnerships, etc.
• By how the revenue is collected (By revenue stream), ex. Player fees, Sponsorship, Grants
• Could be a build/borrow/buy or organic growth vs. inorganic framework too—ex. Can they merge with another
organization or otherwise collaborate via a contractual arrangement.
Maximize Impact
• Interviewee could bucket the “impact” question into:
• Safe space for women & reducing biases against women
• OR Individual & societal impact
Strong interviewees will lead with a clear hypothesis about what the biggest growth areas could be and why. They
will give a sense of what they think are the stronger leads, and what kind of information they need to test their
hypothesis. They should also call out the risks, ex. Partnering with another org gives up control, mergers can be
problematic, etc.
Please proceed to Exhibit 1 when the interviewee asks for revenue information by business line.
134
Exhibit #1
LM11 Net Income
ACT BASE
Ligas Especiales
(Special Leagues)
Otras Actividades
(Other Activities)
$34,000
$0
$10,000
$24,200
$33,200
$17,200
$59,000
$65,350
$64,800
2017
2018
2019
Note: LM11 received an additional $16,650, $24,500, $32,000, respectively, in sponsorships and other contributions
135
Interviewer guidance on Exhibits
Exhibit #1 Interviewer Guidance:
Analysis:
• Revenue Stream Clarifications
• Analysis for the exhibit to have 2 parts –
– ACT BASE
– ACT BASE = Regular leagues (B2C and B2B) and
soccer academies for girls. The soccer academies
comprise only about 1-3% of revenue annually but
make a big difference in the community.
– Ligas Especiales = “Special Leagues,” the revenue
for this line is purely a flat rate for the operations of
10-game seasons for 11-player games (standard
number).
– Otras Actividades = “Other Activities” random
grants, ex. From Embassies
– We do not have expected financials for 2020
• Interviewee should see the note about additional
revenue—this will be used to get to revenue
• Interviewee should ask about costs to get to the
impact part of the problem in addition to
answering the revenue question.
• They need to get to revenue to figure out what
the 20% target is—it’s $104K. Please see next
page for costs and other math details.
•
Most revenue, but it’s also the slowest
growing.
– Ligas Especiales
•
Growing the most! Go here.
– Otras actividades
•
Most fluctuation YoY, not something on which
they can base their business model
• Second order insights
– Interviewee should have uncovered already that
Ligas Especiales are funded by corporations, so it’s
a highly growable space. A strong interviewee will
also notice that the VC in Ligas Especiales spiked
last year—so an area for improvement for the more
vague “maximize impact” prompt would be to get
those costs under control.
– What’s not shown here is inorganic growth
opportunities.
136
Exhibit #1 guidance for interviewer
EXHIBIT 1
Interviewer: Please provide the following
information when the interviewee asks.
*** The best interviewees will realize they
only need to calculate 2019 revenue to
get the target #***
This is Net Income, so the interviewer needs to add back costs to get to revenue
Net Income
2017
2018
2019
ACT BASE
$59,000
$65,350
$64,800
9.83%
Ligas Especiales
$17,200
$24,200
$33,200
93.02%
Otras Actividades
$10,000
$0
$34,000
240.00%
Other Revenue (Note)
$15,000
$17,500
$35,300
$101,200
$107,050
$167,300
$5,850
$60,250
6%
56%
$90,000
$90,000
$126,000
NI in Graph
$59,000
$65,350
$64,800
TOTAL
• Fixed costs/overhead (divide evenly over
all business lines):
• 2017 and 2018 = $90,000
• 2019 = $126,000
• Variable Costs (ACT BASE, Ligas
Especiales, Otras Actividades)
• 2017 = $76,000, $11,300, $0
• 2018 = $84,650, $11,300, $0
• 2019 = $85,200, $44,800,
$100,000
• Additional revenue form the note
• 2017 = $16,500
• 2018 = $24,500
• 2019 = $32,000
They should ultimately calculate
$520,000 as the 2019 total revenue and
calculate 20% of that as $104,000 that
they need to make in the next two years.
YOY Change
YOY % Change
Annual Overhead
% Change ‘17-‘19
Breakdown
ACT BASE
VC
$76,000
$84,650
$85,200
Overhead/3
$30,000
$30,000
$42,000
TOTAL REV
$165,000
$180,000
$192,000
NI in Graph
$17,200
$24,200
$33,200
VC
$11,300
$11,300
$44,800
Ligas Especiales
Overhead/3
$30,000
$30,000
$42,000
TOTAL REV
$58,500
$65,500
$120,000
NI in Graph
$10,000
$0
$34,000
Otras Actividades
VC
$0
$0
$100,000
Overhead/3
$30,000
$30,000
$42,000
TOTAL REV
$40,000
$30,000
$176,000
$16,500
$24,500
$32,000
$280,000
$300,000
$520,000
Additional Rev from Note
TOTAL ANNUAL REV
REVENUE GOAL FOR TWO YEARS FROM NOW
$624,000
GAP
$104,000
137
Brainstorming (1/2)
Prompt:
Analysis:
Interviewee could brainstorm
Organic/Inorganic growth (Recommended):
• 1) Expanding Ligas Especiales
(Expanding current offerings)
Recommended structures:
– If it hasn’t already been uncovered, the revenue for
this line is purely a flat rate for the operations of 10game seasons for 11-player games (standard
number).
– Contracts are by season.
• 2) Inorganic growth (see next page)
• New/Current Customers & Products
– Current Customers
• Corporate in Peru
– New Customers
• Schools/Summer Camps (Kids-centric)
• B2C, ex. Neighborhoods, beach house
communities (this is a real thing they did!)
• Corporations outside of Peru (expand to
neighboring country, exec.
– New Products / Offerings
• Multi-season contracts
• Merchandise/other packages, recorded
games, etc
• Other Sports or eSports
• Recurring/non-recurring & B2B vs. B2C matrix
– Recurring B2B
• Multi-season packages
– Non-Recurring B2B
• Individual events, merchandise, etc.
138
Brainstorming (2/2)
Prompt:
Analysis:
2) Interviewee should brainstorm inorganic
growth options.
Recommended structures:
• Build, Borrow (including JV, License), Buy
– Build: launching new teams, countries,
kinds of sports, etc.
– Borrow:
• Contract with other organizations to
share revenue in the short term via
fundraising, events, etc
• Start a new initiative with
another organization angled at long
term growth, ex. Work with anti-hunger
non-profit to create a of nutrition and
fitness package offering for schools
• License examples: co-branding with
athletic brands on merchandise, any
other kind of advertising agreements
– Buy: purchasing other existing teams,
another non-profit with a similar mission
• Ideally candidates will focus on opportunities
that will promote the two prongs of the mission.
139
Goals for Growth
Prompt #2:
LM11 just found out they won a government grant for $35K to fuel its growth. They have some
growth projects in mind, what do you think? (Hand them the next page, Exhibit 2)
• Interviewee should assess the options by calculating a ratio of Anticipated
NPV/Cost. Alternatively, the candidate could calculate ROI and eliminate the projects that
are outside of the two-year timeline.
• Interviewees should land on projects 1, 2, and 4 which require a total spend of $32K and get
to $110K, which is over our magic number of $104K within 2 years.
• #5 technically has the same ratio as #1; however, upon analysis the fields purchase seems
like it has more certainty.
• Strong interviewees will realize they have $3K more to spend and will offer their own ideas
on how to spend it. Don’t force a brainstorm, but if they do it, great.
#
Project
1 Purchase fields
Digital Marketing
2 Technology
3 Start line of branded gear
4 Sales Person for LE
5 Invest in soccer gear start up
Anticipated
Investment (Months)
NPV
Ratio ROI
$10,000
8
$30,000
3.00
2
Time
$2,000
$10,000
$20,000
$10,000
24
26
12
16
$10,000
$35,000
$70,000
$30,000
6.67
3.50
4.00
3.00
Notes
5.67
2.5 Too long of a time
3
2 May be overvalued
140
Exhibit #2
(Months)
Anticipated
NPV
$10,000
8
$30,000
Digital Marketing Technology
$2,000
24
$10,000
Start line of branded gear
$10,000
26
$35,000
Hire Sales Person for Ligas Especiales
$20,000
12
$70,000
Invest in soccer gear start up
$10,000
16
$30,000
Project
Investment
Purchase fields
Time
141
Goals for Growth
Recommendation
• They can do this by focusing on projects 1, 2, and 4 ($110K total)
• They should focus on growing Ligas Especiales to achieve the target 20% growth
($104K) because there are great revenue opportunities from the corporations. These
companies and working with companies also promotes their mission.
• Interviewee can also touch on what they wanted to do with the $3K that wasn’t spent
in the projects.
Risks and Next Steps:
• Risks could include cost overruns, specific risks to each type of investment, e.g.
purchasing soccer fields that are less accessible to their target community.
• With regard to to the NPV/ROI, the interviewee could discuss the probability of
success with each project.
• Next steps would be to work on the messaging for expanding LE and to hire the sales
person (they actually did this!)
142
Evaluation Criteria
Candidate Level
Assessment
Average Candidate
Creates a revenue framework, figures out the
revenue target, and picks the right projects and how
they would go about prioritizing those
Good Candidate
The above (gets the math shortcut and the note), plus
includes the impact part of the prompt in the framework
and throughout
Excellent Candidate
The above, plus incorporates the impact piece of the
prompt throughout the case and talks about social
enterprise-specific perspectives and challenges
throughout their discussion.
143
New York Shmankees
Industry: Sports/Entertainment
Case Type: Profitability/Growth strategy
Led by: Interviewer (McKinsey Style)
Quantitative Level: Medium
Qualitative Level: Medium
144
Behavioral Questions
Question 1:
• What is the most difficult decision you have had to make and why did you make it?
Question 2:
• Why are we here? (If sitting with a partner I recommend going into your why XXXX
firm response).
145
New York Shmankees
Prompt #1:
• The year is 2013. Your client is a large New York based professional baseball team,
the New York Shmankees. The owner, Baby Ruth is by no means cheap, and has a
reputation for over-paying for some of the teams' players. Baby Ruth has
communicated to our firm that he has little desire to change that moving forward.
