DMCC 2013-2014

Casebook
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 Editor’s Note

Welcome students:

The Duke MBA Consulting Club (DMCC) is proud to present the official 2013-2014 DMCC Casebook. This year we have
included over 15 brand new cases. The objective of this book is to help you prepare for your upcoming consulting case
interviews. Case interviews are an integral part of the hiring process for consulting firms. These interviews give you the
opportunity to showcase your communication, client, creative and analytical skills to your interviewer. This book was
developed to complement the Duke MBA Consulting Roadmap curriculum. We hope that using both will help lead you
to success during the upcoming recruiting season.

A couple of changes have been made to enhance the training of those utilizing the book. First, the book does not
specify which cases are what type (i.e. profitability, market entry, etc.). We believe this unrealistically alerts the
candidate of the nature of the case. Second, the order of the cases are roughly ordered by difficulty. Finally, there are
specialty cases (Federal, Technology, and Human Capital) at the end of the book.

This casebook could not have been completed without Mike Slattery and AJ Tysenn and the valuable contributions of,
Garrett Bredenkamp, Cordelia Chansler, Angela Crocker, Bern Ebersole, Alison Flinn, Gloria Guan, Martin Kaczynski,
Brandon Magsaman, Jen McFann, Michael Nov, Matt Rogers, Mike Sprengnether, Dave Strickler, Richard Wang and the
DMCC Cabinet Officers. We would also like to thank our friends at other MBA programs for sharing with us their old
casebooks in order for us to continue to harvest new material.

We wish you luck with your preparation and would like you to remember that your fellow DMCC members are here to
help! Please reach out to anyone on the cabinet if you feel that you are not “cracking the case”. Lastly, to the students
of other top MBA programs using this case book during their preparation, we warmly welcome you to “Team Fuqua”.

Good luck!

Elise Eggart, Ben Holm and the DMCC Class of 2014 Officers
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 The Cases
Case # Type Name Page
1 Market Sizing Drinks on a Plane 19
2 Market Sizing Snowboards in Colorado 25
3 General SPG 29
4 General Mexican Tile Company 36
5 General Winter Olympics 40
6 General Semi Co 47
7 General Who Will Buy Our Wine 54
8 General Selling Drugs 64
9 General Great Burger 69
10 General Furberry 78
11 General What’s Next for Tony 85
12 General Old McDonald had a…? 92
13 General Parks and Recreation 101
14 General SatCo 109
15 General Alpha Software, Inc. 119
16 General NY Economic Development 129
17 General ERP Corp 136
18 General New Clear Energy 148
19 Federal Agency Overrun 158
20 Technology Bravo Insurance 164
21 Human Capital RDTC 171
22 Deloitte Appeal 176
23 Deloitte Student Health Insurance 187

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The Firms

5
Accenture
High Performance, delivered. Accenture brings strategic thinking, innovative approaches and the ability to
make a difference to companies and governments around the world.
Accenture recruits on-campus for the areas below. Student align with an area before interviewing.
 Strategy- Offerings in Mergers and Acquisitions; Operating Model Strategy; Sales and Marketing
Strategy; and Strategic Planning and Growth
Overview  Operations- Generate value by creating solutions to the most complex supply chain issues
 Federal- Helping government clients solve complex problems
 Finance & Enterprise Performance- Help CFOs from to establish better integration across the
enterprise to improve efficiency, effectiveness and control on the journey to value creation.

Round 1 Round 2
Interview Overview  2 Behavioral/Case interviews  Depends on area
 At least two interviews

 Cases- Cases are often based on real client experiences. Therefore, the case discussion will focus
on your vertical. Cases may or may not have a quantitative component, so listen for verbal clues.
Cases are often very conversational and are an opportunity to showcase your interpersonal skills.
Unique Interview Features  Behavioral/Fit- Fit is very important. The interviewer may have a “brief conversation” about your
background and experience instead of a standard question & answer format.

 Analyst
 Consultant
 (Business School); Summer Consultant
Career Progression  Consultant
 Manager
 Senior Manager
 Senior Executive 6
Bain & Company
Bain is a leading strategy consulting firm based in Boston, MA with 49 offices across the globe.

Bain follows the generalist model. There is no need to align with a specific industry or area before
interviewing.
Overview  Strategy- Influential experts and deep expertise in dozens of industries, provides consultants with
a broad foundation on which to build their own expertise
 Private Equity Group (PEG)-Work with private equity firms to assess potential deals

Round 1 Round 2
 2 Interviews (~45min. each)  1 fit interview (~45min)
Interview Overview  A few behavioral/fit questions  1 written case interview (~45min)
and a case (Note: interview may  1 typical case interview (~45min)
start with the case)

 Shorter prompts- Most cases feature shorter prompts (2-4 sentences) . Candidates should feel
free to ask additional questions before creating a unique framework
 Charts and graphs- Bain has a few unique chart and graph formats that should be reviewed
(materials are on their website) before interviews to become familiar with each type
Unique Interview Features  Second level insights- Candidates should focus on the business implications of information
provided during the case (the “so what?”)
 Action-oriented recommendation The recommendation should be crisp and concise and contain
specific actions the client could take immediately

 Associate Consultant
 Senior Associate Consultant
 (Business School); Summer Associate
Career Progression  Consultant
 Case Team Leader
 Manager
 Principal
 Partner 7
Boston Consulting Group (BCG)
BCG is a premier strategy firm developing and implementing high-value opportunities for change for
Private, Public and Not for Profit Organizations
 Generalist in the beginning – can choose to focus on industry as one moves into project leader
 Strong regional staffing model
 Flat organization with a lot of transparency; communication is direct and feedback is highly valued
 “Chart your own course” philosophy – you can specialize in a particular industry early or take on a
Overview variety of assignments across different countries or take a sabbatical to work for a non-profit for a
year
 Strong mentoring culture, frequent interaction with partners on cases and lots of training
opportunities if you join BCG full-time. Personal development is taken very seriously

Round 1 Round 2
Interview Overview  Two analytical cases with a portion  Two to three analytical cases with a portion
of the time dedicated to behavioral of the time dedicated to behavioral/fit
fit questions – 45 min each questions – 55 minutes each

 Be prepared for the behavioral portion of the case to bleed into the analytical portion of the case.
The break between the two is not always obvious and clear cut.
 Highly quantitative – be prepared for lots of complex math. Most decision round pitfalls are related
to slow or inaccurate mental math.
Unique Interview Features  Partners look for driving the case and the application of common sense judgment. Not simply
textbook knowledge.

 (Undergrad); Analyst – A1/A2 (denotes the years in the position)

 (Business School); Summer Consultant
 Consultant – C1/C2
Career Progression  Project Leader – PL1, PL2, PL3
 Principal – P1, P2, P3, Px
 Partner
 Sr. Partner / Managing Director 8
Deloitte Consulting LLP
Deloitte is a leading strategy firm bringing executable strategies to the Fortune 500

Deloitte has three service areas (below). Student must align with a service area before applying.
 Human Capital professionals bring industry expertise in integrating business, HR and talent
strategies to create business value through people
Overview  Strategy and Operations professionals bring deep industry experience with capabilities spanning
corporate and business unit strategy, M&A strategy, and sales and marketing
 Technology professionals focus on internal technology solutions, challenges, and innovation –and
full-spectrum delivery across strategy, implementation, management and operations

Round 1 Round 2
Interview Overview  Analytical Case– 30 min  Strategy Case– 60 min
 Behavioral– 30 min  Behavioral– 30 min
 Group Case– 90 min

 Long prompts- Some cases feature multi-paragraph introductions that include lots of data. Make
sure you capture all the information before moving on, since it’s usually not repeated.
 The Data Sheet- Deloitte often hands you a page with multiple exhibits (chart, graph, list, or data
table etc.), usually one in each of the four quadrants. Often you will need to combine information
Unique Interview Features
from different exhibits to synthesize an answer.
 The Group Case- You interview with 4-5 candidates. Each of you is assigned a role (usually
different than your prior work experience) and presented with overall and role specific questions.
Collaborate with your peers to successfully crack the case.

 Business Analyst
 Consultant
 (Business School); Summer Associate
Career Progression  Senior Consultant
 Manager
 Senior Manager
 Partner/Principal/Director 9
McKinsey & Company
McKinsey & Company is a global management consulting firm. We are the trusted advisor to the world's
leading businesses, governments, and institutions.
McKinsey recruits students into generalist and business technology tracks. Students can express an
interest in business technology (BTO) during the application process
Summer Associates are assigned to any of a wide range of industries, touching any point in the value
Overview
chain. Project (“study”) staffing is collaborative between SAs and Professional Development staff.
Structured, formal feedback is provided by a senior firm member twice during the summer. Informal
feedback is common, and is highly emphasized in the firm’s culture. M-Th travel is typical.

Round 1 (at or near Fuqua) Round 2 (at office)

Interview Overview  2 Interviews  3-4 Interviews depending on office
 20 min experience  20 min experience
 30 min case  30 min case

 The Personal Experience Interview- Unlike other firm’s behavioral interviews, McKinsey asks
candidates one question to asses behavioral/fit. Questions are rooted in at least one of four key
areas: problem solving, achieving, personal impact, and leadership. Details matter. The interviewer
may ask several follow up questions to understand your thought process in that situation. It’s not
Unique Interview Features
uncommon to spend 20 minutes on one experience.
 Highly Structured Cases- Cases often have discrete framework, brainstorming, and quantitative
“sections” that focus on a question specific to that section. Although candidates must drive the
analysis, the interviewer may redirect towards the next section.

 Business Analyst
 (Business School); Summer Associate
 Associate
Career Progression  Engagement Manager
 Associate Principal
 Partner
 Director
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L.E.K. Consulting
L.E.K. is a global strategy consulting firm. We counsel our clients on their key strategic issues, leveraging
our deep industry expertise and using analytical rigor to solve their toughest and most critical business
problems.
L.E.K. follows the generalist model with new consultants. There is no need to align with a specific
industry or area before interviewing. However, there is potential to specialize in a particular industry
Overview starting in your second year.
 Focus industries where L.E.K. has particular expertise include life sciences/ pharmaceuticals,
aviation and travel, basic industries (building materials/ manufacturing), retail, and private equity

Round 1 Round 2
 2 Interviews (~30min. each)  1 written case interview with presentation(1
Interview Overview  A few behavioral/fit questions hour to prepare, 30 min to present )
and a case  1 typical case interview with Mgr./ C (~30min)
 1 case/fit interview with MD (~45min)

 Shorter cases- L.E.K. cases are designed to be shorter than some of the other firms. First round
interviews last only 30 minutes including behavioral questions, meaning candidates must get
through the case within 20-25 minutes.
 Quantitative focus Nearly all L.E.K. cases contain a significant quantitative component, and
Unique Interview Features quantitative aptitude is very important in the evaluation of candidates. Many cases also require
familiarity with financial statements or basic finance concepts such as NPV. First round cases
typically include at least one market sizing case.
 Leadership potential in addition to standard behavioral questions such as “why L.E.K.?”
interviewers look specifically for candidates able to take on immediate management responsibility,
as consultants are given responsibility for managing associates on casework as soon as they join.

 Associate
 Associate Consultant
 (Business School); Summer Consultant
Career Progression  Consultant
 Manager
 Managing Director (Partner)

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Pricewaterhouse Coopers (PwC)
PwC Advisory helps clients build their next competitive advantage. You will help our clients improve
business processes, transform organizations and implement technologies.

Students must directly apply to one of the following practice areas:

 Health Industries
Overview  Public Sector
 Financial Services
 Products & Services Industry

Round 1 Round 2
 2 Interviews (~45min. each)  2 behavioral/fit interviews (~45min)
Interview Overview  Only behavioral/fit questions  1 case interview (~45min)

 First/Second Round Behavioral Interviews - PwC puts extra emphasis on your background and fit
with PwC. Your first interview will also include a discussion of which vertical (above) best fits with
your work experience and career goals.
 Case Interview - The case interview is a little different than other firms. The case is very
Unique Interview Features conversational as the candidate and interviewer discuss a business situation. Candidates may be
given a case to prepare 1-2 days in advance (usually 4-5 pages). On the interview day, candidates
are given questions on the case and are asked to prepare a slide deck presentation in an hour
before discussing it with the interviewer.

 Associate/ Experienced Associate (Undergraduate level)

 Summer Senior Associate (Business School internship)
 Senior Associate (After Business School)
Career Progression  Manager
 Director
 Partner

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ZS Associates
Our singular focus over our 30 years has been to help global companies maximize their sales and marketing
organizations’ performance and results.

Students must directly apply for one of two roles:

 Business Consultant- serve on project teams that deliver high-quality marketing and sales
strategy projects to clients. In particular, Business Consultants possess qualitative research and
Overview unstructured problem solving skills and/or advanced quantitative analytics skills
 Business Operations Consultant- manage overall projects and client engagements. They
support our clients' sales and marketing activities and ensure productivity and profitability in their
business operations.

Round 1 Round 2
 2 Interviews (~45min. each)  1 fit/behavioral interview
Interview Overview 1 behavioral  1 case interview
1 case  1 presentation case

 Case Focus- Although ZS rigorously tests a candidate’s public math skills and ability to synthesize,
do not neglect the qualitative component. In recent years ZS has begun to focus on both
qualitative reasoning as well as quantitative skills.
Unique Interview Features  Presentation Case- Candidates are provided information and must synthesize a presentation to a
panel of interviewers. Expect to be challenged and questioned.
 Rounds- ZS holds its second round interviews within a few days of its second round. Candidates
should plan accordingly to minimize potential conflicts.

 Associate
 Associate Consultant
 (Business School); Business Consultant Intern
Career Progression  Consultant
 Manager
 Associate Principal
 Principal
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The Basics

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 A Structured Approach
Overview
There are many opportunities throughout the case to demonstrate structured thinking. Creating an initial framework is one of
the most critical parts of the case. Your framework should serve as “roadmap” throughout the case. While many resources
provide sample frameworks, there is no right or wrong framework. Instead a good structure often has the following qualities:

 MECE- Mutually Exclusive, Collectively Exhaustive

 Horizontal and Vertical Logic
 Customized based on the prompt

Case Starts
The following prompts give you an opportunity to practice developing frameworks. Several of the prompts are based on
recent news articles. For additional practice read a WSJ, BusinessWeek, etc. article, write down an initial approach, then
verbally pitch/explain your framework.

1. Several restaurants in a small in Washington, D.C neighborhood have begun to offer a bottomless mimosa brunch (unlimited drinks
for a fixed price) within the past year. Charles, a small restaurant owner, is considering introducing this offering and approached your
firm for advice.

2. BigBank, a large financial services company, has recently acquired a smaller boutique bank specializing in mortgages. The deal has
closed and moved into the integration phase. As part of the acquisition, BigBank has promised 10% IT synergies. Additionally the
CIO promised the CEO that all system, data, and application migration will occur within the next six months. BigBank is asking
several consulting firms for assistance. What is your firms proposal?

3. Your friend Lauren has come to you with an amazing business proposal. She wants to sell frozen ice at Rehoboth Beach during the
summer. She is confident the business will be a success but needs $10,000 to get it started. Will you fund her proposal?

4. Archeologists recently discovered a living dinosaur in Australia! What should they do?

5. Bolts, a contract manufacturing company, started out making nuts an bolts for the aerospace industry. Through several strategic
partnerships, Bolts expanded its products to meet customer needs for ever more complex aircraft. Manufacturing and managing all
these products has become cumbersome. Bolts has hired you to assess its product offerings and determine which SKUs to retire.
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 Public Math and Common Applications
Public Math Resources
Almost all case interviews have a quantitative portion. You must be comfortable confidently articulating basic calculations in
front of someone else. If you find yourself struggling, there are several websites that let you focus on public math.

• https://www.caseinterview.com/math
• http://www.mathsisfun.com/worksheets/index.php

In order to replicate the case environment, time yourself and talk through the math. Once you are comfortable and accurate
with your public math, uses cases to practice other analytical aspects and drive to the “so what.”

Common Applications
Market Sizing
Often components of new product or market entry cases, Market Sizing tests your logical structuring and quantitative skills.
There are many examples online and in other books. This as an opportunity to showcase your business intuition. Examples
include:
 What is the annual contact lens market in the US?
 How many mailboxes are in the city of Manhattan?
 How much money is annually donated to the New York City youth orchestra?

Profitability
In previous years, profitability or profit maximization was the most common case type. Furthermore, almost all cases use one
part of the equation. The profit equation is a good starting point in your cases preparation. A quick refresher is below:

Revenue Cost Profit

Price (P)  Fixed  Overhead
X  Variable  SG&A
Volume/ Quantity (Q)  F+ V*Q  Labor
 Materials
Consider Product Mix  IT
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 Public Math and Common Applications
Valuation
In a variety of cases, you could be asked or required to estimate the value of a business. The formula below is one common
method.

Often the interviewer may tell you to ignore certain factors (taxes, deprecation) or you may have to make an assumption

Comprehensive Simplified
Sales Revenues from operations
- COGS Labor + Materials + Book Depreciation
- SG&A Selling, General and Administrative Costs
EBIT Earnings Before Interest and Taxes
- Taxes Calculated on EBIT
EBIAT Earnings Before Interest After Taxes Annual Profit

+ DEP Book Depreciation (R-G)

- CAPX Incremental Working Capital

FCF Free Cash Flows

FCF
(R-G) Rate of Return – Growth Rate

 After you get a number remember the “so what!”

 Combine other case facts to highlight your analytical and business skills

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The Cases

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 Case 1: Drinks on a Plane
First Round
Our client, CD OutBev, is a major alcoholic beverage distributor. They have asked us to estimate
the daily market size for alcoholic beverages on US domestic flights. First, I would like you to
Prompt #1 brainstorm a few ways we might approach this problem. Once we agree on an approach, I will then
ask you to make some assumptions for me as we work together to size the market. Be sure to
provide an explanation for all assumptions.

This case should take no more than 30 minutes, including behavioral and Q&A. Make sure the
candidate doesn’t get too bogged down in one part of the case- if it takes more than 20-25 minutes
to complete the case, they will probably be stopped. It is OK to push them along once or twice.

Give the interviewee 1-2 minutes to develop a plan of attack if they ask for it. If asked, we are
looking for number of drinks and dollars, in that order.

Some sample approaches might include:

• Top down - start with total number of domestic passengers in a year & estimate a percentage of
passengers that purchase alcohol. OR Take the US population and estimate number or flights
taken per person on average, proceed from there.
Guidance • Bottom-up (PERFERRED METHOD)-Start with number of passengers on one airline or in one
city , and build up from there.

If we knew how many flights left one airport each day on average, and how many airports there
were in the US, I could get the number of daily flights. Then by estimating the number of
passengers on each flight, we could estimate our potential customer base. In order to get the
number of flights at one airport, we could use the number of gates.

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 Case 1: Drinks on a Plane
First Round

Ask the candidate to provide assumptions & rationale for each stage before guiding them to
the preferred assumption.

How many Major Airports in the US? 50

(Sample explanation: there are 50 states, each with about one “major city” on average, so I’d
assume there are 50 major airports)

Average number of Gates per Airport? 50

(Some of the largest US airports like Atlanta or JFK have well over 100 gates, but smaller cities like
Raleigh/Durham have approximately 30 gates. 50 seems like a reasonable average)
50*50= 2,500 Total Gates

Flights per gate per day? 8

(About one flight every two hours from 7am to 11pm for each gate.)
Guidance 2500*8=20,000 domestic flights per day

Average Seats per flight: 100

(A typical Southwest Airlines 737 has about 25 rows of 6, or 150 seats. However many small
regional jets have only 12 rows of 2X2 or 48 seats. 100 seems like a decent midpoint)

% occupied seats/flight (“load factor”): 80%

(most flights are pretty full these days, well over half, but there are still some empty seats, 80%
seems like a good assumption)
= 80 passengers per flight

80*20,000 = 1,600,000 passengers per day. Now we just need the number of drinks purchased
per passenger.

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 Case 1: Drinks on a Plane
First Round

Now that we have determined our potential customer base, how can we further segment the market
Prompt #2 to arrive at the daily market size?

Allow the candidate to offer one or two options, but direct them towards age.
The candidate should realize that some proportion of the population can not legally drink. This
makes age an appropriate way to segment the market.

