all about consulting in business

8/7/2019 All About Consulting in Business

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ALL ABOUT

CONSULTING IN BUSINESS


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Presentation structure

Estimation Cases


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ESTIMATION CASES STEPS

Lay out your logic before you start making assumptions.

Set up your answer in a tree diagram with the branches as

various components of data that will help you arrive at afinal number.

For example, in estimating the number of gasoline stations

two of the branches you should consider are the number of cars in the city and geographical size.


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ESTIMATION CASES STEPS

Use nice round numbers to simplify the slog of dividing or multiplying.

Conduct a sanity check on your final number. Even if your assumptions appear sound, you may have made acalculation or logical mistake.

For example, does it make sense to have over 600gasoline stations in Manhattan when this would probablymean a station at every street corner


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Profitability Cases


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Th e Profit Eq uation

Simple, but invaluable when asked to explain changes in profitability.

Profit = (Q uantity x Price) - Costs

Costs = F ixed Costs + Variable Costs

Breakeven Quantity = F ixed Cost / (Price Variable Cost)

There are three drivers of profitability: sales volume (quantity), price and costs.

When doing a case that involves a change in profitability, you must determinewhich of these elements have changed, and then determine the causes of those changes.


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Th e Profit Eq uation

Issues related to each of the three that must be examined are:- Factors that impact Price

Consumer demand elasticityCompetitors price changes

Market power can we charge a premium?Have we lost a previous ability to charge a premium?Product differentiationOpportunities for differential pricing of the same product (eg. airline seats)Brand implications, eg. strength of brandMethods of pricing cost plus; matching; market based (examine the pros and

cons of each)


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Th e Profit Eq uation contd

- Factors th at impact Volume (q uantity)Ex ternal Factors

CompetitionShare of marketPositioning / ImageCustomers

ProfitabilityDifferentiationFuture plans

Substitutes / ComplementsMarket forces

Declining market sizeTechnologyRegulation

CustomersNeeds latent vs demonstratedPrice sensitivitySegmentationProduct extension eg. Diet Coke


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- Factors th at impact Volume (q uantity)Internal Factors

Distribution ChannelsManufacturing CapacityLogistics / Supply Chain / Inventory Management

Growt h/ reduction in overall market

Increase/decrease in sales to current customers with current productsIncrease/decrease in sales to current customers with new productsIncrease/decrease in sales to new customers with current productsIncrease/decrease in sales to new customers with new products


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- CostPortions which are fixed and variable

Time frames in which costs are fixedShort run vs long run costs

Allocation of costs to product, overheads etc.

Capacity utilization and its impact on total average cost per unitBenchmarking costs against industry competitorsRelative percentage weighting of cost components

Note: c h anging volumes can wreak h avoc on profitability w h en looked at from th e perspective of fixed vs. variable costs. Be sure to understand w h at h appens to fixed cost per unit w h en volume declines (it increases) and h ow th is can affect profitability in capital intensive businesses.

COGS : Raw Materials, Labour, Over h eadsOperating Costs: S ales & Distribution, marketing, general administration, R&DIdentify th e big money buckets in th e industry you are e xamining understand industry cost structure smell th e moneyFor Firm wit h multiple products h ow are fixed costs allocated finding true contribution


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Market Entry Cases


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Market Entry Case A possible approac h

You have been asked to update the CEO of your client with the findings of theteam. What three points would you emphasize to the CEO?

If we were to open a pure tennis court facility in Germany, we would need tocharge at least GBP 70 annual subscription to break even.

We should only consider entering the German market after determiningwhether we can differentiate our offering from the dominant 65% share marketplayer

A number of broader issues should be considered such as regulatoryrequirements, cultural issues, availability of funds to make investments


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THE FOUR Cs

O ften used when contemplating capacity-building options, new product introductions or entering a new market. Can be used for evaluating almost any strategic initiative .

Customers:

- Who are they and what do they want?- What can they afford?- What are they willing to pay for your product?- Are their needs or tastes changing?- Is the overall market growing or shrinking?- How do they perceive the brand name?- What is the Economic Value to the Consumer (EVC Analysis)?

O verall, does a strong enough market exist to justify the proposed action?


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THE FOUR Cs

Competition:- Who are they and what are their current offerings?- How much market share do they have?- How are their brand names perceived in the marketplace?

- Are they producing to capacity or do they have excess capacity?- How do their cost structures compare to the clients?- How will they react to the clients product introduction or capacity increase?

Refer to Porters Five Forces !