However, there has been a decrease in the profit margins of the team over the last
two regular seasons, and Baby Ruth has engaged your firm for help. What key
factors would you look at?
Case Background:
• Background information
– Client/Company information: This is the only team Baby Ruth owns. The Shmankees are a US-based
professional baseball team out of New York City. They compete in the MLB (not the minor leagues) as a
member of the AL East Division. The team has been around since 1901 and has won 27 World Series Titles,
more than any other team.
– Industry/Competition information: There are 30 MLB baseball teams, and the profitability of the other
teams has been mixed.
– Revenue Information: Ticket Sales, Media Rights, Sponsorships, Memorabilia, Concessions.
– If Interviewee asks, they should only focus on regular season profit margins. For simplicity of the case ignore
post-season.
– Objective: Return Profit Margin to the level it was in 2009.
146
New York Shmankees
Framework Buckets:
• Since the prompt mentions that Baby Ruth is known for being a big spender and is
not interested in changing that, the interviewee should pick up on that and place a
greater focus on how to increase revenues. This is not a deal-breaker but can be a
differentiator.
Price
•
•
•
•
•
•
•
$/Ticket
•
Concession Prices
• Shifts in
products
purchased •
?
Media contracts
(What % do we get)
• Pricing
pressures?
• How are
we
•
affected by
cord
cutters?
Price of Memorabilia
How do our prices
compare to peers?
How have these
trended?
What is the elasticity
of our customers?
Quantity
Avg. Attendance
• How has
this
trended?
Total concession
items sold?
• Look at
this by
product
type and
margin
Total Memorabilia
items sold
• Have we
lost any
popular
players
that sold a
lot of
jerseys?
Macro
Costs
Revenue
Variable
Fixed
•
•
•
Stadium
• Leased?
Own?
Player contracts
• New
players
with high
salaries?
• Total
payroll
trends
Front office salaries
•
•
•
•
•
Hourly employees
Field maintenance
Player development
costs
Technology
Travel
• Hotels,
meal,
airplanes,
etc...
•
•
•
•
Less of an overall interest in
sports/baseball?
• Competing with TV shows
such as Netflix
Winning
• Are we as good as we
used to be?
Players
• Do we have a popular
player base?
Competition
• Are other local teams
performing better? Any
other new sports teams?
147
Exhibit #1
148
Interviewer guidance on Exhibit #1
Exhibit #1 Guidance:
Analysis:
Prompt for Exhibit 1:
• You had a jr. analyst without a lot of experience pull the
revenues and costs of the Shmankees over the past few
years. They are shown in this chart. What are your key
takeaways?
Guidance for Exhibit 1:
• The candidate should remember from the initial prompt
that the objective is to return the company to 2009
levels. If they did not already receive this provide it to
them at this time.
• If the interviewee goes down looking to reduce costs tell
them that Baby Ruth WILL not be known for being
cheap. His team is prestigious and he would be
offended if you made that recommendation.
• The candidate should clarify that these numbers are in
millions.
• The candidate should clarify which axis relates to what.
The right axis is revenue and the left axis is costs.
• Analysis for the exhibit to have 2 parts –
– Basic: The candidate should make the calculations
for profit margins in 2009 as a base/target. The
candidate should then move on to making the
calculations for 2012. Strong candidates will ignore
2010 and 2011. The candidate should then note
that there are two ways the company could achieve
their objective: either through increasing revenues
or decreasing costs. If not point them down this
direction.
– Second order insights: The candidate will use
rounding effectively. The candidate will also
remember that the team is not looking to cost-cut
from the initial prompt. The best candidates will
take this information and drive to the next step of
the case and the information they would like to
analyze next.
2009
Revenue
Costs
Profits
Profit Margin
400
360
40
10%
Profit Margin
2010
572
544
28
5%
2011
2012
628
597
31
5%
654
621
33
5%
149
Brainstorming
Prompt:
Analysis:
Prompt for Brainstorming:
• Your team has gotten on the same page
with Baby Ruth, and cost-cutting is out of
the picture. This leaves one option.
Increasing revenues. Baby Ruth has
asked you out to lunch at a popular NY
Pizza restaurant, Joe's Pizza – his
favorite. Your manager has asked you to
come up with some additional revenue
growth strategies to verbalize with Mr.
Ruth over lunch. What would you plan to
discuss?
• Analysis of brainstorming to have at least
2 parts/buckets. Sample answer shown
below. The candidate should conclude
their brainstorm by focusing on which one
they think is the most practical to achieve
the client's objective, and how they would
go about confirming that hypothesis.
• Game Day:
–
–
Increase ticket prices
Increase seating capacity (potential to add standing seats)
–
–
Increase concession prices
Expand concession offerings (deliver to seats)
• Non-Game Day:
– Memorabilia
•
Increase prices, limited editions, etc.
– Media Contracts
•
Any ability to renegotiate?
– Marketing
•
Player roadshows to increase excitement, commercials, social media
engagement, etc.
•
Try to increase fan base by reaching new countries (Japan, China)
and new US geographies
150
Public Math
Public Math Guidance:
Analysis:
Prompt for Public Math:
• The team has determined that they want to focus on
increasing ticket prices. The team currently charges $30 per
ticket which generates 2,762,100 tickets/yr. The team is
investigating increasing prices to $40 which will result in
2,511,000 total tickets sold in 2013, or to $50 which will result
in 2,385,450 total tickets sold in 2013. What is the optimal
pricing strategy for the Shmankees from a profit standpoint?
Guidance:
•
•
•
•
•
The interviewee should relate this information back to the overall
objective of trying to get back to a 10% profit margin.
They interviewee should ask for projected costs in 2013. Projected
costs are $650mm. Candidate should ignore any additional costs if
asked.
The interviewee should also recognize that tickets are just one
source of revenues for the team. Projected other revenues for 2013
are $600mm. A strong candidate will bring up the other revenue
streams and how a reduced fan base may affect those.
Encourage the candidate to round.
The candidate should recognize that increasing ticket prices will
result in the 10% profit margin. Once they recognize this push them
into the recommendation.
Ticket Prices (provide the average ticket price and the projected annual attendance to the candidate)
30
40
2,762,100
2,511,000
Solutions
2,800,000
2,500,000
Rounded Projected Annual Attendance (candidate should round or this case will suck)
Average Ticket Price
Projected Annual Attendance
Total ticket revenues using exact numbers (average ticket price * annual attendance)
Total ticket revenues using rounded numbers (average ticket price * annual attendance)
Additional revenues (to be provided - the candidate should recognize there are other revenue streams)
Total revenues using exact numbers
Total revenues using rounded numbers
Total costs (to be provided)
Profit (can ignore any other costs such as taxes, depreciation, etc…)
Profit Margin using exact numbers
Profit Margin using rounded numbers
$82,863,000
$84,000,000
$600,000,000
$682,863,000
$684,000,000
$650,000,000
$34,000,000
5%
5%
$100,440,000
$100,000,000
$600,000,000
$700,440,000
$700,000,000
$650,000,000
$50,000,000
7%
7%
50
2,385,450
2,400,000
$119,272,500
$120,000,000
$600,000,000
$719,272,500
$720,000,000
$650,000,000
$70,000,000
10%
10%
151
New York Shmankees
Recommendation
• You find yourself in the elevator with the CEO Baby Ruth, and his right hand man
Derek Heater. They both want to know how they are going to increase profit margins
so they can sign their star player Barry Blondes to a long-term contract. What do you
tell them?
Risks and Next Steps:
• The interviewee should recommend increasing ticket prices to $50 as it will result in
the target 10% profit margin.
• Risks: Long-term fans may switch to other forms of entertainment, it may look bad
from a PR standpoint with less fans in the stadium, the players may not be as
motivated with less fans, they may lose some fans long-term, etc.
• Next steps: Stress test our assumptions, analyze the other revenue streams to see if
can increase margins further, etc.
*Look for a concise, to the point recommendation*
152
Pencils & Backpacks
Pencils & Backpacks
Industry:
Public Sector
Case Type:
Strategy
Led by:
Interviewer
Quantitative Level: Difficult
Qualitative Level: Difficult
153
Behavioral Questions
Question 1:
• Describe a time you had to cultivate resilience.
Question 2:
• Tell me about an industry you follow. Why do you follow it? What are the trends?
154
Pencils & Backpacks
Prompt #1:
Our client, the governor of a southeastern state here in the US, is worried
about student performance in K-12 schools in the state. The state has 180
school districts and recently increased spending from $3.2B to $4.5B annually
on public education, but isn’t seeing the results it expected. She has hired us
to diagnose the problem and identify a solution.
Case Background:
– We are focused only on public schools. Private schools, magnet schools, and for
this exercise charter schools, can be ignored.
– The governor is up for re-election next year and she ran her original campaign on
a platform to reimagine education in the state.
– According to a recent publication, the state ranks 48th in student proficiency
– The governor’s goal is simply to increase student achievement.
155
Pencils & Backpacks
Framework Example Buckets:
Intra district
considerations
•
Socioeconomic
status of students
•
Condition of
facilities
•
Staffing of schools
•
Age of textbooks
Inter district
considerations
Political
considerations
•
Student demographics
relative to other
districts and states
•
What changes can
be easily
implemented?
•
Funding disparities
across districts
•
How does an
election year affect
proposals?
•
Key constituents in
certain districts
Framework Notes and Guidance:
Many frameworks will work. One possible way to think about this is within district considerations,
broader state considerations, and then the political considerations of implementation. Funding
should be mentioned somewhere, as the prompt indicates there was an increase in spend with no
results.
156
Exhibit #1
Proficiency in mathematics
1.000
0.900
0.800
0.713
0.700
0.600
0.550
0.500
0.400
0.300
0.200
0.100
0.000
National
Average
Proficiency
Student Demographics
Free and Reduced Lunch
English Language Learner
Special Education Students
School Funding
Average per student
Client
National Average
0.713
Client
0.55
0.3
0.1
0.2
0.5
0.4
0.3
$13,000
$13,000
157
Interviewer guidance on Exhibit #1
Exhibit #1 Guidance:
• Guidance for exhibit 1
– If asked, proficiency in mathematics is a good
proxy for overall student proficiency.
