case interview prep - crack the case workshop
DESCRIPTION
Master the most feared part of the selective process at consulting companies.TRANSCRIPT
Workshop PreviewCrack the
Master the most feared part of the selective process at consulting companies
Case
Crack the Case – PrepLounge 2
Agenda of Training
• Theory Introduction - Cases & frameworks 7 commandments of a case interview: application
examples Market Sizing framework: impress your interviewer
applying the 3 golden rules The Profitability framework and an application example The “Core Three” framework: Customers
(+ market), Company (+ product), Competitors• Practice – PrepLounge.com
Crack the Case – PrepLounge 3
Cases & frameworks (simplified view)
Three main categories of cases:1. Market Sizing
– Always use the Market Sizing framework
2. Business Situations– 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
Crack the Case – PrepLounge 4
Cases & frameworks (detailed view)
Reduce costs
Pure Market Sizing
Market Sizingframework
Market entry New product
Operations strategy
Business turnaroundIncrease salesCompetitive response
Business Situation
framework
Industry analysis New business
Pricing & Valuation
Private equity M&A
M&A / PEframework Supply &
Demand
Capacity change
Capacity framework
Finance
HR
Others
No specific framework
Brainteasers
Crack the Case – PrepLounge 5
Reduce costs
Pure Market Sizing
Market Sizingframework
Market entry New product
Operations strategy
Business turnaroundIncrease salesCompetitive response
Business Situation
framework
Industry analysis New business
Pricing & Valuation
Private equity M&A
M&A / PEframework Supply &
Demand
Capacity change
Capacity framework
No specific framework
• Assess the financial health of Swatch
• How should Coca Cola define the salaries of their overhead?
• What economical consequences would a change in traffic direction in Britain have?
Finance
HR
Others
No specific framework
Brainteasers
• Why are gully covers round?• …
Crack the Case – PrepLounge 6
Finance
HR
Others
No specific framework
Brainteasers
Reduce costs
Pure Market Sizing
Market Sizingframework
Market entry New product
Operations strategy
Business turnaroundIncrease salesCompetitive response
Business Situation
framework
Industry analysis New business
Pricing & Valuation
Private equity M&A
M&A / PEframework
Capacity framework
• For what price could Intel sell the i5 processor if they increased their units production by 25%?
• What is the best diamond extraction and commercialization volume per year for De Beers?Supply & Demand chart
Supply & Demand
Capacity change
Capacity framework
Crack the Case – PrepLounge 7
Supply & Demand
Capacity change
Capacity framework
Finance
HR
Others
No specific framework
Brainteasers
Reduce costs
Pure Market Sizing
Market Sizingframework
Market entry New product
Operations strategy
Business turnaroundIncrease salesCompetitive response
Business Situation
framework
M&A / PE framework
• How much is facebook worth?• Bain Capital wants to buy 10% of Dropbox for
US$300 million. Is that a good deal?• Should UPS really merge with TNT?• Should GM buy its windshield provider (vertical
integration)?Use Business
Situation framework
with focus on synergies!
Industry analysis New business
Pricing & Valuation
Private equity M&A
M&A / PEframework
Crack the Case – PrepLounge 8
Pure Market Sizing
Market Sizingframework
Pricing & Valuation
Private equity M&A
M&A / PEframework Supply &
Demand
Capacity change
Capacity framework
Finance
HR
Others
No specific framework
Brainteasers
Business Situation framework
• C&A has been facing a steady decrease in sales…
Detailed discussion
after break!
• Henkel wants to diversify its business and enter the packaging industry. Is that a good idea?
Reduce costs Operations strategy
Business turnaroundIncrease salesCompetitive response
Industry analysis New business
Market entry New product
Business Situation
framework
Crack the Case – PrepLounge 9
Industry analysis New business
Pricing & Valuation
Private equity M&A
M&A / PEframework Supply &
Demand
Capacity change
Capacity framework
Finance
HR
Others
No specific framework
Brainteasers
Reduce costs Operations strategy
Business turnaroundIncrease salesCompetitive response
Business Situation
framework
Market Sizing framework
• How many golf balls fit in a Boing 747?• How many shoes are sold in Brazil per year?• What is the market of hearing aids in Europe?• For how much would you sell the Golden Gate
bridge?• How heavy is Manhattan?
Pure Market Sizing
Market Sizingframework
Market entry New product
Detailed discussion
after break!
Crack the Case – PrepLounge 10
The commandments: Opening the case
1. Listen actively– Fully concentrate!– Note down ALL information
2. Pause, paraphrase problem and clarify all questions– “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%
Crack the Case – PrepLounge 11
The commandments: Opening the case
3. Plan the solution structure (roadmap)– Ask for 1 minute to gather your thoughts– Identify case type and corresponding framework– Describe and draw framework for interviewer– Organize your notes (consultants are supposed to be
always “client-ready”)
+ 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 Costs-
Example: Profitability framework
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The commandments: Cracking the case
4. Be answer-first– Always list a few possible hypotheses and set
out with one of them– Start with corresponding branch of framework– Refine/rebuild hypothesis as you find out more
Example: Coca-cola’s profit has been declining in the last 2 years.Hypotheses:
Profit
Revenue Costs-
Revenues have decreased Costs have increased Both
+ point: Use your general culture to help choose initial hypothesis
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The commandments: Cracking the case
5. Keep structured throughout the case– Always refer to structure– Don’t jump around framework branches – Consistently explore branches and exclude them if
they are not relevant– Summarize findings when switching major branches– Be MECE!