O verall, is the competition currently strong enough or will their probablereactions be enough to negate all benefit from the proposed action?


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THE FOUR Cs

Company:- What are the clients key strengths, resources and overall strategy?- Are they congruent with what is needed to make the proposed action a

success?

- What are their Strengths, Weaknesses, Opportunity, and Threats(S.W.O.T.)?

O verall, how well suited is the company to carry out the proposed action successfully and to benefit from it?


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THE FOUR Ps

U seful when the case calls for the examination of product marketing, new product development and/or introduction .

Product: What is it? How does it differ from the competitors?

What are the competitive advantages of this product?

Price: What will the price be? What are the competitors prices for competingproducts? What discounts or other incentives will be offered? Will prices varyacross geographic lines? How much do the target customers value the product(what are they willing to pay)?

Will the product be priced at or below its perceived value?


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THE FOUR Ps - contd

Promotion: How will the product be promoted/advertised?

Will promotion be adequate to educate prospective customers of the productsexistence?

Place: [Place actually means Distribution, but Four Ps has a better ring to itthan Three Ps and a D]. What distribution channels will be used (retail stores,direct mail sales, an army of salespeople in plaid jackets selling door to door)?What will the costs of this distribution be?

Is the distribution strategy adequate the get the product sold at the anticipated volumes?


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PORTERS FIVE FORCES

G iven how often you have heard (or will hear) about Porters Five Forces, youd think it would do your laundry for you. Well, it is powerful, but its best used for determining the competitive strength of a particular industry or when evaluating a strategic decision .

How well a company will do (i.e., how good its profit margins and economicreturns will be) in a particular industry depends on the strength (power) of thefollowing five factors: ( see next slide)

In general, an industry is attractive (more profitable) if barriers to entry exist, if there is little threat of substitutes, if the power of the suppliers and buyers isweak, and if competition is rational within the industry


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Case Interview Guide


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Case Interview S teps 1

U nderstand the Question :- Be sure that you understand the question. If not, then ask for more information.

Theres nothing worse than an exquisitely structured analysis on the wrongquestion.

- Ask the interviewer additional questions to add information as you flesh out theproblem-- Do not assume the first question the interviewer asks is the topic of discussion. Rarely does an interviewer state the entire problem at the start. Part of what is being tested is your ability to ferret out information.

- Interviewers generally will lead you down a path towards the answer they want. Beopen to hints they might be providing.

- Be careful about assumptions. Dont make any that you dont have to. If you haveto make assumptions, communicate to the interviewer that you are making theseassumptions and then why you are making them.


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Y ou understand the question, now choose your framework :- Choose an appropriate model. Dont try to match a complex product/market

expansion matrix to a question that is easily answered with a simple SWOTanalysis.

- Stick to models that you know well. No one knows every model in existence. Learna few models very well that you can keep in your tool bag.

- Have a passing acquaintance with the most popular frameworks. On occasion aninterviewer will ask you to use a particular framework to analyze the scenario.

- Once youve chosen a framework, dont announce your model to the interviewer. Itis expected that the interviewer will understand what you are doing, and telling theperson that you are using the value chain analysis will not help your case. This isthe exception to the more communication is good rule.


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A nalyze the case! :- This is the meat of the matter. Using the framework youve chosen, conduct an

analysis.

- Ask questions to get more information; this cannot be overemphasized.Communicate your thought process through the whole interview. Many interviewersare very helpful and will assist you if they see you stray from the path.

- Be willing to change tack. Sometimes it turns out that you chose an unsuitableframework for the analysis. Communicate to your interviewer what youre doing andthat a different type of analysis is warranted. You might get dinged but you mightget points for being flexible.


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A rrive at a conclusion :- Consultants dont do much good if they cant come up with an answer at the end of

an analysis. Be sure to arrive at some type of conclusion even if it is a framework tofurther evaluate the problem.

- Include real recommendations for the company as applicable. Concrete actions aremuch more impressive than vague strategies.

- Do a sanity check, i.e. address or consider any key variables where changes couldsignificantly impact your analysis and conclusion. Also ask yourself, Does thisanswer make sense? Use common sense.


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H ow do companies evaluate your case interview performance?

A case interview is used to assess many of the same characteristicsinterviewers look for in the standard interview.

Therefore, it is much more important that you clearly communicate your abilities and fit with the company you are interviewing with, than that youcome up with the "correct" answer to the case.

