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MSIAUBANI 3SVD 3HL ONINSLSYW McKinsey Candidate Interviewing Recruiting Cases 1
Machine-Loading Case
Macroeconomics
To determine whether the candidate can dissect a general
econémic problem
Background
A client produces a range of synthetic materials in varying widths and lengths.
Each material is used for packaging but differs in physical properties in terms of
£04is. weight, ‘and general performance. Each material can be coated
wth ay one of four or ive types of comical Conting which make the nts
‘more or less impervious to heat light, water, vapor, et.
All of the machines on which these materials are made are housed in one
enormous factory location. Each machine is capable of running any one of the
‘Various materials and /or coating combinations.
Question
‘The client has asked us what combination of products he should run. How
would you go about determining the optimal mix af potential products.on these
machines?
Minimal requirements
Candidate should, at a minimum, address the following issues:
1 Are there market lmiations tthe potential production of anyone
2. Is there competition for these products?
3. Are there differences in Gost in the manufacturing ofthese materials?
For example, do some coatings cost more than others? Do some
materials have inherent cost differences?
4 Is there flexbitity in pricing of these products?
Better answers
‘Additional questions and observations should include
1. Are there differences in setup time and cost for various materials ot
coatings?
2. Do these materials move at different speeds through the machines?
RECEIVED THE OV. 9, 12:53% PRINT TIME nov. 9, 12'S6
\ Candidate Invrviewing Recruiting Cases 3 pee
r
Tite: ‘Merger Candidate in Chemical Industry ee
Type Industry Analysis wee
Purpose: To deterinine whether the candidate is able to structure a basic
industry analysis.
Background
‘One major chemical producer has retained MeKinsey to evaluate another major
‘participant in the industry. Both companies are bulk commodity chemical
Producers. We have been asked to begin our work by analyzing the future,
of the target. /s major product ‘aes include:
‘Production ofthis chemical has slowly dectined over the last ive
years.
Prices have dectined rapidly.
11. There are seven to eight major producers; the largest producer has 1
30 percent share; number two has 20 percent our target company has
38 percent; the restis divided among other
‘Taw ewo argent competion eam s small than: the AISEL SOeAnL
probably at breakeven: rest are at break-even or loss.
1 Largest competitor has just announced construction plans for a major
new modem plant.
Question
How would you go about structuring an analysis ofthe target company’s future
prospect in this product ine?
Minimum requirements
Candidate should, at a minimum, address the following issues:
11. What markets use this chemical, and what has been the nature of
‘growth in these markets? (End-use markets were largely automotive:
related.)
2. How much overall capacity exists now? (Far too much)
RECEIVED TIE fev. 9. 12:53 PRINT TIME nov. 9, 32158 Candidate Interviewing Recruiting Cases 5
Tie: Oil Field Service Equipment
Type: Evaluation of Capacity Expansion
Purpose: The case is designed to test a candidate's ability to structure
an abalyzis to produce an elementary cash flow. Case fact are not
important and you can substitute any industy for oil Geld
services,
Backgroumd
McKinsey was asked by a large diversified manufacturing company to evaluate a
‘request fora capital appropriation from a subsidiary,
‘The request was for $500 million to expand and modemize a plant
making equipment for oil drling.
1 The drilling equipment industry was large, growing quickly, and very
prostabe,
1 The sub held about a 10 percent market share (third largest)
‘The domestic industry was losing share tothe Japanese,
‘T. Quality was a dominant selling point and a primary motivation for the
ew expansion.
Question
you were on a McKinsey team faced with the problem and your engagement
‘manager asked you to sketch outa response, what would you say?
Minimum requirements
‘A candidate should be able to respond that the desirability of the investment
depends on the size and the probability of furure cash flows, which in turn will
depend upon:
1, The level of demand (which is dificult to predict and subject to wide
swings).
2. The company's relative cost posit.
3. The amount of available capacity.
Better answers
Better candidates should be able to push each element inthe logic tee several
branches and sketch out an approach to analyzing each.
1. Demand - demand for oll field service equipment is clearly
dependent on the level of drilling activity which in turn depends
RECEIVED TE nev. 9. 12s PRINT TIRE nov. 9. 12:56 Candidate Interviewing Recruiting Cases 7
Tide: Video Games
Type Industry Analysis
Parpose: To determine whether the candidate is able to structure abasic
industry analysis
‘manufactures video games. ‘Specifically, he needs to know if he should approve
4 $200 milion capital rues for sgnicany expanding the divion’s eee
(Question
You area member of the McKinsey team assigned to this project. Assume you
and Lare at the first team meeting. What are the citca issues we should plant
amine and why?
‘Miniomam requirements
‘The following issues would need to be covered for the candidate to have done an
acceptable job: 5
1. What Candidate needs to question the
2 What isthe compeitie outlook? Should at let recognize the need fo
‘concentration of market shares; control of retail channels; and R&D
‘capabilities (rate of new product introductions, etc.)
3. What willbe the price/ volume relationships inthe future? Issues of
Prices need to be considered.
RECEIVED TIME FOV, 9, 12:53 PRINT TIME nov. 9. 12:56RH Candidate Interoiewing Recruiting Cases 11
Title: Big 8 Accounting Firm
Type: Service Industry Strategy
Purpose: Test candidate's ability to fame proftabiliy and strategic issues
fora profesional service fem
Background
MGnGey was asked by a Big 8 accounting frm to conduct a mujor strategy
review.
1 Growth in accounting and auditing had slowed to 1 to 2 percent.
‘I There was increased competition far auditing cients.
1 Severe price pressure on auditing fees.
‘Questions
‘There are two questions to be addressed in this case:
1. Whats the most meaningful measure of protability?
2 Te market share important for ar accounting frm? If so, why, and at
what level: national, regional, ot local?
Answers: question 1
‘The best answer to this question is given by those candidates who realize that
Staff rations (leverage),
I Staffutilization.
1 Biling rate.
RECEIVED TIE tev. 9. 2:59 PRINT THE nov. 8. 12:55 : Quark ion ee
Yoo mar Romh Kio shee fe a smberrr me
Title: Steam Boiler Hoses
Type: Profit Improvement
Purpose: To determine whether the candidate is capable and comfortable
with constructing a logical framework which will expose
opportunities for profit improvement
Background
McKinsey was asked by a diversified manufacturing client to help turn around
the steam boiler hose division.
L_ Boiler hoses are sold both with original equipment and as
replacements.
| There has been increasing price pressure in the industry
1 Last year, P&L showed (as a percent of sales):
Raw material 70%
Labor 20%
Distributed overhead 10%
SG&A 15%
Profit (15%)
Client is third of eight industry participants.
At least two of the other companies in the industry are making
moderate profits,
L_ The raw material is a commodity petrochemical
Question
How would you structure analysis aimed at restoring profitability? Where do
you expect to be able to save costs? Minimum requirements
Weaker candidates will get bogged down in one of the following areas:
1. Drop the product line (apparently not possible because hoses are
necessary for boiler sales).
7. Raw material prices (they are the same as everyone else's).
3. Allocation of overhead (not sufficient potential plus no cash savings)
4. SG&A (standard industry fee paid for independent installers).
Better answers
Better candidates will move beyond the previous answers to consider:
A+ Scale economies (client is big enough to achieve scale production),
A. Production technology (company has modern plant).
4. Labor costs - both wages and productivity.
‘4. Raw material purchasing practices.
Outstanding answers
The best candidates, following a logical progression, should stumble upon the
actual answer: the product has been over-designed, requiring excess raw
material. They should consider the following organizational implication
J. How is our product engineering operation wired into the marketplace?
2. What kind of feedback are we receiving from our sales force?
3. Are there other areas in the company where similar problems exist? + Qeeskra 3
Title: Video Games
Type: Industry Analysis
S,rrrr—~—“O_OOOOOOCSCOCSF able to structure a basic
industry analysis
Background
team to examine the operations of a subsidiary of his corporation that
manufactures video games. Specifically, he needs to knew if he should approve
3 $200 million capital request for significantly expanding the division's capacity
Question
You are a member of the McKinsey team assigned to this project. Assume you
and Late at the first team meeting. What are the critical issues we should plan to
examine and why? ; Minimum requirements
The following issues would need to be covered for
acceptable job:
1. Whatis future market potential? Candidate needs to question the
continuation of overall industry growth. He/she might ask about the
saturation of markets, competitive products (home computers), and
declining "per capita” usage.
2. Whats the competitive outlook? Should at least recognize the need to
examine competitive dynamics. Issue areas might include:
concentration of market shares; control of retail channels; and R&D
capabilities (rate of new product introductions, etc.)
F the candidate to have done an
3. What will be the price/volume relationships in the future? Issues of
prices need to be considered.
