Ross Case Book 2016

ROSS CASEBOOK 2016
Ross Consulting Club

September 2016
Table of Contents
Cases: Index 3
Introduction & Acknowledgements 5
Firm Overview 7
Industry Overview 27
Case Interview Basics 40
Cases 58
Additional Recommended Cases 306
2
Cases : Index
Case 1 Metal Co. 59
Case 2 DevCo 67
Case 3 Wireless City 77
Case 4 Down Under 83
Case 5 SpaceZ Inc. 103
Case 6 Athelas Insurance 110
Case 7 Spare Parts 120
Case 8 Dallas Foundation 129
Case 9 Laundry Investment 136
Case 10 Dr. Rossmans Magic Eye Drops 152
Case 11 Diesel Transportation Co. 159
Case 12 Chefs Best Cutlery and Co. 166
Case 13 Fertilizer Innovation 176
Case 14 Airport Parking 181
Case 15 German Luxury Car Maker 187
3
Cases : Index
Case 16 African Call Center 192
Case 17 Little Bud Co. 202
Case 18 Midwest Hospital 214
Case 19 Apache Helicopters 223
Case 20 Lawn Co. 230
Case 21 Maries Caf 242
Case 22 PD Gas Buyout 254
Case 23 Office Vending Services 262
Case 24 Acme Packaging 278
Case 25 Balke-Collender Corp. 295
4
Introduction
We proudly present the RCC 2016 casebook. This document is meant to provide a brief overview of the
case interview process and a series of practice cases. For each case, we have specified the type,
difficulty level, and industry. Some cases are also specific to certain formats used by the various firms.
We highly encourage you to practice with fellow students, as this method best simulates the case
interview process.
We have updated the firm and the industry overview sections of this casebook based on the most recent
information available. The materials in this casebook are intended to provide a starting point for
interview preparation, and we encourage you to build upon the information by doing your own research
on industries and engaging with firms to gain a deeper understanding of their practices.
Best of luck in the upcoming recruiting season!
RCC 2016 Casebook Team
Gabriel Iatarola (MBA 2017)

Andrew Rud (MBA 2017)
5
Acknowledgements
Many people contributed to this years casebook. We are very grateful for your help and
support!
Dilparinder Singh
George Wu
Bharat Nagda
Di He
Rodrigo Valera
Harsha Kasturirangan
Puneet Goenka
6
FIRM OVERVIEW
Does not sponsor
Accenture internationals
Accenture is a large global management consulting firm specializing in executable solutions and
organizational transformation.
About Quick Facts
Focused on practical solutions that clients can implement Number of consultants: 18,000
Balance of strategy and implementation Number of offices: 200 in 56
countries
Rapidly growing management consulting division
Services: 18
Internal Strategy College offers consultants the opportunity for
professional growth
New consultants hire into the global operating model or a specific
industry
Interview process overview Career path

First Round: Consultant
o Two 45- minute interviews consisting of a fit portion and a 30 Manager
minute case Senior manager
Second Round: Senior Executive
o Two/Three 45- minute interviews consisting of a fit portion
and a 30 minute case
8
A.T. Kearney
A.T. Kearney is a global team of forward-thinking, collaborative partners that delivers immediate,
meaningful results and a long-term transformational advantage to clients and colleagues.
About Quick Facts
Traditional strengths are operational consulting & strategy Number of consultants: 3500
Increased presence in private equity work 61 offices in 40 countries
Diverse work environment and friendly colleagues 13 Industry groups
Strongest industry verticals: Consumer, Industrial, Retail and Public 11 practice areas
Sector Energy (CIRP). Financial Services picking up
Recent Managing Director change and aggressive growth strategy
(including lateral hires) has been announced for the firm
Career path
Interview process overview Associate
First Round Manager
o 45 minutes case interview Principal
o 45 minutes behavioral interview Partner
o Conducted by a Manager/Principal
Second Round
o Written case (60 minutes preparation, 30 minute presentation
including 15 minutes for Q&A)
o Two 30-45 minutes fit interview
9
Bain & Company
Bain & Company is a global management consulting firm that differentiates itself in solving business
problems for clients by working with the clients team as business partners and focusing on results.
About Quick Facts
Expertise across all major industries and across functions Number of consultants: 5,700
Bain redefined the boundaries of traditional strategy consulting in Number of offices: 51
working with companies such as: Tied Economics, BridgeSpan
Group, PE consulting, Bain Capital
Emphasis on people opportunities to balance work life,
international transfers, externships, private equity rotations
Leading consulting firm sought by major private equity firms
Generalist model with office-based staffing Career Path
Consultant
Interview process overview
Case Team Leader
First Round:
Manager
o Two-45 minute interviews including a brief fit interview (5-
10minutes) and a case interview Principal
Second Round: Partner
o 45 minute behavioral interview
o 45 minute case interview
o Written case: Interviewee has 60 min to review a written case
followed by a 30 minute presentation/Q&A by interviewer
10
Boston Consulting Group
BCG is a global management consulting firm and one of the world's leading advisor on business strategy.
Commitment to both clients' success and its own standards is what sets BCG apart.
About Quick Facts
Regional staffing model Number of consultants: 6,200
Creative and supportive environment that values innovation 87 offices in 45 countries
BCG provides one of the lowest leverage ratios in the consulting 19 Industry groups
industry; senior management works closely with junior consultants 18 practice areas
Emphasis on a generalist approach. Consultants are not required to
specialize in an industry or service line until becoming a Principal

First Round Consultant
o Two Case Interviews (Includes a section for behavioral) Project Leader
o Conducted typically by 2nd year Consultants to Principals
Principal
Second Round
o Three Case Interviews typically conducted by senior Partner
representatives
All Interviews are 45 min with at least 25 min dedicated to the case
Some offices (such as Chicago) piloting a written case
11
Does not sponsor
Cognizant internationals
Cognizant is a global consulting firm focusing on business & IT solutions that increase competitive
advantage through added efficiency and effectiveness.
About Quick Facts
Strong data analytics driven solutions Number of consultants: 3,000+
Senior consultants put on high profile projects right away Number of global offices: 50+
Accelerated promotion track available for top performers Industry Practices: 12
National staffing model Functional Practices: 6
Customer-focus culture, based on passion, collaboration, cost
reductions and business results
End-to-end solutions provider with ideation to value realization
framework
First Round: Senior Consultant
o One 30 interview consisting of fit questions and another 45 Manager
minute interview consisting of a technology case question Senior Manager
Second Round Director
o Two 30 minute interviews consisting of fit and experience Senior Director
questions
Note: Technology case will be a general case consisting of a discussion
about a general idea
*Based on best available information
12
Deloitte
Deloitte is the worlds largest consulting firm, specializing in strategy and operations , technology and
human capital consulting across a broad range of industries and functions.
About Quick Facts
Offers opportunities from strategy through execution, with national Number of consultants: 20,000
staffing providing flexibility to work in a variety of industries Number of offices: 80+ US offices,
Continues to build capabilities to redefine how clients are served: 20 available to students recruiting for
has leading digital practice in Deloitte Digital, and acquired full an internship; 800+ Global offices; 8
service advertising agency Heat in 2016 to grow creative capabilities available to students recruiting for
internships
Built Deloitte University (DU), a leadership development,
networking and training facility; produces whitepapers, periodicals, Practices
MOOCs and podcasts through DUPress Strategy & Operations (S&O);
Embeds Flexibility and Predictability initiative into all engagements Technology (includes Deloitte
to continue to provide work / life balance for consultants Digital); Human Capital
S&O interview process overview Career path

First Round: Senior Consultant
o 30 minute behavioral interview Manager
o 30 minute analytical case interview (interviewer-led Q&A style
Senior Manager
case)
Second Round: Principal or Director
o 2 45 minute strategy case interviews (interviewee led)
including a portion of behavioral upfront
o 90 minute group case interview
13
Deloitte (continued)
Students must select which of the practices they would like to recruit for; each practice has a slightly
different interview process.
Technology interview process overview

First Round:
case)
Second Round:
o 45 minute technology strategy case interview (interviewee led)
o 45 minute behavioral interview (includes emphasis on the practice)
Human Capital interview process overview

First Round:
case)
Second Round:
o 45 minute human capital case interview (interviewee led)
o 45 minute behavioral interview (includes emphasis on the practice)
14
Everest Group
Everest Group is a boutique management consulting firm working with executives for Global 500
companies on the development and execution of global strategies, including IT and business services.
About Quick Facts
Types of projects include: growth, go-to-market, IT and sourcing Number of consultants: 35; of which 5 are
strategy, as well as business transformation, change management, Partners
strategic talent management and implementation Number of offices:
Research arm is the leading provider of global services market o 2 Consulting (Toronto & Dallas)
analysis
o 3 Research (India, Dallas &
Accelerated growth in consulting practice past few years lots of New York)
opportunity for upward mobility Private company
New consultants will be hired into the global consulting practice Follow global staffing model
Interview process overview Career Path

First Round Consultant
o Two 30-minute interviews back-to-back: one behavioral, one Senior Consultant
case Director
Second Round
Senior Director
o One written case and presentation to panel (1 hour prep, 15-
Associate Partner
minute presentation)
o Three, 45-minute case interviews (w/Partner / Assoc Partner) Partner
o Two, 45-minute behavioral interviews
15
EY
EY is the 2nd largest professional service firms in the world delivering capabilities to help companies turn
innovation into action, information into insight and risk into results.
About Quick Facts
Advisory Services Number of consultants: 167,000
Performance Improvement (PI) - includes all operations related work Vision 2020 is a firm-wide growth
and a strategy function known as strategic direction revenue to double revenues by 2020
Financial Services Organization (FSO) - strategy work for Financial (largely led by growth of consulting
Services clients practices)
Interview process overview Career Path
First Round (on campus): Senior Associate

o One or two interviews1 Manager
o Behavioral may be separate or part of each interview
Senior Manager
Second Round (off campus):
o 2-4 interviews with Managers, Senior Managers and Partners Partner
o Mixture of behavioral and case interview
o Group Exercise with a problem statement 15 minutes
1Depends on which service line you are interviewing for.
16
L.E.K Consulting
L.E.K Consulting is a global management consulting firm that leverages its deep industry expertise and
uses analytical rigor to solve the toughest and most critical business problems of its global clients.
About Quick Facts
Expertise in Private Equity, Airlines and MedTech Number of consultants: 1,000+
5 offices in the U.S: Boston, New York, San Francisco, Chicago and 22 offices in 14 countries
Los Angeles 15 Industry groups and 4 functional
Office-based consulting model limits frequency of travel areas worldwide
Provides strong opportunities for international exposure
Option of declaring an industry focus early on in the career
First Round (phone interview): Consultant
o Behavioral and case interviews (quantitative and estimations); Manager
30 minutes; conducted by a consultant or manager
Principal
o Behavioral and case interviews (qualitative); 30 minutes;
conducted by a consultant or manager Partner
Second Round (Off-campus):
o Business presentation interview ; 45 minutes preparation, 30
minutes presentation (no PowerPoint) including Q&A;
conducted by principal and manager
o Behavioral; 30 minutes; conducted by a partner
o Behavioral and case; 45 minutes; conducted by a partner
17
McKinsey & Company
McKinsey & Co is a large global management consulting firm focusing on high profile studies for
businesses, governments, and institutions.
About Quick Facts
Strong research department supporting consultants Number of consultants: 9,000
National staffing model Number of global offices: more than
100 offices in more than 60 countries
High profile clients and studies
Industry Practices: 22
Teams with diverse backgrounds (MBAs, PhDs, JDs)
Functional Practices: 8
A culture that promotes work-life balance
Encourages active discussion; individuals have obligation to
dissent Career path
Associate
Interview process overview
Engagement Manager
First Round:
Associate Principal
o Two 45-60 minute interviews consisting of a case and fit
questions (~15 minutes for fit questions) Partner
Second Round: Director
o Three 45-60 minute interviews consisting of a case and fit
questions (~15 minutes for fit questions)
Note: Fit questions address three main points: personal impact,
leadership, and entrepreneurial skills
18
Parthenon (Part of EY)
EY is the 2nd largest professional service firms in the world delivering capabilities to help companies turn
innovation into action, information into insight and risk into results.
About Quick Facts
Parthenon EY (Transaction Advisory Services) Number of consultants: 500+
Parthenon joined EY on August 29, 2014 to form a strategy Number of global offices: more than
consultancy that helps firms reach their growth goals 22 offices in more than 13 countries
Work is divided as Strategy and Transaction Execution
Strategy - Growth, Market Diligence, Market Entry, Portfolio
Optimization
Transaction Execution Commercial DD, M&A Strategy, Sell-side
Preparation
Career Path
Consultant
Senior Consultant
Interview process overview Vice President
First Round (on campus):
o Two interviews1
o Behavioral may be separate or part of each interview
Second Round (off campus):
o Written Case - 30 mins and work with a consultant ~15 mins
o Behavioral interview 15-20 mins
1Depends on which service line you are interviewing for.
19
Does not sponsor
Partners in Performance internationals
PIP is a global management consulting firm and known for identifying and delivering bottom line
improvements.
About Quick Facts
Non office-based staffing model, consultants may live anywhere Number of consultants: 400+
Creative and supportive environment that values innovation Based in Australia with practices on
each continent
Emphasis on executable ideas over broad strategy
17 Industry groups
Work hand-in-hand with client representatives from all levels to
deliver value and sustainable improvements 15 practice areas
Career path
Associate
Interview process overview Consultant
Senior Associate
First Round (2 interviews): Project Manager
Manager
o Each interview will have a Case and Behavioral portion Project Director
Associate Principal
o Interviewers will range from Managers to Principals Principal
Principal
Second Round
o Same format as the first round Director
20
PwC Advisory
PwC Advisory is a rapidly growing consulting organization backed by the stability and strength of the
PwC brand. They support clients in designing, managing and executing lasting beneficial change.
About Quick Facts
National staffing model Number of advisory staff: 46,000+
Focus on four industry verticals: Financial Services, Health Care, 758 offices in 160 countries
Product and Services, Public Sector Practice areas:
Consulting practice projected to double in the next two years Strategy
High investment by the firm on internal networking events to Finance
develop strong intra-company bonds Operation
New employees recruit for a specific industry focus People & Change
Risk
Interview process over view Career path
First Round (On-campus, 2 sections, 45 minutes each) Senior Associate
o Behavioral Manager
o Mini-Case and Fit Partner/ Principal
Second Round (3 sections, 45 minutes each)
o Behavioral
o Content interview: Industry Focus Interview
o Case interview: a presentation based on a case emailed 48
hours in advance
21
Roland Berger
Roland Berger is one of the top international consultancies. It prides itself on developing creative
strategies and implementing practical solutions.
About Quick Facts

