MBA Campus Recruiting Case Library

Deloitte Consulting LLP

Things the Interviewer Should Know About the Library

Mini Cases will take at least 20 minutes and have been developed to test 5 competencies:
Analytics
Financial Skills
General Business
Operations and Implementation
Strategy and Competitive Analysis

The preferred approach for using the mini-cases is as follows:

The first of the two interviewers to meet with the Round 1 candidate conducts a typical behavioral interview
During the 2-minute debrief in the hall outside the interview room, the 2 interviewers pass on information on what
skills/competencies need to be tested in the 2nd Round 1 interview
The interviewer then chooses one of the cases from the library for that skill/competency

If using the preferred approach, wed suggest that each interviewer choose (in advance) one of the 2 or more mini-
cases offered in each competency category

Many of our campus teams like to have the same team member give the mini-case all day. It is perfectly fine to
simply pick one mini-case and use it

The cases have been designed to require minimal preparation. The first page contains the case scenario and
problem statement. After page 1 is presented to the candidate and while he or she prepares his or her answer, the
interviewer can read page 2 to understand solution considerations and a method to evaluate the candidates answer

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 Mini Case Library At-a-Glance

Competency Case Title Industry Service Line Description Pgs

Analytics Hungry Healthcare Operations Hospital administration needs to decide whether to build a kitchen or outsource their 4-5
Hospital Providers Excellence patient food service dept.

Lubricant Automotive Performance A leading producer and marketer of quality branded automotive and industrial 6-8
Manufacturer Improvement products needs assistance in improving profitability. One business unit has been
identified as having large sales volume, but poor profitability.

Financial Toy Retail CFO Services Toy manufacturer CFO concerned about their stock prices failure to rise in 10-11
Skills Manufacturer (Financial proportion with revenue growth despite the success of its latest hot products.
Management)

Talking Points Retail Mergers and Since a recent acquisition, an US retailer has experienced poor stock performance. 12-14
for the Board Acquisitions Client suspects its due to an ineffective integration. Candidate is asked to present
findings for an upcoming board meeting.

General Luxury Hotels Retail Customer and Luxury hotel chain needs assistance in managing SG+A costs and identifying 16-17
Business Market Strategy strategies to improve their bottom line.

Operations Truck After- Automotive Customer and Heavy duty truck manufacturer needs assistance with prioritizing and implementing 19-20
market Parts Market Strategy initiatives to improve pricing capabilities.

Blood Life Corporate and Blood screening system producer has changed focus from market share to 21-22
Screening Sciences Competitive profitability. To facilitate this, client has decided to redesign their sales and
Products Strategy contracting process and requires assistance with implementing the new process.

Strategy and Medical Life Customer and Medical Diagnostics company has a new technology only currently reimbursable 24-25
Competitive Diagnostics Sciences/ Market Strategy with Medicare/ Medicaid. Due to physician demand for the testing, they would like
Analysis Company Health to negotiate coverage with private payers.
Plans

Regional Healthcare Mergers and Regional hospital system considering investment in a health plan. Candidate is 26-27
Hospital Providers/ Acquisitions asked to address the vertical integration issues and potential to compete with its
System Health customers (other health plans).
Plans

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 Analytics

These cases are designed to test a candidates ability to think

analytically (case 1) and /or run the numbers (case 2)
Hungry Hospital Analytics Page 1

Business Situation

Our client is Hungry Hospital, a large, 800-bed general acute care hospital in a major metropolitan area that provides a wide range of inpatient,
outpatient and emergency services to patients in the county regardless of their ability to pay. As the largest hospital in the metro area, Hungry
Hospital recorded approximately $1.2B in patient revenues this previous fiscal year. Despite significant budget pressures, Hungry Hospital
recently received bond approval to construct several new buildings on its campus because many buildings are severely outdated.

One of the buildings scheduled for demolition and replacement holds the food services department. This includes the kitchen that prepares meals
for the hospitals patients, the staff to prepare and deliver the meals and a small management team. Please note that cafeteria operations (i.e.,
food for staff and visitors) are completely separate and have their own kitchen in the hospital.

The client is aware that that a nearby large hospital chain does not have a kitchen in their hospitals. Instead, they outsource from a local vendor
who delivers patient meals, pre-plated and customized to the patients dietary restrictions, to the hospital each morning. The administration at
Hungry Hospital approached Deloitte Consulting to help determine whether or not they should build a kitchen in the new building or outsource the
food services department.

Problem Statement

The administration at Hungry Hospital approached Deloitte Consulting to help determine whether or not they should build a kitchen in
the new building or outsource the food services department.

How would you structure the decision to in-source or outsource the department?
What data would you need to gather?
What other factors would you need to consider before issuing a final recommendation?