– “Free and Reduced Lunch” is the % of students
who qualify for free or reduced lunch in public
schools. This is typically used as a proxy for
poverty in a school district.
– ”English Language Learner” is the % of students
who are learning English as a second language.
Typically, these students require additional
resources in their schools so they can catch up to
peers.
– “Special education students” is the % of students
who have been diagnosed with a physical or
mental impairment. Schools are typically mandated
by the state and federal government to provide
these students specific additional resources.
Analysis:
- Candidate should notice that the state
seems to have more ”high needs” students
than the national average.
- Candidate should also notice that funding
levels appear to be the same, despite
increased student need in the client state –
this should prompt candidate to dive
deeper into funding as a solution
- Candidate should recognize that the state
ranks 48th or in the bottom 3 in student
proficiency
- No math done on this exhibit; however
these demographics will be important later
in the case.
158
Exhibit #2A
Proportion of high-needs students
0.80
0.75
District E
0.70
0.65
0.60
District F
0.55
0.50
District D
0.45
0.40
District A
0.35
0.30
0.25
0.20
Enrollment
District B
0.15
0.10
District C
0.05
District G
0.00
Math Proficiency
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
159
Exhibit #2B
Proportion of high-needs students
0.80
0.75
District E
0.70
0.65
0.60
District F
0.55
0.50
District D
0.45
0.40
District A
0.35
0.30
0.25
0.20
Total
spend
District B
0.15
0.10
District C
0.05
District G
0.00
Math Proficiency
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
160
Interviewer guidance on Exhibits
Exhibit #2 Guidance:
• Guidance for exhibit 2
• Provide exhibit #2A and 2B at same time
– If asked, proficiency in mathematics is a proxy for
overall student proficiency.
– These districts are a random sample of those in the
state.
– The purpose of Exhibit 2A is to indicate that there
may be a correlation between proficiency scores
and student need.
– Exhibit 2B shows the correlation between spending
and performance.
Analysis:
- No math done on this exhibit
- Candidate should notice that, in general,
districts with higher needs have less
proficiency than those with less need.
- Candidate should also notice that higher needs
districts tend to be larger. A good candidate will
question over-crowding in schools.
- Candidate should also notice that districts with
high proficiency are spending way more than
districts with low proficiency
-
-
A good candidate will recall that average spend per
student from Exhibit 1 is about $13,000 – so should
question why these districts are spending so much
more.
A good candidate should also question why districts are
spending so much more despite having smaller
enrollment.
- Candidate should investigate funding equity as
the next step.
161
Pencils & Backpacks
Exhibit 3 Prompt:
Note to interviewer: handover exhibit and then read prompt:
• Our client agrees with your observations and believes that there is an issue with how
funds are being distributed to districts in the state. Many states have moved to what’s
known as a “weighted student funding formula” – where districts receive a base amount of
funding per student, and additional funds for each student who falls into a category of
need (for example, special education, qualifying for free lunch, etc). These additional funds
are calculated as “weights” – multiplied to the base amount. Our client has two options
before her and wants our help deciding which to move forward with.
162
Exhibit #3
Option 1
Option 2
Proposed Allocation*
Proposed Allocation*
Student type
Base Multiplier
English Language Learners
0.1
Student type
Amount per student
Base
$31,980
Free & Reduced Price Lunch 0.2
Special Education
0.4
Base
$13,000
*No change anticipated in state budget for education
163
Interviewer guidance on Exhibits
Exhibit #3 Guidance:
• Candidate should aim to determine
the cost for each option
• Option 1 proposes a weighted
student funding model.
• Option 2 is a flat base amount per
student.
• Do not give until asked: Average
enrollment size per district is 800
• Candidate must use demographics
from Exhibit 1 to approximate
enrollment of special populations in the
average district
• Candidate should recall 180 districts from
initial prompt
• Rounding is not okay.
Analysis:
Option 1
Average
Enrollment
Total funding
(800 x client’s Additional $ Per student per district ( $
% from Exhibit (weight x
(base +
Per student x
Weight
1)
base)
additional) Enrollment)
English
Language
Learners
0.1
320
$1,300
$14,300
$4.576M
Free & Reduced
Price Lunch
0.2
400
$2,600
$15,600
$6.240M
Special
Education
0.4
240
$5,200
$18,200
$4.368M
1
800
-
Base
$10.400M
$25.584M
Total cost to
state
$25.58M
180 district
$4.605B
Deficit: $105M
Option 2: SAME deficit as option 1 ($31,980 x 800 students x
180 districts = $4.605B
164
Pencils & Backpacks
Brainstorm Prompt: Analysis:
Given that there is a deficit Brainstorm should consider pros & cons of each option, plus
either way – what other
challenges in implementing either. A good way to structure
considerations should the this could be in a matrix/table with details voiced over.
Governor keep in mind?
Pros
#1
Cons
Flexible
Complex
Schools serving students with most
needs will get most $$
May be politically difficult to pass
Iterations of weights over time
Weights are additive, helping those
most in need (an English language
learner who is also on free and
reduced lunch would get 30%
additional funding)
#2
Simple, easy to understand
Flat allocation may be inequitable
–districts who are already doing
fine will just get more $$
165
Pencils & Backpacks
Recommendation
Our client is walking in and she can’t wait to hear your recommendation!
34WL500
Risks and Next Steps:
Although both options have the same deficit, candidate should recommend option 1 as
it targets money more specifically to the students and districts who need it most.
• Risks:
– Political capital necessary to change these weights
– Some districts may be mad if they’re suddenly not getting as much money
• Next steps:
– Look into whether the weights make sense at their current level
– Identify other student subgroups that may need additional funding
– Study to what extent additional funds translate into additional results
166
Dreaming a Better Future (DBF)
Industry:
Non Profit
Case Type:
Strategy
Led by:
Interviewer
Quantitative Level: Medium
Qualitative Level: Difficult
167
Behavioral Questions
Question 1:
• Describe a time when you had to deal with difficult macro trends affecting your team,
and what approach you used to handle the situation.
Question 2:
• What do you think are the most critical elements of a business leader? How have you
used these elements to help others succeed?
168
Dreaming a Better Future (DBF)
Prompt #1:
Dreaming a Better Future (DBF) is an education and housing non - profit organization located in Venezuela. DBF operates one
university and 80 educational centers throughout Venezuela, which provide educational instruction to over 15,000 students in
K-12 schools and technical programs. DBF also provides housing for homeless children and, capacitation centers for lowincome families.
DBF has 2000 full-time employees divided between employees with minimum wages and employees with professional salaries.
Employees with minimum wages do work that does not require an educational degree to perform their duties (cleaning,
maintenance, kitchen, etc.). Employees with professional wages are mainly professors and administrative personnel.
DBF has 2 main sources of income: domestic and foreign. Domestic income mainly comes from donations, real estate
properties, Government aid and products produced by technical schools. Foreign income mainly comes from private donations
and contributions from other DBF divisions in different countries.
Venezuela has had hyperinflation of 10 million % a year, and therefore, Venezuela's currency has lost over 620,000% of its
value against the US dollar in the last 3 years. Employees are still making the same salaries, but the purchasing power of these
wages has decreased dramatically. Moreover, the Venezuelan government has imposed a “currency exchange control." This
means that all money from other countries must be exchanged into the Venezuelan currency by a government entity.
*Interviewer: Pause here and answer any clarifying questions
Question 1:
•
What are the main issues you would want to investigate in diagnosing the condition
of DBF in Venezuela?
Case Background:
•
DBF is a global organization but each country manages its strategies and finances independently.
•
DBF runs 80 locations spread in different states in Venezuela, and 1 in Curacao (Netherlands Islands). This information is crucial for a
future question.
169
Dreaming a Better Future (DBF)
Framework Example #1 Buckets:
Income
DBF
main
issues
Domestic Income
•
Declining over the years,
inflation, donations, sales of
products from tech school.
Foreign Income
•
Private donations, DBF
donations from other countries.
Employees
•
Low salaries, medical insurance
•
Currency exchange control,
infrastructure expenses,
scholarships.
Inflation
•
Long-term consequences?
Aging
•
Buildings, educational programs
Human Capital
•
Employees leaving Venezuela
Expenses
Others
Risks
Framework Notes and Guidance:
Many frameworks will work. One possible way is to tackle 3 main issues: Income, expenses, and
risks. Financial issues should be a highlight of the framework. The candidate must pinpoint the
challenges of dealing with a currency exchange control and inflation, and how they affect DBF
operational areas.
170
Dreaming a Better Future (DBF)
Framework Example #2 Buckets:
A good answer should consider:
• Human Capital Consideration
–
–
Regular employees’ salaries, benefits, low morale (because
inflation) , and retention.
• Finance considerations
–
–
–
Current expenses and increases relate to inflation
Limited sources of income in Venezuela, and from abroad.
New potential sources. Challenges of projecting potential
cash flows because uncertainty.
–
Curriculum out of date, and current students cannot find
proper paid jobs after graduation.
Low morale due to inflation. Most of the employees still
receive the same salaries, but inflation has destroyed the
buying power of the wages.
Limited human and technical resources to gather the right
data to create a financial plan
• Infrastructure considerations
–
Current facilities’ upgrades to supply currents needs.
Making the buildings more efficient.
A very good answer should consider:
• Risks
–
–
–
Financial: Finding money outside Venezuela and the
exchange currency control
Insecurity and high level of delinquency, and protection of
assets and personnel.
Quality of educational services they have provided over the
years has declined exponentially due to loss of
professionals.
• Long Term Strategy
171
Dreaming a Better Future (DBF)
Question 1 Brainstorm
Venezuelans have experienced a significant decline in the purchasing power of their wages
due to hyperinflation and currency devaluation. Over 70% of the total population earns $5
per month. Recent data highlights the following economic trends in Venezuela:
– Example: someone who works in the cleaning services (minimum salary) earns $5 a month while a university
professor with a PHD earns $20 a month.
– The cost of living in Venezuela for one person to cover his/her necessary needs is around $250 a month. Through
industry research we believe that a professional should earn $1000 a month.
