McKinsey Case Interview
Case Interviews
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How to make the most of the sample cases
Our sample cases are based on past McKinsey case interviews to ensure you train
with the most realistic material possible. Here are a few tips to make the most of
them:
1. No calculator
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you. In both situations, you should aim to solve the full case without a calculator
and without looking at the answer key.
2. Do cases out loud
If you are practicing by yourself, you should both play the role of the interviewer
and of the interviewee and you should speak out loud. This might sound a little odd
but candidates who force themselves to use this technique are progressing much
faster than others because it better reproduces the conditions of the interview.
3. Complete the case in 30 to 40mins
McKinsey interviews usually last between 45 and 60 minutes. The personal
experience part of the interview takes 25% of the time on average and the case
interview takes the remaining 75%. We therefore strongly advise you to complete
each of the following cases in 30 to 40 minutes.
4. Study the answer key carefully
After completing the case, you should study the answer key in details. You need to
pay attention both to the content of the answers and to the way it is communicated.
Most candidates are only focused on the content and whether they got to the right
answer. But in reality, your interviewer will also evaluate you on how you
communicate. Do not hesitate to repeat parts of the answer out loud. This will help
you develop a habit of communicating in a structured way.
5. Do cases multiple times
Finally, do the cases multiple times. You might think that you will remember the
answers, but if you wait a couple of days you probably won’t remember them very
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well. In our experience, it is better to do 20 cases and to learn a lot from them than
40 cases without spending time analysing the best way to answer them.
Doing cases a second time will enable you to keep track of your progress and to
double check that you are not making the same mistakes twice. We also
recommend that you keep a notebook where you write down what you've learned
at the end of each case. You can then refer back to it when you do a case for the
second time.
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understand the explanations in the answer key, just drop us a line
at: support@igotanoffer.com. We’ll be happy to fill any gaps!
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Table of Contents
Case #1 - Meditech ................................................................................................................. 5
Case #2 – Alset ......................................................................................................................15
Case #3 – Zeta Bank .............................................................................................................26
Case #4 – Quidi Market .......................................................................................................38
Case #5 - Electron .................................................................................................................49
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Case #1 - Meditech
1. Situation
Your client is a pharmaceutical company called Meditech. It supplies European
hospitals with machines to store and analyse blood at a price of approximately
$10k per machine. The profits for the whole industry have been declining over the
past two years and Meditech is looking for new ways to increase profitability.
The CEO is considering entering a new market with a device called the Gloucoskov.
People who suffer from diabetes can use this device at home in order to monitor
their glucose levels. The device will be priced at $120 and customers will also have
to purchase disposable paper stripes.
2. Framework development
What areas would you investigate to determine whether Meditech should enter this
new market?
3. Quantitative question – Data provided
Question 3.a.
Meditech wants your team to investigate if the UK could be a good market for the
Gloucoskov. What is the size of the UK market for this new product today, in two
years and in four years? Assume the price of the device will drop by 33% and 45% of
the initial price within two and four years respectively.
Question 3.b.
Your team has collected information about Meditech’s competitors in the UK. This
information is presented in the table below:
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UK sales for monitoring diabetes devices
Companies
4 years
3 years
2 years
ago
ago
ago
1 year ago
Present
A
$900,000
$1,800,000
$2,600,000
$3,000,000
$3,100,000
B
$1,000,000
$1,900,000
$2,500,000
$3,000,000
$3,000,000
C
$500,000
$700,000
$1,200,000
$1,500,000
$1,600,000
D
$1,000,000
$1,100,000
$1,200,000
$1,300,000
$1,300,000
Others
$1,500,000
$1,600,000
$1,800,000
$1,850,000
$1,850,000
Total
$4,900,000
$7,100,000
$9,300,000
$10,650,000 $10,850,000
What are some of the insights you can draw from this table and how could they
affect Meditech’s decision to enter the new market?
Meditech also provided you with the following information:
•
R&D cost for the Gloucoskov device: $30m
•
Variable cost: $40 / device
•
Targeted payback period if selling the device at $120: 5 years
4. Creativity question
What are some of the things Meditech could do to make selling the Gloucoskov
devices more profitable?
5. Recommendation
After eight weeks of rigorous analysis it is time for your team to present its findings
to Meditech’s CEO. What would you tell the CEO?
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Answers
1. Situation
Before answering the framework question, you should:
•
Play back the company situation
•
Define the case objective
To play back the company situation, you should summarise what your interviewer
told you. This will enable you to avoid any misunderstandings. In addition, you
could also ask follow up questions that will help you get a better grip on the
situation. For instance, you could ask:
•
Does Meditech design, manufacture and distribute the Gloucoskov devices?
Or does it outsource any parts of the process?
•
Is the product ready to be launched or is still under development?
•
Does Meditech plan to launch the product worldwide or in a specific
geography?
Prior to diving into the framework question, it is also advisable to further define the
objective of the case. Examples of questions you could ask include:
•
I understand the CEO wants to increase profitability. Do we know by how
much and by when he wants to increase profitability?
•
I understand the CEO wants us to focus on new markets. Can you confirm
there aren’t any other devices than the Gloucoskov he wants us to analyse?
2. Framework development
To answer framework questions, you should:
•
Ask for some time to gather your thoughts
•
Extract the main elements from the case question and situation
•
Break down these elements into simple components
In this situation, the main elements that can be extracted from the case question
and situation include:
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A. The CEO wants to increase the company’s profitability. Analysing if the
market you are entering is profitable is therefore essential
B. In addition, entering new markets or launching new devices in healthcare
usually requires regulatory approvals. As a consequence, this area is also
likely to be very important
Let’s now breakdown these main elements into sub components:
A. Market profitability
1. Revenue
a. Number of units sold: What is the market size for diabetes devices?
Who are the biggest competitors in the market? What can Meditech do
to capture a high market share?
b. Price: Are customers willing to pay $120 for the device? Does this price
enable Meditech to recover its costs? How much does the competition
charge for similar devices?
2. Costs
a. Upfront costs: Could Meditech acquire a company to get into this new
market quicker?
b. Fixed costs: How much is Meditech expected to spend to develop its
Gloucoskov devices? Does Meditech need a new manufacturing unit
for its Gloucoskov devices?
c. Variable costs: How high are raw materials and labour costs to
manufacture the Gloucoskov device? Can Meditech take advantage of
its existing assets in order to reduce variable costs (i.e. use the same
distribution channels)?
B. Regulation
1. Regulatory approvals: Does Meditech need regulatory approvals to launch
the Gloucoskov? What are the different approvals required and the chances
of success for each approval?
2. Technology standards: Are there technological standards that Meditech
needs to respect to obtain certain certifications (E.g.: ISO)?
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3. Distribution regulation: Can Meditech sell its Gloucoskov devices directly to
customers or does it have to distribute them via third parties (E.g.:
Pharmacies)?
This framework includes a number of elements that can be prioritised in order of
importance. Here the first priority is to understand if the market is profitable. If it
isn’t then it will not be interesting for Meditech to launch the Gloucoskov devices.
However, if it is profitable, it then makes sense to worry about the regulation.
3. Quantitative question – Data provided
Question 3.a.
To answer maths questions, you should:
•
Map out the calculations you are going to do
•
Present your plan to your interviewer to get feedback before starting the
calculations
•
Do your calculations and simplify the numbers when possible
If a plan does not come to you naturally when trying to answer the question, it is ok
to ask your interviewer for a few seconds to gather your thoughts.
Here is a potential plan you could have shown to your interviewer for this specific
question:
1. Estimate number of people with diabetes in the UK
2. Estimate number of monitoring devices sold per year
3. Estimate market value today, in two years and in four years
Let’s now do the calculations and simplify the numbers when possible:
1. Number of people with diabetes in the UK
•
There are about 60m people in the UK
•
The UK population can be split in 5 age groups of equal sizes assuming 75
as life expectancy. Each group can be assumed to have the same number
of people.
