YGCC Casebook 2012

Find Missing Puzzle Pieces !
in Your Case Interview!
Yale Graduate Student Consulting Club© ! 1!

Notes to Readers
Welcome,
The Yale Graduate Student Consulting Club (YGCC) is proud to present the official 2011–2012
YGCC Case Book. I created this book to help you prepare for your upcoming consulting case
interviews in align with our interview bootcamp. Please review the Bootcamp presentation on
interview principles at http://www.yale.edu/consulting.
This case book could not have been completed without the valuable contributions of members
and alumni of YGCC. Thank C. Babar, E. Chan, R. Cochanski, B. Funk, L. Habegger, Z. Han, S. Li, J.
Ling, F. Schackert, S. Young for sharing their interview experience. Thank Z. Han, Yale School of
Management (SOM) consulting club for enlightening discussions. Thank R. Banerjee for reviewing
the case book. Thank J. Liu for transforming the Latex into MS powerpoint version. I would also like
to thank our club 2012 Annual sponsors: BCG, McKinsey & Company, and ConsultingGuru for their
financial support as well as our friends at other consulting clubs for sharing with us their old
casebooks.
Please feel free contact us if you have any questions or comments regarding preparing the
interview or the case book. Wish all of you success during the upcoming recruiting season!
Sincerely,
Alice Qinhua Zhou
Chair of Yale Graduate Student Consulting Club (YGCC)
www.yale.edu/consulting/

List of Cases
ID Page Case Name Firm Round Type Industry Comm. Struct. Quant
1 4 Rare Disease BCG I Profitability Healthcare 3 5 3
2 10 Cookie Maker BCG I Profitability Consumer Goods 4 5 2
3 16 Car Rental A.T.Kearney I Market Entry Automotive 2 3 2
4 20 Big Box A.T.Kearney I Profitability Retail 4 3 3
5 28 Magazine Revenue A.T.Kearney II Profitability Media 5 4 2
6 35 Premium Grill Bain I Market Entry Consumer Goods 3 3 3
7 39 Ice Cream Bain II Investment Consumer Goods 4 5 4
8 45 Laparoscope Bain II Profitability Healthcare 4 3 0
9 48 Lacrosse League McKinsey II Investment Entertainment 5 5 3
10 56 South Africa Bank McKinsey II Profitability Financial Service 5 4 3
11 63 Hotel Chain Web McKinsey II Investment Service 3 4 2
12 66 ElectronicRS McKinsey II Profitability Retail 4 3 3

13 70 Car Charger BCG I Market Entry Automotive 3 4 4
14 77 DM Program BCG I Market Entry Healthcare 3 4 2
15 80 Luxury Goods BCG II Profitability Retail 5 4 3
16 86 Bank Acquisition BCG II Investment Financial Service 3 3 3
17 90 Bank Statement BCG II Profitability Financial Service 4 4 3
18 96 Bank IT Center BCG I Profitability IT Services 2 4 4
19 99 Medical Device BCG I Market Entry Healthcare 4 4 3
20 106 Grace Proof Paper BCG and SOM II Market Entry Consumer Goods 3 5 4
21 112 Chinese Car McKinsey III Market Entry Consumer Goods 4 3 5
22 118 HelpDesk McKinsey and SOM II Profitability IT Services 5 5 3
23 124 Mini Case 1 McKinsey Insight Non-profit Healthcare 3 3 2
24 127 Mini Case 2 McKinsey Insight Market Entry Consumer Goods 3 2 2

Case 1: Rare Disease
Grow BCG Struct. Comm Quant.
Healthcare Round I 5 3 3
Our client is a large global pharmaceutical company that has succeeded in developing drugs
Prompt
for the treatment of rare diseases (fewer than 200,000 sufferers in the US). Our client wants
to double its sales in its rare disease business in five years. They have hired us to figure out
how to do it.
•  The sales of our current portfolio of drugs is 2.5B and is forecast to grow by 60% by the
end of five years.
Additional Info
•  Generally, the small population for each disease means that no companies are competing
to treat the same disease. There are an estimated 7,000 rare diseases with no drug right
now, which can become new drug targets.
•  It takes 10 years to develop a drug from the beginning of research to launch.
The maximum revenue per drug is $500M, which depends on the number of patients, not
the launching time.
•  All the calculations do not consider interest, inflation, discount rate.
•  Exhibit 1: Drugs currently under development
•  Exhibit 2: Market penetration
Yale Graduate Student Consulting Club© ! Case 1: 1/6 4!

How would you help the company grow?
•  Before structuring, a good candidate should ask the quantitative goal of the project and
ideas the client are considering. With those in mind, the candidate should explore all
possibilities to increase sales and conclude with quantitative analysis back-up.
Structure
•  Since the goal here is to double sales, the interviewer should mainly focus the revenue.
The revenue can be broken down into
•  Current sales
•  Drugs under development
•  Acquire (or joint venture) new drugs
•  An excellent candidate should form a hypothesis. A sample hypothesis could be
“projected current sales and revenues from drugs in pipeline is enough to achieve the
goal”. The candidate should state that if the data does not support the hypothesis, he will
move on to consider acquiring new drugs.
Projection of current sales

Analyze
•  A general understanding of market will lead the candidate to conclude that rare disease
market is promising.
•  Revenue from current sale by the end of the 5th year is: 2.5B × 60% = 1.5B.
•  So, this leaves 2.5B - 1.5B = 1B to be added through new products in order to reach the
target of 5B in 5 years.

Potential sales from drugs under development
•  When the candidate ask for specific data shown in Exhibit 1 & 2, the interviewer is
encouraged to dictate the table instead of presenting it all at once unless the candidate
has mentioned all aspects of data.
•  One common mistake is that the candidate makes the assumption that only Phase III
drugs will be able to launch to the market and neglects Phase II and I drugs.
•  Please see the following table for the calculation of revenue from drugs in pipeline.
Stage Phase I Phase II Phase III
Analyze
Time to mature (yr) 4 3 2

Drugs in pipeline 5 3 2
Success Rate 20% 40% 80%
Drugs launched 5 × 20% = 1.0 3 × 40% = 1.2 2 × 80% = 1.6
Years in the market 1 2 3
Penetration 20% 30% 40%
Revenue 1.0 × 500M × 20% = 100M 1.2 × 500M × 30% = 180M 1.6 × 500M × 40% = 320M
Total revenue from drugs in pipeline: 100M + 180M + 320M = 600M
•  From Exhibit 1 & 2, with the growth of current sale and potential revenue from drugs in
pipeline, a gap of 2.5B − 1.5B − 600M = 400M should be closed by acquiring new targets.

Acquire new drugs to close gap
Analyze
•  The interviewer waits to see if the candidate takes the initiative to propose such question:
what is the minimum number of drugs that needs to be acquired to reach the goal.
•  By assuming $500 potential revenue from phase III drug(s), calculate the minimum (x)
number of new drugs need to be acquired is 500M × x × 80% × 40% = 400M
•  So x = 2.5, i.e. at lease 3 drugs.
To double the sales by the end of 5th year, we recommend to acquire at least 3 phase III
drugs because projected current revenue (1.5B) and potential revenue from products under
development (600M) together leave us a $400M gap in achieving the goal. This analysis
Summary
assumes no variation of attrition and penetration rate variation among drugs and the same
maximal revenue for each drug, and estimates that our client should acquire 3 phase III
drugs. It is also possible to push the regulation approve faster on rare disease. Some
potential risks could be the uncertainty in getting FDA approvals and the unavailability of
acquiring targets. Next, we will work out the cost-effective implementation plan to achieve this
goal.

Exhibit 1: Drugs currently under development
Stage Time to Mature (yr) Number of Drugs Success Rate
Research 6 10 10%
Phase I 4 5 20%
Phase II 3 3 40%
Phase III 2 2 80%

Exhibit 2: Market penetration
Year in the Market Penetration*
1 20%
2 30%
3 40%
* Penetration means percentage of max revenue/drug accumulated by the end of 5th year.

Case 2: Cookie Maker
Revenue BCG Struct. Comm Quant.
Consumer Goods Round I 5 4 2
Prompt
Our client is a cookie maker. It sells to high schools and universities. They found that their
sales from one private boy’s high school, called Alessio, has been flat whereas others
increased by 25%. Why and how to solve the problem?
Qualitative Information Quantitative Information

•  No other cookies are sold on campus.
•  The chocolate and chocolate chip
•  The product are the same in all the schools.
cookies together have been growing
Additional Info
They sell cookies in 1 cafeteria and 5 carts on

by 25% in the other school but not so
campus. These places are spread out and each
in the Alessio.
has a reasonable amount of students pass by.
•  Profit margin for each cookie is $0.5
The client is not considering setting up a new
•  Adding one additional shelf for
cart or cafeteria. The cookies are packed in the
cookie storage costs $1500.
box and put on the shelves.
•  Exhibit 1: Sales in cafeteria per
•  The number of carts is determined by the
month
number of students in the school. The number
•  Exhibit 2: Average sales per cart
of students remains constant for all the schools
per month
the client is serving.

Segmentation, size, growth
External: market Competition

Structure
Substitutes Customer
Factors
Revenue of each stream Product Know (aware of)

Internal: profit
Cost (not important as the Can (available
How we sell and affordable)
goal is to increase revenue)
Will (attracted)
A good candidate should ask about the quantitative goal and some general understanding of
Note
the business (product portfolio). For example, the solution should result in the growth rate of
that high school to be as same as the other schools they are serving.

Nail down to inventory problem
•  The candidate should be led to cross out “competition” sides.
•  When the candidate asks about the segmentation of product, just tell them the name of
the types of cookies.
•  If asked sales data of each product, the interviewer dictates the sales numbers (
Exhibit 1 & 2). The numbers alone can not tell anything. The candidate should compare
them with historical trend and their counterpart sales in other schools of our client.
•  The flat growth of chocolate and chocolate chip cookies should raise a red flag. After
crossing out the possibility of product side, the candidate should move on to how the
Analyze
client sells.
•  The interviewer should lead the candidate to cross out “know” and “will” factors. As for
“can”, the candidate can consider open hours, locations and shelf spaces.
•  Only when the candidate mentions the possibility of an inventory shortage should the
interviewer show the Exhibit 1 & 2. From Exhibit 1 & 2, the candidate should notice that
both chocolate cookies and chocolate chips cookies have been sold out.
How many months to break even if we add one additional shelf to each cart?
•  Assume students need of more these types of cookies and the growth rate is 25%, same
as other schools.
•  $1500 = x × $0.5 × (2000+2000) × 25%
•  x=3

What are the other possible solutions?
•  Re-supplying from manufacturer
•  Adding more space
•  Adding new shelves
•  Adding new cart
Analyze
•  More efficient space usage

•  Pack tighter
•  Change the shape/size of cookies to fit more in one box
•  Change the inventory mix
•  Shift customer demand
•  Persuade them to eat more non-chocolate cookies
•  If the profit margin for different type of cookie is different, we can at least start with
those high-profit margin ones
We recommend adding additional shelves to store chocolate cookies because the saturation
Summary
of inventory in chocolate cookies limited the growth in this high school it takes 1/3 of an
academic year (an academic year contains 9 months) to break even, assuming the same
growth rate and that the client will stay in the school for the next few years. The next step is to
analyze the other potential solutions such as changing the inventory mix.

