The Case Interview Process
Non-Verbal Communication (Tips for Success)
Communicating the correct message non-verbally is as important as the content that is communicated in a case
interview. In order to recommend a candidate, interviewers must:
1. Feel comfortable putting the candidate in front of a client
2. Believe they would enjoy spending 60+ hours a week with the candidate on a project team
You Need to Convey
• Trustworthiness
• Confidence
• Competence
• Honesty
• Positivity
• Curiosity
• Passion
How to Develop These Traits
• Practice and gain proficiency in the technical requirements of
a case – free up mental energy to focus on connecting with
the interviewer
• Practice positive self-talk – the best way to demonstrate
these traits is to truly believe you have them
• Practice quickly connecting with people about non-work
subjects – building rapport before diving into the interview
makes an enormous difference (Note: Not always possible)
5
What Is A Case Interview?
A case interview is a simplified, condensed version of a complete consulting project. The candidate is in the driver’s
seat and is expected to explore the data and provide solutions to an issue that a client paid the firm for.
Ideal Candidates
Demonstrate
Problem-solving
Ability
Interpersonal Skills
Cultural Fit & Passion
From Bain’s Website (but representative of all firms):
The case interview is an example of a real business problem based on your interviewer's past work experiences. The problems you will
encounter are not designed to be brainteasers, or theoretical problems designed to stump you, but rather to reflect the challenges
that our clients face. These real-life examples allow you to learn more about the type of work we do and the impact we have with our
clients.
The firms look for:
• The approach you take to solving a problem
• How analytical and creative your thinking is
• Your usage of data to quantify your recommendation(s)
• Your communication skills in conveying your ideas
• How you would suggest implementing those proposals"
6
Consulting Case Themes
The following case themes are the most popular topics tested and they are ranked in descending order of frequency.
Please note that there are plenty more case topics than the 5 listed below.
Profitability: Analyze potential sources of profit declines and identify ways to improve
profitability
Market Entry / Market Sizing: Analyze the client’s opportunity to expand and quantify
the viable market for any new products
Growth: Identify opportunities for the client to optimally grow revenues or increase
market share
Acquisition / Sale: Determine whether the client should purchase another business or
sell an existing part of the company
Industry Assessment: Assess the health and attractiveness of a particular industry to
advise a client’s decision
7
Note: This not an exhaustive list of all the types of cases you may experience
Case Interview Format
Intro
Fit Question
Case Interview
3-5 Mins
5 Mins
20-30 Mins
Prompt &
Clarifying Q.
Framework
Prompt: This is the premise of
the case. It will include some
background on who the client
is and lay out the problem.
Framework: Once you are
confident that you
understand the prompt and
context, you will take roughly
90 seconds to lay out a
"roadmap" for how to
approach the case. See the
section on "Case
Frameworks" for more tips.
Clarifying Questions: Some
basic contextual questions to
guide your framework; not a
time to get into the nitty gritty
Exhibits &
Analysis
Exhibits: Provide important
insights and next steps in
cracking a case. You should
walk through each exhibit with
the interviewer, confirming
understanding of its content
and identifying relevant
patterns or insights.
Math: See the section on
"Math" for more tips.
Q&A
5 Mins
Brainstorming
Brainstorming: After the
initial analysis, the
interviewer will often ask you
to brainstorm around
additional aspects of the
problem. See the section on
"Brainstorming" for more tips.
Conclusion/
Next Steps
Conclusion: Recap (briefly!)
the initial problem, present
the logical conclusions and
solutions that arose from
analysis and brainstorming
(along with the data to
support them.)
Next Steps: Suggest some next
steps for implementation or
further research and point out
any potential risks
8
Note: This format may differ by firm or by interviewer
Fit / Behavioral Question Overview
Consulting firms are assessing your ability to successfully work with teams and judge how well you understand their
firm and yourself
•
Tell Me
About
Yourself
Why
Firm X or
Consulting
Tell Me
About A
Time
When…
•
•
•
•
•
•
•
•
Your pitch should include: Where you have been / what you have done, who / where you are now, and
what you are interested in going forward
All answers must include: Relative skills & experiences, key transition points in your career, and a career
objective
Strong answers have: Powerful “hook” –your value proposition that highlights how you have the
competencies they are recruiting for
Firm & industry fit: Interviewee should have a deep understanding of a firm’s culture, functional expertise,
and working style
Industry interest: Interviewee should highlight experiences they want to gain and skills they can bring
Strong answers have: This question answered in opening pitch, structured reasons why, and answers
tailored to your prior experiences and future aspirations
Experience/ behavioral: Interviewee should demonstrate leadership ability, “drive” –taking initiative, and
professionalism
CAR: Context / challenge you faced, the action that you demonstrated, and the result of your actions
Strong answers have: Concise response, a learning element if the situation helped you grow, utilizes
structure, and engages the interviewer with energy, emotion, and authenticity
9
The Prompt and Clarifying Questions
Prompt & Clarifying Q.
Framework
Exhibits & Analysis
The Prompt
Brain-storming
Conclusion/
Next Steps
Clarifying Questions
• All case prompts will introduce the
company name, industry, and a brief
description of what the client wants
• Clarifying questions should always be
high level (ex. Context on products, core
goal of the client, how client makes
money)
• Some prompts tend to leave the primary
objective to be vague
• Don’t ask for detailed insights that you
can include in framework (ex. Details on
profitability drivers, market trends, etc )
• Most prompts leave out the business
context of the clients core products or
operations in question
• Feel free to ask further clarifying
questions as you are building framework
10
The Case Framework
Prompt & Clarifying Q.
Framework
Exhibits & Analysis
Brain-storming
Conclusion/
Next Steps
By laying out a framework for analysis at the beginning of a case interview, you are not only keeping yourself organized,
but you are providing a visual roadmap for the interviewer to see how you are thinking and where you are going.
Characteristics of Great Frameworks
Incorrect Framework Myths
• MECE: Mutually Exclusive, Collectively Exhaustive
•
There is one perfect framework for every case
• Detailed but not lost in the weeds
•
There is a finite number of possible frameworks
that will provide answers to every case
•
Frameworks are not that important to the overall
interview
• Thorough but not wasteful
• Insightful but not presumptive
11
Framework Example
Prompt & Clarifying Q.
Framework
Exhibits & Analysis
Conclusion/
Next Steps
Brain-storming
Some frameworks are better than others to address a particular case. There are always multiple approaches that can
yield the same answer.
A simple framework example:
Key Question in the Prompt
Profitability Tree
Market / External
Customer / Company
Notes +
Clarifying
Answers
•
•
•
•
•
Competitors
Economic Health
Regulation / Government
Industry Trends
Geography / Climate
•
•
•
•
Internal Capabilities
• Acquisitions
• Manufacturing Capacity
• Distribution Networks
Brand Perception
Exit Strategies
Consumer Preferences
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Other Framework Examples
While being exposed to many frameworks can help build a strong repertoire of framework components, remember that
no amount of specific framework memorization will cover every possible case a candidate could encounter.
Before & After
•
•
•
Compare current with future
Ideal for a go/no-go decision
Can be used with profit tree (profits before and
after)
Before
Evaluation Criterion 2
Evaluation Criterion…
M&A (similar to Before and After)
•
Compare Company A, Company B, and Company
A+B along various meaningful criteria
After
Evaluation Criterion 1
Company A
Company B
Company A + B
Evaluation Criterion 1
Evaluation Criterion 2
Evaluation Criterion…
Alternative | Evaluation Criteria Matrix)
•
•
•
Alternatives listed across the top
Evaluation criteria listed along the left
Use +, -, o, or check marks to go through the list
Option 1
Option 2
Option 3
Option 4...
