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Duke Case Pack

Duke Case Pack

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DMCC 2010-2011 Sponsors
1
Editors Note
Welcome Students,

The Duke MBA Consulting Club ("DMCC¨) is proud to present the official 2010-2011 DMCC Case Book. This case book
is the result of several years of development. We created this book to help you prepare for your upcoming consulting
case interviews. As you may already know, case interviews are a very important part of the hiring process for consulting
firms. These interviews give you the opportunity to showcase your communication, client, creative and analytical skills to
your interviewer. This book was developed to complement the Duke MBA Consulting Roadmap curriculum. We hope
that using both will help lead you to success during the upcoming recruiting season.

This case book could not have been completed without the valuable contributions of prior DMCC officers and our
Executive Cabinet. We would like to thank personally everyone who helped to ensure this book came to fruition. We
would also like to thank our friends at other MBA programs for sharing with us their old casebooks in order for us to
continue to harvest new material.

Good luck with your preparation and remember that your fellow DMCC members are here to help! Please reach out to
anyone on the cabinet if you feel that you are not "cracking the case¨. Lastly, to the students of other top MBA programs
using this case book during their preparation, we warmly welcome you to "Team Fuqua.¨

Good luck!

Heather Higgins, Brian Kiefer & Kristin Yanulites
DMCC Class of 2011 Officers
www.fuquaconsulting.com

2
How to approach a consulting interview
3

Introduction · 1-2 min · This is your first chance to make an
impression
· Be enthusiastic, professional and
confident
· Overall personal
presence,
professionalism
Behavioral
questions
· 5-10 min · Be prepared to "walk through your
resume¨
· Be ready to answer questions about your
experience without sounding rehearsed
· They may ask you "Why consulting?¨
type questions
· Teamwork ability
· Leadership
· Record of previous
success
Case portion · 30-35
min
· The interviewer will tell you about a
business problem and ask you to
determine a solution
· Be prepared to "think like a consultant¨
and clarify the problem while driving to
specific recommendation
· Problem solving
abilities
· Analytical skills
· Ability to function
under pressure
Duration
What to expect / What the interviewer
expects
Evaluative Area
The consulting interview process is
fairly standardized across firms
4

Case portion =
Solve a business
problem
Poise,
communication
skills
Structured
thinking
Creativity and
enthusiasm for
work
Similar to case work at consulting firms, cracking a case requires you to simplify an
ambiguous problem into an easy to communicate recommendation
The case portion is a realistic
representation of the work consulting
companies do
5

· Sit up straight
· Keep eye contact
· Maintain a professional
presence
· Adapt to cues
· Speak up


· Have fun
· Don't appear like this is
the worst experience of
your life
· Show your creative side
· Don't be a "robot¨

· Don't shy away from
numbers
· Use graphs
· Have a structured
apporach to your
problem solving

Often, people focus exclusively on the analysis. A candidate's poise and
enthusiasm is just as, if not more, important
Poise, communication Creativity/enthusiasm Structured thinking
Strong candidates will be professional,
enthusiastic, and analytical
6

Case question introduction 1-2 min ‡ The interviewer will tell you about the business problem
and what your objective is
‡ You should be taking notes and ask clarifying questions
to ensure you heard the question correctly before moving
on
Structure creation /
Approach development
1-2 min ‡ This is where you lay out how you will solve the problem
(Quiet time is expected here, but feel free to talk through
your reasoning if you are comfortable)
‡ You will be expected to come up with an approach fairly
quickly, but will be able to adjust throughout
Case Analysis 20-25 min ‡ Expect to drive the case, focusing only on what is
relevant and high impact
‡ Ask questions that will help you address your hypothesis
Case Summary /
Recommendation
2-5 min ‡ Summarize the case by giving a recommendation backed
up by insights discovered in the case
1
2
3
4
Interview Stage Duration What to expect / What the interviewer expects
The case interview process is fairly
standardized across firms
7


Hammerjack is a regional chain of local hardware stores located in
numerous neighborhood strip malls and shopping centers. They have
enjoyed excellent performance for the past 15 years and have experienced
declining profits in the past two years. They are concerned about their
profitability and have hired you to explain their situation and provide
recommendations to get them back on track.
Hammerjack Hardware case example
8
1 Case prompt
1.a) Our client, a manufacturer of lawn mowers, is considering selling lawn mowers in
China

1.b) Our client, a manufacturer of lawn mowers, is considering manufacturing lawn
mowers in China


2.a) Our client is looking for suggestions on how to increase sales of copper

2.b) Our client is looking for suggestions on how to increase sales of laptop computers



LISTEN to the prompt, and ask clarifying questions about any
parts of the prompt that are unclear
The prompt will contain many details;
be sure not to miss early hints
9
1.a) Our client, a manufacturer of lawn mowers, is considering selling lawn mowers in China

External opportunity: revenue growth, market size, competitors, demand

1.b) Our client, a manufacturer of lawn mowers, is considering manufacturing lawn mowers in China

Internal opportunity: cost cutting, profit margins, quality issues

2.a) Our client is looking for suggestions on how to increase sales of copper

Undifferentiated product: pricing, customer expansion, market dynamics

2.b) Our client is looking for suggestions on how to increase sales of laptop computers

Differentiated product: new features, new segments, bundling

The topics will all be covered in future DMCC sessions
Small differences will have a big
impact on the case
10 1 Case prompt


Hammerjack is a regional chain of local hardware stores located in
numerous neighborhood strip malls and shopping centers. They have
enjoyed excellent performance for the past 15 years and have experiences
declining profits in the past two years. They are concerned about their
profitability and have hired you to explain their situation and provide
recommendations to get them back on track.
Small, local player. How do
they compare to Home
Depot?
Profits = revenue - costs
Are there other areas
they could be in?
Task: diagnose and suggest
Balance active listening w/ pre-planning
Retailer ÷ let's look at
number of customers
& $/visit
Hammerjack hardware: prompt
dissection
11 1 Case prompt
‡ Establish a hypothesis/answer/hunch first
‡ Follow with the steps needed to assert
whether the answer is true
‡ If constructed correctly, proving the
hypothesis wrong should be just as
valuable as proving it right

‡ Our client should acquire company X .
‡ Mutually Exclusive, Collectively Exhaustive
‡ Approaches should explore disparate areas
(mutually exclusive) while covering all of the
options (collectively exhaustive)
‡ Demonstrates a thorough/systematic
approach to reviewing all of the options

‡ . because the market for X has room for
growth, the competitive landscape is not
set, & X has a sustainable advantage (3 Cs)
Hypothesis Driven Approach M.E.C.E.
The best answers start with a hypothesis, and use a set of M.E.C.E.
assertions to prove whether the hypothesis is true or not
2 Structure
Candidates should use a hypothesis
driven & M.E.C.E. approach to develop
a structure
12
Tree based Descriptive
Take the time to read some case books to find out what works for you
ʌ
R
C
Price ($)
Quantity (Q)
Fixed cost (FC)
Var. Cost (VC)
Product mix
Ind. benchmark
1. Cost ± look at main FC & VC cost
drivers

2. Revenue ± examine pricing, sales
levels, and product mix

3. New opportunities ± acquisitions or
JVs
Candidates should develop a
"structure" to tackIe the issue
13
2 Structure
ʌ
R
C
$
Q
FC
VC
Mix
IND BM
Customers
Competitors
I'd like to examine Hammerjack's revenue and cost structure. While examining revenue I'd especially like
to examine how our different types of customers and our competitors effect the total number of goods
we're selling. When examining cost I'll be sure to look our fixed and variable costs and see if we have any
information on the cost structure of similar companies.
Hammerjack example, cont.
14
2 Structure
· Try to drive the analysis, but look for
cues from the interviewer

· Use your framework!

· Use tables / graphs / diagrams to
display complicated information
· Distill your summary/recs to a few
sentences highlighting the most
important findings

· Have a definite answer, don't hedge

· Refer to numbers/findings from the
analysis

· If time permits, suggest a few areas for
further exploration/review after you
have a given your recommendations

Case Analysis Summary / Recommendation
3 4
Candidates should use a hypothesis
driven & M.E.C.E. approach to develop
a structure
15
4 Conclusion / Recommendations
Conclusion:

Hammerjack's is losing revenue because the maintenance segment is going to big box
retailers; however, we still have a loyal contractor segment because they only shop
once a year

Recommendation:

I recommend that we offer training to improve our employees understanding of the local
communities and work to align our products to our loyal contractor segment's needs



Hammerjack example, cont.
16

· Not being prepared because of too much
case focus

· Being vague/not specifying the impact

· Not discussing skills that support candidacy
(i.e. core consulting competencies)

· Not having a good answer for "why
consulting¨ & "what would you do if you
couldn't do consulting¨
· Not having a clear plan/structure (Probing
for information without reason)

· Drilling too deep into unimportant
information

· Not picking up on interviewer cues

· Getting lost in the numbers

· Being too rigid/structured/mechanical (i.e.
not demonstrating that you can think on the
spot)
Behavioral interview Case interview
Beware of common behavioral and
case interview pitfalls
17
CASES
18
Case Interview feedback form
Case _______________________ Case type ______________ Interviewer ____________________
Execution
‡Structure
¾Logical approach
¾MECE
¾Appropriate drive to solution
‡Quantitative Ability
¾Speed
¾Accuracy
¾Comfort, reaction to mistakes
‡Business intuition
¾Practical
¾Insightful
¾Breadth & depth across multiple functions
¾Creativity




1 2 3 4 5
Comments:






1 2 3 4 5
Comments:






1 2 3 4 5
Comments:






Communication
‡Professionalism
¾Poise
¾Confident-Persuasive
¾Articulate-concise
¾Client ready
‡Written
¾Clarity of writing and page layout
¾Ability to refer back
¾Comfort, reaction to mistakes





1 2 3 4 5
Comments:






1 2 3 4 5
Comments:






Case start time __:__
Case end time ___:____
Framework development ______ min
Framework explanation ______ min
Case discussion ______ min
Behavioral (optional)
‡Quality of star stories 1 2 3 4 5 Comments:
‡Length 1 2 3 4 5
‡Clarity 1 2 3 4 5
‡Relevance 1 2 3 4 5




Strengths
Weaknesses
Overall Rating: 1 2 3 4 5
Key: 1=Bottom 10%, 2= 10
th
-25
th
percentile,
3= middle 50%, 4= 75
th
-90
th
percentile, 5=Top
10%
19
Case Material Table of Contents:
20
!"#$%&% '$()$% *"+$% ,"-$%
1 AccounLlng SouLhwrlghL Medlcal uevlces 41
2 MarkeL Slzlng Þolly Þubllshlng 43
3 MarkeL Slzlng !apanese Colf 8alls 47
4 MarkeL Slzlng ulsposable ulapers 48
3 MarkeL Slzlng Chewlng Cum 30
6 valuaLlon ScoLch 8ar 33
7 valuaLlon Chemlcal 8roLhers lnLernaLlonal 37
8 valuaLlon lnLerneL ÞorLal LvaluaLlon 62
9 valuaLlon Clnemas 63
10 ÞroflLablllLy Sllck Plck larm LqulpmenL 69
11 ÞroflLablllLy nablsco's MarkeL Share 72
12 ÞroflLablllLy SgL. SlaughLer 76
13 ÞroflLablllLy 8ank Commlsslons 83
14 ÞroflLablllLy LlecLronlcs Co. 86
13 ÞroflLablllLy Convenlence SLore 92
16 ÞroflLablllLy Cfflce ÞroducLs 102
17 ÞroflLablllLy Luro Seafood 106
18 Puman CaplLal kCl's Learnlng ManagemenL 113
19 Puman CaplLal SLrugandL and Losen merger 113
20 Puman CaplLal Ldoceo 117
21 Puman CaplLal SmlLh llnanclal C8M 120
22 Puman CaplLal l2u LlecLronlcs 123
23 Puman CaplLal Sunlque Puman CaplLal 126
24 MarkeL LnLry Þrofesslonal Car 8aclng 129
23 MarkeL LnLry LlzeLLe's Luxury ÞroperLles 136
26 MarkeL LnLry napoleon's Þlzza 141
27 MarkeL LnLry k Crace PosplLal Chaln 146
28 MarkeL LnLry SLew's ConnecLlons 130
29 MarkeL LnLry Cne for Lhe 8oad 136
30 MarkeL LnLry uM8 SaLelllLe 161
ACCOUNTING
21
Case 1: Southwright Med Device
Prompt
A medical equipment manufacturer in the southeastern U.S. has called you in because it feels its
working capital requirements are much higher than those of its competitors. How will you help it
solve its problem?
Guidance
This is a financial accounting case focused on a medical device company. The discussion should be
conversational but exacting on details. There are no handouts so the candidate should rely on the
general data given/created by the interviewer. The basic objective of this case is to test knowledge
of the Balance Sheet and how it applies to business operations.

Read this information well before you administer the case. Manage the case discussion and allow
the candidate to formulate a plan based on the assumptions and key evidence provided below
(case-specific). Offer prompts when necessary and provide the following information if he/she
responds correctly and directly to the stimulus offered.

CA & CL: Let the candidate identify the need of Current Assets (CA) and Current Liabilities (CL).
Provide this information on request: "Current assets consist of cash, inventory, and accounts
receivable and current liabilities consist of accounts payable and short term debts."

Company: Provide this information if the candidate asks for the background of the company:
The company is made up of three divisions. The high inventory problem can be traced to a division
acquired by the client about two years ago. The division manufactures equipment for arthroscopic
surgery, namely capital equipment and blades which sell are similar to razors and razor blades, just
much more sophisticated and expensive.

Inventory: If the candidate asks about inventory and indicates that the inventory could be very high,
prompt him/her to discuss possible reasons for inventories to be high.

An ideal answer would consist of: sales, poor forecasting, obsolescence.
Accounting Unknown round Deloitte
22
23
Guidance
If the candidate asks for the reasons for inventory problem, explain to the candidate that technology
has been changing rapidly and the rate of obsolescence is extremely high. As earlier sales forecasts
(shortly after the acquisition) had been overly optimistic, the client now finds itself loaded with
obsolescent finished goods inventory. Then ask the candidate to recommend correction actions to
remedy the problem.

An ideal recommendation should touch upon these points:
ƒDetermine appropriate levels of inventory such that excess inventory is reduced and
customer demands are met.
ƒ Factors that should be considered - Product demand, manufacturing lead times, customer
expectations on order lead times.
Prompt ±
Part II
The client has 2.5 years of capital equipment finished goods inventory while NONE needs to be
carried since these items can be manufactured after receiving the order (i.e. The finished good
product is no longer sold.) What are the next steps?
Guidance
An ideal answer would look like this:

With respect to technology, while certain aspects of the product may have changed substantially,
other are just as likely to have stayed similar to what was previously used and could be salvaged.
One could dismantle the product and reuse parts to manufacture the new devices. Selling off the
inventory to distributors in less advanced healthcare markets is another way to salvage some of the
investment. Alternately write off the non salvageable component parts.

Once the candidate provide satisfactory answer, ask to wrap up.
Accounting Unknown round Deloitte
Case 1: Southwright Med Device
24
Performance
Evaluation
Expected:
The candidate clearly identifies the importance of CA & CL and explores each of these two further.
The candidate asks questions regarding company and indentifies Inventory as a problem. After the
candidate gets the information on inventory problem, he/she recommends some corrective actions.
The candidate is also able to recommend next steps for prompt2.

Good:
The candidate not only performs the analysis in a methodical way identifying all major items but
his/her recommendations also are very close to the ones stated earlier. The candidate does not
need more than couple of prompts in pointing out all factors and reaching a conclusion.

Excellent:
The candidate identifies CA/CL early on and explains all possible elements under CA/CL and their
relevance to the problem. The candidate is also able to quickly identify the problem with the
inventory and explores all possible reasons for the problem in a very structured way. The
candidate's recommendations on corrective actions and next steps are spot on.
Accounting Unknown round Deloitte
Case 1: Southwright Med Device
MARKET SIZE ESTIMATION
25
Case 2: Polly Publishing
Prompt
Your client is the CEO of a publishing company producing a line of educational magazines and a line
of women's magazines. Both businesses are profitable but not growing quickly. He wants to start a
third monthly magazine in the US targeted at 25- to 55-year-old men (e.g. GQ Magazine). His stated
goal is $12 million in circulation revenues in the first year. Is this possible?
Guidance
This is a market estimation case. The case is based off estimations and the candidate's ability to
work with those estimations. While there are no right/wrong answers in market estimation cases, the
interviewer usually has a range of 'correctness', if you will. The candidate's answer should fall within
interviewer's estimate to the extent that your assumptions are realistic.
Ask the candidate to walk you through his thought process ÷ top-down, bottom-up. Once his /her
structure is in place, ask him/her to compute the calculation. Various methods may be used to
estimate the answer; one approach is outlined below.
Analysis
Provide these information on request:
ƒ The total US population is approximately 300 million.
ƒ Based on a normal distribution with the average life span of 80 years, approximately 1/2 of the
population falls between 25-55, or about 150 million people.
ƒ Approximately 1/2 of them are male, or 75 million.
ƒ Of the 75 million 25- to 55-year-old men in the country, assume that at least 1/2 would read a
magazine or ~40 million.
ƒ Given the wide range of magazines on the market assume that only 10% of magazine readers
would want to read a men's journal, or 4 million target customers.
ƒ As a new magazine assume that you can generate a 5% share of the men's magazine market in
year one, or 200,000 customers.
ƒ Based on other magazines selling for $2.50-$5.00, assume a cover price of $4/magazine at the
newsstand and $2/magazine for a subscription.
ƒ Now make some assumptions on how many customers will buy at the newsstand versus
subscription: assume 50% subscribe (100,000 customers) and 50% buy at the newsstand
(100,000 customers).
Market Size Estimation Unknown round DMCC
26
27
Analysis
Monthly revenues amount to $200,000 (subscription) + $400,000 (newsstand) = $600,000.

For simplicity assume that all target customers buy a magazine every month.

This would generate total annual revenues of $600,000 X 12 or $7.2 million.

Conclusion: In this case, given the CEO's stated goal of $12 million in circulation revenues, it does
not make good business sense to launch the magazine.
Performance
Evaluation
Expected:
The candidate recognizes that this is a market estimation case and makes the appropriate
assumptions and proceeds in a logical and structured way.

Good:
The candidate has a good plan to tackle the problem. The candidate explains his/her plans at the
start and provides reasoning behind the approach. The candidate's assumptions are realistic and
the candidate reaches some conclusion.

Excellent:
Apart from the criteria above, the candidate also reaches a very sound conclusion based on the data
unearthed. The candidate's assumptions and estimations are very realistic and the candidate is
quick in identifying all the elements of the problem. The candidate proceeds with the assumptions in
the right direction and estimates the market size without any prompts from the interviewer.
Market Size Estimation Unknown round DMCC
Case 2: Polly Publishing
Market Estimation
Case 3: Japanese Golf Ball Market
Prompt
You are going to visit a client who sells golf balls in Japan. Having had no time for background
research, you sit on the plane wondering about the size of the market for golf balls in Japan, and
what drives demand. Your plane lands in fifteen minutes. How do you answer these questions?
Guidance
There is no one right answer. The purpose of this exercise is to measure the candidate's ability to
think logically.

If the candidate struggle, encourage her outline a general framework for how she is going to solve
the problem, and then come up with reasonable assumptions about the inputs that she needs. A
good rule of thumb is to encourage the candidate to use round numbers.
Analysis
If asked, the population of Japan is 125 million.

There is no one right answer. The analysis below is an example. The candidate should make
reasonable assumptions (ask for logic behind assumption) to arrive at the answer.
Proportion that play golf: 1/5.
Purchase Frequency: the average golfer plays 20 times per year and uses four balls per time.
125 * 1/5 * 20 * 4 = 2,000 million. The estimated market size for golf balls in Japan is 2 billion.
Performance
Evaluation
Expected:
The candidate will use a logical linear thought process to arrive at a market size and recognized the
golf ball sales are driven by end user demand. The candidate will demonstrate confidence in his
logical thought process.
Good:
The candidate is able to point out specific weaknesses in his approach and how those would affect
his answer.
Excellent:
The candidate will show poise and confidence and quick business intuition . He will also recognize
other potential drivers of demand such as golf course needs, business advertising, etc.
DMCC Unknown Round
28
Market Estimation DMCC Round 1
Case 4: Disposable Diapers
Prompt
You have been retained jointly by Pampers and a federal commission on waste management. They
would like you to estimate the volume percentage of disposable diapers in the total US household
garbage.
!
Guidance
This is a market sizing case. The case is based off estimations and the candidate's ability to work
with those estimations. While there are no right/wrong answers in market estimation cases, the
interviewer usually has a range of 'correctness', if you will. The answer should fall within
interviewer's estimate to the extent that assumptions made are realistic.
The interviewer is looking for a logical approach and structure to the candidate's problem-solving
skills. Ask the candidate to walk you through his thought process ÷ top-down, bottom-up. Once his
/her structure is in place, ask him/her to compute the calculation. Various methods may be used to
estimate the answer; one approach is outlined below.
Analysis
The following is all generated by the interviewee, not from the interviewer:
Volume percentage = Diapers (volume) / US household garbage (volume)

Numerator
ƒ Population of the United States: 300 million
ƒ Proportion of population that are disposable diaper-wearing children: 10% = 30 million
ƒ Number of diapers used per day: 4 = 120 million diapers per day.
ƒ Volume per diaper: 500 mL (or use another number in gallons/oz if you prefer)
ƒ Volume thrown away per day = 500mL * 120 million = 60,000 million mL = 60 million liters
Denominator
ƒ Population of the United States: 300 million
ƒ Average volume of household garbage can: 10 liters (or use gallons if preferred)
ƒ Average number of emptied bags per day: 1 = 10 liters per day
ƒ Total volume of garbage/day: 300M * 10L = 3,000 million liters
Ratio
ƒ 60 million liters of diapers/ 3,000 million liters of garbage = 2%
29
Performance
Evaluation
Expected:
Candidate will develop a structured approach to finding a solution. Assumptions will be clarified and
based on reasonable logic.

Good:
Candidate will use numbers or round appropriately to simplify calculations.

Excellent:
In addition to the above, the candidate will evaluate his/her final number and provide explanation as
to how changes to assumptions would affect the estimation.

Market Estimation DMCC Round 1
Case 4: Disposable Diapers
30
Market Estimation DMCC Unknown Round
Case 5: Chewing Gum
Prompt
How would you estimate the size of the annual U.S chewing gum market?

Guidance
This is a market sizing case. The case is based off estimations and the candidate's ability to work
with those estimations. While there are no right/wrong answers in market estimation cases, the
interviewer usually has a range of 'correctness', if you will. The answer should fall within
interviewer's estimate to the extent that assumptions made are realistic.
The interviewer is looking for a logical approach and structure to the candidate's problem-solving
skills. Ask the candidate to walk you through his thought process ÷ top-down, bottom-up. Once his
/her structure is in place, ask him/her to compute the calculation. Various methods may be used to
estimate the answer; one approach is outlined below.
Analysis
The following is all generated by the interviewee, not from the interviewer:

ƒ Population of the US: 300 million
ƒ The heaviest users are between the ages of 10-20. They comprise roughly 20% of the population,
or 60 million.
ƒ Estimate that these people chew two packs per week. Estimate number of packs/year: 2
packs/week * 60 million people * 50 weeks = 6,000 million packs.
ƒ For all other users, (80% of 300 million population, or 240 million) estimate a usage rate of one
half pack per week: 0.5 packs/week * 240 million people * 50 weeks = 6,000 million packs.
ƒ Adding these two figures, estimate the total chewing gum market to be 6,000 + 6,000 = 12,000
million (or 12 billion) packs per year.
ƒ Now check for reasonableness. We have the volume, what about the revenue? How much is
12,000 million packs in terms of dollar sales? Estimate for average price of pack: $0.75. 12 billion
packs * .75 = $9 billion
31
Performance
Evaluation
Expected:
Candidate will develop a structured approach to finding a solution. Assumptions will be clarified and
based on reasonable logic.

Good:
Candidate will use numbers or round appropriately to simplify calculations.

Excellent:
In addition to the above, the candidate will evaluate his/her final number and provide explanation as
to how changes to assumptions would affect the estimation.

Case 5: Chewing Gum
Market Estimation DMCC Unknown Round
32
VALUATION
33
Valuation DMCC Round 1
Case 6: Scotch Bar
Prompt
You are sitting in one of Chicago's oldest scotch bars with a fellow intern. It is a Friday night after a
busy week at your summer internship. The weather is mild²a perfect summer evening. While
enjoying one of the bar's finest stogies and sipping an 18-year old McCallen single malt, your friend
asks you how much you think the bar is worth. Using a back-of-the-envelope calculation, how would
you go about determining the value of this bar?
!
Guidance
This is an estimation case. Because the candidate does not know much about the bar he/she
should ask for details. To estimate cash flow, a "Revenue ÷ Cost" framework is useful. The value of
the bar is the present value of future cash flows.

The following information should be given if requested:
ƒ Product Mix and Pricing: The bar sells two things, liquor and cigars. The average cost of a cigar
is $9 and the average cost of a drink is $12. (Note: these average cost numbers will prove
irrelevant, but in cases one is sometimes given irrelevant info.)
ƒ Capacity: The maximum capacity is 100 people.
ƒ Location: The bar is located on one of Chicago's busier streets for foot traffic.
ƒ Hours: The bar is open Tuesday thru Sunday from 5 pm until 2 am.
ƒ Staff: A bartender, a waiter, and a waitress. All three were there the entire evening.
ƒ Tax Rate: 40%
ƒ Discount Rate: 13%
ƒ Annual Growth Rate of Cash Flows: 3%

The candidate will most likely not ask for all of this information upfront. Allow the candidate to make
some assumptions about revenues. One way to project revenues is to estimate the number of
customers per day or per week and multiply that by the average expenditure of each customer.
Watch for realistic assumptions and logical thought progression.

!
34
35
Prompt ±
part II
Ask the candidate what might drive variation in these numbers. The answer is days of the week
(Fridays and Saturdays are typically busier than other days) and seasonality (people tend to be out
more during summer than winter).
Guidance
While the candidate talks you through his/her approach, but before the candidate does a substantial
amount of calculation, hand the candidate Exhibit 1. If the candidate does the math correctly, the
revenue should add up to $568,000.











The candidate should then proceed to costs. There are two components: fixed costs and variable
costs. Have the candidate brainstorm possible fixed costs and variable costs. Under fixed costs the
candidate might consider rent, general maintenance, management, insurance, liquor license, and
possibly employees. The only real variable cost is the cost of goods sold. Allow the candidate to
brainstorm costs before revealing the following data:

Variable costs are 20% of total revenues, and fixed costs are $120,000.
!
Case 6: Scotch Bar
DMCC Round 1 Valuation
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36
Guidance
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After the candidate has subtracted costs from revenues, he/she should have an income of $334,400.
Do not forget that we need the after-tax cash flow number (approximately $334,000 * (1-40%)) =
$200,400 (or $200,000 for ease of calculation in next prompt). You now have the annual cash flows
generated by the bar.

At this point a great candidate will drive the process forward and recognize that they need to figure out
a stream of cash flows going forward. The interviewer may have to nudge less-savvy candidates
toward the next step (discounted cash flow analysis).
Prompt
How does one perform a valuation of the business?
Analysis
To perform a valuation in this case, the candidate must estimate the cash flows from the business and
discount them back using a perpetuity formula. The discount rate typically used for bars of this genre
is 13%. When the candidate inquires about growth rates, say the bar's cash flow is growing at 3%--
the rate of inflation. Thus, whatever numerator the candidate arrives at should be divided by .13 - .03
= .10, an easy calculation. Use the CF / (r ÷ g) formula for a perpetuity.

In this case, the answer is around $200,000 / .10, or $2 million.

Performance
Evaluation
Expected:
- Accurate arithmetic

Good:
- Drive the process forward, accurate arithmetic.

Excellent:
- A great candidate will drive the process forward and recognize that they need to figure out a stream
of cash flows going forward. Accurate valuation given assumptions.
Case 6: Scotch Bar
DMCC Round 1 Valuation
37
Exhibit 1: Daily Average Sales
Fridays and Saturdays Rest of Week
Spring and Summer $4,800
16 2/3% of Fri and Sat,
(Spring and Summer)
Fall and Winter
3/4 of Spring and Summer,
(Fridays and Saturdays)
85% of Spring and Summer
(Rest of week)
Case 6: Scotch Bar
Exhibit 1: Daily sales
Unknown Round
Case 7: Chemical Brothers Int.
Prompt
Your client Chemical Brothers International (CHEMBRO), is a major chemical producer, has
retained your firm's services to evaluate the feasibility of acquiring another major player in the
industry, Plastics of America (POA). Both companies are bulk commodity chemical producers.
Your task is to analyze the future prospects of POA's major product line, a chemical used in the
production of plastics. Should Chembro acquire POA?
Guidance
There are two issues in this case that should be addressed separately in the suggested order:
1. What issues need to be addressed in evaluating an M&A proposal? Qualitative
2. What is the valuation? Quantitative
Prompt ±
Part II
What strategic issues need to be addressed in evaluating an M&A proposal?
Guidance
The idea here is to get a sense of the candidates' business judgment and whether or not he/she is
able to apply correct frameworks to diagnose the issue at hand.

A strong candidate will recognize that this case deals with internal factors (synergies and economies
of scale) as well as some external factors (opportunity costs and industry attractiveness). The
candidate should include some of the following elements in his framework:

ƒ Market Attractiveness / Industry Potential
ƒ Operational Analysis (Synergies/Economies of Scale/ Network Externalities)
ƒ Organizational and cultural compatibility
ƒ Capability to enact acquisition: Financial, legal, and perceptual barriers
Valuation DMCC
38
39
Analysis

The candidates framework should cover the following buckets. Allow the candidate to ask for
information about the major categories before giving the information. If the candidate is missing one
of the buckets, prompt them with a question to get them on track.

