WHARTO

N C

ONSULTIN

G C

LUB

CASEB

OOK

September 2009, © W

harton Consulting

Club

Contents

�Introduction

�Consulting Industry Guide

�Industry O

verview

�Firm

Ove

rviews (10 Firms)

Section

3 6

Page #

2

�Firm

Ove

rviews (10 Firms)

�Interview Preparation

�Interview O

verview –

Fit + Case

�Sample Framew

orks

�Industry Sna

pshots

�Practice Cases

�14 Practice C

ases

�Links to Other Cases

�Cases from Firm W

ebsites

�Sug

gested C

ases from other Casebooks

18

50

126

Note to the

reader

Dear Consulting Club Member,

This casebook is m

eant to provide you with a brief ove

rview of co

nsulting

recruiting

and

interview prepara

tion as well as a num

ber of pra

ctice cases. Please note tha

t this

is m

eant to sup

plement the

excelle

nt w

ork done

by our and

other scho

ols in earlier

casebooks, so w

e strong

ly encourage you to not make

this yo

ur sole reference. W

e have

indicated w

hich other ca

sebooks w

e foun

d particularly useful at different points in this

casebook.

3

casebook.

Good luck!

-2009 Wharton Consulting Casebook Editorial Team

BIG

PICTU

RE: C

ONSULTIN

G REC

RUITIN

G INVOLV

ES

LOTS

OF LITTLE THIN

GS…

THER

E IS N

O SILVER

BULLET

Gather Info,

Network &

Decide

•Is consulting

wha

t yo

u want to do?

•W

hich firm do you want to join?

•W

hy do you want to join a certain

firm

?•Connect the

dots (pre-M

BA to M

BA

to consulting

)

•MBACM in

dustry cha

ts•Firm

websites / Vault / W

etFeet

•Coffee cha

ts•EISes

•Seco

nd Years / First Years from firms

•Speake

rs on ca

mpus

Your objective

What resources you will need to use

4

Apply

Interview:

Cases

Interview:

Fit

•Get invited to interview (prepare

good resume and

cove

r letter)

•MBACM resume review

•Re

sumania

•Seco

nd Years (at least 2 reviews)

•Demonstrate ‘fit’

-Le

adership

-Team-p

laye

r-W

ell-rounded persona

lity

•Prep ‘F

it’ que

stions tho

roug

hly

•MBACM m

ock interviews

•Interviews with Seco

nd Years

•Re

ad W

SJ, Eco

nomist…

something

•Ace

Cases

•Case books &

Ind

ustry Primer Series!

•Core courses

•Pra

ctice extensively w

ith First Ye

ars

•MBACM m

ock interviews

•Interviews with Seco

nd Years

•Re

ach out to consulting

firm bud

dies

Contents

�Introduction

�Consulting Industry Guide

�Industry O

verview

�Firm

Ove

rviews (10 Firms)

Section

3 6

Page #

5

�Firm

Ove

rviews (10 Firms)

�Interview Preparation

�Interview O

verview –

Fit + Case

�Sample Framew

orks

�Industry Sna

pshots

�Practice Cases

�14 Practice C

ases

�Links to Other Cases

�Cases from Firm W

ebsites

�Sug

gested C

ases from other Casebooks

18

50

126

Industry ove

rview –

Mana

gement Consulting

Mana

gement consulting

invo

lves solving complex business problems and

offering

reco

mmend

ations to companies

Overview of management consulting

•Problem-solve complex and

unstructured

business problems

•W

ork closely w

ith senior mana

gement on

Interview Process

•Case interview –

invo

lves solving a

business case; ca

ndidate expected to

drive

tow

ard

s a solution and

ask for

6

•W

ork closely w

ith senior mana

gement on

the clie

nt side

•Intelle

ctua

lly stimulating

work and

ability to build a strong

set of skills

•Constant tra

vel (depend

ing on office

loca

tion and

consulting

firm) ca

n pose

significa

nt cha

lleng

es

•Industry (prior to eco

nomic dow

nturn)

was ex

pected to grow at 8.8% in 2009

•Most firms ha

ve a global presence and

offer internationa

l project opportun

ities

drive

tow

ard

s a solution and

ask for

releva

nt data; focus on structure;

•Fit interview –

numerous beha

viora

l que

stions focusing

on prior ex

periences

Typical Career Path

•Consultant/Associate

•Senior Consultant/Associate

•Mana

ger/Project Leader

•Associate Partne

r•Pa

rtne

r

Industry ove

rview –

Accenture

Accenture is a leading global mana

gement consulting

firm w

hich is kn

own for offering

co

mprehe

nsive solutions, includ

ing techno

logy services, to its clie

nts.

Accenture O

verview

•2000 consultants

•Global bra

nd reco

gnition due

to

solutions outside m

ana

gement consulting

Interview Form

at

•2 roun

ds of interviews

•Ro

und 1: 2 45-m

inute in

terviews

•Ro

und 2: 3 45-m

inute in

terviews

7

solutions outside m

ana

gement consulting

•3 broad services areas (m

ana

gement

consulting

, systems integra

tion co

nsulting

and

techno

logy consulting

)•Re

giona

l staffing m

odel

•Comprehe

nsive solutions, bey

ond

stra

tegy, offered to clie

nts

•Ro

und 2: 3 45-m

inute in

terviews

Career progression

•Consultant

•Mana

ger

•Pa

rtne

r

Industry ove

rview –

A.T. Kearney

A.T. Kearney

is a leading global mana

gement consulting

firm w

hich is kn

own for the

implementation focus of its projects/results.

A.T. Kearney

Ove

rview

•1700 consultants

•51 offices worldwide

•34 coun

tries

Interview Form

at

•2 roun

ds of interviews

•Ro

und 1: 2 45-m

inute in

terviews

•Ro

und 2: Re

gular ca

se +

fit interviews

8

•34 coun

tries

•12 in

dustry group

s•7 broad services areas

•Global staffing m

odel

•Pa

rtne

rs actively involved in ca

ses

•Re

cently w

ent priva

te w

hen co

mpany

was boug

ht back from EDS

•Ro

und 2: Re

gular ca

se +

fit interviews

Case presentation (60 m

inute

prep, 20 m

inute presentation &

10 m

inutes for Q&A)

Career progression

•Associate

•Mana

ger

•Principal

•Pa

rtne

r (V

ice-President)

Industry ove

rview –

Bain &

Co.

Bain is a global mana

gement consulting

firm. It is co

nsidered one

of the top firms in this

industry and

is kn

own for its focus on delivering

results and

office-centric work m

odel.

Bain O

verview

•3100 consultants

•39 offices worldwide

•26 coun

tries

Interview Form

at

•2 roun

ds of interviews

•Ro

und 1: 2 40-m

inute in

terviews

•Ro

und 2: 3 40-m

inute in

terviews (2 case

9

•26 coun

tries

•Office-specific staffing m

odel

•14 ind

ustry group

s•11 fun

ctiona

l pra

ctice areas

•Office-centric work m

odel

•Culture considered to be colle

gial

•Ro

und 2: 3 40-m

inute in

terviews (2 case

+ 1 fit)

•Office-specific interviews

•“A

nswer-first” approach

•Fo

cus on creativity and

structure

Career progression

•Consultant

•Case Team Leader

•Mana

ger

•Pa

rtne

r

Industry ove

rview –

Booz & C

o.

Booz is a global mana

gement consulting

firm. It is co

nsidered one

of the top firms in this

industry and

was rece

ntly boug

ht out from Booz Alle

n Hamilton, w

hich is govt. focused.

Booz Ove

rview

•3300 consultants

•57 offices worldwide

•30 coun

tries

Interview Form

at

•2 roun

ds of interviews

•Ro

unds 1 &

2: 2 45-m

inute interviews

10

•30 coun

tries

•Re

giona

l staffing m

odel

•16 ind

ustry group

s•8 fun

ctiona

l pra

ctice areas

Career progression

•Consultant

•Mana

ger

•Pa

rtne

r

Industry ove

rview –

Boston Consulting

Group

BCG is a global mana

gement consulting

firm. It is co

nsidered one

of the top firms in this

industry and

is kn

own for its intelle

ctua

l approach and

diverse w

orkforce.

BCG O

verview

•4500 consultants

•66 offices worldwide

•40 coun

tries

Typical Interview Form

at

•2 roun

ds of interviews

•Ro

und 1: 2 45-m

inute in

terviews (cases)

•Ro

und 2: 3 45-m

inute in

terviews (cases)

11

•40 coun

tries

•Re

giona

l staffing m

odel

•15 ind

ustry group

s•14 fun

ctiona

l pra

ctice areas

•Pe

ople considered to be friend

ly

•Ro

und 2: 3 45-m

inute in

terviews (cases)

•Gene

ral 1stroun

d and

office-specific 2nd

roun

d in

terviews

Career progression

•Consultant

•Project Leader

•Principal

•Pa

rtne

r

Industry ove

rview –

Deloitte

Deloitte is a leading global mana

gement consulting

firm w

hich is kn

own for offering

co

mprehe

nsive solutions, includ

ing techno

logy and

tax services, to its clie

nts.

Deloitte O

verview

•Global bra

nd reco

gnition due

to

solutions outside m

ana

gement consulting

•18 in

dustry group

s

Interview Form

at

•2 roun

ds of interviews

•Ro

und 1: 2 30-m

inute in

terviews

•Ro

und 2: 1 60-m

inute in

terview w

ith 2

12

•18 in

dustry group

s•5 broad services areas (enterp

rise,

human ca

pital, outsourcing

, stra

tegy &

opera

tions and

techno

logy integra

tion)

•7 fun

ctiona

l areas within stra

tegy &

opera

tions

•Re

giona

l staffing m

odel

•Comprehe

nsive solutions, bey

ond

stra

tegy and

opera

tions, offered to clie

nts

•Ro

und 2: 1 60-m

inute in

terview w

ith 2

partne

rs

Career progression

•Senior Consultant

•Mana

ger

•Senior Mana

ger

•Pa

rtne

r

Industry ove

rview –

L.E.K. Consulting

L.E.K. is a global mana

gement consulting

firm. It is co

nsidered one

of the top small firm

s in this industry and

is kn

own for its ana

lytica

l rigor.

L.E.K. Ove

rview

•900 consultants

•20 offices worldwide

•Strong

presence outside US

Interview Form

at

•2 roun

ds of interviews

•Ro

und 1: 2 30-m

inute in

terviews (little

fit, some cases were bra

instorm

ing type

13

•Strong

presence outside US

•19 ind

ustry group

s•6 fun

ctiona

l pra

ctice areas

•Kno

wn for its ana

lytica

l rigor

•Cases usua

lly sho

rter (6 to 8 w

eeks)

•Provides im

mediate m

ana

gerial

resp

onsibilities to its M

BA hires

•Pa

rtne

rs actively involved in ca

ses

fit, some cases were bra

instorm

ing type

que

stions)

•Ro

und 2: 3 30-m

inute in

terviews

•Po

tential ca

se on NPV ana

lysis

Career progression

•Associate Consultant

•Consultant

•Mana

ger

•Pa

rtne

r

Industry ove

rview –

McK

insey &

Co.

McK

insey &

Co. is a global mana

gement consulting

firm. It is co

nsidered one

of the top

firm

s in this industry and

is kn

own for deve

loping le

aders and

strong

culture.

McK

insey O

verview

•8500 consultants

•92 offices worldwide

•52 coun

tries

Interview Form

at

•2 or 3 roun

ds of interviews

•Command

and

Control ca

se interviews

•Office-specific interviews in all roun

ds

14

•52 coun

tries

•Nationa

l/global staffing m

odel

•18 ind

ustry group

s•7 fun

ctiona

l pra

ctice areas

•Office-specific interviews in all roun

ds

(tho

ugh Northe

ast offices pilo

ted common

initiative

)•Fit interviews focus on structure, specific

actions and

headlin

es for stories

Career progression

•Associate

•En

gagement M

ana

ger

•Associate Principal

•Pa

rtne

r•Director

Industry ove

rview –

Monitor Group

Monitor is a leading global mana

gement consulting

firm w

hich is kn

own for its thoug

ht

leadership and

focus on kn

owledge tra

nsfer to its clie

nts.

Monitor Ove

rview

•1500 consultants

•30 offices worldwide

•18 coun

tries

Interview Form

at

•2 roun

ds of interviews

•Ro

und 1: 2 interviews (case +

fit)

•Ro

und 2: Group

business case exe

rcise

15

•18 coun

tries

•15 ind

ustry group

s•3 broad services areas (advisory,

capital-building &

capital)

•Global staffing m

odel

•Fo

unded in

1983 by the

likes of Micha

el

Porter

•Ro

und 2: Group

business case exe

rcise

Role play interview

Feedback in

terview

Career progression

•Case Team M

ember

•Module Leader

•Case Team Leader

•Global Accoun

t Mana

ger

Industry ove

rview –

Oliver W

yman

Oliver W

yman is a global mana

gement consulting

firm. It is co

nsidered one

of the top

firm

s in this industry w

ith a significa

nt presence outside the

US.

Oliver W

yman Ove

rview

•2900 consultants

•40 offices worldwide

•16 coun

tries

Interview Form

at

•2 or 3 roun

ds of interviews

•Ro

und 1: 2 30-6

0 m

inute w

ith ca

se and

fit

16

•16 coun

tries

•9 ind

ustry group

s•7 fun

ctiona

l pra

ctice areas

•Global staffing m

odel

•Fo

rmed from a combination of Mercer

Oliver W

yman & M

ercer Consulting

fit•Ro

und 2: 1 Fit interview w

ith tw

o case +

fit interviews

Career progression

•Junior Consultant

•Senior Consultant

•Junior Mana

ger

•Senior Mana

ger

•Pa

rtne

r

Contents

�Introduction

�Consulting Industry Guide

�Industry O

verview

�Firm

Ove

rviews (10 Firms)

Section

3 6

Page #

17

�Firm

Ove

rviews (10 Firms)

�Interview Preparation

�Interview O

verview –

Fit + Case

�Sample Framew

orks

�Industry Sna

pshots

�Practice Cases

�14 Practice C

ases

�Links to Other Cases

�Cases from Firm W

ebsites

�Sug

gested C

ases from other Casebooks

18

50

126

Contents: In

terview preparation

�A typical consulting

interview

�Gene

ral tips

�Fit interview preparation with sa

mple que

stions

�Case in

terview preparation

�W

hat is a case? Case types and

interview m

ethods

18

�W

hat is a case? Case types and

interview m

ethods

�Problem solving –

wha

t is it?

�Ove

rall flow

of a case

�Tips to stand

out

�Sample Fra

mew

orks

�Common Industry Sna

pshots

�Tips for giving cases

�Other resource

s

�Industry sna

pshots

A typical co

nsulting

interview

Proce

ss

•W

ait in

hosp

itality suite

with other ca

ndidates /

recruiters

•Interviewer may

give persona

l background

•Interviewer will start case

•Keep tra

ck of time so tha

t yo

u by w

hen yo

u are

•Yo

ur cha

nce to ask

que

stions

•W

alk back to hosp

itality

Meet & G

reet

The Case

The Fit

Wra

p-up

19

You should

•Interviewer asks for yo

u by name

•Hand

shake

/ greeting

•W

alk to interview suite

/ small talk

•Que

stions about

resume /

experience

you by w

hen yo

u are

expected to reach a

conclusion

•W

alk back to hosp

itality

suite w

ith interviewer

•Appear warm

, co

nfident, p

rofessiona

l•Convince

interviewer that yo

u are fit for the firm

•Pa

ss the

“airport

test”

•Maintain confident,

controlle

d, u

pbeat

demeano

r

•Not ask stock que

stions

•A good cha

nce to get to

learn about the

interviewer’s persona

l ex

periences at the firm

Gene

ral tips

�Make

a great first im

pression

�Professiona

l appearance

�Preparation

�Have

needed sup

plie

s

�Plenty of pens/pencils

20

�Plenty of pens/pencils

�Graph/

plain paper

�Serviceable portfolio

�Project confidence from start to finish

�Re

lax (ha

rd to appear co

nfident if not)

�Be yourself (ex

tremely hard

to be confident if not)

Wha

t is “fit”?

�Opportunity to project “co

nsultant” during the

interview

�Inquisitive, logical, co

nfident, friend

ly, drive

n, happy

�W

hen yo

u describe yourself:

�Fo

cus on a set of skills that the company

wants

�Commun

ication

�Le

adership/Mana

gement

21

�W

ork und

er pressure / ability to deal with co

nflict and

ambiguity

�W

hen yo

u describe your fit:

�Don’t repeat slogans; most firms do the

same thing

s

�Fo

cus on wha

t the firms co

nsider to be the

ir u

nique

factors (e.g. McK

insey’s

internationa

l reach, BCG’s tho

ught leadership, Bain’s office culture etc.)

�Fo

r in-d

epth probing on leadership que

stions (typical of McK

insey)

�Prepare a 5-1

0 w

ord

‘ne

wsp

aper he

adline’ that encapsulates the story

�Prepare beforeha

nd a 1-2

minute description that quickly lays out the

contex

t, the

actors and

the

complication

�Fo

cus on yo

ur actions and

tho

ught proce

ss and

the

impact of yo

ur actions tha

t led to

the solution / eve

ntua

l success

Tips on the Fit Interview

�Alm

ost eve

ry single interview involves at least some fit-

interview type que

stions

�Applicants ha

ve been turned dow

n from the

top consulting

firm

s for no

t ha

ving

cleared the

fit portions of interviews

�Very basic steps go a long

way

22

�Very basic steps go a long

way

�Smile

�Maintain eye contact

�Be hone

st and

heartfelt

�Have

a succinct story

�Practice can make

perfect

�InterviewStream

�Mock fit in

terviews

Tips on the Fit Interview (co

nt.)

�Do

�Establish co

mmon ground (geography, family, interests, sports, etc.)

�Ask the

interviewer friend

ly que

stions

�Be confident in

your answers

�Ta

lk about something other than yo

ur qua

lifications (yo

u’re in

teresting, so

23

�Ta

lk about something other than yo

ur qua

lifications (yo

u’re in

teresting, so

talk about it)

�Don’t

�Discuss something controve

rsial

�Complain about a

nyth

ing

�Make

up elaborate que

stions you know

the

answer to

�Re

peat co

mpany

slogans, m

ottos, tag-lines, etc.

�Fo

cus only on yo

ur business qua

lifications and

experience

Sample fit que

stions

�Ta

ke m

e throug

h yo

ur resume

�Tell me about a tim

e w

hen yo

u ex

hibited leadership

�Tell me about a tim

e w

hen yo

u ha

d to solve a problem

�Tell me about a tim

e w

hen yo

u fa

iled

�Tell me about a tim

e you ha

d impact

�W

hat kind

of leader are you?

24

�W

hat kind

of leader are you?

�W

hy Firm X?

�W

hy City Y?

�W

hy consulting

?

�W

hat is your greatest accomplishm

ent?

�W

hat would you say your biggest w

eakness is?

�W

hat are your long

-term

goals?

�How

do you like school?

�W

hat is your favo

rite class at scho

ol?

�W

hat did you do last sum

mer?

�W

hat do you do for fun?

Case types and

case interview m

ethods

�W

hat is a case?

�A business issue

/problem company

is fa

cing

in a few

sentences

�Ta

kes about 25 m

inutes; has lim

ited data w

hich is usua

lly provided if asked for

�Approach to solution is m

ore important tha

n the final solutio

n

�There are two common ca

se in

terview m

ethods:

‘Go with the flow’ cases (typical of most firms) –

You will determ

ine w

hich

25

�‘Go with the flow’ cases (typical of most firms) –

You will determ

ine w

hich

areas to explore and

lead the

discussion, i.e. drive

the

case

�Command and control (typical of McKinsey) –Interviewer guides the discussion

and

case has he

avy

bra

instorm

ing compone

nts and

qua

ntitative

work

�Common ca

se types* (no

t a comprehe

nsive list):

�Profitability

�Market En

try

�Acq

uisition

�Organiza

tion

�Industry Ana

lysis (incl. no

n-profit)

�Market Sizing

�Capacity Expansion (incl. outsourcing

)

�Inve

stments

*Note

: one

case

could span

multiple case

typ

es

Ove

rall flow

of a case

Und

erstand

the que

stion

Plan yo

urapproach

Probe for

inform

ation

Assert a

conclusion

•Listen actively

•Ask clarifying que

stions

•Ta

ke ju

dicious notes

•Mention yo

u will take

a

minute to plan yo

ur

approach

•Fo

llow your plan!

•Ask specific que

stions

to test hypothesis

•Drive

the

case to a

conclusion before tim

e

expires

~3 m

in.

~3 m

in.

~12-1

5 m

in.

~1-2

min.

26

•Ta

ke ju

dicious notes

•Organize

notes as slides

•Fo

rmulate an initial

hypothesis about

possible solutions

•W

rite dow

n ke

y

que

stion

•Dra

w out a fra

mework

as checklist of topics to

explore

•Select 3 to 5 m

ajor

topic areas

•Identify releva

nt sub

-topics

•Present plan of attack

to in

terviewer –start

with the m

ost im

portant

to test hypothesis

•Adjust hypothesis and

plan as data emerges

•Organize

notes as

slides

•Highlight in

sights from

any

num

erica

l ca

lculations

•Note conclusions

•Answer the que

stion

•Ta

ke a definite stand

•Make

best conclusion

with data on ha

nd

•Make

reco

mmend

ations

and

follo

w the

m w

ith

supporting evidence

•Address “risks” and

“nex

t steps”

Tips: Commun

ication, N

otes & M

ath

�Commun

ication

�Ex

plain your tho

ught-p

roce

ss w

hen presenting your plan

�Make

hypotheses whe

n asking que

stions/reque

sting inform

ation

�Go bey

ond

verb

al co

mmunication

�Be eng

aging! Enjoy the

case problem and

work together to solve it!

