Consulting Club Casebook: 2004-2005 EDITION 1 Release

CONSULTING CLUB
CASEBOOK
2004-2005 EDITION
1ST RELEASE
25 OCTOBER 2004
CONSULTING CLUB CASEBOOK 2004/2005
Preparing for Case Interviews

Dear London Business School Student:
If youre at all interested in consulting, you should recognise right away that youll
need to do well in case interviews. The best recommendation we can give you is to
practice, practice, practice! Take advantage of the crack a case sessions provided by
your colleagues they are your best resource to get ready.
A few pieces of advice:
Leverage all you have learned in your strategy, marketing, finance, operations,
and organizational behaviour classes in your case discussions whenever it
makes sense along with simple common sense
Read up on frameworks but dont obsess about them the last thing a recruiter
wants to hear is a canned response based on a framework you learned in class
that week, when it doesnt really fit the case
Dont be afraid to let your personality shine through many consultancies perform
primarily or even exclusively case-based interviews so this may be their only
chance to get to know you
Again, practice, practice, practice!
Good luck, and please come find us if you have any questions.
2004-2005 LBS Consulting Club
Page 2 of 48 Copyright 2004, Do not copy or distribute without permission

A few pieces of advice
Most interviewers will use cases from their own consulting experience, and
often cases on which they are currently working. It is important to demonstrate
enthusiasm for the problem that they are asking you to solve, e.g., What did
you tell the client to do and was it successful?, not Thank God thats over!
Do not consider the problem solved when all the analysis is complete. The
interviewer will be looking for you to try to drive towards some form of
conclusion. E.g., What our client might consider to protect themselves from
supplier power is, not just, So we can see that the suppliers hold all of the
power.
Ensure that you take a cross-disciplinary approach to problem solving, e.g.,

Profits are down. I wonder whether the problem lies on the revenue side or
on the costs side, not, Profits are down, that means costs must be up.
Take a collaborative, intuitive approach to the problem, rather than trying to

approach the task by following a rigid, pre-learnt process. The interviewer will
want to enjoy the interview, and will be looking for someone who has the
confidence to deal with ambiguity and work their way towards a solution, rather
than trying to jam a pre-learnt process onto the case. E.g., That sounds
interesting, can you tell me more about., rather than, Can I take a minute
to write that down and frame my approach.
Related to the above point, it is crucial that you do not try to force an
inappropriate framework onto the case. Because the cases that you will be
given during interviews will be derived from that interviewers personal
experience, you will come across a wide variety of cases. You will be
expected to solve all of them through applying structured, logical thinking,
identifying the key issues, etc, but this does not necessarily mean applying a
framework you have learnt during your MBA especially if this framework
doesnt 100% fit the problem that you are being asked to solve. E.g., Lets
start by looking at our own revenues and costs over time, then, when we have
an idea of what the issues are, we can take a look at the development of
external industry factors, rather than, So profits are down. Lets analyse the
industry using Porters 5 forces.
Consulting is about working closely with clients, so an interviewer will be

looking for you to demonstrate that you are intuitive around people and that
you interact with him/her in an intuitive, empathetic way during the case
interview. E.g., Im not familiar with the UK credit card industry. Do you pay

off the balance in full each month like we do in Germany?, not, Im going to
assume that in the UK you pay the balance on your credit card each month.
As mentioned previously, consultancies also use case interviews to

demonstrate to the candidate the type of work that they do. The case study is
not just a hurdle to be cleared (e.g., by learning crack-a-case methodology) to
get the job. Consultancies use the case interview to help them understand the
candidates broader approach to collaborative problem solving. If you
internalise this and really understand why consultancies use cases it
should help you enjoy the case interview, rather than just dealing with it as a
dreadful experience that needs to be got through, and this will come across to
the interviewer.
Types of case that you might get in a case interview
Most consultancies will give you a proper business case, drawn from the interviewers
own experience.
BUSINESS CASE
Purpose:
To test candidates business acumen, synthesis, common sense and imagination.
Background:
The general insurance industry e.g., household structure and contents, private
motor, commercial (motor fleet, physical damage to property, loss of profit, workers
compensation, product liability, environmental risks), but not life or healthcare in the
UK has suffered increasing competition in the last few years
Questions:
1. What are the main items of income and expenditure for a general insurance
company?
2. If you were managing/consulting to a large multi-line general insurer, whose
profitability has been declining to the point that it is now losing money, what
ways would you explore to improve its loss ratio i.e., claims divided by
premiums?
(The interviewer would then give you clues if necessary)
***********
However, in addition you may also get asked mini non-business case questions to
test quantitative skills, creativity or judgment. Cases could include:

BRAINTEASER TYPE CASES
There are two containers, one filled with 5 pints of red wine, the other with 5 pints of
white wine. You fill a half pint jug with white wine and pour it into the red wine
container. You mix the liquid in the red wine container, then fill a half pint jug with it,
and then pour the contents of the jug into the white wine container. Now, does the
red wine container have more red wine than the white wine container have white?
Other examples of similar types:
Why is a soda can round?
ESTIMATION TYPE CASES
Estimate how many credit cards there are in the UK.
Other examples of similar types:
Estimate the weight of a Boeing 747

How many black cabs are there in London?
How many weddings take place in England each year?

CASES

SOURCE / FIRM: BOOZ ALLEN HAMILTON

DATE / CONTEXT: 1st round interview for summer internship 2004
ISSUES COVERED: Brainteaser Estimation Business Case
ISSUE/PROBLEM The pensions service has requested assistance from Booz Allen in improving
POSED: its operations and service quality what issues would you consider in breaking
down the issues and challenges facing the pensions service - developed into
discussion around approaches to addressing the issues and tools that could
be used to address them?
INFORMATION None
PROVIDED:
SOLUTION: Firstly tried to list at a high level what kinds of challenges face the industry e.g.
Supply side:
Many employees, Ageing information systems, Access to existing and new
potential customers (i.e. people who are entitled to claim pension benefits),
Updating systems with change of status, How to measure and monitor
success, Responding effectively and in a timely manner to changes in
government legislation
Demand side:
Increasing number of people entitled to benefits, Difficult circumstances under
which peoples status as far as benefits and pensions change e.g. death,
loss of employment
Talked in detail around
-Measuring and monitoring success signs of success for benefits and
pensions department is that they have given away more money
-Access to customers many potential ways of accessing customers
preferences will vary. OAPs not necessarily comfortable with phone systems
where they have to deal with push buttons and answer machines but would
rather speak to someone in person
Depending on the transaction nature different communication means would be
appropriate
Potential outsourcing opportunities
Use of technology in facilitating processes
OTHER USEFUL TIPS: This was a very open-ended case discussion about an industry that I knew
nothing about I tried to approach it from a high level, listing the high level
issues and challenges first then grouping them into people/organization
related, technology related, customer related, etc.
Then drilled down into a couple of them more deeply the interviewer offered
regular encouragement and some limited information at various points then
finished by highlighting some of the realities of the actual project that was in
progress at the time of the interview no real conclusion/solution


ISSUE/PROBLEM What is the size of the UK French Fries market?
POSED:
INFORMATION None
PROVIDED:
SOLUTION: Sought clarification total French Fries market including restaurants and home
consumption? Confirmed that I would consider all possible sources of fries
including home cooking, restaurants, fast food, etc
Approach:
1. Estimated UK population
2. Segment population based on age to eliminate those at the low and
high end who do not consume fries
3. Estimated weekly consumption per capita split into high volume
consumers (regular consumption) and low volume consumers (occasional
consumption)
4. Multiplied to get total annual volume in number of portions of fries
5. Multiplied by estimated price per portion to get value of the French
Fries market value
6. Reality check cant remember exactly what I did something around
looking at the resulting average per capita weekly expenditure
As part of the discussion talked about why French Fries are popular across
socio-economic groups e.g. low cost (important to low earners), fast
(important to high earners who eat on the run)
OTHER USEFUL TIPS: Thought out loud and wrote down the steps in outline before going into the
detailed numbers seemed to go down well with the interviewer


DATE / CONTEXT: 2nd round interview for summer internship 2004
ISSUE/PROBLEM How would you value a football (soccer) player?
POSED:
INFORMATION None
PROVIDED:
SOLUTION: I went around the houses a bit on this one.
Identified sources of revenue for a football club including:
Ticket revenue, Revenue from TV coverage, Sponsorship
Merchandise sales (e.g. shirts)
Talked around how to determine the contribution that an individual player
makes to those revenue streams
The final conclusion was that the best way to divide the portion of revenue
related to the actual players (over their lifetime) between the team would be
based on individual ratings (like those published for each player in the fantasy
football league)
Talked around valuation as the present value of future cash flows related to
each player
OTHER USEFUL TIPS: Open discussion with structure maintained through making notes and drawing
tree diagrams was appreciated used diagrams as prompt for directing
discussions