Market Analysis
ƒ End-users come primarily from the automotive industry
ƒ Market size has been slowly declining over the last five years
ƒ Within the last couple of years, prices have declined rapidly
Competition / Industry Analysis
ƒ There are 10 major producers; the largest one with a 35% share; number two has 25%, and POA
is third with 20%; the remaining share is divided amongst others
ƒ The two largest competitors earn a small return; POA is slightly above break-even; the rest are
operating at break-even or at a loss
ƒ Relative capacity utilization in the industry is 60 to 70 % and has been so for the last 3 years.
POA is also currently working at 75% of capacity
ƒ The two largest competitors are highly diversified with this particular product line representing no
more than 20% of their revenues
ƒ Highly regulated industry with expensive pollution control equipment
ƒ High barriers to entry because of the low profits and high investments required
Product value proposition / brand portfolio
ƒ The price has been driven by self-destructive cuts from the leaders to gain temporary share
points
ƒ We do not foresee the development of any significant byproducts.
ƒ Other possible uses: None.
ƒ Complementary Assets: 50% of POA's sales are to the automobile industry
Unknown Round Valuation DMCC
Case 7: Chemical Brothers Int.
40
Analysis
Finance and Operations
ƒ Cost is based on size/efficiency/age of plant, etc. Within the industry, POA is in an above average
position.
ƒ There are several operational improvements that could be implemented, and management has
not been aggressive in its pursuit of quality and cost controls.
ƒ Great economies of scale exist in marketing and transportation. (Not quantifiable)
ƒ Operational synergies could represent an additional $30 million in profits
Prompt ±
Part III
After discussing the above-mentioned qualitative aspects in some detail, provide the candidate with
Exhibit 1 when the conversation shifts to the topic of valuation.

Ask candidate to compute the present value of acquisition.
Guidance
You may allow the candidate to use 10% rate of return and not 9% (12% Return on Capital ± 3%
Growth Rate) if requested. However ask him the effect on NPV of a higher vs. lower discount rate,
to gauge his understanding of the concept. Answer: Higher discount rate means lower valuation.!
Analysis
NPV analysis: Based on the information from Exhibit A, the net present value of the target company
is = $90M / (10%) = $900 million (assume perpetuity), which is less than the
purchase price tag of $950 million.

Industry Attractiveness: not particularly attractive, unless the larger competitor can use economies of
scale and dominant position for economic gain.!
Unknown Round Valuation DMCC
Case 7: Chemical Brothers Int.
41
Performance
Evaluation
Expected: Candidate identifies that the purchase price is higher than the NPV. Recommendation
wrap-up should clearly include a "go / no go¨ decision followed by quantitative (valuation) and
qualitative (industry and compatibility analysis) facts..

Good: A strong candidate will recognize that this case deals with internal factors (synergies and
economies of scale) as well as some external factors (opportunity costs and industry attractiveness).

Excellent: An excellent candidate will include some of the following additional insights.

A more comprehensive NPV would include the new cash flow from synergies, as well as
the previously calculated NPV. Therefore the $900 million + [Synergies 30M/(12%-3%) =
333M] = $1,233M value of target > 950 price tag.

In addition to the cash flows expected from synergies, the potential economies of scale and tax
advantages from funding the acquisition with debt could be seen as other sources of revenue.

These considerations further improve the deal.
ƒ Competitive and regulatory responses to block the merger are reasonable to assume due to
concerns over industry concentration.
ƒ Benchmarking the value of the POA acquisition to other similar M&A in the industry.
ƒ Consider what multiple of operating profits other acquisitions been valued at?
Unknown Round Valuation DMCC
Case 7: Chemical Brothers Int.
42
Purchase Price
$950 M
!
Annual operating income before tax
$90 M
!
Cash
"#$!%!
No. of employees
&$$$!
Return of capital
'&(!
Market risk premium
)(!
Growth rate
#(!
Tax rate
*$(!
Exhibit 1
Case 7: Chemical Brothers Int.
Valuation Katzenbach Round 2
Case 8: Internet Portal Valuation
Prompt
You have been hired by the internal strategy group at Yahoo. You are asked to analyze the recent
acquisition of YouTube, an online video community, by Google for $1.6 billion. Is this move a
competitive threat for Yahoo?

Guidance
This is a valuation case and involves assessing the potential threat of competition's merger to the
business. The case is primarily qualitative in nature and tests the candidate's conceptual
understanding of M&A activity and overall business knowledge/judgment. The case offers the
candidate several opportunities to be creative in problem-solving. A quality candidate will imbue the
discussion with structure, creative solutions, and demonstrate knowledge of current business
landscape.

Core Competencies and Overall Situation Analysis - The candidate should think about the
acquisition against the backdrop of the core competencies that each firm brings to the table. There
are no absolute right/wrong answers; one approach is outlined below.
Analysis
Yahoo has positioned itself as a destination site. It wants consumers to go to Yahoo! and explore all
of its wonderful services, spending time and money there. Time means that advertisers' ads are
more likely to be clicked. Money means that Yahoo! is making ecommerce transactions, or selling
subscriptions to premium online services. It tries to promote a sense of community among its users.

Google has spent its early years as a search engine. To 'google' has become synonymous with
search. To take advantage of this brand-name recognition, Google pioneered advances in adbased
software that allowed businesses to better target consumers segments based on the particulars of
the search. Google has the "eyeballs¨ of the consumers, but it doesn't have the consumers' wallet. Ìt
wants to monetize all this traffic.

The acquisition of YouTube by Google is a competitive threat. You Tube is a move toward creating a
community. The company spent $1.6 billion because it believes it will be able to monetize this traffic
somehow.
43
44
Prompt ±
part II

Competitive Response ± Inform the candidate that Yahoo wishes to counter this threat and
assume that feasibility and cost are not a concern at this point. Ask the candidate to develop a
competitive response and give candidate creative license. There are no absolute right/wrong
answers; some ideas are outlined below.

Guidance

The candidate should ask for a moment to collect his/her thoughts, and ideate creative solutions
Analysis

Suggested Answers:
ƒ Create an offering to counter YouTube for the Yahoo community
ƒ Buy Google
ƒ Find a way to share real-time videos among friends from mobile devices or wristwatches. This
would involve a cross-selling strategy with a partner
ƒ Create backdrops (or allow open source coders to create them) from historical events or sporting
arenas or famous movies, and enable people to be able to re-enact scenes or create new ones
(An example of this might be a rock stadium backdrop and you and your friends can jam on
instruments and make a rock video)

Case 8: Internet Portal Valuation
Valuation Katzenbach Round 2
45
Prompt ±
part III
Provide candidate the hypothetical situation in which Google decides to proceed with the YouTube
acquisition and believes that it can charge $150 per user annually and make 67% margins. Ask the
candidate to determine if Google can break-even with its current user base?

Guidance

Information to be given if asked:
‡ User base: 40 million
‡ Discount rates should be ignored
‡ Assume no user base growth or attrition.

Analysis
Acquisition Cost = $1.6bn
Therefore, Margin/user needed to recover acquisition cost = $40
Actual Margin/user = $100 per year
Therefore, Google will break-even.

Performance
Evaluation
Expected: . At a minimum, the candidate will offer structured and well developed answers
throughout in addition to demonstrating a good understanding of the current business landscape.
Good: A good candidate will differentiate themselves by offering creative solutions in addition to a
baseline set of core case competencies, structured answers, and showing an understanding of the
current landscape.
Excellent: The excellent candidate will offer insightful, structured answers throughout and show
comfort in both driving the case and being prompted. The candidate will offer creative solutions as
well as a deep understanding of the M&A market and the implications for all parties in the deal.

Case 8: Internet Portal Valuation
Valuation Katzenbach Round 2
Valuation Bain Round 2
Case 9: Cinemas
Prompt
Our client is a global cinema chain with $20B in revenues. Growth options in the current business
are limited. The CEO has been given the opportunity to acquire a private Australian cinema chain,
which has exhibited poor growth in recent years. The CEO has asked Bain to determine whether
this could be an attractive opportunity. The other Bain work streams have calculated that the
business will need to generate $2.0B per year in revenues for the next 5 years for the deal to
generate a profit. The opportunity to bid for the cinema chain closes in 2 hours and you need to
recommend to the client whether they should proceed with the acquisition or not.

Guidance
Key questions the candidate should ask: What is the annual revenue for the cinema chain? What
revenue improvement opportunities or risks exist?

Make the candidate build up to an annual revenue. Ask them to brainstorm revenue streams before
giving them details:











Revenue per cinema per day ($8K)± The candidate should calculate this number
Ticket sales ($6K) Candy bar ($800) Advertising ($700)
Number of tickets
(400)
Price per ticket:
$15
# of sessions per
day: 4
Tickets / session
(90=~100)
Average cinema size
(180)
Occupancy rate:
50%
Rows: 12 Seats in row: 15
% of people
buying from CB:
20%
Avg spend:
$10
% of other
revenue:
10%
46
Valuation Bain Round 2
Case 9: Cinemas
Guidance












Analysis
Candidate should now push on to test the market dynamics and future revenues.

Revenue per cinema
(~$2.8M)
Revenue per
day: $8K
Cinema chain revenue
($1.4B)± Candidate should calculate this number
Number of cinemas
(480 = ~500)
# of cinema
complexes: 48
Average
cinemas /
complex: 10
Days in year
(365 = ~350)
ƒ Looking at revenue drivers
ƒ Possible drivers that could change are:
ƒ Occupancy
ƒ Sessions per day

ƒ % patrons who buy at Concession Booth (CB)
ƒ Average spend at CB
ƒ Other new revenue sources

ƒ Price per ticket
ƒ Market share
Future popularity of movie-going
Ability to extract additional discretionary spend
Competition, from both competitors as well as substitutes
47
Valuation Bain Round 2
Case 9: Cinemas
Analysis
ƒ Candidate should comment that it would be difficult for the CEO to change external factors
ƒ E.g. size of the market would be quite stable, or declining
ƒ E.g. market share is difficult, but not impossible to change

ƒ Candidate should comment that internal factors are easier to influence
ƒ E.g. increase revenue from 'up-selling' candy bar snacks
ƒ E.g. offering more expensive tickets (premium seating)
ƒ E.g. increasing the prices of advertising

ƒ Candidate should then suggest rough magnitude of changes
ƒ E.g. if you could get 20% of customers to buy from the candy bar, it would be worth $800 per
cinema, or an extra 10%

Performance
Evaluation
Expected: Candidate is able to recognize 90% of the inputs that would make up annual revenue.
He/She is able to drive to the revenue answer without being prompted to move from one number to
the next.

Good: Candidate does the above while also recognizing the levers that could either increase or
decrease the annual revenue recognizing which levers would be easier to influence and which would
be more difficult.

Excellent: Candidate starts to assess the magnitude of change, i.e. if we could increase the % of
customers that buy from the candy bar it would be worth $800 per cinema. This is showing a true
understanding of the case and the client's goals.
48
PROFITABILITY
49
Profitability
Case 10: Slick Hick Farm Equipment
Prompt
Your client is Slick Hick, a large agricultural equipment manufacturer. Its primary product line,
farming tractors, is losing money.

What questions would you ask of your client to help them solve their profitability problem?
Guidance
The candidate should outline a general profitability framework (P*Q ± (FC + VC*Q)) and identify
competitors as a necessary piece of understanding.

Competitors - Two direct competitors.

Market share
Current: Client has 40% of the market, competitor #1 has 30% competitor #2 has 15%, with the
remaining 15% belonging to many small manufacturers.
Trends: Five years ago, your client had 60% of the market, competitor #1 had 15%, and competitor
#2 had 10%. Your client has lost significant market share to its two main competitors over the last
few years.

Customers - All three competitors sell to the same customers.

Price
Client's product is priced higher than others. This has always been the case.
Differences that allow for a premium price: Client has a strong reputation/image of quality in the
market and the market has always been willing to pay a premium for that reputation because it
implied a longer lasting more reliable product. This is critical for some farmers because they cannot
afford to have a piece of equipment break down.

Features
The products all have the same basic features. However, tractors are not commodity items and a
few differences do exist.
Unknown Round DMCC
50
51
Analysis
(PQ ÷ (FC + VC*Q))

Revenue insight: Quantity decrease driven by market share loss has driven revenues down

Costs insight: VC increases are driving unprofitability. The specific VC driving this is finished part
prices. The client assumed customers would pay more for better products, but they are not.
Guidance

Candidate should explore reasoning for profitability decline by asking the following questions:
Change in sales revenues: Revenues are down.
Change in sales quantities: Quantity is down.
Change in price: Prices are up.

Change in costs: Costs are up
Change in fixed costs: Unchanged.
Change in variable costs: Variable costs have increased tremendously. The client does not know
why material prices have gone up so staggeringly.

Candidate should deep dive on variable cost breakdown by identifying potential buckets
Type of operation (manufacturing or assembly-only): Primarily assembly.
Change in finished part prices: Finished part prices have gone up.
Change in raw material prices for suppliers: Not to client's knowledge.
Change in supplier labor costs: No change. Also, no change in suppliers.

Candidate should then probe on why finished part prices have gone up.
Reason for suppliers charging higher prices for the same products: They're not--the prices have
increased as a result of product improvement efforts. Client has tightened tolerances and improved
the durability of component parts.
Reason for product improvements: Client strives to sell the world's best tractors.
Customer willingness to pay for product improvements: Client assumed yes.
Profitability
Case 10: Slick Hick Farm Equipment
Unknown Round DMCC
51
52
Analysis
Prices have been raised to cover the costs of improvements, but customers do not place a high
value on the improvements, so the price increase has resulted in a drop in sales. The client needs to
incorporate a cost/benefit analysis procedure into its product improvement process. The client
should also evaluate their marketing plans to ensure their customers are aware of product
improvements and understand their value. Before scaling back their product improvement process,
the client needs to evaluate competitor's R&D and product improvement positions.
Performance
Evaluation
Expected:
- Profitability framework
- Market share probing

Good:
- Identify need to understand profitability decline in terms of changes in revenue and cost levers
- Key in on variable cost increases and identify key buckets that go into building a tractor

Excellent:
- Asking probing questions on why part prices have increased and if these increases have been
passed to the customer
- Making recommendations for cost repositioning and assessing market risks
Profitability
Case 10: Slick Hick Farm Equipment
Unknown Round DMCC
52
Profitability Round 1
Case 11: Nabisco's Market Share
Prompt
The salted food division at Nabisco has been steadily losing market share over the past two years,
from a high of 20% to the current level of 18%. Profits as a percentage of sales, however, have been
growing. What could be causing this?!
Guidance
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DMCC
53
54
Analysis
Sample framework:

External Factors: A decrease in market share may suggest
Competitor dynamics:
Existing players have increased market share
New players have entered the market
Market dynamics:
Market is growing
Client is unable to capture the growth. Why?
Internal Factors
Market share loss may suggest that the company is not spending enough on promotions
Growing profits may suggest that the company is reducing cost

Potential Conclusion
The data show a large decrease in sales force and marketing expenditure. Most of the marketing
reduction was in trade promotions. Product is sold through grocery chains and convenience stores,
which are traditionally driven by periodic trade promotions. The reduction in trade promotions
brought about a loss of shelf space, which led to a decrease in market share. Also, the product line
did not change in a product category where new products and line extensions are routine. The
market has been growing, indicating a missed opportunity for new products in the market. Lastly,
profitability increased due to lower costs, but it may not be sustainable.

Performance
Evaluation
Expected: The candidate will put together a framework and walk the interviewer through his thought
process before asking relevant questions.

Good: The candidate will recognize this as a case dealing with company revenue-cost structure
(internal), as well as some external factors.

Excellent: The candidate will synthesize the information provided and present a clear and concise
summary to CEO John Keebler on how and why the sales channel/sales force/promotions have
impacted Nabisco's market share.
Case 11: Nabisco's Market Share
Profitability Round 1 DMCC
55
Exhibit 1
Growth in Total Sales, Nabisco


Exhibit 2

Growth in Total Market













Case 11: Nabisco's Market Share
Profitability Round 1 DMCC
55
56
Exhibit 3
Company Cost Structure


Case 11: Nabisco's Market Share
Profitability Round 1
Cost Current Two Years Ago
Raw Ingredients 28% 26%
Conversion costs 24% 24%
Distribution 8% 9%
Marketing 16% 18%
Sales force 7% 9%
Pre-tax profit 17% 14%


56
DMCC
Profitability Accenture Round 1
Case 12: Sgt. Slaughter
Prompt
Sergeant Slaughter's Construction Company is a leading provider of construction and infrastructure
materials. Ìt has two divisions: Oil & Gas and Government. The government division's main
customer is the US Military. Your client is offering construction services to help the US military to
build bases. Construction includes dining facilities, dorms, and infrastructure projects for troops
around the world. Each division has its own procurement department. The procurement for the
government division spends $6 billion on the items they purchase. They resell those items for a
profit to the Government. The Vice President of procurement for the government division called
your consulting firm to advise them on how to spend less money on the purchased items and
operate more efficiently.
Guidance
The candidate should take some time (~1 min) to draw a framework and walk through the
framework for the interviewer. Sgt. Slaughter's Construction Company needs to make its
procurement more efficient and determine how to reduce procurement costs. Address the problem
as an operations/value chain problem and try to identify the links and levers that could influence the
efficiency. The candidate should generate themes within the company to potentially explore. Here
are four killer ideas.

1. The contractual relationship with the suppliers and the government.
2. The efficiency of the workers
3. The synergies within the company ÷ the collaboration with the Oil & Gas division
4. The efficiency of the information flow - technology

57
Case 12: Sgt. Slaughter
Prompt ±
Part II
First we need to understand the nature of the business relationship between the suppliers and the
Government. What information do we need to accomplish this?
Guidance
Possible questions and analysis:
ƒ What kind of contracts do they have, long-term or short-term?
ƒ What are the advantages/disadvantages of being in long-term contracts or short-term?
ƒ How constant is the demand? Does the government always spend $6 billion on this contract or is
it expected to grow or decline?
ƒ How many suppliers? Is there volatility in the demand or supply?
ƒ What is Sergeant's competitive advantage? Is there competition for the contract?

Give the candidate the relevant information below.

Contracts between suppliers and the Government division are short-term in nature.
The company has only one supplier. The supplier offers the best cost/quality ratio and Sgt.
Slaughter would like to keep it, if possible. The client is not the only customer for the supplier but is
one of the largest. The company is the main supplier for the Government. They are the best at what
they do. They do not need to worry about the competition as long as they maintain the present
prices and quality.

Note: The interviewee should ask about the volatility of demand and infer that a long-term contract
with the supplier will be less beneficial if Government spending on military bases is volatile (for
example, if the Iraq war ends tomorrow, demand will drop). Also, a single supplier could be grounds
for diversification to improve negotiating power.
Profitability Accenture Round 1
58
Case 12: Sgt. Slaughter
Analysis
See what ideas the candidate can generate. Remember that Sergeant Slaughter cannot negotiate a
better price from Uncle Sam. The proposed solutions should not dwell on competitive issues.

Possible proposals:
· Try to identify multiple suppliers or negotiate a better deal with the current one using this
possibility as bargaining power.
· Create long-term contracts that should offer better pricing, but negotiate a "call clause¨ if the
Government drops the demand.
· Try to identify synergies with the Oil & Gas division
Profitability Accenture Round 1
59
Case 12: Sgt. Slaughter
Prompt ±
Part III
What organizational questions should we ask about the people?
Guidance
Possible questions and analysis:
‡ Are the people that deal with the suppliers experienced enough?
‡ Are there incentives in place? What can be changed?
‡ Is their staffing model efficient? Do they work enough? Are they efficient? What is their level of
productivity?
‡ Can/should we lay off workers?
‡ Do they have enough training?

Here is some information to relay to the candidate. Consider it to be like a data dump²see how
well the candidate can drink from the fire hose.

The staff is not necessarily the most experienced in the field. They are not very good at negotiating
with the supplier, due primarily to lack of experience. The VP of Procurement is actually a newly
hired, former lawyer. The workers do not focus on negotiating with the supplier, as they spend most
of the work on troubleshooting the contracts and enforcing them (have the items delivered on time,
ordering the supplies ahead of time, forecasting demand etc). The productivity of the workers is an
issue. They have a target of 88% productivity time for the workers (88% of the time they are paid,
they should work productively for the company) but the workers are productive only 80% of their
time billed. There are no training and learning processes in place for the workforce. Also, the bonus
structure is fixed. They receive a 10% undifferentiated bonus at the end of the year if the company
makes a profit.
Profitability Accenture Round 1
60
Case 12: Sgt. Slaughter
Analysis
See what ideas the candidate can generate.

Possible proposals:
1. Try to hire more experienced workers
2. Offer training
3. Add incentives - bonuses connected to the money they save from the supplier
4. Reduce the workforce; put a productivity check in place to raise it to the 88% mark.
5. Have the Procurement manager get an MBA!
Prompt ±
Part IV
Let's address bargaining power and find synergies with the Oil & Gas division. What can we ask
Sergeant Slaughter?
Guidance
Possible questions and analysis:
· Do they have the same supplier?
· How much is the Oil & Gas ordering comparing with the $6 billion for Government?
· Are the divisions interacting?
· Do they collaborate to have a stronger bargaining power?
· Do they share information and data about their supplier's contracts and demand forecast?
· Can they combine the procurement departments for the two divisions and have one larger for the
entire company?

Here is some background information for the candidate:

The Government division does not communicate efficiently with the Oil & Gas division. They use the
same supplier but they have issues integrating data therefore one of the recommendations should
address technology and information sharing issues. They do not have a common database with
prices across the globe and former experiences. The Oil & Gas division accounts for $2 billion in
orders from suppliers.
Profitability Accenture Round 1
61
Accenture Round 1
Case 12: Sgt. Slaughter
Analysis
Possible proposals:
1. Coordinate better with the Oil & Gas division and try to integrate orders to obtain stronger
bargaining power over the supplier
2. Try to institute a common system to communicate future orders/demand and try to negotiate
them together
3. Build a database accessible to both divisions with prices negotiated with multiple suppliers in
time to have a common negotiating basis
4. Organize meetings with the procurement teams of both divisions to share best practices and
negotiating tips
5. Unite the two procurement departments into one larger, company-wide solution

Prompt ±
Part V
The VP calls you for an update. Please inform him of your findings.
Guidance
The student should wrap up the case in 3-4 sentences (30-60 sec) such as:
1. State a position
2. Give evidence based on case
3. Other considerations and/or creative aspects

To reduce cost, the VP could combine the two divisions from a technology, procurement, and
workforce perspective. Additionally, the productivity of the workers needs to be increased through
training and new hires. Last, the company should try to negotiate long-term contracts with the
government and aim to obtain lower prices from suppliers.
Profitability
62
63
Performance
Evaluation
Expected:
ƒ Interviewee takes subtle cues from interviewer to move on to next topic
ƒ Ability to generate at least several solutions

Good:
ƒ Creativity in generating solutions (and many of them)
ƒ Listing solutions in a final "Recommendations¨ slide used to conclude case

Excellent:
ƒ Carries the discussion well. This is not a case where the interviewee leads. Instead, the
interviewee should make sure the case is conversational - just the right amount of back and forth
and no awkward pauses.

Case 12: Sgt. Slaughter
Profitability Accenture Round 1
Profitability Accenture Round 2
Case 13: Bank Commissions
Prompt
Your client is a regional commercial bank and your task is to make a recommendation to improve
the profitability of the retail segment of their business operations. Specifically you are required to
evaluate the merits of a proposal made by the CFO - a commission-based incentive program
targeted at the bank's tellers with the objective of increasing product sales. How much commission
should the bank pay its tellers per unit of product sold?
Guidance
This information should only be given if asked (or if the candidate is struggling).

Product Mix: The bank has four products it wants to sell in this program - CDs, Checking accounts,
Mutual funds, and IRAs.
[The Interviewee should ask for more information about the products, without which we cannot
ascertain the profitability of each product in the mix.]

Revenue Streams: If the interviewee asks for the bank's sources of revenue for the products, first
ask the interviewee to list what he/she thinks are the specific sources of revenue for the bank's four
products. The answers are not important to the case. However, it will 1) illustrate the interviewee's
creativity and 2) check the candidate's poise.
Possible answers : Interest generated, commission earned, perhaps an overnight float option,
synergies or
economies of scale from cross selling.

Profit Margins: The interviewee should ask for the profit margin on each of these products in order
to estimate a commission structure. Information to be given if asked:
The profitability is as follows:
ƒ CD's: 2% with an average $4,000 initial deposit
ƒ Checking: 4% with an average $2,000 initial deposit
ƒ Mutual Funds: 1% with an average $8,000 initial deposit
ƒ IRA's: 2% with an average $4,000 initial deposit.
64
Profitability Accenture Round 2
Case 13: Bank Commissions
Guidance
Incentive Program Options ± The Interviewee should arrive at a profit margin of $80
per product and constrain his incentive program within this range. Explore at least four different
incentive options.
Answer: A fixed fee per product, a percentage of the profits, a fixed fee for a certain number of
products sold that would decline after a threshold, or a variable commission depending based on
products and spreads.


Analysis
Criteria for selection of incentive program - Ask the Interviewee what information he would need
to determine the best incentive program for the bank .
Answer:

Profitability - The ease of sale, whether all tellers are equally effective sellers, profit per teller or
per customer, estimated commission as a percentage of current salary, cost of incentive program

Human Capital ± The program that best motivates employees to sell products and increases
retention rate.

Tell the interviewee that his/her choices can be narrowed down to one. In this case, the assumption
is that all the tellers are equally effective and that all the products can be sold with roughly the
same effort. So what would you base the commission on then? Why?
Answer: Fixed fee option as it is a straightforward incentive and has a large upside for employees.
Also administration costs are relatively less.
[Note: It is possible that the interviewee comes up with an even better answer than this. If that is the
case, acknowledge the answer and tell them the client would like to proceed with the fixed fee
option]
65
66
Analysis
Cost of incentive program - Steer the Interviewee toward discussing the cost structure of the fixed
fee incentive program. The Interviewee should ask about the present salaries of the tellers and the
expected sales/teller.
Information to be given if asked:
ƒ Average Salary per year per teller: $25,000
ƒ Expected sales/teller: five products per week.
Thus: Annual sales/teller = 250 products (5 products per week * 50 weeks per year)
ƒ Commission Fee = $10
ƒ New profit margin = ($80-$10) = $70

Ask the interviewee to wrap up. "Ì have a meeting with the CFO in 5 minutes. Tell me your final
recommendation.¨
Performance
Evaluation
Expected:
ƒ You understood the interviewee's framework / plan to solve the case
ƒ Referred to framework often to ask questions
ƒ Asked for help when lost.
ƒ Calm and collected
Good:
ƒ Made a final recommendation and included data.
ƒ Integrated data well and reached insights by seeing the big picture
ƒ Drove the case
Excellent:
ƒ An excellent candidate will do all the above and will mention risks or practical implications of
recommendation:
ƒ Tracking field in their accounting system to associate correct teller ID with sales made
ƒ Changes in payroll systems
ƒ Sales training program for tellers
ƒ Effectiveness study to measure impact on employee retention/satisfaction
Case 13: Bank Commissions
Profitability Accenture Round 2
Profitability Bain Round 1
Case 14: Electronics Co.
Prompt
Your client is Electronics Co., an audio/video sales and repair retailer with 500 stores located
primarily on the West coast. In 2001, revenues were $520M - $120M from repairs of equipment (e.g.
TVs, VCRs etc.) and $400M from sale of equipment (primarily TVs).

Electronics Co. has been in business for 30 years and is known for its fast, professional service.
However, profits have been flat for the past 4 years and competitors have not seen similar problems.

The client wants to know why its competitors are outperforming Electronics Co. Also, they want to
know how Electronics Co. can improve its profitability.

Guidance
The candidate should restate the prompt in an organic way, not word-for-word.

If asked for details on Electronics Co.'s growth vs. its competition, E Co.'s stock price increased only
2% from 1998 to 2001, while competitors have achieved 15% growth. If the candidate asks about
the growth of the market, encourage them to think through possibilities using the stock price
information (i.e., competitors are grabbing a larger share of a growing market, competitors have
found a way to grow margins substantially). Thinking through the market conditions thoughtfully will
show that the interviewee is a strong candidate.

If asked about specific financial benchmarks, you can share that the client wants to quantify the
potential profit improvement but that the client is looking for the interviewee to determine that
number.
67
68
Analysis
As the candidate asks questions about labor, you may let them know that E Co has 2 repair people
per store, vs. its competitors that have 0.5 ÷ 1 repair person per store and that each store has 10
jobs per week, which average about 2.5 hours to complete. Each store is open M-F 8am ÷ 6pm and
repair people are paid $60K annually.

Performance
Evaluation
Expected:
Candidates should know to look at revenues and costs. Since competitors are mentioned in the
prompt, candidates should also ask for market related information.

Good:
Insights from each of the exhibits:
1: E Co's sales are flat despite a market that is growing at nearly 4% annually, and repairs are down
despite overall market growth.
2: Labor is a big cost bucket. Good candidates should seek more information.
3: E Co's profitability is very low, indicating that costs are out-of-line.