�Body lang

uage (ey

e contact, gestures, posture); smile

often but do not ove

rdo it

27

�Body lang

uage (ey

e contact, gestures, posture); smile

often but do not ove

rdo it

�Fa

cial ex

pressions (Maintain composure at all times)

�Notes

�W

rite legibly, ang

le it such tha

t the case-g

iver ca

n see your w

ork

�Use a new

page for each the

me you are exploring

�Circle/box

insights for use in reco

mmend

ations

�Math

�Draw m

ath out clearly (esp

ecially

for market sizing

)

�Ex

plain any

assum

ptions (be reasona

ble w

ith assum

ptions)

�W

alk throug

h yo

ur logic aloud

and

tie the

result to the

case

7 Tips to help you stand

out in the case interview

�Ask que

stions tha

t he

lp clarify the

sco

pe of the case and

the

exact que

stion to be

answered

�Dra

w out as “M

ECE” (Mutua

lly exclusive

, co

llectively exha

ustive

) a fra

mew

ork / tree

as possible

�Ta

lk about the

most important bra

nche

s first and

explain w

hy the

y m

ay be the

key

drive

rs; don’t just follo

w the

seque

nce in which you wrote the

m

28

drive

rs; don’t just follo

w the

seque

nce in which you wrote the

m

�W

hen asking que

stions or for more data, p

refa

ce the

m w

ith co

ntex

tual a

nalysis, or

eve

n a hypothesis as to w

hat yo

u ex

pect the

data sho

w

�W

hen doing m

ath, relate the

num

bers qua

litative

ly to the

case, and

identify/ve

rbaliz

e

the take

aways from your ana

lysis

�‘Bra

instorm

in bucke

ts’: If asked to bra

instorm

, take

a m

inute, identify the

broad leve

rs

that ca

n answer the que

stion, and

run

-riot with ideas. Structure and

a logical approach

is always appreciated.

�W

hen presenting reco

mmend

ation –take

a position! Be concise and

top-d

own in your

reco

mmend

ation (i.e. reco

mmend

ation first with supporting arg

uments, tie in nu

mbers if

possible). The

n, m

ention the risks tha

t inva

lidate your reasoning

A note about framew

orks

�Th

ere are an un

limited num

ber of framew

orks that ca

n be succe

ssfully

applie

d in

case

interviews…

�…

but kno

wledge of a few

solid

fra

mew

orks will go a long

way (profitability, market

entry, go/no

go investment, etc.)

�Sample fra

mew

orks ca

n be foun

d in the follo

wing place

s:

�W

harton, Ross, Stern, Tuck, Kello

gg, and

other scho

ol ca

sebooks ava

ilable on web

cafe

29

�David O

hrva

ll “C

rack the

Case” and

Mark C

osentino“C

ase in Po

int”

�Yo

ur kno

wledge from m

ana

gement, marketing

classes and

prior work experience –

read the

CORE CONNEC

TORpub

lishe

d by the

Wha

rton Consulting

Club too

�Yo

ur own logical problem-solving abilities

�Cosentinoand

Ohrva

ll both offer “systems,” but the

se systems are essentially

co

mbinations of individua

l ca

se-type fra

mew

orks

�Use w

hat(1) Yo

u are comfortable w

ith, and

, (2) works for yo

u. Be as original as

possible: DEV

ELOP A FRAMEW

ORK THAT IS RELEV

ANT TO

THE CASE PROBLEM

QUES

TION AND INDUSTR

Y!

�Some sample fra

mew

orks are provided in the nex

t few slid

es. But the

se are just meant

to get yo

u started –

do deve

lop your own framew

orks for each case!

Sample framew

ork 1: Increase profits

Overview

Sample

Framew

ork

•Clie

nt’s earnings / profits (or ‘bottom-line’ in Inco

me Statement) ha

s declined or stopped growing

•Yo

u ne

ed to reco

mmend

ways to increase profits

Market

Revenues

Costs

Customer / Channel

30

•Industry

-Growth (g)

-Re

venues (R)

-Profits (

Π)

•Competition

-C1 m

arket share (s1

)-C2 m

arket share (s2

)-Etc.

Market

Revenues

Costs

Customer / Channel

•Product mix

-Po

ints of Pa

rity /

difference our

products and

co

mpetition prod.

•Pricing (P)

-Competitive

parity in

price

s-Can we ↑

price

s?•Volume (Q)

-W

hat’s our m

arket

share?

-Enoug

h ca

pacity to

meet demand

?

•Client cost structure

(Fixed / Variable)

-PP&E (Property,

Plant &

Equipment)

-Ove

rhead

-SG&A

-La

bour

-Materials

-IT / Systems

•Benchmarks

-How

do our costs

stack up vs. others?

•Supplier power

•Customer Segment

-W

hich segment do

we serve?

-Are the

y m

ost

profitable?

•Channels

-Current sales mix?

-Are the

y low

-cost

channels?

-Do the

se cha

nnels

attra

ct high marg

in

customers?

-Ince

ntive structures /

perform

ance

Sample framew

ork 2: Market entry; Inve

stment

and

new

techno

logy

Overview

Sample

Framew

ork

•Clie

nt is considering

entering

a new

market. Your goal is to reco

mmend

whe

ther or no

t they

sho

uld enter it

•Fo

r these types of ca

ses wha

t is common is tha

t the company

is co

nsidering

spend

ing m

one

y to get some kind of

eco

nomic return. In addition to seeing w

hether the decision is financially

soun

d, yo

u ha

ve to test:

-Like

lihood of im

plementation success based on industry cond

itions and

firm capabilities

-Do a risk assessment

31

•Why are they thinking of

market entry?

-Growth?

-Mature current m

arket?

-Re

sponse to competitor move

?•Resources and capabilities

-W

hat does the firm have

tha

t make

s them think the

y can be

successful?

�Bra

nd�Pa

tents

�Lo

cal e

xpertise/partne

rs

Strategic Logic

•New

market conditions

-Total R

eve

nues (R)

-Total P

rofits (Π)

-Growth (g)

•Competition in a new

market

-C1 m

arket share (s1

)-C2 m

arket share (s2

)-Etc.

•Economics

-Inve

stment required

-Ex

pected sha

re of reve

nues

-Ex

pected sha

re of profits

-Profitable? Pa

yback period?

Economics of decision

•Execution/entry barriers?

-Cha

nnel a

ccess?

-Re

gulatory barriers?

-Does firm

have

$ to m

ake

inve

stment?

•Risks

-Im

plementation risk

-Po

litical risks?

-Currency risk?

-Macroeco

nomic risk?

Risks / Others

Sample framew

ork 3: M&A deal

Overview

Sample

Framew

ork

•Clie

nt is considering

an M&A tra

nsaction

•Yo

ur goal is to reco

mmend

whe

ther or no

t to do the

deal

Strategic Fit

Deal Economics

Risk Assessment

32

•Basic deal rationale

-Cost syne

rgy-focus?

-Re

venue-syne

rgy

-focus?

-Ea

rly-stage co. being

acq

uired for techno

logy?

-Re

sponse to competitor

move

?•Type of deal

-Vertical integra

tion

-Horizo

ntal

-New m

arket entry via deal

-Diversification move

Strategic Fit

•Valuation (Know basic

DCF!)

-Re

venue &

Costs

-CAPEX

& W

orking Capital

-PBT (profit before tax)

-Ta

xes

-PA

T (profit after tax)

-Cost of ca

pital (R)

-Value =

(PA

T / r)

•Deal Price

•Synergies

-Cost and

Reve

nue

-New Firm value

•New

Value > Deal Price

Deal Economics

•Has the company done

acquisitions before?

-Capability test

•Organizational cultures

-Compatible (high % of

M&A deals destroy value

as cultures are not

compatible)

•Need to manage PMI (Post

merger integration process)

•Can investors not diversify

by themselves

Risk Assessment

Sample framew

ork 4: Outsourcing

Overview

Sample

Framew

ork

•Clie

nt is considering

outsourcing

an opera

tion

•Yo

ur goal is to reco

mmend

whe

ther or no

t to do the

outsourcing

•Do N

OT make

a reco

mmend

ation on co

st saving

s alone

–ex

plore areas like customer service

impact, p

remium customer segment im

pact etc

Strategic logic

Decision Economics

Risks / Others

33

•Why are they thinking of

outsourcing?

-Cost saving

s?-Market entry in

to BRIC/other

markets?

-Ea

rly-stage co. being

acq

uired for techno

logy?

-Re

sponse to competitor

move

?•Customers affected

-W

hich segments?

-W

hat are the

ir needs?

Strategic logic

•Current costs (in-house

operation)

•Outsourced costs

•Initial investment

required

-Outsourcing

consultants

-IT/System in

vestments

•Net cost savings

Decision Economics

•Risks

-Im

plementation risk? Po

litical risks?

-Currency risk?

•Partner capabilities

-Qua

lity of service

-Le

ad tim

e-Techno

logy

-Customer service

•Stakeholder mgmt.

-Stake

holders –

job loss issue

s etc.

-Mana

ge m

edia &

community

Risks / Others

IMPORTA

NT: Sometimes interviews might m

ake

a difference betw

een Outsourcing

and

Off-sho

ring

: form

er refers to fun

ctions tha

t are

done

outside firm’s boun

daries. Latter refers to outsource

d fun

ctions done

in a distant loca

tion such as India or Ireland

.

Sample framew

ork 5: Non-profit organiza

tions

Overview

Sample

Framew

ork

•Clie

nt is a non-profit organiza

tion

•Yo

ur goal is to solve the

specific problem for the organiza

tion

•Im

portant to display tha

t yo

u understand

tha

t no

n-profits have

fundamentally

different drive

rs

beside ju

st the

eco

nomics of a particular decision

Strategic Rationale

Deal Economics

Other

34

•Mission of non-profit

-Health

-Ed

ucation

-Po

verty alle

viation

-Etc.

-Re

sponse to competitor move

?•Stakeholder opinions and likely

reaction

-Dono

rs-“C

ustomers” –those w

ho bene

fit

from the

non-profit’s services

-Volunteers

-Pa

id staff

Strategic Rationale

•Planned investment

-W

hat will it co

st?

-Do w

e have

the

mone

y?

•Returns, if any

-W

ill w

e be getting back

mone

y?

-W

ill organiza

tion make

/ lose

mone

y on this?

Deal Economics

•Required capabilities

-Does no

n-profit ha

ve w

hat it

take

s to do this well?

•Risks

-How

will m

edia perceive this

decision?

-Critica

l to factor in

stake

holder reactions –

will

this alie

nate dono

rs, v

olunteers

etc?

Other

After deve

loping a framew

ork, p

roblem solving

requires sm

art follo

w-up que

stions &

insights

Examples

�Wide variety of decisions

businesses fa

ce

�W

here possible, y

ou will be

guided to quantify

improvement (i.e. to do

some basic applie

d m

ath)

•Sho

uld clie

nt enter new

market? W

hat is N

PV?

•Sho

uld clie

nt do M

&A? Post-m

erger integration risk?

•How

can client increase profits? Q

uantify in

crease.

•How

can client reduce costs? By how

much?

•Sho

uld clie

nt m

ake

new

investment? W

hat is N

PV?

•How

can client increase share? Q

uantify in

crease.

•How

can client grow revenues? Q

uantify in

crease.

•Sho

uld clie

nt outsource? Compare/va

lue alternative

s.

35

Some

solution

drivers

Strategic

analysis

Economic

analysis

Customers /

channels

Catch-all /

Other

•W

hat are industry trends?

•Info on competitors/m

arket shares?

•Strategic rationale und

erlying decision?

•W

hat products? Prices?

Volume?

•W

hat’s the

cost structure?

•Profit impact for client?

•W

hich customer segments?

•W

hat are customer needs / wants?

•W

hat channels? Sales force?

•Any

regional/geographic concerns?

•W

hat are the

risks?

•Any

regulatory issues?

•Any

organizational beha

vior issues?

�Not all issues/drive

rs w

ill

be releva

nt but list should

let yo

u quickly zone

in on

key to problem

�Fo

r these drive

rs, think

about:

a.Cha

nges ove

r time?

b.Compare clie

nt w

ith

competition etc.

�This is meant to be a

thoug

ht starter –no

t a

comprehe

nsive list

Tips for giving cases

One

sho

uld broadly follo

w the

se steps whe

n giving cases to fello

w students

�Re

ad the

case tho

roug

hly

�Don’t give a case tha

t yo

u ha

ve not

stud

ied yourself

Prepare yourself

�Make

the

experience as close to

real a

s possible

�Be serious during the

case eve

n if

you give the

case to your best friend

Make

it real

�Introduce the

problem statement

�Allo

w 3~5 m

insfor ca

ndidate to

gather he

r thoug

hts

Step w

ise approach

36

�Have

any

exhibits ready for use

during the

case

�Be ready to take

notes

�Be toug

h –test cand

idate’s ability

to deal with a negative

vibes from

interviewer

�Control the tim

e. D

o not ex

ceed

30-3

5 m

inutes for the case portion!

�Answer any

que

stions tha

t ca

ndidate m

ay have

�Guide the

cand

idate accord

ingly if

she is digressing from key

issue

Ask que

stions

Guide only w

hen ne

cessary

Provide hone

st feed back

�Best w

ay to m

ake

cases interesting

to provide nece

ssary hints ind

irectly

-for ex

by asking related que

stions

�Fo

llow the

case flow as provided in

the original form

at –It helps in

objective assessment

�Give out inform

ation only w

hen

right que

stion is asked

�Idea is to let ca

ndidate stretch

herself and

get a feel for real

situation

�Go back to your notes and

think

of

both streng

ths and

weakn

esses

�Be specific –W

hat was the m

istake

and

wha

t’s the

right approach

�Be Hone

st –

its in cand

idate’s best

interest to m

ake

mistake

with yo

u and

learn from the

m

Remember that there is no one answ

er to any case! A candidate can be creative enough to take a new

approach towards the problem.

Other references: Case prep

�Th

ere are a num

ber of other resource

s to learn

about case prep. W

e foun

d the

follo

wing

particularly useful:

�Kello

gg 2004 Casebook –Pa

ges 5 to 44

37

Kello

gg 2004 Casebook –Pa

ges 5 to 44

�Ro

ss 2007 Casebook –Pa

ges 3 to 25

�Older W

harton Casebooks

Remember, ca

ses are about problem-solving

abilities, not whe

ther yo

u are an industry expert

Background

•Case in

terviews sp

an a broad rang

e of industries. You may encounter eve

rything from

Fina

ncial S

ervices to M

ining to Education to Form

ula 1

•Those of yo

u who

have

not worked as co

nsultants before w

ill likely not ha

ve any

background in

most of these in

dustries

•This document can give you a very high level view of some ‘typical’ in

dustries that

cases focus on

•Yo

u MUSTattend

the

ind

ustry primer series led by partne

rs from various firms as they

will capture key

insights and

latest trend

s in tho

se in

dustries that tend

to be popular in

38

Important

Warning!

Our belief

cases

•W

e belie

ve tha

t ha

ving

a very basic overview of an industry helps to more

effectively tackle a case

•At the very le

ast it he

lps yo

u co

nstruct a fra

mework tha

t is m

ost applicable to tha

t particular problem contex

t. Examples:

-Consum

er goods: branding is an important driver of success

-Pha

rma: generics manufacturers pose a major competitive threat

•Do not attempt to master industry specifics or memorize industry data

•Yo

u primary objective ove

r the nex

t few w

eeks/months is to master case-based

problem solving… not to become an industry expert

• Spend

ing a little tim

e inform

ing yourself about the

basics of a few key

ind

ustries should

improve

your problem-solving ability. The

follo

wing pages will help in this end

eavo

r.

Airlin

es

•Airlines provide air tra

nsport services for passeng

ers and

/or freight

Ove

rview /

Products &

Services

•Consolid

ation -

multiple high-profile m

erg

ers

•Fa

re competition –airlines co

mpete to und

ercut one

ano

ther on co

mpetitive

routes

•Lo

w-cost ca

rriers -

rece

nt entra

nce by smalle

r ca

rriers trying to replicate Southw

est Airlines’ lo

w-cost m

odel

Key

Trend

s

39

•Establishe

d le

gacy

carriers (e.g., Delta, A

merica

n, United) co

mpete w

ith each other and

with low-cost opera

tors on

multiple domestic routes; price

is usua

lly the

major co

mpetitive

factor. Some domestic carriers also opera

te

internationa

l routes, placing

the

m in co

mpetition with ove

rseas airlines

Competitive

La

ndscape

•Individua

l consum

ers

•Corp

ora

tions/sm

all businesses

•Trave

l web sites/reselle

rsCustomers

•Internet –airline w

ebsites, online ticke

t reselle

rs•Te

lepho

ne –

airline call ce

nter agents

•Trave

l agents

•Ove

r-the-counter –walkup

s at airports

Cha

nnels

•Reve

nue: Ticket reve

nues, exce

ss/ove

rsize baggage fees, food and

beve

rage sales

•Costs: VC: fuel, food and

beve

rage, g

round crew/ho

urly employees FC

: aircraft le

ases, airport gate leases, IT

/admin

costs, salaried employees (i.e., pilo

ts)

Profit

Sum

mary

Consum

er Pa

ckaged G

oods (CPG)

•CPG companies provide consum

ers w

ith a rang

e of ho

useho

ld products etc. soaps, pet supplie

s, sna

ck foods etc.

Ove

rview /

Products &

Services

•Lifestyle/co

nsum

er beha

vior e.g. a

ging population, social n

etw

orks, online adve

rtising, g

o green, eco

nomic downturn

•New products critica

l to succe

ss•Completely new, slightly improve

d, p

roduct line extensions

•In addition, companies driving

‘outside-in’ product inno

vation (from outside of R&D division)

•Product mix and

Bra

nd m

ana

gement are critica

l to C

PG companies

•Em

erg

ing m

arkets –

India &

China

–seen as im

portant source

of future growth

Key

Trend

s

40

•Proctor and

Gamble (P&G); Unilie

ver, C

lorox, K

ello

ggs, Campbell’s, Frito Lay, ConA

gra

Foods, C

olgate-Palm

olive,

L’Oreal, Estee Laud

er

Competitive

La

ndscape

•Individua

l Customers

•Disco

unt W

holesa

lers (Sam’s Club, C

ostco

)•La

rge box retail (W

al-mart ,T

arg

et, Safeway)

•Convenience Retail (7-1

1, R

ite-A

id)

Customers

•Retail

•W

holesa

le•Direct (web and

mail ord

er)

Cha

nnels

•Reve

nue : V

olume of goods sold; Price

premium on bra

nded goods

•Cost s: Bra

nding, S

ales and

Marketing

, COGS (co

mmodity costs –ra

w &

packaging m

aterial)

Profit

Sum

mary

Fina

ncial S

ervices: Consum

er Bank

ing

•Provide deposit-based services, credit card

s, consum

er loans, p

ayments etc.

•Broad rang

e of fina

ncial products are sold by banks who

se m

ain function is to colle

ct m

one

y from tho

se w

ho have

sa

ving

s and

loan mone

y to tho

se w

ho need it.

Ove

rview /

Products &

Services

•Credit crisis / financial meltdown threatene

d solvency of industry due

to illiquid assets difficult to value

•Consolid

ated, m

ature in

dustry w

ith primary growth throug

h acq

uisitions

•Demogra

phic shift (baby boomer aging) creating

larg

e m

arket for retirement products

•Offshoring

of va

rious functions to reduce expenses (e.g. call ce

nters, b

ack office functions)

Key

Trend

s

•La

rge nationa

l players (Bank of America

, Citi) compete w

ith regiona

l banks.

