INSEAD

Consulting Club

Handbook 2020

Sponsored by
 ICC Handbook 2020

Contents
1/ Introduction 5

2/ Consulting Job Search at INSEAD 6

2.1 Top INSEAD Employers for Consulting Positions 6
2.2 Timeline of Consulting Job Preparation 7

3/ Consulting Industry 8
3.2 Structure 8
3.3 Global Trends 9

4/ The Consulting Job 10

4.1 Career Development Paths 10
4.2 Processes: Staffing, Promotions, Opportunities 10
4.3 The Everyday Work – Key Tasks 12

5/ Networking with Consulting Firms 13

5.1 Why and How? 13
5.2 Tips for Informational Interviews 13

6/ Cover Letter and CV Preparation 14

6.1 Goal of Your Cover Letter and CV 14
6.2 Tips for Cover Letters and CVs 15
6.3 Sample Cover Letters 15

7/ Case Interview Resources 17

7.1 Books and Guides 17
7.2 Online Resources 18

8/ The Consulting Interview Process 19

8.1 Case and Fit Interviews: What is Being Tested? 20
8.2 Case Interview Overview 20
8.3 How to Prepare for the Case Interviews? 20
8.4 Types of Cases 21
8.5 How to Ace a Case? 21

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9/ Case Examples 23

9.1 Discount Retailer (BCG) 23

9.2 Medical Software Industry (BCG) 26
9.3 Gas Retail (BCG) 30
9.4 Consumer ADSL Services (BCG) 32
9.5 Call Center (BCG) 34
9.6 Supermarket Deli Turnaround (BCG) 36
9.7 China Outsourcing (BCG) 38
9.8 Specialty Paper Sales (BCG) 42
9.9 Oil Tanker (Strategy&) 44
9.10 Video Game (Strategy&) 45
9.11 Toy Manufacturer (Strategy&) 47
9.12 UK Premium Confectionary Manufacturer (L.E.K.) 48
9.13 Telco A Security Services (Delta Partners) 50
9.14 Project Prioritization for IT Department (Delta Partners) 52
9.15 Company PaintCo (Bain) 53
9.16 Heavy Duty Soap (OC&C) 56
9.17 Vitamins Retailer (OC&C) 58
9.18 Gotham University (Parthenon-EY) 61
9.19 Premium Paints (Parthenon-EY) 64
9.20 Best Buy (Oliver Wyman) 66
9.21 Amazon Prime (Oliver Wyman) 67

10/ Conclusion 68

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1/
Introduction

The INSEAD Consulting Club (ICC) is pleased to present the ICC We would like to acknowledge the support we received from The
Handbook 2020, continuing the tradition created by the 2005 Boston Consulting Group (BCG), who has continuously been
class. sponsoring the production of this book. Since the inception of the
ICC book in 2005, BCG has been a leading contributor to each
We’ve created this book as a guide for students who have already edition, providing access to their resources, case materials, and
decided that consulting is a career they’d like to pursue, and need offering advice and support on how best to compile the information.
support in acing the recruitment process.
We would also like to thank all the companies featured in the book
In this handbook, we walk you through the different stages of for validating their profiles and sharing practice cases. Our most
consulting recruitment, step-by-step. sincere thanks also go to the current students, ex-consultants and
alumni who have contributed significantly both to this book and to
Stage 1: Learn about the role the ICC’s ongoing activities.
In Chapters 2 and 3, we start with a general overview of the
management consulting industry and the opportunities offered to Finally, we would like to thank the 2005 ICC members for initiating
MBA graduates. In Chapter 4, we explain how career progression the production and circulation of the ICC Handbook. It has been a
typically is as well as what to expect in a typical week as a pleasure to put this together, and we hope that this tradition will
consultant. continue in future INSEAD classes.

Stage 2: Select firms and apply ICC Organising Committee, 2020

To help you get those interview invites, we’ve included samples of
cover letters (Chapter 5) and networking tips (Chapter 6).

Stage 3: Prepare for interviews

We realise that most students are nervous about the
interviews, so we’ve dedicated the bulk of this book
to support your interview preparation. Chapter 8 explains
how to prepare for a case interview, types of cases, and tools
and frameworks you can use while cracking the case. To assist
your case practice, we’ve included 21 case examples in Chapter
9.

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2/
Consulting
Job Search at INSEAD

2.1 Top INSEAD Employers

for Consulting Positions

Consulting remains a popular choice for INSEAD graduates, with The job market conditions were cautiously optimistic in 2018, when
stable share in recruitment levels over the past years. There has compared to the previous years, and this subsequently improved in
been a steady increase in the number of graduates who find 2019. And INSEAD is being continuously placed as one of the
consulting jobs through INSEAD career activities and networking. leading recruitment pool for consulting firms. The selection
In 2017, recruitment of INSEAD graduates into consulting rose to process remains rather rigorous though, with a stronger emphasis
reflecting the appetite for hiring our MBAs and the interest from on being well prepared for interviews and increasing importance
students. being given to an applicant’s background and expertise while
assessing their potential as consultants.

TOP INSEAD EMPLOYERS FOR CONSULTING POSITIONS

CLASSES OF 2016 CLASSES OF 2017 CLASSES OF 2018 CLASSES OF 2019

McKinsey & Company 125 (50) McKinsey & Company 130 (52) McKinsey & Company 131 (55) McKinsey & Company 131 (54)
BCG 67 (26) Bain & Company 86 (21) BCG 78 (26) BCG 96 (30)
Bain & Company 48 (14) BCG 71 (26) Bain & Company 65 (22) Bain & Company 77 (28)
Strategy& 24 (8) Accenture 36 (9) Strategy& 31 (9) Accenture 24 (7)
Accenture 16 (6) Strategy& 18 (9) Accenture 23 (5) Kearney 23 (3)
Roland Berger 11 (6) Deloitte 9 (4) A.T. Kearney 23 (4) Strategy& 14 (4)
A.T. Kearney 10 (2) A.T. Kearney 8 (1) LEK Consulting 16 (2) Booz Allen Hamilton 7 (2)
Deloitte 7 (3) Roland Berger 6 (3) Roland Berger 10 (4) Deloitte 7 (4)
Partners in 7 (4) Oliver Wyman 5 (1) Oliver Wyman 5 (5) LEK Consulting 7
Performance
Alix Partners 4 EY – Parthenon 5 (2) EY – Parthenon 6
Oliver Wyman 5 (3)
LEK Consulting 4 (1) Deloitte 4 (1) Roland Berger 6 (1)
LEK Consulting 4
EY 3 (2) Alvarez & Marsal 4
ZS 4 (1)
Oliver Wyman 4 (3)

Table 1/ Top INSEAD employers in Consulting over the most recent years.
Numbers in brackets are former employees returning to the organization after graduation.

Source: INSEAD Employment Statistics (various; most recent 2019)

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2.2 Timeline of Consulting

Job Preparation

The main difference between the timelines of the consulting job

search process for the December and July INSEAD promotions is
the possibility of doing an internship during the summer break for
the December class. In general, students need to figure out which
sector to choose during P1 and P2, network during P3 and go for
it in P4 and P5.

Make sure you initiate your job search before P4 and P5, when
you will have little time and will be more stressed out. Think about
your goals, do your research on the sector and network through
informational interviews or other activities. This will help you to be
more focused on your applications and more confident in your
interviews.

DECEMBER PROMOTION JULY PROMOTION

P1-P2 Attend Mock-interview sessions P1 Career Orientation

Prepare CV & Motivation letters Self Assessment

SELF ASSESSMENT SELF ASSESSMENT
& INTERNSHIP HUNT Do Informational interviews Counselling / Advising sessions

Interview preparation with Peers CHILL!

Apply for Summer Jobs

P3 More Research P2 Prepare CV

and Motivation letters
Just CHILL!
MORE SECTOR PREPARE CV Network
More informational interviews
RESEARCH & NETWORK
(especially with the firms not Informational Interviews
coming on campus)

SUMMER BREAK More Informational Interviews P3 Research Consulting Sectors &

(during the summer project) Companies
INTERNSHIP Networking NETWORK Network

Interview Preparations

More informational interviews

P4 Attend company presentations P4 Attend company presentations

Company case-interview Company case-interview workshops

GO FOR IT! workshops GO FOR IT!
Interview preparation with Peers
Interview preparation with Peers
Consult job postings
Consult job postings
On-campus recruitment
On-campus recruitment

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Consulting Industry:
Structure & Global Trends

3.1 Structure

Here are some differences between generalist firms

and specialized boutiques:

Generalist Firms Specialized firms and boutiques

• Provide the whole range of management consulting • Typically smaller firms, usually founded by
services (strategy, operations, marketing, finance, ex-partners from larger generalist consultancies
organizational redesign, etc.) to all industries, • Structured around in-depth expertise in and knowledge
across a wide geographical range of either specific functions (strategy, marketing,
• Typically larger firms, with long track record finance, etc.) or industry
• Smaller, both in terms of number of employees
and substantial accumulated knowledge base
• Usually multi-regional office array, covering and geographical spread
both developed and high-growth emerging markets • Usually more focused on developed markets,
• Often structured around industry and/or function where such in-depth niche services are in demand
practices, to better leverage personal experience

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3.2 Global Trends

In the late 1990s, aggressive penetration of emerging markets, Specialization

globalization, privatization and the new Information Technology Clients are more demanding and ask for consultants specialized
industry drove growth in the consulting industry, with established in the industry or topic. The major global strategy firms do not want
firms growing as fast as 20% p.a. and with new players emerging to lose their generalist scope and the ability of their consultants to
in the marketplace. There was a huge demand for services and work across industries. However, they have now more structured
consulting firms were hiring MBAs aggressively on campus. organizations across industries and functional lines in order to
deal with the increased sophistication of their clients and to
After this boom period, the growth stalled for a couple of years in the successfully compete with specialized firms.
early 2000s. Earlier, the consulting industry was expected to do as
well in good economic conditions, as in bad ones. As the ultimate Implementation
service industry, Consulting depends heavily on the prospects of Clients ask for a greater focus on implementation rather than only
large corporations. In good economic conditions, consultants can theoretical recommendations or strategic plans. This causes
advise their clients on growth strategies, investment projects and increasing competition among firms in different segments of the
due diligences. In bad economic conditions, clients need advice consulting industry, but is also an opportunity for consulting firms
on down-sizing, cost cutting and disinvestments. to develop long-term relationships with their clients.

However, the rough economy of 2001 and 2002 introduced a lot of Pay for Performance and Measurable
uncertainty for the consulting firms’ clients, who reacted to the Business Results (MBRs)
economic downturn by postponing major decisions. This resulted in Especially during the dot-com boom, some firms agreed on
a sharp decline for the industry: many younger and smaller firms partial/full equity payment. Clients demand more tangible results
had to withdraw and major players had to downscale their and pay according to a performance measure (e.g. cost savings
recruiting efforts. in procurement optimization projects).

From 2004 onwards, the consulting industry recovered growth and New Geographies
firms are now recruiting again and aggressively. At present, most The market for Consulting is growing extremely rapidly in China,
offices are working at full capacity and the outlook for the sector as Russia and the Middle East (Abu Dhabi, Dubai). Markets such as
a whole is very positive. Firms are competing more among each Latin America and India are also growing very fast. Major firms
other and with the Investment Banks for the best candidates. are heavily investing in these geographies, opening or expanding
offices. They compete aggressively to recruit the candidates who
The consulting industry has a very interesting value proposition for have a connection with these regions or possess the right
a recent MBA graduate: the outlook for the industry is good and language skills (Mandarin, Russian, Arabic, etc.).
looks stable, salaries and bonuses are highly competitive, there is
almost no beach time in most firms, and the work is interesting, Fragmented markets
diverse and enriching. In some markets, a large number of former employees start their
own small consulting firms. For example, in China, this trend has
As we are entering an ever increasingly complex and global world, led to a very fragmented market, with hundreds of small and
some clear trends are emerging for the management consulting firms: medium-sized firms.

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The Consulting Job

4.1 Career Development Paths

Career paths in the consulting firms are very fast and allow
professionals to have quick access to Partner positions or to
access senior positions in the industry when leaving the firm.
Typically, for the major consulting firms, time length between
Associate/Consultant and Partner positions is 6 to 7 years.

TYPICAL CAREER PATH IN CONSULTING

**BUSINESS MANAGER
ANALYST(MCK) CONSULTANT PROJECT LEADER PARTNER
ASSOCIATE(BCG) ASSOCIATE
(BAIN/BCG) ENGAGEMENT PRINCIPAL
ASSOCIATE PARTNER – VP
CONSULTANT(BAIN) ASSOCIATE(MCK) MANAGER DIRECTOR
PROJECT DIRECTOR

• Pre-MBA entry level • Post-MBA entry level • Main middle • Pre-partner position • Leadership position
position position management function • Typical responsibilities: • Typical responsibilities:
• Typical responsibilities: • Typical responsibilities: in consulting professional support core client relationship
data gathering, data if no prior consulting • Typical responsibilities: and oversight on projects, management, business
analysis, document background, initially work stream planning client relationship development, sales
creation, modelling, very similar to Analyst/ and execution, team management and & marketing, office,
admin & coordination, Associate; with time and leadership, scheduling development, sales practice, firm, thought
interviewing, problem experience, growing and time management, and marketing leadership, internal
solving with team focus on leading key client interface for • Function and/or industry initiatives, firm policy
• Generalist role Analysts, oversight work, project, relationship expertise building and development
team management, management and some • Office or practice
greater client interface client development leadership
• Mainly generalist • Expertise building

2-3 years 2 years 2 years 2-3 years -

Figure 4 / Typical career path in the Consulting industry

INDUSTRY
4.2 Processes: Staffing, Promotions,
Opportunities
• Consider your willingness for in-town / out-of-town engagements.
Generally, project staffing is preference-based, but with some
At the beginning of your career as a consultant
external constraints. The firm will staff you where possible in a
given moment and minimize your “on the beach/bench” time. • Try to identify and get to know good “teachers” and mentors.
While luck (i.e. having the right opportunities at the right time) They will facilitate your integration in the firm
plays a major role before you acquire expertise and generate • Decide whether you would like to get exposure to a variety of
demand from the managers/project leaders’ side, these are some industries/functions or whether you would like to focus. The
ways in which you can optimise your chances of being staffed on advantages to focusing are: easier exit to senior industry
a case you want: positions and potentially faster career path. The disadvantage
to narrowing your assignment type is that you’re increasing
• Network - up, down and sideways your risk by depending on one industry/function.
• Identify what interests you and what you’re good at

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After a first few projects, choose a sector/function and develop In many cases, the major consulting firms give consultants the
your personal interest, knowledge and network in this area possibility to have additional international exposure if they wish so,
• Focus on true personal interests either by promoting temporary transfers across offices or by
• Formulate mid to long-term plans supporting the participation in international projects.
• Identify and connect with mentors, they are important in your
career evolution and on staffing choices for the long-run Compensation and post-consulting opportunities
• Think about long-term networking with clients The management consulting career has a very fast career track,
• Keep in mind exit opportunities if you do not wish to stay as showed in figure 4. Average compensations in top consulting
in consulting all your career long firms are above Industry, particularly after the first years, and
comparable to Investment Banking positions. The Consulting
Mobility industry career is also quite stable, much less volatile than
Regarding geography, staffing in major consulting firms takes Finance positions. As a final point, bonuses recovered after the
usually place on a country- wide basis. In this case, the amount of 2001-2002 economic downturn and are significant, especially
traveling depends to a large extent on the country’s size and the after reaching Project Leader/ Manager positions and onwards.
concentration of industries and services in a given city. In
Germany, for example, consultants tend to travel more than in Furthermore, you can find several exit opportunities after some
other European countries, as the industries and the financial years as a management consultant. Clients commonly make very
services players are spread out across the country. For some good offers for consultants to join their firms, this being one of the
firms, staffing takes place on an international level, to leverage main reasons of the high turnover rate in the management
competences on a given industry or functional practice. consulting industry. Starting a career in a management consulting
firm opens many possibilities. Consultants are very well perceived
in the market.

EXAMPLE OF TYPICAL WEEK OF A CONSULTANT*

Leave house Monday at 7am

LOGISTICS
Return Thursday 8pm

TYPICAL ACTIVITIES INITIAL PART OF CAREER / LATER IN CAREER /

ENGAGEMENT ENGAGEMENT

With team • Team problem solving, agree • Lead the problem solving,
on structure and hypothesis refine storyline and help over
• Meet project manager (PM) daily
teammates
to propose your plan for the day/week • Manager may come along to
and get feedback gain insight and will let you lead • Run the meeting with minimal
PM lead and PM participation
MONDAY • Inform him of potential meetings • Check your initial hypothesis
THROUGH with clients and refine thinking • Integrate work-streams, make
THURSDAY storyline smooth and gain
• Check progress of other team • Get expert advice on how cross functional insights
members problem should be structured
• Get feedback on progress
• Meet with senior partner once • Check hypothesis and data
in two weeks • Check progress and
relationship building
With clients
• 1-2 client meetings ; 2-3 times per week

• Meet office colleagues • Develop networks and get

FRIDAY • Familiarize yourself with office insight into your industry
• Finish Expenses and booking travel and functional expertise

• Team: Project Manager + 2

LIFESTYLE • 8am – 9pm (varies depending on factors including the day of week, team and client)
• Once in two weeks, organize team events: Spa, Football Games, Bowling, Dinner at nice restaurant
• Feedback sessions with PM once in 2 weeks and with Senior Partner once a month

Source: July ’09 student currently with McKinsey

*Please note that this is just one of many examples and that consulting, by nature, is a variable job; no week is the same

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4.3 The Everyday Work – Key Tasks

Team management
In their everyday work, consultants are expected to gather
information using efficiently all resources available, generate • Design, organize, prepare and staff clients’ meetings
hypotheses to solve the relevant issues, perform quantitative • Present findings and expose arguments
analyses, manage team processes, communicate results and • Facilitate discussions, incorporate inputs and validate
recommendations in an effective way and build good client recommendations/hypotheses
relationships at all levels. There is no typical project but rather a
very diverse set of tasks. Consultants “do what needs to be done” Process management
for the success of the project and the success of the team, both
• Design the work stream process: working calendar,
internally and externally with the client’s team. As an illustration, a
milestones, resources needed
set of key tasks are listed here below:
• Validate and facilitate the work stream process, both internally
within the project team and externally with client’s team
Information gathering

• Perform interviews (clients / internal / external) Client presentation

• Synthesize research reports, market research, previous work
• Prepare written documents (slides and reports)
done by firm in this area, public sources, etc.
• Communicate findings and recommendations to clients (e.g.
formal presentations)
Problem-solving

• Understand client’s overall problem and identify the issues Client relationship management
relevant to the problem
• Manage day-to-day relationship throughout project at all levels
• Plan analytical steps to solve issues
and build long-term relationship after the project
• Generate hypothesis, prioritizes analysis and test arguments
• Assist in subsequent drafting of proposals

Quantitative analyses
Source: INSEAD Alumni
• Perform financial and operational modeling, business plan
• scenarios, statistical analyses (e.g. market segmentation)
• Synthesize quantitative results and build recommendations

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Networking
with Consulting Firms