Evaluation Criterion 1
+
-
-
+
Evaluation Criterion 2
-...
Evaluation Criteria...
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For more details on Framework, please see appendix xx
Guide to Exhibits & Analysis
Prompt & Clarifying Q.
Framework
Exhibits & Analysis
Conclusion/
Next Steps
Brain-storming
Read The title of the exhibit to have a
clear understanding of the information
Observe The legend and gauge the
sizes of any bar graphs for insights
Pay Attention To the footnotes for vital
information
14
Guide to Math Analysis
Prompt & Clarifying Q.
Framework
Exhibits & Analysis
Brain-storming
Conclusion/
Next Steps
Although most case mathematics will involve simple arithmetic, it is still very easy to make mistakes. Follow the tips
below to ensure that you are set up for success.
Tips for Success
Sanity Check
Mistakes are OK
Use Shortcuts
Make sure your
numbers make
sense in the context
of the case
You can recover
from mistakes, just
don’t make the
same mistake twice
Round when
needed and
manage your zero’s
appropriately
Talk it Through
Explain each step
that you are doing
with your
interviewer
So What
Tie the numbers
back to the
question and
explain the
implications
Practice
practice until you’re
comfortable doing
math in front of an
interviewer
15
Guide to Math Analysis
Prompt & Clarifying Q.
Framework
Exhibits & Analysis
Brain-storming
Conclusion/
Next Steps
Tricky Math Examples
Net Present Value
Payback Period
Break-even Sales
A.
Calculates the discounted return on
investment over time
A.
Calculates the amount of time required
to pay back an upfront investment
A.
Calculates the number of units sold to
pay back an upfront investment
B.
Requires cash flows (revenues - costs
over a time period), discount rate,
timeframe, and an upfront cost
B.
Requires cash flows per period and an
upfront cost
B.
Requires per-unit selling price, per-unit
costs, and upfront investment cost
C.
Some cases will assume a calculation
into perpetuity (timeframe = forever).
Payback period will be extremely long,
extremely short, or you will be given
some type of specific criterion the
client uses (e.g. 5 years)
C.
C.
Break-Even Sales = Upfront Investment
Cost/(Per-Unit Selling Price - Per-Unit
Costs)
D.
Perpetuity: (Cash Flow per Period /
Discount Rate) - Upfront Cost
D.
Payback Period = Upfront Cost / Cash
Flows per Period
16
Guide to Math Analysis (Things to Take Note)
Prompt & Clarifying Q.
Framework
Exhibits & Analysis
Brain-storming
Conclusion/
Next Steps
Example Scenario
How much money will the client save?
Current
State
$ Mater. /
Unit
# Labor /
Unit
Volume
Total
Cost
Product 1
15
10
1M
= $25M
Product 2
5
20
2M
= $50M
= $75M
10% Labor Reduction on a per unit basis
Future
State
$ Mater. /
Unit
# Labor /
Unit
Volume
Total
Cost
Product 1
15
9
1M
= $24M
Product 2
5
18
2M
= $46M
= $70M
A. Structure is crucial. The more you can structure information
like an Excel Spreadsheet, the better
I. Helps you recover information
II. Your interviewer can follow along
III. It makes you look organized
B. Write down prompts such as “How much money will the
client save” and “10% labor reduction per unit” to keep the
goal fresh in your mind
C. Circle any important numbers (Total Savings =$5M) that may
be relevant to your final recommendation
D. Go Deeper by speaking to the context of the number, ex: “ I
see the total savings is $5M, which represents about 6% of
our total costs. This seems like a reasonable deduction but
we should figure out how this labor reduction is being
generated and seek to understand any negative
unanticipated consequences as a result of it.”
Total Savings = $5M
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Tips For Brainstorming
Prompt & Clarifying Q.
Framework
Exhibits & Analysis
Brain-storming
Conclusion/
Next Steps
The key to brainstorming is structure. The candidate should first devise two or more "buckets" or categories to organize
his/her thoughts. These constraints make it easier to be creative and provide a more vivid mental model to pull from.
Example Brainstorming Frameworks:
Internal vs. External
The Supply Chain
•
•
•
Internal represents any aspect internal to the client, (e.g.
products, brand, financials, leadership, etc.)
External represents factors external to the client, (e.g. market
trends, geopolitical dynamic, competition, etc.)
•
Each step in the supply chain is a category: raw materials,
manufacturing, warehouse, transport, retail, customer, etc.
Useful for exploring causes or solutions to cost problems
Financial vs. Non-Financial
Stakeholders
•
•
•
•
Financial includes things like costs, hurdle rates, cash flow, etc.
Non-financial would be everything else
Clients, employees, investors, suppliers, regulators, etc.
How are they affected, or what are they looking for?
Long-term vs. Short-term
Customer Journey
•
•
•
Useful for examining potential consequences of a decision
AIDA – Attention, Interest, Desire, Action
Useful for increasing sales
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Conclusion & Next Steps
Prompt & Clarifying Q.
Framework
Exhibits & Analysis
Brain-storming
Conclusion/
Next Steps
There are three key elements that the interviewer should include while wrapping up the final portion of the case.
1. Recommendation
Say the action that the client should take and cite the key insights
in your analysis that have led you to the conclusion
2. Risks & Concerns
3. Next Steps
Mention the factors in the case that the client should be aware of
that may impact the client or the recommendation –(Concerns
should not contradict your overall recommendation)
Highlight at least one action the client should do to either help
mitigate any concerns or any actions needed to move forward
with the recommendation
While you can take a minute before you gather your recommendation, it is crucial to keep this segment concise
19
Industry Overviews
Please note that these are commonly tested industries; This list is not exhaustive
of all the industries tested.
Industry Overview – Consumer / Retail
Key Industry Trends
•
•
•
•
•
Important Calculations
Digital Marketing: CPG (Consumer Packaged Goods) companies are pivoting to digital marketing
solutions like Facebook and YouTube more than ever for smarter and more targeted advertising.
Big Data: Consumer companies & retailers are ramping up the use of consumer shopping behavior data
now more than ever to create curated/ personalized shopping experiences and targeted advertisements
Retail Omnichannel: Large brick & Mortar retailers are pivoting to an “order online, pick-up in store” mix
while also building out their online fulfillment capabilities to cater to the consumer. and keep up with
Amazon). Store foot-prints are also getting smaller to reduce inventory
Private Label & Amazon Effect: Private label consumer products are eroding market share of large name
brand products. This is partially driven by “the Amazon effect” of quick and cheap replacement
fulfillments. -Brand loyalty is getting harder and harder to win.