In general, the case interview will be used to evaluate you along threeprimary dimensions:- creativity and common sense,- analytic ability and- poise and enthusiasm


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J udging creativity and common sense

To get a sense of your level of creativity and common sense, theinterviewer will be judging your ability to :

- Conceptualize problems

- Develop innovative solutions to business situations

- Make assumptions, see patterns, generate hypotheses and draw

conclusions from only partial information


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J udging analytic ability

Your analytic ability will be assessed based on how well you:

- Provide structure to unstructured problems

- Simplify problems into their individual components

- Apply transparent and logical thinking to each component

- Synthesize all of the pieces into a logical solution


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J udging your degree of poise and ent h usiasm

Last, the interviewer will be trying to get a sense for your degree of poise and enthusiasm. It is important that you:

- Seem excited by the case, which is akin to the kinds of issues and problemsconsultants face

- Be not intimidated nor daunted by the process or problem presented in thecase

- Assimilate information quickly and effectively

- Ask insightful questions


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There are no right answers but there are wrong approaches and reactions

Forgetting important facts

Dwelling on unimportant details

Defending impractical solutions (it is OK to change your mind if you are in adead-end)

Force-fitting a framework that just does not work

Changing frameworks several times during the case

Forgetting to do the "reality check" (test your conclusions using commonsense)


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S ome Case Interview Tips

If it helps you to structure your analysis or if the case is quantitative, take notes.

Feel free to pause and collect your thoughts at any time (the pause won't seemas long as you think to the interviewer and the time might help youcommunicate your thoughts more clearly).

Think out loud. The main purpose of the case interviews is to show the way inwhich you analyze a problem, so let the interviewer hear your thought processand any assumptions you make.

Have fun. Nervous tension will come across in an interview. Try to relax andthink of it as an opportunity to explore the drivers of success for a company or industry.


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S ome Case Interview Tips contd

Think about the type of consulting projects the firm does. This might give youinsight into the type of case you are likely to get and the way in which you mightstructure your analysis.

Pay close attention to any hints (subtle or not) that the interviewer gives you,particularly if they are trying to steer you back on course.

Engage yourself and get excited about the case. The interviewer has probablyspent a few months working on the problem and consulting firms are looking for people who enjoy solving problems.

Do not ask for every piece of data; the more you prompt for data withoutassimilating what you have and reaching conclusion, the more confused youcould become. The interviewer has tons of data or will make it up.

Remember that some material may be extraneous


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Industries / LOB s


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INDUSTRIES

Business fundamentals are important, but th ere's no substitute for knowing an industry inside and out.

Asset Management AutomotiveBanking & Capital MarketsBiotechnology

ChemicalsConsumer ProductsGovernment & Public Sector Hospitality & LeisureInsuranceMedia & EntertainmentMining & Metals

Oil & GasPharmaceuticalPower & UtilitiesReal Estate (includes Construction)TechnologyTelecommunicationsTransportation and Logistics


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Industry Overview

Key 18 industries to be prepared High growth, Media Focus, Appearing on Resume, Work Ex

Major Dimensions- Key Terms e.g. ARPU, Passive Infrastructure in Telecom- Major Trends ,- Value Chain,- Business Model- Recent news or activity- Global best practices- Competitor Dynamics- Regulatory Changes

Capital Line, Vault Guides, EBSCO

Compile 2 pager note on each industry,


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Economic Overview

Demographic DataHuman Development IndicatorsMacroeconomic figures

Consumer Statistics Marketing White bookFigures about industry/sector/areas appearing on resume

Countries India, USA, UK and any other (as applicable)

Bulleted Word Document Max 2 pages


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S kills


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S kills interviewers look for

A Passion for Ideas.- The ability to generate relevant ideas through rigorous thinking and careful research- Enjoy problem -diagnosis, problem-framing and problem-solving.- Have a great aptitude for numbers

A Passion for Client S ervice- Commitment to others and ability to excel in meeting client needs- Those who demonstrate superior skills gain personal control early in their careers- the individual needs to excel and generate his or her own marketability

A Passion for People- Consultants who enjoy talking to people do well.- The gregarious do well with their teammates and their clients

- You could accomplish this by charm, humor, listening or hard-work, - it's vital that youenjoy, understand and communicate with clients.- Interviewers are looking for people that they'd like to work with themselves

The bottom line is that firms are screening for skills that match their needs. It is vitallyimportant that you make every effort to understand what these skills are before you stepinto the interview room


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S kills - continued

Intellectual sharpness- Tested through cases, and through the course of the interview- Ability to handle not-so-well-defined problems; abstract concepts- Comfort with data - variables, parameters, relationships- Ability to pick up a thread / train of thought and take it forward