5.1 Why and How?

A good start to the job search is to conduct several informational Preparing for the interview
interviews with employees of companies that you are interested in.
To make best use of your interview time, know in advance what
The goal of these interviews is to increase your understanding of
questions you are going to ask. Keep in mind, this contact may be
this company, to make a better decision as whether to apply and
via a phone call and will require you to be quite flexible to fit into
will also serve as a good preparation for the application process.
their schedules. Examples of questions to ask during these
sessions include:
Informational interviews are useful to
• What is a week on this job really like?
• Learn what the company values in its employees
• What do you like about your job? What do you dislike about it?
• Gain insight in the process of recruiting
• Is your role/trajectory typical of others in this field / for this
• Evaluate how your skills and interests fit with a particular
company?
career or business
• What is the culture like at the company, and at the
• Learn about the working environment and office specific culture
particular office?
• What kind of experience or basic training is required for a
Remember, the sooner you can make contact with the firms you
successful application?
are interested in, the better. It is a great opportunity to clarify your
• What are employers looking for (in terms of skills,
thoughts, understand which firms you would consider working for
education and experience)?
and get used to communicating with potential interviewers.
• What is the potential for advancement and the associated
timing?
Ways to set up such sessions would be via the advertised time
• What are current job prospects like?
slots companies provide, via LinkedIn searches or via informal
introductions through colleagues and peers.
Conducting the interview

Don’t hesitate to get back to the INSEAD Consulting Club should The person with whom you are meeting might be a valuable
you need any help to set up informational interviews. contact. So, even though this is not a job interview, you want to
make a good impression. Some advice:
5.2 Tips for Informational Interviews • Dress professionally
• Take notes
Contacting people to interview • Stick to the time limit that you agreed on when you set up the
interview
• Try to set up informational interviews with INSEAD alumni • Ask for a business card for your records
(1-5 years out of INSEAD) as they can relate to you more • Thank the person for taking the time to meet with you
easily than an INSEAD student and are usually more willing
to give you a hand. The INSEAD Alumni database is easy Following up
to navigate and can be exploited to contact alumni
• Clearly indicate where you got the person’s name or contact Don’t forget to send a thank-you note. Include any follow up
details questions as well as any specific actions that you both agreed to,
• Make it clear from first contact that you are not contacting for for both parties involved.
a job, but rather to gain further insight into the company as part
of your research on the industry

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Cover Letter
and CV Preparation

6.1 Goal of Your Cover Letter and CV

Before starting your cover letter and CV, remember the four • Communication: ability to effectively convey messages both
following basic questions orally and in writing, especially in high-stress situations
• Teamwork: Ability to function well in a team setting, both as
1. What is the purpose of this letter?
a team-member and as a team-leader
2. Why should the company in question consider you?
3. Why does this company interest you?
Your CV should demonstrate the use of each of these skills
4. What action do you want the reader to take next?
mentioned. Further details behind each of these skills are listed
below:
The answer for the last answer is straight forward: the goal of your
cover letter and CV is to get an interview. You are not going to
Leadership and impact
prove your qualities as a consultant yet; this is tested in the
interviews. The target of your cover letter and CV is to attract the • Track record, advancement path, development curve
attention of the people working in the recruiting process. • Increasing responsibilities over time, number of people
managed
Regarding the cover letter, recruiters will look for two aspects. • Unusual/outstanding responsibilities and challenges
First, they will try to assess the candidates’ motivation, either by • Results and achievements – preferably concrete quantifiable
their knowledge about the company or by the description of their impact ($$$, time etc.)
experience while they attended the companies’ presentations. The
cover letter has to be short in order to be read: it is useless to re- Quantitative skills
copy extensively your main achievements or qualities, which are
• Quantitative background, past accomplishments (academics,
better described in the CV. Secondly, the recruiters will look for the
awards), GMAT
offices you are applying for, not only to coordinate the interviewing
• Number-related functions/activities/responsibilities performed
process but also to match your preferences with the system’s
needs. Don’t just list these. Rather, justify why you have the
Analytics and problem solving
chosen the specific offices. Generally, the knowledge of the local
language of the office of choice is required. You must contact the • Analysis-focused or related activities, functions and
Recruiting Coordinators to check for exceptions. responsibilities
• Problem-solving track record, e.g. specific problem-solving
In the CV, you communicate your achievements and the skills that tasks you were in charge of or involved in – including the result
you have which are useful and transferable to consulting (preferably successful…)
(especially if you are not from the consulting industry). • Specific problem-solving initiatives you have self-started and
concluded successfully (impact)
Key skills to focus on are
Communication
• Leadership and impact: proven track record of “making
things happen”, leading people in complex challenges and • Previous communication roles, responsibilities and
achieving substantial results achievements
• Quantitative skills: comfort with numbers and ability to meet • Accumulated communication-related experience, e.g.
numerical challenges preparing, writing, editing and/or presenting written and oral
• Analytics and problem solving: logic-based problem communications
structuring, analysis and synthesis capabilities

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Teamwork 6.3 Sample Cover Letters

• History: number of people you have worked with and how that Sample cover letter 1
grew over time
• Functioning in various team-oriented structures (team-member,
leader etc.), development curve (time and number of people) INSEAD Boulevard Constance
• Successfully coordinating cross-functional/organizational efforts 77305 Fontainebleau
France

6.2 Tips for Cover Letters and CVs INSEAD Recruiting Manager
Company Name
Cover letter Dear Name,
• Do not copy letters or pieces of letters from sample sources.

Recruiters do recognize them easily I am writing in order to express my interest and enthusiasm in
• Do not exceed one page for the cover letter applying for an Associate position at Recruiting Company Name.
• Most cover letters follow a simple structure, with ideally one As I informed you last week, I was unable to attend either the
paragraph for each of the questions mentioned in the point 6.1 presentation or the dinner on date. However, my brief chat with x
• Do not use any fluffy or generic statements about yourself last week was both informative and inspiring.
or your experiences (e.g. excellent interpersonal skills, team
player) unless you can back them up with tangible examples I came to INSEAD after spending six years in a fast-paced, highly
• Do not use generic statements about the company you are entrepreneurial metal trading and processing company, Company
applying to (e.g. leading firm, excellent reputation, blue-chip Name. The experience was extraordinarily rewarding, affording me
Company, etc.). For one, this also applies to most of their the opportunity to establish, build, and manage two companies in
competitors. For another, this shows that you have not done the challenging environment of the Former Soviet Union. With full
your homework to identify why you really want to join the managerial, commercial, and financial responsibility for these two
company subsidiaries, I faced a remarkable range of challenges and rapidly
• Get your cover letter read by at least two other people to check developed my personal and professional skills. I decided to apply
for spelling mistakes, grammatical errors and ease of reading to INSEAD in order to continue this process while receiving the
• Use informational interviews rather than company theoretical framework for all that I had been doing during my time
presentations and websites to find out what is different about at Company Name.
each firm, and why you would be a good fit
The ideal environment for me to pursue this development further
Curriculum Vitae (CV) is in management consulting. Recruiting Company Name’s
• Leverage MBA Career Services CV sessions to get feedback prestige and reputation are unparalleled. However, what was
both from Career Services and from your peers decisive in convincing me to apply for a position were the qualities
• Use the MBA Career Services one-on-one CV sessions to shared by the many people I have met from the company; extreme
polish up your résumé. intelligence, strong ambition, intellectual integrity, and insatiable
• Think carefully about which of the three typical CV formats curiosity are common to all.
(Chronological, Skill- Based or Hybrid) you should use – there
is no one “right answer” for everyone I believe that both my strong academic background and my
• Look at a few dozen other résumés– what can make you stand professional accomplishments attest the fact that I possess the
out? analytical abilities, interpersonal skills, motivation, and business
• Ask your peers (especially those with prior consulting acumen to make a strong contribution to Recruiting Company
background) to review your CV before submission Name.

I would greatly appreciate the opportunity to interview later this

month for a position in Office 1, Office 2, or Office 3.

If I can be of any assistance in the meantime, please do not hesitate

to contact me.

Sincerely Yours,
Name

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Sample cover letter 2 Sample cover letter 3

Dear Sir or Madam, Dear Name,

I am currently enrolled in INSEAD’s MBA Programme, and will Currently in the process of completing my MBA degree at
complete my degree in December of this year. As a result of my INSEAD, I had the pleasure to meet your team at your on-campus
prior education and work experience in research, I am interested presentation. Having followed your company and been influenced
in pursuing a career in Consulting, and particularly with the by your diligent, collaborative, and practical style to provide
Recruiting Company’s Place Office. sustainable and non- conventional solutions for the customers, I
am convinced that Recruiting Company Name will be the ideal
After nearly four years at Company Name, I feel I am extremely workplace for my background, competencies, and values, both
well-suited for a demanding career solving key business issues for professionally and personally.
global managers. I have combined financial acumen, leadership,
and project management skills and reached a level of success The meeting with the partners and other Recruiting Company
rare for someone entering the firm at a junior level. In the spring Name’s consultants at the dinner reinforced my belief that your
of 2003, I became one of only two people in my Associate class company commits to provide its members an international and
of 25 to be asked to stay on at the firm, and was promoted to an stimulating environment, diversified business contexts, unique
Analyst position. learning and skill development opportunities, and a progressive
career track. I therefore decided to apply for the Senior Consultant
Early on, as I demonstrated my skills and tenacity to my team, I position at Recruiting Company Name.
was entrusted with numerous important responsibilities and
frequently interacted with senior executives at the firm to present My personal, academic and professional pursuits have allowed
my research and conclusions. My strong reputation has followed me to develop a solid band of analytical, strategic, problem-
me even outside of the bounds of employment, and I continue to solving and people skills, which make me a good candidate for
be consulted by Company Name’s senior management regarding your company. I am Chinese, living in Europe (EC citizen), and
current issues at the firm even while I am pursuing my MBA studies. have been responsible for the strategic planning and business
development for Company Name in Europe, one of the biggest
My superior undergraduate education at the School Name gives Japanese multinational companies. Such a complex environment
me an advantage given its formal and rigorous business and has helped me to be a dedicated, open, self-aware, interesting
financial training. While at INSEAD, I am building on my prior and interested person. It also fostered my ability to thrive in high-
financial experience and increasing my management skill set. pressure situations, to embrace new challenges, and to assimilate
quickly and flexibly different cultural and business contexts.
Although my experience has been in Investment Management, my
current focus is consulting. I have enjoyed and learned a great deal After INSEAD MBA, it is my aim to go on to a successful Consulting
through my research work, but I am much more interested at this career by combining and extending my skills and learning into a
point in my career to develop my strategy and management skills. management position with more explicit project management and
I believe that my previous work experience coupled with my business development requirements. It is my determination to work
general management MBA give me an important skill-base that with a committed team to achieve the goal of creating value.
can be successfully applied in this environment.
Thanks to the above-mentioned attributes and my personal
I would specifically like to be considered for the Office 1, with determination and motivation, I am convinced that I would prove a
a backup choice in the Office 2. valuable contribution to Recruiting Company Name. I look forward
to your response to the above and the attached CV, and sincerely
I have included my résumé for your review, and please do not hope to meet with your recruitment team in the near future to
hesitate to contact me if you require further information from me. explore potential mutual interest.

Sincerely Yours, Yours truly,

Name Name

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Case Interview
Resources
Crack the Case by David Ohrvall
This handbook aims to give you an overview of the consulting
industry, provide you key insights on the interview process and get Mr. Ohrvall is considered the guru of case interviews and provides a novel
approach to cracking the case. Included in this book are 10 detailed cases,
you started in practicing case interviews - but there’s still an
each with a thorough solution and analysis
abundance of case interview resources out there for you to
practice with. For more information about the book or the author, you can visit
his website at: http://www.mbacase.com

7.1 Books and Guides WetFeet Editions

WetFeet provides five case books with around 12 cases in each.
One of the most common questions students ask during recruitment
This collection of books is a very important practice source as it
is, “How many practice cases should I do?”. As frustrating as it is,
provides around 60 well designed, tough and challenging cases.
there is simply no definitive answer! Successful students have
done as few as <10 cases to as many as >50.
Ace Your Case: Consulting Interviews
Ace Your Case II: Mastering the Case Interview
If you do seek more practice, we recommend the below (most of
Ace Your Case III: Market-Sizing Questions
which are found in INSEAD’s Library).
Ace Your Case IV: Business Strategy Questions
Ace Your Case V: Business Operations Questions
Case in Point: Complete Case Interview Preparation
Wetfeet also has a collection of books about consulting.
by Mark Cosentino
Cosentino demystifies the consulting case interview. He takes you
Vault Guides
inside a typical interview by exploring the various types of case
For the consulting interview, three main books are available and
questions, sharing with you a system that will help you answer
should be used to complement the other two resources.
today’s most sophisticated case questions with both competence
and confidence. The book includes 40 strategy cases and 10 case
The case interview book will give you an overview of the
start exercises.
methodology used to solve consulting case interview along three
levels of frameworks (the most advanced pointing to frameworks
Case Interview Secrets by Victor Cheng
such as Porter’s Five Forces, the Four Cs etc.)
Victor Cheng provides an great starting point for case interview
practice through his book as well as his Look Over My Shoulders
Audio series.

Case in Point by Mark Case Interview Secrets by Crack the Case by Ace Your Case
Consentino Victor Cheng David Ohrvall

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7.2 Online Resources

• RocketBlocks.me: Paid platform where you can gain case

interview skills through interactive drills such as case
structuring, mental math, graph analysis etc. Reach out to
the consulting club for discount code.

• Firmsconsulting: free articles and podcasts in addition to paid

subscription content. 25% discount with INSEAD email and
the coupon code: insead25tco. This code is applicable for
any subscription level: The Consulting Offer (case prep),
the Executive Program or FirmsConsulting Premium.

• PrepLounge: a consulting platform that helps you to find case

partners and practice case interviews online. It also contains
a case library, tutorials and mental math tool.

• Victor Cheng’s www.caseinterview.com. Contains tips, coaching

and math to supplement his book, Case Interview Secrets.

• Marc Cosentino’s www.casequestions.com. Contains tips,

coaching and additional cases to supplement his book,
Case in Point.

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The Consulting
Interview Process

8.1 Case and Fit Interviews:

What is Being Tested?
The first round is generally organized on campus: applicants will a consulting firm. Often applicants overemphasize their case
have two one hour interviews with Associates/ Project Leaders. preparation and don’t invest sufficiently in the fit part of the
The second round is often at the offices you are applying to, with interview!
more senior people. During an interview you can face three
different exercises: WHAT ARE CONSULTING COMPANIES LOOKING FOR
DURING AN INTERVIEW
During the interview you should be prepared to encounter any or
all of the following types of questions:
Structure
• CV/Cover Letter: questions about your experiences and about
• Does the candidate have/follow a structure while tackling
your rationale behind pursuing consulting
the problem?
• Fit Interview: questions to test your fit with the company culture • Is the structure relevant to the case being analyzed?
via examples such as those of leadership and teamwork • Does the candidate have a structure that is both concise
• Case: a problem will be presented for you to work through, and flexible?
similar to those consultants encounter on a daily basis
Quantitative/analytical ability

• Is the candidate comfortable with numbers?

• Does s/he break down ambiguous problems systematically?

FIT: CASE: HIRE / Issues/Prioritizations

CV + FIT JOB REJECT • Does the candidate quickly identify a list of issues that are
QUESTIONS SIMULATION DECISION
most relevant to the business problem?
• Can s/he prioritize/organize the issues or is it more like a
laundry list?

Energy/Presence
You have to be prepared for all three sections of the interview; • Is s/he comfortable with the case or is there a sense of “oh no,
they are all crucial and very important for getting a job into not this kind of problem”?
• If the candidate gets stuck on a particular issue, does she recover
gracefully?

LEADERSHIP QUANTITATIVE
TEAMWORK COMMUNICATION PROBLEM SOLVING
AND IMPACT SKILLS

• Ability to lead teams • Build on other’s • Ability to convince • Business sense • Comfort with numbers
people ideas
• « Make it happen » • Understanding • Ability to structure • Ability to simplify
• Manage information complex business issues complex calculations
• Personal initiative • Comfort with ambiguity
flows
• Analysis and synthesis • Confronting numbers
• Entrepreneurship • Empathy
• Willingness to follow capabilities with reality/business
• « can do » attitude when appropriate • Presence sense
• Creative thinking

Figure 5: Five key dimensions for evaluating consulting interviews - specifically during the fit interview

Source: BCG
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For the fit interview, the firms have their own needs, according Candidates will face a typical business problem, giving them an
to the different cultures: insight of the consulting job. Management consultants are
problem solvers, thus case interviews test mainly problem solving
We list below what potential characteristics that some popular skills. However, during a case interview, consultancies will also
management consulting firms look for, according to a survey made evaluate your quantitative, communication and teamwork skills;
in the US (Source: Chicago GSB). This is not intended to be your own energy, flexibility and personal human maturity. Finally,
complete but rather the informal feedback of former MBAs. the interviewer will look if you have enjoyed the case preparation
and interview. If you did so, you will most likely enjoy the problem
Bain & Company solving in your job as a consultant.
Hypothesis driven – the candidate should quickly analyze facts
and make a hypothesis. She should then drill down to see if the Case interviews are the cornerstone of the recruiting process in
hypothesis is true or should be modified. Finally it is very important the consulting industry. The case is not about finding the right or
that she gives actionable recommendation. wrong answer, but rather about the method you use to derive your
answer. It is about the questions you raise, the assumptions you
Strategy& make, the issues you identify, the areas you prioritize, the
Strategy& is big on microeconomic concepts MR = MC, supply/ frameworks you use, the creativity involved, the logical solution
demand etc. It tends to evaluate the candidates on their micro skills. you recommend, and the confidence and poise you present.
Candidates should also definitely ask questions to understand
industry/business trends (this is true for all firms, but with Strategy& 8.3 How to Prepare for the Case Interviews?
you get dinged if you forget this part).
Practice!
Boston Consulting Group
And start practicing early. Most students don’t ace cases naturally.
Intellectual curiosity and prioritization of issues - while the
You don’t have to do all the cases you can find but the process is
candidates should be structured, they should demonstrate out-of-
much easier if you have done a couple of them before interviews
the-box thinking.
are scheduled.
McKinsey & Company
Preparation tips
Big picture, Big picture, Big picture. It evaluates the candidates on
numbers, but it is vital that they lay out all the issues • Do research on the firm (Peers, Internet, database resources
systematically. The issues should be mutually exclusive and in library)
collectively exhaustive (MECE). Candidates should never rush • Do online case simulations available on the consultancies’
into a hypothesis or probe details (quite different from Bain or websites
BCG, for example) • Practice with your peers in mock interviews
• Read the financial newspapers. Look for new ideas in HBR
8.2 Case Interview Overview and in corporate papers depending on which company you
target (the McKinsey Quarterly, Booz strategy + business, etc…).
During case interviews consultancies watch precisely how • Remind yourself of your High School and GMAT Math. You are
candidates analyze, structure and solve business problems. Case expected to make quick calculations on paper or in your head.
interviews are in fact an excellent indicator of how good you will Consultants love back-of-the-envelope calculations
be as a consultant, both in terms of your problem-solving skills and
your personality. General interview tips