Direct to Consumer vs. In-store Experience: Brand names are slowly shifting resources to sell directly to
consumers as some retailers struggle. Retailers with large brick & mortar footprints are focusing on instore experiences to attract customers
1. Inventory Turnover:
= (Sales / Inventory)
2. Gross Margin:
= (Revenues – COGS)
Revenues
Important Terminology
•
•
•
•
•
SKU: Stock Keeping Unit – Refers to a unique item sold in a store
In-stock: Percent of items that are on the shelves and available for sale vs. what the total display can
hold
CRM: Customer Relationship Management: Strategy & tools designed to boost profitability and
strengthen customer loyalty by using data – also the name for software that facilitates this
Loss Leader: Merchandise sold at a loss to attract new customers or stimulate other profitable sales
Mark-up: Percentage added to the cost of product to get selling price
3. Contribution Margin (CM):
= (Sales – Variable Costs)
CM Rate = (CM)
(Sales)
*Please note that not all trends, terminologies, and calculations are listed above
23
Industry Overview – Energy
Key Industry Trends
•
•
•
•
•
Important Calculations
Clean Renewable Energy: Wind, solar, and biomass power are increasingly replacing the use of fossil
fuels in developed and developing countries with some projections indicating 80% of the worlds energy
needs being met by renewable energy by 2050
Technology: Advancements in drilling techniques like “fracking” and horizontal drilling have significantly
boosted the output of US oil companies and substantially reduced the cost and risks associated with
drilling for oil
Shale: Newly found abundance of shale basins in the USA has helped to boost US oil production output
and has almost eliminated US dependence on foreign oil
Natural Gas: Given its cheap and abundant supply, natural gas has become the primary source of energy
in the US, replacing crude oil and coal
(Important) Petroleum Products: Gasoline, jet fuel, natural gas, fertilizer, plastics, detergent, propane,
diesel, lubricant
1. Return on Investment (ROI)
= (Profits – Cost of Investment)
Cost of Investment
2. Breakeven Point
= ______(Fixed Costs)____
Contribution Margin (CM)
Important Terminology
•
•
•
•
Important Considerations:
Upstream (E&P): Exploration and Production – Process involving the finding, drilling, and producing
of crude oil and natural gas or liquified natural gas (LNG)
Midstream: Focuses on the processing, storage, marketing, and transportation of oil and natural gas.
(Most pipe-line companies fall in this category)
Downstream: Includes oil refineries, petrochemical plants, petroleum products distributors, retail
outlets and natural gas distribution companies
OPEC: Organization of Petroleum Exporting Countries – Cartel of 14 nations that coordinate
petroleum policies. –Often influences output and thus oil prices
•
•
•
•
•
•
Transportation / Distribution costs
Storage Costs
Production Costs: Labor + Materials
Plant Development Costs
Depreciation & Taxes
Overhead
24
*Please note that not all trends, terminologies, and calculations are listed above
Industry Overview – Transportation
Key Industry Trends
•
•
•
•
•
Important Calculations
Airline Capacity Additions: Airline ticket prices have been steadily on the decline driven by companies
adding more routes to cities across the globe –led by low-cost carriers such as JetBlue, Southwest
Fuel Efficiency: Airline companies have been investing heavily in upgrading their fleet to more fuel
efficient aircrafts to reduce their biggest cost driver
EV (Electric Vehicles): Auto manufacturers are all racing to create battery powered vehicles
Autonomous Vehicles: Autonomous vehicles are expected to hit the road as early as 2019 and will cause
major disruption to auto manufacturers, bus systems, taxis, insurance companies
Shortage of Truckers: Transportation companies have been struggling to keep up with the booming
demand for cargo shipments due to a massive shortage of truck drivers –thus causing significant
increases in labor costs
1. Potential Savings by Switching
Equipment
= {New Profit – Old Profit} or
{ [(New Capacity x Price) – (New
efficiency x cost)] – [(Old Capacity x
Price) – (Old efficiency x cost)]}
Important Terminology
•
•
•
•
•
Load Factor: Measures the capacity utilization of transportation services and is equal to the average
actual utilization divided by the maximum capacity
PRASM: Passenger Revenue per Average Seat Mile –Or RASM (revenue) is the revenue generated per
available set miles in which ASM = number of seats available x number of miles flown.
Logistics: The detailed coordination of complex operations involving many people, facilities, or supplies.
FOB: Free On Board –Represents the point at which the sale of a freight cargo is considered complete.
“FOB shipping” means ownership is transferred once the product is shipped of, “FOB shipping point”
means ownership is transferred once the product is delivered
LTL & FTL: LTL (Less than Load) – Small freight that doesn’t fill a truck which is generally more expensive
to ship, (FTL) Full Truck Load) – Large shipments that fill a trailer and are thus cheaper to ship
Important Considerations:
•
•
•
•
•
•
Gasoline / Fuel Prices
Carrying Capacity
Range / Distance
Destination Routes
Maintenance Costs
Depreciation
*Please note that not all trends, terminologies, and calculations are listed above
25
Industry Overview – Manufacturing / Agriculture
Key Industry Trends
•
•
•
•
Important Calculations
D2C: Direct to Consumer: More manufacturers are leveraging their own sales platform to market, sell,
and ship their products to the customer rather than use third party distributers or retailers to boost
profitability
Data Driven Analytics: Manufacturers are using predictive analytics and algorithms to improve product
design, optimize production cycles, and improve demand forecasting
Trade-war & Tariffs: In response to the US tariff on steel and more, Canada, the European Union, and
China have all implemented retaliatory tariffs of close to 25% on agricultural and automobile goods
produced in the US.
Sustainable Food Systems: Vertical farming has been a growing trend in urban locations to minimize
environmental foot-prints and bring produce to major cities
Important Terminology
•
•
•
•
•
(JIT) Just-in Time Inventory: “Pull demand” inventory system in which assembly materials and support
items are delivered as needed to minimize raw material inventory
Commodity: An interchangeable non-differentiated product or material that is sold freely. (Most
agricultural products are commodities)
Bottleneck: The resource in a manufacturing process that is working at max capacity and thus limits the
output of the entire production
Bushel: A unit of dry measure (1 cubic foot) for grain, fruit, etc., equivalent to 8 gallons of liquid
Out-source: Process of contracting an outside party to complete a production or service task for a
business. –Typically done to save cost or due to a lack of expertise
1. Potential Savings with New
Equipment
= (New Equip. Expenses – Old Equip.
Expenses)
[(Old Time x Old Labor) + (Raw Material
Cost x Old Quantity) + Old Depreciation)]
- [(New Time x New Labor) + (Raw Material
Cost x New Quantity) + New Depreciation)
Important Considerations:
•
•
•
•
•
•
•
Raw Material Costs
Labor & Wages
Capacity Constraints / Bottlenecks
Commodity or Not?
Overhead Costs
Supplier & Buyer Relationships
Depreciation
26
*Please note that not all trends, terminologies, and calculations are listed above
Industry Overview – Financial Services
Key Industry Trends
•
•
•
•
Important Calculations
AI, Block-Chain & Crypto Currencies: Digital distributed ledgers offer a cheaper and more efficient way
for firms to verify and facilitate transactions. Crypto currencies have proven themselves to be an
alternative set of asset investments that rival equities, precious metals, and debt holdings
Digital-Only Banks & Payments: The prevalence of more digital transactions have eroded the need for
cash for most daily use, which has in turn lead to the proliferation of online banks that offer higher
savings account interest rates and comparable services
Financial De-regulation: Congress passed legislation easing some of the restrictions from Dodd- Frank
that exempts smaller banks from certain capital requirements which frees up room for more loans
More Transparency in PE Funds: With greater pressure to produce results that outperform their
benchmarks, more PE investors have been demanding greater transparency within their funds and firms
have been using transparency to attract investors
Important Terminology
•
•
•
AUM: Assets Under Management: Market value of all the financial assets that a firm manages on
behalf of all of their clients and themselves. –Includes capital raised by investors and leaders of a firm
Private Equity: Composed of investors and funds that invest directly into private companies or
convert public companies to private companies to improve the target company’s operations and
financials with the goal of extracting a financial return from the company and reselling it another firm
or the public at a profit
M&A: Mergers & Acquisition: Mergers are when two companies comes together to make a new
entity (Dow Chemical & Dupont) = DowDuPont, while an acquisition is where the smaller company is
consumed by the larger company (Amazon + Wholefoods) = Amazon
1. NPV (Net Present Value)
= (CF) x ___1 ___
(1+i)n
Where n = # of periods
2. Pay Back Period
= _____(Fixed Costs)_______
Contribution Margin (CM)
Important Considerations:
•
•
•
•
•
•
•
Current Portfolio
Exit Strategy & Time Horizon
Acquisition Price
Employee & Customer Relationships
Market Trends
Tax & Regulatory Implications
Client Risk Profile
*Please note that not all trends, terminologies, and calculations are listed above
27
Industry Overview – Information Technology
Key Industry Trends
•
•
•
•
•
Artificial Intelligence (AI)/ Machine Learning: Artificial intelligence is the ability for a computer program
to think and learn. The emergence of AI has enabled the rise of self-driving cars, smart homes, advanced
search algorithms, and smart digital assistants
Cloud Computing: Is the practice of using a network of remote servers hosted on the Internet to store,
manage, and process data, rather than a local server or a personal computer. More companies are
moving to this platform for security, convenience, and cost savings
Internet of Things (IOT): Smart devices that are all connected and communicate with each other via the
internet are rising in demand due to value of strategic data that they provide
Blockchain: a digital ledger in which transactions made and recorded chronologically and publicly. –
Important for security and transfer verification purposes. Ex. include Bitcoin, and other cryptocurrencies
GDPR: General Data Protection Regulation: Data protection regulation protecting privacy for all
individuals in the European Union.
