1、 Wharton Consulting Club 2004/05 Practice Case Interview Guide 1 Welcome Consulting Club Member, This manual is the result of significant contributions by your fellow class mates, who have contributed real case questions from the 2004 2 ndyear recruiting season to assist you in preparation for consu
2、lting case interviews. Many students are initially daunted by the prospect of preparing for case interviews which are foreign to anything they have previously experienced. In our view however, there is no need to feel overwhelmed. Preparing for case interviews is much like learning to play a new spo
3、rt. Until, you actually get out and start playing it can be difficult to understand what is going on, but once you get into it, it all comes together with practice. Literally volumes have been written on the topic of case interviews and we strongly recommend that you review at least one of the many
4、publications available. Readily available resources include the 2003 Wharton Case book, which includes a detailed introduction to the Case Interview process, David Ohrvalls Crack the Case, or the Vault Guide to Case Interviews. Reading these texts however is very much like reading a text on how to p
5、lay basketball it might give you a basic understanding for how to play the game but until you go out and shoot a few jump shots you wont be much of a player. It is with that in mind that we have focused this years guide on actual cases, including questions from real interviews together with the inte
6、rviewees solution supplemented by comments and recommendations from the Case Book Editorial Team (who have had the time to consider preferred solutions and frameworks away from the pressure of a live case interview) Our advice: Read at least one preliminary guide (more if you feel necessary) Form a
7、small group of 3-4 members with similar expectations and time commitments Get together regularly to practice cases choosing cases of as many different types and from as many different sources as possible (all interviewers are different and you need to get used to very different styles of interview)
8、Give honest feedback on each others performance (you would rather find out about your errors now rather than in a rejection from a live interview) Get used to thinking out loud and structuring your thinking clearly Do as many cases as you need to feel comfortable with the process. For some people th
9、is will be ten for others it will be sixty. Only you can tell when you are really getting a grip on things. Remember to use a good dose of commonsense. Case interviews are about real world situations, you will normally have a better sense for the right answer than you initially give yourself credit
10、for. Your own experience and your first year subjects should equip you well to know what the issues are. Good luck! Ben Simons Richard Osborne Vice President Member Education Case Book Editor 2 CASE INDEX Case # Title Firm Round Page 1 Optical Fibres BCG Rd 1 3 2 Holding Company Booz Allen Rd 1 5 3
11、Election Booz Allen Rd 1 7 4 Perpetual Motion Bain Rd 1 9 5 Nutracorp McKinsey Rd 1 11 6 Party Goods BCG Rd 1 13 7 Razors and Blades BCG Rd 1 15 8 Supermarket BCG Rd 1 16 9 Chewing Gum AT Kearney Rd 1 18 10 Alcohol Distribution Booz Allen Rd 1 20 11 Gas Station LEK Rd 1 22 12 Telematics BCG Rd 2 24
12、13 Manufacturing BCG Rd 2 25 14 Cell Phones BCG Rd 1 27 15 Explosives BCG Rd 2 29 16 Pharmaceuticals BCG Rd 2 31 17 Electronics Retailers BCG Rd 2 34 18 Aero Inca McKinsey Rd 1 37 19 Pharmaceuticals II ZS Associates Rd 2 39 20 Hotel (Post 9/11) BCG Rd 1 40 21 Beer Booz Allen Rd 2 41 22 Benjamin Carp
13、ets McKinsey Rd 2 43 23 Other Samples Booz/ LEK/ McKinsey 45CASE 1: OPTICAL FIBRES (BCG Round 1) Our client makes optical fibre (has volume advantages to copper wire) which is mainly used by the telecom, cable and mobile phone industries. Its made in glass strands and rolled onto 25 km spools. Their
14、 customers (who are generally major Telecoms networks) would buy a huge quantity, bundle it up, dig a trench and put the bundle of fibres in the ground. Theyve seen a 50% decline in revenues, and have recently brought in a new CEO. The new CEO would like to know: a) Why did revenues drop 50% in one
15、year? b) Can he expect an improvement, and if so in what timeframe? c) How does our company compare to our competitors? Additional Information Provided After Relevant Questions: Optical fibre is similar to a commodity, so consumers do not purchase by brand and pricing is in line with competition. Th
16、ere has been no significant change in supply from the companys perspective. There are no direct substitutes and no regulation changes during this period. The “usage” of the optical fibres, for voice, data and internet, has actually doubled each year. (meaning you would think youd actually need twice
17、 as much each year) Customers are asking for less. No major changes in customers industry. Even spread across industries for product sales. Current usage is 5 T/second, but capacity is 100 T/second. Interviewees Solution: Why did revenues drop 50% in one year? I determined the problem was that becau
