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CASE INTERVIEW WORKSHOP
PART I
OUTLINE
1. What is a case interview
2. What are consulting firms assessing during a
case interview
3. Overall strategy for preparing for case
interviews
4. Components of a case interview
WHAT IS A CASE INTERVIEW?
 Interview where the applicant is given a
business situation/problem/challenge and
asked to resolve the situation.
o Analyze in a structured, hypothesis-driven
manner
o Provide a data-backed recommendation
 Communicate with the interviewer as if you are
a consultant and the interviewer is the client
EXAMPLES OF BUSINESS
PROBLEMS
 How much profit can Cure Pharmaceutical Inc.
make three years after launching its new drug?
 A major fast-food chain is losing money in Texas,
why and what can they do to turn around?
 The competitors have adopted a new digital
technology, should auto insurance company BBB
follow?
 Should BlackRock Venture Capital firm acquire Big
Yellow School Bus Co.?
WHY DO CASE INTERVIEWS
EXIST?
 They simulate on-the-job experience
 Clients ask estimate questions all the time
 Prove yourself as a consultant
 Ask thought-provoking questions client hadn’t
considered
 Analyze data to discover new insights clients hadn’t
seen
 Develop data-supported conclusions that lead client
to a decision
WHAT CONSULTING FIRMS ASSESS
DURING A CASE INTERVIEW
 Hypothesis-driven problem solving
 Communication skills
 Public math skills
 Business acumen
 Client-facing demeanor
HYPOTHESIS-DRIVEN PROBLEM
SOLVING
Understand the
problem/issue
Draw
hypothesis
Lay out
structure or
issue tree
Prioritize and
focus on the
major issues
Perform
quantitative and
qualitative
analyses
Derive insights
from the
analysis
Draw
conclusions and
make
recommendatio
n
COMMUNICATION
 Listen and take notes
 Engage and align with the interviewer
 Ask logical questions
 Be structured in both verbal and written
communications
 Speak succinctly without rambling or being
robotic
 Speak firmly and convincingly
PUBLIC MATH SKILLS
 Do the math accurately
 Do the math quickly
 Speak out loud when doing the calculation
PUBLIC MATH SKILLS
 Precision math
 $237,000,000 + $184,000,000
 ¥397,000,000 - ¥146,000,000
 5  20,000  4  12
 15% of $15B
 Estimation math
 2,987,946  4,004
 24.8% of $101.02M
https://www.caseinterview.com/math/mathtest.p
BUSINESS ACUMEN
 Know basic business terminology
 Research the industries
 Connect data and analysis with business
needs
 Make sound recommendations
 Think of risks and next steps
CLIENT FACING DEMEANOR
 Present professionally
 Be confident, not arrogant
 Align with the interviewer proactively
 Remain cool and calm when challenged
 React properly to pressure or mistakes
OVERALL STRATEGY
1. Understand the skills and abilities that should be
demonstrated in case interviews
2. Acquire general business knowledge
3. Understand the different case types
4. Utilize external tools
5. Know how to open, analyze and close a case
6. Practice with partners in-person
7. Summarize cases practiced and keep a case
journal
GENERAL BUSINESS KNOWLEDGE
 Profit:
 Profit ($) = Revenue – Cost
 Profit margin (%) = (Profit  Revenue) * 100%
 Contribution margin ($) = Price per unit - Variable Cost per unit
 Breakeven means profit = 0
 Revenue breakdown
 Single revenue stream: price per unit  volume
 Multiple streams: product lines; customer segments (age, gender,
occupation), geography
 Cost breakdown
 By variable cost and fix cost
 By revenue segments
 Along the value chain
 By divisions of the company/organization
GENERAL BUSINESS KNOWLEDGE
Basic concepts of economics
 Price sensitivity
 Price elasticity of demand
 Commodity vs. differentiable good
 Substitute
 Market share/penetration and competition
 Economies of scale, scope, and experience
 Time value of money
 Return on investment
 Opportunity cost
GENERAL BUSINESS KNOWLEDGE
Value chain
Research
and
developmen
t
Raw
materials
Manufacturi
ng