DBF has been devastated by the macroeconomic situation in Venezuela. What are the most
important challenged facing DBF, and what possible solutions can you offer?
172
Interviewer guidance on Brainstorm
Brainstorm Guidance:
Analysis:
A good answer may include:
• There are many ways to answer this question;
however, the candidate should notice that, in general,
macroeconomics trends have a massive impact on
DBF’s finances and, therefore, the quality of service
that provides to employees and students.
• The value of domestic income has decreased drastically,
affecting DBF's operations, especially the availability
of professional talent in critical areas as administration and
education.
Issues related to quantity might include:
•
Income sources gap due to Venezuelan currency devaluation
•
Supply of teachers and education resources both at a national level
and a regional or local level
• A good candidate will hypothesize about the need to
explore DBF finances. (Next Exhibit)
Issues related to quality might include:
•
•
Quality of current educational curriculum, and how relevant this
curriculum is in helping students find a job that pays well after
graduation.
Quality of management employees and how they affect DBF's
capabilities to gather and analyze the right data to make long term
financial and strategic plans.
A Very Good answer might acknowledge
•
•
A need to consider DBF's broader financial objectives to cover a
decent salary for its employees and retain talent as a solution, such
as what are the primary sources of funding for DBF? Domestic and
international?
Low morale: among all employees because they are not able to
cover their financial needs with their salaries.
173
Dreaming a Better Future (DBF)
Question 2 Prompt: Brainstorming
•Note to interviewer: share exhibits 1 and 2 with the candidate.
Prompt:
The CFO has provided us with some financial information. What can you infer from this data?
NOTE FOR INTERVIEWER:
• All numbers have been exchanged into $US for analysis
• Although these numbers are in $US dollars, DBF must exchange all international donations into Venezuelan Currency in
a Government entity.
• No formal calculation is needed in this question. The candidate must talk about high-level trends.
Exhibit #2 Clarifications if the candidate asks
• Leases: Revenue coming for the real estate properties that DBF’s own and rent to private customers
• Products Sales: Revenue coming from products produced in technical educational institutions: printing & agricultural
products.
• Government aid: Donation from the Venezuelan Government to help with Students Scholarships
• Private pension: Some of DBF’s Full-time members have dual citizenship and can collect a pension from other
countries.
• Global DBF donations: Income coming from other DBF’s divisions in different countries
• Scholarships for students: DBF’s have over 15,000 students among all its institutions
• Infrastructure Maintenance: Average age of buildings is 50 years old
174
Exhibit #1
*$US Thousands
175
Exhibit #2
176
Interviewer guidance on Question #2
Question #2 Guidance:
Analysis:
• A good answer may include:
– Domestic donations have decreased significantly;
however, the candidate must highlight the effects of
inflation.
– Foreign donations have been steady during the years,
becoming the most significant part of DBF’s income.
– Expenses have decreased due to the lack of income.
– Expense trends will surpass income next year.
• A Very Good answer could include:
– The lack of strong management could make it more
difficult to gather and analyze data to increase
international donations.
– International donations are vital to keeping DBF’s
operations open.
– There are not significant indicators that inflation will
decline in Venezuela, meaning that domestic donations
will continually go down in the next years.
• No math is required on this question.
• There are many ways to answer this question;
however, the candidate should notice critical trends:
•
•
•
Domestic income is going down, there is no expectation of
going up.
The need to increase international donations is essential
The quality of the service provided by DBF is deteriorating.
• A good candidate will hypothesize the need to make
some calculations to forecast how much money
international donation must increase to cover all
expenses. (Next question)
177
Question #3
Question 3 Prompt:
Prompt
A part of our study, our consulting team has devised some solutions to retain full time employees in DBF. One possible
solution is to calculate how much money would be necessary to cover all expenses if DBF wants to pay its employees
enough to cover Venezuela’s cost of living.
Assuming that the rest of the expenses remain the same, how much money would DBF need to collect to pay a decent
salary for all its employees to cover the cost of living in Venzuela?
NOTE FOR INTERVIEWER:
-
-
Candidate should ask for the percentage of employees that are "professionals" and "minimum salary employees".
- Minimum salary employees: 50%
- Professional employees: 50%
A very good candidate should notice that the following information has been given in previous prompts, nonetheless,
these are important key numbers, and should be provided.
• Total # of DBF’s employees: 2000
• Current minimum salary: $5 a month
ideal minimum salary: $250 a month
• Current professional salary: $20 a month
Ideal professional salary: $1000 a month
178
Interviewer guidance on Question #3
Question #3 Guidance:
• Total increase: $15M
• Quantity: 2000 employees * 0.5 = 1000 employees
• Current Salary (Monthly):
–
–
$5 * 1000 = $5000
$20 * 1000 = $20000
• Current Salary (Annually)
–
$250,000 * 12 = 3 M
Potential Salary (Monthly):
- $250 * 1000 = $250,000
- $1000 * 1000 = $1,000,000
Potential Salary (Annually)
- $1,250,000 * 12 = $15,000,000
Analysis:
There are many ways to solve this question. A good candidate most notice that $15M is a significant increase compared to the
current amount.
A very good candidate could present different solutions to address this issue:
• Create a plan to increase salaries gradually each year.
• Hire 1 or 2 management experts that could collect data and prepare a marketing strategy to gain more international
donations from DBF global and other private companies.
• Manage all financial transactions through Curacao (DBF's only operation outside Venezuela) to avoid exchanging foreign
donations into Venezuelan Currency.
• Some Risks:
– Paying decent salaries to all employees could put them at risks due to high levels of vandalism in Venezuela
– Paying higher salaries to all employees can alert the Venezuelan Government and create additional legal procedures
to DBF, like taking out its status as non-profit organization and charge taxes.
179
Dreaming a Better Future (DBF)
Recommendation
The CEO has asked you to summarize what we have done today and make a
recommendation.
Guidance:
• There are many ways to answer this question. One general way to structure a recommendation is to suggest a plan that
addressed short, mid and long terms issues
• BLUF: DBF should hire a team that could gather data and devise a marketing strategy to increase donations from other
countries.
1. Total increase of income: 15M to increase salaries for all employees
2. Using this new income, DBF can increase salaries so employees won’t need to leave Venezuela.
3. Find a way to utilize this tech infrastructure to generate more income.
• Risks:
1. Increasing donations from others could take a long time.
2. Other countries could experience economic downturn and become unreliable as a source of income.
180
Queen Bae
Industry:
CPG
Case Type:
Growth strategy
Led by:
Interviewee
Quantitative Level: Medium
Qualitative Level: Medium
181
Behavioral Questions
Question 1:
• Discuss a time you had a conflict with a superior and how you resolved it.
Question 2:
• Tell me about a time you failed and what you learned from that situation.
182
Queen Bae
Prompt #1:
• Your client is Royal Honey, a manufacturer of premium organic honey that purchases
its raw honey from a single farm in the Midwest. Despite record-high demand for
high-quality organic honey nationwide, Royal Honey has experienced a gradual
decline in profitability in recent years. Its CEO has come to you to determine why the
company’s financial state has rapidly deteriorated over the past four years and to
develop a turnaround strategy for the company.
Case Background:
• Overall Goal - Company wants to return to FY16 profitability in two years
• Competition/Market
- Declining revenue and profitability for all major competitors, but not to the same
extent as Royal Honey.
• Product
- Royal Honey sells only one product: organic golden honey
• Value Chain/Revenue Information
- Royal Honey purchases raw honey from suppliers and manufactures organic
golden honey.
- It sells to domestic high-end grocery stores (e.g., Whole Foods) nationwide
183
Queen Bae
Framework Buckets:
• Strong framework should focus on honey manufacturer value-chain. Possible
Buckets include:
–
–
–
–
Raw Honey Procurement
Honey Manufacturing/Processing (Operations)
Warehousing/Storage
Distribution/Sales
• Strong frameworks can also include:
– Honey market analyses
• New market entrants
• Shift of honey demand from food product to consumer goods (e.g., chapstick)
– Revenue/Cost analysis
• Price/volume changes
– Environmental/regulatory factors
• Honeybee population decline
• FDA considerations
184
Exhibit #1
250
210
200
200
190
180
150
120
120
30
120
120
30
25
25
20
20
20
20
10
FY16
10
FY17
10
FY18
10
FY19
100
50
0
Revenue
Cost of goods
Sales and marketing
Overhead
Other
185
Interviewer guidance on Exhibits 1
Exhibit #1 Guidance:
• Exhibit 1 represents Royal Honey’s
revenue and expenses ($ in millions) over
past 4 years.
• If candidate asks for more information on
revenue, state that the Royal Honey
selling price has remained consistent at
$10/lb.
Analysis:
• Candidate should draw the following
insights from Exhibit 1:
– Revenues have declined $30M and profits $25M
over past four years
– Expenses have remained relatively stable on a
dollar basis but significantly increased as a percent
of revenue
– Case Objective is to return to FY16 profit ($30M),
thus need to increase profit $25M by FY21
• Strong candidate should realize that:
• If candidate askes, mention cost of goods
includes raw honey, processing,
manufacturing, bottling, labeling.
• Once candidate requests additional
information relating to sales volume or
cost of goods, move to Exhibit 2.