• Be prepared
Main problem solving skills
• Demonstrate that you did your homework
• Analyze a problem with structure • Don’t hesitate to quote your personal readings, or to compare
• Recognize critical issues business problems with your previous experiences
• Gather, select and organize information • Have a point of view
• Formulize and test hypothesis (very important!) • Clearly voice your opinion and be prepared to defend your
• Think creatively point of view with a couple of good arguments
• Have business and common sense • Practice answering behavioral questions
• Listen to the questions asked by the interviewer, they might
contain some hints
• Identify your high priority employer and try to interview with
him last

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• Use the interview to find out if you really want to work for A consultant deals on a daily basis with numbers – may it be for
the company evaluating the impact of the project he is working on or for
conducting an industry analysis. With market sizing cases,
Case interview tips consultancies test your quantitative skills. The candidate has to
estimate an unknown amount, showing logical thinking and
• Stay calm, take time to think
making reasonable assumptions. Such cases are rare at MBA-
• Ask (intelligent) questions
entry level but are regularly integrated in a business case.
• Show sincere enthusiasm – answers driven by intellectual
curiosity and energy, not by a rigid focus on impressing the
Ex: How many ties are being sold in Brazil every year? How many
interviewer
golf balls in Japan? Make assumptions and be sure to argue them
• Define issues and hypotheses
well! A good exercise for backing up your arguments in general
• Be creative – do not rely on just “bookish frameworks”
or industry jargon. Use Porter only if it really helps you.
Use the entrepreneur business approach 8.5 How to Ace a Case?
• Accept guidance and clues
• Try to quantify - demonstrate your analytical skills Don’t forget it’s all about structural and logical thinking. Here is a
• Take notes, sketch and draw common interview approach that should allow you to address the
• Drive to potential actions for the client business cases with serenity.
• Do not “Boil the Ocean”
• Refer to previous work experiences Understand
Listen carefully to the situation
The interviewer will first introduce the case to you by giving
8.4 Types of Cases
information on the industry, the business situation and some initial
information. Some cases are deliberately left with little information
Business case
to see how candidates will deal with initial ambiguity. Make sure
A business case is an analysis of a broad business problem. You
you listen very carefully, take some notes with a pen and paper.
are expected to analyze the problem and to formulate
Your interviewer won’t appreciate to have to repeat information.
recommendations. Most of the time, the case will be presented
without written information. Interviews sometimes include written
Firmly establish your understanding of the case
information such as complete cases (Monitor), printed charts or
You may want to verbally paraphrase the situation to show you
graphs (this is more common). Some cases include no information
have a firm understanding of the case.
at all on the business considered in the case. You will then have to
make reasonable assumptions.
Ask the first clarifying questions
You should here make sure you have all the information you need
The business cases are as different as the consultants’
to successfully structure the problem. Are there any additional
engagements. A good preparation to the case interview won’t
constraints? Do you have a clear understanding of the
consist in learning the typical problems and usual frameworks for
problem?
solving it. You should focus on developing an awareness and
understanding of general business problems and develop their
Structure
own structured methodology to solve them. This is the best way to
Take time to evaluate the problem
do well while being under pressure and stress. You could even
Candidates may ask for a short time, about a minute, to think
build your own business cases based on previous experience or
about the problem. This can help you to get rid of your stress if
on newspaper articles.
you feel you are not ready to structure the case.

However, most of the business cases faced by MBA students

Give a roadmap to your interviewer
belong to one of the following families:
This is the main part of the case interview. You should develop an
• Profitability approach to solve the problem. Very often you will divide it into
• Market entry sub-problems. Successful candidates focus on critical issues, use
• Launch of a new product classical frameworks as well as their own creativity. Write your
• Competitive response roadmap on a piece of paper in front of you to make sure you don’t
• Reaction to a change in a market forget it throughout the case. Your interviewer can give you
• Mergers and Acquisitions feedback, pay attention to them but don’t let him solve the case
• Market sizing for you. While explaining this roadmap, prioritize the issues you
want to address and to identify key information you need.

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Conclude
Analyze
Give to your interviewer a brief overview of the alternatives you
Ask focused questions
have analyzed and which actions you recommend. Explain
Here is the time to gather the information you need to analyze the
clearly the reasons that push you to prioritize certain alternatives.
sub-problems you have just defined. Make sure you don’t forget the
Remain focused and pragmatic: consultants don’t like academic
big picture of the problem. If you think the information is not worth a
minds.
question, make an assumption and check it with the interviewer.

Additional advice:
Evaluate the situation
Now that you have the information you need, analyze the sub- • Don’t forget there is no “right” way of solving a case. The
problems you have defined. Think aloud and show your logical interviewer will focus on your analytic and structured
thinking. Compare the importance of each sub-problem; evaluate approach to the problem rather than the solution itself or
their impact using, for example, back-of-the-envelope calculations. specific business knowledge
You should be very careful while evaluating all alternatives, don’t • Hone the problem on the most important issues, instead
focus on the first solution you will find. An efficient approach is to obsessing over the details
analyze the sub-problems using a ‘hypothesis driven approach’. If • You should interact with the interviewer; the interview is a
you feel confident enough with the business case, try to prioritize the dialogue, not a monologue
sub-problems by guessing their relative importance and start with • Pace yourself, don’t rush to conclusions, but watch at the
the most relevant ones. It’s very beneficial, if not crucial, to formulate time.
a couple of hypothesis early on. This is the consultant’s bread and • Most important, relax and have fun... and show your passion
butter. and enthusiasm for the job. Your interviewer will probably
conduct several interviews on the same day. Make sure he is
enjoying the interview as well.

See following example cases to see the advice in action

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Case Examples
Difficulty: Medium
Quant: Easy
Company: BCG

9.1 Discount Retailer

Step 1: Actively listen to the case Do CanadaCo and the competition sell a similar product mix?
Your client is the largest discount retailer in Canada, with 500
Yes. CanadaCo’s stores tend to have a wider variety of brand
stores spread throughout the country. Let’s call it CanadaCo. For
names, but generally, the product mix is similar.
several years running, CanadaCo has surpassed the second-
largest Canadian retailer (300 stores) in both relative market
Are CanadaCo’s prices significantly lower than the competition’s?
share and profitability. However, the largest discount retailer in the
United States, USCo, has just bought out CanadaCo’s No. For certain items CanadaCo is less expensive, and for others
competition and is planning to convert all 300 stores to USCo the competition is less expensive, but the average price level is
stores. The CEO of CanadaCo is quite perturbed by this turn of similar.
events, and asks you the following questions: Should I be worried?
How should I react? How would you advise the CEO? Is CanadaCo more profitable just because it has more stores, or
does it have higher profits per store?
Step 2: Establish understanding of the case
It actually has higher profits than the competition on a per-
So, the client, CanadaCo, is facing competition in Canada from a
store basis.
U.S. competitor. Our task is to evaluate the extent of the threat
and advise the client on a strategy. Before I can advise the CEO
Well, higher profits could be the result of lower costs or higher
I need some more information about the situation. First of all, I’m
revenues. Are the higher per- store profits due to lower costs than
not sure I understand what a discount retailer is!
the competition’s or the result of higher per-store sales?
A discount retailer sells a large variety of consumer goods at
CanadaCo’s cost structure isn’t any lower than the competition’s.
discounted prices, generally carrying everything from house
Its higher per-store profits are due to higher per-store sales.
wares and appliances to clothing. Kmart, Woolworth, and Wal-Mart
are prime examples in the U.S.
Is that because it has bigger stores?

Step 3: Set up the framework No. CanadaCo’s average store size is approximately the same as
Oh, I see. Then I think it makes sense to structure the problem that of the competition.
this way: First, let’s understand the competition in the Canadian
market and how CanadaCo has become the market leader. Then If they’re selling similar products at similar prices in similarly-sized
let’s look at the U.S. to understand how USCo has achieved its stores in similar locations, why are CanadaCo’s per-store sales
position. At the end, we can merge the two discussions to higher than the competition’s?
understand whether USCo’s strength in the U.S. is transferable to It’s your job to figure that out!
the Canadian market.

That sounds fine. Let’s start, then, with the Canadian discount Is CanadaCo better managed than the competition?
retail market. What would you like to know?
I don’t know that CanadaCo as a company is necessarily better
managed, but I can tell you that its management model for
Step 4: Evaluate the case using the framework
individual stores is significantly different.
Are CanadaCo’s 500 stores close to the competition’s 300 stores,
or do they serve different geographic areas?
How so?
The stores are located in similar geographic regions. In fact, you
The competitor’s stores are centrally owned by the company,
might even see a CanadaCo store on one corner, and the
while CanadaCo uses a franchise model in which each individual
competition on the very next corner.
store is owned and managed by a franchisee that has invested in
the store and retains part of the profit.

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In that case, I would guess that the CanadaCo stores are probably the USCo format, I meant that it carries the same brands at prices
better managed, since the individual storeowners have a greater that are on average ten percent lower than the competition’s.
incentive to maximize profit.
What criteria does USCo use in deciding whether it should
You are exactly right. It turns out that CanadaCo’s higher sales are
physically expand a store it’s just bought out?
due primarily to a significantly higher level of customer service.
The stores are cleaner, more attractive, better stocked, and so on. It depends on a lot of factors, such as the size of the existing store,
The company discovered this through a series of customer local market competition, local real estate costs, and so on, but I
surveys last year. I think you’ve sufficiently covered the Canadian don’t think we need to go into that here.
market-let’s move now to a discussion of the U.S. market.
Well, I thought it might be relevant in terms of predicting what it will
How many stores does USCo own in the U.S., and how many do with the 300 stores that it bought in Canada.
does the second-largest discount retailer own?
Let’s just assume that it doesn’t plan to expand the Canadian
USCo owns 4,000 stores and the second-largest competitor owns stores beyond their current size.
approximately 1,000 stores.
OK. I think I’ve learned enough about USCo. I’d like to ask a
Are USCo stores bigger than those of the typical discount retailer few questions about USCo’s ability to succeed in the Canadian
in the U.S.? market. Does USCo have a strong brand name in Canada?

Yes. USCo stores average 200,000 square feet, whereas the No. Although members of the Canadian business community are
typical discount retail store is approximately 100,000 square feet. certainly familiar with the company because of its U.S. success,
the Canadian consumer is basically unaware of USCo’s existence.
Those numbers suggest that USCo should be selling roughly eight
times the volume of the nearest U.S. competitor! Does CanadaCo carry products similar to USCo’s, or does the
Canadian consumer expect different products and brands than the
Close. USCo’s sales are approximately $5 billion, whereas the
U.S. discount retail consumer?
nearest competitor sells about $1 billion worth of merchandise.
The two companies carry similar products, although the Canada
I would think that sales of that size give USCo significant clout with Co stores lean more heavily toward Canadian suppliers.
suppliers. Does it have a lower cost of goods than the competition?
How much volume does CanadaCo actually sell?
In fact, its cost of goods is approximately 15 percent less than that
of the competition. About $750 million worth of goods annually.

So it probably has lower prices. Is there any reason to think that the costs of doing business for
USCo will be higher in the Canadian market?
Right again. Its prices are on average about ten percent lower
than those of the competition. Can you be more specific?

So it seems that USCo has been so successful primarily because I mean, for example, are labor or leasing costs higher in Canada
it has lower prices than its competitors. than in the U.S.?

That’s partly right. Its success probably also has something to Canada does have significantly higher labor costs, and I’m not
do with a larger selection of products, given the larger average sure about the costs of leasing space. What are you driving at?
store size.
I was thinking that if there were a higher cost of doing business in
How did USCo get so much bigger than the competition? Canada, perhaps USCo would have to charge higher prices than
it does in the U.S. to cover its costs.
It started by building superstores in rural markets served mainly
by mom-and-pop stores and small discount retailers. USCo bet that That’s probably true, but remember, CanadaCo must also cope
people would be willing to buy from it, and it was right. As it grew with the same high labor costs. Can you think of additional costs
and developed more clout with suppliers, it began to buy out other incurred by USCo’s Canadian operations that would not be
discount retailers and convert their stores to the USCo format. incurred by CanadaCo?

So whenever USCo buys out a competing store, it also physically USCo might incur higher distribution costs than CanadaCo
expands it? because it will have to ship product from its U.S. warehouses up
to Canada.
Not necessarily. Sometimes it does, but when I said it converts it to

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It might want to consider offering fewer product lines, so that it can

You are partially right. CanadaCo has the advantage in distribution
consolidate its buying power and negotiate prices with suppliers
costs, since its network spans less geographic area and it gets
that are competitive with USCo’s. It might lose some customers
more products from Canadian suppliers. However, since CanadaCo
who want the variety of products that USCo has, but it may be
continues to get a good deal of products from the U.S., the actual
able to retain the customer who is buying a limited array of items
advantage to CanadaCo is not great-only about two percent of
and is just looking for the best price.
overall costs.

All of your suggestions are interesting, and you would want to

All this suggests that USCo will be able to retain a significant price
analyze the advantages and disadvantages of each in more detail
advantage over CanadaCo’s stores: if not ten percent, then at
before making any recommendations to the CEO.
least seven to eight percent.

I would agree with that conclusion. Additional Case Questions

By the time you’ve gone through the case interview example and
Step 5: Summarize and make recommendations the interactive case you probably will have developed a good idea
I would tell the CEO the following: In the near term, you might be of what a case interview is all about. The best way to prepare for
safe. Your stores have a much stronger brand name in Canada a case interview is to practice a few. Ask a friend or career
than USCo’s, and they seem to be well managed. However, as counselor to give you a case using the sample cases below.
consumers get used to seeing prices that are consistently seven
to eight percent less at USCo, they will realize that shopping at
USCo means significant savings over the course of the year.
Although some consumers will remain loyal out of habit or because
of your high level of service, it is reasonable to expect the discount
shopper to shop where prices are lowest. Moreover, over time
your brand-name advantage will erode as USCo becomes more
familiar to Canadian consumers. You certainly have to worry about
losing significant share to USCo stores in the long term. You should
probably do something about it now, before it’s too late.

Can you suggest possible strategies for CanadaCo?

Maybe it can find ways to cut costs and make the organization
more efficient, so it can keep prices low even if its cost of goods
is higher.

Anything else?

It might consider instituting something like a frequent shopper

program, where consumers accumulate points that entitle them to
future discounts on merchandise.

What might be a potential problem with that?

Well, it might not be that cost-effective, since it would be rewarding

a significant number of shoppers who would have continued to
shop there anyway.

Any other suggestions?

CanadaCo might want to prepare a marketing or advertising

campaign that highlights its high level of service. It might even
institute a CanadaCo Service Guarantee that surpasses any
guarantees offered by USCo.

Assuming the only way to keep customers is through competitive

pricing, is there anything CanadaCo can do to appear competitive
to the consumer?

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Difficulty: Hard I would like to know how large each market is and how fast each
Quant: Medium is growing. I would use secondary sources such as press
Company: BCG releases, analyst reports, and published market studies, to obtain
this information.

9.2 Medical Software Industry Great! That is what we did during the market study. Our information
revealed the following market sizes and growth rates.
Step 1: Actively listen to the case
Your client is GenCo, a large, international, diversified company Patient Physician
Administration
with a health care division that produces a wide variety of medical administration support
instruments and related services. Five years ago, it expanded into
Market size
the health care software industry by purchasing MedCount, which 1,500 1,000 1,200
($M)
markets administrative systems to large U.S. hospitals.
Growth
5% 5% 12%
rate
These systems are designed primarily for back-office functions;
they are not designed for managing patients or providing other
From a size and growth perspective, physician support systems
physician and technical support. Since it was purchased, the
look like a very attractive market. I’d like to know a little about the
software division has failed to deliver the growth needed to justify
customers themselves. The client is currently targeting large
the multiple GenCo paid for it.
hospitals. Approximately what percentage of the market do they
represent? We were unable to get an exact breakdown, but we
GenCo feels it has already squeezed margins as much as know that these hospitals make up the vast majority of the total
possible, and now is looking for new sales opportunities. medical software market. That would make sense, since the more
MedCount turned to you to help identify potential ways to increase sophisticated procedures at a hospital might necessitate more
revenues. How would you approach this problem? advanced software solutions. I know that there have been a lot of
changes in the industry as a result of managed care. I don’t know
much about the industry, so I would want to look at market studies
Step 2: Establish your understanding of the case and press clippings to get a better sense of the hospital market in
First, let me make sure I understand the problem. The parent general and any technology or software trends more specifically.
company produces medical devices and services, but before the
acquisition was not involved in health care software. The company Okay. Let’s say that you did that and were presented with this
it purchased, MedCount, sells only administrative systems summary of market trends: Consolidation in the industry, with three
software to large hospitals. It is now looking for opportunities to to four large hospital networks dominating 45 percent of the
increase revenues. market; Cost controls instituted, particularly as these large hospital
networks acquire smaller hospitals (centralization of functions
That is correct. being a key cost issue); Many hospitals seeking to consolidate
Could I take a moment to jot down a few thoughts?
their vendor base. With regard to technology, many hospitals
Sure, that would be fine. upgrading their older systems.

Step 3: Set up the framework If hospitals are consolidating vendors, perhaps our client has an
I would suggest using the following structure: First, I’d want to advantage in being part of a larger medical company. May be the
understand the market size and growth rates for MedCount’s client could also gain some advantages by expanding into other
market and related software markets. Next, I would like to explore software segments. Are the people responsible for purchasing
the competition and their market shares. Third, I would like to software at the hospital the same for all three segments?
examine customer requirements and then, given those external
Like all things, it differs by hospital, but the larger hospital networks
conditions, look at the division’s capabilities to understand how
have tried to consolidate their purchasing not only within but also
well prepared it is to meet the needs of the marketplace.
across hospitals.
That sounds fine. So what do you want to know about the market?
Is the decision maker for medical software the same as for medical
Step 4: Evaluate the case using the framework instrumentation and devices?
Well, the first hurdle would be to identify the markets the company
In some cases, the head of purchasing influences both decisions,
would be interested in. Besides administration systems, what other
but the person who makes the final choice is different. Software
types of medical software systems do large hospitals purchase?
decisions are usually made by the hospital IT function and those
There are many software systems, but for the sake of time, the for instrumentation by the medical staff.
team focused on three primary markets: administration systems,
patient administration, and physician support systems.

What do those systems do?

Patient administration includes systems like admissions and
tracking. Physician support systems are more specialized, for
individual physician procedures.
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I think I have a pretty good understanding of the market for now. I see that two competitors, HTI and HCS Software Systems, have
Let’s look at competition next. We could identify all the competitors very large revenue growth in all three sectors, although they each
and build up the market shares using a combination of public data dominate one. I would want to look at their financials, annual
and estimates. reports, and press releases to find out a bit more about their
strategy in each of these areas.
Well, let’s assume that you don’t have an infinite amount of time
to look at all the competitors. You can only look at the top five
You’d find that they recently entered these non-core markets.
competitors in each market. You are given the following data:
Why might they have done that?

