What is Management Consulting?!!

An introduction to the industry

September 11, 2000

Agenda

What consultants do

How do they it

The entry level consulting role

Case studies

If these meet your goals, try consulting!

Why consulting?

You’d like to gain broad exposure to different areas of business

You want to work in several different industries before making a decision to focus on just one

You want to acquire basic business skills to meet your future goals, such as entering industry or entrepreneurship

You want to take on significant amounts of responsibility in dynamic environs

You are interested in developing a strong and diverse network

If this describes you, do NOT try consulting!

Why you wouldn’t do it

You’re looking for a “glamorous” job but aren’t ready to work hard

You have difficulty assuming responsibility and setting a direction for yourself

You don’t have strong analytical skills

You want to work 40 hour weeks

You don’t like to travel!!

Consultants help businesses run smoothly

and efficiently to stay competitive

Consultants work with clients to solve problems, identify opportunities, and help them change

Work with clients to define opportunities or problems

Collect and analyze data

Recommend client actions

Work with the client to implement the recommended solutions

Bring about healthy change

Consultants work with clients to complete projects that they can’t (or don’t want to) do themselves

Face large scale business issues/problems

Need an objective, fresh insight into their situation

Need expert information not available “inside” their organization

Need help making change

During the proposal process, consultants work to define the client’s problem and needs

Sometimes a competitive bidding process, sometimes a “one-on-one” proposal

objectives and scope

experience and qualifications

project approach

schedule and pricing

The client hires the consulting firm with a proposal which best meets its needs

A typical project involves further problem definition, analysis, and communication

Problem definition

Data gathering and analysis leading to conclusions

• interviewing

•number crunching

•outside research/benchmarking

•modeling new processes, organizations, or IT systems

•utilizing the tools in your toolbox

Team-based problem solving

Communication

To Do

The output of the project can be a recommendation, action plan, implemented change - or all three Recommendation

•findings & conclusions•recommended approach•costs/benefits

Action plan•project workplan•resources required•progress milestones•performance measurement

Implemented change•new process, organization, or system•education/training•tangible results

Project Officer

Project Manager (day-to-day)

Mid-level consultant

Mid-level consultant

Mid-level consultant

Entry level

Entry level

Entry level

Entry level

Entry level consultants participate on projects as team members Projects last for about 3-9 months for entry level consultants

You may be involved in any part of the project - from proposal to

implementation

Teams usually have pyramid structure

Example projects: e-commerce strategy proposal for General Motors

Re-engineering the IRS into a customer-oriented, market-facing organization

Designing a strategic sourcing strategy for a Fortune-50 energy services corporation

Value portions of a major U.S. sugar manufacturer in preparation for divestiture

Build a complete corporate financial model for a major book publishing company

Analyze and improve the customer responsiveness of a major nationwide broadband internet service provider

Case questions are typically used in management consulting interviews

Case questions provide an interviewer the opportunity to assess your:

Analytic skills

Logical thinking

Problem structuring

Ability to filter information

Tolerance for ambiguity

Poise and communication skills

Industry Analysis

Market Expansion

Investment

What is a case interview? - An opportunity to evaluate a candidate’s analytical skills

Sample Business Problems

Simulates a consultant/client situation

Profitability

Pricing

Wildcard

Hypothesize SynthesizeFrame

• Get the facts straight

• Ask pertinent questions

• Develop plausible answers

• Develop framework to test hypotheses

• Tell the story

• Make recommendations

And when things aren’t going as well as you’d like…• Recognize you’re stuck

• Ask for more information• Pursue different paths

How to do well? Approach the case logically

Listen and Clarify

How to do well? Think creatively

DO

Approach the problem

methodically

Raise multifunctional aspects

Adopt CEO/shareholder

perspective

Consider organizational and

cultural issues

Challenge conventions

DON’T

Worry about solving the case –

thought processes are paramount

Shotgun potential solutions

without appropriate analysis

Force fit a standard framework

Speak before thinking carefully

Rely on finding a “silver bullet”

Use buzz words

How to do well? Open your TOOLBOX

Matrices

Strategy Tools

—Porters 5 Forces

—SWOT Analysis

Marketing Tools

Economic Tools

Competitive Analysis

Decision Tree Analysis

Financial Analysis (profitability, cost driver)