Better/outstanding answers
No bounds on creativity, but better answers would address:
1. Market potential
* Recognize that there is a relationship between market penetration
and growth in new users which, when combined, yields an
industry volume estimate.
* Address the shifting mix of product purchases, in this case from
hardware (player unit) to software (video cassettes).
* Seek to look at buyer behavior in key buyer segments, ie., “fad”
potential of product.
2. Software
+ Recognize technology standards are set by industry leaders. In this
situation, the division as a secondary player will have to follow
these standards.
+ Recognize that different distribution needs may exist for different
i products (in this case, hardware versus software).
3. Price/volume relationships
* Discuss the effect capacity additions can have on overall industry
price/volume relationships and on industry price levels,
4. Company ability to compete
* Should ask what the capacity expansion is designed to do.
+ Explore the cost position of the client division relative to that of
other competitors.
+ Seek to understand reasons for poor profit performance of division. CHECKLIST FOR INTERVIEWER
Please fill out this checklist after the interview
+ Logical structuring
- Has the interviewee identified the key issues of the case?
~ Has he/she structured the problem solving process logically?
— Has he/she forgotten items which could have a major impact on
the solution?
- Has he/she clearly isolated the different components of the
solution and solved them in a logical order?
~ Has he/she generated creative and compelling arguments?
* Business judgement
~ Does the interviewee make logical, broadly logical assumptions?
~ Does he/she get caught up and lose time in peripheral details?
~ Do the analyses/solutions suggested by the interviewee reflect
solid “business sense”?
Does he/she go beyond simply “solving the case”? Darden School of Business BEHAVIORAL INTERVIEW Questions
‘Amxiety over the ease interview can cause one to overlook the behavioral interview. The following
information may help you prepare for the behavioral interview. In addition to the list of possible behavioral
questions listed below, we have included the following brief suggestions gleaned from consulting behavioral
interview workshops:
‘There are three general types of questions that are usually asked in a consulting interview: Fit, Resume, and
Behavioral/Situaional
Most interviewers will use your resume as a script forthe interview.
‘The interviewer wants to discern your typical behavior patterns and find repeated evidence of behavior
traits considered important for the position. They will use this evidence as 2 proxy for future behavior.
‘You must know yourself and what you want.
‘Thoroughly understand both what is said and what is unsaid on your resume.
‘You must be knowledgeable about the firm as well as the requirements of the position
‘You must be able to organize your thoughts and answer questions in a concise and thorough manner.
Find out why peopl like the firm by talking to their Darden alumni and the second years who worked there
as summer interns,
Be concise and don’t ramble.
‘Stes your role in any achievements.
Develop an interview agenda that includes your most important relevant traits and accomplishments.
‘Try wo cover the agenda items not covered during the interview in a brief closing statemezt.
Prepare for the interviews as you would for an MC presentation,
Keep the interviewer interested with concise 2-3 minute answers to most questions.
‘Always give specific examples in the answer to very broad questions
‘Ask good questions at the end of the interview but don’t ask questions that you should already know the
answer to.
Fit With Consulting:
Name the 3 reasons why you stand out from all of your talented classmates who also want te work in
consulting.
How does a job with our consulting firm fit into your long-term career plans?
‘What would be the biggest challenge to you about consulting? The biggest reward?
‘Why do you want to be a management consultant?
How would you feel about being a small fish ina big pond?
‘What do you think about spending a lot of time on the road?
‘What would you like most about being a consultant?
Can you work under pressure and how do you handle tension?
You have been given a project that requires you to interact with different levels within the company. How
4o you do this? What levels are you most comfortable with?
‘With your background and your interest in consulting, why don’t you have more academic honors?
‘Why are you interested in our firm?
Have you had any contact with people working as consultants with our firm?
What do you forecast for our firm/industry inthe future?
The Consulting Club at The Darden School of Business BEHAVIORAL INTERVIEW Questions
Job before B-School:
1, What's the most interesting business problem you've faced in a previous job?
2. What did you like/dislike about your last job?
3. Tell me about the last time you felt anger on the job.
4, What are some of the things about which you and your supervisor disagreed?
5. How did your boss get the best out of you?
6 What have your other jobs taught you?
7. Tell me how you moved up through your last employers ranks.
8. What type of decisions did you make on your last job?
9. Inyour last job what were some of the things you spent most of your time on, and why?
10, In what ways has your job prepared you to take on greater responsibility?
11. What did you like the least about your previous job?
12, What did you like the most about your previous job?
13. How did you make a difference in your last job(or in college)?
14. Why did you choose your previous field?
15. What did you like or dislike about that field? (especially if you're changing fields after B-school)
16. What did you lea from your previous job(s) that you can apply to this position?
17. What did you think of your last boss?
18. Youhad a great job. Why did you quit? Are you sure you will not go back?
19. In what ways did your previous job (or summer internship) challenge you?
20. Tell me why you changed jobs before B-school (If applicable)
Choice of Schools:
1. Why id you decide to anend Darden?
2. Why did you decide to attend a case school for graduate study?
3, We tied to hire people from your school before and they never seem to work out. What makes you different
4, I'd be interested to hear about some things you learmed in school that could be used on the job
‘Summer Job:
1, Tell me about your summer.
2. Were the recommendations you made to your suramer employer adopted?
3. You had a great job. Why did you quit? Are you sure you will not go back?
4. If you come work for us this summer, what will be your greatest challenge?
Miscellaneous:
1. Whatare your top 3 strengths and weaknesses?
2. What is the most difficult thing you have ever had to do?
3. Why should I invite you toa party?
4. Discuss the most important event in your life.
5. Have you done the best work you are capable of doing?
6 How iong would you stay withthe company?
7. How long would it take you to make a contribution to our company?
8. Whatare your biggest accomplishments?
The Consulting Club at The Darden School of Business BEHAVIORAL INTERVIEW Questions
9. How do you organize and plan for major projects?
10. What would your references say?
11, How do you take direction?
12. Tell me about yourself.
13, What kinds of things do you worry about?
14. How have you benefited from disappointments?
15. With hindsight, how could you have improved your performance.
16. What kinds of decisions are most difficult for you?
17. Are you willing to take calculated risks when necessary?
18. See this pen I'm holding? Set it to me.
19. Whatis the worst thing you have heard about our company?
20. I'm not sure you're suitable for the job.
21. Wouldn't you feel better off in another firm?
22. What would you say if1 told you your presentation this aftemoon was lousy?
23. What do you think are the most important skills a manager must posses?
24. Why was your intemship successful?
25. Tell me about something in college or a previous job that you didn’t like and what you did about it
26. Where would you rank yourself...top 10%, 20%, or where?
27. Based on what you know about our firm’s opportunities, does Darden prepare you well? How well?
28. Why should we hire you when there are so many people at Darden with better grades and more experience?
29. What was your biggest disappointment personally or professionally?
30. Who are your role models? Why?
31. Why should I hire you?
32, Who else has made you offers? Who else are you interviewing with?
35. Whats your job search strategy?
34, Are you aggressive? Can you take a tough stand? When have you been either tough or aggressive?
35, Why did you major in in undergraduate school?
36, What questions of yours can I answer?
Example/Situation
1, Tellus about atime when you failed and what you leamed from the experience.
2. Describe 2 situation where your work or an idea was criticized
3. Have you ever encountered a situation in which you were wrong? What did you do to correct your ansiver?
4, Give me an example of when you led a team to achieve a major goal.
5. Give mean example of when you had to sell one of your ideas.
6. Givemean example of when you had to make a major presentation.
7. Give me example of when you had to confront a co-worker/teammate about performance.
8. Give me example of when you received negative feedback and how you handled it,
9. Give me example of when you applied your technical knowledge to solve a problem.
10. Give me an example of when you came up with an origina idea
11. Give me an example of when you leamed something new and applied itto solve a problem.
12, Giveme an example of how you have worked witha difficult person.
13. Give me an example of when you had to lead without authority.
14, Give me an example of when you took ask.
15. Give me an example when you showed initiative.
16. Give me an example of when you demonstrated creativity.
‘The Consulting Club at The Darden School of Business
Page 24 BEHAVIORAL INTERVIEW Questions
17. Give me an example of when you worked effectively with upper management.
18. Give me an example of when you had to sift through a large amount of data to perform an analysis and make
a recommendation.
19. Give me an example of when you were involved with 2 team project thet didn’t go in the direction you
‘wanted it to go in and tell me whet you did to correct the situation.
20. Describe a difficult problem you've had to deal with
21, What would you do when you have a decision to make and no procedure exists?
