In my previous Case study interview article, I introduced a very helpful study tool to improve business intuition in order to perform better in case interviews: using professional “case studies” on consulting websites (those that have nothing to do with recruiting). In this article, I will further explain this by using some illustrative examples.
Note: if you are looking for some sample Q&As for typicalcase study interview questions, you may visit our Case Interview Questions page. This article is purely devoted to the illustration of using real-life case studies for business intuition purposes.
Now, as I mentioned in the previous article, there are a lot of good sources for real-life case studies. Let’s now use an example from McKinsey.
In any case study on McKinsey’s website, content is often presented in a very structured way with 3 sections: Challenge, Discovery, and Impact.
What I suggest is to read the “Challenge” part and STOP. Try to tackle it on your own as if it is the case you’d get in a real interview.
This is a sample “Challenge” from a case study at McKinsey:
“The IT department for a global multi-business company was struggling to meet heightened demand for increasingly complex technology solutions. This frustrated the company’s business leaders, who were relying on technological solutions to drive multiple changes in the business model.
The company realized that continuing down this path without making some adjustments in the technological delivery model jeopardized its goals for deepening its IT capabilities. This would have hindered its ability to quickly implement business strategies and to maintain a competitive edge in the market. Senior management asked McKinsey to help change the IT organizational model in a way that would more effectively support strategies.”
Several questions/items you can tackle yourselves to best simulate the real interview:
- Do a recap of the problem, rephrase the case context.
- What are some clarifying questions you would ask?
- What is the key objective of the case? In other words, what is the case question?
- Draw yourselves an issue tree (or framework) to tackle the problem.
- Pick a branch and dig deeper. What are some hypotheses on where the root-cause is?
- Of those root causes, what are some possible solutions?
- Are there any obstacles when implementing those solutions?
- Any other question you can come up with on your own…
Now if you are new to case interviews and to business in general, it’s very common to stall right at this step. Sometimes you face an industry and function you have little insights about. But this is a good exercise for your business intuition.
Once you have tried your very best tackling the questions above, it’s time to read on to the Discovery and Impact sections. Do so and try to go back to the questions above and tackle them again. That’s how you gain business insights and improve intuition.
Now this is the full link to the “challenge” example above! Click here
Have fun practicing with case studies for interviews and improving your business sense!
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Back-Of-The-Envelope And Market-Sizing Assumptions
Estimate the size of the disposable diaper market.
First, I’m going to assume that there are 320 million Americans. I’m going to further assume that the average life expectancy of an American is 80 years. I’m also going to assume that there are even numbers of people in each age group. And that there are exactly same numbers of 8 year-olds as 68 year-olds.
You divide 320 million by 80 and you get about 4 million people per age group. Children wear diapers from ago zero to 3 so that’s 9.9 million kids wearing diapers. So we’ll round it off to 10 million kids. You said disposable diapers. So I’ll estimate that 80 percent of children wear disposable diapers. (I know that it is probably closer to 95%, but 80 is a much easier number to use than 95). So now we’re talking 8 million children wearing 5 diapers a day. That’s 40 million diapers a day times 365 equals approximately 14.6 billion diapers a year.
How many ATMs are there in the country?
I live in Needham, Massachusetts. The population of my town is approximately 30,000. There are fifteen ATM machines in town so I’ll assume that each ATM services 2,000 people. I’m going to assume that the population of the US is around 320 million people. Next I’ll divide 2,000 into 320 million and come up with 160,000 ATMs.
Our client purchased a popcorn manufacturing plant that packages popcorn for two mid-sized brands. Once he saw the margins, he decided to manufacture under his own brand. What does he need to do?
Just to make sure I understand, our client purchased a popcorn plant that currently packages popcorn for two mid-sized companies. After seeing how big the margins are he’s decided to manufacture popcorn under his own brand. We need to advise him of a game plan. Are there any other objectives?
How big are the margins?
Is the industry growing?
Yes. Americans spent $1.25 billion on 5 billion bags of microwave popcorn last year. That represents a six percent growth. They spent another $500 million on ready to eat popcorn. That puts popcorn fourth behind potato chips, tortilla chips and nuts as the most popular snack for men.
What about women?
Women rate popcorn as their number one snack food.
There must be a lot of competition.
Yes. The market leaders are Act II and Orville Redenbacher, which are both owned by ConAgra – a multinational. There’s Popz, Jolly Time, Lil Chiefs, Pop Weaver and Pop Secret just to name a few.
One of our biggest challenges will be how to differentiate ourselves from our competitors. How do we build brand? Would our products be much different from the competitors’?
At his point I don’t know. Maybe you can help us with that problem. That’s why we hired your firm.
Okay, one major issue is building brand. I’d like to come back to that if possible.
Will we be producing just microwave popcorn?
We would have several products. Currently he’s manufacturing premium microwave popcorn in three flavors, premium traditional popcorn kernels in poly or plastic bags and traditional popcorn kernels in plastic jugs.