Excellent/Deeper Insights (Second Years):
These candidates will show an ability to offer practical solutions. For example, in Exhibit 2, great
candidates will ask how E Co.'s profitability compares to its competitors and seek WHY. They will
calculate utilization of the repair people to determine if cuts can be made and will calculate the profit
impact of savings from labor (25 hours of work per week; 100 hours of labor available per week ÷
only 0.5 repair person needed per store; savings of $90K per store * 500 store = $45M in savings). If
a candidate attempts these calculations, provide Exhibit 4.
Case 14: Electronics Co.
Profitability Bain Round 1
69
Case 14: Electronics Co.
Exhibit 1 ± A/V sales & repair markets
A/V Sales
A/V Repair
95 96 97 98 99 00 01
0
1
2
3
$4B
Market size
Repair
Sales
13.0%
10.3%
12.8%
10.2%
13.2%
10.1%
13.3%
10.2%
12.9%
10.4%
13.1%
10.3%
12.2%
10.4%
Annual Growth
95-01
3.8%
3.3%
Profitability Bain Round 1
70
Case 14: Electronics Co.
Exhibit 2 ± Competitor profitability for A/V repair
Ultimate Co. Repair Co. Circuit Co. Electronics Co.
20%
18%
10%
5%
0
5
10
15
20%
Profit margin (A/V repair)
Total A/V
Revenues $24M $80M $50M $120M
Profitability Bain Round 1
Profit
Other
Rent
Labor
Cost of goods
A/V Repair
$120M
0
20
40
60
80
100%
Percent of total revenue
71
Case 14: Electronics Co.
Exhibit 3 ± Electronics Co. cost structure
Profitability Bain Round 1
72
Case 14: Electronics Co.
Exhibit 4 ± Savings opportunity
Savings by having
0.5 repair
person per store
Additional
trucking costs
Lost customers
due to increased
turnaround time
Net change
in cost
-$45M
$12M
$8M
-$25M
-50
-40
-30
-20
-10
$0M
Change in costs
Profitability Bain Round 1
Case 15: Convenience Store
Prompt
Our client is a major convenience store chain with 5,000 stores in the US and $25B in annual
revenues. About one year ago their CEO hired our firm to help increase profits. Since then, we
have worked with the client to aggressively control costs through negotiating larger discounts from
suppliers, restructuring the client's labor force, and cutting other operating expenses by 10%. As a
result of our work, our partners believe there is little room for cost reductions going forward. How
else can we increase profits for our client?
Guidance
1) Background data (TO BE GIVEN ONLY IF ASKED):
· There are 4 major companies (including the client) in the industry that control 95% of the market.
Each has a roughly similar share of the market.
· Client is not interested in expanding/changing product line.
· Client does not want to expand internationally due to logistical concerns.
· We studied possible M&A activities, but there are no desirable targets.
· Client charges same price per item in each of its stores. (i.e. no difference between prices of one
item in Manhattan versus Durham)
· Consumers consider Motrin and Tylenol to be very different brands, with each having very loyal
customers. It would take a substantial change in price of one brand to convince customers to
switch to the other. Buyers of both brands would consider the store brand product , however
they feel that it is a slightly inferior product and would need to be incentivized to do so.
· Advil and Motrin suppliers charge the same price to every convenience store chain
· All other costs (overhead, etc.) should be considered the same across the 4 major chains
2) Case delivery: Initially try to get candidate to brainstorm about how they might be able to
increase profits. Present candidate with Exhibit 1 if they inquire about pricing, products sold, or
sales volumes. Depending on whether candidate wants to focus on Food&Bev or Pain Relievers
first, present them with Exhibits 2 or 3 respectively.
73
Profitability BCG Round 1
74
Analysis
Exhibit 1: Candidate should immediately focus on Pain Relievers and Food &Beverage segments.
Pain Relievers have lowest margin and are most inelastic, which suggests opportunity to increase
prices. Food&Bev is our best seller in terms of Sales and Scan Margin, so look for ways to sell
more or gain share. Cleaning Product sales are $4B. Price elasticities are meant to be illustrative
and are not needed for any calculations. (Note: Scan Margin is essentially the same thing as profit
margin, however it also includes funding from producers. It is a term frequently used by retailers).

Exhibit 2: Candidate should recognize that client has highest unit price and lowest volume/share
relative to competitors in Food&Bev segment. This would imply that there is little room to increase
prices in this category. He/she should recognize that this is not the solution and should go explore
Pain Relievers .

Exhibit 3: Candidate is presented with Total Dollar Sales, Price and Cost data for each of the three
brands of pain relievers. He or she can then calculate profit per unit, total unit sales, and total
$profit per brand

Exhibit 4: The key insight is that our client charges a lot less for Advil that the competition. We
charge the same for Motrin and slightly more for Store Brand. A good candidate will inquire about
market share data at this point, and should be presented with Exhibit 5

Exhibit 5: Candidate should determine that we have a very strong share in Advil (which accounts
for over 50% of industry-wide pain reliever sales). This combined, with our significantly lower price
and profitability in Advil, as well as slim likelihood that customers would switch brands or to our
competitors, means that we should raise prices.
Case 15: Convenience Store
Profitability BCG Round 1
75
Performance
Evaluation
Expected:
‡Candidate recognizes that we need to focus on revenues going forward
‡Identify that revenues are a function of price, quantity, and mix and ask for more data
on each component
‡Recognize that priority should be on investigating Food&Bev and Pain Relievers
when viewing Exhibit 1 and ask for more information on each
‡Determine that raising price of Advil is the solution to the case

Good:
‡ Quickly determine that Food&Bev and Pain Relievers drive profitability
‡ Candidate performs calculations quickly and accurately
‡ Recognize that Food&Bev is not the solution after viewing Exhibit 2
‡ Candidate will ask about competitor prices and market share data when viewing
Exhibit 3

Excellent:
‡ Quickly recognize that client has highest unit price and lowest volume/share relative
to competitors in Food&Bev segment. No need to perform market share calculations
‡ Inquire about shifting share to Store Brand to generate more profits (since it has
highest profit per unit)

Deeper Insights (Second Years)
‡ Attempt to determine profit impact of increasing price of Advil
‡ Have insight that charging higher prices for same item in certain markets would be
an opportunity to generate additional profits
Case 15: Convenience Store
Profitability BCG Round 1
76
Case 15 : Convenience Store
Exhibit 1 - Products Sold by Client
Profitability BCG Round 2
Total Client Sales Total Scan Margin Price Elasticity
Pain Relievers $10 B 0.3
Cleaning Products $0.5 B 1.1
Food & Beverage $9 B $3 B 1.4
Other $2 B $0.4 B 1.8
Total $25 B $4.9 B
77
Case 15: Convenience Store
Exhibit 2- Convenience Store Industry Food &
Beverage Sales
Profitability BCG Round 2
Average
Price/Unit
Total Unit Volume Total $ Sales Share
Client $1.50 $9 B
Competitor 1 10 B $14 B
Competitor 2 $1.35 12 B
Competitor 3

$1.45 8 B
Total 36 B $50.8 B
78
Case 15 : Convenience Store
Exhibit 2 ANSWER KEY ± DO NOT SHOW
CANDIDATE
Profitability BCG Round 2
Average
Price/Unit
Total Unit Volume
Total $Sales
Volume
Share of Total
Market
Client $1.50 6 B $9 B
~18%

Competitor 1
$1.40

10 B $14 B
~28%

Competitor 2 $1.35 12 B
$16.2 B

~32%

Competitor 3

$1.45 8 B
$11.6 B

~22%

Total 36 B $50.8 B
79
Case 15: Convenience Store
Exhibit 3 - Client Pain Reliever Sales
Profitability BCG Round 2
Total $
Sales
Price/Unit Cost/Unit
Advil $8 B $3.99 $3.79
Motrin $1 B $4.99 $4.49
Store
Brand
$1 B $1.99 $1.29
80
Case 15: Convenience Store
Exhibit 3 ANSWER KEY ± DO NOT SHOW
CANDIDATE
Profitability BCG Round 2
Brand
Total $
Sales
Price/Unit Cost/Unit Profit/Unit
Total
Units
Total
Profit
Advil $8 B $3.99 $3.79 $0.20 ~2 B $0.4 B
Motrin $1 B $4.99 $4.49 $0.50 ~200 M $0.1 B
Store
Brand
$1 B $1.99 $1.29 $0.70 ~500 M $0.35 B
81
Case 15: Convenience Store
Exhibit 4- Convenience Store Pain Reliever Prices
Profitability BCG Round 2
Brand Client Price Average Competitor Price
Advil $3.99 $4.69
Motrin $4.99 $4.99
Store Brand $1.99 $1.89
82
Case 15: Convenience Store
Exhibit 5 - Pain Reliever Market Share $ by Brand
Profitability BCG Round 2
Client
Store Brand Motrin Advil
10
90%
44%
10%
18
3 Competitors 56%
14%
86%
7
Profitability Bain Round 1
Case 16: Office Products Co.
Prompt
Your client is Office Products Co., which sells office supplies directly to businesses
and consumers. It is direct retailer of office products through two channels: catalogue
and internet. This market is growing, especially the internet.
Office Products Co. has experienced historic revenue growth rates of 10%/year;
however, over the past two years, revenue growth has been flat and profit margins
have been trending down.
Your job is to figure out what is causing the declining performance and determine
what the management should do to turn things around.

Guidance
If asked, provide the following information:
· Client generates $1B in annual revenue, and has been very successful (annual
revenues have grown at 10% CAGR, operating margins at 12%)
· Client's catalogue sales have stalled, and its internet growth has lagged the market
· Catalogue clients have a higher profitability than internet clients due to higher
$/transaction (and higher retention rates)

A good candidate will list out the following buckets in their framework:
· Market dynamics: size, growth rates
· Company dynamics: revenue drivers (price, # of transactions, $ per transaction),
cost drivers, customer satisfaction
· Competitor dynamics: new market entrants, changes in prices, changes in channels,
changes in customers, new substitutes
83
84
Analysis
Interviewer can provide the following information if asked:
‡ The market is segmented by channels; customers shop across channels and price points
‡ Market information is listed in Exhibit 1. Sales information is listed in Exhibit 2.
‡ There have been no new entrants, but competitors are gaining share.
Performance
Evaluation
Expected:
Sales are flat and margins down due to competitive entry into the internet channel. Client should
focus on driving catalogue sales (which are profitable) and making internet sales more
profitable.

Good:
Office Products Co. should invest to grow the Internet channel, while protecting core Catalogue
sales growth. Office Products Co. is losing share due to underinvestment in the Catalogue
channel and aggressive moves by competitors in the Internet channel
- The Internet channel, while fast growing, is not currently profitable. Average purchase per
customer is 1/5 of the catalogue channel. Investing in this channel is a long-term strategy
given the small size and rapid growth rates.
- The Catalogue channel, although slower growing, is profitable and represents the largest
sales channel, at 90% of 2007 revenue.

Excellent/Deeper Insights (Second Years):
Great candidates will suggest practical solutions; for example, they may suggest that driving growth
means driving more small/medium business users to internet in order to drive up $/transaction and
retention. They will also consider ways to reduce costs, or to gain economies of scale to drive
profitability in the channel and consider ways to drive average purchase per customer to levels
comparable with Catalogue sales.
Case 16: Office Products Co.
Profitability Bain Round 1
0
100
200
$300B
Annual sales
'02
200
'03
214
'04
229
245
262
281
5%
90%
'05 '06 '07
7%
7% 7% 7% 7% 7% 7%
30% 31% 32% 33% 34% 35%
85
Case 16: Office Products Co.
Exhibit 1 ± Market annual sales performance
Profitability Bain Round 1
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$%&'()#*&+,)-#
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86
Case 16: Office Products Co.
Exhibit 2 ± Office products Co. sales performance
Profitability Bain Round 1
0.0
0.2
0.4
0.6
0.8
1.0
$1.2B
Annual sales
'02
0.71
'03
0.79
'04
0.86
'05
0.95
'06
1.00
'07
1.00
5%
62%
10% 10% 10% 10% 5% 0%
3.0M 3.0M 3.0M 2.0M 1.5M 1.0M
!"#$% &'()*+,
-'(%.$/*01&,
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87
Prompt
One of our private equity clients recently acquired a leading European seafood restaurant chain.
The chain owns and operations 700 restaurants across Europe. Same store sales (SSS) declined
last year. The private equity parent has aggressive expectations for improved business
performance. How can the client improve SSS?
Guidance
When the candidate asks about SSS and the main driver of that, please hand them Exhibit 1. The
main takeaway here should be that customer traffic is highly correlated with SSS growth.

When the candidate asks for competitor information, please hand them Exhibit 2. The main
takeaway here should be that there is limited opportunity to increase price or bill size.

When the candidate asks about the current table configurations, please hand them Exhibit 3. The
main takeaway here should be that there is opportunity to reconfigure the restaurants to
accommodate more parties of one or two.
Analysis
The data shows that 4-seater tables are ~50% utilized during peak hours [Look at the chart. It is
hard to read on purpose. About ! of the 4-seat tables are occupied by 3 people. About ¾'s of the
4-seat tables are occupied by 3 people. Thus, !(75% occupancy)+ " (50% occupancy) = ~50%
utilization]; there are on average 2 people sitting at a 4-seater (4-seat capacity*50% utilization).

Lets assume we reconfigure each restaurant so that one 4-seater is separated into two 2-seaters,
effectively adding 2 seats. When the candidate suggests this, prompt him/her by asking "What
is the bottom line impact of adding 2 seats per restaurant?

Additional Seats: 2
Peak Hours: 2 (let the candidate make this assumption)
Table turns per hour: 2 (let the candidate make this assumption)
Additional meals per restaurant= 2 x 2 x 2 = 8 meals
8 meals/restaurant x 700 restaurants (give this number when requested) = 5,600 meals total
5,600 meals x $50/average meal (give this number when requested) = $280,000 revenue
$280,000 revenue x 30% margin (give this number when requested) = $84,000 additional profit/day
$84,000/day x 360 days/year (let candidate make this assumption) = ~$30 M additional profit/year
Case 17: Euro Seafood
Profitability Bain Unknown Round
88
Analysis
Synthesis of the case facts:
Customer Traffic
ƒ Traffic is the biggest contributor to SSS growth
ƒClient should focus on initiatives that add the most value with minimal investment
ƒImproved seat utilization could deliver an extra $30M annually in profits

Number of items
ƒAverage check size and margins are higher than competition

Price per menu item
ƒClient already priced at a premium over competitors

Performance
Evaluation
Expected: The candidate will interpret handouts and offer insights while viewing them. The
candidate will also recognize the opportunity to optimize the table configurations.

Good: The candidate will do all of the above while also probing about the table configurations
without the interviewer's assistance. The candidate will begin to calculate the bottom-line impact
without the interviewer's assistance.

Excellent: Candidate will do all of the above while also remembering to synthesize the entire case
before closing out. Making sure to educate the client on our findings and not focusing on the
opportunity to optimize the tables.

Case 17: Euro Seafood
Profitability Bain Unknown Round
89
Case 17: Euro Seafood ± Exhibit 1
Profitability Bain Unknown Round
-20
-10
0
10
20
30%
-10 -5 0 5 10 15%
SSS change
Unit Price change
R² = 0.04
-20
-10
0
10
20
30%
-20 -10 0 10 20%
SSS change
# of items change
R² = 0.04
-20
-10
0
10
20
30%
-20 -10 0 10 20 30%
Monthly Traffic
change
SSS change
R² = 0.82
Price per item Number of items Customer traffic
90
Case 17: Euro Seafood ± Exhibit 2
Profitability Bain Unknown Round
0
3
5
8
10
¼
Average price per menu item
Client
10.95
Chain 1
9.95
Chain 2
9.50
Chain 3
9.00
Chain 4
8.75
Items
per bill
4.4 4.6 4.1 4.7 3.9
30% 28% 27% 27% 16% Margin
91
Case 17: Euro Seafood - Exhibit 3
Occupancy During Peak Hours
Profitability Bain Unknown Round
0
20
40
60
80
100%
Customer count
Party size
4
5
3
1
2
6
Table size
4
2
8
6
9
9+
8
7
92
Case 17: Euro Seafood ± Exhibit 3
Interviewer Copy. DO NOT GIVE CANDIDATE
Profitability Bain Unknown Round
0
20
40
60
80
100%
Customer count
Party size
4
5
3
1
2
6
Table size
4
2
8
6
9
9+
8
7
50% efficient
75% efficient
HUMAN CAPITAL
Note about nature of the Human Capital Cases: A Human Capital Case contains
an approach much different from the usual "Strategy" case. However the
candidate should not abandon the use of a framework. Here the focus isn't so
much on the bottom line as it is on the approach needed to manage the proposed
changes in the organization. The case should be carried out in a conversational
format with hints and clues to push the candidate alongside the case prompt.

93
Human Capital Deloitte Round 1
Case 18: KGF's Learning Management
Prompt
Your client is faced with dramatic changes in the industry. As your client adjusts their strategy and
reacts to changes while anticipating future changes, they are concerned about their ability to keep
their employees prepared for the challenges they will face. The client is also concerned about their
traditional approach to learning and development and has questions about the return on investment
of their current programs.

Your team was retained to help assess the effectiveness of the organizations learning center,
develop a go forward learning strategy, and to select and implement an "appropriate¨ enterprise
learning management system (LMS) solution that will allow the client's learning center to
successfully execute its learning strategy while simplifying its operational processes and allowing it
to scale for future growth.

Please consider the following questions: What approach would you take to assessing the client's
current learning capabilities and developing the go forward strategy? What issues would you
consider regarding the selection and implementation of the Learning Management System?

Note about nature of the Case: This is a Human Capital Case and thus contains an approach much
different from the usual "Strategy" case. However the candidate should not abandon the use of a
framework. Here the focus isn't so much on the bottom line as it is on the approach needed to
manage the proposed changes in the organization. The case should be carried out in a
conversational format with hints and clues to push the candidate alongside the case prompt.

Guidance
Make sure that the candidate understands that you are looking for a qualitative analysis and not a
quantitative analysis.

Look for a good framework that is logical and sound.
94
95
Analysis
Review current learning activities - balance of instructor-led training, e-Learning, and
other learning methods
ƒ Degree of learning assessment used (Reaction, Learning, Transfer, Results)
ƒ Meet with leadership to determine requirements of new strategy
ƒ Review individual learning plans
ƒ Skill gap analysis
ƒ Assess ability of existing programs to address needs, identify needs for additional
learning programs
ƒ Specific system selection and implementation components candidate may consider:
ƒ Integration with HRIS system
ƒ Data migration, system configuration, and interface development
ƒ Self-service registration
ƒ Degree of network vs. remote access
ƒ Scalability!
Performance
Evaluation
Expected: The candidate will touch on most of the major points listed in the analysis section, such
as skill gap analysis, assess current program's ability to address needs, integration with HRÌS
system, scalability.

Good: A good candidate will complete all of the above, as well as bring in a few creative concerns
and solutions. For example, the candidate could express concern with employee compliance with
the new system or talk about the benefits of the new system and the impact it will have on
complexity within the organization.

Excellent: An excellent candidate will address all of the major points listed in the analysis section
while also bringing in creative insight.


Human Capital Deloitte Round 1
Case 18: KGF's Learning Management
Deloitte Round 1 Human Capital: IT M&A
Case 19: Strugandt & Losen Merger
Prompt
The merger of two major technology companies forged a team of 140,000 employees with
capabilities in 160 countries, doing business in 43 currencies and 15 languages. Contested by key
members of the board until the final hours of the transaction, the merger had a media "fishbowl¨
Effect creating a myriad of rumors regarding layoffs heightening internal anxiety. The client needed
to quickly formulate a strategy to deal with the rumors, stabilize the workforce, and set the
strategic agenda for change.

As a member of the project team can you please answer how you would structure an approach for
the company's executives to successfully address the potential issues and realize the full value of
the acquisition?

Note about nature of the Case: This is a Human Capital Case and thus contains an approach much
different from the usual "Strategy" case. However the candidate should not abandon the use of a
framework. Here the focus isn't so much on the bottom line as it is on the approach needed to
manage the proposed changes in the organization. The case should be carried out in a
conversational format with hints and clues to push the candidate alongside the case prompt.

Guidance
Please make sure the candidate focuses on how this approach will be structured and delivered for
the executive team, therefore they should stay high level with their approach.

96
97
Performance
Evaluation
Expected:
Short Term:
1) Develop and deliver internal and external communications to all stakeholders
(shareholders, Board, the Street, acquired employees, legacy employees)
2) Deliver honest, detailed communications as soon as possible to stop rumors (Key
leadership from both companies should deliver these messages)
3) Review both organizations "as is¨: culture, shared services at both organizations (i.e., HR,
Finance, etc.), talent (what kind of skills/people need to be retained at both organizations)

Good: Good candidates will also mention:
Short Term:
1) Conduct a gap analysis between current state and desired future state
Long Term:
1) Solicit feedback: Talk to the employees to find out the rumors/ concerns/ fears/ etc.
2) Create a website with all the information about the merger (include a place to post
questions/concerns/issues to make sure these are addressed so people don't feel like it's a black
hole)

Excellent: Excellent candidates will also consider:
Long Term: Execution: Move new organization towards "future¨ state
1) Develop new job roles/functions
2) Talent management (prevent intellectual capital drain)
3) Rationalize redundant services (e.g., HR, finance, benefits, etc) - maybe employ Total Rewards
practice
4) Establish the culture of the new organization (not a merger of equals, but the acquired company
should not feel like they are losing their identity/culture) through leadership, training,
communications, etc.
5) Develop and implement appropriate incentives.
Deloitte Round 1 Human Capital: IT M&A
Case 19: Strugandt & Losen Merger
Human Capital: Outsourcing
Case 20: Edoceo
Prompt
Edoceo is a leading global provider of integrated information solutions to business and professional
customers. Customers depend on Edoceo for the information and information applications they need
to make the right decisions to run their businesses. Edoceo provides information solutions for
professionals across a broad range of industries and disciplines.

Edoceo decided to outsource select HR processes including: Recruiting, Benefits Admin, HRIS, HR
Admin, L&D, Compensation, Domestic Relocation, Expatriate Admin, Payroll, HR Contact Center.
Edoceo is working with one of Deloitte's competitors to implement the outsourcing transition. The
initiative's objective is to realize cost savings of 10%-20% of total current annual costs over five
years, while maintaining equivalent levels of service.

In parallel, Edoceo intends to transform the retained HR organization, creating internal Centers of
Excellence (COE) and developing HR Business Partners to support with outsourced services.
Edoceo has hired your team to provide best practice guidance and implementation leadership. How
would you design and implement optimal COEs and HR business partner capability for this
organization and how would you structure the project? How would you describe a successful
outcome for this project?

Note about nature of the Case: This is a Human Capital Case and thus contains an approach much
different from the usual "Strategy" case. However the candidate should not abandon the use of a
framework. Here the focus isn't so much on the bottom line as it is on the approach needed to
manage the proposed changes in the organization. The case should be carried out in a
conversational format with hints and clues to push the candidate alongside the case prompt.

Guidance
ƒ There was a cost reduction effort that the organization was undergoing that required an evaluation
and shift in HR support. Finance and IT were to follow.
ƒ Inefficiency and complexity of the existing HR organization were the driving forces of the
outsourcing!"
Deloitte
98
99
Guidance
ƒThe functions intended for COEs are: Benefits, Compensation, Recruiting, Talent Management, HR
Decision Support, L&D, Org Development, Diversity, and Policy, Compliance and M&A.
ƒ There is no current assessment of the HRBP role today, and each Market Group runs its own
entity. The vision for the HRBP is to be: provide business unit specific and consultative services to
executives and line managers for the people-related issues
ƒ Impacting their business unit. Business Partners "broker" technical talent from the COEs to deliver
HR solutions.
ƒ Considerable job redesign and capability assessment will be conducted for retained positions
ƒ There is significant concern among staff in retained functions about the long term safety of their
jobs

Candidate should discuss the business perspective and specifically the role of retained HR in an
outsourced environment.
Analysis
How to structure project: Follow some type of Plan, Build, Run approach, for example:
Plan & Assess
ƒAs-Is Inventory
ƒDefine staffing strategy COE & Business Partner strategy
ƒReporting & metrics strategy
ƒStakeholder analysis
ƒChange readiness assessment
ƒCommunication and change strategy
Design
ƒProcess design, COE and Business Partner development
ƒBuild communication, change and training materials and implementation plan
Build & Implement
ƒBuild out process designs and COE structure
ƒDeliver training materials for the new positions and processes
Support & Integrate
ƒEnsure effective interactions with outsourced functions and larger organization
Human Capital: Outsourcing
Case 20: Edoceo
Deloitte
100
Prompt²
Part II
Ask the candidate following question:

What else should Edoceo be considering as it implements the outsourcing and development of the
COEs?
Guidance
Let the candidate deliberate and answer this question. There is not much information to be given to
the candidate.
Analysis
Apart from other considerations the candidate should touch upon these:

How to prevent/deal with: Service disruption, Performance/morale issues, Attrition (loss of key
talent), Links to other initiatives
Performance
Evaluation
Expected:
The candidate touches upon all the major points recognized in this case.

Good:
The candidate not only touches upon all the major points but also provides his/her analysis and
reasoning behind those considerations in a structured way with use of a framework.

Excellent:
The candidate explains all the scenarios in a well-planned, structured and thoughtful manner
providing logical reasoning behind his/her statements. The candidate also provides good
explanation for the question in Part II and shows in-depth understanding of the change management
process and human capital concepts.

Human Capital: Outsourcing
Case 20: Edoceo
Deloitte
Deloitte Human Capital: CRM
Case 21: Smith Financial CRM
Prompt
A major U.S. financial services company has just implemented a Client Relationship Management
(CRM) system. The goal: To give leadership a real time view into the organization's sales channel.

For years, sales teams have maintained client sales information in separate excel spreadsheets.
This prevented leadership from having visibility into and a holistic view of sales opportunities,
which meant sending multiple requests to sales teams for the latest and greatest information.
By the end of fiscal year, all sales teams are expected to migrate their sales data onto this new
system, and use it to manage all sales information.

You are the change management lead for this project. How would you get everyone on the
system? Who are the various stakeholders? How would you communicate to these stakeholders?

Note about nature of the Case: This is a Human Capital Case and thus contains an approach much
different from the usual "Strategy" case. However the candidate should not abandon the use of a
framework. Here the focus isn't so much on the bottom line as it is on the approach needed to
manage the proposed changes in the organization. The case should be carried out in a
conversational format with hints and clues to push the candidate alongside the case prompt.

Guidance
Here are some guiding questions that will help the candidate analyze the situation:

1) Who will be affected by this change?
2) What are some ways that you can think of to best announce/communicate this change? Is it a
single person's role, or should multiple individuals of different capacities be involved?
3) Do you think everyone will be happy with this change? How will you handle dissention?

101
102
Analysis
ƒ Definition of Stakeholders: Leadership, Sales teams, & the rest of the organization
ƒ Find out how people in organization like to receive communications
ƒ Identify a change champion (leads one-on-one sessions)
ƒ Technical support/training: how to contact the help desk
ƒ Create a central place for feedback/comments
ƒ Create honest communications (share both the bad and the good)
ƒ Generate excitement/ engagement through a fun and well- branded communications campaign (all
communications/ marketing should use this brand/identity)
ƒ CEO Webcast (announcing the change initiative)
Prompt²
Part II
Do you see any other change issues? How would you address them?
Guidance
Here are some guiding questions that will help the candidate analyze the situation:

1) How do you think on-boarding will work? Will people automatically know how to use the system?
2) How will we keep people using this new system? What is the benefit to them? (if candidate
struggles, mention the word 'incentivize' or 'benefit')
3) How do we know we made the right decision in making these changes?

Analysis
ƒ Training (web based and classroom based) for sales team and technical support
ƒ Design and implement incentives/ tie to Performance Management
ƒ Create success metrics

Deloitte Human Capital: CRM
Case 21: Smith Financial CRM
Prompt-
Part III

How do you measure success? What do you do if leadership digs in their heels and resists the
change?
(After the candidate answers that question, please follow-up with the following question and change
the direction of the case)
Now, let's change things up. Say the system was implemented - without the help of change
management - and it failed (i.e., the people have not adopted the new technology). The team
brings you on to salvage the project. What would you do?

Guidance
1) When/how will you set goals for the outcome of this project?
2) How would you respond if senior management calls you into a meeting to tell you that they refuse
to use this new system?
Analysis
ƒ Set measurable goals at the onset of the project: ex. 75% usage by the end of the project,
reduce number of manual excel reports by 50% within the first 3mo of the CRM launch
ƒ Share with management the other projects that can now be tackled to improve company
performance, now that less time is being spent on maintaining excel spreadsheets.
Performance
Evaluation
Ask the candidate to synthesize all information analyzed in case

Expected: The candidate will recognize that this change affects employees at all levels of the
organization and will plan the change accordingly.
Good: The candidate will touch on the major points mentioned.
Excellent: The candidate will acknowledge and preemptively address and lay out a contingency
plan in the event that the CRM rollout does not go as planned.
Deloitte Human Capital: CRM
Case 21: Smith FinanciaI's CRM
103
Deloitte Round 1 Human Capital
Case 22: F2D Electronics
Prompt
Problem Definition: Your client is the nation's largest distributor of electrical and communications
products. The 150-year old company distributes more than one and a half-million products (1.5
million SKUs) made by multiple manufacturer/suppliers through 256 branches and warehouses in
the US. Given that they are the middle-men, margins in the distribution industry are very thin. F2D
has been generally decentralized with a high degree of branch autonomy (branch and district
managers are kings of their own domain). Each branch has its own processes with considerable off-
system accounting and record keeping on Excel spreadsheets, etc. Given growth over the last
decade, the home-grown mainframe computer system can no longer effectively handle the volume
of transactions. In addition, the time required to reconcile and report sales, inventory, and financial
information from the branches to corporate is hindering senior management's ability to make timely
business decisions. To address these issues, the client is undertaking a major business
transformation program. They will reengineer most business processes (sales, marketing,
forecasting, logistics, finance, customer service) and are implementing one system for everyone in
the company that will provide real-time information and a 360 degree view of the business. Senior
management anticipates a high degree of resistance from the branches. Branch leadership feels the
system and processes from corporate will not understand their needs and threatens their autonomy.
Past initiatives have struggled because people were not adequately prepared for the changes.
Employees are worried about how their jobs will change and whether they will have the skills to do
their jobs within the new system.
Question: How would you assist the client to successfully manage this large scale change
program?

Note about nature of the Case: This is a Human Capital Case and thus contains an approach much
different from the usual "Strategy" case. However the candidate should not abandon the use of a
framework. Here the focus isn't so much on the bottom line as it is on the approach needed to
manage the proposed changes in the organization. The case should be carried out in a
conversational format with hints and clues to push the candidate alongside the case prompt.
Guidance
Note: Remember that this case is intended to be carried out in a conversational manner.
104
105
Analysis
ƒ!!Leadership Alignment and Visibility/Sponsorship: Facilitate leadership at corporate to "sing from
the same page.¨ Then, enable corporate leadership to engage district and branch leaders. Clearly
explain why the changes are required in the competitive business environment, why their leadership
is needed and how they will be rewarded. In times of large scale changes, there should be a high
degree of leadership visibility.
ƒ Buy-In: Employees need to know that their leaders (at corporate and branches) are behind this
effort and they need to hear this directly from their leaders. Provide talking points and support to
make it easier for them to communicate to employees.
ƒ Communications: Develop a comprehensive communication strategy for internal and external
audiences. Explain to employees the business case for change, "what is in it for them,¨ and how
their jobs will change. Communications should be timely and consistent to stem rumors. Similarly,
there should be a communications strategy for suppliers and customers to explain how service will
improve to assure them there will be no disruptions.
ƒ Workforce engagement: Engage employees from as many branches as possible in the design and
implementation of the new process and system. Gather input on their business requirements
throughout the lifecycle of the project. Conduct roadshows out to the branches. Use trainers from
each of the branches to train end users. Engage branches and employees so they take ownership of
the system.
ƒ Organizational Reinforcement/Incentives: Make sure those who are providing input, championing
and adopting the system are recognized, rewarded, and utilized as change agents.
ƒ Training: Profile how jobs will change and train employees thoroughly on the new process and
system. Hands-on training close to the launch and relevant to employees' jobs tends to be most
effective.
Deloitte Round 1 Human Capital
Case 22: F2D Electronics
106
Performance
Evaluation
Expected:
The candidate touches upon all the major points recognized in this case.