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Hungry Hospital Analytics Page 2

Solution Considerations (For interviewer reference ONLY)

This is a cost analysis case which involves evaluating cost data under two scenarios and proposing a recommendation. The cost data should be
considered in light of strategic considerations. Two possible approaches are:

Aggregate level - Compare the NPVs of building the kitchen to the amount saved by NOT building the kitchen.
Individual-meal level - Identify the full costs of a patient meal compared to the vendors quote. Meal costs could include labor, food,
management, equipment maintenance, etc.

In addition to outlining costs of each scenario, the following considerations should be included:
Hospital mission, including emergency preparedness without a kitchen
Impact on other food-related factors in addition to patient meals, e.g. cafeteria, tube feeding supplies, formulas, and floor stock (food held
on the floors for between-meal snacks for patients and families)
Quality of food prepared in-house versus by a vendor. Is quality a major factor in this market?
Workforce issues Management experience, presence of organized labor
Number of vendors providing the needed service
Risks associated with each option especially the long-term risks of betting on a single vendor into perpetuity

Candidate Evaluation

This situation requires developing costs under two scenarios and, in conjunction with non-financial factors, develop a recommendation as to how
the hospital should proceed with their capital planning. A strong candidate will:
Outline a process for gathering and evaluating data
Identify needed quantitative data and ideally, how to obtain this data:
Fixed costs Construction, building life, capital equipment, depreciation schedule
Variable costs Labor, food, small equipment
Obtain qualitative data through interviews with the Food Services Director, hospital administration, vendor representatives
Identify operational factors that drive cost projections and logistics
Operations - # of meals served, revenue per meal, patient growth, discount rate
Logistics - how vendor meals would be delivered to patients
Suggest non-analytic factors that should also be factored into the final recommendation

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Lubricant Manufacturer - Analytics Page 1

Business Situation

Our client is a leading producer and marketer of quality branded automotive and industrial products and services with $1.3 Billion in revenues,
operating profit of $105 Million, 5% sales growth and second largest market share at 18%.

The client manufactures three types of products: lubricants, automotive chemicals, and cleaners & degreasers. It markets its products through
four business units each focused on a specific customer segment:

Do-it-yourselfers, sold through retailers and mass merchandisers

Quick Oil Change shops sold through independent distributors
Industrial customers sold through company distributors and directly to national accounts
Commercial customers sold through the same company distributors and national account sales force

Two of these business units sell all three products while the other two sell only one or two products. All business units sell lubricants which make
up almost 2/3 of total sales. The three products sell by the barrel into the various customer groups (see handout).

Manufacturing processes for the 3 product types are similar and utilize the same equipment. The production facilities are producing at capacity.
Approximately half of COGS are fixed costs (e.g., plant, equipment, utilities, fixed labor, etc.) and half are variable (e.g., raw materials and
variable labor expenses).

Problem Statement

Our client has asked us to assist them in improving profitability. In the first week of the project we put together an analysis (see
handout) of gross margin across products and customer segments. The biggest profitability problem is the Industrial business unit
which generates a lot of sales volume, but not much profitability.

How much incremental gross margin would be achieved if the Industrial business unit achieved similar margins as the total
company?
If our client exited the Industrial business unit and did not replace those sales in any other business unit, how much would
operating profits decline? (Assume that SG&A + capital and other costs are fixed).
What tactics should we consider in improving the industrial division margins?

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Lubricant Manufacturer - Analytics Handout
Automotive Cleaners & All
Customers: Lubricants Chemicals Degreasers Products Channels

Memo: COGS per Barrel $81.50 $49 $54

Do-It-Yourselfers
Revenues per Barrel $112 $78 $70
Total Revenue ($ Millions) $400 mm $60 mm $120 mm $580 mm Retailers & Mass
Gross Margin % 27% 37% 23% 27% Merchandisers

Quick Oil Change Shops

Revenues per Barrel $130 N/A N/A Independent
Total Revenue ($ Millions) $200 mm $200 mm Distributors
Gross Margin % 37% 37%

Industrial Company
Revenues per Barrel $82 $52 $62 Distributors
Total Revenue ($ Millions) $100 mm $140 mm $60 mm $300 mm & Direct to
Gross Margin % 0.5% 6% 13% 6% National Accounts

Commercial Company
Revenues per Barrel $98 N/A $74 Distributors
Total Revenue ($ Millions) $100 mm $120 mm $220 mm & Direct to
Gross Margin % 17% 27% 22% National Accounts

TOTAL COMPANY
Total Revenue ($ Millions) $800 mm $200 mm $300 mm $1.3 billion
Gross Margin % 25% 15% 23% 23%

Note: Total Gross Margin (revenues less COGS) is $300 million. Corporate SG&A, capital costs and
other expenses total $195 million, leaving $105 million in Operating Profit (before taxes).