22. Tellme about a difficult situation where you had to rely on your communication skills,
Leadership/Teamwork
1. What things have you done to demonstrate your leadership abilities?
2. Describe a team project you've worked on recently.
3. What role do you usually play on teams?
4. What role did you play in your study group?
5, What kinds of people do you like to work with?
6. Whatkinds of people do you find it difficult o work with?
7, How have you successfully worked with this difficult ype of person?
8 Whatis an example of an experience in which you took on a leadership role?
9. How have you demonstrated initiative?
10. How would you define your leadership style?
11, Whatare some key lessons you have leamed about motivating people?
12. How do you get along with different kinds of people?
13. How do you motivate people to do things they don’t want to do?
14. Do you prefer working with others or alone?
15. How would your peers describe the way you interact with other people?
‘The Consulting Club at The Darden School of Business
Page 25 FRAMEWORKS Summary
Ce Wruree
A framework can help you "structure" your thoughts during a case interview so you don't confuse yourself and miss
something basic to the problem. I's much better to cover all the basies and get the solution wrong than to miss @
A framework can also help you avoid the "20 Questions” mistake. You will lose points by asking a series of
seemingly unrelated questions and then popping your answer out at the end. If you're brilliant (or you knew the
answer from prior experience), you might impress your interviewer with your intelligence, but you will lose points
‘on the “structured thinking" scale,
What is a framework?
Each framework includes some kind of model ofthe business issues at hand and an implied logic leading to a set of
business conclusions. The model is, in turn, composed of alist of things to think about and a set of relationships
between those things. For example, one of the most often used, basic, and useful models isthe profit framework, a
simplified form of the income statement. If your interviewer asks, "Our client would like you to help him figure out
‘why profits are down,” you can reply by building the profit model and applying the logic.
‘The profit framework includes the following parts:
The (Simplified) Profit Mode!
Things
Profit, Revenue, rice, Volume, Cost, Fixed Cost, Variable Cost, Raw Materials, Direct Labor, Shipping & Selling,
Overead
Relationships
Profit = Revenue- Cost
Revenue = Price x Volume
Cost = Fixed Cost + Variable Cost
Variable Cost = Raw Materials + Shipping & Selling
Fixed Cost = Overhead + Direct Labor (sometimes this is variable or semi-fixed)
The Implied Logic of the Profit Model
Businesses want to maximize their profi To do so, they must maximize revenue while minimizing cost.
Maximizing revenue requires maximizing price and volume. Minimizing cost requires minimizing Fixed Cost and
minimizing Variable Cost, etc.
Ifa business has seen a change in prof, find out which ofthe parts changed, starting a the top level of Revenue &
Cost and working down from there.
The Consulting Club at The Darden School of Business
Page 26 FRAMEWORKS Summary
(enone et eee cee
‘MeKinsey outlines 5 steps in their advice on handling consulting interviews (see separate handout):
Step 1. State the problem (usually done by the interviewer)
Step 2. Disageregate the issues
Step 3. Eliminate all non-key issues
‘Step 4. Conduct critical analysis, altemating between data and hypotheses
Step 5. Synthesize findings and build argument
Frameworks are particularly useful in step 2, and shows up again in step 5. Itmay take one or two
How do | use a framework?
First, lit on your pad of paper the parts of the model (or just the major ones if you like). This becomes a sort of
checklist to make sure you don't miss something important.
Second, use the logic to work backwards from the question being asked to the relationships and parts of the model
that could effect that issue inthe question.
For example, here is possible use of the profit framework.
Step 1. Interviewer: "Our client is a small manufacturer of plastic cups. He called us in because his profits
‘are 50% less than last year and he is very worried about the furure of his business. How would you look at
this problem?"
Step 2. You: [Applying the Intemal-Extemal framework} "First I'd want to know if the problem is with the
company or the industry. Have profits across the plastic cup making industry dropped as well?”
Interviewer: "No, his competitors seem to be doing fine.”
‘Step 1 again, You: "Then the problem is intemal tothe company. We need to look for the drivers of profi
that changed in his company.”
Step 2 again, You: "I like to look at the various revenues and costs to see where the problem might be
How have revenues and costs changed over the last year?”
Interviewer: “Revenues are flat or slightly up, but costs have risen."
‘You: "Has fixed or variable cost increased?”
Interviewer: "He's not sure which of his costs are fixed and which are variable.”
[Here you push down a level and adapt the framework to the problem at hand.)
‘You: “l would imagine that the major cost components inthis business would be labor, raw materials like
plastic and coloring, shipping utility bills, depreciation on the machinery, marketing, ren, and managers
Fularies In this situation, raw materials and shipping are probably the only variable costs. How have these
costs have changed?”
Interviewer: "Shipping has gone up 100%. Everything else is pretty close to last year's figures.”
Step 3. You: "Then it seems we can rule out revenue and fixed cost, and we should focus on the shipping
ppart of the variable cost.”
‘The Consulting Club at The Darden School of Business
Page 27 FRAMEWORKS Summary
EEUROMECE ere}
‘Step 4. [The conversation continues as you analyze the drivers for shipping cost and find that shipment
sizes dropped as customers try to hold less inventory.)
Interviewer: "Great job. We only have a couple minutes left. Can you summarize what we have discussed
and what we should do as a case team going forward?"
Step 5, You: "Sure. We looked at the various components of his profit and found that the most Significant
Change was a large increase in shipping cost due to smaller and more frequent orders. It seems that he will
avert either pass on these costs to his customers by increasing prices with a volume discount, changing
the way he bile for shipping, or finding a cheaper way to ship the product in small volumes. We should
Jook deeper inte the shipping patterns to see which ofthese options looks bet inthe short and long te."
‘You might apply a second framework tothe results of your analysis with the first one. thus chaining them togehet
Inthe example above, you might have discovered thatthe loss in profits was due to reduced sales volume, fo
aon eelermine tet the company needed a beter marketing plan, you could apply some ofthe frameworks fom
werheting to figure out what to do. Remember that the question asked is often not he answer needed (Le sought By
the interviewer)
Donat use a famework you do not understand well enough to explain to someone with an example. You are Hiely
to make a mistake and/or show your ignorance.
First Years will have seen only « few of the frameworks presented here by the time they interview, though mest of
thom are covered by the end of the year (particularly in Strategy). If you don't understand framework, 8 @
Second Year to explain
‘The Consulting Club at The Darden School of Business
Page 28 FRAMEWORKS Overview
ON Ziniom eer eed
‘Questions Answered! ‘Type of Case
Source of financial difficulty ‘Profits are down
‘© What would happen ifI did X in
my existing business
Costs vs. Benefits ‘+ Why should client do/not do X? ‘Any decision involving existing
choices
Internal Factors ~ Why should dofnot do X? ‘7 Almost any case
Extemal Factors ‘© What would you expect the result of action
tobe?
‘Value Chain + Whereis the most value being added? = Compare two providers of
‘+ What are the economics built into a service: e.g. existing firm vs,
product/service? start-up
‘+ Where should we focus our cost reduction
efforts?
Five Cs = What options are available tome andmy | » Strategy, Marketing
competitors in a given market?
STPE the Ps = How do we introduce a new product? = Marketing
Porters Five Forees |» Is this an attractive industry/market tobe in? | Industry Analysis,
‘© DoThave a sustainable competitive
advantage?
‘© What are the major forces trying to reduce |
my profits? |
Tndustry Attractiveness [= Why should(at) we be in a market? Business Expansion
= Competitive Position |» Which divisions in our company should we ‘Cash Management in a
Matrix invest in? Divest? Harvest for cash? Diversified Corporation
(generalization of the
Growth-Share Matrix)
Forte's Diamond | Is county X atrasive asa bate of + Country Analysis
operations?
‘Manufacturing > What should we focus our manufacturing on | © Manufactaring/Marketing
to competitively satisfy the market? problems |
‘The brief framework write ups thet follow do not include EOQ, Supply-Demand, NPV, or any of the other dozens of
tools you can in class because these are not frameworks in that they don't help you disaggregate the problem. Thave
included only a few of the most generally applicable frameworks here, and may well have missed some great ones
‘out of neglect.
My Recommendation: If you have time, read The 10 Day MBA, which was written by @ Darden grad. It's not great
on everything, but it covers a lot of tools, frameworks, and basic ideas from a generalist perspective (and isn't that
what Darden is about, anyway”).