Example: Coca-colaProfit
Revenue Costs-Answer first: Costs have increased
Raw material DistributionLabor Others
+ point: Mention that your structure is MECE
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The commandments: Cracking the case
6. Gather data the right way– ALWAYS segment your data!– Proactively ask for relevant data – Don’t be too vague– Quantify whenever possible– Go for the trend (this year vs. last years)– Company-specific or industry-wide?
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The commandments: Closing the case
7. Close the case properly– Ask for a minute to gather your thoughts
(and draw them up)– It’s all about actionable recommendations!– Choose a side and stand by it!– First conclusion/recommendation then justification– People like 3: give the interviewer 3 reasons!
Conclusion + recommendation
Reason 1
Reason 2
Reason 3
+ point: Always apply the pyramid principle (by Barbara Minto)
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Market Sizing framework – the 3 golden rules
1. Always use a tree to structure your problem2. Find the trade-off between pragmatism and
accuracy3. Do sanity checks along the way
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Always use a tree to structure your problem
• How structured you are, that’s what matters!• First the structure (downward from top) then
the numbers (upward from bottom)
1
Example: How many golf balls can you fit in a Jumbo?
# golf balls in Jumbo
Golf ball volume
(m3)
Jumbo volume
(m3)/ x Filling
constant
Radius 2
(m2) x π
Sectional area
(m2)
Length
(m)x
+ point: always explicitly write the
units of the variables being
estimated10 3
30
1500
Diameter3 (m3)
125.10-6
125.10-6 1.2
12M . 1.2 ≈ 14M
50
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Find the trade-off between pragmatism and accuracy• Rounding numbers is an art that must be used• But… ask the interviewer if he’s fine with it!• Round some up and some down
2
+ 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 ≈ 15Wrong: 4 *3.8 ≈ 4 * 4 = 16
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Find the trade-off between pragmatism and accuracy• Work with averages when the problem is
complicated enough, otherwise segment!• MECE is essential in segmentation• Don’t make implicit assumptions
2
Example: How many shoes are sold in Brazil per year?
# shoes/year in Brazil
+ point: try to segment in three categories.
Anyone can understand 3 categories, which is not
true for 4 or more
# shoes class B /
year
# shoes class A /
year
Class A population
# shoes / person /
year
+ # shoes class C /
year
x
+
Class B population
# shoes / person /
year
x … x …
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Do sanity checks along the way
• Problems are not easy: you might make mistakes• Take a step back, be critical, use common sense• Do sanity checks for major branches
3
Example: How many people can stand together on an airport runway?
# people on runway
# people / m2
Runway area(m2)
x
Width(m)
Length (m)x
+ 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 1,000
50,000 5
250,000
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• Only profitability problem (quantitative focus)
• Only conceptual problem (qualitative focus)
• Combined problem (quantitative + qualitative)
Business Situation compound framework – 3 different combinations
Profitability framework
“Core Three” framework
Profitability framework
“Core Three” framework
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• Profit: number 1 reason for consulting projects• Almost half of Business Situation cases start with
a profitability problem– Sales falling– Costs rising– Both
The Profitability framework and an application example
profit
costsrevenue -
revenue / unit
# units soldx variable
cost fixed cost+
cost / unit # units soldx
+ point: focus on isolating the problem by applying the
commandments
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Actionable recommendations
Competitors
Company (+product)
Customers (+ market)
The “Core Three”: Customers (+ market), Company (+ product), Competitors• First and foremost the
customer: the company’s raison d’être
• The company and its products
• Competitors and competitive landscape
The “Core Three” framework
Insights
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The “Core Three” – Customers (+market)
• Who are our customers?– How can we segment them?– How big are the segments? What is our
market share?– Customer concentration (bargain power)?
• What does the customer expect (per segment)?– Do we understand it?– Do we fulfill it?– Which distribution channels do they like?
• Is the market growing? Is it profitable?
Competitors
Company (+product)
Customers (+ market)
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The “Core Three” – Company (+product)
• What is our product?– Is it differentiated or a commodity?
What’s the pricing?– Can we cross-sell add-ons to it (bundles)?– Is there a substitute threat?– If portfolio: what does the BCG matrix look like?
• What is the client’s company?– What are the company’s core competences?– Which distribution channels are used?– 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)?
Competitors
Company (+product)
Customers (+ market)
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The “Core Three” – Competitors
• Who are our competitors?– How is the competition structured
(fragmented, monopoly, oligopoly etc.)?– 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?• Is the market regulated? If so, how?
Competitors
Company (+product)
Customers (+ market)
Now it’s your turn!
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