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o 0 – 15
o 16 – 30
o 31 – 45
o 46 – 60
o 61 – 75
•
People above the age of 60 are older and therefore probably more likely
to suffer from diabetes. Let’s assume that 5% of people in this age group
suffers from the disease. For the other age groups, let’s assume that 1%
of the group is a diabetes sufferer.
•
The number of diabetes sufferers in the UK is therefore:
o 60m x 20% x 5% + 60m x 80% x 1% = 1.08m people
2. Number of monitoring devices sold per year
•
Assuming patients replace their monitoring kit every 10 years on average,
10% of patients will buy a new kit every year.
•
The number of devices sold yearly is therefore:
o 1.08m x 10% = 108,000 or about 100,000
3. Market value today, in two years and in four years
•
We can assume the suggested selling price of $120 for the Gloucoskov is
the average market price and therefore the current market size is:
a. 100,000 x $120 = $12m
b. In 2 years, the market size will be: 100,000 x $120 x (1 – 0.33) =
$8m
c. In 4 years: 100,000 x $120 x (1 – 0.45) = $6.6m
Once you found the answer to the maths question, you need to:
•
Relate the result back to the broader case question
•
Suggest next steps in the analysis
In this case, the size of the market seems to be falling rapidly. If our price
assumptions are correct, it will almost halve in 4 years. This suggests the market is
not very attractive for Meditech unless it manages to decrease its production costs
as rapidly as the price falls. A potential next step could be to analyse where this
price reduction comes from and if it is due to intense competition in the market.
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IGotAnOffer Special Tip
Assumptions
You need to make assumptions to answer this question (e.g. percentage of
diabetes sufferers in each age group). These assumptions should be anchored to
some sort of argument whenever possible (e.g. older people are more likely to
have diabetes).
Before actually diving in the calculation, you should check whether your
interviewer is ok with your assumptions or not. The easiest way to do this is
through eye contact. If you look at your interviewer you will quickly realise if he
agrees with the assumption you have just made or not.
Rounding up / down
You can round numbers up or down to make your calculations easier within
reason. A good rule of thumb is that you should not round numbers up or down
by more than 10%. As you do this you should keep an eye on your interviewers’
reactions to make sure he is comfortable with your estimates
Question 3.b.
At the start of a data interpretation question, you need to make sure you
understand the headers, axes and units of the graphs you will be interpreting.
Whenever possible, you should read tables horizontally first and focus on
extracting trends from the totals. You can then switch to reading the table vertically
to extract complimentary insights.
Here are some insights that can be extracted by reading the table horizontally:
•
First of all, looking at the total market size we notice that the market has
more than doubled over the past four years. That being said, growth has
slowed down over the past two years
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•
The individual companies all grew every year until a year ago. Some of them
did not grow in the past year. This is consistent with the trend observed on
the total market size and raises concerns about the attractiveness of the
market
The following trends can also be extracted by reading the table vertically:
•
Four years ago, four big players of similar sizes accounted for approximately
60% of the market. The remaining 40% was probably distributed among
many smaller companies
•
Three years ago, companies A and B started to clearly grow market share vs.
the rest of the competition. Today companies A and B account for about 55%
of the market. This high market concentration could raise barriers to entry
for Meditech
The information provided also indicates that Meditech intends to achieve a pay
back of five years for its investment. The number of devices that needs to be sold to
break even in five years can be calculated as follows:
•
# units = Fixed cost / (Selling price – Variable cost)
= $30m / ($120 - $40) = 375k
Once you have analysed the data at hand you need to:
•
Relate the result back to the broader case question
•
Suggest next steps in the analysis
Here, Meditech needs to sell 375k units over five years and therefore 75k units on
average every year for five years to break even. The UK total market size is about
100k according to the previous question. It is therefore unrealistic for Meditech to
break even in five years by entering the UK market, as it will need to capture 75% of
the market. If Meditech wants to enter the UK market it therefore needs to lower
the cost of its Gloucoskov device to be able to break even with a lower market. This
could be the next area we focus.
4. Creativity question
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To answer creativity questions, you should:
•
Ask for some time to gather your thoughts if necessary
•
Develop a simple mini framework
•
Brainstorm within this mini framework
In this case, we can think of two areas to make the Gloucoskov more profitable:
1. Increasing revenue by:
•
Adding valuable features to the device such as a mobile app recording the
test results
•
Providing a service that automatically sends stripes to the device user
before he runs out
•
Launching in more markets than just the UK
2. Decreasing costs by:
•
Acquiring existing players and minimising manufacturing expenses
•
Selling directly to customers rather than through a network of distributors
•
Outsourcing part or all the manufacturing as it decreases capital
expenditure
Once you have developed the ideas above, you should:
•
Prioritise them by impact
•
And highlight risks related to them if necessary
In this case, it could make sense to start by exploring ways to increase revenue, as
an important jump in profitability seems to be needed. This jump in profitability is
less likely to come from the cost side where improvements are usually incremental.
One risk the bear in mind as we explore ways to increase revenue is that some of
the ideas we listed involve upfront costs that will further decrease profitability in
the short-term.
5. Recommendation
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The recommendation is a critical part of the case. Almost without exceptions, this is
what your conclusion should contain:
1. Give your recommendation statement first
2. Then provide supporting arguments, ideally three or more
3. And finally, talk about next steps (additional analysis, potential risks, etc.)
The initial analysis indicates that Meditech should not enter the UK home-kit
diabetes market for the following reasons:
1. It needs to capture virtually the whole market to break even in five years
which is not realistic
2. The value of the home-kit diabetes market seems to be plateauing making
suggesting that competition is likely to be increasingly fierce over time
3. There are already two big players in the market (companies A and B) and it
will be difficult for a new player like Meditech to take a large share of the
market away from them
However, there are further areas that could be explored to solve Meditech’s
profitability issue:
1. It could analyse other markets than the UK
2. It could think about buying one of the existing players
3. It could also explore ways to fix the profitability of its current product
IGotAnOffer Special Tip
Note that in most cases, there is no right or wrong conclusion. As long as you
follow the method above and give a good rational for your conclusion, your
interviewer will accept it.
Outlining next steps is important. This is something all consultants do at the end
of projects to sell on the next project. Including that in your conclusion will show
your interviewer that you are aware of how actual projects work!
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Case #2 – Alset
1. Situation
Alset is the 3rd largest automotive company in the world. Alset has recently been
experiencing a decline in profitability in the SUV (Sports Utility Vehicle) category. Its
CEO wants to identify the reasons behind this decline and bring the profit margin of
the SUV category back to where it was two years ago.
Note: SUVs are large 4 by 4 vehicles originally designed to drive in the mountain or
forest. Customers in urban areas have also adopted them.
2. Framework development
What are the areas you would look at to identify the reasons for the profit margin
decline in the SUV category?
3. Quantitative question – Data provided
Question 3.a.
The CEO believes that one of the reasons for the decline in Alset’s profit margin is
the growth in manufacturing costs. He asked your team to look into each
manufacturing facility to verify his hypothesis.
Which manufacturing facility is producing at the lowest cost?
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Manufacturing Cost per Facility ($m)
Oldcastle,
1,550
Reeds, 2,800
Northampton,
1,400
Perminton,
2 000
Nacaster, 800
Facility
Oldcastle Perminton Nacaster Northampton
SUVs
manufactured
250,000
200,000
100,000
70,000
Reeds
280,000
Question 3.b.
A group of analysts from your team collected the data below regarding the cost per
SUV of Alset’s competitors and the total cost for each company for 2015. What are
some of the insights that can be concluded from the data?
