Consulting Case Math Problem

Consulting Case
Math problem
Contents
Ryanair to Introduce 3 Ticket Fare Scheme..........................................................................................1
GP Investments to Build a New Football Stadium in Brazil................................................................4
What is Annual Revenue for a Turkish Telecom Company?..............................................................7
Costa’s Cafe to Hire Extra Baristas Based on Demand......................................................................9
South Beauty Restaurant Converts Open Seating into Small Rooms.............................................14
Tesla Motors to Introduce the New Tesla Model S............................................................................16
Local Ann Arbor Supermarket to Add a Pharmacy in Store..............................................................20
Murphy Oil to Buy Gas Station in Seattle Port....................................................................................23
Chicago Booth to Increase On-campus Internship Offers.................................................................25
FedEx Ground to Switch Diesel Engine Fleet to Electric Vehicles..................................................28
Toys “R” Us to Increase Shipping & Handling Profits by 115%........................................................32
Hedge Fund Paulson & Co. to Hire More Junior Analysts................................................................38
Aeromar Airline Will Not Cut Its Mexico City-Brasilia Route.............................................................39
Aspen Mountain Ski Field to Build a Second Ski Lift.........................................................................41
Cisco Evaluates the Outlook of Core Control Product Line..............................................................43
Fast Food Chain Sees Lower Profits With More Stores Opened.....................................................46
Kmart to Test Radio Frequency Identification (RFID) in Stores.......................................................50
Brokerage Firm Charles Schwab Prepares for Next Recession......................................................57
Boeing to Set Up New Attack Helicopter Plant in Brazil....................................................................61
Newmont Mining Corporation to Exploit Gold Mine in Peru..............................................................65
Delivery Service Startup Zipments Receives VC Funding................................................................69
China Southern Airlines to Fly New Guangzhou-Perth Route..........................................................73
Southwest to Offer Free Flight Ticket for Children Under 14............................................................77
Ethiopia to Reduce Adult Mortality Due to Injuries.............................................................................82
7-Eleven to Renew Gas Contract with Same Supplier......................................................................87
Which Cowboy Will Walk Out Alive From a Truel?............................................................................90
Riva Group to Exit Hot Roll Commodity Steel Production.................................................................91
To Boost Profits, Family Video Rental Cuts Late Return Fees.........................................................95
Burger King Not To Introduce Customer Loyalty Program................................................................98
Canadian Oil Sands Concerned about Cost & Time Overruns......................................................101
Express to Reject Catalog Printing & Postage Cost Increase........................................................105
Real Estate Tycoon Donald Trump Enters Costa Rica Market......................................................107
Chase to Cross-sell Credit Card Insurance to Card Holders..........................................................110
Heinz to Offer 15% Discount for Its Classico Sauce Products.......................................................114
PNC Bank to Increase Penetration in Hispanic Market...................................................................116
Bank of America to Offer New Cash Back Credit Card...................................................................119
Los Angeles Zoo to Buy a Rare 900-pound Gorilla from Africa.....................................................121
MGM Grand Hotel & Casino to Unveil New Dice Game..................................................................124
Subway to Roll Out New Frequent Eater Program..........................................................................126
German Luxury Car Maker BMW to Enter Bangladesh Market.....................................................128
CarMax to Tighten Car Loans & Auto Finance Policy.....................................................................129
Capital One Auto Finance to Revamp Loan Issuing System..........................................................131
Guggenheim Museum Sees Record Attendance.............................................................................134
More People Play Football Than Watch Football Match in UK.......................................................137
How Many Spikes Are on the Back of a Hedgehog?.......................................................................141
How Much Interest is Lost on Money Sitting in Phone Boxes?......................................................142
Gogo Inflight Wireless Internet to Expand to More Airplanes.........................................................144
How to Improve Rail Wheel Production Performance?...................................................................146
Cologne Online Newspapers’ Home Delivery Plan Fails................................................................149
Bank of England to Buy National Bank of Belgium..........................................................................151
Romance Publisher Harlequin Rejects Bookstore’s Deal...............................................................153
How Many Tennis Balls Can Fit in a Boeing 747 Airplane?............................................................155
Microsoft Pursues Strategy for Penetrating Large Organizations..................................................156
AstraZeneca Offers to Sell Other Companies’ Drugs......................................................................158
US Airways to Re-paint Its Fleet of 350 Aircrafts.............................................................................159
Why are Sinusitis Drug Sales Different Between US & Canada?..................................................161
Should Cab Driver Stay in O’Hare or Go Back to City?...................................................................162
Goldman Sachs Capital to Invest in Royal Caribbean.....................................................................164
What is the Sex Ratio in India?...........................................................................................................166
How Many Golf Balls Can Fit into a School Bus?............................................................................166
How Many Cups of Coffee Are Sold in US Every Year?.................................................................167
Nordstrom Cut Costs in Cleaning Services Division........................................................................168
Should Volkswagen Ship Cars by Train or by Truck?.....................................................................174
Hugo Boss Enters U.S. Tie Market....................................................................................................175
SunTrust Launch Commission-based Incentive Program...............................................................176
American Express May Drop Credit Card Annual Fee....................................................................179
Elle Magazine Considers Selective Binding Ads..............................................................................180
Vogue to Maximize Profits by Optimizing Delivery Number............................................................183
Ann Taylor’s Catalog Printing and Postage Costs Increase...........................................................184
Ryanair to Introduce 3 Ticket Fare Scheme

Case Type: increase sales; math problem.
Consulting Firm: Arthur D. Little first round full time job interview.
Industry Coverage: airlines.
Case Interview Question #00776: The client Ryanair Ltd. (ISEQ: RYA, LSE: RYA, NASDAQ: RYAAY) is
an European airline headquartered in Swords, Dublin, Ireland, with its primary operational bases at Dublin
and London Stansted Airports. In 2013, Ryanair was both the largest European airline by
scheduled passengers carried, and the busiest international airline by

passenger numbers. The airline has been characterised by its rapid expansion, a result of the
deregulation of the aviation industry in Europe in 1997 and the success of its “hybrid” business model.
Ryanair is a hybrid carrier, a combination of full service and low cost types. As a result of this, recently
customers and the aviation industry become confused of their true positioning and the company has been
garnering substantial losses. Their operations in Europe cater to the budget travel category and those
outside the continent are of the long haul type. They offer different fares: flexible and regular.
The flexible fare allows customers to avail themselves of additional features (changing dates, time of flight
etc.) by paying an additional fee.
The client Ryanair has engaged you to recommend different types of tickets and services in the economy
class to revamp their value proposition and generate additional revenue. How would you go about this
case?
Possible Answer:
Question 1: What factors would you consider to determine market positioning for the client?
Suggested Solution:
Factors to be considered are customers (target segments), competition, targeting the correct segment by
designing products and services which conform to the value proposition, effectiveness of communication
used for market positioning, customer satisfaction, customer values and opinions.
Cost structure is an important factor, too.
Question 2: The client Ryanair is focusing on the short-haul economy segment. The market trends are
increasingly in favor of budget travel and EasyJet (LSE: EZJ), a key competitor, is gaining strength. The
client Ryanair has decided to compete by launching 3 budget fare types: low-cost, medium and premium.
Please suggest airline offerings which could differentiate each of the 3 fare types.
Suggested Solution:
Buyers of the premium budget fare should be provided additional service such as pre-booking of seats,
additional cabin baggage, check-in at the airport counters, priority queues for boarding, food and
beverages in flight etc.
Buyers of the medium budget fare can be offered a sub-set of the above. Costs incurred in providing
these services should be the main consideration while determining the service package.
Low-cost budget travellers should be offered the above for a price.
Question 3: What are the internal challenges that the client Ryanair could experience if the client were to
introduce the 3 budget fare types? Note to interviewer: the purpose of this question is to judge the
candidate’s ability to structure his/her thought process.
Suggested Solution:
The ideal answer would be to consider each step in the entire journey: booking of tickets; preparation for
flight; at the airport; in-flight, and identify challenges associated with each.
Booking of tickets: On-line booking services would have to be revamped to include the 3 fare types. The
customers might get confused by three different options of fares and the provisions associated with each.
Preparation for flight: If the traveler needs to bring additional luggage after booking is complete he would
have to buy extra slots- this should be specified to avoid inconvenience to customers on the day of the
flight.
At the airport and in-flight: confusion arising out of 3 fare types as customer handling depends on the type
of fare selected. Re-training of airline personnel required. Change management would be crucial.
The candidate should cover at least all the above mentioned points. Points are to be deducted if change
management is neglected
Question 4: The client Ryanair currently offers only 1 fare type which is analogous to the medium budget
fare in the proposed pricing structure. With reference to revenue what is the main risk in implementing the
3 fare scheme?
Suggested Solution:
One of the main risks is to effectively promote and market each of the 3 fare types to attract the right
amount of customers to each far type to optimize the profitability of the whole scheme. As an example,
customers who were purchasing the higher priced medium budget tickets would shift towards the low-cost
budget type. It would be difficult to attract enough premium passengers to outweigh this, which would
result in a lower revenue level compared to before.
Question 5: What would be the most effective way to optimize revenue from the 3 fare scheme?
Suggested Solution:
The first step would be to analyses the spending patterns of the 2 different customer types: budget &
business. Business travelers are more likely to purchase the premium budget fare and leisure travelers
are more likely to purchase the medium and low-cost fare types.
Based on the flying patterns (routes, frequency and time of travel) of each customer type the most
relevant fare types should be made available while the availability of the others should be limited. For
instance: business travelers opt to travel early morning or late night usually between certain destinations.
On such flights the availability of medium and low cost budget fares should be limited.
Question 6: Please calculate the revenue that the client Ryanair can expect to generate per day with the
below pricing/customer information.
Additional Information: (To be shared with interviewee)
1. New Pricing
 Budget Fare Price: €100

 Medium Fare Price: €140
 Premium Fare Price: €180
2. Average Day: 10,000 passengers
3. Flight Patterns:
 40% passengers fly in early morning between 6:00 – 10:00

 27% passengers fly during day 10:00 – 18:00
 33% passengers fly in evening/late night 18:00 – 24:00
During
Early Morning Day Evening/Late Night Sum

Passengers 40% 27% 33% 100%
Business
Travelers 75% 20% 60%
Leisure 25% 80% 40%
4. Passenger segmentation: 50% of passengers of both customer groups (business and leisure) continue
to buy the medium fair ticket. For the sake of simplicity assume that business travelers purchase only
premium and medium fare types. Leisure travelers purchase only medium and budget fare types.
Possible Solution:
Evening/Late
Early Morning During Day Night Sum
Passengers 4000 2700 3300 10000
Business Travelers 3000 540 1980
Leisure 1000 2160 1320
With 50% customers

switching
Business in Medium 1500 270 990
Business in Premium 1500 270 990
Leisure in Budget 500 1080 660
Leisure in Medium 500 1080 660
Daily Revenue (€)
Business in Medium 1500*140=210,000 270*140=37,800 990*140=138,600 386,400
Business in Premium 1500*180=270,000 270*180=48,600 990*180=178,200 496,800
Leisure in Budget 500*100=50,000 1080*100=108,00 660*100=66,000 224,000
Leisure in Medium 500*140=70,000 1080*140=151,200 660*140=92:400 313,600
Total 1,420,800
Insight/Conclusion:
Comparing new revenue €1,420,800 with old revenue €1,400,000 (€140 * 10000), the new 3-ticket fare
scheme makes sense in this case.
GP Investments to Build a New Football Stadium in Brazil
Case Type: finance & economics; private equity & investment; math problem.
Industry Coverage: sports, leisure, recreation.
Case Interview Question #00775: GP Investments is a leading alternative investment firm in Latin
America with a strong presence in asset management, principally private equity funds. Since its
foundation in 1993, GP Investments has raised US$5 billion from investors worldwide and
has completed investments in more than 50 companies in 15 different

industries. The firm invests across a range of industries in Latin America, with bigger focus in Brazil.
The year is 2010. An investment fund owned by GP Investments is assessing a proposal to build a new
football stadium in Brazil. The private equity firm will continue to own and operate the football stadium for
a period of 5 years post construction. After the 5-year period the firm is planning to sell the stadium to a
new owner. Should the private equity firm make this investment? Please prove the profitability of this
project.
Additional Information: (to be provided to interviewee if asked)
1. Investment
4 years are required to plan and build the new football stadium, with an initial investment of $500 M in
year 0 (2010).
2. Stadium
 The new football stadium has a capacity of 50,000.

 Average stadium occupancy: 50% (assume that this holds for all 3 ticket types).
 The local football team plays 50 matches/year, 50% of which are played in the new stadium.
 Depreciation (straight line) = 20 years.
3. Revenues
Revenue generation will start in year 4 (2014).
Revenues come from two parts: ticket sales, and non-ticket revenues which include sales of food and
beverages, merchandise and organization of events.
For the purpose of the case, consider that COGS, SG&A, and revenue from ticket sales increase by 10%
each year. Revenue from sales of advertisements, food and beverages, merchandise and organization of
events increases at 50% each year.
 For the first year with revenues (year 4), assume that non-ticket revenue is $200 M.
 COGS = $120,000 (year 4)
 SG&A = $1,200,000 (year 4)
4. Tickets types and prices:
Ticket Type Seats Price/Seat
Super
premium 5,000 $300
Premium 20,000 $100
Popular 25,000 $50
5. Consider tax rate of 25% and discount rate of 10%.
6. Consider 5 year time horizon for NPV calculations.
Possible Answer:
1. Calculation of ticket sales
Stadium Capacity: 50,000

Occupancy: 50%
Ticket Type Seats Price/Seat Ticket Sales
Super
premium 5,000 $300 $1,500,000
Premium 20,000 $100 $2,000,000
Popular 25,000 $50 $1,250,000
Total 50,000 $4,750,000
Considering Occupancy: $2,375,000

Matches/year: 50
Matches in the stadium/year: 25
Revenues from tickets/year: $2,375,000 * 25 = $59.4M
2. 5-year NPV Calculations
20 20 20
Year 2010 11 12 13 2014 2015 2016 2017 2018
Invest 500
ment M
Ticket
sales 59.4M 65.3M 71.8M 79M 86.9M
Additio
nal
revenu
e 200M 300M 450M 675M 1,012.5M
COGS 120,000 132,000 145.200 159.720 175.692
SG&A 1.2M 1.3M 1.4M 1.6M 1.7M
EBITDA 258.1M 363.9M 520.2M 752.3M 1,097.5M
Depreci
ation 25M 25M 25M 25M 25M
EBIT 233.1M 338.9M 495.2M 727.3M 1,072.5M
Net
Income 174.8M 254.1M 371.4M 545.4M 804.4M
Depreci
ation 25M 25M 25M 25M 25M
Operati -
ng cash 500
flow M 199.8M 279.1M 396.4M 570.4M 829.4M
Annual
Discou
nt Rate 10%
199.8/ 279.1/ 396.4/ 570.4/ 829.4/

(1.1)^4=136. (1.1)^5=173. (1.1)^6=223. (1.1)^7=292. (1.1)^8=386.
PV 5M 4M 8M 7M 9M
$713
NPV .3M
Conclusion:
The PE firm should proceed with the investment due to positive NPV.
What is Annual Revenue for a Turkish Telecom Company?
Case Type: estimation, guesstimate; math problem.
Industry Coverage: telecommunications & network.
Case Interview Question #00771: The City of Ankara, formerly known as Ancyra and Angora, is the
capital of Turkey, located in Central Anatolia. With a population of more than 4 million in the urban center
(as of 2014) and more than 5 million in its province (as of 2015), Ankara is Turkey’s second largest city
behind Istanbul.
For this case, please estimate the annual revenue for Türk Telekom, a Turkish telecommunications
company operating in the city of Ankara (use “4 million” as the city’s total population).
Additional Information: (only provide if asked)

 Türk Telekom’s customers are only corporate clients, i.e. only businesses, as the company
specializes in this sector.
 Türk Telekom’s market share is 30% based on number of corporate customers.
Given this additional information, the candidate should then devise a way to estimate the number of
businesses in the city (assuming all need internet).
Question #1: Calculate the total number of corporate employees.
 City population of 4 Million

 Average of 5 people per household
 Average of 1.3 people eligible to work in a household (ask the candidate to make assumption
before providing)
 Unemployment rate: 10%
 Percentage of corporate employees: 90% of employed population.
Suggested Solution:
 Total labour force: (4 M / 5) * 1.3 = 1.04 M
 Employed population: 90% * 1.04 M = 936 K
 Number of corporate employees = 90% * 936 K = 842 K
Cookies: Considering unemployment rate
Question #2: Calculate the total number of corporate customers

 Percentage of small, medium and large companies in the city: 70%, 25%, 5%
 Average number of employees in small, medium and large companies: 10, 50, 1000
Suggested Solution:
 Total number of corporate organizations: 842 K / (70%*10 + 25%*50 + 5%*1000) = 12115
 Total number of Türk Telekom’s corporate customers = 30% * 12115 = 3634
Question #3: Calculate total annual revenue
Monthly plans for small, medium and large companies: 100€, 600€, 15000€.
Company’s share:
a. Small business segment: 30%

b. Medium business segment: 60%
c. Large business segment: 60%
Suggested Solution:
 Total revenue from small companies: €100 * 12 * 30% * 70% * 12115 = €3,052,980
 Total revenue from medium sized companies: €600 * 12 * 60% * 25% * 12115 = €13,084,200
 Total revenue from large companies: €15000 * 12 * 60% * 5% * 12115 = €65,421,000
 Total revenue: 3,052,980 + 13,084,200 + 65,421,000 = €81,558,180
Conclusion:
Total revenue for a Turkish telecom company operating in a city with a population of 4 million is
approximately €81 billion.
Costa’s Cafe to Hire Extra Baristas Based on Demand

Case Type: improve profitability; math problem.
Consulting Firm: McKinsey & Company final round full time job interview.
Industry Coverage: restaurant & food service; small business.
Case Interview Question #00764: Costa’s Cafe is a small local coffee shop in the town of Hanover (with
a population of 11,260 as of the 2010 census), New Hampshire. Costa’s Cafe serves only coffee and
latte. This small coffee shop has been around for decades and is known for its high quality drinks and
cozy atmosphere.
Historically, Costa’s Cafe has been very popular among the local people in Hanover and has enjoyed very
healthy profitability. Recently, however, the cafe has seen declining profits over the last few quarters. The
owner of Costa’s Cafe has hired you to help increase its profits. What would you do?
Additional Information: (to provided upon request)

Note that this is a typical McKinsey style interviewer led case with lots of tables and heavy math.
There are two other coffee shops in the nearby area that sell coffees and pastries. (There is no further
information on these competitors.)
Costa’s Cafe currently serves only two items (coffee and latte) in three different cup sizes:
 Small: 8 oz
 Medium: 12 oz
 Large: 16 oz
Possible Answer:
If the candidate touches on prices or costs, ask him/her:
Question #1. How much profit does Costa’s Cafe currently make per customer? Show the two tables
below. Assume that each customer only purchases one drink per visit.
Table 1. Products and Price
Product Price % Customers who purchase
Coffee (8) $1.00 15%
Coffee (12) $1.50 15%
Coffee (16) $2.00 15%
Latte (8) $3.00 20%
Latte (12) $4.00 20%
Latte (16) $5.00 15%
Table 2. Products and Cost

Product Cost
Cup (8) $0.30
Cup (12) $0.40
Cup (16) $0.50
4 oz of Coffee $0.10
4 oz of Latte $0.50
Possible Solution:
Table 3. Calculation of average profit per customer
% Customers who Profit per
Product Price purchase Cost Profit customer
0.30 + 0.20 = 1.00 – 0.50 = 0.50 * 15% =

Coffee (8) $1.00 15% $0.50 $0.50 $0.08
Coffee 0.40 + 0.30 = 1.50 – 0.70 = 0.80 * 15% =

(12) $1.50 15% $0.70 $0.80 $0.12
Coffee 0.50 + 0.40 = 2.00 – 0.90 = 1.10 * 15% =

(16) $2.00 15% $0.90 $1.10 $0.17
0.30 + 1.00 = 3.00 – 1.30 = 1.70 * 20% =

Latte (8) $3.00 20% $1.30 $1.70 $0.34
0.40 + 1.50 = 4.00 – 1.90 = 2.10 * 20% =

Latte (12) $4.00 20% $1.90 $2.10 $0.42
0.50 + 2.00 = 5.00 – 2.50 = 2.50 * 15% =

Latte (16) $5.00 15% $2.50 $2.50 $0.38
Average Profit = 0.08 + 0.12 + 0.17 + 0.34 + 0.42 + 0.38 = $1.50 per customer
Strong candidates will point out that larger sizes yield larger profit margins, and suggest new profit
increasing strategies like promoting sales of larger sizes, introducing a 20 oz size, eliminating 8 oz size,
etc.
Question #2. What is the average profit that Costa’s Cafe earns per day?
Additional Information:
 Each customer purchases exactly one beverage.
 Two baristas are working at any given time. Baristas are paid $15/hour.
 Business hours: 7AM to 10PM, Monday through Friday. Closed on weekends.
 The number of customers per hour is listed below (Table 4). Customers leave if they can’t be
served quickly.
 On average, it takes 2 minutes for a barista to complete an order. Coffee is served fairly quickly,
while lattes take significantly longer to make. (The candidate should realize that only 60 customers
can be served per hour by the 2 baristas.)
Table 4. Average Number of Customers per Hour
Time Average Demand per Hour
7AM to
10AM 100
10AM to 1PM 80
1PM to 4PM 60
4PM to 7PM 40
7PM to 10PM 15
Possible Solution:
Assuming 2 baristas per hour, average profit is $607.50 per day (See below Table 5).
The candidate should realize that Costa’s Cafe is losing money in the evening hours (7PM – 10PM). A
strong candidate should suggest adding or subtracting baristas based on demand.
Question #3. If you could change the number of baristas during each time period, what would be the
daily profit for Costa’s Cafe?
Possible Solution:
By adding a third barista in the morning shifts and reducing one at night, the new profit would be $787.50
per day – see below Table 5.
Table 5. Profit Calculations

Demand per Serve Current Optimal Optimal Optimal
Time Hour d Profit Baristas Served Profit
7AM to
10AM 100 60 180 3 90 270
10AM to
1PM 80 60 180 3 80 225
1PM to 4PM 60 60 180 2 60 180
4PM to 7PM 40 40 90 1 or 2 30 or 40 90
7PM to
10PM 15 15 -22.5 1 15 22.5
Total Profits $607.50 $787.50
Question #4. Costa’s Cafe currently does not offer wireless access for its customers. Should the cafe
add this new service?
Possible Answer:
Positives
 More customers
 Potentially charge customers for wireless service
 Customers may order larger sizes of drinks to stay longer in the cafe
Negatives
 Costs of wireless setup, outlets

 Sufficient room for customers
 Customers stay longer, slowing sales during busy periods
 Image of the cafe – may change current atmosphere
Question #5. (If candidate mentions that competitors sell pastries while Costa’s Cafe does not…) What
factors should Costa’s Cafe consider before purchasing an oven to sell pastries?
Possible Answwer:
Revenues
 Doughnut sales, increased synergies with coffee/volume of customers.

Costs
 Fixed costs – purchasing/maintaining oven, setting up display case, storage, advertising.

 Variable costs – ingredients, hiring/training staff.
Capacity
 Room in cafe for oven and ingredients.

 Baristas available to accommodate for increase in demand.
Brand image – Costa’s Cafe is known for its coffee and atmosphere; adding pastries may change brand
image and drive away loyal customers, especially if they are low quality.
Competition – price and quality compared to competitors.
Alternative opportunities – purchasing doughnuts from somewhere else.
Question #6. A new espresso machine, priced at $2000, can greatly decrease the time it takes to make a
latte. The average time it takes to complete an average customer’s order decreases from 2 minutes to 90
seconds. How long would it take to pay back the $2000 espresso machine?
Possible Answer:
90 seconds per order would mean two baristas can now serve (60 min / 1.5 min) * 2 = 80 orders per hour.
Daily profit shown below in Table 6, calculated with the optimal number of baristas.
$2000 / ($922.50 – $787.50) = 14.8 days ~= 15 days
The new espresso machine would be paid back in 15 days .

4 Baristas in the 7-10AM would also yield similar profits with the advantage of turning away fewer
customers.
Table 6. Profit Calculations with the new espresso machine

Demand per Serve Current Optimal Optimal Optimal
Time Hour d Profit Baristas Served Profit
7AM to
10AM 100 90 270 3 100 315
10AM to
1PM 80 80 225 2 80 270
1PM to 4PM 60 60 180 2 60 180
4PM to 7PM 40 40 90 1 40 135
7PM to
10PM 15 15 22.5 1 15 22.5
Total Profits $787.50 $922.50
South Beauty Restaurant Converts Open Seating into Small Rooms

Consulting Firm: McKinsey & Company final round full time job interview.
Industry Coverage: restaurant & food service.
Case Interview Question #00763: Our client South Beauty 881 is an upscale Chinese restaurant located
in the city of Shanghai. The restaurant mostly serves government officials and high-level business
customers. Its monthly revenue is RMB 1.2 Million Yuan, but profit is not very high. The manager of
South Beauty 881 recently hired McKinsey & Company to help them increase
profits. How would you go about this case? What recommendation would you give to the client?
Additional Information: (to be provided upon request)
As China’s economy is booming, the upscale dining market is growing at 20% every year.
Customers for high end dining are generally price insensitive.

All competitors are earning money. Competitors’ price and value proposition are similar.
Variable costs across industry is 50% of revenue. Assume there are no fixed costs.
On weekdays, there is always a line of customers waiting for individual rooms at dinner time. As a result,
the South Beauty 881 restaurant has to turn away half of its weekdays dinner customers due to capacity
constraint.
The client South Beauty 881 has two kinds of seating in their dining area: 10 small private rooms with 2
tables per room, one big room with 20 tables.
a. Individual Room: 20 tables
Week Day Weekend
Occupancy: 80%; Price per person: 150; Party Occupancy: 30%; Price per person: 100; Party
Lunch size per table: 4 size per table: 4
Dinne Occupancy: 100%; Price per person: 300; Party Occupancy: 50%; Price per person: 200; Party
r size per table: 6 size per table: 6
b. Big Room: 20 tables
Week Day Weekend
Occupancy: 20%; Price per person: 100; Party Occupancy: 30%; Price per person: 100; Party
Lunch size per table: 4 size per table: 4
Dinne Occupancy: 30%; Price per person: 200; Party Occupancy: 30%; Price per person: 200; Party
r size per table: 4 size per table: 4
Question #1: What do you think are the possible reasons for the client’s low profits?
Possible Answer:
The main reason for the client’s low profits: Government officials and high end business customers prefer
individual rooms to big room seating because of their requirement for privacy. Currently our client is not
meeting customer demand.
Question #2: What are potential solutions for this situation?

Possible Answer:
 Raising price.
 Turning big room tables into individual private rooms.
Question #3: Through market research, we have determined that if we raise weekday individual private
room price by 33%, we will lose 10% of customers. How will it change our profitability?
Possible Answer:
For weekday lunch, raising the price will result in 10% customer loss.
Previous Now
Customer 4 x 20 x 80% = 64 64 x (1 – 10%) = 58
Price 150 150 x (1 + 33%) = 200
Revenue 64 x 150 = 9,600 58 x 200 = 11,600
Profit 9,600 x 50% = 4,800 11,600 x 50% = 5,800
Incremental Profit 5,800 – 4,800 = 1,000
For weekday dinner, the underlying demand is 200% of current capacity, so raising price won’t reduce
volume.
Previous Now
Customer 6 x 20 = 120 120
Price 300 300 x (1 + 33%) = 400
Revenue 120 x 300 = 36,000 120 x 400 = 48,000
36,000 x 50% =
Profit 18,000 48,000 x 50% = 24,000
Incremental Profit 24,000 – 18,000 = 6,000
Total Daily Incremental Profit: 1,000 + 6,000 = 7,000 Yuan
Question #4: A second solution is converting half of the big room into 5 individual rooms. It will take 2
weeks for the restaurant to finish the decoration, during which time the restaurant has to be completely
shut down. The decoration will cost RMB 100K Yuan. What is the total cost of this project?
Possible Answer:
Costs
 Capital investment: 100K

 Opportunity Cost: ~300K** (2 weeks of profits = 1.2Million/4 weeks * 2 weeks * 50%)
** Note: The observant candidate will quickly calculate this from the initial revenue info given at beginning
of case rather than making heavy calculations involved with calculating it from the table of data.
Total Costs = 100K + 300K = 400K Yuan

Tesla Motors to Introduce the New Tesla Model S
Case Type: new product; industry analysis; math problem.
Consulting Firm: McKinsey & Company first round full time job interview.
Industry Coverage: automotive, motor vehicles.
Case Interview Question #00759: Our client Tesla Motors, Inc. (NASDAQ: TSLA) is an American
company that designs, manufactures, and sells electric cars and electric vehicle (EV) powertrain
components. Headquartered in Palo Alto, California, Tesla Motors was incorporated in July 2003. Tesla’s
primary goal was to commercialize electric vehicles, starting with a premium

sports car aimed at early adopters and then moving as rapidly as possible into more mainstream vehicles,
including sedans and affordable compacts.
The year is 2008. Mr. Elon Musk, Chairman and CEO of Tesla Motors, wants to know how to position a
new car model, the Tesla Model S in the market. The CEO has retained your consulting firm to advise
him.
1. Ask the candidate whether the EV industry is attractive for our client.
2. The CEO asked you to help him develop strategies to identify the right segment they can sell the new
vehicles to.
3. Secondary goal (if asked): Profitability.
1. Company
The client Tesla Motors is a startup, started in 2003 by Martin Eberhard and Marc Tarpenning, that has
developed a new patented battery technology that is validated and tested for viability in cars.
The client Tesla Motors has currently one product in the market (Tesla Roadster) and they are planning to
release their second vehicle (Tesla Model S) in the next 24 months.
When candidate asks about the current car model Tesla Roadster, provide the following information about
their current product.
2. Current Car Model
Purchase Price Segment
Tesla
Roadster $110,000 Premium Sports
The Tesla Roadster has the following ratings across its features (on a scale of 1-10)
Stylin
Purchase Price g Performance Quality Safety Features Green Rating
Tesla
Roadster $110,000 9 10 6 6 6 10
For segment worth and Competitor’s market share, refer to Exhibit B below.
Possible Answer:
1. Industry Attractiveness
The candidate should come up with the below structure for analyzing the industry attractiveness. Using
Porter’s 5 forces, it’s clear that the industry is attractive for incumbents.
 Buyer’s power: High

 Suppliers power: High in EV segment as the technology is new.
 Competition: Very High (entire auto industry)
 Substitutes: Very High (other modes of transportation)
 Barriers to Enter: Med-High. This means that it is hard for new entrants to enter.
2. Financial Status and Cost Structure
As a startup, the client Tesla Motors has yet to make a profit. Their first product Tesla Roadster sold 2000
units across 30 countries in the world.
The client Tesla Motors has funding from U.S. government, private equity firms and recently they went
public and raised money.
Depending on the target segment’s needs, the average production cost for different vehicles is given
below in Exhibit B (all costs inclusive in USD)
At this point, provide Exhibits A and B to the interviewee

Exhibit A: Electric Vehicle Utility By Feature
Exhibit B: EV Segments and Share of Competitors

Segment Competitor Average Units Average Cost to
Segment Worth Share Sold Produce
Sports Segment $1 billion 80% 8,000 $90,000
Premium Sedan
Segment $1.2 billion 75% 18,000 $43,000
Sedan Segment $1.8 billion 82% 36,900 $38,000
Coupe/Other $1 billion 95% 32,000 $33,000
Calculations:
A. Average Price per Unit and Profitability per Unit (Ask the Interviewee to calculate):
Segment Competitors Units Cost to

Segment Size Share Sold Average Price Produce Profit/unit
0.8 * $1B = $800M/8,000 =

Sports $1B $800M 8,000 $100,000 $90,000 $10,000
Premium 0.75 * $1.2B = $900M/18,000 =

Sedan $1.2B $900M 18,000 $50,000 $43,000 $7,000
Sedan $1.8B 0.82 * $1.8B = 36,900 $1,476M/36,900 = $38,000 $2,000

$1,476M $40,000
0.95 * $1B = $950M/32,000 =

Coupe/Other $1B $950M 32,000 $30,000 $33,000 -$3,000
B. Potential market size and profitability calculations (this also requires information from the exhibits):
Segment Addressable Share In units Segment Profitability
Sports 20% 8,000 * (0.2/0.8) = 2,000 $10,000 * 2,000 = $20M
Premium Sedan 25% 18,000 * (0.25/0.75) = 6,000 $7,000 * 6,000 = $42M
Sedan 18% 36,900 * (0.18/0.82) = 8,100 $2,000 * 8,100 = $16.2M
$32,000 * (0.05/0.95) =
Coupe/Other 5% 16,842 -$3,000 * 16,842 = -$50M
Now, ask the candidate which segment to target.
Possible Answer:
The candidate should identify that per unit profitability is high for vehicle in premium sedan segment
($7,000). So this might be the profitable segment to go after. Also, because electric vehicle technology is
still new, customers in premium sedan segment might be willing to pay a premium for the eco-friendly
factor, whereas customers in other segments may not put much emphasis on this aspect as they are
more price sensitive.
3. Conclusion
A. Recommendation
 After doing the analysis, the client Tesla Motors should enter premium sedan segment for the
following reasons:
 Competition is low as addressable market size is 25%
 Segment profitability is high with $7,000 per unit profitability
 Customers in premium sedan segment are more likely to pay a premium for the eco-friendly
feature of our client model.
B. Risks
 Getting the product right to suit the customer needs is necessary as the client Tesla Motors is
already under financial pressure.
 The client may not be able to service all the vehicles in the premium sedan segment as the
segment is large. Relationships need to be established with service providers.
 As the client Tesla Motors is still new in the market, establishing brand value is necessary,
especially in the premium sedan segment where brands like BMW, Mercedes, Lexus compete.
Local Ann Arbor Supermarket to Add a Pharmacy in Store
Case Type: new business; math problem.
Consulting Firm: Oliver Wyman first round full time job interview.
Industry Coverage: small business; retail.
Case Interview Question #00758: After graduating from business school, you work as a consultant at
Oliver Wyman. You have a friend who owns a single supermarket (mom & pop store) in the town of Ann
Arbor, Michigan. This friend has called you for some free advice because you are an MBA and consultant.
He says that he has noticed his supermarket competitors have recently added
pharmacies to their stores and he is wondering whether or not he should do that himself.
Your friend has some data sources and can provide you with whatever you need, but first he needs to
know what data you need to help him make this decision. So, what kind of data would you tell your friend
to gather? Should your friend add a pharmacy to his supermarket? Why, or why not?
Additional Information: (provided upon request)
1. Investment Criteria
Because this is a small operation, your friend needs a payback of < 2 years (no discounting necessary).
2. Customers
 He has 10,000 unique customers every month.

 On average, 50% of the local population have prescriptions.
 People who have prescriptions average 1 filling per month.
3. Competitors
There are 2 Pharmacies and 2 Grocery Stores within 4 miles of his store.
4. Revenues
 Each grocery customer spends an average $100/month at his store (assume 1 visit/month).
 Each prescription sale brings in revenue of $50.
 Each prescription customer tends to spend 40% more on groceries at the store.
5. Costs
 Initial investment for adding a pharmacy: $1.2m.

 For an added pharmacy, assume the costs of running a pharmacy are equal to 90% of revenue.
 Current grocery operations cost structure:
 50% Food / COGS
 10% Labor
 10% Fixed Overhead
Possible Answer:
1. Suggested Framework
This is a typical “adding a new business line” kind of case. The interview is meant to be conversational
with the giver of the case to ask enough probing questions to keep the candidate on their toes and
thinking through the problem.
Additional questions that help to steer discussion. Note: not all questions need to be asked if the
candidate is leading the conversation.
 What is the population of the town/addressable market?

 What is the minimum market share needed to break even in 2 years? Is this reasonable?
 What are the two major costs of operation that the grocer will incur when opening a pharmacy?
 What margin do you asses for incremental grocery sales? (Only if the individual asks about
revenue synergies)
2. Quantitative Analysis
A. Current market size estimate:
Because there are three Grocery Stores in the local market, estimate that the current market share of
your friend’s grocery business at 30%.
10,000 / 0.30 = Total unique customers each month = 33,000
33,000 grocery customers * 3 people per household = Total Population = 100,000
Pharmacy market is then 100,000 * 50% = 50,000 customers
Odds of each household containing at least 1 pharmacy customer = 1 – 0.5^3 = 87.5%
Thus, of your friend’s 10k grocery customers, 8,750 have prescription needs
B. Incremental value of a pharmacy customer per year:
Profit from grocery sales = $100 * 40% incremental sales * 30% profilt margin (1-50%-10%-10%) = $12
Profit from drug sales = $50 * 10% profilt margin (1-90%) = $5
($12 + $5)/month * 12 months = $204 per year
C. To break even in 2 years:
1.2m / ($204 * 2) = ~3,000 pharmacy customers

Your friend only needs 3,000/8,750 = ~35% of the households who have prescriptions and currently shop
at your friend’s store to break even in two year.
3. Conclusion
A. Recommendation
 Your friend should invest / expand to include a pharmacy because there is an extremely high
likelihood that he will break even in less than two years.
 Value of a pharmacy customer is very high because of margin on drug sales and increased
grocery sales in the store.
 Only need 35% of his current grocery customers who have prescriptions to switch to his
pharmacy to make it profitable.
B. Next Steps
Some suggestions:
 Make good design plans for the pharmacy

 Get a bank loan
 Interview pharmacists
 Market the new service to customers
 Contact drug reps / determine suppliers
 Contact drug-store competitors to see if they want to do a joint venture or partnership because
you will probably put them out of business.
Murphy Oil to Buy Gas Station in Seattle Port
Case Type: market entry; math problem.
Consulting Firm: Oliver Wyman first round full time job interview.
Industry Coverage: Oil, Gas & Petroleum Industry.
Case Interview Question #00757: Your client Murphy Oil Corporation (NYSE: MUR) is a large petroleum
refining company that owns service stations. Murphy Oil produces oil and natural gas in the United
States, Canada, Malaysia, the United Kingdom and Republic of the Congo and conducts exploration
activities worldwide. The Company operates a growing retail marketing gasoline

station chain, Murphy USA in the parking lots of Walmart Supercenters and at stand-alone locations in the
United States.
Murphy Oil Corporation is headquartered in El Dorado, Arkansas, and has over 8,600 employees
worldwide. Recently, Murphy Oil is looking to expand its retail operation. The CEO of Murphy Oil has
decided to enter the Northwest region and is looking to run a gas station in one of the main ports in
Seattle, Washington. The CEO has hired you to determine how to proceed. What would you tell him?
1. Market
 The Seattle port is operating 24 hours per day.
 Port area is slowly growing because of consolidation occurring along Northwest ports.
 There is no concrete information on full demand, but estimates place demand between 15,000-
20,000 gallons of gasoline per day for the port.
2. Competition
 There are three existing gas stations in the vicinity. These stations are of equal size and
capabilities.
 All three gas stations are similar in location, operations, demand, etc.
 All three stations are currently operating at full capacity.
 Two of these three stations are owned by major corporations like Murphy Oil, and the third one is
family owned.
3. Investment
 Murphy Oil requires a 5-year payback on initial investment.