18、se it is such an effort and expense to dig the trenches to put the fibre bundles in, the customer does it as infrequently as possible which leads to overcapacity. Can he expect an improvement? If so when? I found out that they buy a year in advance of needing it. Since usage doubled yearly, I worked
19、 out that customers would reach capacity in 3.5 years, and therefore we would be impacted for 2.5 years. The CEO wants a benchmark slide with how we compare to our competitors: what would be the main items youd want to see on that slide? I asked for Market Share (leader), Cost (lowest cost), People
20、(no advantage), Customer Base (no advantage), Product (no real advantage), and Balance Sheet (highest) He asked if we could weather the storm or if we were in trouble. I said if we had a pretty healthy financial situation, we could weather the storm for 2.5 years but that it would be worthwhile look
21、ing for other ways to diversify since this would be a cyclic problem. 3Commentary/Recommendations: The key to answering this question is understanding what is actually going on in the industry. To get to the heart of this issue you could ask: Clearly our client has lost a significant portion of thei
22、r revenue. To understand why there are three key things I would want to examine. First, what has changed about our Client we havent heard of any major reason why things would be going wrong internally but some of the things that I would want to look at are: Have they lost key sales personnel with go
23、od customer relationships? Have they lost their good reputation because of some incident or accident etc? Have there been perceived quality problems? Etc Second, I would want to look at our key Competitors Are they offering a better product? (probably not if the industry is commoditized) Are they se
24、lling at a lower price? Are they offering better service/delivery times etc? Are there now more competitors? Are our competitors better placed geographically to meet the needs of our customers? Are their some competitors that are doing better than us? If so how do they differ from us? Are they bigge
25、r and leveraging their scale, etc? Third, I would want to look at the needs of our Customers and whether these have changed. If there is nothing wrong with our product (Client) and our Competitors havent suddenly got better then the downturn in sales must have something to do with the needs of our C
26、ustomers. What is their current usage? What is their current capacity? What is their anticipated usage? What are their purchasing patterns relative to capacity? etc This structure should drive you to identify the key issue. The way the facts are presented it looks like most of the questions on Clien
27、t and Competitors will yield little return and the richest part of the discussion will focus around Customer needs. This should provide the opportunity to discover all of the facts about the growth in demand and the capacity constraint currently in place. It could also lead to understanding the “lum
28、py” nature of these capital purchases. This discussion should also draw out enough information to answer the follow up question on how our client compares to its competitors. 4CASE 2: HOLDING COMPANY (Booz Allen Round 1) Client is a holding company or conglomerate. They are a longstanding client of
29、ours. Their revenues are about 1.5B/year. They hold all sorts of companies, mostly around low tech manufacturing, including roughly in the “Oil and Gas” “Automotive” and “other” categories. The holding company doesnt really have a unified portfolio, but basically places bets on companies it acquires
30、. It is now looking at an auto parts manufacturer, and trying to get an idea of whether it should acquire it. What kind of things would you want to investigate to find out whether it was a good idea? Additional Information Provided After Relevant Questions: Financial health is excellent sitting on a
31、 lot of cash. Their portfolio is well diversified. They are not looking for “synergies” necessarily. After market products winches for cars, trucks, ATVs (revenues of 300M for this product line). They have 90% of the market in the US, and the market is expected to have flat growth. Second division i
32、s drive train mechanism for switching car from 2W drive to 4W drive. Its a small niche market, mostly luxury cars. Interviewees Solution: 5What were some options for the Winch products since the market in the US seemed tapped out? We talked about markets not really existing in other geographies beca
33、use it was mainly ATVs and they werent as common in other countries. We talked about leveraging the technology and although nothing else could be made with it, they did discover a use as a “tool” for home and shop use (to lift bricks etc). Who would the customers be here? We talked about small contr