7 Note that every framework artemps to answer the question, "What are the major factors to consider in this ease?"
2 Not much to say about this one - you've been doing it since high school. It has no write up here.
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Page 29 FRAMEWORKS
Types
Esra ey ed
Prot Made
Prot
aasnize)
——— 1
Revenue Coat
rncmize) Cui)
——F_—— ——
Pace Guay tix] [Producing Con Owenead
———t ——
Fad Verso] [7 s@ea_] [eres]
L{ taser] [[Rewntatera]
Lf Deprecaton} L{ shipping
Eneay
‘Note: usually the point of ab
ss is not just to generate profit, but return on invested capita
18 $1,000,000 a year i great until consider tha I invested $50,000,000 to get it (2% return)
Expanded Prott Model
Retum on invested Capital
(Maximize)
—_-F
Prof Invested Capital
(Maximize) (Minimize)
NetAssels
|. may think making
Net Warking Capital Food Capital
[Cash + AIR + Inventory “AVP PPAE
Cash
[Accounts Recehabie
“Accounts Payable
Inventory
More info: See 10 Day MBA or a corporate income statement.
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Page 30 FRAMEWORKS Types
ctu ar ae =e nese
‘This framework may be the starting point for many cases, and it may quickly lead you to another framework.
Internal Factors (The Darden class list)
Model A: Core Business vs. Overhead
Core Business: Marketing & Selling
‘© OPS: are you efficiently making the thing desired by customers?
‘© MKTG: are you effectively reaching the customers you need to sell to?
Overhead
‘+ ACCIOB: Is your internal accounting system creating inappropriate behavior?
‘+ STRIMC: Is your strategy appropriate? E.g. If the market wants low price, are you trying to compete
‘on quality? (3 generic strategies: price, differentiation, niche) Do the right people understand what the
strategy is?
FIN: Is your debvequity mix making your capital expensive (e.g. interest payments)?
(OB: Is there some major trust or corporate culture issue holding you back? (e.g. union & management
fights)
Model B: 7S
“The {deal company has « mutually supportive set of 7S characteristics. Structure should support stategy, systems
should support improvement of skills, etc. More info: See 10 Day MBA.
The Hard Triangle
‘Structure: Organization chart. Divisional boundaries. Vertical vs. flat. Geographic vs. product line
Funetional vs. matrix,
Strategy: whatever longer term plans the company is tying to execute. This drives operational
decisions, Basis of competition: cost, differentiation, niche.
‘Systems: Formal and informal procedures for
‘+ Information: gathering, storing, processing, and moving information inside tc
‘enterprise and with the outside world.
+ Materials: moving stuff around
+ Financial: financial controls (e.g. cost accounting system)
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Page 31 FRAMEWORKS Types
SEUSS tc ne ee Coll
The Soft Square
Superordinate Gols (usually placed in the middle): What the organization says it is about, usually
in a mission statement, 1) Profitshareholder value 2) Customers 3) People are usually important
elements.
‘Style (Culture): "The way we do things around here". Conservative or risk taking. Numbers or
‘ut. Goal oriented or process oriented.
Staff: HR systems - appraisals, training, wages, motivation, morale, atinude
'd)
Skills: 3M's research ability. GE's ability to grow good management talent. P&G's consumer
marketing prowess.
External Factors
Industry/Market
* Industry capacity (over/under)
+ New products
+ Substiutes
+ New technologies
‘Changes in customers desires
Outside the Industry
‘© Regulation (Government or other body)
+ Economy: uptum, downturn (BPE)
‘+ Related industries e.g. steel price -> car price)
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Page 32 FRAMEWORKS Types
‘You must first figure out exactly which part of the chain you are looking at, If we are a automotive supply
company, we own the chain from the bulk purchase of upholstery material, plastic and steel to the delivery of a
finished car seat to GM. We do not own the chain from raw chemicals through plastic to nylon upholtey, nor do
‘we own the chain from car seat through car assembly to car sale.
If you want to reduce costs, look at the biggest cost item in the value chain. Below, we should thitk about raw
materials, assembly of parts, and the three material adaptations. The value chain implies these would be better
targets for cost cutting than packaging the finished goods because they are larger (no one ever said frameworks had
to be complicated - packaging up common sense is largely what consultants get paid to do).
If you want to compare two competitors, think about how the elements of the value chain would be different for
‘each. For example, a small start up player in the industry will probably have a higher raw material cost because
bigger competitors will negotiate for lower prices. The start up may have lower labor costs, however, because the
‘workforce hasn't had time to unionize. A company in the same state as the buyers should have lower vansportation
cost than a foreign supplier.
Here is amade up example for a car seat maker:
Price: Y%of Value Chain for Pallet of Car Seat
$200 _price Supplier
40 | 20% Profit Margin
jo}
10 [3 ST
10 [3%6_| Package finished seat for shipment
40 | 20% Assembly of parts
‘Agaping Material
50 | 25% | Cutting & Sewing Fabric: $20
| ‘Welding Stee! Frame: $20
Forming Plastic: $10
Raw Material
50 | 25% Upholstery, Stee! tubing,
Plastic pellets
‘You can drawn a value chain for a whole business chain as well (this is the compact form of the value chain, without
the $ amounts): raw iron ore —> basic steel ->steel tubing ~>seat frame —>seat —>car._ You might say that the most
value is being added in the seat —> car step, $0 you would expect the most money difference to be there, so we
should expect whoever ov this step (the auto maker) to have the most control over this whole chain (which they
do).
More info: See 10 Day MBA
T Some people might not consider shipping and other logistics costs as part ofa value chain because it doesn't add
value that the customer cares about.
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Page 33 FRAMEWORKS: Types
Porter's Diamond
‘These four all tend to increased a county's ability to compete globally in a given industry because they all drive
‘innovation (these are usually drawn as a diamond with arrows between each point showing that they reinforce each
other):
Factor Conditions
‘These are the classic factors (land, labor, capital) seen through a new lens:
Human resources: how educated & skilled are your people? (Hard to get)
Physical resources: gold mines, harbors, farm land ... Require unsophisticated investment to yield profit
Climatic conditions: hard to make a buck farming wheat if monsoons come every year
Knowledge resources: what do people here know that few elsewhere do? (e.g. scientific research at universities)
Hard to get.
Location: being next to a big consumer, .
Capital resources: how much do people save? Is your capital market efficient?
Infrastructure: telecommunications networks, highways, rail, ports,
NOTE: weakness in one or two of these can spur the country to work harder. E.g. Japan had limited capital after
WW II, so it worked harder to be efficient with this capital
Firm Strategy, Structure, Rivalry
If firms compete a lot (i.e. reduce profits to compete for market share) they will tend to innovate on cost to try to
capture greater profits.
Demand Conditions
Sophisticated customers who anticipate global tends are the most demanding. They will drive domestic producers
to make the best products, which will then handily defeat other country’s players in non-domestic markets.
Related and Supporting Industries
Having the highest quality, lowest cost steel producers would tend to make your cars cheaper.
Having 2 world-class fax making industry will end to put demands on the electronics parts industry, making it more
effective.
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Page 34 FRAMEWORKS Types
EE ee NETO
generalization of the BCG Growth-Share Matrix.
‘This is a two dimensional way to analyze a business mapping to the following two questions:
1, How attractive isthe industry?
‘© How fastis it growing? Faster is better.
‘+ How profitable is it (return on invested capital)? Higher is beter.
‘¢ How big is it? Bigger is better.
2. How competitive are we in this industry?
© Whatis our market share?
© Dowe have the leading product technology?
# Do.we have the best operations to provide what the market wants (be it price, quality, performance,
innovation ..)
‘+ How are we perceived by our customers
The BCG model used marketshare as the primary measure for industry atwactiveness, based on a strong correlation,
they had found between market position and profitability.
‘McKinsey altered this mode! by adding a number of other factors for the client to weigh, from legal risk to
technology leadership.
Competitive Strength
High Low
High [— Star 2
Industry CFtor- | CF:-
Atractiveness Low | Cash Cow | Dog.
cr:+ | CF +or-
‘Dog: Divest by selling the business or raising prices to reduce market share. Use any cash generated for Stars or
question marks.
Cash Cow: Hold by investing to maintain market share. Use net cash generated for Stars or question marks.
‘Star: Invest cash to expand the business, if needed.
‘Question Mark: Consider the future of the business: Can we invest to gain a better position in the industy? If so,
invest cash from Dog Balance cash needed going forward to make this a star with cash available. Consider risk that
this business may slip to Dog status ifthe industry becomes less attractive.
eon a divisional level but can just as easily be done on a product level by changing
"matket attractiveness",
‘This analysis is normal!
‘industry attractiveness”
‘Note: 2x2 diagrams usually put the most positive or interesting thing in the upper right quadrant. This matrix is
peculiar in that respect (stars in the upper left) because it puts the focus on the question marks.
More info: See 10 Day MBA.
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Page 35 FRAMEWORKS Types
This is from Ed Davis's Operations Strategy class, It can be used for manufacturing or service operations. The
‘whole theory is to much to explain here, but this i the part that can be useful to people who haven't taken the class.