ISSUE/PROBLEM The airline industry is facing difficult times at the moment. Talk about some of
POSED: the challenges it is facing and how it should address these going forward
INFORMATION None
PROVIDED:
SOLUTION: Segmented the industry initially into traditional carriers (e.g. B.A.) and low cost
carriers (e.g. Easyjet) since I felt that maybe the challenges facing each would
be somewhat different
Picked 3 or 4 issues facing each. E.g. BA face price pressures from Easyjet,
Easyjet face challenges getting slots at major airports and intense competition
among low cost carriers
Discussed how the industry might develop e.g. continued consolidation of
low cost carriers, slimming down of traditional carriers, continued differentiation
of traditional versus low-cost based on service, the role of the internet
OTHER USEFUL TIPS:

SOURCE / FIRM: MARAKON ASSOCIATES

ISSUE/PROBLEM The goal was to assess the feasibility of 5-year plan for expansion into
POSED: broadband by Telco. The plan was put forth by one of the companys
executive. You had to analyze it in the context of industry, changing trends,
customer base, etc.
INFORMATION We were provided a 10-page power point pack to read in 10 minutes before
PROVIDED: the interview. There was a lot of data in the presentation, including customer
data/preferences, market segmentation and growth prospects, competitor
data, organizational information, quotes and thoughts by the executive
committee, hard financial forecasts, etc. We were provided 3 discussion
questions, around assessing the feasibility of the plan and key hurdles.
SOLUTION: There is no set solution for the case, although for some questions you could
have gotten a particular number. However, that did not seem to be as large of
a concern as the logic behind the answers.
- Breakeven: You had to do breakeven calculations on a number of
customers the company had to acquire in order to meet set goals.
(basically you have to cover fixed costs)
- Market Growth: You had to analyze the market, including its growth and
sources of customer income. If you did this right, you would realize that
the goals were overambitious: basically you would have to capture the
whole market to meet the targeted revenue levels.
- Customers: There was also an issue of market cannibalization: you have
dial-up customers, but you are selling broadband. To cover investment
costs and keep your revenue stream, you need to keep your dial-up and
ISDN customer. However, you wanted to move some customers to
broadband (which is essentially a loss-generation product for you until you
reach critical mass). Hence, you had to address this dilemma.
- Organizational: your executives who are in charge of dial-up/ISDN will be
resistant to change, as it jeopardizes their power and position.
Broadband was a separate department, which is very threatening for dial-
up and ISDN groups. The organization was essentially not aligned to
support companys strategy.
OTHER USEFUL TIPS: When you get into interviews with loads of hard data, dont panic! Everyone is
in the same boat as you. Quickly scan the information and try to decipher the
data you will need to answer the questions as hand. In order to even get
though the pack (without analysis) you needed to be very quick and not get
stuck on a particular page/section.
Know whats in the pack, so that you can reference it during your discussion,
even if you have no calculations. Explaining your train of thought OR how you
would solve the problem, had you had time.
State your key assumptions!

SOURCE / FIRM: MARAKON ASSOCIATES

ISSUE/PROBLEM Discuss whether overvaluation of companys stock should be a concern for its
POSED: CEO.
INFORMATION We were provided a press clipping about a company with overvalued stock
PROVIDED: and an interview with its CEO where he commented on companys growth
prospects.
SOLUTION: There is no solution to this base; it was more of a discussion. Basically you
had to talk about whether stock overvaluation is a good thing or a bad thing
and why?
Reasons: Know the reasons why the market may overvalue the stock. For
example: Information asymmetry between the company and the market, etc.
Solutions: Know how to bring the overvalued stock back into line: do it
gradually, avoid sudden price corrections (because it sends bad signals and
may hurt company credibility). How can Marakon help? By valuing the
company first, help executives establish market credibility and aid with
communication plans for the market.
Valuation: How would you value the company, know several methods:
discount CF, P/E multiple, Equity CF and Operating CF.
We were given some numbers and were asked to value the company on the
spot.
Source of value: Know what drives company value and what levers the
market is particularly sensitive to: if you have a big division and the market
thinks it is growing at 10% the company adjusts it downward, it may
negatively impact the whole company and decrease its share price. From an
exec compensation perspective, know why stock grants are different from
stock options and when you would use either and how they ultimately impact
the company.
OTHER USEFUL TIPS: The company is very quantitative. Be comfortable with numbers. However,
most importantly, you have to be able to talk about the story that the numbers
tell you.
Know about Marakon and what it can do for its client: where does it create
value and be ready to apply this knowledge to cases.

SOURCE / FIRM: AT KEARNEY

ISSUE/PROBLEM A donut manufacturer has seen an increase in their profits, how did they
POSED: achieve this?
INFORMATION None.
PROVIDED:
SOLUTION: I looked at the profit equation and asked about the possible variables that
could have affected either Revenue or Costs. On the revenue side I was told
that the price of the product remained the same and that demand had
remained constant. In other words revenue was the same. So I thought it must
have been costs. The cost of raw materials had not changed. Transportation
costs had not changed. Packaging had not changed. Over Head had not
changed. If all these costs remained the same, could they have changed the
formula of the donut so that cheaper ingredients made up a bigger portion of
the donut? There must have been some sort of process redesign. Bingo! The
manufacturer was pumping air into the donuts so that they looked the same,
tasted the same but had fewer ingredients making their production costs lower.
OTHER USEFUL TIPS: Take your time. Structure the problem and the rest will fall into place.
Remember: structure and approach are king. There are no right answers. Stay
calm, communicate all your thoughts and try to read the interviewer. He might
let your know if you are close or far from what he/she is looking for without
using any words.

SOURCE / FIRM: MCKINSEY & COMPANY

ISSUE/PROBLEM Fitness / Health club expansion in Europe. The firm prides itself in the variety
POSED: of facilities it provide for its customers. There are many parts to this problem:
a) Club has 8 tennis courts and a gym. Some of the members use tennis
courts. If the tennis courts are open 10am-7pm everyday and they are
booked throughout the day how many members play tennis.
b) How will the club charge members who play tennis and those who do not
play tennis. Say tennis courts costs $10,000 to build and $1000 to
maintain p.a. what should tennis players get charged per person per year.
People who dont play tennis dont pay for it.
c) Firm wants to expand in Europe. What are the criteria they would look at?
How would they evaluate the choices of the market, (lifestyle issues..
urban population spread, etc)
b) Which is more attractive for which reasons i) If the existing clubs in
Europe has little facilities and charge less fees but have low attendance
OR ii)existing clubs have a lot of facilities but run on low profitability
INFORMATION None
PROVIDED:
SOLUTION: Well the first part of the problem is numerical. You have to estimate that 2
distinct individuals play tennis at any given time (say per one hour of the
court). So 2x8x(12hrs) = 192 members play tennis everyday. And then you can
approximate that on an average each member play tennis twice a week and
get the number of members who play tennis = 196x7days/2 (2: because there
is a repetitive due to the players playing 2 times a week)
Now you can estimate the life of tennis court and estimate how much the club
should charge annually to its tennis playing members. So $10,000 over 10
year is $1000 per year. So Annually the charge should be
(5000+1000)/Number of tennis members
In terms of expansion in Europe you may have to cite things like where are the
clubs located. What are the habits of the population? Do they like to drive or
walk to clubs?
If the clubs are well-equipped and not very profitable then u may have a
problem entering the market. U can do a porters five forces model on this. Or
you can also suggest that if clubs are not well-equipped this is an opportunity
for our firm to distinguish itself from others and charge more fees. U could
suggest pilot launches in different places, etc
OTHER USEFUL TIPS: I think its important to give a structure to your thinking. They really look for that

SOURCE / FIRM: ACCENTURE

DATE / CONTEXT: Interview for summer internship 2004
ISSUE/PROBLEM The firm has several offices across France. Sales are growing but the firm is
POSED: not making money. Why? What should be done?
INFORMATION Revenue by geographic region
PROVIDED: Number of employees by region
Comparables data on the same parameters
Some other data on customers, history etc (this seemed to be a mass of data
given to test my ability to sort through a ton of data and prioritise)
SOLUTION: Break down of cost heads (fixed, variable, semi variable)
Cost driver analysis (volume, coverage etc)
Comparison with competitor data for each cost head
After doing the analysis it was apparent that the key issues were around
i) Degree of geographic concentration (i.e. the firm being analysed was spread
to thin)
ii) Overhead cost being very high due to office locations
I suggested a solution focused on geographical consolidation and moving to a
shared services model for overheads.
Interviewer seemed to agree with my solution and analysis.
Just as the case analysis ended, the interviewer threw a sudden brain
teaserWhat is the quickest way to calculate 30/8?
OTHER USEFUL TIPS:

SOURCE / FIRM: ROLAND BERGER

ISSUE/PROBLEM What is the size of the scrap metal market in Russia?
POSED:
INFORMATION The reliable data to estimate the scrap metal market directly does not exist.
PROVIDED: The market is dominated by 4 underground players that do not reveal any
data.
SOLUTION: Solution: the data about the iron ore production and total output of still mills
could be found. We can approximate how many tons of metal is possible to
get from the iron ore. Subtracting potential production from actual production
we can roughly estimate how many tons are coming from the scrap market.
OTHER USEFUL TIPS: Estimation case that tests the ability to find the needed data from limited
information provided.

