Cracking Case Interview: Profitability Frameworks

Presents
Cracking Case Interview: Methodology and

Frameworks
11-08-2016
Recap
What is Consulting?
What are the different types of Consulting?
Questions asked in interview
Things to keep in mind
Frameworks
ConSIG | SJMSOM | Case Interview Frameworks
Consulting
What is Consulting?
Consulting is the business of giving
expert/professional advice to other professionals
3
Consulting Interview
Questions Asked in Interviews

Guesstimates
Business
Cases
Brain Teasers
Market Size
Revenue Forecast
Puzzles
Market Entry
Profit & Loss
M&A
Pricing Strategy
4
Make a note
Things to Keep in Mind

Take
Notes
No Vague
Assumpti
ons
Ask
Questions
Problem
Solving
Think Out
Loud
Layout a
Roadmap
Take Your
Time
5
Frameworks
Structured thinking and synthesis of all possible facets of problem
6
Agenda
Case Interviews
Commonly used frameworks
How to apply particular framework to solve business
problem?
How to combine and customize various framework?
Purpose of Case Interview

Whats a case interview?
Analysis of business questions
Most of the times no specific answers are expected.
Your thought process will be judged (analytical skills)
You need to show your analytical, logical and creative way of
thinking to deal with the issue
Adopt a Holistic and systematic approach
Always begin with general issues and hypotheses which will
lead to more specific sub-issues and outputs
Evaluation based on communication skills
Case Interviews - Process

Ask Key Questions
To Validate Or
Invalidate Each
Hypothesis
Listen to the case as

presented
Clarify major issues by

restating the problem
and clarifying
questions
For Each Issue

Develop One Or
More Hypotheses
Reformulate
Hypothesis
- or Next Hypothesis
Summarize Your
Conclusions
Case Interviews - Process

Business Situation/Client
Objective
Issue
Issue
Issue
Hypothesis
Hypothesis
Hypothesis
Analysis
Analysis
Analysis
Begin with the big general

picture and narrow down to
reach to final solution
Synthesis
Case Interviews
Illustration of breaking up the problem at hand into smaller sub-parts and proceeding in
systematic approach
Fact
Fact
Hypothesis
Finding
Conclusion
Recommendation
Conclusion
Recommendation
Fact
Issue
Finding
Hypothesis
Fact
Fact
Finding
Fact
Listen
Develop
Collect
Synthesize
Diagnose
Prescribe
Tips for acing Case Interviews
Take notes
Dejargonize (Express the problem in own words)
Think out loud
Use schemes and graphics to express the approach
Address issues one at a time
Request additional information if required (explaining why)
Perform important analysis (remember to speak out your
thought process throughout)
Dont hesitate from taking a step back if headed in the
wrong direction
Watch cues from interviewer maintain eye contact and
have a positive body language
Stay calm and confident!
Types of Cases
Industry Analysis
Increasing profits (Increasing Sales and/or Reducing
costs)
Market Entry
Market Sizing and expansion
New Product Development
Pricing Strategies
Capacity Expansion
Increasing Sales
Reducing costs
Merger and acquisition cases
Frameworks
Frameworks for Case Interviews
Frameworks for Case questions

Revenue Cost breakdown (Profitability Framework)
Three Cs & P
The Four Ps
Five Forces analysis
SWOT analysis
Value Chain
Supply and Demand
Frameworks..
3Cs and P (Best for cases like new business, new product, new
market entry, growth strategy, and company assessment)
Customers
o How are customers segmented?
o What are your target customers?
o What are the customers needs and wants?
Company
o What are your companys capabilities and expertise?
o What is the companys brand and culture?
o How is its financial situation?
Competition
o What is the market share and growth potential of each competitor?
o How have the competitors performed?
Product
o What is the nature of your products or services?
o Do they meet the needs and wants of the customers?
o What are the complementary goods and the substitutes?
Frameworks..
The Four Ps (Best for marketing cases)
Product:
o What do your customers need and want from your product or service?
o What features does it have to meet these needs and wants?
o How is it differentiated versus the competitors?
Place:
o Where do the customers look for your product or service?
o How can you access the right distribution channels?
o How do your competitors distribute their products?
Promotion:
o Where and when you can get across your marketing messages to your
target market?
o How do your competitors do their promotions?
Price:
o
o
o
o
What is the value of the product or service to the customers?

