写在前面​
Hi 有缘人，​
你好，我是爱做case的鱿鱼，MBB offeree。从考GMAT到申请学校到求职咨询，我在论坛上学到很
多。如今上岸MBB，我想把我的经验分享给你。​
现在市面上有太多casebook，质量层次不齐。这个PDF是我精选的三本casebook，他们都是我在求职
过程中使用并认可的，分别是Kellogg 2020、Duke 2014和Peter K 2020。​
希望能对你有帮助。
同时，也请允许我打个广告。我也在抽空帮助有需要的candidate进行辅导case/fit mock（象征性收
费哦~），如果你有需要，也欢迎联系我。​
闲鱼&小红书ID均为：鱿鱼Consulting​
彩蛋：关注我，送你Peter K 2023最新版！​
祝顺利，
鱿鱼
Kellogg Consulting Club
2020 Casebook
23rd October 2019
Welcome to the Kellogg Consulting Club 2020 Casebook!
Over the summer of 2019, we made both major and minor changes to the Casebook. Changes have been made in response to feedback in the
Spring 2019 KCC survey from 2019 and 2020 consulting candidates. The headline objective has been to bring more structure to the cases to
benefit both interviewees and interviewers alike. A sample of changes is provided below:
•
Fit questions: Appropriate Fit or Experience questions have been introduced at the beginning of every case.
•
Case navigation: The first page of every case features a numbered list that now clearly aligns with subsequent case solving steps.
•
Print-friendly: Exhibits now immediately follow the Case title page to facilitate economical printing of the most critical pages only.
•
Case curriculum: A curated list of 25 cases and proposed timeline for traditional internship candidates (page 7).
•
References: Easily searchable 3-character reference numbers simplify identification of desired cases by industry, business concept etc.
•
Hyperlinks: Case contents now link to the relevant page of the Casebook.
•
Difficulty ratings: Subjective case difficulty ratings have been removed with the intention to introduce evidence-based ratings next year.
•
Cases archived: Removal of several cases deemed unpopular or out-of-date.
•
Clear call-outs: For McKinsey-style interviewer-led cases, prompts to hand candidates Exhibits etc.
•
Eco-friendly: Reduction in number of full-color pages and introduction of low-ink exhibits that are easy to read in black and white.
Please don’t hesitate to contact us with any questions, suggestions or corrections that you may have regarding the Casebook.
Rohan Maini
Kellogg 2020
KCC VP Training
2
Contents
All contents
Welcome to the KCC 2020 Casebook!
2
How to use this book
6
Planning your case preparation
7
Understanding individual case pages
9
Finding cases
13
Getting the most out of a case
17
Evaluating case performance
20
2020 Cases*
22
*See next page for detailed case contents
3
Contents
Detailed case contents
Case
Page
Case type
Industry
Busch’s Barber Shop NEW!
23
Market entry
Hospitality & Leisure
Chic Cosmetology
34
Market entry
Hospitality & Leisure
Chicouver Cycle
43
Market entry
Transportation & Logistics
Dark Sky
55
New product
Aerospace & Defense
DigiBooks
66
Market entry
Retail & CPG
Events.com NEW!
76
Profitability
Technology
Garthwaite Healthcare
86
Profitability
Healthcare
Health Coaches
94
Operations
Healthcare
Healthy Foods
104
Growth Strategy
Retail & CPG
High Q Plastics
115
Profitability
Engineering & Construction
Kellogg in India
127
Market entry
Government & Public Sector
Maine Apples
138
New product
Agriculture & Food
Money Bank Call Center
144
Cost reduction
Legal & Professional Services
Montoya Soup
151
Profitability
Retail & CPG
Mustard Clinic NEW!
163
Operations
Healthcare
Orrington Office Supplies
173
Operations
Engineering & Construction
Plastic World
183
Mergers & Acquisitions
Private Equity
Rotisserie Ranch
192
New product
Retail & CPG
Salty Sole Shoe
199
Profitability
Retail & CPG
Format (interview lead)
Interviewer-led
Interviewer-led
Interviewer-led
Interviewer-led
4
Contents
Detailed case contents (continued)
Case
Page
Case type
Industry
Format (interview lead)
Sosland Sports NEW!
209
Market entry
Hospitality & Leisure
Interviewer-led
Tactole
217
Profitability
Agriculture & Food
Vitality Insurance
233
Profitability
Financial Services
Wildcat Wings
243
Operations
Transportation & Logistics
Wine & Co
253
Opportunity Assessment
Agriculture & Food
Winter Olympics Bidding
263
Opportunity Assessment
Entertainment & Media
Zephyr Beverages
271
Mergers & Acquisitions
Retail & CPG
Zoo Co
278
Mergers & Acquisitions
Financial Services
5
How to use this book
6
Planning your case preparation
• Cases are of increasing difficulty
(as determined subjectively by the
KCC Exec team) so don’t feel
dejected if you feel as though
you’re not getting better at casing
Moderate
Straightforward cases that challenge
candidates’ reliance on pre-canned
case-frameworks
November
Break
• The Curriculum features 25 cases,
but this is by no means a minimum
nor a maximum number of
suggested cases
Easy
Cases selected to build familiarity with
the case interview process (primarily
profitability and cost cutting)
Hard
Complex ‘pressure’ cases that challenge
multiple skills and cannot be solved with
traditional frameworks.
Winter Break
• The curriculum is provided to
support case selection for
practice but is completely optional
and in no way required
Early Jan
• New in the 2020 casebook, the
Case Curriculum provides a list of
cases curated by the KCC Exec
team to give candidates a wide
range of ‘classic’ and ‘unusual’
cases from a variety of industries
and Casebooks
September / October
Case curriculum
Confidence Boosters
Cases selected to encourage custom
framework creation. No major complexity
ahead of impending interviews.
Case
Casebook
DigiBooks
Kellogg 2020
Dark Sky
Kellogg 2020
Zephyr Beverages
Kellogg 2020
Sosland Sports
Kellogg 2020
Orange Yoga Studio
Fuqua 2014
Maine Apples
Kellogg 2020
Chic Cosmetology
Kellogg 2020
Goodbye Horses
Fuqua 2016
LifeRenew
Haas 2015
California Parking Lot
Columbia 2017
Tacotle
Kellogg 2020
Orrington Office Supply
Kellogg 2020
Mexico City Airport Taxi Services
Wharton 2009
Garthwaite Healthcare
Kellogg 2020
Salty Sole
Kellogg 2020
Mustard Clinic
Kellogg 2020
Desert City
Yale 2013
Coyotes
Fuqua 2014
Rock Band
Columbia 2017
Ski Resort
BCG
Contact Lens Manufacturer
Darden 2011
Supermarket Deli Turnaround
BCG
Maldovian Coffins
McKinsey
7
Planning your case preparation
Use of a single casebook alone is unlikely to prepare you adequately for success in the interview
room. Suggested resources to supplement this casebook with include:
Other school casebooks
Most popular with Kellogg
Students: Fuqua 2014,
Sloan 2011, Wharton 2012
Firm representatives
For internship applicants,
cases with firm reps tend to
happen in Dec and early Jan
Sponsored students
Firms make sponsored students
known at Presentations or on their
school recruiting webpages
Recorded case interview analysis
Ask your IPG leader for more
information on these (eg. Victor
Cheng LOMS)
Casing textbooks
‘Case Interview Secrets’ and
‘Case in Point’ help get started
with basic cases early on
Reading cases
Regularly reported to be a useful
way to quickly gain broad case
‘experience’ when working alone
8
Understanding individual case pages
The Case title page contains details that help inform case selection
1
3
2
4
5
6
1
Format
Calls out interviews that follow the McKinsey-style, interviewer-led case format
2
Concepts tested
Provides a reference to the main concepts that the case tests (see page 16 for more information)
3
Primary sectors
Provides a reference to the primary sectors involved in the case (see page 14 for more information)
4
Case type
Provides a reference to the predominant case type (see page 15 for more information)
5
Similar cases
Provides examples of cases that test similar concepts as this case
6
Additional information
Contains miscellaneous information about the case
9
Understanding individual case pages
The Interviewer guide provides interviewers with a summary of the case structure
1
2
1
Case prompt
This is the information that is provided up front to the interviewee; it introduces the key case context and
headline problem that the interviewee is to answer in the course of the case
2
Interviewer guide
This section provides a 30-second summary on how the case can be solved. Numbered list not only
provides an ideal list of steps to solve the case, but aligns exactly with subsequent areas of the case that
may be covered during the course of the interview
10
Understanding individual case pages
The Interview prompt page contains all pre-structure information
1
2
3
1
Fit/Experience question
New this year, fit questions (experience for Interviewer-led cases) are provided ahead of each case
2
Case prompt
As summarized on the previous slide, this section introduces the key case context and headline problem
3
Clarifying information
Provides additional pieces of information that should be provided to the interviewee if requested
11
Understanding individual case pages
Case solving pages are broken down into numbered parts
1
2
3
1
Part number
New to the 2020 Casebook, each part number aligns with the numbered list on the interviewer guide (see
page 10 for more information)
2
Interviewer prompts
Above the dotted line, interviewer guidance (including instructions about when to provide the interviewee
with Exhibits) and contextual / problem voiceover is provided.
3
Solution
Below the dotted line: full working, part solutions, takeaways and interviewee assessment criteria are
provided.
12
Finding cases
Introduction
•
Consultancies hiring for generalists typically issue a wide range of cases from random industries,
functions or problem areas.
•
If you are interviewing with a boutique consultancy or specific practice area, you should expect to
see a higher proportion of cases that are directly related to the type of work they do. For
example…
– ‘ZS Associates’ cases skew towards pharmaceutical industry clients
– ‘BCG Digital Ventures’ cases typically involve a technology problem
•
In the KCC Casebook, each ‘Case title page’ contains details that help inform case selection to
aid easy searching for cases that test a certain industry sector, case type or concept. The
casebook uses three character references to aid ‘Ctrl+F’ searching across ‘Case title pages’ (see
page 9 for more information). A list of references is provided in the next three pages.
13
Finding cases
Industry sectors
Industries
Description
X01 Aerospace & Defense
Production, sale, and service of commercial vehicles, military weapons and systems designed to operate on land, sea,
and air. Also includes production of aircraft and space vehicles (usually satellites) for both military and commercial use.
X02 Agriculture & Food
Agriculture, husbandry or farming, is activity of cultivating plants, animals, and other life forms for food, fiber, and fuel.
X03 Energy, Utilities & Mining
Utilities provide basic amenities, such as water, sewage services, electricity and natural gas. Mining companies locate
and extract metal and mineral reserves, then used in jewelry-making, industrial applications, and investments.
X04 Engineering & Construction
Construction of buildings, civil engineering projects, and other industrial plant construction. The industry includes
highway, tunnel, bridge, and other civil engineering operations, as well as commercial, residential and industrial buildings.
X05 Entertainment & Media
Comprised of businesses that produce and distribute motion pictures, television programs and commercials, streaming
content, music and audio recordings, broadcast, radio, book publishing, video games and supplementary services
X06 Financial Services
Financial services are provided by the finance industry, which encompasses a broad range of businesses that manage
money, including banks, credit-card companies, insurers, accountancies, stock brokerages and investment funds.
X07 Government & Public sector
Includes public goods and governmental services such as law enforcement, public infrastructure, transit, and education,
X08 Healthcare
The healthcare sector consists of companies that provide medical services, manufacture medical equipment or drugs,
provide medical insurance, or otherwise facilitate the provision of healthcare to patients
X09 Hospitality & Leisure
The leisure and hospitality industry sector includes a broad category of fields within the service industry such as lodging,
food services, event planning, theme parks, transportation and other tourism oriented products and services.
X10 Legal & Professional Services
Professional services are occupations in the tertiary sector of the economy requiring special training in the arts or
sciences. Some professional services require holding professional licenses such as architects or lawyers.
X11 Pharmaceuticals
The pharmaceutical industry discovers, develops, produces, and markets drugs for use as medications to be
administered to patients, with the aim to cure them, vaccinate them, or alleviate the symptoms.
X12 Retail & CPG
Retailers sell products, mainly consumer packaged goods (CPG) to end users/consumers. CPG refers to a broad
spectrum of manufacturers, sellers, and marketers of (typically packaged) physical goods.
X13 Technology
Businesses involved in manufacturing of electronics, creation of software, computers or products and services relating to
IT. The technology sector offers a wide arrange of products and services for consumers and businesses.
X14 Telecommunications
Comprised of companies that make wireless or wired communication possible on a global scale, (eg. phone, internet)
X15 Transportation & Logistics
Transportation and logistics involves planning, implementing, and controlling movement and storage of goods.
14
Finding cases
Case types
Case Type
Description
Y01 Cost reduction
Identifying internal or external costs that are out of line
Y02 Growth strategy
Identifying ways in which a firm can optimally grow
Y03 Mergers & Acquisitions
Evaluating whether a firm should merge or purchase another company
Y04 New product / Market entry
Analyzing a firm’s opportunity to expand into a new product, business or segment
Y05 Operations
Identifying problems in internal or customer-facing processes
Y06 Opportunity assessment
Examining the potential purchase / sale of a new or existing business or installation / abandonment of infrastructure
Y07 Profitability
Analyzing causes for recent drop in profits / ways to increase profits
15
Finding cases
Qualitative
Quantitative
Business concepts
Business Concept
Description
Z01 Accounting
Tests some aspect of accounting. Typically, this will be a simple Income Statement, Balance Sheet or Statement of Cash
flows. Most common concept tested is depreciation/amortization.
Z02 Net Present Value
Tests ability to calculate the net present value of cash flows over time (or at a point in time). Usually in the context of
investment, market entry or company acquisition case.
Z03 Breakeven analysis
Generally used in market entry cases, break-even analysis tends to test ability to determine how many units (or what
price) a product should sell in order to cover a fixed cost.
Z04 Capacity
Tests understanding of production capacity, in particular long and short run considerations.
Z05 Elasticity
Tests understanding of price elasticity of demand or supply, usually in the context of price changes’ impact on quantity
sold and by extension revenue.
Z06 Macroeconomics
Tests understanding of macroeconomic variables trends than affect businesses including: inflation, foreign exchange
rates, recessions, international trade.
Z07 Market share
Tests understanding of the client and its competitors’ market share. This may include understanding of typical features of
concentrated and fragmented markets.
Z08 Market sizing
Tests ability to develop a structured approach to sizing a market. Emphasis is on mathematical approach rather than
accurate estimation of market size or dependent variables.
Z09 Microeconomics
Tests understanding of microeconomics, for example the role of demand and supply in market pricing.
Z10 Customer marketing strategy
Tests understanding of marketing to customer segments. May involve analyzing their needs, WTP, buying decision,
preferred distribution channel etc.
Z11 Competitive analysis
Tests ability to analyze relevant aspects of the competition in relation to the client’s business situation.
Z12 Creativity
Tests ability to develop creative options, usually as part of a brainstorming exercise.
Z13 Organizational changes
Tests ability to develop recommendations around the organizational structure, people and/or culture.
Z14 Pricing strategy
Tests ability to develop options and methodologies to price a new product or reprice an existing one.
Z15 Supply/value chain
Tests understanding of players and activities involved in sale of a product, from the delivery of source materials from
suppliers to manufacturers, to delivery to the end user.
Z16 Vertical integration
Tests ability to develop a practical solution involving vertical integration of the supply chain.
16
Interviewee
Getting the most out of a case
Interviewer
Best practices before a case
Share focus areas
Inform your interviewer of any
specific areas that you would
like feedback on
Share your caselog
Share an up-to-date caselog
with your interviewer so you
don’t accidently repeat a case
Don’t sneak a peek!
Replicate a real-life case
interview experience by going
in completely in the dark
Bring materials
Bring several sheets of blank
paper and a pen or pencil to
the meeting
Brush up on the industry
Review unfamiliar industries
with KCC’s industry primers or
online (eg. Vault.com)
Review the case
Familiarize yourself with the
case ahead of time to avoid
having to check guidance
Do the math beforehand
Gain practice with the math
required and understand
where common traps may lie
Print exhibits
Interviewers should bring
printed out copies of any
exhibits needed for the case
17
Interviewee
Getting the most out of a case
Interviewer
Best practices during a case
Take it seriously
You might be interviewing with a friend, but
a formal atmosphere will be more valuable
and provide a realistic interview experience
Keep quiet!
While silence may be uncomfortable, resist
the urge to jump in with pointers, hints, or
additional information
Ask fit questions
Almost all interviews start with fit or
Experience questions, so the KCC now
provides such a suggested question before
each case prompt
18
Interviewee
Getting the most out of a case
Interviewer
Best practices after a case
Provide high-level performance assessment
Be honest with the interviewee about their
performance. If it was a good case, tell
them. If it was poor, it’s even more
important to tell them!
Provide detailed feedback
After providing a high-level performance
assessment, explain why by running the
interviewee through each part of their case
Give feedback!
A case is a two-sided conversation. Tell the
interviewer how they could do anything
differently in terms of case or performance
assessment delivery
19
Evaluating case performance
Evaluation criteria
Case skills and driving the case
Problem definition
Clearly understands and defines the problem/ question; summarizes the essence of the issue
Problem breakdown
Breaks problem into most important components
Structure
Uses a structured and thoughtful approach to solve the problem (e.g. draw issue tree with critical pieces of
analysis)
Prioritization
Identifies critical path to the recommendation and most important issues/components
Information
Identifies and addresses key pieces of information and assumptions needed to solve the problem
Solution oriented
Formulates hypothesis when needed and maintains focus on the recommendation
80-20 approach
Deep dives into identified critical issues to develop a recommendation (80% of solution with 20% of analysis)
Recommendation
Ends up with a pragmatic/ realistic solution that answers the initial question; supported with the analysis
Communication skills
Structure
Shares thinking process throughout the case and aligns his communications with the structure of the case
Focus
Highlights key insights, important findings and critical issues
Questions
Ask clear questions related to the case process and solution
Engagement
Engages with the interviewer during the solution of the case
Support
Clearly supports any conclusion or important claim with relevant arguments
Business language
Feels comfortable discussing the case with business terminology
Body language
Communicates naturally and uses body language to support the communication process
Grade
Grade
20
Evaluating case performance
Evaluation criteria (continued)
Polish and interpersonal skills
Self confidence
Shows confidence when solving and attacking the case without sounding arrogant
Quantitative skills
Feels comfortable handling complex calculations and analytics; shows clear calculations and data framing
Analysis
Deep dives in identified critical issues or components and comes up with a solution for each issue
Interpersonal skills
Drive a conversation and acts naturally
Balance
Good balance of quantitative and qualitative analysis during the solution
Business sense and high level thinking
Creativity
Identifies or uses different approaches to solve the problem. Out of the box thinking; uses creative methods
and arrives at creative solutions
Synthesis
Summarizes key findings through the solution of the case and translates them into insights or important takeaways
Concepts
Clearly understands and uses the key business concepts to solve the case
“So what” thinking
Clearly addresses and articulates what each analysis, conclusion or recommendation means to the case,
solution or the client
Testing
Frequently tests assumptions and conclusions with reality checks or other quick analysis
Assessment
Assesses risks and consequences for the recommendations; identifies key next steps to further prove the
solution
Business sense
Uses common sense and realistic thinking to get to pragmatic recommendations; has the ability to think from
different perspectives (e.g. client, competitor, consumer, etc.)
Grade
Grade
21
2020 Cases
22
Case 01
Busch’s Barber Shop
Concepts tested
Primary sector(s)
Similar cases
• Z08 Market sizing (2)
• X09 Hospitality & Leisure
• Snack Foods Acquisition
(Columbia 2017)
• Z12 Creativity (5)
• Surfboard Wax in Hawaii
(Fuqua 2014)
Case type
• Y04 Market entry
• Chic Cosmetology (Kellogg
2020)
• Y06 Opportunity assessment
Case author(s): Michael Eidem (Kellogg 2020)
Edited by: Rohan Maini (Kellogg 2020)
23
Busch’s Barber Shop
Interviewer guide
Case Question
• Your friend, a current MBA student, has his heart set on starting a barbershop in Evanston after graduation.
• There are plenty of barbershops and salons near the Northwestern campus, but your eager friend argues they are either (A) vastly
overpriced or (B) cheap, but really low quality.
• He wants your help coming up with a plan.
Interviewer guide
• Problem: Develop a market entry strategy for Busch’s Barber Shop
• Key case steps:
1. Develop a structure to address the problem
2. Confirm market attractiveness (size)
3. Calculate revenue and costs for two potential locations
4. Evaluate profitability of potential loyalty program
5. Brainstorm other areas of consideration
6. Provide client recommendation
24
Busch’s Barber Shop
Fit: Tell me something about yourself that is not on your resume.
Case Question
• Your friend, a current MBA student, has his heart set on starting a barbershop in Evanston after graduation.
• There are plenty of barbershops and salons near the Northwestern campus, but your eager friend argues they are either (A) vastly
overpriced or (B) cheap, but really low quality.
• He wants your help coming up with a plan.
Clarifying information
• Customers: For this analysis, your friend wants to focus solely on a target market of the male population of Evanston.
• Competitive dynamics: Highly competitive, segmented into two distinct groups (high price & low price). Friend believes there is a
profitable space in between these two segments.
• Market: Growing at GDP the past five years.
• Your Friend: No specific experience in the cosmetology area, has enough savings to fund initial upfront costs and early ongoing
costs. Profitability is the main goal in the short term (wants to be profitable in year one to justify his decision not to take a highpaying consulting job).
• Product: Barbershop only intends to initially sell haircut service. Any other additional products or services can be considered in the
future.
25
Busch’s Barber Shop
Exhibit A – Market analysis
Where do men in Evanston get
their haircut?
Competitors’ market share
100%
80%
$$$,
33%
10%
10%
25%
20%
60%
$,
67%
40%
20%
35%
30%
30%
40%
0%
Low-end
High-end
Notes:
•
Men’s haircut market split between two groups, high-end (avg price $50) and low-end (avg price $20).
•
Evanston Adult Population: 60k (50% male)
26
Busch’s Barber Shop
Exhibit B – Market Entry Projections
Expected Customer Steal
Description
Upfront Costs
Ongoing Costs
From
Low-end
From
High-end
Equip.
Advert.
Rent
Labor
Location #1
Downtown
10%
5%
$30k
$20k
$4k
4 workers, $15/hr
Location #2
Not Downtown
5%
5%
$30k
$25k
$1k
2 workers, $15/hr
Notes:
• Projections of customer steal based on consumer survey. Survey described new barbershop as in-between quality at price
point of $30.
27
Busch’s Barber Shop
Part 1
1. Develop framework for how to approach this new venture
A sample case structure would include the following:
• Client: Specific goals, strengths, capabilities, resources
• Market: Size, growth, competition, customer segmentation
• Profitability
• Expected customer volume, target customers
• Price elasticity, pricing method (ex: loyalty), service mix
• Costs: Fixed costs (rent, equipment, merchandise, advertising), variable costs (labor)
• Go-to strategy: Build, acquire, partner with additional co-owner
• Barriers: Capital, local regulations, attracting talent
• Risks: Competitive response, no differentiation, opportunity cost
Following discussion of framework, interviewee should be asked to briefly market size the adult men’s haircut market in Evanston
(See next page)
28
Busch’s Barber Shop
Parts 2-3
2. Confirm market attractiveness (size)
Interviewee should make educated guesses regarding:
• City population size (~60k)
• Male/female ratio (~50/50)
• What % of male population pays for haircuts (i.e. likely
omitting young kids, those who cut their own hair, bald men)
3. Calculate revenue and costs for two potential locations
Provide Exhibits A & B
Your friend thinks there is a profitable middle ground between
the low cost/low quality cut and the high cost/high quality cut
markets.
• What % of men in Evanston get their haircut in Evanston vs
downtown Chicago near their place of work.
Additional information:
• Average annual haircuts per person being considered
• Barbershop will be open 10 hours/day, 360 days/year
• Price segmentation (average price for cut, high end vs low
end portions of the market and distribution between the two)
• Assume customers stay with the same barbershop once they
make a decision (i.e. customers don’t switch back and forth
between shops).
• End result should be a total annual dollar amount spent on
haircuts by men in Evanston.
There is no correct answer to this exercise. A good interviewee
will show creativity, structure, and intuition regarding making
educated guesses. Push interviewee to move quickly since this
is not the primary purpose of the overall case.
• An average male in Evanston pays for 10 haircuts per year
Lead interviewee towards calculating 1st year profit in each
location to determine optimal choice [see next page for
solution].
29
Busch’s Barber Shop
Part 3 (continued)
3. Calculate revenue and costs for two potential locations (Exhibit A & B)
Adult male population count in each segment:
Market
Adult Male Customers
Low-end
= 60k * 50% * 2/3 = 20k
High-end
= 60k * 50% * 1/3 = 10k
Projected revenue calculation of each location:
Location
Total Customers Stolen
Downtown
= 20k*10% + 10k*5% = 2.5k
Not Downtown
= 20k*5% + 10k*5% = 1.5k
Revenue
= 2.5k * 10 cuts/yr * $30/haircut = $750k
= 1.5k * 10 cuts/yr * $30/haircut = $450k
Cost calculations of each location:
Location
Upfront Costs
Downtown
= 30k+20k = 50k
Not Downtown
= 30k+25k = 55k
Labor
= 4*$15/hr*10hr/day*360days = $216k
= 2*$15/hr*10hr/day*360days = $108k
First year profitability:
Location
Downtown
Not Downtown
Revenue
= $750k
= $450k
-
Rent
= 48k
= 12k
Total Cost
$314k
$175k
=
=
=
Total
$314k
$175k
Profit
$436k
$275k
Takeaway: Downtown location has higher projected first year profits.
Optional brainstorming question: What other factors should be considered when choosing a potential shop location?
Potential answers: Long term plans, proximity to other stores, ease of transportation to location, visibility, layout of store, capacity
constraint for future growth, preference of target demographic
30
Busch’s Barber Shop
Part 4
4. Evaluate profitability of potential loyalty program
Your friend (after having chosen the downtown location) is considering implementing a loyalty reward system as part his marketing
strategy. He’s decided that such a system would reward customers by giving them their 10th haircut for free. He projects this will
result in a 10% increase in total first year customers. Is this a profitable decision?
One method is to calculate the new annual customer count, determine expected annual revenue, and compare with previously
calculated revenue. Costs assumed to remain constant since no marginal costs for additional haircuts (employees paid hourly,
assume no additional employees required).
New expected annual customer count:
= (Previously calculated total customers) * 110% = 2500 * 1.1 = 2750 customers
Expected revenue with loyalty program:
= (# of expected customers) * (average # haircuts paid for annually) * (price) = 2750 * (10 – 1) * $30 = $742.5k
Takeaway: Revenue without loyalty program was $750k. Since costs do not change, not profitable decision.
Additional insight: Revenue decline is minimal (~1%), are there potential advantages of increasing customer base by 10% that would
still make implementing loyalty program attractive? (example: implement loyalty program for only the first year to build customer base,
upsell products such as shampoo/additional services to this larger customer base, etc.)
31
Busch’s Barber Shop
Part 5
5. Brainstorm other areas of consideration (optional)
Additional optional brainstorm questions:
1. What changes could be made to make this loyalty program profitable?
• Decrease frequency of freebies, make reward 50% off instead of free cut, etc.
2. Instead of the loyalty program, your friend is considering introducing a membership-based pricing. In this system, a customer
would pay a set price every month for unlimited haircuts. What are pros and cons of such a system, and if it was implemented,
how would you think about setting the price?
• Pros (more predictable revenue stream, potentially increased data on customers, differentiation)
• Cons (adverse selection likely to occur with only customers who would overuse membership signing up, potentially unhappy
employees if tips reduce based on different payment scheme)
3. One key to success will be finding quality employees without having to pay as high of a base wage as high end competition. What
are some possible methods of attracting and retaining talent in this scenario?
• Possible options: more flexible work schedule, end of year profit sharing to make employees feel invested in store’s success,
finding rising stars in the lower end market who haven’t had the chance to move to the high-end yet, etc.
32
Busch’s Barber Shop
Part 6
6. Provide client recommendation
Overall:
• Your friend should choose the downtown location for starting his new barbershop without the loyalty program.
• Projected first year profits of ~$430k
• Implementing free 10th haircut results in decreased revenue at current growth expectations.
Risks:
• Numbers assume immediate customers acquisition: unrealistic without effective marketing campaign.
• Competitive response: high end stores may offer discounts or decrease price if they experience large loss of customers, although,
projected market steal from this segment is only 5%, unlikely to cause drastic response.
• Customers might not find quality increase enough to justify increased price compared to other low-end options.
• Opportunity costs: what other business options could your friend be pursuing with his saved capital? Are there other locations
better suited than Evanston? Would it be more efficient to buy a current existing shop instead of starting a new one?
Next steps:
• Perform due diligence on buying an existing shop.
• Perform more extensive customer surveys to confirm existing projections.
• Research how to hire qualified barbers to meet expectations of improved quality compared to low level shops.
• Sign lease, purchase equipment, bring on advisor (since friend has no previous experience), develop marketing strategy.
• Evaluate changes to proposed loyalty program to improve profitability.
33
Case 02
Chic Cosmetology
Concepts tested
Primary sector(s)
Similar cases
• Z03 Breakeven analysis
(1)
• X09 Hospitality & Leisure
• Busch’s Barber Shop
(Kellogg 2020)
• Z12 Creativity (2)
• Yumy Co
2012)
• Z07 Market share (3)
(Yale
Case type
• Y04 Market entry
Case author(s): Peter Manoogian (Kellogg 2012)
Edited by: Rohan Maini (Kellogg 2020)
34
Chic Cosmetology
Interviewer guide
Case prompt
• Our client is a for-profit, specialty college named Chic Cosmetology University (CCU). Founded in 2005, CCU is a program for high
school graduates seeking their professional cosmetology license. CCU is currently the market leader for cosmetology education
with campuses in ten major metropolitan areas in the US.
• CCU has capital to invest in a new campus and is considering Chicagoland as a location – should they do it?
Interviewer guide
• Problem: Will CCU be able to enroll enough students to offset the initial investment and achieve positive profit?
• Key case steps:
1. Evaluate CCU revenue and cost structures
2. Brainstorm CCU customers
3. Project CCU’s market share
4. Provide client recommendation
•
Note: It is critical that the interviewee lands on the figures presented (or is course corrected toward them before proceeding)
35
Chic Cosmetology
Fit: What would be the hardest part about starting at our firm?
Case prompt
• Our client is a for-profit, specialty college named Chic Cosmetology University (CCU). Founded in 2005, CCU is a program for high
school graduates seeking their professional cosmetology license. CCU is currently the market leader for cosmetology education
with campuses in ten major metropolitan areas in the US.
• CCU has capital to invest in a new campus and is considering Chicagoland as a location – should they do it?
Clarifying information
• Goal: Achieve positive operating profit for the new campus two years after opening
• Format: Enrolled students take classes at a physical campus for one school year to earn degree (FY begins on 9/1)
• Reputation: CCU has the best campuses and equipment in the industry, and boasts strong job placement into top local slaons
• Growth: CCU and industry enrollments growing at 5% per year
• Competitors: 2-3 other large specialty colleges, and lower-cost community colleges
• Industry: H.S. Diploma and cosmetology degree required to enter the field
• Students: 98% of cosmetologists are women
36
Chic Cosmetology
Exhibit A – CCU 2010 financials (31-Aug-2010)
Student enrollments (all campuses)
Revenue from enrollments
10
$150,000
Total fixed campus costs
Buildings and equipment
Recruiting, general, and administrative
$48,000
$32,000
$16,000
Total variable campus costs
Instructors
Student supplies
$80,000
$40,000
$40,000
Operating profit
$22,000
Notes:
• All units in ‘000s
Chic Cosmetology
Exhibit B – CCU and major competitor locations (31-Aug-2010)
Campus
2010 share*
San Francisco, CA
8%
Los Angeles, CA
14%
Minneapolis, MN
15%
Dallas, TX
14%
Houston, TX
10%
Atlanta, GA
16%
Miami, FL
12%
Philadelphia, PA
12%
New York City, NY
16%
Boston, MA
8%
*Measured as share of total ‘potential’ students,
as defined by CCU
CCU Campus
Major competitor campus
38
Chic Cosmetology
Part 1
1. Evaluate CCU revenue and cost structures
Provide Exhibit A after interviewee asks about revenues or costs
• How many students will CCU need to break-even in year 1?
• If asked, the investment initial Chicagoland campus cost is $4.5M in initial building costs to renovate its chosen site. These costs
can be amortized evenly over a three year period. Assume fixed costs remain flat per year.
• Interviewee should calculate
• Total fixed costs per year = $6.3M ($4.8M + $1.5M from amortization).
• Gross profit per student = $7K
• Average revenue per enrollment = $15K (revenue / total enrollments)
• Total annual fixed cost per campus = $4.8M ($48M / 10)
• Total variable cost per student = $8K ($80M / 10K)
• Gross profit per student = $7K ($15K - $8K)
• Break-even number of enrollments per year = 900 ($6.3M / $7K)
• Next step: Interviewee should tackle the overall opportunity in the area and how many year 1 enrollments CCU could expect
39
Chic Cosmetology
Part 2
2. Brainstorm CCU customers
• What types of schools / students do you think CCU targets?
• Possible responses (schools):
• Public schools (private HS more likely to have grads go to 4yr univ)
• HS’s in middle-class cities (may be an affordability issue w/lo income)
• Closest to the campus (geography)
• Possible responses (students)
• Female HS graduates
• Not attending 4yr college
• Interested in cosmetology
• After a few of the above criteria are noted, share:
• CCU has identified 1,000 targeted high schools in the Chicagoland area
• Within these HS, CCU’s market research estimates that on average 6 students per HS have “potential” for CCU enrollment
40
Chic Cosmetology
Part 3
3. Project CCU’s market share
Provide Exhibit B to the interviewee
• 80% of enrolled students come directly from high school, the other 20% of students come from the “Adult” market
• What is the highest share we could expect CCU Chicago to capture in Y1?
• Campuses w/competitors present tend to have a lower share (10%) than those w/out (15%)
• However, presence of >1 competitor does not have an increased negative impact on market share (Boston has 8% share w/only
one competitor)
• Interviewee should assume a projected 10% market share for a Chicago campus (one competitor)
• 10% market share equals 750 enrollments
• Takeaway: CCU cannot break even based on the enrollment number estimated
41
Chic Cosmetology
Part 4
4. Provide client recommendation
• Overall, our client should NOT enter the Chicago market under the current cost structure. Even with a 10% market share
assumption in year 1, the Chicago campus will enroll only 750 students, this is 150 fewer than the 900 required to break-even.
• The client should also consider several qualitative issues:
• Consider offering scholarships to increase the number of potential students and/or conversion rate of potential students
• Consider other cities beyond Chicagoland that currently do not have a CCU presence, or add a second campus to a city such
as NYC that has high market share and potentially low capacity
• Perform market research in other cities to understand if there is a greater potential per target high school to increase ROI
• Consider ways to reduce fixed costs (e.g., transporting equipment / materials from campuses that are not at capacity)
• Strong interviewees identify several of the qualitative issues listed above as ways in which CCU could proceed
• Outstanding interviewees will recognize that the 10% market share is for campuses that have been in place for at least three years,
therefore Chicago is unlikely to achieve that share in year 1 or 2; this rules out the feasibility of the follow-up question that suggests
the possibility of reducing the one-time investment from $4.5M to $300K.
42
Case 03
Chicouver Cycle
Concepts tested
Primary sector(s)
Similar cases
• Z12 Creativity (1)
• X15 Transportation & Logistics
• Fast Food Co. (Columbia
2017)
• Z02 Net Present Value (2)
• Duck Island Beer Co.
(Fuqua 2016)
• Z03 Breakeven analysis
(3)
Case type
• Y04 New product / Market entry
Case authors: John Ng (Kellogg 2018)
Edited By: Michael Eidem (Kellogg 2020)
43
Chicouver Cycle
Interviewer Guide
Case prompt
• Our client, Chicouver Cycle (pronounced “Chai-cover”), is a bikesharing startup. Like other bikeshare operators in cities around the
world, Chicouver Cycle owns bicycles and rents them out to users one trip at a time.
• Chicouver Cycle wants to know how they should launch operations in the city of Chicouver. They have specifically asked us to
recommend one or more of Chicouver’s neighborhoods to enter.
Interviewer guide
• This case test the interviewee’s ability to move beyond the typical market entry framework to consider practical issues of launching
a sharing economy business.
• Key case steps:
1. Develop a structure to address the problem - identify factors for comparing different neighborhoods as potential launching
grounds.
2. Analyze cost and revenue drivers for different neighborhoods and trip types.
3. Compute profitability for different operating models (docking versus dockless bikeshare systems)
4. Provide client recommendation
44
Chicouver Cycle
Fit: You’re interviewing for a generalist role, however, are there particular industries or functions that you’re especially interested in?
Case prompt
• Our client, Chicouver Cycle (pronounced “Chai-cover”), is a bikesharing startup. Like other bikeshare operators in cities around the
world, Chicouver Cycle owns bicycles and rents them out to users one trip at a time.
• Chicouver Cycle wants to know how they should launch operations in the city of Chicouver. They have specifically asked us to
recommend one or more of Chicouver’s neighborhoods to enter.
Clarifying information
• Customers: Chicouver residents are avid bicyclists. The city is also a popular tourist destination
• Competitive Dynamics: There is currently no existing bikeshare system in Chicouver.
• Company: Our client wants to generate cash from initial launch to fund further growth. Profitability is important.
• Product: Most bikeshare systems charge $1 per trip. Our client will charge the same. Our client is choosing between two models of
bikesharing systems: docking and dockless.
• Other: The city of Chicouver has worked with other sharing economy platforms before; permitting will not be an issue. Chicouver
has reasonable weather for biking all year round.
45
Chicouver Cycle
Exhibit A – Chicouver’s Neighborhoods
Mid-income residential
neighborhood for
Chicouver’s working adults
1 mile
Population density
Low
Wetlands
Ritzy residential
neighborhood, home to
Chicouver’s titans of
industry
High
Capitol Hill
Swanville
Chicouver’s main
tourist district
Historic District
CBD
Bayside
Heights
Newly gentrified residential
neighborhood popular with
young professionals
Nightlife
District
Popular with locals
Monday through
Saturday
Recreation
District
Gyms, museums, nature
parks frequented by local
residents after work
Business district where all
of Chicouver’s residents
commute to work
46
Chicouver Cycle
Exhibit B – Chicouver’s Topography
1 mile
Topography
Flat
Wetlands
Very
hilly
Capitol Hill
Swanville
Historic District
Bayside
Heights
CBD
Nightlife
District
Recreation
District
47
Chicouver Cycle
Exhibit C – Projections by Type of Bikeshare Trip
Expected No. of
Trips Per Week (K)
No. of Bikes Needed
to Meet Demand (K)
Utilization (%)
Commuting
500
50
4%
Tourism
400
5
24%
Recreation
300
4
22%
Nightlife
600
30
7%
Trip Type
Notes:
• Utilization = # hours bike is used each week / total # hours in a week
48
Chicouver Cycle
Exhibit D – Bikeshare Systems
DOCKING System
DOCKLESS System
Users must start and end trips at a
docking station.
Users pick up any available bike and end a trip
anywhere within the service area.
49
Chicouver Cycle
Exhibit E – Projected Costs
Costs
Docking System
Dockless System
$200
$200
$10,000
n/a
Flat
$100
$200
Moderately Hilly
$500
$1,000
Very Hilly
$2,000
$4,000
Annual cost per bike
Annual cost per docking station*
Annual distribution
cost per bike
*Notes:
• Each docking station holds 20 bikes
50
Chicouver Cycle
Part 1
1. Develop a structure to address the problem
An ideal structure focuses mostly on the specific question at hand: which neighborhood(s) should Chicouver Cycle look to launch in
first? Additional elements of a new venture/market entry framework help to round out a complete view of the problem.
Key elements expected to be included in this framework are:
• Overall Market: Who are the target customers and what are their preferences, what does the competitive landscape look like (even
though there aren’t other bikesharing companies, what are available substitutes), what are the overall economic trends in the city of
Chicouver and how will that impact the sharing economy?
• Our Client: What are our core competencies, have we launched in other cities previously and learned from that experience, do we
have a current image/brand, how lean are we looking to be at initial launch, what are our future aspirations (other products,
services)?
• Profitability: What will the expected costs be (marketing, bikes, docking equipment, labor, technology development and
maintenance, etc.) and how much revenue can we expect to earn (user volume, ride frequency, payment level and structure)?
• Location Choice: The prompt specifically focuses on location, so the interviewee should consider factors that matter when analyzing
neighborhoods as potential launching grounds: population density, neighborhood uses, household income, topography (critical for
bikeshare!), etc.
51
Chicouver Cycle
Part 2
2. Analyze cost and revenue drivers for different neighborhoods and trip types.
After discussing initial framework, when interviewee raises questions regarding how to evaluate which neighborhood to enter…
Provide Exhibit A & B
• There is a lot of info in Exhibit A: population density, what takes place in each neighborhood, and who is in each neighborhood.
• There are 3 residential neighborhoods where people commute from home to work in CBD. After work, residents travel from the
CBD to the recreation and nightlife districts. Tourists tend to stay within the historic district.
• Terrain matters: it’s easier to bike on flat terrain than hilly terrain, and this may affect our revenues or our costs.
• Interviewee should discuss how these different characteristics of neighborhoods affect the attractiveness of each for market entry.
• Interviewee may need help seeing that there are different types of trips taking place within and between neighborhoods.
Provide Exhibit C
• Exhibit C lays out 4 types of trips that people take in Chicouver. Interviewee may note that while commuting and nightlife have the
greatest number of trips, they require many bikes to provide an acceptable level of service, leading to low utilization.
• No calculations needed at this time, but interviewee should raise issue of revenues and costs. If asked about revenues, tell
interviewee that our client will charge $1 per trip. When asked about costs, ask interviewee to quickly brainstorm major cost items.
52
Chicouver Cycle
Part 3
3. Compute profitability for different operating models (docking versus dockless bikeshare systems)
• When the interviewee raises the need to look at costs and revenues…
Provide Exhibit D & E
Calculate revenue and costs for each distinct trip type to determine which neighborhoods should be targeted:
• Revenue = ($1) * (# of weeks) * (# of trips)
(Assume 50 weeks in a year)
• Cost of bikes = ($200) * (# bikes)
• Number of stations = (# bikes) / 20
Cost of Stations = ($10,000) * (# stations)
• Distribution costs = (distribution costs) * (# bikes)
Type
#
Trips
#
Bikes
Terrain
Revenue
Bike Cost
# Stations
Station Cost
Dist. Cost
(docking)
Dist. Cost
(dockless)
Docking Profits
Dockless
Profits
Commute
500
50K
All 3 (use
flat)
$1 * 500K *
50 = 25M
$200 * 50K
= 10M
50K / 20 =
2500
2500 * $10K
= 25M
$100 * 50K
= 5M
5M * 2 =
10M
25 – 10 – 25 – 5
= -15M
25 – 10 – 10 =
5M
Tourism
400
5K
Very hilly
$1 * 400K *
50 = 20M
$200 * 5K =
1M
5K / 20 =
250
250 * $10K
= 2.5M
$2000 * 5K
= 10M
10M * 2 =
20M
20 – 1 – 2.5 – 10
= 6.5M
20 – 1 – 20 =
-1M
Recreation
300
4K
Moderate
$1 * 500K *
50 = 15M
$200 * 4K =
0.8M
4K / 20 =
200
200 * $10K
= 2M
$500 * 4K =
2M
2M * 2 =
4M
15 – 0.8 – 2 – 2
= 10.2M
15 – 0.8 – 4 =
10.2M
Nightlife
600
30K
Flat
$1 * 500K *
50 = 30M
$200 * 30K
= 6M
30K / 20 =
1500
1500 * $10K
= 15M
$100 * 30K
= 3M
3M * 2 =
6M
30 – 6 – 15 – 3 =
6M
30 – 6 – 6 =
18M
53
Chicouver Cycle
Part 4
4. Provide client recommendation
• Recommendation: Chicouver Cycle should launch a dockless system in the nightlife district:
• This will generate $18m in profits per year, driven by the nightlife district’s high volume of projected bikeshare trips.
• Going dockless will save $15 in station costs in exchange for a doubling of distribution cots to $6m, which are relatively low
thanks to the nightlife district’s flat terrain.
• Going forward, a dockless system will also entail lower costs and higher profits than a docking system as Chicouver Cycle
expands to other neighborhoods and serves other trip types. Choosing the right operating infrastructure with the eye to future
growth is important for a bikeshare system.
• Next Steps:
• Utilization of bicycles for nightlife trips is low. Our client should explore ways to increase utilization and improve margins by
using the same bikes to target additional trip types, such as recreation trips. Recreation is a good candidate because the
recreating and nightlife districts are geographically adjacent.
• Our client should investigate ways to reduce distribution costs. One idea is to incentive users to end trips in specific locations
that won’t require Chicouver Cycles to send someone to redistribute the bikes later on.
• Chicouver Cycle should increase loyalty among customers and raise switching costs to protect itself from other sharing
economy transportation competitors, including other bikeshare companies that may enter the city.
54
Case 04
Dark Sky
Concepts tested
Primary sector(s)
Similar cases
• Z12 Creativity (1)
• X01 Aerospace & Defense
• Fruit Cart Vendor
(Stern 2012)
• Z05 Elasticity (2)
• Sgt. Slaughter
(Fuqua 2010)
• Z14 Pricing strategy (2)
Case type
• Y04 New product / Market entry
• Ice Cream Dream
(Darden 2016)
Case author(s): Sean Burrow (Kellogg 2011)
Edited by: Eugene Kim (Kellogg 2015), Rohan Maini (Kellogg 2020)
55
Dark Sky
Interviewer guide
Case prompt
• Our client, Dark Sky, is a small manufacturer of unmanned (ie. remotely piloted) data collection aircraft.
• Dark Sky produces the Assessor, an aircraft originally designed for unmanned weather exploration.
• In 2006, the United States military began purchasing Assessors for use in Intelligence, Surveillance and Reconnaissance (ISR)
missions. The Assessor is profitable, but sales have stagnated and the client wishes to grow.
• What are some steps Dark Sky could take to achieve growth?
Interviewer guide
• This case intentionally uses terminology that may not be familiar to the typical MBA student. This is meant to challenge the
interviewee to dismiss superfluous information and to focus on the business problem.
1. Analyze historical growth and brainstorm growth strategies
2. Explore attractiveness of prototype products
3. Brainstorm other product selection considerations
4. Provide client recommendation
56
Dark Sky
Fit: What is your greatest weakness? Tell me about a team experience when you where hampered by this weakness.
Case prompt
• Our client, Dark Sky, is a small manufacturer of unmanned (ie. remotely piloted) data collection aircraft.
• Dark Sky produces the Assessor, an aircraft originally designed for unmanned weather exploration.
• In 2006, the United States military began purchasing Assessors for use in Intelligence, Surveillance and Reconnaissance (ISR)
missions. The Assessor is profitable, but sales have stagnated and the client wishes to grow.
• What are some steps Dark Sky could take to achieve growth?
Clarifying information
• Customer / Price: Dark Sky’s only customer is the US Military, with which they have a Cost-Plus-Fixed-Fee contract. The contract
has been extended in the past and is up for renegotiation; the Military has agreed to a marginal inflationary price increase
• Company: Dark Sky has additional capacity to manufacture. They are too small to acquire competitors.
• Product: Dark Sky designs a unique aircraft that is launched from a catapult device; the aircraft can be launched from ships at sea
or from harsh terrain (e.g. desert, mountains). Dark Sky only sells the Assessor, but has other prototypes designed.
• Competition: There are approximately 20 competitors that manufacture unmanned aircraft.
57
Dark Sky
Exhibit A – Historical revenue (2014 – 2019)
Revenue
($ millions)
5.0
4.0
3.0
2.0
1.0
0.0
2014
2015
2016
2017
2018
2019
58
Dark Sky
Exhibit B – New product sales forecast (2020)
New Product Sales
(units sold)
New Product
Offering
Navy
Army
Price Per Aircraft
SeaBird
50
--
$220,000
SandBird
--
60
$210,000
JointBird
38
52
$180,000
59
Dark Sky
Exhibit C – Impact of new product on existing sales (2020)
New Product Sales
(units sold)
New Product
Offering
Navy
Army
Price Per Aircraft
Assessor unit sales lost
(cannibalized)
SeaBird
50
--
$220,000
40%
SandBird
--
60
$210,000
70%
JointBird
38
52
$180,000
90%
60
Dark Sky
Part 1
1. Analyze historical growth and brainstorm growth strategies
Provide Exhibit A when the interviewee asks about revenue
• The military started purchasing the Assessor in 2016. The price of the aircraft has remained constant at $100,000 per unit.
Throughout the past decade, The Assessor has been Dark Sky’s only source of revenue.
• How many units were sold in 2019 and what was the growth rate from 2015 to 2019? How could Dark Sky grow?
• How many units were sold in 2019?
• $5,000k ÷ $100k/unit = 50 units
• What was the growth rate from 2015 to 2019?
• ($5,000k - $500k) ÷ ($500k ) x 100 = 900%
Organic
• Increase penetration with US military
• Product development – develop new products for the
military
Inorganic
• Joint Venture – to increase market accessibility or
product offering.
• M&A – add additional capacity and/or products.
• New market entry to new markets or customers
• Increase / reduce prices (based on demand elasticity)
61
Dark Sky
Part 2a
2a. Explore attractiveness of prototype products
Provide Exhibit B after Exhibit A asks about new products
• Dark Sky has developed several aircraft prototypes designed specifically for military missions. The company has the capability to
continue producing the Assessor and to introduce one new aircraft.
• To maximize short-term growth, which aircraft should Dark Sky produce?
• To calculate the revenue for each scenario, the interviewee should add Assessor sales to the sales of the new product.
• Assessor sales are based on:
• 50 units sold with no new product launch
• Cannibalization forecast specific to each new product launch
• $110,000 per aircraft
• New product sales can be easily calculated using shortcuts. For example:
• SeaBird: $220k * 100 = $22m… then half of this
• SandBird: $210k * 100 = $21m… then half of it and add (10% of $21m)
• JointBird: Add to get 90… then $180k*100 = $18m, subtract (10% of $18m)
62
Dark Sky
Part 2b
2b. Explore attractiveness of prototype products
Provide Exhibit C only if the interviewee asks about cannibalization
• The introduction of a new aircraft will have a negative impact on Assessor sales. Which aircraft should Dark Sky produce?
• Assessor Sales (Units, Revenue):
• No new product = 50 aircraft, $5,500,000
• With SeaBird = 50 + (50 * (-40%)) = 50 - 20 = 30 aircraft, $3,300,000
• With SandBird = 50 + (50 * (-70%)) = 50 - 35 = 15 aircraft, $1,650,000
• With JointBird = 50 + (50 * (-90%)) = 50 - 45 = 5 aircraft, $550,000
• New Product Revenue:
• SeaBird = 50 * $220,000 = $11,000,000
• SandBird = 60 * $210,000 = $12,600,000
• JointBird = (38 + 52) * $180,000 = 90 * $180,000 = $16,200,000
• Total Revenue:
•
•
•
•
Assessor Only = $5,500,000
Assessor and SeaBird = $3,300,000 + $11,000,000 = $14,300,000
Assessor and SandBird = $1,650,000 + $12,600,000 = $14,250,000
Assessor and JointBird = $550,000 + $16,200,000 = $16,750,000
63
Dark Sky
Part 3
3. Brainstorm other product selection considerations
• If the candidate doesn’t start by listing other considerations relevant to selection of a new aircraft, as them to brainstorm.
Development
• Speed: How quickly could Dark Sky start manufacturing a third model (i.e. can Dark Sky produce SandBird this year, and be
producing SandBird and SeaBird the following year)? If so, what are the revenue implications?
• Costs: How profitable are the four aircraft models in comparison? Note: Because Dark Sky has a Cost-Plus-Fixed-Fee contract,
profitability for each aircraft is likely equivalent. For this reason, Dark Sky should focus on maximizing the number of aircraft sold. •
How much and how long is the payback period for the investment in manufacturing each type aircraft?
Portfolio
• If Dark Sky produces JointBird, is $550,000 in Assessor revenue worth the associated cost to produce the aircraft? Should
resources be allocated to another project?
Customer
• Potential benefits of have two customer bases for new product (Navy and Army).
64
Dark Sky
Part 4
4. Provide client recommendation
• Based on 2020 forecasted revenue alone, Dark Sky should introduce the JointBird to the US Military in order to boost growth.
• Among the three new prototype product, the JointBird is forecasted to maximize short-term revenue
• However, there are several connected issues that Dark Sky should consider to include profitability, long-term revenue forecasts,
competitive response, etc.
• Excellent interviewees will identify cannibalization as a consideration before beginning revenue calculations
65
Case 05
DigiBooks
Interviewer-led
Concepts tested
Primary sector(s)
Similar cases
• Z10 Customer strategy (2)
• X12 Retail & CPG
• Z10 Marketing strategy (3)
• X13 Technology
• Heavy Things Fitness
(Fuqua 2014)
• Z12 Creativity (3)
• Z08 Market sizing (4)
Case type
• Z04 New product / Market entry
• High Peaks Jacket
2009)
(Tuck
• Termite Control
2005)
(Ross
Case authors: Shobhit Chugh (Kellogg ’11)
Edited By: Adam Louras (Kellogg 2011), Rohan Maini (Kellogg 2020)
66
DigiBooks
Interviewer Guide
Case prompt
• Our client, DigiBooks, is a manufacturer and seller of electronic book readers (tablets). DigiBooks also distributes e-books for the
tablets through their website. The tablet is only compatible with books sold through the DigiBooks site.
• DigiBooks is planning the launch of its tablets in a country where no electronic book readers are currently sold. Only 1% of the
population has ever used an electronic book readers, though 50% is aware of the concept. The Chief Marketing Officer of
DigiBooks has come to you to help determine:
• What factors should DigiBooks consider when launching and marketing DigiBook tablets in this new country?
Interviewer guide
• Problem: How should DigiBooks enter this new market?