Good:
The candidate not only touches upon all the major points but also provides his/her analysis and
reasoning behind those considerations in a structured way with use of a framework.

Excellent:
The candidate explains all the scenarios in a well-planned, structured and thoughtful manner
providing logical reasoning behind his/her statements. The candidate also provides good
explanation for the question in the prompt and shows in-depth understanding of the leadership,
alignment and buy-in process as well as Human Capital concepts.
!
Deloitte Round 1 Human Capital
Case 22: F2D Electronics
Human Capital Deloitte Round 1
Case 23: Sunique Human Capital
Prompt
Your client is faced with dramatic changes in the industry. As it adjusts its strategy, reacts to
changes and anticipates future changes, it is concerned about its ability to keep its employees
prepared for the challenges they will face. The client is also concerned about its traditional
approach to learning and development and has questions about the return on investment of its
programs.

Your team was retained to help assess the effectiveness of the organizations learning center,
develop a go forward learning strategy, and to select and implement an "appropriate¨ enterprise
learning management system (LMS) solution that will allow the client's learning center to
successfully execute its learning strategy while simplifying its operational processes and allowing it
to scale for future growth.

What approach would you take to assessing the client's current learning capabilities and
developing the go forward strategy? What issues would you consider regarding the selection and
implementation of the Learning Management System?
Guidance
Make sure that the candidate understands that you are looking at qualitative analysis and not a
quantitative analysis.

Look for a good framework that is logical and sound.
107
108
Analysis
Review current learning activities - balance of instructor-led training, e-Learning, and other learning
methods
ƒ Degree of learning assessment used (Reaction, Learning, Transfer, Results)
ƒ Meet with leadership to determine requirements of new strategy
ƒ Review individual learning plans
ƒ Skill gap analysis
ƒ Assess ability of existing programs to address needs, identify needs for additional learning
programs
ƒ Specific system selection and implementation components candidate may consider:
ƒ Integration with HRIS system
ƒ Data migration, system configuration, and interface development
ƒ Self-service registration
ƒ Degree of network vs. remote access
ƒ Scalability
Performance
Evaluation
Expected: At a minimum, the candidate should touch on the major points and be comfortable in
discussing other aspects of the case when gently guided by interviewer.
Good: A good candidate will touch all the major points and require a small amount of guidance to
cover all aspects of the case.
Excellent: The excellent candidate will touch all the key points with little to no guidance, be
comfortable and confident in discussing the major points of the case, and develop a framework for
implementation.
Human Capital Deloitte Round 1
Case 23: Sunique Human Capital
MARKET ENTRY
109
Market Entry Accenture Round 2
Case 24: Professional Car Racing
Prompt
Your client is the owner of UPS #88, a racecar on the NASCAR tour. It races in the Nextel Cup, a
points-based championship where the season winner has accumulated the most points over the
course of the racing season.

There are 36 races in total, running from February to November. Dale Jarrett, a well-known celebrity
driver, races for the team. Dale helped win the Nextel Cup three years ago, and so far this year is
eighth in a field of 43 drivers.

A close friend who is the VP of marketing at Home Depot recently contacted the client. She inquired
about sponsoring a second racing team with the client. She recognizes that NASCAR is the fastest
growing segment among males ages 18-45. She also has talked to a successful driver from a
regional drag racing circuit to try out as the driver of the team.

Evaluate the potential of this opportunity.
Guidance
The candidate should present an overview of his/her approach to the case and develop a
framework. A profitability analysis should follow, with the candidate requesting revenue and cost
information. Interviewer should probe candidate on the sources of revenue in this market before
providing the following information.

Revenue information: included in Exhibit 1; before giving to candidate, ask what revenue buckets
they can think of, then give remaining
Cost information: included in Exhibit 2; before giving to candidate, ask what cost buckets they can
think of, then give remaining
110
111
Analysis
Revenue ± Give candidate Exhibit 1 after buckets are outlined
$50K-1000K per race winnings. Assume average of 200K (other assumptions are ok)
36 races per year. Assume driver qualifies for 30.
Æ$200K*30 = 6000K or 6M

Race winnings are 25% of total revenue
Æ6M / .25 = 24M total revenue

Cost - Give candidate Exhibit 2 after buckets are outlined
Tell candidate that total costs are $20M

Profit
24M ± 20M = 4M profit
Guidance

Since total revenue is not given, the candidate should recognize that the only way to calculate it
from the revenue information given is by estimating total race winnings and extrapolating based on
the percentage of total that these represent.

After being told the total costs, the candidate should revisit the revenue estimation and adjust the
average winnings assumption, if necessary (e.g. 100K avg would be unrealistic loss, while 500K
average would be unrealistic profit)
Market Entry Accenture Round 2
Case 24: Professional Car Racing
111
112
Analysis
Marginal cost of adding a new team
Total Costs = $20M
Race-facing costs = 40% / 2 * 20M = $4M
Equipment costs = 25% * 20M = $5M
Travel costs = 5% * 20M = $1M

ÆMarginal costs of adding new team = 4+5+1 = $10M
Guidance

The candidate should now turn his/her attention to the cost of adding a new team. If interviewer
observes that the candidate needs direction, prompt him/her by asking: "What is the minimum
amount of money that the client should ask for from Home Depot?"

Information to be given with respect to adding a new team.
The costs affected w.r.t. addition of a new team are Salaries, Equipment, and Travel. The other two
cost components are associated with the engine shop.
Specifically,
ƒ Race-Facing costs will double
ƒ Equipment costs will double
ƒ Travel costs will double
Market Entry Accenture Round 2
Case 24: Professional Car Racing
112
113
Prompt ±
Part II
Should the client charge a premium to Home Depot for sponsorship?
Analysis
Option 1: Yes, we should charge a premium ² Home Depot seems to have already made some
commitment to the deal by conducting initial negotiations with the potential driver. Therefore client
has bargaining power. Premium can be justified by providing Home Depot with an acceptable Return
on Investment analysis.

Option 2: No, we should not charge a premium ²Home Depot has several other options to sponsor,
including 1) another race team, 2) another sport (e.g., baseball), 3) another racing circuit (e.g.,
Formula One)
Guidance

Potential for charging premium ÷ The interviewer should ask candidate to evaluate the possibility of
charging a premium to Home Depot for the sponsorship. Note that there is no
right/wrong answer here; rather interviewer should evaluate response basis candidates' rationale.

Multiple answers are acceptable here. This answer key is not exhaustive.

After this question, ask candidate to wrap up case.
Market Entry Accenture Round 2
Case 24: Professional Car Racing
113
114
Performance
Evaluation
Expected:
- Accurate arithmetic
- Profitability framework

Good:
- Identify need to calculate marginal cost of new team

Excellent:
- Candidate discusses risks of adding new team. For example,
ÆOther potential points include the natural tension between adding a new team and the allocation
of resources (e.g., high quality mechanics from Dale's team may work with the Home Depot car,
thus diluting the quality of performance of Dale).
ÆPotential risks certainly include adding a new driver who has only drag racing experience. This
driver would probably not contribute to merchandising revenue, due to his relative anonymity.

-Candidate discusses validity of cost assumptions for new team. For example,
ÆThere is some validity, however, to the point that salaries for the new team may be lower because
the new driver lacks the name recognition of Dale Jarrett.
ÆThe total cost of equipment may be lower than average due to the ability to leverage the engine
shop technology. Some candidates might recommend closing the engine shop, but we have no
margin information to substantiate this.
Market Entry Accenture Round 2
Case 24: Professional Car Racing
Market Entry Accenture Round 2
Exhibit 1
Revenue Sources
% of
Revenues
Description
Sponsorships
60% UPS dominates, other sponsors include Outback
Steakhouse and 3M
Nextel Cup Race
Winnings
25% One can win from $50K - $1MM depending on how
one finishes and the significance of the particular
race
Selling Engines
10% Strong R&D shop. Engines are sold to professional
drivers domestically
Merchandising
5% License out production to third-party. T-shirts and
caps are a small revenue source
Case 24: Professional Car Racing
115
Market Entry Accenture Round 2
Exhibit 2
Revenue Sources % of Costs Description
Salary
40% 'Race-facing' costs make up 50% (Mechanics and
Dale Jarrett); 'Non race-facing' costs make up the
remaining 50% (engine shop technicians, HR,
accounting etc)
Equipment 25% Race cars, engines, parts (sheet metal)
Travel 5% Getting to and from races
Leisure, engine shop 10% Leasing of land in rural North Carolina
R&D 20% Engine shop technology improvements
Case 24: Professional Car Racing
116
Market Entry A.T. Kearney Round 1
Case 25: /L]HWWH¶V Luxury Properties
Prompt
Your client is a real estate developer, /L]HWWH¶V Luxury Properties, and is currently assessing a new
project idea in Costa Rica. Costa Rica has a beautiful coastline which has historically been difficult
to access. The nearest airport was over six hours away. As of last year, a new airport was
constructed only a half hour away. There has been an investment boom in the region due to the
increasing number of tourists (popular with Americans and Asians). The Mandarin Oriental and The
Four Seasons, two prominent luxury hotel chains, were the first to enter this market with a 250-room
hotel each. Should your client invest in the tourism opportunity created by the new airport? Would
you recommend that s/he enter the market?
Guidance
The framework developed by the candidate may explore a variety of issues including: Core
Competencies, Market Attractiveness, ROI, and Project Success Factors. Here is some information
that will help the candidate analyze the situation:

Client's Core Competencies:
- The client has focused on hi-rise apartments (50%) and luxury condominiums (50%) in the past but
wants to enter the hotel arena.
- They have focused on world-class beaches, such as Playa del Carmen, Marbella, Coral Beach,
Tahiti, Fiji, Maldives, Mikonos, etc.
*The key insight here is that the client has past experience in construction of a similar type, but has
no direct experience in the hotel industry or service operations. Additionally, the client probably has
good judgment in spotting travel locations and has a successful track record with the construction of
prime properties.


117
Market Entry A.T. Kearney Round 1
Guidance
Market Attractiveness / Five Forces Analysis
ƒ Market size - 875,000 tourists per year (assume 350 days in a calendar year)
ƒ Average duration of stay per tourist - 4 nights
ƒ Average hotel check - $2,000.
ƒ Others - In terms of tourists, you depend on government spend on advertising, on travel agents,
and on the network effect of the existing hotels in the area.
ƒ Competitiveness - Other hotels chains that are thinking of entering the market are Starwood,
Peninsula, and Imperial Hotels.
ƒ Supplier Power - The local labor market offers a huge supplier of workers (very positive)
ƒ Substitutes - You are fighting with every other "paradise-type" destination, from Disneyland to
Vegas to Bermuda. Interest in this area, however, is sky high.
ƒ Barriers to Entry - Government regulations, high capital requirements, unavailable beachfront
property.
ƒ Buyer Power ÷ The recent consolidation among travel agencies and proliferation of e-vendors put
buyers in a powerful position.

Analysis
Quantitative takeaway:
3.5 million tourist nights / 350 days = 10,000 tourists / night
$2,000 average check/ 4 days average stay = $500/night

Qualitative takeaway: Despite the competitive nature of the market it is large enough to be
profitable, and client has desired capabilities to successfully compete. The level of resources
required would be a barrier to entry and maybe there are others that need to be investigated--such
as government permits, access to sewage, water, etc.
Case 25: /L]HWWH¶V Luxury Properties
118
Market Entry A.T. Kearney Round 1
Guidance
ROI Analysis ± If the candidate brings up ROI, tell them that client has already short listed three
available lots. Ask him/her to recommend one of the three such that Return on Investment is
maximized?









· Average occupancy 50%
· No. of operating days in a year: 350
· Operating expenses are 100% variable
· At ROI 10%, company target is to recover investments within one year

Analysis
ROI Analysis:
ROI = Profit/Investment.
Revenue = Revs per night * number of nights * number of rooms * nights per year * occupancy rate

Option 1: Lover's Lair
·Operating Profits: (((($450 revenue ÷ 250 operating costs) * 500 rooms)* 350 nights/year) * 50%
occupancy rate) = $17.5 million operating profits/year (a)
· Initial Investment: 30,000 cost/room * 500 rooms + $2,000,000 land = $17 million (b)
· Net Profit: (a)-(b) = $500,000 (c)
· ROI: (c) / (b) = $500,000/17 million = 2.9%

Land
Cost
Cost/Room Operating
Cost
Room
Capacity
Price/Night
Lover's Lair $2 MM $30 K $250 500 $450
Paradise Lost $4 MM $28 K $200 1000 $400
Fookwah Heights $6 MM $25 K $150 1500 $350
Case 25: /L]HWWH¶V Luxury Properties
119
Market Entry A.T. Kearney Round 1
Analysis
ROI Analysis (Continued):
Option 2: Paradise Lost
· Operating Profits: (((($400-200) * 1000) * 350) * 50%) = $35 million
· Initial Investment: 28,000 cost/room * 1000 rooms + $4 million land = $32 million
· ROI: $3,000,000 / $32 million = 9.4%

Option 3: Fookwah Heights
· Operating Profits: (((($350-150) * 1500) * 350) * 50%) = $52.5 million
· Initial Investment: $25,000 * 1,500 rooms + $6 million land = 43.5 million
· ROI: 9 million / 43.5 million = 20.7%

Guidance
Factors determining project feasibility ± Ask the candidate to list factors to be
considered in determining the feasibility of the project

Analysis
Good Concerns:
Competition (what are they focusing on? will it flood the market?)
Strategy (Where will you compete--low cost, high service, best in class, packages?)
How should the developer finance the building? Since the hotel will bring jobs maybe the
government can help with some tax deductions, free services, etc.

Great Concerns:
·How can they leverage their experience, what values from their other business can they leverage?
·Would they manage the hotel or build it and then find an operating partner like Starwood or Hilton?
·What are the existing barriers to entry, how would you change them to insure a greater degree of
success?

Case 25: /L]HWWH¶V Luxury Properties
120
Market Entry A.T. Kearney Round 1
Final Prompt
After the candidate offers his/her insights, tell him/her to focus on ROI first with the room prices
specified in table and then with the market room price ($500).

Finally: Ask the candidate to conclude the case with a "go/no go¨ decision, supporting it with the
insights drawn through out the case. Probe into additional concerns the client needs to address.

Performance
Evaluation
Expected:
Candidate will develop a structured framework that touches on some if not all of the categories
described. Candidate will exhibit accurate arithmetic in ROI analysis.

Good:
The candidate will be able to provide the qualitative takeaways regarding market attractiveness
and/or core competencies.

Excellent:
In addition to the above, the candidate will also identify the key concerns regarding the project
feasibility and provide a go/no go decision with supporting evidence from insights drawn from the
case.

Case 25: /L]HWWH¶V Luxury Properties
121
Market Entry DMCC Round 1
Case 26: NapoIeon's Pizza Pies
Prompt
Napoleon's Pizza Pies ("Pizza fit for an Emperor¨) has recently tried to establish the best home
pizza delivery business in Paris. Pizza Hut, however, has a virtual monopoly on the pizza home
delivery market. Napoleon's has asked your consulting firm to analyze the issues that will determine
the likelihood of successful entry in the Parisian pizza market.

What information would you need and how would you analyze the pizza delivery market?
Guidance
1) Candidate needs to estimate the size of the Parisian home pizza delivery market. If the
candidate asks for market information, introduce Exhibit 1 and Exhibit 2.
2) Other information available upon request:
ƒ Percentage of Pizza Hut's business that is delivery is ~50%
ƒ Almost 90% of deliveries take place outside the city centre
ƒ City centre Pizza Hut stores offer predominantly restaurant service
ƒ The market for pizza is growing at 5% annually. The submarket for pizza delivery is growing
at 8%
3) Candidate should do a market sizing, market attractiveness and segmentation and then look at
the cost structure of the industry to find a potential competitive advantage.
Analysis
Overall Pizza Delivery Market:
50% of business is delivery X [$1.2M / ~90% market share] = $667k

Of that, city centre's delivery market is:
$667k X 10% of delivery business is done in city centre = $67k!
122
123
Performance
Evaluation
Expected:
It is expected that all candidates will complete a market sizing with realistic assumptions and a basic
market and cost analysis (similar to what is provided above).

Good:
Good candidates will remember that Pizza Hut has a virtual monopoly position in home delivery but
that the market for the city centre seems underserved. A good candidate will also ask for and
identify the different growth rate of the delivery market versus the pizza market in general.

Excellent:
Excellent candidates will complete a market sizing and quickly move into a complete industry
analysis for market segmentation and cost structure understanding. The candidate will identify the
opportunity in the city centre market and identify the low barriers to entry for Pizza Hut in that
market. The candidate should also consider that the execution of the delivery service may have
more complexity within a market like city centre.
Prompt-
Part II
Follow up prompt for Good & Excellent candidates:
Napoleon launches his pizza delivery business and wins a customer service award. Pizza Hut
responds (Show Exhibit 3). What should Napoleon do?

Napoleon calls you from his moped for answers. What can you tell him?
Guidance
1) Candidate should consider price war implications and Pizza Hut's position as a near monopoly in
the market
2) Determine if there are considerable differences in cost or quality of delivery service for Napoleon
Case 26: NapoIeon's Pizza Pies
Market Entry DMCC Round 1
124
Performance
Evaluation
Expected:
Recognize the potential for a price war with Pizza Hut and explain implications

Good:
Good candidates will identify Pizza Hut's reaction as an over-reaction based on their position in the
market. The candidate should avoid the price war in his recommendations and potentially focus on
key products or sub-segments of the city centre segment.

Excellent:
Excellent candidates will identify the over-reaction and look for ways to take advantage of this
strategic mistake made by Pizza Hut. The candidate should probe about any substantial differences
between the quality and speed of delivery for Napoleon and look to exploit any of them. Ultimately,
the candidate should recommend that Napoleon continue to focus on the premium market and
continue to execute on points of differentiation like customer service.
Case 26: NapoIeon's Pizza Pies
Market Entry DMCC Round 1
125
Case 26: NapoIeon's Pizza Pies
Market Entry DMCC Round 1
Paris Population By Region
0
2
4
6
8
10
12
14
16
18
20
Cumulative Population in millions
City Centre
Urban Areas
Suburban Areas
Exhibit 1
Exhibit 2
Pizza Hut Information
Sales in millions (Pizzas) 1.2
Stores 95
Market Share 85-95%
Market Segments, % of sales
Paris City 20%
Metropolitan Areas 35%
Paris Suburban Areas 45%
126
Case 26: NapoIeon's Pizza Pies
Market Entry DMCC Round 1
Exhibit 3
Pizza Prices
$20
$22
$20
$21
$18
$19
$13
$16
$17
$15
$22
$24
$23
$21
$17
$20
$17 $17 $17
$19
$18 $18
$16
$15 $15
$14
$12
$21
$13
$10
$14
$18
$22
$26
Pan Pizza Hand-
Tossed
Style
Pizza
Stuffed
Crust
Pizza
Lower Fat
Pizzas
Cheese
Lover's
pizza
Meat
Lover's
pizza
Pepperoni
Lover's
pizza
Sausage
Lover's
pizza
Veggie
Lover's
pizza
Chicken
Supreme
Napoleon's
Price
Pizza Hut
Before Entry
Pizza Hut
After Entry
McKinsey & Co. Round 1 Market Entry: Entry / Exit Decision
Case 27: K. Grace Hospital Chain
Prompt
Your client is a large hospital chain, K. Grace. There have been proposed legislation changes to
Medicare that will affect your client. For example, some surgeries will no longer be reimbursable at
the same rate. As a result, this has caused the hospital to consider a strategy that would shift its
focus toward less profitable surgeries by using alternative therapies. However, the client is
concerned about the decreased revenue potential from this proposed shift in strategy.

Currently the client has a $4 billion top line. Surgeries represent half of this total. Half of the
hospitals in the chain perform all of these surgeries. For this case, let's say that all patients are on
Medicare (private insurance is not a factor). Should we close part of the chain? All of the chain?
None of the chain? What drivers will help us arrive at a close / no close decision?!
Guidance
Allow the candidate some time (<1.5 min) to create a structured framework.

Some issues to discuss could be the profitability (revenues and costs) of the surgeries. Look for a
basic framework that includes a revenue breakdown into prices and quantities and a simple cost
structure with fixed and variable costs.

Next, ensure that the candidate is considering the percentage of surgeries that is actually impacted.

Prompt the candidate by asking: Maybe we should explore whether the hospital chain has any
capabilities in providing alternative therapies÷could we make money there?

Let's see external things, too, like the ability to influence the regulatory environment, the needs and
preferences of our end users (would they pay out-of-pocket?).

Lastly, the candidate should not fail to address the strategies competitors are adopting.
!
127
128
McKinsey & Co. Round 1
Guidance
Steer the candidate toward profitability information. What does he/she want to know? Allow the
candidate to make assumptions regarding profitability (guide them if their assumptions are way off
base). This case is not about the specific numbers, rather the analysis conducted.
Analysis
Typical impacted hospital (annual):
Patients: 1,000
Price (revenue) per patient: $1,000
Cost per patient: $800
Fixed Cost of facility: $100,000
If the candidates numbers are very different, suggest they use the numbers provided above for
simplicity.
Simple breakeven calculations should be made²The hospital must serve at least 500 patients to
remain open. Each patient delivers a $200 contribution margin.
Prompt²
Part II
How many patients would you have to lose below breakeven (500) to close the hospital?
!
Guidance
The candidate needs information on the cost of exiting the business. Let them ask for it. Once they
request the information, you can give them the following: The exit cost is $50,000.!
Analysis
The profitability over time, discounted back to today, minus the PV of the exit costs, should equal
zero to breakeven: Q*$200 ± $100,000 = -$50,000. Q = 25

Another way to look at this is the value of lost customers to the business over time, taken as a
perpetuity. Or, loss / hurdle rate = exit cost. Assume a discount rate of 10%.

Loss / .10 = 50,000. Loss = $5,000, which equals 25 patients that you would have to lose below
breakeven to close the hospital. 500 - 25 = 475 patients to remain open!
Market Entry: Entry / Exit Decision
Case 27: K. Grace Hospital Chain
129
McKinsey & Co. Round 1
Prompt²
Part III
If fixed costs change to $150,000, how many patients will you need to break even? How many
patients would you have to lose to close the hospital? !
Analysis
$150,000 / $200 = 750 patients to stay open

Loss / .10 = $50,000. The loss of future value that one gives up by incurring the exit costs equals 25
patients. Below 725 patients, the facility should close.
!
Prompt²
Part IV
The hospital does some research and finds that 3/8 of its surgeries will not be reimbursable. A
government report says it will save 6-9% by passing the new legislation. You know that someone
has botched the research. How is the information contradictory?!
!
Guidance
The candidate should ask for the national market share of the company. Otherwise, the data above
is like comparing apples to oranges.

The market share for your client is 20%.

This means that, according to your client, 7.5% (.375 * .20 = .075) of the government savings will
come from its surgeries, which represent only 20% of the total national market.
Market Entry: Entry / Exit Decision
Case 27: K. Grace Hospital Chain
130
Performance
Evaluation
Candidate should provide a crisp recommendation ÷ By McKinsey standards, a crisp
recommendation should be roughly 30 seconds long and should include clear bullet points that
support an overall recommendation. For example, "Close the chain for reasons 1, 2, and 3.¨

Expected:
ƒ Accurate arithmetic
ƒ Solid profitability and breakeven calculations

Good:
ƒ Framework that includes exploration of all possible options
ƒ Clear recommendation that summarizes key findings in under 30 seconds

Excellent:
ƒ Considered possibility of alternative therapy surgery market entry
ƒ Understanding of, and clear answer to, the final question (Note: this question is very complicated)

!
McKinsey & Co. Round 1 Market Entry: Entry / Exit Decision
Case 27: K. Grace Hospital Chain
Market Entry BCG Round 2
Case 28: Stew's Connections
Prompt
Our client is a start-up with the ability to deliver broadband internet to commercial airlines. How
would you help them think about their offering?!
Guidance
About the case: This is a market entry case where candidate are required to evaluate the feasibility
of a new product in conjunction with the airline industry. The candidate should use a comprehensive
framework, walk the interviewer through it and be prepared for analytical detours throughout the flow
of the case.

The calculations represented here are only one approach and interviewees may take other
approaches, depending on the assumptions made. The interviewer should be mindful of this and
allow for flexibility.

Industry & Market Size Discussion: The interviewee should have mentioned this as a major bucket
in his/her framework.

Use the information below to provide guidance as necessary.

Broadband for the airlines
There is general interest in broadband internet from the airline industry. The start up would have to
invest relatively little up front and would keep most of the revenues. They would charge the
customers on a per flight pricing model.

Size of the Market
Ask the candidate to estimate the market size and hand over Exhibit 1. Inform the candidate that
there are 3,000 planes. Full answer in chart belo"!

Pricing
In order to finish the market size, the candidate should ask for the price per
flight. Hand out Exhibit 2 and ask candidate to set the price.
131
132
Market Entry BCG Round 2
Case 28: Stew's Connections
Analysis
Class First Coach
Seats/Plane 20 180
Load Factor .75 .75
Full seats/plane 15 135
Biz Travelers 100% 30%
Laptop users/plane 15 40.5
Total laptop users/plane 55.5
3000 planes x 2000 legs/plane x ~50 laptop users/plane = 300,000,000 approximate annual
potential user-legs.
133
Analysis
Assume 100 passengers (for ease) at the various price/penetration combinations.

30 users at $5=$150/flight

25 users at $10=$250/flight

20 users at $15=$300/flight

10 users at $20=$200/flight

5 users at $25=$125/flight

Set price at $15.!
Guidance
Breakeven Analysis
Given the information already revealed in the case and the information below the candidate should
calculate a break-even point.

Information to be given if asked:
The company has discovered that if they can generate $250,000 per plane in annual
revenue, they will be profitable installing the technology on that plane.
Analysis
250,000/2,000 legs/plane = $125/leg

$125/$15 about 8 users/leg

50 laptop users/leg, and at $15, there's a penetration rate of 20%, so we estimate 10 users/leg.

Response: Yes, they should break even.
Market Entry BCG Round 2
Case 28: Stew's Connections
134
Guidance
Other factors
Probe the candidate for breadth and understanding of new market entry. Ask him/her about the
following aspects of this project.
Analysis
Competition
The interviewer should probe deeper into the competition especially with regard to Intellectual
Property. For this case, the company has the patent on the high speed connection.

What about low-speed internet connections?

Risks
Ask the candidate which risks are associated with the business model. Use your
judgment when considering their answers.
Performance
Evaluation
Candidate should provide a crisp recommendation ÷ A crisp recommendation should be roughly 30 -
45 seconds long and should include clear bullet points that support an overall recommendation. For
example, "Enter the market for reasons 1, 2 and 3¨

Expected: Accurate arithmetic with solid profitability and breakeven calculations.

Good: Candidate provides a framework that includes exploration of all possible options and offers a
clear recommendation that summarizes key findings in under 30 seconds.

Excellent: Candidate considered sufficient number of other factors while maintaining poise through
"what else¨ line of questioning at the end of the case.

Market Entry BCG Round 2
Case 28: Stew's Connections
135
Market Entry BCG Round 2
Exhibit 1
Case 28: 6WHZ¶VConnections
136
Market Entry BCG Round 2
Exhibit 2
Case 28: Stew's Connections
Round 1 Market Entry: Life Sciences
Case 29: One for the Road, Inc.
Prompt
Problem Definition: A small life science technology startup, One For The Road, Inc., (ORI), has
invested a huge amount of money in R&D and was recently granted a patent for a new breakthrough
product. The client wants to know what approach it should take to commercialize the product.
Guidance
This is a "Go to Market" case combined with a piece on M&A. The case is structured on the 3C's
framework and combines the following two questions:
ƒ What are the core competencies of this company?
ƒ Do they have the funds to develop the capacity in-house, or should they be looking for a partner or
buyer for the patent?

This section of the case is exploratory in nature so make sure that the candidate has come up with a
healthy list of questions before proceeding.

Information to be given if asked:
ƒ How long is the patent protection? - 10 years
ƒ Are there any competitors? - No. This product would create a new market
ƒ Market potential? - The client expects sizable immediate demand
ƒ How much money has been invested in R&D? - Substantial amounts
Prompt²
Part II
Market Strategy ± Discuss the following aspects with the candidate:
ƒ Managing hyper growth
ƒ Optimal acquisition strategy (new customers)
ƒ Appropriate pricing via EVC analysis
DMCC
137
138
Prompt²
Part III
Operations Strategy ± Discuss the following aspects with the candidate:
ƒ Costs: fixed and variable
ƒ R&D Resources/Strengths
ƒ Required Capabilities: Buy, Build, or Partner?
ƒ Manufacturing: in house vs. outsourcing
ƒ Marketing & Sales
ƒ Distribution Channels
Prompt²
Part IV
Finance Strategy ± Discuss the following aspects with the candidate:
ƒ Debt vs. Equity to finance growth
ƒ Timeline to break even
Prompt²
Part V
External Factors ± Discuss the following aspects with the candidate:
ƒ Legislation
ƒ Suppliers of raw materials
Prompt²
Part VI
M&A potential ± Ask the candidate to discuss various entry strategies available to the client w.r.t
introducing the product in the market.
Analysis
Candidate should assert that the client has several options:
ƒ Acquire a company that provides manufacturing and marketing capabilities
ƒ Joint venture with another company
ƒ Outsource manufacturing, marketing and distribution channels
ƒ Grow skill sets organically, ergo more slowly
Round 1 DMCC Market Entry: Life Sciences
Case 29: One for the Road, Inc.
139
Prompt²
Part VII
Evaluating M&A options ± Ask the candidate to evaluate the pros and cons of the different strategies
suggested above
Analysis
Given that the client is a small R&D lab, its core competency is not in the area of manufacturing,
marketing, and sales. ORI should certainly pay attention to the profitability of these strategies, but
also bear in mind the risk (while going alone may allow ORI to keep all the profits, it has many
more pitfalls than teaming with an established player in the industry.