Are there established price points in this area?
Are the customers price-sensitive?
How is your price compared to your competitors?
Frameworks..
Porters Five Forces (Best for cases of new market entry,
business strategy development, industry analysis)
Threat of New Entrants:
Is it easy or difficult to enter the market?
What are time and cost of entry?
What are the barriers to enter the
market?
Does your company have any advantages
(cost advantage, economics of scale, etc.)?
Does it have protection for its key
technologies?
Threat of Substitute Products or

Services:
Do your customers find substitutes
easily?
How about the substitutes
performance?
What is the perceived level of product
differentiation?
What is the cost of change?
Rivalry Competition:
How intense is the
competition in your market?
How have the competitors
performed?
Does your company have any
competitive advantages?
Bargaining Power of Suppliers:

How easy is it for the suppliers to
drive up prices?
How many suppliers are there?
What is the size of each supplier?
How about the differentiation of
inputs?
Does your company have ability to
substitute the suppliers?
Bargaining Power of Buyers:

How easy is it for the buyers to
drive prices down?
How many customers are there?
What is the size of each purchase?
How is the customers price
sensitivity?
Do they have ability to substitute?
Frameworks..
SWOT (Best for cases of new business, new product, new
trends and changes, strategic planning)
Strengths:
What are the characteristics that give your organization an advantage over others?
Weaknesses:
What are the characteristics that place your organization at a disadvantage relative to others?
Opportunities:
What are the opportunities or favourable trends in the market?
Threats:
What are the elements in the environment that could cause trouble for the business or
project?
Supply and Demand (Best for cases of market research, market entry,
price setting)
Supply:
o What is the quantity of a product or service desired by buyers?
o Is supply increasing, decreasing, or unchanged?
o How do you segment suppliers?
Demand:
o What is the quantity of a product or service that people are willing to buy?
o Is demand increasing, decreasing, or unchanged?
o How do you segment buyers?
Frameworks..
Value Chain (Best for cases of product analysis, cost
analysis, competitive advantage, management strategy)
Inbound Logistics:
o These are all the processes related to receiving, storing, and distributing inputs
internally
Operations:
o These are the transformation activities that change inputs into finished products
and services
Outbound Logistics:
o These activities deliver your finished product or service to your customer
Marketing & Sales:
o These are the processes you use to persuade clients to purchase from you instead
of your competitors
Service:
o These are the activities related to maintaining the value of your product or service
to your customers, once it has been purchased
Note: The above framework is just a typical value chain for general cases. For
each actual case, the value chain can vary a lot depending on each specific
industry. For example, value chain of the cement industry would be: Limestone
Clinker Cement Concrete Construction.
Frameworks..
BCG Matrix
Frameworks..
GE Matrix
Thank You
Presents
A preparatory session on
Profitability Frameworks (Case Based Approach)

11-08-2016
Profitability Framework
What are we going to cover

Profitability
Growth Revenue
Cost Cutting
Company turnaround
Profits are declining.