• Key case steps
1. Develop a problem-solving structure
2. Analyze customer segments
3. Brainstorm market entry considerations
4. Estimated profits to identify optimal sales channel
5. Provide CEO recommendation
67
DigiBooks
Experience: Tell me about a time that you lead a time to meet an aggressive deadline.
Case prompt
• Our client, DigiBooks, is a manufacturer and seller of electronic book readers (tablets). DigiBooks also distributes e-books for the
tablets through their website. The tablet is only compatible with books sold through the DigiBooks site.
• DigiBooks is planning the launch of its tablets in a country where no electronic book readers are currently sold. Only 1% of the
population has ever used an electronic book readers though 50% is aware of the concept. The Chief Marketing Officer of
DigiBooks has come to you to help determine:
• What factors should DigiBooks consider when launching and marketing DigiBook tablets in this new country?
Clarifying information
• Industry Definitions: Electronic book readers: Is a software, hardware and network platform that utilizes wireless connectivity to
enable users to shop for, download, browse, and read e-books, newspapers, magazines, blogs, and other digital media.
• Client Characteristics: DigiBook’s Tablet: Uses an e-ink electronic paper display that features 16 shades of grey. This allows for a 12
hour long battery life and easy readability.
• Locations: DigiBook has never sold a product outside of the US.
• Competitive Dynamics: No competitors in the e-book or tablet space plan to enter this country
• Market Characteristics: Total population of the country 76MM, high literacy level
68
DigiBooks
Exhibit A – Market segments
250
25
$200
20
$175
15
200
150
$125
Books per year
100
10
eReader WTP
15
5
50
10
5
0
Segment
Population
Super
(SR)
SuperReaders
Readers
(SR)
8M
Occasional
Readers
(OR)
Occasional
Readers
Rare
Readers
(RR)
Rare
Readers
20M
10M
(OR)
0
(RR)
69
DigiBooks
Exhibit B – Channel decisions
Channel
Reach as a % of
Total potential
market
E book Gross
Margin %
E-reader Gross
Margin %
Penetration
Overheads
Retail
50%
50%
30%
40%
$20M
Internet
50%
50%
60%
10%
$10M
70
DigiBooks
Part 1
1. Develop a structure to address the problem
• A structure should cover the key areas needed to explore in order to determine how DigiBooks should launch and market the
tablets in this country. Key elements expected to be included in this framework are:
• Segmentation, targeting and positioning: Are there particular segments in the population that will be ideal customers for us?
• Product: What key capabilities are people looking for? Can we use our existing products or do we need to develop a new one for
this country?
• Price: What price should the tablets and books be sold at? What is customers willingness to pay? Should we price the tablet at a low
price so as to capture most of the market, and make margin on e-books?
• Promotion: How should the tablets be marketed? What promotion mechanisms should be used?
• Place/Distribution: Should the tablets be sold through retail channels, internet or other alternative means?
• Selection of e-books: Is a wide selection of books available for this country?
71
DigiBooks
Part 2
2. Analyze customer segments
Provide Exhibit A
• Through research, we found several segments. We are only able to target one segment with our product.
• Using a 3-year projection, which segment should DigiBook target?
• If unclear, the interviewee should answer based on Revenue Potential (i.e. Ignore probability of purchase) assuming all tablet sales
happen immediately (Ignore TVM).
• The missing data is that the average price of an e-book is $10, for each of the segments, and that e-books and tablets have the
same margin
• Using Exhibit A, interviewee should calculate:
• SR Revenue = [(15 books x $10 X 3 Years) + ($200 x 1 tablet)] x 8M People = $5.2B
• OR Revenue = [(10 books x $10 x 3 Years) + ($125 x 1 tablet)] x 20M People = $8.5B
• RR Revenue = [(5 books x $10 x 3 Years) + ($175 x 1 tablet)] x 10M People = $3.25B
• Takeaway: Segment to be targeted = Occasional Readers (OR) with a Revenue Potential of $8.5B
72
DigiBooks
Part 3
3. Brainstorm market entry considerations
• DigiBooks is now considering how it should sell its e-book readers: through retail stores or through the internet.
• How would you go about evaluating this decision?
Retail
Pros
Cons
• Should encourage trial of the product
• Lower margin due to value chain expansion
• Retailers can help with joint marketing
campaigns
• Will take time and money to set up and adds
training costs
Internet
• Retailers can help with customer service,
returns
• Likely cheaper to establish, will result in
higher margins
• Hard to encourage trial
• Takeaway: We should do some sort of financial analysis to determine which channel is more attractive.
73
DigiBooks
Part 4
4. Estimated profits to identify optimal sales channel
Provide Exhibit B
• Based on revised market estimates, we decided to price the e-reader at $100 and target the Occasional Reader segment.
• Using this information and Exhibit B, can you estimate the profit potential of each of these sales channels? Which should we
choose?
• What segment would you recommend to your client?
• If unclear, the interviewee should answer this with a 1-year Profitability calculation for each of the Sales Channels and back out the
Upfront Investment. They should ignore all other costs.
• There is no missing data; however, the Market Size of 20M people in the OR segment is needed from Exhibit A and the price per ebook of $10.
• Using Exhibit B, interviewee should calculate:
• Retail Profit = [(10 Books x $10/book x 50%) + ($100/tablet x 30%)] x (20M People x 50% reach X 40% Penetration) = $320M $20M = $300M
• Internet Profit = [(10 Books x $10/book x 50%) + ($100/tablet x 60%)] x (10M People x 10% Penetration) = $110M - $10M =
$100M
• Takeaway: Sales Channel to Use = Retail with a profit of $300M
74
DigiBooks
Part 5
5. Provide CEO recommendation
• Overall, DigiBooks should launch the e-book reader for the Occasional Reader segment through the Retail Sales Channel.
•
Based on our calculations, we expect to earn a $300MM annual return
Other items to consider:
• What advertising mechanisms do we use in this case?
• Do we setup a manufacturing facility in the country or do we source the products from our current manufacturing facilities?
• Are there any prospects of competitors entering the market?
• Strong interviewees notice key nuances in the case such as: Time Value of Money impacts on Exhibit A and Probability of Purchase
or Penetration on Exhibit A
• Outstanding interviewees detail various elements of marketing strategy of a new product launch. They lay out tables appropriately
and completes relatively complex calculations at a fast pace.
75
Case 06
Events.com
Concepts tested
Primary sector(s)
Similar cases
• Z14 Pricing strategy
• X13 Technology
• Maine Apples
(Kellogg 2020)
• Z07 Market share
• Montoya Soup
2018)
(Kellogg
Case type
• Y07 Profitability
Case author(s): Alex Fabry (Kellogg 2020)
76
Events.com
Interviewer guide
Case prompt
• Our client is Prospect Equity Partners (‘Prospect’), a prominent Private Equity firm that invests in the technology space. They have
recently acquired Events.com due to strong commercial wins and momentum in the market
• Events.com is a leading SaaS-based registration/ticketing platform for Endurance events (5K runs, Marathons, Triathlons, Mud
Runs, etc.). They make money by taking registrations and processing payments for events and charging a fee per transaction
(similar to Ticketmaster or Eventbrite) ($100 registration price x 10% Fee = $10 in Revenue for Events.com)
• Events.com has doubled market share since 2015, but in the last two years revenue is flat and profits are down, despite growing
share. Prospect wants you to determine what is causing this and come up with a plan to improve profitability
Interviewer guide
• Problem: Are the costs associated with the DM program justified by the savings?
• This case is about a PE-portfolio company in Tech that has been undergoing a decline in profitability, despite commercial wins and
market share growth. Events.com made a pricing change that has harmed profitability and needs to make a change
1. Analyze profitability issues
2. Identify root cause of issue
3. Quantify price change impact
4. Provide client recommendation
77
Events.com
Fit: What has been the most risky project that you have worked on?
Case prompt
• Our client is Prospect Equity Partners (‘Prospect’), a prominent Private Equity firm that invests in the technology space. They have
recently acquired Events.com due to strong commercial wins and momentum in the market
• Events.com is a leading SaaS-based registration/ticketing platform for Endurance events (5K runs, Marathons, Triathlons, Mud
Runs, etc.). They make money by taking registrations and processing payments for events and charging a fee per transaction
(similar to Ticketmaster or Eventbrite) ($100 registration price x 10% Fee = $10 in Revenue for Events.com)
• Events.com has doubled market share since 2015, but in the last two years revenue is flat and profits are down, despite growing
share. Prospect wants you to determine what is causing this and come up with a plan to improve profitability
Clarifying information
• Market: The market has declined ~4% per year since 2015, driven by low participation in experiential runs like Color or Mud Runs
• Competition: Two main other players in space: Active Network and RunSignUp. No recent entrants.
• Customers: Customers are all in the US. Historically, local 5K events are targeted, but Events.com recently signed IRONMAN
triathlon in Q4 2017, which has $125M in transaction volume per year, and other premium events
• Product: The product platform is called EventWorks Endurance, and has been around for 10+ years
• Company: No changes have been made to company since being acquired by Prospect
78
Events.com
Exhibit A – Historical P&L and Market Share
2015 Market Share
12%
17%
6%
$m
2015
2016
2017
2018
Revenue
25.0
35.0
39.9
39.9
Payment Processing Costs
3.3
4.7
8.0
11.9
Server Hosting Costs
3.8
5.3
4.8
4.8
Total Variable Costs
7.1
9.9
12.8
16.7
Headcount
5.0
5.3
5.5
5.5
Marketing
1.5
1.7
1.8
2.0
SG&A / Other Costs
2.0
2.1
2.2
2.2
Total Fixed Expenses
8.5
9.0
9.5
9.7
Operating Income
9.4
16.1
17.6
13.5
Operating Income Margin
38%
46%
44%
34%
Variable Costs
65%
2018 Market Share
8%
34%
28%
30%
Events.com
Active Network
RunSignUp
Other
Fixed Costs
79
Events.com
Exhibit B – Payment Processing Breakdown
2017
2018
Number of events
4,023
5,051
Total registrations
8.0M
7.9M
Dollars processed
$339M
$595M
Events.com Revenue
$39.9M
$39.9M
Payment Processing Expenses
$8.0M
$11.9M
80
Events.com
Exhibit C – Pricing Structure
Old Pricing Structure
Fee per transaction
10.0%
New Pricing Structure
Fixed fee per transaction
Price under $50
Price over $50
$3.00
$5.50
81
Events.com
Part 1
1. Analyze profitability issues
Provide Exhibit A when asked about Profitability (or revenue/costs)
• Using Exhibit A, have a discussion around what is driving the decline in profitability
• Interviewee should note that market share growth is from stealing share from Active Network, but largely ignore the share data
• Interviewee should focus on 2017 and 2018 and notice that payment processing costs have increased drastically, hypothesizing
that is due to an increase in processing volume or processing rate (since this is a variable expense), and ask for more information on
payment processing
• Interviewee should ignore other expenses, as the growth is not material
82
Events.com
Part 2
2. Identify root cause of issue
Provide Exhibit B when about Payment Processing Costs or Revenue
• Provide the additional information along with the exhibit:
• Price per Registration declined as higher priced customers (smaller events with fewer total registrations) were acquired
(Ironman Triathlon) and lower priced customers did not renew
• If interviewee is stuck, start a discussion about pricing and how it affects revenue, and have the interviewee calculate the payment
processing rate, average fee, and average price per registration in 2017 and 2018.
• Interviewee should now isolate whether the processing costs increase is driven by rate or volume, and should calculate the
processing rate to confirm (Payment Processing Expenses / $’s Processed)
• 2017: $8m / $399m = 2%; 2018: $11.9m / $595m = 2%
• Interviewee should now realize cost increase is driven by volume and that registrations and volume are up, although revenue is
down, leading to analysis of the components of revenue
• Avg. fee rate (Revenue / $’s Processed):
• 2017 = 10%; 2018= 6.7%
• Price per registration ($’s Processed/Registrations):
• 2017 = $50; 2018 = $75
83
Events.com
Part 3
3. Quantify price change impact
Provide Exhibit C when asked about Pricing
• Provide the additional information along with the exhibit:
• Pricing was changed due to competitive pressure
• Interviewee should realize that pricing was changed from variable (10% fee) to a tiered fixed fee pricing, and as the price per
registration increased, this caused revenue to be flat, despite acquiring customers
• Candidate should realize ‘Over $50’ pricing should be changed, and when prompted, let interviewee know that customer surveys
have indicated that a 2.25% “Credit Card Fee” can be added to “Over $50” tier with negligible customer losses, and that ~$375m of
volume is over $50
• Interviewee should now calculate revenue increase from adding 2.25% fee
• 2.25% * $375m = $8,437,500
• Do not allow rounding
84
Events.com
Part 4
4. Provide client recommendation
• Interviewee should summarize that a change in pricing to fixed fee tiered pricing caused revenue to remain flat and profitability to
decline. They should recommend adding a 2.25% variable fee to the ‘Over $30m’, which will add ~$8.4m of revenue and profitability
• Risks: Additional increases to average price per registration, customer reaction to pricing increases
• Next Steps: Roll-out strategy for pricing change, investigation of ways to further change pricing to guard against additional
increases in average price per registrations (add additional pricing tiers, customer/market research to figure out customer
willingness to pay, etc.); Could look at targeting new sets of lower priced customers; consider acquiring RunSignUp to take over
strong market position and stratify offerings; or exiting market due to its decline.
• Excellent interviewees demonstrate the ability to analyze a P&L and think through how variable costs and revenues are related,
along with testing brainstorming on pricing strategy.
• Outstanding candidates will quickly focus on the correct items in the P&L and make the connections between pricing, revenue, and
variable costs and how that has eroded profitability, despite being the market share leader.
85
Case 07
Garthwaite Healthcare
Interviewer-led
Concepts tested
Primary sector(s)
Similar cases
• Z12 Creativity (2)
• X08 Healthcare
• Mustard Clinic
(Kellogg 2020)
• Z15 Supply/value chain (4)
• Insurance for Underserved
(Wharton 2017)
• Z16 Vertical integration (4)
Case type
• Y07 Profitability
Case author(s): Aaron Mowery (Kellogg 2013)
Edited by: Rohan Maini (Kellogg 2020)
86
Garthwaite Healthcare
Interviewer guide
Case prompt
• Our client is Garthwaite Healthcare Co (GHC), a health insurance firm located in the Midwest.
• Customers pay GHC a fixed monthly premium per person covered under the plan. In exchange, GHC pays for all health services
that each member requires (eg. physician care, prescription medications, hospitalization).
• In recent years, GHC’s financial and competitive position has begun to decline, and the CEO has retained our firm to help them
determine what is causing the problem and how to fix it.
Interviewer guide
• Problem: How can GHC reduce its total cost to serve its policy holders?
1. Develop a structure to address the problem
2. Brainstorm medical cost sources and solutions
3. Calculate administrative costs
4. Develop commission sharing arrangement
5. Provide client recommendation
87
Garthwaite Healthcare
Experience: Tell me about a time when you had to come up with a creative solution for a problem.
Case prompt
• Our client is Garthwaite Healthcare Co (GHC), a health insurance firm located in the Midwest.
• Customers pay GHC a fixed monthly premium per person covered under the plan. In exchange, GHC pays for all health services
that each member requires (eg. physician care, prescription medications, hospitalization).
• In recent years, GHC’s financial and competitive position has begun to decline, and the CEO has retained our firm to help them
determine what is causing the problem and how to fix it.
Provide all Clarifying information even if the interviewee does not request it
Clarifying information
Client Characteristics
• GHC is a mutual insurance company, meaning profits are returned to members in the form of lower premiums the following year. As
such, GHC does not seek to maximize profit – it seeks to minimize cost, but does expect to earn a 5% profit margin.
• GHC’s prices reflect underwriting of risk and the underlying cost to serve a customer
Competitive Dynamics
• Market share is steady, despite presence of major national health insurance company UHC (which has 30% share)
Industry Economics
• National medical cost inflation is 10% over the past 5 years. GHC’s cost increase in this period is 12% and UHC’s is 10%.
88
Garthwaite Healthcare
Part 1
1. Develop a structure to address the problem
• The interviewee should lay out a structure for analyzing the case.
• The interviewee could have determined that revenue is not relevant to this case based on information given in the Case prompt, so
the interviewee should focus on cost.
• Costs in this case break out into fixed costs and variable costs:
• Variable costs (medical costs – claims made by policyholders)
• Fixed costs (administrative costs – e.g., marketing & sales, underwriting, finance, HR)
• Specifically, we will need to understand how these costs have changed in recent years.
89
Garthwaite Healthcare
Part 2
2. Brainstorm medical cost sources and solutions
• Medical costs are the largest component of GHC’s costs. However, GHC’s medical costs are increasing faster than the national
average. What are some potential reasons why this is taking place? What potential opportunities could you explore to reverse this
trend?
• Medical cost = (Number of claims per customer) x (Number of claimants) x (Cost per claim)
Solutions
Problems
Number of claims per customer
Number of claimants
(% of customers claiming)
Cost per claim
• GHC customers sicker on average • GHC customers older than average • GHC pays more per procedure
than average
• Low deductibles incentivize more
claims on average
• Enhance wellness programs
• Increase marketing efforts toward
younger customers
• Introduce pre-enrollment diagnosis
diagnosis to improve cost
• Increase deductibles
estimates
• Conduct benchmarking study to
determine competitors’ costs
90
Garthwaite Healthcare
Part 3
3. Calculate administrative costs
• GHC administrative costs are also higher than average. The biggest driver of this is high cost of sales. GHC policies are sold
through independent agents, each of which works with a ‘General Agency’ that acts as a sales support organization.
• How much does GHC pay in commissions each year?
• What are some potential approaches GHC could take to reduce its cost of sales?
• What potential strategic issues exist with these approaches?
• After interviewee explains how they would calculate commission expense, provide the below:
• Commission (10% of annual premiums) is paid to the General Agency, which passes a share to the independent agent. Total
commission paid is, on average, $25 per agent, per month. There are 500,000 agents.
• Total commission expense = $25 * 500,000 * 12 = $150,000,000
Approaches
• Reduce commission percentage
Issues
• Cap commission to a certain level per year
• Agents could shift business from GHC to another
carrier that pays higher commission
• Change commissions from percent of premium to flat
fee (% increases annually with inflation)
• Agents would lose incentive to sell if their
commission is capped
91
Garthwaite Healthcare
Part 4
4. Develop commission sharing arrangement
• The team has decided to pay a flat commission directly to agents, and to pay the General Agencies a separate fee for the support
services they provide to agents. If the total commission paid to both parties is set at $20 per member per month, what share should
be given to the General Agencies?
• If interviewee asks, explain they should find the maximum amount that should be allocated to the General Agencies.
Additional information
• General Agencies perform three activities: training, application processing, and performance management.
• If GHC were to perform these activities internally, they would cost:
• Training: $6,000,000
• Application processing: $9,000,000
• Performance management: $15,000,000
Potential approach
• The total cost of the activities that General agencies perform is $30,000,000 (=$6,000,000 + $9,000,000 + $15,000,000).
• There are 500,000 members and 12 months in a year.
• The maximum amount of money GHC should be willing to pay the General Agencies for the activities performed is the per member,
per month cost of these activities ($30,000,000 / (500,000 x 12) = $5
92
Garthwaite Healthcare
Part 5
5. Provide client recommendation
• Taking into account what you’ve learned thus far as well as your own additional hypotheses, what initiatives would you recommend
to the CEO at this point?
• Our client should take action to reduce both medical costs and administrative costs.
• At this point, the interviewee should synthesize the findings from the interview into several clear initiatives, for example:
• Enhance marketing efforts to attract more young customers and bring down the average claims per member.
• Conduct a benchmarking study to determine opportunities for reductions in payments for medical services.
• Change the commission structure to flat fee per member per month. This achieves the goal of reducing commission expense,
while at the same time keeping an agent’s incentive to sell more business.
• Strong interviewees will demonstrate the ability to analyze issues using a clear structure and will draw out the implications of their
analysis. The quantitative calculations in this case are elementary, but the process to get to them is somewhat more complicated
93
Case 08
Health Coaches
Concepts tested
Primary sector(s)
Similar cases
• Z10 Customer strategy (2)
• X08 Healthcare
• Mustard Clinic
(Kellogg 2020)
• Z08 Market sizing (3)
• TV Screens
2017)
• Z12 Creativity (4)
Case type
• Y05 Operations
(Wharton
• Vitality Insurance
(Kellogg 2020)
• Y06 Opportunity assessment
Case author(s): David Wellner (Kellogg 2011)
Edited By: Craig DePriester (Kellogg 2012), Rohan Maini (Kellogg 2020)
94
Health Coaches
Interviewer guide
Case prompt
• Our client is a large national healthcare payer (health insurance company, think Aetna) exploring the launch of a new disease
management (‘DM’) program to better serve its 5 million members.
• The idea is to hire and train a team of ‘Health Coaches’ to manage a portfolio of patients to reduce the costs of overall health
expenditures (eg. reminders to take drugs, provide limited medical advice, suggested diet, exercise etc). Studies show that once a
month contact with each patient reduces health spending by 5% on average.
• Should our client launch the program? If so, what steps should it take?
Interviewer guide
• Problem: Are the costs associated with the DM program justified by the savings?
• Problem solving steps
1. Develop a structure to address the problem
2. Explore market segmentation
3. Calculate program profitability
4. Brainstorm other ideas to boost profitability
5. Provide client recommendation
95
Health Coaches
Fit: Tell me about a project where you used your problem solving skills.
Case prompt
• Our client is a large national healthcare payer (health insurance company, think Aetna) exploring the launch of a new disease
management (‘DM’) program to better serve its 5 million members.
• The idea is to hire and train a team of ‘Health Coaches’ to manage a portfolio of patients to reduce the costs of overall health
expenditures (eg. reminders to take drugs, provide limited medical advice, suggested diet, exercise etc). Studies show that once a
month contact with each patient reduces health spending by 5% on average.
• Should our client launch the program? If so, what steps should it take?
Clarifying information
• Industry: The whole industry is under pressure to innovate new products that will control spending
• Company: Assume client is first to market
• Operations: Past attempts to purely automate DM have yielded minimal savings
• Health Coaches: All activity conducted remotely via phone/email, typically by a nurse that wants to work from home
• Patients: It’s difficult to actually reach patients, so Coaches can contact 8 members per day (assume 25 days per month)
• Costs: Annual costs per Coach: $60K salary +20% other (training, benefits, laptop, etc.). There are no other program costs
96
Health Coaches
Exhibit A – Client’s member segmentation by disease type
100%
90%
80%
70%
60%
Other
50%
Degenerative
Hereditary
40%
Lifestyle
30%
Healthy
20%
10%
Segment
0%
Segment size
Individual
Individual
Group
Group
65+
65+
15%
65%
20%
97
Health Coaches
Exhibit B – Average cost data
Average cost PMPM*
Segment
Lifestyle
Hereditary
Degenerative
Individual
$600
$150
$150
Group
$400
$100
$100
$1,200
$300
$300
65+
*Notes:
• PMPM = Per Member Per Month
98
Health Coaches
Part 1
1. Develop a structure to address the problem
• The interviewee should drive towards quantifying the savings
• Consideration of qualitative issues is ideal.
Program Savings
• Customer segmentation by
disease area and cost per
member
Program Costs
Risks
• Communication systems
• Assumption accuracy
• Health Coach Salary
• Competitive response
• Training
• Regulatory, liabilities
99
Health Coaches
Part 2
2. Explore market segmentation
Provide Exhibit A when the interviewee asks about segments or disease areas
• Group are employee sponsored plans (e.g. ,if you work for our consultancy, you are in a group plan), Individual are non-groups (eg.
private contractors, unemployed, etc). 65+ (see note below chart).
• Which disease area should we look at first?
• Interviewee should choose to focus on the 65+ segment
• 65+ patients are the sickest,
• Sicker patients are likely to drive higher costs
• Higher costs provides greatest benefit for DM
• Interviewee should choose to focus on lifestyle diseases
• Lifestyle diseases make up the largest portion of sick members
• As diseases primarily brought on by behavior, this segment is likely to benefit from DM
• Number of 65+ lifestyle = 20% segment x 40% lifestyle x 5m members = 400,000
100
Health Coaches
Part 3
3. Calculate program profitability
Provide Exhibit B when the interviewee asks about medical costs
• Note: lead with Exhibit A. If the interviewee leads with profitability, steer him/her to first think about customer segmentation.
• What can we do with this information?
• Cost per Coach = $60k base + 20% = $72k
• Size of Portfolio = 8 patients per day x 25 days per month = 200 patients per year
• Savings for one portfolio = $1,200 cost per month x 12 months per year x 5% average savings x 200 patients = $144k
• Overall savings = ($144k savings - $72k costs) x 2,000 coaches = $144m profit per year
• Takeaway: Profit is $72K per Health Coach (double the cost of a coach)
• Based on PMPM lifestyle cost data, Individual segment is break-even (50% less savings), Group segment is a loss
101
Health Coaches
Part 4
4. Brainstorm other ideas to boost profitability
• There are 650,000 Group members with lifestyle diseases left ‘uncoached.’ Is there a way to make the segment profitable?
More efficient DM program
• Coaching at work
• Bi-monthly contact
• Automated correspondence
• Better training for Health Coaches
Seek additional revenue sources
• Employers might be willing to pay a
fee to enroll in service
Client selection
• Target members who will respond
with savings well above 5%
• Government support as a stateapproved or sponsored program
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Health Coaches
Part 5
5. Provide client recommendation
• Client should launch the Health Coaching program, and first focus on lifestyle diseases in the 65+ segment
• Launch a pilot program to prove out assumptions (eg. 5% cost reduction, Coach portfolio capacity, etc.)
• First expand to entire 65+ lifestyle segment ($144M per year savings per coach, a 2x return on each Health Coach)
• Consider introducing to Individual lifestyle segment despite break-even (customer retention, moral rationale, etc.)
As first to the market, client plans to expand Health Coach program externally. Who should they target?
• The program yields the greatest savings in the 65+ lifestyle disease segment. However, the client should keep in mind that more
lifestyle members will increase overall health care costs, considerably (still almost 4x after savings).
• As an alternative, the client could sell its Health Coach service to other payers.
• Excellent interviewees should use common sense to make reasonable assumptions before you provide required inputs.
• Outstanding interviewees are able to keep track of all units from a math perspective.
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Case 09
Healthy Foods
Concepts tested
Primary sector(s)
Similar cases
• Z10 Customer strategy (2)
• X12 Retail & CPG
• Dark Sky
2020)
• Z10 Marketing strategy (2,
3, 4)
(Kellogg
• Z12 Creativity (3)
Case type
• Y02 Growth Strategy
Case authors: Milija Medic
Edited By: Mauricio Atri (Kellogg 2012), Tuhina Kapoor (Kellogg 2020)
1 04
Healthy Foods
Interviewer guide
Case prompt
• Our client is Healthy Foods, a wholesaler serving a variety of clients with Food products. The client is profitable but they want you to
help them find revenue growth opportunities from their current business.
• How can we help Healthy Foods drive their revenue growth?
Interviewer guide
• Problem: How can Healthy Foods increase revenue?
• Problem solving steps:
1. Develop a structure to address the problem
2. Identify main customer types and their current contributions
3. Analyze client’s wallet share for different customers
4. Share of Wallet analysis and Wallet Size versus Share of Wallet
5. Provide client recommendation
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Healthy Foods
Fit: Tell me about a time you had to lead a diverse team?
Case prompt
• Our client is Healthy Foods, a wholesaler serving a variety of clients with Food products. The client is profitable but they want you to
help them find revenue growth opportunities from their current business.
• How can we help Healthy Foods drive their revenue growth?
Clarifying information
• Customers: The client serves various customer categories (shown in Exhibit A).
• Customer sensitivities are (highest to lowest):
o Price
o Convenient delivery
o Help with location planning
o Help with menu
o Web site development
o Inventory
o Help with management optimization
• Competition: The client is one of the market leaders and is not losing the market share
106
Healthy Foods
Exhibit A – Revenues by Customer Type
Other
Grocery Stores
School Cafeterias
Independent Restaurants
Hospitals
Chain Restaurants
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Healthy Foods
Smallest
X
Customer Size
Exhibit B – Client’s Share of Wallet
C
Largest
A
B
0%
10%
20%
30%
Client is Primary Food Supplier
40%
50%
60%
70%
Client is one of many food suppliers
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Healthy Foods
Exhibit C – Wallet Size vs. Share of Wallet for the Smaller-Revenue-Generating
Customer Categories
600
500
Wallet Size ($m)
Hospitals
400
Hotels
School Cafeterias
300
Grocery Stores
200
Chain Restaurants
100
0
0%
10%
20%
30%
40%
50%
60%
Share of Wallet (%)
109
Healthy Foods
Part 1
1. Develop a structure to address the problem
• A structure should cover the key areas needed to explore in order to determine how Healthy Foods can explore new revenue growth
opportunities. Key elements expected to be included in this framework are:
• Market: Overall trends, offerings by competitors and customer preferences
• Segmentation, targeting and positioning: Are there particular segments in the population that will be ideal customers for us? How
are positioned in the market?
• Product and channel mix: What is our current mix of products offered and what markets and channels do we service? What is the
menu?
• Price: What price are our products sold at? Is there scope for increasing the price? Can we bundle any of our offerings?
• Promotion: How are our products marketed? What promotion mechanisms are being used?
• Volume: Who are our customers? How do we reach them? What is our wallet share with them?
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Healthy Foods
Part 2
2. Identify main customer types and their current contributions
• The client has some information about the customer segments that it sells to:
Provide Exhibit A
• The interviewee will probably explore opportunities for growth in the independent restaurant category. If they inquire about customer
satisfaction and sensitivities, provide information from the ‘Clarifying information’ section, and emphasize that the needs of this
segment are already met.
• The interviewee should inquire about the Share of Wallet in the customer categories to get a better idea on where the growth
opportunities lie.
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Healthy Foods
Part 3
3. Analyze client’s wallet share for different customers
Provide Exhibit B when the interviewee realizes they need to understand Share of Wallet
• The interviewee should recognize that Share of Wallet in the highest-revenue-generating customer categories is already high, and
that the client is already a key provider for a lot of them.
• Ask the interviewees to list all options to increase revenue and the reasons behind (brainstorming exercise).
• Help interviewee to reach that the growth opportunity in the smaller revenue-generating customers, where client’s Share of Wallet is
smaller. Now the interviewee should formulate the criteria to prioritize among the smaller revenue-generating customer types: the
bigger their Share of Wallet and the smaller client’s Share of Wallet, the better.
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Healthy Foods
Part 4
4. Share of Wallet analysis and Wallet Size versus Share of Wallet
• Share Exhibit C when the interviewee realizes they will need to understand the Share of Wallet vis-à-vis Wallet Size
Provide Exhibit C
• The bigger the Size of Wallet and the smaller client's Share of Wallet, the larger the revenue growth opportunity for the client.
• Using Exhibit C, the interviewee should identify the hospitals and the hotels as the most promising candidates for revenue growth
given their large wallets and small client’s Share of Wallet. The interviewee should identify the strongest sensitivities these clients
would have and suggest ways to increase client’s Share of Wallet there.
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Healthy Foods
Part 5
5. Provide client recommendation
• In the current business, the largest growth opportunities lie in customer segments: hospitals and hotels.
• The interviewee should suggest ways to better serve those customers and increase client's Share of Wallet there, capturing
significant new revenues due to the large Wallet Size of those clients.
• Excellent interviewees identify Share of Wallet as an important parameter, quickly recognize that there is little opportunity for growth
in the largest-revenue-generating customers, and come up with the size of wallet vs. Share of Wallet plot as a good prioritization tool
for identifying promising customer categories for the client’s revenue growth.
114
Case 10
High Q Plastics
Concepts tested
Primary sector(s)
• Z11 Competitive Analysis
• X04 Engineering & Construction
Similar cases
• Z12 Creativity
Case type
• Y01 Cost reduction
• Y05 Operations
• Y07 Profitability
Case Authors: Erin Brooks (Kellogg 2011)
Edited By: Uri Kalir (Kellogg 2012), Tuhina Kapoor (Kellogg 2020)
1 15
High Q Plastics
Interviewer guide
Case prompt
• Our client, High Q Plastics, is an automotive parts supplier in the U.S. They primarily manufacture and sell plastic injection-molded
parts, such as grills, door handles, decorative trim etc., to automotive customers.
• The client has two primary revenue sources: large automotive OEMs, and aftermarket. The client has recently seen declining profits,
primarily due to increased price competition from new overseas competitors in China. Annual profits have declined from $50M to
$20M over the past few years.
• What is the reason behind declining profitability? How can High Q improve profits? Can they reach $100M in profits by 2014?
Interviewer guide
• Problem: How can High Q generate $100m in profits by 2014?
1. Develop a structure to address the problem
2. Brainstorm ideas to improve profits
3. Determine whether the profit goal can be met
4. Provide client recommendation
• An effective interviewee should demonstrate clear and MECE approach at dissecting profitability, structured brainstorming in
improving profits (e.g., brainstorming in buckets) and effectively using exhibits to outline the correct approach to calculating 2014
profits.
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High Q Plastics
Fit: Tell me about a time you had to navigate a conflict and come up with a creative solution.
Case prompt
• Our client, High Q Plastics, is an automotive parts supplier in the U.S. They primarily manufacture and sell plastic injection-molded
parts, such as grills, door handles, decorative trim etc., to automotive customers.
• The client has two primary revenue sources: large automotive OEMs, and aftermarket. The client has recently seen declining profits,
primarily due to increased price competition from new overseas competitors in China. Annual profits have declined from $50M to
$20M over the past few years.
• What is the reason behind declining profitability? How can High Q improve profits? Can they reach $100M in profits by 2014?
Clarifying information
• Industry Characteristics/Market Economics
- Automotive sales overall still growing steadily, driven by emerging markets
- Automotive manufacturing is leaving the U.S.
• Client Characteristics
- Client is currently one of the leaders in this category
- Client has U.S.-based manufacturing
- Revenues have been slowly declining over last 5 years
- Client’s products are of a higher quality than most Chinese competitors’ products
• Competitive Dynamics
- Automotive OEM customers are looking to reduce cost, driving increased price competition among parts suppliers
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High Q Plastics
Exhibit A – High Q’s 2010 Financials, By Facility
$m
Plant A
Plant B
Plant C
Plant D
Revenues
100
100
100
100
Labor
20
40
60
30
Material
55
40
20
35
Overhead
20
15
15
30
Net Profits
5
5
5
5
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High Q Plastics
Exhibit B – 2010 U.S. Automotive Market
20%
38%
Compact cars
Full-size cars
Trucks and SUVs
42%
Additional Information:
• 2010 US Automotive Sales = 16 million units
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High Q Plastics
Exhibit C – U.S. Truck / SUV Market Share (2010 – 2014)
45%
40%
40%
35%
33%
31%
30%
25%
21%
20%
20%
2010
19%
2014
14%
15%
10%
10%
7%
5%
5%
0%
Ford
GM
Chrysler
Toyota
Nissan
Additional information:
• High Q supplies 70% of Toyota’s business
• Average price of High Q products sold to Toyota = $20
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High Q Plastics
Part 1
1. Develop a structure to address the problem
What key questions would you ask an industry expert in order to better understand the reasons behind High Q’s declining profits?
An effective structure should address the following factors:
• Industry: What is the sales volume trend? What is the % of demand and growth of OEM vs. aftermarket segment? Is one of these
segments more profitable than the other?
• Competitors: Who are they? What is their relative market share? What are their prices vs. our clients’? What is their cost structure
vs. our clients’? Do they have a technology or quality competitive advantage relative to our client?
• Revenue: How have our clients’ prices changed in recent years? Have they declined across all customers and products?
• Costs: What trends is our client seeing in their cost structure? Increasing labor or material costs?
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High Q Plastics
Part 2
2. Brainstorm ideas to improve profits
The CEO of High Q wants to know if $100M in annual profits is achievable by 2014. What would you need to know in order to
determine this? What data would you ask for?
What ways can you think of to increase revenues? What ways can you think of to reduce costs?
After asking the interviewee the above questions, he / she should come up with 2-3 ways each for cost reduction and increasing
revenues:
• Reduce Cost: find alternative material sources, invest in process automation to reduce labor, consolidate multiple manufacturing
sites to reduce SG&A costs, relocate close to customers to reduce transportation costs.
• Increase Revenue: segment customers to determine sensitivity to price, increase marketing in aftermarket segment, negotiate longterm contracts with OEM customers.
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High Q Plastics
Part 3
3. Determine whether the profit goal can be met
Our client is planning on implementing lean manufacturing across all 4 of it U.S. plants, in order to provide cost savings and increase
profits.
Provide Exhibit A
• The client is expecting to produce 80% of 2010 volumes in 2014. They are also planning on reducing prices by 10% due to
increased competition.
• Lean manufacturing implementation across all plants will provide an additional 20% savings in raw material, and 30% savings in
labor. What is the change in profits the High Q CEO can expect from 2010 to 2014, based on this information?
• Please see solution on the next page.
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High Q Plastics
Part 3 (Continued)
3. Determine whether the profit goal can be met
• The interviewee should use the information provided in Exhibit A to calculate the following profitability for each plant in 2014, and
walk the interviewer through the calculation steps. It is important to first note that revenues, labor, and material will decrease by
20% due to the reduced quantity output from each plant, plus the additional 20% savings in material and 30% in labor. Revenue will
decrease by an additional 10%, in a cost cutting maneuver. Overhead costs will not change.
All figures in $m
Plant A
Plant B
Plant C
Plant D
Revenues
72.0
72.0
72.0
72.0
Labor
11.2
22.4
33.6
16.8
Material
35.2
25.6
12.8
22.4
Overhead
20.0
15.0
15.0
30.0
Net Profits
5.6
9.0
10.6
2.8
Total 2014 Profits
28.0
Additional Profits
8.0
• From this calculation, the interviewee should reference back to question 2. Even with the lean manufacturing implementation, High
Q is still a long way from the CEO’s goal of $100M in annual profits, and this is therefore not a realistic target. A strong interviewee
should note the importance of aligning a client’s expectations.
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High Q Plastics
Part 3 (Continued)
3. Determine whether the profit goal can be met
• High Q ‘s CEO has also asked us to take a look at competitive dynamics among the automotive OEMs, in order to predict any
increase in profits from increased sales. Hand out exhibits 2 and 3.
• Based on the information given, what do you expect High Q will see in additional profits due to Toyota’s predicted 30% increase in
market share in truck and SUVs?
Provide Exhibit B & C
The interviewee should be able to use the information provided in the Exhibits to calculate the following revenue growth (“Sales”
figures below are in units/vehicles). Rounded answers ($13 or $14M) are fine, given that interviewee has already demonstrate math
proficiency.
2010
US Auto Market
16,000,000
U.S. Truck & SUV Sales
3,200,000
2014
Toyota Truck & SUV Sales
320,000
1,280,000
High Q's Toyota Qty. Sold
224,000
896,000
High Q's Toyota Revenues
4,480,000
17,920,000
Additional Revenue
$13,440,000
125
High Q Plastics
Part 4
4. Provide client recommendation
Please summarize your findings to the CEO, including any other potential opportunities to increase High Q’s profits over the next few
years.
The interviewee should concisely summarize the overall goal of the case (to increase High Q’s declining profitability due to new, lowcost competition), and main findings from each question, and a recommendation (yes, High Q should implement the lean
manufacturing initiative, while recognizing that this initiative alone will not hit the CEO’s total profit goal in 2014). The interviewee
should also generate a list of additional opportunities that were not explored in the case, including:
a) Consolidation of the 4 manufacturing plants (especially Plant D, with its high overhead costs)
b) Pursue growth in the aftermarket segment of their business
c) Diversify their business into plastic injection-molded parts for other industries (outside of automotive), with less price competition
126
Case 11
Kellogg in India
Concepts tested
Primary sector(s)
Similar cases
• Z08 Market sizing (2)
• X07 Government & Public Sector
• Big Public High School
(Darden 2012)
• Z07 Market share (3)
• Busch’s Barber Shop
(Kellogg 2020)
• Z03 Breakeven analysis
(3)
Case type
• Y04 New product / Market entry
• Chic Cosmetology (Kellogg
2020)
Case author(s): Abhilash Sridharan (Kellogg 2015), Rashaad Jamaal (Kellogg 2015)
Edited by: Rohan Maini (Kellogg 2020)
1 27
Kellogg in India
Interviewer guide
Case prompt
• Our client is the Dean of Kellogg School of Management. She has hired you to advise her on an idea, which struck her during the
previous week – To consider starting a satellite campus of Kellogg in India. She has asked you to determine whether Kellogg should
enter the Indian market.
Interviewer guide
• This case is a quintessential market entry case.
• The two main quantitative concepts on which the candidate is being tested are on market size estimation and breakeven analysis.
1. Develop a structure to address the problem
2. Confirm market attractiveness (sizing)
3. Market share and breakeven analysis
4. Conduct risk analysis
5. Provide client recommendation
128
Kellogg in India
Fit: Tell me about a time when you were provided feedback and what action you took.
Case prompt
• Our client is the Dean of Kellogg School of Management. She has hired you to advise her on an idea, which struck her during the
previous week – To consider starting a satellite campus of Kellogg in India. She has asked you to determine whether Kellogg should
enter the Indian market.
Clarifying information
• Strategic Rationale: India is a fast growing economy with huge demand for MBAs. Kellogg’s Dean believes that an India campus
would help Kellogg become a Top 3 global MBA program. The caliber of India candidates is the same as in the US.
• Objective: The Dean wants the satellite campus to breakeven in 4 years
• Competition: Eight top-tier business schools: 7 IIMs and the ISB (ISB has a partnership with Kellogg, for its pedagogy).
• Candidate selection: IIMs select based on CAT test results. The ISB admits candidates based on the GMAT.
• Pricing: Indian MBAs cost $20k per year (US MBAs cost $70k). Indian schools don’t offer scholarships but banks offer loans.
• Product: Kellogg would only launch the 2Y MBA program in India.
129
Kellogg in India
Exhibit A – Indian business schools
Category
Indian Institutes of Management (IIMs)
• IIMs select via the Common Admission Test (CAT)
Description of • IIM interviews candidates with the top 6% CAT scores
program
• 5 candidates are interviewed for every available seat
• 85% of admitted candidates matriculate
Cost incurred
by Student
Indian School of Business (ISB)
• 70% of admitted students
matriculate
• Two campuses with a total class
size of 1,400
• INR 1,200,000 per year*
• 1 USD = 60 INR
Notes:
• Assume the total cost incurred by a student annually at Kellogg is $70k per annum
130
Kellogg in India
Exhibit B – Admitted students
Year
Expected admits per
year
1
600
(7.5% of 8,000)
2
600
3
900
4
900
Notes:
• Only source of revenue is the fee charged to students
131
Kellogg in India
Exhibit C – Estimated cost structure
Fixed Costs
Annual Variable Costs
Year 0
Year 1
Year 2
Year 3
Year 4
$100M (land)
$50 (support
infrastructure)
$30M
$30M
$30M
$20M
132
Kellogg in India
Part 1
1. Develop a structure to address the problem
Impact on ranking
Brand Kellogg & Kellogg India
Qualitative
Cannibalisation
Job Prospects, ROI
Market Entry
Quantitative
Market Sizing
# of students
Revenue
Fee per annum
Fixed
Costs
Variable
- Salaries
- Marketing
- SGA
- Cost/student
133
Kellogg in India
Part 2
2. Confirm market attractiveness (size)
The candidate can choose to size the market either top-down or bottom-up. A top-down approach becomes too dependent on
assumptions. Exhibit A can be used for a bottom-up approach.
Provide Exhibit A when the candidate requests any of the information that it contains
A. Estimate the Total Addressable Market from competition
1. IIMs
• 500,000 applications per year
• Top 6% are interviewed = 30,000 applicants
• 1 in 5 are accepted = 6,000 eligible students
2. ISB
• 1,400 matriculated students / 70% of total admitted students = 2,000 eligible students
• If interviewee gets this wrong, ask which student pool are we most interested in: matriculated students or all accepted students.
Total Addressable Market = 6,000 + 2,000 = 8,000 high quality applicants
B. Market Size
Fee to be charged annually needs to be calculated. A value somewhere in between $20,000 and $70,000 is acceptable. $50,000 per
year for 2 years: 8,000 * $50,000 * 2 = $800M
134
Kellogg in India
Part 3
3. Market share and breakeven analysis
• The candidate should mention a target market share in
the year of launch. A lower number would be preferable
to start with. After letting the candidate present their
logic, ask them to assume 7.5% market share in the
year of launch.
Y0
Number of students
• Breakeven Analysis: Expected breakeven in 4 years
Total Revenue ($ M)
Provide Exhibit B when asked about Revenue
• The candidate should note that from the second year
onwards, last year’s fee should be included in the
current year.
Provide Exhibit C after Cost brainstorming
• Costs: Ask the candidate to brainstorm for costs
Costs ($ M)
Profits
Y3
Y4
600
900
900
50,000
50,000
50,000
50,000
30
30
45
45
30
30
45
30
60
75
90
150
30
30
30
20
-150
0
30
45
70
Revenue $m from students in year 1
Revenue $m from students in year 2
Y2
600
Yearly Fee per student ($)
Provide the information below when requested:
Y1
• When asked for a discount rate, confirm there is none.
• Conclusion: The project should go ahead: by the 4th year, the project
doesn’t breakeven by only $5M. Given rising revenues and declining
costs, breakeven would be achieved in the first month of year 5.
• The candidate must move towards a NPV Calculation:
135
Kellogg in India
Part 4
4. Conduct risk analysis
Ideally, the candidate will raise risks related to the project. If not, ask them to brainstorm:
Brand impact
Rankings impact
Cannibalization
Brand parity
Job prospects
Support
• No top US
schools is
successful in
India
• Satellite
campus might
dilute brand
• Diversity
• International
presence
• Proximity to
Asia
• Job prospects
• 50-60 Indian
students
matriculate at
Kellogg US
• Impact on US
MBA
candidate pool
across Asia
• Kellogg US
MBA = Kellogg
India MBA
• Premium for
Kellogg India
versus IIM /
ISB
• Parent campus
pedagogical
support for
satellites
136
Kellogg in India
Part 4
6. Provide client recommendation
Overall
• While starting a satellite campus makes financial sense, further scrutiny is needed on the impact of this move on Kellogg’s brand
and other factors that impact rankings
• Other additional points, which the candidate may add, could be:
• Negotiate on the costs for initial investments, to lower it down from $150M.
• Support from Indian government on subsidies to be offered
• Develop additional sources of revenue, from supporting programs and corporate training sessions
Risks
Brand dilution / considering the impact of a satellite campus on Brand Kellogg
Cannibalization of existing revenue from Indian students
Admission percentage is projected to increase from Year 2 to Year 3 by 50% (This is quite high)
The salaries of Indian graduates, as per Indian Market conditions, (considering Indian PPP) may influence the average salary of
Kellogg School of Management given global reporting, eventually impacting the ranking negatively
• Given Kellogg’s new building being constructed, the $150M additional investment for a satellite campus, may require additional
rounds of fund raising for the India campus
•
•
•
•
Next Steps
•
•
•
•
Employ a Brand agency / consultant to figure out the impact of starting a satellite campus on Brand Kellogg
Fund Raising for $150M to be worked out
Potential Partners for promoting the program and supporting with faculty initially
Discussions to be started with the government of India for the land, infrastructure investment and licenses.
137
Case 12
Maine Apples
Concepts tested
Primary sector(s)
Similar cases
• Z08 Market sizing (2)
• X02 Agriculture & Food
• Antidepressant pricing
(Sloan 2011)
• Z14 Pricing strategy (3,4)
• Jamaican Land Investment
(Haas 2015)
• Z15 Supply/value chain (4)
Case type
• Y04 New product / Market entry
• Mission Eternity
(Fuqua 2016)
• Y06 Opportunity assessment
• Y07 Profitability
Case author(s): Adam Borchert and Joep Knijn (Tuck 2004)
Edited By: Peter Manoogian (Kellogg 2012), Rohan Maini (Kellogg 2020)
1 38
Maine Apples
Interviewer guide
Case prompt
• Our client is a Korean conglomerate named Danut that has acquired a small Boston-based biotechnology firm
• The biotech firm has developed a chemical that helps control the ripening of produce. After testing, this chemical appears to work
especially well with apples: it allows apple orchards to harvest earlier and it improves the overall quality of the harvest.
• Danut traditionally uses a test market to determine commercialization. Given Danut’s proximity to Boston and average apple yields,
Maine has been chosen.
• Danut would like to know if they should attempt to commercialize this chemical.
Interviewer guide
• Problem: Is the market size large enough and the estimated profitability high enough for Danut to commercialize this chemical?
• Key case steps:
1. Confirm market attractiveness (size)
2. Quantify cost savings from earlier harvests
3. Quantify revenue growth from improved yields
4. Project farmers’ margins and pricing for Danut
5. Provide a recommendation and highlight risks
139
Maine Apples
Fit: Analysis is not always perfect. Tell me a time when the analysis wasn't perfect but you still had to use it.
Case prompt
• Our client is a Korean conglomerate named Danut that has acquired a small Boston-based biotechnology firm
• The biotech firm has developed a chemical that helps control the ripening of produce. After testing, this chemical appears to work
especially well with apples: it allows apple orchards to harvest earlier and it improves the overall quality of the harvest.
• Danut traditionally uses a test market to determine commercialization. Given Danut’s proximity to Boston and average apple yields,
Maine has been chosen.
• Danut would like to know if they should attempt to commercialize this chemical.
Clarifying information
• Product Benefits:
• Reduced costs through earlier harvesting
• Improved apple yields
• Improved juice yields (with higher quality apples)
• Client Characteristics: Only concerned about a “test-market” in the state of Maine
• Competitive Dynamics: No other competitive products on the market currently
• Industry: Growing at the rate of GDP
140
Maine Apples
Parts 1 - 3
1. Confirm market attractiveness (size)
2. Quantify cost savings from earlier
harvests
3. Quantify revenue growth from
improved yields
When asked, provide the following:
• Maine has 200 orchards
When asked to quantify the
improvements, provide the following:
When asked to quantify additional
revenue, provide the following:
• Avg. annual orchard revenue is
$30K/acre
• It costs $1.5K/night to maintain
crops for 100 acre orchard
• Avg. orchard has 100 acres of land
• With the chemical, farmers are able
to harvest crop 10 days sooner
• Our client’s product improves the
consistency of red apples and
increases the selling price by 10%
• Only one apple harvest per year
Interviewee should calculate the
market size based on info provided:
• ($30K/acre x 200 orchards x 100
acres/orchard = $600M)
This is a significant market and
warrants further investigation
• The sweetness factor increases the
selling price of juice by 5%
Interviewee should calculate cost
savings per year using this information:
• 25% of revenue comes from whole
apple sales, 75% from juice sales
• ($1.5K/day x 10 days / 100 acres =
$150/acre/year)
Improved yield:
• ($30K/acre x 25% x 10% =
$750/acre/year)
Improved sweetness:
• ($30K/acre x 75% x 5% =
$1,125/acre/year)
Total improvement (with cost
reduction) = $2,025/acre/year
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Maine Apples
Part 4
4. Project farmers’ margins and pricing for Danut
When asked about product pricing, provide the following:
• Danut’s product costs $100k per 200 acre farm
Farmer’s incremental revenue/cost savings = $2,025/acre
Product costs = $100K/200 acres = $500/acre
Profit margin = ($2025-$500)/$2025= 75% [$1,525 per acre]
The interviewee should note that this is an extremely high profit margin for the farmer and realize that there is a significant opportunity
for profits with this product.
• How much of this benefit can we capture in our pricing?
• Interviewee should provide a percentage between 25% and 50%. Anything higher than 50% should be questioned due to the
novelty of the product and resulting lack of social proof.
A 50% profit margin for our client would also realize a 50% profit margin for farmers. This is absolutely a realistic price to set, if not a
little low.
• Given the costs provided, will we make a profit? Yes
• Interviewee should calculate profit: ($100,000 / 200 acres = $500/acre). Assuming $1,000 price per acre, gross margin will be
50%. [($1,000 - $500) / $1,000]
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Maine Apples
Part 5
5. Provide a recommendation and highlight risks
• Overall, our client should commercialize this chemical and price it at approximately $1,000 per acre to make a 50% margin.
Risks/Next steps:
• Differentiation: What is our positioning?
• Environmental issues: Is there a risk of backlash and/or boycott from the general public? Could the U.S. government attempt to
regulate our product?
• Operational reality check: Does the company have the resources to do this?
• Patenting: Is the product already patented? If yes, then when does it expire? If no, then is it possible to patent? If not, then can we
patent the manufacturing process?
•
Representativeness of test market: Does it cost less to cover apples in other states?
• Strategic fit: Is this opportunity too small relative to the size of the client?
• Strong interviewees share several qualitative issues listed above to supplement the recommendation to enter the market.
• Outstanding interviewees consider value-based pricing: the need to quantify added profits that our client’s product will make for its
clients and how much of that money our client can capture.
143
Case 13
Money Bank Call Center
Concepts tested
Primary sector(s)
Similar cases
• Z01 Accounting
• X10 Legal & Professional Services
• Z05 Capacity
• X06 Financial Services
• Call Center
(Yale 2013)
• Z13 Organizational
changes
• EasyNAV
2009)
(Wharton
Case type
• Y01 Cost reduction
• Y05 Operations
Case authors: Guruprasad Sankaranarayanan (Kellogg 2012)
Edited by Nikola -DNLé (Kellogg 2016), Elizabeth Henry (Kellogg 2020)
144
Money Bank Call Center
Interviewer guide
Case prompt
• Our client is a large financial services firm with multiple locations around the world. Part of their service offering includes a 24-hour
helpline. The client has their call centers in New York and Paris.
• The client has recently acquired a small firm (Firm B) in order to expand its reach in a particular geography. Firm B provides a
subset of the services and has its call center located in the Philippines.
• The client has asked us to determine its strategy going forward for handling customer calls. In particular they want us to look into
the call center operations.