Cost Per SUV Sold
14,000
12,000
10,000
$
8,000
6,000
4,000
2,000
0
Panther
WMB
Alset
Manufacturing
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Ronda
SG&A
Gexus
Nord
R&D
16
Total cost
($bn)
Panther
WMB
Alset
Ronda
Gexus
Nord
11.50
14.70
11.07
11.00
12.10
13.91
4. Creativity question
What could Alset do to increase sales in the SUV category?
5. Recommendation
Alset’s CEO is meeting your team tomorrow to discuss your findings and he wants
to know whether it’s possible for his company to increase the profit margin of the
SUV category and what they need to do in order to achieve this. What is your
recommendation?
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Answers
1. Situation
Before answering the framework question, you need to:
•
Play back the company situation
•
Define the case objective
To play back the company situation, you should summarise what your interviewer
told you. This will enable you to avoid any misunderstandings about the situation.
In addition, you could also ask follow up questions that will help you get a better
grip on the situation. For instance, you could ask:
•
Has the decline in profit affected all categories or is it specific to SUVs?
•
Have Alset’s competitors experienced similar issues?
Prior to diving into the framework question, it is also advisable to further define the
objective of the case. Examples of questions you could ask include:
•
I understand the CEO wants us to get profitability back to where it was two
years ago. But how much is profitability today? And how much was it two
years ago?
•
By when does the CEO want to return to historical profitability levels?
•
Can you confirm we are only interested in improving the profitability of the
SUV category?
2. Framework development
To answer framework questions, you should:
•
Ask for some time to gather your thoughts
•
Extract the main elements from the case question and situation
•
Break down these elements into simple components
In this situation, there are two potential drivers behind the decrease in profits:
A. SUV industry total profits: The SUV industry as a whole might be experiencing
difficulties which could partly explain why Alset is experiencing declining
profits
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B. Alset’s share of total profits: Alset might be underperforming and losing
ground in the SUV category against its peers
Let’s now breakdown these main elements into sub components:
A. SUV industry total profits
1. Revenues
a. Number of units: How many SUVs are sold every year? Is the
number of SUVs sold growing / shrinking?
b. Price: What is the average price of an SUV? Is the price growing /
shrinking?
c. Which company is the market leader?
2. Costs
a. What is the average cost of an SUV? Is the cost growing / shrinking?
b. Which company has got the best-cost structure?
B. Alset’s share of total profits
1. Revenues
a. Number of units: How many SUVs did Alset sell over the past few
years? Has this number been growing / shrinking?
b. Price: At what price is Alset selling its SUVs?
c. What type of SUVs does Alset market? Luxury, entry price, etc.?
2. Costs
a. What is the average production cost for an Alset SUV? Is the cost
growing / shrinking?
For this particular framework it is necessary to analyse both areas to make a
conclusion on Alset’s profits. As a consequence prioritising one part of the
framework vs. the other adds no value.
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3. Quantitative question – Data provided
Question 3.a
To answer maths questions, you should:
•
Map out the calculations you are going to do
•
Present your plan to your interviewer to get feedback before starting the
calculations
•
Do your calculations and simplify the numbers when possible
If a plan does not come to you naturally when trying to answer the question, it is ok
to ask your interviewer for a few seconds to gather your thoughts.
Here is a potential plan you could have shown to your interviewer for this specific
question:
•
Calculate the cost per SUV for each facility
•
Identify the lowest cost per SUV facility
Let’s now do the calculations and simplify the numbers when possible.
The cost per SUV can be calculated by dividing the total cost of each facility by the
number of vehicles it produces:
•
Oldcastle: 1,550,000 / 250 = $6,200 / SUV
•
Perminton: 2,000,000 / 200 = $10,000 / SUV
•
Nacaster: 800,000 / 100 = $8,000 / SUV
•
Northampton: 1,400,000 / 70 = $20,000 / SUV
•
Reeds: 2,800,000 / 280 = $10,000 / SUV
Oldcastle is therefore the lowest-cost facility. In fact, Oldcastle is about 70%
cheaper than Northampton; 40% cheaper than Perminton and Reeds; and 25%
cheaper than Nacaster.
Once you found the answer to the maths question, you need to:
•
Relate the result back to the broader case question
•
Suggest next steps in the analysis
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Oldcastle has managed to develop a better cost structure than other facilities. This
is particularly impressive given it is not the facility with the largest scale.
Understanding how Oldcastle manages to produce at such a low cost could
therefore help determining a path to return to profitability. Similarly, understanding
why large facilities such as Northampton produce at high cost would also prove to
be very helpful.
Potential drivers of Oldcastle good profitability include: new machinery, lower cost
of labour, cheaper real estate, etc. We could look into this as a next step in the
analysis.
Question 3.b
At the start of a data interpretation question, you need to make sure you
understand the headers, axes and units of the graphs you will be interpreting.
Whenever possible, you should read tables and graphs horizontally first and focus
on extracting trends from the totals. You can then switch to reading the table
vertically to extract complimentary insights.
In this particular case, the graph is simple enough to be analysed in one go. We can
extract the following insights:
•
Manufacturing costs are the largest contributor to the total cost per SUV for
every company
•
Alset has the highest cost per SUV mainly because of proportionally higher
manufacturing costs than its competitors. This confirms our previous
hypothesis that understanding why Oldcastle performs so well could help
improving profitability
•
Ronda has the lowest total cost and manufacturing cost per SUV. But it also
has the highest R&D costs. This might indicate that high expenditure in R&D
leads to better product designs and therefore lower manufacturing costs.
But it might also just be that Ronda has its manufacturing facilities in areas
where labour and real estate costs are low
•
Alset has both the lowest total cost and the highest cost per SUV. It is
therefore the company that sells the least number of SUVs. This indicates
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that contrary to the CEO’s assumption, Alset might have more than a cost
problem
•
WMB has the highest total cost but the second to lowest cost per SUV. This
indicates it is likely to be the market leader
Once you have analysed the data at hand you need to:
•
Relate the result back to the broader case question
•
Suggest next steps in the analysis
In summary, it seems that Alset has the highest cost per SUV of the group of peers
studied. This is mainly because of high manufacturing costs that are likely to hurt
profitability. However, Alset also seems to have lower sales than their direct
competitor, which means it probably also needs to improve demand for its
products.
We have already found that analysing Oldcastle could give us ways to decrease
Alset’s costs. A potential next step could be to analyse ways in which Alset can
improve its profitability by growing revenues.
IGotAnOffer Special Tip:
You should not hesitate to summarise where your analysis is standing when you
feel you are coming to a natural transition point between questions. This will
help you keep an eye on the broader objective of the case. And it will also keep
your interviewer on board with your progress.
Consultants very often do that in client meetings or at various points during
client projects to make sure everyone is kept on the same page. This is a best
practice you should not hesitate to replicate in case interviews.
4. Creativity question
To answer creativity questions, you should:
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•
Ask for some time to gather your thoughts if necessary
•
Develop a simple mini framework
•
Brainstorm within this mini framework
In this case, Alset could explore the following solutions to increase sales in the SUV
category:
1. Short-term:
•
Increase advertising activities. This could include launching new TV
spots, or sponsoring a major automotive event or increasing spending
on online marketing and social media
•
Focus on growth markets. Some countries such as China probably
experience a booming demand for SUVs and Alset needs to make sure
it is well positioned there
•
Refresh the current SUV models. Slightly update the exterior and
interior designs of the current model to reflect the latest trends and
boost sales
2. Long-term:
•
Identify gaps in the market. Analyse the demand for different types of
SUVs as well as the offer from the competition. And identify specific
gaps in the market that could be addressed by Alset
•
Launch new SUVs in identified gaps. This could include sporty design,
connected car, new hybrid or electric motors, etc.
•
Building the brand. Today’s consumers are examining more factors
when buying cars such as sustainability and corporate responsibility. It
seems important for Alset to adopt these principles and communicate
on its efforts in this space
Once you have developed the ideas above, you should:
•
Prioritise them by impact
•
And highlight risks related to them if necessary
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In terms of prioritisation, it makes sense to first focus on the short-term actions, as
they are easier to implement than the long-term ones. It should also be highlighted
that there are some risks involved related to these actions. The main one is that
most of them require some form of investment. As a consequence, in the very near
term these actions are likely to degrade profitability.