SOURCE / FIRM: ANDERSEN BUSINESS CONSULTING

DATE / CONTEXT: 1st round interview for Andersen Business Consulting Internship 2002
ISSUE POSED: Your client is a publisher, managing a portfolio of magazines. The company
has grown revenues through acquisitions, but now profitability is falling.
Prepare for a meeting where you will present an initial proposal for fixing this.
INFORMATION
PROVIDED:
SOLUTION: You can make a basic profit = revenue - cost analysis. The candidate (who
got to the second round!) made a 3C (company, customer, competition)
analysis. He found out that what had changed was the competition: revenues
are down because advertising revenue is down, both in prices and volumes.
Advertising revenue is down because of the competition of online advertising.
Once the issue has been identified, the candidate should make suggestions to
change the situation. Candidates proposals included killing dead weight in the
portfolio and creating an on-line strategy, (looking at build, buy, and alliances).
OTHER USEFUL TIPS: The interviewer did not provide a lot of structure, preferring to test the
candidates ability to create it.

SOURCE / FIRM: BAIN

DATE / CONTEXT: 1st round interview for Bain Summer Internship 2002
ISSUE POSED: You are an UK-based Fruit-flavoured drink manufacturer.
Your company has been created 4 years ago. The fruit-flavoured drinks are its only
business. It sells to the major supermarket chains. Bottles come in two 2 sizes, 1 litre
and 250 ml. You have 10% of the UK market and do not export.
You are losing money, and have done since the beginning.
Why are you losing money?
What can be done to correct this?
INFORMATION The information below is not given at the beginning but only as an answer to relevant
PROVIDED: questions. The most important is the capacity utilisation number it is the key to the
case.
Your company is a price taker (as are all manufacturers). There is a premium
market for different products (e.g. pure orange juice)
The market is consolidated to 4 players: 40%, 30%, 10% and us (10%). All (except
us) are long-established. There is little brand value.
All 3 competitors make money. You believe you are by some way the most efficient
producer some competitors have inefficient legacy machines. Your product is
also slightly better quality (due to newer machines).
We produce 30 millions litres p.a. This is 40% of your capacity.
Set-up times/costs for flavours are better than competitors our managers used to
work for competitors.
Price: 40 p for the 1 litre bottle, 12p for the 250 ml bottle. Cost at present: 50 p per
litre: 25% raw materials
45% packaging
30% fixed costs
SOLUTION: The candidate should go through a classic profit=revenue-costs. Nothing can be done
about prices since the client is a price taker. There is no problem with the variable
costs. The only problem is the under-utilisation of capacity that leads to excessive fixed
costs.
At some point, the interviewer will give the cost figures and the utilisation figures and
ask the candidate by how much costs could be reduced if the plant was producing at
full capacity. Answer:
fixed costs/litre now = 50p*0.3 =15p

total fixed costs: 15p*30M=$4,5M
production at full capacity = 30 M/0.4=75 millions
fixed cost/litre at full capacity=4,5M/75M=6p
Therefore, it is possible to reduce production costs/litre by almost 20% by producing at

full capacity.
The next step is: how can the company increase its sales to produce at full capacity?
Price promotion is not a solution since it destroys value in an over-supplied market.
Solutions proposed by the candidates included:
Sell one of our machines abroad to reduce fixed costs (not to competitor!)
Contract manufacture for competitor (more efficient than they can produce)
Manufacture for private label (supermarket own label brands)
This last solution is the one that was followed by the candidate.
Producing for private labels will result in tiny margins on supermarket product, but large
volume, and the good margins on branded product will be maintained.
OTHER USEFUL TIPS: Producing for a private label is a classic solution when capacity is under-utilised. But

there are other things you can do: produce more flavours, work on the packaging to
reduce the costs, sell through other distribution channels (bars, restaurants, schools),
etc. In addition to your main solution, you should mention alternative options to show
your creativity.

SOURCE / FIRM: BAIN

DATE / CONTEXT: 1st round interview for Bain Summer Internship 2002
ISSUE POSED: You are a leading US credit card company. Your market share used to be 25%
but has now fallen to 15%. You are still growing but the market is growing
faster.
As the new general manager, you want the companys profits to grow at least
as fast as the markets. You have 3 months to come up with a strategy and
determine how to grow profits.
INFORMATION The average customer has 6 credit cards (yours included)

PROVIDED:
The existing strategy is to aggressively target new customers.
SOLUTION: The important point here is to understand what drive profits.
On the revenue side, a client generates revenue only if he/she uses his/her
credit card. Therefore, acquiring new customers can fail to generate revenue if
they sign up for the card and then do not use it.
Some elements of revenue are:
% on purchases;
interest on customer balances;
small amount from accepting inserts from complimentary businesses
in statement and mailings
Some elements of cost are:
Acquisition costs: marketing, mailing, discounts, etc.

Cost of funding balances
Bad-debt risk of customers
Transaction/Payment processing
Fraudulent transactions
The solution followed by the candidate was:
To increase profits, focus on existing customer base use focus groups,

surveys, etc. to segment existing customers (no acquisition costs) and develop
strategies to increase card utilisation. The company could develop fidelity
programmes with partners and for example give air miles to frequent card
users (in association with an airline). It could also sell its database to increase
revenues, provided it can legally do it.
OTHER USEFUL TIPS:

SOURCE / FIRM: THE BOSTON CONSULTING GROUP

DATE / CONTEXT: 1st round interview for BCG Summer Internship 2002
ISSUE POSED: Your client is the CEO of a hygiene products manufacturer. He is
manufacturing diapers, toilet paper and feminine pads. Right now, the CEO is
preparing a plan for the next 3 years. His main objective is growth. He is
worried about the feminine pads segment: he does not have a story to tell to
his shareholders. He wonders if he should consider producing for a private
label. What is your recommendation?
INFORMATION When the interviewee asks questions about the market, he/she is given the
PROVIDED: following table:
TOTAL OUR RELATIVE GROWTH PRICE
REVENUE MARKET MARKET PER
SHARE SHARE PAD
Brand $800 M 15% 0.3 1.7% $2
market
Private $200 M - - 6.9% $1.5
label
NB. The interviewer will ask if you know what relative market share is
(apparently nobody does) It is our market share divided by the one of the
leader. Then he will ask to deduce the leaders market share. In this case it is
50% (15%/0.3)
She will also ask the level of the clients sales (15%*$800M=$120M).
When asked, the interviewer informed me that the client was the third producer
on this market (the second one has a 20% market share)
None of the two main competitors is working for a private label.
When the interviewee asks questions about the costs, he/she is given the
following table (figures vary from candidate to candidate):
OUR BRAND PRIVATE
LABEL
COGS 45% NA
Overheads 10% NA
R&D 10% NA
A&P 10% NA
Distribution 5% NA
Retailer margin 10% NA
Our margin 10% NA
Price per pad $2 $1.5
When the interviewee asks about capacity utilization, he is told that it is 80%,
so there is 20% available for extra production for a private label.
If private label is launched, cannibalisation of the clients brand will be 33%.

SOLUTION: The clients main objective is growth, so logically you should ask about growth
rates and get the first table. It shows that the private label segment is growing
faster than the brand one.
You then should check profitability. That is when you get the costs table.