Distribution
Marketing
Sales
Customer
service
GENERAL BUSINESS KNOWLEDGE
Different divisions of most companies
 Board of directors
 Executive team
 Finance
 Human resources
 Legal
 Research and
development
 Operations
 Marketing
 Sales
DIFFERENT CASE TYPES
 By format
 Candidate-led
 Interviewer-led
 Written/presentation
 Group
 By content
 Market entry
 Profitability
 Growth, expansion,
relocation strategy
 Response to
competition
 Merger and
acquisitions
 Many others
CASE INTERVIEW
PREPARATION RESOURCES
 Case preperation books
 Case Interview Secrets
 Case In Point
 Crack the Case System
 How to Get into Top
Consulting Firms
 Graph In Point
 Business school
casebooks
 Consulting firm websites
 Audio resources from
Victor Cheng
 Look Over My Shoulder
 Behind Closed Doors
 Consulting prep websites
and their YouTube
channels
 caseinterview.com
 managementconsulted.com
 mconsultingprep.com
 firmsconsulting.com
 Magazines and
newspapers
 The Wall Street Journal
 Harvard Business Review
 The Economist
 Bloomberg Businessweek
 Financial Times
 New York Times - Business
Day
COMPONENTS OF A CASE
COMPONENTS OF A CASE
 Opening
 Analysis
 Closing
OPENING THE CASE
OPENING THE CASE
1. Take notes
2. Summarize the prompt
3. Ask clarifying questions
4. Pause to prepare a structure
5. Present hypothesis and structure
PROMPT
The client is a large-sized agricultural equipment
assembly company. Its primary product line is
selling tractors, which are priced at $50,000
each. They sold 160 tractors this year. They also
made $4 million in profits last year, but this year
they are at a $2 million loss. The CEO wants to
know why profits have plummeted.
TAKING NOTES
 Bring lots of blank paper and a pencil/pen
 Write down numbers and use shorthand
 Make sure handwriting is legible
Agriculture
equipment assembly
- tractors
Profit – last yr $4M
this yr -$2M
Why?
160 tractors x $50K
SUMMARIZE THE PROMPT
 Summarize the information instead of
recapping every fact
 Aim for half the time to summarize as the
interviewer took to explain
 Show genuine interest in the case presented
SUMMARIZE THE PROMPT
Candidate: This is a very interesting case. It
seems that our client, a major agricultural tractor
assembler, saw a $6M drop in profit this year
although they sold 160 tractors at $50,000 each.
And we are here to figure out why and how to
turn it around.
CLARIFYING QUESTIONS
 Ask about anything you missed or words you did
not understand
 Understand the client’s business model and
problem
 Overall situation of the industry and economy
 Geographic segmentation
 Unique company or product advantages
 Company’s experience in the industry
 Ask if the client has a specific numerical objective
in mind
 Continue taking notes
PROMPT
The client is a large-sized agricultural equipment
assembly company. Its primary product line is
selling tractors, which are priced at $50,000
each. They sold 160 tractors this year. They also
made $4 million in profits last year, but this year
they are at a $2 million loss. The CEO wants to
know why profits have plummeted.
CLARIFY THE BUSINESS MODEL
Candidate: What does an agricultural equipment
assembly company look like?
Interviewer: Our client is involved in primary
assembly of the tractor, not manufacturing. Client
purchases the finished parts from a single
supplier, who also charges us fees for raw
materials. After receiving the finished parts, the
client assembles the tractor together, performs
quality control and testing, so there’s a total labor
cost for the client.
CLARIFY THE BUSINESS MODEL
Candidate: How does the client sell the tractors?
Do we have different revenue segments?
Interviewer: No major segments, and the client
sells directly to farmers mainly through phone
sales.
CLARIFY THE INDUSTRY AND
ECONOMY
Candidate: Have our competitors seen a similar
drop in profit?
Interviewer: No, we have two competitors who
are not having profitability issues this year.
