Crack a case

Sample case
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 Market
Sizing

Business
Operations

Business
Strategy

Other

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Case 1: How many blue jeans are sold in Germany each year?
(This is a straightforward question and there are several ways of answering it.)

So the question is how many pairs of jeans are purchased in Germany every year. There a
couple of ways of answering this question. One way would be to build from the ground up by
Candidate assessing the jeans-wearing population and multiplying that number by the average number
answer of new jeans each person buys each year. Another way would be to estimate the number of
jeans that a single company makes each year and then multiply that by its market share. I’m
going to try the first way because I think my estimates will be more accurate.

The candidate has given a preview of what she will be doing and also provided two ways
Comment of assessing the problem.

Now let’s assume – for the sake of round numbers – that there are 80 million people in
Germany. What percentage of the population buys jeans? Jeans seem to be a staple in
most people’s wardrobes, but for different reasons: for example, jeans are fashion
statements for younger people, jeans are leisure and comfort wear for middle-aged people,
Candidate
and are functional for a large set of workers – mechanics, farmers, etc. I’ve even seen babies
answer wearing jeans! They are also available in a range of prices, so no one is really priced out the
entire jean market. I’d say, then, that about 80 percent of people wear jeans, this
makes the total jeans market 65 million. The next step will be to determine how many
pairs of jeans these 65 million people buy.

What the candidate has done well here is provide some insights into the jeans market and
let that insight drive the assumption. As a result, the candidate demonstrates some
Comment business savvy and intuition around customer behavior and price sensitivity. Also, note
that the use of 80 percent results in a more round number and that the candidate provides
the interviewer with a roadmap of where she is going next.

My guess would be that the average jeans-wearer has approximately three pairs of
jeans. I recognize that there will be a large range: some people will only have one pair,
Candidate others will have quite a few, based on their needs and what they wear jeans for, but an
answer average of three sounds about reasonable to me. Of course, if I was looking for exact market
sizing, I would segment the market much more and see how many jeans each segment
purchases.

Though the candidate is clearly guessing, this is okay as long as the interviewer is aware
Comment how you the candidate would get more detail if needed.

The next analysis involves estimating how often people buy jeans. Again, this is going to
depend on what people are wearing jeans for: those who wear jeans for style and fashion are
likely to replenish more quickly than someone who wears jeans around the house only. But
Candidate
again I’m going to take a guess and say that the average jeans last around three years.
answer Therefore, people are buying new jeans every three years, and if they have three pairs of
jeans each, it follows that on average they will be buying one new pair of jeans each
year, there are about 65 million new jeans bought each year.

The candidate has done a nice job of summarizing the logical steps and highlighting key
Comment assumptions.

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Case 2: How long does it take a Starbucks to serve enough coffee to
completely fill the gas tank of a hummer?
(This is a case designed to test your ability with numbers and your comfort with estimates and
assumptions.)

There are really three components to this question that I’ll need to walk through to
reach a solution First, how big is the average cup of coffee sold at an average
Candidate
Starbucks? Second, what is the rate at which Starbucks coffee is served? And
answer third, how big is the gas tank of a Hummer? Along the way I’ll need to do some
conversions and some simple arithmetic.

Excellent start. The candidate has clearly laid out an approach for the interviewer and has
Comment created a structure to ensure that he stays on track as he moves through the solution.

From my own visits to Starbucks, I know that there are a few different sizes available. You
Candidate
can buy a small, a medium, a large, and maybe even a “grande”. In any event, let’s assume
answer for this question that the average size of a cup of coffee sold is about 0.5 liters.

When the question is open-ended, there’s nothing wrong with making an informed
Comment assumption about a component part and moving on. Don’t get tangled up in too many
trivial details. And, as always with market-sizing questions, use round numbers.

The question of the rate is a little bit trickier, as that varies depending on the time of day,
day of the week, possibly temperature, and even time of the year. To keep things
manageable, let’s assume that we’re talking about a Starbucks that’s open five days a week,
like the one near my office. The busiest time of day is likely to be the morning rush, between
Candidate the hours of approximately 7:00 a.m. and 9:00 a.m. At those times, the Starbucks should be
answer staffed most heavily and drawing the greatest crowd, so the rate of service will be higher. At
other times of the day the rate is likely to be slower. So let’s assume that between 7:00 a.m.
and 9:00 a.m., two customers per minute are served, and at all other hours of the day, only
one customer per minute is served. Therefore, on a weighted average basis, 1.2
customers per minute are served on average throughout the course of the day.

The candidate has handled the somewhat tricky rate question well, first by choosing
manageable but believable numbers, and next by displaying his understanding of the concept
Comment of weighted average, a simple but common formula that surfaces all the time in the world of
consulting. In this case, the formula would be [(2 customers per minute x 2 hours) + (1 customer
per minute x 8 hours)] / (10 hours, or 600 minutes) = 1.2 customers per minute.

So, 1.2 customers per minute equals 72 customers per hour and we’ve already
Candidate
established that each customer on average purchases 0.5 liter of coffee. Therefore, in a given
answer hour, there are 72 x 0.5, or 36 liters of coffee sold.

Lastly, assuming that the Hummer has a tank much bigger than an average car, a
Candidate
tank that holds say 150 liters of gasoline, it would take a Starbucks a little bit
answer more than four hours to sell enough coffee to fill the tank.

Having navigated all of the somewhat tricky points of the case, the candidate wraps up
Comment succinctly and confidently.

Interviewer
Well done.
answer

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 Market
Sizing

Business
Operations

Business
Strategy

Other

5 of 30
Case 1: A leading breakfast cereal manufacturer has hired your to
determine why its profits have taken a dive in the last year. What should it
do to improve its performance?
(This is a typical case of declining profits. The interviewer is exploring the candidate’s
understanding of basic business concepts and logical components of operating a
manufacturing business.)

If profits have dropped, then either revenues have decreased recently, costs
Candidate have increased, or both. Let’s start with revenues. Has there been a drop to revenues
answer recently? Specifically, have any changes in sales volumes or product pricing occurred, which
would bring revenues down?

The candidate has shown that she understands the profit equation. She then proceeds by
confidently diving into revenues. Also, she asks the question of revenue decline while at the
Comment same time demonstrating her understanding of its components, price and volume. She
may have scored additional points by mentioning potential reasons for price and volume
changes, but she may be focusing on just gathering information up front, which is fine.

Interviewer Yes, there have been changes to the client’s revenue picture. Sales have
answer dropped by 5 percent. Pricing has not changed.

Okay, if pricing has not changed, the volume of cereal sales has declined. Let’s
Candidate explore this in greater detail. A decline in volume could be tied to a shrinking cereal
answer market or to a reduction in market share. Perhaps the market for cereal is on the
decline, say due to an increase in substitute products at coffee shops, for example.

She is staying to her structuring by methodically investigating the problem. At this point,
she begins to point out possible levers to shrinking volume. In doing this, she shows two
Comment high-level areas potentially responsible, namely market share or market size. Further, she
presents a creative and logical rationale for why the market may be shrinking.