•La

rgest players services extend

well beyond

commercial banking to investment banking, securitiza

tion, proprietary

Competitive

41

•La

rgest players services extend

well beyond

commercial banking to investment banking, securitiza

tion, proprietary

trading, e

tc w

ith services that are increasing

ly opaque

Competitive

La

ndscape

•Individua

l consum

ers

•High ne

t worth co

nsum

ers (priority segment)

•Small/

medium businesses witho

ut sufficient size for larg

er inve

stment banking financing services

Customers

•Still larg

e face

-to-face

presence w

ith bank bra

nche

s, telle

rs, e

tc•Increasing

use of ATM

services, online banking

•Banks increasing

ly offer credit card

s, home loans, e

tc as means to increase asset base

Cha

nnels

•Reve

nue: N

et reve

nue is the spread betw

een bank’s borrowing cost and

the rates charg

ed to borrowers; fees

•Costs: O

verhead (bra

nche

s, administration, complia

nce); Salaries; Bad D

ebt Ex

pense

Profit Sum

mary

Fina

ncial S

ervices: In

surance

•Insura

nce is fundamentally

about und

erw

riting

various types of risks. Customers m

ake

regular payments (premiums) to

the in

surer for co

vera

ge w

hen unforeseen eve

nts, e.g. car crash; fire damage; death; credit defa

ult) occur

•The in

surer inve

sts premiums to gene

rate sufficient in

come to m

atch future assets w

ith future liabilities

Ove

rview /

Products &

Services

•Credit crisis / financial meltdown threatene

d solvency of industry due

to illiquid assets difficult to value

•One

of the global leaders (AIG

) na

tiona

lized in

credit crisis, empha

sizing

the

importance of monitoring

investment

portfolio

•US nationa

l he

althcare policy cha

nges co

uld completely cha

nge the

land

scape of the health insura

nce m

arket

•Companies focused on mana

ging risk and

controlling

costs

Key

Trend

s

•Seve

ral larg

e, integra

ted players opera

ting

across m

ultiple parts of the ind

ustry (AIG

, Prudential, etc)

Competitive

42

•Seve

ral larg

e, integra

ted players opera

ting

across m

ultiple parts of the ind

ustry (AIG

, Prudential, etc)

•Some niche

players focusing

in a particular segment (Geico)

Competitive

La

ndscape

•Individua

l consum

ers seeking

to m

ana

ge risk at ho

me / on the road

•Small/

medium/larg

e businesses seeking

to m

ana

ge risks of property damage, liability, etc

Customers

•Insura

nce agents (sales force) still m

ana

ge m

uch of the front-end

sales proce

ss to businesses/individua

ls•Online sales beco

ming easier with better websites and

aggressive m

arketing

•Direct m

arketing

to employees via in-office demonstrations (Aflacsupplemental insurance, etc)

Cha

nnels

•Reve

nue: N

et reve

nue is the spread betw

een premiums co

llected and

claim

s/payments made ove

r time

•Costs: O

verhead (administration, complia

nce); Salaries; Sales Commissions; Marketing

Profit Sum

mary

Manu

facturing

Ove

rview /

Products &

Services

Key

Trend

s

•Manufa

cturing sector includ

es co

mpanies that are in

the

business of mechanica

l, phy

sica

l, or chemical transform

ation of

materials/substances/co

mpone

nts into new products

•Sub

sectors in

clud

e: textile, p

aper, che

mical, co

mputer/electronics, tra

nsportation equipment, machinery

•Manufa

cturing is highly cyclical in m

ost sectors

•US m

anufa

cturing, traditiona

l streng

th of US eco

nomic growth, ha

s suffered due

to highe

r co

st structure (labor in m

any

ca

ses) as co

mpanies outsource

manufa

cturing to lo

wer-co

st regions of the w

orld

•Gene

ral M

otors, C

hrysler, Ford

, Toyota, Hond

a

43

Competitive

Land

scape

Customers

Cha

nnels

Profit Sum

mary

•Gene

ral M

otors, C

hrysler, Ford

, Toyota, Hond

a•Boeing, A

irbus

•GE, Phillips, Siemens

•Hone

ywell, Dow, C

orning

•Varies by ind

ustry, can be end

-consum

er, O

EM (original e

quipment m

anufa

cturer) –

B2B

•Automotive

: Primarily end

consum

er; M

etal: airplane

, automotive

, tool/die m

anufa

cturing; Apparel: End

Consum

er;

Plastics: medical industry, machinery m

anufa

cturing; Infra

structure/Machinery: Gove

rnment, Utilities, Rail opera

tors;

Che

micals: pha

rmace

utical, proce

ss techno

logy, semicond

uctor manufa

cturing

•Retail (A

utomotive

, Apparel –

industries whe

re end

-consum

er is primary customer)

•W

holesa

le –

B2B (Plastics, Che

micals, P

harm

ace

uticals, Metal, Machinery, Semicond

uctors, Computer Hard

ware –

Industries whe

re the

customer is ano

ther business)

•Reve

nue: diversity of customers, v

olume (automotive

: high, airplane

manuf: low), emerg

ing m

arkets, a

djace

nt ind

ustries,

new techno

logies/products, e

nd-consum

er demand

s•Cost: outsourcing

(potential qua

lity), proce

ss efficiency, sup

ply cha

in m

ana

gement (inve

ntory turns), la

bor (unions), raw

materials/co

mmodities, cha

nnel mana

gement (ie. A

uto dealers), m

arketing

, ca

pital inve

stment

Media

•The m

edia sector includ

es print, aud

io and

video content gene

ration and

dissemination. The various sub

sectors are

unique

yet ha

ve m

any

ove

rlapping attributes. Primarily an adve

rtising-sup

ported in

dustry, the

media space

face

s unprece

dented cha

lleng

es as online m

edia continue

s to disrupt traditiona

l business m

odels.

Ove

rview /

Products &

Services

•The digitization of media has required considera

ble capital investment by m

edia content gene

rators. The rapidly

improving

speed of the w

ired in

ternet and

wireless device

s creates que

stions about how m

edia w

ill ultim

ately be

consum

ed –

via internet, via cable, via m

obile

? Service providers m

ay converg

e ove

r time. The

prolifera

tion of

“free” co

ntent has ha

rmed content gene

rators but created opportunities for ne

w cha

nnels.

Key

Trend

s

44

•Varies by sub

sector. Media players gene

rally

compete for aud

ience interest in

ord

er to gene

rate m

ore adve

rtising

reve

nue. La

ndscape is very competitive

with a few m

ajor players owning

integra

ted portfolio

s across the

entire

media unive

rse (Disne

y, V

iaco

m, News Corp

, etc)

Competitive

La

ndscape

•W

hile in

dividua

l co

nsum

ers seem to be the

customers, in reality consum

ers are part of the product. Aud

ience reach,

rating

s, circulation measures are utilized to sell adve

rtising. Potential adve

rtisers are the

real customers in

tra

ditiona

l models altho

ugh individua

l co

nsum

ers m

ay be the

customers for some sub

scription models.

Customers

•Print: tra

ditiona

l paper product & online / m

obile

•Te

levision: tra

ditiona

l broadca

st / cable / satellite &

online / m

obile

•Movies: tra

ditiona

l the

atres, rentals &

online (to a growing extent)

Cha

nnels

•Reve

nue Drive

rs: adve

rtising, sub

scriptions in

some cases (the

re is talk about m

oving

to highe

r subscription model for

premium content)

•Cost Drive

rs: V

C: p

roduction co

sts (salaries of staff, techno

logy); FC: ca

pital co

sts (studios, printing presses);

ove

rheard

, marketing

& adve

rtising

Profit

Sum

mary

Pha

rmace

uticals

•Bra

nded/ Ethical/ O

riginator drug producers produce original p

atent-p

rotected (for a certain period of time) drugs

for human and

animal diseases

•Gene

ric drug producers produce ‘copy-cat’ drugs (w

ith the same m

edical result) at a lower deve

lopment cost w

hen

the originator drug’s patent expires

Ove

rview /

Products &

Services

•Price

competition from gene

ric drug m

anufa

cturers

•Increasing

pressure from health insura

nce companies and

hosp

ital cha

ins to reduce price

s•

R&D cha

lleng

e of find

ing high reve

nue drugs (‘Blockbusters’ h

ave

annua

l sa

les > $1B)

•Lo

ss of patent on ke

y drugs for many

larg

e Pha

rmaCos. around 2010-1

1

Key

Trend

s

•Key succe

ss factor co

mes down to one

thing

: products

45

•Key succe

ss factor co

mes down to one

thing

: products

•Products targ

et va

rious treatm

ent areas (TA): cancer, card

iova

scular, psychology etc

•US, E

urope and

Japan are la

rgest m

arkets altho

ugh emerg

ing m

arket opportunity (eg. China

) is growing

•Fo

od &

Drug Autho

rity (FD

A) ne

eds to approve

all drugs before sale

Competitive

La

ndscape

•Doctors w

ho prescribe the

se m

edicines

•Insura

nce companies that pay for them

•Patients/co

nsum

ers w

ho need the

se drugs/medicines

•In some emerg

ing m

arkets, v

arious officials (ho

spital, provincial and

centra

l gove

rnment) may control channel access

Customers

•Ove

r the counter (“OTC

”, can be sold w

itho

ut prescription): R

etail outlets –

CVS, W

algreens; Mail ord

er

•Prescription drugs: Hosp

itals; pha

rmacies

•B2B: D

istributors / interm

ediaries ; ho

spitals; pha

rmacies

Cha

nnels

•Reve

nue Drive

rs: S

ize of sp

ecific treatm

ent area / leve

l of co

mpetition; Buy

-in from doctors tha

t will prescribe; Speed

to m

arket/ expertise in

difficult products (for gene

rics)

•Cost Drive

rs: V

C: sales and

marketing

(doctor visits, sp

onsored studies); FC

: R&D (drug disco

very, form

ulation, clinical

trials; a lot of this is no

w outsource

d; gene

ric co

mpanies only need to perform

clinical trials)

Profit

Sum

mary

Priva

te Equity (Go/No G

o Investments)

•Eq

uity tha

t is not pub

licly tra

ded

•Common form

s includ

e Leve

raged Buy

outs (LBOs), V

enture Capital (VC), M

ezzanine

Capital, Distressed In

vestments,

and

Growth Capital

Ove

rview /

Products &

Services

•La

rger amounts of equity required for each deal

•Potential wave

of deals failing

in the coming years

•Buy

ing and

selling

of current PE co

mmitments likely to increase ove

r the next few years

•Growing need for PE firm

s to have

cash m

arg

ins

Key

Trend

s

•Deal v

olume has sharp

ly declined rece

ntly

Competitive

46

•Deal v

olume has sharp

ly declined rece

ntly

•La

rge (e.g. KKR, C

arlyle, B

lackstone

, TPG), M

id ($250M to $5B), and

Small Market PE shops

Competitive

La

ndscape

•New customers of PE deals m

ay be corp

ora

tions

•Institutiona

l investors

•Customers can ra

nge from small fa

mily

-owne

d companies to larg

e corp

ora

tions

Customers

•Le

vera

ged Buy

outs: co

ntrolling

interest (of equity) is acq

uired throug

h high borrowing

•Venture Capital: inve

stors give cash in exchang

e for shares/co

ntrol o

f inve

sted company

; typical w

ith start-ups

•Mezzanine

Capital: fina

ncing tha

t co

ntains equity based options and

sub

ord

inated debt (e.g. co

nvertible loans)

•Growth capital: fina

ncing to expand

, restructure, o

r enter ne

w m

arkets w

ith little cha

nge in mana

gement

•Distressed In

vestments: in

vesting in fina

ncially

stressed companies

Cha

nnels

•W

hat fina

ncial leve

rs can be pulled to m

ake

this more profitable (va

rious w

ays to access cash, cap structures, etc)?

•W

hat opera

tiona

l leve

rs can be pulled to m

ake

this deal b

etter (m

ore efficiencies, new m

ana

gement etc)?

•W

hat return on inve

stment is required to m

ake

this inve

stment w

orthw

hile?

•W

hat is the

tim

eframe of return on this investment?

•Is the

re a better (m

ore profitable) inve

stment w

here m

one

y sho

uld be spent?

Profit Sum

mary

Techno

logy

•The techno

logy ind

ustry broadly consists of the systems (PCs, servers), semicond

uctors, communications equipment,

software, internet and

IT services subsectors.

Ove

rview /

Products &

Services

•Increasing

M&A A

ctivity: A

s growth has slowed in

certain sub

sectors (systems, software), le

ading vend

ors have

utilized

M&A for growth, o

ffering

customers a one

stop sho

p proposition (ieHP/Compaq, O

racle/Peoplesoft)

•Co-opetition: Leading vend

ors co-exist as co

mpetitors and

colla

bora

tors. This is a key cha

racteristic of the ind

ustry

and

has beco

me eve

n more so as players m

ove

into adjace

nt sub

sectors. Ex

amples includ

e: Microsoft/Intel,

Ora

cle/IBM

•Cloud

Computing: O

ffering

IT as outsource

d utility has im

plications across sub

sectors

Key

Trend

s

•Systems: IB

M, Hewlett-Packard

47

•Systems: IB

M, Hewlett-Packard

•Semicond

uctors: Intel, Samsung

, Toshiba, T

exas Instruments

•Communications Equipment: Cisco

, Nokia, Samsung

•Software: M

icrosoft, IBM, Ora

cle / Internet Software: G

oogle, Yaho

o!, Microsoft

•IT Services: Accenture, IBM, HP/ED

S

Competitive

La

ndscape

•Releva

nt splits:

•By size: Enterp

rise, S

MB (sm

all/

medium businesses), R

etail

•By type: B

usiness vs. consum

er

Customers

•Varies by customer focus. Business/Enterp

rise-focused players tend

to rely on direct sales force.

SMB/Retail/

Consum

er tend

to rely on indirect cha

nnels.

Cha

nnels

•Systems: Lower marg

in (COGS m

ana

gement key to profitability)

•Semicond

uctors: H

igh fixed costs (capex) and

highly cyclical; m

anufa

cturing utilization

•Communications Equipment: Manufa

cturing utilization

•Software: license/maintena

nce versus sub

scription service m

odel; rene

wal rates; high gross m

arg

ins, but high R&D

expenses

•IT Services: staff utilization; reve

nue per employee

•Internet: reve

nue per click

Profit

Sum

mary

Teleco

mmun

ications / M

obile

•Te

leco

mmunications is a m

ammoth ind

ustry, comprising

companies that make

hard

ware, p

roduce software, a

nd provide

services. Hard

ware in

clud

es a vast rang

e of products tha

t ena

ble communication across the

globe, such as broadca

sting

satellites, telepho

ne hand

sets, fiber-optic ca

bles etc. Services includ

e running

the

switches that co

ntrol the pho

ne system,

Mobile

and

Internet access, a

nd configuring priva

te netw

orks by w

hich internationa

l corp

ora

tions cond

uct business.

Software m

ake

s it all work, from send

ing and

rece

iving e-m

ail to relaying satellite data to controlling

telepho

ne

switching equipment.

Ove

rview /

Products &

Services

•The in

dustry has grown and

evo

lved at an incredible pace

for the last 20 years. M

obile

pho

ne pene

tration

approaching 50% globally

; Mobile

broadband

sub

scribership has topped 200 m

illion worldwide; rollo

ut of 3G

netw

orks in emerg

ing m

arkets causing m

obile

broadband

sub

scribers to outnumber fixed-line broadband

sub

scribers.

•Many

househo

lds are giving up the

ir land

line, preferring to use a cell pho

ne or VoIP services (Sky

pe, Vona

ge) on their

computer.

Key

Trend

s

48

•La

ndscape is very competitive

and

wireless carriers have

und

erg

one

a w

ave

of co

nsolid

ation: In rece

nt tim

es, C

ingular

acq

uired AT&

T W

ireless; Sprint joined N

extel; and

ALLTEL acq

uired W

estern W

ireless.

•Big 4 cellular players are AT&

T, V

erizo

n, T-M

obile

and

Sprint N

extel

•Cable companies attempting

to capture w

ireless customers throug

h wireless service offering

s of their own (or in

partne

rship) e.g. C

omca

st in

troducing W

iMAXservice in

Portland

, Ore; COX w

ill offer ce

ll pho

ne service late ’0

9.

Competitive

La

ndscape

•Individua

ls, companies and

gove

rnments.

Customers

•Carrier-owne

d stores and

leading retaile

rs like

Wal-Mart, R

adioSha

ck and

Best Buy

are significa

nt cha

nnels for

mobile

pho

ne sales and

service.

•Major ca

rriers have

online stores for pho

ne and

service purchases. The

y are joined online by all of their retail

competitors (Best Buy

, W

alm

art, R

adioSha

ck) as well as amazo

n.co

m, wireless specialty retaile

rs like

letstalk.com and

W

irefly.

Cha

nnels

•Reve

nue Drive

rs: Sub

scriptions, d

ata services (SMS, email and

internet access on ce

ll pho

nes), mobile

adve

rtising, a

pp

stores.

•Cost Drive

rs: V

C: m

arketing

& adve

rtising, salaries; FC: ca

pital co

sts (equipment, infra

structure –

cell towers, n

etw

ork

maintena

nce, stores); ove

rhead

Profit

Sum

mary

Contents

�Introduction

�Consulting Industry Guide

�Industry O

verview

�Firm

Ove

rviews (10 Firms)

Section

3 6

Page #

49

�Firm

Ove

rviews (10 Firms)

�Interview Preparation

�Interview O

verview –

Fit + Case

�Sample Framew

orks

�Industry Sna

pshots

�Practice Cases

�14 Practice C

ases

�Links to Other Cases

�Cases from Firm W

ebsites

�Sug

gested C

ases from other Casebooks

18

50

126

List of Practice Cases

�Case 1: McK

insey –

Mex

ico C

ity Airport Taxi Services

�Case 2: Bain –

Franchising

Gyms

�Case 3: BCG –

Greeting

Card

Manu

facturer

�Case 4: Bain –

UK A

sset Mana

ger

�Case 5: McK

insey –

Mighty M

ining Company

�Case 6: Bain –

The Reel Deal

Case Description

51

56

63

68

74

79Page #

50

�Case 7: Le

novo

–Pub

lishing

Company

�Case 8: BCG –

Retirement Apartment C

omplexe

s

�Case 9: Bain –

Big Yello

w Bus

�Case 10: A.T. Kearney

–Car Company

�Case 11: Bain –

Blood Bank

�Case 12: McK

insey -

EasyNAV

�Case 13: A.T. Kearney

–Manny’s M

anu

facturing

�Case 14: Bain –

Zenith Hotels

82

86

92

98

102

106

115

120

Case: Mex

ico City A

irport Taxi Services

McK

insey, Round: 1

Ove

rview for interviewer

Inform

ation to be provided upfront (ha

nd cand

idate

attached exhibit)

The autho

rities of the M

exico C

ity airport have

decided to issue

2,500 new

taxi perm

its for $1,000 each. Th

ese perm

its autho

rize

a

taxi to service arriving passeng

ers. Yo

ur clie

nt has a taxi fleet in the

city but does no

t service the

airport. He has ex

cess

capacity

(meaning

he has ca

rs and

drive

rs ava

ilable). He has asked you to determ

ine if he

sho

uld buy

tho

se new

perm

its. If so, ho

w m

any

should he buy

?

Problem statement narrative

51

This is a profitability case, so the

form

ula P =

R-C

sho

uld be

broug

ht up by soon in the

discussion and

guide any

framew

ork proposed by the

cand

idate.

Use the

discussion to guide cand

idate tow

ard

s determ

ining

the possible reve

nue to be m

ade and

to talk about costs to

determ

ine profitability.

After the cand

idate presents his/he

r framew

ork, give

cand

idate the

hand

out containing inform

ation ne

eded to

solve the

case. Th

e cha

lleng

e w

ith the hand

out is that it

contains a lot of inform

ation which the

cand

idate w

ill need to

proce

ss quickly to be able to use throug

h the case.

Case Type: Profitability / O

perations

Case Style: Command

& Control

All the inform

ation is given to cand

idate on the hand

out. If

cand

idate asks data again refer him/he

r to the

hand

out.

•Airport hand

les 42 m

illion passeng

ers yearly.

•The

re are 5,500 taxis operating

in the airport.

•On ave

rage a taxi take

s 60 m

inutes to drive

passeng

er and

return to airport for ne

xt pick up

.•O

n ave

rage a passeng

er pays $200 cab fare via

regulated rates.

•On ave

rage 40% of domestic flig

hts passeng

ers and

80%

of internationa

l flights passeng

ers use taxis.

•30% of daily

demand

occurs betw

een 6:00 a.m

. and

10:00

a.m

., 40% occurs betw

een 6:00 p.m

. and

10:00 p.m

.•A

ssum

e each passeng

er uses one

cab.

•On ave

rage each taxi requires $8,000 yearly on

maintena

nce.

•Taxi d

rive

rs keep 50% of the fare.

attached exhibit)

Potential Issue Tree &

Approach to Solving the

Case

Key

elements of ana

lysis to solve the

case

Estimate the

num

ber of passeng

ers

arriving each day

Estimate passeng

ers tha

t will require

taxis

Is this demand

being m

et?

Estimate daily

demand

for taxis

Estimate possible reve

nue

List possible costs: perm

its, car

maintena

nce, drive

rs salary, gas, car

repairs, etc

P =

R –

CEstimate possible profits

Demand

not being m

et daily

: 500 passeng

ers in the m

orning

+ 8,000 passeng

ers in the eve

ning

= 8,500 passeng

ers needing service

x $200 =

$1,700,000 daily

reve

nue

52

Is this demand

being m

et?

P =

R –

CProfit = Reve

nue –

maintena

nce repairs –

drive

r co

mmissions –

perm

it cost

P =

571,200,000 –

($8,000 x 2,000

taxis –

285,600,000 –

($1,000 x 2,000

taxis) = 267,600,000

Possible follo

w-up and

guidance

to in

terviewer

Possible follo

w-up and

guidance

to in

terviewer

Possible follo

w-up and

guidance to

interviewer

Tell ca

ndidate to consider only perm

its

costs, car maintena

nce and

drive

rs

salaries (the

num

bers for these costs were

given to cand

idate at the beginning

of

the case interview on a piece

of paper)

x $200 =

$1,700,000 daily

reve

nue

Yearly Reve

nue =

$571,200,000

See follo

wing slid

e.

Assum

e tha

t passeng

er vo

lume is

equa

lly distributed throug

h the year /

week/ day.

Assum

e tha

t 50% of passeng

ers are

from domestic flig

hts and

50%

internationa

l flig

hts.