Provide the candidate the following age breakdown of the domestic air travel market:
0-20 years old= 10% of passengers
20-40 years old= 25%
40-60 years old= 40%
Age 60+= 25%

Expected calculation- Passengers by segment (% * 1.6 million)

0-20- =160,000 20-40 =400,000
Guidance 40-60=640,000 60+= 400,000

Next provide the candidate the % of passengers in each segment who drink
0-20:- 0% (0 passengers) 20-40: 20% (80,000)
40-60 :30% (192,000) 60+ 14% (56,000)

Next provide the candidate the average number of drinks purchased by those who do drink:
20-40 & 40-60- 2 drinks/ passenger. 60 ~ 1 drink/passenger
Expected calculation: 2*80,000+2*192,000+1*56,000= 600,000 drinks per day.
Price per drink = $6.00 * 600,000= $3.6M size of daily market

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 Case 1: Drinks on a Plane
First Round

CD OutBev is considering purchasing the exclusive rights to supply all alcoholic beverages on US
domestic flights for an indefinite period for $2 billion. Based on the market size we found, should
Prompt #3 they invest if we expect the market to grow by 3% per year? (Note: use the daily figure we
determined, no need to convert days into an annual estimate)

The candidate should recognize that this is a present value of a perpetuity, and use the
equation
PV= FCF / (r-g) where FCF = free cash flow, r= cost of capital, g= perpetuity grow rate.
You can provide this equation if the candidate asks for it, but a strong candidate will know it.

Provide the following information if asked :

• Profit margin is 50% ($3,600,000 * 50% = $1,800,000) * 365 (okay to round to 350) = $630M
Guidance • Cost of capital is 13%

PV= 630M / (.13-.03) = $6.3B

Since $6.3 billion > $2 billion purchase price, the candidate should recommend investing.

22
 Case 1: Drinks on a Plane
First Round

Expected:
• Candidate completes the market sizing calculations with minimal errors.
• Able to correctly take the present value in the investment decision portion with some help from
the interviewer

Good:
• Provides more than one viable approach to solve the problem, but quickly switches methodology
Performance if asked by the interviewer.
• Makes reasonable assumptions based on personal experience and communicates them
Evaluation succinctly to the interviewer.
• No more than a couple of quant mistakes
• Recognizes the need for the present value formula and knows it.

Excellent:
• Near-flawless on math, strong explanation of all assumptions, adds some additional insight
based on knowledge of the airline industry (“load factors are high because of all the recent
merger activity”) or (I’d expect margins are typically high when we’re dealing with beverages) .

23
 Case Interview feedback form
Case _______________________ Case type ______________ Interviewer ____________________

Execution
Case start time __:__
• Structure 1 2 3 4 5
 Logical approach Comments: Framework development ______ min
 MECE Framework explanation ______ min
 Appropriate drive to solution Case discussion ______ min
• Quantitative Ability 1 2 3 4 5
 Speed Comments:
Case end time ___:____
 Accuracy
 Comfort, reaction to mistakes Overall Rating: 1 2 3 4 5
• Business intuition 1 2 3 4 5
 Practical Comments: Strengths
 Insightful
 Breadth & depth across multiple functions
 Creativity

Communication
• Professionalism 1 2 3 4 5
 Poise Comments:
 Confident-Persuasive
 Articulate-concise
 Client ready Weaknesses
• Written 1 2 3 4 5
 Clarity of writing and page layout Comments:
 Ability to refer back
 Comfort, reaction to mistakes

Behavioral (optional)
• Quality of star stories 1 2 3 4 5 Comments:
• Length 1 2 3 4 5
• Clarity 1 2 3 4 5
Key: 1=Bottom 10%, 2= 10th-25th percentile, 3=
• Relevance 1 2 3 4 5
middle 50%, 4= 75th-90th percentile, 5=Top 10% 24
 Case 2: Snowboards in Colorado
First Round

Prompt What is the 2013 market size (in revenue) of snowboards in the state of Colorado?

This is a market estimation case. The below analysis is one way that it could be solved, and the
information may be provided if requested. It is also acceptable for the candidate to make many of
these assumptions as long as you find them reasonable.

Either way, ask the candidate to walk you through his/her thought process for solving the problem
before embarking on the calculations. Once you are comfortable with his/her approach, ask him/her
Guidance to find the answer, explaining as he/she goes.

In this case, it is safe to estimate the retail market size for snowboards (not rentals), but a good
candidate should suggest evaluating the rental market as well (i.e. those boards purchased by
resorts to be rented to day snowboarders)

The candidate should generate the below calculation. If he/she is stuck, assist him/her in arriving at
this equation.

Market size = Population of CO * % Snowboarders * Avg Snowboard Price * Replacement Rate of

Snowboard
Analysis
Population of CO
 Population of the United States: 300 million
 US has 50 states; therefore, the average population per state is 6 million. Candidate should
reason that CO is average sized state. Reasonable estimate is a population of 5-6 million

25
 Case 2: Snowboards in Colorado
First Round
% of Population that Snowboards:
• Have the candidate talk through how to properly segment the population and discuss which
segments might snowboard. Logical way to segment the market is needed for strong
performance:
− Age segmentation (15-25 yrs have higher percentage snowboarding than over 60 yrs)
− Wealth segmentation (rich can afford to pay for lift tickets)
− Macroeconomic impacts on snowboard purchases (e.g. elastic demand)
• Reasonable estimate: Likely around 10% of CO households. Acceptable answers from
candidates range from 5-20% of households, given reasons listed above.

Average Snowboard Price:

• Prices vary by brand
• Reasonable estimate: $200-$1,000
Analysis
Replacement Rate of Snowboards:
(cont.) • Candidate should reason that all individuals will not purchase a snowboard each year and should
divide the number they have arrived at thus far by the average life of a board (or multiply by the
replacement rate). Again, segmentation here is indication of how strong the candidate is or is
not.
• Reasonable estimate: average boards should last 2-10 years

Result:
5 M people in CO * 10% Snowboarders = 500,000 Snowboarders * $500 per board =
$250,000,000 Total Market Size / 5 years =

$50M PER YEAR

26
 Case 2: Snowboards in Colorado
First Round
Expected:
Candidate will develop a structured approach to finding a solution. Assumptions will be clarified
and based on reasonable logic.

Good:
Performance Candidate will use numbers or round appropriately to simplify calculations. He/she will correctly and
Evaluation clearly walk the interviewer through the calculations. Appropriate segmentation of the population is
a must. Considering rental markets is a plus for good candidates.

Excellent:
In addition to the above, the candidate will evaluate his/her final number and provide explanation as
to how changes to assumptions would affect the estimation.

27
 Case Interview feedback form
Case _______________________ Case type ______________ Interviewer ____________________

Execution
Case start time __:__
• Structure 1 2 3 4 5
 Logical approach Comments: Framework development ______ min
 MECE Framework explanation ______ min
 Appropriate drive to solution Case discussion ______ min
• Quantitative Ability 1 2 3 4 5
 Speed Comments:
Case end time ___:____
 Accuracy
 Comfort, reaction to mistakes Overall Rating: 1 2 3 4 5
• Business intuition 1 2 3 4 5
 Practical Comments: Strengths
 Insightful
 Breadth & depth across multiple functions
 Creativity

Communication
• Professionalism 1 2 3 4 5
 Poise Comments:
 Confident-Persuasive
 Articulate-concise
 Client ready Weaknesses
• Written 1 2 3 4 5
 Clarity of writing and page layout Comments:
 Ability to refer back
 Comfort, reaction to mistakes

Behavioral (optional)
• Quality of star stories 1 2 3 4 5 Comments:
• Length 1 2 3 4 5
• Clarity 1 2 3 4 5
Key: 1=Bottom 10%, 2= 10th-25th percentile, 3=
• Relevance 1 2 3 4 5
middle 50%, 4= 75th-90th percentile, 5=Top 10% 28
 Case 3: SPG
First Round
Your client is SPG, an international hotel chain that specializes in boutique luxury vacations. The
client has over 500 properties worldwide mostly concentrated in North America and Europe. These
markets are highly correlated with the global economy. In an effort to diversify, SPG is focusing on
Latin America. SPG is interested in opening another 200 room hotel in Costa Rica and has
requested your consulting firm’s help. There are several locations within Costa Rica suitable for the
Prompt #1 new location as costs are relatively uniform throughout the country.

1. What should SPG consider when evaluating site locations?

2. Since costs will be the same, regardless of the site, which location offers the highest average
daily revenue per room?

Note: The candidate should focus on revenue. A strong candidate will acknowledge that costs are
not a concern and may even express skepticism

Typically Questions and Response:

• Why Costa Rica? The client has selected this market due to familiarity with the country and ease
of doing business. They are not interested in alternatives
• Do they have other hotels in Costa Rica? Yes, one other located in Manual Antonio
• What is a boutique luxury hotel? All the client’s hotels have 200 rooms and cater to the wealthy.
As a result, these room typically go for 50% more than the average rate and the total spend per
room is 100% more then the average room
Guidance
Sample Framework:
• Entry: Buy, Build, Partner
• Revenue: Room, Food/Drinks, Activities, etc.
• Risks: Tourism Trends, Competition, etc.

Focus on the revenue bucket. A strong candidate will explain the framework and prioritize
revenue. Push the candidate to brainstorm beyond the initial framework for sources of
revenue to a hotel
29
 Case 3: SPG
First Round

Prompt #2 That sounds like a good approach. Please take a look at Exhibit 1. Tell me what you think?

Interviewer to review candidate calculations using Appendix 2 and 3.

Before beginning the calculations:

• A strong candidate will tell the interviewer initial findings or present a hypothesis
• A weak candidate will read the exhibit to you or just start doing math
Guidance The candidate should conclude that Arenal Volcano offers the highest average daily revenue
at $356.25.

$356.25* 360 days/year * 200 rooms = $25.65MM per year revenue opportunity.

30
 Case 3: SPG
Exhibit 1
Map of Potential Locations Property Information
San Jose • The hotels are open 360 days per year
• The cost of cleaning each room is $25 dollars
Arenal Volcano Avg. Room/ Day: $100 per day
Avg. Daily Spend/ Room: $25 • Presence of another SPG property in the same
Avg. Room/ Day: $250 Other SPG Properties: 0
location will decrease occupancy by 50%
Avg. Daily Spend/ Room: $50
• All hotels have 200 rooms
Other SPG Properties: 0
1 • There are typically 4 guests per reservation

2 3

Average Occupancy by
Attraction
= 60% = 100%
Guanacaste 4

Avg. Room/ Day: $300 = 75% = 50%

Avg. Daily Spend/ Room: $100 Manual Antonio
Other SPG Properties: 0
Avg. Room/ Day: $350 = 80% = 25%
Avg. Daily Spend/ Room: $150
Other SPG Properties: 1
= 10%

Category Impact on Average Rates and Spend

Category Room Factor Daily Spend Factor
Budget -50% -50%
Luxury +50% +100%
31
Case 3: SPG
Exhibit 2: GUIDANCE

Start Here

• Map provides “base

rates/spend”
• Candidate may use the
information in the other
boxes to calculate revenue
• The circled information is
required. Other is meant to
complicate calculations or
not relevant.

32
 Case 3: SPG
Exhibit 3: GUIDANCE - Calculations
Location/Site
1 2 3 4
Room
Base $ 250 $ 300 $ 100 $ 350
Luxury Bonus (50%) $ 125 $ 150 $ 50 $ 175
Effective Rate $ 375 $ 450 $ 150 $ 525

Daily Spend
Base $ 50 $ 100 $ 25 $ 150
Luxury Bonus (100%) $ 50 $ 100 $ 25 $ 150
Effective Rate $ 100 $ 200 $ 50 $ 300

Total spend $ 475 $ 650 $ 200 $ 825

Occupancy 0.75 0.5 1 0.8

Cannibalization Penalty (x.5) no no no yes
Effective Occupancy 0.75 0.5 1 0.4

Spend per day $ 356.25 $ 325.00 $ 200.00 $ 330.00

33
 Case 3: SPG
First Round
What else should the client consider? (This is about risks)

Prompt #3 The candidate should briefly outline some risks. Then suggest a recommendation.
If the candidate does not mention risks, suggest a recommendation.

Expected:
• The candidate focuses on revenue
• The candidate engages the interviewer while calculating revenue, talking through the thought
process and findings

Good:
• The candidate demonstrates structured thinking throughout the case (prompt, brainstorming, and
analysis/ calculations)
Performance • Even though the prompt asks for the daily average, a strong candidate will perform rough
Evaluation calculations to synthesize a “so what” (i.e. annualize the calculations)
• Candidate performs calculations accurately with little help
• The candidate drives the case requiring very little interviewer prompting

Excellent:
• The candidate shows confidence and creativity throughout the case (Framework, Brainstorming,
Risks)
• The candidate quickly and accurately performs calculations with no help from interviewer

34
 Case Interview feedback form
Case _______________________ Case type ______________ Interviewer ____________________

Execution
Case start time __:__
• Structure 1 2 3 4 5
 Logical approach Comments: Framework development ______ min
 MECE Framework explanation ______ min
 Appropriate drive to solution Case discussion ______ min
• Quantitative Ability 1 2 3 4 5
 Speed Comments:
Case end time ___:____
 Accuracy
 Comfort, reaction to mistakes Overall Rating: 1 2 3 4 5
• Business intuition 1 2 3 4 5
 Practical Comments: Strengths
 Insightful
 Breadth & depth across multiple functions
 Creativity

Communication
• Professionalism 1 2 3 4 5
 Poise Comments:
 Confident-Persuasive
 Articulate-concise
 Client ready Weaknesses
• Written 1 2 3 4 5
 Clarity of writing and page layout Comments:
 Ability to refer back
 Comfort, reaction to mistakes

Behavioral (optional)
• Quality of star stories 1 2 3 4 5 Comments:
• Length 1 2 3 4 5
• Clarity 1 2 3 4 5
Key: 1=Bottom 10%, 2= 10th-25th percentile, 3=
• Relevance 1 2 3 4 5
middle 50%, 4= 75th-90th percentile, 5=Top 10% 35
 Case 4: Mexican Tile Company
First Round

A large, Mexican Tile company, Azulejo, has enjoyed rapid sales growth and profitability the last
several years. However, the company’s sales growth has been stagnate so far this year. The
Prompt #1 company is also concerned that it over-hired this past year and may need to reduce headcount.
The company requests your help to assess the current situation and to determine the optimal next
steps.

The goal of this case is two fold:

1) Understand the financial implications of retaining and/or laying off employees
2) Develop strategies that would allow Azulejo to retain workforce and spark sales growth and
profitability

Provide the following information upon request:

• Azulejo occupies a very dominant position in the Mexican market.
• The market growth has slowed down dramatically over the last year. Many industry experts
believe the market has become saturated.
• Azulejo needs to find a way to generate $5M per year in additional profits to avoid layoffs
• Azulejo has the ability to move into other markets. It has access to a warehouse in McAllen,
Guidance Texas (southern part of the state) where it could store its tiles for US distribution

Costs associated with expansion into the United States

Fixed Costs: Warehouse ($600k/year), US workforce (350k/year), trucks and drivers (500k/year)
Variable Costs: Cost per tile (.50/tiles), Sales Cost (.08/tile), Shrink (.02/tile), Shipping (.10/tile)
*assume this list is exhaustive of all Costs

Total US Market Size – 400 M tiles / year

Revenue per Tile - $1.30
Expected Market Capture for Azulejo – 8% within three years

36
 Case 4: Mexican Tile Company
First Round

What is the NPV of the US expansion opportunity, given a discount rate of 0%?
Prompt #2
Should they enter the US tile market?

To be given if requested:
Profit Target - $5M

Calculations to be performed:
• US Market – 400M tiles
• US Revenue – 400M tiles * $1.30 = $520M
• Azulejo Share – 400M * 8% = 32M Tiles
• Azulejo Revenue = 32M * $1.30 = $41.6M
• Azulejo Sales Margin = (Unit Revenue – Variable Cost) * Units =
($1.30-$0.70) * 32M = $0.60 * 32M = $19.2M
Guidance • Azulejo Profit = Total Margin – F.C. = $19.2M – $1.45M = $17.75M

NPV= $17.75 M > $5 M Required Return = $12.75 M

Yes, Azulejo should enter the US Tile Market

37
 Case 4: Mexican Tile Company

First Round
Expected:
• The interviewee should realize that the Mexican Tile Market is saturated and consider
alternatives that don’t involve the Mexican Market.

Good:
• Candidate should recommend expanding into new geographical markets
• Candidate should consider changing product mix to compete in markets within Mexico
• Walk through the financial viability of expanding into new markets, in this case US
Performance • Give a recommendation, based on financial analysis, to enter the market
Evaluation
Excellent:
• Solve the specific case, which is to expand into the US as well as provide viable, creative
alternatives.
• Discussing competitive response by other US firms.
• Discuss the risks as well as recommend a good entry strategy to optimize opportunity for
success.

38
 Case Interview feedback form
Case _______________________ Case type ______________ Interviewer ____________________

Execution
Case start time __:__
• Structure 1 2 3 4 5
 Logical approach Comments: Framework development ______ min
 MECE Framework explanation ______ min
 Appropriate drive to solution Case discussion ______ min
• Quantitative Ability 1 2 3 4 5
 Speed Comments:
Case end time ___:____
 Accuracy
 Comfort, reaction to mistakes Overall Rating: 1 2 3 4 5
• Business intuition 1 2 3 4 5
 Practical Comments: Strengths
 Insightful
 Breadth & depth across multiple functions
 Creativity

Communication
• Professionalism 1 2 3 4 5
 Poise Comments:
 Confident-Persuasive
 Articulate-concise
 Client ready Weaknesses
• Written 1 2 3 4 5
 Clarity of writing and page layout Comments:
 Ability to refer back
 Comfort, reaction to mistakes

Behavioral (optional)
• Quality of star stories 1 2 3 4 5 Comments:
• Length 1 2 3 4 5
• Clarity 1 2 3 4 5
Key: 1=Bottom 10%, 2= 10th-25th percentile, 3=
• Relevance 1 2 3 4 5
middle 50%, 4= 75th-90th percentile, 5=Top 10% 39
 Case 5: Winter Olympics
First Round

Your client is a large U.S T.V network and they are looking into buying the rights to broadcast the
winter Olympics.
Prompt #1
The opportunity to bid on this target closes shortly, and you need to advise the client on
how much should they bid, and what should they take into account when bidding.

Additional information, should be provided only upon request:

• The winter Olympics would be held in Sochi , Russia.
• The network will be filming the events in Russia, and broadcasting the events only in the U.S.
• The network has no experience in broadcasting sports events, nor do they have an audience in
this segment, nor experience filming events abroad.
• There is no specific goal for the network (no ROI or specific profit) – just be profitable from the
bid.

Guidance This case is focusing on a cost benefit (incremental, and non incremental) for the network.

The candidate should present a framework focusing on :

1. Industry : Understanding the network’s main competitors, trends, and most importantly the
viewers who will play a key factor in this case.
2. Company – Basic profitability tree, the financials of the company (do they have enough money
to go through with this bid), and the feasibility of proceeding with this bid (can they actually “pull
it off”).
3. Risks that are affiliated with this bid: No experience, new market segment, losing the bid etc.

40
 Case 5: Winter Olympics
First Round
A good candidate should mention couple of potential revenue streams such as: Pay per view,
advertisers, reselling re-runs rights, merchandise.

Information that should be provided by the interviewer:

Type of hour Value per 30 seconds commercial

Prime time $400k

Else $200k

Upon request only the interviewer should proved the following information:
• Prime time: week days (M-F) – 7 p.m. – 11 p.m., weekends (S+S) – 12 hours a day day.
• The Olympics will be held for 17 days, 10 weekdays, 5 weekends days, and two special events
Guidance • The Olympics will start with an opening ceremony (7 p.m. – 11 p.m.), and will end with a closing
event (9 a.m. – 5 p.m.).
• The audience will tolerate only 10 minutes of commercials per hour.

The candidate has to make an assumption when the broadcasting will start and will they end
(11 a.m. – 11 p.m. every day is reasonable), with justification. A strong candidate will talk about time
differences between Russia and the U.S (effects the time when the events should be broadcasted).

41
 Case 5: Winter Olympics
First Round
The candidate should perform a revenue calculation (this is the best, and the simplest one to do!):
• Each commercial is 30 seconds, 10 minutes of commercials / hour ~ 20 commercials / hr.
• Prime time hour = 20 commercials * $400k = $8MM
• Non prime time hour = 20 commercials * $200k = $4MM

Type of day # of # of Revenue per day # of days Revenue per day type
prime non
time prime
hours time
hours

Weekend 12 0 12 hr * $8M = $96M 5 5 * $96MM= $480M ~ $500M

Week days 4 8 4 hr * $8M+ 10 10 * $64M = $640M ~$600M

8 hr * $4M = $64M
Guidance
Special days 4 (O) + 0 4 hr * $8M = $32M 2 (F +S) $64M + $32M = $96M ~ $100M
(opening + 8 (C) 8 hr * $8M = $64M
closing)

Total revenue ~$1.2B (okay to round)

42
 Case 5: Winter Olympics
First Round
The candidate should now move into cost analysis and brainstorm about potential costs. The
candidate should look at segmenting costs by:
• Fixed: marketing (advertising before the events), equipment (the network does not own sports
filming equipment).
• Variable: additional labor, transportation, accommodation, security for crew, processing, financing
(investment).

The interviewer should provide the candidate the with the total costs only after the
brainstorming - $450M.