Important Calculations
1. Addressable Market size:
Top-Down: Total Population >>> Number
of users >>> Market share >>> # of Units
per User x Price per Unit
Bottom-Up: Current Customer Population
>>> Potential Customer Base (Estimated
using consensus data or industry info) >>>
Future user base x units per user x price
Important Terminology
•
•
•
•
IP (Intellectual Property): A category of property that includes intangible creations protected by
trademarks and copyrights (e.g. software, code, algorithms, etc.)
Unicorn: a start-up company valued at more than a billion dollars, typically in the software or
technology sector
Freemium: A pricing model used by many digital services, a “freemium” model is one where the
majority of users are able to engage with a product or service entirely for free (perhaps in exchange
for data collection or being served advertisements)
SaaS: “Software as a service” - a software distribution model in which a third-party provider hosts
applications and makes them available to customers over the Internet –Like Salesforce or Workday
2. Customer Acquisition Cost:
_______Marketing Expenses_____
Newly Acquired Customers (Yearly)
28
*Please note that not all trends, terminologies, and calculations are listed above
Industry Overview – Media & Entertainment
Key Industry Trends
•
•
•
•
•
•
Important Calculations
Cord Cutting / Over the Top Streaming: The rise of Hulu, Netflix, YouTube, & Amazon Prime video has left
many to abandon traditional cable and opt for online streaming services to get the content they want
Content is King: Media giants have been spending heavily to curate high quality content to hook
subscribers to their service and maintain and grow their subscriber base
Ad-model Shift: Cable advertisement has been trending downward while digital online advertisements
have been trending up. As online viewers opt for ad-blockers, AI and big data are helping marketing
agencies personalize advertisements and increase user engagement
Augmented Realty (AR)/ Virtual Reality (VR): While still in their early stages, AR and VR capabilities have
been gaining traction in the industry as a way to enhance storytelling and improve sporting coverage
Music Streaming: The rise of Spotify, Apple Music, & YouTube Music has almost eliminated the physical
disc music market as most artist now prioritize online platforms to release albums and new songs
Gaming & E-Sports: The video gaming industry has been one of the fastest growing segments in
entertainment led by mobile gaming and game streaming experiences via Twitch and E-sports. Many
video game creators are focused on a “games as a service model” as they monetize video games
overtime by selling in-game customizable perks
1. Profitability
(Revenues – Costs)
(Price x Quantity) – (Quantity x Var. Cost)
– (Fixed Costs)
Important Considerations:
•
Important Terminology
•
•
•
Digital vs. Linear: Linear is traditional broadcast or cable television. Digital is online (streaming, etc.)
Ratings: A measure of viewers of a particular program or time segment in television. Nielsen is the
largest provider of ratings data in the US, but has been slow to provide digital ratings
Box-Office: The total revenue generated by movies shown at theaters
•
Revenue Factors
• Advertising Rev.
• Ticket sales (Price x Quantity)
• Merchandising
• Tours / licensing / Endorsements
Cost Factors
• Artist fees
• Commission
• Promotion advertising
• Venues
• Content creation costs
29
*Please note that not all trends, terminologies, and calculations are listed above
Industry Overview – Healthcare & Life Sciences
Key Industry Trends
•
•
•
•
•
•
Important Calculations
Wearable Medical Devices: Activity trackers help patients stay more active and healthier on their own
while also monitoring health metrics reducing the need to visit doctors frequently
Smart Technology & Data: Data on a patient’s background and conditions allow more personalization
options, targeted treatments, and faster recommendations at hospitals
Gene Therapy: The transplantation of normal genes into cells in place of missing or defective ones in
order to correct genetic disorders. –Growing trend using CRISPR to treat previously uncurable diseases
Price Transparency: As drug companies receive criticism on the rising cost of their drugs, more states are
considering independent efforts to improve transparency in drug pricing and cost controls
Government: With the repeal of the Affordable Care Act (ACA), legislation has stagnated on fixing the
rising cost of healthcare and Medicaid in the US, thus leaving a continued rise in insurance premiums
Bundled payment, episode-of-care payment, etc.: Generally describes paying for the whole treatment at
once, rather than by individual tests or visits – an attempt to incentivize improved outcomes
•
•
•
•
Top-Down: Total Population >>> Number
with Illness >>> Number Diagnosed >>>
Market share of Drug >>>> (Dosage per
Time Frame) x Price per Dosage = Market
Size per Time Frame
Important Considerations:
•
Important Terminology
•
1. Market sizing:
Orphan Drug: A pharmaceutical drug that remains commercially undeveloped due limited potential for
profitability as a result of a small curable population size
FDA: “Food & Drug Administration” Federal organization tasked with protecting and promoting the
safety of food and pharmaceuticals in the US. FDA approval is needed for almost all drugs sold in the US
Generic Drugs: A prescription drug that has the same active-ingredient formula as a brand-name drug
but sold at a cheaper cost. –Typically occurs when name branded drugs lose patents
Biotech vs. Pharmaceutical: Biotech firms use live organisms like bacteria and enzymes to manufacture
their medicines while pharmaceutical companies primarily use chemicals synthesis
Auto-immune Diseases: A disease in which the body's immune system attacks healthy cells
•
•
•
•
Regulations
• FDA Approvals
• Patent Rights
• Foreign Government Laws
Competition / Cannibalization
Drug Effectiveness
• Cure vs. Treatment
• Time to Market
• Side Effects
Manufacturing Capabilities
Pricing, Costs (Fixed / Var.), Dosage
30
*Please note that not all trends, terminologies, and calculations are listed above
Industry Overview – Telecommunications
Key Industry Trends
•
•
•
Important Calculations
5G Network Service: Next generation of mobile internet connectivity with faster speeds, more reliable
connections, and 100x more bandwidth capacity than 4G.