Que

stion 1 –

Math

Estimate the

num

ber of passeng

ers arriving each day:

•42million/

12 m

onths =

3.5 m

illion passeng

ers m

onthly

•3.5 m

illion passeng

ers / 4 w

eeks =

875,000 passeng

ers w

eekly

•875,000 passeng

ers / 7 days = 125,000 passeng

ers daily

Estimate passeng

ers tha

t will require taxis:

•62,500 domestic passeng

ers x 40% of domestic use taxis =

25,000

Ove

rall approach, g

ood sho

rtcuts &

solution

Inform

ation ne

eded to solve case is

given on the hand

out, which sho

uld have

been given to cand

idate early in the

caseInform

ation to provide up front

Math Q

uestion

Estimate the

daily

demand

for taxis. Is this demand

being m

et? If not, how

many

more taxis are needed?

53

•62,500 domestic passeng

ers x 40% of domestic use taxis =

25,000

•62,500 internationa

l passeng

ers x 80% of internationa

l use taxis =

50,000

•Total p

asseng

ers demand

ing taxis daily

= 75,000

•6am –

10am =

22,500 passeng

ers need a taxi (=

75,000 x 30%)

•6pm –

10pm =

30,000 passeng

ers need a taxi (=

75,000 x 40%)

•Non-peak ho

urs = 22,500 passeng

ers need a taxi (=

75,000 x 30%)

Is this demand

being m

et?

•From 6 to 10am, each taxi make

s 4 trips (ave

rage trip take

s 60min). If w

e have

5,500 taxis operating

the

n ca

pacity serves 22,000 passeng

ers. Ex

cess demand

=500

passeng

ers. 250 domestic x 40% =

100 passeng

ers +

250 internationa

l x 80% =

200 passeng

ers for a total of 300 passeng

ers needing a taxi / 4 rides per ho

ur =

125 taxis needed to m

eet ex

cess demand

.•

From 6 to 10pm, using the

same logic capacity m

eets 22,000 passeng

ers: 5,500 taxis

operating

thu

s ex

cess demand

= 8,000 passeng

ers (ne

ed 2,000 taxis).

•During non-peak ho

urs (16 hours) 22,500 passeng

ers w

ill need a taxi. W

ith 5,500

taxis in operation there is ca

pacity to serve 88,000 passeng

ers during tha

t time. In

that time period the

re is ex

cess capacity.

To service demand

not being m

et in the

morning and

night periods 2,000 taxis are required.

Provide in

form

ation if asked

Assum

e tha

t passeng

er vo

lume is equa

lly

distributed throug

h the year.

Assum

e tha

t 50% of passeng

ers are

from domestic flig

hts and

50%

internationa

l flig

hts.

Assum

e all ex

isting

taxis can run during

peak ho

urs and

tha

t maintena

nce is a

minim

al tim

e commitment.

Mex

ico City A

irport Taxi Fa

cts & A

ssum

ptions

�Airport hand

les 42 m

illion passeng

ers yearly

�Th

ere are 5,500 taxis operating

in the airport

�On ave

rage a taxi take

s 60 m

inutes to drive

passeng

er and

return to

airport for ne

xt pick up

.

�On ave

rage a passeng

er pays $200 cab fare via regulated rates

54

�On ave

rage a passeng

er pays $200 cab fare via regulated rates

�On ave

rage 40% of domestic flig

hts passeng

ers and

80% of

internationa

l flights passeng

ers use taxis.

�30% of daily

demand

occurs betw

een 6:00 a.m

. and

10:00 a.m

., 40%

occurs betw

een 6:00 p.m

. and

10:00 p.m

.

�Assum

e each passeng

er uses one

cab

�On ave

rage each taxi requires $8,000 yearly on maintena

nce

�Ta

xi drive

rs keep 50% of the fare

Sample Reco

mmend

ation

Clie

nt sho

uld buy

2,000 perm

its based on the potential ye

arly profit of $267,600,000 from excess

demand

at the airport.

Reco

mmend

ation

Possible retalia

tion from other tax companies, such as entering

other markets w

here the

clie

nt operates

and

stealin

g clie

nts. Th

ere is no gua

rantee airport w

ill not allo

w additiona

l perm

its in the

future w

hich

could in

crease the

num

ber of taxis at the airport.

Risks

55

There is no gua

rantee tha

t all ex

cess demand

will be

serviced by clie

nt cars, esp

ecially

beca

use if he

is

buy

ing only 2,000 perm

its, ano

ther taxi co

mpany

can

buy

the

remaining 500 perm

its and

compete for the

exce

ss demand

tha

t isn’t being currently served.

An option would be to buy

all 2,500 perm

its, and

using only 2,000 taxis (blocking ano

ther tax company

from buy

ing 500 perm

its) tha

t would reduce profits to

$267,100,000 (just sub

tract from profits the

cost of

buy

ing the

additiona

l 500 perm

its).

BONUS

Case: Franchising

Gyms

Bain, R

ound 2

Your clie

nt is a gym franchisor. The

clie

nt focuses on sm

all gyms (approxim

ately 3000 squa

re feet) w

ith stand

ard

fitne

ss equipment,

but no classes or lockers. The

gyms are typically

loca

ted in loca

l strip m

alls. The

y are open 24 hours per day; members enter the

gym via an access card

. Staffing at the gym is minim

al to none

(depend

s on each ind

ividua

l franchisee).

This business is growing very rapidly. How

eve

r, there is no

w a new

competitor offering

a sim

ilar franchising

opportun

ity. To m

ake

our clie

nt’s franchising

opportun

ity m

ore attractive, our clie

nt w

ould like

your inp

ut on ho

w the

profitability of its franchises ca

n be

improve

d.

Problem statement narrative

56

This is a straight-forw

ard

case. An ideal walk-throug

h (presented in the sub

seque

nt slid

es) w

ould include the

follo

wing:

•Breake

ven ana

lysis based on un

derstand

ing of

reve

nue and

cost structures

•Brainstorm

ing of ne

w reve

nue opportun

ities

•Brainstorm

ing of co

st cutting

opportun

ities

•Ana

lysis of pros and

cons of market segments

•Conclusion / Reco

mmend

ation

Case Type: VariousOve

rview for interviewer

See follo

wing slid

es for furthe

r detail.

Inform

ation to be provided upon reque

st

improve

d.

Potential Issue Tree &

Approach to Solving the

Case

Cand

idate m

ay propose ana

lysis / action in:

•Key

reve

nue streams

•Key

fixed and

variable costs

Profit Structure (Re

v and

Cost)

•Size of the m

arket

•Growth expectations

•Key

customer segments and

differentiating

qua

lities

Market Opportunity

•Key

competitors

•Amoun

t of co

ncentration or

fragmentation

•By customer segments

•Key

differentiating

features

Competitors

57

•Key

differentiating

features

Possible follo

w-up and

guidance to interviewer

Possible follo

w-up and

guidance to interviewer

Possible follo

w-up and

guidance to interviewer

•Sho

uld lead to nex

t slide (the m

ath

que

stion)

•Ove

rall market ex

pected to grow

slightly faster than GDP given

healthier liv

ing trend

s•$10 billion in reve

nue last year

•Re

leva

nt segmentation (loca

tion):

•Urb

an

•Sub

urban

•Rural

•Key

competitors offer essentially

the same franchising

opportun

ity

client does

•Not a key

asp

ect of the case;

deempha

size

Que

stion 1 –

Breake

ven Ana

lysis

How

many

members m

ust each gym loca

tion ha

ve to breake

ven? Th

is is a key

metric for potential

franchisees

Que

stion

•Identify the

reve

nue per member, fixe

d and

variable costs for a gym

•Monthly Reve

nue

•Membership due

s: $40 / m

onth

•Vend

ing m

achines (net): $5 / m

onth

Ove

rall approach, d

ata required and

solution

•Guide cand

idate to the

approach

•W

alk throug

h each category (reve

nue

per member, fixe

d and

variable costs),

brainstorm

ing each of the potential

Inform

ation to provide up front

58

•Vend

ing m

achines (net): $5 / m

onth

•Pe

rsona

l training (ne

t): $15 / m

onth

•Total: $60 / m

onth

•Variable C

osts: N

one

(or too m

inim

al to m

atter)

•Fixe

d Costs

•Re

nt: $

24 / squa

re feet / year (or $6000 / m

onth)

•Eq

uipment: $

144K initial co

st, 3 year depreciation, $0 salvage value

(or $4000 / m

onth)

•La

bor: 40 hours / w

eek @

$20 / hour (or $3200 / m

onth)

•Utilities: $400 / m

onth

•Franchise fee: $300 / m

onth

•Marketing

: $100 / m

onth

•Total: $14000 / m

onth

•Breake

ven ca

lculation

•Contribution marg

in: $60 / m

onth

•Fixe

d Costs: $14000 / m

onth

•# of members to breake

ven = $14000 / $60 =

233

brainstorm

ing each of the potential

associated line items

•Do N

OT automatica

lly provide each

piece

of data (such as sa

lvage value for

depreciation)

•Po

tentially

tricky parts:

•Using

consistent m

etric

(monthly, yearly, etc.)

•Re

venu

e =

contribution

marg

in beca

use the

re are no

variable costs

•Asking for equipment salvage

value

•Ta

keaway: By any

measure, breake

ven

of 233 m

embers is ve

ry low

Que

stion 2 –

Reve

nue G

rowth O

pportun

ities

Wha

t are potential reve

nue growth opportun

ities the clie

nt can pursue?

Que

stion

•Price

: •Increase current reve

nue stream pricing

•Tiered m

embership based on accessibility (time, equipment, e

tc.)

Potential resp

onse

59

•Tiered m

embership based on accessibility (time, equipment, e

tc.)

•Consider multi-p

eriod contracts with disco

unted pricing

•Qua

ntity

•Increase #

of gyms franchised

•Increase #

of members per gym (assum

e w

e have

not hit a utiliz

ation sa

turation point)

•Create new

product / service offering

s•

Juice bar

•Sell clothing, timers, lig

htweights

•Lo

ckers for rent

•Pa

rtne

r with full-service gyms to offer disco

unt for classes (like yoga, sp

inning

)

•Other •

Increase m

arketing

efforts

Que

stion 3 –

Cost C

utting

Opportun

ities

Wha

t are potential co

st cutting

opportun

ities the clie

nt can pursue? W

hat opportun

ities are m

ore

actiona

ble?

Que

stion

•Re

cognize

tha

t rent, equipment and

labor and

the

largest expense categories, so start the

re

•Re

nt

Potential resp

onse

60

•Re

nt•

Re-negotiate current contracts

•Move

to less optimal loca

tions

•Actiona

bility: Low

•Eq

uipment

•Use the

equipment lo

nger (thu

s increasing

the

depreciation period)

•Consider purchasing

used equipment

•Consider renting equipment

•Consider co

nsolid

ating

equipment purchases to few

er ve

ndors

•Increase buy

er pow

er by m

aking

purchases across m

ultiples gyms

•Actiona

bility: Moderate

•La

bor (currently comes in 8 hours per day, M

-F, to answer gene

ral que

stions)

•Decrease the

num

ber of ho

urs staffed

•Utiliz

e pho

ne sup

port

•Po

st m

ore FAQs on the w

alls

•Actiona

bility: Moderate

Que

stion 4 –

Segment A

nalysis

Which segment offers the

greatest opportun

ity on a profitability basis? W

hat are the

key

factors?

Que

stion

Potential resp

onse

Costs for

Franchisee

Gym Space

Location

Availability

Convenience

for Members

Segment

Fitness Interest

Segment Spare

Income

Competition

61

Franchisee

Availability

for Members

Fitness Interest

Income

Competition

Urb

an

High (�

)Low (�)

High (☺

)High (☺

)Medium

High (�

)

Sub

urban

Medium

Medium

Medium

Medium

Medium

Medium

Rural

Low (☺)

High (☺

)Low (�)

Medium

Medium

Low (☺)

•Key

Take

away

•Rural segment is ve

ry attractive, beca

use of the lo

wer co

st (rent, labor), high ava

ilability of gym space

and

low

co

mpetition

•Competition is the

surprise factor; very few

gyms ha

ve place

d loca

tions in rural areas due

to very high

breake

ven membership requirements for fully

-loaded, traditiona

l gyms

Sample Reco

mmend

ation

•Clie

nt business m

odel allo

ws for low breake

ven membership point for franchisees

•To improve

profitability, client sho

uld consider reve

nue growth opportun

ities (give best examples) and

co

st saving

opportun

ities (give m

ost actiona

ble items)

•Clie

nt sho

uld also focus on the rural market segment, primarily due

to a lack of significa

nt competition

Reco

mmend

ation

•Adding new

services (ie reve

nue streams) w

ill m

ake

clie

nt gym offering

s less distinct from traditiona

l gyms

•Cutting

costs at a bare m

inim

um gym m

ay cause customer service issue

sRisks

62

•Ex

ecute on reco

mmend

ations

•Also consider M&A opportun

ities, primarily to gain sca

le and

improve

cost structure

Nex

t Steps

Case: Greeting

Card

Manu

facturer

BCG, M

ock Interview

Ove

rview for interviewer

Inform

ation to be provided upon reque

st

A greeting

card

manu

facturer ha

s ex

perienced decreased profit. Th

e CEO

has asked you to figure out w

hy.

Problem statement narrative

63

This case involves a discussion of both the

reve

nue and

cost

drive

rs of profit. Greeting

card

companies operate w

ith a

unique

reve

nue system, and

this will also affect the

cost side

of the company.

Case Type: Profitability

Ove

rview for interviewer

The greeting

card

s are stocked at groce

ry stores and

pha

rmacies like CVS

Greeting

card

s are good for one

season only –

if a card

does no

t sell by the

end

of the season, it will be shipped

back to the

manu

facturer at their expense and

disca

rded

The greeting

card

ind

ustry has ex

perienced m

oderate

growth ove

r the years

Competitors have

experienced steady or slightly increased

profit

Inform

ation to be provided upon reque

st

Potential Categories of Cand

idate’s Framew

ork

Notable comments / potential discussion points

Industry Ana

lysis

•Greeting

card

s market: growing, shrink

ing, stable?

•Competitors: market share, growth rate

•Consum

ers: ne

eds, brand

perception, differentiation?

Profit drive

rs•Re

venu

e •Fa

ctors tha

t affect sales vo

lume

64

•Fa

ctors tha

t affect sales vo

lume

•Card

selection

•Card

sup

ply

•Is it better to ove

rstock or stock just the right amoun

t?•Ove

rstock: customers like cho

ices; it looks bad w

hen there is only one

card

on the she

lf –

creates more goodwill w

hen there are additiona

l ca

rds eve

n if the

y w

ill not all sell

•Just the

right amoun

t: do not incur additiona

l shipping costs to send

unsold card

s back to the

manu

facturer; do not incur va

riable costs for un

sold card

s; w

hy m

ake

more tha

n yo

u ca

n sell?

•How

does the greeting

card

manu

facturer earn reve

nue? W

hat are the

reve

nue streams?

•Costs •W

hat are the

fixed costs?

•W

hat are the

variable costs?

•Is the

re any

thing special about greeting

card

costs?

The cand

idate m

ust figure out how

the

greeting

card

manu

facturer earns reve

nue as well as ho

w costs are incurred.

Potential Issue Tree &

Approach to Solving the

Case

Key

elements of ana

lysis to solve the

case

How

is the

greeting

card

ind

ustry

doing?

How

are competitors perform

ing

compared to our company

?Are the

re cha

nging trend

s?

Industry Ana

lysis

Wha

t fa

ctors affect sales vo

lume?

Wha

t are the

repercussions if a

customer walks into a retaile

r and

the

ca

rd she

lves are empty?

Is it better to ove

rstock or stock just the

Reve

nues

Wha

t are the

fixed costs?

Wha

t are the

variable costs?

Costs

65

Are the

re cha

nging trend

s?Is it better to ove

rstock or stock just the

right amoun

t?W

hat are the

reve

nue streams?

Possible follo

w-up and

guidance

to in

terviewer

Possible follo

w-up and

guidance

to in

terviewer

Possible follo

w-up and

guidance to

interviewer

•If she

lves are empty, the follo

wing

repercussions are possible:

•Lo

se the

sale entirely, result in

poor brand

awarene

ss; lose

customers to competitors;create

poor relationships with retaile

rs•Manu

facturer rece

ives payment only

whe

n ca

rds are SOLD

to consum

ers.

Unsold card

s are shipped back at the

manu

facturer’s ex

pense

COGS: $1.50

SG&A: $

0.25

Shipping: $

0.05 (only in

curred if the card

is unsold)

Fixe

d Costs: $200,000 (printing presses,

plants, admin)

•Th

e greeting

card

ind

ustry has

remained stagna

nt throug

hout the

ye

ars due

to threats such as e-card

s•Competitors have

experienced stable

or moderate increases in profit

•Our company

’s card

s ha

ve

continuo

usly sold out in retaile

rs as

compared to competitors

Que

stion 1 –

Breake

ven

Break eve

n = Fixed Costs / Unit Contribution

Ove

rall approach, g

ood sho

rtcuts &

solution

N/A

Inform

ation to provide up front

Math Q

uestion

If greeting

card

s are sold at $3.00 per ca

rd and

fixed costs are $200,000 per ye

ar, ho

w m

any

card

s must the greeting

ca

rd m

anu

facturer sell to break eve

n?

66

Fixe

d Costs = $200,000

Unit Contribution = $3.00 -

$1.50 -

$0.25 =

$1.25

Break eve

n = $200,000 / $1.25 =

160,000 card

s

COGS: $1.50

SG&A: $

0.25

Shipping: $

0.05 (only in

curred if the card

is un

sold)

Fixe

d Costs: $200,000

Provide in

form

ation if asked

Sample Reco

mmend

ation

The greeting

card

manu

facturer should improve

reve

nues by ensuring a w

ide selection and

sup

ply of

card

s at each retaile

r while also keeping in mind the

num

ber of un

sold card

s at the end

of the selling

season. Th

e in

crease in goodwill and

brand

awarene

ss among

retaile

rs and

consum

ers outweighs the

added variable costs from unsold card

s.

Reco

mmend

ation

Sup

plying extra card

s may not be profitable if the qua

lity of the card

s are lacking compared to

competitors’.

Risks

The m

anu

facturer should perform

additiona

l research regard

ing how

consum

ers cho

ose greeting

card

s and

determ

ine if un

sold card

s may be re-used in any

fashion (salvage value).

Nex

t Steps

67

and

determ

ine if un

sold card

s may be re-used in any

fashion (salvage value).

Nex

t Steps

The num

ber of ca

rds sold during the

year depend

s on

the num

ber of ca

rds shipped to the

retaile

r. If these

are the

expected sales nu

mbers, which one

sho

uld the

manu

facturer choose?

Shipment Q

uantity: 2,000, Sales Volume: 1,900

Shipment Q

uantity: 2,500, Sales Volume: 2,200

Shipment Q

uantity: 2,700, Sales Volume: 2,300

Profit = ($1.25 * 2,200) –($1.8 * 300) = $2,210

BONUS

Case: UK A

sset Mana

ger

Bain, M

ock Interview

Our clie

nt is a priva

te equity firm tha

t is looking

at a potential acq

uisition target. Th

e target is a UK asset mana

gement firm

that

has seen a 33% drop in AUM in the past 18 m

onths. O

utside of a valuation ana

lysis of the target (assum

e this ha

s been done

by

the clie

nt), w

e need to determ

ine w

hether or no

t this is a good acq

uisition.

Problem statement narrative

68

The clie

nt is a priva

te equity fun

d tha

t wants yo

u to

determ

ine the

acq

uisition prosp

ects of an asset mana

gement

firm

based in the United Kingdom. The

interviewer should

allo

w the

interviewee to deve

lop 1) a tho

roug

h framew

ork

on ho

w the

y w

ould eva

luate the

problem, 2) an ove

rall

reco

mmend

ation to the

clie

nt regard

ing the

acq

uisition, and

3) ne

xt steps that offer to eithe

r dig deeper in a particular

area of ana

lysis or offer ways in w

hich the

target co

mpany,

once acq

uired, co

uld be improve

d.

Case Type: Inve

stment (Go/No-G

o)

Ove

rview for interviewer

Explain AUM as total assets und

er mana

gement w

ithin the

asset mana

ger’s portfolio

of three broad investment types:

retail, in

stitutiona

l, and

alternative

fun

ds (~

75% in retail and

institutiona

l fun

ds)

Specific inve

stments within retail and

institutiona

l fund

s includ

e m

utua

l fun

ds (comprised of equities, bond

s, m

one

y

market fund

s, and

others); alternative

fun

ds includ

e hedge

fund

s and

priva

te equity investments (sho

w Exhibit 1 here).

The fun

d operates predominantly in the UK w

ith a m

uch

smalle

r presence in Germ

any

and

Spain.

Inform

ation to be provided upon reque

st

Potential Issue Tree &

Approach to Solving the

Case

One

possible fra

mew

ork

•Market size

and

how

this

has chang

ed ove

r time by

segment, g

eography, and

product mix

•Und

erlying drive

rs for AUM

•How

compare across the

Market

•Target’s m

ajor co

mpetitors

•Competitor market share

and

how

this ha

s chang

ed

ove

r time

•Reputation, product

offering

, AUM size,

Competitors

•Key

segments and

purchasing

criteria

•Major institutiona

l customers

•Major chann

el partne

rs (e.g.,

bank

s, financial advisors)

•Do customers invest in

Customers/Cha

nnels

•Profitability

-Fee structure (reve

nues)

-Compensation structure

(costs)

•Portion of AUM declines due

to m

arket declines vs. fund

Company

69

•How

compare across the

different business segments

offering

, AUM size,

customer mix, g

eographic

focus, etc.