In addition to these costs, a strong candidate will recognize potential to lose revenue from the
current commercials.
• The candidate should estimate how much the client stands to lose from existing commercial
Guidance revenues
• The estimation should be roughly half of the potential revenue
• In this case the opportunity costs will be $1.2B/2 = $600M.

The max bid should be: $1.2B - $450M - $600M = $150M.

43
 Case 5: Winter Olympics
First Round

Prompt #2 What other factors does the network take into account before proceeding with the bid?

The candidate should address a number of key issues:

1. Risks (mentioned in page #1 of the case).
* Strong candidates will analyze what happens if client loses the bid (i.e. viewers lost to
competing network, advertisers lost, revenue lost).
2. Non incremental value – new viewers to our network (approaching new segments), larger
Guidance viewer base, new advertisers, increase in brand name.

The interviewer should prompt the candidate to form a recommendation which will integrate all
parts of the case.

44
 Case 5: Winter Olympics
First Round

Expected:
• Completes all math accurately
• Proceeds through the process to the answer with some prompting

Good:
Performance • Is able to drive the process forward, covering the necessary points with minimal prompting
• Walks the interviewer clearly through the math – also making the math simple
Evaluation
Excellent:
• Drives the process forward while recognizing that they need to figure out the opportunity costs.
• Acknowledges all of the risks and the non-incremental value in this case.
• Provides an answer first recommendation with the max bid, the risks involved and next steps (a
superb candidate will suggest analyzing the opportunity to open another channel and
broadcasting the games on it).

45
 Case Interview feedback form
Case _______________________ Case type ______________ Interviewer ____________________

Execution
Case start time __:__
• Structure 1 2 3 4 5
 Logical approach Comments: Framework development ______ min
 MECE Framework explanation ______ min
 Appropriate drive to solution Case discussion ______ min
• Quantitative Ability 1 2 3 4 5
 Speed Comments:
Case end time ___:____
 Accuracy
 Comfort, reaction to mistakes Overall Rating: 1 2 3 4 5
• Business intuition 1 2 3 4 5
 Practical Comments: Strengths
 Insightful
 Breadth & depth across multiple functions
 Creativity

Communication
• Professionalism 1 2 3 4 5
 Poise Comments:
 Confident-Persuasive
 Articulate-concise
 Client ready Weaknesses
• Written 1 2 3 4 5
 Clarity of writing and page layout Comments:
 Ability to refer back
 Comfort, reaction to mistakes

Behavioral (optional)
• Quality of star stories 1 2 3 4 5 Comments:
• Length 1 2 3 4 5
• Clarity 1 2 3 4 5
Key: 1=Bottom 10%, 2= 10th-25th percentile, 3=
• Relevance 1 2 3 4 5
middle 50%, 4= 75th-90th percentile, 5=Top 10% 46
 Case 6: Semi Co.
First Round

Semi Co. is an international semiconductor company that designs and manufactures chips that are
used in three industries including: consumer electronics, healthcare and automotive. The CEO of
Semi Co. has witnessed decreasing profit over the last three years.
Prompt #1
Semi Co. has hired you to fix the decline in profit. What are the areas that they should look
into to identify their problem?

The candidate should come up with a MECE framework that covers the following areas: industry
trend, product mix, competitors, revenue and cost (profitability).

When the candidate tries to clarify whether it is a revenue problem or a cost problem, give the
following information below:
• 70% of revenue is from consumer electronics, 20% from healthcare and 10% from automotive.
Guidance • Revenue over the past three years have been stable.
• The profit margin for consumer electronics declined from 50% to 25%
• The profit margin for healthcare increased from 50% to 70%
• The profit margin for automotive declined from 100% to 80%

The candidate should be able to identify consumer electronics is the client’s major problem.

47
 Case 6: Semi Co.
First Round

Prompt #2 What are the reasons that caused profit declined in consumer electronics ?

The candidate is expected to bring up the following costs with the value chain structure.
R&D Manufacturing Packaging Shipping Customers

Provide the following information when asked:

• The price of consumer electronics chips has decreased. The CEO mentioned that there are lots
Guidance of players in consumer electronics industry, therefore Semi Co. has high price pressure. They
cannot increase the price for their current products.
• The volume sold has increased. But they need to be a price leader to get high volumes in the
future.

The candidate should figure out the client needs to decrease cost.

48
 Case 6: Semi Co.
First Round

Semi Co. has determined, with your help, that they need to decrease cost to increase their profits.
They have determined that the best way to do this is by cutting the size of their chips down.
Prompt #3
If Semi Co. wants to decrease the chip cost by 10%, by what percentage should the chip size be
decrease?

Provide the following information to the candidate:

• The chip is cut from a wafer.
• The current dimension of the chip is 10mm x 10mm. Semi Co. can get 10,000 chips from one
wafer.
• The cost of wafer is $500.
• Packaging cost per chip is $0.08.
Guidance • The wafer test cost per chip is $0.02.
• The Final Test cost per chip is $0.02.
• The labor rate is $3.5 / hr. The labor time per chip is roughly 30 sec.
• Shipping cost per chip is 5% of total above cost.
• Overhead per chip is 15% of total above cost.
• Profit per chip is 30% of total above cost, or 25% including shipping and OH.

49
 Case 6: Semi Co.
First Round
The candidate should realize that:
1. The wafer cost per chip is $0.05 ($500 / 10,000 chips)
2. The total cost per chip is $0.30
(0.05 for wafer, 0.03 for labor, 0.12 for packaging and testing, 0.10 for shipping OH&P).
3. The total cost per chip after 10% cost reduction is $0.30 * 90% = $0.27
4. Assume all cost reductions come from the wafer costs, thus the new wafer cost is $0.02 / chip
5. Semi Co. should decrease the chip size by 60%. (Which is very challenging)
6. The number of chips per wafer is $500 / $0.02 = 25,000
7. The chip size should be 10,000 * 100 / 25,000 = 40 (mm^2)
8. The detailed calculation is:

Guidance 25,000

50
 Case 6: Semi Co.
First Round

The CEO is walking in the room in 1 minute and expect a summary, please summarize your
Prompt #4 recommendation?

The candidate should have a structured approach about the final recommendation:

1. Semi Co. should focus on consumer electronics since it accounts for 70% of the revenue.
2. If they could decrease the chip size by 60%, their cost can be decreased by 10%, and increase
their profits by roughly 4% (not big impact). They should not work on this as it is difficult to
Guidance achieve and low cost impact.
3. Semi Co. should check if they can decrease the packaging cost since it is the key cost
driver (around 27% of the total cost)
4. To further increase profit in the long term, Semi Co. should find methods to increase their price.
For example, invest more in R&D to be technology leader and get a price premium.
5. In the long term, develop healthcare and automotive revenue sources.

51
 Case 6: Semi Co.
First Round

Expected:
• Provides a MECE framework, mentioning industry trend, product mix, revenue and cost
• Realizes that consumer electronics should be their major focus
• Correctly answers all questions

Good:
Performance • Correctly provides the value chain structure and think logically of the reasons for profit declining
Evaluation • Asks relevant clarify questions right after the prompts are given
• Performs all calculations with no errors and with little prompting

Excellent:
• Correctly and quickly performs all calculates in the case with no assistance from the interviewer
• Keeps the interviewer engaged during the calculations and brainstorm sessions, demonstrating
strong communication skills

52
 Case Interview feedback form
Case _______________________ Case type ______________ Interviewer ____________________

Execution
Case start time __:__
• Structure 1 2 3 4 5
 Logical approach Comments: Framework development ______ min
 MECE Framework explanation ______ min
 Appropriate drive to solution Case discussion ______ min
• Quantitative Ability 1 2 3 4 5
 Speed Comments:
Case end time ___:____
 Accuracy
 Comfort, reaction to mistakes Overall Rating: 1 2 3 4 5
• Business intuition 1 2 3 4 5
 Practical Comments: Strengths
 Insightful
 Breadth & depth across multiple functions
 Creativity

Communication
• Professionalism 1 2 3 4 5
 Poise Comments:
 Confident-Persuasive
 Articulate-concise
 Client ready Weaknesses
• Written 1 2 3 4 5
 Clarity of writing and page layout Comments:
 Ability to refer back
 Comfort, reaction to mistakes

Behavioral (optional)
• Quality of star stories 1 2 3 4 5 Comments:
• Length 1 2 3 4 5
• Clarity 1 2 3 4 5
Key: 1=Bottom 10%, 2= 10th-25th percentile, 3=
• Relevance 1 2 3 4 5
middle 50%, 4= 75th-90th percentile, 5=Top 10% 53
 Case 7: Who Will Buy Our Wine?
First Round

Your client is Deda Mitsa Winery, a mid-size wine producer in the Republic of Georgia. They
produce ten million bottles of wine annually and are moderately profitable. They enjoy a reputation
as a high quality wine producer; many of Deda Mitsa Winery’s competitors are known to import
grapes and pass them off as Georgian in their wines.
Prompt #1 Even though Georgian wine is largely unknown in many parts of the world, it is the one of the most
prized wines of the former Soviet Union and Eastern Europe. However, Russia has recently
declared a moratorium on imports of Georgian wine due to the prevalence of counterfeits. Deda
Mitsa Winery usually exports 50% of its wines to Russia and is uncertain where to make up the
difference. What options are available to the company?

Provide the additional information if requested:

• The remainder of Deda Mitsa Winery’s stock is sold to the Ukraine (30%) and domestically
(20%).
• Overall, 100 million bottles of Georgian wine are produced every year, giving Deda Mitsa Winery
a 10% market share.
• The potential of the domestic market is limited because many Georgians make wine at home.

Quality frameworks include many/all of the following possibilities:

• Raise prices
Guidance • Shut down the company
• Move into alternate grape products (juice, vodka) that are not covered by the embargo
• Seek an exemption from the embargo based on the company’s reputation for quality
• Export to new markets
• Expand sales domestically

Steer the candidate toward exporting to new markets. Ask the candidate to brainstorm what factors
determine where Deda Mitsa Winery should export. If the candidate asks about wine consumption
levels, present Exhibit 1 and 2.
54
 Case 7: Who Will Buy Our Wine?

Exhibit 1: Per Capita Wine Consumption

50

45

40

35

30

25

20

15

10

0
France USA Romania Ukraine Kazakhstan Moldova Estonia

Liters Per Capita

55
 Case 7: Who Will Buy Our Wine?

Exhibit 2: Per Capita Wine Consumption vs. Previous Year

35

30

25

20

15

10

0
France USA Romania Ukraine Kazakhstan Moldova Estonia

-5

-10

Percent Growth

56
 Case 7: Who Will Buy Our Wine?
First Round

Give candidate Exhibit 1 and 2

Prompt #2 Based on the Exhibit 1 and 2, which country/countries are the strongest candidates for Deda Mitsa
Winery’s export strategy? Create a short list of 2-3 countries to explore. What additional factors
should they consider?

Arguments can be made for many of the countries on the list. A successful candidate will display
understanding of the charts by considering growth rate and current consumption, but will also use
information from earlier in the case to inform his/her analysis. For instance, the candidate knows
that Georgian wine has little fame outside the former Soviet Union, so it may not be a good idea to
try and compete in a place with a strong international reputation for wine, such as France. However,
the growth rate of US wine consumption is such that a candidate may argue for exports to the US.

Based on the charts and the information in the case, Estonia and Romania are the strongest
potential markets.

Possible additional factors to consider:

Guidance • Cost of shipping
• Wine preferences (dry, sweet)
• GDP
• Potential of additional embargos
• Reputation of Georgian wine in that country
• Political and economic stability
• Distribution networks
• Corruption level

Guide the candidate toward considering profitability.

57
 Case 7: Who Will Buy Our Wine?
First Round

How much will Deda Mitsa Winery have to charge per bottle in each country in order to break even?
Assume that all of the bottles Russia used to buy will be sold in one new country from the list below.
Prompt #3 Each country should be evaluated independently.

For your convenience, costs are listed in lari, the Georgian currency.

COGS
Wine – 5 lari
Bottle – .5 lari
Label – .1 lari .
Total – 5.6 lari per bottle

Marketing Tariffs Shipping

Guidance Estonia 1MM lari 1MM lari 5 lari/bottle

Romania 7MM lari 20MM lari 5 lari/bottle

USA 12MM lari 0MM lari 10 lari/bottle

58
 Case 7: Who Will Buy Our Wine?
First Round
Wine formerly purchased by Russia:
10,000,000 bottles in production by DM x 50% to Russia = 5,000,000 bottles

Total COGS
5,000,000 bottles x 5.6 lari/bottle = 28MM lari

Total Cost to Sell to Estonia

28M COGS + 1M marketing + 1M tariff + (5 lari shipping x 5M bottles) = 55MM lari

Total Cost to Sell to Romania

Analysis 28MM COGS + 7MM marketing + 20MM tariff + (5 lari shipping x 5MM bottles) = 80MM lari

Total Cost to Sell to USA

28MM COGS + 12MM marketing + 0MM tariff + (10 lari shipping x 5MM bottles) = 90MM lari

Breakeven Prices
Estonia: 55MM lari / 5MM bottles = 11 lari per bottle
Romania: 80MM lari / 5MM bottles = 16 lari per bottle
USA: 90MM lari / 5MM bottles = 18 lari per bottle

59
 Case 7: Who Will Buy Our Wine?
First Round

Prompt #4 What information do you need in order to determine whether these prices are reasonable?

If the candidate asks for competitors’ prices or the average price of wine in the countries above,
show them Exhibit #3.

The candidate should note that the breakeven price is higher than what most Romanians regularly
Guidance pay for wine. The candidate should also note that while the breakeven price for selling wine in the
USA is higher than the other breakeven prices, it is still within the range of what most Americans will
pay for wine. Most Estonians would also be willing to pay the breakeven price for Georgian wine
sold there.

Prompt #5 Make a recommendation as to where Deda Mitsa Winery should attempt to export their wine.

Look for structured logic and justifications that pull in all the points from the case. They should take
into account growth of consumption, breakeven prices, and willingness to pay (competitor
Guidance comparison).

Look for risks and next steps.

60
 Case 7: Who Will Buy Our Wine?

Exhibit 3: Competitor Wine Prices (percentile)

45

40

35

30
Lari

25

20

15

10

0
Estonia Romania USA

90th 50th 10th

61
 Case 7: Who Will Buy Our Wine?
First Round

Expected:
• Completes all math accurately
• Proceeds through the process to the answer with some prompting
Performance Good:
Evaluation • Is able to drive the process forward, covering the necessary points with minimal prompting
• Walks the interviewer clearly through the math – also making the math simple

Excellent:
• Drives the process forward while recognizing that they need to figure out the opportunity costs.
• Able to drive to insights within the case without prompting

62
 Case Interview feedback form
Case _______________________ Case type ______________ Interviewer ____________________

Execution
Case start time __:__
• Structure 1 2 3 4 5
 Logical approach Comments: Framework development ______ min
 MECE Framework explanation ______ min
 Appropriate drive to solution Case discussion ______ min
• Quantitative Ability 1 2 3 4 5
 Speed Comments:
Case end time ___:____
 Accuracy
 Comfort, reaction to mistakes Overall Rating: 1 2 3 4 5
• Business intuition 1 2 3 4 5
 Practical Comments: Strengths
 Insightful
 Breadth & depth across multiple functions
 Creativity

Communication
• Professionalism 1 2 3 4 5
 Poise Comments:
 Confident-Persuasive
 Articulate-concise
 Client ready Weaknesses
• Written 1 2 3 4 5
 Clarity of writing and page layout Comments:
 Ability to refer back
 Comfort, reaction to mistakes

Behavioral (optional)
• Quality of star stories 1 2 3 4 5 Comments:
• Length 1 2 3 4 5
• Clarity 1 2 3 4 5
Key: 1=Bottom 10%, 2= 10th-25th percentile, 3=
• Relevance 1 2 3 4 5
middle 50%, 4= 75th-90th percentile, 5=Top 10% 63
 Case 8: Selling Drugs
First Round
Your client is a major pharmaceutical company who has recently acquired a small biotech company.
They have asked you to advise them on the merger, the structure of its sales force, and the
Prompt #1 potential risks going forward. The CEO is coming to meet with us in about 30 minutes and would
like to have a recommendation. Please take a minute to think about the situation.

This case requires the interviewer to be very engaged in order to properly evaluate the
candidate.

This is a qualitative/strategy case where no numbers will be provided. Instead the case tests how
the candidate thinks. It is acceptable for the candidate to make many assumptions, as long as you
find them reasonable. If the candidate asks for numbers to help with their analysis, clearly tell
him/her that no numbers will be provided. Strong candidates will quickly recognize this is a
qualitative case.

Ask the candidate to walk you through his/her thought process for solving the problem.

Provide the following information if requested. Candidate should make reasonable assumptions.
Guidance
Large pharmaceutical company:
• Headquartered in Northeast United States
• Currently sells cardiovascular, diabetes, and oncology drugs
• In the process of developing additional drugs in these therapeutic areas
• Large, experienced sales force

Small Biotech Company

• Located in California
• One Autoimmune drug was approved by the FDA last year while two more drugs are currently in
early stages of drug development
• Small, inexperienced sales force

64
 Case 8: Selling Drugs
First Round
Here you should have the candidate talk through the implications of the merger and what sort of
impact it will have on the corporation as a whole, as well as the sales force.

• Corporate considerations:
• Human resources
• Profitability of new and old business, expenses, etc…
• Efficiencies (or lack there of)
• Physical location of employees
• Manufacturing facilities, etc…

• Sales force:
• Experienced vs. inexperienced sales reps
• Geographic location
Guidance • Impact on customers (physicians, payers, patients)
• Mix of products the current reps sell
• How should the sales force be organized going forward?

• Risks:
• Inefficiencies due to bi-coastal merger
• High costs associated with employee relocation
• High employee turnover due to merger
• PR associated with merger/acquisition
• Regulatory risks associated with acquisitions, drug development, and drug sales
• Potential supply chain issues
• Selling issues due to sub-optimal sales force structure

65
 Case 8: Selling Drugs
First Round
Interviewer, if candidate has not thought about risks and strengths of the proposed merger, directly
ask them to do so now.
Prompt #2 How can you maximize the strengths of the merger?

How can you minimize the risks presented by the merger?

Again, this is a purely qualitative response. The answers to this prompt will vary greatly depending
on what risks and strengths they listed in the previous prompt.

Guidance Push back on their reasoning often and to varying degrees of intensity. “Why do you think that?”
“Are you sure?” “I wouldn’t start there, but this is your case”, etc.

You are testing for poise, confidence, logic, and candidates being able to defend their position.

Prompt #3 The CEO is about to come in the room. What are you going to recommend to them, and why?

Give the candidate sufficient time to create a C-level recommendation. A few minutes are
Guidance acceptable.

66
 Case 8: Selling Drugs
First Round
Expected:
• Candidate will develop a structured approach to finding a solution.
• Assumptions will be clarified and based on reasonable logic.

Good:
• Candidate will develop a structured approach as well as touch on many of the items listed on the
Performance previous slide. A good candidate will clearly identify many of the corporate issues, sales force
issues, as well as overall risks.
Evaluation
Excellent:
• In addition to the above, the candidate will add his/her own insight and provide a clear, logical,
and reasonable recommendation to the CEO.
• An excellent candidate will be comfortable with the case even though there is a clear lack of
structure and numbers
• Will maintain poise under pressure from the interviewer.

67
 Case Interview feedback form
Case _______________________ Case type ______________ Interviewer ____________________

Execution
Case start time __:__
• Structure 1 2 3 4 5
 Logical approach Comments: Framework development ______ min
 MECE Framework explanation ______ min
 Appropriate drive to solution Case discussion ______ min
• Quantitative Ability 1 2 3 4 5
 Speed Comments:
Case end time ___:____
 Accuracy
 Comfort, reaction to mistakes Overall Rating: 1 2 3 4 5
• Business intuition 1 2 3 4 5
 Practical Comments: Strengths
 Insightful
 Breadth & depth across multiple functions
 Creativity

Communication
• Professionalism 1 2 3 4 5
 Poise Comments:
 Confident-Persuasive
 Articulate-concise
 Client ready Weaknesses
• Written 1 2 3 4 5
 Clarity of writing and page layout Comments:
 Ability to refer back
 Comfort, reaction to mistakes

Behavioral (optional)
• Quality of star stories 1 2 3 4 5 Comments:
• Length 1 2 3 4 5
• Clarity 1 2 3 4 5
Key: 1=Bottom 10%, 2= 10th-25th percentile, 3=
• Relevance 1 2 3 4 5
middle 50%, 4= 75th-90th percentile, 5=Top 10% 68
 Case 9: Great Burger
First Round
Our client, Great Burger, is a chain of fast food restaurants. Great Burger (GB) is the fourth largest
fast food chain in the world, measured in number of restaurants. They offer food and “combo” meals
for breakfast, lunch, and dinner. GB owns some of its stores, but 85% are owned by franchisees
who own and manage individual stores. Franchisees pay a franchise fee, and do not have any
major decision rights in strategic decisions (menu, look and feel of store, etc.)