 Disregard cost of capital.
Possible Answer:
A. Building a new gas station
Revenue
 Gas
 Minimart sales – the three existing stations in area do not have minimarts
Costs
 Initial investment
 Fixed costs: property, plant and equipment (PPE), maintenance, labor, utilities, marketing
 Variable costs: gas, minimart items
B. Buying existing station – (do not mention this option to the candidate upfront)
Can only buy the privately owned gas station; the other two are not for sale.
A. How much would a new gas station make per year? (provide additional info on request)
 New gas station costs $650,000 in initial costs, and includes a minimart.
 New gas station can sell 5,000 gallons per day.
 Gas sells for $3.00 per gallon.
 Gas station makes margin of 10 cents per gallon.
 Assume 300 business days in a year.
 Costs $250 to run the gas station (utilities, labor, etc.) per day.
Calculation – Gasoline only:
Calculation: $0.10 per gallon x 5000 gallons – $250 costs = $250 / day in profit.
$250 x 300 = $75,000 profit per year on gas alone.
Calculation – Including the minimart:
 Operating the minimart costs an additional $100 / day.

 Daily sales: $500
 Daily cost of merchandize for the gas station: $200
Calculation: $500 – $200 – $100 = $200 / day in profit for minimart.
Total profit : $(250 + 200) / day x 300 days / year = $135,000 per year.
In five years: $135,000 x 5 = $675,000 -> Enough for payback (by $25,000)
B. Purchasing the existing station
The owner of the family owned gas station is looking to sell his station and wants $530,000, but the
station has no minimart. Building a minimart would cost an additional $130,000.
The gas station has the same capabilities as previously calculated (5000 gallons per day).
Guidance for interviewer and additional information provided upon request
If the interviewee chooses to calculate breakeven with no minimart: $75,000 profit/year (see earlier) * 5 =
$375,000, not enough to cover the $530,000 investment.
With the minimart, the station would earn $675,000 (see earlier) with a $530,000 + $130,000 = $660,000
initial investment, thus earning a $15,000 profit over 5 years.
Based on numbers alone, the interviewee should conclude that building a new gas station is a better
strategy. But purchasing the existing gas station may be the better decision (see below “Other factors to
consider”).
3. Other factors to consider
Demand – although demand exceeds supply now, there may not be enough demand to support four
stations. Therefore, buying a station is considerably safer in this instance.
Timing – it would take longer to build a new gas station, thus favoring buying.
Competition – another company could buy the existing station, thus favoring buying now. Buying would
also deter new entrants as there isn’t necessarily enough demand to support four stations.
Expansion – could add more pumps to the existing station to support demand.
Marketing – could sell more variety of products at the minimart. Adding a minimart could also drive traffic
towards Murphy Oil’s station and away from competitors, although this would only be useful if Murphy Oil
can expand.
Next steps – closer analysis of demand to confirm that buying is a better idea than building a new station.
Chicago Booth to Increase On-campus Internship Offers

Case Type: operations strategy, value chain; math problem.
Consulting Firm: IBM Global Business Services (GBS) first round summer internship job interview.
Industry Coverage: Education & Training Services.
Case Interview Question #00755: The Booth School of Business is a graduate business school located
in Chicago, Illinois, at the University of Chicago. Formerly known as the University of Chicago Graduate
School of Business, Booth is the second-oldest business school in the U.S., the first such school to offer
an Executive MBA program, and the first to initiate a Ph.D. program in business.
The school was renamed in 2008 following a $300 million endowment gift to the school by alumnus David
G. Booth. US News, in the 2013 Best Business Schools ranking, ranked Chicago Booth 4th in the U.S.
The Booth School of Business is looking to promote its MBA program’s reputation and ranking position,
by improving its on-campus summer internship employment stats. Currently, only 60% of Booth’s first
year full-time MBA students secure an internship through on-campus recruiting. The Dean of Chicago
Booth has hired our consulting firm to provide insight and recommendations on how to improve the on-
campus offers. What would you recommend him to do?
Assume that Booth School of Business has 500 full-time MBA students in each class.
Push the interviewee to understand the “value chain” of on-campus recruiting (see below)
Wait for the interviewee to ask clarifying questions about specific objectives of this case:
 Primary objective: increase on-campus internship offers to 75%.

 Secondary objective: the school administration is very cost sensitive and is only willing to spend
up to $500K on this project.
Possible Answer:
1. Value Chain Analysis
First, ask the interviewee to brainstorm the value chain for Booth to assist its first-year MBA students to
get internship offers.
Data for current on-campus recruiting:
 # of companies that recruit on-campus = 100

 average # of positions offered per company = 2
 # of interview slots per position = 15
 Interview success rate = 10%
(assumption = each MBA student receives only one offer)
Then, ask the interviewee to brainstorm on possible ways to increase the number of total offers made
(he/she should go over the “value chain”)
The Booth school is looking into two possible strategies:
 Increase the number of companies that recruit on campus

 Improve the interview success rate
a. Increase the number of companies
To attract more companies to recruit on-campus, Booth’s Office of Career Services (OCS) needs to hire
additional firm relations managers.
Each manager can handle 5 companies and requires an annual salary of $75K. Additional costs
(including travel, marketing expenses, etc.) per relations manager are estimated at $50K.
Target # of offers = 500 * 75% = 375

Current # of offers = 500 * 60% = 300
(375 – 300) / 300 = 25%
Thus, Booth needs to increase the number of companies recruiting on-campus by 25% * 100 = 25
# of additional OCS firm relations managers needed = 25/5 = 5
Annual cost of firm relations managers = 5 * ($75K + $50K) = $625K
b. Increase the interview success rate
The interviewer should have the interviewee brainstorm on possible ways to increase interview success
rate.
According to a recent survey, the most important factor in interview success rate is the number of mock
interviews. For every 0.5% increase in interview success rate, Booth will need to hire 15 second-year
MBA students as part-time mock interview counselors.
Each second-year MBAs works 40 hours per month, with an hourly wage of 20$.
Recruiting season lasts for 5 months.
Also, every 2% increase in interview success rate attracts 5 new companies that recruit on campus.
Thus, adding 2% in interview success rate:

(100 + 5) companies * 2 offers per company * 15 interview slots per offer * (10% + 2%) success rate =
378 offers
Annual cost of second-year MBAs = 2%/0.5% * 15 MBAs * 40 hours per month * 5 months * 20$/hour =
$240K
Note: A good candidate will make sure that we have sufficient second-year MBA “Capacity”.
3. Conclusion
a. Recommendation
Recommend that Booth hires 60 additional second-year MBA students as part-time mock interview
counselors. This will increase the total number of internship offers from 300 to 378 (meeting the goal of
increasing on campus offers to 75%).
b. Possible Risks (mitigation / next steps)
 Difficulty recruiting so many second-year MBA students (can even increase hourly wage up to
$40 without exceeding target budget of $500K)
 Economic downturn may cause companies to reduce the number of internship positions / slots.
 Limited # of study rooms at Booth to accommodate such an increase in the # of mock interviews
(reach out to graduate school, law school, medical school, etc to get access to their rooms).
 With so many second-year MBAs spending so much time on mock interview counseling, their
grades may be negatively impacted, affecting the total Booth brand image (employ grade non
disclosure policy).
FedEx Ground to Switch Diesel Engine Fleet to Electric Vehicles
Case Type: reduce costs; math problem.
Consulting Firm: A.T. Kearney first round full time job interview.
Industry Coverage: transportation; freight delivery, shipping services.
Case Interview Question #00753: FedEx Corporation (NYSE: FDX) is an American global courier
delivery services company headquartered in Memphis, Tennessee. For this case, our client is FedEx
Ground, a subsidiary company of the FedEx Corporation that focuses on ground transportation of
commercial freight. Headquartered in Moon Township, Pennsylvania, a suburb
of Pittsburgh, FedEx Ground provides 1-5 day delivery of small packages to all 50 states, plus Canada.
For the past 15 years, the client FedEx Ground has been using diesel engines to power its fleet of
vehicles, but now wants to explore the possibility of switching to electric powered engines (EV
technology) due to rising fuel costs. The CEO of FedEx Ground has approached us for guidance and
wants to know how to proceed. What would you tell him?
 Our client FedEx Ground has identified a supplier to provide the electric vehicle (EV) technology
since it does not have in-house capabilities.
 Since it has an extensive fleet of vehicles, our client FedEx Ground wants to retrofit existing
vehicles instead of buying new ones.
 No other ground transportation company has used EV powered engines. If our client proceeds
with the conversion, it will be the first in the industry to do so.
 The candidate should ask questions about the current costs of transportation and determine
potential cost savings.
Possible Answer:
1. Overall Guidance
The candidate should explain his/her overall framework, then identify that the current and future costs of
ground transportation will determine feasibility of project.
The candidate should then ask questions to determine the initial investment required for EV retrofitting
and consider this cost along with the cost savings of the entire project.
Candidate can assume that the current supplier offers the best EV opportunity in terms of price and
efficiency.
EV technology has the potential to double existing fuel efficiency.
a. Revenue
Explore impact on revenue (e.g. improved business relationships due to sustainable operations or
reduced carbon footprint in supply chain for partners).
b. Costs
Labor, insurance, fuel, maintenance, retrofit initial investment.
c. Competition/Industry
New technology may create competitive advantage for the client, thereby growing its business.
Failure to properly implement fleet could disable operations, allowing competitors to take over.
d. Existing Capability
The client FedEx Ground has no knowledge of using EV technology, requiring a learning curve.
First to test the new technology may also pose a risk.
3. Analysis
A. Breakdown of Current Costs and Future Costs
Provide the following cost data (Table 1) as the right questions are asked but do not give them away
freely. Of the costs listed below, ask the candidate which would change and why.
Current
Costs Future Costs
# of vehicles: 2000 2000
Fuel tank size: 50 gallons 50 gallons
Average MPG (miles per gallon): 10 20
Cost of fuel per gallon: $3.00 $3.00
Average miles travelled per week: 1000 1000
Average annual maintenance and repair: $500 $3500
Insurance: $1K/year 3K/year
Labor: $20K/year $20K/year
B. Calculations of Fuel Savings

b.I. Current fuel costs
 Miles driven per tank = 10 mpg * 50 gallons = 500 miles

 Miles traveled per week = 1000 miles
 # of times tank is filled per week = 1000 miles / 500 miles = 2
 Total cost of fuel per week = 2 * 50 gallons * $3.00 per gallon = $300
 Average yearly fuel costs (~50 weeks) = $300/week * 50 weeks = $15K
b.II. Future fuel costs. The candidate can perform calculations again, or receives a bonus for realizing that
doubling fuel efficiency (from 10 mpg to 20 mpg) reduces fuel costs by half for the year.
 Miles driven per tank = 20 mpg * 50 gallons = 1000 miles

 Miles traveled per week = 1000 miles
 # of times tank is filled per week = 1000 miles / 1000 miles = 1
 Total cost of fuel per week = 50 gallons * $3.00 per gallon = $150
 Average yearly fuel costs (~50 weeks) = $150/week * 50 weeks = $7.5K
b.III. Annual fuel savings per vehicle: $15K – $7.5K = $7.5K
C. Breakdown of Total current costs and Total future costs
Total current costs Total future costs
Fuel: $15K $7.5K
Annual
maintenance: $500 $3500
Labor: $20K / year $20K / year
Insurance: $1K / year $3K / year
Total: $36.5K $34K
 Switching to EV thus saves $36.5 – $34 = $2.5K per year.

 The current vehicles have a remaining useful life of 10 years.
 Thus, switching to EV saves: $2.5K * 10 – $5K (retrofit cost) = $20K over the lifetime of each
vehicle (10 years).
 At a fleet level, this would save the company $20K * 2000 vehicles = $40M over the lifetime of the
vehicles.
 The candidate can ignore time value of money/discounting, but should receive bonus points for
considering it.
4. Conclusion
a. Recommendation
Given the existing data, our client FedEx Ground should proceed with retrofitting its vehicle fleet to EV
since it would save 40M over their remaining useful life.
b. Risks
 Our client FedEx Ground would be the first in the industry to use EV technology, therefore its
effectiveness in commercial transportation is untested.
 The vehicles need to commute 1000 miles per week and current EV technology is limited to short
range use.
 There are limited recharging stations in the US.
 There may be other unanticipated costs to using the new technology.
c. Next Steps
 Work with suppliers to test the effectiveness of the new technology.

 Run a pilot test to determine whether EV technology works and does not negatively impact
normal transportation operations.
 Gain input from drivers on efficacy of EV technology.
 Perform research to determine whether there are government incentives for EV adoption.
 Perform research to determine whether EV adoption grows customer base/revenue.
Toys “R” Us to Increase Shipping & Handling Profits by 115%
Consulting Firm: McKinsey & Company first round full time job interview.
Industry Coverage: retail.
Case Interview Question #00732: Your client Toys “R” Us, Inc. is a global specialty retailer of children’s
toys and baby products headquartered in Wayne, New Jersey, United States. The company operates
more than 872 Toys “R” Us and Babies “R” Us stores in the United States, more than 715 international
stores and over 180 licensed stores in 35 countries and jurisdictions. It also
operates a portfolio of e-commerce sites including Toysrus.com, Babiesrus.com, eToys.com, and
FAO.com.
On July 21, 2005, a consortium of Bain Capital Partners LLC, Kohlberg Kravis Roberts (KKR) and
Vornado Realty Trust invested $1.3 billion to complete a $6.6 billion leveraged buyout of the Toys “R” Us
company. After the recent buyout by private equity, the client Toys “R” Us has been pursuing aggressive
growth targets across all three of its divisions. The e-commerce division has about $400 million in total
revenue and a major area of growth has been identified within Shipping & Handling (S&H) of customer
orders.
Your client offers its customer’s two Shipping & Handling options: “2nd Day Expedited” or “Ground”, and
each of those are further divided into “Lower 48 States” or “Alaska & Hawaii” depending on the order
destination zip code. Annual S&H revenue from each product offering is as follows:
 Ground to Lower 48: $32 million

 Ground to AK & HI: $180,000
 Expedited to Lower 48: $3.73 million
 Expedited to AK & HI: $90,000
The e-commerce division of Toys “R” Us hopes to increase Shipping & Handling (S&H) profits by ~115%.
You are part of a consulting team studying their S&H economics and are asked to make a
recommendation to impact immediate growth and meet their goals. What would you recommend?
Additional Information: (Provide the following information if requested by interviewee.)

Total revenue of e-commerce division during previous year = $400 Million. Divided as follows:
 S&H Revenue = 9% ($36 MM)

 Merchandize Sales Revenue = 91% ($364 MM)
Your client ships customer orders from a single distribution center in Groveport, Ohio.
Your client ships products in 8 different box sizes.
Total Annual S&H revenue from each product offering
 Ground to Lower 48: $32 million

 Ground to AK & HI: $180,000
 Expedited to Lower 48: $3.73 million
 Expedited to AK & HI: $90,000
Your client is currently priced on par with competitors.
Possible Answer:
I. Areas of Discussion
A. First, explore the revenue and pricing structure:
1. Select SKU’s (items) in inventory have fixed S&H prices for each of the four delivery options regardless
of delivery destination.
2. 21% of all orders include SKU’s using these fixed prices.
3. The majority of inventory is priced according to the weight of the order against a “weight table”. Weight
table pricing is as such:
 Ground shipments to the Lower 48 states begin at $4.84 for the first 1 lb and increases at $0.85
for each additional pound.
 Ground shipments to AK & HI begin at $6.84 for the first 1 lb and increases at $0.85 for each
additional pound.
 2nd Day shipments to the Lower 48 states begin at $10.98 for the first 1 lb and increases at $0.99
for each additional pound.
 2nd Day shipments to AK & HI begin at $20.98 for the first 1 lb and increases at $0.99 for each
additional pound.
 This weight table is a blended price that aggregates the zone-based cost table that the carrier
charges and adds a 25% markup.
4. 73% of all orders are priced against the weight table. Another 6% of orders include a mix of items with
fixed price S&H and weight table pricing.
B. Then, guide the interviewee to explore items with Fixed Pricing:
Further analysis into the SKU’s that have fixed shipping prices shows that 44 items represent 10% of
merchandize revenue of all fixed price items and represent 59% of the losses in that segment.
C. Explore the cost structure:
Your client uses a single package delivery vendor to ship all orders. The vendor charges your client for
each order based on the following factors:
 Distance. The lower 48 states are categorized into 8 zone distances, with 1 being the closest and
8 the furthest. Alaska & Hawaii are divided into 2 zones; Metro and Remote.
 Size. Small packages (less than 3 cubic feet) are billed based on its weight. Large items are billed
based on volumetric dimensions.
D. Have the interviewee brainstorm about other shipping cost drivers per order:
 Number of Shipments. A large order with smaller items is likely to be more “combinable” and may
ship in fewer boxes than one with larger items.
 “Over-boxed” items. Manufacture’s packaging of some items is not durable for cargo shipping and
therefore needs to be put in another box, or “over-boxed”.
E. Explore the following questions after graphs have been shared with the interviewee:
Question #1. The largest loss bucket in S&H is Ground shipments to the Lower 48 states. Why should
your client not increase its S&H prices for this group? Why should they increase prices on the other three
S&H offerings?
Possible Answer:
 Ground shipping also constitutes the largest portion of your clients business and increasing prices
could negatively affect demand for items and orders.
 Expedited shipping is a premium product and the customer is likely to be less elastic to an
increase in price. Therefore an increase in price might not impact demand too much.
 Alaska and Hawaii constitutes a small fraction (less than 1%) of your client’s total business while
contributing to ~5% of losses. Unless it is a business decision to maintain a presence in that region at
such a cost, there is no reason to do so.
Question #2. Your client’s shipping prices are on average 25% more than their vendor’s price table. Why
do you think your client is seeing egregious losses in certain categories? How can they tackle this?
Possible Answer:
The egregious loses are primarily due to “over-boxing” of items due to the limited number shipping boxes.
The client would need to better understand the demand on various items, their dimensions, what items
are most frequently combined and then determine the optimal assortment (number and dimensions) of
shipment cartons they use. This would be a longer-term solution.
Question #3. If you were to recommend a new pricing strategy that raises prices, how much would your
business be at risk? How much of you estimated losses can you save?
Possible Answer:
 The percentage of business at risk is the ratio of the total merchandise dollars shipped through
the segments that the candidate is recommending a price change to over the total business. If the
interviewee recommends raising prices to Alaska & Hawaii, Expedited shipments and the 44 fixed
price items the interview should identify approximately 11% of the business at risk (calculations
below).
 Percentage of loss saved for the segments to AK & HI, Expedited shipments and the 44 fixed
price items is approximately 30% (calculations below).
Question #4. Should raising prices be a long-term solution? Why or why not?
Possible Answer:
Raising prices is not a long-term solution because it leaves your client at a competitive disadvantage. The
long-term goals should be to reduce costs by further analyzing each of the cost drivers. Some longer-term
solutions are:
 Conducting a “carton-size study” to determine the optimal assortment of boxes used.

 Look to expand the distribution network to also ship items from distribution centers on the east
and west coast.
 Negotiate lower shipping costs with the vendor.
II. Analysis (Calculations to be completed by interviewee.)
A. Margin on each product is calculated with the following formula:
(Margin On Wins + Margin On Losses) / Total Revenue In Category
Margin on Ground to Lower 48: 13%

Margin on Ground to Alaska & Hawaii: -142%
Margin on Expedited to Lower 48: -17%
Margin on Expedited to Alaska & Hawaii: -39%
B. Percentage of business at risk:
(Merchandise To AK & HI + Merch To Expedited + 10% × Total Merch With Fixed Price) / Total
Mechandize Dollars
= (200 K + 30,000 K + 1,800 K + 10% × 76,440 K) / 364 MM
= 10.89%
C. Percentage of Loss Saved:
(Loss Margin To AK & HI + Loss Margin To Expedited + 59% × Loss Margin With Fixed Price) / Total
Mechandize Dollars
= (257.2 K + 1,010 K + 38.18 K + 59% × 892.6 K ) / 6,172.2 K
= 29.68%
Handouts/Figures
Exhibit 1. Business Shipped to Various Segments.
Exhibit 2. Gross Margin on Category Wins and Losses.
Key Takeaways (What the interviewee should glean from handouts/figures. There may be some
calculations here as well.)
1. Business Shipped to Various Segments.
 Approximately 1/3 (~28%) of the business is shipped to customers at a loss

 Approximately 2/3 (~78%) of all business to Alaska and Hawaii (Ground & 2nd Day) are shipped
at a loss
 Approximately 1/3 (~34%) of all orders that have items with a fixed price are shipped to
customers at a loss
2. Gross Margin on Category Wins and Losses.
 Orders shipped by Ground to the Lower 48 states (which is ~91% of the business) accounts for
~79% of Losses
 Orders with only items with fixed S&H pricing (which is 21% of the business) accounts for ~14%
of Losses
 Orders shipped Expedited to the Lower 48 states (which is ~8% of the business) accounts for
~16% of Losses
 Orders shipped by Ground to Alaska and Hawaii (which is ~0.5% of the business) accounts for
~4% of Losses
 Orders shipped Expedited to Alaska and Hawaii (which is ~0.05% of the business) accounts for
~0.6% of Losses
III. Recommended Conclusion
In the short-term the client can save ~30% of losses by:
 Increasing fixed S&H prices on 44 SKU’s.

 Raise weight table prices for Ground orders to AK & HI and Expedited orders to both the Lower
48 states and AK & HI.
The higher prices might leave the client at a competitive disadvantage and therefore the long term goal
should be to reduce costs and return prices to normal. The client can look to reduce costs by:
 Conducting a “carton-size study” to determine the optimal assortment of boxes used

 Look to expand the distribution network to also ship items from locations in the east and west
coast
 Negotiate lower shipping costs with the vendor
Hedge Fund Paulson & Co. to Hire More Junior Analysts
Case Type: math problem.
Consulting Firm: Capital One first round summer internship job interview.
Industry Coverage: financial services.
Case Interview Question #00721: Your client Paulson & Co. Inc. is an investment management firm
specializing in global merger, event arbitrage and credit strategies. The firm mostly works in the arbitrage
business, which is quite lucrative. In economics and finance, arbitrage is the practice of taking advantage
of a price difference between two or more markets: striking a combination of

matching deals that capitalize upon the imbalance, the profit being the difference between the market
prices.
With its arbitrage strategy, the firm has no profitability problem and no competition. The company has 4
senior analysts, 3 junior analysts, and 1 admin. The activities in which they are involved include the initial
stage, which comprises 20% of the work, the core stage which is 70% of the work, and the
recommendation which is the remaining 10% of the work. These percentages are constant. How many
junior analysts need to be added to free up capacity among the senior analysts, so that they can focus on
selling additional work?
The interviewee should first inquire about how much of the three activities the three staff persons are
engaged in.
 Senior Analysts do 60% initial, 20% core, and 80% recommendations.
 Junior Analysts do 30% initial, 70% core, and 20% recommendations.
 Admin does 10% initial and 10% core, with no recommendations.
Possible Answer:
1. Analysis (Calculations to be completed by interviewee.)
If you multiply the percentages that the junior analysts are doing by the breakout of the activities, it looks
like this:
 initial stage: 30% of 20% = 6%

 core stage: 70% of 70% = 49%
 recommendation: 20% of 10% = 2%
Therefore, 6% + 49% + 2% = 57% of total work is being done by the junior analysts.
2. Recommended Conclusion
There are only 3 junior analysts in the firm. Currently each is doing 57% / 3 or 19% of the total work for
the firm.
How many junior analysts need to be added so that they are working at 100% capacity?
100% / 19% = approximately 5.
There are currently 3 junior analysts. 5 – 3 = 2 junior analysts need to be added.
Now that there is a total of five junior analysts, what is the new constraint in getting the work done? -Time.
Aeromar Airline Will Not Cut Its Mexico City-Brasilia Route

Case Type: increase revenues; math problem.
Consulting Firm: Kurt Salmon first round summer internship job interview.
Case Interview Question #00720: Our client is the CEO of Transportes Aeromar, a mid-size passenger
airline based in the General Aviation Terminal at Mexico City International Airport in Venustiano Carranza,
Mexico City, Mexico. Aeromar operates scheduled domestic services in Mexico and international services
to the USA, South America, and Central America. Its main base is Mexico City
International Airport.
The Transportes Aeromar airline operates on the Hub & Spoke model (a system of connections arranged
like a chariot wheel, in which all traffic moves along spokes connected to the hub at the center). and is
currently seeking to increase its revenue. It intends to do so by switching the only airplane currently
serving the flight from Mexico City to Brasilia, Brazil (the federal capital city of Brazil with a population of 2
million) to their existing Mexico City-New York City line service. Is this a good idea? Why or why not?
1. Mexico City-Brasilia Route
 The airplane serving the Brazil line is a Boeing B757 with 200 seats
 Only one airplane serves the Brazil line, making two round trips a day
 The occupancy rate of the Brazil line is 90%
 Each round trip ticket to Brazil costs $350
2. Mexico City-NYC Route
 The New York line is currently served by 4 planes similar to the Brazil line plane
 The New York planes each make 3 round trips a day
 The occupancy rate of the New York line is 80%
 The round trip ticket cost is the same, $350
 If an additional plane (and flight) is added to the NYC line, occupancy rate will drop to 70%
Possible Answer:
1. Areas of Discussion
 Are costs relevant for this case? (They are not)

 What is the revenue generated by each route?
 Is there enough demand for NYC flights to justify another airplane?
 Does eliminating the Brazil route have any repercussions on other flights to South America?
2. Analysis (Calculations to be completed by interviewee.)
Current revenue: $798,000 per day
 Brazil line = 200 seats * 90% * 2 round trips per day * $350 = $126k / day
 NYC line: 200 seats * 80% * 3 round trips per day * 4 planes * $350 = $672k / day
 Total revenue from the two lines: $126k + $672k = $798k / day
New revenue would be: $735,000 per day
 NYC line only = 200 seats * 70% * 3 round trips per day * 5 planes * $350 = $735k / day
3. Recommended Conclusion
The short answer is “no go”.
Calculations indicate that eliminating the Brasilia line would actually decrease overall revenues of the
airline. This is because the occupancy rates for the New York City route drops when an extra airplane is
added to that line.
In addition, removing the airplane that serves Brasilia completely eliminates a highly profitable flight, and
may cause service quality repercussions due to unsatisfied customers.
Aspen Mountain Ski Field to Build a Second Ski Lift

Case Type: math problem; operations strategy, optimization.
Consulting Firm: Kurt Salmon first round full time job interview.
Industry Coverage: sports, leisure, recreation.
Case Interview Question #00717: Aspen Mountain is a ski area located in Pitkin County, Colorado, just
outside and above the city of Aspen. It is situated on the north flank of Aspen Mountain and the higher
Bell Mountain at an elevation of 11,212 ft (3418 m) just to the south of Aspen Mountain. It
was founded in 1946 as the first ski area venture of the Aspen Skiing Company,
and today it is one of four adjacent ski areas operated by the company as part of the Aspen/Snowmass
complex.
The Aspen Mountain ski field, with only one ski lift and one slope, has a limit of 200 skiers and is full every
day. The ski lift has a capacity of 5 skiers per minute and it takes 10 minutes for the lift to carry a skier to
the top of the mountain slope. Skiers take 5 minutes on average to ski down and get in the queue again.
The manager of Aspen Mountain ski field has hired you to analyze how the time that skiers spend in the
queue can be reduced. There are two options: (A) increase the speed of the ski lift or (B) build another
equal lift. There are no budget constraints in the decision. Which of the two options would you
recommend the manager pursues?
Possible Answer:
The recommended approach to this problem is as follows:
1. Find the time skiers spend in the line (25 minutes, see below)
2. Analyze the first option: increase the speed of the ski lift, e.g. 5 minutes. That would actually increase
the queue time to 30 minutes (see below)
3. Analyze the second option: build another ski lift, that would decrease the queue time to 5 minutes (see
below)
4. The mountain can hold the double of skiers if another lift is built (told only if asked)
There are two methods one might take to calculate the queue time
Method 1:
Ski lift capacity * (Minutes in queue + Minutes on lift + Minutes skiing) = number of skiers / number of lifts
5 skiers per minute * (X + 10 + 5) mins = 200 / 1
Before the
change Option A: increase lifting speed Option B: add a second lift
# skiers 200 people 200 people 200 people
ski lift capacity 5 skiers/min 5 skiers/min 5 skiers/min
# lifts 1 1 2
mins lifting 10 mins 5 mins 10 mins
mins skiing 5 mins 5 mins 5 mins
mins queuing 25 mins 30 mins 5 mins
Method 2:
Option A: increase lifting
Before the change speed Option B: add a second lift
ski lift capacity 5 people/min 5 people/min 5 people/min
mins lifting 10 mins 5 mins 10 mins
mins skiing 5 mins 5 mins 5 mins
# skiers 200 people 200 people 200 people
5 skiers/min * 10 mins = 5 skiers/min * 10 mins * 2 lifts =

# skiers on lift 50 5 skiers/min * 5 mins = 25 100
5 skiers/min * 5 mins = 5 skiers/min * 5 mins * 2 lifts =

# skiers skiing 25 5 skiers/min * 5 mins = 25 50
# skiers 5 skiers/min * X mins = 5 skiers/min * X mins = 150 5 skiers/min * X mins * 2 lifts =

queuing 125 50
Total 200 200 200
queuing time 25 mins 30 mins 5 mins
The interviewee can use another hypothesis for lift time reduction in option A; but the conclusion must be
the same.
Conclusion:
Building a new ski lift is a better option for queue time reduction.
If there is time, the interviewer could ask the interviewee to brainstorm additional measures the manager
might take to reduce queue time, e.g. build a cafeteria, lengthen the run, increase ticket’s price, etc.
Cisco Evaluates the Outlook of Core Control Product Line

Case Type: industry analysis; math problem.
Case Interview Question #00711: Our client Cisco Systems, Inc. (NASDAQ: CSCO) is a diversified
technology corporation producing primarily telecommunications support equipment. With its headquarter
located in San Jose, California, United States, Cisco designs, manufactures, and sells
telecommunications infrastructure and networking equipment. The company’s

current portfolio of products and services is focused upon three market segments – Enterprise and
Service Provider, Small Business, and the Home.
You have been hired by the CEO of Cisco to evaluate a product known as “Core Control”. This product
handles basic call connectivity—recognizing phone numbers dialed and connecting outgoing calls to
recipients. The customers of this product are AT&T, Verizon, T-Mobile and the like, and our client Cisco
competes against companies like Lucent and Alcatel for sales. This is an IP-driven business, and the
market has experienced a significant downturn in the last year.
The CEO of Cisco has asked your consulting team to evaluate the future of the “Core Control” product
line. How would you approach this case?
Possible Answer:
The interviewee should quickly identify that this is a mature product and choose a framework that
identifies the potential issues. One approach may look like this (3C’s):
1. Company
a. What is Cisco’s strategy? Where does Core Control fit?

b. How lean is Core Control? A mature industry often requires price leadership.
c. What are the financials of Core Control product? Are we making money?
d. What is Core Control’s outlook:
 can we sell it off?

 can we milk it to fund R&D of new technology?
 can we bundle Core Control with a more profitable service?
 should we cut our losses?
2. Competition
a. Who are they?

b. Are they taking market share or leaving this declining market?
c. How easily will they cede market share to us?
d. Do they have advantages over us (cost leadership; brand strength; customer relations)?
3. Customers
a. Who are they?

b. Why aren’t they buying IP components (new technology, declining industry)?
c. Can we grow the market?
Question #2: The CEO of Cisco wants to use Core Control revenues to fund new R&D. Last year, our
client earned 15% EBIT on revenue of $8 billion from Core Control. This year, our client’s revenues are
expected to decrease with the market rate (quantified: Year 1 = $50 billion; Year 2 = $25 billion). You’ve
been asked to come up with a rough estimate of what the business might look like this year from a
financial standpoint, and offer some thoughts on what this could mean going forward.
Possible Answer:
This is primarily a “numbers case”, with the underlying exercise of estimating a cost structure. The
essential task of this case is to estimate a cost structure for this year, determine what the EBIT will be,
and discuss what this could mean for the business going forward. The interviewee’s thought process in
allocating costs is a crucial component of evaluation, and should involve some discussion of how and why
he/she decides to allocate costs into the respective line items.
Revenues
Very simply, the interviewee can assume that revenues will decrease by the market downturn, i.e. 50%,
from $8 billion to approximately $4 billion.
Costs
Interviewee should begin by identifying the following basic costs items (he/she can identify others, but if
so, interviewer should suggest that he/she bucket them into the following 4 basic items):
 CoGS: Cost of goods sold

 R&D: research & development
 S&M: sales & marketing cost
 G&A: general and administrative expense
A logical next step would be for the interviewee to determine the total costs from last year:
EBIT was 15%, so total costs were 85% of sales, or $8 billion * 85% = $6.8 billion
The interviewer should then ask how these total costs might have been allocated to the 4 basic costs
items. One useful method is to first estimate how much each cost item will be as a % of sales (with total
costs summing to 85% of sales). General breakdown should roughly align with:
 CoGS = 50% of sales

 R&D = 20% of sales
 S&M = 10% of sales
 G&A = 5% of sales
Generic logic behind this reasoning:
 CoGS will be largest cost item.

 Since product is “IP-driven,” R&D will be next biggest expense.
 S&M and G&A will be smallest cost items.
As long as the interviewee defends his/her reasoning, these percentages can be more/less than specified
above.
Next, using these %’s, the interviewee can derive actual cost amounts for last year (total costs = $6.8b):
 CoGS = 50% x $8b = $4.0b

 R&D = 20% x $8b = $1.6b
 S&M = 10% x $8b = $0.8b
 G&A = 5% x $8b = $0.4b
To extrapolate costs to this year, the interviewee should separate the above costs as fixed or variable
(interviewer should prompt the interviewee to do so if not done on their own):
 All or significant majority of CoGS will be variable (i.e. some small portion of CoGS may not vary
with sales).
 All or significant majority of R&D will be fixed.
 All or significant majority of S&M and G&A will be fixed (i.e. some small portion of S&M may vary
with sales).
Next, interviewee should split the calculated costs into fixed vs. variable costs. Exact cost breakdown will
vary, but should fall within basic parameters outlined above (i.e. majority fixed vs. variable, or vice versa).
For example:
 CoGS = $3.8 (variable) + $0.2 (fixed) = $4.0b

 R&D = $1.6 (fixed) = $1.6b
 S&M = $0.6 (fixed) + $0.2 (variable) = $0.8b
 G&A = $0.4 (fixed) = $0.4b
Thus, the interviewee will have derived (or thereabouts):
 $4.0b in variable costs

 $2.8b in fixed costs
The interviewee can then derive EBIT for this year.
With the 50% decrease in revenue, variable costs will also decrease by 50%, with fixed costs remaining
the same. Thus:
 $2.0b in variable costs, $2.8b in fixed costs.

 $4.8b in total costs
 EBIT = $4.8b – $4.0b = ($0.8)b
3. Conclusion: Now that you have evaluated the outlook for Core Control, how would you advise the
CEO of Cisco to proceed from here?
Possible Answer:
Based on costs and revenue, the interviewee should find that the Core Control business will lose money
this year.
The interviewee should provide commentary (outside of limited case facts) about why it may or may not
be a good idea to get out of this business, such as:
 market downturn could be an indication of the product’s obsolescence.

 since this is an IP-driven business, business is cyclical and this year’s investment in R&D could
generate a rebound next year.
The interviewee should also propose modifying the cost structure. Answers will vary, but the focus of this
case in the EBIT calculation.
Fast Food Chain Sees Lower Profits With More Stores Opened
Case Type: reduce costs; new product; math problem.
Case Interview Question #00695: Our client Freddy’s Frozen Custard & Steakburgers is a fast food
restaurant chain based in Wichita, Kansas. The company opened its doors 10 years ago, and today it has
more than a hundred locations in 17 of the 50 U.S. states. Freddy’s made its
debut in 2002. In April 2011, the company opened its 50th store in Victorville, California, and in October of
2013 its 100th store in Bowling Green, Kentucky. There are currently 104 Freddy’s locations nationwide. It
continues to expand at a rapid rate. Freddy’s plans to open 400 more stores over the next 10 to 15 years.
Freddy’s menu items are prepared fresh, after order. Freddy’s offers frozen custard with a variety of
specialty sundaes and blended concretes. In an effort to increase sales and face increasing competition,
the company has just introduced a series of new products. While sales have increased in all 104 stores in
the country, some locations have experienced decreasing profits. How would you help the company
identify what the problem is?
Additional Information: Provide the following information if requested
The fast food chain Freddy’s Frozen Custard & Steakburgers used to sell only sweet products such as
frozen custard,mainly purchased as snacks or desserts. The ingredients in these products include fresh
produce items such as strawberries, bananas, and other fresh fruits.
Increasing competition and stagnant unit and gross sales motivated the company to introduce savory
products including steakburgers, hot dogs, and chicken sandwiches and increase traffic at off-peak hours
(peak hours in this case are afternoons, when people generally have a snack or dessert).
The new products (steakburgers, hot dogs, and chicken sandwiches) include a set of savory products
with ingredients requiring special ordering and handling. These ingredients also include fresh produce
such as lettuce, tomatoes, and cheese.
Most of the ingredients in both sweet and savory products include fresh produce.
Possible Answer:
An appropriate structure for this case is the profitability framework: Profits = Revenues – Costs
Revenues
Revenues = Price * Volume, and in this case even as the new savory products are slightly more
expensive than the old ones, customers have reacted positively and have started purchasing them.
However, there has been some product cannibalization, and the unit sales of sweet products have
experienced some decline.
Costs
Since revenues are not the main source of the problem, the interviewee should proceed to evaluate the
cost side if the equation: Costs = fixed costs + variable costs.
In this case fixed costs haven’t changed. Most of the stores have been in operation for some years now,
and the inclusion of the new products has not affected their operation significantly. Marketing and
advertising campaigns have been recently launched to promote the new products, but the costs were
evenly spread across all stores and are not of significant value.
The problem is with variable costs. Labor was already in place, and actually the new products increased
activity in slow times, but there wasn’t a need to hire additional personnel. The new products are sold
mainly at hours were the operation used to be slow in the past and has actually decreased slack time of
employees during those hours.
With all other costs being negligible, the main source of the problem is with the food cost. The bottom line
of the problem is that since the new products require special handling, the cost of some ingredients is not
the same for all store locations. The company has national contracts with its main suppliers, but as stores
are located in different geographic locations, seasonality and varying distributing costs has forced
suppliers to charge these ingredients at a premium.
Question #2: Given the problem is that the food costs are not constant for all stores, and that has
decreased profitability at some locations, suggest potential solutions to address this situation.
Possible Answer:
Exercise bargaining power over suppliers: Since the company has several locations throughout the
country and has signed national contracts with suppliers, it could try to negotiate discounted prices for
“troubled” locations.
Look for alternate local suppliers: Evaluate the possibility of purchasing certain products from local and
smaller suppliers, generally selling at lower prices.
Look for alternate and cheaper ingredients. This sounds risky because it could lower the quality of the
food sold.
Reduce the volume used. For the same reason, this sounds risky because it would change product
recipes.
Introduce alternate items at certain locations: This is also very risky, as it would take away uniformity from
the chain and may upset some customers. On the other hand, the company could take advantage of local
food preferences and offer unique creations to cater local markets.
Change the product mix: The total food cost is the sum of the individual food costs for each of the items
sold. Promoting products with higher margins would reduce the overall food cost and contribute to
increase profitability.
Combos and promotions: Grouping low and high cost items in combo meals (e.g. entrée + beverage +
dessert) could motivate clients to purchase more products and ultimately reduce the food cost by
promoting a more efficient product mix. Also, through discounts and promotions of products with higher
margins the company could improve the product mix.
Question #3: Let’s suppose that you decide that you want to launch a campaign to promote higher
margin products and improve profitability on troubled stores. You are provided with the following
information:
Before New Products were included:
Product
Type Average Price Average Cost Average Weekly Units Sold
Sweet $5.00 $1.00 4,000
After New Products were included:
Product
Type Average Price Average Cost Average Weekly Units Sold
Sweet $5.00 $1.00 3,000
Savory $6.00 $3.00 1,250
Assuming that food cost is the only significant cost, what should be the product mix the company should
sell, including the new products, to return to at least the same level of profitability without losing the
increase in revenue due to new products?
Possible Answer:
Old Profit = Total Old Revenues – Total Old Costs = 4,000 x $5.00 – 4,000 x $1.00 = $16,000
New Gross Sales = $5.00 x 3,000 + $6.00 x 1,250 = $22,500
Define Variables
X = Sweet products sold
Y = Savory products sold
New Profit = Total New Revenues – Total New Costs = Old Profit
New Profit = ($5.00 X + $6.00 Y) – ($1.00 X – $3.00 Y) = $ 16,000
New Profit = $4.00 X + $3.00 Y = $ 16,000 ————(1)
New Gross Sales = $5.00 X + $6.00 Y = $ 22,500 ————(2)
Solving for X and Y using equations 1 and 2, you get that the company should sell 3,167 sweet products
and 1,111 savory products.
Question #4: How does the total food cost under this new product mix compare to that under the less
profitable scenario?
Possible Answer:
Old Food Cost = $1.00 x 3,000 + $3.00 x 1,250 = $6,750
As a % of Sales = $6,750 / $22,500 = 30%
New Food Cost = $1.00 x 3,167 + $3.00 x 1,111 = $6,500

As a % of Sales = $6,500 / $22,500 = 28.9%
Change in Food Cost = (New Food Cost – Old Food Cost)/(Old Food Cost) x 100% = ($6,500 –
$6,750)/($6,750) x 100% = 3.7%
Question #5: If the client company wants to negotiate the prices of new ingredients (savory product) with
its suppliers to reach the improved profitability levels with the old price mix, what should be the price
discount it should ask for?
Possible Answer:
Total Target Savings = $6,750 – $6,500 = $250
Unit Savings = $250 / 1,250 = $0.20
Discount = $0.20 / $3.00 x 100% = 6.67%
6. Conclusion
The interviewee should have identified that this is a profitability problem focused on the cost side rather
than on the revenue side of the formula.
After addressing the main cost items, he/she should have been more extensive in asking questions about
the different cost items and should have identified that the problem was with the food cost.
As the interviewee prepares to wrap up, he/she should be able to recap the situation and cite a couple of
the potential solutions to the problem. Further, he/she could use the numbers to provide some insight
about the situation, mentioning how the new savory products have a higher food cost and how can some
of the solutions could be translated into tangible results.
Kmart to Test Radio Frequency Identification (RFID) in Stores

Case Type: new product, new technology; math problem.
Consulting Firm: Advisory Board Company second round summer internship job interview.
Industry Coverage: retail; information technology (IT).
Case Interview Question #00661: Our client is Kmart (often stylized as K-Mart), an American chain of
discount consumer goods retailer headquartered in Troy, Michigan, United States. The company was
founded in 1962 and currently is the third largest discount store chain in the United States, behind
Walmart (NYSE: WMT) and Target (NYSE: TGT). As of January, 2011, Kmart
operated a total of 1,308 Kmart stores across 49 states, including 1,278 regular discount stores and 30
Super Stores (averaging 100,000 sq ft).
RFID (Radio Frequency Identification) is a new technology. RFID contains a wireless non-contact system
that uses radio-frequency electromagnetic fields to transfer data from a tag attached to an object, for the
purposes of automatic identification and tracking. It is a tiny system that consists of wireless technology to
transmit product serial numbers from tags to a scanner without human intervention. RFID technology is
widely seen as the likely successor to barcode technology.
Our client Kmart recently is investigating the possibility of requiring its Super Store suppliers to tag each
product with RFID. Kmart’s board requires that all major capital improvement projects recoup all costs
within 3 years or less. They have come to us to investigate this opportunity. Should we advise our client
Kmart to pursue it?
 If so, what risks are there?