Locations in U.S: Chicago, Boston, Detroit Number of consultants: 2400
Values entrepreneurial spirit and individuality of consultants 50 offices in 36 countries
Three core values: entrepreneurship, excellence and empathy 26 Industry groups and 27 functional
Deep Understanding of diverse cultures and markets areas worldwide
Internal transfer policy that allows consultants to permanently 3 industry groups and 4 functional
change offices if they have suitable language skills areas in North America
Every new hire is assigned a senior mentor to help with the
transition and personal development Career path
Interview process overview Senior Consultant
First Round Project Manager
o Fit and short case interview; 45 minutes; conducted by Principal
consultants
Second Round Partner
o Personal fit interview; 30 minutes; conducted by consultants
o Business knowledge interview; 30-45 minutes; conducted by a
partner
o Presentation case interview ; 30-60 minutes preparation, 30
minutes for presentation including Q&A; conducted by
consultants and members of management team
22
Strategy&
Strategy&, member of the PwC network of firms, is a global management consulting firm known for its
functional expertise, industry foresight, and sleeves rolled up approach to working with clients.
About Quick Facts
Strategy& is been known for deep industry and functional expertise Number of consultants: 3,000
across public and private sectors, influential global studies and Number of offices: 57, including
books, and management magazine strategy + business North America, South America,
Emphasis on mentoring and assessment senior mentor, junior Europe, Middle East, Asia, Australia,
mentor, 360 degree performance assessment New Zealand and South East Asia
Expertise across diverse industries and functional areas and
emphasis to pick either industry or function; functions align to
industry practices as you move up
National staffing model
Interview* process overview Career Path

First Round: Associate
o Two 45- minute interviews consisting of a fit portion and a 30 Senior Associate
minute case Principal
Second Round: Vice President, Partner
o Two 45 minute interviews with partners following the same
format as the first round
*Can apply to PwC and Strategy&, but can only interview with one
23
The Cambridge Group Does not sponsor
internationals
The Cambridge Group is a management consulting firm specializing in helping clients identify and
capture market demand.
About Quick Facts
Acquired by The Nielsen Company in 2009 enables access to key Number of consultants: 90
customer insights Number of offices: 1 (Chicago)
Emphasis on helping Growth strategy top line growth
Office-based consulting model limits frequency of travel
Major industries include retail, CPG, and financial services, but
expanding into other areas including media and technology
Career path
Consultant
Project Manager
Single Round (3 consecutive interviews over ~2 hours): Project Manager
Project Director
Two 40-45 minutes Full case interview Project Director
Principal
40-45 minutes Behavioral interview Principal
24
Treacy and Company
Treacy and Company is a management consulting and venturing firm that advises clients on their most
most pressing performance issues related to strategy, growth, and profitability.
About Quick Facts
Emphasis on helping growth strategy and innovation (product and Number of consultants: 100+
service, go-to-market, operating model) Number of offices: 2 (Chicago and
Major industries include financial services, telecommunications, Boston)
industrial products, healthcare, and consumer goods.
Works in highly focused teamstypically a partner and two or three
consultants
Has an active venturing arm that focuses on Stage 0 start-up ideas
with a goal of launching at least one new viable venture each year Career path
Associate
Engagement leader
First Round (2 interviews): Project Manager
Principal
Two 30 minutes 20 minutes case and 10 minutes behavioral Project Director
Second Round (3 interviews): Principal
o Two 45 minutes - 30 minutes case interview and 15 minutes
behavioral
25
Does not sponsor
ZS Associates internationals
ZS Associates is a global management consulting firm specializing in using data driven strategies to
provide sales and marketing solutions.
About Quick Facts
Expertise in marketing and sales with a focus in healthcare Number of consultants: 2,000
Partnership with clients to design and implement solutions Number of offices: 20
ZS services include consulting, outsourcing, technology, and Practices
software Business consulting
Project-specific and formal training provide opportunities for Business operations
continued professional development
Business technology

First Round:
Consultant
o On campus consisting of two sessions-a behavioral interview
and a case interview; 45 minutes each; conducted by a manager Manager
Second Round: Associate Principal
o Behavioral interview; 45 minutes Principal
o Case interview; 45 minutes; conducted by a principal
o Business presentation interview ; 45 minutes preparation, 30
minutes presentation including Q&A
26
INDUSTRY OVERVIEW
Airline Industry
Key Ideas Revenue Streams Cost Drivers
Consolidation in industry Ticket sales to economy and Fuel

Low cost carriers and fare business passengers
Labor
competition on competitive Charges for baggage and on-
routes board services (up-selling) Marketing
Online booking and check-in Cargo transportation Terminal fees
Expansion of domestic and Credit cards Insurance/legal fees
international routes
Capacity optimization (Load
Factor)
Leisure travelers (generally price sensitive)

Customer
Business travelers (very important to airlines due to margins and services purchased)
Segments
Freight/Cargo Transportation
Internet - online travel sites, airline websites
Channels Airline sales team: call centers, online, or kiosk
Travel management companies (TMCs) serving corporate clients, travel agents
Changes in fuel prices have a major impact on profitability
Risk Macro-economic conditions greatly impact amount of leisure travelers
An intensely competitive market with many foreign airlines partly government subsidized
World Price of Crude Oil Optimization of capacity
Key Economic
Trips by US residents Per capita disposable income
Drivers
28
Automotive Industry
Automakers, Original New car sales Labor

Equipment Manufacturers Auto part sales Materials
(OEMs), Replacement Parts
Production, Rubber Fabrication Services offered with vehicle Advertising
purchase Financing costs
Highly capital and labor
intensive Financing Recall costs
Extensive competition due to Extended warranties
foreign automakers Leasing
Unions
Cars, vans, pickup trucks and SUVs Commercial purchasers

Customer
Personal car buyers Government purchasers
Segments
Rental car companies
Automobile dealers
Channels Secondary automobile market
Automotive parts/services outlets
Globalization of the industry enables more ease of foreign competition
Risk Extensive competition impact on already low margins
Changes in consumer trends and tastes
GPD growth Steel prices
Key Economic
Income growth/disposable income Consumer confidence index
Drivers
Price of crude Yield on Treasury note
29
Commercial Banking
Key Ideas Revenue Streams Costs Drivers
Consolidation/acquisitions Loan interest Wages
Increased mobile banking Loan types Bad debt expense
Channel innovation in digital Real estate Interest rates on deposits
and physical channels Auto Branch and compliance costs
Customer attrition rate Personal Overhead costs - paper fee; error
Offshoring of call centers, back Education rate costs for manual processing
office functions Service Fees
Digitization of processes Spread between interest rate
Cross-selling charged and Fed rates
Credit cards
Customer Wealth: deposit balances, income Size: small businesses and consumers
Segments By lifestyle: buying behavior Age: under 35 adapt to technology better
Savings and loan Traditional checking Microfinance

Channels Credit union Online banking
Change in savings behavior

Risk Loan default, interest rates and federal funds rates
Consumer confidence Urbanization Interest rate

Key Economic
Household debt Home and car buys Government Regulation
Drivers
Employment statistics Disposable income
30
Health Care Industry
Affordable Care Act Hospital care Dependent on segment

Highly fragmented: Top 50 Physician and clinical services Significant costs related to new
organizations account for 15% technology implementation
revenues Prescription drugs
Employers pushing health care Nursing Often inefficient organizational
costs onto employees structures
Dental services
Aging Baby Boomer population
driving increased revenues Research, Equipment,
Investment
Customer Patients/consumers
Segments All generations and segments of the population require different products/services
Hospitals Outpatient surgery centers

Channels Doctors offices Pharmacies
Nursing homes Medical equipment
New legislation (Impact of Affordable Care Act still uncertain)
Risk Funding availability
Regulation for health & medical insurance Aging population

Key Economic
Federal funding for Medicare and Medicaid Advances in medical care and technology
Drivers
31
Non-profit Industry
Intended Impact Consider tradeoffs
Define success criteria Depth vs. breadth of reach
Think big picture (e.g., society, people you are Quality vs. quantity of program initiative
working for/with0 Intended impact should align with strategic
goals
Theory of Change Define timelines, initiative priorities and
ownership responsibilities
Define specific actions steps to achieve the
intended impact
Key Ideas
Implementation Feasibility New infrastructure cost IT systems, office

space
Revenue Impact (Self sustaining model, grants)
Indirect costs
HR costs: creating new roles, hiring new staff,
train existing and new staff, modify existing Impact on culture of organization
organization structure
Impact on scale on quality of outcomes
Performance Measures and Reporting Impact
Measure performance vs. peers Monitor and modify plan accordingly
Set milestones for financial and operational goals Consider performance during and after
implementation of initiatives
Case topics
Growth through existing platforms Thought sharing to strengthen the industry
Growth through new partnerships Growth using technology
Growth driven by policy changes
Link for sample case:
http://www.bridgespan.org/MediaLibraries/Bridgespan/BridgespanMedia/AboutUs/HR/PracticecaseinterviewFall2007.pdf
32
Oil & Gas Industry
Upstream, midstream, downstream Crude oil Exploration: seismic studies,

PV-10 Gasoline drilling rigs and labor
Cost per gallon Natural gas Production: refining
OPEC Refining products such as Pipelines
GDP growth lubricants Gas station: oil, labor, insurance,

Gas stations: gasoline, food licenses
Renewable energy
market, car wash
Fracking
Petroleum refiners Domestic and commercial users
Customer
Segments Electricity generators Other industries
Retail Commercial
Channels
Wholesale
Access to reserves Political pressures

Risk Energy policies Substitutes/renewable energy
OPEC decisions
Government regulation
Key Economic
Drivers International oil production and demand
For the 2014-2015 changes in O&G industry read: http://www.nytimes.com/interactive/2015/business/energy-

environment/oil-prices.html?_r=0
33
Pharmaceutical Industry
Affordable Care Act Insurance payments Research & Development

Aging population The federal government provides
Manufacturing cost (the largest
certain grants to subsidize R&D
Patents and generics share of the industrys costs)
Due to significant R&D lead
Research & Development times revenue is highly volatile Marketing costs
Insurance Seasonality is high on certain Wages
products (vaccines and cold
FDA medicine) and low on other Liability insurance and legal fees
Market penetration products (pain medicines)
Contract v. in-house salesforce
Medical patients Government insurance programs

Customer
Segments Prescribing doctors Health insurance companies
Over-the-counter
Channels Prescription drugs: Hospitals, pharmacies
Mail order pharmacy: Express Scripts, Walgreens
Generic manufacturers pose a major competitive threat following patent expiration
Risk Tariff barriers are no longer a relevant form of protection
Unfavorable government healthcare regulations and CMS rates
Median age of population Insurance and regulatory landscape
Key Economic
Drivers Research and development expenditure Patent protection
34
Private Equity & Hedge Funds
Revenue Streams Cost Drivers Key Ideas
Components of the revenue charge Wages and profit-sharing Value creation: selling
o Invested capital Administrative costs(regulatory underperforming assets, pricing
o Transaction and advisory fees filings, record keeping, accounting optimization, diversifying
o Carried interest and travel)(sub-bullets) customer base, operations
Divestures Outsourcing of capital intensive IT efficiency
functions for algorithmic trading Exit: strategic or IPO
Synergies
Stability of cash flows(IRR, NPV)
Strong management team
Targeted returns ~ 40%+
Un-invested capital vs. invested
Pension funds (largest share)
Investors Private investors (e.g. High net-worth individuals)
Banks, sovereign funds and life insurance companies
Averages in Large firms focus on deals ~ $1.0B; middle market firms cover deals between $15.0M- $1.0B
Industry Average holding period before sale has increased from 3 years to 6 years in the past 15 years
Borrowing can typically range from 65.0% to 85.0% of the purchase price of the firm
New regulation -> compliance costs, Rising competition -> decreasing industry fees
Risk Competition also exists with sovereign wealth funds and corporate buyers
Changes in tax structure
Investor uncertainty/Pension demand Exit opportunities
Key Economic
Access to credit/interest rates GDP/Investment returns
Drivers
Regulations
35
Retail
Same store sales Womens apparel sale Cost of Goods Sold (74% of costs)
Sales per square foot Drugs & cosmetics Transportation
Inventory turn-over Furniture & household appliances Wages
Seasonality/recessions Children apparel Rent and utilities
Trends Men's apparel Marketing
Toys
Footwear
Misc. items
Customer The industry consumer-oriented and, due to the spectrum of products, its markets are generally
Segments segmented into different income, demographics and age
Department Stores/Big box retailers Demographic retailers

Channels Discount retailers Shopping malls
Changes in disposable income Easy entry invites competition

Risk Demand and supply issues
Overstock
Consumer Confidence index Gross Domestic product/inflation
Key Economic
Per capita disposable income Households > 100,000 income(luxury goods)
Drivers
International Export/Import Commodity prices(eg : gold price for jewelry)
36
Telecommunications Industry
Deregulation led to spur of new Voice calls Infrastructure
companies Additional lines/family plans Wages
Bottlenecks: High capital, scarce Text and image communication Marketing and advertising
operating skills and management
experience Data subscriptions
Shift from telephones to internet Accessories
based services for mobile
Bundling of services
Customer Residential and Small Business (Price sensitive)

Large multinationals (Price insensitive)
Segments
Retail stores - carriers and mass retailers

Channels Online
Rapid development of technology

Risk High exit barriers
Systems not reusable across industries
Investment in rising technology services
Key Economic
Number of subscriptions to additional services
Drivers
Number of broadband and mobile internet connections
37
Utilities Industry
Increase in energy consumption Transmitted electricity: base load Purchased power accounts
High investment costs and and intermittent electricity (nearly half of total costs)
regulations Base load (95% of industry) Infrastructure
Industry structure is Coal, natural gas, nuclear, other
disintegrating into smaller Intermittent: renewable energy Wages
supplier segments Marketing
Seasonality
Gov. incentives for sustainable Maintenance contracts
initiatives
Bundling services w/renewable
Commercial and Industrial

Customer
Segments Residential
Transmission lines/pipelines
Channels Upstream electricity generators
Clean energy threatens the future of traditional power generation methods

Risk Seasonal demand leads to uncertain estimates
Energy efficient appliances decrease consumption
Economies of scale
Key Economic
Industrial production index
Drivers
Climate/seasonality
38
Further Reference
Other recommended sources include