In looking at ways to become more profitable, GB began a search for acquisition targets; Heavenly
Prompt #1 Donuts looked promising, and is growing both in the US, and internationally. Like GB, Heavenly
Donuts (HD) uses a franchise model, but the model is slightly different from that used by GB. HD
franchisees operate in areas or regions, and a franchisee must agree to open a certain number of
stores within that region.

How will you approach GB’s question of whether or not to acquire HD?

This is a profitability case, within the context of evaluating a potential acquisition target. As you will
see, this case also focuses on synergies, especially in the brainstorming question.

1. Use your best judgment in answering clarifying questions about GB and HD. You can think of
GB as being similar to Burger King or McDonalds, and HD as being similar to Dunkin Donuts.
2. If the candidate asks to quantify GB’s objective (increased profitability), say that GB does not
have a specific number in mind, and that they are open to your suggestions.
3. The candidate will likely develop a framework that compares the purchase price for HD with the
Guidance future profitability from acquiring HD. This is a good approach, but we will not end up getting into
the details of purchase price. This is NOT a valuation case.
4. If the candidate asks for numbers right away, tell him/her that we will get to the numbers
eventually, but to build a framework without specific numbers (prices, volume, costs, etc.)
5. Evaluate the candidate’s framework, and make sure he/she has included some form of a profit
tree, with appropriate details for a fast food chain.
If the candidate does not mention synergies, push him/her to include synergies in the
“other” bucket; the first question will focus on potential synergies of this acquisition!
69
 Case 9: Great Burger
First Round
We started thinking about potential synergies that could be achieved by acquiring HD. Here are
some key facts.

Prompt #2 Give candidate the Exhibit #1.

What are some potential synergies you can think of between GB and HD?

This is the brainstorming question. Ideally, the candidate will use his/her framework to evaluate the
exhibit, and will place potential synergies in “buckets” associated with his/her framework.

1. If candidate is struggling initially, you can say that a synergy is an area where additional benefits
can be captured, over and above the sum of the two companies, such as cost savings or
additional revenue.

2. A good answer should include:

a) Increased bargaining power with suppliers (cost of sales)
b) Potential reduction in Corporate G&A costs by integrating corporate management
c) Increased HD sales per store (GB seems to be better at identifying attractive locations for
Guidance restaurants, as its sales per store are higher than the industry average)
d) Market entry in specific geographical areas (HD has limited presence in Europe, and no
presence in Asia; GB could help them enter these markets)
e) Co-branding (similar to combination Pizza Hut and Taco Bell)
f) Opportunity to cross sell (for example, sell HD donuts in a GB restaurant)

A strong candidate will come up with the majority of these on their own. If not, coach him/her to
come up with most of these answers before moving on to the next question. “What else?” is a
classic McKinsey interview question

70
Exhibit 1: Financial Comparisons

71
 Case 9: Great Burger
First Round
The team thinks that with synergies, it should be possible to double HD’s North American market
share in the next 5 years, and that GB’s access to capital will allow it to expand the number of HD
stores by 150%. What sales per store will HD need in 5 years in order for GB to achieve these
goals?
Prompt #3 You should note that current average N.A. consumption of donuts is $10.00 per person per year,
and that in five years, this is expected to double to $20.00 per person per year.

The candidate should assume the North American population is 350 million.

This is a classic McKinsey style word problem, that forces the candidate to use numbers from the
exhibit, and form an equation (for current sales and market share) and then make a second
equation based on what the market will look like in 5 years.

If the candidate is absolutely lost, restate the question (in bold above) and ask the candidate how
he or she would like to approach the problem.

It should look something like:

a) The current market is (350 million x $10.00) = $3.5 billion
b) HD’s average sales per store is $700,000, times 1000 stores = $700 million
Guidance c) By dividing 700 million by $3.5 billion, current market share is ROUGHLY 20%
d) If the market is expected to double, in 5 years the total U.S. market will be $7 billion
e) If GB is able to double HD’s market share, HD will have roughly 40% of the market ($3 billion)
f) If GB is able to grow the number of HD stores by 150%, in 5 years they will have 2500 stores
g) Dividing $3 billion by 2500 stores, average annual sales per store would be $1.2 million

Prompt candidate to evaluate if number seems reasonable. This number does seem reasonable,
as per store sales are less than doubling, while per capita consumption is expected to double.

72
 Case 9: Great Burger
First Round

Okay great, let’s move on. One of the key synergies that the team wants to review is increasing the
businesses’ overall profitability by cross-selling, or selling HD donuts in GB stores.
Prompt #4
How would you assess the profitability impact of this synergy?

Here we are basically evaluating the ability of the candidate to come up with a “mini framework” off
the cuff. General brainstorming is okay, but encourage candidate to “be more structured in their
thinking/analysis”.

A good answer should look something like:

a) Model the current profitability of GB stores (revenue = volume x price, costs = FC + volume x
VC) or (current profit = revenue x margin)
b) Model the incremental profit per store by selling HD donuts (similar methods as used above)
Guidance c) The potential for cannibalization of current GB sales based on offering HD donuts

A strong candidate should mention cannibalization of current GB sales (maybe someone buys a
donut instead of a breakfast sandwich). If not, prompt him/her with an open ended question like
“Interesting, do you think that GB sales would change at all if they were also selling donuts?”

Once the candidate realizes that some degree of cannibalization would probably occur, move on to
the next question.

73
 Case 9: Great Burger
First Round

What would be the incremental profit per store if we think GB will sell 50,000 donuts per
store per year at a price of $2.00 per donut at a 60 percent margin, with a cannibalization rate
of 10 percent of GB’s sales?

Tell the candidate that GB currently sells 300,000 units per store, with an average price per unit of
Prompt #5 $3.00, and a 50 percent margin.

If the candidate is confused with the terminology, explain that a unit could be a burger, or an order
of fries, and that the average price of all units sold is $3.00. If this is still unclear, explain that if you
bought a $5.00 burger and a $1.00 order of fries, the average unit price would be $3.00

Compared to the last “word problem” question, this is relatively easy.

Calculations should look something like:

a) Current revenue is 300,000 units x $3.00 = $900,000
b) With a 50% margin, current profit is $450,000
c) Additional revenue (selling donuts) is 50,000 units x $2.00 = $100,000
d) With a 60% margin for donuts, additional profit is $60,000
Guidance e) We are cannibalizing 10% of current GB sales, so we need to subtract $45,000 of profit.
f) $450,000 + $60,000 – 45,000 = $465,000 profit per store
g) Incremental profit per store is $15,000

The candidate should note that this is an increase in profit of 3%, which is really not that great. If he
or she does not make this leap in logic, that is fine; move on.

74
 Case 9: Great Burger
First Round

We just ran into the Great Burger CEO, and she asks you to summarize our perspective on
Summary whether or not GB should acquire HD. What would you say?

Answers may vary significantly. Use common sense in evaluating the candidate’s ability to
summarize the key things he/she looked at:
1. Synergies by acquiring HD
Guidance 2. Increased profit by growing the number of HD locations in the next 5 years
3. Increased profit by selling HD donuts at GB locations
4. Next steps: what would we be willing to pay for HD?

75
 Case 9: Great Burger
First Round

Expected:
• Creates a MECE framework
• Provides at least 3 synergies associated with acquiring HD
• Correctly calculates profit by increasing number of HD locations
• Correctly calculates profit by selling HD donuts in GB locations
• Provides an effective summary of findings to the CEO

Good:
• Creates a framework that incorporates synergies
• Provides 5 or more synergies associated with acquiring HD
• Comfortable with the exhibit, does not need too much prompting or coaching in interpreting
• Calculates profit in “word questions” quickly and accurately
• Provides most corrective actions listed with minimal prompting from the interviewer
Performance • Shows business judgment by reacting to the numbers he or she calculates (the “so what”)

Evaluation Excellent:
• Framework addresses all subsequent questions in the case (at a top level)
• Lists nearly all potential synergies, and does so in a logical manner
• High speed and accuracy of computations
• Incorporates practical matters in framework (is GB management well positioned to make this
acquisition happen?)
• Shows the business judgment to provide real world examples (Yum brands, KFC, Taco Bell, etc.)
• Remembers (from the prompt) that HD has a regional franchise model, and suggests that we
take a closer look at why their model differs from GB, and see how this would impact an
acquisition
• Realizes that we have not even discussed the purchase price for HD, and brings this up as a
“next step” to the CEO

76
 Case Interview feedback form
Case _______________________ Case type ______________ Interviewer ____________________

Execution
Case start time __:__
• Structure 1 2 3 4 5
 Logical approach Comments: Framework development ______ min
 MECE Framework explanation ______ min
 Appropriate drive to solution Case discussion ______ min
• Quantitative Ability 1 2 3 4 5
 Speed Comments:
Case end time ___:____
 Accuracy
 Comfort, reaction to mistakes Overall Rating: 1 2 3 4 5
• Business intuition 1 2 3 4 5
 Practical Comments: Strengths
 Insightful
 Breadth & depth across multiple functions
 Creativity

Communication
• Professionalism 1 2 3 4 5
 Poise Comments:
 Confident-Persuasive
 Articulate-concise
 Client ready Weaknesses
• Written 1 2 3 4 5
 Clarity of writing and page layout Comments:
 Ability to refer back
 Comfort, reaction to mistakes

Behavioral (optional)
• Quality of star stories 1 2 3 4 5 Comments:
• Length 1 2 3 4 5
• Clarity 1 2 3 4 5
Key: 1=Bottom 10%, 2= 10th-25th percentile, 3=
• Relevance 1 2 3 4 5
middle 50%, 4= 75th-90th percentile, 5=Top 10% 77
 Case 10: Furberry
First Round

Furberry is an iconic British luxury retailer. It’s distinctive plaid indicates taste, sophistication, and
wealth. Within the past five years, Furberry launched an ambitious strategy-- taking the primarily
Prompt #1 European brand global. Investors haven't responded as positively as anticipated. The CEO has
hired your firm to evaluate the growth strategy.

The prompt is intentionally vague. The candidate must systematically “discover” the problem. The
prompt clues the candidate to focus on growth but let the candidate take the case in any direction.
Only clarify if the candidate is really lost/stuck. It’s very important for the interviewer to read the
entire case before giving it.

The candidate must identify why the client missed its revenue target.
Guidance
Provide the following information if asked (key facts are in bold)
 Growth Strategy: 5% Annual growth achieved through entering the American, Asian, and
Middle Eastern Markets.
 Distribution: Luxury department stories, online, and retail stores
 Product Divisions: Men’s, Women’s, and Accessories
 Competitors: Mucchi, Poach, Lauren Lauren. Revenues up 3%, slight decrease in market share.

78
 Case 10: Furberry
First Round

The candidate must specifically ask for the following pieces of information:
 Actual Revenue by year and geography
 Target Revenue by year and geography

Once the candidate asks for all of the above, provide Exhibit 1. Otherwise, just read off the items
requested.

Once the candidate has correctly identified the problem: Tell him/her revenue in the UK has
Guidance declined by 30% over 5 years.

The candidate must combine two charts to create the view below and perform some basic
math.

Key takeaways:
• Europe is the problem region
• North America has strongest growth is helping conceal declining or sluggish growth in other
markets

2009 2010 2011 2012 2013

Target Actual Target Actual Target Actual Target Actual Target Actual
Asia 13 13 14 15 14 15 15 16 16 17
Europe 87 88 88 89 88 88 87 86 82 80
Middle East 23 23 25 24 27 30 30 30 31 32
North America 57 57 63 63 69 70 76 78 89 89
TOTAL 180 181 189 191 198 203 208 210 219 218
79
 Case 10: Furberry
First Round
Exhibit 1: Target and Observed Revenues

Revenue Targets
2009 2010 2011 2012 2013
Target Actual Target Actual Target Actual Target Actual Target Actual
Asia 13 13 14 15 14 15 15 16 16 17
Europe 87 88 88 89 88 88 87 86 82 80
Middle East 23 25 24 27 30 30 30 31 32
North America 57 57 63 63 69 70 76 78 89
TOTAL 180 181 189 191 198 203 208 210 219 218

Actual Revenue
2009 2010 2011 2012 2013
Target Actual Target Actual Target Actual Target Actual Target Actual
Asia 13 13 14 15 14 15 15 16 17
Europe 87 88 88 89 88 88 87 86 82 80
Middle East 23 23 25 24 27 30 30 30 31 32
North America 57 57 63 63 69 70 76 78 89 89
TOTAL 180 181 189 191 198 203 208 210 219 218

80
 Case 10: Furberry
Exhibit 2: Guidance First Round

Ask the candidate: “Why do you think this has happened?” As the candidate is brainstorming,
hand out Exhibit 2.

The candidate should layout several buckets/causes for the drop in Brand Perception

Guidance Guide the candidate to the following:

• Cheap counterfeit identical hats and scarves have flooded the UK market. Now low/middle
consumers income are sporting Furberry’s signature plaid. Wealthy customers have fled the
brand.
• Ask “How would counterfeits impact the brand?” if the candidate is stuck

Brand Perception
5

0
2010 2011 2012 2013

Furberry Mucchi Poach 81

 Case 10: Furberry
First Round
Exhibit 2: Brand Perception
Best
5
M

4
F

0
2010 2011 2012 2013

Furberry Mucchi Poach

82
 Case 10: Furberry
First Round

Prompt #2 What should Furberry do?

The candidate should outline several options.

If the candidate asks for additional information, you can tell the candidate “I have no more
Guidance information.”

If the candidate does not move towards a recommendation, say “The client is about to walk in. I
want you to update the CEO. “

Expected:
• The candidate outline a structured approach to identify the problem focusing on revenue
• The candidate syntheses the exhibits providing takeaways

Performance Good:
Evaluation • The candidate prioritizes throughout the case and provides the “why”
• Candidate maintains composer especially when running into “dead ends”

Excellent:
• The candidate drives the case
• All parts of case demonstrate structured thinking and are highly creative

83
 Case Interview feedback form
Case _______________________ Case type ______________ Interviewer ____________________

Execution
Case start time __:__
• Structure 1 2 3 4 5
 Logical approach Comments: Framework development ______ min
 MECE Framework explanation ______ min
 Appropriate drive to solution Case discussion ______ min
• Quantitative Ability 1 2 3 4 5
 Speed Comments:
Case end time ___:____
 Accuracy
 Comfort, reaction to mistakes Overall Rating: 1 2 3 4 5
• Business intuition 1 2 3 4 5
 Practical Comments: Strengths
 Insightful
 Breadth & depth across multiple functions
 Creativity

Communication
• Professionalism 1 2 3 4 5
 Poise Comments:
 Confident-Persuasive
 Articulate-concise
 Client ready Weaknesses
• Written 1 2 3 4 5
 Clarity of writing and page layout Comments:
 Ability to refer back
 Comfort, reaction to mistakes

Behavioral (optional)
• Quality of star stories 1 2 3 4 5 Comments:
• Length 1 2 3 4 5
• Clarity 1 2 3 4 5
Key: 1=Bottom 10%, 2= 10th-25th percentile, 3=
• Relevance 1 2 3 4 5
middle 50%, 4= 75th-90th percentile, 5=Top 10% 84
 Case 11: What’s Next for Tony?
First Round

Our client is a disgraced former congressman, Tony Politician, that resigned after numerous
indecent text messages he sent surfaced in the media. After congress, Tony is considering using
Prompt #1 his vast resources to purchase one of three companies. Our job is to ensure he picks the right
company that matches his interest and expertise, and is also profitable.

A good candidate will ask for more information about the three firms being considered, and
hopefully background on the congressman. If requested, provide the following:

Provide Exhibit #1 for Tony’s background

PictSecure
• PictSecure is a picture sharing application that ensures pictures cannot be forwarded beyond the
original recipient
• Start up based in Santa Barbara, California
• Highly technical product

Doom Shelters
Guidance • Builds and installs Dooms Day Shelters (bomb proof, haz-mat proof living quarters)
• Mom and pop company located in Wichita, Kansas
• Construction focuses, with conspiracy theory driven customers

Bossy Pants Cakes

• Gourmet cake company made famous by a reality show that highlights their provocatively
themed baked goods
• Established bakery located in Brooklyn, New York
• Looking to establish online presence and expand to West Coast

Framework should evaluate the quantitative and qualitative arguments for each firm

85
 Case 11: What’s Next for Tony?
First Round
Exhibit 1: Background for Tony Politician

• Born in the Bronx in 1965

• First born of 13 kids
Background • Graduate of West Point Military Academy (top of class)
• Married (court proceedings eminent based on recent issues)

• Worked at family deli through high school

Work • Served in the Army for 8 years prior to getting his MBA
• Worked at Apple for 18 months prior to being fired for “lack of creativity”
Experience • Congress for NYC from 2006 to 2013
• Struck it rich by prospecting for oil and gas

Community • N/A
Service

• Technology, particularly around the “much needed” security for mobile phones
Personal • Wants to leave a legacy
Interests • Loves conspiracy theory movies
• Hates the Midwest, particularly Kansas

86
 Case 11: What’s Next for Tony?
First Round

Provide Exhibit #2
Prompt #2 I think you have a lot of great ideas for how to evaluate the options for Tony. Here are some
financials for each of the companies. Please focus on 2013. How would you evaluate these?

The candidate is going to be calculating NPV for the three different firms for 2013. The calculation
is essentially . FCF is calculated by Sales - (COGS+SG&A) – Taxes + Dep – CapEx

Below are the completed calculations. Do not give this to the candidate. Exhibit 2 has
unnecessary info. This is intended to throw off candidates.

PictSecure Doom Shelters Bossy Pants Cakes

2012 2013 2012 2013 2012 2013
Sales (M) $ 3.5 $ 8.0 $ 16.0 $ 20.0 $ 27.0 $ 30.0
COGS (M) $ - $ - $ 8.0 $ 8.0 $ 14.0 $ 14.0
SG&A (M) $ 0.5 $ 2.0 $ 2.8 $ 3.0 $ 4.0 $ 4.0
Guidance Taxes (33%) $ 1.0 $ 2.0 $ 1.7 $ 3.0 $ 3.0 $ 4.0
Earnings After Tax $ 2.0 $ 4.0 $ 3.5 $ 6.0 $ 6.0 $ 8.0
Depreciation $ - $ - $ 0.5 $ 0.5 $ 0.5 $ 1.0
Cap Ex $ - $ - $ - $ 1.0 $ - $ 2.0

FCF $ 2.0 $ 4.0 $ 4.0 $ 5.5 $ 6.5 $ 7.0

Rate of Return (R ) 20% 20% 20% 20% 15% 15%

Mortgage Rates 0.0% 0.0% 3.7% 3.7% 4.5% 4.5%
Personal Interest Rates 3% 3% 4% 4% 3% 3%
Growth (g) 15% 15% 10% 10% 5% 5%
NPV $ 40.2 $ 80.0 $ 40.2 $ 55.0 $ 65.3 $ 70.0
87
 Case 11: What’s Next for Tony?
First Round
Exhibit 2: Information for Each Firm
PictSecure Doom Shelters Bossy Pants Cakes
2012 2013 2012 2013 2012 2013
Units Made 1,166,666 2,666,666 320 400 3,500,000 4,000,000
Units Sold 1,166,666 2,666,666 320 400 3,500,000 4,000,000
Personnel 4 16 56 60 100 100
SG&A per Person $ 125,000 $ 125,000 $ 50,000 $ 50,000 $ 40,000 $ 40,000
COGS per unit $ - $ - $ 20,000 $ 20,000 $ 4.00 $ 3.50
Price per unit $ 3.00 $ 3.00 $ 50,000 $ 50,000 $ 7.70 $ 7.50
Sales (M) $ 3.5 $ 16.0 $ 27.0
COGS (M) $ - $ 8.0 $ 14.0
SG&A (M) $ 0.5 $ 2.8 $ 4.0
Taxes (33%) $ 1.0 $ 1.7 $ 3.0
Depreciation $ - $ - $ 0.5 $ 0.5 $ 0.5 $ 1.0
Cap Ex $ - $ - $ - $ 1.0 $ - $ 2.0
Rate of Return (R ) 20% 20% 20% 20% 15% 15%
Mortgage Rates 0.0% 0.0% 3.7% 3.7% 4.5% 4.5%
Personal Interest Rates 3% 3% 4% 4% 3% 3%
Growth (g) 15% 15% 10% 10% 5% 5%
*All figures in Millions

88
 Case 11: What’s Next for Tony?
First Round

After reviewing the all the information thus far, which company should Tony pursue purchasing?
Prompt #3 What are the risks that he faces in trying to purchase it?

The case clearly points to PictSecure. It meets Tony’s desire to work on Technology, as well as his
knowledge about the lack of picture security. His ability to use his scandal as a selling point for the
Guidance product would also work.

