Cracking the Case

Interview

Sumit Dhar
sumit.dhar@gmail.com
 Before We Begin
 The Ambady and Rosenthal Experiment
 The START framework
 Before the Case
− Numbers
− Why Consulting?
− About the company
− “Do you have any questions for us?”

 During the Case

− Take notes
− Ask questions to clarify
− Analyze aloud
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 Case Interview Are Not New
 A man walks into a restaurant. Orders a
dish of albatross meat. Takes one bite of
the dish, pulls out his revolver and shoots
himself. Why?

 A man is driving down the highway in his

car. He suddenly pulls over and shoots
himself. Why?

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 Case Categories
 Market Sizing or Guesstimate Questions

 Business Operations

 Business Strategy

 Brain Teasers and Others

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 Market Sizing Framework
Typical Case: How many units of product X are consumed
every year?

Step 1: Start with the overall population

Step 2: Calculate number of potential users

Step 3: Categorize on basis of usage (Hi, Med, Low)

Step 4: Assign percentages to each category. Use these

percentages to calculate number of people in each
category and from that calculate units of products used.

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 Case: Market Sizing
Case 1: How many cats in the USA?

Population of USA: 300 Million (approx)

Average size of family: 3 Members
No. of families in US: 100 Million

Assume one in five families in US has a pet.

Therefore, families with pets: 20 Million

Assume dogs and cats are the only pets US families have and that
the distribution is 1:1
Therefore families with cats: 10 Million

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 Case: Market Sizing
Cat owners are peculiar. Many of them have more than one cat.
So we come up with a distribution table:

Cats / Family % of families No. of families No. of Cats

1 40 4 Million 4 Million
2 30 3 Million 6 Million
3 30 3 Million 9 Million

Total Number of Cats: 19 Million

But what about strays? Assume there is a stray for every 10 pet
cats. The number of strays: 1.9 Million
Therefore, total Number of cats in US: 20.9 Million

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 Case: Market Sizing
Case 2: How many toffees are consumed
in India annually?
Population of India: 1 Billion (approx)
Age group of toffee eating junta: 3-13 years
% population in that band: 20%
No. of children in that band: 200 Million

We can safely assume that bulk of the toffee consumption in India

primarily occurs in Urban Areas
Population distribution (Rural: Urban): 70:30
Children in cities: 60 Million

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 Case: Market Sizing
Of these 60 Million children, suppose only 50% can afford toffees.
Therefore toffee consumers: 30 Million

Assume families go shopping once a week. That is nearly 50

times a year. Assume parents buy 4 toffees per kid per trip.
Therefore per kid per year (50x4): 200 toffees
Total Toffees Produced (30M * 200): 6 Billion Units

You can go fancy with distributing the 30 Million toffee purchasing

kids into High (10 toffees per trip), Medium (5) and Low (2)
categories. Then assume percentages for each category and get
the total number of toffees consumed.

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 Case: Market Sizing
Case 3: Rahul – Wannabe Painter, Unsuccessful Model,
Bullshitter Extraordinary. DNA subscriber number 3,98,233.
How true, do you think, are DNA numbers?
Population of Mumbai: 2 Crores (approx)
Average size of family: 4 members
Families in Mumbai: 50 Lakh

We can be sure that the literacy rate of Mumbai is higher than the
country average. Take literacy rate: 70%
Literate Households: 35 Lakhs
Not all literate households will buy newspaper. Assume 3 out of 5
such households buy a newspaper. Total households in Mumbai
buying newspapers is: 21 Lakhs
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 Case: Market Sizing

Total Newspaper buying households: 21 Lakh

Of these many households buy Vernacular or Hindi Newspapers.
Let us take English : Vernacular ratio to be: 1:1
Therefore, number of English Newspaper subscribers: 10 Lakh

Currently English Newspapers in Mumbai: TOI, HT, ET, Mid-Day,

Indian Express etc. Assume that the leader (TOI) has 50%
market share.
Therefore, TOI circulation figures (approx): 5 Lakh

If the market leader has a circulation of ~5 Lakh, then DNA’s

quote of 4 Lakh subscribers even before going to print sounds
quite dubious.

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 Practice Cases: Market Sizing
− How many TT balls will fit into this auditorium
− How many plastic coffee cups are used in the world per
day?
− How many lawn tennis balls used in India per year?
− How many jeans purchased annually in the USA?
− What is the average number of chairs per household?
− How many petrol pumps in Mumbai?
− What is the total number of credit cards in circulation in
the Indian market?
− How many people fly in and out of Mumbai Domestic
Airport per day?

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 Case: Business Operations
Case 1: The number 3 shoe maker has hired you to determine
why its profits are down while that of competitors are up.

Profits = Revenues – Costs

If profits are down, it means either revenues have gone down or
costs have gone up.

Costs would include:

Cost of Goods Sold Operational Costs:
 Direct Labor  Marketing & Distribution Costs
 Direct Material  Administrative Costs
 Overheads  R & D costs

How are we placed on costs compared to our competitors?

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 Case: Business Operations
Revenues would be determined by:
 Number of units sold
 Prices
Have the prices of our products dropped due to a price war with
competitors?

The units sold will be determined by:

 Size of the market
 Our market share

If the market size has increased, it can only mean that our share
has decreased. To analyze why that has happened, I will look at:
 Our Customers (vis-à-vis competitors’)
 Our Product (vis-à-vis competitors’)
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 Case: Business Operations
Conclusion:
Over the last few years, customer demographics and consumer
preferences have changed. Majority of the customers in this
market are now teenagers who prefer sneakers and other
informal footwear while we make formal footwear.
Hence our revenues have decreased while that of competitors
have increased. To compete successfully, I would seriously look at
entering the informal footwear market

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 Case: Business Operations
Case 2: BOA (in US) charges $100 as annual fees on its credit
card. A newly hired MBA comes up with a brilliant idea to
waive the fees. His reasoning: the increase in customers due
to dropped fees should more than offset the loss in revenues.
Analyze.
Sources of Revenue for a credit card company:
 Annual Fees (AF) [$100]
 Merchant Fees (MRF) [1% of Transaction Vol.]
 Customer Late Fees (CLF) [Not Known]

Revenue = No. of customers * (100 + CLF + Merchant Fees)

How do we calculate the unknowns in the equation? Ask the

interviewer if these numbers are available, else use guesstimates

Revenue = 10M * (100 + 10 + 10) = 1.2 Billion

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 Case: Business Operations
The new scheme will be dropped only if revenues generated are
more or equal than the first case. What do you think is the impact
of removing annual fees on the Merchant Fees and Late Fees?

New Revenues = No. of customers * ( 0 + 10 + 10)

Or No. of New Customers > 1.2/20
Or BOA needs 60 Million customers for this scheme to bring same
revenue as previous scheme

Time For Reality Check:

Is it possible for BOA to increase its customer base 500% by just
removing annual fees?
The credit card owning population of US is nearly 200 Million. Can
BOA capture 25% of that market?

Final Recommendations & Conclusions?

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 Business Strategy Framework
Typical Case: Should company X enter a new market?

Threat of Entry
Capital Requirements,
Economies of Scale, Brand
Loyalty, Cost adv.

Power of suppliers Industry Rivalry Power of Buyers

Supplier Concentration, Fragmentation, Growth, Buyer concentration,
Volume, Forward Exit Barriers Purchase Volume, Backward
Integration, Switching Costs Integration, Switching Costs

Threat of Substitutes
Buyer Inclination, Price vs.
Performance tradeoff

Industry Analysis Framework: Porter’s 5 Forces

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 Case: Business Strategy
Typical Case: CEO of a national phone installation company is
considering getting into the electronic home security business at
Mumbai. This business would utilize similar services to their phone
installation services: phone lines, equipment installation and monitoring.
The 5 largest firms in the market have a combined share of less than
10%. The CEO believes they can centralize the whole operation and take
advantage of economies of scale. Due to this, their service will be
cheaper than rivals and he can induce switchovers. What do you think?

To analyze the CEO’s move, let us start by looking at the Industry

structure.
 Highly fragmented: Indicates a high competitive rivalry
 Why no large players? Do customers prefer local players?

Conclusion:
 High competitive rivalry.
 No advantages to centralized large players.
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 Case: Business Strategy
Next let us look at buyer power:
 Who are the buyers? Concentrated?
 Switching costs?
Conclusion: Buyer Power High

Next we look at the threat of new players entering the market:

 Capital Requirements? Probably low.
 Brand Loyalty? Commodity market, probably no loyalty.
 Economies of scale? Might not work as require localization
Conclusion: Threat of new players entering is very high

Substitutes & Supplier power can be ignored. Not relevant.

Final Recommendation?

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 Recommended Readings
 Competitive Strategy: Porter’s Five Forces
http://en.wikipedia.org/wiki/Porter_5_forces_analysis

 Marketing Concepts (4 Ps, 3 Cs etc.)

http://en.wikipedia.org/wiki/List_of_marketing_topics

 Accounting: Basics of a Income Statement

http://en.wikipedia.org/wiki/List_of_accounting_topics

 As many consulting cases as you can

 HOW TO PREPARE?
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Before We Close…

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 Ithaca
When you set out on your journey to Ithaca,
pray that the road is long,
full of adventure, full of knowledge.
The Lestrygonians and the Cyclops,
the angry Poseidon -- do not fear them:
You will never find such as these on your path,
if your thoughts remain lofty, if a fine
emotion touches your spirit and your body.
The Lestrygonians and the Cyclops,
the fierce Poseidon you will never encounter,
if you do not carry them within your soul,
if your soul does not set them up before you.
Pray that the road is long.
That the summer mornings are many, when,
with such pleasure, with such joy
you will enter ports seen for the first time;
stop at Phoenician markets,
and purchase fine merchandise,
mother-of-pearl and coral, amber and ebony,
and sensual perfumes of all kinds,
as many sensual perfumes as you can;
visit many Egyptian cities,
to learn and go on learning from their scholars.
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 Before We Close: Ithaca
Always keep Ithaca in your mind.
To arrive there is your ultimate goal.
But do not hurry the voyage at all.
It is better to let it last for many years;
and to anchor at the island when you are old,
rich with all you have gained on the way,
not expecting that Ithaca will offer you riches.
Ithaca has given you the beautiful voyage.
Without her you would have never set out on the road.
She has nothing more to give you.
And if you find her poor, Ithaca has not deceived you.
Wise as you have become, with so much experience,
you must already have understood what these Ithacas mean.

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 Thank You
All the best to you all
Feel free to write to me:
sumit.dhar@gmail.com
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