#3 Understanding Business...
Transcript of #3 Understanding Business...
Case Interview Workshops
#3 – Understanding Business Situation
1
The Johns Hopkins Business & Consulting Club
2
1. Understand the business situation framework
2. Do a business situation market entry case
Goals to achieve today
3
Types of case interview question could vary a lot…
1. Growth: a. Top-line (revenue) growth
b. Bottom-line (profitability) growth
2. Business Situations a. New products or services
b. Market entry
c. Competition
d. Pricing and valuation
e. Operations
3. Merger & Acquisitions
4
Business Situation Framework
• Who?
• Segment size and growth?
• Preferences? – wants, price points, distribution Customers
• Advantages/disadvantages
• Substitutes
• Why is it useful? Does it match customer needs? Product
• What does client do well?
• Capabilities?
• Financials – profitability (R, C, market share)
• Brand reputation
Company
• Who?
• Size? By market share, revenue, etc.
• What do they do well? – best practices Competition
5
The good news - the format is almost same for all cases!
5 min
3-4 min
15-20 min
1-3 min
*Interviews can also be interviewer-led or interviewee-led
1. Establishing Background:
1. Listening to the case
2. Understanding objectives
3. Clarifying questions
2. Structuring Approach:
1. Structuring in a MECE way
2. Hypothesizing
3. Prioritizing
3. Analysis
1. Quantitatively analyzing
2. Qualitatively analyzing
4. Recommendation
Wharton 2008 Case Book 7
De Beers, one of the leader diamond exploration companies in the world,
is thinking about entering the retail business Should De Beers do so?
Case Prompt
Wharton 2008 Case Book 8
De Beers, one of the leader diamond exploration companies in the world,
is thinking about entering the retail business Should De Beers do so?
1. What is involved in diamond exploration business?
2. What is involved in diamond retail business?
3. What is client trying to achieve with this? Increased profit, market
share, or revenue?
Establish Background: Ask clarifying questions
Wharton 2008 Case Book 9
De Beers, one of the leader diamond exploration companies in the world,
is thinking about entering the retail business Should De Beers do so?
1. What is involved in diamond exploration business?
2. What is involved in diamond retail business?
3. What is client trying to achieve with this? Increased profit, market
share, or revenue?
It is crucial to understand De Beers’ value chain: exploration – extraction
– distribution – polishing and finishing – jewelers – retail. De Beers is
currently in exploration, extraction, and in distribution and would like to
enter retail. They won’t, however, enter polishing or jewelling. Basically,
De Beers wants to take advantage of their brand equity to sell finished
diamonds. They would continue selling raw diamonds to polishers and
they would then buy finished diamonds from jewelers.
Establish Background: Ask clarifying questions
Wharton 2008 Case Book 10
De Beers, one of the leader diamond exploration companies in the world,
is thinking about entering the retail business Should De Beers do so?
1. What is involved in diamond exploration business?
2. What is involved in diamond retail business?
3. What is client trying to achieve with this? Increased profit, market
share, or revenue?
It is crucial to understand De Beers’ value chain: exploration – extraction
– distribution – polishing and finishing – jewelers – retail. De Beers is
currently in exploration, extraction, and in distribution and would like to
enter retail. They won’t, however, enter polishing or jewelling. Basically,
De Beers wants to take advantage of their brand equity to sell finished
diamonds. They would continue selling raw diamonds to polishers and
they would then buy finished diamonds from jewelers.
Establish Background: Ask clarifying questions
11
Structuring Your Approach What areas are important for this case?
• Who?
• Segment size and growth?
• Preferences? – wants, price points, distribution Customers
• Advantages/disadvantages
• Substitutes
• Why is it useful? Does it match customer needs? Product
• What does client do well?
• Capabilities?
• Financials – profitability (R, C, market share)
• Brand reputation
Company
• Who?
• Size? By market share, revenue, etc.
• What do they do well? – best practices Competition
12
Structuring Your Approach What areas are important for this case?
• Who?
• Segment size and growth?
• Preferences? – wants, price points, distribution Customers
• Advantages/disadvantages
• Substitutes
• Why is it useful? Does it match customer needs? Product
• What does client do well?
• Capabilities?
• Financials – profitability (R, C, market share)
• Brand reputation
Company
• Who?
• Size? By market share, revenue, etc.
• What do they do well? – best practices Competition
Hypothesis: It is a good idea to enter the retail diamond business if it is
profitable for De Beers and there are low barriers of entry.
14
Structuring Your Approach Is there an opportunity?
• Who buys diamonds? – wealthy/excess income
• Why? – gifts or personal use – special occasions, engagement, etc.
• Spending habits? seasonal?
• Segment size and growth?
• Preferences? Location? – large metropolitan areas
Customers
• Who are the largest players? - Jewelry stores: Jared, Kays, family owned, Designer names
• Industry? – healthy, growing
• What do they do well? – best practices
Competition
16
Structuring Your Approach Can our client?
• Is it profitable?
• Potential new revenue - How are diamonds sold and priced?
• Cost investment for a retail venture
• Capability – space, labor, marketing force
• Brand reputation – well known for diamonds
Company
• Quality of our diamonds vs. others?
• Substitutes – cubic zirconia, other gems
• Designs of jewelry
• Stores - # stores, location – want customer access
Product
18
Structuring Your Approach Should our client?
• Investment costs
• Any regulation on diamond sales?
• Do we have the capital?
• Sales force
Barrier to Entry
• Competitive response
• New area Risks
• Do by themselves?
• Acquire a retailer?
• Partner with an existing retailer? How?
Qualitative Analysis: Discussing points in the structure
1. Market
2. Customers
3. Barriers to entry
4. etc.
19
Quantitative Analysis: NY, high end store, $300 per square meter, 5000 square meters
Cost per year: $300*5000*12 = $18M
How many diamonds do you need to break even?
Ask for revenue data
Breakeven means P=0, so R=C
(#diamonds)(price/diamonds) = 18M
20
Quantitative Analysis: NY, high end store, $300 per square meter, 5000 square meters
Cost per year: $300*5000*12 = $18M
How many diamonds do you need to break even?
Ask for revenue data
Breakeven means P=0, so R=C
(#diamonds)(price/diamonds) = 18M
Is this realistic to reach? Per year? Per day? Per hour?
21
Recommendation Action recommendation – answer question
◦ Yes or no, DeBeers should (not) enter market
3 reasons to support why
1. Qualitative conclusion
2. Quantitative conclusion
3. Other issues discussed/conclusions
Reiterate yes/no answer
Next steps: What would you like to know to be more confident in conclusion? What is unexplored?
22