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Lubricant Manufacturer - Analytics Page 2

Solution Considerations (For interviewer reference ONLY)

1. How much incremental gross margin would be achieved if the Ind. Business unit achieved the total company margin
The simple answer would be calcd at the all products level (23% - 6%) x the $300 million in Industrial sales = $51 million.

An excellent answer would do this at the individual product level (24.5% x $100 mm) + (9% x $140 mm) + (10% x $60 mm) = $43 million.

The superb answer would actually take the Industrial division out of the calculations to see what margins would have been by product without
that division the answer is $78.5 million but we dont expect anybody to get there without a calculator!

2. If our client exited the Industrial business, how much would operating profits decline (assuming SG&A and corporate costs are
fixed). Theyd lose the $18 million in current gross margin plus the $141 million in fixed manufacturing costs that they currently absorb
($300mm 18mm gross margin) = $282 COGS. COGS x 50% fixed mfg. costs = $141mm. So the answer is $159 million.

3. What tactics should we consider in improving margins in the Industrial Division? This is all about increasing the net price per barrel
received from the Industrial customers. So try incentivizing the distributors and/or sales folks differently, leaning on the distributors who also
sell to the Commercial customers to try to get better prices, maybe emphasize the more profitable cleaners & degreasers instead of lubricants,
etc. As shown in #2 above, the candidate should not suggest that we exit the Industrial sector (as it pays a lot of mfg. overhead!) and they can
also not assume that there are any manufacturing efficiencies. The simple problem is that we cant get Industrial customers to pay as much
for our product as do other customers.

Candidate Evaluation
In answering this mini-case, the candidate should:

Show proficiency in reviewing a variety of data, making conclusions and doing simple calculations
Show a comfort level in reviewing and discussing standard profitability information COGS, gross margin, etc.
Demonstrate an ability to go from data and analysis to recommended actions to improve profitability

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 Financial Skills

These cases are designed to test a candidates ability to understand,

calculate and use standard financial ratios and/or statements
Toy Manufacturer Financial Skills Page 1

Business Situation
Our client is an $800 million traditional toy manufacturer. The traditional toy market is comprised of two major players who control about 90% of
the US market. The traditional toy market has been shrinking in recent years as childrens preferences have shifted.

Our client currently has the hottest toy on the market. Brand recognition for the flagship products is at an all-time high with the core brands
enjoying revitalization in the marketplace after a period of sluggish revenue. Stock price, however, has not kept up with revenue growth, even
dropping slightly during the most recent quarter. Looking at the financials, the client has a very strong balance sheet with a high degree of
liquidity. The debt to equity ratio is currently 20%.

The CFO has expressed some concern about the failure of the stock price to rise in proportion with the success of its latest products. The
organization would like to identify the drivers of the companys current performance and identify areas for improvement. Traditionally, the focus
has been on profitability. However, the CFO understands that shareholder value is broader than net income.

Problem Statement

Deloitte has been engaged to analyze the companys performance and develop recommendations for ways to increase shareholder
value.

What key financial ratios and analyses are required to help determine which drivers the organization should focus on?
What inherent characteristics of the industry should be taken into consideration? How would you modify the analysis to take these
characteristics into account?
How would you structure the analysis for this client?
What type of data would be needed to support your recommendations?

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Toy Manufacturer Financial Skills Page 2

Solution Considerations (For interviewer reference ONLY)

This is a standard shareholder value problem where an inherently volatile industry with few players compounds the analysis. Solutions should
include:

Financial analysis using the four drivers of shareholder value: revenue growth, operating margin, asset efficiency, expectations or DuPont
analysis (e.g., ROE = profit/equity = profit/sales * sales/assets * assets/equity)
Understanding of key financial ratios including: gross margin of product mix, days in inventory, asset turnover, fixed costs vs. variable costs
importance of benchmarking against industry leaders
Implications of debt/equity ratio and other financing considerations on any assessments made
Incorporation of the clients business model/core competencies into the recommendations
Understanding of the role industry conditions play how can we combat these pressures?
Potential projects that would leverage Deloitte capabilities supply chain transformation, growth and innovation, etc.

Candidate Evaluation

As mentioned above, this is a standard shareholder value problem and with the change in consumer preferences, the toy manufacturer must
consider how any changes made to combat inherent volatility or capitalize on changing market demands may deviate from the organizations core
competencies. A strong candidate will address:

Different levers of shareholder value short-term drivers include revenue growth (either organically through sales in new markets/increase
in prices or externally through acquisition) and operating margin (lean operations and efficient R&D that drives creation of toys that are well
received in the market); long-term drivers include asset efficiency (specifically inventory turnover in the warehouse) and expectations
(partnership and collaboration with suppliers across the world, brand perception, particularly in relation to safety)
Importance of accurate forecasting in an industry where the majority of sales are generated during the holiday season
Recognition that changing consumer demands from traditional toys to video/computer games may require the organization to revise its
processes; Ways to grow may lead to development of new products/technologies however, consideration of core competencies is
imperative
Financing for growth a change in leverage will affect the risk/return for shareholders
Excellent answers will include an understanding of the relationship between the toy manufacturer and its customers (both direct and
indirect) as majority of the power in the direct market is held by a small number of players (e.g., Target, Wal*Mart) although majority of the
marketing is directed towards end consumers