• Network operates mainly on the cloud
• Allows for “network slicing:” Creates separate wireless networks on the cloud for users to have
their own personalized network
• Roll-out may be 2020 in North America due to high infrastructure costs associated with
development
Network Consolidation: The third and fourth largest cell phone carriers T-Mobile and Sprint are in the
process of merging, a move that will consolidate the telecom market to 3 major players
Content Integration: High profile acquisition like AT&T of Time Warner and Verizon of Yahoo illustrate a
push to either get into the content creation game or to build out their advertising network
1. Return on Investment (ROI):
(Future Profits – Cost of Investment)
(Cost of Investment)
2. Customer Acquisition Cost:
_______Marketing Expenses_____
Newly Acquired Customers (Yearly)
Important Terminology
•
•
•
•
Carrier: A company that is authorized by regulatory agencies to operate a telecommunications service
system: AT&T, Verizon, T-Mobile
OEM: Original Equipment Manufacturer – A company whose goods are used as components in the
product of another company that sells the finished goods to users
LAN: Local Area Network: Locally owned and administered data network that runs primarily through
cables –ex. Ethernet connection
Fiber Optic: Transmission connectivity via glass strands which are 100x more faster than traditional
copper wires for more efficient cell phone and internet connections
Important Considerations:
•
•
•
•
Regional Competition
Competitors
• New Entrants
• Barriers to Entry
• Substitutability
Contract lengths & stipulations
Infrastructure
31
*Please note that not all trends, terminologies, and calculations are listed above
Consumer Packaged Goods (CPG)
Products/services
CPG companies provide consumers with a range of household products
such as cleaning agents, beauty products, snacks, pet foods, etc.
Revenue
Volume of goods sold; Price premium on branded goods
Costs
Sales and Marketing (branding, discounting); COGS (raw materials,
packaging, and processing)
Procter & Gamble (P&G), Unilever, Clorox, Mondelez, Frito Lay
Competitive
landscape (competitors, Private label products, home remedies
substitutes, new entrants) Chobani
Customers
Walmart, Sams, Costco, Target, Grocery stores, Convenience stores
Distribution
channel(s)
Wholesale to customers (Walmart, etc.)
Direct (limited web distribution through Amazon and others)
Suppliers/
supply chain
Supply chain varies widely by product and region; plants are
owned/operated or contract manufactured
Key trends
Activist investors push cost cutting and selling non-core brands; private
label growth; innovation/brand is critical to fight product commoditization
7
Oil & Gas
Products/services
Products are categorized along the value chain as upstream and downstream.
Upstream: oil and natural gas. Downstream: chemicals and plastics
Revenue
Volume of goods sold; Price is generally determined by global indices
Costs
Extraction costs, COGS, labor, technology and licensing
Upstream: BP, Shell, Aramco, Exxon Mobil
Competitive
landscape (competitors, Oilfield services: Schlumberger, Halliburton, Baker Hughes
substitutes, new entrants) Downstream: BASF, Dow, SABIC
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.
Key trends
Oil prices have been volatile over the past two years. The recent American shale
oil boom, and slowdown have seen the price of oil have high variance.
8
Manufacturing
Products/services
Manufacturing sector includes companies that are 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
Costs
Process efficiency, supply chain management, labor, raw materials/commodities,
channel management, marketing, capital investment
Competitive
General Motors, Chrysler, Ford, Toyota, Honda, Boeing, Airbus, GE, Phillips,
landscape (competitors, Siemens, Caterpillar, Honeywell, Dow, Corning, HP, Intel
substitutes, new entrants)
Customers
Varies by industry and position in supply chain, can be consumers or
raw goods to businesses
Distribution
channel(s)
Retail to consumers (Walmart, etc.)
Wholesale to businesses
Suppliers/
supply chain
Supply chain varies widely by product and region; plants are
owned/operated or contract manufactured
Key trends
Increased automation increasing cyclical nature, location is sector and
customer dependent (“next-shoring”)
9
Financial Services
Products/services
Deposit-based services, credit cards, consumer loans (personal and business),
payments, insurance, 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; fees
Costs
Overhead (branches, administration, compliance); Salaries; Bad Debt Expense;
Marketing
Competitive
landscape (competitors,
Large national players (Wells Fargo, Bank of America, Citi) compete with regional banks.
Largest players’ services extend well beyond commercial banking to investment banking,
securitization, proprietary trading, etc. with services that are increasingly opaque
substitutes, new entrants)
Customers
Individual consumers
High net worth consumers (priority segment)
Small/medium businesses without sufficient size for larger investment banking financing services
Private companies going public looking for underwriting
Distribution
channel(s)
Still large face-to-face presence with bank branches, tellers, etc.
Increasing use of ATM services, online banking
Banks increasingly offer credit cards, home loans, etc. as means to increase asset base
Suppliers
Private deposits from individuals and corporations
Key trends
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)
10
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, management fees
Levers pulled to increase revenue: timeframe, identifying efficiencies, new management
Costs
Investment expenses, legal, technical assistance to firms, administrative expenses, travel, labor
is very costly (few and highly paid employees), taxes
Competitive
landscape (competitors,
Supply of capital greater than demand
Large (e.g. KKR, Carlyle, Blackstone, TPG), Mid ($250M to $5B), and Small Market PE shops
substitutes, new entrants)
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 high borrowing
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 (e.g. convertible
loans)
Growth capital: financing to expand, restructure, or enter new markets with little change in management
Distressed Investments: investing in financially stressed companies
Suppliers
Private investors, large corporations, foundations
Key trends
Larger amounts of equity required for each deal,
Startup financial performance not always meeting high valuations
Health care and tech are seeing most of the activity
Buying and selling of current PE commitments likely to increase over the next few years
Growing need for PE firms to have cash margins
11
Pharmaceuticals
Products/services
Brand name/originator drug manufacturers produce original patent-protected (for a certain period of time) 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
Size of specific treatment area / level of competition; Buy-in from doctors that will prescribe; Speed to market (1st to
market is important)/ expertise in difficult products (for generics). Dosage and frequency of drugs can alter revenue.
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,
Success contingent on drug effectiveness, adoption/buy-in from doctors, coverage approval from private and public
insurers, patient adherence and ease of use. Products compete within various treatment areas (T): cancer,
cardiovascular, psychology etc. US, Europe and Japan are largest markets although emerging market opportunity
(eg. China, India, Brazil) is growing. 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 by insurers.
substitutes, new entrants)
Customers
Doctors who prescribe these medicines
Insurance companies that pay for them (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; B2B: Distributors/intermediaries
Suppliers/
supply chain
Drug manufacturer
Key trends
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.
Drug wholesaler/distributor
retailer/pharmacy/doctor’s office/hospital
patient
12
Airline
Products/services
Air transportation for passengers and cargo
Revenue
Ticket sales, baggage fees, food and beverage sales, freight fees
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
Competitive
landscape (competitors,
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. Barrier to entry include available gate
space.
substitutes, new entrants)
Customers
Individual passengers, corporate travelers, travel agents/websites
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.)
Suppliers/
supply chain
Aircraft manufacturer, avionics manufacturer, aircraft leasing companies, fuel providers, airport
operators, flight training providers, catering providers, aircraft maintenance providers
Key trends
Growth is limited in this market, in 2014 growth was 3%, total expected growth by 2019 in 8.3% over the
passenger volume in 2014. Recent years have seen consolidation of legacy carriers (United and
Continental, American and US Airways)
13
Media
Products/services
Media sector includes print, audio and video content generation and distribution.
Revenue
Advertising is a key revenue driver, additional revenue sources are subscriptions, one-time
purchases (video on demand, DVD purchase), licensing fees
Costs
Production costs (salary, technology, location fees etc), distribution costs, marketing and
advertising, promotions, capital costs (studios, equipment etc.)
Competitive
landscape (competitors,
Highly competitive with a few major players owning most of the market. New entrants such as
Hulu and Netflix are changing the market.
substitutes, new entrants)
Customers
Individual viewers are part of the product for most ad-revenue driven models. The main
customers there are the advertising companies. For subscription based models, the end viewer
or consumer of the content is the customer.