IBIS World reports
Industry Handouts on Investopedia
39
CASE INTERVIEW BASICS
Case Structure
Understand the Develop Form

Analyze
Question Framework Recommendation
(~20 minutes)
(~1-2 minutes) (~2 minutes) (~1-2 minutes)
Listen! Ask for a moment to Refer back to the State your
Paraphrase the problem organize your thoughts framework as you move recommendation as a
statement to make sure you Develop 3-4 areas to through each of the direct response to the
understand the situation analyze along with a few main areas problem/objective it
and objectives tailored sub-topics Use one sheet of paper should not come as a
Ask 1-2 clarifying questions Structure the framework per topic think of the surprise to the interviewer
around the topic and/or in a logical fashion it case as presentation Incorporate key
metrics to be used for the should open with the deck metrics/findings as a part
analysis most important topic Tie back each piece of of your recommendation
Make sure you have all the and provide the analysis to the main Include risks, mitigation of
information you need to interviewer with a objective/problem risks and next steps
develop a framework roadmap of where you statement
State an initial hypothesis plan to take the case Walk through the
which you plan to test Engage interviewer by calculations /analysis
using your framework turning framework Drive insights whenever
towards them and possible!
explain framework,
including relationships
between various buckets
41
Porters Five Forces
Porters Five Forces Analysis
Threat
of New Entrants
Bargaining Power Internal Bargaining Power

of Suppliers Rivalry of Customers
Threat
of Substitutes
42
Porters Five Forces
Concept Key Drivers

Internal Rivalry Concentration and balance Exit barriers
Industry growth Overcapacity
Product differences
Threat of New Entry Economies of scale Competitor response
(Barriers to Entry) Capital requirements Brand identity
Access to distribution Proprietary product differences
channels
Threat of Substitutes Switching costs Availability of and consumer
Relative pricing propensity to substitute products
Bargaining Power of Supplier concentration Threat of forward integration

Suppliers Switching costs Product differentiation
Bargaining Power of Buyer concentration Ability to backward integrate

Customers Buyer volume Substitute products
Buyer switching costs
43
Key Marketing Concepts
4Ps Considerations
Product Features and capabilities Packaging and size
Quality and reputation Positioning and market
Service and warranties segmentation
Differentiated versus commodity
Promotion Pull versus push Public relations
Consumer awareness Buying process
Loyalty Trial/Repurchase
Advertising medium
Price Perceived value Skimming
Willingness to pay Strategy relation to market
Retail/Discounts size, product lifecycle, and
Economic incentives competition
Place Channels Coverage
(Distribution) Inventory levels, turnover, Transportation alternatives,
carrying costs efficiencies, costs
44
Key Marketing Concepts
3Cs Considerations
Company Strengths/Weaknesses/Opportunities/Threats
Strategy and vision
Available resources/Capacity
Experience/Learning curve
Financial
Culture/Organizational structure
Competition Industry
Size/Number/Market share
Economies of scale/Scope
Capabilities/Experience
Resources Financial, distribution
Customer Perceptions
Loyalty
Switching costs
Purchase behavior
Segmentation
Market characteristics/Trends
45
General Frameworks
Topic Key Drivers

Revenue Volume
Internal Price, Customer Service,
Distribution/Inventory/Capacity
External Competition, Substitutes/Complements, Market
Forces/Demand
Price Competition, Elasticity, Differentiation, Segments
Product Mix Attributes (e.g. niche, patent), Quality, % of
Revenue, Variety
Alternative Revenue Streams
Costs Fixed Costs Manufacturing, Labor, Marketing, Overhead, IT,
SG&A, PP&E
Variable Costs Inputs, Distribution, Marketing, Maintenance,
Packaging, Inventory
Balance Sheet Items
Benchmark Opportunity Cost/Cost Accounting/Capacity Utilization
External Union strikes, Technology, Currency Fluctuations,
Tariffs, De-Regulation
46
General Frameworks
Topic Key Drivers

Competition Rivals (structure) Reaction
New Entrants Position
Substitutes
Customers Market Size Purchase Drivers
Segments Price Elasticity
Needs Retention/Loyalty
Processes Manufacturing Customer Service
Marketing IT
Sales R&D
Distribution Forecasting
Company Core Competencies Controls
Cost of Capital Financial Capability
Brand Management Capability
Organization / Incentives
47
General Frameworks
Topic Key Drivers

Macro Legislation
Unions
Technology
Economy Oil, Interest Rates, Unemployment
International Issues Politics, Regulations, Taxes, Tariffs
Environment
Socio-Cultural
Demographics
Supply Chain Suppliers
Distributions
Industry Barriers to Entry/Exit
Lifecycle
Consolidation
Government Policy
Capital Costs
Access to Technology, Distribution, etc.
48
Key Formula Review Income Statement
Topic Formula
Income Sales
Statement - COGS
= Gross Profit
- Operating Expenses (excluding Depreciation/Amortization)
= EBITDA
- Depreciation/Amortization
= Operating Profit (EBIT)
- Interest Expense
= Profit before Tax
- Tax Expense
= Net Income
Margin Gross Margin = (Revenue - Cost) / Revenue
EBIT Margin = Operating Income/ Sales Revenue
EBITDA = EBIT + Depreciation & Amortization
Net Margin = Net Income / Sales Revenue
Breakeven Breakeven = Fixed Cost (FC) .

Price (P) Variable Cost (VC)
49
Key Formula Review Income Statement
Ways to value a Discounted Cash Flow

company Multiple based (EV/EBITDA, P/E)
Transaction based (Past M&A deals in the same industry)
Time value of Perpetuity = Annual Cash Flow / (Discount Rate Growth Rate)
Money NPV = {Net Period Cash Flow/(1+R)^T} - Initial Investment
where R is the rate of return and T is the number of time periods.
Rule of 72 Time for invested principal = 72/ R
R = rate of return
At 7% R, the investment will double every 10 years
At 10% R, the investment will double every 7 years
Return on Assets ROA = Net Income/ Total Assets
(ROA)
Return on Equity ROE = Net Income / Total Shareholders Equity
(ROE) ROE = Operating Efficiency * Asset Efficiency * Financial Leverage
Du Pont Analysis
50
Economics Review
Concept Definition
Adverse Selection Situation in which an individuals demand for insurance is aligned to
their risk of loss (i.e. people with the highest expected value will buy
insurance) and the insurer cannot account for this correlation in the
price.
Consumer Surplus Economic gain achieved when consumers purchase a product for a
price less than their willingness to pay.
Consumer Surplus = Willingness to Pay - Price
Economies of Scale The average cost per unit for a business entity is reduced by increasing
the scale of production.
Economies of Scope The average cost for a business entity is reduced by producing two or
more products.
Elasticity If E>1, decrease price to increase revenue
If E<1, decreased price leads to lower revenue
Law of Diminishing At some point in the production process, the addition of one more unit
Returns of output, while holding everything else constant, will eventually lead
to a decrease in per unit returns.
51
Economics Review
Concept Definition
Marginal Cost Cost of one more unit of output.
Monopoly Entity is the only supplier of a particular good.

Lack of competition produce less and charge more
Barriers may include government regulation, networks, patents, scale, etc.
Revenue is the midpoint of the demand curve
Moral Hazard The unobservable actions and risks that humans may take once a contract is signed since they
dont bear consequences. It is a special case of information asymmetry that affects the cost of
transaction.
Perfect Competition Firms take price MR = P
Maximum profit = MR = MC
P<AVC shut down
Price Discrimination Situation in which identical goods are sold at different prices from the same provider.
1sr degree Different price for different willingness to pay
2nd degree Different price for different quantities
3rd degree Different price for different segments (attributes)
Risk Averse Individuals who prefer certainty over the uncertain for the same expected value (EV).
Risk Neutral Individuals who are indifferent on risk taking if the EV is the same.
Risk Seeking Individuals who prefer risk even if the EV for a certain event and the risk is the same.
52
Key definitions
Term Definition
Arbitrage The purchase of securities on one market for immediate resale on another
market in order to profit from a price discrepancy.
Break-Even Total amount of revenue needed to offset the sum of a firm's costs. Implies that
the firm's profit will be $0.
CAGR Compound Annual Growth Rate: (Ending value/beginning value)^(1/# of
years)-1. Most likely to show up in a case with graphs and exhibits.
Capacity The maximum level of output of goods and/or services that a given system can
potentially produce over a set period of time.
Competitive When a firm is able to deliver benefits equal to competitors but at a lower cost
Advantage OR able to deliver greater benefits than competitors.
Contribution C=P-V, where P is unit price, and V is variable cost per unit.
Margin
Core The activities that a firm does well to create competitive advantage.
Competencies
53
Key definitions
Term Definition
Customer Subdivision of a market into discrete groups that share similar
Segmentation characteristics.
Discount Rate Also known as cost of capital. There is an opportunity cost associated
with every investment, with the cost being the expected return on an
alternate investment.
Entering New Market Three main methods: start from scratch, form joint venture, acquire an
existing player.
Fixed Costs Costs that do not change with an increase or decrease in the amount of
goods or services produced.
Gross Margin A Companys total sales minus its cost of goods sold, divided by the
total sales revenue, expressed as a percentage.
Horizontal Integration The acquisition of additional business activities at the same level of
the value chain.
International Main mechanisms: exporting, licensing, franchising, joint venture,
Expansion foreign direct investment (acquisition or startup).
54
Key definitions
Term Definition
Inventory A ratio showing how many times a company's inventory is sold and
Turnover replaced over a period. Should be compared to industry averages: low
turnover implies poor sales or excess inventory; high ratio implies either
strong sales or ineffective buying.
Learning Curve Visually shows how new skills or knowledge can be quickly acquired
initially, but subsequent learning becomes much slower. A steeper curve
indicates faster, easier learning and a flatter curve indicates slower, more
difficult learning.
Market Share The percentage of market size controlled by an individual firm.
Payback Period The length of time required to recover the cost of an investment.
Market Size Total size of a population (usually measured in number of people or actual
dollar value) that would purchase a company's goods or services. Market
size is always relevant and is a question that should be asked.
Product Lifecycle Four main stages: market introduction, growth, maturity, decline.
NPV The difference between present value cash inflows and present value cash
outflows.
55
Key definitions
Term Definition
Product Mix Total number of product lines that a company offers to its customers.
Often an important area to explore in profitability cases to identify
loss-making products.
Promotion Coupons, discounts, trials, etc. designed to increase sales of a product
or service.
Rule of 72 Also known as the rule of 70, AKA rule of 69. Simply put 72, 70 or
69 in the numerator and the projected annual growth rate in the
denominator to give you the amount of time until the investment
doubles.
Sales per Square Foot The average revenue a business creates for every square foot of sales
space. Used in the retail industry as a measure of efficiency.
Same Store Sales A statistic used in retail industry to determine what portion of new
(SSS) sales has come from sales growth and what portion from the opening
of new stores.
56
Key definitions
Term Definition
SWOT Analysis Strengths, Weaknesses, Opportunities and Threats. Very basic
framework, probably not a good idea to put down as your case
framework, but good to have as a mental checklist.
Synergies The idea that the value and performance of two companies combined
will be greater than the sum of the separate individual parts. Used
mostly in M&A.
Value Chain Another concept from Michael Porter. His Value chain: Inbound
Logistics, Operations, Outbound logistics, Marketing and Sales.
Variable Costs Costs that vary depending on a company's production volume; they
rise as production increases and fall as production decreases.
Vertical Integration Degree to which a firm owns its backward suppliers or forward
buyers.
Weighted Average An average in which each quantity is assigned a weight. These
weightings determine the relative importance of each quantity on the
average.
57
CASES
Case 1: Metal Co., Ross Original (Interviewer Driven)
Prompt Additional Information (if requested)

Your client, Metal Co, is a global company Target: There is no target, the greater the savings the better it is.
involved in manufacturing parts of made from
metals, plastics and glass. They have an Revenue: We dont have the numbers but we know that they are
expertise in a stamping process whereby they stable (low growth).
use heavy machines to stamp and cut parts from Activities: Design of parts and manufacturing. They have plants
sheets of those raw materials. All their parts are in all the countries since they are involved in heavy and volumetric
usually made to order. Some examples of those parts. Sometimes, they outsource a part of their activities to
parts include car doors, window panes, smaller companies.
dashboards of cars etc.
Customers: Auto makers, construction companies, electronics
They are headquartered in the US but operate in companies
200 countries. Like most of the economy, they
experienced a severe downturn in 2009.
However, they have been able to recover well Evaluation Guide
from revenue standpoint and the year on year
revenues have stabilized. But, their profitability is A strong candidate will:
much lower compared to competition and this
has put severe pressure on the CEO. The CEO Identify that this is a cost problem and avoid too many
thinks that there are concerns with the cost questions on revenue or customers.
structure of the company and wants you to
specifically analyze their cost structure. Absorb following key takeaways global nature, focus on
cost structure
Before we begin, do you have any questions?
Point to the fact that most companies managed to bring their
costs down during recession but maybe Metal Co did not
59
Question 1: Can you list the cost components you
would like analyze and how?
Strong Candidate Will Cover: Exceptional Candidate Will Cover:

Raw Material Steel, plastic, glass, etc. Mention outsourcing costs as a key costs component.
Labour plant workers, designers, engineers They will identify that if a higher margin activity like
designing is outsourced, their margins will be lower.
Utilities Electricity, Water, Gas
However, if low margin activities like manufacturing is
PP&E Depreciation of Machines outsourced, the margins will be higher.
Sales & Marketing including lobbying Want to benchmark the costs with those of the
Transportation Raw material and finished goods competition
transportation
Will prioritize on Raw Material, Labour and/or Utilities
Outsourcing costs manufacturing of parts, designing as key items to focus on.
60
Question 2: We obtained some cost figures from Metal
Co and this is what we found (hand Exhibit 1). Please
share your thoughts and next steps based on this.
Strong Candidate Will Cover: Exceptional Candidate Will Cover:

The costs for Steel & Plastic have increased by 50% in Ask if the revenues increased in line with costs. This is
two years. a key point that highlights business acumen.
This is a commodity item and the costs should not Answer this by saying that revenues did not increase
have increased dramatically. at such a high rate.
The costs for Heating and Air-conditioning as well as Will mention the next steps saying they want to further
Electrical went up for 2 years ago and then came back analyze steel costs because the jump is highest in
down. steel ($200M)
This means that the company has either controlled the
costs, or the projects with such requirements have
reduced. This would happen if the proportion of
infrastructure projects increased in the last year.
61
Question 2: We looked deeper into steel and found the following about
steel prices (hand Exhibit 2). Metal Co anticipates that their steel
consumption will increase 20% by volume next year. Can you calculate
how much they will save by procuring from China?
Additional Information for Candidate:

The costs mentioned included transportation and customs duties
Strong Candidate Will Cover:

Identify that the share of costs is to be divided in $
terms whereas increase in consumption is in terms of
volume (tons).
Compare the final savings to $600M and $1525
Mention that there are risks associated with procuring
form China
62
Question 2: What do you think are the challenges associated with
procuring from China? (This is a brainstorming question)
Strong Candidate Will Cover:

Take some time to structure their thoughts and talk through the thought process
Some of possible answers include:
Quality considerations
Longer lead times to deliver across the world
Capacity constraints in Chinese steel manufacturers
Foreign exchange fluctuations associated with CNY
Existing relationships with current suppliers which might be supplying other
raw materials as well
Political considerations because many steel producers in China are state
owned
Increase in transportation costs
63
Exhibit 1: Total Costs for Metal Co
3 YEARS AGO 2 YEARS AGO 1 YEAR AGO

STEEL 400 500 600
PLASTIC 300 350 400
GLASS 200 300 250
ALUMINUM 150 200 175
OTHERS 50 75 100
TOTAL 1100 1425 1525

$MN
64
Exhibit 2: Steel Prices for Metal Co
AVG LOCAL AVG COSTS

SHARE OF
COSTS FOR FOR STEEL
TOTAL COSTS
METAL CO FROM CHINA
HIGH GRADE
60% $1500 $1200
STEEL
LOW GRADE
40% $1200 $1000
STEEL
Per ton
65
Solution to Exhibit 2:
TOTAL TOTAL VOLUME SAVINGS TOTAL

COSTS VOLUME NEXT YEAR PER TON SAVINGS
LAST YEAR LAST YEAR FROM CHINA
HIGH GRADE 60%*600 = =360M/1500 =240 * 120% $300 PER =288K * 300
STEEL 360 =240K TONS =288K TONS TON =$86.4M
LOW GRADE 40%*600 = =240M/1200 =200*120% $200 PER =240K * 200

STEEL 240 = 200K TONS =240K TONS TON =48M
=134.4M
66
Case 2: DevCo, Deloitte
Redefining Medical Device Global Marketing Strategy
Business Situation:
DevCo is a global medical device manufacturer headquartered in the US with operations in more than 60 countries. The Company produces a range of
medical devices and data management tools. They have always been a market leader and commanded premium pricing; however, intensified
competitive pressure from lower-cost manufacturers and increased customer price sensitivity have negatively impacted margins and market share.
In response to these dynamics, Aaron Rike, the Chief Marketing Officer of DevCo, repositioned a portion of the high-end product line to address the
preferences of more cost conscious customers. He also led DevCos efforts to acquire and develop a lower cost product line to expand its product
range. Aaron quickly realized that while the expanded portfolio was robust, the product lines lacked differentiation which created customer confusion
and impacted financial performance. Further, he faced organizational challenges since product development, marketing, and sales were managed at
the product level.
Concerned that product overlap would further erode market share and profitability, Aaron called Sally Jones, a Principal In Deloittes Strategy practice
and long-time advisor to him and the DevCo, to discuss his challenges. He engaged Deloitte to develop a new portfolio strategy and redefine the
accompanying go-to-market strategy in order to position DevCo for continued market leadership and growth.
Problem Statement (For interviewer reference only; Provide one question at a time)
Imagine you are a Senior Consultant on Sallys team as you help DevCo understand the following.
1. What factors should DevCo consider when evaluating its product portfolio and go-to-market strategy?
2. Deloitte analysis indicates that DevCo should rationalize its portfolio in order to reduce overlap. There are three primary
product lines (A, B, and C). Which product line is most attractive for DevCo? (Note: Share data sheet with candidate at
this point)
3. How many units of NewPro does DevCo need to sell to be profitable? Based on this analysis and the considerations from
the prior question, would you launch NewPro? (Note: Interviewer must provide price and cost data)
4. What should DevCo consider when deciding to launch NewPro for Product Line B? If you were the CEO (head of all three
product lines), would you launch NewPro?
67
Prompt Questions and Responses (For interviewer reference ONLY)

What factors should DevCo consider when evaluating its product portfolio and go to market strategy?
A good answer will explore the impact of external environment and company capabilities on the product portfolio and go-to-
market strategy. Below is a list of areas that may be addressed:
Customer Mix: What types of customers use DevCo products? What must the company provide in order to meet these
different customer preferences (e.g., product attributes, engagement approach)?
Competition: What differentiates DevCos products from the competition? How can this be leveraged to protect / gain market
share?
Brand: How should DevCo position products in the market (i.e., features, price, channel) to promote the DevCo brand?
Channel: Which distribution channels should DevCo utilize? What regulatory perspectives should be taken into account?
Product: What is a customers willingness to pay for certain product features / functionality? What products offer good
enough features to address customer preferences?
Financial Impact: How much revenue does each product line drive? Which lines are most profitable?
A great answer looks beyond external factors and company capabilities to explore the impact of the portfolio structure and go-to-
market strategy on DevCos strategy and operations both today and in the future. Below is a list of areas that may be addressed:
Strategic Priorities: How can product positioning and customer engagement be used to support DevCos strategic priorities
(e.g., continued market leadership, broad portfolio)?
Organization Structure: Can the current organization and structure support the future portfolio strategy?
Global Footprint: How will country-specific needs and regulations impact product requirements and go-to-market strategy?
Evolving Environment: What market trends (e.g., Health Care Reform, growth of emerging markets) are impacting customer
preferences and how should DevCo respond?
68
Prompt Questions and Responses (For interviewer reference ONLY) Note: Please provide data sheet to candidate at this time
Deloitte analysis indicates that DevCo should rationalize its portfolio in order to reduce overlap. There are three primary
product lines (A, B, and C). Which product line is most attractive for DevCo?
A good answer will provide accurate financial information to support the argument (see below).
The interviewee will create income statements for each product line for the most recent fiscal year (2012). Cost of capital should not be
used in any way (extraneous information)
The interviewee will calculate operating income and operating margin %.
If the candidate focuses on largest operating income then product line B is the correct answer; however, if candidate focuses on
operating margin % then Product Line C is correct
Below is the math for each product line:
Product Line A Product Line B Product Line C

2012 2012 2012
Revenue (1) $1,000 $2,250 $600
COGS (2) $600 $1,700 $250
SG&A (3) $150 $225 $120
Operating Income (4)=(1)-(2)-(3) $250 $325 $230
Operating Margin % (5) = (4) / (1) 25% 14% 38%
69

Deloitte analysis indicates that DevCo should rationalize its portfolio in order to reduce overlap. There are three primary product lines (A, B,
and C). Which product line is most attractive for DevCo?
ANSWER CONTINUED
A great answer will calculate the income statement for three years using historic and forecast data to identify trends in operating income and operating
margin % (operating income for 2013 can be calculated without constructing the full statement since all the costs are variable, operating income
grows at the same rate as revenue):
Product line C has enjoyed the fastest top-line growth, although it remains the smallest of the three, while product line B, the largest one, has had the
slowest growth
All product lines have seen operating margin declines since 2011, and stable margins in 2012-2013, with product line C having the highest margin.
As a result, Product Line C is most attractive both from the total operating income perspective and from the operating margin % perspective
(different than the good answer due to forecasting with growth)
The candidate can also use the qualitative information to develop further inferences from the data. As long as they can strongly articulate the basis for
the argument, this is valid. Examples include:
Support model: The candidate references the service models as being a key driver of profitability for the products
Durability: Product Line B has a product life that matches product line A, but at a lower price point. This could be a key driver in why gross margin
is lower in product line B
Product Line A Product Line B Product Line C
2011 2012 2013 2011 2012 2013 2011 2012 2013
Revenue (1) 800 1,000 1,200 2,200 2,250 2,363 300 600 900
COGS (2) 400 600 720 1,600 1,700 1,785 100 250 375
SG&A (3) 120 150 180 220 225 236 60 120 180
Operating Income (4)=(1)-(2)-(3) 280 250 300 380 325 341 140 230 345
Operating Margin % (5) = (4) / (1) 35% 25% 25% 17% 14% 14% 47% 38% 38%
70

Product Line B is considering launching a new product, NewPro, to expand its footprint within the DevCo portfolio. NewPro
will have a suggested price of $200 with a rebate offered to all purchasers of $15 per product. The manufacturing cost will be
$115 per unit and per product marketing costs are expected to be $20 per unit. The fixed costs to launch the product will be
$20,000,000. Product Line leadership only wants to launch NewPro if it is profitable by the end of year 1.
How many units does DevCo need to sell to be profitable?
This answer is a straightforward calculation. The candidate needs to be able to properly build a breakeven analysis. There is only one
correct answer to this question though a fair answer could still be obtained if the candidate sets the analysis up properly (i.e., shows the
understanding) but makes a simple mental math error. See the math below:
Price $ 200
Rebate $ (15)
Net Price $ 185
Manufacturing costs $ 115

Marketing $ 20
Variable Costs $ 135
Margin $ 50
Fixed Costs $ 20,000,000
Break even units 400,000
71

Product Line B is considering launching a new product, NewPro, to expand its footprint within the DevCo portfolio. NewPro
will have a suggested price of $200 with a rebate offered to all purchasers of $15 per product. The manufacturing cost will be
$115 per unit and per product marketing costs are expected to be $20 per unit. The fixed costs to launch the product will be
$20,000,000. Product Line leadership only wants to launch NewPro if it is profitable by the end of year 1.
FOLLOW UP: Based on this analysis and the considerations from the prior question, would you launch NewPro?
A good answer will consider the viability of selling 400,000 units in year one, in addition to the brand, selling model, and risk
considerations discussed in the prior questions. One way to justify the viability of the volume required to breakeven is for the candidate
to calculate the projected revenue from NewPro at break-even and to compare it with the total Product Line B revenue in 2012.
Revenues from NewPro represent only around 3% of product line revenues, suggesting that achieving break-even in the first year is
viable.
Break-even NewPro Net NewPro break-even Product Line B revenue, NewPro break-even revenue
Net price per unit, USD
volume revenue, USD MM 2012, USD MM as % of Product Line B
(1) (2) (3)=(1)x(2) (4) (5)=(3)/(4)
400,000 185 74 MM 2,250 MM 3.3%
A great answer will not only consider the viability of selling 400,000 units in year one, but also consider the potential impact to the
broader business (e.g., capacity, resourcing) and some qualitative considerations which should be explored (i.e., branding, product
overlap, sales model). This brings in information from the answer provided in question 1.
The candidate can also mention that 100% rebate execution is a conservative assumption, and that, if execution percentage is lower, the
contribution margin will be higher and less units will be required to break even.
Finally, the candidate can discuss the positive margin implications for Product Line B, as the margin on NewPro is significantly higher
than the average product line margin (25% from gross and 27% from net price vs. 14% average).
72

NewPro will be positioned as leading edge with a high touch support model. The product will be sold through the third-party
distributors that Product Line B utilizes.
What should DevCo consider when deciding to launch this product? If you were the CEO (head of all three product lines),
would you launch NewPro ?
A good answer will use information from previous answers to raise several considerations in addition to the output of the breakeven
analysis most information suggest that NewPro should not be launched with the current plan:
Investment priorities: Given relatively slow growth and low margins, Product Line B may not be the best place to spend limited
investment dollars. Product Line C is most attractive (highest margin %) for DevCo, so investment should focus there.
Product Overlap: Product overlap has been identified as one of the key issues to be resolved, and NewPro introduction arguably
exacerbates this problem. Being a leading edge product, NewPro may not align with the brand, price point, and feature set of other
products from Product Line B. NewPro is more similar to Product Line A, which could further cannibalize revenues and create
customer confusion.
Support Model: Product Line B is sold through distributors with limited on site support. A higher touch support model, for NewPro
would require additional investment from DevCo.
A great answer will examine mitigation strategies that would allow DevCo to realize financial and strategic opportunities from NewPro
while addressing associated risks, and highlight additional considerations, for instance:
NewPro launch as part of Product Line A the candidate should explain the fit with Product Line A and understand that we may
need some additional info, i.e. whether the product line already has similar products. Also, we have to determine whether direct sales
force selling Product Line A is an appropriate channel for NewPro.
Identified need for the product if current customers of Product Line B are demanding this particular product, then investment can
be a necessity to prevent customers from switching to competitors.
73
Wrap Up
Wrap Up
As part of this engagement, the Deloitte team:
Developed a go-to-market strategy to create differentiation within the clients portfolio and tailored the marketing strategy
by customer segment. The strategy included branding, messaging, engagement model, development approach, and
organization enablers
Analyzed the product portfolio and recommended a portfolio prioritization strategy based on customer preferences that
reduced product overlap
Aligned key business leaders around a common view of the customer one achieved by looking through the customers
eyes
Recommended internal processes and structural changes that would allow for improved communication to focus on the
customer
74
DevCo: Data Sheet
Financial Information Breakdown*
All numbers in millions of dollars (USD)
Revenue COGS SG&A Cost of Capital 2013 Growth

(Estimated)
2011 2012 2011 2012 2011 2012 2011 2012
Product Line A $800 $1,000 $400 $600 $120 $150 17% 15% 20%
Product Line B $2,200 $2,250 $1,600 $1,700 $220 $225 7% 10% 5%
Product Line C $300 $600 $100 $250 $60 $120 19% 20% 50%
Product Line Information
Product Features /
Product Support Description Product Life Sales Channel Price Point
Line Functionality
Leading edge Always on call
A 10-15 Years Sales Force High
and mid-range High touch approach
Mid-range and Readily available support
B 10-15 Years Distributor Medium
entry level Limited on-site availability
Mid-range and Always on call
C 8-10 Years Distributor Low
entry level Limited on-site availability
* When using this information, assume all costs are variable
75
Case 3: Wireless City, McKinsey (Round 1)
Problem Statement
Our Client is the government of a large city. (Think Chicago, New York or Los Angeles)
They plan to provide free wireless connection to all of their residents by building Wi-Fi
hotspots covering the entire city. They hired McKinsey to help them determine whether or
not they should do it.
Type of Case Interviewer Guidance