 If not, what alternatives can we investigate?
Possible Solution:
1. Structure the solution
Below is one possible structure, one that is probably overkill. Any structure that is able to address all
relevant aspects of the issue is acceptable.
 Cost/benefit analysis
 Supplier relationships
 Consumer privacy concerns
 Technology considerations and capital outlay
 Internal change considerations
The main aspect of the structure for this “new product/new technology” case is cost-benefit analysis. If the
candidate delves into other areas (i.e. privacy concerns), the interviewer or case giver should be aloof
and mention that you do not have data on that subject. That should bring the candidate back to the
cost/benefit track.
2. Cost-benefit analysis details
I. Costs
The candidate may want to start with benefits first. The interviewer should direct them to start with costs
first. Costs are more interesting in terms of dissecting a graph, and for benefits the interviewer can give
candidate answers easily without requiring diving into calculations if time is running short.
Interviewer: Ask the candidate to brainstorm on what costs could occur. Let them generate 4-5 ideas,
then ask which is likely to be the greatest cost and why. Then, dive into details.
Present the candidate the “General Information” slide (Exhibit 1) for cost discussion. You could say: Let’s
examine the cost of rolling out RFID to individual super stores and distribution centers (DCs).
Kmart – General Information (Exhibit 1. slide to give to candidate)

30 Super Stores and 3 Distribution Centers (DCs)
Super Store Distribution Center
Financial
Sales/year $50M
COGS ($39.4M)
Total assets $3M $8M
Total inventory $1.5M $5M
Operational
Size 100,000 sq ft 400,000 sq ft
SKUs (unique products) 50,000 225,000
# of Employees 100 300
Average employee wage $20,000/year $20,000/year
*Note: all values are average per Store or per Distribution Center
Interviewer: Our client Kmart’s Strategic Planning Team worked closely with the IT department and came
up with the following chart to determine how many receivers, which will read the RFID tags, to install in
super stores. (Show Exhibit 2. “Kmart Super Store Receiver Layout” to candidate).
Exhibit 2. Kmart Super Store Receiver Layout

The following chart depicts the recommended RFID receiver layout for a standard Kmart Super Store. To
simplify analysis, store layout has been abstracted to high-level blocks, with each block having a specific
level of traffic.
Chart Legend
Low density – 4 receivers/10,000 sq ft
Medium density – 10 receivers/10,000 sq ft
High density – 20 receivers/10,000 sq ft
Interviewer:
 What does this chart indicate? (Wait for candidate’s answer; guide them if necessary).
 With this, can you determine the cost of rolling out RFID receivers to super stores?
 What are you missing? (Let the candidate compute; the candidate should realize that he/she is
missing information about the cost of RFID receivers, wiring, and systems).
 The cost of each RFID receiver, including all wiring and systems, is $100 per receiver.
 Now, what is the cost of rolling out the receiver to all super stores? (Let the candidate compute).
 Expected candidate math:
 First, compute number of receivers per 10,000 square feet Store space: 4/low * 2 low +
10/medium * 5 medium + 20/high * 2 high = 8 + 50 + 40 = 98/10,000 sq ft.
 Second, compute cost of receivers per Store: $100/receiver * 100,000 sq ft per store *
98/10,000 sq ft = ~$100,000/store
 Third, compute cost of receivers in all 30 super stores: $100,000/store * 30 stores = $3
million
Interviewer: Now, let’s look at the Distribution Centers. (Show Exhibit 3. “Kmart Distribution Center
Receiver Layout” to candidate). Let’s again assume that the total cost per RFID receiver, including all
wiring and systems costs, is $100 per receiver.
Exhibit 3. Kmart Distribution Center Receiver Layout

The following chart depicts the recommended RFID receiver layout for a standard Kmart Distribution
Center. To simplify analysis, distribution center layout has been abstracted to high-level blocks, with each
block having a specific level of traffic.
Chart Legend
Low density – 4 receivers/10,000 sq ft
Medium density – 10 receivers/10,000 sq ft
High density – 20 receivers/10,000 sq ft
 What is the cost of rolling out to all Distribution Centers? (Let them compute).
 First, compute number receivers per 10,000 square feet DC space: 4/low * 3 low +
10/medium * 5 medium + 20/high * 1 high = 12 + 50 + 20 = 82 receivers/10,000 sq ft.
 Second, compute cost of receivers per DC: $100/receiver * 400,000 sq ft * 82/10,000 sq
ft = ~$330,000/DC
 Third, compute cost of receivers in all 3 DCs: $330,000/DC * 3 DCs = ~$1 million
Interviewer: There will be an additional one-time cost of $8M for developing supporting computer systems
and training, in the first year. In addition, the cost of yearly maintenance will be $3M/year.
Expected candidate math (Note: a great candidate will summarize costs this way before moving onto
benefits):
 One-time costs: $8M (systems & training) + $3M (receivers in stores) + $1M (receivers in DCs) =
$12M
 Yearly costs = $3M
II. Benefits
Interviewer: Ask the candidate to brainstorm on what benefits could occur. Let them generate 4-5 ideas,
then ask which is likely to be the greatest benefit and why. Then, dive into details.
The candidate should come up with some of the following answers. These are lumped into three main
categories. Feel free to group their suggestions into one of the following, or say “that’s not
applicable/relevant to this case” if not classifiable.
Note: their framework may say Revenue/cost instead of Benefit/cost. If so, feel free to tell them that the
following benefits are effects on contribution to fixed cost, as opposed to revenue. They should realize
that we are not dealing with revenue directly in this case, but rather focusing on cost and on contribution.
a. Reduction in out-of-stock; Reduction in theft (both in-store and in distribution).
 Interviewer: Sales are projected to increase 0.1% a year as a result of the RFID technology.
 Expected candidate math: $50M sales/store/year (from General Information slide) * 30 stores =
$1.5B/year sales, $1.5B/year * 0.1% = additional $1.5M/year contribution.
b. Better inventory management; Faster cross-docking distribution.
 Interviewer: There is a one-time savings of 5% on total inventory once the distribution process
has been re-engineered. Assume that this happens within the first year.
 First, compute total inventory: inventory = $1.5M/store * 30 stores + $5M/DC * 3 DCs (all
#s from General Information slide) = $45M + $15M = $60M
 Next, compute one-time savings: $60M * 5% = $3M one time contribution.
 Note to interviewer: This is a really complicated calculation; if running out of time
(especially with 1/2 hour interview), feel free to directly give this number to the candidate.
c. Reduced in-store and warehouse labor; Faster checkout in store.
 Interviewer: We expect a decrease in Store and DC labor cost of 5% per year.

 First, determine total store and DC labor cost: labor = $20K/store employee * 100
employees/store * 30 stores + $20K/DC employee * 300 employees/DC * 3 stores = $60M +
$18M = $78M ~= $80M/year (expect rounding)
 Second, determine yearly cost decrease: $80M/year * 5% = $4M/year.
 Note to interviewer: This is a really complicated calculation; if running out of time
(especially with 1/2 hour interview), feel free to directly give this number to the candidate.
d. Total benefits
Expected candidate math (Note: a great candidate will summarize benefits this way before moving away
from benefit/cost analysis):
 One-time benefits: $3M (better inventory management & faster cross-docking)

 Yearly benefits: $1.5M (reduction in out-of-stock & reduction in theft) + $4M (reduction in labor &
faster checkout) = $5.5M
Note: the candidate is expected to set up a data table like the one below, as it directly answers whether
the client Kmart should consider this new technology proposal as-is.
Year Year 1 Year 2 Year 3 Year 4
Cost 12 + 3 = 15 3 3 3
Benefit 3 + 5.5 = 8.5 5.5 5.5 5.5
Net (year) 8.5 – 15 = -6.5 5.5 – 3 = 2.5 5.5 – 3 = 2.5 5.5 – 3 = 2.5
Net (cumulative) -6.5 -6.5 + 2.5 = -4 -4 + 2.5 = -1.5 -1.5 + 2.5 = 1
(All values in $Millions)
3. Risks to accepting technology
If the candidate determined (through incorrect math) that the client Kmart should accept the technology
as-is, they should begin to brainstorm risks. Here are some examples; the more descriptive their risks, the
less a math error should be held against them (especially if most of the math was correct):
 Technology risk: RFID is a rapidly changing technology. If Kmart makes a decision on one non-
standard technology type, that type may be phased out of the market if a different type is chosen as a
standard.
 Budget risk: Massive projects are inherently difficult, and as a result the project may surpass
budget. Depending on candidate’s calculations, there should be little leeway between recouping
expenditures and not recouping expenditures by year 4.
 Assumptions risk: There were many assumptions that were made, that could easily be incorrect.
 Growth/shrink risk: how do costs scale if company grows or shrinks?
 Other risks: let the candidate be creative.
4. Alternatives to the proposed plan
 Start small: instead of instituting a full roll-out on every products and every store, stage the rollout
based on geography or sales category.
 Distribution first, then retail: focus on implementing RFID for distribution as first phase of plan,
then on retail enhancement for second phase. Two separate phases will allow two separate periods
to recoup expenditure.
 Others: let the candidate be creative.
5. Summary
Interviewer: Give the candidates 2 minutes to create summary and summarize their findings at the end of
case.
Note: If the interview is given only 30 minutes, do not expect anyone to finish the case in full. Just ensure
that the candidate summarizes what has been discussed and gives a strong statement as to whether
he/she believes the client should pursue.
Brokerage Firm Charles Schwab Prepares for Next Recession
Case Type: math problem, quantitative case; improve profitability.
Consulting Firm: Capital One first round summer internship job interview.
Industry Coverage: financial services.
Case Interview Question #00648: Our client Charles Schwab Corporation (NYSE: SCHW) is an
American retail Brokerage firm based in San Francisco, California. The company started offering discount
brokerage on May 1, 1975 and since then has become one of the largest discount brokers in the world.
Schwab offers the same services as a traditional brokerage, but with lower
commissions and fees. The company serves 7.9 million client brokerage accounts as of September 2011.
In addition to discount brokerage, the company also offers services such as asset management,
investment research, mutual funds, annuities, bond trading, checking, savings, and mortgages.
Charles Schwab had annual revenues of USD $5 billion last year. They are operating throughout the US
with 300 branches opened. Half of these branches are corporate and half are franchised.
Question #1: What are the economics of Charles Schwab’s business?
Possible Solution:
A good structure or framework will identify the followings:
In order to analyze the economics of the business I need to find more information about their revenues
and costs. Then, I would like to look into what competition is doing on the market, how segmented the
market is and who are the consumers and what their needs are.
On the revenue side, I need to understand where the client’s revenues are coming from and then break it
into the two components: price and quantity
On the cost side, I would like to look at the fixed and variable costs:
 Fixed costs:
 SG&A (Selling General and Administrative Expenses)
 IT system
 Marketing costs
 Variable costs:
 Labor
 Other cost related to broker commissions, fees, etc
The next thing that I would like to look into is what competition is doing:
 how many competitors do we have?
 are there new competitors in the market?
 have they stolen share from us?
 are they offering services that we are not?
We also need to understand how the overall market is doing:
 is it growing or shrinking?
 how segmented is the market?
 are there any specificities related to regions?
Furthermore, I would also look at the consumers/customers:
 who are they?

 what do they want?
 how do our client’s products meet their needs?
Additional Information to be provided upon request:
1. Revenues
The client Charles Schwab’s revenues come from 2 different divisions:
 Trading: $3 Billion
 Asset Management: $2 Billion
Trading means that brokers do specific transactions as per their customer’s requests, like buy or sell
1,000 shares of XYZ stock. The revenue in this division would come from a fixed fee of $10 per
transaction.
In the Asset Management division, the firm is administering the customer’s money and the revenues
come from a percentage from the total amount of assets under management (AUM) which is 1%
2. Costs
 Fixed costs: $1B

 $800M – IT system ($700M from Trading and $100M from Asset Management)
 $100M – Marketing
 $100M – SG&A
 Variable costs:
 Trading:
 Commission to brokers: 40% of revenues
 Other costs: $2 per transaction
 Asset Management:
 Commission to brokers: 40% of revenues
 Fee to an outsourcing investment firm that is managing the assets: 0.4%
Possible Solution:
The candidate should now do the calculations for the profits:
Profits = Revenues – Costs
Trading division:
 Revenues = $3B
 Number of transactions = $3B / $10 = 300 million
 Fixed Costs = $700M (IT) + $60M (Marketing, pro rated from the revenues) + $60M (SG&A, pro
rated from the revenues) = $820M
 Variable costs:
 Commission: 40% of the $10 fee = $4 per transaction
 Other = $2 per transaction
 Variable costs = ($4 + $2) * 300 million = $1.8B
Asset management division:
 Revenues = $2B
 Total assets under management (AUM) = $2B / 1% = $200B
 Fixed Costs = $100M (IT) + $40M (Marketing, pro rated from the revenues) + $40M (SG&A, pro
rated from the revenues) = $180M
 Variable costs:
 Commission: 40% of the $2B revenue = $800M
 Fee for the outsourcing investment company = 0.4% of the $200B total administered
assets = $200B * 0.4% = $800M
 Variable costs = $800M + $800M = $1.6B
Profits:
 Trading profits = $3B – $1.8B – $820M = $380M

 Profit margin = $380M / $3B = 12.66%
 Asset Management profits = $2B – $180M – $1.6B = $220M
 Profit margin = $220M / $2B = 11%
A good candidate will also observe that Trading is slightly more profitable than Asset Management.
Question #2: Now we are almost in an economic depression. What would happen to this firm if an
economic recession would happen next year? Calculate by how much they need to increase the number
of transactions and assets under management now in order to breakeven in each division in case of
recession.
During the last recession, the client’s
 Number of transaction decreased by 50%

 Assets managed decreased by 20%
Possible Answer:
In order to do that I need to know what happened with this firm at the last recession in order to try to
benchmark the effects.
Note: if the interviewee does not ask for past recession effects, ask him/her to brainstorm on how they
can estimate the effects of the incoming recession till they get to this answer.
For Trading:
If x = the number of transaction needed to break even
# of transaction * revenue per transaction = fixed costs + # of transaction * variable cost per transaction
(50% * x) * $10 = $820M + (50% * x) * $6
x = 410M
Current # of transaction = 300M
(410M – 300M) / 300M = 36.7% = ~37%
They will need to increase the number of transaction by ~37%. I don’t think this is feasible in a short
period of time, especially just before a recession.
For Asset management:

If y = the amount of assets needed to break even
Amount of assets * % of assets = fixed costs for asset management + variable costs for asset
management
(80% * y) * 1% = $180M + [(y * 80% * 1% * 40%) + (80% * y * 0.4%)]
y = $112.5B
So, there is no risk of becoming unprofitable in this division even under a recession.
Question #3: How can they address the risk of the recession? How can they keep the company’s
profitability at current levels?
Possible Answer:
They can either try to increase the revenues or decrease the costs.
Increase revenues:
 Change the product mix – get more asset management business because it is more profitable
 Advertise
 Incentivize brokers to get more assets
 Offer more benefits for customers coming to us instead of competition
 Extend office locations
 Offer new products for current customers
 Put in place a field sales team of brokers to get more assets or trade customers either by
attracting more and richer customers or by making the current ones put more money in
 Get more, richer customers
 Increase the fee per transaction or the percentage for the asset under management
 Segment the market and differentiate depending on customer
Decrease costs:
 Fixed costs:
 IT seems to be the highest: outsource IT because it can also bring some other benefits
like expertise from an IT firm, risk dispersion if it breaks down
 Use cheaper systems, less qualified labor
 Variable costs:
 Decrease the commission for brokers
 Get the asset management in house instead of outsourcing
 Link the commission of the brokers to the performance, create an incentive system to
actually make them bring more business.
Boeing to Set Up New Attack Helicopter Plant in Brazil
Case Type: add capacity; math problem.
Consulting Firm: Booz Allen Hamilton (BAH) first round full time job interview.
Industry Coverage: aerospace & defense.
Case Interview Question #00645: Our client Boeing Defense, Space & Security (BDS), formerly known
as Boeing Integrated Defense Systems (IDS), is a unit of The Boeing Company (NYSE: BA) responsible
for defense and aerospace products and services. Based in Berkeley, Missouri, near the city of St. Louis,
Boeing Defense, Space & Security makes Boeing the third largest defense
contractor in the world and is responsible for 50% of the parent company’s total income in 2010.
One division of Boeing Defense, Space & Security manufactures the Boeing AH-64 Apache helicopters
for military operations. The AH-64 Apache is a four-blade, twin-engine attack helicopter with a tailwheel-
type landing gear arrangement. It features a nose-mounted sensor suite for target acquisition and night
vision systems. These helicopters are fully equipped with guns and ammo when delivered to the client.
The AH-64 Apache is armed with a 30-millimeter M230 Chain Gun carried between the main landing
gear, under the aircraft’s forward fuselage. It has four hardpoints mounted on stub-wing pylons, typically
carrying a mixture of AGM-114 Hellfire missiles and Hydra 70 rocket pods.
Recently, the Boeing Company is considering setting up a new plant to meet increasing demand in the
attack helicopter space. The client has considered three sites to setup operations – Brazil, France and the
US, and needs your help in deciding which one to choose.
Question #1: How would you go about defining the parameters for decision?
Possible Answer:
A good structure should include the following elements
1. Export control restrictions between the US and France & Brazil.
 This is important because if the transfer of technology is disallowed, then the only option is to
setup the plant in the United States.
2. Financial analysis of operating up the plant in different locations
 Costs (Fixed Costs, Variable Costs)

 Revenues that accrue from sales
 Where are the profits?
3. Customers
 Where are they based?

 The new plant needs to be close to the customer for design inputs
4. Suppliers
 Spare Parts
 Raw materials
5. Logistics
 What’s it going to take to get the products to the customer?

6. Manpower
 The availability of skilled managers, technicians, etc

Note: the interviewer or case giver should provide the candidate with the information she/he asks for, but
don’t volunteer any information. The case itself isn’t very hard, but the critical thinking around how a
country might alter purchases based on country of origin is a thought that good candidates will bring up.
The other key aspect is the candidate’s ability to capture data and not get lost in it.
Additional Information to provide the candidate, but only upon specific request
1. Company
 The client Boeing Defense, Space & Security currently has 3 plants in the US: 2 in Kansas and 1
in Michigan
 The 3 plants operate at full capacity today.
 One of the US plants can accommodate an additional assembly line at the cost of $500 million;
the other 2 plants are landlocked in residential areas and cannot be expanded.
2. Cost
 Initial plant setup costs are $500 million (US), $2 billion (Brazil), $3 billion (France)
 Fixed Costs are $100 million annually in all three countries
 Variable costs are $15 million (US), $20 million (Brazil), $25 million (France)
3. Market Size and Market Share
 Defense Budget for next 5 years: $100 billion (US), $15 billion (Brazil), $10 billion (France)
 % of Defense Budget to be spent on our Apache attack helicopters over the next 5 years are
shown in the following table
Purchases by US Purchases by Brazil Purchases by France
Department of Defense Department of Defense Department of Defense

Plant in
the US 20% of budget 0% 0%
Plant in
Brazil 20% of budget 50% of budget 0%
Plant in
France 20% of budget 0% 50% of budget
4. Revenues
 The Boeing AH-64 Apache helicopters sell for $100 million a piece, but if they are imported into
the US, then the US Government require them to be certified and the certification process costs
additional $15 million per chopper.
Question #2: Where should they setup the plant based on that analysis?
Possible Solution:
After gathering all the information, a good candidate should set up a calculation table like the one below.
Plant Site United States Brazil France
Costs (5 years)
Initial Setup $500M $2B $3B
Annual Fixed
costs $100M * 5 $100M * 5 $100M * 5
Variable costs $15M/chopper $20M/chopper $25M/chopper
No need to calculate since

$500M + $500M + $2B + $500M + (# of US bound revenues are lower and costs
Total Costs (# of units) * units) * ($20M + $15M) + (# of are higher than Brazil, so ignore
(over 5 years) ($15M) Brazil bound units) * ($20M) France
Revenues (5
years)
US $20B $20B $20B
Brazil 0 50% * 15B = $7.5B 0
France 0 0 50% * $10B = $5B

Total Revenues
(over 5 years) $20B $20B + $7.5B = $27.5B $20B + $5B = $25B
If set up a new plant in US
 US revenues over 5 years = 20% of $100B = $20B

 # of choppers = $20B / $100M = 200 helicopters
 Total Cost = 500M + 500M + (200) * ($15M) = $4B
 Profit = $20B – $4B = $16B
If set up a new plant in Brazil
 US revenues over 5 years = 20% of $100B = $20B

 Brazil revenues over 5 years = 50% of $15B = $7.5B
 # of US-bound choppers = $20B / $100M = 200 helicopters
 # of Brazil-bound choppers = $7.5B / $100M = 75 helicopters
 Total Cost = $2B + $500M + (# of US bound units) * ($20M + $15M) + (# of Brazil bound units) *
($20M) = $2.5B+ (200) * ($35M) + (75) * ($20M) = $2.5B + $7B + $1.5B = $11B
 Profit = $20B + $7.5B – $11B = $16.5B
Therefore, having the new plant in Brazil will give us profits higher than the US by $16.5B – $16B =
$500M
A good candidate will come up with a Final Recommendation

Based on the financials, Brazil appears to be a more attractive candidate for setting up the new plant, this
is because:
 our client’s profits over 5 years will be higher by $500 million

 we won’t be entirely dependent on one single country (US) for sales
However, we need to also explore the following issues:
 what is the potential for selling choppers outside of these 3 countries to the worldwide market?
 what will labor reaction at our existing US plants be if we off shore production to Brazil?
 are US relations with Brazil likely to be cordial over the next 5 years for us to benefit from export
control laws and sales to both nations?
Note:
This case is not overly complicated, but allows for the opportunity to bring in your own knowledge from
reading about companies in the defense space, e.g. the issues with EADS and Airbus. In reference to
labor relations and plant locations in France can be a point of discussion for bonus point.
Newmont Mining Corporation to Exploit Gold Mine in Peru
Case Type: math problem; operations strategy.
Consulting Firm: Schlumberger Business Consulting (SBC) first round summer internship job interview.
Industry Coverage: mining, metals production.
Case Interview Question #00641: The client Newmont Mining Corporation (NYSE: NEM, TSX: NMC) is
a gold mining company based in Greenwood Village, Colorado, USA. The Company’s operating
segments include North America, South America, Asia Pacific and Africa. As one of the world’s
largest producers of gold, Newmont has active mines in Nevada, Indonesia,

Australia, New Zealand, Ghana and Peru. As of December, 2010, Newmont produced approximately 5.4
million equity ounces of gold annually. Other metals that the company mines include copper and silver.
Recently, Newmont is going to exploit a mine in Peru that is expected to be full of a very unique gold ore.
The CEO of Newmont has asked us in which order his mining team should extract the gold ore from the
field. The gold ore will then be sent to a nearby factory that his company already owns. How would you go
about analyzing the case and coming up with a solution?
Additional Information: (to be given to candidate if requested)
 The field is divided in cells of equal size. Once you blow one cell there is no way the truck can
pass through it to go to the factory.
 Each cell has different gold ore content and therefore each cell has a different cost of extraction.
 Trucks enter the factory with rocks containing 1% of gold ore. The output is 100% gold ore.
 For sake of simplicity, assume there will be no growth in population.
Below is a plan of the gold mining plant in Peru:
Recommended Approach:
The interviewer is testing whether the candidate can identify a useful algorithm to determine the best way
to extract gold ore from this field. The candidate should not initially waste any time developing one idea
too fully; instead he/she should come up with a few reasonable suggestions and test them for validity with
the interviewer. The candidate should, like in most cases, be aware that he/she is missing critical
information and should identify what he/she needs to solve the case and then ask the interviewer for this
data.
Possible Solution:
Interviewer: So, tell me how we might approach this problem for our client?
Candidate: First, I would like to make sure that I fully understand our client’s needs. Let me repeat the key
issues: our client wants us to provide him with a recommendation on what approach his mining team
should take to extract the gold ore in order to maximize profits.
Interviewer: Yes, that pretty much sums it up. So, what’s next?
Candidate: I can imagine a number of different ways of prioritizing which cells to take out first, such as:
1. Profit: Profits = Revenues – Costs = Price * Volume – Costs.
2. Demand: Outlook of the price of the different types of gold ore. If the price is low (perhaps because
demand today is lower), but we believe that this same ore will be sold for much more in the future
(perhaps due to an increase in demand), it could make sense to begin extracting lower concentration
cells.
I am imagining that this could be similar to the oil industry. Think for example about the price of oil. The oil
is in the field anyway, so it’s better to exploit the places with the least of oil when the oil price in the
market is at a low level. Unless, of course, we can store the gold ore for long periods of time without a
large opportunity cost by tying up capital and space.
3. Capacity of the plant: Maybe there is a minimum level we need to provide to the plant as input. Maybe
there is a maximum. This could determine how much we want to extract in any given time period,
especially, if there are penalties for operating outside of this min-max range.
4. Operational issues: For example, if I dig a hole in the ground and the truck cannot pass through that
cell, it may be wise to start at the cells that are further from the factory so that I do not block off routes.
Interviewer: OK, let’s assume that the points that you have raised are all reasonable. This is a complex
business and I was pleased to hear you touch on many of the important points. But, first, let’s focus on
profits. How would you define profit?
Candidate: OK, in this case profits would be (price of a ton of gold ore) * (expected content of ore in cell)
– (the cost of extraction for that cell). I will then rank each of the cells based on its overall profit
contribution and determine my extraction path from there. Of course, we need to consider that if we
extract from one highly profitable cell, but it cuts off access to a lesser, but still profitable, cell, this is a
cost of doing business under this assumption and should reduce my overall expected profits.
Interviewer: Let’s assume that we map the field and this is what we get:
x = tons of gold ore in that cell

C = cost of extracting in that cell in thousand dollar
Candidate: Do we have any information on today’s price of the gold ore?
Interviewer: Yes, our client expects to get $10,000 dollars per ton of gold ore.
Candidate:
 For Cell 1 the profit will be: 1 * $10,000 – $3,000 = $7,000.

 For Cell 2 would be: 1.3 * $10,000 – $10,000 = $3,000.
 For Cell 3 would be: 1.1 * $10,000 – $5,000 = $6,000.
So I will start for Cell 1, then Cell 3 and finally exploit Cell 2.
Interviewer: OK. What if price changes? Does it change your decision?
Candidate: Yes.
Interviewer: Why?
Candidate: Let’s say price is now $30,000 per ton.
 For Cell 1 the profit will be: 1 * $30,000 – $3,000 = $27,000.

 For Cell 2: 1.3 * $30,000 – $10,000 = $29,000.
 For Cell 3: 1.1 * $30,000 – $5,000 = $28,000.
So I would recommend extracting Cell 2, then Cell 3 and finally Cell 1. This is based on the fact that the
costs appear to be fixed and do not change despite the overall price fluctuations that we are discussing.
Interviewer: Let’s move on. Our client has told us that per ton Profit and Loss (P&L) statement is as
follows…wait, perhaps you could tell me how you would construct it?
Candidate: I would try to find out the average price, the average cost of goods sold (COGS) and then
assign some part of the SG&A (Selling, General and Administrative Expenses) costs.
Interviewer: OK. Here are the figures that our client provided. What is the company’s break-even point?
Item $1,000 per ton
Revenue
s 1.0
COGS 0.8
SG&A 0.6
Profit -0.4
Candidate: OK. The company has $200 gross margin per ton of gold ore, before we factor in SG&A costs.
So, if I divide SG&A by the gross margin I will find how much they have to produce. In this case, $0.6 /
$0.2 = 3, which means they have to produce 3 times more to cover fixed costs.
Interviewer: How the same P&L would look like?
Candidate: Basically, we have to divide the SG&A by 3. We are in essence spreading the fixed SG&A
costs across more units. However, we would need to make sure that SG&A does not increase with
volume of gold ore extracted.
Item $1,000 per ton
Revenue
s 1.0
COGS 0.8
SG&A 0.2
Profit 0.0
Interviewer: Good, can you summarize what we have identified so far?
Candidate: Sure. Our client was looking for a framework to identify the order in which he should extract
cells of ore from a field. We chose to focus on profitability as the main driver. As mentioned, but not
discussed in depth, profitability includes the core components of price per ton of ore, cost to extract the
cell (which appears to be fixed), but also the cost of not being able to access a cell for extraction.
Once we have calculated the profits per cell our client can draw out a map to understand which cells to
extract and when in order to maximize his P&L. Next we discussed the company’s P&L and identified that
SF&A costs are relatively significant and appear to be fixed. This means that we would want to extract
more ore in order to spread these costs across production and increase overall profitability.
Interviewer: Great. Thank you.
Delivery Service Startup Zipments Receives VC Funding

Case Type: new business; quantitative case, math problem.
Consulting Firm: Siemens Management Consulting first round summer internship job interview.
Industry Coverage: freight delivery, shipping services; small business, startups.
Case Interview Question #00640: The client Zipments is a British startup company based in a small
village 300 miles away from Central London. The company provides local businesses and individuals with
fast and affordable package delivery and courier service. After receiving fundings from a prominent
venture capital firm, the CEO and Founder of Zipments recently has hired your
consulting team to help them decide how many delivery trucks to lease.
There are three different truck models available, but our client has been told that he will need to have a
consistent fleet, meaning they can only lease one model type. So, we will also need to identify what
model he should lease for his company. This company provides the local delivery of packages sent to this
village through UPS next-day delivery service.
How would you suggest approaching the client’s problem?

1. A quick overview of how the Zipments company operates:
 They receive every package at 5pm from UPS
 a bunch of people hired by the company then sort the packages and
 load them on a truck where they are stored overnight
 then they deliver the packages starting at 9am for 10 hours.
2. The startup company Zipments operates five days a week: Monday – Friday
 Number of packages delivered per day: 1,000.
 Dimension of package (envelope) is 1 * 1 * 1.
 It takes 8 minutes, on average, to deliver a single package and to be ready for the next one
(“assume they deliver one every 8 minutes”).
3. There are three different truck models available for lease:
 Truck A costs $150 per day and its dimensions are 3 * 4 * 5.