How to turn around the organization
A Hypothetical Case:
Our client is a major retailer in clothing and household products.
Our client has been experiencing sluggish growth and declining
profits. Our client has 15 stores in malls in metros and suburbs.
What do you do?
Clarifications to ask in the beginning

Is it industry wide problem?
Which segment do you cater to?
How large is that segment?
Benchmarking against competitor?
External factors affecting the product?
Profitability
REVENUE COST
Cost Analysis
Fixed Cost
Variable Cost
Cost Analysis
TOTAL COST = FC + (VC * Number of units)

COSTS
COST PER UNIT
NO OF UNITS
(SALES PROD
MISMATCH)
Concept of Value Chain

Identify fixed and
variable cost
Revenue Model
Revenue
Revenue per
customer
Basket size
Number of
Customers
Pricing
Industry
wide
Growth
Market size
Company
specific
Profitability
Internal
External
Profitability Framework - Revenue Model

Company
Revenue
External
revenue
Internal
revenue
External
conditions
Competition
Supply
Demand
Value chain
4Ps
Product
POP
Price
POD
ABC model
Promotion
Competitive
pricing
Placement
Your client is a drug lord from Mexico

whose company is reporting a drop in
profits in the last 2 years. He has hired
you and you have no choice but to figure
out why. How do you work it out?
Thank You
Presents
A preparatory session on
Market Entry Frameworks (Case Based Approach)

11-08-2016
Market Entry Framework
MECE
Mutually Exclusive, Collectively Exhaustive - Diving
problem in distinct, non-overlapping issues
MECE
Your client is an electronics

manufacturer which wants to enter
the Haryana market. You need to
tell them whether it is a good idea
to do so.
Desirability Analysis
Is Indian market attractive or desirable?
Feasibility Analysis
Is Client capable of doing business there?

Is the market attractive or desirable?
Porters 5 Forces

Is the market attractive or desirable?
PESTEL Analysis
Is Indian market attractive or desirable?

Based on Porters and PESTEL Analysis,

list down KSF required by the company
New product variants

Service centre network
Skilled manpower
Higher margin (distribution)
Step 1: For every component of value chain, ask a question
whether this component is important for given KSF
Step 2: If a given component is important for KSF then what
should be its value to meet KSF
Step 3: Whether this component is able to meet desired value
Desirability
Analysis
Strength
Weakness
SWOT
Feasibility
Analysis
Opportunity
Threat
Can it make profit?

Profit
Revenue
Cost
KNOW MORE ABOUT PROBLEM SOLVING TOOLS
Books:
The Mckinsey Mind
The Mckinsey Way
Case Interview Secrets: A Former McKinsey
Interviewer Reveals How to Get Multiple Job
Offers in Consulting
Internet: www.caseinterviewscracked.com
Avoiding some common mistakes

When setting up your framework view the case from the
perspective of a manager scoping out the modules for the
consultants on her team
What buckets of information do you need - Your framework comes from

this
Which are most critical - Tells you where to start
What information can I fill in from my past experience - Leads you to smart
questions
Dont ask the interviewer where they want to start the case. Pick a
place and give a brief explanation why you are starting there
Dont rapid fire questions. Lead each question with a transition from
the data you just got or a rationale for why you are asking the
question
Before making a calculation walk the interviewer through the steps
you are going to take (Revenue = Market Share * Total Market Size).
Then take a minute to do the calculations on your paper and gut
check your answers
Use the results of your calculations to make a conclusion and
transition to your next question
Keep calm and Cool!!!

THANK YOU
APPENDIX
Case types..
Industry Analysis
Easily recognized by cases that ask whether firms should be in industry, or by cases
that lead to entire industry doing poorly
Key Points Candidate Should Explore
Market
Competition
Customer/Supplier
Relations
Barriers to Entry /
Exit
Financials
Evaluate market size and segmentation