•Distribution

adva

ntages/disadva

ntages

•Do customers invest in

fina

ncial institution or

individua

l investment

mana

ger?

•Customer stickine

ss

Possible follo

w-up and

guidance to interviewer

Possible follo

w-up and

guidance to interviewer

Possible follo

w-up and

guidance to interviewer

•Total U

K asset

mana

gement m

arket £3.4T

•AUM drive

n by: market

perform

ance,

GDP/wealth, and

net

capital flow

s•UK fun

ds market: 75%

institutiona

l, 25% retail

•Major co

mpetitors include

bank

s, in

surance companies,

and

other fund

mana

gers

•Target is 10thin both inst.

and

retail and

both are

highly fragmented m

arkets

•No notable differences in

reputation, product

offering

, mix, o

r distribution

•Target lost the

mand

ate from

a la

rge institutiona

l inve

stor in

2008, accoun

ting

for much of

its ca

pital/AUM outflow

s for

that ye

ar

to m

arket declines vs. fund

redemptions?

•Asset mana

gers/ke

y

personn

el

•Perform

ance against

benchm

arks/co

mpetitors

Possible follo

w-up and

guidance to interviewer

•Sho

w Exhibit 2 w

hich sho

ws

-greater outflow

s than the

market

-about equa

l perform

ance as

the m

arket

70

Exhibit 1: Ta

rget’s Total AUM by Fun

d Type

15

£20B

15.7

16.3

18.1

12.0

12.1

WCC Case -2009 -UK A

sset Mana

ger

Note: Fiscal year ending December 31 except for 2009 data which is as of June 2009

05

10

2005

2006

2007

2008

12.0

2009*

12.1

Retail

Institutional

Alternative

71

400

£500B

476

-3.4

1.9

2.0

4.4

-114

367

3.1

6.3

0.0

3.4

7.6

402

UKfundsmarketflowoffunds

(Dec'07-June'09)

AuM

Netoutflow

Netinflow

Market

~1% capital

inflows

10

£15B

13.4

-0.9

-0.2

0.0

0.0

Target'sflowoffunds

(Dec'07-June'09)

AuM

Netoutflow

Netinflow

Market

~25% drop in asset

value in 2008

~24% drop in asset

value in 2008

~8% capital

outflows

Mutual Fund Performance

Exhibit 2: AUM Sum

mary

0

100

200

300

12/07

Equities

Bond

MoneyMkt

Other

Market

12/08

Equities

Bond

MoneyMkt

Other

Market

06/09

~3% capital

inflow

05

10

12/07

Equities

Bond

MoneyMkt

Other

Market

-3.3

12/08

9.0

Equities

-0.1

Bond

-0.1

MoneyMkt

-0.1

Other

0.1

Market

0.2

06/09

9.1

Note: Excludes alternative investm

ents

~1% capital

outflows

outflows

Que

stion 1 –

Math

The cand

idate w

ould bene

fit from kno

wing the

“rule of 72” (ie,

Ove

rall approach, g

ood sho

rtcuts &

solution

Ann

ual returns of 4.5%

Inform

ation to provide up front

Math Q

uestion

Given that the target’s fun

ds un

der mana

gement are ave

raging 4.5% returns ann

ually, h

ow m

any

years w

ould it take

for the fun

ds to

doub

le?

72

~72 divided by the

rate of interest w

ill give approxim

ate

period of time needed for initial a

moun

t to doub

le)

OR

Sho

uld realiz

e absolute amoun

t is unimportant (strictly depend

s on rate)

------------

Solution: 72/4.5= ~16 years

If asked, give current fun

ds AUM of £9.1B

Provide in

form

ation if asked

Sample Reco

mmend

ation

Assum

ing no issue

s with va

luation, reco

mmend

against clie

nt acq

uiring

the

target. Th

e target, on

ave

rage, has simila

r fina

ncial perform

ance to ind

ustry peers but its clie

nts are w

ithd

rawing capital

faster than the ind

ustry ave

rage. W

hile the

motiva

tion is unclear, there could be uncove

red problems

with client service and

/or client m

ix.

Reco

mmend

ation

Sho

uld valid

ate valuation. Th

e valuation of target may be attractive desp

ite being a poor perform

er

compared to the

market. Th

e redemption problems, largely drive

n by one

key

clie

nt in 2008, co

uld be

behind

the

m.

Risks

Ana

lyze

alternative

investments as well as Germ

an and

Spanish m

arkets.

73

Ana

lyze

alternative

investments as well as Germ

an and

Spanish m

arkets.

Ana

lyze

perform

ance of fund

mana

gers in ord

er to determ

ine w

hich m

ana

gers can be replace

d

(compare perform

ance against benchm

arks).

See if ove

rall portfolio

’s relative

und

erw

eighting in

institutiona

l ve

rsus retail segments matters.

Nex

t Steps

Case: Mighty M

ining Company

(inspired by) McK

insey, Round 2

Ove

rview for interviewer

Inform

ation to be provided after actions id

entified

Your clie

nt is a global mining company

with a loca

tion in South Africa. This particular loca

tion is perform

ing below ave

rage

fina

ncially

. McK

insey has been hired to identify the

problem and

make

reco

mmend

ations to address it. W

hat would you do first

toapproach this problem?

(Note

to int

erview

er: Th

is lea

doff

que

stio

n is m

eant

to focu

s on

actio

ns o

ne w

ould take

bef

ore

diving int

o the

fra

mew

ork

–actio

ns suc

h as co

llecting d

ata

, visiting

the

loca

tion

to o

bse

rve

oper

ations

, inte

rviewing e

mplo

yees

, et

c)

Problem statement narrative

74

This que

stion is intentiona

lly vague

, as many

Partne

r leve

l ca

ses ca

n be, to encourage the

cand

idate to ask que

stions at

this stage.

This is command

and

control, so start w

ith the first que

stion,

then provide the

detail to the

right and

ask for a full ana

lysis

(framew

ork). After the framew

ork is deve

loped by the

ca

ndidate, dive deeper into cost and

operations and

ask

follo

w-up que

stions.

Case Type: Operations

Case Style: Command

& Control

Ove

rview for interviewer

The proce

ssing plant is loca

ted 160 m

iles inland

and

it uses a

fleet of large trucks to transport m

inerals from the

plant

(which is loca

ted near the m

ineral source

) to a port city. Th

e

minerals are the

n loaded onto barges and

shipped to clie

nts

aroun

d the

world. The

plant needs to operate at maxim

um

capacity to m

eet customer demand

.

The m

inerals produced are commodities with low m

arg

ins.

Inform

ation to be provided after actions id

entified

Potential Issue Tree &

Approach to Solving the

Case

Key

elements of ana

lysis to solve the

case

Revenue: explore

historica

l data,

trend

s, product sp

ecific data

Benchm

ark against competitors and

other co

rporate loca

tions.

Reve

nues

Explore operationa

l issues that might lead

to poor perform

ance such as interrup

tions

in operations (is plant operating

at full

capacity, is it runn

ing 100% of the tim

e or

are the

re pow

er outages or other

Opera

tions

Costs: explore fixed costs (PP&E,

ove

rhead) and

variable costs (m

aterial,

labor)

Transportation: considering

this

product is a commodity, transportation

Costs

75

other co

rporate loca

tions.

are the

re pow

er outages or other

disruptions, are the

re loca

l protests, is

theft or loca

l un

rest impacting plant),

employe

e skill leve

l, employe

e m

orale, etc

Possible follo

w-up and

guidance to

interviewer

If the

interviewer gives a vague

resp

onse

such as “I w

ould w

ant to und

erstand

the

loca

l market co

nditions” then push for

specific ex

amples of operationa

l issues

that would impact a plant in the m

iddle of

South Africa.

It is important tha

t the cand

idate identify

gene

ral o

perating

issue

s and

loca

lly

impacted issue

s.

Possible follo

w-up and

guidance

to in

terviewer

Altho

ugh im

portant to m

ention, the

focus of this case is co

st and

operations

so don’t let the cand

idate spend

too

much time here.

product is a commodity, transportation

make

s up

a large portion of the

product co

st and

sho

uld be separated

out.

Possible follo

w-up and

guidance

to in

terviewer

If the

cand

idate has no

t already done

so, a

sk the

m to identify the

key

cost line

items on the income statement and

elaborate on the COGS for this

industry.

COGS: La

bor, Materials,

Shipping/Lo

gistics

Operating Expenses

Administrative

, Ove

rhead, D&A

Follo

w-up Q

uestions

Resp

onse sho

uld cove

r a rang

e of ideas as the interviewer is looking

for out of the box

think

ing. Some id

eas might be: the

plant is

Guidance for interviewer:

Follo

w-up que

stion #1

In gathering

data from the

clie

nt, yo

u find

tha

t transportation co

sts are significa

ntly highe

r as a portion of COGS tha

n any

other

African plant loca

tion. W

hy m

ight this be? (If the

160 m

ile trip from plant to port has no

t been mentione

d, inform

interviewerof the

transportation details here)

76

send

ing trucks that are not full increasing

trips ne

eded, drive

rs are not going directly to the

port (poor route plann

ing, sleeping on

the jo

b, etc), trucks are hija

cked along

the

route, drive

rs m

ust pay bribes to get throug

h ce

rtain road blocks.

Follo

w-up que

stion #2

You co

llect historica

l data on the ave

rage tim

e it take

s a truck to m

ake

the

200 m

ile trip from the

plant to the

port, wha

t should you

expect the

graph to look like?

Interviewer: (Th

e graph should be a norm

al distribution) Yo

u ex

pected the

graph to be norm

ally

distributed but your data reve

als

the follo

wing graph. W

hat ca

n yo

u draw from this data?

The cand

idate sho

uld identify tha

t the first peak is expected (per the norm

al distribution) but the

seco

nd peak ne

eds to be ana

lyze

d.

Ask for ideas of wha

t might cause the

seco

nd peak. Th

ese could include certain drive

rs taking

too m

any

breaks, traffic patterns, etc.

Guidance for interviewer:

Mighty M

ining Trip Tim

e D

istribution

1000

77

Total roun

d trip tim

e (ho

urs)

0

# of trips

24

Fina

l Que

stion and

Sample Reco

mmend

ation

Follo

w-up que

stion

You disco

ver that the port closes at 10pm and

any

truck tha

t does no

t arrive by 10pm m

ust wait until the port opens again at 4am

to

drop off its load and

return to the

plant. The

minim

um roun

dtrip trave

l time is 7 hours and

the

plant owns 20 trucks; how

eve

r, a

barge needs 30 truckloads to reach capacity and

ship out. W

hat would you reco

mmend

Mighty M

ining to do about this situation?

Remember: the

plant m

ust operate at max capacity to m

eet customer demand

Rather than crun

ch num

bers aroun

d optimization, it is sufficient tha

t the cand

idate identify tha

t there are

seve

ral bottlene

cks in the

sup

ply cha

in (trave

l time, port hours of operations, ca

pacity of trucks versus

78

seve

ral bottlene

cks in the

sup

ply cha

in (trave

l time, port hours of operations, ca

pacity of trucks versus

barge) and

reco

mmend

potential solutions tha

t may be considered:

•In the

sho

rt term

, the company

needs to identify the

latest a truck can leave

and

still arrive by 10pm.

They

could use employe

e incentives to encourage drive

rs to reduce rest stops along

route to m

ake

the

10pm cut-off. Drive

r shifts sho

uld be rearrang

ed to optimize m

aterial delivered to the

port.

•In the

long

term

, see if they

lobby tha

t 24 hour port operations is more profitable for all parties.

•Evaluate the

costs of setting up a storage facility by the

port for night deliveries against purchasing

more trucks.

•Ana

lyze

costs of up

grading fleet to larger size

trucks.

•Consider leasing

trucks vs. purchasing

.

Sample

Reco

mmend

ation

Since

loca

tion already is poor perform

ing, must ana

lyze

cost of ca

pital to ensure tha

t inve

sting in

capital im

prove

ments is highe

st N

PV alternative

(ship from other better plants?).

Cha

nges in customer demand

could lead to an inve

stment tha

t is not ne

eded long

term

.Risks

I would ana

lyze

the

se options and

present a final reco

mmend

ation for the clie

nt including ju

stification

for any

investment needed by the

company

to m

itigate the

risk of senior mana

gement not wanting to

inve

st.

Nex

t Step

Case: Th

e Reel Deal

Bain, R

ound 1

Ove

rview for interviewer

Inform

ation to be provided upon reque

st

A m

ovie studio clie

nt has an ex

tensive library of hit movies from prior ye

ars. As part of yo

ur effort to find new

source

s of profit for

the company, yo

u are to assess the

viability of digitizing the

movie reels and

making

the

m ava

ilable online for a fee.

Problem statement narrative

79

This case is intend

ed to test the

cand

idates ability to react to

a broadly w

ord

ed sce

nario, determ

ine the

key

data needed

to m

ake

a decision and

navigate seve

ral basic but

potentially

tricky m

ath que

stions. Th

e in

terviewer should

begin by asking the

cand

idate w

hat inform

ation they

will

need to ana

lyze

the

problem and

make

a reco

mmend

ation.

A brief discussion on industry ana

lysis (including consum

er

trend

s and

competition) as well as co

mpany

position

(including m

arket share and

firm specializ

ation) is

appropriate, BU

T this is a m

ath case focused on profitability

(other data is irreleva

nt). The

interviewer should quickly get

to the

data and

ultim

ately offer any

inform

ation (see right

pane

l) tha

t is not asked for.

Case Type: Profitability / M

arket En

try

Ove

rview for interviewer

Exp

ect

ed

re

ven

ue

s: $

20

0/c

lip

10

0 c

lips

pe

r m

ovi

e

50

/50

re

ven

ue

sp

lit p

er

clip

(5

0%

go

es

to r

oya

ltie

s fo

r o

the

r

pa

rtie

s)

Stu

dio

est

ima

tes

the

re w

ou

ld b

e a

25

% y

ea

rly

uti

liza

tio

n

rate

Inform

ation to be provided upon reque

st

Case Q

uestions

Key

elements of ana

lysis to solve the

case

Wha

t would be the

reve

nue per movie

per ye

ar?

Calculate expected reve

nue

Say the

studio only had fixed costs

(once the

movie w

as digitized, any

reve

nue is pure profit). It costs $30M to

complete. T

he studio w

ould like to see a

positive

return on any

investment w

ithin

Breake

ven ana

lysis, part 1

The studio realiz

es up

keep of the digital

files and

service for the online business

would have

additiona

l va

riable costs of

$18 per utilize

d clip

. W

ill the

y be able to

break eve

n in 2 years?

Breake

ven ana

lysis, part 2

80

positive

return on any

investment w

ithin

2 years.

break eve

n in 2 years?

Possible follo

w-up and

guidance

to in

terviewer

Possible follo

w-up and

guidance

to in

terviewer

Possible follo

w-up and

guidance to

interviewer

($200*.5)*100*.25 =

$2500 per

movie per ye

ar

Give demand

whe

n asked: ano

ther

stud

io w

ith simila

r offering

s is seeing

demand

of 8,000/ year

…$30M/$2500 =

12,000 customers

to break eve

n. Assum

ing w

e can get

close to the

competitor’s demand

of

8,000/yr, we can break eve

n within 2

years.

$100-$

18=$82 C

M per ye

ar per clip

($200*.5)*82*.25 =

$2050 per movie

per ye

ar

$30M/$2050 =

14,634 customers to

break eve

n …

still achieva

ble w

ithin 2

years based on 8,000/yr foreca

st.

Sample Reco

mmend

ation

Based on the data provided, all scena

rios suggest the

digitization move

is a prudent end

eavo

r.

Reco

mmend

ation

Gene

ral competitive

threats; ne

w techno

logy m

aking

this strategy obsolete; assum

ptions do not ho

ld

true

; some m

ovies are m

ore popular than others; partne

rs m

ay demand

highe

r roya

lty payments.

Risks

Altho

ugh no

t ce

ntral to the

case reco

mmend

ation, potential ne

xt steps co

uld include: deeper co

mpetitive

ana

lysis, determ

ination of a specific techno

logy platform

, any

nece

ssary legal agreements

Nex

t Steps

81

ana

lysis, determ

ination of a specific techno

logy platform

, any

nece

ssary legal agreements

Nex

t Steps

Disregard

ing any

ancillary inform

ation provided

earlier, wha

t risks ex

ist in m

aking

this decision based

on demand

seen by a competitor?

Some potential answers:

•Competitor ha

s large m

arket share, making

entry

difficult

•One

year of demand

data does no

t allo

w trend

ana

lysis

•Data m

ay not be accurate

BONUS

Case: Pub

lishing

Company

Leno

vo, R

ound 2

Ove

rview for interviewer

Inform

ation to be provided upon reque

st

Your clie

nt is Putter, a company

tha

t pub

lishe

s romance nove

ls tha

t they

sell to bookstores. Typically, Putter reim

burses itscustomers

at the end

of the year for any

unsold inventory. Now

, one

of Putter’s customers, a retail bookstore, ha

s co

me to it with an offer for a

deal. In return for a 10% disco

unt on who

lesa

le price

s, the

bookstore w

ill no long

er send

back any

books at the end

of the year.

Sho

uld Putter do the

deal?

Problem statement narrative

82

This is primarily a calculations, marg

in case. Make

the

ca

ndidate explore the

calculus in the case first and

foremost;

discussion of business and

strategic alternative

s ca

n co

me

later.

Case Type: Operations / Profitability

Case Style: Command

& Control

Ove

rview for interviewer

Putter’s clients ha

ve to sell at a price

we dictate, no

che

aper.

Inform

ation to be provided upon reque

st

Potential Issue Tree &

Approach to Solving the

Case

Key

elements of ana

lysis to solve the

case

Marg

in calculationsMath

•Re

duction in operationa

l co

mplexity

•Good w

ill m

eeting

customer/chann

el

reque

st•Open up

new

business m

odel –may

lead to additiona

l distribution

Opportunities

•Cash Flow (with ne

w m

odel, get lesser

cash flow upfront-problem in this

eco

nomy)

•Market Sha

re (assum

ing few

er un

its

sold)

Threats

83

lead to additiona

l distribution

chann

els?

sold)

•May affect other clients’ cho

ices as well

(iefirst of many, no

t isolated case)

•Re

lationship w

ith client (supply the

m w

ith

less, the

y view you as less important)

Possible follo

w-up and

guidance

to in

terviewer

Possible follo

w-up and

guidance

to in

terviewer

Possible follo

w-up and

guidance to

interviewer

•Don’t forget sa

lvage value

•Ex

plore rationa

le for # of books

ord

ered (directiona

lly up, dow

n or

flat), more in ne

xt page

•W

hen mentioning

cash flow, h

ave

ca

ndidate do the

calculations. Previously

get $100,000 upfront, no

w only get

$67,000.

Que

stion 1 –

Good D

eal?

Don’t forget sa

lvage value.

Ove

rall approach, g

ood sho

rtcuts &

solution

•In 2008, Putter sold 10,000 books to this bookstore

Inform

ation to provide up front

Math Q

uestion

Does this m

ake

sense on a profit basis?

84

Calculations:

Pre-cha

nge: profit = 8,000 * (10-5

) –2000 *5 =

$30,000

Post-cha

nge: profit = 7,500 * (9-5

) = $30,000

Pre-cha

nge: ca

sh-flow: 10,000 * $10 =

$100,000 upfront

Post-cha

nge: ca

sh-flow: 7,500 * $9 =

$67,500 upfront

Pre-cha

nge: market share at 8,000 books

Post-cha

nge: market share at 7,500 books

Solution: T

he expected profit is the

same, but initial cash flow is

lower and

market share is lower. The

re does no

t seem to be a

direct financial ince

ntive to take

the

deal.

•It costs Putter $5 on ave

rage to m

ake

a single book

•Putter previously sold books to the

bookstore at $10

•Note to interviewer: M

SRP not releva

nt

•Putter’s Salvage Value for un

sold books =

0•Ro

mance nove

l sa

les ha

ve been flat for a deca

de,

expected to remain so in the coming years

•In 2008, the retail bookstore sent back 20% of its books

•Have

interviewee explain how

he/she w

ill gue

ss at a

figure of ho

w m

any

books the

bookstore w

ill ord

er, then

give the

projected num

ber of 7500

Provide in

form

ation if asked

Sample Reco

mmend

ation

The deal does no

t seem attractive on a financial or strategic basis. Th

e expected profitability is the

same but cash flow and

market share w

ill decline. Such problems are complicated by the

fact tha

t others in the ind

ustry m

ay follo

w the

lead of the first bookstore. Re

commend

ation is not to accept the

deal.

Reco

mmend

ation

By not accepting

the

reque

st of yo

ur clie

nt, yo

u risk alie

nating

the

bookstore if other pub

lishe

rs shift

business m

odels.

Risks

Consider the differences in “blockbuster” books vs. low

er-vo

lume books. Perhaps ne

w business m

odel

(at different pricing

) may m

ake

sense for some titles.

Nex

t Steps

85

(at different pricing

) may m

ake

sense for some titles.