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Talking Points for the Board Financial Skills Page 1
Business Situation

A U.S. retailer of low cost casual clothing with $4 billion in annual sales recently acquired a smaller retailer with stores located in similar
geographies that serve a higher-end clientele. The company was purchased to move into the more predictable professional segment of clothing
buyers, and it added $1 billion in annual sales to the acquirer. Since the acquisition, the share price of the combined organization has been
depressed. The CEO believes that the poor stock performance is related to an ineffective integration of the recently purchased retailer.

The CEO tells you that he has a conference call with the Board of Directors in an hour, and he would like your immediate thoughts on where the
problems might be. He pulls out notes from an earlier conversation with the CFO about the companys consolidated financial statements covering
periods before and after the acquisition, and he asks you to jot down the following key points: (*Note to interviewer: Data below is also provided
as a handout on the next page which the interviewer can provide instead of reading the bullets).

Gross margin: constant at 25% before and after acquisition

COGS: averaged $3 billion before acquisition and $3.75 billion following acquisition
SGA: decreased slightly over the last several years
Depreciation & Amortization: minimal increase
Income Taxes: CFO confirmed this is not the cause of performance issues
Fixed Asset Turnover: has decreased significantly
AR turnover: appears consistent before and after acquisitions
Inventory Turnover: has decreased significantly

Problem Statement

With the Board Meeting approaching, you have little time to evaluate the situation and tell the CEO if his intuition seems correct.

What factors would you consider in this situation?

Given the CEOs notes, what appears to be impacting the companys profitability?
What could be impacting the decrease in fixed asset turnover?
What could be impacting inventory turnover?
If you found out that the companys average inventory was $600K before the acquisition and $1B after the acquisition, would you agree with
the CFOs view that Inventory Turnover has decreased significantly?
What are some potential actions that the CEO should consider discussing with the Board of Directors?

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Talking Points for the Board Financial Skills Handout

Handout: Companys Consolidated Financial Statements Notes

Key points from an earlier conversation with the CFO about the companys consolidated financial statements covering
periods before and after the acquisition:

Gross margin: constant at 25% before and after acquisition

COGS: averaged $3 billion before acquisition and $3.75 billion following acquisition
SGA: decreased slightly over the last several years
Depreciation & Amortization: minimal increase
Income Taxes: CFO confirmed this is not the cause of performance issues
Fixed Asset Turnover: has decreased significantly
AR turnover: appears consistent before and after acquisitions
Inventory Turnover: has decreased significantly

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Talking Points for the Board Financial Skills Page 2
Solution Considerations (For interviewer reference ONLY)
How would you go about assessing the situation?
Confirm that the companys situation is due to company specific factors, and not economic wide or industry factors
Why hasn't gross margin gone up with the acquisition of higher end "professional" stores?
Understand that this case concerns stock performance, and not profit margins alone. Expectations must be managed. Asset utilization and alternative investment opportunities are factors to
consider in terms of how the acquisition/integration is viewed by the market
Given the case introduction, a logical framework to use is a financial statement analysis (in this case, we only have assess to the CEOs notes about the financials)
Focus on negative changes in financial performance that coincide with the acquisition (before and after)
Consider acquisition impact on basic profitability (return on net assets = net profit margin x avg. asset turnover) -- in this case, asset utilization is impacting basic profitability, not margins
Given the CEOs notes, what appears to be impacting the companys profitability?
Consider operating activities that could be impacting profit margin: Gross margin, SGA, Depreciation & Amortization and Income Taxes do not appear to have changed for the worse after the
acquisition to impact profitability
Consider asset turnover: Decreases in Fixed Asset turnover (sales / avg. fixed assets) and Inventory turnover (COGS / avg. inventory) appear to be impacting profitability
Drill down to identify why Fixed Asset and Inventory turnover have decreased
What could be impacting the decrease in fixed asset turnover?
The majority of a retailers Fixed Assets are likely to be primarily Property (stores) and some Equipment (e.g., supply chain related technology). Integration of the new stores and technology
following the acquisition may not have been adequate (poor planning, poor execution or both)
What could be impacting inventory turnover?
Casual clothing inventory may be building due to shifting fashion trends (i.e. decrease in inventory turn may not be related to the acquisition)
Acquired company is carrying higher inventory levels due to differences in products (e.g., consumer purchasing behavior, seasonality)
Sourcing may be inefficient at acquired company (e.g., legacy technology, lot size, delivery schedules, contract terms specifying when possession is taken, distribution and warehousing)
Changes in accounting methods (e.g., LIFO, FIFO) however these differences should already be figured into the stock price
If average inventory was $600K before acquisition and $1B after, would you agree that Inventory Turnover has decreased significantly?
Yes. Inventory turnover has decrease by 25%. Before acquisition = $3B/$600K = 5 turns. After acquisition = $3.75B/1B = 3.75 turns
What are some potential actions that the CEO should consider discussing with the Board of Directors?
Fixed Assets
Rationalize geographic footprint to minimize duplication/overlap of facilities (retail and warehousing) caused by newly acquired company
Consider the size of retail outlets of acquired company (sq.ft. cost of floor space, potential differences in layout, etc.)
Seek to improve leasing economics (note: lease expenses are capitalized onto balance sheet)
Inventory
Determine if the right mix of products are being shipped to and sold at stores across geographies. Identify slow moving merchandise and items no longer in stock in sufficient ranges of sizes
Consider use of markdowns to clear merchandise. Seek ways to better gauge fashion trends if that is a source of slow moving inventory
Pursue JIT sourcing opportunities which may not be in place at recently acquired company. Minimize excess inventory in stores and distribution centers
Other
Assess original timeline for achieving anticipated benefits from acquisition. Consider possible quick hit actions that will signal Wall Street without diminishing longer term potential of
acquisition value. Communicate with investor community.

