MCG Casebook

2024-2025 Edition
Class of 2025 MCG Co-Chairs:
Andrew Metcalf, Fletcher Fair, Ingrid Onul, Jacob Pachter, Monica Murcia, Siddharth Seth, Sindhu Senthilkumar
With thanks to our sponsors

Overview
The Management Consulting Group (MCG) at the University of Chicago Booth School of Business
would like to thank our sponsors for their generous support and continued engagement with the
Chicago Booth community:

Interview
Fit Prep
Case Prep
Resources
2
Introduction: The Consulting Interview

Overview
Welcome to the Chicago Booth MCG Casebook!
You’ve made it! After a month of recruiting and hours of networking, coffee chats, and meet & greets, you are
ready to start preparing for interviews.

Interview
The MCG Casebook is designed to help you as you develop interviewing skills and expertise. It offers practical
advice on how to approach a typical consulting interview, a resource bank which will be useful for developing case
skills, and most importantly, a set of 40+ cases to practice with your colleagues. This casebook is not meant to
direct you toward specific case frameworks, fit answers, or thinking patterns. As you will learn, no resource can be
the final word on what is ‘right’ or ‘wrong’ in this process.

Organization of the book

Fit Prep
The book will begin by providing a general overview of consulting interviews, followed by recommendations on
how to prepare and budget one’s preparation time. It will then explore fit and case interviews in more detail,
provide a set of case resources, and finally, include the practice cases.

Purpose of a consulting interview

A typical interview contains two parts: (1) the fit interview, and (2) a business case, lasting between 40-60 minutes

Case Prep
total. The interviewer’s objective is to gauge the candidate’s interpersonal skills, comfort with ambiguity, business
sense, logic, quantitative skills, coachability and client-readiness.

Ultimately, the interviewer is looking for someone they would want to work with. Candidates often make the
mistake of thinking about the consulting interview in terms of two distinct sections – fit and case, but the
interviewer is in fact assessing the above qualities throughout both portions of the interview.

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As you prepare, remember to portray a confident, well-rounded, likeable self to the interviewer and try to enjoy the
process – you will learn a lot!

3
Table of Contents

Overview
Overview…………………………………….. 5 Interview Prep Resources………………………… 36

Interview
Interview Prep…………………………….. 7 • Sample case frameworks……………………….. 38

• Case Practice and Evaluation……………………. 8

• Supplemental case information……………… 43
• External Case Prep Resources………………….. 11
• Case math………………………………………… 50

Fit Prep
The Fit Interview………………………………… 12
• Clearing charts…………………………………. 55
• Preparing for fit questions……………………….. 13
• Industry Checklist……………………………….. 62
• Common fit questions…………………………….. 20

Case Prep
• Zoom Best Practices…..............……………… 63
• Fit story structuring examples…………………. 21
Practice Cases …...…………………………………. 64
The Case Interview………………………………… 25

• Overview of case structure……………………… 26 • Tips to give an effective case…..…………….. 65

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• Common mistakes………………………………….. 35 • Index of Practice Cases…..…………………..... 66

4
Overview of the ‘fit’ and ‘case’ portions (1/2)

Overview
The “fit” interview

• The ‘fit’ part of the interview is often underestimated Your story should flow logically: be
in its importance. Although the case is Resume prepared to walk through the details of

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unquestionably important, let’s face it, you can learn overview your resume and explain the rationale
the skills that are needed to succeed as a consultant! behind your decisions.
But are you a right fit for the firm’s culture?
You need to explain why consulting makes
• If you can get the interviewer to be on your side Why sense for your career progression and how
during the fit, the case part of the interview is more it will help you achieve your long-term

Fit Prep
consulting
likely to go smoothly as the interviewer already goals.
wants you to succeed!

• While the time allocated to fit varies among firms, Give specific reasons why you want to join
every firm will have an official fit portion. Your goal that firm and how firm values or practices
Why firm are aligned with your interests.
should be to present yourself in a genuine and

Case
cohesive manner. In general, the fit portion is
composed of four elements, presented on the right.
Your stories should demonstrate your
Personal leadership, problem solving/analytical,
experience working with others, and communication

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skills.

5
Overview of the ‘fit’ and ‘case’ portions (2/2)

Overview
The “case” interview The “case” interview

• Consulting firms use case interviews as a proxy for

Interview
the day-to-day job. Each case is used to evaluate a
range of capabilities, mainly the ones presented on • Structured thinking in ambiguity
Problem • Combining various types of data
the right.
Solving • Analytical rigor
• Business judgment
• The case interview typically begins with the

Fit Prep
interviewer describing a business and / or client
• Articulating complexity
situation. The candidate’s job is to work through the
Client • Prioritizing issues
information, develop a framework to approach the • Communicating assertively and with
readiness
problem, and refine a hypothesis through analysis as confidence
additional information is provided.
• Ability to deal with pressure

Case
• Structured brainstorming, mathematical reasoning, Personality • Confidence and relatability
and analyzing data will be used to hone in on a
recommendation, which the candidate will present
succinctly at the end of the case.

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6
Interview Prep Overview

7
Interview Prep: General tips on how to prepare

Overview
.
Timeline Tracking your progress

• Most students begin interview preparation in November • As you practice, it is important to keep track of the feedback
(right after 1Y Consulting Forum), starting cases with other you receive and review it periodically. By reflecting on your

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1Ys, then 2Ys, and eventually with firm reps (if available). cases and internalizing feedback from others, you gain a
much better sense of where you stand and the trajectory of
• Make sure you do a wide variety of cases which will give you
your development.
exposure to a variety of functions (strategy, marketing,
operations, etc.) and industries (banking, consumer • We recommend you keep a case log of all your cases,
packaged goods, telecommunications, transport, etc.). recording after each:
• Be careful not to burn out from doing too many cases and, as • Case name and interviewer (put a cover page on

Fit Prep
a result, become robotic – you should be excited and each case).
enthusiastic to dive into every case! • Your framework (and / or the framework you wish
you had developed).
• Key information, calculations, or analyses you
missed.

Case Prep
• Score
• Lessons/tips
Expectation
• The review process is as important as the actual case
Performance

session and you should spend as much time reviewing your

Reality
feedback as you spend actually doing cases.

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• After each case, spend some time redoing the case and
reviewing your framework, your calculations, your
# cases brainstorming and your recommendation. What could you
have done better in each one of them?

8
 Interview Practice

Overview
Interview Prep Overview Tips on Giving a Case

• Giving cases is a great way to observe different ways of

1-2 min: Breaking the ice thinking, creating frameworks and brainstorming ideas. With

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10-15 min: Fit questions time, you will also identify what looks good and what looks
1-2 min: Case prompt & questions bad in an interview.
3-5 min: Framework • Prioritize giving a case you have already done. If not, make
14-20 min: Analysis + Synthesis sure you go through the entire case on your own, including
2 min: Recommendation the calculations, otherwise it will be difficult to provide
accurate feedback.

Fit Prep
• We recommend learning at least 2-3 different cases well
20 mins: Feedback (only for case prep)
and giving those to all case prep partners. Your ability to give
solid feedback will increase as you become more familiar
with the case and as you can compare different
Tips on Receiving a Practice Case performances.

• Make sure your interviewer has enough time to give Practice format

Case Prep
you case and detailed feedback (approx. 60 min). • Towards the beginning of your prep, you might prefer to stop
• Review the case step-by-step and ask the interviewer throughout the case in order to give advice, retry
what you did well and what you could have done better
calculations, repeat delivery of your recommendation, etc.
in each step of the case.
• Write down feedback and ask interviewer for advice if • As you improve, you will want to run through the entire case
you observe a repeated mistake on your cases. as it would be presented in an interview, giving feedback
• Always thank the interviewer for their time and only at the end.

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feedback! This might the first of many cases of you two!

9
Case Evaluation

Overview
❑ Framework is mutually exclusive, collectively exhaustive (MECE). Make sure the same
Structure and information is not in two different buckets.
framework ❑ Framework is tailored to case context. “Revenue from oil barrel sales” > “revenue”.
❑ Framework was used throughout case to guide discussion

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❑ Quick and accurate calculations
Analytical and ❑ Organized information in a structured way
❑ Interpreted graphs and tables accurately, drawing insights quickly
problem solving ❑ Able to keep complex fact base organized and structured
❑ Creative in evaluating issues, possible causes and drawing conclusions

Fit Prep
❑ Conveyed conclusions logically and succinctly
Synthesis and ❑ Conclusions were compelling and backed with evidence developed during the interview
conclusion ❑ Comprehensive, captured all relevant points discussed during the case and answered all
questions

Case Prep
❑ Verbalized thought process and communicated thinking at every stage of the case
Communication ❑ Communicated in a crisp and concise manner without rambling or wandering
skills ❑ Built strong rapport with interviewer, case discussion was more a conversation than a
monologue

❑ Drove the case discussion, assuming an active rather than passive attitude

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❑ Confident and relaxed
Presentation
❑ Enthusiastic and engaging

10
External Case Prep Resources

Overview
In addition to this casebook, you may want to check out other interview preparation resources. Here are some
resources Booth students have found useful in the past:

Interview
Fit Prep
Books like, Case in Point, by David Online resources like
Listening to podcasts on Spotify Cosentino, Case Interview Secrets, by Victor rocketblocks that can assist in
like Strategy Simplified and The Cheng and Crack the Case by David Orhvall improving specific segments of
Case Interview casing through drills

Case Prep
Resources
Firm specific websites: many consulting firms Casebooks from other schools: Some earlier
Career Services media site: Career Services
include case preparation materials on their editions of these have been published
has archived videos of case interview
external websites. These can include practice externally and can be found online via Google.
demonstrations from prior interview events.
cases and video examples of various Notable books include Ross (2005 and 2006),
potential solutions. HBS, and Wharton (2009, 2010).

11
The Fit / Behavioral Interview
The Fit / Behavioral portion of the interview is just as important
as the case portion. Do not under-index on preparation.

12
The Behavioral Interview: Personalize your candidacy

Overview
Most consulting interviews will begin with some questions which allow the
What is the main
interviewer to understand more about the candidate’s background and assess
objective?
the candidate’s fit for consulting and ‘fit’ with the firm.

Interview
The fit interview offers you the opportunity to personalize your candidacy. You
Why should they should focus on telling a cohesive story: what led you to business school, why
hire you and not you are interested in consulting, why you are interviewing with this firm in this
someone else? location, why you believe you can add value as a consultant, how the role fits in

Fit Prep
your long-term professional goals, etc.

Booth consulting recruiters have consistently reported that students don’t focus
enough on preparing for the fit interview. Use the fit portion of the interview to
What do recruiters
show your passion for the firm and show off your track record. Firms expect
say?
that you know yourself well. Save 2-3 weeks before interviews to prepare your

Case Prep
stories and tailor your answers to each firm!

In addition to understanding yourself, you should also understand the firms.

From the firms’ websites, corporate presentations and networking events, you
Why do you want should have an understanding of what a firm prides itself on, what differentiates

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firm X? it from others, and most importantly, its culture. You should tailor your stories
to what you’ve learned about the company. You should also have a good
understanding of the firms’ business models and organizational structures.

13
The Behavioral Interview: Two categories of questions

Overview
Professional questions Behavioral/Character
Behavioral questions Questions

These questions are used to evaluate the trajectory of Behavioral questions are used to profile your ability to
your career, how you affected that direction, and where cope with complex, challenging situations. They also

Interview
it looks to go from here. Professional questions will allow the interviewer to examine the depth of your
probe into your: professional and personal experiences. These questions
will probe into:
• Work history
• Past experiences and accomplishments • Challenging situations and your response
• Personal interest or motivations for pursuing • Your potential to create impact

Fit Prep
consulting • Personal thought processes in difficult circumstances
• Reasons for applying with this specific firm • Experiences working in teams
• Location choice • Leadership experiences
• Aspirations for your career in the short and long term

Case Prep
Example professional questions: Example behavioral questions:
• Why is management consulting a good fit for your • Describe a major professional failure and how you
career? dealt with it.
• What do you hope to learn at our firm? • Tell me about a time you have used data to change
• How have your past experiences prepared you for someone’s mind.
consulting with our firm? • What is the most challenging team environment

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you’ve worked in?

14
The Behavioral Interview: Preparation process

Overview
Structure your stories

High-Level Overview = Give interviewer a sense of

H overall story and your role in the story The goal of your stories should be to convey your

Interview
personality, poise, confidence, capabilities and
Situation = in a sentence or two, describe the
S situation / context / environment
leadership ability concisely in 90 to 120 seconds.

Keep in mind that even during this section, you are

O Obstacle = briefly define the obstacle to be resolved
being tested on your ability to think and
communicate in a logical manner, so it is important
A Action = describe in detail the action you took to keep your answers concise and well structured.

Fit Prep
Spend most of your time talking about the actions
Result = discuss the outcome of that action and its you took; minimize the time you spend discussing
R impact on the client / team, etc. the situation and / or obstacle.
Learning = describe what you learned from the
L experience / situation

Case Prep
Other tips
• Create a spreadsheet with your top 5-10 stories, that highlight different situations, personal qualities, and skills (i.e. leadership,
teamwork, difficult team/client, persuasion, use of data, etc.) organized according to the H-SOAR-L framework
• Create written outlines of your behavioral answers, using four or five sentences. The first sentence in this approach is the
“newspaper headline”. The next few sentences concisely summarize the main components of the story that will be discussed
(the actions you took). The final sentence should reiterate the results / impact of your experience and what you learned.

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• If you are preparing for the McKinsey PEI (Personal Experience Interview), be prepared to go deep into several of your stories
and detail your thought process, your feelings, reactions of others and how you responded (what you said / did) in each story.
• We recommend incorporating fit into your case prep early and often. Try to add one to two fit questions into every case prep
session – two are included at the start of each practice case in this book!

15
How to answer behavioral interview questions (1/3)

Overview
Adjust your stories to fit the question. For example, the answers to “tell me about a time
Answer the you had to persuade someone” and “tell me about a time you had to deliver a difficult
interviewer’s message” are likely not the same answer. When you’re thinking through which story to

Interview
question tell for Fit questions, start with “does this story answer the question” or “how can I
make this story fit the question?”

Interviewers want to know what you did in the context of a team/project/initiative, so

Focus on your be very clear about your contributions. Show off the wonderful things you have done,
contributions / but give credit for team effort and emphasize your contributions to that team effort

Fit Prep
accomplishments (how is the team better for your being there?).

Do not lie or Tell your stories in their best light and emphasize your contributions and

Case Prep
overly exaggerate accomplishments, but avoid misrepresenting your role, as that can harm your interview
performance.

Interviewers look for candidates who can also think logically and structure their
Structure your storytelling. See the many examples in this section of how co-chairs from this year and

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thoughts years past have structured their stories.

16
Source: MBA_ish
How to answer behavioral interview questions (2/3)

Overview
You should have multiple possible responses to most of the common behavioral
questions, and particularly for those ‘top 10’ questions. You can re-tell stories between
Prepare multiple rounds (first round interviews and second round interviews) but you cannot tell stories
stories for

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multiple times within a round, or tell the same story to answer different questions in the
common same round. Interviewers from the same firm may ask you the same behavioral
questions questions in back-to-back interviews and you need to have two distinct stories ready to
share. Interviewers may also ask you to tell them a different story after you’ve started
telling your ‘1st choice’ story.

Fit Prep
Interviewers are trained to listen for authenticity (or lack thereof). Being authentic and
Be authentic (and thoughtful will stand out over inauthentic answers. For example, do not say that your
thoughtful) in your greatest weakness is working too hard. It is much more powerful to be genuine and
answers demonstrate self-awareness through vulnerability (but share what you’re doing to
improve and grow)

Case Prep
Many interviewers will ask follow ups about your behavioral stories – be excited for
Prepare for these! It means the interviewer is engaged and listening, and something you said caught
their attention. As you go through the interview prep process, try to think of (and get
follow-ups

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feedback from other Boothies on) potential questions interviewers may ask in response
to a story.

17
How to answer behavioral interview questions (3/3)

Overview
While you need to have multiple stories that can answer each prompt, the same story
Quality over can likewise answer multiple prompts. You can’t use the same story twice in the same
quantity round, but the same story can flex to answer different questions, especially between

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interview rounds.

Tell your story in 2-3 minutes max. Make sure you give the interviewer the main points
(sparknotes) of your story, and give them the chance to ask follow-up questions if they
Be concise

Fit Prep
want to hear more details about a specific part of your story

Weave elements of the firm and office culture into your answers where possible. Many
Tailor to the firm

Case Prep
firms are transparent about the characteristics they are looking for – make sure your
and office stories touch on those characteristics when interviewing with those firms.

Remember the person on the other side is a human too. While they are there to evaluate

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you now, they may also become your best friend when you join the firm. Engage them in
Relax your stories, let your personality come through naturally, and get excited for their
questions.

18
Top 10 behavioral questions to prepare for

Overview
You should prepare and practice answers to all common questions on the next slide, but make sure you’re able to
answer the below questions in a succinct and compelling way, tailored to your experience and interests. Remember to
leverage H-SOAR-L in answering these questions, and shoot for 1-2.5 minutes to tell the full story.

Interview
1. Walk me through your resume (no need for H-SOAR-L)
2. Why consulting / why [xyz] firm / why [xyz] office (no need for H-SOAR-L)
3. Tell me about a time when you faced a significant challenge
4. Tell me about a time when you dealt with a conflict with your

Fit Prep
team/manager/client
5. Tell me about a time you had to persuade your team/manager/client of
your idea
6. Tell me about a time you failed (and what you learned from it)

Case Prep
7. Tell me about a time you had a large impact on a team/teammate/project
8. What is your proudest accomplishment (not necessarily professional)
9. Tell me about a time you had to deal with ambiguity/operate under a tight
deadline

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10. Tell me about a weakness you have / a challenge you face professionally?

19
Common Behavioral Questions

Overview
Professional questions Behavioral questions

❑ Tell me about yourself/ Walk me through your resume ❑ What accomplishment are you most proud of?
❑ Tell me who are you, not in your resume, that I can read ❑ Tell me about a time you have used analysis to guide your decision
❑

Interview
Tell me more about [a specific bullet on resume] making process.
❑ Why Consulting? ❑ Tell me about a time when you had to persuade someone
❑ Why did you choose Booth? (team/client) to do something they initially did not want to do.
❑ Why Consulting? ❑ Tell me about a time when you had a disagreement with your
❑ Why Firm X? boss/team and how you handled it.
❑ Why firm X over other consulting firms? ❑ Tell me about a time when you had to lead a team through
❑ Why city Y? What parameters did you use to evaluate? significant change.
❑ Which classes have you enjoyed the most and why? ❑ Tell me about a time when you had to deal with a difficult

Fit Prep
❑ What does management consulting mean to you? teammate.
❑ Who do you look up to professionally and why? ❑ Tell me about a time a time when you had to deal with an
❑ How would you evaluate the business of one of your previous ambiguous situation.
employers? ❑ Tell me about a time when you had to work with a lot of
❑ What do you like to do for fun? ambiguous data and how you handled it.
❑ What are three qualities your friends would use to describe you? ❑ Tell me about a time when you worked with people who
❑ What are your major strengths? approached things differently than you.
❑ What are your short and long term goals? ❑ Tell me about your biggest failure and what did you learn with that.

Case Prep
❑ Where do you see yourself in 5-10 years? ❑ Tell me about a time you’ve faced a challenge at work and what
❑ What are your areas for improvement (weaknesses) and have you have you done to overcome it.
been working on them? ❑ Tell me about a time you had to make a difficult decision.
❑ What distinguishes you from other candidates I am meeting today? ❑ Describe your dream project
❑ What is one thing you want me to remember/ask/know about you? ❑ Looking back at your professional experience - what is the one
❑ How would your co-workers / classmates describe your leadership thing you would change/ do differently?
style? ❑ What was the worst team you have had and why do you think it

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❑ Why should I hire you? was bad?
❑ Tell me about a time when you set your goals too high? (too low?)

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Example of Fit interview prep approach #1

Overview
This is not necessarily the best or only way to prepare for the Fit interview, but it is one possible approach
For reference – this is meant only to demonstrate 1) a method of documenting and structuring your stories and 2) an example of the level of detail that
can be cut from your story to fit the expected answer timeframe.
Question: Tell me about a time you had to deal with ambiguity / had to manage complexity
Full-Text Answer / Details Interview Response Text (1-2.5 minutes)

Interview
We were brought into a retailer who had invested in fixed asset capacity on forecasted growth that did not I’d like to tell you about when I helped a retailer identify a new
H materialize and wanted to develop a playbook for what to do with this excess capacity. I was specifically responsible
for 4 main components of our work: financial modeling, sourcing go-to-market offering opportunities, then
go-to-market concept for them to sell excess fixed asset capacity.
identifying and ranking potential buyers, and helping socialize our work with the client to ensure smooth adoption
and transition of ownership during implementation.
Tasked with delivering on a very broad and multi-faceted scope on a tight timeline. I was specifically responsible for Retailer forecasted a lot of growth, but growth didn’t come and there was
S the following functional areas while managing their impact on other efforts of the team and client:
1. Develop overall financial model to assess multiple go-to-market solutions being developed and prioritize
excess capacity – especially in Supply chain, procurement and back of
investment in capabilities and sales efforts house.
2. Develop specifically the inputs for the sourcing go-to-market offering, which entailed selling excess sourcing

Fit Prep
capability and capacity in a marketplace format
I was responsible for identifying ways to fill this capacity.
3. Identify and rank list of potential buyers, ranging from smaller retail players to startups where we could
exchange our capacity and capabilities for an equity stake in their businesses (because they are cash poor)
4. Help onboard new member of team in charge of IT workstream
1. Really broad scope My challenges included broad scope and limited client input as this was a
O 2. limited client input and direction
3. limited audience mandate (limited number of clients were allowed to know about this)
relatively secret project not well publicized internally.
4. Limited data availability, limited internal expertise, new project area for project team and client
Identified and worked directly with internal experts (SMEs) to develop GTM (go-to-market) frameworks and To solve for this I took a 3-step approach:
A playbooks for different functional areas. I owned the above pieces, so developed a deeper understanding of the
1. All products need a buyer – start with who would buy different services,
sourcing and indirect procurement landscape where I had limited prior background knowledge, and this became

Case Prep
one of our leading service offerings. from startups to smaller retailers and brands
2. Define metrics for success – how will we compare and sell our product?
I worked with their heads of merchandising, strategy, supply chain, and procurement to identify relevant
benchmarks, source comparable from the market, and develop playbooks and marketing materials. I also needed to
3. Define our fit with delivery - Where do we have the highest potential to
understand impact on current operations so that was part of my scope and presentation as well. sell?
I worked shoulder to shoulder with the client to bring them along with this
process and ensure buy-in and smooth transition.
Developed go-to-market plan and timeline with complete client buy-in (it’s now launched as [redacted] brands). My The result was I presented a compelling thesis to build this offering complete
R analysis supported the ultimate prioritization of services to launch and ultimately I continued to follow up with the
with a tactical ‘stand up’ plan and full financials that the client later adopted.
client and our project teams after I was rolled to a new opportunity to ensure its ultimate success.

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Major takeaways and learnings include that it is important to measure outcomes because only through that can you Several of my learnings from this were:
L see progress. It is important to get buy-in from the client and that involves iterative and ‘hands on’ work to make
1. It’s exciting to see things I proposed come to life
sure that handoff is smooth and they are bought in. It is important to take a structured approach when facing
ambiguity with limited expertise or background in the subject area. 2. Have a clear and hypothesis-driven structure
3. Setting a way to measure outcomes is important

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Example of Fit interview prep approach #2

Overview
This is not necessarily the best or only way to prepare for the Fit interview, but it is one possible approach
For reference – this is meant only to demonstrate 1) a method of documenting and structuring your stories and 2) an example of the level of detail that
can be expected when telling stories (or shorter)

Interview
Fit Prep
Case Prep
Resources
22
Example of Fit interview prep approach #3

Overview
Prompt: Tell me about your greatest accomplishment
As a 25-year-old, I came in to be interim-CFO of a struggling business facing bankruptcy. Looking back at the company when I left vs. when I arrived is my greatest
Headli
ne

accomplishment.

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• Company was on verge of bankruptcy
Context

• Took over interim-CFO duties as a 25-year old of a $70mm business with the need to help address.
• First thing I did was observe, meet with all the different departments and understand what the issues with the company are.
• From those discussions and analyses I understood the three major buckets I had to address were profit, culture, and lender relations

Actions

Fit Prep
Action 1: Diagnosis Action 2: Profit Action 3: Culture Action 3: Lender Relations
Met with different core functions of 1) Transition fill room from Los 1) Assisted CEO in recruiting new 1) Opened up transparent
the business to understand: Angeles to Tijuana, Mexico head of operations in Mexico, communications and monthly
• How the business and industry 2) Increased fill rates (revenues) by CFO meetings
functioned; working with operations team to 2) Cleaned up the financial 2) Developed weekly cash flow
• Where the pain points were; improve purchasing and statements – errors in the source reports
• and collected information to rationalize stock keeping units files (had to go through 2-3
analyze and develop solutions. years of data to clean and tie to
(SKU)s.

Case Prep
audited financials).
3) Created a ‘do it right first time’
culture.

Company was able to perform much better, had a stronger management team to take over, and performance began to improve by the time I left. Had initial discussions about
Results

going to lender as pre-MBA intern.

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• Learned how to be an operator, lead a team, the difficulty of not just developing a strategy but implementing it.
Takeaways

• Most of the time things that you get assigned as someone who is young has a short deliverable – you get small deadlines,

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Example of Fit interview prep approach #4

Overview
This is not necessarily the best or only way to prepare for the Fit interview, but it is one possible approach

Interview
Fit Prep
Case Prep
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24
The Case Interview

25
Overview of case structure and skills evaluated

Overview
Interviewer Engage with the candidate constructively

• Present client • Evaluate framework • Provide specific data • Probe logic behind • Evaluate consistency

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problem and approach when asked insights & logic of case
• Offer high-level • Decide on best path • Evaluate business • Push thinking beyond synthesis and
overview of client’s forward for case judgment what has already recommendation
business been said

Fit Prep
Problem Statement Structuring Analysis Synthesis Recommendation

• Ask clarifying • Organize framework • Make logical • Combine relevant • Recommend

questions • Be MECE and assumptions data or analysis actionable solutions

Case Prep
• Verify case objectives top-down! • Arrange and • Draw insights to • Highlight risks and
• Establish scope • Use 80/20 rule interpret data answer “so what?” next steps
• Show appropriate • Make leaps in
breadth and depth business intuition

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Candidate Drive the case forward

26
Problem Statement

Overview
Problem Statement Structuring Analysis Synthesis Recommendation

Interview
Clarifying questions:

Business model = ex. How does the company make money? Are we talking about one product or a
B mix of products? How is the company structured? Etc.

Fit Prep
Geography = in what region / country / city does the company operate? The company might be
G
global, but the case may only consider one region.
Objective = many case prompts may be purposefully obscure, such as “the company is facing
O
issues, what should they do”. Always clarify the client’s obj. before moving on.

Case Prep
T Timeframe = do we have a timeframe for increasing revenues X% or for recovering an investment?
(ex. company has to breakeven in 3 years)

Before structuring your framework, make sure you understand the following:
1. The main objective of the case (i.e. profitability, revenue expansion, cost reduction, etc.).

Resources
2. The information given to you (you may repeat your notes to verify you interpreted the prompt
correctly).

27
Structuring your framework

Overview
Problem Statement Structuring Analysis Synthesis
Synthesis Recommendation

Interview
Why is the
A good framework will guide you throughout the case. It ensures that your response will be
framework structured, logical and thorough. Additionally, the interviewer will begin to draw conclusions about
important? your candidacy based on your ability to break down the problem into clear buckets/categories.

Fit Prep
Never use the popular frameworks directly and do not blindly memorize and apply frameworks!
Applying Over-reliance on a specific framework can make a candidate appear robotic. Instead, you should
frameworks customize the framework to the question you are being asked and be creative with your analysis.

Based on the case information received and the framework you have developed, you should
Be hypothesis-

Case Prep
formulate an initial hypothesis about the problem you are evaluating. Throughout the case, step
driven back occasionally to evaluate and adjust your hypotheses based on new data.

Sketch out your thoughts on paper, use large handwriting, and tell the interviewer what you are
doing. Be as structured as possible when you are giving your thoughts on an issue or performing
Keep quality calculations.

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notes It is a good practice to use a new sheet of paper for each phase of the analysis. Imagine you are
sketching out slides in a PowerPoint presentation that you will use to present to the client. This will
allow you to stay organized and visualize how the case has progressed

28
Analysis + Synthesis

Overview
Problem Statement Structuring Analysis Synthesis Recommendation

Interview
Before doing calculations, talk through your logic so that the interviewer understands your
Structure your approach.
thinking
If the data proves your hypothesis to be invalid, use your framework and proceed to the issue with

Fit Prep
the next highest priority and develop a new hypothesis.

“So what?” As you work through more data, it is a good idea to verbally summarize where you are, what you
have learned, what information means in diagnosing the problem and where you are heading
next

Do not panic! Candidates have successfully obtained offers despite making (sometimes several)

Case Prep
mistakes in calculations. The interviewer is not only assessing how you think, but also your
Math personality.
mistakes
If the interviewer helped you identify the mistake, say “Thanks” (don’t say Sorry!) and move on
with confidence and composure.

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Get out of your quant comfort zone during practice. Prioritize calculations in the same way you
Additional prioritize issues (i.e. Is this calculation relevant to the client / problem? Will it tell me needed
tips information to drive the case forward

29
Recommendation

Overview
Problem Statement Structuring Analysis Synthesis Recommendation

Interview
End your interviews with a succinct recommendation which provides the answer first. Do not recap
your path of analysis; instead, draw on key facts to give a clear answer to the central questions of
the case.
Finishing the
Keep a list of key findings from each piece of analysis on top of the each paper (headline) used
case

Fit Prep
throughout the case. Depending on your interviewer’s style, you may have time (30-60 seconds) to
prepare a response or you may be asked to respond immediately.

Excellent recommendations usually include:

The • A succinct, actionable recommendation that directly addresses the problem.

Case Prep
recommendation • High level description of relevant analyses from the case.
• Discussion topics for next steps and risks/points of attention.

Remember that the interviewer is assessing whether they would like to work with you. Keeping
the interviewer engaged and interested in you and your thought process is crucial to success.
Engaging with the

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• Keep a steady pace throughout.
interviewer • Bring some personality into your analyses of problems.
• Involve the interviewer in your thinking and calculations.

30
End of Interview – Q&A

Overview
Quality wrap-up questions

• After the case, you will typically have a few minutes

Interview
to ask any questions you might have. Students often
make the mistake of under-preparing for this
section. Be sure to prepare by doing thorough
research about the firm beforehand.

Fit Prep
• Prior to the interview, research your interviewer’s
Examples of questions: background in advance. Find points in common with
❑ Tell me a little bit about your your interviewer to explore in this section.
background and your journey
with firm X • The interviewer will use this to assess your
❑ What do you like the most

Case Prep
candidacy and how much you want the job.
about firm X?
❑ Why did you decide to • Remember that each interviewer does this several
specialize in Practice Y? times a day – use this as an opportunity to stand
❑ I’m very interested in your
practice, can you tell me a little out!
bit more about it?

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31
Additional Case Tips

Overview
• Practice! Get comfortable and confident with a style that works for you across a variety of case types and
industries. Practice solving different problems while demonstrating your personality. Cases will always require
some level of creativity and conversation.

Interview
• Track your performance, feedback, and progress in a case log. Give – and solicit – structured feedback during
practice! Feel free to leverage the MCG interview feedback template (found in the MCG Google Drive) or come
up with something that fits your learning and feedback style.

• Once you are in the interview room, prior networking or recruiting does not matter – you must impress the
person sitting across from you.

Fit Prep
• Understand different firm’s casing styles. Ask second-years to provide first-hand perspective on different case /
firm styles during the interview process.

• Prepare, prepare and prepare. The biggest criticism reported to Career Services about Booth students is that

Case Prep
people underprepare for fit and case! Using canned frameworks, coming in with pre-drawn lines on your paper,
and doing too many cases can hinder students’ ability to think on the spot and be flexible. Don’t fall into this
trap! Remember that the case should be an actively engaging conversation.

• Case prep is not a linear process. Remember that there is a lot of luck and randomness in the case process.
Setbacks will occur, but staying resilient is an important part of succeeding.

Resources
32
How to structure your paper

Overview
• Organize each separate analysis on a different piece of paper and write the main conclusion at the top of the
paper, as a headline, to help you organize your thoughts and put together a recommendation quickly!

Interview
Framework Analysis - math

Should Company X expand in China? Market in China = 3B

Chinese Mkt Revenues Costs Tt mkt 1MM Potential Market = Total Market x %
Global - Price point x
- Competitor structure - Cost/unit units segment x % share captured x Price
producer of - Target mkt volume expected - Fixed costs 4 big players...
CPG.... charged

Fit Prep
Other Entry Options Potential Market = 3B
- Cultural - Greenfield
- Regulation - Acquisition

Analysis - brainstorming Recommendation

Case Prep
Ways to improve revenue Enter Chinese market

1. Market of 3B
Product Channels Advertising
2. Breakeven of x years
3. Opportunities to increase revenue
-Reduce quality -Explore other -Advertise with
to increase sales channels local markets
Risks Next Steps
penetration

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Competitor’s reaction Evaluate JV with current player

33
How to communicate throughout the case

Overview
• Communication skills differentiate an average caser from a stellar caser. You must be able to communicate with
the interviewer throughout your analysis, and share the insights you uncover.

Framework

Interview
Should Company X expand in China?
In order to assess this expansion, I’d like to take a look
at market structure, possible revenues and costs we
Chinese Mkt Revenues Costs
can obtain, our entry options and any other aspects,
Global
producer of
- Competitor structure
- Target mkt
- Price point x
volume expected
- Cost/unit
- Fixed costs
such as cultural fit.
CPG....

Other Entry Options

Fit Prep
- Cultural - Greenfield
- Regulation - Acquisition

I’d like to start my analysis by evaluating the

Chinese market. China is a large, promising market
from the outside, but I understand it can be quite
closed, and I imagine our client would have to

Case Prep
compete with local players. I want to see how
fragmented this market is, and how our competitors
stack up.

Then, I’d like to take a look at the profitability of

✔
operating in China, ….

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34
Common mistakes during the case

Overview
• Interviewers see upwards of 12 candidates per day, and a framework that is unique and tailored to the client’s
business problem can be a major differentiator .
Framework is • The interviewer can tell whether the candidate is thinking critically about the business problem or simply
too generic regurgitating a framework that was memorized in advance.

Interview
• One simple way to tailor a framework is to make it industry-specific. For example, if the client is in the oil
exploration business, a cost category should be written as “pipelines” rather than “transportation”.

• The candidate’s framework should be mutually exclusive and collectively exhaustive (MECE).
• In other words, the categories on a framework should not overlap at all (e.g., you should not have “competitors”
Framework is listed twice in two different places in your framework).
not MECE • This mistake is too obvious and indicates that the candidate is disorganized and has messy logic.
• The candidate should include all potential issues that they think are relevant to solving the client’s business problem.

Fit Prep
• If the candidate fails to ask clarifying questions at the beginning of the case, it prevents them from narrowing the
scope of the case and writing a more tailored framework.
Objective not • Common questions include: “What are the client’s goals and objectives?” “What is their business model?” “Where
clear does our client operate?” “What are the various steps in the manufacturing process?” “What benefit does the product
provide?”

Case Prep
• This problem arises when the candidate asks for data and clarifying materials haphazardly rather than systematically
asking questions that relate to their initial hypothesis.
Unstructured • For example, a weak candidate would ask, “Do we have any information on costs?” while a strong candidate would ask,
request of data “Given that our client is operating in the pharmaceuticals industry, I think fixed costs, and specifically R&D, could be
major drivers of profitability. Do we have any information to support this?”

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• The candidate should move systematically through each “branch” of their framework and not jump in a
Jumping disorganized manner between areas of analysis (“buckets”).
• Similarly, when doing a brainstorming exercise, the candidate should use organized buckets and try to fill one bucket
around with ideas before moving on to the subsequent bucket.

35
Interview Prep Resources

36
Resources: Overview of different sections

Overview
The following resources can be used to assist in your case prep. We recommend reviewing each section and
returning to these pages as your progress in your practice. The resources include:
•Illustrative frameworks as examples of what to • Long-list of industries to study
I. II.

Interview
analyze Summaries of key industries can be found in the
Sample case •These examples are meant to be simple – you Industry MCG Industry Overview
frame-works can use them as a base to build on Checklist
P. 38 •Adapt frameworks to the problem P. 62

•Tips, tricks, and shortcuts to use during •Covers A/V, dress code, other
III. quantitative exercises VIII. recommendations for virtual casing, behavioral

Fit Prep
Case math •Purpose is to get you to the insights quicker – Zoom Best interviewing, and general guidance on
P. 50 not to make you better at math Practices networking/virtual interactions
•List of useful info for market sizing P. 63

•Approaches to clearing common types of charts

IV. you will see during case interviews

Case Prep
Clearing
charts
P. 55

Resources
37
I. Sample case frameworks – Growth strategy

Overview
Case problem: Client would like help defining a near-term (3-5 year) growth strategy.
(Growth strategies typically refer to revenue growth, but can be clarified with interviewer)
Market Analysis Organic Growth Inorganic Growth

Interview
• Market Growth • Existing Products (sales ↑ in • M&A (suitable for
− Market size & growth short-term) short-term)
− Drivers of demand − Price 𝚫: elasticity effects on volume − Synergies
• Competitive Landscape − Volume: Sales + Marketing − Cannibalization
− Market share/ − Grow market size − Fit with current portfolio
• Investments

Fit Prep
Fragmentation ■ New distribution channels
− Barriers to entry ■ New customer segments − Investment / entry cost
− Consolidation over time & breakeven period
• New products / business (sales ↑ in
− Differentiation − ROI
long-term)
− Capabilities viability
• Recent trends − Expand Product Mix
− Technological ■ Add-on features

Case Prep
innovations ■ Differentiate into new
− Regulatory changes products/services
− Higher R&D cost
− Competitive response

Resources
Note: This framework is illustrative. It represents what could be written down in 60-90 seconds to structure
candidate’s thinking. Other illustrative frameworks will be provided in MCG Public Toolkit.

38
I. Sample case frameworks – New market entry

Overview
Case problem: Should a banana producer start selling coconuts?
(Clarify objectives with interviewer – Are we entering for revenue growth, profitability, market share etc.?)
Coconut Market Company Entry Profitability

Interview
• Market size / growth • Product mix fit • Revenues
− Segmentation • Brand fit − Pricing decision
− Demand for Product (commodity/premiun,
− Cannibalization WTP)
• Key Market Drivers − Alienating core consumers − Expected volume
• Customers • Capital / Financial Capabilities − Synergies to sell
− Largest segments Supply / Distribution chain • Product mix

Fit Prep
•
− Preferred channels − What kind / type of
capabilities (operational) coconuts?
− Preferences for coconut • Manufacturing Capabilities − Cannibalization
consumption, i.e. juice,
whole, etc. • Managerial Capabilities • Costs
− Initial investment
• Competition − Ongoing fixed costs
− # of competitors and (overheard, SG&A)

Case Prep
market share – − Ongoing variable costs
concentrated vs (labour, COGS)
fragmented − Opportunity costs
− Barriers to entry • Investment: Breakeven
− Competitive response time period / ROI target?

Resources
Note: This framework is illustrative. It represents what could be written down in 60-90 seconds to structure
candidate’s thinking. Other illustrative frameworks will be provided in MCG Public Toolkit.

39
I. Sample case frameworks – Profitability

Overview
Case problem: Despite strong historical performance, margins have been declining

Market Profitability

Interview
• Market size
• Competition Revenues (Industry Specific) Costs (Industry Specific)
− Current share
− New entrants • Prices ↑↓? • Fixed costs
− Source of competitive − Capacity
advantage • Volume ↑↓?
− Rent / depreciation
− Adjacent markets • Product mix

Fit Prep
(substitutes, − Insurance
complements) − Examine shifts in volume − Cost centers
• New consumer trends − Different pricing decision • R&D
being observed • By channel / geography • Marketing
• Regulatory changes − Contribution from different • Variable costs
impacting industry segments − Raw Materials

Case Prep
• Technological advances − Labor
• By customers
• Macroeconomic − Overhead
conditions − Customer segments
• Benchmark and adopt best
− Shifting customer needs?
practices

Resources
Note: This framework is illustrative. It represents what could be written down in 60-90 seconds to structure
candidate’s thinking. Other illustrative frameworks will be provided in MCG Public Toolkit.

40
I. Sample case frameworks – Merger & Acquisition

Overview
Case problem: Should a private equity (PE) client acquire a company?

Market Target Company Transaction/Deal Economics

Interview
• Size of market & growth • Capabilities / sources of • Deal economics
• Trends competitive advantage ○ Cash Flows
− Tech innovations − Customer loyalty ■ Revenue
− Regulatory changes − Patents ■ Costs
− Distribution network / ○ Investment: ROI,
• Customers
relationships payback period

Fit Prep
− Segments
− Quality ○ NPV vs deal price
− Buying behavior
− Brand equity • Exit opportunities
− Channels
− Management team
• Competition • Due diligence
− Operational improvement
− Market share • Portfolio Fit
− Barriers to entry − Synergies/cannibalization

Case Prep
− How do players compete − Expertise in industry
(price/service/etc.)? • Risk
− Cultural fit
− Competitive response

Resources
Note: This framework is illustrative. It represents what could be written down in 60-90 seconds to structure
candidate’s thinking. Other illustrative frameworks will be provided in MCG Public Toolkit.

41
I. Sample case frameworks – Cost reduction

Overview
Case problem: What should a conglomerate looking to reduce costs do?

Industry Dynamics Internal Costs External Costs

Interview
• Analyze existing processes • Labour • Supplier
across value chain − Efficiency • Distributors
− Identify critical processes − Safety
• Cheaper Sources
• Identify outliers / trends − Shifts
• Economies of scale • Discounts of volume
• Benchmark • Risk: quality drop
• Rent vs own

Fit Prep
− Competition
• In house vs outsource
− Across business units
− Past performance • Risk:
− Increased turnover in
• Supplier power
high-performing labour
− Decreased workforce morale

Case Prep
Resources
Note: This framework is illustrative. It represents what could be written down in 60-90 seconds to structure
candidate’s thinking. Other illustrative frameworks will be provided in MCG Public Toolkit.

42
II. Sample brainstorming questions and frameworks

Overview
Common brainstorming
Common brainstormingquestions
questions Important considerations
Important considerationswhile brainstorming
while brainstorming
• How do you grow revenue?
– Existing products • Always be structured and write down the
brainstorming – rambling hurts you!

Interview
– New products
• How do you reduce costs? Sample frameworks: • Use 2-3 buckets while brainstorming – make sure
– 2X2 $ Investment required and time to implement the buckets are MECE
– Value chain analysis • Don’t merely list down the points
• What are the source of synergies in this acquisition?
– Revenue synergies • Try to have 2-3 points under each bucket
– Cost synergies • Be creative – don’t use canned memorized points

Fit Prep
• How would you price the product? while brainstorming
• What are the factors affecting the price of the • Be case specific
product / service?
• Where do you find information about a product /
service / industry etc.?
– Surveys
– Experts

Case Prep
– Market research
• Pros and cons of an acquisition / strategic
partnership
• Pros and cons of diversification
• Pros and cons of outsourcing
• What do you need to analyze a particular
investment decision?

Resources
• Considerations for launching new technologies
• Commodity vs specialized products

43
II. Supplemental case information – industry analysis

Overview
Factors to
Factors toconsider
considerin in
anan
industry analysis
Industry Analysis
• Relevant industry conditions
– Size (in volume and USD)

Interview
– Profitability
– Growth (historical and trends)
– Segments (high vs low end)
– Regulation
– Technological advances
• Barriers to entry / exit (also see Growth Strategy page)
– Fixed costs component / economies of scale
– Learning curve

Fit Prep
– Access to distribution channels
– Access to suppliers
– Regulation of assets (i.e. utilities)
• Key drivers for success
– Consumer insight-> where is the value for consumers?
– Technological advances

Case Prep
– Brand equity
• Current substitutes
– New technologies and consumer trends usually create new
• Industry structure (usually one of the following) substitutes
– Perfectly competitive (price = marginal cost) -> easier to • Current trends
entry and capture market share – Cost drivers (outsourcing, new competitors, etc.)
– Oligopoly -> more difficult to entry, may pace price war – Product trends

Resources
• Value chain
– Monopoly (price > marginal cost)
– Vertical chain of productions including suppliers and distributors
– Important to assess key players and their respective – Is the industry vertically integrated?
market-share

44
II. Supplemental case information – profitability analysis

Overview
Factors toto
Factors consider in a profitability
consider analysisAnalysis
in Profitability

Profit = Revenues - Costs

Interview
Revenues = Price * Volume Costs = Variable Costs + Fixed Costs
• Factors affecting prices • Variable costs (must vary with each unit sold)
– Elasticity of demand – Materials
– Product mix – Fuel
– Differentiation • Fixed costs (do not vary with each unit sold)
– Labor (can be semi-variable)

Fit Prep
– Customer segment (low end vs high end)
• Factors affecting volume – Property, plant and equipment
– Internal – Operating costs: distribution, marketing, R&D, SG&A
• Distribution logistics, supply chain • Other cost considerations
• Inventory management – Sunk cost bias
• Capacity – Capacity utilization and impact on total cost per unit

Case Prep
– External – Benchmark costs with key competitors
• Competition – Relative percentage of cost components
• Customer trends – Cost allocation across multiple products
• Substitutes / complements – Total costs, average variable costs (economies and
• Market trends (declining market, regulation, etc.) diseconomies of scale)
– Variations in costs over a period of time

Resources
– Inventory holding costs

45
II. Supplemental case information – growth strategy

Overview
Factors to
Factors toconsider
considerin in
a growth
Growthstrategy caseAnalysis
Strategy
Mapping growth strategy options: • Factors to consider for new market / new product
– Industry structure and analysis (see above)

Interview
Existing New Market
– Localization of product / service offerings, regulations,
Market
tariffs
Existing Increased New Market – Source of volume (steal share, create new market)
Products Penetration Entry – Customer related barriers to entry
New Product Diversification • Switching costs
Products Development • Access to distribution channels

Fit Prep
• Brand awareness
– Non-customer related barriers to entry
• Increased penetration • Capital requirements
– Capacity to sustain increased volume (see Capacity • Regulation
Expansion below) • Economies of scale
– Increased marketing expense – Quantify investment cost and risk

Case Prep
– Prior experience with market / product entry – have they
• Methods of market entry or product entry tried this before? If so, what was the outcome?
– Organic / greenfield
– Acquisition • Additional factors for new product entry
– Partnership / joint venture – Cannibalization
– Trading up, trading down

Resources
46
II. Supplemental case information – Marketing

Overview
Framework for Strategic Marketing
1 Three ‘C’ Analysis 2
• Product Differentiation, OR

Interview
Strategic • Customer Strategic
• Cost Leadership, OR
analysis • Company objectives • Focus Strategy
• Competition

3
Marketing

Fit Prep
• Target market / positioning Market Target Market
Positioning
objectives • Demand Strategy Segmentation Selection

4 4 P analysis i.e. Marketing mix

• Product

Case Prep
Marketing
• Price
tactics • Place (channels)
• Promotion

Resources
Measuring Customer acquisition Customer retention Share of wallet
outcomes (Get) (Keep) (Sell more)

47
II. Supplemental case information – acquisition

Overview
Factors to
Factors toconsider
considerin in
a private equity/acquisition
a Private case Case
Equity / Acquisition
• Determine the rationale
– Revenue increase and / or cost reduction?

Interview
• Acquire resources
– Capacity
– Technology
– Distribution
Human capital

Fit Prep
–
– Brand
– Product line
– Network effects
– Complementarities

Case Prep
• Cost synergies
– Economies of scale
– Economies of scope
– Learning curve

Resources
48
II. Supplemental case information – investment, capacity

Overview
expansion, pricing strategy
Factors to consider for investment in new business Factors toStrategy
consider for pricing strategy
New Business Investment Pricing
• Industry analysis
• Elasticity of demand
• Rationale
• Financial assessment and breakeven point – Substitutes

Interview
– NPV: initial investment, ongoing costs, projected cash flows, cost of – Short run outcomes
capital, sensitivity analysis / risks – Long run effects
• Property, plant and equipment • Economic value analysis
– Useful life of equipment – Reference value
– Depreciation – Differentiation value
– Utilization • Cost-plus method
– Salvage value • Non-linear pricing

Fit Prep
• Opportunity costs / economic rent / option value
– Two-part tariffs
– Bundling: complements, non-complements
Factors to consider
Capacity
• Rational forExpansion
expansion (e.g. capacity utilization, demand increase)
• Impact on prices – increasing supply may affect demand
• Competitive reaction

Case Prep
• Options
– Expand existing facility
– Build new facility
• Proximity to suppliers / distributors and transportation
requirements
• Time to build
– Seek alternatives – lease, outsource, acquire, etc.

Resources
49
III. Case math – general guidelines

Overview
Case math tests candidates’ ability to perform calculations quickly and accurately, as well as general “number sense” or
understanding of how to extract meaningful insights from a large quantity of information.

Interview
Talk through your analysis Be as accurate as possible

Before calculating anything, provide a structured approach Performing long division to get the right answer is much
to your interviewer for how you will solve the problem better than trying to do the math mentally and getting it
ahead of you. wrong!

Fit Prep
There are many ways to get to the right answer Handle mistakes with poise

What sets apart a great analysis is: (i) elegance of the Many people mess up a calculation at some point and still
solution, (ii) articulation of the math / logic, and (iii) receive job offers. Keep your cool, correct the errors, and
synthesis of the key takeaway, or “so what?” move forward.

Case Prep
Ask to round when possible Use the paper you feel comfortable with
Rounding can help you get to an 80/20 solution. Be sure to Most people use white 8.5” x 11” paper, but try graphing or

Resources
ask your interviewer to see if it’s okay to round first. engineering paper if you think it would help you stay
organized.