Administration Systems Sales ($M) Growth (%) Perhaps, like our client, each had a strong position in its own
segment, HTI in patient administration and HCS Software
MedCount 700 4%
Systems in physician support. Maybe they too decided to branch
HCS Software Systems 100 7% out into the other segments to find additional growth.
Morningside Software 80 3%
That is a very good hypothesis. Let’s say there is evidence in the
Admin Systems Solutions 70 2% sources you consult that supports your assertion.
HTI Software 50 15% Well, if that were true, these two companies could be a threat not
only in the other two segments, but also in our client’s segment,
administrative systems. It looks as if the client is slowly losing market
Patient Administration Sales ($M) Growth (%)
share in its segment, since it is growing more slowly than its market.
HTI 300 5%
Good observation
Registration Software Solutions 240 4%
The market and competitor trends could also suggest that the
Signup Software 60 3% client may want to enter these other markets. In particular, the
HCS Software Systems 30 16% physician support market looks attractive; given it has high
growth and lack of a dominant competitor. The higher gross
Patient Software 20 -1% margins may provide attractive returns on the necessary
investment in software development. However, the patient
administration market may also be attractive. Although it is more
Physician Support Sales ($M) Growth (%)
concentrated and offers lower margins than physician support, the
HCS Software Systems 150 16% client may be able to enter this segment with a smaller up-front
investment. Given the trend toward upgrading existing computer
Physician Support Systems 100 11%
systems, it may be important for MedCount to have a product
Medical Technology Inc 25 18% offering in each of the three market segments. That should not be
HTI 20 32% too difficult, since the company is already in the software industry.

Perhaps, but you should think a little more closely about these
MedSys 5 15%
types of software. Are all software systems alike?

Very interesting. The first thing I would note from the data is that Well, let me think about that for a moment. I suspect patient
the market concentrations are very different. In administrative administration would have relatively low entry barriers. From your
systems, the top five competitors control 66 percent of the market earlier description, these systems appear to be pretty basic,
and in patient administration, they control 65 percent. But in the dealing primarily with admissions and patient tracking. However,
physician support market, they control only 25 percent. the entry barriers in physician support might be higher, since these
systems are more complex and there are probably multiple
I would want to know what gross margins look like in each of systems for the various physician procedures. I guess it would be
these markets as well. I might turn to analyst reports and look at harder to get into those types of systems.
competitors’ financial statements to deduce whether they are
making money in each market. That would make sense.

Gross margins vary, of course, but the analyst reports have Since the company might want to go into only some of the
margins of 25 to 30 percent for administrative systems and for segments, I would want to know how important it is to have
patient administration. For physician support, the margins tend to products in all three segments. Do we know if the competitors are
be higher, more like 45 to 50 percent. marketing their products as a bundle?

How might you find that out?

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Since it would be difficult to talk to a competitor directly, I would With regard to software, does the company feel it has any strengths
probably target a competitor’s customer, particularly one that just or weaknesses?
converted from our client’s software.
It feels that their administrative product is very strong (“best of
Let’s say you get an interview with a customer that recently
breed”) and is the dominant technology. Also, the product is
switched to HTI. You discover that the competitor was offering it
modular in design, which allows for easier upgrades. Although the
a better pricing deal and service for software products in all
company has never branched out into other market segments, the
three segments.
software developers believe that certain modules could be used
to build the foundation for other administrative software programs.
How were MedCount’s software and service perceived in relation
The company feels customer support is also an area in which it
to those of competitors?
excels.
The customer thought that its administrative systems were
adequate, “the old standby,” but not stellar. Step 5: Summarize and make recommendations
Let’s start with our client’s market. The client dominates the
Were there any other key reasons it switched from MedCount’s administrative software market, which is fairly large but growing
system? slowly, and the company appears to be slowly losing market
share. Patient administration is also growing relatively slowly. Both
When it decided to upgrade its systems, it tried to contact
markets are relatively concentrated and appear to offer lower
MedCount, but could never get a representative to describe its
margins than physician support. The physician support market is
options.
large and less concentrated, and could potentially provide higher
margins, but would require a larger investment. The hospital
Interesting. How did HTI perform?
market itself is becoming more concentrated and is pushing to
The HTI representative had heard that the company was consolidate vendors. The purchasing agent is often the same for
considering switching software vendors and provided a sales the three types of software.
representative to pitch HTI’s administrative product the next day.
Looking at our client’s competitors, HTI and HCS Software
It definitely sounds as if there was a problem with the sales function Systems, appear to be particularly threatening. Each has a
and that customer relations need to be improved, particularly for dominant position in one segment and is branching out into other
the larger hospital chains. There also seems to be an advantage areas. They appear to be marketing their products and services
from both a marketing and sales perspective in having multiple as a bundle and are using service as a key point of differentiation.
software products. I would want to confirm those views by doing
further interviews. Let’s say further interviews support those The client offers only one type of system and appears to have
assumptions. some weaknesses in its marketing organization, particularly in
marketing to the larger hospital networks, which offer the most
Since we have already looked at the external conditions, I would
promising market opportunities.
like to move on to the client itself. I’d like to know more about its
marketing and selling organization as well as its software
How would you recommend proceeding?
development skills.
The first priority should be to fix the marketing organization,
So far, we know that our client offers administrative software and particularly for the large hospital networks. MedCount will have
that there may be a problem with sales and marketing. Could you trouble expanding into new markets if it can’t defend its current
tell me a little about the marketing department? position and shore up its existing customer relationships. There
should be a team dedicated to each of the major chains. The client
The marketing department is organized regionally. Teams are
should also look at improving customer tracking so that it is clear
assigned to hospitals within each state or geographic region, such
when its customers are going to upgrade. There should also be
as New England.
clear contacts so that the customer can easily keep in touch
with MedCount.
That could explain some of the problems with MedCount’s
marketing and sales. If hospital purchasing is centralized, the
Next, I would recommend that the client explore entering the other
marketing organization may be outdated. Does the company have
market segments by leveraging its dominant position in
any teams dedicated to the four or five biggest hospital networks?
administrative systems. At first glance, patient administration does
No, there are no dedicated teams. They talked about doing that not appear to be very attractive, with slow growth, low margins,
for a while, but it conflicted with the regional structure it had and large, dominant competitors. There appears to be some
in place. advantage, however, in having products across the product range.
I would recommend that we interview some of MedCount’s

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existing customers to better understand their needs and future IT

requirements. If the customer base is interested in one software
provider for both back-office administration and patient
administration functions, this segment looks promising.

If the client does decide to enter this market, it should look at the
lowest-cost method of entry, either developing a product internally
or acquiring a competitor. The modular design of its existing
administrative software suggests internal development of the
patient administration product may be the way to go, but we would
need a more thorough comparison of the internal development
and acquisition options, including both cost and time to market. I
think that physician support offers our client an exciting growth
opportunity, given its high margins, high growth, and fragmented
competition. I would definitely think about an acquisition strategy,
since the client may lack the technical capabilities to enter this
specialized market. I would recommend going for one of the larger
companies, as that would give the client a stronger position.
Smaller companies would probably not offer an important enough
position in the market. More research would be needed, however,
for us to better understand the intricacies of the market and each
potential acquisition.

Those are very interesting conclusions. Thank you.

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Difficulty: Medium
Quant: Hard
Company: BCG

9.3 Gas Retail

Your client is the major operator (monopolist) in one of the largest
European gas market. His business includes two major activities: Let us start with the market’s growth potential. What are the
Gas sales to households and firms (gas bought from large market’s growth levers? (Structure)
producers in Russia, Norway, Algeria…), and Gas transportation
from the national border, where it is delivered by the producer, to I would differentiate between firms and households. The key
the end consumers. This implies the existence of a large levers by client type would be: Households: network penetration,
ensemble of infrastructures: transportation network, distribution share of gas vs. other energies; consumption of gas/household
network, storage equipment, methane terminals… (climate, isolation…)

Firms: same as households, plus industry growth, productivity,

Let’s discuss the challenges on the natural gas market after
competitiveness with other energy forms
market liberalization in Europe.
Given the market’s main growth levers for the firms’ segment and
Situation
for the households’ segment, do you think that the market will
Concretely, the market’s deregulation means
strongly grow, stagnate, or decrease? (Judgment)
• The end of the monopoly for the gas sales; the arrival of new
competitors For the households, I would estimate the rise of penetration
• The preservation of the monopoly on transportation, but under (network extension) but, overall, I think the consumption will
the surveillance of an independent authority that guarantees decrease due to global warming and to better built houses. For the
equal access to all competitors firms, I think it will decrease, especially in industries that consume
a lot of gas (general price and risk issues).
Your client is at the head of the purchases/sales department.
He is in the following situation: So what is your conclusion? (Synthesis, So what)

• Today, company market share is 100%

I think there will be weak or inexistent growth. A new entrant will
• At a certain point in the next years the market will at once
have to take clients from the major player.
be opened to competition
• (which is a simplified way of putting it since in reality there
Can you imagine what a gas retailer’s cost structure is?
will be stages)
(turnover = 100)? (Synthesis, Structure)

Client’s question
I believe it would include the energy itself (cost of goods – gas),
About the gas sale activity that will be opened to competition: the infrastructure cost and sales and marketing costs (commercial).
What will be the level of competitive intensity at opening? What
actors are likely to become my competitors? Here is a simplified cost structure: gas – 50%, infrastructures –
40%, commercial costs – 7% and the margin is around 3%. What
Evaluate the case cost advantage can a new entrant expect to build for each one of
According to you, how many and what types of competitors are these costs? (Judgment)
likely to enter the market? (Structure)
Most probably, there is a small opportunity of differentiation
I believe I would need to evaluate the market attractiveness through costs:
(market growth, profitability/margin, risks) and the entry barriers • Gas is sourced at comparable prices
(gas availability, brand). I would need to ask the following questions: • Infrastructure prices are identical for all competitors
What are the rules of the game/key success factors (access • New entrants have to invest rather more in marketing
to suppliers, customer intimacy, cost advantages, branding…)? • New entrants are not expected to have a productivity lever
and only have a small pricing lever.
How are other players positioned to enter the market?

What are their competitive advantages thanks to synergies with I would have to check these assumptions.
other activities (electricity, services …)?
Let us put ourselves in the shoes of a household client whose
Let us focus on the gas retail sale activity’s attractiveness. There yearly gas invoice amounts to € 500. What is the price reduction
are three dimensions you should consider: the natural gas potential for a new entrant? Can you give a rough estimate?
market’s growth potential, the profitability of this activity and the (Judgment, Rigor)
risks associated with it.

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If I assume I can reduce commercial/marketing costs by 33% (500 We are not working on the right strategic segment: the gas retail
x 7% x 33% = 11.55) and I allow a 50% lower margin (500 x 3% sale segment in not independent of the electricity sale and
x 50% = 7.5), then a new competitor can reduce the gas price services, as soon as the monopoly disappears. We have been
around € 15–20/year (11.55+7.5=19). This might allow it to influenced by the client’s historical view.
compete with the established client. Marketing costs can be
reduced if the new entrant is already established in other energy In fact there is a bias in our reasoning from the start. What is it?
markets and benefits from scale and known brand name. (Creativity)

What can we conclude on a new entrant’s margin level? (Synthesis) We have looked at the gas market on a stand-alone basis. But
we need to take into account that the rules of the game might
Margin will necessarily have to be weak or inexistent to attract change and that other energy providers might enter the market.
clients and draw away from established player. Those providers might offer additional products to the gas client:
electricity, oil, services or other products.
Let us now consider the risks borne by our retailer. In order to
simplify, let us focus on what is called the climatic risk. The sales Are there other levers that would enable a player to enter the gas
volumes will vary a lot depending on the year, whether the winter market in a profitable way? (Creativity)
is cold or not. During a “warm” year, let’s suppose that the heating
volumes decrease by 10%, that the cost of supply/gas are totally By offering other energy products or services and products, there
variable, that the commercial costs are totally fixed, that the can be synergies with the gas supply:
infrastructure costs are partly flexible, at 70%. What will be our
• Channel diffusion/delivery costs
gas retailer’s margin? (Structure, Rigor)
• Margins from other services can cover production risk

I am basing my analysis on the sales and cost structure of a

On the other hand, there could be cost synergies on the
normal year (turnover = 100). Then I calculate the value of each
commercialization:
cost block for a warm year, also the margin and compare with the
margin in a normal year. • Client back-offices could combine gas and electricity sales
• Brand and client acquisition
Cold vs. warm
Sales: 100 vs. 90 (-10%) Who could the other new players in the gas market be? (Judgment)

Gas: 50 vs. 45 (-10%) Potential new players that bring additional value to the client could
be major electricity firms, major oil producers and/or major
Infrastructure: 40 vs. 38.8 (30% of 40 is variable, makes 12,
retailers. For the electricity firms, synergies would be mainly based
10% reduction makes 1.2) Commercial: 7 stay 7
on the commercialization cost synergies, also for retailers. For the
Total cost: 97 vs. 90.8 oil producers, there are synergies on the supply side.
Margin: 3 vs. -0.8
In a warm year, it is more expensive to sell gas, so it is a high What can we finally say to our client? (Judgment)
risk business.
The threat is real; the firm’s traditional strategic vision must be
What can we deduce from this risk calculation? (Judgment) questioned due to the emergence of the new market conditions
and rules of the game. Examples of dangerous players are large
The climatic risk is too high to justify the small margin in a normal year. power firms, oil producers if they don’t have more profitable
investments to make and a partnership between a large European
Your first meeting with your client is tomorrow morning. What can energy player and a large retailer.
you tell him/her to answer his/her question based on the analyses
that we have just done together? (Synthesis)
Well, the market is not that attractive and new entrants are a
weak threat.

Finally, it looks like our major player does not have to worry; the
gas retailer activity’s attractiveness is so weak that one would
have to be stupid to venture in it at its opening! But why would it
be a big mistake to tell our client not to worry? (Creativity)

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Difficulty: Medium
Quant: Medium
Company: BCG

know anything about the price?

9.4 Consumer ADSL Services

ADSL is a technology that enables the implementation of I: We know that the incumbent charges on average EUR 20
per month.
broadband Internet services via the existing telephony
infrastructure. This telephony infrastructure is owned by the C: OK, let’s assume we could also ask EUR 20 to start with. Later
incumbent telecom operator in Norway. As in most European we may need to reconsider this and see if we need to lower the
countries, the regulator has ruled that new entrants may offer price in order to become more competitive. So let’s see if we
ADSL services, using the existing incumbent-owned telephony can calculate this… hmmm, wait, I see we have a lot of
infrastructure via MDF access. This means, the new entrant can information on technical costs, but I don’t see anything on
hire the copper wire from the incumbent operator but has to personnel costs, is this correct?
purchase its own ADSL equipment.
I: Well spotted, we also need an organization and a small
The technical set-up that a new entrant would need in order to marketing budget. The new entrant has done some pre-work
establish an ADSL connection basically consists of three and has calculated that an annual budget of EUR 4.8 million
elements: MDF access (copper wire), ADSL equipment, Internet would be sufficient to cover the entire country.
uplink capacity (fiber access connecting the ADSL equipment to
C: OK, then I can calculate the break-even point. Per customer,
the Internet).
the new entrant earns EUR 20, of which it uses EUR 14 to
cover the expenses for MDF access and the Internet uplink.
The costs involved in establishing the technical set-up are given
That means he has EUR 6 per customer per month to cover all
(amounts have been converted to Euros):
other costs. We write off the ADSL equipment in 5 years, so
• MDF access tariff is EUR 12 per line per month, that’s EUR 2,000 per month per location. For 250 locations
set by the regulator that’s EUR 500,000 per month. In addition, we have to cover the
• Required investments for the ADSL equipment is EUR 120,000 organizational costs, which is EUR 400,000 per month. So for
per location, depreciation period of 5 years. For simplicity break-even we need EUR 900,000/EUR 6=150,000 customers.
reasons we assume linear depreciation with no interest costs.
In total, there are 250 locations where ADSL equipment could After the basic set-up of the case, the interviewer assesses the
be installed, covering all households in Norway candidate’s ability to make some basic assumptions in order to
• Internet uplink capacity is commercially available. Depending get to the next level (Judgment) and play around a little bit with that
on the required end-user speed, costs are on average EUR 2 to see if the candidate can really see through the drivers of the
per end-user per month case (Synthesis).
• For simplicity reasons, we assume that the consumer ADSL
modem is client-owned. I: OK, so what do you think, is that a realistic number to achieve?
Let me add that we have roughly 2 million households in Norway.
Suppose you wanted to assess if a new entrant can run a profitable
C: Hmmm, let’s see...at first sight, 150,000 out of 2 million does
business in offering consumer ADSL services, how would you
not seem impossible, but I would like to know a bit more about
approach this?
the market. For instance: is there a lot of growth in the market?
How many competitors are there? Can you tell me a bit more
Let’s see, since we are considering a new entrant, who has initially
about that?
no customers, the company will at first generate loss, and
gradually will become more profitable as the number of customers
I: Yes, at the time of this situation, the incumbent operator was still
increases. I could make some assumptions on the pace at which
the only provider of ADSL services in Norway, but others have
the customer base will grow, but rather than making this too
considered entering the market, just as we are doing now. The
complex at the beginning, I would start by calculating some sort of
distribution was as follows: 20% of the households had ADSL
break-even point. I mean, if we never reach break-even, this idea
services, 20% used Broadband via cable, 50% still used dial-
will certainly not fly.
up and 10% had no Internet. We know that these percentages
were established in 5 years time. That is: 5 years before no
I: Sounds good, how would you calculate the break-even point?
broadband Internet existed. We have no data from in-between
C: Hmmm, we know all the costs, but we don’t know the revenue, years.
which would be price times number of customers. So I could
C: OK… so that’s a fast growing market. I would say we start
assume a price and then calculate the number of customers
focusing on acquiring new customers from the group that is
we need. Subsequently, I would need to check if the required
currently using dial-up, since this is the largest group and since
number of customers would be a reasonable number. Do we
it is probably easier to acquire new customers than

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to persuade customers from our competitors to switch. Now, if Of course, this can only be justified by offering better service.
we would take a situation for instance 5 years later and if we Would it be possible to increase the speed, for instance?
assume that by then the market has grown again with roughly I: Yes, technically this would be possible. You would need to make
the same amount, the ADSL market increases from 20% to sure that you buy enough capacity on the Internet uplink. Let’s
40%, which means 400,000 new households will subscribe to assume the speed you can offer is directly proportional to the
ADSL. We would be competing for these clients, against the capacity you buy and the costs associated with it.
incumbent operator, and maybe some other new entrants as
C: OK, so doubling the speed would increase the cost per
you mentioned. So… let’s say the incumbent operator gets at
subscriber by EUR 2 per month, while we could probably
least a 50% share of that, since it has a strong presence in the
charge a much higher tariff, maybe EUR 30 or so. If we could
market already. Let’s assume we would be competing against
diversify our offering, and if part of the customers subscribe to
1 or 2 other competitors, which means we could get 17–25%
the premium packages, this would certainly improve the case.
share of the new customers, or ~70,000–100,000 in total. So
Furthermore, I am considering offering additional services, like
it seems that it won’t be possible to reach break-even from new
telephony or even video services if that’s possible. Of course
customers only. We could also have a look at the existing
we would need to make a separate business case for that, but
customers, both ADSL and cable customers. But then I would
since EUR 12 out of the 20 we charge is spent on MDF access,
need to know how likely it is that they would switch?
any other service we can offer, which re-uses this asset, would
greatly improve the case. I mean, we would spread our largest
I: OK, that is something you may want to investigate. But what
cost component across multiple services.
would be your upfront judgment on this?”