First translate the percentages for the brand label in dollar costs. Then make
assumptions on which costs are fixed (check that there is capacity available so
fixed costs will not increase with an increase in production) and which costs
are variable. Use these assumptions to determine dollar costs for the private
label. For example, cost of goods sold should be the same in dollar costs (90
cents) but you can assume there is no additional expense in advertising and
promotion (A&P) since no advertising is done for a private label.
An important point is: how much do you give to the retailer for a private label?
The retailer expects to get more money for a private label (that is why they like
private labels!) so you should put a margin of more than 20 cents.
This will give you the contribution of the private label pad. The number
obviously varies depending on your assumptions on fixed/variable costs but
you should get a cost that allows for a positive contribution (if not of course you
should not proceed).
Do not conclude straight away that they should go ahead, though. A downside
of private label is cannibalisation. You should point out that launching the
private label pad could lower the brands sales. You will be told that
cannibalisation will be 33% of the brands sales if the private label is launched.
So you have to do the math to see if the private label is still a good idea.
Calculate the contribution of the brand pad (it depends on your hypothesis on
fixed costs) then solve:
80 (=new level of brand label sales)*CB (=contribution of brand label sales)+30

(=sales of private label if you assume that they devote 20% of their production
capacity to private label you obviously can make other assumptions or ask to
the instructor and get a different number)*CP (=contribution of private label)-
FIXED COSTS (depends on your original assumptions)
Compare this to the profit now (20 cents*120 M=$24M)
You can then make a recommendation.
In the end, address other issues that should be taken into account: change in
the balance of power between the client and the retailer (all of a sudden, a
single client represents a very significant percentage of the sales), eventual
image problems, sustainability of the high growth in this segment (feminine
pad is not a commodity), etc.
In the end, the interviewer told me it was a real case. The client ended up
going into the private label market. To retain some power in their relationship
with the retailer, they kept their advertising expenses high because the retailer
liked the fact that its supplier also manufactured a renowned brand. But growth
slowed down because of the nature of the product: customers on this market
are not very price sensitive.
OTHER USEFUL TIPS: This case was given in 2002 and 2001. If you are lucky enough to get it in
2003 or after, do not forget to interact with the interviewer and to be creative
you do not want to look like you are reciting something. Note that they may
give you the same case with different numbers, so there is no use in trying to
remember what the result of the calculation were.


DATE / CONTEXT: 1st round interview for BCG Summer Internship 2002
INDUSTRY: Turbine manufacturer
ISSUE POSED: Your client, a turbine manufacturer, calls you up. Profits are going down. What
are your recommendations?
INFORMATION On an index scale, if revenues are 100, costs are at 110.
PROVIDED:
History data reveals that revenues went up by 4% (Industry rate), and costs
went up by 12%
Cost structure is as follow:
Share of total cost Variation from last year

Sub-assemblies 40% 15%
Components 30% 5%
Labour 10% ~0%
Overhead 20% 10%
Others 10% 20%
Ranking of the contribution to the cost increase highlights sub-assemblies as

the main issue. Break-down of the sub-assemblies is as follow:
Share of total cost Variation from last year

Blades 20% 10%
Rotors 20% 20%
Casing 10% 15%
Focusing on the procurement of the rotors reveals the following:

It is a commodity product,
It is delivered to one unique point-of-delivery (no geographical issues),
No quality issues: all suppliers meet the specs,
The current number of suppliers is 70,
Theoretically our clients whole demand could be supplied by 1 or 2 suppliers.
The number of suppliers grew from 12 (5 years ago) to 70 this year.
SOLUTION: The problem here is the cost induced by the large number of suppliers. The
candidate should understand why the number of suppliers has multiplied. The
candidate who got this case made the different hypothesis:
Limited capacity per supplier

Poor forecasting that does not give time to suppliers to schedule larger run,
No centralized ordering system internally (fragmented demand),
Every year, new suppliers come in with more competitive pricing,
Contracts lock client with minimum committed volume,
Poorly trained purchasing people
But the reason is that our clients purchasing function is enjoying cosy
relationships with its suppliers. In order to maximize the number of presents

and gifts received from them, they maximize the number of suppliers! So the
company should introduce a no gift policy
OTHER USEFUL TIPS:


DATE / CONTEXT: 1st round interview for Booz Allen Hamilton Internship 2002
ISSUE POSED: Imagine a Rubik cube that is 6x6x6 large. How many mini-cubes can you
see?
INFORMATION
PROVIDED:
SOLUTION: Calculate how many mini-cubes do NOT face out and subtract that from
6x6x6, i.e. subtract 4x4x4 from 6x6x6.
OTHER USEFUL TIPS:


DATE / CONTEXT: 1st round interview for Booz Allen Hamilton Internship 2002
ISSUE POSED: Our client is a Birmingham based construction company. They've been
approached by a Bristol based construction company looking to sell for 20m.
Should they?
INFORMATION
PROVIDED:
SOLUTION: Examine the profit and loss account of both companies and understand the
reasons for the different margin levels. Brum's margin was 5%, Bristols 20%.
Why? 2 reasons.
Bristol was 1/2 way through a big contract to build part of a new motorway
near Bristol (transport ceases to be efficient after 40 miles) with cash flows of
2m for each of next two years. This meant that they were operating near
capacity, so their unit cost was very low. When the contract expired, their
production would halve, and their margin would drop to zero. It is unlikely that
Brum could add any real value through a merger, e.g. through cutting
overheads.
Other dimensions to this case.
(1) Bristol buys in its supplies from 20+ different suppliers. Brum
buys its supplies from one multi-supplier. How does this impact?
(2) Bristol phones up and offers to sell for 2m - how does this impact? (i.e.
use NPV concept to decide if it is good in the long term)
(3) Bristol has 40% of local trade, with 1 competitor. How would game theory
come into play? E.g. would they pay us to buy Bristol and close it down one
year later so they'd have a monopoly?
OTHER USEFUL TIPS: This was hard, as he kept on throwing in new info and almost dictating the
pace and direction of the case.

SOURCE / FIRM: DELOITTE CONSULTING

DATE / CONTEXT: 1st round interview for Deloitte Internship 2002
ISSUE POSED: Determine the size of the Dutch market for teacups and plates from Brazil.
INFORMATION This information is given only if the candidate asks for it.
PROVIDED:
Population of Netherlands: 16 million
Average household: 1.8 person (rounded to 2)
Average cups and plates per household: 6 sets
Average time of replacement: 5 years.
Other information given: read the solution

SOLUTION: After the candidate had asked for the additional information above, he was
asked to determine all possible sources of information for these data.
In order to do so, he performed a supply chain analysis. He established

sources of information between all nodes of supply chain and showed how to
convert information obtained between nodes to final market size. He also
analysed expected accuracy for each data source. The interviewer was not
satisfied until all nodes were addressed: he kept asking which other sources
could be found until the candidate drew a diagram of the supply chain and
proved that all nodes had been addressed. Note that information can come
from the supply chain has two starting points, Brazil and the Netherlands, and
joins before distribution. All nodes in both branches must be addressed).
After working on the information sources, the candidate was asked to go back
to the original problem and solve it. With the information given, he found the
market size for sets bought by households.
The interviewer then asked him to list all other possible markets.
From the list, he was asked to perform an analysis and determine the size of
the market for hotels. He was told that no information on the hotel industry was
available, but that general statistics on tourism could be asked.
The candidate asked:
The amount of tourists coming to the Netherlands each year (20
million)
The average duration of their stay (7 days)
=> He calculated the average number of tourists in the Netherlands at any time
The average percentage of rooms occupied: 60%
=> He calculated number of hotel rooms in the Netherlands
he assumed 3 sets per room (which the interviewer accepted)
He assumed a faster replacement in hotels than in private households
(he proposed 1 year but the interviewer told him that 2 years was more
credible)
OTHER USEFUL TIPS:


ISSUE POSED: Multinational Health Insurance company which historically has under-invested
in production. Has a small budget and wants to know where to allocate this
cash to best effect in terms of overall cost reduction.
INFORMATION Several candidates got this case and they all agree on the fact that the
PROVIDED: information provided was lacking precision sometimes even changing
between the beginning and the end of the case. The interviewers routinely
answered I do not know or this information is irrelevant to questions asked
by candidates. The information below has been given to one candidate but
others had different information or no information at all.
The company offers a portfolio of products and customises some

offerings to corporate clients.
The company has a small number of call centres, no CRM, no

streamlined or integrated features. It is very traditional.
The company also has a hospital network, which does not always run
at full capacity. It has new technology / new equipment.
Overall, the company's market share is shrinking. This is a mature

market.
SOLUTION: For this case, the interviewer gave very limited information and there was
obviously no solution that the candidate was supposed to find. The point was
more to see what the candidates approach was. A good candidate will
therefore show that he understands the different issues:
analyse the production process to see where investment would
be optimal (call centre, hospital)
do some benchmarking on competition
segment the market and identify high margin clients (probably the
corporate ones)
Etc.
OTHER USEFUL TIPS: After the 3rd I do not have this information from the interviewer, do not lose
your calm or start panicking thinking you are getting it all wrong. Check with
the interviewer that you are not completely off-track (do you agree with this
approach?) and if he does not push you towards another direction, assume it
will be a no data given case and begin to make assumptions instead of
asking questions. For example, instead of asking what is the percentage of
corporate clients? say I assume that the partition between corporate and
individual clients is 80/20. Does it seem a reasonable assumption to you?
Do not get too frustrated!