 Truck B costs $40 per day and its dimensions are 9 * 2 * 1.
 Truck C costs $130 per day and its dimensions are double the size of truck A, or 6 * 8 * 10
Drivers, fuel, etc. are not considered and do not make a material difference to the analysis (for the sake of
simplicity). The case will also include additional questions not addressed in the initial scope.
Possible Answer:
This quantitative case tests a candidate’s ability to analyze how many packages must be delivered and to
see if the bottleneck is the time or the truck size. Not all information is provided up front to the candidate;
he/she should be aware of this and must identify additional data that will allow him/her to solve the case.
Interviewer: So, how would you go about analyzing this problem?
Candidate: I’d like to understand a few things to evaluate this decision. First, I would like to start by
analyzing the demand. I would like to know how many packages we have to deliver and how long, on
average, it would take us to deliver a single package. Then, I would like to analyze the numbers in the
context of the three truck models our client can lease.
Interviewer: OK. We can satisfy a demand of 1,000 packages per day and it takes 8 minutes on average
to deliver each one.
Candidate: So, 8 minutes per package * 1,000 packages / 60 minutes per hour / 10 hours = 13.3 trucks.
So we need at least 14 trucks. I would like to think about the leases we can consider.
Interviewer: Ok. Let me show you the information we received from the client:
Truc
k Cost per day Dimensions
A $150 3*4*5
B $40 9*2*1
C $130 6*8*10
Truck A cost $150 per day and its dimensions (for the packages) are 3*4*5. Oh, by the way, you did not
ask about the average size of an envelope, but our client has told us that the average size is 1*1*1.
Candidate: OK, so when assessing Truck A we multiply 1,000 (total packages for all trucks) by 1*1*1
(average package size) and divide by 3*4*5. We will know how many trucks we would need of the Truck
A model. My calculations show 1000/(3*4*5) = 16.6 which would mean we would need 17 of this type of
truck. As 17 is more than the time constraint of 14 truck to ensure on-time delivery, we stick with 17.
So, this is the result of performing this analysis for each type of truck:
Truc Cost per # trucks

k day Dimensions # trucks (rounded) (minimum) Total cost per day
A $150 3*4*5 1000/(3*4*5) = 17 17 $150 * 17 = $2,550
B $40 9*2*1 1000/(9*2*1) = 56 56 $40 * 56 = $2,240
C $130 6*8*10 1000/(6*8*10) = 3 14 $130 * 14 = $1,820
Now, from a pure financial analysis, I would recommend leasing 14 trucks of the C Model because it will
allow our client to minimize the cost while ensuring on-time delivery (customer satisfaction). On the other
hand, we also might consider that there would be plenty of room for delivering other things if they can
figure out how in the future.
Interviewer: OK, it seems a good idea. Let’s move on to the next part of the case. Now imagine 6 months
have passed and your recommendation was pretty successful. Now the CEO of the Zipments startup
want us to investigate any potential risks that he should be assessing/considering.
Candidate: Can I take a minute to organize my thoughts?
Interviewer: OK.
Candidate: So, I would like to go over this problem by analyzing both internal and external factors. Here is
a list of the things I would think about:
Internal
 Need for extra drivers (e.g., people get sick) – do we have enough employees
 Unionized drivers may shift labor cost up in the future
 Need to lease more trucks because trucks can break down causing late delivery
 Insurance costs
 Extra fine tickets than forecasted because drivers want to deliver on time
External
 Only one supplier (UPS) – we are captive to UPS

 Adoption of new technology (e-mail) might reduce the need for sending packages
 Government regulation
 New competition in the city – there are no real barriers to entry, since UPS would likely partner
with any carrier who can deliver on customer service metrics at a cheaper cost
 No association with our brand, thus our supplier can switch to our competitors or start its own
operation
Obviously, I could analyze the sorting operation more to make a more profound (exhaustive) analysis but
that was not covered on our initial discussion.
Interviewer: Don’t go that direction. Let’s think of another scenario. Now we have to investigate sources
for profit growth for this startup company with one restriction, we can neither add new truck leases nor
change the existing ones.
Candidate: OK. Let me think about increasing revenues:
 Extend hours: the trucks are already paid for the day, if we extend the delivery time after 7pm we
can deliver more of UPS or from other companies, even local companies. That would go (impact)
directly to profits.
 Different packages: we may recommend to UPS to sell different (more robust) packages to some
clients and get part of it.
 Pick packages: every time we leave a package we make space to pick a package and deliver it to
another part of the village or to give it back to UPS to send it to another place.
 Get contract with a new operator: see whether we can deliver stuff to other company who is in the
delivery business but does not compete directly with UPS.
 Since we can not add new trucks we can think about utilization of current trucks.
 Advertisement: are the trucks painted with UPS logos? We can sell advertisement to them or to
other companies. Those trucks are all day in the street.
 Insurance: offer insurance of packages to clients.
Interviewer: What else?
Candidate: We can also think about streamlining operations (reducing costs). I would think about them in
terms of fixed and variable costs.
 Evaluate the route of each truck to reduce time or usage of gas (fuel)
 Improve technology usage in the sorting and loading packages. May reduce number of people at
the factory
 Re-negotiate leasing terms for trucks
 Move warehouse to a cheaper place
Interviewer: OK, we are running out of time, but thank you for the list of business challenges that the client
should assess, I am sure that some of these will lead to very interesting discussions.
China Southern Airlines to Fly New Guangzhou-Perth Route

Case Type: new product; math problem.
Consulting Firm: Bain & Company first round summer internship job interview.
Case Interview Question #00627: Our client China Southern Airlines Company Limited is an airline
headquartered in Guangzhou, Guangdong Province, People’s Republic of China. It is the world’s sixth
largest airline measured by passengers carried, and Asia’s largest airline in terms of both fleet size
and passengers carried. China Southern Airlines is one of China’s “Big Three”
airlines, alongside Air China and China Eastern Airlines. From its main hubs at Guangzhou Baiyun
International Airport and Beijing Capital International Airport, the airline flies to 121 destinations.
The client already operates two daily flights from Guangzhou, China to Sydney, Australia, offering
connections to Perth, Sydney. The CEO of China Southern Airlines has hired your consulting firm Bain to
evaluate a new direct flight between Guangzhou and Perth. Should they create this new route from
Guangzhou to Perth?
1. Market
 At this point there is no other airline flying from Guangzhou to Perth, and there is only one
competitor Qantas Airways flying from Guangzhou to Sydney. Sydney to Perth is a domestic route
with one competitor.
 The market grows with GDP.
 15% of passengers from Guangzhou to Sydney (or return) have Perth as the original or final
destination
 China Southern Airlines’ current load factor in Guangzhou to Sydney flight is 80%
 Ticket price to fly from Guangzhou to Sydney or Guangzhou to Perth is $600 one way
2. Flight distance
 Guangzhou – Sydney = 4,800 miles

 Guangzhou – Perth = 3,800 miles
 Sydney – Perth = 2,350 miles
3. Aircraft type
 Airbus 319 (120 seats) has a maximum fly range of 4,000 miles
4. Costs
 Airbus 319 (120 seats) has a fixed cost of $41,000

 Airbus 320 (165 seats) has a fixed cost of $62,000
Possible Answer:
Interviewer: So, how would you go about analyzing this case?
Candidate: (Summarize the case and work on a framework) This case requires us to estimate the
potential market size of route Guangzhou-Perth, the growth opportunity, the competition as well as our
client’s resources. Also, any legal or governmental issue should be discussed.
Interviewer: OK. How would you estimate the market size (demand) for the Guangzhou-Perth route?
What do you need to know? I have been working with this client for a long time and might have the
needed information.
Candidate: Although we could estimate the size of the market, it might be more reasonable to look at the
current information the client company has about the indirect route. I would believe many passengers
already fly from Perth to Guangzhou by connecting flights in Sydney, right?
Interviewer: Correct.
Candidate: So I would like to find out the number of flights per day, the number of passengers per flight
and the percent of these passengers that actually have Perth as the origin or destination.
Interviewer: Very well thought. It is a smart decision to start more conservative. Our client China Southern
Airlines currently flies twice a day from Guangzhou to Sydney and back. It currently operates Airbus 320
in this route, with 80% load factor. 15% of the passengers have Perth as the origin or destination. I can
also tell you some aircraft limitations:
Candidate: This gives us 165 * 80% = 132 passengers per flight or 132 * 2 = 264 passengers per day
(one way), of which 15% or 40 have Perth as the origin (and final destination). We should have in mind
that if the client offers the new Guangzhou-Perth direct flight, it will reduce the load factor of the
Guangzhou-Sydney route from 80% to 68%.
Aside from our own cannibalization, I would expect that by offering this new route our client China
Southern Airlines will be able to take customers from its competitors, right? Actually, does the client have
any competition on its current routes?
Interviewer: There is only one competitor flying from Guangzhou to Sydney, but this competitor has a
code-share agreement with a domestic airline that flies from Sydney to Perth. From Guangzhou to
Sydney the competitor flies an A330 (240 seats) daily with the same 80% load factor. Also, 15% of its
passengers have Perth as the origin or final destination.
Candidate: This gives us an additional 240 * 80% * 15% = 30 passengers/day. Before we conclude that
our client will be able to steal these customers from the competition, let’s analyze the pricing points. Do
you have any information of prices?
Interviewer: Both our client and the competitor charge $600 per one way from Guangzhou to Sydney or
Guangzhou to Perth.
Candidate: It is interesting to see that the passenger pays the same fare to fly from Guangzhou to Sydney
(4,800 miles) and from Guangzhou to Perth (4,800 + 2,350 = 7,150 miles). So basically we have the
same price and potentially a faster trip. Unless we find any competitive advantage other than travel time,
we could assume our client is able to steal all the Guangzhou-Perth customers from the competitor.
I would also imagine that by entering into this route our client would have first-mover advantage and the
competitor would not enter this route if they didn’t think that it could steal share from our client.
Interviewer: This makes sense. Basically you have estimated a conservative demand. What else would
you analyze?
Candidate: We know the potential demand; although there is an expected growth in the industry let’s see
whether this route would be currently profitable. What do we know about the cost structure?
Interviewer: The total fixed cost of operating A319 and A320 are $41,000 per flight and $62,000 per flight
respectively. There are some variable costs, but they are marginal.
Candidate: Basically for route Guangzhou-Sydney the client must use an A320, but A319 is an option for
route Guangzhou-Perth. Let’s analyze the daily revenue, cost, and profit for each route:
Revenues from Guangzhou to Sydney: (165 * 80% * 85%) * $600 = $67,320

Cost for Guangzhou to Sydney: $62,000 (A320)
Profit: $67,320 – $62,000 = $5,320
Profit margin: $5,320 / $67,320 ~= 8%
Revenues from Guangzhou to Perth: (40 + 30) * $600 = $42,000

Cost for Guangzhou to Perth: $41,000 (A319)
Profit: $42,000 – $41,000 = $1,000
Profit margin” $1,000 / $42,000 ~= 2.4%
I am assuming the client could use the A320 for the main Guangzhou to Sydney route and A319 for the
new Guangzhou to Perth route. As we can see, the former route will remain profitable (8%) and the new
route will give a 2.4% margin.
Interviewer: So, what is your conclusion?
Candidate: Taking into consideration that a 2.4% margin is not a very bad number for the airline industry
and that our assumption does not take into consideration an additional demand generated by the new
faster route from Guangzhou to Perth, the client should at least launch a trial of this new route. The
former route, from Guangzhou to Sydney, will remain profitable.
Interviwer: Very good. Thank you.
Note:
This is a typical Bain style case. The interviewee should feel free to bring in their understanding of the
airline industry as they see fit. This was a real case that the interviewer (a manager at Bain & Company)
had worked on during his time at Bain. The interviewee should take some time to structure his/her
thoughts before discussing the case.
The interviewer was expecting the interviewee to structure a framework, which would look at the big
picture that any MBAs should have in mind about the airline industry. A strong candidate would have to
arrive into final numbers as well as in a final conclusion.
Some important elements are:
 First player in the market

 Cannibalization and complementary business
 Discuss trade-offs
Southwest to Offer Free Flight Ticket for Children Under 14
Consulting Firm: Seabury Group first round full-time job interview.
Case Interview Question #00608: Our client Southwest Airlines (NYSE: LUV) is a large low-cost carrier
in the United States headquartered in Dallas, Texas. As of November 2012, Southwest Airlines operates
scheduled service to 78 destinations in 39 states. The airlines does not use the more traditional “hub and
spoke” flight routing system of most other major airlines, preferring instead the
“Point to Point” system. Therefore, it has notably large operations in certain airports.
Recently the President and CEO of Southwest Airlines has hired Seabury Group to evaluate a
promotional campaign for one of its routes, both in terms of the economics and risks involved. The
promotion aims to offer full fare passengers a complimentary ticket for one child under the age of 14 on
the same flight. Should they implement this promotion? What are some of issues that must be
considered?
Suggested Approach:
This case was given by a former Bain consultant, involving the airline industry and it is a typical Bain style
case. This was definitively a real case scenario, and the interviewer had clearly had that experience
before. The candidate should take the time to structure his/her thoughts before starting discussing the
case.
The interviewer was expecting the candidate to structure a framework, which would look at the big picture
that any MBAs should have in mind about the airline industry. A strong candidate would have to arrive
into final numbers as well as in a final conclusion.
Some important elements of the case were:
 Contribution margin (breaking down fixed costs and variable costs)

 Consumer behavior
 Market segmentation
In this case, the candidate focuses only on the full-fare passengers. The numbers would be different if the
candidate focuses on both sets of fares. For simplicity, try to make the candidate focus on the full fares.

1. The specific route that Southwest Airlines is planning to launch the promotional campaign is between
Chicago Midway International Airport and Las Vegas McCarran International Airport.
 Seats available: 1,500,000 per year

 Seats sold: 1,000,000 per year
2. Customer segmentation: Business (50%) and Leisure (50%) passengers
3. Only two types of tickets:
 Full fare ($300 one way)

 Discount fare ($100 one way)
4. Of Business passengers: 100,000 fly discount, 400,000 fly full fare
5. Marginal cost of $10 per passenger per trip
6. Percentages of children travelers will be given in the case
Possible Solution:
Candidate: (Summarize the case and work on a framework). This case requires us to estimate the
financial impact of this promotion – revenue, cost and profit – as well as the risks involved. We want to
anticipate any legal or governmental issue and competition response, and evaluate internal constrains,
consumer behavior and market demand.
Interviewer: OK. I have some data available if you need. How would you go about estimating the
economics of this promotion?
Candidate: I will start this analysis by looking at Profit = Revenues – Costs. I will break down Revenues
and Costs respectively as Price * Volume and Fixed Cost + Variable Cost.
Let me start with Revenues first. Although we could estimate the size of the market for this route (to
calculate for Volume), it might be more reasonable to look at the current information the company has
about this route. What is the current sales load factor of our client’s Chicago-Las Vegas route?
Interviewer: Our client offers 1,500,000 seats per year, of which only 1,000,000 are usually sold
(passengers that have actually flown during the year).
Candidate: This represents a 66.7% load factor. In terms of pricing, how many different fares does our
client sell?
Interviewer: What do you think?
Candidate: I can think of First Class, Business, Economy, and Discounted.
Interviewer: Actually our client Southwest Airlines only has two different price points, Full fare and
Discount. Full fare is $300 one way and Discount is $100 one way. Discount fare is usually sold al least 3
weeks in advance of the departure date.
Candidate: Do we know the share of each?
Interviewer: Fair enough. 40% of the customers travel with discount tickets.
Candidate: So I am assuming 400,000 passengers were discount and 600,000 were full fares. Let me
estimate the total revenue.
400,000 discount passengers * $100 fare + 600,000 full-fare passengers * $300 fare = $220,000,000
Interviewer: Perfect. What would the contribution margin be?
Candidate: As I said before, I will break down costs into Fixed and Variable Costs. Aircraft leasing, crew,
maintenance and airport staff are some of the fixed costs. Variable costs are actually marginal, such as
meals and ticketing. Fuel would be primarily fixed but would also change according to the number of
passengers.
Interviewer: What about if I told you that we outsource luggage handling?
Candidate: Then it would become a variable cost.
Interviewer: Right. We ran some calculations and found out that the variable cost is $10 per passenger
per one-way flight.
Candidate: So we should then segment the customer base to estimate the economics of the promotion.
Before I start doing so, let me discuss the possible outcomes of this promotion:
 Some of the current passengers might end up bringing their children for free, without generating
any additional revenue.
 Business passengers might get upset with the increase in the number of children on board.
 Competition might start a price war.
 Loss of revenue because current paying passengers (children) might get to travel for free.
 Customers might get used to the promotion (consumer behavior) which would negatively impact
the company in the case of a fare increase or cancellation of this promotion.
Interviewer: Very good points. How would you go about segmenting the customer base then?
Candidate: I guess we could break it in business and leisure travelers.
Interviewer: That is correct. Out of the discount tickets, 100,000 are business travelers. Out of the full
fare, 400,000 are business travelers.
Type Business Leisure Total
Full fare 400,000 200,000 600,000
Discoun
t 100,000 300,000 400,000
Total 500,000 500,000 1,000,000
Candidate: (Set up data table and run the calculations) So basically on the other end of the 500,000
business travelers, we have 500,000 leisure travelers. We should also estimate the number of
passengers that would bring kids along. I believe we should only focus on full fare passengers because
with a fare of $300, because even with an additional passenger for free the full fare price would still be
higher then purchasing two discount tickets.
Interviewer: Good point. We ran a marketing research and found out that out of the business travelers,
none of the them are currently traveling with children, and only 10% would bring children after the
promotion. Out of the leisure passengers, on average 50% of them have children, and 50% of those with
children are currently traveling with children. After the promotion, all of the full fare leisure passengers
with children would bring children with them.
Candidate: So, for full fare passengers, the percentage of people who bring children with them are:
Type Business Leisure
Before promotion 0 50% * 50% = 25%
After promotion 10% 50% * 100% = 50%
Most likely after the promotion we will face the following scenario:
 We will lose 50,000 paying children passengers: current full-fare child leisure paying passengers
who would be flying for free with their parents = 200,000 * 25% = 50,000
 We will gain 50,000 new children flying for free with leisure passengers: 200,000 * 50% * 50% =
50,000
 We will gain 40,000 new children flying for free with business passengers: 400,000 * 10% =
40,000
What do we know about new passengers that will be attracted by this promotion?
Interviewer: The research shows 150,000 new customers attracted by this campaign.
Candidate: This is equal to an additional 300,000 passengers (150,000 paying customers along with their
children). Let’s see the total impact on margin:
 Total demand: 1,000,000 (existing) + 50,000 + 40,000 + 300,000 (new customers) = 1,390,000.
This number is still below the total capacity of 1,500,000 passengers per year.
 Losing contributed income: 50,000 * ($300 – $10) = $14,500,000 in contribution margin.
 Additional cost from non-revenue passengers: (50,000 + 40,000 + 300,000) * $10 = $3,900,000
 Additional revenue from new passengers: 150,000 * ($300 – $10) = $43,500,000
 Net additional margin = $43,500,000 – $14,500,000 – $3,900,000 = $25,100,000
Interviewer: Are you sure this is your final number?
Candidate: Absolutely not. As I previously said, we should expect to lose some business passengers
which won’t be satisfied with the increase in the number of children on-board.
Interviewer: Our research shows that 50,000 business passengers won’t fly with Southwest Airlines
anymore because of that.
Candidate: This represents a loss of contribution margin of 50,000 * ($300 – $10) = $14,500,000. But still,
our initial number $25,100,000 – $14,500,000 = $10,600,000
Interviewer: You are right. Before we analyze whether there are other costs that you haven’t considered,
what could our client do to minimize this loss of business passengers?
Candidate: Our client could try to create different lines for boarding, different check-in lines and keep
children seated in the back of the airplane.
Interviewer: I like your idea of different lines for boarding. Any other cost to be considered?
Candidate: We discussed the $10,600,000 of contribution margin, but we did not discuss overheads and
sales expenses.
Interviewer: Actually this promotion will cost our client $3,000,000 per year.
Candidate: This leaves $7,600,000 as a net result of this promotion.
Interviewer: So, what is your conclusion?

Candidate: I would recommend the promotion.
Ethiopia to Reduce Adult Mortality Due to Injuries

Consulting Firm: Bridgespan Group final round job interview.
Industry Coverage: government & public sector.
Case Interview Question #00582: Ethiopia, officially known as the Federal Democratic Republic of
Ethiopia, is a developing country located in the Horn of Africa. With more than 84 million inhabitants,
Ethiopia is the second-most populous nation on the African continent, and the tenth largest by area,
occupying 1,100,000 square kilometers.

Your Client is the Minister of Public Health and Safety of Ethiopia. The minister has asked you to help
determine the best way to allocate the Ministry’s available funds. The health ministry has sufficient funds
to reduce death from any one and only one of the three following causes by 5% (each costs the same):
1. Infant mortality due to malaria (malaria kills 10% of children under the age of 5)
2. Adult Mortality due to injuries (half of all citizens who make it to age 5 die before reaching their 60th
birthday at an average age of 30 years; of
those, 10% die from injuries)
3. Senior mortality due to infections (of those who survive to age 60, 40% die from infections and 60% die
of natural causes)
For the sake of this case, assume that malaria effects only infants, injuries effect only adults between 5
and 60, and infections effect only seniors. What are an Ethiopian citizen’s chances of dying from each of
these three causes? What are the “life years” lost from each cause? What cause of death do you
recommend the Minister of Public Health address?
Additional Information: (to be given to you if asked)

Exhibit 1: Life Expectancies and Ages
 Life expectancy at birth is 48 years

 The average victim of malaria is 2 years old
 The average victim of injuries is 30 years old
 The average victim of infections is 70 years old
 The average victim of natural causes death is 80 years old
Possible Solution:
Good organization and structure is essential in this quantitative case. The math gets very complicated,
and so allow simplifications (simple rounding won’t change the final answer by a lot). Also, if the
candidate cannot do all of the calculations or steps, just ask what sort of analysis he or she would do with
more time. The candidate should take the following steps:
 Set up the death rates issue tree as provided in the prompt.

 However, this does not address life expectancy. The candidate needs the life expectancy and / or
age at each node of the issue tree. So, the interviewer should provide Exhibit 1 upon request.
 Then, the candidate should be asked to evaluate how each cause of death affects the “life years”.
These calculations are shown for each cause of death:
malaria, injuries, then infections.
 Lastly, the candidate should compare the final numbers and make a moral judgment about what
he / she values most.
1. Diagram of Death Rates
This diagram (an issue tree) below calculates the death rates from the three causes of death in the
prompt: childhood malaria, adult injuries, and senior infections.
Of every 100 people born:
 10% die from malaria before they reach 5: 10 people

 90% live: 90 people. Of the 90 people who make it to age 5:
 50% die before reaching their 60: 90 * 50% = 45 people. Of these 45 people:
 10% die from injuries: 45 * 10% = 4.5 people
 90% die from other cause: 45 * 90% = 40.5 people
 50% live to age 60: 90 * 50% = 45 people. Of these 45 people:
 40% die from infections: 45 * 40% = 18 people
 60% die of natural causes: 45 * 60% = 27 people
Therefore, each citizen’s chances of dying from each of these three causes are:
 Malaria in childhood = 10/100 = 10%

 Injuries between ages 5 and 60 = 4.5/100 = 4.5%
 Infections after age 60 = 18/100 = 18%
2. Calculate Life Expectancy
Now the candidate can calculate the total life expectancy. But, ask the candidate which cause of death
leads to the greatest loss of “life years”.
Of every 100 people born:
 10% die from malaria before they reach 5: 10 people. Their average age = 2
 50% die before reaching their 60: 90 * 50% = 45 people. Their average age = 30.
 40% die from infections: 45 * 40% = 18 people. Their average age = 70.
 60% die of natural causes: 45 * 60% = 27 people. Their average age = 80.
Therefore, we have the following data to calculate life expectancy:
Ag
e Percent
2 10%
30 45%
70 18%
80 27%
Weighted average: 2 * 10% + 30 * 45% + 70 * 18% + 80 * 27% = 47.9
3. Calculate “Life Years” Loss From Malaria
Calculate the number of “life years” lost by each cause of death. To do this, calculate the life expectancy
by removing one cause of death to see its effect on the life expectancy. Then, combine the original life
expectancy and the new life expectancy, weighting each by the number of lives.
So, of every 100 people born:
 0% die from malaria before they reach 5.

 40% die from infections: 50 * 40% = 20 people. Their average age = 70.
Therefore, we have the following data to calculate life expectancy without malaria:
Ag
e Percent
2 0%
30 50%
70 20%
80 30%
Weighted average: 30 * 50% + 70 * 20% + 80 * 30% = 53.0
This is a gain of 53.0 – 47.9 = 5.1 years.
Another way to interpret the 5.1 years: Remember that malaria kills 10% of the population at age 2, rather
than at age 53, and so each malaria death means a loss of 51 expected years. Thus, the total expected
loss of “Life Years” from malaria = 51 * 10% = 5.1 years.
4. Calculate “Life Years” Loss From Injuries
Do the same step as was done for malaria, but now for injuries. Previously, 4.5 people died from injuries,
but now they live, and so they move from the “die from injuries” to “die from other causes, or die from
infections, or natural causes”. These 4.5 people should be distributed to the other three categories
according to their previous chances.
 10% die from malaria before they reach 5 years old: 10 people. Their average age = 2
 50% die before reaching their 60: 90 * 50% = 45 people. Of these 45 people:
 Previously, 10% die from injuries: 45 * 10% = 4.5 people. Now, 0% die from
injuries. These 4.5 people either die from other cause, or die from infections, or die of natural
causes. The 4.5 people who no longer die of injuries need to be distributed to the other three
outcomes:
 (40.5 / 40.5 + 45) * 4.5 = ~2.0 to “other cause”
 (18 / 40.5 + 45) * 4.5 = ~1.0 to “infections”
 (27 / 40.5 + 45) * 4.5 = ~1.5 to “natural causes”
 Previously, 90%, or 40.5 people die from other cause.
 Now, 40.5 + 2 = 42.5 people die from other cause.. Their average age =
30.
 18 people die from infections. Now, 18 + 1 = 19 people. Their average
age = 70.
 27 die of natural causes. Now, 27 + 1.5 = 28.5 people. Their average age
= 80.
Therefore, we have the following data to calculate life expectancy without death from injury:
Ag
e Percent
2 10%
30 42.5%
70 19%
80 28.5%
Weighted average: 2 * 10% + 30 * 42.5% + 70 * 19% + 80 * 28.5% = 49.05

Another way to interpret the 1.15 years: “Other cause” people gain 0 years, “infections” people gain 40
years (from 30 to 70), and “natural causes” people gain 50 years (from 30 to 80), for a weighted average
gain of 25.5 years for each of the 4.5 people who don’t die of injuries. Or, an increase in total life
expectancy of (25.5 * 4.5% ) = 1.15 years.
5. Calculate “Life Years” Loss From Infections
This is the easiest step, do the same logic as before. The 18 people who died of infections now die of
natural causes.
 10% die from malaria before they reach 5: 10 people. Their average age = 2
 0% die from infections. Their average age = 70.
Therefore, we have the following data to calculate life expectancy without death from infections:
Ag
e Percent
2 10%
30 45%
70 0%
80 45%
Weighted average = 2 * 10% + 30 * 45% + 80 * 45% = 49.7

Another way to interpret the 1.8 years: Of the 18 people who previously die of infections, now they all die
of natural causes (from 70 to 80 years old, gaining 10 years each). And so, 18% of the population gains
10 years, so total expected life years gained = 10 * 18% = 1.8 years.
6. Wrap It Up
Now the candidate should compare the different losses: lives lost versus “life years” lost. This is a
moral/ethical judgment that the candidate has to make. If the candidate asks what the health minister
values more: lives or life-years — tell the candidate that the health minister wants the candidate to make
the choice and explain that choice.
As a “cherry on top”, the candidate can discuss net GDP lost to society as a third variable to consider (the
interviewer can prompt for this discussion as well). Children who die from malaria haven’t used up many
resources yet. Their parents can often reproduce again. Seniors are typically past their prime productive
years. 30-year olds have consumed a lot in terms of energy from their parents and education from the
community and are only in the middle of paying back this debt to society. They often leave families behind
who then look to the government or other community entities for support. Thus, 30-year-olds’ deaths are
the most costly to a society.
Lives Lost “Life Years” Lost Sample GDP Loss
Malaria 10% 5.1 years 4%
Injuries 4.5% 1.15 years 10%
Infections 18% 1.8 years 1%
7-Eleven to Renew Gas Contract with Same Supplier

Consulting Firm: Booz & Company second round job interview.
Case Interview Question #00570: You have been approached by the CEO of 7-Eleven, an international
chain of convenience stores headquartered in Dallas, Texas, United States. 7-Eleven, operating under
Seven-Eleven Japan Co. Ltd and owned by Seven & I Holdings Co. of Japan, is the world’s largest
operator, franchisor and licensor of convenience stores, with more than 46,000
outlets as of 2012.
In the United States, 7-Eleven stores all have gas stations where they sell branded gas. The CEO has
been using the same supplier of gas for the past 20 years. The contract with this gas supplier is coming
up for renewal and the CEO is considering his options, either: renew the contract, sign a contract with a
different gas supplier, or start his own new brand of gas. What do you recommend, and why?
1. Market
 Assume there are 2 levels of branded competitors for gas: high and low.
 Also assume there are 2 types of gas in the market: premium and regular.
 For high branded competitors, 20% of their volume sales are premium gas, 80% are regular.
 For low branded competitors, 10% of their volume sales are premium gas, 90% are regular.
 High branded competitors sell 90,000 gallons of gas per month on average, while low branded
ones sell 110,000 gallons of gas per month on average.
2. Company
 Currently 7-Eleven is using mid-premium gas supplier: right in the middle of premium and regular
(so the client’s prices / profits are in the middle of high and low brands).
 Gas quality is pretty much the same from different suppliers. There is a perceived difference, but
for our purposes, consider it negligible. For example, premium unleaded gas from Shell is of the
same quality as premium unleaded from ARCO (Atlantic Richfield Company).
3. Customers
 A report shows the following customer preferences in buying gas: 70% prioritize convenience
(location), 20% prioritize price, 8% prioritize quality (brand), and 2% prioritize other services (car
wash, air pump, convenience store, etc).
4. Profits
 There is a $0.30 difference between premium and regular gas prices at high branded gas
stations; while this difference is $0.20 at low branded gas stations.
 Low branded competitors sell regular gas for $3.67 and high branded sell it for $3.70.
 The profit margin on premium and regular gas at a low brand gas station is $0.15 per gallon and
$0.10 per gallon, respectively.
 Relative to low branded gas, for high branded gas, the cost per gallon of regular gas is $0.03
higher and cost of premium gas is $0.05 higher.
Possible Solution:
The various numbers presented in the “Additional Information” section are confusing if not drawn out
clearly. Below are some data tables to serve this purpose, and show how the numbers are used to
calculate profits.
Basically, A * B * C = Total Profit for each type of gas, then sum the profits for total profit of each brand. It
is by far the easiest to calculate the profit margin per gallon, then multiply by the number of gallons.
Table 1. Breakdown of Gas Volume (A)

Premium Regular
High-
brand 20% 80%
Low-brand 10% 90%
Table 2. Total Volume of Gas (B)
High-
brand 90,000 gallons
Low-brand 110,000 gallons
Table 3. Profit Margin of Gas per Gallon (C)
Premium Regular
 Price:  Price:
$4.00 $3.70
 Cost:  Cost:
High- $3.77 $3.60
 Profit:  Profit:
brand
$0.23 $0.10
 Price:  Price:
$3.87 $3.67
 Cost:  Cost:
$3.72 $3.57
Low-brand  Profit:  Profit:
$0.15 $0.10
Table 4. Total Profits (A * B * C)
Premium Regular Total Profits
 Revenue: 90,000 * 20% *  Revenue: 90,000 * 80% *

High- $4.00 = $72,000 $3.70 = $266,400 $4,140 + $7,200 =
 Profit: 90,000 * 20% *  Profit: 90,000 * 80% *
brand $11,340
$0.23 = $4,140 $0.10 = $7,200
 Revenue: 110,000 * 10% *  Revenue: 110,000 * 90% *
Low- $3.87 = $42,570 $3.67 = $363,330 $1,650 + $9,900 =
 Profit: 110,000 * 10% *  Profit: 110,000 * 90% *
brand $11,550
$0.15 = $1,650 $0.10 = $9,900
The difference between $11,340 and $11,550 is almost negligible: the profits from High-brand and Low-
brand are close enough to be exactly the same.
This case requires fast sizing of what is important, some numbers, and then a broader perspective about
which approach to take. The profitability is the same if using a high-brand versus a low-brand, and so
there should be a discussion about the marketing issues in using a new brand versus keeping the existing
one. In addition, there are risks to changing suppliers. Also, there are enormous setup costs to starting a
new brand.
The interviewer should also press the candidate for marketing issues:
 How do the customer preference (70 / 20 / 8 / 2) relate?

 What do you look for when buying gas?
Conclusion: Probably, the best option for 7-Eleven is to continue using the same contract with the same
gas supplier. However, there are arguments to be made for using a new brand of gas based on the
company’s target customers, changing dynamics in the industry, etc.
Which Cowboy Will Walk Out Alive From a Truel?
Case Type: math problem; finance & economics.
Consulting Firm: Cornerstone Research first round job interview.
Industry Coverage: Agriculture, Farming, Aquaculture.
Case Interview Question #00557: There are three cowboys: Cowboy A, Cowboy B, and Cowboy C.
They are standing in an equilateral triangle in a truel (a three-person “duel”). Each cowboy has one gun
and one bullet and they all must shoot each other at the same time. Whoever Cowboy A shoots has a
100% chance of dying. Whoever Cowboy B shoots has a 60% chance of dying.
Whoever Cowboy C shoots has a 40% chance of dying. So, which cowboy is most likely to walk out
alive?
Note to Interviewer:
As the interviewer you should not allow the interviewee to apply any framework for this math, probability
and game theory related case. Just jump straight into the case and present the questions successively as
the candidate answers each one. Try to throw the candidate off pace by not allowing a framework and
changing the scenarios. It should feel very different for the candidate, but a well-practiced one will roll with
the punches and take a hold and drive the case.
Question #1: Which cowboy is most likely to walk out alive?
Possible Answer:
Calculate the probability of each cowboy dying:
 Cowboy A: (60% + 40% ) / 2 = 50%
 Cowboy B: (100% + 40% ) / 2 = 70%
 Cowboy C: (100% + 60% ) / 2 = 80%
Thus, Cowboy A is the most likely to walk out alive.
Question #2: In the previous situation, the cowboys didn’t know each other’s probabilities. Now assume
that the cowboys know everyone’s probabilities; then who is the most likely to walk out of there alive?
Possible Answer:
In this scenario, each cowboy will try to eliminate the stronger one of the rest two, in order for himself to
survive.
 Cowboy A will shoot Cowboy B because Cowboy C has higher chance of dying than B
 Cowboy B will shoot Cowboy A because Cowboy C has higher chance of dying than A
 Cowboy C will shoot Cowboy A because Cowboy B has higher chance of dying than A
Therefore, Cowboy C is the most likely to walk out alive.
Question #3: What is the relationship between parts 1 and 2? What exactly caused the change in the
most likely to survive?
Possible Answer:
There is an inverse relationship between the probability of survival and the amount of information known.
Being a better shooter makes the cowboy a more likely target, and thus hurts his probability of survival.
The key drive is the availability of information.
Question #4: Can you provide a business example of when having asymmetric information can lead to
different outcomes?
Possible Answer:
There are almost countless examples. An excellent candidate should brainstorm several and describe the
relation to each. Some examples are: international trade, corporate mergers and acquisitions, insider
trading, contract bargaining, government negotiations, new market entry, etc.
Riva Group to Exit Hot Roll Commodity Steel Production

Case Type: operations strategy; math problem.
Consulting Firm: Capgemini Consulting second round job interview.
Industry Coverage: metals production; manufacturing.
Case Interview Question #00542: Your client Riva Group is a large European steel manufacturing
company headquartered in Milan, Italy. The company had annual revenues of $6.8 Billion and operating
profits of $650 Million last year. Currently it is the world’s eighteenth and the third largest steel producer in
Europe. Its products include hot rolled flat steel, bars, iron rod and slabs.
The Riva Group operates integrated steel mills. Their competitors in Europe are 10 other integrated mills
(IM’s), using 150 year old blast furnace technology and 30 mini-mills (MM’s), all of which are smaller than
the IM’s. They use most modern technology, a method commercialized during the late 1970s. A process
flow diagram for both the technologies and the end product of each stage is given below (Figure 1).
Raw
materials Melt Cast Roll Finish Coat
Blast furnace -> Hot Cold Hot dipping line or

Integrated Ore, Coke, Basic oxygen Continuous rolling rolling Electro-galvanizing
mill Coal furnace caster line line line
Hot Cold Hot dipping line or

Electric arc Continuous rolling rolling Electro-galvanizing
Mini-mill Scrap furnace caster line line line
Hot Dip, Electro-

Product Melt Slab Hot roll Cold roll galvanized
Question #1: Ask the candidate what he/she can understand from the flow diagram. (Guide if they don’t
get there soon)
Possible Answer:
Only the melting process is different. All others are same for integrated mills and mini-mills. The basic
product (hot rolls) feeds the upstream stage, gaining value at each stage.
Question #2: A new steel commodity exchange is under development in the European Union. The
company will be able to buy and sell commodity steel (hot rolls) on the exchange. With the opening of the
online exchange, should Riva Group continue to make its own commodity steel or should it buy
commodity steel?
Additional Information: If the client decides to exit the production of commodity steel (hot rolls) and
decide to buy from exchange, the bought steel will be used as inputs for manufacturing value added steel
product.
Possible Answer:
How to solve this case? Let us use the hypothesis driven problem solving method. Say the hypothesis
here is “Riva Group should buy commodity steel from the exchange”. To prove this we need to answer
the following questions.
Hypothesis: Riva Group should buy commodity steel from the exchange

1. Savings from buying on commodity market will be more than profit lost from abandoning commodity
steel production
 How much revenue and profit currently comes from commodity steel?
 How much would the company need to save by buying commodity steel on an exchange to make
up for profit lost by not making it?
2. Riva Group’s cost disadvantage in commodity steel will make this an unprofitable business
 What are Rive Group’s production costs compared to mini mills?

 What will the market price for commodity steel be? – Candidate has to make assumptions
Additional Information: Provide the following data about Riva Group to the candidate when asked.
Volume (million tons) Price ($/ton) Unit Cost ($/ton)
Commodity steel
Hot roll 13.0 275.00 260.00
Value-added
steel
Cold roll 5.0 320.00 280.00
Hot dipped 2.0 410.00 360.00
Electro-galvanized 1.0 560.00 475.00
Total 21.0
To produce commodity steel the operating costs for mini-mills is $220 per ton, compared to $260 per ton
for integrated mills.
The candidate is expected to perform the following calculations for Riva Group
Operating Operating Individual revenue as Individual profit as
Sales in $m costs in $m profit in $m % of total revenue a % of total profits
Commodity
steel
275 * 13.0 260 * 13.0 = 3575.0 –

Hot roll = 3575.0 3380.0 3380.0 = 195.0 3575/6555 = 54.54% 195/580 = 33.62%
Value-added
steel
320 * 5.0 = 280 * 5.0 = 1600.0 –

Cold roll 1600.0 1400.0 1400.0 = 200.0 1600/6555 = 24.41% 200/580 = 34.48%
410 * 2.0 = 360 * 2.0 = 820.0 – 720.0

Hot dipped 820.0 720.0 = 100.0 820/6555 = 12.51% 100/580 = 17.24%
Electro- 560 * 1.0 = 475 * 1.0 = 560.0 – 475.0

galvanized 560.0 475.0 = 85.0 560/6555 = 8.54% 85/580 = 14.66%
Total 6555.0 5975.0 580.0 100.00% 100.00%
Key Conclusion from the calculations: The profits and revenues contributed by commodity steel (hot roll)
is significant to Riva Group, accounting for 33.62% and 54.54% respectively.
It is highly likely that the price of commodity steel on the exchange will drop below $260 per ton which is
the variable cost per ton for integrated steel manufacturers. This means that our client Riva Group will
make losses.
Question #3: How much should be the minimum saving from the ‘Buy’ decision so that we can maintain
the same profits as now? (The steel bought will be used as inputs to the value added steel)
Possible Answer:
Calculations to be performed by candidate:
 If the client decides to stop producing their own commodity steel, profits that the client will give up
= $ 195 million
 Number of tons produced after exiting commodity steel = 8 million tons (Only value added steel =
5.0 + 2.0 + 1.0 = 8.0 million)
 To keep the same profits extra savings needed = 195,000,000 / 8 million tons = $ 24.375 per ton
Therefore, buying commodity steel in the exchange should result in at least $24 to $25 per ton saving in
order for the client to keep the same profits as now.
Recommendations: The numbers and environment suggest that Riva Group should exit commodity steel
production and start buying from the exchange.
Question #4: What are the potential risks of such a decision to exit commodity steel production?
Possible Answer:
 Union and labor issues from laying off labor
 Pressure from the government
 Loss of control on quality of steel
 Competitive weakness
 Subject to fluctuations in the market price
To Boost Profits, Family Video Rental Cuts Late Return Fees
Consulting Firm: Cognizant Business Consulting (CBC) first round job interview.
Industry Coverage: entertainment.
Case Interview Question #00541: Family Video is a privately-owned video rental chain in the United
States. The company has its headquarters located in Glenview, Cook County, Illinois and has more than
300 stores across nineteen states, with their strongest customer base in the Midwest. The company also
sells new and used movies and games online, and also has an emerging
commercial property division, fitness division, fiber optics division, and e-commerce division.
As a regional video rental chain, recently Family Video is facing declining profits for the past 2 years. You
have been hired as a consultant to help identify the root cause of the falling profits and make suggestions
to reverse the trend. How would you go about analyzing the case? What recommendations will you come
up with?
Suggested Structure:
This is a straight profitability case, so using (Profits = Revenues – Costs) framework seems most
appropriate. The interviewer should test the candidate for various hypotheses and math skills.
 Step 1: The candidate has to identify sources of revenue. Then he/she has to propose various
hypotheses possible for a decline in sales volume. (At least 5 to 7 hypotheses)
 Step 2: Candidate may want to look at pricing and pricing arrangements. Then he/she has to
propose various hypotheses possible for a decline in prices.
 Step 3: The candidate has to identify sources of cost. Then he/she has to propose various
hypotheses possible for an increase in cost. (At least 5 to 7 hypotheses)
Question #1: What do you think are the main sources of revenues for a DVD video rental chain like the
client Family Video?
Possible Answer:
The main source of revenue is the DVDs rental fee collected. The other source of revenue could be late
fees. Though the company doesn’t sell DVDs, some candidates may mention this.
Question #2: Why are the client’s profits going down?
Possible Answers:
Profits = Revenues – Costs. Profits going down means either revenues are declining, or costs are going
up, or both.
1. Some hypotheses for sales declining
 Increase in DVD rental fee

 Long waiting list and stock outs due to improper inventory management
 Deterioration of customer service levels
 Increase in late fees
 Entry of new competition like Netflix or competitor’s new stores (Hollywood Video, Blockbuster,
etc)
 Overall industry decline (Less new movies being made)
 Substitute products like Video-On-Demand and direct online streaming of video to PC
 Increase in pirated DVD market
 Cut in advertisement spend and marketing budget resulting in poor publicity
 Store locations in key markets changed to reduce cost
Bonus point: The candidate may also want to monitor changes in metrics like Same-store sales, Sales per
square feet, Number of customer visits per store, Revenue per customer, New store sales, Sales by
geographic region etc. Ask the candidate for the metrics he/she would like to explore. We don’t provide
any data here but the idea is to see how the candidate thinks.
2. Pricing arrangements
The revenue is captured through pricing. Ask the candidate for different methods of pricing for a DVD
rental business. Some ideas are:
 Fixed monthly fee

 Fee for DVD based on number days of use (Example: $2 per movie per day or $ 5 per movie per
week)
 Price discrimination (lower price for members and higher price for non-members)
 Pricing based on ‘On-time DVD return record’
 Pricing of late fee (Penalty increases with each day the DVD is not returned back)
 Different price for new and old movies
 Student discounts
 Additional fee for value added services like home delivery, home pickup, etc
Price can go down for several reasons. But mainly the candidate should touch upon pricing pressure from
competition and substitute products.
3. Sources of costs
For a DVD video rental chain some of the costs could be
 Store rental charges (Real estate)

 Cost of DVDs
 Sometimes the movie distributors have a revenue sharing agreement with the chains
 Labor costs
 Store maintenance costs like energy, utilities, insurance and so on
 Advertisement and promotion costs
 Damaged and lost DVD costs, including shrinkage and non-returned items
 Corporate overheads
 Taxes to government
Increase in the above costs could have resulted in a profit decline. It is a good idea to group the costs as
internal and external costs. The other way to group costs would be fixed and variable costs.
Question #3: Testing the candidate’s quantitative skills. Provide the following additional information to the
candidate.
Based on our analysis we find that there has been an increase in the labor costs in the last 2 years. We
also find that a high percentage of customers don’t return the DVDs on time. As the company currently
doesn’t have any late fee this is resulting in stock outs and customer defection. So the company wants to
introduce a “Late fee” program. You have to do 2 things now:
 Quantify the impact of the increase in labor costs associated with introducing the “Late fee”
program
 Recommend if the company should go ahead with the “Late fee” program
Impact of increase in labor costs: Provide the following data to the candidate.
 Number of stores: 300

 % of stores affected by labor cost increase: 16.667%
 Store working hours per day: 12
 Store working days: 5 days per week, 50 weeks a year
 Number of workers per store at any given time of day: 4
 Labor cost per hour per worker (Before cost increase): $9
 Labor cost per hour per worker (After cost increase): $12
Possible Answer:
Calculations to be performed by the candidate:
Total annual working days: 5 days per week * 50 weeks per year = 250 days per year
Total number of man hours per year per store: 4 workers * 12 hours per day * 250 days per year = 12,000
hours
Total number of stores affected by labor increase: 300 * 16.667% = 50
Total man hours per year in affected stores: 50 * 12,000 = 600,000
Total annual labor cost in the affected stores before cost increase: 600,000 * $9 = $5,400,000
Total annual labor cost in the affected stores after cost increase: 600,000 * $12 = $7,200,000
Total increase in costs: $7,200,000 – $5,400,000 = $1,800,000
Therefore, the increase in labor cost is approximately $1.8 million per year.
Question #4: Should they implement the “Late fee” program?

The candidate will have to explore the costs and benefits of the late fee program. Provide the following
additional data only when requested by the candidate
 Number of stores: 300
 Total annual working days: 250
 Number of customers per checking out per day per store: 100
 Average number of DVDs a customer checks out per visit: 2
 Maximum number of days a customer can keep DVD (as per policy): 3
 Fee per DVD (All customers pay this amount irrespective of number of days they keep this): $6
 % of customers who return DVDs later than due date: 10%
 Average number of late days: 2
 Late fee proposed per DVD per day: $1
 % of current revenue lost because of late fee introduction: 8% (Assume that the late fee will make
some customers choose another competitor who does not charge late fee)
Possible Answer:
Calculations to be performed by the candidate:
Current revenue: 300 stores * 250 days * 100 visits per day per store * 2 DVDs per visit * $6 per DVD =
$90,000,000
Expected late fee collection (Treat this as revenue too): 300 stores * 250 days * 100 visits per day per
store * 2 DVDs per visit * 10% * 2 late days * $1 per DVD per late days = $3,000,000
Revenue lost because of late fee collection: $90,000,000 * 8% = $7,200,000
Net revenue from this initiative: $7,200,000 – $3,000,000 = -$4,200,000
Conclusion: Numbers show that the “Late fee” program will result in a net loss of revenues. Probably the
client should not go ahead with this program.
Question #5: What are some of the ways to reduce labor cost?
Question #6: What alternative ways can you think of to ensure timely collection of DVDs back without
late fee? Look for creative answers here.
Burger King Not To Introduce Customer Loyalty Program
Consulting Firm: Siemens Management Consulting first round job interview.
Case Interview Question #00529: Burger King is a global chain of hamburger fast food restaurants
headquartered in unincorporated Miami-Dade County, Florida, United States. At the end of fiscal year
2011, Burger King reported that the chain had more than 12,400 restaurants in 73 countries, employing
more than 34,000 people; of these, 66 percent are in the United States and 90
percent are privately owned and operated.
Recently, the CEO of Burger King is planning to introduce a new customer loyalty program called “Quick
Rewards” for his chain. The program is modeled like the airline industry’s frequent flyer program:
customers earn rewards for money spent at the restaurant chain. You have been hired as a consultant to
advise him on this program. Specifically, he want to know if Burger King should go ahead with this
initiative. What would you recommend and why?
Suggested Approach:
 Step 1: Understand the features of the program first.
 Step 2: What will be the incremental benefits to the restaurant company?
 Step 3: What is the cost involved in this program?
 Step 4: Do benefits exceed costs?
 Step 5: Any other potential risks or opportunities?
1. Program features: A customer will get 2 points for each dollar he/she spends at any Burger King
restaurant. And when the customer reaches 200 points he will get some standard gifts. So for each 200
points they get one gift.
2. Benefits of the program: Data is on a per store per year basis

Number of
Customer customers per Average number Average $ % That join Average number of
Segment store of visits per year spent per visit program additional visits
Heavy 8,000 30 $4.00 20% 6
Light 12,000 9 $4.00 5% 3
Burger King’s average operation margin is 20% of the revenues.
3. Costs of the program: Each gift costs the company $1. The customer gets one gift for each 200 points.
Instruction to the interviewer: Please read out the above data and don’t give it in the table format. See
how the candidate organizes his/her data.
Possible Answers:
The candidate is expected to calculate the following to justify his conclusion
 Absolute revenue increase and percentage revenue increase for the ‘Heavy’ segment
 Absolute revenue increase and percentage revenue increase for the ‘Light’ segment
 Total profits from the program
The calculations are shown in the below table
Heavy Light
12,000 * 9 * $4.00 =
A Total revenue without program 8,000 * 30 * $4.00 = $960,000 $432,000
8,000 * 20% * 6 * $4.00 = 12,000 * 5% * 3 * $4.00 =

B Additional revenue with program $38,400 $7,200
C % increase in revenue (100% * B/A) $38,400/$960,000 = 4.0% $7,200/$432,000 = 1.67%
Incremental income @ 20% of rev (B

D * 20%) $38,400 * 20% = $7,680 $7,200 * 20% = $1,440
E Total points scored (A * 2) 1,920,000 864,000
F Cost of gifts (E / 200) $9,600 $4,320
G Net profit from the program (D – F) $7,680 – $9,600 = -$1,920 $1,440 – $4,320 = -$2,880
Conclusion: The results show that the “Quick Rewards” customer loyalty program is a losing proposition.
Why – the cost of the program is spread over all the purchases and not just the incremental spending.
Question #2: If the candidate reaches this conclusion (the program will lose money), ask for suggestions
to make this program profitable. Most candidates may not distinguish between profits from Light and
Heavy users. Hence ask if this can be implemented only for heavy segment. Candidates who get creative
at this stage will get more points.
Possible Answers:
Some suggestions to make the program profitabble would be:
Negotiate with the gift vendor and negotiate a better price for the gifts.
Increase the number of points needed for a gift (However, the incremental benefits may also change
because customers are less incentivized)
Look at co-branded customer loyalty programs with other companies like airlines, credit card issuers, etc.
This way the cost can be shared and opportunities for revenue increase are more.
Explore alternate ways of discriminating between light and heavy users.
Question #3: The CEO of the company says that the analysis is good. However he wants you to give him
advice on how to increase sales (ideas apart from the loyalty program). This question is to see if the
candidate can quickly think of various ways to increase revenue. Creativity will win points here.
Possible Answer:
A good candidate would use the following framework to increase revenues:
New Customers – New Products

New Customers – Current Products
Current Customers – New Products
Current Customers – Current Products
Question #4: Ask the candidate to give a 30 second summary of his findings and his recommendations.
Canadian Oil Sands Concerned about Cost & Time Overruns
Consulting Firm: Schlumberger Business Consulting (SBC) final round job interview.
Case Interview Question #00523: The Canadian Oil Sands Limited (TSX: COS) is a Canadian company
headquartered in Calgary that generates income from its oil sands investment in the Syncrude Joint
Venture. Syncrude operates an oil sands facility and produces crude oil through the mining of oil sands
from ore deposits. As of January, 2007, the company holds a 36.74% interest in
Syncrude, which is the largest stake of any of the joint owners.
Recently, the Canadian Oil Sands company are planning to build an oil production and refining facility in
the Athabasca region of northern Alberta, Canada (Shaded regions in Figure 1 show an area where client
wants to build the refinery). The estimated cost of building a facility is $5 billion and estimated time for
completion is 5 years. The company is concerned about cost and time overrun to complete the project.
For your information, 5 other competitors have already started building production and refining facility in
the nearby areas. You have been hired as a consultant to assess the situation and make them aware of
the potential issues. How would you go about the case?
Notes to the interviewer:
The objective of this case is
 To see if the candidate possesses a good clock speed, i.e. if the candidate can quickly explore
several possible reasons for time and cost overruns.
 To see if the candidate presents creative solutions to specific questions posed by the interviewer
and to see if the candidate can quickly do basic math.
Suggested Structure:
The case should start with the candidate hypothesizing the reasons that could lead to cost and time
overruns. To guide the candidate, the interviewer may ask the candidate to list the possible steps in the
project.
Question #1: What are some of the possible reasons for cost over-runs?
Possible Answers:
 Uncertainty or Changes in the field profile resulting in increased construction costs.
 Changes in price of commodities like steel and other materials used for construction.
 Environmental regulations resulting in additional investment.
 Suppliers operating at full capacities resulting in additional investment. Hence the supplier may
ask the client to share some investment.
 Skilled labor shortage for construction resulting in very high salaries. This is the biggest problem
in this industry and the case will focus on this problem.
Question #2: What are some of the possible reasons for time over-runs?
Possible Answers:
 Design and Field development planning delays
 Manufacturing lead time for machinery and equipments
 Transportation lead time for plant machinery and equipments
 Labor shortage during construction, installation and commissioning
 Poor productivity of untrained labor
 Government approvals and regulations
 Approval from environmental authorities
Notes to the Interviewer: At this stage, the case will now focus on the labor issues. Provide the following
additional information to the candidate.
 The components of the oil production and refining facility are fabricated in another country,
however joining the components and installation take place on-site.
 The peak demand for labor will occur in 3 years from now.
 The period sadly coincides with the peak labor demand for competitors in the same region.
Especially we need several welders and we are quite sure that they can’t get welders.
Question #3: Can you think of any ideas to manage the situation?
Possible Answers:
Some possible suggestions could be:
 Automation of construction, material movement, fabrication and welding of components

 Explore opportunities to get pre-welded components from supplier
 Design components in such a way so that the need for welding itself is reduced
 Share some facilities like piping, storage etc with competitors thereby eliminating the need for
separately building them
 Recruit labor from other countries (But cultural issues, immigration issues, opposition form labor
unions in Canada, not many want to move to Alberta, Canada as it is very cold)
 Recruit labor from US as there seems to be a decline in manufacturing industry and hence the
client may be able to obtain skilled welders
 Tie-up with technical training institutions and develop students from now onwards with a
guaranteed employment after 3 years
Question #4: Ask the candidate to calculate the breakeven number of barrels of crude oil and years to
break-even assuming no over runs.
Additional Information: Provide the following data when asked
Data Current – Without Over-runs
Project Cost (Fixed Cost in dollars) $5 billion
Estimated production capacity (Barrels per day) 100,000
Average price per barrel of refined crude (Dollars) $38
Variable cost of production per barrel of crude (Dollars) $10
Variable cost of refining per barrel of crude (Dollars) $13
Break-even quantity (Barrels) To be calculated by candidate
No. of years to break even (Assuming 330 days of operation per year) To be calculated by candidate
Possible Answer:
Costs = Fixed Cost + Variable Cost = $5 billion + ($10 + $13) per barrel * X barrels
Revenues = $38 per barrel * X barrels
To break even, $5 billion + $23 per barrel * X barrels = $38 per barrel * X barrels
Break even quantity X = $5 billion / $15 = 333.3 million barrels approximately
Number of years to break even = 333.3 million barrels / (100,000 barrels per day * 330 days per year) =
10 years approximately
Question #5: Ask the candidate to calculate the break-even number of barrels of crude oil to be produced
and years to break even with Cost over runs
New Scenario – With cost over
Data runs
Average price per barrel of refined crude (Dollars) $38
Break-even quantity (Barrels) To be calculated by candidate
No. of years to break even (Assuming 330 days of operation per

year) To be calculated by candidate
Possible Answers:
Break even quantity = $6 billion / ($38 – $10 – $13) = 400 million barrels
Number of years to break even = 400 million barrels / (100,000 barrels per day * 330 days per year) = 12
years approximately
Question #6: Assume there are cost over-runs. If the company wants to break-even within the same time
frame we found with no over runs, what should be the price per barrel of crude oil?
Data New Scenario – With cost over runs
Average price per barrel of refined crude (Dollars) To be calculated by candidate
333.3 million barrels (no cost over-

Break-even quantity (Barrels) runs)
No. of years to break even (Assuming 330 days of operation per 10 years (no cost over-runs)
year)
Possible Answer:
Let the price per barrel to break even within 10 years = P, solve $6 billion / (P – $10 – $13) = 333.3
million, P = $41
Question #7: Ask the candidate for a 30 second summary of his/her findings.

Express to Reject Catalog Printing & Postage Cost Increase
Case Type: math problem; pricing & valuation.
Consulting Firm: Capital One Business Analyst first round job interview.
Industry Coverage: retail; apparel, clothing & textiles.
Case Interview Questions #00481: Your client Express, Inc. (NYSE: EXPR) is an American fashion
retailer headquartered in Columbus, Ohio and New York City, New York. Express operates over 590
stores in the United States as of April 2011 and generates $1.8 billion in annual sales in fiscal year 2010.
Although primarily associated with women’s clothes, Express is a dual-gender brand. One of their primary
selling tool for the business is the product catalog. Recently, the printing and postage costs of your
client’s catalog have just been increased from 35 cents to 40 cents per catalog by their catalog publishing
company. How can Express decide whether this new cost is feasible for their current direct mail business
model? What is the break-even point for the client’s catalog printing and postage costs?
Possible Answer:
This is a quantitative case where candidate is required to evaluate the feasibility of a change in the cost
structure of the client’s catalog business. The candidate should use a framework and walk the interviewer
through it. A profitability analysis should follow.
1. Revenue and cost structure – The Interviewee should ask for revenue and cost information in order
to infer profit margin.
Additional Information: (to be given if asked)
 Client’s profit margin on catalog orders: 15%, excluding catalog printing and mailing costs.
 Catalog printing and postage costs: $40 for each 100-catalog bundle mailed (100 * 40 cents =
$40).
Exhibit 1: Mail Retailer Revenue Data (2006-2010)
Number of Catalogs Number of Orders Number of Re-orders (within 6

Year Mailed Received Sales months)
2006 50,000 1,000 $150,000 200

2007 100,000 2,000 $150,000 600
2008 200,000 3,000 $300,000 1,000
2009 150,000 3,000 $300,000 600
2010 200,000 6,000 $400,000 1,500
The candidate should be able to deduce the following information from Exhibit 1.
 Average response rate: 1,000/50,000 = 2%, i.e., two orders placed for every 100 catalogs mailed
in 2006. This number has increased slightly over time to 3% in 2010 (6,000/200,000 = 3%).
 Average order size: Decreased over time from $150 to $66.67 ($150,000/1,000 = $150,
$400,000/6,000 = $66.67)
 Percentage of customers who re-order within six months: Hovering over time between 20% and
33%, on average 25%.
Revenue calculations for year 2010
 Total orders generated per 100 catalogs = orders received + re-orders within 6 months, i.e. each
100 catalogs will result in 100 * 3% = 3 orders, plus 3 * 25% = 0.75 additional re-orders within 6
months, for a total of 3.75 orders placed per 100 catalogs mailed.
 Revenue per 100 catalogs = orders per 100 catalogs * average sales order = 3.75 * $66.67 or
$250.00 in revenues.
Cost calculations
 Given profit margin of 15% means approximately $250 in sales will return a profit before printing
and postage cost of $250 * 15% = $37.50.
 This is insufficient to cover the catalog printing and mailing cost of $40 per 100-catalog.
2. Revenue per catalog – Ask the candidate how the client might improve the revenue per catalog
metric. This is an open-ended question where the candidate is expected to brainstorm possibilities given
the above analysis.
Possible Answer:
The best answer might have the candidate take some time to come up with a structured response.
Examine the various aspects that affect the catalog revenue; think of a MECE (mutually exclusive and
collectively exhaustive) solution.
One example might be modifying the product, i.e. the catalog itself (bigger pictures, layout, more product
selection, print in color, etc). Client could also consider tweaking the marketing strategy through better-
targeted advertising or by offering a pre-holiday sales to spur sale volume.
3. Conclusion
Given the present profit margin of $37.50 per 100 catalogs, it is not feasible for the client to accept the
cost increase to 40 cents. The minimum break-even point for client’s catalog printing and postage costs is
37.5 cents.
Real Estate Tycoon Donald Trump Enters Costa Rica Market

Case Type: market entry, new market; math problem.
Consulting Firm: A.T. Kearney first round job interview.
Industry Coverage: tourism, hospitality, lodging; property, real estate.
Case Interview Question #00480: For this case, your client is American business magnate and real
estate developer Donald Trump. He is currently assessing a new project idea for his company.
Costa Rica is a multilingual, multiethnic and multicultural country in Central

America, bordered by Nicaragua to the north, Panama to the southeast, the Pacific Ocean to the west
and the Caribbean Sea to the east. Costa Rica has a beautiful coastline which has historically been
difficult to access. The nearest international airport (Juan Santamaria International Airport) was over six
hours away. As of last year, a new international airport (Daniel Oduber Quiros International Airport) was
constructed only a half hour away.
Since then, there has been an investment boom in the region due to the increasing number of tourists
(popular with Americans and Asians). The Mandarin Oriental and The Four Seasons, two prominent
luxury hotel chains, were the first to enter this market with a 300-room hotel each. Your client Donald
Trump is considering investing in the tourism opportunity created by the new airport. Would you
recommend that Trump enter the market?
Possible Answers:
Part #1: Client’s Core Competencies
The client Donald Trump has focused on high-rise apartments (50%) and luxury condominiums (50%) in
the past but wants to enter the hotel arena.
Note: The key insight here is that the client has past experience in constructions of a similar type, but has
no direct experience in the hotel industry or service operations.
They have focused on world-class beaches, such as Playa del Carmen, Marbella, Coral Beach, Tahiti,
Fiji, Maldives, Mikonos, etc.
Note: The insight here is that the client probably has good judgment in spotting travel locations and has a
successful track record with the construction of prime properties.
Part #2: Market Attractiveness – Ask the candidate to calculate the average number of tourists visiting
Costa Rica on any day, and the average hotel price per room per night.
 Market size – 875,000 tourists per year (assume 350 days in a calendar year).
 Average duration of stay per tourist – 4 nights.
 Average hotel check – $2,000.
 Others – In terms of tourists, it depends on government spending on advertising, on travel
agents, and on the network effect of the existing hotels in the area.
Possible Answer:
875,000 tourists * 4 nights per tourist / 350 = 10,000 tourists per night
$2,000 average check / 4 nights average stay = $500 per night
Part #3: Porter’s Five Forces Analysis

This part of the case is exploratory; the interviewer should prompt the candidate to list several factors.
Possible Answer:
 Competitiveness – Other hotels chains that are thinking of entering the market are Starwood,
Peninsula, and Imperial Hotels.
 Supplier Power – The local labor market offers a huge supply of workers (very positive).
 Substitutes – You are fighting with every other “paradise-type” destination, from Disneyland to
Las Vegas to Bermuda. Interest in this area, however, is sky high.
 Barriers to Entry – Government regulations, high capital requirements, unavailable beachfront
property.
 Buyer Power – The recent consolidation among travel agencies and proliferation of e-vendors put
buyers in a powerful position.
Notes: The key takeaway here is that despite the competitive nature of the market, it is large enough to
be profitable, and the client Donald Trump has desired capabilities to successfully compete in this market.
The level of resources required would be a barrier to entry and maybe there are others that need to be
investigated – such as government permits, access to sewage, water, etc.
Part #4: ROI Analysis
At this stage, the interviewer should inform the candidate that client has already short listed three
available lots. Ask him/her to recommend one of the three such that Return on Investment (ROI) is
maximized (Show the candidate Exhibit 1).
Exhibit 1
Cost/roo
Land Land Cost m Operating Cost/room Room Capacity Price/night
Lover’s Lair $2,000,000 $30,000 $250 500 $450
Paradise Lost $4,000,000 $28,000 $200 1000 $400

Fookwah
Heights $6,000,000 $25,000 $150 1500 $350
 Average room occupancy is 50%
 Number of operating days in a year: 350
 Operating expenses are 100% variable
 At ROI 10%, company target is to recover investments within one year.
Note: ROI = Profit/Investment. Give the candidate several minutes to generate these numbers. A solid
candidate will be vocal during the calculations, and may even introduce a written version of the match.
That means that instead of just writing numbers, the candidate will write out formulas, such as:
Revenue = Price per night * number of rooms * nights per year * occupancy rate
By doing this, the candidate demonstrates knowledge of the situation. If a math error comes about, it is
much easier to correct and the interviewer recognizes that the candidate has already shown a strong
grasp of the problem.
Possible Answer:
Option 1: Lover’s Lair
 Operating Profits: ($450 price per room per night – $250 operating costs per room per night) *
500 rooms * 350 nights/year * 50% occupancy rate = $17.5 million operating profits/year (a)
 Initial Investment: $30,000 cost/room * 500 rooms + $2,000,000 land = $17 million (b)
 Net Profit: (a) – (b) = $17.5M – $17M = $500,000 (c)
ROI: (c) / (b) = $500,000/17 million = 2.9%
Option 2: Paradise Lost
 Operating Profits: ($400 – $200) * 1,000 rooms * 350 nights/year * 50% = $35 million
 Initial Investment: $28,000 cost/room * 1,000 rooms + $4 million land = $32 million
 Net Profit: $35M – $32M = $3M
 ROI: $3,000,000 / $32 million = 9.4%
Option 3: Fookwah Heights
 Operating Profits: ($350 – $150) * 1,500 rooms * 350 nights/year * 50% = $52.5 million
 Initial Investment: $25,000 cost/room * 1,500 rooms + $6 million land = $43.5 million
 Net Profit: $52.5M – $43.5M = $9M
 ROI: $9 million / $43.5 million = 20.7%
Part #5: Factors determining project feasibility – Ask the candidate to list factors to be considered in
determining the feasibility of the project.
Possible Answer:
Good Concerns:
 Competition (what are they focusing on? will it flood the market?)
 Strategy (Where will you compete – low cost, high service, best in class, packages?)
 How should the real estate developer finance the building? Since the hotel will bring new jobs,
maybe the local government can help with some tax deductions, free services, etc.
Great Concerns:
 How can they leverage their experience? What values from their other business can they
leverage? Would they manage the hotel or build it and then find an operating partner like Starwood or
Hilton?
 What are the existing barriers to entry? How would you change them to ensure a greater degree
of success?
After the candidate offers his/her insights, tell him/her to focus on ROI, first with the room prices specified
in Exhibit 1 and then with the market hotel room price ($500 per room per night).
Part #6: Conclusion

Ask the candidate to summarize the case with a “go/no go” decision, supporting it with the insights drawn
through out the case. Probe into additional concerns the client needs to address.
Comments:
This case has a center piece that is quantitative in nature; the rest of the case may explore various
aspects of the market entry decision-making process and does not follow a specific sequence. The case
focuses on two key focus areas – the attractiveness of the market (market sizing and Porter’s five forces
analysis) and long term profitability (sustainability, barriers to entry, core competencies and signaling).
This case allows the interviewer to handle various issues at different points, so ask the candidate to
choose a starting point, but challenge the candidate’s choice by requesting him/her to give strong reasons
to validate his/her choice. An example could be: “I’d like to start by reviewing the company’s core
competencies because I want to see if this fits into their development model”.
Chase to Cross-sell Credit Card Insurance to Card Holders

Consulting Firm: Capital One Business Analyst first round job interview.
Industry Coverage: banking; financial services.
Case Interview Question #00472: Chase Bank is the consumer and commercial banking subsidiary of
J.P. Morgan Chase & Co. (NYSE: JPM). The bank was known as Chase Manhattan Bank until it merged
with J.P. Morgan & Co. in year 2000. With more than 5,100 branches and 16,100 ATMs nationwide, J.P.
Morgan Chase is one of the Big Four banks of the United States with Bank of
America, Citigroup and Wells Fargo. In 2004, J.P. Morgan Chase acquired Bank One, making Chase the
largest credit card issuer in the US.
Recently, the credit card division of Chase is considering launching a new financial product: cross-selling
credit card insurance policy to its credit card holders. Credit card insurance usually come in a variety of
forms. The four main types are credit life insurance, disability insurance, unemployment insurance, and
property insurance. For this case Chase plans to launch unemployment credit insurance only. The
insurance product works this way:
 customers who buy the unemployment credit insurance policy would pay 1% of their monthly
balance for insurance premium;
 if customers are involuntarily laid-off or downsized, they can file insurance claim and Chase
would pay their credit card debt in the month they are laid-off;
 customers’ credit card purchases after the involuntary unemployment would not be covered.
Question #1: Is this credit card insurance product going to be a profitable business for Chase?
 On average Chase credit card holders spend $1000 in credit card purchase each month.
 Market research predicts that, due to bad economic environment, 5% of Chase credit card
holders who buy the unemployment credit insurance policy would file insurance claim within 6 months
of buying the insurance.
 There is no additional cost to Chase in terms of IT implementation, management, and
maintenance of the insurance program.
Possible Answer:
To evaluate whether the credit insurance program will be profitable or not, we will have to weigh both the
cost and the benefit of the program. To simplify the calculations, let’s suppose 100 people will purchase
the unemployment credit insurance policy.
1. Cost
100 people, 5% will file insurance claim in 6 months, average monthly balance is $1000, thus costs to
Chase = 100 people * 5% * $1000 = $5000
2. Benefit
100 people, paying 1% of their monthly balance ($1000) for 6 months, revenues to Chase = 100 people *
1% * $1000 per month * 6 months = $6000
3. Net Profit
Profit = Revenue – Cost = $6000 – $5000 = $1000 per 100 customers
Therefore, by doing a simple cost-benefit analysis, it seems the credit card insurance program will be a
profitable business for Chase.
Question #2: We haven’t talked about marketing cost and customer acquisition cost associated with
launching the credit insurance program. Chase’s marketing department will be using direct mail marketing
to acquire customers. It costs Chase Bank $0.25 to send out a mail. Market research has shown that the
direct mail marketing campaign only has 1% response rate, meaning among the mails sent out to Chase
credit card holders, only 1% card holders will actually buy the credit insurance. Now, adding the marketing
cost, is the credit card insurance program a profitable business?
Possible Answer:
With a low response rate of 1%, in order to have 100 customers buying the credit insurance, Chase
needs to send out 10,000 mails at least. Thus, marketing cost = 10,000 * $0.25 = $2500.
Now, Profit = Revenue – Cost = $6000 – $5000 – $2500 = -$1500 per 100 customers
Therefore, by adding the marketing cost of $2500, the credit insurance product becomes unprofitable
now.
Question #3: What if the response rate of Chase’s direct mail marketing campaign doubles to 2%? Will
the business be profitable?
Possible Answer:
With a response rate of 2%, and insurance claim rate remains at 5%, for every 10,000 mails sent out, 200
people will buy the credit insurance product, and 200 * 5% = 10 people will file insurance claim within 6
months.
1. Cost
Marketing cost: 10,000 mails * $0.25 = $2,500

Insurance claim: 10 people * $1000 = $10,000
2. Benefit
200 people * 1% * $1000 per month * 6 months = $12,000
3. Net Profit
Profit = Revenue – Cost = $12,000 – $10,000 – $2,500 = $-500 per 200 customers. So, it looks like even
with a doubled response rate of 2%, Chase is still going to lose money.
Question #4: What is the required response rate in order for Chase Bank to break-even in the credit card
insurance business?
Possible Answer:
Assume that the break-even response rate is X%, for every 10,000 mails sent out, 100X people will buy
the credit insurance product, and 100X * 5% = 5X people will file unemployment insurance claim within 6
months.
Cost = Marketing cost + Insurance claim = $2,500 + 5X * 1000 = 2,500 + 5000X
Revenue = 100X * 1% * $1000 per month * 6 months = 6000X
To break even, profit = revenue – cost = 6000X – (2,500 + 5000X) = 0, X = 2.5
Therefore, Chase’s direct mail marketing campaign will have to achieve a response rate of at least 2.5%,
in order for the credit insurance program to break even.
Question #5: Assume that the credit insurance claim rate is unknown, what would the relationship
between insurance claim rate and response rate be if Chase wants to break even for the credit insurance
product? Draw a graph to show their relationship. What does the graph tell you?
Possible Answer:
Let the credit insurance claim rate be Y%, and response rate X%. Again, for every 10,000 mails sent out,
10,000 * X% = 100X people will buy the credit insurance product, 100X * Y% = XY people will file
unemployment insurance claim within 6 months.
Cost = Marketing cost + Insurance claim = $2,500 + XY * 1000 = 2500 + 1000XY
Revenue = 100X * 1% * $1000 per month * 6 months = 6000X

To break even, profit = revenue – cost = 6000X – (2500 + 1000XY) = 0, Y = 6 – (2.5/X)
To plot the graph, we could get the (X, Y) for a few points:
 X = 0.417, Y = 0
 X = 0.5, Y = 1.0
 X = 1.0, Y = 3.5
 X = 2.5, Y = 5.0
 X = 5.0, Y = 5.5
 X = 10.0, Y = 5.75
The insurance claim rate (Y) vs marketing response rate (X) is shown in Figure 1.
From the graph, we can see that: even if the insurance claim rate (Y) only increases slightly, Chase would
have to significantly increase the direct mail marketing response rate (X) in order to break even.
Therefore, to make money for the credit insurance product, it would make much more sense for Chase to
keep the insurance claim rate under control instead of trying to boost direct mail response rate.
Heinz to Offer 15% Discount for Its Classico Sauce Products

Consulting Firm: ZS Associates final round job interview.
Industry Coverage: food and beverage.
Case Interview Question #00453: The client Classico is a wholly owned subsidiary of The H.J. Heinz
Company (NYSE: HNZ). Best known for its ketchup (tomato sauce), condiments, frozen food, and soup
products, Heinz is a billion dollar food company headquartered in Pittsburgh, Pennsylvania, United
States, and employs more than 30,000 people world wide as of 2011.
The client Classico specializes in the manufacturing and preparation of high quality sauces. The client is
based in the U.S. and caters only to the U.S. retail stores. Recently, the client has seen an increase in
their volume of sales (by 20%). However, their profits have declined 10% in the same period. Your
consulting firm has been brought in to investigate the issue. More specifically, the client wants you to
address the following two questions:
 What is the cause for the decline in profits even though the unit volume increased?
 What can be done to reverse this trend?
Additional Information: (to be given to candidate only if asked)
The interviewer should wait to let the candidate ask for the following information before giving it to them.
1. Revenue
 Products sold: Pasta sauce, tomato sauce, and salad dressing
 Overall price change: None
 Channel sales (volume, price): Only retailers, no problems here
 Product mix change: None
 Competitive pressure: None
 Substitutes: No new substitutes or change in customer taste
 Market conditions: No problems here
 Quality: No problems here
2. Cost
 Manufacturing cost: No change here
 Distribution cost (by channel): No change here
 Promotion cost: This has gone up!
3. Other Relevant Information
 Promotion cost is an important component of total cost in the food industry. The client started
providing a 15% discount per product (across all products) for 40% of its products during this period.
 For the sake of simplicity, assume that all products are sold at the same price per case and the
discount is across all 40% of its products.
Suggested Approach:
Revenue-Cost approach is ideal for this profitability case. The candidate should be able to identify all the
key revenue and cost buckets and explore the promotion cost component in detail (promotion cost is key
in the food industry).
It is important to first prove the 10% decline in profits with the 20% increase in sales volume and discount.
This will establish the source of the problem clearly and let the interviewer know that you can analyze and
structure a problem well.
Finally, drive toward a break even analysis without the interviewer requesting you to do it. This will get
you bonus points.
Possible Answer:
Based on the data provided by the interviewer (sales volume increased 20%, profits declined 10%, 15%
discount for 40% of all products), the candidate should set up a data table similar to the one presented
below, and calculate the profits before and after the promotion.
Scenario Before Promotion After Promotion
Total Volume
(Units) 100 120 (20% increase)
Price per product $100 $85 for 40 products, $100 for 80 products
Cost $80 (assume 20% profit margin) $80

Profit $2000 (100 * $20) $1800 (80 * $20 + 40 * $5)
The above table proves that with a 20% increase in sales volume, the profits dropped by 10% (from
$2000 to $1800) due to the promotion cost.
Once the candidates identify that the promotion cost is the cause of the problem and prove the 10%
decline in profits, the interviewer should guide the candidate to do the break-even analysis. In the end this
is the key part of the case. Candidates have an opportunity to impress the interviewer here and drive
themselves forward by nailing the break-even analysis in a confident and cool manner (all the while
continuing to focus on relationship building with the interviewer).
Break-even Analysis:
 If discount is offered for 40% of products, then the discount per product has to be 10% in order to
break even:
After promotion profits = $2000 = 80 * ($100 – $80) + 40 * [$100 * (1 - X) - $80], X = 10%
 If discount is 15% per product, then the percentage of products for which the discount is given
should be 26.67%:
After promotion profits = $2000 = (120 – 100 * X) * ($100 – $80) + 100 * X * ($85 – $80), X = 26.67%
Recommendations
An outstanding candidate will also remember to propose creative ways to turn the situation around.
 Why is volume increasing only by 20% even though discount was given for 40% of products?
 Is the promotion being implemented and advertised effectively?
 Is the distribution channel taking away most of the discount such that the consumer is not seeing
a lot of it?
 Primary demand stimulation – make consumers consume more (new uses for the products) or
increase the number of time they use our product through ad campaigns.
PNC Bank to Increase Penetration in Hispanic Market
Case Type: add capacity, growth; math problem.
Consulting Firm: Capital One 2nd round job interview.
Industry Coverage: banking; financial services.
Case Interview Question #00436: The client PNC Financial Services Group, Inc. (NYSE: PNC) is a
banking and financial services corporation in the US, with assets of ~$264.3 billion as of December 2010.
Headquartered in Pittsburgh, Pennsylvania, PNC’s operations include a regional banking franchise
operating primarily in fifteen states and the District of Columbia, specialized
financial businesses serving companies and government entities, and leading Turnkey Asset
Management Program and processing businesses. Currently PNC is the sixth largest bank by deposits in
the US and the third largest bank off-premise ATM provider.
PNC is one of the biggest banks that issue credit cards in the US. Recently, PNC Bank is looking for new
card member growth areas in the United States. Its Hispanic market penetration is low compared to
comparable peer banks’ penetration rates. That group is a fast growing ethnicity and the bank wants to
capitalize on it.
What is the current problem (i.e., what are the possible reasons for PNC’s under-penetration in the
Hispanic market)? How should the bank move forward to increase penetration in the Hispanic market?
PNC’s new credit cards are sold in three main ways:
1. cross-sell to existing banking customers

2. sell to new customers via direct mail campaigns
3. distribute via private label partnerships with retailers and airline
Suggested Approach:
This case is representative of many of the prepared Capital One round 2 cases, in which the interviewer
actively walks the interviewee through a set of qualitative and quantitative questions. The interviewer
should “stick to the script” of questions. To the effect that the interviewee struggles, the interviewer can
assist the interviewee to get back on track.
The interviewee should be structured in answering qualitative questions and crunch through any numbers
thrown his or her way, always keeping in mind how they tie back to the larger issues.
Possible Solutions:
Question #1: What might be wrong? Hypothesize.

Possible Answer:
The candidate should discuss briefly the potential of each of the following to affect the market penetration
rate:
 Product Definition – Does the card, as it has been defined meet the needs of the customer?
 Pricing of Credit Card Terms – Are the fees and rates on par with other comparable cards?
 Marketing/Advertising – Are the messages properly directed to the audience (both content and
distribution)?
 Channel Partners – Does our target audience shop at / eat at / buy from our partners?
 Internal Sales Messages/Incentive Structure – Are the sales messages correctly structure to
entice our potential customer? Is our internal sales force (i.e., teller and desk personnel) trained and
incented properly to promote the card? Discuss in detail (i.e., what might be misaligned, how that
might affect adoption rates, etc.).
Question #2: Calculate the number of additional card members PNC Bank wants to add based on the
following information:
 There are 40 million Hispanic people in the US.
 3/8 of them are too young to have credit cards.
 The average customer is worth $180 to the bank over the course of his life.
 Due to decreased acquisition costs, the average Hispanic customer is worth 10% more.
 Currently, PNC bank’s penetration rate among Hispanic people is 10% (of valid customer
prospects).
 They want to get to a 30% level over the next 5 years.
Possible Answer:
 3/8 of 40M are too young to have credit cards, so 5/8 of 40M are valid customer prospects. That
translates to a market of 5/8 * 40M = 25M people.
 They currently have 10% of 25M = 2.5M
 They want 30% of 25M = 7.5M
Therefore, they need 5M additional card members over 5 years.
Question #3: How much is that additional market share worth to PNC Bank (or how much would PNC
Bank be willing to spend on that additional market share)?
Possible Answer:
If the average customer lifetime value is $180, but the average Hispanic customer is worth 10% more,
each Hispanic customer is worth $180 * (1 + 10%) = $198. Rounding that to $200, the total value of 5M
extra card member is 5M * $200 = $1B.
Question #4: PNC’s cross-selling to branch customers is significantly below the industry norms (Industry
average = 15,000 to 20,000 per month; PNC Bank = 5,000 per month). What might be the reason?
Possible Answer:
Product – Is the PNC Bank credit card product different from competitors’ products? Interviewer: NO
Pricing – Are the fees and rates different than other comparable credit cards? Interviewer: NO
Customer – Are we targeting a fundamentally different audience? Interviewer: NO
Channel Partners – Are the distribution channels mis-aligned? Interviewer: NO
Marketing/Advertising – Is there something wrong with our sales mechanism? Interviewer: Let’s
investigate.
Question #5: PNC Bank uses direct mail campaigns to solicit new card members.
 The average response rate for the non-Hispanic population is 1%.
 PNC Bank’s historical response rate from Hispanic prospects is 3%.
 The bank is planning to target 15M potential customers with each of 3 mailings this year.
 It expects that after the first mailing, the response rate will drop by 1/3 in each of the subsequent
mailings.
 The bank has a conversion rate of 45% of respondents.
How many new customers should PNC bank expect after the third mailing?
Possible Answer:
 3% * 15M = 450,000 from first mailer
 450,000 – 1/3 * 450,000 = 300,000 from second mailer
 300,000 – 1/3 * 300,000 = 200,000 from third mailer
 Total = 450,000 + 300,000 + 200,000 = 950,000
Therefore, 950,000 * 45% conversion rate = ~450,000 new customers.
Question #6: You rounded 950,000 to 1,000,000. Would you expect the actual number of new customers
to be more or less than 425,000 and how do you calculate that (in your head)?
Possible Answer:
Slightly more since 10% of 950,000 is 95,000; therefore 40% is 4*95,000 or 380,000. Add 5% of 950,000
(or half of 95,000) which is 47,500 to 380,000 to get 427,500. That would be somewhere between 2M and
2.5M over five years.
Question #7: You bump into the Senior Vice-president (SVP) of Sales in charge of the credit card
business in the hall and he asks you “How does it look”. How would you respond (1 minute only)?
Possible Answer:
We are still crunching the numbers, but based on your current market position, your goal of increasing
penetration by 20%, and historical conversion rates for direct mail campaigns, our initial estimates
suggest that you will fall short of your goal by mainly relying on that method of acquisition. In fact, it will
only get you about half way to your goal.
We need to discuss other measures to increase penetration of the Hispanic market. Specifically, we need
to look at your sales force compensation structure, training and specific sales and marketing messages.
Let’s plan to review our formal recommendations later in the week.
Bank of America to Offer New Cash Back Credit Card

Consulting Firm: Capital One second round job interview.
Industry Coverage: financial services; banking.
Case Interview Question #00412: The client is the Global Consumer and Small Business Banking
(GC&SBB) division of Bank of America (NYSE: BAC). Headquartered in Charlotte, North Carolina, Bank
of America is a multinational banking and financial services corporation, and is the second largest bank
holding company in the United States by assets, and the fourth largest bank in
the U.S. by market capitalization as of 2011.
The GC&SBB is the largest division in the company, and deals primarily with consumer banking and
credit card issuance. Recently, the division head of Bank of America’s credit card business is considering
launching a new cash-back reward credit card called “BankAmericard Cash Rewards”. The goal is to
significantly grow their credit card business. You have been hired to advise them on rolling out this new
product.
Question #1: Is this new cash-back reward credit card a good idea?
Additional Information: (to be given to you only if asked)
Bank of America credit card business has two main revenue sources: merchant fee and interest earned
on customer’s unpaid balance.
 The bank receives 1% of the transactions from merchants.

 The credit card has an interest rate of 12.99% APR (Annual Percentage Rate).
 There is no annual fee for the credit card.
Cash back Rewards
 Customers earn a fixed percentage for different categories of purchase charged to the credit
card.
 Detailed cash-back percentage of the reward program is shown in Figure 1.
 There is no expiration on earned cash back rewards.
Average customer is expected to carry a balance of $1,000 on the card and have transactions worth
$5,000 a year.
Average customer spending break-down is shown in Figure 2.
Possible Answer:
This “new product” type of case is a simple math problem in which the candidate will have to evaluate the
cost and benefit of the cash-back reward credit card. The calculation is best performed on an individual
account basis.
Cost: cash back paid per year

$5000 * 25% * 5% + $5000 * 15% * 3% + $5000 * 60% * 1% = $115
Benefit: merchant fee and interest earned per year

$5000 * 1% + $1000 * 12.99% = $180
So, it looks like the new cash-back reward credit card will be a profitable product, if there is no other cost
involved.
Question #2: Bank of America currently has 5 million regular credit card accounts with no cash-back
rewards. For these accounts, customers carry a balance of $800 on the card and make transactions
worth $4,000 a year on average. Should Bank of America allow the regular credit card to be converted to
the new cash-back card?
Possible Answer:
For the regular credit card, Bank of America earns merchant fee and interest, but does not pay any cash
back. Net revenue = $4000 * 1% + $800 * 12.99% = $144.
From Question #1, we already determined the net revenue for a cash-back credit card = $180 – $115 =
$65.
Therefore, they should not allow regular account to be converted to cash-back account.
Question #3: Six months after Bank of America rolls out the cash-back reward credit card, they haven’t
seen the expected growth in terms of the number of new account opened. The marketing department
comes up with a promotion idea: For the first 50,000 new cash-back reward credit card accounts,
customers can get a $100 cash back bonus after they make $500 in purchase within 90 days of account
opening. How many new credit card accounts does Bank of America need in order to break even?
Possible Answer:
Assume that all the 50,000 new card members will be able to make $500 in purchase within 90 days and
earn the $100 bonus.
To break even, set revenues – costs = $65 * X – 50,000 * $100 = 0, solve the equation X = 77,000.
Los Angeles Zoo to Buy a Rare 900-pound Gorilla from Africa

Case Type: math problem; merger & acquisition.
Consulting Firm: Oliver Wyman second round job interview.
Industry Coverage: leisure & recreation.
Case Interview Question #00390: The Los Angeles Zoo, formally known as the Los Angeles Zoo and
Botanical Gardens, is a 113-acre zoo located in Griffith Park of Los Angeles, California, United States.
The City of Los Angeles owns the entire zoo, its land and facilities, and the
animals. The zoo is home to 1,100 animals (more than 250 species) from around the world.
Recently, the manager of Los Angeles Zoo is considering the acquisition of a very rare 900-pound gorilla
from central Africa. You have been hired to help the zoo’s management to decide whether this is a
worthwhile venture. How would you go about analyzing the proposed acquisition?
Possible Answer:
The candidate should take a few moments to brainstorm the impact of the acquisition. He/she should
consider the aspects of the actual acquisition, as well as the support of the gorilla. He/she should also
think about the possible impact on revenueof a new attraction. If he/she wishes to progress the financial
impact in detail, ask him/her to consider other factors first.
Key Issues to consider for a gorilla acquisition:
 Space / Capacity / Facilities

 Food / Diet
 Trainers / Expertise
 Environment / Temperature / Climate
 Mating arrangements / additions of more gorillas
Other than the issues identified above, the most important thing that the management of Los Angeles Zoo
must consider is the financial impact of the acquisition. The candidate should calculate whether the
acquisition is financially viable.
Impact on Cost:
 Space / Facilities
 Training
 Food / Diet
 Maintenance
Impact on Revenue:
 Increase in zoo attendance (volume of visitors)

 Extra admission fee
 Programs / Events / Shows
Additional Information: (to be provided to candidate if requested)
Currently, 600,000 people visit the Los Angeles Zoo each year. Half of the visitors are adults, half are
children. Admission is currently $15 for adults, $10 for children.
Other zoos have acquired giant gorillas, and have seen increases in overall attendance at the zoo. San
Diego Zoo, for example, saw a 12% increase in the first year after acquiring a 900-pound gorilla, an
increase which it was able to maintain into the future.
Costs of acquiring the gorilla are as follows:
 Consultants fees already incurred to identify available gorillas in Africa and to advise on
transportation requirements of $200,000.
 Acquisition fee of $590,000 payable immediately.
 Costs of building new enclosure is $1,175,000 payable immediately.
 Transportation costs of $335,000 payable immediately.
 Annual gorilla expenditure and maintenance on the enclosure is $300,000 paid at the end of each
year.
Applicable discount rate = 20%.
Assume the gain experienced in the first year will be maintained in perpetuity. For simplicity, ignore any
capital maintenance or growth.
Calculations:
The interviewee should calculate the NPV (net present value) of the acquisition project.
Costs: The immediate cost of acquiring and transporting the gorilla to the zoo is $200,000 + $590,000 +
$1,175,000 + $335,000 = $2.3 million.
Benefits: Assuming the Los Angeles Zoo will have a similar increased attendance as San Diego Zoo, it is
likely to see an increase in attendance of 12% on 600,000 people = 72,000, or 36,000 adults and 36,000
children at the 50/50 ratio. This translates into an increase in revenue of (36,000 * $15) + (36,000 * $10) =
$900,000 per year. Remember, the maintenance cost each year is $300,000, so the net impact on
earnings each year is a gain of $600,000.
NPV calculation:
 Year 0: – $2.3 million
 Year 1 onwards in perpetuity: Annual gain = $600,000, Perpetuity = $600,000 / 20% = $3 million,
NPV = $3 million / (1 + 20%) = $2.5 million
Conclusion: From the above calculations, the NPV of buying the 900-pound gorilla is just positive by
$200,000. This provides evidence in favor of acquiring the gorilla. The interviewee should summarize the
case by committing to a position and backing it up with evidence. Given a positive NPV, there exist strong
grounds to acquire the gorilla.
MGM Grand Hotel & Casino to Unveil New Dice Game
Case Type: pricing & valuation; math problem.
Consulting Firm: Accenture first round job interview.
Industry Coverage: entertainment; tourism, hospitality, lodging.
Case Interview Question #00382: The client MGM Resorts International (NYSE: MGM) is a Paradise,
Nevada based corporation that brands itself as a global hospitality company. It is the second largest
gaming company in the world by revenue – about USD $6 billion in fiscal year
2009. It owns and operates 15 properties in Nevada, Mississippi and Michigan, and has 50% investments
in four other properties in Nevada, Illinois and Macau, China.
Recently, the CEO of MGM Resorts is considering unveiling a new game in his MGM Grand Las Vegas
Hotel & Casino. The rules of the game are as follows:
 The player pays an amount of X to play the game

 The player then rolls a single standard 6-sided die
 After the 1st roll, the player is awarded the amount on the die times $1000 (i.e., if you roll a 4, you
win $4000)
 The player then has the option to give up that prize and roll a 2nd time
 The player can again accept the amount on the die in thousands or choose to roll a 3rd time
 The maximum number of rolls is 3, and the player only gets the amount of money in thousands
shown on the die on the last roll.
The CEO would like you to help him set a price for the new game. The price should not be too high that
nobody wants to play. Also, it must not be too low that the Casino would run into a loss. The goal is to
determine the minimum amount of money X that the Casino should charge players to play the game. How
would you go about the case?
Possible Answers:
This pricing and valuation case has no additional information; it is simply a look at the interviewee’s
approach to a real options/statistical analysis problem. Do not let the interviewee veer off into tangents
about other miscellaneous concepts.
Assume that all parties act rationally, and although it is obvious the Casino will charge some amount of
margin above the expected value of the game, the goal is to simply find the minimum amount they would
be willing to charge in order to break even, which is the expected value. It is helpful to understand the
concept of “Real Options”, but it is not necessary to solve the case.
Possible Solution:
A. 1-Roll Game:
Expected value of a single roll = (1+2+3+4+5+6)/6 = 3.5
Therefore, the expected payout of a single roll game is $3,500.
B. 2-Roll Game:
The price of a 2-roll game will have to be higher than the price of a 1-roll game $3,500.
We will assume a certain price P1 for 1-roll game and will further determine the expected value of a 2-roll
game, P1 is greater than $3,500.
At P1 = $4,000
 1/3 of the players (those who roll a 5 or 6) will quit right after the first roll. The expected payout for
these players is = (5+6)/2 * $1,000 = $5,500.
 2/3 of the players will continue to play the 2nd roll. The expected value of their roll (which is now a
single roll game), as established before is $3,500.
Therefore, the expected payout of a 2-roll game is: 1/3 * $5,500 + 2/3 * $3,500 = $4,166.67
The price of a 2-roll game will have to be greater than $4,166.67
C. 3-Roll Game:
The price of a 3-roll game will be higher than the price of a 2-roll game.
We will assume a certain price P2 for 2-roll game and will further determine the expected value of a 3-roll
game, P2 is greater than $4,166.67
At P2 = $4,500
 1/3 of the players (those who roll a 5 or 6) will quit right after the first roll. The expected payout for
these players is = (5+6)/2 * $1,000 = $5,500.
 2/3 of the players will continue to play the 2nd roll. Again, among those 2/3 players,
 1/3 of them (those who roll a 5 or 6) will quit after the 2nd roll. The expected payout for
these players is = (5+6)/2 * $1,000 = $5,500.
 2/3 of them will continue to play the 3rd roll. The expected value of their roll (which is now
a single roll game), as established before is $3,500.
Therefore, the expected payout of a 3-roll game is: 1/3 * $5,500 + 2/3 * (1/3 * $5,500 + 2/3 * $3,500) =
$4,611.11
Conclusion: The price for the new dice game will have to be greater than $4,611.11
Subway to Roll Out New Frequent Eater Program
Consulting Firm: Capital One final round job interview.
Case Interview Question #00376: The client Subway is an American restaurant franchise that primarily
sells submarine sandwiches (subs). It is owned and operated by Doctor’s Associates Inc. (DAI).
Headquartered in Milford, Connecticut, Subway is one of the fastest growing fast food franchises in the
world with more than 35,000 restaurants in 98 countries and territories as of

September 2011.
Recently, the CEO of Subway wants to introduce a ‘frequent eater’ program. He has hired your consulting
team to evaluate the feasibility of this new program. Two questions will have to be addressed by you:
1. Is this a good idea or not?
2. What are the potential risks/issues that Subway must consider?
Additional Information: (to be provided to you if asked)
For every $1.00 a customer spends in any Subway stores, they get 1 point. The frequent eater plan is to
give away coupon that can be redeemed for a free sandwich once a customer accumulates 20 points.
Candidate can start working assuming an average store and fine-tune later. An average Subway store
has around 8,000 ‘heavy’ eaters and 12,000 ‘light eaters’ per year – segmentations beyond ‘heavy’ and
‘light’ are not very relevant for this case.
Market research survey indicates that heavy eaters will increase the frequency of visits from 30 to 36
times a year; light users will increase frequency of visits from 10 to 12 times a year.
Customers spend an average of $5.00 for every visit – this is the same for both heavy and light eaters.
Heavy users just come more often.
Around 20% of the heavy users are expected to participate in the frequent eater program. Around 5% of
the light users are expected to participate.
The “give-away” free sandwiches cost $2.00 to make and there is a 50% gross margin on the average
items sold.
Only 50% of the customers who participate in the frequent eater program actually redeem/use the
coupons.
Possible Solution:
A cost-benefit approach works best for this case. The goal is to determine if this frequent eater program is
profitable for the average store. The candidate should structure his/her analysis to determine the revenue
and cost drivers, thereby getting the information listed above. It is ok to make some calculation errors, but
it is important to identify all the revenue and cost drivers and the participation rates.
 Number of heavy user participants = 20% * 8000 = 1600.
 Increase in revenue for heavy users = 1600 * (36 – 30) * $5.00 = $48,000.
 Gross increase in earnings (50% margin) = $24,000.
 Number of light user participants = 5% * 12000 = 600.
 Increase in revenue for light users = 600 * (12 – 10) * $5.00 = $6,000.
 Gross increase in earnings (50% margin) = $3,000.
Net increase in gross earnings = $24,000 + $3,000 = $27,000.
 Cost of providing free sandwich to heavy users = 1600 * (36 * 5 / 20) = $14,400. At 50%
redemption rate, the cost is $7,200.
 Cost of providing free sandwich to light users = 600 * (12 * 5 / 20) = $1,800. At 50% redemption
rate the cost is $900.
Total Cost of free sandwich giveways = $7,200 + $900 = $8,100.
Net value to average store = $27,000 – $8,100 = $18,900.
So, from a simple cost-benefit point of view the conclusion is that Subway’s planned frequent eater
program will be profitable to the average store.
Potential risks/issues:
Once you prove the program is valuable for the average store, think about potential problems associated
with the frequent eater program:
 Different kinds of stores may have different outcome: stores along highway may not benefit as
much as stores in urban areas, for example.
 What if competition comes up with a similar program?
 Will there be any increase in visits? What if customers didn’t come more frequently as they
claimed in survey?
 What about the costs associated with setting up the program (software upgrade, maintenance
cost, marketing, etc)?
 Risks with fake coupons if the paper coupons are too easy to forge.
Interviewee’s Comments:
Structure all your calculations so that they are easy to follow – this way, if you make a mistake, the
interviewer can correct your numbers. Also, it is OK to approximate / ball-park, but you should state your
approximations loudly
German Luxury Car Maker BMW to Enter Bangladesh Market

Case Type: market entry/new market; math problem.
Consulting Firm: KPMG Consulting final round job interview.
Industry Coverage: automotive, motor vehicles.
Case Interview Question #00350: Our client BMW (FWB: BMW) is a German luxury car maker that
manufactures automobile, motorcycle and engines. It also owns and produces the Mini marque, and is
the parent company of Rolls-Royce Motor Cars. Headquartered in Munich, Germany, the BMW group
produced more than 1,400,000 automobiles and over 110,000 motorcycles

worldwide across all its brands in 2010.
Recently, The CEO of BMW wants to grow business and is looking into selling cars in Bangladesh (a
sovereign state located in South Asia and bordered by India). The current population of Bangladesh is
estimated to be 142 million and the country’s GDP growth is 5% per year during the last three years. The
CEO of BMW wants you to help find out whether they can break even in three years if his company enters
the Bangladesh market. How would you go about it?
 Currently, the only luxury car sold in Bangladesh is Mercedes-Benz (FWB: DAI) and they have
been in this market for the past 10 years.
 Mercedes-Benz imported and sold 10,000 luxury cars in this market over the past 10 years, and
has their own dealership in Bangladesh.
 There are ~1000 new buyers for luxury cars in Bangladesh each year.
 Existing luxury car owners replace their cars every 10 years (the interviewee should calculate
how many new cars are sold to existing owners – 1000 per year, and therefore the total market size
per year is 2000 new cars)
 If BMW enters the market, they will have 30% (The interviewer should not give this info out right
away, ask the candidate to estimate first) market share each year.
 The price Mercedes-Benz charges is $100,000 per car.
 Assume the discount rate is zero.
Possible Answers:
1. Ask the candidate how to estimate BMW’s market share.
Possible Approach:
 Understand customer needs through survey and estimate how well we could meet those needs
and therefore how much market share we could gain.
 Find benchmark in other markets. It turned out that our client already entered Vietnam and other
Southeast Asian markets similar to Bangladesh and on average gained 30% market share in each of
these markets.
2. Break-even analysis
Cost Structure
 Fixed Costs: Initial one-time investment: $7 MM.
 Variable Costs (per car):
 Manufacturing $20,000.
 Transportation 120% of manufacturing cost. $20,000 * 120% = $24,000
 Customs/Taxes 95% of manufacturing + transportation costs. ($20,000 + $24,000) * 0.95
= $41,800
 SG&A (Selling, General and Administrative Expenses) 12% of all the above costs
combined. ($20,000 + $24,000 + $41,800) * 0.12 = $10,296
The total variable cost per car rounds up to $96,000/car. Therefore, if BMW charges the same price for
their luxury car as Mercedes-Benz, $100,000 per car, the profit on each car is $4000. With 30% market
share, the client’s annual profit will be 2,000 cars * $4,000 per car * 30% = $2.4 MM. Given the initial
investment of $7 MM, BMW will likely break even in 3 years.
3. An excellent candidate should also evaluate potential risks of entering this new market
 Assumptions might be inaccurate.

 Client BMW may not be able to grab 30% market share like they did in other countries.
 Economic downturn could cause less people to buy luxury cars.
 BMW may have a hard time competing with established player in this new market, price
may have to be reduced.
 Bangladesh may not be stable politically and economically, therefore our client will bear more
risk.
 There could be other new entrants like Audi, Jaguar, Volvo, Lexus, Infiniti, etc.
 Existing competitor Mercedes-Benz could react to our entry by
 Reducing price (the best answer might also mention that with the low income level in the
country, customers who can afford luxury cars might not be price sensitive at all). Ask candidate
what price Mercedes-Benz will reduce their car to. Possible Answer: $96,000/car or less.
 Improving BMW’s services if that’s the differentiating factor of our product.
 Blocking some local resources.
CarMax to Tighten Car Loans & Auto Finance Policy
Case Type: math problem; new business; finance.
Industry Coverage: automotive, motor vehicles; retail; financial services.
Case Interview Question #00334: Our client CarMax (NYSE: KMX) is a used car retailer and dealership
headquartered in Richmond, Virginia, USA. Their business has been stagnating in recent years. They are
located in a low to middle-income area and in the past have only sold cars to
customers who are willing to pay 100% of the cost up-front or can obtain bank financing. In order to boost
sales, CarMax is considering offering car loans to customers that the dealership itself will finance.
To be eligible for a loan, customers must undergo a complete credit check (which we assume to be
accurate). The credit check rates potential car buyers on a scale of 0 to 100, where 0 corresponds to a
0% chance of paying off the loan and 100 corresponds to a 100% chance of paying the loan in full. Each
loan only lasts 1 year in which payments are made monthly and the entire loan will be paid off in 1 year’s
time. Buyers ultimately fall into two categories, those that pay off the loan entirely, and those that default.
The Question: What should be the cutoff level where CarMax decides to give potential buyers the loan?
What issues might cause you to alter this cutoff-level?
Additional Information: (to be given to you when asked)

 Average cost of a used car to CarMax: $6,000.
 Average price of car sold to customer: $7,000.
 Minimum down payment for all customers: $1,000.
 Average loan defaulter makes three months of payments before defaulting.
Possible Answer:
Although this case looks like a typical “starting a new business/service” case, I did not really use any
framework because this case is more of a question of establishing where the break-even marks would lie.
I did all the calculations on the average.
Candidate: So what is the average cost of each car and how much does our client CarMax sell them for?
Interviewer: The dealership’s average cost per car is $6,000. We sell them for an average of $7,000.
Candidate: What is the minimum down payment? Do all customers default at an amount relative to their
credit report (i.e. a potential buyer with an 80 credit rating will pay the down-payment and 80% of the
remaining loan)? How much do we make on the loans?
Interviewer: The minimum down payment is $1,000 regardless of credit rating. The average default is
after three months. Assume we make nothing on the loans; they are only used to entice in additional
customers.
At this point, I stated to crank through some of the math. We make a profit margin of only $1,000 on each
car. For this to be worthwhile we must make more on additional cars sold and paid for in full than what we
lose in loan defaulters.
 Net profit to the dealership for a good loan: $7,000 – $6,000 = $1,000.
 Total loss to the dealership for a default: $6,000 (average cost of car) – $1,000 (down payment) –
$1,500 (three months payment before default) = $3,500.
This means that we need to have 4 good loans
for every 1 bad loan to turn a profit/not lose

money. If 4/5 of loans must be good, then a credit rating of 80 should be our cutoff. At this point I drew the
following graph for the interviewer to illustrate my point and to discuss other issues to consider:
I would probably be tempted to raise the cutoff above 80, at least in the beginning. This is for two
reasons:
(1) We are not sure how successful our client will be with this process, so it would be better to start more
conservatively and if successful, ramp up the operation.
(2) At the 80 cutoff we are working very hard for diminishing profits, where at the 90 cutoff the potential
rewards are much higher.
Alternative solution and other possible issues to consider:

 Another possible solution would be to lower the cutoff level for higher risk loans but raise the
minimum down payment required. This would change our risk profile.
 Look at the cash flow situation of the client. If a few unexpected bad loans in a row would
bankrupt our client, then we may want to raise the cutoff.
 Examine expected economic conditions looking forward. If we sense that the economy will be
poor in the future, we also may want to increase the cutoff point.
 The use of warranties or add-ons, paid at the time of purchase, that force customers to pay more
up-front would also allow us to lower the cutoff levels. For example, it we allow a customer to
purchase a two-year warranty for $1,000 that is paid for in full at the time of purchase, it reduces our
overall risk exposure.
Capital One Auto Finance to Revamp Loan Issuing System
Case Type: new business; math problem; finance.
Industry Coverage: financial services; banking.
Case Interview Question #00329: Capital One Financial Corp. (NYSE: COF) is a McLean, Virginia,
United States-based bank holding company specializing in credit cards, home loans, auto loans, banking,
and savings products. Based in Plano, Texas, Capital One Auto Finance (COAF) is the auto loans
division of Capital One. It is the largest Internet auto lender, as well as one of the
top US auto lenders overall.
The COAF division has a loan-issuing operation that requires the following steps:
 The car loan application is generated at a branch office.

 A complete applicant background check is performed at the branch office.
 The application and background check are sent to a loan processing office.
 The background check is updated and verified (this takes much less time than original check).
 The car loan is either approved or denied.
Recently, Capital One Auto Finance division is considering getting rid of the first background check and
only relying on the loan processor’s check to speed the process. If the loan processor does the whole
check with the proposed new software system, the check takes one additional hour per application at the
processor’s office. Should Capital One Auto Finance implement the revised new system or not? Why?
 The average profit margin for a “good” loan (i.e., loans which are repaid) is $0.20 per dollar
loaned.
 The average marginal loss for a “bad” loan (i.e., loans which are not repaid) is $0.50 per dollar
loaned.
 50% of the applicants pass the first background check.
 90% pass the second background check.
Possible Answers:
What I would like to do first is to calculate the annual profits of the original system and compare those to
the annual profits of the proposed new systems. With that in mind, I would ask the interviewer how many
auto loan applications are filled out per year in Capital One Auto Finance division.
What followed were a series of questions designed to help calculate the annual profits of the two systems.
For the sake of brevity, the actual questions have been left out. The following facts, however, were
revealed:
1. General:
 Number of auto loan applicants is roughly ~100,000 per year.

 Average value per car loan is $10,000.
 Given: Average profit margin for a “good” loan: $0.20 per dollar loaned.
 Given: Average marginal loss for a “bad” loan: $0.50 per dollar loaned.
2. Original system:
 Default rate under the original system: 10%.

 Processing costs under the original system: $100/application.
 Given: Acceptance rate under the original system: 45%.
 50% of the applicants pass the first background check.
 90% pass the second background check.
3. Proposed new system:
 Default rate under the proposed system: 5% (estimated).

 Processing costs under the proposed system: $60/hour.
 Processing time per application under the proposed system: 1 hour.
 Expected acceptance rate under the proposed system: 40%.
 Additional costs for the new program: $50/application.
4. Based on the information provided, the following profit calculations could be made for both the original
system and the proposed new systems.
A. Original System:
 Revenues:
 Dollars loaned: 100,000 applications * 45% loans per application * $10,000 per loan =
$450MM.
 Revenues per dollar loaned: (90% Good * $0.20 – 10% Bad * $0.50) = $0.13.
 Total revenues: $450MM * 0.13 = $58.5MM.
 Costs: $100 processing fee per application * 100,000 applications = $10MM.
 Profit: $58.5MM – $10MM = $48.5MM.
B. Proposed New System:
 Revenues:
 Dollars loaned: 100,000 applications * 40% loans per application * $10,000 per loan =
$400MM.
 Revenues per dollar loaned: (95% Good * $0.20 – 5% Bad * $0.50) = $0.165.
 Total revenues: $400MM * 0.165 = $66MM.
 Costs:
 Processing fee: $60/hour * 1 hour/application * 100,000 applications = $6MM.
 Additional costs: $50/application * 100,000 applications = $5MM.
 Total costs: $11MM.
 Profit: $66MM – $11MM = $55MM.
Recommendations for Client:
At first glance, it seems that Capital One Auto Finance should progress with the proposed new system.
There are additional costs, however, that the auto loan division should consider, such as costs associated
with retraining employees, system installation costs, and so on. That said, there might be additional
benefits, as well. For example, a faster loan processing speed may help the company get more business.
Interviewer’s Comments:
This case obviously tests your analytical skills. Do not attempt to answer this question without working
through the calculations on a piece of paper. If your math skills are poor, this strategy could easily
backfire, making you look stupid. This case is relatively straightforward, but make sure that you have all
the information necessary to develop an answer.
Guggenheim Museum Sees Record Attendance

Consulting Firm: Booz & Company final round job interview.
Industry Coverage: entertainment; leisure & recreation.
Case Interview Question #00302: Our client, The Solomon R. Guggenheim Museum, is a well-known
museum located on the Upper East Side of Manhattan in New York City, United States. Designed by
Frank Lloyd Wright, it is one of the 20th century’s most important architectural landmarks. It is the
permanent home to a renowned collection of Impressionist, Post-Impressionist,

early Modern, and contemporary art and also features special exhibitions throughout the year.
Guggenheim Museum broke attendance records in 2008. The number of visitors jumped 12% to 1.1
million. It has hired your consulting firm because it is looking for help understanding why it is experiencing
big problems with visitor congestion in their museum. You have been assigned to the case. Your job is to
identify the cause of the problem and recommend a solution to resolve the issue. How would you go
about it?
When the candidate asks about the layout of the museum should you provide the below figure. If the
candidate doesn’t ask, let them probe around a bit and then provide.
As shown in the figure, there are a total of 6 exhibit rooms per floor. There is a hallway that goes around
the room and through the center (in gray). Each exhibit has a door leading into the exhibit room. There is
one elevator that leads to the entrance at the front. People exit the elevator and move to their desired
exhibit room. What next?
Possible Framework:
The beauty of this case is that there is no single appropriate framework. Let the candidate attempt to build
one, but they are likely to find themselves stuck quickly.
Possible Solution:
First of all, ask the candidate: what should we look at?
Often the candidate will list off many obvious things. The point is to drive them to a very specific solution.
Give them the chance to exhaust ideas. In general, the answer is “no, that’s not it”. Some common
questions are below:
 Can we add more doors to the exhibit rooms? No.
 Can we stagger the flow somehow? No.
 Is it always busy? Yes.
 Are some floors worse than others? No, they are all bad.
 Can we add a second elevator? No.
 Are certain parts of each floor worse? No.
 Has congestion always been this bad? Yes.
 Has volume increased over time? No.
 Has the kind of people visiting changed? No.
 Do people stay longer than they used to? No.
 How long do people stay at the museum? Doesn’t matter, congestion is always bad.
 Are certain exhibits more popular? Yes, but it doesn’t matter. And no, we can’t move them
anyway.
 Can we expand museum hours? No we cannot.
 Can we move exhibits? No.
 Can we do anything at all with the layout? Nothing substantial no.
 Are there stairs somewhere? No, and you can’t add them.
 Can we put in timers in the rooms that limit amount of time? Yes, but customers would backlash,
so no.
 Can we raise ticket prices to reduce volume and ease traffic? A good idea, but no, we cannot.
 Is the problem seasonal in any way? No it isn’t.
The case is now about optimization. Guide the candidate to think about how people flow when they get off
the elevator. Eventually the candidate should realize that someone has to decide whether to go east or
west when walking out of the elevator. If they don’t get there (many don’t), you can ask them to think
about how people get to the exhibits they want. The next question they should ask is whether or not there
are signs or maps that are handed out to the visitors.
Once the candidate identifies that the problem deals with flow, and specifically, signage or maps –
provide the candidate with the following statement.
As it happens, we do provide individuals with maps. We do not however, have signage on each floor. Do
you think we should put it there?
All candidates will say yes. Unless they elaborate, you should push them to state what the signs should
say. Force them to be explicit. The candidate should realize that given 6 “slices” the question becomes
when does it make sense to go east instead of going west and when does it make sense to go through
the middle? If the candidate does not realize this, help them by asking: Ok so we put signs up near the
elevator and exhibit rooms and in the middle. Pretty much everywhere. But what should they say?
A typical candidate response is usually “the signs should say the right for 1,2,3, to the left for 4,5,6”. If
they forget the middle ask: when should you go down the middle?
They will typically reply “when it’s shorter”. Insufficient! If you receive this response, ask the candidate to
demonstrate when it is shorter to go down the middle.
In general, the answer is as follows (A detailed complete solution follows later in the text): The individual
should go right to get to exhibit rooms 1 and 2. The individual should go down the middle to get to rooms
3 and 4, and the individual should go left to get to 6 and 5. If a candidate says this, ask them to explain
why that is. They should, again, be explicit and provide the solution similar to that below. Simply stating
“because that’s the shortest path” is insufficient! Push the candidate to demonstrate why that is.
Here are the explicit steps required to solve the last part of this problem. If the candidate needs help, you
can push them along with these questions. Only use if the candidate cannot solve on their own.
1. How far is it from the elevator to the other side? Given a circle with radius “r”, the distance down the
middle to the other side is: 2r.
2. What is the circumference of a circle? The circumference of the entire circle is 2πr.
3. So how far is it to room #1? The degrees to one room away (in either direction), moving along the edge
is 60/360. Thus, the circumference of that distance is 1/6 * 2πr = (1/3)πr. Since π = 3.14, this can be
approximated as roughly 1r.
4. So how far is it to room #2? The distance two rooms away moving along the edge is 120/360 * 2πr =
1/3 * 2πr = (2/3)πr. Again, this can be approximated as roughly 2r.
5. So how far is it to room #3? If you were to go along the outside of the ring to get to room #3, you’d
travel 180/360 * 2πr = πr. This could be approximated as 3r.
6. Therefore, should you go down the middle for room #4? As identified in part #5, since π =3.14 > 2, then
by definition πr must be greater than 2r. Therefore the distance to get to room #3 via the outer ring is 3r.
The distance via the middle is 2r. Therefore: going along the outside to get to rooms #3 or #4, rather than
down the middle, is inefficient.
7. The solution can be generalized for N rooms. If the arc length of the outer passage is less than 2r, the
visitor should go along the outside, if not, they should go along the middle.
Final Recommendations:
The client has asked us for our final recommendation. What would you tell the client?
A good response would be crisp and simple: The problem may be that people are not finding what they
need or are getting to their locations in an efficient manner. We need to optimize how an individual gets to
an exhibit once they get off on a given floor. Based on our current configuration, I would recommend that
we optimize movement by directing flow down the middle of the rooms for rooms 3 and 4, to the left for 5
and 6, and to the right for 1 and 2. We should add appropriate signage when you get off the elevator to
direct individuals.
More People Play Football Than Watch Football Match in UK

Case Type: estimate/guesstimate; math problem.
Consulting Firm: Oliver Wyman 2nd round job interview.
Industry Coverage: sports, leisure & recreation.
Case Interview Question #00293: In an average week, do more people play football (soccer), or watch a
football match in the United Kingdom (UK)?
Possible Answer:
More people play football than watch a football match in the UK.
At first sight this looks like a brainteaser question. The job candidate should
realize that it can be solved as an estimation/guesstimate or market sizing case. The key to approaching
this type of case questions is: to start by clarifying the question; then to identify any assumptions you can
make to simplify the problem; next to break down the problem logically, before finally getting into the
detail of the numbers. Interviewers will be impressed with people who can approach a problem
conceptually, and also who can find ways of getting to a roughly right or “80/20” version of the truth
quickly, which can be refined later.
1. Start by raising any questions you have to clarify the parameters of the analysis.
In this case, you might want to confirm that “watching a football match” means watching a match in
person, not on TV; and that “playing in a match” means playing in an organized manner with 2 full teams
and a defined pitch, rather than a kick-about with friends in the local park, or with your kids in the garden.
Football could include 5-a-side as well as full XIs, but does not include non-standard football, e.g. Eton
Fives or other variants.
2. There are normally some simplifying assumptions to make up front – and you should always lay these
out to the interviewer and confirm she/he is happy with them, before proceeding. The assumptions in this
example could be:
 Assume we are talking about people in England – and that the conclusion for England will be the
same as for the rest of the U.K., as there is no structural reason to believe the other nations behave
differently.
 Assume we are talking about distinct individuals rather than played occasions – so people playing
> once a week or watching > once a week does not count.
 Assume you only need to prove that the number playing is greater / less than the number
watching – rather than the absolute numbers involved in each.
3. Once you’ve clarified the scope and agreed your simplifying assumptions, you can start laying out a
logical structure to breaking down the problem.
For this case question, one approach would be to start by listing out all the different playing and watching
“occasions”. This allows you to show your interviewer that you’ve considered the problem as a whole,
rather than diving down a particular line of argument – and also allows them to alert you to anything
you’ve missed. Don’t be afraid to use a piece of paper to write these down.
For example, an occasion list might look like:
 Children
 School PE lessons
 Inter-school matches
 Other children’s matches (county or other local leagues)
 Adults
 Adult amateur: 5-a-side, local Sunday leagues, company teams etc
 Adult professional: Premier League etc.
4. Once you laid out the occasions, you should then prioritize which ones to analyse, in this case, based
on:
(a) Do you believe the numbers of players v.s. spectators will be asymmetric, or do the players and
spectators cancel each other out? If canceling out, you can ignore the occasion, for the purposes of the
analysis (remember, you don’t need to know how many, just more or less).
(b) Which occasions contribute the most to total player or spectator numbers: you should always focus
your efforts on the “big ticket” items which will have the most impact on the final solution.
A “prioritization matrix” might look like:
Occasion Number Playing Number Watching Priority to analyse
School PE lessons Significant None High
Inter-school matches Cancel out Cancel out Low
Other children Cancel out Cancel out Low
Adult amateur Unknown None Low
Adult professional Likely to be low Significant High
The logic behind this prioritization is as follows:
 Most children (especially boys) will play football at school, but there are rarely any non-playing
spectators other than the PE teacher.
 A child playing in a match (school or other league) will on average bring 1 parent or other friend to
watch – so the number playing and the number watching will cancel out.
 Practically no-one watches adults play amateur football on a regular basis.
 Professional, i.e. League, football players are a small proportion of all adults playing football –
and certainly in proportion to the number of spectators.
This leaves us with two occasions in favour of players – School PE (significant) and Adult Amateur
(unknown); and one occasion in favour of spectators – Adult Professional (significant). Therefore, if you
can prove that School PE is greater than Adult Professional, you can answer the question, without
needing to work out the number of Adult Amateur players (currently unknown).
I. First, start by working out how many children play football in school.
(a) How many school-age children are there in England?
English population = 50M (you would be expected to know this / know that the total UK population is
around 60M, and most of this is in England).
Population in each age bracket (i.e. one year) = 50M / 75 (average life expectancy) = 2 / 3 M.
Years of school playing regular matches = 9 (Ages 7 – 16, as most don’t start PE in their first few years at
school, and tend to stop playing in Sixth Form, or leave school).
Therefore, total children = 2 / 3 M * 9 = 6 M.
There are actually 7.5M children in school in the UK, so 6m of match-playing age in England seems
sensible.
(b) Of school-age children, how many play football?
Remember, you are looking for the minimum likely number, to prove it is more than people watching
football, rather than the actual. You should also bear in mind that the proportion of children playing is very
different for girls than boys. A cautious minimum estimate could be:
Proportion of girls playing football = 0%

Proportion of boys playing football = 25%
Therefore, total players = 0% * (6M/2) + 25% * (6M/2) = 750,000
Therefore, the minimum likely number of people playing football in an average week is 750,000.
II. Next, work out how many people watch professional football.
There are two dimensions to the total number of spectators: number of matches * number of spectators
per match.
(a) How many professional matches are there per week?
Assume that each professional team plays each week, then number of matches = number of professional
teams / 2 = 92 / 2 = 46.
You may know the number of professional teams already – but don’t worry if you don’t. The best
approach is to break it down further – into number of leagues * teams per league. If you assume there are
4 leagues, and 20 – 25 teams per league, this gives you a range of 80 – 100 teams, or an average of 90
teams, therefore 45 matches.
The interviewer will let you know if you are completely wrong on the number: the key thing is to show a
logical approach to estimation.
(b) What is the attendance at each match?

The first think to bear in mind is that attendance will vary significantly between the different leagues – so
the Premier League would have much higher attendance than Division 2. You could start by assuming
that each League has half the attendance per match than the previous league. This means you only need
to estimate the average attendance at a Premier League match.
Premier League total = 30k (this is an estimate).

Other Leagues total = 30/2 + 30/4 + 30/8 = 15k + 8k + 4k (round up) = 27k.
All Leagues total = 30k + 27k = 57k.
All Leagues average = 57k / 4 = approx 15k.
The actual number for average attendance is 15.4k, so very close to this number.
(c) What is the total average attendance?
Total attendance = matches * spectators per match = 45 * 15k = 675k (you can multiply this out
longhand).
Therefore, the likely number of people watching professional football is 675k.
Conclusion: 675k is less than the 750k minimum estimate for children playing football, which does not
include the number of adults playing amateur football. Therefore, more people play football than watch
football in an average week.
How Many Spikes Are on the Back of a Hedgehog?
Industry Coverage: Agriculture, Farming & Aquaculture.
Case Interview Question #00292: How many spikes are there on the back of a hedgehog?
Possible Answer:
Answering this estimation/guesstimate type of case questions requires answering a number of sub-
questions (SQ). To estimate the number of spikes on the back of a hedgehog, the following sub-questions
and possible solutions could be used:
1. How do you define the ‘back’ of the hedgehog?

2. What is the area of the back of the hedgehog?
3. How many spikes are there in a specific area?
4. How many spikes are there on the back of the hedgehog?
SQ1: How do you define the ‘back’ of a hedgehog?
 Could define this as the whole area upon which spikes can be found.
 Could be the whole area that is not in contact with the ground.
 Could be an area in a similar proportion to the circumference of the hedgehog (when viewed from
above) but of smaller size i.e. the area around it can be described as the sides rather than the back.
Let’s go with the latter option and try to determine the area of that.
SQ2: What is the area of the back of a hedgehog?
 Estimating the size/shape of a hedgehog, you could say it could be held comfortably in your
hands:
 Ellipsoid in shape so Elliptic when viewed from above
 20 cm in length
 16 cm in width
 Assuming that the curvature of the hedgehog is ‘smooth’ between the back and sides and so the
back ends and side starts halfway between center and outside of the ellipse:
 the length of the back is 10 cm (radius L = 5 cm)
 the wide of the back is 8 cm (radius W = 4 cm)
 For simplicity, assume the surface area of the back when flattened is of similar size. Using the
standard formulae for the area of an ellipse, the area of the back of the hedgehog = Pi * radius L *
radius W = 3.14 * 5 * 4 ~= 63 cm2.
SQ3: How many spikes are in a specific area of the back?
 Let’s consider an area of 1cm2 as the specific area.

 Spikes are much thinker than human hairs so let’s assume that the width of a spike is 1mm.
 Assuming that the spikes are packed together and each takes up an area of about 1mm2, then
the total number of spikes in 1cm2 is 100.
Final Step: How many spikes are there on the back of a hedgehog?
 Let’s assume that the density of spikes is uniform across the back.
 Given a total area of 63cm2 on the back and 100 spikes within each 1cm2, the total number of
spikes is approximately 6,300.
How Much Interest is Lost on Money Sitting in Phone Boxes?
Case Interview Question #00291: How much interest is lost on money sitting in telephone boxes (a.k.a.
telephone booth or telephone kiosk) in England each year? Calculate the interest for year 2006 and 1985.
Possible Answer:
Answering this estimation/guesstimate case question requires answering a number
of sub-questions (SQ):
1. How many telephone boxes are there in England?

2. How much money is in each telephone box?
3. Assuming an annual interest rate of 5% in 2006 or 10% in 1985, how much interest is lost on
money sitting in phone boxes in England each year?
SQ1: How many telephone boxes are there in England?
a. Start by considering how many people there are per telephone box.
 There are two telephone boxes in my village and it has around 200 houses
 Assuming that the average household has four people living in it (parents plus two children), then
there are: 200 houses * 4 people / 2 boxes = 400 people per phone box in rural areas
 Now consider urban areas, given the higher density of housing, say double, there will be 400
houses per two phone boxes
 However, occupancy rates are likely to be lower in urban areas e.g. more flats. Assuming, that
half are family houses with four people and half are flats with two people, the average household will
have three people living in it
 There are: 400 houses * 3 people / 2 boxes = 600 people per phone box in urban areas
 Finally, assume that in England 25% of the population live in rural areas and 75% live in urban
areas, then the average number of people per phone box is: 600 people * 75% + 400 people * 25% =
550 people per telephone box in England
b. Use the population of England to estimate the number of boxes
 Total number of people in England is ~50 million

 Total number of telephone boxes is: 50 million / 550 people ~= 90,000
SQ2: How much money is in each phone box?
 Under the assumption that telephone boxes will be emptied when they are full and not before, we
do not need to consider frequency of use and instead require an estimate of coinage capacity.
 Phone calls cost 20p in England so the majority of coins will be 20p.
 The collection trays in phone boxes are approximately 20cm high, 20cm wide and 10cm deep,
giving a total volume of 20 * 20 * 10 = 4,000 cm3.
 A 20p coin is about 2cm in diameter and about 1/4cm in depth, giving a total space taken up of 2
* 2 * 1/4 = 1cm3.
 Therefore, the collection tray can hold 4,000 20p pieces when full, or £800 – this assumes that
the shoot into the tray maintains an orderly coin arrangement.
 Assuming that there is a consistent use of phone boxes through time, the average amount in a
phone box is £400.
Final Step: How much interest is lost on money sitting in phone boxes in England each year?
 The average total amount in all English phone boxes is: £400 * 90,000 = £36 million.
 Assuming an annual interest rate of 5% on deposited money, the total amount of interest lost in a
year is £36 million * 5% = £1.8 million.
Extra Question: Calculate the interest for year 1985.
 Under the assumption that the phone box is emptied when it is full, the average number of coins
in the box remains at 2,000.
 In 1985 a call cost 10p rather than 20p so the average amount in the phone box was £200 (ignore
the slightly different sizes of the coins).
 We used to have four boxes in our village instead of the two we have now – Assume there were
twice as many boxes in England in 1985 i.e. 180,000 boxes.
 The average total amount in all English phone boxes would have been: £200 * 180,000 = £36
million.
 Assuming an annual interest rate of about 10% in 1985, the total amount of interest lost in a year
was £3.6 million.
Gogo Inflight Wireless Internet to Expand to More Airplanes
Consulting Firm: Boston Consulting Group (BCG) second round job interview.
Industry Coverage: telecommunications & network; airlines; startups.
Case Interview Question #00253: Our client Aircell is a start-up company with a technology to deliver
broadband internet service to commercial airlines. Aircell offers the Gogo Inflight Internet which allows
airline passengers to connect to the Internet through a system of cell towers on the
ground. The towers have been outfitted to point their signals at the sky rather
than along the ground. The aircraft picks up the signal through a receiver installed on its underside. Once
in the aircraft, the data signal is distributed throughout the cabin via a Wi-Fi wireless system. As a
consultant hired by the CEO of Aircell, how would you help them think about their offering?
Part #1: Industry and Market Size – The candidate should include the industry and market size in
his/her framework.
Additional Information: (to be given if asked)
 Broadband for the airlines: There is general interest in the broadband internet from the airline
industry. The start up would have to invest relatively little up front and would keep most of the
revenues. They would charge the customers on a per flight pricing model.
 Size of the Market: Ask the candidate to estimate the market size and hand over the first Exhibit
1. Also inform the candidate that there are 3000 planes.
Exhibit 1.
 Annual flights legs per plane: 2000

 Average seats per plane: 200
 Average load factor: 75%
 Cabin seating: First class 10%, Coach 90%
 Passenger mix by cabin:
 First class: Business 100%, Leisure 0%
 Coach: Business 30%, Leisure 70%
 % travelers who carry laptops: Business 90%, Leisure 0%
Possible Answer:
First class Coach
Seats per plane 20 180
x load factor 75% 75%
= 15 135
x business travelers 100% 30%
Laptop users/plane 15 40.5
Total laptop
users/plane 55.5
3000 planes * 2000 legs/plane * ~55 laptop users/plane = 330 million approximate annual potential user-
legs.
Part #2: Pricing – In order to finish the market size, the candidate should ask for the price per flight.
Hand out Exhibit 2 (Inflight internet price elasticity) and ask candidate to set the price.
Possible Answer:
Assume 100 passengers (for ease) at the various price/penetration combinations:
 30 users at $5 = $150/flight
Therefore, the client should set price at $15.
Part #3: Break Even – Given the information already revealed in the case and the information below the
candidate should calculate a break-even point.
Additional Information: (to be given if asked) The company has discovered that if they can generate
$250,000 per plane in annual revenue, they will be profitable installing the technology on that plane.
Possible Answer:
250,000/2000 legs/plane = $125/leg, to break-even they will need $125/$15 = 8.3, about 9 users/leg.
From Part #1, we already figure out 55 laptop users/leg, and at $15 there’s a penetration rate of 20%, so
we estimate 55 x 20% = 11 users/leg. Yes, they should be able to break even.
Part #4: Other factors – Probe the candidate for breadth and understanding of new market entry. Ask
him/her about the following two aspects of this project.
 Competition – The interviewer should probe deeper into the competition especially w.r.t.
Intellectual Property. For this case, the company has the patent on the high speed connection. But,
what about low-speed?
 Risks – Ask the candidate which risks are associated with the business model. Use your
judgment when considering their answers.
Note to Interview: This is a new business development case where candidate is required to evaluate the
feasibility of a new product/service offering in conjunction with the airline industry. The candidate should
use a comprehensive framework, walk the interviewer through it and be prepared for analytical detours
throughout the flow of the case. The calculations represented here are only one approach and
interviewees may take other approaches, depending on the assumptions made. The interviewer should
be mindful of this and allow for flexibility.
Interviewee’s Comments: Like some cases, we just crunched numbers until we were out of time. The
interviewer had a lot of different exhibits. There was no way someone could get through all of them.
Cases don’t always flow neatly. The interviewer will jump around and direct you where he wants to be at
that particular time. Other people who did the case the same day talked about different things. He also
didn’t ask me to wrap up. When I got feedback on the case, he told me I did a really good job, so don’t let
things like that bother you.
How to Improve Rail Wheel Production Performance?
Consulting Firm: McKinsey & Company first round job interview.
Industry Coverage: manufacturing; railroads & trains.
Case Interview Question #00252: There is this middle-sized rail wheel company in New South Wales in
Australia. Its major business is to make steel wheels for railway carriages. Our client Pacific Equity
Partners (PEP) is one of Australia’s four largest buyout firms. PEP just bought this rail wheel company
and they feel that its performance can be improved. We have been called in to
help. How would you go about analyzing the case?
Possible Answers:
Candidate: Is it the production performance they are concerned about, or is the performance related to
the revenues and costs?
Interviewer: It’s a production issue.
Candidate: What’s the issue?
Interviewer: Not many wheels are being manufactured.

Candidate: Not many wheels compared to the competitors, I assume.
Interviewer: Yes.
Candidate: Okay, how many wheels are we currently making? And how many are our competitors
making?
Interviewer: We don’t have much information about our competitors except that they are making more
wheels than we are. We currently make around 63,000 wheels per year.
Candidate: Okay, so 63,000 wheels per year is approximately 5,250 wheels per month or 175 wheels per
day. (I divided the monthly number by 30 to ease up my calculations). We need to make more than 175
wheels per day, right?
Interviewer: Yea, how do we do that?
Candidate: How are the wheels made currently? Like what is the wheel making process?
Interviewer: We buy 1m x 10m bars of steel which are cut into 30cm slices called cheese. This cheese is
melted and put into a milling furnace. While the hot cheese is spinning, heavy rollers squash it out into a
wheel shape. This is then taken to a finishing area where it takes 2 days to cool down.
Candidate: So each wheel takes 2 days to cool down?
Interviewer: That is correct.
Candidate: Is there something that can be done differently in this process? Like quicker cooling?
Interviewer: No.
Candidate: Could there be some process inefficiencies? Such as the steel bars not being the optimal
shape for cutting, or steel impurities so that the cheese doesn’t melt as fast? Do we buy enough steel to
produce more than 175 wheels/day? Could there any wastage of raw material?
Interviewer: Those are interesting observations. To your point, there aren’t any process inefficiencies that
could be the cause of our low output. But we do buy enough steel to produce more than 175 wheels/day.
Candidate: That is interesting. So we do have enough raw material, but somehow aren’t producing
enough wheels. Could it be that some of the wheels being produced aren’t usable?
Interviewer: Good point! 5% of all wheels produced get rejected due to operational error. The wheel
punching machine isn’t calibrated well. Another 5% get rejected during testing due to structural problems
in the wheels.
Candidate: So only 90% of the wheels we produce are usable?
Candidate: Is the calibration issue due to human error? How can we improve the rejection rate?
Interviewer: Yes. The calibration issue is due to human error. Some of the factory workers are not well
trained to operate the machines. The structural problems we cannot address. So, why don’t you tell me
how we can improve the rejection rate?
Candidate: Well, we can reduce the rejection rate from 10% to 5% if we can address the operational
errors. As these errors are caused by poorly trained workers, we can implement training programs and
quality control measures to ensure that lesser wheels get rejected.
Interviewer: Okay, very good. How will this improve my monthly output?
Candidate: So let’s say we currently make x wheels/day out of which 10% are rejected. So 90% of x =
175. So x = 175/90% = 194. As the rejection rate has gone down to 5% due to our improvements, our
output increases to 95%. So the total number of wheels we will make after these improvements is: 95% of
194 = 184 (as we cannot have fractional wheels). The number of wheels we can make monthly would be
184 * 30 = 5520.
Interviewer: Very good. Now let’s stick to our 175 number. We did a little more digging, and we found out
that even with this 5% improvement, we were still behind our competitors in the number of wheels
produced.
Candidate: Why? Is the factory running under capacity? How many wheels can the factory produce in a
day?
Interviewer: We don’t know how many wheels the factory can produce in a day, but it is definitely running
under capacity.
Candidate: Okay, so we know that we buy enough steel to produce more wheels. Could it be that the
factory is not running 24/7?
Interviewer: Excellent point. We asked around, and realized that each day, the factory experienced 8
hours of downtime:
* 30 minutes due to MRO (maintenance, repair, and operations)

* 190 minutes of unplanned maintenance due to machine breakdowns
* 260 minutes due to production run changeovers where the operators change the wheel measurements
Candidate: Which of these can we affect? Can we improve unplanned maintenance by buying new
machines?
Interviewer: We don’t have the money to buy new machines.
Candidate: What are production run changeovers? Why are wheel measurements changed? Can we
shorten this?
Interviewer: Well – we make wheels in 2 sizes. During a production run changeover, we recalibrate the
punching machine to change the size of the wheel being produced.
Candidate: Are there inefficiencies in this process? Let me elaborate with an example – Let’s say we
produce a big wheel and a small wheel. Suppose for the first quarter of the day, we make small wheels.
Then we switch to making big wheels. In the third quarter of the day, we switch back to making small
wheels – and so on. Each of these switches is contributing to wasted time during changeovers. If such
inefficiencies exist, we can improve by only having 1 changeover. Lets make small wheels in the morning
and big wheels in the evening. Hopefully, you get my drift =)
Interviewer: Great point. We actually did end up facing a similar issue. Let’s say, by improving the process
, we can now reduce the time spent in production run changeovers to 80 minutes. How many more
wheels will we make in a year?
Candidate: Alright, let me have a couple of minutes to do some quick math.
Before: 24 – 8 (downtime) = 16 hours makes 175 wheels. In one hour – we make 175/16 wheels.
After: Downtime is now 30 + 190 + 80 = 300 minutes or 5 hours. (Means we have 3 more hours each day
to produce wheels) So each year, we would make 3 * 365 * 175/16 = 11,976 (roughly 12,000) more
wheels.
Interviewer: I think that sounds about right. Now do you have any questions for me?
Cologne Online Newspapers’ Home Delivery Plan Fails

Consulting Firm: Monitor Group first round internship interview.
Industry Coverage: mass media & communications; small business & startups.
Case Interview Question #00245: As an established consultant with Monitor Group, you have
volunteered your weekend time to critique business plans at a local entrepreneur’s forum in Cologne, the
fourth-largest city in Germany with about 1 million population. One particular startup team has submitted a
business plan that calls for establishing door-to-door distribution of an already existing online newspaper
named The Kölner Stadt-Anzeiger (KStA) in the Cologne/Bonn Metropolitan

Region.
Without detailed knowledge of how the process would work in practice, how might you evaluate the
feasibility of the proposed distribution plan?
Additional Information: (To Be Provided If Requested)

 No external funding or venture capital has been provided, and the startup’s available resources
only allow for the hiring of 6 newspaper carriers on bicycles, each of whom will be responsible for one
square kilometer within the downtown area of the city.
 You should use simplifying assumption that the city is in the shape of a square and the population
is evenly distributed in homes that are an equal distance apart from each other. Also ignore non-
residential areas and assume no “stacking” of homes.
 The newspaper is scheduled to be printed and ready for distribution by 4AM each morning, and
must be delivered by 6AM to meet customer requirements.
 Key assumption the interviewee must make (reorient them if they assume something far from this
figure): subscriber homes within the proposed distribution area are on average 10 meters apart from
each other.
Possible Answer:
One way to assess the feasibility of the plan is to calculate how quickly the newspaper carrier must
deliver a single newspaper, and evaluate whether that sounds like a reasonable figure.
If the interviewee has difficulty conceptualizing the problem, sketch a rough estimation of this graph to
guide his/her thinking:
By assuming that homes are 10 meters apart from each other on average, each side of the square must
contain 100 homes (1,000 meters / 10 meters between each home). Therefore, a square kilometer
contains 10,000 “stops” for the newspaper carrier (100 “stops” per row x 100 rows of homes).
Given only 7,200 seconds to complete the job (2 hours x 60 minutes per hour x 60 seconds per minute),
the newspaper carrier would need to deliver more than one newspaper per second (10,000/7,200 = 1.4),
which is likely impossible since subscriber homes are on average 10 meters apart from each other.
Possible Solutions: Due to the budget constraints of the business plan, hiring more newspaper carriers
is not a valid option. Two potential solutions include the following:
 Reduce distribution area – Pare back distribution to reach only the most profitable potential
subscribers.
 Change distribution method – Co-distribute with other publications and/or locate alternative
channels.
Bank of England to Buy National Bank of Belgium
Case Type: mergers & acquisitions; math problem.
Consulting Firm: Capital One first round job interview.
Industry Coverage: banking.
Case Interview Question #00237: Your client is the Bank of England. As the name suggests, it is a mid-
sized London, UK based bank and deals primarily in commercial retail banking services like mortgages,
savings, loans, and credit cards. The bank’s revenues are rising, but their profits are
declining. The client has asked your consulting firm to help them identify why
their profits are declining and to suggest possible strategies to stem the decline. How would you approach
the case?
Possible Answer:
Candidate: So the goal of this case is to restore profitability. Profits have two components – Revenues
and Costs. First, I would like to explore the following areas:
 Revenues – what is driving them?
 A new (more expensive) product mix being sold.
 Pricing (is the revenue growth due to low pricing).
 Costs – are costs increasing disproportionately?
 The fixed costs like people, offices or advertising.
 The variable costs like transaction costs.
 Industry profitability trends — Depending on what the cause for the profit decline is, we may want
to consider one or more of the following issues:
 Changing the product mix offered or promoted.
 Changing the pricing.
 Rationalizing operations.
 Reviewing fixed costs.
Interviewer: Sounds great! Let’s assume that on doing your research, you find out that the lowering of
profits is actually due to the high cost of funding customer growth, including heavy advertising and
introduction of high-cost products. Since the size of the bank is relatively small, the CEO wants to grow by
acquisition in order to achieve economies of scale. The candidate European banks for possible
acquisition are:
Number of Customers Average number of products Average profit per

(thousand) per customer customer
Central Bank of 400 1.8 £ 100

Luxembourg
National Bank of
Belgium 1,200 1.6 £ 150
Bank of France 4,800 1.6 £ 120
Which bank would you select for acquisition and why?
Candidate: Just on the basis of this table, it looks like Bank of France has a large customer base, which
may be an asset as we are looking to achieve economies of scale. The profits of Bank of France are the
highest among three at 4.8 M x £120 = £576M. However, it seems like they are not the best target since
even though they are 4 times of National Bank of Belgium, their average profits per customer are lower.
This may signal that they are not the best for helping our client attain economies of scale, although there
may be other, revenue-side reasons for lower per customer profits.
I will go with National Bank of Belgium, which certainly has the highest profits per customer, which will
help our client Bank of England with the profitability problem directly, as well as through economies of
scale as being 4 times larger (number of customers) than Central Bank of Luxembourg, it also has 50%
higher per customer profits. It seems like they do know a bit about managing their operations.
Interviewer: Interesting. Now I have a little math exercise for you. Assuming for the two acquisition
candidates Central Bank of Luxembourg and National Bank of Belgium, after the base figure of 400,000
customers, for each additional 100,000 customers, a further 4.125% operational cost is reduced from the
cost. Total costs are 60% of revenues for Central Bank of Luxembourg, then how much are the costs for
the two banks?
Candidate: Central Bank of Luxembourg has 400,000 customers, while National Bank of Belgium has
1,200,000. Thus National Bank of Belgium has 800,000 more customers than Central Bank of
Luxembourg, that is 8 * 4.125 = 33% less cost.
For Central Bank of Luxembourg: total costs = 60% of revenues, total profits = 40% of revenues, thus
costs = 60/40 = 150% of profits. Total profits = 400,000 * £ 100 = £ 40 M, total costs = 150% * £40 M =
£60 M.
For National Bank of Belgium: total costs = 60% * (1 – 33%) = 40% of revenues, total profits = 60% of
revenues, thus costs = 40/60 = 66.7% of profits. Total profits = 1.2 M * £150 = £180 M, total costs =
66.7% * £180 M = £120 M.
Romance Publisher Harlequin Rejects Bookstore’s Deal

Case Type: operations strategy; new business; math problem.
Consulting Firm: IBM Global Business Services 2nd round job interview.
Industry Coverage: mass media & communications.
Case Interview Question #00233: Your client Harlequin Enterprises Limited is a Toronto, Ontario-based
publishing company owned by the Torstar Corporation (TSX: TS.B), the largest newspaper publisher in
Canada. Harlequin Enterprises is the world’s leading publisher of series romance and women’s fiction
with approximately 120 new titles published each month in 29 different languages in 107 international
markets on six continents.

Harlequin Enterprises sell its romance novels directly to bookstores. Typically, the company reimburses
its customers at the end of the year for any unsold inventory. Now, one of Harlequin’s customers, a large
retail bookstore, has come to it with an offer for a deal. In return for a 10% discount on wholesale prices,
the bookstore will no longer send back any books at the end of the year. Should Harlequin do the deal or
not? Why?
Additional Information: (to be provided to you if asked)
 Romance novel sales have been flat for a decade, and sales are expected to remain so in the
coming years.
 Harlequin’s clients have to sell books at a price they dictate, no cheaper.
 In 2008, Harlequin sold 10,000 books to this retail bookstore. At the end of the year, the
bookstore sent back 20% of its books to Harlequin.
 It costs Harlequin $5 on average to make a single book, and Harlequin previously sold books to
the bookstore at $10.
 Harlequin’s Salvage Value for unsold books = 0.
 Note to interviewer: Have the interviewee explain how he/she will estimate/guess at a figure of
how many books the bookstore will order this year, then give the projected number of 7500.
 MSRP of books is not relevant in this case.
Possible Answers:
Key elements of analysis to solve the case:

1. Math: Margin calculations.
 Don’t forget salvage value.

 Ask the candidate to explore rationale for the projected number (7500) of books that will be
ordered this year (directionally up, down or flat?).
2. Opportunities:
 Reduction in operational complexity.

 Good will meeting customer/channel request.
 Open up new business model – may lead to additional distribution channels.
3. Threats:
 Cash Flow (with new model, Harlequin will get less cash flow upfront – a big problem in this kind
of economy).
 Market Share (assuming fewer units sold).
 May affect other clients’ choices as well (i.e. first of many, not isolated case).
 Relationship with client (supply them with less books, they will view you as less important).
Note to interviewer: When mentioning cash flow, have candidate do the calculations. Previously, get
$100,000 upfront, now only get $67,000 (see part 4 Calculations below).
4. Calculations:
 Pre-change: profit = 8,000 * ($10-$5) – 2000 * $5 = $30,000

 Post-change: profit = 7,500 * ($9-$5) = $30,000
 Pre-change: cash-flow: 10,000 * $10 = $100,000 upfront
 Post-change: cash-flow: 7,500 * $9 = $67,500 upfront
 Pre-change: market share at 8,000 books
 Post-change: market share at 7,500 books
Conclusion: The expected profit is the same, but initial cash flow is lower and market share is lower.
There does not seem to be a direct financial incentive to take the deal.
Final Recommendation: The deal does not seem attractive on a financial or strategic basis. The
expected profitability is the same but cash flow and market share will decline. Such problems are
complicated by the fact that others in the industry may follow the lead of the first bookstore.
Recommendation is not to accept the deal.
 Possible Risk: By not accepting the request of your client, you risk alienating the bookstore if
other publishers shift business models.
 Possible alternative: Consider the differences in “blockbuster” books vs. lower-volume books.
Perhaps new business model (at different pricing) may make sense for some titles.
Note to Interviewer: This case is primarily a quantitative math problem with margin calculations. Make
sure that the candidate explore the calculation part in the case first and foremost; discussion of business
and strategic alternatives can come later.
How Many Tennis Balls Can Fit in a Boeing 747 Airplane?
Case Type: estimate or guesstimate; math problem.
Consulting Firm: OC&C Strategy Consultants first round job interview.
Industry Coverage: sports, leisure & recreation; transportation; airlines.
Case Interview Question #00213: How many tennis balls can you fit in a big Boeing 747 airplane?
Possible Answer:
Answering this estimation/guesstimate type of case questions requires answering a number of sub-
questions (SQ). To estimate the number of tennis balls that can fit into a Boeing
747 airplane, the following sub-questions and possible solutions could be used:

1. What is the size of a Boeing 747 airplane?
2. What is the size of a tennis ball?
3. How many tennis ball can fit in a Boeing 747 airplane?
Calculations
1. First of all, let us approximate the size of a Boeing 747 airplane as a large cylinder. Let us assume that
it is 200 feet long and 20 feet in diameter. Calculate the volume of this cylinder = (π * radius^2) * length =
π * (10^2) * 200 = 20,000π cubic feet.
2. Then estimate the volume of a tennis ball (approximate it as a 3 inch sphere, for example) and
calculate its volume = (4/3) * π * radius^3 = (4/3) * π * (3/2)^3 = 4.5π cubic inch. Remember, 1 foot = 12
inches.
3. A division should give you the number of tennis balls that can fit into a Boeing 747 = 20,000π * (12^3) /
4.5π = 7,680,000.
In addition, one should estimate the empty air space left when spherical tennis balls are closely packed in
a cylinder and make correction to the answer. Let’s say 25% space is wasted, then the number of tennis
balls = 7,680,000 * 0.75 = 5,760,000.
To get a more accurate answer, you could also ask the interviewer if there are seats in the plane or if the
wings could also be filled with tennis balls. Don’t stop here – you can always question why we are trying
to fit tennis balls in a Boeing 747 in the first place. If the goal is simply to ship as many tennis balls as
possible from one place to another, you may ask the interviewer: is it possible to pack a tennis ball
machine and lots of plastic raw materials in the airplane so that many more tennis balls can be made at
the destination?
Note: This estimation/guesstimate case is very similar to the “How Many Golf Balls Can Fit into a School
Bus” case, so be sure to check out the answer to that case too.
Microsoft Pursues Strategy for Penetrating Large Organizations
Case Type: math problem; organizational behavior; operations strategy.
Consulting Firm: PricewaterhouseCoopers (PwC) final round job interview.
Industry Coverage: software, information technology (IT).
Case Interview Question #00200: The client Microsoft Corporation (NASDAQ: MSFT) is a multinational
corporation headquartered in Redmond, Washington, USA. Microsoft develops, manufactures, licenses,
and supports a wide range of software products and IT services predominantly related to computing
through its various product divisions.
One particular division of the client makes a software product called Microsoft System Manager (MSM)
that manages desktop applications across different machines. There are 2 broad categories of customers
– large organizations (with 1000 + computers) and small organizations (with 100 – 1000 computers) that
use the MSM software. Microsoft has a strong presence in the small customer segment but has not been
able to penetrate the large segment. Question: 1. Why is Microsoft not able to have a footprint in the large
segment? 2. What recommendations would you have – stay or exit the large segment? 3. What
tactics would you use if the client decides to stay/exit?
Note to case giver/interviewer: This is a quantitative numbers case – so guide the candidate
appropriately.
 The Microsoft System Manager (MSM) desktop application software reduces system crashes and
calls to system administrator. It is a background application so the end-user does not even know that
it exists on his / her computer.
 Microsoft sells the software through computer retail stores that sell software products. There are
over 2,000 such retail stores across the country.
 Large segments are more profitable than small segments, and currently the small segment
market is almost saturated. So from the client’s perspective, they clearly need to sell more to large
segment. The question is: How do we sell more?
 No other player operates in this niche market – however an open source system application
manager is in the cards.
 Microsoft’s MSM software is extremely stable and has clear benefits because of reduced system
outage. These benefits are more for large companies than for small companies.
 Client sells the software, retail stores sell support services at time of sale. Retail stores sell using
a direct sales force that visits the large / small companies.
 The average license price for small firm is $2,000. Stores sell 100 licenses a year and get a 10%
margin. In addition, retail stores sell support services 100% of the time for each license, each of
which produces another $2,000 in revenue with a total margin of 10%.
 The average license price for large firm is $20,000. Stores sell 12 licenses to get a 25% margin.
In addition, retail stores sell support services 20% of the time for each license, each of which
produces another $20,000 in revenue with a total margin of 25%.
 The actual sale is made by sales representatives who get 1% of every $1 in revenue they bring in
to the store. A sales representative can either make 8 small company sales or 2 large company sales
in a given month.
Possible Answer:
While a 3-C approach works, a faster approach is to contrast the large versus small company and look at
the client’s product, competition and features in these 2 segments. The candidate should quickly
determine that the problem is in the channel, the open source application is just a distraction. Candidate
should realize that large companies will not go in for open source product until the product matures. To
compare small company v.s. large company:
1. Small company:
Revenue = 2000 * 100 = 200,000
Profit to store = 200,000 * 0.1 = 20,000
Profit from support services = 200,000 * 0.1 * 100% = 20,000
Net profit to store / company = 40,000
2. Large company:
Revenue = 20000 * 12 = 240,000
Profit to store = 240,000 * 0.25 = 60,000
Profit from support services = 240,000 * 0.25 * 20% = 12,000
Net profit to store / company = 72,000
Therefore, retail stores get more profits if they are able to sell to large companies.
3. Sales representative incentive:

Small firm = 8 * 40,000 * 0.01 = $3,200 per month
Large firm = 2 * 72,000 * 0.01 = $1,440 per month
Sales reps therefore tend to favor searching for small firms – which is okay if they can continue to make 8
sales a month, but this market is maturing, so they are potentially going on fruitless searches. The sales
rep incentives should reflect the margin per sale and not just the net margin.
Outstanding Answer
After the candidate gets the numbers, an outstanding answer will just have to be creative:
 Examine merits / demerits of moving away from channel partner towards having a dedicated
direct sales force.
 Piggyback on another software vendor’s direct sales force.
 Partner with computer vendors (Dell, HP, etc) to have software installed in OEM (Original
Equipment Manufacturer) fashion, etc.
AstraZeneca Offers to Sell Other Companies’ Drugs
Consulting Firm: Trinity Partners final round job interview.
Industry Coverage: healthcare: pharmaceutical, biotech, life sciences.
Case Interview Question #00191: The client AstraZeneca plc (LSE: AZN, NYSE: AZN) is a global
pharmaceutical company headquartered in London, United Kingdom. As the world’s seventh largest
pharmaceutical company measured by revenues, AstraZeneca has operations in over 100 countries and
has a portfolio of drug products for major disease areas including cancer, cardiovascular, gastrointestinal,
infection, neuroscience, respiratory and inflammation.
AstraZeneca has a strong existing sales force. However, new drug products in the pipeline have failed at
the Research and Development (R&D) stage. Hence, AstraZeneca’s sales force is currently underutilized.
Question #1: AstraZeneca has advertised in trade journals, offering to sell other companies’ products.
The response has been excellent and AstraZeneca wishes to narrow down fifteen possible new drug
products to the two most viable candidates. How can it do this?
 AstraZeneca’s traveling sales force visits customers (doctors and pharmacists) at their place of
business.
 AstraZeneca is known for its high-quality, moderately priced line of pharmaceuticals.
 AstraZeneca may have other competing products in development or may be moving away from
some market segments.
Possible Answer:
The basic approach is to determine which products are the best fit with the existing distribution channel
and AstraZeneca’s current strategy.
 A 2×2 matrix analyzing what AstraZeneca currently desires to sell and what it wishes to sell in the
future would provide one solution to this case. The matrix should have a high / low value proposition.
 The fifteen potential products must be analyzed for their match potential with AstraZeneca’s
current and future pharmaceutical product lines.
 The recommendation must also consider whether AstraZeneca will have sufficient sales force
capacity when its own new drugs are launched.
 Different price points: Premium, Moderate, Discount or Branded verse Generic.
Question #2: The new drug product development process consists of three phases. AstraZeneca has
determined the cost and success rate at each phase as shown in the following table:
Phase Cost per Product Success Rate
R&D $2 million 10%
Testing $10 million 20%
Product
Rollout $50 million 80%
How many drug products does AstraZeneca need to undertake in order to generate two successful ones?
What is the total cost associated with developing two successful drug products?
Possible Answer:
The quantitative part of the case requires the job candidate to do the calculations in a reverse way: from
Product Rollout phase to Testing, and to R&D:
Cost per #
Phase Product Success Rate # Leaving Phase Products Total Cost
Product
Rollout $50 million 80% 2 3 $150 million
Testing $10 million 20% 3 15 $150 million
R&D $2 million 10% 15 150 $300 million
Total Cost 600 million
Thus, 150 drug products require development in order to generate two successful ones. The total cost
associated with developing two successful drugs is $600 million.
US Airways to Re-paint Its Fleet of 350 Aircrafts

Case Type: math problem; operations strategy.
Consulting Firm: Simon-Kucher & Partners first round job interview.
Industry Coverage: Airlines.
Case Interview Question #00189: Your client US Airways, Inc. is a major airline based in Tempe,
Arizona, United States. The airline is an operating unit of US Airways Group (NYSE: LCC) and is the 6th
largest airline by traffic and 8th by market value in the country. US Airways operates major hubs in
Charlotte, Phoenix and Philadelphia and maintains focus city operations at Ronald Reagan Washington
National Airport.
The U.S. domestic airline industry is extremely competitive and airline companies frequently sustain large
losses. Consequently, decisions that involve even small outlays of cash are carefully considered.
Question #1: The client US Airways has ugly planes. Should it re-paint them?
 Most airlines paint their planes to match their corporate logo or as part of a brand image
campaign.
 US Airways has updated its brand image/marketing materials, but has not yet painted its planes.
 The client US Airways’ planes are currently painted with a logo/image dating from the mid-1980’s
in colors currently considered out-of-date.
 The airline industry is a fixed-cost business. Adding passengers does not increase costs very
much. Thus, the client should do whatever is required to fill the planes.
 If customers think the planes are ugly, they will fly an airline with better-looking planes.
 The customer segment that cares about plane appearance is the vacation traveler who travels
out of non-hub cities.
 Re-painting planes costs about $500,000 per plane, the expected revenue increase due to
painting planes is 1%.
 US Airways’ fleet currently has 350 mainline jet airplanes and total Revenues of $10 billion.
Possible Answer:
The first part of the case requires a cost-benefit analysis. Essentially it is simple math problem. The
candidate should attempt to discover the costs and benefits of the action before recommending a
solution.
Increase revenue by 1% will lead to a ($10 billion x 1% = $100 million) increase in Revenue, compared to
the ($500,000 x 350 = $175 million) cost, the painting expenditure will be recovered in less then two
years. Therefore, paint the planes!
Question #2: Since the client US Airways is going to paint its planes, how can the job be accomplished
without idling aircraft?
 Grounding an airplane reduces its utilization, thereby reducing its potential revenue.
 Airlines don’t like grounding planes even if few flights are scheduled, since they are more likely to
incur uncompensated costs if problems occur.
Possible Answer:
The candidate ought to point out that planes routinely are grounded for two weeks per year for D-check
major maintenance. It so happens that it would take 12-14 days to paint one plane: 2 days to paint and
10-12 days for the drying/curing cycle. Therefore, the planes ought to be painted during the regular
maintenance cycle.
Why are Sinusitis Drug Sales Different Between US & Canada?

Case Type: math problem; industry analysis; market sizing.
Consulting Firm: Campbell Alliance final round job interview.
Industry Coverage: healthcare: pharmaceutical, biotech, life sciences.
Case Interview Question #00183: Your client GlaxoSmithKline plc (LSE: GSK, NYSE: GSK) is a global
pharmaceutical and consumer healthcare company headquartered in London, United Kingdom. As of
2009, it is the world’s third largest pharmaceutical company measured by revenues (after Johnson &
Johnson and Pfizer).
GSK makes and sells a prescription drug brand-named Augmentin for nasal infections (or Sinus Infection,
Sinusitis). You’re brought in as an external consultant because GSK’s sales department has seen some
strange sales numbers showing per capita sales of Augmentin in the US are much higher than sales in
Canada. Their question to you: Why are per capita sales different between the two countries?
 A nasal infection is an ailment with symptoms much like a cold. People cannot self diagnose a
nasal infection.
 The competitors are the same in the US as they are in Canada.
 This is a prescription drug – it is not sold over the counter (OTC). Given a prescription, patients in
both countries will have it filled. Insurance will pay for it.
 Americans are no more or less likely to contract a nasal infection, or show symptoms than
Canadians.
 Canadians with nasal infection symptoms are will visit the doctor 60% of the time, while
Americans will visit the doctor 30% of the time.
 Canadian doctors are twice as likely to misdiagnose a nasal infection. In other words, Canadian
doctors diagnose a cold or flu, when the patent indeed has a nasal infection (the candidate should
ask for the magnitude of misdiagnosis – 10% in the US and 20% in Canada).
 For a diagnosis of nasal infection, American doctors prescribe the client’s drug 70% of the time
versus 33% of the time in Canada.
 The price of the drug in the US is 25% higher than the price in Canada.
 Canadian patients receive no refills for their prescription on average, while Americans receive 1
refill on their prescription.
Possible Answer:
The key to this case is to identify the process by which a person receives the drug. Since all comparisons
are made in per capita terms, the candidate should not focus on market or population size differences
between the two countries.
There are several steps in the process. The good approach should identify the relevant steps in the
process, in order, and compare US and Canadian revenues at each step. A good answer will identify four
of the five steps in the process, a very good answer will identify all 5 steps, and an excellent answer will
identify all five steps and be able to calculate the relative difference in sales between the two markets.
A good way to approach this case is to start with certain number of patients, say 100, and compare
revenues through each step in the process. The five steps in the process are:
 Of 100 people with undiagnosed nasal infections 60 Canadians will go to the doctor versus 30
Americans.
 Of the 60 (Canadian) / 30 (U.S.) people that visit the doctor 80% (Canadian) / 90% (US) will be
correctly diagnosed 48 (Canadian) / 27 (U.S.).
 Of the 48 (Canadian) / 27 (US) people that are diagnosed, 33% (Canadian) / 70% (US) receive a
prescription for our drug: 16 (Canadian) / 19 (US).
 Of the 16 (Canadian) / 19 (US) people that are prescribed the drug, price of the drug in the US is
25% higher than the price in Canada, this is equivalent to having 25% more people in the US receive
the drug. The 19 US people are 19*(1+0.25) = 24 revenue equivalent Canadian patients.
 Of the 16 (Canadian) / 24 (US) equivalent patients, Canadians, on average, receive no refill,
while Americans, on average, receive 1 refill. Again, each US patient is 2 revenue equivalent
Canadian patients. The 24 American patients are actually 48 revenue equivalent Canadians.
Conclusion: Overall, US revenues are three times higher than Canadian revenues – 48 revenue
equivalent US patients versus 16 revenue equivalent Canadian patients.
Should Cab Driver Stay in O’Hare or Go Back to City?
Consulting Firm: IBM Global Business Services final round job interview.
Industry Coverage: transportation.
Case Interview Question #00174: You have a friend who is a taxi cab operator (not the cab owner) in
Chicago and he is asking for your help in assessing a situation: After dropping off customers at Chicago
O’Hare International Airport (ORD), the taxi driver has 2 choices:
1. Stay at O’Hare and wait in the queue for 2 hours to take a customer back into the city.
2. Go directly back to the city and conduct business.
Your taxi driver friend wants to determine which one is the better option. What would you recommend and
why?
Note to Interviewer: At this stage, ask the interviewee to brain storm how he/she would approach the
problem. Seek a broad level understanding of the different issues that should be addressed. This case is
meant to be very interactive and you need to ask the candidate very often for his/her thoughts. After a
short brainstorming session and an introduction of the framework, the candidate should ask for the
following facts specifically. If he/she does not think of one, help them reach it by asking questions that will
lead to it.
 Distance: The distance of the trip between O’Hare International Airport and Downtown Chicago is
approximately 20 miles, and the trip is all highway
 Operation Revenues: $4 for the first mile, and $2 for every subsequent mile, tips = 15% of total
meter.
 Operation Costs:
 Current gas price is $3/gallon, the cab’s gasoline consumption is 25 miles/gallon when
driving on the highway and 20 miles/gallon in the city.
 50% meter revenue goes to the cab owner.
 When waiting in the queue, assume no gas is consumed.
 The toll for a one-way trip is $3.
Possible Answer:
The variable cost for a one way trip (Gas) is: ($3/gallon) x (20 miles) / (25 miles/gallon) = $2.4. Assume all
other costs i.e. maintenance etc., are negligible.
Option #1 Cost/Benefit Analysis: Waiting in O’Hare Airport
 Revenues: meter $4 + $2×19 = $42, tips $42 x 15% = $6.3, $48.3 in total
 Costs: – $21 (half the meter to cab owner) – $2.4 (Gas for trip from O’Hare to city) = -$23.6
 Profit: $48.3 – $23.6 = $24.9
Option #2 Cost/Benefit Analysis: Going back to the City
There is no right answer here – any reasonable assumption would do. Try to gauge the interviewee on
what he/she thinks is appropriate.
Assume 40 minutes ride from O’Hare to Downtown Chicago (lost). In the remaining 80 minutes we
assume the cab driver to have 6 rides. The candidate can set up a table like this to structure the
calculations:
Number of
rides Number of miles driven Value per ride Total
2 6 miles 4+10=14 28
2 3 miles 4+4=8 16
2 1 mile 4 8
Total 8+4+2=14 miles 52
We also assume the cab will be driving a total of 10 miles around Chicago downtwon looking for
customers.
 Revenues: meter $52 + tips $7.8 = $59.8

 Costs: – $2.4 (Gas for trip from O’Hare to city) – $3 (Tollway) – $26 (half the meter) – $3.6 ($1.5
gas for driving around for 10 miles looking for customers + $2.1 driving customers for 14 miles) = -
$25
 Profit: $59.8 – $25 = $24.8
Conclusion: In both scenarios, the taxi driver will earn about $25. In recommending one approach, we
believe it is better to wait in the queue so that the taxi driver can use the 2 hours to do other things (i.e.
study, relax). Also, there is less risk involved with less miles driven, and extended life of cab, reduced
maintenance costs etc.
Note: An especially excellent answer would also address the a microeconomic stand point of this
equilibrium, especially if the numbers of the two options don’t match in the interviewee’s calculation.
Goldman Sachs Capital to Invest in Royal Caribbean
Case Type: private equity, investment; finance & economics; mergers & acquisitions; math problem.
Consulting Firm: Capital One first round job interview.
Industry Coverage: Financial Services; Tourism, Hospitality & Lodging; Transpoortation.
Case Interview Question #00142: Your consulting team has been retained by Goldman Sachs Capital
Partners, the private equity arm of Goldman Sachs (NYSE:GS). Based in New York City, New York, GS
Capital Partners is focused on leveraged buyout and growth capital investments
globally. It has raised approximately $39.9 billion since inception across seven
funds and has invested over $17 billion.
To diversify its assets, GS Capital Partners is considering purchasing one of two cruise lines: “Carnival
Cruise Lines” operates in the Mediterranean and has an initial cost of $25 million, while “Royal Caribbean”
operates in the Caribbean and has an initial cost of $50 million. Both cruise lines are profitable, and
Goldman Capital has an ROA (Return On Assets) of 20%. Which one would you advise Goldman to
choose? How would you start your analysis? What factors do you need to consider?
Possible Answers:
Factors/Issues to Consider:
 What is the primary goal/motive for the purchase (asset diversification, extension of existing
business line, improving profitability, etc.)?
 What are any potential synergies or core competencies that Goldman Sachs Capital can leverage
to this business?
 Are there any environmental factors, e.g., political, international, economic such as inflation,
exchange rates, tax rates, demand cycles?
 What is each cruise line’s useful life? (Assume 10 years.)
Assume all of the above does not significantly impact your analysis and go with the choice that will yield
the highest Net Present Value (NPV). Assume tax rate is 60% for “Carnival Cruises” in the Mediterranean
and 40% for “Royal Caribbean” in the Caribbean.
Comparison of two choices

Carnival Cruises Royal Caribbean
Operation Revenues
# of Passengers 100K per year 100K per year
Average Fare $500 per passenger $500 per passenger
Annual Revenue $50M $50M
Operation Costs
Fuel $1M $500K
Labor $2M $8M
Food $40.8M $20.4M
Docking $.15M $75K
Annual Cost $43.95M $28.975M
Annual Profit $6.05M $21.025M
Tax Rate 60% 40%
After Tax Profit $2.4M $12.6M
PV@20% discount rate over 10 years $10M $52.8M
Initial Cost ($25M) ($50M)
Net Present Value (NPV) ($15M) $2.8M
Therefore, choose “Royal Caribbean” for sure.