CLARIFY THE PRODUCT
Candidate: How does our product compare to
those of our competitors?
Interviewer: Our tractor is priced higher than
others, which has always been the case, and we
made some improvements to the product this
year. Our client has a strong reputation/image of
quality in the market and the market has been
willing to pay a premium for a longer lasting,
more reliable product.
CLARIFY THE OBJECTIVE
Candidate: Does our client have a specific
numerical goal in mind?
Interviewer: Not at this time.
PAUSE TO PREPARE A
STRUCTURE
 Candidate: I’d like to take a quick minute to
generate a structure to apply to this problem.
 Think of the objective and 2-4 buckets that
need to be analyzed for reaching that objective
 Profit = revenue – costs
 Pick a testable and justifiable hypothesis
 Example: Pricing is not optimal, resulting in low sales
 Spend no more than 2 minutes preparing
PRESENT THE STRUCTURE
 Turn the paper around to face the interviewer
 State your hypothesis
 Explain how analysis of each bucket will
support or disprove your hypothesis
Profit
Revenue
Price Volume
Costs
Fixed Variable
Finished
parts
Raw
materials
Labor
PRESENT THE STRUCTURE
Agriculture equipment
assembly - tractors
Profit – last yr $4M
this yr -$2M
Why?
160 tractors x $50K
$6M
Hypothesis: Pricing is driving low sales
Objective: Why are profits down?
comp doing fine
premium product,
higher price
costs – raw materials,
finished parts, labor
sell to farmers
PRESENT THE STRUCTURE
Candidate: Our objective here is to figure out why
profits have dropped. I’m thinking that our pricing
isn’t optimal so this decline in profits might be a
sales issue. To examine this hypothesis, I’d like
to take a look at two things: revenue and costs.
Under revenue, I’d like to see if we’ve changed
our prices or seen a decline in volume that would
result in a drop in sales. If that’s not the case,
then I’d also like to look at costs to see if
anything has increased in our fixed or variable
cost structure.
ANALYZING THE CASE
ANALYSIS
1. Select one component of the structure
2. Analyze using process of elimination
3. Comment on significance of numbers
4. Update structure with insights
5. Synthesize what you have learned
6. Move to next branch
7. Exhaust all branches
REVENUE BRANCH
 Recall from the prompt that this year we sold 160 tractors at
$50,000
 Candidate: Do we have any information about our revenue
from last year?
 Interviewer: Last year we sold 250 tractors at $40,000 each
 Candidate: Why did we increase the price of tractors by
$10k?
 Interviewer: Our client strives to sell the world’s best
tractors. The most recent product line has tighter tolerances
and improved durability of component parts.
REVENUE NUMBERS
 Do your math on a separate piece of paper
 Make a table when possible
Price Volume Revenue
Last year $40K 250
This year $50K 160
Difference
REVENUE NUMBERS
 Do your math on a separate piece of paper
 Make a table when possible
Price Volume Revenue
Last year $40K 250 $10M
This year $50K 160 $8M
Difference -$2M
COMMENT ON NUMBERS
Candidate: It looks like the price hike wasn’t very
effective and caused fewer tractors to be bought,
resulting in a $2M revenue loss from last year.
Do we have any data on price sensitivity in our
customers?
EXHIBIT 1
0
50
100
150
200
250
300
350
400
450
$30K $35K $40K $45K $50K $55K
Volume
Price
Tractor price sensitivity
CALCULATE REVENUE
Price Volume Revenue
$30K 400
$35K 350
$40K 250
$45K 200
$50K 160
$55K 100
CALCULATE REVENUE
Price Volume Revenue
$30K 400 $12M
$35K 350 $12.25M
$40K 250 $10M
$45K 200 $9M
$50K 160 $8M
$55K 100 $5.5M
MINI SYNTHESIS OF REVENUE BUCKET
Candidate: It looks like our customers are very
price-sensitive and selling tractors at $35K would
maximize our revenue. However, this doesn’t
explain the full loss in profits between this year
and last year. Our client must also be spending
$4M more in costs. Since our client has improved
the durability of their product, I would
hypothesize that an increase in the parts cost is
driving our loss in profits.