C: I can imagine that customers would want to switch if they are I: OK, sounds like these ideas are worth investigating. Anything
very unsatisfied with the current service, or if the new entrant else you can think of?
would offer a much lower price. Do we know anything about
C: What about starting in a limited number of regions, instead of
customer satisfaction?
covering the entire country from the start? Is the number of
customers per location equal across the country?
I: Most customers are very satisfied, the service is very reliable.

C: OK, so let’s look at lowering the price. For instance a 10% I: Good point! The area of each region is more or less the same,
discount... Hmm... but that would mean we also would need which means…
more customers to reach break-even. A 10% discount means
C: You have a huge variation in the number of households per
we drop from EUR 20 to EUR 18 contributing EUR 4 per
location. If we pick the high density areas, for instance the Oslo
customer instead of EUR 6 to the fixed costs. So we would
area, plus some other larger cities, we can perhaps reach 50%
need 225,000 customers in this case. Even if we could get a
of the households through, I don’t know, maybe only 20% of the
greater share from new customers, I still think it would be
locations and thus only 20% of the ADSL equipment cost. That
unrealistic to assume we could persuade a large number of
would make a difference.
customers to switch for a EUR 2 discount, particularly if they are
satisfied with the current service. In addition, there’s the risk that
I: You’re absolutely right, and you know, looking back this is
our competitors would lower their prices too. Concluding, I
exactly what new entrants have done when entering the ADSL
would say this is a risky business to step into.
market: start in high density areas, offer higher speeds at
premium prices, in particular to small and medium-sized
When the basics of the case have been cracked, the interviewer
enterprises, and – at a later stage – expand the service by
would finally test if the candidate is able to assess the problem
offering additional services.
from different angles and if he/she can come up with alternative
solutions (Creativity). If the case runs smoothly and there’s time
left, the candidate can even quantify part of these alternative
solutions.

I: I agree. The way we have been looking at it, the business case
looks very challenging indeed. But let’s spend a minute to see if
we can come up with some creative ideas here. Could you think of
some ideas that would make this business case more attractive?

C: I was struck by the negative effect a slight price decrease has.

So, I was thinking: could we somehow increase the price?

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Difficulty: Easy
Quant: Easy
Company: BCG

9.5 Call Center

There is a company, let’s say a travel agency, that sets up a seasonal pattern. The average time spent on a call is simply the
centralized call center where all incoming phone calls from all duration of the call and the time needed by the agent to wrap up
branches are diverted to. Shortly after setting up the call center, the call (e.g. enter information in a computer).
the travel agency is virtually unreachable because of the large
amount of phone calls received. FIGURE 1 (POSSIBLE ANSWER):
Number of
Before answering any questions, the candidate should check if he/ diverted
customers
she completely understands the problem stated. The candidate X
can ask additional questions if the problem is not completely clear. Call Number of calls
volume per customer
The first question tests the candidate’s creativity and ability to X
come up with more than one idea, at the same time it tests the use Seasonal
of a structure, which helps coming up with more ideas. First, the pattern (%)
candidate should think of main causes, and then specify these
main causes in more detailed possibilities. Required Call time
no. of agents (sec)
Average
+
Interviewer: What could cause the overload of the call center? settlement time
Wrap-up time
Candidate: I believe there could be different types of reasons: (sec)
Caused by supply
Lack of call center agents (by sickness, by poor planning) Working hours
per agent (sec)
Poor organization of the call center (unstructured call-diverting) X
Capacity Gross/net ratio
Caused by technical difficulties per agent (%)
Calls are not transferred to the centralized call center X
Working Time
Duration (%)
Caused by demand
Peak in client demand (more calls than expected due to international
The capacity per agent starts of course with the working hours per
affairs, high- season, bad weather…)
agent, but an agent is not 100% productive. There are several ways
to define the productivity, in this example the productivity is split
I: Let us assume that the overload in the call center is not caused
up in two parts. The first is gross versus net working hours due to
by technical problems or by peaks in demand, but is solely
lunch breaks etc. The second is “working time duration”, this is the
caused by the fact that the amount of required agents does not
percentage of the time the agent actually is busy with a phone call.
match the number of agents in the center. How would you
An agent can be busier during prime time and less during other
calculate the required number of call center agents needed to
hours of the day.
fix the problem?

There is now a clear structure to show what drives the amount of

For this question, it is important to set up a good structure to
agents needed, and therewith a way to calculate the required
tackle it. Not a general structure, but one tailored to this specific
amount of agents.
situation. This is one of the main things the interviewer tests with
this question: can the candidate set up a good structure, tailored
I: How many agents are required in week 20?
to the problem. Furthermore, the interviewer tests if the candidate
understands the problem and has some (business) judgment (e.g. Most case interviews have some computation in them. To solve it,
in this case: a call center agent is not productive 8 hours per day). the candidate will have to figure out the numbers for all parts of the
“driver-tree” to compute the required number of agents. There are
This answer first divides the required number of agents in volume several ways to figure out the numbers. First of all, an interviewer
of calls, average time spent on a call and capacity per agent. The might give the candidate some data to start with, and he/she will
next step would be to divide these three main parts into smaller have to pick out the numbers to use in the calculation. Secondly,
parts. For the volume of calls, the first important driver is the the candidate can ask the interviewer for data, and thirdly the
amount of diverted customers. Furthermore, customers can call candidate can make assumptions using common sense. The
up more than once; this is called the average number of calls per candidate should always clearly state when he/she is making an
customer. The third driver of the volume of calls is the assumption and how he/she comes up with it.

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 ICC Handbook 2020

In this case interview, the following data is given by the interviewer: 40 * 80% * 50% = 16 hours per week.
Now, the candidate has all numbers to calculate the amount of
CUMULATIVE NUMBER OF CUSTOMERS WHO ARE agents needed in week 20. The candidate should not forget to
DIVERTED TO THE CENTRALIZED CALL CENTER use the same units for all parts of the equation (all in seconds,
Note: At the moment of set-up of the call center, the graph starts with 0.
hours, or weeks) and not make any unnecessary mistakes. In this
case, the number of agents needed in week 20 is: 5.400 calls
1.200.000 *1/12 hours per call / 16 hours per week = 28.1, so either 28 or 29
cusotmers
Number of

agents are needed.

1.000.000
I: There are no additional trained call center agents available.
800.000
What other ways can you think of to help the travel agency with
600.000 its telephone problem?

It is stated that the amount of required agents does not match the
400.000
number of agents in the center. However, since there are no
additional trained call center agents available, the candidate has
200.000
to find ways to decrease the amount of agents needed.
0
0 10 20 30 40 50 60 This question will test if the candidate really grasps the problem
Week
and if he/she uses his/her structure in the right way. Looking again
From this graph, the candidate can deduct the cumulative number
at the structure, the answer is clear: There are three levers to
of diverted customers in week 20: approximately 140.000 decrease the amount of agents needed:
customers. So in week 20, there are 140.000 clients “in the
database of the call center”. To calculate the required number 1. Reduce the call volume
of agents, other data in the driver-tree is needed, and the 2. Reduce the average settlement time
candidate will have to figure it out. He/she can start off with asking 3. Increase the capacity per agent
the interviewer for data, but it’s always best to make assumptions
and test these with the interviewer. For example: “I assume that To determine specific solutions, the candidate needs creativity
on average, a client has contact with an agent of the call center and understanding of the problem.
twice per year, so the average number of calls per customer is 2”.
And: “I wonder if there are many more calls in week 20 versus the On the first lever:
other weeks of the year, for now I assume the seasonal pattern to
be 0%”. The candidate then calculates the calls’ volume: • Stop diverting the calls from branches to call center
140.000 / 52 * 2 + 0% = approximately 5.400 calls in week 20. (and divert back)
• Insert a computer-based menu which answers the most
To determine the average settlement time, the candidate can ask frequently asked questions
the interviewer for information. The interviewer may either tell the
candidate to make an assumption, or give the numbers. In this A possible solution to the second lever is:
case, these are given: “Monitoring talk- and wrap-up-time gave an Reduce the wrap-up time by monitoring it, determine the most
average call time of 240 seconds and an average wrap-up-time of common wrap-up actions and shorten these actions where
60 seconds per call”. This information gives the candidate the possible. For example introduction of a computer application that
average settlement time: 240 + 60 seconds = 5 minutes = 1/12 hour. helps the agents with the standard wrap-up actions such as
“sending a brochure”
The last driver is the capacity per agent. The candidate can
assume that the number of hours an agent works is 40 per week. For the third lever, a possible solution would be:
To determine the gross/net ratio, the candidate could ask the Align planning of agents with actual demand for agents by
interviewer, though he/she could also easily make an assumption mobilizing more agents during peaks in client demand and less
on own experience: “I assume that of the 8 hours worked in a day, during a low. This solution can be for example achieved by
approximately 1.5 hour is lost to lunch and other breaks. This stimulating the agents to work part-time.
makes the gross/net ratio ~80% ((8-1.5)/8 = 81%). The last number
to figure out is the working time duration, this is a hard number to
guess without knowledge of call centers, but the candidate could still
give it a try. The candidate should then ask the interviewer if the
assumption is more or less right. From experience, the number is
~50%. This gives the capacity of an agent per week:

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Difficulty: Medium
Quant: Easy
Company: BCG

9.6 Supermarket Deli Turnaround The candidate should recognize that the client’s deli meat and
prepared food sales have been growing at about the category
Questions and Facts averages; therefore, revenues are not the main issue here. Deli
meat COGS have been more or less flat, mirroring sales.
1. Client’s deli financials However, despite robust growth in prepared food sales, prepared
See Exhibit 1 food profits have been flat, implying deteriorating margins.

2. Overall industry/ customers At this point, the candidate is asked for some potential reasons for
Deli meat category has been flat to slightly declining recently. deteriorating margins (e.g., change in product/sales mix, rising
Prepared foods category has been growing at roughly 10% per material costs, rising labor costs).
year as people have less time to cook at home.
If the candidate asks about changes in product mix, the interviewer
3. Competitors informs him/her about the BBQ chicken wings and the “made to
Increasing competition from deli departments of other supermar- order” sandwiches. The candidate should be suspicious at this
kets, discounters, etc. – e.g., expanding product lines, increasing point and ask to learn more about these products.
advertising. Also competes with fast food restaurants in prepared
foods category. By doing a back-of-the-envelope analysis of product profitability
(based on data in Exhibit 2), the candidate can find that BBQ
4. Client’s product mix and recent events wings have a 50% margin, indicating that they are not a problem.
Mix has remained constant, with the exception of two products On the other hand, he/she will find that the client is losing a lot of
introduced a couple of years ago – BBQ chicken wings and “made money on the “made to order” sandwich concept.
to order” sandwiches. Both products have been a major boost to
prepared foods revenue. The candidate is then asked for recommendations,
which could include:
5. Info on new products 1) Eliminating the “made to order” sandwich
BBQ wings are similar to the chicken wings the company already 2) Restricting the “made to order” sandwich to busier stores
sells, although they take a little longer to fry and are tossed in or during busier times of the day (e.g., lunch hours only)
BBQ sauce after frying. “Made to order” sandwiches is client’s 3) Raising or lowering prices (to either increase profit per sale
response to Subway, etc. – for two hours during lunchtime and or units sold – will depend on demand elasticity)
two hours during dinnertime, one employee’s sole task is to 4) Boost demand (through increased advertising, promotions,
make sandwiches to order for customers. better merchandising, etc.).

6. Financials of new products The candidate can also consider the second-order effects of
Revenues for each product are $40M annually. Costs are not eliminating the product or boosting sales (the effect on traffic in the
broken down at the product level. deli and the overall store).

See Exhibit 2.
Framework and Analysis
There are three main questions asked to the candidate:
Which part of the business is responsible for the lack of profit
growth – deli meats, prepared foods, or both?

Is the lack of profit growth caused by flat revenues, increasing

costs, or both?

What is causing the flat revenues or increasing costs (and what

should the client do)?

Based on Exhibit 1, the candidate will see that gross margins for
both business lines are flat. Furthermore, deli meat sales have
been basically flat while prepared foods sales have been growing
at 10%.

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SUPERMARKET DELI TURNAROUND

EXHIBIT 1

$M
2002 2003 2004

Revenues 260 255 260

Deli meats
COGS 160 155 160

Revenues 360 400 440

Prepared foods
COGS 190 230 270

Revenues 620 655 700

Overall
COGS 350 385 430

Gross margin 270 270 270

SUPERMARKET DELI TURNAROUND

EXHIBIT 2

BBQ wings “Made-to-order” sandwiches

Price $5 for 20 pieces Price $4 per sandwich

Total material cost $0.10 per piece Avg. sales/store 20 sandwiches per day

Prep time 15 minutes per batch of 200 Total material cost $2 per sandwich

Employee cost $20 per hour (fully loaded) Employee cost 4 hours per day

Total COGS $2.50 per 20 pieces Dedicated hours 4 hours per day

Margin $2.50 per 20 pieces Revenue $80 per store per day

Total COGS Margin $120 per store per day

Margin $(40) per store per day

SAMPLE APPROACH

What should supermarket do to turn around deli?

Main question

Revenue and profit breakdown within deli External factors influencing the overall deli
• Deli meat revenue and profits flat-consistent market
with overall category • People have less time to cook at home -
• Prepared foods showing revenue growth prepared foods category growing, deli meats
(10% consistent with category) but no category flat
Key areas profit growth • Increasing competition from other deli
to explore - Therefore declining margins - why? departments - starting to expand product lines,
increase advertising, etc.
- Made-to-order (MTO) sandwiches losses
offsetting profit growth from BBQ wings

• Eliminate made-to-order sandwiches (at least in low-traffic stores or during non-peak hours)
Recommendation • Raise or lower prices on MTO sandwiches (depending on demand elasticity)
• Boost demand for MTO sandwiches (e.g., advertising, promotions, merchandising)

Other factors • Eliminating MTO sandwiches of boosting demand can impact overall traffic in store and deli

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Difficulty: Medium
Quant: Easy
Company: BCG

9.7 China Outsourcing

Quality: lower quality on freezer bags, equal quality on plastic
Problem set-up plates and utensils (both regular and specialty).
The client is a national manufacturer of plastic consumer products
that are sold in a variety of retail formats, including supermarkets, Lead time: need 3-4 weeks of additional lead time for each product
discounters, club stores, and dollar stores. The company has line for transportation from China to U.S. distribution center.
three main product lines: 1) freezer bags, 2) plastic plates and
utensils, and 3) specialty plates and utensils. 6. Chinese market, current client presence
All three categories are relatively underdeveloped but growing,
The CEO has been reading for some time about American dominated by local manufacturers. Client does not currently have
companies outsourcing their production overseas to low-cost any sales in China, although a few of their U.S. customers (e.g.,
countries such as China. She wonders whether this makes sense Wal-Mart) do have presence there.
for her company as well. It worries her that none of her main
competitors have established foreign production capabilities; on Framework and Analysis
the other hand, this could be a tremendous opportunity to gain a The candidate should start with a brief overview of the potential
competitive advantage. benefits and risks of outsourcing to China. The main benefit is lower
We have been asked to help the client understand the benefits costs, mostly driven by inexpensive labor. A secondary benefit is
and risks of moving its production capabilities to China and to a possible springboard into the emerging Chinese (and other
provide a recommendation. Asian) market. Risks include lower labor productivity, possible
quality issues, longer lead times, additional transportation costs,
Question and Facts and potential communication/coordination issues. The candidate
can be asked about the ramifications of longer lead times – they
1. Freezer bags include greater carrying costs, higher cycle and safety stock,
Plastic bags are used mainly to store food items in freezers. greater forecast error, and less responsiveness to demand.
According to customers, top purchase criterion is quality, since low
quality bags will result in food spoilage. Client is #3 in category, There are three main questions asked to the candidate: How much
with 200 million lbs. sold. The category leader has a strong brand cheaper is producing in China?
and strong innovation.
What do consumers value and how would outsourcing affect those
criteria?
2. Plastic plates and utensils
Disposable plates and utensils; intended for single/limited use. What are the client’s current production capabilities and how would
According to customers, top purchase criterion is price. Client is outsourcing part/all of their production affect the remainder?
#2 in category, with 300 million lbs. sold. Client is at cost parity
with category leader but has a weaker brand. First, the candidate should size the opportunity – is this a $5 million
or a $500 million opportunity? By solving for the last column in
3. Specialty plates and utensils Exhibit 1, the candidate will find that the client would save $0.25/
Plastic plates and utensils produced for specific retailers, lb. (25% of current costs) by outsourcing to China. Given current
customized to their design specs. According to customers, top production levels, the client would save $50 million by outsourcing
purchase criterion is style/design. Because many products are freezer bags, $75 million by outsourcing plastic plates and utensils,
new and untested, demand is highly variable. Client is #1 in and $25 million by outsourcing specialty plates and utensils. Two
category, with 100 million lbs. sold. No strong competitors. notes: 1) costs may increase if the Chinese Yuan rises versus the
dollar and 2) these estimates do not include a profit margin for the
Chinese outsourcing partner.
4. Current client production capabilities
All products are made in a single factory in Ohio. The factory is
The candidate should also recognize that cost savings alone are
at capacity and the company is considering building or acquiring a
not sufficient to make a decision. It is important to understand how
nearby facility.
an outsourced product will affect sales. The candidate should
suggest market research to understand consumer behavior.
5. Chinese production options
Client has no previous experience in building and managing a
Freezer bags: since customers’ top purchase criterion is quality
factory overseas. Client has met with several Chinese
and outsourcing would produce lower quality bags, the candidate
manufacturing partners and has done initial product testing.
should raise a red flag here. A more sophisticated recommendation
would be to conduct market research to see the impact on sales of
the lower quality bag at lower prices – even though quality
All three product lines have similar cost structures and savings
(Exhibit 1).

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is more important than price, the magnitude of a price change may specialty plates and utensils should not be outsourced.
override the drop in product quality. An analysis of customer purchase behavior indicates that plastic
plates and utensils should be outsourced, specialty plates and
Plastic plates and utensils: the top purchase criterion here is utensils should not be, and freezer bags probably should not be.
price, which makes this product line an attractive outsourcing The final step is to understand the impact of outsourcing on the
opportunity. The candidate can be asked what the client should client’s current production capabilities. For example, will it lead to
do with the cost savings – potential recommendations include plant closings (resulting in closing costs and possible negative
dropping price to steal share, investing to defend its position in publicity)? Will it lead to underutilization of current facilities?
case competitors begin outsourcing (e.g., brand, innovation,
customer service), and milking the product line as a cash cow. Since the current plant is already near capacity, moving plastic
plates and utensils offshore would actually save the client from
Specialty plates and utensils: the highly variable and unpre- investing in new facilities. However, since that product line makes
dictable demand for these products means that shorter lead times up 50% of total production (in terms of lbs.), removing it may create
are critical in order to adjust production quickly. Longer lead times too much extra capacity in the current plant for the two remaining
will result in greater forecast errors, higher safety/cycle stock, and lines. To compensate, the client could produce a new product line,
more unsold inventory and/or out-of-stocks. Therefore, rent out the extra capacity, or move to a smaller plant.