Nex

t Steps

Case: Re

tirement Apartment C

omplexe

sBCG, R

ound 1

Ove

rview for interviewer

Inform

ation to be provided upon reque

st

Th

e c

lien

t o

wn

s a

nd

op

era

tes

25

re

tire

me

nt

ap

art

me

nt

com

ple

xes

for

the

55

-75

ye

ar

old

de

mo

gra

ph

ic in

th

e s

ou

th-e

ast

an

d

sou

th-w

est

sta

tes

of

FL,

CA

, N

M a

nd

AZ

. B

y a

nd

larg

e t

he

ap

art

me

nt

com

ple

xes

hav

e a

sim

ilar

de

sig

n a

nd

am

en

itie

s. S

ho

uld

th

e

clie

nt

com

pa

ny

’s C

EO

co

nsi

de

r e

xpa

nd

ing

to

oth

er

No

rth

ern

cit

ies

or

con

tin

ue

to

fo

cus

on

th

e S

ou

th?

Problem statement narrative

86

Even thoug

h this case starts out w

ith a m

arket entry problem

que

stion, the

cand

idate sho

uld eve

ntua

lly realiz

e (with or

witho

ut guidance) that the case is about profitability,

specifica

lly costs as there is clearly an un

met market in the

North and

hence reve

nues wouldn’t be an issue.

Ultim

ately, the

cand

idate sho

uld use some m

ath to determ

ine

that the financial justification for ex

pand

ing in the N

orth vs.

South is roug

hly equiva

lent, so strategic bene

fits and

risks

should guide the

clie

nt’s focus.

Case Type: Profitability/ M

arket En

try

Ove

rview for interviewer

cand

idate sho

uld probe deeper to und

erstand

the

market in

the N

orth and

why

the

clie

nt w

ants to consider ex

pand

ing.

•Any

specific fina

ncial goals? –maxim

izing profitability

throug

h ne

w apartment existing

properties.

•W

hat make

s the clie

nt think

tha

t there is demand

in the

North? –

Surve

y cond

ucted 2-3

years ago in states

such as NY, N

J, M

A and

IL reve

aled tha

t the pre-

retirees /retirees want sim

ilar fa

cilities in tho

se

underserved (he

nce no competition ex

its) m

arkets so

that they

can stay closer to the

ir families and

friend

s.

•A pilo

t apartment complex w

as erected in dow

ntow

n Chica

go 2 years ago w

ith more amenities than its sister

properties in the

south.

Inform

ation to be provided upon reque

st

Potential Categories of Cand

idate’s Framew

ork

Notable comments / potential discussion points

Most cand

idates will tend

to examine reve

nues and

costs once the

y realiz

e this ca

se is about m

axim

izing profitability. W

hile this is

the eve

ntua

l course of action it is im

portant for the cand

idate to und

erstand

the

current m

arkets tha

t the clie

nt operates in

and

glean

key le

arnings. Remember –if the

cand

idate had asked the

financial goal que

stion, the

clie

nt w

ants to m

axim

ize profitability throug

h ne

w or EX

ISTING

properties.

Potential p

oints include, but are not lim

ited to:

Industry ana

lysis

87

Industry ana

lysis

•firm

position / m

arket share

•trend

s•co

mpetition

Profit drive

rs•reve

nue

•co

sts

Potential Issue Tree &

Approach to Solving the

Case

Key

elements of ana

lysis to solve the

case

Whe

n dealin

g w

ith apartment

complexe

s, examine the

follo

wing:

•Num

ber of properties

•Num

ber of un

its per property

Market Size

Identify source

s of reve

nue from

apartment complexe

s:

•Re

nt•Utilities, if mana

ged by building co.

Reve

nue

Identify cost bucke

ts and

disting

uish fixed

from variable compone

nts

•Maintena

nce

•Amenities

Cost

88

•Num

ber of un

its per property

•Occup

ancy Rates

•Utilities, if mana

ged by building co.

•Premium for amenities, if any

•Re

tail reve

nue, if any

•Maintena

nce or other fees

•Amenities

•Le

asing

/Marketing

•Utilities

•Property Taxe

s

Possible follo

w-up and

guidance

to in

terviewer

Possible follo

w-up and

guidance

to in

terviewer

Possible follo

w-up and

guidance to

interviewer

If the

cand

idate has no

t ye

t asked for

the current apartment complexe

s in the

Southe

rn states, give her/him details:

•Competition is strong

in the south;

easy to build new

apartments.

•Occup

ancy rates typically

start out at

90%+ but eve

ntua

lly settle at 80% as

new complexe

s are built.

•3-5

% growth eve

ry year fed by new

people w

ho m

igrate to the

south

Reca

ll that the Chica

go property pilo

t provides residents with additiona

l amenities co

mpared to properties in the

south. The

cand

idate sho

uld examine this

asp

ect to accurately compare costs.

Que

stion 1 –

Math

Math Q

uestion: W

hich is more profitable –

north or south?

1.

First co

mpute occup

ancy leve

ls and

reve

nue. Fo

r this discussion all apartments in a given region ca

n be considered equiva

lent.

South: 800 units/bldg * 0.8 occupancy rate * $500 rent/mo = $320,000 per mo (let ca

ndidate kno

w tha

t rent includes

maintena

nce, amenities, utilities; each property gene

rates identical reve

nue so leave

calculations on an individua

l property basis)

North: 400 units * 0.9 occupancy rate * $1,000 rent/mo = $360,000 per mo

Rent in

clud

es amenities charges for a 24 hr. on-site m

edical fa

cility tha

t residents bene

fit from in a hug

e w

ay

89

2.

Nex

t co

mpare costs (per month)

Cost Item

North

South

Maintena

nce

400 units * $200 =

$80,000

800 units* $125 =

$100,000

Amenities

$54,000

$48,000

Utilities

$45,000

$38,000

SG&A

$60,000

$80,000

Medical Fa

cility

$60,000

$0

Total C

ost per mo

$299,000

$266,000

TotalR

eve

nue per mo

$360,000

$320,000

Profit per mo per bldg

$61,000

$54,000

Que

stion 1 –

Math, co

nt’d

Math Q

uestion co

nt’d…

3.

Nex

t ca

lculate profitability for both loca

tions by using

the

form

ula

Profit per mo per building

÷Total Revenue per mo

4.

Turns out tha

t the south and

north are equa

lly profitable at 16.8% approx.

90

The key

to this que

stion is not to stop at ca

lculating

profit and

jump to a conclusion then. A good cand

idate w

ill take

the

nex

t step to calculate profitability and

realiz

e tha

t the South and

the N

orth are equally profitable relative to revenue

generated.

Now

the

cand

idate sho

uld consider the profitability relative to

the cost to implement various initiative

s. Is it more expensive to

open in the

North or South? W

hat is the

incremental co

st of

constructing

medical fa

cilities in the

south (relative

to increased

earnings)? W

hat is the

cost of enh

ancing some amenities in the

South to gene

rate highe

r rent? H

ighe

r NPV is the goal.

We w

ill not ex

plore the

capital co

st in this case, but a return on

cost ana

lysis should be part of ne

xt steps.

Ove

rall approach, g

ood sho

rtcuts &

solution

N/A

Inform

ation to provide up front

At this point the cand

idate m

ay ask about the

market

size

in the

North or the cost to open ne

w facilities in the

North (or the cost to reno

vate / alter fa

cilities in the

South). T

here is no

additiona

l data ava

ilable, but for the

purposes of this discussion we can assum

e tha

t the return

relative

to cost is also comparable in North vs. South.

Provide in

form

ation if asked

Sample Reco

mmend

ation

To im

prove

sha

reho

lder return and

maxim

ize profitability, the CEO

of the Retirement Homes should

consider ex

pand

ing in the north to capture unm

et demand

and

be the

first m

ove

r in this area. To increase

profitability in the South the follo

wing could be considered:

1.

Increase reve

nues by opening

medical ce

nters in all apartment complexe

s and

increase the

rent. W

e

have

seen that people w

ill pay for the convenience of such an amenity.

2.

Decrease costs using best practices with the Chica

go site, re-negotiate contracts, etc.

The key

here is that the cand

idate sho

uld m

ake

a strategic arg

ument for the reco

mmend

ations he m

ake

s.

Given that the financial measures are roug

hly equiva

lent here (profit marg

in per region, profit relative

to

Reco

mmend

ation

91

Given that the financial measures are roug

hly equiva

lent here (profit marg

in per region, profit relative

to

capital inve

stment (NPV) per region, strategic intuition will drive

the

clie

nt’s decision.

cand

idate sho

uld m

ention risks such as co

st of ex

pansion in the

North, the

commercial real estate issue

s fa

cing

the

ind

ustry how

eve

r, pullin

g this business insight from the

inform

ation provided during the

case

interview w

ill disting

uish a good resp

onse from an insightful one

-90% occup

ancy is no

t sustainable in the

long

run

given wha

t ha

ppens in the South.

Risks

Evaluate cost to open ne

w buildings in the

North and

cost to reno

vate in the South.

Size demand

in major Northe

rn cities and

, co

st of ex

pansion no

twithstand

ing, co

nsider ex

pand

ing rapidly

to secure demand

.Ex

amine how

best practices ca

n be applie

d to existing

properties North to South and

vice versa.

Nex

t Steps

Case: Big Yello

w Bus

Bain, R

ound 1

Ove

rview for interviewer

Inform

ation to be provided upon reque

st

Your clie

nt is a priva

te equity fun

d considering

the

acq

uisition of Big Yello

w Bus Co, one

of the leading m

anu

facturers of scho

ol

buses in the

US. Th

e clie

nt has eng

aged Bain to help determ

ine w

hether or no

t to proce

ed w

ith the investment.

Problem statement narrative

92

This is a classic go/no

-go investment case w

hich sho

uld use a

command

& control form

at if the

cand

idate does no

t hit the

right path quickly. The

cand

idate sho

uld first deve

lop a

framew

ork, w

hich w

ill id

eally

include assessing the

market,

the company, and

the

transaction. As part of the m

arket

discussion the case tests the cand

idate’s m

ath w

ith a m

arket

sizing

que

stion. After this point the case sho

uld m

ove

on to

the competitive

land

scape, w

hich w

ill test the

cand

idate’s

business intuition. Ex

hibit 1 sho

uld be provided to the

ca

ndidate w

hen the case m

ove

s to this juncture.

Case Type: Inve

stment (Go/No-G

o)

Ove

rview for interviewer

•BYB is the

#1 playe

r in the

market by reve

nue, #

2 by

volume.

•Th

ere are only 3 competitors in the m

arket with relative

ly

equa

l sha

re but BYB w

as the clear leader 5 years ago.

•BYB’s price

s are 20% highe

r than its co

mpetitors

•Th

e m

arket ha

s a fairly steady long

-term

3% growth rate

drive

n by G

DP / population growth.

•Market growth has been 6% ove

r the last two years as

loca

l towns rush to buy

buses prior to new

emissions

regulations coming into place.

•Th

e customers are alm

ost exclusive

ly loca

l cities and

tow

ns

in the

US.

Inform

ation to be provided upon reque

st

Potential Issue Tree &

Approach to Solving the

Case

Key

elements of ana

lysis to solve the

case

•How

sizable is the m

arket for scho

ol

busses?

•W

hat is the

growth potential?

•W

hat does the competitive

land

scape look like?

Market

•How

does BYB stack up relative

to

peers?

•How

is the

financial perform

ance?

•How

do BYB’s trend

s look relative

to

peers?

Company

•W

hat is the

likely pricing

? W

ill it meet

our clie

nt’s return hurdles?

•Can the transaction be financed?

•W

hy are w

e the

right buy

er?

Transaction

93

land

scape look like?

peers?

•Is the

company

well-positione

d?

•How

effective is mana

gement?

Possible follo

w-up and

guidance

to in

terviewer

Possible follo

w-up and

guidance

to in

terviewer

Possible follo

w-up and

guidance to

interviewer

•Have

the

cand

idate size the

market

(see nex

t slide).

•After sizing

the

market talk about

growth potential (hopefully

ca

ndidate addresses it directly). Ta

lk

throug

h the rece

nt growth

acceleration and

whe

ther it is likely

to persist.

•As part of co

mpetitive

land

scape

discussion reve

l the M

arket Fina

ncial

Sum

mary and

wait for the

cand

idate’s reactions.

•If nece

ssary direct the

discussion to

reve

al tha

t:•BYB is the

high-price

option

•Competitors have

co

nsiderable procurement

adva

ntage given ow

nership

•Case w

ill not focus he

re, altho

ugh

consider whe

ther the priva

te equity

fund

owns sim

ilar businesses that might

have

ove

rlapping needs (such as other

heavy

equipment / auto m

anu

facturing

companies in the

portfolio

.•Assum

e pricing

can be attained at

reasona

ble leve

ls –

focus on strategic

streng

ths / w

eakn

esses.

Que

stion 1 –

Market Sizing

Ove

rall approach, g

ood sho

rtcuts &

solution

If cand

idate begins dow

n the w

rong

path, redirect to

population proxy. Th

is is m

eant to test basic math skills.

Inform

ation to provide up front

Math Q

uestion

How

large is the m

arket for scho

ol busses in the

US? Follo

w-up: Is the m

arket attractive?

US Population

~320M people

Life Expectancy

~80 years

94

Cand

idate can make

his own assum

ptions or ask for inputs.

•~33% of scho

olchildren take

buses to school

•~50 students ride each bus

•Ancillary busing needs (sporting eve

nts, field trips, etc)

are absorb

ed alm

ost entirely by the

norm

al fleet

Attractive m

arket?

•Market growth is traditiona

lly G

DP/population-drive

n at 3% per ye

ar; last 2 years have

seen 6% growth

•Pull-throug

h demand

ahe

ad of chang

ing

emissions regulation

Provide in

form

ation if asked

Life Expectancy

~80 years

People per Deca

de

~40M people

School A

ge C

ommuters

(~15ye

ars)

~60M children

%Ta

king

Buses

33%

School-Age Children Ta

king

Buses

~20M children

Children per Bus

~50

BusesRe

quired

400K buses

Ave

rageLife of Bus

10 years

Buses Sold

per Ye

ar

40K buses

Exhibit 1 –

Competitive

Land

scape in US Bus M

arket

Big Yellow BusCo

CompetitorA

Competitor B

Market Sha

re A

nalysis

Market Sha

re ($)

38%

34%

28%

95

Market Sha

re (units)

34%

36%

30%

Marg

in A

nalysis

Reve

nue

100%

100%

100%

Gross M

arg

in25%

35%

36%

Operating

Marg

in15%

25%

26%

Que

stion 2 -

Competitive

Land

scape

There are two m

ajor take

aways:

1)

BYB’s sha

re of reve

nue is highe

r than its share of vo

lume

•W

hy? Its price

s are highe

r than peers by 20%

•Does this m

atter? –

YES

•Commodity product and

highly price

-sensitive customer (loca

l cities & tow

ns)

•5 years ago BYB’s m

arket share w

as 60%

Wha

t does the Competitive

Land

scape Data imply?

96

•5 years ago BYB’s m

arket share w

as 60%

•Low-cost competitors are gaining sha

re…

2)

BYB’s cost structure is high relative

to peers

•W

hy? •Gross m

arg

in is the big differentiator

•Cand

idate sho

uld address COGS for bus company

•Materials, labor are largest (no

t just commodity m

etals –

specialty m

achinery

compone

nts)

•BYB has significa

nt m

aterials procurement disadva

ntage

•Competitor A &

B are not stand

-alone

firms –they

are owne

d by large in

dustrial

trucking

firms with some cha

ssis and

eng

ine ove

rlap

Sample Reco

mmend

ation

We do not reco

mmend

proce

eding w

ith the investment of BYB. Even if pricing

of transaction is

attractive BYB is in a difficult competitive

position. BYB is losing

sha

re to two low

er-co

st competitors w

ith

significa

nt built-in co

st adva

ntages given their owne

rship structures. Fu

rthe

r, co

st is the biggest drive

r in

the m

arket as buses beco

me increasing

ly commoditized and

loca

l cities & tow

ns beco

me m

ore price

sensitive in

the

face

of bud

get deficits. Ove

rall, not an attractive investment.

Reco

mmend

ation

Econo

mic decline / immigration patterns co

uld actua

lly accelerate demand

bey

ond

3% growth going

forw

ard

, but eve

n in this ca

se BYB is still at a cost disadva

ntage.

Risks

97

forw

ard

, but eve

n in this ca

se BYB is still at a cost disadva

ntage.

Risks

Make

sure PE fund

does no

t ow

n related portfolio

companies that might allo

w for procurement

syne

rgies with BYB along

the

lines of wha

t is achieve

d by competition. Assum

ing the

re are none

, move

on.

Nex

t Steps

Case: Car Company

A.T. K

earney

, Round 2

Ove

rview for interviewer

Inform

ation to be provided upon reque

st

Frank

is 65 years old, and

for his entire w

orking career, ha

s ow

ned a m

anu

facturing company

which m

anu

factures un

ibodyca

r frames. He has always ha

d one

contract w

ith one

vehicle O

EM, ho

weve

r this year that OEM

has decided not to rene

w its contract.

Wha

t should Frank

do?

Problem statement narrative

98

This is a high-leve

l strategy case. The

interviewer should

guide cand

idate into exploring

Frank

’s various options and

ultimately w

eighing

each option to determ

ine w

hich he

should take

. Various framew

orks co

uld be used to explore

Frank

’s options in the ind

ustry , including, b

ut not lim

ited to a

Value Cha

in Ana

lysis or Five

C’s.

Case Type: Market Strategy

Ove

rview for interviewer

The reason Frank

’s long

time customer ha

s decided to end

their contract w

ith Frank

is beca

use a new

type of welding

techno

logy is being used to m

ake

unibodyframes, and

Frank

’s plant does no

t support this techno

logy.

This new

welding techno

logy w

ill soon be m

and

ated for ca

rs

by gove

rning regulatory body.

Frank

’s company

is priva

tely owne

d, 100% by him

, with an

ann

ual contract reve

nue of $5M.

Frank

has won nu

merous production efficiency and

sup

plie

r qua

lity award

s.

His sup

ply cha

in is alm

ost fully optimized, h

oweve

r he

could

source

some m

aterials elsew

here and

save

$100K / year.

Inform

ation to be provided upon reque

st

Potential Categories of Cand

idate’s Framew

ork

Notable comments / potential discussion points

How

eve

r the cand

idate cho

oses to address Frank

’s options, he

sho

uld reco

gnize

tha

t Frank

’s reve

nue has been elim

inated in

its

entirety so his focus must be resp

ond

ing / repositioning

in ord

er to survive

:

Value Cha

in Ana

lysis (w

here can Frank

gain adva

ntages to low

er his co

st base or better meet customer demand

s?)

•Design / R&D

•Sup

ply Cha

in M

ana

gement

•Production

•Distribution

99

•Distribution

•Customer Mana

gement

Profit Drive

rs•

Revenue (Can Frank

provide his product to other customers, ca

n Frank

adapt his plant to m

anu

facture products for other

customers, Can Frank

lease out his facilities to others?)

•Costs (W

hat will it co

st Frank

to upgrade his facility? W

hat will it cost Frank

to m

anu

facture other products? W

hat will

Frank

have

to invest to gain new

customers?)

5 Cs:

•Customers

(Frank

currently has one

customer, ca

n he

expand

tha

t?)

•Costs(W

here can Frank

cut costs W

hat will it take

for him to upgrade his facility and

adapt the new

techno

logy)

•Competition(W

here is Frank

’s competition positione

d? Are the

re others in his position? Are the

re m

arkets w

here Frank

ca

n ex

plore tha

t are m

ore profitable?)

•Company(W

hat are Frank

’s companies streng

ths? Can that be adapted to ano

ther market/customer?)

•Context( W

hat is causing the

cha

nge in customer beha

vior? Can Frank

do any

thing to sha

pe the

regulatory env

ironm

ent

or get ahe

ad of future cha

nges?)

Potential Issue Tree &

Approach to Solving the

Case

Key

elements of ana

lysis to solve the

case

•Design & R&D

•Sup

ply Cha

in M

ana

gement

•Production

•Distribution

•Customer Mana

gement

Value Cha

in (Profitability)

While cost is co

vered in va

lue cha

in

discussion, the

other “C

’s” ca

n he

lp

determ

ine potential alternative

s:

•Customer

5 C’s

While cost is co

vered in va

lue cha

in

discussion, the

other “C

’s” ca

n he

lp

determ

ine potential alternative

s:

•Customer5 C’s (Continue

d)

100

•Customer Mana

gement

(Basic Math sho

uld be done

to determ

ine Fra

nk

will not be profitable if he

upgra

des since

Frank w

ants to see a return on any

investment

within 2 years)

•Customer

•Company

•Competition

•Contex

t

•Customer

•Company

•Competition

•Contex

t

Possible follo

w-up and

guidance

to in

terviewer

Possible follo

w-up and

guidance

to in

terviewer

Possible follo

w-up and

guidance to

interviewer

For Frank to invest and

upgra

de his facilities he

will have

to in

vest $10M. H

is current (soon to

be expiring contra

ct is $5M and

all-in costs are

$4.5M). If Fra

nk w

ere to reloca

te, his up

gra

de

costs would remain the

same (patented

techno

logy w

ould still ha

ve to be purchased.)

Frank can make

a few cuts in his sup

ply cha

in

and

save

$100K. Fra

nk cannot sa

ve in

distribution and

end

customer co

sts as the O

EM

he serves is right next door. Frank has won

numerous production award

s for being a lean

plant.

Customer: It w

ill be difficult for Frank

to

find

new customers for his current techno

logy

since tha

t techno

logy is being replace

d per

regulations. If he w

ere to upgra

de his plant,

potential new O

EM customers have

signe

d

long

-term

contra

cts with Frank

’s competition.