Candidate Evaluation
Candidate should:
Identify that decreases in Fixed Asset and Inventory turnover appear to be impacting return on net assets; profit margins are not the issue
Recognize that changes to improve asset utilization by addressing PPE and inventory could impact both top line sales (e.g. consolidating store locations may result in lost
sales) and bottom line margins (e.g. getting rid of slower moving merchandise to increase inventory turnover may hurt profitability depending on the mix of profit margins
among products)
Recognize that investor expectations need to be managed especially following an acquisition (when investors are looking to see if value is realized)
Provide key-takeaways for the CEO to discuss with the Board of Directors

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 General Business

This case is designed for the candidate with a non-standard background

(e.g., military, non-profits, non-US business, etc.) to test if they adequately
understand US-based enterprise-wide business concepts
Luxury Hotels General Business Page 1

Business Situation
Our client is a small chain of luxury, five-star hotel located in New York City. The hotels are independently operated and the chain brands itself as
an exclusive, premier accommodation for wealthy international tourists and business professionals.

Amidst intense new competition, the hotel chain has been able to maintain its popularity and prices. It features a rooftop pool, retail space (some
of which is currently vacant), a restaurant, and meeting facilities. Roughly 80% of its customers are tourist families who often do little planning
before their trip.

For many years, the business enjoyed an annual profit north of $10M but those margins have started to deteriorate over the past three years.
Pressure has been mounting to reverse the trend during this upcoming fiscal year.

While sales and operating costs have remained consistent, SG&A costs associated with the launch of a mass market advertising campaign,
doubling the number of reservations agents, and buying more office supplies have steadily increased.

Problem Statement

Concerned with recent business performance, the board of directors has hired Deloitte to help the hotel develop some ideas on how it
can improve its annual profit. The principal has scheduled a brief meeting for you with a client team member, to help prepare some
preliminary recommendations.

How should the client address the increased SG&A costs?

Looking more broadly at the entire business, what other recommendations can help the client increase profit?
What are the potential risks to the recommendations you suggested?

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Luxury Hotel General Business Page 2

Solution Considerations (For interviewer reference ONLY)

Potential Solutions
Segmentation and Targeting of affluent customers to address the majority of the SG&A problem. Get smarter about advertising spend, focusing
on specific customers to drive increased revenue to offset advertising spend or even potentially reduce the amount of overall spend
Lower rents for vacant retail space and engage in profit-sharing arrangement to lure new retailers to fill empty space or make better use of
empty space to generate new revenue
Partner with premium NY tour companies to offer bundle tour/hotel packages to customers, extracting some revenue from the sale or another
creative solution to increase ancillary revenue. This can help the hotel serve better its wealthy, poor planning clientele as well.

Solutions Not to Recommend

Lay off reservation agents, outsource, or hire less experienced reservation agents. This is a small area of impact, and this may impact
customer service perception if less skilled/experienced people are hired
Reduce advertising spend without thinking about how. The candidate should recommend smarter spend to target the right people, which may
have the dual benefit of also reducing spend

Candidate Evaluation

The candidate throughout the discussion should formulate hypotheses and either prove/disprove through questioning and thinking. A strong
candidate should:

Understand the components of SG&A in a hotel including sales and reservations, credit card fees, marketing, etc.
Isolate the main driver of increased SG&A quickly, reservation agents and office supplies for a single hotel are not a large percentage of
costs
Leverage information given in the business situation to drive hypotheses development such as the information about vacant space and the
lack of planning these particular customers do before traveling to NY
Demonstrate a basic understanding of P&L, discussing sources of revenue and cost for the hotel and how they impact the bottom line
Balance practicality and risk with creativity to identify recommendations that can be implemented in the near-term.