‘There are 6 primary order winning criteria that a production system can focus on. It cannot focus on them all (as
marketing would have you believe it must). Usually one or two is the maximum. Figure out what your market (oF
targeted segment) wants, then focus your production system to get it.
1. Delivery: either being fast at tuming around orders or simply delivering on time. The less inventory the
‘customer holds, the more important this is.
2. Quality: Not Rolls Royce, but Toyota - everything sent to customers is within specifications. Very few or zero
defects in shipped goods. If there is something wrong with your Rolls, they will be happy to come fix it for
‘you, but Toyota can't afford that so they standardize and nune the production process to the point that it puts out
only acceptable products.
3. Price (ie. low cost): To the price sensitive customer, everything looks the same so why pay more for any
feature? Commodities have price as their only order winning criteria. In the past many people assumed that
quality (in this sense) was a trade off with price, but the Japanese ear manufacturers proved them wrong.
Delivery, quality and price often go together.
4. Performance: Rolls Royce. BMW. Any product that does something better than the competition and which
‘customers are willing to pay for.
5. Flexibility: There are many kinds of flexibility, but this refers to the ability of a production system to adjust to
changing product mix and volume quickly, easily, and cheaply. Cranking out 51 million copies of Elton John's
"Candies in the Wind" for Princess Di in a few weeks required some serious flexibility
6. Innovativeness: Mountain bikes, computer hardware, clothes. Production systems that can quickly bring in
new ideas and get them to market faster will win, Note that this is mot a measure of how creative the firm is.
‘Whether the idea came from the outside (competitor, government lab...) or inside (your own R&D, your plant
floor, Marketing ..) doesn't mater. A fast follower that copies the leader's innovations and quickly gets them to
market ranks high on innovation.
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Page 36 FRAMEWORKS Types
‘Taken from the Harvard College Guide to Consulting Questions
Pree es)
‘Another way to solve business problems is with the SCs method. The five “Cs” stand for company, cost,
competition, consumer, and channels. This is the most elementary method or framework for answering
‘case questions. The advantage of this methodology is that it allows you to touch on all the key areas. Even
if you don’t know @ lot about a particular company, you should be able to seem reasonably intelligent and
well organized. However, the SCs have been around for a while and recruiters aren't particularly
impressed with someone who just steps through them. If you use this framework, itis best to punctuate
your answer with questions that initiate a conversation, so that your answer doesn’t se
like a laundry list
‘The SCs are:
1
Company
‘What do you know about the company? What industry are they in? What kind of products or
services does the company offer? What size market share does the company have?
Costs
What are their major costs? How can the company reduce them? How do their costs compare
‘with the rest ofthe industry?
Competition
‘Who is the competition? How do their products compare to your clients? What advantages or
disadvantages does your client have compared to the competition? What kind of marketshare do
they own?
Consumer or Customer
‘Who are their customers? How well do they know their needs? How well do they hs.
customer service? How do they retain their best customers? How do they atract new ones? Who
are their competitors’ customers?
Channels
How does the company get its product to market? What kind of distribution channels do they use?
How can they increase the number of distribution channels? How much are they costing the
client? Is there a better way to reach their customers/vendors?
‘The Consulting Club at The Darden School of Business
Page 37 FRAMEWORKS Types
Taken from the Harvard College Guide to Consulting Questions
DCR
‘The 4Ps, like the SCs, is an elementary framework. It consists of useful points that can inspire thought and
generate conversation. However, as with the SCs, if you sound like you are listing off the 4Ps, your answer
may be suitable, but you will most likely lose points for creativity.
Product
‘What is the company’s product? What features should it have in order to satisfy the needs of the
target customer? What is the company’s niche? Should the product be high quality or is a basic.
mode! called for? How much will the product cost to design and manufacture? Who will make it?
Price
‘What price are the customers willing to pay? How does the company determine price? How will
their price compare to other similar products?
Place
How do they physically get the product to the customer? What distribution channels will they
use? What distribution channels do their competitors use? How much will distribution cost
through these channels?
Promotion
How do they plan to promote and market their product? How do the competitors market their
products? What are the costs of getting this message out and how will the company pay for it?
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Page 38 FRAMEWORKS Types
‘Taken from the Harvard College Guide to Consulting Questions
Michael Porter’s “Five Forces” or
RSL Le EAE) eles Ur
Porter's “Five Forces” are brilliantly explained in his bestseller, Competitive Strategy. Please refer to the
book for a more detailed account. Figure B shows a diagram of the five forces driving industry
competition.
‘The state of competition in an industry depends on five basic competitive forces:
1
‘The threat of mew or potential entrants: This includes new companies or acquisitions of
‘established companies by a new player. If barriers are high or if newcomers can expect
entrenchment or retaliatory measures ffom existing competitors, such as a price war, then the
threat of entry is low.
According to Porter, barriers to entry include:
economies of scale
product differentiation
capital requirements
switching costs
‘access to distribution channels
proprietary product technology
government policy
Intensity of rivalry among existing competitors
Pressure from substitute products, i., sugar versus high-ffuctose com syrup and artificial
sweeteners
Bargaining power of buyers: “Buyers compete with the industry by forcing down prices,
bargaining for higher quality or more services, and playing competitors against each other-all at
the expense of industry profitability
Bargaining power of suppliers: Forces 4 and 5 have to do with supply and demand. When there
fare many suppliers but few buyers, the buyers have the upper hand, When there are many buyers
but few suppliers, the suppliers have the advantage.
‘The Consulting Club at The Darden School of Business
Page 39 FRAMEWORKS
‘Taken from the Harvard College Guide to Consulting Questions
Michael Porter’s “Five Force:
(CeriTe))
Types
FIGURE
MICHAEL PORTER'S $ FORCES"
Forces Driving Industry Competition
POTENTIAL
ENTRANTS
Threat of
new entrants
Bargaining power
of suppliers
INDUSTRY | Bargaining power
COMPETITORS | of buyers
PY
SUPPLIERS
BUYERS
ad
Rivalry Among
Existing Firms
‘Threat of substitute
products or services
|SUBSTITUTES
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Page 40 ‘FRAMEWORKS By Case Type
1 PROFIT IMPROVEMENT CASES
Profit improvement cases can cover a wide range of topics in strategic analysis. Rather than simply
repeating Porter's and Ohmae's models, this outline will give you some general ideas to consider in solving profit
improvement cases. You will be able fo zero in on the main issues by using the 3 C’s. The three C's are costs,
customers, and competition. The relationship between these three factors is summed up in the equation
Profits = (Price - Cost) X Volume.
Costs can be broken down into fixed and variable costs. An analysis of costs will vary greatly with the type of
industry being examined. Possible areas to investigate will be suppliers, materials, plant utilization/investment,
‘quality control, economies of scale, and distribution. Changes in production methods can create substantial cost
savings, but factors such as the negative effects ofthe learning curve will need to be considered if you're advocating
large changes in operation procedures. Labor and marketing costs are also frequently relevant in profit cases,
Price increases offer another way for companies to increase their profits. Three methods of pricing are: 1)
Cost plus basis 2) Matching competition 3) Charging what the market will bear.
Charging what the market will bear isthe most hcrative ofthe three choices. In order to be able to engage
in this type of pricing, it helps to differentiate yourself from the competition. Segmentation by market, product,
‘geography, quality, ete. ean help distance a company from its competitors.
In depth analysis of current market conditions and future industy expectations can help a firm establish @
position in a less competitive industry niche. Less competition translates into higher prices. The introduction of a
‘ew product or type of service can help a company price its goods at a high premium. The relative power of buyers
‘and the competition from substitute goods are other issues that can surface in cases.
Volume is the third component of profit. Growth in current market share or expansion into new areas can
help a future increase its volume. Changes in the product, sales network, marketing, and price can all impact on
volume. Intangibles such as quality of service ean also be improved or marketed to help increase volume.
Price, cost, and volume are all interelated, Companies need to find the best mix of the tree items and
realize that improving one aspect can negatively impact the other two items, thus lowering firm profit, If a firm
increases volume by cutting prices, what happens to profit? If increased volume necessitates higher costs through
plant expansion, how is profit affected? These examples show that the analyst needs to balance the three
‘Components to find the best swategy for the company as a whole.
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Page 41 FRAMEWORKS By Case Type
2.
INDUSTRY ANALYSIS CASES
Issues To Address:
‘What are the relevant markets, and what has been the nature of growth of these markets?
‘What does demand look like? What is the future market potential?
‘What are the relative cost positions of competitors?
How severe is competition? Is there competition for the product? What would the likely competitive
reaction to a new entrant be?
‘What isthe price competition like? Is pricing rational? Discuss the effects that an increase in supply ean
have on industry price levels
If an expansion is being considered, why is this so? What is the expansion designed to do? Why does the
company need it?