Interviewer guide
• This is an outsourcing case with the following elements:
• Use a framework that covers the most important areas of M&A and cost cutting
• Read the exhibits to assess the cost effectiveness and efficiency of the 3 locations
• Discuss qualitative information on the acquired company – products, culture, customers, etc.
• There is no right or wrong recommendation, as it will depend on the interviewees assessment of the qualitative concerns
• Key case steps:
1. Evaluate existing and potential cost structure
2. Explore alternative ideas for implementation
3. Provide client recommendation
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Money Bank Call Center
Fit: If you were a partner and could choose to work on any type of case, what would you do? What do you think you would learn?
Case prompt
• Our client is a large financial services firm with multiple locations around the world. Part of their service offering includes a 24-hour
helpline. The client has their call centers in New York and Paris.
• The client has recently acquired a small firm (Firm B) in order to expand its reach in a particular geography. Firm B provides a
subset of the services and has its call center located in the Philippines.
• The client has asked us to determine its strategy going forward for handling customer calls. In particular they want us to look into
the call center operations.
Clarifying information
• Client Characteristics:
• Provides full range of financial services for individuals and small organizations
• Acquired firm was started 5 years ago and is still run by the original founders
• Call Center Characteristics:
• New employees are college graduates with basic knowledge of financial services and products
• Fluency and English and several European languages required
• Regulatory Environment:
• Very difficult to lay off employees in the Paris location & significant costs will be incurred
• Philippines government encourages investment in the country & significant tax advantage possible
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Money Bank Call Center
Exhibit A – Call Center Performance FY 2010
Calls / Year
Employee Cost /
Year ($)
Overhead Cost /
Year ($)
# Employees
New York
600,000
50,000
450,000
75
Paris
400,000
50,000
600,000
60
Philippines
300,000
20,000
300,000
75
Center
147
Money Bank Call Center
Part 1
1. Evaluate existing and potential cost structure
Provide Exhibit A when the interviewee asks about call center performance
• Here, the interviewee needs to:
• Compare the efficacy of the three locations & possible explanations for variance;
• Identify the cost effective options & how it is impacted by integration cost
• Additional information:
• Total cost incurred by the 2 firms is $9.6M
• Philippines currently processes calls at half the efficiency of NY (per employee)
• Interviewee could ask about available slack at any of the call centers but should be advised that all call centers are currently
operating at capacity
• If asked, state that currently, we have space, infrastructure necessary to expand. Assume overhead is variable in this case. The
candidate should be able to calculate that to process total call volume Philippines will need an additional 250 employees to handle
the traffic (1.3M total calls/ 4000 calls/employee in Philippines). Operating cost after the change will be $7.8M; net savings of
$1.8M.
• The interviewee should realize that this does not account for all the costs, including hiring and training costs. When prompted inform
the interviewee about a 1 time cost of $5M (includes severance for NY and Paris, expanding the Philippines facility) implying that the
move is not profitable
148
Money Bank Call Center
Part 2
2. Explore alternative ideas for implementation
• Client will not budge on two-year breakeven
• Prompt the interviewee to explore ways to make outsourcing to the Philippines feasible
• Other options: decrease $5m investment cost; increase efficiency of Philippines employees (guide interviewee towards the latter)
• The interviewee needs to identify the difference in calls / employee between the New York and Philippines locations
• Ask the interviewee to assume that the best practices can be transferred and implemented within 3-6 months
• Potential cost savings if Philippines achieves same effectiveness as New York
• # employees required = 1.3M calls / 8,000 calls / employee / year = 162.5 (allow rounding to 160)
• New employee cost = 160 * $20,000 = $3.2M
• Ask interviewee to assume overheads double with the need for better equipment. Before the efficiency improvement, OH =
$1.3M for 1.3M call. New OH = $2.6M
• New total cost = $3.2M + $2.6 = $5.8M ($3.8M savings from status quo and $2M better than pre-efficiency improved option)
• Other questions interviewee needs to consider
• Will the client be able to acquire sufficient talented personnel within the short time frame?
• How will customer satisfaction by impacted with the new labor base?
• Legal constraints / requirements in NY and Paris – how quickly can we lay off the staff?
• How will public opinion be impacted by the news of massive outsourcing?
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Money Bank Call Center
Part 3
3. Provide client recommendation
• This is an open ended case. The interviewee needs to justify the recommendation based on the qualitative considerations
• A good recommendation would include 3 sections:
• Recommendation: If the recommendation is to outsource the interviewee needs to highlight the risks associated with
outsourcing and nature of the acquired firm. If the recommendation uses any other approach sufficient justification needs to
be given to overcome the cost savings
• Risks:
• Risks associated with increasing capacity by more than 200% in the Philippines – people, infrastructure, service quality,
gaps in knowledge transfer, organizational changes, etc.
• Reputational impact – do customers notice a difference in service, can the competitor leverage this to steal customers?
• Next steps: If outsourcing, some of the next steps would be to analyze the infrastructure requirements and capabilities, find
the right talent, ensure smooth transfer and implementation of best practices, etc.
• The interviewee should explore the option of improving effectiveness of the Philippines location without being prompted
• Excellent interviewees need to address the qualitative information provided in the case: nature of merger, nature of markets being
served, etc.
150
Case 14
Montoya Soup
Concepts tested
Primary sector(s)
Similar cases
• Z14 Pricing strategy (2)
• X02 Agriculture & Food
• Z10 Customer marketing
strategy (3)
• X12 Retail & CPG
• Frozen Food Co
(Columbia 2017)
Case type
• Y01 Cost Reduction
• Dark Sky
2020)
(Kellogg
• Orrington Office Supplies
(Kellogg 2020)
• Y07 Profitability
Case author(s): Nico Montoya (Kellogg 2016)
Edited by: Michael Eidem (Kellogg 2020)
1 51
Montoya Soup
Interviewer guide
Case Question
• In F14, Montoya Soup, a business unit of Izzy’s Healthy Foods, grew revenue and increased the contribution margins on their
traditional and light soups.
• However, a spike in fixed costs caused them to see a dip in profitability. To offset this effect in F15, they launched a line of premium
soups to increase volume and generate economies of scale.
• Though they felt the new launch was a success, their profitability dropped again in F15. They have hired you to diagnose the
problem and propose a solution for F16.
Interviewer guide
• Problem: Determine what is causing Montoya’s profitability decrease and analyze/recommend a method for improving it.
• Key case steps:
1. Develop a structure to address the problem
2. Deep dive – Why did profitability decline?
3. Deep dive – How do we fix profitability? (pricing strategy and potential cost reductions)
4. Provide client recommendation
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Montoya Soup
Fit: Tell me about your favorite class at business school thus far.
Case Question
• In F14, Montoya Soup, a business unit of Izzy’s Healthy Foods, grew revenue and increased the contribution margins on their
traditional and light soups.
• However, a spike in fixed costs caused them to see a dip in profitability. To offset this effect in F15, they launched a line of premium
soups to increase volume and generate economies of scale.
• Though they felt the new launch was a success, their profitability dropped again in F15. They have hired you to diagnose the
problem and propose a solution for F16.
Clarifying information
There is limited clarifying info up front, the interviewee will have to be comfortable making assumptions regarding the prompt and
moving forward based on an inherent knowledge of the grocery industry.
• Client: Montoya sells cases of soup to buyers at grocery retailers who mark up the units inside to sell.
• Product: Traditional, Light, and Premium are the only product lines in Montoya Soup Co.’s product portfolio.
The prompt hints that revenue is up and fixed costs haven’t increased in 2015, so the candidate should be thinking about variable
costs right away. That said, this is a portfolio pricing strategy case disguised as a cost reduction case and a strong candidate might
recognize that possibility.
153
Montoya Soup
Exhibit A – Performance Metrics
16%
12%
8%
4%
0%
F11
F12
F13
F14
F15
-4%
-8%
Sales Volume % +/-
Sales Revenue % +/-
Contribution Margin % +/-
Gross Margin % +/-
F10
F11
F12
F13
F14
F15
Sales Vol. (M of cases)
126.5
130.4
131.7
136.5
140.0
155.0
Sales Rev. (M)
$3,282
$3,366
$3,409
$3,560
$3,680
$4,200
Contribution Margin (M)
$1,165
$1,212
$1,261
$1,264
$1,360
$1,356
Gross Margin (M)
$65.2
$61.9
$61.4
$63.9
$60.0
$56.0
154
Montoya Soup
Exhibit B – Product Lines
Variable Input Cost Per Case
“Our research showed that many of our consumers
were willing to pay more for a product with more meat
and vegetable bounty in a carton (instead of a can).
After testing several price points, we decided a lower
margin and higher volume would help us reach the
economies of scale we wanted to see. Consumers
loved the product and thought it was a great bargain!”
$25
$1
$20
$7
$1
$15
$1
$10
Trad.
Light
$28
$24
$30
F14 Vol.
(M cases)
80
60
-
F15 Vol.
(M cases)
60
40
$1
$4
$6
$1
$5
$4
$7
$8
$3
$0
55
$4
Prem.
Wholesale
Price
$1
$4
$1
$1
$1
Traditional
Light
Premium
Broth
Meat
Vegetables
Spices
Packaging
Wages
155
Montoya Soup
Exhibit C – Demand Analysis
Cost Reduction Effect on Demand
“We looked into moving premium out of cartons
and into cans. On the plus side, it would gain us
$3 of margin per case, but on the con side it
would decrease demand by 20% and
cannibalization of our Traditional line would spike
to 75%.”
“We could decrease our meat and vegetable
bounty to be on par with Traditional. That would
buy us $3 of margin points and consumers
shouldn’t know the difference, in the short run at
least.”
Price Elasticity & Cannibalization
Last Year
Increase Price
Premium Price
$30
$33
Premium Demand (M cases)
40
20
50%
10%
12.5%
0%
Traditional Cannibalization Rate
Light Cannibalization Rate
156
Montoya Soup
Exhibit D – Stakeholder Input
Customer Feedback
•
“We really loved the new Premium Montoya
Soup offering, it brought a new consumer to
the shelf-stable soup category when all of the
other players were introducing products that
just stole from their competitors.”
•
“We’re planning to give more shelf space to
Montoya Soup in F16 after their successful
premium launch this year. Our guests really
loved the new packaging format and the
higher meat and vegetable content. Product
trial wasn’t extremely high, but we saw a lot of
repeat purchases from the people who were
buying.”
Consumer Focus Group Excerpts
•
“I’m trying to eat healthier, and I’m really
nervous about canned products with their
BPA lining. As soon as Montoya came out
with their new carton soup, I switched right
away from their Traditional line and I’m never
going back!”
•
“I definitely think their brand is rising with me,
the old stuff was mostly broth, this new stuff is
a huge bargain and it actually has actual stuff
in it.”
•
“Glad to see that when everyone else is trying
to rip you off, Montoya is making soup that
actually tastes like something I would make at
home.”
157
Montoya Soup
Part 1
1. Develop framework for how to approach this problem
A sample case structure would include the following:
Question: Why is profitability down and what to do about it?
• Has Revenue decreased?
• Volume: Has volume of sales changed? Are we selling different quantities of different products? How can we increase sales of
higher margin soups? Are there new customer types we could target (restaurants, convenience stores, etc.)?
• Price: Has price changed? How elastic is price to customers / is there room to increase it? Are we in line with our competition?
• Have Costs gone up?
• Fixed: How have fixed costs changed? Facilities, R&D, marketing spend, distribution systems, etc. How can we adjust costs?
• Variable: Have variable costs changed? Raw soup materials, labor, packaging, etc.
• Have there been changes in the Market?
• Is the soup market growing/shrinking? Are grocery store sales increasing/decreasing?
• Customers: Have shoppers’ tastes & preferences changed? Are shoppers shifting to freshly made soup instead of packed?
• Competition: Are there new companies competing with us? Have substitute products entered the market?
• Risks that need to be considered when making changes:
• Competitive response, cannibalization of our other soup product lines, upsetting major grocery chain customers, etc.
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Montoya Soup
Part 2
2. Deep dive – Why did profitability decline?
Several potential paths a candidate might want to dig into.
Provide Exhibit A
and then follow the below lines of thought:
Revenue
Costs
Product Mix
• Growth was driven by premium line.
There was some cannibalization of
traditional and light lines.
• Input prices are the same as F14 for the
traditional & light lines. No add’l wastage.
No change in formulation.
Questions:
Question: “What trends do you see with
regard to top line growth?”
Question:
• “How can profitability be down if revenue
is up, FC’s are flat, and the cost of our
inputs have not changed?”
• “What happed with fixed costs in F15?
Variable costs?”
• “What info do you need to look into fixing
the product mix to optimize profitability?”
• “What could have driven up VC’s?”
Insights:
Insights:
• Assuming no change in formulation or
wastage, then the issue must be with
cannibalization of higher margin products
by lower margin ones.
Insights:
• Revenue grew significantly in F15, much
faster than in any other year in recent
history.
• Revenue outpaced volume, meaning that
not only did revenue grow, but it grew
even though avg price increased
Provide Exhibit B
• FC’s were flat at $1.3B in F15 (GM – CM
= FC’s), so profit decline was driven by
an increase in VC’s.
• Increase in VC’s could have come from
pricier mix of inputs, same inputs but
increase in input prices, more waste, or
change in demand mix.
Provide Exhibit B
• Candidates should want to look at the
product lines’ prices, COGS, elasticity,
and cannibalization rates.
Provide Exhibit B
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Montoya Soup
Part 3
3. Deep dive – How do we fix profitability?
There are several potential routes towards improving profits. When appropriate:
Provide Exhibit B&C
Cost Reduction
Pricing (Cannibalization / Elasticity)
• If asked: Competitors aren’t playing in
the “premium” space, only in “value”
and “super-premium.”
• If we both raise prices and change
packaging, we will lose enormous
distribution.
Question:
Question:
• “How much profit do we make per
case of Premium? Traditional? Light?”
• “What is the optimum price for
profitability?”
Insight:
Insights:
• $10 contribution margin on Traditional
& Light, $6 contribution margin on
Premium (price – sum of VC’s).
• Candidate should infer from Exhibit B
that Premium cannibalized Traditional
substantially.
• Largest opportunity for variable cost
reduction would be in packaging,
meat, and vegetable, but reducing
these might erode value prop of
premium product.
• (Math on next page)
Stakeholder Value Proposition
Provide Exhibit D
Questions:
• “What are the long-run effects on
customers for changing packaging?
For reducing meat/veg costs? For
increasing prices?”
• “What about for the end consumer?”
Insights:
• Candidate should see that customers
are willing to pay for a pricier product,
but that reducing variable costs (and
thereby reducing quality) is not a
viable long run strategy and will hurt
the brand.
• (Math on following page)
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Montoya Soup
Part 3 (continued)
3. How do we fix profitability (math solutions)
Logic behind the math:
Below are the calculations the candidate would have to make if they calculated every single scenario. It seems like a lot, but keep in
mind that the margins on Traditional and Light are $10, so candidates can simply add a zero to the cannibalized volume number to get
cannibalized profit.
The candidate should feel free to elect not to calculate the first two scenarios if deemed strategically unwise long-term decisions.
Net profit from Premium will be the profit from Premium minus profit lost from cannibalizing Traditional and Light.
Unit
Margin
Volume
Profit
Trad.
Vol.
Cannib.
Trad.
Margin
Trad.
Profit
Lost
Light
Vol.
Cannib.
Light
Margin
Light
Profit
Lost
Net
Total
Profit
Last Year
$6
40
$240
-20
$10
($200)
-5
$10
($50)
($10)
If packaging
changed
$9
32
$288
-24
$10
($240)
-5
$10
($50)
($2)
If meat/veg
costs reduced
$9
40
$360
-20
$10
($200)
-5
$10
($50)
$110
If price raised to
$33
$9
20
$180
-2
$10
($20)
0
$10
$0
$160
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Montoya Soup
Part 4
4. Provide client recommendation
Overall:
• Profits have declined due to the introduction of a margin-dilutive product line that cannibalized higher margin products.
• Recommendation is to increase price of Premium product line to $33 per case to maximize profitability (Gross profit would more
than quadruple). This recommendation:
• Increases margins (though volume will drop)
• Reduces cannibalization substantially
• Other alternative cost-reduction measures hurt value proposition and will cause long-run issues with brand equity.
Risks:
• Pricing measures didn’t consider competitive response (could competitor come in with a lower priced premium soup and force us
out of the category?)
• Raising prices could upset some buyers and lose distribution
• Opportunity cost: could be better long-term strategy to keep prices low and start phasing out of old lines, ramping up Premium.
Next steps:
• Perform due diligence on long-term consumer preference forecast
• Launch advertising campaign to make sure we can justify higher prices and defend from competitors
• Look to reduce high fixed costs so we can protect against potentially price-aggressive competitors or increased commodity prices.
162
Case 15
Mustard Clinic
Interviewer-led
Concepts tested
Primary sector(s)
Similar cases
• Z04 Capacity (3)
• X08 Healthcare
• Alkaline Ash
(Columbia 2017)
• Z12 Creativity (4)
• Garthwaite Healthcare
(Kellogg 2020)
Case type
• Y07 Profitability
• Y01 Cost reduction
• Princeton-Plainsboro
(Wharton 2012)
• Orrington Office Supplies
(Kellogg 2020)
• Y05 Operations
Edited by: Rohan Maini (Kellogg 2020)
1 63
Mustard Clinic
Interviewer guide
Case prompt
• Your client is the CEO of the Mustard Clinic, a for-profit hospital in the United States.
• The hospital is known primarily for its leading care for babies and young children.
• Patients pay a fixed fee to access services on arrival, and all subsequent costs are borne by the Mustard Clinic.
• Sugar Magnolia does not deal with insurance providers. Instead, patients submit expense claims directly with their insurance
provider(s).
• In the last few years, the hospital’s profitability has fallen, and they are facing bankruptcy. Last year they lost $1.4m
• The CEO asks you: “Why has profitability gone down and how can we turn it around?”
Interviewer guide
• Problem: How can the Mustard Clinic break even (increase profits by $1.4m)?
1. Analyze customer segments
2. Determine cost impact of shorter patient stays
3. Determine profit impact of shorter patient stays
4. Brainstorm ways to shorten patient stays
5. Provide client recommendation
164
Mustard Clinic
Experience: Tell me about a time you implemented a new way of doing things in an organization.
Case prompt
• Your client is the CEO of the Mustard Clinic, a for-profit hospital in the United States.
• The hospital is known primarily for its leading care for babies and young children.
• Patients pay a fixed fee to access services on arrival, and all subsequent costs are borne by the Mustard Clinic.
• Sugar Magnolia does not deal with insurance providers. Instead, patients submit expense claims directly with their insurance
provider(s).
• In the last few years, the hospital’s profitability has fallen, and they are facing bankruptcy. Last year they lost $1.4m
• The CEO asks you: “Why has profitability gone down and how can we turn it around?”
Clarifying information
• Goal: The Mustard Clinic wants to at least break even.
• Customers: The Clinic cannot influence its patient mix in the short term.
• Services: The Clinic offers intrapartum (childbirth), neonatal (for newborns), pediatrics (for infants and children) and a small
geriatrics (for the elderly) unit.
• Competitors: There aren’t any competitors that have contributed to the Mustard Clinic’s problem.
• Revenue model: Customers are charged a fixed fee at the time of checking-in. All subsequent costs are borne by the Mustard
Clinic.
165
Mustard Clinic
Exhibit A – Key hospital unit metrics
Segment
Description
Annual volume
(patients)
Average stay
(nights)
Intrapartum
Care of due and in-labor mothers
(during labor and childbirth)
500
10
Neonatal
Care of premature newborns (first
28 days of life)
300
7
Pediatrics
Care of infants, children, and
adolescents (up to age 21)
150
11
Geriatrics
Care of elderly patients (aged 60
and over)
50
25
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Mustard Clinic
Exhibit B – Cost structure
Fixed costs
$1.4m
Variable costs
$600/patient per night
Average stay (nights)
10
Patients per year
1,000
Capacity utilization*
100%
Notes:
• Capacity = Total number of patient nights per year that the Mustard Clinic can accommodate
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Mustard Clinic
Part 1
1. Analyze customer segments
Provide Exhibit A
• Our team has conducted the following analysis on various groups of customers.
• Providing overnight care is expensive for the Mustard Clinic. In number of nights, what is the average stay duration for a Mustard
Clinic patient?
Unit
Volume
Average stay
(nights)
Total nights
Intrapartum
500
10
500 x 10 = 5,000
Neonatal
300
7
300 x 7 = 2,100
Pediatrics
150
11
150 x 11 = 1,650
Geriatrics
50
25
50 x 25 = 1,250
Total
1,000
10,000
• Average stay duration = Total nights / Number of patients = 10,000 / 1,000 = 10 nights
• Takeaway: Because we have a fixed fee arrangement, it might be worth looking to reduce the average patient stay duration.
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Mustard Clinic
Part 2
2. Determine cost impact of shorter patient stays
Provide Exhibit B
• If the Mustard Clinic were to reduce the length of an average patient stay by two nights, what would be the cost saving?
Costs with 10 night stay
• Fixed costs: $1.4m
• Variable costs: 1,000 patients x 10 night stay x $500 per night = $6m
Costs with 8 night stay
• Fixed costs: $1.4m
• Variable costs: 1,000 patients x 9 night stay x $500 per night = $4.8m
• Takeaway: Shorter stays saves $1.2m, which is promising but doesn’t help the Mustard Clinic breakeven.
• But shorter stays also frees up capacity for new patients.
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Mustard Clinic
Part 3
3. Determine profit impact of shorter patient stays
• Reducing the average stay length frees up space for new patients. How many additional patients can we serve and what would be
the impact on profit if the average revenue per patient is $6,000?
• Hospital capacity: 1,000 patients x 10 nights average stay = 10,000 patient nights
• Capacity made available from stay reduction: 1,000 patients x 2 night stay reduction = 2,000 patient nights
• Additional patients that could be served: 2,000 patient nights / 8 night average stay = 250 additional patients
• Revenue: 1,250 patients per year x $6,000 revenue per patient = $7.5m
• Fixed Cost: $1.4m
• Variable Cost: 1,250 patients per year x 8 night average stay x $600 variable costs per night = $6m
• Proft = $7.5m – ($1.4m + $6m) = $100k
• Takeaway: The Mustard Clinic can return to profitability by shortening patient stays by 2 nights and using the freed up capacity.
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Mustard Clinic
Part 4
4. Brainstorm ways to shorten patient stays
• What are some ways in which the Mustard Clinic could reduce the average patient stay duration from 10 to 8 nights?
• The actual ideas are less important here than providing some approach to structuring the brainstorm. One example might be to use
steps in the patient journey to identify areas to optimize speed.
Patient Journey
Admittance
Diagnosis
Surgery
Recovery
Other
• Decrease/eliminate
geriatrics unit
• More receptionists
• Partner hospitals
• Tele-diagnosis
• Technology
• Doctor skill/quality
• Operational delays?
• Tele-medicine
• At-home care
• Partner hospitals
• End fixed fee pricing
• Drive awareness of cost
structure to doctors
171
Mustard Clinic
Part 5
5. Provide client recommendation
• Overall, the Mustard Clinic can meet their goal and return to profit.
• This is based on decreasing average patient stay duration from 10 to 8 days, which:
• Saves $1.2m in variable costs per patient night for all patients
• Frees up capacity for 250 additional patients
• Brings in $300k in profit from these additional patients
• One way to reduce patient stay duration would be to close the Geriatrics unit, which is not our core competency.
• Risks: Reducing average patient stay might affect revenues if patient care worsens or if Geriatrics is a complementary service.
• Next steps: Feasibility study into tactical ways to actually reduce average without impacting patient care.
• Strong candidates maintain organization well since there are several points in the case when they will need to refer back to previous
clarifying information, exhibits or calculations.
• Outstanding candidates are able to think strategically about the impact of changes throughout the case. Structures math and finds
quick ways to do calculations (eg. Q2 saving = 2 nights x 1,000 patients x $600 per night = $1.2m)
172
Case 16
Orrington Office Supplies
Concepts tested
Primary sector(s)
Similar cases
• Z04 Capacity
• X04 Engineering & Construction
• Alkaline Ash
(Columbia 2017)
• Garthwaite Healthcare
(Kellogg 2020)
Case type
• Y05 Operations
• Y07 Profitability
• Princeton-Plainsboro
(Wharton 2012)
• Mustard Clinic
(Kellogg 2020)
Case author(s): Andy Grieve (Kellogg 2001)
Edited By: Peter Manoogian (Kellogg 2012), Rohan Maini (Kellogg 2020)
1 73
Orrington Office Supplies
Interviewer guide
Case prompt
• Our client, Orrington Office Supplies (OOS) is a leading manufacturer of office products in 1992, with sales of $275m in 1991. They
have strong brands, invest heavily in marketing and advertising, and have grown through product line extensions and 4 key
acquisitions.
• OOS is organized into 5 autonomous divisions, but shares manufacturing and marketing functions. Shared costs (45% of total) are
allocated on a percentage share of sales method. There are three plants running at a current capacity utilization of 50%.
• Analysts predict OOS is a potential acquisition target given its strong balance sheet but weakening earnings. They are publicly
traded and have little long-term debt. As a potential investor, how would you improve its profitability?
Interviewer guide
• Problem: How can OOS increase profits?
• Problem solving steps:
1. Identify trends in sales and profit
2. Analyze plant production operations
3. Determine financial impact of plant consolidation
4. Provide client recommendation
174
Orrington Office Supplies
Fit: What role do you typically play in a team? Give me an example of this.
Case prompt
• Our client, Orrington Office Supplies (OOS) is a leading manufacturer of office products in 1992, with sales of $275m in 1991. They
have strong brands, invest heavily in marketing and advertising, and have grown through product line extensions and 4 key
acquisitions.
• OOS is organized into 5 autonomous divisions, but shares manufacturing and marketing functions. Shared costs (45% of total) are
allocated on a percentage share of sales method. There are three plants running at a current capacity utilization of 50%.
• Analysts predict OOS is a potential acquisition target given its strong balance sheet but weakening earnings. They are publicly
traded and have little long-term debt. As a potential investor, how would you improve its profitability?
Clarifying information
Industry
Client Characteristics
• U.S. Office supplies market grew at 5% CAGR historically. In
1990 and 1991, the market declined at 5% per year.
• Broader product line than competitors (12.5k SKUs vs. 4-5k
for competitors)
• Superstore channel is becoming increasingly critical
• Gained 10 share pts in past 2 years
• Distribution: 75% wholesalers, 15% superstores, 10% end
customers
• Typically discount products 30% to small retailers/dealers
• Highest selling product is a high-end branded stapler
• Superstores are aggressively substituting private label
products for traditional brand names
• Staples, Inc. is OOS’s largest customer
175
Orrington Office Supplies
Millions
Exhibit A – Historical revenues and profits
$350
$300
$250
$200
Sales
Pre-tax Profit
$150
$100
$50
$1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1980 to 1989
1989 to 1991
Sales CAGR
15%
-8%
Pre-tax Profit CAGR
15%
-40%
176
Orrington Office Supplies
Units
Exhibit B – Production plants
14,000
12,000
10,000
8,000
7,500
Unused capacity
3,500
SKU capacity utilization
6,000
2,500
4,000
2,000
4,500
5,000
3,000
0
Chihuahua, MEX
Grand Rapids, MI
Sayreville, NJ
177
Orrington Office Supplies
Costs ($m)
Exhibit C – Plant operating costs
45
39.5
40
35
30
25.5
25
20
Fixed Costs
20
18
18
Variable Costs
15
15
10
5
0
Chihuahua, MEX
Grand Rapids, MI
Sayreville, NJ
178
Orrington Office Supplies
Part 1
1. Identify trends in sales and profit
Provide Exhibit A after the candidate asks about profitability
• Why do the slopes for sales and profits differ as time elapses?
• The interviewee should not only be able to interpret the data on this slide, but also come up with two insights:
1. The fact profits have been declining more steeply than sales reflects the fixed-cost nature of this business, and;
2. The reason that sales did not grow at a faster clip than profitability during the 1980s likely reflects a strategy to grow through
acquisitions, which prevented OOS from seeing the gains through economies of scale that one would normally expect in a
business such as this
179
Orrington Office Supplies
Part 2
2. Analyze plant production operations
Provide Exhibit B after the candidate asks about plant consolidation
• Qualitatively discuss the potential options for plant consolidation with the interviewee.
• The interviewee should recognize the Chihuahua plant is close to having capacity to produce OOS’s 12.5k SKUs. Either OOS can
close that plant and move all production to the US, or it could close the US plants, discontinue 500 SKUs and move production to
Chihuahua.
• Strong interviewees will note that Chihuahua is the most feasible strategy, but will ask to see fixed and variable cost data.
180
Orrington Office Supplies
Part 3
3. Determine financial impact of plant consolidation
Provide Exhibit C after the candidate asks about Costs
• How would this change revenues? (currently $275m/year)
• How would this change production costs? What are they now?
• How would this change pre-tax profits (currently $25m/year?)
• Revenues: Each SKU earns annual revenues of $22k ($275m divided by 12,500 SKUs) therefore, eliminating 500 SKUs will
decrease annual revenue by $11m, or 4%
• Costs:
Each plant currently has the following annual costs:
Each plant has the following variable cost per SLU:
Chihuahua: $20m + $18m = $38.0m
Chihuahua: $18m / 4.5k SKUs = $4k per SKU
Michigan: $15m + $39.5m = $54.5m
Michigan: $39.5m / 5k SKUs = $7.9k per SKU
New Jersey: $18m + $25.5m = $43.5m
New Jersey: $25.5m / 3k SKUs = $8.5k per SKU
$136m
• Consolidating revenues to Chihuahua will reduce annual costs by 50% to:
• Chihuahua: $20m + ($4k * 12k SKUs) = $20m + $48m = $68.0m
• Profits: We increased profits by $57m ($68m - $11m) to $82m, which more than triples them.
181
Orrington Office Supplies
Part 4
4. Provide client recommendation
• Overall, our client should eliminate 500 SKUs and consolidate all production to the Chihuahua plant to raise annual profits from
$25m to $82m.
• The client should also consider several qualitative issues:
• Implementation: Long-term timeframe.
• Unionized labor: Whether organized labor exists at closing plants and the impact of that
• Distribution and Warehousing: We will need a carefully-developed transition plan.
• Purchasing: We will need to transition to a strong central purchasing department, rather than smaller local ones.
• Culture: Communicating the change properly is key, and we will need to ensure that morale does not take a nosedive.
• Excellent interviewees need to recognize what macroeconomic issues are beyond the scope of the client’s control and then quickly
dive into the plant consolidation, then analyze the cost structures
182
Case 17
Plastic World
Concepts tested
•
•
•
Z13 Organizational
changes
Z07 Market share
Z10 Customer strategy
Primary sector(s)
Similar cases
• X06 Financial Services
• Snack Foods Acquisition
(Wharton 2017)
• Steel Corp
2015)
Case type
• Y03 Mergers & Acquisitions
(Haas
• Soda Ash Producer
(Columbia 2017)
Case authors: Milija Medic
Edited By: Peter Manoogian (Kellogg 2012), Laura Mast (Kellogg 2020)
1 83
Plastic World
Interviewer guide
Case prompt
• Our client is a private equity firm interested in Plastic World, a plastic packaging manufacturer.
• Plastic World’s owners are requesting $25m. The offer is final. Should our client buy the company?
Interviewer guide
• Problem: Should the PE firm purchase Plastic World for $25m?
• Problem solving steps:
1. Examine financial statements
2. Explore feasibility of target’s profit margin improvement
3. Provide client recommendations
184
Plastic World
Fit: Tell me about a time that you demonstrated entrepreneurial drive in a non-professional environment.
Case prompt
• Our client is a private equity firm interested in Plastic World, a plastic packaging manufacturer.
• Plastic World’s owners are requesting $25m. The offer is final. Should our client buy the company?
Clarifying information
• Company
• Makes plastic packaging for beverages, cosmetics, household and automotive chemicals
• Products are top quality, they have 350 sets of molds, with different materials, finish, colors, always innovating
• Overall product mix has not changed in recent years
• The sales force is “the best in breed”, they hold market share, and they are compensated on market share
• Two years ago they invested further in equipment for product innovation
• Customers
• Plastic Worlds’ customers exhibit strong loyalty
• They are experiencing increasing pressures in their industries to innovate the plastic packaging
185
Plastic World
Exhibit A – Profit & Loss statement
2018
Sales
2017
2016
($)
18,824,000
19,180,000
19,650,000
Volume
(units)
36,200,000
34,250,000
32,750,000
COGS
($)
9,050,000
8,900,000
8,650,000
SG&A
($)
7,500,000
7,200,000
7,300,000
Depreciation
($)
3,450,000
3,450,000
2,250,000
EBIT
($)
(1,176,000)
(370,000)
1,450,000
186
Plastic World
Exhibit B – Competitor Profit Margins
Competitor A
Competitor B
Competitor C
Competitor D
Competitor E
Competitor F
PlasticWorld
-10
-5
0
5
10
15
187
Plastic World
Exhibit C – Valuation by Profit Margin
50
Company Valuation ($m)
45
40
35
30
25
20
15
10
5
0
-10
-5
0
5
10
15
Profit Margin (%)
188
Plastic World
Part 1
1. Examine financial statements
Provide Exhibit A immediately after the interviewee runs through their problem-solving structure
• What observations can be made from this P&L statement?
• Would could be the reasons behind what is in the data?
• Plastic World has experienced a steady drop in revenues while the sales volume has been growing.
• Profit margin is dropping and negative; Interviewee should calculate the profit margin (-6%)
• Given the unchanged product mix and increasing sales volume, the drop in revenues is caused by a reduction in prices;
• Depreciation change – it was equipment investment.
• To check if it’s an industry-wide or company-specific drop in profitability, they should request competition profitability data
• Interviewee should ask about the product quality and customer loyalty to discard price competition as the reason to drop prices.
The products are high-quality and customers are loyal, so most of them would buy even at a higher price.
• The interviewee should find, asking independently or with your help, that sales force is compensated based on market share. This
gives the sales force incentive to drop the prices.
189
Plastic World
Part 2
2. Explore feasibility of target’s profit margin improvement
Provide Exhibit B when the interviewee requests information about Competitors
Provide Exhibit C after the interviewee starts talking about using Profit Margins in Valuation
• Exhibit B
• The candidate should identify the profitability problem is client-specific, all competitors are profitable
• Push the interviewee to discuss a realistic profit margin goal for Plastic World based on this industry profitability data
• Exhibit C
• The observation from the graph is that the company would be worth $25M if Plastic World increased profit margin from –6% to
0%. If the profit margin reached the industry average, the company would be worth $40M.
• Now the question is how easily can the profitability be increased above zero (making the company worth more than the
$25M). The sales force incentive change is easy to make.
• Looking for other high-impact improvements, the dense product line and constant innovation is the next largest candidate.
Eliminate some molds to cut costs, mindful of innovation pressures in PW’s clients’ industries.
• Interviewee should investigate the profitability drop and the low prices further and suggest options to get Plastic World’s profitability
in line with the industry, and their feasibility
190
Plastic World
Part 3
3. Provide client recommendation
• Our client should accept the $25M offer and boost the profitability (and value) of PlasticWorld.
• The client should engage in the following easy-to-implement changes:
• Compensate sales force based on company earnings instead of market share.
• Simplify the product line - eliminate some of the 350 molds to cut costs while leveraging the superior sales force to maintain
client satisfaction.
• Examine the industry best practices to find other areas for improvement.
• Excellent interviewees will immediately notice that the company would be worth more than $25M if its profit margin was at the level
of industry average.
• Outstanding interviewees will quickly identify the pricing as the issue behind the revenue decrease and lay out potential causes for
the price drop, finding the sales force incentive. A framework comprehensive enough to find the product line size problem is a
bonus.
191
Case 18
Rotisserie Ranch
Interviewer-led
Concepts tested
Primary sector(s)
Similar cases
• Z10 Customer marketing
strategy
• X02 Agriculture & Food
• Beverage Manufacturer
(Wharton 2012)
• X12 Retail & CPG
• Botox
(Stern 2012)
Case type
• Y04 New product
• Y06 Opportunity assessment
Case author(s): Brian Fox (Kellogg 2004)
Edited By: Adam Louras (Kellogg 2011), Rohan Maini (Kellogg 2020)
1 92
Rotisserie Ranch
Interviewer guide
Case prompt
• Our client is Rotisserie Ranch, a poultry farming company that specializes in growing chickens for rotisserie roasting. Its primary
customer segment is comprised of large grocery chains that buy chickens to fresh roast in the meat departments of their grocery
stores.
• Market research has revealed to Rotisserie Ranch that more and more consumers have begun buying flavored rotisserie chickens
recently.
• Rotisserie Ranch is thinking of pre-flavoring some of its chickens for grocers, what would you consider in making this
recommendation?
Interviewer guide
• Problem: Should Rotisserie Ranch pre-flavor its chickens?
• Problem solving steps:
1. Brainstorm value to customers of new product
2. Analyze results of market test
3. Provide client recommendation
193
Rotisserie Ranch
Fit: Tell me about a time you had to deal with a difficult boss.
Case prompt
• Our client is Rotisserie Ranch, a poultry farming company that specializes in growing chickens for rotisserie roasting. Its primary
customer segment is comprised of large grocery chains that buy chickens to fresh roast in the meat departments of their grocery
stores.
• Market research has revealed to Rotisserie Ranch that more and more consumers have begun buying flavored rotisserie chickens
recently.
• Rotisserie Ranch is thinking of pre-flavoring some of its chickens for grocers, what would you consider in making this
recommendation?
Clarifying information
• Industry: Predicting demand for cooked chickens is difficult for grocers; any leftover cooked chickens at the end of the day are
thrown out; unthawed chickens cannot be re-frozen
• Client: Client has patented process for sterilely packaging chicken, so that it will remain fresh for 30 days, making freezing
unnecessary. Client is currently the industry market share leader in rotisserie-ready chicken
• Product: Four New “Flavored” Products to be introduced concurrently: Barbecue, lemon herb, tandoori and teriyaki
• Competitor: No competition in new product market due to patented process
194
Rotisserie Ranch
Exhibit A – Store sales
Standard Rotisserie
Store
BBQ Seasoned Rotisserie
A
B
C
D
Weekly Sales
$1,000
$2,000
$1,600
$2,700
Retail Price
$3.33
$2.50
$4.00
$3.00
Retailer Margin
30%
30%
25%
25%
195
Rotisserie Ranch
Part 1
1. Brainstorm value to customers of new product
• Do you think that grocery retailers would be interested in pre-seasoned chickens from Rotisserie Ranch?
• After the interviewee brainstorms, ask them:
• After several interviews, grocers are interested in Rotisserie Ranch’s proposed new product, but first they want to be sure that
the chickens will sell well. How would you make sure?
• The candidate may begin going into detail on how this test would be run. Cut him or her off as soon as you are comfortable that they
understand that: (a) a pilot test should be run and (b) the pilot needs to have some control or comparison group.
Yes
•
Labor Cost Reduction: Meat department
workers; don’t need to spend time
seasoning the chickens.
•
Economies of Scale: Seasoning
centralization; lower cost.
•
Product Consistency: Centrally managed;
able to spend more on R&D.
No
•
Loss of Differentiation: Grocery chains
differentiate by value-added .
•
Attune to Local Needs: Likely to be better
at gauging consumer tastes.
•
Increases Inventory & SKUs.
196
Rotisserie Ranch
Part 1
2. Analyze results of market test
Provide Exhibit A once the interviewee identifies the need for market testing
• A test market launch for the new Rotisserie Ranch BBQ chicken was administered. What is the overall profit for both Store A and B
from the test market?
• Using Exhibit A, interviewee should calculate:
• Retailer profit for Seasoned Chicken compared to Standard Chicken
• Retailer profit = # of chickens sold * (price per chicken * retailer margin per chicken)
• Standard Chicken (total profit for retailers = $300 + $600 = $900/week)
• Store A: $1,000 (weekly sales) * 30% (retailer margin) = $300 overall profit
• Store B: $2,000 (weekly sales) * 30% (retailer margin) = $600 overall profit
• Test Market BBQ Seasoned Chicken (total profit for retailers = $400+ $675= $1,075/week)
• Store C: $1,600 (weekly sales) * 25% (retailer margin) = $400 overall profit
• Store D: $2,700 (weekly sales) * 25%* (retailer margin) = $675 overall profit
197
Rotisserie Ranch
Part 3
3. Provide client recommendation
• Overall, our client should launch the Pre-Seasoned BBQ Chicken product and test other products because:
• Competitive Necessity: Consumers are spending more money on seasoned rotisserie chicken than traditional rotisserie
chicken and the market is shifting in this direction
• Benefit to Grocers: Assuming test market was representative, Grocers can expect to earn $175 more gross profit using our
client’s product relative to the standard rotisserie chicken
• Potential scale benefits to our Client over time as more pre-seasoned chickens are sold
198
Case 19
Salty Sole Shoe
Concepts tested
Primary sector(s)
Similar cases
• Z12 Creativity
• X12 Retail and Consumer
• Z01 Accounting (2/3)
• X06 Financial Services
• US Shoe Manufacturing
(Wharton 2017)
• Z09 Microeconomics
• Kicks
2009)
(Tuck
Case type
• Y07 Profitability
Case authors: Meredith Tierney (Kellogg 2011)
Edited By: Uri Kalir (Kellogg 2012), Derek Wiatrowski (Kellogg 2020)
199
Salty Sole Shoe
Interviewer Guide
Case prompt
• Your client is a large retail-focused private equity firm that owns Salty Sole, a leading designer of junior women’s footwear, primarily
targeting the 14 – 22 year old age group.
• Salty Sole was purchased last year by the private equity firm expecting to realize substantial profits upon sale in 2012 by increasing
the company’s EBITDA. The situation, however, is that due to a current recession, annual profit has only grown modestly post the
acquisition and is not on track to generate the double-digit returns that the private equity firm originally anticipated.
• How can the company increase profitability and achieve the private equity firm’s return on investment objectives?
Interviewer guide
• The case primarily tests an understanding of profitability and profitability growth strategies. Begin by reading the case question and
asking the interviewee to take a few moments and then explain how they would like to proceed in the client’s problem
1. Develop a structure to address the problem
2. Analyze client costs
3. Analyze client revenues
4. Analyze market size/share
5. Provide client recommendation
200
Salty Sole Shoe
Fit: What is an example of when you showed initiative and leadership?
Case prompt
• Your client is a large retail-focused private equity firm that owns Salty Sole, a leading designer of junior women’s footwear, primarily
targeting the 14 – 22 year old age group.
• Salty Sole was purchased last year by the private equity firm expecting to realize substantial profits upon sale in 2012 by increasing
the company’s EBITDA. The situation, however, is that due to a current recession, annual profit has only grown modestly post the
acquisition and is not on track to generate the double-digit returns that the private equity firm originally anticipated.
• How can the company increase profitability and achieve the private equity firm’s return on investment objectives?
Clarifying information
• Industry Characteristics/Market Economics: Client is the market leader in junior women’s footwear in the U.S. only. Apparel industry
is characterized by cyclicality due to economy and consumer preferences.
• Client Characteristics: Client designs and distributes footwear to discount retailers (like Kohl’s) and is considered mid-priced. Client
outsources all manufacturing on a fixed-contract basis (i.e. manufacturing costs with outsourced providers fall under Fixed Costs for
simplicity).
• Competitive Dynamics: Client follows a “me-too” strategy and follows fashion rather than inventing it then offering lower prices than
name brands (i.e. not subject to fashion risk). Client competes on the basis of trendy fashion and value pricing.
201
Salty Sole Shoe
Exhibit A – Salty Sole Financial Estimates
($ in millions)
2006A
2007A
2008A
2009E
2010E
2011E
2012E
Sales $
50.0
65.0
60.0
61.0
62.0
65.0
70.0
Less Discounts/Allowances $
(0.5)
(0.65)
(0.60)
(0.61)
(0.62)
(0.65)
(0.7)
Net Sales $
49.5
64.35
59.4
60.39
61.38
64.38
69.3
% Increase
20.0
30.0
(7.7)
1.7
1.6
4.8
7.7
COGS
24.75
32.18
29.70
30.20
30.69
32.18
34.65
Fixed Costs
15.00
15.00
15.00
15.00
15.00
15.00
15.00
Total Costs
39.75
47.18
44.70
45.20
45.69
47.18
49.65
EBITDA $
9.75
17.18
14.70
15.20
15.69
17.18
19.65
Sale Multiple
6.5x
6.5x
6.5x
6.5x
6.5x
6.5x
6.5x
111.64
95.55
98.77
101.99
111.64
127.73
Purchase/Sale Price $
Return on Investment %
2.7
Notes:
• Acquisition occurred on December 31, 2006
202
Salty Sole Shoe
Exhibit B – US Casual Footwear Market Size and Share
100%
$125M
$163M
$150M
$153M
90%
80%
Percent Market Share
70%
Competitor 5
60%
Competitor 4
Competitor 3
50%
Competitor 2
Competitor 1
40%
Salty Sole
30%
20%
10%
0%
2006
2007
2008
2009
203
Salty Sole Shoe
Part 1
1. Develop a structure to address the problem
• After asking the case question, the interviewee should draw a framework that outlines the basic concept that profit is driven by
revenue (price and volume) and cost (fixed and variable)
Ź
R
Avg P
•
•
•
•
Discounts
Channel variations
Product mix
Customer segments
C
Qty Sold
Share of market
F
Size of market
• Factories
• Marketing
• SG&A
V
• Canvas
• Rubber
• Labor
• Specific category
• Competitors
204
Salty Sole Shoe
Part 2
2. Analyze client costs
Provide Exhibit A
• What observations can be made from this chart? Interviewee should point out that the company experienced significant growth
during the pre-recession years, but a decline and only gradual pick-up following.
• Interviewee should pick-up on the fact that the change in net sales is not due to increased discounts/allowances (remains 1%
throughout years).
• Have a quick discussion on the company’s cost structure
• On the cost side, interviewee should note that variable costs remained flat at 50% and fixed costs remained flat
• Fixed: Interviewee should note that fixed costs are not extremely high (about 23-25%), but could be an area for improvement.
Ask how interviewee would reduce fixed costs? Examples include: renegotiate contracts, find cheaper manufacturing
partners, etc.
• State that in-fact fixed costs cannot be adjusted based on the company’s research.
• Variable: Interviewee should note that variable costs are approximately 50% of sales. Ask how interviewee would think about
reducing variable costs? Examples include: reduce labor/sales force, use technology, renegotiate / volume purchase
materials
• State that variable costs are currently at the lowest possible rates based on market research.
205
Salty Sole Shoe
Part 3
3. Analyze client revenues
• Once interviewee determines that cost is not the issue, have a discussion on the components of revenue – price and volume.
• Price: Interviewee should ask if pricing has remained constant over time or if the company has adjusted its pricing to reflect lower
consumer discretionary income.
• Ask what considerations the interviewee would have when considering adjusting price?
• Answers should be price sensitivity / elasticity, cost structure, brand equity (dilute brand through price decrease but compete
with more upscale brands if increase).
• State that pricing has remained constant at an average of $25/unit. The company has determined that it would not be
prudent to adjust pricing based on industry research. Interviewee can now determine the # of pairs sold for later in the case.
• Now that the interviewee has hopefully zeroed-in on the fact that the issue is volume, ask how many units must be sold by 2012 in
order for the private equity firm to achieve a 20% return on the investment in Salty Sole Shoe, which equals approximately $300
million sale value (give this number). Note that interviewee should ignore discounts/allowances for simplicity.
• Interviewee should determine that if the sale value needs to be $300mm in 2012, then EBITDA will need to be
$300 / 6.5 = $46.15 (round up to $50 million).
• The formula to determine how many pairs of shoes must be sold to reach that EBITDA level is as follows:
• $50,000,000 = $25*v – (.5 * 25 * v) – 15,000,000
• $65,000,000 = 12.5v
• V = 5,200,000 pairs of shoes
206
Salty Sole Shoe
Part 4
4. Analyze market size/share
• Interviewee should note that this is more than double the 2008 and 2009 volume levels. Ask what the interviewee would want to
know to determine if this volume is feasible? Answer: market size / share.
Provide Exhibit B
• Show the candidate Exhibit B when he/she notes that market size/share would be helpful.
• Candidate should note that the client is already the market leader with 40% and that the market size is not projected to increase.
• This should lead to the conclusion that the client can increase volume by stealing share and/or new products in other categories.
207
Salty Sole Shoe
Part 5
5. Provide client recommendation
• The interviewee should zero-in on the fact that since cost-structure is fixed and price is also fixed, volume is the only real way to
increase profitability.
• However, volume must more than double in order to achieve the growth desired by the private equity firm for a 20% return, which
could be difficult given recession and the fact that the industry as a whole isn’t growing.
• Interviewee should recommend potentials strategies for achieving that volume growth while outlining the risks of each: 1) Volume:
new products / geographies / distribution channels (international?); increase marketing to steal share; acquire growth (brands);
adjust product mix to higher-margin products. 2) Price: add value / features. 3) Risks: Capacity, cannibalization if new products.
• Excellent interviewees quickly identify that volume is the issue by ticking through the parts of the profitability equation.
• They will also ask about product mix and question the 50% gross margin. The interviewer should note that it’s assumed that all
products have the same margin, but that’s a great question.
• Outstanding interviewees will note that since the company is not projected to have to adjust discounts / allowances, then it
probably has a good product that is highly-valued by customers and/or this may be aggressive projecting.
208
Case 20
Sosland Sports
Concepts tested
Primary sector(s)
Similar cases
• Z03 Breakeven analysis
(2)
• X09 Hospitality & Leisure
• Thrill Park
2016)
• Z11 Competitive analysis
(3a)
• Tommy’s Tennis
2012)
• Z12 Creativity (3b)
Case type
• Z10 Customer strategy (4)
• Y04 Market Entry
(Fuqua
(WSO
• Snack Foods Acquisition
(Wharton 2017)
Case source: PrepLounge (‘Fysikum’)
Edited by: Rohan Maini (Kellogg 2020)
2 09
Sosland Sports
Interviewer guide
Case Question
• Your client, Sosland (pronounced sauce-land) Sports, is an operator of squash centers in Sweden. The squash centers
include sauna, spa, pool, gym and - of course - the squash courts!
• Due to the extreme success in Sweden the company is considering expanding to other countries in Europe, in particular Germany.
• The founder and CEO, Felicity Sosland, has asked us to evaluate this possible expansion.
• What factors would you consider in order to estimate the outcomes of this expansion?
Interviewer guide
• Problem: Should Sosland Sports expand into Germany?
• Problem solving steps
1. Develop problem solving structure
2. Determine the breakeven point
3a. Conduct competitive analysis
3b. Brainstorm service differentiators
4. Provide client recommendation
210
Sosland Sports
Experience: Tell me about your most meaningful career achievement to date.
Case Question
• Your client, Sosland (pronounced sauce-land) Sports, is an operator of squash centers in Sweden. The squash centers
include sauna, spa, pool, gym and - of course - the squash courts!
• Due to the extreme success in Sweden the company is considering expanding to other countries in Europe, in particular Germany.
• The founder and CEO, Felicity Sosland, has asked us to evaluate this possible expansion.
• What factors would you consider in order to estimate the outcomes of this expansion?
Clarifying information
• Company: Sosland Sports centers are mid-range centers with medium-quality facilities. They only exist in Sweden.
• Goal: Breakeven at least. No timeframe.
• Revenue: Annual subscription based revenue model.
211
Sosland Sports
Exhibit A – Cost overview
Total annual cost
€200,000
Number of courts
15
Opening hours
Days of use per week
Court use
Usage capacity
8am – 6pm
7
1 hour per member per week
70%
212
Sosland Sports
Part 1
1a. Develop problem solving structure
1b. Determine data gathering approach
• This question should give an overview of the candidate’s ability to structure an
answer. The best way to solve this is by using a “3C’s” or “Five Forces” analysis.
Good answers
• The interviewee should recognize the question as an opportunity to brainstorm.
• Purchase marketing analyses /
research reports
• The answer should include some of the following points:
• Internet research on competitors
Customers
• Contact real estate agent for real
estate costs
• Market size and growth rate
• Market segmentation (activity level, ages)
• Cultural factors (ie. German sporting preferences)
• Contacting someone in the consulting
company who has experience in the
market or industry
Competitors
Outstanding answer
• Number and concentration, substitutes
• Intensity
• Positioning
• An outstanding candidate would
structure their answer. For example:
they would gather information (1)
internally, using firm resources and
within the client’s own organization,
and (2) externally from third party
sources.
Company
•
•
•
•
Replication of business model
Economies of scale
Cost of expansion
Projected profitability
213
Sosland Sports
Part 2
2a. Determine the breakeven point
2b. Sense check calculation
Provide Exhibit A
• Can you determine the minimum annual membership fee Sosland Sports has to charge in
order to cover the running cost?
• Information that can be shared if inquired: If the candidate asks about revenues, tell
him/her that they are equal to the annual costs.
• Courts are always used during operating hours.
• The candidate should think about the possibility of doubles. If they ask, they should
assume 50% single and 50% double matches.
• Number of hours available per week = 10 hours/day x 7 days/week x 15 courts = 1,050
• Number of hours courts in use = 70% utilization x 1,050 = 735
Are you sure this is an annual fee
and not a weekly one?
This is meant to be a tricky question
to show the confidence of the
interviewee. But as the annual
costs are divided by the total
number of members this is indeed
an annual fee.
Ideally the candidate should note
that the €90 membership fee seems
low and look to compare against the
competition.
• Average number of players per hour = (50% x 2) + (50% x 4) = 3
• Members = 735 hours x 3 members/hour = 2,205
• Membership = €200,000 / 2,205 = €90.70
214
Sosland Sports
Part 3
3a. Conduct competitive analysis
3b. Brainstorm service differentiators
The dominant market player for squash centers (70% market share in Germany) offers
memberships for €70. Would you recommend entering the market?
What could Sosland Sports offer to
customers to differentiate their service
offering?
Good answer
• Further investigation is required, in particular what the competitor is offering and if
Sosland Sports can differentiate its services from this offering.
