A profitability case might look like this: “An electric car manufacturer has recently been experiencing a decline in profits. Expertise – What the client is capable of and where their limitations are e.g great at manufacturing clothes cheaply but bad at luxury design? There is a reason they became popular in the first place and that is because they are effective. What qualities separate them from competitors? They then sell this blood to hospitals, which use this blood for emergency situations when a blood transfusion is required. <> endobj M&A McKinsey Best for Merge & Acquisition cases Stand-alone value of the targeting company: Financial factors: profitability, growth, cash flow, etc. This is what creates the 2x2 Matrix because it creates four different quadrants. 14 0 obj stream What – the products they are buying and reason for buying this product e.g stapler to help organise paperwork, Where – the location of the customer base e.g UK, Europe, global, Price – the prices that customers have been paying, Consumer risk – how concentrated are these customers, what effect will losing certain customers have on total revenues? The interviewer is on your side and wants to see you do well and by talking out loud you are giving them every opportunity to help you. This case involves many different stakeholders: For cases in which many different stakeholders are involved, it will be useful to look at each stakeholder and determine what each could do to address the problem. The business situation framework was developed by a former McKinsey consultant, Victor Cheng, who added a fourth component to this framework, product. 0000000903 00000 n The 4 P’s in this framework are: product, place, promotion, and price. For example, are there new technology or regulatory changes? To decide whether Coca-Cola has the capabilities to produce beer, we need to know if there are any capability gaps or if there are significant synergies that Coca-Cola can leverage. Market entrants – has anyone entered the market before? Matrix: Usually taking the form of a table but sometimes a pair of axis (BCG matrix). endobj Let’s take a look at an example: Your client is a non-profit blood bank. endobj endobj Outstanding case frameworks set you up for success for the case while poor frameworks make the case difficult to solve. I also recommend becoming a caseinterview.com member to watch my 6 hour tutorial that goes in depth on how to use each of these frameworks in case interviews. 27 0 obj Customers - who are the customers and what have their historical buying trends been? Case interview guide covering what is a case interview and how to prepare for it. Following its branches, it is easy to identify where the issue lies and visualise where it fits into the bigger picture. Finally, even if the company has the capabilities to enter the market, we need to verify that they will be profitable from entering. Any case involving profits or one of its components (revenues and costs) will require a profitability framework. [ 27 0 R] Product types – what products is the market receptive too? Value based pricing: The value that the product provides to the consumer. <> q��ct}O� O�!�D�߱�613ܕ� The key is to use only the minimum necessary parameters in order to make a clean and simple comparison. I would not recommend using these exact frameworks during a case interview because the interviewer may think you are just regurgitating memorized information instead of thinking critically about the case. Increasing the price of a product is usually the quickest way to increase profits but this will effect the number of units that can be sold at that price, the magnitude of the effect will depend on the elasticity of demand and alternatives available to the consumer. Often XYZ is something a little unusual, such as a non-profit case, a human resources organization design case, a manufacturing process improvement, or IT vendor selection case. Expected revenue & ROI – what is the expected return from entering the market? Other case interview prep resources often will give you dozens of frameworks to use in your preparation. Intangibles – does the client possess anything intangible that may effect the strategic decision? It is still important to remain disciplined and methodical by exhausting each point before moving onto the next. Porter’s Five Forces framework was developed by Harvard Business School professor Michael Porter. Another situation is a private equity company looking to acquire a company as an investment. Different customer segments have different purchasing habits and behaviors. This framework can be an alternative to the growth and market entry frameworks below if you are short of preparation time and cannot learn all the suggested frameworks. endobj As far as identifying my weak spots, I feel it’s with the “qualitative” cases, something that you mention is a common issue with people [...], I receive many emails asking if I have a framework for XYZ kind of case. It started out as a simple profitability problem, which I worked [...], Recently I have received several emails from readers asking if you can be “too prepared” for a case interview. If so, which fixed costs have gone up? 0000001128 00000 n Who – the demographic of the customer base e.g age, gender, individuals, businesses etc. endobj 9 0 obj We'll never spam you or share your email. Useful