IGotAnOffer Special Tip:
If you do not feel that you have enough context from your interviewer to
brainstorm relevant ideas it is ok to ask a few questions to clarify the company’s
situation. This will help you get specific ideas that are well adapted to the
company. Your interviewer will value this, as general ideas are usually less
effective than specific ones.
For instance, here you could have asked: “When did Alset launch its latest SUV
model?” or “Which countries is the company currently focusing on?” or “Does the
company have any vehicles with hybrid or electric motors?” etc.
5. Recommendation
The recommendation is a critical part of the case. Almost without exceptions, this is
what your conclusion should contain:
4. Give your recommendation statement first
5. Then provide supporting arguments, ideally three or more
6. And finally, talk about next steps (additional analysis, potential risks, etc.)
This initial analysis indicates that it seems possible for Alset to increase its profit
margin in the SUV category by focusing on the following:
•
Reduce the manufacturing cost in underperforming facilities like
Northampton by adopting the success factors of other facilities like Oldcastle
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•
Use the savings to increase the R&D budget. This should help further
decrease manufacturing costs in the long-term and create a virtuous
profitability increase loop
•
Identify market gaps in the SUV category and fill them with new SUV models
to boost Alset’s sales
This recommendation is based on initial findings and could be consolidated by
further analysing certain areas. Next steps could include:
•
Understanding if the SUV industry as a whole is profitable and growing. This
should give a good indication of whether the SUV segment is the right
segment for Alset to focus on
•
Understanding how much of Alset’s total profits are driven by the sales of
SUVs. This should also give a good indication of whether Alset should
continue pursuing SUVs or if it should redeploy its efforts in other areas
IGotAnOffer Special Tip:
Note that in most case interviews, there is no right or wrong conclusion. As long
as you follow the method above and give a good rationale for your conclusion,
your interviewer will accept it.
Outlining next steps is important. This is something all consultants do at the end
of projects to sell on the next project. Including that in your conclusion will show
your interviewer that you are aware of how actual projects work!
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Case #3 – Zeta Bank
1. Situation
Your client is Zeta Bank, a major UK bank. Zeta Bank’s aging IT system and its
myriad of new products has increased the complexity of its operations. A lot of
simple tasks such as changing a customer address or updating a customer on the
status of his loan application require manual intervention. This has led to an
increase in customer complaints about service quality and response times.
The Chief Information Officer (CIO) wants to increase next year’s IT budget to
develop digital tools that will decrease manual intervention to answer simple
customer questions. The CEO also wishes to improve customer service because he
is planning to expand Zeta Bank’s presence globally. That being said he is
concerned that the £5m increase in the CIO’s budget will not deliver the expected
improvement in customer satisfaction.
2. Framework development
What areas would you look at to address the CEO’s concerns?
3. Quantitative question – Data provided
The analytics team at Zeta Bank collected data on customers who call the bank for
simple queries that require a lot of manual intervention from the Operations team
to resolve. It then calculated average processing and resolution times:
Queries regarding
Processing
Resolution time
Queries per
time (h)
(h)
month
Loan applications
2
48
150
Online banking
2
24
300
Credit cards
1
2
500
Change of contact details
10
11
100
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The time between a customer making a query and the operations team starting
work on the query is called the “Processing time”. The time between a customer
making a query and the query being fully resolved is the “Resolution time”.
The analytics team at Zeta Bank also provided you with the customer survey below.
Customers who had to call Zeta Bank for each type of query described above were
asked two questions:
•
How much of an inconvenience was it to call us for this query and to wait for
our reply? (1 = low, 5 = high)
•
How likely are you to leave Zeta Bank because you had to call us for this
query and to wait for our reply? (1 = very unlikely, 5 = very likely)
Zeta Bank Customer Survey
Loan applications
Online banking
Credit cards
Change of contact details
0
Likelihood of leaving
1
2
3
4
5
6
Level of inconvenience
Question 3.a.
The CIO wants to know which type of query the operations team spends the most
time on and how many FTEs it accounts for?
An FTE (Full Time Equivalent) is the hours worked by an employee on a full time
basis.
Question 3.b.
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What are some of the insights you can drive from the customer survey presented
above?
4. Creativity question
Zeta Bank’s main IT team is based in the UK but it also has a software development
team in China. The CEO is considering using the team in China to develop the digital
tools the CIO is asking for. What factors should the CEO consider before making
that decision?
5. Recommendation
After two months of rigorous analysis it’s time for your team to present its findings
to the CEO and CIO of Zeta Bank. What would you tell them?
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Answers
1. Situation
Before answering the framework question, you should:
•
Play back the company situation
•
Define the case objective
To play back the company situation, you should just summarise what your
interviewer told you. This will enable you to avoid any misunderstandings. In
addition, you could also ask follow up questions that will help you get a better grip
on the situation. For instance, you could ask:
•
What is the total CIO budget? How material is a £5m increase in that budget?
•
Has the volume of customer complaints only recently increased or have they
been an on-going issue?
•
Has the CIO run similar digital initiatives in the past? Were these initiatives
successful in improving customer satisfaction?
Prior to diving into the framework question, it is also advisable to further define the
objective of the case. Examples of questions you could ask include:
•
I understand the CEO wants to improve customer satisfaction. Do we know
how customer satisfaction is measured today? And by how much it changed
in recent years?
•
I understand the CEO is concerned that the digital tools proposed by the CIO
will not improve customer satisfaction. Does he think that the tools per se
will not make a difference to customer satisfaction? Or does he think his
team lacks the skills to roll out and use these tools?
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IGotAnOffer Special Tips
Asking the right questions to your interviewer at the beginning of the case can
unveil parts of the framework your interviewer has in mind. As you become
more and more comfortable with case interviews, the questions you ask at the
beginning should both aim to clarify the situation and objectives but they should
also help you develop your framework.
2. Framework development
To answer framework questions, you should:
•
Ask for some time to gather your thoughts
•
Extract the main elements from the case question and situation
•
Break down these elements into simple components
In this situation, the main elements that can be extracted from the case question
and situation include:
A. First, the overarching goal of the CEO is to improve customer satisfaction. It
would therefore be helpful to understand the fundamental drivers behind
the decrease in customer satisfaction
B. Second, the CEO actually wants to know if the digital tools suggested by the
CIO would help increase satisfaction. Analysing these digital tools is therefore
important
Let’s now breakdown these main elements into sub components:
A. Customer satisfaction
1. Internal environment
a. Customer expectations: what are customers’ expectations for Zeta
Bank’s products? And for the quality of its customer service?
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b. Service performance: where exactly does Zeta Bank’s products or
customer service fall short of these expectations? Are there any
obvious pain points in the customer experience leading to a lot of
queries?
2. External environment
a. Competition: how does Zeta Bank’s customer satisfaction ratings
compare to competitors’? Is the bank losing customers because of low
customer satisfaction compared to its peers?
b. Best practices: are there customer service best practices that Zeta
Bank has not adopted yet and could roll out?
B. Digital tools
1. New technology: what sort of tools is the CIO planning on rolling out exactly?
How are they addressing the main customer pain points? How will these
improvements be measured?
2. Daily operations: Can Zeta Bank run these digital tools alongside its legacy
IT systems? Is this going to cause any issues in the day-to-day operations?
3. Skills: Does Zeta Bank have people in house to develop these tools or is the
development going to be outsourced? Does the CIO have any experience in
rolling out this type of tools?
4. Cost: How will the £5m requested by the CIO be used? What is the expected
financial return of this investment in digital tools? Have alternative plans
been studied?
