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Case Interview Frameworks Overview

Determine Key Issue(s) Develop Hypotheses Gather Data / Test Hypotheses Refine Answer Develop Options Make Recommendation

As the interviewer describes the situation, think about what are the key issues facing general managment Develop hypotheses Decide what data you need to better understand the issues Listen to the facts Evaluate which facts are critical to the key issues Probe for more detail in critical areas Use facts and numbers appropriate in building argument Summarize options before making recommendation State pros and cons - be fact driven Make your recommendation
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Case Interview Frameworks Using Frameworks


There is no golden rule, more than one framework may be applicable Use an appropriate framework Do not force a framework Be hypotheses driven Be prepared to revise your hypotheses Mutually Exclusive and Collectively Exhaustive (MECE) Listen for clues from the interviewer Accept direction from the interviewer Display your thinking visually / graphically Be transparent in your analysis Leave time to summarize and make recommendations

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Case Interview Frameworks Some General Frameworks


The Three Cs The Four Ps Porters Five Forces (+govt.) Supply & Demand The Profit Equation Internal - External NPV Analysis

Dont be afraid to create your own framework, as long as it is logical, appropriate and transparent to the interviewer.

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Case Interview Frameworks Market Sizing


Determine The Key Drivers Bottom Up or Top Down?

Make Assumptions

Calculate Use Round Numbers! Common sense check!

Analyze Results Implications?

Increasing Factors

Decreasing Factors

Adjust Answer

Adjust Answer

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Case Interview Frameworks Declining Profits


What's Driving the Decline?

Gather Information

Analyze Using Profit Equation

Revenues

Expenses

Price

Volume

Product Mix

Fixed Costs

Variable Costs

Unusual Expenses

Decreasing Comp. pressure?

Decrease

Increase

Selling Less Profitable Items

- Added Capacity?

- Raw Material Prices

- Writeoffs - Lawsuits

- Market Conditions - Competition

Higher Marg. Costs - Org. Dysfunction - Overtime

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Case Interview Frameworks Increase Profitability

Revenues

COGS

SG&A

Price

Unit Volume

Direct Material

Direct Labor

Variable O/H

Price Sensitivity - Elasticity

Existing Market - Promotion - Place

Scale Economies /Diseconomies - Supply Constraints

Replace w/machines - Union?

Cost Acctg. - Allocation Drivers - Does pricing reflect Cost

Competitive Environ. - Substitutes

New Markets - Geographic - Economies of Scope

Inventory Mgmt. - Carrying Costs - Shrinkage

Can we explore economies of scope with entry into adjacent industry?

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Case Interview Frameworks Increase Capacity?

Should We Increase Capacity?

Market Demand

Investment vs. Improvement

Industry Capacity

Market Trends

Improve Productivity

Add Capacity

Competitors Plans

Threats

Cyclical / Seasonal Economy

Bottlenecks Design for manuf.

Add shifts Acquire Outsource

Global Competition Consumer tastes Substitutes

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Case Interview Frameworks Customer Turnover


What Has Changed in the Following Environments?

Company

Customer

Competition

Regulatory

Product Is quality sagging?

Tastes changing?

Are low cost competitors stealing from us?

Do new tax incentives exist?

Price Have sensitivities changed? Overpriced versus our competition? Place Is our distribution getting squeezed out? Are Customers Changing Channels? Promotion Are we spending? Push vs. pull? Has public image changed?

Disposable income?

Are diffentiated competitors stealing from us?

Any new regulations restricting the use of our product and favoring substitues?

Demographics of our target?

Are competitors integrating into distribution and shutting us out? Are they offering our customers special incentives to switch? (particularly with substitutes)

Do new substitutes exist?

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Case Interview Frameworks Competitive Response

Customer - What do they want? - How do they choose?

Competitor - Where are we positioned? - Where is the competition?

Company - How do we add value?

Values/Tastes

Price Sensitivity

Purchasing Habits

Product Place

Resources to respond?

Business relationships

Susbsitutes Demographic changes New customers?

Disposable income Mature market?

Distribution channel Price Bundled product? Promotion Normal good?

Cost structure Tangible Intangible Finances

Distributor Vendor Customer

Given the above, is it worth making a competitive response? How will the competition react? Applying game theory or PARTS analysis may help.

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Case Interview Frameworks New Product Introduction?

Customer Does product met a need?

Competition Is there any?

Company Can we do it?

Product Have we done homework? What does the segment want? Proliferation of products already? Price Have we explored sensitivity? Can we make a profit at this price?

Yes

No

Finance Are we able to finance the launch? Should we buy an existing producer?

Many

Few

Are there barriers to entry?

Will we be first movers?

Operations D0 we have capacity? Supply network?

Is market growing? Promotion Push or Pull? Cost of launch? Will current promotions help? Place Is distribution aligned with customer? Are we experienced in this channel?

What wil be the strategy? Low cost or Differentiated?

Yes Can we beat them?

Any precious resource that we own? (Ricardian rents)

Can we eat the young?

No Can we erect some?

Marketing Will we cannibalize existing products? Is this a complement / bundled good Does it build on resources?

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Case Interview Frameworks International Expansion


Internal External Quantitative Doesit match our growth strategy? - ROE/ROI Cultural Differences of Customers - Tastes / product preferences - Values / gender roles Methods of Conducting Business - Introductions - Government contacts Educational Differences ROI / Hurdle Rate

Alliance with local firm? - Joint venture/distributor

Cash Flows

Can our resources succeed overseas? - Flexible enough to adapt?

Amount

Is organization consistent with overseas 'autonomy'

Economy & Exchange Rates

Timing - Startup / disposition - Operating Discount Rate

Corporate Values - Bribery Worker's conditions / child labor

Seasonality - Weather

Distribution system - Transportation infrastructure - Different channels Political Climate - Instability

Local Market - Size - Competition

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Case Interview Frameworks Investment Decision

Investment Decision

NPV Analysis

Other Factors

Useful Life

Cash Flows

Discount Rate

Strategic Fit

Synergies

Environmental

Political

Competitors

Timing - Opportunity Cost

- Risk Free Rate - Inflation - Risk Adjust

- Missing Links of Value Chain

- Seasonality - Volatility - Inflation Demand Cycle

Stability Regulation

- Current Supply Potential Demand

Size - Market Potential - Outflows - Working Capital

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Case Interview Frameworks Company Acquisition


Understand Purpose Diversification? Gain Market Share? Geographic Expansion?

Analyze Opportunity

Internal Factors

External Factors

Strategic Objective

Strengths & Weaknesses

Industry Attractiveness

Identify Acquisition Candidates

Resources

Acquisition Fit Porter's Five Forces Three C's Soft Issues - Culture/Fit - Management Hard Issues - Price - Balance Sheet

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Case Interview Frameworks Hostile Takeover Defense


Two Options Both Designed to Raise the Value of the Company

Self-Help

White Knight

Are We Highly Levered? (Relative to the Industry)

Classic M&A Is there a Firm That...

Yes

No

Has Financial Strength Strategic Compatability

Do We Have Cash?

Issue Debt, Buy Back Stock Cultural Fit

Yes Then Buy Back Stock to Raise Stock Price

No Can We Release Good News to Raise Stock Price?

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