The following comparison matrix presents the pros and cons of the various strategies (do not hand
this to the candidate, rather allow them to form their opinion and then guide them where necessary)

Prompt²
Part VIII
Patent pricing strategy ± Inform the candidate that ORI has decided to sell the patent
to an established pharmaceutical firm and ask him how he might derive an acceptable price for
the product from the pharmaceutical company.
Analysis
ƒ Conduct Economic Value to the Customer (EVC) analysis
ƒ Surveys to potential customers in order to conduct a conjoint analysis
ƒ Chance to price discriminate among segments (if it can tweak product attributes)
ƒ Analyze past introductions of new products for historical sales trends
ƒ Focus group experiments in separate, comparable regions (to find price elasticity):
ƒ Lower the price in one and raise the price in the other
ƒ Compare the sales volume over a period of time
Round 1 DMCC Market Entry: Life Sciences
Case 29: One for the Road, Inc.
140
Prompt²
Part IX
Consumer segmentation - Inform the candidate that the new market has two
segments, healthcare providers and home users and ask him to list some differing characteristics
between the two groups that might affect the client's marketing strategy.
Analysis
Again, do not hand this to the candidate, rather allow the candidate to form his/her own opinion and
then guide them where necessary

Round 1 DMCC Market Entry: Life Sciences
Case 29: One for the Road, Inc.
DMCC Round 1
Performance
Evaluation
Expected: Accurate arithmetic with solid calculations while keeping track of information/data from
earlier parts of the case throughout the entire interview. This is a long case, they need to stay
organized and composed.

Good: All of the above, while also anticipating some of the prompts before the interviewer needs to
suggest the next step. Really piecing this case into real life and coming up with some real life next
steps.

Excellent: Candidate considered all of the prompts throughout the case, while constantly keeping
track of earlier information and referring back to the situation at hand. Never losing site of the big
picture. Lastly, maintaining poise through the extensive line of questioning throughout the case.


Market Entry: Life Sciences
Case 29: One for the Road, Inc.
141
DMCC Round 2
Case 30: DMB Satellite, Inc.
Prompt
Stefan Lessard, the CEO of a large conglomerate, finds a once-in-a-lifetime deal and buys a satellite
at a heavily discounted price. He can keep it or sell it today for a profit. What questions could you
ask to gain critical information?
Guidance
The candidate should take some time to think and then come up with some basic questions.
Candidates should recognize this case as a profitability / market extension case. The candidate
should request revenue and cost information and then calculate the profit for each situation. Later,
the candidate should consider market dynamics, and the risks associated with having a single
customer versus a diversified portfolio.

This information should be given if asked for:
- Cost of satellite acquisition: $10 million
- Market value of satellite today: $35 million
- Repair/maintenance cost: Negligible. The satellite is in good condition.
- Launch status of satellite: Satellite is still in the box and needs to be launched if the company
decides to keep it. DMB can use it for 3 years after which it becomes obsolete ($0 resale value and
non-functional).
- Costs associated with launch: Launch costs are $10 million for high orbit launch and $8 million for
low orbit launch.
- Low orbit satellites are used to transmit data between two points where the distance between
them is on the order of 3,000 to 5,000 miles (e.g. from one coast to another). These satellites are
primarily used by corporations to transmit data in batches. Low orbit signal is subject to high
interference, thus it is not used when continuous transmission quality is critical. (solution for
multiple clients option)
- High orbit satellites are primarily used for continuous transmission (i.e. in real time) where signal
quality is critical. Live global television broadcasting is the primary application. (solution for news,
broadcasters, etc. - single client option)
Market Entry
142
143
Guidance
- Life expectancy: 5 years (needs to be replaced in 5 years, as it becomes obsolete)
- Potential customers for satellite services: There are two customer segments based on use: data
transmission and voice/video transmission. Large corporations use satellites to batch transfer
information periodically during the day. The use is short and intermittent, allowing for multiple
clients. News broadcasters and telecommunications companies use the satellites for voice/ video
transmission. They require 24-hour, global coverage limiting the satellite to only one client.
Potential to lease satellite capacity: Leasing satellite capacity is a good option but not available in
this case

Prompt²
Part II
What is the best road to profits for DMB Satellite?
!
Guidance
The candidate should conduct a profitability analysis listing the 3 options. 1) Sell today for a $35M
profit, 2) Operate single satellite offering data transmission service to multiple clients, and 3)
Operate single satellite system to offer voice and video transmission.

Low Orbit Revenues
ƒ Each Year 1 customer pays $50,000 per month
ƒ Each Year 2 customer pays $30,000 per month
ƒ Each Year 3 customer pays $20,000 per month
ƒ There is some competition entering the market and you can assume that you will need to reduce
the prices for the multiple customer solution every year to attract incremental revenues. Prices
for the contract you sign in year 1, however, fall to new rates in year 2.
ƒ 80% of customers generated in a given year will remain the following year.
[Note: Data has been intentionally left out. The candidate should ask for the expected number of
customers in each of the 3 years (see solution in Analysis section)]
!
DMCC Round 2
Case 30: DMB Satellite, Inc.
Market Entry
144
Guidance
High Orbit Revenues
The high orbit customer pays $2,500,000 per month
This is a specialized market, where we have found only one potential customer who is ready to sign
up
The candidate should continue with the profitability analysis and cash flow calculations comparing
the three options: sell now, low orbit, and high orbit. If the candidate asks, the discount rate is
negligible.
!
Analysis

!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
Market Entry DMCC Round 2
Case 30: DMB Satellite, Inc.
New Customers Months CostY1 total revenue Y2 total revenue Y3 total revenue Revenue Totals
50 12 50,00030,000,000 14,400,0007,680,00052,080,000
40 12 30,000 14,400,000 11,520,000 25,920,000
30 12 20,000 7,200,0007,200,000
Total Revenue: 85,200,000
Rule: lose 20% of existing customer base in following year Cost: 8,000,000
Profit rounded: 77,200,000
New Customers Months CostY1 total revenue Y2 total revenue Y3 total revenue Revenue Totals
1 12 2,500,000 30,000,000 30,000,000 30,000,000 90,000,000
Total Revenue: 90,000,000
Launch Cost: 10,000,000
The high orbit customer pays 2.5 million monthlyProfit: 80,000,000
Calculations: Low orbit
Calculations: High orbit
145
Analysis

Summary of profitability calculations:

Option #1 - Sell today for a $35 million dollar pre-tax profit. Strong candidates will recognize that
the $10 million acquisition cost is a sunk cost.

Option #2* - Operate single satellite offering data transmission service to multiple clients:
$73,360,000 profit (pre-tax). One key trick is that in year one you'll have 50 clients, in year two
those 50 clients become 50*80% = 40 clients. In year three those 40 clients have been reduced
again to 40*80% = 32 clients.

Option #3* - Operate single satellite system to offer voice and video transmission. Requires
increased upfront investment: $85,000,000 profit (pre-tax).

* Very important: Candidate should remember to verify that company has access to capital for
purchase and launch.
Prompt²
Part III
Carter Beauford, DMB Satellites' President, wants some answers during your morning elevator ride.
What do you say?
Guidance
Option 3 generates the highest profits. However, Option 3 has highest initial cost and offers strong
bargaining power for the single client. Also, what if we lose the client somehow to bankruptcy?
There are also few available customers. The risk is high.
Option 1 gives us a nice chunk of change. But, do we have other viable investment opportunities for
the cash generated in that sale? If the market value of the satellite is $45 million, it's doubtful we
can find another for only $10 million.
Option 2 offers a diversified client portfolio, and seems to be the optimal choice


DMCC Round 2
Case 30: DMB Satellite, Inc.
Market Entry
146
Performance
Evaluation
Expected:
‡ Calm and composed despite the broad nature of the original prompt
‡ Developed a framework that is relevant to the prompt.

Good:
‡ Developed a framework that is relevant to the prompt.
‡ Listed the 3 options and used it to guide analysis.
‡ Analyzed the data well on a piece by piece basis.
‡ Final recommendation was to the point and data-driven and used facts and data to back up
thoughts.
‡ Remembered to clarify if the client has assess to capital for purchase and launch

Excellent:
‡ Placed data analysis in a table format
‡ No math errors
‡ Considered risks and benefits of each strategy. Final recommendation was persuasive and
delivered with a bottom line tone.


DMCC Round 2
Case 30: DMB Satellite, Inc.
Market Entry

Editors Note
Welcome Students, -2011 DMCC Case Book. This case book is the result of several years of development. We created this book to help you prepare for your upcoming consulting case interviews. As you may already know, case interviews are a very important part of the hiring process for consulting firms. These interviews give you the opportunity to showcase your communication, client, creative and analytical skills to your interviewer. This book was developed to complement the Duke MBA Consulting Roadmap curriculum. We hope that using both will help lead you to success during the upcoming recruiting season.

This case book could not have been completed without the valuable contributions of prior DMCC officers and our Executive Cabinet. We would like to thank personally everyone who helped to ensure this book came to fruition. We would also like to thank our friends at other MBA programs for sharing with us their old casebooks in order for us to continue to harvest new material.
Good luck with your preparation and remember that your fellow DMCC members are here to help! Please reach out to

Good luck! Heather Higgins, Brian Kiefer & Kristin Yanulites DMCC Class of 2011 Officers www.fuquaconsulting.com

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How to approach a consulting interview

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professional and confident Duration Introduction 1-2 min Evaluative Area Overall personal presence. professionalism Behavioral questions 5-10 min Be ready to answer questions about your experience without sounding rehearsed Teamwork ability Leadership Record of previous success type questions Case portion 30-35 min The interviewer will tell you about a business problem and ask you to determine a solution and clarify the problem while driving to specific recommendation Problem solving abilities Analytical skills Ability to function under pressure 4 .The consulting interview process is fairly standardized across firms What to expect / What the interviewer expects This is your first chance to make an impression Be enthusiastic.

cracking a case requires you to simplify an ambiguous problem into an easy to communicate recommendation 5 . communication skills Case portion = Solve a business problem Structured thinking Creativity and enthusiasm for work Similar to case work at consulting firms.The case portion is a realistic representation of the work consulting companies do Poise.

important 6 . communication Creativity/enthusiasm Structured thinking Sit up straight Keep eye contact Maintain a professional presence Adapt to cues Speak up Have fun the worst experience of your life Show your creative side numbers Use graphs Have a structured apporach to your problem solving enthusiasm is just as. enthusiastic. and analytical Poise.Strong candidates will be professional. if not more.

The case interview process is fairly standardized across firms Interview Stage 1 Duration 1-2 min What to expect / What the interviewer expects The interviewer will tell you about the business problem and what your objective is You should be taking notes and ask clarifying questions to ensure you heard the question correctly before moving on This is where you lay out how you will solve the problem (Quiet time is expected here. focusing only on what is relevant and high impact Ask questions that will help you address your hypothesis Summarize the case by giving a recommendation backed up by insights discovered in the case Case question introduction 2 Structure creation / Approach development 1-2 min 3 Case Analysis 20-25 min 4 Case Summary / Recommendation 2-5 min 7 . but feel free to talk through your reasoning if you are comfortable) You will be expected to come up with an approach fairly quickly. but will be able to adjust throughout Expect to drive the case.

They have enjoyed excellent performance for the past 15 years and have experienced declining profits in the past two years. They are concerned about their profitability and have hired you to explain their situation and provide recommendations to get them back on track.Hammerjack Hardware case example Hammerjack is a regional chain of local hardware stores located in numerous neighborhood strip malls and shopping centers. 8 .

a manufacturer of lawn mowers. is considering manufacturing lawn mowers in China 2.b) Our client is looking for suggestions on how to increase sales of laptop computers LISTEN to the prompt. is considering selling lawn mowers in China 1.The prompt will contain many details.b) Our client. a manufacturer of lawn mowers. and ask clarifying questions about any parts of the prompt that are unclear 1 Case prompt 9 .a) Our client.a) Our client is looking for suggestions on how to increase sales of copper 2. be sure not to miss early hints 1.

quality issues 2.b) Our client is looking for suggestions on how to increase sales of laptop computers Differentiated product: new features. a manufacturer of lawn mowers. bundling The topics will all be covered in future DMCC sessions 1 Case prompt 10 . market dynamics 2. profit margins. market size. demand 1.Small differences will have a big impact on the case 1. competitors. customer expansion. new segments.a) Our client. is considering manufacturing lawn mowers in China Internal opportunity: cost cutting.b) Our client. a manufacturer of lawn mowers.a) Our client is looking for suggestions on how to increase sales of copper Undifferentiated product: pricing. is considering selling lawn mowers in China External opportunity: revenue growth.

costs Task: diagnose and suggest Balance active listening w/ pre-planning 1 Case prompt 11 . local player.Hammerjack hardware: prompt dissection Small. How do they compare to Home Depot? Retailer number of customers & $/visit Are there other areas they could be in? Hammerjack is a regional chain of local hardware stores located in numerous neighborhood strip malls and shopping centers. They have enjoyed excellent performance for the past 15 years and have experiences declining profits in the past two years. Profits = revenue . They are concerned about their profitability and have hired you to explain their situation and provide recommendations to get them back on track.

E.Candidates should use a hypothesis driven & M.C.C. Collectively Exhaustive Approaches should explore disparate areas (mutually exclusive) while covering all of the options (collectively exhaustive) Demonstrates a thorough/systematic approach to reviewing all of the options growth.E. Mutually Exclusive. & X has a sustainable advantage (3 Cs) The best answers start with a hypothesis.E. proving the hypothesis wrong should be just as valuable as proving it right M. and use a set of M.E. assertions to prove whether the hypothesis is true or not 2 Structure 12 .E. approach to develop a structure Hypothesis Driven Approach Establish a hypothesis/answer/hunch first Follow with the steps needed to assert whether the answer is true If constructed correctly.C. the competitive landscape is not set.E.

benchmark Take the time to read some case books to find out what works for you 2 Structure 13 . and product mix 3. New opportunities JVs acquisitions or C Var. sales levels. Cost look at main FC & VC cost drivers 2. Revenue examine pricing. Cost (VC) Ind.Candidates should develop a Tree based Price ($) R Quantity (Q) Product mix Fixed cost (FC) Descriptive 1.

$ R Q Customers Competitors Mix FC C VC IND BM to examine how our different types of customers and our competitors effect the total number of goods information on the cost structure of similar companies.Hammerjack example. 2 Structure 14 . cont.

C. approach to develop a structure 3 Case Analysis 4 Summary / Recommendation Try to drive the analysis. suggest a few areas for further exploration/review after you have a given your recommendations 15 .E.E. but look for cues from the interviewer Use your framework! Use tables / graphs / diagrams to display complicated information Distill your summary/recs to a few sentences highlighting the most important findings Refer to numbers/findings from the analysis If time permits.Candidates should use a hypothesis driven & M.

we still have a loyal contractor segment because they only shop once a year Recommendation: I recommend that we offer training to improve our employees understanding of the local communities and work to align our products to our loyal contractor segment's needs 4 Conclusion / Recommendations 16 . Conclusion: retailers. cont. however.Hammerjack example.

e. core consulting competencies) Case interview Not having a clear plan/structure (Probing for information without reason) Drilling too deep into unimportant information Not picking up on interviewer cues Getting lost in the numbers Being too rigid/structured/mechanical (i. not demonstrating that you can think on the spot) 17 .e.Beware of common behavioral and case interview pitfalls Behavioral interview Not being prepared because of too much case focus Being vague/not specifying the impact Not discussing skills that support candidacy (i.

CASES 18 .

4= 75th-90th percentile.Case Interview feedback form Case _______________________ Case type ______________ Interviewer ____________________ Execution Structure Logical approach MECE Appropriate drive to solution 1 2 3 4 5 Comments: Case start time __:__ Framework development Framework explanation Case discussion ______ min ______ min ______ min Quantitative Ability Speed Accuracy Comfort. reaction to mistakes 1 2 3 4 5 Comments: Weaknesses Behavioral (optional) Quality of star stories Length Clarity Relevance 1 1 1 1 2 2 2 2 3 3 3 3 4 4 4 4 5 5 5 5 Comments: Key: 1=Bottom 10%. 3= middle 50%. 5=Top 10% 19 . 2= 10th-25th percentile. reaction to mistakes 1 2 3 4 5 Comments: Case end time Strengths ___:____ Overall Rating: 1 2 3 4 5 1 2 3 4 5 Business intuition Practical Comments: Insightful Breadth & depth across multiple functions Creativity Communication Professionalism Poise Confident-Persuasive Articulate-concise Client ready 1 2 3 4 5 Comments: Written Clarity of writing and page layout Ability to refer back Comfort.

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ase Material Table of Contents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

ACCOUNTING 21 .

How will you help it solve its problem? This is a financial accounting case focused on a medical device company.Case 1: Southwright Med Device Accounting Deloitte Unknown round A medical equipment manufacturer in the southeastern U.S. Read this information well before you administer the case. obsolescence. Offer prompts when necessary and provide the following information if he/she responds correctly and directly to the stimulus offered. The basic objective of this case is to test knowledge of the Balance Sheet and how it applies to business operations. Manage the case discussion and allow the candidate to formulate a plan based on the assumptions and key evidence provided below (case-specific). just much more sophisticated and expensive. The division manufactures equipment for arthroscopic surgery. 22 . An ideal answer would consist of: sales. poor forecasting. There are no handouts so the candidate should rely on the general data given/created by the interviewer. prompt him/her to discuss possible reasons for inventories to be high. has called you in because it feels its working capital requirements are much higher than those of its competitors. The high inventory problem can be traced to a division acquired by the client about two years ago. The discussion should be conversational but exacting on details. namely capital equipment and blades which sell are similar to razors and razor blades. Inventory: If the candidate asks about inventory and indicates that the inventory could be very high. CA & CL: Let the candidate identify the need of Current Assets (CA) and Current Liabilities (CL). Prompt Guidance Company: Provide this information if the candidate asks for the background of the company: The company is made up of three divisions.

explain to the candidate that technology has been changing rapidly and the rate of obsolescence is extremely high.5 years of capital equipment finished goods inventory while NONE needs to be carried since these items can be manufactured after receiving the order (i. while certain aspects of the product may have changed substantially. Alternately write off the non salvageable component parts. manufacturing lead times. Once the candidate provide satisfactory answer.Product demand. the client now finds itself loaded with obsolescent finished goods inventory. The client has 2. The finished good product is no longer sold. customer expectations on order lead times.Case 1: Southwright Med Device Accounting Deloitte Unknown round If the candidate asks for the reasons for inventory problem. ask to wrap up. other are just as likely to have stayed similar to what was previously used and could be salvaged. Selling off the inventory to distributors in less advanced healthcare markets is another way to salvage some of the investment. 23 . Factors that should be considered . Guidance An ideal recommendation should touch upon these points: Determine appropriate levels of inventory such that excess inventory is reduced and customer demands are met.) What are the next steps? An ideal answer would look like this: Prompt Part II Guidance With respect to technology. One could dismantle the product and reuse parts to manufacture the new devices.e. Then ask the candidate to recommend correction actions to remedy the problem. As earlier sales forecasts (shortly after the acquisition) had been overly optimistic.

Excellent: The candidate identifies CA/CL early on and explains all possible elements under CA/CL and their relevance to the problem. The candidate asks questions regarding company and indentifies Inventory as a problem. The candidate is also able to quickly identify the problem with the inventory and explores all possible reasons for the problem in a very structured way.Case 1: Southwright Med Device Accounting Deloitte Unknown round Expected: The candidate clearly identifies the importance of CA & CL and explores each of these two further. he/she recommends some corrective actions. The candidate is also able to recommend next steps for prompt2. Performance Evaluation Good: The candidate not only performs the analysis in a methodical way identifying all major items but his/her recommendations also are very close to the ones stated earlier. After the candidate gets the information on inventory problem. The candidate does not need more than couple of prompts in pointing out all factors and reaching a conclusion. The 24 .

MARKET SIZE ESTIMATION 25 .

or 75 million. assume that at least 1/2 would read a magazine or ~40 million.000 customers. bottom-up.000 customers). GQ Magazine). ask him/her to compute the calculation. or about 150 million people.000 customers) and 50% buy at the newsstand (100. assume a cover price of $4/magazine at the newsstand and $2/magazine for a subscription. or 200. one approach is outlined below. Approximately 1/2 of them are male. or 4 million target customers.to 55-year-old men in the country. Various methods may be used to estimate the answer.g.50-$5. Based on other magazines selling for $2. Based on a normal distribution with the average life span of 80 years. approximately 1/2 of the population falls between 25-55. Once his /her structure is in place. Both businesses are profitable but not growing quickly. He wants to start a third monthly magazine in the US targeted at 25. Now make some assumptions on how many customers will buy at the newsstand versus subscription: assume 50% subscribe (100. While there are no right/wrong answers in market estimation cases. His stated goal is $12 million in circulation revenues in the first year.00. As a new magazine assume that you can generate a 5% share of the men's magazine market in year one. Given the wide range of magazines on the market assume that only 10% of magazine readers would want to read a men's journal.to 55-year-old men (e. Provide these information on request: The total US population is approximately 300 million. Of the 75 million 25. the Prompt Guidance Ask the candidate to walk you through his thought process top-down. 26 Analysis . Is this possible? work with those estimations.Case 2: Polly Publishing Market Size Estimation DMCC Unknown round Your client is the CEO of a publishing company producing a line of educational magazines and a line of women's magazines.

it does not make good business sense to launch the magazine. The candidate proceeds with the assumptions in the right direction and estimates the market size without any prompts from the interviewer.Case 2: Polly Publishing Market Size Estimation DMCC Unknown round Monthly revenues amount to $200.000 (newsstand) = $600.000 (subscription) + $400. Good: The candidate has a good plan to tackle the problem. Expected: The candidate recognizes that this is a market estimation case and makes the appropriate assumptions and proceeds in a logical and structured way. Analysis This would generate total annual revenues of $600. For simplicity assume that all target customers buy a magazine every month. 27 . Conclusion: In this case. The candidate explains his/her plans at the the candidate reaches some conclusion.2 million. Performance Evaluation Excellent: Apart from the criteria above.000.000 X 12 or $7. the candidate also reaches a very sound conclusion based on the data quick in identifying all the elements of the problem. given the CEO's stated goal of $12 million in circulation revenues.

Purchase Frequency: the average golfer plays 20 times per year and uses four balls per time. Good: The candidate is able to point out specific weaknesses in his approach and how those would affect his answer. A good rule of thumb is to encourage the candidate to use round numbers. The purpose of this exercise think logically. The candidate should make reasonable assumptions (ask for logic behind assumption) to arrive at the answer. etc. you sit on the plane wondering about the size of the market for golf balls in Japan. Proportion that play golf: 1/5. and what drives demand. Excellent: The candidate will show poise and confidence and quick business intuition . 28 Performance Evaluation . and then come up with reasonable assumptions about the inputs that she needs. Analysis There is no one right answer. The candidate will demonstrate confidence in his logical thought process. encourage her outline a general framework for how she is going to solve the problem. Expected: The candidate will use a logical linear thought process to arrive at a market size and recognized the golf ball sales are driven by end user demand. Having had no time for background research. business advertising. If asked. The analysis below is an example. He will also recognize other potential drivers of demand such as golf course needs. Guidance If the candidate struggle. The estimated market size for golf balls in Japan is 2 billion.Case 3: Japanese Golf Ball Market Market Estimation DMCC Unknown Round Prompt You are going to visit a client who sells golf balls in Japan.000 million. 125 * 1/5 * 20 * 4 = 2. the population of Japan is 125 million. How do you answer these questions? There is no one right answer. Your plane lands in fifteen minutes.

000 million liters Ratio 60 million liters of diapers/ 3. not from the interviewer: Volume percentage = Diapers (volume) / US household garbage (volume) Numerator Population of the United States: 300 million Proportion of population that are disposable diaper-wearing children: 10% = 30 million Number of diapers used per day: 4 = 120 million diapers per day. Ask the candidate to walk you through his thought process top-down. ! with those estimations. one approach is outlined below. bottom-up. While there are no right/wrong answers in market estimation cases.000 million mL = 60 million liters Denominator Population of the United States: 300 million Average volume of household garbage can: 10 liters (or use gallons if preferred) Average number of emptied bags per day: 1 = 10 liters per day Total volume of garbage/day: 300M * 10L = 3. Various methods may be used to estimate the answer. The following is all generated by the interviewee. Once his /her structure is in place.000 million liters of garbage = 2% Analysis 29 . ask him/her to compute the calculation. They would like you to estimate the volume percentage of disposable diapers in the total US household garbage. the Prompt Guidance -solving skills. Volume per diaper: 500 mL (or use another number in gallons/oz if you prefer) Volume thrown away per day = 500mL * 120 million = 60.Case 4: Disposable Diapers Market Estimation DMCC Round 1 You have been retained jointly by Pampers and a federal commission on waste management.

30 . Assumptions will be clarified and based on reasonable logic. Excellent: In addition to the above. Performance Evaluation Good: Candidate will use numbers or round appropriately to simplify calculations.Case 4: Disposable Diapers Market Estimation DMCC Round 1 Expected: Candidate will develop a structured approach to finding a solution. the candidate will evaluate his/her final number and provide explanation as to how changes to assumptions would affect the estimation.

bottom-up. Estimate that these people chew two packs per week.000 million (or 12 billion) packs per year. Ask the candidate to walk you through his thought process top-down.000 = 12. estimate the total chewing gum market to be 6. The following is all generated by the interviewee.5 packs/week * 240 million people * 50 weeks = 6. Adding these two figures. the Guidance -solving skills.000 million packs in terms of dollar sales? Estimate for average price of pack: $0. They comprise roughly 20% of the population. or 240 million) estimate a usage rate of one half pack per week: 0.S chewing gum market? Unknown Round Prompt with those estimations.000 + 6. We have the volume. For all other users.Case 5: Chewing Gum Market Estimation DMCC How would you estimate the size of the annual U.75 = $9 billion Analysis 31 . what about the revenue? How much is 12. Once his /her structure is in place. one approach is outlined below. or 60 million. Now check for reasonableness. While there are no right/wrong answers in market estimation cases. Estimate number of packs/year: 2 packs/week * 60 million people * 50 weeks = 6. ask him/her to compute the calculation.000 million packs. (80% of 300 million population. 12 billion packs * .75. not from the interviewer: Population of the US: 300 million The heaviest users are between the ages of 10-20. Various methods may be used to estimate the answer.000 million packs.

Case 5: Chewing Gum
Market Estimation DMCC Unknown Round
Expected: Candidate will develop a structured approach to finding a solution. Assumptions will be clarified and based on reasonable logic.

Performance Evaluation

Good: Candidate will use numbers or round appropriately to simplify calculations. Excellent: In addition to the above, the candidate will evaluate his/her final number and provide explanation as to how changes to assumptions would affect the estimation.

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VALUATION

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Case 6: Scotch Bar
Valuation DMCC Round 1
You are sitting in one of Chicago's oldest scotch bars with a fellow intern. It is a Friday night after a busy week at your summer internship. The weather is mild a perfect summer evening. While enjoying one of the bar's finest stogies and sipping an 18-year old McCallen single malt, your friend asks you how much you think the bar is worth. Using a back-of-the-envelope calculation, how would you go about determining the value of this bar? ! This is an estimation case. Because the candidate does not know much about the bar he/she the bar is the present value of future cash flows.

Prompt

Guidance

The following information should be given if requested: Product Mix and Pricing: The bar sells two things, liquor and cigars. The average cost of a cigar is $9 and the average cost of a drink is $12. (Note: these average cost numbers will prove irrelevant, but in cases one is sometimes given irrelevant info.) Capacity: The maximum capacity is 100 people. Location: The bar is located on one of Chicago's busier streets for foot traffic. Hours: The bar is open Tuesday thru Sunday from 5 pm until 2 am. Staff: A bartender, a waiter, and a waitress. All three were there the entire evening. Tax Rate: 40% Discount Rate: 13% Annual Growth Rate of Cash Flows: 3%
The candidate will most likely not ask for all of this information upfront. Allow the candidate to make some assumptions about revenues. One way to project revenues is to estimate the number of customers per day or per week and multiply that by the average expenditure of each customer. Watch for realistic assumptions and logical thought progression. ! 34

Case 6: Scotch Bar Valuation DMCC Round 1 Ask the candidate what might drive variation in these numbers.2".$%$$$&'()*+ BC<@D@@@ 12*&/(3/4225 FMJ?JJN/'*/MOJ?//P*2/3.')7/")-/0%882.*/H/BIDJ@@/3(. general maintenance. the revenue should add up to $568. If the candidate does the math correctly.*/")-/0"&%..000. !"#$%#"&'()* +.A !"#$%$$$&'()*+ UOCF/B<C@D@@@/H/BME@D@@@ !-./K/0"&? 06. and fixed costs are $120. BIDJ@@F<=/4225*/H/B<C@D@@@/L(&"#/ 9/:.000. L(&"# @?E=FBE@D@@@/H//!.-"./'*/$#(*2-A/H/BUD<@@ BUD<@@/F/<=>225*/H/!. but before the candidate does a substantial amount of calculation./+. Under fixed costs the candidate might consider rent. and possibly employees.$%$$$&'()*+& Guidance +"##/")-/4')&2. Have the candidate brainstorm possible fixed costs and variable costs. The only real variable cost is the cost of goods sold. ! 35 . insurance. There are two components: fixed costs and variable costs.%$$$&'()*+ BMCED@@@ The candidate should then proceed to costs. liquor license.*/9T()-". The answer is days of the week (Fridays and Saturdays are typically busier than other days) and seasonality (people tend to be out more during summer than winter). management.* BCDE@@F</G". Allow the candidate to brainstorm costs before revealing the following data: Variable costs are 20% of total revenues.%"#*/<=/>225*?// =@/>225*/')/"/.'-". hand the candidate Exhibit 1."$&'()*/>Q2)2R2.'-"./6(**'S#2 BCDE@@FMOJF/C/-". Prompt part II While the candidate talks you through his/her approach.

