cracking case interviews

Cracking the Case

Interview

Sumit Dhar

[email protected]

Creative Commons License [email protected] Slide Number: 2

Before We Begin The Ambady and Rosenthal Experiment

The START framework

Before the Case− Numbers

− Why Consulting?

− About the company

− “Do you have any questions for us?”

During the Case− Take notes

− Ask questions to clarify

− Analyze aloud


Case Interview Are Not New A man walks into a restaurant. Orders a

dish of albatross meat. Takes one bite of the dish, pulls out his revolver and shoots himself. Why?

A man is driving down the highway in his car. He suddenly pulls over and shoots himself. Why?


Case Categories

Market Sizing or Guesstimate Questions

Business Operations

Business Strategy

Brain Teasers and Others


Market Sizing Framework

Step 1: Start with the overall population

Step 2: Calculate number of potential users

Step 3: Categorize on basis of usage (Hi, Med, Low)

Step 4: Assign percentages to each category. Use these percentages to calculate number of people in each category and from that calculate units of products used.

Typical Case: How many units of product X are consumed every year?


Case: Market Sizing

Case 1: How many cats in the USA?

Population of USA: 300 Million (approx)

Average size of family: 3 Members

No. of families in US: 100 Million

Assume one in five families in US has a pet.

Therefore, families with pets: 20 Million

Assume dogs and cats are the only pets US families have and that the distribution is 1:1

Therefore families with cats: 10 Million


Case: Market Sizing

Cat owners are peculiar. Many of them have more than one cat. So we come up with a distribution table:

Total Number of Cats: 19 Million

But what about strays? Assume there is a stray for every 10 pet cats. The number of strays: 1.9 Million

Therefore, total Number of cats in US: 20.9 Million

Cats / Family % of families No. of families No. of Cats

1 40 4 Million 4 Million




Case: Market Sizing

Case 2: How many toffees are consumed in India annually?

Population of India: 1 Billion (approx)

Age group of toffee eating junta: 3-13 years

% population in that band: 20%

No. of children in that band: 200 Million

We can safely assume that bulk of the toffee consumption in India primarily occurs in Urban Areas

Population distribution (Rural: Urban): 70:30

Children in cities: 60 Million


Case: Market Sizing

Of these 60 Million children, suppose only 50% can afford toffees.

Therefore toffee consumers: 30 Million

Assume families go shopping once a week. That is nearly 50 times a year. Assume parents buy 4 toffees per kid per trip.

Therefore per kid per year (50x4): 200 toffees

Total Toffees Produced (30M * 200): 6 Billion Units

You can go fancy with distributing the 30 Million toffee purchasing kids into High (10 toffees per trip), Medium (5) and Low (2) categories. Then assume percentages for each category and get the total number of toffees consumed.


Case: Market Sizing

Case 3: Rahul – Wannabe Painter, Unsuccessful Model, Bullshitter Extraordinary. DNA subscriber number 3,98,233.

How true, do you think, are DNA numbers?

Population of Mumbai: 2 Crores (approx)

Average size of family: 4 members

Families in Mumbai: 50 Lakh

We can be sure that the literacy rate of Mumbai is higher than the country average. Take literacy rate: 70%

Literate Households: 35 Lakhs

Not all literate households will buy newspaper. Assume 3 out of 5 such households buy a newspaper. Total households in Mumbai buying newspapers is: 21 Lakhs


Case: Market Sizing

Total Newspaper buying households: 21 Lakh

Of these many households buy Vernacular or Hindi Newspapers. Let us take English : Vernacular ratio to be: 1:1

Therefore, number of English Newspaper subscribers: 10 Lakh

Currently English Newspapers in Mumbai: TOI, HT, ET, Mid-Day, Indian Express etc. Assume that the leader (TOI) has 50% market share.

Therefore, TOI circulation figures (approx): 5 Lakh

If the market leader has a circulation of ~5 Lakh, then DNA’s quote of 4 Lakh subscribers even before going to print sounds quite dubious.


Practice Cases: Market Sizing

− How many TT balls will fit into this auditorium

− How many plastic coffee cups are used in the world per day?

− How many lawn tennis balls used in India per year?

− How many jeans purchased annually in the USA?

− What is the average number of chairs per household?

− How many petrol pumps in Mumbai?

− What is the total number of credit cards in circulation in the Indian market?

− How many people fly in and out of Mumbai Domestic Airport per day?


Case: Business OperationsCase 1: The number 3 shoe maker has hired you to determine why its profits are down while that of competitors are up.

Profits = Revenues – Costs

If profits are down, it means either revenues have gone down or costs have gone up.

Cost of Goods Sold

Direct Labor

Direct Material

Overheads

How are we placed on costs compared to our competitors?

Costs would include:

Operational Costs:

Marketing & Distribution Costs

Administrative Costs

R & D costs


Case: Business Operations

Revenues would be determined by:

Number of units sold

Prices

Have the prices of our products dropped due to a price war with competitors?