Is there a market niche to exploit? Is this relevant?”
‘Are there barriers to entry/exit? How often do companies enter/exit the industry? Are there economies of
scale? Is there a learning curve? Are there any government regulations? What will the salvage value be if
the firm does enters?
‘What is the real nature of the product and what are the potential substitute products?
‘Additional Information You May Want to Ask For:
‘What does the market share look like? In the relevant firm an industry leaders? Recognize that
technological standards are set by industry leaders. If the firm is a secondary player, they will have to
follow these standards.
Who are the customers/consumers?
‘What is the sales history? What are sales like now? Is there a trend? What do Company X’s sales look like
compared to Company Y's?
How do costs compare across competitors? Are their economies of scale? What are the main cost:?
What is the mode of distribution? If there is more than one relevant product, recognize that different
distribution needs may exist for different products.
How profitable has the industry been? How is it currently? Are there any trends?
‘What isthe tue nature of the product? Static? Constant revisions? Does success inthe industry require a
lot of research and development?
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Page 42 FRAMEWORKS By Case Type
3 MARKET EXPANSION CASES
Example: A tele-communications compary that is switching from the defense industry to the private sector.
Market Analysis
Can they compete?
Use Porter's Five Forces analysis.
Use the basic supply/demand microeconomic analysis.
Determine any future trends that may affect demand.
How well does the Company's strengths match the new market?
Need to define the market and its size?
‘What is the current competitive situation in the market?
What value-added technology can the Company add?
‘Can the Company capture a niche in the market?
Focus on the customer's preferences and current bebavior.
Can the current sales force be effective?
Financial Analysis
‘What isthe timing ofthe capital outlays?
Focus on the Company's payback, Net Present Value (NPV),
Can the Company gain enough market share to be profitable?
How fast can the Company capture revenues?
‘What is the current capacity situation in the market?
Is the market characterized by high fixed costs?
How do margins compare in the two markets?
‘What price can the company expect the market to bear?
‘What possible pricing retaliation can be expected from the markets current participants?
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Page 43 FRAMEWORKS By Case Type
4. PRICING CASES
dentify the type of market:
‘Monopoly - You have significant control over prices. Set prices to maximize profits, but be careful thatthe
‘market doesn't become too attractive tothe competition. Consider the characteristics of the monopely and
the barriers to entry.
Oligopoly - You have marginal control over prices. Resist the urge to eut prices; your competition will
likely match your price cut and then you'll both lose.
Perfect Competition - Without any product differentiation, you will be a price taker.
Issues To Address:
Consider what the market will bear.
‘Think about the long-term effects of pricing decisions.
‘Think how the competition will respond to changes in pricing,
‘What isthe elasticity of demand? Consider the consumers sensitivity to price changes.
Consider methods to create price discrimination.
Consider using strategic tactics such as creating ‘loss leaders’ or ‘traffic builders."
Be careful not to price too low, doing so could compromise the reputation of the brand,
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Page 44 FRAMEWORKS By Case Type
5. _ INVESTMENT CASES
General Example: Cases involving the decision of whether to invest ina particular product or market segment.
Issues to Examine
Sustainability of profits in segment.
Market size and dynamics.
Competitive position.
Product differentiation and standards.
Price dynamics.
Distribution of costs
Key Analytical Tools
Profit-Tree analysis is probably the most useful.
Porter's analysis: Identify company's comparative advantage.
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Page 45 FRAMEWORKS By Case Type
6 WILDCARD CASES
‘The best advice for preparing for Wild Card cases is just to know basic demographic facts about the U.S.
(©. U.S. population is 250 million). Recruiters just want to See your thought process when they give these type of
eases,
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Page 46 Stern School of Business
The Case Interview Guide
Fall 1997 Overview
‘The purpose of this section is to provide a summary of standard business thought written by two of the more
‘respected and recognized authors in their field. It is important to note that student's should focus on the principles
‘and applications presented in the brief summary of several works presented below. In order to better understand
the concepts presented in these outlines, you may find it useful to read the entire books by these authors.
Porter's Five Forces
The nature and degrees of competition in an industry hinge on five forces:
‘The threat of new entrants
‘The bargaining power of buyers (customers)
‘The bargaining power of suppliers
‘The threat of substitute products or services
(Changes in the relauive standing or positioning among current competitors
‘The strength ofthese threats determines the profitability ofthe market:
moomp>
Threat of New
Entrants
Industry
‘Competitors
Bargaining Bargaining
Power of —s | Rivary Among J+— Poveof — Gee
Suppliers EestagFinme Buyers
Threat of Substitute
Products
i, Intense competition allows minimal profit margins
fi, Mild compeution allows wider profit margins
‘The goal of the strategist is to determine whether a firm should enter/exit the industry or to find a position in the
industry where the company can best defend itself against these forces or can influence them in its favor. Jt isnot a
strong enough goal to simply find an ideal market position.
Stern Schoo! of Business .
New York University ‘A. There are several sources of barriers to entry:
i, Economies of Scale
ii, Product Differentiation - Established firms have brand identification and customer loyalties
iii, Capital Requirements
iv. Switching Costs - One-time costs facing the buyer of switching from one supplier's product to another's
‘v. Access to Distribution Channels
vi. Cost Disadvantages Independent of Scale
Proprietary product technology
Favorable access to raw materials
Favorable location
Government subsidies
Learning and/or experience curve
Government Policy
viii. “The newcomers expectations about likely retaliation of the incumbents or the slow growth of the industry
B.A buyer group is powerful if:
i. Itis concentrated or purchases large volumes relative to seller sales
fi. The product it purchases from the firm represents a significant fraction of the buyer's costs or purchases
iii, The product it purchases from the industry are standard or undifferentiated
iv. It faces few switching costs
vy, Buyers pose a credible threat of backward integration
vi. The industry's product is unimportant to the quality of the buyer's products or services
vii. The buyer has full information
CC. _Asupplier group is powerful if:
i. Itis dominated by a few companies and is more concentrated than the industry it sells to
fi, tis not obliged to contend with other substitute products for sales tothe industry
fii, The industry is not an important customer of the supplier group
iv. The suppliers group is an important input to the buyer's business
'v. The suppliers group's product are differentiated or it has built up switching costs
vi The supplier group poses a credible threat of forward integration
D. Substitute products that deserve the most attention are those that:
i. Are subject to trends improving their price-performance trade-off with the industry’s products
ii, Are produced by industries earning high profits.
E. _ Rivalry among existing competitors increases if:
i, Numerous or Equally Balanced Competitors
ii, Slow Industry Growth
iii, High Fixed or Storage Costs
iv. Lack of Differentiation or Switching Costs aaa
v. Capacity Augmented in Large Increments
vi. Diverse Competitors Low High
vii. High Strategic Stakes Tow Siable | Low Risky
viii, High Exit Barriers: dow | Returns ‘Returns
a. Specialized assets Entry
b. Fixed costs of exit Barriers | pig | High Stoble | High Risky
‘¢._Strategic interrelationships Returns Returns
4. Emotional barriers
e. Government and social restrictions
a
‘Management Consulting Association
The Case Interview Guide (Onmaz’s THe Min OF THE SrraTeaist:
The following is a brief summary of Kenichi Ohmae’s 1982 book The Mind of the Suategist
Corporate strategy implies an attempt to alter a company's strengths relative to its competitors in the most efficient
‘way. “Strategy” concems actions aimed at directly altering the strength of the enterprise relative to that ofits
Competitors. Four ways of strengthening a company’s position to that of its competitors are:
1. Business strategy based on identifying the key factors for success in the industry concerned and injecting a
concentration of resources into a particular area where the company sees an opportunity to gain the most
Significant advantage over its competitors.
2. Business strategy based on relative superiority. Make use of the technology, sales network, profitbiity,
‘and so on, of those of its products which are not competing directly with the target competitors, or make
sure of any other differences in the composition of assets between the enterprise and its competitors.
3. Business strategy based on aggressive initiatives. In a mature and slow-growth industry sometimes the
only answer is to upset key factors for success on which the competitor has built an advantage, i.e.
‘changes the rules of the game or upset the status quo.
4. Business strategy based on strategic degrees of freedom. In cases of intense competition within the same
industry, success can be achieved by opening up new markets or through the development of new
Products,
‘The principal concern is to avoid doing the same thing on the same bateground as the competition. First gain
relative advantage through measures a competitor can not follow, and then extend that advantage suill further.
Ohmae’s Strategic Triangle:
‘The strategic triangle consists of three players: the corporation itself, the customer, and the competition. The job
of the strategist is to achieve superior performance, relative to the competition, in the key factors for success of the
business while matching the strengths of the corporation with the needs and objectives ofa clearly defined markets.
