2.2 ICC Intermediate Cases

ICC Compiled Cases
Intermediate Profitability
Compiled from our Master Casebook Library
ICC Compiled Cases: Intermediate
Table of Contents
Intermediate level cases:
Lizette’s Luxury Properties (3/5 difficulty) pg 3
Blood Bank (3/5 difficulty) pg 12
Maxicure (3/5 difficulty) pg 18
Health Coaches (3/5 difficulty) pg 24
German Luxury Car Maker (3/5 difficulty) pg 32
Convenience Store (3/5 difficulty) pg 37
Good stepping-stone cases to bring you to the advanced difficulty cases.
Winter Olympics Bidding(4/5 difficulty) pg 47

A+ Airlines (4/5 difficulty) pg 53
Lizette’s Luxury Properties
ATK | Round 1 | Tourism & Real Estate| Interviewee-Led
Difficulty:
Intermediate Market Entry: Lizette’s Luxury Properties
Lizette’s Luxury Properties

ATK | Round 1 | Tourism / Real Estate
Case Prompt
Your client is a real estate developer, Lizette’s Luxury Properties, and
is currently assessing a new project idea in Costa Rica. Costa Rica
has a beautiful coastline which has historically been difficult to
access. The nearest airport was over six hours away. As of last year,
a new airport was constructed only a half hour away. 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 250-room hotel each. Should your
client invest in the tourism opportunity created by the new airport?
Would you recommend that s/he enter the market?
Framework Guidance
Core Competencies Market Attractiveness ROI

● Experience of client ● Market size ● Investment Costs
○ Past management experience in ● Competitiveness ● Incoming Revenue
real estate ● Porter’s 5 forces ● Feasibility
○ Expertise in travel and tourism
The framework developed by the candidate may explore a variety of issues including: Core Competencies, Market Attractiveness,
ROI, and Project Success Factors.
5
Guidance
Client’s Core Competencies
Experience in Real Estate Experience in Locations

● Client has focused on hi-rise apartments (50%) and luxury ● They have focused on world-class beaches such as
condominiums (50%) in the past but wants to enter the Playa Del Carmen, Marbella, Coral Beach, Tahiti, Fiji,
hotel arena Maldives, Mykonos etc.
Key Insight:
● The client has past experience in construction of a similar type, but has no direct experience in the hotel industry or service
operations
● Additionally, the client probably has good judgement in spotting travel locations and has a successful track record with the
construction of prime properties
6
Guidance Analysis
Market Attractiveness / Five Forces Analysis Quantitative Takeaway:
Market information: ● 3.5 million tourist nights / 350 days = 10,000 tourists / night
● 875,000 tourists per year (assume 350 days in a calendar ● $2,000 average check / 4 days average stay = $500 / night
year)
Qualitative Takeaway:
● Average duration of stay per tourist – 4 nights
● Despite the competitive nature of the market, it is large
● Average Hotel Check - $2,000
enough to be profitable, and the client has desired
● Other: In terms of tourists, you depend on government
capabilities to successfully compete
spending on advertising, on travel agents, and on the
● The level of resources required would be a barrier to entry
network effect of the existing hotels in the area
and maybe there are others that need to be investigated –
● Competitiveness: Other hotel chains that are thinking of
such as government permits, access to sewage, water, etc.
entering the market are Starwood, Peninsula, and Imperial
Hotels
● Supplier Power: The local labour market offers a huge
supply of workers (very positive)
● Substitutes: You are fighting with every other
paradise-type destination, from Disneyland to Vegas to
Bermuda. Interest in the 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 proliferations of e-vendors put buyers in a
powerful position
7
Exhibit 1 If the candidate brings up ROI, tell them that client has already short listed three available lots.
Ask them to recommend one of the three such that Return on Investment is maximized
ROI Analysis
Land Cost Cost / Room Operating Cost Room Capacity Price / Night
Lover’s Lair $2 MM $30 K $250 500 $450
Paradise Lost $4 MM $28 K $200 1000 $400
Fookwah Heights $6 MM $25 K $150 1500 $350
• Average occupancy: 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
8
Analysis from Exhibit 1

ROI Analysis
ROI Analysis
● ROI = Profit / Investment
● Revenue = Revs per night * number of nights * number of rooms * nights per year * occupancy rate
Option 1: Lover’s Lair
● Operating Profits (((($450 revenue – $250 operating costs) *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) = $500,000 ( c )
● ROI: (c) / (b) = $500,000 / 17 million = 2.9%
Option 2: Paradise Lost
● Operating Profits (((($400 revenue – $200 operating costs) *1000 rooms) * 350 nights/year) * 50% occupancy rate) = $35 million
operating profits / year (a)
● Initial Investment: 28,000 cost/room * 1000 rooms + $4,000,000 land = $32 million (b)
● Net Profit: (a) – (b) = 3,000,000 ( c )
● ROI: (c) / (b) = $3,000,000 / 32 million = 9.4%
Option 3: Fookwah Heights
● Operating Profits (((($350 revenue – $150 operating costs) *1500 rooms) * 350 nights/year) * 50% occupancy rate) = $52.5
million operating profits / year (a)
● Initial Investment: 25,000 cost/room * 1500 rooms + $6,000,000 land = $43.5 million (b)
● Net Profit: (a) – (b) = $9,000,000 ( c )
● ROI: (c) / (b) = $9,000,000 / 43.5 million = 20.7%
9
Guidance
Factors Determining Project Feasibility
Ask the candidate to list factors to be considered in determining the feasibility of the project
Good Concerns: Great Concerns:

● Competition (What are they focusing on? Will it flood ● How can they leverage their experience, what values
the market?) from their other business can they leverage?
● Strategy (Where will you compete – low cost, high ● Would they manage the hotel or build It and then find
service, best in class, packages? an operating partner like Starwood or Hilton?
● How should the developer finance the building? Since ● What are the existing barriers to entry how would you
the hotel will bring jobs maybe the government can change them to insure a greater degree of success?
help with some tax deductions, free services etc
10
Conclusion
After the candidate offers their insights, tell them to focus on ROI first
Interviewer Feedback
when the room prices specified in table and then with the market room Look for the following
price ($500)
Case Execution
Finally: Ask the candidate to conclude the case with a “go/no go” • Framework: logical, mece, creative
decision, supporting it with the insights drawn through out the case. • Quantitative ability: accurate, quick,
Probe into additional concerns the client needs to address well-structured approach
• Business acumen: insightful, implementable,
To conclude, the interviewee should provide the following: business judgment, creative brainstorm
Communication
Expected • Presence & non-verbal: confident, poised,
● Candidate will develop a structured framework that touches on some good posture, clear & concise, body
if not all of the categories described. Candidate will exhibit accurate language, coachability
arithmetic in ROI analysis • Case materials: organized page layout,
Good recognition of errors, resource references
● The candidate will be able to provide the qualitative takeaways Behavioural
regarding market attractiveness and/or core competencies • Overall performance: quality of answers,
Excellent relevance, clarity & time
● In addition to the above, the candidate will also identify the key
concerns regarding the project feasibility and provide a “go/no go” Overall, what were the interviewee’s strengths?
decision with supporting evidence from insights drawn from the case What are some opportunities for improvement?
Blood Bank
Bain | Round 2 | Healthcare| Interviewee-Led
Difficulty:
Intermediate Profitability: Blood Bank Clarifying Information
Note: Provide this only if related questions are
Blood Bank asked.
Bain | Round 2 | Healthcare

Case Prompt
Our client is a blood bank that has operations spanning four states. They
operate many sites from which their staff go out to different locations (eg.
schools and offices) in order to collect blood samples. Next the blood is
transported to centralized processing centers for testing, treatment, etc.
(There is one processing center per state). Finally, the blood is transported
from the testing centers to the hospitals that ultimately use the blood. The
blood bank faces competition from other blood collection organizations.
Only 80% of hospital demand for blood is currently being met. As a result,
hospitals often have to share blood by transporting it between different
hospitals, which is costly. There are no substitutes for human blood
(synthetic substances or animal blood). Their profitability has been slowly
declining for some time and they are worried because new regulations are
coming out will require them to invest in a new expensive technology. The
CEO wants to investigate potential areas to review in order to improve
profitability and wants to know how to prioritize among them.
Note:
This is a basic profitability case but has a twist in that the candidate is asked to
prioritize among the different possible mechanisms by which to improve
profitability. This means that they will have to use their business judgement to
assess the feasibility of different options.
Intermediate Profitability: Blood Bank
Framework Guidance
External Market Forces Internal Operations
● Customers (hospital) ● Revenues – opportunities to grow top line?
○ What’s their elasticity of demand? ○ Price – is there any flexibility in terms of the price
○ What criteria do they use when purchasing we’re currently charging hospitals?
blood? ○ Quantity – we know that there is unmet demand so
● Suppliers (donors) how can we increase the volume of units of blood
○ How can we increase the volume of donations? we sell to hospitals?
○ Increase # of donors or frequency of donations? ● Costs - opportunities to cut costs
● Competitors ○ Variable costs – opportunities to improve
○ Are our competitors profitable? procurement/ labour?
○ Are they doing something we’re not? ○ Fixed costs – opportunities to cut overhead / gain
efficiency?
Note: There are many possible alternatives to this framework. These are only provided as possible suggestions.
14
Possible Follow Up and Guidance for Interviewer

Note: Provide this only if related questions are asked.
• Price – Given what we know about the market, what is your • Customers - A typical operations costs the hospital $40K
hypothesis in terms of our ability to raise our prices? and requires an average of 2.5 units of blood. Blood costs
Candidate should realize that unmet demand gives client $100/unit. Candidate should realize blood is relatively low
pricing power. cost for hospitals. Interviewer can share that blood is seen
• Quantity – Candidate should quickly recognize that there is
as a commodity by hospitals.
unmet demand they can easily fill if they increase the size • Suppliers – Candidate should explore possibilities for
of their donations increasing blood supplies to meet unmet demand. A good
• Costs – Candidate should prove in this area and give ideas candidate will come up with multiple ways to increase
for cutting costs, but interviewer should tell candidate that supply. In actuality, most have been tried in real life and
the client has already doing these and has cut costs as have not worked, Supply is essentially fixed
much as possible • Competitors – No additional information is known.
15
Question 1
How can we tell if we are breaking even?
Follow up after answer: If we’re losing money, what price do we need in order to break even?
Follow up after answer: Do you think the price is achievable?
Provide Information If Asked: Overall approach, good shortcuts & solution

● Overall fixed costs: $15 M a year ● Fixed costs = $15M
● Variable costs: $80/unit ● Contribution margin = $100 (price) - $80 (variable costs) =
● Sales price: $100 $20
● Current volume: 400K ● Break Even Volume = $15M/$20 = 750K units
● Typical operation costs hospital: 40K The blood bank is not reaching their break even point (400,000
● Typical operation requires average of 2.5 units of blood units)
To solve the second question, hold volume and fixed costs
constant and solve for contribution margin:
● $15M / 400K units = $37.50
● They need to raise prices by $17.50 per unit. This is an
increase of nearly 100%
To solve the third question, evaluate the price impact on the

hospitals
● An operation costs $40 K, blood costs are currently 2.5 x $100
= $250. Blood costs are approximately 0.625% of total costs
($250/$40K). There should be ample room to increase these
16
costs.
Conclusion Interviewer Feedback

To conclude, the interviewee should provide the following: Look for the following
Recommendation Case Execution
• Framework: logical, mece, creative
● First and foremost, raise prices to improve margins. There is
unmet demand and blood represents a small portion of costs. • Quantitative ability: accurate, quick,
well-structured approach
● Second, continue to look for ways to increase quantity in
order to fill unmet demand. Finally, continue the efforts to business judgment, creative brainstorm
keep costs minimal
Communication
Risks
• Presence & non-verbal: confident, poised,
● Risks are low, since blood is essential, has no substitutes and good posture, clear & concise, body
there is unmet demand language, coachability
Next Steps • Case materials: organized page layout,
● Immediately implement price increases recognition of errors, resource references
Behavioural
● Invest new profits in order to try to increase donation levels
• Overall performance: quality of answers,
relevance, clarity & time
Overall, what were the interviewee’s strengths?

What are some opportunities for improvement?
Maxicure
McKinsey | Round 1 | Manufacturing| Interviewer-Led
Difficulty:
Intermediate Profitability: Maxicure
Maxicure
McKinsey | Round 1 | Manufacturing
Clarifying Information
Case Prompt asked.
Your client, Maxicure, manufactures and sells an over-the-counter
• There are 2-3 larger players in this
cough and cold medicine. Their sole plant in Kentucky is aging,
and its increasing maintenance costs are leading to low margins on over-the-counter business who have
their products. How would you advise Maxicure proceed to solve distribution across the country. Maxicure is
this problem? one of them.
• Maxicure sells all of its products in the US
• Objective is to reduce production costs
while maintaining product quality (cost,
Note to interviewer: this is intentionally open-ended. The interviewee will
quality and brand image all matter to
have to ask multiple questions to frame the problem and gather the
customers)
information necessary.
Question 1
What options does Maxicure have for purposes of tackling this problem, and what
factors would you consider when deciding which options to choose?
Options/Considerations Refurbish Rebuild, same site Rebuild, new location Outsource
Investment cost
New per unit cost
Financial/non/financial
benefits
Effect on quality
Opportunity to improve
tech/capacity
Proximity to distribution
centers
20
Question 2
Maxicure has narrowed down its decision to 2 options:
1) build a new facility next to the old plant or 2) outsource the manufacturing to a competitor. With
the information given below, how many bottles of medicine would Maxicure need to sell for the
in-house option to be more profitable than the outsourcing option?
Candidate should ask for the following in order to answer the
Guidance:
question:
● Margin in house: $2.50
Selling price per bottle:
● Margin outsourced: $2.25 < $20M and $2 > 20 M
● $4.50
In-house: ● Let’s say Maxicure needs to sell x bottles to make the
● Initial investment: $50 M two options have equal margins
● Total cost per bottle: $2.00 ● In house margin = 2.5x – 50M
● Outsource margin = (x-20M) *2 + 2.25 * 20M
Outsource: ● Setting the profits as equal: 2.5x – 50M = ((x-20M) * 2) +
● Total cost per bottle (first 20M bottles, regardless of total (2.25 * 20M))
order size): $2.25 ● X = 110 M
● Total cost per bottle (bottles after the first 20M,
regardless of total order size): $2.5 Note: After the calculation, push the candidate to select an
option and give reasons why.
21
Question 3
Maxicure has decided to build a new production facility, but it wants to build the plant in Indiana
instead to be closer to a major distribution center. How should it convince the governor of Indiana to
offer Maxicure the necessary tax breaks to make the move more profitable for the firm?
Guidance:
● More tax collection for the state, stimulating the economy
● More job creation
● Good press for the governor
● Attract other manufacturers to the state
● Suggestions to conduct community-building initiatives like schools, parks etc
Note: There are many acceptable answers. The above are just examples
22

What is your final recommendation for the client? Look for the following
Case Execution
Recommendation
• Quantitative ability: accurate, quick,
● Recommendation including 2-3 points of data-driven well-structured approach
evidence
Risks business judgment, creative brainstorm
Communication
Next Steps • Presence & non-verbal: confident, poised,
good posture, clear & concise, body
language, coachability
• Case materials: organized page layout,
recognition of errors, resource references
Behavioural

Health Coaches
Kellogg 2012 | Healthcare | Interviewee-Led
Difficulty:
Intermediate Profitability: Health Coaches
Health Coaches asked.
Healthcare Competitive Dynamics

• With spiraling health care costs, the
Case Prompt industry is under pressure to innovate new
Our client is a large national health payer (health insurance company, products that will control spending
think Aetna) exploring the launch of a new disease management • Assume client is first to market
(“DM”) program to better serve its 5 million members. The idea is to • Past attempts to purely automate DM have
hire and train a team of “Health Coaches” to specialize in a single
yielded minimal savings
disease area (eg. Heart disease, diabetes, etc). Each coach will
manage a portfolio of patients to reduce the costs of overall health Health Coaches
expenditures (eg. Reminders to take drugs, provide limited medical • All activity conducted remotely via
advice, suggested diet, etc). Studies show that once a month contact phone/email
with each patient reduces health spending by 5% on average. • Typical profile is registered nurse that
wants to work from home
Should our client launch the program? If so, what steps should it
take? • It’s difficult to actually reach patients, so
coaches can contact 8 members per day
(assume 25 days per month)
Note to interviewer: this is intentionally open-ended. The interviewee will
• Annual costs per coach: 60k salary + 20%
have to ask multiple questions to frame the problem and gather the
information necessary. other (training, benefits, laptop, etc)
• There are no other program costs
Framework Guidance
Program Savings Program Costs Risks

● Customer segmentation ● Salary and other ● Do assumptions hold?
by disease area and ● Portfolio size/capacity ● Competitive response
cost per member (members/coach) ● Regulatory, liabilities
Note: Before showing exhibits, interviewee should convey the essence of the case: Are the costs associated with the DM
program justified by the savings?
26
Segmentation and Disease Focus

What segment and disease should be the focus?
Exhibit 1 – Hand out when interviewee establishes need Notes to interviewer
for understanding client’s membership segmentation Interviewee should choose to focus on the 65+
and/or exposure to disease areas. segment
If he/she is not headed there alone, you can ask “how would • 65+ (Medicare) patients are the sickest, followed by
you segment the client’s members?” Individual
• “What can we get out of this chart? Please let me know if • Group members are the healthiest (younger, working)
you have questions” • Sicker patients are likely to drive higher costs, which will
• Definitions (if needed): Group are employee sponsored make them riper candidates for the DM program (i.e., the
plans (e.g. ,if you work for McKinsey, you are in a group 5% cost reduction will have a bigger impact)
plan), Individual are non-groups (e.g., private contractors,
unemployed, etc). 65+ (see asterisk below chart). Interviewee should choose to focus on diabetics
• “Which segment is likely to generate the greatest per (Assume all are Type 2 for the purposes of this case)
member costs.? Why?” • Diabetics make up the largest portion of sick members
• “Which disease area should we look at first?” • As a chronic disease primarily brought on by behavior,
T2 diabetics are most likely to benefit from DM program
Segmentation and disease focus
Using Exhibit 1, discuss which segments and disease areas Number of 65+ diabetics
are most important to explore
27
Program Profitability
How profitable is the current business? Notes to interviewer
Exhibit 2 – Hand out when interviewee asks for medical

cost data. Try to avoid handing out exhibit 2 until exhibit 1
has been discussed. (Hint: If interviewee leads with
profitability, steer them to first think about the customer
segmentation)
Program Profitability
Leveraging all data (both exhibits), interviewee should
determine if Health Coaches are profitable in each of the
three segments
Conclusion
• Profit is $72K per Health Coach, 2x cost of a Coach
• Based on PMPM diabetic cost data, Individual segment is
break-even (50% less savings), Group segment is a loss
28

● The client should launch the Health Coaching program, and Case Execution
first focus on diabetes for the 65+ Medicare segment • Framework: logical, mece, creative
The client should take the following steps: • Quantitative ability: accurate, quick,
● Launch a pilot program to prove out assumptions (e.g., 5% well-structured approach
cost reduction, Coach portfolio capacity, etc) • Business acumen: insightful, implementable,
business judgment, creative brainstorm
● First expand to entire 65+ segment ($144M per year savings,
a 2x return on each Health Coach) Communication
• Presence & non-verbal: confident, poised,
● Consider introducing to Individual segment despite
break-even (customer retention, moral rationale, etc) language, coachability
recognition of errors, resource references
Behavioural

Follow Up Questions Interviewer Feedback

There are 650K Group diabetics left “uncoached.” Is there a way to Look for the following
make the segment profitable? Ideas include: Case Execution
● More efficient DM program (e.g., Coaching at work, • Framework: logical, mece, creative
bi-monthly contact, automated correspondence, etc) • Quantitative ability: accurate, quick,
● Seek additional revenue sources (e.g., Employers might be well-structured approach
willing to pay a fee, government support)
● Since 5% is the average savings, program can target business judgment, creative brainstorm
members who will respond with savings well above 5%
As first to the market, client plans to expand Health Coach program Communication
externally. Who should they target? • Presence & non-verbal: confident, poised,
● It’s tempting to suggest that the client should market to 65+ good posture, clear & concise, body
Medicare patients with diabetes, since this is where the language, coachability
program yields the greatest savings. While it’s good that we • Case materials: organized page layout,
have lowered the cost of older diabetics, client should keep in recognition of errors, resource references
mind that more diabetic members will increase overall health Behavioural
care costs, considerably (still almost 4x after savings) • Overall performance: quality of answers,
● An instinctive interviewee might suggest an alternative: Client relevance, clarity & time
should sell its Health Coach service to other payers. But how
would you price that? What are the challenges (e.g.,
regulatory, info sharing, etc) Overall, what were the interviewee’s strengths?
Exhibit 1
Client’s member segmentation by health
31
Exhibit 2
Average cost data (Per Member Per Month)
Segment Average PMPM Average Diabetic
Individual $150
Group $100 4X
65+ $300
32
German Luxury Car Maker
BCG | Round 1 | Automotive | Interviewer-Led
Difficulty:
Intermediate Market Entry: German luxury Car Maker
German Luxury Car Maker Note: Provide this only if related questions are
asked.
BCG | Round 1 | Automotive
Case Prompt • Mercedes-Benz imported and sold 10,000
cars in this market over the past 10 years,
The German luxury car maker wants to grow business and is looking and has their own dealership in
into selling cars in Bangladesh. The GDP growth in Bangladesh is Bangladesh
5% per year. Currently, the only luxury car sold in Bangladesh is
Mercedes-Benz and they have been in the market for the past 10 • There are 1,000 new buyers each year
years. The CEO wants to find out if the company enters the market, • The price Mercedes-Benz charges is
can they break even in three years? $100,000 per car
Note to interviewer: this is intentionally open-ended. The interviewee will • Existing owners replace their car every 10
have to ask multiple questions to frame the problem and gather the years (the interviewee should calculate
information necessary. how many new cars are sold to existing
owners – 1000 per year, and therefore the
Interview Guidance to Case and Exhibits total market size per year is 2000 new
cars)
• Estimating Market Share: Understand customer needs through survey
and estimate how well we could meet those needs and therefore how • Assume the discount rate is zero
much market share we could gain. • We will have 30% market share (don’t give
• Find Benchmark: It turned out that our client already entered Vietnam this info out right away, ask candidate to
and other markets similar to Bangladesh and on average gained 30% brainstorm how to estimate market share)
market share in each of these markets each year
Part 1
Will the company break-even after within 3 years (Interviewee should determine the need to
calculate this after estimating the market share)
Cost Structure:
● Initial Investment = $7M
● Variable Costs
○ Manufacturing = $20K
○ Transportation = $24K = 120% of Manufacturing Cost
○ Customs/Taxes = $41.8K = 95% of Manufacturing & Transportation Cost
○ SG&A = $10.296 = 12% of all above costs
● The variable cost per car rounds up to $96K/car
● Therefore the profit on each car is $4K
● With 30% market share, the client’s annual profit will be $2.4M and will break even in 3 years
35
Part 2
Evaluate potential risks of entering this market
Brainstorming Solution:
● Assumptions might be inaccurate
● Bangladesh is not stable politically and economically, therefore our client will bear more risk
● There could be other new entrants
● 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)
○ Ask candidate what price Mercedes-Benz will reduce their car to. (Answer: $96K/car or less)
○ Improving their services if that’s the differentiating factor of our product\
○ Blocking some local resources
36

Case Execution
Recommendation • Framework: logical, mece, creative
● The profit on each car is $4K • Quantitative ability: accurate, quick,

well-structured approach
● With 30% market share, the client’s annual profit will be
$2.4M and will break even in 3 years business judgment, creative brainstorm
Risks Communication
● Those gained from brainstorming • Presence & non-verbal: confident, poised,
Next Steps good posture, clear & concise, body
language, coachability
● Market analysis on competitive response and target customer
● Determine best way to enter the market (JV, Greenfield, etc.) recognition of errors, resource references
● Look into ownership structure (franchise or owned Behavioural
showrooms) • Overall performance: quality of answers,

Convenience Store
BCG | Round 1 | Retail | Interviewer-Led
Difficulty:
Intermediate Profitability: Convenience Store Clarifying Information
Convenience Store • There are 4 major companies (including the client) in the
industry that control 95% of the market.
BCG | Round 1 | Retail
• Client is not interested in expanding/changing product
Case Prompt line.
Our client is a major convenience store chain with • Client does not want to expand internationally due to
5,000 stores in the US and $25B in annual revenues. logistical concerns.
About one year ago their CEO hired our firm to help • We studied possible M&A activities, but there are no
increase profits. Since then, we have worked with the desirable targets.
client to aggressively control costs through negotiating • Client charges same price per item in each of its stores.
larger discounts from result of our work, our partners (i.e. no difference between prices of one item in
believe there is little room for cost reductions going Manhattan versus Durham)
forward. How else can we increase profits for our
client? • Consumers consider Motrin and Tylenol to be very
different brands, with each having very loyal customers. It
Case delivery: Initially try to get candidate to brainstorm about would take a substantial change in price of one brand to
how they might be able to increase profits. Present candidate convince customers to switch to the other. Buyers of both
with Exhibit 1 if they inquire about pricing, products sold, or brands would consider the store brand product ; however
sales volumes. Depending on whether candidate wants to focus they feel that it is a slightly inferior product and would
on Food&Bev or Pain Relievers first, present them with Exhibits need to be incentivized to do so.
2 or 3 respectively. • Advil and Motrin suppliers charge the same price to every
convenience store chain
• All other costs (overhead, etc.) should be considered the
same across the 4 major chains
Intermediate Profitability: Convenience Store
Case Guidance
Exhibit 1
Candidate should immediately focus on Pain Relievers and Food & Beverage segments. Pain Relievers have lowest margin
and are most inelastic, which suggests opportunity to increase prices. Food & Bev. is our best seller in terms of Sales and
Scan Margin, so look for ways to sell more or gain share. Cleaning Product sales are $4B. Price elasticities are meant to be
illustrative and are not needed for any calculations. (Note: Scan Margin is essentially the same thing as profit margin, however
it also includes funding from producers. It is a term frequently used by retailers).
Exhibit 2
Candidate should recognize that client has highest unit price and lowest volume/share relative to competitors in Food&Bev
segment. This would imply that there is little room to increase prices in this category. He/she should recognize that this is not
the solution and should go explore Pain Relievers.
Exhibit 3
Candidate is presented with Total Dollar Sales, Price and Cost data for each of the three brands of pain relievers. He or she
can then calculate profit per unit, total unit sales, and total $ profit per brand.
40
Case Guidance Continued...

Exhibit 4
The key insight is that our client charges a lot less for Advil that the competition. We charge the same for Motrin and
slightly more for Store Brand. A good candidate will inquire about market share data at this point and should be presented
with Exhibit 5.
Exhibit 5
Candidate should determine that we have a very strong share in Advil (which accounts for over 50% of industry-wide pain
reliever sales). This combined, with our significantly lower price and profitability in Advil, as well as slim likelihood that
customers would switch brands or to our competitors, means that we should raise prices.
41
Case Execution Interviewer Feedback

Look for the following Look for the following
Good Case Includes Case Execution
• Quickly determine that Food&Bev and Pain Relievers drive • Framework: logical, mece, creative
profitability
• Quantitative ability: accurate, quick,
• Candidate performs calculations quickly and accurately well-structured approach
• Recognize that Food&Bev is not the solution after viewing Exhibit 2 • Business acumen: insightful, implementable,
• Candidate will ask about competitor prices and market share data business judgment, creative brainstorm
when viewing Exhibit 3 Communication
Excellent Case Includes • Presence & non-verbal: confident, poised,
• Quickly recognize that client has highest unit price and lowest good posture, clear & concise, body
volume/share relative to competitors in Food&Bev segment. No language, coachability
need to perform market share calculations • Case materials: organized page layout,
• Inquire about shifting share to Store Brand to generate more profits recognition of errors, resource references
(since it hashighest profit per unit) Behavioural

Exhibit 1
Products Sold by Client
Total Client Sales Total Scan Margin Price Elasticity
Pain Relievers $10B 0.3
Cleaning Products $0.5B 1.1
Food & Beverage $9B $3B 1.4
Other $2B $0.4B 1.8
Total $25B $4.9B
43
Exhibit 2
Convenience Store Industry Food & Beverage Sales (ANSWERS)
Average Price/Unit Total Unit Volume Total $ Sales Share
Client $1.50 6B $9B ~18%
Competitor 1 $1.40 10B $14B ~28%
Competitor 2 $1.35 12B $16.2B ~32%
Competitor 3 $1.45 8B $11.6B ~22%
Total 36B $50.8B
44
Exhibit 3
Client Pain Reliever Sales (ANSWERS)
Total $ Sales Price/Unit Cost/Unit Profit/Unit Total Units Total Profit
Advil $8B $3.99 $3.79 $0.20 ~2B $0.4B
Motrin $1B $4.99 $4.49 $0.50 ~200M $0.1B
Store Brand $1B $1.99 $1.29 $0.70 ~500M $0.35B
45
Exhibit 4
Convenience Store Pain Reliever Prices
Client Price Average Competitor Price
Advil $3.99 $4.69
Motrin $4.99 $4.99
Store Brand $1.99 $1.89
46
Exhibit 5
Pain Reliever Market Share $ by Brand
18 10 7
47
Winter Olympics Bidding
Kellogg 2012 | Media | Interviewee-Led
Difficulty:
Intermediate Profitability and NPV: Winter Olympics
Winter Olympics Winter Olympics schedule (16 days)
Kellogg 2012 | Media • Day 1- Friday – Opening Ceremonies – 3 hours of
programming from 8-11pm
Case Prompt • Day 2-15 – Games – 10 hours/day
• Weekday (9am-noon, 2pm-5pm, 7pm-11pm)
Our client is a major US television network that is trying to figure out
how much to bid for the 2018 Winter Olympics and has brought you • Weekend (11 am – 9pm)
in to hep us figure out the right bid. The Winter Olympics are a huge • Day 16 – Saturday – closing – 3 hours of
deal and will require a significant amount of capital to secure the programming from 8pm – 11 pm
rights. Before our network bids on the Winter Olympics, we want to Revenues
make sure that we’ve considered all the right things. • No subscription revenue, but can keep 100% of
advertising revenue
Note to interviewer:
• Ad rates are $400k/30 second ad for prime time
• This is a very quantitative case that requires the interviewee to run the
(M-F 7-11PM, all weekend) and $200K/ad for
numbers on an Olympics bid. The candidate will have to decide potential
non-prime time
ad revenue/cost information, as well as the NPV, to determine bid size.
• The candidate will need to ask for additional information that is • Market research has shown that you can include
no more than 10 minutes of advertising per hour
necessary to solve the problem, rather than relying on the interviewer to
dispense it. After getting the initial calculations right, there are a lot of Costs
implications that may change the level of the bid. • $428,000,000 of total costs
• Especially for less finance-minded interviewees, you may need to help • Opportunity cost: $1M/hour
nudge candidates through the math
• Time value of money: 6 year lag for receipt of
revenue
• WACC: 12%
Framework Guidance
Investment Opportunity Benefits of Winning Market/Competition Landscape
● Revenue from hosting Olympics ● Intangible factors, benefits, risks ● What is the competition for this bid?
● Identify Costs ● Some critical factors: ● How competitive are we in this
○ Production costs ● Might give network access to new market?
○ Opportunity costs viewers
○ Time value of money ● Prestige associated with hosting
Is this a good investment? event
● Opportunity for product tie-ins,
supplemental revenue
50
Question 1
Calculate the revenue from broadcasting the Winter Olympics.
• Some of the numbers are assumptions here and difficult, so nudge the candidate along if necessary
• First of all the candidate should find the revenues from hosting the Olympics
• Then, the candidate will have to figure out if this is a good investment. They should identify 3 costs, (production costs, opportunity costs,
and Time Value of Money). By factoring in these costs, the candidate will find out if the Olympics are worth the investment.
Total revenues should be equal to $928M for the project

● Primetime: Weekdays (M-F): 10 weekdays x 4 hrs/day x 10 min/hr x 2 slots/min x $400,000/ad = $320M
● Non-prime: Weekdays (M-F): 10 weekdays x 6 hrs/day x 10 min/hr x 2 slots/min x $200k/ad = $240M
● Weekend: 4 days x 10 hrs/day x 10 min/hr x 2 slots/min x 400K/ad = $320M
● Opening/Closing: 2 days x 3 hrs/day x 10 min/hr x 2 slots/min x 400K/ad = $48 M
● TOTAL: $928 M
51
Question 2
Factoring in costs, is this a good investment? Find the NPV
Using the “Rule of 72”, we know that 72/rate of return means the number of years to double our
money. With a six year lag and a 12% WACC, we know that all future cash flows must be halved.
● Revenues $928 M - $428M of total costs - $146M of opportunity cost (2 days x 3 hours x $1M/hr + 14 days x 10
hours x $1M/hr) = $346M
● $346/2 = $177M in present value (NPV)
• After finding the NPV of $177M, ask the candidate about intangible factors, benefits, and risks.
• Some critical factors:
○ Might give the network access to new viewers
○ There is prestige associated with hosting this event
○ We can use the air time to promote other programming
○ Opportunities for product tie-ins, supplemental revenue
• After finishing the discussion, ask the candidate for a recommendation
52

Recommendation Look for the following
● While the NPV of the project is $177M, the fact that there are other Case Execution
intangibles (new viewers, plugging our programs, and prestige) the • Framework: logical, mece, creative
bid should just be $177M. While there is no one correct answer, • Quantitative ability: accurate, quick,
most answers should be in the range of $200M. If there is well-structured approach
significant fluctuation from $200M, the candidate will have to
provide in-depth justifications and make a concrete argument.
business judgment, creative brainstorm
Bonus/Guide to an Excellent Case Communication
● Ultimately, the best interviewees will make a very strong argument • Presence & non-verbal: confident, poised,
using the facts provided and support their bid and explain why they good posture, clear & concise, body
moved their bid from the NPV figure. language, coachability
● There is also a lot of room for creativity for the interviewee to • Case materials: organized page layout,
discuss other factors, including supplemental streams of revenue, recognition of errors, resource references
intangible factors, and things to consider during the bid process
Behavioural

A+ Airlines
Kellogg 2012| Airline | Interviewee-Led
Difficulty:
Intermediate Opportunity Assessment: A+ Airlines
A+ Airlines Note: Provide this only if related questions are asked.
Airline Industry Industry Characteristics/Market Economics
• Card use: roughly 99% of all consumers
Case Prompt purchase their airline tickets using a credit
card, ie. All consumers on an airplane have a
Our client is A+ Airline Co. the third largest airline in the U.S by credit card available to them.
passengers carried. This week, we have been flying on our primary Client Characteristics
competitor, Gamma airline, and we noticed something interesting; • Items sold: only food and alcoholic beverage
they stopped accepting cash for in-flight food and beverage services items are sold on A+ Airline flights.
and they now only accept major credit cards.
• Locations: This is a US Domestic decision
The CEO of A+Airline Co. wants to know, why did Gamma Airline only. Ignore international.
switch from a Cash & Card system to a credit card only Competitive Dynamics
system, and should we follow them? • Gamma is the only airline that has made the
switch; however all other airlines are
evaluating the switch.
Note to interviewer: Commonly, the interviewee will ask a lot of questions
• For the purposes of this case, Gamma and A+
about historical coss, revenues, etc. This is not the correct approach for this
question. The savvy interviewer will realize that this is a BEFORE vs. Airline should be considered to be exactly the
AFTER comparison of switching from a CASH & CARD system to a CARD same in all regards.
ONLY system. Therefore, the questions asked should focus on the DELTA,
or the cash changes that occur when the switch is made.
Interviewer Guide to case and handouts

Case Structure
Interviewee’s structure should be a BEFORE vs. AFTER comparison of the switch from CASH & CARD to CARD
Revenue Changes: Loss of Cost Changes: Benefit of cash Cash Flow Changes: Interest and time
Cash Only Customers vs. management cost removed vs value of money (TVM) and working
increase in Credit Card incremental cost (fee) of credit capital impacts due to an increase in
Customers card collection speed
56
Changes in Revenue
After interviewee walks through structure, they will likely ask questions about consumer purchase behavior on
airplanes. Once you feel that they have identified the need to do a market sizing, hand out Exhibit 1. (DO NOT
ALLOW ROUNDING)
• Ask the interviewee to determine the Total Market Size in ($) for food and beverage purchases on an average flight.
• The interviewee should calculate the CURRENT allocation of purchases (cash vs. card) for an average flight.
• The interviewee should correctly identify that some of the current “cash” customers will not convert to card. Tell them we
will lose ⅓.
57
Changes in Revenue Cont.

Notes on Exhibit 1:
Using Exhibit 1, interviewee should calculate:
1. Total Number of Passengers per Plane 2. Total Number that Purchase and Total Spend ($)
Seats Occupants Business Leisure # that purchase Total Purchase

($)
First Class 50 50 50 0
Business 45 450
Economy 150 120 60 60
Leisure 15 75
Total 200 170 110 60
Total 60 525
Interviewer should note that First Class is provided with
complementary food and beverage and therefore should not be
included in calculations moving forward.
58
Changes in Revenue Cont.

Notes on Exhibit 1:
Using Exhibit 1, interviewee should calculate:
3. Cash vs. Card Spend + Loss Lose 1/3 of Cash Customers
Cash Card Total # $ New Total
Inflight $ $105 $420 $525 Business 3 ($30) $420
Leisure 1 ($5) $70
Total 4 ($35) $490
59
Changes in Costs
The interviewee should recognize that there might be a cost savings due to the change. Most interviewees know that
there is a Credit Card processing fee but do not realize that there are many costs associated with cash management.
Ask them about the types of costs A+ Airline might face under both processes before handing out Exhibit 2.
• The interviewee should notice the following information:

• Cash management and card management both have 2% fees associated, so this is a “wash” in terms of savings
• Cash management requires additional overhead, 7 total employees per airport, that could be eliminated for further
savings.
• When asked, explain that the total, per flight, savings from eliminating overhead due to Cash Management
Operations is $35/flight.
• Interviewee should notice that the $35 savings offsets the $35 loss in Revenue (slightly more because this
impacts bottom line but ignore margin).
60
TVM & Working Capital

Exhibit 2 also shows that there is a 30 day time benefit to collecting payment via Credit Card vs. Cash
Prompt 1: Ask the interviewee to qualitatively explain the impact this time savings will have
Qualitative Assessment: Time Value of Money: A+ Airline will receive their money 30
The interviewee should qualitatively mention that days sooner, and this money could be used to:
there are benefits to eliminating the longer cash ● Invest in interest earning accounts or growth projects
management process: ● Pay off suppliers early and take advantage of discounts
● Pay down lines of credit faster
Working Capital Improvement: $50 per flight in change can be

eliminated, thus freeing up cash in flow. Additionally, there will
be a reduction in loss of cash due to theft and damage.
Happier Customers: The majority of customers will be able to

place and receive their order faster on the plane which will also
increase sales
61

