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2010 Casebook

CONSULTING INTERVIEW

PRACTICE CASES AND GUIDE

CONSULTING CLUB

Table of Contents

**1. Introduction

2. 5 Steps to the Case Interview
3. Types of Cases
4. Frameworks
5. Practice Cases** I. Pizzanomics II. Gas station III. Bidding on the Olympics IV. Wayne Rooney V. Strawberry Jam VI. Premium Home Retailer VII. Portable Storage VIII. Household Cleaners Growth IX. Household Cleaning Services X. College Football Program

Introduction

An impressive resume and an appearance at a recruiting event may be enough to get you an interview, but if you want to get a job in consulting you need to learn to confidently solve a case. Luckily, case interviewing is a skill that can be learned with practice. Additionally, case interviewing can be a good way to learn about some of the problems consultants solve and whether a career in consulting is for you. If you enjoy case interviewing, you may be on the right career track. Keep in mind that the case interview is not only about “cracking the case.” Consulting firms are often not just looking for the right answer, but for a logical and structured approach to solving the problem. Additionally, consulting firms are looking for candidates that can explain their thoughts in a clear and compelling manner, are personable and friendly, and can perform under pressure. As a consultant, you will often be interacting with senior management, and consulting firms want to make sure you can handle it. We hope you find the material in this casebook helpful. We have included cases from a variety of consulting firms to give you a sense of the different types of cases you may encounter. Even if not contained in this book, it is recommended that you review cases from firms with which you are interviewing in order to gain a sense of that firm’s specific style. Have fun and good luck! Your casebook VP’s, Carlin Meleney (‘11), Jeremy Wilson (‘11), Reed Hansen (‘12), Marie Lafkiotes (‘12)

5 Steps to the Case Interview

Though case formats vary, these general steps often apply: 1) Listen carefully to the question and write down everything the interviewer says. Make sure you ask them to repeat anything you missed. It is a good idea to reserve a place on your paper to write down the question the interviewer wants you to answer and potentially how they want you to determine the answer. 2) Clarify the question and objectives. After the interviewer is done with the introduction, repeat back to them the key facts and the question you are being asked to solve. Often, it is a good idea to ask, “Are there any other objectives?” as there are often additional questions the interviewer wants answered, and it is helpful to clarify these up front. Additionally, it can be helpful to determine the criteria you should use to answer the question – will you be calculating a profit margin or giving a subjective opinion? 3) Develop a framework. You want to sound organized as you answer the case, so ask the interviewer for a few minutes to write down a structure. A structure serves as a guide as you work through the case. It should be MECE – mutually exclusive collectively exhaustive – guiding you through all the important issues without repeating anything. Practice writing structures quickly – you don’t want to spend too much time writing during the interview. A minute is usually a good target. Once you are done writing your structure, turn it towards the interviewer and walk them through it.

Types of Cases

Though the five steps previously outlined apply to most case interviews, there are many types of cases. Often, a firm will have a specific style which most cases will follow. Some firms usually will give a number of charts during the interviewer, while others will give a narrative. First round interviews are often more quantitative, while later interviews are often more qualitative. It is a good idea to get familiar with the type of case given by firms you are interviewing with. 8 general types of cases include the following:

1. Standard Case: This is the most common type of case interview at the MBA level. These cases usually involve a broad business strategy problem such as market entry, profitability, industry analysis, acquisition etc. These cases can be either highly quantitative requiring extensive calculations or entirely qualitative. 2. Market Sizing: More common at the undergraduate level than at the MBA level. These cases will ask the interviewee to determine an estimate of a given market size. It is a good idea to have general estimates of the US population, cities, states etc. to draw on during these cases. 3. Command and Control: McKinsey is generally the only consulting firm that will use this case type. In these cases, the interviewer will lead more so than in other cases, but it is important to maintain control over the case. Often, market sizing or brain teaser type questions will be embedded in the case.

Types of Cases

4. Number Crunching: Some firms will give a candidate a booklet of facts and charts and ask the interviewer to flip through and answer a question or questions. Often, some of the information in the case is not helpful or misleading, and it is up to the interviewee to determine what is what. Some calculation and chart interpretation may also be required. 5. Read and Analyze: Some firms have given candidates a 1- 2 page written case which the candidate is asked to read. The interviewee is then given a series of questions and is asked to draw on the information from the written case. 6. Presentation: These cases are easy to spot because the interviewer will often say, “Pretend you are going to give a presentation to the CEO of corporation x in 5 minutes….” The interviewee will then often be given a few minutes to ask for information and a few minutes to draw up a few slides. Remember to make you slides easy to read and present then in a concise manner. 7. Practice Specific: Often, when interviewing for a specific practice area such as IT Strategy, CRM or HR, cases will be specific to the practice. For example, when interviewing for IT strategy, interviewees may be asked how they would go about soliciting software vendors. When interviewing for CRM, interview questions may focus on customer segments or pricing. It is important to have a thorough knowledge of the practice area you are interviewing for. 8. Written: Especially during second rounds, some firms will give written instead of verbal cases. These cases are similar to standard cases, but also test your writing skills.