Industry: Public Sector This is a typical McKinsey style case. You begin with
testing the interviewees capability of building a
Difficulty: Medium framework for an uncommon topic, followed by two
brainstorm questions. The math part of the case is a
Format: Interviewer led
geometry question, which is likely to hit the
interviewees unprepared area.
76
Clarifying Information and Case Guidance
Clarifying Information on Request Sample Framework
Criterial or Goal: There is no clear decision - Benefit

making criteria. Our Clients goal is to maximize
- Individual
the Wi-Fi for the residents. They would like to
hear our thoughts about the potential benefit of - Commercial
this project.
- Public
Customer: The target users are the city
- Cost
residents. If the candidate asks whether tourists
can use the service, tell them the client want us - Initial investment
to make a recommendation.
- Maintenance and service
Location: United States.
- Alternatives (commercial Wi-Fi, 4G network)
Budget: There is no budget for this project yet.
- Are alternatives good enough?
However, cost is certainly a consideration in
decision making.
In-house or outsourcing: Our Client want us to
make a recommendation on this.
Tech-ready? : Yes, all required technologies are
available in the market.
77
Brainstorming Question A
Brainstorming Question
After the candidate explains the framework, mention:

Our client likes your analysis. They did some further research and finalized the details of how the Wi-Fi hotspots
operate. Each Wi-Fi hotspot can cover a certain area. When any opened, Wi-Fi capable device enters this area,
the Wi-Fi hotspot will notice and begin to trace its location. The owner of the Wi-Fi device can login to the wireless
network for free with a unique ID and password provided by the government. Once logged in, the owners name
and location will be traced by the Wi-Fi hotspot.
Given these details, can you think about possibly uses given the location, time and login ID data collected by the
Wi-Fi hotspots?
Brainstorming Solution
Keep pushing the candidate for at least 5-6 answers. Some possible answers include:
- Crime prevention
- Traffic network design
- Urban planning
- Push advertisement for nearby restaurants or stores
- Find the hot location for new restaurants or stores
- Real-time traffic monitoring
78
Brainstorming Question B
Step One
Regardless of whether or not the candidate mentioned crime prevention, ask the following:
Now lets talk about crime prevention. One government officer suggested that when a crime is
reported, the police can narrow down the suspect by looking at the data of the nearby Wi-Fi
hotspot. Do you think this is a good idea?
Step Two
Allow the candidate to brainstorm some pros and cons until he mentions that if someone intends to do
something bad, he will not login the Wi-Fi in order to avoid his data being tracked. Then mention:
One officer had a similar concern, so he suggested that the government should not let the public
know that their ID and location will be recorded by the Wi-Fi hotspot. What do you think?
Step Three
This is an open ended question. The candidate may talk about the importance and potential backlash
from the public. Push the candidate to see if they can defend their position logically.
79
Math Questions and Solutions
Math Question
Our client collected quotes for the total cost of the project and the best quote was $30M. To benchmark,
they want to see how much the project will cost if they install the Wi-Fi hotspots by themselves. The size
of the city area is 40*25 and each hotspot can cover a circle area with radius of 5. Our client want to
cover 100% of city area. Each Wi-Fi hotspot cost $1M. Do you think it is better for the client to install the
hotspots or to outsource?
Potential Clarification Questions
The following information should only be given when asked:

If the client were to launch the project, $20M is the total initial cost (service costs are not included)
$1M is the total cost of installing one Wi-Fi hotspot, including labor, equipment, etc.
80
Math Question Solution
A candidate with really strong math will figure that four WiFi hotspots can cover a 102 * 102 square
area. Therefore, the 40*25 triangle area needs (40/14) * (25/14) * 4 = 3*2*4 = 24 hotspots. (See below)
As long as the answer is within the 24 28 range and the methodology makes sense, it can be
considered a good answer. However, if the candidate directly divided the area of the triangle (1000) by
the area of the circle (3.14*5^2= 80) and got ~13, you should remind them that a triangles area can not
be perfectly covered by circles without overlap.
A good candidate will synthesize that the total installing cost will be lower than $30M but not far away
from it. Considering that the extra admin cost of in-house approach, accepting the $30M outsource cost
may still make sense.
After the math question, let the candidate make a recommendation

and conclude the case.
81
MOCK CASE: DOWN UNDER
82
Down Under - Business Situation
Prompt the candidate to explain their thought process and approach to address the issue
For Candidate: Business Situation
Our client is Down Under Apparel an Australian based swim wear and lifestyle company. The company unexpectedly
missed its internal earnings target. The CEO has called Deloitte to diagnose the problem.
For Interviewer: Guide candidates through the following steps
Identify the Brainstorm

Structure Understand the Client Analyze
Problem Solutions
Develop structured Methodically learn Analyze the forecast Synthesize Brainstorm a
approach to identify more about the client & actual information information to potential solutions
& recommend a to tailor the analysis through interpreting determine why Down and deliver a
solution to the data Under missed its recommendation
problem earnings forecast
Copyright 2015 Deloitte Development LLC. All rights reserved.

83
Additional Background Information
This slide includes extra information to navigate the case but should not be provided unless
the candidate asks
For Candidate: Clarifying Questions & Answers
Competitors The client competes against a difference competitor set depending on the product. Historically, the Maui was
the largest rival in the surf and athletic swim wear, but offered lower quality products at lower price points.
The client has no interest in growth through competitor acquisition
Customers Surfers and Professional Athletes (30% of Revenue): Value to the performance and cutting edge technology
(hydrodynamic). Willing to pay for performance, yet low earnings for the average suffer and swimmer
suggest limits to what they will pay
Luxury Seekers (70% of revenue): Fastest Growing segment, contributing to the explosive growth. These are
casual users who enjoy the performance but not a key to buying process. Value the brand and ascetics.
Brand offers legitimacy.
Channel Surf Shops: Typically small independent retailers located in beach towns. Client has long standing
relationships and entry point for any given market. See more Surfers and Professional Athletes. Carry limited
merchandise due to small locations, almost exclusively performance wear.
Big Box Retailers ( think Dicks, not Walmart): Asking for products at targeted price points to appeal to their
customers. Typically more price sensitive customers. Offers a wide variety of performance wear and
equipment (boards, beach equipment etc.) some lifestyle products. Frequent Sales
Department Stores (think Bloomingdales, not J.C. Penny): Least price sensitive customers. Offers a wide
variety products focusing on the lifestyle wear. Only channel outside online that offers the resort collection.
Direct to Consumer (Online): Attracts repeat customers who are already familiar with brand and products.
Never puts anything on sale.

84
Candidate Handout
1
Financial Trends
Sales by Year Costs by Year
$14,000 $14,000
$12,800
$12,000 $12,000
$12,000
$11,700
$11,500
$10,000 $10,000
$9,500
$9,300
$8,900 $9,000
$8,000 $8,350 $8,000
$8,000
$7,800
$7,500
$6,000 $6,000
$4,000 $4,000
$2,000 $2,000
$- $-
2012 2013 2014 2012 2013 2014
Forecast Actual Forecast Actuals
Note: in millions ($)

85
2 Candidate Handout
Forecast Details
2014 Sales Forecast by Channel and Category ($MM)
Big Box Department Online Surf Shops Total
Beach Attire $1,000 $800 $480 $400 $2,680
Casual Swim $1,400 $870 $580 $435 $3,285
Professional Swim $400 $0 $360 $800 $1,560
Resort Wear $1,050 $1,100 $450 $675 $3,275
Surf Equipment $400 $0 $0 $1,600 $2,000
Total $4,250 $2,770 $1,870 $3,910 $12,800
2014 Projected Units Sold by Channel and Category
Beach Attire 8 6 4 3 21
Casual Swim 11 6 4 3 24
Professional Swim 3 0 2 4 9
Resort Wear 7 6 3 4 20
Surf Equipment 1 0 0 4 5
Total 30 18 13 18 79
Note: in millions

86
3 Candidate Handout
Sales by Category (Actuals)

Net Sales by Category
Average Price by Category (2014)
$2,600 Beach Attire $128

$1,600
Casual Swim $134
2012 $2,100
$2,000 Professional Swim $173
Resort Wear $163
Surf Equipment $400

$3,050
$1,700
2013 $2,550
Margin by Category
$2,200
Casual Swim 4%
Professional Swim 8%
$3,480
$1,800 Resort Wear 11%
2014 $3,000
Beach Attire 6%
$2,520
$1,200 Surf Equipment 20%
$- $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 0% 5% 10% 15% 20% 25%
Casual Swim Professional Swim Resort Wear Beach Attire Surf Equipment

87
4 Candidate Handout
Cost Information (Actuals)

Average Cost by Category Other Information
$350
Down Unders offers free shipping for Direct to
Customer sales due to competitive pressures
$300
Down Under is opening a new manufacturing and
distribution center and consideration 3 sites:
$120
$250 - Southern California
- Mexico
$200 - Guatemala
$40
Five years ago, Down Under relocated many of
$150
$60 its manufacturing facilities to South Asia from
Australia boosting long term profitability
$70
$60
$20 $43 FY 2014 costs are approximately the same as
$100 $15 $36
FY 2013 costs
$10
$15 $30 $12
$50 $30
$15 $10
$50
$20
$20 $20
$60
$40 $35
$30 $30
$-
Casual Swim Professional Surf Equipment Beach Attire Resort Wear
Swim
Materials Labor Marketing Shipping SG&A

88
Step 1: Candidate Develops a Framework
Guiding and Evaluating Candidate Responses (For interviewer reference only)
First: The candidate should summarize the case and create a framework
Next: The interviewer should evaluate whether or not the framework is MECE, which is a good indication of structured thinking
Here are the key considerations of this case:

1. The candidate has to recognize that the main topic of the case is identifying why Down Under Missed Its
earnings forecast
2. Understanding the client and industry is key prerequisite before launching into a project
3. Concept forecasts v. actuals and the ability to distinguish between the two
4. Segmenting data is necessary for analysis and to draw insights (e.g., customer types, sales channels, etc.)
5. Precise questions uncover additional data
6. Risks and challenges of launching a new product
Finally: The candidate should state a hypothesis and work through a framework to test it. Redirect candidate that immediately
requests data to learn more about the client
The candidate should attempt to learn more about the client and then identify hypotheses

89
Step 2: Analyze Information
The candidate should come to the following conclusion: The client missed its earning forecast due to selling 2m fewer
surfboards/ surf equipment at surf shops
The candidate can determine that information in several ways. One potential path is below:
Candidate asks about expected earnings and is provided data sheet 1
Candidate compares expected sales and costs to determine expected earnings = $1,100 million
Candidate asks for a breakdown of either the sales or cost information and is provided data sheet 2
- No relevant analysis at this time. The candidate moves to actual sales.
Data Sheet 3 provides the following information:
- Actual Sales = $12,000 million
- New category introduced in 2014: Surf Equipment
- Interview must provide the following when prompted: $800 million sold at Surf Shops
- Using the information on the sheet, $800 million / $400 = 2 million units sold
- Compares this information to data sheet 2 and determine only 50% of units sold compared to forecast
- Forms a hypothesis: Missed surf equipment at surf shops is the issue
- Proposes to validate through understanding cost information
Data Sheet 3 confirms that costs are inline with expectations and costs are not a problem
The candidate should be able to draw insights between the data sheets to identify the source of the problem

90
Step 3: Brainstorm a Solution
Candidate should propose potential solutions to increase sales at Surf Shops. If the candidate does not switch to solutioning, then
guide him/her with the following question:
Thinking about your own or a friends shopping experience, how could the client increase sales?
A good response would include the following considerations:

Tailor to the customer experience instead of sales overall
Acknowledge but not focus on other ways to increase sales (e.g., working with the vendor, product modification, etc.)
Outline potential challenges, risk, or other considerations
The candidate should prepare a structure or framework to organize brainstorming

91
Step 4: Provide a Recommendation
At this stage, the candidate should recap the case and deliver a fact based recommendation on the best course of action for
Down Under.
A good response will include the following:

1. Recap the case: Deloitte was engaged by Down Under to identify the reason why the company missed its earnings forecast
2. Share Insights: Down Under missed its earnings forecast due to lower than expected sales of Surf Equipment at Surf Shops.
The new product launch into a tangential category proved challenging for down under.
3. Propose next steps identify risks:

Propose options to increase sales (e.g., introduce surf equipment into new channels, developed actionable steps to
increase sales with surf shops, increase product consideration, etc.)
Identify other considerations/ challenges (lack of channel and consume awareness of product, movement away from core
competencies, long term impact to brand)
The candidate must demonstrate executive presence, describe the problem, and propose a solution

92
Appendix
(For interviewer
reference only)
93
1 Always provide this before data sheet 2, even if the candidate asks for more specific information
Expect Profit = $1,100M

Forecast (for interviewer reference ONLY)
Actual Profit= $500M

$14,000 $14,000
$12,800
$12,000 $12,000
$12,000
$11,700
$11,500
$10,000 $10,000
$9,500
$9,300
$8,900 $9,000
$8,000 $8,350 $8,000
$8,000
$7,800
$7,500
$6,000 $6,000
$4,000 $4,000
$2,000 $2,000
$- $-
2012 2013 2014 2012 2013 2014

Approximate figures
94
2 Only provide if the candidate proposes to break down the information on data sheet 1
Forecast Details (for interviewer reference ONLY)

Beach Attire $1,000 $800 $480 $400 $2,680
Casual Swim $1,400 $870 $580 $435 $3,285
Resort Wear $1,050 $1,100 $450 $675 $3,275
Surf Equipment $400 $0 $0 $1,600 $2,000
Total $4,250 $2,770 $1,870 $3,910 $12,800
Total 30 18 13 18 79
Note: in millions
95
3

(for interviewer reference ONLY)
$2,600 Casual Swim $145

$1,600
Professional Swim $200
The candidate should notice Surf
2012 $2,100
Equipment is new. After making the Surf Equipment $400
$2,000
observation, provide the following
Beach Attire $120
information:
Resort Wear $150
$3,050
Surf Equipment
$1,700 is a recently
2013 launched category$2,550 Margin by Category
$2,200
Products include Surf Boards,
Casual Swim 4%
primarily at Surf Shops
Sold $800 million at Surf Shops Professional Swim 8%
$3,480
this year
$1,800 Resort Wear 11%
2014 $3,000
Beach Attire 6%
$2,520
$1,200 Surf Equipment 20%
$- $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 0% 5% 10% 15% 20% 25%

96
4
Cost Information (Actuals) (for interviewer reference ONLY)