Distribution
channel(s)
Online streaming is the fastest growing channel, tradition distribution through retail outlets still
exists. Additional distribution through theaters and other ‘live’ events.
Suppliers/
supply chain
Technology providers (particularly internet service providers are becoming key in
allowing high speed streaming), actors, artists and musicians
Key trends
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 starting to create original
content to remain competitive
14
Technology
Products/services
Broad industry consists of PCs, servers, semiconductors, internet service providers, communications providers and
equipment, IT services, software and application development, and internet companies. Is part of every industry
Revenue
Varies by type of product. For PCs revenue is primarily from sales of PC and also from support, for internet mobile
applications revenue is driven by clicks on ads. IT services revenue is tied to staff utilization per employee.
Costs
Costs vary by the product, for software the initial R&D cost is high but the marginal cost for production is negligible.
For PCs and servers input costs include component costs, labor costs, distribution and support costs.
Semiconductors have high fixed costs.
Competitive
landscape (competitors,
Few large competitors in the PC and server space, many competitors in the software and application development
space. Internet companies have low barriers to entry and thus a highly competitive environment; acquisitions of
smaller players are common by the internet giants.
substitutes, new entrants)
Customers
Varies by product: ranges from individual customers and corporations to companies looking for advertising
channels. Internet companies tend to be B2C (ad click revenue), 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
For hardware: various suppliers include raw material providers, semiconductor manufactures, machine and
technology providers
For software: supply chain includes software testing houses, distribution through 3rd party such as app store
Key trends
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.
15
Banking and Financial Services
Overview: Industry offers services like lending, insurance, and securities management
•
•
•
•
Types of banks: commercial banking, retail banking, investment banking
Products include credit cards, mortgages, loans, insurance, and checking/savings accounts
Customers can be segmented by income levels, individual vs small business vs large business
Highly competitive: international and national players compete with regional banks and new online banks
Revenue Drivers:
Cost Drivers:
•
•
•
•
Interest
Fixed or Variable Fees (trading commissions,
M&A fees, asset management fees)
Premiums
•
•
•
•
•
IT (back-end processing, security, apps &
websites)
Real estate costs (physical branches)
Labor (customer service commonly off-shored)
Marketing
Research (e.g., on securities)
Losses on investments (e.g., loan defaults)
Important Considerations / Trends:
•
•
•
•
Use of AI / Blockchain to verify transactions
Growth of mobile banking; disruption in the industry from Fintech and online banks
Regulations within the industry – e.g. Dodd-Frank increased capital requirements for banks
Changes in customer demographics creating a larger market for retirement products
© 2019 NYU | Stern MCA – All Rights Reserved
20
Retail
Overview: Industry consists of department stores, wholesale retailers, discount stores, speciality retailers, and
online retailers. Amazon and other online retailers caused major disruption in the industry by lowering operating
costs and passing savings to customers. Technology also reduced bargaining power of retailers as customers can
easily compare prices online.
Revenue Drivers:
Cost Drivers:
•
•
•
•
•
•
•
•
•
•
•
•
•
Traffic (foot / online)
Conversion rate (visits vs purchases)
Basket size (driven by consumer spending)
Avg. price per item
Other revenue (e.g., after sales services)
Key Metrics:
• Sales per square foot
• Inventory turnover
• Total revenue = traffic * conversion rate * basket
size * avg. price per item
Cost of goods sold
Returns
Inventory management (storage and stock)
Distribution
Delivery
Labor
Real estate
Online retail – technology cost
Important Considerations / Trends:
•
•
•
•
•
•
Seasonality is a big factor in retail sales – large portion of sales occur in holiday season / end of year
Industry is very impacted by economic conditions
Social media presence has a large impact on brand strength and perceptions
Omnichannel retail is growing through e-commerce development or acquisition
More private label products (i.e. Walmart brand instead of manufacturer brand)
Use of big data to tailor the shopping experience
© 2019 NYU | Stern MCA – All Rights Reserved
21
Consumer Packaged Goods (CPG)
Overview: Industry consists of household durable and non-durable products. Mature industry and concentrated
market in the US with most growth coming from emerging markets. Sales are impacted by type of product – luxury
vs basic necessity. Customers can be retailers or end users.
Revenue Drivers:
Cost Drivers:
•
•
•
•
•
•
•
•
•
•
•
•
•
Sales direct to consumer (higher margins)
Sales to retailers (lower margins)
Shelf placement in stores
Packaging and price tiering
Product mix (cannibalization vs complementary
products)
Cost of goods sold (raw materials)
Manufacturing facilities (owned or leased)
Packaging
Distribution & inventory management
Marketing
R&D – new product innovation
Environmental and regulatory costs
Durables – spoilage
Important Considerations / Trends:
•
•
•
•
•
•
•
Discounts and price promotions have lowered margins
Cannibalization can be a concern when introducing new products, so firms regularly rationalize brands
Tariffs and regulations play a role in imports / exports and where the firm is manufacturing or sourcing
Small firms compete via specialization or local targeting
High buyer power for retailers (e.g., Walmart)
Demand has recently increased for organic / socially minded companies
In-store experiences are one way to increase direct to consumer sales
© 2019 NYU | Stern MCA – All Rights Reserved
22
Technology
Overview: Includes online services (security, productivity, platforms – Google, Amazon, Dropbox), hardware
(computers, smartphones, servers – Apple, Samsung, Lenovo), software (search, storage – Microsoft, Oracle,
Adobe). Key customer segments include: large companies, small/medium businesses, retail/consumers.
Revenue Drivers:
Cost Drivers:
Online services
• Ad revenue (especially for free services)
• Subscriptions (mostly B2B)
Hardware
• Sales: price * # of goods sold
• After sales services
Software
• Licenses
• Managed services (SaaS)
Online services
• R&D
• Product development
• IT & back-end infrastructure
• Customer service
Hardware
• Component COGS
• Manufacturing & labor
Software
• High up-front investment in development
• Lower variable costs following product launch
• Privacy protection
Important Considerations / Trends:
•
•
•
•
•
Innovation in the industry has reduced product life spans and increased obsolescence
Firms are trying to create ecosystems (e.x. Google Home, Amazon Echo)
Businesses want dynamic software with low implementation costs
Software sales are highly dependent on network effects
Key Terms: Internet of Things, cloud computing, Blockchain, AI / Machine Learning, GDPR
© 2019 NYU | Stern MCA – All Rights Reserved
23
Healthcare Providers (hospitals, nursing homes)
Overview: The industry consists of facilities, distributors, and service providers (e.g. hospitals, emergency care
facilities, clinics, nursing homes, pharmacies). Rising healthcare costs in the US.