That’s an interesting hypothesis. While the market for cereal has declined in the last
Interviewer
10 years, it leveled off last year and thus a shrinking market does not seem to be
answer our problem here.

So our client has been losing market share. Let’s consider the reasons for this by
looking at competitors and customers. Let’s look at competitors first. Have
Candidate competitors made any major strategic moves recently that may cause customers to buy their
answer cereal over our clients? For example, they may have stepped up marketing efforts, improve
existing products, introduced new products better aligned with customers, or lowered their
pricing. Have any of these things occurred?

Good. She took the clue to skip market size and move to market share. In doing so, she
presents logical reasons why share may be dropping. This is always smart because it
Comment serves as dual purpose of demonstrating creative hypotheses, while proactively getting the
interviewer to steer you closer to the content path. She also shows part of the three C’s
framework by looking at competition.

Interviewer Interestingly enough, no. Competitors have not done a thing, but have picked up
answer market share as you mentioned. What about customers?

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 The interviewer has noted the candidate’s consideration of competitors, and is now
Comment steering hr towards customers to gauge her hypotheses.

I would want to assess not only end customers, but retail customers like supermarkets, mass
Candidate merchants and membership clubs. I would segment the end consumers first, to see if there
answer has been a shift in preferences away from our client’s cereal types toward those of its
competitors, say from sugar to healthy cereals.

Excellent. The candidate highlights that there are two very different groups of customers,
the stores that sell cereal and the end consumer of cereal. She also introduces a
Comment segmentation strategy, the cornerstone of many consulting problem-solving techniques. In
doing this, again, she presents a potential rationale for a shift in consumer preferences.

The client has done extensive market research and found no changes in
Interviewer
consumer preferences. In fact, our client’s brand has been and remains on top in
answer the minds of consumers. What would you look at regarding retail customers?

Comment The interviewer continues to steer the candidate through the possibilities.

Well, considering we have lost market share in a non-shrinking market in which consumers
Candidate favor our product brand, pricing and selection over competitors, we may have a supply
answer problem. Have our retail customers had problems with the product supply coming from
our client?

The candidate effectively summarizes what she knows so far, showing the interviewer that
Comment she is staying in touch, and is noting clues along the way.

Yes. Stock-outs have been increasing over the last year and retail customers have
Interviewer become agitated with orders frequently not being fulfilled by our client.
answer Specifically, of the five cereal products produced by our client, it is only the “Amazing Flakes”
line that is having problems. Unfortunately, this product is typically 60 percent of sales.

She is now on to something. But a bit of a curve ball has been thrown. The interviewer is
now shifting away from the traditional drivers of consumer problems and toward the last
Comment of the C’s, the company and its operations. Further, the candidate is being asked to focus
her analysis on one manufacturing line, most likely in the interest of time. This is
undoubtedly meant to test the candidate’s logic around manufacturing operations.

Interesting. Okay, the revenue problem is neither customer not competitive

driven, but rather caused by our client’s capacity to fulfill orders. Let’s scrutinize
our client’s company to determine what the problem is. Not enough “Amazing Flakes” are
being produced, so our client is capacity constrained. Further, they have maxed out the
Candidate
production line’s potential under efficient conditions and must expand, or something is
answer going on with the line’s efficiency. My hypothesis is that the line has stumbled in the last
year, sine we know that the size of the market has not grown and we assume that
our client was able to supply enough “Amazing Flakes” in the past when the line
was running well.

This is very good. The candidate shows an understanding of the two primary potential
scenarios behind capacity problems. Better yet, she assesses earlier information about a
Comment flat market to hypothesize that the problem is one of efficiency and not plant size since the
client once could fulfill demand.

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 Good thinking. You are correct. Our client knows that expansion is not the answer, plus they
Interviewer are capital constrained as it is They don’t seem to be optimizing their plant’s
answer capacity on the Flakes line. Let’s explore this. As you do, think about the capacity issue in
terms of costs.

The interviewer is asking the candidate to directly talk about costs now. A very
Comment comprehensive case indeed!

The cost structure of a manufacturing plant will be heavily weighted toward the
fixed cost of plant and equipment, and therefore capacity utilization is key –
especially if there is sufficient demand. We already know that there has been a drop
Candidate
in revenue, but given the link to our client’s capacity problem, the cost per unit has
answer undoubtedly risen because fewer units are being spread out across the fixed assets.
Variable costs – raw materials, for example – should also be scrutinized. Has
there been any change in variable cost per unit?

Good demonstration of her understanding of fixed and material costs as they relate to a
Comment capital intensive manufacturing plant.

You are correct about fixed costs. In fact, the “Amazing Flakes” line was running at 90
Interviewer percent of its potential last year, but now is being utilized only 70 percent of the
answer time. Variable costs have also gone up per outputted unit, while suppliers of rice,
vitamins, and sweeteners have not raised the prices that charge to our client.

Careful here. Variable costs have gone up per box of cereal, but suppliers have not raised
prices. The interviewer is seeing whether the candidate can speak immediately to this
Comment dynamic. Also, the utilization numbers clearly illustrate an efficiency problem, confirming
that the candidate is on the right track.

The “Amazing Flakes” line is in serious trouble. I would want to conduct a full analysis
of the three major aspects of a manufacturing line. Utilization, throughput,
and quality. In other words, we want our client to be up and running, as much as possible,
we want as many boxes of cereal being produced per unit of operating time as possible, and
Candidate
of those units, we want as little waste as possible. With utilization first, we know that the
answer machines are not running 30 percent of the time. This could be due to the labor strikes or
unscheduled downtime for maintenance. This rise in variable costs indicates that
there is a lot of wasted raw materials. Perhaps the machines are not calibrated
correctly. How is throughput?

The candidate has impressively showed her understanding of the three logical aspects of a
manufacturing line. Again, she is taking clues given to her to present some hypotheses
Comment around utilization and quality. This will show the interviewer her creative thinking, while
getting the interviewer to reveal which hypotheses are going in the right direction.

Interviewer Throughput is normal. Talk to me more about utilization. You are right about the
answer machine being down for maintenance more often. What could be happening?

Well, the machines may have not been overhauled correctly, they may be just
Candidate
wearing down from age, or maybe the management of the line is less effective
answer than it uses to be.

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 Interviewer Good point. There was, in fact, a management change last year on the “Amazing
answer Flakes” line.

That may be a driver. What changes in management approach occurred with the switch?
Candidate How about maintenance? The new manager may be doing something different that
answer is resulting in more downtime. Is all the maintenance reactive to a machine after it
breaks or is any preventative maintenance down?

The candidate continues to aggressively investigate, while suggesting possibilities along

Comment the way. A good combination of techniques that will pay dividends in the mind of the
interviewer.

Interesting question. The new manager ceased what he considered the excessive
Interviewer
and costly preventive maintenance imposed by the previous manager. But this
answer seems to be a problem since the line is broken 30 percent of the time now.