50
III. Case math – tips and tricks

Overview
Rounding
Rounding Distributive property
Distributive Property
Example 1: Example 1:
223 million * 21 23 * 51

Interview
≈ 220M * 20 = (20 * 50) + (3 * 50) + 23
= 4,400M or 4.4 billion = 1,000 + 150 + 23

Example 2:
Example 2:
3,756 / 33
1,030,850 / 33 million
= (3,300 / 33) + (456 / 33)
≈ 1/33 = 100 + (330 / 33) + (126 / 33)

Fit Prep
≈ 3% ≈ 100 + 10 + 4
= 114 (or 120)
Scientific notation
Scientific Notationto avoid miscounting zeros Rule of
Rule of 72
72
The Rule of 72 allows you to calculate the growth rate an
Multiplication Example: investment will require to double in a specific number of

Case Prep
2,000 * 300 years. Conversely, it can be used to calculate the number of
= (2 * 103) * (3 * 102) years it will take an investment to double in value at a given
= 6 * 105 growth rate.
= 600,000 Example 1:
For an investment to double in 5 years, it must grow at:
Division Example: (72 / 5) = 14.4%

Resources
100,000,000 / 5,000
= (10 * 107) / (5 * 103) Example 2:
An investment growing at 12% will double in:
= 2 * 104 (72 / 12) = 6 years
= 20,000

51
III. Case math – business formulae (1/2)

Overview
• Contribution Margin reveals how much of the
company’s revenues contribute to the company’s fixed
costs and income
• Breakeven quantity indicates how many units of

Interview
product need to be sold to cover the fixed costs
• Time to breakeven indicates how many periods will be
necessary to reach the breakeven quantity

• Elasticity indicates how many more items (volume) we

can sell with a decrease of 1% in price

Fit Prep
• Revenue growth considers the increase in revenues
due to increase in price and increase in volume
• CAPM stands for Capital Asset Pricing Model and is
used for pricing of financial markets securities

Case Prep
• Present value is the value of future cash flows (positive
or negative) brought to present value
• Perpetuity calculation is the value of all future cash
flows until perpetuity brought to present value; is
usually used to calculate the value of firm or
investment

Resources
• NPV stands for net present value and is the value of all
future cash flows brought to present value by the
interest rate minus the initial investment

52
III. Case math – business formulae (2/2)

Overview
• CAGR stands for Compound Annual Growth rate and
indicates the average annual growth per years in a
given period of time

Interview
• Return on assets (ROA) measures how profitable the
company is relative to its assets and gives an idea of
how effective management is on using company’s
assets to generate earnings

• Return on equity (ROE) measures how much money

a company has provided relative to the money

Fit Prep
shareholders have invested

• Return on investment (ROI) measures the efficiency

of an investment. Sometimes used to compare
several possible investments

Case Prep
• Gross margin is how much money the company
makes before sales, marketing and general expenses;
this amount divided by the overall revenue of a
company is the gross margin %

Resources
• Operating margin indicates how much money the
company makes before taxes

53
III. Case math – facts and fractions

Overview
Case factoids
Factoids Equivalent fractions
Equivalent fractions
You might be asked to estimate a market size. It’s useful to know
approximate data so your estimation is more accurate. Research
It can help to have the following fractions memorized:
1/2 = 50%

Interview
these types of facts for your office location.
1/3 = 33%
1/4 = 25%
Population Data: Economic Data: 1/5 = 20%
1/6 = 16.7%
• U.S. Population: 320M • U.S. GDP Growth Rate: 2-3%
• NYC Population: 8M • World Nominal GDP: 1/7 = 14%
1/8 = 12.5%

Fit Prep
• LA Population: 4M $100 trillion
• Chicago Population: 3M • U.S. Nominal GDP: $25 trillion 1/9 = 11%
• E.U. Nominal GDP: $20 trillion
• U.S. Households: 100M 1/10 = 10%
• Average lifespan: 80 years
• Evenly distributed per age:
4M
•
Other math resources

Case Prep
• Population of China: 1.3B
• Population of India: 1.5B • Flash cards or times tests online
• Global Population: 8.0B
• GMAT prep books!
• CQ Interactive (membership required):
http://www.cqinteractive.com/cqi_main.cfm
• iPhone or other mobile apps: (i.e. Fractionator,

Resources
Fraction Factory, Brain Tuner Lite (free), and
ArithmeTick)

54
Chart clearing - general tips

Overview
1. Begin your chart clearing by explaining what You’ll see the following types of charts during case
you are seeing: interviews:
a) The data 1. Marimekko or “Mekko”

Interview
2. Waterfall
b) Axes
3. Stacked Bars
c) Units
4. Bubble Chart
d) Years
5. Clustered Bars

2. Articulate high-level insights and trends you Make sure that you can confidently clear each chart

Fit Prep
can identify based on the chart type.

3. (If asked), use data from the chart for Rocketblocks and other schools’ casebooks are useful
additional analysis for chart clearing prep.

Case Prep
4. Link chart insights to other information
provided, and offer second-order insights

5. Finish with a clear “so what” from the chart –

what does this information mean for the case

Resources
and the client?

55
IV. Charts - “Marimekko” or “Mekko” (1/2)

Overview
Clear stacked bar charts by looking at the following:

External to chart:
• Check chart title, headers, and footers

Interview
• Read axes and units carefully

Internal to chart:
• Pay attention to segment sizes / overall total
• Box sizes within each segment typically show
absolute market share within that segment
• Totals for each company can be computed by

Fit Prep
multiplying height (percentage in this example)
* width (segment size in this example)
• Check across segments for trends or missing
companies
• Check for an “Other” box which combines the
remaining companies’ share into a single box. A

Case Prep
large “Other” box typically indicates a
fragmented market.

Resources
The “Mekko” is a common chart form,
especially at Bain and BCG.

56
IV. Charts - “Marimekko” or “Mekko” (2/2)

Overview
Key takeaways from this chart

Market segmentation:
Notice that the $160B market is divided into

Interview
four segments. The width of the segment on
the top of each bar indicates the size of that
segment. For instance, segment 1 is $50B and
segment 3 is $35B.

Competitive landscape:

Fit Prep
We can observe the level of competition and
relative positioning of each player. For
instance, segment 1 is dominated by our
client and is consolidated, while segment 3 is
very fragmented. Additionally, Competitor 3

Case Prep
doesn’t play in segment 3 or 4, and
Competitor 2 is not in Segment 2.

Share of segment:

Resources
Within each segment, we can also find the size of segment captured by the various players by looking at their
height within the bar. For instance, segment 1 generates $50B of revenues and our client has 50% share i.e.
50% of $50B = $25B. Similarly, segment 2 generates $25B of revenues and competitor 3 appears to have 10%
share i.e. 10% of 25 = $2.5B.

57
IV. Charts – “Waterfall”

Overview
Clear waterfall charts by looking at the
following:

External to chart:

Interview
• Check chart title, headers, and footers
• Read axes and units carefully

Internal to chart:
• Orient yourself to what is being built-up
(or built-down)

Fit Prep
• Pay attention to each bar’s size / value
relative to total size / value
• If axis is a total (not %), can calculate
individual components in % of total
• If axis is % (with known total), can

Case Prep
calculate individual components in #
• Pay attention to each label and how it
ties back to the case

Resources
58
IV. Charts – “Stacked Bars”

Overview
Clear stacked bar charts by looking at the
following:

Interview
External to chart:
• Check chart title, headers, and footers
• Read axes and units carefully

Internal to chart:
• Absolute axes can show volume

Fit Prep
changes over time (See Exhibit 1 – left
hand side)
• If only absolute, can check for mix shift
using segment / total
• % axes can show mix shift over time

Case Prep
(See Exhibit 2 – right hand side)
• If only %, can check for absolute
growth using totals & %’s
• Pay attention to each label and
segment and how it ties back to the
case

Resources
59
IV. Charts – “Bubble Chart”

Overview
Clear stacked bar charts by looking at the
following:

Interview
External to chart:
• Check chart title, headers, and footers
• Read axes and units carefully
• Check legend – typically bubble size is
meaningful

Internal to chart:

Fit Prep
• Understand the meaning of the axis,
positioning, size of each bubble
• Pay attention to each label and how it ties
back to the case
• Make sure to understand trend lines and
“normative bands” as they vary from firm to

Case Prep
firm
• Look for outliers in any of the three
dimensions (x, y, bubble size)

Resources
Bubble charts can be confusing – ask questions if something is unclear.

60
IV. Charts – “Clustered Bars”

Overview
Clear stacked bar charts by looking at the
following:

Interview
External to chart:
• Check chart title, headers, and footers
• Read axes and units carefully

Internal to chart:
• Pay attention to each bar / trend and how it
ties back to case

Fit Prep
• Compare bars to each other to understand
trend and tie back to case
• Check totals of each bar and understand
implications on case
• Identify inflection points where trends
change significantly

Case Prep
• Pay attention to CAGR calculation start and
end points, and identify trends before and
after those points which do not follow

Resources
A clustered chart groups information together to allow for easy
comparison.

61
V. Industry – Checklist of industries to explore

Overview
❑ Agribusiness ❑ Defense ❑ Oil & Gas
❑ Advertising ❑ Dentists ❑ Pharmaceuticals
❑ Air transport / Airlines ❑ Doctors ❑ Poultry Production
❑ Alcoholic Beverages ❑ Drugstores ❑ Printing and Publishing

Interview
❑ Alternative Energy ❑ Electric Utilities ❑ Private Equity
❑ Automotive ❑ Electronics Manufacturer ❑ Professional Sports
❑ Bars and Restaurants ❑ Food Stores ❑ Railroads
❑ Books & Magazines Retail ❑ For-profit Education ❑ Real Estate
❑ Car Dealers ❑ Funeral Services ❑ Recycling
❑ Casinos ❑ Government (local / regional / national) ❑ Student Loan Companies
❑ Cattle Ranchers ❑ Gym Studios ❑ Steel Production

Fit Prep
❑ Clergy & Religious Organizations ❑ Highway Concessions ❑ Sugar Cane Production
❑ Clothing Manufacture ❑ Hospitals ❑ Telecom Services (mobile and fixed)
❑ Coal Mining ❑ Hotels ❑ Timber, Logging & Paper Mill
❑ Colleges, Universities, Schools ❑ House Appliances Retail ❑ Tobacco
❑ Coffee Shops ❑ Infrastructure ❑ Transportation (urban)
❑ Computer Software ❑ Internet and Cable TV ❑ Trash Collection
❑ ❑ ❑

Case Prep
Commercial Bank Insurance Company Travel Agency
❑ Contractors ❑ Libraries ❑ Utilities
❑ Credit Card Company ❑ Media / TV ❑ Venture Capital
❑ Cruise Ships ❑ Music Production
❑ Dairy

Resources
For each industry, understand sources of revenue, cost structures, and who the customers are.

Overviews of some key industries can be found in the MCG Industry Review

62
VI. Zoom Best Practices (Overall)

Overview
Technology Attire, Surroundings
• Join the meeting ~10 minutes before the start time • Follow recommended dress attire. Interviews are
• Use earbuds / headphones for audio, if possible business professional; it helps to practice in business

Interview
• Use your phone for audio (use Zoom dial-in or call-me casual occasionally. Wear shoes, even on Zoom – it’ll
features or similar). That way if you have computer / make it feel like the real thing (because soon it will be)
internet issues the audio won’t be interrupted • Set neutral or virtual background, and check video for
• Hardwire your computer to the modem, if possible good lighting before starting the interview
• Make sure that your Zoom profile shows your
first and last name (and pronoun, if desired)

Fit Prep
Communication
• Avoid reading from a screen or notes from a paper – make eye contact with either the camera (preferred) or the screen
• Be clear and concise in your messaging. When giving structured answers, ‘lay out the framework’ before filling in the
blanks (e.g., “I have 3 things I’d like to explore… the first is [xyz]”)
• It’s ok to ask additional clarifying questions if you didn’t hear something clearly over Zoom. This is normal and expected

Case Prep
• Walk your interviewer through any math before you start – be sure to tell them why you’re doing your calculations
• Maintain physical presence as you would for an in-person interview, bring your best energy, and smile! ☺

Troubleshooting
• Tech challenges happen often. Don’t panic, note where the conversation was interrupted, and reach out to your contact

Resources
(might be the interviewer, might be the recruiter) to re-establish connection
• Interruptions will not materially impact your interview if you don’t let it. Stay calm - remain a professional. Consultants
experience this with clients - it happens. They will appreciate your composure should it happen during your meeting
• If you have computer or internet issues consider switching to your phone to join the interrupted meeting

63
Practice Case Compendium

64
Tips for Giving an Effective Case
There are many ways to give a case. Case structure, tone, format, and content will vary by interviewer, by firm, by office, by
geography. We do recommend the following to help both yourselves and your classmates become more effective casers and
candidates:

• Ask your partner if there is something they want to work on in advance (or if they’ve received common feedback)
– Practice casing with intent. Have an area you want to specifically focus on improving, then target that area during the
practice case
• Take the casing process seriously
– Now is the time to congratulate your friends and case partners for doing something well, and at the same time not let
them off the hook for their mistakes – doing so will only jeopardize their chances of doing well when it really matters
– Do not joke around during the case – treat these as formal encounters to get in practice for the real deal
• Read the case fully through beforehand, and think through how you might solve it and what mistakes you might make
or challenges you may encounter
– If there is a quant piece, solve it in advance so you’re not solving along with the interviewee
– If the case covers a subject area (industry or function) you don’t know well, do a quick review from the industry and
functional frameworks found in this book or provided in the MCG Google Drive
• Do not unnecessarily ‘help’ your partner along
– If there is uncomfortable silence, or they’re going down the wrong path you can ‘nudge’ them in the right direction, but
only after you’ve given them a fair shot to figure it out themselves
– Let them be wrong (for a time) before pushing them in the right direction. Learning how to ‘get out of a hole’ is a critical
part of the case learning curve
• Take detailed notes during the case, and provide unvarnished and honest feedback
– Leverage the case feedback template in the MCG Google Drive to structure your feedback by case component

65
Index of Practice Cases (1 of 3)
PAGE CASE # CASE NAME FIRM CASE TYPE INDUSTRY Overall Quant Creativity
69 1 Army Hotel McKinsey & Company Market Entry Hospitality 2 2 2
75 2 Breast Cancer Surgery L.E.K. Consulting Profitability Healthcare 1 1 1
80 3 Burger Palace Undisclosed Market Entry Restaurants, Food & Bev 2 2 1
87 4 Chicken Pox Vaccine Undisclosed Market Sizing Pharmaceutical/Healthcare 3 3 2
94 5 Cleaning Products McKinsey & Company Growth Strategy Consumer Products 1 2 1
100 6 Coffee and Tea Apparel Deloitte Mergers & Acquisitions Retail & Apparel 2 3 1
Transportation &
108 7 Commercial Vehicle OEM in China Strategy& Growth Strategy 2 2 2
Automotive
114 8 Consumer Products Strategy BCG Market Entry Consumer Products 2 2 3
121 9 Contact Lenses McKinsey & Company Profitability Consumer Products 2 2 2
131 10 Deepwater Inc. Undisclosed Investment Decision Energy 3 1 3
137 11 Electric Utility McKinsey & Company Profitability Energy 2 1 2
143 12 Elena's Electronics Undisclosed Profitability Consumer Electronics 2 2 1
150 13 Finance Co Bain & Company Growth Strategy Financial Services 3 3 3
157 14 French Beauty Co Accenture Operating Model Retail & Apparel 2 1 2
163 15 German Telecom BCG Profitability Telecommunications 2 2 1
169 16 Green Co Deloitte Investment Decision Retail & Leisure 3 3 1
Financial Services &
176 17 GreenShield Health Insurance Strategy& Market Entry 2 2 1
Insurance
183 18 Hawaiian Smoothies BCG Market Entry Restaurants, Food & Bev 2 2 2

1 = Easiest, 3 = Hardest
Quant = Level of math involved, Creativity = Difficulty of developing frameworks and brainstorming

66
Index of Practice Cases (2 of 3)
PAGE CASE # CASE NAME FIRM CASE TYPE INDUSTRY Overall Quant Creativity
189 19 Heavy Attrition Z.S. Associates Organizational Change Healthcare 1 1 2
194 20 International Airlines Bain & Company Profitability Transportation 1 2 1
201 21 Katrina BCG Non-traditional Problem Non-profit/Education 2 1 2
206 22 Linda's Great Burgers McKinsey & Company Mergers & Acquisitions Restaurants, Food & Bev 2 1 2
212 23 Lola Lo’s Zoo Undisclosed Investment Decision Entertainment 3 3 3
219 24 Lost Patent A.T. Kearney Revenue Pharmaceutical/Healthcare 2 1 3

224 25 Midwest Machinery Co. Bain & Company Sourcing/Outsourcing Industrial Goods 3 3 2

231 26 New Vaccine L.E.K. Consulting Market Entry Pharmaceutical/Healthcare 2 2 1

238 27 Payments Company Deloitte Profitability Financial Services 2 2 1
245 28 Pharmaceutical Rare Disease BCG Growth Strategy Pharmaceutical/Healthcare 3 3 2
251 29 Project Gargoyle Bain & Company Investment Decision Hair Care Products 3 2 3
261 30 PyeongChang Winter Olympics McKinsey & Company Investment Decision Tech, Media, & Telecom 3 3 3
266 31 Quahog Public Schools McKinsey & Company Non-traditional Problem Non-profit/Education 3 2 3
272 32 Retirement Apartment Complexes Undisclosed Market Entry Real Estate 2 3 2
279 33 Skylight Goods BCG Operations Industrial Goods 3 3 2
290 34 Smart Cards McKinsey & Company Growth Strategy Tech, Media, & Telecom 2 1 3

297 35 Student Health Insurance Deloitte Growth Strategy Insurance 2 2 3

309 36 Super Jr. Baby Formula Bain & Company Investment Decision Consumer Products 3 3 2

1 = Easiest, 3 = Hardest
Quant = Level of math involved, Creativity = Difficulty of developing frameworks and brainstorming

67
Index of Practice Cases (3 of 3)
PAGE CASE # CASE NAME FIRM CASE TYPE INDUSTRY Overall Quant Creativity
320 37 Apache Helicopter Undisclosed Investment Decision Industrial Goods 3 3 3
328 38 White Boards Bain & Company Sourcing/Outsourcing Durable Goods 2 1 2
334 39 Telco Talks Accenture Mergers & Acquisitions Telecommunications 2 2 1
340 40 Yarmouth Yachts Cornerstone Research Legal Analysis Luxury Retail 1 1 1
348 41 Sueno Mattress KPMG Strategy Profitability Consumer Products 1 1 2
354 42 Cruise Line Acquisition BCG Profitability Travel & Tourism 3 2 3

362 43 Shoe Co. Bain Market Entry Consumer Products 2 2 1

370 44 Craft Co. EYP Profitability Consumer Products 1 2 1

376 45 Telecom Co. Bain Market Entry Telecom 3 3 2

1 = Easiest, 3 = Hardest
Quant = Level of math involved, Creativity = Difficulty of developing frameworks and brainstorming

68
 Overall Quant Creativity
2 2 2

Case #1: Army Hotel

Case Type: McKinsey & Co – Interviewer Driven
Market Entry

Industry:
Hospitality

Concepts Tested:
• Pricing
• Breakeven analysis
 Quant Level – MEDIUM

Case #1: Army Hotel (1/5) Case Type Industry Client Type

Market Entry Hospitality Private Equity

McKINSEY & CO – Round 1 – Interviewer Driven

Fit Questions Interviewer Guidance

1. Why consulting? This case helps candidates understand that investors’ interests are usually two-fold: profitability
2. Tell me about a time when you had to face a significant of the investment and their own financial hurdles. In order to be successful in this case,
challenge. candidates must also gain an understanding of the market and competition. McKinsey cases are
interviewer driven, so you will ask all the questions listed. However, do assess the candidate on
their ability to drive the case forward.

Fit Evaluation
Overall Fit Performance
S1 O1 A 1
R 1

2 2 2 2

Case Prompt Case Development

Our client is a PE firm that has the opportunity to invest in building a 400-room hotel on an army base. The idea was 1. Framework
given to the PE firm by the army. 2. Pricing analysis
3. Revenue analysis
The government has decided to give our client the land for free – our client can build the hotel and keep all of the 4. Cost analysis
profits. Our client has hired you to find out what they need to know to determine if they should build it or not. 5. Recommendations

Case Evaluation
Structure and Framework

Analytical and Problem Solving Ability

Communication and Positive Attitude

Synthesis and Recommendation

70
Case #1: Army Hotel (2/5)
Framework Interviewer Guidance
Working hypothesis: The PE firm should build the hotel. To validate that, I’d like to The purpose of the hotel is to provide housing for:
look at • Soldiers attending training at the base
• Hotel Market • Soldiers with temporary transfers to this base
– Competition
• Number of hotels If asked, provide the candidate with the following information:
• Location
– Customers Competition
• Soldiers • There are three existing hotels near the base and each are approximately
– Proximity to base 20 miles away from it. The nightly rates for each hotel are:
– Hilton ($110/night)
• Profitability – Hampton Inn ($75/night)
– Revenues
– Days Inn ($40/night)
• Demand/Occupancy
• # of rooms
• Pricing Occupancy
– WTP – There are two training classes held at the base:
• Non-occupancy revenues • Basic Officer Training: 200 soldiers per class; class lasts 10 weeks and
– Costs is held 5 times per year.
• Capital expenses • Advanced Officer Training: 50 soldiers per class; class lasts 4 weeks
– Building/investment and is held 10 times per year.
– Breakeven timeline
– Temporary housing: Soldiers are transferred every 3 years and are given
• Operational expenses
15 days to find a permanent place to stay. There are 9,000 active duty
– Labor
soldiers subject to this rotation.
– Maintenance

• Client interests (PE firm)

– Portfolio mix
– Financial and operational investment goals
– Exit opportunities
– Opportunity cost

71
Case #1: Army Hotel (3/5)
Question: Pricing Strategy Interviewer Guidance: Pricing Strategy
The Army will reimburse soldiers $75 per night (per diem). How much would • Probe the student to determine how much per night the hotel will charge
you charge at the hotel? and what services should be included.
• The candidate should consider how much breakfast and dinner will cost
Clarify that this per day reimbursement is also intended to cover the soldiers’ the soldier and ensure that those costs in addition to the nightly rate will
breakfast and dinner. not exceed the stipend.
• The candidate should recognize that the Days Inn ($40/night) is the only
competitive option the soldier is likely to consider, and should discuss how
the distance away (20 miles) might also impact this decision, as well as
what amenities are included.

Question: Revenue Interviewer Guidance: Revenue

Assume for purposes of the rest of the case that the client decides the hotel Candidate should use occupancy information in previous slide to compute
will charge a fee of $60/night. revenue:

Assuming that the classes and relocation of soldiers are the only sources of Type of Times/ Total rooms/
revenue, what is the total potential revenue per year for the hotel? People # Time Period
training year year

Basic 200 10 weeks 5 70,000

Advanced 50 4 weeks 10 14,000
Temp. 3,000 15 nights 45,000

Total rooms/yr. = 129,000 (round to 130,000)

Total revenue = $7.8 million @$60 per night

72
Case #1: Army Hotel (4/5)
Question: Costs Interviewer Guidance: Costs
Having addressed the revenue side, let's talk about costs. What are the costs Annual operating costs
associated with operating a hotel? • Candidate should list off relevant fixed and variable operating costs such as
labor, supplies and utilities.
If the candidate has not yet touched upon initial investment costs, probe • Tell them to assume total Op-ex of $4 million per year.
them to do so by asking:
Upfront investment cost
What are the other costs associated with running a hotel? • The candidate should talk about investment costs.
• Tell them that the Hampton Inn made an initial investment of $50,000 per
room. The same costs can be assumed for our client’s hotel.
• Candidate should calculate a total initial investment of $20 million to build
a 400 room hotel.

Question: Capacity Interviewer Guidance: Capacity

Are there any issues that may keep the hotel from attaining the calculated We are looking for the candidate to touch on capacity issues.
revenue?

After the candidate identifies the capacity issue, state that “during their The candidate should revise revenue calculation:
busiest part of the year, which lasts four months, the hotel runs a capacity • 80 rooms x 4 months x 30 days per month = 9600 rooms per year (round
shortage of 80 rooms per night.” this to 10,000 rooms)
• So, the new number of rooms are 120,000 x $60 per night = $7.2M/ year in
The candidate should then recalculate the revenue projection created earlier annual revenue
and to determine the operating profit. • Therefore operating profit is $7.2 M (Revenue) - $4M (Operating Cost) =
$3.2M per year (profit)

73
Case #1: Army Hotel (5/5)
Question: Breakeven Interviewer Guidance: Breakeven
Assume the client wants to breakeven within 4-5 years, what is the breakeven • Breakeven time = fixed costs (investment) / operating margin: $20M /
point for the PE firm? $3.2M = 6-7 years.

Once calculated, probe the candidate by asking, “Is this a good rate of • Probe the candidate to come up with some ideas and suggestions to
return? Why do you think this?” decrease breakeven period:
– Add a restaurant to the hotel
Once the candidate responds, ask, “What can be done to decrease the – Host army conferences
breakeven period?” – Find ways to decrease costs or increase occupancy

Recommendation Risks and Next Steps

The PE firm should not invest in the army hotel: Risks
• Annual operating profits are $3.2M • May lose opportunity for decreasing BE timeline by augmenting
• This results in a breakeven period of 6-7 years, exceeding the firm’s goal of non-occupancy revenue (ex. restaurants and amenities) and by reducing
4-5 years costs
• Current army per diem does not allow for increases in the price of the • Trainings may change and occupancy estimations may be inaccurate
hotel/night • Opportunity cost for PE firm

Next Steps
• Analyze the financial impact of non-occupancy revenue and explore areas
of cost reduction
• Look for other army bases with lower costs and/or higher occupancy
demands
• Look for other investments that have a breakeven time period of 4-5 years

74
 Overall Quant Creativity
1 1 1

Case #2: Breast Cancer Surgery

Case Type: L.E.K. Consulting – Candidate Driven
Profitability

Industry:
Life Science, MedTech

Concepts Tested:
• Pricing
• Revenue Maximizing
• Marketing Strategy
 Quant Level - LIGHT

Case #2: Breast Cancer Surgery (1/4) Case Type Industry Client Type

Medical device
Profitability Healthcare
L.E.K.– Round 1 – Candidate Led company

Fit Questions Interviewer Guidance

1. Tell me about a time you navigated ambiguity in the This is a candidate driven case. Provide the candidate with additional information only when
workplace. asked. The candidate should understand that to assess the profitability of this device, they will
2. Tell me about a time you demonstrated initiative. have to size the market as well as measure the willingness to pay for the device.

Fit Evaluation
Overall Fit Performance
S1 O1 A 1
R 1

2 2 2 2

Case Prompt Case Development

Our client is a large medical device corporation. They have developed a new medical device to assist surgeons in 1. Framework
breast conservation surgeries (BCS). They’ve approached us to determine a revenue maximizing pricing strategy for 2. Analysis of Market potential
the device. 3. Analysis of Revenue potential
4. Final recommendation
A breast conservation surgery is the partial removal of breast tissue found to be cancerous. This is in contrast to a
mastectomy, which removes the entire breast. While hopefully this device will be adopted worldwide, at the
moment, the client would like us to determine the pricing strategy for the product in the United States only. Case Evaluation
Structure and Framework

Analytical and Problem Solving Ability

Communication and Positive Attitude

Synthesis and Recommendation

76
Case #2: Breast Cancer Surgery (2/4)
Interviewer Guidance Framework
The candidate should develop a framework that considers the following drivers: The candidate should walk the interviewer through the framework and ask
further questions to understand the market and revenue potential. Provide
• Med Device Market Potential this information when asked:
– Patient
• Market size: Number of breast conservation surgeries conducted per year • There are around 100,000 breast conservation surgeries per year.
(demand) • The device is applicable across a wide range of procedures: it can be used
• Growth trend: Frequency rate of breast cancer in population in every breast conservation surgery.
• The device is disposable, so every surgery needs a new device.
• Revenue Potential • The device is FDA approved.
– Provider/Clinician Adoption rate: willingness of clinicians to adopt the device • There are no concerns related to quality from R&D.
at different price points • The success rate of the device is 100%.
– Med Device Co. relationship with clinicians: supplier contracts, trust • Currently there are no competitors, and the device would be the only
– Insurance companies willingness to cover device cost as part of surgery product of this kind available on the market.

• BCS Device At this point, the candidate should know that the market potential for the
– Degree of Innovation (availability of substitutes) device is 100,000 surgeries per year.
– Main features
• Device applicability / usability across variety of breast conservation The candidate should then inquire if we know anything about a clinician’s
surgeries willingness to pay for the device. Show Exhibit 1.
• Success/complication rate
• Useful life, quality
– Compliance to regulations (FDA)
• Patent

Transition statement: I would like to begin by better understanding a clinician’s

adoption of the new device. It would be great if we had data on their willingness to
adopt the device at various price points.

77
Case #2: Breast Cancer Surgery (3/4)
Exhibit 1: Adoption

Clinician Adoption of Device By Potential Price Point

Percent of
Surgeries

Price Per Medical Device

78
Case #2: Breast Cancer Surgery (4/4)
Recommendation Brainstorm
In order to understand the willingness to pay of clinicians, the candidate After the candidate has identified the optimal pricing strategy of $600/unit,
should calculate the revenue at each price point tested during the market ask “How would you tailor a marketing strategy to ensure you reach 50%
research. adoption?”

Market Price / Device Willingness to Potential Potential Answer

Potentia Adopt (%) Revenue • Leverage existing sales relationship with general practitioners and specialty
l doctors
100,000 $0 90% $0 • Target large hospital networks
100,000 $300 75% $22.5M • Ads (TV, Social Media, Specialty Websites)
100,000 $600 50% $30.0M
100,000 $1000 10% $10.0M

The candidate should conclude that the device price that allows the client to
achieve maximum potential revenues is $600. The candidate should also Risks and Next Steps
conclude that greater adoption across surgeries does not necessarily lead to
greater revenues, since the benefit of higher adoption may be outweighed by Risks
a lower price point. • Competitors might replicate the device and enter the market
• The revenue maximizing price might not be the profit maximizing one
A strong candidate will identify that the revenue maximizing price may not be
optimal in terms of profits. Next steps
• Raise the barriers to entry by patenting the product and signing exclusivity
agreements with clinicians
Calculations • Move forward with the analysis including the costs to find the profit
• The client should market the device at a price of $600 per unit maximizing price
• This price allows the client to maximize the revenue potential given the
current willingness to adopt

79
 Overall Quant Creativity
2 2 1

Case #3: Burger Palace

Case Type: Undisclosed – Candidate Driven
Market Entry

Industry:
Restaurants, Fast Food and Beverages

Concepts Tested:
• Market sizing
• Breakeven analysis
• Math structuring
 Quant Level – MEDIUM

Case #3: Burger Palace (1/6) Case Type Industry Client Type

Restaurants, Food &

Market Entry Fast Food Restaurant
UNDISCLOSED – Round 1 – Candidate Driven Beverage

Fit Questions Interviewer Guidance

1. Tell me about your most rewarding professional The primary objective is for the new restaurant to be profitable; Burger Palace’s management
accomplishment. will move ahead if it is. They would like to act as quickly as possible.
2. Tell me about your most difficult professional
challenge. This is a straightforward profitability case that is good practice for a candidate to drive a case.
The interviewer should not need to provide much guidance or prodding throughout the case.

Fit Evaluation
Overall Fit Performance
S1 O1 A 1
R 1

2 2 2 2

Case Prompt Case Development

Our client is Burger Palace, a Chicago area fast food restaurant with 20 locations. They have been approached by 1. Framework
Midway Airport about opening a new location inside the main terminal. 2. Discussion/Q&A
3. Profitability analysis
They have asked us to come to a meeting with their CEO and tell them if we think this would be a profitable venture. 4. Final recommendation
How would you structure your approach to this question?

Case Evaluation
Structure and Framework

Analytical and Problem Solving Ability

Communication and Positive Attitude

Synthesis and Recommendation

81
Case #3: Burger Palace (2/6)
Framework Interviewer Guidance
Working hypothesis: Burger Palace should open the new restaurant in Midway. Candidates will take a variety of approaches to structuring an approach to this
question. The primary things to look for are:
• Profitability: Will the new restaurant be profitable?
– Expected revenue • Did the candidate state a hypothesis?
– Volume of sales – estimate by looking at expected customers – The candidate should express the core idea that they would like to test
– Average revenue per sale – estimate by looking at avg. tickets at other through their analysis. They should clearly demonstrate how the questions
Burger Palaces, customer research at Midway, or avg. ticket of similar they’re asking are directed at answering the specific question of whether
restaurants in airport Burger Palace should open a new restaurant.
– Expected costs – It’s less important for the hypothesis to be backed up with evidence, since it’s
– Fixed costs – rent, food preparation equipment, operating expenses, so early in the case (though strong candidates will draw on their own
salaried labor, royalty fees to Midway airport, advertising knowledge and intuitions to develop preliminary insights about the potential
– Variable costs – hourly labor, ingredients (burger patties, buns, and for this new restaurant).
fries), utilities
• Is profitability the primary consideration?
• Market: Will the new restaurant succeed in the airport food market? – The prompt is very clear that profitability is the deciding factor for
– Primary Competitors management. It’s OK for candidates to discuss other considerations, but their
– Are the other restaurants similar in cuisine/style? primary focus should be on profitability.
– Would the other restaurants respond to the Burger Palace opening?
– Customer Profile • Is the framework case-specific?
– Major customer groups: passengers and employees – Excellent frameworks will explore specific aspects of the Midway fast food
– Would customers respond positively to the healthiness of the food, market, rather than just generic ideas about new market entry.
speed of service, price, etc.?

• Risks: What other factors should Burger Palace consider?

– Execution – would Burger Palace be able to successfully open and run the
restaurant, given that it’s their first airport location?
– Strategy fit - How does this potential airport location fit into Burger Palace's
broader business strategy? (e.g., expand reach, target new customer
segments)

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Case #3: Burger Palace (3/6)
Market Information Market Information (cont’d)
Provide the candidate with the information below when it is requested. Push Sales Volume at Midway
the candidate to think about specific ways to estimate revenue, costs, and Let the candidate structure their own approach and ask for all of the
profits at Burger Palace. Don’t simply disclose information if asked general following information. If needed, prompt with, “How would you estimate the
questions about expected revenue, costs, or profits. number of customers that Burger Palace would have at Midway airport?”

Burger Palace Passengers

Information has not been provided about other Burger Palace locations, although we do – Hours/dates of operation: 6am – 10pm.
have some comparable revenue/cost information: – Day open per year: 350 days
• The average transaction size is $10. – Gates at Midway: 25
• Variable costs are approximately 80% of sales revenue. – Average planes per hour: 1 per hour per gate
– Fixed costs will include: – Average plane size: 175 passengers
• $200,000 in annual rent and fixed operating costs (includes the initial construction of – Average load factor: 80% (number of seats filled on average)
the new restaurant). – Passengers who will eat each day: 5% of passengers will eat at Midway
• $80,000 as an annual royalty fee to Midway Airport.
Employees
Competition – Number of employees: 2,000
• There are currently 7 restaurants at Midway. They each have an equal market share. – Employees who will eat each day: 60% of employees will eat at Midway
• If Burger Palace were to open a restaurant, we expect that each of the 8 restaurants
would then gain an equal market share.
• We do not expect the number of total customers to increase because of the new Burger
Palace location.
• We don’t know anything about the types of restaurants currently at Midway.

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Case #3: Burger Palace (4/6)
Calculations (1/2) Calculations 2/2
Number of Passengers Annual Profit
– 25 gates x 1 plane/hr. x 16 hrs./day = 400 planes/day – $245,000 passenger profit + $105,000 employee profit = $350,000 total annual profit
– 175 capacity/plane x 80% avg load factor = 140 pax/plane (excl. FC)
– 400 planes/day x 140 passengers/plane = 56,000 pax/day – $350,000 - $280,000 annual fixed costs = $70,000 total annual profit
– 56,000 pax/day x 1/8 BP market share x 5% eat each day = 350 pax/day at
Burger Palace (note math shortcut that 56k/8=7k) A strong candidate will identify and use math shortcuts:
– Use contribution margin directly instead of revenue and variable costs separately (i.e.
Contribution from Passengers using $2 CM in one step rather than using $10 revenue and $8 costs in two steps).
– 350 pax/day x $10 avg spend x 20% profit margin = $700 profit/day (excl. FC) – Add the 350 passengers and 150 employees to a 500 customer total before computing
– $700 profit/day x 350 days/year = $245,000 profit/year (excl. FC) revenues and profits.

Number of Employees
– 2,000 employees x 1/8 BP market share x 60% eat per day = 150
employees/day at BP

Contribution from Employees

– 150 employees/day x $10 avg transaction size x 20% profit margin = $300
profit/day (excl. FC) Interviewer Guidance
– $300 profit/day x 350 days/year = $105,000 profit/year (excl. FC) Some interviewees will have trouble starting the market sizing and may need a little nudge to
begin thinking in that manner. That is OK--it isn’t about whether or not they can read the
interviewer’s mind--it’s about how logically they think about the problem as they go. Do they
make realistic assumptions about how many people are on a plane? Do they account for the
fact that the planes won’t all be full?

Most interviewees will miss that customers will include both passengers and Midway Airport
employees. If so, let the candidate go through calculations for passengers only, then ask,
“Would anyone else be eating at Burger Palace?” Finally, proceed to the second calculation.

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Case #3: Burger Palace (5/6)
Brainstorming: Optional Math Extension: Optional
After the candidate has identified $70 K in annual expected profit, ask, “What If the candidate identifies market share as a risk and has performed well on the
are other factors that should be considered when opening a new restaurant math, ask, “You mentioned that Burger Palace may not be able to achieve 1/8
at Midway Airport?” market share. What is the minimum market share that Burger Palace would need to
break even?”
Potential Answers
The candidate should assume that the average transaction size is the same at other
restaurants at Midway ($10).
Internal Factors
• Implementation & execution Breakeven occurs when:
• Staffing the new location • Annual Costs = Annual Revenue (i.e. Profit = 0)
• Brand effects for Burger Palace • Annual Costs = $280k + Annual Revenues x 80% variable costs
• Advertising & marketing • Therefore, breakeven occurs when: $280k = Annual Revenue x 20%
– Note: this could be calculated directly from the alternative approach,
External Factors breakeven occurs when: Fixed Costs = Revenue * % Contribution Margin
• Competitive response within Midway
• Assumption about Burger Palace receiving 1/8 market share Market Size:
• Annual Revenue = Market Share x Market Size
• Customer preferences
– Market Share is unknown; Market Size is known
• Market Size = (# pax/day + # employees/day) x Avg. Transaction x 350 days
• Market Size = (56,000 x 5% + 2,000 x 60%) x $10 x 350 days
• Market Size = (2,800 + 1,200) x $3,500 = $14M

Combining these two sections:

• $280k = Annual Revenue x 20% = Market Share x Market Size x 20%
• $280k = $14M x Market Share x 20%
• Market Share = $280k/$2.8M = 10%

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Case #3: Burger Palace (6/6)
Recommendation Risks
– A new Burger Palace location inside Midway Airport would be profitable, so • Change in market share
Burger Palace should open the new restaurant – We assumed we would split market share with the other Midway
• The new restaurant should expect $70,000 total annual profit restaurants. Is this completely realistic?
• We expect Burger Palace to receive 12.5% market share, although they would – Do we need to look deeper into what other/similar types of food are
break even at only 10% present at Midway and where they are located?
• Increase in costs or Midway Airport royalty payment

Next Steps

• Conduct market assessment to determine feasibility of assumptions and

better understand competitive landscape
• Advertising/branding opportunities for Burger Palace’s other locations –
will opening this location help the other locations?
• Potential to charge higher prices: often chains charge higher prices at their
airport locations to compensate for their royalty fees to the airport. Is
there room for Burger Palace to raise prices?

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 Overall Quant Creativity
3 3 2

Case #4: Chicken Pox Vaccine

Case Type: Undisclosed – Candidate Driven
Investment Decision

Industry:
Pharmaceutical/Healthcare

Concepts Tested:
• Chart clearing
• Market sizing
• Pricing
• Breakeven analysis
 Quant Level – HEAVY

Case #4: Chicken Pox Vaccine (1/6) Case Type Industry Client Type

Pharmaceutical / Pharma
Market sizing
UNDISCLOSED – Round 1 – Candidate Driven Healthcare Manufacturer

Fit Questions Interviewer Guidance

1. Walk me through your resume. This case contains a lot of information to be given. Let the interviewee know we are only
2. Why X Firm? (specify a Firm of interviewer choosing) concerned with the US market. The candidate should ask questions on the vaccine (dosage,
frequency, etc.). The key will be to identify that once the current population is vaccinated, the
revenues will drop as the volume would only correspond to incremental population growth.

Fit Evaluation
Overall Fit Performance
S1 O1 A 1
R 1

2 2 2 2

Case Prompt Case Development

Your client is a large pharmaceutical drug company working on a vaccine for chicken pox. The vaccine needs to pass 1. Framework
three phases of testing to be approved by the FDA. It has just completed the second phase, and the client is asking for 2. Market sizing - volume
your help to decide if they should fund the third phase. The third phase would last 2 years and cost $300M. Results 3. Pricing the product
from previous phases indicate the vaccine has a 95% chance of approval. We would be able to start producing vaccine 4. Cost-benefit analysis and
immediately following approval. discussion
5. Recommendation
Should our client invest or not? Case Evaluation
Structure and Framework

Analytical and Problem Solving Ability

Communication and Positive Attitude

Synthesis and Recommendation

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Case #4: Chicken Pox Vaccine (2/6)
Framework Interviewer Guidance
Working hypothesis: The client should invest in the vaccine. • The below information should be provided only when candidate asks:
– Vaccine is a one time injection.
• Pharma Market
– Assume US population is 300M, and it is uniformly distributed from 0-75 (as
– Customer Segments
many people enter population as leave every year).
• Likely children, potentially includes some adults
– Competition / Substitutes – It is estimated that it would take 3 years to vaccinate existing population, and
– Size / Growth Rate would be done at an even pace.
– Channels
• Providers, pharmacy clinics • Interviewee should begin by sizing the US market.

• Profitability • If interviewee has not asked about the portion of population that would need
– Revenue vaccine, then push him or her to go in that direction.
• Price – per treatment
• Volume – number of treatments needed (current pop.) • When asked what portion of population would need vaccine, Show only Exhibit
– Future vol once current population is vaccinated 1, cover Exhibit 2.
– Costs – Candidate should be pushed to conclude that the portion of the population
– Fixed costs needing the vaccine is that with an infection rate of less than 50%.
» Plant capacity
» R&D costs
» Investment / BE timeline
– Variable costs
» SG&A
» Inputs for production, labor
– “Discounting Cost” – do we need to discount these free cash flows
(FCF)?

• Pharma Company
– Fit with existing products, i.e. other vaccines or childhood focused
therapies?
– Opportunity cost - could this money be spent elsewhere?

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Case #4: Chicken Pox Vaccine (3/6)
Exhibit 1 Exhibit 2

90
Case #4: Chicken Pox Vaccine (4/6)
Market Sizing: Volume Interviewer Guidance
Candidate should begin by sizing the population that can be treated by this drug, which can • Probe interviewee to recognize that population with < 50% chance of
be viewed in two parts: existing population when vaccine is released and people that will be infection can be considered as “not infected”.
born every year.
• Population that is already infected (>50% infection) should not be treated
Insights from Exhibit # 1 first – vaccination doesn’t work for them.
• By age 18, 100% of the population has been exposed to chicken pox and thus does not • Candidate can also use 320M for the US population and assume even
need the vaccine. distribution of population from 0 to 80 years.
• 300M/75 = 4M people of each age; 4M*18 = 72M people ages 0-18
– Each age range would still have 4 M people.
• Since only those who haven’t been infected would need the vaccine, we should vaccinate
ages 0 – 9, 50% of the 0-18 population. This is used as a cut off point since population is – Infection assumptions remain the same regardless of initial population
evenly distributed, those younger than 9 have >50% chance of not having been infected size and age range used.
and those older than 9 has <50% chance of not having been infected.
– 72M x 50% = 36M in addressable market

Pricing the Product

When asked about price, show Exhibit 2. Provide the following only when asked:
• Client should price at $30. While an argument could be made for a lower • Costs (per injection):
price point, the inflection point at $30 and low price elasticity below $30
suggests it is the right price point. – Distribution $1.50
• There is a slight decline between $25 and $30 that will lose a small – Production $2.50
population for $5 more per unit over total populace, but slope of demand – SG&A $5.00
gets considerably steeper after $30. • Assume the $300M costs for phase three includes everything else (plant
• At $30, notice that only 75% of the market is approachable for vaccination. set up costs, etc.) and can be expensed evenly over the 2 years of testing.

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Case #4: Chicken Pox Vaccine (5/6)
Cost-Benefit Calculation Key Takeaways
• Net target population for vaccination is: Good candidate:
– Population (age 0-18) * (% not infected) * (% willing to pay) • Profitability during first 3 years is $756M, annuity profit is $63M from year
• 72 M * 50% * 75% = 27M 6 onwards.
– 9M treated per year based on the assumption it takes 3 years to
vaccinate existing population. • Breakeven in ~1.25 years.

• In addition, there are 4M babies being born each year (as population is
Stronger candidate:
• Pharma companies usually have rather high hurdle rates (or discount
steady state), with parent willingness to pay staying constant at $30.
rates) due to the risky nature of their business model, but any reasonable
– Thus, 4M*75% = 3M vaccinations per year.
rate will yield a high positive NPV.
– Candidate does not need to calculate NPV – just recognize high positive value.
• Total costs per injection are $9 (see prev. page) and thus, the contribution
margin is $21/injection. • Interviewee should also mention the percentage chance of failure (for
example 5%) and discuss how that could affect the calculation (there are a
• An example of math structure to calculate net profit for three years after couple correct ways to interpret the effect).
vaccine approval is shown below. Note that a strong candidate will use the
contribution margin to calculation net profit for each of these three years
and compare the total profit to the initial 300M investment.

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Case #4: Chicken Pox Vaccine (6/6)
Brainstorm Suggested Response
Do we need to be worried about any new entrants? We do not need to worry about potential new entrants.
• Since there is a natural three year protection due to required FDA testing, other
Note: Many interviewees will blindly say yes. If this occurs, provide the companies would not be able to capture the “existing population” segment of the market.
information in the first bullet below. This should prompt the candidate to ask Assuming they do enter in year 6, we would be sharing only 3M vaccines per year. Even
about the rest of the data. assuming they were able to capture a decent portion of the market, they wouldn’t be
able to cover the upfront testing costs for years.
This information is only to be provided when asked: – With 50% of market and holding price constant (which is itself unrealistic),
• Vaccine will not be patented. competition gets only $31.5M, and breakeven time is ~10 years.
• Other companies would have to undergo same series of testing and no – Under more likely scenario where price is reduced in half to $15, competition only
other companies have started formal testing of vaccine. gets $9M if they get 50% of market, and breakeven time on phase 3 alone is ~33
• Phase 1 and 2 combined take 3 years (we have 3 years of competitive years. Calculation: ($15-$9)*3M*50% = $9M.
protection); Phase 1 and 2 cost $200M. – Costs for phase 1 and 2 should not be used when calculating go/no go since they are
sunk, but should be considered when evaluating competitors’ decision.

Recommendation Risks and Next Steps

• Client should invest in the chicken pox vaccine Risks
– Breakeven in 1.25 years, profitability during first 3 years is $756M, • Risk of potential new entrants
annuity profit is $63M – Pharmaceuticals usually have high hurdle rates, and, given that we will have 3
– Charge $30 per injection, gross margin of $21 (70%) years protection from FDA process and will corner the existing market, it will
take several years for competitors to breakeven; therefore, competitors have
– Target ages 0-9; 75% of parents willing to pay at this price point no real incentive to enter, even for generics

Next Steps
• Develop a roll-out / implementation plan for the investment
– Including channel strategy and any fit with existing products from client

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 Overall Quant Creativity
1 2 1

Case #5: Cleaning Products

Case Type: McKinsey & Co - Interviewer Driven
Growth Strategy

Industry:
Consumer Product

Concepts Tested:
• Chart clearing
• Calculating revenue changes
 Quant Level - MEDIUM

Case #5: Cleaning Products (1/5) Case Type Industry Client Type

Growth Strategy Consumer Products Manufacturer

McKINSEY & CO – Round 2 – Interviewer Driven

Fit Questions Interviewer Guidance

1. What is the biggest challenge you faced at your last job This is a short case designed to test a candidate’s ability to interpret simple information and
and how did you navigate it? think creatively. The recommendation is fairly straightforward, and most candidates will arrive
2. What is your leadership style? Tell me about a time at the same conclusion. The interviewer should take note of the candidate’s delivery. Strong
when you effectively led a team by leveraging this candidates will anticipate the interviewer’s next question and drive the discussion forward. The
leadership style. best candidates will flesh out this basic case with out-of-the-box thinking and creative
recommendations.

Fit Evaluation
Overall Fit Performance
S1 O1 A 1
R 1

2 2 2 2

Case Prompt Case Development

Our client is a prominent manufacturer of household cleaning products such as soap. They feel that an opportunity 1. Framework
exists for them to do better in the market. What will be some of the first things that you will ask the client? 2. Structured Brainstorming /
Q&A
3. Final Recommendation
Interviewer Guidance
Drive the candidate to ask what is meant by “doing better in the market” before writing out a full framework. If the
candidate doesn’t bring it up, guide the discussion in that direction. Possible replies by candidate may include Case Evaluation
stronger growth, more market share, more profitable, etc.
Structure and Framework

Analytical and Problem Solving Ability

Communication and Positive Attitude

Synthesis and Recommendation

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Case #5: Cleaning Products (2/5)
Interviewer Guidance Framework
• A simple internal/external factors framework is effective here, but any number of • Once candidate presents the framework, ask:
frameworks could work well. The framework below is illustrative of a backbone – What questions will you ask our client to help you get the information you
that ought to be fleshed out in greater detail. need?

• Internal: • Only provide the following if asked. If not, drive the candidate towards the
– Revenues information:
• Price (relative and absolute) / price elasticity – Revenues in the last year were $3 billion.
• Quantity, product mix, channel mix (grocery vs low cost vs bulk (e.g. – The client’s product mix includes dish washing powder, clothing detergent
Costco)) powder, hand wash liquid, shower gel, and all-purpose soap.
– Expenses – There are no opportunities in cost savings or by adding new products to the
• Fixed costs (PP&E, SG&A, advertising, etc.) mix.
• Variable costs (labor at factories, raw material such as plastic, shipping,
etc.)
• External
– Market (growth, percent share)
– Competition (new entrants, differentiation, price)
Case Development
– Customers (preference, trend toward environmentally friendly products)
• After presenting the framework and learning the information in the section
Transition Statement: I would like to begin by better understanding client revenues, above, a strong candidate will conclude the following:
and then I would like to examine their product mix. First, do we know client sales – It appears that the only way to increase profitability is to improve revenues.
last year? – Possible ways to do this include increasing sales volumes or altering prices.
– The firm can increase volumes by either grabbing more market share or
growing the total available market.

• A strong candidate might ask a number of questions at this point, but guide the
discussion towards price elasticity. Show Exhibit 1 on the following page.

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Case #5: Cleaning Products (3/5)
Exhibit 1: Price Elasticity

Based on your ideas, you conducted a market research study. Your research has shown that if the prices of the client’s products are changed all at once in the
percentages shown, the volumes of the products sold will remain unchanged. Note that changes in price either all happen at the same time or none of the
changes are made at all (i.e., they will either change all the prices below or none of them).

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Case #5: Cleaning Products (4/5)
Interviewer Guidance
• Allow the candidate to talk through their insights from Exhibit 1. A strong candidate will understand they have enough information to calculate the new revenues
associated with the price change and drive the discussion forward. Either way, ask the following question:

– The client has told us that they will be happy with a 1% increase in revenues. Should they go ahead with the price change?

• The candidate should calculate current revenue and revenue after price change from table (i.e. the candidate should come up with the two rightmost columns in the table
below). Strong candidates will recall from earlier in the case that total current revenue is 3 billion dollars.

• Based on these calculations, revenues will be $3.039 billion after the price change representing an increase of $39 million. The client’s target was $30 million (1% revenue
change), so they should go ahead with the price change.
– A strong candidate will recognize that they can calculate the overall change in revenue by summing the difference in revenue by product to arrive at the $39M increase
in revenue.