400. an easy calculation.000 / . accurate arithmetic. Excellent: .A great candidate will drive the process forward and recognize that they need to figure out a stream of cash flows going forward.10. Use the CF / (r g) formula for a perpetuity.Case 6: Scotch Bar Valuation DMCC Round 1 After the candidate has subtracted costs from revenues. 36 .000 for ease of calculation in next prompt). The interviewer may have to nudge less-savvy candidates toward the next step (discounted cash flow analysis). Thus. At this point a great candidate will drive the process forward and recognize that they need to figure out a stream of cash flows going forward..Accurate arithmetic Performance Evaluation Good: . the answer is around $200. Do not forget that we need the after-tax cash flow number (approximately $334. the candidate must estimate the cash flows from the business and discount them back using a perpetuity formula. he/she should have an income of $334. whatever numerator the candidate arrives at should be divided by . The discount rate typically used for bars of this genre -the rate of inflation.10. Accurate valuation given assumptions.13 . or $2 million. You now have the annual cash flows generated by the bar.Drive the process forward.400 (or $200.000 * (1-40%)) = $200. Guidance Prompt How does one perform a valuation of the business? To perform a valuation in this case. In this case. Analysis Expected: .03 = .

5+.04 51$6+-4'+76'3+&816+-4 904&':./01+20'3+.-'.<0= +*"&-.'+76'<$7&01 7/0142>?&234&526:042>?= 7A<?6&-..&580139&234&5:.<0#& $@.&580139&234&5:.'<00= 3>1$72'+76'38??01 !"#$%%& '(&)*+.&/01&234&52 7580139&234&5:..&B<<C= 37 .&-.Case 6: Scotch Bar Exhibit 1: Daily sales !"#$%$&'()'*+$..&-.

legal.Case 7: Chemical Brothers Int. What issues need to be addressed in evaluating an M&A proposal? Qualitative 2. Valuation DMCC Unknown Round Your client Chemical Brothers International (CHEMBRO). production of plastics. What is the valuation? Quantitative What strategic issues need to be addressed in evaluating an M&A proposal? Guidance Prompt Part II able to apply correct frameworks to diagnose the issue at hand. is a major chemical producer. has Prompt industry. A strong candidate will recognize that this case deals with internal factors (synergies and economies of scale) as well as some external factors (opportunity costs and industry attractiveness). and perceptual barriers 38 . Plastics of America (POA). The candidate should include some of the following elements in his framework: Guidance Market Attractiveness / Industry Potential Operational Analysis (Synergies/Economies of Scale/ Network Externalities) Organizational and cultural compatibility Capability to enact acquisition: Financial. Both companies are bulk commodity chemical producers. Should Chembro acquire POA? There are two issues in this case that should be addressed separately in the suggested order: 1.

prices have declined rapidly Competition / Industry Analysis There are 10 major producers. Valuation DMCC Unknown Round The candidates framework should cover the following buckets. POA is also currently working at 75% of capacity The two largest competitors are highly diversified with this particular product line representing no more than 20% of their revenues Highly regulated industry with expensive pollution control equipment High barriers to entry because of the low profits and high investments required Product value proposition / brand portfolio The price has been driven by self-destructive cuts from the leaders to gain temporary share points We do not foresee the development of any significant byproducts. prompt them with a question to get them on track. the largest one with a 35% share. Other possible uses: None. POA is slightly above break-even. the rest are operating at break-even or at a loss Relative capacity utilization in the industry is 60 to 70 % and has been so for the last 3 years. Analysis 39 . If the candidate is missing one of the buckets. the remaining share is divided amongst others The two largest competitors earn a small return.Case 7: Chemical Brothers Int. Allow the candidate to ask for information about the major categories before giving the information. number two has 25%. and POA is third with 20%. Market Analysis End-users come primarily from the automotive industry Market size has been slowly declining over the last five years Within the last couple of years.

Great economies of scale exist in marketing and transportation. Valuation DMCC Unknown Round Analysis Finance and Operations Cost is based on size/efficiency/age of plant. Answer: Higher discount rate means lower valuation. Industry Attractiveness: not particularly attractive. Within the industry. unless the larger competitor can use economies of scale and dominant position for economic gain. You may allow the candidate to use 10% rate of return and not 9% (12% Return on Capital 3% Growth Rate) if requested.Case 7: Chemical Brothers Int. provide the candidate with Exhibit 1 when the conversation shifts to the topic of valuation. lower discount rate. Prompt Part III Guidance Ask candidate to compute the present value of acquisition. There are several operational improvements that could be implemented. and management has not been aggressive in its pursuit of quality and cost controls. POA is in an above average position. to gauge his understanding of the concept.! NPV analysis: Based on the information from Exhibit A. (Not quantifiable) Operational synergies could represent an additional $30 million in profits After discussing the above-mentioned qualitative aspects in some detail. etc. the net present value of the target company is = $90M / (10%) = $900 million (assume perpetuity). which is less than the purchase price tag of $950 million.! Analysis 40 . However ask him the effect on NPV of a higher vs.

Valuation DMCC Unknown Round Expected: Candidate identifies that the purchase price is higher than the NPV. Consider what multiple of operating profits other acquisitions been valued at? 41 . the potential economies of scale and tax advantages from funding the acquisition with debt could be seen as other sources of revenue.Case 7: Chemical Brothers Int. as well as the previously calculated NPV. Therefore the $900 million + [Synergies 30M/(12%-3%) = 333M] = $1. Competitive and regulatory responses to block the merger are reasonable to assume due to concerns over industry concentration.233M value of target > 950 price tag. Excellent: An excellent candidate will include some of the following additional insights. Performance Evaluation A more comprehensive NPV would include the new cash flow from synergies. In addition to the cash flows expected from synergies. Good: A strong candidate will recognize that this case deals with internal factors (synergies and economies of scale) as well as some external factors (opportunity costs and industry attractiveness).. Benchmarking the value of the POA acquisition to other similar M&A in the industry. These considerations further improve the deal. Recommendation wrapqualitative (industry and compatibility analysis) facts.

of employees Return of capital Market risk premium Growth rate $950 M ! $90 M ! "#$!%! &$$$! '&(! )(! #(! *$(! Tax rate 42 .Case 7: Chemical Brothers Int. Exhibit 1 Purchase Price Annual operating income before tax Cash No.

Money means that Yahoo! is making ecommerce transactions. creative solutions.6 billion. The company spent $1. It wants consumers to go to Yahoo! and explore all more likely to be clicked. an online video community. Core Competencies and Overall Situation Analysis . by Google for $1. To take advantage of this brand-name recognition.6 billion because it believes it will be able to monetize this traffic somehow. one approach is outlined below.The candidate should think about the acquisition against the backdrop of the core competencies that each firm brings to the table. You are asked to analyze the recent acquisition of YouTube. A quality candidate will imbue the discussion with structure. You Tube is a move toward creating a community. The acquisition of YouTube by Google is a competitive threat. 43 Analysis . Is this move a competitive threat for Yahoo? Prompt Guidance understanding of M&A activity and overall business knowledge/judgment. or selling subscriptions to premium online services.Case 8: Internet Portal Valuation Valuation Katzenbach Round 2 You have been hired by the internal strategy group at Yahoo. The case offers the candidate several opportunities to be creative in problem-solving. There are no absolute right/wrong answers. Yahoo has positioned itself as a destination site. It tries to promote a sense of community among its users. and demonstrate knowledge of current business landscape. Google pioneered advances in adbased software that allowed businesses to better target consumers segments based on the particulars of wants to monetize all this traffic. google search.

There are no absolute right/wrong answers. some ideas are outlined below. This would involve a cross-selling strategy with a partner Create backdrops (or allow open source coders to create them) from historical events or sporting arenas or famous movies. and ideate creative solutions Analysis Suggested Answers: Create an offering to counter YouTube for the Yahoo community Buy Google Find a way to share real-time videos among friends from mobile devices or wristwatches.Case 8: Internet Portal Valuation Valuation Katzenbach Round 2 Competitive Response Inform the candidate that Yahoo wishes to counter this threat and assume that feasibility and cost are not a concern at this point. Ask the candidate to develop a competitive response and give candidate creative license. Prompt part II Guidance The candidate should ask for a moment to collect his/her thoughts. and enable people to be able to re-enact scenes or create new ones (An example of this might be a rock stadium backdrop and you and your friends can jam on instruments and make a rock video) 44 .

Excellent: The excellent candidate will offer insightful. The candidate will offer creative solutions as well as a deep understanding of the M&A market and the implications for all parties in the deal. Acquisition Cost = $1. Analysis Performance Evaluation 45 . Google will break-even. structured answers throughout and show comfort in both driving the case and being prompted. the candidate will offer structured and well developed answers throughout in addition to demonstrating a good understanding of the current business landscape. structured answers. Ask the candidate to determine if Google can break-even with its current user base? Guidance Information to be given if asked: User base: 40 million Discount rates should be ignored Assume no user base growth or attrition. Margin/user needed to recover acquisition cost = $40 Actual Margin/user = $100 per year Therefore. Good: A good candidate will differentiate themselves by offering creative solutions in addition to a baseline set of core case competencies. Expected: .6bn Therefore.Case 8: Internet Portal Valuation Valuation Katzenbach Round 2 Prompt part III Provide candidate the hypothetical situation in which Google decides to proceed with the YouTube acquisition and believes that it can charge $150 per user annually and make 67% margins. At a minimum. and showing an understanding of the current landscape.

Ask them to brainstorm revenue streams before giving them details: Revenue per cinema per day ($8K) The candidate should calculate this number Candy bar ($800) % of people buying from CB: 20% Avg spend: $10 Prompt Ticket sales ($6K) Price per ticket: $15 # of sessions per day: 4 Number of tickets (400) Tickets / session (90=~100) Occupancy rate: 50% Advertising ($700) % of other revenue: 10% Guidance Average cinema size (180) Rows: 12 Seats in row: 15 46 . Key questions the candidate should ask: What is the annual revenue for the cinema chain? What revenue improvement opportunities or risks exist? Make the candidate build up to an annual revenue.0B per year in revenues for the next 5 years for the deal to generate a profit. The CEO has asked Bain to determine whether this could be an attractive opportunity. The opportunity to bid for the cinema chain closes in 2 hours and you need to recommend to the client whether they should proceed with the acquisition or not. which has exhibited poor growth in recent years. Growth options in the current business are limited. The other Bain work streams have calculated that the business will need to generate $2.Case 9: Cinemas Valuation Bain Round 2 Our client is a global cinema chain with $20B in revenues. The CEO has been given the opportunity to acquire a private Australian cinema chain.

from both competitors as well as substitutes 47 . Looking at revenue drivers Possible drivers that could change are: Occupancy Sessions per day Future popularity of movie-going Analysis % patrons who buy at Concession Booth (CB) Average spend at CB Other new revenue sources Price per ticket Market share Ability to extract additional discretionary spend Competition.4B) Candidate should calculate this number Round 2 Guidance Revenue per cinema (~$2.Case 9: Cinemas Valuation Bain Cinema chain revenue ($1.8M) Number of cinemas (480 = ~500) Revenue per day: $8K Days in year (365 = ~350) # of cinema complexes: 48 Average cinemas / complex: 10 Candidate should now push on to test the market dynamics and future revenues.

but not impossible to change Candidate should comment that internal factors are easier to influence E.Case 9: Cinemas Valuation Bain Round 2 Candidate should comment that it would be difficult for the CEO to change external factors E.e.g. i.g. Good: Candidate does the above while also recognizing the levers that could either increase or decrease the annual revenue recognizing which levers would be easier to influence and which would be more difficult. offering more expensive tickets (premium seating) E. it would be worth $800 per cinema. or an extra 10% Expected: Candidate is able to recognize 90% of the inputs that would make up annual revenue. He/She is able to drive to the revenue answer without being prompted to move from one number to the next. market share is difficult. if you could get 20% of customers to buy from the candy bar. size of the market would be quite stable. or declining E.g. increasing the prices of advertising Candidate should then suggest rough magnitude of changes E. Excellent: Candidate starts to assess the magnitude of change. if we could increase the % of customers that buy from the candy bar it would be worth $800 per cinema.g. This is showing a true Analysis Performance Evaluation 48 .g.

PROFITABILITY 49 .

All three competitors sell to the same customers. However. Price Client's product is priced higher than others. Your client has lost significant market share to its two main competitors over the last few years. Market share Current: Client has 40% of the market. competitor #1 has 30% competitor #2 has 15%. tractors are not commodity items and a few differences do exist. 50 . What questions would you ask of your client to help them solve their profitability problem? The candidate should outline a general profitability framework (P*Q competitors as a necessary piece of understanding. Trends: Five years ago. your client had 60% of the market. Differences that allow for a premium price: Client has a strong reputation/image of quality in the market and the market has always been willing to pay a premium for that reputation because it implied a longer lasting more reliable product. with the remaining 15% belonging to many small manufacturers. This is critical for some farmers because they cannot afford to have a piece of equipment break down.Case 10: Slick Hick Farm Equipment Profitability DMCC Unknown Round Prompt Your client is Slick Hick. is losing money. (FC + VC*Q)) and identify Guidance Customers . a large agricultural equipment manufacturer. Its primary product line. This has always been the case. Competitors . Features The products all have the same basic features. competitor #1 had 15%. and competitor #2 had 10%.Two direct competitors. farming tractors.

Reason for suppliers charging higher prices for the same products: They're not--the prices have increased as a result of product improvement efforts. The specific VC driving this is finished part prices. Candidate should explore reasoning for profitability decline by asking the following questions: Change in sales revenues: Revenues are down. but they are not.Case 10: Slick Hick Farm Equipment Profitability (PQ (FC + VC*Q)) DMCC Unknown Round Analysis Revenue insight: Quantity decrease driven by market share loss has driven revenues down Costs insight: VC increases are driving unprofitability. The client assumed customers would pay more for better products. Change in supplier labor costs: No change. Change in sales quantities: Quantity is down. The client does not know why material prices have gone up so staggeringly. Client has tightened tolerances and improved the durability of component parts. Also. Change in finished part prices: Finished part prices have gone up. Candidate should then probe on why finished part prices have gone up. Change in price: Prices are up. Change in costs: Costs are up Change in fixed costs: Unchanged. 51 . Change in variable costs: Variable costs have increased tremendously. Customer willingness to pay for product improvements: Client assumed yes. no change in suppliers. Guidance Candidate should deep dive on variable cost breakdown by identifying potential buckets Type of operation (manufacturing or assembly-only): Primarily assembly. Change in raw material prices for suppliers: Not to client's knowledge.

Before scaling back their product improvement process. The client needs to incorporate a cost/benefit analysis procedure into its product improvement process. but customers do not place a high value on the improvements.Market share probing Performance Evaluation Good: .Case 10: Slick Hick Farm Equipment Profitability DMCC Unknown Round Analysis Prices have been raised to cover the costs of improvements.Key in on variable cost increases and identify key buckets that go into building a tractor Excellent: .Making recommendations for cost repositioning and assessing market risks 52 .Asking probing questions on why part prices have increased and if these increases have been passed to the customer . Expected: .Identify need to understand profitability decline in terms of changes in revenue and cost levers . The client should also evaluate their marketing plans to ensure their customers are aware of product improvements and understand their value. the client needs to evaluate competitor's R&D and product improvement positions.Profitability framework . so the price increase has resulted in a drop in sales.

$/0(41+.'("#$%).+5!-)(5+!0)$/$-1$4.$35!14!3()*+!*)$.+8$ 53 .Profitability DMCC Round 1 Prompt The salted food division at Nabisco has been steadily losing market share over the past two years.!.!6$).%.%)D$=52D".!24.!(<$2-!0)$/$-1$4:!.-1$4.2-!-$!)+52.+:!0)$/$-1$4.+!(<$2-!=>?!$6!-#+!/()7+-!.#!.#(4*+5! :+5&"$'*$1-+)D"$%)$.-.#(14.!#(.+!0+)!E2()-+)8! F%(%)D$'*$0#'('.7+5:!0)$.(3+.!.-1$4.$/03+-+!314+. however.-"$1+)2%2+.+!.2)!(-!-#+!+45!$6!+(.-$/+)!(-!3+(.-"$&%.%')$*#'($1'(0".%')&&!F)$/$-1$4. from a high of 20% to the current level of 18%.:!+-.#(4*+.!+(.-.%+.2(33D!$.(3+.%')6!"(3+.#(44+3.<-%=%.$.-.1.#()+8! A%**"#").1-. Profits as a percentage of sales.-$)+.5+.:!<2-!42/<+)!$6!$2-3+-.14*!.:! .!6$).%.8! ! C"+&')$*'#$&+/"&$15.(3+.#(44+3. have been growing.+!.-!$4.!()+!-%$!/23-14(-1$4(3!.$4.+)-1. What could be causing this?! Guidance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

Most of the marketing reduction was in trade promotions. indicating a missed opportunity for new products in the market. profitability increased due to lower costs. The reduction in trade promotions brought about a loss of shelf space.Profitability Sample framework: DMCC Round 1 Analysis External Factors: A decrease in market share may suggest Competitor dynamics: Existing players have increased market share New players have entered the market Market dynamics: Market is growing Client is unable to capture the growth. Lastly. Also. but it may not be sustainable. which led to a decrease in market share. Product is sold through grocery chains and convenience stores. which are traditionally driven by periodic trade promotions. Excellent: The candidate will synthesize the information provided and present a clear and concise summary to CEO John Keebler on how and why the sales channel/sales force/promotions have 54 . Expected: The candidate will put together a framework and walk the interviewer through his thought process before asking relevant questions. Why? Internal Factors Market share loss may suggest that the company is not spending enough on promotions Growing profits may suggest that the company is reducing cost Potential Conclusion The data show a large decrease in sales force and marketing expenditure. Performance Evaluation Good: The candidate will recognize this as a case dealing with company revenue-cost structure (internal). as well as some external factors. The market has been growing. the product line did not change in a product category where new products and line extensions are routine.

Nabisco DMCC Round 1 Exhibit 1 Growth in Total Market Exhibit 2 55 .Profitability Growth in Total Sales.

Profitability Company Cost Structure DMCC Round 1 Exhibit 3 Cos t Raw Ingredients Conversion costs Distribution Marketing Sales force Pre-tax profit Current 28% 24% 8% 16% 7% 17% Two Years Ago 26% 24% 9% 18% 9% 14% 56 .

Address the problem as an operations/value chain problem and try to identify the links and levers that could influence the efficiency. The Vice President of procurement for the government division called your consulting firm to advise them on how to spend less money on the purchased items and operate more efficiently. dorms. The procurement for the government division spends $6 billion on the items they purchase. 1. 2.technology Guidance 57 . Each division has its own procurement department. They resell those items for a profit to the Government. The candidate should generate themes within the company to potentially explore. Slaughter Profitability Accenture Round 1 Prompt customer is the US Military. Here are four killer ideas.Case 12: Sgt. 3. The candidate should take some time (~1 min) to draw a framework and walk through the procurement more efficient and determine how to reduce procurement costs. Construction includes dining facilities. The efficiency of the workers The synergies within the company the collaboration with the Oil & Gas division The efficiency of the information flow . The contractual relationship with the suppliers and the government. and infrastructure projects for troops around the world. 4. Your client is offering construction services to help the US military to build bases.

Case 12: Sgt. Note: The interviewee should ask about the volatility of demand and infer that a long-term contract with the supplier will be less beneficial if Government spending on military bases is volatile (for example. a single supplier could be grounds for diversification to improve negotiating power. They do not need to worry about the competition as long as they maintain the present prices and quality. Also. The company is the main supplier for the Government. The company has only one supplier. demand will drop). Slaughter Profitability Accenture Round 1 First we need to understand the nature of the business relationship between the suppliers and the Government. long-term or short-term? What are the advantages/disadvantages of being in long-term contracts or short-term? How constant is the demand? Does the government always spend $6 billion on this contract or is it expected to grow or decline? How many suppliers? Is there volatility in the demand or supply? Give the candidate the relevant information below. The client is not the only customer for the supplier but is one of the largest. if the Iraq war ends tomorrow. They are the best at what they do. Guidance Contracts between suppliers and the Government division are short-term in nature. What information do we need to accomplish this? Prompt Part II Possible questions and analysis: What kind of contracts do they have. The supplier offers the best cost/quality ratio and Sgt. Slaughter would like to keep it. if possible. 58 .

Remember that Sergeant Slaughter cannot negotiate a better price from Uncle Sam.Case 12: Sgt. Slaughter Profitability Accenture Round 1 See what ideas the candidate can generate. Try to identify synergies with the Oil & Gas division 59 . The proposed solutions should not dwell on competitive issues. Create longGovernment drops the demand. Analysis Possible proposals: Try to identify multiple suppliers or negotiate a better deal with the current one using this possibility as bargaining power.

The productivity of the workers is an issue. 60 . the bonus structure is fixed. former lawyer. Consider it to be like a data dump well the candidate can drink from the fire hose. as they spend most of the work on troubleshooting the contracts and enforcing them (have the items delivered on time. There are no training and learning processes in place for the workforce. due primarily to lack of experience.Case 12: Sgt. they should work productively for the company) but the workers are productive only 80% of their time billed. The VP of Procurement is actually a newly hired. They have a target of 88% productivity time for the workers (88% of the time they are paid. Also. They are not very good at negotiating with the supplier. Slaughter Profitability Accenture What organizational questions should we ask about the people? Round 1 Prompt Part III Possible questions and analysis: Are the people that deal with the suppliers experienced enough? Are there incentives in place? What can be changed? Is their staffing model efficient? Do they work enough? Are they efficient? What is their level of productivity? Can/should we lay off workers? Do they have enough training? Here is some information to relay to the candidate. ordering the supplies ahead of time. forecasting demand etc). The workers do not focus on negotiating with the supplier. They receive a 10% undifferentiated bonus at the end of the year if the company makes a profit. see how Guidance The staff is not necessarily the most experienced in the field.

They do not have a common database with prices across the globe and former experiences. Possible proposals: 1. 5. 61 Round 1 Analysis Prompt Part IV Guidance . Offer training 3.bonuses connected to the money they save from the supplier 4. put a productivity check in place to raise it to the 88% mark. Try to hire more experienced workers 2.Case 12: Sgt. Slaughter Profitability Accenture See what ideas the candidate can generate. Reduce the workforce. What can we ask Sergeant Slaughter? Possible questions and analysis: Do they have the same supplier? How much is the Oil & Gas ordering comparing with the $6 billion for Government? Are the divisions interacting? Do they collaborate to have a stronger bargaining power? Can they combine the procurement departments for the two divisions and have one larger for the entire company? Here is some background information for the candidate: The Government division does not communicate efficiently with the Oil & Gas division. The Oil & Gas division accounts for $2 billion in orders from suppliers. Add incentives . Have the Procurement manager get an MBA! synergies with the Oil & Gas division. They use the same supplier but they have issues integrating data therefore one of the recommendations should address technology and information sharing issues.

procurement. Additionally. 62 . company-wide solution The VP calls you for an update. Try to institute a common system to communicate future orders/demand and try to negotiate them together 3. Other considerations and/or creative aspects Guidance To reduce cost. Slaughter Profitability Accenture Round 1 Possible proposals: 1. Organize meetings with the procurement teams of both divisions to share best practices and negotiating tips 5.Case 12: Sgt. Analysis Prompt Part V The student should wrap up the case in 3-4 sentences (30-60 sec) such as: 1. the productivity of the workers needs to be increased through training and new hires. the company should try to negotiate long-term contracts with the government and aim to obtain lower prices from suppliers. Give evidence based on case 3. the VP could combine the two divisions from a technology. Please inform him of your findings. Unite the two procurement departments into one larger. Coordinate better with the Oil & Gas division and try to integrate orders to obtain stronger bargaining power over the supplier 2. Last. and workforce perspective. Build a database accessible to both divisions with prices negotiated with multiple suppliers in time to have a common negotiating basis 4. State a position 2.

Instead.Case 12: Sgt. This is not a case where the interviewee leads.just the right amount of back and forth and no awkward pauses. 63 . Slaughter Profitability Accenture Expected: Interviewee takes subtle cues from interviewer to move on to next topic Ability to generate at least several solutions Good: Creativity in generating solutions (and many of them) Round 1 Performance Evaluation Excellent: Carries the discussion well. the interviewee should make sure the case is conversational .

Profit Margins: The interviewee should ask for the profit margin on each of these products in order to estimate a commission structure. and IRAs. Specifically you are required to evaluate the merits of a proposal made by the CFO . commission earned. without which we cannot ascertain the profitability of each product in the mix. Product Mix: The bank has four products it wants to sell in this program . [The Interviewee should ask for more information about the products.a commission-based incentive program should the bank pay its tellers per unit of product sold? This information should only be given if asked (or if the candidate is struggling).CDs.Case 13: Bank Commissions Profitability Accenture Round 2 Your client is a regional commercial bank and your task is to make a recommendation to improve the profitability of the retail segment of their business operations. Information to be given if asked: The profitability is as follows: Checking: 4% with an average $2.] Revenue Streams: Prompt Guidance Possible answers : Interest generated. perhaps an overnight float option. synergies or economies of scale from cross selling.000 initial deposit 64 . Mutual funds.000 initial deposit Mutual Funds: 1% with an average $8. Checking accounts.

Ask the Interviewee what information he would need to determine the best incentive program for the bank . If that is the case. estimated commission as a percentage of current salary. Answer: A fixed fee per product.The ease of sale. profit per teller or per customer. the assumption is that all the tellers are equally effective and that all the products can be sold with roughly the same effort.Case 13: Bank Commissions Profitability Accenture Round 2 Incentive Program Options The Interviewee should arrive at a profit margin of $80 per product and constrain his incentive program within this range. In this case. [Note: It is possible that the interviewee comes up with an even better answer than this. a percentage of the profits. cost of incentive program Human Capital retention rate. So what would you base the commission on then? Why? Answer: Fixed fee option as it is a straightforward incentive and has a large upside for employees. Also administration costs are relatively less. whether all tellers are equally effective sellers. acknowledge the answer and tell them the client would like to proceed with the fixed fee option] 65 . The program that best motivates employees to sell products and increases Analysis Tell the interviewee that his/her choices can be narrowed down to one. Explore at least four different incentive options. a fixed fee for a certain number of products sold that would decline after a threshold. or a variable commission depending based on products and spreads. Guidance Criteria for selection of incentive program . Answer: Profitability .

The Interviewee should ask about the present salaries of the tellers and the expected sales/teller. Integrated data well and reached insights by seeing the big picture Drove the case Excellent: An excellent candidate will do all the above and will mention risks or practical implications of recommendation: Tracking field in their accounting system to associate correct teller ID with sales made Changes in payroll systems Sales training program for tellers Effectiveness study to measure impact on employee retention/satisfaction Performance Evaluation 66 . Thus: Annual sales/teller = 250 products (5 products per week * 50 weeks per year) Commission Fee = $10 New profit margin = ($80-$10) = $70 Analysis Expected: Referred to framework often to ask questions Asked for help when lost.Case 13: Bank Commissions Profitability Accenture Round 2 Cost of incentive program .000 Expected sales/teller: five products per week. Calm and collected Good: Made a final recommendation and included data.Steer the Interviewee toward discussing the cost structure of the fixed fee incentive program. Information to be given if asked: Average Salary per year per teller: $25.

VCRs etc. encourage them to think through possibilities using the stock price information (i. However..Case 14: Electronics Co.$120M from repairs of equipment (e. Guidance 67 . TVs. has been in business for 30 years and is known for its fast. an audio/video sales and repair retailer with 500 stores located primarily on the West coast.. competitors are grabbing a larger share of a growing market. revenues were $520M .g. If asked about specific financial benchmarks. The client wants to know why its competitors are outperforming Electronics Co. If the candidate asks about the growth of the market. professional service. Profitability Bain Round 1 Your client is Electronics Co. In 2001.) and $400M from sale of equipment (primarily TVs). Also. while competitors have achieved 15% growth. Prompt Electronics Co. profits have been flat for the past 4 years and competitors have not seen similar problems. If asked for details on stock price increased only 2% from 1998 to 2001. can improve its profitability.e. competitors have found a way to grow margins substantially). not word-for-word. The candidate should restate the prompt in an organic way. you can share that the client wants to quantify the potential profit improvement but that the client is looking for the interviewee to determine that number. Thinking through the market conditions thoughtfully will show that the interviewee is a strong candidate. they want to know how Electronics Co.

vs.5 hours to complete. Good candidates should seek more information. For example. -of-line.Case 14: Electronics Co. you may let them know that E Co has 2 repair people per store. in Exhibit 2. great calculate utilization of the repair people to determine if cuts can be made and will calculate the profit impact of savings from labor (25 hours of work per week.5 repair person needed per store. Excellent/Deeper Insights (Second Years): These candidates will show an ability to offer practical solutions. savings of $90K per store * 500 store = $45M in savings). 100 hours of labor available per week only 0. Each store is open M-F 8am 6pm and repair people are paid $60K annually.5 1 repair person per store and that each store has 10 jobs per week. which average about 2. Analysis Good: Insights from each of the exhibits: Performance Evaluation despite overall market growth. Expected: Candidates should know to look at revenues and costs. If a candidate attempts these calculations. Since competitors are mentioned in the prompt. its competitors that have 0. Profitability Bain Round 1 As the candidate asks questions about labor. candidates should also ask for market related information. provide Exhibit 4. 68 . 2: Labor is a big cost bucket.

- 6>6? .2 43>5? 46>6? . 43>8? 45>./F34 :&-. Exhibit 1 Profitability A/V sales & repair markets Bain Round 1 !@@A&'$B-CD<E$ .1 43>4? 46>5? ./ %&'() *(+&..Case 14: Electronics Co.? 33 43>6? 46>4? 34 43>8? 45>5? 69 43>6? 46>3? .(<$).=( 789 6 5 4 3 .- !"#$%&'() 6>2? !"#$*(+&.0 43>5? 45>2? .

()*+ )$./0$#()*+ 1"'/#.'-&$.$#(%&.'C'20'3 D4EF D85F D95F D745F 70 .<$2(=>?@(. Exhibit 2 Profitability Competitor profitability for A/V repair Bain Round 1 :.*2$/3()*+ B*#&"(>?@ .Case 14: Electronics Co.'-&$.A 456 456 786 79 75 756 9 96 5 !"#$%&#'()*+ .*.

/#0&1#$12##30 .#" =.Case 14: Electronics Co. cost structure Bain Round 1 '&()" ?. :. 4561*)7-%" 71 . *)+& >..< !"#$%& Electronics Co.-. Exhibit 3 Profitability !)"A)+&1#$1&#&-B1")C)+D) 9. .@ 89:.