Ah. Yes, it is a problem, both managers could be correct to some extent. The new manager
claims it is not economical to do “excessive” preventative maintenance. The previous
manager imposed this kind of maintenance to avoid downtime. What would I do as their
consultant is look at all machines on the line to determine failure history of each.
I would also rank the level of impact each machine has on the line. I would
Candidate
institute regular and rigorous preventative maintenance on those machines
answer with high- impact (i.e., those that single-handedly could result in a line shutdown) and
with high failure frequency. In that vein, I would avoid costly preventative
maintenance on machines of lower criticality and less frequent mechanical
problems. Ultimately this will allow the client to maximize the value it draws from
its fixed asset base in an environment of high demand.

The candidate especially hesitates to criticize the current or past decisions of client
managers, and clearly considers optimal and sub-optimal aspects of both managers’
maintenance strategies. This candidate displays a strong finish by taking the last clue and
Comment running with it toward a solid conclusion and recommendation. In doing so, she presents a
logical framework of segmenting machines and ranking where each of them falls on scales
of both impact and failure rate. She explains that it would be the result of this analysis that
would gain the details of a final recommendation.

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Case 2: A regional bank interested in expanding beyond commercial
banking services has merged with a major asset management firm. They
are struggling with post-merger integration and have hired your to help
them. What issues would you address?
(This question is less investigative in nature, but seeks to evaluate whether the candidate
understand what challenges are critical areas a firm in a complex post-merger integration may
face. The candidate is charged with structuring and displaying a comprehensive view of issues,
as opposed to coming up with a specific solution.)

Interesting situation. Let me first give you a sense of how I would structure my approach,
and then I will drive deeper into each issue. I would think about this challenge using both
Candidate an external and internal perspective. Externally, I would consider the
answer customer, first and foremost. I would also manage the impression by Wall Street
regarding the merger. Internally, I would break my focus into five categories:
organizational, cultural, technological, operational and strategic

The candidate lets the interviewer know how she plans on approaching the question. She
lays out a simple, yet effective framework for considering the situation. She also lays out
Comment her planned areas of focus within both internal and external perspectives. This is valuable
on two levels. First, it demonstrates thoughtful structure and gives the interviewer an
opportunity to direct you down the most desirable path.

Interviewer
Sounds good. What would you think of first?
answer

I would think of the customer first. Depending on how communication has been
handled to date, customers may not feel comfortable with the uncertainty that typically
accompanies a merger. Risk of customer attrition must therefore be managed. Let’s
assume little has been done to date. I would first send announcements to my customers
Candidate
explaining the benefits of the merger and expressing our appreciation for their business.
answer Some benefits may be bundled product offerings, access to a greater network of investment
research, and better investments in baking rates. I would also have all relationship managers
actively visiting and communicating with our most profitable customers. Finally, I may
consider a brief survey to gauge customer concerns and preferences.

Smart to pick customer first. All service business should start with the customer. She
explains why there may be an issue, regarding customer satisfaction in face of a merge,
states an assumption, explains the business risk, and then proceeds to suggest several
Comment ideas to addressing the problem. Remember, this is not as much of an investigative case,
such as a profitability case, and so this sequence of points is exactly what the interviewer is
seeking.

Interviewer That’s great so far. Your earlier point about managing Wall Street is an important one, but
answer let’s move on to internal challenges. What issue would you address around culture?

The interviewer wishes to redirect the candidate toward an internal perspective and is
Comment satisfied with the candidate having mentioned, and briefly touched upon, the external
issues. Points are scored and focus is achieved.

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 With any luck, the architects of the merger carefully evaluated cultural mix before the
merger was transacted. Unfortunately, this is often one of the least considered and analyzed
factors in a pre-merger situation. I would take a similar path to that taken with my
customers. Both formal and informal communication is critical, and
Candidate
expectations, hopes and concerns must be heard and addressed. Additionally, I
answer would encourage all mangers to informally meet with employees to gauge potential
issues, as well as to communicate corporate strategy. This open communication will
help diagnose cultural issues as they surface. They can then be prioritized and addressed
accordingly.

Without being very presumptuous, the candidate demonstrates some knowledge of typical
merger pitfalls and uses this knowledge to logically prioritize her discussion points.
Comment Further, as she introduces culture into the discussion, she begins by suggesting the
gathering of information, both formally and informally. All effective consulting cases are
predicated on gathering sufficient data first, even if the answer seems clear.

Interviewer
You mentioned technology. What would need to be done around technology?
answer

The interviewer is not gauging technical expertise, but the typical connection between
Comment technology and a successful and profitable business, especially through a merger transition.

I would imagine that there are complicated customer systems that help both companies
mange their customers, track profitability, store transaction histories, execute transactions,
and so on. Customers may even have access to proprietary account reporting software.
Having some experience with financial services, I know that companies often have old legacy
Candidate systems that are not easily integrated with other legacy systems. I would evaluate the
answer strategic and operational significance of the systems that exist across two firms and work
with in-house technology experts to assess integration options. Technology is a critical
part of a merger integration to get right, as any problem in transaction
execution, balance reporting or customer information could damage the firm’s
credibility with clients, perhaps irreparably.

The candidate provides logical examples and draws from previous experience to assist in tackling
Comment the situation. As a result, she gains credibility in her views and demonstrates resourcefulness.

Interviewer What about operational issues? Give me a couple examples of what you would address
answer operationally.

The interviewer seems satisfied with her briefly addressing culture and technology, and
Comment new moves the candidate on to operational issues.

The merged firm will have to meet the challenge of presenting a seamless, consolidated
service for what previously were two customer groups, one commercial banking and one
asset management. It will be critical that customers see the company as one and not as two
separate companies sharing the same name. Relationship managers will need to be trained
Candidate across products so they can look out for best interest of their clients. Call centers will need to
answer function cohesively and may have to be combined geographically. Call center reps will need
to have efficient access to accurate customer information, as well as trained on how to use
that information. For example, it makes strategic sense to flag critical customers so call
center reps can provide the appropriate level of service. To do this, it would be necessary to
segment the news, combined customer group based on both current and future profitability.

11 of 30
 The candidate continues to demonstrate the importance of looking through the customers
eyes. Good consultants must not be overly academic and inward-looking, but rather
continuously take an “outside-in” perspective of the business. In doing this, she highlights a
very important business point – and one that consultants frequently focus on – which is
Comment suggesting the “customer profitability gradient”. Customers have varying levels of cost to
support and subsequent levels of current and future profitability. These two sides of the
customer equation must be used to prioritize a company’s focus, as rarely are there enough
resources to focus on all customers in the same way and with the same price points.

Interviewer Yes, I agree. Good point. Since we are running short on time, briefly summarize
answer remaining issues you would address.

The interviewer is satisfied and wants to wrap things up. The candidate has done well in
moving through the question with structure and supporting detail. The interviewer wants
Comment her to broadly cover any remaining points – often an opportunity to obtain bonus points in
the eye of the interviewer.