Exhibit 1: Sales in cafeteria per month
Cookie Type Units in Inventory Units Sold

Oatmeal 8000 4800
Chocolate 8000 8000
Chocolate Chip 8000 8000
Brownies 8000 6000
Ginger 8000 3000
Total 40000 29800

Exhibit 2: Average sales per cart per month
Cookie Type Units in Inventory Units Sold

Oatmeal 2000 1000
Chocolate 2000 2000
Chocolate Chip 2000 2000
Brownies 2000 1500
Ginger 2000 1200
Total 10000 7700

Case 3: Car Rental
Market Entry A. T. Kearney Struct. Comm Quant.
Automotive Round I 3 2 2
Prompt
Our client is a car rental company in US. They have been successfully entered west Europe
region. Now, they are thinking about entering the east Europe region. Should they enter?
What factors should they consider?
•  Quantitative goal, gain $200,000 profit / year by the end of the third year
•  The total revenue of the current market at that region 10M and will steadily linearly grow
Additional Info
by 10%/yr for the next 5-10 years. In other words, increase 30% by the end of the third
year
•  Current competitor in that region: 1 international firm shares 35%, 1 local firm shares 45%,
and the other firms share the rest 20%
•  No segmentation of the market
•  All companies in that market has the same profit margin, 5%
•  No regulation as an entry barrier
•  Our client has 35% of the west Europe market

Case 3: Car Rental
What factors should the client consider?
Structure
•  A good candidate should ask the quantitative goal and then notice that the profit goal is
not high for a large corporation and ask why. One explanation is that the profit margin is
low for rental car industry and therefore they don’t expect to gain much in the first few
years given the initial investment.
•  Use the market entry framework (see Exhibit 1 for example)
How much market share the client should gain?
•  Given the total revenue of the market (10M), growth rate (10%/yr), profit margin, and
profit goal, the candidate should calculate how much market share (x) the company
should gain in order to reach the goal.
Analyze
•  10M × (1+30%) × x × 5% = $200,000

•  So x ≈ 30%
•  Then the candidate should take the initiative to comment on this number and transit to the
next branch of the tree.
•  The market share seems high because it means our client need to be at least the
third biggest player in the market upon its entry assuming that we have the same
profit margin as the industry.

Case 3: Car Rental
How to achieve the desired market share?
•  The candidate should move to the next branch and mention three possibilities:
•  Partner
Analyze
•  Acquire
•  From scratch
•  For the first two options, the client can almost immediately achieve such goal or even
faster, with the associated risk and strategy unexplored. For the last option, the client will
facing several entry barriers such as brand loyalty, learning curve, capital requirements,
and all types of business problems that might not be transferable. It will be relative easier
if the client has past experience in successfully entering similar market.
Summary
We recommend to enter the eastern EU market because the market is growing and profitable.
To achieve $200,000 profit goal by the end of third year, we need to gain 30% of market
share by M&A or joint venture. Next step is to consider work out an implementation plan on
how to achieve M&A and to minimize associated risk.

Case 3: Car Rental
Size, Growth
Exhibit 1: Issue Tree trend
Market
Competition,
Share
Worth or not
Cost
Profit Volume
Revenue
Independent Price
How to gain
Enter? M&A
market
Joint venture/
partner
Opportunity cost
Risk Legal issues
Competitor
reaction

Case 4: Big Box
Profitability A. T. Kearney Struct. Comm Quant.
Retailing Round I 3 4 3
Big Box is a retailer company like Wal-Mart. Big Box is currently the market leader and has
Prompt
been growing steadily at the rate of industry average. The CEO of the company has a gut
feeling that something with the company has gone wrong. He asks you to figure out what
went wrong if something did go wrong.
•  One new competitor has been gaining share over the past few years and has been
projected to continuously grow in the future.
Additional Info
•  Gross profits of competitor and our client are the same, 100M. The gross profits exclude
fix costs, i.e. πgross= Revenue - Variable Cost
•  Our client sells only 2–3 products from the same company, while the competitor sells 4-6
products per company. The distribution and SG&A costs are the same between the client
and the competitor.
•  Our client pays to its employees a higher benefit package and therefore the employees
stay longer. In contrast, the competitor only pays a minimal benefit package and its
turnover rate is higher.
•  Exhibit 1: Sales data of our client and competitor

Case 4: Big Box

Structure
External: market Competition
Substitutes Customer
Factors
Revenue of each stream Product Know (aware)

Internal: profit
Can (available
Profit margin How we sale and affordable)
Will (attracted)
•  A good candidate should ask whether there is any specific “gut” feeling the CEO has in
mind (However, the interviewer should provide no additional information upon asking.)
and can state his/her assumption that the “gut” feeling is about profitability since
Note
businessmen care most about making money.

•  By asking about the competitors, the candidate should notice the threat of the new
competitor might be the threat. So, in the analysis, the candidate should always
benchmark with the new competitor.

Case 4: Big Box
Compare with competitors
•  From Exhibit 1, the candidate should notice that the sales of computers are much higher
than our competitors, while the sales of the household is the lowest among all the
segments and lower than our competitors.
•  Although the gross profit is the same as competitor, the client earn less revenue than the
competitor but we have higher overall gross profit margin since the computer segment
has the highest profit margin.
•  It is hard to tell which company overall is more profitable (no fixed cost info)
Analyze
Math question: calculate the revenue of each company (Rclt and Rcomp)
•  Because (weighted average)

•  Rclt × 70% × 40% + Rclt × 20% × 10% + Rclt × 10% × 20% + Rclt × 0% × 20% =
$100M
•  Rcomp × 20% × 40% + Rcomp × 30% ×10% + Rcomp × 30% × 20% + Rcomp × 20% ×
20% = $100M
•  So Rclt = $312.5M < Rcomp = $476.2M
•  The variable costs can also be calculated as VCclt = Rclt - $100M = $212.5M and VCcomp
= Rcomp -100M = $376.19M

Case 4: Big Box
How to increase revenue?
•  From Exhibit 2, we should prioritize our increase revenue focus on food/drink.

•  To increase revenue, there are 3 aspects to consider
•  Customer: the same as the competitor
•  Product: a better produce mix (e.g. bundling media sales with computer)
•  Sales/marketing
How to increase sales?

Analyze
•  As for the sales, we need to consider: Location, Open hours, Sale force, Layout, and
Promotion
•  To increase food/drink goods sale, we might need to
•  Improve our layout
•  Train sales force
•  Attract traffic by promotion
•  The interviewer can tell the candidate the information about our employee benefit
package. The candidate can reasonably state that the reason why the client sells those
high tech goods better is because the client has more experienced labor and the client
may have established such reputation among customers.

Case 4: Big Box
How to increase margin?
•  To increase the margin, the client can

•  Increase the price
•  Cut variable cost (mainly buying the products from the supplier)
•  One major difference is that the client sells fewer types of products from one company
Analyze
than the competitor does and gets less discounts.

•  To further cut down our lower-than competitor variable cost
•  Eliminate low sales category (such as household, if we can’t improve it). However,
we need to consider if this movement will hurt our brand image.
•  Change the product mix to have a higher number of products per company.
However, the concerns are
•  The customers may feel fewer choices available
•  The client can’t be distinguished from the competitors and the customers can
easily switch.
Summary
The problem is that Big Box has lower revenues than the competitor. We recommend that our
client increase revenue by bundling sales, improving layout, employee training program and
promotion. Next, we would like to work with you on the implementation plan of these
recommendations and further investigate ways to lower fixed costs.

Case 4: Big Box
Exhibit 1: Sales data of our client and competitor
% of Sales
Goods Contribution Margina
Client Competitor
Computer/tech 70% 20% 40%
Media 20% 30% 10%
Food/drink 10% 30% 20%
Household 0% 20% 20%
aContributionmargins and defined as (price - variable cost)/price and are the same for client and competitor.
The interviewer should tell the candidate of contribution margin without explain the meaning of it unless asked.

Case 4: Big Box
Exhibit 2: Calculation of client
Segment Computer/tech Media Food/drink Household
% of sales 70% 20% 10% 0%
Total Revenue* Rclt Rclt Rclt Rclt
Revenue of each segment Rclt x 70% Rclt x 20% Rclt x 10% Rclt x 0%
Margin 40% 10% 20% 20%
Profit of each segment Rclt x 70% x 40% Rclt x 20% x 10% Rclt x 10% x 20% Rclt x 0% x 20%
Rclt × 70% × 40% + Rclt × 20% × 10% + Rclt × 10% × 20% + Rclt × 0%
Total Profit
× 20% = $100M; So Rclt = $312.5M
*See the calculation of the math question

Case 4: Big Box
Exhibit 3: Calculation of competitor
Segment Computer/tech Media Food/drink Household
% of sales 20% 30% 30% 20%
Total Revenue* Rcomp Rcomp Rcomp Rcomp
Revenue of each segment Rcomp x 20% Rcomp x 30% Rcomp x 30% Rcomp x 20%
Margin 40% 10% 20% 20%
Profit of each segment Rcomp x 20% x 40% Rcomp x 20% x 10% Rcomp x 20% x 20% Rcomp x 20% x 20%
Rcomp × 20% × 40% + Rcomp × 30% ×10% + Rcomp × 30% × 20% + Rcomp × 20%
Total Profit
× 20% = $100M; So Rcomp = $476.2M
*See the calculation of the math question

Case 5: Magazine Revenue
Revenue A. T. Kearney Struct. Comm Quant.
Publishing Round II 4 5 2
Prompt
Pick your favorite magazine, how can you increase their revenue?
•  50 years ago, 90% of revenue comes from ad. Nowadays, the percentage has dropped to
40% (30% paper ad and 10% online ad, no data for tablet ad)
Additional Info
•  Predict 16M ipad will be sold next year

•  The revenue increase from subscription follows as the inflation rate
•  Ad to content ratio remains constant over the years
•  Advertisement has 3 segments: print, online and tablet version
•  Currently, online price are charged by $5 / 1000 click
•  The packaging and ad formats on the ipad will be very similar to the print editions
•  The Audit Bureau of Circulations decided that ipad subscription can be counted into total
circulation
•  Exhibit 3: Change in Ad Revenue and Pages

How to increase revenue?
Structure
•  Before structuring, the candidate could ask why focus on revenue not profit? Any
numerical goal?
•  Issue tree: see Exhibit 1 for example
How to attract more subscription?
•  Lets take BusinessWeek for example. The revenue comes from two sources: subscription
and advertisement.
Analyze
•  Lead the candidate to discuss different ways to attract more subscription (see Exhibit 2
for sample answers). Increasing/decreasing the price of subscription is not entirely
unacceptable. However, the elasticity of the price is high at high price and low at low price
and may result in revenue decrease.
•  A good candidate should ask for revenue data and conclude that the problem comes from
ad revenue. Then if the candidate may ask for price and volume information on ads,
provide him/her Exhibit 3.