ISSUE POSED: You are a telecom company and are faced with a new actor in your market. A
company is acting as an intermediary between the telecom companies and the
end-users (businesses). It wishes to consolidate the requests from the end-
users and negotiate with the telecom companies in order to achieve the best
deals. How do you face this threat?
INFORMATION The telecom company offers a full range of services. The case was quite
PROVIDED: unstructured so if you play the interviewers role you can make up the answers
to whatever questions the interviewee asks.
SOLUTION: Here is what the candidate did (and he got to the second round!):
I started asking some more data on the industry, understanding the range of
services offered, the success factors and the margin. Then I moved on to the
characteristics of the B2B markets, pointing out two alternative strategies:
1) the telecom company (which was able to offer a full range of services) could
convert into a service provider and deal directly with the end-users;
2) The telecom company could merge with/buy/establish a JV with one

outsourcing company (the new player) and the venture would be based on a
sharing of the margin.
OTHER USEFUL TIPS: If you play the role of the interviewer: evaluate the way the candidate
structures his answer and the quality of his proposition. This is paradoxically a
little like a guesstimate: what counts is not the exactitude of the final answer,
but the reasoning.


DATE / CONTEXT: 1st round interview for McKinsey Internship 2002
ISSUE POSED: You are the CEO of an American suburban bank in the early eighties. You
commercialise only one product, a credit cad. Your competitors have a larger
portfolio of products and you are losing customers. You are thinking of offering
frequent fliers points to your cardholders. You are in contact with Flyover
Airlines. Should you partner with them to implement a frequent fliers points
programme?
INFORMATION
PROVIDED:
SOLUTION: This case was very structured: the candidate had no chance to choose his own
way of solving it. The interviewer just asked questions that were mini-cases
and the candidate had to find the answer to progress.
How would you approach whether or not to partner with Flyover?

Evaluate the revenue and the cost of the programme.
Question 2: What do you think is the potential US market for this

programme?
This is a guesstimate. There are 250 million inhabitants in the United States.
50% are adult consumers (you have to remember that not all of the 250 million
Americans use a credit card but the interviewer will give you the number if you
do not know the percentage of adult consumers). 40% of these 50% have a
credit rating (same remark as before). So the potential market size is 50
million.
Question 3: Who would be interested in this card?

Frequent flyers and people who want to fly more. The interviewer gives the
percentage of these two populations: respectively 10% and 30% of the
potential US market. Therefore 20 million Americans would be interested.
Question 4: What is the cost of providing this service to customers?

There would be some marketing costs, but almost all the costs would be
supported by the airline. So the cost per point would be the price Flyover
Airline would charge the company.
Question 5: Which elements will determine the costs for Flyover airline?
It is a fixed/variable costs question. Most of a flights cost is fixed. So if people
who use their points do so for planes that are not flying at full capacity, the
marginal cost is quite low. If they replace regular passengers however, it is
high.
Question 6: You ask your finance team to give you an estimation of the
cost per point for Flyover Airline. They tell you that the cost for them will
be 1 cent per point. At this price, you can make a profit. You contact the
President of the airline and tell him about your idea. He likes it and
proposes to sell the points to you at 1 cent. Do you accept the offer?
Obviously your finance team got it all wrong: if the cost for Flyover Airline were
1 cent, they would charge more. Therefore, you should negotiate to lower the
price.
OTHER USEFUL TIPS: Do not get intimated by the McKinseys very formal style: the interviewer has a
piece of paper in front of him and check a box each time you give him one of

the elements he is looking for. It is pretty unnerving, especially when this
damn pen stays still for a long time


DATE / CONTEXT: 1st round interview for Roland Berger Internship 2002
ISSUE POSED: You have to decide within 10 minutes whether or not to order 10 million ping-
pong balls, for delivery the next day. Can you fit them all in one 747? If yes,
do the deal, if not, don't.
INFORMATION
PROVIDED:
SOLUTION: This is a classic guesstimate. You have to estimate the volume of 10 million
ping-pong balls and the volume of a 747. You can for example approximate
the volume of one ping-pong ball by the volume of a cube with a 3 cm side =>
volume of 10 millions ping-pong balls is 270 million cm3 = 270 m3 (remember
that 1 m3 = 1,000,000 cm 3).
To estimate the volume of a 747, you can use different approaches. You may
happen to have a pretty good idea of the length and width of a 747 because
you are flying in them all the time and simply use the cylinder volume formula
(*r2*height), correcting for non-usable space like the cockpit, the motors
You may remember how many people a 747 seats (approx. 500) and deduce
the volume from there.
OTHER USEFUL TIPS:


ISSUE POSED: How would you estimate the size of the market for aircraft maintenance
service? Can you estimate its growth? (The timeline for the estimate is one or
two days.)
INFORMATION On questioning the interviewer narrowed the area to commercial aircraft and
PROVIDED: revealed that 80% was done in-house by commercial airlines. The other 20%
was sub-contracted, and after further probing he revealed that there was one
listed company among the contractors.
SOLUTION: The point here is to show that you would know where to look to gather
information. By examining the expenses and revenues of the listed company,
as well as the type of aircraft they serviced, one could extrapolate figures to
the world fleet as published by Boeing and Airbus. For growth, the two key
drivers are numbers of each type of aircraft and their age, each of which could
be gotten form the published fleet numbers and the projections thereof.
OTHER USEFUL TIPS:


ISSUE POSED: A retail bank has experienced a drop in profitability. What is the cause and
how should we address it?
INFORMATION 2 kind of retail accounts: deposit and current
PROVIDED: No other products (mortgages/loans, etc.)
Different interest rates: deposit 5%, current 2%
Many customers have shifted from current to deposit accounts
SOLUTION: The cause of loss in profitability is a shift between the two account types.
There is a small margin on deposit account compared to current account.
Could be addressed by issuing credit cards / expanding customer

case/developing new products
OTHER USEFUL TIPS: This interview was fairly informal. There was lots of chatting, the case study
was very short.


DATE / CONTEXT: LBS Interview 1996
ISSUE POSED: You have been given a telecommunications licence in a market that has only
just been deregulated. What types of services do you provide first?
INFORMATION We focused exclusively on mobile phones, as that was the service that I posed
PROVIDED: first. [NB: you should always provide a rationale for your choice, e.g. the
macroeconomic conditions of the country, demographics, etc.]
SOLUTION: There are 4 main parts to this question.
Part 1 - Identifying the three variables: Price is a dependant variable, and

was therefore my first mistake. There must be a million answers to this, but
mine focused around three reasons why you would buy a mobile;
Average weekly wage. You can only buy it if you can afford it.
Car registrations per capita. You buy a mobile phone because you want
mobility. Car registrations are a good indicator of the mobility of the
population.
Advertising expenditure of mobile phone company. You have to know
about it to buy it.
Part 2 - Identifying the customer base The customer base should be largely
those with a high need for mobility, but the best way to find out is ask the
phone retailers, relevant govt department (they want deregulation, so therefore
want you to succeed) and look at your competitors customers.
Part 3 - Pricing structure Pricing has 3 main components, which may be

weighted to focus on different types of customer. The three components are:
initial cost of the phone
monthly or quarterly fixed charge
cost of calls made
Typically the companies subsidise the cost of the phone as people cannot
use their system if they have chosen to buy someone elses phone i.e. the
cost must be competitive up front. The remaining 2 elements can be used
to get low usage, emergency" type customers (low fixed charge, high call
charge) or high usage customer (low call charge, high fixed charge).
Often a mobile phone company will have different pricing programmes
suited to catch different types of customers.
Part 4 - Cost structure The cost structure follows in part from your answer to
part 3. If the cost of the phone is subsidised, the company will incur a lot of
cost to phone manufacturers and retailers before any revenue is received.
Other major cost components include base stations and the interconnect cost
to the BT network (or other national carrier).
OTHER USEFUL TIPS: The guy was pretty tough and not afraid to say No, youre wrong. I have
heard this is not unusual for BCG, but dont let it throw you.