Company: The

streng

ths of Frank

’s company

lie

s in the

R&D and

design of the unibody

frame techno

logy. Frank

’s company

does no

t sell any

thing else, n

or does it have

high

bra

nd reco

gnition other expertise.

Competition: Fra

nk’s competitors have

signe

d contra

cts with other OEM

s and

some

have

diversified portfolio

s. All ha

ve adapted

the new techno

logy.

Context: Frank is 65 years old and

would

like to spend

more tim

e w

ith his gra

ndkids.

He could consider lobbying the

regulatory

body for a freeze

on the cha

nges, but this

would require a long

er-term

, dedicated

effort.

Sample Reco

mmend

ation

Based on ana

lyzing

Fra

nk’s value cha

in/profit drive

rs, the

streng

ths/weaknesses of his co

mpany

, the

market, Fra

nk

should exit the

current m

arket as he

is currently the

sole proprietor and

quickly aging. Th

e costs of im

plementing the

ne

w regulatory techno

logy are high, and

it does no

t appear that Frank

would be able to reco

up the

m in

his required

2-year turnaroun

d. Th

erefore Fra

nk sho

uld begin to deve

lop an exit strategy, w

hich m

ay in

clud

e a sale to a strategic

buy

er that ca

n make

use of his existing

assets and

/or ha

s more patience to m

ake

long

er-term

inve

stments.

Reco

mmend

ation

If Fra

nk w

ere to close his company

, he w

ould need to consider closure costs, in

clud

ing any

long

-term

sup

plie

r co

ntra

cts,

outstand

ing debt, w

arranties, union fees, potential ill will in

the

commun

ity.

Risks

Frank sho

uld further explore if any

of his current equipment, techno

logies ca

n be adapted to m

ake

new products and

the

costs/reve

nues, altho

ugh initial signs (his co

mpany

’s streng

ths are not in new techno

logy) indicate this may be difficult.

Nex

t Steps

101

costs/reve

nues, altho

ugh initial signs (his co

mpany

’s streng

ths are not in new techno

logy) indicate this may be difficult.

Frank sho

uld explore salvaging current assets and

/or selling

the

business outright.

Nex

t Steps

BONUS

Who

may be potential buy

ers for Frank’s business?

•Strategic buy

ers / competitors: F

rank’s und

erlying

techno

logy m

ay still be attra

ctive in some w

ays.

•Fina

ncial buy

ers: p

robably not given difficult growth

story, b

ut perhaps as part of an industrial roll-up

stra

tegy of simila

r businesses.

Case: Blood Bank

Bain, R

ound 2

Our clie

nt is a blood bank

tha

t ha

s operations spann

ing four states. Th

ey operate m

any

sites from w

hich the

ir staff go out to

different loca

tions (e.g., scho

ols and

offices) in ord

er to colle

ct blood samples. Nex

t, the

blood is transported to centraliz

ed

proce

ssing centers for testing, treatm

ent, etc. (the

re is one

proce

ssing center per state). Fina

lly, the

blood is transported from the

testing centers to the

hosp

itals tha

t ultimately use the

blood. The

blood bank

face

s co

mpetition from other blood colle

ction

organiza

tions. Only 80% of ho

spital demand

for blood is currently being m

et. As a result, ho

spitals often ha

ve to sha

re blood by

transporting it betw

een different hosp

itals, which is costly. The

re are no sub

stitutes for hu

man blood (synthe

tic substances or animal

blood).

Problem statement narrative

102

This is a basic profitability case but has a twist in tha

t the

cand

idate is asked to prioritize

among

the

different possible

mechanism

s by w

hich to improve

profitability. This means

that they

will have

to use the

ir business jud

gment to assess

the feasibility of different options.

Case Type: Profitability

Ove

rview for interviewer

See follo

wing slid

es for furthe

r detail.

Inform

ation to be provided upon reque

st

Their profitability has been slow

ly declining for some tim

e and

the

y are w

orried beca

use new

regulations are coming out tha

t will

require the

m to invest in an ex

pensive new

techno

logy. Th

e CEO

wants to investigate potential areas to look at in ord

er to improve

profitability and

wants to kno

w how

to prioritize

among

the

m.

Sample Issue

Tree &

Qua

litative

Ana

lysis

Cand

idate m

ay propose ana

lysis / action in:

•Reve

nues –opportunities to grow our top line?

•Price

–is the

re any

flexibility in

term

s of the price

we’re

currently cha

rging hosp

itals?

•Qua

ntity –

We kno

w tha

t there is unmet demand

so how can

we in

crease the

volume of units of blood w

e sell to hosp

itals?

•Costs –opportunities to cut costs?

Internal O

pera

tions

•Customers (ho

spitals) –wha

t’s their elasticity of demand

? W

hat

criteria do the

y use w

hen purchasing

blood?

•Sup

plie

rs (dono

rs) –How can we increase the

volume of dona

tions?

Increase #

of dono

rs or freque

ncy of dona

tions?

•Competitors –

are our competitors profitable? Are the

y doing

something w

e’re not?External M

arket Fo

rces

103

•Costs –opportunities to cut costs?

•Variable costs –opportunities to improve

procurement/labor?

•Fixed Costs –opportunities to cut ove

rhead/gain efficiency?

something w

e’re not?

Possible follo

w-up and

guidance to interviewer

Possible follo

w-up and

guidance to interviewer

Price

–Given wha

t we kno

w about the

market, w

hat is your hypothesis

in term

s of our ability to raise our price

s? Cand

idate sho

uld realize

that unmet demand

gives client pricing

power.

Qua

ntity –

Cand

idate sho

uld quickly reco

gnize

tha

t there is unmet

demand

the

y can easily fill if the

y increase the

size of their dona

tions.

Costs –Cand

idate sho

uld probe in

this area and

give ideas for cutting

costs, but interviewer should tell ca

ndidate tha

t the clie

nt has already

been doing the

se and

has cut co

sts as much as possible.

Customers –

A typical opera

tion co

sts the hosp

ital $

40K and

requires

an ave

rage of 2.5 units of blood. Blood costs $100/unit.

Cand

idate sho

uld realize blood is relative

ly lo

w cost for ho

spitals.

Interviewer ca

n share tha

t blood is seen as a commodity by hosp

itals.

Sup

plie

rs –

Cand

idate sho

uld explore possibilities for increasing

blood sup

plie

s to m

eet unmet demand

. A

good cand

idate w

ill come

up w

ith multiple w

ays to increase sup

ply. In actua

lity, most have

been tried in

real life and

have

not worked. Sup

ply is essentially

fixed.

Competitors –

No additiona

l info is kno

wn.

Que

stion 1 –

Math

How

can we tell if w

e are breaking

eve

n?Fo

llow-up after answer: If we’re losing

mone

y, w

hat price

do w

e need in ord

er to break eve

n?Fo

llow-up after answer: Do you think this price

is achieva

ble?

Math Q

uestion

Ove

rall approach, g

ood sho

rtcuts &

solution

NoneIn

form

ation to provide up front

104

Fixe

d Costs = $15M

Contribution Marg

in =

$100 (Price

) -$80 (va

riable costs) =

$20

Break Even Volume =

$15M/$20 =

750K units

The blood bank

is no

t reaching the

ir break eve

n point (400,000 units).

To solve the

seco

nd que

stion, hold volume and

fixed costs co

nstant and

solve for

contribution marg

in:

$15M/400K units =

$37.50 The

y need to raise price

s by $17.50 per un

it. This is

an increase of ne

arly 100%.

To solve third

que

stion, eva

luate the

price

impact on the hosp

itals:

An operation co

sts $40K, blood costs are currently 2.5 x $100 =

$250. Blood costs

are approxim

ately 0.625% of total co

sts ($250/$40K). Th

ere sho

uld be ample

room to increase the

se costs.

-Ove

rall fixe

d costs are $15M a year

-Variable costs are $80 per un

it-Sales price

is $100

-Current volume is 400K units

-Typical operation co

sts ho

spital $40K

(also provided earlier)

-Typical operation requires ave

rage of 2.5

units of blood (also provided earlier)

Provide in

form

ation if asked

Sample Reco

mmend

ation

First and

foremost, raise price

s to improve

marg

ins. Th

ere is unm

et demand

and

blood represents a

small portion of co

sts.

Seco

nd, continue

to look for ways to increase qua

ntity in ord

er fill un

met demand

.Fina

lly, continue

in efforts to keep costs minim

al.

Reco

mmend

ation

Risks are low

, since blood is essential, ha

s no

sub

stitutes and

the

re is un

met demand

.Risks

Immediately im

plement price

increases

Inve

st new

profits in ord

er to try to increase dona

tion leve

lsNex

t Steps

105

Inve

st new

profits in ord

er to try to increase dona

tion leve

lsNex

t Steps

Case: Ea

syNav

McK

insey, M

ock Interview

EasyNAVis a m

ulti-nationa

l third-p

arty fun

d accoun

ting

company

based in New

York. A

sset mana

gers, such as Fidelity or other

smalle

r inve

stment sho

ps, often outsource

the

calculation of their daily

fun

d price

s to third

-parties such as Ea

syNAV. The

se fun

d

price

s, calle

d N

et Asset Values, or “N

AVs,” represent the

per-share price

of the fun

d, which the

n beco

mes pub

lishe

d to the

gene

ral

pub

lic, e

.g., in the

Wall Street Journa

l. G

iven the high fina

ncial stake

s, asset mana

gers require EasyNAV

to be both highly accurate

and

tim

ely in their N

AV calculations. Th

is is still a highly m

anu

al p

roce

ss due

to the

num

ber of data source

s required to colle

ct this

inform

ation and

inconsistency in data form

ats delivered to EasyNAV. Altho

ugh business growth has been strong

ove

r the last five

years, Ea

syNAV

has seen its co

sts rising

more quickly tha

n its reve

nues. At the current trajectory, co

sts will exceed reve

nues within

the nex

t deca

de, and

something m

ust be done

. W

hat are

the

caus

es o

f Ea

syNAV’s

rising

costs, a

nd w

hat ca

n be

done

to red

uce

them

?

Problem statement narrative

106

The in

itial p

roblem statement specifica

lly asks the cand

idate

to explore EasyNav’srising

costs. Th

erefore, the cand

idate

should ig

nore typical Profitability framew

orks that ex

plore

Reve

nues in addition to Costs.

After the cand

idate deve

lops a framew

ork the

interviewer

should m

ove

on to the

sub

seque

nt que

stions.

Case Type: Profitability / O

perations

Case Style: Command

& Control

Ove

rview for interviewer

Steps Ea

syNavuses to calculate N

AVs:

1.

Verify the

num

ber of shares of each security tha

t is held

within the fun

d2.

Verify the

num

ber of outstand

ing sha

res of the fun

d itself

3.

Rece

ive and

confirm the

market-close price

s of each

security in the fun

d (must wait) for the equity m

arkets to

close; 4pm EST)

4.

Use all ava

ilable data to calculate N

AV and

send

to

requisite pub

lishe

rs –

Wall Street Journa

l, Fina

ncial

Times, etc. (m

ust submit by 6pm EST)

Inform

ation to be provided upon reque

st

the nex

t deca

de, and

something m

ust be done

. W

hat are

the

caus

es o

f Ea

syNAV’s

rising

costs, a

nd w

hat ca

n be

done

to red

uce

them

?

Potential Issue Tree &

Approach to Solving the

Case

Key

elements of ana

lysis to solve the

case

How

does Ea

syNAV

operate?

•Workflow

proce

ss•Balance of labor

Company

Who

are the

y?

•Influx

of sm

all asset mana

gers

•Shift in customer mix

Customer

Wha

t are the

ind

ustry trend

s & norm

s?

•Shift to w

ider rang

e (and

complex)

inve

stment products

•Techno

logy adoption rates

Industry

107

Possible follo

w-up and

guidance

to in

terviewer

Possible follo

w-up and

guidance

to in

terviewer

Possible follo

w-up and

guidance to

interviewer

•Bottlene

ck of waiting for market-close

price

s will cause EasyNAV

to have

to

staff to this peak period of ca

pacity

demand

, leaving

periods of time

earlier in the

day tha

t are left w

ith

slack capacity.

•Dedicated fun

d accoun

tants who

proce

ss each accoun

t from start to finish

are m

ore costly tha

n functiona

lizing

roles along

the

value cha

in.

•Smalle

r asset mana

gers have

sim

pler

systems leading to ad hoc/

manu

al

methods of delivering

data to.

EasyNAV, w

hich in

creases labor & cost

•Greater business from new

customers

vsex

isting

customers requires greater

expense in

initial accoun

t setup.

•Shift from typical mutua

l fund

s to

deriva

tive

s add to complexity and

are

more difficult to price.

•Fe

w third

-party fun

d accoun

ting

co

mpanies relying on techno

logy to

calculate N

AVs resulting in high labor

costs.

Que

stion 1 –

Cost Reduction

Que

stion

EasyNAVha

s 125 fun

d accoun

tants today (the FTE

s who

calculate N

AVs) w

ho typically

are assigne

d 3-6

fun

ds each, which the

y w

ork

with from m

orning until end

of business. The

se fun

d accoun

tants tend

to be very busy during the

end

of the day in ord

er to m

eet

submission deadlin

es. Separately, Ea

syNAV

also has a staff of 25 fun

d administrators w

ho deal mainly w

ith the pub

lishing

of

qua

rterly and

ann

ual prosp

ectuses (i.e. a report of fund

perform

ance). In addition to its operations in up

state N

ew York, Ea

syNAV

has fund

accoun

ting

operations in Melbourne

, Australia

, which hand

les some internationa

lly domicile

d fun

ds. W

hat are some possible

ways for Ea

syNAV

to improve

the

ir w

orkflow

and

reduce costs?

108

None

Inform

ation to provide up front

None

Provide in

form

ation if asked

Possible solutions:

--Functiona

lize p

iece

s of the value cha

in to properly alig

n resource

s with

work lo

ad. For example, instead of one

fund accountant follo

wing a fund

from beginning

to end

, break up

the

steps to calculating

a N

AV.

--Rebalance funds across different fund accountants to ensure tha

t the m

ost

complex funds are hand

led by the

best fund accountants (load balancing).

--Utilize the

fund administrators group

to help proce

ss funds during the

peak end

-of-day period. Since

the

ir w

ork output is on a qua

rterly basis,

they m

ay have

capacity to assist the fund accountants during crunch time.

--Utilize all loca

tions (U.S., Lo

ndon, Ind

ia) to better load balance w

ork

throug

h time zone

arb

itra

ge. For example, end

-of-day activities for

Lond

on would take

place

during quieter morning/no

on times for the U

.S., so

exce

ss capacity in the U

.S. co

uld be used to help Lond

on during peak times.

--Utilize potential low-cost regions of the globe for additiona

l offshoring

.--

Increase use of techno

logy to reduce m

anual proce

sses

Ove

rall approach, g

ood sho

rtcuts &

solution

Que

stion 2 –

Productivity Loss

Math Q

uestion

Due

to m

arket chang

es, the

team belie

ves that productivity per FT

E ha

s dropped ove

r the past five years. Beca

use m

ore complex

fund

s take

more m

anp

ower to proce

ss, Ea

syNAVno

rmaliz

es the difficulty of each fun

d by assigning

fun

ds a “co

mplexity point score,”

which allo

ws a fair fun

d-to-fun

d comparison (e.g., a fun

d w

ith co

mplexity sco

re 15 take

s three tim

es as long

to proce

ss as a fun

d w

ith

complexity sco

re 5). Th

e team needs to determ

ine the

leve

l of seve

rity of this productivity drop. To do this, data in Ex

hibit 1 has

been co

llected. Using

this data and

any

other data you might deem nece

ssary, wha

t is the

percentage drop in productivity ove

r the

past five years, whe

re “productivity” ca

n be expressed as co

mplexity points per FT

E?

109

Exhibit 1 sho

uld be provided after problem statement is read.

Inform

ation to provide up front

-La

rge funds ha

ve an ave

rage of 10 complexity points each

-Small fund

s ha

ve an ave

rage of 20 complexity points each

-Num

ber of larg

e funds ha

s grown 25% ove

r the last five years

-Num

ber of sm

all fund

s ha

s grown 120% ove

r the last five years

-Num

ber of fund

accountant FTEs ha

s grown 150% the

past five year

Provide in

form

ation if asked

Solution: 20% drop in productivity

Ove

rall approach, g

ood sho

rtcuts &

solution

Que

stion 3 –

Resource

Allo

cation

Math Q

uestion

After meeting

with Ea

syNAV

mana

gement, the team is asked to explore potential sa

ving

s by utilizing fund accountant downtim

e in one

geogra

phy

to assist

ano

ther geogra

phy

during the

ir peak time betw

een 4-6

pm. Specifica

lly, they w

ould like us to examine how the

Melbourne

loca

tion co

uld assist the N

ew York

loca

tion. Additiona

l inform

ation unco

vered:

--Melbourne

is 16 hours ahe

ad of New York

--Due

to natura

l va

riances in w

orkload per day, a lo

cation’s ave

rage

--FTEs are paid an equiva

lent of USD $50,000 per year

utiliza

tion ca

nnot exce

ed 80% of the total ava

ilable FTEs. That is,an

--New York has 100 FTEs staffed throug

hout the

day, Melbourne

has 60 FTEs

ave

rage safety cushion of 20% FTEs is required all times of the day to

--Utilization of FTEs varies throug

hout the

day based on the amount

allo

w for ve

ry busy days. Both loca

tion’s full-staffing leve

ls reflect

of work required at that time of day. A

vgutiliza

tion in Exhibit 2.

the nece

ssary staffing to m

eet this requirement (e.g. 100 employees in

110

Exhibit 2 sho

uld be provided after problem statement is read.

Inform

ation to provide up front

Utilization is a m

easure of ho

w m

uch of a lo

cation’s total ava

ilable

FTE resource

s are being used (demand

ed) at any

given time, e.g., if a

loca

tion ha

s 5 FTEs on ha

nd, and

the

utilization is 60% at no

on, the

n the demand

for work is 3 FTEs at that time.

Provide in

form

ation if asked

of work required at that time of day. A

vgutiliza

tion in Exhibit 2.

the nece

ssary staffing to m

eet this requirement (e.g. 100 employees in

New York to m

eet the ave

rage need of 80 employees in peak ho

urs).

If all ava

ilable slack capacity in Australia

could be diverted to help w

ork on New York-p

roce

ssed funds during the

ir peak activity period of 4-6

pm, ho

w m

uch

could be save

d in labor expense by reducing the

New York staffing requirement?

See follo

wing slid

e.

Ove

rall approach, g

ood sho

rtcuts &

solution

Que

stion 3 –

Solution

Math Solution

Solution: EasyNAVwill save $750,000/yr, or about 15% of total New York FTE spend

-Time zone

conversion: 4-6

pm peak period in

NY is 8-1

0am in Melbourne

-Ava

ilable resource

s in M

elbourne

: -From the

exhibit, a

vera

ge utilization in M

elbourne

from 8-1

0am is 60%, the

refore the

re is 20% capacity before reaching the

80%

threshold (ave

rage utilization ca

nnot exce

ed 80% during any

period of the day)

-The

refore, 2

0%*6

0 FTE =

12 FTEs ava

ilable to assist NY

-New resource

requirement in

NY by utilizing M

elbourne

: -D

uring the

peak time of 4-6

pm, N

Y has an ave

rage of 80% FTE utilization, m

eaning

tha

t 80%*1

00 FTEs = 80 FTEs ne

eded/working

111

-During the

peak time of 4-6

pm, N

Y has an ave

rage of 80% FTE utilization, m

eaning

tha

t 80%*1

00 FTEs = 80 FTEs ne

eded/working

during this time

-By utilizing M

elbourne

, EasyNAVca

n reduce the

80 FTE demand

by 12: 80-1

2 =

68 FTEs required in

New York

-Saving

s due

to reduction of FTE requirements in N

Y:

-EasyNAVca

n reduce staff in

NY so tha

t the 68 FTEs required during the

peak time represent 80% staffing requirements

-The

refore, 6

8 FTEs/80% =

85 FTEs

-FTE saving

s of 100-8

5 =

15 FTEs

-Dolla

r sa

ving

s of 15 FTEs*$50,000 =

$750,0000

EasyNAVEx

hibit 1

112

EasyNAVEx

hibit 2

113

Sample Reco

mmend

ation

EasyNav’sprimary cost drive

r is the

mismatch betw

een FT

E resource

s and

demand

. The

clie

nt can

reduce the

se costs by utiliz

ing slack capacities betw

een New

York and

Melbourne

. Such an

arrang

ement w

ill allo

w EasyNAV

to reduce its labor by 6 FTE

, a saving

s of $300,000/ye

ar.

Reco

mmend

ation

Trade-offs to m

axim

um efficiency (e.g. potential loss of qua

lity or less-skille

d labor in offshore

agreements, loss of ow

nership, e

tc)

Risks

EasyNAVmay bene

fit from greater automation of manu

al p

roce

sses and

, in addition, can work w

ith its

clients to m

and

ate stand

ard

ized data sub

missions to streamlin

e N

AV calculations.

Nex

t Steps

114

clients to m

and

ate stand

ard

ized data sub

missions to streamlin

e N

AV calculations.