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 Operations and Implementation

These cases are designed to test a candidates ability to basic

understanding of operational processes and their ability to structure
an operational problem/analysis, and perhaps develop a work plan
Truck After-market Parts Operations and Implementation Page 1
Business Situation

Our client manufactures heavy duty trucks and supports an after-market service parts business. The after-market parts business (the focus of this
project) does more than $1B in sales through a dealer network and direct to major fleet customers (e.g., Penske, UPS, Ryder).

Recent industry consolidation, both horizontal and vertical, is increasing competition and pushing prices down in many product categories while
rising commodity costs are challenging the businesss ability to execute its cost-plus pricing strategy and continue to make a profit. Furthermore,
the clients pricing people and processes have been strained to the breaking point over the last several years as they struggle to manage part
pricing on over two million parts currently maintained in disparate databases and spreadsheets.

The client recently completed an internal assessment resulting 42 pricing improvement initiatives including shifting the clients pricing strategy
from cost-plus to a market/value based approach, revamping key processes and tools to managing prices and implementing pricing actions that
would result in margin lift for the business. Deloitte has been hired to assist the company in implementing these initiatives to improve overall
pricing capabilities and develop recommendations for improvement.

Problem Statement
In phase 2, Deloitte has been asked to create a pricing improvement roadmap and execution plan that will prioritize the 42 improvement
initiatives outlined in the phase 1 assessment.

As the project manager for this phase:

How would you prioritize the implementation of the 42 initiatives? How would you cluster and sequence those projects into major initiatives?
How would you consider the value of taking a cost-plus versus a market value approach? How might they be different operationally?
How would you develop the work plan?

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Truck After-market Parts Operations and Implementation Page 2
Solution Considerations (For interviewer reference ONLY)

Initiative Prioritization/Sequencing: The client can not embark on every initiative at the same time and so a roadmap must be developed to
guide the organization through what change/initiative should happen and when. To do this, a framework must be applied in order to prioritize
the phase 1 initiatives.
Potential frameworks: Level of Effort vs. Ease of Implementation / Level of Customer Risk vs. Potential Revenue Increase / Benefit vs.
Cost
What risks and interdependencies exist?
Clustering: The most straight forward way of clustering the initiatives is by grouping them in categories such as Strategic,
Organization/People, Process, Tools/Technology
Work Plan: This question is aimed at testing the candidates ability to logically think through the steps required to complete a typical
consulting task building a work plan. Within each step that the candidate proposes, the interviewer may probe deeper into that step by
asking why that step is important or potential impacts.
The candidate should identify steps such as: Review information available (Phase 1 outputs); Define expectations for reporting,
documentation, communication and involvement of stakeholders; Validate scope of the project; Resources available to the project; Time
line requirements

Candidate Evaluation

To successfully answer this case a candidate should:

Show logical and task-oriented thinking when discussing these core project management elements (highlight scope / budget / team /
appropriate approval channels, etc.) and
Propose a framework for clustering and sequencing the 42 initiatives in the roadmap
Understand the business situation and keep the core problem at the top of mind: How can this client improve its bottom line profit. As stated
in the case, market prices are falling / costs are rising, current strategy (cost-plus) cannot be sustained. Deloitte is engaged to figure out how
to change this strategy and improve the organization and operations behind it (process and tools), hence the roadmap development. The
candidate should tap into the basic question at some point in the case discussion.

A strong candidate should raise key issues along the way that may not have been specifically spelled out in the case like:
Should pricing actions which lift margin be prioritized / sequenced ahead of building the organizational skills to execute enhance business
processes?
What internal change management must the client do to make a change in its pricing strategy (from cost-plus to market-based)? Who needs
to buy into this (executive ownership)?
What challenges might the client face as they roll any pricing changes out to their distribution channels (Direct to Fleet + Dealer Network)
How do I address and communicate these key changes with my customers?
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Blood Screening Products - Operations: Overcoming Resistance to Change Page 1

Business Situation
Our client is a $300M company that produces and distributes blood screening systems used to identify a patients blood type and diagnose
disease. They sell two main diagnostic systems a manual system and an automated system. The manual system is somewhat of a commodity
product with low margins and the automated system earns much higher margins.

In the past, our client has been focused predominantly on gaining market share in a relatively fragmented industry. They have been successful
and are now the #2 competitor in their market. However, to get to this position, our client emphasized winning contracts at any price and, as a
result, the companys margins have been spiraling.