Profit
Revenue
Price Volume
Costs
Fixed Variable
Finished
parts
Raw
materials
Labor
UPDATE STRUCTURE AND
HYPOTHESIS
$6M
$2M
$50k vs.
$40k
160 vs.
250
Hypothesis: Pricing is driving low sales + increase in
costs
COSTS BRANCH
Candidate: Do we have any information on the
fixed and variable cost breakdown from this year
and last year?”
Interviewer:
Fixed costs
Raw
materials
Finished
parts
Labor
Last
year
$1M $2M $1M $2M
This
year
$1M $2M $5M $2M
COSTS NUMBERS
Candidate: As I suspected, our finished parts
cost has gone up fivefold, which is a staggering
increase.
Candidate: Has our supplier increased prices or
is it because we are buying better parts?
Interviewer: The costs have increased because
our client is buying premium parts.
COSTS NUMBERS
Candidate: Got it. So we assumed that
customers would pay more for a better product,
but looking at our revenue between this year and
last year, it looks like they are not willing to. Do
we have any data on customer preference for
tractor features?
EXHIBIT 2
Factor
Importance
when buying*
Price 5
Durability 2
Fuel efficiency 3
Brand 1
*5 is most important, 1 is least important
MINI SYNTHESIS OF COSTS
BUCKET
Candidate: Spending more on finished parts to
make a more durable tractor has resulted in an
increase of $4M in total costs. However, our
customers value price as most important when
they are buying a tractor, followed by fuel
efficiency, and then durability and branding.
Thus, our customers are not willing to pay a
higher price even for a premium product.
Profit
Revenue
Price Volume
Costs
Fixed Variable
Finished
parts
Raw
materials
Labor
UPDATE STRUCTURE
$6M
$2M
$50k vs.
$40k
160 vs.
250
$4M
$5M vs.
$1M
$4M
CLOSING THE CASE
CLOSING
1. State recommendation or conclusion clearly
2. Two or three supporting reasons
3. Risks
4. Next steps
RECOMMENDATION
Candidate: Based on our data, I recommend that
our client re-evaluate their emphasis on building
the best tractor and cut finished parts costs to
focus their efforts on producing a quality low-cost
tractor to be sold at $35K.
SUPPORTING REASONS
Candidate:
1. Customers value price as the first factor of
importance when purchasing a tractor and are
very price sensitive. Selling tractors at $35K will
maximize revenue.
2. Customers do not value durability as assumed. In
spite of tighter tolerances and better tractor
components, when our client raised prices to
cover the cost of improvements, they saw a huge
drop in sales.
RISKS
Candidate: Our main competitors may be
pursuing an alternative strategy to outcompete us
(ex. more fuel-efficient tractors, longer
warranties, etc.).