– Domestic market demand is growing nationwide
but Royal Honey revenue is declining
– Given that price has remained stable, Royal Honey
faces declining sales volumes and increasing cost
of goods dilemmas
• Candidate should want more details on
the increased cost of goods and declining
sales volume
186
Exhibit #2
Northeast
Southeast
Midwest
Southwest
West
Total Domestic Supply of Raw Honey
Value of production ($ in millions)
1,200
1,100
1,000
900
800
700
600
500
400
300
200
100
0
FY16
FY17
FY18
FY19
187
Interviewer guidance on Exhibits 2
Exhibit #2 Guidance:
• Exhibit 2 represents total domestic supply
of raw honey by region over the past 4
years
• Candidate should recognize that Honey
Production has been declining
• If asked for more information on the
decline in honey production, mention that
bee populations have been declining
nationwide and that populations in the
Midwest have been particularly impacted
• Once candidate realizes that supply
constraints are driving up the cost of raw
honey AND/OR that the company cannot
meet demand, move onto brainstorm
Analysis:
• Candidate should draw the following
insights from Exhibit 2:
– Domestic honey production has decreased by
~$200M over the past four years
– The Midwest has been impacted the most,
declining $120M (from $620M to $500M)
– Decline in honey production has led to increased
prices of raw honey
• Strong candidate should realize that:
– Since Royal Honey sources its honey from a single
farm in the Midwest, it is likely facing supply
constraints
– Therefore, Royal Honey is unable to meet demand
for its products and is missing out on millions of
dollars of sales
• Candidate should want to explore
additional sources of honey beyond the
United States
188
Brainstorming
Prompt:
• Based on your request, our client has
presented us with some additional
information. For the past few years,
honeybee populations in the United
States have been declining. This has
resulted in limited availability of raw honey
as well as rising prices. This trend has
especially impacted Royal Honey as its
Midwest supplier has declining raw honey
production and as a result has increased
its price annually.
• Given this information, what should our
client consider to increase profitability?
• Once candidate wants to explore
additional raw honey procurement
sources, move to next Exhibit
Analysis:
• The interviewer should mention several factors
but should primarily focus on expanding Royal
Honey’s procurement of raw honey. Ideas
include:
– Expand procurement beyond single Midwest farm
to source raw honey internationally (e.g., Mexico,
South America)
– Invest in R&D to develop animal-free honey
product
– Invest in R&D to develop sustainable
practices/technologies that better preserve beehive
populations
– Raise price of honey sold at stores
– Change formulaic mixture of Royal Honey to utilize
less raw honey, thus expanding volume
– Vertically integrate or partner internationally
• Strong candidates will also point out the
difficulties of:
–
–
–
–
New supply agreements
International supply chains and add’l costs
International taxes, trade agreements, tariffs
Potential impact of FDA regulations
189
Exhibit #3
Supplier
Location
Available raw
honey supply
Raw Honey Cost
Other Cost
Considerations*
Current
20M pounds
$7.25 / lb
$2.50 / lb
Mexico
10M pounds
$6.00 / lb
$3.00 / lb
Brazil
10M pounds
$4.50 / lb
$5.00 / lb
S. Africa
5M pounds
$3.50 / lb
$4.50 / lb
China
5M pounds
$3.50 / lb
$4.50 / lb
*Other cost considerations includes all additional costs beyond raw honey necessary to sell finished goods (e.g.,
transportation, manufacturing, SG&A, etc.).
Interviewer guidance on Exhibits 3
Exhibit #3 Prompt:
• Given our recommendation to expand raw
honey procurement, our client has
provided us with a list of potential
international raw honey suppliers as well
as its current supplier price.
• The company estimates that there will be
demand for 30M pounds for Royal Honey
nationwide in FY21. Assuming a sale
price of $10 per pound, what is the
optimal raw honey procurement strategy
for Royal Honey to maximize profit?
Analysis:
• Candidate should draw the following
insights from Exhibit 3:
– Prioritize cheapest sourcing first: 1) China & S.
Africa 2) Mexico 3) Brazil 4) Current
– Profit per pound by Country:
• China/S. Africa: $10 – $8 = $2/lb
• Mexico = $10 - $9 = $1/lb
• Brazil = $10 - $9.50 = $0.50/lb
• Current = $10 – $9.75 = $0.25/lb
– Answer (not considering minimum
purchase order):
•
(5M x $2) + (5M x $2) + (10M x $1) + (10M x
$0.5) = $35M profit
• Strong candidate should realize that:
• Only if asked for current contract
terms, mention that Royal Honey has
minimal purchase order of 10M pounds
annually with its Midwest supplier.
– Current sourcing contract requires purchase of
10M pounds of raw honey annually
– (5M x $2) + (5M x $2) + (10M x $1) + (10M x
$0.25) = $32.5M profit
191
Queen Bae
Recommendation
• The CEO has just walked in the room. What is your recommendation moving
forward?
Risks and Next Steps:
• Recommend implementing expanding procurement internationally which will exceed
goal of $30M of net income in FY21 by 8.3% ($2.5M).
• Risks include establishing new international supply chains, FDA regulation
compliance, competitor response, changing customer demand, continued decline of
honeybee populations, and quality control of new suppliers.
• Next steps are to perform due diligence on new suppliers, establish shipping
contracts, and expand production capacity to the extent necessary.
192
Nautical Nonsense
Industry:
Case Type:
Led by:
Quantitative Level:
Qualitative Level:
Food / Entertainment
M&A
Interviewer
Easy
Medium
193
Behavioral Questions
Question 1:
• Tell me about a time that you encountered conflict on a team. How did you handle it?
Question 2:
• What to hope to learn most during your internship / full-time position?
194
Nautical Nonsense
Prompt #1:
• Mr. Krabs, the owner of the restaurant “The Krunchy Krab”, has a predicament. The Krunchy Krab has
reigned as king of the Martini Bottom casual restaurant market for quite some time, however, their
primary competitor, “The Clam Bucket”, which is run by Mr. Krabs’ arch nemesis, Plankton, has been
rapidly stealing market share from the Krunchy Krab for the last few years. Krabs has hired your
consulting firm to figure out how to solidify its place as the dominant player in the market. Last year, the
Krunchy Krab brought in $500K in revenue. What should Mr. Krabs do to improve sales this year?
Case Background:
Additional Information to give the candidate if asked:
• Client/Company
– The Krunchy Krab currently sells only 1 product, the “Krunchy Patty”, which is a 100% lean beef burger
– Last year, the Clam Bucket brought in $400K in revenue
• Market
– The Krunchy Krab competes in the casual restaurant market in Martini Bottom which is a $1.5M market located just
outside the U.S.
– The casual restaurant market is fairly concentrated in Martini Bottom – in addition to the Clam Bucket and the
Krunchy Krab, there are a few other smaller competitors
– We don’t have any information as to why the Clam Bucket has been stealing market share at the moment
• Goal
– Mr. Krabs is eager for retirement, so he wants quick results. The primary objective is for the Krunchy Krab to
increase annual sales to $750K THIS year (a 50% share of last year’s total market size).
195
Framework
Framework Buckets:
• Suggested buckets for a framework for this case include:
– Organic Growth
– Same Products, Same Markets
– Improve the customer experience
– Build a referral or rewards program / initiative
– Hire more staff to accommodate customers in peak times
– Increase hours of operation
– Increase / decrease prices
– Same Products, New Markets
– Increase marketing efforts
– Expand into new markets / regions geographically
– New Products, New Markets
• Introduce a new product line (e.g. hot dogs, fries, veggie burgers)
– Inorganic Growth
• Acquire a competitor to quickly gain market share and generate synergies
Interviewer Guidance
• Interviewee should stray away from a profitability framework (revenue and costs) and
instead focus on ways to increase market share (improving sales)
• Interviewer should point to the acquisition option as the best path considering the
short term objectives of Mr. Krabs. If they do not recognize this, continue to nudge
the interviewee in the direction of inorganic growth. Next, show them exhibit 1.
196
Exhibit #1
Mr. Krabs agrees that with his short-term goals in mind, an acquisition is the best
route to take. Which of the following restaurant(s) would you recommend that the
Krunchy Krab acquire in order to meet those goals?
Restaurant
Price
Annual Rev.
Synergy Potential
Sandy’s Steaks
$500K
$250K
LOW
Squiddy’s Sandwiches
$375K
$125K
LOW / MEDIUM
Flying Dutchman Fries
$225K
$150K
HIGH
Patrick’s Pizza
$75K
$75K
MEDIUM
Note: Mr. Krabs estimates that the Krunchy Krab has $400K in its capital budget which they are willing to spend toward M&A activity
197
Interviewer guidance on Exhibit 1
Exhibit #1 Guidance:
Analysis:
• If the interviewee forgot the
original goal or never asked,
remind them that Mr. Krabs’
objective is to reach $750K in
sales (so they need $250K
additional revenue from their
current annual revenue of $500K)
• If the interviewee asks, clarify
that they are welcome to choose
more than 1 option
• The interviewee should recognize that NONE of
the combinations of acquisitions will both meet
the $250K revenue addition and stay under the
$400K capital budget
• They should, however, recognize that the
combination of a “Flying Dutchmen Fries” and
Patrick’s Pizza” combination, will get them
closest to the $250K revenue needed ($225K
total) and within the capital budget allotted
• The interviewee might start looking at the Price /
Annual Rev. ratios. While not necessary, this will
also identify the best two acquisition options
• Additionally, the interviewee should recognize
that each of these 2 restaurants have medium or
high synergy potential, thus, the interviewer
should drive toward brainstorming value creation
strategies between the Krunchy Krab and the
newly acquired restaurants in order to make up
for the remaining $25K. If they don’t, push them
to do so.
198
Brainstorm 1
Prompt:
Analysis:
• What strategies can the Mr. Krabs use to
create revenue synergies between the
Krunchy Krab, Flying Dutchman Fries,
and Patrick’s Pizza?
• Ideas may include:
• Price
– Selling products in combination deals / bundling
– Using shared marketing channels through
improved brand recognition
– Introducing new, complimentary products at each
restaurant
• Volume
– Leveraging increased pricing power to raise
product prices
– Running promotions / discounts
– Introducing a rewards program for visits /
purchases
Interviewer Guidance
• After the interviewee has thought through several potential sources of revenue
synergies, show them exhibit 2
199
Exhibit 2
Mr. Krabs agrees that there is high revenue synergy potential between the three
restaurants which could help the Krunchy Krab reach his sales target, but the short
timeline necessitates the selection of only one initiative to focus on. Which of the
following initiatives would you recommend in order to capture the necessary remaining
revenue?
1000
900
800
700
600
500
400
300
200
100
0
800
20%
650
500
4%
100
Krunchy Patty /
Dutchman Fries
Combo
Patrick Pizza
Saturday
Special
4%
"Bubble Ads"
Promotional
Plan
2%
Krab Kard
Rewards
Program
30
27
24
21
18
15
12
9
6
3
0
Expected % of Revenue Captured
Potential Annual Revenues ($000s)
Potential Strategic Initiatives
Potential Annual Revenues Created
Expected % of Revenue Captured This Year
200
Interviewer guidance on Exhibit 2
Exhibit #1 Guidance:
Analysis:
• The interviewee should recognize
that the amount of revenue
synergies necessary in order to
reach the sales target is $25K
($225K + $25K = $250K).