mnemonic: My Children Tried Saying Rebellious. Let’s return to the Coca-Cola case example in which we are asked to determine whether or not they should enter the beer market. endobj A complete guide to the frameworks required to pass any case interview. (market share, growth rates, new entrants). endobj <> The issue with using memorized frameworks is that they aren’t tailored to the specific case you are solving for. The “too prepared” designation comes [...], I’ve had several requests to provide an example of a case involving the Capacity Change Framework as described in my case interview frameworks article. Useful mnemonic: Whales Wave With Police Constables. There are four case interview framework strategies you should have in your toolkit: When given a case interview, you will need to decide which framework strategy you want to use. One potential framework could look like the following: Similar to the previous case framework strategy, some cases may require you to focus on improving or optimizing a particular process. If so, which cost elements have gone up? Case Interview Frameworks 1. Whilst pricing cases are less common its sensible to know at least the basics of pricing strategies. Let’s take a look at an example: Your client is a waste disposal company that manages a fleet of drivers and garbage trucks that go to residential homes, collect garbage, and then dump the garbage in city landfills. 56 0 obj<>stream I did 60+ case [...], Question: I’m really hoping you reply to this email if you get the time. Who will participate? Once you have gone through this profitability framework and understand both quantitatively what is causing the decline in profits and qualitatively why this is happening, you can begin brainstorming ideas to address the profitability issue. Covers examples, tips, frameworks and maths shortcuts. endobj It is easy to get carried away with elaborate ideas such as ‘build an app’ but hard to offer sensible ideas with real potential for the client and their current operations. This is a logical progression that your market entry framework will take you through to develop a recommendation for market entry cases. To determine whether the beer market is attractive, we would need to know the market size, the market growth rate, and the average profit margins in the market. Competitors - who are they and what have they been doing? In other words, are we selling more low-priced products and fewer high-priced products? Recently, they have been failing to meet this requirement and are backed up with garbage disposal requests. I am still far from mastering the frameworks, but I am getting more and more confident. See the video below for an example of how to solve a profitability case using this profitability framework. Nevertheless, it is helpful to review these common consulting frameworks in order to understand the fundamental concepts and business principles behind them. This is the overarching equation that you are looking at but as always you must dig deeper into each component of the equation to find the crux of the issue. Often this is used in conjunction with a bucket framework. Merger and acquisition frameworks are also common frameworks you’ll use in consulting interviews. 10 0 obj They are looking to grow and are considering entering the beer market in the United States. This then leads to the question “why have rent costs increased” and thus a potential way to increase profits. <> endobj �/�;���00�\dܩs��ث��)�l�|��c���ɶ��X���͓��W�m�9E���1�� 2- H <> 0000000016 00000 n For cases involving processes and efficiencies, it can be helpful to look at the different components or steps in the process. <> endobj %%EOF I am trying to go over the seven times mantra, hopefully before the first round. If you've done any research on case interview frameworks, you'll find that my approach is a bit different than what you might see elsewhere.. Other case interview prep resources often will give you dozens of frameworks to use in your preparation. <> 0000063860 00000 n 37 0 obj Instead of creating frameworks from scratch each time, this second case framework strategy provides a method to speed up the process while still creating frameworks that are unique and tailored to the case. e.g wholesale, retail, direct to consumer, e-commerce etc. ��1��O�@$�N��`R����kE�hO�͋�,�L��*�hd\�Y8�A�ރG2(�;���(W��ʇ�9U=�W��҅��ѥ Ts��X�e8H��a�gjG��b����"D�B� ��D0 Often a case will require you to identify the root cause of an issue and then subsequently recommend solutions. Because of this, many interview candidates make the mistake of using memorized frameworks for case interviews. Additionally, you won’t need to memorize multiple different frameworks. You can do this with our free download that includes five free case questions or with our complete Case Interview guide that includes both questions and worked solutions. 20 0 obj }�\pH ���+r3P�ܬ����p(c�6����d�UEfHEQz�Op׸���@��T� |X%q�s�e����#1%��*��k�t٫9��=|�Q�h���M+��.���"[�:\ �Wd��p+^���zy)|z�)�wH_�7��`����8^u�9٦ADb{�����w;���e��i�;�St�X�&�5�1���X#�y�| This isn’t to say you should not offer all of the ideas in the beginning but then choose which ones you would recommend they explore further based on the situation in front of you. Let’s look at an example: Coca-Cola is a large manufacturer and retailer of non-alcoholic beverages, such as sodas, juices, sports drinks, and teas.