ISSUE POSED: Drink cans were traditionally made from three separate pieces of metal (Top, bottom,
and side). A new technology known as the two-piece tin is now in use at many canning
facilities in the US.
I want you to imagine that you are in the executive conference room of a large US
canning facility that is considering transferring to the two-piece technology.
Please take on the role of each of the vice-presidents of the facility and present to me
what you think each of them would have to say about the decision to stay with the
three-piece or move to the two-piece
INFORMATION
PROVIDED:
SOLUTION: An impressive way to start this answer would be to ask if the factory was organised by
function or process. Since factories are typically functionally organised. I would start
by saying something like:
Why dont we go along the value-chain and explore the benefits and advantages for a
manager responsible for each segment of the chain?
Using a framework ensures that you are in McKinsey speak MECE (Mutually exclusive
and collectively exhaustive), otherwise you might bounce around for 10 minutes and
forget operations!
This is not an exhaustive list, but it serves to give you some ideas.
Procurement
Lower metal content reduces raw materials inventory, freeing up space and cash.
Identify new suppliers for high tech materials or work with existing to change
material specs.
Human Resources
Downsizing from increased automation
Retraining lead-times
Information Technology
Probably plug and play with legacy systems
Infrastructure (Finance, accounting, quality)

Where is the money coming from?
We should be able to sell the three piece line to a subsidiary or company operating
in a developing country
Operations
Change-over options (Pilot or parallel run unnecessary unless we are an early
adopter, more likely a shut down / start-up implementation utilising around the clock
vendor technicians and our engineers.
Large positives with new machinery: lower maintenance, better control interfaces,
high volumes and tolerances, less staff but more highly trained.
Distribution
Infrastructure compatibility (pallet sizes, stacking height, handling ease)
Sales and marketing

Customer reaction - are we an early adopter - if not - no issues, if yes, some
education required. E.g. cost and environment - less waste, ring pull stays with the
can, so less litter.
Service

Non issue?
One problem with this case and many in general is that it parallels a HBS case - Crown
Cork & Seal. If the interviewer knows that it is taught in your core strategy class he /
she may expect:
1. A much richer answer
2. You to reveal that you are familiar with the case - I wouldnt tell them before starting
since this will raise expectations. Since I was not interviewing with other students
from the same school, I kept my mouth shut
However it may be that the interviewer can tell that you have done the case before,
because you answer too quickly and in too much detail for it to be spontaneous. If
this is the case it is better to be open about your familiarity with the case.
OTHER USEFUL TIPS:

SOURCE / FIRM: UNKNOWN

ISSUE POSED: An institutional food service company has a contract to provide catering and
cafeteria services to an office building in Denver, Colorado. This business unit
is losing money. Why?
INFORMATION In fact there were four separate food service functions provided for under the
PROVIDED: contract:
Employee cafeteria
Open-to-the-public restaurant
Catering service for in-house functions
Coffee wagon set up in the lobby
Under further questioning the profitability of each part of the business could be
assessed and decisions about what to do with each could be made.
SOLUTION: Consider cost and revenue dynamics of each business separately:
Fixed and variable costs
Minimum turnover required to break even
The extent to which the businesses result in cross sales (to justify
cross subsidisation)
Are the same skill sets required to run each of these businesses
Can joint purchasing mean that food costs are lowered by eligibility for
greater bulk discounts?
What are the exit costs for each business
Would terms of the contract permit providing some but not all of the
business?
Key insight - the business was not a monolith and that each of the four
parts had different economic profiles. Despite bad overall management,
there were some highly attractive businesses mixed in with some awful
money losers. The only insight was to make the appropriate breakdowns
and determine the attractiveness of each sub-unit on a disaggregated
basis.
OTHER USEFUL TIPS:


ISSUE POSED: How many gas stations are there in the US?
INFORMATION None
PROVIDED:
SOLUTION: There are two ways I thought of to approach this question:
1. Population theory - In say Menlo Park / Atherton, there are about

15 gas stations for about 40,000 people. In urban areas, there are
many more people per gas station (say 150 in San Francisco for
700,000 people), while in rural areas, there are fewer people per
station (in my hometown, there were 3 gas stations for about
5,000 people). Add in a fudge factor for truck stops in the middle
of nowhere, and lets guestimate that the average nation-wide (I
know one isnt supposed to average averages, but this is
consulting) is around as populated with stations as Menlo park.
This is a ratio of 1 station per 2,667 people. There are 250 million
people in the US so thats around 90,000 stations.
Note - one could just have used Menlo Park from the start, but the
idea is not to get the answer but to think transparently. I threw in
things like urban areas, people without cars, commercial transport
etc to show that I was casting a net to test the reasonableness of
my assumptions, regardless of the fact that I finished where I
started.
2. Patterns of demand and a little knowledge - My idea of the

average gas station has 8 pumps. I have observed that, on
average, 4 pumps are in use during the 14 hours a day the station
(average station) is open. Lets guess that the average station
sells (14 hours x 6 fills / hr x 4 pumps x 10 gallons of gas). I.e.
3,360 gallons of gas / day. Thats around 1.2 million gallons per
year. Now, I know that all of the US could fit into the front seats of
all of the cars in the US, so lets assume there are 125 million cars
on the road. If each car is driven for 12,000 miles at 20 miles per
gallon, that implies (125 million x 12,000 miles/20mpg) i.e. 75
billion gallons of gas are consumed each year. Therefore 75
billion gallons / 1.2 million gallons / station / year = 62,500
stations.
Note - I know that this is convoluted but more elegant solutions are
available.
Last I heard the right answer is around 80,000.
OTHER USEFUL TIPS: Remember the idea is not to get the right answer but to think logically, in a
linear fashion, and get to a reasonable answer. That is 1 million stations is
obviously too many, where 1,000 is probably the number you personally have
been to in your life. Given the interview conditions, it is worthwhile picking
relatively easy numbers to work with rather than getting caught up in some
highly complex mental arithmetic.


ISSUE POSED: The CEO of a large diversified building products company has asked us to help him
examine the operations of his china products division. Specifically, he wants to know if
he should approve a $200 million capital expenditure for new manufacturing facilities
INFORMATION China products include tubs, toilets, and urinals.
PROVIDED: The company is:
One of seven producers in the United States: largest producer has 20%, our
client is number three with 15%
Prices for the clients products have been flat
The two largest competitors appear to earn a small return; our client is break
even
The largest competitor has just announced plans for a major modern plan
SOLUTION: Initial solution- pose questions structured loosely around 5 forces model:
Marketing
How rational has pricing been in the industry
Have competitors ever announced capacity expansions before and then not
implemented them?
Are there opportunities to rationalise the product line?
Does the new finish that will result from the investment pay for itself with higher
prices?
Competitive Position:
How important is the product line to each competitor?
Are the products sold in combination (with each other or with other products such as
fittings)
Would exiting this business affect the sales, profits or cost of the other business
units?
Are there advantages to plants being located in specific places due to high
transportation cost
If the competitors new plant is built, will other competitors exit?
External environment
Is regulation important?
Are there changing demographics that will affect demand?
Customer
Do customers demand a full line supplier (for example if other building products are
required)
Is any significant portion of sales to single customers (e.g. Sears)
Barriers to entry or exit
What is the minimum efficient size for the new plant?
How expensive is entry or exit? Has there been a history of change in the industry
players?
Manufacturing
Do the plants produce other products or contribute to overhead?
Are there ways in which costs can be substantially lowered?
Second phase: Clarify
Is the planned investment expected to lower costs? (Yes but not substantially,
because the new process will result in a better finish)
Does the company rely on a limited source of raw materials? (No, as the materials
are easy to get)
Has the market been growing? (Market is linked to new housing)
Is there over-capacity in this market?
What are the competitors relative cost positions?
Market segmentation - residential vs. industrial vs. commercial
Price points - cheap vs. expensive / quality
Third phase: provide a recommendation
OTHER USEFUL TIPS:


ISSUE POSED: Your client designs, manufactures, and markets a full line of bicycles. The
company had been growing in sales and profits when its profitability flattened,
then began declining 3 years ago.
INFORMATION
PROVIDED:
SOLUTION: 1st analysis - Assess whether revenues, expenses, or both are the source
of decreasing profits
Revenues growing at roughly the same rate as before the down-turn
Expenses increasing disproportionately
(Would use financial statements to assess this data)
2nd level analysis - Analyse source of increasing expenses
Operating/Administrative? Administrative costs growing, but operating
costs appear to account for bulk of increased expenses.
Components of Operating Cost - Fixed/Variable: Fixed costs growing but
variable costs appear to account for the bulk of increased expenses
Components of variable cost - direct/indirect: Both have been growing.
Bicycles have become more sophisticated, with better materials and
components. (However, the increasing cost/bike has been comparable to
the growing price/revenue per bike). Indirect costs are increasing
disproportionately.
Components of Indirect Variable Cost - Materials, Labour: Allocations of
indirect material about the same. (Loss of bikes about the same).
However, allocation of indirect labour appears to be the big problem.
Why is indirect labour increasing? Examine WIP: increasing. Look at the
factory floor, many bikes waiting around. What are the bottlenecks? Not
capacity related - plenty of throughput available. Much time appears to
be spent now-a-days in set-up - resetting paint booths, welding jigs, dies
and presses, etc.
Why has set-up time increased? Either by increasing the number of set-
ups of bikes or increasing the set-up time.
Increased set up time? No, it has actually decreased as the
workforce has improved set up tools/jigs etc. Workforce turnover,
labour relations, etc. are all fine.
Increased Set ups? Yes
Conclusion
At the time of the profit decline, the industry had been trending towards
increased specialisation in bicycles: touring/mountain/racing/hybrid/etc. This
company had responded with rapidly proliferating product lines, leading to
increased number of set-ups and lower volumes per assembly run.
Solution: To rationalise product lines, and try to increase shared components

across model lines.
OTHER USEFUL TIPS: The key to this case is to methodically dissect the cost structure for the
company, and knowing what the components of cost are (i.e. cost accounting).


ISSUE POSED: Our client was a division of a large company that produced speciality labels,
like this one here (the interviewer pulls a lipstick container out of her purse for
a dramatic flare). They have been experiencing losses for the last couple of
years. The client wants to know two things:
1) What is the most reasonable way to quickly improve the financial results?
2) Is this a good industry to be in, in the long run?
INFORMATION
PROVIDED:
SOLUTION: We explored the entire manufacturing cost detail. The factory was run
efficiently and labour costs were just slightly higher than industry average.
Apparently this division was the largest player in the market, which was
composed primarily of mom and pop operators located in close proximity to
cosmetic factories.
A new label necessitated some significant up-front costs in matching colours
etc, to artwork.
Exacting detail was needed since product appearance is a key purchasing
criteria for the consumer of the final retail product. The client had implemented
an activity based costing system, but it could not provide precise data for
individual orders. We pursued the factors affecting the unit costs of various
order sizes and came upon two points
The artwork caused per unit costs to soar for small orders.
Some orders would recur with only slight variations from season to season,
thus saving artwork matching costs
A further analysis of order / customer profitability in the industry was in order.
The mom and pop operations had a slight advantage over the client for small
orders in that they required little co-ordination between engineering functions
for the matching and products.
One line of action was to analyse the process / interface between engineering
and production to look for ways to streamline the process. Further invoicing
and other set-up costs might be further analysed for reduction. This was
correct, but only a partial answer.
We also noted that small competitors sometimes quoted poorly, but could still
generate enough income to provide a living (but not enough to surpass hurdle
investment rates of a subsidiary of a larger company).
Barriers to entry were low, so the small companies could be expected to exist
in the future.
Another key fact that emerged was that the colour matching ability of our client
was more reliable than that of competitors. Thus, high-end cosmetic lines
would pay a slight premium; this was not entirely a commodity business.
RECOMMENDATION
The company needed to rationalise its customer base. The small customers /
small orders needed to be eliminated (except for small orders for large
customers who refused to divide their business). The client also needed to
eliminate some capacity; a partial sell-off of equipment was possible with the
reduced volume levels.
OTHER USEFUL TIPS:


ISSUE POSED: A marketing vice-president of a major pharmaceutical firm is working on a
business plan for a new revolutionary product. The researchers have
developed eye drops that completely eliminate near sightedness in 60% of the
cases (the cases caused by eye strain rather than irregularly shaped eye
lenses) if the drops are used twice a day.
Part I
Problem: The client has been working on a business plan but is having a
difficult time with one piece of information. The client needs a directional
estimate of the retail price they should set for the drops so that he can
complete the business plan. How would you help the client structure his
thinking on the price and what is your back-of-the-envelope estimate on the
price that he should use in the business plan?
Part II
Problem: After talking through the pricing issue, the price of drops of $200 per
year approx. is agreed with the client. The client now wants to discuss another
issue. The client needs to complete his baseline business plan within an hour
and share it with the management committee later in the afternoon. He wants
to produce a ballpark estimate of the market of the product. Specifically, what
dollar level of sales might he be able to expect per year in the long run in the
US market?
INFORMATION
PROVIDED:
SOLUTION: Part I
One rough cut pricing analysis would determine the market price for the
product that is being replaced ... in this case eyeglasses or contact lenses.
For example, if eyeglasses cost $120 and last on average 2 years, then a
two-year supply of drops could be sold for $120.
A more advanced analysis might determine that eye drops are simple to
use and completely trouble-free so that they should replace the most
expensive option including all the costs associated with that option. For
example, this may include $100 per year in optometrists fees, $180 in
contact lenses ($120 per pair plus on average each user loses one lens in
a year) and $25 in contact lens cleaning solution and other supplies, for a
grand total of $305. Using this example, the retail price of the one year
supply of drops should sell for $305.
The most advanced issue will include the fact that this new product is
actually much better than the alternatives, issues such as dynamics of
pricing strategies (e.g., start high and reduce over time to best understand
elasticities), and pricing so that marginal revenue equals marginal cost.
Part II
Because you have already estimated a reasonable price, you must now
estimate the number of yearly supplies that the client can reasonably expect to
sell in the US. One possible organising structure (with estimates) is:
Estimate the number of people in the US 250 million
Estimate the percentage of (1) using corrective eye wear 20%
Estimate the percentage of (2) that are nearsighted 70%
Use the clients figure for the percentage of (3) that will be helped 60%
Estimate the percentage of people that will adopt the new product 40-60%
OTHER USEFUL TIPS:


ISSUE POSED: Major discount retailer with over 1,300 pharmacies. Pharmacy operations have had flat
sales in a growing industry. Profitability is very poor relative to industry. Chain has
history of decentralised pricing and promotion for pharmaceuticals, leading to strong
autonomy in field operations, as well as wildly inconsistent pricing. Customer pricing
complaints and customer attrition is chronic. New head of pharmacy operations has
engaged us to solve the pricing issue. How should we proceed? New head of
pharmacy operations has engaged us to solve the pricing issue. How should we
proceed?
INFORMATION
PROVIDED:
SOLUTION: CUSTOMERS
Customers are generally older, repeat, discount-sensitive shoppers (as opposed to
convenience-oriented shoppers).
Customers may initially select a pharmacy on referral, location or price.
Tend to build strong loyalty to pharmacy due to personal relation with pharmacist
and high switching costs (transfer of records etc).
Price tends to be a major factor, particularly given nature of customer (usually pay
in cash from fixed income) and trust relationship (i.e. price fluctuations acre very
damaging).
Inconsistent pricing on a given item may lead to price shopping, exposing all
purchases to scrutiny, and losing the customer.
PRICE
The client recommends a standard mark up from cost, with price matching to be
determined by the pharmacist at the store. As mentioned before, this leads to wildly
different pricing from store to store, as different pharmacists are vigilant to different
degrees, regarding optimal pricing strategies.
COMPETITORS
Three main groups - chain drug stores, independent pharmacies, and discount
chains with pharmacy operations (Wal-Mart, Kmart). Client is in the discount
group but competition is fierce between groups. No pricing studies have been
done.
NARROWING
Do a pricing study
Select a market basket of items in commonly dispensed quantities, and call for
prices from a selection of competitors and our stores from across the country. Fine
- it turns out that prices on high-volume items are very erratic: from our prices at the
higher end to well below cost at some discounters. Less common items display
more consistent pricing across chains, with our pricing more or less in line.
Which items displayed the most aggressive pricing? Heart, diabetes, cholesterol
and the like - basically higher cost, maintenance medications - those that
someone has to take for the rest of their lives. Turns out, customers are very
sensitive to pricing on these items, as they represent a significant, unavoidable
expense. These are the items industry experts say are price shopped most
commonly by customers.
NOTE - here the interviewer might suggest you design a pilot program to improve
pricing, or you might be prompted to give your insight on the information gathered to
this point.
RECOMMENDATION
Test a pricing program where prices are set centrally for a number of stores in
different markets. In this test, set prices very aggressively for items identified as
key items, and try to make up margins on non-key items. Monitor results and adapt,
and roll out if volume, profit warrant.
This is how most (good) retailers price. The hot items serve as loss leader, drawing
traffic into the store for general purchases, where money is made. In pharmacy in
particular, it is important to be priced aggressively in situations when many of your

customers use cash (vs. insurance) and where the item is used by the customers with
other health care needs. Hence, heart and diabetes medications tend to be sold at or
below cost in many cases.
OTHER USEFUL TIPS:


ISSUE POSED: Our client is a major British electricity utility. Currently, rates and returns are
regulated, but there is a new proposal that will change the system to a more
market based pool system. How would you evaluate this situation? At what
price will / should people bid into the pool? What non-competitive aspects
might you expect from this system?
INFORMATION The mechanics (simplified for case use) are as follows:
PROVIDED: Rather than each utility producing electricity for the use of its customers
only (with excess or shortage made up for in short-term contracts with other
utilities or independent power producers), all utilities and power producers
will bid into a pool for power supply.
Bidding for the purpose of this case can be assumed to (somehow) occur
continuously - that is, if a supplier decides to produce an amount of
electricity (kilowatt-hours) at a certain, time, he bids that amount into the
pool.
Bids will be arranged according to price, that is, the producer who bids in at
the lowest price will have his power used first, then the next highest price
power will be used, etc.
Demand will determine how much power gets taken from the pool at any
time
The last unit of power purchased will be bought at the price it was bid into the
pool at. All power sold at that time will be sold at the price set by the last unit.
This can be thought of as a market-clearing price.
SOLUTION: As with all economics questions, draw a graph first!
A supply / demand graph works quite nicely.
Demand
P*
The demand side reflects the instant nature of demand - remember, the case
said so. Keep in mind, power can be thought of as pretty inelastic at any
given point in time. The supply curve should be thought of as chunks of power
being bid into the pool at different quantities and prices.
The market clears at P*, as you might think, but keeping the mechanism of the
pool in mind, the last guy only sells part of what he bid in, and the next guy
sells nothing. Note the massive producer surplus for the guys who bid in low.
This is basically the only model you need to get all of the following points:
First, as in theory, the market price is set by the high-cost producer. This

would obviously raise concerns of price fixing and collusion among few
competitors. Lets put that aside for now and think about some other key
points
People will bid in at their marginal cost of production. If you end up being
the last guy in the pool who sells power, you at least break even on a short
run basis. If you turn out lower than anyone else, then you make some
money. I would propose that this equilibrium isnt sustainable over the
long haul, unless demand shifts up and down enough to bring high-cost
producers into the pool so I can get more than LRMC on average (else I
will shut down in the long run)
Also, this system places a huge premium on owning both high- and low-
cost resources. Likewise, you must understand patterns of demand. If
you know a demand peak is coming up, bid both your high cost resource
(to set the price) and you low-cost resources (to make profit) into the pool.
Which brings in obvious collusion issues
The extent to which the market disciplines gamesmanship and collusion

depends to a large extent on those strategic management issues we all
forgot or didnt have as first years - number and size of competitors, trade
associations, degree of communication, signalling mechanisms, and the
like.
One might propose that the airline industry provides a good, similar model
of deregulated industry (with consumers getting all the benefits of an
industry that bids SRMC for prices and loses money o the long haul on
huge fixed costs). On the other hand, telecommunications deregulation
has produced huge profits.
Overall, the pool favours those with low cost resources. The wrinkle in
electricity production is that the lowest cost resources do not tend to be
dispatchable, that is you have to run them all day long if you run them at all.
(Hydroelectric ad Nuclear plants are like this). Implications? Many, including
the fact that all bidders know that you have to run your resource, and will
assume you bid into the pool at zero. Also, if everyone has these resources,
during periods of slack demand, there will be no one to sell to at any price, and
the pool will clear at or near zero. This is why understanding (and modifying, if
possible) demand is so critical
OTHER USEFUL TIPS:


ISSUE POSED: You are in a meeting with a client who mentions that she is considering
building a new plant. The new plant will require 100 million tons per year of
recycled aluminium as an input. Your client turns to you and asks you if there
is 100 million tons of recycled aluminium available in the US on a yearly basis.
You do not have that information of the top of your heard. How can you
answer the question on the spot?
INFORMATION None
PROVIDED:
SOLUTION: I know that soda cans are made of aluminium. Lets assume that soda
cans are the major source of recycled aluminium. Also, lets assume that
people drink 5 cans of soda per day.
350 days / year x 5 cans / day / person = 1,750 cans per year per person
Lets assume there are 17.5 cans in a pound of aluminium.
That means there are 100 pounds of aluminium per year per person
There are 250 million people in the United States
That means that there are 25,000 million pounds per year.
Since 2,000 pounds = 1 ton, there are only 12.5 million tons of recycled
aluminium available per year.
Thus there is not enough recycled aluminium available per year in the
United States.
OTHER USEFUL TIPS: WHAT NOT TO DO
Make the math too difficult for yourself. It is acceptable and very wise to
round off. For example I used 17.5 cans in a pond and 350 days in a
year as they are close enough and they make the calculations easier.
Forget to state your assumptions - there are several assumptions youll

have to make to come to an answer. Make sure you state what they
are. It is better to make an assumption that you are uncertain of rather
than to stop and not to get to an answer. Once you have an answer, it
is perfectly acceptable, and advisable to say Ive made several
assumptions to come to this answer. One I am not sure of is my
assumption about how many cans make up a pound. I said 17.4 cans
are in a pound. If there were really twice that many, I would have to
adjust my number as accordingly. Of course that would not change my
bottom line answer. There would still not be enough recycled
aluminium.

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CONSULTING CLUB

Preparing for Case Interviews

A few pieces of advice:

2004-2005 LBS Consulting Club

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A few pieces of advice

Ensure that you take a cross-disciplinary approach to problem solving, e.g.,

Take a collaborative, intuitive approach to the problem, rather than trying to

Consulting is about working closely with clients, so an interviewer will be

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As mentioned previously, consultancies also use case interviews to

Types of case that you might get in a case interview

(The interviewer would then give you clues if necessary)

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Other examples of similar types:

Why is a soda can round?

ESTIMATION TYPE CASES

Estimate how many credit cards there are in the UK.

Other examples of similar types:

Estimate the weight of a Boeing 747

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SOURCE / FIRM: BOOZ ALLEN HAMILTON

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SOURCE / FIRM: BOOZ ALLEN HAMILTON

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SOURCE / FIRM: BOOZ ALLEN HAMILTON

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SOURCE / FIRM: BOOZ ALLEN HAMILTON

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SOURCE / FIRM: MARAKON ASSOCIATES

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SOURCE / FIRM: MARAKON ASSOCIATES

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SOURCE / FIRM: AT KEARNEY

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SOURCE / FIRM: MCKINSEY & COMPANY

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SOURCE / FIRM: ACCENTURE

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SOURCE / FIRM: ROLAND BERGER

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SOURCE / FIRM: ANDERSEN BUSINESS CONSULTING

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SOURCE / FIRM: BAIN

fixed costs/litre now = 50p*0.3 =15p

Therefore, it is possible to reduce production costs/litre by almost 20% by producing at

Solutions proposed by the candidates included:

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SOURCE / FIRM: BAIN

INFORMATION The average customer has 6 credit cards (yours included)

Some elements of revenue are:

Some elements of cost are:

Acquisition costs: marketing, mailing, discounts, etc.

The solution followed by the candidate was:

To increase profits, focus on existing customer base use focus groups,

OTHER USEFUL TIPS:

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SOURCE / FIRM: THE BOSTON CONSULTING GROUP

None of the two main competitors is working for a private label.

If private label is launched, cannibalisation of the clients brand will be 33%.

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