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Case #5: Cleaning Products (5/5)
Brainstorm Recommendation
• Ask the candidate: is there anything that our client should watch out for? Recommendation
Sample responses may include: Go ahead with the price change
– Revenue will increase by $39M, which is higher than the goal of a 1%
Internal increase
– Geography: Does the research reflect all the client’s key markets? – Given price changes will not cause a decrease in volume of the products
– Cost Increase: There may be some additional costs associated with sold
price increases (i.e. advertising to explain price increase) that may eat
into profits generated through the $39M additional revenue. Risks
• Research may not have been fully reflective of client’s geographic /
– Sustainability of revenue increase: This is a one-time increase in
demographic market
revenues. The client cannot expect to continue raising prices to keep a
• Research is based on the status quo – if competitors use the opportunity
steady top-line growth.
to lower prices, we may lose customers and revenue
• Research only considered one change option; there may be more optimal
External price changes that could be made
– Competitive response: Competitor’s moves may undermine our price
changes. Next steps
– Legal: Are we a monopoly producer? If so, we may invite antitrust • Pilot the recommendation in one market to confirm the results from the
lawsuits by increasing prices. market research
• Explore other potential channels to grow revenue organically (e.g., online)
• If the candidate stops after two or three ideas, probe them by asking and consider expanding marketing and sales effort to improve market
“what else?” to come up with at least four or five ideas before proceeding share in profitable products
to developing a final recommendation. This should be an opportunity for • Cost cutting diagnostic could be done to see if there are other avenues to
the candidate to demonstrate structured thinking. improve the bottom line

99
 Overall Quant Creativity
2 3 1

Case #6: Coffee and Tea Apparel

Case Type: Deloitte – Interviewer Driven
Mergers and Acquisitions

Industry:
Retail & Apparel

Concepts Tested:
• Chart clearing
• Calculating revenue changes
 Quant Level – HEAVY

Case #6: Coffee and Tea Apparel (1/7) Case Type Industry Client Type

M&A Analysis Retail & Apparel Clothing Retailer

DELOITTE – Round 1 – Interviewer Driven

Fit Questions Interviewer Guidance

1. What has been your most significant professional There are several questions which will be outlined in this case. You should provide the below
accomplishment? information as background and distribute a copy of the data sheet on the next page for the
2. Tell me about a weakness. candidate’s reference throughout the case.

Fit Evaluation
Overall Fit Performance
S1 O1 A 1
R 1

2 2 2 2

Case Prompt Case Development

Deloitte has been asked to help the client, Coffee, evaluate a hold or sell decision. Coffee is a large multinational women's 1. Background discussion
clothing retailer with worldwide revenues of over $3B in 2016. They sell sports, formal and casual apparel. The company as a
2. Data sheet discussion
whole has been performing strongly and has emerged out of the financial crisis with strong sales growth and many investment
opportunities. Despite the company’s strong performance overall, its American operation has an underperforming brand that 3. Questions 1-5
they have put up for review. The firm has also closed some of the brand’s associated stores. 4. Recommendation
The American operation has two major brands: a formal wear brand bearing the same name as the company, “Coffee,” and a
casual wear brand named “Tea.” The brands are sold through the following channels: Case Evaluation
• Coffee branded retail stores: $200M in annual revenues Structure and Framework
• Tea branded retail stores: $20M in annual revenues
• Coffee branded outlet stores: $150M in annual revenues Analytical and Problem Solving Ability
• Wholesale sales to major retail chains (e.g., Macy’s): $600M in annual revenues
Communication and Positive Attitude
The Tea brand has historically been neglected because management has focused its resources on the core business – the Coffee
brand. Nonetheless, the Tea brand has consistently put up a profit with minimal management attention and capital
reinvestment. Essentially, Coffee wishes to understand whether they are better served by divesting the Tea brand and refocusing Synthesis and Recommendation

their attention on their core Coffee brand business or holding the Tea business and simply “milking the cash cow.”

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Case #6: Coffee and Tea Apparel (2/7)
Data Sheet

•Management has decided that the terms of the sale will be as follows:
‒ Sale of Tea brand will include only Tea’s branded product sales in Tea’s retail channel and Tea’s wholesale business
‒ Buyer will not have access to Coffee’s Outlet stores or Coffee branded retail stores for distribution
Revenue Multiples: Consumer Product
Transactions in the U.S.

Brand vs. Channel Sales CY2016 Revenue Deal size

Deal date
multiple ($M)
Transaction
A
0.6 147 January 2016
Transaction
B
0.7 300 March 2016
Coffee Tea
Coffee
branded branded Transaction
($M) branded Wholesale 0.9 180 April 2015
retail retail C
outlets
stores stores Transaction
Coffee D
0.6 70 October 2015
Brand 180 10 120 540
products Transaction
E
1.9 5 November 2012
Tea Brand
products
20 10 30 60 Tea Brand Business Historical
Performance
Note: Sales in the Wholesale channel are expected to remain
unchanged in CY2017 (% of sales) 2014 2015 2016

Revenues 100% 100% 100%

Number of Retail
Stores Gross Profit 23% 23% 22%
Start of 2015 Start of 2016 Start of 2017 EBIT 12% 11% 10%
Coffee
branded 100 125 150
SG&A 5% 6% 6%
stores
COGS 77% 77% 78%
Tea
branded 45 32 20
stores Note: Contains all sales of Tea Brand Products
Note: All store closings and openings occur at the start of the
calendar year. Number of outlet stores remains constant

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Case #6: Coffee and Tea Apparel (3/7)
Framework Interviewer Guidance
Working hypothesis: Coffee should hold the Tea brand. The following Strong candidates should focus on revenue generation for the two options
considerations will be used to test whether this hypothesis holds true. (holding Tea or divesting), but they should not forget to look into other
success metrics such as:
Market
– Channels: retail, outlet, wholesale • Customer perception and loyalty
– Customer preference: coffee v. tea • Brand development
– Competitor response • Benefits from holding / selling Tea
• Risks associated with holding / selling Tea
• Ability to remain competitive if only in coffee market

Projected Revenues
– Holding Tea:
• By channel for Coffee & Tea products
• # Stores by channel
• Breakeven (if hold, when is cash flow equivalent to sale of Tea?)
– Divesting Tea
• Projected valuation
• Premium on purchase for buyer (own synergies, ability to fill Tea
stores with their own products)
– Buyer may view scenario differently and want to negotiate
purchase price
• Ability to fill Coffee stores with higher revenue products than from
Tea

Risks
– Holding Tea: may no longer be ‘cash cow’ over time
– Loss of diversification / synergies from divestiture
• Impact on Coffee brand loyalty over time
• Potential sourcing issues if reliant only on international suppliers for
raw material
– Tariffs on coffee / tea apparel imports and associated revenue impact

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Case #6: Coffee and Tea Apparel (4/7)
Question 1 Calculations / Insights
Provide the below questions to the candidate: Question #1A:
Candidate should do the following:
Question #1A: 1. Isolate the revenues of the part of the business being put up for sale (Tea’s retail
Using the terms of the sale from the data sheet, find the associated revenues + Tea’s wholesale).
2. Project Tea’s retail revenues by using proportional change of stores from 2016 to
for 2017 that the buyer would receive from buying Tea?
2017.
3. Tea’s wholesale revenues will not change from 2016 to 2017.
• Interviewer can mention that the terms of the sale are available on the
data sheet given their importance.
Revenue ($M) Coffee branded Tea branded retail Coffee branded
Wholesale
Question #1B: retail stores stores outlets
Using the terms of the sale from the data sheet, find the associated 2017 Coffee Brand
180 10 120 540
revenue that Coffee could maintain by not selling Tea? products
Tea Brand
20 10 30 60
products
Fraction of 2016
- 20/32 = 0.625 - 1 (no change)
stores in 2017
2017 Total
revenues
Revenue = $66.25 10*0.625 = 6.25 60
Question #1B:
Candidate should do a similar analysis as below:

Coffee branded Tea branded retail Coffee branded

Revenue ($M) Wholesale
retail stores stores outlets
Coffee Brand
180 10 120 540
products
Tea Brand
20 10 30 60
products
Fraction of 2016
150/125 = 1.2 20/32 = 0.625 1 1 (no change)
stores in 2017
2017 revenues 1.2*20 = 24 10*0.625 = 6.25 30 60

Total Revenues = $66.25M (see Q 1A above) + $24M (1.2 * $20M from

Coffee retail) + $30M (from Coffee outlet) = $120.25M

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Case #6: Coffee and Tea Apparel (5/7)
Question 2 Potential Response

How would you value the sale scenario and hold scenario? Please use Candidate should determine a revenue multiple from the data sheet.
available data to support your argument.
Good Answer:
Average of all deal multiples is ~0.9.
• Sale = $66.25M * 0.9 = ~$60M
• Hold = $120.25M * 0.9 = ~$108M

Better Answer:
Remove Transaction E as it is dated and reflects inflated pre-crash asset
prices. Doing this yields an average deal multiple of ~0.7.
• Sale = $66.25M * 0.7 = ~$46M
• Hold = $120.25M x*0.7 = ~$84M

Additional Thoughts in a Great Answer:

Sell Scenario:
• Buyer may have existing channels that can satisfy the demand; or buyer
can build channels from scratch.
Interviewer Guidance • Buyer is also purchasing the remaining store leases as part of its purchase
Push the candidate to perform the below steps: price, so ability to fill up space in Tea stores currently filled by Coffee
1. Take revenues calculated from previous question. branded products may also attract a slight premium.
2. Refine revenue multiple to adjust for outliers and dated information. • Coffee’s ability to replace the lost revenue streams associated with the
3. Apply revenue multiples to value the two scenarios. sale will improve the attractiveness of the sell scenario but should be wary
of the buyer seeking a discount for having to replace the lost revenue
where Coffee products were sold.
• The buyer can capture some of the existing demand for the Tea brand
currently satisfied through Coffee branded retail stores and Coffee
branded outlets (i.e., a portion of each of the $20M and the $30M.

Hold Scenario:
• Candidate can compare Coffee’s return on investment to Tea’s to
determine if there is any merit in investing money into Tea to turn it
around.

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Case #6: Coffee and Tea Apparel (6/7)
Question 3 Response to Question 3
If Coffee decides to hold the Tea brand, how long will it take for the cash flow Good Answer:
from Tea to equal the amount of money that Coffee would have received Using $120.25M of revenue from question 1B, candidate can use the 10% EBIT
through selling Tea? margin to get close to cash flow.
10% * 120.25M = ~$12M per year
Note: Candidate should use $50M as the sales price in the calculation, ignore
Therefore, breakeven = $50M/$12M or ~4 years.
time value of money.
Better Answer:
If asked, tell the candidate to assume no depreciation / amortization or • Candidate should realize that EBIT is not the true cash flow and should take taxes
changes in working capital. (So, we would make cash flow equal to EBIT out.
minus taxes.) • Assuming 40% tax rate, net earnings % would be 6% (10% * 0.6).
6% * 120.25 = $7.2M per year

Therefore, breakeven = $50M/$7.2M or about 7 years.

Question 4 Response to Question 4

Based on your analysis, what would you recommend Coffee do? • The candidate should compare the value of the sale scenario (~$46M) to the hold
scenario (~84M) – refer to Question 2.

• Based on the analysis, the conclusion should be to hold onto the Tea brand. The
candidate should at minimum recommend that Coffee pursue the scenario with
the higher valuation.

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Case #6: Coffee and Tea Apparel (7/7)
Recommendation Interviewer Guidance
If candidate chooses to hold Tea, the candidate should mention: Arguments can be made to substantiate either sell or hold, but make sure that
• Hold value to Coffee exceeds the sell case reasons are given for what the candidate chooses.
• There may be an opportunity to improve the performance of Tea that may
require extra investment: open more Tea retail stores, enterprise cost reduction A good answer will be logically structured to address various business considerations
program, take brand international, take brand to a broader range of potential including:
wholesale clients (e.g. independent retailers)
Overall business strategy for women's apparel: Does Tea’s brand, product mix, and
If candidate chooses to sell Tea, the candidate should mention: styling fit within the overall strategy of Coffee’s vision? This is potentially an
• Some revenue streams from Tea branded goods are likely to be readily replaced overriding factor in the decision to buy or hold the business.
by Coffee’s operations
• Allows Coffee to gain as much as possible for the Tea retail business before it Ability to Change: In a hold scenario, does Coffee have the appetite to fully
loses more value implement the changes required to halt the slide of Tea?
• Mention the fact that as long as the trend continues to close the Tea stores, the
valuation for Tea may go down Impact to Remaining Revenue Streams: Candidate should explore the impact that a
divested business unit will have on the portions of the business that remain.

Potential Buyers: Who are the prospective buyers for the business, and what are the
Risks and Next Steps potential issues with making a deal with each one?
Hold: • Private Equity: Potential carve out experience, but unlikely to overpay for asset. If
• Risks they do not have other similar businesses in their portfolio, will need to set up
– Holding Tea could allow the retail business to continue to leak value. The combined effects of store closures their own back office functions.
and steady decline in EBIT margin (12% in 2014 to 10% in 2016) has resulted in a significant reduction in
Tea’s retail profits. The bulk of Tea’s value increasingly lies with the wholesale business. • Strategic buyer: May take brand up or down market; an existing retail buyer may
• Next Steps want to close the rest of the Tea retail stores; lack of back office will make it
– Coffee needs to assess whether this declining trend in the Tea retail outlets will difficult for some buyers to do a “bolt-on” business.
continue and determine if that is potentially harmful to the overall business.
Sell: Transaction Costs: Banker costs and potential loss of management focus on the core
• Risks business during deal will make sale scenario less attractive.
– Loss of opportunity related to the hold scenario revenues
– Buyer may try to negotiate a discount for having to replace lost revenue for where Coffee products were Stranded Costs: There may be services across the two brands that are shared and
sold
may be stranded upon sale.
• Next Steps
– Determine extra investment needed to hold and improve Tea and determine if there is any scenario where
the hold value of Coffee still exceeds the sell case including additional investment
– Determine sell terms suitable for Coffee that do not include discounting the sale value of Tea

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Case #7: Commercial Vehicle OEM in China

Case Type: Strategy& – Candidate Driven
Growth Strategy

Industry:
Transportation & Automotive

Concepts Tested:
• Brainstorming
• Breakeven analysis
 Quant Level – MEDIUM

Case #7: Commercial Vehicle OEM in China (1/5) Case Type Industry Client Type

Transportation &
Growth Strategy Manufacturer
STRATEGY& – Round 1 – Candidate Driven Automotive

Fit Questions Interviewer Guidance

1. What can you contribute to our consulting team? A key assumption to this case is that profitability will result from growth - the critical question is
2. Why did you choose this geographic location? how to increase share.

There are two dimensions:

• Qualitative discussion (10 - 15 min)
– Why did Megatron originally believe it could be successful in China?
– Why has Megatron struggled in China?
Fit Evaluation • Quantitative calculation (10 - 15 min)
Overall Fit Performance – Should Megatron proceed with the capital investment?
S1 O1 A 1
R 1

2 2 2 2 – What are the risks to each decision?

Case Prompt Case Development
Our client is Matthew Stafford, CEO of Megatron International, a global commercial vehicle OEM. 1. Framework
2. Qualitative brainstorming
The company is successful and has strong positions in “mature” markets - i.e., North America and Western Europe.
Nonetheless, while it entered China five years ago, it has struggled to grow there. This is particularly troubling since 3. Quantitative analysis
China has become the world’s largest market and now represents 80% of global demand by volume. 4. Recommendations
We have been tasked to help Stafford and Megatron profitably increase its share position in China. Case Evaluation
Structure and Framework

Analytical and Problem Solving Ability

Communication and Positive Attitude

Synthesis and Recommendation

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Case #7: Commercial Vehicle OEM in China (2/5)
Framework Interviewer Guidance
OEM Market in China Strong candidates should focus on market considerations, profitability of the
• Growth and size of market client, and the client’s overall capabilities and risks it has as a company in the
• Customer: Chinese OEM market.
– Preferences – quality considerations; price-sensitivity; ability to pay for
vehicle
• Competitors: If candidates do not consider the company’s capabilities, push them to do so
– Product differentiators; fragmented or concentrated mkt.
before continuing with the case.
• Geographic location
Profitability
• Revenue:
– Price of vehicles manufactured, # sold, by region
– Product mix
• Costs
– FC: PPE, initial investments-recouped?
– VC: labor, per vehicle mfg., distribution, salesforce
Company
• Capabilities
– Scale in manufacturing, low-cost, global
– Excellent product quality, brand reputation
• Risks
– Entering unfamiliar emerging market
– Lack of parts / service availability / dist. Network for regions

Transition statement: I would like to consider Megatron’s positioning in China

along each of these three parameters to better understand their current
abilities relative to that of their competitors.

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Case #7: Commercial Vehicle OEM in China (3/5)
Question: China Entry Interviewer Guidance: China Entry
As we mentioned, Megatron is an established and successful player in North There is no data to support the question - the interviewee is merely to provide
American and Western European markets. hypotheses. A strong response would draw out the various steps of the value chain
and then comment on whether or not such capabilities could be transferred to
Looking back at the decision to enter China five years ago: China; for example:
• Strong product development capabilities
What capabilities did Megatron assume it could bring to bear as it expanded
• Scale in manufacturing
into China? Or, put another way, what advantages that helped drive its
• Low-cost and global manufacturing footprint and supply chain (it currently
success in mature markets would have been most applicable as it expanded
supplies two regions)
into emerging regions? • Excellent product quality and reliability
• Strong brand / marketing and sales capabilities
Push the candidate to go beyond their initial thoughts from their framework • Global management team
by asking, “what else?”, as the candidate walks you through their ideas.

Question: Capabilities Interviewer Guidance: Capabilities

Despite these advantages, Megatron has clearly struggled to increase its Again, there is no data - the candidate is asked to develop hypotheses. A strong
presence in China. response must mention lack of local market knowledge - i.e., unfamiliarity with new
competitors, customer needs, buying criteria, product requirements, etc.
What capabilities do you think it lacks? What factors have likely contributed
to its difficulties? Additional factors that may be mentioned include:
- Inadequate dealership network
- Lack of parts / service availability
- Over-engineered product
- Lack of regional scale

Note: Candidate may mention concerns around government involvement in market /

need to find local JV partner: while these are very valid concerns, they are not the
focus of this example.

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Case #7: Commercial Vehicle OEM in China (4/5)
Case Development Interview Guidance
At this point, the interviewer will direct the candidate to explore in greater depth Breakeven Calculation
the issue of “lack of local market knowledge”. • The interviewer should share the following information with the candidate only
• The Chinese commercial vehicle market is dominated by domestic firms, which upon request.
– Total size of global market: 500K units
control 90% of volume (five major players - top domestic OEM controls 20%). – Price of Ndamukong vehicle: $50K per unit
• These competitors have adopted a completely different strategy: – COGS of Ndamukong vehicle: 75% of price
– While Megatron trucks are built to last for twenty years, Chinese entries are – SG&A: $10K per unit
far less durable - lasting for, at most, 4 years. – Stafford and Megatron would require a break-even period of 4 years.
– Nonetheless, these trucks are far less expensive - priced at ¼ the amount of – For ease of calculation, the Chinese truck market is not expected to grow over
the next five years.
Megatron’s.
– This value proposition plays well to Chinese customers, for whom price and • The key calculation is to determine the market share required to breakeven on
payback period are critical considerations. the investment within the four-year time frame.
• In attaining market leadership, Megatron is considering introducing a new brand -
Ndamukong Inc. - with products specifically built for the Chinese market.
• These products would be priced similarly to those of the competition, with
equivalent performance / cost trade-offs. Breakeven Calculation
• We are to advise Stafford and Megatron on whether or not to invest in
• Size of Chinese market = 500K x 80% = 400K units
Ndamukong. • Variable margin per vehicle = $50K - (75% * 50K) - 10K = $2.5K
• To simplify, the required investment would consist of a $500M facility / supply • Vehicle sales required to breakeven = $500M / $2.5K = 200,000 units
base / distribution network to produce Ndamukong-branded commercial • Vehicle sales per year required to breakeven = 200,000 units / 4 years = 50,000
vehicles. units
• Market share required = 50,000 / 400,000 = 12.5%
• Candidates could also perform additional calculations:
– Calculate additional profit potential - each 1% share delivers $10M in variable
margin.
– Describe share as percent of domestically-controlled market (14% = 50K /
360K annual units), as this is the most applicable segment for Ndamukong
products.

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Case #7: Commercial Vehicle OEM in China (5/5)
Recommendation Risks and Next Steps

Either go or no go for the investment is acceptable. Risks Proceeding

• Failure to obtain required share due to competitive pressure / inability to
Recommendation distinguish Ndamukong offering in the market
Megatron should proceed with its investment in the Chinese commercial • Dilution of Megatron brand / confusion over brand promises (i.e.,
vehicles market and strive to achieve at least a breakeven market share of customers expect Megatron quality from Ndamukong product)
12.5% • Megatron may lack the capabilities to engineer to “high enough”
• This must be achieved by adapting to local preferences while maintaining a standards
level of differentiation compared to domestic OEMs. Only then would it
be capable of reaching the market share required to be profitable. Next Steps Proceeding
Ignoring the largest commercial vehicle market would be terribly • Competitor analysis to assess feasibility of and ways in which to achieve
prohibitive for future growth. the 12.5% market share
• Customer insights study on brand image
• Explore partnership with local organizations to enhance local market
knowledge and to identify potential 3rd-party manufacturers to help
produce vehicle at “high enough” standards
Evaluation
Strong recommendations will pick a firm position and provide back-up using
Risks Not Proceeding
qualitative and quantitative analyses previously conducted as supporting
• Omission from world’s largest commercial vehicle market and cession of
evidence.
global scale to Chinese OEMs
• Failure to develop manufacturing / design capabilities with which to serve
other emerging markets

Next Steps Not Proceeding

• Re-focus efforts on other emerging markets and determine if opportunity
exists to enter a smaller market and be biggest player
• Create prioritization plan for internal growth of capabilities that best align
with customer needs in emerging markets of interest

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 Overall Quant Creativity
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Case #8: Consumer Product Strategy

Case Type: BCG – Candidate Driven
Market Entry

Industry:
CPG

Concepts Tested:
• Marketing Strategy
• Competitive Dynamics
• Willingness To Pay
 Quant Level – MEDIUM

Case #8: Consumer Products Strategy (1/6) Case Type Industry Client Type

Market Entry Consumer Products Manufacturing

BCG – Round 1 – Candidate Driven

Fit Questions Interviewer Guidance

1. What kind of a leader are you? This case features a combination of quantitative analysis and brainstorming. A strong candidate
2. Tell me about a time when someone on your team will cater their approach, framework, and brainstorming to the specific situation at hand
challenged you. focusing on low income consumers as opposed to treating it as a generic consumer goods
growth case.

Fit Evaluation
Overall Fit Performance
S1 O1 A 1
R 1

2 2 2 2

Case Prompt Case Development

Our client is a large, multinational consumer products company with business in over 200 countries. Today, we are 1. Framework
going to focus on its US business. It has been following US demographic trends and has found that low income
households have been growing 2X (twice) as quickly as other consumer segments. Low income is defined as families
2. Quantitative analysis
with income at the poverty level or below. 3. Brainstorming

Our client has always had a premium product strategy. It sells its products in grocery stores, 4. Recommendations
convenience stores, mass retailers, etc., but its products are always priced at the high-end of their respective Case Evaluation
categories. It has never targeted the low income segment before and doesn't have a strategy to do so, but, given the
Structure and Framework
growth of this segment, our client is considering entering the low income segment.
Analytical and Problem Solving Ability
Our client has 3 questions for BCG:
1) Should it have a low income strategy?
Communication and Positive Attitude
2) If it should have a low income strategy, what are some tactics it should deploy?
3) What are some of the risks the client may face?
Synthesis and Recommendation

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Case #8: Consumer Products Strategy (2/6)
Framework
Market Information to be provided upon request:
• Low income consumers • Low income consumers purchase largely in smaller, local shops.
– Demographics (who is buying? – age, gender, socioeconomic status) • Low income consumers can’t afford salons but will indulge on shampoos.
– Price sensitivity • Low income consumers are willing to spend more on baby food to protect their
children.
– Product preferences (brand v. generic)
• There are valid generics that compete with our client’s cold medicine.
– Channel selection for these consumers (neighborhood store)
• Competitors The framework should include:
– Low-cost producers (Walmart, Costco, Dollar store) • The framework should be catered to the case, i.e. consumer goods strategy in the
• Segment growth, size low income market. There are issues specific to this population. A strong
framework would not be reusable in a generic consumer goods case.
Profitability • A market examination including consumer preferences.
• Revenue • A revenue or profitability analysis.
– Price of product by category: high WTP for select products (e.g. shampoo, • A consideration of the risks associated with the candidate’s strategy.
baby food)
– Volume sold for lower-priced products
• Costs
Case Development
– FC: manufacturing setup costs, initial investment to enter new channels
– VC: per unit costs, labor, distribution, salesforce, marketing for new products When the candidate asks about products, show Exhibit 1.

Consumer Products Company

• Capabilities to add new product strategy Then ask:
• Risks: The client has shared some data for its key products. What do you make of
– Consumer loyalty to competitors this information?
– Access to our products: arrival to store by transportation methods (e.g. car,
bus, train), geographic location of storefronts in cities
After discussion of Exhibit 1, ask:
Transition statement: I would first like to begin by analyzing revenue for some of the If the client achieved its fair share of the low income segment, how much
client’s products, such as food and medicine, and then analyze low income
additional revenue would it generate?
consumers’ spend by these different product categories. Do we have any similar
data?

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Case #8: Consumer Products Strategy (3/6)
Exhibit 1

Consumer Spend by Product Category

Client category sales Total LI consumer spend on LI Consumer spend on

Product/ category Total category sales (US$M) (US$M) category (US$M) client (US$M)

Shampoo 400 100 90 30

Cold Medicine 250 50 75 7.5

Diapers 300 150 100 25

Baby food 300 100 100 30

LI: Low Income

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Case #8: Consumer Products Strategy (4/6)
Calculations
1. Calculate the overall share and share of low income consumers by After market share and revenue analysis from Exhibit 1, share that the client
product/category. is not interested in the cold medicine category. However, the client has done
customer research that suggests low income consumers are interested in
buying diapers (show Exhibit 2).
Client share of
Product/ Client overall low income Overall share vs Ask the candidate:
category market share consumers low income share
What do you see that could help us figure out why low income consumers
Shampoo 100/400 = 25% 30/90 = 33% Overall < LI aren’t buying our client’s diapers?
Cold Medicine 50/250 = 20% 7.5/75 = 10% Overall > LI
After Discussion:
Diapers 150/300 = 50% 25/100 = 25% Overall > LI What else should our client think about as it develops low income strategy?
Baby food 100/300 = 33% 30/100 = 30% Overall = LI What are the risks?

2. Calculate incremental revenue for cold medicine and diapers Sample Response
• Cold medicine: (20% - 10%) x $75M = $7.5M
Product
• Diapers: (50% - 25%) x $100M = $25M
– Reduce package size of diapers: our client’s package size is significantly larger
• Total incremental revenue: $7.5M + $25M = $32.5M than its competitors. The client should keep the price / diaper the same; but, if
the client dropped the package size from 40 pack to 20 pack, it would cut the
absolute price of the box to $10, even lower than its competitors.
– Develop discount brand to sell more affordable goods.
Customer
– Enter smaller, local shops.
– Market specifically to low income consumers.
Company
– Capitalize on existing strengths, such as baby food and shampoo.

Note: Brainstorming should be conducted by categories.

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Case #8: Consumer Products Strategy (5/6)
Exhibit 2

Product Packaging and Price by Category

Average package Average price of

Product/ category Client package size Client price
size of competitors top 5 competitors

Shampoo 10 oz bottle 12 oz bottle $4 $3

Cold Medicine 6 oz bottle 6.5 oz bottle $6 $3

Diapers 40-pack 32 pack $20 $16

Baby food 6 oz jar 6 oz jar $2 $1.50

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Case #8: Consumer Products Strategy (6/6)
Recommendation Risks and Next Steps

The client should pursue a low income strategy by: Risks

• Focusing on diapers, this could generate an additional $25M in revenue • Brand dilution and cannibalization
• Increase sales by retaining its price / diaper but reduce package size from • Increased packaging and distribution costs by targeting low income
40 to 20 diapers per box to achieve a lower absolute price of $10/box consumers
• Competitive response, such as a price war

Next Steps
• Study on effect of the strategy on our brand and existing customers’
purchasing behavior
• Re-negotiate supplier packaging contracts to lock in lower prices and
research 3rd party vendors to potentially outsource distribution cost
• Competitor analysis of categories in which client wants to play to analyze
likelihood of such responses and client’s ability to sustain itself with such a
response

Evaluation
• A strong candidate will be organized and address all 3 case questions in a
structured and firm manner.
• It may be helpful to repeat the questions at the outset of the final
recommendation.

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Case #9: Contact Lenses

Case Type: McKinsey & Co – Interviewer Driven
Profitability

Industry:
CPG

Concepts Tested:
• Pricing
• Product Mix
• Sales Channels
 Quant Level – MEDIUM

Case #9: Contact Lenses (1/9) Case Type Industry Client Type

Profitability Consumer Products Contact Lens Provider

McKINSEY & CO – Round 1 – Interviewer Driven

Fit Questions Interviewer Guidance

1. Tell me about a time you turned around a team. As an interviewer-driven case, each section of this case is structured around a specific question
2. Tell me about a time when you did not accomplish a to ask the candidate.
professional goal and what you learned from it. If the candidate asks for more information on the product or industry, provide the following:
(1) for the scope of this case, BB manufactures and distributes only in the U.S.;
(2) demand for contact lenses has been growing steadily at about 3% annually; and
(3) the client and its main competitor each sell about 10 Million contacts per year
(4) the industry has high barriers to entry (since a high R&D outlay is necessary), is mature (20
years plus), and is dominated by BB and its competitor, who are equal in most areas.
Fit Evaluation
Overall Fit Performance
S1 O1 A 1
R 1

2 2 2 2

Case Prompt Case Development

Your client is a well-known contact lens provider called BB. BB manufactures and distributes contact lenses in the U.S. 1. Framework
While BB is one of the largest players in the U.S. market, and has been for quite some time, the company feels that
compared to its main competitor, it is not doing as well as it could.
2. Questions and answers
3. Final recommendation and
BB has called in McKinsey to find out how to solve this problem and to recommend a solution.
synthesis
How would you go about structuring this case? Case Evaluation
Structure and Framework
Note: If the candidate hasn’t clarified the purpose of the case (i.e. what problem does BB want them to solve?), push
them to do so. This case will be unsuccessful if the candidate does not key in on this early on.
Analytical and Problem Solving Ability

Communication and Positive Attitude

Synthesis and Recommendation

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Case #9: Contact Lenses (2/9)
Framework Interviewer Guidance

• Revenue • A lot of people automatically assume that BB’s sales aren’t growing at the
• Price industry rate, or that BB isn’t satisfied with its market share. If the candidate
• Minor differences in pricing may exist, but probably nothing major. does, read back the statement of the issue in the introduction (“is not doing as
• Customers may be price-sensitive, but given that lenses are fitted to a well as it could”) and ask him or her to explain what that could mean. If the
person by a doctor, customers do not purchase lenses purely on price; candidate still doesn’t get it, point out that the statement is very subjective (it
comfort, fit, and compatibility are big issues. could be interpreted to mean many different things) and by then, the candidate
• Product Mix
• Distribution/sales channels: competitor may be selling through more should specify profitability.
profitable channels.
(This is a key takeaway and avenue for the case.) • This is a profitability problem, so the candidate should utilize a classic
• Volume profitability framework.
• Substitute goods: may be substituting away from BB? Any substitutes
(Lasik, glasses, etc.) will likely hit competitor equally. • Contact lenses are commoditized, so difference in raw materials, prices, and
• Competitor may capture more of market because of better branding, fixed costs should be comparable across major competitors.
better distribution, better price, better products? Could be possible,
but not an issue at this time.
• Cost • The best candidates will be specific about their bullet points, giving concrete
• Variable Costs examples and eliminating certain areas based on their communicated
• Raw Materials: inputs will be plastic, saline solution (water, salt), hypotheses. Often candidates don’t do this, so after the framework is laid out,
packaging (paper, aluminum foil, plastic). These are all commodities. push back and ask the candidate to do this.
• Labor: will be unskilled, and the wage rate probably set by minimum
wage standards. Unless BB is unionized and the competitor is not, • If the candidate drives the case with a hypothesis, allow the candidate to do so.
nothing here to put BB at disadvantage to competitor. Thus, this is not Then, follow up with the questions on the subsequent page.
an issue.
• Fixed Costs
• Plant, Property & Equipment
• R&D: big cost factor, but likely equal between BB and competitor.
• Overhead (People): no major differences as companies are of similar
size.
• Marketing/Distribution: probably no differences.
• Legal issues: possible, but BB is probably big enough that even a huge
class action settlement shouldn’t affect its bottom line too much.

Working hypothesis: My hypothesis is that the problem lies with our client’s
profitability rather than it being a result of changes in the contact lens market.

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Case #9: Contact Lenses (3/9)
Question 1: Drivers Question 2: Costs
Ask the candidate: • Ask the candidate:
Based on the information you’ve been given so far, or mentioned, and based • After analyzing BB’s cost structure, McKinsey is confident that BB’s costs
on what you know about the contact lens industry, where would you prioritize are extremely competitive. Knowing this, where do you think the problem
your investigation? could lie?

• What answer the candidate ends up with does not matter, but the • The candidate should mention that the issue is on the revenue side and
specifically should focus on sales.
candidate should concretely and rationally eliminate certain options by
evaluating each area on their framework. • The candidate should have outlined the four areas that impact sales:
product, price, promotion, place.
• The easiest way to reason out possible problem areas is by thinking about
current, established major contact lens players such as Bausch & Lomb and • Once the candidate comments on customer and product mix or
Johnson & Johnson. distribution, make the following comment and present Exhibit 1 –
Customer Mix:
• Good candidates will incorporate their own experiences with contact • McKinsey analyzed the distribution channels of BB and its competitor, and
lenses or optical solutions. Push the candidate to think about the came up with the following information.
economics of the business and relate it to either their own experiences or
to people they know who use contact lenses.

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Case #9: Contact Lenses (4/9)
Exhibit 1

Sales Volume by Customer

Percent of Sales

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Case #9: Contact Lenses (5/9)
Guidance for Exhibit 1

Overview:
• The Customer Mix slide is vague. The candidate should immediately walk through and clarify what is being represented. If not, highlight some key points:
– The slide shows customer mix in terms of volume. As a reminder, the competitor and BB sell equal volume annually (around 10,000,000 lenses per
year).
– There are three main channels / customers:
• Big Box Discounter = Walmart, Sam’s Club
• Doctor’s Offices = Local, non-chain doctor’s offices
• Optical Retailer = LensCrafters, etc.

Important Takeaways:
• Competitor sells more via Doctor’s Offices; BB via Optical Retailers
• Each customer has a varying degree of buying power. Walmart purchases in large volume. Doctor’s offices purchase in small quantities, and they are likely
not as business savvy and do not have a procurement department. LensCrafters is in the middle.
• These customers / channels differentiate themselves: Walmart is known for cheap prices while doctor’s offices are specialized and offer higher levels of
service. LensCrafters is in the middle.

Key Insight:
• BB and its competitor charge the same prices for the same products in each channel (as established earlier in framework). The issue is overall profitability;
therefore, the issue must lie in a pricing difference between the different sales channels that makes some channels more profitable.
• If the candidate has not clearly explained their reasoning behind why the pricing is different, probe by asking, “Does this surprise you?” Then move to the
next slide and provide candidate with Exhibit 2 – Profitability by Customer.

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Case #9: Contact Lenses (6/9)
Exhibit 2

Profitability by Customer

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Case #9: Contact Lenses (7/9)
Question 3: Channel Profitability Question 3: Continued
Question #3A Question #3B
Ask the candidate: Ask the candidate:

Can you tell me what you see here? • Given this information and the initial problem we’re solving for, what would you
want to look at?
• The candidate should analyze Exhibit 2 and decide to calculate profit and percent
• The candidate should want to look at how we can sell more lenses in the
profit margin per channel.
doctor’s office channel, possibly by shifting resources from the Big Box channel.
• Candidate should reach the following conclusions: Question #3C
• Big Box Discounter: $1.50 profit and 9% profit margin Ask the candidate:
• Doctor’s Office: $16.00 profit and 57% profit margin
• Optical Retailer: $8.50 profit and 39% profit margin • With what you see here, what are some additional alternatives to further
increasing profitability?
• Once calculated, ask the candidate, “what are your thoughts?” before continuing
with Question #3B. • Since this is a channel strategy case, online direct to consumer alternatives
– The candidate should comment on how BB is behind competitors in the most should be mentioned; or, creating a subscription model service would
profitable channel. potentially be a feasible alternative.

• Probe the candidate on risks for their proposed route. Some ideas include:
cannibalization of existing sales, logistics impact on profitability, time to service
and refill rates.

• State that the client has, “elected to remain in existing channels and change
their distribution strategy.” Have the candidate calculate current profitability.

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Case #9: Contact Lenses (8/9)
Question 4: Sales Reps Interviewer Guidance
Like its competitor, BB relies on sales reps to distribute its contact lenses to Provide the following information to the candidate when asked:
the doctor’s offices. Currently, BB has 5 reps in its call center dedicated to • Each sales call takes 30 minutes.
reaching out to the doctor’s offices and doing whatever is necessary to get • Each sales rep works 20 days per month, 8 hours a day.
them to sell as many BB lenses as possible. • Each sales rep spends approximately 3 hours of each work day on
administrative work, lunch break, etc.
Interestingly, McKinsey has discovered a relationship between call frequency Relevant Calculations
and sales generated: • 8 hours a day less 3 hours a day for admin = 5 hours a day for sales calls
• For every 2 calls made to a customer per month, our client sees a 5% • 5 hours per day divided by 0.5 hours per call = 10 calls per day
increase in revenue from that customer.
• 10 calls per day times 20 days total = maximum capacity is 200 calls
• For every 3 calls made, our client sees a 15% increase from that customer. per month per rep
Currently, each B&B sales person has 100 customer accounts. Each account • 200 calls max less 100 calls necessary = 100 “free” calls
must be called at least once a month, as B&B does not want to lose any • You can use all options to call additional customers (a) three times, or
customers. Assume that sales per customers, when the customer is called (b) two times per month:
once a month, is $100. • Already have called all customers once, so to reach 3 calls per month,
must only call customer 2 additional times. Therefore, BB could call
Given these findings, what should BB do? 100/2 = 50 customers 3 times per month.
• The candidate should realize that they need to isolate the effect of • Alternatively, B&B could also call 100/1 = 100 customers 2 times per
making additional calls to a customer per month. month.
• Recall effectiveness of different numbers of calls:
• 1 call = $100
• 2 calls = $100 x 1.05 = $105
• 3 calls = $100 x 1.15 = $115
• If all customers are called twice, then sales = 100 customers x $105 per
customer = $10,500.
• Otherwise, sales = 50 customers x $100 + 50 customers x $115 =
$10,750.
• BB should call 50 customers once and 50 customers 3 times.

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Case #9: Contact Lenses (9/9)
Recommendation Risks and Next Steps
BB should sell more lenses in the doctor’s office channel and direct its sales Risks
reps to refocus their calling efforts to doctors for the following reasons: – Potential competitor response and retrenchment
– BB is behind its competitor in the most profitable channel (doctor’s – Possible customer fatigue and backlash from multiple sales calls each
offices) month
– It can increase the efficiency and profitability of its marketing efforts by
changing calling frequency Next Steps
– By calling 50 customers once and 50 customers three times, BB will – Evaluation of ways to strengthen relationships further with doctor’s
have a revenue of $10,750/mo. offices to compete effectively against other competitor
– Cycle through doctor’s offices getting three calls/mo. to minimize
fatigue

Evaluation

Excellent candidate performance will include:

– Talking through math.
– Well-structured data.
– Discussion about potential competitor response.

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 Overall Quant Creativity
3 1 3

Case #10: Deepwater Inc.

Case Type: Undisclosed – Candidate Driven
Investment Decision

Industry:
Energy

Concepts Tested:
• ROI Analysis
 Quant Level – LIGHT

Case #10: Deepwater Inc. (1/5) Case Type Industry Client Type

Investment Decision Energy Manufacturer

UNDISCLOSED – Round 1 – Candidate Driven

Fit Questions Interviewer Guidance

1. Why did you decide to come to Booth? This case tests the candidates ability to analyze a manufacturing process and draw conclusions
2. Describe the best team you have ever had — what about an industry with which they are not likely to be familiar. This case also tests a candidate’s
defined your experience? ability to deal with a more ambiguous solution to a case and to draw insights from discussions
and brainstorms. Strong candidates will continue to ask appropriate questions to arrive at the
details necessary to solve the case. The interviewer should pay close attention to the
candidate’s delivery as they navigate this somewhat complex case.

Fit Evaluation
Overall Fit Performance
S1 O1 A 1
R 1

2 2 2 2

Case Prompt Case Development

Our client, Deepwater, is an oil refinery firm looking at an investment in a filtering unit to transform residual oil into 1. Framework
useful feedstock to produce gasoline (show Exhibit 1). The major input is crude oil which gets refined to gasoline.
Deepwater would like your help in determining whether or not they should invest in the filtering unit. 2. ROI Analysis
3. Final recommendation
Note: At this point, prompt the candidate to walk you through the diagram. Making sure to outline all categories of
products:
• Primary input - crude oil; secondary input - feedstock and fuel; byproduct - oil 6 and residual Case Evaluation
Structure and Framework
The candidate should ask for information regarding the company’s products, the market for the products, uses for
waste products, and the company background. If they do not ask upfront, these questions should come out as the Analytical and Problem Solving Ability
candidate discusses their framework.
Communication and Positive Attitude

Synthesis and Recommendation

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Case #10: Deepwater Inc. (2/5)
Exhibit 1 (Operations)

GASOLINE
CRUDE Distiller
OIL 6

FEEDSTOCK
Distiller
RESID

FEEDSTOCK
Filter Cracker
Fuel

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Case #10: Deepwater Inc. (3/5)
Additional Information Framework
Please provide this information if/when asked: A good framework will allow the candidate to test their hypothesis regarding the two
• The usable output is gasoline.* alternatives: production and profitability with the filter AND production and
• Oil 6 can be converted to feedstock and then gasoline.* profitability without the filter.
• Residual is a waste product unless the filter is purchased.* Residuals are leftovers
Working hypothesis: Deepwater should invest in the filtering unit.
(heavy oils).
• Gasoline is sold to a competitive market and the company has no influence on Scenario A (Without Filter)
the price of gasoline. • Revenues
• There is enough demand for gasoline. – Gasoline $/barrel
• Fuel can be used to fire the different units. If fuel is not available, residual is used. – Residual in $/barrel
• The filter transforms residual into useful cracker feedstock. • Costs
• Many of Deepwater’s competitors have invested in this kind of filter unit. – Crude $/barrel
• There are no significant environmental concerns with respect to the filter. – Converting Oil 6 to feedstock and then gasoline; converting fuel to
• There is no outside market for Oil 6 or feedstock. gasoline
Note*: A top candidate would recognize this on their own. If the candidate does not,
make sure to clarify this. Scenario B (With Filter)
• Revenues
– Gasoline $/barrel
• Make sure the candidate understands the diagram before moving forward.
• Costs
– Crude $/barrel
– Converting Oil 6 to feedstock and then gasoline; converting fuel to
gasoline
– Investment in filter
– Opportunity cost of converting residual instead of selling in $/barrel

Strategic Risks
• Volatility of demand/price for inputs and outputs (crude, residual, fuel and
gasoline)
• Regulatory changes impacting cost of residual waste production
• Environment considerations and potential backlash

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Case #10: Deepwater Inc. (4/5)
Cost-Benefit Criteria Strategic Criteria
Ask the candidate the following questions: Ask the candidate:

On the diagram, which cost comparison is most relevant? If we sell all residual and buy fuel to make gasoline what concerns may arise?
– The candidate should see the selling cost for the residual and the cost to – Changes in fuel price and availability will impact cost / benefit of selling
purchase the fuel is most relevant to determining whether to purchase residual vs converting to feedstock.
the filter.
Note: Candidate should go through Porter’s Five forces focusing on buyer and
Under what scenario would you then utilize residual instead of purchasing supplier power (this should be an opportunity for structuring and
outside fuel (i.e. use residual instead of selling it)? brainstorming). As the interviewer, drive this to be a discussion between you
– If the cost of purchasing fuel is more than the selling price for residual, and the candidate, continuously asking “what else?” and pushing the
the client should use residual. candidate to fully analyze all potential risks.

Investment Decision
The candidate should ask for more data on the different costs and selling prices. Only give data for items that the candidate brings up.
– The client estimates an investment cost of $40M and a 20 year useful life of the filter (assume straight line depreciation).
– The client also estimates annual operating costs of $4M per year for the filter.
– With the filter we can make an additional 5,000 barrels/day at a contribution margin of $4/barrel.
– The plant operates 350 days per year.
After discussing the above information, ask, “what is the payback period?”

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Case #10: Deepwater Inc. (5/5)
Annual Profit Risks and Next Steps
The candidate should do a similar analysis to the one shown here: Risks
– Annual Contribution Margin (CM) = $20K/day * 350 days/year = $7M/year – Volatility in the market of residual and gasoline
– Annual Operating Profits = CM – FC = $7M – $4M = $3M/year – Changing environmental concerns about the technology
– Payback period = investment/operating profit • Taxes on gasoline might increase, the firm may come under increased
• $40M / $3M per yr. = ~13 years scrutiny from environmentalists, etc.
– Lost relationships with customers that purchased cheap residual
– Payback period is approximately 13 years, which is enough to cover for
additional depreciation. Next steps
– Annual profit after depreciation is $1M. – Assess volatility in the markets in both the short and long term to
determine any impact on the investment decision
– Perform sensitivity analysis under different tax scenarios and technology
implementations to evaluate profitability
– Identify new customers for gasoline or additional byproducts
Recommendation
It is profitable for the client to invest in this filtering unit
– Payback period is 13 years
– Annual profit after depreciation is $1M

136
 Overall Quant Creativity
2 1 2

Case #11: Electric Utility

Case Type: McKinsey & Co. – Interviewer Driven
Profitability

Industry:
Energy

Concepts Tested:
• Brainstorming
 Quant Level – LIGHT

Case #11: Electric Utility (1/5) Case Type Industry Client Type

Profitability Energy Utility Company

McKINSEY & CO – Round 2 – Interviewer Driven

Fit Questions Interviewer Guidance

1. Tell me about a time when you had to convince This is a Round 2 case and involves a lot of qualitative discussion with the candidate. It is
leadership of your idea. What challenges did you face important that the candidate takes time to structure their thoughts every time a question is
and how did you react? asked during this case. You should be prepared to push the interviewee beyond the initial set of
2. Tell me about a time when you had to work under tight responses by asking “what else?”
timelines. How did you approach this situation?
Also, the candidate should take some time to summarize the issue and use an appropriate
framework (profitability framework) to respond best to the qualitative discussions. Have the
candidate go through their framework initially before asking further questions.
Fit Evaluation
Overall Fit Performance
S1 O1 A 1
R 1

2 2 2 2

Case Prompt Case Development

Our client is GPE, a producer of electricity. Here are a few concepts about electricity generation that will help you in 1. Framework
this case:
• There are several ways to produce electricity: water, coal-fired plants, nuclear, wind, etc. 2. Q & A and discussion
• Electricity can be supplied to a wholesaler or to consumers directly. 3. Recommendation
• Electricity transmission is highly regulated because the wires used to transport electricity are mostly government
controlled. However, electricity usage is mostly deregulated (i.e. the government does not set the price, it is set
by competitive forces). Case Evaluation
Structure and Framework
Our client has 10 plants that produce electricity using coal. The client obtains coal partly from its own coal mines and
partly from 3rd-party providers. Of late, the client has seen the profitability of its coal generated electricity decline.
Analytical and Problem Solving Ability
What could be causing this?
Communication and Positive Attitude

Synthesis and Recommendation

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Case #11: Electric Utility (2/5)
Framework Framework Discussion
Below is a potential framework that the candidates should use for As the candidate goes through various parts of the framework, share the information
profitability. below. As the interviewer, you should wait for the candidate to ask for this, but
eventually share the information even if the candidate does not explicitly ask.
Working hypothesis: Increasing costs are causing the decline in profitability
Price
since there are no real opportunities on the revenue side. • This is a deregulated industry; price is set by competitive forces.
• There is one price set per the entire year.
• As a simplification, assume the same price is charged to all customers.
Profits

Volume
• GPE supplies electricity to over 1 M customers (a customer is a household or
business) in deregulated markets through wholesalers.
Market Revenue Costs • Volume is generated by demand. The market is fragmented.
• The market is growing at about 3% per annum.
•What are the Insight #1
Variable
market dynamics? Price Volume Fixed Costs
Costs Good candidates will deduce that since the market sets the price and this is a mature
•No competition industry, currently the supply meets all the demands. There is not much opportunity
but are customers
•How is price •No. of •Lease or own •Raw material in terms of volume and price.
opting for
set? households transmission costs – coal,
alternate forms of •Does it change or customers lines? nuclear, Fixed Cost
energy? over time? •Competitor’s •Other fixed hydro? • GPE runs 10 plants around the US.
•Shift in •Price volume costs •Labor • GPE pays a fixed cost to lease transmission lines to transmit the electricity
wholesaler vs. discrimination •Market produced.
individual •Regulation by growth
consumer government Variable Cost
consumption? • As a simplification, consider the main raw-material to be coal.

Insight #2
The candidate should consider looking deeper into the cost side, because it was
already deduced that there aren’t any opportunities in the revenue side.

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 Case #11: Electric Utility (3/5)
Question 1 Potential Response
Let’s explore the cost side in more detail. A simplified supply chain for 1. Acquiring the coal:
electricity consists of 3 parts: – The coal may have to be transported across some distance. This could be done
1. Acquiring the coal through rail or road. There are potential savings here in optimizing the
2. Generating the electricity transport channel.
– The coal is received from several sources: GPE’s own coal mines and 3rd-party
3. Transmitting the electricity
mines. The quality of coal (its energy content) is likely to be different in
different mines. Hence, processing different types of coal probably takes
What potential issues may lie in each of the above? different processes and machines. This diversity could be a potential cost
generator and this could be handled by sourcing for more similar coal varieties.
– The coal mines could be in a geographically separate region, subjecting GPE’s
coal supply to other regions’ risks (for e.g., climatic factors such as hurricanes,
political turmoil, etc.)
– The coal mines are probably unionized, and that may add to volatility in our
coal supply.
2. Generating the electricity:
– The electricity generators may be old and not functioning efficiently, inducing
Interviewer Guidance
waste in the system.
Allow the candidate to brainstorm at least 3 potential issues for each of the – There are 10 different plants in the client’s company. Differences in operations
above parts. Prompt the candidate to brainstorm more by persistently asking, of these plants may induce volatility in the system.
“what else?” after each response until the candidate provides at least 3 issues – The availability of labor may have changed by the arrival of other industries or
for each part of the supply chain. competitors nearby.
– Given that GPE generates electricity through coal, some new environmental
Note that this case is about brainstorming and generating ideas and not about laws may have come into force increasing the cost of electricity generation.
numbers.
3. Transmitting the electricity:
– Push the candidate to bring specific elements to the discussion.
– Transmission could be streamlined by finding more customers closer to the
electricity plants themselves.
– GPE could look into a bandwidth sharing contract so that their lease may be
cheaper.
– GPE can look into checking the transmission lines for repairs, etc. that may be
required so that there is less electricity loss in transmission.
– Provider applying peak-hour surcharges to regulate customer usage

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 Case #11: Electric Utility (4/5)
Question 2 Interviewer Guidance
GPE is primarily an electricity generating company. Do you think they should Here is some information that can be shared with the candidate if the
keep the coal mine? candidate asks for it:

• GPE gets a 30% cheaper rate on coal from its own coal mines than
compared to 3rd-party coal mines.
• There is a large market for coal.
• Coal customers are diverse, electricity producers are just one of many.
– As a simplification, assume that all coal customers pay the same market
price for coal when they purchase coal from coal mines

With the above, candidates may be tempted to deduce that GPE should keep
the coal mine because they get coal cheaper from their own coal mine.

