Case Interview Frameworks

Overview
Determine Key
Issue(s)

Develop
Hypotheses

Gather Data /
Test Hypotheses

Develop Options

Make
Recommendation

Refine Answer

As the interviewer describes the situation, think about what are the key issues
facing general managment

Develop hypotheses

Decide what data you need to better understand the issues

Listen to the facts

Evaluate which facts are critical to the key issues

Probe for more detail in critical areas

Use facts and numbers appropriate in building argument

Summarize options before making recommendation

State pros and cons - be fact driven

Make your recommendation

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Case Interview Frameworks

Using Frameworks
There is no golden rule, more than one framework may be applicable
Use an appropriate framework
Do not force a framework
Be hypotheses driven
Be prepared to revise your hypotheses
Mutually Exclusive and Collectively Exhaustive (MECE)
Listen for clues from the interviewer
Accept direction from the interviewer
Display your thinking visually / graphically
Be transparent in your analysis
Leave time to summarize and make recommendations

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Case Interview Frameworks

Some General Frameworks
The Three Cs
The Four Ps
Porters Five Forces (+govt.)
Supply & Demand
The Profit Equation
Internal - External
NPV Analysis

Dont be afraid to create your own framework, as long as it is logical,

appropriate and transparent to the interviewer.

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Case Interview Frameworks

Market Sizing
Determine The Key Drivers
Bottom Up or Top Down?

Make Assumptions

Calculate
Use Round Numbers!
Common sense check!

Analyze Results
Implications?

Increasing Factors

Decreasing Factors

Adjust Answer

Adjust Answer

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Case Interview Frameworks

Declining Profits
What's Driving
the Decline?

Gather Information

Analyze Using
Profit Equation

Revenues

Price

Decreasing
Comp. pressure?

Expenses

Volume

Decrease

Increase

- Market Conditions
- Competition

Higher Marg. Costs

- Org. Dysfunction
- Overtime

Product Mix

Fixed Costs

Variable Costs

Unusual Expenses

Selling Less
Profitable Items

- Added Capacity?

- Raw Material Prices

- Writeoffs
- Lawsuits

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Case Interview Frameworks

Increase Profitability

Revenues

Price

COGS

Unit Volume

Direct Material

Price Sensitivity
- Elasticity

Existing Market
- Promotion
- Place

Scale Economies
/Diseconomies
- Supply Constraints

Competitive Environ.
- Substitutes

New Markets
- Geographic
- Economies of Scope

Inventory Mgmt.
- Carrying Costs
- Shrinkage

SG&A

Direct Labor

Variable O/H

Replace w/machines
- Union?

Cost Acctg.
- Allocation Drivers
- Does pricing
reflect Cost

Can we explore economies of scope with entry into adjacent industry?

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Case Interview Frameworks

Increase Capacity?

Should W e Increase Capacity?

Market Demand

Industry Capacity

Competitors Plans

Investment vs. Improvement

Market Trends

Threats

Improve Productivity

Add Capacity

Cyclical / Seasonal

Bottlenecks

Add shifts

Economy

Design for manuf.

Acquire

Global Competition
Consum er tastes

Outsource

Substitutes

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Case Interview Frameworks

Customer Turnover
What Has Changed in
the Following Environments?

Company

Customer

Competition

Regulatory

Product
Is quality sagging?

Tastes changing?

Are low cost competitors

stealing from us?

Do new tax
incentives exist?

Price
Have sensitivities changed?
Overpriced versus our competition?

Disposable income?

Are diffentiated competitors

stealing from us?

Any new regulations

restricting the use of our
product and favoring substitues?

Place
Is our distribution getting squeezed out?
Are Customers Changing Channels?

Demographics of our target?

Are competitors integrating

into distribution and
shutting us out?

Promotion
Are we spending?
Push vs. pull?

Do new substitutes exist?

Are they offering our customers

special incentives to switch?
(particularly with substitutes)

Has public image changed?

