Case Interviews
A Group 5 Presentation
Agenda
What is a Case Interview ?
What do they assess in a case interview?
What are the types of case interviews ?
How to go about tackling a case ?
What are the different frameworks which can be used ?
Case based Interviews
3 step process Presentation of case by interviewer Exploring the underlying causes of the problem . Suggesting recommendations to remedy the problem.
Scenario based problem solving - real business situations Used majorly by strategy consulting firms.
What do they assess?
Analytical thought process Response to pressure
Business insight/judgment
Quantitative skills
Response to lack of information
Interpersonal skills
Creativity/inquisitiveness
Decision making ability
General Knowledge
Communication skills
Modes of presenting the problem
Types of Cases
Case Questions
Guesstimates/ Market Sizing
Business Problem
Brain Teasers
The Great Unknown
Parade of facts
Guesstimates / Market Sizing
The interviewer asks you to estimate a value using common-sense assumptions.
E.g.
• Estimate the number of gas stations in the US. • How much should our client pay for the Prudential Building? • How many golf balls are made in the US each year?
Market Sizing
Determine The Key Drivers Bottom Up or Top Down?
Make Assumptions
Calculate Use Round Numbers! Common sense check!
Analyze Results Implications?
Increasing Factors
Decreasing Factors
Adjust Answer
Adjust Answer
Guestimation Exercise
• 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
~ 50 million people play golf in the US
~ 2 to 3 balls per round
• Number of rounds they play per year
Average of 10 rounds per year
~ 10 rounds per year
~ 1.25 billion golf balls
Brain Teasers
Interviewer asks some sort of brainteasers or bizarre questions and sits back silently. They challenge a candidate's ability to think creatively.
E.g.
• Why are manhole covers round?
• Above is the graph of the rate at which water is flowing into a cylinder. Draw a graph of the volume of water in the cylinder. The Approach Be creative, and think (and talk) through why. Cover multiple reasons, but pick the most likely reason at the end
Business Problem
Most common form of case
Simulate the thinking of a consultant.
GREAT UNKNOWN • Provides very little Information • Tests ability to probe for additional details • Requires Structuring frameworks based on New facts
PARADE OF FACTS • Significant amount of info • Test ability to distill key issues • Requires depth of analysis based on relevant facts
Structured Problem Solving
You are a consultant for a German luxury car manufacturer interested in
entering the sports utility vehicle (SUV) market after noticing the market has
grown dramatically worldwide in the past two years. The client currently has no experience with manufacturing these types of vehicles. How would you advise the CEO about what his company should do?
Decomposing the case problem
Business Issues
Profitability
Example
What impact will the client’s entry have on sales and pricing of SUVs?
Investment
Should your client invest funds in developing a new vehicle? Should the client invest in the infrastructure necessary to make SUVs? Are there additional costs with training the line staff to make these vehicles? Does the client currently posses sales channels and infrastructure adequate to compete with incumbents? What are the impact on the organization of establishing this new line?
Business Operations
Market Impacts
How much market share would the client stand to gain if it enters the market? What competitive response can it expect from incumbents? Is there another way to enter the market without alerting the incumbents?
Stating Hypothesis of the case Problem
Framework Hypothesis
The client’s reputation for high quality in luxury vehicles will continue to be a competitive advantage; therefore, the client should leverage their brand image. The current fuel crisis may pose a threat to the SUV market, thus fuel efficiency would be key There is little position in the high-end market for SUVs; therefore the client should consider creating a lower-end model for every day users; pricing would have to be amenable to the price-sensitive consumer
SWOT Analysis
Kotler’s Four P’s
BCG’s Growth Share Matrix
The SUV market is growing slowly and the client’s current position will support a new line of vehicles Incumbents will vigorously defend their market share – additional analysis is required; significant investment to modify the factory will be required to make SUVs
Porter’s Five Forces
Testing the hypothesis of case
• Client should not invest in new technology because it will not be profitable
Hypothesis
Assumptions
• Resources and production elements will remain constant • Technology investment is one time fee
Questions
• What does technology cost? • Will the introduction of a new SUV impact the sales of current SUV’s? • What are revenue probabilities?
Test
• The client should invest in the technology if the potential profits demonstrate a higher return on investment than other opportunities
Analysis
• Costs vs. revenue • Compare to other investment opportunities (stocks, t-bills, etc.)
Summarizing the case findings
Investing in the necessary infrastructure will not be profitable
Areas for further examination
– Market based studies should be conducted to determine the impact of brand promotion and advertising on sales and customer retention
Recommendation
– Further analysis will be required to determine the most effective method for branding – It may also be worthwhile to undertake scenario planning
Eleven Things To Remember
1. Practice 2. Take notes as needed 3. Confirm, clarify, and question 4. Find facts 5. Utilize the tools you know 6. Find a framework and stick with it 7. Focus first, broaden later 8. Don’t jump to an answer; explain how you arrived at your conclusion 9. There’s no right answer (usually) 10. Don’t Circle 11. Don’t forget about your conclusion
Thank You !!!
Presented by: Abhinav Saraf Abhishek Anand Chandan Durgia Deval Valia Karan Aggarwal Mehul Sangoi 08FN-001 08FN-002 08FN-029 08FN-032 08FN-043 08FN-049
Appendix - Frameworks
Declining Profits
What's Driving the Decline?
Gather Information
Analyze Using Profit Equation
Revenues
Expenses
Price
Volume
Product Mix
Fixed Costs
Variable Costs
Unusual Expenses
Decreasing Comp. pressure?