If candidates say this, remind them that:

Potential Response • Yes, GPE is getting coal cheaper from their coal mines. But they can also
Candidate’s response should include a qualitative assessment of the sell the same coal to other customers and make the same profit.
cost-benefit analysis for the two scenarios:
1) Use the coal from their mine to generate electricity and sell the coal from What is the advantage of using their own mined coal for their electricity
their mine for profit. generation operation?
2) Buy coal from other coal mines.

Note:
• Having their own coal mine reduces supplier power for GPE. GPE’s
electricity generation operations have the advantage of encountering less
volatility in the supply of their core raw material, coal. GPE can control the
coal production and hence can have less volatility in coal quality and labor
issues.
• GPE’s business is more diversified through the coal mining operation.

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Case #11: Electric Utility (5/5)
Question 3 Discussion for Question 3
On an average, GPE operates at 80% utilization. GPE’s CEO saw this statistic and Tell the candidate that the “demand for electricity is cyclical”. Ask the candidate,
asked McKinsey if they should look into increasing this from 80% to 90%. what might that imply?
• Candidates should point out that it means there are peaks and troughs in
Given that the industry average is to operate at 77% utilization, how would you electricity demand (e.g. air conditioners working over time during summer).
approach this problem?
As an electricity company, GPE is committed to meet the peak demand and so, it is
normal to operate at less than 100% utilization. GPE is already operating at close to
the industry average and it may be unrealistic to expect the utilization to increase to
90%.

Recommendation Risks and Next Steps

The key reason for profitability decline is an increase in cost: Risks
– Acquisition costs of coal are higher potentially because of • Client is unable to negotiate better contracts with 3rd party coal mines /
transportation, 3rd party coal mines, unionized labor, etc. labor unions and is unable to obtain sharing contracts reducing the cost of
– Cost of electricity generation is potentially high because of old electricity transmission
equipment, operational inefficiencies, etc. • Continued increases in costs along all parts of the value chain
– High costs of electricity transmission
• GPE should continue the use of its coal mine Next Steps
• It should also ignore the pressure to increase the utilization to 90% • Identify the top 5 cost savings opportunities, especially regarding
electricity generation activities, for client to internally reduce production
costs
• Build an implementation plan to ensure prioritization of cost reducing
steps along the value chain

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 Overall Quant Creativity
2 2 1

Case #12: Elena’s Electronics

Case Type: Undisclosed – Candidate Driven
Profitability

Industry:
Consumer Electronics

Concepts Tested:
• Quantitative analysis
 Quant Level - HEAVY

Case #12: Elena’s Electronics (1/6) Case Type Industry Client Type

Electronic Goods
Profitability Consumer Electronics
UNDISCLOSED – Round 1 – Candidate Driven Chain Store

Fit Questions Interviewer Guidance

1. Tell me something interesting about you that is not on A strong candidate may ask about criteria for success. Instruct the candidate that “profitability
your resume. is very important, but they want us to take a broad look at whether the pilot was successful”.
2. What would you bring to the Firm?

Fit Evaluation
Overall Fit Performance
S1 O1 A 1
R 1

2 2 2 2

Case Prompt Case Development

Our client is Elena’s Electronics, an electronic goods chain store. Historically, the client relied on rapid opening of new 1. Framework
stores to increase growth. However, the client’s presence is now so broad that it must also look for internal growth. In
2017, Elena’s Electronics tested a pilot that changed the responsibilities of staff in its cell phone division. 2. Analysis of store revenues
In the old model, all employees were expected to handle all tasks related to sales and products. Under the new
program, there are two different types of employees: sales specialists and product specialists. Sales specialists handle
all customer interactions, such as talking to customers about their needs and recommending products. Product
specialists handle all product management functions, including inventory, ordering, and shelf management. Case Evaluation
Structure and Framework
The purpose of the pilot was to see whether sales specialists could target customer needs better and thus increase
profits from phone sales. Our client wants us to assess whether or not the program was successful and whether it
Analytical and Problem Solving Ability
should expand the pilot program to all the divisions of the stores.
Communication and Positive Attitude

Synthesis and Recommendation

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Case #12: Elena’s Electronics (2/6)
Framework Interviewer Guidance
Working hypothesis: Elena’s Electronics should expand the pilot program to increase Strong candidates should focus on profitability, but they should not forget to
profitability across all of its divisions. look into other success metrics such as:

• Was the pilot program successful? • Morale/motivation of the sales team

– Profitability
• Customer experience
• Competitor response
• Revenue
• Brand development
• Cost
– Other metrics
• Brand
• Competitive positioning
• Customer experience

• Would the pilot program be repeatable?

• Similarity of cell phone division to other divisions
• Customer base consistency across departments
• Workforce readiness for the transition Case Development

The focus of this case is on profitability, so the candidate should start there after
explaining their framework. If the candidate asks about qualitative factors, share the
following information:

Other Divisions: The other primary divisions at Elena’s Electronics are televisions,
laptops, smart appliances, and new tech (drones, 3D headsets, etc.). Their sales
were unaffected by the pilot for the cell phone division.

Competitors: The primary competitors to Elena’s are big box electronics stores, such
as Best Buy. These stores have a wide variety of staffing models – there is no clear
industry standard.

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Case #12: Elena’s Electronics (3/6)
Economics Exhibit 1: Solution
When the candidate mentions that they would like to explore revenue, say, “I The candidate should calculate revenue per store and phones sold per store.
have some financial statements with me. Which number you would like to If the candidate is stuck, prompt with “How much did the average revenue
start with?“ per store change as a result of the pilot program? How about the number of
phones sold per store?”
Show Exhibit 1, but make sure to cover up Exhibit 2 first.
2016 2017
Number of stores 120 160
Total phone revenue $36 M $44 M
Total phones sold 54,000 104,000

Revenue/store $300 K $275 K

Phones sold/store 450 650

The candidate should identify that while phones sold per store are up, store
revenues are down. A strong candidate will conclude that this is likely due to
the product mix sold as a result of the program.

When the candidate asks if there is additional information that could help
explain changes in product mix, reveal Exhibit 2.

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Case #12: Elena’s Electronics (4/6)
Exhibit 1 Exhibit 2

2016 2017 Product

Selling Elena’s Quantity Sold Quantity Sold
Price COGS (2016) (2017)
Number of stores 120 160
Deluxe $1,000 $700 24,000 16,000
Total phone revenue $36 M $44 M Midrange $500 $400 18,000 24,000
Total phones sold 54,000 104,000 Budget $250 $200 12,000 64,000

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Case #12: Elena’s Electronics (5/6)
Exhibit 2: Solution Exhibit 2: Analysis
Candidates should solve for the quantities sold in different product lines. There has been a shift to selling more budget phones and fewer deluxe
Candidates should also solve for per-store profit. phones. As a result, profit per store has decreased, despite an increase in the
overall quantity of phones sold. The candidate should suggest that this is
Option 1: likely due to the new program.

Product Quantity per store (2016) Quantity per store (2017) After the candidate identifies that total profit per store has decreased as a
result of the program, ask them to brainstorm reasons for why this might be
Deluxe 24,000/120 = 200 16,000/160 = 100
happening. If the candidate asks about the sales compensation program
Midrange 18,000/120 = 150 24,000/160 = 150 under the new specialist model respond that “compensation is based on the
Budget 12,000/120 = 100 64,000/160 = 400 quantity of phones sold.”
Option 2: A strong candidate will synthesize that sales of the budget phones are
Profit increasing because sales specialists are recommending the budget phones to
Product Total profit (2016) Total Profit (2017)
Margin the consumers. This may be occurring because the budget phone is easy to
sell due to its simple function and low price.
Deluxe $300 $300*24,000 = $7.2 M $300*16,000 = $4.8 M

Midrange $100 $100*18,000 = $1.8 M $100*24,000 = $2.4 M

Budget $50 $50*12,000 = $0.6 M $50*64,000 = $3.2 M

Total $9.6 M $10.4 M
Total per store $9.6 M/120 = $80 K $10.4 M/160 = $65 K

Profit
Product Per store profit (2016) Per store profit (2017)
Margin
Deluxe $300 200*$300 = $60 K 100*$300 = $30 K
Midrange $100 150*$100 = $15 K 150*$100 = $15 K
Budget $50 100*$50 = $5 K 400*$50 = $20 K
Total per store $80 K $65 K

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Case #12: Elena’s Electronics (6/6)
Recommendation Risks
• The pilot program caused a decrease in phone revenue and profit per • The program may have brought about some benefits, and changing it
store, so the pilot should not be expanded to additional divisions could reverse those benefits:
– The per-store profitability for phones decreased from $80 K to $65 K – Morale/effectiveness of sales specialists from new compensation
– Elena’s experienced a 4x increase in the number of budget phones sold, structure
but a 50% decrease in the number of deluxe phones sold. – Customer experience
– Sales specialists are compensated in a way that motivates them to sell – Cross-selling in other divisions
lower margin products

Next Steps
• Redesign the program:
– Better train sales specialists, bring incentives to focus on more
profitable phones, and involve sales specialists in the review of their
compensation package
– Study customer journey
– Examine revenue and profit differences that could be traced back to
this program

149
 Overall Quant Creativity
3 3 3

Case #13: Finance Co

Case Type: Bain & Company – Candidate Driven
Growth Strategy

Industry:
Financial Services

Concepts Tested:
• Chart clearing
• Math structuring
 Quant Level – HEAVY

Case #13: Finance Co (1/6) Case Type Industry Client Type

Growth Strategy Financial Services Asset Management

BAIN & COMPANY – Round 1 – Candidate-led

Fit Questions Interviewer Guidance

1. What are your career goals over the next 5-10 years This is a market entry case, but the main question to be answered is: Which market has the best growth
and how does consulting fit into that? perspectives: IRA or Defined Contribution plans?
2. What do you typically do when you move onto a new
Additional Information (only share if asked by interviewee):
project? • Over the life of a U.S. worker, they generally build up assets in DC plans.
• During job change or retirement, most workers will ‘roll’ (transfer) DC assets into an IRA.
• Transfer may only occur from DC to IRA, not vice versa.
• At retirement, people will begin to withdraw their balance over time.

Fit Evaluation Pay attention to the interviewee’s structure/organization during the quantitative section of the case.
Overall Fit Performance
S1 O1 A 1
R 1

2 2 2 2

Case Prompt Case Development

Our client, Finance Co, is an international asset manager who concentrates on retirement account administration. 1. Framework discussion
They are considering entering the US retirement market. Finance Co cannot decide whether to target the Defined
Contribution (DC) market (e.g. 401k) or the Individual Retirement Account (IRA) market.
2. Market Potential
• Each market contains ~$3 trillion in investable assets and generates about the same amount of margin per dollar 3. Revenue analysis
of investable assets.
• U.S. workers and their employers typically make investments in DC plans while working.
4. Recommendation
• Upon job change or retirement, workers have the option of taking distributions, which remain tax deferred if Case Evaluation
rolled into an IRA.
Structure and Framework

What is the growth outlook for each of these markets over the next 5 years? Which market is more attractive for
Analytical and Problem Solving Ability
Finance Co?
Communication and Positive Attitude

Synthesis and Recommendation

151
Case #13: Finance Co (2/6)
Framework Interviewer Guidance
• After discussing the framework, the interviewee should be able to identify
that population is a key driver for estimating growth of both markets.
Show only Exhibit 1, cover Exhibits 2-3.

Exhibit 1
• If necessary, push candidate to discuss which segments of the population
look interesting and which segments of the population will grow vs. shrink
over the next 5 years.
• Candidate should ask for DC and IRA balances to determine total market
size. Uncover Exhibits 2-3.

Exhibit 2&3
• If necessary, push candidate to discuss main differences between DC and
IRA balances.
• Higher DC balances earlier in life are due to DC contributions tied to
employment.
• Higher IRA balances later in life are due to ability to ‘roll’ DC
contributions upon job change and/or retirement, and workers are no
longer able to make DC contributions in retirement.
• If necessary, push candidate to draw conclusions from previous analysis on
population trends and identify that the IRA market looks more interesting
(considering aging of population). If candidate doesn’t come to this
hypothesis, ask them what are the population trends.
• Candidate should request information about future performance. Show
Transition statement: Since population is the key growth Exhibit 4, cover Exhibit 5.
driver for the IRA or DC market, I would like to begin by
determining how the current US population is changing
over the next 5 years, specifically by age group.

152
Case #13: Finance Co (3/6)
Math Analysis (for interviewer) Interviewer Guidance
Exhibit 4
Ask candidate:
Calculate the total value of the DC and IRA market today and in the next five
years.
• A good candidate should only need to confirm initial hypothesis that IRA is
more interesting and then use the provided exhibits for the math exercise.

Exhibit 5: (Optional, complete if time permits)

After discussing Exhibit 4, ask candidate the below question, then uncover
Exhibit 5.

Based on the information in Exhibit 5, you can see the rollover of DC

distributions into IRAs have been identified as a key factor in IRA market
growth. Assuming all else remains equal, let's say the IRA market was
projected to grow to $3.1T next year. What DC rollover rate would result in
growth in IRA's to $3.05T versus $3.1T?

Answer: 50% rollover rate is needed

• Currently, a 75% rollover rate is resulting in $150B contribution to IRA
growth (75% of $200B). To reduce IRA growth by $50B to $100B, rollover
rate must be reduced by 1/3 to 50% (50% of 200B is $100B).

Synthesis
• After analysis of Exhibit 5 is completed, ask for the candidate’s
recommendation. Tell interviewee that Exhibit 5 was an independent
exercise and not necessary for the recommendation.

153
Case #13: Finance Co (4/6)
Exhibit 1 Exhibit 2

Age Group

Exhibit 3

Age Group

Age Group

154
Case #13: Finance Co (5/6)
Exhibit 4 Exhibit 5 (Optional, if time permits)

Age Group *Transferred to new plan

155
Case #13: Finance Co (6/6)
Evaluation Recommendation
Finance Co should enter the IRA market due to a greater 5 year growth • Based on the market growth outlook calculation, Finance Co should enter
outlook the IRA market over the DC market. A strong candidate response will
• Predicted $3.36T in the IRA market versus $3.19T in the DC market provide a clear recommendation backed by data with a mention of key
• The aging population trend further confirms that the IRA is more favorable risks and next steps to moving forward.

• A strong candidate will also recognize that there are several additional
analyses that are essential to a strong, well-rounded recommendation.

• The candidate should reference their framework when determining

additional analysis.

Risks and Next Steps

Risks
• Lack of analysis on Finance Co’s ability to capture market share
• Adverse regulatory and/or political environment
• Financial position of Finance Co

Next Steps
• Need to determine:
– Competitive environment of each market
– Competitive response to Finance Co entering each market
– Finance Co’s marketing and sales capabilities
• Consider:
– Lobbying
– Analysis of future changes
• Analyze company capabilities and fit of IRA market with Finance Co’s
existing products / services

156
 Overall Quant Creativity
2 1 2

Case #14: French Beauty Co

Case Type: Accenture – Candidate Driven
Operating Model

Industry:
Retail & Apparel

Concepts Tested:
• Brainstorming
 Quant Level – LIGHT

Case #14: French Beauty Co (1/5) Case Type Industry Client Type

Beauty Products
Operating Model Retail & Apparel
ACCENTURE – Round 1 – Candidate Led Company

Fit Questions Interviewer Guidance

1. Tell me about the largest impact you’ve ever had on a This case includes multiple brainstorming exercises and is light on math.
team.
2. How would you handle being on a project in X industry, Additional Information (only share if asked by interviewee):
outside of your expertise? Would you be excited for • There is an impending recession.
this work? • This is a maturing industry in developed markets, but emerging markets are seeing explosive
growth.
• A leveraged organization is the same as a centralized organization.
Fit Evaluation
Overall Fit Performance
S1 O1 A 1
R 1

2 2 2 2

Case Prompt Case Development

A large French beauty products company with a revenue of $2B operates as manufacturer, seller and marketer of 1. Background Discussion
luxury fragrances. This company sells to high-end beauty retailers. Recently, the company has acquired a player in the
‘accessible’ beauty products industry.
2. Initial brainstorming
3. Additional revenue analysis
The acquired company manufactures, sells and markets skincare and cosmetics. Being that the two companies
operate similarly along their value chains, the COO has opted to combine manufacturing, but initially keep the two 4. Recommendation/Wrap-up
sales units operating separately because the luxury sales unit and the accessible sales unit don’t have the same Case Evaluation
customers. However, the COO is interested in understanding if additional value can be realized by integrating the two
Structure and Framework
sales organizations.
Analytical and Problem Solving Ability
Your goal is to help the COO determine if a leveraged or a decentralized sales organization is a valuable strategy for
the company.
Communication and Positive Attitude

Synthesis and Recommendation

158
Case #14: French Beauty Co (2/5)
Framework Brainstorming Insights
Revenue Increase
- Volume increase (New channels, increased capacity, sales efficiency,
buik savings opportunities)
- Price Increase (more informed pricing decisions)
Cost Savings Leveraged (Centralized) Decentralized
- Supply chain/ staffing synergies
- Improved contracts with suppliers (bulk buying)
- Reduced SG&A footprint • Reduce redundancies • Flatter org structure could
Fit • Streamline best practices encourage fast acting
- Leadership and Organizational change • Human capital synergies • Familiarity with status quo
- cultural change • Reduce costs roles
(+)
- dilution of luxury brand • Centralized control and • Broad knowledge
Operations accountability
- Procedural changes • Brand synchronization
- Time/cost of integration
• Employees will be unfamiliar • Lack of accountability could
with the new standard lead to a hold-up problem
Brainstorm operating procedures • Increased costs
Transition statement: To determine which sales organization structure is best, I (-) • Leadership changes may • No common goal
would like to focus on sales generation in a leveraged versus a decentralized sales disrupt familiar culture • No brand synchronization -
organization. • Bureaucracy stifles decision could lead to customer
making confusion
Once the candidate explains their framework, ask, “what are the advantages and
disadvantages of each operating model?”
• Push the candidate to consider several of the options listed to the right, ensuring
they list both advantages and disadvantages for each sales organization
structure.

159
Case #14: French Beauty Co (3/5)
Question 1 Questions 2 & 3
Once complete with brainstorming, tell the candidate: Question 2:
How much revenue could be gained by selling fragrances at Walmart, and would it
The CEO has stopped by to let us know that the company’s Board has met and is be enough to satisfy the Board’s goals?
upset about their profitability. They have indicated that a 5% generation of added
value above their current $2B needs to be achieved by this year. • When the candidate asks about the possible market capture and / or
manufacturer margins, let them know that a market analysis performed by
• Show the candidate Exhibits 1 & 2, and walk the candidate through the following Accenture showed that 25% of the revenue could be captured by our client.
three questions: • Have the candidate perform the following calculations to determine if that would
be enough to satisfy the Board’s goal.
Question 1:
Based on the two provided exhibits, what are some ways to achieve the added value $400M in Revenue * 25% = $100M potential revenue
goal?
$100M/$2B= 5%
• Push the candidate to initially focus on revenues and not costs.
• Candidate should identify that Walmart generates a significant amount of Selling fragrances at Walmart would achieve the Board’s goal.
revenue through the sale of fragrances (more than any of French Beauty Co’s
current fragrance retailers) – a channel that our salesforce has not tapped into
currently. Question 3:
– If asked, interviewer can provide additional information on the fact that our How else could the COO drive the required 5% value add?
client, being a major sales and marketing force in the industry, can easily pivot
to manufacture perfume for the “accessible” customer by tapping its talented • Have the candidate brainstorm potential answers, which include:
workforce. – Reduce costs
– Look into emerging market growth
– Improve advertising
– Identify new retailers / customers
– Addition new product lines

160
Case #14: French Beauty Co (4/5)
Exhibits Retailer’s Revenue by Product Line

French Beauty Co Sales Unit Acquired Company Sales Unit

Primary retail outlets sold to: Macys, Bloomingdale, Saks, Nordstrom Walgreens, Walmart, CVS
Neiman Marcus

Product Sold: Fragrances Skincare and cosmetics

161
Case #14: French Beauty Co (5/5)
Recommendation Risks and Next Steps
French Beauty Co should shift to a leveraged (centralized) sales Risks
organization – Challenges in combining different cultures; unfamiliarity with new standard
• This would allow the company to manufacture and effectively sell operating procedures
“accessible” perfume to Walmart – Leadership changes may disrupt familiar culture; bureaucracy stifles
decision-making
• This will result in the projected 5% revenue gain that will appease the
goal set by the Board – Ability to obtain shelf space for fragrances at Walmart

Next Steps
Additional Benefits that may be mentioned: – Identify similarities and differences between the two firms; develop strategic
• Use of existing customer relationships to sell “accessible” perfume in plan to bring them together
new channels will be valuable – Craft message from leadership and develop internal feedback system to
• Encourages education, knowledge sharing and shadowing amongst maintain pulse on employees’ satisfaction and ability to be successful at work
the reps in each sales organization – Leverage existing relationships at Walmart to design strategic market entry
• Creates a unifying culture and vision for the company plan
• The accessible perfume market will be key in an economic downturn
Evaluation

• Assessment is based on qualitative brainstorming and quantitative

approach during analysis section.
• Exemplary candidates are able to:
– Support their brainstorming with evidence and / or examples.
– Go back to the framework for additional ideas; often is a valuable tool to
generate deeper insights.
– Demonstrate strong analytical abilities in the value generation calculations.
– Summarize the discussion and create a strong and clear final
recommendation.

162
 Overall Quant Creativity
2 2 1

Case #15: German Telecom

Case Type: BCG– Candidate Driven
Profitability

Industry:
Telecommunications

Concepts Tested:
• Breakeven analysis
• Bidding strategy
 Quant Level – MEDIUM

Case #15: German Telecom (1/5) Case Type Industry Client Type

Profitability Telecommunications Telecom Company

BCG – Round 1 – Candidate Driven

Fit Questions Interviewer Guidance

1. Tell me about a time you’ve faced a challenge as part This case assesses critical thinking and analytical problem solving while evaluating the
of a team. profitability of a specific action for the client. It is a great case for testing a candidate’s ability to
2. Tell me about a time when you led a team to elevate its ask the right questions to obtain the correct information and drive the problem forward. It is
performance to a new level. heavily candidate-driven.

Provide the case prompt below and then provide additional information (on the following page)
only as the candidate asks for it. You should allow the candidate to drive the interaction.

Fit Evaluation
Overall Fit Performance
S1 O1 A 1
R 1

2 2 2 2

Case Prompt Case Development

Our client is a large German telecom company. It is considering making a bid in an auction for one of 5 licenses to 1. Background Discussion
operate a new generation of mobile phone networks (4G) in the United Kingdom. 2. Initial brainstorming
3. Additional revenue analysis
It has engaged BCG to help with the issue and determine the appropriate strategy for the auction. 4. Recommendation/Wrap-up

Case Evaluation
Structure and Framework

Analytical and Problem Solving Ability

Communication and Positive Attitude

Synthesis and Recommendation

164
Case #15: German Telecom (2/5)
Interviewer Guidance
If the candidate asks for more information on the AUCTION, provide the following:
• The auction will be a sealed bid auction with all bids received simultaneously. Since it is a sealed bid auction, our client will not know the true bidding
strategies of its competitors with any certainty.
• The licenses will go to the highest 5 bidders. Each bidder can attain only one license. The licenses will be valid for 5 years.
• The British government intends for the auction to open the mobile phone market to competition to help control consumer prices. As a result, one license
has been reserved for a new entrant, but the other four are open to both new entrants as well as established competitors.
• The auction is the first of its kind for 4G networks in Europe.

If the candidate asks for more information on the TECHNOLOGY, provide the following:
• The most important characteristics are the high data speeds and increased capacity for service that it offers.
• It will enable data speeds of up to 5x greater than the most advanced 3G networks available today.
• Additional 4G spectrum enables incumbent wireless companies to build out their capacity in order to support more customers and to enable
high-bandwidth services in an environment that is increasingly capacity-constrained.
• Following the introduction of 4G technology, old technology networks will be phased out by the government over the span of 3 years.

Note: The candidate should, at this time, draw out a framework. Below is more information the candidate may ask for; provide this only if the candidate asks.

If the candidate asks for more information on the CLIENT, provide the following:
• It is a market leader in Germany.
• It has a large presence in the rest of Europe, but no presence in the United Kingdom currently.
• It has been experiencing stagnating growth and is looking for opportunities to expand.
• It has the financial capability to bid what is needed, but does not want to overpay for the license.
• It has the financial capability to build the network that will be needed to operate in the UK.

If the candidate asks for more information on the COMPETITION, provide the following:
• It is unclear how many competitive bids will be received or who will bid.
• Four major operators exist in the current UK market, and they roughly split the market equally.
• They already have established networks as well as retail outlets that can be leveraged for the introduction of 4G technology.

165
Additional Information (3/5)
Interviewer Guidance Framework
The Market
• Approximately 30 million people have a mobile phone in the UK.
• Converting to the new network will require the purchase of a 4G
network-enabled device.

Volume
• Some potential for growth beyond current market due to new services.
• Must consider that conversion of customers will be critical and that client is at a
disadvantage compared to established competitors.
• A likely outcome is that our client will receive less than 1/5 of the total customers
due to new entrant status.

Price
• Customers pay £30 per month for their current mobile phone plans, cost is Working hypothesis: The client should bid for the license as long as
expected to be higher for 4G. profitability can be established, in PV terms, for the life of the license. I
• Could charge additional fees for additional services and allow customer to pick would first like to calculate this and then establish the bid price.
and choose what they want.
• Could charge more for a fixed plan with all services included; however, there will Interviewer Guidance
also be increased competition in the market.
The candidate should utilize industry specific terminology and examples as
• Candidate should consider both the factors that will increase the price (new
services) and decrease the price (increased competition). they walk through the framework.

Fixed Cost There are two parts to this case. First, the candidate must assess if the
• Significant upfront cost for our client as they must set up the network and retail market is attractive for our client by assessing the total profitability over the
chains. 5 years life of the license. Once complete, the candidate should determine
• Upfront costs not as significant for established competitors (a key disadvantage an appropriate bid price.
for our client).
• Once network is established, fixed costs consist of: Do not provide the candidate with all of the information on the right. Rather,
– Network operation push them to make assumptions about each factor and work with them to
– Maintenance
uncover the information. Actual numbers for the calculation are provided on
– Retail operations, etc.
the next page.
Variable Cost
• Minor once network is established (i.e. one extra customer costs little).

166
Case #15: German Telecom (4/5)
Assessing Profitability Data to Provide
The candidate should be driving to calculate the annual revenues and costs in If the candidate is struggling to come up with values for price, volume, fixed
order to calculate the profitability and present value of the future cash flows cost, and variable cost, provide the following guidance:
for the next 5 years (life of the license).
Price
At this point, instruct the candidate not to worry about discounting future • Average price per customer is likely to increase to £50 due to new service
cash flows (or tell them that the discount rate is 0%). adoption among key customer segments.
Volume
Note: Some candidates may come up with their own assumptions (e.g.,
retention rate of customers, adoption rates, market growth each year, etc.). • Assume an increase of 33% in customers (to 40M) overall.
Feel free to allow for more difficult calculations depending on the candidate’s • Assume the client will receive 1/8 of market annually (5M total).
level of case practice. The solution below is simply illustrative. Fixed Costs
• £740M to build network.
• £50M to run network annually.
Variable Costs
• £50M to run network annually.

Calculations
Our client’s bid is based on an assessment of Revenues Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 TOTAL
profitability: Price/Customer £600 (£50x12) £600 (£50x12) £600 (£50x12) £600 (£50x12) £600 (£50x12)
• The bid could be as high as the total value of the # of Customers 5M 5M 5M 5M 5M
Revenues £3B £3B £3B £3B £3B £15B
cash flows from the license (break-even). Costs Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 TOTAL
• The candidate should consider if the bid should be Build Network £740M £0 £0 £0 £0 £740M
lower to realize some profits from the venture. Run Network £50M £50M £50M £50M £50M £250M
Variable Costs: £50M £50M £50M £50M £50M £250M
• As a result, the bid will be no higher than £13.76B. Total Costs £1.24B
Total Profit £13.76B

167
Recommendation (5/5)
Recommendation Evaluation
German Telecom should bid for the 4G mobile network in the United A good candidate response will provide a clear recommendation backed by
Kingdom the data with a mention of key risks to moving forward.
• Bid price can be up to £13.76B based on projected profits and break-even
analysis A strong candidate will also recognize that the 4 UK-established competitors
• Our assumption is based on an expected market share of 1/8 due to are willing to pay far more as their fixed costs will likely be significantly lower.
fierce competition, especially with several companies already established This would imply that it is unlikely that our client would be willing to outbid
in the UK. the established competitors as a result. Instead the client’s real competition
comes from other new entrants for the license reserved for them.

Risks and Next Steps

Risks
• Competition from foreign telecom companies; inability to capture 1/8 market share
• Unable to charge estimated average price of £50, which leads to lower revenues
• Government issuance of additional licenses or withdrawal of existing licenses

Next Steps
• Appraisal of foreign competitor landscape and likelihood of other new entrants into UK
market
– Market analysis to calculate feasibility of capturing intended market share
• Pricing analysis to determine customers’ actual willingness to pay for higher speed service
• Develop contingency plans to deal with new regulations should they arise

168
 Overall Quant Creativity
3 3 1

Case #16: Green Co

Case Type: Deloitte – Interviewer Driven
Investment Decision

Industry:
Retail and Leisure

Concepts Tested:
• NPV
• ESG
• Implementation
 Quant Level – HEAVY

Case #16: Green Co (1/6) Case Type Industry Client Type

Investment Decision Retail & Leisure Apparel

DELOITTE – Round 1 – Interviewer Driven

Fit Questions Interviewer Guidance

1. Tell me about yourself. This case is interviewer driven, uses a non-traditional format (it has no framework), and
2. Tell me about a time you had unclear instructions for a includes NPV calculation. It is a great case for an interviewee who is in the mid-to-late stage of
task and how you approached this task. casing and who desires a very quantitative case.

There are several questions which will be outlined in this case. You should provide the case
prompt and then show the candidate Exhibit 1: Data Sheet for the candidate’s reference
throughout the case. Before asking question 1A, allow the interviewee to review the data
sheet.
Fit Evaluation
Overall Fit Performance The BAU scenario is one in which the company implements no carbon emission reductions.
S1 O1 A 1
R 1

2 2 2 2

Case Prompt Case Development

Our client, Green Co, is a $10B global manufacturer and retailer of high-end outdoor apparel, with several well-known brands. 1. Case Prompt and Data Sheet
The company has big growth aspirations. Through organic and inorganic growth, Green Co is hoping to grow from $10B in
Review
revenue in FY21 to $15B by FY25.
2. Questions 1-4
At the same time, the CEO has recognized their customers’ and investors’ interest in being an environmentally sustainable 3. Brainstorming
company and has asked their Director of Sustainability to develop goals for absolute reduction in carbon emissions despite the 4. Recommendation
growth they have planned (as compared to a “Business As Usual” (BAU) scenario). The CEO expects this to support the
company’s overall sustainability vision, help ensure protection of their brands’ value, and bolster the company’s market Case Evaluation
capitalization. Structure and Framework

Analytical and Problem Solving Ability

Communication and Positive Attitude

Synthesis and Recommendation

170
Case #16: Green Co (2/6)
Exhibit 1: Data Sheet

Table 1 – Company FY21 Data Table 2 – FY25 Growth Goal

Metric FY21 Metric FY25 (Goal)

Company Revenue $10 billion Company Revenue $15 billion
Offices: 20 Offices: 28
Retail: 600 Retail: 900
Locations Locations
Manuf. & Dist.: 50 Manuf. & Dist.: 60
Total: 670 Total: 988
Offices: 0.5
Energy
Retail: 4.0 NPV Calculation
Consumption
Manuf. & Dist.: 2.0
(millions kWh)
Total: 6.5
** CO2-e is the unit measurement for carbon emissions; one can
Energy Spend $65 million assume that carbon emissions are directly correlated to energy
consumption
Carbon Emissions 300,000 metric tons of CO2-e** ** Assume discount rate of 10%

Table 3 - Potential Energy Efficiency

Projects
Annual CO2-e
Project Groupings Energy Efficiency Project(s) CapEx Lifetime
Savings Reductions
Grouping 1 – Lighting & HVAC Retrofits at all 140,000
$4,000,000 $1,600,000 5 Years
Offices Offices metric tons
Grouping 2 –
140,000
Manufacturing & Solar Installations & other controls $41,500,000 $4,400,000 Perpetuity
metric tons
Distribution

171
Case #16: Green Co (3/6)
Question 1: Spend & Emissions Interviewer Guidance
Question #1A
Metric FY21 FY25 Forecast
After allowing the candidate to review Exhibit 1, ask:
Offices: 20 Offices: 28
Retail: 600 Retail: 900
Without putting a carbon reduction goals in place, how much money would Locations
Manuf. & Dist.: 50 Manuf. & Dist.: 60
you project the company to spend on energy in FY25? Total: 670 Total: 988

Offices: 0.5 Offices: 0.7

• You may remind the interviewee that they have some FY25 data. Energy Consumption Retail: 4.0 Retail: 6.0
(millions kWh) Manuf. & Dist.: 2.0 Manuf. & Dist.: 2.4
• A candidate may wish to assume some increase in energy prices, which is Total: 6.5 Total: 9.1
perfectly acceptable. Allow them to assume no price change.
Energy Spend $65 million $91 million

Question #1B Carbon Emissions 300,000 metric tons of CO2-e 420,000 metric tons of CO2-e
Ask the following:

How much will the company emit in FY25?

• Push the candidate to calculate the exact number and not round.

172
Case #16: Green Co (4/6)
Question 2: NPV Interviewer Guidance
Question #2 •

Ask the following:

What is the NPV of the two potential project groupings that the company is
considering implementing? Assume benefits and costs are immediately
realized in FY21.

• Ask the candidate for the approach that they would take and write out
the formula. Do not ask them to do the NPV calculation, it will take too
long for the allotted time. Once they write the formula, provide the
information that the PV (cost savings) is $6.7M.
• Discount rate is 10% (also on the data sheet).
• Investment and payback both happen in FY21.

173
Case #16: Green Co (5/6)
Question 3: Emission Reduction Interviewer Guidance

Question #3A Questions #3A and #3B

• Since emissions are directly correlated to energy consumption (as noted in the
Ask the following: data tables) and the cost of energy stays constant:
– A 0% increase in absolute emissions would equate to a 0% change in energy

• Relative to the BAU scenario, what are the potential consumption. Energy spend would stay at $65 million, resulting in a savings
of $26 million ($91 million - $65 million).
energy cost savings if the company chose to adopt a – A 5% reduction in emissions, following the same logic, would equate to a
goal of: 5% reduction in energy consumption (and thus spend). Spend would be
a) 0% absolute increase in emissions from FY21 to reduced by 5% to $61.75 million ($65M * 95%) and thus the savings from
the Business as Usual number is $29.25 million ($91 million - $61.75
FY25 or, million).
b) 5% decrease in emissions from FY21 to FY25?
• Being methodical will be critical to this question; there are several variables that
must be addressed in logical order:
Question #3B • BAU carbon emissions are forecasted to be 420,000 MT CO –e .
2
• Which of the two project groupings should Green Co • A 5% reduction target would require a 135,000 MT reduction (420,000 MT

pursue to achieve a goal of 5% decrease in emissions? – 285,000 MT), which could be accomplished by both project groupings
(140,000 MT each).

• The BAU (Business as Usual) scenario, as mentioned in • Since both Grouping 1 and 2 offer the same carbon emissions savings potential,
the prompt, is one in which the company implements the candidate should choose the one with the better NPV, which is Grouping 1.
no carbon emission reductions. • In addition to getting the NPV calculation right and getting to a recommended
goal, a great answer would include:
• Balancing NPV with the non-financial benefits (i.e., carbon emissions) to
ensure the goal makes sense from a financial and non-financial (e.g.,
stakeholder expectations) perspective.
• Benchmarking these goals against those of their peers and competitors in
the marketplace to understand whether these goals will help meet
stakeholder expectations.

174
Case #16: Green Co (6/6)
Brainstorm
Question #4 Green Co should implement the Grouping 1 energy efficiency project
• What other factors should the company consider when setting goals and • This project has a positive NPV of $2.7M vs Grouping 2’s $2.5M
planning for the implementation? • It meets the company’s sustainable vision for the future by reducing
carbon emissions by 5%
Key points may include:
• Additional financial considerations
– Length of availability of tax credits & incentives
– Availability of capital (Grouping 2 requires a very large upfront
investment)
• Organizational
– Internal appetite for adoption of these goals
– External stakeholder expectations
– Management commitment
– Alignment with CEO’s vision
• Operational
– Creation of an implementation roadmap Risks and Next Steps
– Measurement & verification of results (i.e. cost savings, carbon
emissions reductions) Risks
• Does Green Co have the financial means to implement?
• Does client have capability to implement project
• Forecasts and constant price of energy may be inaccurate

Next Steps
• Determine Green Co’s financial position to implement
• Examine movement in energy prices
• Analyze company’s ability to implement and impact on wider company
operations

175
 Overall Quant Creativity
2 2 1

Case #17: GreenShield Health Insurance

Case Type: Strategy& – Interviewer Driven
Market Entry/Sizing

Industry:
Financial Services & Insurance

Concepts Tested:
• Market Sizing
• Breakeven Analysis
• Channel Selection
 Quant Level - MEDIUM

Case #17: GreenShield Health Insurance (1/6) Case Type Industry Client Type

Market Entry / Financial Services

Healthcare Insurer
STRATEGY& - Round 1 – Interviewer Led Market Sizing and Insurance

Fit Questions Interviewer Guidance

1. Describe a time when you led a team through a This is a 3 part case that tests several different skills:
significant change or introduced a new idea during a – PART 1: MARKET ATTRACTIVENESS (15 min)
• Testing: Market Sizing, Breakeven Analysis, other factors
project.
– PART 2: CHANNEL SELECTION (15 min)
2. Tell me about a time when you failed. • Testing: Grasp of channel economics of client acquisition model, other channel factors
– PART 3: PROPOSED RECOMMENDATION (5 min)
• Testing: Ability to synthesize conclusions from large amounts of data, identify risks, and respond to challenges

Fit Evaluation
Overall Fit Performance
S1 O1 A 1
R 1

2 2 2 2

Case Prompt Case Development

Your client is GreenShield Health Insurance, or GHI. They are a health insurance company that wants to expand into 1. Framework
Florida. GHI wants your help creating a business plan for this venture to see if it makes sense to enter this market. 2. Q&A Discussion
3. Final Recommendation
• Before allowing the candidate time to write out a framework, have a discussion about the important facets of a
business plan and what one would need to believe to enter this market.
• The candidate would ideally touch upon market attractiveness, customer identification, and distribution channels.
For the next portion of the case, guide the candidate through each of the dimensions and allow them to come up Case Evaluation
with a separate mini-framework for each.
Structure and Framework

Analytical and Problem Solving Ability

Communication and Positive Attitude

Synthesis and Recommendation

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Case #17: GreenShield Health Insurance (2/6)
Framework Interviewer Guidance
• The candidate should walk the interviewer through their framework. The
• Health Insurance Market interviewer should ask further questions of the candidate, if necessary, to
– Size drive a discussion around market potential for the client.
• # insured by employer – If the candidate does not fully flush out their thoughts on the size and segments
• # insured by other means v. uninsured associated with the market, probe the candidate further by asking, do you think that
– Customer Segments every person who could individually get health insurance (>18 yrs. old) in FL has health
• Insured v. uninsured insurance?
• Ability to afford insurance – If the candidate still struggles to identify different customer segments for the market,
• Satisfaction with current plan prompt them by saying, what are some reasons that a person may not have
insurance?
– Competition
• Other health insurance companies
• State-run health exchange
– Channels
• Direct (mail, calls, agents) v. indirect (internet, billboard)
– Growth Rate

• Profitability
– Revenue
• Price per policy
• Volume-# potential policies issued
– Costs
• Fixed costs-initial investment
• Variable costs-per policy issued (admin, etc.), salesforce, marketing

• Company (GHI)
– Fit with current portfolio of customers (by state)
– FL insurance regulation concerns
– Changes to existing insurance laws (e.g. ACA)

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Case #17: GreenShield Health Insurance (3/6)
Part 1: Market Attractiveness Part 2: Channel Selection
1. Ask the candidate how they would estimate market size (e.g. what data would be 1. The candidate should begin with a brief discussion of their framework for
necessary, how they would use that data, etc.). addressing the issue of channel selection (having been previously completed).
Below are relevant questions that the candidate should ask to arrive at an
• After this discussion, show Exhibit 1 (cover Exhibit 2) and ask the appropriate solution.
candidate to react. No calculations are necessary, but the candidate should
2. How is insurance sold?
have already cited several of the factors in the exhibit during the
– Discuss direct (calling customers, direct mail, agents) and indirect models
discussion. (internet, billboard).

2. Ask the candidate to determine the breakeven criteria and formula, given the 3. Where do the sales come from?
following information (show Exhibit 2): – Discuss leads. Specifically, the candidate should identify that direct models
will likely generate far higher leads than indirect models, but are probably also
Investment Required $2,000,000 more costly.
Revenue per policy = $500 – After the candidate identifies channel differences in lead generation, show
Medical Cost per policy = $350 Exhibit 3 and allow them to react. A strong candidate may dive into
calculating the most attractive sales channels.
Admin Cost per policy = $100
– The candidate should easily calculate the contribution margin per policy 4. Ask the candidate to explain differences between yield percentages and look for
a coherent response (e.g. secondary and tertiary insights are given, a relationship
($50). As a result, 40,000 policies need to be sold to cover the 2M to self and knowledge of how effective each channel is personally may be
investment. Assume all costs and revenues are over the lifetime of the explained, etc.).
customer.
5. Ask the candidate to identify the most attractive sales channel and which
resulting model is best (e.g. direct v. indirect).
3. Next, using Exhibits 1 and 2, ask the candidate to calculate the share of the – The profit calculation for each channel is as follows:
current market the firm would need to capture to breakeven: Total Revenue-Total Cost = ((# of leads) * (% yield) * (revenue per sale)) – ((# of
(40,000 policies) / (4,800,000)= 0.8% leads) * (cost per lead))
– Note: Use number of insured, not target market. The candidate should Result:
identify that this is a realistic market share target. Internet - $75K
Direct Mail - $100K
Call Center - $200K
Billboard - $0
Agent - $1,950K

– The candidate should identify that direct sales models are best and that
using agents, call centers, and direct mail are the best channels for selling
insurance.

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Case #17: GreenShield Health Insurance (4/6)
Exhibit 1: Market Sizing Exhibit 2: Breakeven Analysis

Market Estimation
Florida population 17,000,000
Over 18 yrs. old 12,000,000
Not covered by employer, % 50%
Breakeven Analysis
Not covered by employer, amt 6,000,000
Currently Insured, % 80% Upfront Investment $ 2,000,000
Currently Insured, amt 4,800,000
Revenue Per Policy $ 500
Uninsured, % 20%
Uninsured, amt 1,200,000 Medical Cost Per Policy $ 350

Uninsured, can afford 30% Administrative Cost Per Policy $ 100

Uninsured, can afford 360,000
Insured but unhappy 30%
Unhappy, amt 1,440,000
Total Target Audience 1,800,000

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Case #17: GreenShield Health Insurance (5/6)
Exhibit 3: Channel Selection

Lead Generation by Channel

Internet Direct Mail Call Center Billboard Agents

Cost Per Lead 25 15 30 10 30

Number of Leads 1,000 20,000 10,000 500 10,000

Yield 10% 2% 5% 1% 30%

Revenue Per Sale 1000 1000 1000 1000 750

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Case #17: GreenShield Health Insurance (6/6)
Part 3: Recommendation Risks and Next Steps
• The client company should enter the Florida insurance market Risks
– Based on the upfront investment necessary, the client only needs to capture 0.8% of – The Florida market may look attractive now, but we do not have any information on
the insured market to breakeven market trends
– The direct channels are the most profitable and, as such, the client company should – We do not know about our client’s existing direct sales capabilities (e.g., do they
leverage these starting with agents first already employ agents and have expertise in this area?)
– We are not sure if the direct channels will best address the market segments the client
hopes to target in Florida

Next Steps
– Conduct further market research to best understand trends in the FL health insurance
market over time
– Create plan for build out of client salesforce (agents) and training specific to the FL
health insurance market
– Determine how the client’s target customer responds to marketing by sales channel to
refine lead generation model

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 Overall Quant Creativity
2 2 2

Case #18: Hawaiian Smoothies

Case Type: BCG – Candidate Driven
Market Entry

Industry:
Retail & Apparel

Concepts Tested:
• Math structuring
• Breakeven analysis
• Brainstorming
 Quant Level - MEDIUM

Case #18: Hawaiian Smoothies (1/5) Case Type Industry Client Type

Restaurants, Food &

Market Entry Investor
BCG – Round 2 – Candidate Led Beverage

Fit Questions Interviewer Guidance

1. Tell me about a time you struggled as a leader. If you This is a breakeven problem. The candidate should draw out a framework and explore the
could redo everything, what would you change? major business aspects of opening the smoothie store. This case is candidate-led, so push the
2. Tell me about a time you persuaded someone who candidate to drive the case. Only provide information when it is specifically requested.
initially disagreed with you. What was the
disagreement, what did you do, and what was the If asked about timing, respond, “Jim plans to open the store as soon as he finds a co-investor”.
result?
If asked about payback period or Dan’s investment objectives, respond, “Dan would only invest
if the payback period is within two years. He’s also interested in the longer-term prospects and
Fit Evaluation growth potential of selling smoothies”.
Overall Fit Performance
S1 O1 A 1
R 1

2 2 2 2

Case Prompt Case Development

It is the year 1990. Your client, Dan, was approached by an entrepreneur, Jim, who wanted to discuss the possibility of 1. Framework
Dan investing in one of his ideas. Jim has a history of successfully launching new business ideas, but Dan is not sure 2. Analysis of OpEx
whether to invest. 3. Analysis of Revenues
4. Calculation of BEP and profits
The idea Jim is proposing is to open a new “smoothie” shop, a type of drink he saw when he was recently in Hawaii. 5. Recommendation
He thinks that smoothies could be a big business and he wants to get the first store opened up soon so that he can
start rolling out franchises if they are successful. Jim has asked Dan to invest $30,000 in the concept, for which he will Case Evaluation
get a 50% ownership stake in the business. As a result of his 50% ownership stake, he will receive 50% of the profit or
Structure and Framework
loss generated by the business.
Analytical and Problem Solving Ability
Dan wants to know what you think he should consider when deciding whether to invest.
Communication and Positive Attitude

Synthesis and Recommendation

184
Case #18: Hawaiian Smoothies (2/5)
Framework Interviewer Guidance
Working hypothesis: Dan should invest in the new smoothie store because customers are • Did the candidate state a hypothesis?
becoming more health-conscious. – The candidate should express the core idea that they would like to test through their
• Breakeven in 2 years? analysis. They should clearly demonstrate how the questions they’re asking are
• Revenues directed at answering the specific question of whether Dan should invest in the
• Volume of smoothie sales smoothie store.
• Price of smoothies – It’s less important for the hypothesis to be backed up with evidence, since it’s so early
• Product mix & other sales in the case (though strong candidates will draw on their own knowledge and intuitions
• Costs
to develop preliminary insights about the potential for this new smoothie store).
• Fixed
• Real estate & store footprint
• Equipment for food prep • Is breakeven the primary consideration? Are external factors considered?
• Advertising & marketing – Breakeven is the deciding factor for Dan. It’s OK for candidates to discuss other
• Variable considerations, but their primary focus should be on profitability.
• Raw materials: fruit, add-ins
• Store Employees • Is the framework case-specific?
– Excellent frameworks will explore specific aspects of the smoothie market, rather than
• Positive market response? just generic ideas about new market entry.
• Smoothie Market
• Demand from consumers
• Growth potential & franchising
• Consumer tastes/preferences
• Competition
• New smoothie competitors
• Response from existing food & beverage stores

Case Development
• This case is deliberately open-ended – after the framework, the candidate can start by analyzing either revenue or costs. After analyzing both, the
candidate should evaluate the profits and breakeven potential (i.e., whether or not the initial investment can be recovered, and how long it will take if so).

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Case #18: Hawaiian Smoothies (3/5)
Costs: Fixed & Variable Revenues
FC • Store hours: 11am – 9pm
• Real Estate – the store will be located in a suburban strip mall. • Open days: 360 days per year (30 days per month)
– Rent will cost $7,200/month. • Price: $5 per smoothie, only one size
– The candidate should convert to day rates ($240/day). • Sales: 15 smoothies per hour, on average
• Equipment – juicers, cash registers, freezers, refrigerators.
– Equipment will cost $20,000 at the outset, and it will have to be repaid at the end of
the first year.
Computations:
• Smoothies sold per day: 15 smoothies/hour * 10 hours = 150 smoothies/day
• Advertising and marketing – print ads, mailers, radio spots, promotions. • Employee cost per day: 10 hours * 2 employees * $6/hr. = $120/day
– Advertising and marketing will cost $10,800/year. • Total cost to run the store per day: $240 rent + $120 employees + $30 advertising = $390
– The candidate should convert to price/day ($30/day). per day
VC
• Employees – two employees, likely high-school or college age kids making • Profit margin per smoothie: $5 - $1.50 = $3.50 (excl. investment)
the minimum wage in 1990. • Profit per day: ($3.50 profit margin * 150 smoothies) – $390 = $135 profit/day (excl.
– Employees will cost $6/hr. each. investment)
• Raw materials – fruits, milk, juices, add-ins. • Total yearly profits: $135 * 360 days = $48,600 (excl. investment)
– Raw materials will cost of $1.50 per smoothie.

Interviewer Guidance
• Do not provide information if the candidate simply asks, “Do we have any information on the expected revenues/costs/profits?”. Push the candidate to
think deeper and identify the major business drivers behind revenues and costs. Respond, “What do you think the major revenues/costs would be?”

• Strong candidates will proactively describe item in-depth (e.g. rather than just saying “equipment” as a cost, they will describe the types of equipment),
make inferences about figures, and evaluate the reasonability of figures provided to them.

• If the candidate is missing information when calculating breakeven, ask them whether they might be missing anything.

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Case #18: Hawaiian Smoothies (4/5)
Math Extension: Optional Brainstorm
For an optional math extension, ask, “The store is not entirely sure that it will After the candidate has completed the breakeven analysis, ask, “What are
be able to sell 15 smoothies per hour. What is the minimum number of some other ways the store could increase revenue?”
smoothies the store must sell to breakeven on a daily basis?”
The candidate should structure their response:
• Total cost to run the store per day: $390
• Total profit margin per smoothie: $3.50 Internal Strategies
• Total number of smoothies needed to breakeven per day: $390 / $3.50 = • Open for additional hours and serve “breakfast” smoothies
~111 or ~11 per hour • Sell food items or other beverages
• Strong candidates will recognize that 11 is a reasonable amount as that is • Add premium drinks with “boosters”
about one every 5-6 minutes. • Sell athletic supplements
• Rise prices

External Strategies
• Enter into partnerships with local gyms
• Franchise the stores

Once the candidate has completed the brainstorming, ask for the final
recommendation for Dan.