Remind them of this if they
forget.
• The interviewee should begin calculating the
expected revenue from each option, either by
writing out their calculations or talking through
their logic.
• Ultimately, the interviewee should determine that
the “Bubble Ads” promotion (4% x $650K =
$26K) is the best initiative choice as it helps the
Krunchy Krab reach Mr. Krabs’ sales target.
201
Recommendation
Mr. Krabs had to step out, but the GM, SpongeRob, just walked in the room.
Let’s hear your final recommendation for the Krunchy Krab!
Recommendation
• Given Mr. Krabs’ short-term growth goals, the Krunchy Krab should:
– Focus on inorganic growth by acquiring Flying Dutchman Fries and Patrick’s Pizza to add $225K in
additional sales
– Capture the remaining $25K by launching a “Bubble Ads” shared billboards promotional initiative for
the combined restaurant group
Risks and Next Steps:
• Risks:
– Mergers don’t always result in synergies, so they still might fall short of Mr. Krabs’ target sales goal,
especially within such a short timeline
– Competitive response from the Clam Bucket – might respond by acquiring another restaurant or
growing organically
– Cultural issues between the restaurants
– Cannibalization – might just steal customers from one another and not actually add new sales
– The acquired restaurants might be reddened with debt – lack of proper due diligence
– Focusing on short-term market share gain might not lead to long-term prosperity
• Next Steps:
– Initiate actions toward negotiating the deal and beginning integration activities
– Contact marketing to start promotional planning for the billboard plan
202
Evaluation Criteria
Candidate Level
Assessment
Average Candidate
The interviewee creates a profitability framework and/or
fails to recognize that inorganic growth is the best
solution for short-term growth in market share.
Good Candidate
The interviewee correctly identifies that this case is
about growing sales and that an acquisition might be a
good strategy, but they struggle to get through the math
in the exhibits and/or require prodding to analyze
potential synergies to reach the target sales goal.
Excellent Candidate
The interviewee confidently analyzes both inorganic
and organic solutions to increase sales, breezes
through the exhibits, and provides a strong
recommendation that ties together the acquisition
strategy and synergy creation which leads to reaching
the $750K sales target.
203
High Strung
Industry:
Case Type:
Led by:
Quantitative Level:
Qualitative Level:
Entertainment
Profitability
Interviewee
Medium
Difficult
204
Behavioral Questions
Question 1:
• Discuss your most difficult ethical decision and how you arrived at a conclusion.
Question 2:
• Tell me about a time when you had to reconcile being right with being a good
teammate.
205
High Strung
Prompt #1:
• The Carolina Symphony Orchestra is in trouble. Despite recently doubling down on
marketing & advertising, the orchestra’s profitability has consistently dropped for the
last several years.
• The executive board has enlisted your help to diagnose the cause of this nosedive
and reverse it.
• CSO must find a sustainable method to generate net-new profits over the next two
years to hit its strategic growth goals.
Case Background [provide if prompted]:
– Industry: the CSO is the only professional symphony in the area, but competes with
other high-caliber entertainment providers; it plays mainly classical music but does
incorporate some popular music
– Product: the CSO provides a range of offerings including group, single, and
subscription tickets in addition to community education & engagement eventsand
public concerts
– Value Chain/Revenue: revenue is split into three categories: earned (ticket &
concession sales), contributed (donations, grants), and investment (securities)
– Audience: Main segment consists of older, wealthier consumers, although there is a
burgeoning interest in the orchestra among younger subscribers.
– Overall goal: incremental profit of $3M over next two years
206
High Strung
Framework Buckets:
• Revenue Benchmarking
• Revenue by type:
• Earned: # of tickets & price, types of tickets (single, subscription),
• Contributed: Size of average donation & frequencyof donations
• Investment:Types of holdings (stocks/bonds/funds) & portfolio distribution
• Cost Benchmarking
• Fixed: facilities overhead, performer salaries,insurance
• Variable: printed materials, concessions,booking fees
• Customer Profiling
• Distribution of ticket holders by age, income level, visit frequency (etc.)
• Brand awareness & product attractiveness to local customers (survey data)
• Competitive Analysis
• % market share of local live entertainment market
• Price benchmarking vs. similar live entertainment offerings
• Industry best practices vs. current strategy
207
Exhibit #1a
Carolina Symphony Orchestra: Revenue & Cost (2017-2019)
($M)
12
10
8
6
4
2
0
2017
2018
Costs
Contributed Revenue
Earned Revenue
2019
Investment Revenue
208
Exhibit #1b
Ticket Sales Data (2017-2019)
2017
2018
2019
# Tickets
Sold
Avg. Ticket Price
($)
# Tickets
Sold
Avg. Ticket Price
($)
# Tickets
Sold
Avg. Ticket Price
($)
Single Attendance
42,000
50
36,000
65
28,000
70
Premium Subscription
30,000
110
26,000
100
24,000
90
Group
14,500
50
14,000
50
14,000
45
209
Interviewer guidance on Exhibits
Exhibit #1a&b Guidance:
Analysis:
Exhibit 1a
• The candidate should identify right away that this
case does not focus on cost issues
• If necessary, prompt candidate to identify main
driver of revenue decline (major decreases YOY in
earned revenue)
• Provide Exhibit 1b only when candidate asks for
more granular data showing price/volume
breakdown for earned revenue
Exhibit 1b
• Good candidates will immediately eliminate group
ticket sales as a driver
• Strong candidates will notice that they must
calculate the overall losses/gains for single
attendance & premium subscription revenues to
determine the primary driver
• Push candidate to think in terms of revenue impact
if they become fixated on comparing by # of tickets
sold only
• Once the candidate has identified subscription
tickets as the main driver, prompt the candidate for
a summary (if not given independently) and
introduce the following brainstorm
Exhibit 1a
• Basic analysis: operating change only slightly year
to year ($10.6M $11.2M)
• Second-order insights: Even though investment
revenue is decreasing overall, it does so at a slower
rate than earned revenue (and with less overall
impact)
Exhibit 1b
• Basic analysis: both single attendance & premium
subscription ticket sales are declining YOY
Ø Single attendance (# tix * average price):
• $2.1M → $2.34M → $1.96M (Total Δ = -$140K)
Ø Premium Subscription (# tix * average price):
• $3.3M → $2.6M → $2.16M (Total Δ = -$1.14M)
• Second-order insights:
• Subscription holders are the single largest revenuegenerating customer segment
• The price for subscription tickets and the number
sold are both dropping: this could indicate either
adverse price signaling or management fixation on
pricing when revenue decline is caused by
something else
210
Brainstorming
Prompt:
Analysis:
• “After reviewing your calculations, the board
agrees that the subscription ticket holder
category is mainly to blame for the eroding
bottom line.”
• “Based on this trend, what are some levers
that the board could pull to boost the
revenue generated by its subscriptionholding patrons?”
Guidance:
• After the brainstorm, provide exhibit 2a ifthe
candidate independently identified
subscriber preferences and/or asked for
information regarding purchasing habits &
preferences among subscription holders. If
the candidate struggles, prompt them to
consider what might be driving the
downward trend in subscription-based
revenue and steer them toward subscriber
preferences
• Good candidates will have noticed from the prior
exhibit that management has consistently
decreased subscription ticket prices and will
avoid price slashing tactics
• General buckets:
– Understand consumer base for subscription
product - demographic of the population
(families, age range, income level)
– Survey subscription holders to determine the
most important aspects determining
purchasing behavior (e.g. programming, special
guest artists)
– Targeted marketing (e.g. social media, direct
mail) to recapture business of former
subscription holders
– Subscription benefit review: add/expand
concert offerings, include perks (e.g. lounge
access, soloist meet & greets)
– Price increase to reverse potential negative
price signaling (decreased prices may have
indicated to customers an initial overvaluing of
subscription product)
211
Exhibit #2a
Subscriber Preferences by Segment
Musical Selection
# of Concerts per Season
Quality of Guest Artists
Quality of Orchestra
Programming Variety
Quality of Venue
2019-2020
Subscriber Distribution
5+ Years
31%
1-5 Years
18%
<1 Year
51%
212
Exhibit #2b
Improving Orchestra Quality: Options
Option #1:
Option #2:
Hire Renowned Conductor
Increase Principal Chair* Salaries
($M)
($M)
Cost / Year
1.5
0.5
Expected Revenue (Yr. 1)
3.0
2.0
Expected Revenue (Yr. 2)
3.5
2.5
*Note: Principal chairs are the leader for each orchestra section and are generally the highest-quality musicians in the ensemble.