• For instance if the competitor is using a cost leadership strategy and offers a very
cheap, but low-quality service, Sosland Sports could launch a premium, high quality
squash center.
Outstanding answer
• There could be other outcomes of the investigation.
• If the competitor operates across all segments, from low-end to high quality, and has
a lower cost base, Sosland Sports should not enter the market. An entrance would
only lead to a price competition that our client cannot win.
There are several possible
solutions (some mentioned at the
beginning of the case) but these should
be structured by the interviewee:
• Providing high-quality courses
• Setting up cross-country
tournaments between Sweden and
Germany
• Advertise the squash center
with famous people (celebrities)
• Offer longer opening-hours for
members paying a higher fee
• Offer services like a café or a bar
215
Sosland Sports
Part 4
4. Provide client recommendation
• Overall, there is only a case for Sosland Sports to enter the German market if they can differentiate themselves from the dominant
competitor.
• Sosland Sports needs to charge €90 for an annual membership to break-even
• The major incumbent charges €70 per year
• Sosland Sports needs to determine how they can differentiate themselves to charge this higher price
• Risks: Competitor reaction to a new entrant, differing consumer preferences/buying habits in Germany
• Next steps: Deeper dive into competitors’ businesses and market research into Germans’ leisure buying habits
• Strong interviewees quickly contextualize the €90 fee in terms of the client problem and look to compare in the market.
• Outstanding interviewees structure the math correctly and solve it in a simple and clear manner.
216
Case 21
Tacotle
Concepts tested
Primary sector(s)
Similar cases
• Z06 Macroeconomics (2)
• X02 Agriculture & Food
• Yumy Co
2013)
• Z01 Accounting (4,5)
(Yale
• Burger Chain
(Ross 2012)
• Z10 Customer strategy (6)
Case type
• Y07 Profitability
• Le Seine
(Harvard 2015)
• Y05 Operations
Case author(s): Ryan Sullivan (Kellogg 2016)
Edited by: Rohan Maini (Kellogg 2020)
2 17
Tacotle
Interviewer guide
Case prompt
• Your client is Tacotle, a leading national fast casual restaurant with $420m in revenue in 2019.
• Over the five years proceeding 2019, Tacotle has experienced steady revenue growth and industry leading profitability. But for the
first time in its 15 year history, Tacotle has experienced three straight quarters of EBITDA erosion.
• Tacotle’s CEO has hired you to explore what is causing profits to drop and what can be done to reverse the tide.
Interviewer guide
•
Problem: How can we return Tacotle to profit growth?
•
Problem solving steps:
1. Develop a structure to address the problem
2. Analyze external market conditions
3. Identify trends in profitability over time
4. Deep dive into drivers of revenue change
5. Calculate change in units sold between 2018 and 2019
6. Analyze operational reasons for price increases
7. Provide client recommendation
218
Tacotle
Fit: Tell me about a time you felt conflict in the workplace.
Case prompt
• Your client is Tacotle, a leading national fast casual restaurant with $420m in revenue in 2019.
• Over the five years proceeding 2019, Tacotle has experienced steady revenue growth and industry leading profitability. But for the
first time in its 15 year history, Tacotle has experienced three straight quarters of EBITDA erosion.
• Tacotle’s CEO has hired you to explore what is causing profits to drop and what can be done to reverse the tide.
Clarifying information
• Goal: Profitability (no specific milestones, looking for positive annual profit growth in the short term)
• Market: Defer until after the framework presentation
• EBITDA: Ensure interviewee understands that EBITDA is Earnings before interest, tax, depreciation and amortization (profit)
219
Tacotle
Exhibit A – Quarterly revenue and EBITDA
Millions
Revenue
EBITDA
$140
$120
$100
$80
$60
$40
$20
Period
$0
EBITDA (%)
Q1
Q2
Q3
Q4
Q1
Q2
Q1 2017
Q2 2017
Q3 2017
Q4 2018
Q1 2018
Q2
2017
2012 2012 2012 2012 2013 2013
44
45
44
46
45
45
Q3
Q3
2018
2013
44
Q4
Q4
2018
2013
46
Q1
Q1
2019
2014
39
Q2
Q2
2019
2014
40
Q3
Q3
2019
2014
39
Q4
Q4
2019
2014
40
220
Tacotle
Exhibit B – Average revenue per order
Avg. revenue per order
$5.50
$5.00
$4.50
$4.00
$3.50
$3.00
Period
Q1
2017
Q2
2017
Q3
2017
Q4
2017
Q1
2018
Q2
2018
Q3
2018
Q4
2018
Q1
2019
Q2
2019
Q3
2019
Q4
2019
221
Tacotle
Exhibit C – Income statement
2017
2018
2019
364
377
420
COGS
51
54
96
Wages
96
99
101
SG&A
11
10
10
Fixed Overhead
43
44
44
163
170
169
Revenue ($M)
Expenses ($M)
EBITDA ($M)
222
Tacotle
Exhibit D – Customer survey (2018)
5.0
4.8
4.0
4.7
4.5
4.5
3.4
3.0
3.3
3.1
2.0
1.0
0.0
Quality
Speed of
Service
Consistency of Has a drive
Product
through
Importance
Restaurant
Cleanliness
Friendliness of Ample Seating
Staff
Performance
Notes:
• On a scale of 0-5, how important are the following characteristics when dining at fast casual restaurants?
• On a scale of 0-5, how well does Tacotle Co. perform against the following characteristics?
223
Tacotle
Exhibit E – Customer survey (2019)
5.0
4.8
4.0
4.7
4.6
4.5
3.5
3.0
3.4
3.1
2.0
1.0
0.0
Speed of
Service
Quality
Has a drive
through
Consistency of Restaurant
product
Cleanliness
Importance
Friendliness of Ample Seating
Staff
Performance
Notes:
• On a scale of 0-5, how important are the following characteristics when dining at fast casual restaurants?
• On a scale of 0-5, how well does Tacotle Co. perform against the following characteristics?
224
Tacotle
Part 1
1. Develop a structure to address the problem
• After framework review, Candidate should:
• Understand that the problem could originate from market conditions or company operations
• Discuss the basis profitability framework with some focus on anticipated fixed and variable cost drivers for Tacotle
ŹĻ
Market Conditions
Operations
Ŏ Product Mix?
Avg P Ļ
Revenue Ļ
Costs Ĺ
Competition Ĺ
F
Qty
• Marketing
• PP&E
• SG&A
ŎCustomer Prefs
Ļ Market
V
•
•
•
COGS
Distribution
Labor
225
Tacotle
Part 2
2. Analyze external market conditions
• When asked, provide the interviewee with the following information about the market, competitors and customers:
• Market growth
• Market is growing at the same rate as GDP
• Mature market
• Competition
• No major competitors have entered or exited
• No new substitutes introduced
• Tacotle currently has a 30% market share (by revenue) which it has maintained
• Customers
• Customers are beginning to stress the importance of ingredient quality and order customization
• Takeaway: the profitability issue is not one that is market wide. The problem seems to be specific to Tacotle.
• There are no major competition related factors that are driving the decreased profitability. The issue is most likely related to a
change within Tacotle
•
The change in customer preferences doesn’t seem like it is directly driving decreased profits but it may have influenced
decisions made within Tacotle
226
Tacotle
Part 3
3. Identify trends in profitability over time
Provide Exhibit A once the interviewee requests information regarding Tacotle’s Revenue or Profitability
• What are potential drivers of:
• Revenue spike? (Increase in price or units sold)
• EBITDA erosion? (Increase in cost, decrease in rev.)
• EBITDA % decline? (Decrease in margin)
• Spike in revenue in Q1 2019 with relatively flat EBITDA and large decrease in EBITDA %. Followed by steady revenue decline
• Good response will hypothesize what could cause this, with the conclusion that either prices and/or purchases increased with costs
increasing more than the additional revenue
• A good interviewee will take a deep dive into the profitability framework looking to determine why:
1.
Revenue spiked then declined over the following quarters
2.
Profitability (EBITDA) did not follow revenue
227
Tacotle
Part 4
4. Deep dive into drivers of revenue change
• Guide the candidate down the revenue side of the profitability framework if they do not do so.
Provide Exhibit B once the interviewee has hypothesized potential drivers of increased revenue
• After interviewee has stated that price increased, interviewee should recognize that a change in price could lead to a change in
quantity.
Provide Exhibit C once the interviewee asks how the units sold changed in 2019
• Takeaways (Exhibit B):
• A good interviewee will quickly identify that Tacotle increased the average price of their orders.
• It should initially be ambiguous whether units sold increased or decreased. A good interviewee will not rush to a conclusion
• Takeaways (Exhibit C):
• Interviewee should evaluate the entire slide then attempt to answer the question posed regarding units sold in 2019
• Interviewee should refer back to the exhibit and notice that COGS nearly doubled from 2018 to 2019
228
Tacotle
Part 5
5. Calculate change in units sold between 2018 and 2019
• If the interviewee does not calculate the change in units sold themselves, ask them to
Units sold in 2018:
Units sold in 2019:
• Units sold = Revenue / (Avg. price per unit)
• Units sold = Revenue / (Avg. price per unit)
• 2018 Revenue = $377m (Round to 380M)
• 2019 Revenue = $420m
• 2018 Avg. price per unit = $4.05 (Round to $4)
• 2019 Avg. price per unit = $5.25
• Units sold = $380m / $4 = 95m units sold
• Units sold = $420m / $5.25 = 80m units sold
Takeaways:
• Although revenue increased sharply, the total number of orders decreased.
• As revenue continued to decline over the last three quarters of 2019, prices remained the same. Therefore, a decrease in the
quantity sold is responsible for the eroding revenues and EBITDA
229
Tacotle
Part 6a
6a. Analyze operational reasons for price increases
• Why did Tacotle increase prices?
• Why did units sold continue to decrease throughout 2019?
Provide Exhibit D once the interviewee or interviewer asks these questions
• Ensure that before moving into ‘operations’ the interviewee has analysed Exhibits A, B and C and has received Exhibit D..
• Exhibit D illustrates Tacotle’s performance against customer preferences
• Tacotle lags with regards to quality but is on par or exceeding expectations for all other categories
• Interviewee should conclude that Tacotle did something that was aimed to increase quality which most likely caused COGS and
revenue to increase
230
Tacotle
Part 6b
6b. Analyze operational reasons for price increases
• After interviewee has speculated on potential operational changes Tacotle could have implemented, inform them that Tacotle
introduced a new menu focused on allowing the consumer to customize their orders more and higher quality and selection of
ingredients
Provide Exhibit D at this point
• If asked for, the average time to serve a customer increased from ~1 minute to ~3.5 minutes.
• Interviewee should recognize that Exhibit E is the same survey as Exhibit D but for the next year (post menu upgrade)
• Interviewee should also recognize that the order of attributes has changed
• “Speed of Service” is now Tacotle’s weakest attribute
• This is due to the new menu which added complexity to food preparation
• “Consistency of Service” has also dropped below customer expectations due to the added complexity of food preparation
• Although Tacotle has met expectations with regard to “Quality”, the decline of ratings in “Speed of Service” and “Consistency of
Service” have more than cancelled it out, resulting in a net decrease in customer satisfaction
• Takeaway: The menu change was not effective
231
Tacotle
Part 7
7. Provide client recommendation
Overall: Scale back the menu changes that were implemented during 2019.
• The menu change led to a significant increase in COGS which decreased EBITDA %
• The menu change led to overall customer dissatisfaction, degrading brand equity
• The customer dissatisfaction lead to decreasing unit sales (quarter over quarter) which is driving the EBITDA erosion
Risks
• Scaling back the menu too much could lead to decrease in customer satisfaction for “Quality”
• Scaling back could disrupt relationships with suppliers require asset divesture relating to initial menu change
• A scale back that does not focus on margin improvement could lead to smaller revenues and profits, effectively downsizing the
company.
Next steps
• Perform more detailed and focused customer surveys to gage what Tacotle customers expect from the chain
• Perform a scale back on the menu size that focuses on cost cutting balanced with customer needs
• Follow-on menu changes should be implemented on a smaller/trial basis at a small number of individual restaurants
232
Case 22
Vitality Insurance
Concepts tested
Primary sector(s)
Similar cases
• Z13 Organizational
changes (3)
• X06 Financial Services
• TV Screens
2017)
(Wharton
Case type
• Y07 Profitability
Case author(s): Peter Manoogian (Kellogg 2012)
Edited by: Matthew Heintz (Kellogg 2016), Rohan Maini (Kellogg 2020)
2 33
Vitality Insurance
Interviewer guide
Case prompt
• Our client, Vitality Insurance, is a leading provider of supplemental insurance products in the United States.
• Vitality agents partner with companies to offer their employees optional, supplemental insurance for such conditions as life, longterm disability, etc.
• Vitality has undergone fairly steady growth in the past two years, but profit margin is decreasing. What should they do about it?
Interviewer guide
• Problem: How can Vitality improve its profit margins?
• Problem solving steps:
1. Identify cost trends
2. Determine root-cause of sales cost changes
3. Examine mis-aligned incentive programs
4. Provide client recommendation
234
Vitality Insurance
Fit: What role do you typically play in a team? Give me an example of this.
Case prompt
• Our client, Vitality Insurance, is a leading provider of supplemental insurance products in the United States.
• Vitality agents partner with companies to offer their employees optional, supplemental insurance for such conditions as life, longterm disability, etc.
• Vitality has undergone fairly steady growth in the past two years, but profit margin is decreasing. What should they do about it?
Clarifying information
• Client:
• Vitality is the leader in its category and has over 10,000 field sales agents (FSAs)
• Vitality sells all policies through FSAs who are solely compensated on a percentage commission of total new premium,
(defined as premium from new customers or additional premium up-sell from existing policyholders)
• In addition to the commission, short term priorities are often communicated via sales contests that focus on a particular
customer segment or activity and pay a bonus in addition to standard commission
• Major costs: sales, G&A, and advertising
• Competition: Few competitors in this mature market with similar growth. Vitality is a leader in the space; competition not the focus
• Industry: Agent turnover is very high on a yearly basis (though was lower during the recessionary period)
235
Vitality Insurance
Exhibit A – Results and Costs
Vitality insurance key results and costs (figures in ‘000s)
2008
Accounts converted
Total policyholders enrolled
Total premium from policyholders
2009
2010
500
550
605
1,500
1,650
1,815
$2,500,000
$2,750,000
$3,025,000
$50
$55
$58
$250
$275
$400
$25
$28
$30
9.50%
9.40%
8.50%
Total costs
General and Administrative
Sales
Advertising
Profit margin
236
Vitality Insurance
Exhibit B – Insurance sales process
Reactivating
dormant account
Acquire new
accounts
Hire new agents
Keep accounts
active
Upsell active
accounts
Produce results
(Premium $)
Number of sales contests targeted at these leverage points on the selling process
New Agents
Acquire new accounts
Keep accounts active
Upsell active accounts
(bonus based on # of accounts)
(bonus based on # of
accounts)
(bonus based on # of
accounts)
(bonus based on total
premium $)
Produce results
2008
n/a
2
4
1
2
2009
n/a
2
4
1
2
2010
n/a
4
0
1
4
237
Vitality Insurance
Exhibit C – Snapshot of ‘Sweeps Week’ contest results
Ratio to Average Weekly Premium (2008-2010)
2010 ‘Sweeps Week’ (1)
2 010 ‘Sweeps Week’ (2)
200%
150%
2008
2009
2010
100%
50%
0%
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
Week during Jan-Jun
238
Vitality Insurance
Part 1
1. Identify cost trends
Provide Exhibit A when the interviewee asks for cost information
• Interviewee should recognize the following:
• All line items except for sales costs growing at 10% per year
• Sales costs grow at 10% from 2008 to 2009, but at 45% from 2009 to 2010 (while premium growth remains at 10%)
• Stronger interviewees will quickly note that something is strange with the 2010 sales costs, but will calculate to confirm
• Finally, profit margins are declining significantly from 2009-10, suggesting that the increase in sales costs is not paying off
239
Vitality Insurance
Part 2
2. Determine root-cause of sales cost changes
Provide Exhibit B if the interviewee asks about the value chain or sales process
• If the interviewee asks about the new contests focused on premium, provide the following information:
• Vitality launched a contest called ‘Sweeps Week’ that aimed to drive increased premium in weeks that were traditionally low
volume for the company. Vitality paid an extra 10% bonus on all premium booked in those two weeks.
• Sales agents thought ‘Sweeps Week’ was a great contest
• Assume the types of contests run in 2008 and 2009 were fairly similar
• Do not share Exhibit C until the interviewee recognizes this shift in mix and begins asking questions about the new programs
• As seen in Exhibit B; Vitality’s sales agents are engaged in several activities along the sales process, and that new premium can be
generated in many ways.
• The interviewee should recognize the shift in contest mix from 2008/09 to 2010. Coupled with the additional information provided in
the previous slide, the interviewee should realize that Vitality has shifted its focus more toward total premium and new accounts in
2010
240
Vitality Insurance
Part 3
3. Examine mis-aligned incentive programs
Provide Exhibit C if the interviewee asks about the effectiveness of ‘Sweeps Week’
• If asked, confirm that agents have authority to ‘book’ sales whenever they want by influencing the enrollment timing by up to one
week
• Strong interviewees will also recognize that, despite not having charts to support it, a shift in customer focus toward acquiring new
accounts in 2010 will likely also hinder profit margins, as acquiring a new customer costs considerably more than retaining (or upselling) an existing customer
• Exhibit C shows weekly premiums for all of Vitality from 2008 – 2010. The chart is shown in a way that compares each year’s actual
premium to the average of historical premium for that year, so as to provide for a ‘benchmark’ comparison.
• The ‘Sweeps Week’ contest launched in 2010 is shown in weeks 4 and 20 in the chart, and clearly yields high premium volume for
those particular weeks. However, it is done at the expense of the weeks surrounding the sweeps week.
• This implies that agents may be ’gaming’ the system by pushing/pulling sales into that week to earn the contest rewards
241
Vitality Insurance
Part 4
4. Provide client recommendation
• The interviewee should conclude that Vitality overspent in 2010 on the ‘Sweeps Week’ sales contest, thus hurting its profitability
• Exhibit C indicates that the contest influenced the sales force to conduct undesirable selling practices by pushing / pulling
forward business to earn the extra commission
• Further, the contest’s focus, driving new premium was duplicative with that of the main commission system, therefore it did not
add much value
• Recommendation: eliminate ‘Sweeps Week’ for 2011 and potentially repurpose those funds toward an activity that is not already
covered by the main commission structure
• It is unclear whether we should remove the increased contests on new accounts, as this could be a new customer focus that we do
not know about
• Excellent candidates will make the following observations:
• Recognize that the likely decline in profit margin from 2009 to 2010 is linked to the abnormal increase to sales costs
• That the ‘contest mix’ in Exhibit B is similar to a firm’s marketing mix, especially given that the sales channel has already been
established as the main marketing channel for these products
• Suggest that the added contests on acquiring new accounts will also decrease profitability because acquiring new customers
is more costly than retaining existing ones.
242
Case 23
Wildcat Wings
Concepts tested
Primary sector(s)
Similar cases
• Z08 Market sizing (2)
• X01 Aerospace & Defense
• case, casebook + year
• Z12 Creativity (4)
• X15 Transportation & Logistics
• Z16 Vertical integration (4)
Case type
• Y06 Opportunity assessment
• Y05 Operations
Case author(s): Adam J. Louras (Kellogg 2011) [formerly A+ Airlines]
Edited by: Deepika Singh (Kellogg Class’16), Rohan Maini (Kellogg 2020)
243
Wildcat Wings
Interviewer guide
Case prompt
• Our client is Wildcat Wings, the third largest airline in the United States by passengers carried. This week, the CEO flew with our
primary competitor, Phoenix Air, and she noticed something interesting: Phoenix has stopped accepting cash for in-flight food and
beverage services and they now only accept major credit cards.
• The CEO of Wildcat Wings wants to know why Phoenix Air switched to Card only, and if Wildcat Wings should follow them.
Interviewer guide
• Problem: Should Wildcat Wings go cashless for in-flight purchases?
• Problem solving steps:
1. Develop a structure to address the problem
2. Analyze current in-flight purchases
3. Explore cost impacts of switching to card only
4. Brainstorm additional benefits
5. Provide client recommendation
244
Wildcat Wings
Fit: Tell me how about a time someone convinced you to take a differnet approach.
Case prompt
• Our client is Wildcat Wings, the third largest airline in the United States by passengers carried. This week, the CEO flew with our
primary competitor, Phoenix Air, and she noticed something interesting: Phoenix has stopped accepting cash for in-flight food and
beverage services and they now only accept major credit cards.
• The CEO of Wildcat Wings wants to know why Phoenix Air switched to Card only, and if Wildcat Wings should follow them.
Clarifying information
• Card Use: Roughly 99% of all consumers purchase their airline tickets using a credit card, i.e. all consumers on an airplane have a
credit card available to them.
• Items Sold: Only food and alcoholic beverage items are sold on Wildcat flights.
• Competitive Dynamics: Phoenix is the only airline that has made the switch; however all other airlines are evaluating the switch.
• Competitors: For the purposes of this case, Phoenix and Wildcat should be considered to be exactly the same in all regards.
245
Wildcat Wings
Exhibit A – Flight economics
Average Wildcat Wings flight
Boeing 737-800
Total seats
200
Traveler type
Cabin share
of seats
Business
Leisure
Seat
utilization
First Class
25%
100%
0%
100%
Economy
75%
50%
50%
80%
Cabin
Traveler type
Purchase rate
Average purchase value
Business
40%
$10
Leisure
25%
$5
Method of payment
Fleet size: 50
Cash
20%
Card
80%
246
Wildcat Wings
Exhibit A – Cash and Credit Card management processes
Wildcat Wings Cash Management Process*
On ground
Cash handler
collects flight
lockbox from
plane (EOD)
Cash handler
loads plan with
$50 in change
Cash handler
collects flight
lockbox from
plane (EOD)
Flight lockboxes
deposited to
onsite cash
processing
center
Armored car
service collects
cash
Armored car
service
reconciles cash
for counterfeit
Cash (less fees)
deposited to
Wildcat Wings
bank account
End-to-end process: 31 days
In flight
Flight attendant
collects cash
from passengers
and issues
change
Flight attendant
deposits cash
into flight
lockbox
Wildcat Wings Credit Card Process
2% fee on all
cash collected
On ground
Merchant
service receives
and processes
card transaction
Cash (less fees)
deposited to
Wildcat Wings
bank account
End-to-end process: 24 hours
In flight
Flight attendant
swipes credit
card in wireless
terminal
Additional information:
• 5 cash handlers per airport
• 2 employees onsite cash processing center at each airport where Wildcat operates
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Wildcat Wings
Part 1
1. Develop a structure to address the problem
• Case Structure – Interviewee’s structure should be a before and after comparison of the switch from Cash & Card to Card only and
should include:
• Revenue Changes: Loss of Cash Only customers vs. Increase in Credit Card customers
• Cost Changes: Benefit of Cash Management Cost Removed vs. Incremental Cost (Fee) of Credit Card
• Cash Flow Changes: Interest and Time Value of Money (TVM), and Working Capital impacts due to an increase in collection
speed
248
Wildcat Wings
Part 2
2. Analyze current in-flight purchases
Provide Exhibit A when the interviewee asks about market sizing
When asked, state we will lose 1/3 of cash customers when we move to card-only
• Ask the interviewee to determine the Total Market Size in ($) for food and beverage purchases on an average flight
• The interviewee should calculate the current allocation of purchases (Cash vs Card) for an average flight.
• The interviewee should begin with the correct assumption that revenue will be lost due to unhappy, cash-only passengers
• First class business passengers = 200 seats x 25% share x 100% utilization x 100% business = 50 passengers
• Economy business passengers = 200 seats x 75% share x 80% utilization x 50% business = 60 passengers
• Economy leisure passengers = 200 seats x 75% share x 80% utilization x 50% leisure = 60 passengers
• Business spend = (50 + 60) x 40% x $10 = $440
• Leisure spend = 60 x 25% x $5 = $75
• Cash payments = $515 x 20% = $103
• Card payments = $515 x 80% = $412
• Takeaway: Lost revenue = 1/3 x 103 = ~$35
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Wildcat Wings
Part 3
3. Explore cost impacts of switching to card only
• Interviewee should make mention of Cost changes due to the shift to a Card Only strategy.
Provide Exhibit B when the candidate after cash and credit card processing cost brainstorming
When asked, explain that the total, per flight, savings from eliminating overhead due to Cash
Management Operations is $35/flight
• The interviewee should notice the following information:
• Cash Management & Card Management both have 2% fees associated, so this is a “wash” in terms of savings.
• Cash Management requires additional overhead, 7 total employees per airport, that could be eliminated for further savings.
• Interviewee should notice that the $35 savings offsets the $35 loss in revenue. A good candidate will notice that savings go straight
to the bottom line whereas revenue doesn’t.
250
Wildcat Wings
Part 4
4. Brainstorm additional benefits
If the candidate does not mention TVM, ask them about benefits of collecting payment early
• The interviewee should qualitatively mention that there are benefits to eliminating the longer cash management process:
• Time Value of Money: Wildcat Wings will receive their money 30 days sooner, and this money could be used to:
• Invest in interest earning accounts or growth projects
• Pay off suppliers early and take advantage of discounts
• Pay down lines of credit faster
• Working Capital Improvement: $50 per flight in change can be eliminated, thus freeing up cash flow. Additionally, there will be
a reduction in loss of cash due to theft and damage
• Happier Customers: The majority of customers will be able to place and receive their order faster on the plane which will also
increase sales
251
Wildcat Wings
Part 5
5. Provide client recommendation
• Overall, our client Wildcat Wings, should switch to a Credit Card only system for in-flight food & beverage because:
• Quantitative Benefits: We calculated that there would be a loss of 3 business customers and 1 economy customer per flight
which amounted to a Revenue loss of $35. We also found that we could save $35 in overhead expenses by eliminating the
Cash Management process. In sum, the decision to switch is in favor because the savings are to the bottom line and the
revenue losses are top line.
• Qualitative Benefits: We also found that we will receive payment 30 days sooner by only accepting credit cards. This improves
our cash flow and could allow us to earn interest, pay down creditors, or invest in projects. Additionally, by reducing cash
losses and eliminating “Change” tied up on airplanes, we can improve our Working Capital and also put this money to work for
us. Finally, it appears as though customers, in general, might actually be happier because the speed of transactions on the
airplane will improve.
• Outstanding interviewees will note:
• Due to the increased transaction speed, probability of purchase for both Business and Economy passengers in the AFTER
state should go up due to a reduction in frustration. The people on the back of the airplane often abandon a purchase if it
takes too long to place an order. Making change takes a lot of time!
• Average purchase amount should also increase. There is a proven psychological phenomenon that shows how consumers
who do not carry cash purchase less when a cash option is offered because they feel guilty using their card. A card-only
option eliminates this guilt and consumers don’t mind using the card.
• Being creative when listing the change of costs as: Wifi cost (connect with banks and verify transaction), Fraud cost
(increased chance of fraud to happen after implementing card only payment).
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Case 24
Wine & Co
Interviewer-led
Concepts tested
Primary sector(s)
Similar cases
• Z02 Net Present Value (2)
• X02 Agriculture & Food
• Pharmacy in Supermarket
(Sloan 2011)
• Z10 Marketing strategy (3)
• Rocky Resort
(WSO 2012)
Case type
• Y06 Opportunity assessment
• Jamaican Land Investment
(Haas 2015)
Case authors: Anil Goteti (Kellogg 2011)
Edited By: Mauricio Atri (Kellogg 2012), Laura Mast (Kellogg 2020)
253
Wine & Co
Interviewer Guide
Case prompt
• Wine & Co is a niche wine manufacturer in the San Francisco Bay area. Wine & Co recently acquired 12 acres of land outside San
Francisco.
• The company wants to investigate opportunities to best use the land and needs a recommendation from you.
• What are the different ways in which Wine & Co can use the land?
Interviewer guide
• Problem: How can Wine Co maximize the
• Problem solving steps:
1. Develop a structure to address the problem
2. Identify most profitable product
3. Determine preferred product for manufacturing
4. Provide client recommendation
254
Wine & Co
Experience: Tell me about a time when you faced conflict in a team setting.
Case prompt
• Wine & Co is a niche wine manufacturer in the San Francisco Bay area. Wine & Co recently acquired 12 acres of land outside San
Francisco.
• The company wants to investigate opportunities to best use the land and needs a recommendation from you.
• What are the different ways in which Wine & Co can use the land?
Clarifying information
• Product: Wine & Co only manufactures red wines. The company does not sell any other products.
• Customers: The company serves only the local market (the San Francisco Bay area).
• Company: The company is currently very healthy and does not face any problems.
255
Wine & Co
Part 1
1. Develop a structure to address the problem
• The interviewee should create a framework and structure the problem. The interviewee should suggest options including
manufacturing the wine, creating adjacent products (like wine tasting tours), using the land for other uses (commercial real
estate/selling the land for a profit/other opportunity costs).
• A strong candidate would provide a detailed structure (eg. profitability framework for manufacturing feasibility with customization of
the framework - yield of grapes, cost per liter of wine, etc.) and outline the risks or considerations involved in some of these options
(like usability of land for manufacturing or company competency in pursuing in other opportunities unrelated to wine manufacturing).
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Wine & Co
Part 2a
2. Determine most profitable product
• Wine & Co has decided to use the land to manufacture wine. Each acre of land produces 1,000kg of grapes annually. Wine & Co
has an option to manufacture Merlot or Bordeaux.
• The two wines use different grapes and the grapes have varying yields. While the Merlot grapes yield 2 litres/kg, the Bordeaux
grapes yield 1 litre/kg. Wine & Co can charge $20 per liter of Merlot and can charge $40 per liter of Bordeaux.
• Which wine yields more profits annually?
• When asked, provide the following information:
• Profit Margins on Merlot are 10% while the margins on Bordeaux are 15%.
• A good candidate would ask for the profit margins/costs without being prompted. Look for organization and structure when the
candidate evaluates the annual profits for each wine (a good candidate would use a table like structure when doing the math). The
revenues would be $480,000 for both wines annually but the margins would be higher for Bordeaux ($72,000 for Bordeaux versus
$48,000 for Merlot). After the candidate arrives at the profits, look for interpretation.
• A strong candidate would recommend using Bordeaux while at the same time consider other factors (competency in manufacturing
either of the wines, customer demand in the bay area, sensitivity to product yields, customer reservation price, etc.)
• A creative candidate might suggest that we compare the age of the two wines (and hence will impact when the profits might
actually start)
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Wine & Co
Part 2 (continued)
2. Determine most profitable product
• Math working for Part 2
Description
Value
A
Acres of Land
B
kg of grapes produced/acre
1,000
C
kg of grapes produced total [A x B]
12,000
Description
D
Yield (Liter/kg)
E
Total Yield (Liter) [C x D]
F
Price / Liter
G
Total Revenue [E x F]
H
Profit Margin
I
Total Profit [G x H]
12
Merlot
Bordeaux
2
1
24,000
12,000
$20
$40
$480,000
$480,000
10%
15%
$48,000
$72,000
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Wine & Co
Part 3
3. Determine preferred product for manufacturing
• Aging has an effect on the revenues and profitability. Merlot has to be stored for 6 years while Bordeaux has to be stored for 12
years before revenues can be generated. Which wine would you choose for manufacturing?
• When asked, provide the following information:
• Discount rate is 12% (strong candidates will use the ‘Rule of 72’ to discount
• Assume the costs are only incurred when the revenues are realized after aging (no costs until year 6 for Merlot and no costs
until year 12 for Bordeaux).
• The interviewee should identify that the cash flows for Merlot would be $48,000 annually starting year 6. Cash flows for Bordeaux
would start in year 12 ($72,000 annually). Then, consider TVM, calculating annual cash flow discounted to the same year:
• Merlot:
Perpetuity value of cash flow (value in year 6) = $48,000/0.12 = $400,000
• Bordeaux:
Perpetuity value of cash flow (value in year 12) = $72,000/0.12 = $600,000
Value of perpetuity in year 6 = $600,000 / (1.12^6) = $300,000 (Rule of 72).
• Provide help here if the candidate is struggling with the division. Look for the candidate's approach rather than the exact number.
Since value of pursuing Merlot ($400,000) is higher than value of pursuing Bordeaux ($300,000), the company should manufacture
Merlot.
• Strong interviewees interpret the results and suggest we consider factors like inventory costs, sensitivity to discount rate, etc.
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Wine & Co
Part 3 (continued)
3. Determine preferred product for manufacturing
• Math working for Part 3
A
Annual Profit
B
Years to Maturity
C
Discount Rate
D
Merlot NPV once ripe (at year 6)
E
Bordeaux NPV once ripe (at year 12)
Merlot
Bordeaux
Comments
$48,000
$72,000
See Part 2
6
12
12%
12%
$400,000
A/C
$600,000
A/C
$300,000
E/(1.12)6
$400,000
$300,000
D and F
Method 1
F
Bordeaux NPV at year 6 (using discount rate)
G
Comparison at year 6
Method 2
H
Merlot NPV at year 12 (using discount rate)
$800,000
$600,000
D x (1.12)6
I
Comparable comparison at year 12
$800,000
$600,000
I and E
12%
12%
6
6
Method 3
J
Discount rate
K
Years to double value = 72/Discount Rate
L
Value after 6 years
$400,000
$300,000
Halve Bordeaux at 12 years
M
Value after 12 years
$800,000
$600,000
Double Merlot at 6 years
72/12
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Wine & Co
Part 4
4. Recommend a marketing strategy
• Wine & Co has decided to manufacture Merlot. How should they market this product in the San Francisco Bay area?
• Customer segment currently served by Wine & Co is niche wine enthusiasts.
• Candidate should ask for the customer segments that the company might sell to and suggest appropriate marketing
channels/strategies to consider. Look for a MECE structure here.
• Suggestions should include retail strategies, direct to consumer strategies (like wine clubs, wine tasting), traditional media and print
advertising and online advertising.
261
Wine & Co
Part 5
5. Provide client recommendation
• Excellent interviewees would recommend a solution (manufacturing Merlot) but would detail out the risks/next steps associated
with the recommendation. Next steps may involve market research, land usability testing, evaluation of opportunity costs. Risks
have been discussed previously.
• Outstanding interviewees provide an answer that includes:
• Identification of opportunity costs, particularly of not selling/leasing the land, which might be more profitable considering the
current value of land in the Bay Area and/or Napa
• Considering industry specific issues like aging of wine
• Considering time value of money/perpetuity of cash flow
• Considering risks like customer demand, land usability
• Potential benefits of diversifying the acreage and producing multiple types of grapes (compensate for shifts in consumer
demand, broader appeal to local market, etc.)
262
Case 25
Winter Olympics Bidding
Concepts tested
Primary sector(s)
Similar cases
• Z02 Net Present Value (2)
• X05 Entertainment & Media
• World View
(Harvard 2015)
• Z12 Creativity (3)
• Mobilizing Your World
(Fuqua 2015)
Case type
• Y06 Opportunity assessment
• Footloose
2012)
(LBS
Case author(s): Chris Dupre (Kellogg 2003)
Edited By: Uri Kalir (Kellogg 2012), Rohan Maini (Kellogg 2020)
2 63
Winter Olympics Bidding
Interviewer guide
Case prompt
• Our client, a major US television network, is trying to figure out how much to bid for the exclusive right to broadcast the Winter
Olympics Games in four years time
• The Winter Olympics are a huge deal and will require a significant amount of capital to secure the rights, so our client has brought
us in to help them figure out the right bid amount after considering all relevant factors.
Interviewer guide
• This is a very quantitative case that requires the interviewee to run the numbers on an Olympics bid. The candidate will have to
decide potential ad revenue/cost information, as well as the NPV, to determine bid size.
• The candidate will need to ask for additional information to solve the problem, rather than relying on the interviewer to dispense it.
After getting the initial calculations right, there are a lot of implications that may change the level of the bid.
• Especially for less finance-minded interviewees, you may have to help nudge candidates through the math.
1. Develop a structure to address the problem
2. Calculate NPV
3. Brainstorm intangible benefits and risks
4. Provide client recommendation
264
Winter Olympics Bidding
Fit: Why do you want to join our consultancy in particular?
Case prompt
• Our client, a major US television network, is trying to figure out how much to bid for the exclusive right to broadcast the Winter
Olympics Games in four years time
• The Winter Olympics are a huge deal and will require a significant amount of capital to secure the rights, so our client has brought
us in to help them figure out the right bid amount after considering all relevant factors.
Clarifying information
Revenues
• No subscription revenue, but can keep 100% of advertising revenue
• Ad rates are $400k per 30 second ad for prime time (weekends, weekdays 1900 - 2300) and $200k non-prime time
• Market research has shown that you can include no more than 10 minutes of advertising per hour.
Costs
• $482m of total production costs
• Opportunity cost: $1m/hour
• Time value of money: 4 year lag for receipt of revenue
265
Winter Olympics Bidding
Exhibit A – Winter Olympics Schedule
Day 1
Day 2 – 15
Friday
Weekday
Opening Ceremony
Day 16
Main events
Closing Ceremony
Weekend
Saturday
0800 – 0900
0900 – 1000
Biathlon
1000 – 1100
Bobsleigh
1100 – 1200
Skating / Skiing
Biathlon
1200 – 1300
Skiing
1300 – 1400
Skating
1400 – 1500
Curling
Bobsleigh
1500 – 1600
Ice Hockey
Skating
1600 – 1700
Luge
Skiing
1700 – 1800
Ice Hockey
1800 – 1900
Skiing
1900 – 2000
Skating
Luge
Skiing
2000 – 2100
Opening commentary
Luge
Closing commentary
2100 – 2200
Opening ceremony
Skiing
Closing speeches
2200 – 2300
Opening speeches
Luge
Closing ceremony
266
Winter Olympics Bidding
Part 1
1. Develop a structure to address the problem
Provide Exhibit A if the interviewee asks for TV schedules or identifies ad revenues in their structure
• Candidate should determine that this is a cost-benefit / NPV analysis.
• Candidate should identify potential revenue streams from hosting the Olympics, i.e. ad revenue, product placements, etc.
• Then, the candidate will have to figure out if this is a good investment. They should identify 3 costs (production costs, opportunity
costs, and time value of money). By factoring in these costs, the candidate will find out if the Olympics are worth the investment.
• Some of the numbers and assumptions here are difficult, so nudge the candidate along if necessary.
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Winter Olympics Bidding
Part 2
2. Calculate NPV
Revenues
Costs
• $400k/ad for prime time (M-F 7-11 PM, all
weekend) and $200k/ad for non-prime time
• $482M of production costs
• 10 minutes/hour of advertisements
• WACC: 10%
• Opportunity: $1m/hr
• Total revenues should be equal to $928M for the project.
• Primetime: Weekdays (M-F): 10 weekdays x 4 hrs/day x 10 min/hr x 2 slots/min x $400,000/ad = $320M
• Non-prime: Weekdays (M-F): 10 weekdays x 6 hrs/day x 10 min/hr x 2 slots/min x $200K/ad = $240M
• Weekend: 4 days x 10 hrs/day x 10 min/hr x 2 slots/min x 400K/ad = $320M
• Opening/Closing: 2 days x 3 hrs/day x 10 min/hr x 2 slots/min x 400K/ad=$48M
• Total profit should be equal to $300M.
• Profit: Revenues $928m - $482m of total costs - $146m of opportunity cost (2 days x 3 hours x $1m/hr + 14 days x 10 hours
x $1m/hr) = $300m
• NPV should be equal to $200m.
• Discount rate: 1.104 = 1.4641 (ask candidate to round to 1.50)
• $300m/1.5 = $200m
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Winter Olympics Bidding
Part 3
3. Brainstorm intangible benefits and risks
• Might give network access to new viewers
• There is prestige associated with hosting this event
• We can use the air time to promote other programming
• Opportunities for product tie-ins, supplemental revenue
• After finishing the discussion, ask the candidate for a recommendation
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Winter Olympics Bidding
Part 4
4. Provide client recommendation
• While the NPV of the project is $200m, the fact that there are other intangibles (new viewers, plugging our programs, and prestige)
the bid should just be $200m.
• While there is no one correct answer, most answers should be in the range of $200m. If there is significant fluctuation from $200m,
the candidate will have to provide in-depth justifications and make a concrete argument.
• This case tests the interviewee’s comfort with numbers and understanding of how intangible factors may influence financial value.
The bid process requires another level of understanding around game theory and what dynamics will ultimately determine the value
of the bid beyond NPV.
• Ultimately, the best interviewees will make a very strong argument using the facts provided and support their bid and explain why
they moved their bid from the NPV figure.
• There is also a lot of room for creativity for the interviewee to discuss other factors, including supplemental streams of revenue,
intangible factors, and things to consider during the bid process.
270
Case 26
Zephyr Beverages
Concepts tested
Primary sector(s)
Similar cases
• Z10 Customer marketing
strategy
• X12 Retail & CPG
• ABC Conglomerate
(Wharton 2005)
• Z11 Competitive analysis
• InsureCo
2015)
(Fuqua
Case type
• Y03 Mergers & Acquisitions
Case author(s): Edwin Van Dusen, Brian Fox and David Welch (Kellogg 2004)
Edited by: Rohan Maini (Kellogg 2020)
2 71
Zephyr Beverages
Interviewer guide
Case prompt
• Our client, Zephyr Beverages, is a division of a large consumer products company. The division produces fruit juices in three forms,
all under the Zephyr name: chilled, juice boxes, and frozen concentrate. Zephyr had sales of $600 million last year, about 3% of the
company’s overall sales of $20 billion.
• The chilled segment represents $120 million in sales per year. While juice boxes and frozen concentrate have been consistently
profitable, chilled juices are only breaking even in good quarters and are losing money in bad quarters. Zephyr has received a
proposal from upper management to sell the chilled juices business. We need to help them decide whether or not this is a good
idea.
Interviewer guide
• Problem: What does Zephyr do with an underperforming business?
• Problem solving steps:
1. Develop a structure to address the problem
2. Conduct competitive analysis
3. Determine product analysis
4. Provide client recommendation
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Zephyr Beverages
Fit: What do you think makes a good management consultant?
Case prompt
• Our client, Zephyr Beverages, is a division of a large consumer products company. The division produces fruit juices in three forms,
all under the Zephyr name: chilled, juice boxes, and frozen concentrate. Zephyr had sales of $600 million last year, about 3% of the
company’s overall sales of $20 billion.
• The chilled segment represents $120 million in sales per year. While juice boxes and frozen concentrate have been consistently
profitable, chilled juices are only breaking even in good quarters and are losing money in bad quarters. Zephyr has received a
proposal from upper management to sell the chilled juices business. We need to help them decide whether or not this is a good
idea.
Clarifying information
Industry:
• It has been growing at GDP (~3%) the last few years and is projected to continue that growth rate.
• The market for chilled juices is dominated by mothers with young kids.
• Brand name is important in this market, as mothers tend to prefer reliable products. However, the brand premium must be in line
with other branded products and all branded juices sell in the same price range.
• This is a highly price sensitive market that loves coupons, promotions, etc.
Competition: Highly concentrated market. There has not been a lot of change, technological progress or threat of new entrants
273
Zephyr Beverages
Part 1
1. Develop a structure to address the problem
• A sample case structure would include the following:
1. Identifying the options: sell chilled juice, sell all juice businesses, continue on with all businesses
2. Qualitative discussion of competitive dynamics
3. Discussion of product selection/components, as well as ways to cut costs
When asked, the interviewer can reveal the following additional information:
• Chilled beverages are a $1 billion worldwide industry
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Zephyr Beverages
Part 2
2. Conduct competitive analysis
• Using basic information provided, interviewee should deep dive the competitive dynamics in further detail.
• Relevant info:
• Bad market position: 12% vs. 40% and 25%
• Assumed profitability differences
• Disadvantage on trade promotions
• The two largest players have market shares of 40% and 25%, respectively. Zephyr’s market share, 12% makes it third in the
industry.
• The two market leaders are able to do more advertising, couponing, promotion, and trade than Zephyr is able to do. We do
not know about their profitability, but assume it is positive
• Interviewee should be able to see that Zephyr is at a serious disadvantage on all fronts as a smaller company that is both less
profitable and less engaged in the kinds of trade promotions that key customers covet. The overall conclusion should be that this is
a weak competitive position.
275
Zephyr Beverages
Part 3
3. Determine product selection
• Using information about our products vs. our competitors, the interviewee should focus on discussion about how to cut costs.
• Relevant info (when asked):
• The market leaders produce pure orange juice/blends based on citrus juices. Zephyr uses more elaborate blends, usually with
a base of pear or peach juice (60% of inputs) and flavor with cranberries, bananas, mangoes, etc. (the other 40%). Pear and
peach juice are a similarly price to orange juice, but the other flavorings cost about twice as much.
• A plant in California produces all products; chilled, juice boxes and frozen. Each of the three products uses different
machinery. It would be difficult to find another use for the plant without a major conversion.
• Additionally, there are currently synergies between chilled, frozen and juice boxes – mothers are slightly more likely to buy products
from the same brand
• This indicates that, despite a disadvantage, divesting is not realistic and there may be room for cost reduction based on
reformulation to make Zephyr profitable.
276
Zephyr Beverages
Part 4
4. Provide client recommendation
There are three possible solutions, with no right answer. The recommendation should be well-reasoned, comprehensive, and include
as much relevant information as possible.
• Sell the chilled juice business. This would, however, affect the juice and frozen concentrate businesses, as there are both
advertising and manufacturing synergies.
• Sell all of the juice business. This may be more feasible, as the buyer could capture the synergies, but would not be too likely to turn
the business around. The selling price is likely to be low.
• Keep the chilled juice business and rework the ingredients and costs. This is the most feasible option, as evidenced by the success
of the competitors. We are probably developing extra features in our ingredient mix that the market does not want and is not willing
to pay for. Eliminating or scaling back those features will probably allow us to cut costs without affecting revenue.
• Interviewees who do well on this case will have to be comfortable with ambiguity and with a lack of perfect information. They will
quickly grasp the issues and delve into the underlying qualitative discussions, coming up with a lot of additional risks/potential
benefits for each option.
• Creative solutions beyond those listed are possible and encouraged, though should be done within the framework of the information
available.
277
Case 27
Zoo Co
Concepts tested
Primary sector(s)
Similar cases
• Z12 Creativity (1)
• X06 Financial Services
• Car Wash Chain
(Columbia 2017)
• Z02 Net Present Value (2)
• National Zoo
(Wharton 2011)
• Z02 Breakeven analysis
(3)
Case type
• Y03 Mergers & Acquisitions
Case authors: Aneri Jambusaria (Kellogg 2011)
Edited By: Ron Mantel (Kellogg 2015), Matthew Heintz (Kellogg 2016), Michael Eidem (Kellogg 2020)
2 78
Zoo Co
Interviewer Guide
Case prompt
• Our client is a zoo that is thinking about acquiring a famous zebra from an African preserve.
• It’s a huge investment, but they believe the new zebra would be a great contribution to their animal community. You have been
engaged to help decide whether this is a good idea. What would you consider when trying to help your client make this decision?
Interviewer guide
• Even though the client is a zoo, we’re undertaking a similar process to what is done when underwriting an insurance policy. The
case evaluates basic concepts but involves many calculations and the use of financial assessment techniques.
1. Develop a structure to address the problem
2. Investment valuation - Walk through the valuation process of an asset.
3. Breakeven analysis – Determine the revenue increase needed for a positive NPV
4. Risk assessment – Should the zoo use an insurance contract to hedge downside risk?
5. Provide CEO recommendation
• Note: Rounding numbers is generally okay but should not be done to the extreme as it will alter the results.
279
Zoo Co
Fit: Talk about a time when you had to influence someone who initially disagreed with you.
Case prompt
• Our client is a zoo that is thinking about acquiring a famous zebra from an African preserve.
• It’s a huge investment, but they believe the new zebra would be a great contribution to their animal community. You have been
engaged to help decide whether this is a good idea. What would you consider when trying to help your client make this decision?
Clarifying information
• Goal: Zoo’s primary concern is whether the zebra acquisition would be profitable. No specific timeline, but zebras do have a finite
lifespan.
• Client Characteristics: Major zoo within the US. Majority of revenue generated through admission sales to daily zoo visitors.
• Competitive Dynamics: No other zoo within the local market.
280
Zoo Co
Exhibit A – Market Research Findings
Possible Attendance
Increases
Annual Revenue
Probability
3% Increase
$135,000
20%
5% Increase
$225,000
40%
7% Increase
$315,000
30%
9% Increase
$405,000
10%
Expected Additional
Annual Revenue
$252,000
Plus: Current Annual
Revenue
$4,500,000
Expected Total Annual
Revenue
$4,752,000
281
Zoo Co
Part 1
1. Develop a structure to address the problem
An ideal structure should resemble the typical M&A framework. Focus should be on determining whether the acquisition of this zebra
is a smart financial decision. Key elements expected to be included in this framework are:
• Market: What does local competitive landscape look like? (Not necessarily other zoos, but substitutes for how families/individuals
spend their leisure time) How has the zoo attendance market been trending? Who are the target customers and what do they care
about? (i.e. more concerned with animal selection, activities hosted by the zoo, general cleanliness and layout, etc.)
• Target (the zebra):
• Financial evaluation – What are the expected costs (purchase price, transportation, ongoing maintenance, update in habitat
space) vs the expected revenue increase (increased attendance, change in ticket price, merchandise sales)
• Non-financial evaluation – How old is the zebra? What is its expected lifespan? Why is the zebra famous, does that matter?
• Transition:
• What synergies does the zebra provide? Are there ways to reduce cost by sharing food production/habitat/maintenance
investment with a similar animal? Are there revenue synergies (example: being able to promote a complete African exhibit)
• How will the zoo market the acquisition of this new zebra?
• Does adding a zebra benefit/fit the zoo’s brand?
• Deal execution: What will the payment structure look like? Are there opportunities to lease a zebra from another zoo instead of
purchase?
282
Zoo Co
Part 2
2. Walk through the valuation process of an asset.
Data to provide when asked more about expected revenues and costs:
Revenue:
• 300K people visit the zoo annually; admission is $15 per person
• Benefits from zebra acquisition could lead to increased attendance. Another zoo that acquired a similar zebra had an 8% increase.
Costs from zebra acquisition:
• Immediate costs: Acquisition cost ($235K), new facilities ($850K), transportation ($110K)
• Annual maintenances: Food, health costs, and additional trainers ($90K)
• Discount rate = 20%, Assume that the immediate costs are paid today, and annual costs and benefits are realized beginning next
year and sustained into perpetuity, even though the Zebra will not live on to perpetuity.
The interviewee should use the above data to calculate the NPV of the acquisition:
• Assume that the attendance benefits are realized immediately and maintained thereafter
• Annual benefits = (300K)*($15)*(0.08) = $360K
• Upfront costs = $235K + $850K + $110K = $1.195M
• Annual costs = $90K
• NPV = -$1,195K + (($360K - $90K)/0.20) = $155K
• Takeaway: Acquisition is NPV positive. Financially (assuming assumptions are accurate), this is a smart decision.
283
Zoo Co
Part 3
3. Breakeven analysis – Determine the revenue increase needed for a positive NPV
• Additional prompt: Zoo Co is concerned about using the other zoo’s attendance benefits as a proxy. They think that attendance
could increase by less than 8%. What analysis could you perform to address their concerns? What is the breakeven attendance
increase required?
• The interviewee should think about performing a break-even and a sensitivity analysis. Afterwards, they need to think about
performing a risk assessment.
Break-even Analysis:
• Break-even = 0 = -$1,195,000 + ((revenue - $90,000)/0.20)
($1,195,000) * 0.20 = revenue - $90,000
Revenue = $239,000 + $90,000 = $329,000
(this is the required additional revenue to break even)
$329,000 = (300,000) * (15) * (% increase in attendance)
% increase in attendance = ($329,000 / $4.5M) = 7.3%
• Takeaway: We already knew from the previous calculation that the acquisition of the zebra was profitable if attendance increased
by 8%. This new calculation shows us that our 8% assumption is barely above the break-even calculation. If our attendance
assumption is wrong be even 1%, the investment may end up NPV negative.
284
Zoo Co
Part 4
4. Risk assessment – Should the zoo use an insurance contract to hedge downside risk?
• Since the zoo is very risk-averse, they’re interested in hedging some of their downside risk. An insurance company has offered to
provide the zoo with a constant revenue to increase revenue to $250K per year if attendance increases are less than or equal to
5% (example: If post-zebra acquisition is only 3% and thus revenue increases by only $135K, the insurance will give the zoo $115K
to reach a total increase of $250K). In exchange, the insurance company wants the zoo to pay 1% of the zoo’s total annual
revenues as a premium. What might you do to determine if this was a good deal?
• The interviewee should recognize that additional information is needed and that a market research study could aid in this process.
Hand out exhibit after interviewee identifies this notion.
Provide Exhibit A
The interviewee should use the market research to determine the probable attendance increase:
• Annual cost to zoo:
1% of total zoo revenues = (0.01) * ($4,752,000) = $47,520
• Annual expected benefit to zoo:
($250,000 - $225,000) * (0.40) + ($250,000 - $135,000) * (0.20) = $33,000
• Takeaway: Costs > Benefits, so this is not a good deal.
285
Zoo Co
Part 5
5. Provide CEO recommendation
• It is unlikely that the zebra acquisition is a good idea for the zoo to undertake given the information provided. At other zoos,
attendance has gone up substantially due to a new zebra; however, based upon our market research, it seems less likely that we
can breakeven on the investment through increased attendance. We have received an insurance contract to help mitigate some of
the downside risk; however, it is too expensive to create value.
Other items to consider:
• In order to make the investment more palatable, we may consider negotiating with the insurance company to either increase the
revenue benefits provided or decrease the premium cost.
• There are other creative options to drive zebra related revenue (merchandise) or decrease cost (look for a less expensive zebra)
• Excellent interviewees:
• Identify that we can use another zoo’s attendance increase as a proxy for estimating our own attendance increases.
• Notice in Exhibit A that it is unlikely that attendance will increase sufficiently enough for the zoo to break even.
