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Acing the Case Interview
MIT Careers OfficeRoom 12-170
Agenda
Introductions Business Case Interview Overview Types of Cases Frameworks Example Case Case Interview Tips Case Practice in Groups Questions
Source: Deloitte, 2005
Business Case Interview Overview
Q What is a Business Case Interview?
A A Business Case interview is an interactive experience where you will be presented with a business problem / scenario and asked to work through the solution based on the information available. The case interview is used to evaluate how you think and how you approach a problem. There is typically no right or wrong answer. A business case interview normally consists of a challenging question with incomplete information. Sometimes, business case interviews are based on actual client engagements.
"Remember that the best leaders never stop learning."
Abraham Lincoln
Source: Deloitte, 2005
Consulting Companies Use Business Case Interviews to Assess:
Logical / analytical thought processesCommunication skills CreativityBusiness insightsPerformance under pressureGeneral knowledge Problem solving with incomplete information
Objectives
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4
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7
Source: Deloitte, 2005
Types of Cases
3. General Business
Typical general business cases include the following subjects:
Falling Profits, New Product Introduction, Entering a New Market, Where to Locate a New Facility (Site Selection), Mergers and Acquisitions
2. Brainteasers
Puzzles or questions that challenge a candidates ability to think creatively.
Examples:
Why are manhole covers round?
Why do fashions change every year or two?
1. Market Sizing
Determine how big a particular problem is, or how many of X products are used.
Examples:
How many golf balls are made in the US each year?
How many cans of paint are needed to paint the Delta fleet?
Source: Deloitte, 2005
How many new golf balls would be used in the US in a given year?
Market Sizing
Possible Approach:
Number of golfers in the US
250 million people in the US, 20% of population plays golf
Number of balls they use per round
2 to 3 balls per round
Number of rounds they play per year
Average of 10 rounds per year
~ 1.25 billion golf balls
~ 50 million people play golf in the US
~ 2 to 3 balls per round
~ 10 rounds per year
Source: Deloitte, 2005
Best Buy has asked you to develop an expansion strategy
General Business
Possible Solutions:
Increase number of stores
Increase revenues within existing stores
Build new brands
Acquire competitor
Add products and services
Source: Deloitte, 2005
Use of Frameworks
Frameworks can help logically structure problem solving
Many different methodologies exist, for example: Porters 5 Forces (Suppliers, New Entrants, Buyers/Customers,
Threat of Substitutes, Industry Competitors) S.W.O.T. (Strengths/Weaknesses, Opportunities/Threats) 4 Cs (Customer, Costs, Competitors, Capabilities) 4 Ps (Price, Promotion, Place, Product)
Dont blindly follow a framework! Choose a framework based on the problem you are solving, and use the framework to organize your business case analysis
It is better to not apply a framework if you are unsure of how to use it. You dont need to use a framework as long as your response is well structured and your solution is sound
Source: Deloitte, 2005
Porters Five Forces is useful for understanding the competitive intensity and overall attractiveness of an industry.
Framework: Porters Five Forces
Leverage of suppliers over buyers
Supplier Power
Bargaining power of customers
Buyer Power
Rivalry among existing competitors
Industry Competition
Threat of substitute products and services stealing share from existing competitors
Threat of Substitutes
Threat of new entrants entering the market and stealing share from existing competitors
Barriers to EntryDescriptionForce
Source: Deloitte, 2005
Likelihood of entrance of new competitors
Changing consumer trends Economic upturn Changes in government regulation New technologies
Framework: S.W.O.T. AnalysisThe S.W.O.T. analysis is a useful framework for understanding a companys core competencies and shortcomings at a high level.
Sustainable distinctive competitive competency
Acknowledged market leader Adequate financial resources Cost advantages Management assets
Strengths
Obsolete facilities, products or services
High debt, low equity Lack of management depth Too narrow (or wide) product line Myopic promotion strategy
Weaknesses Market saturation Inflation or recession Threat of national security Natural disaster Trade restrictions
Threats
Opportunities
Source: Deloitte, 2005
Framework: The Four Cs
Demographics Purchasing Criteria Sales and go to market strategy Segmentation
Customers (Examples)
Competitive Advantage Market Share Perceived Value Price
Competitors (Examples)
Economies of Scale Inventory and other holding
costs Labor Leverage over suppliers
Acquisition of Raw Materials Production Strategy Organizational Strategy
Capabilities (Examples)
The Four Cs are a useful tool for understanding retail and sales oriented cases as well as for analyzing new product introductions.