NEXT STEPS
Candidate: Thus, moving forward, our client
should:
1. Incorporate a cost/benefit analysis procedure
into product improvement
2. Evaluate competitor’s R&D and product
improvement positions
COMMON MISTAKES
 Not understanding the objective
 Not talking out loud
 Asking too many questions
 Using a generic or broad structure
 Proceeding with the case in a random or non
hypothesis-driven manner
 Failing to present a strong recommendation
UPCOMING CLUB EVENTS
 Networking Mixer: May 26
 Case Interview Workshop II: 1st week of June
 Case Interview Workshop III: 3rd week of June
APPLICATION DEADLINES
AND ON-LINE EVENT
DATE/TIME EVENT
May 28th (Sunday) McKinsey #aplaceforyou Deadline
July 17th (Monday) McKinsey 2018 Full Time Position
Deadline
July 21st (Friday) Bain 2018 Full Time Position Deadline
July 23rd (Sunday) BCG 2018 Full Time Position Deadline
No due date available Off Cycle Full Time Position ClearView
(Experienced Professional)
No due date available Putnam Associates Life Science
Consultant (San Francisco or Boston)
DATE/TIME EVENT
May 16th (Tuesday) at 7:00-8:00
PM
Bain: Cracking the Case

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Let's begin our analysis by first examining revenue. Could you please provide more details on the client's pricing and sales volume over the past two years?Interviewer: Sure, our tractor pricing has remained the same at $50,000 per unit. However, sales volume has dropped from 200 tractors last year to 160 this year, a 20% decline

  • 2. OUTLINE 1. What is a case interview 2. What are consulting firms assessing during a case interview 3. Overall strategy for preparing for case interviews 4. Components of a case interview
  • 3. WHAT IS A CASE INTERVIEW?  Interview where the applicant is given a business situation/problem/challenge and asked to resolve the situation. o Analyze in a structured, hypothesis-driven manner o Provide a data-backed recommendation  Communicate with the interviewer as if you are a consultant and the interviewer is the client
  • 4. EXAMPLES OF BUSINESS PROBLEMS  How much profit can Cure Pharmaceutical Inc. make three years after launching its new drug?  A major fast-food chain is losing money in Texas, why and what can they do to turn around?  The competitors have adopted a new digital technology, should auto insurance company BBB follow?  Should BlackRock Venture Capital firm acquire Big Yellow School Bus Co.?
  • 5. WHY DO CASE INTERVIEWS EXIST?  They simulate on-the-job experience  Clients ask estimate questions all the time  Prove yourself as a consultant  Ask thought-provoking questions client hadn’t considered  Analyze data to discover new insights clients hadn’t seen  Develop data-supported conclusions that lead client to a decision
  • 6. WHAT CONSULTING FIRMS ASSESS DURING A CASE INTERVIEW  Hypothesis-driven problem solving  Communication skills  Public math skills  Business acumen  Client-facing demeanor
  • 7. HYPOTHESIS-DRIVEN PROBLEM SOLVING Understand the problem/issue Draw hypothesis Lay out structure or issue tree Prioritize and focus on the major issues Perform quantitative and qualitative analyses Derive insights from the analysis Draw conclusions and make recommendatio n
  • 8. COMMUNICATION  Listen and take notes  Engage and align with the interviewer  Ask logical questions  Be structured in both verbal and written communications  Speak succinctly without rambling or being robotic  Speak firmly and convincingly
  • 9. PUBLIC MATH SKILLS  Do the math accurately  Do the math quickly  Speak out loud when doing the calculation
  • 10. PUBLIC MATH SKILLS  Precision math  $237,000,000 + $184,000,000  ¥397,000,000 - ¥146,000,000  5  20,000  4  12  15% of $15B  Estimation math  2,987,946  4,004  24.8% of $101.02M https://www.caseinterview.com/math/mathtest.p
  • 11. BUSINESS ACUMEN  Know basic business terminology  Research the industries  Connect data and analysis with business needs  Make sound recommendations  Think of risks and next steps
  • 12. CLIENT FACING DEMEANOR  Present professionally  Be confident, not arrogant  Align with the interviewer proactively  Remain cool and calm when challenged  React properly to pressure or mistakes
  • 13. OVERALL STRATEGY 1. Understand the skills and abilities that should be demonstrated in case interviews 2. Acquire general business knowledge 3. Understand the different case types 4. Utilize external tools 5. Know how to open, analyze and close a case 6. Practice with partners in-person 7. Summarize cases practiced and keep a case journal