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IGotAnOffer Special Tip
Your interviewer will often ask you follow up questions after you have laid out
your framework. A typical question he could ask is if there are additional areas
that are not part of the initial framework that could be explored.
The framework above mainly focuses on technology. Your interviewer might
therefore ask you: “What other solutions do you think could be considered
beyond rolling out new technology?”
Additional ideas you could give could include: improving the training of
customer service employees to enhance customer satisfaction; increasing
customer service staff, etc.
3. Quantitative question – Data provided
Question 3.a.
You should clearly lay out your plan to identify the query category taking up the
most time before diving into any calculation. Here you can simply:
•
Calculate the time spent per query for each category
•
Calculate the total time spent on each category per month
•
Convert this time into a number of FTEs per year for the top category
The time spent by the operations team per query for each category is simply the
total resolution time minus the processing time:
•
Loan applications: 48 - 2 = 46 h / query
•
Online banking: 24 - 2 = 22 h / query
•
Credit cards: 2 - 1 = 1 h / query
•
Change of contact details: 11 - 10 = 1 h / query
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The total time spent on each category per month is simply the number of queries
per month times the time per query:
•
Loan applications: 46 x 150 = 6,900 hours
•
Online banking: 22 x 300 = 6,600 hours
•
Credit cards: 1 x 500 = 500 hours
•
Change of contact details: 1 x 100 = 100 hours
Loan applications are therefore the category taking up the most time per month. In
order to convert this number of hours into a number of FTEs you can simply
assume that 1 FTE works 8 hours a day and 20 days a month.
FTEs needed for the loan application category:
•
6,900 (hours/month) / (8 (hours/day) x 20 (days/month)) = 43 FTEs
“Loan applications” therefore account for 43 FTEs. “Online banking” also accounts
for about 40 FTEs. Together, these two categories count towards more than 90% of
the total FTEs needed. As a consequence, developing digital tools to handle these
types of queries automatically will save the most cost to the bank. At this point, it
might be interesting to analyse if “Loan applications” and “Online banking” are also
the two categories that really dissatisfy customers.
Question 3.b.
Here is a simple plan you could follow to drive as many insights as possible from
the survey:
1. First focus on the two questions asked in the survey individually
2. Then focus on combining the insights from each question asked
3. And finally relate your findings back to the other questions in the case
Let’s focus on the “Likelihood of leaving“ question first. The category with the worst
rating is “Online banking”. This indicates that Zeta Bank is falling short of customers’
expectations in online banking. It seems that customers consider they should not
have to contact the bank for a query regarding online banking. They probably
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consider that they should have been able to resolve their query by themselves
directly online.
In terms of level of inconvenience, “Loan applications”, “Online banking” and “Credit
cards” were all rated 4 or 5. This seems to reflect that customers are generally
annoyed with having to call the bank.
Overall, there does not seem to be a direct correlation between the level of
inconvenience and the customers’ likelihood to leave the bank. This might reflect
that customers are ready to endure some inconvenience for certain specific queries
but not for others. In other words, customers seem to have different service
expectations for different query categories.
The CEO’s objective is to improve customer satisfaction. As a consequence, Zeta
Bank should probably focus its efforts on the categories for which customers are
most likely to leave: “Online banking” and “Credit card”. These categories also
happen to be the ones with the highest number of queries per month and “Online
banking” is the second largest consumer of FTEs according to our earlier calculation
that confirms they are good areas to focus on.
4. Creativity question
Creativity questions are best answered using a simple framework. This will ensure
that you cover the question comprehensively. It is ok to ask for some time at the
beginning of a creativity question to put a simple framework together if it does not
come to you naturally. Once you identified a framework, you can then brainstorm
in each of its different sections to answer your interviewer’s question.
The factors the CEO needs to consider in order to make his decision can be split
into two categories: quantitative and qualitative.
1. Quantitative:
•
Cost: What are the cost implications of using the software development
team in China? Will it be cheaper / more expensive than using another
Zeta Bank team or a third party?
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•
Time: How long will it take for the development team in China to
complete the project?
•
Capacity: Does the team in China have sufficient capacity to take this
project on next year? Or would extra personnel need to be hired?
2. Qualitative:
•
Project management: Who will lead the management of the project? The
team in the UK or in China? What are the dynamics between the two
teams?
•
Communication: Given this is a critical project, how can the team in
China and the team in the UK best communicate? Won’t time differences
be an issue when the tools need to be rolled out in the UK?
•
Team skills: Are the skills of the team in China similar to the ones of the
team in the UK? Can they develop the same type of tools in the same
timeline?
•
Tools maintenance: How will futures updates to the tools be handled if
they are used mostly in the UK but the software developers are in China?
How will the customer feedback received in the UK be transferred back to
the development team in China?
Before deciding, the most important thing to determine is if the China team has got
the right skills to develop the tools and if it is realistic for them to maintain the
digital tools in the future taking the customer feedback on board. The risk of having
the team in China develop the software is that it adds communication and time
difference complexities to a project that seems critical to improve customer
satisfaction.
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IGotAnOffer Special Tip:
Notice here how after brainstorming different ideas we are summarising the
most important things to understand before the CEO decides. In addition, we
are also highlighting the risks related to the CEO’s ideas.
Prioritising ideas and highlighting risks are two really helpful habits in creativity
questions. We definitely encourage you to emulate these habits.
5. Recommendation
Your conclusion should be structured as follows:
1. Give your conclusion statement first
2. Then provide three or more supporting arguments
3. And finally, talk about next steps (additional analysis, opportunities
encountered during the case, etc.)
Based on our initial analysis, Zeta Bank should develop digital tools with a particular
focus on improving how queries regarding “Online banking”, “Loan applications”
and “Credit cards” are handled. There are two main reasons for suggesting this:
•
First, “Online banking” and “Credit card” are the two categories for which
customers are most likely to leave the bank if they are dissatisfied.
Developing digital tools to handle such queries is therefore likely to help
improving customer satisfaction.
•
Then, “Online banking” and “Loan applications” account for more than 90% of
FTEs dedicated to handling customer queries. Developing digital tools to
handle such queries will therefore decrease costs.
This recommendation is based on initial findings and could be consolidated by
further analysing certain areas. Next steps could include:
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•
First, Zeta Bank could analyse by how much the digital tools will reduce the
resolution time
•
Second, it could try to estimate if it will increase customer satisfaction and by
how much
•
Third, it needs to understand if £5m is the right cost estimate for the
development of the tools and if it should use an internal team or an external
company to develop the tools
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Case #4 – Quidi Market
1. Situation
Your client is Quidi Market (QM), a small supermarket chain in the North East
England that opened its first shops in the 1980s in Gateshead and Darlington. The
chain is known for its friendly staff, local products and support to the local
communities.
In the past five years big super market chains from the South of England have been
expanding in the North East. QM is a family-owned business and its owner is
concerned that his business will not be able to compete with the large supermarket
chains. He fears he will not be able to keep his business up and running as it
happened with other small supermarkets in other areas of England where the big
chains recently established themselves.
2. Framework development
What areas would you look at to assess how much of a threat the arrival of large
super market chains is to QM?
3. Quantitative question – Data provided
Question 3.a.
The National Consumer Agency in England considers that a city is under served
when it has less than 1 supermarket per 10,000 people. Below that number, people
need to travel long distances to find a supermarket.
Your team has collected the information below about the population of five cities in
the North East of England and the number of supermarkets per city. The total
number of supermarkets includes QM shops.
QM’s owner wants to invest in one of these cities and open new shops. Which city
would you recommend?
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City
Population
Total # of
Total # of QM
supermarkets
supermarkets
Newcastle
280,000
45
15
Sunderland
275,000
35
15
North Tyneside
200,000
20
8
Gateshead
205,000
20
10
Darlington
105,000
20
12
Population Trends in North East England
330,000
280,000
Newcastle
230,000
Sunderland
Gateshead
180,000
North Tyneside
130,000
Darlington
2030
2029
2028
2027
2026
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
80,000
Question 3.b.