Average Cost by Category
$350
Other Information

$300

$120
$250
- Southern California
Higher marketing - Mexico

costs as a
$200 - Guatemala
percentage of
$40 overall costs due Five years ago, Down Under relocated many of
to recent product
its manufacturing facilities to South Asia from
$60 launch
$150 Australia boosting long term profitability
$70 FY 2014 costs are approximately the same as

$20 $43 FY 2013 costs
$60
$100 $15 $36
$10
$15 $30 Information should inform candidate costs are not the main issue
$12
$50 $30
$15 $10
$50
$20
$20 $20
$60
$40 $35
$30 $30
$-
Swim

97
1 Candidate Handout
Financial Trends
$14,000 $14,000
$12,800
$12,000 $12,000
$12,000
$11,700
$11,500
$10,000 $10,000
$9,500
$9,300
$8,900 $9,000
$8,000 $8,350 $8,000
$8,000
$7,800
$7,500
$6,000 $6,000
$4,000 $4,000
$2,000 $2,000
$- $-
2012 2013 2014 2012 2013 2014

98
2 Candidate Handout
Forecast Details
Beach Attire $1,000 $800 $480 $400 $2,680
Casual Swim $1,400 $870 $580 $435 $3,285
Resort Wear $1,050 $1,100 $450 $675 $3,275
Surf Equipment $400 $0 $0 $1,600 $2,000
Total $4,250 $2,770 $1,870 $3,910 $12,800
Total 30 18 13 18 79
Note: in millions

99
3 Candidate Handout

$2,600 Beach Attire $128

$1,600
Casual Swim $134
2012 $2,100
$2,000
Professional Swim $173
Resort Wear $163
Surf Equipment $400

$3,050
$1,700
2013 $2,550
Margin by Category
$2,200
Casual Swim 4%
$3,480 Professional Swim 8%
$1,800
Resort Wear 11%
2014 $3,000
$2,520 Beach Attire 6%

$1,200
Surf Equipment 20%
$- $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000
0% 5% 10% 15% 20% 25%

100
4 Candidate Handout
Cost Information (Actuals)

Average Cost by Category Other Information
$350
$300
$120
$250 - Southern California
- Mexico
$200 - Guatemala
$40
Five years ago, Down Under relocated many of
$150
$60 its manufacturing facilities to South Asia from
Australia boosting long term profitability
$70
$60
$20 $43 FY 2014 costs are approximately the same as
$100 $15 $36
FY 2013 costs
$10
$15 $30 $12
$50 $30
$15 $10
$50
$20
$20 $20
$60
$40 $35
$30 $30
$-
Swim

101
Case 5: SpaceZ Inc., Ross Original
Problem Statement
Our client is a national Aerospace company that focuses on creating space programs. For
the past few years, there has not been a reusable platform for software to be shared across
programs. The client is doing well, but wonders if they should develop an interface to have
software shared among programs. It makes sense, but the client suspects it might be too
expensive. The client wants you to help decide whether to develop this, and if so, how to go
about it.

Industry: Aerospace Candidate should go through all three phases of
possible involvement (greenfield, partnerships,
Difficulty: Medium acquisition)
Format: Interviewer Led / Cost Candidate should analyze the current market
Reduction conditions; why the company decided to consider this
initiative
Concepts Tested: Quantitative
Analysis Candidate should know that the purpose of this is to
reduce cost of other programs and not revenue
generation
102
Clarifying Information on Request Interviewer Guide to Case and Exhibits
SpaceZ has been losing a lot of bids recently to The candidate should explain his/her overall
its competitors due to its higher priced quotes framework (not revenues), then identify the
current and future cost savings
Only in the US market
The candidate should then ask what are the
The customer is government
initial costs associated in creating this reusable
Programs do not talk to each other, in other interface. Candidate should explore each of the
words, no communication between each project parts (greenfield, partnership, acquisition)
and no sharing of any lessons learned
Candidate should then, before doing any
+90% of the projects are classified and are only calculation, eliminate acquisition because it
shared on a need-to-know basis wont allow the client to leverage it into the near-
term proposals
Government is becoming cost conscious and
bids cannot be revised any longer (used to be Candidate should evaluate the cost savings of
able to get more money from the government if the other two as well as the risk of going with
underbid) both
Client has eight near-term proposals that will be
submitted within a year for new
projects/contracts; wanted to use this to platform
to be more competitive
103
Math Question
Extra cost associated with acquisition, partnerships, and greenfield.
Math Solution
Acquisition will cost $1 Million and 1.5 years to complete

Partnerships Option 1
$10,000 set up fee
$200,000 x .5 years = $100,000 labor cost to finish the project
$100,000 x .5 years = $50,000 in maintenance cost
Total to $10,000 + $50,000 + $100,000 = $160,000 the first year, $100,000 the second year, etc
104
Math Solution Continued
Partnerships Option 2 (users can be changed to what customers believe should be the optimum
$10,000 set up fee
$200,000 x 0.5 years = $100,000 labor cost to finish the project
$2,000 x 0.5 years x 5 users (estimated minimum, adjustable) = $5,000 in maintenance cost
Total to $10,000 + $5,000 + $100,000 = $115,000 the first year, $5,000 the second year, etc (need
to understand that users will increase year over year and can result in becoming more expensive)
Greenfield
$100,000 first year (development), $100,000 second year (development), $20,000 third year
(maintenance), etc
105
Exhibit 1: Table Exhibit
Costs Acquisition Partnership Partnership Greenfield

Enterprise (1) Individual (2)
Set Up Fee $1,000,000 $10,000 $10,000 $0
Labor $0 $200,000/year $200,000/year $100,000/year
Time Frame to 1.5 years 0.5 year 0.5 year 2 years

Completion
Increase in $0 $100,000/year $2,000/ year $20,000
Maintenance Cost per user
Number of Users 1st Yr 0 Unlimited ? 0
Both Acquisition and Greenfield have too long of a timespan to use for near term
proposals, so the candidate should eliminate them immediately.
Candidate needs to fill in the ? number for use in calculation
Labor with Partnership exists because it requires integration and support services from
partners
106
Exhibit 2: Bar Chart Exhibit
Annual Cost of the Three Options
Acquisition Partnership (1) Greenfield

$1000K
$160K
$100K
$100K
$100K
$100K
$100K
$100K
$100K
$20K
$20K
$20K
$20K
$K
$K
$K
$K
$K
YE A R 1 YE A R 2 YE A R 3 YE A R 4 YE A R 5 YE A R 6
107
Conclusion
Recommendation (Sample: choose either partnership

Next Steps
structure with sound reasoning)
Recommendation Move to enterprise edition once users
have exceeded 50 people
Choose partnership structure (2) because of the
lowered costs. Given the uncertainty of this product Use the result of this project in the
and it is the first time the company is doing this, it is immediate proposals to put forth
imperative the investment is small. The company can competitive bids
always move to the enterprise edition later
Risks
Chosen company for partnership does not live up to its
reputation
Excellent Case Answers
A star would be able to see that it is not necessary to only go with one option, and will do minimal math
to pick the partnership (assuming good clarification questions were asked).
108
Case 6: Athelas Insurance, Round 2
Problem Statement
Athelas Insurance company is the leading provider of health insurance in its state. The
company has consistently been the lowest cost player in that state. This has enabled them
to capture 70% of the states insured population (4 Mn insured individuals).
Recently, Athelas senior management has been looking at growth opportunities, and they
do not think geographic expansion is a viable option given their expertise. That said, they
have been looking to acquire one of the states largest hospitals, Apollo Inc., which they
think is an attractive target.
Athelas Insurance has hired you to evaluate the investment and suggest a future course of
action.

Industry: Healthcare This case is designed to test the candidates ability to
perform a basic valuation, understand the financial
Difficulty: Hard interests of both sides in an acquisition and evaluate
ways of creating value from an acquisition
Format: Interviewee led
Allow the candidate to lead the interview, but ensure
Concepts Tested: Basic Valuation, they dont jump the gun to value creation (synergies)
M&A, Health industry knowledge without understanding the current position.
109
What was Athelas aim in pursuing the deal? Framework - This cases aims are how much
They dont have a particular aim, they are should they be willing to pay, why, and what they
looking to you to evaluate all synergies. should do post-acquisition. Push back when
frameworks dont address it.
What does Athelas want to know? They want to
know how much to bid and what to do post- Valuation (Exhibits 1-3) - Interviewees could start
acquisition (if they do it) the case with any aspect of Apollos stand-alone
value (Revenue, costs, growth, discount rate). In
Background of Apollo Inc. - Is among USAs
this case, please show them one of Exhibits 1,2
most reputed general hospitals, known for its
or 3 depending on what the question is.
high quality of care and expertise across all
major areas of care. Most patients are extremely Post-valuation Once the candidate figures out
loyal and rarely use other hospitals. the $4 Bn valuation and therefore the $1.2 Bn
profit needed over 3 years, we need to go to
Does Athelas have a financial goal? - They are
synergies which will need to be at least $450 Mn.
looking for a 3 year ROI of 30%. Ignore
discounting for this calculation. Once we get there, we brainstorm the various
synergies and evaluate the one that is feasible.
Questions on Athelas financials We will get
This is when we go to exhibit 4; push the candidate
into it later
to try and calculate how many procedures they
need to convert to get to $450 Mn
110
Math Questions and Solutions (1 of 2)
Math Question
How much should Athelas offer for Apollo hospitals Inc.?

How much do they need in synergies for the ROI to make sense?
How many procedures do they need to convert to Apollo for the deal to make sense?
Math Solution
1. The amount they should offer is $4 Bn
$
= = = $4 Bn
( ) % %
= EBIT * Average multiple = $750 Mn * 5.33 = $4 Bn

2. They need $1.2 Bn over 3 years. On a standalone basis they expect to get $750 Mn over 3 years
($250 Mn * 3). So they will need $450 Mn in synergies over 3 years to meet their ROI target.
3. Assuming the premiums and the hospitals costs to serve patients dont change. They need to convert
112.5k new procedures over 3 years for them to hit their ROI limit. Refer Calculations on next page
111
Math Questions and Solutions (2 of 2)
Math Solution
Current Pricing scheme Proposed Pricing scheme

Revenue Cost Profit Revenue Cost Profit
Apollo Hospitals $10.0 K - $10.0 K $10.0 K - $10.0 K
Apollo
Insurer - $8.5 K -$8.5 K - $9.0 K -$9.0 K
patients
Total $10.0 K $8.5 K $1.5 K $10.0 K $9.0 K $1.0 K
Hospital - - - $10.0 K $2.0 K $8.0 K
Converted
Insurer - $7.0 K -$7.0 K - $9.0 K -$9.0 K
patients
Total - $7.0 K -$7.0 K $10.0 K $11.0 K -$1.0 K
$ 500 lost per procedure

Loss on current
Times $ 225 Mn
patients
150k Patients times 3 years
($450 Mn needed to meet Target + $225 Mn losses) 112,500

New patients needed
divided by Patients
to Reach ROI target
($6.0 K in gains per patient) over
112
Brainstorming Questions and Solutions
How can they make up the additional $450 Mn that they need to meet the ROI target for 3 years?
There are three broad options:

Reduce costs at the hospital Is probably not realistic, why would an insurance company be
the best to reduce costs of providing service at a hospital?
Reduce costs for the insurance company They could pay the hospital less, but this equally
reduces revenues at the hospital. Will it attract new consumers either? Probably not given they
dont see any of the benefit.
Increase revenues for the insurance company/hospital We can do this by setting more
attractive pricing at Apollo Hospital which can bring in new lives, it can also convert current
procedures insured by Athelas to Apollo. The second part can be evaluated, the first is valuable
but we dont have the numbers.
113
Exhibit 1: Apollo Hospital Valuation analysis
Approach 1 Cash Flows Approach 2 Multiples
Apollo Hospital Inc. Free Cash flows (2015) Recent Hospital EBIT
Net Income $250.0 Mn acquisitions Multiple
EBIT $750.0 Mn Alpha Hospitals Inc. 6.11
Taxes $300.0 Mn Beta Hospitals Inc. 4.44

NOPAT $450.0 Mn Gamma Hospitals Inc. 5.33
Depreciation and Amortization $175.0 Mn Delta Hospitals Inc. 5.45
Change in Net Working Capital $25.0 Mn
Capital Expenditure $200.0 Mn Average 5.33
Free Cash Flow $400.0 Mn
Discount Rate Growth Rate

10% 0%
114
Exhibit 2: Apollo Hospital Revenue breakdown
Average $ per procedure received by Apollo Hospital
$30.0 K
$ per procedure
$25.0 K
$24.0 K Avg $ paid by insurance
$20.0 K Avg $ paid by patients
$15.0 K
$14.5 K
$10.0 K
$8.5 K
$5.0 K
$6.0 K
$4.0 K $1.0 K $1.5 K
- - - $0.5 K
Medicaid Medicare Batna Inc. Americare Athelas Inc.
Insurer Inc.
Total # of
75 K 75 K 100 K 100 K 150 K
procedures
Total
$0.30 Bn $0.45 Bn $2.50 Bn $1.50 Bn $1.50 Bn
Revenue
115
Exhibit 3: Apollo Hospital Cost breakdown
Apollo Hospital 2015 costs
$7.0 Bn
$6.0 Bn Facilities, $0.4 Bn

Pharmaceuticals,
$5.0 Bn $0.6 Bn
Supplies, $0.7 Bn
$4.0 Bn
$3.0 Bn
Salaries and
$2.0 Bn benefits, $4.3 Bn
$1.0 Bn
116
Exhibit 4: Apollo hospital Occupancy data
Research highlights
Apollo Hospital has significantly excess capacity, they can absorb up to 200k excess patients without
having to expand their facilities.
At current capacity, it costs Apollo a marginal $2,000 to perform every incremental procedure
We are investigating the below pricing scheme to convert non-Apollo procedures to Apollo
Average at Non-
Current contract Proposed Contract
Apollo facilities
Amount Contributed
by Patient
$8.5k $9.0k $7.0k
Amount paid to
Apollo Hospital by $1.5k $1.0k $0.5k
Athelas
117
Conclusion
Recommendation Next Steps
Recommendation Investigate the surgeries that are most

likely to convert
Bid $4.0 Bn for Apollo hospital
Investigate if the better contract with
Change the contract to convert procedures to Apollo
Apollo will attract more people to the
Risks insurance products
We need to increase procedures performed by ~20%
over 3 years; response from medical staff
What is the nature of these new patients? Do we have
the right capacity? Different specializations, etc.
Completing the case in 30-40 minutes requires excellent structure and math ability
Brings out the best opportunities to create value through the acquisition
Recognizes the risks involved in expanding the services offered by a high-quality hospital
Recognizes the cultural implications of asking doctors to perform 20% more surgeries
118
Case 7: Spare Parts, Bain (Round 1)
Problem Statement
Our client is a dominant spare parts distributor in Europe and they want to enter the US
market at end of this year. Our client collects spare parts from the manufacturers and
distributes it further within the region. The client has approached Bain to determine the US
market size for next year.