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Case Interview Frameworks

Competitive Response

Customer
- What do they want?
- How do they choose?

Values/Tastes

Price Sensitivity

Competitor
- Where are we positioned?
- Where is the competition?

Purchasing Habits

Product

Company
- How do we add value?

Resources to respond?

Business relationships

Place
Susbsitutes

Disposable income

Distribution channel

Demographic changes

Mature market?

Bundled product?

Cost structure

Distributor

Tangible

Vendor

Intangible

Customer

Price

New customers?

Normal good?

Promotion

Finances

Given the above, is it worth making a competitive response?

How will the competition react?
Applying game theory or PARTS analysis may help.

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Case Interview Frameworks

New Product Introduction?

Customer
Does product met a need?

Competition
Is there any?

Yes

Product
Have we done homework?
What does the segment want?
Proliferation of products already?
Price
Have we explored sensitivity?
Can we make a profit at this price?

Many

Is market growing?
Promotion
Push or Pull?
Cost of launch?
Will current promotions help?

Company
Can we do it?

Can we eat the young?

No

Few

What wil be the strategy?

Low cost or Differentiated?

Are there barriers to entry?

Yes
Can we beat them?

No
Can we erect some?

Finance
Are we able to finance the launch?
Should we buy an existing producer?

Will we be first movers?

Any precious resource

that we own?
(Ricardian rents)

Operations
D0 we have capacity?
Supply network?

Marketing
Will we cannibalize existing products?
Is this a complement / bundled good
Does it build on resources?

Place
Is distribution aligned with customer?
Are we experienced in this channel?

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Case Interview Frameworks

International Expansion
Internal

External

Quantitative

Doesit match our growth strategy?

- ROE/ROI

Cultural Differences of Customers

- Tastes / product preferences
- Values / gender roles

ROI / Hurdle Rate

Alliance with local firm?

- Joint venture/distributor

Methods of Conducting Business

- Introductions
- Government contacts

Can our resources succeed overseas?

- Flexible enough to adapt?

Educational Differences

Amount

Is organization consistent
with overseas 'autonomy'

Economy & Exchange Rates

Timing
- Startup / disposition
- Operating

Corporate Values
- Bribery
Worker's conditions / child labor

Seasonality
- Weather

Discount Rate

Cash Flows

Distribution system
- Transportation infrastructure
- Different channels
Political Climate
- Instability

Local Market
- Size
- Competition

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Case Interview Frameworks

Investment Decision

Investment Decision

NPV Analysis

Useful Life

Cash Flows

Timing
- Opportunity Cost

Other Factors

Discount Rate

- Risk Free Rate

- Inflation
- Risk Adjust

Strategic Fit

Synergies

Environmental

Political

Competitors

- Missing Links
of Value Chain

- Seasonality
- Volatility
- Inflation
Demand Cycle

Stability
Regulation

- Current Supply
Potential Demand

Size
- Market Potential
- Outflows
- Working Capital

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Company Acquisition
Understand Purpose
Diversification?
Gain Market Share?
Geographic Expansion?

Analyze Opportunity

Internal Factors

External Factors

Strategic Objective

Strengths & Weaknesses

Resources

Acquisition Fit

Industry Attractiveness

Porter's Five Forces

Three C's

Identify Acquisition
Candidates

Soft Issues
- Culture/Fit
- Management
Hard Issues
- Price
- Balance Sheet

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Case Interview Frameworks

Hostile Takeover Defense
Two Options Both
Designed to Raise the
Value of the Company

Self-Help

White Knight

Are We Highly Levered?

(Relative to the Industry)

Classic M&A
Is there a Firm That...

Yes

No

Do We Have Cash?

Issue Debt, Buy Back Stock

Has Financial Strength

Strategic Compatability
Cultural Fit

Yes
Then Buy Back Stock
to Raise Stock Price

No
Can We Release Good News
to Raise Stock Price?

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