Key Insights
• The candidate should remember that at the end of the first year, Jim and Dan will have to repay the $20,000 in equipment costs. This means that first year
profits will only be $28,600.
• Candidate should recognize that Dan will receive 50% of the returns from the store: $14,300 in the first year and $24,300 per year, starting in the second
year, and continuing every year after that. Therefore, Dan will recover his investment during the second year.

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Case #18: Hawaiian Smoothies (5/5)
Recommendation Risks
– Dan should invest in Hawaiian Smoothies • Bad economy or faulty assumptions could adversely affect estimates and
• Dan should recover his $30k investment during the first half of the revenues could be lower than projected
second year • Food and beverage competitors could introduce smoothies, since it’s a
• Dan should earn $24,300 annually on an on-going basis from the simple product to make, cutting into Jim’s profits
investment
• The store only requires ~11 smoothies/day for breakeven on daily
expenses, but we expect to sell 15 smoothies/day

Next Steps

• Examine other ways to increase revenues, such as:

– Open for breakfast and serve breakfast smoothies
– Attract health-conscientious and potentially higher margin customers
by serving athletic supplement-boosted and/or healthy smoothies
– Increase size offerings – small, medium, large etc.
• Examine possible competitive response and gain first mover advantage

188
 Overall Quant Creativity
1 1 2

Case #19: Heavy Attrition

Case Type: Z.S. Associates – Candidate Driven
Organizational Change

Industry:
Healthcare

Concepts Tested:
• Churn/Attrition
• Sale Channels
 Quant level- LIGHT

Case #19: Heavy Attrition (1/4) Case Type Industry Client Type

Organizational Medical Device

Healthcare
Z.S. ASSOCIATES – Round 2 – Candidate Led Change Company

Fit Questions Interviewer Guidance

1. Describe your leadership style and give me an example This is an open-ended case that focuses on brainstorming and forming a hypothesis. It is
of a time when you demonstrated it. indicative of the type of case typically provided by partners and could even be performed
2. Tell me why you are specifically interested in our Firm without pen and paper if asked to do so.
and the city / office for which you are applying.
An excellent candidate should be able to quickly distinguish what factors are key to focus on
(i.e., those in the framework) based on the background information provided, and should also
be able to provide a clear structure to an otherwise ambiguous case.

Fit Evaluation
Overall Fit Performance
S1 O1 A 1
R 1

2 2 2 2

Case Prompt Case Development

Our client has asked us to look into why there is such heavy attrition amongst the junior salespeople in the 1. Framework
organization. Where do you think we should start? 2. Discussion/ Q&A
3. Recommendation
Let the candidate drive the case. The candidate should ask clarifying questions around the qualitative “heavy
attrition” verbiage.

When asked, reveal the following: Case Evaluation

• The average time a newly hired salesperson stays in the organization is less than one year. This is worrisome
Structure and Framework
because it takes about 6 months for a new salesperson to learn how to do their job well and get up to speed.
• On the other hand, experienced salespersons (people who have been with the organization greater than 3 years)
Analytical and Problem Solving Ability
have almost no attrition.
• The organization is a fairly new medical devices company that has been operating for 10 years.
Communication and Positive Attitude

Synthesis and Recommendation

190
Case #19: Heavy Attrition (2/4)
Framework

Increase retention through an improved incentive scheme

Attrition not caused by poor performance Work conditions similar across all employees Are there differences in incentive schemes?

• % of company driven leaves (layoffs) • Working conditions of people working less than • Base and variable salary differences (sales
• Satisfaction with work environment among and over 3 years people)
employees • Working hours • Commission by sales volume; distance
• Is avg. attrition in the market lower? • Type of work traveled
• Any competitor or new market player hiring • Location • How does split compare to competition?
sales people? • Insurance • Financial vs non-financial incentives
• Industry exams needed after 1y? • Maternity / paternity leaves, additional benefits
• Expense coverage
Working hypothesis: The heavy attrition is due to the incentive structure of the client. I would like
to begin by examining differences in the incentive structure for junior and senior employees.

Interviewer Guidance
• The ideal candidate should be quick to hypothesize that there seems to be an incentive problem. As a result, while the framework may have a bucket addressing additional
factors (i.e. industry regulations or exams, barriers from pre-existing relationships, etc.) it should primarily examine different types of incentives and how these compare
between new and experienced sales representatives.
• Incentives could include the type of work, compensation, perks, etc.; however, since the primary work of sales people is to sell, we can assume that the nature of work is
similar between both types of salespeople. Thus, we focus on the monetary aspects of the incentive structure.
• Sales people are typically paid a small fixed salary and a commission which is based off the sales they accomplish. Thus, commission for a sales person is a function of:
• Volume sold (type of clients, type of product sold)
• Distance traveled for each sale

• For the remainder of the case, the candidate should look to investigate how and why the commission varies between the junior and senior sales people with regards to
each of the above factors.

191
Case #19: Heavy Attrition (3/4)
Brainstorm
Ask the candidate: “Assuming there are no significant differences between the tasks of junior and senior sales people, what do you believe would be the main factors
determining incentives obtained?” A good candidate should present at least 3 headlines (buckets) to create an efficient incentive scheme. The following three headlines are
examples. Sub-topics should be discussed in detail. If the candidate does not do this, follow-up by asking what the most important issues to analyze first are – a good
candidate will do this without additional questions needed.

Type of client in the territory Distance to customer location

Type of product sold

• Margins of each product? • Incentive adjustment according to territory potential? • Incentives adjusted to distance to customer?
• Effort to sell? • How territories are assigned? • What is the average distance for each client on customer
• Can junior sales people sell every product? • Best clients / territories assigned to senior people? portfolios?

Interviewer Guidance

The candidate should show an understanding that it is important if Typically sales people are assigned territories so they don’t have to A salesperson’s commissions could be heavily impacted if their
the company sells multiple products of differing commissions and compete with one another for the same customers. customers are geographically separated by large distances and they
price ranges and if the junior salespeople do not have access to the are forced to spend relatively more time on the road traveling than
entire range of products. The candidate should want to know how territories are assigned. If it with customers.
• For example: Apple iPods priced in the $100-300 range practically is based on geography, there could be a problem if junior salespeople
are provided lower income neighborhoods, while senior salespeople This problem could be compounded if the junior salespersons are
sell themselves, i.e. they require little effort on the part of the
command coveted higher-income neighborhoods (potentially skewed getting new potential customers who are far from each other.
salesperson. iMacs, on the other hand, are priced in the compensation).
$2000-3000 range and require a greater effort to sell.
On the other hand, territories could be based on industries of
The candidate should investigate whether the incentives are aligned customers. For example, a few sales people sell to higher education, a
with the effort required to make a sale, such as having a higher few sell to businesses, a few to retail, etc. If the junior sales people
commission for an iMac than an iPod in the example above. are assigned to a client-group where they have to acquire new
customers or where customers aren’t familiar with the product, it
If the commissions are structured as above, the candidate should could negatively impact their compensation.
investigate whether junior salespeople are allowed to sell higher
Another issue could be that typically high volume customers for the
margin, higher commission products or whether they are forced to
firm are earmarked to be serviced by the senior sales team. This setup
sell only the lower-priced end of the product line. Improper incentives would inflate commission of the senior sales team to the detriment of
could lead to lower morale among junior sales people and motivate junior members who are not able to experience the benefits of bigger
them to leave quickly. clients or to build relationships with them.

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Case #19: Heavy Attrition (4/4)
Recommendation

As a final question to the candidate, ask them for their recommendation.

• The interviewee should prioritize one of the factors discussed previously and provide their rationale for doing so (the rationale matters more than
which factor is selected).
• They should also include some suggestions like the ones listed in the sample recommendation, and should be rewarded for creative ideas.

Recommendation
The client should review the incentive scheme for junior employees, namely by:
• Analyzing the type of products sold by different sales levels, as this is likely to have the greatest impact on sales commission
• Reviewing any adjustments required to even out sales effort among territories
• Compensating for differences in average distances to clients

Risks Next steps

• Increases in attrition among senior employees • Include senior employees in the decision making process / committee
• Other factors might be creating the attrition problem • Investigate the main attrition caused through a survey to junior sales
• Fairer incentives not enough to compete on the labor market people
• Analyze competition and market best practices regarding
compensation

Evaluation

As mentioned before, this case focuses on the candidate’s ability to brainstorm. A good candidate will provide thoughtful reasoning about buckets and
sub-bullets, making sure to have a MECE approach.
It is also important to drive the case and prioritize topics in order of importance after each brainstorming question. Additionally, the candidate should
keep using the same ideas across questions to show confidence in the reasoning presented before.

193
 Overall Quant Creativity
1 2 1

Case #20: International Airlines

Case Type: Bain & Company – Candidate Driven
Profitability

Industry:
Transportation

Concepts Tested:
• Revenue Streams
• Competitive Landscape
 Quant Level – LIGHT

Case #20: International Airlines (1/6) Case Type Industry Client Type

Profitability Transportation International Airline

BAIN & COMPANY – Round 1 – Candidate Led

Fit Questions Interviewer Guidance

1. Of what experience on your resume are you most This is a profitability case. The candidate should draw out a framework outlining the possible
proud? issues and then use it to ask exploratory questions. Ensure the candidate understands the
2. How have you used analysis to guide your decisions? airline business model before proceeding.

Fit Evaluation
Overall Fit Performance
S1 O1 A 1
R 1

2 2 2 2

Case Prompt Case Development

One of our clients, a leading international airline, has come to Bain with a problem. Over the last three years they 1. Framework
have noticed that while their business has been doing well, their profitability seems to be stagnant. They have come 2. Analysis of Freight
to us to try to determine what the issue is and how they can correct the problem.
3. Profitability evaluation
Framework: 4. Recommendation
This is a classic profitability case, so a framework considering external factors (i.e. state of the airline industry,
competitive landscape) and internal factors (i.e. revenue streams, costs) is appropriate. The framework should be Case Evaluation
industry specific.
Structure and Framework

Additional Information (to provide during discussion with the candidate):

Analytical and Problem Solving Ability
The airline has two main lines of business: passenger and freight. Provide Exhibit 1 only when asked about business
segments (product mix or profit trends). The firm operates globally.
Communication and Positive Attitude

Synthesis and Recommendation

195
Case #20: International Airlines (2/6)
Framework

Increase profitability by optimizing usage on freighter flights

This is not a market wide trend Profitability is decreasing due to freight business Freight business can be improved

• Clients • Revenues • Major cost item can be improved making

• Market size • Product-mix profitability grow
• Overall growth trends • Passengers • Investment needed to make the change is more
• Demographic / client-mix changes • $revenue / mile traveled ratio than compensated by the upside (NPV, ROIC, BE
• Competition • Costs analysis)
• Same profitability trend? • Capacity utilization • Special customer needs that make adjustments
• New competitors in the market? • Fuel costs impossible (service levels)
• Innovation and trends • Maintenance • Any long-term commitments?
• Alternative transportation developments • Personnel • Re-sell capacity
affecting business (Uber, faster trains, etc.) • Insurance

Working hypothesis: The client is experiencing decreases in profitability due to the freight business. I would like to begin by
analyzing trends in the profitability of this business segment over the past several years.

Interviewer Guidance

• Note that this is a Bain & Co case and the candidate should start with an “Answer First” approach. The answer provided might
be different as long as the supporting facts below are MECE and able to redirect the candidate to the correct analysis.
• The ideal candidate should be quick to hypothesize about the recovery of one of the business segments. If clarifying questions
and answers already indicate there is a freight problem, the hypothesis should be related to freight flights.
• If the candidate did not take an answer first approach, the framework should include buckets associated with the market (size,
customers and competitors), client profitability (detailed revenues and costs, airline specific, references to product mix) and
execution (regulation, decision making, ability and client capabilities).

196
Case #20: International Airlines (3/6)
Exhibit 1: Segments

Revenue and Profit by Business Segment

197
Case #20: International Airlines (4/6)
Details About Freight Key Takeaways
Let the candidate walk you through the data. • There might be a problem with the usage of freighter and passenger jets to carry
the freight.
Provide the following information once candidate identifies freight as an issue:
• Belly freight is a substitute for freighters themselves.
• There are two main types of freight: belly freight, which is carried in the bays of
the planes that are operating as passenger jets, and freighter freight, which is • Candidate should now ask for some information about the profitability of belly
carried on specially-designed freighters. freight versus freighter freight.
• With the exception of live animal freight, which is an inconsequential portion of
this airline’s overall business, all types of freight can be carried on either
freighters or passenger planes.
• Passenger planes typically have about 35% of the room for freight as compared to
freighters.

Key Data Additional Details

Provide the following once asked about belly versus freighter freight profitability. This • International Airlines has quadrupled their number of freighters from 3 to 12 over
box gives details on costs, then move to usage in the Additional Details box. the past 3 years. Further they have added new freighter flights. This has led to
Revenues are included in Exhibit 2 (next page) and should be shown to candidate the usage of the freighters’ capacity on each flight to drop from 85% to 35%.
last.
• At the same time, the number of passenger flights has doubled and the number
• The cost per ton of belly freight (i.e. the incremental cost to the airline) is
of destinations served via passenger flights has increased by 1/3. Belly freight
approximately 20% that of freighter freight.
capacity usage however has dropped from 85% to 60%.
• The time to deliver belly freight is approximately 10% longer than that of freighter
freight.
• The destinations served are actually greater with belly freight flights than with
freighter freight.
• They operate out of the same airports, although separate personnel are required
to operate freighter freight flights.
• If belly freight or freighter freight capacity goes unoccupied, it’s non-revenue
generating (i.e. nothing else is carried in that space).

198
Case #20: International Airlines (5/6)
Exhibit 2: Profits

The total cost for a freighter freight flight averages $400,000 per flight and for passenger flights they are $600,000 (regardless of the freight carried). Further,
revenues for each flight from the freight move on a sliding scale based upon how full the planes are.

Revenue By Freight Usage

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Case #20: International Airlines (6/6)
Interviewer Guidance Risks and Next Steps
Due to the unnecessary freighter expansion project, the airline is making Risks
$280K per freighter flight down from $680K. As a result, it is now losing
• Can the company cover the same routes?
$120k per flight versus a profit of $280k per flight.
• Further reduction in use of freighter and passenger flight capacity
• $800K * (85%) = $680K $800K * (35%) = $280K • Expensive and risky to try and become a leader in the express freighting
• $400K cost per freighter flight: business
– Before: $680K - $400K = $280K profit Next Steps
– Current: $400K - $280K = $120K loss per freighter flight
• Analyze need to reduce number of routes to return to profitable freighter
flights while maximizing usage of passenger freight to increase profit
• Much of this freight could be carried in the belly of the planes and would
result in a cost free incremental profit to the airline. • Review any possible contractual constraint on selling / divesting from
• It can consider trimming its freighter operations to lower facility / freight
personnel costs. • Analyze spin-off opportunities for freight business (business valuation)
• It can consider entering into agreements with other freighter companies in
order to share usage of planes and personnel in an effort to cut costs /
maximize usage. Evaluation
• The airline could try and become a leader in the express freighting A good candidate takes an answer first approach with MECE supporting
business. factors. Additionally, specially for this case, the candidate should clarify the
Recommendation
business model of the firm, namely regarding product mix. The candidate
should also be able to understand the math and provide the conclusion that
Examples: the firm is losing $120k / freight flight without any support from the
interviewer.
• Use passenger flights’ available freight capacity to serve current freight
business and study the sale of freight business
• Sell available capacity to competition
Supporting factors:
• Freight business losing $120k per flight
• Passenger flights at 60% capacity on belly freight
• Belly freight costs only 20% of that of freighter flights

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 Overall Quant Creativity
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Case #21: Katrina

Case Type: BCG – Candidate Driven
Non-traditional

Industry:
Non-profit / Education

Concepts Tested:
• Structured brainstorming
• Root cause analysis
 Quant Level – LIGHT

Case #21: Katrina (1/4) Case Type Industry Client Type

Non-traditional Non-profit/
School System
BCG – Round 1 – Candidate Led Problem Education

Fit Questions Interviewer Guidance

1. Tell me about a time when you did not meet a goal. This case provides a good balance between quantitative and qualitative reasoning skills, and
How how did you overcome / respond to this? also introduces a new perspective and set of client goals for the candidate to consider that
2. What are three adjectives your coworkers would use to differ from the typical business profitability model.
describe you?
The objective of this case is to see if the candidate can break down a problem statement to
analyze the different causes that might be contributing to the issue at hand.

Fit Evaluation
Overall Fit Performance
S1 O1 A 1
R 1

2 2 2 2

Case Prompt Case Development

Our client is a school district in New Orleans that has been completely devastated by Hurricane Katrina. After the 1. Framework/ Q&A
hurricane, they saw most of their students leave and relocate to nearby states. Two years into the disaster, students
are slowly returning. The school district has hired us to advise them on two things: 2. Quantitative discussion
1) How many schools do they need to reopen within the next couple of months? 3. Qualitative discussion
2) What can be done to improve the quality of education?
4. Final recommendation
Additional information (to be provided if candidate asks):
• Before Hurricane Katrina, New Orleans Public Schools ranked as one of the lowest performing school districts in the Case Evaluation
country. The district faced significant financial problems and was on the verge of bankruptcy. Structure and Framework
• There were 64,000 students displaced due to the hurricane, and 64 schools before the hurricane struck. Since then,
18 have been reopened. Analytical and Problem Solving Ability
• Approximately 24,000 students have already returned to the state and about 1,600 students are returning every
month. Communication and Positive Attitude
• Before the hurricane, the school district statistics were the following:
• For every 10 students who enrolled in schools, fewer than 6 made it to graduation. Synthesis and Recommendation
• Of those graduating, only 2 enroll in college.

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Case #21: Katrina (2/4)
Framework

Improve New Orleans school system

Number of schools needed in 2 months Improve quality of education

• Number of students • Quality of teachers

• Students who did not leave during Katrina • Incentives to teach in New Orleans (pay, non-financial benefits)

• Current number of returned students • Hiring criteria, national recruitment program

• Additional students over the next 2 months • Coaching & leadership development programs

• Return rate of students to New Orleans • Curriculum development, learning standards (district, state,
national)
• Increases in students from other states due to natural
disasters nearby (TX, FL) • School environment

• Capacity per school • Leadership and administration

• Goal: Pre-Katrina level? (1000 students per school) Higher? • Safety, building quality & welcoming atmosphere

• Current socioeconomic needs of students: health & emotional supports

Transition statement: I would like to begin by analyzing the expected change in student population over
the next two months. Then, assess the highest lever areas to improve the quality of education.

Interviewer Guidance
• The candidate should build a high-level framework that addresses both questions: 1) number of schools to open and 2) how to improve the quality of
education.
• If the candidate does not address the quality issue, ask a specific question (Q2) after solving for the math for schools needed.
• A good candidate will present a hypothesis and / or potential solutions while walking the interviewer through the framework.

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Case #21: Katrina (3/4)
Question 1 Question 2
How many schools does the district need to reopen by the end of next month? What can be done to improve the quality of education?
Interviewer guidance:
• From their framework, the candidate should suggest that identifying the
The below answers are just ideas. The objective of this exercise is to see if the candidate can
change in student population to determine the number of schools to open break down a problem statement to analyze the different causes that might be creating the
is the starting point for this case. The candidate and interviewer should go problem. This should be a structured brainstorm.
through the math below to answer question one. Teachers & Curriculum
Note: The information required to answer this question is given on slide 1. If • Attract, develop and retain quality teachers.
this was not already given to the candidate, it should be told to the candidate • Provide incentive structures (teacher pay, non-financial incentives)
• Additional support in curriculum development; coaching and leadership development
now.
programs
Calculations: • Engage students better by catering to subjects that are more pertinent to today’s world.
• Formerly, 64 schools with 64,000 students, so 1,000 students per school. For example, courses like computer education could give students an edge getting jobs in
high-paying sectors. Also, offering education in practical areas like carpentry, masonry,
• 18 schools have reopened already. nursing etc. could translate directly into local jobs.
• Benchmark best practices with other school districts and state and national standards.
– 18 * 1,000 = 18,000 students can currently be accommodated.
School Environment
• Number of students who have returned to New Orleans = 24,000. • Attract, develop and retain quality principals and administrators.
• Improve the student teacher ratio to allow for more individual attention while ensuring
– Shortfall in capacity: 24,000 – 18,000 = 6,000 students. adequate capacity in the schools.
• Every month, 1,600 students return. • Experiment with new school models by setting up a charter system allowing involvement
of private groups and corporations.
– By next month, there will be a shortfall of 6,000 + 2*1,600 (current • Grant some amount of autonomy to the schools in exchange for increased accountability,
month + next month) = 9,200 students. encouraging sharper focus on student achievement. This could also provide an incentive
for schools to find creative ways to decrease spending in administration and instead invest
• Thus, by end of next month, the school district should target to reopen 10 the money in instruction.
new schools with a capacity of 1,000 students each to accommodate 9,200 Community
students. • Get the community involved, including parental involvement in school activities, which
would be particularly helpful during the rebuilding period.
– Beyond that, the school district would need to open ~2 schools per • Advertise changes currently being implemented to facilitate community understanding
month to accommodate the 1,600 students returning every month. and buy-in.
• Get local and national non-profit and/or corporate involvement. This will allow for
additional funding to achieve goals.

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Case #21: Katrina (4/4)
Recommendation Evaluation

The school district should: A basic answer will demonstrate an understanding of:
• Immediately open 10 more schools, and 2 more each month going forward • Numeric calculations required to achieve capacity requirements.
• Utilize earlier brainstorming ideas to ensure improvement of school quality
during re-openings • Importance of focusing on the quality of the schools instead of just the
number being opened.
Supporting factors: – Specific ways to increase quality should be mentioned, such as
• Schools are currently over capacity (>1,000 students on average) developing more practical curriculum or focusing on attracting and
• More incoming students every month (1,600) retaining higher-quality teachers.
• Need to increase teaching quality

Excellent candidates will also:

• Demonstrate an understanding of the risks associated with these goals and
suggest ways to mitigate them.
For example:
Risks and Next Steps – Media portrayal is a risk because they might focus on the negatives,
Risks especially if the schools cannot provide adequate capacity quickly
• Fewer incoming students than expected and negative press related to enough for the returning student body. In that case, students may be
quality of school openings dissuaded from returning, causing even more harm to the school
• Lack of funding to carry out goals district. Forging relationships with the media to cover advancements
• Further decline in quality due to hurried pace of school re-openings and achievements of the schools would be a way to mitigate the risk,
and could even be turned into a plus by providing a venue to ask for
Next Steps additional funding.
• Develop marketing campaign (e.g. with local media) to show school – For a community rebuilding itself, costs can be a constraint. However, it
opening and quality to attract students can be also viewed as an opportunity to get endowments to fund new
• Use additional exposure as a venue to request more funding (ex. from plans, especially while public awareness and support for the disaster
endowments, foundations, charities and donors) relief is high.
• Focus on attracting / retaining better teachers, using industry best
practices when developing schools models and setting student-teacher
ratios

205
 Overall Quant Creativity
2 1 2

Case #22: Linda’s Great Burgers

Case Type: McKinsey & Co – Candidate Driven
Mergers and Acquisitions

Industry:
Restaurant, Food & Beverage

Concepts Tested:
• Chart clearing
• Assessing synergies
 Quant Level – LIGHT

Case #22: Linda’s Great Burgers (1/5) Case Type Industry Client Type

Mergers & Restaurants, Food &

Fast Food Chain
MCKINSEY & CO – Round 1 – Interviewer Led Acquisitions Beverage

Fit Questions Interviewer Guidance

1. Tell me about a time you had to lead a team through a This case is an acquisition case. You will want to assess the candidate’s thought process and
complex challenge. how they structure a road map to assess whether or not acquiring the target company is a good
2. Tell me about a personal or professional challenge strategy for the client.
where you had to make risk decisions. This case also offers several opportunities to brainstorm. You will push the candidate to
brainstorm at several points in the case.

Fit Evaluation
Overall Fit Performance
S1 O1 A 1
R 1

2 2 2 2

Case Prompt Case Development

Our client is Linda’s Great Burgers (GB). GB is a worldwide fast food chain store. Linda’s uses the individual franchise 1. Framework
model to sell burgers. The client feels the burger market is saturated and is exploring acquisitions for growth. To
2. Exhibit 1 & Synergy Calculation
increase growth Great Burgers is thinking of acquiring Heavenly Donuts.
3. Growth Calculation
Heavenly Donuts (HD) is a young coffee/donut chain. It’s business model is a territorial franchise model (i.e.
4. Synthesis
franchisers are granted specific regions to sell donuts). HD is a worldwide company.
Is HD a good acquisition and match for GB? Case Evaluation
Structure and Framework

Analytical and Problem Solving Ability

Communication and Positive Attitude

Synthesis and Recommendation

207
Case #22: Linda’s Great Burgers (2/5)
Framework

Linda’s GB should acquire HD

Donut Market HD Investment Fit with GB

• Customers • Profitability • Expected amount needed • Management capabilities

• Market Size • Revenues (PxQ) (valuation) • Synergies
• Trend • Costs • NPV • Growth (revenues)
• Segments • Labor • ROIC • Efficiency (costs)
• Sales % • Stores • BE • Location and operational
• Competition • Variable • Capacity of GB to fund challenges related to logistics
• # • Market share acquisition? • Cultural fit
• Size and penetration • Debt
• Substitutes • Equity
• Bagels?
• Healthy versions?

Working hypothesis: GB should acquire HD. To test this hypothesis, I would like to analyze each of these four parameters, beginning with GB’s and HD’s market positions first.

Interviewer Guidance

• Allow the candidate to discuss their framework. Probe into some areas to see how the candidate is thinking about the problem. After you have discussed
the framework, provide the candidate with Exhibit 1.
• Ask the candidate, “where might there be synergies in the acquisition?”

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Case #22: Linda’s Great Burgers (3/5)
Exhibit 1

209
Case #22: Linda’s Great Burgers (4/5)
Interviewer Guidance Additional Question
After discussing synergies, ask the candidate the following:
There is sufficient data for numerous observations. A good interviewer will What would revenues per store need to be if HD were to double market share
push the candidate to find at least five. The candidate should communicate in 5 years?
the findings in a confident, enthusiastic, and relationship-building manner.
Response:
Revenue synergies: • Current revenue = $700M
– Market coverage - GB covers more market than HD, so it could bring HD • Double current revenue to double market share = $1.4B
into more markets (such as Europe and Asia). • $1.4B / 1020 stores = $1.37M revenues per store
– Based upon its better local business knowledge, GB could more rapidly • Thus, assuming total market size and number of stores do not change,
bring HD into markets and in some geographies even experiment with revenues would need to be $1.37M per store.
cross-selling to the customers (i.e. placing the stores right next to each
other under one roof).

Cost savings through economies of scale/scope:

– Raw material purchasing (volume discount)
Interviewer Guidance
– Consolidate property and equipment
– Decrease Corp SG&A • Candidate should immediately look at the above calculation and think
about whether it’s feasible. You would need to double revenues per store
Improve HD’s operation: from $686.3K ($700M / 1020 stores) to $1.37M over 5 years. This means
– GB is performing better than industry average while HD’s is performing that HG would have to grow revenues by around 15% per year, so it should
worse than the industry average. GB could transfers its better franchise be feasible.
model and store management to HD to improve HD’s performance. – General convention: double in 5 years implies ~15% CAGR.
– Candidate should mention caveats, such as consumers’ needs,
competitors’ response, and GB and HD’s ability to attain this per store
revenue growth.
• Brainstorming:
– Push the candidate to list some ideas to promote such growth. This list
should be structured.

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Case #22: Linda’s Great Burgers (5/5)
Interviewer Guidance Recommendation

Other areas you can develop with the candidate involve company cultures Recommendation
and management issues. They are not beyond the scope of the case, but we GB should invest in HD for several reasons:
leave it to the interviewer to be creative in making them up.
• Possibility of doubling HG market share in 5 years
• After this discussion, ask the candidate for a final recommendation based
on their findings. • Potential growth synergies, specially through geographic expansion
• Complementary businesses that can improve revenues for both businesses
• HD revenue per store can be optimized based on GB
Risks
• Donuts not an attractive food option in expansion markets, trouble
generating demand
• Cultural mismatch
• New entrants and market trends – healthier options?
Next Steps
Evaluation
• Other due diligence GB might need to do:
This case definitely tests a candidate’s interpersonal skills and creative
thinking. In discussing the case afterwards, remind the candidate that getting – Physically visit HD locations analyzing consumer demand
ready for a case interview is as much about learning to be a good interviewee – Perform market analysis
(i.e. practicing relationship building and creativity skills) as anything else. – Customer surveys
• Perform valuation of HD (get to know investment needed), study financing
options (debt and equity), and learn about culture of HD to ensure it is a
fit
• Market analysis to better understand competitors and substitute
availability

211
 Overall Quant Creativity
3 3 3

Case #23: Lola Lo’s Zoo

Case Type: Undisclosed – Candidate Driven
Investment Decision

Industry:
Entertainment

Concepts Tested:
• Net present value
• Brainstorming
 Quant Level – HEAVY

Case #23: Lola Lo’s Zoo (1/6) Case Type Industry Client Type

Investment Decision Entertainment Zoo Owner

UNDISCLOSED – Round 1 – Candidate Driven

Fit Questions Interviewer Guidance

1. Tell me about a leader or role model in your life. Why The candidate should realize that this is a net present value investment problem, meaning that
do you admire them? What lessons have you learned Lola Lo should be willing to purchase the dinosaur at any price producing a positive net present
from them? What is a recent example of you applying value.
those lessons?
2. Tell me about a time you had to pivot your initial If the candidate asks about Lola Lo’s objectives, respond, “Lola Lo is primary interested in
approach. How did you go about it? whether the investment would pay for itself, but is also thinking more broadly about other
benefits”.

Fit Evaluation If the candidate asks about timeframe, respond, “If Lola Lo decides to move forward, the zoo
Overall Fit Performance would like to invest and set up the exhibit as soon as possible”.
S1 O1 A 1
R 1

2 2 2 2

Case Prompt Case Development

Our client, Lola Lo, owns and runs a zoo in a major metropolitan area within the United States. There has been a 1. Framework
recent discovery of a dinosaur on a small island in the South Pacific. This is the only dinosaur in the world. Lola Lo 2. Discussion/Q&A
would like to investigate if purchasing the dinosaur is a good project. 3. Net Present Value analysis
Specifically, please help our client with the following questions: 4. Investment decision
1. How would you determine if purchasing the dinosaur is a good project? 5. Final recommendation
2. If it is, how would you determine the purchase price for the dinosaur? Case Evaluation
Structure and Framework

Analytical and Problem Solving Ability

Communication and Positive Attitude

Synthesis and Recommendation

213
Case #23: Lola Lo’s Zoo (2/6)
Framework Interviewer Guidance
Working hypothesis: Lola Lo should purchase the dinosaur at a price that is • Did the candidate state a hypothesis?
less than the overall investment breakeven point. – The candidate should express the core idea that they would like to test
through their analysis. They should clearly demonstrate how the
• Will the dinosaur investment be at least breakeven? questions they’re asking are directed at answering the specific question
– Revenues of whether Lola Lo should purchase the dinosaur.
• Ticket sales – It’s less important for the hypothesis to be backed up with evidence,
since it’s so early in the case (though strong candidates will draw on
• Food, hotel accommodations
their own knowledge and intuitions to develop preliminary insights
• Movie & entertainment licensing
about the potential for this new exhibit at the zoo).
• Merchandise
• Research • Is breakeven the primary consideration? Are external factors considered?
– Costs – Breakeven is the deciding factor for Lola Lo. It’s OK for candidates to
• Purchase of dinosaur discuss other considerations, but their primary focus should be on
• Construction of exhibit area whether the investment would at least break even.
• Staff to serve the dinosaur
• Is the framework case-specific?
• Food & merchandise sales
– Excellent frameworks will explore specific aspects of the zoo and new
• Operations exhibit, rather than just generic ideas about investment.
– For example, how do you determine the revenue from tickets? Are you
• Will it be feasible to transport and show the dinosaur in the zoo? proposing a separate ticket? If so, then you can count those revenues. If
– Risks you are proposing the same ticket for the zoo and dinosaur exhibit,
• Disease or death; cloning or discovery of additional dinosaurs then not all the revenues from tickets will count. Only the revenues
• Safety & legal considerations from the tickets in excess of original ticket sells will count.
– Transportation and Display
• Movement of dinosaur from South Pacific
• Sustaining a healthy dinosaur in a captive environment
• Meeting zoo visitors’ preferences to view the dinosaur

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Case #23: Lola Lo’s Zoo (3/6)
Case Development Interviewer Guidance
Facts about the Dinosaur and Zoo The candidate should drive the case forward. Provide the candidate with the
• The dinosaur is the size of an elephant. information below when it is requested. Push the candidate to think about
• The dinosaur can easily be transported from the South Pacific to the specific ways to estimate revenue, costs, and profits for the dinosaur within
United States. the zoo. Don’t simply disclose information if asked open-ended questions
• The dinosaur cannot reproduce. about expected revenue, costs, or profits. If a candidate is unable to identify
• The dinosaur is not violent, but cannot interact with non-trained an item after brainstorming, you can provide it so that the candidate’s math
individuals. is complete.
• The zoo has enough land to house the dinosaur and construct an exhibit
area without reconfiguring the existing park. Revenues (annual)
– Tickets: $2,000,000
Age and Lifespan of the Dinosaur – Hotels Accommodations: $1,000,000
While the actual numbers are not that important, the candidate needs to – Movie & Entertainment Licensing: $500,000
realize that this is a net present value problem and the project lasts as long as – Food in the Park: $500,000
the dinosaur is alive. It is important to determine the age and lifespan of the – Merchandise: $250,000
dinosaur. – Research: $250,000

Before disclosing the following information, the candidate should suggest Fixed Costs (one-time)
ways of determining both the age and the lifespan of the dinosaur. – Dinosaur: Unknown (This should be solved.)
– Exhibit Area and Housing Area: $15,000,000
Some suggestions could be consulting a dinosaur expert, DNA testing, fossil
testing, comparisons to living animals, examining growth rate/metabolism, Variable Costs (annual)
etc. – Staff to Serve the Dinosaur: $1,000,000
– Food & Merchandise Sales: $250,000
Provide candidate with the following once they come up with age and – Operations: $250,000
lifespan suggestions:
• Current Age: 21 years
• Expected Lifespan of Dinosaur: 50 years

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Case #23: Lola Lo’s Zoo (4/6)
Calculations Calculations (Continued)
Operating Profit
Based on the information provided, we can calculate the annual operating
cash flows for the next 29 years as follows:

Annual Revenue
– $2M (tickets) + $1M (hotel) + $0.5M (movie) + $0.5M (park food) + $0.25M (merchandise)
+ $0.25M (research) = $4.5 M

Annual Costs
– $1M (staff) + $0.25M (food &merchandise) + $0.25M (operations) = $1.5 M

Annual Profit
– Annual Operating Profit = $4.5 M – $1.5M = $3M

Discount Rate
– Besides knowing the expected lifespan of the dinosaur and all the
revenues and costs, the candidate needs to ask about the discount rate.
• Discount rate = 10%

NPV
– Now with all the information, the candidate can determine the highest
amount that the client should pay for the dinosaur.
• Assume revenues and costs are static over time to simplify the equation.
• To solve for maximum cost of dinosaur, assume the breakeven NPV = 0 .

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Case #23: Lola Lo’s Zoo (5/6)
Brainstorm: Exhibit Design Interviewer Guidance
After concluding the breakeven analysis, ask the candidate, “If you were • Throughout the case, the candidate should relate their insights back to the
asked to design the exhibit area for the dinosaur, what are the major things central hypothesis being tested.
that you would consider?” • The candidate should also realize that the dinosaur will not live forever;
therefore, the revenue stream will disappear when the dinosaur dies.
Safety & Logistics • Strong candidates will make case-specific observations (relevant to this
• Safety of viewers: nets, cages, alert systems particular investment consideration of a dinosaur within Lola Lo’s Zoo),
• How to route traffic around the exhibit area rather than using generic ideas about investments.
• Moving walkway: prevents traffic from building up and controls the
cycle time that spectators spend in the exhibit area
• Multiple levels: more spectators can cycle through simultaneously

Experience & Well-being

• Dinosaur well-being: feeding, grooming, health monitoring
• Size of the exhibit area: balance between sufficient space for the dinosaur
to roam and sufficient proximity for spectators to see
• Spectator experience and viewing efficiency

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Case #23: Lola Lo’s Zoo (6/6)
Recommendation Risks
– Lola Lo should purchase the dinosaur and pay no more than $13.125M – The dinosaur could die of diseases in North America
• The investment calculations show a positive net present value for a – No zoo in the world has ever cared for a dinosaur before; this creates a
purchase price equal to or less than $13.125M host of unknowns in the exhibit area that could drive up costs
• The zoo should expect $3M total annual profit from the dinosaur – The dinosaur may come into contact with non-trained individuals more
exhibit for the next 29 years frequently (e.g. spectators) than a normal animal, raising liability risk
• The dinosaur’s exhibit can be designed to maximize efficiency and
spectator safety

Next Steps

– Engage scientific experts for advice in caring for the livelihood of the
dinosaur
– Evaluate dinosaur exhibit designs and associated costs by comparing
options to those for similarly-sized animals at other zoos
– Conduct design review of the proposed exhibit to ensure safety; evaluate
insurance options

218
 Overall Quant Creativity
2 1 3

Case #24: Lost Patent

Case Type: Kearney – Interviewer Driven
Revenue

Industry:
Pharmaceutical / Healthcare

Concepts Tested:
• Structured brainstorming
• Vague information handling
 Quant Level – LIGHT

Case #24: Lost Patent (1/4) Case Type Industry Client Type

Pharmaceutical / Drug
Revenue
A.T. KEARNEY – Round 2 – Interviewer Led Healthcare Company

Fit Questions Interviewer Guidance

1. Tell me about a time where you had to make a decision This case tests the candidate's business acumen as they should understand why cost savings are
based on incomplete information. How did you do it? not likely and focus on revenues instead. This case is also very open-ended and not focused on
2. How do you see yourself becoming involved in the quantitative problem-solving; it would likely be paired with a heavy quant case.
culture / various initiatives of this Firm?

Fit Evaluation
Overall Fit Performance
S1 O1 A 1
R 1

2 2 2 2

Case Prompt Case Development

Your team has been working with a major drug company on their future strategy. Their patent on a blockbuster drug, 1. Framework
Zewal, will run out in less than a year. It currently generates half of their revenues, while 10 other drugs generate the 2. Brainstorming
other half of revenues. Their next blockbuster drug is still more than 5 years away from being ready and mergers are
not possible. How can we help the company? 3. Discussion/Q&A
4. Final recommendation
Additional information (to provide in discussion with candidate):
The company is efficient and well-run. In fact, they have been cutting costs for the last few years and they are Case Evaluation
competitive with industry standards.
Structure and Framework

Analytical and Problem Solving Ability

Communication and Positive Attitude

Synthesis and Recommendation

220
Case #24: Lost Patent (2/4)
Framework Interviewer Guidance
Drug Market • The prompt is intentionally vague. The candidate should seek to
• End user: our drug effectiveness, rate of disease it treats clarify what is meant by “help the company”. The candidate should
• Competitors also recognize this is not a cost-cutting case. If they push on this
• Strategic position in the market
subject, let them know this is a well-established firm that has been
• Salesforce positioning
• Their drug effectiveness cutting costs for several years.
• Substitutes (generics)
Profit Maximization
• The candidate should seek additional information on each of these
– Revenues sections in their framework to drive towards a recommendation. Ask
• Increase sales volumes for drug before and after patent expires questions to probe for more information and logic (see next page for
– Identify potential new customers (doctors, hospitals, etc.) questions).
– Identify potential new channels for POS (drug stores / pharmacies) – Customer
– Create own generic knock-off (cannibalize self)
– Competition
• Increase sales volumes for other 10 drugs
– Costs – Company
• Industry standards and relative positioning
Drug Company • The structure for this case is very open-ended. A good candidate will
– Evaluate salesforce effectiveness have developed a structure which includes each of the areas above
• # of employees relative to industry and more.
• Compensation structure & company policies for Zewal sales
– Re-incentivize to sell other company drugs as Zewal patent expiration • The candidate should recognize that acquisitions are not possible
nears (given in the prompt), so the interviewer should redirect them if they
– Advertising growth
attempt to pursue this option.
• Targeted marketing programs
Working hypothesis: Since costs are not an issue, I would like to focus first on
ways to maximize revenue from Zewal before its patent expires. Then, I would
like to consider any marketing and salesforce changes necessary to support
sales increases. Therefore, it would be nice if we had information on how we
currently sell Zewal.

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Case #24: Lost Patent (3/4)
Analysis: Questions 1 & 2 Analysis: Questions 3 & 4
Analysis 3: How would changes in the compensation structure affect sales?
Analysis 1 - Sales Revenue: Ask the candidate to identify ways to increase sales of
their drugs. • Provide to the candidate if asked:
– The sales person’s compensation structure is dependent on the
• Customer demographics are as follows (provide to the candidate if asked):
contribution margin of the drugs they sell. Each sales person has a
– Salesforce mainly sells to doctors. portfolio of drugs with varying margins.
– 20% of all doctors make up 80% of prescriptions. – The contribution margin for Zewal is the lowest. So far this strategy has
– They consistently keep in touch with major HMOs. worked as there is more pull for the drug than push required from the
sales people.
• Potential answers include the following:
– Increased samples to doctors. • Potential answers include the following:
– Expansion of coverage networks. – The candidate should walk through the potential benefits from
increased sales with the risk of increased costs.
Analysis 2 - Sales & Marketing Efforts: How many sales personnel should be added?
Analysis 4: What are some potential ways to improve advertising given
• Salesforce demographics are as follows (provide to the candidate if asked):
competitor’s positions?
– Dedicated salesforce of 150 people. On average a sales person is responsible
for 100 doctors. • Competition is as follows (provide to the candidate if asked):
– The industry standard is one per 50 doctors. – There is presently no single drug that has a similar chemical
– The rival company has the advantage of a bigger salesforce which can reach composition as Zewal, but doctors have been trying out a combination
out to 35% of all doctors in the U.S. of drug regimen from a rival company.
• Our client’s reach is about 10%. – When the patent expires, our client will get about 6 months before
generic drug companies come up in the market.
• Potential answers include the following:
– The candidate should consider the cost of hiring versus the benefit; they
should stop adding when the marginal cost > marginal revenue.
– Optional: ask the candidate to sketch this graphically with basic (no numbers)
marginal revenue and marginal cost curves

222
Case #24: Lost Patent (4/4)
Recommendation Evaluation

The drug company should: There is no “right” or “wrong” answer. Candidate should show business
judgment when evaluating revenue vs. cost strategies.
• In the current year before the drug expires our client should seek to
maximize potential revenue by: Excellent candidates will:
• Expanding their sales & marketing department (MR> MC) • Quickly recognize that this is a not cost-reduction case, as they are a
• Improving advertising to bolster sales to doctors well-established company that has been cutting costs for years.
• Identify multiple possibilities to increase revenues both before the patent
expires and after.
• Our client should also seek to improve their position after the patent
expires by:
– Attempting to patent a specific dosage size
– Maximizing sales effort through direct-to-customer marketing
– Consider revising the salesforce compensation structure for the drug

Risks and Next Steps

Risks
• Competitors could develop a generic drug faster than expected, reducing
potential revenues
• Increasing the salesforce and changing the compensation structure could
generate more costs than expected, thus reducing profitability

Next Steps
• Analyze capabilities of competitors and determine if we can create
contracts with high-potential doctors and hospitals to be their only
supplier of Zewal
• Carefully monitor costs of new sales and marketing programs and
incentives structure

223
 Overall Quant Creativity
3 3 2

Case #25: Midwest Machinery

Case Type: Bain & Company – Candidate Driven
Sourcing/Outsourcing

Industry:
Industrial Goods

Concepts Tested:
• Math structuring
• Brainstorming
 Quant Level – HEAVY

Case #25: Midwest Machinery Co. (1/6) Case Type Industry Client Type

Sourcing /
Industrial Goods Manufacturing
BAIN & COMPANY – Round 1 – Candidate Led Outsourcing

Fit Questions Interviewer Guidance

1. Tell me about a time you had to develop a creative This case involves brainstorming and considerable quantitative analysis. It is a good exercise for
solution to solve a problem. those who wish to practice ‘case math,’ particularly when working through the optional
2. Think about a ‘good team’ that you’ve been a part of – questions.
what made it a good team and how did you contribute
to it? Excellent candidates will distinguish themselves through their ability to synthesize the
quantitative and qualitative aspects, particularly by factoring key details from the Q&A /
discussion into the mathematical calculations and by demonstrating an understanding of both
components when providing their final recommendation.
Fit Evaluation
Overall Fit Performance
S1 O1 A 1
R 1

2 2 2 2

Case Prompt Case Development

Situation 1. Q&A/ Discussion
• Midwest Machinery makes a variety of machines designed for the medium to heavy industrial sector that are 2. Framework
used in factories, farms, and industrial buildings. Revenues are $3B and net profit margins are 12%.
3. Quantitative analysis
• The CEO wants to find cheaper ways to produce machines, and has pushed management to search for alternate
suppliers in faraway places such as Colombia, Shanghai and India. 4. Optional questions
• The CEO also wants to increase efficiency in processes that support operations. In particular, they want to ensure 5. Recommendation
that basic activities that do not involve intellectual capital are performed at the lowest cost possible. The CEO
respects the company’s traditions and strong sense of community with the town, but knows that profitability Case Evaluation
must come first for them and their shareholders. Structure and Framework

Issue and Question

Analytical and Problem Solving Ability
• The MM team has proposed moving the manufacturing process for the XL292 machine, a critical machine for
many of their end products, to India. These results may affect the CEO’s decision on whether to outsource other
processes, as there is a total of $300M in costs with outsourcing potential. Before the CEO looks at the financial Communication and Positive Attitude
data, they want to have a clear understanding of the pros and cons of outsourcing.
• Develop a structure for thinking through the pros and cons of outsourcing this process to India. Explain the model Synthesis and Recommendation
and what you would advise the CEO to consider as they review the data.

225
Case #25: Midwest Machinery Co. (2/6)
Framework: India Framework: U.S.
Pros Pros
• Financial: • People:
– Cheaper labor, facilities, etc. abroad – Loyalty, best people stay, morale will be up
• Plant operations: • Plant operations:
– Capacity will remain steady
– Unnecessary production may be streamlined resulting in more savings long • Community Relations:
term, opportunity to build in higher capacity in new plant (if needed)
– Unions and community leaders will continue to support Midwest
management
Cons • Technology:
• Financial: – By producing locally, Midwest can quickly keep up with technological changes
– Potential hidden costs with respect to handling products, quality control,
currency exchange rates, and doing business in a foreign country Cons
• People: • Financial:
– Fearing for their jobs, good people may leave – MM will continue to waste profits due to high costs
• Plant operations: • People:
– Good employees may still leave as personal opportunities diminish
– Idle capacity may cause further expense in local plants
• Community relations:
Working hypothesis: Midwest should outsource production to increase profits
– Backlash from community may hurt company brand/reputation and to remain competitive in the market. I would like to begin by exploring the
• Funding: economics of such a decision, and then consider the impact of outsourcing on the
– Upfront CAPEX investment will be required to move production; could be people and community.
difficult to obtain funding from bankS

Interviewer Guidance
Additional information to be provided (only if asked):
• Community – The company is located in a small town in the U.S. and has been the largest employer there for over 30 years.
• Unions – Midwest is unionized but the union and management have typically been on friendly terms.
• CEO Personal Incentive – If they save the company over $50M this year, they will receive a $1M bonus.
• Competitors – They have been benefiting from lower costs associated with outsourcing for years.

Question 1:
Once the candidate has discussed their framework, they should drive toward next steps and a data request. If not, guide the candidate to an economic analysis of the
decision (show Exhibit 1). If the candidate does not automatically begin, ask them to calculate the profitability of staying local vs. going abroad to India.

226
Case #25: Midwest Machinery Co. (3/6)
Exhibit 1

Economics of Staying Local or Outsourcing to India

Stay Local India

Total Units 10,000 10,000

Labor and benefits per hour $30 $7
Hours to produce a unit 6 8
Material Cost per unit $400 $250
Holding cost per unit $30 $20
Shipping cost per unit $15 $44
Import Duty $0 $90
Made in USA credit per unit $85 $0

227
Case #25: Midwest Machinery Co. (4/6)
Economics: U.S. Economics: India
Sample response: Sample response:

= (Labor * Hours) (30*6 = $180) = (Labor * Hours) (7*8 = $56)

+ Materials ($400) + Materials ($250)
+ Holding cost ($30) + Holding cost ($20)
+ Shipping ($15) + Shipping ($44)
+ Import duty ($0) + Import duty ($90)
- USA credit ($85) - USA credit ($0)
----------------------------- -----------------------------
$540/unit $460/unit

$540/unit * 10K units $460 * 10K units

= $5.4M total cost = $4.6M total cost

Interviewer Guidance
•Cost savings = $0.8M ($5.4M - $4.6M) or 14.8% (~15%, $0.8M/$5.4M)
•Extrapolating to other processes of $300M of costs with outsourcing potential – it can save up to ~45M ($300M * ~15%)
•$45M is ~13% of Midwest’s bottom line ($3B * 12% = $360M of profit, $45M/$360M = 12.5%)

Ask the candidate:

Returning to your model, how has the outcome of your calculations affected your thinking about this problem, if at all?

• Candidate should return to their framework and initial hypothesis and use the data to either confirm or to shift their hypothesis. The candidate should
consider risks and next steps based off of this data and their conclusions. This response is an opportunity to demonstrate structured thinking (in written
form) before moving on to questions 2 and 3.

228
Case #25: Midwest Machinery Co. (5/6)
Question 2 Question 3
What would happen if labor costs in India doubled? At an investment of $2.5M, how many units would Midwest Machinery Co.
need to break even? (Use original labor costs.)
Sample response:
Sample response:
= (Labor * Hours) (7*8*2 = $112)
+ Materials ($250) • Breakeven when investment = Total cost saved
+ Holding cost ($20) • Cost savings = $80/unit
+ Shipping ($44) • Investment = $2.5M
+ Import duty ($90) • Breakeven:
- USA credit ($0) – Investment = Cost savings * Units
----------------------------- – $2.5M = $80 * units
$516/unit
– $2.5M/$80 = 31,250 units to breakeven on investment
$516 * 10K units
= $5.16M total cost

• Save ~4% as compared with staying local (($5.4M - $5.16M)/$5.4M)

• If outsource all $300M in costs = ~$12M savings ($300M * ~4%)
• Total savings represent ~3% of current profit margin ($12M/$360M)

229
Case #25: Midwest Machinery Co. (6/6)
Recommendation Evaluation

• Midwest should outsource production of the XL282 machine: • The candidate should develop an opinion regarding whether the overseas
• Midwest can expect to save about $0.8M when going abroad with the investment is worthwhile. The recommendation itself is less important
than the consideration of both qualitative and quantitative factors.
XL282 machine, with a total expected outsourcing potential of around
$45M. Although the savings for this individual machine do not seem • The candidate should weigh the impact of the additional $300M in
high enough to merit overseas investment, the aggregate overseas outsourcing costs (i.e. their final recommendation should not solely be
potential is large enough to justify the risk. based on the expected results from the XL282 machine).
• Based on the ‘pros and cons’ discussion, it may be a good idea to
• When candidate is weighing the importance of different factors, they
perform a pilot using the XL282 machine, making sure this part is
should demonstrate awareness of background information provided (e.g.
successful before moving the additional processes totaling $300M of CEO is more concerned about profits than community ties).
costs to India.

Risks and Next Steps

Risks
• Unpredictable changes in a foreign country:
• Supplier change – large savings may disappear
• Government changes –taxes and credits may shift
• Hourly rate – less predictable rates and productivity in India
• Weather- potential supply disruption due to weather conditions
• Quality of product
• Employees’ job concerns over outsourcing, union and community backlash

Next Steps
• Perform a more detailed analysis of variable risk factors to quantify likelihood of
potential disruptions
• Craft a proposal for the XL292 machine pilot that includes a more detailed cost
forecast and that maintains product quality standards
• Invest time in frequent and open communication with employees to be transparent
about company shifts and any effects these shifts would have on employees’ jobs

230
 Overall Quant Creativity
2 2 1

Case #26: New Vaccine

Case Type: L.E.K. Consulting – Candidate Driven
Market Entry

Industry:
Healthcare

Concepts Tested:
• Pricing
• Competitive Dynamics
• Pharmaceuticals
 Quant Level – MEDIUM

Case #26: New Vaccine (1/6) Case Type Industry Client Type

Pharmaceutical /
Market Entry Pharmaceutical
L.E.K. – Round 1 – Candidate Led Healthcare

Fit Questions Interviewer Guidance

1. Tell me about a time you received feedback that you This is a quantitative case that requires the candidate to synthesize facts presented in the
did not agree with. How did you respond? discussion component with the data provided directly to them through the exhibit. Excellent
2. Tell me about a time you needed to establish credibility candidates will be comfortable going beyond the calculations directly asked of them to
with a team / manager. How did you accomplish this? generate more meaningful comparisons between different aspects of the data.

Fit Evaluation
Overall Fit Performance
S1 O1 A 1
R 1

2 2 2 2

Case Prompt Case Development

Our client is a large pharmaceutical corporation, and they have developed a new vaccine that prevents low birth 1. Framework
weight infants from contracting staph infections. They have approached us to determine the potential for this 2. Q&A/ Discussion
vaccine. 3. Quantitative Analysis
4. Recommendation
Additional detail that can be provided in response to candidate follow-up questions:
• When the candidate asks what is meant by the ‘potential for this vaccine,’ explain that our client is looking for Case Evaluation
clarity around revenue potential and a cost-benefit analysis of administering the vaccine.
Structure and Framework
• Our client is looking to launch this product in the United States, and is not currently concerned about
international potential.
Analytical and Problem Solving Ability

Communication and Positive Attitude

Synthesis and Recommendation

232
Case #26: New Vaccine (2/6)
Framework Interviewer Guidance
Market Size This is the back-and-forth section after the framework is presented. Below
– Population / demand are several data points the interviewer should provide out loud if asked. The
• # of low birth weight infants / yr. candidate may elect to complete market sizing first and come back to
• Rates of staph infections remaining questions later during the analysis.
– Other vaccines (competition); substitute products (antibiotics)

Revenue Potential
Basic Population / Demand Information
– Price point per dose of vaccine
• Costs to administer vaccine; cost of other treatments if population is Babies born each year 5 million
infected with staph (antibiotics) in the U.S.
– Distribution channels: hospitals, clinics, drug stores / pharmacies Low birth weight babies 10% of all babies
– Product mix: born each year
• Can vaccine be administered with other vaccines needed by (this segment Basic Product Information:
of) babies?
Cost of Administration $1,000 per dose of vaccine
• Does our client make additional vaccinations for (this segment of) babies?
– Product details: frequency of administration, efficacy, etc. Dosage 6 doses (shots) needed per child
FDA Approval Product has been fully approved
Risks R&D Considerations No - not for this case
– Stage of drug development: Ready for market? In clinical trials?
Success Rate Assume 100% for this case
– FDA approval
– Changes to target population birth weights (i.e. # of babies born with such low Basic Competitor Information:
birth weights in the U.S. may change with further advances in nutrition and Other comparable None
healthcare) vaccines on market
Alternative products Yes – if a low birth weight baby contracts
Transition statement: To determine revenue potential, I would like to analyze the staph, the infection can be treated with
market demand by looking at the % of new births that will be targeted by this antibiotics (assume these are always
vaccine. Then, I would like to look at the cost of administering each vaccination to successful). Note: more detail in Exhibit 1.
determine pricing potential. Do we have any such data?

233
Case #26: New Vaccine (3/6)
Interviewer Guidance Interviewer Guidance
Show candidate Exhibit 1. Ask: The candidate should be able to fill out the below table based on the
1). What do you think you should price the vaccine at? information provided in Exhibit 1 (next page)
A: At or above the cost of administration or >= to $1000 / dose ($6K total).

2). What is the potential revenue for the client at this price point?
A: At this point, the interviewee should be able to calculate the revenue potential of
this vaccine given the current size of the target population: Segment of low <1,000 1,000- 1,500-
(5M * 10% low birth weight babies) * (6 * $1,000/dose of vaccine) birth weight grams 1,500 2,500
= (500K low birth weight babies) * ($6,000/full vaccine administration) babies grams grams
= $3B in revenue potential % of low birth 10% 10% 80%
weight babies by
3). If the candidate tries to end the case here, push them by saying, “wow, that’s a segment
huge number, can we go tell our client they will get $3B per year in revenue for this
Frequency of 40% 10% 2%
vaccine? Do you think that’s realistic?”
staph by segment
• A strong candidate would take this into consideration automatically.
Cost per child for $35K/child $25K/child $10K/chil
4). Encourage the candidate to consider alternative treatments / substitutes antibiotics d
(competitor information on prev. page). Size of segment 50K babies 50K babies 400K
• After discussing that the antibiotics are a substitute product, candidate should (500K * (500K * babies
ask if there is any additional information regarding this type of treatment. 10%) 10%) (500K *
80%)
• At this point the interviewer may state and ask the following:
– The frequency of staph infections and the cost to treat them with antibiotics Cost to vaccinate $300M $300M $2.4B
vary depending on the size of the baby. The client is interested in entire segment (50K * (50K * (400K *
understanding the cost to vaccinate the total population of babies compared $6K) $6K) $6K)
to the cost to treat the population of low birth weight babies with antibiotics.
– First what is the cost to vaccinate the population of low birth weight babies by
segment?

234
Case #26: New Vaccine (4/6)
Exhibit 1

Staph Infection Treatment by Baby Size

Segment of low birth weight <1,000 grams 1,000- 1,500 grams 1,500- 2,500 grams
babies

% of low birth weight babies 10% 10% 80%

by segment

Frequency of staph by 40% 10% 2%

segment

Cost per child for antibiotics $35K/child $25K/child $10K/child

235
Case #26: New Vaccine (5/6)
Case Development

At this point the case should turn into a cost / benefit analysis. The person doing the case may ask a lot of questions about who’s paying, etc. For this case,
that is not important. Inform the candidate that whichever treatment is the most cost effective will be the treatment most likely administered for each
segment of the low birth weight baby population.

• The candidate should come up with the following comparison that they can use in their final recommendation.

Segment Cost to vaccinate Cost to treat with antibiotics Conclusion

<1,000 grams $300M $700M (0.4*50K*35K) It is reasonable to expect that our client will attain
$300M in revenue to cover the costs from vaccinating
this segment, so vaccination would be the preferred
treatment method for this segment of low birth weight
babies.
1,000 - 1,500 grams $300M $125M (0.1*50K*25K) Our client could potentially capture $300M in revenue
to cover the costs associated with treating this
population segment with the vaccine. However, it is not
guaranteed and the antibiotic treatment may be the
best treatment method for this segment of low birth
weight babies.
1,500 - 2,500 grams $2.4B $80M (0.02*400K*10K) It is unlikely that our client will attain $2.4B in revenue
to cover the costs associated with treating this segment
of low birth weight babies with the vaccine. Unless
there is some sort of government mandate that vaccine
be given to all low birth weight babies, it is best to treat
this segment of the population with antibiotics.

236
Case #26: New Vaccine (6/6)
Recommendation Evaluation

The company should consider a potential revenue range of $300M - $600M • Someone who “cracks the case” will instinctively realize that it’s cheaper
• This depends on their ability to successfully capture the 1,000 - 1,500 to vaccinate the smallest group, and that it may be more cost effective to
grams segment for which the vaccine is not quite as cost effective treat the other groups with antibiotics.

• The interviewee should present / discuss the risks associated with

capturing the market for each segment of low birth weight babies. But, for
the final recommendation, the candidate should synthesize their thoughts
into one final analysis on the revenue potential of the vaccine for the
client.

Risks and Next Steps

Risks
• Inability to capture segments for which the vaccine is less cost effective
• Risk of more harm to babies if they are allowed to contract staph first and
are treated with antibiotics vs. vaccination
– Public opinion against vaccinations

Next Steps
• Develop a product marketing strategy based on different levels of revenue
potential explaining the benefits of preventing staph infections for low
birth weight babies by vaccination
• Analyze potential short-term and long-term health effects of a staph
infection on low birth weight babies to share with doctors / parents about
why vaccination has a potentially higher overall benefit vs. antibiotics

237
 Overall Quant Creativity
2 2 1

Case #27: Payments Company

Case Type: Deloitte – Interviewer driven
Profitability

Industry:
Financial Services

Concepts Tested:
• Chart clearing
• Breakeven analysis
 Quant Level – MEDIUM

Case #27: Payments Company (1/6) Case Type Industry Client Type

Payments (Credit
Profitability Financial Services
DELOITTE – Round 1 – Interviewer Driven Cards)

Fit Questions Interviewer Guidance

Read the following statement out loud to the candidate before you read the case prompt:
1. Are you applying to all consulting firms? Why / why
not? Our client, PayCo, is a global credit card company, with revenues over $5B in 2010. A recent trend in the credit card industry is
2. Why should I hire you over your peers? the use of contactless (tap and go) payments technology to make purchases at places like fast food restaurants and convenience
stores.

PayCo is looking to leverage contactless payments to drive top-line growth and has identified the transit vertical (i.e. subways,
trains, buses, taxis) as an opportunity for growth since this is generally a cash dominated vertical. In support of this strategy,
PayCo has developed proprietary technology (called “TAP”) to process contactless transactions specifically for transit
applications, and is looking to commercialize this technology. A key challenge is whether transit authorities will implement this
new technology or stay with current systems for fare collection.
Fit Evaluation
Overall Fit Performance Deloitte Consulting has been engaged to size the overall transit market globally, prioritize potential opportunities, develop a
S1 O1 A 1
R 1
financial business case, and develop a go-to-market strategy.
2 2 2 2

Case Prompt Case Development

Your role on the PayCo engagement is to develop the business case for commercializing PayCo’s contactless 1. Framework
technology.
2. Questions and Financial Analysis
1) Which market and transit vertical should PayCo target as a first priority? 3. Recommendation
2) What is the profitability of the “TAP” technology? Specifically, will PayCo breakeven on commercializing “TAP” in
less than 5 years?
3) Would you recommend that the client pursue the commercialization of this technology? Case Evaluation
Structure and Framework
Case Questions:
This case is driven by the above series of questions to be asked of the candidate. Do not pursue all questions with
Analytical and Problem Solving Ability
the candidate up front, as each question is meant to be a mini-case. These questions are provided on subsequent
pages in the order that they should be asked of the candidate. A traditional framework will not be needed for this
Communication and Positive Attitude
case, but the candidate should remain structured in their thinking and in their responses throughout the case.
Synthesis and Recommendation

239
Case #27: Payments Company (2/6)
Exhibit 1

Country Data1

US England Japan
Population (MM) 313 63 126
Population Growth
0.96% 0.56% -0.28%
(%)
GDP ($Tr) $14.7 $2.2 $4.3
GDP Growth (%) 2.7% 1.6% 3.0%
GDP per Capita
$47,400 $35,100 $34,200
(USD)
Subway System Data Buses Data

NYC London Tokyo NYC London Tokyo

Daily Passengers (MM) 11.5 8.5 14.3 Daily Passengers (MM) 3.0 4.5 5.8
Annual Fare Collection Annual Fare Collection
$12 $13 $45 $2.8 $5.5 $4.4
($B) ($B)
Timing for new system 2012 2012 2015 Timing for new system 2013 2013 2015
Probability of winning Probability of winning
90% 70% 20% 90% 70% 20%
contract 2 contract 2
Notes:
1 Data from CIA World Factbook, extracted April 2011. GDP figures at purchasing power parity
2 Probability of winning contract is based on estimates from the PayCo Business Development team, and can be used to determine the potential revenue opportunity
for PayCo

240
Case #27: Payments Company (3/6)
Question 1

1. Which market and transit vertical should PayCo target as a first priority?

Note to interviewer: Provide Exhibit 1 to the candidate. If the candidate only provides a quantitative answer, prompt them for additional qualitative
considerations.

A good answer will draw the following conclusions from the data provided:

• The answer we’re looking for is New York Subways.

• Given the subway and bus detail, the candidate should quickly recognize that the country data is too high-level.
• A quick comparison of subways and buses should rule out buses without any calculations.
• Even though Tokyo subways is the largest market, it actually has the smallest potential due to a low probability of winning a contract.
• New York has the highest potential revenue opportunity for PayCo based on the calculation below:

City (Fare Collection) * (Prob of winning contract) = PayCo Market Opportunity

New York: $12MM * 90% = $10.8MM
London: $13MM * 70% = $ 9.1MM
Tokyo: $45MM * 20% = $ 9.0MM

A better answer will include the items above and address additional elements around the data. Some findings include:

• Although Tokyo looks like a huge opportunity initially, they are not looking for a new system until 2015, while NYC and London are ready earlier (2012).
• The candidate may also raise the sensitivity of this assessment on the sales probability data point and point out how even a 5% increase for Tokyo would
give it the highest value.

A great answer will include the items above and also raise additional considerations beyond the data, including:

• How strong is PayCo’s brand in each city?

• Is one city more strategically important to PayCo?
• Are there differences in cost or difficulty in going after these markets?
• Do PayCo’s capabilities make one option more likely to succeed than another?

241
Case #27: Payments Company (4/6)
Exhibit 2

NYC Subway Forecast Data

2011 2012 2013 2014 2015

"TAP" Transactions (MM) 1,500 2,000 2,500 3,000 3,000

"TAP" Fare Collection
$3,750 $5,000 $6,250 $7,500 $7,500
($MM)
PayCo “TAP” Assumptions

Revenue Assumptions Cost Assumptions

Annual License Fee ($000s) $250 Past Investment in "TAP" Development
$1,000
($000s)
"TAP" Processing Fee * 0.20%
Cost per transaction $0.005
* Processing Fee applies to dollar value of Fare Collections

Cost Projections (in

$000s) 2011 2012 2013 2014 2015
Advertising and
$500 $250 $0 $0 $0
Promotion
SG&A $50 $50 $50 $50 $50

242
Case #27: Payments Company (5/6)
Question 2
2. What is the profitability of the “TAP” technology [for NYC]? Specifically, will PayCo break even on commercializing “TAP” in less than 5 years?

Note to interviewer: Provide Exhibit 2 to the candidate.

A good answer would be:

– Yes, PayCo will break even in 4 years and will achieve a total profit (excluding time value of money) of $250,000 in 5 years.
• A key insight is that the past investment in developing the “TAP” technology is a sunk cost in making the decision on commercializing the
technology and should not be incorporated into the analysis.
• Here is a summary of revenues and costs calculations as a guide for the interviewer:
– Revenue = (TAP Fare Collection * TAP Processing Fee) + Annual License Fee
– Costs = (# of transactions * cost per transaction) + Advertising and Promotion + SG&A

A great answer would:

– Be very well structured with clear calculations laid out in a grid (like a spreadsheet or income statement / P & L statement).
– Realize the revenue and the cost for each year are the same after the initial calculation (see below).
– Comfortably handle the variety of units (revenues in $MMs, costs in $000s, percentages).
– Acknowledge time value of money and suggest calculating an NPV to evaluate the investment.

243
Evaluation
Case #27: Payments Company (6/6) Recommendation
3. Would you recommend that the client pursue the commercialization of this A good answer will include:
technology? – Based on the cost / benefit analysis, commercializing “TAP” is estimated to generate
– PayCo should pursue the commercialization of this technology $250,000 in profit over 5 years and meets the client’s criteria for breakeven.

• Based on the cost/benefit analysis, commercializing “TAP” is A great answer would recognize the above, but also include:
estimated to generate $250,000 in profit over five years and meets – Identification of risks in the assumptions, such as:
the criteria for breakeven • The 90% sales probability assumption for NYC.
• Revenue or cost drivers.
– Identification of sensitivity in calculations, such as:
• Forecasted transactions and fare revenue.
• Cost forecasts, particularly advertising and promotion.
– Qualitative benefits of pursuing commercialization:
• Positive impact on brand and market share.
• Becoming market leader and growing to other cities.
– Competitive Response:
• How might PayCo’s competitors respond to its launch of this technology?
– Defining next steps, such as further analysis or a high-level implementation plan.

Risks and Next Steps

Risks
– 90% sales probability assumption that PayCo would win the for NYC contract
– Reasonableness of the revenue and cost assumptions:
• Forecasts of transaction amount and fare revenue
• Advertising and promotion costs

Next Steps
– Analyze potential competitor response and / or bid for NYC contract
– Perform further analysis on the revenue and cost assumptions / forecasts and develop
a high-level implementation plan

244
 Overall Quant Creativity
3 3 2

Case #28: Pharmaceutical Rare Disease

Case Type: BCG – Candidate Driven
Growth Strategy

Industry:
Healthcare

Concepts Tested:
• Net present value
• Chart clearing
• Math structuring
• Pharmaceuticals
 Quant Level – MEDIUM

Case #28: Pharmaceutical Rare Disease (1/5) Case Type Industry Client Type

Pharmaceutical /
Growth strategy Pharma company
BCG – Round 1 – Candidate-led Healthcare

Fit Questions Interviewer Guidance

1. Tell me a story that explains your background, and why This case is a NPV investment evaluation go / no-go.
you're here today (why consulting, why this firm, why
location). You should read the case prompt to the candidate and show them the data sheet on the next
2. What is your proudest accomplishment (not page as they request each piece of information.
necessarily a professional achievement)?

Fit Evaluation
Overall Fit Performance
S1 O1 A 1
R 1

2 2 2 2

Case Prompt Case Development

Our client is a large pharmaceutical company with a strong business in "Rare Disease" (RD). Rare diseases are 1. Framework
conditions that affect fewer than 200,000 people in the US. Historically, pharmaceutical companies have not invested 2. Revenue Analysis
significantly in Rare Disease , because it has not been cost effective to conduct research for such small populations.
3. Cost analysis
Due to the fall off in the number of pharmaceutical blockbusters and improved regulation to make R&D cheaper for 4. NPV calculation and recommendation
Rare Disease, pharmaceutical companies have begun to invest more in Rare Disease R&D over the last few years.
Our client has hired BCG because it would like to grow its Rare Disease business. Case Evaluation
Structure and Framework
How can the client double its Rare Disease business in 5 years?
Analytical and Problem Solving Ability

Communication and Positive Attitude

Synthesis and Recommendation

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Case #28: Pharmaceutical Rare Disease (2/5)
Framework Interviewer Guidance
• Candidate should ask what growth means: revenues, profits, volume,
market share, customer base, etc. or lay out options between those
Existing RD Drug Market New RD Drug Market alternatives. The interviewer should respond by saying that the client is
Increase Penetration New Market Entry interested in all potential options for growth.
- Frequency of usage - Can drugs be used in other – Candidate should structure the growth opportunities considering
diseases?
current assets/drugs/patents + new opportunities
- Increase penetration on
– Note: The suggested framework is different from the traditional market
Existing market - Combinations with other
and profitability framework as it considers all options through an
drugs/ drugs?
patents - Acquisition existing v. new lens and structure.
- Expansion to other
– Even if the candidate comes up with a different framework, it should
countries/regions or capturing consider the expansion on current drugs and the new drugs under
underserved region in the US? development for other rare diseases. If not, ask the candidate what
other factors should be considered until they come to this point.
Product Development Diversification
- Small improvements in - New pipeline of R&D – when
current drugs -> increase would drugs be ready to • Candidate should also talk about cross-functional issues, like regulations or
New drugs
price point? go-to-market? (respecting reimbursement of these drugs by health insurers.
time-frame of 5 years)
• If necessary, after discussion of the framework, ask the candidate one of
the questions below to get them started on further exploration of the
Transition statement: I would like to first consider the client’s position in the market
issue.
by learning more about our client’s current R & D and drugs on the market. Do we
have any similar information? – How would you approach our client's question on growing its Rare
Disease business?
– Where would you like to start?

• The candidate should then ask for company information for analysis. Show
them Exhibit 1.

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Case #28: Pharmaceutical Rare Disease (3/5)
Exhibit 1

248
Case #28: Pharmaceutical Rare Disease (4/5)
Interviewer Guidance Math Calculation
• After showing Exhibit 1 to the candidate, ask them: based on the data, Growth from existing assets: assumes linear growth – do not ask to calculate
how large will the client’s Rare Disease business be in 5 years? compounding growth.

• If necessary, ask, what is the shortfall to the client’s goal of doubling their • Current baseline: $2.5B, growing at 5% for 5 years = $2.5B * 5% * 5
business? = $625M

• Then ask, what does the client need to do to double the Rare Disease Growth from pipeline:
revenues in 5 years? If candidates discusses acquisitions, ask, who should Phase # of Attritio Peak % of peak rev Total
be acquired? How many assets will we need to buy? assets n Rev
I 5 x 20% x $500M x 20% - 1st = $100M
year
• Information to be provided upon request:
II 3 x 40% x $500M x 40% - 2nd = $240M
– Our client is an industry leader with a track record of success. Its year
existing business is $2.5B, expected to grow at 5% per year.
III 1 x 60% x $500M x 60% - 3rd = $180M
– Rare disease market is $30B and is as profitable as "Big Pharma“. year
• Note: research assets need 6 years to reach the market and will not generate
– While research is relatively expensive, the government provides tax revenue in 5 years. = $520M
credits for drugs designated to treat rare diseases.
Shortfall:
– Additionally, prices tend to be higher to make up for the upfront • Growth target: $2.5B - to double the business
research investment. It's also growing faster than Big Pharma. • Internal growth is $625M + $520M = $1.145M, need ~$1.4B more
– There are many small bio-techs that are attractive targets and there are • If each asset is $500M, then the client needs to buy 3 peak revenue assets
also other big pharmaceutical companies that have rare disease or more (if they are in R&D) to double business in 5 years.
divisions / assets. Assume each company has approximately $500M in
Portfolio in 5 years:
revenues.
• $5B portfolio with:
– $3.1B (~60%): from current baseline
– $520M (~10%): from pipeline
– $1.4B (~30%): acquisitions

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Case #28: Pharmaceutical Rare Disease (5/5)
Recommendation Interviewer Guidance
Recommendation • After completing the analysis, ask the candidate to provide a
In order to double the current revenue of $2.5B, client will need to acquire ~3 recommendation on what is necessary for the company to achieve its
"peak revenue" assets to close the gap between your goal of $2.5B and the desired market growth. The main question in this case is not whether the
$1.1B their portfolio will generate organically growth is realistic or feasible, but rather, what should be done to achieve
the client’s target.
• Current pipeline will provide $3.1B in revenue, assuming 5% growth • In the recommendation, the candidate should focus on addressing the
• New research will contribute with $520M in revenue, considering Phases I original question and on providing the results from the analysis.
to III
• Acquisition of 3 players (average revenue of $500M), would compose
additional needed revenue of $1.4B

Risks
• Difficulty in acquiring businesses / market value
• Delays in R&D and testing phases may delay revenues from new products
• Regulation

Next Steps
• Perform due diligence of possible targets to evaluate best options
• Define internal mechanisms to control track of product launches to
guarantee timing
• Work on FDA approval and obtain patents for drugs in pipeline and on
market to guarantee projected revenues

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 Overall Quant Creativity
3 2 3

Case #29: Project Gargoyle

Case Type: Bain & Company – Candidate Driven
Investment Decision

Industry:
Hair Care Products

Concepts Tested:
• Breakeven analysis
• Chart clearing
 Quant Level – MEDIUM

Case #29: Project Gargoyle (1/9) Case Type Industry Client Type

Investment Decision Hair Care Products PE fund

BAIN & COMPANY – Round 1 – Candidate-led

Fit Questions Interviewer Guidance

1. What are your major strengths? This case is a investment go / no-go evaluation.
2. Tell me about a time you had to deal with a challenging You should read the case prompt to the candidate and show them the data sheet on the next
situation. page as they request each piece of information.

Information to be provided only upon request:

• Gargoyle has grown quickly, especially during most recent period.
• EBITDA margin declined and EBITDA $ were flat.

Fit Evaluation
Overall Fit Performance
S1 O1 A 1
R 1

2 2 2 2

Case Prompt Case Development

Your client, a private equity fund, is evaluating the potential acquisition of Gargoyle. Gargoyle is a premium, fashion 1. Framework
forward hair care products brand sold in the U.S. Gargoyle has grown quickly over the past 5 years and management 2. Revenue Analysis
is forecasting strong top-line growth. 3. Cost analysis
4. Break-even calculation
Your client has little experience in the industry and needs to quickly evaluate the opportunity. Your client would like 5. Recommendation
to grow cash flow (EBITDA) each year during the investment horizon with minimal capital expenditure.
Case Evaluation
How should you evaluate the opportunity? Should the fund invest in Gargoyle?
Structure and Framework

Analytical and Problem Solving Ability

Communication and Positive Attitude

Synthesis and Recommendation

252
Case #29: Project Gargoyle (2/9)
Framework Interviewer Guidance
Working hypothesis: The fund should invest in Gargoyle; but, I would like to test this • Profitable growth over the investment horizon is the key factor in determining
by first looking at the financials of the opportunity and then by determining whether attractiveness of the opportunity.
the market is attractive.
– A profit tree framework should be included as a key way to understand the
•Hair Care Market – Is the market attractive? root cause of margin decline (EBITDA decline, flat $).
– Size of the market
– Market is Growing / Shrinking in the US? (historical + forecasted data) • The framework utilized should also assess attractiveness of market and company
– Competitive landscape (market is consolidated or fragmented) as well as an assessment of company profit.
– Substitutes (professional products, natural products) – Candidate should understand these points first to better understand how to
•Gargoyle Specifics calculate profitability of the opportunity.
– % of share – opportunity to capture more?
– Segments targeted today – opportunity to expand to other segments?
– Channels used
– Customer loyalty
– Leadership team and cultural fit

•Gargoyle Profitability
– Revenue
• # Products sold
• Price per unit
• Product mix
– Cost Determine best
• Variable cost – cost per unit of product evaluation tool for
– Chemical products client:
– Bottles
– Packaging • NPV
• Fixed costs – SG&A, distribution, insurance • Payback period
• Breakeven
– Investment
• Money for acquisition is available?
• Payback or break-even requests?
• Cost of capital – discount factor
• Is the best use of capital?

•Client requests – PE Portfolio

– Does it make sense to the fund?
– Synergy with other current investments?

253
Case #29: Project Gargoyle (3/9)
Interviewer Guidance Interviewer Guidance (cont’d)
Exhibit 1: Historical revenues Exhibit 4: Cost to serve drugstores
After laying out the framework, the candidate should start exploring the company’s Ask the candidate, if we were to invest in the drugstore channel, what is the breakeven
financials, starting with revenues. If not, guide the candidate to that; then, show Exhibit 1 quantity for drugstores?
and ask: Candidate should ask for cost information per unit. Show Exhibit 4.
What observations can you make about Gargoyle’s growth? Candidate should then proceed with a breakeven calculation:
Candidate should highlight: $5M Fixed Cost / $0.50 margin per unit = 10M units to breakeven
• Gargoyle has grown quickly, especially during the most recent period. 10M units for breakeven x $5/unit = $50M breakeven revenue
• EBITDA has grown more than revenues through 2009, but has deaccelerated since.
• Last year EBITDA margin declined and EBITDA $ were flat.

Exhibit 2: Hair product market segmentation by channel Exhibit 5: Salon interviews – Brand perception comparison
If the candidate asks for company information first, jump to Exhibit 3 and then come back to After observing that the drugstore business also doesn’t seem attractive. The candidate
Exhibit 2. Otherwise, candidate should want to understand the reasons for EBITDA decrease should be inclined to evaluate if there is still some value in the Gargoyle brand for its
and take a look at the market segmentation. If necessary, push candidate to evaluate the consumers, for example by assessing customer satisfaction. Show candidate Exhibit 5.
market by asking:
What would you expect to see in the hair product market? What growth would you expect? If the candidate goes in a different direction, lead them toward this direction by asking: what
What channels? What does the market analysis tell you? Show Exhibit 2. other factors can be valuable in the Gargoyle brand?
• Candidate should make logical points about growth (e.g., growth is roughly aligned with • If you need to ask this, evaluate how structured the candidate’s brainstorming is.
population growth) and think through channels.
• Market growth is not attractive. Does Gargoyle play in high growth areas? From the graph analysis, candidate should highlight:
• Salon/stylist as key customers/influencers, but Gargoyles product does not perform well
with stylists.
Exhibit 3: Gargoyle sales by channel • Exclusive distribution is important to salons (selling to drug stores is likely to erode core
After evaluating the market, candidate should ask for Gargoyle’s revenue breakdown by customer base).
channel. Show Exhibit 3. If necessary, push candidate to find reason of EBITDA decrease in • Gargoyle is underperforming relative to peers on customers’ needs.
2010, by asking them:
What drove margin decline in ‘10?
Candidate should highlight:
• Gargoyle began distributing to drug stores in 2010.
• All growth came from this segment (10M), since, as we saw in Exhibit 2, the salons channel
is not growing.

254
Case #29: Project Gargoyle (4/9)
Exhibit 1

255
Case #29: Project Gargoyle (5/9)
Exhibit 2

256
Case #29: Project Gargoyle (6/9)
Exhibit 3

257
Case #29: Project Gargoyle (7/9)
Exhibit 4

258
Case #29: Project Gargoyle (8/9)
Exhibit 5

259
Case #29: Project Gargoyle (9/9)
Recommendation Interviewer Guidance
Recommendation • After the analysis, ask the candidate for their recommendation.
Client should NOT invest in Gargoyle • The candidate should recommend that the PE fund NOT invest in
• Market growth of the industry is not attractive Gargoyle.
• Majority of sales are in the salon market, which is a segment that is • Interviewee should identify that the client wants to ensure
not growing and in which Gargoyle has been underperforming its profitable growth over the investment horizon.
competitors • Gargoyle entered lower margin drug store channel in 2010, causing
• Expansion to the drug store channel is not profitable (breakeven is EBITDA margins to decline.
met); is the underlying reason EBITDA margins have deteriorated • A wrap-up answer will consider detrimental impact on core customer
• Customer research reveals that Gargoyle does not perform well against (salons) by selling product through alternative mass distribution channels
most important criteria (brand perception, pricing, exclusivity, etc.). Also, candidate should
consider alternative growth options, but ultimately conclude these are
risky and expensive.
Risks
• Any further investment in the drug store market could harm key
customer base (salons)
• We might be missing an investment opportunity in this market
• For competitive reasons, it can still make sense to the fund

Next Steps
• Strengthen relationship with salons to improve perception of
performance and exclusivity of Gargoyle brand
• Evaluate possibility of acquisition of other competitors in this market
• Close the loop with fund’s management

260
 Overall Quant Creativity
3 3 3

Case #30: PyeongChang Winter Olympics

Case Type: McKinsey & Co – Interviewer Driven
Investment Decision

Industry:
Tech, Media & Entertainment

Concepts Tested:
• Math structuring
• Net present value
• Brainstorming
 Quant Level – HEAVY

Case #30: PyeongChang Winter Olympics (1/4) Case Type Industry Client Type

Tech, Media, &

Investment Decision TV Network
McKINSEY & CO – Round 1 – Interviewer Led Telecom

Fit Questions Interviewer Guidance

1. Tell me about a time you had to deal with a conflict Drive case to revenues first and read quantitative data beforehand.
with a group or with your manager.
2. Tell me about a time you had to deal with a difficult
team member or overcome a coworker who was
blocking progress.

Fit Evaluation
Overall Fit Performance
S1 O1 A 1
R 1

2 2 2 2

Case Prompt Case Development

In the year 2012, we have been retained by a television network that is trying to decide how much to bid for the 1. Framework
rights to broadcast the 2018 Winter Olympic Games in PyeongChang, South Korea. 2. Revenue Analysis
3. Cost analysis
How much should they bid? 4. NPV calculation and
recommendation

Case Evaluation
Structure and Framework

Analytical and Problem Solving Ability

Communication and Positive Attitude

Synthesis and Recommendation

262
Case #30: PyeongChang Winter Olympics (2/4)
Framework Interviewer Guidance
Working Hypothesis: The bid price will be determined by the overall profitability of • This is a profitability case so the framework should include internal and
broadcasting the Olympics. Therefore, I would like to first start with potential ad revenue external factors driving profitability including the following:
generated from televising this event.
– Assessment of the current market and competitive landscape.
• Broadcasting Market – Revenues and costs: please notice that the case is focused on the
– Olympics Viewers revenue side. It is fine to ask the candidate about costs as a
• Size for this particular event brainstorming exercise, but make sure the candidate deep dives into
• Trends on Olympic viewership (growing / shrinking / method of viewing (ex. revenues.
tablets))
– Candidate should acknowledge that the amount to bid is limited by the
• Population segments – are viewers a compelling population for advertisers?
profits that could be generated from the broadcasting.
– Competition

• Other networks / substitutes (e.g. streaming online)

• Amount to bid – determined by profitability

• Revenue
– Advertising
– Merchandising Case Development
– License non-US networks to use our feed
• Cost • Our client is a broadcast television network that makes money through
– Fixed costs – building on-site studio, paying talent, broadcast infrastructure advertising only, not subscriptions.
– Variable costs – hotels, insurance
– Other bidding costs
– Opportunity cost – what else could we be showing?
– Discounting – cash flows will be in the future; what is client’s discount rate?

• Television Network
– Fit – are we the right station? Are we ESPN, ABC or HGTV?
– Experience – past sports or Olympic broadcasting experience?

263
Case #30: PyeongChang Winter Olympics (3/4)
Key Data Interviewer Guidance

Market research has shown that consumers can take no more than 10 • All data and facts to be provided upon candidate’s request. Do not show
minutes of ads per hour of television; they will stop watching if ad time the candidate the table. Rather, expect the candidate to organize this
is higher. information appropriately as this case provides an opportunity for the
candidate to practice structuring their math.
Winter Olympics Schedule
• After leading the candidate to focus on ad revenue, they should calculate
Duration 16 days
total ad revenue generated from the Olympic event ($928M). Per hour
Open Ceremony First day (Friday) revenue generated is $4M ($200k per slot x 20 slots per hour) in
Competitions Held in next 14 days non-prime time and $8M in prime time ($400k per slot x 20 slots per
Closing Ceremony Last day (Saturday) hour).
Broadcast
Opening Ceremony 8 – 11pm
Category Calculation Total
Weekdays coverage 9am – 12pm, 2 – 5pm, 7 – 11pm
(per day) Weekday (non prime) 10 days X 6 hours X $4M $240M
Weekend coverage 11am – 9pm (per day) Weekday (Prime) 10 days X 4 hours X $8M $320M
Closing Ceremony 8 – 11pm Weekend (Prime) 4 days X 10 hours X $8M $320M
Advertising Opening/Closing 2 events X 3 hours X $48M
$8M
Prime Time Mon to Fri 7 – 11pm; Sat – Sun
all day, Opening and Closing Total $928M
ceremonies
Non Prime Time Mon to Fri all other times
Adv. slot duration 30 seconds
Prime Time adv. slot cost $400,000
Non Prime Time adv. slot $200,000
cost

264
Case #30: PyeongChang Winter Olympics (4/4)
Brainstorm Recommendation
• After calculating revenue, have the candidate brainstorm costs. An • Enter a bid of $177M
internal/external framework could be appropriate here. – Expected additional revenue opportunities from being a part of the
Olympics might warrant a higher bid as you may be able to expand your
viewership from this opportunity, thereby enabling you to charge higher
FC VC advertising fees
Internal • Buildings on-site • Contract employees – For excellent performance, candidate should mention that client can
• Paying network (additional on-site also prevent a competitor from having an event that is hard to
talent labor) counterprogram against
• Broadcast • Marketing to viewers
infrastructure about Olympics and
events
External • Rental property • Hotels
on-site • Insurance
• Rental equipment • Utilities on-site
on-site

Risks and Next Steps

• There is no breakdown here. Once candidate completes brainstorm, state
that the total accounting cost is $428M. Risks
• This yields an even accounting profit of $500M ($928M-$428M). Many • Other competitors might enter the bid
candidates will think the case is over; however, we still need to worry • Fit of airing the Olympics with network brand and programming
about opportunity cost. • New technologies disrupting the industry might strongly change the
• If candidate doesn’t mention opportunity cost, remind them. Here, viewership base (tablets, smartphones) and prevent client from
opportunity cost is $1M per hour of displaced programming ($1M X 146 recognizing predicted ad revenue as advertisers will shift their medium to
hours), or $146M. Economic profit is $354M ($500M-$146M).
• Again, many candidates will think final answer is $354M. However, these match consumer viewership
cash flows are 6 yrs. in future (case is set in 2012) and need to be Next Steps
discounted. Discount rate is 12%; through rule of 72 (72/12=6 yrs. to • Assess whether or not competitors are planning to enter the bid and
double), you end up dividing 2018 profit in half. Therefore, in 2012 dollars, determine what resulting bid strategy should
profit = $177M.
• Complete internal assessment to ensure that network fit matches the
• Candidate should recognize that the max bid the client should make based
on predicted advertising revenue is $177M. Olympic programming
• Do a customer survey to understand the potential disruption caused by
new technologies

265
 Overall Quant Creativity
3 2 3

Case #31: Quahog Public Schools

Case Type: McKinsey & Co – Interviewer Driven
Non-traditional

Industry:
Non-profit/ Education

Concepts Tested:
• Chart clearing
• Structured brainstorming
 Quant Level – MEDIUM

Case #31: Quahog Public Schools (1/5) Case Type Industry Client Type

Non-traditional Non-profit/
School System
McKINSEY & CO – Round 1 – Interviewer Led Problem Education

Fit Questions Interviewer Guidance

1. Tell me about a time you worked on a project with a This case is a non-profit case, which pushes candidates to think outside of the box. It is meant
team and had to convince your team member(s) to go to assess their creativity and ability to adapt their thinking to new problems or contexts. The
along with your idea. case calls for a lot of brainstorming from the candidate, but is ultimately driven by the
2. Tell me about a time you disagreed with one of your interviewer asking a series of questions to get to the final recommendation.
work colleagues and how you handled the situation.

Fit Evaluation
Overall Fit Performance
S1 O1 A 1
R 1

2 2 2 2

Case Prompt Case Development

Our client is the superintendent of a system of schools in Quahog, Rhode Island. He is concerned because the 1. Framework & Exhibit 1
performance of students from these schools in standardized tests has been repeatedly subpar. He has asked us to 2. Specific Issue Brainstorming
help him figure out what to do about it. 3. Quantitative Problem-solving
4. Final Recommendation
Additional clarifying information (provide only if asked):
Q: What is a “system of schools”?
A: For example, Chicago Public Schools Case Evaluation
Structure and Framework
Q: What are standardized tests?
A: Exams that occur at a certain point of the school year for a particular grade level and that are developed and
Analytical and Problem Solving Ability
organized by a school district, state, or other large education agency (ex. end of course exams, SAT).
Communication and Positive Attitude
Q: What is subpar performance?
A: On average, a student from Quahog Schools performs below exam mean as compared to national student scores
Synthesis and Recommendation
on the same assessment.

Show Exhibit 1. Candidate should then develop their framework.

267
Case #31: Quahog Public Schools (2/5)
Exhibit 1

Quahog Student Performance Relative to National Performance

Quahog Students’ National

Performance Performance

268
Framework
Case #31: Quahog Public Schools (3/5) Case Development
• Students A good framework would consider three or four dimensions, such as those
– Attendance rates (e.g., unsafe neighborhoods 🡪 low attendance or listed on the left.
support 🡪 poor results)
– Demographics (e.g., students from low socioeconomic background 🡪 Allow the candidate to discuss their framework. Then, provide the following
work or take care of family after school 🡪 low attention to studies; race information when asked:
/ ethnicity; high need populations such as Special Education or English • In response to the candidate’s questions about teachers or the teaching
Language Learners) environment, inform them that it is on par with other schools.

• Teachers • If the candidate asks about student demographics, inform them that
– Recruitment standards (i.e., do we hire untrained teachers?) students are from low to middle household income categories.
– Training programs (i.e., do we keep our teachers current in pedagogical
skills?) • If the candidate has not brought out the issue of ‘books’, inform them that
– Retention rates, especially of high quality teachers the schools provide books to the students.

• Resources
– Syllabus or curriculum (i.e., are we teaching appropriate material at the Interviewer Guidance
right level of rigor?)
– Access to facilities / resources (e.g. library, technology, science After the discussion, guide the candidate toward ‘books’ as a major issue. Tell
laboratories, art, music, gym, school nurse) the candidate:
– Book, teaching material, and supplemental supply availability
Early findings suggest the shortage of books has been a major factor
• Teaching and learning environment affecting student performance at Quahog. How do you think we can address
this?
– School safety
– Administrative support Encourage the candidate to brainstorm and think from multiple perspectives.
– Aesthetically supportive learning environment (clean, welcoming, This is a classic “what else?” situation where you should probe for more and
windows, air conditioning)
more ideas. A good candidate will bucket his/her thinking into three or so
Transition Statement: Since the school district is looking to improve groups. See the following page for a potential answer.
standardized test scores, I would like to first determine whether all teachers
and students have the necessary resources. It would be great if we had
information on current resource distribution by school or grade level.

269
Case #31: Quahog Public Schools (4/5)
Brainstorm Response Calculations

• Raise money to buy books This is how the candidate could solve the follow-up question:
– Fundraising (grants / donations)
– Price discrimination to students (students who can pay, buy books Shortage:
through school) Total shortage = 8,000 books
• Arrange for new books without additional money Math shortage= 60% * 8,000 = 4,800
Science shortage = 40%*8,000 = 3,200
– Gifts (in-kind donations)
– Borrow from other school systems Benefit:
– Partner with Amazon / retailers for used books as a philanthropy Amazon partnership = 70%*4,800 = 3,360
measure on their part Coordinated sharing = 20%*3,200 = 640
• Manage with current number of books in system Total benefit = 4,000 books
– Coordinated book sharing system
– Scan / copy books Note: a strong candidate will do the following:
• Spot the pattern in percentages:
– Total benefit = 70%*60% + 20%*40% = 42% + 8% = 50% = 4,000 books
Follow-Up Question
After the brainstorm discussion, state and ask the following: • Focus on the “so what?” of the 50% benefit by discussing why this is
important to the overall case question.
An immediate area of concern is Grade 6 math and science books. We’ve
identified a shortage of 8,000 such books. Sixty percent of these books are
math books and the rest are science books. The math books are available on
Amazon, but the science ones are not. By partnering with Amazon, we can
reduce the shortage of math books by 70%. Independently, by coordinated
book sharing, we can reduce the shortage of science books by 20%.

What is the total impact of these plans?

270
Final Question
Case #31: Quahog Public Schools (5/5) Recommendation
After the candidate has finished presenting their calculations, ask this final Preliminary analysis has shown that shortage of books is the leading indicator
question: of subpar student performance in Quahog Schools.
• We have identified several ways to reduce effective shortage, in three
You meet the superintendent in the hallway and they ask you what you have categories: fundraising, arranging books without additional cash, and
found so far. What will your response be? managing with same number of books.
• Our estimates indicate that we can reduce the grade 6 book shortage by
Note: Strong candidates will spot that this is the ‘recommendation’ question, 50% with two of these initiatives: partnership with Amazon and a
and will be comfortable verbalizing their recommendation in a structured coordinated book sharing arrangement.
way.

Risks and Next Steps

Risks
• The other 50% (remaining shortage of 4000 books) will not be easily
addressed
• Student performance may not rise sufficiently by reducing book shortage
• There may be other causes of poor performance which are impactful and
need to be explored

Next Steps
• Create plan to reduce remaining book shortage
• Quantitatively estimate impact of reduced book shortage on student
performance
• Explore other drivers of subpar student performance (teacher training and
retention, curriculum rigor, school learning environment, etc.)

271
 Overall Quant Creativity
2 3 2

Case #32: Retirement Apartment Complexes

Case Type: Undisclosed – Candidate Driven
Profitability/ Market Entry

Industry:
Real Estate

Concepts Tested:
• Math structuring
• Brainstorming
 Quant Level – MEDIUM

Case #32: Retirement Apartment Complexes (1/6) Case Type Industry Client Type

Profitability / Market Property

Real Estate
UNDISCLOSED – Round 1 – Candidate Driven Entry Management

Fit Questions Interviewer Guidance

1. Tell me about a time you used data to solve a problem This case will require candidates to focus on profitability analysis, within the context of new
and to convince someone of your solution. market entry considerations. Strong candidates will bring structure to their quantitative
2. If you receive multiple offers, how will you pick a Firm? analysis, in order to keep information organized across a set of options. While candidates will
be tempted to round during math calculations, this is one case where the answers could be
impacted by doing so and thus rounding should not be permitted.

Fit Evaluation
Overall Fit Performance
S1 O1 A 1
R 1

2 2 2 2

Case Prompt Case Development

Our client owns and operates 25 retirement apartment complexes for the 55-75 year old demographic. The 1. Framework
apartment complexes are in the Southeast and Southwest states of Florida, California, New Mexico and Arizona.
2. Math Question
The main goal for the client is to maximize profitability, so the client company’s CEO is considering expanding into 3. Brainstorm
Northern states. As a pilot, the client built an apartment complex in downtown Chicago two years ago. By and large, 4. Recommendation
the client's apartment complexes have similar designs and amenities. However, the new complex in Chicago has more
amenities than the client’s properties in the South. Case Evaluation
Structure and Framework
What are the main factors the CEO should consider for growth in the US?
Analytical and Problem Solving Ability

Communication and Positive Attitude

Synthesis and Recommendation

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Case #32: Retirement Apartment Complexes (2/6)
Additional Case Information

Provide the information below if requested.

Demand in the North

A survey of pre-retirees and retirees across a number of states, including New York, New Jersey, Massachusetts and Illinois, revealed an unmet demand in the
North for retirement facilities. Retirees wanted options that would allow them to stay close to their families and friends.

Competition
In the South competition is fierce. In the North, competition is fragmented or nonexistent.

Revenues
• In the South, rent includes maintenance, amenities, and utilities.
• In the North, rent further includes charges for access to a 24-hour on-site medical facility.
• For the purposes of this analysis, buildings within a region can be considered identical.

Amenity Differences
The pilot building in the North offers 24-hour access to a medical facility in the complex.

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Case #32: Retirement Apartment Complexes (3/6)
Framework

Retirement facility industry Market entry considerations Profitability (North vs. South) = R - C
• Market size/growth • Startup/construction
costs - build vs. buy? Revenue Costs
• By region
• Marketing needs/launch • Rent • Fixed costs
• Other segments
(demographics, type of care strategy • # of units • Property management
needed) • Client fit for expansion in • Occupancy rate contract/labor
• Trends/retiree preferences new region • # of bldgs. and regions • Amenities
• Proximity to family • Construction and • Utilities, if managed by building co. • Admin and marketing
• Integrated health services property mgmt. • Premium for amenities, if any • Lease and property taxes
• Low tax states relationships • Retail revenue, if applicable • Maintenance (bldg.-wide
• Barriers to entry i.e. HVAC)
• Urban vs. suburban/rural • Building maintenance fees
• Regulation • Building-wide utilities
• Competitor landscape
• Access to financing • Variable costs
• By region within industry
• Time to breakeven • Maintenance (i.e. per unit
• From other types of property
wear and tear costs)
use (multi-family housing,
condos, assisted living
• Utilities (per unit)
facilities)

Transition statement: In order to evaluate the options on the basis of profitability, we need to
understand the cost differential between complexes in the South and the pilot complex in the North.

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Case #32: Retirement Apartment Complexes (4/6)
Math Questions Interviewer Guidance

1. Which region generates more profit per building in the short-term? In • To challenge candidate, don’t provide units per building figure until
the long-term? candidate requests it.
2. How do the profit margins compare between the regions? • If needed, prompt candidates to compare profit margins in addition to
profits per building.
• Candidates may want to round – however, in this case, rounding may
affect their answer. Request that the candidate complete the calculations
Information to provide to candidate: without rounding.
Occupancy rates See next page for calculations.
Occupancy rates for new complexes typically start around 90%. Over time,
they have tended to settle out around 80%. The pilot building in Chicago is still
seeing a 90% occupancy rate. Sample Takeaways
• Profit margins in the South are higher across the board.
Per Building, Per Month South North • Profitability in the first couple years after an expansion, when occupancy
rates are 90% in both the North and South, is significantly higher in the
Units/Building 800 400
South.
Rent revenue/Unit $500 $1000 • If the North’s 90% occupancy rate holds, profitability per building would
Maintenance costs/Unit $125 $200 be commensurate with the South in the long run -- could provide good
diversification benefit for company.
Amenities $48,000 $56,000
• Occupancy trend in pilot building should be monitored.
Utilities $38,000 $45,000 • Potential to add medical facilities in Southern buildings, given
SG&A $80,000 $64,000 demonstrated willingness to pay for those services in the North.
Medical Facility $0 $55,000

Note: Maintenance costs/unit are incurred regardless of occupancy.

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Case #32: Retirement Apartment Complexes (5/6)
Math Solution

South North

Occupancy 80% (current buildings) 90% (given expansion, first 80% (if rate falls to match 90% (current pilot rate)
couple years) Southern trend)

Revenues per month $500 * 800 * 80% $500 * 800 * 90% $400 * 1000 * 80% $400 * 1000 * 90%
= rent * # units * occupancy rate
= 320K = 360K = 320K = 360K

Costs per month 48K + 38K + 80K + (125 * 800) = 166K + 100K 56K + 45K + 64K + 55K + (200 * 400) = 220K + 80K
= FC + VC
= 266K = 300K

Profit per month 320K – 266K 360K – 266K 320K - 300k 360K – 300K
=R-C
= 54K = 94K = 20K = 60K

Profit margin 54/320 = 27/160 94/360 = 47/180 20/320 = 1/16 60/360 = 1/6
= Profit/R (long divide) (long divide) (half of 1/8)
= 16.875% = 26.11% = 6.25% = 16.67%

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Case #32: Retirement Apartment Complexes (6/6)
Brainstorm Question Request for Recommendation
What are the benefits and risks to entering the market in the North? What is the recommendation for the client?

Sample Brainstorm Structure Recommendation

Build out market entry plan in the North to obtain first mover advantage,
pilot medical facility renovation in the South
Benefits Risks • Profit margin is equivalent in new Northern market (ST) as established
Southern market (LT) at ~16.8%
Market First mover advantage in High level of fragmentation may be
share the North given low function of underlying fundamentals or • High customer WTP for amenities, such as a medical facility, indicates
competition levels regulatory barriers market opportunity for upgrades in current facilities and inclusion in any
new Southern expansion; high profit margin for new Southern expansion
Profitability • Potentially higher • Uncertainty on occupancy trends allows for such facility upgrades
occupancy rates • Higher willingness to pay /
• Higher proven occupancy may be impacted more in
willingness to pay a recession Risks
for amenities • Costs may increase • Drop in occupancy rates in North
• Diversification disproportionately over time • Startup costs in Northern expansion
benefit for (minimum wage laws, taxes)
• Cost of medical facility renovation
company as a • Opportunity cost from tying up
whole, in the event capital in North instead of Southern • No interest and / or capability to pay for medical facilities in South
of regional expansion / medical facility
recessions expansion Next Steps
• Startup cost overruns • Conduct market survey for occupancy benchmarks in North
• Negotiate long-term contracts with contractors
Operations New build allows for Uncertainty on new build timelines,
updated amenities, zoning, licensing, subcontract • Price out medical facility renovation
adoption of best relationships, etc. • Survey residents in Southern facilities for interest in medical facility
practices

278
 Overall Quant Creativity
3 3 2

Case #33: Skylight Goods

Case Type: BCG – Candidate Driven
Operations

Industry:
Industrial Goods

Concepts Tested:
• Inventory Management
• Manufacturing
• Distribution channel
 Quant Level – HEAVY

Case #33: Skylight Goods (1/10) Case Type Industry Client Type

Operations Industrial Goods Manufacturing

BCG – Round 1 – Candidate Driven

Fit Questions Interviewer Guidance

1. Tell me about a time you’ve had to communicate This is a profitability case that tests candidates’ quantitative, critical analysis, and self-directing
something difficult to a client. How did you do that? skills. Push the candidate to drive the case.
2. Tell me about a time when you built consensus for an
idea you proposed.

Fit Evaluation
Overall Fit Performance
S1 O1 A 1
R 1

2 2 2 2

Case Prompt Case Development

Our client, Skylight Goods, is a $12B industrial goods manufacturer. They have various divisions and the division they 1. Framework
are working with makes pressure sensitive self adhesive canvases for sign boards. This division has seen revenues 2. Profitability analysis: Costs
stagnate over the past few years and profitability has declined. 3. Operations analysis:
Distributors
Skylight has engaged BCG to help them with this issue. The two questions facing them are:
4. Recommendations
1. How can skylight improve profitability?
2. Should the client change its delivery channels? Case Evaluation
Structure and Framework
Note: Candidate should answer these questions sequentially. The first question tests costs; the second tests top-line
growth. Analytical and Problem Solving Ability

Communication and Positive Attitude

Synthesis and Recommendation

280
Case #33: Skylight Goods (2/10)
Interviewer Guidance
To understand what the product is, think of any signboard that you see. One part of the signboard is the metallic post that holds the board up; upon that
board you can stick our client’s product. Skylight’s customers buy blank canvases from Skylight, print their signs onto the canvas and then simply paste the
canvas over sign boards, just like you would paste a normal sticker

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Case #33: Skylight Goods (3/10)
Interviewer Guidance

Provide the following information if the user probes:

1. Revenue has stagnated at about $100M per year.
2. Price has not changed. Since this is an undifferentiated product, there are no opportunities to increase or decrease price.

Provide the following descriptions only if the candidate asks.

About Skylight Goods

• Skylight positioning: Skylight is among the largest market share holders in the pressure sensitive self-adhesive canvas market. Skylight has been in this
industry for a long time and has an established brand. Skylight has grown through acquisitions and has a few manufacturing plants that it has acquired.
• Geography: Skylight supplies the entire US.
• Product Mix: Assume that there is only one kind of product in the client’s product mix. There are no opportunities to change this.
• Objective of the case: The client has already asked us whether they should look at improving their distribution channels.

If the candidate asks, provide this information. Otherwise, provide after the framework has been presented by the candidate.

The Market
• There are 2 other big players. Skylight and each of the two big players have about 25% of the market each; the rest is fragmented.
• The market is growing at 3% (strong candidates should figure out that this is an industry growing as fast as the GDP grows).
• Our competitor’s products are very similar to ours and are priced similarly too. Our competitors do not have any differentiation when it comes to product,
promotions, or price.

Discussion of candidate’s framework should identify that there are no opportunities on the revenue side. The candidate should then explore costs. So:
• Provide Exhibit 1 when asked about costs. With Exhibit 1, candidate should conclude that the only cost that is increasing significantly is the manufacturing
cost.
• When candidate asks for more information about manufacturing costs, provide Exhibit 2. Otherwise, drive the candidate towards manufacturing costs and
then provide the exhibit.

282
Case #33: Skylight Goods (4/10)
Framework Framework Discussion

• As the case presents a clear question on profitability and one on delivery,

Market Profitability the candidate’s framework should include both dimensions.

•Growth • Revenues • Additional information to be shared with candidate if they ask:

• % share held by Skylight Goods • Price (unchanged) – Pricing and product mix/differentiation are irrelevant to this case due to
• Quantity an inability to change prices for a singular, undifferentiated product.
• Competition • Product Mix
• New entrants • Channel Mix • Refer to page 3 and then proceed to Exhibits 1 & 2 for further information
to be shared with candidate.
• Number of competitors • Promotion
• Differentiation • Number sold
• Price • Expenses
• Substitutes • Fixed Costs
Operations • PP&E/Manufacturing
• Delivery channels • Variable Costs
• Distribution center locations • Labor
• Customer locations • Raw Material
• Service levels • Glue
• Vendors • Paper
• Cost efficiencies
Transition statement: Since there is no change in price and the product is
undifferentiated in the market, it is clear that costs are decreasing client
profitability. I would like to test this by digging into the VCs associated with
manufacturing.

283
Case #33: Skylight Goods (5/10)
Exhibit 1

Skylight Goods Income Statement (in $ Millions):

284
Case #33: Skylight Goods (6/10)
Exhibit 2

Manufacturing Costs

285
Case #33: Skylight Goods (7/10)
Interviewer Guidance Sample Response
With Exhibit 2, also provide the explanation below regarding the • After reviewing Exhibit 2, candidate should conclude that there might be
manufacturing process: something going on with the number of employees and additional hours
that showed significant increase.
The product is sold by the yard. The way the process works is that the raw • Skylight Goods has produced the same length of canvas per year, but their
materials are fed into the machine for a pre-set run length, where run length = average run length has been decreasing, number of employees increasing,
length of canvas produced in the run. The machine runs for that period, and employee overtime increasing. Inventory turns has also been
generates the pre-set amount of canvas, and then stops and needs to be set increasing.
up again for the next run. • The decrease in run lengths was done to reduce inventory, but it has, in
turn, caused inefficiencies in the manufacturing process.
If asked, provide candidate with the following information:
• Skylight goods has heard about inventory management and they have
learned that a high inventory turn is generally good for the company.
• Inventory turn = total volume / average inventory (candidate should infer
that average inventory has been decreasing).
• Skylight Goods has sought to increase inventory turns because they feel
that the demand in the market for these canvases is uncertain. So they’re
unwilling to keep inventory indefinitely.
• The product can be kept in inventory for long periods and Skylight already
has capability to store them.

If candidate asks why the client feels that the market demand is uncertain, say
that it’s what a different consulting firm has told them.

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Case #33: Skylight Goods (8/10)
Question 1 Question 1: Continued
Using the information I gave you, how inefficient is Skylight Goods today in The candidate should ask whether it’s possible to produce more than
comparison to 2004? 1000-yard run lengths. If so, provide the following:
For brainstorming, ask for ways to benchmark efficiency before calculating. • It is possible to go up to 1500 yards per run. Calculate yards per minute at
Ways to do this include estimating additional hours paid / year and total time 1500 yards per run and determine what the improvement in efficiency is
needed to produce the material. over 2004 and 2006 in yards run per minute.
Sample calculations:
• 2004 Sample calculations:
– Average run: 1000 yds / 25 yds per minute = 40 minutes • 1500 yard run
– Setup time: 20 minutes – Average run: 1500 yds / 25 yds per minute = 60 minutes
– Total time: 60 minutes to produce 1000 yds – Setup time: 20 minutes
– Speed: 1000 yds / 60 minutes = 16.67 yds per minute
– Total time: 80 minutes to produce 1500 yds
• 2006 – Speed: 1500 yds / 80 minutes = 18.75 yds per minute
– Average run: 500 yds / 25 yds per minute = 20 minutes
– Setup time: 20 minutes • Improvement calculation
– Total time: 40 minutes to produce 500 yds – 2004: (18.75 / 16.67) – 1 = 12.48%
– Speed: 500 yds / 40 minutes = 12.5 yds per minute
– 2006: (18.75 / 12.5) – 1 = 50%
Conclusion:
To produce 1,000 yards in 2006, Skylight will need 80 minutes, 33% more than
2004. Efficiency is down 33%. Conclusion:
It is clear that 1500 yards per run is an improvement in terms of yards run per
minute, increasing efficiency by 12.48% and by 50% over 2004 and 2006
production, respectively.

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Case #33: Skylight Goods (9/10)
Question 2 Interviewer Guidance
At this point, candidates should move on to the question on distribution The candidate should deduce based on their analysis which distribution
channels. Interviewer should provide directional guidance as needed. factors are the most important and should be supported based on case
evidence. Candidate response should be structured to demonstrate
thinking.
What factors would be important when considering changing
distribution channels or networks?
Recommendations can include:

Provide if asked: • Skylight should engage more distributors in the other regions.

• Currently, Skylight Goods works with two distributors who sell the • Skylight should move its existing distributors to be more proximal to
canvases to end customers. One distributor is based on the west coast the customers
and another is based on the east coast. Customers generally prefer
distributors close to them in terms of distance.
• Our competitors use several distributors across all regions.
• The distributors, whether for Skylight Goods or for the competition,
work on standard percentage of sales.
• Most distributors are open to stocking multiple brands.

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Case #33: Skylight Goods (10/10)

Risks and Next Steps Recommendation

Restore profitability by increasing run lengths Risks
• Our profitability has declined because we have reduced our average run • Running machines at capacity may result in more wear and tear, resulting in
length from 1000 yards to 500 yards. This has reduced our efficiency by added maintenance expenditures
33%. • Engaging new distributors may make our existing distributors unhappy
• To restore profitability, Skylight Goods should aim to increase run lengths • Potential increases in inventory holding costs due to longer run lengths
to the maximum of 1500 yards per run. This will increase their efficiency
by 12.5% over 2004 results and by 50% over 2006 results. Next Steps
• Review current preventative schedule for machines and tradeoffs of
Improve revenues with distributor diversification running at capacity
• It is possible that lack of distributor locations caused our growth to • Identify resources to find new distributors and logistical solutions; revisit
remain stagnant while the market grew at 3%. contracts with existing distributors for geographical exclusivity
• We should engage more distributors in geographically diverse regions of • Explore reductions in inventory holding costs (less manpower, cheaper
the US, so our customers may be able to source the canvases more vendor to store product) to realize the benefits of increased inventory
easily. This will allow us to both regain our own internal growth and start turns. The reduction of these costs may be enough to compensate for
growing at the market growth rate. increases in manufacturing costs.
Evaluation

• A strong candidate will be self-led in narrowing down key areas for

further analysis as well as in performing calculations with data provided
to validate observations and recommendations.
• Recommendations should be supported by previously calculated data.
• Risks and next steps provide a good opportunity for second and third
level insights regarding possible outcomes of the candidate’s
recommendations.
• An excellent candidate will circle back to address the client’s focus on
inventory management.

289
 Overall Quant Creativity
2 1 3

Case #34: Smart Cards

Case Type: McKinsey & Co – Interviewer Driven
Growth Strategy

Industry:
Technology

Concepts Tested:
• Chart clearing
• Brainstorming
 Quant Level – LIGHT

Case #34: Smart Cards (1/6) Case Type Industry Client Type

Growth Strategy Technology Manufacturer

McKINSEY & CO – Round 1 – Interviewer Led

Fit Questions Interviewer Guidance

1. Tell me about a time you dealt with ambiguity and the This is a command-and-control style case, where the interviewer leads the candidate through
steps you took to manage the situation. a series of questions. The candidate should maintain an active role in the discussion at all
2. Tell me about a time you had to overcome a times, and should not be thrown off if the interviewer drives the case in a different direction.
challenging situation at work and how you maintained
buy-in from key stakeholders to resolve the situation.

Fit Evaluation
Overall Fit Performance
S1 O1 A 1
R 1

2 2 2 2

Case Prompt Case Development

Our client, Electronics Inc., is a large diversified Electronics Component manufacturer. One of their businesses is the 1. Framework
manufacture of Smart Cards used by transport authorities (passenger cards). They entered this business 3 years ago.
2. Q&A/ Discussion
The CEO is unhappy with the performance of this business and has asked McKinsey for help. What areas will you 3. Interviewer Questions
explore?
Additional detail that can be provided in response to candidate follow-up questions:
• The focus is on the US market.
Case Evaluation
• The client manufactures both Smart Cards and Card Readers. Customers for these are primarily transport
Structure and Framework
authorities (e.g.: CTA).
• The client also manufactures chips and custom electronic components. Analytical and Problem Solving Ability
• The client’s Smart Card business has experienced low revenue growth and recent customer complaints.
• The CEO is considering whether to spin off or to sell the Smart Card business. Communication and Positive Attitude

Synthesis and Recommendation

291
Case #34: Smart Cards (2/6)
Framework
Our main customers are transport authorities. How might you segment them?
Smart Card Market Competition
• Who (substitute manufacturers, • Examples: by revenue, margin or geography.
• Size/Growth
• Customer segments next gen apps) • An example of revenue-based segmentation could be Tier 1 transport
• Trends in adoption/tech • Market share/growth of share authorities (NY, Chicago, SF) vs. Tier 2 (mid-sized cities).
• Competencies • If needed, lead candidate to revenue-based segmentation before
transitioning to the next question.
Client’s Smart Card Business Product and Product Support
• Customers • Price vs. WTP
• Value chain • Quality (reliability, product life,
• Synergies with other ease of integration with other
business lines systems, cost for updates,
security)
• Delivery
• Customer service
• Servicing, replacement,
maintenance
Question 2

Transition statement: To understand the client’s growth challenges and Great. Industry professionals do generally segment by revenue. Now what?
potential options for the Smart Card business, I’d first want to better • The candidate should want to understand how the client does in each
understand the Smart Card Market and our client’s position in it. segment compared to their competitors.
• Once they reach this insight, provide them with Exhibit 1.

292
Case #34: Smart Cards (3/6)
Exhibit 1

Market Segment Penetration

Smart Cards Electronics Inc.

Competitor A Competitor B Others
Segment Penetration in (Client)
share share share
Segment share

Tier-1
100% 15% 40% 45% 0%
(10 customers)

Tier-2
10% 0% 2% 8% 0%
(70 customers)

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Case #34: Smart Cards (4/6)
Chart Clearing Question 3
Sample Insights from Table What do you think the key purchase drivers in this business are?
• This is a concentrated market, with only 3 players. (i.e. Why would a customer choose one player over another?)
• We are the weak third player in the market.
• Our competitors have a significant advantage in the Tier-1 segment. Sample Answer
– We should consider what is needed to grow share in this segment. • Cost
• There may be opportunity in Tier-2. – Per unit price (card reader, smart card)
– This Tier may not be profitable though, considering the low – Replacement / maintenance / upgrade costs
penetration rate to date. – Package pricing options of card reader + smart card 🡨 Key Driver
Note: A strong candidate will realize the last point regarding penetration rates • Quality/service
and provide next steps when considering whether to pursue any opportunity
in Tier-2. – Reliability of tech 🡨 Key Driver
– Security
– Customer service
– Proven adoption in similar markets

• Flexibility
– Switching costs (i.e. contract terms)
– Ease of integrating with other tech / systems

Note: A strong candidate will identify key drivers and rank or prioritize these
answers in some way.

If asked, tell the candidate that all players in the market have parity on
everything except reliability.

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Case #34: Smart Cards (5/6)
Question 4 Question 5
As mentioned earlier, there have been some recent customer complaints. As a Upgrading reader quality to 99% reliability will require a $10M investment.
result, some of the client’s current customers are considering moving to other Based on this information, what do you think the client should do with the
vendors. All the players in the market have parity on all the purchase drivers business?
except reliability.
Note: The candidate might want to do a cost-benefit analysis, but a strong
Here is some relevant data (read or show to candidate): candidate will hypothesize that it may not make sense to upgrade since we
• Electronics Inc.: Reader Reliability 90% Card Reliability 75% have such a low market share and face two dominant players who already
• Competitor A: Reader Reliability 98% Card Reliability 60% have 99% reliability.
• Competitor B: Reader Reliability 99% Card Reliability 70%
Sample Response
What are your takeaways from this information? • This is a platform strategy where “winner-takes-all” within each geography,
and all Tier 1 geographies are saturated.
Sample Response • For Tier-1 customers, the client is worse off than Competitor A and B. The
• Reader reliability is much more important than card reliability. client has reliability issues and no superior “value-proposition” in any other
– Cards can be easily replaced, but reader failure can shut down the entire substantive respect.
system. • There are demand-side economies (proof of concept with more established
– Client should explore the possibility of improving reader reliability since customer base) and supply-side economies (scale, lower infrastructure
it threatens the integrity of the system. costs) that provide the established competitors with additional advantages.
• Client appears to have a small card reliability advantage. • There might be an opportunity in the Tier-2 segment, and the client should
– May be an advantage that can be better monetized if it is delinked from explore this possibility. However, given that the other competitors haven’t
the card reader product. targeted a larger share of Tier 2, it could simply be unprofitable.
• Unless a profitable solution can be developed for Tier 2, the client should
exit the market and sell off assets to Competitor A or B.

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Case #34: Smart Cards (6/6)
Question 6 Synthesis
How would you find out if there is an opportunity in the Tier-2 segment? Since this case is light on quant, the interviewer should use this opportunity to push
the candidate to synthesize their thoughts and to provide a recommendation orally,
including risks and next steps.
Sample Response
• The client should go to the Tier 2 customers and find out why they have Recommendation
not adopted smart cards. • Unless a profitable solution can be developed for Tier 2, the client should exit
• The insights from this investigation could potentially be used to develop a the market and sell off assets to Competitor A or B.
better solution for Tier 2. Risks
• For instance, the client might find that Tier 2 customers don’t need and • If the client enters the Tier 2 market, they may expose themselves to risk of an
don’t want to pay for the full-scale product offered to Tier 1 customers and unprofitable venture.
might be willing to consider a cheaper, functional system. In this case, the
client should consider the possibility of providing a cheaper “lite” solution Next Steps
to the Tier 2 customers. • This could be mitigated by first analyzing the customer in this segment and
. determining whether the client can better meet Tier 2 customer needs as
compared to current competitors. However, if the client cannot do this, it is best
to divest themselves of the card reader and smart card assets.
Evaluation

Candidate performance differentiators:

• A framework suited to this case – exploring the industry and competition,
not profitability.
• Realizing that the Tier-2 segment may be unprofitable to serve.
• Recognizing that reader reliability is more important for integrity of the
system.
• Understanding the “winner-takes-all” nature of this business.
• Answering the original question of “what to do” – sell-off assets to a
competitor and exit. This can be a difficult insight because it is
counterintuitive to tell a client to give up on a business or line of business.
However, it is important that it not be overlooked, as sometimes the best
answer is not the one that will result in the most growth.

296
 Overall Quant Creativity
2 2 3

Case #35: Student Health Insurance

Case Type: Deloitte – Interviewer Driven
Growth Strategy

Industry:
Financial Services & Insurance

Concepts Tested:
• Operating Margin
• Competitive Dynamics
• Market Penetration
 Quant Level – MEDIUM

Case #35: Student Health Insurance (1/11) Case Type Industry Client Type

Financial Services &

Growth Strategy Insurance
DELOITTE – Round 2 – Interviewer Led Insurance

Fit Questions Interviewer Guidance

1. When did you make a lasting impact on a team? This case tests a candidate’s ability to engage in structured brainstorming and interpret large
2. If I asked your last boss why I shouldn’t hire you, what volumes of data. Strong candidates will be extremely diligent about structuring their
would they say? responses. The interviewer should note that the sample responses included here are not the
only successful responses.

Fit Evaluation
Overall Fit Performance
S1 O1 A 1
R 1

2 2 2 2

Case Prompt Case Development

Our client is a business unit within a large national health insurance company. The client focuses primarily on the 1. Framework
higher education student health insurance market, selling medical insurance, prescription drug insurance and dental 2. Multiple Discussions/Q&A
insurance to students at large universities. The client is the market leader, both in terms of customers (~500K) and
3. Multiple Recommandations
revenue (~$500M). The overall market for higher education student health insurance is estimated at 2.5M potential
customers and $2.2B in potential revenue.

This market requires a unique, two-staged sales model. The “first sale” is often made to the on-campus student Case Evaluation
health center to gain access to the student population. The “second sale” is to the students, who are the ultimate
Structure and Framework
purchasers of the insurance products. In certain segments of the market, a broker may also act as an intermediary to
the school.
Analytical and Problem Solving Ability

Communication and Positive Attitude

Synthesis and Recommendation

298
Case #35: Student Health Insurance (2/11)
Case Prompt: Continued

The client’s operating margins have declined significantly in the face of aggressive competition and shrinking higher education budgets. Additionally, health
care reform presents a potential risk for future growth and profitability – notably, students age 26 and under can remain on their parents’ health insurance
(versus having to buy student health insurance), and health insurers will be required to spend 80% of all revenue on medical expenses. The client’s current
operating margins are 9%, down from 25% five years ago.

Deloitte Consulting has been engaged to identify profitable avenues of growth for the client as a part of the client’s three-year growth strategy. Additionally,
we have been asked to deliver prioritized recommendations on potential growth strategies.

Case Questions:
The following questions are provided on subsequent pages in the order that they should be revealed to the candidate. Do not share all questions with the
candidate up front, as each question is meant to be a mini-case. A traditional framework will not be needed for this case, but the candidate should remain
structured in their thinking and in their responses throughout the case.

1. Brainstorm: What are the potential avenues of growth for the student health insurance company?
2. Chart Clearing: What are some of the key trends that you see on the data sheet (Data Sheet 1)? Based on these trends, what are the potential
avenues of growth for the student health insurance company?
3. Brainstorm: Our client felt a large part of the addressable market was not being addressed (the small school market). They specifically wanted a
strategy for moving “down market” and going after smaller schools. At a high level, what qualitative and quantitative criteria should the client
consider when assessing this market?
4. Quantitative Analysis: Our primary concern related to the attractiveness of the small school segment was whether healthy operating margins could
be achieved. What type of information would you need to calculate operating margin percentage for this segment? What is the operating margin
percentage for each of the four product / customer scenarios?
5. Recommendations: Given the outcome of your previous operating margin analysis, what recommendations would you develop for the client in
terms of pursuing the small school market?
6. Synthesis: Ultimately, multiple opportunities were identified for the client to grow, including increasing share in the core market, pursuing small
schools and selling new products to schools and to students – how would you evaluate the opportunities and prioritize them?

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Case #35: Student Health Insurance (3/11)
Question 1 Sample Response
What are the potential avenues of growth for the student health insurance
company?
Products/Business Models
Interviewer guidance:
• This question was intentionally developed to assess the candidate’s ability Existing New
to deal with ambiguity and provide a variety of solutions based on their • Identify new segments / channels • Target non-consumers (uninsured),
academic and professional experience. to sell existing products tailoring product scope to address
• Look for the candidate to provide structure in assessing the growth • Pursue small school segment barriers to entry (i.e. emergency
opportunity. (universities) plans for cost-conscious consumers)
• If the interviewee starts listing random opportunities, ask how they would Ne • Pursue secondary schools
structure an approach to devising ideas. w (private / charter schools) to
capture transition to college

Customers/Markets
• A sample response is provided to the right. This framework is one of
several potential avenues a candidate might take towards answering this • Pursue individual students
where schools do not offer
question. The interviewer should evaluate the candidate’s ability to create
insurance
a high level structure and to flesh it out with more granular insights.
• Defend and grow the core • Develop new products for students
business AND schools customers
• Optimize price • Capture student wallet share for
• Enhance marketing and sales adjacent insurance products
force effectiveness to increase (tuition insurance, electronics
Ex penetration insurance, auto insurance,
ist • Apply pricing strategy to steal renters insurance, etc.)
in share in the large school • Consider adjacent health services
g market for current students (mental
• Develop additional areas of health, wellness)
differentiation (functionality, • Consider adjacent services for
reliability, convenience) health centers (billing)
• Develop digital applications to
provide remote health services

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Case #35: Student Health Insurance (4/11)
Question 2 Sample Response
Provide the candidate with Data Sheet 1 (next page). Charts
1: Lower enrollment schools (<10K students) have a significant portion of
Ask the candidate: students (42%) fragmented across thousands of schools.
What are some of the key trends that you see on the data sheet?
2: The client earns the vast majority of its revenue from schools with more
Based on these trends, what are the potential avenues of growth for the than 10K students.
student health insurance company?
1 & 2: There is an opportunity for the client to diversify its current revenue
Interviewer guidance: base by pursuing the small school market, which is comprised of almost 90%
Ask the candidate to synthesize their comments and provide additional of all schools.
recommendations (a strong candidate will draw insights from these trends
without being prompted). 3: The client is not well diversified in terms of number of products driving
revenue.

4: The client has difficulty selling its ancillary products to both students and
schools that purchase the medical product.

3 & 4: There is a significant opportunity to grow revenue by increasing the

penetration of non-core products.

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Case #35: Student Health Insurance (5/11)
Data Sheet 1

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Case #35: Student Health Insurance (6/11)
Question 3 Sample Response
Our client felt a large part of the addressable market was not being
addressed (the small school market).

They specifically wanted a strategy for moving “down market” and going
after smaller schools. At a high level, what qualitative and quantitative Criteria Qualitative Quantitative
criteria should the client consider when assessing this market? Market size • Segment the market to understand • Quantify revenue potential by
potential customer behavior considering # of schools, # of
Interviewer guidance: • Consider key factors in insurance students, insurance requirements,
buying behavior and premium projections by
• Interviewee should recognize this is a market attractiveness question and
segments developed
provide relevant criteria for assessment. Market • Assess maturity of the market • Historic market growth rates
• The market attractiveness criteria and corresponding comments provided growth • Consider market trends and • Model projected number of
to the right are NOT exhaustive. Look for the candidate to touch on many healthcare reform schools currently in the market and
of these areas, and possibly offer other areas for investigation. likelihood to join
• The interviewer should again focus on the candidate’s ability to provide a Competitive • Conduct customer interviews, • Market share analysis
structured, detailed response. intensity focus groups, voice of the • Win/loss rates for sales
customer analysis
• Conduct competitor assessment
Strategic fit • Determine how strategy required • N/A
to win in new segment (cost versus
differentiation) aligns with existing
business strategy
Capability • Understand future state capability • Requisite investments (capital
needs needs from the new market expenditures) to enter the new
• Conduct gap analysis market
Profitability • Interview potential clients to • Model potential margin scenarios
develop understanding of revenue based on various revenue, market
and cost assumptions size and cost structure
assumptions
Likely • Assess customer needs in the • Model sensitivity analysis based on
penetration / market market growth, competitive
market share • Consider client’s current share in intensity, margin and pricing
other segments requirements

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Case #35: Student Health Insurance (7/11)
Question 4: Part 1 Question 4: Part 2
Our primary concern related to the attractiveness of the small school segment Provide candidate with Data Sheet 2.
was whether healthy operating margins could be achieved.
What is the operating margin percentage for each of the four product /
What type of information would you need to calculate operating margin customer scenarios?
percentage for this segment?
Response (see next pages for complete calculations):
Sample Answer: Option Operating Margin %
• Cost structure of the company (fixed versus variable) 1 5.5%
• Product pricing 2 3.0%
• Penetration (number of customers) 3 0.5%
• Total revenue 4 (2.0%)

Interviewer Guidance:
Do not provide candidate with Data Sheet 2 until they provide some ideas in Follow-Up Question:
response to the question. What observations or trends do you notice about the cost structure?

Sample responses
• Fixed costs are more tenable with larger customers.
• Higher priced product cuts variable costs in half.
• Medical expenses / selling expenses are fixed regardless of the school size
or product.

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Case #35: Student Health Insurance (8/11)
Data Sheet 2

305
Case #35: Student Health Insurance (9/11)
Question 4: Sample Response
Using Data Sheet 2, the interviewee should calculate the expected costs under each of the four scenarios and then calculate the operating margin percentage.
They will need to calculate the number of customers in each scenario and apply the fixed and variable costs.

Avg. Annual
Premium Customers
Revenue (Students per Medical Operating
Option Product Sold per School school) Expenses Selling Expenses Setup Costs Admin Costs Total Costs Margin %
Plus 80% 7% 5% 2.5% 94.5%
1 $1,000,000 500 5.5%
($2,000) ($800K) ($70K) ($50K) ($25K) ($945K)
80% 7% 5% 5% 97%
2 Standard ($1,000) $1,000,000 1000 3.0%
($800K) ($70K) ($50K) ($50K) ($970K)
Plus 80% 7% 10% 2.5% 99.5%
3 $500,000 250 0.5%
($2,000) ($400K) ($35K) ($50K) ($12.5K) ($498K)
80% 7% 10% 5% 102%
4 Standard ($1,000) $500,000 500 (2.0%)
($400K) ($35K) ($50K) ($25K) ($510K)

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Case #35: Student Health Insurance (10/11)
Question 5 Sample Response
Given the outcome of your previous operating margin analysis, what
recommendations would you develop for the client in terms of pursuing the
small school market? Prompt Questions
Whether to pursue How to pursue (if required)
Interviewer guidance: OK • Client should not • N/A • Under what
• Interviewee likely will not give a simple yes or no answer, but they should Answer pursue the conditions
identify scenarios under which it would make sense to pursue the market. segment because should the
it is not profitable client pursue
• Use the prompt questions to the right as necessary to draw out a stronger
enough the small school
candidate response. market?
• Interviewee should recognize that under the provided cost structure, none Good • Client should • Reduce SG&A or selling costs • Is there
of the scenarios lead to an operating margin that was in line with the Answer pursue the through standard cost reduction anything they
current, overall operating margin (provided in the background section); market if they can methods (business process could do to
better answers will center on finding ways to make the market viable (by apply different redesign, contract renegotiation, make the
applying levers to improve profitability or inventing a new business model). levers to make it etc.) unprofitable
more profitable • The interviewee may suggest price small market
increases or reducing medical costs, segment more
but it’s important to note that attractive?
neither is possible under current
health care reform
Strong • Client should • Create an online B2C model that • What kind of
Answer pursue the sells directly to students and business
market with a bypasses the two intermediaries model would
different business (brokers and schools) – similar to be appropriate
model other industries that have for this
transitioned into direct, online market?
distribution (e.g. books, airplane
tickets, etc.)
• Other ideas

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Case #35: Student Health Insurance (11/11)
Question 6 Sample Response
Ultimately, multiple opportunities were identified for the client to grow,
including increasing share in the core market, pursuing small schools and Strategic Impact • Competitive differentiation
selling new products to schools and to students. and Fit • White space / new market opportunity
• Is there disruptive potential?
How would you evaluate the opportunities and prioritize them? • Address unmet marketplace needs
• Alignment with current business unit and corporate
Interviewer Guidance: strategy
Interviewee should establish a framework for screening or prioritizing Financial Impact • Revenue potential (what is the market size?)
multiple opportunities. A sample framework and criteria are provided to the • What is the expected margin?
right to end the case. • Administrative cost reduction
• Future cost avoidance
Note that a traditional recommendation followed by risks and next steps is
not necessary in this case. Rather, a framework that structures and Necessary Costs • Investment (capital) costs
synthesizes priority areas from the case discussion is best. • Ongoing operating costs

Ease of • Alignment with existing capabilities

Implementation • Complexity of the change
• Availability of partners or acquisition targets

308
 Overall Quant Creativity
3 3 2

Case #36: Super Jr. Baby Formula

Case Type: Bain & Company – Candidate Driven
Investment Decision

Industry:
Consumer Products

Concepts Tested:
• Chart clearing
 Quant Level – MEDIUM

Case #36: Super Jr. Baby Formula (1/10) Case Type Industry Client Type

Investment Decision Consumer Products Private Equity

BAIN & COMPANY– Candidate Led

Fit Questions Interviewer Guidance

1. Tell me about a time you managed a work conflict. This case tests a candidate’s ability to clear charts effectively and to synthesize a large volume
2. What is the best feedback you’ve received? Why? of information to make a recommendation. A strong candidate will develop a framework that
goes beyond discussion of market conditions and profitability, and they will apply their
framework to drive the case forward.

Fit Evaluation
Overall Fit Performance
S1 O1 A 1
R 1

2 2 2 2

Case Prompt Case Development

Your client is a private equity firm looking at the baby formula market in China. In particular, they are looking at a 1. Framework
company called Super Jr., which is a Chinese startup founded in 2006. Super Jr. brands itself as a foreign company,
advertising their products as being made and imported from Australia. 2. Discussion/Q&A
The PE firm would like your help in determining whether they should invest in Super Jr. 3. Chart Clearing/Quantitative
Analysis
4. Final Recommendation
Case Evaluation
Structure and Framework

Analytical and Problem Solving Ability

Communication and Positive Attitude

Synthesis and Recommendation

310
Case #36: Super Jr. Baby Formula (2/10)
Additional Information Exhibit 1
Provide the following information in the discussion with candidate. Present the candidate with Exhibit 1 after they have walked through their
framework and have suggested a direction for further analysis (sample
Business Model framework on next page).
•Super Jr. currently has no manufacturing capabilities and sources their
product, “Super Jr. Formula,” from an Australian manufacturer. Sample takeaways from Exhibit 1:
•Super Jr . primarily distributes to regional and local supermarkets. The • The baby formula market overall has seen steady annual growth, at 20%
CAGR (tripling the market size in 6 years).
supermarkets currently charge them a fee for stocking their product (for
• This growth rate is strong considering that annual GDP growth in
shelf-space usage).
fast-growing countries like China is around 9% (although the
candidate may not know this, they should feel comfortable
Brand
commenting that 20% CAGR is encouraging).
•Super Jr . has spent a lot on marketing and has gained reputation in
• If this growth rate continues, the market will more than double in size
the Chinese market as a “decent” brand.
in a rather short time horizon (~4 years).
• Super Jr. is projected to grow from approximately $5M to $60M in the span
Management
of 6 years, which is very significant growth.
•The management team at Super Jr . is composed of people who have
• Super Jr.’s growth outlook is very optimistic compared to overall
previously worked in the food sales and distribution industry.
historical market growth rates.
• This means Super Jr. will have to outgrow the market by stealing
Growth Strategy
share from competitors.
•The current growth strategy is to continue expanding distribution to
large-format, national retail chains (such as, Walmart), while investing
further in marketing to penetrate the premium segment, allowing them to
price at a premium

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Case #36: Super Jr. Baby Formula (3/10)
Framework

Baby Formula Market Considerations Super Jr. Company Considerations Fit for PE Client
•Market size / growth rate • Company strategy • Ability to hit profitability / ROI targets
•Competitive landscape – Product / customer segments • Synergies with existing PE portfolio
– Market share / momentum – Growth targets • PE staff capacity to provide management
– Competitor value propositions / – Organic and inorganic (M&A) support vs. need for management support
business models growth plans
• Opportunity cost from other investment
•Customer segment growth • Profitability options
– By region / demographic – Pricing strategy / profit margins
– Willingness to pay – Cost structure
– Elasticity/brand loyalty – Exposure to cost risks (raw
– Trends in product preferences materials, foreign exchange
(organic, imported vs. local, etc.) fluctuations)
•Product types • Brand image
– Commodity vs. specialty • Supplier sources
– Profit margin differences
• Channels
– Raw material availability / pricing
• Management experience
•Channels
– Infrastructure to support growth • R&D

To determine whether Super Jr. is a good investment for our client, we need to determine that:
1. The baby formula market is attractive.
2. Super Jr.’s position in that market is promising.
3. Super Jr. would be a good fit within our client’s portfolio.

Transition statement: My first step is to assess the growth of the baby formula market. Is there any data on the historical
performance of this market?

312
Case #36: Super Jr. Baby Formula (4/10)
Exhibit 1

313
Case #36: Super Jr. Baby Formula (5/10)
Math Question 1 Math Question 2
Assuming the same CAGR from 2000 to 2006, what would be the overall Estimate the CAGR Super Jr. expects to achieve between 2006 and 2012.
market size in 2012? Is the projection realistic?

Sample Response: Sample Response:

From the graph, we can see that CAGR of 20% implies a tripling of the market Estimate CAGR using the rule of 72:
size in 6 years. Another 6 years at this growth rate would lead to a further $60M/2 = $30M $15M/2 = $7.5M
tripling of the market size, from $9B to $27B. $30M/2 = $15M $7.5M/2 ~= $3.75M (close to $5M)
--> Size doubles almost 4 times in 6 years, or about every 1.5 years
Alternative Response: Rule of 72: 72/1.5 = 48%
Final Market Size = Initial Market Size * (1 + CAGR)^(# Years)
= $9B * ( 1+ 0.2)^6 Alternative Response:
= $27B CAGR = (End Value/Beginning Value)^(1/# years) – 1
= (60/5)^(1/6) - 1
Sample estimation process for (1.2)^6: = (12^(1/6)) – 1
= (6/5 * 6/5)^3 = (36/25)^3 ~= (35/25)^3 ~= 1.5 – 1 = 0.5 = 50%
= (7/5)*(7/5)*(7/5) = (49/25)*(7/5) ~= 2*7/5 = 14/5 Note: The actual CAGR calculation results in a CAGR of 51%.
= 2.8 --> round up to 3 because of net rounding down during simplifications
Sample estimation process for (12)^(1/6):
from prior problem we know 1.2^6 = 3, therefore 3^(1/6) = 1.2
(12)^(1/6) = (3*4)^(1/6) = 3^(1/6) * 4^(1/6)
= 1.2 * 4^(1/(2*3)) = 1.2 * 2^(1/3)
~= 1.2 * 1.25 = 6/5 * 5/4 = (30/20) = 1.5

Given the market CAGR is 20% and the projected CAGR for Super Jr. is ~50%, 2.5x that of the
market, this projection will be difficult to achieve since Super Jr. needs to accomplish this by
stealing market share from competitors.

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Case #36: Super Jr. Baby Formula (6/10)
Candidate-Led Next Steps Exhibit 2
Upon completing the quantitative analysis and discussing the results, the Sample Takeaways:
candidate should ask for more information, such as: As a ‘local specialty’ brand, Super Jr. competes in the medium and low
markets.
• What are the core competencies of Super Jr. and how do they compare
to competitors (sales, distribution, production)? • The medium and low markets are highly fragmented, whereas the premium
brand is much more concentrated.
• What particular segment does Super Jr. play in and is it easy to • Overall market momentum is being driven by growth in the premium
penetrate and/or gain share in that segment? market.

• What do customers demand? Does Super Jr. do anything that

meets/exceeds customer expectations?

The candidate should, in general, ask for information about customer or

product segments or the competitive landscape. When they do, show the
candidate Exhibit 2.

315
Case #36: Super Jr. Baby Formula (7/10)
Exhibit 2

* Super Jr. is considered a ‘local specialty’ company

316
Case #36: Super Jr. Baby Formula (8/10)
Candidate-Led Next Step Exhibit 3
At this point the candidate should be synthesizing the information to argue Provide the candidate with Exhibit 3 once the candidate has presented some
that Super Jr. is either a good or bad investment for the client. arguments either for or against investment in Super Jr.

Sample Takeaways from Exhibit 3:

Sample Arguments in Favor of Investment:
• Super Jr. spends most of its resources on marketing and none on R&D.
• Super Jr. has an established brand, so it is possible their planned move into
the premium market will be successful, yielding higher growth.
• Super Jr. has very high raw material costs and zero manufacturing costs
(which is to be expected since they source final goods).
• Significant fragmentation among Specialty Market players suggests an
opportunity for Super Jr. to gain market share by acquisition and/or
• Prices for local established brands (which compete with Super Jr.) are much
aggressive marketing. lower, primarily due to lower marketing costs.
• Input costs (raw materials + manufacturing) are fairly commensurate across
Sample Arguments Against Investment: segments.
• The growth rate of the markets Super Jr. competes in are much lower than
their company growth projections. Following the discussion, the interviewer should ask the candidate to
synthesize the results of the case into a final recommendation. This case is
• There are very few players in the premium market and, as such, there may very open ended and good arguments can be made either way. As long as the
be unforeseen difficulties for Super Jr. as it attempts to enter this segment.
candidate sticks with and supports their recommendation with logical
evidence from the case discussion, the recommendation should be accepted
by the interviewer (sample recommendations on the following pages).

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Case #36: Super Jr. Baby Formula (9/10)
Exhibit 3

318
Case #36: Super Jr. Baby Formula (10/10)
Rec: For Investment Rec: Against Investment
Recommendation Recommendation
• Invest in Super Jr.: • Don’t invest in Super Jr.:
– With a continued emphasis on marketing, Super Jr. can build a – Super Jr. doesn’t have any core competency (beyond marketing) to
reputation in the premium market while gaining market share in the low develop new products and compete in the premium market given that
and medium markets. they do not have any R&D capabilities.
– The Super Jr. business model means they have low fixed capital costs and – Their growth projections are likely premised at least in part on entering
can be flexible and responsive to the market in their choice of products the premium market, which is highly concentrated and for which their
to source. brand isn’t well-suited yet.
– The management team’s experience in food distribution may be a – Their business model carries a lot of risk (no R&D in-house, high ‘raw
significant competitive advantage as Super Jr. seeks to grow quickly. material’ costs, single point of failure with their Australian distributor,
– As the brand gets more established, marketing expenditures could be exposure to foreign exchange fluctuations).
reduced, thus increasing profit margins.
Risks
Risks • Super Jr.’s business model proves to be the best setup to grow quickly in
• Breaking into the premium market proves harder than expected this high-growth market
• Break-down of relationship with Australian distributor • Super Jr. establishes its brand quickly and firmly, decreasing the returns
on any investment in its competitors
Next Steps
• Conduct market study of premium market Next Steps
• Analyze contract terms with distributor • Analyze Super Jr.’s specific plans to hit its growth targets for fit with its
business model
• Evaluate Super Jr.’s competitors for potential alternative investment
opportunities and / or to determine Super Jr.’s competitive advantage

319
 Overall Quant Creativity
3 3 3

Case #37: Apache Helicopter

Case Type: Undisclosed – Candidate Driven
Investment Decision

Industry:
Industrial Goods

Concepts Tested:
• Brainstorming
• Chart clearing
• Math structuring
 Quant Level – HEAVY

Case #37: Apache Helicopter (1/7) Case Type Industry Client Type

Investment Decision Industrial Goods Manufacturer

UNDISCLOSED – Round 1 – Candidate Led

Fit Questions Interviewer Guidance

1. Tell me about one of your strengths and one of your This case tests a candidate’s ability to think logically through a cost-benefit analysis between
weaknesses and how these are displayed in a team three options while determining whether assumptions are reasonable. There is no clear right
setting. answer in this case. This is a good case for practicing quantitative reasoning and structured
2. Tell me about a time you had to convince someone of math.
something using data.

Fit Evaluation
Overall Fit Performance
S1 O1 A 1
R 1

2 2 2 2

Case Prompt Case Development

Our client is a US defense contractor. One of its divisions manufactures Apache helicopters for military operations. 1. Framework
The company is considering setting up a new plant to meet increasing demand in the attack helicopter space. The 2. Market sizing
client is considering three sites for the new plant – Brazil, France, and the US. 3. Cost-benefit analysis
They have hired us to help them answer the following two questions: 4. Final recommendation
1) How would you determine the parameters for the decision?
2) Where should they set up the plant? Case Evaluation
Structure and Framework

Analytical and Problem Solving Ability

Communication and Positive Attitude

Synthesis and Recommendation

321
Case #37: Apache Helicopter (2/7)
Additional Information Framework
A good candidate will ask questions in a logical format and specify the A good candidate answers the prompt in the way they set up their
categories they are considering. framework.

If asked, provide the candidate with the following information: Demand Characteristics (understand how much):
• The client has 3 plants in the US; 2 in Kansas and 1 in Michigan. • Size of increased demand spike
• Company Information: – Based on location
– The plants operate at full capacity today. • Market details
– Size
– One of the US plants can accommodate an additional assembly line at – Current margin
the cost of $500M; the other 2 are constrained in residential areas and
cannot be expanded. Facility Capabilities by Region (understand can we do it):
• Qualified labor
– This is the only defense contractor that sells Apache helicopters.
• Political stability
– They will only be selling to Brazil, France, or the US.
• International supply chain management
– This is the first time that they sell to Brazil or France. • QA of raw materials
Profitability by plant location (select which one is best):
• NPV, Breakeven
• Revenue
– Quantity based on plant location
– Price per helicopter
• Cost
– Investment
– FC, VC of production

Transition statement: To best determine where to open a plant, I would like

to first look at the demand by region. Once identified, we can further test
where to establish the plant based on profitability and capabilities by region.

322
Case #37: Apache Helicopter (3/7)
Market Sizing / Demand Brainstorm #1
If the candidate does not begin by considering market demand, guide them If the candidate asks about competition, remind them there are currently no
toward this by calculating the increase in demand from the additional plant. other producers of Apache Helicopters. Then, guide them to think about
This is based off of the defense budget for each of the three nations that the costs.
contractor would sell to.
What are the major costs that are associated with the development of the
Provide the candidate the following information as they ask for it: plant and production of helicopters?
• Defense budget for the next five years: $100B (US), $15B (BR), $10B (FR)
• Countries will dedicate a certain percentage of their defense budget to be There are many ways you can approach this brainstorm. The best way is to
spent on Apache helicopters based on the location of the plant. Provide think of the value chain.
Exhibit 1.
• Candidate should conclude their calculations by identifying key takeaways Plant (Opx) Plant Operations
from the data. For example, the highest demand / government spend ($) Development
will occur from a plant in Brazil. (CAPX) Sourcing Production Distribution
• Property • Materials • Assembly • Storage (5
Calculation to be performed by candidate: • Legal • Shipping • Labor (union) years)
United States Brazil France
• Construction based on • Training • Shipping
• Qualified location of • QA/QC • QA on
20% * $100B = labor suppliers delivery
Plant in the US $0 $0
$20B • Sourcing QA • Taxes
material
20% * $100B = 50% * $15B =
Plant in Brazil $0
$20B $7.5B
Note: Candidates can insert more buckets as they see fit.
20% * $100B =
Plant in France $0 50% * $10B = $5B
$20B

323
Case #37: Apache Helicopter (4/7)
Exhibit 1

Defense Budget Over Next 5 Years

Purchases by Brazil Dept. of Purchases by France Dept. of

Purchases by US Dept. of Defense
Defense Defense

Plant in the US 20% of budget 0% 0%

Plant in Brazil 20% of budget 50% of budget 0%

Plant in France 20% of budget 0% 50% of budget

324
Case #37: Apache Helicopter (5/7)
Cost-Benefit Information Sample Approach: Helicopters
The candidate can be provided with the information below when asking The candidate should recognize they need the price per chopper. If they
about costs. haven’t identified this, steer them in that direction during the math.
– The helicopters sell for $100M a piece.
Initial plant set-up costs: Candidates should then recognize they need to calculate the number of
– US: $500M helicopters produced at each plant.
– Brazil: $2B
– France: $3B
Fixed costs per year: United States Brazil France
– US: $100M $20B/$100M = 200
Plant in the US 0 0
– Brazil: $100M heli
– France: $100M $20B/$100M = 200 $7.5B/$100M = 75
Plant in Brazil 0
Variable cost of production: heli heli
– US: $15M $20B/$100M = 200 $5B/$100M = 50
Plant in France 0
– Brazil: $20M heli heli
– France: $25M
Additional cost:
– If helicopters are shipped into the US, then the US Govt. requires them
to be certified; the certification process is $15M per chopper.

325
Case #37: Apache Helicopter (6/7)
Sample Approach: Costs Sample Approach: Profit
Candidates should layout the costs per plant location remembering the $15M A great candidate will pause and explain why the costs are so different
for importing to the US: between the various locations. They may give some hypotheses around why
certain differences, such as production costs, may be even more of an issue
Note: A strong candidate will recognize that the revenue from France is lower with exchange rate volatility, etc.
than Brazil and that the initial setup costs as well as variable costs in France
are higher than Brazil. Therefore, they should rule France out and not need to At this point a candidate should be fully pushing to calculate the total profit
perform the calculation. expected per location.
Plant location United States Brazil France Plant location United States Brazil France

Total Revenue
Initial setup $500M $2B $3B $20B $20+$7.5B = $27.5B $20B+$5B = $25B
(over 5 years)
Total Cost (over 5
Annual Fixed Cost $100M*5 = $500M $100M*5 = $500M $100M*5 = $500M $4B $11B $12.75B
years)
$20M*(200+75) = $25M*(200+50) = $ Profit (Over 5
Variable Cost $15M*200 = $3B $16B $16.5B $12.25B
$5.5B 6.25B years)

Import Cost $0 $15M * 200 = $3B $15M * 200 = $3B At this point, a good candidate should recommend which plant the contractor
should select.
Total Costs (Over 5
$4B $11B $12.75B
years) A great candidate will directly jump into a brainstorm of the risks between
selecting one plant over the other.

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Case #37: Apache Helicopter (7/7)
Brainstorm #2 Recommendation
Given that there is only a 3% difference in profit, what are some factors that Once the cost-benefit analysis is complete, ask for a recommendation:
would cause you to choose either the US or Brazil? “The CEO is about to walk into the room and has asked us for a
Candidates should pick up that this is a risk brainstorm. The best way to do recommendation. What would you tell them?”
this would be to list risk factors down the left hand side of a table and • Note: This is meant to go either way based on candidate’s last brainstorm;
compare the two options: sample is for US.

A potential response could include:

Risk Plant in US Plant in Brazil Advantage
• You should open a new plant in the US
Political Negative view of US Instability, issues with • It is slightly less profitable than opening in Brazil, however, your existing
US
defense contractors president, Reselling operations and stability in the US offset the potential risk of opening up in
Currency Another recession Cheaper to pay labor Brazil
Volatility in currency/5 US Risks
years
• Change in administration causing decreased demand
Labor Unionized labor, skilled Cheaper labor, unskilled Brazil • Missing out on opportunity to enter Brazil
Next Steps
Cost of quality Expensive to receive initial Expensive to have proper
US • We should look into locking in a contract with the existing administration
material material QA/QC
to ensure purchase
Assumptions New administration in 5 More likely to pull back • We should see if Brazil would purchase at a price lower that $100M.
(demand, etc.) years from purchase
New opp. in Brazil
US Additionally, we should do an analysis to see if we can enter in a
(commercial heli) commercial helicopter capacity.
Evaluation
• This case tests a candidate’s ability to weigh different options and understand the potential demand for the client’s product. Creativity and the ability to
drive the case in the right direction should be rewarded.
• It is important that the candidate refer back to the original case questions and allow their framework to drive the analyses.
• A good candidate will anticipate the risks and do a cost-benefit exercise. By doing so, they should select one option and make a clear and succinct
recommendation based on what they find.

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 Overall Quant Creativity
2 2 1

Case #38: White Boards

Case Type: Bain & Company – Candidate Driven
Sourcing Outsourcing

Industry:
Durable Goods

Concepts Tested:
• Chart clearing
• Cost / benefit analysis
 Quant Level – MEDIUM

Case #38: White Boards (1/5) Case Type Industry Client Type

Sourcing /
Durable Goods Manufacturer
BAIN & COMPANY – Round 1 – Candidate Driven Outsourcing

Fit Questions Interviewer Guidance

1. Tell me about a time when you utilized effective This is a cost / benefit analysis case. Candidate should try to compare the advantages and
communication to resolve an issue. disadvantages of in-house trucking services with that of outsourced trucking services. If asked,
2. What will be the major challenge you face as a it does not matter whether the company’s retail outlets are their own or franchises, and the
consultant and how will you mitigate it? logistics of how the trucking industry works is not important.

Fit Evaluation
Overall Fit Performance
S1 O1 A 1
R 1

2 2 2 2

Case Prompt Case Development

Our client is a manufacturer of white boards. The client ships the boards from its factories to its distribution center 1. Framework
and then from the distribution center to all of its retail locations. To meet their shipping needs, the client presently 2. Discussion / Q&A
uses in-house trucking services. 3. Cost-benefit analysis and
additional brainstorming
They have approached Bain & Company asking for advice as to whether they should look to outsource their trucking 4. Recommendation
services instead.
Case Evaluation
Structure and Framework

Analytical and Problem Solving Ability

Communication and Positive Attitude

Synthesis and Recommendation

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Case #38: White Boards (2/5)
Framework Interviewer Guidance
• In-house vs. outsourced scenarios: profitability and non-monetary • Push the candidate to think about costs (there should be no assumed
considerations. difference in revenue). A major cost of transport in this case is the
damage to goods during transit.
– Once the candidate gets that this is a major cost, ask why this would
need to be included in the comparison. After all, if transportation
damages occur in both cases, it does not need to be included for
comparison.
– The candidate should realize that, when outsourced, the external
contractors will not be as careful while loading and unloading thus
changing the percentage of the whiteboards that get damaged.

• Once the candidate has started thinking about costs, share Exhibit 1 on
the next page with current costs, and provide the following information
out-loud:
• The transit damage is 15% of the load when in-house trucking
• Risks of Outsourcing services are used.
– Availability of vendors (geography, volume, etc.) • For outsourcing trucking, the transit damage is 25% of the load.
– Quality control, loss of internal distribution practices • Chart details:
– Costs of product damage – This shows total costs, not per pound costs.
– If the candidate does not recognize that the daily volume
Working hypothesis: The company should outsource their trucking. I would considered should be 100lbs. (50lbs. to the distribution center and
like to test this by comparing the costs associated with in-house vs. 50lbs. to retailer), the interviewer should clarify this.
outsourced trucking. Do we have any data on this? – The candidate should initiate using the information you’ve given
them to calculate the cost difference between in-house trucking
and outsourcing (see p. 4 for calculation examples).

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Case #38: White Boards (3/5)
Exhibit #1
The company ships 50 lbs. of white boards daily to the distribution center, and the distribution center ships the same amount to the retail stores every day. If
outsourced, the vendor charges $8.50/lb., irrespective of distance.

Current Total Costs Per

Day

$40 $350

$30 $260 $240

$10

Maintenance Fuel Costs Salaries of

costs of trucks employees

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Case #38: White Boards (4/5)
Calculations Interviewer Guidance
In-house Costs (Current Scenario): The candidate should use Exhibit 1 to perform a cost-benefit analysis by
calculating the transportation cost per lb. of saleable white board per day under
– Costs per day both sourcing alternatives.
• Maintenance ($260) + Fuel ($350) + Salaries ($240) = $850/day
– Loss in damages Cost Comparison:
In-house: $10.00
• 50 lbs. transported daily, round trip = 100 lbs. Outsource: $11.33
• 15% damage: -15 lbs. ($1.33) savings/lb./day (Costs more to outsource than transport in-house.)
• Number of saleable white boards: 85
– Transportation cost per lb. of saleable white board = 850/85 • If candidate calculates daily savings quickly, push them to calculate what this
would be for total volume per day, year, etc.
= $10/lb./day
– $1.33 savings x 100 lb./day = $133 savings/day
– $133 savings/day x 365 days per year = ~$140 x ~350 days
Outsourced Costs:
= (100 x 350) + (40 x 350) = ($35,000) + ($14,000) = $49,000
– Costs per day
(exact answer is $48,545)
• $8.50/lb. x 100 lbs. = $850/day
– Loss in damages Brainstorm:
• 50 lbs. transported daily, round trip = 100 lbs. Are there any non-monetary benefits to outsourcing our client should consider?
• 25% damage: -25 lbs.
• Candidate potential responses may include:
• Number of saleable white boards: 75
– Expanded geographic reach / ability to enter new markets.
– Transportation cost per lb. of saleable white board = 850/75
– Potential increase in daily volume capacity (if internal manufacturing can
= $11.33/lb./day support it).
– Better company focus on manufacturing vs. distribution may lead to higher
manufacturing efficiency.

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Case #38: White Boards (5/5)
Recommendations Brainstorm: Optional
The company should keep trucking services in-house because: After performing the calculation, ask the candidate for recommendations and solutions to
help reduce loss of saleable boards due to damage incurred during transit.
– It costs an additional $1.33/lb./day to outsource (~$49K annually)
• If asked, the boards come in 3 sizes – small, medium, and large. The small boards are
– Outside of delivery costs, in-house delivery leads to fewer damages and rarely damaged during transit while rate of damage is highest for large boards, which
more boards to profit from overall. are bulky.
– Company can invest in R&D on damage reduction and provide Potential responses:
additional incentives / training to employees to reduce in-house • Internal
– Invest in R&D for damage reduction practices (examples: better packaging, better
damages during transit (additional brainstorm information can be used loading practices, making white boards more modular so they can be transported in
here) smaller parts that are less likely to be damaged).
– Incentivize employees to reduce damages.
– Provide additional training to delivery employees.

• External
– Review contract terms with outsourcing provider to reduce our client’s liability /
costs for damages.
– Conduct secondary research to select outsourcing delivery service based on damage
reputation / history / guarantees.

Risks and Next Steps

Risks
– Cost of internal changes to reduce damages may outweigh benefit of reduced transit
damage
– Long-term dual focus on manufacturing and shipping may reduce growth / efficiency

Next Steps
– The company can analyze costs associated with reducing damages during internal
transit by the following methods and select the best option(s) to pursue:
• Making white boards modular and transport them in smaller parts to be
reassembled
• Using better packaging and cushioning to reduce damage during transportation
• Negotiating with outsourcing firm for them to bear losses during transit
– Create long-term plan for growth and determine necessary implementation targets to
achieve goals while maintaining efficiency

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 Overall Quant Creativity
2 2 1

Case #39: Telco Talks

Case Type: Accenture – Candidate Driven
Merger & Acquisition

Industry:
Telecommunications

Concepts Tested:
• Synergies
• Attrition
 Quant Level - MEDIUM

Case #39: Telco Talks (1/5) Case Type Industry Client Type

Mergers &
Telecommunications Telecom Company
ACCENTURE – Round 1 – Candidate Driven Acquisitions

Fit Questions Interviewer Guidance

1. What do you want me to know about you? This case focuses on a candidates ability to determine the marginal increase in profitability
2. Describe your dream project at X Firm. based on purchasing assets of another company. Additionally, it poses the question of whether
or not entering on a national level is worthwhile, or if they should continue to stay in their
market where they have been very profitable.

Fit Evaluation
Overall Fit Performance
S1 O1 A 1
R 1

2 2 2 2

Case Prompt Case Development

Our client is a large telecom company that operates in the Midwestern region. They focus on providing 3 primary 1. Data sheet discussion
services: phone, TV, and internet. They have already taken several cost cutting initiatives, and now are currently
exploring new growth opportunities. They’ve been approached by another telecom company (WIT Co) to purchase 2. Questions 1-4
WIT Co’s assets and customer base, which would transform our client from a regional player to a national player. 3. Brainstorming
Our client therefore has asked us whether or not they should proceed with purchasing WIT Co’s assets. 4. Recommendation
Case Evaluation
Structure and Framework

Analytical and Problem Solving Ability

Communication and Positive Attitude

Synthesis and Recommendation

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Case #39: Telco Talks (2/5)
Framework Additional Information
Working hypothesis: I believe that the client should purchase WIT Co’s assets The candidate should write out a complete framework. If asked, the
given the following considerations. following information can be provided before the candidate structures
their thoughts.
WIT Co is healthy
• Profitability Company
– Revenue and Costs
• Size, growth • Goal is to grow while maintaining margins on customer basis.
– Access to more national customer base • Background: assets are concentrated in 3 states − CA, NY, FL.
• Market position
• New capabilities
Customers
– Better tech, faster speeds, reliability (phone, TV, and internet) – Are both residential and business.

Purchase is financially positive

• Cost of acquisition After candidate completes the discussion of their framework, the
• Cost-benefit analysis for client candidate should drive toward inquiring about the financial position of
– ROI / BE / NPV the client and acquisition target. If not, make sure to provide to the
information below to the candidate before moving on to Question 1.
Combination is better than alone
• Cost synergies
– Scale Current Client
– Combined customer services/marketing
– Revenue of $8.5B
Risks – Costs of $7.5B
• Government antitrust suits
• Cultural fit – 5M customers
• Geographical expansion: additional infrastructure needs WIT Co (acquisition target)
– Revenue of $5B
– Costs of $4.55B
– 3.6M customers

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Case #39: Telco Talks (3/5)
Question 1 Question 1: Continued
What is the profit and who is the customer for the current and combined The candidate should recognize that the result of purchasing the assets
companies? Compare the two and determine whether or not to buy the would yield a lower profitability per customer than without the assets. A
assets. great candidate would jump into a brainstorm of how to lower costs after
purchasing. However, steer candidate with the following prompt:

If the candidate struggles, guide them to calculate the profitability on a per Let’s say that if Telco purchases WIT Co’s assets, they believe that they can
customer base. Although not tested in this case, telecom cares highly about save $500M in costs due to a leaner labor force and to utilizing certain
churn. contracts that they currently have. Would the acquisition still be worthwhile?

The candidate should recalculate but only using the combination

Combined with Synergies

Revenue $13.5B
Costs $12.05B -$0.5B = $11.55B
Profit $1.95B

Customers 8.6M
Profit/Cust $226.74/cust

The candidate should recognize that the new profit is higher than the
previous combined calculation and that the acquisition is worthwhile.

337
Case #39: Telco Talks (4/5)
Question 2 Brainstorm
The candidate should drive to the acquisition price of the assets. If they do What are some benefits and risks that you would want to consider when
not, give them the following prompt: giving a final recommendation?
The following is just a sample framework of this brainstorm. There are many
What is the maximum amount that they should pay for WIT Co’s assets? categories they can consider and several ideas from the candidate’s original
case framework can be used here to support their response.
– The candidate should recognize that they need to use a perpetuity
calculation to determine the benefit of the acquisition for the client. In addition, the candidate should explain why each bullet is important when
Therefore, the maximum the client should pay is the perpetuity of the discussing their brainstorm framework.
additional profits from WIT Co and the synergies they receive.

Calculation
Total additional profit from acquisition is:
$450M (WIT Co) + $500M (synergies) = $950M/year

Guidance
▪ Assume profitability is constant in perpetuity
▪ Assume a 12% discount rate
▪ Assume 2% growth into the future (mature market)
▪ Candidate should realize discount = 10% (12-2)

Perpetuity = $950M / 0.1 = $9.5B

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Case #39: Telco Talks (5/5)
Risks and Next Steps
Once the risk benefit brainstorm is complete, ask for a recommendation: Risks
“The CEO is about to walk into the room and has asked us for a • We will not maintain the existing customer base which gives us the
recommendation. What would you tell them?” additional profit
– Attrition could result from differences in service availability / quality
A potential response could be: • Market will not maintain its current pace as we considered a specific
• The client should acquire WIT Co’s assts for up to $9.5B growth and discount rate
• We can capture $950M in additional profit a year • Synergies don’t decrease costs as expected
• This is due to an increase in profits of approximately $26/customer Next Steps
• We should do a customer survey to see what customer retention would be
like
– Develop post-merger integration plan
• Perform a market analysis to ensure that we can expect a growth rate of
2% and a discount rate of 12% (overall discount rate of 10%)
• Perform detailed due diligence to confirm estimates / secure synergy cost
reduction
Evaluation

• This case tests a candidate’s ability to determine the benefits and risks of
an acquisition, including a determination of whether an entry into a larger
market would actually be beneficial for the company.
• A good candidate will anticipate the risks of the assumptions made.
Specifically, the candidate will consider the risks associated with the
assumption of a consistent customer base, which yields the additional
profit anticipated, as well as the assumption around the discount rate,
which, when altered, drastically changes the price the client is willing to
pay for the acquisition.

339
 Overall Quant Creativity
1 1 1

Case #40: Yachmout Yachts

Case Type: Cornerstone Research – Candidate Driven
Legal Analysis

Industry:
Luxury Retail

Concepts Tested:
• Economic Damages
 Quant Level - LIGHT

Case #40: Yarmouth Yachts (1/7) Case Type Industry Client Type

Luxury Yacht
Legal Analysis Luxury Retail
CORNERSTONE – Round 1 or 2 – Candidate Led Manufacturer

Fit Questions Interviewer Guidance

1. What are your long-term goals? This case is provided by Cornerstone Research, an economic and financial consulting firm
2. Tell me about a time you made a significant impact on providing analysis /expert testimony in commercial litigation and regulatory proceedings. Thus,
a team. the case has a legal component which may not be seen in other types of case interviews. Also, a
traditional framework is not necessary for this case as it develops through a series of questions
and answers.

Fit Evaluation
Overall Fit Performance
S1 O1 A 1
R 1

2 2 2 2

Case Prompt Case Development

Yarmouth Yachts is a publicly-traded luxury boat builder ($2M avg. selling price). The company experienced rapid earnings growth and share 1. Case Prompt
price appreciation during 2005 and 2006. See Exhibit 1 for an overview of Yarmouth’s sales process. (Provide Exhibit 1 after prompt.)
2. Evaluating Stock Price Drop
Over the course of 2006, management revised its FY06 earnings guidance upwards and maintained guidance of 20% earnings growth for 3. Evaluating Net Income
FY07. On December 12, 2007, Yarmouth released record FY06 results that surpassed earlier guidance (89% net income growth) and revised 4. Calculating Damages
its FY07 projection to 2 – 11% growth. Its stock closed at -22% for the day. (Provide Exhibit 2 after prompt.)
5. Conclusion
Following the stock drop, a class action suit was filed alleging that executives inflated Yarmouth’s stock price during the time period from
January 9, 2006 to December 12, 2007 (1/9/06 –1/12/07) by withholding information about a decline in showroom visits. This was the only Case Evaluation
allegedly concealed information. The plaintiff’s allegations were the following:
Structure and Framework
1. Misleading investors about growth prospects. Company revised FY07 estimates down from 20%.
2. Withholding crucial information. Plaintiffs allege executives had material inside information about a decline in customer showroom
visits that would cause a decline in FY07 income. Yarmouth discloses the value of new contracts on a quarterly basis, but not showroom Analytical and Problem Solving Ability
visits.
Cornerstone has been retained by Yarmouth’s counsel to develop economic responses to the allegations. What types of questions would we Communication and Positive Attitude
want to ask to assess the reasonableness of the plaintiff’s claims?
• (If the candidate asks for specific financial information, you should state that this is not necessary to complete the case. Details about
Yarmouth’s strategy and operations are also outside the scope of the case.) Synthesis and Recommendation

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Case #40: Yarmouth Yachts (2/7)
Exhibit 1 Exhibit 2

342
Case #40: Yarmouth Yachts (3/7)
Sample Response
• The following includes some of the areas the candidate may want to investigate. If the candidate does not bring up this areas on their own, ask the
questions to the candidate. When the candidate provides a response, ask for specific examples / factors.

• 1) Did the disclosure cause the stock price to drop? Are there alternative explanations?
• Examples: Market, industry, or other firm-specific factors

• 2) If not fraud, what other reasons could justify the 2007 guidance revision?
• Examples: Economic slow-down, change in consumer preferences for boats, increased competition, etc.

• 3) Was the information known to insiders [i.e. the decline in customer showroom visits] important for the market to know? Do the allegations matter?
• It is important for the market to know about such information only known to insiders as this is potentially an indicator of overall company growth. It
looks like factors, such as the decline in customer showroom visits, might be important information that is hidden as evidenced by the decline in stock
price in 2006. But, more analyses should be done to conclude this.
• Based on Exhibit 1, we do not have any numbers which indicate that every customer who visits the showroom signs a contract or even that a large
number that visits signs a contract. It would be great to have information on the number of people that visit and on the number of conversions.
Additionally, it would be a great next step to analyze the direct impact of customer visits on net income.
• The allegations matter as it is extremely important that accurate financial information regarding the growth prospects of a company be reported to
investors. However, whether the allegations are material is a different point that requires further analysis.

• Note: Candidates may not ask the above questions initially. After some probing, the interviewer may provide them with the question and / or relevant
information.

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Case #40: Yarmouth Yachts (4/7)
Question 1 Question 2
Ask the candidate the following: After discussing the stock drop, ask the candidate this follow up question:
What analysis could we do to evaluate other possible causes for the stock What analysis could we do to evaluate the claim that the Executives had
drop? What data would we need? inside information and allegedly knew the company’s net income would
eventually decrease?
• The candidate should ask if there are market or industry variables that can
explain the stock drop. This analysis requires returns data for Yarmouth, a • This question addresses the relationship between showroom visits and net
broad market index such as the NYSE, and an index of comparable income. Remind the candidate that Yarmouth discloses contracts signed
companies. Refer the candidate back to the price chart in Exhibit 2. on a quarterly basis, but not showroom visits.

• The take-away is that market and industry factors do not appear to fully • The correct response is to build regression models to analyze the
explain the stock price drop because the indices are flat or have much relationship between net income, contracts, and visits.
smaller relative declines than Yarmouth on the disclosure day.
• After getting this response, ask the candidate to interpret the regression
• Explain that the burden of proof is on the plaintiffs to rule out other output in Exhibit 3 (this step is optional; show candidate Exhibit 3 if
possible causes for the share price drop. Plaintiff’s argument does not proceeding with analysis).
control for market or industry factors. – The conclusions the candidate should draw is that contracts are
sufficient predictors of net income and that disclosure of showroom
visits is not material. After controlling for lagged showroom visits and
contract value (Exhibit 3, Regression 3), contract value is the only
statistically significant predictor of net income.

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Case #40: Yarmouth Yachts (5/7)
Exhibit 3: Optional

345
Case #40: Yarmouth Yachts (6/7)
Question 3 Sample Calculation

Regardless of any discussion of the regression analysis in Exhibit 3, ensure Provide candidates with the below data and ask them
that the candidate now knows that, in actuality, the showroom visits do not to calculate alternative damages:
matter and that it is only the contract value that predicts net income. • Actual return per share (price drop per share): $8.00
• Modeled return (price drop per share based on market factors): $4.00
Ask the candidate the following question: • Damaged shares (shares that don’t include people in point 2): 25 MM
The plaintiffs have argued that each investor owning shares on December 12,
2007 should be repaid for the full price drop on the corrective disclosure day. Calculations:
Based on an $8 price drop and 155MM shares outstanding, please calculate
the potential damages for Yarmouth.

$8 * 155MM = $1.2B

Then ask:
Is this a reasonable amount? How can we reduce the potential damages for
Yarmouth?
Interviewer Guidance
There are two approaches to address:
1. Control for other factors in returns. Build a model to estimate what the
return would have been had the corrective disclosure not been made
(the “but-for” price). A predicted decline helps explain / can partially
offset the price drop on the disclosure day.
2. Exclude shareholders who were not affected by the alleged price
inflation. This group includes (i) anyone who bought and sold before the
alleged disclosure date, (ii) shares held by Yarmouth Executives, and (iii)
shares held throughout the entire class period.

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Case #40: Yarmouth Yachts (7/7)
Interviewer Guidance Recommendation

End by asking the candidate to summarize the findings of the case. Key Findings
• Plaintiff calculations are overly broad and fail to account for the impact of
market and industry factors on returns and shareholders who are not
damaged.
– Ex. The overall potential damages are $100MM versus $1.2B suggested
by the plaintiffs. Shares bought and sold before the disclosure date
were not damaged.

• Contracts are a sufficient predictor of net income and showroom visit data
were not material as was alleged by plaintiffs. (In this case, regression
analysis was used to test the materiality of showroom visits.)

• For damages calculations, a market model was used to partially offset the
stock price drop on the disclosure day. The purpose of this is to estimate
the share price return “but-for” the corrective disclosure.
Evaluation
The candidate should be able to clearly and succinctly discuss the findings of Risks
the case. They should also discuss the results of the analyses and explain how – Financial and legal risk: while lower than $1.2 billion, $100MM in
the analyses impact the case. charges can be significant for Yarmouth
– Undetermined relationship between % of showroom visits and contract
conversion
– Plaintiffs might debate the actual number of damaged shares

Next Steps
– Analyze company financials to determine if they can sustain such a
payout in damages
– Analyze % of showroom visits that lead to contracts; identify trends for
these data
– Find comparable cases where a company was sued for similar stock
fraud to determine appropriate number of damaged shares

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 Overall Quant Creativity
1 1 2

Case #41: Sueno Mattress

Case Type: KPMG – Candidate Driven
Profitability

Industry:
Consumer Products

Concepts Tested:
• Chart clearing
• Structured brainstorming
• Soliciting relevant data
• Market analysis
 Quant Level - LIGHT

Case #41: Sueno Mattress (1/5) Case Type Industry Client Type

Mattress
Profitability Consumer Products
KPMG– Round 1 or 2 – Candidate Led Manufacturer

Fit Questions Interviewer Guidance

1. Describe your ideal team working environment? This case is a competitive strategy case in which an established player is losing profits
2. Tell me about a time when you had to make a decision due to customer purchasing habits (i.e. moving to lower priced, direct-to-consumer products).
without all of the information you wanted or needed. While the client has maintained revenue and volume above market growth, their units are now
being sold at outlet stores at a discount resulting in smaller profit margins.
Through the course of the case we will seek to get the candidate’s thoughts on:
• The overall market and competitive dynamics at play
• Potential reasons for client challenges
• Pros and cons of different channel distribution strategies
Fit Evaluation • Impact of shifting customer trends on a company/brand
Overall Fit Performance • Suggested path forward to address these challenges
S1 O1 A 1
R 1
• Opportunities and risks associated with suggested path
2 2 2 2
• Immediate next steps for the client
Case Prompt Case Development
Sueno Mattress is a top 5 US mattress manufacturing company. 1. Case Prompt
2. Evaluating Stock Price Drop
The company has seen steady growth in recent years, but has missed profit targets the past three quarters and the
3. Evaluating Net Income
stock price is slipping. Thomas Scott, the CEO, has contacted KPMG Strategy for advice on how to respond to the
company’s current situation. 4. Calculating Damages
5. Conclusion
Case Evaluation
Structure and Framework

Analytical and Problem Solving Ability

Communication and Positive Attitude

Synthesis and Recommendation

349
Case #41: Sueno Mattress (2/5)
Information to be disclosed Data only if requested
• Sueno Mattress has a varied product line, but can mostly be thought of as • Sueno distributes its products through three major channels:
offering three main SKUs: Good, Better, Best. – Furniture stores (i.e. Ashley Furniture, Rooms-to-Go)
– Mattress stores (i.e. Mattress Firm)
• Global market = $30B growing at a CAGR of 7% – 300 client owned Luxury stores across North America (i.e. Sueno Branded Stores)
– Channel sales mix is in-line with other major players
• Industry Value Chain: Super-luxury brands distribute their products via
their own stores, while most other players rely on furniture stores and • Average Sueno Mattress Sales Price
mattress stores to reach consumers. – Furniture stores: $1,000
– Mattress Stores: $850
• Customer Trends: In the past five years, a number of new players have – Sueno Branded Stores: $1,150
entered the market with an online direct-to-consumer model, offering
lower prices to consumers and driving down customer willingness to pay • Global Market Segmentation
full prices across the industry – Asian market: 12% CAGR
– US market: 5% CAGR
– RoW markets: 8% CAGR

• 2016 Annual Sales Data:

– Mattresses Sold: 3M
– Revenues: $3B

• 2017 Annual Sales Data:

– Mattresses Sold: 3.15M
– Revenues: $3.09B

• Pricing: Sueno has not dramatically changed its own store pricing

• Product Mix: Has not dramatically changed over last 5 years

• COGS/Ops. Costs: Sueno has not seen any significant increase in product
costs

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Case #41: Sueno Mattress (3/5)
Sample Response
Frame problem, approach and hypotheses:
The candidate should frame the client problem and begin to formulate a hypothesis to prove/disprove and drive the analysis.
• There are multiple possible explanations behind declining profitability including, but not limited to decreasing revenues, decreasing market
share, decrease in price, increasing costs, etc.
• The candidate should identify what analysis needs to be done to identify the underlying cause of the problem and determine a strategic
approach to advise our client such as price, volume, cost analysis; competitive landscape; customer trends/need, etc.

Question 1
Ask the candidate the following:
What analysis could we do to evaluate the industry and potential cause of profitability decline?

Interviewer should steer the candidate to look into their identified potential causes of profitability decline. Refer below to various data sets to support their
analysis.
• The order and depth of discussion on the following bucketed topics will likely vary from candidate to candidate.

• A good candidate might identify:

• The US is losing market share to other regions
• The loss is due to a slower growth compared to other regions
• Sueno (our client) is focusing on the slowest growth area

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Case #41: Sueno Mattress (4/5)
Question 2 Question 3
Ask the candidate the following: After discussing industry trends and client sales/financials, ask the candidate
What analysis could we do to evaluate the client sales & financials? to analyze the Channel Trend Data.

The interviewer should steer the candidate to look into segmenting the market data by
If candidate requests historical financial data for Sueno provide the 2016/17 channel segment and region. Refer below to various data sets to support their analysis.
sales numbers provided in Databank. The interviewer should prompt the Note: Based on how the candidate frames the issue, either provide market segmentation
candidate to calculate YoY volume & revenue growth % (to determine if data (as shown in graphs) or share the 2012 -2017 change (i.e. -10% change for US Furniture
stores).
performance is above, below or behind competitors/ market). The
interviewer should have the candidate walk through the logic and
assumptions. There are multiple ways to estimate the value, but a sample
calculation is provided below.
• 2016 to 2017 YoY growth:
– Units Sold: (3.15M – 3M)/3M = 5%*
– Revenue: ($3.09B - $3.0B)/$3.0B = 3%*
Candidate should be able to identify Sueno’s volume growth is in line with US
market, but lags behind China and Rest of World. Also, the gap between
revenue and volume growth should be noted.

Candidate will likely request pricing information, so the interviewer should

prompt the candidate to calculate estimate the value per unit. There are
multiple ways to, but a sample calculation is provided below: • A good candidate might identify:
• Average revenue per sale per year: – The emergence of direct-to-consumer as a new sales channel
– 2016 Avg. Price/unit: $3B/3M = $1,000 – The Luxury and Furniture Store segments are shrinking
– 2017 Avg. Price/unit: $3.09B/3.15M = $980+ – The Mattress stores segment is taking more share of sales
It may not be necessary for candidate to accurately complete the calculation – A greater portion of 2017 sales are coming from a channel with lower sales prices
– The Chinese market, although growing faster, is only ~26% of the US market
for 2017 average sales price, but they should be able to set up the equation
and note that the average price has obviously fallen below $1000/unit. The interviewer should push the candidate to outline thoughts on the impact of identified
trends AND how the profitability decline may be mitigated based on the information
provided.
If prompted, inform candidate that other areas of potential analysis (e.g.
variable costs, fixed costs, overhead) appear to be unchanged and prices Push the candidate to develop hypotheses and quantitatively determine what the largest
remain unchanged. value at stake opportunity is.

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Case #41: Sueno Mattress (5/5)
Interviewer Guidance Recommendation
Select recommendations
Case Wrap-up: After the candidate has exhausted available data and – Introduce new product to meet demands of growing
completed the analysis OR the interview is running out of time, prompt the “direct-to-consumer” market
candidate to provide a summary of the findings for the client and provide a – Reposition brand to meet changing customer needs (i.e. target “luxury”
recommendation to increase profitability. – customers”)
– Expand geographically to take advantage of global market growth in
higher priced sales
– Analyze same store sales (owned stores) to determine if low
performing stores should be closed
– Limit availability of product to mattress retailers (depends on brand
strength)

Risks
– Introduce new product: Cannibalism to higher margin products? What
Evaluation are key criteria for success? Impact on brand reputation? Can costs be
cut to maintain margin?
The candidate should be able to clearly and succinctly discuss the findings of – Expanding geographically: Pulling out of US, brand impact, investment
the case. They should also discuss the results of the analyses and explain how cost? How would we do it? Market knowledge?
the analyses impact the case. – Repositioning brand: Can our cost structure support this? Will more
low price sales offset lost high price sales in own stores/furniture
stores?
– Limit availability of product to mattress outlets: Is our brand strong
enough to drive consumers towards owned stores and dept. stores to
find our product?
– Limit discount % allowed by retailers: Is our brand strong enough to
maintain volume at higher prices? Price elasticity of consumers?

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 Overall Quant Creativity
3 2 3

Case #42: Cruise Line Acquisition

Case Type: Student Submitted – Candidate Driven
Profitability

Industry:
Travel & Tourism

Concepts Tested:
• Brainstorming
• Chart clearing
• Math structuring
 Quant Level - MEDIUM

Case #42: Cruise Line Acquisition (1/7) Case Type Industry Client Type

Profitability Travel & Tourism Cruise Line

Student Submitted – Candidate Driven

Fit Questions Interviewer Guidance

1. Tell me about a conflict that you have had in the The primary objective is to determine if it is feasible to increase profitability of the acquisition
workplace. target. The goal is to move from 10% to 40% EBITDA. Do not disclose target unless asked.
2. Tell me about your most rewarding accomplishment.
This is a straightforward profitability case that is good practice for the candidate to drive the
case forward. Not much guidance should be necessary.

Fit Evaluation
Overall Fit Performance
S1 O1 A 1
R 1

2 2 2 2

Case Prompt Case Development

Our client is FunCruiseLines, a major cruise line headquartered in the United States. They are currently considering 1. Framework
acquiring a new, luxury cruise line, FSC (Fancy Small Cruises). Before doing so, they would like to determine if there is 2. Profitability analysis
room to increase profitability of FSC. 3. Brainstorm
4. Final recommendation
They have asked us to come to a meeting with their CFO and tell them if we think this can be done.

How should we structure this case? Case Evaluation

Structure and Framework

Analytical and Problem Solving Ability

Communication and Positive Attitude

Synthesis and Recommendation

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Case #42: Cruise Line Acquisition (2/7)
Framework Interviewer Guidance
Working hypothesis: FunCruiseLines will be able to increase profitability of Candidates will take a variety of approaches to structuring an approach to this
FSC. question. The primary things to look for are:

Will FunCruiseLines be able to increase profits? • Did the candidate state a hypothesis?
- Expected Revenues per passenger per day – The candidate should express the core idea that they would like to test through
- Ticket Sales their analysis. They should clearly demonstrate how the questions they’re asking
are directed at answering the specific question of whether FunCruiseLines should
- Excursions
acquire FSC.
- Casino – It’s less important for the hypothesis to be backed up with evidence, since it’s so
- Beverage early in the case (though strong candidates will draw on their own knowledge and
- Expected costs intuitions to develop preliminary insights about the potential for this acquisition).
- Fixed – corporate salaries, office rent, shipboard salaries, fuel, port docking fees
- Variable –food & beverage, excursion costs • Is profitability the primary consideration?
– The prompt is very clear that profitability is the deciding factor for management.
Will efforts to increase profits be successful? It’s OK for candidates to discuss other considerations, but their primary focus
- Primary competitors should be on profitability.
- What is their profitability?
- Will they respond?
• Is the framework case-specific?
– Excellent frameworks will explore specific aspects of the Cruise Line market and
- Will efforts to reduce costs make us less competitive?
overall economic environment (e.g., COVID-19), rather than just generic ideas
- Execution about profitability.
- What timeframe is needed to execute?
- Will any capital investments be needed to reduce operating costs?

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Case #42: Cruise Line Acquisition (3/7)
Revenue & Cost information Continued
Revenues: The candidate should calculate totals for FSC, FunCruiseLines, and
This case will be focused on costs, not revenues. While a great candidate will competition, as well as new costs to FSC after alignment.
be able to list out expected revenue categories, they should be educated that
FSC is an all-inclusive line, with revenues of $1,000 per APCD (Available Costs:
Passenger Cruise Day - this is a “unit revenue” for the Cruise Line industry). FSC (pre): $900/APCD
Gaming (casino) revenues can be ignored. FSC (post): $650/APCD
FunCruiseLines: $200/APCD
Costs: Competitor Avg: $660/APCD
Provide the candidate with exhibits 1 + 2 as requested. The candidate should
be able to make assumptions on which cost categories should align with Itemized costs:
competitors (e.g., food) and which can align to the parent company. These are Corporate salaries: $10/APCD – align to parent
listed below. Provide guidance as needed, but ensure candidate explains their Office rent: $5/APCD – align to parent
rationale for their choices. Fuel cost: $45/APCD – apply 10% discount to align to parent $/bbl
Shipboard salaries: $220/APCD – align to competition
Cost alignment: Port docking fees: $50/APCD – align to competition
- Align to parent company Food & beverage: $100/APCD – align to competition
- Office rent Excursions: $220/APCD – align to competition
- Fuel cost / barrel Total: $650/APCD
- Candidate should recognize this will not align on an APCD basis due to
fewer passengers on board, however candidate should recognize the The candidate should note the stark difference between FSC and the parent
10% cost reduction and apply accordingly company, however, this is not an issue as the parent company is a very
- Shipboard salaries different business (>2,000 passengers / ship).
- Corporate salaries
- Align to competitors The candidate should also note that this does not meet the margin
requirements the parent company was interested in. The candidate can then
- Port docking fees – align to competitors because destinations are more
be asked to brainstorm to come up with the idea of increasing the number of
luxurious than FunCruseLines
passengers / ship. At this point, present the candidate with exhibit 3.
- Food & beverage
- Excursions

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Case #42: Cruise Line Acquisition (4/7)
Exhibit #1: Costs per APCD

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Case #42: Cruise Line Acquisition (5/7)
Exhibit #2: Fuel costs / bbl

FunCruiseLines
FSC

Cost / bbl

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Case #42: Cruise Line Acquisition (6/7)
Exhibit #3: Survey results

FSC
(Current)
Acceptable to
Customers
Passengers / ship

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Case #42: Cruise Line Acquisition (7/7)
Passenger density Recommendation
Once presented with exhibit 3, the candidate should recognize that only fixed • Candidate should deliver the recommendation that the client should move
costs will be adjusted, and that costs will be reduced 20%. forward with the acquisition as they can reach their EBITDA target of 40%+

New costs:
Corporate salaries: $8/APCD
Office rent: $4/APCD
Fuel cost: $36/APCD
Shipboard salaries: $176/APCD
Port docking fees: $40/APCD
Food & beverage: $100/APCD
Excursions: $220/APCD
Total: $584/APCD

Risks & Next Steps

• Candidate should recognize that reduced costs may reduce the customer
experience, follow up with customer survey
• Candidate should recognize risks with combining corporate offices to
ensure that the parent company can market & meet needs of luxury
customers, follow up with staff survey and / or training

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 Overall Quant Creativity
1 2 1

Case #43: Shoe Co.

Case Type: Bain & Company – Candidate Driven
Market Entry

Industry:
Consumer Product Goods

Concepts Tested:
• Chart clearing
• Root cause analysis
 Quant Level - MEDIUM

Case #43: Shoe Co. (1/7) Case Type Industry Client Type

Consumer Product
Market Entry Retailer
BAIN– unknown – Candidate Driven Goods

Fit Questions Interviewer Guidance

1. Tell me about a situation where you dealt with

ambiguity? This is a straightforward market entry case that is good practice for the candidate to drive the
2. Tell me about a time where you were required to case forward. Not much guidance should be necessary.
motivate a diverse team?
Volume of sales can be understood as the average number of transactions within the store.

Fit Evaluation
Overall Fit Performance
S1 O1 A 1
R 1

2 2 2 2

Case Prompt Case Development

Our client, Shoe Co., is a small affordable luxury shoe retailer, branded as classic and fun. The average shoe sells at a 1. Framework
price point of $300 per pair. 2. Profitability analysis
3. Brainstorm
Unfortunately, our client is facing a recent decline in the volume of same store sales despite the growth of same 4. Final recommendation
store sales for competitors. Our client hired us to understand the root cause of the client’s same store sales decline?

Case Evaluation
Structure and Framework

Analytical and Problem Solving Ability

Communication and Positive Attitude

Synthesis and Recommendation

363
Case #43: Shoe Co. (2/7)
Framework Interviewer Guidance
Working hypothesis: Shoe Co. is likely facing a decline in sames store sales Candidates will take a variety of approaches to structuring an approach to
due to a misalignment with customer trends given that competitor growth this question. The primary things to look for are:
indicates it is not an industry wide trend.
• Did the candidate state a hypothesis?
Framework should focus on drivers of same store sales including: – The candidate should express the core idea that they would like to test through their
analysis. They should clearly demonstrate how the questions they’re asking are
directed at answering the specific question of what is the driver of Shoe Co’s decline in
1) Market Dynamics same store sales
a) geographic considerations – It’s less important for the hypothesis to be backed up with evidence, since it’s so early
b) industry wide trends in the case (though strong candidates will draw on their own knowledge and
2) Customers intuitions)
a) Customer trend information and preference
b) Where are customers falling out of the pipeline (coming to the store,
checking out?, returns?
3) Competitors • Is the identification of the root cause the primary consideration?
a) Competitor price points – The prompt is very clear that same store sales are declining and the client wants to
b) competitor customer demographic know the root cause.
c) Competitor product differentiation
• Is the framework case-specific?
– Excellent frameworks will explore specific aspects of the luxury shoe market and
overall competitive environment .

Candidate should ask for information about either the competitors or customers, if they ask
about the competitors steer them towards the customer information.

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Case #43: Shoe Co. (3/7)
Exhibit #1: Consumer Survey Results

365
Case #43: Shoe Co. (4/7)
Exhibit #2: Consumer Survey Results

366
Case #43: Shoe Co. (5/7)
Exhibit #3: Consumer Survey Results

367
Case #43: Shoe Co. (6/7)
Exhibits Math
Exhibit 1: The candidate should calculate totals for FSC, FunCruiseLines, and
• Candidate should note that Shoe Co. has a 70% consumer awareness competition, as well as new costs to FSC after alignment.
• But only a ~20% conversion rate to purchase
Design Spend Increase:
A strong candidate will ask for further information on this low conversion Increase in design spend as % of sales: 8% - 6.5% = 1.5%
rate and if this is a recent or ongoing trend? Required increase in design spend: $800*1.5% = $12M

Exhibit 2: Expected Gross Margin Lift costs:

• Candidate should note that this is a persistent trend that is due to a Expected sales lift: $800*5%= $40M
decrease in volume of purchases Gross Margin: $40M *40% = 16M
• Candidate should see that ~30% (75% of 40%) decreased purchases Expected Lift: $16M - $12M = $4M
for design reasons

Candidate should ask if there is more information around the product design

Exhibit 3:
• Candidate should note that 40% of those familiar with Shoe Co. do
not buy because of product issue
• The wrong product assortment is keeping customers away

Once candidate reaches the above conclusion, share the following

information:
- Shoe Co spends significantly less in design compared to other
competitors in the market.
- Industry benchmarks is 8% of sales, Shoe Co is currently at 6.5%
- Shoe Co has sales of $800M and Gross Margin % of 40%
- Bain Retail Expert expects that “...getting the assortment right can be
worth between 5-10% in sales lift for the average retailer.”
Ask: what would the expected gross margin lift be with an increase in design
spend?

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Case #43: Shoe Co. (7/7)
Brainstorm Recommendation
Ask: what other quantitative or qualitative questions would you want to
consider if you were Shoe Co? • Candidate should deliver the recommendation that Shoe Co should
increase their product design spend to better serve customer tastes
and lift their gross margin by $4M.
Qualitative:
• Investing in-house versus outsourcing design – is this a capability that
Shoe Co should have internally?
• Scale of investment – given Shoe Co’s small size, will this investment
based on % of sales be big enough to be meaningful? Is there a
minimum dollar threshold above which they must invest to reap
benefits?

Quantitative:
• Ramp-up costs (i.e. hiring designers, expanding facilities)
• Payback period
• NPV

Risks & Next Steps

• Candidate should recognize some risks associated with the

recommendation including that the recommendation might have a
longer timeline that client would prefer
• Next steps should align with the risks or recommendation noted, such
as a launching a consumer survey to better understand their design
preferences going forward

369
 Overall Quant Creativity
1 2 1

Case #44: Craft Co.

Case Type: EY Parthenon – Interviewer Driven
Profitability

Industry:
Consumer Product Goods

Concepts Tested:
• Chart clearing
• Profitability calculation
 Quant Level - MEDIUM

Case #44: Craft Co. (1/5) Case Type Industry Client Type

Consumer Product
Profitability Retailer / Distributor
EYP– unknown – Interviewer Driven Goods

Fit Questions Interviewer Guidance

1. Tell me about a time where you failed?

2. What is a project you worked on that you are proud of If candidate asks:
the results? Why? • Craft Co’s products are typically marketed towards young adults ages 18-35
• Craft Co. was seen as the first major player in this market, but new competitors began to
enter by the end of 2020
• There is no specific ROI or objective that our client is aiming to achieve related to this
analysis, but they are most interested in short-term strategies in the next 1-3 years as
opposed to longer-term opportunities
Fit Evaluation • Craft Co. is currently focused solely on the U.S. market
Overall Fit Performance
S1 O1 A 1
R 1

2 2 2 2

Case Prompt Case Development

Read to candidate: 1. Framework
• Our client, Craft Co., is a subscription service that will send customers kits for adult crafting and DIY projects 2. Profitability analysis
(e.g., watercolor painting, woodworking) 3. Brainstorm
• Customers pay a monthly fee based on the number of kits they would like, Craft Co. sends them a box with 4. Final recommendation
craft supplies
• Craft Co. had grown its customer base rapidly during the COVID-19 pandemic, but has seen a dip in recent
quarters as new competitors have entered the field Case Evaluation
• Management is looking to assess the business’s current performance and identify whether it can grow
Structure and Framework
profitably and regain market share in the next ~3-5 years
Analytical and Problem Solving Ability
Our client would like our help in answering two questions (i) how has Craft Co. performed recently? and (ii) what
strategies can it implement to grow profitability and increase share?
Communication and Positive Attitude

Synthesis and Recommendation

371
Case #44: Craft Co. (2/5)
Framework Brainstorm before Math
How can Craft Co. become more profitable?
Working hypothesis: Craft Co. is likely facing a decline in sames store sales
due to a misalignment with customer trends given that competitor growth Revenue growth
indicates it is not an industry wide trend. • Increase revenue from existing customers
• Enter new geographic markets
Framework should focus on drivers of same store sales including: • Expand into new channels (e.g., children's kits, cooking kits)

1) Profitability Review Cost control

a) Revenue
• Analyze marketing mix and effectiveness to reduce spending without losing
i) Subscriber base
subscribers
ii) Subscription price point
iii) Volume of sales
b) Costs
i) Fixed Costs (store front, manufacturing facilities, etc)
ii) Variable Costs (materials, shipping, etc.)
2) Market Considerations
a) Current market Share
b) Product Suite alignment with consumer trends
3) Execution Strategies

Allow the candidate to walk you through their framework, noting that we do
not have information on product opportunities, guiding them to the
profitability exercise

372
Case #44: Craft Co. (3/5)
Exhibit #1: Consumer Survey Results

373
Case #44: Craft Co. (4/5)
Exhibit #2: Consumer Survey Results

374
Case #44: Craft Co. (5/5)
Exhibit 1 Exhibit 2
Question 1: Based on exhibit 1, how would you estimate Craft Co.’s monthly Question 3: What do you notice about Craft Co.’s performance?
profitability in Q4 2020? Answer should include:
Answer should include: • Craft Co. outperforms competitors on price and quality, but
• Accurate calculation of revenue, cost, and profit underperforms on delivery and convenience
• Craft Co. is operationally unprofitable, largely driven by marketing • Exhibit 2 in context with profitability analysis suggests Craft Co. has
costs likely lost customers to higher-priced competitors positioned as
• Individuals purchasing 1 kit per month are breaking even and do not “premium”, therefore there may be opportunity to increase price to
need to be calculated to find profit restore profitability since Craft Co. is perceived as high-quality

Question 4: How might Craft Co. stabilize its subscriber decline?

Stabilization levers:
• Better differentiating its product relative to new entrants
• Loyalty incentives
• Acquiring one of its competitor

After this brainstorming, the case is finished. A strong candidate will wrap up
the brainstorm naturally with a strong “so-what”.
Question 2: Based on exhibit 1, how would you describe Craft Co.’s pattern of
subscriber growth?
Answer should include:
• Subscriber levels have seen a steady decline in 2020, even though
interest in crafts likely increased due to the pandemic
• Earlier growth could be due to strong investment in marketing and
lack of initial competitors and/or pandemic-related demand increase
across the market

375
 Overall Quant Creativity
3 3 2

Case #45: Telecom Co

Case Type: Bain – Candidate Driven
Market Entry

Industry:
Telecommunications

Concepts Tested:
• Competitive Dynamics
• Market Sizing
• Breakeven Analysis
 Quant Level - MEDIUM

Case #45: Telecom Co. (1/8) Case Type Industry Client Type

Market Entry Telecom Telco

BAIN– unknown – Candidate Driven

Fit Questions Interviewer Guidance

1. Tell me about a time when you had to convince

someone of an opposing viewpoint This is a market entry case that requires break even analysis. The candidate may be challenged
2. Tell me about a time when you overcame adversity to seek out understanding of the industry in order to clearly articulate a solution.

Fit Evaluation
Overall Fit Performance
S1 O1 A 1
R 1

2 2 2 2

Case Prompt Case Development

Our client, Telecom Co., provides satellite TV services (DBS) nationally. Telecom Co.’s customer base is being 1. Framework
threatened by telcos and cable companies offering “triple play” (combo services). To combat this, Telecom Co. is 2. Brainstorm
considering deploying wireless network (WiMAX) to offer broadband internet. 3. Profitability analysis
4. Final recommendation
Should the client go into the WiMAX business?

Case Evaluation
Structure and Framework

Analytical and Problem Solving Ability

Communication and Positive Attitude

Synthesis and Recommendation

377
Case #45: Telecom Co. (2/8)
Framework Interviewer Guidance
Working hypothesis: Telecom Co. should invest in WiMAX to be competitive Candidates will take a variety of approaches to structuring an approach to
against other providers. this question. The primary things to look for are:

Framework to help answer whether or not the investment is attractive: • Did the candidate state a hypothesis?
– The candidate should express the core idea that they would like to test through their
- Costs analysis. They should demonstrate how their hypothesis answers the core prompt of
- Capital expenditures whether or not Telecom Co. should enter the WiMAX market
– It’s less important for the hypothesis to be backed up with evidence, since it’s so early
- Base stations
in the case (though strong candidates will draw on their own knowledge and
- Licenses intuitions)
- Additional equipment
- Operational expenses
- Maintenance
- Leases • Is the framework case-specific?
– Excellent frameworks will explore specific aspects of telco industry
- SG&A
- Sales & marketing • The candidate should move forward with examining the costs next
- Revenue
- Market share
- How big is the market?
- Reasonable market share?
- Pricing
- Market price benchmark
- Price sensitivity
- Key challenges
- Buy vs.build
- Competitive moves
- Regulations

378
Case #45: Telecom Co. (3/8)
Exhibit #1: Total Cost Structure

Total cost

Network cost SG&A

Customer Premise Assume

Spectrum Base Stations these costs
Equipment* are minimal
initially and
focus on
network
costs

* CPE is additional equipment placed in subscribers’ homes

379
Case #45: Telecom Co. (4/8)
Exhibit #2: Historic Spectrum auction price

380
Case #45: Telecom Co. (5/8)
Exhibit #3: Own or Lease base station?

Build (Own & Operate) Lease

381
Case #45: Telecom Co. (6/8)
Exhibits Interviewer Guide

Exhibit 1: Cost structure Exhibit 1: Cost structure

Outline of costs associated with pursuing the opportunity Candidate should ask for detailed breakdown / data for each.

Exhibit 2: Spectrum Auction Price Exhibit 2: Spectrum Auction Price

Assume Spectrum price average is $500M and use this in final calculation Candidate should list what they see in this historic data, but ultimately identify that
they can use the average in their total cost calculation

Exhibit 3: Base Station Own or Lease? Exhibit 3: Base Station Own or Lease?
Before diving into calculating the cost of base stations, ask the candidate to list pros Candidate should realize that it is cheaper to rent and should suggest to rent,
and cons for building vs. leasing base stations. assuming $150K per station. This should be used in final cost calculation.

Brainstorm should be organized and show structure.

Brainstorm sample answer:

Build
- Pro
- Complete control over network footprint
- Best tower real estate can be used for network
- Con
- Very costly to own / operate
- Longer time-to-market

Lease
- Pro
- Smaller upfront investment
- Time-to-market advantages as towers already exist
- Con
- Availability of towers → coverage not possible if tower real estate
unavailable in given location

382
Case #45: Telecom Co. (7/8)
Math: Info Math: Calculations
Base Station Base Station Cost
A good candidate should know: Estimating number of households
- U.S. population 300M / 2.5 = 120M households
- Persons per household (2.5)
Marketshare
120M x 5% = 6M households
When asked, give the candidate the information below:
- Market share (estimated by management) is 5% Households per base station
- Base station bandwidth is 80, 000 kbps (80,000 kbps / 320 kbps) x 2 = 500 households per base station
- Bandwidth required per household is 320 kbps
- % of concurrent connections is 50% ***multiplied by 2 to account for concurrent connections (50%)
- Telco companies balance the cost per subscriber and required bandwidth
per subscriber by estimating % of users online at the same time Number of base stations needed to service 6M households
- Cost per base station is $150K (to lease) 6M / 500 = 12,000 households

Base station cost

12,000 x 150,000 = $1.8B

CPE Cost
Total cost
Customer Premise Equipment $150 x 6M = $900M
- CPE cost is $150 per household
- Client estimates that 2/3 could be passed through to the customer Pass on 2/3 to customer
$900M x 1/3 = $300M

TOTAL COSTS
Spectrum = $500M Base Station = $1.8B CPE = $300M
$500M + $1.8B + $300M = $2.6B

REVENUE
6M subscribers x $20/month x 12 months = $1.4B / year
Revenue from offering
- Broadband internet service price is $20 per month

383
Case #45: Telecom Co. (8/8)
Recommendation Risks / Next Steps

Telecom Co. should not invest in WiMAX due to high up-front costs and lower 1. Lose market share to competitors
revenue lift. – Identify other areas of value to retain customers. This could be
done by tech innovations or partnerships.
Telecom Co. should focus on defending existing core services such as satellite 2. Lose out on high growth opportunity
TV. – Research customer trends to quantify the potential in WiMAX
market

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MCG Thanks our 2024-2025
Sponsor Firms

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