How to increase ad pages sold?
•  Ask the candidate to list factors that affect the number of ad pages sold or how to increase
ad pages sold (see Exhibit 4 for sample answers)
•  A good candidate should mention that
•  The business type magazine may make customer rich;
•  If the competitors are cutting budget on ad in recession, the ad can stand out and
attract their customers.
Analyze
Estimate the online revenue
•  Annual subscription (about 1M) × online Readers per Copy (about 10) × % of click the
online ad (about 0.1%) × $5 / 1000 click = $50
•  The candidate should conclude that if charge the ad by clicking, the online revenue could
be neglected.
•  If the candidate mention tablet ad, ask the candidate to the pricing strategy of tablet ad
compared to print ad. A potential answer could be “Ad rate on ipad can be the same as
print ad or even higher because ipad ad is still a part of reading experience and ipad is
capable of interactivity, video and other elements that make ad more effective.”

Exhibit 1: Issue Tree

External: market
Competition, substitute Customer
Increase Revenue?
Revenue of each revenue
Product
stream (new vs. old)
Internal: profit
How we
Cost
sell

Exhibit 2: Methods to Improve Subscription Price
Content
Improve product
(retain current customer)
Printing tech
Service (e.g. order)

Subscription
Younger generation
(Facebook)
Institutional
Find new subscribers
cooperation
International market

Exhibit 3: Change in Ad Revenue and Pages
Source: PerfectMarket.com

Exhibit 4: Factors Affect Ad Revenue
Magazine Contents
Know
Magazine Reputation
Ad fee
Ad pages sold Can
Space available
Need for Publicizing
Will
Quality of ad
presented

Case 6: Premium Grill
Market Entry Bain Struct. Comm Quant.
Consumer Goods Round I 3 3 3
Prompt
The client makes and sells low end grills for cooking in US and has been industry leader for
the past decades. They are thinking of selling premium grill. Should they do it?
Additional Info
•  The motivation behind selling premium grills is to make more money.

•  The goal of the client is to gain 20% market share in premium grill.
•  The leader in premium market has 40% of market share; the 2nd to 4th shares 30%
altogether; and the rest are fragmented.
•  Average price for low end grills is $200, while $1000 for premium grill.
•  On average, a grill will be replaced every 10 years.

What factors would you consider?
•  The candidate should ask the motivation of the new idea (which is making more money)
and then state using that as major criteria.
•  A good candidate can write down other possibilities that are beyond the scope of this
case (for example, selling products that require similar tech such as portable stove,
selling complements, enter other international market, etc).
Structure
Market size, growth
Attractiveness Competition, share

Revenue
Profit
Cost
Factors
Competitor response
External
Legal issues
Achievability
Initial set-up
Internal
Issues with value chain

Can you estimate the annual market size?
•  Let the candidate list the differences between premium and low–end grill.
•  Price: build the brand to sell high-priced products because customers sometimes
judge the quality by the price.
•  More Function: flavor generator plates, mixture of heat level
•  Imaging: commercial-type styling
•  Easier to use: more installation options, electronic ignition, safety, easy to clean
•  Let the candidate to identify potential customer such as high income household,
restaurant, hotel, club or political campaign organization.
Analyze
•  Estimate the annual market size (see the table blow)

Revenue / year (R)*
Number of premium grills Average annual price
# of household % of home use % of premium grills Price Replacement rate
300M / 4 40% 20% $1000 10
R = 300M / 4 x 40% x 20% x $1000 / 10 = 600M
*Commercial usage from restaurant and institutional usage are ignored.
•  So if the company capture 20% of market share, potential revenue growth is 600M x 20%
= 120M

How can the client achieve the goal?
Lead the candidate through value chain (or cost structure) and consider
Analyze
•  R&D
•  Infrastructure compatibility
•  Capacity
•  Sales/marketing
Summary
We recommend that the client enter the premium grill market. They can achieve their goal
either by acquiring one-to-several of their competitors. Alternatively, they can directly compete
with differentiated products that better meet customer needs and utilize a well-planned
marketing strategy. Our next steps could be to analyze the possibility of M&A.

Case 7: Ice Cream
Market Entry Bain Struct. Comm Quant.
Consumer Goods Round II 5 4 4
Prompt
The client is a coffee shop chain in NYC. They found the other coffee shop is selling ice
cream and they wonder if they should do so as well.
•  The client wants to do so in order to make more money.

•  There no synergy between coffee and ice cream.
•  The ice cream market is segmented into big brand (40%), small chains (30%) and
Additional Info
fragments (the rest 30% market share). No size or growth data.

•  The other coffee shop sells ice cream all day and all year along.
•  No profit, revenue or cost data on competitors.
•  The client has no idea what ice cream to sell or at what price. The client don’t know what
is the initial cost for setting up ice cream machine.
•  The client has started a pilot program, selling ice cream in one of the stores.
•  Exhibit 1: Sales data in pilot store
•  Exhibit 2: Coffee profit margin (For those who care about ice cream or coffee business,
see this exhibit for additional information as an entertainment)

Case 7: Ice Cream
Whether to sell ice cream or not?
•  The candidate should ask about the motivation of the new plan (which is making more
money) and use this as the major criterion as the case flows: selling ice cream has to add
Structure
profit and we need to estimate the revenue and cost of selling ice cream.
•  Three major estimate methods on revenue side are:
•  Max Revenue: market size x growth x the share client can get
•  Min Revenue: based on cost, pricing data, calculate how much volume need to
generate, compare with market share to determine achievable or not
•  “Pilot” Revenue: try the idea in small portion of the business and test if it work in that
small portion and within certain time period (notice the bias of sampling).
A good candidate could also mention:

•  Beyond scope idea: for example, analyzing the possibility of selling other products that
has synergy with coffee, such as coffee flavor candle, coffee ice cream cake
Note
•  Risks:
•  Legal issues
•  Competitors’ response
•  Additional criteria: brand image

Case 7: Ice Cream
Estimate revenue from pilot program
•  If the candidate mentions pilot program, then give data to the candidate piece by piece
only when he/she ask for it (see Exhibit 1). The number of customer increased while the
average purchase is lowered.
•  A good candidate should take the initiative to calculate revenue both before and after the
pilot program (See results in the table below, assuming one ticket one customer): revenue
is reduced and cost is increased after the pilot program, which is not a good sign for
launching ice cream selling.
Analyze
Time Pre-pilot Post-pilot

Customer Average Customer Average
revenue Revenue
(%) ticket (%) ticket
7am-10am 40% $5 200×40%×$5=400 50% $3 250×50%×$3=375
10am-4pm 35% $6 200×35%×$6=420 40% $5 250×40%×$5=500
4pm and
25% $7 200×25%×$7=350 10% $6 250×10%×$6=150
beyond
Total 200 1170 250 1025

Case 7: Ice Cream
Evaluate the pilot program
•  I wonder the pilot program is conducted scientifically, i.e., holding other variables in goals.
Exhibit 1 shows something interesting. The customer flow increases in the morning but
decreases at noon and in the afternoon, which contradicts our common expectation that
people tends eat ice cream when it is warm, such as in the middle of the day, rather than
starting the day with ice cream.
•  If we assume the increase of customer flow in the morning is driven by ice cream, what
Analyze
causes drop in customer numbers in the afternoon? Are the driving forces dependent on
ice cream, or be specific to that pilot store? If possible, I would like to see more detailed
breakdown of ice cream sales versus coffee for each ticket.
Why the pilot program is not profitable?
Without further investigation into the preceding two issues, possible explanations include:
•  The change of customer mix: more kids, more customer don’t value premium coffee; in
other words, the ice cream hurt the brand image
•  Cannibalization between desert or coffee with ice cream
•  Sampling bias
Summary
We recommend the client not to sell ice cream in their coffee chain because, based on the
data from pilot program, it will reduce revenue by cannibalization products, shift customer mix
to lower end products.

Case 7: Ice Cream
Exhibit 1: Sales data in pilot store
Time Pre-pilot Post-pilot

Average Average
Customer(%) Customer(%)
ticket ticket
7am-10am 40% $5 50% $3
10am-4pm 35% $6 40% $5
4pm and beyond 25% $7 10% $6
total customer 200 250

Case 7: Ice Cream
Exhibit 2: Coffee profit margin
Item Latte Drip

2 shots espresso (using 9gr/shot Using 5.25oz coffee to brew 3L
Coffee and $7/lb) = $0.18 airpot gets you 8 12oz cups =
(1 penny per gram) $0.29/12oz cup
8oz milk (using $4/gal) = $0.24 (3
milk None
pennies per ounce of milk)
12oz cup $0.07
lid $0.04
sleeve $0.02
COGS $0.55 $0.42
Price $2.85 $1.45
Gross margin 80% 71%
Source: www.coffeeforums.com Similarly, based on a typical ice cream recipe, you can figure that the gross margin is
around 60%. Notice that we didn’t count fixed cost in the calculation and the COGS can vary due to the recipe, quality of
raw material, and economic of scale.

Case 8: Laparoscope
Revenue Bain Struct. Comm Quant.
Healthcare Round II 3 4 0
The client manufactures and sells a medical device called laparoscope. The laparoscope
Prompt
allows doctors to perform both minor and complex surgeries with a few small cuts in the
abdomen. They have been the leader for the last 20 years and had control over price. In the
past 5 years, a new entrant from Chinese has taken 50% of the market share. How should
the client out compete the competitor?
•  Market is flat because the innovation of laparoscope is slow. Only minor innovations have
been developed, such as the orientation of the handle
Additional Info
•  Our customer are hospitals. Most hospitals concerned about the cost.
•  The client send representatives on-site to train doctors in using the machine. This is a
majority of the cost structure.
•  The competitor’s product has lower price. Some part of the laparoscope that the
competitor sells is removable and can be cleaned and reused. They don’t provide on-site
training and along with lower labor cost.
•  Since the client is already a big name for hospitals, they don’t need to worry about access
to customer in the case.

Case 8: Laparoscope
How would you help the client?
Structure
•  Analyze current market: Why has the competitor gained market share? What is the
difference between our client and the competitor?
•  Customer: segmentation, particular needs
•  Product: price, mix, quality
•  The way we sale: channel, ad, promotion, service
•  Expand to new market
How to out compete the competitor?
•  The interviewer should tell the candidate that a customer survey shows that the hospitals
are now more sensitive to the price.
•  To out compete the competitor, the client can
•  Lower the price (and remain the same profit margin, if possible): compare our cost
Analyze
structure with the competitors along value chain

•  Add more value to the product
•  Lower usage cost: the client could focus on innovation that can save cost for
the hospital, such as electricity, removable parts for cleaning etc
•  Better service
•  Emotional need (brand image): the client can segment the product into
premium brand (better service, higher price) and normal brand for those
hospitals that have deep pocket and don’t care much about the price

Case 8: Laparoscope
How to reduce training cost?
•  The interviewer should tell the candidate that the study finds the client has higher costs in
Analyze
after-service because we send training representatives to hospitals but our competitor

does not.
•  To reduce that training cost and remain same service quality, the client can replace it with
•  Online training material or DVD packed with the machine
•  Email or online chatting system to answer questions from doctors
Summary
To compete with the competitor, we recommend the client 1) to cut off the on-site training to
save cost and lower the price, 2) to innovate on reduce usage cost of hospitals. The client
can also consider differentiation from the competitor by setting up a premium product
segment with a “good service” brand image.