QM’s owner is planning to invest £5m in new stores in one of the above locations.
He wants to open small and big stores. Each small store will yield £100k in annual
profits compared to £200k for a large store. The owner wants the ratio of the
number of small to big stores to be 3:1. How many stores of each kind does QM
need to open to achieve a 5-year payback?
4. Creativity question
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QM’s owner also wants to decrease costs to be in a healthy financial position to face
the large chains getting into the region. What are the different costs that could be
cut?
5. Recommendation
After four months of analysis, QM’s owner wants to know what are the best ways
for his team to respond to the entry of large chains in the region. What would you
tell him?
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Answers
1. Situation
Before answering the framework question, you should:
•
Play back the company situation
•
Define the case objective
To play back the company situation, you should summarise what your interviewer
told you. This will enable you to avoid any misunderstandings. In addition, you
could also ask follow up questions that will help you get a better grip on the
situation. For instance, you could ask:
•
How many stores do QM and the large chains have in the North East
respectively?
•
What is the typical size of a QM store and of a large chain store?
•
Is QM in a healthy financial position at the moment?
Prior to diving into the framework question, it is also advisable to further define the
objective of the case. Examples of questions you could ask include:
•
I understand the owner of QM is concerned about the competition. Do we
know more specifically what the owner is worried about? Is it lower prices,
more products variety or bigger stores?
•
I understand QM is a family owned business. Does the owner want the
business to remain independent or would he consider selling to a large
chain?
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IGotAnOffer Special Tips
Asking the right questions to your interviewer at the beginning of the case can
unveil parts of the framework your interviewer has in mind. As you become
more and more comfortable with case interviews, the questions you ask at the
beginning should both aim to clarify the situation and objectives but they should
also help you develop your framework.
Here for instance, the last question on whether the owner would consider an
acquisition can unveil a lot about the direction in which your interview is going to
take the case.
2. Framework development
To answer framework questions, you should:
•
Ask for some time to gather your thoughts
•
Extract the main elements from the case question and situation
•
Break down these elements into simple components
In this situation, the main elements that can be extracted from the case question
and situation include:
A. QM’s owner is worried about the competitive threat represented by the
arrival of the large supermarket chains. Understanding the competition in
detail and how it is positioned vs. QM is therefore important
B. The other main area to look at is the competitive response that QM can
launch to counter the arrival of the large chains
Let’s now breakdown these main elements into sub components:
A. Competitive threat:
1. Price: How price-aggressive are large chains compared to QM? Do they
run more promotions and discount more products?
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2. Products: Do competitors have more product variety than QM? Do they
compete with QM on local products, one of the company’s strengths?
3. Stores: Do competitors have similar types of stores than QM? Do they
locate their stores in similar areas as QM?
4. Service: Do competitors offer more services than QM such as online
shopping, click and collect, etc.?
5. Other markets: In other areas of England, what happened to the local
players when the large supermarkets entered their region? What
techniques did the large supermarkets use to dominate the market?
B. QM response:
1. Consolidate current position
a. Reinforce what makes QM different including: the friendly staff,
local products and support to the community
b. Keep up with customers’ demand for new services such as online
shopping, click and collect, etc.
c. Refurbish current stores and adapt store format to evolving
customer needs if required
2. Scale up
a. Open new stores in strategic locations to gain in scale and be able
to compete with the larger competitors
b. Alternatively, if QM needs to grow very fast, it could also acquire
one or several other local supermarket chains
c. QM could also create partnerships with other chains to buy
products together and therefore gain scale and lower costs
This framework includes a number of elements that can be prioritised in order of
importance.
In this case, understanding the scale of the threat represented by large chains is
really the priority. Once this has been determined an appropriate response can be
designed for QM.
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3. Quantitative question – Data provided
Question 3.a.
This question is a mix of maths and data interpretation.
Let’s first calculate the number of supermarkets per 10,000 people and then extract
insights from the graph.
Cities can be ranked by their number of supermarkets per 10,000 people:
1. Darlington: (20 / 105k) x 10k = 1.9 supermarket per 10,000 people
2. Newcastle: 1.6
3. Sunderland: 1.3
4. Gateshead: 1.0
5. North Tyneside: 1.0
Gateshead and North Tyneside are therefore close to be underserved and seem
like good targets to open new stores.
Here are some insights that can be extracted by reading the graph:
1. Darlington’s population looks set to decrease, which will likely increase its 1.9
ratio in the near future. This makes the city unattractive for new investments
2. Newcastle’s population is going to increase. This will help decreasing its 1.6
ratio in the mid-term and might make it a more attractive investment in a few
years
3. Sunderland’s population will stay the same over the next few years meaning
its 1.3 ratio is likely to stay unattractive in the near term
4. Gateshead has got the fastest growing population and is underserved. This
makes it extremely attractive for investments
5. North Tyneside is underserved but its population is decreasing making it a
less attractive opportunity than Gateshead
Once you have analysed the data at hand you need to:
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•
Relate the result back to the broader case question
•
Suggest next steps in the analysis
Based on the analysis above, Gateshead is clearly the best city to invest in. It both
has a growing population and is currently underserved in terms of number of
supermarkets.
An additional area we could look at is the market penetration of QM in the different
cities. There is a small risk of cannibalisation if QM adds a lot of stores in a city
where its penetration is already very high. But given Gateshead is underserved and
growing this risk seems limited.
Question 3.b.
To answer maths questions, you should:
•
Map out the calculations you are going to do
•
Present your plan to your interviewer to get feedback before starting the
calculations
•
Do your calculations and simplify the numbers when possible
If a plan does not come to you naturally when trying to answer the question, it is ok
to ask your interviewer for a few seconds to gather your thoughts.
Here is a potential plan you could have shown to your interviewer for this specific
question:
1. Layout the basic equation for the payback period
2. Express the relationship between the number of small to big stores as an
equation
3. Inject the store ratio equation in the payback equation
Let’s now do the calculations and simplify the numbers when possible.
•
The payback period equation is:
o Payback period = Initial investment / Annual profits
o 5yr = £5m / (£0.1m / yr x A + £0.2m / yr x B)
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o Where A is the number of small stores and B the number of large
stores
•
The ratio of small to big stores is 3:1. If A is the number of small stores and B
the number of big stores:
o A = 3B
•
Let’s now replace A by B in the payback equation:
o 5yr = £5m / (£0.1m / yr x 3B + £0.2m / yr x B)
o 5yr = £5m / (£0.5m / yr x B)
o B = 1 / 0.5 = 2
•
The number of large stores is therefore 2. Given A = 3B, it follows that the
number of small stores is 3 x 2 = 6
Therefore, QM could open 8 stores in total, 2 big and 6 small, in order to achieve a
5-year payback period for a £5m investment.
Once you found the answer to the maths question, you need to:
•
Relate the result back to the broader case question
•
Suggest next steps in the analysis
Investing in new store is a good idea to consolidate QM’s position and fight back the
entrance of new players. However, if eight stores were built in Gateshead the
number of stores in the city would increase by 80%. This is probably very aggressive
and might lead to reaching the saturation point of the market. A good next step in
the analysis could be to analyse if it would be an interesting idea to install some of
these new stores in cities where QM is not already present.
