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Consulting Basics:

Frameworks

Consulting Basics: Frameworks Richa Agrawal Rachit Agarwal

Richa Agrawal Rachit Agarwal

Quick Recap

● Two types of case interviews:

○ Case Study: Scenario based problem solving

○ Guesstimate: Finding an approximate value

● How to solve a case?

○ Open a case (Take time and frame preliminary questions)

○ Analyze and Fragment the problem (Fit frameworks, Value chain, etc)

○ Close the case (Conclude the problems you found, and give recommendations)

Guesstimate

Problem: # burgers sold in McDonalds outlet in one day?

Guesstimate

Problem: # burgers sold in McDonalds outlet in one day?

Where is the outlet? What type of burgers? Take away or Have-it?

Guesstimate

Problem: # burgers sold in McDonalds outlet in one day?

# burgers = #have-it burgers + #take-away burgers

#have-it burgers : Demand or Supply? (See what is the restriction/ limitation)

Guesstimate

Problem: # burgers sold in McDonalds outlet in one day?

# burgers = #have-it burgers + #take-away burgers

#have-it burgers : Demand or Supply? (See what is the restriction/ limitation)

#have-it burgers = total working time/time for one burger.

Framework: Profitability

Profit Revenue Cost Price/ unit Fixed Cost
Profit
Revenue
Cost
Price/ unit
Fixed Cost
#units sold
#units sold

Variable Cost

Company specific or Industry wide?

What is expected of you?

Cost? Problem? Change Both? Revenue?
Cost?
Problem?
Change
Both?
Revenue?
Solution?
Solution?

Revenue?

Revenue? Revenue Streams? # units sold Price per unit Will be discussed in pricing strategies Supply
Revenue Streams? # units sold Price per unit Will be discussed in pricing strategies
Revenue
Streams?
# units sold
Price per unit
Will be discussed in
pricing strategies
Supply
Supply
Revenue? Revenue Streams? # units sold Price per unit Will be discussed in pricing strategies Supply

Demand

Cost?

Cost? Cost Streams? Variable Fixe d #Units Sold Cost per unit
Cost Streams? Variable Fixe d
Cost
Streams?
Variable
Fixe
d
#Units Sold
#Units Sold
Cost per unit
Cost per unit

Let’s Start

Let’s Start Problem: Steel manufacturer is facing reduced profits. You have been hired to find the

Problem: Steel manufacturer is facing reduced profits. You have been hired to find the problem and recommend solutions.

Let’s Start

Let’s Start Problem: Steel manufacturer is facing reduced profits. You have been hired to find the

Problem: Steel manufacturer is facing reduced profits. You have been hired to find the problem and recommend solutions.

Preliminary Questions?
Preliminary
Questions?

Let’s Start

Let’s Start Problem: Steel manufacturer is facing reduced profits. You have been hired to find the

Problem: Steel manufacturer is facing reduced profits. You have been hired to find the problem and recommend solutions.

Preliminary Questions?
Preliminary
Questions?

Company

Competition

Product

Customer

Let’s Start

Let’s Start Problem: Steel manufacturer is facing reduced profits. You have been hired to find the

Problem: Steel manufacturer is facing reduced profits. You have been hired to find the problem and recommend solutions.

Preliminary Questions?
Preliminary
Questions?

Company

Competition

Product

Customer

1. Company specific/ Industry wide?

2. Location

3. Reputation of company

4. Value chain?

5. Competitors?

6. Customer segmentation?

7. Problem since when?

Let’s Start

Let’s Start Problem: Steel manufacturer is facing reduced profits. You have been hired to find the

Problem: Steel manufacturer is facing reduced profits. You have been hired to find the problem and recommend solutions.

Preliminary Questions?
Preliminary
Questions?

Company

 

Competition

Product

Revenue

or Cost?

Customer

Revenue?

Revenue? Revenue Streams? ● Tonnage of sold steel ● By-products (energy)
Revenue Streams?
Revenue
Streams?

● Tonnage of sold steel

● By-products

(energy)

Revenue?

Revenue? Revenue ● Tonnage of sold steel Streams? ● By-products (energy) # units sold Price per
Revenue ● Tonnage of sold steel Streams? ● By-products (energy) # units sold Price per
Revenue
Tonnage of sold
steel
Streams?
By-products
(energy)
# units sold
Price per unit

Cost?

Cost? Cost Streams? Value chain?
Cost Streams?
Cost
Streams?

Value chain?

Cost?

Cost? Cost Streams? Value chain? Cost of Cost of Cost of distribution marketing production
Cost Streams?
Cost
Streams?

Value chain?

Cost of Cost of Cost of distribution marketing production
Cost of
Cost of
Cost of
distribution
marketing
production

Cost?

Cost? Cost Streams? Value chain? Cost of Cost of Cost of marketing production distribution Fixed Initial
Cost Streams?
Cost
Streams?

Value chain?

Cost of Cost of Cost of marketing production distribution Fixed Initial infrastructure, land, maintenance, etc
Cost of
Cost of
Cost of
marketing
production
distribution
Fixed
Initial infrastructure,
land, maintenance, etc
Variable
Electricity, raw materials, etc

Cost?

Cost? Cost Streams? Value chain? Cost of Cost of Cost of marketing production distribution Transportation
Cost Streams?
Cost
Streams?

Value chain?

Cost of Cost of Cost of marketing production distribution Transportation Incentive to retailer
Cost of
Cost of
Cost of
marketing
production
distribution
Transportation
Incentive to
retailer

Cost?