The organizational structure would need to be assessed. The merger is bound to

result in overlap of functionality and a scenario of “too many cooks”. Having complementary
skill sets across the team would be a key objective. Also, it would be strategically important
Candidate to analyze what products and services we want to emphasize most, so resources
answer can be focused accordingly. And finally, if I was hired as a consultant to facilitate the
integration, it would be absolutely critical to have a cross-functional merger taskforce
made up of client employees dedicated to the effort. Our efforts would be governed
by a strict project work plan, with clear timeframes and stated ownership.

Interviewer
Great job. That is a very comprehensive way to look at the problem.
answer

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Case 3: The director of purchasing for the aircraft maintenance division of
a major airline has asked for your help. His supplier base has grown to
more than 500 vendors, who supply approximately 100,000 different
aircraft parts to the airline. He has realized that his supplier strategy is
suboptimal, both from a cost and efficiency standpoint. How would you
help him develop a supplier strategy?
(This is a supply chain case that digs deep into how a company should optimize the strategy
around suppliers. It is meant to assess the candidate’s business logic in a complex supplier
environment with a large supplier base, providing parts which range from the very simple to
the very complex.)

Wow, a lot of suppliers to handle, indeed. The first thing I would do is make sure I have
all the necessary data consolidated in a database from which I can efficiently
run spend analyses. From that I would segment the vast supplier base into
manageable buckets from which to establish different purchasing strategies.
Candidate An airplane is mixed with parts of different levels of criticality. The first buckets could
answer consist of highly critical items linked to safety, such as navigation equipment, flight controls
and engine components. The second bucket could cover low-tech, commodity items such as
basic nuts-and-bolts hardware, paint, wire, etc. The last bucket could contain items not
critical to safety, but highly important to customer satisfaction, such as interior fabrics,
seats, and in-flight entertainment systems.

Data management is critical given the scope of parts and the volume of suppliers who
provide them. The candidate shows his understanding of this by suggesting a database.
He then moves into his approach by discussing segmentation, both of parts and suppliers.
Comment This is a pervasive technique in consulting and critical to analyzing vas amounts of data.
The candidate confidently settles on three “buckets” to work from and presents a logical
rationale behind this segmentation. Overall, he is off to a good start by presenting a solid
foundation from which to begin considering supplier strategies.

Interviewer That seems that a good way to handle the mass of information. What would you do
answer next?

Once suppliers are segmented, I would establish decision criteria around what
is important to the client in each of the three buckets. For highly critical items,
logical criteria would be quality and reliability – cost would be secondary. Strong supplier
support and priority service would also be secondary. Strong supplier support and priority
service would also be important, so if an aircraft is grounded due to maintenance, they could
Candidate
be relied on to get it back flying as soon as possible. For commodity items, cost is a major
answer concern. By definition, these items are straightforward to manufacture and can be brought
from many different suppliers. The third bucket is trickiest. The items are not safety
critical, but will influence customers’ desire to fly the airtime over competitors,
thus impacting revenues. Cost is key criteria item, while ensuring innovation design
that appeals to the customer.

Excellent. The candidate has gathered information, managed a through organization, and
has now established decision criteria to guide strategy. He has thus presented a very
Comment structured approach that is logically sequenced. He has also linked supply-based decisions
to the impact on revenues, namely grounded planes and customer choice.

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 Interviewer
That makes sense. Now what would you do?
answer

In each bucket I would next analyze the spend profile. Specifically, I would see how
total costs are distributed across different parts and suppliers to understand what is driving
Candidate
the majority of my costs. This would allow me to focus my effort efficiently and not chase
answer down cost reductions or quality enhancements for every part and every supplier, but rather
just the primary ones.

These kinds of cases are very much about sifting through lots of data to pinpoint where the
leverage is. His technique is correct. He is suggesting further segmentation within each parts
Comment category to identify the leverage. It is called the Pareto Principle – or more commonly, the
80/20 rule – and it refers to the common business fact that 80 percent of the value can be
found in 20 percent of the factors, in this case it regards suppliers and parts.

Interviewer
That seems logical. Could you provide an example?
answer

Sure. Let’s take the commodity bucket. Let’s say that of 1,000 parts, I notice that 50
percent of total cost is spent on fuselage rivets, versus 1 percent on three-inch washers. I
would thus scrutinize the suppliers of fuselage rivets and not washers. Then let’s say that I
see that 80 percent of the total spent of fuselage rivets goes to one supplier,
where 20 percent goes to a remaining 24 suppliers of rivets. I may focus any
negotiating effort for a price reduction on the primary seller and not all
suppliers. An alternative strategy would be to tell all 25 suppliers that I am going to
Candidate
consolidate down to one primary and secondary supplier of rivets. This would create a
answer competitive bid situation, which would likely yield better pricing for our client. There would
be great incentive for the suppliers to drop prices since they could win a large piece of our
business, but also since picking up volume would lower their manufacturing costs by
increasing capacity utilization and spreading out their fixed costs. I should note that the
actual analysis would likely be more complex, due to suppliers spanning across several
different commodity types. Such a strategy may not work in other buckets if suppliers are
differentiated, there are few suppliers, or switching costs are high for our client.

Always be prepared to elaborate with an example and to illustrate with numbers.

Interviewers love it. It demonstrates further analytical horsepower. The candidate clearly
illustrates the concept of 80/20 rule here. He also throws an understanding of potential
negotiating tactics available, given the example. In doing this, he demonstrates a win-win
approach by suggesting a supplier would have the incentive to lower prices, win more
Comment volume, and therefore benefit by covering more of its fixed costs. Additionally, being
unsure of whether time is running out in the interview, he scores extra point by suggesting
added complexity requiring consideration in a real-life situation. If the interviewer wants
more on that added complexity, he will ask for it and it won’t be a strike against the
candidate. Finally, he clearly points to drivers of the buyer-supplier balance of power,
recognizing that strategies with differ depending on that balance.

You seem to have a good grasp of controlling supplier costs. You have laid out a good “buy
Interviewer
for less” strategy for commodity suppliers. What other strategies might you consider
answer to improve efficiency and cost across all buckets?

The interviewer seems content with the strategy example for a specific bucket, and now wants
Comment to push your thinking further on external supplier optimization strategies that span all buckets.

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 Inventory management is a critical factor across all buckets. If our client is out of
stock of parts when they need them, it could result in a costly grounded plane. Additionally,
having too much inventory on hand results in high carrying costs. I would work closely with
primary suppliers to ensure that the latest inventory management techniques, such as just-
in-time and vendor-managed inventory are in place. Technological tools can also be
Candidate
leveraged to improve coordination with suppliers, demand forecasting accuracy, logistical
answer flows, and transactional efficiency. Also, if our client is part of an airline consortium, it
would be valuable to leverage their overall buyer power and share best practices regarding
supplier management. Lastly, I would involve suppliers in future solution design
decisions to drive toward more standardization, simplified specifications, and
rationalized requirements.