Industry: Automotive Candidate should focus only on the Market Sizing
Difficulty: Easy This case tests the candidates logic and reasoning
Format: Interviewee led

Concepts Tested: Market Sizing,
Back-of-the-envelope estimation
119
Client has strong relationships with all the spare Help candidate understand that this is a pure
parts manufacturers in USA, and distributes all market sizing problem, and the framework
possible spare-parts in the market should be focused on the question asked
Client distributes the spare-parts to retailers, car Help candidate understand that the overall
manufacturers, workshops etc. market size is asked for, and presence of
competitors does not affect the overall market
Focus on passenger car market for this case
size
120
Possible Framework:
Number of passenger vehicles in US

Frequency of maintenance
Number of spare parts used per vehicle per maintenance
Number of repair workshops in US
Average price per spare part
121
Math Question
How many passenger vehicles you think are there in US?
Math Solution
Break down the US market size by household income levels: High, Medium and Low
Take into account non-household passenger vehicles as well.
Assumption: High-income households make up 20% of the total households, medium income make up
50% and the low income households make up the remaining 30% of the total households
Assumption: US population: 350M -> 3.5 members per household on average -> 100M households
Refer to Ex 1 for detailed calculations
Total number of passenger vehicles in US = 250M
122
If you were told that you need to estimate the market size using three more variables, what would those
be?
Write down the complete equation
Number of spare parts per vehicle

Frequency of maintenance
Price per spare part
Total Market Size = # vehicles* # spare parts per vehicle* frequency of maintenance* $ per spare part
123
How would you go about collecting that information/data?
There are 50 states in the US with varying demographics, and Id interview the repair workshops across
each city since they will have the information on # spare parts per vehicle per year and average price
per spare part.
Assuming 40,000 cities and towns in USA, I believe that conducting a survey for repair workshops
across 10,000 cities and towns will give us a good representative sample size to assume the
aforementioned data points.
Frequency of maintenance: I have owned a car for 5 years, and I take my car to the repair workshop
twice a year, and I would assume it would be the same across the target market.
124
Math Question
We conducted the survey and with the following results, calculate the total market size:
# spare parts per vehicle per maintenance: 1
Frequency of maintenance: 1.5
Average price per spare part: $10
Math Solution
Total Market Size = # vehicles* # spare parts per vehicle per maintenance* frequency of maintenance* $
per spare part
250M*1*1.5*$10
3.75B USD
Even if our client can capture 5% market share in the first year, their market share will be $187.5M a
pretty good figure.
125
Exhibit 1: Total number of passenger vehicles in US
Income category # households # cars per Total Cars per

household category
High 20%*100M = 20M 4 80M
Medium 50%*100M = 50M 2 100M
Low 30%*100M = 30M 1 30M
Total number of household passenger vehicles in US, therefore, is (80+100+30) = 210M.

To this number, add another 40M representing taxis, limos, government cars and rental cars.
Therefore, the total number of passenger vehicles in US is 250M
126
Conclusion
Recommendation Assess how much market share can our client

capture within first year and thereafter
The total market size in US is 3.75B USD
Assess the profits and return-on-investment for
- This number is calculated based on number of
our client
passenger vehicles in US and information
gathered from the repair workshops across the Include the analysis of the non-passenger
country. vehicles into our estimation
Risks
The total market size, in itself, does not give a complete picture as to
how much market share can our client capture and about the upfront
investment of entering the new market and costs in general.
Strict focus on the market sizing and not getting distracted

Logical reasoning behind the estimations throughout the case
127
Case 8: Dallas Foundation, FSG (Round 1)
Problem Statement
Our client is a private foundation operating in the Dallas Metro Area.
Historic focus on health, education, economic development, arts and culture
New Executive Director, Mary, needs help in refining strategy and identifying 1-2 focus
areas

Industry: Private Foundation This case is focused on developing a strategy for a
Foundation and is testing the interviewees basic
Difficulty: Easy understanding of how Foundations strive to create
impact as well as the interviewees ability to structure
ambiguous, open-ended questions in a logical
Concepts Tested: Strategy manner
development, Market sizing
128
Endowment of the foundation is $200 million If interviewee asks for this information provide it
after narrating the case prompt
Annual budget for making grants to
organizations is $10 million If not, move ahead to brainstorming questions
Wide variety of work done currently among If interviewee never asks for annual budget
impact areas with no specific focus during the case this is a red flag
129
Brainstorming Questions and Solutions (1 of 4)
In preparing for our upcoming trip to Dallas, what broad areas would you explore to help Mary? What
questions would you ask and where would you get this information?
Interviewee should demonstrate structure and logic in answering this question.

Social indicators Donor landscape Partner NGO landscape
Key indicators for health (BMI), Other foundations in Dallas, their Quality and types of grantee orgs,
education (drop out rates), investment areas to assess confidence in leadership, operations
employment etc. overlap/opportunities and impact. Source: Primary
interviews with non-profit leaders
Source: City data, health centers Source: Secondary research
Internal capabilities Government/Policy outlook

Talent quality and expertise across Policy push, subsidy or service fee
investment areas, Current awarded in certain impact areas
partnerships. Source: Interviews
Source: Secondary research,
with Texas Foundation staff
interviews with Foundation staff
130
Based on initial research, three areas of impact emerged as frontrunners childhood obesity, high
school drop outs, and shortage of affordable housing
What factors or selection criteria could be applied to help assess which of the three areas to focus on?
Interviewee should be encouraged to discuss these investment areas and how they may differ from
each other, what kinds of investments they would require, what impact they could have
One possible method is to rank order the options (Low, Medium, High) across key criteria and develop a
hypothesis for which investment area would be most viable
Childhood obesity HS dropouts Affordable housing
Investment requirement M M H
Time horizon to realize impact M L H
Availability of good grantee org's M M M
Internal capability L M L
Effort to develop internal capability M L H
xx
xx
Overall propensity for impact M H L
131
While researching several indicators, one stakeholder provided us a 10 year longitudinal data set of
high school students in Dallas with the following information: Test scores, Lunch program status, Zip
code, Race, Attendance record
How could you use this data to identify sub-segments within the Dallas area to improve the high school
drop out rates
One possible solution is to propose running a regression on this data

Dependent variable (Y) = Attendance
Independent variables (X) = Test score, lunch program status, zip code, race
Results from the regression may show that attendance is significantly impacted by zip code this could
help identify school districts that need most help.
132
Assume that after further analyses and interviews childhood obesity came out as the frontrunner
Estimate the number of Hispanics born in 2016 in Dallas at risk for obesity when they turn 5 years old
Candidate should have sense for high Hispanic population in Texas (actual % is 38.2%)
Candidate should be able to identify sensitivity factors. e.g. % at risk for obesity
There are several ways to approach this estimation question. One potential solution is outlined below
Population of Dallas Metro Area = 10 million Population Growth Rate = 1%
Population Growth = 100,000
What % of 100,000 are newborns (vs. older populations living longer due to higher life expectancy)
Assumed 90% are newborns
Number of Dallas newborns = 900,000 x Percent of newborns that are Hispanic = 20%
Number of Hispanic newborns = 18,000 x Percent that live in low socio-economic neighborhoods = 50%
Hispanic newborns in low socio-economic neighborhoods = 9,000
Percentage at risk for obesity = 100% Number at risk = 9,000
133
Conclusion
Recommendation Continue data collection to validate

hypothesis that childhood obesity is the
Focus investment portfolio to decrease childhood
most impactful intervention area
obesity in the Dallas Metro Area because of a sizeable
potential for impact (9,000/year), moderate investment Develop communication strategy for
requirements, and high quality grantee organizations internal and external stakeholders
that have demonstrated their ability to make this impact
Internal capability development plan to
Risks implement this shift in focus
Reaction of current/future donors, negative impact on
other program areas due to budget reallocation
An excellent case answer will go beyond providing recommendations and risks and discuss a
communication/internal buy-in strategy. Several impact consulting firms look for consensus building as
opposed to the conventional answer-first approach
The interviewee will also demonstrate ability to source data and information creatively since industry
reports and documented data not often available in impact consulting projects
134
Case 9: Laundry Investment, Ross Original
Problem Statement
We are in the 1990s, and you are a consultant working for a respected Private Equity fund
interested in consolidating the on-site coin laundry business in the state of Michigan.
The client has pre-negotiated acquiring four thousand locations at a multiple of five times
their current annual Net Income.
The client wants to know whether or not they should move forward with the deals.

Industry: Private Equity This case is focused on Private Equity techniques for
value creation through consolidation and turnaround,
Difficulty: Hard over the background of the peculiar on-site laundry
industry.
Concepts Tested: Market Sizing;
Turnaround; Operational
Improvement; Pricing Strategy
135
Financial target: payback in two years. To start, hand Exhibits 1 and 2 to the candidate
and explain the on-site coin laundry business.
The turnaround should be based on a minimal or
zero investment strategy (aside from the initial This case involves the acquisition of multiples
acquisitions). companies with the ultimate goal of
consolidation. Those companies are referred in
The client has no previous experience nor other
the case as target companies.
portfolio companies in the coin laundry business
or related businesses. The word location is used to refer to one
laundry unit containing on average ten coin-
Highly fragmented industry: the current largest
operated laundry machines.
player manages 3,000 locations and has 3%
market share. In the Exhibits, Supply and Demand are given in
a per-location basis, in terms of the number of
The 4,000 locations were pre-negotiated with
laundry machines demanded and/or available.
multiple owners and together will represent 4%
market share for the client.
There are 100,000 locations in the state of
Michigan.
The facilities are often unattractive, unclean, and
unorganized.
136
Exhibit 1: Target segment: on-site coin laundry business
On-site coin laundry is the target segment of this deal
Laundry industry
Self-operated laundry machines

Laundry shop / Dry cleaning Coin laundry made available for customers in
exchange for coins
Laundry stores where customers
drop their laundry and pick it up
in a later time. Store staff runs
the laundry process
Off-site coin laundry On-site coin laundry
Facility installed in community

Self-operated off-site
areas, such as student housing,
laundry stores
apartment buildings, hospitals etc.
137
Exhibit 2: On-site coin laundry business Industry Profile
The target companies own the laundry machines and negotiate installing them
in community areas, such as student housing, apartment buildings etc.
Revenue They get a share of the inflow of cash from the laundry machines and
Model negotiate a revenue split agreement with landlords. Average revenue split
agreement is 50%. Concession of space and revenue-split agreements are
generally renewed annually.
The target companies are responsible for all aspects of operations. Major
Operational costs include coin collecting staff, equipment and maintenance of laundry
Model machines. The landlords grant free use of the space, in return for their share of
revenue and assurance of minimal service level.
Cash business, no inventories, no working capital. Profit margins are 40% of

Financials Net Revenues (Gross Revenues deducted of landlord's share). Virtually no
growth expected for the industry.
138
Question 1
Math Question
Estimate the Purchase Price.
Math Solution
Working hours per day: 19

Average utilization: 60%
Cycle time: 60 minutes
Price per cycle: $1.5
Machines per facility: 10
Working days per year: 350
# of facilities: 4,000
Revenue split agreement: 50%
Profit margin: 40%
139
Question 2
Hand candidate Exhibit 3.

What are the main issues?
How can the client increase revenues?
Peaks of demand in some periods of the day and idle periods during others are leading to unattended
demand and low utilization (60%).
Crests occur right before and right after general working hours.
Candidate should realize that since there is no control over demand, and supply is fixed (low investment
strategy) changing the pricing strategy is the only way to increase revenues.
140
Exhibit 3: Demand, Supply, Utilization, and Price
Demand, Supply, and Utilization [machines in use/demand per hour] vs. Price [$/cycle]
141
Question 3
Propose a new pricing strategy.

What are the expected impacts of the proposed pricing strategy?
New pricing strategy should include a variable pricing model, with higher prices during peaks of
demand, and lower prices during the troughs.
Expected impact:
Higher price will negatively impact customer experience.
The demand should very inelastic (within a reasonable range people will still use the on-site
machines; other alternatives are much more expensive).
People generally care more about the convenience of the on-site machine than about price.
142
Exhibit 4: Demand, Supply, Utilization, and Price - New Pricing Model
Demand, Supply, and Utilization [machines in use/demand per hour] vs. Price [$/cycle]
143
Question 4
Math Question
Hand Exhibit 4 to candidate.