34、actors and home use consumers (do it yourself) I asked where they shopped and it turned out that small contractors shopped mainly at wholesalers and big box shops like Home Depot. The trend was moving towards big box. These shops only renew their contracts once a year with manufacturers. How would y
35、ou figure out margins for Home Depot? We talked about how margins were based on margin/square foot and that you could ask for a small space, but keep it extremely well stocked at all times and keep our packaging small. How would you bring in customers in this entirely new market? Advertising through
36、 do it yourself channels on TV, magazines, in-store demos. (this apparently didnt work as well b/c they had to send people to 350 stores to do the demos and for a small company it was too much). He then wanted to talk about sales in the Drive Train component area: I asked about consumers, and we tal
37、ked about consumers being both end consumers and auto manufacturers. I asked how often cars were redesigned and he said every 4-5 years, but the trend was going down towards every 3 years. What does this tell us? The opportunity to get in a redesign is better. What does this tell us about the future
38、 as this time continues to go down? Is this an advantage? I said no, because now you will likely have more competitive pressure from those who saw this as a barrier. Lastly, he wanted to know how I would evaluate the overall deal tactically. I talked about doing some sort of return on investment cal
39、culation to make sure the return was adequate, and that the results we needed in a particular time frame existed. Commentary/Recommendations: My concern in this case would be that the interviewee hasnt developed a clear set of criteria for assessing the potential acquisition and used these to drive
40、through the case in a structured fashion. There are a number of potential approaches but I would probably break it down as follows: Before anything else I would ask for some more information on the potential targets business. What products do they sell? What are their revenues and margins? Etc. Then
41、 I would analyze whether this makes the acquisition desirable by looking at the following: o First I would want to look at whether this is an attractive industry to be getting into generally The automotive parts industry seems to be generally consistent with the other products in their portfolio so
42、I would assume that they probably have the skills to manage this sort of business, is that correct? I would also want to look at the growth prospects for this industry. Is the automotive parts industry expected to grow faster or slower than other low tech industry companies they may also choose to i
43、nvest in? o Second I would want to examine whether this is the right company within the automotive parts industry to buy in particular I would want to know to what extent our client could derive value from the acquisition. Will there be any synergies with the other companies that our client owns? Wi
44、ll our client be able to improve profitability by driving costs out of this business? Are there opportunities to increase sales or grow the business faster than existing management is predicting? o Finally I would want to consider these potential improvements from a financial perspective. Does the c
45、lient have a certain NPV or ROE target that it is looking to achieve before it invests? 6CASE 3: ELECTION (Booz Allen Round 1) What do you think is going to happen after the election if Kerry wins and Drug Reimportation from Canada is legalized? Id like to know what you think the impact will be to L
46、ipitor (Pfizer) and if its negative, how we can mitigate it. Additional Information Provided After Relevant Questions: In the US, the Lipitor market is $7B. Lipitor is manufactured in Puerto Rico. Drug reimportation is not currently legal, so is mostly conducted via the internet. Interviewees Soluti
47、on: What is the impact? I broke it up into a short term revenue impact and a long term impact on the pharma large margin model. I drew the value chain for the drug model: Pharmaco, PBM Pharmacy Benefit Manager (negotiates price) Pharmacy (sells) Consumer (buys) In between you have the Doctor talking
48、 to the pharmacy and the health plan ultimately picking up the tab. We established that the healthplans will be pushing for this, and the PBMs will put pressure on the Pharmacos as the gatekeeper to the contracts with health plans. What will be the financial effect? I asked what the pricing was curr
49、ently. It is sold for $70 per month, and we were looking at $30 per month for the same drug in Canada. That meant the $7B would be $4B less. Big effect! What can Pfizer to do mitigate? I asked if there were drugs that they sold in the US but not in Canada there are. This is an option they can bump margins on those products. They can lower costs (they should already be doing this but b/c their margins are so big, its not a priority)
