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ONLINE CASE STUDY—MAGNA HEALTH
Great Burger
INTRODUCTION
Q1 Q2 Q3 Q4 Q5 Q6
A1 A2 A3 A4 A5 A6
How to fix declining profitability.
Practice this case QUESTION 1
What areas would you want to explore to determine
whether GB should acquire HD?
ANSWER 1
Some possible areas are given below. Great job if you identified
several of these and perhaps others.
Stand alone value of HD
Profitability/profit margin
Synergies/strategic fit
QUESTION 2
What potential synergies can you think of between GB and
HD?
ANSWER 2
We are looking for a few responses similar to the ones below:
Lower costs
Increase revenues
QUESTION 3
The team thinks that with synergies, it should be possible
to double HD’s U.S. market share in the next 5 years, and
that GB’s access to capital will allow it to expand the
number of HD stores by 2.5 times. What sales per store
will HD require in 5 years in order for GB to achieve these
goals? Use any data from Exhibit 1 you need, additionally,
your interviewer would provide the following assumptions
for you:
ANSWER 3
You should always feel free to ask your interviewer additional
questions to help you with your response.
QUESTION 4
One of the synergies that the team thinks might have a
big potential is the idea of increasing the businesses'
overall profitability by selling doughnuts in GB stores.
How would you assess the profitability impact of this
synergy?
ANSWER 4
Be sure you can clearly explain how the assessment you are
proposing would help to answer the question posed.
Some possible answers include:
QUESTION 5
What would be the incremental profit per store if we think
we are going to sell 50,000 doughnuts per store at a price
of $2 per doughnut at a 60 percent margin with a
cannibalization rate of 10 percent of GB's sales?
ANSWER 5
While you may find that doing straightforward math problems in
the context of an interview is a bit tougher, you can see that it is
just a matter of breaking the problem down. We are looking at
both your ability to set the analysis up properly and then do the
math in real time.
QUESTION 6
You run into the CEO of GB in the hall. He asks you to
summarize McKinsey’s perspective so far on whether GB
should acquire HD. Pretend the interviewer is the CEO–
what would you say?
ANSWER 6
You may have a slightly different list. Whatever your approach,
we love to see candidates come at a problem in more than one
way, but still address the issue as directly and practically as
possible.
Answers may vary, but here is an example of a response:
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