A discussion around supply chain is not complete without some mention of controlling the
flow and timing of goals to the buyer. The candidate seems to have an additional grasp of
some of the techniques out there, such as JIT and VMI (this terminology would not really
be expected). Such complex supply chains will undoubtedly rely on effective use of
Comment technology to manage them. The candidate sees this, which will score him points as well.
Finally, the candidate goes above and beyond by speaking to the potential advantage of
leveraging airline consortiums and involving suppliers as partners in design decisions –
again a win-win perspective.

Interviewer
Good job.
answer

15 of 30
Case 4: The general manager of a popular ski resort has called on you to
help her figure out why her resort has been experiencing declining profits
over the past three years. How would you help her?
(This is a commonly asked case question about the potential reasons for and responses to a
drop in profits. You’ll encounter questions like these referring to various industries, but the
approach to solving them is similar)

Candidate If profits are down, then either costs are up, revenues are down, or both. Have
answer costs increased in recent years?

The candidate has successfully recognized this as a profit question, and has introduced the
Comment profit equation.

Actually, no. Assuming that I’m the client, I can tell you that costs have even declined a
Interviewer
bit in recent years as we’ve improved sourcing in our food operations an decreased
answer snowmaking.

Comment So it’s not cost – carry on.

Okay, so if the problem is not fundamentally on the cost side, it must be on the
Candidate
revenue side. Has visitation to the mountain decreased, or have prices
answer decreased?

Clearly then, since we’re not dealing with a cost issue, it’s a revenue problem. The
Comment candidate has identified price and volume as the component parts of revenue.

Interviewer Prices have not dropped, in fact, they’ve increased slightly with inflation. The number
answer of visitors to the mountain has decreased, though.

All right. Now, what’s happening in the industry at large? Are other ski resorts
Candidate
experiencing similar decline? If so, are their declines in profit in line with those at your
answer resort?

The candidate has wisely turned to understanding the current dynamics of the industry.
Comment Doing so will allow her to determine whether she’s dealing with a market share or a
market size problems.

Yes, other resorts are struggling as well. At a recent trade show I spoke with
Interviewer
executives from dozens of other resorts, and they’re all experiencing the same thing I am.
answer Visitor numbers and profits are down.

The candidate continues to make good progress through her framework and has identified
Comment the forces at work in creating the profit problem. Now she’ll need to dive deeper.

Right. So we’ve determined that customers are leaving, and they’re not migrating to
other ski mountains, since everyone is struggling. I want to dig deeper into who exactly is
Candidate
leaving so we can develop some hypotheses around why they might be doing so. Are there
answer certain types of customers who are leaving in greater numbers than others? For
example, customers of a certain age or geographic location?

16 of 30
 Given that there is an industry-wide visitation decline in place, the candidate has decided
to pursue a customer segmentation path to see what it reveals. A completely random
Comment migration of customers would present a set of issues much different than a migration
among a specific answer segment.

Interviewer Hmmm. Unfortunately, I’m really not sure. We don’t do as good of a job as we should of
answer tracking our customers’ profiles. So I’m afraid I can’t tell you that.

Situation in which data is limited and/or difficult to access are extremely common to
Comment consulting projects. As a consultant, you’ll often be called upon to make smart assumptions
and take creative approaches to difficult problems.

Let’s try a slightly different approach. I know that you sell a range of different ski
Candidate tickets, everything from season passes down to half-day tickets. In addition, I imagine you
answer also generate revenue from concessions and equipment rentals? Can you tell
me how the revenue decline has broken out along those lines?

The candidate has wisely decided to pursue a slightly different line of questioning, but one
Comment that may still lead her to some kind of segmentation and/or valuable information
concerning the specifics of the revenue decline.

That I can help you with. Our food business has declined, but no faster or slower
than our visitation rate. Basically, each skier purchases an average amount of food and
Interviewer beverages, and those businesses have declined linearly with visitation. Tickets and rentals,
answer however, are a different story. Revenues from rentals have declined twice as fast as
visitation, and our sales of half-day and full-day lift passes have dropped more
precipitously than our sales of full-week tickets and season passes.

Now we’re getting somewhere! The candidate’s persistence has paid off – clearly something
Comment is driving the disproportionate decline in the rental and short-duration lift ticket business.

Great. That’s extremely helpful. My hypothesis is that less-experienced skiers are not
coming to the mountain as frequently. I believe this because both rentals and shorter-
Candidate term lift ticket sales are down; I would think that these products are purchased most often by
answer beginning skiers. More experienced skiers are more likely to own their equipment, and
therefore less likely to rent, and so far more likely to purchase a season pass. Do those
assumptions seem reasonable?

The candidate has formed a fact-based hypothesis, and has “sanity-checked” it with the
interviewer. Always keep in mind that the interviewer (who, in this case, is playing the role
Comment of the client) is an expert in the industry, so be sure to approach problems confidently but
not arrogantly.

Yes, I think you’re onto something. Those assumptions do seem reasonable, and now that you
Interviewer mention it, reminds me that our revenue from ski lessons is way down as well. And those
answer services are used most by beginning skiers. So let’s assume that we’re right, and that beginners
aren’t showing up as often. What are some ways you might go about fixing it?

The candidate got to bottom of the “why” behind the revenue decline – less experienced
skiers are no longer coming to the mountain as often as they used to. The interviewer has
Comment decided to probe a bit around the “how”– that is, what can be done to fix the problem and
restore profits.

17 of 30
 A few of the areas I’d begin to think about are marketing, pricing, and getting a better
understanding of who that beginning consumer is and why he or she may be
leaving. First, on the marketing front, how is your resort being promoted? I’m a fairly
experienced skier, and I know that a lot of the advertising I see contains images of people
skiing through deep powder and jumping off cliffs. Maybe that kind of imagery is a turn-off
to beginners, who may be more scared than inspired by it. So a safer, less intimidating
marketing approach could be more comforting to this consumer segment. I’ve also noticed
that certain ski resorts have been experimenting with slow-skiing “family ski areas” on the
mountains. That may be something to try.
Candidate Second, skiing is certainly an expensive sport, and while I wouldn’t recommend a price
answer decrease in an environment of falling profits – especially without more data – maybe we
could explore some more creative pricing arrangements. For example, what about
bundling free lessons with a lift ticket for first-time skiers? An offer like that could attract a
reluctant first-timer to give skiing a try.
And third, in terms of understanding the consumer, I’d certainly want to develop some way
to collect more data on the people who are visiting your mountain. I’d also
hypothesize that there are a lot of activities these days that are competing for
consumers’ disposable dollars. With the explosion of all kinds of outdoor sports,
customers who aren’t already hooked on skiing may be sampling a host of other sports, and
you are probably competing for a share of their wallet as much as anything else.

