In the first couple of months of almost any top full-time MBA program something interesting happens. No matter what students wrote on their MBA applications and essays about their goals, half of the class will attempt to land a consulting role. Let the “consulting rush” begin. After all, who doesn’t want to land an offer from “MBB” (McKinsey, Bain, BCG), Deloitte, Parthenon? You know, “just in case…”.
Well, if you’re at this spot, you probably already know that most consulting companies’ interviews comprise of two parts: the behavioral interview, and the case interview. (Some also have the written case).
In this article we will focus on the consulting case interview. More specifically we will focus on consulting case frameworks. But first, some important caveats.
Rules of the Game
- Memorizing frameworks will not guarantee passing the interview. That is only a starting point. Eventually after practicing enough cases you should develop your own style. Most importantly, the framework you will actually draw in the interview should be customized to the question case prompt. Case interviews are also likely to include calculation and market sizing questions. Moreover, you will also be evaluated on the way you non-verbally deliver. Can you communicate well? Are you enthusiastic enough? Will you appear presentable to the client? Are you confident? These will all require practice.
- Nailing the case requires time and practice. By the time the case is done, most of your classmates would have probably practiced at least 20 cases. Some will practice over 50 cases. People will warn you about wearing out. I personally don’t think it’s true. If you got in a top MBA program, you are probably not the type who can practice too much. Set up time with your classmates to practice cases. If you need practice cases there is an abundant of them online (just Google “[school name] + case book”). Most probably, your school has a case book as well.
- Nailing the case doesn’t guarantee a job offer. There are other factors in play. First, the behavioral interview is just as important (if not more) than the case interview. At the end of the day, if the interviewer didn’t like you he won’t recommend you, even if you somehow nailed the case.
Case Interview Structure
A typical case interview has 6 parts:
1. The prompt
First the interviewer will read a prompt. We highly recommend listening carefully and jotting down the key points as the interviewer mentioned them. Some candidates prefer to come with a ready made page template designed like a slide: a section for taking notes, a section for the title, and a section for the frameworks. If you didn’t catch a data point, ask the interviewer.
2. Clarifying questions
We highly recommend to always ask clarifying questions. Asking clarifying questions can help save the case for you and shows the interviewer you think before you act. At the very least, unless you’ve been given that information, ask “Is there a specific financial goal?” and “Are we focusing on a specific territory”?
3. Jotting down the case framework
At this point say “Thank you, can I take a minute to organize my thoughts?”. Now you’ll write a customized version of a framework that fits the case prompt. Try to go as deep as you can, but not go over time. We recommend writing the framework horizontally. First finish the main buckets, so that if you’re “stuck” you’ll at least have the main buckets to talk through. Then dive deep into each bucket. Remember: a good case framework is “MECE” (pronounced Me See). MECE is common consulting jargon which stands for mutually exclusive, collectively exhaustive. It is key that your framework covers all areas without repeating them.
4. Presenting the framework to the interviewer
Now, turn the page around 90-180 degrees and show the interviewer your plan of action. Be confident and adapt to the case “First, I’d like to understand whether this is a profitable decision… This is the airline industry so I’d like to begin with the large fixed costs of airplanes”.
5. Walking through the case
Different consulting companies have different expectations at this phase. A McKinsey interviewer is more likely to lead the case, asking you specific questions. Bain and BCG are more likely to expect you to lead the case. Either way, we recommend to try and lead. Start executing through your framework. The interviewer will know to navigate you to where he wants you to be. This part can include several sub components:
- Interpreting charts;
- Solving quantitative questions; and
- Market sizing.
6. The recommendation
At any point of the case the interviewer could say something in the lines of “What is your recommendation?”, or “The CEO walks into the room, give him your recommendation”. In the first example, you can ask for time to collect your thoughts and organize your slides. In the second examples, you should be ready to present in a few seconds. That is why it’s important to organize your pages and treat them as slides throughout the case. Build a story that leads to the recommendation, and present the slides and charts as you speak. Always start with the recommendation in a direct approach. E.g. “We recommend not buying the factory. In our analysis we saw that while the purchasing price is relatively low, the reduction in variable cost does not justify the price over the next 10 years. Instead…”
Are all case interviews equal? No. Sometimes, especially when interviewing with partners, the case will be more like a conversation. You won’t have time to write down a framework and the interviewer wouldn’t really look for you to do so. It might even take you a minute to realize the case section has begun. Partners have a talent of casually inserting the case interview prompt in the conversation. This is why you want to be as strong on qualitative cases as you are on quantitative cases.
Popular Consulting Case Frameworks
Profitability Consulting Case Framework
This is by far the most common framework. All companies care about profits. For most, profit is the main goal. Therefore, at least a part of any case fall or rise based on the profit question. Here is one framework to think about when thinking about profit:
In simple terms, profit is revenue minus costs. The revenue can be simplified to quantities times price. When collecting this info from the interviewer or case prompt, always look for trends, and see if you can segment revenue by products, distribution channels, or customers.
When brainstorming about what can impact the revenue, you will at a minimum want to think about: 1) Internal company level issues such as the sales team and the distribution channel; 2) The Product Mix and how the products are differentiate; 3) The customers – did their taste change? How are they segmented, what is the loyalty of each segment?; and the Industry: who are the competitors? How fragmented is the market? What’s the growth of the entire market? Are there market alternatives?
Costs are broken down to fixed costs – costs that do not change with quantity sold, and variable costs – costs that add for each unit sold. The variable costs can be calculated by multiplying the variable cost by the quantity sold. Just like revenues, you would usually want to look for trends and segmentation of these costs. Many times the interviewer will ask you to segment them yourself.