Case 9: Lacrosse League
Investment McKinsey Struct. Comm Quant.
Sports Round II 5 5 3
Your client is a private equity firm that plans to buy all 30 teams of professional lacrosse
Prompt
league, which are only present in Northeast region. There was a player’s strike last year and
therefore those players got a 5% raise in their salary. Because of the strike, the league
canceled the whole season, lost TV contract and most of their revenue. Should they buy the
league? If so, what is the highest acceptable price if the client want to pay back in 3 years?
Additional Info
•  The client wants to buy the Northeast segment of the lacrosse sport market, which has
been grown by 138% / year since 2001. Therefore, the client will become the monopoly of
the northeast lacrosse market and compete for audience attention with other sports.
•  Ticket price = $30 / spectator, no differentiation on seat price, profit margin = 21%.
•  Ticket revenue composes of 50% of total revenue.
•  Exhibit 1: Ticket sales data of last season
•  Exhibit 2: Survey over 1000 potential customers

What factors would you consider to make the decision?
Size, growth trend

Market
Competitors, substitutes
Worth?
Revenue: ad, ticket, broadcasting license,
commercial goods, etc
Structure
Profit
Cost: equipment, labor, SG&A, tax, etc
Value chain
Buy? Implementation
Exit strategy
Responses
External
Legal issues
Risks
Financial
Internal
Operational

What is the profit from ticket sales?
•  Tell the candidate to focus on ticket revenue for the rest of the case and show the
candidate Exhibit 1.
•  Please see the following table for the calculation of the profit from ticket sales
May Jun Jul Aug Sep

Game 10 150 150 150 80
Audience / game 15,000 15,000 10,000 7000 8000
Analyze
Audience 150k 2250k 1500k 1050k 640k

Total audience 150k + 2250k +1500k +1050k + 640k = 5590k
Revenue 5590 × $30 = 167.7M
Profit 167.7M × 21% = 35.217M / yr
•  After the calculation, a good candidate should state:

•  Insight from the numbers: assuming no change in the number of games, audience
and price, we should not pay more than 35M × 3 / 50% = 210M, without considering
discount of cash flow and multiple
•  Next steps: 1) to understand why the sales drops over the time, 2) to find ways to
grow the business

What would you do to grow the ticket revenue?
•  We can approach from two aspects

•  Price
•  Increase
•  Mix: change price mix, sell seasonal tickets
•  Decrease: to drive up the volume sold, but depends on the price elasticity
•  Total audience size
Analyze
•  Increase the number of games: show game, compete with other part of the
country, add new teams
•  Increase the number of audience/game
•  Target: students, corporate group activity
•  Locations: capacity, transportation convenience
•  Timing: game too long, summer too hot
•  My initial hypothesis is that the game is too long to be attractive and we can shorten the
game to increase ticket revenue. To test this, I would like to conduct customer interviews/
survey.

What do you find from a potential customer poll?
•  The interviewer show the candidate Exhibit 2
•  Compared to other sports, we can find that
•  The number of people who watch lacrosse in the stadium or on TV shrinks as the
age increases
•  The proportion of people who play lacrosse between 18-30 years old is much larger
than the others
•  Therefore, the elder generation has a higher potential to grow and they are the group with
deep pockets. In order to attract older generation to watch lacrosse in the stadium, we
Analyze
need to understand
•  Why they lose interest in lacrosse after 30 years old
•  Why they prefer playing lacrosse but not watching it between age 18-30
•  Some areas to further investigate are
•  Marketing strategy
•  Stadium: location, players, explanation of , cheer team performance, lucky draw
events
•  Game rule: Length, break, score
•  Season: length, time, number of games (not conflict with other major sport events,
comfortable whether)
•  In the meantime, we need to make sure the teenagers will continue to watch game when
they get older.

We recommend to buy the league for no more than $210M because the market is growing
Summary
and the business is profitable with yearly ticket profit = $35M. However, in order to further
grow the business, we need to target those who have income to watch the game. We may
need to change the time, location and rules of the game and marketing strategy to satisfy our
targeting group. Next, I would like to further interview with customers to get their opinion on
those aspects.
•  Private Equity buy company and sell them at higher price. So for all the PE cases, make
sure to mention how to further grow the business so that PE can sell higher 5-7 years
later.
Note
•  Three common valuation methods consider stock price (if available), comparable deal
multiple (profit times multiple a constant (4-11) = deal price) and NPV. This simplified case
only ask the candidate to calculate current cash flow, one step before NPV.
•  This case is designed to end the interview before reaching decisive conclusion on how to
improve the profitability.

Exhibit 1: Ticket sales data of last season
Regular Season1 Play Off2
May Jun Jul Aug Sep
Game 10 150 150 150 80
Audience / game 15,000 15,000 10,000 7000 8000
1 The season starts at the end of May

2 Playoffs are a game or series of games played after the regular season by the top competitors, which are more competitive and intense

Exhibit 2: Survey over 1000 potential customers
Legend: color from dark to light: Play, Watch TV, Watch in stadium, Not interested
Source: YGCC

Case 10: South Africa Bank
Revenue McKinsey Struct. Comm Quant.
Financial Service Round II 4 5 3
Prompt
The client was a market leader of retail banks in South Africa. Despite that they have recently
lowered the cost to the lowest in the industry, the client is still not profitable in recent years.
The client has come to us to find ways of increasing revenue.
•  Goal: profitable in 2 years (give the following information until the candidate ask, i.e.
increase revenue by 20%)
•  Retail bank provides: checking account, saving account and loans
Additional Info
•  Customer segmentation: college students, middle class and affluent people

•  Retail bank service channel includes: Branches, ATMs, Internet, Mobile banking, Call
center, Email and Mail
•  34% of South Africa customer have changed their main bank and 10% plan to change in
the next three years*
•  Our client’s current attrition rate is 50%
•  Exhibit 1: Overview of student segment
•  Exhibit 2: Attrition survey: do you plan to switch your main bank?
* Source: Ernst & Young – Global Consumer Banking Survey 2011

Q1: What factors would you consider to increase revenue?
•  A good candidate should ask clarifying questions such as what is retail banking, what
does client do and what specific goal do they have in mind.
Segment, size, growth
Market Customers
Structure
External
Government regulation Competitors
Factors
Current
Product
Internal New
Service
•  We don’t mention cost because cost has been lowered as mentioned in the prompt.

Q2: What can you conclude from Exhibit 1?
•  A: 5M × (1+10%)2 = 6.05M
•  B: 10% × (1+100%)2 = 40%
•  Year 1: 5M × 10% × 50% × 10% = 25k
•  Year 3: 6.05M × 40% × 75% × 20% = 363k
•  A good candidate should
•  Drive insights: it is challenging because 1) the market is shrinking, 2) we are facing
the same, if not more serious, competition in the future
•  Next step: 1) dig deeper to find areas in which we can increase market share by
Analyze
out-competing or acquiring our competitors, 2) switch to other revenue streams
Q3: What is major risk and how to minimize it?

•  The major risk is whether the student can pay back the loan.
•  To minimize the risk, we can score each applicant based on:
•  Past credit history (student, family members)
•  Potential pay back ability
•  General economy
•  College type, major
•  Past employment
•  Current saving accounts
•  Terms of contract (loan amount, cosigning, valuable property to put up as collateral)

Q4: How to increase revenue in checking and saving accounts?
•  Maintain the old customers and attract the emerging customers: need to understand their
functional and emotional needs and match our product and service to their needs
•  The candidate can briefly mention the key areas to investigate by using data from
customer survey or research reports.
Q5: What can you conclude from Exhibit 2?
•  The interviewer should ask this question only after the candidate has mentioned customer
loyalty, attrition rate, or similar ideas. (Attrition rate means the change of main back, the
Analyze
higher the attrition rate is, the less loyalty the customers are.)
•  Our client’s attrition rate is much higher than world average and South Africa average. A
good candidate should take the initiative to ask “so what”, i.e. why is our attrition rate so
high and what shall we do? Aspects to be improved could be
•  Product
•  Product mix/variety
•  Price
•  Quality
•  Brand image: trust
•  Service
•  Channel accessibility (mobile banking)
•  Security (online purchase warning)
•  Personalized context (email alert of new product)

To increase our revenue, I recommend that our client decrease our higher-than-average
Summary
attrition rate by increasing product variety, building trustable brand image, make our channel
more available and convenient for our customers. Also, we found that if we want to increase
revenue by 20%, we need to double our current market share which is challenging. In the
following weeks, I will look into how to increase our share in college loan and create
implementation plan to increase our customer loyalty.

Exhibit 1: Overview of student segment
Current year, Year 1 Year 3 Projected growth rate
Current youth population 5M A 10%
% of students 10% B 100%
% with bank account 50% 75% --
Market share 10% 20% --

Exhibit 2: Attrition survey: do you plan to switch your main bank?
Our client’s current attrition rate is 50%

Source: Ernst & Young – Global Consumer Banking Survey 2011

Case 11: Hotel Chain Web
Investment McKinsey Struct. Comm Quant.
IT Services Round II 4 3 2
Your client is a national hotel chain across US. It has a website for guests to book rooms.
Prompt
Guests can also book the room through a third party website, which offers an entire vacation
package, including air tickets, hotel, rental car etc. Your client is interested in growing the
revenues by offering its own website for booking the vacation packages and come to you for
advice.
•  Website visitors per month: 12.5 million

Additional Info
•  Average visits per visitor per month: 2

•  Percentage of visits leading to room browsing: 25%
•  Percentage of room browsing leading to successful booking 20%
•  Average price per room per night: $125
•  Profit margin: 10%
•  10% of visitors who book rooms also book air tickets
•  Average airfare: $160
•  Commission fee: 2%

What are the areas you should investigate?
•  Financially
•  Additional revenue from booking rooms
Structure
•  Additional revenue from package

•  Implementation/risk
•  Partnership
•  Competitor reaction
•  Company internal
•  Cannibalization
•  Capability
•  Capacity
How much profit can the client make each month? What percentage of profit
does airfare booking add to room booking?
•  Total profit = 12.5M × 2 × 25% × 20% × ($125 × 10% + 10% × $160 × 2%) = $16M
Analyze
•  Percentage of profit from airfare = (10% × $160 × 2%) / ($125 × 10% + 10% × $160 × 2%)
≈ 2.5%
•  State the obvious: so the airfare would only be a small proportion of the total profit.
•  Drive the insight: if we are not considering the additional profit from booking the room, it
seems that airfare booking will only grow our revenue by 2.5%. Considering the risk of
losing relationship with our current partner and cannibalization, this is a good opportunity.