(/01"$/ 10/'2%(10/('32/0 455$3$2%"6 3/789$%&(82'3' :2'3(87'32. =B.Case 14: Electronics Co.@ Savings opportunity Bain Round 1 =A.0 <03(8+"%&0 $%(82'3 72 . !"#$%&'()*(+"#$%& .0/' 570(32($%8/0"'05 37/%"/27%5(3$. Exhibit 4 Profitability E+"%&0($%(82'3' >..-. >C@ =>B. =>?. >AB@ =?.@ =D.@ =.

) should be considered the same across the 4 major chains 2) Case delivery: Initially try to get candidate to brainstorm about how they might be able to increase profits. Since then. 73 . We studied possible M&A activities. with each having very loyal customers. or sales volumes. but there are no desirable targets. etc. Present candidate with Exhibit 1 if they inquire about pricing. About one year ago their CEO hired our firm to help increase profits.e. How else can we increase profits for our client? Prompt Guidance 1) Background data (TO BE GIVEN ONLY IF ASKED): There are 4 major companies (including the client) in the industry that control 95% of the market. present them with Exhibits 2 or 3 respectively. (i. Depending on whether candidate wants to focus on Food&Bev or Pain Relievers first. no difference between prices of one item in Manhattan versus Durham) Consumers consider Motrin and Tylenol to be very different brands. products sold.000 stores in the US and $25B in annual revenues. Client charges same price per item in each of its stores. however they feel that it is a slightly inferior product and would need to be incentivized to do so. Each has a roughly similar share of the market. Client does not want to expand internationally due to logistical concerns. our partners believe there is little room for cost reductions going forward. It would take a substantial change in price of one brand to convince customers to switch to the other. Advil and Motrin suppliers charge the same price to every convenience store chain All other costs (overhead.Case 15: Convenience Store Profitability BCG Round 1 Our client is a major convenience store chain with 5. Buyers of both brands would consider the store brand product . we have worked with the client to aggressively control costs through negotiating larger discounts from result of our work. Client is not interested in expanding/changing product line.

Cleaning Product sales are $4B. however it also includes funding from producers. total unit sales. Price elasticities are meant to be illustrative and are not needed for any calculations. A good candidate will inquire about market share data at this point. He/she should recognize that this is not the solution and should go explore Pain Relievers . Price and Cost data for each of the three brands of pain relievers.Case 15: Convenience Store Profitability BCG Round 1 Exhibit 1: Candidate should immediately focus on Pain Relievers and Food &Beverage segments. This combined. Food&Bev is our best seller in terms of Sales and Scan Margin. which suggests opportunity to increase prices. as well as slim likelihood that customers would switch brands or to our competitors. so look for ways to sell more or gain share. (Note: Scan Margin is essentially the same thing as profit margin. Pain Relievers have lowest margin and are most inelastic. It is a term frequently used by retailers). We charge the same for Motrin and slightly more for Store Brand. This would imply that there is little room to increase prices in this category. with our significantly lower price and profitability in Advil. means that we should raise prices. Analysis Exhibit 3: Candidate is presented with Total Dollar Sales. 74 . and total $profit per brand Exhibit 4: The key insight is that our client charges a lot less for Advil that the competition. Exhibit 2: Candidate should recognize that client has highest unit price and lowest volume/share relative to competitors in Food&Bev segment. and should be presented with Exhibit 5 Exhibit 5: Candidate should determine that we have a very strong share in Advil (which accounts for over 50% of industry-wide pain reliever sales). He or she can then calculate profit per unit.

quantity.Case 15: Convenience Store Profitability BCG Round 1 Expected: Candidate recognizes that we need to focus on revenues going forward Identify that revenues are a function of price. No need to perform market share calculations Inquire about shifting share to Store Brand to generate more profits (since it has highest profit per unit) Deeper Insights (Second Years) Attempt to determine profit impact of increasing price of Advil Have insight that charging higher prices for same item in certain markets would be 75 an opportunity to generate additional profits . and mix and ask for more data on each component Recognize that priority should be on investigating Food&Bev and Pain Relievers when viewing Exhibit 1 and ask for more information on each Determine that raising price of Advil is the solution to the case Performance Evaluation Good: Quickly determine that Food&Bev and Pain Relievers drive profitability Candidate performs calculations quickly and accurately Recognize that Food&Bev is not the solution after viewing Exhibit 2 Candidate will ask about competitor prices and market share data when viewing Exhibit 3 Excellent: Quickly recognize that client has highest unit price and lowest volume/share relative to competitors in Food&Bev segment.

4 Other $2 B $0.8 Total $25 B $4.9 B 76 .4 B 1.Case 15 : Convenience Store Exhibit 1 .Products Sold by Client Profitability BCG Round 2 Total Client Sales Total Scan Margin Price Elasticity Pain Relievers $10 B 0.1 Food & Beverage $9 B $3 B 1.3 Cleaning Products $0.5 B 1.

45 8B Total 36 B $50.35 12 B Competitor 3 $1.Convenience Store Industry Food & Beverage Sales Profitability Average Price/Unit Client $1.Case 15: Convenience Store Exhibit 2.50 BCG Total Unit Volume Total $ Sales Share Round 2 $9 B Competitor 1 10 B $14 B Competitor 2 $1.8 B 77 .

35 12 B $16.40 10 B $14 B ~28% Competitor 2 $1.8 B 78 .Case 15 : Convenience Store Exhibit 2 ANSWER KEY DO NOT SHOW CANDIDATE Profitability Average Price/Unit BCG Total Unit Volume Total $Sales Volume Round 2 Share of Total Market ~18% Client $1.6 B ~22% Total 36 B $50.2 B ~32% Competitor 3 $1.45 8B $11.50 6B $9 B Competitor 1 $1.

79 Motrin $1 B $4.99 $4.99 Cost/Unit $3.49 Store Brand $1 B $1.Case 15: Convenience Store Exhibit 3 .Client Pain Reliever Sales Profitability BCG Round 2 Total $ Sales Advil $8 B Price/Unit $3.29 79 .99 $1.

49 $1.4 B $0.35 B 80 .50 $0.20 $0.70 Total Units ~2 B ~200 M ~500 M Total Profit $0.99 Cost/Unit $3.29 Profit/Unit $0.Case 15: Convenience Store Exhibit 3 ANSWER KEY CANDIDATE Profitability BCG DO NOT SHOW Round 2 Brand Advil Motrin Store Brand Total $ Sales $8 B $1 B $1 B Price/Unit $3.79 $4.1 B $0.99 $1.99 $4.

Case 15: Convenience Store Exhibit 4.99 $1.99 $4.Convenience Store Pain Reliever Prices Profitability BCG Round 2 Brand Client Price Average Competitor Price Advil $3.99 $4.69 Motrin $4.99 Store Brand $1.89 81 .

Pain Reliever Market Share $ by Brand Profitability 18 BCG 10 10% 7 14% Round 2 Client 44% 90% 86% 3 Competitors 56% Advil Motrin Store Brand 82 .Case 15: Convenience Store Exhibit 5 .

Profitability Bain Round 1 Your client is Office Products Co.Case 16: Office Products Co.. which sells office supplies directly to businesses and consumers. over the past two years. $ per transaction). has experienced historic revenue growth rates of 10%/year. provide the following information: Client generates $1B in annual revenue. especially the internet. revenue growth has been flat and profit margins have been trending down. This market is growing. Prompt Office Products Co. # of transactions. It is direct retailer of office products through two channels: catalogue and internet. changes in prices. customer satisfaction Competitor dynamics: new market entrants. changes in channels. new substitutes 83 . cost drivers. and has been very successful (annual revenues have grown at 10% CAGR. Your job is to figure out what is causing the declining performance and determine what the management should do to turn things around. however. If asked. changes in customers. operating margins at 12%) Guidance Catalogue clients have a higher profitability than internet clients due to higher $/transaction (and higher retention rates) A good candidate will list out the following buckets in their framework: Market dynamics: size. growth rates Company dynamics: revenue drivers (price.

. while fast growing. Expected: Sales are flat and margins down due to competitive entry into the internet channel. They will also consider ways to reduce costs. There have been no new entrants. Office Products Co. is losing share due to underinvestment in the Catalogue channel and aggressive moves by competitors in the Internet channel . Excellent/Deeper Insights (Second Years): Great candidates will suggest practical solutions. Investing in this channel is a long-term strategy given the small size and rapid growth rates. while protecting core Catalogue sales growth. Sales information is listed in Exhibit 2. customers shop across channels and price points Market information is listed in Exhibit 1. Profitability Bain Round 1 Interviewer can provide the following information if asked: The market is segmented by channels. they may suggest that driving growth means driving more small/medium business users to internet in order to drive up $/transaction and retention. should invest to grow the Internet channel. Average purchase per customer is 1/5 of the catalogue channel. although slower growing. Client should focus on driving catalogue sales (which are profitable) and making internet sales more profitable.Case 16: Office Products Co. but competitors are gaining share. is not currently profitable.The Internet channel. is profitable and represents the largest sales channel. or to gain economies of scale to drive profitability in the channel and consider ways to drive average purchase per customer to levels comparable with Catalogue sales. for example. at 90% of 2007 revenue.The Catalogue channel. Analysis Performance Evaluation 84 . Good: Office Products Co.

)-# ."<## +=#20&(/)## 1!5 # 4%)%3+*>(# 65 #!! #!! "!! 7()%03# 25 ! $%&'()#*&+.Case 16: Office Products Co. Exhibit 1 Profitability Market annual sales performance Bain Round 1 4567# 8 # '(()*+.-*+.$%!!& #"0 ##1 #02 #3# #4" 91)(&1()## :.&%/)0+1#20&(/)## /-%11(3# /!# 65 %!5 /!% 65 %"5 /!0 65 %#5 /!2 65 %%5 /!3 65 %05 /!6 65 %25 85 !"# .

-'(%. /"*"#(&2$.10 ('"#) '"! !"& !"% !"$ !"# !"! !"#$% &'()*+.. Exhibit 2 Profitability Office products Co. 7 . 7% !"&% !"56 '"!! '"!! 81*$'1$*. 3"*"#(&2$. !"#$%&$ '()*'$ $ %#7 !"3' !"35 67 2!# '!7 4"!8 2!4 '!7 4"!8 2!$ '!7 4"!8 2!6 '!7 #"!8 2!% 67 '"68 2!3 !7 '"!8 86 . sales performance Bain Round 1 *++. /0'/2#"*0(1. 3456./0-.Case 16: Office Products Co.-.$/*01&..

The chain owns and operations 700 restaurants across Europe. there are on average 2 people sitting at a 4-seater (4-seat capacity*50% utilization). please hand them Exhibit 2. How can the client improve SSS? When the candidate asks about SSS and the main driver of that. is the bottom line impact of adding 2 seats per restaurant? Analysis Additional Seats: 2 Peak Hours: 2 (let the candidate make this assumption) Table turns per hour: 2 (let the candidate make this assumption) Additional meals per restaurant= 2 x 2 x 2 = 8 meals 8 meals/restaurant x 700 restaurants (give this number when requested) = 5.000 revenue $280. !(75% occupancy)+ " (50% occupancy) = ~50% utilization]. The main takeaway here should be that customer traffic is highly correlated with SSS growth.000 revenue x 30% margin (give this number when requested) = $84. About ! of the 44-seat tables are occupied by 3 people.Case 17: Euro Seafood Profitability Bain Unknown Round Prompt One of our private equity clients recently acquired a leading European seafood restaurant chain.000 additional profit/day 87 $84. The data shows that 4-seater tables are ~50% utilized during peak hours [Look at the chart. please hand them Exhibit 3.600 meals x $50/average meal (give this number when requested) = $280. Guidance When the candidate asks for competitor information. It is hard to read on purpose. Lets assume we reconfigure each restaurant so that one 4-seater is separated into two 2-seaters. The main takeaway here should be that there is limited opportunity to increase price or bill size.000/day x 360 days/year (let candidate make this assumption) = ~$30 M additional profit/year . The private equity parent has aggressive expectations for improved business performance.600 meals total 5. please hand them Exhibit 1. When the candidate asks about the current table configurations. Same store sales (SSS) declined last year. effectively adding 2 seats. Thus. The main takeaway here should be that there is opportunity to reconfigure the restaurants to accommodate more parties of one or two.

Good: The candidate will do all of the above while also probing about the table configurations -line impact Excellent: Candidate will do all of the above while also remembering to synthesize the entire case before closing out. Making sure to educate the client on our findings and not focusing on the opportunity to optimize the tables. The candidate will also recognize the opportunity to optimize the table configurations. Performance Evaluation 88 .Case 17: Euro Seafood Profitability Bain Synthesis of the case facts: Customer Traffic Traffic is the biggest contributor to SSS growth Client should focus on initiatives that add the most value with minimal investment Improved seat utilization could deliver an extra $30M annually in profits Unknown Round Analysis Number of items Average check size and margins are higher than competition Price per menu item Client already priced at a premium over competitors Expected: The candidate will interpret handouts and offer insights while viewing them.

>:. %#& 45 6 #7#8 Customer traffic ((( )*+. 9 :.Case 17: Euro Seafood Profitability Bain Exhibit 1 Unknown Round Price per item ((( )*+.-.-. 01. %#& 45 6 #7B" "# "# "# $# $# $# # # # !$# !$# !$# !"# !$# !' # ' $# $'& !"# !"# !$# # $# "#& !"# !"# !$# # $# "# %#& /.-. %#& 45 6 #7#8 Number of items ((( )*+.-. )*+..0) )*+.<= )*+. 89 .-.01 230).1*?@ A3+.-.

() /(01 -2(/ %!56# %! $ # " ! .Case 17: Euro Seafood Profitability Bain Exhibit 2 Unknown Round &'()*+( .2(/< .)-.() =-44 @*)+-0 34-(02 959 "!? 37*-0 % 95> 8$? 37*-0 8 95% 8:? 37*-0 " 95: 8:? 37*-0 9 "56 %>? 90 656# 65#! 65!! $5:# .( .

Case 17: Euro Seafood .Exhibit 3 Profitability Bain Unknown Round Occupancy During Peak Hours ()*+. 91 ./ 0..)1+ &!!' %! $! #! " <= < % > $ 7 # 8 # % $ "! ! 23/+4 *56. & " 93:.-. *56.

*56.Case 17: Euro Seafood Profitability Bain Exhibit 3 Unknown Round Interviewer Copy.-.. 92 . DO NOT GIVE CANDIDATE ()*+. & " 93:.)1+ &!!' %! $! #! " <= < % > $ 7 # 8 % $ 75% efficient # 50% efficient "! ! 23/+4 *56./ 0.

The case should be carried out in a conversational format with hints and clues to push the candidate alongside the case prompt. 93 .HUMAN CAPITAL Note about nature of the Human Capital Cases: A Human Capital Case contains much on the bottom line as it is on the approach needed to manage the proposed changes in the organization.

Case 18: Human Capital Deloitte Round 1 Your client is faced with dramatic changes in the industry. The client is also concerned about their traditional approach to learning and development and has questions about the return on investment of their current programs. Make sure that the candidate understands that you are looking for a qualitative analysis and not a quantitative analysis. The case should be carried out in a conversational format with hints and clues to push the candidate alongside the case prompt. they are concerned about their ability to keep their employees prepared for the challenges they will face. As your client adjusts their strategy and reacts to changes while anticipating future changes. Your team was retained to help assess the effectiveness of the organizations learning center. current learning capabilities and developing the go forward strategy? What issues would you consider regarding the selection and implementation of the Learning Management System? Note about nature of the Case: This is a Human Capital Case and thus contains an approach much manage the proposed changes in the organization. 94 Prompt Guidance . Look for a good framework that is logical and sound. successfully execute its learning strategy while simplifying its operational processes and allowing it to scale for future growth.

the candidate could express concern with employee compliance with the new system or talk about the benefits of the new system and the impact it will have on complexity within the organization. and interface development Self-service registration Degree of network vs. e-Learning. scalability. remote access Scalability! Expected: The candidate will touch on most of the major points listed in the analysis section. Round 1 Analysis Performance Evaluation 95 . Excellent: An excellent candidate will address all of the major points listed in the analysis section while also bringing in creative insight. Good: A good candidate will complete all of the above. Learning.balance of instructor-led training. identify needs for additional learning programs Specific system selection and implementation components candidate may consider: Integration with HRIS system Data migration. and other learning methods Degree of learning assessment used (Reaction. such system. Results) Meet with leadership to determine requirements of new strategy Review individual learning plans Skill gap analysis Assess ability of existing programs to address needs. Transfer. system configuration.Case 18: Human Capital Deloitte Review current learning activities . For example. as well as bring in a few creative concerns and solutions.

therefore they should stay high level with their approach. Guidance 96 . doing business in 43 currencies and 15 languages.000 employees with capabilities in 160 countries. The case should be carried out in a conversational format with hints and clues to push the candidate alongside the case prompt. and set the strategic agenda for change. The client needed to quickly formulate a strategy to deal with the rumors. Contested by key Effect creating a myriad of rumors regarding layoffs heightening internal anxiety.Case 19: Strugandt & Losen Merger Human Capital: IT M&A Deloitte Round 1 The merger of two major technology companies forged a team of 140. stabilize the workforce. Please make sure the candidate focuses on how this approach will be structured and delivered for the executive team. Prompt As a member of the project team can you please answer how you would structure an approach for executives to successfully address the potential issues and realize the full value of the acquisition? Note about nature of the Case: This is a Human Capital Case and thus contains an approach much manage the proposed changes in the organization.

finance. HR. etc) . talent (what kind of skills/people need to be retained at both organizations) Good: Good candidates will also mention: Short Term: 1) Conduct a gap analysis between current state and desired future state Long Term: 1) Solicit feedback: Talk to the employees to find out the rumors/ concerns/ fears/ etc. detailed communications as soon as possible to stop rumors (Key leadership from both companies should deliver these messages) Finance. 2) Create a website with all the information about the merger (include a place to post hole) Excellent: Excellent candidates will also consider: Long Term 1) Develop new job roles/functions 2) Talent management (prevent intellectual capital drain) 3) Rationalize redundant services (e. acquired employees. but the acquired company should not feel like they are losing their identity/culture) through leadership. legacy employees) 2) Deliver honest.. etc.Case 19: Strugandt & Losen Merger Human Capital: IT M&A Deloitte Round 1 Expected: Short Term: 1) Develop and deliver internal and external communications to all stakeholders (shareholders. 5) Develop and implement appropriate incentives. Board.g. 97 Performance Evaluation . communications. etc. training. benefits. the Street.).maybe employ Total Rewards practice 4) Establish the culture of the new organization (not a merger of equals.

Case 20: Edoceo Human Capital: Outsourcing Deloitte Edoceo is a leading global provider of integrated information solutions to business and professional customers. Customers depend on Edoceo for the information and information applications they need to make the right decisions to run their businesses. Payroll. Inefficiency and complexity of the existing HR organization were the driving forces of the outsourcing!" 98 . HR Admin. 10%-20% of total current annual costs over five years. Guidance There was a cost reduction effort that the organization was undergoing that required an evaluation and shift in HR support. Edoceo provides information solutions for professionals across a broad range of industries and disciplines. Compensation. Domestic Relocation. creating internal Centers of Excellence (COE) and developing HR Business Partners to support with outsourced services. Prompt In parallel. How would you design and implement optimal COEs and HR business partner capability for this organization and how would you structure the project? How would you describe a successful outcome for this project? Note about nature of the Case: This is a Human Capital Case and thus contains an approach much manage the proposed changes in the organization. Expatriate Admin. Benefits Admin. HR Contact Center. HRIS. The case should be carried out in a conversational format with hints and clues to push the candidate alongside the case prompt. Edoceo has hired your team to provide best practice guidance and implementation leadership. L&D. Edoceo decided to outsource select HR processes including: Recruiting. Finance and IT were to follow. Edoceo intends to transform the retained HR organization. while maintaining equivalent levels of service.

change and training materials and implementation plan Build & Implement Build out process designs and COE structure Deliver training materials for the new positions and processes Support & Integrate Ensure effective interactions with outsourced functions and larger organization Analysis 99 .Case 20: Edoceo Human Capital: Outsourcing Deloitte The functions intended for COEs are: Benefits. Recruiting. HR Decision Support. Talent Management. Compliance and M&A. Org Development. Compensation. Diversity. Build. and each Market Group runs its own entity. There is no current assessment of the HRBP role today. L&D. and Policy. COE and Business Partner development Build communication. Run approach. Considerable job redesign and capability assessment will be conducted for retained positions There is significant concern among staff in retained functions about the long term safety of their jobs Candidate should discuss the business perspective and specifically the role of retained HR in an outsourced environment. for example: Plan & Assess As-Is Inventory Define staffing strategy COE & Business Partner strategy Reporting & metrics strategy Stakeholder analysis Change readiness assessment Communication and change strategy Design Process design. The vision for the HRBP is to be: provide business unit specific and consultative services to executives and line managers for the people-related issues Guidance HR solutions. How to structure project: Follow some type of Plan.

Case 20: Edoceo
Human Capital: Outsourcing Deloitte

Prompt Part II Guidance Analysis

Ask the candidate following question: What else should Edoceo be considering as it implements the outsourcing and development of the COEs? Let the candidate deliberate and answer this question. There is not much information to be given to the candidate. Apart from other considerations the candidate should touch upon these: How to prevent/deal with: Service disruption, Performance/morale issues, Attrition (loss of key talent), Links to other initiatives Expected: The candidate touches upon all the major points recognized in this case. Good: The candidate not only touches upon all the major points but also provides his/her analysis and reasoning behind those considerations in a structured way with use of a framework. Excellent: The candidate explains all the scenarios in a well-planned, structured and thoughtful manner providing logical reasoning behind his/her statements. The candidate also provides good explanation for the question in Part II and shows in-depth understanding of the change management process and human capital concepts.

Performance Evaluation

100

Case 21: Smith Financial CRM
Human Capital: CRM Deloitte
A major U.S. financial services company has just implemented a Client Relationship Management

For years, sales teams have maintained client sales information in separate excel spreadsheets. This prevented leadership from having visibility into and a holistic view of sales opportunities, which meant sending multiple requests to sales teams for the latest and greatest information. By the end of fiscal year, all sales teams are expected to migrate their sales data onto this new system, and use it to manage all sales information.

Prompt

You are the change management lead for this project. How would you get everyone on the system? Who are the various stakeholders? How would you communicate to these stakeholders? Note about nature of the Case: This is a Human Capital Case and thus contains an approach much

manage the proposed changes in the organization. The case should be carried out in a conversational format with hints and clues to push the candidate alongside the case prompt.
Here are some guiding questions that will help the candidate analyze the situation:

Guidance

1) Who will be affected by this change? 2) What are some ways that you can think of to best announce/communicate this change? Is it a 3) Do you think everyone will be happy with this change? How will you handle dissention? 101

Case 21: Smith Financial CRM
Human Capital: CRM Deloitte
Definition of Stakeholders: Leadership, Sales teams, & the rest of the organization Find out how people in organization like to receive communications Identify a change champion (leads one-on-one sessions) Technical support/training: how to contact the help desk Create a central place for feedback/comments Create honest communications (share both the bad and the good) Generate excitement/ engagement through a fun and well- branded communications campaign (all communications/ marketing should use this brand/identity) CEO Webcast (announcing the change initiative) Do you see any other change issues? How would you address them?

Analysis

Prompt Part II

Here are some guiding questions that will help the candidate analyze the situation: 1) How do you think on-boarding will work? Will people automatically know how to use the system? 2) How will we keep people using this new system? What is the benefit to them? (if candidate 3) How do we know we made the right decision in making these changes? Training (web based and classroom based) for sales team and technical support Design and implement incentives/ tie to Performance Management Create success metrics

Guidance

Analysis

102

Case 21: Smith
Human Capital: CRM Deloitte

CRM

Prompt Part III

How do you measure success? What do you do if leadership digs in their heels and resists the change? (After the candidate answers that question, please follow-up with the following question and change the direction of the case) - without the help of change management - and it failed (i.e., the people have not adopted the new technology). The team brings you on to salvage the project. What would you do? 1) When/how will you set goals for the outcome of this project? 2) How would you respond if senior management calls you into a meeting to tell you that they refuse to use this new system?

Guidance

Analysis

Set measurable goals at the onset of the project: ex. 75% usage by the end of the project, reduce number of manual excel reports by 50% within the first 3mo of the CRM launch Share with management the other projects that can now be tackled to improve company performance, now that less time is being spent on maintaining excel spreadsheets. Ask the candidate to synthesize all information analyzed in case

Performance Evaluation

Expected: The candidate will recognize that this change affects employees at all levels of the organization and will plan the change accordingly. Good: The candidate will touch on the major points mentioned. Excellent: The candidate will acknowledge and preemptively address and lay out a contingency plan in the event that the CRM rollout does not go as planned. 103

Case 22: F2D Electronics
Human Capital Deloitte Round 1
Problem Definition: products. The 150-year old company distributes more than one and a half-million products (1.5 million SKUs) made by multiple manufacturer/suppliers through 256 branches and warehouses in the US. Given that they are the middle-men, margins in the distribution industry are very thin. F2D has been generally decentralized with a high degree of branch autonomy (branch and district managers are kings of their own domain). Each branch has its own processes with considerable offsystem accounting and record keeping on Excel spreadsheets, etc. Given growth over the last decade, the home-grown mainframe computer system can no longer effectively handle the volume of transactions. In addition, the time required to reconcile and report sales, inventory, and financial

Prompt

business decisions. To address these issues, the client is undertaking a major business transformation program. They will reengineer most business processes (sales, marketing, forecasting, logistics, finance, customer service) and are implementing one system for everyone in the company that will provide real-time information and a 360 degree view of the business. Senior management anticipates a high degree of resistance from the branches. Branch leadership feels the system and processes from corporate will not understand their needs and threatens their autonomy. Past initiatives have struggled because people were not adequately prepared for the changes. Employees are worried about how their jobs will change and whether they will have the skills to do their jobs within the new system. Question: How would you assist the client to successfully manage this large scale change program?
Note about nature of the Case: This is a Human Capital Case and thus contains an approach much

manage the proposed changes in the organization. The case should be carried out in a conversational format with hints and clues to push the candidate alongside the case prompt.

Guidance

Note: Remember that this case is intended to be carried out in a conversational manner.

104

In times of large scale changes. Similarly. Communications should be timely and consistent to stem rumors. Training: Profile how jobs will change and train employees thoroughly on the new process and system. Gather input on their business requirements throughout the lifecycle of the project. Communications: Develop a comprehensive communication strategy for internal and external Round 1 Analysis their jobs will change. why their leadership is needed and how they will be rewarded.Case 22: F2D Electronics Human Capital Deloitte !!Leadership Alignment and Visibility/Sponsorship: explain why the changes are required in the competitive business environment. Handseffective. Conduct roadshows out to the branches. rewarded. and utilized as change agents. there should be a high degree of leadership visibility. Provide talking points and support to make it easier for them to communicate to employees. Use trainers from each of the branches to train end users. Engage branches and employees so they take ownership of the system. Buy-In: Employees need to know that their leaders (at corporate and branches) are behind this effort and they need to hear this directly from their leaders. Organizational Reinforcement/Incentives: Make sure those who are providing input. 105 . there should be a communications strategy for suppliers and customers to explain how service will improve to assure them there will be no disruptions. Workforce engagement: Engage employees from as many branches as possible in the design and implementation of the new process and system. championing and adopting the system are recognized.

Excellent: The candidate explains all the scenarios in a well-planned. structured and thoughtful manner providing logical reasoning behind his/her statements. ! 106 . alignment and buy-in process as well as Human Capital concepts.Case 22: F2D Electronics Human Capital Deloitte Expected: The candidate touches upon all the major points recognized in this case. The candidate also provides good explanation for the question in the prompt and shows in-depth understanding of the leadership. Round 1 Performance Evaluation Good: The candidate not only touches upon all the major points but also provides his/her analysis and reasoning behind those considerations in a structured way with use of a framework.

Guidance Look for a good framework that is logical and sound.Case 23: Sunique Human Capital Human Capital Deloitte Round 1 Your client is faced with dramatic changes in the industry. As it adjusts its strategy. reacts to changes and anticipates future changes. it is concerned about its ability to keep its employees prepared for the challenges they will face. 107 . developing the go forward strategy? What issues would you consider regarding the selection and implementation of the Learning Management System? Make sure that the candidate understands that you are looking at qualitative analysis and not a quantitative analysis. Your team was retained to help assess the effectiveness of the organizations learning center. The client is also concerned about its traditional approach to learning and development and has questions about the return on investment of its programs. Prompt successfully execute its learning strategy while simplifying its operational processes and allowing it to scale for future growth.

and other learning methods Degree of learning assessment used (Reaction.Case 23: Sunique Human Capital Human Capital Deloitte Round 1 Review current learning activities . and develop a framework for implementation. identify needs for additional learning programs Specific system selection and implementation components candidate may consider: Integration with HRIS system Data migration. Learning. the candidate should touch on the major points and be comfortable in discussing other aspects of the case when gently guided by interviewer.balance of instructor-led training. remote access Scalability Expected: At a minimum. and interface development Self-service registration Degree of network vs. Good: A good candidate will touch all the major points and require a small amount of guidance to cover all aspects of the case. system configuration. be comfortable and confident in discussing the major points of the case. Transfer. Analysis Performance Evaluation 108 . e-Learning. Excellent: The excellent candidate will touch all the key points with little to no guidance. Results) Meet with leadership to determine requirements of new strategy Review individual learning plans Skill gap analysis Assess ability of existing programs to address needs.

MARKET ENTRY 109 .

a well-known celebrity driver. and so far this year is eighth in a field of 43 drivers. There are 36 races in total. She recognizes that NASCAR is the fastest growing segment among males ages 18-45. running from February to November. before giving to candidate. The candidate should present an overview of his/her approach to the case and develop a framework. Prompt Guidance Revenue information: included in Exhibit 1. She inquired about sponsoring a second racing team with the client. A profitability analysis should follow. Dale Jarrett. with the candidate requesting revenue and cost information. ask what cost buckets they can think of. It races in the Nextel Cup. a points-based championship where the season winner has accumulated the most points over the course of the racing season. Dale helped win the Nextel Cup three years ago. A close friend who is the VP of marketing at Home Depot recently contacted the client. a racecar on the NASCAR tour. then give remaining Cost information: included in Exhibit 2. Evaluate the potential of this opportunity.Case 24: Professional Car Racing Market Entry Accenture Round 2 Your client is the owner of UPS #88. before giving to candidate. ask what revenue buckets they can think of. races for the team. She also has talked to a successful driver from a regional drag racing circuit to try out as the driver of the team. Interviewer should probe candidate on the sources of revenue in this market before providing the following information. then give remaining 110 .