Decrease
Increase
Selling Less Profitable Items
- Added Capacity?
- Raw Material Prices
- Writeoffs - Lawsuits
- Market Conditions - Competition
Higher Marg. Costs - Org. Dysfunction - Overtime
Increase Profitability
Revenues COGS SG&A
Price
Unit Volume
Direct Material
Direct Labor
Variable O/H
Price Sensitivity - Elasticity
Existing Market - Promotion - Place
Scale Economies /Diseconomies - Supply Constraints
Replace w/machines - Union?
Cost Acctg. - Allocation Drivers - Does pricing reflect Cost
Competitive Environ. - Substitutes
New Markets - Geographic - Economies of Scope
Inventory Mgmt. - Carrying Costs - Shrinkage
Can we explore economies of scope with entry into adjacent industry?
Increase capacity
Should We Increase Capacity?
Market Demand
Investment vs. Improvement
Industry Capacity
Market Trends
Improve Productivity
Add Capacity
Competitors Plans
Threats
Cyclical / Seasonal
Bottlenecks
Add shifts
Economy Global Competition Consumer tastes
Substitutes
Design for manuf.
Acquire Outsource
Customer Turnover
What Has Changed in the Following Environments?
Company
Customer
Competition
Regulatory
Product Is quality sagging?
Tastes changing?
Are low cost competitors stealing from us?
Do new tax incentives exist?
Price Have sensitivities changed? Overpriced versus our competition? Place Is our distribution getting squeezed out? Are Customers Changing Channels? Promotion Are we spending? Push vs. pull? Has public image changed?
Disposable income?
Are diffentiated competitors stealing from us?
Any new regulations restricting the use of our product and favoring substitues?
Demographics of our target?
Are competitors integrating into distribution and shutting us out? Are they offering our customers special incentives to switch? (particularly with substitutes)
Do new substitutes exist?
Competitive Response
Customer - What do they want? - How do they choose? Competitor - Where are we positioned? - Where is the competition? Company - How do we add value?
Values/Tastes
Price Sensitivity
Purchasing Habits
Product Place
Resources to respond?
Business relationships
Susbsitutes Demographic changes New customers?
Disposable income Mature market?
Distribution channel Price Bundled product?
Promotion
Cost structure Tangible Intangible Finances
Distributor Vendor Customer
Normal good?
• Given the above, is it worth making a competitive response? • How will the competition react? • Applying game theory or PARTS analysis may help.
New Product Introduction
Customer Does product met a need? Competition Is there any? Company Can we do it?
Product Have we done homework? What does the segment want? Proliferation of products already?
Price Have we explored sensitivity? Can we make a profit at this price?
Yes
No
Finance Are we able to finance the launch? Should we buy an existing producer?
Many
Few
Are there barriers to entry?
Will we be first movers?
Operations D0 we have capacity? Supply network?
Is market growing?
Promotion Push or Pull? Cost of launch? Will current promotions help?
What wil be the strategy? Low cost or Differentiated?
Yes Can we beat them?
Any precious resource that we own? (Ricardian rents)
Can we eat the young?
No Can we erect some?
Marketing Will we cannibalize existing products? Is this a complement / bundled good Does it build on resources?
Place Is distribution aligned with customer? Are we experienced in this channel?
International Expansion
Internal External Quantitative Doesit match our growth strategy? - ROE/ROI Cultural Differences of Customers - Tastes / product preferences - Values / gender roles Methods of Conducting Business - Introductions - Government contacts Educational Differences ROI / Hurdle Rate
Alliance with local firm? - Joint venture/distributor
Cash Flows
Can our resources succeed overseas? - Flexible enough to adapt?
Amount
Is organization consistent with overseas 'autonomy'
Economy & Exchange Rates
Timing - Startup / disposition - Operating Discount Rate
Corporate Values - Bribery Worker's conditions / child labor
Seasonality - Weather
Distribution system - Transportation infrastructure - Different channels Political Climate - Instability
Local Market - Size - Competition
Investment Decision
Investment Decision
NPV Analysis
Other Factors
Useful Life
Cash Flows
Discount Rate
Strategic Fit
Synergies
Environmental
Political
Competitors
Timing - Opportunity Cost
- Risk Free Rate - Inflation - Risk Adjust
- Missing Links of Value Chain
- Seasonality - Volatility - Inflation Demand Cycle
Stability Regulation
- Current Supply Potential Demand
Size - Market Potential - Outflows - Working Capital
Company Acquisition
Understand Purpose Diversification? Gain Market Share? Geographic Expansion?
Analyze Opportunity
Internal Factors
External Factors
Strategic Objective
Strengths & Weaknesses
Industry Attractiveness
Identify Acquisition Candidates
Resources
Acquisition Fit Porter's Five Forces Three C's Soft Issues - Culture/Fit - Management
Hard Issues - Price - Balance Sheet
Hostile Takeover Defense
Two Options Both Designed to Raise the Value of the Company
Self-Help
White Knight
Are We Highly Levered? (Relative to the Industry)
Classic M&A Is there a Firm That...
Yes
No
Has Financial Strength Strategic Compatability
Do We Have Cash?
Issue Debt, Buy Back Stock Cultural Fit
Yes Then Buy Back Stock to Raise Stock Price
No Can We Release Good News to Raise Stock Price?
Return on Invested capital (RoIC)
Minto Pyramid Framework
Where to use which ?