What are the risks for launching the website for vacation packages? How
would you minimize the risk of cannibalization?
See answer for Q1. To minimize the risk of cannibalization, we can differentiate our service
from 3rd party website and target premium customers, such as free printing e-ticket of airfare
Analyze
in the hotel if you book on our website.
What would you do to the third party website you launch your own website
for vacation packages?
To maintain a good relationship, we can establish a cross–reference strategy on the website.

Case 12: ElectronicRS
Revenue Growth McKinsey Struct. Comm Quant.
Retailing Round II 3 4 3
Your client, ElectronicRS, is a national electronics chain store (like BestBuy). It is recognized
Prompt
by customers for its outdated products, such as printers, DVD players but not for the latest
electronic products they sell. The revenue in the past 3 years has thus stayed flat. The
manager would like to significantly increase the revenues in the next 3-5 years.
Additional Info
•  Website visitors per month: 12.5 million

•  ElectronicRS currently sells 11,100 cell phones per year. Assume price and profit margin
does not change.
•  The current US market size for cell phones is $4M per year.
•  Exhibit 1: Sales data

What areas would you like to investigate?
•  Find attractive growth target
Structure
•  External: market
•  Segmentation, size, growth
•  Competition
•  Internal: profit
•  Revenue of each revenue stream
•  Profit margin k
•  Implementation/risk
Analyze the Exhibit 1 and tell me what you think?

•  In terms of profit margin, printers and home theaters are the least profitable, the next less
profitable is MP3s. Those three together take over 75% of the store space but only
Analyze
generate (100 + 350 + 300) / 2690 ≈ 28% of the total profit. In addition, those categories is
declining or flat. Unless we can reverse the declining demand of the industry, we should
less focus on those three categories.
•  On the other side, the cell phone, Parts and Service has been growing and has been
profitable. I will choose cell phone as our primary focus base on impact and difficulty: 1)
cell phone profit composes larger percent of our total profit than Service and 2) there are
fewer types of products, which is easier to implement than Parts.

If you would like to discontinue selling printers, scanners, MP3s and audios,
and increase sales on wireless. How much more cell phones do you need
to sell to cover the loss in the profits? What do you think?
•  Profit per cell phone = $800k / 11100 = $72
•  Profit loss = $100k + $350k = $450k
•  The additional cell phone need to be sold are 6250
•  Since the total market size of cell phone is $4M, this means we are going to capture
($450k × 1330k / 800k + 1330k) / $4M = 52% of the market share, which is quite
impossible.
Analyze
What areas would you investigate to increase cell phone sales?

The principle is to match customer needs and purchasing behavior with our offering
•  Products
•  Price
•  Variety
•  Quality (functionality, image)
•  How we sell
•  Brand image
•  Professional and friendly sale force
•  Store layout and label
•  In-out store ad

Exhibit 1: Sales data
Types of products Store space Revenue (k/yr) Profit (k/yr) Growth
Cell phones 100 10% 1,330 800 Growing
Printers, scanners 300 25% 800 100 Declining
MP3s, audios 200 25% 650 350 Flat
Home theaters 350 25% 1,900 300 Declining
Parts 2,000 10% 1,650 1,100 Growing
Service 100 5% 45 40 Growing

Case 13: Car Charger
Market Entry BCG Struct. Comm Quant.
Automotive Round I 4 3 4
Prompt
Our client is an electric device manufacturer of circuit breakers for households in US. Their
profit has been staggered and is looking for a new market for growth. They think electric car
chargers are interesting and wonder if they should enter.
Additional Info
•  One charger per electric car

•  Initial investment = 30M, fixed cost = 3M / yr
•  If the client enter the market, they will gain 20% of market share
•  Exhibit 1: Electric Car Sales
•  Exhibit 2: Historical Price of Electric Car Charger
•  Exhibit 3: Cost Structure

What areas would you like to investigate?
Structure
The core of business is to make money. So based on the equation

profit = revenue - cost
= market size × growth × share – (initial investment + VC × vol + FC)
we need to understand the size and growth of the market, if we are going to be profitable and
if this is attractive, how to achieve this. I would start by estimating the revenue we can get if
we enter this market and then move on to the cost side.
Given Exhibit 1 and 2 together, what is our revenue in 2015?
•  Exhibit 1: The electric car market is and will continue growing. The number of electric car
sold in 2015 is estimated between 50k to 500k. Since one car has one charger, the
number of car charger will be 50k to 500k.
Analyze
•  Exhibit 2: The price of the charger is decreasing and the trend indicate that the price at
2015 will be stable around $500.
•  Together, the market size of electric car charger is calculated to be $25M (= 50k × $500) ~
250M ( = 500k × $500).
•  If we assume the client can grasp 20% market share, the estimated revenue at 2015
would be 5M and 50M.
•  In order to determine the profitability, I would like to understand the cost structure of this
business so as to compare our revenue with the cost.

Analyze the Exhibit 3 and tell me what you think?
Analyze
•  According to the volume estimation in Exhibit 1, the candidate calculates the total annual
cost shown in Exhibit 4.
•  Since the total cost for either scenario is higher than the potential revenue, this is not a
profitable business without considering the initial investment, implementation difficulty and
future competition.
Summary
I do not recommend that the client enter the electric car charger market because we will not
be profitable assuming the market size of electric car at either 500k or 50k by 2015, the price
of charger at $500, our share being 20% and the cost structure.

Exhibit 1: Electric Car Sales
Source: YGCC

Exhibit 2: Historical Price of Electric Car Charger
Source: YGCC

Exhibit 3: Cost Structure
Unit cost Savings Savings Savings

at 1,000 level at 10,000 units at 100,000 units at 1,000,000 units
Raw material and parts 80 25% 25% 75%
Circuits 20 25% 25% 75%
Manufacturing 75 0% 25% 25%
Sales & marketing 25 0% 25% 25%

Exhibit 4: Cost Structure
Unit cost ($) Savings Savings Savings

at 1,000 level at 10,000 units at 100,000 units at 1,000,000 units
Raw material and parts 80 25% 25% 75%
Circuits 20 25% 25% 75%
Manufacturing 75 0% 25% 25%
Sales & marketing 25 0% 25% 25%
Unit savings ($) 0 25 50
Unit cost ($) 200 175 150
175 × 10000 150 × 10000
Annual variable cost ($/yr)
= 1750k = 1500k
Annual fix cost 3M 3M
(1.75 + 3) × 5 (1.5 + 3) × 5
Total cost over 5 years
= 23.75M = 23.75M
500 × 10000 × 5 500 × 100000 × 5
Total revenue
= 25M = 250M
Initial investment 30M 30M
Profit -28.75M 202.5M

Case 14: DM Program
Our client is US pharmaceutical company. One of its blockbuster drugs will go off-patent next
Prompt
year. This drug generate $10B revenue per year. However, no new drug has been added to
the R&D pipeline since 4 years ago. They are looking for growth opportunities and find
disease management an interesting target. They hired us to find out if this area is worth
pursuing.
•  Disease management (DM) is a program that educate healthy or non-healthy employees

to prevent disease or prevent complications of their illnesses or treatments. From an
employer’s perspective, the DM can save their cost on employee’s health care.
Additional Info
•  The client’s criteria is “If the new market can cover 10B revenue lost from the blockbuster
drug.”
•  The annual growth is 40% per year from 1997-2005.
•  If our client enter the market, it would have 10 customers (institute/company) in two years.
On average, each customer has 30k employee. Only 50% of the employees will enrolled
in DM. 75% are healthy and the rest are not.
•  The employer can save $500/employee/yr for those semi-healthy and save $200/
employee/yr for those healthy. For the simplicity of this case, lets assume the amount the
employer saves is equal to the client’s revenue.

Case 14: DM Program
How would you approach this problem?
•  Find if this is an attractive growth target

Structure

•  Competition
•  Revenue
•  Profit margin
•  Implementation plan / risk
•  Synergy with current portfolio
•  Entry barrier
How much would you predict our revenue to be if we enter this market?
Analyze
•  10 × 30k × 50% × (75% × $200 + 25% × $500) ≈ 41M << 10B.

•  So the DM program alone is far from enough to cover the lost from 10B drug.

Case 14: DM Program
How big is the disease management market? If we eat the entire DM market,
will we cover all the revenue lost from the blockbuster drug?
•  US population (300M) × % of age between 20-60 (50%, assuming evenly distributed) × %
of employed (90%) × % of company have DM (30%) × % of enrollment (50%) × same
pricing model (0.75 × 200 + 0.25 × 500) ≈ 5.6B
•  So even if we eat the entire DM market, it is still not enough to cover the lost revenue
from blockbuster drug.
Analyze
Besides developing new drug and selling them world wide, what other ways
the client can do to cover the lost revenue?*
•  R&D and manufacturing: cosmetics
•  Knowledge in disease and medicine: diagnosis devices and kits, health consultation
•  Relationship with provider, patients: insurance, IT system for hospital
*This question test the candidate’s ability of “out of box thinking” or “creativity”. My thinking process is to look at the value
chain of Pharm, their capability at each step and see if any of their strength can be applied to an existing or emerging
industry, potentially with money left on the table. Using a more structure thinking process, even if you didn’t hit an interesting
option such as cosmetics, the interviewer will still value you more than if you are brainstorming because they can see where
your ideas comes from and if your creativity is repeatable
Disease management alone can only generate 41M of revenue and will not be sufficient to
Sum
cover the 10B lost. I recommend the client to looking into other opportunities such as
cosmetics, health consultation and insurance.

Case 15: Luxury Goods
Revenue Growth BCG Struct. Comm Quant.
Your client is a luxury goods franchise that owns 14 brands. They are only in charge of
Prompt
marketing and a central reservation center. The others are operated by franchisee. The
franchisee must pay a franchise fee, which is 4% of revenue. The client is looking for growth
opportunity. What should they do?
Additional Info
•  Our client’s website conversion rate (# of purchase / # of visit) is 5%, while the industry
average is 10%. Our client hasn’t update the website in past 4 years.
•  Initial investment for updating website is 48M, the recurring cost is 4M. The client want to
breakeven in 3 years. We have 1M visitors/yr. The average spending is $12500 / visitor.
•  Exhibit 1: Revenue in recent five years
•  Exhibit 2: Profitability of each distribution channel

•  Find attractive growth target

Structure
•  Competition
•  Revenue of each revenue stream (volume × price, historical trend)
How would you segment revenue stream?

•  Customer (who buys? who uses? when and where? how much? why?)
•  Product / service (mix/variety/bundling, segment, price, quality)
Analyze
•  How we sell (customer decision journey)

•  Aware
•  Search and compare (similar product and substitutes)
•  Order / pay
•  Transportation
•  In use
•  Feedback / retention

Actually, we segment based on how they order. From Exhibit 1 and 2, what
do you find? Which segment would you target to grow?
•  Over the past few years, the “walk-in” segment is continuously growing and the most
profitable, while the other segments have been stable.
•  My criteria to prioritize them is 1) impact and 2) difficulty. The walk-in segment has the
largest impact because it has been growing and it is the most profitable. However, since
the client has less control over them, it is hard to target this segment. Despite that the
website segment been stable, this segment has the second highest profit/customer and
Analyze
the client have control over it.