25 = 24M total revenue Round 2 Analysis Cost . the candidate should revisit the revenue estimation and adjust the average winnings assumption. Assume average of 200K (other assumptions are ok) 36 races per year. Assume driver qualifies for 30.g. 100K avg would be unrealistic loss. if necessary (e. the candidate should recognize that the only way to calculate it from the revenue information given is by estimating total race winnings and extrapolating based on the percentage of total that these represent.Case 24: Professional Car Racing Market Entry Accenture Revenue Give candidate Exhibit 1 after buckets are outlined $50K-1000K per race winnings. After being told the total costs. while 500K average would be unrealistic profit) 111 .Give candidate Exhibit 2 after buckets are outlined Tell candidate that total costs are $20M Profit 24M 20M = 4M profit Guidance Since total revenue is not given. $200K*30 = 6000K or 6M Race winnings are 25% of total revenue 6M / .

Equipment. If interviewer Guidance Information to be given with respect to adding a new team. addition of a new team are Salaries. Specifically. The costs affected w.r. Race-Facing costs will double Equipment costs will double Travel costs will double 112 .t.Case 24: Professional Car Racing Market Entry Accenture Marginal cost of adding a new team Total Costs = $20M Race-facing costs = 40% / 2 * 20M = $4M Equipment costs = 25% * 20M = $5M Travel costs = 5% * 20M = $1M Marginal costs of adding new team = 4+5+1 = $10M Round 2 Analysis The candidate should now turn his/her attention to the cost of adding a new team. and Travel. The other two cost components are associated with the engine shop.

we should charge a premium Home Depot seems to have already made some commitment to the deal by conducting initial negotiations with the potential driver.Case 24: Professional Car Racing Market Entry Accenture Should the client charge a premium to Home Depot for sponsorship? Round 2 Prompt Part II Option 1: Yes. Analysis Option 2: No. 2) another sport (e. ask candidate to wrap up case. After this question. Therefore client has bargaining power. including 1) another race team. Note that there is no Guidance Multiple answers are acceptable here. baseball).. Formula One) Potential for charging premium The interviewer should ask candidate to evaluate the possibility of charging a premium to Home Depot for the sponsorship. 113 . This answer key is not exhaustive.g. 3) another racing circuit (e. we should not charge a premium Home Depot has several other options to sponsor..g. Premium can be justified by providing Home Depot with an acceptable Return on Investment analysis.

There is some validity. Accenture Round 2 Performance Evaluation 114 . to the point that salaries for the new team may be lower because the new driver lacks the name recognition of Dale Jarrett. For example.Profitability framework Good: . Some candidates might recommend closing the engine shop. This driver would probably not contribute to merchandising revenue.Candidate discusses risks of adding new team. The total cost of equipment may be lower than average due to the ability to leverage the engine shop technology. but we have no margin information to substantiate this. Other potential points include the natural tension between adding a new team and the allocation thus diluting the quality of performance of Dale).Accurate arithmetic .Identify need to calculate marginal cost of new team Excellent: . -Candidate discusses validity of cost assumptions for new team.Case 24: Professional Car Racing Market Entry Expected: . due to his relative anonymity. however. Potential risks certainly include adding a new driver who has only drag racing experience. For example.

Engines are sold to professional drivers domestically License out production to third-party. other sponsors include Outback Steakhouse and 3M One can win from $50K . T-shirts and caps are a small revenue source 10% 5% 115 .Case 24: Professional Car Racing Market Entry Accenture Round 2 Exhibit 1 Revenue Sources Sponsorships Nextel Cup Race Winnings Selling Engines Merchandising % of Revenues 60% 25% Description UPS dominates.$1MM depending on how one finishes and the significance of the particular race Strong R&D shop.

HR. accounting etc) 25% 5% Race cars.Case 24: Professional Car Racing Market Entry Accenture Round 2 Exhibit 2 Revenue Sources Salary Equipment Travel Leisure. parts (sheet metal) Getting to and from races 10% 20% Leasing of land in rural North Carolina Engine shop technology improvements 116 . engine shop R&D % of Costs 40% Description remaining 50% (engine shop technicians. engines.

Here is some information that will help the candidate analyze the situation: : . Mikonos. Kearney Round 1 Prompt Your client is a real estate developer. The Mandarin Oriental and The Four Seasons. and Project Success Factors. were the first to enter this market with a 250-room hotel each. Guidance 117 . etc. Costa Rica has a beautiful coastline which has historically been difficult to access. . Tahiti. There has been an investment boom in the region due to the increasing number of tourists (popular with Americans and Asians). Marbella. such as Playa del Carmen.The client has focused on hi-rise apartments (50%) and luxury condominiums (50%) in the past but wants to enter the hotel arena. ROI.T. a new airport was constructed only a half hour away. Additionally. and is currently assessing a new project idea in Costa Rica.They have focused on world-class beaches. two prominent luxury hotel chains. Maldives. *The key insight here is that the client has past experience in construction of a similar type. the client probably has good judgment in spotting travel locations and has a successful track record with the construction of prime properties. Luxury Properties. Should your client invest in the tourism opportunity created by the new airport? Would you recommend that s/he enter the market? The framework developed by the candidate may explore a variety of issues including: Core Competencies.Case 25: Market Entry Luxury Properties A. Market Attractiveness. The nearest airport was over six hours away. As of last year. Fiji. Coral Beach. but has no direct experience in the hotel industry or service operations.

T. Competitiveness . on travel agents.000 tourists per year (assume 350 days in a calendar year) Average duration of stay per tourist . however. and on the network effect of the existing hotels in the area.875. Supplier Power .000 tourists / night $2. Buyer Power The recent consolidation among travel agencies and proliferation of e-vendors put buyers in a powerful position. Barriers to Entry . is sky high.In terms of tourists. and Imperial Hotels. unavailable beachfront property. Others .000. The level of resources required would be a barrier to entry and maybe there are others that need to be investigated--such as government permits.$2.000 average check/ 4 days average stay = $500/night Analysis Qualitative takeaway: Despite the competitive nature of the market it is large enough to be profitable. and client has desired capabilities to successfully compete. Kearney Round 1 Guidance Market Attractiveness / Five Forces Analysis Market size . 118 . Interest in this area.Case 25: Market Entry Luxury Properties A. high capital requirements. water.Government regulations. Peninsula. Quantitative takeaway: 3.Other hotels chains that are thinking of entering the market are Starwood.4 nights Average hotel check . you depend on government spend on advertising.5 million tourist nights / 350 days = 10. access to sewage. etc.The local labor market offers a huge supplier of workers (very positive) Substitutes Vegas to Bermuda.

Ask him/her to recommend one of the three such that Return on Investment is maximized? Land Cost $2 MM Paradise Lost Fookwah Heights $4 MM $6 MM Cost/Room $30 K $28 K $25 K Operating Cost $250 $200 $150 Room Capacity 500 1000 1500 Price/Night $450 $400 $350 Guidance Average occupancy 50% No.000 cost/room * 500 rooms + $2. company target is to recover investments within one year ROI Analysis: ROI = Profit/Investment.000 (c) ROI: (c) / (b) = $500.5 million operating profits/year (a) Initial Investment: 30.9% 119 . Revenue = Revs per night * number of nights * number of rooms * nights per year * occupancy rate Analysis Operating Profits: (((($450 revenue 250 operating costs) * 500 rooms)* 350 nights/year) * 50% occupancy rate) = $17. of operating days in a year: 350 Operating expenses are 100% variable At ROI 10%.000/17 million = 2.000 land = $17 million (b) Net Profit: (a)-(b) = $500.T. Kearney Round 1 ROI Analysis If the candidate brings up ROI.Case 25: Market Entry Luxury Properties A.000. tell them that client has already short listed three available lots.

7% Factors determining project feasibility Ask the candidate to list factors to be considered in determining the feasibility of the project Good Concerns: Competition (what are they focusing on? will it flood the market?) Strategy (Where will you compete--low cost.500 rooms + $6 million land = 43. what values from their other business can they leverage? Would they manage the hotel or build it and then find an operating partner like Starwood or Hilton? What are the existing barriers to entry.000 * 1. best in class.5 million = 20.000 / $32 million = 9.5 million Initial Investment: $25.5 million ROI: 9 million / 43. how would you change them to insure a greater degree of success? 120 .000 cost/room * 1000 rooms + $4 million land = $32 million ROI: $3. high service. packages?) How should the developer finance the building? Since the hotel will bring jobs maybe the Guidance Analysis Great Concerns: How can they leverage their experience. Kearney Round 1 ROI Analysis (Continued): Option 2: Paradise Lost Operating Profits: (((($400-200) * 1000) * 350) * 50%) = $35 million Initial Investment: 28.T.4% Analysis Option 3: Fookwah Heights Operating Profits: (((($350-150) * 1500) * 350) * 50%) = $52.000.Case 25: Market Entry Luxury Properties A.

Expected: Candidate will develop a structured framework that touches on some if not all of the categories described.Case 25: Market Entry Luxury Properties A. Kearney Round 1 After the candidate offers his/her insights. tell him/her to focus on ROI first with the room prices specified in table and then with the market room price ($500). Candidate will exhibit accurate arithmetic in ROI analysis. Probe into additional concerns the client needs to address. Performance Evaluation Good: The candidate will be able to provide the qualitative takeaways regarding market attractiveness and/or core competencies. 121 .T. Excellent: In addition to the above. Final Prompt with the insights drawn through out the case. the candidate will also identify the key concerns regarding the project feasibility and provide a go/no go decision with supporting evidence from insights drawn from the case.

Case 26: Market Entry DMCC Round 1 pizza delivery business in Paris. Overall Pizza Delivery Market: 50% of business is delivery X [$1. If the candidate asks for market information. What information would you need and how would you analyze the pizza delivery market? 1) Candidate needs to estimate the size of the Parisian home pizza delivery market. The submarket for pizza delivery is growing at 8% 3) Candidate should do a market sizing. Pizza Hut. has a virtual monopoly on the pizza home the issues that will determine the likelihood of successful entry in the Parisian pizza market. introduce Exhibit 1 and Exhibit 2.2M / ~90% market share] = $667k Analysis $667k X 10% of delivery business is done in city centre = $67k! 122 . however. market attractiveness and segmentation and then look at the cost structure of the industry to find a potential competitive advantage. 2) Other information available upon request: Prompt Guidance Almost 90% of deliveries take place outside the city centre City centre Pizza Hut stores offer predominantly restaurant service The market for pizza is growing at 5% annually.

Case 26: Market Entry DMCC Round 1 Expected: It is expected that all candidates will complete a market sizing with realistic assumptions and a basic market and cost analysis (similar to what is provided above). What should Napoleon do? Napoleon calls you from his moped for answers. The candidate will identify the opportunity in the city centre market and identify the low barriers to entry for Pizza Hut in that market. A good candidate will also ask for and identify the different growth rate of the delivery market versus the pizza market in general. The candidate should also consider that the execution of the delivery service may have more complexity within a market like city centre. Performance Evaluation Prompt Part II Guidance Follow up prompt for Good & Excellent candidates: Napoleon launches his pizza delivery business and wins a customer service award. Good: Good candidates will remember that Pizza Hut has a virtual monopoly position in home delivery but that the market for the city centre seems underserved. Pizza Hut responds (Show Exhibit 3). What can you tell him? 1) the market 2) Determine if there are considerable differences in cost or quality of delivery service for Napoleon 123 . Excellent: Excellent candidates will complete a market sizing and quickly move into a complete industry analysis for market segmentation and cost structure understanding.

Round 1 Performance Evaluation Excellent: Excellent candidates will identify the over-reaction and look for ways to take advantage of this strategic mistake made by Pizza Hut. 124 . The candidate should probe about any substantial differences between the quality and speed of delivery for Napoleon and look to exploit any of them.Case 26: Market Entry DMCC Expected: Recognize the potential for a price war with Pizza Hut and explain implications Good: -reaction based on their position in the market. The candidate should avoid the price war in his recommendations and potentially focus on key products or sub-segments of the city centre segment. Ultimately. the candidate should recommend that Napoleon continue to focus on the premium market and continue to execute on points of differentiation like customer service.

Case 26: Market Entry DMCC Round 1 Exhibit 1 Paris Population By Region 20 18 16 14 12 10 8 6 4 2 0 Cumulative Population in millions City Centre Urban Areas Suburban Areas Exhibit 2 Pizza Hut Information Sales in millions (Pizzas) Stores Market Share Market Segments. % of sales Paris City Metropolitan Areas Paris Suburban Areas 1.2 95 85-95% 20% 35% 45% 125 .

Case 26: Market Entry DMCC Round 1 Exhibit 3 Pizza Prices $26 $22 $18 $14 $24 $23 $22 $22 $21 $21 $21 $20 $20 $20 $19 $19 $18 $18 $18 $17 $17 $17 $17 $16 $16 $15 $15 $15 $14 $13 $13 $12 Napoleon' Price Pizza Hut $10 Before En Pan Pizza HandStuffed Lower Fat Cheese Pepperoni Meat SausageChicken Veggie Tossed Crust Pizzas Lover's Lover's Lover's Lover's Supreme Lover's Pizza Hut Style Pizza pizza pizza pizza pizza pizza After Entry Pizza 126 .

Surgeries represent half of this total. this has caused the hospital to consider a strategy that would shift its focus toward less profitable surgeries by using alternative therapies. Lastly. Grace. However. ! 127 .Case 27: K. K.5 min) to create a structured framework. ensure that the candidate is considering the percentage of surgeries that is actually impacted. Should we close part of the chain? All of the chain? None of the chain? What drivers will help us arrive at a close / no close decision?! Allow the candidate some time (<1. Half of the Medicare (private insurance is not a factor). the candidate should not fail to address the strategies competitors are adopting. Round 1 Your client is a large hospital chain. For example. Guidance Prompt the candidate by asking: Maybe we should explore whether the hospital chain has any capabilities in providing alternative therapies could we make money there? preferences of our end users (would they pay out-of-pocket?). Grace Hospital Chain Market Entry: Entry / Exit Decision McKinsey & Co. some surgeries will no longer be reimbursable at the same rate. As a result. Currently the client has a $4 billion top line. Some issues to discuss could be the profitability (revenues and costs) of the surgeries. Prompt Next. the client is concerned about the decreased revenue potential from this proposed shift in strategy. There have been proposed legislation changes to Medicare that will affect your client. Look for a basic framework that includes a revenue breakdown into prices and quantities and a simple cost structure with fixed and variable costs.

Once they request the information. you can give them the following: The exit cost is $50. How many patients would you have to lose below breakeven (500) to close the hospital? ! The candidate needs information on the cost of exiting the business.000 Price (revenue) per patient: $1. 500 . Grace Hospital Chain Market Entry: Entry / Exit Decision McKinsey & Co. discounted back to today.000 If the candidates numbers are very different.000 = -$50. Q = 25 Analysis Prompt Part II Guidance Analysis Another way to look at this is the value of lost customers to the business over time. This case is not about the specific numbers. Round 1 Guidance Steer the candidate toward profitability information. suggest they use the numbers provided above for simplicity.000. What does he/she want to know? Allow the candidate to make assumptions regarding profitability (guide them if their assumptions are way off base).000 Cost per patient: $800 Fixed Cost of facility: $100. which equals 25 patients that you would have to lose below breakeven to close the hospital.Case 27: K. taken as a perpetuity. Or. Simple breakeven calculations should be made The hospital must serve at least 500 patients to remain open.25 = 475 patients to remain open! 128 . should equal zero to breakeven: Q*$200 $100. loss / hurdle rate = exit cost.10 = 50.000. Let them ask for it. Assume a discount rate of 10%. minus the PV of the exit costs. Loss = $5. Loss / . Typical impacted hospital (annual): Patients: 1.! The profitability over time. rather the analysis conducted.000. Each patient delivers a $200 contribution margin.000.

how many patients will you need to break even? How many patients would you have to lose to close the hospital? ! Prompt Part III $150. according to your client.5% (.000. Grace Hospital Chain Market Entry: Entry / Exit Decision McKinsey & Co. 7.Case 27: K. which represent only 20% of the total national market. You know that someone has botched the research. 129 . ! The hospital does some research and finds that 3/8 of its surgeries will not be reimbursable. How is the information contradictory?! ! The candidate should ask for the national market share of the company. This means that.000 / $200 = 750 patients to stay open Analysis Prompt Part IV Loss / . Otherwise. the facility should close.000. the data above is like comparing apples to oranges. Guidance The market share for your client is 20%.075) of the government savings will come from its surgeries. The loss of future value that one gives up by incurring the exit costs equals 25 patients.10 = $50.375 * . Below 725 patients. Round 1 If fixed costs change to $150. A government report says it will save 6-9% by passing the new legislation.20 = .

a crisp recommendation should be roughly 30 seconds long and should include clear bullet points that Expected: Accurate arithmetic Solid profitability and breakeven calculations Performance Evaluation Good: Framework that includes exploration of all possible options Clear recommendation that summarizes key findings in under 30 seconds Excellent: Considered possibility of alternative therapy surgery market entry Understanding of. Round 1 Candidate should provide a crisp recommendation By McKinsey standards. the final question (Note: this question is very complicated) ! 130 . and clear answer to.Case 27: K. Grace Hospital Chain Market Entry: Entry / Exit Decision McKinsey & Co.

They would charge the customers on a per flight pricing model. the candidate should ask for the price per flight. Broadband for the airlines There is general interest in broadband internet from the airline industry. The calculations represented here are only one approach and interviewees may take other approaches. Guidance Use the information below to provide guidance as necessary. Full answer in chart belo"! Pricing In order to finish the market size. depending on the assumptions made. 131 . Hand out Exhibit 2 and ask candidate to set the price. How would you help them think about their offering?! About the case: This is a market entry case where candidate are required to evaluate the feasibility of a new product in conjunction with the airline industry. Inform the candidate that there are 3. Size of the Market Ask the candidate to estimate the market size and hand over Exhibit 1.000 planes. walk the interviewer through it and be prepared for analytical detours throughout the flow of the case. The candidate should use a comprehensive framework. The start up would have to invest relatively little up front and would keep most of the revenues. The interviewer should be mindful of this and allow for flexibility.Case 28: Market Entry BCG Round 2 Prompt Our client is a start-up with the ability to deliver broadband internet to commercial airlines. Industry & Market Size Discussion: The interviewee should have mentioned this as a major bucket in his/her framework.

000.5 .000 approximate annual potential user-legs.5 Analysis Biz Travelers Laptop users/plane Total laptop users/plane 3000 planes x 2000 legs/plane x ~50 laptop users/plane = 300. 132 .Case 28: Market Entry Class Seats/Plane BCG First 20 Coach 180 Round 2 Load Factor Full seats/plane .75 135 30% 40.75 15 100% 15 55.

133 . Guidance Information to be given if asked: The company has discovered that if they can generate $250.! Breakeven Analysis Given the information already revealed in the case and the information below the candidate should calculate a break-even point. they should break even. they will be profitable installing the technology on that plane.000 legs/plane = $125/leg $125/$15 about 8 users/leg Analysis Response: Yes. 30 users at $5=$150/flight 25 users at $10=$250/flight Round 2 Analysis 20 users at $15=$300/flight 10 users at $20=$200/flight 5 users at $25=$125/flight Set price at $15.000/2.Case 28: Market Entry BCG Assume 100 passengers (for ease) at the various price/penetration combinations.000 per plane in annual revenue. 250.

For this case. Good: Candidate provides a framework that includes exploration of all possible options and offers a clear recommendation that summarizes key findings in under 30 seconds. the company has the patent on the high speed connection. Analysis What about low-speed internet connections? Risks Ask the candidate which risks are associated with the business model. Use your judgment when considering their answers.Case 28: Market Entry BCG Round 2 Guidance Other factors Probe the candidate for breadth and understanding of new market entry. Excellent: Candidate considered sufficient number of other factors while maintaining poise through Performance Evaluation 134 . Competition The interviewer should probe deeper into the competition especially with regard to Intellectual Property. Candidate should provide a crisp recommendation A crisp recommendation should be roughly 30 45 seconds long and should include clear bullet points that support an overall recommendation. Ask him/her about the following aspects of this project. For Expected: Accurate arithmetic with solid profitability and breakeven calculations.

Case 28: Market Entry Connections BCG Round 2 Exhibit 1 135 .

Case 28: Market Entry BCG Round 2 Exhibit 2 136 .

One For The Road.Substantial amounts Prompt Part II Market Strategy Discuss the following aspects with the candidate: Managing hyper growth Optimal acquisition strategy (new customers) Appropriate pricing via EVC analysis 137 . Inc. Inc. Market Entry: Life Sciences DMCC Round 1 Prompt Problem Definition: A small life science technology startup.Case 29: One for the Road.10 years Are there any competitors? . has invested a huge amount of money in R&D and was recently granted a patent for a new breakthrough product. framework and combines the following two questions: What are the core competencies of this company? Do they have the funds to develop the capacity in-house.The client expects sizable immediate demand How much money has been invested in R&D? . or should they be looking for a partner or buyer for the patent? Guidance This section of the case is exploratory in nature so make sure that the candidate has come up with a healthy list of questions before proceeding.No. Information to be given if asked: How long is the patent protection? .. This product would create a new market Market potential? . The client wants to know what approach it should take to commercialize the product. (ORI).

Inc. marketing and distribution channels Grow skill sets organically.Case 29: One for the Road. ergo more slowly 138 . Market Entry: Life Sciences DMCC Round 1 Operations Strategy Discuss the following aspects with the candidate: Costs: fixed and variable R&D Resources/Strengths Required Capabilities: Buy. or Partner? Manufacturing: in house vs. Build.r.t introducing the product in the market. Candidate should assert that the client has several options: Acquire a company that provides manufacturing and marketing capabilities Joint venture with another company Outsource manufacturing. Equity to finance growth Timeline to break even External Factors Discuss the following aspects with the candidate: Legislation Suppliers of raw materials Prompt Part III Prompt Part IV Prompt Part V Prompt Part VI Analysis M&A potential Ask the candidate to discuss various entry strategies available to the client w. outsourcing Marketing & Sales Distribution Channels Finance Strategy Discuss the following aspects with the candidate: Debt vs.

but also bear in mind the risk (while going alone may allow ORI to keep all the profits. The following comparison matrix presents the pros and cons of the various strategies (do not hand this to the candidate. and sales. it has many more pitfalls than teaming with an established player in the industry. comparable regions (to find price elasticity): Lower the price in one and raise the price in the other Compare the sales volume over a period of time 139 . Analysis Conduct Economic Value to the Customer (EVC) analysis Surveys to potential customers in order to conduct a conjoint analysis Chance to price discriminate among segments (if it can tweak product attributes) Analyze past introductions of new products for historical sales trends Focus group experiments in separate. its core competency is not in the area of manufacturing. ORI should certainly pay attention to the profitability of these strategies. Inc. Market Entry: Life Sciences DMCC Round 1 Prompt Part VII Evaluating M&A options suggested above Ask the candidate to evaluate the pros and cons of the different strategies Given that the client is a small R&D lab. rather allow them to form their opinion and then guide them where necessary) Analysis Prompt Part VIII Patent pricing strategy Inform the candidate that ORI has decided to sell the patent to an established pharmaceutical firm and ask him how he might derive an acceptable price for the product from the pharmaceutical company.Case 29: One for the Road. marketing.

do not hand this to the candidate. Market Entry: Life Sciences DMCC Round 1 Consumer segmentation .Inform the candidate that the new market has two segments. healthcare providers and home users and ask him to list some differing characteristics Prompt Part IX Again. Inc. rather allow the candidate to form his/her own opinion and then guide them where necessary Analysis 140 .Case 29: One for the Road.

Never losing site of the big picture. while also anticipating some of the prompts before the interviewer needs to suggest the next step. Performance Evaluation 141 . Inc. Market Entry: Life Sciences DMCC Round 1 Expected: Accurate arithmetic with solid calculations while keeping track of information/data from earlier parts of the case throughout the entire interview. Lastly. maintaining poise through the extensive line of questioning throughout the case. Excellent: Candidate considered all of the prompts throughout the case. Really piecing this case into real life and coming up with some real life next steps.Case 29: One for the Road. they need to stay organized and composed. while constantly keeping track of earlier information and referring back to the situation at hand. This is a long case. Good: All of the above.

Cost of satellite acquisition: $10 million . (solution for news. . the CEO of a large conglomerate. the candidate should consider market dynamics. Low orbit signal is subject to high interference.Repair/maintenance cost: Negligible. The satellite is in good condition. . . Market Entry DMCC Round 2 Stefan Lessard.g. (solution for multiple clients option) . thus it is not used when continuous transmission quality is critical.Launch status of satellite: Satellite is still in the box and needs to be launched if the company decides to keep it. What questions could you ask to gain critical information? The candidate should take some time to think and then come up with some basic questions.000 miles (e. etc. Candidates should recognize this case as a profitability / market extension case. Later. from one coast to another). These satellites are primarily used by corporations to transmit data in batches. in real time) where signal quality is critical. Live global television broadcasting is the primary application. broadcasters.Case 30: DMB Satellite. finds a once-in-a-lifetime deal and buys a satellite at a heavily discounted price. DMB can use it for 3 years after which it becomes obsolete ($0 resale value and non-functional). He can keep it or sell it today for a profit.e.High orbit satellites are primarily used for continuous transmission (i.single client option) 142 Prompt Guidance . This information should be given if asked for: . Inc. and the risks associated with having a single customer versus a diversified portfolio.Costs associated with launch: Launch costs are $10 million for high orbit launch and $8 million for low orbit launch.Market value of satellite today: $35 million . The candidate should request revenue and cost information and then calculate the profit for each situation. .000 to 5.Low orbit satellites are used to transmit data between two points where the distance between them is on the order of 3.

2) Operate single satellite offering data transmission service to multiple clients. allowing for multiple clients.000 per month Each Year 3 customer pays $20. Low Orbit Revenues Each Year 1 customer pays $50.Case 30: DMB Satellite. as it becomes obsolete) .Life expectancy: 5 years (needs to be replaced in 5 years. Market Entry DMCC Round 2 . The use is short and intermittent. fall to new rates in year 2. [Note: Data has been intentionally left out. Inc. The candidate should ask for the expected number of customers in each of the 3 years (see solution in Analysis section)] ! 143 Guidance Prompt Part II Guidance . 80% of customers generated in a given year will remain the following year. global coverage limiting the satellite to only one client. 1) Sell today for a $35M profit. and 3) Operate single satellite system to offer voice and video transmission. Potential to lease satellite capacity: Leasing satellite capacity is a good option but not available in this case What is the best road to profits for DMB Satellite? ! The candidate should conduct a profitability analysis listing the 3 options. Prices for the contract you sign in year 1.000 per month Each Year 2 customer pays $30. however.Potential customers for satellite services: There are two customer segments based on use: data transmission and voice/video transmission.000 per month There is some competition entering the market and you can assume that you will need to reduce the prices for the multiple customer solution every year to attract incremental revenues. News broadcasters and telecommunications companies use the satellites for voice/ video transmission. Large corporations use satellites to batch transfer information periodically during the day. They require 24-hour.

000.500.Case 30: DMB Satellite.000 14. low orbit.000 11. the discount rate is negligible. If the candidate asks.000 7.400. and high orbit.000 ! 30 12 20.920.000 per month This is a specialized market.200.520.5 million monthlyProfit: ! 144 .000 ! Launch 10.000 ! Total Revenue: 90. where we have found only one potential customer who is ready to sign up The candidate should continue with the profitability analysis and cash flow calculations comparing the three options: sell now. Market Entry DMCC Round 2 High Orbit Revenues The high orbit customer pays $2.000 90.000.000 52.000 ! Profit rounded: 77.000 !The high orbit customer pays 2.000.000 30.680.000.000.400.200.000.000 ! Rule: lose 20% of existing customer base in following year Cost: 8.000 25.000 ! ! 40 12 30.200.000.000 7.000.500. ! Guidance Analysis ! !Calculations: Low orbit Months C Y2 total Y3 total Revenue Totals ! New Customers ost Y1 total revenue revenue revenue 50 12 50.000 14.000 ! ! !Calculations: High orbit Months C Y2 total Y3 total Revenue Totals ! New Customers ost Y1 total revenue revenue revenue 1 12 2.000.000 ! Total Revenue: 85.000 Cost: 80.200.000 30.000 7.00030.000 30. Inc.080.

In year three those 40 clients have been reduced again to 40*80% = 32 clients. Option 3 has highest initial cost and offers strong bargaining power for the single client.000 profit (prethose 50 clients become 50*80% = 40 clients. Strong candidates will recognize that the $10 million acquisition cost is a sunk cost. Market Entry DMCC Summary of profitability calculations: Option #1 . * Very important: Candidate should remember to verify that company has access to capital for purchase and launch. do we have other viable investment opportunities for Guidance can find another for only $10 million. The risk is high. Prompt Part III Carter Beauford What do you say? Option 3 generates the highest profits. Requires increased upfront investment: $85. Option 2 offers a diversified client portfolio.000.Operate single satellite offering data transmission service to multiple clients: $73. Inc. Option 1 gives us a nice chunk of change.Sell today for a $35 million dollar pre-tax profit.000 profit (pre-tax). But. Option #2* .Operate single satellite system to offer voice and video transmission. Also. Round 2 Analysis Option #3* .360. and seems to be the optimal choice 145 .Case 30: DMB Satellite. However. what if we lose the client somehow to bankruptcy? There are also few available customers.

Round 2 Performance Evaluation 146 .Case 30: DMB Satellite. Inc. Final recommendation was to the point and data-driven and used facts and data to back up thoughts. Good: Developed a framework that is relevant to the prompt. Analyzed the data well on a piece by piece basis. Final recommendation was persuasive and delivered with a bottom line tone. Remembered to clarify if the client has assess to capital for purchase and launch Excellent: Placed data analysis in a table format No math errors Considered risks and benefits of each strategy. Listed the 3 options and used it to guide analysis. Market Entry DMCC Expected: Calm and composed despite the broad nature of the original prompt Developed a framework that is relevant to the prompt.

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