Nex

t Steps

Case: Manny’s M

anu

facturing

Insp

ired by A.T. Kearney

, Round 2

The cand

idate sho

uld first determ

ine the

profitability of the

Ove

rview for interviewer

Products are sold only in the U

nited States

Inform

ation to be provided upon reque

st

Manny’s M

anu

facturing is a U.S. based company

tha

t produces a consum

er packaged good. It currently has manu

facturing facilities

in the

U.S. and

an idle plant in South America

. The

exe

cutive

team at Manny’s M

anu

facturing is trying to determ

ine the

health of its

business and

whe

ther to use the

South America

n plant.

Problem statement narrative

115

The cand

idate sho

uld first determ

ine the

profitability of the

North America

n plant by looking

at reve

nue and

costs.

He/she w

ill m

ost likely do a m

arket size

ana

lysis to assist

with this. H

e/she w

ill the

n eva

luate potential profitability of

the South America

n plant and

finally

explore some of the

qua

litative

issues that co

me w

ith operating

internationa

lly

(additiona

l taxe

s, env

ironm

ental concerns, proxim

ity of

distributors, product qua

lity, lack of techno

logical

adva

ncement etc). Th

e cand

idate m

ay decide to use the

S.A.

plant, sell the S.A. plant, or maintain status quo

. D

epend

ing

on the cand

idate’s assum

ptions, different answers m

ay apply.

Be sure tha

t the logic is soun

d.

Case Type: Profitability, Market Size, Strategic A

nalysis

Products are sold only in the U

nited States

North America

profitability ana

lysis:

1.

Market Size ana

lysis

1.

U.S. P

opulation: 300M

2.

% of population demand

ing the

product: 10%

3.

# of products demand

ed per person: 20

4.

Price

of product: $ 0.50

5.

Manny’s M

arket Sha

re: 5%

6.

Market is m

ature and

not expected to grow

significa

ntly. C

ompetitive

market, but difficult to steal

market share

2.

Costs with N.A. plant (see Q

uestion 2)

3.

Costs with the S.A. p

lant (see Q

uestion 2)

4.

Capacity: N

.A. p

lant can make

50M goods; S.A. can make

20M goods

5.

The same product with the same qua

lity can be produced in

S.A. o

r N.A.

Que

stion 1 –

Market Sizing/ Reve

nue Ana

lysis

Wha

t is M

anny’s Reve

nue?

Un

ite

d S

tate

s

Un

ite

d S

tate

s P

op

ula

tio

n (

giv

en

)3

00

,00

0,0

00

Pe

rce

nta

ge

of

the

po

pu

lati

on

de

ma

nd

ing

th

e p

rod

uct

(g

ive

n)

10

%

To

tal P

eo

ple

de

ma

nd

ing

th

e p

rod

uct

(3

00

M *

10

%)

30

,00

0,0

00

-No inform

ation is to be given up

front. Sim

ply ask

how the

cand

idate w

ould do m

arket share ana

lysis

Inform

ation to provide up front

116

To

tal P

eo

ple

de

ma

nd

ing

th

e p

rod

uct

(3

00

M *

10

%)

30

,00

0,0

00

# o

f p

rod

uct

s d

em

an

de

d b

y p

ers

on

on

ave

rag

e (

giv

en

)2

0

To

tal M

ark

et

Size

(#

of

pro

du

cts)

(2

0*

30

M)

60

0,0

00

,00

0

Pri

ce p

er

pro

du

ct (

giv

en

)$

0.5

0

To

tal M

ark

et

Size

($

) ($

0.5

0*

60

0M

)$

3

00

,00

0,0

00

Ma

nn

y's

Ma

rke

t Sh

are

(g

ive

n)

5%

Ma

nn

y's

Pro

du

cts

De

ma

nd

(5

% *

60

0M

un

its)

30

,00

0,0

00

Ma

nn

y's

To

tal P

ote

nti

al R

eve

nu

e (

$0

.50

* 3

0M

)$

1

5,0

00

,00

0

-Market Po

pulation = U.S.: 300M

-% of population demand

ing the

product: 10%

-# of products demand

ed / person: 20

-Price

: $0.50

-Manny’s M

arket Sha

re: 5%

Provide in

form

ation if asked

Que

stion 2 –

Cost Structure

Wha

t are M

anny’s costs to opera

te each plant?

Co

sts

for

N.A

. P

lan

t

Fixe

d C

ost

s$

5,0

00

,00

0

Va

ria

ble

Co

sts

Ra

w M

ate

ria

ls (

$0

.10

pe

r p

rod

uct

)$

3,0

00

,00

0

Tra

nsp

ort

ati

on

($

0.0

5 p

er

pro

du

ct)

$

1

,50

0,0

00

Oth

er

VC

$

4

,00

0,0

00

-No in

form

ation is given up

front. Th

e cand

idate sho

uld

ask for each of the num

bers.

-If the

cand

idate asks for “V

ariable C

osts,” ask

him/he

r to give examples of V.C.

-Ask the

m to explore w

hat co

uld be in the O

ther V.C.

bucke

t (labor, va

riable ove

rhead, etc)

Inform

ation to provide up front

117

Oth

er

VC

$

4

,00

0,0

00

To

tal C

ost

s$

13

,50

0,0

00

Co

sts

for

S.A

. P

lan

t -

ass

um

ing

op

era

tin

ga

t 1

00

% (

20

M g

oo

ds

wh

ich

is

no

t e

no

ug

h t

o

sati

sfy

10

0%

of

de

ma

nd

)

Fixe

d C

ost

s$

4,5

00

,00

0

Va

ria

ble

Co

sts

Ra

w M

ate

ria

ls (

$.0

5 p

er

pro

du

ct)

$

1

,00

0,0

00

Tra

nsp

ort

ati

on

($

0.2

0 p

er

pro

du

ct)

$

4

,00

0,0

00

Oth

er

VC

$

4

,50

0,0

00

To

tal C

ost

s$

14

,00

0,0

00

-Fixe

d Costs for N.A. are $5M

-Ra

w M

aterial Costs for N.A. are $0.10 per product

-Transportation Costs for N.A. are $0.05 per product

-Other V.C. in N

.A. are $4M

-Fixe

d Costs for S.A. are $4M

-Ra

w M

aterial Costs for S.A. are $0.05 per product

-Transportation Costs for S.A. are $0.20 per product

-Other V.C. for S.A. are $4M

-Manny’s capacity in N.A. is 50M

-Manny’s capacity in S.A. is 20M

Provide in

form

ation if asked

Issue Tree: Qua

litative

Factors

In addition to the

previous qua

ntitative

slid

es, cand

idate can ex

plore various bucke

ts

-Is there a larger env

ironm

ental impact

associated w

ith transportation from

S.A.?

-Do the

same env

ironm

ental

regulations apply to the

S.A. plant as

Environm

ental C

oncerns

-Are the

re stricter/looser laws in S.A. or

N.A.?

Legal C

oncerns

-Is it possible to expand

to other markets?

-W

hat are the

tax implications of

internationa

l expansion?

Internationa

l Expansion

118

regulations apply to the

S.A. plant as

the N

.A. plant?

Possible follo

w-up and

guidance

to in

terviewer

Possible follo

w-up and

guidance

to in

terviewer

Possible follo

w-up and

guidance to

interviewer

-Carb

on footprint is something the

co

mpany

has been extremely concerned

with and

would like to keep emissions as

low as possible. Shipping from S.A. w

ould

dra

stically

increase the

carb

on footprint

-Environm

ental regulations are not as strict

in S.A., particularly w

ith waste disposa

l and

factory cleanliness. T

his co

uld tarnish

the company

’s image

-W

hile laws are stricter in the

U.S.,

Manny’s is not willing to use any

of the

loopho

les in S.A. to gain a competitive

adva

ntage for fear of damaging its

image.

-Have

the

cand

idate explore the

option by

asking follo

w up que

stions

-How m

uch ca

pacity is ava

ilable?

-Which m

arkets sho

uld M

anny

expand

to and

why

?-W

here w

ould M

anny produce the

goods to expand

?-There w

ill be import/export taxes, but for

ease, a

ssum

e the

y fall within other V.C.

Sample Reco

mmend

ation

Manny’s M

anu

facturing sho

uld continue

to produce in the United States and

sell the South America

n plant if an attractive opportun

ity arises. Th

e reason to continue

producing in the U.S. and

not in S.A. are

1) Manny’s w

ould actua

lly lose m

one

y on sa

les to the

U.S. from S.A. ($10M reve

nue -$14M cost at full

capacity utiliz

ation in S.A.); 2) It is cheaper to produce in the U.S. mainly due

to transportation co

sts; 3)

The env

ironm

ental impact of producing in the U.S. is significa

ntly low

er; and

4) S.A. does no

t ha

ve the

ca

pacity alone

to m

eet demand

in the U.S. and

the

refore the

N.A. and

S.A. plants would both need to

be run

ning

meaning

Manny w

ould incur the

fixed costs at both loca

tions.

Reco

mmend

ation

-Manny’s m

ay not find

a buy

er for the plant or may m

iss opportun

ities to expand

in S.A.

-Manny’s m

any

eve

ntua

lly reach capacity in the U.S.

Risks

119

-Manny’s m

any

eve

ntua

lly reach capacity in the U.S.

-Try to increase demand

in N.A. to get the N

.A. plant fully utiliz

ed

-Ex

plore internationa

l ex

pansion

-Find

potential buy

er for S.A. plant

Nex

t Steps

Wha

t would it take

to m

ake

the

S.A. plant m

ore

appealin

g?

-Increased capacity

-Lower transportation co

sts

-Increased demand

(the N

.A. factory is no

t runn

ing at

100% utiliz

ation currently)

BONUS

Case: Zenith Hotel

Bain, R

ound 1

Ove

rview for interviewer

Inform

ation to be provided upon reque

st

Zenith Hotel is a global ho

tel chain w

ith 50 hotels in 20 coun

tries. Th

e company

is eva

luating

the

construction of a new

hotel in the

Baha

mas. Zenith has co

me to us asking w

hether it sho

uld and

can move

forw

ard

with the project.

Problem statement narrative

120

This case is ex

tremely straightforw

ard

and

open end

ed. The

interviewer read the

problem statement and

waited for the

cand

idate to drive

the

rest of the case. N

o exhibits were

introduced.

This w

as primarily a case about feasibility, so the

discussion

should focus on an internal / external ana

lysis of the

company

’s plans w

ith tw

o m

ath problems to solve.

Case Type: Market En

try

Ove

rview for interviewer

The hotel w

ill have

400 rooms

Inform

ation to be provided upon reque

st

Potential Issue Tree &

Approach to Solving the

Case

Key

elements of ana

lysis to solve the

case

•Capabilities

•Start-up costs

•Ex

pected profits, drive

n by reve

nues

(volume * price

) and

costs (broke

n dow

n by fixed and

variable)

Internal

•Competition

•Consum

er demand

•Re

gulatory/other issues

External

See m

athematica

l detail on follo

wing

pages

Feasibility

121

dow

n by fixed and

variable)

Possible follo

w-up and

guidance

to in

terviewer

Possible follo

w-up and

guidance

to in

terviewer

Possible follo

w-up and

guidance to

interviewer

•Ask the

cand

idate to w

alk throug

h the

costs that the hotel would occur on an

on-going basis

•Make

sure tha

t insurance and

marketing

costs are included

•Re

gulatory/co

untry-specific issues

are not a concern

See m

athematica

l detail on follo

wing

pages

Que

stion 1 –

Breake

ven

•Costs ove

r 5 years =

$500M +

10*2

0M =

$700M

Ove

rall approach, g

ood sho

rtcuts &

solution

•Start-up costs are $500M

Inform

ation to provide up front

Math Q

uestion

How

much would Zenith need to cha

rge on ave

rage per room to break eve

n?

122

•400 rooms * 350 days/ye

ar * 10 years =

1.4M room days

•$700M/1.4M =

$500 per night

•Th

e hotel w

ould cost $20M a year to operate

•Assum

e tha

t we are eva

luating

a ten ye

ar ho

rizo

n

•Assum

e 350 days in a year at co

nstant rates

Provide in

form

ation if asked

Que

stion 2 –

Market Sha

re

•400 rooms * 75% occup

ancy =

300 rooms

Ove

rall approach, g

ood sho

rtcuts &

solution

•Ave

rage occup

ancy is 75%

Inform

ation to provide up front

Math Q

uestion

Wha

t is Zenith’s implie

d m

arket share?

123

•300 rooms * 3 people =

900 people at any

given time

•900 people per week * 4 w

eeks/month = 3,600

people/month

•3,600 people per month/

50,000 people per month = 7.2%

market share

•Baha

mas rece

ives 50,000 visitors per month

•Assum

e 3 people per room

•Assum

e 7 day ave

rage stay

‘

Provide in

form

ation if asked

Sample Reco

mmend

ation

Zenith sho

uld proce

ed w

ith the construction of the hotel. A

s a global ho

tel chain, gaining a 7% m

arket

share in the Baha

mas seems like a reasona

ble goal.

Reco

mmend

ation

It seems ove

rly aggressive to assum

e tha

t ho

tel rooms will be occup

ied 350 days a year for the

breake

ven ca

lculation.

Risks

Examine consum

ers’ willingne

ss to pay $500/night for a Zenith hotel room in the Baha

mas.

Nex

t Steps

124

Nex

t Steps

Contents

�Introduction

�Consulting Industry Guide

�Industry O

verview

�Firm

Ove

rviews (10 Firms)

Section

3 6

Page #

125

�Firm

Ove

rviews (10 Firms)

�Interview Preparation

�Interview O

verview –

Fit + Case

�Sample Framew

orks

�Industry Sna

pshots

�Practice Cases

�14 Practice C

ases

�Links to Other Cases

�Cases from Firm W

ebsites

�Sug

gested C

ases from other Casebooks

18

50

126

Reco

mmend

ed cases from company

web

sites (1/3)

Firm Name

Case Name

Case Type

Link to Case

McK

insey

Great Burger

Acq

uisition

http://www.m

ckinsey.co

m/ca

reers/ho

w_do

_i_apply/ho

w_to_do_well_

in_the_intervie

w/ca

se_interview.asp

x

McK

insey

Magna

Health

Profitability

http://www.m

ckinsey.co

m/ca

reers/ho

w_do

_i_apply/ho

w_to_do_well_

in_the_intervie

126

_i_apply/ho

w_to_do_well_

in_the_intervie

w/ca

se_interview.asp

x

BCG

GenC

oRe

venue

improve

ment

http://bcg

.com/ca

reers/interview_prep/d

efa

ult.html

BCG

Sug

ar Cereal

Distribution

http://bcg

.com/ca

reers/interview_prep/d

efa

ult.html

BCG

Jet Fighter

Profitability

http://bcg

.com/ca

reers/interview_prep/d

efa

ult.html

BCG

Disco

unt Re

taile

rCompetitive

strategy

http://bcg

.com/ca

reers/interview_prep/d

efa

ult.html

Reco

mmend

ed cases from company

web

sites (2/3)

Firm Name

Case Name

Case Type

Link to Case

Bain

Persona

l Care

PE Firm

Acq

uisition

http://www.jo

inbain.com/apply-to-

bain/interview-

prepara

tion/

defa

ult.asp

Bain

Office Vend

ing

Profitability

http://www.jo

inbain.com/apply-to-

bain/interview-

127

bain/interview-

prepara

tion/

defa

ult.asp

Oliver W

yman

Wum

ble

World

Theme Park

Profitability

http://www.oliverw

yman.co

m/ow

/479

7.htm

Oliver W

yman

Aqua

lineBoats

Reve

nue

improve

ment

http://www.oliverw

yman.co

m/ow

/479

7.htm

L.E.K

Case 1

Market Sizing

http://www.le

k.co

m/Careers/mba_ca

se_interview.cfm

Reco

mmend

ed cases from company

web

sites (3/3)

Firm Name

Case Name

Case Type

Link to Case

AT Kearney

Case 1

Growth

Strategy

http://www.atkearney

.com/shared_res

/pdf/interview_ca

sebook_

S.pdf

AT Kearney

Case 2

Growth

Strategy

http://www.atkearney

.com/shared_res

/pdf/interview_ca

sebook_

S.pdf

AT Kearney

Case 3

Distribution

http://www.atkearney

.com/shared_res

128

AT Kearney

Case 3

Distribution

http://www.atkearney

.com/shared_res

/pdf/interview_ca

sebook_

S.pdf

AT Kearney

Case

4Competitive

threat/resp

http://www.atkearney

.com/shared_res

/pdf/interview_ca

sebook_

S.pdf

AT Kearney

Case 5

Outsourcing

http://www.atkearney

.com/shared_res

/pdf/interview_ca

sebook_

S.pdf

AT Kearney

Case 6

Sha

red svcs

http://www.atkearney

.com/shared_res

/pdf/interview_ca

sebook_

S.pdf

Reco

mmend

ed cases from C

asebooks (1/7)

Firm Name

Case Name

Case Type

Casebook / Reference

Bain

Giant Bank

Profitability

2007 Ross M

ichigan / #

13

Bain

Acm

e Packaging

Priva

te Equity

2007 Ross M

ichigan / #

14

Bain

Mattress M

ake

rMarket Entry

2007 Ross M

ichigan / #

15

129

Bain

Mattress M

ake

rMarket Entry

2007 Ross M

ichigan / #

15

Booz

PCB M

anufa

cturer

Sup

ply C

hain

2007 Ross M

ichigan / #

16

AT Kearney

Electronics M

eter

Manufa

cturer

Profitability

2007 Ross M

ichigan / #

17

Food W

holesa

ling

Profitability

2004 Kello

gg / #

1

Reco

mmend

ed cases from C

asebooks (2/7)

Firm Name

Case Name

Case Type

Casebook / Reference

GOTO

Net

Market Entry

2004 Kello

gg / #

2

Main A

pples

New

Product

2004 Kello

gg / #

3

Syzy

gy

Profitability

2004 Kello

gg / #

5

130

Syzy

gy

Sup

ercomputers

Profitability

2004 Kello

gg / #

5

Winter Olympics

Bidding

Determ

ining

Value

2004 Kello

gg / #

6

Retail Banking

Growth

2007 W

harton / #

3

Retirement Homes

Profitability

2007 W

harton / #

4

Firm Name

Case Name

Case Type

Casebook / Reference

Bain

Airplane

De-Icing

Outsourcing

2006 Ross M

ichigan / #

4

Booz

Gard

ening

Retaile

rProfitability

2006 Ross M

ichigan / #

10

ZS Associates

Cleaning

Sup

plie

sSalesforce

2007 Ross M

ichigan / #

20

Reco

mmend

ed cases from C

asebooks (3/7)

131

ZS Associates

Cleaning

Sup

plie

sSalesforce

2007 Ross M

ichigan / #

20

Booz

PCB M

anufa

cturer

Sup

ply C

hain

2007 Ross M

ichigan / #

16

Chicken Po

xNew

Product

2006 Tuck / pg. 34

Fine

China

Profitability

2006 Tuck / pg. 50

Firm Name

Case Name

Case Type

Casebook / Reference

Kicks

Market Entry

2006 Tuck / pg. 66

Splat!

Profitability

2006 Tuck / pg. 83

New

York Taxi

Profitability

2006 Tuck / pg. 99

Reco

mmend

ed cases from C

asebooks (4/7)

132

New

York Taxi

Drive

rProfitability

2006 Tuck / pg. 99

Consum

er

Electronics

Portfolio

Strategy

2006 W

harton / pg. 27

Bain

European

Motorcycles

Priva

te Equity

2005 C

olumbia/ #

12

BCG

Eye Surgery

Market Entry

2005 C

olumbia/ #

14

Firm Name

Case Name

Case Type

Casebook / Reference

BCG

Institutiona

l Asset

Mana

ger Fe

es

Market Entry

2005 C

olumbia/ #

18

Bain

Gum

by’s Pizza

Priva

te Equity

2005 C

olumbia/ #

19

New

Eng

land

Profitability

2005 C

olumbia/ #

23

Reco

mmend

ed cases from C

asebooks (5/7)

133

New

Eng

land

Re

tail Bank

Profitability

2005 C

olumbia/ #

23

Bain

She

ep Auction

New

Product

2005 Ross M

ichigan / #

16

Bain

Security Systems

Market Entry

2005 Ross M

ichigan / #

17

BCG

Sand

wich Bags

Sup

ply C

hain

2005 Ross M

ichigan / #

28

Firm Name

Case Name

Case Type

Casebook / Reference

McK

insey

Maldovian Coffins

Determ

ining

Value

2005 W

harton / #

1

Bain

Hard

HeatHelm

ets

Priva

te Equity

2005 W

harton / #

2

Mercer

Verizo

n Security

Market Entry

2005 W

harton / #

3

Reco

mmend

ed cases from C

asebooks (6/7)

134

Mercer

Verizo

n Security

Services

Market Entry

2005 W

harton / #

3

Bain

ABC Cong

lomerate

Portfolio

Strategy

2005 W

harton / #

4

McK

insey

H Health

Profitability

2005 W

harton / #

9

Booz

H Hotel

Pricing

2005 W

harton / #

10

Firm Name

Case Name

Case Type

Casebook / Reference

Butcher Sho

pSup

ply C

hain

2004 H

BS / #

2

Trave

l Agency

Profitability

2004 H

BS / #

10

Regiona

l Je

t Profitabiliy

2004 H

BS / #

16

Reco

mmend

ed cases from C

asebooks (7/7)

135

Regiona

l Je

t Corp

oration

Profitabiliy

2004 H

BS / #

16

Helicopter

Market Entry

2003 W

harton