•  So I will first choose the website to develop growth strategy.
•  Note that a common mistake here is choose “walk in” as a target. The interviewer should
guide the candidate to consider implementation difficulty.
How would you improve the website?

•  First, I want to understand the revenue composition in terms of price and volume, where
volume can be further break down into the number of customer come to website and the
number of ordering.
•  Then I will benchmark with our competitor or the industry average or our past
performance and find out in which aspect we are underperforming or can be further
improved.

The interviewer provide additional information on conversion rate.
•  Interesting, our conversion rate is half of the industry average because we haven’t
updated our website in the past 4 years. In other words, my hypothesis is that if we invest
to update our website, the conversion rate will be improved. (The candidate should check
this with the interviewer, at least from eye contact)
Analyze
•  The next step is to do a breakeven analysis to understand if we invest into the website,
how much we need to improve the conversional rate to breakeven.
The interviewer provide additional information on breakeven analysis.
•  1M visitors/yr × additional conversion rate x × $12500/visitor × 4% commission fee × 3yr =
$48M + 3yr × $4M/yr. A common error is missing this 4%.
•  So, the additional conversion rate for breakeven is 4%. The industry average is 10% still
larger than 5% + 4% so this goal is realistic and if we reach the same or higher
conversion rate, we will increase our revenue.
Summary
To further grow the business, I recommend to invest in updating the website to increase
our conversion rate (currently 5%) to match with industry average (10%). We prioritize the
website because of it has the second highest profit/customer and relatively easy to
implement. We can breakeven in 3 years if we increase the conversion rate to 9%.

Exhibit 1: Revenue in recent five years
Source: YGCC

Exhibit 2: Profitability of each distribution channel
Source: YGCC

Case 16: Bank Acquisition
Investment BCG Struct. Comm Quant.
Financial Services Round II 3 3 3
Your client is a national retail bank that has 1000 branches. They are looking for growth
opportunities among 3 options: 1) buy small retail bank, 2) build branches from scratch and 3)
Prompt
direct banking (offer financial service without branches). In the case, let’s focus on the first
option. The client is considering acquiring bank B, which operates 200 branches in
metropolitan areas. The current deal includes $100M premium in addition to the valuation.
The client comes to you and ask if the deal makes sense.
•  Exhibit 1: Profit data of our client and acquiring target

Additional Info
Our client Bank B
Total revenue / yr 2.45B 360M
Total cost / yr 1.5B 320M

Why big bank buy smaller banks and how would you approach this problem?
•  Additional revenue
•  Capture the new group of customer
Structure
•  Synergy of cross sell

•  Cost savings
•  Finding and building new branches
•  Economic of scale
I would like to compare the additional profit generated from acquiring the new branches to the
premium we are paying. If the additional profit is more than the premium, this deal is
reasonable.
Given the data in Exhibit 1, what do you think?

Analyze
From Exhibit 2, we can see that bank B has much lower profitability than our client. In order
to understand why, we compare the revenue/branch and cost/branch and find that it is the
revenue drives the lower profitability of bank B. Their revenue per branch is lower than ours
while the cost is comparable considering lack of economic of scale.

If we buy the bank B and can transform the profitability to the same level as
we do, what do you think?
Analyze
Those 200 branches is going to generate additional $950M/5 - 40M = $150M of profit, which
is larger than the 100M premium.
Summary
The 100M premium is acceptable because after the deal, we can transform the bank B into
a more profitable bank as we are and therefore generate additional 150M profit/yr.

Exhibit 2: Analysis of sales data
Our client Bank B
# of branch 1000 200
Total revenue / yr 2.45B 360M
Total cost / yr 1.5B 320M
Profit ($ k / yr) 950M 40M
Profit margin (% / yr) 38.7% 11.1%
Revenue / branch / yr 2.45M 1.8M
Cost / branch / yr 1.5M 1.6M

Case 17: Bank Statement
Cost BCG Struct. Comm Quant.
Financial Services Round II 4 3 4
Prompt
Your client is a national retail bank in US. They have 3 business unit: credit cards, mortgages
and loans, saving and checking accounts. The client want to achieve $10M/yr cost saving on
printing and mailing of the statements.
•  Exhibit 1: Printing cost data

•  Set 1
•  The machine used in printing mortgage statement is old and operated in NYC. The client
outsourced the printing of credit card statement to 3rd party. The client prints debit card
Additional Info
statements in TX using updated machine.

•  The client sends all mail through USPS. The normal price is ¢44/statement. The client get more
volume discount if they can package more mail to the same zipcode.
•  Currently, our client is pre-sorting statements within each segment.
•  Set 2
•  New machine for mortgage printing costs 2M initial investment and lowers the printing cost/
statement to ¢16.
•  Altogether-sorting method will lower the mailing cost ¢1 per statement.
•  Set 3
•  New machine for credit card statement printing will cost 2M initial investment and keep printing
cost/statement the same as the outsourcing cost ¢12.

How would you approach the problem?
Different ways of informing the customer
•  Email or online content (save both print and mailing cost): environmental campaign
•  Fax (save mailing cost but not cost on machine or printing)
Structure
•  Print & mail cost includes

•  Raw material
•  Paper: condense content, double side printing
•  Inside envelope for check back
•  Outside envelope
•  Printing
•  Mailing
I would like to understand the cost of each item above for different segments of each item and
find areas we can reduce the cost.

Given the data in Exhibit 1, what do you find?
•  The printing cost for mortgage statements is higher than other categories.
•  The mailing cost is different for each segment. First I want to understand why and how to
reduce them further to be at least the same as credit card.
The interviewer provide additional information set 1

•  So the printing cost for mortgage is high because of higher costs on maintaining the old
machine and because of higher labor costs in NYC relative to TX. I recommend we move
our printing department of mortgage statements to TX. If the current capacity is not
Analyze
enough to accommodate additional 5M statements per month, I would also subtract the
cost of the new machine from our cost saving analysis.
•  We can pre-sort all the different types of statements together to get more volume
discount. I would like to calculate how much saving we can achieve per year by doing so.
•  Saving on printing mortgage statement:
•  First year: ¢2 × 10M × 12 - 2M = 0.4M/yr
•  Second year and beyond: 2.4M/yr
•  Saving on mailing: ¢1 × (50M + 10M + 5M) × 12 = 7.8M/yr
•  Together, 10.2M/yr from second year and beyond. So we can achieve this goal by
implementing those two cost saving transformations.

Our outsourcing contract is going to expire soon, what do you recommend?
I would like to compare those two options see which one is more cost efficient.
Analyze
See Exhibit 2. The answer depends on
•  If the additional transportation cost surpass the new machine investment and
•  If the company is capable and willing to handle the printing.
As long as the candidate can validate his/her recommendation, either answer is fine.

Exhibit 1: Printing cost data
# of statement / month Raw material Printing Postage

(M) (¢ / statement) (¢ / statement) (¢ / statement)
Credit card 50 2 12 36
Mortgage 10 2 18 40
Debit card 5 2 10 42

Exhibit 2: Outsourcing vs. printing by ourselves
Outsourcing Printing by ourselves
Financially: additional cost Transportation New machine
Implementation: print Low High (depends on capacity)
Difficulty: pre-sorting High (depends on synchronization) Low

Case 18: Bank IT Center
Cost BCG Struct. Comm Quant.
Financial Services Round I 4 2 4
Prompt
The Director of the IT department of famous retail Bank comes to you and asks you if they
should move the Data center from California to Texas.
•  The goal is to be able to pay back in 3 years.

•  The Data center needs 1000 employees to operate. They only plan to move 250 core
employees from CA to TX. The rest 750 will be laid off and they will recruit them locally in
TX.
Additional Info
•  The average salary is 100k/yr/employee in CA and 80k/yr/employee in TX.

•  They will give those core employee a one-time bonus to encourage them to move. The
bonus is 30% of their annual salary.
•  Each employee laid-off will receive a one-time lay-off package, equivalent to their 3-
month-payment.
•  Each new employee recruited in TX will receive a one-time 6k.
•  The office in CA is 100k square feet large and they plan to have a 200k square feet large
office in TX.
•  The rent/feet2 is $20 in CA and $15 in TX.
•  The cost to move 1000 servers the client owns should cost 2M in total.

•  Financially, which option is cheaper (since IT center is support function, assuming no

contribution to the revenue. However, the Data center could be one selling point.)
Structure
•  Implementation
•  Cash
•  Time
•  Tech such as server, connection network
•  Talent: can we keep them
•  Risk
•  Employee morale
•  Street perspective

Calculate payback period
•  One time cost: 32.75M

•  Tech: 2M (server movement)
•  Talent:
Analyze
•  Movement bonus for core employee: 250 × 100k × 30% = 7.5M

•  Layoff package: 750 × 100k × 3 / 12 = 18.75M
•  Recruiting: 750 × 6k = 4.5M
•  Annual cost: save 19M
•  Salary: -20k × 1000 = -20M
•  Rent: 200k$ × 15 - 100k × $20 = 1M
•  So we can breakeven in 2 years.
Summary
The analysis shows that we can breakeven in 2 years, which is less than 3-year-breakeven-
goal. So we should move the data center. Next, I would like to form a implementation plan
and discuss the potential risk associated with it.

Case 19: Medical Device
Prompt
The client is a major pharmaceutical company and they are interested in investing in medical
devices. Which market should they enter?
Additional Info
•  Exhibit 1: Common drug delivery methods that the client is considering
•  Exhibit 2: Factors considered by doctors in choosing delivery method
•  Exhibit 3: Market sales data in 2010

•  Attractiveness (market size × growth × the share client can get × profit margin - initial
investment cost)
Structure

•  Competition (affect share)
•  Impact (profitability and social impact)
•  Implementation plan
•  Difficulty: barriers prevent us to enter, such as regulation (insurance), technology/
capacity, initial investment
•  Risk: uncertainties if we successfully enter the market
Who do you think are the major customers?

Analyze
Individual, hospitals and other health care providers

Given the data in Exhibit 1, what do you find?
From Exhibit 1, each drug delivery method has its advantages and disadvantages. According
to my framework, to prioritize them, I would like to evaluate the market size (demand from
doctors) first. In order to estimate the market size, we need to know which device doctors
favor most at certain circumstances. I could conduct a survey on what factors doctors
consider most in prescribing those devices, such as Dose precision and Emotional Stress of
patients and safety issues.
BCG has surveyed 10,000 doctors and Exhibit 2 summarizes their responses
Analyze
•  From Exhibit 2, we see that the safety and efficacy are the two most important factors
cross different types of diseases. Therefore, the inhaler will not be a good target because
it could potentially cause oral cancer. Considering the pain and dose precision, the skin
patch seems more suitable for serious diseases than the auto-injector. As for the mild and
acute diseases, both one-shot and slow-release types are suitable. If we do need to match
one device with one disease category, the one-shot works better for mild disease than the
slow release type because the doctors have slightly higher emphasize on the efficacy.
(However, we need to determine 5% of difference is statistically significant or not.)
•  The next step is to determine which one will give higher net profit. I will first start with
understand the overall market size and the profitability if we step into anyone of the
market.