Having established themselves in the blood diagnostic market, our client is now switching focus from emphasizing market share to increasing
profitability. As such, our client has decided to redesign its sales and contracting process. The new process will reduce the ability of the sales
force to sell products below a certain margin. As part of this, the company is introducing a new contracting system that has automated checks
and alerts before a low margin contract is signed. Our client will consider changing its sales compensation system as they now pay sales reps
based on unit sales.

They would like to roll out the new process and technology as soon as possible. However, there has been quite a bit of resistance from the sales
team. The sales team believes the new process will limit their ability to sell to customers, and ultimately, reduce their sales commissions.

Problem Statement

Deloitte Consulting has been called in and asked to help the company implement the new sales process. They have been asked to
help with the following two issues to enable a successful implementation:

What change management issues must be addressed to overcome sales force resistance to the new process? What potential strategies
would you use to overcome each issue?
How would you structure the project to effectively implement this process and technology change?

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Blood Screening Products - Operations: Overcoming Resistance to Change Page 2

Solution Considerations (For interviewer reference ONLY)

The candidate should address the following basic change management concepts in addressing the case problem:
Leadership / stakeholder alignment
Compensation / incentive structure
Sales force training

In addition, the candidate should lay out a work plan for the project, including:
Assessment
Design
Training
Pilot / Implementation
Monitoring

Candidate Evaluation

A strong candidate will identify areas of potential resistance and develop an action plan to address this. This includes:
Leadership / stakeholder alignment:
Effectively communicating the reason for change
Identifying who might be most resistant to change and working out solutions to address this
Working with leadership to ensure they consistently and effectively communicate support
Compensation / incentive structure
Understanding sales incentives today and how compensation will change for each individual
Communicating with sales force to explain changes to compensation and how they can be successful under new system
Sales force training
Training the sales force on the new process and system
Retraining the sales force to sell on value rather than price
In addition, a really excellent candidate might also address the following:
Addressing sales force feelings of disempowerment and identifying ways to empower them in other ways
Identifying special programs (beyond pay) that might drive desired behavior
Structuring compensation to promote high margin sales on the high margin business without penalizing reps that have a high mix of low
margin commodity business (i.e., breaking out margin goals by product line)

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 Strategy and Competitive Analysis

These cases are designed to test a candidates ability to think

strategically and/or structure a complex strategic problem
Medical Diagnostics Company Strategy and Competitive Analysis Page 1

Business Situation
Our client is a medical diagnostics company that sells testing for people who are prescribed major pain medications, such as OxyContin.
Physicians prescribe the tests concurrently with medication to monitor patients dosage and discourage addiction. Patients go to a lab for regular
blood and other tests throughout treatment, and the results are regularly provided back to the physician for monitoring. Monitoring allows the
physician to spot signs of overdose or addiction, which can result in serious side effects to patients, increase long-term medical costs, and
potentially lead to malpractice suits.

The majority of the clients revenues currently come from Medicaid/Medicare reimbursements. Until now, the company has been too busy to
negotiate coverage from private insurers, meaning that patients with private insurance would have to pay for the testing on their own. Because of
this, many physicians do not prescribe the testing to patients with private insurance.

Now that it has demonstrated physician demand for the testing, the company wants to more aggressively target gaining reimbursement approval
from private insurers. This will involve not only negotiating reimbursement coverage, but also negotiating an optimal reimbursement rate.

Problem Statement
The company has engaged Deloitte to identify an optimal reimbursement rate and develop a strategy to negotiate private insurer
reimbursement coverage.

What are the key issues you would need to consider in this case?
How would you structure your approach to this case?
What are some types of analysis you could use to determine optimal reimbursement rates?
What are possible sources for data to quantify the tests value proposition to private insurers?

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Medical Diagnostics Company Strategy and Competitive Analysis Page 2

Solution Considerations (For interviewer reference ONLY)

This is a classic revenue-side strategy problem, where consideration of the stakeholder power structure is the key to the solution.
There are four main stakeholder groups involved in use and pricing decisions: company, payer, physician, and patient the company and
payer (insurer) hold the most power for pricing decisions
Stakeholder power structure means company can not unilaterally set pricing, but must negotiate with payers (insurers) to increase
reimbursement rates. Key to expanding coverage and obtaining an optimal reimbursement rate is to demonstrate the value proposition for
private insurers (i.e., reducing future medical costs)
Quantifying value proposition will need to take into consideration probability of addiction and medical complications and associated costs
Pricing negotiation for health products includes actual ethics risks and the risk of perceived ethics violations, such as pricing uninsured
individuals out of the market, over-estimating value proposition benefits, or a public/media perception of price gouging

Candidate Evaluation

A strong candidate should:

Identify the following as key issues to consider: product value proposition, position relative to competitors, buyer power, and barriers to
entry (e.g., proprietary technology, whether competitors have Medicare/Medicaid reimbursement approval)
Provide a logical structure for approaching the case, such as the 3Cs (company, competitors, customers), Porters 5 Forces, or the
candidates own construct. Candidates should recognize that this is a revenue-side problem, and structure their analysis accordingly
List 1-2 options for identifying optimal price, such as quantifying value proposition, conjoint analysis, surveys, focus groups, or
comparables; Identify the need to conduct financial modeling to determine impact on coverage and revenue
Candidate should not suggest that private payer pricing simply be the same as the Medicare/Medicaid reimbursement rate
Recognize that the power structure between company and insurers is the key to negotiating reimbursement rates Insurers hold the
primary power over payment and are the gatekeepers for physicians wanting to prescribe the testing
Identify 2-3 possible sources for data on quantifying the tests value proposition to insurers, such as interviewing physicians and insurers,
historical client records, government/academic information and studies, etc.
Demonstrate thoughtful consideration of ethical issues and risks as outlined above
An exceptional candidate may also:
Recognize that since insurers hold primary power for pricing, demonstrating and quantifying the products value proposition to the insurers
(i.e., reduced future medical costs from addiction or misuse) is the key to getting the best reimbursement rate
Note the importance of clarifying the clients goals for optimizing the reimbursement rate i.e., is the clients goal to grow revenue or
increase profitability and incorporate this goal into their recommended analysis
Identify risks of mis-pricing, such as alienating physicians, reducing coverage, undercutting value perception, or perception of gouging
Incorporate a more sophisticated power structure analysis that includes physicians and patients

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Regional Hospital System Strategy and Competitive Analysis Page 1

Business Situation

Our client is a $2 billion regional hospital system with 3 hospitals in a major Midwestern market. Its hospitals are the preferred (and presumed
highest quality) hospitals in the market. Its revenues come primarily from 3 sources: Medicare (50% of hospital revenue), Blue Cross (30% of
revenue) and most of the remainder from a variety of managed care companies.

The CEO of a mid-size local health plan (about 7% market share in this region and $1 billion in revenues) just approached our client and offered
to sell the health plan at a substantial discount to its actual market value. Although profitable and stable, this health plan needs capital to grow
and better compete in the market.

Our client has a very strong balance sheet and has plenty of funds to make the $300 million investment without constraining its own future growth
prospects and capital plans.

In addition to the good investment prospects, owning the health plan would also allow our client to shift significant amounts of patient volume to its
own facilities.

While the initial financial analysis suggests that this would be a very good investment, our client is concerned with the implications of going into
competition with its best customer (Blue Cross) and also competing with the other managed care companies that provide it with patients.

Problem Statement

Deloitte Consulting has been called in and asked to lead our client through the analysis and decision processes of whether to proceed
with this investment.

What issues must be considered in making this decision?

What data and analyses are required to aid the decision process?
How would you structure the analytic and decision processes?

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Regional Hospital System Strategy and Competitive Analysis Page 2

Solution Considerations (For interviewer reference ONLY)

This is a standard vertical integration problem where strategic and competitive issues of two related but very different industries must be
considered, including:

Competitive analysis and SWOT of the (health plan) target standard acquisition analyses
Implications of the hospital company trying to compete in the health plan business
Relative competitive position of our (hospital/provider) client
Transfer pricing issues where do you take the profit? Where do you take the risk?
Implications of competing with your customers impacts on your potential future relationship with the large payers in your market
Potential competitive counter-moves in both the payer and provider markets

Candidate Evaluation

As mentioned above, this is a vertical integration situation and with overlapping regional markets, the Hospital company needs to play off the
potential impact of competing with its best customers (other health plans that provide it with patients) with the potential profitability and extra
patient volume that they might get from buying the health plan. A strong candidate will address:

Relative advantage of the hospital system over the payors in its market to see if they can pick up more volume from the target than they
lose from current health plans/customers. Provide a framework (e.g., Porters 5 Forces) to organize the competitive analysis.
Competitive issues in both the provider and payor markets:
Competitive position and growth plans of our client (Hospital) and its target (health plan)
Relative premiums, provider pay rates, and medical loss ratios (i.e., total payments to providers divided by premiums) of the target
health plan to other health plans in the market
Relative profitability of the (hospital) business from the various payors if Blue Cross is less profitable than other commercial payors,
maybe potential trade-off in volume might be positive
Potential impact on the physicians who are major partners for both the health plans and the hospitals
Transfer prices (i.e., prices the target health plan will pay our client Hospitals) do you take the profit in the payor business or in the
provider business?
A really excellent answer might discuss the relative capital structures of the Hospital company and its potential acquisition into the payor
business (as hospitals are capital intensive and health plans provide their own growth capital due to the negative WC position they carry)

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