Revenue Drivers:
Cost Drivers:
•
•
•
•
•
Collections from third party payers (i.e. insurance
companies)
Co-payments
Government re-imbursement (~50% of spend)
Inpatient & outpatient treatment costs (without
insurance)
•
•
•
•
•
Key Metrics:
• Bed capacity utilization
• # of deaths in surgery
• # of patients seen
High upfront investment in hospital facilities and
equipment
Physicians (i.e. doctors & nurses)
Medical suppliers
Insurance (malpractice liability)
SG&A
Other labor
Important Considerations / Trends:
•
•
•
•
•
•
•
Shortage of physicians and nursing staff
Frequency and cost of medical visits increase with age
New technology advancements allow for more outpatient procedures (as opposed to inpatient)
Rise in unemployment correlates with a decline in elective procedures
Wearables (e.g., Apple Watch) are keeping people healthier
More data allows for personalized care and faster recommendations
Non-profits partner with for-profits to decrease costs
© 2019 NYU | Stern MCA – All Rights Reserved
24
Healthcare Payers (insurance companies)
Overview: Industry provides insurance coverage to both companies and individuals. Insurance is heavily based
on risk measurement and forecasting the inflows and outflows of cash. Five main types of plans exist:
• Fee for Service (FFS): insurance pays one-off providers and patients sees anyone they want
• Health Maintenance Organization (HMO): integrated payer and provider; cheaper but less selection
• Preferred Provider: mix of FFS and HMO
• High Deductible: lower premium; on patient to use services efficiently
• Pharmacy Benefits
Revenue Drivers:
Cost Drivers:
•
•
•
Insurance premiums
Government subsidies
Key Metrics:
• # of doctor visits
• # of people employed
• Population age
• Total health expenditures
•
•
Payouts to healthcare providers – insurance
companies often negotiate directly with healthcare
providers on reimbursement rates; billed price is
typically paid at a discount
Re-insurance
Labor
Important Considerations / Trends:
•
•
•
•
Market is slowly consolidating (top 4 payers are 35%), with the rest fairly fragmented.
Industry has been affected by healthcare reform – increases in bottom line due to pressure to eliminate /
lower coverage caps, reduce denials based on pre-existing conditions, and increase in insured population
Firms differentiate based on broader network coverage, lower administration fees, steeper discounts on
provider charges, and add-ons (e.g., case management)
Price comparisons occur on exchanges / online marketplaces
© 2019 NYU | Stern MCA – All Rights Reserved
25
Life Sciences / Pharma
Overview: Industry encompasses originator drug producers, generic drug manufacturers and pure R&D firms. It
can take years to get a new drug approved and on the market. Strict and cumbersome regulatory processes.
Customers can be doctors / providers or patients.
Revenue Drivers:
Cost Drivers:
•
•
•
•
•
•
•
•
Drug sales – difference in price comes from OTC /
prescription drugs
3rd party payer reimbursement
Government subsidies
Key Metrics:
• # of patented drugs
• Market sizing: total population → % with illness →
% diagnosed → market share of drug → price of
one dose * # of doses per year
Important Considerations / Trends:
•
•
•
•
•
High growth in emerging markets
Patents protect drugs for up to 20 years
First mover advantage is real
FDA approvals last 5 years with a high failure rate of drugs
Increasing demand for pricing transparency
© 2019 NYU | Stern MCA – All Rights Reserved
26
High R&D
Regulatory and legal costs (e.g., patents, FDA)
Manufacturing and production
Distribution and sales
Labor
Airlines
Overview: Two types: cargo and commercial. Within commercial airlines segments include international vs
national vs regional, and low cost vs legacy carriers. Two main traveller types: leisure (price sensitive) vs business
(price inelastic). Industry faces extensive price competition.
Revenue Drivers:
Cost Drivers:
•
•
•
•
•
•
•
•
•
•
Ticket fees
Extra baggage fees
In-flight purchases (e.g., food and beverages,
entertainment)
• Tiered amenities (e.g., extra leg room seats)
• Ancillary revenue (e.g., reservation changes)
• Cargo fees
Key Metrics:
• Load factor = % of aircraft capacity filled by paying
passengers
•
•
Gate leases
Fuel
Aircraft leases
Insurance & Legal fees
Maintenance / equipment
Crew & ground staff salaries
In-flight consumables (e.g., food and beverages,
entertainment)
Marketing
Technology (e.g., booking system)
Important Considerations / Trends:
•
•
•
•
•
Major consolidation within industry due to high fixed costs
Rise in third party booking websites (e.g., Booking.com, Expedia)
Airlines use rewards programs (miles) and partnerships with hotels, car rentals and credit card companies to
increase loyalty / differentiate
Low cost carriers (e.g, Southwest, Spirit) creating price wars
Reduce costs by fuel efficiency opportunities and route optimization
© 2019 NYU | Stern MCA – All Rights Reserved
27
Media & Entertainment
Overview: The industry encompasses the creation, licensing and/ or distribution of video, audio, and print
media. Major disruption in the industry due to digital content. Disruptors include online news and online streaming
services (e.g., Netflix, Hulu).
Revenue Drivers:
Cost Drivers:
•
•
•
•
•
•
Advertising (largest revenue category, especially
for media offered free to customers)
Subscriptions
Licensing fees
One-time purchases
Merchandise
•
•
•
•
Media production (e.g., studios, equipment,
printing presses)
Talent (e.g., actors, editors, writers)
Other labor (e.g., sales staff)
Marketing
Technology – especially for digital media
Key Metrics:
• Viewership / Readership
Important Considerations / Trends:
•
•
•
•
•
•
Very consolidated due to history of conglomerates
High importance of network effects to grow viewership / readership
Most media has shifted to omnichannel presence
Digital media has low barriers to entry, creates downward pressure on ad prices, and increases piracy risks
Consumer and advertising spending is highly influenced by macroeconomic conditions
Augmented reality / virtual reality technology
© 2019 NYU | Stern MCA – All Rights Reserved
28
Oil & Gas
Overview: Oil & Gas is a stage based industry. Majority of market share tied to upstream operations.
•
•
•
Upstream: Drilling and extracting raw oil (usually contracted out)
Midstream: Transporting the raw oil
Downstream: Refining and selling the finished petroleum products
Revenue Drivers:
Cost Drivers:
•
•
•
Upstream
• Exploration (e.g., land leases)
• Rig rates (usually daily) & rig utilization
• Drilling and extraction equipment & labor
Midstream
• Crude oil
• Storage
• Transportation
• Pipeline construction
Downstream
• Crude oil
• Refinery equipment & labor
Upstream: Crude oil price
Midstream: Transportation fees
Downstream: Sale of gasoline, oils, fuel, and other
petroleum products
Important Considerations / Trends:
•
•
•
Organization of Petroleum Exporting Countries (OPEC) accounts for ~44% of global oil production and ~73%
of the worlds proven oil resources. OPEC effectively controls the price of oil.
Tech (e.g., fracking) increases output and pushes costs down
Liability for spills
© 2019 NYU | Stern MCA – All Rights Reserved
29
Industrials
Overview: Provides products and services primarily used to produce other goods. Main sectors include
electrical equipment / components, heavy machinery, construction, and aerospace and defense. Main customers
include the government, OEMs, and B2B. Market is very consolidated, functioning as an oligopoly.
Revenue Drivers:
Cost Drivers:
•
•
•
•
•
•
Volume (driven by product type and demand)
Contract length
Bundling of product and services (e.g.
maintenance package)
Customization (made to order vs. large batch)
New technologies and products (automation)
•
•
•
•
•
Key Metrics:
• Capacity utilization
• Inventory turnover
• Book-to-bill ratio
Manufacturing – capital intensive (can be leased /
owned)
Raw materials
Labor – often unionized
R&D
Marketing & trade shows
Distribution & inventory management
Important Considerations / Trends:
•
•
•
•
•
Tied to gross domestic product (GDP) growth, production and capacity utilization, and economic indicators
Greatly impacted by recession, as drop in overall capital and construction spend decreases
Local assembly is cheaper because it’s easier to ship
Push to just-in-time inventory
Often commoditized, with high switch costs
© 2019 NYU | Stern MCA – All Rights Reserved
30
Casing Math
Numbers to Know
Casing math is one of the essential skills
to master. While the specific mathematics are
rarely complex, quick recognition, shortcuts, and
application of key concepts is essential to
progressing efficiently and saving time to focus
on other aspects of the case.