  • 14. GENERAL BUSINESS KNOWLEDGE  Profit:  Profit ($) = Revenue – Cost  Profit margin (%) = (Profit  Revenue) * 100%  Contribution margin ($) = Price per unit - Variable Cost per unit  Breakeven means profit = 0  Revenue breakdown  Single revenue stream: price per unit  volume  Multiple streams: product lines; customer segments (age, gender, occupation), geography  Cost breakdown  By variable cost and fix cost  By revenue segments  Along the value chain  By divisions of the company/organization
  • 15. GENERAL BUSINESS KNOWLEDGE Basic concepts of economics  Price sensitivity  Price elasticity of demand  Commodity vs. differentiable good  Substitute  Market share/penetration and competition  Economies of scale, scope, and experience  Time value of money  Return on investment  Opportunity cost
  • 16. GENERAL BUSINESS KNOWLEDGE Value chain Research and developmen t Raw materials Manufacturi ng Distribution Marketing Sales Customer service
  • 17. GENERAL BUSINESS KNOWLEDGE Different divisions of most companies  Board of directors  Executive team  Finance  Human resources  Legal  Research and development  Operations  Marketing  Sales
  • 18. DIFFERENT CASE TYPES  By format  Candidate-led  Interviewer-led  Written/presentation  Group  By content  Market entry  Profitability  Growth, expansion, relocation strategy  Response to competition  Merger and acquisitions  Many others
  • 19. CASE INTERVIEW PREPARATION RESOURCES  Case preperation books  Case Interview Secrets  Case In Point  Crack the Case System  How to Get into Top Consulting Firms  Graph In Point  Business school casebooks  Consulting firm websites  Audio resources from Victor Cheng  Look Over My Shoulder  Behind Closed Doors  Consulting prep websites and their YouTube channels  caseinterview.com  managementconsulted.com  mconsultingprep.com  firmsconsulting.com  Magazines and newspapers  The Wall Street Journal  Harvard Business Review  The Economist  Bloomberg Businessweek  Financial Times  New York Times - Business Day
  • 21. COMPONENTS OF A CASE  Opening  Analysis  Closing
  • 23. OPENING THE CASE 1. Take notes 2. Summarize the prompt 3. Ask clarifying questions 4. Pause to prepare a structure 5. Present hypothesis and structure
  • 24. PROMPT The client is a large-sized agricultural equipment assembly company. Its primary product line is selling tractors, which are priced at $50,000 each. They sold 160 tractors this year. They also made $4 million in profits last year, but this year they are at a $2 million loss. The CEO wants to know why profits have plummeted.
  • 25. TAKING NOTES  Bring lots of blank paper and a pencil/pen  Write down numbers and use shorthand  Make sure handwriting is legible Agriculture equipment assembly - tractors Profit – last yr $4M this yr -$2M Why? 160 tractors x $50K
  • 26. SUMMARIZE THE PROMPT  Summarize the information instead of recapping every fact  Aim for half the time to summarize as the interviewer took to explain  Show genuine interest in the case presented
  • 27. SUMMARIZE THE PROMPT Candidate: This is a very interesting case. It seems that our client, a major agricultural tractor assembler, saw a $6M drop in profit this year although they sold 160 tractors at $50,000 each. And we are here to figure out why and how to turn it around.
  • 28. CLARIFYING QUESTIONS  Ask about anything you missed or words you did not understand  Understand the client’s business model and problem  Overall situation of the industry and economy  Geographic segmentation  Unique company or product advantages  Company’s experience in the industry  Ask if the client has a specific numerical objective in mind  Continue taking notes
  • 29. PROMPT The client is a large-sized agricultural equipment assembly company. Its primary product line is selling tractors, which are priced at $50,000 each. They sold 160 tractors this year. They also made $4 million in profits last year, but this year they are at a $2 million loss. The CEO wants to know why profits have plummeted.
  • 30. CLARIFY THE BUSINESS MODEL Candidate: What does an agricultural equipment assembly company look like? Interviewer: Our client is involved in primary assembly of the tractor, not manufacturing. Client purchases the finished parts from a single supplier, who also charges us fees for raw materials. After receiving the finished parts, the client assembles the tractor together, performs quality control and testing, so there’s a total labor cost for the client.
  • 31. CLARIFY THE BUSINESS MODEL Candidate: How does the client sell the tractors? Do we have different revenue segments? Interviewer: No major segments, and the client sells directly to farmers mainly through phone sales.
  • 32. CLARIFY THE INDUSTRY AND ECONOMY Candidate: Have our competitors seen a similar drop in profit? Interviewer: No, we have two competitors who are not having profitability issues this year.