4. Creativity question
To answer creativity questions, you should:
•
Ask for some time to gather your thoughts if necessary
•
Develop a simple mini framework
•
Brainstorm within this mini framework
In this case, QM could explore the following options to cut costs:
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1. Fixed Costs
•
Real estate: QM’s owner could try to lower the rents paid by renewing
and lengthening the company’s leases. If QM owns some of its stores it
could consider selling them to generate cash in the short-term
•
Equipment (i.e. fridges, checkout registers): QM should consider leasing
its equipment to avoid having to replace it every time a new technology
comes out. It could also partner with other retailers to lease the same
equipment and obtain better prices
• Utilities: QM could take measures to increase its energy efficiency and
therefore decrease its electricity bills. It could achieve this by using energy
efficient lighting, closed fridges, etc. These initiatives might carry some
cost initially and then pay for themselves over the course of a few months
2. Variable Costs
•
Product costs: QM could reduce product costs by making its suppliers
compete harder for its business. QM could also create partnerships with
other retailers and gain scale to get better prices
•
Advertising: QM could reduce its advertising to the minimum given it is
already known in the region. The downside of doing this is that it might
lose visibility as new players enter the region
•
Labour: QM could try to naturally decrease its labour costs by not
replacing people who retire and by stopping to hire new employees in the
short-term. For instance, it could install automatic tills in its current stores
as well as its new stores and reshuffle its current cashiers across its stores
Once you have developed the ideas above, you should:
•
Prioritise them by impact
•
And highlight risks related to them if necessary
In this case, it makes sense to focus a lot of attention on product costs and real
estate costs, as they are likely the highest costs QM incurs. It should also be
highlighted that some of the cost cutting measures suggested require an initial
investment. As a consequence, in the very near term some of these actions are
likely to degrade profitability.
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5. Recommendation
The recommendation is a critical part of the case. Almost without exceptions, this is
what your conclusion should contain:
1. Give your recommendation statement first
2. Then provide supporting arguments, ideally three or more
3. And finally, talk about next steps (additional analysis, potential risks, etc.)
The initial analysis indicates that QM should expand in Gateshead in response to
the market entry of large chains for three reasons:
•
First, Gateshead is quasi under served with currently only one supermarket
per 10,000 people. It is therefore very likely that there is enough demand for
QM to roll out new stores
•
Then, Gateshead’s population is forecasted to grow over the next 15 years
making it attractive for investment
•
Finally, expanding could help QM gain in scale and reduce its cost per store.
For instance, it could get better deals from suppliers thanks to its scale and it
could roll out automatic tills and split its staff across its current and new
stores to decrease staff costs
However, there are further areas that could be explored. Next steps could include:
•
Making sure that QM has got the financial resources to expand in Gateshead.
We should make sure that the expansion does not weaken QM financially
before the arrival of the large chains
•
Understanding in more detail how large chains managed to get market share
in other regions they recently got into could help enhance QM’s competitive
response
•
Looking into potential acquisitions of other local chains or into partnerships
with these chains could also help QM drive costs down
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Case #5 - Electron
1. Situation
Your client is a high-tech British start-up called Electron. Electron launched the first
cooking thermometer in the UK two years ago and it was a huge success. A cooking
thermometer is used to measure the internal temperature of meat when cooking.
The CEO of Electron thinks the UK market is extremely competitive. He aims to
maintain market share in the UK between 2015 and 2020. At the same time, he
wants to enter at least two new markets and is considering countries in continental
Europe and Asia. His overall aim is to quadruple sales between 2015 and 2020.
He is convinced that to achieve his vision he needs to add new innovative products
to Electron’s portfolio and to diversify the company’s culture by hiring international
employees. Currently Electron hires 40 British employees based in London and
outsources the manufacturing of its product to a manufacturer in the UK. Electron’s
CEO hired your team to help him define a strategy in order to achieve his vision.
2. Framework development
What key factors would you analyse to design the CEO’s strategy?
3. Quantitative question – Data provided
Electron’s CEO decided that the countries he wants to enter are China and
Germany. Your team collected the information below about Electron’s competition
in these countries.
2014 Cooking thermometer sales ($m)
China
Xi-
H-
Ion
Chen
170
150
Germany
Others iWarme
20
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KlugL
VatenT
20
12
SGlim
10
eKoch
Other
8
9
49
Assume that the population in China and Germany is respectively 1,360m and 80m
inhabitants and that the average price of a cooking thermometer is $50 and $80
respectively in these two countries.
Question 3.a
What is the market penetration of cooking thermometers in each country?
Question 3.b
The CEO believes that Electron can capture 10% of the German and Chinese
markets in 2015.
Is it realistic? Would it put Electron on track to achieve its 2020 revenue target? In
2014 Electron had revenues of $15m.
4. Creativity question
What measures can be taken to reduce the risks related to entering the German
and Chinese markets?
5. Recommendation
It’s time for your team to present your findings to Electron’s CEO. What are your
recommendations for Electron’s strategy?
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50
Answers
1. Situation
Before answering the framework question, you need to:
•
Play back the company situation
•
Define the case objective
To play back the company situation, you should summarise what your interviewer
told you. This will enable you to avoid any misunderstandings about the situation.
In addition, you could also ask follow up questions that will help you get a better
grip on the situation. For instance, you could ask:
•
Is there any particular reason why the CEO is only considering Europe and
Asia and not the US for example?
•
Has Electron already started developing new products or is it just focused on
the kitchen thermometer?
•
Does Electron have any stores or does it only sell its product online?
Prior to diving into the framework question, it is also advisable to further define the
objective of the case. Examples of questions you could ask include:
•
I understand that the CEO wants to quadruple sales by 2020. Do we know
what sales are today?
•
Does the CEO only have a sales target or does he also have a profit target in
mind for 2020?
•
The CEO seems to be expecting most of the sales growth in the next 5 years
to come from the UK. Can you confirm that’s right?
2. Framework development
To answer framework questions, you should:
•
Ask for some time to gather your thoughts
•
Extract the main elements from the case question and situation
•
Break down these elements into simple components
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In this situation, the main elements correspond to the means the CEO wants to use
quadruple sales by 2020. These means include:
•
Entering two new markets – one in Asia and one in Europe
•
Diversifying the product portfolio
•
Diversifying the company’s culture with international employees
Therefore, the three areas that can be used to structure your framework are new
markets, products and company culture.
Let’s now breakdown these main elements into sub components:
A. New markets:
1. Market size: What is the size of the market and the customer segments
for Electron’s products in different countries? Are customers in those
markets early adopters of smart kitchen technology? Given Electron’s
products are related to cooking, is there a strong cooking culture in these
countries?
2. Competition: How many competitors does Electron have in the different
countries? How concentrated is this competition? How do their products
compare to Electron’s (price, features)?
3. Barriers to entry: Are there any legal issues preventing Electron from
entering the targeted markets?
B. New Products
1. When: Is it wise for Electron to invest in the development of new products
before entering the new markets? Or should it launch the smart
thermometer in new markets first and then reinvest some of the
revenues in developing new products?
2. What: Should Electron focus only on smart kitchen related appliances or
should it launch smart home products too? Is the vision of the company
to become a specialist leader in smart kitchen appliances or does it want
to play across more markets?
3. Where: Where should the company design and manufacture its new
products? Should it move the manufacturing to a lower cost facility than
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in the UK? Should Electron launch its new products in the UK or in one of
its new markets?
C. Company culture
•
Diversity: How can Electron ensure that it attracts diverse talent in terms
gender, nationality, ethnicity, etc.?
•
Inclusiveness: How can Electron create an inclusive working culture
where diversity is celebrated?
•
Values: How can Electron ensure that its values are preserved while it
transforms into a more diverse place to work at?
This framework includes a number of elements that can be prioritised in order of
importance.
Developing new products and building a more diverse culture both take time. As a
consequence, it probably makes sense to first focus on taking Electron’s existing
product, the cooking thermometer, and trying to sell it in new markets. This is the
area of the framework that is most likely to deliver sales growth in the short term.
3. Quantitative question – Data provided
Question 3.a
To answer maths questions, you should:
•
Map out the calculations you are going to do
•
Present your plan to your interviewer to get feedback before starting the
calculations
•
Do your calculations and simplify the numbers when possible
If a plan does not come to you naturally when trying to answer the question, it is ok
to ask your interviewer for a few seconds to gather your thoughts.