The units sold will be determined by:

Size of the market

Our market share

If the market size has increased, it can only mean that our share has decreased. To analyze why that has happened, I will look at:

Our Customers (vis-à-vis competitors’)

Our Product (vis-à-vis competitors’)


Case: Business Operations

Conclusion:

Over the last few years, customer demographics and consumer preferences have changed. Majority of the customers in this market are now teenagers who prefer sneakers and other informal footwear while we make formal footwear.

Hence our revenues have decreased while that of competitors have increased. To compete successfully, I would seriously look at entering the informal footwear market


Case: Business OperationsCase 2: BOA (in US) charges $100 as annual fees on its credit card. A newly hired MBA comes up with a brilliant idea to waive the fees. His reasoning: the increase in customers due to dropped fees should more than offset the loss in revenues. Analyze.

Sources of Revenue for a credit card company:

Annual Fees (AF) [$100]

Merchant Fees (MRF) [1% of Transaction Vol.]

Customer Late Fees (CLF) [Not Known]

Revenue = No. of customers * (100 + CLF + Merchant Fees)

How do we calculate the unknowns in the equation? Ask the interviewer if these numbers are available, else use guesstimates

Revenue = 10M * (100 + 10 + 10) = 1.2 Billion


Case: Business OperationsThe new scheme will be dropped only if revenues generated are more or equal than the first case. What do you think is the impact of removing annual fees on the Merchant Fees and Late Fees?

Time For Reality Check:

Is it possible for BOA to increase its customer base 500% by just removing annual fees?

The credit card owning population of US is nearly 200 Million. Can BOA capture 25% of that market?

New Revenues = No. of customers * ( 0 + 10 + 10)

Or No. of New Customers > 1.2/20

Or BOA needs 60 Million customers for this scheme to bring same revenue as previous scheme

Final Recommendations & Conclusions?


Business Strategy FrameworkTypical Case: Should company X enter a new market?

Power of suppliers

Supplier Concentration, Volume, Forward

Integration, Switching Costs

Power of Buyers

Buyer concentration, Purchase Volume, Backward Integration, Switching Costs

Industry Rivalry

Fragmentation, Growth, Exit Barriers

Threat of Entry

Capital Requirements, Economies of Scale, Brand

Loyalty, Cost adv.

Threat of Substitutes

Buyer Inclination, Price vs. Performance tradeoff

Industry Analysis Framework: Porter’s 5 Forces


Case: Business StrategyTypical Case: CEO of a national phone installation company is considering getting into the electronic home security business at Mumbai. This business would utilize similar services to their phone installation services: phone lines, equipment installation and monitoring.

The 5 largest firms in the market have a combined share of less than 10%. The CEO believes they can centralize the whole operation and take advantage of economies of scale. Due to this, their service will be cheaper than rivals and he can induce switchovers. What do you think?

To analyze the CEO’s move, let us start by looking at the Industry structure.

Highly fragmented: Indicates a high competitive rivalry

Why no large players? Do customers prefer local players?

Conclusion:

High competitive rivalry.

No advantages to centralized large players.


Case: Business StrategyNext let us look at buyer power:

Who are the buyers? Concentrated?

Switching costs?

Conclusion: Buyer Power High

Next we look at the threat of new players entering the market:

Capital Requirements? Probably low.

Brand Loyalty? Commodity market, probably no loyalty.

Economies of scale? Might not work as require localization

Conclusion: Threat of new players entering is very high

Substitutes & Supplier power can be ignored. Not relevant.

Final Recommendation?


Recommended Readings Competitive Strategy: Porter’s Five Forces

http://en.wikipedia.org/wiki/Porter_5_forces_analysis

Marketing Concepts (4 Ps, 3 Cs etc.)

http://en.wikipedia.org/wiki/List_of_marketing_topics

Accounting: Basics of a Income Statementhttp://en.wikipedia.org/wiki/List_of_accounting_topics

As many consulting cases as you can

HOW TO PREPARE?


Before We Close…


IthacaWhen you set out on your journey to Ithaca,pray that the road is long,full of adventure, full of knowledge.The Lestrygonians and the Cyclops,the angry Poseidon -- do not fear them:You will never find such as these on your path,if your thoughts remain lofty, if a fineemotion touches your spirit and your body.The Lestrygonians and the Cyclops,the fierce Poseidon you will never encounter,if you do not carry them within your soul,if your soul does not set them up before you.

Pray that the road is long.That the summer mornings are many, when,with such pleasure, with such joyyou will enter ports seen for the first time;stop at Phoenician markets,and purchase fine merchandise,mother-of-pearl and coral, amber and ebony,and sensual perfumes of all kinds,as many sensual perfumes as you can;visit many Egyptian cities,to learn and go on learning from their scholars.


Before We Close: Ithaca

Always keep Ithaca in your mind.To arrive there is your ultimate goal.But do not hurry the voyage at all.It is better to let it last for many years;and to anchor at the island when you are old,rich with all you have gained on the way,not expecting that Ithaca will offer you riches.

Ithaca has given you the beautiful voyage.Without her you would have never set out on the road.She has nothing more to give you.

And if you find her poor, Ithaca has not deceived you.Wise as you have become, with so much experience,you must already have understood what these Ithacas mean.


Thank You All the best to you all

Feel free to write to me:[email protected]

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