  • 33. CLARIFY THE PRODUCT Candidate: How does our product compare to those of our competitors? Interviewer: Our tractor is priced higher than others, which has always been the case, and we made some improvements to the product this year. Our client has a strong reputation/image of quality in the market and the market has been willing to pay a premium for a longer lasting, more reliable product.
  • 34. CLARIFY THE OBJECTIVE Candidate: Does our client have a specific numerical goal in mind? Interviewer: Not at this time.
  • 35. PAUSE TO PREPARE A STRUCTURE  Candidate: I’d like to take a quick minute to generate a structure to apply to this problem.  Think of the objective and 2-4 buckets that need to be analyzed for reaching that objective  Profit = revenue – costs  Pick a testable and justifiable hypothesis  Example: Pricing is not optimal, resulting in low sales  Spend no more than 2 minutes preparing
  • 36. PRESENT THE STRUCTURE  Turn the paper around to face the interviewer  State your hypothesis  Explain how analysis of each bucket will support or disprove your hypothesis
  • 37. Profit Revenue Price Volume Costs Fixed Variable Finished parts Raw materials Labor PRESENT THE STRUCTURE Agriculture equipment assembly - tractors Profit – last yr $4M this yr -$2M Why? 160 tractors x $50K $6M Hypothesis: Pricing is driving low sales Objective: Why are profits down? comp doing fine premium product, higher price costs – raw materials, finished parts, labor sell to farmers
  • 38. PRESENT THE STRUCTURE Candidate: Our objective here is to figure out why profits have dropped. I’m thinking that our pricing isn’t optimal so this decline in profits might be a sales issue. To examine this hypothesis, I’d like to take a look at two things: revenue and costs. Under revenue, I’d like to see if we’ve changed our prices or seen a decline in volume that would result in a drop in sales. If that’s not the case, then I’d also like to look at costs to see if anything has increased in our fixed or variable cost structure.
  • 40. ANALYSIS 1. Select one component of the structure 2. Analyze using process of elimination 3. Comment on significance of numbers 4. Update structure with insights 5. Synthesize what you have learned 6. Move to next branch 7. Exhaust all branches
  • 41. REVENUE BRANCH  Recall from the prompt that this year we sold 160 tractors at $50,000  Candidate: Do we have any information about our revenue from last year?  Interviewer: Last year we sold 250 tractors at $40,000 each  Candidate: Why did we increase the price of tractors by $10k?  Interviewer: Our client strives to sell the world’s best tractors. The most recent product line has tighter tolerances and improved durability of component parts.
  • 42. REVENUE NUMBERS  Do your math on a separate piece of paper  Make a table when possible Price Volume Revenue Last year $40K 250 This year $50K 160 Difference
  • 43. REVENUE NUMBERS  Do your math on a separate piece of paper  Make a table when possible Price Volume Revenue Last year $40K 250 $10M This year $50K 160 $8M Difference -$2M
  • 44. COMMENT ON NUMBERS Candidate: It looks like the price hike wasn’t very effective and caused fewer tractors to be bought, resulting in a $2M revenue loss from last year. Do we have any data on price sensitivity in our customers?
  • 45. EXHIBIT 1 0 50 100 150 200 250 300 350 400 450 $30K $35K $40K $45K $50K $55K Volume Price Tractor price sensitivity
  • 46. CALCULATE REVENUE Price Volume Revenue $30K 400 $35K 350 $40K 250 $45K 200 $50K 160 $55K 100
  • 47. CALCULATE REVENUE Price Volume Revenue $30K 400 $12M $35K 350 $12.25M $40K 250 $10M $45K 200 $9M $50K 160 $8M $55K 100 $5.5M
  • 48. MINI SYNTHESIS OF REVENUE BUCKET Candidate: It looks like our customers are very price-sensitive and selling tractors at $35K would maximize our revenue. However, this doesn’t explain the full loss in profits between this year and last year. Our client must also be spending $4M more in costs. Since our client has improved the durability of their product, I would hypothesize that an increase in the parts cost is driving our loss in profits.