Strategy Tools - Expanded

Porters 5 Forces:

Threat of new entrants

Threat of substitutes

Supplier power

Buyer power

Industry rivalry

SWOT

Strengths

Weaknesses

Opportunities

Threats

Used for industry insight and attractiveness

Marketing Tools - Expanded

4 Ps:

Product

Price

Promotion

Place (distribution channel)

3 Cs:

Customer

Competition

Company

Useful for marketing analyses - to ensure you’ve covered the issues

Economic Tools - Expanded

Break-Even Analysis

Marginal Cost

Demand Analysis

Supply Analysis

Useful for marketing analyses - to ensure you’ve covered the issues

Financial Tools - Expanded

Profitability Analysis:

Profits = revenue - cost

Revenue = units x price

Costs = fixed cost + variable cost

Variable cost = cost/unit x # of units produced

Cost Driver Analysis:

Materials – commodity prices, product formula

Direct Labor – wage rates, throughput rates

Indirect Labor – staff size, wage rates, plant output

Useful analytics to surface revenue and cost issues

Good and Pertinent Reads

The Fast Track by Mariam Naficy

Competitive Strategy Book by Michael Porter

The Mind of the Strategist by Kenichi Ohmae

Sample case questions

Industry analysis• A group of investors is considering building a large restaurant in the downtown arts district

of a large city. What factors should they consider?

Market expansion case• A U.S. snack food manufacturer is considering entering the Asian market with a new

product line. Should this client pursue entering this market?

Investment case• An East Coast high-end clothing manufacturer is considering opening retail stores in the

Midwest to handle the growing demand for their product. What factors should they consider?

Profitability case• Your client manufactures diapers for babies. The board wants to know if its advertising

campaign for a new premium line of diapers has been successful. How would you evaluate the campaign’s performance?

Pricing case• An inventor of a new electronic gadget wants to know: 1) What is the market for his goods,

and 2) how to produce it and 3) What the pricing structure should be. What steps should be taken?

Industry analysis case: A group of investors is considering building a large restaurant in the downtown arts district of a large city. What factors should they consider?

Market/Competition• How big is the market?• Who else in in the market?

— What level of product differentiation exists?• How concentrated is the industry?• How difficult it is to enter/exit this industry?

— What are the economies of scale?— How steep is the learning curve?

Customer/supplier relations• Is the company in a position of negotiating power?• Are there multiple substitutes for supplies?

Financials• What key financials need to be considered?• What risk factors can be identified?

Key questions to ask yourself:

Market expansion case: A U.S. snack food manufacturer is considering entering the Asian market with a new product line. Should this client pursue entering this market?

Market/Competition• Where would you find information on market size?• Is the market downsizing, stagnant or growing?• Who else in in the market?

— How does the client compare with these competitors?

Customer needs• What customer segments need to be identified?

— How are the needs of these segments different?• Are these needs currently being met?• Can the client meet these needs?

Economics• What are the costs involved in this expansion?• How great is the ROI?

Key points to consider:

Investment case: An East Coast high-end clothing manufacturer is considering opening retail stores in the Midwest to handle the growing demand for their product. What factors should they consider?

Sustainability of profits• Is this market look continually profitable?• Is this the correct segment to move into?

Competition• What is the client’s competitive position in this market?• What differentiates the product?

Price/Costs• How do pricing structures compare?• How are the costs distributed?

Key questions to ask yourself:

Profitability case: Your client manufactures diapers for babies. The board wants to know if its advertising campaign for a new premium line of diapers has been successful. How would you evaluate the campaign’s performance?

Costs• What are the fixed costs? variable?• What economies of scale exist?• Is plant utilization up?

Customers• How sensitive are customers to price?• How is the market segmented?

Key questions to ask yourself:

Pricing case: An inventor of a new electronic gadget wants to know: 1) What is the market for his goods, and 2) how to produce it and 3) What the pricing structure should be. What steps should be taken?

Market• What type of market is it?• What will the market bear?

Competition• How does the client’s position compare to others in the industry?• How will the competition respond to pricing changes?

Customer• How will customers respond to pricing changes?• What demand is there for this product?

Key questions to ask yourself: