cCrack the case workshop review

Workshop Preview

Crack the

Master the most feared part of the selective process at consulting companies

Agenda of Training

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Theory 

Introduction - Cases & frameworks

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7 commandments of a case interview: application examples

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Market Sizing framework: impress your interviewer applying the 3 golden rules

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The Profitability framework and an application example

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The “Core Three” framework: Customers (+ market), Company (+ product), Competitors

Practice – PrepLounge.com

Cases & frameworks (simplified view) Three main categories of cases: 1. Market Sizing  –

Always use the Market Sizing framework

2. Business Situations  –

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85% of the time: General Business Situation framework 15% of the time: M&A / PE or Capacity frameworks

3. Other cases types  –

No off-the-shelf frameworks

Cases & frameworks (detailed view) Market Sizing framework

No specific framework

Pure Market Sizing Business Situation framework

Market entry

Competitive response

New product

Increase sales

Reduce costs

Business turnaround

Operations strategy

Industry analysis M&A / PE framework

Pricing & Valuation

Finance

Private equity

HR

Brainteasers

Others

Capacity framework

New business

Capacity change

M&A

Supply & Demand

No specific framework •

Market Sizing framework

Assess the financial health of Pure Market Swatch Sizing

No specific framework

Business Situation • framework

How should Coca Cola define New product Market entry the salaries of their overhead?

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Competitive response

Increase sales

What economical consequences would a change in traffic Reduce costs Operations strategy direction in Britain have?

Business turnaround

Why are gully covers New round? Industry analysis business

…

M&A / PE • framework

Pricing & Valuation

Private equity

M&A

Finance

HR

Brainteasers

Others

Capacity framework Capacity change Supply & Demand

Capacity framework •

Market Sizing framework

No specific

For what price could Intel sell theframework i5 processor if Pure Market they increased their Finance Sizingunits production by 25%?

Business Situation • framework

What is the best diamond extraction and HR Brainteasers New product Market entry commercialization volume per year for De Beers? Competitive response Supply &

Increase sales

Demand chart Reduce costs

Business turnaround

Operations strategy

Industry analysis M&A / PE framework

Pricing & Valuation

Private equity

Others

Capacity framework

New business

Capacity change

M&A

Supply & Demand

M&A / PE framework •

Market Sizing framework

How much is facebook worth? Pure Market Sizing

No specific framework Finance

Bain Capital wants to buy 10% of Dropbox for Business Situation US$300 million. Is that a good deal? HR Brainteasers framework New product

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Market entry

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Should UPS really merge with TNT? Competitive response

Increase sales

Business turnaround

Others

Should GM buy its windshield provider (vertical integration)? Reduce costs Operations strategy

Capacity framework

Industry analysis M&A / PE framework

Pricing & Valuation

New business

Private equity

M&A

Use Business Capacity Situation change framework with focus on Supply & synergies! Demand

Business Situation framework •

Market Sizing framework

No specific

C&A has been facing a steady decrease framework in sales… Pure Market Sizing

Business Situation framework

Market entry

Competitive response

Increase sales

Reduce costs

Industry analysis M&A / PE framework •

Finance

New product

Business turnaround

Operations strategy

New business

HR

Brainteasers

Detailed Others discussion after break! Capacity framework Capacity change

Pricing & to diversify Private Supply & Henkel Valuation wants its enter M&Abusiness and equity Demand the packaging industry. Is that a good idea?

Market Sizing framework Market Sizing framework Pure Market Sizing Business Situation framework

Market entry

New product

No specific framework

Detailed Finance discussion after break! HR

Brainteasers

Others

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Competitive Increase turnaround How many golf balls fit Business in a Boing 747? response sales

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How many shoes are sold in Brazil per year? Reduce costs Operations strategy

Capacity framework

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What is the market of hearing aids in Europe? Industry analysis

New business

Capacity change

For how much would you sell the Golden Gate M&A / PE bridge? Pricing & framework Private Supply & M&A •

Valuation

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equity

How heavy is Manhattan?

Demand

The commandments: Opening the case 1. Listen actively  –

Fully concentrate!

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Note down ALL information

2. Pause, paraphrase problem and clarify all questions  –

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 “So, if I understood it well, I’m the CEO of a company…”  Double check on objective: “Is reducing production costs our only goal in this case?”  Don’t be afraid to ask: make sure you understood the problem 100%

The commandments: Opening the case 3. Plan the solution structure (roadmap)  –

Ask for 1 minute to gather your thoughts

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Identify case type and corresponding framework

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Describe and draw framework for interviewer

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Organize your notes (consultants are supposed to be always “client-ready”) Example: Profitability framework

+ point: You don’t need to call your structure a framework! Interviewers always complain that candidates force-fit their cases into off-the-shelf frameworks

Profit

Revenue

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Costs

The commandments: Cracking the case 4. Be answer-first  –

Always list a few possible hypotheses and set out with one of them

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Start with corresponding branch of framework

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Refine/rebuild hypothesis as you find out more

Example: Coca-cola’s profit has been declining in the last 2 years. Hypotheses: 

Revenues have decreased

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Costs have increased

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Both

Profit

Revenue

+ point: Use your general culture to help choose initial hypothesis

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Costs

The commandments: Cracking the case 5. Keep structured throughout the case  –

Always refer to structure

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Don’t jump around framework branches

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Consistently explore branches and exclude them if they are not relevant

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Summarize findings when switching major branches

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Be MECE! Profit

Example: Coca-cola Answer first: Costs have increased Revenue

+ point: Mention that your structure is MECE

Raw material

Labor

Costs

Distribution

Others

The commandments: Cracking the case 6. Gather data the right way  –

ALWAYS segment your data!

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Proactively ask for relevant data

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Don’t be too vague

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Quantify whenever possible

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Go for the trend (this year vs. last years)

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Company-specific or industry-wide?

The commandments: Closing the case 7. Close the case properly  –

Ask for a minute to gather your thoughts (and draw them up)

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It’s all about actionable recommendations!

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Choose a side and stand by it!

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First conclusion/recommendation then justification

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People like 3: give the interviewer 3 reasons! Conclusion + recommendation

+ point: Always apply the pyramid principle (by Barbara Minto) Reason 1

Reason 2

Reason 3

Market Sizing framework – the 3 golden rules 1. Always use a tree to structure your problem 2. Find the trade-off  between pragmatism and accuracy 3. Do sanity checks along the way

Always use a tree to structure your problem

1

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How structured you are, that’s what matters! First the structure (downward from top) then the numbers (upward from bottom) Example: How many golf balls can you fit in a Jumbo?

12M . 1.2 ≈ 14M

Jumbo volume (m3)

1500

+ point: always explicitly write the units of the variables being estimated

# golf balls in Jumbo

/

Golf ball volume (m3) 125.10 -6

30

Sectional area (m2)

x

Length (m)

50

Radius (m2)

2

x

π

3

Filling constant 1.2

Diameter3 (m3) 125.10 -6

10

x

Find the trade-off between pragmatism and accuracy

2

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Rounding numbers is an art that must be used

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But… ask the interviewer if he’s fine with it!

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Round some up and some down + point: if you are able to make the exact calculation, round up the answer instead of the inputs. Ex: Right: 4 * 3.8 = 15.2 ≈ 15 Wrong: 4 *3.8 ≈ 4 * 4 = 16

Find the trade-off between pragmatism and accuracy

2

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Work with averages when the problem is complicated enough, otherwise segment!

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MECE is essential in segmentation

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Don’t make implicit assumptions Example: How many shoes are sold in Brazil per year?

+ point: try to segment in three categories. Anyone can understand 3 categories, which is not true for 4 or more

# shoes/year in Brazil

# shoes class A / year

Class A population

x

# shoes  / person  / year

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# shoes class B / year

Class B population

x

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# shoes  / person  / year

# shoes class C / year

…

x

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Do sanity checks along the way

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Problems are not easy: you might make mistakes

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Take a step back, be critical, use common sense

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Do sanity checks for major branches Example: How many people can stand together on an airport runway?

250,000

50,000

+ point: don’t worry if your check is off by 2 times. But do something if it’s off by 10 times or more

50

Width (m)

# people on runway

Runway area (m2)

x

x

Length (m)

# people / m2

1,000

5

Business Situation compound framework – 3 different combinations •

Only profitability problem (quantitative focus) Profitability framework

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Only conceptual problem (qualitative focus)  “Core Three” framework

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Combined problem (quantitative + qualitative) Profitability framework

 “Core Three” framework

The Profitability framework and an application example •

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Profit: number 1 reason for consulting projects Almost half of Business Situation cases start with a profitability problem  –

Sales falling

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Costs rising

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profit

revenue

Both revenue / unit

+ point: focus on isolating the problem by applying the commandments

x

# units sold

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costs

variable cost

cost / unit

x

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# units sold

fixed cost

The “Core Three”: Customers (+ market), Company (+ product), Competitors •

First and foremost the customer: the

The “Core Three” framework

company’s raison d’être •

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The company and its products Competitors and competitive landscape

Customers (+ market) Company (+product)

Competitors

Insights

Actionable recommendations

The “Core Three” –  Customers (+market) •

Who are our customers?  –

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How can we segment them? How big are the segments? What is our market share?

Customers (+ market) Company (+product)

Competitors

Customer concentration (bargain power)?

What does the customer expect (per segment)?  –

Do we understand it?

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Do we fulfill it?

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Which distribution channels do they like?

Is the market growing? Is it profitable?

The “Core Three” – Company (+product) •

What is our product?  –

Is it differentiated or a commodity?

What’s the pricing?

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Can we cross-sell add-ons to it (bundles)?

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Is there a substitute threat?

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If portfolio: what does the BCG matrix look like?

Customers (+ market) Company (+product)

Competitors

What is the client’s company?  –

What are the company’s core competences?

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Which distribution channels are used?

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What are the main cost blocks (use the value chain)? Is there supplier concentration (bargain power)?

What are the company’s main assets (brand value, customer loyalty) and liabilities (legal problems, debts)?

The “Core Three” – Competitors •

Who are our competitors?  –

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How is the competition structured (fragmented, monopoly, oligopoly etc.)?

Customers (+ market) Company (+product)

Competitors

How do they behave? Is there a price war? Best practices: are they doing something better than us? Do we do something better than them?

How does our cost structure compare with our

competitor’s? •

Are there barriers to entry?

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Is the market regulated? If so, how?

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