Risks include the high growth rate…what if it doesn’t turn out? What if he sucks at business, etc.

Prices for the firms are as follows: PictSecure - $62M Doom Shelters - $33M BPCakes - $49M
Prompt #4
Does this change your recommendation, why or why not?

Candidate is taking NPV – Asking Price of Firm to get expected value for Tony:

• PictSecure - $80M - $62M = $18M

• Doom Shelters - $55M - $33M = $22M
Guidance • Bossy Pants Cakes - $70M - $49M = $21M

This muddies the waters. Tony has a clear financial advantage to Doom Shelter, but his personal
reasons should deter him from buying it. This is ambiguous and should test candidates thought
process and ability to defend their position. 89
 Case 11: What’s Next for Tony?
First Round

Expected:
• Completes all math accurately
• Proceeds through the process to the answer with some prompting

Performance Good:
• Is able to drive the process forward, covering the necessary points with minimal prompting
Evaluation • Walks the interviewer clearly through the math – also making the math simple

Excellent:
• Disregards unnecessary information quickly and easily
• Performs all calculations with no prompting or errors
• Provides clear logic for overall recommendation, noting risks and how to mitigate them

90
 Case Interview feedback form
Case _______________________ Case type ______________ Interviewer ____________________

Execution
Case start time __:__
• Structure 1 2 3 4 5
 Logical approach Comments: Framework development ______ min
 MECE Framework explanation ______ min
 Appropriate drive to solution Case discussion ______ min
• Quantitative Ability 1 2 3 4 5
 Speed Comments:
Case end time ___:____
 Accuracy
 Comfort, reaction to mistakes Overall Rating: 1 2 3 4 5
• Business intuition 1 2 3 4 5
 Practical Comments: Strengths
 Insightful
 Breadth & depth across multiple functions
 Creativity

Communication
• Professionalism 1 2 3 4 5
 Poise Comments:
 Confident-Persuasive
 Articulate-concise
 Client ready Weaknesses
• Written 1 2 3 4 5
 Clarity of writing and page layout Comments:
 Ability to refer back
 Comfort, reaction to mistakes

Behavioral (optional)
• Quality of star stories 1 2 3 4 5 Comments:
• Length 1 2 3 4 5
• Clarity 1 2 3 4 5
Key: 1=Bottom 10%, 2= 10th-25th percentile, 3=
• Relevance 1 2 3 4 5
middle 50%, 4= 75th-90th percentile, 5=Top 10% 91
 Case 12: Old McDonald had a…?
First Round

Your client specializes in manufacturing and leasing specialized agricultural equipment to small-to-
medium farms. Your client experienced rapid revenue growth in recent years, but growth has
Prompt #1 plateaued in the past year, and the Board is worried. The CEO wants to know what might be
causing this decline in growth rate and what to focus on as part of a growth strategy going forward.

When asked, you should share that farmers turn to our client to lease equipment (think tractors,
harvesters) to increase capacity during peak times (harvest season). Historically, our client has
been the high-end player, offering high-performance products at a premium – in many ways, the
“Lexus” of the industry.

The client serves primarily US farms and offers 3 primary types of products (essentially specialized
tractors). Customers sign short-term leases and pay weekly, often renewing their contracts year-
over-year.
Guidance There are two primary goals in this case:
1. To identify the cause behind the decline in growth
2. To ultimately provide a viable recommendation for a growth strategy by selecting which product
on which to focus

A quality framework will be MECE and will explore external and internal factors for the decline in
growth with an emphasis on looking at the breakdown of products and the market potential for
each. Student should recognize that the case is not about costs. Student does not need a detailed
understanding of the industry or the machines to crack the case.

92
 Case 12: Old McDonald had a…?
First Round

When student asks about how revenue breaks down by product, show “Exhibit 1”. If they don’t ask
about revenue, prompt them to think about it.

Review exhibit #1 and:

Prompt #2 1. Identify key takeaways
2. Brainstorm reasons why growth has slowed in Product 1 revenues
3. Develop a hypothesis around why growth has slowed and brainstorm ways to test this
hypothesis.
Takeaways:
• Candidate should recognize that historically >90% of client’s revenues have come from Product 1.
• Product 2 is growing, but is not a sizeable part of the business.
• Product 3 is a recent addition, appearing first in 2013 and expected to grow quickly.

Reasons growth slowed for Product 1

• Customer switch to competitor (change in customer perceptions of quality, competitor
winning on price);
Guidance • Customer switch to a substitute (overall decline in market, prevalence of new
technologies);
• Shift in distribution areas/processes; shift in marketing/force tactics and effectiveness

Hypothesis and Testing

Candidate should identify a hypothesis. Ways to test it include: customer interviews, market/industry
surveys, competitor research

93
 Case 12: Old McDonald had a…?
Exhibit 1: Overall Company Revenue Breakdown by Product ($M)

2000
1800
1600
1400
1200
1000
800 Product 3
600
Product 2
400
Product 1
200
0
2011 2012 2013 2014E

94
 Case 12: Old McDonald had a…?
First Round

Your teammates have surveyed the market and identified that the key issue is that farmers are
Prompt #3 moving away from the technology that Product 1 provides, and farmers are increasingly turning
towards other products (such as Products 2 and 3) to meet their agricultural needs.

Student should then recognize that it is important to investigate growth potential for Products 2 and
3. If they don’t, prompt them to review those two areas for additional insights.
Guidance This is designed to be a brainstorming section of the case. Once they have exhibited good
brainstorming (along with enough “what else” prodding from the interviewer), prompt the candidate
to think about competitive landscape. A strong candidate will not need prompting.

95
 Case 12: Old McDonald had a…?
First Round
Hand candidate Exhibit #2

• Talk through context for Product 2 and Product 3, identifying key insights from chart
Prompt #4 • Highlight key insights from “Product Info” table
• Develop hypotheses about which product client should focus growth strategy on

Takeaways
1. Our client is the market leader in Product 1.
• Student should synthesize findings from previous page, and focus Client’s attention on
reviewing potential for Products 2 and 3
2. Client is not the key player in Product 2. Could be an attractive industry, but client has little share
and largest player has over half the current market.
• If asked, share Product 2 is a more basic version of Product 1- less versatile, but gets the job
done. Customers of Product 2 tend to value low-cost.
• When asked, Competitor 1 has differentiated itself as the low-cost player, the “Ford” of the
Product 2 market. Competitor 1 has massive advantages of scale
Guidance • Candidate should recognize that it will be difficult to compete with Competitor 1 in Product 2
and/or a growth strategy focused on Product 2 does not align with client’s value proposition
3. Client has majority market share and only 1 competitor in Product 3.
• If asked, share that that Product 3 is proprietary technology our customer developed that fuses
the specialization offered by Product 1 with some of the cost-savings of Product 2.
• Candidate should remember that Product 3 is a very small, but growing part of client’s
revenue.
• Candidate should ask about the size of the potential market for Product 3.

SUMMARY – High Profit and Growth in Product 3…clear product to focus on.

96
 Case 12: Old McDonald had a…?
Exhibit 2: Client Market Share by Product
100%

80%

60%
Others
40% Competitor 2
20% Competitor 1
Client
0%
Product 1 Product 2 Product 3
Client Retail Expected Expected Expected Expected
Products Price Industry Industry Industry Industry
(per Growth Rate Growth Rate Growth Rate Growth Rate
week) (2013) (2014) (2015) (2016)
Product 1 $800 10% 10% 10% 10%

Product 2 $200 20% 20% 20% 20%

Product 3 $500 200% 50% 33% 16.7%

97
 Case 12: Old McDonald had a…?
First Round

The market hasn’t caught on to Product 3 yet, but the client believes there is significant potential for
Prompt #5 Product 3 and would like you to estimate the size of the opportunity through 2016.

Candidate should use chart on previous page to estimate size of the opportunity:
Guidance • $100M in 2013 * 200% growth = 300M in 2014 * 50% growth = 450M in 2015 * 33%
growth = 600M in 2016

What factors may impact this estimate? How might the emergence of a competitor in Product 3
Prompt #6 change the size of the opportunity? What if the market doesn’t grow at the expected rate?

Candidate should estimate confidence bands around the size of the opportunity based on sensitivity
around industry growth rate and client’s percentage of market share. If time permits, encourage
candidate to perform some quantitative valuation to form these bands (ex. size of opportunity if
client secures 60%-90% of market). Otherwise, have a qualitative discussion.

Guidance Final Recommendation:

• Student should identify that the evolution of the market away from Product 1, our client’s core
offering, along with the presence of a large competitor in Product 2’s space, are root causes
behind why growth has slowed for our client.
• Growth strategy should focus on investing in new customers for Product 3, while seeking to
preserve customer base in Product 1.
98
 Case 12: Old McDonald had a…?
First Round
Expected:
• MECE framework
• Complete all calculations with limited help and errors
• Identify causes behind the decline in growth rate.
• Identify a product to focus on as growth strategy going forward, and provide supporting evidence

Good:
• Drive the case to each prompt
Performance • Perform calculations with no help or errors
Evaluation • Identify that Product 3 should be an integral part of growth strategy,
• Identify key risks in focusing on Product 3 (ex. market may evolve in different direction; shifting
focus away from core may cause churn in Product 1 customers)

Excellent:
• Perceive nuance that market is moving away from client’s core (Product 1),
• Candidate determines that client can’t compete in Product 2, and that Product 3 potential is
largely unknown.
• Question long-term potential and whether CEO should sell the business and get out altogether.

99
 Case Interview feedback form
Case _______________________ Case type ______________ Interviewer ____________________

Execution
Case start time __:__
• Structure 1 2 3 4 5
 Logical approach Comments: Framework development ______ min
 MECE Framework explanation ______ min
 Appropriate drive to solution Case discussion ______ min
• Quantitative Ability 1 2 3 4 5
 Speed Comments:
Case end time ___:____
 Accuracy
 Comfort, reaction to mistakes Overall Rating: 1 2 3 4 5
• Business intuition 1 2 3 4 5
 Practical Comments: Strengths
 Insightful
 Breadth & depth across multiple functions
 Creativity

Communication
• Professionalism 1 2 3 4 5
 Poise Comments:
 Confident-Persuasive
 Articulate-concise
 Client ready Weaknesses
• Written 1 2 3 4 5
 Clarity of writing and page layout Comments:
 Ability to refer back
 Comfort, reaction to mistakes

Behavioral (optional)
• Quality of star stories 1 2 3 4 5 Comments:
• Length 1 2 3 4 5
• Clarity 1 2 3 4 5
Key: 1=Bottom 10%, 2= 10th-25th percentile, 3=
• Relevance 1 2 3 4 5
middle 50%, 4= 75th-90th percentile, 5=Top 10% 100
 Case 13: Parks and Recreation
Decision Round

Leslie Knope has been recently elected to the Town Council of Pawnee, Indiana. During her
campaign, she promised the citizens of Pawnee that she would build a beautiful new park. The
towns’ budget, however, does not have the funding to fulfill Leslie’s ambitious promise.
Prompt #1
Leslie wants your advice on how to proceed and determine if and how it’s possible to build
her park.

• Ask the candidate to walk you his/her thinking.

• Ask the candidate to pick the two most important areas/points
• Once it seems you are satisfied, the candidate should proceed to dive into the first area. STOP
and move to the next section.

Provide the following information if asked:

Guidance 1) The park costs approximately $750,000
2) The Park’s Department annual budget is a approximately $5 Million dollars. Make sure
the candidate knows this before moving forward.
3) There are no other relevant campaign promises
4) The town is not allowed to run a budget deficit and typically returns surplus funds to tax payers.
Leslie doesn’t know the status of other departments’ budget.

101
 Case 13: Parks and Recreation
Decision Round
Sample for your reference and in case the candidate gets stuck:
• Profitability
• Revenues
• Taxes, Fees, State/Federal Grants, donations.
• Expenditures
• Some type of logical grouping (department, personnel/equipment)
• Analysis of Alternatives
Analysis • Build something different- smaller park, shade garden.
• Improving current parks
• Etc.
• Other considerations
• Timeline
• Impact of failure to deliver

102
 Case 13: Parks and Recreation
Decision Round

Great idea; however, the client has asked us to focus on town expenditures. What do you think are
Prompt #2 some categories and types of expenses and how can Pawnee reduce them?

See the exhibit 1 for possible solutions. There are no wrong expenditures/ categories. The
best responses are creative yet plausible and highly structured. This is pure brainstorming.

If the candidate begins to ask questions for more information, encourage them to think about the
town they grew up in. After the candidate has outlined several buckets, push them and ask “What
else?”
Guidance
Test the candidate’s confidence by continuing to ask “What else?”

Successful candidates will work though several iterations of what else by adding breadth or depth
and upon exhausting their imagination propose to explore one area in detail.

STOP and move to the next section

103
 Case 13: Parks and Recreation
Decision Round

Prompt #3 Those are all great ideas, so why don’t you take a look at this. Hand the candidate Exhibit 1.

The candidate should take time to analyze the charts and may ask questions. If the candidate gets
stuck or lost in the charts. Ask them what is important to know and suggest to work though each
chart.

IMPORTANT: Data for 2009 does not include personnel expense. Personnel expenses equal 50%
of the listed amounts in Exhibit 2 (2009 only). The candidate should multiple the amounts by 1.5.

Key Takeaways:
• The utilities budget has doubled, while all the other departments have stayed around the same
• Pawnee’s budget has decreased by 20%. Suggest other problems beyond the clients immediate
Guidance question.

Math Solutions:
• 2013
• Parks = $5MM (The candidate should remember this from clarifying questions)
• Public Works = $4.25MM
• 2009
• Utilities = $3MM (includes personnel expenses)

STOP and move to the next section

104
 Exhibit 1: 2009 and 2013 Budgets
2013 Budget
Parks - ?

Administration- $13.75M

Public Safety- $15M

Law and Courts- $11M Total: $100M

Public Works- ?

Utilities- $6M

Schools- 45%

2009 Non-personnel
Schools- $48M

Utilities - ?
Total: $85M
Public Works- $5M

Law and Courts- $8M

Public Safety- $11M

Administration- $6M

Parks-$5M

0 10 20 30 40 50 60

105
 Case 13: Parks and Recreation
Decision Round
Since 2009, Pawnee has replaced its old light bulbs with SuperNova bulbs. These bulbs have not
reduced electricity as marketed, and Pawnee is considering replacing the bulbs. Evaluate whether
Pawnee should proceed with this plan.

Prompt #4 Electricity represents 2/3 of the utilities budget.

Pawnee wants to keep SuperNovas in street lights. These represent 50% of all public lights.
Eco lights will replace the other bulbs and consume 40% of the electricity of a SuperNova bulb.
The cost to buy and change the bulbs is approximately 0.5% of the TOTAL 2013 budget (one time
cost; minor future costs)

The candidate can quickly multiply the fractions together to eliminate several intermediate math
steps.

2/3 x 1/2 x (1-.4 = 3/5) = 6/30 x $6MM= 6/5 or $1.2M

$1.2M- $500k= $700k savings
Guidance To challenge an exceptional candidates ask “Are you sure?” to test confidence.

Key Takeaways (strong candidates always make connection to these without being prompted):
• Yes, Pawnee should move forward with the plan.
• The savings is almost enough to build the park

106
 Case 13: Parks and Recreation
Decision Round
Expected:
• The candidate’s approach is MECE and logically grouped
• The candidate provided thoughtful answers to the brainstorming sessions (3 costs)
• The candidate demonstrates both horizontal and vertical logic. Flows from most to least
important.
• Candidate performs math without errors.

Good:
• Without prompting, the candidate tells you the first/most important area to investigate and why
Performance • The candidate drives the case until you interrupt them and redirect
• Candidate should excel at brainstorming sessions (4 or 5 costs to cut)
Evaluation • Candidate sees some of the “so what” of each of the sections and how they tie back into the
whole case
• Additionally, the candidate will either confidently respond or gracefully recover when challenged

Excellent:
• The candidate challenges the given facts of the problem as needed
• Candidate suggests a few ways to increase the savings so that the client can build the park.
• Candidate nails brainstorming with new valuable ideas each time you ask “what else”
• Candidate suggests all of the “so what” of each of the sections and how they tie back into the
whole case

107
 Case Interview feedback form
Case _______________________ Case type ______________ Interviewer ____________________

Execution
Case start time __:__
• Structure 1 2 3 4 5
 Logical approach Comments: Framework development ______ min
 MECE Framework explanation ______ min
 Appropriate drive to solution Case discussion ______ min
• Quantitative Ability 1 2 3 4 5
 Speed Comments:
Case end time ___:____
 Accuracy
 Comfort, reaction to mistakes Overall Rating: 1 2 3 4 5
• Business intuition 1 2 3 4 5
 Practical Comments: Strengths
 Insightful
 Breadth & depth across multiple functions
 Creativity

Communication
• Professionalism 1 2 3 4 5
 Poise Comments:
 Confident-Persuasive
 Articulate-concise
 Client ready Weaknesses
• Written 1 2 3 4 5
 Clarity of writing and page layout Comments:
 Ability to refer back
 Comfort, reaction to mistakes

Behavioral (optional)
• Quality of star stories 1 2 3 4 5 Comments:
• Length 1 2 3 4 5
• Clarity 1 2 3 4 5
Key: 1=Bottom 10%, 2= 10th-25th percentile, 3=
• Relevance 1 2 3 4 5
middle 50%, 4= 75th-90th percentile, 5=Top 10% 108
 Case 14: SatCo
First Round

Your client is a satellite television service provider. Recently, the client has been experiencing
declining revenues and market share because of increased competition from cable based television
providers. Cable based providers offer a range of services including phone, internet and television
(commonly called a “triple play”). Our client currently only offers television services and has been
Prompt #1 losing customers to competitors offering triple play services.

Our client is exploring the possibility of expanding services to include a bundled phone and internet
package. You are here today to help the client determine if they should expand service offerings or
not.

Know the details of the case prior to giving. This should be candidate driven, and they may not
follow the exact order of the case. This is what strong candidates should do. Weaker candidates
will need lots of direction and prompting to get through all sections.

This is a classic profitability and market entry case. The candidate is welcome to brainstorm a list of
competitive responses, but guide them to a discussion of the revenues and costs associated with
entering the “triple play” market.

Guidance Background data that the candidate may request

• Satellite television broadcast and business will stay unchanged for the client
• Phone service will be conducted via voice over IP (VOIP) requiring access to broadband
towers
• Each individual customer will need one receiver box to power television (which current
customers already have) and a separate box to run the phone and internet
• There are only three major players in the television market and we are #3 with 20% market
share and market cap of $3Bn
• Provide Exhibit 1 if the candidate is unsure of the infrastructure required

109
Case 14: SatCo
First Round

Exhibit 1: Internet and Phone Infrastructure

110
 Case 14: SatCo
First Round

Prompt #2 Determine the potential market size for the additional phone and internet bundled service.

Assumptions:
• 100M Households in the US
• 50% have cable
• 40% of cable customers have triple play currently
• Client expects to capture 10% of the existing triple play market
• In addition, client expects to convert 40% of their existing customers to triple play
Guidance Calculations:
• Total Existing Triple Play Market
• 100M Households x 50% Cable x 40% Triple Play = 20M Households
• Client expects to capture 10% existing = 2.0M
• Converting Existing Customers
• 50M Cable Subscribers x 20% Market Share x 40% conversion = 4.0M Households
• Total Market = 2M + 4M Households = 6.0M Households

111
 Case 14: SatCo
First Round

Prompt #3 Determine the annual revenues for the additional phone and internet bundled service.

Assumptions:
• Average price per month $20
Guidance
Calculations:
• 6.0M Households x 12 Months x $20/Month = $1.440B per year

112
 Case 14: SatCo
First Round

Prompt #4 Determine the annual costs for the additional phone and internet bundled service.

Background information
• There are three key inputs required for phone and internet broadcast
1. Towers
2. Spectrum
3. In-home box (also called CPE or “Client Premise Equipment”)
• Client estimates that 200 towers are required across the country to satisfy demand

Assumptions:
• Provide candidate Exhibit 2 (Spectrum Price Chart) to determine spectrum pricing. Candidate
should use average price of $500M as a basis, but strong candidates will point out the volatility in
the auctions and may also go into auction theory.
• Towers can be bought outright or leased.
• Purchase price is $15M/tower and requires $0.2M/year per tower to maintain
• Lease price is $2.2M/year per tower and includes all maintenance and installation fees
Guidance • CPE cost is $20 per box

Calculations:
• Tower calculations
• Purchase: $15M x 200 + $0.2M x 200 = $3.0B + $40M annual maintenance = $3.08B
• Strong candidates should notice that this is a HUGE capital outlay
• Lease: $2.2M x 200 = $440M
• Spectrum Purchase = $500M
• CPE = 6.0M Households x $20/house = $120M
• Total
• Purchase Towers = $3,000M + $40M + $500M + $120M = $3.7B
• Lease Towers = $500M +$120M = $620M Capex + $440M Opex = $1.06B in year 1

113
 Case 14: SatCo
First Round

Exhibit 2: Auction Price Spectrum

Average Auction Price BB Spectrum (Millions)

1400

1200

1000

800

600
Average: $500M

400

200

0
1 2 3 4 5 6 7 8 9 10 11 12

Auction Number

114
 Case 14: SatCo
First Round

Prompt #5 What factors should the client consider when determining whether to lease or buy?