The candidate has certainly risen to the interviewer’s challenge by laying out a clear
framework and proposing a host of creative ideas for action. Would you be expected to
come up with a list this comprehensive in a live interview? Not necessarily, and this
Comment candidate is obviously familiar enough with skiing to generate a detailed list of
suggestions. But when you’re asked for potential practical solutions to a problem, be fact-
based, rely on what you’ve learned in the case so far, and be creative

Interviewer That’s a great list. We got a lot of work ahead of us, but I’m confident that we’re on the right
answer track.

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 Market
Sizing

Business
Operations

Business
Strategy

Other

19 of 30
Case 1: A small manufacturer and distributor of women’s surf clothes is
considering selling to high-end boutiques and has hired you to help out.
What kinds of issues would you think about to help it make the decision?
(This is a case about entry into new channels; the issues are similar to market entry cases)

I hate to sound overly structured, but I think the 3C framework will work nicely here,
and help me organize my thoughts and analysis. So I’ll discuss the customer, the
competition and the company in that order. First, let’s talk about some information that I
Candidate
would need about customers. Do people who shop in surf shops also visit boutiques? In
answer essence, what is the target market for both the surf shops and the boutiques and how do they
overlap or differ? This would answer questions about cannibalization of the existing
customer base.

This is a good use of a framework to set up the answer. When you apply an off-the-shelf
Comment framework like the 3Cs, be sure that it is appropriate. Interviewers tell us that they really
dislike it when candidates struggle to bend a problem to an ill-fitting framework.

Okay, so you would want to know about who is buying the clothes. In the apparel industry,
Interviewer
there are really two sets of customers: the retailers and the consumers. What
answer type of information would you want to know about the retailers?

The interviewer is leading the candidate down a specific path so by all means she should
Comment follow it!

Ah, good question, I need to consider the channel. First off, I’d want to know something
Candidate about the size of the boutique market: is it big enough to sustain a new product
answer introduction? Also, what are the components of serving the boutique market? And, perhaps
most importantly, would they be interested in buying our product? Is surf wear “in”?

All good questions. It turns out that the average selling price of clothing at boutiques
is significantly higher than at surf shops – this shouldn’t surprise anyone. Also, beach
Interviewer wear in general is “in” right now, and the client has a fresh, youthful brand. What
answer concerns the boutiques, though, is price competition from other retailers: they
do not want to see a piece of clothing that they sell at their store for sale at a surf shop for
two-thirds the price. How does this impact their decision?

The interviewer is taking an active role in leading the discussion, even though he is
starting to take the candidate away from his framework. Remember being too rigid in
your frameworks is almost as bad as using the wrong framework. It’s doubtful that you
Comment will ever be able to march all the way through an interview by sticking to the same
framework. Use it is a crutch when you get into trouble, but rely primarily on the
interviewer – not the framework – to guide you.

Well, the margins seem to be pretty good at the boutiques, assuming that costs to
serve are relatively similar to surf shops and boutiques. And our brand and type of
clothing seem to fit with their needs. The question will be avoiding channel
Candidate
conflict. There are a couple of ways to get around this one to simply avoid geographical
answer overlap by selling to boutiques in one geography and surf shops in another. Another is to
create a new line of clothing that is branded separately from clothing the client sells to surf
shops.

20 of 30
 Interviewer
Good. What else would you want to know?
answer

This is the time when the candidate can get back to her framework. The interviewer is
Comment clearly satisfied with this line of analysis and is ready to move on.

I would want to know about the competition. What types of surf clothing exists in
boutiques now? This would help the client assess share of wallet at the boutique and assist in
Candidate profitability analysis. Also, what type of competition exists in surf shops? And what is the
answer nature of that competition is based on price, fashion, fit, quality or other factors? If the
client is successful in moving into boutiques, who is going to follow? Can the client
establish any barriers to entry?

Interviewer
What type of barriers to entry are you thinking about?
answer

Be careful which buzz words you use when using frameworks because interviewers will pounce
Comment on them and see if you know what you’re talking about or if you’re blindly trying to impress him.

Candidate I was thinking about things such as strong sales force exclusive agreements,
answer production scale.

Comment Hopefully the candidate was actually thinking about these things …

You mentioned the nature of the competition. How would you test whether or not the
Interviewer
competitive environment within this new channel would be the same as the
answer traditional surf shop channel?

There may be examples of other channel expansions within the apparel industry that I could take
Candidate
a look at, but my operating assumption would be that because the same set of competitors
answer would be involved, the nature of the competition would be the same.

Interviewer Good. I want to touch upon how the company’s operations would change to serve this
answer new channel. What type of new capabilities do you think they would need to add?

The interviewer again is taking an active role in structuring the interview and it’s the
Comment candidate’s role to take the lead.

Well, I mentioned the sales force earlier. Because the buyers are likely different, the client
would probably have to develop a new sales force targeted at this new channel.
These sales representatives would need to have a broader understanding of fashion trends
Candidate and not just specialize on surf apparel trends. In addition, design and manufacturing
answer processes may need to change – perhaps the boutiques require a different type of
merchandise with more emphasis on fashion than function. And, the client would need
to assess capacity requirements: can existing capacity be used? Or do new plants need
to be built?

Interviewer
Good analysis. Now let’s talk a bit about your resume.
answer

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Case 2: Your client is a large owner and operator of hotels and vacation
properties. It also runs a highly successful rewards program that gives
guests the opportunity to earn points for each stay. The company is
considering partnering with small beds-and-breakfasts and offering guests
the opportunity to earn points for stays at participating B&Bs as well.
Should it go ahead with this partnership? W hat should it think about it
order to make its decision?
(This is a classic strategy question on how to grow profitability? There’s clearly a lot of
information missing, half of the problem will involve getting the right information out of the
interviewer.)

Well, we’re going to want to weigh the advantages of such a program against its
costs and risks. First, I’d like to ask a couple of questions. First, what types of
Candidate
customers does the client target? Second, what types of hotels does the client
answer operate? And third, I want to get a sense of how the proposed partnership might
operate; I need to address what the revenue and cost structure would look like.

This is much better and safer approach. The candidate has set up a loose framework (cost-
benefit analysis) and has probed for more information. It’s a good rule of thumb to force
Comment yourself to ask a question of your interviewer after hearing a case. It will almost never
hurt you to do so, and will allow you a little more time to prepare your own thoughts.

Let me answer the third question first. The way the program would work – and it’s your job
to determine if there are any other ways to structure the flow of funds – is that each B&B
would pay the client an annual membership fee to be part of the network.
Interviewer
Customers would then be able to earn reward points each time them they
answer stayed at the B&Bs, and also redeem their points at the participating B&Bs. In
return, the client would provide them with access to the centralized reservation
service and allow them to advertise the fact that they are part of our network.

Candidate And would members of the reward program be able to stay for free at the participating
answer B&Bs?

This question demonstrates understanding of the program and shows that the candidate
Comment has been listening attentively.