124
Interviewer guidance on Exhibits
Exhibit #1a&b Guidance:
Analysis:
Exhibit 2a
• Each Harvey ball shows the percentage of each
segment identifying the specific characteristic as a
key driver of their patronage (to the nearest 25%)
• Good candidates will focus on “Quality of
Orchestra” & “Quality of Guest Artists,” while
excellent candidates will hone in on Orchestra
Quality since it is mathematically the most valued
(see calculations at right)
• If the candidate struggles to identify Orchestra
Quality, prompt them to consider qualitatively what
new subscribers (technically the majority) want
Exhibit 2b
• Once the candidate has identified orchestra quality,
provide this exhibit, which shows financial
information for two options for improving orchestra
quality as identified by the board (the candidate
should recognize that this information will be
required for an NPV calculation)
• If necessary, remind the candidate that the
symphony needs $3M in profit over the next two
years; provide an interest rate of 10%
• Good candidates will recognize that the options are
equivalent and require only one NPV calculation;
excellent candidates will identify a clear choice and
justify their position
Exhibit 2a
• Basic analysis: “Quality of Guest Artists” & “Quality
of Orchestra” are the two obvious drivers based on
the Harvey ball information alone
• Second-order insights: ”Quality of Orchestra” is the
more impactful factor than “Quality of Guest Artists”
– Guest Artists: (1*31)+(0.5*18)+(0.5*51) = 65.5
– Orchestra: (1*31)+(0.25*18)+(0.75*51) = 73.75
Exhibit 2b
• Basic analysis: Both options provide over $3M in
NPV to the bottom line:
– Conductor:
– Endowed Chairs:
• Second-order insights: Both options are defensible from
qualitative perspectives. For example, a conductor might
in the near term establish more brand equity for the
symphony, while increasing salaries for the best
members of the orchestra attracts more stable
investments over the long term
125
Brainstorming (optional)
Prompt:
Analysis (Example Answers):
• If the candidate independently identifies
an optimal answer, prompt them to
identify pros and cons of each option
• Option #1: Conductor
– Pros
• A well-known name immediately provides a boost of
visibility to the orchestra among target audiences
• Hiring a famous conductor will likely inspire the orchestra
members to a higher standard of musicianship
– Cons
• The search for a well-known conductor will likely be very
costly and time-consuming
• The musical community may reject the orchestra’s choice
of conductor
• Option #2: Principal Chair Salaries
– Pros
• Higher salaries motivate more skilled musicians to
audition and retain positions
• Greater control over potential expense and contract
structuring
– Cons
• The orchestra may already have best-in-class principal
chair musicians (less senior positions would benefit most
from raises)
• Increasing salaries for one group of musicians may have a
domino effect on others
215
Recommendation
Recommendation
• “The symphony’s executive board is meeting this afternoon and wants to know your
recommendation for meeting their expressed sustainability goal.”
• Good candidates will begin by clearly stating their preferred option and why it fulfills
the goal of the client (meets $3M profit threshold in a 2 year time frame)
• Excellent candidates will provide qualifying information to support their choice over
the other alternative
Risks and Next Steps:
• Risks for each option should include at least some of the cons mentioned from the
prior brainstorm (if completed). Both options suffer from the risk that the projected
financial figures may be inaccurate; good candidates will recognize the link between
this risk and the varied distribution of preferences across subscriber segments.
• Next steps for Option #1 (conductor): the orchestra might begin by formally
announcing its search while hiring an industry headhunter to lead a targeted search.
For Option #2 (salaries): the orchestra might assess all of the principal chair salaries
and review past audition & performance information to determine how the increases
should be distributed.
– Both options would benefit from an internal benchmarking process to verify the
validity of projected figures
216
Evaluation Criteria
Candidate Level
Assessment
Average Candidate
Will identify the need to dive into either cost or revenue;
requires some guidance on driving case forward; may
struggle with exhibit #1b calculations but deliver
directionally correct analyses
Good Candidate
Asks specifically for information that demonstrates whether
cost or revenue is to blame; constructs a MECE framework;
considers all information on exhibit; may struggle with
driving the case on their own
Excellent Candidate
Delivers a well-reasoned hypothesis for the decrease in
profitability; drives the case and shows independence;
quickly absorbs information in exhibits and shows
confidence with calculations; recognizes mathematical
shortcuts (e.g. Exhibit #2b); gives succinct recommendation
that ties back to the ultimate goal of $3M over next two
years
217
Pencils & Backpacks
Sardine Airlines
Industry:
Transportation
Case Type:
Strategy
Led by:
Interviewer
Quantitative Level: Medium
Qualitative Level: Medium
218
Behavioral Questions
Question 1:
• What in your career has prepared you for consulting?
Question 2:
• What is the best reason that I should hire you?
219
Sardine Airlines
Prompt #1:
• Sardine Airlines is an ultra low-cost carrier with flights throughout the continental
United States. They have hub airports in Oakland, California; Tulsa, Oklahoma, and
Hartford, Connecticut. Sardine Airlines is facing increased pressure from other low
cost carriers such as Cattle Car Air and Soul Airlines. Sardine Airlines has faced
declining profit for the past year. Sardine’s CEO, Penny McPincher, has asked your
team for advice on how to reverse the profitability trend.
Interviewer Guidance:
• Additional information to give the candidate if asked:
– Sardine Airlines competes primarily on having the lowest cost fares and offering
minimal service
– Due to its business model Sardine Airlines has a culture of cost savings that can
be passed to the customer
– Sardine Airlines is trying to grow profit margin to 20% (INTERVIEWER
GUIDANCE: net income/total revenue)
– If the interviewee asks about revenues/costs give them Exhibit 1, Statement of
Operations
220
Exhibit #1 – Statement of Operations
Unaudited, in millions
2015
2014
2013
2012
Operating Revenue
Passenger
$
1,088
$
1,092
$
908
$
793
Non-ticket
$
1,055
$
968
$
862
$
769
$
2,143
$
2,060
Fuel
$
589
$
583
$
625
$
718
Landing Fees
$
383
$
370
$
332
$
296
Maintenance
$
214
$
164
$
106
$
67
SG&A
$
428
$
309
$
185
$
171
$
225
Total Revenue
$ 1,770
$ 1,562
Operating Expense
$
Special Charges
$
-
$
-
NI Pre Tax
$
529
$
634
$
297
$
310
Taxes
$
158
$
189
$
88
$
92
Net Income
$
371
$
445
$
209
$
218
221
Exhibit #1 – INTERVIEWER GUIDE
2015
Operating Revenue
2014
2013
2012
YOY CHANGE IN REVENUES FROM PRIOR YEAR
Passenger
-.37%
20.26%
14.47%
Non-ticket
9%
12%
12%
Total Revenue
4%
16%
13%
Operating Expense
Fuel
EXPENSES/NI AS A PERCENT OF TOTAL REVENUE
27%
28%
35%
46%
Landing Fees
18%
18%
19%
19%
Maintenance
10%
8%
6%
4%
SG&A
20%
15%
11%
11%
Special Charges
0%
0%
13%
0%
NI Pre Tax
25%
31%
17%
20%
Taxes
30%
30%
30%
30%
Net Income
17%
21%
12%
14%
222
Interviewer guidance on
Exhibit 1
Exhibit #1 Guidance:
Analysis:
• The exhibit is designed to have too much
data to synthesize in a reasonable
amount of time
• Additional information:
• The candidate should keep in mind the
20% profit margin that the CEO wants,
which given the NI, is $57.6M
• The candidate should see that revenue
has continued to grow, albeit slower than
in the past
• The candidate should see that SG&A as a
proportion of revenue increased from 15%
to 20% and is the primary driver of
declining profit – once identified give them
Exhibit 2
• If the candidate identifies maintenance
costs proportionately increasing give them
Exhibit 3 – if exhibit 3 never comes up,
you do not need to push it to the
candidate
– Non ticket revenue are things like bag fees,
food, beverages, customer service charges,
paper tickets, etc.
– Landing fees are what Sardine Airlines pays
to use airports
223
Exhibit #2 – SG&A
Breakdown
428
Marketing
86
309
62
Salaries
171
170
Rent
86
Customer Service
64
Miscellaneous
21
46
19
2015
12
2014
In $M
224
Interviewer guidance on
Exhibit 2
Exhibit #1 Guidance:
Analysis:
• The percent of total SG&A and absolute
increases are below
• The candidate should identify that 3 areas
are driving growth in SG&A: Marketing,
Rent, and Customer Service
• The other areas are not large enough
increases to focus on to get to the $57.6M
profit increase the CEO is looking to
achieve
428
309
Marketing
20%
20%
Salaries
40%
55%
Rent
20%
Customer Service
Miscellaneous
15%
5%
2015
15%
6%
4%
2014
Marketing
Salaries
Rent
Customer Service
Miscellaneous
YoY Change
$
24
$
1
$
40
$
52
$
2
225
Exhibit #3 – Sardine
Maintenance
TO: Penny McPincher, CEO of Sardine Airlines
FROM: Michael Huerta, Administrator of the Federal Aviation Administration
DATE: June 30th, 2015
SUBJECT: Sardine Airlines Maintenance Record
This memorandum is to notify that as of today, Sardine Airlines is no longer
under maintenance supervision from the Federal Aviation Administration (FAA).
The FAA believes the improved maintenance program no longer warrants FAA
intervention.
Any future decrease in maintenance standards will result in FAA supervision or
sanctions.
226
Interviewer guidance on
Exhibit 3
Exhibit #1 Guidance:
Analysis:
• The Federal Aviation Administration (FAA) • The candidate should put together that
the increase in maintenance spending is
is the U.S. Government regulatory agency
directly tied to the fact that previous
responsible for the safety of U.S. airlines
maintenance spending was not sufficient
to be considered safe
• The candidate should move off of
maintenance cost cutting
• If the candidate still is interested in
pursuing cost cutting in maintenance give
them this prompt, “Our client is adamant
that the recently improved maintenance
program is running at peak efficiency and
any cuts would invite unwanted scrutiny
from regulators.”
227
Sardine Airlines
Prompt #2:
• Sardine Airlines has been aggressively advertising to combat competitive pressures.
Both the CEO and the Board believe this is a critical expenditure. Recently the
landlord for the firm’s headquarters in Oakland raised rent by $35M. Customer
service complaints have increased nearly 3,000%, which the company believes is
due to the new 12 inch seats that were installed in the entire fleet. This has caused
Sardine’s call center provider to increase billing by 520% from 2014’s $12.36M. What
can Sardine Airlines do to address these issues?
Interviewer Guidance:
• Neither the CEO or Board will take any recommendations on cutting the marketing
expenses
• The firm does not have to be headquartered in Oakland, but does want to be in a
location where it has major operations
• The firm is not interested in increasing seat sizes. They are actually looking to pilot 8
inch seats in a new class of service called, “steerage”
• The call center vendor charges rates that are on average 60% higher because their
call center’s are based in the United States and staffed with native English speakers
• Rent in Tulsa or Hartford would be 40% less than current 2015 rent (INTERVIEWER
GUIDANCE this equates to $34.4M)
228
Sardine Airlines
Recommendation
• The CEO, Ms. McPincher is going to be joining us in just a few minutes to hear your
recommendations on how to improve profitability.