What is the Sex Ratio in India?
Consulting Firm: Google first round job interview.
Industry Coverage: Government & Public Sector.
Case Interview Question #00141: In one rural state of India, people have strong preference for boys
over girls. There is no “one-child” or any other family planning policy as in China. So every family in the
state continues to have children until they have a boy. If their first child is a girl, they will just have another
child. If they have a boy, they will stop. The Indian Bureau of Census is quite
concerned about it. They want you to find out the overall sex ratio (proportion of boys to girls) in this
particular state.
Possible Answer:
This case is more like a brain-teaser than probability-based math problem. The interviewee has to realize
that because there are no extreme measures to artificially reduce the population of baby girls (sex-
selective abortion or infanticide), the sex ratio in this Indian state remains natural, approximately 50:50.
Below is a detailed analysis.
 Imagine there are 100 couples in a small village who have 100 babies. 50 will be girls. 50 will be
boys. (Total babies made: 100, with 50 boys and 50 girls)
 The 50 couples who had girls will have 50 more babies. Half (25) will be girls. Half (25) will be
boys. Add 25 boys to the 50 already born and 25 girls to the 50 already born. (Total babies made:
150, with 75 boys and 75 girls.)
 The 25 couples that had girls will have 25 more babies. Half (12.5) will be boys and half (12.5) will
be girls. Add 12.5 boys to the 75 boys already born and 12.5 girls to the 75 already born. (Total
babies: 175 with 87.5 boys and 87.5 girls).
 And so on, maintaining a 50/50 population.
How Many Golf Balls Can Fit into a School Bus?
Consulting Firm: Google 2nd round job interview.
Industry Coverage: Sports, Leisure & Recreation; Automotive, Motor Vehicles.
Case Interview Question #00140: How many golf balls can you fit into a classic yellow school bus?
Possible Answer:
This is one of those estimation/guesstimate cases management consulting companies or market research
firms like to use just to see if the job candidates can explain the key challenge to solving the
problem. In this case, however, quite a bit of number-crunching math drills are
also involved which can make the case look a bit intimidating.
1. Capacity of a yellow school bus

Suppose a standard yellow school bus is about 8ft wide by 6ft high by 20 feet long – this is just a guess
based on the thousands of hours I have been trapped behind school buses while traffic in all directions is
stopped. That means 8x6x20 = 960 cubic feet volume capacity. Since there are 12x12x12 = 1728 cubic
inches in a cubit foot, that means about 960×1728 ~ 1.6 million cubic inches.
2. Volume of one golf ball

I calculate the volume of a golf ball to be about (4/3) x pi x (0.85)^3 = 2.5 cubic inches as 0.85 inches is
the radius of a golf ball.
3. Number of golf balls

Divide that 2.5 cubic inches into 1.6 million and you come up with 1.6MM/2.5 = 640,000 golf balls.
However, since there are seats on the bus taking up extra space and also since the spherical shape of a
golf ball means there will be considerable empty space between them when stacked, the actual number
would be smaller than that. The highest average packing density of close-packing of spheres is given by
pi/(3 x sqrt(2)) = 74%, and cubic close-packing of spheres in three dimensions gives packing density of
(4/3) x pi x (0.5)^3 = pi/6 = 52%. To be on the safe side, I’ll round down to 640,000×0.5 = 320,000 ~
300,000 golf balls. So, the final answer: about 300,000 golf balls can fit into a classic yellow school bus.
Note: This is one of those questions Google asks (for Product Manager job) just to see if the applicant
can explain the key challenge to solving the problem.
How Many Cups of Coffee Are Sold in US Every Year?
Case Type: market sizing; math problem.
Consulting Firm: West Monroe Partners first round job interview.
Industry Coverage: Food and Beverage.
Case Interview Question #00128: How many cups of coffee are sold in the US every year?
Possible Answer:
This is a simple population-based market sizing case. Usually, this type of cases can be approached by
the following steps:
1. Start with a known population, e.g. US population is 300 million.
2. Divide the population into segments according to relevant parameters, like age, income, consuming
habits, purchasing habits, etc.
3. Pick percentages of each segment who belongs in your market.
Tips: Use 300MM for US population. Use manageable round numbers for bracket sizes and percentages,
for example: 300/4 = 75, 75/3 = 25, 75/5 = 15, etc.
Calculations:
Assume US population is 300M. Let’s bracket by age in groups of 20-year spans and assume an even
distribution (75M in each age bracket).
age cups/da
group population % drink coffee subtotal y total
0-20 75M 1/5 15M 1 15M
20-40 75M 2/3 50M 2 100M
40-60 75M 1/3 25M 2 50M
60+ 75M 1/3 25M 1 25M
190M
Thus, total cups of coffee sold per year = cups/day x days/year = 190M x 365 = 69B cups/year.
Reality Check: According to COFFEE STATISTICS REPORT 2010 Edition, Americans consume 400
million cups of coffee per day, or equivalent to 146 Billion cups of coffee per year; making the United
States the leading consumer of coffee in the world. If we assume half of the consumed coffee is bought
from coffee shops and the other half is home made, roughly 73 Billion cups of coffee are sold in the US
every year.
Nordstrom Cut Costs in Cleaning Services Division
Case Type: reduce costs; math problem.
Consulting Firm: Bain & Company first round job interview.
Industry Coverage: Retail.
Case Interview Question #00124: Your client Nordstrom (NYSE: JWN) is an upscale department store
chain in Manhattan which competes with Macy’s. Founded by John W. Nordstrom and Carl F. Wallin
initially as a shoe retailer, Nordstrom today also sells clothing, accessories, handbags, jewelry, cosmetics,
fragrances, and in some locations, home furnishings. The corporate

headquarters and the flagship store are located in Downtown Seattle, Washington.
The objective in this case is to cut costs across the company due to lower profit margins during the
recessionary economy. Your engagement manager assigns you the task of cutting down costs by 50% in
the company’s Cleaning/Janitorial Services Division. What would you do to accomplish that goal?
Possible Answers:
Me: So, let me reiterate the problem at hand to make sure I got down all the important points: Client –
Large department store competing with Macy’s; Objective – Cut cleaning costs by 50%. Is there
something that I have missed out or are there any other objectives that I should be aware of?
Interviewer: No, that seems about it.

Me: Sounds interesting. Could I have a moment to collect my thoughts?
Interviewer: Sure, go ahead.
Me: (Draw the following Chart) I would first like to see what are the different Drivers of Cleaning Costs in a
department store. Is there anything else I am missing out?
Interviewer: What about flagship stores vs. other stores?
Me: (Though I think that’s a redundant question but anyway) That’s a good point, let me add that to my
chart.
Interviewer: That looks like a good way to start.
Me: I would like to know if the cleaning/janitorial services is in-house or outsourced.
Interviewer: They are currently outsourced.
Me: Do we know if we are getting a good price compared to our competitors?
Interviewer: We have no idea as to what our competitors are doing with respect to cleaning.
Me: Okay then, does our client just have one store?
Interviewer: The client runs 4 stores in Manhattan.
Me: And we want to cut down cleaning costs across these 4 stores by 50%, right?

Me: Do we use the same supplier for all the 4 stores?
Interviewer: (Smiles) No, we use a different supplier for each store. Well, the client also gave us this
chart.
Me: (This doesn’t really tell me anything, quiet for a couple of minutes due to confusion) Well, I suppose I
will get a better idea if I knew the spend/store.
Interviewer: That’s a good point. Take a look at this chart.
Me: Wow, stores 1 & 4 seem to be the reason for most of the spend.
Interviewer: Good Point. Why do you think that is the case?
Me: Maybe because stores 1 & 4 are larger than the other stores. Would you happen to have the size for
each store?
Interviewer: Yes, the sizes of the stores are as follows:

Store 1- 20,000 sq ft
Store 2 – 5000 sq ft
Me: That’s really helpful. Now let me figure out the cost/sq ft for each store:
Store 1- $2.5 k/sq ft
Store 2 – $1.5 k/sq ft
Store 3 – $3.4 k/sq ft
Store 4 – $4 k/sq ft
So it seems that Store 2 is getting the lowest price per sq ft for cleaning services. What if I decide to
contract the cleaning/janitorial services to supplier of Store 2? Can I achieve even lower prices due to
economies of scale?
Interviewer: There will be no volume based discounts. What kind of savings are you looking at if we
contract the cleaning services to Supplier #2?
Me: I would like to have a minute to do the math. (Furiously crunch out some numbers) Total Current
Spend: $100 million.
Possible Future Spend if contract cleaning of all stores to Supplier #2:

Store 1 – 20,000 sq ft * $1.5 k/sq ft = $30M
Store 2 – 5000 sq ft * $1.5 k/sq ft = $7.5M
Total = $54 million
Possible Future Savings if contract cleaning of all stores to Supplier #2: $46 million (which is 46%). Need
another 4% in savings.
Interviewer: Very Good, now how do you plan to get the rest of the 4% in savings?
Me: Perhaps we can now look at the Suppliers cost and help him get some savings which he can pass on
to out client.
Me: We are in no position to negotiate with the Suppliers.
Me: Going back to Chart one, I see that although Supplier #2 has the lowest supplies cost. Supplier #4
has really low percentage of labor costs.
Interviewer: I see, but how does this help us?
Me: Maybe, we can lower Supplier #2′s costs by using the low labor costs, like those of Supplier #4.
Interviewer: Hmm… Well, out suppliers do not want to collaborate, so that is out of the question. But why
don’t you try it and see if we get significant savings?
Me: (Doing some quick math and getting the hint that it might not be worth it) On second thoughts, it looks
like that idea will not really help us much.
Interviewer: Are you sure?
Me: (Thanks for totally confusing me now) Yes, I think I am sure.

Interviewer: Okay then, moving on, how will you get another 4% of savings?
Me: (Umm… I don’t know… Pondering over Charts)
Interviewer: How about some strategic ideas to lower costs?
Me: (Oh of course!! Hit head with hand… Some Qualitative Ideas!!) Yea, there are a couple of ways we
could achieve another 4% savings. We could cut down the frequency of store cleaning. For example, we
could have the stores cleaned every other day instead of everyday.
Interviewer: Well, we are sort of a high end store and we do not want to compromise on our quality.
Me: Of course, we would need to empirically figure out how much we can cut down on the cleaning
frequency to ensure that the look and feel of the store is not compromised.
 Maybe we can extend this idea to the stores themselves. Cleaning frequency can be cut down in
Stores other than the Flagship Store.
 Maybe certain areas of the stores which receive less foot traffic can be cleaned out a lot less
frequently. We will have to monitor which areas get maximum traffic and focus on those areas.
 Perhaps we can find cheaper cleaning supplies or substitutes without compromising on quality.
 We could negotiate with our current supplier for volume discounts.
 We could try to find a further cheaper supplier of janitorial services altogether.
 We could try to build an in house cleaning services team. That way, we may be able to save on
some of the premium we probably have to pay our suppliers.
Interviewer: Yes, these all seem like pretty good ideas. Now suppose you have a meeting with our client.
What are you going to tell him about your findings? (This means sum up your case in a minute)
Me: Well, initial studies show that we would be able to achieve a 50% cost reduction in cleaning/janitorial
services. Currently, we use 4 different suppliers, each offering a different pricing schemes, for our 4
Manhattan stores. We can achieve 46% of our targeted savings by contracting the cleaning services of all
4 stores to supplier #2. Furthermore, we can achieve an additional 4% of savings if we cut down the
frequency of store cleaning, use cheaper cleaning material substitutes or focus on certain areas of the
store getting more foot traffic, as long as it does not compromise our quality standards. A combination of
both will give us our 50% savings target.
Interviewer: Thank you, those seem like excellent ideas.
Interviewee’s Note: Actual Case I received during one of my interviews. This is how I approached the
problem, it is by no means the “correct” way. You may have your own ideas and methodologies, and
there are a lot of different ways to solve the same case. And my charts weren’t as pretty.
Should Volkswagen Ship Cars by Train or by Truck?
Consulting Firm: American Express 1st round job interview.
Industry Coverage: automotive, motor vehicles; freight delivery; railroads & trains.
Case Interview Questions #00089: You are hired by the CEO of Volkswagen Group (FWB: VOW), a
large car manufacturer in Europe. As of 2010, Volkswagen was ranked as the world’s third largest motor
vehicle manufacturer and Europe’s largest. All of Volkswagen cars are produced in one major plant
located in Wolfsburg, Germany and are then distributed all over Europe. VW
Group has the choice of transporting the cars either by train or by truck.
The CEO of VW Group wants you to advise him which mode of transportation they should choose and
why. Also, he wants to know how much money in total VW spends on car transportations every year. How
would you go about analyzing this case?
Additional Information: (to be given to you if asked for)
 VW Cars are currently shipped by train to central distribution points in the different European
countries. From there, they are shipped by truck to the various car dealerships.
 VW Group owns all the distribution points.
 Trains require a minimum load of 100 cars.
 The cost of shipping one car by train to a distribution point is $100.
 Trucks have no minimum load requirement and can transport up to 10 cars at one time.
 The cost of transporting one truckload of cars to any distribution point is $1500.
 Trucking costs from the distribution point to the dealerships are $200 per load of up to ten cars.
 The average truckload shipped to a dealer is 6 cars.
 There are 10 European countries including Germany where the factory is located. The German
factory also serves as a distribution point for that country.
 Operating expenses of a distribution point are $1,000,000 per year.
 Total demand for VW cars is 1 million vehicles per year.
50% of car buyers do not take delivery from dealer stock, but wait for factory delivery.
Possible Answers:
This case is a pure number-crunching math problem. To choose between train and truck, one has to
figure out the cost for each of the two transportation options.
1. Total number of cars shipped to dealers per year: 1 million * 50% = 500,000.
2. The cost of shipping 500,000 cars from plant to distribution points by train: 500,000 * $100 = 50 million.
3. The minimum cost (fully load 10 cars for every truck) of shipping 500,000 cars from plant to distribution
points by truck: (500,000/10) * $1500 = 75 million.
4. The cost of shipping 500,000 cars from distribution points to dealers by train: 500,000 * $100 = 50
million.
5. The cost of shipping 500,000 cars from distribution points to dealers by truck: (500,000/6) * $200 = 17
million.
Clearly, the current transportation mode (shipping cars from plant to central distribution points by train and
then to the various car dealerships by truck) is already the best choice. Nothing needs to be changed.
Thus, the total cost of car transportation = 50 million + 17 million + 10 million operating cost of the 10
distribution points = 77 million.
Hugo Boss Enters U.S. Tie Market

Case Type: market entry/new market; math problem.
Consulting Firm: Advisory Board Company 1st round job interview.
Industry Coverage: Retail; Clothing & Textiles.
Case Interview Question #00084: Your client Hugo Boss Ltd. (FWB: BOS3) is a German clothing
manufacturer and retailer based in Metzingen. The company currently has at least 6,100 points of sale in
110 countries. It owns around 330 retail stores with over 1,000 stores and shops owned by franchisees.
Recently Hugo Boss is considering entry into the United States tie market.
In Europe, Hugo Boss has been very successful in the tie business by targeting young males in urban
areas with stylish ties that are moderately priced. It is partially owned by a large German department store
chain and currently sells 55% of its ties through these stores. You are asked by the CEO of Hugo Boss to
prepare a brief overview of the U.S. tie market. You do some research and find interesting data at the
United States Tie Manufacturing Association website (See the two tables below).
Table 1. Customer Segmentation of the US Tie Market
Percent of US Tie
Segment Segment Characteristics Market
Elite Executives Brand Recognition, Quality Conscious, Price insensitive 11%
White Collar
Businessmen Conservative fashions, Moderate to expensive price range 45%
Impulse buyers, Value style over brand name, Moderate
Trendies prices 27%
Younger buyers (age 15 – 24), Less expensive prices,

School Ties Influenced by family and peers 7%
Eccentrics Retro fashions, Outlandish designs, Price insensitive 10%
Table 2. Distribution Channels for Customer Segments

Department Manufacturer
Customer Segment Store Chain Independent Shop Catalogues
Elite Executives 36% 21% 38% 5%
White Collar
Businessmen 44% 17% 31% 8%
Trendies 31% 45% 16% 8%
School Ties 25% 46% 29% 0%
Eccentrics 17% 18% 55% 10%
Now the questions are:
1. Should Hugo Boss target the trendy customer segment or not?
2. Would a strong presence in the trendy customer segment allow Hugo Boss to gain more than 5% of the
overall United States tie market?
Possible Answers:
No answer is provided yet. Feel free to share your own answer/solution or any thought to this case by
leaving a comment below.
SunTrust Launch Commission-based Incentive Program
Case Type: increase sales; HR/organizational behavior; math problem.
Consulting Firm: Accenture final round job interview.
Industry Coverage: Banking.
Case Interview Questions #00081: Your client SunTrust Bank (NYSE: STI) is one of the largest regional
banks in the United States. It had $172.7 Billion in assets as of 2009. Currently, it operates approximately
1,700 bank branches across Southern states, including Alabama, Arkansas, Florida, Georgia,
Maryland, Mississippi, North Carolina, South Carolina, Tennessee, Virginia,
West Virginia, and Washington, DC.
The bank’s offerings include retail and commercial banking, as well as trust services, mortgage banking,
credit cards, mutual funds, insurance, equipment leasing, asset management, and securities underwriting
and dealing.
As an external consultant, your task is to make a recommendation to improve the profitability of the retail
segment of SunTrust’s business operations. Specifically you are asked to evaluate the merits of a
proposal made by the CFO – a commission-based incentive program targeted at the bank’s tellers with
the objective of increasing product sales. How much commission should the bank pay its tellers per unit of
product sold?
Possible Answers:
Prompt 1: Product mix – The job candidate should ask for more information about the products SunTrust
Bank is offering, without which we cannot ascertain the profitability of each product in the mix.
Suntrust Bank has four products it wants to sell in this proposed “commission-based incentive program” –
CDs, Checking accounts, Mutual funds, and IRAs.
Prompt 2: Revenue stream – The interviewer should ask the candidate the specific sources of revenue
for the bank’s four major products.
Possible Answer:
Interest generated, commission earned, perhaps an overnight float option, synergies or economies of
scale from cross selling.
Prompt 3: Profit Margins – The candidate should ask for the bank’s profit margin on each of these four
products in order to estimate a commission structure.
The bank’s profit margin is as follows:
 CD’s: 2% with an average $4,000 initial deposit

 Checking: 4% with an average $2,000 initial deposit
 Mutual Funds: 1% with an average $8,000 initial deposit
 IRA’s: 2% with an average $4,000 initial deposit.
Prompt 4: Incentive Program Options – The candidate should arrive at a profit margin of $80 per
product and constrain his incentive program within this range. Explore at least four different incentive
options.
Possible Answer:
1. A fixed fee per product.
2. a percentage of the profits.
3. a fixed fee for a certain number of products sold that would decline after a threshold.
4. a variable commission depending based on products and spreads.
Prompt 5: Criteria for selection of incentive program – The interviewer should ask the candidate what
information he/she would need to determine the best incentive program for SunTrust Bank.
Possible Answer:
 Profitability – The ease of sale, whether all tellers are equally effective sellers, profit per teller or
per customer, estimated commission as a percentage of current salary, cost of incentive program.
 Human Capital – The program that best motivates employees to sell products and increases
retention rate.
Make an assumption that his/her choices can be narrowed down to one. In this case, the assumption is
that all the tellers are equally effective and that all the products can be sold with roughly the same effort.
So what would you base the commission on then? Why?
Possible Answer:
Fixed fee option as it is a straightforward incentive and has a large upside for employees. Also
administration costs for fixed fee option are relatively less.
Prompt 6: Cost of incentive program – Steer the Interviewee toward discussing the cost structure of the
incentive program. The Interviewee should ask about the present salaries of the tellers and the expected
sales per teller.
 Salary per year per teller: $44,000 – 56,000
 Note that there is no relationship between teller’s ability to sell and years of experience.
 Expected sales per teller: five products per week.
Possible Answer:
Average teller salary $50,000 per year. Annual sales per teller = 250 products (5 products per week * 50
weeks per year)
Concluding Recommendation:
Suggested incentive: Commission fee of $20 per product. (Interviewee assumes commission = 10%
annual salary, $50,000 * 10% = $5,000 for 250 products). New profit margin = $(80 – 20) = $60
Commentary/Notes – The job candidate may suggest necessary adjustments in internal processes for
the incentive program to work.
Suggested Answers:
 Tracking field in their accounting system to associate correct teller ID with sales made
 Changes in payroll systems
 Sales training program for tellers
 Effectiveness study to measure impact on employee retention and satisfaction
Notes to Interviewer: Read this information well before you administer the case. This case is open-
ended – make the candidate come up with his/her own assumptions and estimates at every step. One set
of reasonable assumptions is provided – use these to steer the candidate back on track if they seem to be
off the reservation.
American Express May Drop Credit Card Annual Fee
Case Type: market sizing; math problem.
Industry Coverage: Financial Services.
Case Interview Questions #00078: Suppose your consulting team has been retained by American
Express Company (NYSE: AXP). American Express (a.k.a. Amex) is a diversified global financial services
company headquartered in New York City. Founded in 1850, it is one of the 30 components of the Dow
Jones Industrial Average. The company is best known for its credit card, charge
card, and traveler’s cheque businesses. Amex cards account for approximately 24% of the total dollar
volume of credit card transactions in the US, the highest of any card issuer.
Business Week and Interbrand ranked American Express as the 22nd most valuable brand in the world,
estimating the brand to be worth US$14.97 billion. Fortune listed Amex as one of the top 30 Most
Admired Companies in the World.
Recently, American Express has faced strong competition from new credit cards issuers (in addition to
the competition from Discover, Mastercard, and Visa) entering the market. The CEO of Amex is
considering dropping the $50 annual fee for their major credit cards. He needs your advice to help him
make the decision. What are the “economics” of such a decision and should Amex drop the fee or not?
Possible Answers:
One possible approach is outlined below:
1. Determine how American Express makes money.

2. Cost-benefit analysis: evaluate the pros and cons of dropping annual fee.
3. Make a recommendation.
I. Revenue Drivers
Key Assumptions:
1. $50 annual fee multiplied the number of members.
2. No additional revenue from consumers because they pay-off monthly.
3. Amex receives 1% of the transactions from retailers who honor the Amex card. (Reality check:
currently, American Express’ average US merchant rate is about 2.5%, while the average Discover,
Mastercard, and Visa U.S. merchant rate is about 2%)
II. Cost-benefit analysis:
1. Key issues:
If the annual fee is dropped, Amex loses ($50 x # of members). To overcome this loss, they have to
increase the revenues from consumer purchases (1% from the retailer). Is it likely that current cardholders
will spend more per year if the annual fee is dropped?
Reality check: Not likely. They would still have to pay off their balance every month.
Therefore, the only way to increase revenues from consumer purchases is to increase the number of
Amex cardholders
2. Assumptions:
Number of current cardholders = 4% of the U.S. population (Just a guess): 250MM x 4% = 10MM current
cardholders, $50 x 10MM = Annual loss of $500MM by dropping the fee.
Current percentage revenue: 10MM members x $1000 annual purchase (average), [10MM x (1000 x 1%)]
= $100MM (Estimate of current percentage revenue)
3. Key Question:
Can Amex attract enough new members (without a fee) to offset a $500MM loss?
Each new member contributes $10 (1% of $1000 annual purchase).

Thus, (500MM/$10) = 50MM new members are needed to offset the loss of dropping the annual fee.
50MM new members is approximately equivalent to 20% of the U.S. population (gut check).
III. Assessment and Recommendation:

Based on these assumptions, increased membership equivalent to 20% of the population is probably not
likely. Thus, do not drop the annual fee! Amex may have to consider varying the fee (sensitivity vs. new
members).
Elle Magazine Considers Selective Binding Ads

Industry Coverage: publishing, mass media & communications.
Case Interview Questions #00066: Your client Elle is a major fashion magazine that focuses on
women’s fashion, beauty, health and entertainment. Hachette Filipacchi Media, the publisher of Elle
Magazine recently has been offered by a printing company a proprietary new process called “selective
binding” which enables publishers to customize the pages included in readers’
magazines based on demographic data known about the reader. For example, an ad in Better Homes &
Gardens for lawn chemical services could be placed only in those issues going to subscribers who live in
houses and not to those living in condominiums or apartments. In this way, advertisers can focus their
communications on the demographic segment they are targeting.
As a consultant to Elle, would you advise your client to take advantage of this new process and offer
selective binding to its advertisers?
Possible Answers:
This is a pretty straightforward “launching a new product” case that can be solved by cost-benefit analysis
framework. Elle magazine would want to consider offering the new service to its advertisers if it would be
able to enhance its earnings by being able to charge its advertisers a premium for being able to more
exactly and efficiently target the demographic segment they want to reach. Of course the increased
revenue from the any premium must be able to offset any revenue lost as advertisers stopped targeting.
The interviewee could start the analysis by obtaining the following information form the interviewer:
Candidate: What demographic breakdowns can be made in the magazine’s database?
Interviewer: The only breakdown possible on your database is between subscribers who make under
$50,000 and those who make over $50,000.
Candidate: What it total readership, the proportion of readers who are subscribers (as opposed to
newsstand buyers), and the proportion of subscribers in each demographic category?
Interviewer: There are 1 million readers per month, 80% of who are subscribers. 25% of subscribers
make under $50,000 and 75% make over $50,000. The same mix applies to the newsstand buyers
according to readership audits.
Candidate: What proportion of the client’s advertisers target each demographic category of readers?
Interviewer: Most advertisers are selling high end fashion products, so 75% of them are targeting the high
income group.
Candidate: What is the cost of the selective binding service and what does the magazine charge for its
ads?
Interviewer: The service is being offered to your client free for 3 years since the printing company wants
to promote this new service’s use by getting a major magazine to start using it. The client charges $50 per
thousand full page ad (selective binding can only be offered on full page ads). Therefore revenue
associated with a single inserted page (front and back) in an issue is $100 per thousand page.
Candidate: What does the client’s closest direct competitor for advertisers charge for ads and what is their
readership like?
Interviewer: The client’s closest direct competitor has 500,000 readers, 100% of whom are subscribers.
Effectively, all of their readers make over $50,000. They charge $70 per thousand for their full one page
ads.
Since the printing cost to the client of selective binding is zero, the client simply needs to evaluate cost on
the basis of revenue per thousand gained or lost as their advertiser base uses the service to better target
their ads to their desired segment. Presumably, instead of 100% of advertisers paying the full
$50/thousand per page, the 25% of advertisers targeting the lower income segment will choose to
advertise only to the 25% of subscribers targeting the high income segment will choose to advertise only
to the 25% of subscribers falling into that segment and the 75% of the advertisers targeting the high
income segment will advertise only to the high income subscribers (75% of subscribers). Assume that all
advertisers continue to advertise in 100% of the newsstand copies. The revenue effect of this change can
be calculated by looking at the impact the change would have on average ad rate per thousand on
subscription readership:
New ad revenue per page = Old ad revenue per page X [(% low income subscribers X % low income
target advertisers) + (% high income subscribers X % high income advertisers)]
Thus, new ad revenue per thousand page = $50 X [(25% X 25%) + (75% X 75%)] = $31.25 < $50 (old ad
rate)
Now the question is, can ad rates per thousand on the selective binding portion of ads sold be increased
sufficiently to increase average revenue per thousand over what it is today? To answer this question, your
client’s ad rates must be looked at from the perspective of their advertisers. If you consider the
advertisers targeting the high income group, their alternative to advertising in your client’s magazine is to
put their ad dollars toward the 100% high income readership competitor. The cost per thousand high
income readers with the competitor magazine is:
(Page rate X total readership)/(portion of readers who are high income) = ($70 X 500,000)/500,000 = $70
Thus $70 is the maximum price per thousand the client can charge its advertisers for selectively bound
ads before the advertisers would switch to their competitor. Note that currently, the client is a cheaper buy
for these high income advertisers even though they are paying to reach readers they do not want: ($50 X
1 million)/750,000 = $66.67
If the client charged $70/thousand for selectively bound ads, average revenue per thousand to the client
would be: $70 X [(255 X 25%) + (75% X 75%)) = $43.75
Since $43.75 is less than the $50 that advertisers are currently paying, the magazine should not offer
advertisers the selective binding service.
Of course, there are other issues which interviewees might want to mention such as the possibility of
price discriminating between high and low income advertisers, the potential for and cost of expanding the
advertising base using selective binding as a selling tool, etc. However, it is important by the end of the
interview to have reached a recommendation regarding the initial question posed by the interviewer. To
mention these other possibilities and areas for further investigation is certainly worthwhile, but it is also
important not to get too far off track or to complicate the issue so much that a final recommendation is
never reached.
Vogue to Maximize Profits by Optimizing Delivery Number

Case Type: improve profits; math problem; economics.
Consulting Firm: Towers Watson 2nd round job interview.
Industry Coverage: Publishing, Mass Media & Communications.
Case Interview Questions #00031: Vogue is a fashion and lifestyle magazine that is published monthly
in 18 national and one regional edition by Condé Nast Publications, a worldwide magazine publishing
company with main offices in New York, Chicago, Miami, Madrid, Milan, Tokyo, London, Paris, and
Moscow. Total annual circulation for Vogue magazine is about 1,250,000 as of

2010.
The chief publisher of Vogue is trying to decide how many magazines she should deliver to each
individual distribution outlet in order to maximize profits. She has massive amounts of historical data for
sales volumes through these outlets and a well constructed internal accounting system. How should she
go about computing an appropriate number?
Possible Solution:
The best way to tackle this optimization case (without going into a huge quantitative analysis of Economic
Order Quantity EOQ) is not so much to start asking questions as to set out an outline for analysis and fill
in as you go.
It should be observed immediately that to maximize profits, marginal revenues would be set equal to
marginal costs. The marginal revenue for a magazine would be its cover price times the probability that it
will be sold. The probability of sale, with an appropriate confidence interval, could be established in some
manner from the historical sales data. The marginal costs could be obtained from the internal accounting
data.
A detailed discussion of the application of these concepts from basic microeconomics and statistics may
be necessary.
Ann Taylor’s Catalog Printing and Postage Costs Increase

Case Type: math problem; pricing & valuation.
Consulting Firm: Fujitsu Consulting 1st round job interview.
Industry Coverage: Retail; Apparel, Clothing & Textiles.
Case Interview Questions #00020: You are consulting for clothing retailer Ann Taylor (NYSE: ANN), an
American group of specialty apparel retail chain stores for women headquartered in New York City, New
York, United States. The brand is marketed under four divisions: Ann Taylor,
LOFT (formerly Ann Taylor LOFT), Ann Taylor Factory and LOFT Outlet, with a total revenue of $2.4
billion in fiscal year 2008.
One of Ann Taylor’s early businesses is direct mail retailing that sells ladies apparel and clothing by mail
order (buying of goods or services by mail delivery). Your client’s mail order catalog (A mail order catalog
is a publication containing a list of general merchandise from a company) printing and postage costs have
just been increased from 28 cents to 32 cents per catalog by the catalog publishing company. How can
you help your client decide if the new price offered by catalog publishing company is acceptable?
 The average response rate for Ann Taylor’s catalogs mailed is 2%. In other words, each 100
catalogs mailed results in 2 orders placed.
 The average order size is $80.
 In addition, 25% of customers who order product can be expected to reorder within six months.
 The fully allocated profit margin (excluding mailing costs) on catalog orders is 15%.
Possible Solution:
This is a pure quantitative math problem. The candidate just has to figure out whether the profits
from catalog mailing are more than enough to cover the total printing and postage costs. A detailed
calculation is outlined below:
1. For each 100 catalogs mailed, total printing and postage costs are $32. (100 x 32 cents).
2. Each 100 catalogs will result in 2 orders, plus 2 x 25%, or 0.5 additional reorders within 6 months, for a
total of 2.5 orders placed per 100 catalogs mailed.
3. Every 2.5 orders will result in 2.5 x $80 = $200 in sales. At a fully allocated profit margin of 15%, these
sales will return a total profit of $200 * 15% = $30.
Conclusion: The $30 profit is not sufficient to cover the printing and mailing costs of $32. Therefore, the
client Ann Taylor should reject the new printing & mailing arrangement at 32 cents per copy.

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Consulting Case

Ryanair to Introduce 3 Ticket Fare Scheme

scheduled passengers carried, and the busiest international airline by

Cost structure is an important factor, too.

Low-cost budget travellers should be offered the above for a price.

 Budget Fare Price: €100

 40% passengers fly in early morning between 6:00 – 10:00

Leisure 25% 80% 40%

Passengers 4000 2700 3300 10000

Business Travelers 3000 540 1980

Leisure 1000 2160 1320

With 50% customers

Business in Medium 1500 270 990

Business in Premium 1500 270 990

Leisure in Budget 500 1080 660

Leisure in Medium 500 1080 660

Daily Revenue (€)

Business in Medium 1500*140=210,000 270*140=37,800 990*140=138,600 386,400

Business in Premium 1500*180=270,000 270*180=48,600 990*180=178,200 496,800

Leisure in Budget 500*100=50,000 1080*100=108,00 660*100=66,000 224,000

Leisure in Medium 500*140=70,000 1080*140=151,200 660*140=92:400 313,600

has completed investments in more than 50 companies in 15 different

 The new football stadium has a capacity of 50,000.

Revenue generation will start in year 4 (2014).

Ticket Type Seats Price/Seat

Premium 20,000 $100

Popular 25,000 $50

5. Consider tax rate of 25% and discount rate of 10%.

6. Consider 5 year time horizon for NPV calculations.

Stadium Capacity: 50,000

Ticket Type Seats Price/Seat Ticket Sales

Premium 20,000 $100 $2,000,000

Popular 25,000 $50 $1,250,000

Total 50,000 $4,750,000

Considering Occupancy: $2,375,000

2. 5-year NPV Calculations

COGS 120,000 132,000 145.200 159.720 175.692

SG&A 1.2M 1.3M 1.4M 1.6M 1.7M

EBITDA 258.1M 363.9M 520.2M 752.3M 1,097.5M

EBIT 233.1M 338.9M 495.2M 727.3M 1,072.5M

199.8/ 279.1/ 396.4/ 570.4/ 829.4/

Additional Information: (only provide if asked)

 City population of 4 Million

Question #2: Calculate the total number of corporate customers

a. Small business segment: 30%

Costa’s Cafe to Hire Extra Baristas Based on Demand

Additional Information: (to provided upon request)

Coffee (8) $1.00 15%

Coffee (12) $1.50 15%

Coffee (16) $2.00 15%

Latte (8) $3.00 20%

Latte (12) $4.00 20%

Latte (16) $5.00 15%

Table 2. Products and Cost

Cup (8) $0.30

Cup (12) $0.40

Cup (16) $0.50

0.30 + 0.20 = 1.00 – 0.50 = 0.50 * 15% =

Business in Medium 1500140=210,000 270140=37,800 990*140=138,600 386,400

Business in Premium 1500180=270,000 270180=48,600 990*180=178,200 496,800

Leisure in Budget 500100=50,000 1080100=108,00 660*100=66,000 224,000

Leisure in Medium 500140=70,000 1080140=151,200 660*140=92:400 313,600