Analyze product demand/trends
Identify customer requirements
Analyze competitive economics
Determine levels of
o Product differentiation
o Market integration
o Industry concentration
Evaluate negotiation power
Identify substitutes
Assess backward or forward integration potential
Evaluate companies entering/exiting
Determine competitor reaction to new entrant
Analyze economies of scale
Predict learning curve
Research government regulations
Identify key financial ratios (ROI, ROE)
Determine fixed and variable costs
Assess risk factors of industry
Examples
A group of investors is
considering building a 40,000seat concert pavilion in the
Northwest suburbs. What factors
should they consider?
A manufacturer of automotive
batteries is losing market share
and profitability is eroding. What
should the company do?
A national provider of in-home
health care services is
considering purchasing a regional
managed-care facility with 250
physicians. What factors should
our client consider in making this
decision?
A leading manufacturer of
automobiles is considering
acquiring a national rental car
company. What factors are
important in this decision?
Case types..
Capacity Expansion
Usually recognized by questions about firms increasing their output potential
Consider all alternatives: build, expand, outsource, etc.
Determine the growth in overall market, firms market share and trends in demand and market supply
Opportunity cost payback period, break-even point
Estimate the potential benefit for expansion without neglecting the risks associated such as decline in
demand
Summary should be a Cost/Benefit analysis of options
Acquisitions
Probably the easiest to identify: Firm X is thinking of acquiring Firm Y
Start looking for synergies
Understand potential acquirers business: does this fit?
Assess rationale
Increase resources: capacity, distribution reach, broaden product line, etc.
Decrease costs: Economies of scope, economies of scale, learning curve, etc.
Consider competitor response and possible organizational issues
NPV analysis compare costs vs benefits
Alternatives to the acquisition
Case types..
Market Sizing
Recognizable as request to determine the size of an opportunity or market
Market sizing are often a part of a broader issue
E.g. Company X, the worlds leading light bulb manufacturer, obtained a patent for a light bulb
that will never run out. Should they develop this product?
Recommended approach
Find the driver related to the sizing, e.g., Population, households, other markets
Break the problem into smaller pieces
Share the assumptions and estimations clearly with the interviewer
Make calculated and logical guesses
Rounding is ok just be sure to indicate this to the interviewer
Remember to vocalize your calculation
Do not over complicate the problem dig only as deep as you can handle
Market Entry
Recognizable by cases with firms seeking to expand into a new region, business or customer segment
Recommended approach:
Consider the industry and the size (estimate) of the market Assess market attractiveness
Understand the competition
Analyse customer needs to identify potential gaps
Determine if these gaps can be met satisfactorily
Evaluate methods of entry and barriers and duly consider the risks involved
Decide on the best way to become a player start from scratch, acquire an existing player or
strategic alliance with another player
Frameworks..
Profitability Framework (Best for profit related cases)
Profit is defined as Revenue Costs, we have profitability framework as follows:
Profit
Revenue
Cost
# of units sold
Cost/Unit
Variable
Cost
# of units sold
Revenue/Unit
Fixed
Cost
There can be various ways to break revenue and costs into smaller pieces :
Revenue can be broken down based on demographic, location, or product line, etc.
Costs can be split into components such as overhead, salary, rental, etc.
Keep drilling down until you isolate the problem the name of the game is problem isolation
Verify if it is an industry-wide or company specific issue
Case types..
Profitability
Another easily recognized case listen for indication on profit decline
Profit, = [(P-VC) * Q] FC
Use this extended formula so that you do not miss distinction between FC and VC
Breakeven quantity = FC/(P-VC)
Focus on factors which impact each of these variables, listening carefully with clues
E.g. Firm X experienced difficulty in labour relations last year . This is probably indicating a
recent increase in VC due to wage increases
Watch out for cost allocation in firms with multiple products/divisions
Key Points Candidate Should Explore
Costs:
Fixed and variable
Labor costs
Suppliers
Materials
Price/cost/volume relationship:
Plant utilization
Quality
Economies of scale
Distribution
Customers:
Price sensitivity
Segmentation
Cost-benefit trade-off
Competition:
Pricing
Capacity
Basis of differentiation
Case types..
Pricing
Company Objectives
Market Share
Profits
Cost Based pricing
Competitive analysis
Market maturity
Core/Potential target price sensitivity
Competitor prices
Substitute prices
Will Based pricing
Cost of goods
sold
Break even point
Profitability
Added /
Perceived value
Willingness to pay
Innovators
Cost Reduction
Labour
Cross training of
workers
Cut overtime
Downsizing?
Temporary
employee hiring
Production
Invest in technology
Consolidate production space to gain
scale
Reduce inventories
Outsourcing activities
Renegotiate with suppliers
Strategic sourcing
Finance
Make customers pay