Good question. That’s up for discussion. Now you also asked some questions about the
Interviewer
customer base. What specific information are you looking for and why do you want to know
answer about it?

Beware of asking questions only to fill time. Interviewers want to know that you’re
Comment thinking before you’re talking.

What I’m looking for there is a sense of overlap between the customers in the
Candidate
reward program and those who visits B&Bs. We need this to get a rough estimate of
answer demand.

22 of 30
 I see. The client owns and operates higher-end hotels that are primarily used
for business purposes. The average customer is wealthy, lives in the suburbs,
Interviewer and travels significantly. The customer base is highly loyal and redeems points on
answer vacations. Moreover, the customer plans vacations around his or her ability to
redeem points for free stays; as an example, a customer will go to Park City instead of
Vail for a ski vacation if he or she is able to stay for free.

The interviewer has revealed a lot of information about customers and customer
Comment preferences. It’s important to note that some of the data that the interviewer gives you will
be more relevant than others; it’s your responsibility to sift through it.

Interesting. Because the customers are redeeming their points on vacation, I’m
going to assume that they’re not currently staying at B&Bs, because they can’t
Candidate
redeem their points there. But would they stay at B&Bs if they could, or are they so used
answer to large hotels and all of the modern amenities that are associated with them that these
customers would not stay at B&Bs?

This is the appropriate time to start making assumptions; the candidate has demonstrated
an understanding of the situation and has asked a lot of questions. Something to think
about: if you’re halfway through your allocated time and you’re still only asking
Comment questions, you may want to think about initial conclusions to focus your analysis and line
of questioning. The interviewer will challenge your assumptions if she disagrees with
them.

Another good question. The client recently conducted a survey that said that customers
Interviewer
are seeking less adventurous vacations and are staying closer to home. They
answer prefer a quiet, more removed setting.

Candidate Which is what a B&B offers, I imagine. So there is demand for the program, at least from
answer the existing base of reward program members.

The candidate has established a lot of credibility with the interviewer by immediately
Comment incorporating the information given and linking it to her line of logic.

Interviewer
It appears so.
answer

This a critical time in the interview. The candidate has made some initial conclusions, but
Comment the interviewer is not going to provide guidance on where to go next.

But what we must also consider is whether or not there would be demand for the
B&B’s for this program. Reward program members, it seems, would only be
Candidate staying at B&Bs if they could stay for free by using points, so the B&B owners
answer would be providing a room for free. If all they get from the client is access to a
reservation system, which we’ve already established wouldn’t be that useful if the B&B is
only being used for free stays, it doesn’t sound like a very compelling value proposition.

This is a nice summary of how a B&B owner might react to the proposed partnership
Comment arrangement and also shows that the candidate remembers the structure of the program
that the interviewer gave at the outset.

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 I agree. But from our client’s perspective, I hear you saying that it may be an attractive
Interviewer
program because it responds well to customer priorities. What could our client do with the
answer structure of the program to make it more attractive to the B&Bs?

The interviewer is clearly impressed with the candidate’s analysis thus far and has asked
Comment her to consider restructuring the initial proposal. If you get into these types of details
during a case interview, it’s a signal that you’ve done very well.

Well, the client is going to have to make the financials much more attractive to
the B&B owners. The client could reimburse the B&B owners for the cost of the
Candidate room or pay the B&Bs an annual fee instead of vice versa. Of course, these costs
answer would need to be weighted against the revenue the client would receive for
offering the program, which is the estimated increase in number of paid stays at the
client’s hotel network.

There are a lot of other potential adjustments to the program for example, midweek stays
only when the B&Bs are likely not at capacity (and therefore not losing margin revenue),
Comment requiring a three-night minimum when the customer pays for two nights and so on. Don’t
make a laundry list; the interviewer would rather hear how you would analyze whether or
not your idea would work.

Interviewer
Great. Let’s move on to another case.
answer

24 of 30
Case 3: Your client is a major branded skateboard manufacturer that has
decided to enter the Brazilian market. Should it license its brand or
manage the entry in-house?
(This is a common new market/expansion strategy question, though the licensing element is
somewhat of a twist.)

This is an interesting one. I can’t say I’m too familiar with skateboarding personally, but I’m
sure I can ask some questions along the way to sort through the issues. This case of course
ultimately hinges on the benefits of licensing versus keeping the business in-house for entry
into the Brazilian skateboarding market; the decision to enter the market has already been
Candidate reached. Therefore, it seems that my first step would be to weigh the relative economics
answer of licensing versus the in- house scenario, and see how that comes out. If that’s not
clear-cut, then we’ll want to consider some qualitative issues that may affect the decision, but I
think I should hold off on those to see if they prove necessary. To begin with, could you please
give me a sense of how a licensing arrangement would work, both
organizationally and financially? I want to make sure I’m clear on that before we jump in.

Good start. The candidate has clearly spelled out her approach to the case, and has started
with the big picture. In addition, she is not afraid to ask a question about licensing
Comment arrangements; a very specific area with which she is not familiar. It’s always better to ask
the question than to pretend you know things that you don’t. Save that until you actually
become a consultant.

In a licensing scenario, the client would choose a third party vendor that would
manage the production and sales of its skateboards in Brazil. The client would
retain responsibility for designing the product and would have full authority
Interviewer
over the use of its brand. Presumably, the vendor the company selected would be
answer one that has deep familiarity and competencies in the Brazilian marketplace.
From a financial standpoint, the client would collect a 6 percent royalty on gross
sales.

Comment Great. The candidate got what she needed.

Thank you. That’s helpful. Next, can you please tell me a bit about the skateboard
Candidate
market in the United States? How big is the market and what is the client’s
answer market share?

Comment The data hunt continues.

Interviewer I don’t see why that would be important. The question is about the Brazilian market, not the
answer US market. Did you mean to say Brazil?

The interviewer issues a little bit of a challenge, possibly to test the candidate’s persistence,
Comment or possibly to signal that she’s on the wrong track.

I should clarify. I think that understanding just a couple of quick facts about the US market
Candidate
would help me make some assumptions later on about how well the client can expect to do
answer when it enters Brazil.

Comment The candidate holds her ground, sensing that the interviewer is testing her a bit.

25 of 30
 Fair enough – that makes sense. I can tell you that the company’s market share in the
Interviewer United States is about 5 percent of total units, making it the number three or four
answer player in the market. Unfortunately, I don’t have the client’s sales data in front of me, so I
can’t tell you off-hand what the total market size is. You’ll have to make an assumption.

So the interviewer seems to have been testing the candidate’s resolve on the previous point.
But now a small hurdle has arisen. It seems that a market-sizing question has reared its
Comment head inside this broader strategy question. This is not at all uncommon. Just as on the
market-sizing questions you’ve already practiced, make good assumptions, use round
numbers and move on. It’s your method, not your number, that counts.