Costs (Examples)
Source: Deloitte, 2005
Important Product Attributes Selection Criteria Value added
Product
Advertising Discounting Incentive Programs
Promotion
Predatory Pricing At Market Pricing Premium Pricing
Price
Distribution Strategy Location Organizational Strategy
Place
Framework: The Four Ps
The Four Ps are a useful tool for understanding marketing problems.
Source: Deloitte, 2005
Approach for Solving a Business Case Study
Use this 5 step approach for solving a business case study:
Understand the problem
Obtain more information
Apply Frameworks
Present Conclusion Recommend
As the case is being presented, the interviewee should write down key facts.
The interviewee will need to ask questions in order to gain clarity and insight into the problem.
As more questions are asked, it can be helpful to structure thoughts in an appropriate framework.
After all of the information has been analyzed, the interviewee should develop and present a conclusion.
Once the conclusion has been made, the interviewee should offer a recommendation and present their insights.
Source: Deloitte, 2005
Cracking the Case
Listen and understand the business case situation Determine your structure up front Communicate to the interviewer the issues you plan to evaluate If the Interviewer redirects you, dont fight them they may be trying to
pull you back on track Perform the appropriate calculations Ask questions that support or refine your framework Check your progress Wrap it up!
> Based on the facts you have gathered, draw a conclusion that answers the interviewers question
> Be prepared to wrap it up even if you run out of time
Source: Deloitte, 2005
Example Business Case - Background
Client:Drug Co, a major North American Drug / Convenience store has been
losing market share for three years. They have asked us to determine the cause for this trend and to recommend solutions to regain market share.
Background:Drug Co has 3000 stores in metro, suburban, and rural areas. Along
with prescription drugs, Drug Co sells food and beverages, and health and beauty aides.
Financial Snap Shot:Over the past three years Drug Co sales have increased at a
compound annual growth rate of 3%. During that same period, market share has declined from 10% to 5%.
Source: Deloitte, 2005
Step 1: Understand the Problem
Client: Major Drug Retailer (Drug Co) Locations: 3000 Stores in metro, suburban, and rural areas Products: Prescription drugs, food and beverages and health and
beauty aides Financial: 3% Growth in sales 50% decline in market share Objective: To determine why market share has declined and to offer a
recommendation on how to reverse this trend
As the interviewer presents the case, you should write down key facts. You will need to recall these facts later on in the case study.
Source: Deloitte, 2005
Step 2: Ask Questions and obtain more information
Financial: 3% Growth in sales and a 50% decline in market share What does the industry growth outlook look like What are the competitive characteristics of the industry
Products: Prescription drugs, food and beverages, and health and beauty aides
What is breakdown of Drug Cos revenue by product Which products have the highest and lowest growth
Locations: 3000 Stores in metro, suburban, and rural areas What is Drug Cos geographic foot print Where has Drug Co experienced the greatest growth
Source: Deloitte, 2005
In order to solve the case, you will need to ask questions which will add clarity and structure to the problem.
Step 2: Ask Questions and obtain more information
Over the past 3 years, the retail drug store industry has experienced a CAGR* of 7%. This growth has been fueled by:
More price sensitive consumers Discounting and other loyalty programs Growth in certain geographic segments
There are three types of competitors: National Drug Store Chains, e.g., CVS National Discount Chains, e.g., Wal-Mart Online Drug Store
Some cases will present qualitative as well as quantitative information.
Product % RevenueCAGR Last 3
Years
Prescription Drugs 20% 11%
Health and Beauty Aides
50% 1%
1%Food and Beverages
30%
Drug Co Revenue & Growth by Product
Region % RevenueCAGR Last 3
Years
Metro Area 40% 2%
Suburbs 20% 7%
2%Rural Area 40%
Drug Co Revenue & Growth by Region
* CAGR is the average annual growth rateSource: Deloitte, 2005
Step 3 Apply Frameworks
What are the barriers to expanding in each geographic region
What is the threat of substitutes from online stores such as drugstore.com
What is the rivalry between existing firms in each market
How much choice do consumers have in where to shop
What is Drug Cos relationship with its suppliers
As you think of questions it is important to structure your thoughts by applying an appropriate framework that you are comfortable using.
Region % RevenueCAGR Last
3 Years
Metro Area 40% 2%
Suburbs 20% 7%
2%Rural Area 40%
Porters Five Forces
Drug Co Revenue & Growth by Region
Product % RevenueCAGR Last
3 YearsPrescription
Drugs20% 11%
Health and Beauty Aides
50% 1%
1%Food and Beverages
30%
Drug Co Revenue & Growth by Product How do prices differ from competitors
What kind of promotional incentives exist, e.g., loyalty programs, discounts
How are products distributed to the stores within the different regions
How important are cost and convenience to consumers
The Four Ps
Source: Deloitte, 2005
Step 3 Apply Frameworks - ContinuedThe Four Ps is a useful framework to apply when analyzing the marketing effectiveness of a companys product.