CHINA OUTSOURCING OPPORTUNITY

EXHIBIT 1

Costs in Costs in China Costs in

Costs U.S. ($/lb.) relative to U.S. China ($/lb.)

Labor 0.30 8% of wage rate

8% of productivity
Material
• Plastic resin 0.30 80%
• Other material (incl. packaging) 0.20 75%

Variable overhead 140%

Transportation
• China to U.S. distribution center N/A $6K to ship 40K lbs.
• U.S. distribution center to customer 0.05 Same

Total 1.00

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CHINA OUTSOURCING OPPORTUNITY

SAMPLE APPROACH

Should plastics manufacturer move production to China?

Main question

Cost savings Consumer behavior and Effect on current

• Would save $0.25/lb. purchase criterion production capabilities
(25% of current costs) • Quality is top purchase • Current plant is at capacity
• At current production levels, criterion for freezer bags - Outsourcing would eliminate
would save: - lower quality from China need to build additional
- $50M in freezer bags • Price is top criterion for plastic capacity
Key areas plates and utensils • Plastic plates and utensils are
to explore - $75M in plastic plates
and utensils • Style is top criterion for 50% of total production
- $25M in specialty specialty plates and utensils - Outsourcing may create too
plates and utensils - Highly variable demand much extra capacity
requires shot lead times

• Outsource plastic plates and utensils to China

Recommendation • Do not outsource specialty plates and utensils
• Do not outsource freezer bags (although further analysis may be warranted)

• To compensate for extra capacity that would be created in current plant, could produce new product line,
Other factors
rent out spare capacity, or move to smaller facility

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CHINA OUTSOURCING OPPORTUNITY

QUESTIONS AND FACTS

Topic Information

Raw mats ➡ Layering ➡ Sheeting ➡ Packaging ➡ Distrib.

• Rolls of • Adhesive • Rolls of

paper and liner layered
• Adhesive applied to paper cut
Supply chain rolls into sheets
• Non-stick
liner

• The client is not capacity constrained in its manufacturing process

• The client’s manufacturing and packaging operations are currently configured to package specialty papers in boxes

• There are approximately 24,000 commercial printers in the United States

• Printers are roughly categorized into three groups: small, medium, and large
• Differences among the groups are driven by the type of printing technology employed and the size of print
jobs that the printers are able to serve
Customers • Printers prefer to receive product from the specialty paper manufacturers in different forms, primarily driven
by the type of printing technology employed
- Small printers prefer to receive their specialty paper in boxes
- Medium printers prefer cartons of specialty paper
- Large printers prefer to receive palletized shipments of specialty paper

• The client has approximately 30% market share with small printers and only 10% share with medium
Market share
and large printers

• Margins are currently acceptable but management is against cutting price to gain market share, knowing that
Client financials competitions can match price cuts
• Price and cost to serve per equivalent box are different for each customer type

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Difficulty: Easy
Quant: Easy
Company: BCG

9.8 Specialty Paper Sales

Problem set-up The following is given to the candidate:

Your client is a leading manufacturer of specialty papers sold to • Investment and operation of carton packaging line would cost
commercial printers. The client produces self-adhesive sheeted $675,000 per year
papers that are ultimately used in a variety of labeling applications • Investment and operation of the palletizing line would cost
– including the labeling of consumer goods and the printing of self- $2,300,000 per year
adhesive signs.
A logical conclusion would be that an investment in a carton
Your client’s operations are profitable, but the business has failed packaging line would be a superior investment compared to the
to grow over the past few years. The client would like to invest in palletizing line
the business and you have been asked to identify opportunities for
growth. Potential conclusions:
• The carton packaging line is a less-risky investment (requires
Framework and Analysis less up-front capital)
The problem set-up indicates that the client wants to invest in this • The solution assumes a static environment. If large printers
business. Investment can take many forms including expansion of are growing in number and or usage of specialty paper,
manufacturing operations and capacity, expansion of customer- this may change the answer
facing activities, and acquisition of competitors. It is interesting to • The investment in a new carton packaging line would need
note that this is currently a profitable, no-growth business for to be evaluated against other potential investments
the client. Investment decisions cannot be made unless the to understand if it is the optimal use of the client’s capital
management team (and the candidate) understands the market
conditions as well as the client’s internal capabilities

This case does not lend itself well to traditional “case solution
structures”. A strong initial response is to list a set of internal and
external factors that must be understood and evaluated.
Ultimately, the candidate should decide whether investment is
warranted, and if so, where.

Strong hypotheses might include:

• Assuming the client is not capacity constrained, there are

likely groups of customers that represent opportunities for
profitable growth
• Depending upon the current go-to-market strategy, the client
may need to re-evaluate the way that it is configured to serve
existing and potential customers

The client can expand its packaging operations to better serve

medium or large customers, but not both. Client economics and
cost to serve each customer group are shown on Exhibit 1. For
simplicity, taxes and depreciation are ignored and SG&A is
assumed to be fixed.

The candidate should recognize that a comprehensive solution

evaluates the required investment to serve a particular market
segment (packaging line, manufacturing operations, additional
SG&A) against the expected return.

The candidate should evaluate the profit pool from serving medium
and large customers. This should be based upon an assumption
about the size of the market that the client can capture. Assuming
the client can match its small printer market share, the client could
capture an additional 20% of the medium or the large printer
customer segment

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GROWING SPECIALTY PAPER SALES

QUESTIONS AND FACTS

All figures are per equivalent box

Small (boxes) Medium (carton) Large (pallets)

Price to printer 20.00 18.00 15.00

Materials 5.50 5.50 5.50

Coating 1.00 1.00 1.00

Sheeting 0.50 0.50 0.50

Packaging (direct costs) 3.00 2.00 1.00

Gross profit/($ per equivalent box 10.00 9.00 7.00

Number of printers 20,000 3,000 1,000

Annual usage
100 500 3,000
(number of equivalent boxes)

Total potential profit pool ($) 20,000,000 13,500,000 21,000,000

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Difficulty: Easy
Quant: Easy
Company: Strategy&

9.9 Oil Tanker

Step 1: Background and question For completeness, the market-clearing price will be $37,500 per
My grandfather has just died and left me an oil tanker. I need a unit. Large tankers, all of which will be employed, will earn profits
valuation for tax purposes, and I have hired you to tell me what it of $50,000 per year and be worth $500,000. Half of medium
is worth. For your information, there are 3 types of tankers in tankers will be employed at rates that just cover their costs, while
the world: small, medium, and large. Within these three classes, the other half sit idle. Finally, small tankers will not have costs low
each tanker is identical to every other. I have just inherited a enough to enter the market and will also be worth zero or scrap
medium tanker value only.

Step 2: To be given as a response to student inquiries: If demand is instead fixed at 650 units, the small tankers will be
Supply-side information the marginal capacity and medium tankers will earn profits and
have positive value. The equilibrium price will now rise to $50,000
per unit. Medium tankers will earn $25,000 per year and be worth
Small Medium Large
$250,000; large tankers will earn $100,000 per year and be worth
$1,000,000.
Number 100 100 100

Step 4: Discussion
Capacity 1 unit 2 units 4 units
This case is a business problem that at its core is a relatively
Number of trips simple problem in microeconomics.
1 1 1
per year
Students need not get all the way to a numerical answer for the
Operating cost $50,000/trip $75,000/trip $100,000/trip value of the tanker, and few should be expected to give both
answers depending on demand assumptions. Nevertheless,
students should first demonstrate a good conceptual framework
for determining the tanker’s value, and be reasonably creative
Demand-side information about asking for the right kind of data to get at least part way to
Scenario I: fixed demand for 500 units of capacity per year the solution.
(transport costs are a negligible part of total oil-cost structure, and
demand is completely inelastic for purposes of this analysis). Note that both the revenue and cost side of the problem need to
be understood in order to reach a valuation.
Scenario II: fixed demand for 650 units of capacity per year (note:
change demand-side scenario to this only if student correctly
determines value of tanker under first scenario and if time permits).

The market is highly fragmented and therefore competitive. The

discount rate is 10%.

Step 3: Solution
Because the market is competitive, the market price will be the
lowest price sufficient to cause enough capacity to enter the
industry to serve the fixed demand, and the marginal unit will earn
revenue just sufficient to cover its costs.

Clearly, the large tankers have the lowest cost structure, followed
by the medium tankers and finally the small tankers. The large
tankers can supply 400 units of oil transportation services, the
medium tankers 200 units, and the small tankers 100 units.

If demand is fixed at 500 units, then medium tankers will be the

marginal capacity, and we can say directly that the market-
clearing price will be just sufficient to cover the costs of operating
such tankers. So my tanker has no value (or, alternatively, scrap
value only).

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Difficulty: Medium
Quant: Easy
Company: Strategy&

9.10 Video Game

Distribution
• Primarily outlets of distribution are top end electronics stores
Step 1: Background
The CEO of a large, diversified entertainment corporation has
Profitability
asked a team to examine the operations of a subsidiary of his
• Division currently exceeds corporate return requirements,
corporation that manufactures video games. Specifically, he needs
however, margins have recently been falling
to know if he should approve a $200 million capital request for
tripling the division’s capacity.
Product
• Hardware standards have been established by the industry
Step 2: Question
leaders
You are a member of the team assigned to this project. Assume
• Product features are constantly developed (e.g., new type of
you and I are at the first team meeting. What are the critical issues
remote joy stick), to appeal to segments of the market
we should plan to examine to determine if the industry is an
attractive one for the CEO to continue to invest and why?
Step 4: Solution
Minimum Requirements: the following issues would need to be
Step 3: To be given as a response to student inquiries
covered for candidate to have done an acceptable job:
The following information may be given if requested by the
candidates, though the candidate should focus on identifying
1) What is future market potential?
issues, not on obtaining more information.
The candidate needs to question the continuation of overall
industry growth. She/he might ask about the saturation of markets,
Market share
competitive products (home computers), and declining “per
• Division is 3rd largest manufacturer of hardware in industry
capita” usage.
(10 percent market share) Top two producers have 40 and 35
percent market share
2) What is the competitive outlook?
• Remainder is divided by small producers
The candidate should at least recognize the need to examine
• Division sells to broad range of consumers
competitive dynamics. Issue areas might include: concentration of
market shares; control of retail channels; and R&D capabilities
Sales
(rate of new product introductions, etc.).
• Division sales have increased rapidly over last year from a
relatively small base
3) What will be the price/volume relationships in the future?
• Current estimate is annual sales of 500,000 units
Issues of prices need to be considered.
• Current estimate of industry hardware sales is 5,000,000 units
annually
Better answers would address:
• Industry growth has been strong though over last few months,
Market Potential
however company sales growth has slowed
• Recognize that there is a relationship between market
• Division’s current sales price for the basic unit is $45 per unit
penetration and growth in new users which, when combined,
• Division remains less than 20 percent company sales
yields an industry volume estimate
• Top two competitors also develop, manufacture and sell
• Address the shifting mix of product purchases, in this case
software/games though division sells only licensed software
from hardware (player unit) to software
• Industry growth of software continues to increase
• Seek to look at buyer behavior in key buyer segments, i.e.,
“fad” potential of product
Cost
• Division estimates current cost is $30 fully loaded. Requested
Software
expansion should reduce the cost by 5 to 7 percent and triple
• Recognize technology standards are set by industry leaders.
production of the hardware unit
In this situation, the division as a secondary player will have to
• Top two competitors are estimated to have a 10 to 15 percent
follow these standards
cost advantage currently
• Recognize that different distribution needs may exist for
• Main costs are assembly components and labor
different products (in this case, hardware versus software)
Current
Price/Volume Relationships
• Division estimates much of initial target market (young
• Discuss the effect capacity additions can have on overall
families) has now purchased the video game hardware
industry price/volume relationships and on industry price levels
• No large new user segments have been identified

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Company Ability to Compete

• Should ask what the capacity expansion is designed to do
• Explore the cost position of the client division relative to that of
other competitors
• Seek to understand reasons for poor profit performance
of division

Step 5: Discussion
The primary issue of the case is to determine if the industry is
attractive and, especially, if our client’s position in that industry is
sustainable. The candidate should identify issues which are
necessary for assessing both the industry and our client’s position,
but should not be expected to solve the problem.

If the candidate begins to discuss too deeply a specific issue,

before having covered the key issues overall, he/she will probably
be brought back to discuss the industry more broadly by questions
such as “what other issues must be examined?”

If the candidate is discussing issues which seem irrelevant to the

attractiveness of the industry, he/she may be asked “how will that
analysis help to assess the attractiveness of the industry or our
client’s position?”

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Difficulty: Easy
Quant: Medium
Company: Strategy&

9.11 Toy manufacturer

Suggested answer:
Let’s say that we consider mainly (for this client) the market of 0-14
Your client is the third largest toy manufacturer in Europe and has
year old children. There are 10 million people in Belgium, which
come to you because their sales have been stagnant or even
translates into about 3 million households if you take an average
declining during the last few years. Sales had been rising before.
of 3 people per household. Not all households have children, and
Why are sales like this? How can the client improve the situation?
some have more than one, and so I guessed that there would be
Which elements would you like to analyze?
about 0.5 children on average in this age category per household,
so 1.5 million children.
Information to be given as a response to student inquiries:
• Company is selling traditional toys
Then I looked at the gifts they receive and started to enumerate
• Company segments their market into: pre-school (0-6 years),
important occasions children at that age get presents from their
girls’ toys and boys’ toys
parents: birthday, Christmas, beginning and end of school, and
• Highest volume products are: plastic toys, dolls and vehicles +
maybe one more occasion, which gives 5 in total. Then I said that
action figures
each time the parents would spend 50 Euros on average. So this
• Industry growth has been flat
means that each child receives toys for an amount of about 250
• Profit margin is ten to fifteen percent
Euros per year. I then multiplied the 250 Euros with the 1.5 million
• Production takes place in Asia
children to find my estimate for the toy market in Belgium of about
• Company has subsidiaries in main European markets,
375 million Euros.
responsible for sales in these markets. The sales force visits
the distributors of the toys, which are mainly supermarkets and
What would you think could be a reason of the stagnant sales
department stores on the one hand and dedicated toy shops
of the client? Suggested answer:
on the other hand
The first one that comes to mind is that the client is not strong in
• Brand image of client is good
the electronic game business, which has been the fastest growing
segment over the last decade in the toy industry. The client should
Question asked:
consider one of three options: either grow their electronics
Suppose you are in a meeting with this client and the question
business themselves, or buy a company that already is
arises as to how large the toy market really is in Belgium? How
specialized in electronic games, or else form a partnership with
would you determine this?
such a firm.

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Difficulty: Medium
Quant: Easy
Company: LEK

of a premium for its product relative to the competition, and

9.12 UK Premium Confectionary management strongly believes that any further premium would
Manufacturer have a severely detrimental impact on its sales volumes.]

2. Scope to achieve reductions in costs

You have been hired by a small confectionary manufacturer that [Supplementary question – which areas of cost are most likely to
is in financial trouble. They are based in the UK, where they offer scope for achieving reductions]
have a single manufacturing facility that serves the UK market.
The company has consistently been operating at a loss for the This question is open-ended and looking to test commercial
last 5 years. reasoning / judgement. Examples of points to make:
They have asked you to investigate the reasons for this, and • Starting with the variable costs, raw materials are a large
make recommendations to address the situation. element of the total cost, and would be worth looking at for that
reason. However, it may not offer much scope for reduction
since a number of the key inputs into chocolate (e.g. cocoa
Question 1: What is the current profit / loss position of the beans, sugar) are commodities. There may of course be some
manufacturer? scope to achieve better terms for increased volumes, which
You are provided with the following information: we consider later.
The plant sells 0.5m units of its specialty chocolate product per • Packaging and distribution is also likely to be a relatively
annum, and achieves an average price per unit of 50p. commoditised area, although given the niche premium
positioning of the product, it is possible that the packaging
Further information will be provided if requested across the costs are high relative to the industry. This might therefore be
following areas of cost: an area worth exploring further.
• Energy: The UK market is competitive and unlikely to offer
Per unit costs: scope for reduction, although the terms of current contract
would need to be investigated.
Raw materials: 24p
• Labour: Workforce is unlikely to be highly skilled in this sector,
Packaging and distribution: 3p with minimum wage levels setting a potential floor on any
Energy costs: 3p scope for reductions. Level of unionisation could also be a
Labour costs: 5p consideration, but unlikely to be an issue for a small-scale
manufacturer
Overhead costs: • Overhead costs – these costs are likely to relate to premise
lease costs, depreciation of plant and machinery, and
In total overhead costs amount to £100,000 per annum. No
managerial labour overhead. Depending on utilisation of
breakdown is provided (or needed for this question).
the premises, relocation to a cheaper location could be
Having identified the various categories of cost, the net profit can considered. Sales of plant and machinery could reduce the
be simply derived as follows: depreciation charge, but may not be feasible whilst maintaining
Net profit = (volume x unit price) – (volume x variable cost) a viable production facility. Overhead labour could also be
– fixed cost examined further, but given the total quantum of overhead may
= (0.5m x £0.50) – (0.5m x £0.35) - £100,000 not be significant.
= loss of £25,000
[Further guidance is provided that a working assumption should
be made that costs cannot be reduced in any category]
Question 2: Can this current loss-making be rectified?
This answer can be broken down into a consideration of each of 3. Scope to increase volume sales
the following areas in turn:
[Supplementary question - By how much would sales need to be
1. Scope to increase the unit price of the product increased in order to achieve break-even?]
2. Scope to achieve reductions in the quantum of variable costs Break-even can be calculated using the following formula:
or fixed overheads Break-even sales = Fixed costs / Gross profit
3. Scope to increase volume sales, and hence reduce the per = £100,000 / £0.15
unit fixed cost = 666,667 units

1. Price increase Given current unit sales of 0.5m, breakeven requires an increase
[Interviewer provides the following information - the confectionary of sales of 33%.
manufacturer is a relatively small player that has a distinctive
niche in the chocolate market. It already achieves something [Supplementary question – what factors would you want to
consider in assessing the potential for an increase in volumes]
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• Firstly, the capacity of the company would need to be [Supplementary question – the company has identified a potential
investigated. Guidance is provided that for the given cost new confectionary product that it could produce using existing
structure of the facility, volumes could be increased to up to machinery that would allow it to increase sales by 50% (assume
1m per annum, which exceeds the break-even level. the new product has the same unit price and cost structure as the
• Secondly, demand conditions would need to be considered current product). However, some re-tooling of the plant capacity
e.g. scope for increasing penetration of the current product would be required to provide the required production flexibility, and
into the market. [Guidance is provided that the product is this would cost £150,000. Would you recommend that the
relatively niche, and in its current form is unlikely to find much company proceed with this additional investment?]
in the way of additional untapped demand to be exploited].
The impact of the £150,000 investment can be evaluated as
• White-labelling of the product could also be considered e.g.
follows:
selling in volume to an up-market supermarket chain to be
own-labelled [Guidance is provided that currently no retailer
Profit impact of retooling = incremental sales x gross profit
is prepared to offer terms to the manufacturer that allow it to
= 0.5m x 50% = 250k x £0.15
realise its variable costs]
= £37.5k per annum
• It might also be worth investigating whether other
confectionary products could be produced utilising the The investment therefore offers a 4 year pay-back.
existing asset base of the company e.g. alternative chocolate
formulations, different-sized bars. Whether the company should proceed with this investment
depends on the company cost of capital. However, at this level of
return, it is likely to be a sensible investment.