Let’s say you decide to group slow release and one-shot into one category:
auto-injector. Here is the sales data. What do you think?
•  The sales data in Exhibit 3 indicates that the total profit of the auto-injector market is
(1+1.2) × $200 × 20% = $88B and only 3M × $100 × 25% = $75M for the skin patch.
•  So the auto-injector market is the most attractive.
•  Next, I would like to evaluate our capability to gain market share and initial cost to set-up
this product line.
Analyze
Let’s discuss the potential risks if we enter this market.
•  Externally, we need to consider the competitors’ reaction: how will they react to our entry,
will our movement will followed by others?
•  Internally, opportunity cost of the investment, cannibalization with current product portfolio
(e.g. if the client are selling normal injectors.) and brand image are the things we need to
consider.

Exhibit 1: Common drug delivery methods

Exhibit 2: Factors considered by doctors in choosing delivery method
Source: YGCC
Note: We notice that efficacy may be dependent on the dose precision and therefore the listing of factors is not MECE.

Exhibit 3: Market sales data in 2010
Disease Serious Acute Mild
Device Patch Auto-injector Auto-injector
Volumea 3M 1B 1.2B
Price $100 $200 $200
Profit margin 25% 20% 20%
a Total unit sold in the market

Case 20: Grace Proof Paper
Market Entry Bain & Yale SOM Struct. Comm Quant.
Your client manufactures grace proof paper manufactured mainly for microwave popcorn
Prompt
package. The paper prevents the oil in the popcorn or the package from leaking into the
microwave when heating. Two sheets of paper can be folded into one popcorn paper bag.
Our client just invented a 10 times more grace proof paper. It only takes one sheet to make a
bag. They have patented it and come to us to help them: what should they do with this paper?
•  Other usage than pop-corn packaging is not considered. (But encourage a good
Additional Info
candidate to mention this)

•  The market is quite stable
•  Four players including our client, each share 25% of market share
•  Price of current pop-corn bag (two sheet) is $0.30 (same as competitors); 200M units of
sheet manufactured at full capacity and sold per year by our client; cost of each bag is
$0.25/bag, half of which is variable cost (same cost structure as competitors).
•  The variable costs of the new bag is half of its of current bags.
•  The competitor can only lower their profit margin to 10%.

•  Profitability estimation: market size × growth × the share client can get × profit margin -
initial investment cost
•  In this case, since we assumed that the number of bags sold to the pop-corn manufacturer
Structure
is the same for the new product, “market size × growth × the share client can get” are
condensed to volume sold of 100M bags. Also, the new product is not a pharmaceutical
new product, the initial investment of R&D is not significant and can be neglected. Now, it
leaves us to discuss the profit margin, since the manufacturer knows the cost, the only
question left to us, consultants, is pricing strategy.
•  As a candidate, we can ask the interviewer basic questions about market size, growth and
competition (market share) to get an overall picture of the market, as well as sense of the
focus of the case. Then navigating to the profit side, the candidate has two options
determine volume or determine price to get total profit.

What price shall we charge?
•  We can price it based on our competitor and the customer’s willingness to pay. First, let
me calculate if we want to keep the same profit as the current product, how much we
should charge on the new grace proof paper.
•  See Exhibit 1 for calculation. If we don’t consider the sunk cost of the R&D and initial
investment to implement the new manufactory lines, we can price as low as $0.2375, yet
have the same profitability. This price is lower than the current price and therefore we can
have a great cost advantage over the competitors. We can charge lower than $0.30 to
gain the market share. However, we don’t know if the competitor will lower their price as
Analyze
well to compete with us.
If the competitor will only bear more than 10% of profit margin, what price
would you recommend?
•  Their cost is $0.25/bag, so the lowest price they can bear (x) is (x-0.25) / x = 10%, i.e.
0.25 / 90% = $0.2778, which is higher than $0.2375. So we can price lower than their
bottom line at $0.275, which will gives us total profit of $30M (see Exhibit 2 for
calculation) and we might drive the competitor out of the market.
•  Of course, we haven’t considered if the customers are willing to switch to the new grace
paper because they might need to modify their packaging procedure and might worry
about safety issues with the new grace paper.

We recommend to sell the new grace proof paper between $0.2375 to $0.275 because this
Summary
will gives us 5-30M of profit and is still pricing lower than the competitors. Here, we assumed
manufacturing at full capacity, the customers are willing to switch to us and the competitor
can not bear lower than 10% profit margin. Next, I would like to calculate the price if we
consider the R&D and implementation cost. We also would like to work with you to discuss
the possibility of expand capacity and selling the grace proof paper for other uses.

Exhibit 1: Calculation of new price if keep the same profitability
Current New
Price ($/bag) $0.30 x
Volume sold 200M(sheets) → 100M(bags) same as current → 100M(bags)
Cost ($/bag) $0.25 --
VC ($/bag) $0.25 / 2 = $0.125 $0.25 / 2 / 2 = $0.0625
FC $0.25 / 2 × 100M = $12.5M same as current → 12.5M
Total profit ($0.30 - $0.125) × 100M - $12.5M = $5M same as current → 5M
To calculate x, we have the equation: ($x - $0.0625) × 100M - $12.5M = $5M, so x = $0.2375

Exhibit 2: Calculation of profit with price at $0.275/bag
Price ($/bag) $0.275
200M(bags), assuming full capacity (200M sheets)

Volume sold
enough customers of competitors switch to us
VC ($/bag) $0.25 / 2 / 2 = $0.0625
FC $12.5M
Total profit ($0.275 - $0.0625) × 200M - $12.5M = $30M

Case 21: Chinese Car
Market Entry McKinsey Struct. Comm Quant.
Automotive Round II 3 4 5
Prompt
Your client is a Chinese automotive manufacturer, who is considering enter US market.

Should they do it?
Additional Info
•  Major products of our client are low-end compact car, SUV etc. So we will only enter the
low-end market.
•  One comparable US competitor sells low-end cars both in China and US. They are the
leader in US.
•  The quality of our products are similar to the competitor.
•  The variable cost of manufacturing is the same as the competitor.
•  Exhibit 1: Sales and market data

Q1: What factors should you consider?
•  Find if this is an attractive growth target

Structure

•  Competition
•  Revenue
•  Entry barrier such as money, capability, regulation, customer loyalty
Q2: Exhibit 1 shows the sales data of our client and the US competitor in
China and US. What is the low-end car market size of US and China?
Analyze
Comparing the two market: first calculate the revenue = price × volume and market size =
revenue / share (see Exhibit 2). We notice that the low-end market composes a lower
percentage of total market in US than in China, yet that the absolute market size of low-end
market is higher in US than in China. Assuming the market is quite mature and stable in US,
the size of the US low-end market is ok.

Q3: How about our profitability in US compared to the competitor and our
current practice in China?
We notice that the competitor actually charges a higher price in China than in US. This is
possibly due to 1) premium brand image and 2) additional tariff cost and distribution,
marketing and sales cost. However, if the client enters US, we would not have such premium
brand image and we probably need to keep the low price to get into the market. In addition,
we are going to face a cost disadvantage by importing cars to US. This raises concerns about
how profitable we can be in the US low-end market.
Analyze
Q4: Assume that we can sell similar units and price if we enter US market,
how much market share do we need to obtain?
The revenue target will be the same as we currently have in China, which is $530.5M. Since
we are only entering low-end US market, its market size is $8B. $530.5M / $8B = 6.63%.
Q5: Do you think 7% market share is achievable in three years?

Currently, our competitor, a long term player and one of the market leader, only has a market
share of $604,750,000 / $8B = 7.56% in the low-end US market. It seems quite challenging to
achieve 7% in three years. Even if we make it, the profit we gain from the US market will be
lower than the Chinese one.

I recommend not entering the US low-end market because from the market side, the market
size in US is slightly larger than the Chinese market. However, from the profitability point of
view, to gain similar profit from US as from China, we need to achieve more than 6.63% of
market share and become a market leader, which is quite impossible due to low brand
awareness. Even if we do, the additional cost from transportation, entry sales/marketing and
potentially lower price will further decrease our profit from US. Next, I would like to find other
attractive market for you to enter such as high-end Chinese market.
Summary
30 years ago, the Japanese entered the US market with no cost advantage or
brand image. They are now the market leader. Why can’t we mimic them?
The key here is to answer the challenge from CEO diplomatically (disagree without
offending). “Yes, it is true that Japanese succeed because they differentiated themselves from
US competitors by innovating in safety and fuel efficiency. If we are be able to do so or
compete in a niche market first, entering US might be a good idea. If time allows, we can
work with you to identify such niche market in the future engagement.”

Exhibit 1: Sales and market data
Client in China Competitor in China Competitor in US
Units Share Price Units Share Price Units Share Price

Segment
sold (%) ($) sold (%) ($) sold (%) ($)
1 15,000 10% 10,000 12,500 10% 12,000 13,000 13.65% 10,500
2 20,000 12% 12,000 17,500 11.55% 13,200 15,000 12.5% 12,500

Low-end
3 5,000 7.5% 12,500 4,500 7.56% 14,000 12,500 6.75% 13,500
4 6,000 5% 13,000 7,500 7.5% 15,600 8,000 3.73% 14,000
5 -- -- -- 4,500 15% 20,000 42,000 15.27% 20,000

High-end
6 -- -- -- 2,000 12.5% 24,000 40,000 11.5% 23,000
Total share 7.7% 10.12% 11%

Exhibit 2: Calculation
Client in China China Client in China Client in China Us

Units Share Price Revenue Market Units Share Price Revenue Units Share Price Revenue Market
sold (%) ($) ($) Size ($) sold (%) ($) ($) sold (%) ($) ($) Size ($)
1 15,000 10% 10,000 150M 1.5B 12,500 10% 12,000 150M 13,000 13.65% 10,500 136.5M 1B
2 20,000 12% 12,000 240M 2B 17,500 11.55% 13,200 231M 15,000 12.5% 12,500 187.5M 1.5B
3 5,000 7.5% 12,500 62.5M 0.833B 4,500 7.56% 14,000 63M 12,500 6.75% 13,500 168.75M 2.5B
4 6,000 5% 13,000 78M 1.56B 7,500 7.5% 15,600 117M 8,000 3.73% 14,000 112M 3B
5 -- -- -- -- 0.6B 4,500 15% 20,000 90M 42,000 15.27% 20,000 840M 5.5B
6 -- -- -- -- 0.4B 2,000 12.5% 24,000 50M 40,000 11.5% 23,000 920M 8B
7.7% 530.5M 6.9B 10.12% 701M 11% 2,364,750k 21.5B
9.00% 530.5M 5.9B 9.52% 561M 7.56% 604,750k 8B

Case 22: HelpDesk
Cost McKinsey & SOM Struct. Comm Quant.
IT Services Round II 5 3 5
Our client is HelpDesk, Inc, a company that provides outsourced IT services to large
commercial and industrial clients. For a fixed monthly fee, customers receive the right to
Prompt
make unlimited IT helpdesk calls to our client. When a customer call cannot be resolved over
the phone by call-center technicians, on-site technicians are dispatched to address problems
in person at the customers’ sites. As the company’s operations have grown, its profit has
declined. We have been hired to diagnose the problem and recommend a solution.
Additional Info
•  The client provides service on answering questions about software.