• Outstanding interviewees:
• Notice that the insurance company’s premiums and benefits are both impacted by attendance increases; so if attendance
increases are always greater than 5%, the zoo will be paying even more but getting no benefit.
• Notice that the insurance company’s contract is essentially an option; so a different structure to the contract may be more
suitable for the zoo.
286
287
Kellogg Case Book
2020 Edition
The original version of the KCC casebook was originally written, edited, and designed by:
Adam J. Louras
Kellogg 2011
Bain alum, now COO at Iris
Nova
Ameed Mallick
Kellogg 2012
Bain alum, now VP at
InfoArmor
Uri Kalir
Kellogg 2012
Now Executive Director at
JPMorgan Chase
Peter Manoogian
Kellogg 2012
Now Partner at ZS
Associates
Craig DePriester
Kellogg 2012
Bain alum, now General
Manager at DaVita Medical
Mauricio Atri
Kellogg 2012
BCG alum, now Director at
Vista Equity Partners
Historical KCC casebook owners:
Derek Collins
Kellogg 2019
Previously at DaVita, now
Associate at McKinsey
Rohan Maini
Kellogg 2020
Previously at PwC, joining
McKinsey as Associate
New VP Training
Kellogg 2021
Apply to join the KCC Exec
team in Spring 2020!
288
This book is intended for internal use by members of the Kellogg Consulting Club (KCC). Distribution to individuals outside of the KCC is forbidden without express written consent by KCC.
Copyright 2019 © by the Kellogg Consulting Club. Copyright Act of 1976, no part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval
system, without the prior written permission of the publisher.
DMCC 2014-2015
Casebook
DMCC 2014-2015 Sponsors
Sponsor
Categories
Firms
Platinum
Gold
Silver
2
Editor’s Note
Welcome first year students:
The Duke MBA Consulting Club (DMCC) is proud to present the official First Year Student 2014-2015 DMCC Casebook.
This year we have included over 20 brand new cases. The objective of this book is to help you prepare for your upcoming
consulting case interviews. Case interviews are an integral part of the hiring process for consulting firms. These
interviews give you the opportunity to showcase your communication, client, creative and analytical skills to your
interviewer. This book was developed to complement the Duke MBA Consulting Roadmap curriculum. We hope that
using both will help lead you to success during the upcoming recruiting season.
A couple of changes have been made to enhance the training of those utilizing the book. First, we have included
behavioral questions with each case. Through feedback it was communicated that structured opportunities to practice
behavioral type questions was lacking so this should help address - please take the time to administer and answer these
questions! Second, although we cannot prepare you for everything you might encounter during a your case interviews
we went to great lengths to better diversify the case content. Current cases cover a wide variety of topics from
pharmaceuticals to insurance sales, across several problem types.
This casebook could not have been completed without all of the wonderful cases submitted by your classmates and the
valuable contributions of the DMCC Cabinet Officers. We would also like to thank our friends at other MBA programs for
sharing with us their old casebooks to supplement the cases herein.
We wish you luck with your preparation and would like you to remember that your fellow DMCC members are here to
help! Please reach out to anyone on the cabinet if you feel that you are not “cracking the case”. Lastly, to the students
of other top MBA programs using this case book during their preparation, we warmly welcome you to “Team Fuqua”.
Good luck!
Jeff Kaloski and Vineet Hingwe
3
Overview of the Casebook and Recommendations
• The first section provides an overview of the firms, followed by a case table of contents, then the cases
• Qualitative and quantitative case difficulty is identified within the case table of contents; difficulty is on a scale of 1 to 7
(7 being the most difficult)
• Cases 24 and 25 were provided by BCG so these are very representative of the type of case you will receive in a BCG
interview
• Case 26 was provided by Deloitte so this is very representative of the type of case you will receive in a Deloitte
interview
• Ask the behavioral questions EVERY TIME you give a case!
• Most cases are adaptable so try to familiarize yourself with the case prior to giving
• Print exhibits before giving the case or be prepared to share digitally (we tried to ensure that all exhibits are effective
when printed in black and white, but recommend double checking your print outs to be sure!)
• HAVE FUN!
4
The Firms
5
Accenture
High Performance, delivered. Accenture brings strategic thinking, innovative approaches and the ability to
make a difference to companies and governments around the world.
Overview
Interview Overview
Accenture has recently re-structured its Management Consulting practice. Most or all on-campus
recruiting opportunities will fall into the Strategy group. Candidates will interview for the general
Strategy group but may wish to express interest in a specific functional area or industry during the
recruiting process.
ƒ Strategy- Offerings in Mergers and Acquisitions; Operating Model Strategy; Sales and Marketing
Strategy; Finance & Enterprise Performance Strategy; Operations Strategy; Talent & Organization
Strategy; Technology Strategy; Digital Strategy
ƒ Federal- Helping government clients solve complex problems
Round 1
ƒ 2 Behavioral / Case interviews
Round 2
ƒ 2 Behavioral / Case interviews
ƒ Cases- Cases are often based on real client experiences. Cases may or may not have a
quantitative component, so listen for verbal clues. Cases are often very conversational and are an
opportunity to showcase your interpersonal skills.
Unique Interview Features
Career Progression
ƒ Behavioral/Fit- Fit is very important. The interviewer may have a “brief conversation” about your
background and experience instead of a standard question & answer format. Also, in the first
round at least one of the interviewers may focus much more heavily on behavioral/fit and place
less emphasis on the case.
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
Analyst
Consultant
(Business School); Summer Consultant
Consultant
Manager
Senior Manager
Managing Director
6
Bain & Company
Bain is a leading strategy consulting firm based in Boston, MA with 49 offices across the globe.
Overview
Interview Overview
Unique Interview Features
Career Progression
Bain follows the generalist model. There is no need to align with a specific industry or area before
interviewing.
ƒ Strategy - Influential experts and deep expertise in dozens of industries, provides consultants with
a broad foundation on which to build their own expertise
ƒ Private Equity Group (PEG) - Work with private equity firms to assess potential deals
Round 1
ƒ 2 Interviews (~45min. each)
ƒ A few behavioral/fit questions
and a case (Note: interview may
start with the case)
Round 2
ƒ 1 fit interview (~45min)
ƒ 1 written case interview (~45min)
ƒ 1 typical case interview (~45min)
ƒ Shorter prompts- Most cases feature shorter prompts (2-4 sentences) . Candidates should feel free
to ask additional questions before creating a unique framework
ƒ Charts and graphs- Bain has a few unique chart and graph formats that should be reviewed
(marimekko and 100% stacked bars are most common – materials are on the website) before
interviews to become familiar
ƒ Second level insights- Candidates should focus on the business implications of information provided
during the case (the “so what?”). Some of the data presented will not provide insights into the case sift through the data.
ƒ Action-oriented recommendation The recommendation should be concise and contain specific
actions the client could take immediately along with any additional work streams that are needed to
complete the analysis
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
Associate Consultant
Senior Associate Consultant
(Business School); Summer Associate
Consultant
Case Team Leader
Manager
Principal
Partner
7
Boston Consulting Group (BCG)
BCG is a premier strategy firm developing and implementing high-value opportunities for change for
Private, Public and Not for Profit Organizations
Overview
Interview Overview
Unique Interview Features
Career Progression
ƒ Generalist in the beginning – can choose to focus on industry as one moves into project leader
ƒ Regional staffing model, though each office values its own culture and network
ƒ Flat organization with a lot of transparency; communication is direct and feedback is highly valued
ƒ “Chart your own course” philosophy – you can specialize in a particular industry early or take on a
variety of assignments across different countries or take a sabbatical to work for a non-profit for a
year
ƒ Strong mentoring culture, frequent interaction with partners on cases and lots of training
opportunities if you join BCG full-time. Personal development is taken very seriously
Round 1
ƒ Two analytical cases with a portion
of the time dedicated to behavioral
fit questions - 45 min each
Round 2
ƒ Two to three analytical cases with a portion of
the time dedicated to behavioral/fit questions
- 55 minutes each
ƒ Be prepared for the behavioral portion of the case to bleed into the analytical portion of the case.
The break between the two is not always obvious and clear cut.
ƒ Highly quantitative – be prepared for lots of complex math.
ƒ Partners look for driving the case and the application of common sense judgment. They look for
creative thinkers who can structure their thoughts
ƒ Not simply textbook knowledge
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
(Undergrad); Analyst – A1/A2 (denotes the years in the position)
(Business School); Summer Consultant
Consultant – C1/C2
Project Leader – PL1, PL2, PL3
Principal – P1, P2, P3, Px
Partner
Sr. Partner / Managing Director
8
Deloitte Consulting LLP
Deloitte is a leading strategy firm bringing executable strategies to the Fortune 500
Overview
Interview Overview
Unique Interview Features
Career Progression
Deloitte has three service areas (below). Student must align with a service area before applying.
ƒ Human Capital professionals bring industry expertise in integrating business, HR and talent
strategies to create business value through people
ƒ Strategy and Operations professionals bring deep industry experience with capabilities spanning
corporate and business unit strategy, M&A strategy, and sales and marketing
ƒ Technology professionals focus on internal technology solutions, challenges, and innovation –and
full-spectrum delivery across strategy, implementation, management and operations
Round 1
ƒ Analytical Case– 30 min
ƒ Behavioral– 30 min
Round 2
ƒ Strategy Case– 60 min
ƒ Behavioral– 30 min
ƒ Group Case– 90 min
ƒ Long prompts- Some cases feature multi-paragraph introductions that include lots of data. Make
sure you capture all the information before moving on, since it’s usually not repeated.
ƒ The Data Sheet- Deloitte often hands you a page with multiple exhibits (chart, graph, list, or data
table etc.), usually one in each of the four quadrants. Often you will need to combine information
from different exhibits to synthesize an answer.
ƒ The Group Case- You interview with 4-5 candidates. Each of you is assigned a role (usually
different than your prior work experience) and presented with overall and role specific questions.
Collaborate with your peers to successfully crack the case.
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
Business Analyst
Consultant
(Business School); Summer Associate
Senior Consultant
Manager
Senior Manager
Partner/Principal/Director
9
L.E.K. Consulting
L.E.K. is a global strategy consulting firm. It counsels its clients on key strategic issues, leveraging its deep
industry expertise and using analytical rigor to solve clients’ toughest and most critical business problems.
Overview
Interview Overview
Unique Interview Features
Career Progression
L.E.K. follows the generalist model with new consultants. There is no need to align with a specific
industry or area before interviewing. However, there is potential to specialize in a particular industry
starting in your second year.
ƒ L.E.K. has particular expertise include life sciences/ pharmaceuticals, aviation and travel, basic
industries (building materials/ manufacturing), media & entertainment, retail, and private equity
Round 1
ƒ 2 Interviews (~30min. each)
ƒ Traditionally one qualitative and one
quantitative (each will include a few
behavioral/fit questions)
Round 2
ƒ 1 written case interview with presentation(1
hour to prepare, 30 min to present )
ƒ 1 typical case interview with Manager (~30min)
ƒ 1 case/fit interview with Partner (~45min)
ƒ Shorter cases - L.E.K. cases are designed to be shorter than some of the other firms. First round
interviews last only 30 minutes including behavioral questions, meaning candidates must get
through the case within 20-25 minutes.
ƒ Quantitative focus - Each L.E.K. interview round will contain a significant quantitative component,
and quantitative aptitude is very important in the evaluation of candidates. Many cases also require
familiarity with financial statements or basic finance concepts such as NPV. First round cases
typically include at least one market sizing case.
ƒ Leadership potential - in addition to standard behavioral questions such as “why L.E.K.?”
interviewers look specifically for candidates able to take on immediate management responsibility,
as consultants are given responsibility for managing associates on casework as soon as they join.
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
Associate
Associate Consultant
(Business School); Summer Consultant
Consultant (manages single project)
Manager (manages multiple projects)
Principal (managing director in training)
Managing Director (Partner)
10
McKinsey & Company
McKinsey & Company is a global management consulting firm. We are the trusted advisor to the world's
leading businesses, governments, and institutions.
McKinsey recruits students into generalist and practice areas (Business technology, Operations,
Marketing) Students can express an interest to apply as a generalist and/or for a practice area
Overview
Interview Overview
Summer Associates are assigned to any of a wide range of industries, touching any point in the value
chain. Project (“study”) staffing is collaborative between SAs and Professional Development staff.
Structured, formal feedback is provided by a senior firm member twice during the summer. Informal
feedback is common, and is highly emphasized in the firm’s culture. M-Th travel is typical.
Depending on office preference you will either have a one day “Power Round” session or the standard
tiered process. The Southern office and international offices typically conduct “Power Round” style
interviews.
Power Round (at or near Fuqua, if intl. at office)
ƒ
ƒ
ƒ
Unique Interview Features
Career Progression
4-5 Interviews
20 min experience
30 min case
Round 1 (at or near Fuqua)
ƒ
ƒ
ƒ
2 Interviews
20 min experience
30 min case
Round 2 (at McK office)
ƒ
ƒ
ƒ
3-4 Interviews
20 min experience
30 min case
ƒ The Personal Experience Interview- Unlike other firm’s behavioral interviews, McKinsey asks
candidates one question before each case to asses behavioral/fit. These questions are rooted in at
least one of the following areas: personal impact, entrepreneurial drive, problem solving, personal
achievement, and leadership. The interview will ask the initial question and then probe deeper by
asking several follow up questions to understand your thought process in that situation. It’s not
uncommon to spend 20 minutes on one experience.
ƒ Highly Structured Cases- Cases often have discrete framework, brainstorming, and quantitative
“sections” that focus on a question specific to that section. Although candidates must drive the
analysis, the interviewer may redirect towards the next section.
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
Business Analyst
(Business School); Summer Associate
Associate
Engagement Manager
Associate Principal
Partner
Director
11
Pricewaterhouse Coopers (PwC)
PwC Advisory helps clients build their next competitive advantage. You will help our clients improve business
processes, transform organizations and implement technologies.
Overview
Interview Overview
Unique Interview Features
Career Progression
Students must directly apply to one of the following practice areas:
ƒ Health Industries
ƒ Public Sector
ƒ Financial Services
ƒ Products & Services Industry
Round 1
ƒ 2 Interviews (~45min. each)
ƒ Only behavioral/fit questions
Round 2
ƒ 2 behavioral/fit interviews (~45min)
ƒ 1 case interview (~45min)
ƒ First/Second Round Behavioral Interviews - PwC puts extra emphasis on your background and fit
with PwC. Your first interview will also include a discussion of which vertical (above) best fits with
your work experience and career goals.
ƒ Case Interview - The case interview is a little different than other firms. The case is very
conversational as the candidate and interviewer discuss a business situation. Candidates may be
given a case to prepare 1-2 days in advance (usually 4-5 pages). On the interview day, candidates
are given questions on the case and are asked to prepare a slide deck presentation in an hour
before discussing it with the interviewer.
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
Associate/ Experienced Associate (Undergraduate level)
Summer Senior Associate (Business School internship)
Senior Associate (After Business School)
Manager
Director
Partner
12
ZS Associates
Our singular focus over our 30 years has been to help global companies maximize their sales and marketing
organizations’ performance and results.
Overview
Interview Overview
Unique Interview Features
Career Progression
Students must directly apply for one of two roles:
ƒ Business Consultant- serve on project teams that deliver high-quality marketing and sales
strategy projects to clients. In particular, Business Consultants possess qualitative research and
unstructured problem solving skills and/or advanced quantitative analytics skills
ƒ Business Operations Consultant- manage overall projects and client engagements. They
support our clients' sales and marketing activities and ensure productivity and profitability in their
business operations.
Round 1
ƒ 2 Interviews (~45min. each)
ƒ 1 behavioral
ƒ 1 case
Round 2
ƒ 1 fit/behavioral interview
ƒ 1 case interview
ƒ 1 presentation case
ƒ Case Focus- Although ZS rigorously tests a candidate’s public math skills and ability to synthesize,
do not neglect the qualitative component. In recent years ZS has begun to focus on both qualitative
reasoning as well as quantitative skills.
ƒ Presentation Case- Candidates are provided information and must synthesize a presentation to a
panel of interviewers. ZS provides a laptop to create the slides. Expect to be challenged and
questioned.
ƒ Rounds- ZS holds its second round interviews within a few days of its first round. Candidates
should plan accordingly to minimize potential conflicts.
ƒ Interviewers- Partners and senior managers conduct the first round interviews on-campus, unlike
j
g
some firms that use consultants and junior
managers
in the first round.
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
Associate
Associate Consultant
(Business School); Business Consultant Intern
Consultant
Manager
Associate Principal
Principal
13
The Cases
Case #
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
Name
Purple Pill Company
Buy Low, Sell High
Oklahoma Gas Company
Heavy Things Fitness
Orange Yoga Studio
Surfboard Wax in Hawaii
Pacific Northwest Telco
The Everything Retailer
Gee & Gee’s House of Brands
Going Green
AllHealthy CRM
Coyotes
Ferry Follies
AutoDrivers
Steel Works
WOEM
Money in Michigan
Pharma Co.
Quality Control
WorkIT
So Fresh and So Clean
Kid Country
Texas Oil
Consumer Products Strategy
Pharmaceutical Business Growth
Insurance Co. – Business Restructuring
Difficulty (1 - 7)
Qualitative Quantitative
4
2
5
5
6
2
1
5
3
4
4
5
3
4
5
2
2
6
4
4
4
3
5
N/A
N/A
N/A
4
5
3
6
4
2
1
4
6
5
1
5
4
3
2
1
3
6
2
4
3.5
4
3
N/A
N/A
N/A
Industry / Sector
Page
Pharma
Financial Services
Oil & Gas
Other
Other
Other
Telecommunications
Retail
Retail
Other
Human Capital
Non-Profit
Transportation
Insurance
Steel
Hospitality
Public Sector
Pharma
Med. Devices
Insurance
CPG
Media
Oil & Gas
CPG
Pharma
Insurance
15
23
34
42
53
66
74
81
91
99
112
117
130
138
151
164
171
179
190
195
206
216
226
236
244
250
14
CASE 1 – PURPLE PILL COMPANY
15
Case 1: Purple Pill Company
Deloitte Case Writing
Competition Finalist
Prompt
Your client is a multinational pharmaceutical and biologics company. The client has a portfolio of drugs for major disease areas,
including cancer, cardiovascular, and gastrointestinal diseases, to name a few. The client has experienced a decline in revenue over the
last 18 months, and is fearful of further declines, especially given that its most commercially successful drug, which treats acid reflux
disease, will be going off of patent in May of next year. What are the areas they should look into to change the course of this trend?
Behavioral Questions
• Why consulting now (after xx years in xx industry)?
• Tell me one industry that you’re interested in right now. What are the trends or opportunities for key players in this industry? (can
also be a function, area of business, etc.)
Interviewer Guidance
The candidate should come up with a MECE framework that covers the following areas: product mix, industry trends, competitors
•
•
•
•
The candidate should identify that this is a revenue problem, given the prompt.
A good candidate will identify the patent expiration impact on revenues quickly.
A good candidate may also discuss sales by region (since it is a global company) in addition to product mix.
Additional information should be provided upon request:
o Exhibit 1 Revenues by disease area (Product Mix)
16
Case 1: Purple Pill Company
Exhibit 1
Company Revenues by Disease Area (in $B)
Neuroscience
Respiratory
Gastrointestinal
Cardiovascular
& Oncology
Drug
Category
% 2013 Revenues
% Chg Revenues
Market Share
Red Pill
Cardiovascular
22%
-8%
Steady
Purple Pill
Gastrointestinal
15%
-2%
Respiratory
14%
+10%
Neuroscience
7%
-40%
Blue Pill
Green Pill
17
Case 1: Purple Pill Company
Analysis
What are the largest drivers of revenue decline over the last year? (Provide Exhibit 1 if not already provided)
Guidance:
• Give the candidate 20-30 seconds to review the chart. Then, prompt them to start sharing insights.
o E.g. - Overall business is declining ~10%, driven by neuroscience, and cardiovascular & oncology
o E.g. - Respiratory is driving growth, driven by the blue pill; has also gained market share
• Ask: Which drug is largest source of dollar declines from 2013 to 2012? How much is the loss?
• Math:
o Red Pill: 22% x $21B = $4.6B / .92 = $5B Æ 4.6B – 5.0B = $0.4B, or $400M loss
o Purple Pill: 15% x $21B = $3.15B / .98 = $3.21B Æ 3.21-3.15= $0.06B, or $60M loss
o Green Pill: 7% x $21B = $1.5B/ .6 = $2.5B Æ 2.5B – 1.5B =$1B loss
Recommendation
• Brainstorming – Ask candidate: What are some issues that could have caused this decline?
o Acceptable answers: lower price, lower tablet sales volume, generics coming on market, regulatory restrictions, out of
stocks, currency and geographic trends
o Good candidates will connect generics coming on market to reduced market share in Exhibit 1.
• Additional information to be provided as confirmation:
• In addition to other issues, the decline is attributed to the introduction of generics in the US and other established markets. It’s fair
to attribute 50% of the decline to generics. The additional declines were related to Medicaid liability and other inventory related
issues.
18
Case 1: Purple Pill Company
Analysis
Given these issues with the Green Pill, the client would like your help in determining specifically how to maintain as much revenue
as possible from the Purple Pill when it goes off patent next year. It has several options that it would like for you to evaluate.
Options:
1. Do nothing
2. License the brand to an over the counter (OTC) manufacturer for $250M one-time revenue
3. Direct-to-patient campaign online and pay 3rd party for delivery
Additional facts and assumptions:
• With no action, Green Pill lost 20% of annual volume in the past (use this assumption)
• Current revenue per pill is $1 at an 80% margin – (remember, total revenue $3.2B)
• 10% of current Purple Pill volume will transfer to OTC brand – we get only one time revenue
• Direct to patient will retain 25% that would’ve been lost to generic but the margin would be reduced to 50%
• Over 2/3 of the Purple Pill’s revenue comes from the US.
Recommendation
Ask: What would you do and why? What are your assumptions on incremental or retained volume in each scenario? Why?
The head of Purple Pill brand needs to make a decision would like for us to share our recommendation today. Please share your
analysis and recommendation.
19
Case 1: Purple Pill Company
Analysis
Decision
Math:
• Do nothing: $3.2B x .80 retained (20% lost) = $2.5B revenue x 80% margin = $2B gross profit
• License for $250M: = $2B + $250M = $2.25B – (10% x $3.2B x 80%) = $2.25B - $0.256B = $1.994B (This is a reduction of $60K
compared to doing nothing)
• Direct to patient program - = $2B + (20% lost x 25% of this retained x $3.2B x 50% margin) = $2B + $.08B = $2.08B
Guidance:
The math is important here, but more important is that the candidate can think through short-term and long term scenarios. For
example, licensing may look like breakeven in year one and retain the brand, but it is a long-term loss as there is no additional revenue
(the $250B) in year 2. You would want there to be little to no cannibalization.
Also, if the direct to patient program cannibalizes more of your existing 80% margin business, you will lose money if you don’t increase
the price.
This case gauges the candidates comfort with making assumptions and making strategic decisions.
20
Case 1: Purple Pill Company
Performance Evaluation
Expected:
• Completes all math
• Guides the conversation and probes for additional facts and data without prompting
Good:
• Is able to think creatively and drive the process forward
• Walks the interviewer through the logic
• Provides next steps for the analysis
Excellent:
• Is comfortable providing own assumptions around cannibalization and patient retention
• Brings up the possibility of a merger with another drug producer or other out of the box ideas.
• Provides financials for multiple years and has a forward thinking strategy.
21
Case Interview feedback form
Case _________________________ Case type _________________ Interviewer ____________________
Execution
Case start time ___:____
1 2 3 4 5
•Structure
¾Logical approach
¾MECE
¾Appropriate drive to solution
Comments:
•Quantitative Ability
1 2 3 4 5
¾Speed
¾Accuracy
¾Comfort, reaction to mistakes
Comments:
•Business intuition
¾Practical
¾Insightful
¾Breadth & depth across multiple functions
¾Creativity
1 2 3 4 5
Comments:
Framework development
Framework explanation
Case discussion
______ min
______ min
______ min
Case end time ___:____
Overall Rating: 1 2 3 4 5
Strengths
Communication
1 2 3 4 5
•Professionalism
¾Poise
¾Confident-Persuasive
¾Articulate-concise
¾Client ready
Comments:
Weaknesses
•Written
¾Clarity of writing and page layout
¾Ability to refer back
¾Comfort, reaction to mistakes
1 2 3 4 5
Comments:
Behavioral (optional)
•Quality of star stories
•Length
•Clarity
•Relevance
1
1
1
1
2
2
2
2
3
3
3
3
4
4
4
4
5
5
5
5
Comments:
Key: 1=Bottom 10%, 2= 10th-25th percentile, 3=
middle 50%, 4= 75th-90th percentile, 5=Top 10%
CASE 2 – BUY LOW, SELL HIGH
23
Case 2: Buy Low, Sell High
Prompt
Your client is a rich financier who has decided recently to the capital markets as a market maker. Market makers make % commissions off of
transactions in capital markets, and are necessary to provide liquidity and orderly market action. The year is 2014 and he believes that we
have recovered long enough from the financial collapse to warrant an investment in this sector. There are multiple opportunities in the
financial market and you have been hired to advise him on how and where to invest his money. He is considering entry into one of four
markets: Commodities, Options, Equities, and Fixed Income.
Behavioral Questions
• What is one situation you have been in where you had to lead upwards (be a leader when you didn’t have the authority)?
• How would you deal with a team environment where you did not feel welcome?
Interviewer Guidance
This case is designed to see if a candidate can perform an analysis of market segments and determine a profitable entry point into
an established market. This is a two-part analysis.
Facts (to be provided if asked)Amount to be invested: up to $2.5 billion.
Client has experience in finance, but not in trading
Investment to be focused inside of United States
Goal is to have a positive NPV investment. Limited to only one investment (he feels his attention can only be focused on one opportunity at a
time)
• Size and market shares of four markets to be provided upon asking
• Market makers make a fixed % commission on each transaction, so more volume and bigger $ value of transactions is usually better. These
markets each intrinsically have different commission rates (which we don’t have).
•
•
•
•
Candidate should be handed Exhibit 1 and Exhibit 2 after he has walked through the structure of the problem and finished asking questions. He
should perform an analysis of market attractiveness with this data.
24
Case 2: Buy Low, Sell High
Exhibit 1
Number of transactions
(millions/yr)
Total assets in market ($trillion)
Commodities
Options
Equities
Fixed Income
1200
1000
800
600
400
200
0
Commodities
Options
Equities
Fixed Income
25
Case 2: Buy Low, Sell High
Exhibit 2
*Note: Player 2 in the Equities market recently had a rogue trader incident and is looking to exit through asset liquidation
26
Case 2: Buy Low, Sell High
Interviewer Guidance
Exhibit 1: Candidate should be able to conclude from the two charts that total asset value and number of transactions suggest options
and commodities are the most attractive markets to enter. However, none of these charts show actual profit earned in the four
markets, so more information is necessary (what are the levels of commissions?).
Exhibit 2: From this exhibit, commodities and equities seem the most attractive for an entrant, since there are fewer major players in
commodities and there is a major player exit in equities. Again, actual profit from entry is not apparent.
Prompt
Our analysts have done some research on the costs of entry and expected profits from entering these markets. Please look at their
analysis in Exhibit 3 and tell me what you can extract from these findings.
Guidance
Candidate should perform an NPV analysis based on the data provided.
27
Case 2: Buy Low, Sell High
Exhibit 3
$MM
Commodities
Options
Equities
Fixed Income
200
??
150
160
Salaries
50
40
20
30
Rent & Utilities
50
40
40
30
Depreciation
??
30
25
50
60
70
65
??
30
20
20
40
Earnings before tax
30
50
45
10
Taxes
10
10
??
2
20
40
30
8
2,000
2,500
1,500
2,100
Expected Revenue
Operating Profit
Interest expense
Net Income
Expected Investment
*Cost of capital = 5%, all income assumed to last forever and begin in year 1, depreciation constant YoY
28
Case 2: Buy Low, Sell High
Exhibit 3 Guidance for Interviewer
$MM
Commodities
Options
Equities
Fixed Income
200
180
150
160
Salaries
50
40
20
30
Rent & Utilities
50
40
40
30
Depreciation
40
30
25
50
60
70
65
50
30
20
20
40
30
50
45
10
10
10
15
2
20
40
30
8
2,000
2,500
1,500
2,100
100
100
90
100
2,000
2,000
1,800
2,000
-
(500.00)
300.00
(100.00)
Expected Revenue
Operating Profit
Interest expense
Earnings before tax
Taxes
Net Income
Expected Investment
EBITDA
Investment return
NPV
*Cost of capital = 5%, all income assumed to last forever and begin in year 1, depreciation constant YoY
29
Case 2: Buy Low, Sell High
Analysis
Market attractiveness:
Initial analysis should show commodities and options to be most attractive in terms of market size, with commodities as the most
attractive due to the lack of major players to inhibit entry. Both Options and Fixed Income seem to be markets where a few players
dominate, making potential entry very difficult. Equities is interesting because of potential for cheap entry due to the liquidation of a
major player’s assets, so further analysis is necessary
Valuation:
Based on NPV analysis, equities are the investment to make due to the cheap entry cost. This carries an added benefit of leaving $1
billion free for other uses. Candidate can include this excess sum in calculation, but that isn’t necessary.
Recommendation
Recommendation should be to invest in equities. Ask candidate to give a recommendation to a the actual investor (“he is about to
come into the room,” etc…)
Next steps may include: ascertain process for buying liquidated assets, determine if there are other buyers, look at other passive
investments for excess funds.
Potential risks: regulatory delays, volume of equities market is low, market at all time highs and crash could mean future profit
projections are off
Next steps and risks are open ended and don’t have to be these suggested options. Make sure candidate has thought out logical points
and can explain his reasoning.
30
Case 2: Buy Low, Sell High
Performance Evaluation
• Initial problem solving:
Distinctive - Well-structured problem solving that is MECE and covers major factors to be considered. This is very open-ended
so there are no “musts”, but candidate should quickly realize this is an investment/market entry problem and approach
it as such.
Very strong - Structured analysis that covers many aspects, but may not be fully MECE. Candidate might need some guidance
to ask for right information.
Strong - Analysis covers many factors and is thoughtful. Needs some guidance to direct candidate towards data and
crux of problem.
Needs improvement - Analysis is fragmented. Candidate unable to structure problem and needs a lot of guidance to proceed.
• Exhibit 1&2 - market analysis:
Distinctive - Candidate quickly grasps what the three charts are trying to say and comes to conclusions quickly. Realizes that
there is some possibly conflicting information and asks for data (potentially asks to do NPV).
Very strong - Candidate comes to solid conclusions from the charts and is ready to proceed. May need prompting before
next step.
Strong - Candidate can handle multiple tables but may struggle to fully realize the conflicts embedded in the data. Might try to
end case here. Needs some prompting to proceed.
Needs improvement - Analysis is fragmented. Candidate cannot handle the multiple charts and needs a lot of
guidance to proceed.
31
Case 2: Buy Low, Sell High
Performance Evaluation Continued
• Exhibit 3- valuation:
Distinctive - Candidate understands how to do an NPV and performs calculations quickly and accurately. Exceptional if
candidate understands most of data is superfluous and calculates from Operating Profit and Depreciation numbers only.
Very strong - Candidate performs calculations in a timely manner. May make some mistakes.
Strong - Candidate takes a bit of time to perform calculations. May need some guidance on where to start.
Needs improvement - Candidate does not understand what an NPV is. May try a breakeven analysis or other kind of
calculation. Interviewer needs to cut calculations short to get to recommendation.
• Recommendation:
Distinctive - Candidate concisely gives accurate recommendation and covers logical next steps and reasonable risks.
Very strong - Candidate gives accurate recommendation with some next steps and risks. May be a little long-winded.
Strong - Candidate gives a recommendation but may forget next steps and risks. May need some guidance on where to start.
Needs improvement - Candidate isn’t structured and struggles to give a recommendation.
32
Case Interview feedback form
Case _________________________ Case type _________________ Interviewer ____________________
Execution
Case start time ___:____
1 2 3 4 5
•Structure
¾Logical approach
¾MECE
¾Appropriate drive to solution
Comments:
•Quantitative Ability
1 2 3 4 5
¾Speed
¾Accuracy
¾Comfort, reaction to mistakes
Comments:
•Business intuition
¾Practical
¾Insightful
¾Breadth & depth across multiple functions
¾Creativity
1 2 3 4 5
Comments:
Framework development
Framework explanation
Case discussion
______ min
______ min
______ min
Case end time ___:____
Overall Rating: 1 2 3 4 5
Strengths
Communication
1 2 3 4 5
•Professionalism
¾Poise
¾Confident-Persuasive
¾Articulate-concise
¾Client ready
Comments:
Weaknesses
•Written
¾Clarity of writing and page layout
¾Ability to refer back
¾Comfort, reaction to mistakes
1 2 3 4 5
Comments:
Behavioral (optional)
•Quality of star stories
•Length
•Clarity
•Relevance
1
1
1
1
2
2
2
2
3
3
3
3
4
4
4
4
5
5
5
5
Comments:
Key: 1=Bottom 10%, 2= 10th-25th percentile, 3=
middle 50%, 4= 75th-90th percentile, 5=Top 10%
CASE 3 – OKLAHOMA GAS COMPANY (OGC)
34
Case 3: Oklahoma Gas Company (OGC)
Prompt
(~Present day) The Oklahoma Gas Company (OGC) is a medium-sized private company that has a rich history of drilling and producing
natural gas wells in Oklahoma. They possess a diverse, and they believe valuable, set of land assets where more wells could be drilled.
The company is well capitalized, but profits have been falling the last few years and are projected to be negative next year.
One of the key drivers in the drop in profitability is the price of natural gas, which has dropped substantially, thanks in part to
companies like OGC, that have perfected unconventional drilling techniques and have subsequently oversupplied the North American
natural gas market. Natural gas prices are currently at a five year low.
A larger competitor has approached management about acquiring OCG for $250 M. Management would like your help in assessing the
offer as well as identifying alternate strategies.
Behavioral Questions
• If you could only do one of the experiences on your resume over, which would it be and why?
• If you could change one experience on your resume, which would it be and why?
35
Case 3: Oklahoma Gas Company (OGC)
Interviewer Guidance
The interviewee will likely dwell on the acquisition offer. Guide them away from this, as it will only serve as the baseline for option
selection. The objective of the case is for the interviewee to evaluate viable options before recommending a course of action.
Ideally the candidate creates a basic profitability framework, and focuses on what OPTIONS the company has.
•
•
•
•
•
•
•
•
Present Valuation of OCG is not readily available. Tell the interviewee that more data on the topic will become available later
Costs have remained stable
While Natural Gas demand fluctuates seasonally, the annual demand has been stable over the past few years
Land Assets = OGC owns 100% of the mineral rights of their land
While regulations have changed, and may continue to change, they have yet to have a large impact on OGC’s business
OGC has not drilled oil wells in the past, but would likely have the competency to do so in the future
Natural gas and oil prices are volatile and out of the control of OGC. Future prices are difficult to predict.
Only operated in Oklahoma
36
Case 3: Oklahoma Gas Company (OGC)
Interview Guidance
Note: This case is meant to be adaptable. The interviewer can make it more or less difficult at anytime based on their discretion.
Potential Options for OGC:
1. Explore oil wells (Obvious - if candidate is aware of booming shale oil revolution in the US or current price of oil)
2. Continue drilling gas wells in the areas that they own
3. Sell some land assets
4. Acquire land and drill gas wells elsewhere
5. Acquire smaller competitor
6. Go Public
7. Sell for $250 M
8. Negotiate the $250 M offer upwards
Guide the candidate towards (1) drilling oil wells, (2) continue drilling gas wells, (3) considering the acquisition offer
While continuing to do what is NOT working may seem counterintuitive, but OGC is very good at drilling gas wells. Key takeaway from
this case is that all the assumptions and projections made my OCG and the candidate are based on highly volatile commodity prices.
37
Case 3: Oklahoma Gas Company (OGC)
Interview Guidance
OCG has found an oilfield in South Texas that it can acquire and drill on immediately.
The candidate should begin asking for DATA to analyze the three options on a present value basis:
Natural Gas
• The present value of all OCG’s currently producing gas wells is $50 M
• The Price of gas is $3.00/mcf (thousand cubic feet)
• Cost of capital = 10%
• Cost of acquiring and drilling the additional natural gas wells is $50 M – Each well will come online in the Year 0 and stop producing
after Year 2
• Year 0 Gas production projected = 40,000 mmcf (million cubic feet – unit change)
• Year 1 Gas production projected = 30,000 mmcf
• Year 2 Gas production projected = ~17,000 mmcf
• At a price of $3.00 this gives you a total PV of $194 M
• PVs:
• Year 0- $70 M (include the $50 M drilling cost)
• Year 1- $81.8 M
• Year 2- $42.1 M Æ NOTE: A $.20 increase in the price of Natural Gas would mean the wells’ PV is greater than$210 M
38
Case 3: Oklahoma Gas Company (OGC)
Interview Guidance
Note: This case is meant to be adaptable. The interviewer can make it more or less difficult at anytime based on their discretion.
Oil – if the candidate got the the PV for Gas correct, begin giving them the data below. Go straight to last bullet if they struggled.
• Current Price of oil is $120 (NOTE: historically high $)
• The cost of acquiring and drilling all necessary wells in the oilfield is $100 M
• Cost of capital = 10%
• Production horizon for each well is 10 YEARS - at this point candidate should realize that the math is too much, and even if they do
the math, the value is far too dependent on the price of oil
• State that projected PV of the oilfield is $210 M
Candidate now has three values - $210 M for drilling oil wells (+$50 M in legacy gas well), $250 M to sell the company, $194 M to
continue drilling gas wells (+$50 M in legacy gas well). At this point they will likely give a firm answer that acquiring the new
oilfield and drilling is the correct path forward.
39
Case 3: Oklahoma Gas Company (OGC)
Interview Guidance
The interviewer should then push back:
• Is OGC sure they can successfully drill oil wells, out of state, with no experience?
• Where did the $210 M value come from - projecting oil recovery is VERY DIFFICULT?
• Drilling costs are highly variable, likely to run over?
• Finally, how sure are they about FORECASTING PRICES?
The correct answer to the case is that there is not enough information given to provide a firm answer at this point. Thorough price
forecasting (for both oil & natural gas) needs to be done. A counter offer should be made. OGC’s competency to drill and produce oil
wells should be reviewed. A second opinion should be taken on the PV projection of the oilfield. Assumptions play a huge role in the
valuations.
Note: candidate may push back regarding the chances that gas prices rise because of the oversupply situation. As we see in reality
today, large oil & gas companies will stop drilling for gas when prices drop, and gas wells inherently produce for shorter lifespans, thus a
significant change in the supply of natural gas is possible.
40
Case Interview feedback form
Case _________________________ Case type _________________ Interviewer ____________________
Execution
Case start time ___:____
1 2 3 4 5
•Structure
¾Logical approach
¾MECE
¾Appropriate drive to solution
Comments:
•Quantitative Ability
1 2 3 4 5
¾Speed
¾Accuracy
¾Comfort, reaction to mistakes
Comments:
•Business intuition
¾Practical
¾Insightful
¾Breadth & depth across multiple functions
¾Creativity
1 2 3 4 5
Comments:
Framework development
Framework explanation
Case discussion
______ min
______ min
______ min
Case end time ___:____
Overall Rating: 1 2 3 4 5
Strengths
Communication
1 2 3 4 5
•Professionalism
¾Poise
¾Confident-Persuasive
¾Articulate-concise
¾Client ready
Comments:
Weaknesses
•Written
¾Clarity of writing and page layout
¾Ability to refer back
¾Comfort, reaction to mistakes
1 2 3 4 5
Comments:
Behavioral (optional)
•Quality of star stories
•Length
•Clarity
•Relevance
1
1
1
1
2
2
2
2
3
3
3
3
4
4
4
4
5
5
5
5
Comments:
Key: 1=Bottom 10%, 2= 10th-25th percentile, 3=
middle 50%, 4= 75th-90th percentile, 5=Top 10%
CASE 4 – HEAVY THINGS FITNESS
42
Case 4: Heavy Things Fitness
Prompt
Your client is Heavy Things Fitness, a small fitness center chain with 15 locations in a minor metropolitan area in the US, established
during the fitness boom in the late 70s. After decades of continual growth, Heavy Things has seen membership decline by alarming
rates. Over the past 5 years, it has seen total membership numbers decrease an average of 6% annually. The client has asked us to
determine what is causing this trend and how they can reverse this trend to begin growing again. Based on what you know about this
industry, what do you believe is causing this membership attrition?
Behavioral Questions
• Tell us a time when you had a conflict with your manager or peers. How did you resolve it?
• When was the last time you were creative in solving a problem?
43
Case 4: Heavy Things Fitness
Interviewer Guidance
The focus of this case is on market segmentation and determining/targeting the optimal segment. The candidate should demonstrate
an understanding that profit is the ultimate goal. Various strategies will have different implementation costs and potential revenues,
and the candidate should return to these numbers at every step.
If they ask for more information on the city, tell them it has a population of about 1-1.5M, similar to Providence, RI; Milwaukee, WI; or
Jacksonville, FL. No other information is relevant (such as location within the US), as this is not the focal point of the case.
Relevant additional information:
• Gym memberships in this city have been growing 3% each year, both in this city and in all regions of the country
• Heavy Things Fitness gyms offer cardio rooms, free weights, and weight machines
• Membership prices and payment plans are in line with their closest competitors
• Heavy Things Fitness targets serious fitness enthusiasts, believing that these are the most loyal customers
When interviewee asks for industry or client customer demographic information, provide Exhibit 1 and 2, respectively.
Potential Causes:
• Changing fitness trends, such as towards class-based fitness or high intensity training
• Negative attributes of Heavy Things, such as poor customer service or deteriorating facilities
• Competitors offer better services, such as personal trainers or basketball courts
• Shifts in city or industry demographics, away from Heavy Things’ target demographic
Unlikely Causes:
• Decreasing city population (as the rest of the city’s gyms are seeing increasing memberships)
• Competitors offer lower cost (already established that Heavy Things’ costs are comparable to competitors
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Case 4: Heavy Things Fitness
Exhibit 1: Local Interest in Gym Memberships, Demographic Segmentation
Local Interest in Gym Memberships, by Age
100%
65+
90%
80%
50-65
70%
60%
40-50
50%
40%
30-40
30%
20%
18-30
10%
0%
1994
1998
2002
2006
2010
2014
45
Case 4: Heavy Things Fitness
Exhibit 2: Client Customers, Demographic Segmentation
Client Customers by Generation
Seniors (65+),
3%
Baby Boomers
(50-65), 6%
Generation X
(40-50), 13%
Millenials (18-30),
62%
Generation Y
(30-40), 16%
46
Case 4: Heavy Things Fitness
Prompt 2
Given the information in Exhibits 1 and 2, what do you believe is the source of Heavy Thing’s declining membership?
Guidance
Clarifying Note: The legend order corresponds with the Generation graphic in Exhibit 1. In other words, the top portion of the chart
represents Seniors, and the bottom represents Millennials.
Extractable Facts:
• Local gym memberships are trending towards Gen X and Y and away from Millenials, Baby Boomers and Seniors
• Genders seem to have shifted towards men, then back to women
• Heavy Things’ membership is heavily concentrated in the Millennial generation
• Heavy Things’ membership is evenly split between men and women
Key Takeaways:
• Heavy Things’ membership gender profile parallels local industry gender profile
• Heavy Things’ membership generation profile is focused on the declining Millennial population rather than the growing Gen X and Y
populations
Potential Conclusions:
• Target Gen X and Y customers
• Become more of a niche gym for declining millennial customer segment
47
Case 4: Heavy Things Fitness
Prompt 3
After reviewing this data, Heavy Things leadership agrees that they should target Gen X and Y customers. What are some possible
ways that Heavy Things Fitness can target these growing demographics? What would be the risks of each of these solutions?
Guidance
Good Potential Solutions:
• Marketing campaign targeting consumers aged 30-50
o Spokesperson in that age range
o Ads run in areas of interest for these consumers
o Explanation that this gym is for these consumers (a la Planet Fitness ads)
• Offer new services more to the liking of middle aged customers
• Make prices more appealing to middle aged customers
o If price is believed to be a primary concern, lower prices
o If not, raising prices would help offer more services and prevent younger customers with less disposable income from joining
• Make the gym an exclusive club where only those members can join
Top level candidates will address the inherent risk of cannibalization when switching from one target demographic to another, and
include solutions that will minimize such cannibalization. If the candidate does not mention cannibalization, lead them to it. Some
such solutions would be:
• Convert some existing locations to more Gen X and Gen Y-friendly establishments, while keeping the rest the same, enabling current
customers to go to another Heavy Things if theirs gets shut down
• Develop a brand extension in brand new clubs that target these customers
• Divide the physical space of each gym into two distinct gyms (like a combination Pizza Hut and Taco Bell)
48
Case 4: Heavy Things Fitness
Prompt 4
We presented your findings to the client at a recent status meeting, and Heavy Things leadership liked the idea of a brand extension of
5 facilities targeted at Gen X and Y customers, called “Fast Class Fitness”, which will focus on the class-based fitness programs that our
client’s research has shown appeals to Gen X and Y customers. They want us to determine whether it is more profitable to convert
existing Heavy Things properties into Fast Class properties, or to expand into new properties in which to open Fast Class centers.
Guidance
Pertinent Information (let candidate brainstorm what information is necessary to calculate revenues and costs before providing):
Revenues
• Membership Dues at Heavy Things Facilities = $50 per month
• Membership Dues at Fast Class Facilities = $75 per month
• Average Memberships at Heavy Things Facilities = 300
• Average Memberships at Fast Class Facilities = 400
Costs
• Rent of All Facilities (Including Cost of Fitness Equipment), Heavy Things and Fast Class = $10K per month
• Labor at Heavy Things Facilities = 2 Employees at $36K per year each
• Labor at Fast Class Facilities = 4 Employees at $48K per year each
• Retention of Members from Converted Heavy Things Gyms= 33% of Each Gym’s Membership
o This is a small city, so when a club is converted, members can simply move to a neighboring location
o In other words, when a gym is closed, 1/3 of the members will join a different Heavy Things gym, but 2/3 of the members
will leave Heavy Things for a competitor
• Assume Heavy Things Can Maintain These Membership Levels
49
Case 4: Heavy Things Fitness
Analysis
Sample Calculations:
Convert
Costs (Monthly, in $K)
Heavy Things Rent
Heavy Things Labor
Fast Class Rent
Fast Class Labor
10 locations, $10K each
10 locations, 2 employees per location,
$3K per employee
5 locations, $10K each
5 locations, 4 employees per location,
$4K per employee
Expand
$100 15 locations @ $10K each
15 locations, 2 employees per location,
$60
$3K per employee
$50 5 locations, $10K each
5 locations, 4 employees per location,
$80
$4K per employee
$150
$90
$50
$80
Revenues (Monthly, in $K)
Heavy Things (current members)
Heavy Things (retained members)
Fast Class
Total Corporate Income (Monthly, in $K)
10 locations, 300 members per location,
$50 per member
5 locations, 33% of 300 members per
location, $50 per member
5 locations, 400 members per location,
$75 per member
$150
15 locations, 300 members per location,
$50 per member
$25 N/A
$150
5 locations, 400 members per location,
$75 per member
$35
$225
$0
$150
$5
However, the fastest way to calculate this is to realize that the revenues and costs from Fast Classes are constant, so the only necessary
calculation is subtracting the additional cost to maintain the 5 heavy things locations ($80K) from the revenue gained by keeping all 15
Heavy Things locations ($50K).
Either way, the correct conclusion is that it is more profitable to convert the 5 locations rather than expand.
50
Case 4: Heavy Things Fitness
Prompt 5
Olaf Dungren, the CEO of Heavy Things Fitness, is about to walk into this office, and he’d like to hear our recommendation. How would
you summarize our findings?
Guidance
Answers may vary, but should include:
• Recommendation to convert five Heavy Things fitness centers to Fast Classes fitness centers
• Justification based on the ability to attract new members and increase profitability at a more efficient rate than by expanding to new
properties
• Potential risks to this suggestion that include five not being the optimal number to convert, increasing properties serving as
advertising that would generate additional memberships, the 33% estimate of retention being inaccurate
• Next steps, such as hiring class teachers for the new gyms, developing an advertising campaign to build the Fast Class brand, and
hiring contractors to convert the Heavy Things gyms to Fast Class centers
51
Case Interview feedback form
Case _________________________ Case type _________________ Interviewer ____________________
Execution
Case start time ___:____
1 2 3 4 5
•Structure
¾Logical approach
¾MECE
¾Appropriate drive to solution
Comments:
•Quantitative Ability
1 2 3 4 5
¾Speed
¾Accuracy
¾Comfort, reaction to mistakes
Comments:
•Business intuition
¾Practical
¾Insightful
¾Breadth & depth across multiple functions
¾Creativity
1 2 3 4 5
Comments:
Framework development
Framework explanation
Case discussion
______ min
______ min
______ min
Case end time ___:____
Overall Rating: 1 2 3 4 5
Strengths
Communication
1 2 3 4 5
•Professionalism
¾Poise
¾Confident-Persuasive
¾Articulate-concise
¾Client ready
Comments:
Weaknesses
•Written
¾Clarity of writing and page layout
¾Ability to refer back
¾Comfort, reaction to mistakes
1 2 3 4 5
Comments:
Behavioral (optional)
•Quality of star stories
•Length
•Clarity
•Relevance
1
1
1
1
2
2
2
2
3
3
3
3
4
4
4
4
5
5
5
5
Comments:
Key: 1=Bottom 10%, 2= 10th-25th percentile, 3=
middle 50%, 4= 75th-90th percentile, 5=Top 10%
CASE 5 – ORANGE YOGA STUDIO
53
Case 5: Orange Yoga Studio
Prompt
Your client is Yoga Jones, the owner of Orange Yoga Studio. Orange Yoga is a very popular, up-scale yoga studio in New York City known
for high quality instruction and a relaxed vibe. Yoga Jones has owned and operated Orange Yoga for the past 5 years. For its first four
years, Orange Yoga was very financially successful; however in the past year, Yoga Jones noticed that her profits are declining. She
doesn’t keep very good financial records and has made a few big investments lately, so is having a hard time figuring out a) whether
she is actually losing profit and b) how to fix her financial problems
How do you help Yoga Jones?
Behavioral Questions
• Please give an example of a time you led in an ambiguous or uncertain context
• What are you most proud of?
Interviewer Guidance
Note: This case requires extensive guidance by the interviewer. Make sure to review carefully before giving.
Provide the following background information upon request, or to help provide clarity after the initial framework
• Orange Yoga offers 5 classes daily on weekdays. On weekends, they offer 4 classes. All of of their classes are “Vinyasa Flow” style
• Orange Yoga clients pay on a per-class basis. There are currently no “package” deals or membership rates.
• The competitive landscape for yoga studios in NYC has remained unchanged over the past three years.
• Yoga Jones’ recent investments were major maintenance upgrades for her studio (installing hardwood floors, fresh paint, and new
shower facilities). These investments were financed primarily through loans.
54
Case 5: Orange Yoga Studio
Analysis
The candidate should quickly get to a π = Revenue-Cost framework. Framework considerations may include:
• Revenue: Price per class, number of clients per class, potential other sources of revenue (i.e. yoga mats, water bottles, etc.)
• Cost: Rent, insurance, instructors, utilities, loan payments
• Other Considerations (a strong candidate will think of these): potential decline in popularity of yoga, marketing promotions, etc.
Information on Cost (provide when asked)
• No variable costs on a per-customer basis - all costs are fixed.
• 5 main fixed costs: Rent/utilities building = $3500 a month; Liability Insurance = $1800 a year; administration costs (including owner
salary, supplies, computer system, marketing supplies) = $800 a week; Yoga instructor salaries: $50 a class; Loan Payments (to pay
off major paint/floor/plumbing renovations) = $500 a month
Information on Revenue (provide when asked)
• Class fees are Orange Yoga’s only source of revenue
• All classes cost $12 and there are average of 8 students per class on weekdays and 6 students per class on weekends
• Assume every month has 22 weekdays and 8 weekend days
55
Case 5: Orange Yoga Studio
Analysis Continued
Answers:
Revenue: ($12 per class * 5 classes per day *8 students per class * 22 weekdays in a month) = $10,560 a month on weekdays
($12 per class*4 classes per day*6 students per class * 8 weekend days in a month) = $2304 a month on weekends
Total Revenue per month = $12,864 (can be rounded to $12.8K)
Costs: Monthly costs = $3500 in rent per month+150 in insurance per month ($1800/12) + $3200 in admin costs per month
($1000*4) + $5500 in yoga teacher salaries on weekdays ($50 a class * 5 classes a day *22 weekdays a month) + $1600 in yoga
teacher salaries on weekends ($50 a class*4 classes a day*8 weekend days a month) + $500 a month in loan payments.
Total Costs per month = $14,450 (can be rounded to $14.5K)
After being provided information on cost and revenue, the candidate should realize that Yoga Jones currently is losing approximately
$1.7K ($1650) a month in profit.
56
Case 5: Orange Yoga Studio
Prompt #2: Brainstorm
(Note: A strong candidate will naturally begin to go into the “So What” after analyzing the profit scenario, and begin to hypothesize on
the potential ways to improve revenue or lower costs. Steer the conversation by using the following prompt)
Prompt: “After analyzing her books, Yoga Jones realizes that her decline in profit began after a $2000 per month rent increase last year
and a decision to raise all teacher salaries by $10 per class. She does not want to move and believes strongly in paying her teachers a
high wage for their work.
What else can she do?”
Analysis
Potential solutions
Revenue:
• Charge more for classes
• Variable pricing: charge more for certain clients or for certain classes
• Diversify products: Offer higher-priced classes, like pilates; start offering private classes or teacher-training classes; or start selling
related products, like yoga mats or water bottles
• Offer more classes
• Get more clients
Cost:
• Eliminate unprofitable classes, cut down on her own salary, etc..