Here, for each country we simply need to calculate:
4. The value of the cooking thermometers market
5. The number of cooking thermometers sold
6. The number of households in each country
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7. The market penetration
Let’s estimate the market penetration for each country following the steps above:
1. Value of the cooking thermometers market:
•
The market value can be calculated by adding the sales of competitors
in each country
•
China: 170 + 150 + 20 = $340m
•
Germany: 5 + 20 + 12 + 10 + 8 + 9 = $64m
2. Number of cooking thermometers sold:
•
The number of cooking thermometers can be calculated by dividing
the market value by the price of a cooking thermometer
•
China: $340m / $50 = 6.8m
•
Germany: $64m / $80 = 0.8m
3. Number of households:
•
The number of households can be calculated by dividing the
population by the number of people per household. Four people per
household can be assumed as a simplification assumption
•
China: 1,360m / 4 = 340m
•
Germany: 80m / 4 = 20m
4. Market penetration:
•
The market penetration can be calculated by dividing the number of
thermometers by the number of households:
•
China: 6.8m / 340m = 2%
•
Germany 0.8m / 20m = 4%
Once you found the answer to the maths question, you need to:
•
Relate the result back to the broader case question
•
Suggest next steps in the analysis
The CEO wants to enter at least two new markets. The market penetration for
China and Germany is respectively 2% and 4%. It is difficult to know by how much
this penetration can grow and how much opportunity there is left in these two
countries. Comparing these penetrations to the UK’s penetration or to other
countries could provide more information on this.
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However, given China’s penetration is twice as low as Germany’s we can conclude
that there is still headroom for growth in China. The Chinese market could
potentially double in size, which is an attractive opportunity for Electron.
As a next step, it might be helpful to understand the highest limit these market
penetrations can reach. This could be done by looking at the penetration of cooking
thermometers or similar kitchen products in other countries.
Question 3.b
This question is a mix of maths and data interpretation.
Asking if you think that Electron can capture 10% of the German and Chinese
markets is a form of data interpretation question.
The Chinese market is extremely concentrated, with Xi-Ion and H-Chen having more
than 90% market share. By comparison, the German market is more fragmented
with KlugL and VantenT accounting for 50% of the market. Based on this simple
concentration analysis, it seems that it might be easier for Electron to get 10%
market share in Germany than in China.
To achieve 10% market share in China, Electron would need to have some sort of
price advantage or technological advantage that its Chinese competitors do not
have.
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IGotAnOffer Special Tip:
Answering with limited information
To answer this question comprehensively, you would need to know if Electron’s
prices and technology are better than its competitors. This information is not
available here.
In this type of situations, you should ask your interviewer if he has information
about prices and technology. If he doesn’t, you should then make an initial
conclusion based on the information you have and outline the conditions under
which your conclusion would need to be revised.
This is what we are doing here by saying that it would seem difficult for Electron
to grab a 10% market share in China unless it has superior prices and
technology.
Let’s assume for a moment that Electron can achieve 10% market share. Calculating
if that would be sufficient for Electron to reach its target is a form of maths
questions.
To answer maths questions, you should:
•
Map out the calculations you are going to do
•
Present your plan to your interviewer to get feedback before starting the
calculations
•
Do your calculations and simplify the numbers when possible
If a plan does not come to you naturally when trying to answer the question, it is ok
to ask your interviewer for a few seconds to gather your thoughts.
You can take a three steps approach to calculate if China and Germany would be
enough for Electron to be on track to meet its 2020 target:
1. Calculate additional 2015 sales needed to be on track for the 2020 target
2. Calculate the realistic share that could come from Germany
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3. Calculate the realistic share that could come from China
Let’s now do the calculations and simplify the numbers when possible.
1. Additional 2015 sales required
•
Electron wants to quadruple sales by 2020. 2014 sales were $15m.
Electron therefore needs to add $45m in sales in 6 years. Assuming a
linear growth, Electron needs to grow by $45m / 6 = $7.5m in
additional sales every year
2. Share of revenue from Germany
•
Germany’s market size in 2014 was $64m. Assuming that the German
market size remains unchanged and that the company captures 10%
of the market, Electron would get revenues of $6.4m in 2015. That
would leave Electron short of $1.1m ($7.5m - $6.4m) in sales to be on
track to meet its target
3. Share of revenue from China
•
$1.1m is less than 1% of the Chinese market. It therefore seems
realistic to say that Electron could be on track to reach its 2020 target
by achieving a 10% share of German market and 1% share of the
Chinese one
Once you found the answer to the maths question, you need to:
•
Relate the result back to the broader case question
•
Suggest next steps in the analysis
Overall, the CEO’s revenue objective seems realistic. To confirm this, it could make
sense to further analyse Electron’s pricing and technology compared to its
competition. In addition, we could also look at whether there is enough room for
growth in Germany and China for Electron in 2016 onwards. If it is not the case,
Electron might have to consider expanding in other countries or launching new
products.
4. Creativity question
To answer creativity questions, you should:
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57
•
Ask for some time to gather your thoughts if necessary
•
Develop a simple mini framework
•
Brainstorm within this mini framework
Here you first need to identify the main risks related to the strategy and then
suggest how they can be mitigated both in the short-term and in the long-term.
1. Main risks
•
Being unable to compete with the two very large Chinese players
•
Focusing too much on China and Germany and ending up neglecting the UK
•
Focusing too much on market development and ending up neglecting
product development
2. Mitigation strategies
•
Short-term:
o Electron should perform a detailed analysis of the two Chinese players
(price, technology, region, etc.) to identify any gaps in the market
o Electron might want to think about a more ambitious goal for the UK
than just maintaining its position in order to avoid losing momentum
in its home market. For instance, it could try to achieve a reasonable
yearly growth target
o Electron might also want to continue investing in its technology or at
least to have a clear roadmap for the development of new products
•
Long-term:
o Concentrate all efforts in China on a single gap identified. Examples of
gaps could include a region that is underserved by the two large
players or a segment of the market for which Electron’s technology is
particularly well adapted, etc.
o As the CEO spends more and more time developing new markets, he
might want to appoint a strong figure of the company to continue
leading the development of Electron in the UK
o Finally, the CEO should make sure the company keeps on developing
new interesting products. This will probably be best achieved by
continuing to recruit the best possible engineering talent.
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Once you have developed the ideas above, you should:
•
Prioritise them by impact
•
And highlight risks related to them if necessary
Here the prioritisation has already been done by splitting the framework in shortterm vs. long-term. Similarly, the framework focuses on risks so there is no need to
outline risks after the brainstorming exercise.
5. Recommendation
The recommendation is a critical part of the case. Almost without exceptions, this is
what your conclusion should contain:
4. Give your recommendation statement first
5. Then provide supporting arguments, ideally three or more
6. And finally, talk about next steps (additional analysis, potential risks, etc.)
Based on the initial findings from our analysis it seems possible for Electron to
reach its 2020 sales target by focusing on the following:
1. Capture 10% of the German market and 1% of the Chinese market by
focusing on gaps left by current competitors
2. Maintain momentum in the UK market to make sure sales do not start
decreasing as the CEO’s attention is focused on other countries
3. Continue developing innovative products by attracting the best possible
engineering talent
In addition, further work could be done to consolidate the strategy outlined above:
1. Electron should define a more detailed plan to diversify its workforce and
attract the best possible talent
2. Explore alternative markets to China as it seems to be very concentrated with
high barriers to entry
3. Examine the option of moving the manufacturing facilities to Asia while
keeping the design of its products in the UK
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IGotAnOffer Special Tip:
Note that in most case interviews, there is no right or wrong conclusion. As long
as you follow the method above and give a good rational for your conclusion,
your interviewer will accept it.
Outlining next steps is important. This is something all consultants do at the end
of projects to sell on the next project. Including that in your conclusion will show
your interviewer that you are aware of how actual projects work!
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