•  On-site visit has 100% success rate and we assume no reoccurring problem in this case.
•  On-site cost: 2 technicians on average takes one hour to solve the problem. Their hourly
wage is $50. Other costs involving fuel etc. is $20 per visit.
•  Call center cost: see “Known” part of Exhibit 1: Cost calculation
•  Exhibit 2: Performance of all center-call technicians

Case 22: HelpDesk
Q1: What factors should you consider?
Structure
•  Competition, substitute
•  Revenue streams
•  Customers
•  Product
•  How we sell
•  Cost
Q2: What do you think are the most important operational costs?
Analyze
Breakdown by operation process:

•  Labor
•  Equipment (telecommunication), rent
•  Transportation (truck, fuel)
•  SG&A

Case 22: HelpDesk
Q3: Technician A spends an average of 30 minutes on each call, while
Technician B spends 12 minutes. Which one is more cost-effective?
•  See Exhibit 1 for additional information the interviewer should give when the interviewee
asks and for the details of calculation. One common mistake is not to consider the on-site
visit cost associated with each technician.
•  State the obvious: so technician A is more cost-effective as A costs $15 less per call than
B. Although technician A takes fewer calls per hour, he/she refers fewer cases to the on-
site team.
Analyze
•  Drive the insights: we need to investigate why technician A refers fewer. Is it because he/
she spend longer time with the customer? (A reasonable hypothesis)
Q4: Here is Exhibit 2 on the performance of 30 sampled technicians. What

does the data suggest to you?
•  State the obvious: We can see a correlation between number of calls per hour and the
referral rate: the fewer calls a technician deals with, the lower referral rate and therefore
the more cost-effective that technician is. (There is also some minor clustering: a group
clustering toward A and the other clustering at top right corner.)
•  Drive insights: It is possible that as the business grew, we hired more B type technicians
and therefore drove the cost up. Do you have any historical data indicate this is the case?

Case 22: HelpDesk
Q5: You might be right but we don’t have historical data to compare with.
Let’s say this is the case, tell me what could cause this correlation and what
are some strategies we should explore to help the client reduce the cost?
•  Know: not aware that referring more on-site visit costs more for the company
Analyze
•  Can: can not answer questions

•  more training
•  tier program: less well-trained techs refer calls to more experienced techs
•  Will:
•  personally: lazy or not patient
•  professionalism: too many phone calls waiting in line, want to finish more per hour
•  associate incentive plan with cost-effective Evaluation
We recommend reducing the referral rate by providing more training and refined incentives to
Summary
less cost-effective call center technicians and by referring unsolved cases to more
experienced techs. We found that the less time technician spend on each call, the higher the
referral rate and thus higher cost per call. Next, our team would like work with you to design
the implementation plan. Also, we can look into other options to lower the cost.

Case 22: HelpDesk
Exhibit 1: Cost calculation
Cost / on-site visit = $50/hr/person × persons/visit × 1hr/visit + $20 other cost / visit = $120 / visit
Known Calculated
Call-center Time spent/call
Referral rate Wage/hr Calls/hr Cost/call Cost/technician/call
technician (min)
$30 / 2 15 + 120 × 15%
A 30 15% $30 2
= $15 = $33
$30 / 5 6 + 120 × 35%
B 12 35% $30 5
= $6 = $48

Case 22: HelpDesk
Exhibit 2: Performance of all center-call technicians
Source: YGCC

Mini Case 1
Business Sense McKinsey Struct. Comm Quant.
Healthcare Insight Healthcare 3 3 2
Prompt
Your client is an advocacy group for a national cancer society. Your client wants to investigate
differences in cancer survival rates between patients that have health insurance and patients
that do not. What factors would you consider?
Cancer types
Genetics
Patients
Structure
Life styles
Factors
Prevention (related education or training)
Diagnosis (frequency)
Processes
Treatment (drug, surgery, mental care)
Support (family, friends, colleagues)
Yale Graduate Student Consulting Club© ! Mini Case 1: 1/3 124!

Mini Case 1
Q1: How does the law affect survival rates?
•  The interviewer should dictate the following information

•  5 Year survival rates: with insurance = 30%, without insurance = 15%
•  Proportion of the population that does have health care insurance: before the
change in health care law = 60%, after the change in health care law = 90%
Proportion of population
Insurance Survival Rate
Analyze
Before policy After policy

change change
Have 30% 60% 90%
Don’t have 15% 40% 10%
•  Solutions: weighted average survival rates

•  Before: 0.6 x 0.3 + (1 - 0.6) x 0.15 = 0.24
•  After: 0.9 x 0.3 + (1 - 0.9) x 0.15 = 0.285
•  Improves survival rates by (0.285 – 0.24) / 0.24 = 18.75%
•  A good candidate should compare this improvement with historical statistics and
other countries

Mini Case 1
Q2: How much more are the drugs prices in the US than other countries?
•  Compared with other countries, average US residents pay 20% more in purchasing
prescribed drugs, and they actually get 20% fewer pills. How much more are the drug
prices in the US than other countries?
•  Solution: (1+20%) / (1-20%) = 1.5, which means 50% more
Q3: What are the possible reasons for higher drug prices in the US?
Analyze
R&D
Manufacturing (labors, equipment)
Cost Transportation
Sales / marketing
After sales (customer services, legal issues)

Factors
Monopoly / oligopoly
Competitors
Greedy pharmaceutical companies
High demands
Customers
Doctors and insurance companies agree on a high price

Mini Case 2
Market Entry McKinsey Struct. Comm Quant.
Telecommunication Insight Engineering 2 3 2
Prompt
The client is a smart phone manufacturing company. They are thinking about launching two
new products together: “C” level premium smart phone (more functions) and low-end smart
phone. What factors should be consider?

Size, Growth trend
Market Competitors
Structure
Substitutes
Worth?
Revenue
Profit
Cost
Enter? Implementation Issues along value chain
Competitor responses
External
Innovation speed
Risk
Financial
Internal
Operational

Mini Case 2
Q1: How many low-end products do we need to sell?
•  The interviewer should dictate the following information through phone call. How many
low-end smart phones do we need to sell to generate equal profit with “C” level ones?
(Notice that the interviewer may ask you to estimate the price if time allows.)
“C” level Low-end

Price $400 / set $200 / set
Analyze
Profit margin 50% 40%

Estimated units to be sold 2000 ?
•  Solutions: since πC x PC x VC = πL x PL x VL., therefore VL = 5000
Q2: How do you interpret the calculation?
•  The sale ratio between “C” level and low-end is 2:5

•  A good candidate should question if this is reasonable based on the market size and our
market share.

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Find Missing Puzzle Pieces !

in Your Case Interview!

Yale Graduate Student Consulting Club© ! 1!

Yale Graduate Student Consulting Club© ! 2!

1 4 Rare Disease BCG I Profitability Healthcare 3 5 3

2 10 Cookie Maker BCG I Profitability Consumer Goods 4 5 2

3 16 Car Rental A.T.Kearney I Market Entry Automotive 2 3 2

4 20 Big Box A.T.Kearney I Profitability Retail 4 3 3

5 28 Magazine Revenue A.T.Kearney II Profitability Media 5 4 2

6 35 Premium Grill Bain I Market Entry Consumer Goods 3 3 3

7 39 Ice Cream Bain II Investment Consumer Goods 4 5 4

8 45 Laparoscope Bain II Profitability Healthcare 4 3 0

9 48 Lacrosse League McKinsey II Investment Entertainment 5 5 3

10 56 South Africa Bank McKinsey II Profitability Financial Service 5 4 3

11 63 Hotel Chain Web McKinsey II Investment Service 3 4 2

12 66 ElectronicRS McKinsey II Profitability Retail 4 3 3

14 77 DM Program BCG I Market Entry Healthcare 3 4 2

15 80 Luxury Goods BCG II Profitability Retail 5 4 3

16 86 Bank Acquisition BCG II Investment Financial Service 3 3 3

17 90 Bank Statement BCG II Profitability Financial Service 4 4 3

18 96 Bank IT Center BCG I Profitability IT Services 2 4 4

19 99 Medical Device BCG I Market Entry Healthcare 4 4 3

21 112 Chinese Car McKinsey III Market Entry Consumer Goods 4 3 5

22 118 HelpDesk McKinsey and SOM II Profitability IT Services 5 5 3

23 124 Mini Case 1 McKinsey Insight Non-profit Healthcare 3 3 2

24 127 Mini Case 2 McKinsey Insight Market Entry Consumer Goods 3 2 2

Yale Graduate Student Consulting Club© ! 3!

Yale Graduate Student Consulting Club© ! Case 1: 1/6 4!

Projection of current sales

Yale Graduate Student Consulting Club© ! Case 1: 2/6 5!

Time to mature (yr) 4 3 2

Yale Graduate Student Consulting Club© ! Case 1: 3/6 6!

Yale Graduate Student Consulting Club© ! Case 1: 4/6 7!

Stage Time to Mature (yr) Number of Drugs Success Rate

Phase III 2 2 80%

Yale Graduate Student Consulting Club© ! Case 1: 5/6 8!

Year in the Market Penetration*

Yale Graduate Student Consulting Club© ! Case 1: 6/6 9!

Qualitative Information Quantitative Information

They sell cookies in 1 cafeteria and 5 carts on

Yale Graduate Student Consulting Club© ! Case 2: 1/6 10!

Segmentation, size, growth

External: market Competition

Revenue of each stream Product Know (aware of)

Yale Graduate Student Consulting Club© ! Case 2: 2/6 11!

Yale Graduate Student Consulting Club© ! Case 2: 3/6 12!

• More efficient space usage

Yale Graduate Student Consulting Club© ! Case 2: 4/6 13!

Cookie Type Units in Inventory Units Sold

Yale Graduate Student Consulting Club© ! Case 2: 5/6 14!

Cookie Type Units in Inventory Units Sold

Yale Graduate Student Consulting Club© ! Case 2: 6/6 15!

Yale Graduate Student Consulting Club© ! Case 3: 1/4 16!

How much market share the client should gain?

• 10M × (1+30%) × x × 5% = $200,000

Yale Graduate Student Consulting Club© ! Case 3: 2/4 17!

Yale Graduate Student Consulting Club© ! Case 3: 3/4 18!

Risk Legal issues

Yale Graduate Student Consulting Club© ! Case 3: 4/4 19!

Yale Graduate Student Consulting Club© ! Case 4: 1/8 20!

Segmentation, size, growth

External: market Competition

Revenue of each stream Product Know (aware)

•  More efficient space usage

•  10M × (1+30%) × x × 5% = $200,000

•  Because (weighted average)

•  From Exhibit 2, we should prioritize our increase revenue focus on food/drink.

•  To increase the margin, the client can

•  Predict 16M ipad will be sold next year

•  The motivation behind selling premium grills is to make more money.

•  Estimate the annual market size (see the table blow)

•  The client wants to do so in order to make more money.