I think it’s safe to say that our client knows the manufacturing side of the business. Some things we need to think about are how are we going to enter the market. I can’t see that there would be any barriers to entry. It’s not a regulated industry. The technology isn’t proprietary. I’ll assume that we’ll have access to distribution channels. Do we have enough capital to introduce and market ourselves?
Let’s take a minute to look at what our management team’s like and figure out what are their core competencies? We’re strong in manufacturing, but are probably weak in marketing and possibly sales. How is our sales department?
Very, very small. We manufacture for two companies so there is not a lot of sales activity going on. The popcorn market is somewhat limited in that respect.
We need to think about who are our customers will be and how best can we reach them. And once they’re our customers how do we gain their loyalty and retain them as clients? I’d also see if there is going to be a competitive response. Will one or both of the companies that we currently manufacturer for pull their business if we are going to compete directly against them?
Maybe. That’s a good point.
If we are going to enter this market we need a full commitment. If our plant clients pull their business do we have enough cash on hand to ensure we can survive while we ramp up? If they do pull their business, it would probably take them several months to find a new manufacturer. What can we be doing now to keep them from leaving? How can we raise their switching costs? Or, does it make sense to buy one or both of them out?
Do a cost benefit analysis for me.
If we start from scratch we’ll have to one, find marketing and sales people. Two, establish distribution channels such as food brokers and distributors. Three, we need to find a few big customers fast – like a Wal-Mart or Costco. We could hire away our competitors’ sales staff.
If we bought out a competitor they would have established distribution channels, management in place, and name recognition. It would save us a lot of time, but it would probably be expensive. Part of the decision would be based on our cash situation. It might be worth looking into.
If we didn’t buy an established player we would have to build brand. We could increase our profile with a marketing and public relations campaign. One way differentiate ourselves is through pricing. Selling at a lower price.
Let’s not talk pricing. We’ve already decided that we will be priced the same as our major competitors.
Then another way to differentiate our company is to donate a percentage of profits to a good cause. Ben and Jerry’s Ice Cream donates approximately 8% of its pre-tax profits. As does Stonyfield Farms yogurt. Both those companies have received good press and increased sales from their association with good causes. Who do we see as our customers?
We could donate a portion of pre-taxed profits to a family-oriented literacy program. That’s a special interest of First Lady Laura Bush. So it might draw additional attention and besides it’s a great cause.
If I could, I might suggest that we cast our net wider and go after the kid and teen market as well. We could make some “rad” popcorn that pops in different colors – red, blue green and yellow. Think of it as a microwave bag of M&M popcorn. Or, like Ben and Jerry’s we could develop different flavored popcorn and give it funky names like they did with Cherry Garcia. We could offer single servings, the standard 3-serving packet as well as a party tub size.
Let’s talk about markets. I’ve been assuming that we are only talking about the US consumer market?
Let’s just keep this focused on the US market.
Okay, but there is also the institutional market like concession stands and the fundraising market. It’s a way for schools and sports teams to raise money. These products along with gift baskets could be sold over the web site.
Do we have a web site?
I would put a lot of thought into the web site and make it fun as well as informative. We could also continue to package popcorn under other people’s names – private branding. I know that Hollywood Video and Blockbuster have their own “brand’ of popcorn. Let’s go after those accounts. If there is a 90 percent margin then there is a lot room to move in regards to pricing.
Any other marketing ideas?
Two. We could give General Electric packages to give away whenever someone buys a new microwave oven. We could also sell hotels and motels individual packages to have in their guest rooms with microwaves. There are a hundred and one ways to market this.
It seems like you’re having fun with this question.
Yes. I love problems like this.
Okay, summarize for me. What would you tell our client?
I’d tell them that this is a great market to be in, but in order to do well we have to overcome a few hurdles, particularly if they have decided to enter the market on their own and not buy their way in.
Assume that we are, as you say, starting from scratch.
Then the biggest hurdle is differentiating ourselves from the competition. We need to come up with new products and expand beyond our targeted audience of families and women to include teens and preteens. Often, kids make the buying decisions regarding snack foods. We need to develop some “rad” types of popcorn flavors and names, i.e. Ben & Jerry’s to get the kids interested. One way to attract women and families to our brand is to donate part of our pre-tax profits to a literacy foundation. Another way is to offer a variety of packaging sizes.
The next big hurdle is the marketing and sales side of the management team. I suggest we hire away some of our competitors’ talent. They already have the contacts inside the big buyers like Wal-Mart and Costco. Not to mention inside information on what the competitor has done in the past and what they are planning to do in the future.
A third concern is protecting our current revenue stream. The two companies that we are currently producing popcorn for might get irked that we will now be competing directly against them. We need to make it hard for them to pull their business.
Finally, I would aggressively go after packaging opportunities of “house brands” like Blockbuster and Hollywood video. The margins won’t be as great, but if we have plant capacity available, it’s a good additional revenue stream.
Type: Starting a new business, entering a new market.
Comments: This student hit a home run. She had a lot of good questions, a number of good ideas, some insight into the market. She also got big points for thinking about ways to keep the current clientele from leaving our company once they find out that we will be competing directly against them.