Solution & Recommendations
Look for the following
Overall, our client, A+ Airline should switch to a credit card only Case Execution
system for in-flight food and beverage because:
• Quantitative Benefits: We calculated that there would be a • Quantitative ability: accurate, quick,
loss of 3 business customers and 1 economy customer per well-structured approach
flight which amounted to a Revenue loss of $35. We also found
that we could save $35 in overhead expenses by eliminating business judgment, creative brainstorm
the cash management process. In sum, the decision to switch
is in favour because the savings are to the bottom line and the Communication
revenue losses are top line. • Presence & non-verbal: confident, poised,
• Qualitative Benefits: We also found that we will receive language, coachability
payment 30 days sooner by only accepting credit cards. This
improves our cash flow and could allow us to earn interest, pay recognition of errors, resource references
down creditors, or invest in projects. Additionally, by reducing
cash losses and eliminating “Change” tied up on airplanes, we Behavioural
can improve our working capital and also put this money to • Overall performance: quality of answers,
work for us. Finally, it appears as though customers, in general, relevance, clarity & time
might actually be happier because the speed of transactions on
the airplane will improve. Overall, what were the interviewee’s strengths?

Bonus/Guide to an Excellent case:
Look for the following
● Due to the increased transaction speed, probability of Case Execution
purchase for both Business and Economy passengers in
the AFTER state should go up due to a reduction in
frustration. The people on the back of the airplane often • Quantitative ability: accurate, quick,
abandon a purchase if it takes too long to place an order. well-structured approach
Making change takes a lot of time! • Business acumen: insightful, implementable,
● Average purchase amount should also increase. There is business judgment, creative brainstorm
a proven psychological phenomenon that shows how Communication
consumers who do not carry cash purchase less when a • Presence & non-verbal: confident, poised,
cash option is offered because they feel guilty using their good posture, clear & concise, body
card. A card-only option eliminates this guilt and language, coachability
consumers don’t mind using the card.
● Being creative when listing the change of costs as: Wifi recognition of errors, resource references
cost (connect with banks and verify transaction), Fraud
cost (increased chance of fraud to happen after Behavioural
implementing card only payment). • Overall performance: quality of answers,

Intermediate Profitability: A+ Airlines
Exhibit #1: An Average A+ Airline Flight

Intermediate Profitability: A+ Airlines
Exhibit #2: A+ Airline Cash & Card Operations

2.2 ICC Intermediate Cases

Uploaded by

Copyright:

Available Formats

You might also like

2.2 ICC Intermediate Cases

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

2.2 ICC Intermediate Cases

Uploaded by

Copyright:

Available Formats

ICC Compiled Cases

Good stepping-stone cases to bring you to the advanced difficulty cases.

Winter Olympics Bidding(4/5 difficulty) pg 47

Lizette’s Luxury Properties

Core Competencies Market Attractiveness ROI

Experience in Real Estate Experience in Locations

Lover’s Lair $2 MM $30 K $250 500 $450

Paradise Lost $4 MM $28 K $200 1000 $400

Fookwah Heights $6 MM $25 K $150 1500 $350

• Average occupancy: 50%

Analysis from Exhibit 1

Good Concerns: Great Concerns:

Blood Bank asked.

Bain | Round 2 | Healthcare

Possible Follow Up and Guidance for Interviewer

Provide Information If Asked: Overall approach, good shortcuts & solution

To solve the third question, evaluate the price impact on the

Conclusion Interviewer Feedback

Overall, what were the interviewee’s strengths?

Options/Considerations Refurbish Rebuild, same site Rebuild, new location Outsource

New per unit cost

Conclusion Interviewer Feedback

Overall, what were the interviewee’s strengths?

Healthcare Competitive Dynamics

Program Savings Program Costs Risks

Segmentation and Disease Focus

Exhibit 2 – Hand out when interviewee asks for medical

Conclusion Interviewer Feedback

Overall, what were the interviewee’s strengths?

Follow Up Questions Interviewer Feedback

Segment Average PMPM Average Diabetic

Conclusion Interviewer Feedback

● The profit on each car is $4K • Quantitative ability: accurate, quick,

Overall, what were the interviewee’s strengths?

Case Guidance Continued...

Case Execution Interviewer Feedback

Overall, what were the interviewee’s strengths?

Total Client Sales Total Scan Margin Price Elasticity

Pain Relievers $10B 0.3

Cleaning Products $0.5B 1.1

Food & Beverage $9B $3B 1.4

Other $2B $0.4B 1.8

Total $25B $4.9B

Average Price/Unit Total Unit Volume Total $ Sales Share

Client $1.50 6B $9B ~18%

Competitor 1 $1.40 10B $14B ~28%

Competitor 2 $1.35 12B $16.2B ~32%

Competitor 3 $1.45 8B $11.6B ~22%

Total 36B $50.8B

Total $ Sales Price/Unit Cost/Unit Profit/Unit Total Units Total Profit

Advil $8B $3.99 $3.79 $0.20 ~2B $0.4B

Motrin $1B $4.99 $4.49 $0.50 ~200M $0.1B

Store Brand $1B $1.99 $1.29 $0.70 ~500M $0.35B

Client Price Average Competitor Price

Advil $3.99 $4.69

Motrin $4.99 $4.99

Store Brand $1.99 $1.89

Total revenues should be equal to $928M for the project