Cost? Cost Streams? Value chain? Cost of Cost of Cost of marketing production distribution Transportation
Cost Streams?
Cost
Streams?

Value chain?

Cost of Cost of Cost of marketing production distribution Transportation Incentive to Value retailer Chain?
Cost of
Cost of
Cost of
marketing
production
distribution
Transportation
Incentive to
Value
retailer
Chain?
Start ?
Start ?
Start ? Transportation Route ? End ?

Transportation

Route ?
Route ?
End ?
End ?
Start ?
Start ?

Mode of transport, lease (try another vendor/ start your own), labor to transfer from factory to pickup, etc

your own), labor to transfer from factory to pickup, etc Transportation Route ? Shortest? Capacity of

Transportation

Route ?
Route ?

Shortest? Capacity of carrier, etc

End ?
End ?

What about the vessel on return? Labor to deload the steel, etc

Transportation cost = Fixed cost + Variable (Fuel + Maintenances + Toll + Drivers)

Compare self with cartel price.

Recommendation Start own transportation channel rather than leasing out.

Recommendation

Start own transportation channel rather than leasing out.

Market Entry Framework

Market Entry Framework

Conventional questions for market entry case -

Conventional questions for market entry case - Tip - Never ask all questions straight in the

Tip - Never ask all questions straight in the beginning of the case. Only the basic ones ! Remaining questions should be asked on need to know basis as you proceed through the case .

Basic structure for market entry case -

Market Entry

Basic structure for market entry case - Market Entry Quantitative Analysis Qualitative Analysis

Quantitative

Analysis

Qualitative Analysis

Basic structure for market entry case -

Market Entry

Basic structure for market entry case - Market Entry Quantitative Analysis Estimate Market Size Estimate Market
Quantitative Analysis Estimate Market Size Estimate Market Share Estimate Profits Revenue
Quantitative
Analysis
Estimate Market Size
Estimate Market
Share
Estimate Profits
Revenue

Breakeven

point

Qualitative Analysis

Cost (Fixed and Variable)

Size Estimate Market Share Estimate Profits Revenue Breakeven point Qualitative Analysis Cost (Fixed and Variable)

Basic structure for market entry case -

Market Entry

Basic structure for market entry case - Market Entry Quantitative Qualitative Analysis Analysis Estimate Market Size
Quantitative Qualitative Analysis Analysis Estimate Market Size Customers Estimate Market Share Competition/
Quantitative
Qualitative Analysis
Analysis
Estimate Market Size
Customers
Estimate Market
Share
Competition/
Substitutes
Supplier/ Buyer
Concentration
Entry Barriers
Estimate Profits
Revenue

Breakeven

point

Value Chain

Feasibility

Cost (Fixed and Variable)

Level 2 Structure - Market entry case -

Value Chain Feasibility Marketing Challenges
Value Chain
Feasibility
Marketing
Challenges
Production Challenges
Production
Challenges
Resource Availiabilty
Resource
Availiabilty

Distribution Challenges

Capital Investment

Production Capacity

Labor

Equipments/

Input content

Sample Case

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.

Sample Case

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.

General Preliminary Questions -

1)

First you can make the most basic segregation - Quantitative vs Qualitative !

2)

What metric should we use to judge whether we should enter the market? Profits?

3)

Is there any other underlying objective that should be taken care of ?

Specific Preliminary Questions -

4)

What parts of the value chain do we operate in?

5)

What geography within India we are looking to enter?

6)

What exactly is the product ?

7)

How does the product work?

8)

Regarding Competition - Major players in market

Initial structure to solve the case -

Market Entry Quantitative Analysis Qualitative Analysis Estimate Estimate Market Share Profit per Unit Market Size
Market Entry
Quantitative
Analysis
Qualitative Analysis
Estimate
Estimate
Market Share
Profit per Unit
Market Size
Value Chain
Customers
Feasibility
Competition/
Substitutes
Supplier/ Buyer
Concentration
Entry Barriers

Lets start with market size !

100% 50% 0% 37.5 million approx
100%
50%
0%
37.5 million approx

Alway keep looking for acknowledgement from the interviewer so that you know you’re on the right track !

Market Share

It depends on various parameters specific to case !

What are the alternatives available ?

We need to compare all the parameters given below with our competitors and substitutes.

1)

2)

3)

Price Lifespan of product Illumination

Considering all the factor you will reach a market share say 30% of initial (40% lost to cheap clones and 30% lost to other competitors)

Number doesn’t matter - only thought process and factors considered do !

Finally calculating profits-

Finally calculating profits- Cost

Cost

Finally calculating profits- Cost
Finally calculating profits- Cost
Ask for the data on fixed and variable cost - You can also specifically ask
Ask for the data on fixed and variable cost -
You can also specifically ask for these sub parts in variable cost !
Manufacturing cost ?
Logistics cost ?
Distribution cost ?
Marketing etc .?
Revenue
Revenue = Market Size * Market Share * Price/unit
Profits
Profits

Profits

Profits
Profits
Profits

Profits = Revenue - Cost (as life span of product may be 2-3 years, so these profits will be assumes in 2-3 years time )

Business insights - Qualitative part

Value chain feasibilty Marketing Challenges
Value chain feasibilty
Marketing
Challenges

Production

Challenges

feasibilty Marketing Challenges Production Challenges Distribution Challenges Capital Investment Production

Distribution Challenges

Capital Investment

Production Capacity

You can ask about Entry Barriers !

You can ask about supplier-buyer concentration !

Conclusion

It should be crisp and to the point !

Possible conclusion -