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Difficulty: Medium
Quant: Easy
Company: Delta Partners

9.13 Telco A Security Services

• This is a broad, qualitative stragegy case and is to be given in a very open and conversational manner. No hard
data is provided - instead, the interviewer should ask the candidate to come up with assumptions and estimates
Note
to drive the case forward. Therefore, there is no “right” answer, but the candidate must be able to come up with
reasonable assumptions and then follow them logically to a conclusion.

• Teleco A is the nation’s largest provider of local telephone services. They are considering entering the home
Problem
security market. Should they?

Expected questions and answers

The candidate should explain what framework / structure he / she is going to use to solve the problem
Good Answer:
• I am going to look at the market size and what share of that the telco can get based on
Framework/ - Competition
structure - Internal capabilities
- xxx
• Then I will look at the cost structure to deploy this services for the telco
• If this mets xx, yy conditions then I would say yes, go for it

Priority discussion areas

If the candidate asks for the size of the market, make him/her come up with assumptions and calculate the total
market size. A sample calculation based on sample assumptions follows:
• Total Households in US: 100M
Market size • % Households Serviced by Telco A: 50%
• % Households That Can Afford Service: 50%
• Annual Subscription Price: $250
• Total Addressable Market: 100M x 50% x 50% x $250 = $6.25B

Ask the candidate to discuss what the cost structure might be for Telco A to enter this market. What are the fixed
costs? Variable costs? Does Telco A have a cost advantage over other players?
Good Answer: The business has very little fixed cost beyond the infrastructure already installed in potential
customers’ homes (i.e. the existing phone wiring). Customer would need door / window / motion sensors installed,
which could be done by a third-party installer and billed to the customer at cost + markup and owned by the
Cost customer
structure

Variable costs are also very small - essentially just the cost to maintain enough call centre operators to dispatch
police when alarms are triggered. Telco A does not seem to have much or a cost advantage over other players,
since they are all using the common carrier phone network. Telco A might have some economies of scale in
operating the call centre, but this effect would be slight.

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Expected questions and answers (1)

Ask the candidate to speculate on the various customer segments and their relative importance, size, and value
Good Answer: We can reasonably divide the customer base into urban and suburban customers, having different
Customer needs and different price sensitivities. Urban customers are likely to have lower incomes but a high willingness to
segment pay due to thd increased crime rate of the city. Suburban customers are likely to have a higher income but a lower
perceived threat due to a lower suburban crime rate. By first-degree price discrimnation, it may be reasonable to
charge the suburban customers a higher price because they are presumably less price sensitive. We can assume
that 50% of customers are urban and 50% suburban

Have the candidate come up with a pricing scheme and prices for each of their identified customer segments. There
is no right answer, but they must justify why they are setting the price they are. Some areas they might consider:
• Insurance companies generally give breaks on homeowner’s insurance for having an alarm. This will increase the
EVA to the customer and can inform pricing.
Pricing • What other services to homeowners pay for monthly? Cable, phone, DSL. How are the values of these services
perceived compared to the value of the alarm?
• Pricing will need to be competitive with other market players.
• The candidate might assume a net margin based on the competitive landscape and use this with assumed
market size to determine attractiveness rather than determining an end-consumer price.

2nd priority discussion areas

• The market is composed of a large number of mom-and-pop alarm company operators. No firm has over5%
Competition
market share overall, although there are some strong regional players

Expected questions and answers (2)

Regulation • The market is not regulated and government regulation is not expected to play a role

Ask the candidate what advantages Telco A might have in marketing via a vis its competitors. Keep points the
candidate should identify include:
• Telco A has monthly customer contact with a large pool of potential alarm services customers through its phone bills
Marketing
• Telco A already has brand loyalty for phone service, why not alarm service?
• Shear size of the company (and deep pockets) make it more able to achieve scale economies in marketing
and reach a broad audience.

A star condidate will see that his/her time is nearly up and will present a recommendation for the client without
prompting. If the interview is within 3 minutes of the end, ask:
Good Answer: Yes. Telco A possesses several small but important competitive advantages for entering into this
new market. It has economies of scale in call center operations that will enable it to be highly cost-competitive in
operating a security network. It has an established brand that the consumer associates with reliability as well as
with networking and communications - the primary function of a home security system. More importantly, Telco A
already reaches 50M households every month through its phone services bill that it could leverage to launch and
Conclusion market this new service. Also, the company has deep pockets and the ability to advertise such a service far more
effectively than the small, regional competitors.
The size of the opportunity is large enough for Telco A to consider. Assuming a potential market size of $6B in Telco
A’s territory, even at only a 10% share, Telco A can add $600M in revenue. Given the low cost structure of this
business and the high perceived value to the customer, this is likely to be highly profitable revenue as well.
With Telco A’s marketing clout and customer reach, the company should be able to gain significant market share
and become the national leader in this.

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Difficulty: Easy
Quant: Easy
Company: Delta Partners

9.14 Project Prioritization for IT Department

CASE LIBRARY

Project prioritisation for IT department

• You are doing a project for a mobile virtual network provider (MVNO), entering the market. IT team
Initial Information is overloaded with the requirements and CIO asked you to help with prioritisation of two critical
projects, which he received from Marketing and Sales team. How will you help him to solve this
challenge?

• Information given when requested:

Additional Information - Projects do not have any influence on each other
- Projects can be done at any period of time

Key Areas of Discussion Expected Answer

• Interviewer should identify the way of project assessment: potential impact and/or resources required
• Assuming that both projects are critical for owners (one is a new tech for the new offer and another
technology to improve channels performance), the interviewer should focus on cost assessment
• Ideally, candidate should propose several dimensions for cost assessment such as time, budget
and manpower
• Both projects are long-term (>1 year) and don’t require any extra budget.
• The key difference between the project is a manpower requirement:
- Project 1 needs 40 hours of project manager time and 100 hours of analyst time per week
Interview flow - Project 2 needs 20 hours of project manager time and 20 hours of analyst time per week
• Candidate should change the focus from demand part to supply and request the following
information:
- Available resources - IT department has 3 project manager and 4 analysts
- Current utilization - project managers are utilized by 50% and analysts are by 40%
• Making the assumption that each person has 8 hours working day and 5 days a week, candidate
should estimate the bottleneck (1 analyst resource) and say that IT department has resources
only for project 2

• Interviewer should ask the candidate to summarize the all available information and give the
recommendation
Final solution
• The exceptional candidate will remember that both projects are long-term and recommend the
company to hire one extra analyst to do both projects.

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Difficulty: Medium
Quant: Medium
Company: Bain

9.15 Company PaintCo Market growth: +

Number of cars: +
Client Situation Population: +
• PaintCo, a Major European industrial goods company, focuses Cars / person: ++
mainly on coatings. Car accidents involving paint damage: -
• The performance coatings division wants to develop a growth Distance travelled / car: =
strategy while maintaining high margins, by looking at the potential Accidents / km travelled: -
of its different businesses. Road infrastructure
• One of the businesses which we are looking at now is Vehicle Safety equipment in car
Refinishing, repairing scratches and other paint damage on cars, % damage repainted: =
where our client is #4 globally. Insurance coverage: +
• Vehicle Refinishing is currently one of the more profitable % insured cars declared total loss: -
businesses in PaintCo’s portfolio, selling premium and commodity % non-insured cars repaired: =
refinishing products which come with a wide array of services - Paint / car: -
from training to free equipment. # layers: =
• The client wants to find out what EBITDA growth it can expect Thickness of 1 layer: -
from its Vehicle Refinishing business going forward. Price of paint: ++

Steps to suggested case solution: Step 3: Potential Acquisition.

1. Split EBITDA growth into market growth, acquisitions and
profitability increase (Tests business insight - a plus, but not critical to get this)
2. Estimate market growth bottom up
3. Look at potential acquisitions We’ve done a screening of some potential targets, but although
4. Look at profitability increase interesting, the bigger targets have high synergies with their
5. Place refinishing in the portfolio, taking everything into account automotive OEM “factory” paints, which we are not selling.
Automotive OEM paints have a much lower margin.

Step 1: Structure the problem OK so we will either need to pay for synergies we won’t have or
EBITDA growth tree acquire a lower margin business which will not help our profitability
• Market growth objective.
• Acquisitions
• Profitability increase Step 4: Profitability Increase
• Mix effects
- Price (Tests analytical skills)
- Cost
Drivers are
Alternative:
• Revenue increase • Prices
• Price increase • Costs
- Raw materials
- Price / unit
- Mix effects - Production
• Volume increase - SG&A
- R&D
- Acquisition
- Market growth - Overhead
• Cost decrease
Half of our products are premium paints, which sell at 25 EUR
/liter, the other half are commodity selling at 15 EUR /liter. We do
not expect this mix to change
Step 2: Market Growth
Estimate the growth of the refinishing market (rough estimates are
(Give Figure 1: cost bar slide)
sufficient, no need for an exact %)

(Tests creativity by asking details on the potential drivers of each

element)

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Raw materials and sales are the largest cost elements. • Commodity sales cost: 4 €/liter
Raw material cost is in line with the benchmark, but sales is • 50% savings is 2 €/liter
not. • New cost: 11 €/liter
• Average cost: 50% * 11 €/liter + 50% * 19 €/liter = 15 €/liter
When you compare costs of premium products to commodity, • Average price: 50% * 15 €/liter + 50% * 25 €/liter = 20 €/liter
what do you see? • Margin = 1 - 15 €/liter / 20 €/liter = 5 €/liter / 20 €/liter = 25%

SG&A is almost as high in commodity as in premium. Couldn’t Step 5: Recommendation

we cut back services in commodity customers?
Given what you know, how would you position the vehicle refinish
(Give Figure 2, customer survey slide) business in the company’s portfolio? Would you invest, divest or
maintain? Why?
Premium gives high importance to service. For the others, price
is key. It seems feasible that cutting commodity services will Invest if possible, maintain otherwise
have no major impact on its sales.
(Looking for elements such as:
Suppose we could cut our SG&A costs for commodity products • Good growth & margin
by 50%, what would our new total EBITDA margin be? • More profitable in PaintCo’s portfolio
• #4 position
• Acquisitions will be difficult)

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FIGURE 1

FIGURE 2

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Difficulty: Medium
Quant: Medium
Company: OC&C Strategy

9.16 Heavy-Duty Soap (OC&C Strategy)

Part 1: Context

Our client, Clean Inc., is a manufacturer of heavy-duty soap with

most of its £200m in revenues concentrated in Europe and the
US. They sell soap to four client segments: healthcare, industry,
commercial, and food.

They have asked us to help them think about potential growth

opportunities in both their existing markets and elsewhere. Part 3: Growth Opportunities

Part 2: Market Sizing Question A: Now let us talk about the potential growth opportunities
for Clean. Before we get into specifics, how would you think about
Let us start by looking at one of Clean’s core markets, the UK,
the ways that our client could grow?
where the company generates 20% of its sales. How would you
go about sizing the market for Clean’s products in the UK? Answer A: Here you should introduce a relevant framework to
identify areas of growth. Examples frameworks include:
[A good answer will introduce two possible approaches (bottom-
up and top-down) and discuss benefits/drawbacks of each. The • 2x2 with New/Old Products vs Existing/New Customers works
selected approach should be bottom-up, at which point the well
interviewer will provide you with a data table :
• Domestic v. International is an important angle
• Innovation and new products is also key

• (Bonus) Identify growth drivers tied to either Price (Spend per

Employee) or Volume (Usage per Employee)

• (Bonus) Call out likely evolution of Number of Employees in

each sector (e.g., declining in Industry due to automation)

Question B: Can you think of a few potential growth opportunities

for each of the areas you have identified?
a) Introduce approach Answer B: open ended – no correct answer
• Market Size = number of Employees (i.e. users of soap) * Part 4: New Product
Spend per Employee
Context: Clean has been working for the past 10 years on an
• Specify differences in both inputs by client segment
innovative new product: an electronic group monitoring system for
b) Analyse each input separately soap usage. Their product consists of a sensor attached to a soap
dispenser that registers every time someone uses it; sensors are
• Spend per Employee = Usage per Person * Spend per Usage
wirelessly linked to a central database to generate reports.
» Specify time as part of calculations (per day, per year)
Pilot trials have started in two hospitals and the initial results have
» (Bonus) Mention distinction between MSP and RSP in been encouraging. It is now up to us to advise the CEO if he
value sizing of market should go ahead with the project or not.
» (Bonus) Mention penetration rate by segment (in the UK Question A: What do you think will be the impact of this new
it’s 100% for this case) product for the company? The market? What are the implications
for Clean’s strategy?
• Candidate should proactively estimate numbers based on
sensible assumptions Answer A: you should structure your answer to cover most of the
» Fill in the blanks in the data table in Exhibit 1 following:

• (Bonus) Sense checks you answer. For example: • Size of opportunity (potential market)

» Market share of Clean in UK is 40% • Time horizon for payback

» Personal experience on soap usage (amplified to account • Investment required

for heavier use) • Profitability of product

• (Bonus) Mention Impact of external factors, such as regulation, • IRR/NPV or other kind of internal threshold used for go/no-go
health scares, innovation, etc. decisions

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• Expected market share of Clean

• Other competitors

• Other types of products that achieve the same results (e.g.,

badges on users)

• Sectors to which this product would be attractive

• Demand and expected take-up of potential clients

• (Bonus) external drivers to make product attractive (eg, high

cost of low hand-washing compliance in healthcare)

Question B: Based on the data in Exhibit 3, what are the expected

profits by 2018 if they decide to go ahead with this product?

Answer B

• Assume linear market size growth (2014: £10m, 2015: £20m,

2016: £30m, 2017: £40m, 2018: £50m)

• Calculate yearly revenues with 60% share of product and 60%

Clean market share

» 2014: £3.6m; 2015: £7.2m; 2016: £10.8m; 2017: £14.4m;

2018: £18m

» Total Revenues: £54m

• 30% Margin = £16.2m

• Investment required = £13m (£5m in 2014, £2m in 2015, £2m

in 2016, £2m in 2017, £2m in 2018)

• Net Profit: £3.2m (25% return)

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Difficulty: Medium
Quant: Easy
Company: OC&C Strategy

9.17 Vitamins Retailer similarly likely to drive higher consumption

• Product innovation, such as the introduction of multi-vitamins,

Part 1: Context is likely to drive consumption
Our client is a leading specialist vitamins retailer, directly operating » (bonus) worth flagging that new products can drive high
c.500 stores in the UK. Their products include vitamins, minerals adoption at first, but may just be a temporary fad
and supplements, all sold as pills in bottle format (for the sake of
simplicity).
• The rise in specialist diets can drive higher penetration levels
and spend (e.g. supplements for people on a free-from/vegan diet
Part 2: Market Sizing and Growth Drivers or with intolerances)

Question 2a: How large is the UK vitamins market? (i.e. total • (bonus) Increased availability of products as they are
annual spend on vitamins) accessible via more retail channels, such as grocers, online and
D2C subscription services
Answer 2a: A good answer will introduce two possible approaches
(bottom-up and top-down) and discuss benefits/drawbacks of Part 3: Product Margins
each. One solid approach would be bottom-up starting with the UK Question 3a: The client sells both branded products and own-
population and based on average spend, segmented by age label products. Which are more attractive to sell from a margin
bracket. You should make sensible assumptions around perspective?
penetration & volume consumed by age bracket and support your
assumptions with a clear rationale. Answer 3a: Here you should break down the product economics
and highlight the differences between the two product types.
1) Introduce approach
The own-label products will be cheaper to sell, but substantially
• Market Size = Number of People (by age bracket) * Penetration cheaper to purchase (because there are many potential suppliers
rate * Annual spend per person relative to branded products). The branded sellers may be able to
• Specify differences in both inputs by client segment exhibit supplier power.

2) Analyse each input separately (Bonus) When thinking about price promotion, the Client has more
control on depth of promotion for own-label products but on the
• Number of people: start with the total UK population and break
downside, the investment in promotion has to be fully covered (i.e.
into sensible brackets with similar consumption levels
not shared with the brand).
• Penetration rate: explain rationale behind your assumptions
(Second Level Bonus) You can ask if the Client manufactures their
and why the penetration levels are different across the age
brackets own-label products, and if they do then their margins are higher
than on branded products because the Client captures both the
• Annual spend: keep it simple and be practical. Think about the RSP and MSP, as opposed to losing the MSP to the manufacturer
fact that vitamin is typically sold in bottles that can last several of branded products.
months, meaning that this is not a monthly purchase, making an
annual spend the better metric to use here (as opposed to Part 4: Investment Thesis
monthly) Question 4a: Given what we have learnt about the market, and by
Example calculation shown in Exhibit 1, resulting in a £1bn UK looking at below two charts on the channel shift & our client’s
market. revenues, would you invest in this business? Why?

Question 2b: Let us assume that the UK vitamins market is £1bn,

what are its underpinning growth drivers? Moreover, do you Answer 4a: This is a very attractive business due to several
believe that this market will grow in the future? reasons, which you should be able to derive following a logical
Answer 2b: A good approach is to structure the growth drivers in framework far
line with the metrics used to size the market in the previous 1) Is the market attractive?
question
• Yes, as established in Part 3, the market is growing
• Ageing population means will shift the weight to the higher
spenders therefore driving the market size up 2) Is it aligned with channel trends?

• Greater public awareness about the benefits of vitamins and • Mostly yes, using Exhibit 2 the specialist retailer channel mix
supplements is likely to drive up penetration across all age groups appears stable

• More government campaigns about nutritional requirements is • (Bonus) Another good point to add here is that the threat from
online might be a concern in the future, therefore the business

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should be prepared to expand their offer online if the market starts

to shift in that direction

3) Is the business well positioned with consumers?

• Yes, the Client is clearly to dominant player in this market. From

Exhibits 2 and 3, you can derive the Clients’ market share (18-
20%)

4) Is the business growing?

• Yes, you should first note from Exhibit 3 that Clients’ revenues
have consistently grown over the past 5 years, and from Exhibits 2
& 3 that their growth was far ahead of market growth (11% vs 4%)

Question 4b: As the new owner, how would you grow this
business?