What follows is a list of common
concepts and constants that you should become
familiar with. The list is by no means exhaustive
but will provide a solid foundation for you to begin
building speed and accuracy.
•
Multiplication Table up to 20 * 20
• Be particularly familiar with perfect squares
•
Division rules
•
Be comfortable working with percentages
•
Fractions as Decimals
Finally, one of the most common
mistakes made is with orders of magnitude. Find
the way that most makes sense for you to keep
track of zeros as they can make or break a case.
For some, it’s scientific notation while others
prefer simply using letters.
example: K * K = M and B / K = M
1/6
.1667
1/7
.1428
1/9
.1111
1/11
.0909
1/12
.0833
1/15
.0667
1/16
.0625
1/18
.0555
14
© 2019 NYU | Stern MCA – All Rights Reserved
Casing Math: Key Formulas
Net Present Value
•
•
•
𝑁𝑃𝑉 =
•
Percent Change
Know how to set up NPV calculations for both
perpetuities and annuities.
Do not forget to include initial investment costs, if
applicable
Perpetuity (if the cash flow is constant, g = 0):
% 𝑐ℎ𝑎𝑛𝑔𝑒 =
𝑒𝑛𝑑𝑖𝑛𝑔 𝑣𝑎𝑙𝑢𝑒 − 𝑏𝑒𝑔𝑖𝑛𝑛𝑖𝑛𝑔 𝑣𝑎𝑙𝑢𝑒
𝑏𝑒𝑔𝑖𝑛𝑛𝑖𝑛𝑔 𝑣𝑎𝑙𝑢𝑒
% 𝑐ℎ𝑎𝑛𝑔𝑒 =
𝐶𝑎𝑠ℎ 𝐹𝑙𝑜𝑤
𝑐
=
𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡 𝑅𝑎𝑡𝑒 − 𝐺𝑟𝑜𝑤𝑡ℎ 𝑅𝑎𝑡𝑒 𝑟 − 𝑔
Annuity:
𝑁𝑃𝑉 = 𝑐0 +
𝑐1
𝑐2
+
1+𝑟
1+𝑟
2
+
𝑐3
1+𝑟
𝑒𝑛𝑑𝑖𝑛𝑔 𝑣𝑎𝑙𝑢𝑒
− 1
𝑏𝑒𝑔𝑖𝑛𝑛𝑖𝑛𝑔 𝑣𝑎𝑙𝑢𝑒
Rule of 72
3
+ …
Investments double in
72
% 𝐴𝑛𝑛𝑢𝑎𝑙 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑅𝑎𝑡𝑒
Break Even
Return on Investment
𝐹𝑖𝑥𝑒𝑑 𝐶𝑜𝑠𝑡 = 𝑄𝑢𝑎𝑛𝑡𝑖𝑡𝑦 ∗ 𝑃𝑟𝑖𝑐𝑒 − 𝑉𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝐶𝑜𝑠𝑡
•
•
Has many applications to solve for any unknown
P – VC is the contribution margin
© 2019 NYU | Stern MCA – All Rights Reserved
𝑅𝑂𝐼 =
15
𝐺𝑎𝑖𝑛 − 𝐶𝑜𝑠𝑡
𝐶𝑜𝑠𝑡
years
Casing Math: Accounting
Income Statement
GAAP
Margins
𝐺𝑟𝑜𝑠𝑠 𝑀𝑎𝑟𝑔𝑖𝑛 =
Non-GAAP
Revenue
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑀𝑎𝑟𝑔𝑖𝑛 =
- COGS
𝑁𝑒𝑡 𝑀𝑎𝑟𝑔𝑖𝑛 =
= Gross Profit
- SG&A
𝑅𝑒𝑣𝑒𝑛𝑢𝑒 − 𝐶𝑂𝐺𝑆 𝐺𝑟𝑜𝑠𝑠 𝑃𝑟𝑜𝑓𝑖𝑡
=
𝑅𝑒𝑣𝑒𝑛𝑢𝑒
𝑅𝑒𝑣𝑒𝑛𝑢𝑒
𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
𝑅𝑒𝑣𝑒𝑛𝑢𝑒
= EDBITDA
- Depreciation
= Operating Profit
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑃𝑟𝑜𝑓𝑖𝑡
𝑅𝑒𝑣𝑒𝑛𝑢𝑒
Markups
= EBIT
𝑀𝑎𝑟𝑘𝑢𝑝 =
- Interest, Taxes
+ Gains
𝑃𝑟𝑖𝑐𝑒 − 𝐶𝑜𝑠𝑡
𝐶𝑜𝑠𝑡
Inventory Turns
- Losses
𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑇𝑢𝑟𝑛𝑠 =
= Net Income
𝐴𝑛𝑛𝑢𝑎𝑙 𝐶𝑂𝐺𝑆
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦
𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑃𝑒𝑟𝑖𝑜𝑑 =
note: Gains and Losses refer to Gains/Losses on, for
example, the sale of PP&E.
© 2019 NYU | Stern MCA – All Rights Reserved
note: do not confuse with margin
365 𝐷𝑎𝑦𝑠
𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑇𝑢𝑟𝑛𝑠
16
Casing Math: Market Sizing
Market Sizing Approach
Common Market Sizing Constants
Market sizing is a common case interview
component as it tests your structure, creativity, estimation
skills, and mathematics. Familiarize yourself with the two
most common approaches: top-down and bottom-up. Then
follow this methodology:
•
•
•
•
Lay out the problem before doing any multiplication
•
Structure the items you need, and how they’ll
interact (addition, multiplication, division, etc.)
•
Don’t make it more complicated that it has to be
Make and state assumptions. Be open to feedback
from your interviewer and adjust if necessary.
•
Try to pick numbers that are easier to work with
Always gut check your answer
•
There are wrong answers. If your sizing feels off,
go back and challenge your assumptions.
•
If the number makes sense, don’t stop there.
Make an insight and drive the case forward.
Market sizing questions can appear as part of a larger
case or as the case itself
•
Recognizing the context of the question will help
to inform the complexity of your approach
Always remember the scope of the market you are sizing
(e.g., US vs Global) and never forget the units you are
solving for!
© 2019 NYU | Stern MCA – All Rights Reserved
17
•
•
•
US Population: 320 M
NYC Population: 8 M
US Households: 120 M
•
•
US Life Expectancy: 80 years
US Population Growth (CAGR): ~0.7%
•
•
•
US GDP: 19T
US GDP CAGR: ~2%
Median Household Income: ~$60,000
•
•
•
•
Europe Population: 740 M
Asia Population: 4.4 B
Africa Population: 1.2 B
Global Population: 7.4 B
Additional Casing Resources
Resource
Uses
Cost
Management
Consulted
•
•
•
Additional case access
Firm overviews, skill practice
1-on-1 casing practice ($)
Most resources free through
MCA subscription
FastMath
•
Mental math tutorials and practice
$49 (sign up with Stern email
address)
S&P Industry Reports
•
Industry insights (e.g., margins, growth, drivers)
Free through Stern dashboard
Rocket Blocks
•
•
•
Framework drills
Charts and data analysis skills work
Mental math practice
$35 / month or $155 / year
•
Various resources including fast math and framework
practice to resume and cover letter coaching
Look Over My Shoulder program is a collection of
audio files of example live-cases, both good and bad
Most resources free through
MCA
Case Interview
Secrets
•
Other resources: https://nyustern.campusgroups.com/mca/links/
© 2019 NYU | Stern MCA – All Rights Reserved
18