• (Not a great idea: refinancing loans—her loan payments are relatively small)
After the candidate has run out of ideas, show them Exhibit #1 and ask: “Yoga Jones feels that she may not be meeting her students
demands with class times and this could be creating problems. Here is some information that may help.”
57
Case 5: Orange Yoga Studio
Exhibit 1 A
Average number of weekday students in Orange Yoga classes, 2010-2014
Average number of weekday students in
Orange Yoga classes (2014)
12
10
8
# of students
6
4
2
0
7am 10am 12pm 6pm
8pm
11
10
9
8
7
6
5
4
3
2
2010
7am
10am
12pm
6pm
8pm
2011
2012
2013
2014
58
Case 5: Orange Yoga Studio
Exhibit 1 B
Average number of weekend students in Orange Yoga, 2010-2014
Average number of weekend students in
Orange Yoga classes (2014)
12
12
10
8
6
# of students
4
2
10
10am
8
12pm
6
6pm
4
8pm
2
0
10am
12pm
6pm
8pm
0
2010
2011
2012
2013
2014
59
Case 5: Orange Yoga Studio
Analysis
Chart insights: The presentation of information on the four graphs is deliberately overwhelming. All candidates should realize that the
top two graphs both pertain to weekday trends and the bottom two graphs pertain to weekend trends; strong candidates will structure
their analysis separately for weekends and weekdays. No detailed calculations are necessary for this graph - just insights
Key Weekday Insights:
• Midday classes have a lower number of students than morning and evening classes
• This trend has become more pronounced over last 5 years
• Strong candidates will note that the 10am classes are not generating enough revenue to even cover teacher salary
Key Weekend Insights
• Has opposite profile of weekday classes: midday classes are much more popular than evening classes
• This trend has remained somewhat steady over past 5 years, though has become slightly more pronounced
• Strong candidates will note that evening classes are not generating enough revenue to even cover teacher salary
A strong candidate will also notice that the max number of average participants peaks at 10 for both weekday and weekend classes
Strong candidates will also begin to hypothesize potential solutions, including restructuring class times to better meet the needs of
clients, eliminating unprofitable classes, and perhaps adding additional classes/instructors in the evening
60
Case 5: Orange Yoga Studio
Prompt #3: Increase Class Size
(Note: A strong candidate will notice that the max number of average participants peaks at 10 for both weekday and weekend classes.
If they do not realize this, steer them towards this realization).
Prompt: “Good point. Yoga Jones currently allows a max of 10 students per class in order to keep the classes small. However, upon
looking at her registration records, it appears that she is almost always turning away students for her weekday evening classes and
weekend morning classes.
She would like to see if she can fit more students in her studio. Her studio is 13ft long and 21 ft wide. The average yoga mat is 6 ft long
and 2 ft wide. Yoga Jones feels that the minimum distance between 2 mats should be one foot, and the minimum distance between a
mat and a wall should be 6 inches. How many mats can she fit in her studio?”
Analysis
13 ft
21 ft
There are two acceptable solutions:
• The max she can fit is 13, thought this very tricky to figure out. See chart at left. The
only real way that candidates can solve this is by drawing it out (at left). Some candidates
may realize that each mat will need a total of 21 square feet (6 inches on each side) and
the studio is 273 square feet. 273/21=13 (however very strong candidates will point out
that this mathematical equation doesn’t always hold true spatially).
• If a candidate says 12, that’s fine as well, as long as they acknowledge that there will be
wasted space in this configuration.
(The instructor does not need a mat)
61
Case 5: Orange Yoga Studio
Prompt #4: Implementation
Prompt: Assume all current classes that currently have 10 students always have a lengthy waiting list. If Yoga Jones increases her class
size, will this be enough to save her studio?
Analysis
The studio is currently losing $1650 a month. Therefore the new students must bring in at least $1650 in new revenue a month.
Cost
• Costs will remain the same
New Revenue if they calculated 12 as the max class size
• New students: 6 new students on weekdays, 4 new students on weekends.
• 6*22*$12=$1584 extra weekday revenue
• 4*8*$12= $384 extra weekend revenue
• $1968 total new revenue. Yes, this is now profitab (although barely).
New Revenue if the calculated 13 as the max class size:
• New students: 9 new students on weekdays, 6 new students on weekends.
• 9*22*$12=$2376 extra weekday revenue
• 6*8*$12= $576 extra weekend revenue
• $2952 total new revenue. Yes, this is now profitable.
Strong candidate should also suggest cutting classes that don’t cover variable costs to manage costs and adding additional evening
classes to increase revenue.
62
Case 5: Orange Yoga Studio
Recommendation
What are your final recommendations to Yoga Jones?
Analysis
All candidates should summarize their analysis and recommend increasing the max class size and eliminating classes.
Strong candidates will briefly summarize their analysis and results, but focus primarily on risks and next steps.
Risks include: losing long-term clients who valued flexible class times, upsetting clients who enjoyed small class sizes, and upsetting
valued teachers whose classes were eliminated.
Next step include: Mitigating against risks mentioned above - but more importantly, exploring some of the other options that were
outside of the scope of this case, including raising prices, diversifying products, etc…
63
Case 5: Orange Yoga Studio
Performance Evaluation
•
What does the case test?
This case has both quantitative and qualitative elements. None of the math in this case is particularly tricky, but does require a
lot of quick calculations, as well as tying multiple pieces together to get a holistic recommendation. It also tests creativity by
encouraging candidates’ brainstorming and “thinking outside the box” ability.
• What should good interviewee be doing/asking/providing throughout the case?
There are many different potential paths that this case could take—a good candidate should test a variety of hypotheses with
the interviewer throughout the case.
• Provide examples of what exceptional interviewees are doing throughout this case.
This case may be tricky for candidate who have no familiarity with yoga; however strong candidates should put themselves in
the shoes of the small business owner and try to see the problem for her perspective.
Exceptional candidates will always be thinking one step ahead, and provide next steps and hypotheses throughout the case.
64
Case Interview feedback form
Case _________________________ Case type _________________ Interviewer ____________________
Execution
Case start time ___:____
1 2 3 4 5
•Structure
¾Logical approach
¾MECE
¾Appropriate drive to solution
Comments:
•Quantitative Ability
1 2 3 4 5
¾Speed
¾Accuracy
¾Comfort, reaction to mistakes
Comments:
•Business intuition
¾Practical
¾Insightful
¾Breadth & depth across multiple functions
¾Creativity
1 2 3 4 5
Comments:
Framework development
Framework explanation
Case discussion
______ min
______ min
______ min
Case end time ___:____
Overall Rating: 1 2 3 4 5
Strengths
Communication
1 2 3 4 5
•Professionalism
¾Poise
¾Confident-Persuasive
¾Articulate-concise
¾Client ready
Comments:
Weaknesses
•Written
¾Clarity of writing and page layout
¾Ability to refer back
¾Comfort, reaction to mistakes
1 2 3 4 5
Comments:
Behavioral (optional)
•Quality of star stories
•Length
•Clarity
•Relevance
1
1
1
1
2
2
2
2
3
3
3
3
4
4
4
4
5
5
5
5
Comments:
Key: 1=Bottom 10%, 2= 10th-25th percentile, 3=
middle 50%, 4= 75th-90th percentile, 5=Top 10%
CASE 6 – SURFBBOARD WAX IN HAWAII
66
Case 6: Surfboard Wax in Hawaii
Prompt
Your client is a surfboard manufacturer based in Hawaii. The company has high brand recognition and a strong distribution network in
the state. The CEO wants to expand the company’s product line and revenues and is thinking of entering the market for surfboard wax.
It has hired us to help them determine how big the market for surfboard wax is in Hawaii.
67
Case 6: Surfboard Wax in Hawaii
Interviewer Guidance
Before the Framework:
The candidate should recognize that this is a market sizing case and confirm this with the interviewer. If the candidate asks what
surfboard wax is, you can tell them that the wax comes in a bar form (similar to soap) and is used to coat the top of the surfboard in
order to provide surfers with a surface that their feet can grip. The candidate may ask how much the wax costs and is used. You can
explain that we will discuss this later in the case. A strong candidate will also ask if the client is looking for an annual dollar amount and
you should respond yes. Typically, all market sizing cases are in dollars but it’s good to clarify this upfront.
Framework:
A strong candidate’s framework will have the units needed to calculate the market size at the top of the paper. In this case, the units
are the average number of bars of wax sold annually * the average price of a bar of wax. The candidate should demonstrate an
understanding that he/she needs to know the number of surfboards in Hawaii, usage frequency, amount used and price in order to
crack the case. A good framework will outline an approach for how he/she will estimate the numbers for all of these units and present
this to the interviewer. For average number of bars of wax sold in a given year, the candidate would need to know the number of
surfboards in Hawaii, how frequently wax is applied to each surfboard and how much wax is used with each application. For price, the
candidate should show some approach for how the price might be estimated. Some suggested approaches are discussed later in this
case.
A common mistake is that the candidate will immediately attempt to estimate the population of Hawaii without explaining how this
will determine the market size. If the candidate does this, interrupt them and ask why they are estimating the population of Hawaii. If
they are unable to link the population of Hawaii with the number of surfboards and therefore units of wax sold in Hawaii, guide them
until they are able to correctly identify the units that are needed to solve the case.
68
Case 6: Surfboard Wax in Hawaii
Interviewer Guidance
After the Framework:
Calculating the Number of Surfboards
A strong candidate will recognize that Hawaii has a large tourism industry and would therefore have to estimate the number of
resident surfers and number of tourists who surf and the average number of boards per surfer for each population.
Resident Surfers
One approach is to estimate the population of Hawaii by starting with the estimated US population of 300 million divided among 50
states. This gives each state an average population of 6 million. Hawaii is a smaller state – bigger than Wyoming, which has a
population of 500k but smaller than Maryland which has a population of 6m. (The actual population of Hawaii is 1.4m). Assuming that
the candidate is not wildly off, you can provide this number to the candidate after he/she estimates the population and allow for
rounding of 1m or 1.5m to make the math easier.
The candidate can then calculate the number of surfers by segmenting the population by age (0-20, 21-40, 41-60, 61+ is easiest) and
estimating the percentage who surf. An estimate of 25%-50% is acceptable. Another approach is to draw from personal experience. A
candidate from Minnesota might say 25% of Minnesotans play hockey, the state’s most popular sport. Since surfing is the most popular
sport in Hawaii, I’ll assume that 25% of the population surfs. After the candidate calculates the number of resident surfers, you can tell
the candidate that the average number of surfboards per surfer is 2.
The candidate should calculate the number of surfboards owned by residents is 25%*1m*2=500,000 on the low end and
50%*1.5m*2=1,500,000 on the high end.
69
Case 6: Surfboard Wax in Hawaii
Interviewer Guidance
Tourists
Companies that rent surfboards to tourists comprise the other major segment of the market and there are many ways to estimate the
number of surfboards in this segment. Ask the candidate to brainstorm what the number might be and how they would calculate the
number of surfboards needed to serve tourists. The key here is to check whether the candidate understands that tourists are
sharing/renting boards so the number of surfboards in this segment be much smaller than the number of tourists who visit might
imply. It also is meant to showcase the candidate’s ability to structure an approach to solve a very complex problem. One approach is
to start by estimating the number of tourists who visit Hawaii. Since Hawaii’s primary industry is tourism, it is safe to assume that the
number is going to be a multiple of the state’s population since the vast majority of the state’s jobs depend on it. Think about how
many tourists would be needed in a hotel to cover the cost of overhead and pay for the salary of one hotel worker.
At the end of the brainstorm, the interviewer should tell the candidate that there are 7m tourists who visit Hawaii a year staying an
average of 10 days. Twenty-five percent of tourists surf an average of two days. It is assumed that all of them rent surfboards. The
candidate should calculate the number of surfboards needed for rental: 7m*25%*2=3.5m/365 days = 9,589 boards needed per day
(Rounding the year to 350 days or the solution to 10k is fine). Therefore, the total number of surfboards in Hawaii ranges from 510k or
1.51m.
Usage
If there is time, ask the candidate to brainstorm the amount of how wax used per waxing and how frequently the product is used. One
approach is for the candidate to relate it to something they are more familiar with such as car wax. A candidate might say that they
wax their car 4 times a year and use 25% of the jar per use. In this case, the interviewer can share that a surfboard is waxed every
three months and uses 50% of the bar with each use. Therefore, there are 510k*4*50%=1.02m bars of wax sold annually on the low
end and 1.51m*4*50%=3.02m on the high end.
70
Case 6: Surfboard Wax in Hawaii
Interviewer Guidance
Pricing:
If there is time, ask the candidate how they might determine the average price. There are two approaches to this. The candidate can
either estimate costs on the value chain or identify comparable products (like car wax) and what their costs are to provide an estimate.
Since a value chain approach is more difficult in this case, the candidate should use a comparable product to estimate what the
average price of wax is. The interviewer can then share that the average price is $2 per bar.
Market size:
The candidate can then calculate the total market size: 1.02*$2=$2.04 M or 3.02*$2=$6.04 M
Ending the Case:
Market sizing questions don’t typically need recommendation but the candidate could end the interview with something like this: The
total market size we calculated is $2.04m. We arrived at this estimate by calculating the total number of surfboards in Hawaii among
residents and at rental companies and multiplying this by how frequently wax is purchased - which in this case is every three months,
and the average price of wax at $2. If our client is looking to expand its product line and revenue, it may want to consider selling higher
revenue items like clothing or sell its surfboards in the mainland.
71
Case 6: Surfboard Wax in Hawaii
Performance Evaluation
Exceptional Candidate:
Candidate asks clarifying questions at the beginning of the prompt and recognizes that this is a market sizing case. Framework is
appropriately customized and has correct units listed and a clear plan for how the candidate will estimate those units. Candidate drives
case, executes mathematical computations flawlessly and provides a market size within the accepted range.
Strong Candidate
Candidate asks clarifying questions at the beginning of the prompt and recognizes that this is a market sizing case. Framework is
appropriately customized and has correct units listed and a clear plan for how the candidate will estimate those units. Candidate may
need some guidance on moving forward in the case and may make small mistakes on mathematical computations. The candidate
provides a market size within the accepted range.
Borderline Candidate
Candidate recognizes that this is a market sizing case. Framework is appropriately customized and has correct units listed but may lack
a clearly defined plan for how the candidate will estimate those units. Candidate may need guidance on moving forward in the case
and may make some mistakes on mathematical computations. The candidate provides a market size within the accepted range.
Weak Candidate
Candidate recognizes that this is a market sizing case. Framework is not customized, does not have correct units listed and lacks a
defined plan for how the candidate will estimate those units. Candidate may begin to estimate Hawaii’s population without conveying
how this will help them size the market. Candidate needs guidance on moving forward in the case and makes many mistakes on
mathematical computations. The candidate does not provide a market size within the accepted range.
72
Case Interview feedback form
Case _________________________ Case type _________________ Interviewer ____________________
Execution
Case start time ___:____
1 2 3 4 5
•Structure
¾Logical approach
¾MECE
¾Appropriate drive to solution
Comments:
•Quantitative Ability
1 2 3 4 5
¾Speed
¾Accuracy
¾Comfort, reaction to mistakes
Comments:
•Business intuition
¾Practical
¾Insightful
¾Breadth & depth across multiple functions
¾Creativity
1 2 3 4 5
Comments:
Framework development
Framework explanation
Case discussion
______ min
______ min
______ min
Case end time ___:____
Overall Rating: 1 2 3 4 5
Strengths
Communication
1 2 3 4 5
•Professionalism
¾Poise
¾Confident-Persuasive
¾Articulate-concise
¾Client ready
Comments:
Weaknesses
•Written
¾Clarity of writing and page layout
¾Ability to refer back
¾Comfort, reaction to mistakes
1 2 3 4 5
Comments:
Behavioral (optional)
•Quality of star stories
•Length
•Clarity
•Relevance
1
1
1
1
2
2
2
2
3
3
3
3
4
4
4
4
5
5
5
5
Comments:
Key: 1=Bottom 10%, 2= 10th-25th percentile, 3=
middle 50%, 4= 75th-90th percentile, 5=Top 10%
CASE 7 – PACIFIC NORTHWEST TELCO
74
Case 7: Pacific Northwest Telco
Prompt
Your client is a large, regional telecommunications provider in the Pacific NW. Amidst increased competition, the client has brought you
on to explore ways which it can increase customer relationship and revenue. What are your thoughts?
Behavioral Questions
• What’s your favorite hobby?
• Tell me about something interesting you’ve done that’s not on your resume?
Interviewer Guidance
• The client’s goal is to increase revenue and stabilize customer base. Costs should not be considered
• The client provides the following services : cable television, fixed telephone lines, internet, and mobile phones
• Profitability and revenue have remained constant, but the client is concerned about new market entrants (Verizon and AT&T, among
others)
• Interviewee should first walk through an analysis of where money is made in this business
o After creating a profitability tree, ask where they see opportunities to increase revenue
75
Case 7: Pacific Northwest Telco
Exhibit 1
Potential bundling options
4X bundle
Feature
3X bundle
Price / month
Components
2x bundle
Price / month
Components
Bundled:
Bundled:
Internet
Internet
Price / month
Phone line
$
Cable
Internet
$
75
Phone line
$
25
Cable
$
100
$
75
150
150 Cable
185
Unbundled:
Cable
Unbundled:
Cell phone
Cell phone
54 months
Price / month
Unbundled:
Internet
$
Components
Bundled:
$
Phone line
No Bundle
$
Phone line
$
25 Cell phone
75 Cell phone
$
75
36 months
42 months
30 months
Average customer life
76
Case 7: Pacific Northwest Telco
Interviewer Guidance, continued
•
Push the interviewee to create 6-8 ideas for the client to increase revenue after presenting their profitability analysis. Continue to
ask “what else?” Continue to push for a few minutes, even if they are stumped
•
If the interviewee suggested bundling products say, “the client liked your suggestion of beginning to bundle products, and has
conducted the following analysis. They would like you to tell them which of the following bundles would be most likely to achieve
their goals.” Show them Exhibit 1
•
If the interview did not suggest bundling, say “The client believes that beginning to bundle products will increase revenue and
customer retentions rates, and has conducted the following analysis. They would like you to tell them which of the following
bundles would be most likely to achieve their goals.” Show them Exhibit 1
•
See appendix 1 for explanation of exhibit and required calculations
Recommendation
•
The interviewee should recommend that the client begin offering / promoting the 4 bundle product: fulfills goal of increased
revenue and customer retention
77
Case 7: Pacific Northwest Telco
Performance Evaluation
• What does the case test?
o Basic profitability analysis of telecom industry
o Opportunities to increase revenue when costs are not a concern
o Basic math and exhibit comprehension
• What should good interviewee be doing/asking/providing throughout the case?
o Should have a solid profitability analysis
o Should ask about products offered by client
o Should provide accurate answers to mental math on Exhibit 1
o Should be able to understand exhibit 1 without asking too many clarifying questions
• Provide examples of what exceptional interviewees are doing throughout this case.
o Excellent interviewees will ask about product mix without prompting and will mention the fact that they know there has
been a lot of consolidation (M&A) and product line expansion in this industry
o Should be able to come up with ideas on demand until the interviewer provides the bundling suggestion
- Coming up with the bundling idea should not be expected
o Ideal candidate would ask about cannibalization / opportunity size (even though it’s not relevant)
78
Case 7: Pacific Northwest Telco
Exhibit 1
Explanation
4X bundle
Feature
3X bundle
Price / month
Components
Bundled:
2x bundle
Price / month
Components
Bundled:
Internet
Internet
Price / month
$
Cable
Internet
$
75
Phone line
$
25
Cable
$
100
$
75
150
150 Cable
185
Unbundled:
Cable
Unbundled:
Cell phone
Cell phone
54 months
Price / month
Unbundled:
Internet
Phone line
$
Components
Bundled:
$
Phone line
No Bundle
$
Phone line
$
25 Cell phone
75 Cell phone
$
75
42 months
36 months
30 months
Average customer life
Total value:
9990
9450
9000
8250
Interviewee should realized that lifetime value is the key here. Therefore monthly revenue should be multiplied by average
customer life. Assume client buys all 4. Also, cannibalization and market size should not be considered
79
Case Interview feedback form
Case _________________________ Case type _________________ Interviewer ____________________
Execution
Case start time ___:____
1 2 3 4 5
•Structure
¾Logical approach
¾MECE
¾Appropriate drive to solution
Comments:
•Quantitative Ability
1 2 3 4 5
¾Speed
¾Accuracy
¾Comfort, reaction to mistakes
Comments:
•Business intuition
¾Practical
¾Insightful
¾Breadth & depth across multiple functions
¾Creativity
1 2 3 4 5
Comments:
Framework development
Framework explanation
Case discussion
______ min
______ min
______ min
Case end time ___:____
Overall Rating: 1 2 3 4 5
Strengths
Communication
1 2 3 4 5
•Professionalism
¾Poise
¾Confident-Persuasive
¾Articulate-concise
¾Client ready
Comments:
Weaknesses
•Written
¾Clarity of writing and page layout
¾Ability to refer back
¾Comfort, reaction to mistakes
1 2 3 4 5
Comments:
Behavioral (optional)
•Quality of star stories
•Length
•Clarity
•Relevance
1
1
1
1
2
2
2
2
3
3
3
3
4
4
4
4
5
5
5
5
Comments:
Key: 1=Bottom 10%, 2= 10th-25th percentile, 3=
middle 50%, 4= 75th-90th percentile, 5=Top 10%
CASE 8 – THE EVERYTHING RETAILER
81
Case 8: The Everything Retailer
Deloitte Case Writing
Competition Finalist
Prompt
A mass retailer Everything Retailer is seeing stagnating growth in its year-over-year sales. You were brought in to identify the issue and
propose ways to boost sales growth.
Behavioral Questions
• Describe a time you were confronted with a failure or an obstacle at your job, and how you handled it.
• Describe a time you exercise creativity or outside-the-box thinking.
Interviewer Guidance
This starts as a broad case on strategy – there are many different ways the interviewee may want to proceed. Quantitative analysis
begins when the interviewee identifies the need for a new store format. Bonus points if, at the end, the interviewee mentions other
risks and ways to mitigate them.
Additional information:
• Large US retailer (think Walmart) with an extensive network of big-box discount stores across the US.
• Sales growth slowed to 1-2%, while industry is growing at 3%. Client’s target: double-digit “comp sales” growth.
• If asked about any increases in costs, say no. This is irrelevant.
82
Case 8: The Everything Retailer
Analysis
1) Ask the interviewee to identify the source of Everything Retailer’s problem by presenting data on sales from Everything Retailer
• Show Exhibit 1
Recommendation
Some potential sources of flat growth that the interviewee may mention are:
• New competitors, especially e-commerce as consumers shift away from big-box stores to shopping online – tell him/her that this is
an interesting additional consideration, but steer him/her away from delving into this.
• Big-box stores’ product assortment – no longer as relevant to the customers shopping in those stores.
• Macroeconomic factors – recession and decrease in consumers’ disposable income.
Exhibit 1 shows that stores are now opening faster than the sales are increasing. Thus, the current store format has reached its
maximum penetration, and sales are flat.
• Need to tap into a new customer segment.
83
Case 8: The Everything Retailer
Exhibit 1
Everything Retailer's Historical Sales ($M) and
Number of Stores
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
-
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
# of Stores
Sales ($M)
84
Case 8: The Everything Retailer
Analysis
2) In proposing ways to grow sales, interviewee may have (MECE):
• International – expand overseas (build stores or M&A or Joint Venture) – steer interviewee away.
• Domestic
o Grow current big-box store sales – steer interviewee away – current stores have the optimal product mix and
locations for big-box retailer.
o Reach new customer:
- Product – go up-market or down-market to target more affluent or less affluent shoppers. Good point, but
steer interviewee away.
- Format – say that the client has piloted 3 formats and show Exhibit 2
Recommendation
Entering the grocery market with “Local Market” stores represent the biggest revenue opportunity.
Ask the interviewee what analysis he/she would need to do next. What analysis and factors should Everything Retailer consider in
deciding whether to go ahead with opening Local Markets?
85
Case 8: The Everything Retailer
Exhibit 2
Format
Description
Competitors
Market
(FY2015)
Expected
market share
Local Market
Grocery store +
pharmacy
Kroger, Safeway,
regional grocers
$620B
30%
MiniBox
Same product
assortment as bigbox stores, but much
smaller size
Big-box stores on
college campuses,
with some
assortment tailored
to students’
shopping habits
Dollar stores,
convenience stores
$106B
60%
Campus
Companion
Depends on location N/A
(urban vs. college
town)
N/A
86
Case 8: The Everything Retailer
Analysis
3) Use a simple NPV analysis to determine whether Everything Retailer should go ahead with opening Local Markets.
Show Exhibit 3 and ask to calculate NPV. Give formula, if needed: NPV = ∑ (FCFt)/(1+WACC)^t
Assume market growth rate of 0% annually
Exhibit 3 Guidance
Year 0
Market share
Revenue
Costs
$6.25M *1,000 stores =
$6.25B
Discount rate (WACC)
Year 1
Year 2
Year 3
10%
20%
30%
$62,000,000,000
$124,000,000,000
$186,000,000,000
$1,000,000,000
$4,000,000,000
$8,000,000,000
10%
10%
10%
FCF
($6,250,000,000)
$61,000,000,000
$120,000,000,000
$178,000,000,000
FCFt/(1+WACC)t
($6,250,000,000)
$55,454,545,455
$99,173,553,719
$133,734,034,560
NPV
$282,112,133,734
* Acceptable for Interviewee to round numbers
Recommendation
Ask the interviewee whether the client should undertake this venture. The answer should be “Yes” since it is NPV-positive.
87
Case 8: The Everything Retailer
Exhibit 3
NPV of building 1,000 Local Market stores
Year 0
Year 1
Year 2
Year 3
10%
20%
30%
?
?
?
$1M per store to
maintain
$4M per store to
maintain
$8M per store to
maintain
Discount rate (WACC)
10%
10%
10%
(1+WACC)t
1.10
1.21
1.33
Market share
Revenue
Costs
$6.25M per store
to build
FCF
?
?
?
?
FCFt/(1+WACC)t
?
?
?
?
NPV
?
88
Case 8: The Everything Retailer
Performance Evaluation
• This case tests the interviewee's ability to consider the client (which is a huge and mature big-box retailer), and hone in on the fact
that the current store format has reached its optimal penetration, and that a new format strategy is needed.
• Interviewee will also suggest a basic NPV analysis as a way to evaluate whether Everything Retailer should build Local Market stores.
• A good interviewee will have a MECE approach for exploring the levers to grow sales growth, and in his/her Recommendation and
Next Steps slide, will also include risks such as:
o Competitors – other brick-and-mortar grocers – can be mitigated if Everything Retailer leverages its economies of scale to
maintain a price leadership position on the products in in its Local Markets, thus differentiating itself from other grocery
chains.
o Competitors – e-commerce, like Fresh Direct or AmazonFresh – can be mitigated by a move into e-commerce.
o Cannibalization of grocery sales from existing big-box stores, which also carry groceries. Can be offset by offering a different
grocery assortment in its big-box stores versus its Local Markets.
o Overcoming a brand perception of quality that can be an obstacle to winning grocery customers’ trust – can be mitigated by
spinning off Local Markets as a separate brand.
89
Case Interview feedback form
Case _________________________ Case type _________________ Interviewer ____________________
Execution
Case start time ___:____
1 2 3 4 5
•Structure
¾Logical approach
¾MECE
¾Appropriate drive to solution
Comments:
•Quantitative Ability
1 2 3 4 5
¾Speed
¾Accuracy
¾Comfort, reaction to mistakes
Comments:
•Business intuition
¾Practical
¾Insightful
¾Breadth & depth across multiple functions
¾Creativity
1 2 3 4 5
Comments:
Framework development
Framework explanation
Case discussion
______ min
______ min
______ min
Case end time ___:____
Overall Rating: 1 2 3 4 5
Strengths
Communication
1 2 3 4 5
•Professionalism
¾Poise
¾Confident-Persuasive
¾Articulate-concise
¾Client ready
Comments:
Weaknesses
•Written
¾Clarity of writing and page layout
¾Ability to refer back
¾Comfort, reaction to mistakes
1 2 3 4 5
Comments:
Behavioral (optional)
•Quality of star stories
•Length
•Clarity
•Relevance
1
1
1
1
2
2
2
2
3
3
3
3
4
4
4
4
5
5
5
5
Comments:
Key: 1=Bottom 10%, 2= 10th-25th percentile, 3=
middle 50%, 4= 75th-90th percentile, 5=Top 10%
CASE 9 – GEE & GEE’S HOUSE OF BRANDS
91
Case 9: Gee & Gee’s House of Brands
Prompt
A large CPG company “Gee & Gee” is looking to shed half of its brands in an effort to boost growth, simplify its operations, be more
nimble, and cut costs. How do you decide which brands to eliminate in order for Gee & Gee to reach its growth targets? What are the
additional considerations that the client should be aware of?
Behavioral Questions
• What achievement are you most proud of? Why?
• Describe a time you faced a conflict in a team, and the outcome.
Interviewer Guidance
The client is looking to exit any industry or brand that it does not have a market leadership position in. Make sure the interviewee
grasps this motivation, and it informs his/her analysis of which brands to eliminate. Bonus points for the interviewee who appreciates
why the client is willing to cull its brand portfolio – in order to become more nimble in responding to consumer trends.
Additional information:
• The client is a large, multinational CPG company (think P&G, Unilever), with ~$6B in annual sales.
• Assume a 10-brand portfolio spanning beauty, personal care products, baby care, cleaning supplies, pet food, etc. Client wants to
shed 5 brands.
• If asked about any increases in costs, say there has been nothing unusual, but that Gee & Gee will benefit from eliminating the costs
associated with maintaining “unproductive” brands.
92
Case 9: Gee & Gee’s House of Brands
Analysis
1) How would you choose which 5 brands to divest from the 10-brand portfolio? Show Chart 1.
• Are some metrics more important or relevant to Gee & Gee than others?
• Reiterate that size of the business may not matter – a billion-dollar in sales brand can go on the chopping block if Gee & Gee
does not have a market leadership position in that space.
Recommendation
The interviewee’s criteria for which brands to eliminate should be similar to the criteria he/she will see in Chart 1.
The interviewee should point out the following observations from Chart 1:
• Top 5 brands are bringing in ~80% of sales revenue.
• Quickly identify the obvious market leaders for Gee & Gee (Warrior Two Detergent, Triangle Diapers) across all the metrics.
• Acknowledge the trade-offs of eliminating smaller brands that may be higher-margin, have strong brand equity, or give Gee & Gee access to a
certain retail channel.
• Interviewee does not need to calculate the annual profit of each brand; he/she can just point to the trade-off inherent in divesting
smaller brands that may have with higher margins.
• Pet food is probably not strategic fit with CPG’s overall focus on personal care products.
The client might look into eliminating (and give the rationale):
1. Downward-Facing Dog Food – does not have a market leadership position.
2. Bird of Paradise Feed – does not have a market leadership position.
3. Headstand Hair Color – relatively small annual sales and low consumer brand perception, despite being high-margin.
4. Soapvasana – relatively small annual sales and low margin, but strong consumer brand perception.
5. Sun Salutations Soak – relatively small annual sales and low consumer brand perception.
The interviewee should name some risks associated with divesting each of these brands, such as:
• An exit from the Pet food market means there is less portfolio diversification for Gee & Gee – and Downward-Facing Dog Food is a large brand
in terms of annual sales.
93
Case 9: Gee & Gee’s House of Brands
Exhibit 1
Gee & Gee’s Brand Portfolio
Category
Annual
sales
Profit
margin
Gee & Gee’s
market share
Consumer
perception*
Beauty
$980M
18%
2nd
3
Personal care
$110M
12%
4th
4
Baby care
$660M
22%
3rd
4
Cleaning supplies
$415M
14%
2nd
3
Pet food
$915M
27%
4th
2
Personal care
$125M
29%
5th
3
Baby care
$1.05B
33%
2nd
4
Cleaning supplies
$1.150B
19%
1st
5
Bird of Paradise Feed
Pet food
$230M
26%
3rd
3
Headstand Hair Color
Personal care
$190M
36%
5th
2
Brand
Upward-Facing Wash
Soapvasana
Happy Baby Shampoo
Cat Cow Cleaner
Downward-Facing Dog Food
Sun Salutations Soak
Triangle Diapers
Warrior Two Detergent
* A proxy for brand equity, measured on a scale of 1-5, where 1 is perceived as the as cheapest and lowest-tier
brand in that market, 5 as the highest-tier brand.
94
Case 9: Gee & Gee’s House of Brands
Analysis
2) After proposing to sell the 5 brands identified in Chart 1, if the interviewee does not dive into next steps, prompt him/her to
discuss:
• How to calculate the sale price?
• How to evaluate potential buyers?
Recommendation
Calculate the sale price – interviewee can suggest a Discounted Cash Flow analysis or a Comparables analysis.
Potential buyers are:
• Other CPG firms
• Pro: Less aggressive in price negotiations than PE firms
• Con: May become more competitive vis-à-vis Gee & Gee; may end up leveraging Gee & Gee brands’ retail channels or
hiring Gee & Gee employees
• PE firms specializing in turning around “orphaned” CPG brands
• Pro: Do not directly compete with Gee & Gee
• Con: Traditionally, aggressive in extracting value from the deal
95
Case 9: Gee & Gee’s House of Brands
Analysis
3) Suppose Gee & Gee divests the 5 brands you identified. Propose a strategy that will drive company growth post brandrationalization.
Recommendation
This prompt is broad, and tests the interviewee’s ability to tackle ambiguity in a structured way.
Interviewee may suggest levers for growth such as:
• Appeal to new customer segments in the same distribution channels:
• Demographic trends – brands that target Baby Boomer or Millennials, which are growing segments
• Social-economic segmentation – for example, grow Gee & Gee’s market share in premium or all-natural products
• Look for new distribution channels:
• Brick-and-mortar – undertake co-branding campaigns with major big-box retailers; pharmacies; Costco/Sam’s Club
• E-commerce – grow Gee & Gee’s market share in Amazon.com, Soap.com
96
Case 9: Gee & Gee’s House of Brands
Performance Evaluation
This case tests the interviewee’s ability to:
• Sift through a lot of information quickly and ignore the extraneous data.
• Put him/herself “in the client’s shoes” as the CPG client undergoes the process of brand rationalization, and refreshes its growth
strategy (intentionally ambiguous prompt).
A good interviewee will drive the case after the 5 brands are eliminated, discussing the potential buyers and the growth strategy, and
will deliver a Recommendation and Next Steps slide that succinctly ties the whole case together.
97
Case Interview feedback form
Case _________________________ Case type _________________ Interviewer ____________________
Execution
Case start time ___:____
1 2 3 4 5
•Structure
¾Logical approach
¾MECE
¾Appropriate drive to solution
Comments:
•Quantitative Ability
1 2 3 4 5
¾Speed
¾Accuracy
¾Comfort, reaction to mistakes
Comments:
•Business intuition
¾Practical
¾Insightful
¾Breadth & depth across multiple functions
¾Creativity
1 2 3 4 5
Comments:
Framework development
Framework explanation
Case discussion
______ min
______ min
______ min
Case end time ___:____
Overall Rating: 1 2 3 4 5
Strengths
Communication
1 2 3 4 5
•Professionalism
¾Poise
¾Confident-Persuasive
¾Articulate-concise
¾Client ready
Comments:
Weaknesses
•Written
¾Clarity of writing and page layout
¾Ability to refer back
¾Comfort, reaction to mistakes
1 2 3 4 5
Comments:
Behavioral (optional)
•Quality of star stories
•Length
•Clarity
•Relevance
1
1
1
1
2
2
2
2
3
3
3
3
4
4
4
4
5
5
5
5
Comments:
Key: 1=Bottom 10%, 2= 10th-25th percentile, 3=
middle 50%, 4= 75th-90th percentile, 5=Top 10%
CASE 10 – GOING GREEN
99
Case 10: Going Green
Deloitte Case Writing
Competition 3rd Place
Behavioral Questions
•
•
Describe a time a teammate was not pulling their weight. What did you do about it?
What three things would your previous supervisor identify as your areas of improvement?
Prompt
Over the last few years some states have legalized medical marijuana sales on a prescription basis, and some have even legalized
recreational use. The cultivation and sales of marijuana most often take place in small storefronts called dispensaries. In most states,
limits have been created on how many dispensaries are allowed to exist at any one time.
Your client, North Carolina Tobacco Company, made $8 Billion in revenue and $2 Billion in profits last year, but has seen declining use
of cigarettes in the United States, which currently makes up 25% of its total revenue and profit. NC Tobacco is considering moving into
the recreational marijuana market. What should they do? Assume that federal regulations are not a concern in this case.
100
Case 10: Going Green
Interviewer Guidance
Provide if requested:
• Global use of tobacco has not declined and is even increasing in some areas
• NC Tobacco currently grows and processes cigarette/tobacco products, which are then sold to retailers
• Dispensaries grow, process and sell their own products directly to consumers
• NC Tobacco is interested in diversifying their portfolio of products
• NC Tobacco is normally focused on long-term profitability, but because this is a very new market they aren’t completely sure what
other considerations they should be thinking about
• NC Tobacco only interested in entering the recreational market, not the medical marijuana market
A good candidate will recognize that this is a market entry question. The framework can include:
• Market: Market Size, barriers to entry, consumer profile
• Entry: Buy, Build, Partner
• Economics: Costs, Revenue, synergies with cigarette business, product mix,
• Risks: underdeveloped market, PR risk, vertical integration in marijuana value chain, cannibalization, detracting from core business
101
Case 10: Going Green
Prompt
NC Tobacco is interested in Washington and Colorado, which are two states that have legalized recreational use of marijuana. What is
the potential market size in Washington and Colorado?
Interviewer Guidance
Guide the candidate toward a top-down approach. Provide the following information if requested:
•
•
•
•
•
•
Colorado Population: 5 Million
Colorado Population that smokes: 15%
Washington Population: 7 Million
Washington Population that smokes: 10%
Number of grams consumed per week: 1
Price per gram (assume this is the equivalent of 1 marijuana cigarette): $15
Candidate should lay out information requested on an organized chart or data table.
Analysis
Washington Market size: $15/gram * 50 grams/yr * 7M people * 10% = $525 M
Colorado Market Size: $15/gram *50 grams/yr * 5M people * 15% = $562.5 M
Candidate should note a fairly large market size relative to current NC Tobacco profits, and a relatively larger market size in Colorado.
102
Case 10: Going Green
Prompt
Now that NC Tobacco understands the market size, how should they enter the market?
Interviewer Guidance
The candidate should analyze the cost/benefits for buy, build or partner. Guide them to the primary analysis of buy or build, if they
don’t arrive there quickly. If candidate inquires about JV, assume NC Tobacco wants full control of the process. The candidate should
approach this in a structured way that analyzes the positives and negatives of each. Utilizing a table is one way to facilitate this:
Analysis
Strategy
Buy
Build
Benefits
•
Quick to ramp up and capitalize on first mover
advantage
Utilize local expertise
Few states have marijuana cigarettes so easy to
consolidate
Utilize local brand recognition
•
•
•
Easier to build culture
Few consolidated competitors means less competition
Similar products may allow ease of entrance into market
Integration into new company
Scattered, independent operators may make
consolidation challenging
Financing may be challenging for marijuana dispensary
purchases
•
Limited licenses distributed restrict ability to build from
scratch
Time to grow plants, establish brand name and sell may take
too long – other competitors may enter
•
•
•
Disadvantages
•
•
•
•
Recommendation
Candidate should recall limited amount of licenses distributed and recognize that building would be more difficult. Client should buy
rather than build.
103
Case 10: Going Green
Prompt
Which market should NC Tobacco enter, if any? How would you determine this?
Interviewer Guidance
Guide the candidate towards an NPV analysis to determine of the value of purchased dispensaries to NC Tobacco. Once they have
asked for financial information, provide Exhibit 1.
The first step of this analysis is to determine the revenue for each individual dispensary. Candidate should recognize that they require
the number of individual dispensaries in each state. See below for information – individual revenue numbers are on interviewer copy
of Exhibit 1.
• Total number of dispensaries in Colorado: 100
• Total number of dispensaries in Washington: 200
One they calculate the individual revenue, the candidate should begin pursuing an NPV valuation with the data at hand. Provide the
following information upon request.
•
•
•
•
•
Total number of dispensaries in Colorado available for sale: 10
Estimated purchase price of each Colorado dispensary: $4M
Total number of dispensaries in Washington available for sale: 30
Estimated purchase price of each Washington dispensary: $1.5M
Discount rate: 10% (assume the NPV is in perpetuity)
NOTE: Candidate should recognize that NC Tobacco can only purchase a portion of the dispensaries in each market. Guide the
candidate towards this realization if not acknowledged or questioned when they arrive at that part of the calculation.
104
Case 10: Going Green
Exhibit 1
Estimated Income Statement for a Future NC Tobacco Dispensary
Colorado
Washington
Revenue
?
?
Cost of Goods Sold
$2,175,000
$1,050,000
Overhead
$1,100,000
$450,000
Salary
$525,000
$375,000
105
Case 10: Going Green
Exhibit 1: Interviewer Guidance
Estimated Income Statement for a Future NC Tobacco Dispensary
Colorado
Washington
Revenue
$5,625,000
$2,625,000
Cost of Goods Sold
$2,175,000
$1,050,000
Overhead
$1,100,000
$450,000
Salary
$525,000
$375,000
106
Case 10: Going Green
Analysis
Colorado
Washington
Market Size
$562,500,000
$525,000,000
# of Dispensaries
100
200
Revenue/Dispensary
$5,625,000
$2,625,000
Cost of Goods Sold
($2,175,000)
($1,050,000)
Overhead
($1,100,000)
($450,000)
Salary
($525,000)
($375,000)
CF/store
$1,825,000
$750,000
# of stores available for purchase
10
30
Total CF/Store
$18,250,000
$22,500,000
Discount Rate
10%
10%
DCF of purchased stores
$182,500,000
$225,000,000
Cost to purchase 1 store
Cost to purchase available stores
($4,000,000)
($40,000,000)
($1,500,000)
($45,000,000)
NPV
$142,500,000
$180,000,000
Recommendation
A good candidate will immediately note the higher NPV for Washington over Colorado. An excellent candidate will realize that both are viable
options due to the positive NPV..
107
Case 10: Going Green
Prompt
The CEO of NC Tobacco is walking in the door, and is interested in seeing what you have discovered.
Interviewer Guidance
Candidate should provide a conclusion clearly identifying the recommendation, along with the risks associated with the strategy.
Recommended action would be to move forward with purchase of both Colorado and Washington dispensaries due to NPV, but the
candidate can make a case for either moving forward or for not purchasing as long as sufficient support is provided. After the
candidate completes their conclusion, test the candidates poise by pushing back with a few contrary points, some of which are listed
on the following page.
108
Case 10: Going Green
Analysis
Potential rationale for moving forward with purchase:
• Positive NPV
• Higher profit margin than cigarettes
• First mover advantage
• Potential high-growth market as more states legalize
• Synergistic opportunities in supply chain, marketing, etc.
• New (and highly loyal) customer base
• Cigarettes potentially inviable for long term
Potential rationale for not continuing:
• NPV relatively small
• Potential variability in projected vs. actual income statement estimates
• Potentially low estimate of purchase price (given low NPV/store)
• Potential first mover disadvantage – (i.e. free rider problem)
• Negative PR for getting in ‘drug’ business
• Potential substitution of cigarette sales
• Potential consumer distaste for ‘big business’
• Problems with financing (banks don’t want to finance due to risks associated with Marijuana)
• Cigarette sales still strong abroad – focus on international opportunities
• NC Tobacco moving into unfamiliar part of value chain (retail in addition to manufacturing)
109
Case 10: Going Green
Performance Evaluation
• This case tests the candidate’s ability to:
o Work through complicated math
o Develop structured approaches to problems
o Recall key facts discussed earlier in the case
o Understand key factors that drive market entry and M&A cases
o Make a recommendation in the face of ambiguous information
o Remain professional in a business case that may otherwise encourage individuals to lose their professionalism
• Good interviewees will:
o Will have an understanding where the case is going throughout
o Have 1-2 math errors but recovers appropriately
o Displays good ability to utilize public math
o Creates basic MECE structure (bucketed approach, etc.) to analyze problems
o Provides conclusion with support
o Provides a recommendation after analysis with 3-4 potential risk factors
o Maintains professional composure throughout
• Exceptional interviewees will
o Drive the case forward throughout with hypothesis based inquiry
o Have 0 math errors
o Will maintain composure throughout the math
o Add creative ideas to qualitative analysis
o Addresses prompts with advanced matrices or analytical structures that show depth of thinking and organization
o Is engaging, displays interest in the subject and has appropriate body posture and presence
o Provides a strong, efficient, concise recommendation with at least 4-5 risk factors.
110
Case Interview feedback form
Case _________________________ Case type _________________ Interviewer ____________________
Execution
Case start time ___:____
1 2 3 4 5
•Structure
¾Logical approach
¾MECE
¾Appropriate drive to solution
Comments:
•Quantitative Ability
1 2 3 4 5
¾Speed
¾Accuracy
¾Comfort, reaction to mistakes
Comments:
•Business intuition
¾Practical
¾Insightful
¾Breadth & depth across multiple functions
¾Creativity
1 2 3 4 5
Comments:
Framework development
Framework explanation
Case discussion
______ min
______ min
______ min
Case end time ___:____
Overall Rating: 1 2 3 4 5
Strengths
Communication
1 2 3 4 5
•Professionalism
¾Poise
¾Confident-Persuasive
¾Articulate-concise
¾Client ready
Comments:
Weaknesses
•Written
¾Clarity of writing and page layout
¾Ability to refer back
¾Comfort, reaction to mistakes
1 2 3 4 5
Comments:
Behavioral (optional)
•Quality of star stories
•Length
•Clarity
•Relevance
1
1
1
1
2
2
2
2
3
3
3
3
4
4
4
4
5
5
5
5
Comments:
Key: 1=Bottom 10%, 2= 10th-25th percentile, 3=
middle 50%, 4= 75th-90th percentile, 5=Top 10%
CASE 11 – ALLHEALTHY CRM
112
Case 11: AllHealthy CRM
Prompt
Your client, AllHealthy, is one of the largest health plans in the United States with over 30,000 employees. They are facing drastic
changes in the health care industry. Healthcare reforms have pushed AllHealthy to pursue a route of customer-centric strategies. To
remain competitive with the raise of Health Care Exchanges, your client has decided to implement a Client Relationship Management
(CRM) system in order to enhance the customer and employee experience.
Currently, contact center associates have no visibility into customer call history. When a customer calls with a follow up question, new
cases are created in AllHealthy’s legacy CRM system instead of being attached to the original case. Additionally, when calls are
transferred, the next associate does not the previous call history and must re-ask demographic and issue questions. This process
decreases customer satisfaction and leads to re-work and decreased productivity for contact center associates.
You are the change management lead for the new CRM system adoption project. AllHealthy wants to understand how you will help
them prepare their business for this large scale change.
There are several questions and considerations they want you to address in your plan:
Who are the stakeholders? How will you communicate to these stakeholders?
What are the change issues and how will you address them?
How will you measure success?
Interviewer Guidance
Note: Human Capital cases are intended to be carried in a conversational manner. They may take multiple different routes and have
multiple acceptable answers. The candidate should not abandon the use of a framework. The focus of this case is on the approach
needed to mange the proposed changes in the organization.
113
Case 11: AllHealthy CRM
Analysis
Who are the stakeholders? How will you communicate to these stakeholders?
• Stakeholders: Leadership, contact center associates, customers, and rest of organization
• Consider how the organization currently receive communications and leverage current policies and procedures.
• Identify change champions and change agents, some of which may serve as super-users for the IT adoption project
• Videos can provide context to the reasons why the new CRM system creates greater value for stakeholders
• Ask for honest and open feedback through anonymous surveys
What are the change issues and how will you address them?
• Leadership alignment: While top leadership may want the new CRM system, leadership throughout all levels should be engaged. The reasons
for the change must be explained and understood by all stakeholders as well as how they will be rewarded.
• Buy-in: Change is always met with resistance. Employees need to see that leadership is aligned and are all behind the new CRM system.
Change agent networks should be set up and provided with speaking points to engage the rest of the organization.
• Communications: Mistrust and resistance is rampant when employees do not know that change is coming. Clear, consistent, and early
communications plans help to facilitate feedback and manage negative perceptions.
• Training: While employees may undergo training, the main consideration here is adoption. The training must be concise, yet thorough. It must
take into account knowledge gaps, competency tests, and continued use post deployment.
• Incentives: Employees are more likely to adopt if there is an established benefit or incentive for the new system. Design and implement or tie
the adoption to Performance Management.
How do you measure success?
Determine a collective, measurable set of success metrics at the onset of the project from the perspective of leadership, customers, and contact
center associates. Examples include:
• 75% employees trained, logged in, and using new system by the end of the deployment
• Greater customer satisfaction on surveys relating to call quality
• Enhance employee satisfaction, adoption, and productivity through surveys and call metrics like call issue resolution time, open issue past due,
etc
114
Case 11: AllHealthy CRM
Performance Evaluation
The case tests candidates’ ability to critically think about IT adoption projects from the lens of a Human Capital practitioner.
Expected: The candidate will recognize that the CRM project will affect the entire organization and will touch on the major points
mentioned.
Good: The candidate will touch on the major points mentioned and also provide his/her analysis in a structured framework.
Excellent: The candidate will thoroughly discuss the major components of change management in a thoughtful and structured
framework. The candidate will show an in-depth understanding of Human Capital concepts and be able to prioritize change
management issues.
Behavioral Questions
• Tell me about a weakness that you have turned into a strength.
• Tell me about a failed client interaction and how you have grown from that experience.
115
Case Interview feedback form
Case _________________________ Case type _________________ Interviewer ____________________
Execution
Case start time ___:____
1 2 3 4 5
•Structure
¾Logical approach
¾MECE
¾Appropriate drive to solution
Comments:
•Quantitative Ability
1 2 3 4 5
¾Speed
¾Accuracy
¾Comfort, reaction to mistakes
Comments:
•Business intuition
¾Practical
¾Insightful
¾Breadth & depth across multiple functions
¾Creativity
1 2 3 4 5
Comments:
Framework development
Framework explanation
Case discussion
______ min
______ min
______ min
Case end time ___:____
Overall Rating: 1 2 3 4 5
Strengths
Communication
1 2 3 4 5
•Professionalism
¾Poise
¾Confident-Persuasive
¾Articulate-concise
¾Client ready
Comments:
Weaknesses
•Written
¾Clarity of writing and page layout
¾Ability to refer back
¾Comfort, reaction to mistakes
1 2 3 4 5
Comments:
Behavioral (optional)
•Quality of star stories
•Length
•Clarity
•Relevance
1
1
1
1
2
2
2
2
3
3
3
3
4
4
4
4
5
5
5
5
Comments:
Key: 1=Bottom 10%, 2= 10th-25th percentile, 3=
middle 50%, 4= 75th-90th percentile, 5=Top 10%
CASE 12 – COYOTES
117
Case 12: Coyotes
Deloitte Case Writing
Competition Winner
Prompt #1
Your client is the American Southwest Preservation Trust (ASPT). The trust is a non-profit organization tasked with promoting
conservation & eco-tourism in the American Southwest. One of the biggest tourist draws is local fauna, particularly coyotes. The
coyote population has declined significantly from historical levels. The Trust requests your help to figure out why & what it should do.
Behavioral Questions
• If your C-LEAD teammates had to describe your biggest point for improvement, what would it be and why?
• Can you tell me about a time when you handled an especially sensitive or high-risk assignment or project?
Case Guidance
This case is geared towards challenging brainstorming and frameworking skills, while at the same time honing public math and
analytical skills. It simulates cases which have uncommon or unanticipated structural elements, and may be especially appropriate for
individuals who need practice building creative frameworks.
Interviewer Guidance – Prompt Q&A
Provide the additional information if requested:
• Coyotes are medium size canine carnivores (between a fox and a wolf) native to the American Southwest.
• Coyote populations were historically stable until recently. Only 10,000 coyotes exist today down from 25,000.
• Geographically, only consider the area administered by the trust.
• No other fauna or flora have been impacted as much.
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Case 12: Coyotes
Interviewer Guidance: Framework
Species loss is a not a common framework, and so be prepared to iterate by asking “what else.” Quality frameworks should include at
least the following “buckets” or “nodes” (for those who use trees):
- Environmental factors (pollution, climate change, species migration)
- Dietary factors (number of predators, number of prey, availability of water)
- Human-generated factors (hunting, poaching, habitat loss)
- Disease and Genetics
Award brownie points for additional creative ideas.
Steer the candidate gradually towards human-generated factors (habitat loss and hunting). Have the candidate brainstorm for a few
minutes how habitat loss would impact the species, especially given that other factors haven’t changed significantly with time (prey
availability, water, hunting, etc).
A strong candidate may immediately guess changing birth rates, fertility, and the availability of finding partners. Regardless of whether
the candidate gets to this or not, steer the candidate by issuing the next prompt (below).
Prompt #2 – For Analysis
The client is likewise concerned by the impact of development and interactions with man on the coyote population, and wants to
understand the expected impact on the population this year. ASPT has provided a few demographic details they have on the coyote
population in the area (Exhibits A and B).
119
Case 12: Coyotes
Exhibit A: Habitat Loss
The coyote population is currently split into three groups (shown by silver clouds) following the construction of highways (black
lines) and cities (yellow dots).
Group B
Group
oup A
Group C
Gr
120
Case 12: Coyotes
Exhibit B: Group Statistics
The following table shows estimated demographics by group
Group
Percent of
Total Pop
Percent Male
Percent Female
Hunting Licenses
A
40
60
40
800
B
20
35
65
200
C
40
90
10
400
121
Case 12: Coyotes
Interviewer Guidance: Exhibits and Analysis Part 1
From the exhibits, the candidates should point out links between groups, unequal gender sizes, and different numbers of hunting
licenses for similarly sized territories.
The candidate should grasp that the overall goal of the analysis is to find out how populations are changing. The first step is finding out
the current number of coyotes in each group by gender.