Practice Cases

CONSULTING CLUB

Pizzanomics (1 of 5) RCC Original An aspiring chef just moved to NY, and is trying to decide if it makes more sense to get in on the new fad of high end pizza places with imported cheese and wood burning ovens, or open a more traditional pizza place. Which type of pizza restaurant will be more profitable?

• Startup costs are the same to buy ovens and other materials
• Both types of restaurants need the same amount of space to operate
• The traditional place uses locally sourced materials (cheese, sauce, etc) while the high end places imports mozzarella from Italy. The high end place also offers a different set of topping options.
• Both markets are equally developed at this point
• Don’t let the candidate start asking for numbers yet -- info on cost and revenue in future slides Problem statement narrative Guidance for interviewer and information provided upon request(1)

Pizzanomics (3 of 5) RCC Original

Cost Structure

High End Pizza Place Traditional Pizza Place Unit Price # Total Unit Price # Total Labor $5,500 52 $286,000 Labor $3,500 52 $182, Utilities $550 12 $6,600 Utilities $800 12 $9, Wood $400 36 $14,400 Wood NA $ Rent $6,000 12 $72,000 Rent $5,000 12 $60, Pizza $4 72,000 $288,000 Pizza $3 23,000 $69, Toppings $100,000 1 $100,000 Toppings $25,000 1 $25, Misc $25,000 Misc $30, Total $792,000 Total $375, Labor - High end place needs more employees due to higher volume and more prep work ($5,500 per week, vs. $3,500 per week)Utilities – Traditional Pizza Place has higher utilities, because they use a gas oven vs. wood (priced per month) Wood - $400 per cord or wood, 3 cords needed per month Rent – per month basis, also included furnishings, which is why the high end place is more expensive. Pizza – is the materials cost per pizza – don’t give out the number of pizzas here, just the unit cost. Toppings – Volume drives price differential here too Miscellaneous – traditional pizza place sells more non-pizza items (drinks, pasta, hamburgers, etc)

Pizzanomics (4 of 5) RCC Original The high end pizza place sells many more pizzas, especially specialty. Strong candidates will notice that the high end place doesn’t make any additional profit on specialty, since there is no extra margin put in, only enough to cover the cost of toppings.

Revenue

High End Pizza Place Traditional Pizza Place Unit Price # sold Total Unit Price # sold Total Plain Pizza $10 22,000 $220,000 Plain Pizza $13 11,000 $143, Specialty $12 50,000 $600,000 Specialty $17.50 12,000 $210, 72,000 $820,000 23,000 $353, Additional (drinks,etc) $70,000 Additional (drinks,etc) $90, Total Revenue $890,000 Total Revenue $443, Total Cost $792,000 Total Cost $375, Profit $98,000 $67,

Gas station (1 of 7) BCG, Round 2 Your client is a gas company that operates in a town with a population of 1,000. There is only one other gas company in this town, and it is 1 mile away. The other nearest gas stations are outside town, and they are 20 miles away (see picture on next page). Recently, our client was approached by a supermarket with the idea of selling groceries in the gas station. Our client is a simple businessman and has hired us to evaluate this proposal. What should our client consider?

1. What are the proposed groceries the gas station would now sell? (turn question around and ask the candidate). Likely answers include cigarettes, milk, snack foods; probably not fresh produce or healthy foods.
2. Currently, the gas station is barely scraping by. Profit is essentially 0.
3. If asked anything about the other gas station, the answer is “we don’t know, but assume they are identical” Candidate should recognize that each gas station serves 500 people. Problem statement narrative Guidance for interviewer and information provided upon request(

Map of area (not to scale) Gas station (2 of 7) BCG, Round 2

What kind of costs could there be? Additional questions for candidate

• Investment in freezers, shelves, utilities.
• No increase in labor expected.
• Total increase in costs: one-time cost of $1.25MM. Solution guide Costs Gas station (4 of 7) BCG, Round 2

• Groceries:
  • What kind of people will shop for groceries here?
  • How much do they spend per year?
• What else can be a source of revenue?
  • Candidate should recognize that more people will buy gas here now.
• What is the total increase in sales?
• The gas station owner is a simple man and wants to look at this like a perpetuity. What does this work out to? - (discount rate) r = 10% - (growth in cash flows) g = 0% Additional questions for candidate - People who shop here are probably not health conscious, since gas station groceries are not healthy. They are probably also in a rush, and will make small purchases (milk, cigarettes, jerky, etc.) - Out of 1000 people, assume 500 will buy groceries here at $200 per year per person - - > $100,000 per year - Increase in gas sales: very important distinction: people won’t buy more gas, but more people will buy gas here (stealing customers from station B) - We can steal 50% of station B’s customers ( people), who purchase $100 in gas per year - > $25,000 per year - Total increase in sales per year: $125,000. - As a perpetuity: $1.25MM. Solution guide Revenue stream Gas station (5 of 7) BCG, Round 2