Okay. Let’s assume that of a total US population of 250 million, about 70 million
are age 25 or under, which I imagine is the demographic of most skateboarders. Of
those, let’s assume that one in seven owns a skateboard, or about 10 million
people. My guess would be that most of these people own one skateboard, but that
Candidate
there is certainly a more serious contingent of people who own several. If we
answer assume that, it averages out to about 1.5 boards per person, the total number of
skateboards would be 15 million. In addition, I think it’s fair to assume that a
skateboarder might upgrade his board once a year, making the annual market for
skateboarders in the Unites States 15 million.

Fair enough. When a market-sizing question is embedded in a broader case, it’s usually
Comment best to move through it quickly without getting tangled in too many detailed assumptions.
After all, it is just one piece of a much bigger puzzle, so don’t get bogged down.

Interviewer
Sounds reasonable to me. Let’s keep moving.
answer

Okay, so if the market for skateboards in the United States is 15 million, and the
Candidate client has a 5 percent share, this would mean that its annual sales are 750,000
answer boards. I think that will be a helpful reference point when I begin to think about what the
company’s “fair share” might be in the Brazilian market. Turning now to …

Interviewer Fair share? What does that mean? Do you mean that the client will be entitled to the same
answer share it has in the United States in the Brazilian market? But aren’t the markets different?

Comment Another challenge – but this candidate seems up to the task.

I mean to say that the client’s share in the US market may serve as a helpful proxy for
thinking about how it will perform in Brazil. But in order to validate that hypothesis, I do
need to ask a couple of questions about the Brazilian market. How big is the
Candidate
marketplace right now? I imagine it’s less mature than the US market. In addition,
answer what does the competitive landscape look like? Are the same brands that
compete with the client in the United States also selling in Brazil? Knowing that
will help me figure out whether the “fair share” assumptions I plan to use are valid.

The candidate calmly responds to the interviewer’s challenge and clearly explains where
Comment she’s headed.

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 The market for skateboards in Brazil is indeed smaller than in the United
States, as you say. Last year, about a million boards were sold in Brazil. The market,
Interviewer however, is projected to grow very quickly which is one of the reasons why the
answer company is interested in it. To your second question, the top two brands in the United
States are also the top two in Brazil. Much of US skate culture has made its way to
Brazil, and kids there have latched on to the same brands.

Here the interviewer seems to validate much of the candidate’s approach, offering some
Comment helpful hints.

Great. So Brazil is a small, but growing skateboard market that looks a lot like the United
States from a competitive standpoint. Let me apply a bit of fair share logic here and see what
it tells us. Let’s assume for a minute that the client could achieve the same 5
percent share in Brazil. That would imply annual sales of 50,000 skateboards, a
pretty small number, especially in comparison with the US business of 750,000. You did
mention that the market in Brazil was growing rapidly, but even at a compound annual
growth rate of 20 percent, sales would only grow about 100,000 units in four
years, assuming steady market share of 5 percent. In addition, I assume that the retail
price of skateboards in Brazil would therefore dictate that the skateboard’s
made for sale in Brazil be produced far more cheaply.
Candidate
answer So my initial hunch is that the Brazilian business is a strong candidate for
licensing, given its relatively small size in the near term and my assumptions about
the amount of investment that would be required for the client to manage the
entry in-house. To my last point, are there any existing capabilities or
relationships that the client would be able to leverage in entering the market?
For example, are there distribution relationships that span both the United States and
Brazil? Would the client need to add employees to manage the new business? In addition,
I’m wondering whether you know if the company’s competitors in Brazil have decided to
license their business? In addition, I’m wondering whether you know if the company’s
competitors in Brazil have decided to license their businesses there. That would be
interesting to know.

The candidate has done a bit of math that has led her to hypothesize that the size of the
Brazilian business may warrant licensing. But she’s not yet sure enough to draw a line in
Comment the sand and has opted to dig deeper. Floating an initial hypothesis to gauge your
interviewer’s response can be a smart way to test ideas. Just be careful not to appear like
you’re fishing for validation; this could signal a lack of confidence.

Good questions. From a capability and relationship standpoint, the client won’t
have the benefit of very much leverage. The retail landscape in Brazil is very different
from the United States, but just as fragmented. So a new sales force would definitely be
Interviewer
needed. And you’re correct: retail prices in Brazil are about half of what they are in the
answer United States, so production would need to be cheaper. The company couldn’t afford to
make the boards by hand as it does in the United States. And lastly, I do know that the
number one competitor in Brazil licenses its brand to a third-party vendor.

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 Given what I know, my preliminary recommendation would be in favor of licensing due to
the small size of the business and what would seem to be the hefty investment required.
From and investment standpoint, I’d be particularly concerned that the client would need to
dramatically alter its production process to value-engineer the boards for Brazil. Making
them by hand would be difficult to sustain in a substantially lower-pried market. In
Candidate
addition, licensing would potentially mitigate some of the risk of entering a
answer market in a country that has been economically volatile in the past. On the other
hand, there are certainly some arguments to be made in favor of keeping the business. For
example, if my fair share assumptions actually proved to be conservative, licensing the
business could prevent the client from realizing some of its upside. Nonetheless, based on
what I know, licensing seems the better approach.

The candidate successfully builds on her previous hypothesis and uses the new information
Comment to solidify her position. She also wisely acknowledges a potential counter-argument; which
is a great way to demonstrate a command of all of the issues surrounding a case.

Interviewer That seems like a reasonable conclusion. One last question: if this were an actual
answer project, is there anything else you would do before coming to a decision?

Good question. The answer is yes. In a real project, it would be critical to build a
detailed model to understand the relative economics of licensing and keeping
in- house. My analysis was admittedly high-level, and any actual consulting team would
Candidate need to dive much deeper into the numbers, I would envision building a few potential fair
answer share scenarios for licensing and run a sensitivity analysis. Ultimately, we’d need to
compare the NPV (net present value) of each scenario, using a 6 percent royalty
rate for the licensing scenario, and using smart assumptions based on what we
know about the market for the in-house scenario.

The candidate acknowledges the limitations of her analysis, limitations that are to be
expected in the context of a short case. But she has a clear point of view on what would be
Comment required in an actual project scenario. In this part of the case, an MBA candidate would be
expected to have a firmer grasp of the economic decision points than an undergraduate or
advanced-degree candidate.

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 Market
Sizing

Business
Operations

Business
Strategy

Other

29 of 30
Examples of additional questions candidate might be asked

 I see you led a cross-functional merger integration team at Daimler Chrysler. What was
your leadership style?

 After one year with our firm, what would our formal evaluation of your performance look
like?

 What would you contribute to the community of our firm outside of your work?

 I see you used your work in product management at the Nivea division of Bayer. Describe
for me how your product was positioned in the marketplace. What would you say is the
biggest challenge facing the Nivea brand over the next five years? If you were CEO, what
would you do to meet that challenge?

 I see that you worked at a dot.com for a year, before moving to a large bank for two years.
What do you see as the pros and cons for you of working in a large organization versus a
small organization? What would you bring to consulting from your experiences in two very
different working environments?

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