The total population should have been asked for during the Q&A portion. If the candidate did not get to it then, provide the number
now (10,000).
The first step is to break out the 10k by each group by gender. If the candidate doesn’t think of this, steer them towards it. Some
candidates may try to jump towards calculating births and deaths, in which case they guessed the missing steps (see next section), but
have them work out the calculations by gender and group first.
Analysis Part 1 – Solution
The candidate should arrive at the following numbers (series of multiplications) needed for the second part.
Group
Percent of
Total Pop
Number of Coyotes
Number
of Male
Number
of Female
A
40
4000
2400
1,600
B
20
2000
700
1,300
C
40
4000
3600
400
122
Case 12: Coyotes
Interviewer Guidance: Analysis Part 2
Let the candidate drive the continuation of the analysis. If the candidate is lost, ask them how they would calculate the change in
coyotes every year. The general equation they should arrive at:
Change in coyotes for this year = Number Born in this year – Number Died in this year. Focus them on calculating the change for this
year!
Several pieces of information have been deliberately withheld from the candidate. A perceptive candidate will ask for them:
• Litter size: This is the number of coyotes born to each pregnant female. Assume 2 pups/litter.
• Gestation period: Assume coyotes breed once per year.
• Partner fidelity: Assume that coyotes are monogamous (meaning that once a male coyote has impregnated one female coyote, he
will not impregnate another female coyote).
• Availability or % Mate: Not all coyotes will breed each year. Assume that only 40% of potential pairs birth a litter each year.
• The candidate should notice that hunting isn’t the only cause of death. Assume that all other deaths are natural and the death rate
is 10% (applies to adults only – use beginning population and don’t include pups).
• Assume that hunting deaths happen at the end of the year, and hence so is cumulative with the natural deaths.
Other questions that the candidate could ask:
• What are the frequency of hunting licenses? Answer: annual
• How many coyotes does a license permit to be killed? Answer: one
• Can both males and females be hunted? Answer: yes
• Do all hunting licenses get used? Answer: assume yes
Lastly, because of the monogamous nature of coyotes, the candidate should pick up on the fact that the lesser occurring gender in
each territory is the limiting factor on births.
123
Case 12: Coyotes
Analysis Part 2 – Solution
The candidate should arrive at the following numbers.
The equations for getting them are:
# of Births: # of Pairs * % Mate * Birth Rate
# of Deaths: (Beginning Population – Hunting Deaths) * Natural Death Rate
Note that calculating Deaths as “(Beginning Population * Natural Death Rate) + Hunting Deaths” wrongfully assumes that none of the
hunted coyotes would have died naturally if they had not been hunted
Group
Limiting Gender
# of Pairs
% Mate
Birth Rate
# of Births
A
Female
1600
40%
2
1,280
B
Male
700
40%
2
560
C
Female
400
40%
2
320
Group
Beg. Population
Hunting Deaths
Natural Deaths
# of Deaths
A
4,000
800
320
1,120
B
2,000
200
180
380
C
4,000
400
360
760
124
Case 12: Coyotes
Advanced Conclusions from Analysis
A very perceptive candidate should notice:
• The decline is gradual (only 100 coyotes per year). Hence the historical number of 25k must either imply a long time ago or a large
drop due to other circumstances.
• The C population group will be gone in approximately 10 years, or even sooner if females are hunted or die disproportionately.
• The other groups should grow if hunting and natural deaths affect both genders equally and at present rates.
• Overall, coyotes are likely to remain in the Southwest.
Group
Total Births
Total Deaths
Total Change
A
1,280
1,120
160
B
560
380
180
C
320
760
-440
Total
2,160
2,260
-100
125
Case 12: Coyotes
Prompt #3 (if time)
ASPT is considering lobbying for a reduction in hunting licenses. How would you design a proposed reduction, and what information
would you use to support it?
Interviewer Guidance:
The candidate should hopefully mention some of the bullet points under the advanced analysis section if they have gotten to this
point. If not, spend some time with the analysis results and ask the candidate what they imply.
Afterwards, redirect the candidate towards the topic of hunting licenses. Ask if hunting licenses are really the issue. If after the
candidate struggles for a few minutes, they are still lost, point out that more hunting licenses were issued for Group A rather than C,
even though the groups were the same size.
This should mean that Group A should not be sustainable, while Group C should be growing. However, the reality is exactly the
opposite. Ask the candidate why?
The candidate should quickly zero in on two potential culprits:
•
The gender ratio in Group A v. Group C
•
The percentage that mate
Since the percentage that mate (and other factors) are constant, the gender ratio must be the key. Once the candidate realizes this,
proceed to the recommendation portion of the case.
126
Case 12: Coyotes
Recommendation
Recommendations should include:
• Overall, the population of coyotes is not at risk.
o One group of coyotes (Group C) will die out within 10 years, if no interventions are attempted.
• ASPT can help rescue or foster coyote population growth by:
o Evening out the gender ratio between populations by building wildlife bridges, transplanting coyotes, etc.
o Helping coyotes locate each other and increasing the mating pair percentage.
o Increasing fertility levels (# of pups/pair) using medical techniques.
• (For those who made it to Prompt #3) The ASPT should not invest significant resources in a legislative battle against hunting licenses
if licenses are maintained at the current levels.
o That said, a temporary hunting ban in Group C would likely help as an effort is made to stabilize the female population
127
Case 12: Coyotes
Performance Evaluation
• What does the case test?
This case involves a non-traditional framework, extensive “public math,” and a logic puzzle with clearly identifiable missing pieces. This
makes this a fairly all-around good practice case. However, it is especially appropriate for individuals that need practice with being
creative with frameworks or figuring out withheld pieces of a puzzle.
Expected: The candidate’s framework may have missing elements, but should be MECE. The candidate is able to brainstorm ideas for
species loss, and perhaps habitat loss. Once provided with the framework elements, the candidate is able to proceed to and solve
Analysis – Part 1. The candidate may get stuck with Analysis Part 2 and will probably not get all the way through it and to Prompt #3.
Recommendations are likely to be primarily around the framework and exhibit observations.
Good: The candidate creates a complete MECE framework, and is able to brainstorm ideas for habitat loss. The candidate does a good
job noticing the hunting licenses, gender ratios, and groups in the exhibits. With minimal direction, the candidate is able to solve
Analysis Part 1. The candidate makes it through Analysis Part 2 with minimal or moderate assistance and attempts to make advanced
observations. The candidate probably won’t get to the third prompt. Recommendations from the analyses #1 and #2 should be correct,
but are likely to be incomplete.
Excellent: The candidate is undaunted by a uncommon framework, and comes up with a solid MECE framework. He or she is able to
identify habitat loss, and provides interesting and creative brainstorming ideas. Analyses #1 and #2 are solved with minimal direction,
and the candidate is able to make advanced observations. Analysis #3 is solved with minimal to moderate assistance, and
recommendations are complete, clear, and concise.
128
Case Interview feedback form
Case _________________________ Case type _________________ Interviewer ____________________
Execution
Case start time ___:____
1 2 3 4 5
•Structure
¾Logical approach
¾MECE
¾Appropriate drive to solution
Comments:
•Quantitative Ability
1 2 3 4 5
¾Speed
¾Accuracy
¾Comfort, reaction to mistakes
Comments:
•Business intuition
¾Practical
¾Insightful
¾Breadth & depth across multiple functions
¾Creativity
1 2 3 4 5
Comments:
Framework development
Framework explanation
Case discussion
______ min
______ min
______ min
Case end time ___:____
Overall Rating: 1 2 3 4 5
Strengths
Communication
1 2 3 4 5
•Professionalism
¾Poise
¾Confident-Persuasive
¾Articulate-concise
¾Client ready
Comments:
Weaknesses
•Written
¾Clarity of writing and page layout
¾Ability to refer back
¾Comfort, reaction to mistakes
1 2 3 4 5
Comments:
Behavioral (optional)
•Quality of star stories
•Length
•Clarity
•Relevance
1
1
1
1
2
2
2
2
3
3
3
3
4
4
4
4
5
5
5
5
Comments:
Key: 1=Bottom 10%, 2= 10th-25th percentile, 3=
middle 50%, 4= 75th-90th percentile, 5=Top 10%
CASE 13 – FERRY FOLLIES
130
Case 13: Ferry Follies
Deloitte Case Writing
Competition 2nd Place
Prompt
Your client is a Department of Transportation for a state in the northwestern United States. The Department of Transportation controls
six modes of transportation: aviation, biking, ferries, rail, public transportation (e.g. busses), and walking. With budget cuts and rising
energy costs projected for the coming fiscal year, your client evaluated each mode of transportation and determined that it must
improve the financial performance of its ferries. The Department of Transportation has employed your firm to assess the current state
of its ferry operations and recommend a strategic plan for improving financial performance.
Behavioral Questions
• Imagine that it is a Friday afternoon and you have just been given your new client assignment to begin on Monday morning. What
steps will you take to prepare for your first day? What steps will you take when you arrive at the client site to get up to speed?
• What type of teammate are you?
Interviewer Guidance
• Provide this information to the candidate if asked:
o The client defines “improved financial performance” as increased profit margins.
o The client wants to cut $70M from its annual budget after 2 years
o There are 24 ferry vessels and 18 ferry terminals. The ferries are used by both commuters and tourists.
o Over 20 million passengers travel on these ferries annually.
• Note: Not all of this information is relevant to the case; a strong candidate will be able to assess what is salient.
131
Case 13: Ferry Follies
Analysis
• The candidate should ask about the measurement of financial performance. If they have not, encourage them to think through
various ways to measure financial performance and guide them towards profit margin.
• Prompt 1: Identify sources of cost and revenue for the Department of Transportation’s ferry system.
Recommendation
• These brainstorming questions test the candidate’s ability to think through the underpinnings of transportation operations. Encourage
the candidate to be creative when brainstorming.
• Answers may include but are not limited to:
COST
o Ferry Maintenance
o Fuel
o Employees: salaries, wages, benefits
o Overhead (e.g. Executive, HR, Legal)
o Marketing & Advertising
o Weather Services
REVENUE
o Fares/Tickets
o Advertising (e.g. promotions)
o Corporate partnerships
o Food and drink on board
• Don’t hesitate to ask “what else” to push them.
o For example, if they list “employees” as a source of cost, encourage them to think through categories of employees (DOT
administrators, ferry captains, ferry crews, ticket office staff, etc.)
• Strong candidates will identify that cost is a more salient option than revenue for improvement.
132
Case 13: Ferry Follies
Analysis
• Prompt 2: The client has decided to focus on cost control. Your consulting team investigated the cost structure of the ferries and
identified four main cost buckets: diesel fuel, salaries & wages, overhead costs, and miscellaneous (e.g. dock fees and ferry
maintenance). We know that:
o Diesel fuel accounts for 1/3 of the client’s total ferry budget, which is $270 million
o There are approximately 2000 employees with average salaries of $54,000
o Overhead is 20% of all costs
Recommendation
• This question tests the candidate’s ability to process ambiguous information, identify missing pieces, develop a clear
understanding of the client’s cost structure, and perform accurate calculations.
• Strong candidates will create a table to look at each of the four cost buckets and reach the following conclusions, remarking on
the implications of each:
Cost bucket
Fuel
Wages
Overhead
Miscellaneous
TOTAL
Percent of total cost
33%
40%
20%
7%
100%
Total (in $M)
90.0
108.0
54.0
18.0
270.0
Calculations
33% of $270
2000 x 54k
20% of $270
Plug
Given
133
Case 13: Ferry Follies
Analysis
• Prompt 3: Given the cost structure, the client would like your consulting team to determine if the targeted savings are feasible
and identify potential areas for cost reduction.
• Hint: What percentage cost reduction would be needed in order for the client to shed $70M from the ferry budget?
Recommendation
• Note: This question is intentionally ambiguous and tests the candidate’s ability to drive the case, handle ambiguity, and think
logically under pressure. If needed, remind the candidate that the client aims to achieve $70M in savings in two years.
• Calculation: $70M of $270M is approximately a 25% cut.
• A strong candidate will:
o A. Investigate the four major cost buckets and brainstorm solutions to each
- Examples: Using alternative fuel sources other than diesel, explore staff reductions, pooling shared services across
Department of Transportation divisions, better understand the “miscellaneous” cost bucket
o B. Prioritize solutions that address the client’s primary cost centers
- Diesel fuel and wages collectively account for over 3/4 of the client’s annual costs; solutions that address these highcost buckets are more likely to help the client achieve significant cost savings than solutions focused on overhead or
miscellaneous costs
o C. Determine if $70M in 2 years is feasible
- $70M is a ~25% cost reduction in 2 years; this tests the candidate’s logical thinking
o D. Create a recommendation
- A strong recommendation will include an assessment of whether the client’s goal is feasible and specific actions the
client may take to reach this goal AND/OR a suggested revision of the client’s goal – either should mention the targeted
timeframe
134
Case 13: Ferry Follies
Analysis
• Prompt 4: The client has requested that you design an implementation strategy to achieve the targeted savings of $70M in 2
years. They have provided this additional information:
• Switching from diesel to alternative fuel sources will cut fuel costs by 45% over the next two years
• The client has told us they can accommodate the following labor reductions over the next two years: 10% cut of ferry
captains, 500 cut administrative staff, 100 cut operational staff
• Is the client’s $70M goal feasible? What potential hurdles or backlashes could results from these cuts?
Recommendation
• Provide this additional information if asked:
# of Employees
% of Total
Drivers
50
2.50%
Admin
1300
65.00%
Operational
650
32.50%
TOTAL
2000
100%
• Calculations:
Fuel Costs
Diesel
Gas
Cost cut:
Salary
$110,000
$50,000
$58,000
$54,100
Total Wages
$5,500,000
$65,000,000
$37,700,000
$108,200,000
Labor Costs
Total Cost Cuts (Million)
Total
$90,000,000
GAS
40.5
Drivers
$550,000
45% savings
Labor
31.4
Admin
$25,000,000
$40,500,000
Total:
71.9
Operational
$5,800,000
$31,350,000
• The candidate should conclude that the client can reach the targeted $70M savings by implementing these recommendations. Risks include fuel
contract renegotiation challenges and negative PR from laying off state government employees.
• Request that the candidate articulate succinctly the recommendation, risks, and next steps as if presenting to a client.
#
5
500
100
Salary
$110,000
$50,000
$58,000
135
Case 13: Ferry Follies
Performance Evaluation
• This case tests the candidate’s ability to:
o Understand the underpinnings of profit margins:
- Determine appropriate measures of financial performance
- Brainstorm sources of costs and revenue as they relate to profit margin and determine which area should be
investigated
o Determine what information is salient to “solve” the case
- Employ critical thinking skills to weed through information
o Think logically in ambiguity
o Complete calculation quickly and accurately
• A strong candidate will:
o Hone quickly in on cost reduction
o Handle the math of the cost table smoothly and without aid
o Drive the case with little prompting by the interviewer
• An exceptional candidate will
o Transition between Prompt 2 and Prompt 3 without the interviewer asking the next question
o Exhibit “what else” thinking and provide creative brainstorming
o Create a logical, actionable, prioritized recommendation for the client with specific time parameters
136
Case Interview feedback form
Case _________________________ Case type _________________ Interviewer ____________________
Execution
Case start time ___:____
1 2 3 4 5
•Structure
¾Logical approach
¾MECE
¾Appropriate drive to solution
Comments:
•Quantitative Ability
1 2 3 4 5
¾Speed
¾Accuracy
¾Comfort, reaction to mistakes
Comments:
•Business intuition
¾Practical
¾Insightful
¾Breadth & depth across multiple functions
¾Creativity
1 2 3 4 5
Comments:
Framework development
Framework explanation
Case discussion
______ min
______ min
______ min
Case end time ___:____
Overall Rating: 1 2 3 4 5
Strengths
Communication
1 2 3 4 5
•Professionalism
¾Poise
¾Confident-Persuasive
¾Articulate-concise
¾Client ready
Comments:
Weaknesses
•Written
¾Clarity of writing and page layout
¾Ability to refer back
¾Comfort, reaction to mistakes
1 2 3 4 5
Comments:
Behavioral (optional)
•Quality of star stories
•Length
•Clarity
•Relevance
1
1
1
1
2
2
2
2
3
3
3
3
4
4
4
4
5
5
5
5
Comments:
Key: 1=Bottom 10%, 2= 10th-25th percentile, 3=
middle 50%, 4= 75th-90th percentile, 5=Top 10%
CASE 14 – AUTODRIVERS
138
Case 14: AutoDrivers
Prompt
A large auto insurance company, AutoDrivers is exploring telematics and has identified whether OBD (On-Board Diagnostics) or a
mobile solution is the right fit for them. Telematics is defined as the convergence of informatics and telecommunications to transmit
data. Think about Fit Bit, On Star which collect and use data to deliver additional services to consumers. With Telematics, AutoDrivers
can capture driving data and use it to better price insurance premiums.
The company hopes that using telematics will enable it to enroll new customers and reverse its decline in market share. The company
has hired you to identify which telematics strategy is the right fit for them. The company is also interested in understanding how it can
increase its engagement with its customers and provide them additional services. Specifically they are interested in growing in states
where AutoDrivers has a low brand perception.
Behavioral Questions
• Tell me a time when you encountered a challenging situation and how did you overcome it?
• What are your areas of development?
Interviewer Guidance
This is a strategy case where the interviewee will identify the right strategy for AutoDrivers and help it select either the OBD
approach or the mobile app approach.
Additional Information
1) AutoDrivers is a medium size auto insurnace company operating mostly in NJ, PA and MD
2) AutoDrivers currently only offers auto insurance
139
Case 14: AutoDrivers
Interviewer Guidance Continued
3) AutoDrivers had revenues of $300 M in 2013 and has seen a 5% slide in market share for each of the last 3 years
4) The US auto insurance industry as a whole had revenue of $3B in 2013
5) Major competitors of AutoDrivers are all currently exploring telematics options and operate in the same geographies as AutoDrivers
6) If interviewee asks about customer engagement then explain how insurance is a commoditized business and insurance companies
are developing services (Competitions for safe drivers, teen-driving programs) to differentiate themselves from competitors and
increase their engagement with their customers.
Analysis
Question 1
Ask the interviewee to identify what are the first steps that AutoDrivers should consider when deciding which telematics strategy to
implement.
Interviewer Guidance
Expected response from the interviewee should consider several factors including, margin for OBD vs mobile solution, will AutoDrivers
be able to implement in a timely manner, what are the technology considerations for AutoDrivers (Is this a product that will be
developed inside the company or will AutoDrivers need to partner with another firm), what is competition doing
A advanced response will also consider factors such as which options offers AutoDrivers the best way to increase customer
engagement, what are some of the regulatory considerations and customer adoption rates.
140
Case 14: AutoDrivers
Interviewer Guidance Continued
After the interviewee has presented the initial framework, share Exhibit 1 with them
Question 2
Which strategy should AutoDrivers select
Exhibit 1 Guidance
Based on the information presented in the Exhibit, the interviewee should calculate two data points
1) Potential Size of the Market
• Correct Calculation should be as following
• OBD potential customers are 1000 and with an adoption rate of 25%, OBD will enable AutoDrivers to enroll 250 new customers
• Mobile solution potential customers are 1000 and with an adoption rate of 50%, mobile solution will enable AutoDrivers to enroll
500 new customers
• After the interviewee has identified the size of potential new customers, the next step is to calculate the net profitability for both
OBD and Mobile Solutions
2) Calculation of Profits (OBD)
• OBD total fixed cost = $0.9 M
• OBD variable costs are $OBD variable costs are $1400
• OBD revenue = $2000
• Margins = $2000 - $1400 = $600
• Net Profit = $600*250 customers - $0.9 M = $(0.75 M)
• The right number of customers is 250 based on the adoption rate]
141
Case 14: AutoDrivers
Exhibit 1 Guidance (Continued)
3) Calculation of Profits (Mobile Solution)
• Mobile Solution total fixed cost $2 M
• Mobile Solution variable costs are $OBD variable costs are $500
• Mobile Solution revenue = $5000
• Margins = $5000 - $500 = $4500
• Net Profit = $4500*500 customers - $2 M = $250,000
• [The right number of customers is 500 based on the adoption rate]
4) Based on the calculation of profitability, the interviewee should recommend that AutoDrivers choose the strategy of
Mobile Solution
Analysis
Question 3
Ask the interviewee to identify what are some of the pros and cons of choosing the Mobile Solution. Ensure the interviewee does
not focus on financial figures and thinks of several other reasons
142
Case 14: AutoDrivers
Exhibit 1
OBD
Mobile Solution
Potential Customer Size for telematics
10000
20000
Potential Market Share
10%
5%
Variable Marketing Cost per customer
$400
$0
Variable Equipment Cost per customer
$1000
$500
Revenue per customer
$2000
$5000
Customer Adoption Rate
25%
50%
Technology Development
Partner with a firm in NJ
Partner with a firm in China
Cost of technology development
$0.9 M
$2 M
• Expected over next 3 years
143
Case 14: AutoDrivers
Interview Guidance for Question 3
A strong interviewee will identify the following factors when evaluating the pros and cons of the Mobile Solution
Keep probing the interviewee until he or she has come up with a detailed list
Pros of Mobile Solution
Cons of Mobile Solution
Ease of use. Customers will only download a Mobile App
Reliability of data capture – Mobile technology is still
under development
High scalability for AutoDrivers
Partnering with a firm in China could increase
development lead time
Updates to technology can be easily sent to customers
Regulators could impose restrictions on collecting driving
data via mobile phone
Fits in with new customer demographics – Mobile, flexible
Higher Cap Ex
Mobile phone technology keeps improving at a high speed
High speed to market
A good interviewee will come up with a few pros and cons. Keep probing them until they have exhausted their list of responses.
An excellent interviewee will show understanding of mobile platforms and applications and be able to identify advantages of having a
mobile solution
144
Case 14: AutoDrivers
Analysis
Question 4
AutoDrivers has now requested your help to identify in which state they should pilot the Mobile Solution. What is the state for the
AutoDrivers? Share Exhibit 2 with the interviewee
145
Case 14: AutoDrivers
Exhibit 2
% of New Customers Interested in Telematics
35
40
25
NJ
PA
MD
• New customers represent the customers who are considering signing up for a telematics program provided by
Auto Drivers
• Brand Perception is based on a customer survey comparing different auto insurance companies and how they are
perceived in providing high customer engagement
146
Case 14: AutoDrivers
Exhibit 2 (Continued)
% Increase in Adoption Rates
20
15
10
5
0
Year 1
Year 2
NJ
PA
Year 3
MD
• % of Adoption Rates is the number of customers who will continue signing up for AutoDrivers Mobile solution
147
Case 14: AutoDrivers
Interview Guidance for Question 4
The interviewee should be able to identify that NJ has the highest % of new customers who might be interested in signing up for
telematics and also has the highest brand perception for Auto Drivers. This seems to be an ideal state for Auto Drivers to launch its
Mobile Solution.
However the rate of increase in the adoption rate for NJ is lower than PA and may hurt AutoDrivers in its long-term strategy of
reversing its slide in market share
Since AutoDrivers wants to increase customer engagement i.e. provide more value-added services, PA represents the best option for
AutoDrivers. The candidate should be able to tie back to the original prompt which indicated where AutoDrivers prefers to grow.
Although it has low brand perception in the state, the Mobile Solution will give it opportunity to offer new features to its customers
and increase customer engagement. The rate of increase in customer adoption is also the highest in PA which will enable AutoDrivers
to enroll new customers.
148
Case 14: AutoDrivers
Recommendation
We anticipate running into the CEO in the cafeteria. What would you say to him?
Interview Guidance for Recommendation
An average response should be concise and structured. It should include why AutoDrivers should implement the Mobile Solution and
what are some of the risks associated with implementing this solution. The interviewee should also identify which state they should
pilot the program in
Next steps
An exceptional response should include the next steps for selecting the Mobile Solution and the state to pilot the program in. These
can include developing a contract with the partner in China, ensuring that the partner can successfully develop the product in a timely
manner, identifying the distribution channels for the Mobile Solution (Agents, Third-party vendors), selecting the right marketing
strategy for the Mobile Solution and conducting a testing program to validate the solution.
Risks for telematics
• How to subside customer concerns over privacy
• Potential barriers from regulators and state governments
• Contingency plan if telematics does not succeed
149
Case Interview feedback form
Case _________________________ Case type _________________ Interviewer ____________________
Execution
Case start time ___:____
1 2 3 4 5
•Structure
¾Logical approach
¾MECE
¾Appropriate drive to solution
Comments:
•Quantitative Ability
1 2 3 4 5
¾Speed
¾Accuracy
¾Comfort, reaction to mistakes
Comments:
•Business intuition
¾Practical
¾Insightful
¾Breadth & depth across multiple functions
¾Creativity
1 2 3 4 5
Comments:
Framework development
Framework explanation
Case discussion
______ min
______ min
______ min
Case end time ___:____
Overall Rating: 1 2 3 4 5
Strengths
Communication
1 2 3 4 5
•Professionalism
¾Poise
¾Confident-Persuasive
¾Articulate-concise
¾Client ready
Comments:
Weaknesses
•Written
¾Clarity of writing and page layout
¾Ability to refer back
¾Comfort, reaction to mistakes
1 2 3 4 5
Comments:
Behavioral (optional)
•Quality of star stories
•Length
•Clarity
•Relevance
1
1
1
1
2
2
2
2
3
3
3
3
4
4
4
4
5
5
5
5
Comments:
Key: 1=Bottom 10%, 2= 10th-25th percentile, 3=
middle 50%, 4= 75th-90th percentile, 5=Top 10%
CASE 15 – STEEL WORKS
151
Case 15: Steel Works
Prompt
A large steel manufacturing company based in Chicago called Steel Works has been facing some challenging times. They are facing
pressure from competition who are stealing away customers by offering cheaper prices. Steel Works is currently exploring the option
to shut down one of its three production units to consolidate operations and reduce its total operating costs. You have been asked to
identify which production unit they should close down in order to reduce their total operating costs.
Share with interviewee Exhibit 1
Behavioral Questions
• Tell us about a time when you explored alternatives to a solution and how you went about choosing between the alternatives?
• What is your most exemplary leadership experience?
Interviewer Guidance
This case tests the interviewee’s ability to digest information and identify a solution that reduces the overall operating cost for Steel
Works. The interviewee will also be tested in his ability to identify synergies among the production units after a consolidation
process.
Additional Information
1) Steel Works is a global steel manufacturing company that has several operations in the US.
2) Its competitors include other major steel makers who offer similar products at lower prices
152
Case 15: Steel Works
Interviewer Guidance
3) Steel Works recently hired a new CEO that is open to investing in new technology as long as overall operating costs
can be reduced
4) Steel Works supplies products to several industries including aerospace, automotive, appliance makers, construction and roofing
5) Steel Works is operating in a growing steel market with a 5 Yr CAGR of 2.5%
Analysis
Question 1
What should Steel Works consider when choosing which production unit to close
Interviewer Guidance
Expected response from the interviewee should consider several factors including the following
Production Costs
Shipping Costs
Process Capability and access to technology
Potential investment required to accommodate increase in production
How will the integration be planned and executed
An exceptional response can also include the following
Will testing be required for products being moved from one facility to the other
If we reduce workforce, how will this affect the morale of the company
153
Case 15: Steel Works
Exhibit 1
B
A
Direct Shipping Route
via Canal
Shipping
Location
To Lake
Michigan
Sparkling Water Canal
Shipping
Location
Shipping
Location
Direct Shipping Route
via Trucks
ƒ
ƒ
ƒ
ƒ
C
Direct Shipping Route
via Canal
Figure not drawn to scale
A,B and C are the 3 production units of Steel Works
Shipping is managed via road and canal
Sparkling canal is expected to undergo a 50M revitalization project partially funded by Steel Works
154
Case 15: Steel Works
Analysis
Question 2
Can you come up with a new production plan for Steel Works and the impact on their total costs
Share Exhibit 2 with the interviewee
Interviewer Guidance
The interviewee should be able to correctly identify the new production plan.
The first step is calculating current production levels at each of the 3 production units. Based on the production capacity and
utilization for the 3 production units, the candidate should correctly identify spare capacity available
A
B
C
Production Capacity
2 M tons
4 M tons
1 M tons
Utilization
80%
90%
80%
Actual Production
1.6 M tons
3.6 M tons
0.8 M tons
Spare Capacity
0.4 M tons
0.4 M tons
0.2 M tons
155
Case 15: Steel Works
Interviewer Guidance
After the interviewee has identified the correct spare capacity, guide the interviewee to develop the new production plan for each
production unit with the goal of closing 1 production unit
A
B
C
Production Capacity
2 M tons
4 M tons
1 M tons
Utilization
80%
90%
80%
Actual Production
1.6 M tons
3.6M tons
0.8 M tons
Spare Capacity
0.4 M tons
0.4 M tons
0.2 M tons
TRIP Steels
1.2 M tons
2.8 M tons
0 M tons
Dual Phase Steels
0.5 M tons
0.7 M tons
0 M tons
Complex Phase Steels
0.3 M tons
0.5 M tons
0 M tons
New Production Plan
156
Case 15: Steel Works
Exhibit 2
A
B
C
Year Built
1965
1940
1955
Production Capacity
2 M tons
4 M tons
1 M tons
Utilization
80%
90%
80%
Number of Employees
1000
800
600
Workforce
Unionized
Non-unionized
Unionized
TRIP Steels
0.9 M tons
2.6 M tons
0.5 M tons
Dual Phase Steels
0.5 M tons
0.7 M tons
0 M tons
Complex Phase Steels
0.2 M tons
0.3 M tons
0.3 M tons
Production Cost
$300 / ton
$100 / ton
$ 250 / ton
Major Customers
Automotive,
Appliance
Aerospace,
Appliance
Automotive,
Aerospace
Type of Products Manufactured
ƒ
ƒ
ƒ
ƒ
ƒ
TRIP Steels, Dual Phase Steels and Complex Phase Steels are 3 types of advanced steels
Production units A and C can produce a maximum of 0.3 M tons of Complex Phase Steels
Production unit A can produce a maximum of 1.2 M tons of TRIP Steels
1 ton = 2,000 lbs
Complex Phase steels are growing due to high demand from automotive and aerospace companies
157
Case 15: Steel Works
Interviewer Guidance Continued
The interviewee should correctly allocate production by production unit
This requires taking into account the capacity constraint for Production Units A,B and C for production of Complex Phase Steels and TRIP
steels and the cost of production per production unit.
Therefore the correct recommendation is to close Production Unit C, but an excellent interviewer will be able to develop the new
production plan without too much guidance.
The interviewee should also correctly identify the new production costs
Old production costs = $ 1040 M
Production Unit A – Total tons: 1.6 M, Total cost: 1.6 M tons * $300 / ton = 480 M
Production Unit B – Total tons: 3.6 M, Total cost: 3.6 M * $100 / ton = 360 M
Production Unit C – Total tons: 0.8 M, Total cost: 0.8 M * $ 250 / ton = 200 M
New production costs = $ 1000M
Production Unit A – Total tons: 2 M, Total cost: 2 M tons * $300 / ton = $600 M
Production Unit B – Total tons: 4 M, Total cost: 4 M * $100 / ton = $400 M
Production Unit C – Total tons: 0 M, Total cost: $0 M
An excellent interviewee will recognize that although Steel Works is saving $40M by closing one production unit, it requires running the
other two production units at full capacity. It also requires shutting down an unionized facility and Steel Works may face obstacles to
successfully close it down.
158
Case 15: Steel Works
Analysis
Question 3
Present Exhibit 3 to the Interviewer and ask how this will affect the choice of Production Unit to close.
Exhibit 3 Guidance
Based on the information presented in the Exhibit, the interviewee should be able to observe the following
1) Shipping cost for Production Unit A is the highest
2) Although it is highest, it should not change the decision of Steel Works to close Production Unit C based on production constraints
3) An advanced interviewee will quickly recalculate the total costs saved after taking into account the shipping costs for
each production unit
4) Old Operating Cost with 3 Production Units (Including Shipping Costs) - $1.858 B
• Production Unit A - $800 M
• Production Unit B - $738 M
• Production Unit C - $320 M
5) New Operating Cost with 2 Production Units (Including Shipping Costs) – $1.820 B
• Production Unit A - $1000 M
• Production Unit B - $820 M
• Production Unit C - $0 M
Savings of $38 M
159
Case 15: Steel Works
Exhibit 3 – Shipping Costs
A
•
•
•
B
C
Via Canal
0
$ 105 / ton
$ 100 / ton
Via Truck
0
0
$ 50 / ton
To Production Unit
$200 / ton
0
0
Production Unit A ships products to production units B or C to ship to final customers
For production unit C, equal amount of steel is shipped via canal and truck
Above costs represents total shipping costs for each production unit.
160
Case 15: Steel Works
Analysis
Question 4
What factors should Steel Works consider when they are integrating different production units?
Interviewer Guidance
• The interviewee should be able to come up with a detailed list of factors that Steel Works should consider when integrating different
production units
o Does the new labor force have the right skills to operate on new machinery or technology that might exist in a different
production unit
o Are we going to layoff any of the workforce? If yes, how many and how will the compensation be structured
o Will any of the workforce be relocated to another production unit
o Is there any investment that would be required to ensure production units can run at 100% utilization
• An advanced response can consist of the following
o How is employee morale affected by closing of 1 production unit. How can Steel Works mitigate loss in employee morale
o Will customers care if they are being products from a different production unit
o Is there a need for a testing phase to accommodate production of new products
o Are production units setup to accommodate increase in production and manpower
o How will Steel Works deal with Union issues
o What should Steel Works do with the truck fleet used to ship steel from Production Unit C
161
Case 15: Steel Works
Recommendation
The CEO after attending a recent shareholders meeting is under pressure to reduce costs. Request the interviewee to come up with a
recommendation for the CEO.
Interviewer Guidance
An expected response from the interviewee should include recommendation to close Production Unit C in order to reduce total
operating cost for Steel Works. The interviewee should explain that shipping costs do not alter the recommendation. He or she should
also outline risks and next steps for the company.
Risks
• Loss of employee morale
• Production Units may not be able to operate at 100% utilization
• Closing 1 Production Unit may affect Steel Works ability to meet demand for Complex Phase Steels, if demand continues to rise
Next Steps
• Communicate with customers of closing down of 1 Production Unit
• Setup planning team to carry out closure and consolidation of operations
An advanced recommendation can consist of the following
• Savings of $38 M after shipping costs may not be substantial for Steel Works to reduce its overall operating costs. The
recommendation can include ways of reducing costs by looking at inefficiencies in the process as well as labor costs.
• Steel Works should consider making investments in its equipment to produce more volumes of the Complex Phase Steels
• Consider building a shipping facility at Production Unit A and avoid shipment of products between Production units. This can further
reduce shipping costs.
162
Case Interview feedback form
Case _________________________ Case type _________________ Interviewer ____________________
Execution
Case start time ___:____
1 2 3 4 5
•Structure
¾Logical approach
¾MECE
¾Appropriate drive to solution
Comments:
•Quantitative Ability
1 2 3 4 5
¾Speed
¾Accuracy
¾Comfort, reaction to mistakes
Comments:
•Business intuition
¾Practical
¾Insightful
¾Breadth & depth across multiple functions
¾Creativity
1 2 3 4 5
Comments:
Framework development
Framework explanation
Case discussion
______ min
______ min
______ min
Case end time ___:____
Overall Rating: 1 2 3 4 5
Strengths
Communication
1 2 3 4 5
•Professionalism
¾Poise
¾Confident-Persuasive
¾Articulate-concise
¾Client ready
Comments:
Weaknesses
•Written
¾Clarity of writing and page layout
¾Ability to refer back
¾Comfort, reaction to mistakes
1 2 3 4 5
Comments:
Behavioral (optional)
•Quality of star stories
•Length
•Clarity
•Relevance
1
1
1
1
2
2
2
2
3
3
3
3
4
4
4
4
5
5
5
5
Comments:
Key: 1=Bottom 10%, 2= 10th-25th percentile, 3=
middle 50%, 4= 75th-90th percentile, 5=Top 10%
CASE 16 – WOEM
164
Case 16: WOEM
Prompt 1
Your client is WOEM, a wedding cake and clothing company located in Los Angeles, California. WOEM has two separate entities;
WOEM cakes and WOEM clothing. WOEM was unprofitable last year. WOEM’s CEO believes that the creation of a third entity, WOEM
wedding planning, will lead to sustained profitability. WOEM’s CEO wants your perspective on how to make WOEM profitable again.
Behavioral Questions
• Tell me about a time when you resolved a conflict within your team
• What are your strengths and weaknesses – list 2 for each
Interviewer Guidance
This is a profitability case, within the context of evaluating the current state of the company and expanding offerings
Additional information, should be provided only upon request:
• Major players in the wedding cake, clothing and wedding planning industry were profitable last year
• WOEM’s current customers include middle income individuals (40%) and wedding planners (60%)
• WOEM has no experience in wedding planning, but it understands the wedding business and have a network to pull this off
• There is no specific goal for WOEM (no ROI or specific profit) – WOEM just wants sustained profitability
The interviewee should break the case into two parts. Part A should focus on WOEM’s current operations and part B should focus on
understanding the wedding planning industry. Ask interviewee to present a framework focusing on part A only.
The interviewee’s current operations framework should include questions on the industry, for example competitors and trends (no
information available) and a basic profitability tree to understand why WOEM is unprofitable.
165
Case 16: WOEM
Prompt 2
Provide the interviewee with the following financial information:
WOEM Cakes:
2013: Sales: 900 cakes; Price: $1000 average per cake; costs: $600 average per cake
2012: Same average price and cost but number of cakes sold was 1300
WOEM Clothing:
2013 Revenue: $150,000; Total Costs: $560,000
2012 Revenue: $140,000; Total Costs: $400,000
Interviewer Guidance
A good interviewee will state that WOEM is unprofitable because of WOEM Clothing. A good interviewee will do the math quickly and
state that WOEM cakes is selling about 30% fewer cakes than it did in 2012 and that although WOEM clothing’s revenue increased 7%
in 2013, costs increased by 40%.
Ask interviewee why WOEM is selling 30% less cakes. Possible answers include:
• New competition
• Substitute: Customers are switching to other types of cakes that WOEM doesn’t offer
• Decreased income level: Customers are purchasing fewer cakes/having fewer weddings
The answer is that consumers are switching from vanilla and chocolate cake to red velvet cake, WOEM doesn’t sell red velvet cake.
If interviewee asks why WOEM clothing is unprofitable: It has been unprofitable since its inception. Customers don’t associate
WOEM with clothing and Los Angeles customers are very brand conscious.
166
Case 16: WOEM
Prompt 3
Ask the interviewee how he or she will determine if WOEM should enter the wedding planning market.
Interviewer Guidance
The interviewee’s framework should cover the following:
• Industry (Understanding the key players in this market, market size and trends): 4 reputable players control 50% of the wedding
planning market in Los Angeles. Reputation of wedding planners is the main purchase driver in this market. No market size or trend
information is available (to make this case more advanced you can test interviewee’s market sizing thought process.
• Company Capability (Understanding if the company has the resources to pull this off): Ask interviewee what he or she thinks.
WOEM has access to financing and can leverage its current customer base, but will need to hire wedding planners.
• Economics: Projected Revenue and costs from entering this market (no information available)
• Risks associated with entering this market: Ask interviewee what he or she thinks - No experience, loss of current WOEM
customers (since wedding planners make up 60% of WOEM’s current customer base) and opportunity costs are some of the risks
167
Case 16: WOEM
Recommendation
WOEM should not expand into wedding planning at this time. Instead, WOEM should expand its cake line to include red velvet cake
and sell its clothing business in order to be profitable
Supporting facts:
• Wedding planners make up 60% of WOEM’s customer base. WOEM will face intense competition from its current customers and
thereby reduce profitability on current business. WOEM also doesn’t have a reputation in wedding planning
• Consumer tastes are changing, for WOEM to stay profitable it needs to enter the red velvet market
• WOEM’ clothing has been unprofitable since its inception, as WOEM is not associated with clothing
Risks
• WOEM and competition might be leaving money on the table by not entering the wedding planning business
• Closing the clothing business might affect the sales of WOEM cakes
• Cannibalization
Immediate Next steps
• Expand cake line to include red velvet cake (understand the costs associated with this)
• Start looking for buyers of the clothing business
168
Case 16: WOEM
Performance Evaluation
What does the case test?
• Structure and Strategy
What should good interviewee be doing/asking/providing throughout the case?
• Interviewee will develop a structured approach
• Interviewee will do the math accurately
• Interviewee will generate at least 3 ideas to explain why WOEM is selling fewer cakes
Provide examples of what exceptional interviewees are doing throughout this case.
In addition to what is above, interviewee should do the following:
• Be able to drive to insights within the case without prompting
• Be able to come up with a solid recommendation even though the case is unstructured and has limited financial information
• Be able to maintain poise under pressure from the interviewer
169
Case Interview feedback form
Case _________________________ Case type _________________ Interviewer ____________________
Execution
Case start time ___:____
1 2 3 4 5
•Structure
¾Logical approach
¾MECE
¾Appropriate drive to solution
Comments:
•Quantitative Ability
1 2 3 4 5
¾Speed
¾Accuracy
¾Comfort, reaction to mistakes
Comments:
•Business intuition
¾Practical
¾Insightful
¾Breadth & depth across multiple functions
¾Creativity
1 2 3 4 5
Comments:
Framework development
Framework explanation
Case discussion
______ min
______ min
______ min
Case end time ___:____
Overall Rating: 1 2 3 4 5
Strengths
Communication
1 2 3 4 5
•Professionalism
¾Poise
¾Confident-Persuasive
¾Articulate-concise
¾Client ready
Comments:
Weaknesses
•Written
¾Clarity of writing and page layout
¾Ability to refer back
¾Comfort, reaction to mistakes
1 2 3 4 5
Comments:
Behavioral (optional)
•Quality of star stories
•Length
•Clarity
•Relevance
1
1
1
1
2
2
2
2
3
3
3
3
4
4
4
4
5
5
5
5
Comments:
Key: 1=Bottom 10%, 2= 10th-25th percentile, 3=
middle 50%, 4= 75th-90th percentile, 5=Top 10%
CASE 17 – MONEY IN MICHIGAN
171
Case 17: Money in Michigan
Prompt
Your client is Michigan Economic Development Corporation (MEDC), a state agency tasked with economic development for the state of
Michigan. Michigan is still recovering from the economic recession in 2009, when Michigan had the highest unemployment rate in the
country at 13.4% and also the highest net emigration, with over 86,000 citizens leaving the state, presumably to find work elsewhere.
Five years later the state is slowly recovering and MEDC wants to know what to do to make Michigan more attractive.
Behavioral Questions
• Tell me about a time you faced a challenging situation in a team and what you did to solve it
• What is your proudest accomplishment that is not listed on your resume?
172
Case 17: Money in Michigan
Interviewer Guidance
Background data that the candidate may request:
The candidate should confirm that increasing employment is MEDC’s main goal, but a second goal is to increase the CAPEX or capital
expenditure in the state. Numbers will be provided later.
Suggestions about how the case is to be delivered:
Interviewers should read the case in advance and be prepared to lead the candidate through and provide answers to questions as
necessary.
What to look for in a candidate䇻s responses:
The candidate should come up with a MECE framework that strategically addresses ways to make Michigan more attractive. A few
examples include:
• Determine what industries are new/growing
• Offer financial incentives:
o Financial/other incentives for companies to relocate to Michigan
o Tax credits for companies already in Michigan to expand
• Make policy/regulatory changes:
o Change policies to make it easier for companies to be successful and grow
o Examine tax code and ensure it incentivizes growth
o Improve quality of life for citizens (e.g., education, poverty, health, crime)
• Create programs:
o Prepare citizens with training programs (private and public)
o Offer public work programs
• Research competition:
o Learn what are other states doing to create jobs/ attract Michigan’s workforce
173
Case 17: Money in Michigan
Prompt 2
A. MEDC is focused on adding 1,000 jobs and bringing in $40MM in CAPEX (capital expenditure) in the next year, what else can they do to achieve
this goal?
B. The state of Michigan has created a special fund of $10 MM to spend to incentivize companies to relocate their business to Michigan. The state
has given MEDC sole discretion on how to spend the money and MEDC has decided to go “all in” and try and get the best project it can. To do
this, MEDC has some information about direct, indirect, and induced job creation. Direct jobs are those created by the new company, indirect
jobs are those created by related businesses (e.g., suppliers to the new company), and induced jobs are those created by a stimulated economy
(e.g., a hotel increases its employees due to more usage from the new company). For example, if a new company creates 10 jobs and the
indirect job multiplier is 1.5, then there would be 15 new jobs total, 10 direct and 5 indirect.
Analysis
A. This is a quick way to get candidates prepared for the “what else,” question. Have the candidate provide 5 additional ideas not included in
his/her framework OR finish when the candidate says “I have a strong list, and I would like to proceed with..” and then gives you a concrete
next step.
B. Calculations: (A trick is to subtract 1 from the multiplier and multiply it by the direct jobs (e.g., 3.2*100 =320 indirect jobs instead of 4.2*100
=420 total – 100 direct jobs = 320 indirect jobs); another trick is to use relationships between indirect/induced jobs to do calculations quicker
Name
Industry
Gamer Zone
Software
Development
Retail chain for
children
Capital-intensive
Manufacturing
Call Center
Kidoodle
PreFab
Speedylane
CAPEX Indirect Induced Total
Total
Total
(MM) Jobs
Jobs
Indirect Induced Jobs
100
70
4.2
2.6
320.0
160.0
580.0
Direct Jobs
280
16
1.4
1.2
112.0
56.0
448.0
70
420
7.0
2.0
420.0
70.0
560.0
520
4
1.1
1.05
52.0
26.0
598.0
174
Case 17: Money in Michigan
Prompt 2
Projects under consideration
Job multipliers
Direct
Jobs
CAPEX
(MM)
Software
Development
100
70
Kidoodle
Retail chain for
children
280
PreFab
Capital-intensive
Manufacturing
Speedylane
Call Center
Name
Industry
Gamer Zone
Indirect
Jobs
Induced Jobs
Software
Development
4.2
2.6
16
Retail chain for
children
1.4
1.2
70
420
Capital-intensive
Manufacturing
7.0
2.0
520
4
Call Center
1.1
1.05
Industry
175
Case 17: Money in Michigan
Prompt 3
A strong candidate will have provided a recommendation/thoughts after completing the calculations. Whether a recommendation is provided or
not, say the following:
It is clear that a single project will not achieve MEDC’s goal of adding 1,000 jobs in a single year. Which project do you think most closely achieves
the goals and additional concerns/benefits will be provided to the state of Michigan?
Analysis
The candidate should immediately remove Kidoodle and Speedlylane are they do not meet both the job creation or CAPEX goals. Given
that Gamer Zone and PreFab both meet the CAPEX goal and are close in terms of job creation, the candidate should create a
framework to determine which project to go with and then make a suggestion based on the prompt. The can be done with a chart, or
any way that shows organization. Brief suggestions below:
Gamer Zone
PreFab
Jobs
580
560
CAPEX
420
70
Concerns
Smaller CAPEX could lead to less permanence;
availability of trained employees?; located in
already prosperous area?;
High indirect jobs multiplier suggests reliance on
another industry; manufacturing projects are highly
competitive-other states might offer greater incentives
Benefits
Software Developers are usually highly
educated/white collar;
High CAPEX suggests permanence; highest potential
to spur indirect/induced job creation
If time, feel free to use the above suggested answers to play devil’s advocate with the candidate – the important part of this is to
ensure the candidate does not easily change his/her opinion.
176
Case 17: Money in Michigan
Prompt 4/Conclusion
An MEDC official is walking into the room and wants to know where MEDC should send their $10MM. Please take 30 seconds to gather
your thoughts and then provide a recommendation.
Recommendation
The candidate should suggest: Recommendation (and provide a single project), risks (concerns from the last prompt), and offer some
next steps (ideas to mitigate the concerns suggested). The candidate should take no longer than 30 seconds to wrap up.
Performance Evaluation
This case tests a candidates ability to think creatively and should be an easier case due to fewer numbers/much of the information is
provided. However, like more difficult cases, it introduces a problem that is not usually top of mind and it does not require a traditional
profit formula to complete.
A good candidate:
Asks clarifying questions only to move the case forward
Remembers MEDC’s goals
Has minor calculation errors
An exceptional candidate:
Reads signs of the interviewer and organizes information without being prompted
Does not make calculation errors
Offers insightful next steps without being prompted
Is able to suggest logical next steps and defend decisions
177
Case Interview feedback form
Case _________________________ Case type _________________ Interviewer ____________________
Execution
Case start time ___:____
1 2 3 4 5
•Structure
¾Logical approach
¾MECE
¾Appropriate drive to solution
Comments:
•Quantitative Ability
1 2 3 4 5
¾Speed
¾Accuracy
¾Comfort, reaction to mistakes
Comments:
•Business intuition
¾Practical
¾Insightful
¾Breadth & depth across multiple functions
¾Creativity
1 2 3 4 5
Comments:
Framework development
Framework explanation
Case discussion
______ min
______ min
______ min
Case end time ___:____
Overall Rating: 1 2 3 4 5
Strengths
Communication
1 2 3 4 5
•Professionalism
¾Poise
¾Confident-Persuasive
¾Articulate-concise
¾Client ready
Comments:
Weaknesses
•Written
¾Clarity of writing and page layout
¾Ability to refer back
¾Comfort, reaction to mistakes
1 2 3 4 5
Comments:
Behavioral (optional)
•Quality of star stories
•Length
•Clarity
•Relevance
1
1
1
1
2
2
2
2
3
3
3
3
4
4
4
4
5
5
5
5
Comments:
Key: 1=Bottom 10%, 2= 10th-25th percentile, 3=
middle 50%, 4= 75th-90th percentile, 5=Top 10%
CASE 18 – PHARMA CO.
179
Case 18: Pharma Co.
Prompt
Pharma Co. has developed a new AML drug X (type of cancer). Preliminary Phase I trials indicate tremendous potential, but the costs
to get the drug FDA approved and to market are extremely high. A private equity firm has approached Pharma Co. offering to pay
$150M for 50% of all future drug X profits. Pharma Co. wants you to tell it what to do.
Behavioral Questions
• What are three traits that your former colleagues would use to describe you? Briefly explain each.
• Tell me about something not on your resume that you are proud of.
Interviewer Guidance
Information that can be provided to the interviewee / used to direct the interviewee during case:
• The only known objective is to determine how Pharma Co. should proceed
• Pharma Co. has no experience taking a drug to market
• Cancer drugs tend to be extremely expensive ($100k+) for the patient
• ONLY U.S. insurance will reimburse the cost of the drug, thus Pharma Co. only wants to consider the U.S. market
• Pharma Co. does have other drugs in the pipeline
• This new drug has not completed U.S. FDA Phase I, Phase II, or Phase III trials
• Assume patent life of 10 years
• Side effects are consistent with similar drugs so a non-factor
• There will be competition (will be explored later)
180
Case 18: Pharma Co.
Analysis
The interviewee should quickly recognize that market opportunity needs to be evaluated against the total costs - a good framework will
include these two points as its primary pillars. Other points that would likely be included within the framework include patent expiration,
insurance reimbursement, current experience / capability set, probability of FDA trial success, and competition.
Guide interviewee towards total market opportunity if not initiated. Begin by asking interviewee what inputs should be used to determine
total opportunity and how these inputs could be collected (sample answers - push interviewee to explore and defend new inputs):
•
•
•
•
•
•
•
•
•
Interviews with experts in the field (doctors, insurance experts, pharmaceutical business experts, healthcare experts)
Review of government census data for population / demographic data
Review of medical journals for cancer incidence trends
Review of FDA records of trials of competitive drugs to see if competition could cut into market share
Review of the ramp of adoption of similar drugs
Survey / interview with potential patients and their willingness to try drug X
Review of the price points of similar drugs
Financial reports for competitors’ drug performance / drug pipeline information (competition)
Review of negotiated blanket contracts similar drugs have in place with the government (think Medicare)
Fortunately, for the interviewee a lot of that information has already been collected. Provide Exhibit 1 to the interviewee. Ask interviewee
to provide total market opportunity for drug X.
181
Case 18: Pharma Co.
Exhibit 1
• Annual patients afflicted with
AML are 3,300
• Estimated cost of drug X is
$125,000 per patient per year
• Interviews indicate that
doctors are willing to
prescribe drug X to 70% of
their patients
• Assume drug X achieves 100%
of its projected market share
after Yr 3
Competitor market share
Year (Yr)
Competitor Market Share
YR1
0%
YR2
0%
YR3
0%
YR4
0%
YR5
25%
YR6
25%
YR7
25%
YR8
25%
YR9
25%
YR10 (1)
25%
YR11
100%
(1) Drug X goes off patent after 10 years
182
Case 18: Pharma Co.
Total market opportunity calculation (for interviewer only)
Number afflicted
Willingness to prescribe
Patients (pre-ramp)
Share of market
Patients (after competitor cut)
Ramp
Patients (after ramp)
Total patients (after ramp)
Price
Total Market Opportunity
YR1
3300
70%
2310
100%
2310
11%
254
YR2
3300
70%
2310
100%
2310
55%
1271
YR3
3300
70%
2310
100%
2310
100%
2310
YR4
3300
70%
2310
100%
2310
100%
2310
YR5
3300
70%
2310
75%
1733
100%
1733
YR6
3300
70%
2310
75%
1733
100%
1733
YR7
3300
70%
2310
75%
1733
100%
1733
YR8
3300
70%
2310
75%
1733
100%
1733
YR9
3300
70%
2310
75%
1733
100%
1733
YR10
3300
70%
2310
75%
1733
100%
1733
16,543
125,000
$
$ 2,067,875,000
183
Case 18: Pharma Co.
Analysis
Great! That is a lot of money! But we need to take into consideration the probability that drug X receives FDA approval.
This probability is applied to the total market opportunity to determine the “risk-adjusted” market opportunity.