Costs Qualitative: In order to segment the costs, you will be required to brainstorm on the different cost impact factors. Think about the value chain of the business you are being asked about. The factors that are usually impacting are the costs of raw materials, the costs of manufacturing, shipping costs, and distribution costs. Sometimes you will be asked to brainstorm about fixed costs. These can include rent / storage, HR, electricity, etc. Though even these can be considered variable costs, depending on the case.
Bringing it together
When calculating profitability (profits/revenues), there is usually some additional measurements you would use to see if it’s a good investment or not. For example, measuring the return on investment ( ROI = (Gain-Cost)/Cost ) vs. the cost of capital (COC). If ROI > COC it’s typically a good investment.
Sometimes, you won’t have such measurements. In that case use your best judgement and business acumen. A 0.2% margin may be positive but it is risky and can easily turn to negative. Look to compare the profitability (not profit!) to your competitors.
Customizing the Profitability Case Framework
If you’re planning on just copying this framework onto a paper then you’ll likely not make it to the next round. An important factor to succeeding in the case interview is to customizing the framework to the question asked. If, for example, you case is about movie theaters, then under revenue use terms such as “tickets”, “capacity”, “3D”, “iMAX” and so on. Under costs, use terms such as “Distribution rights”, “royalties”, etc.
Market Entry Consulting Case Framework
When being asked whether a company should enter a market, or a venture should establish, there are typically three questions you would want to ask: 1) Is this market attractive? 2) Why this company? And 3) How should we enter the market.
The biggest question here is likely the profitability question. Use the profitability framework logic to answer this one. Next, you will want to ask if the market is growing, and what’s the total market size in revenues.
When discussing the market/industry attractiveness, there is a really famous framework that is worth memorizing: “Porter’s 5-forces of industry attractiveness” covered in Michael Porter’s book “Competitive Strategy: Techniques for Analyzing Industries and Competitors”.
The model discusses 5 forces to determine industry attractiveness:
First what is the threat of new entrants? Are the barriers to entry too low? If it’s too easy to get into that industry, or if it will be in the near future the industry will not be attracits.
Second, what is the threat of substitutes? What other alternative industries answer the customers’ same pain points? If there such and they are cheaper or better, maybe it’s not a great idea entering that market.
Third, what are the suppliers’ bargaining power? If there are a few suppliers and the company must use them to deliver products or services, than it is not an attractive industry as these suppliers will suffocate the company’s margins. The suppliers’ industries may be attractive.
Fourth, what is the bargaining power of the buyers? If there a few buyers they can negotiate prices that will also suffocate the margins.
Finally how fierce is the competition? Are there many existing competitors? Is the market fragmented?
Beyond Porter’s 5-forces, it’s also a good idea to think about exogenous factors such as regulation or economic impact on the industry.
Attractiveness to the company (why me?)
Why is this a good idea for the company in question to get into this industry? Does this company have any advantages over others? Can they leverage existing capabilities to create synergy? Is there any intellectual property?
How to get in
The different methods of getting into the market can affect the attractiveness of the decision. Should we do it as a joint venture to reduce costs and risk and increase synergies? Acquire a new company? Perhaps doing it ourselves?
Mergers and Acquisitions
A mergers and acquisitions framework looks to answer one simple question: “Should we acquire this business?”
The first component of this framework is identical to the one presented for market entry. If the company in question is in the same industry as the company of your client, this part of the framework is likely less relevant.
This is a key question for the M&A question: Is this company worth the price? First you would want to understand what’s the purchasing price. Then compare it to the company’s position. Are they profitable? (use the profitability framework). What are their special capabilities? How are they positioned amongst their competitors?
Mergers are almost always about synergies. How can joining the two companies add value? We usually look at the value in saving costs, or coupling the distribution channels to enhance sales.
Growth Consulting Case Framework
Occasionally you may be asked how to increase a company’s sales/revenues. This can also be a subset of a profitability case.
There are two key ways of increasing a company’s sales:
Buying another company. Use the M&A framework here.
Analyze the revenue side of the profitability framework. A very handy model to think about how to grow sales organically is the Ansoff Matrix:
|Existing Product||New Product|
|Existing Market||Market Penetration: Do this through increasing marketing budgets, new pricing, etc.||Product Development: Increase share of wallet. Create upsell or cross sale opportunities by introducing new products that address the same market.|
|New Market||Market Development: Expand to new markets with the same product. Usually think about international expansion.||Diversification: This is a very rare and risky strategy. However in history there have been examples of this strategy such as Nokia moving into the cell phone industry (from paper industry). Sometimes the distribution and HR in place can introduce valuable opportunities.|
The more you move to the right and bottom, the riskier that approach is.
Pricing Consulting Case Framework
In a consulting case you might be asked how to price a certain product. While real life pricing is a more rigorous and scientific process, in a consulting case interview a simple MECE framework will suffice:
If the client knows he is looking for a specific gross margin (ask a clarifying question), than a cost analysis is the way to go. Identify the potential variable costs and calculate what the price needs to be.
Price Based / Customer Perception
The best way to price a product is based on how customer perceive the product’s value. Estimations of how customers perceive the price can be done through surveys and experiments. Asking the customer “how much would you pay for this product” is not a good question because customers will be biased to place a lower price tag. Instead, there are techniques such as “Conjoint Analysis” which ask customers two choose between similar products at different price points.
An easy way to price a product is to look at what competitors are pricing it at. But be careful, if authorities believe the company is coordinating prices with your competitors, there are antitrust laws that will be enforced against the company.
Any questions or suggestions? Feel free to comment below.
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