Answer 4b: Here, you should come up with several ideas to grow
the business and elaborate on each. These questions are often to
test your creativity rather than focusing on a particularly clever
structure. Some examples are:

• Introduce new products and new formats (e.g. different size of

bottles, new vitamin mix)

• Rollout more stores in the UK with similar catchment

characteristics to strong performing existing stores

• Introduce online sales via own website. (Bonus) Discuss that

this is a pre-emptive move in the face of Amazon and online pure
plays entering this category

• Introduce products in adjacent categories to drive basket size

(e.g. healthy snacking, natural beauty products)

• Introduce a subscription scheme

• Expand to attractive international markets with similar

characteristics to the UK. This can be by opening own stores,
franchising stores, and/or wholesales to local retailers. Conditions
for market selection include:

o Large and growing vitamins market

o Similar consumption per capita & comparable consumer

attitude to vitamins

o Similar competitive landscape

o Easy product compliance processes (no import challenges)

o No regulatory challenges (e.g. do not enter countries where

vitamins are only sold at pharmacies by law)

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EXHIBIT 1: ANSWER TO PART 2

EXHIBIT 2: VITAMINS MARKET BY CHANNEL (£BN), 2012-16

EXHIBIT 3: CLIENT REVENUE (£M), 2012-16

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Difficulty: Medium
Quant: Medium
Company: Parthenon-EY

9.18 Gotham University Questions for candidates

Q1. Gotham University is currently loss making.

About the case:
1a. What do you think could be driving this loss making status?
This case is about Gotham University, which is a university in the
1b. Which of these drivers do you think is most important?
City of Metropolis that is spread across three campuses (which
are each a ~20 minute bus / tube ride away from each other) Q2. Before the start of the 2015/16 academic year, the university
had £35M in cash reserves, which was accumulated from selling
It is currently a low ranked university in the City of Metropolis
part of the estate.
Over the past five years, Gotham University has experienced
2a. Based on the estimated student numbers and expected costs
declining enrolments
(on the following data sheet), in what academic year do you expect
Gotham University is currently loss making (i.e. operates an the university to run out of cash?
annual financial deficit)
2b. We were provided this data by Gotham University. If you could
Advice to candidates: check any one of these numbers to ensure its validity, what
number would you check? (Diagram for Question 2)
If you don’t understand something, please ask for clarification
Q3a. What can Gotham University do to fix the fact that it is loss
There are no ‘tricks’ here – we are trying to find out what you can
do, not if we can catch you out making (assuming you can impact all variables)?

Q3b. And which of these potential solutions would you prioritise?

Take the time to think through your answer and structure your
response

Please write down your workings clearly on the sheets of paper

provided so that your interviewer can follow along

Please keep working through even as your interviewer is taking

notes

FOR CANDIDATE (Q2):

DATA FROM GOTHAM UNIVERSITY

Cash Reserves
£35M
(in the bank before the start of the 2015/16 academic year)

Number of Students in 2015/16 12,000

Expected Annual Growth in Student Numbers -15%

Annual Revenue per Student £9,000

Revenue per Student Increase in 2017/18 10%

Annual Fixed Costs £40M

Annual Variable Costs (% of student revenue) 80%

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FOR INTERVIEWER:
GOTHAM UNIVERSITY CASE EVALUATION (1 OF 3)

Question Poor Average Good Excellent

1. Gotham University is currently loss making. • Does not • Mentions either the • Structures the problem into the drivers of • Achieve all ‘good’ criteria
structure revenue or cost revenue and costs • Understands the importance of student
a. What do you think could be driving this the drivers, or • Picks up on the key drivers: numbers in driving a profitable business
loss making status? question mentions both but ‒ Revenue: student fees, student given the material fixed costs associated
and does lacks structure and numbers, additional revenue with this business
b. Which of these drivers do you think is
not get the misses several sources (i.e. cafeteria, housing, ‒ Identifies that the market context
most important?
most points etc.) be contributing to falling enrolment
(5 mins) important ‒ Fixed Costs: rent, investment in the (i.e. rising competition, changing
drivers estate (refurbishments) needs of students)
‒ Variable Costs: academic faculty, • Understands that a shrinking university m
administrative staff struggle to right size its cost base
(potentially resulting in: high teacher /
student ratios, poor estate utilisation,
inability to scale down central admin costs
etc.)
2. Before the start of the 2015/16 academic year, the • Can’t do • Can get many of • Sets up a table for each year • Achieve all ‘good’ criteria
university had £35M in cash reserves, which was calculation the calculation but • Does the calculation in each year correctly • Gets almost everything correct
accumulated from selling part of the estate. in year 1 needs help and but misses a few of the data points
• Significant guidance in all
a. Based on the estimated student numbers mathematic years
and expected costs (on the following data al errors
sheet), in what academic year do you
expect the university to run out of cash?

b. We were provided this data by Gotham

University. If you could check any one of
these numbers to ensure its validity, what
number would you check?
(10 mins)

FOR INTERVIEWER:
GOTHAM UNIVERSITY CASE EVALUATION (2 OF 3)

Question Poor Average Good Excellent

1. Gotham University is currently loss making. • Does not • Mentions either the • Structures the problem into the drivers of • Achieve all ‘good’ criteria
structure revenue or cost revenue and costs • Understands the importance of student
a. What do you think could be driving this the drivers, or • Picks up on the key drivers: numbers in driving a profitable business
loss making status? question mentions both but ‒ Revenue: student fees, student given the material fixed costs associated
and does lacks structure and numbers, additional revenue with this business
b. Which of these drivers do you think is
not get the misses several sources (i.e. cafeteria, housing, ‒ Identifies that the market context
most important?
most points etc.) be contributing to falling enrolment
(5 mins) important ‒ Fixed Costs: rent, investment in the (i.e. rising competition, changing
drivers estate (refurbishments) needs of students)
‒ Variable Costs: academic faculty, • Understands that a shrinking university m
administrative staff struggle to right size its cost base
(potentially resulting in: high teacher /
student ratios, poor estate utilisation,
inability to scale down central admin costs
etc.)
2. Before the start of the 2015/16 academic year, the • Can’t do • Can get many of • Sets up a table for each year • Achieve all ‘good’ criteria
university had £35M in cash reserves, which was calculation the calculation but • Does the calculation in each year correctly • Gets almost everything correct
accumulated from selling part of the estate. in year 1 needs help and but misses a few of the data points
• Significant guidance in all
a. Based on the estimated student numbers mathematic years
and expected costs (on the following data al errors
sheet), in what academic year do you
expect the university to run out of cash?

b. We were provided this data by Gotham

University. If you could check any one of
these numbers to ensure its validity, what
number would you check?
(10 mins)

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FOR INTERVIEWER:
GOTHAM UNIVERSITY CASE EVALUATION (3 OF 3) - CASH FLOW CALCULATION

Assumptions
Cash Reserves (Before the start of 2015/ 16) 35,000,000
Number of Students (2015/ 16) 12,000
Expected Annual Growth in Student Numbers -15%
Revenue per Student 9,000
Increase in Student Fees in 2017/ 18 10%
Fixed Costs 40,000,000
Variable Costs (%of student revenue) 80%

2015/16 2016/17 2017/18

Fees per Student 9,000 9,000 9,900
Number of Students 12,000 10,200 8,670
Total Revenue 108,000,000 91,800,000 85,833,000
Fixed Costs - 40,000,000 - 40,000,000 - 40,000,000
Variable Costs - 86,400,000 - 73,440,000 - 68,666,400
Total Costs - 126,400,000 - 113,440,000 - 108,666,400
Profit / Loss - 18,400,000 - 21,640,000 - 22,833,400
Cash Reserves 16,600,000 - 5,040,000 - 27,873,400

Gotham University runs out of cash in 2016/1

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Difficulty: Medium
Quant: Medium
Industry: Parthenon-EY

9.19 Premium Paints

About the case: Additional Information on UK Paints Industry

This case is about Premium Paints Ltd., (PPL) a company that 1. PPL only sells paint in 5L tins
sells “premium” paints for the interior and exterior of homes. For
2. The average price per litre of premium paint is £20; the average
now, the company only sells paint in the UK
price per litre for standard paint is £10
“Premium” or “posh” paints are priced at a premium to “standard”
3. On average, people paint 4 rooms per redecoration
paints, and market themselves as having better colour density and
a better finish than “standard” paints 4.On average, it takes 5L of paint per room

The market for premium paints has grown substantially over the Advice to candidates:
last two decades, and this growth has been led by PPL. PPL is
If you don’t understand something, please ask for clarification
the market leader in premium paint with sales of 4M litres of paint
in 2013 There are no ‘tricks’ here – we are trying to find out what you can
do, not if we can catch you out
PPL has hired Parthenon to answer three questions:
Take the time to think through your answer and structure your
Q1. What % of UK households does PPL serve with its paint response
products?
Please write down your workings clearly on the sheets of paper
Q2. How large (£) is the total premium paint market in 2013? provided so that your interviewer can follow along
Q3. What % of total paint sales (£) were premium paint sales in Please keep working through even as your interviewer is taking
2013?(slide on UK paints market summary plot) notes

FOR CANDIDATE: UK PAINT MARKET

MARKET SHARE OF PREMIUM VS. NON-PREMIUM PAINTS (VOLUME)

100%
100%

80
Fired Earth

60

40

20

0
Premium Paint Brands

Premium Paints Ltd. (PPL)

50%
Share of "Premium" Paints Market

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PREMIUM PAINTS QUESTIONS

Question Poor Average Good Excellent

Premium Paint Ltd sold 4M litres of • Limited view on required • Asked for some, but not all the • Identified the right data-points • Achieve all ‘good’ criteria
paint in 2013. What percent of UK assumptions data points needed to get to the number of HHs • Move from number of people
households are being “addressed” • No meaningful structure • Non-MECE structure using PPL share and volume using PPL in one year
[definition: when they paint, they use • Significant assistance required • Not fully sensible approach to • Market sized with a clear, seamlessly to number of HH
PPL] by PPL? in developing problem solving problem solving / needed MECE structure being addressed, identifying
approach prompts • Clearly arrive at the number of that a redecoration cycle
• Significant mathematical errors • Some minor mathematical HHs using PPL in one year assumption might be neces s
(10-15 mins) errors • When prompted quickly pick-up
on the redecoration cycle
How big is the total premium paint • Missed volume link to value • Got volume link to value, but • Needs to be prompted to ask • Achieve all ‘good’ criteria
market in the UK in 2013? mathematical errors for the share of premium paint • Understands the need to mo
or to move from value to from volume to value and th
(5 mins) volume PPL value to total premium
• However, when prompted the value
maths is executed well
What % of total paint sales were • Needing prompting to link • Linked to remainder of HHs, but • Linked to remainder of HHs, • Made no errors in approach
premium paint in 2013? premium calculation to answered in value not made minor mathematical maths
remainder of UK HHs percentage and made errors
(5 mins) mathematical errors
Additional Questions (if time): • Off the cuff view, binary answer, • Some consideration of factors • Further developed views on • Thoughtful identification of
without any strong rationale that might make a market market considerations, some market attractiveness factor
Do you think other markets would be attractive, e.g., percentage of level of prioritisation clear prioritisation based on
attractive for international market that is premium, logical assumptions of
expansion? How would you go about premium paint momentum, importance
assessing the most attractive presence of incumbents
opportunities?

Note: Candidates will have to make the assumption that all 25M HHs in the UK will undertake redecoration projects within 4 year
cycles, and that when they undertake these redecoration projects they choose to paint (as opposed to wall paper, for example)
Better candidates will ask on this assumption / identify this is an assumption they will have to make

ADDRESSABLE MARKET – CURRENT PENETRATION (PREMIUM AND TOTAL MARKET CALCULATIONS)

FY14 Premium Value Calculation

• Total # of UK HHs (given

4.0M Litres 25M

• Split between premium

1.6M 23.4M
5L per Room and standard HHs
Number of premium HHs Remaining HHs

£20/L £10/L • Price points (given)

4 Rooms
= £32M spend = £234M

Average price per litre of Average price per litre of

premium paint non-premium paint

• Average amount of paint

4 Years • Average redecoration cycle of 5L per Room 5L per Room
Redecoration cycle = £160M = £1.17B needed to paint one standar
HHs (need to request)
main room*

# of HHs using PPL every 4 yrs. 4 Rooms 4 Rooms •

800K = £640M = £4.68B
800K / 25M = 3.2% of UK HHs Average number of rooms
HHs addressed overall by
PPL painted per redecoration**

50% • Premium Paint Ltd. (PPL) share • Premium Paint Ltd. custome
4 Years 4 Years
PPL market share (from graph) paint on average once every
years**

1.6M £160M
Premium HHs in the UK
£1.17B
(6.4% of the total HHs)
Annual spend, non-

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Difficulty: Easy
Quant: N/A
Company: Oliver Wyman

9.20 Best Buy

Format: Answer Guidance for interviewers – not to be given to
candidates
You will present your response to this case question in front of a
panel of two Partners/Consultants for 30 minutes. You should • Candidates should frame the basic problem:
expect to present your response for approximately 15 minutes, ─ The basic objective is to generate revenue from doing
and the panelists will use the remaining time to ask any questions. something that Best Buy already does and doesn’t get paid for:
A whiteboard will be available in the room and you may bring serving as an electronics showroom
notes/exhibits with you.
─ The fundamental issue is that this is a one-sided value
Case question: exchange that Best Buy is trying to make less one-sided – so
The CEO of Best Buy (consumer electronics retailer) calls you and we’re trying to identify a zone of potential agreement. There are
shares the following situation: Our US retail store sales are two outcomes with different payoffs to the two parties:
declining because people are basically coming in, looking at − Best Buy keeps carrying Samsung
products, and then going home and buying them online more
cheaply elsewhere. I want to augment our revenue model by − Best Buy gets the showroom fee (+) AND whatever revenues
charging electronics manufacturers an annual showroom fee to they get from selling Samsung products (+)
carry their products in our store. I am meeting with Samsung in 2 − Samsung pays the showroom fee (-) BUT keeps the revenues
months to tell them this and I need help figuring out how much of (+) that they generate 1) directly from their sales at Best Buy and
a showroom fee I should ask for. What would your approach be to 2) sales that occur elsewhere but where the consumer’s decision
solving this problem for me over the next 2 months in advance of was influenced by seeing the product at Best Buy
the meeting?
− Best Buy stops carrying Samsung
Guidance:
− Best Buy loses revenues from selling Samsung products (-)
• You are expected to present an approach, not the answer –
focus on how you would solve this problem if you had time and − Samsung loses revenues from Best Buy sales and other sales
resources that benefitted from the Best Buy showroom (-)

• Be structured ─ There are a few twists that influence these numbers

─ Establish an objective – what are we really trying to solve? − The showroom effect may not work equally for all products –
perhaps consumers do want to touch and feel Samsung phones
─ Define a method – What are the key areas that a project would before buying but not DVD players (ie, they may be very content
need to focus on in order to accomplish this objective? just to buy online). Therefore Samsung may not be willing to pay
─ Prioritize – what are the important areas to focus on vs. the Best Buy anything for DVD players but they would for phones
less important ones? − Samsung would also care if Best Buy also carried competitors’
• Be analytical – this case isn’t about doing math on the spot but products – if Best Buy carried lots of near-substitutes, Samsung
it is imperative that you demonstrate fluency in analytical would pay less for the privilege of showrooming. If Best Buy locked
concepts. out competitors, then Samsung would pay more for that.

─ What analyses would you need to do to accomplish the • The approach should try to size the magnitudes of the various
objective and what information would you need? (+) and (-) effects taking into account these twists

─ Use and talk through exhibits to help the panel understand

your approach

• Be creative

• Please note, you are not permitted to use mobile phones or

other electronic devices as part of your case preparation

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Difficulty: Easy
Quant: N/A
Company: Oliver Wyman

9.21 Amazon Prime

Answer Guidance for interviewers – not to be given to
Format: candidates
You will present your response to this case question in front of a • Candidates should frame the problem:
panel of two Partners/Consultants for 30 minutes. You should
─ The key questions are already stated as evaluating the
expect to present your response for approximately 15 minutes,
profitability of the Amazon Prime program and finding ways to
and the panelists will use the remaining time to ask any questions.
improve its profitability
A whiteboard will be available in the room and you may bring
notes/exhibits with you. ─ Determining profitability involves an assessment of the relative
revenues and costs of having the program versus not
Case question:
─ Improving profitability involves identifying the drivers of
The Head of Strategy of Amazon (ecommerce retailer) wants to
profitability and understanding how to impact said drivers
hire us to address the following issue:
• Determining profitability can progress in various stages of
“It’s been almost a decade since we launched Amazon Prime in
sophistication
2005, a subscription service that provides free 2-day shipping to
customers for an annual fee. The CEO wants to know 1) how ─ Basic assessment identifies revenue from membership fees
profitable the program has been and 2) what changes should be and sales and costs of shipping
made going forward to increase profitability.”
─ More sophisticated answers address net profit relationship
The team asks you to take a first crack at the approach (NOT the between revenues from membership fees and additional sales
answer). You have 30 minutes to prepare and then present to your from the free 2-day shipping offer that Amazon hopes generate
fellow consultants enough profit to offset shipping costs, taking into account how
Prime members will be skewed towards higher annual shipping
Guidance:
costs
• You are expected to present an approach, not the answer –
─ The most sophisticated candidates would devise analysis to
focus on how you would solve this problem if you had time and
investigate the purchase behavior of Prime members and how
resources
they differ from non-Prime members to arrive at the net profitability
• Be structured of the program
─ Establish an objective – what are we really trying to solve? • Candidates should identify and clearly justify ways to impact
─ Define a method – What are the key areas that your approach the drivers of profitability, invoking concepts such as:
would need to focus on in order to accomplish this objective? ─ Customer segmentation to divide customers into casual
customers who occasionally buy one-off items from Amazon and
─ Prioritize – what are the important areas to focus on vs. the
habitual customers who regularly purchase everyday items from
less important ones?
Amazon. This can be done via purchase volume, frequency, or
• Be analytical – this case isn’t about doing math on the spot but purchase category (phone vs toilet paper). The idea is to identify
it is imperative that you demonstrate fluency in analytical ways to shift more customers from casual to habitual to improve
concepts. overall profitability via targeted offers, new services, etc.
─ What analyses would you need to do to accomplish the ─ Price optimization to determine the profit-maximizing annual
objective and what information would you need? membership fee by inferring customers’ utility functions based on
─ Use and talk through exhibits to help the panel understand which customers choose to enroll in Prime historically
your approach ─ Competitive advantage, whereby Amazon invested heavily in
• Be creative its logistics infrastructure to support the Amazon Prime program
by dramatically lowering the costs of offering free 2-day shipping
• Please note, you are not permitted to use mobile phones or via warehouse optimization and better inventory management
other electronic devices as part of your case preparation
• Candidates should clearly articulate at each step what results
they would need to see in their analysis to support their
conclusions

• Direct candidates away from answers that refer to other

Amazon services that distract from the case (e.g., Subscribe &
Save, Amazon Student)

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10/
Conclusion
We hope that the INSEAD Consulting Club Handbook will prove and group crack the case sessions. Please make the most of
useful to all INSEAD students in finding both summer internships these stimulating events, in addition to seeking more informal
and full-time jobs in consulting. opportunities to practice cases with colleagues and friends.

Please consider this book as one source of preparation for a We would welcome any feedback on improvements or general
career in consulting. The INSEAD Consulting Club in association comments about the book, to ensure that future editions
with Career Services organizes a range of events throughout the incorporate these suggestions and build on the last one. Please
year which also help you prepare. Some of these events include email: [email protected].
peer to peer mock case interview sessions, ex-consultant INSEAD
students sharing ‘a day in the life of a consultant’ experiences All the best!

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INSEAD
Consulting Club
mba-clubs.insead.edu

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