  • 49. Profit Revenue Price Volume Costs Fixed Variable Finished parts Raw materials Labor UPDATE STRUCTURE AND HYPOTHESIS $6M $2M $50k vs. $40k 160 vs. 250 Hypothesis: Pricing is driving low sales + increase in costs
  • 50. COSTS BRANCH Candidate: Do we have any information on the fixed and variable cost breakdown from this year and last year?” Interviewer: Fixed costs Raw materials Finished parts Labor Last year $1M $2M $1M $2M This year $1M $2M $5M $2M
  • 51. COSTS NUMBERS Candidate: As I suspected, our finished parts cost has gone up fivefold, which is a staggering increase. Candidate: Has our supplier increased prices or is it because we are buying better parts? Interviewer: The costs have increased because our client is buying premium parts.
  • 52. COSTS NUMBERS Candidate: Got it. So we assumed that customers would pay more for a better product, but looking at our revenue between this year and last year, it looks like they are not willing to. Do we have any data on customer preference for tractor features?
  • 53. EXHIBIT 2 Factor Importance when buying* Price 5 Durability 2 Fuel efficiency 3 Brand 1 *5 is most important, 1 is least important
  • 54. MINI SYNTHESIS OF COSTS BUCKET Candidate: Spending more on finished parts to make a more durable tractor has resulted in an increase of $4M in total costs. However, our customers value price as most important when they are buying a tractor, followed by fuel efficiency, and then durability and branding. Thus, our customers are not willing to pay a higher price even for a premium product.
  • 55. Profit Revenue Price Volume Costs Fixed Variable Finished parts Raw materials Labor UPDATE STRUCTURE $6M $2M $50k vs. $40k 160 vs. 250 $4M $5M vs. $1M $4M
  • 57. CLOSING 1. State recommendation or conclusion clearly 2. Two or three supporting reasons 3. Risks 4. Next steps
  • 58. RECOMMENDATION Candidate: Based on our data, I recommend that our client re-evaluate their emphasis on building the best tractor and cut finished parts costs to focus their efforts on producing a quality low-cost tractor to be sold at $35K.
  • 59. SUPPORTING REASONS Candidate: 1. Customers value price as the first factor of importance when purchasing a tractor and are very price sensitive. Selling tractors at $35K will maximize revenue. 2. Customers do not value durability as assumed. In spite of tighter tolerances and better tractor components, when our client raised prices to cover the cost of improvements, they saw a huge drop in sales.
  • 60. RISKS Candidate: Our main competitors may be pursuing an alternative strategy to outcompete us (ex. more fuel-efficient tractors, longer warranties, etc.).
  • 61. NEXT STEPS Candidate: Thus, moving forward, our client should: 1. Incorporate a cost/benefit analysis procedure into product improvement 2. Evaluate competitor’s R&D and product improvement positions
  • 62. COMMON MISTAKES  Not understanding the objective  Not talking out loud  Asking too many questions  Using a generic or broad structure  Proceeding with the case in a random or non hypothesis-driven manner  Failing to present a strong recommendation
  • 63. UPCOMING CLUB EVENTS  Networking Mixer: May 26  Case Interview Workshop II: 1st week of June  Case Interview Workshop III: 3rd week of June
  • 64. APPLICATION DEADLINES AND ON-LINE EVENT DATE/TIME EVENT May 28th (Sunday) McKinsey #aplaceforyou Deadline July 17th (Monday) McKinsey 2018 Full Time Position Deadline July 21st (Friday) Bain 2018 Full Time Position Deadline July 23rd (Sunday) BCG 2018 Full Time Position Deadline No due date available Off Cycle Full Time Position ClearView (Experienced Professional) No due date available Putnam Associates Life Science Consultant (San Francisco or Boston) DATE/TIME EVENT May 16th (Tuesday) at 7:00-8:00 PM Bain: Cracking the Case

Editor's Notes

  1. Semi-hostile clients look for you to screw up
  2. Nervousness is often interpreted as lack of conviction