An internal team has developed percentages of failure at each phase. The percentages that drug X completes each stage are (TOTAL
PROBABILITY AND RISK-ADJUSTED MARKET OPPORTUNITY TO BE CALCULATED BY INTERVIEWEE):
• Phase I probability - 90% (already begun and results are promising resulting in high %)
• Phase II probability - 30%
• Phase III probability - 50%
How should these probabilities be applied to the total market opportunity that was just calculated?
• Total probability that drug X receives FDA approval - 13.50% (FOR INTERVIEWER ONLY)
• Risk-adjusted market opportunity for drug X is ~$280M (FOR INTERVIEWER ONLY)
184
Case 18: Pharma Co.
Analysis
With the risk adjusted market opportunities in hand, costs should now be calculated. Ask the interviewee what costs should be
considered (sample answers - difficulty can be increased by eliminating time to structure thoughts):
• Regulatory fees
• Promotional materials
• Marketing campaigns
• Production costs (e.g. materials, quality, sourcing)
• Adding personnel (e.g. sales, marketing, administrative, regulatory)
• New facilities
• Packaging materials
• Shipment (e.g. logistics)
• Distribution costs (e.g. McKesson)
• Taxes
Fortunately, Exhibit 2 outlines these costs and should be provided to the interviewee. Using Exhibit 2 and the market opportunity
numbers calculated in the first half of the case the interviewee should be prompted to begin calculating the EBITA for the “riskadjusted” scenario (FOR RISK ADJUSTED KEY THAT INTERVIEWEE RISK ADJUSTS COSTS AS THEY ALIGN WITH THE FDA PHASES - HINT IF
NECESSARY). Total EBITA is $38M (FOR INTERVIEWER ONLY). If interviewee initiates NPV discussion, redirect to total EBITA noting
management has specifically requested a total EBITA number as part of the analysis and that NPV will follow.
Interviewee should ask for discount rate to calculate NPV of the 50% profit stream that the private equity company has offered $150M
for. Provide a discount rate of 5% BUT BEFORE interviewee begins to calculate ASK HOW they would structure the NPV calculation.
Once explained, note that the NPV will likely be negative (or ask interviewee based on information provided where they think it would
fall without doing any calculations), and that time is running short so you need to move on…
With a negative NPV estimate (approximate NPV is -$25M) for the 50% profit stream, total EBITA, and the total assuming the private
equity firm’s offer is accepted of $181M ($150M offer + $31M profit split), ask for the recommendation.
185
Case 18: Pharma Co.
Exhibit 2
Phase I
•
$160M (1)
Phase II
•
$125M
Phase III
•
$75M
Production
•
•
•
Manufacturing costs: 5%
of price
Logistics: 5% of price
All other costs: 10% of
price
(1) The $160M includes both what has been invested AND the projected amount required to complete Phase I trails
186
Case 18: Pharma Co.
Exhibit 1 (“RISK ADJUSTED” ANSWERS - FOR INTERVIEWER)
Phase I
•
$160M
•
•
•
•
•
Phase II
•
$125M
Phase III
•
$75M
Phase I: $160M x 90% = ~$144M
Phase II: $125M x (90% x 30%) = ~$34M
Phase III: $75M x (90% x 30% x 50%) = ~$10M
Total for production:
• ~2B x (5% x 5% x 10%) = $400M
• $400M x (90% x 30% x 50%) = ~$54M
EBIDTA is: $280M - $242M = ~$38M
Production
•
•
•
Manufacturing costs: 5%
of price
Logistics: 5% of price
All other costs: 10% of
price
187
Case 18: Pharma Co.
Recommendation
An argument can be made to both accept and turn down the private equity firm’s offer, though most will suggest that it be accepted based on the
numbers. But an argument could be made that because other drugs are in the pipeline this could serve as a foundation drug, that the risk
adjustment numbers are too conservative, etc. Either recommendation should mention risk tolerance of Pharma Co., need for capital, validation of
the risk adjustment percentages, risks because Pharma Co. has never taken a drug to market, possible exploration of alternative paths forward
(partner, license, or sell the technology). Additional questions to probe / challenge recommendation:
•
Probe for alternative solutions?
•
What additional analysis would the interviewee like to perform?
•
Would it make sense for Pharma Co. to revaluate after Phase I approval? Phase II and III approvals?
•
What data would be required to further explore / validate alternative solutions?
•
What are the non-financial risks to pushing forward with development?
•
How can the risk adjusted numbers be validated?
•
What are logical next steps for Pharma Co.?
Performance Evaluation
The case evaluates the interviewees ability to recognize a profit case, thinking logically and quickly through a long-term strategic problem, and
perform simple math. An exceptional interviewee will do the following:
• Recognize that there is risk that the drug will not make it through all FDA approvals (and appropriately apply to the total market
opportunity and costs)
• Able to quickly and logically identify reasonable means for collecting inputs required to determine market opportunity
• Understand that there are both non-recurring costs (R&D, trials, etc.) and recurring costs (manufacturing, staffing, selling, etc.)
• Note that the market will be cut or end because of generic competition once the patent ends
• Identify other geographies and other uses as key channels to push total profits higher
• Able to quickly and logically identify key costs
• Note that competition is likely and needs to be considered
188
Case Interview feedback form
Case _________________________ Case type _________________ Interviewer ____________________
Execution
Case start time ___:____
1 2 3 4 5
•Structure
¾Logical approach
¾MECE
¾Appropriate drive to solution
Comments:
•Quantitative Ability
1 2 3 4 5
¾Speed
¾Accuracy
¾Comfort, reaction to mistakes
Comments:
•Business intuition
¾Practical
¾Insightful
¾Breadth & depth across multiple functions
¾Creativity
1 2 3 4 5
Comments:
Framework development
Framework explanation
Case discussion
______ min
______ min
______ min
Case end time ___:____
Overall Rating: 1 2 3 4 5
Strengths
Communication
1 2 3 4 5
•Professionalism
¾Poise
¾Confident-Persuasive
¾Articulate-concise
¾Client ready
Comments:
Weaknesses
•Written
¾Clarity of writing and page layout
¾Ability to refer back
¾Comfort, reaction to mistakes
1 2 3 4 5
Comments:
Behavioral (optional)
•Quality of star stories
•Length
•Clarity
•Relevance
1
1
1
1
2
2
2
2
3
3
3
3
4
4
4
4
5
5
5
5
Comments:
Key: 1=Bottom 10%, 2= 10th-25th percentile, 3=
middle 50%, 4= 75th-90th percentile, 5=Top 10%
CASE 19 – QUALITY CONTROL
190
Case 19: Quality Control
Prompt
Your client is a leading medical device company and just recently acquired a smaller company to help grow their orthopedics division.
Shortly after the acquisition, the parent company found several quality problems within the acquired company’s manufacturing sites
that have to be remediated within six months to avoid FDA violations. You have been hired to come up with a plan that will successfully
complete all remediation efforts on time.
Behavioral Questions
• Tell me about a time when you received feedback (positive or constructive) and you acted upon the feedback to further improve?
• What kind of client interaction would be the most difficult for you to manage and why?
Interviewer Guidance
This care requires a nontraditional framework and requires flexibility and creativity.
Additional key details if asked: (Provide only after initial framework is given by interviewee)
• 5 manufacturing sites are affected
• 25 quality problems found at each site that all need to be remediated
• Client can not extend beyond six month time frame and assume six months starts from today
Candidate should focus on first understanding the scope of this remediation effort and if it is feasible to complete given certain
constraints. They should consider the costs, constraints/barriers, and offer potential next steps.
191
Case 19: Quality Control
Analysis
1) There are 5 manufacturing sites that are affected with 25 quality defects found at each site. Their current level of resources can
remediate at a rate of .125 defects/day. Will they meet their remediation goals? Let interviewee know that they can assume they
are working weekends
2) What do you suggest that our client do in order to complete remediation on time? What are some potential options?
3) The CEO of our client is about to walk into the room, please summarize your findings and suggestion to him. You do not have time
to prepare.
Recommendation
1) No, they will not meet their remediation goals
5 sites * 25 defects = 125 total defects
.125 = 1/8 so it takes 8 days to complete one defect
125 defects * 8 days = 1000 total days to complete all defects
1000 days / 30 days in month = 33.3 months needed at current rates
33.3 months / 6 month timeline = over by ~5.5 times
Conclude that need 5.5x the number of resources at the same rate or improve their productivity
2) Brainstorming question: many different options (hire more, increase productivity, contract out, etc) with each option the candidate
should be thinking about the potential costs associated or other barriers in addition to how feasible. A great candidate would be able
to structure their brainstorming (ex: greatest impact, least cost, feasibility)
192
Case 19: Quality Control
Performance Evaluation
• Fairly easy case but should test candidate’s ability to structure thoughts and their creativity in suggestions
• Exceptional candidates will drive to a solution upon discovering the objective is unachievable
• Exceptional candidates will structure their thoughts logically in response to brainstorming questions (written structure is not
required as long as conveyed verbally in a structured manner)
193
Case Interview feedback form
Case _________________________ Case type _________________ Interviewer ____________________
Execution
Case start time ___:____
1 2 3 4 5
•Structure
¾Logical approach
¾MECE
¾Appropriate drive to solution
Comments:
•Quantitative Ability
1 2 3 4 5
¾Speed
¾Accuracy
¾Comfort, reaction to mistakes
Comments:
•Business intuition
¾Practical
¾Insightful
¾Breadth & depth across multiple functions
¾Creativity
1 2 3 4 5
Comments:
Framework development
Framework explanation
Case discussion
______ min
______ min
______ min
Case end time ___:____
Overall Rating: 1 2 3 4 5
Strengths
Communication
1 2 3 4 5
•Professionalism
¾Poise
¾Confident-Persuasive
¾Articulate-concise
¾Client ready
Comments:
Weaknesses
•Written
¾Clarity of writing and page layout
¾Ability to refer back
¾Comfort, reaction to mistakes
1 2 3 4 5
Comments:
Behavioral (optional)
•Quality of star stories
•Length
•Clarity
•Relevance
1
1
1
1
2
2
2
2
3
3
3
3
4
4
4
4
5
5
5
5
Comments:
Key: 1=Bottom 10%, 2= 10th-25th percentile, 3=
middle 50%, 4= 75th-90th percentile, 5=Top 10%
CASE 20 – WORKIT
195
Case 20: WorkIt
Deloitte Case Writing
Competition Finalist
Prompt #1
Your client is WorkIt an insurance firm that sells workers’ compensation insurance policies exclusively. Workers’ compensation is an
insurance policy that companies purchase to protect themselves from lengthy litigation and unexpected and incredibly high legal fees
related to employees who are injured at work. Workers’ compensation is paid by the company on a per-employee basis each month
and in exchange, the policy covers medical, indemnity, and other expenses. For example, if an employee falls off a ladder and breaks a
leg, workers’ compensation pays for the employee’s medical bills and indemnity or lost wages. The policy also covers other related
expenses. Companies are required by state law to purchase workers’ compensation plans.
WorkIt has been successful in North Carolina, South Carolina, and Georgia but is considering entering a new state. WorkIt would like
your help to determine if this is a good idea.
Behavioral Questions
• Tell me about a time you had to make a difficult decision when you had limited information
• What is your greatest transferable skill?
196
Case 20: WorkIt
Interviewer Guidance
Background data that the candidate may request:
This case does not provide a lot of information about the direction upfront, but successful candidates will work through the content
and uncover the direction as they proceed. The candidate may ask some clarifying questions; however, the main goal is to determine
whether WorkIt should expand (and then where the company should expand) and candidates will receive more information as they
proceed. Profit is a big concern, but so are qualitative issues.
Suggestions about how the case is to be delivered:
• The first prompt is meant to be open ended, so there is not any additional information for the candidate at this point (e.g., WorkIt’s
main goals are not explicit)
• If candidates need more information about workers’ compensation, please provide the optional overview / explanation:
• It is an insurance policy in which a company pays a premium to be protected from unpredictable accidents
• The following example can be repeated to explain components: If an employee falls off a ladder and breaks a leg, workers’
compensation pays for the employee’s medical bills (medical) and also pays the employee for lost wages (indemnity). The
policy also covers other expenses (e.g., overhead, benefit delivery, occasional attorney fees paid by workers’ compensation).
What to look for in a candidate’s responses:
• The candidate should come up with a MECE framework that covers the following areas: revenue and cost (profitability),
competitors, WorkIt’s current market saturation/industry mix of clients, regulatory concerns/changes, economic conditions, and
company network geographically
• The prompt mentions that WorkIt sells workers’ compensation policies exclusively, so a successful candidate will not ask about
additional insurance offerings, though this could become a suggestion for WorkIt to consider later in the case.
197
Case 20: WorkIt
Optional Overview of Workers’ Compensation
Employee
•
Covered if injured (whether the
employee is at fault or not)
Employer
•
•
Pays insurance premium to cover
employees injured at work
Benefits by avoiding lawsuits and
unexpectedly large expenses if an
employee is injured at work
Workers’ Compensation Provider (e.g.,
WorkIt)
Receives insurance premium in
exchange for providing benefits to
employees injured at work
•
Benefits include:
•
Medical (e.g., hospital bills)
•
Indemnity (e.g., lost wages)
•
Expenses (e.g., overhead,
benefit delivery, occasional
attorney fees)
•
198
Case 20: WorkIt
Prompt #2
Great, so WorkIt is thinking of expanding in the South to remain regional. WorkIt has gathered data on 9 states; however, WorkIt does
not want to engage with markets smaller than South Carolina (30,000 cases of injured employees) or larger than Georgia (70,000 cases
of injured employees). In this case, you can assume that WorkIt would be able to control the entire market in the state. Please take a
moment to review the data sheet and gather your thoughts on which states to consider.
Analysis
The candidate should determine that only four states fit WorkIt’s criteria: AL, MS, TN, VA
Frequency of claims
Total Employment (Ths.)
AL
Employed
% injured each year
Total injured (Ths.)
AR
2000
2%
40
FL
1200
2%
24
LA
7700
2.00%
154
MS
2000
4%
80
TN
1150
4%
46
TX
2800
2%
56
VA
11400
4%
456
WV
3900
1%
39
800
2%
16
199
Case 20: WorkIt
Prompt #2
Exhibit 2: Growth in Cost Per Claim
Exhibit 1: Total Employment (Ths.)
AR
FL
LA
MS
TN
TX
VA
WV
10
% Change In Cost Per
Claim
AL
% injured each
Employed year at work
2000
2%
1200
2%
7700
2%
2000
4%
1150
4%
2800
2%
11400
4%
3900
1%
800
2%
5
0
-5
-10
2012 to 2013
2013 to 2014
Exhibit 3: Medical Costs Per Claim (2013)
Exhibit 4: Breakdown of Total Costs
Average Medical
Cost/Claim
$20,000
Expenses
17%
$15,000
$10,000
$5,000
Medical
50%
$0
AR WV MS TN FL TX
Claims by State
LA VA AL
Indemnity
33%
200
Case 20: WorkIt
Prompt #3
Let’s proceed with Alabama, Mississippi, Tennessee, and Virginia. Now determine WorkIt’s profit. Please note that WorkIt’s revenue is
a flat 101% of total costs.
Analysis
Provide hints if the candidate needs it. Here is one way to solve:
Costs
Step 1: # of injuries (exhibit 1) x cost per (medical) (exhibit 3) = total medical
Step 2: total medical x 2 (medical is half the total expense from exhibit 4) = total cost by state
Revenue/Profit
Step 3: Total per state x 101% commission – total cost by state = profit
OR
Step 3: Candidates could realize that profit is 1% of total costs
AL
MS
TN
VA
Costs
Revenue
Profit
# of injuries (ths.) Cost per injury (medical) Total cost (medical) Total cost (all three) 101% (Costs)
1% (Costs)
40
$17,500
$700,000
$1,400,000
$1,414,000
$14,000
46
$10,000
$460,000
$920,000
$929,200
$9,200
56
$11,000
$616,000
$1,232,000
$1,244,320
$12,320
39
$16,000
$624,000
$1,248,000
$1,260,480
$12,480
The candidate should comment about the state with the highest revenue potential. Also, note that the commission could still be in (ths.) from
earlier (i.e., $14,000 is actually $14,000,0000) making this a worthwhile option for WorkIt.
201
Case 20: WorkIt
Prompt #4
WorkIt is concerned about recent policy changes and hospital and judicial reform, which could eventually impact the company’s 1%
commission. Without doing any math, what state should WorkIt now consider?
Analysis
Based on Exhibit 4, Alabama is now less attractive – as total costs have decreased significantly over the past year (and prior year).
Mississippi and Tennessee show variability and have decreased costs from 2013-2014, which shows decreased profits from the 2013
numbers. It also suggests it will be difficult for WorkIt to predict future profits.
In this case, Virginia is the most stable state and it could be argued, the most attractive state.
202
Case 20: WorkIt
Prompt #5
What else should WorkIt research before making a decision?
Analysis
Suggested response should include a few of the below:
1. Additional Costs – will there be future changes to fixed and variable costs?
2. Competition – what other company is operating in each state? Does WorkIt stand a chance of getting the contract? Could there be
a bidding war?
3. Different legal/regulatory changes – will WorkIt need to hire a new legal team? Any reason a state might not be ideal (that is not
included in Exhibit 3)?
4. Company Capabilities – cost of entry, will their be a bidding war for the contract, can WorkIt operate successfully from afar? If not,
can WorkIt be successful in the selected state?
203
Case 20: WorkIt
Prompt #6/Conclusion
WorkIt’s CEO is walking into the room and wants to know if the company should expand and if so, where? He is now in the room, let
him know what you suggest.
Recommendation
The candidate should suggest: Recommendation (go or no go is fine as long as it is supported), risks (concerns from the last prompt),
and next steps (these could be based on earlier work from the initial framework/concerns). In this case, the candidate was told to give
the conclusion right away and should not ask for 30 seconds. However, the candidate could write the recommendation as he/she
presents to remain organized.
Performance Evaluation
This case involves a market entry decision. The decision is based on limited information, as the candidate knows the revenue, but does not
have the associated costs needed to determine profit.
A good candidate:
Asks clarifying questions only to move the case forward
Remembers crucial information and is able to disregard extraneous information
Has minor calculation errors and is able to continue after an error is made
An exceptional candidate: (in addition to the above)
Finds shortcuts for calculations
Reads signs of the interviewer and organizes information without being prompted
Offers insightful next steps without being prompted
Is able to suggest logical next steps and defend decisions
204
Case Interview feedback form
Case _________________________ Case type _________________ Interviewer ____________________
Execution
Case start time ___:____
1 2 3 4 5
•Structure
¾Logical approach
¾MECE
¾Appropriate drive to solution
Comments:
•Quantitative Ability
1 2 3 4 5
¾Speed
¾Accuracy
¾Comfort, reaction to mistakes
Comments:
•Business intuition
¾Practical
¾Insightful
¾Breadth & depth across multiple functions
¾Creativity
1 2 3 4 5
Comments:
Framework development
Framework explanation
Case discussion
______ min
______ min
______ min
Case end time ___:____
Overall Rating: 1 2 3 4 5
Strengths
Communication
1 2 3 4 5
•Professionalism
¾Poise
¾Confident-Persuasive
¾Articulate-concise
¾Client ready
Comments:
Weaknesses
•Written
¾Clarity of writing and page layout
¾Ability to refer back
¾Comfort, reaction to mistakes
1 2 3 4 5
Comments:
Behavioral (optional)
•Quality of star stories
•Length
•Clarity
•Relevance
1
1
1
1
2
2
2
2
3
3
3
3
4
4
4
4
5
5
5
5
Comments:
Key: 1=Bottom 10%, 2= 10th-25th percentile, 3=
middle 50%, 4= 75th-90th percentile, 5=Top 10%
CASE 21 – SO FRESH AND SO CLEAN
206
Case 21: So Fresh and So Clean
Prompt
Our client, So Fresh and So Clean, is a cleaning supply distributor and operates a national distribution network. Over the past 5 years
the client has acquired several small regional players and has experienced decreasing margins. In 2009, the company’s net margin was
3.1% and since the net margin has dwindled to 2.4% at the end of 2013. The CEO is worried about long-term longevity of the company
and hired us to conduct an extensive diagnostic of the company’s health. How would you approach this problem?
Behavioral Questions
• Ask the candidate which industry they’re passionate about. Then ask them what they think the future state of the industry will be
over the next ten years.
• Tell me about a time you had to convince someone of your ideas where there was a lack of data.
Interviewer Guidance
• This is intended to be an overarching case, which requires candidates to analyze the overall market and diagnose a specific company
issue. The crux of the case is an ineffective sales force. However, the candidate is not expected to discover this right away.
• The candidate should first probe about market health. Once they realize the overall market is stagnant and the company’s
profitability is aligned with competitors they should push towards a profitability tree.
• Clarifying questions
• What products do we sell? Our client provides chemicals, cleaning supplies, uniforms, and equipment to restaurants,
hospitals, schools, and other food service providers. Located within the United States.
• Questions about the industry: Market has averaged 2% growth over the past five years. So Fresh and So Clean is the industry
leader with 20% market share, followed by competitor A at 15%, B at 8%, C at 5%, and others make up the rest.
• The company acquired a $3.3B revenue competitor in 2010 and $3.1B revenue competitor in 2012
207
Case 21: So Fresh and So Clean
Prompt A
The team has recently conducted a market analysis and reviewed the company’s audited financial statements. Please review the
following Exhibits (1 & 2).
Guidance: Exhibit 1 – The candidate should quickly recognize the market is mature and the client’s profitability is aligned with
competitors. As a result, they should assess the company’s internal operations. Exhibit 2 - The candidate should discover SG&A costs
have skyrocketed with the company’s acquisitions in 2010 and 2012.
Ask the candidate to brainstorm reasons how to lower sales costs (e.g., reductions, organization structure redesign, technology)
Prompt B
After each acquisition, the client did not fully rationalize its salesforce and as a result SG&A costs have skyrocketed. The team has
conducted 20 field surveys with sales reps to benchmark their monthly activity to the competition. Based on Exhibit 3 what would you
recommend to the client?
Guidance: Once the candidate identifies competitors spend 2x the amount of time selling, then the candidate needs to brainstorm
specific ways to increase this percentage.
208
Case 21: So Fresh and So Clean
Prompt C
The team has recommended a new selling model to the client to increase the amount of time sales representative spend working with
customers. Under the new model, the client would hire entry level account coordinators to perform administrative tasks and help sales
rep service the customers. This position would then allow the client to increase sales reps’ customer account coverage and reduce the
workforce. The client wants to know how much this model would save them a year.
Prompt D
The CEO is coming in for a quick update in a minute. Please prepare a recommendation.
209
Case 21: So Fresh and So Clean
Exhibit 1
Market analysis and competitor benchmark
Industry Benchmark
Industry Benchmark
Net margin
Net margin
USD Billions
Cleaning Supply
Distribution Market Size
210
Case 21: So Fresh and So Clean
Exhibit 2
5 Year Financial Performance (2009-2013)
Industry Benchmark
Net margin
So Fresh and So Clean - Income Statement (billions)
2009
2010
2011
2012
2013
Sales
$ 18.79 $ 22.30 $ 22.85 $ 25.82 $ 26.39
Cost of sales
$ 15.31 $ 18.17 $ 18.74 $ 21.18 $ 21.64
Gross profit
$ 3.48 $ 4.12 $ 4.11 $ 4.65 $ 4.75
Depreciation
$ 1.50 $ 1.55 $ 1.62 $ 1.60 $ 1.61
Selling, General & Administrative $ 0.60 $ 0.95 $ 1.00 $ 1.55 $ 1.60
Other
$ 0.50 $ 0.55 $ 0.60 $ 0.55 $ 0.56
Operating expenses
$ 2.60 $ 3.05 $ 3.22 $ 3.70 $ 3.77
Operating income
$ 0.88 $ 1.07 $ 0.89 $ 0.95 $ 0.98
Income taxes
$ 0.29 $ 0.38 $ 0.25 $ 0.30 $ 0.35
Net earnings
$ 0.58 $ 0.69 $ 0.64 $ 0.65 $ 0.63
Gross Profit Margin
Operating Margin
Net Margin
Financial Performance Metrics
2009
2010
2011
18.5%
18.5%
18.0%
4.7%
4.8%
3.9%
3.1%
3.1%
2.8%
2012
18.0%
3.7%
2.5%
Year-over-Year Change
2010
2011
2012
19%
2%
13%
19%
3%
13%
19%
0%
13%
3%
5%
-1%
58%
5%
55%
10%
9%
-8%
17%
6%
15%
23%
-17%
6%
31%
-34%
19%
19%
-7%
1%
2013
2%
2%
2%
1%
3%
2%
2%
3%
15%
-2%
2013
18.0%
3.7%
2.4%
211
Case 21: So Fresh and So Clean
Exhibit 3
Net margin
Breakdown of typical
yp
sales person
p
monthly
y in 2013
Industryactivity
Benchmark
212
Case 21: So Fresh and So Clean
Interviewer Guidance (Do not share with Interviewee)
Information and calculation for new sales
model
benefit
Industry
Benchmark
•
•
Net margin
Required information for calculation:
•
Number of new account coordinators - 148
•
Salary of account coordinators - $55K
•
Amount of time saved for Sales Reps - 16
orders per week, each order takes 25 minutes
•
Total time worked by sales reps in a week: 40
hours
Sales Reps salary - $120,000
Total Sales Reps - 1,500
Calculation:
Investment
148 sales reps (~150) x $55,000 = $8,250,000
Time saved
16 orders x 25 minutes = 400 minutes
40 hours x 60 minutes = 2,400 minutes
17% (1/6) reduction in time spent
Benefit
$120,000 x 1,500 sales reps = $180,000,000
Total Savings
(1/6) * $180,000,000 = $30,000,000
Net Saving = $21,750,000
213
Case 21: So Fresh and So Clean
Recommendation
This case is intended to follow a structured path. The case intentionally begins high level and then quickly narrows upon a specific
problem, a bloated sales force. Each prompt is meant to spur creativity and challenge the candidates problem solving. Ensure the
candidate holistically assesses each prompt and identifies potential risks to the end solution.
Performance Evaluation
•
•
•
•
This case tests a candidates ability to diagnose a specific problem with initially vague information.
Each prompt is suppose to test the candidates ability to brainstorm potential solutions to a problem.
Strong candidates will drive the case through each prompt and solve the cost-benefit analysis
Exceptional candidates will also come up with innovative solutions to solve the company’s profitability issue and highlight the
challenges a 17% reduction in salesforce would create for the customer base. The Salesforce reorganization only saves $21M which
is a 2.1% improvement to 2013 operating income. Small in the grand scheme of enterprise.
214
Case Interview feedback form
Case _________________________ Case type _________________ Interviewer ____________________
Execution
Case start time ___:____
1 2 3 4 5
•Structure
¾Logical approach
¾MECE
¾Appropriate drive to solution
Comments:
•Quantitative Ability
1 2 3 4 5
¾Speed
¾Accuracy
¾Comfort, reaction to mistakes
Comments:
•Business intuition
¾Practical
¾Insightful
¾Breadth & depth across multiple functions
¾Creativity
1 2 3 4 5
Comments:
Framework development
Framework explanation
Case discussion
______ min
______ min
______ min
Case end time ___:____
Overall Rating: 1 2 3 4 5
Strengths
Communication
1 2 3 4 5
•Professionalism
¾Poise
¾Confident-Persuasive
¾Articulate-concise
¾Client ready
Comments:
Weaknesses
•Written
¾Clarity of writing and page layout
¾Ability to refer back
¾Comfort, reaction to mistakes
1 2 3 4 5
Comments:
Behavioral (optional)
•Quality of star stories
•Length
•Clarity
•Relevance
1
1
1
1
2
2
2
2
3
3
3
3
4
4
4
4
5
5
5
5
Comments:
Key: 1=Bottom 10%, 2= 10th-25th percentile, 3=
middle 50%, 4= 75th-90th percentile, 5=Top 10%
CASE 22 – KID COUNTRY
216
Case 22: Kid Country
Prompt
Our client, Kid Country, is the purveyor of an increasingly unpopular form of hybrid rap/rock/country music. An early boom in the
market for awful music allowed him to amass a substantial war chest and offer products (music related) in a variety of areas. His
accountants have recently informed him of consistently declining revenues over the last three years and encouraged him to seek
outside expertise.
Behavioral Questions
• What was your most challenging moment at work?
• Tell me about a time you led a team
Interviewer Guidance
A quality framework will seek to identify which lines of businesses are problematic and which have opportunities, address the basic
economic levers within these businesses, and take into account both internal and external factors impacting these levers.
When asked about Kid Country’s diversification, have the candidate brainstorm some likely possibilities and then share the key lines of
business: apparel (tasteless t-shirts), beverages (tasteless beer), CD/MP3 sales, concert ticket sales.
When asked about revenue trends, confirm that overall revenue numbers are down but that trends vary across lines of business. We’ll
address specifics later on.
Strong candidates will also ask about profitability: profitability trends vary by line of business as well, but we’ll get into those later on.
217
Case 22: Kid Country
Analysis
Once the candidate identifies Kid Country’s products (either through bucketing each line of business separately, or through a
revenue/profitability bucket addressing them all), give him the chance to guide the case towards understanding how each product is
performing. Weak candidates may require your prompting to focus in on this.
When the candidate requests information on products’ performance, provide Exhibits 1 and 2.
After reviewing the exhibits, the candidate should move into discussing potential recommendations. If the candidate fails to do so,
prompt him to.
Recommendation
Candidate should identify several takeaways from Exhibits 1 & 2
•
Concert tickets are the core business - highest revenue, great profitability, highest profit, but declining revenues due to Kid
Country’s out-of-style music
•
Apparel seems like a dud- profitability is too low and it hasn’t improved much since 2011
•
CD/MP3 sales are high but declining with low profitability, and getting squeezed by channels - the rise of Spotify, Pandora, and
iTunes are eating into artist margins - candidates should identify channel margin growth as a problem here, but Kid Country lacks
the leverage to fight back against this
•
Beverages are a growth opportunity - very good profitability, but low current sales - Candidate MUST be able to recognize that this
line of business was added since 2011
After reviewing exhibits, candidate should guide case forward by suggesting that we explore how to improve Kid Country’s position.
Strong directions should attempt to shore up the core business of tickets (which is likely a driver for the brand and thus the side
business) while capitalizing on growth opportunities in beer and considering ways to either kill or fix the apparel business.
218
Case 22: Kid Country
Exhibit 1
2014 Sales ($M)*
7
6
1
5
3
1
2
4
4
3
3
2
0.5
0.5
1
0.75
0.25
0
Apparel
1
CD/MP3
Profit ($)
1
Concert Tickets
Channel Margin ($)
Beverages
Other Costs ($)
*Forecast through EOY
219
Case 22: Kid Country
Exhibit 2
2011 Sales ($M)
1.5
8
1.5
6
3
4
1
6
2
3
0.9
0
0.4
0.2
Apparel
CD/MP3
Profit
Concert Tickets
Channel Margin
Other Costs
220
Case 22: Kid Country
Prompt #2
After letting the candidate explore recommendations for improving Kid Country’s business, introduce the following:
“Kid Country would like us to evaluate a proposal he just received from his concert promoters, which would substantially change the
business model of his tours - tell us what you think of it”
Provide Exhibit 3 and voice over the following: “The promoters have been able to negotiate a unique deal with the venues which host
Kid Country - if he is willing to drop ticket prices dramatically (while increasing the venues’ cut of course), they will allow him to
perform back-to-back shows (either the same night or on consecutive nights) and will agree to carry exclusively Kid Country’s own
“Real American Red White and Blue Lager” for sale during these shows.”
Recommendation
Candidate should recognize that he is being asked to make a go/no-go recommendation, and should not depend on interviewer prompting
to come to one. THIS IS THE CASE CONCLUSION- if a candidate waffles after it, prompt him to conclude.
If the candidate asks what our base case forecasts look like, tell him that we don’t have any and ask for his input - a strong candidate should
be able to recognize that 2011->2014 trends and the general context of the case imply declining performance.
If the candidate has questions about the forecasts, explain that we are confident in them; a strong candidate will likely express concerns
about the fact that we aren’t taking into account the extra costs of a second show- explain that, because almost all costs for a given location
are fixed, back-to-back shows add negligible costs which do not need to be considered.
Candidate should be able to quickly build a profit calculation table to produce a go/no-go recommendation along with acknowledgment of
the risks associated with either.
• Pros: Major revenue and profit opportunity; movement into higher profitability space; reversal of disastrous trend
• Cons/risks: Redefines core business - Kid Country is now essentially a brewer who uses music to sell beers; can Kid Country scale his
beverage business?; Kid Country will have to play twice as many shows- this is a huge personal burden - does he want to?
221
Case 22: Kid Country
Exhibit 3
Tour Forecast Data
Tour
Dates
Ticket
Price
Tickets/
Show
Beer
Price
Beers/
Show
% of Own
Brand Beers
Ticket
Margin
Beer
Margin
222
Case 22: Kid Country
Exhibit 3 Interviewer Guidance
Tour Forecast Data Key
*Exceptionally curious candidates may wonder if this is actually a good deal for our venues. It is- their profits go from $2M to $2.4M.
223
Case 22: Kid Country
Performance Evaluation
• Skills tested
o Rudimentary case math, identification of trends, strengths, and weaknesses within a business, ability to drive a line of
thought to an actionable conclusion
• Strong candidates will:
o Complete necessary math with minimal stumbles
o Handle Exhibit 3 with a clean, well-organized profit calculation table while avoiding unnecessary calculations
o Consider qualitative factors (will Kid Country want to work twice as many shows? Could he re-brand by playing another type
of music? [probably not])
o Drive to conclusions- above all else, a strong candidate will drive this case, recognize that Prompt #2 is a go/no-go decision,
and present a crisp, concise, and decisive conclusion upon its completion rather than depending on the interviewer to wrap
the case up for him.
o Incorporate data on relative impact of project in conclusion (e.g. circle back to total 2014 profits across all lines of business
to show % profit increase in overall terms)
224
Case Interview feedback form
Case _________________________ Case type _________________ Interviewer ____________________
Execution
Case start time ___:____
1 2 3 4 5
•Structure
¾Logical approach
¾MECE
¾Appropriate drive to solution
Comments:
•Quantitative Ability
1 2 3 4 5
¾Speed
¾Accuracy
¾Comfort, reaction to mistakes
Comments:
•Business intuition
¾Practical
¾Insightful
¾Breadth & depth across multiple functions
¾Creativity
1 2 3 4 5
Comments:
Framework development
Framework explanation
Case discussion
______ min
______ min
______ min
Case end time ___:____
Overall Rating: 1 2 3 4 5
Strengths
Communication
1 2 3 4 5
•Professionalism
¾Poise
¾Confident-Persuasive
¾Articulate-concise
¾Client ready
Comments:
Weaknesses
•Written
¾Clarity of writing and page layout
¾Ability to refer back
¾Comfort, reaction to mistakes
1 2 3 4 5
Comments:
Behavioral (optional)
•Quality of star stories
•Length
•Clarity
•Relevance
1
1
1
1
2
2
2
2
3
3
3
3
4
4
4
4
5
5
5
5
Comments:
Key: 1=Bottom 10%, 2= 10th-25th percentile, 3=
middle 50%, 4= 75th-90th percentile, 5=Top 10%
CASE 23 – TEXAS OIL
226
Case 23: Texas Oil
Deloitte Case Writing
Competition Finalist
Prompt 1
Your client, Texas Oil, is a large, integrated oil and gas company which competes with the likes of ExxonMobil, Shell, and Chevron. They
have assets in 72 countries, on 5 continents, and own one-quarter of the US oil market. They recently purchased a large area of land
from a small, independent oil company and are attempting to integrate it into their portfolio in West Texas. They hired your firm to
help them determine how to develop the purchased land.
While the company is large, it is “capital constrained”. This is because of low crude oil prices and an over-budget refinery in Angola. As
a result, the company cannot develop all of the purchased land in the coming years.
How would you frame this problem for the client?
Behavioral Questions
• What was your favorite team moment?
• Can you tell me a time when you exhibited strong leadership qualities?
Interviewer Guidance
Background information (if requested):
• All of the purchased land has proven oil and gas reserves (with 90% confidence)
• Other major competitors are also in West Texas.
• Oil and Gas are commodities, and traded on an international, liquid market (meaning the quality of the reserves is not important for
the case)
• Texas oil does not have enough market share to influence the price of oil/gas
• The purchased lease will expire in 3 years
• The total amount purchased is 320,000 acres
227
Case 23: Texas Oil
Interviewer Guidance Continued
The candidate should frame this as a prioritization problem. The key value measure for prioritization is a cost/benefit analysis:
Costs: Land development (building roads, infrastructure), appraisal costs (geological analysis), construction and drilling costs, labor
costs, production costs (pipelines, etc.)
Benefits: Revenue, market share, production
228
Case 23: Texas Oil
Prompt 2
The land on which the drilling rights were purchased is owned by the government and leased to companies on a five-year timeline. If a
lease holder does not develop that land in that time, the lease expires and the lease holder can no longer develop it. Texas Oil’s
purchased land has only three years remaining on its lease agreement.
How many acres can Texas Oil develop before their lease expires? What percentage of their purchased land does this represent?
Interviewer Guidance
This is a short, back of the envelop calculation. The candidate should ask for figures, but if they are having difficulty you can start from
the top with information.
Historically, the company has been able to develop (drill and produce) land at a rate of 100 square miles per year.
640 acres = 1 square mile
Texas oil has three years remaining on the lease, so 3*100 = 300 square miles
300*640 = 192,000 acres can be developed in 3 years
Company purchased a total of 320,000 square acres
192,000 / 320,000 = 60% of its purchased land
229
Case 23: Texas Oil
Prompt 3
OK, now that we’ve determined how much of the land can be developed, we need to prioritize. The company has categorized the land
into five “focus areas”, each with 64,000 acres (show exhibit 1 to candidate).
How would you go about prioritizing focus areas?
Interviewer Guidance
This is purely a brainstorming question, and if the candidate asks for specific figures, you can indicate that they are forthcoming.
NPV is the base answer (i.e. prioritize land based on expected revenue from reserves minus expected costs of development), but you
should push the candidate to be a bit more creative.
2nd Level Insights:
• Capital efficiency (some areas may have slightly higher profits but cost much more to develop)
• Total cost of development (the prompt indicated that the company is “capital constrained”)
• Total production
o Some companies may be more production focused than profit because it boosts stock price and/or valuation of the company
(e.g. independent oil companies looking to sell)
230
Case 23: Texas Oil
Exhibit 1
Focus Areas
Coyote
Tooth
Eagle
Mountain
Midland
Fox Path
Nag River
Head
231
Case 23: Texas Oil
Prompt 4
Each one of these areas can be developed independently, but not at the same time. The firm has provided you with exhibits 2 and 3
and asked you to determine its optimal course of action. According to the head of the West Texas Business Unit, the company has 300
million available to spend.
How should Texas Oil develop its purchased land?
Interviewer Guidance
The Oil, Gas, and NGL figures are a distraction, and feed directly into revenue. If the candidate asks about priorities, suggest that the
company wants to “maximize profitability given its capital constraints”
The key to answering this question is capital efficiency.
The correct answer is : Eagle Mountain, Midland, and Fox Path.
Coyote Tooth can also be substituted for Fox Path, but it spends more money and gets the same amount of revenue. Nag River Head is
attractive because it has a higher NPV, however, it violates the 300 million limit set by the business unit head (when developed with
any 2 other areas), and is not capital efficient. If the company decides to develop Nag River Head, then, it must give up developing a
third segment, thus forgoing profits on that segment as well.
2nd level insights:
• Texas Oil could re-categorize land within those segments and achieve higher portfolio efficiencies (i.e. not all land in one segment is
equally profitable)
• Texas Oil should sell the excess acreage to other competitors, rather than sitting on the lease and allowing it to expire.
232
Case 23: Texas Oil
Exhibit 2
Focus Area Figures
Acres
Oil Revenue Gas Revenue NGL Revenue
($MM)
($MM)
($MM)
Revenue
($MM)
Total Cost
($MM)
NPV
($MM)
Eagle Mountain
64,000
100
30
9
139
94
45
Fox Path
64,000
110
45
3
158
108
50
Midland
64,000
90
50
1
141
96
45
Nag River Head
64,000
180
10
15
205
150
55
Coyote Tooth
64,000
80
80
0
160
110
50
Total
320,000
560
215
28
803
558
245
233
Case 23: Texas Oil
Exhibit 3
Focus Area Capital Efficiencies
234
Case Interview feedback form
Case _________________________ Case type _________________ Interviewer ____________________
Execution
Case start time ___:____
1 2 3 4 5
•Structure
¾Logical approach
¾MECE
¾Appropriate drive to solution
Comments:
•Quantitative Ability
1 2 3 4 5
¾Speed
¾Accuracy
¾Comfort, reaction to mistakes
Comments:
•Business intuition
¾Practical
¾Insightful
¾Breadth & depth across multiple functions
¾Creativity
1 2 3 4 5
Comments:
Framework development
Framework explanation
Case discussion
______ min
______ min
______ min
Case end time ___:____
Overall Rating: 1 2 3 4 5
Strengths
Communication
1 2 3 4 5
•Professionalism
¾Poise
¾Confident-Persuasive
¾Articulate-concise
¾Client ready
Comments:
Weaknesses
•Written
¾Clarity of writing and page layout
¾Ability to refer back
¾Comfort, reaction to mistakes
1 2 3 4 5
Comments:
Behavioral (optional)
•Quality of star stories
•Length
•Clarity
•Relevance
1
1
1
1
2
2
2
2
3
3
3
3
4
4
4
4
5
5
5
5
Comments:
Key: 1=Bottom 10%, 2= 10th-25th percentile, 3=
middle 50%, 4= 75th-90th percentile, 5=Top 10%
CASE 24 – CONSUMER PRODUCTS
STRATEGY
PROVIDED BY
236
Case 24: Consumer Products Strategy
Prompt
Our client is a large, multinational consumer products company with business in over 200 countries. Today, we are going to focus on its
US business.
Our client has been following US demographic trends and has found that low income households have been growing two times as
quickly as other consumer segments Low income is defined as families with income at the poverty level or below.
Our client has always had a premium product strategy. It sells its products in grocery stores, convenience stores, mass retailers, etc. but
its products are always priced at the high-end of their respective categories It has never targeted the low income segment before and
doesn't have a low income strategy, but given the growth of this segment, our client is considering entering the low
income segment.
Our client has 3 questions for BCG.
1) Should it have a low income strategy?
2) If it should have a low income strategy, what are some tactics it should deploy?
3) What are some of the risks the client may face?
Interviewer Guidance
Ask the candidate the following question
1) What would you like to know to help the client answer its questions?
When the candidate asks about products, share Exhibit 1. The client has shared some data for its key products. What do
you make of this information?
237
Case 24: Consumer Products Strategy
Interviewer Guidance Continued
Ask the interviewee the second question
2) What else would you like know about diapers and cold medicine to assess the opportunity?
Ok. The client is not interested in cold medicine, but it has done customer research that suggests low income consumers are interested
in buying diapers. Share Exhibit 2
What do you see that could help us figure out why low income consumers aren't buying our client's diapers?
What else should our client think about as it develops a low income strategy? What are the risks?
Interviewer Guidance (Provide only upon request)
•
•
•
•
Low income consumers purchase largely in smaller, local shops
Low income consumers can't afford salons, but will indulge on shampoos
Low income consumers are willing to spend more on baby food to protect their children
There are valid generics that compete with our client's cold medicine
238
Case 24: Consumer Products Strategy
Recommendation
The client should pursue a low income strategy, focusing on diapers, which could
generate an additional $25M in revenue.
To pursue low income consumers, our client should reduce its package size. Today, our client's package size is significantly larger than
its competitors. Our client could keep the price /diaper the same, but if it dropped the package size from 40 diapers to 20 diapers, it
would cut the absolute price of the box to $10, even lower than its competitors.
There will be some risks involved with adopting a low income strategy including cannibalizing business from existing products and
brand risk.
239
Case 24: Consumer Products Strategy
Exhibit 1
LI: Low Income
240
Case 24: Consumer Products Strategy
Exhibit 2
241
Case 24: Consumer Products Strategy
Quantitative analysis and solutions
Product/Category
Client Overall
Markey Share
Client Share of Low
Income Consumers
Overall share Vs Low
Income Share
Shampoo
100/400 = 25%
30/90 = 33%
Overall < LI
Cold Medicine
50/250 = 20%
7.5/75 = 10%
Overall > LI
Diapers
150/300 = 50%
25/100 = 25%
Overall > LI
Baby food
100/300 = 33%
30/100 = 30%
Overall = LI
242
Case Interview feedback form
Case _________________________ Case type _________________ Interviewer ____________________
Execution
Case start time ___:____
1 2 3 4 5
•Structure
¾Logical approach
¾MECE
¾Appropriate drive to solution
Comments:
•Quantitative Ability
1 2 3 4 5
¾Speed
¾Accuracy
¾Comfort, reaction to mistakes
Comments:
•Business intuition
¾Practical
¾Insightful
¾Breadth & depth across multiple functions
¾Creativity
1 2 3 4 5
Comments:
Framework development
Framework explanation
Case discussion
______ min
______ min
______ min
Case end time ___:____
Overall Rating: 1 2 3 4 5
Strengths
Communication
1 2 3 4 5
•Professionalism
¾Poise
¾Confident-Persuasive
¾Articulate-concise
¾Client ready
Comments:
Weaknesses
•Written
¾Clarity of writing and page layout
¾Ability to refer back
¾Comfort, reaction to mistakes
1 2 3 4 5
Comments:
Behavioral (optional)
•Quality of star stories
•Length
•Clarity
•Relevance
1
1
1
1
2
2
2
2
3
3
3
3
4
4
4
4
5
5
5
5
Comments:
Key: 1=Bottom 10%, 2= 10th-25th percentile, 3=
middle 50%, 4= 75th-90th percentile, 5=Top 10%
CASE 25 – PHARMACEUTICAL RARE
DISEASE BUSINESS GROWTH
PROVIDED BY
244
Case 25: Pharmaceutical Rare Disease Business Growth
Prompt
Our client is a large pharmaceutical company with a strong business in "Rare Disease" (rare diseases are conditions that affect fewer
than 200,000 people in the US).
Historically, pharmaceutical companies have not invested significantly in Rare Disease because it has not been cost effective to conduct
research for such small populations. Due to the fall off in the number of pharmaceutical blockbusters and improved regulation to make
R&D cheaper for Rare Disease, pharmaceutical companies have begun to invest more in Rare Disease R&D over the last few years.
Our client has hired BCG because it would like to grow its Rare Disease business.
Interviewer Guidance
Case question to solve
1) How can the client double its Rare Disease business in 5 years?
245
Case 25: Pharmaceutical Rare Disease Business Growth
Interviewer Guidance
Ask the candidate the following questions
1) How would you approach our client's question on growing its Rare Disease business?
2) Where would you like to start?
When the candidate asks about the existing business, share Exhibit 1. Based on the data, how large will the client's rare disease
business be in 2016? [If necessary,] what is the shortfall to its goal of doubling its business?
What does the client need to do to double the Rare Disease revenues by 2016? [If candidates discusses acquisitions] ask who should
the client acquire and how many assets will client need to buy?
Let's say the CEO walks in, could you summarize for me?
Interviewer Guidance (Provide only if requested)
Our client is an industry leader with a track record of success. Its existing business is $2.5B, expected to grow at 5% per year
Rare disease market is $30B and is as profitable as "Big Pharma“
• While research is relatively expensive, the government provides tax credits for drugs designated to treat rare diseases
• Additionally, prices tend to be higher to make up for the upfront research investment. It's also growing faster than Big Pharma.
There are many small bio-techs that are attractive targets and there are also other big pharmaceutical companies that have rare
disease divisions / assets
246
Case 25: Pharmaceutical Rare Disease Business Growth
Recommendation
Internal growth will not be sufficient to achieve your goal of doubling your business. You will need to acquire ~3 "peak revenue" assets
to close the gap between your goal of $2.5B and the $1.1B your portfolio will generate organically.
247
Case 25: Pharmaceutical Rare Disease Business Growth
Quantitative Analysis and Solutions
LI: Low Income
248
Case 25: Pharmaceutical Rare Disease Business Growth
Exhibit 1
LI: Low Income
249
CASE 26 – INSURECO.
PROVIDED BY
250
Case 26: InsureCo – Business Restructuring
Prompt
Our client, InsureCo, is a large, multi-national insurance provider, with revenues of over $25B in 2009. However, the tightening of the
credit markets and downturn in the economy has caused their profitability to drop significantly from 10% to 5% in the most recent
year.
As a result of economic downturn, our client has decided to evaluate their business portfolio and divest portions of their business to
raise capital and refocus on their core General Insurance business. Their goal is to raise over $3B in capital through the sale of various
business units. The management team has already identified two potential candidates for divestiture from its Life Insurance and
Property and Casualty divisions.
It is considering divesting one of the following business units, in addition to several other businesses across the company:
LifeLine Asia: Asian-based life insurance business, with $250MM in annual revenues
All-World Property and Casualty: A US-based Property and Casualty insurance business, with $100MM in annual revenues
Deloitte Consulting has been engaged to identify and recommend the most viable business unit candidates for divestiture, as well as
assist in the operational separation of the business units’ operations from InsureCo.
Problem Statement
InsureCo has approached Deloitte Consulting to assess candidates for divestiture and to develop a game plan for executing the
divestiture of selected business units
1. What would you estimate as the potential sales price for each company? Please use available data to support your argument
(Note to interviewer: no other data is provided, candidate can make assumptions as necessary)
2. Which company would you advise InsureCo to divest?
3. What are some of the other key factors that InsureCo should consider when assessing which units to divest?
251
Case 26: InsureCo – Business Restructuring
Prompt Questions and Responses (For interviewer reference ONLY)
1. What would you estimate as the potential sales price for each company? Please use available data to support your argument
(Note to interviewer: Please provide candidate with data sheet)
The candidates will have to estimate the potential sales price for each company.
A good answer will include:
A better answer will include the above. But the candidates would also mention the following points:
• The P/E has been declining in Life and Increasing in P&C. By using the more recent multiples the potential prices could be:
o LifeLine Asia - $20 MM * 10 = $200 MM
o All-World - $12 MM * 20 = $240MM
• This makes All-World look like a more attractive divestiture target from a sale price perspective
A great answer will include the above. But the candidates would also mention the following points and how each may affect the valuation of the
companies:
• In reviewing the industry segment overview:
o The Life segment is on the decline
o The P&C is going up
• In reviewing the geography overview:
o North America is on the decline
o Asia seems to be going up
252
Case 26: InsureCo – Business Restructuring
Data Sheet
253
Case 26: InsureCo – Business Restructuring
Prompt Questions and Responses (For interviewer reference ONLY)
2. Which company would you advise InsureCo to divest?
A good answer will draw the following conclusions from the data provided:
If candidate chooses LifeLine Asia the candidate should mention:
• The possibility of getting a higher sales price (based on average deal multiples)
• Asia is a more attractive market and may help InsureCo get a higher premium to help raise capital
• Life seems to be a segment that is detracting, so InsureCo may want to consider getting out of the Life Insurance business
If candidate chooses All-World Property and Casualty the candidate should mention:
• As the company is in the P&C sector, it may command a higher premium than LifeLine
• Based on recent deal multiples, the company may get a higher sales price
254
Case 26: InsureCo – Business Restructuring
Prompt Questions and Responses (For interviewer reference ONLY)
3. What are some of the other key factors that InsureCo should consider when assessing which units to divest?
A good answer will be logically structured to address various business considerations including:
• Overall Culture/People Impact : Selling off the highest quality assets can disrupt the employee base and change the overall image of
the company and cultural underpinnings. Considerations should also be made around how to retain key talent at the remaining
company. If certain employees in the divested business are being groomed for executive positions at the corporate parent,
measures need to be taken to remain these individuals.
• Geographic Reach/Overlap: Considerations should be made to determine where the company has overlap in various geographies
and product mixes.
• Impact to Remaining Revenue Streams: Candidates should explore the impact to that a divested business unit will have on the
portions of the business that remain. For example, if other insurance and investment products are cross-sold at a life insurance
business unit that is being sold, the company needs to assess the potential loss in revenue.
• Potential Buyers: Who are the prospective buyers for the business and what are the potential issues with making a deal with each
one? If any of these business are being spun out into separate companies (via IPO), legal and regulatory considerations must be
made.
A great answer will include the items above, but also explore the impact of shared infrastructure, including IT and key technology
systems, sales and marketing, finance, distribution, etc. Many business units are dependant upon the shared infrastructure for support
and running the business. The corporate parent will need to consider the level of effort to fully separate these business
units.
255
Case 26: InsureCo – Business Restructuring
Wrap-up
• Companies frequently look to M&A activity as a way to accelerate their growth, but divestitures can also be an effective tool for
helped businesses sharpen their focus and use proceeds to invest in high-growth areas.
• In this situation, Deloitte was brought in to help the client with an efficient, accelerate divestiture of a number of business units.
• The Deloitte team assisted the client by:
o Creating a robust divestiture process
o Expediting and aligning the planning process with separation blueprints, Day One readiness plans, and exit plans
o Execution of issue free Day One for numerous divested business units and successful Day two
• Deloitte is viewed as a trusted advisor to the client and has conducted numerous project to help the client transform their business
operations
256
写在中间​
Hi 有缘人，​
你好，我是爱做case的鱿鱼，MBB offeree。​
能够读到这里相信你对consulting一定是有自己的热情吧，接下来将是一些实战中出现的real case，
希望能对你有帮助。
同时，也请允许我打个广告。我也在抽空帮助有需要的candidate进行辅导case/fit mock（象征性收
费哦~），如果你有需要，也欢迎联系我，闲鱼&小红书ID均为：鱿鱼Consulting。​
祝顺利，
鱿鱼
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< 写在最后​
Hi 有缘人，​
你好，我是爱做case的鱿鱼，MBB offeree。​
恭喜你已经读完这本资料！
真实的case面试会和casebook风格略有差异，也请允许我打个广告。我也在抽空帮助有需要的
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ID均为：鱿鱼Consulting。​
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祝顺利，
鱿鱼