Interviewer Guidance:
• Candidate should have a recommendation that includes the following:
– To increase profit margin to 20%, Sardine Airlines should focus on cutting SG&A
costs
– There are two key ways to cut SG&A, customer service and rent
– Recommend that the call center vendor should transition to an overseas based
vendor, which would save approximately $38M
– Move the headquarters to either Tulsa or Hartford, which will have less expensive
office real estate markets and thus find major cost savings
– Given the relative low increase in revenue from installing 12” inch seats,
recommend against 8” seats
• Risks should include: one-time expenses in moving the headquarters, unhappy
customers from decreased customer service quality
229
Pencils & Backpacks
Fringe Science
Industry:
Healthcare
Case Type:
Strategy
Led by:
Interviewer
Quantitative Level: Medium
Qualitative Level: Difficult
230
Behavioral Questions
Question 1:
• If a previous coworker was asked to describe you, what three qualities would they
highlight?
Question 2:
• Describe a time when you and a coworker had different opinions on how best to
proceed on a project or solve a problem. How was this situation resolved?
231
Fringe Science
Prompt #1:
Massive Dynamic is a multi-national pharmaceutical company. One of their assets,
Cortexiphan, is an anti-infective that successfully treats three major types of hospitalborn illness and is currently in Phase II clinical trials. Unfortunately, Massive Dynamic
only has the capital to finance a Phase III clinical trial for one of the three illnesses with
Cortexiphan treats. Walter Bishop, Chief Medical Officer of Massive Dynamic, has
enlisted your help to decide which of the three possible indications for cortexiphan they
should pursue to maximize profits over a five year-period post-launch.
Interviewer Guidance:
Clarifications to be provided:
§ Drug is only likely to be approved in the US at this time
§ Drug will be sold directly to hospitals by Massive Dynamic; therefore, no need to
consider distribution channel cots, etc.
§ No need to calculate based on NPV, just do total over five years w/out discounting
§ Provide Exhibit 1 when asked about market size and/or competition
§ Provide Exhibit 2 when asked about development costs or clinical profile
§ Provide Exhibit 3 after an initial indication selected and pricing prompt given
232
Exhibit #1
Annual Doses:
1.5B
200M
5.0B
Avg. Price per
Dose ($):
$10
$20
$5
100%
Competitor
10%
25%
Market Share
20%
5%
10%
15%
20%
30%
75%
6
5
4
3
2
1
25%
40%
25%
0%
Aspergillosis
Rare Molds
Candidiasis
233
Interviewer Guidance: Exhibit 1
Exhibit #1 Guidance:
Interviewer Prompt: Here is preliminary
analysis of the three potential indications for
cortexiphan. What are your initial thoughts
based on this information?
Potential questions:
• No new entrants other than cortexiphan
are likely to enter the market in the time
frame we are considering
• Market for all three indications is not
expected to grow or decline over time
Analysis:
• Qualitatively, candidate should recognize:
– Asp. indication has four products available, two of which
are used quite sparingly
– Rare molds indication has only 2 products available,
with one clear market leader; physicians likely want
more options AND the potential for a lower-cost option
than $20/pill (2-4x the other two treatments) is very high
provided that our client can make the economics work
at that price.
– Candidiasis is a very crowded indication, with no clear
market leader; very strong clinical profile (i.e. the
efficacy of the drug relative to other available options
within that indication) will be required to penetrate
• Candidate should also calculate total market size for each
indication
– Asp. = 1.5B x $10 = $15B
– Rare Mold = 200M x $20 = $4.0B
– Cand. = 5.0B x $5 = $25B
• Candidiasis is biggest, but info on development costs and
likely market share in each indication is required before
making a decision; candidate should request info on
clinical profile (Exhibit 2)
234
Exhibit #2
Metric
Probability of
Phase III
Trial
Success
Phase III Trial Cost
Production
Cost Per
Dose
Safety Profile
(vs. Market
Leader)
Efficacy Profile
(vs. Market
Leader)
Aspergillosis
Rare Molds
Candidiasis
50%
25%
60%
$2 Billion
$500M
$1 Billion
$7.0
$5.0
$2.0
Equal
Equal
Poor
Superior
Equal
Equal
235
Interviewer Guidance: Exhibit 2
Exhibit #2 Guidance:
Analysis:
Interviewer Prompt: Our development
team has provided the following information
on cortexiphan’s clinical profile, based on
the Phase II trial results
• Candidate should have sound rationale
for market share assumptions; after
discussion tell them to use the following
for calculations
Potential questions:
• Cortexiphan can be assumed to be priced
at market average for initial analysis
• Hypothetical market share should be first
estimated by candidate based on the
information provided in Exhibit 1 & 2
combined
• Candidate should now proactively
calculate annual profits with market share
– Asp = Superior clinical profile to current options;
likely to become new market leader (50-60%)
– Rare Molds = Equal clinical profile; likely to pretty
much split the market with current leader; maybe
cortexiphan gets a bit less since competition has
advantage of being first to market (40-50%)
– Cand. = Clinical safety profile is worse than leader
in a crowded market; at same price as competition
we are unlikely to be a significant player (much less
than 25% share of market leader)
– Asp = 60%
– Rare Molds = 40%
– Candidiasis = 10%
Profit = (Revenue per Dose – Cost per Dose)*(Market
Share * Total Annual Doses)
– Asp = ($10-$7) * (60% * 1.5B) = $2.7B
– Rare Molds = ($20-$5) * (40% * 200M) = $1.2B
– Cand. = ($5 - $2) * (10% * 5.0B) = $1.5B
• Clinical trial costs and probability of
success should also be included to make
final decision (5 year period); calculations
on next page
236
Interviewer Guidance: Exhibit 2
Analysis:
Expected Profit = (Prob Success * Profit if Success) – (Prob Fail * Loss if Fail)
– Asp = $11.5*50% - $2.0*50% = $4.75
– Rare Molds = $5.5*25% - $0.5*75% = $1.0
– Candidiasis = $6.5*60% - $1.0*40% = $3.5
•
Candidate should drive to conclusion that Aspergillosis is the most profitable
indication if successful, and has the highest expected profit even when accounting for
potential failure; therefore, this should be indication chosen
237
Fringe Science
Prompt #2:
Dr. Bishop agrees with your initial assessment that the aspergillosis indication is a good
first indication. Next, he is wondering whether pricing at either a discount or premium to
the market will result in increased profitability. What do you think are the main pros and
cons of both strategies?
Interviewer Guidance:
Brainstorming exercise; possible answers include:
Premium:
• Pros – Signals to market that product is better than what is currently available, which matches
clinical profile; more revenue per dose; can selectively offer discounts to certain hospitals if
required, but don’t sacrifice revenue pro-actively in case where you don’t
• Cons – Formulary status / market share are likely lower; bad publicity w/ current mediaand
government pressure on high priced pharmaceuticals
Discount:
• Pros – High market share and quicker product uptake; can always take price increases over time
• Cons – Decreased revenue per dose; pricing choice for aspergillosis could hinder pricing
potential for rare molds or candidiasis if pursue these indications later b/c low price is expected
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Exhibit #3
Cortexiphan Aspergillosis Formulary Status Distribution by Pricing Strategy
100%
0%
20%
10%
25%
Off Formulary
On Formulary, Restricted
No Restrictions
% of Hospitals
30%
25%
80%
60%
50%
Formulary
Status
Expected
Market Share
Off Formulary
10%
On, Restricted
50%
No Restriction
70%
0%
Discount ($5)
Parity ($10)
Premium ($15)
Strategy ($ per Dose)
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Interviewer Guidance: Exhibit 3
Exhibit #3 Guidance:
Interviewer Prompt: Our market research team has now conducted preliminary interviews
with both payers and providers to get more detailed information on how cortexiphan is likely
to be used at different price points
Potential questions:
• All hospitals can be assumed to be of similar size for calculation purposes
Analysis:
• Candidate should recognize qualitatively that higher price leads to worse formulary
status, and consequently lower market share
• Candidate should determine overall market share at each price point by using a sumproduct of percentage of hospitals at each formulary status * expected market share
– Discount: 80%*70% + 20%*50% = 66%
– Parity: 60%*70% + 30%*50% + 10%*10% = 58% (round to 60%)
– Premium: 50%*70% + 25%*50% + 25%*10% = 50%
• Annual revenue should be calculated based on price, market share, and total doses
– Discount: 1.5B doses * 2/3 * $5 = $5B
– Parity: 1.5B doses * 60% * $10 = $9B
– Premium: 1.5B doses * 50% * $15 = $11.25B -> five-year = $56.25B
• Profit tracks with revenue b/c cost is the same, so only need to calculate for premium
– ($15 revenue - $7 cost per pill) * 0.75B doses annually * 5 years = $30B - $2B trial cost = $28B
240
Fringe Science
Recommendation
Based on all of the information presented, what would be your recommendation for Dr.
Walter Bishop regarding the development of cortexiphan?
Interviewer Guidance:
• Candidate should recommend pursuing the aspergillosis indication at a premium
price of $15 / dose
• This recommendation will result in total expected revenue of $56.25B and profits of
$28B over the five-year period post-launch
• Candidate should note risks of strategy (e.g., there is a 50% chance the trial fails,
leading to a $2B loss for the cost of the trial)
• Aspergillosis indication is preferred because of cortexiphan’s superior clinical profile,
high expected market share, and relatively large market size; although candidiasis is
bigger market, we are not expected to be a big player based on the clinical profile
• Pricing at a premium hinders formulary status somewhat, but the higher price per
dose makes up for this; should also discuss potential cons of premium price
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Fringe Science Evaluation Criteria
Candidate
Level
Average
Candidat
e
Assessment
•
•
•
Good
Candidat
e
Excellent
Candidat
e
•
•
•
•
•
•
Framework touches only om minority of case components
Some guidance required in driving towards profitability, or
misses requesting important information required to make
calculations
Focused only on quantitative considerations, lacking on
qualitative insights
Discusses all aspects of profitability case: market size,
competition, market share potential, fixed and variable costs
Calculations are quick and sound
Makes clear, confident recommendations based on
information presented
Framework is customized to healthcare considerations and not
basic profitability framework
Proactively thinks about opportunity to pursue different
pricing strategies and impact on potential revenue
Notes risks of preferred strategy
242