‘The three different business strategies are
1. Customer-Based Strategies - This strategy attempts to establish a strategic edge over the competition by
segmenting the market and focusing on one or more subsets where it can have an advantage. There are
‘wo basic modes of market segmentation: (a) segmentation by objectives, i.., in terms of the different
customers use of the product and (b) segmentation based on the enterprise's own ability and resources.
2. Conporate-Based Strategies ~ This strategy aims to maximize the enterprise's strengths relative to the
‘competition in the functional areas that are critical o success in the industry. The enterprise must
‘maintain a positive differential in key functional strengths to retain an advantage in profit performance
‘and market share, The other main advantage of functional strategies is to design and deliver cost-effective
functions. This can be done in three ways: (a) reduce cost more effectively than the competitions, (6)
exercise greater selectivity in terms of orders accepted, products offered, or functions performed, and (c)
share certain key functions across the enterprise’s other businesses or even with other companies
3. Competitor-Based Strategies ~ This strategy can be constructed by looking at possible sources of
differentiation in functions ranging from purchasing, design and engineering to sales and servicing The
‘main point is that any difference must be related to profit, volume, and/or cost
‘There are three major constraints which affect strategy: (a) reality - the strategist must always be aware of the
customer, the competition, and the company’s field of competence, (b) ripeness ~ the strategist must be concerned
‘that the tume is ripe for the proposed strategy or it will fail, and (c) resources.
Stern School of Business 5
New York University asic Model
| 1
i Compete intemal |
Inteigence | Envronment Ccapabities & Copabiies &
Resources | “Resources
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Management Consulting Association
The Case Interview Guide BASICPLAN OF ATTACK
This section deals with the models or frameworks important for the analysis portion of your interview. Orce you
have assessed the situation by gathering information and have determined what type of case you are dealing with,
the next step is to determine what framework you will use to structure your analysis. To begin, itis imporant to
keep in mind that for any case there is no ‘correct’ answer. Some models work better for specific situations than
others but more important than choosing the very best model is your ability to use them. Most important to the
‘management consulting interviewer than the final answer is the process. Having said tha, itis also important that
at the close of the interview you do come up with an answer to bring the process to a conclusion,
Like the framework of your analysis, you should have an overall structure in your mind for your interview. The
first portion of the case isthe question. Once the interviewer presents the case, you might use the following four
step plan to help you along
A. Understand the Question
i, Be sure that you understand the question. If not, then ask for more information. There's nothing worse
than an exquisitely structured analysis on the wrong question,
fi, Ask the interviewer additional questions to add information as you flesh out the problem-- Do not assume
the first question the interviewer asks isthe topic of discussion, Rarely does an interviewer state the entire
problem at the start. Part of what is being tested is your ability to ferret out information,
iii, Interviewers generally will lead you down a path towards the answer they want. Be open to hints they
might be providing,
iv, Be careful about assumptions. Don’t make any that you don’t have to, If you have to make assump:ions.
Communicate to the interviewer that you are making these assumptions and then why you are making them.
B. You understand the question, now choose your framework:
i, Choose an appropriate model. Don’t try to match a complex productmarket expansion matrix to a question
that is easily answered with a simple SWOT analysis.
fi, Stick to models that you know well. No one knows every model in existence. Learn a few models very well
that you can keep in your tool bag.
ini, Have a passing acquaintance with the most popular frameworks, On occasion an interviewer will ask you to
luse a particular framework to analyze the scenario,
iv. Once you've chosen a framework, don’t announce your model to the interviewer. It is expected that the
imerviewer will understand what you are doing, and telling the person that you are using the value chain
analysis will not help your case. This is the exception to the “more communication is good’ rule.
C. Analyze the case!
i, Thisis the meat ofthe matter. Using the framework you've chosen, conduct an analysis.
ji, Ask questions to get more information; this cannot be overemphasized. Communicate your thought process
{through the whole interview, Many interviewers are very helpful and will assist you ifthey see you stray
from the path
4h, Be willing to change tack. Sometimes it tums out that you chose an unsuitable framework forthe analysis,
‘Communicate to your interviewer what you're doing and that a different type of analysis is warranted. You
might get dinged but you might get points for being flexible.
D._ Arrive at a conclusion:
4, Consultants don’t do much good if they can’t come up with an answer at the end of an analysis. Be sure to
arrive at some type of conclusion even ifit isa framework to further evaluate the problem.
ji, Include real recommendations for the company as applicable. Concrete actions are much more impressive
than vague strategies.
‘ii, Do “sanity check”, ie. address or consider any key variables where changes could significantly impact
‘Your analysis and conclusion, Also ask yourself, “Does this answer make sense?” Use common sense.
Stern School of Business 2
‘New York University Case Interven
fous
‘What follows are thirteen popular case models. This list is not meant to be an exhaustive analysis ofall analytical
‘models available to consultants. It isa list of models that we've found useful inthe confined scenarios of case
interviews. Models chosen are fairly straight forward and flexible to a large array of situations. tis not important
to try to memorize them all but to understand a few different types and be able to use them well. Have a passing
acquaintance with those models you choose not to use.
1. Porter's Five Forces
(One of the granddaddies ofall analytical frameworks. The five forces are used for industry analysis:
Customers: The relative bargaining power of customers and other buyers.
Suppliers: The relative power of vendors and other suppliers
Competitors jockeying for position: Competitive environment in the industry
‘Threat of entry by new participants: Barriers of entry and current profitability of the industry
compared to other industries.
Threat of substitutes: The degree to which the firm differentiates its product.
‘This framework is extremely flexible and can be used for cases involving most any industry. It is best applied
‘to cases that involve corporate strategy and new opportunity questions. By analyzing each of the five forces and
their related areas you should be able to come up with insight as to what course of action should be taken for the
‘company in question. Be careful though, don’t spend too much time dwelling on any one force because You
‘could easily use up a whole hour. Keep your goal in mind and drive towards a solution to the question at hand.
‘A major limitation of the Five Forces Model is that it does not take two important market forces into account:
Government and Technology. Whenever appropriate try to include these forces into your analysis,
I, The3 C's
{ This is an excellent model for analyzing strategy problems involving new opportunities. Be sure to include a
fourth C » What is the impact ifanything changes?
Company
‘© What resources does your firm have?
‘¢ What are your firm's strengths and weaknesses?
‘+ What is your firm’s value proposition to the customer”
Customers
© What is your market?
© What are the customer needs?
‘+ How will we satisfy those needs?
‘¢ How much are customers willing to pay?
Competitors
«Who are your competitors?
‘¢ What are your competitors doing?
© What are their strengths and weaknesses?
‘© How are they meeting the customer's demands?
© What is their cost structure?
Management Consulting Association
‘The Case Interview Guide VIL._BCG Matrix
One of the tools from Boston Consulting Group's bag of tricks, the 2X2 BCG Matriv is excellent for
‘acquisition analysis and portfolio management questions. The matrix is broken into four quadrants based on
‘market share and industry growth rate.
Industry Growth
Rate
‘The ideal mix for a conglomerate is to hold stars and cash cows in its portfolio while unloading any dogs it
‘owns and nurturing promising new ventures. When the case question involves a company looking to grow
through acquisition, then the ideal candidates are stars or new ventures depending on available resources and
the company’s intentions. A company most likely would not want to expand into a market which has litle
growth rate, this eliminates cash cows.
VIII, Product/Market Expansion Matrix
‘A good tool for marketing and competition questions, the producvmarket expansion matrix analyzes vour
Product and market in a 2X2 matrix. Products and markets are differentiated as existing or new. By
analyzing market and product status the appropriate strategy is determined from the matrix. If you use this.
you might consider drawing the matrix for the interviewer. Matrices impress the hell out of people.
Products
Existin New
Market
IX. Porter's Generic Strategies
‘This matrix provides a visual representation of Porter's Generic Strategies with respect to corporate strategy
for individual products. Strategy is determined by the cost ofthe product and the scope ofthe market. If sour
market scope is broad then your product strategy depends on product cost. If your product cost is less than
the competition's product cst, then you can differentiate your product through low cost leadership and win
market share that way. If your product cost i high, then you must differentiate the product in another way
for example high quality or superior service. In the case of narrow market scope, the company is best served
by focusing on its niche, possibly by finding ways to raise entry bariers.
Strategic Advantage
Lower Cost Differentiation
Cos beaten
—
Broad
Strategic
Target
Narrow
‘Management Consulting Association 10
‘The Case Interview Guide x1
XIV.