Guidance:
• Excellent answers will include a pro/con list similar to the one below

Lease:
• Pros
• Low capital outlay up front
• Easy to exit if not profitable
• No need to create tower maintenance and operations expertise
Guidance • Cons
• Subject to rising prices
• Less control over service levels
• Ultimately less profitable

Buy: Many of the reverse statements above will be applicable

115
 Case 14: SatCo
First Round

Prompt #6 Determine the profitability of the two scenarios.

Background information
• Client discount rate is 15%
• Growth rate is 5%
• CAPEX is equal to depreciation every year. No new working capital is introduced
• Tax rate is 34%
• Depreciation is $20M annually into perpetuity

Calculations:
Guidance • Purchase towers
• Investment: $3,000 Tower Purchase + $500M Spectrum Purchase + $120M CPE = $3,620M
• Annual Free Cash Flows = ($1,440M - $40M Maintenance Costs - $20M Depreciation) x
66% = $910M
• NPV = -$3,620M + $924M/(.15 - .05) = $5,488M
• Lease Towers
• Investment: $500M Spectrum Purchase + $120M CPE Purchase = $620M
• Annual Free Cash Flows = ($1,440- $440M) x 66% = $660M
• NPV = -$620M + $660M/(.15 - .05) = $5,980M

116
 Case 14: SatCo
First Round

The COO has just stepped into the room and will be briefing the CEO on the decision in 15
Prompt #7 minutes. What is your recommendation?

Expected:
• Concise recommendation with supporting information
• Performs calculations with little help
• Builds MECE profitability framework

Good:
• Mentions of the tradeoffs between leasing and buying
• Performs calculations with no help
Performance • Needs little prompting to go to the next section
Evaluation Excellent:
• Discusses pricing sensitivity
• Performs calculations quickly with no help
• Recommends that client buy towers
• If candidate recommends leasing the towers, the discuss ways to mitigate risks
• Clear points for not entering the market if recommending no-go
• Drives case, and looks for the “so what” of each section

117
 Case Interview feedback form
Case _______________________ Case type ______________ Interviewer ____________________

Execution
Case start time __:__
• Structure 1 2 3 4 5
 Logical approach Comments: Framework development ______ min
 MECE Framework explanation ______ min
 Appropriate drive to solution Case discussion ______ min
• Quantitative Ability 1 2 3 4 5
 Speed Comments:
Case end time ___:____
 Accuracy
 Comfort, reaction to mistakes Overall Rating: 1 2 3 4 5
• Business intuition 1 2 3 4 5
 Practical Comments: Strengths
 Insightful
 Breadth & depth across multiple functions
 Creativity

Communication
• Professionalism 1 2 3 4 5
 Poise Comments:
 Confident-Persuasive
 Articulate-concise
 Client ready Weaknesses
• Written 1 2 3 4 5
 Clarity of writing and page layout Comments:
 Ability to refer back
 Comfort, reaction to mistakes

Behavioral (optional)
• Quality of star stories 1 2 3 4 5 Comments:
• Length 1 2 3 4 5
• Clarity 1 2 3 4 5
Key: 1=Bottom 10%, 2= 10th-25th percentile, 3=
• Relevance 1 2 3 4 5
middle 50%, 4= 75th-90th percentile, 5=Top 10% 118
 Case 15: Alpha Software, Inc.
Decision Round

Our client, Alpha Software, provides technology software to pharmacies. Alpha product is a highly
customizable inventory tracking system. Because of the necessary customization, the time from
sale to delivery is on average 12 months. Alpha is considering buying a competitor, Bravo Software.
Prompt #1 Bravo also sells an inventory tracking products to pharmacies, however its product is less
customizable. The average time from sale to delivery is 3 months.

Should Alpha buy Bravo?

Provide the following information on request:

• The client’s business process is as follows:
1. A sales person sells the software to a pharmacy.
2. The customization team customizes the product and delivers it to the client.
3. The service team handles customer service requests and coordinates maintenance.
Guidance
The candidate should use an M&A framework, walking through the potential pros/cons of the
acquisition. Guide the candidate to hypothesize that Alpha can increase their revenue and reduce
costs through consolidating the duplicative cost centers of the merged company.

119
 Case 15: Alpha Software, Inc.
Decision Round

Prompt #2 What are some costs centers for the two companies?

Cost Centers for Businesses (a strong candidate should included in their framework)
• Executive salaries
• Legal, HR, support function staff
• Advertising and Marketing
• Sales team
• Technology customization team
Guidance • Customer service & maintenance support team
• Overhead (office space, insurance, etc.)

It is appropriate to break out the labor by function because consolidation will impact each of these
cost centers differently. The candidate may also identify production and distribution of the software
as cost. This cost is minimal in the case of Alpha and can be disregarded.

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 Case 15: Alpha Software, Inc.
Decision Round
Once the candidate has brainstormed potential costs, provide Exhibit 1.

Provide them with the following info upon request:

Revenue: Alpha- 450M. Bravo- 350M.

The candidate should calculate profit margin for both Alpha and Bravo. If they don’t prompt them:
• Alpha Profit Margin= (Revenue-Costs)/Revenue= (450-300)/450= 33%
Guidance • Bravo Profit Margin= (Revenue-Costs)/Revenue= (350-210)/350= 40%

The candidate should note Bravo’s higher profit margin. This indicates Bravo has better control of its
costs than Alpha. This suggests Bravo could be a good buy for Alpha.

Guide the candidate to calculating the profit margin for the merged company. A strong candidate should
not need this prompting

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 Case 15: Alpha Software, Inc.
Decision Round

Exhibit 1: Cost Comparisons for Alpha and Bravo

Alpha (millions) Bravo (millions)

Executive/Legal/HR 100 76

Advertising & 27 16
Marketing

Sales 56 34

Customization 49 22

Customer Service 48 33

Overhead 20 29

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 Case 15: Alpha Software, Inc.
Decision Round
After reviewing the cost centers, what amount of savings can the merged Alpha and Bravo company
Prompt #3 expect for each cost center? Justify your answer with reasoning.

There is no correct numerical answer; look for the candidate’s logical thinking.
Once the candidate has answered provide Exhibit #2 and have them calculate the overall savings.
NOTE: There are two version of Exhibit #2. One that requires calculating the cost per cost
center. USE THIS FOR STRONG CANDIDATES, OR ONES THAT NEED WORK ON QUANT.

% Decrease Reason for decrease

(New Amount)
Executive/Legal/HR 35% (114) Fewer employees needed
Advertising & Marketing 50% (21) Market both products in current channels
Sales 10% (81) Minimal impact- different clients

Guidance Customization 15% (60) Minimal impact- product customization requires

different skills
Customer Service 35% (52) Similarly skilled labor force
Overhead 60% (20) Office, insurance will decrease
Candidate should calculate the costs for the merged company (unless using easier Exhibit 2), then the
profit margin. Candidate can assume that revenues from the merged company would be equal to the
combined revenues from individual companies. If they don’t do this automatically, prompt them..

Alpha 2.0 Profit Margin = (Revenue-Costs)/Revenue ~ ($800-$350)/$800 ~ 55%

The candidate should note Alpha 2.0’s higher profit margin. The candidate should come to the
conclusion that based upon a comparison of profit margins, Alpha should buy Bravo, assuming the price
is right.
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 Case 15: Alpha Software, Inc.
Decision Round

Exhibit 2: Cost Comparisons for Combined Alpha and Bravo

% Decrease Reason for decrease

Executive/Legal/HR 35% Fewer employees needed

Advertising & Marketing 50% Market both products in current

channels

Sales 10% Minimal impact- different clients

Customization 15% Minimal impact- product

customization requires different skills

Customer Service 35% Similarly skilled labor force

Overhead 60% Office, insurance will decrease

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 Case 15: Alpha Software, Inc.
Decision Round

Exhibit 2: Cost Comparisons for Combined Alpha and Bravo

% Decrease Reason for decrease

(New Amount)
Executive/Legal/HR 35% (114) Fewer employees needed

Advertising & Marketing 50% (21) Market both products in current

channels

Sales 10% (81) Minimal impact- different clients

Customization 15% (60) Minimal impact- product

customization requires different skills

Customer Service 35% (52) Similarly skilled labor force

Overhead 60% (20) Office, insurance will decrease

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 Case 15: Alpha Software, Inc.
Decision Round

If Alpha were to move forward with the purchase, how would you determine what price
Prompt #4 would they pay for Bravo?

The candidate does not need to calculate a numerical value. The candidate can suggest (among
other things) that Alpha:
• Look to comparable sales,
• An NPV calculation using predicted future,
• Using an EBITDA multiple. If the candidate suggests an EBITDA multiple, the multiple should be
Guidance low (10-20) instead of high (60-70) because the pharmaceutical software industry is low growth.

The purchase will also depend on Alpha’s current outstanding debt, and its ability to obtain
financing. The candidate can also highlight some additional considerations that will impact the
merger such as human capital or technology integration.

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 Case 15: Alpha Software, Inc.
Decision Round

Expected:
• Provides a MECE framework
• Correctly calculates profit margins
• Lists some cost centers
• Provides at least two ways to value the target company
• Able to articulate reasons for cost savings through consolidation

Good:
Performance • Before prompted, moves to calculate profit margin of merged company
• Breaks out labor into specific business processes, recognizing that consolidation will impact
Evaluation each labor force differently

Excellent:
• Probes expected revenue of merged company and identifies the buyout as an opportunity for a
competitor to target both companies current customers, with a potential for decreased revenue
for merged company
• Suggests some alternative considerations beyond profit margin and financing to consider in the
purchase

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 Case Interview feedback form
Case _______________________ Case type ______________ Interviewer ____________________

Execution
Case start time __:__
• Structure 1 2 3 4 5
 Logical approach Comments: Framework development ______ min
 MECE Framework explanation ______ min
 Appropriate drive to solution Case discussion ______ min
• Quantitative Ability 1 2 3 4 5
 Speed Comments:
Case end time ___:____
 Accuracy
 Comfort, reaction to mistakes Overall Rating: 1 2 3 4 5
• Business intuition 1 2 3 4 5
 Practical Comments: Strengths
 Insightful
 Breadth & depth across multiple functions
 Creativity

Communication
• Professionalism 1 2 3 4 5
 Poise Comments:
 Confident-Persuasive
 Articulate-concise
 Client ready Weaknesses
• Written 1 2 3 4 5
 Clarity of writing and page layout Comments:
 Ability to refer back
 Comfort, reaction to mistakes

Behavioral (optional)
• Quality of star stories 1 2 3 4 5 Comments:
• Length 1 2 3 4 5
• Clarity 1 2 3 4 5
Key: 1=Bottom 10%, 2= 10th-25th percentile, 3=
• Relevance 1 2 3 4 5
middle 50%, 4= 75th-90th percentile, 5=Top 10% 128
 Case 16: NY Economic Development Corp.
Decision Round
Note – this is a very open-ended case, and will be driven mostly by the candidate. To make this a
quality mock interview, the interviewer needs to be very familiar with the details of the case, and
know when to (and when not to) give the candidate information. Please take the time to read the
case IN DETAIL before giving it.

It is October 2001, and our client is the New York City Economic Development Corporation (EDC). The
EDC partners with a variety of governmental and non-governmental firms, serving as an engine for
Prompt #1 economic development. The EDC is charged with leveraging the city’s assets to drive growth, create jobs
and improve quality of life. Like a Chamber of Commerce, the EDC shapes policy for local business
interests. The EDC is requesting our help in looking at the city’s hotel industry in the wake of the
September 11th attacks. The EDC would like to know:

1. Can we quantify the expected impact of 9/11 on the New York City hotel industry?
2. Will the New York City hotel industry need government assistance?

Ultimately, This is a profitability case. It requires (like some final round cases) a two part framework. First,
the candidate should build a basic profit tree to take a look at the profitability of the NYC hotel industry
prior to 9/11. Then, he/she should frame out (based on some assumptions) how 9/11 is expected to affect
the industry’s future profitability.

1. Hopefully will not ask about cost structure of revenue before building a framework. If he/she does ask
Guidance these detailed questions, simply say “we will get there later” and advise that he/she build a framework.
2. If the candidate asks what kind of assistance the EDC provides, or what kind of policies they try to
influence, turn the question around and ask him or her what they think the EDC could do to advance
local business interests. If the candidate is totally lost, give an example of lobbying for tax changes to
stimulate purchases from local businesses.
3. If the candidate asks if we are talking about all of New York City or just Manhattan, say that we are
considering all five boroughs. (This will matter later in terms of number of hotels, etc.)

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 Case 16: NY Economic Development Corp.
Decision Round

As the candidate builds a framework, try to follow along to make sure he or she is not going off track, If so,
this will become a pretty painful case. You may even have to prompt the candidate to focus on profitability,
if he or she is completely lost. This is “choose your own adventure.”

Once the candidate is finished with a framework, ask smart questions and push the candidate to improve
his/her framework (if required) to progress through the case toward the goal.

The candidate’s framework should address:

Profitability of the NYC hotel industry before 9/11

a) Revenue is a function of number of rooms, occupancy rates, and average rate charged. The candidate
may point out that some guests are travelling for business, while some are traveling for leisure. This is
a great insight, and will matter later in the case.
b) Costs consist of FC, in the form of property, wages and salaries (almost all fixed in the hotel industry),
Guidance insurance, and utilities, and VC (which includes items like room service, laundry, etc.).
c) The candidate may key in on the fact that many hotels in NYC also generate revenue from restaurants
and bars. While this is a great point, advise the candidate that to simplify the case, we will focus only
on revenue generated by providing rooms to guests.
Modeled profitability of the NYC hotel industry after 9/11
d) This should be very similar to the first framework, with some modifications based on changes to
occupancy, maybe changing room rates, etc.
Given the analysis of the change in profitability (based on 9/11) the candidate can then make a
recommendation of whether or not the industry will need assistance.

The candidate should have a strong hypothesis. A good example would be:
“Yes, we can quantify the impact of 9/11 on the industry, by looking at profitability before and after
9/11. We can then make a determination of whether or not assistance is needed by looking at the
magnitude of the change in profitability, given the current financial health of the hotel industry.”

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 Case 16: NY Economic Development Corp.
Decision Round
The candidate should focus on profitability next. If not, prompt them in this direction after a bit.

The candidate will likely ask about revenue and costs. Force him/her to be specific in these questions,
and only provide the following information. If the candidate is uncomfortable making assumptions, you
may have to say something like “we are in the early stages of working with the client, and just don’t have
that much information.” If the candidate continues to push, you can suggest making some assumptions.

Revenue
a) There are 300 hotels in New York City
b) On average, each hotel has 250 rooms
c) The average nightly room rate is $300.00
d) Average nightly occupancy is 80%

Candidate to calculate nightly revenue of $18M for all NYC hotels

Guidance
Costs - We don’t know anything about the NYC hotel industry’s cost structure. Ask the candidate to make
some assumptions.
e) Steer the candidate towards a 10% margin
f) The breakdown between FC and VC is also going to have to be an assumption. Keep in mind that the
hotel industry has high fixed costs, and if necessary, point this out to the candidate.

For example, if the candidate assumes a 10% margin, nightly costs would be $16.2M
If the candidate assumes 80% of costs are FC, then nightly FC are roughly $13M, and nightly VC are
roughly $3.2M

Candidate calculates nightly profit is $1.8M for the industry before 9/11

Note: The candidate should realizes that he or she will need the FC / VC breakdown in the next step. If
the candidate jumps right to profit, let him or her continue, as costs will come up later…

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 Case 16: NY Economic Development Corp.
Decision Round
Now the candidate should be moving on to a model that will show how profitability will change based on
9/11. In this case, we have no information, and you should let the candidate make assumptions. Use your
Next Step best judgment (and the example below) to guide whether or not the candidate is making reasonable
assumptions.

Obviously 9/11 had a significant impact on New York City, and effectively destroyed the local economy in
the short term. The following example shows one way that the candidate could model the swing in
profitability for the hotel industry:

Revenue
a) Assume a 50/50 split between business and leisure travelers looking for hotel rooms.
b) Assume that leisure travelers will simply chose not to come to NYC in the short term.
c) Assume that 50% of business travelers will still need a room, and the other 50% will cancel their trips.
d) Assume that average room rates will NOT change in the short term, and will stay at $300.00 per night.

This would result in $4.5M of nightly revenue from business travelers, and $0 of nightly revenue from
leisure travelers, for a total of $4.5M per night.
Guidance
Costs
e) Assuming that cost structures remain constant (from the last page) we have FC of $13M per night
f) VC are now $3.2M divided by 4 (based on the above assumptions), for updated VC of $800,000 per
night.
g) Total costs are now 13.8M per night, and the industry is losing $9.3M every night.

The candidate should come up with a number between ($5M) and ($12M) for nightly profitability. Of
course, the answer will change based on the assumptions the candidate makes. If his or her assumptions
are even close to reasonable, the candidate should conclude that the industry is bleeding money, and
badly needs help.

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 Case 16: NY Economic Development Corp.
Decision Round

Hopefully, now that the candidate has modeled the change in profitability for the industry, he or she is
Next Step ready to move on to the second question. Here the candidate should be looking at the fact that the
industry badly needs help, and should be thinking of ways the EDC (and government) can help.
The candidate should show sound business judgment and realize that this swing in profitability is HUGE,
and that the industry is bleeding money. The next step is how the EDC can help.

To help in guiding the discussion that will follow:

1. If the candidate is stuck, or asks for direction, ask him/her “how do you think the EDC could help?”
This should generate a discussion, and you are mostly applying common sense to the suggestions
that the candidate will provide.
2. If the candidate asks about the current financial health of the industry, turn the question around and
ask the same of him/her. The candidate may come up with:
a) There is a huge difference between an individual hotel and a chain (ability to sustain losses)
because the chain will continue to generate revenue from its other locations
b) Certain areas will be hit harder, based on geographic proximity to the Twin Towers and the
Guidance Financial District.
c) Some hotels may be uninhabitable in the short term.
3. How can the EDC help?
a) It may be helpful to ask the candidate about the different levels of government (Federal, State,
local) and how they could help the industry.
b) Examples could be tax breaks, federal funding direct to individual hotels, a PR blitz to incentivize
tourism, etc.
c) A strong candidate will bring up risks and other potential downsides associated with each strategy.
d) At this point, you are assessing the candidate’s creativity and business judgment. Keep the
conversation moving until he or she is out of ideas.

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 Case 16: NY Economic Development Corp.
Decision Round

Okay, great. We just ran into the President of the EDC, and he would like an update on our
Summary progress. What would you say?

Answers may vary significantly. Use common sense in evaluating the candidate’s ability to
summarize the key things he or she looked at:
1. Profitability before 9/11
Guidance 2. How we modeled profit after 9/11 (assumptions, etc) and what we learned
3. Does the industry need help? What kind of help should the EDC recommend?
4. Next steps: what would we look at if we had more time?

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 Case 16: NY Economic Development
Corp.` Decision Round

Expected:
• Creates a MECE framework
• Asks intelligent questions about revenue and costs, to arrive at a solid estimate of profitability
• Correctly calculates profit pre-9/11
• Makes assumptions, and correctly models post-9/11 profits
• Comes up with 2 good ideas of how the EDC can help the industry

Good:
• Creates a framework that incorporates business and leisure travelers
• Is comfortable making assumptions, and makes logical assumptions that show solid business
judgment
• Calculates profit quickly and accurately
• Provides most corrective actions listed with minimal prompting from the interviewer
Performance • Shows business judgment by reacting to the numbers he or she calculates (the “so what”)
• Comes up with 4 or more good ideas of how the EDC can help the industry
Evaluation
Excellent:
• Framework addresses all subsequent questions in the case (at a top level)
• Very comfortable with making assumptions, “drives” the case even in the absence of information
• Speed and accuracy of computations
• Realizes that there is a difference between individual hotels and chains, with regard to ability to
sustain losses based on short term decreases in revenue
• Realizes that the hotel industry has high fixed costs, and sees the second order impact of this
cost structure
• Thinks about governmental policies that could actually solve this problem, and lists them in a
logical, MECE manner
• Comes up with “outside the box” ideas like using hotel rooms to house first responders who are
working at the Twin Towers

135
 Case Interview feedback form
Case _______________________ Case type ______________ Interviewer ____________________

Execution
Case start time __:__
• Structure 1 2 3 4 5
 Logical approach Comments: Framework development ______ min
 MECE Framework explanation ______ min
 Appropriate drive to solution Case discussion ______ min
• Quantitative Ability 1 2 3 4 5
 Speed Comments:
Case end time ___:____
 Accuracy
 Comfort, reaction to mistakes Overall Rating: 1 2 3 4 5
• Business intuition 1 2 3 4 5
 Practical Comments: Strengths
 Insightful
 Breadth & depth across multiple functions
 Creativity

Communication
• Professionalism 1 2 3 4 5
 Poise Comments:
 Confident-Persuasive
 Articulate-concise
 Client ready Weaknesses
• Written 1 2 3 4 5
 Clarity of writing and page layout Comments:
 Ability to refer back
 Comfort, reaction to mistakes

Behavioral (optional)
• Quality of star stories 1 2 3 4 5 Comments:
• Length 1 2 3 4 5
• Clarity 1 2 3 4 5
Key: 1=Bottom 10%, 2= 10th-25th percentile, 3=
• Relevance 1 2 3 4 5
middle 50%, 4= 75th-90th percentile, 5=Top 10% 136
 Case 19: Agency Overrun
Specialty
A federal agency has 160 offices and stores inventory in 40 warehouses across the country.
Each office has it’s own property management and inventory processes, allowing the offices
to access inventory from any of the 40 warehouses. The agency has difficulty tracking
Prompt #1 assets, and estimates that only 10% of all assets are tracked in it’s tracking system. The
agency also estimates that 2% of all assets are now permanently lost.