Ability to relate work experience to other contexts- Abstraction from particular experiences to generic principles- Application of generic principles to specific instances- Communication Skills; especially verbal- Clarity in communication- Language, choice of words


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Types of Consulting Firms


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TYP ES OF CONSULTING FIRMS

Full S ervice (Advisory)- Pricewaterhouse Coopers- KPMG- Ernst & Young- Deloitte

Business S trategy (Pure Play)- McKinsey- Booz Allen Hamilton- Bain- Boston Consulting Group- Arthur D Little

IT Focused- Accenture- AT Kearney- IBM- Infosys


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CONSULTING SERVICES OFFERED FULL SERVICE

Accounting Advisory ServicesBusiness Performance ServicesCorporate FinanceFinancial Risk Management

ForensicInternal Audit, Risk & Compliance ServicesIT Advisory ServicesRestructuringTransaction Services

RewardHR Management


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FULL SERVICE ADVISORY - EXAM P LES

Advisory services include assistance to clients in tackling core issuessuch as:

Addressing severe underperformanceBest practice governance and corporate citizenshipEfficiency and cost optimizationEntering new marketsGrowth from transactionsManaging the regulatory environment

Optimizing organizational riskValue from major infrastructure projects and alternative assets


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TRANSACTION ADVISORY SERVICES

Accounting valuations Advice on fundraisingBid support and bid defense servicesCommercial and market due diligence

Financial due diligenceIndependent opinionsPost deal servicesPrivate equity advisoryPrivatization advice

Structuring services


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SERVICES OFFERED BY P URE P LAY EG . MCKINSEY

Business Technology OfficeCorporate FinanceMarketing & SalesOperations

OrganizationRiskStrategy


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SERVICES OFFERED BY P URE P LAY EG . BAIN

Change ManagementCorporate RenewalCorporate StrategyCost & Supply Chain Management

Customer Strategy & MarketingGrowth StrategyITMergers & AcquisitionsOrganization

Performance ImprovementPrivate Equity


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SERVICES OFFERRED BY IT CONSULTING EG . INFOSYS CONSULTING


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Four Broad Areas of Consulting

S trategy

While most problem-solving involves some sort of strategy, there are

companies, groups, and assignments that are particularly focused onhigh-level strategy development.

Interpreted broadly, strategy includes the development of an overallapproach to improving a companys competitive position acrossmultiple areas.


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Operations /Process Improvement

A subset of strategy, operations focuses on improving the product or service-generating part of the enterprise.

MBA students tend to overlook the strategic aspects of this functionand its importance to the client organization.

Their perception is that operations is not as glamorous as strategy,when in reality operations can be quite strategic and is usually the keyto a successful organization.


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Ch ange Management /O rganizational Design

Another subset of strategy, change management relates specifically tohuman resource issues within organizations emphasizing alignment

of - culture,- people, and- structure

with

- strategy,- products,- processes, and- technology.


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Interviewing Tips


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Interviewing Tips

Know your resume . Be prepared to discuss any item on your resume (no matter howinnocuous you think it may be).

Prior to th e interview , make sure you have nailed down answers to the obviousquestions: why consulting; where do you see yourself in X years; what are two of your strengths and weaknesses?

Rela x. Be calm. Do not get flustered during a case interview. Take time to frame your answer and structure your response. Do not worry about making mistakes. Consultinginterviewers like to see you attempt to solve the problem.

Wh en you are given time to ask q uestions about th e firm, use it well .Intelligent and relevant questions demonstrate your interest in the firm. Think about howmany questions you would have if you were buying a new car or new home. You must beable to generate and express this level of interest about the firm at which you areinterviewing. If you do enough research on the firm beforehand, you are better positionedto ask key questions .


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Interviewing Tips

Keep the answers concise and full of content .Presentability- Attire (Dont go overboard, but must meet basic cut-off criteria)- Grooming

- Body languagePresence of Mind- May attempt to throw you off and see how you react- Eg. If you got a job simultaneously with Firm XXX, would you take our offer?- Your understanding of what a consulting career involves

Nature of workLifestyle (travel, out-of-town assignments, demands on personal life etc.)


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Interviewing S ummary

Remember that the interview is a sales pitch.

What are they looking for in an interview?

Consultants distill their interviews down to two questions:- Can you do the job? and- will I enjoy working with you?

They are trying to determine whether you are capable of doing the joband whether they like you.You need to demonstrate that the answer to both is yes. How you do itis up to you , but each person must develop their own unique pitch

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