Offerings Prescription Drugs Health and Beauty Aides Food and Beverages
Price Premium pricing. Prices typically 20% higher than market
Market pricing. Prices typically 10% higher than discounters
No promotion or loyalty program for consumers
Meant to be a follow on sale after customer has filled prescription order
Tier 2 status with consumer products companies
Quantity discounts with vendors less frequent
Customers value price and availability of desired products
Market pricing. Prices typically 20% higher than discounters
Promotion Free personal consultations with pharmacist
Prescription database which allows a customer to pick up a prescription in any store
No promotion or loyalty program for consumers
Meant to be a follow on sale after customer has filled prescription order
Place #7 buyer of prescription drugs
Relationships with all of the major drug producers
Tier 2 status with consumer products companies
Quantity discounts with vendors less frequent
Product Customers value the ability to purchase prescriptions at one location
Customers value price
The Four Ps
Source: Deloitte, 2005
Step 3 Apply Frameworks - ContinuedPorters Five Forces is a useful framework to apply when assessing the attractiveness of a certain customer segment or channel.
Porters Five Forces
Region Metro Area Suburbs Rural
Barriers to Entry High real-estate costs Lack of space for prime
locations
Moderate real-estate costs Prime locations available in
sprawling communities
Online drug stores and grocers moderately used
Territorial. Stores serve a particular geographic niche
Buyer has a some options within a particular region. Choice often made based on proximity to home
Suppliers are global pharmaceuticals and consumer goods companies
Building awareness Lack of high foot traffic
areas
Threat of Substitutes Online drug stores and grocers are widely used and are taking away share from traditional brick and mortar stores
Online drug stores and grocers moderately used
Industry Competition Intense. There is a drug store on every corner
Biggest threat from discounters such as Target and Wal-Mart
Buyer Power Buyer can buy similar products in many different stores
Buyers have few options to choose where to shop
Buyers constrained by budgets
Supplier Power Suppliers are global pharmaceuticals and consumers goods companies
Suppliers are global pharmaceuticals and consumer goods companies
Source: Deloitte, 2005
Step 4 Present ConclusionUse your analysis to develop a conclusion.
Drug Co is losing market share for two principle reasons Incorrect geographic footprint
Incorrect product strategy
Problems with Drug Cos current footprint Losing share from online drug stores in the metro areas
Losing share from discount stores in the rural areas
Not capturing growth opportunities in the suburbs
Problems with Drug Cos product strategy Too little emphasis on selling prescription drugs
Lack of customer loyalty program for health and beauty aides and food and beverages
Source: Deloitte, 2005
Step 5 Structure RecommendationPresent a well-structured and comprehensive recommendation.
What Drug Co should do to improve market share Concentrate on expanding in suburban areas
Sell more prescription drugs
Why Drug Co should expand in suburbs Moderate to low real-estate costs
Low penetration from online drug stores and discounters
Strong growth opportunities and prime locations available in developing suburbs
Why Drug Co should sell more prescription drugs Prescription drugs were the highest growth products for Drug Co
Build brand identity as the leading provider of prescription drugs in order to reinforce customer loyalty program
Source: Deloitte, 2005
Case Interview Tips Preparation
Practice! Grab a friend and practice some cases with him/her Wet Feet Press and The Vault have good practice cases on their web sites Check out Case Interview Resources tip-sheet from the MIT Careers Office Contact alumni in the Consulting field for insider tips Bring paper and pencil to the Business Case Interview
Execution Relax. The interviewer wants you to succeed as much as you do. Maintain your composure. Pretend you are having a conversation rather
than an interview Dont jump to an answer. Take your time and explain how you arrived at
your answer Ask questions, but if you need to make an assumption, state it and move on
Source: Deloitte, 2005
Things NOT To Do In A Case Panic or become emotional Guess Ramble Say I have no idea Change the subject or lose focus Make the problem more complicated Jump to conclusions
Source: Deloitte, 2005
Acing the Case InterviewAgendaBusiness Case Interview OverviewObjectivesTypes of CasesMarket SizingGeneral BusinessUse of FrameworksFramework: S.W.O.T. AnalysisFramework: The Four CsApproach for Solving a Business Case StudyCracking the CaseExample Business Case - Background Step 1: Understand the ProblemStep 2: Ask Questions and obtain more informationStep 2: Ask Questions and obtain more informationStep 3 Apply FrameworksStep 3 Apply Frameworks - ContinuedStep 3 Apply Frameworks - ContinuedStep 4 Present ConclusionStep 5 Structure RecommendationCase Interview TipsThings NOT To Do In A Case