What is a long-term strategy to improve the asset management process?

Candidate should ask clarifying questions about the issues and then form a framework to attack the
problem, including systems, offices and warehouses.

Information to be given upon request:

1) Inventory consists of assets such as cars, other motor vehicles, laptops, printers, and other
office equipment.
2) Property management IT systems vary across offices, and project management systems are
inconsistently used from office to office
3) Property management IT systems are inconsistent across warehouses
4) There is no barcoding of assets (no tracking number is assigned to any assets that enter the
system). Assets are associated with an employee’s name and have no other identifiable marking
Guidance 5) Assets that are not currently in use are rarely entered into the property management system,
making it likely that an office will order a brand new assets when there are unused assets
elsewhere in the agency
6) Equipment is occasionally traded and leased between offices. It is unclear which office owns
the equipment (for accounting purposes) and which office currently has possession of the
assets
7) An individual office can order from any of the 40 warehouses regardless of whether it is the
most cost effective.
8) Many warehouses are small in size and were created with little thought to the cost effectiveness
of the warehouse. Approximately 10 large warehouses exist and the remaining 30 are small

137
 Case 19: Agency Overrun
Specialty
What information do you want to gather to understand and analyze the current
Prompt #2 organizational issues?
Candidate should come up what information to seek (underlined), & interview provides italicized
info:
1) Who has procurement authority
• Procurement authority varies by office. Offices exist in silos and there is little
communication between offices.
• Offices have grown over the years, and many offices now have overlapping procurement
responsibilities. For example, one office has a designated Head of Procurement, but many
supervisors bypass the Head of Procurement
2) What are current processes in place to obtain and track assets
• The employee fills out a purchase order (in hard copy) and hands the it to the office’s
designated Head of Procurement or to their immediate supervisor.
• The purchase order is almost always approved for purchase and is rarely checked against
existing inventory. When the asset arrives, it generally goes directly to the person who
ordered it without being entered into the office’s system by the Head of Procurement.
Guidance • Once the asset is delivered to the employee, it is rarely tracked and employees are not
held accountable for these assets when they leave the agency
3) Process to trade assets within offices
No process is in place and no guidelines exist
4) Current IT systems in place across the different offices and warehouses to track the assets
• The agency does not have a top-down communication system to coordinate the purchase
and tracking of assets throughout the agency
• Some offices use a homegrown database to track assets
5) Who has the ability to champion this project within the agency
• The Chief of Procurement who resides at the agency level
• Within individual offices, the champion and affect change varies
6) Location of current records so the assets currently in use can be moved to an automated system
• Varies by office and they will be difficult to locate

138
 Case 19: Agency Overrun
Specialty
Prompt #3 How would you obtain the information you just outlined?

Possible answers include:

1) Review the existing procurement policy
2) Obtain an organizational chart to understand who has procurement authority at the overall
agency level and within the individual offices
3) Interview key stakeholders to understand their perspective of the process and the current
challenges the agency faces with the existing process
Guidance 4) Interview Head of Procurement within several offices to understand how process varies by office
(should also talk to employees who complete purchase orders and stakeholder in the
warehouse)
5) Review existing purchase orders to understand redundancies in equipment ordered and to
understand which warehouse locations offices are receiving the assets from
6) Review existing system with IT champion

139
 Case 19: Agency Overrun
Specialty
Prompt #4 What is your recommendation?

Candidate should come up with one or two options (short term and long term). Possible answers
include:
1) Centralize purchase authority
2) Improve coordination among offices and warehouses to reduce redundancies in personnel and
assets
3) Revamp procurement guidelines and enforce those guidelines to track equipment throughout
agency
4) Implement policy that equipment must be returned to procurement pool before it is loaned or
leased
Guidance 5) Implement database that spans offices and warehouses so there is real time information
regarding inventory levels and asset location within agency
6) Centralize the warehouses and reduce number of warehouses from 40 to a more reasonable
number. Start by closing some of the 30 smaller warehouses and consolidating to the 10 main
warehouses. Understand which warehouses are centrally located and close any that are
redundant (based on location)
7) Outsource procurement to a private entity to close warehouses altogether. If this is
recommended, candidate should mention that a centralized approval and tracking system is still
needed within the agency

140
 Case 19: Agency Overrun

Expected:
• Candidate will ask about the current procurement process and the loaning of equipment
• Candidate will quickly identify that the procurement process is done on a largely ad-hoc basis
and recommend structuring this process

Good:
• Candidate will consider not just the process and technology involved, but also the human capital
Performance aspects and
Evaluation • Candidate will understand that getting agency buy-in is key to executing a strategy within the
federal government.

Excellent:
• Candidate may explore ideas involving the centralization of the warehouses to eliminate
redundancies.
• Candidate may explore ideas involving the recovery of existing assets and how to enter and
track those in the system.

141
 Case Interview feedback form
Case _______________________ Case type ______________ Interviewer ____________________

Execution
Case start time __:__
• Structure 1 2 3 4 5
 Logical approach Comments: Framework development ______ min
 MECE Framework explanation ______ min
 Appropriate drive to solution Case discussion ______ min
• Quantitative Ability 1 2 3 4 5
 Speed Comments:
Case end time ___:____
 Accuracy
 Comfort, reaction to mistakes Overall Rating: 1 2 3 4 5
• Business intuition 1 2 3 4 5
 Practical Comments: Strengths
 Insightful
 Breadth & depth across multiple functions
 Creativity

Communication
• Professionalism 1 2 3 4 5
 Poise Comments:
 Confident-Persuasive
 Articulate-concise
 Client ready Weaknesses
• Written 1 2 3 4 5
 Clarity of writing and page layout Comments:
 Ability to refer back
 Comfort, reaction to mistakes

Behavioral (optional)
• Quality of star stories 1 2 3 4 5 Comments:
• Length 1 2 3 4 5
• Clarity 1 2 3 4 5
Key: 1=Bottom 10%, 2= 10th-25th percentile, 3=
• Relevance 1 2 3 4 5
middle 50%, 4= 75th-90th percentile, 5=Top 10% 142
 Case 20: Bravo Insurance
Specialty
Your client, Bravo Insurance, is an insurance provider in the US. Over the last five years, Bravo
has grown through acquisitions of four small regional insurance companies. It has recently
completed an integration of a medium sized competitor which was acquired two years earlier. Due
to these acquisitions and growth, Bravo’s market share has increased at a rate of 8% per year.
Furthermore, the product portfolio has been recently optimized and rationalized through a
consulting engagement. Finally, extensive research has been done for a new pricing strategy, which
has been successfully introduced three months ago. Profits have been flat the last five years
across the industry, however, Bravo profits have decreased over the same period by 4% per
Prompt #1 annum. Recent regulatory reform and public attitude towards insurance providers has added
increased pressure on the executive team to transform the organization and turn the company
around.

The CEO had asked the CIO of Bravo to put together a roadmap to identify key areas of
transformation. The CIO has hired you to lead the planning and road-mapping exercise for his
technology organization. What project plan or roadmap would you propose for this engagement to
sell to the CIO?

There is no additional data that is required for this case.

Most (if not all) of the data/information in the prompt is superfluous and is meant to overwhelm the
candidate as the final prompt asks for a “roadmap…to sell to the CIO,” which is different from a
typical case where the candidate will jump head first into a “framework.” The most important aspect
of the case is to identify the “ask” correctly. The ask is for a “roadmap” or “project plan,” not a
Guidance typical “framework.”

Hints:
• If the candidate jumps into a typical “framework,” stop him/her and restate that your client is
looking for a “roadmap, phases, project plan”; tell the candidate that a “cost framework” may be
useful later, but not now

143
 Case 20: Bravo Insurance

Candidate should develop something along these lines:

1. Stakeholder Analysis (on both business and technology side)

2. Business Strategy and Technology Strategy Alignment
[the following are for the CIO and the technology organization]
3. Current State Capability Assessment (CSA)
Guidance 4. Future State Capability Assessment (FSA)
5. Gap Analysis
6. Project Identification
7. Project Prioritization
8. High Level Project Plan/Timelines

One or two examples or comments about what each of the above mean are expected.
Expected:
• Correctly identify the ask as a “roadmap” and not a typical “framework”

Good:
Performance • Current State Capability Assessment
• Future State Capability Assessment
Evaluation • Gap Analysis

Excellent:
• Candidate asking if he/she can do a deep dive to investigate if there are any savings
opportunities in the IT organization.

144
 Case 20: Bravo Insurance
Specialty

You have identified a hypothesis that will explain some of the key issues the CIO is facing. Due to
Bravo’s growth through acquisitions, the IT infrastructure is fragmented, resulting in increasing
costs, redundancies, and inefficiencies, impacting the bottom line.
Prompt #2
What are some of the key issues that the CIO should highlight to his senior management team as
opportunities for savings?

• This is a qualitative assessment, not quantitative; no additional data is required.

• This is asking to drill down into the Gap Analysis step. A “typical” cost framework can be used.

Answers will vary greatly, but they should be structured. People and systems are good
buckets to encourage them to evaluate if they need help.

Impact on People:
• Change organizational structure to eliminate redundancies
• Change/Update job mandates (e.g. right people doing right jobs)
Guidance • Upgrade people skills (e.g. people doing jobs right)
• Outsourcing vs. Insourcing

Impact on Systems and Processes:

• Outsourcing vs. Insourcing
• Benchmark system costs to competitors
• Upgrade systems
• Retire/merge/consolidate systems (to eliminate redundancies)
• Consolidate data centers (to eliminate redundancies)
• Inefficient processes that can be streamlines and reengineered

145
 Case 20: Bravo Insurance
Specialty

Answers will vary greatly, but they should be structured. People and systems are good
buckets to encourage them to evaluate if they need help.

Impact on People:
• Change organizational structure to eliminate redundancies
• Change/Update job mandates (e.g. right people doing right jobs)
• Upgrade people skills (e.g. people doing jobs right)
• Outsourcing vs. Insourcing
• Etc.
Guidance
Impact on Systems and Processes:
• Outsourcing vs. Insourcing
• Benchmark system costs to competitors
• Upgrade systems
• Retire/merge/consolidate systems (to eliminate redundancies)
• Consolidate data centers (to eliminate redundancies)
• Inefficient processes that can be streamlines and reengineered
• Etc.

146
 Case 20: Bravo Insurance
Specialty

Prompt #3 The CIO is on his way to meet with you. What is your summary of your strategy to solve this issue?

The candidate should re-use his/her roadmap that was created earlier, followed by a specific
recommendation about key cost saving opportunities.

• Tell the candidate to take a minute.

• A “Recommendation” and “Risks” are appropriate. The “roadmap” that was created earlier can
be used for “Next Steps”

Good summary
Guidance • Restate the key hypothesis: Fragmentation due to acquisitions, resulting in increased costs
• Recommendation: Focus on people, process, and system redundancies to turn around the 4%
per annum decrease in profits
• Risks: People change management, business continuity, hidden costs
• Show the roadmap and highlight the first two steps, “Stakeholder Analysis,” and “Business
Strategy and Technology Strategy Alignment” (no need to go over the full roadmap, but rather
highlight the kick off and strategy alignment steps)

147
 Case 20: Bravo Insurance
Specialty

Expected:
• Ability to complete without getting thrown off by pure strategy nature of case
• Completes all section with logical recommendations for each

Good:
• Develops roadmap and framework when appropriate, and determines how the two tie into one
Performance another
Evaluation • Comes up with good and structured areas for improving the IT infrastructure, particularly
reviewing people and systems

Excellent:
• Complete all areas seamlessly without hesitating, and incorporating the roadmap and framework
into the CIO recommendation

148
 Case Interview feedback form
Case _______________________ Case type ______________ Interviewer ____________________

Execution
Case start time __:__
• Structure 1 2 3 4 5
 Logical approach Comments: Framework development ______ min
 MECE Framework explanation ______ min
 Appropriate drive to solution Case discussion ______ min
• Quantitative Ability 1 2 3 4 5
 Speed Comments:
Case end time ___:____
 Accuracy
 Comfort, reaction to mistakes Overall Rating: 1 2 3 4 5
• Business intuition 1 2 3 4 5
 Practical Comments: Strengths
 Insightful
 Breadth & depth across multiple functions
 Creativity

Communication
• Professionalism 1 2 3 4 5
 Poise Comments:
 Confident-Persuasive
 Articulate-concise
 Client ready Weaknesses
• Written 1 2 3 4 5
 Clarity of writing and page layout Comments:
 Ability to refer back
 Comfort, reaction to mistakes

Behavioral (optional)
• Quality of star stories 1 2 3 4 5 Comments:
• Length 1 2 3 4 5
• Clarity 1 2 3 4 5
Key: 1=Bottom 10%, 2= 10th-25th percentile, 3=
• Relevance 1 2 3 4 5
middle 50%, 4= 75th-90th percentile, 5=Top 10% 149
 Case 21: RDTC
Round 1
RDTC is a large public accounting firm with over $3B in revenues and over 8,000 employees. Over the past
three years the firm has been working to overcome challenges identified in their practice through an
organization-wide change initiative. There are two key components of this change initiative—a brand new
technology called LCS and a suite of tools, resources, and methodologies to ensure streamlined processes
called RDTC Project Management. RDTC Project Management (RDTC PM) is the driving force behind the
new RDTC Methodology to performing audits while LCS is simply the new software that will allow auditors to
successfully execute this new methodology. This is also the first time in the history of the organization that
project management has been emphasized and used to evaluate performance of staff.
RDTC is entering the third year of this change initiative and is at a critical inflection point with both LCS and
RDTC PM. LCS has rolled out to all of the small and medium project teams but is now set to deploy to all
large accounts. These large accounts bring in the most revenue for RDTC, have the largest teams, require
the most staff hours, and have most senior audit partners leading them.

Deployment of RDTC PM has had several challenges. One of the most important aspects has been the role
creation and hiring of 50 new, full-time project managers to enhance RDTC’s project management
capabilities; thereby ensuring a consistent methodology for performing audits. RDTC forecasted that the 50
Prompt new project managers would be assigned to the 70 largest project teams by this year. So far only 20 have
been hired and assigned to 30 project teams teams. In addition, the existing project managers have met
resistance from the account teams who are not accustomed to having project management oversight.
The adoption of this change initiative is essential to ensuring that RDTC stays competitive in the
market and avoids penalties from the oversight board. They want you to develop a plan for the next
year of their change initiative. They want these questions and considerations addressed in your
plan:

How do we prioritize the challenges that their change initiative is facing?

What should they consider as LCS prepares to deploy to large engagements?
How can we attract new project managers and focus on ensuring success of the ones?

Possible 2nd level question if candidate brings up issue: The other 30 project teams have started assigning
project management responsibilities to people within their team instead of waiting on a trained project
manager. What are the potential risks associated with this approach? How would you address this problem?

150
 Case 21: RDTC
Guiding Questions:
When was the last time RDTC updated its software?
They have been operating on their legacy system for the past 15-20 years, so not recently.

How successful was the LCS roll out to small and medium engagements?
It was met with a lot of resistance from audit personnel. To convert to LCS, engagement teams are supposed to submit
software conversion requests. Teams consistently missed deadlines to submit conversion requests

How is RDTC organized?

They are organized in regional divisions—East, West, and Central. Each region has the same leadership structure with one
regional president, VP, and office leads. The project teams’ clients are all within their region. Project Managers are
supposed to be assigned to project teams within their region, but because there is a shortage many have had to work
with teams outside of their region.

What slowed the hiring of new project managers? (If they ask this question—ask them to brainstorm ideas first.)
Several things have slowed progress.
1. The career path for new project managers is not fully established thereby reducing the attractiveness of the option
2. The training has not been fully developed so leadership does not feel comfortable with hiring additional project
managers
3. The opportunity has not been communicated across the organization
Guidance 4. Right now they are only recruiting internally at experienced auditors who desire a career change, but could be open to
considering outside candidates

Is there anything preventing them from hiring new project managers?

Right now, they are waiting until the end of busy season to hire additional project managers. They will not be able to hire
anymore for six months.

Is engagement team leadership bought in to this initiative?

Because senior managers, partners, and directors are accustomed to the legacy technology, many have not submitted
request to convert to LCS and are reluctant to do so. Many of them also do not understand the benefits of project
management and do not understand the purpose of project managers. There are a few champions within the
organization however, but everyone is not aligned on what this change means

151
 Case 21: RDTC
Candidates have the opportunity be creative in their approach and framework, but should clearly create and
communicate their structure and plan. Feel free to ask probing questions in any of these areas to push the candidate to
think further on these topics. A good framework should include these elements and considerations.

The candidate should avoid discussing what competitors are doing and should think more broadly than a tech adoption
case.

An exceptional candidate will also consider

PEOPLE
Leadership alignment: Importance of change coming from leadership; How to ensure key stakeholders are aware of
benefits and are communicating that to direct reports; How do we get all of leadership bought in to change initiative

Candidate could discuss a change curve to prioritize who is most important and how to encourage adoption of initiative

Performance Learning: Onboarding training program for new project managers is critical as the organization is creating a new role;
Develop tools and resources for engagement teams who do not have a project manager yet; What type of learning
Evaluation should be developed for project teams that are unfamiliar with project management oversight

Possible development of a Center of Excellence for both areas of change initiative

Key Stakeholders: Audit personnel; Engagement teams; Leadership; Clients; Current project managers and potential
candidates

PROCESSES
Communications: How is RDTC communicating the availability of the project manager role?; Use of strategic
communications to announce technology change and benefits of change initiative to engagement teams

Project Management: How to handle engagement teams who have not been assigned a project manager; How to
utilize existing project managers so they are not too stretched

TECHNOLOGY
LCS adoption: Perform a pilot and phased roll out; Identify “Super Users” or utilize “Train the trainer” philosophy to
help auditors understand and use new technology

152
 Deloitte Cases
The following cases are real Deloitte cases. To get the most out of these cases, save them
for once you have mastered the basics.

153
DMCC is thankful for Deloitte Consulting LLP’s support and contributions to the 2013-2014 Casebook
MBA Case Interviews

FY12 Winter Case Library

Deloitte Consulting LLP

 1st Round Analytical Case
Apparel – Brand Carve Out

176
Brand Carve Out – Case Overview

Business Situation
Deloitte has been asked to help the client, Coffee, evaluate the hold or sell decision. Coffee is a large multinational woman’s
clothing retailer with worldwide revenues of over $3B in 2011. They sell sports, formal and casual apparel. The company as
a 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 they have put up for review and have also closed some of the brand’s associated stores.
The American operation has two major umbrella 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:

• Coffee branded retail stores: $200M in annual revenues

• Tea branded retail stores: $20M in annual revenues
• Coffee branded outlet stores: $150M in annual revenues
• Wholesale sales to major retail chains (e.g., Macy’s): $600M in annual revenues

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
re-investment. Essentially, Coffee wishes to understand whether they are better served by divesting the Tea brand and
refocusing their attention on their core Coffee brand business or holding the Tea business and simply “milking the cash
cow.”

Problem Statement
Deloitte Consulting has been approached by Coffee to assess whether Coffee should hold or sell the Tea brand.
1. Using the “terms of the sale” from the data sheet, find the associated revenues for 2012 that the buyer would
receive from buying Tea and compare that to the associated revenue that Coffee could maintain by not selling Tea?
2. How would you value the sale scenario and hold scenario? Present your findings.
3. If Coffee decides to hold the Tea brand, how long will it take for the cash flow from Tea to equal the amount of
money that Coffee would have received through selling Tea? Note: Please use $50M as the sales price.
4. Based on your analysis, what would you recommend to Coffee?
5. Are there any other relevant issues that may affect the valuation or the divestment decision?