Synergies
Can be used in many situations, but is especially useful in analyzing the potential benefits of mergers or
acquisitions. Synergies can come in many forms, but these are the mast common:
Spreading fixed costs over greater production levels
Gaining sales from having a larger product line and extending brands
Better capacity utilization of plants
Better penetration of new geographic markets
‘Learning valuable management skills
‘Obtaining higher prices from eliminating competition
Internal/External Analysis,
“This framework is used in organization versus environment cases where the imternal portion ofthe analysis
refers to the organization and the external portion refers to the environment. The analysis can then be
expanded by including other tools on the internal and external sides. Internally, for example, a value chain
analysis and externally Porter's Five Forces may be worthwhile
‘Alternatively, for a simpler case question, merely listing internal and external factors may be preferred. For
example, when asked the cause of a company’s success you could list factors internally and extemally that
‘you want to look at to determine what makes the company is successful
Supply/Demand Analysis
Remember microeconomics? Incredibly, something useful did come out of that class: the framework of supply
‘and demand, When would you use this? As Prof. Silber would say, supply and demand is the right answer 95%
of the time, We all have the basics of supply and demand curves down, I won't waste paper on the topic. This
‘simple model can be very useful. don’t overlook supply and demand
Cost Benefit Analysis
Holy cow, something else from managerial accounting, Cost benefit analysis is one of the best ways to get a
Auick idea of whether an opportunity makes financial sense or which way to go when facing a business
decision. Start out by determining what are your options and your opportunity costs. Once you have
determined your alternatives, list the costs & benefits foreach alternative, This analysis generally uses the
same ingredients as profitability analysis.
‘Some Handy Rules of Thumb
© US population = 250-275 million
© Avg. # People Per Houschold = 2.5
© # US Houscholds = 100 million
Stern School of Business
MW
New York University Case Question 1:
Why is there no light beer in the UK?
‘Suggested Framework(s):
‘This problem does not fit a common framework, but can be simply dissecting the alternative reasons for each
‘component of the issues. Here is one approach
‘The reason there is no light beer in the UK could because (1) consumers do not demand it, (2) producers are not
producing it, despite consumer demand, or (3) some outside influence, such as government, will not permit light
beer in the country. Following the producer option, one can subdivide the problem as nobody wants to sell light
beer in the UK or somehow, light beer producers are blocked out of the UK.
Case Question 2:
A major airline is considering acquiring an existing route from Tokyo to NY. How can it determine if the
route is good idea?
Su Frame
Profitability analysis looks like the best approach. Simply determine if revenue is greater than the costs. Simply
‘analyze the factors that go into revenue and the factors that go into cost and come to a conclusion,
ote
. Revenues will be determined by occupancy and expected prices. Both of these will be determined by
expected demand. the competitive environment, and the extent to which our client could win over
passengers from competitor routes.
. Operating costs will depend on expected fuel costs, incremental landing rights, etc, It is also very
important to estimate the cost of cannibalization o existing Tokyo - LA and LA - NY routes. And last
‘but not least. itis important to note that losing passengers to cannibalization is better than losing them to
‘competitors.
Case Question 3:
How would you determine whether a location in NYC holds enough banking demand to warrant opening a
branch?
‘Suggested Framework(s
Because this is a demand-oriented question, one should consider a marketing framework, such as the 3 C's. To
bring your case to a conclusion, consider the 4P's as a framework.
Notes:
+ The demographics of the area surrounding the prospective branch should be examined. Population,
bbusiness concentration, income levels, etc. should be compared with those of historically successful
branches.
+ Competitive reactions could easily make this venture unprofitable, so itis essential to anticipate them.
These will depend on the importance of the area to competitors (in terms of profits, share, etc).
The client will have to match competitors incentives to customers and should estimate the cost of these.
‘The client must examine if the new branch would complement their existing competence and strategy
(etait or commercial; high growth or high profitability ec.) and what purpose it would serve. If the need
focuses on deposits and withdrawals only, maybe a cash machine would suffice.
‘Management Consulting Association 2
‘The Case Interview Guide Sample Case Study Questions and Suggested Answers
‘Case Question 4:
‘How would you compare the airline industry with the baby food industry? In which would you invest your
own money?
‘Suggested Framework(s)
‘This is a classic industry attractiveness question. Use Porter's Five Forces, or even better, create your own.
framework for analyzing the suitability ofan industry for investment ee
x S persone
Notes: gees
+ Ittums out that competition inthe airline industry is intense, Fixed coss are high and competitors keep
‘cutting costs till they shave margins tothe very bone, Customers are price sensitive. Brand equity is
virtually non-existent
‘* Using a microeconomics argument, you see that airlines will keep cutting prices as long as they are
covering variable costs. Since fixed costs are high, and probably financed with debt, these companies can
end up defaulting on interest payments,
‘+ Onthe other hand, the baby food industy is less competitive. There are two or three large players who do
not indulge in cut-throat pricing, Products are well differentiated. Customers are quality conscious: they
‘will pay a premium for quality
© Toinvest your own money, baby food is beter than airlines due to higher profit potential
Case Question S:
‘A newspaper publisher has been experiencing declining readership and as a result, decreasing profitability
‘What should it do?
‘Sug Framework(s
First, use the profitability analysis framework to isolate the problem. It's clear from the question that the number
of units Sold is too low. Form here, further analyze exactly what is happening to revenues ~ make sure to consider
all sources, Once you have determined the core problem with revenue, then use a marketing framework such as
the 3 C’s to understand what is happening and the 4 P's to structure a solution
Notes
. It is important to recognize that advertisements are the major source of revenue for newspapers. But these
revenues totally dependent on readership.
. It tums out that all newspaper publishers share the same plight and TV is the main culprit. To fight this.
the client can, at best, study other markets where TV is prevalent but newspaper readership is high (e.g.,
Japan) and use any knowledge they gain to promote readership in the U.S. they could share costs via
‘newspaper publisher associations.
. To compete with other newspapers and periodicals, the client can determine customer preferences and
tailor contents to them. But any differentiation created will quickly be neutralized by the competition
© The best course of action is build mechanisms to continually adapt to the changing reader tastes. This
could be accomplished by market studies, flexible and versatile staf, etc.
. Also, the client should focus on cost rationalization to increase profitability. This would mean
‘consolidating operations and reengineering them. Consolidation would help in deriving economies of
scale whereas reengineering would increase operational efficiencies
Stern School of Business 2B
‘New York University Case Question 6:
‘There are 4 men who want to cross.a bridge. They all begin on the same side. You have 17 minutes to get all of
them across to the other side. It is night. There is one flashlight. A maximum of two people can cross at one
lime. Any party who crosses, either I or 2 people, must have the flashlight with them. The flashlight must be
walked back and forth, it cannot be thrown etc. Each man walks ata different speed. A pair must walk together at
a rate of the slower man's pace.
Man 1: 1 minute to cross.
Man 2: 2 minutes to cross.
‘Man 3:5 minutes to cross,
‘Man 4: 10 minutes to cross,
For example, if Man 1 and Man 4 walk across first, 10 minutes have elapsed when they get tothe other side of the
bridge. 1f Man 4 returns with the flashlight, a total of 20 minutes have passed, and you have
failed the mission.
‘See how quickly you can solve this!
Notes:
. ‘The flashlight cannot shine a long distance. No one can be carried, etc. (This is a straightforwara
problem. There are no tricks.)
Case Question 7:
Your client is a large hardware chain? Develop a growth strategy?
Notes
+ Sortie mare isin tha a nse ies sane hem pee th ago
Ta Vale andthe SOs eld han ee oe a
povngsene
+ fnemulcneipsediogow dow.
‘Customers are primarily consumers, and can be segmented as advice seekers and price seekers. The ~
former makes up 40% of the market and the later 60%. Case
nse fulgerator og
Chain sores cope among ems bc paly opi and selecton (eee
Fran cons oma of COOS en and mete tease oe aa
\ Ammon of 0.00 pope ins Se ads ound src ua ne rg haere AN
Case Question 8:
Your client operates a stee! mill and is concerned about vulnerability to market cycles. What should it do?
Notes:
. Fixed costs are 50% of total costs.
. Demand for steel is highly cyclical. Demand in the trough of a recession can be as low as 70% of the
demand at the peak of the business cycle.
. ‘The market pressures the company to pay out excess cash in the form of dividends during upturns in the
‘economy:
Labor unions are inflexible with regard to work rule changes.
Increased competition from mini-mills and foreign competitors.
‘Management Consulting Association a
‘The Case Interview Guide
2 ‘Sample Case Study Questions and Suggested Answers
Case Question 9:
‘The CEO of a large international manufacturer of aircraft engines wants long-term strategic
recommendations. What do you tell him? +
Notes: .
Themaeisan lapel wih four major radars ane ngs, A [LP .
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