sooner faster payment
terms
Refinance your debt
Sell non-essential assets
Hedge currency rates
Case types..
The client is a German Electronics company. They have

developed a solar lantern. They have hired us to figure out
whether they should enter the market in India.
Case types..
Pricing
Company Objectives
Market Share
Profits
Cost Based pricing
Competitive analysis
Market maturity
Core/Potential target price sensitivity
Competitor prices
Substitute prices
Will Based pricing
Cost of goods
sold
Break even point
Profitability
Added /
Perceived value
Willingness to pay
Innovators
Cost Reduction
Labour
Cross training of
workers
Cut overtime
Downsizing?
Temporary
employee hiring
Production
Invest in technology
Consolidate production space to gain
scale
Reduce inventories
Outsourcing activities
Renegotiate with suppliers
Strategic sourcing
Finance
Make customers pay

sooner faster payment
terms
Refinance your debt
Sell non-essential assets
Hedge currency rates

Cracking Case Interview: Profitability Frameworks

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Presents

Cracking Case Interview: Methodology and

ConSIG | SJMSOM | Case Interview Frameworks

Questions Asked in Interviews

Things to Keep in Mind

ConSIG | SJMSOM | Case Interview Frameworks

Purpose of Case Interview

ConSIG | SJMSOM | Case Interview Frameworks

Case Interviews - Process

Listen to the case as

Clarify major issues by

For Each Issue

ConSIG | SJMSOM | Case Interview Frameworks

Case Interviews - Process

Begin with the big general

ConSIG | SJMSOM | Case Interview Frameworks

ConSIG | SJMSOM | Case Interview Frameworks

Tips for acing Case Interviews

ConSIG | SJMSOM | Case Interview Frameworks

Frameworks for Case Interviews

ConSIG | SJMSOM | Case Interview Frameworks

Frameworks for Case questions

ConSIG | SJMSOM | Case Interview Frameworks

What is the value of the product or service to the customers?

Threat of Substitute Products or

Bargaining Power of Suppliers:

Bargaining Power of Buyers:

ConSIG | SJMSOM | Case Interview Frameworks

ConSIG | SJMSOM | Case Interview Frameworks

ConSIG | SJMSOM | Case Interview Frameworks

Profitability Frameworks (Case Based Approach)

What are we going to cover

ConSIG | SJMSOM | Case Interview Frameworks

Profits are declining.

ConSIG | SJMSOM | Case Interview Frameworks

Clarifications to ask in the beginning

ConSIG | SJMSOM | Case Interview Frameworks

TOTAL COST = FC + (VC * Number of units)

COST PER UNIT

ConSIG | SJMSOM | Case Interview Frameworks

Concept of Value Chain

ConSIG | SJMSOM | Case Interview Frameworks

ConSIG | SJMSOM | Case Interview Frameworks

Profitability Framework - Revenue Model

ConSIG | SJMSOM | Case Interview Frameworks

Your client is a drug lord from Mexico

ConSIG | SJMSOM | Case Interview Frameworks

Market Entry Frameworks (Case Based Approach)

Market Entry Framework

ConSIG | SJMSOM | Case Interview Frameworks

ConSIG | SJMSOM | Case Interview Frameworks

Market Entry Framework

Your client is an electronics

ConSIG | SJMSOM | Case Interview Frameworks

Market Entry Framework

Is Indian market attractive or desirable?

Is Client capable of doing business there?

ConSIG | SJMSOM | Case Interview Frameworks

Market Entry Framework

Is the market attractive or desirable?

ConSIG | SJMSOM | Case Interview Frameworks

Market Entry Framework