- 156 -
Brand Carve Out – Data Sheet
General Information Revenue Multiples: Consumer Product
• Management has decided that the terms of the sale will Transactions in the U.S.
be as follows:
‒ Sale of Tea brand will include only Tea’s branded
product sales in Tea’s retail channel and Tea’s Revenue Deal size
Deal date
multiple ($M)
wholesale business
‒ Buyer will not have access to Coffee’s Outlet stores or Transaction A 0.6 147 January 2011
Coffee branded retail stores for distribution Transaction B 0.7 300 March 2011
Brand vs. Channel Sales CY2011 Transaction C 0.9 180 April 2010
Coffee Coffee Transaction D 0.6 70 October 2010
Tea branded
($M) branded branded Wholesale
retail stores
retail stores
outlets
Transaction E 1.9 5 November 2007
Coffee
Brand 180 10 120 540
products Tea Brand Business Historical Performance
Tea Brand
products
20 10 30 60

Note: Sales in the Wholesale channel are expected to (% of sales) 2009 2010 2011
remain unchanged in CY2012
Revenues 100% 100% 100%
Number of Retail Stores
Gross Profit 23% 23% 22%
Start of 2010 Start of 2011 Start of 2012
EBIT 12% 11% 10%
Coffee
branded 100 125 150 SG&A 5% 6% 6%
stores
Tea COGS 77% 77% 78%
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

- 157 -
Brand Carve Out – Isolate Revenues for Sell & Hold Scenarios

Prompt Questions and Responses (For interviewer reference ONLY)

1a. Using the terms of the sale from the data sheet, find the associated revenues for 2012 that
the buyer would receive from buying Tea?
(Note to interviewer: Please provide candidate with data sheet)

General Approach: (Interviewer can mention that the terms of the sale are available on the data
sheet given their importance)

Candidate should do the following:

1. Isolate the revenues of the part of the business being put up for sale
2. Scale the Tea retail revenues by the proportion of stores that will remain open at the beginning of
2011 (20/32 = 0.625)

A good answer will isolate the likely revenues based on the terms of business for sale and scale the
retail stores by the amount of stores open at the beginning of 2012:

Coffee branded Tea branded Coffee branded

($M) Wholesale Total Revenues
retail stores retail stores outlets
Tea
- 6.25 - 60 66.25
Revenues (10 x 0.625)

- 158 -
Brand Carve Out – Isolate Revenues for Sell & Hold Scenarios

Prompt Questions and Responses (For interviewer reference ONLY)

1b. Using the terms of the sale from the data sheet, find the associated 2012 revenue that Coffee
could maintain by not selling Tea?

General Approach:
Candidate should do the following:
1. Isolate the revenues of Tea sales through all channels
2. Scale the retail revenues by the proportion of stores open at beginning of the year: number of Tea
retail stores goes down (20/32 = 0.625); number of Coffee retail stores goes up (150/125 = 1.2)

Coffee branded Tea branded Coffee branded

($M) Wholesale Total Revenues
retail stores retail stores outlets
Tea 24 6.25 30 60 120.25
Revenues (1.2 x 20) (0.625 x 10)

- 159 -
Brand Carve Out – Value Hold & Sale Scenario

Prompt Questions and Responses (For interviewer reference ONLY)

2. How would you value the sale scenario and hold scenario? Please use available data to
support your argument
(Note to interviewer: Please provide candidate with data sheet)
General Approach:
Candidate should do the following:
1. Take revenues calculated from previous question
2. Refine revenue multiple to adjust for outliers and dated information
3. Apply revenue multiples to value the two scenarios

Revenue Multiples Calculation

Revenue Deal Size
Deal Date
Scenario Total Revenues Multiple ($M)
Tea Sale Scenario 66.25 Transaction A 0.6 147 January 2011
Tea Hold Scenario 120.25 Transaction B 0.7 300 March 2011
Transaction C 0.9 180 April 2010
Transaction D 0.6 70 October 2010
Transaction E 1.9 5 November 2007
Unadjusted
Average
0.9
Adjusted
Average
0.7

- 160 -
Brand Carve Out – Value Hold & Sale Scenario

Prompt Questions and Responses (For interviewer reference ONLY)

2. How would you value the sale scenario and hold scenario? Please use available data to
support your argument (Note to interviewer: Please provide candidate with data sheet)
Valuation:
Good Answer:
• Sale Scenario – Take $66.25M and capitalize by revenue multiple of 0.9 to value the company for sale at ~$60M
• Hold Scenario – Take $120.25M and capitalize by revenue multiple of 0.9 to value the company for sale at ~$108M

Better Answer: Candidate suggests Transaction E be removed because it is dated and reflects inflated, pre-crash asset
prices
• Sale Scenario – Take $66.25M and capitalize by revenue multiple of 0.7 to value the company for sale at ~$46M
• Hold Scenario – Take $120.25M and capitalize by revenue multiple of 0.7 to value the company for sale at ~$84M

Great Answer: will include the above, but the candidate would also mention the following points and how each may
affect the valuation:
Sale Scenario:
• The ability to 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)
– Buyer may have existing channels that can satisfy the dormant demand; or buyer can build channels from
scratch
• Buyer is also purchasing the remaining store leases as part of its purchase price, so ability to fill up space in Tea
stores currently filled by Coffee branded products may also attract a slight premium
• Coffee’s ability to replace the lost revenue streams associated with the 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 streams
Hold Scenario:
• Candidate should 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.

- 161 -
Brand Carve Out – Value Hold & Sale Scenario

Prompt Questions and Responses (For interviewer reference ONLY)

3. If Coffee decides to hold the Tea brand, how long will it take for the cash flow from Tea to
equal the amount of money that Coffee would have received through selling Tea?
Note: Please use $50M as the sales price in the calculation, ignore time value of money

Good Answer:
• Using $120.25M of revenue from question 1b, candidate will need to use the 10% EBIT margin.
• 10% * 120.25M = $12M per year
• Breakeven would occur $50M/$12M or slightly past 4 years

Better Answer:
• Candidate should realize that EBIT is not the true cash flow and should take taxes out
• Assuming 40% tax rate, net earnings % would be 6%
• 6% * 120.25 = $7.2M per year
• Breakeven would occur $50M/$7.2M or about 7 years

- 162 -
Brand Carve Out – Recommendation & Other Issues
Prompt Questions and Responses (For interviewer reference ONLY)
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).
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.
A good answer will draw the following conclusions from the data provided:
If candidate chooses to hold Tea, the candidate should mention:
• Its value to Coffee exceeds the sell case
• There may be an opportunity to improve the performance of Tea that may require extra investment:
‒ Open more Tea retail stores
‒ Enterprise cost reduction program
‒ Take brand international
‒ Take brand to a broader range of potential wholesale clients (e.g. independent retailers)
• Holding Tea could allow the retail business to continue to leak value. The combined effects of store
closures and steady decline in EBIT margin (12% in 2009 to 10% in 2011) has resulted in a
significant reduction in Tea’s retail profits. The bulk of Tea’s value increasingly lies with the wholesale
business
• Mention the declining trend in the Tea retail outlets and have Coffee assess whether that is
potentially harmful to the overall business
If candidate chooses to sell Tea, the candidate should mention:
• Some revenue streams from Tea branded goods are likely to be readily replaced by Coffee’s
operations
• Allows Coffee to gain as much as possible for the Tea retail business before it loses more value
• Mention the fact that as long as the trend continues to close the Tea stores, the valuation for Tea
may go down

- 163 -
Brand Carve Out – Recommendation & Other Issues

Prompt Questions and Responses (For interviewer reference ONLY)

5. Are there any other relevant issues that may affect the valuation or divestment decision?

A good answer will be logically structured to address various business considerations

including:
• Overall business strategy for woman’s apparel: Does Tea’s brand, product mix, and styling fit
within the overall strategy of Coffee’s vision? This is potentially an overriding factor in the decision
to buy or hold the business
• Ability to Change: In a hold scenario, does Coffee have the appetite to fully implement the
changes required to halt the slide of Tea?
• 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 potential
issues with making a deal with each one? E.g., Private Equity: Potential carve out experience, but
unlikely to overpay for asset. If they do not have other similar businesses in their portfolio, will
need to set up their own back office functions. Strategic buyer: May take brand up or down
market; an existing retail buyer may want to close the rest of the Tea retail stores; lack of back
office will make it difficult for some buyers to do a “bolt-on” business.
• Transaction Costs:Banker costs and potential loss of management focus on the core business
during deal will make sale scenario less attractive
• Stranded Costs: there may be services across the two brands that are shared and may be
stranded upon sale

- 164 -
Brand Carve Out

Wrap Up
 Divestitures are often an effective tool for a business to sharpen its focus on its core activities and
free up proceeds to invest in areas of high growth. The client needed to understand whether the
decision to sell a brand was a good idea, which required a thorough understanding of what a sell
scenario or hold scenario would look like financially
 In this situation, Deloitte was brought in to help the client to evaluate the hold or sell decision
 The Deloitte team assisted the client by:
– Carving out the brand and determining the value of the brand to the company in both the hold
and sell scenarios
– Conducting commercial diligence to maximize the value of the sale for the client
– Working with Deloitte’s Financial Advisory Services Practice to conduct sell side transaction
advisory and execution services
– Implementation planning to minimize any stranded costs left with sell-side post -transaction
 Deloitte is viewed as a trusted M&A strategy advisor to the client and has conducted numerous
projects to execute the transaction

- 165 -
2nd Round Strategic Case
Student Health Insurance

187
Profitable Growth Strategy: Business Unit of National Health Insurance Company
Business Situation
Our client is a business unit within a large national health insurance company. The client focuses primarily on the higher-
education student health insurance market, selling medical insurance, prescription drug insurance and dental insurance
to students at large universities. The client is the market leader, both in terms of customers (~500,000) and 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 health
center to gain access to the student population. The “second sale” is to the students, who are the ultimate consumers
and purchasers of the insurance products. In certain segments of the market, a broker may also act as an intermediary
to the school.

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.

- 167 -
Profitable Growth Strategy: Business Unit of National Health Insurance Company
Questions
[Note to interviewer: Reveal one question at a time to the interviewee (do not share all questions with
interviewee up front) as each question resets the case for the interviewee]

1. What are the potential avenues of growth for the student health insurance company?

2. 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?

3. (Quantitative problem) In developing the “down market” small school analysis, our primary concern related to the
attractiveness of this 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?

4. 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?

5. 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?

- 168 -
Profitable Growth Strategy: Business Unit of National Health Insurance Company
Data Sheet – Question 1
1 Student Health Market Size 2 Revenue Composition by Customer Size
2%
2,000
20%
1,500
Number of Schools

Large Schools
(>$1M annual revenue)
1,000 % of all 93 7%
students % Small Schools
20% (<$1M annual revenue)
500 26%
32%

0
>20K 10-20K 5-10K 1-5K <1K Note : 90% of the client’s “Large Schools” have >10K students
School Size (Students)
3 Product Revenue Contribution 4 Select Product Penetration

Medical Insurance 99.0% 42.0% School

Dental Student
6.6%
Dental Insurance 0.6%
52.3%
Discount Cards
Discount Cards 0.2% 19.5%

Student Assistance Program

0.2% Student Assistance 7.5%
(SAP)
Program (SAP) 100.0%

Discount Cards: Cards that provide discounts on prescriptions, School Penetration = # schools offering product / total school
dental services, gym memberships, etc. customers
Student Assistance Program: Remote counseling services for Student Penetration = # students with specified product / #
students students with medical insurance

- 169 -
Profitable Growth Strategy: Business Unit of National Health Insurance Company
Data Sheet – Question 3

Client Historical Financials Product/Customer Combinations

$518M Average Annual

$487M Insurance
$462M Premium Revenue
Plan Sold
$398M per School
$373M (Product)
Option (Customer Type)

A Plus – Large School Plus $1,000,000

B Standard – Large School Standard $1,000,000

$88M $70M C Plus – Small School Plus $500,000

$58M $42M $44M
D Standard – Small School Standard $500,000

2006 07 08 09 10
Revenue ($M) Pretax Operating Income ($M)

Client-Specific Insurance Plan Pricing Client-Specific Small School Cost Structure

Cost Structure
Cost Amount
Insurance Plan Price Per Student Per Year Component

Plus Insurance $2,000 Selling Expenses 7% of Premium Revenue

Standard Insurance $1,000 Setup Costs $50,000 Per School

Administration Costs $50 Per Student
Medical Costs 80% of Premium Revenue

Note: Under recently passed Health Care Reform

laws, insurance companies are required to spend
80% of all premium revenue on medical expenses

- 170 -
Profitable Growth Strategy: Business Unit of National Health Insurance Company
Prompt Questions & Responses (For interviewer reference ONLY)

1a. What are the potential avenues of growth for the student health insurance company?

[Note to interviewer: Look for the candidate to provide structure in assessing the growth opportunity. If the interviewee starts listing
random opportunities, ask how they would structure an approach to devising ideas. This question was intentionally developed to
assess the candidate’s ability to deal with ambiguity and provide a variety of solutions based on his/her academic and professional
experience. The framework and comments below are NOT exhaustive. ]

Products/Business Models
Existing New
• Identify new segments/channels to sell existing • Target non-consumers (uninsured)
products • Offer new products to new customers
‫ ۔‬Pursue small school segment (universities)
‫ ۔‬Pursue secondary schools (private / charter
New

schools)
‫ ۔‬Pursue individual students where schools do not
Customers/Markets

offer insurance

• Defend and grow the core business • Develop new products that can be offered to the
‫ ۔‬Optimize or increase price current customers (customer are both students AND
‫ ۔‬Enhance marketing and sales force schools)
effectiveness to increase penetration of existing ‫ ۔‬Capture student wallet share for adjacent insurance
Existing

product offerings products (tuition insurance, electronics insurance,

‫ ۔‬Steal share in the large school market auto insurance, renters insurance, etc.)
‫ ۔‬Develop additional areas of differentiation ‫ ۔‬Consider adjacent health services for current
(functionality, reliability, convenience) students (mental health, wellness)
‫ ۔‬Establish cost leadership and set prices ‫ ۔‬Consider adjacent services for health centers
accordingly (billing)

- 171 -
Profitable Growth Strategy: Business Unit of National Health Insurance Company
Prompt Questions & Responses (For interviewer reference ONLY)

1b. Based on the data sheet, what are the potential avenues of growth for the student health insurance company?

[Note to Interviewer: Provide the candidate with the data sheet after he/she provides an approach. Ask the candidate to
synthesize the comments and provide additional recommendations. The numbers below correspond with the numbers on the
accompanying data sheet. (Note that both 1 & 2 can be analyzed as a pair, as can 3 & 4. These trends below correlate with the
charts on the data sheet.]

Key Trends
1 Lower enrollment schools (<10K students) have a significant portion of students (42%) fragmented across thousands
of schools
2 The client earns a significant portion of its revenue from schools with more than 10K students
1 2 There is an opportunity for the client to diversify its current revenue base by pursuing the small school market, which
is comprised of almost 90% of all schools

3
The client is not well diversified in terms of number of products offered

4
The client has difficulty selling its ancillary products to both students and schools that purchase the medical product
There is a significant opportunity to grow revenue by increasing the penetration of non-core products
3 4

- 172 -
Profitable Growth Strategy: Business Unit of National Health Insurance Company
Prompt Questions & Responses (For interviewer reference ONLY)

2. 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?

[Note to interviewer: Interviewee should recognize this is a market attractiveness question and provide relevant criteria for
assessment. The market attractiveness criteria and corresponding comments provided below are NOT exhaustive. Look for the
candidate to touch on many of these areas, and possibly offer other areas for investigation.]

Criteria Qualitative Quantitative

Market size • Segment the market to understand potential • Quantify revenue potential by considering # of
customer behavior schools, # of students, insurance requirements,
• Consider key factors in insurance buying behavior and premium projections by segments developed
Market growth • Assess maturity of the market • Historic market growth rates
• Consider market trends and healthcare reform • Model projected number of schools currently in
the market and likelihood to join
Competitive • Conduct customer interviews, focus groups, voice • Market share analysis
intensity of the customer analysis • Win/loss rates for sales
• Conduct competitor assessment
Strategic fit • Determine how strategy required to win in new • N/A
segment (cost versus differentiation) aligns with
existing business strategy
Capability needs • Understand future state capability needs from the • Requisite investments (capital expenditures) to
new market enter the new market
• Conduct gap analysis
Profitability • Interview potential clients to develop • Model potential margin scenarios based on
understanding of revenue and cost assumptions various revenue, market size and cost structure
assumptions
Likely • Assess customer needs in the market • Model sensitivity analysis based on market
penetration / • Consider client’s current share in other segments growth, competitive intensity, margin and pricing
market capture requirements
(share)

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Profitable Growth Strategy: Business Unit of National Health Insurance Company
Prompt Questions & Responses (For interviewer reference ONLY)

3a. Our primary concern related to the attractiveness of this segment was whether healthy operating margins could be
achieved. What type of information would you need to calculate operating margin percentage for this segment?

[Note to interviewer: After the candidate indicates what data he/she would need, provide the data sheet and ask him/her to
calculate the operating margin for the four scenarios.]

Interviewee should ask for information about the cost structure of the company (fixed versus variable) as well as the product
pricing, penetration (number of customers) or total revenue.

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Profitable Growth Strategy: Business Unit of National Health Insurance Company
Prompt Questions & Responses (For interviewer reference ONLY)

3b. What is the operating margin percentage for each of the four product/customer scenarios? Each scenario presents a
different mix between the product sold and the size (in terms of revenue) for the customer.

Using the data sheet, 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 Customers Admin-
Option

Product Medical Selling Setup Total Operating

Premium (Students istrative
Sold Expenses Expenses Costs Costs Margin %
Revenue per school) Costs
per School
Plus 80% 7% 5% 2.5% 94.5%
1 $1,000,000 500 5.5%
A ($2,000) ($800K) ($70K) ($50K) ($25K) ($945K)
Standard 80% 7% 5% 5% 97%
2 $1,000,000 1000 3.0%
B ($1,000) ($800K) ($70K) ($50K) ($50K) ($970K)
Plus 80% 7% 10% 2.5% 99.5%
3 $500,000 250 0.5%
C ($2,000) ($400K) ($35K) ($50K) ($12.5K) ($498K)
Standard 80% 7% 10% 5% 102%
4 $500,000 500 (2.0%)
D ($1,000) ($400K) ($35K) ($50K) ($25K) ($510K)

Key Trends
Follow-Up Prompt Questions After Analysis is Completed: • Fixed costs are more tenable with larger customers
• Higher priced product cuts variable costs in half
What observations/trends do you notice about the cost structure?
• Medical expenses and selling expenses are fixed
regardless of the school size or product

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Profitable Growth Strategy: Business Unit of National Health Insurance Company
Prompt Questions & Responses (For interviewer reference ONLY)

4. 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? [Note to interviewer: Interviewee likely will not give a simple yes or no
answer in terms of pursuit – they should identify scenarios under which it would make sense to potentially pursue the market –
use the prompt questions as necessary if they are not able to move beyond the “OK answer”]

Interviewee should recognize that under the provided cost structure, none of the scenarios led to an operating margin that was in
line with the current, overall operating margin (provided in the background section); better answers will center on finding ways to
make the market viable (by applying levers to improve profitability or inventing a new business model)

Prompt Questions (if

Whether to pursue How to pursue required)
• Client should not pursue the • N/A • Should the client
OK Answer segment because it is not pursue the small
profitable enough school market?
• Client should pursue the • Reduce SG&A or selling costs through • Is there anything they
market if they can apply standard cost reduction methods (business could do to make the
different levers to make it process redesign, contract renegotiation, unprofitable small
more profitable etc.) market segment more
Good Answer • The interviewee may suggest price attractive?
increases or reducing medical costs, but
it’s important to note that neither is
possible under Health Care Reform
• Client should pursue the • Create an online B2C model that sells • Would a different
market with a different directly to students and bypasses the two business model be
business model intermediaries (brokers and schools) – appropriate for this
Best Answer
similar to other industries that have market?
transitioned into direct, online distribution
(e.g. books, airplane tickets, etc.)

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Profitable Growth Strategy: Business Unit of National Health Insurance Company
Prompt Questions & Responses (For interviewer reference ONLY)

5. 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?

Interviewee should establish a framework for screening or prioritizing multiple opportunities. Good components would include:

Strategic Impact and Fit Financial Impact Cost to Achieve Time to Implement / Ease
of Implementation
• Competitive differentiation • Revenue potential (market • Investment (capital) costs • Alignment with existing
• White space / new market size) • Ongoing operating costs capabilities
opportunity • Income / margin • Innovation complexity
• Disruptive potential (low • Administrative cost reduction • Availability of partners or
cost) • Future cost avoidance acquisition targets
• Address unmet marketplace
needs
• Alignment with current
business unit and corporate
strategy

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