What is the new pricing model's expected impact on revenue?
After the candidate successfully identifies Higher Capacity Utilization and Higher Average Price as
the main impact from the new Pricing Model, provide the estimates below.
Math Solution
Impact on revenue
Main conclusions from Exhibit 4
Average utilization 25% increase
Higher capacity utilization
Price per cycle 20% increase
Provide impact: +25%
Total impact = (1+20%)*(1+25%) - 1 = 50% increase
Higher average price
Provide impact: +20% Initial Gross Revenue = $240M
New Gross Revenue = $240M * 1.5 = $360M
144
Question 5
Analyze Exhibit 5.
Candidate should realize that the target companies have the worst negotiation results in the industry;
matching Competitor A's rates would increase Net Revenues with minimum risk of loss of market share.
Candidate should first choose a conservative approach to the analysis and confirm that the deal would
be attractive under the safest renegotiation strategy possible (60%).
145
Exhibit 5: Revenue Split Agreement Benchmark
146
Question 6 (optional)
How else could you increase revenues?
Potential low-investment new revenue streams: At the end of discussion, provide

candidate with estimates:
Vending machines (partnership)
Annual revenue: $60M
Snacks; Beverages
Profit margin: 50%
Laundry supplies dispensers (partnership)
Detergent; Softener
Entertainment (partnerships)
Arcades; Pinball machines; Newspaper
dispensers
147
Question 7
Math Question
Should the client move forward with the deal?
Math Solution
Gross Revenue: $360M

Revenue split agreement: 60%
Total cost: unchanged: $72M
Other streams of revenue
Revenue: $60M
Profit margin: 50%
Payback meets the financial target
Notice that the initiatives selected do not
impact costs, thus the total annual cost
should be unchanged ($72M), but the
profit margin should be higher.
148
Conclusion
The client should move forward with the deal. Propose to analyze the due dates of
Potential payback in less than three years. the current contracts and lay down a
Major opportunities for increase in profits. timetable for the client.
Turnaround plan is not CAPEX intensive.
Make sure the legal department will
Risks analyze the new contracts and protect
Revenue split renegotiations can take up to one year to the new revenues from the split
be completed depending on each contract due date. agreements.
Landlords may try to claim a share of the new streams of Find suppliers to install and/or manage
revenue. the dispensers in the facilities.
Candidate should note that here is further potential for:

Further improve revenue split agreements (industry average = 70%)
Cost savings due to economies of scale.
149
Sample Framework
Purchase Price
(Current Revenue)*(Current Profit Margin)*(Negotiated Multiple)
Potential for revenue improvements
Maximization of capacity utilization
Price increase
Renegotiation of revenue split agreements
New revenue streams
o Vending machines
o Laundry supplies dispensers
o Entertainment
Potential for cost optimization
Economies of scale
Best practices
Standardization
150
Case 10: Dr. Rossmans Magic Eye Drops, Ross Original
Your client, Dr. Rossman, has invented an amazing product; he has discovered the chemical formula
for Magic Eye Drops. One drop in each eye will cure short or long-sightedness in any patient.
However, Dr. Rossman is a scientist, not a businessman, and has come to our firm because he wants
to sell the rights to his Magic Eye Drops to a business that will commercialize the invention. What
should his asking price be?
Industry: Pharmaceutical/ Candidate should ask about patent duration and describe
Medical Devices some implications.
Candidate should ask about any known side effects or
Difficulty: Easy risks.
Brainstorm other competitors or substitutes
Format: Pricing/Valuation
Concepts Tested: Net present

value, Estimation
151
Clarifying Information on Request Interviewer Guidance to Case and Exhibits
Dr. Rossman has secured an exclusive, Help candidate understand this is a valuation
worldwide patent for the next 20 years. After problem. The candidate will develop a structure
the patent expires, generic versions will quickly to estimate NPV of future expected revenues
be developed and costs.
No obstacles to regulatory approval To develop revenue projections, the candidate
No known side effects or risks will have to estimate the market size and the
Extra points for identifying laser surgery as the optimal price. An illustrative example of market
closest competitor. But ask candidate to focus sizing is given on next slide and an estimate of
on corrective lenses (glasses and contacts) as revenue, including pricing, is given on next
competitors for this case slide.
Focus on US market Make the candidate brainstorm cost drivers.
Assume the discount rate is zero Once the candidate has listed cost drivers,
provide him with the figures listed the following
cost/math slide.
152
Possible Framework
Possible Framework
Profit = Revenue Costs Customers:

Revenue: Age Range
Direct Sales Market share
Partners - hospitals, eye care, pharmacies, eye Adoption Rates
care product manufacturers
Market Size
Existing Customers
Industry Growth
Price:
Cost
Competition
Value
Competition:
Laser Therapy
Contact Lens
Glasses
Costs:
Fixed Cost
Facility and Equipment
Approval and Licensing
Distribution
Marketing
Variable Cost
Materials/Production
Testing
153
Market Sizing
Age Group Population Rate of Sight Problems Rate of Adoption Market Size
0-15 50M 20% 10% 1M
16-30 50M 30% 50% 7.5M
31-40 50M 40% 50% 10M
41-60 50M 50% 50% 12.5M
61-75 50M 60% 40% 12M
75+ 50M 75% 20% 7.5M
~50M
Give candidate bonus points for thoughtful and creative explanations of the assumed rate of sight problems and
assumed rate of adoption within each segment (e.g., adoption among young and old patients will be lower because
parents will be unwilling to test out a new technology on young children whose eyes are still changing and elderly
patients with fewer years to live will realize fewer years of savings from not having to purchase new corrective lenses).
Give candidate bonus points for recognizing that the market will grow over the course of the 20 year patent. If the
candidate raises this point, provide a projected annual growth rate of 3.5%. By the rule of 70, this means that the
market will double before the patent expires, resulting in a true market estimate of 100M consumers.
154
Pricing and Revenue Estimation
Candidate should weigh different pricing strategies: competitive, cost based and value based. For example
use competitive pricing, using corrective lenses as the relevant comparison price point.
Solution
Based on personal experience, general knowledge or interviewer-provided information, the candidate should
assume an annual cost of corrective lenses at ~$200
Revenue over the life of the patent can be calculated as shown below:
Market Size * Annual Value of Magic Eye Drops * Patent Life = Total Revenue
~100M Patients * $200 * 20 years = $400B
The candidate may suggest factors that alter the price point such as convenience (suggesting a higher price
point) and riskiness (suggesting a lower price point). The interviewer should accept reasonable alterations.
The solutions assumption of 20 years of revenue assumes that all customers will purchase as soon as the
product comes on the market. The candidate may reasonably adjust the years of revenue downward to
account for some customers waiting several years before purchasing.
Make sure that the candidate understands that we will disregard discount rates for the purposes of
this case. In other words, assume a discount rate of 0%.
155
Costs
Candidate should brainstorm types of costs. Then interviewer should provide the below details
Solution
Interviewer should provide Candidate should calculate
Cost Total
Operating Costs $100M * 20 yrs 2B
Marketing $150M/year for first 10 years
$50M/year for last 10 years
Production $20 per drop $20 * 2 eyes * 50M 2B

Patients
Distribution $100M per year $100M * 20 yrs 2B
Management/Overhead
33% of operating costs 1/3 * 6B 2B
(i.e. 33% of Marketing +
Production + Distribution)
Total = 8B
156
Conclusion
Recommendation Solicit buyers

Dr. Rossman should put the invention up for sate at Focus on strategic acquirers
~392 B (400 B -8B in costs). Sales could however
continue even after patent expiration Attempt to start a bidding war
Risk Factors Speak at conferences

Another substitute/improved product may be invented
Exclusive patent wont stop pirating in all countries
Star candidates will drive the estimations and justify their reasoning
Excellent candidates will also hit all the side points such as realizing there is a discount rate, a growing
population and rule of 70, free market generics after the patent expires. r
157
1)
Our client is a national shipping company that focuses on ground transportation of commercial freight.
For the past 15 years, it has been using diesel engines to power its fleet of vehicles, but now wants to
explore the possibility of switching to electric powered engines (EV technology) due to rising fuel costs.
The CEO has approached us for guidance and wants to know how to proceed.
Industry: Transportation
This is a case heavy on numbers and deals with adoption of
Difficulty: Medium new technology.
Format: Cost Reduction
Concepts Tested: Quantitative

Analysis,
Clarifying Information on Request Interviewer Guidance to Case
Our client has identified a supplier to provide the The candidate should explain his/her overall
electric vehicle technology since it does not have framework, then identify that the current and future
in-house capabilities. costs of ground transportation will determine
Candidate can assume that the current supplier feasibility of project.
offers the best EV opportunity in terms of price and The candidate should then ask questions to
efficiency. determine the initial investment required for EV
Since it has an extensive fleet of vehicles, our retro-fitting and consider this cost along with the
client wants to retro-fit existing vehicles instead of cost savings of the entire project.
buying new ones. The candidate should now ask questions about
No other ground transportation company has the current costs of transportation and determine
used EV powered engines. If our client proceeds potential cost savings.
with the conversion, it will be the first in the See additional cost information on following page
industry to do so.
EV technology has the potential to double
existing fuel efficiency.
159
Possible Framework
Framework
Diesel engines and EV technology engines costs

Initial costs of retrofitting
Costs of fuel (mileage of each engine type and cost per gallon)
Labor costs (drivers, technicians etc.)
Maintenance costs
Insurance costs
Switching benefits
Cost savings (calculate from components in the cost bucket for both technologies)
Better positioning of the company due to usage of innovative and environmentally friendly technology
Switching hurdles
Efficacy of new technology
Repair and maintenance network (especially on highways and sparsely populated areas)
Downtime of vehicles while retrofitting
Supplier negotiations
Other
160
Further Cost Information to be Provided
Breakdown of Current Costs with the diesel engines
Provide the following cost data as the right questions are asked but do not give them away freely.
# of vehicles: 2000 Cost of fuel per gallon: $3.00
Fuel tank size: 50 gallons Average miles travelled per week: 1000
Average mpg: 10 Average annual maintenance and repair: $500
Insurance: 1K / year Labor: 20K / year
Breakdown of Future Costs when EV technology is adopted
Of the costs listed below, ask the candidate which would change and why. (good answers would be
mileage (as it is a new technology) and maintenance and repair (possibly higher insurance costs as the
technology is untested and thus a higher insurance premium would be charged)
# of vehicles: 2000 Cost of fuel per gallon: $3.00
Fuel tank size: 50 gallons Average miles travelled per week: 1000
Average mpg: 20 Average annual maintenance and repair: $3500
Insurance: 3K / year Labor: 20K / year
161
Math Question 1
Find the current and future annual fuel costs and savings per vehicle.
Math Solution Fuel Savings per vehicle
Current fuel costs

Miles driven per tank = 10 mpg * 50 gallons = 500 miles
Miles traveled per week = 1000 miles
# of times tank is filled per week = 2
Total cost of fuel per week = 2 * 50 gallons * $3.00 per gallon = $300
Average yearly fuel costs (~50 weeks) * $300 = $15K
Future fuel costs (candidate can perform calculations again or receives a bonus for realizing that doubling fuel
efficiency reduces fuel costs by half for the year)
Miles driven per tank = 20 mpg * 50 gallons = 1000 miles
Miles traveled per week = 1000 miles
# of times tank is filled per week = 1
Total cost of fuel per week = 50 gallons * $3.00 per gallon = $150
Average yearly fuel costs (~50 weeks) * $150 = $7.5K
Annual fuel savings per vehicle: $15K $7.5K = $7.5K
162
Math Question 2
Find the total annual costs and savings for the entire fleet.
Math Solution Total Costs and savings for entire fleet
Total current costs Thus, switching to EV saves: $25K $5K (retrofit cost) =
Fuel: $15K $20K over the lifetime of each vehicle.
Annual maintenance: $500 At a fleet level, this would save the company $20K * 2K
Labor: $20K / year vehicles = $40M over the lifetime of the vehicles.
Insurance: $1K / year Candidate can ignore time value of money/discounting, but
Total: $36.5K should receive bonus points for considering it.
Total future costs

Fuel: $7.5K
Annual maintenance: $3.5K
Labor: $20K / year
Insurance: $3K / year
Total: $34K
Switching to EV thus saves $2.5K per year.
The current vehicles have a remaining useful life of 10
years.
163
Conclusion
Recommendations Work with suppliers to test the effectiveness of

Our client should proceed with retrofitting its vehicle fleet to EV since the new technology.
it would save $40M over the remaining useful life. Run a pilot test to determine whether EV
Risks technology works and does not negatively impact
Our client would be the first in the industry to use EV technology, normal transportation operations.
therefore its effectiveness in commercial transportation is untested. Gain input from drivers on efficacy of EV
The vehicles need to commute 1000 miles per week and current EV technology.
technology is limited to short range use. Perform research to determine whether there are
There are limited recharging stations government incentives for EV adoption.
There may be unanticipated costs in using the new technology. Perform research to determine whether EV
adoption grows customer base/revenue.
Excellent case answers
Candidate would identify issues with adoption of new technology. Candidate would recommend conducting pilot tests for
launching the program. This case would also test the candidates capabilities to complete calculations more efficiently.
164
Case 12: Chefs Best Cutlery and Co., McKinsey (Round 1)
Problem Statement
Our client is an international manufacturer of medium and high quality kitchen knives. Chefs Best sells knives in more
than 20 countries, with a focus on Latin America, US & Canada, and global emerging economies.
Chefs Best produces five types of knives: Steak Knives (used at the table), Butcher Knives (used for chopping meat),
Carving Knives (used for carving slices from large pieces of meat), Paring Knives (used for cutting small fruits &
vegetables), and Chefs Knives (large all purpose knives).
Chefs Best has experienced slowing sales growth in the past few years. How can Chefs Best increase revenue growth
for the next 5-10 years?
Industry: CPG This is an interviewer led case consisting of three exercises whereby
the interviewer will let the interviewee know they have certain
Difficulty: Medium information and will hand out the exhibits one-by-one.
Format: Market Growth
Concepts Tested: Market Share

Analysis, Competitive Analysis, Sales
channels, Distribution channels
Chefs Best sells primarily through a direct sales After interviewee prepares and explains
method (individual sales people throughout each framework, interviewer will prompt the interview
region). to move forward with Exhibit 1, which covers
Chefs Best sales are largest in Mexico, the US, growth and profitability. (Guidance on following
and Brazil. pages)
Phase 1: Ask candidate to brainstorm and tell After the interviewee has answered the math
you how they would approach the problem. Prod question in Exhibit 1, the interviewer will lead to
for depth/creativity in framework then move the Exhibit 2 and Exhibit 3.
candidate on to Exhibit 1 after 7-10 minutes. After synthesizing the information in Exhibit 3,
A good framework should include major areas the interviewer will prompt for a
(e.g. product, customer, company, competition) recommendation.
but this is really a test of creativity and ability to
derive a logical framework & brainstorming for
this question with only ambiguous information.
See a possible framework on the next page.
The framework will not be important for the next
steps.
166
Possible Framework
Framework
Market
Market size and growth (Across geographies, product segments, customer segments)
Competition
New players: capturing share due to better distribution channels/marketing efforts
Low-cost competitors: More competitive prices offered in market
Substitutes (e.g., electronic choppers and food processors)
Customer
Segmentation of customers (e.g., chefs knives to be sold more to restaurants and not households)
Price sensitivity of customers
Product
Product mix (Is our product mix aligned with consumer preferences?)
Complimentary products and services (e.g., napkins with steak knives)
Quality of products/brand image (Has quality of our products gone down or brand image suffered?)
Company
Insufficient coverage due to limited distribution channels
Inadequate cross-selling for different kind of knives
Sales force effectiveness
167
Exhibit 1 Guidance: Market Overview Exhibit
Exhibit 1 Exercise
Tell candidate that you have some information to answer their question on growth and profitability. Hand out Exhibit 1.
See if the client has a keen eye for details and if he notices the footnotes and multiple details on the graph
Ask the candidate to tell you what they have learned from this and what this information means.
Look for:
Identification of largest profit centers (Mexico & Brazil)
Identification of poor growth in Mexico
Candidate should be able to confidently reach conclusions about important areas and risk areas.
Ask Math question. This is a test of the candidates ability to do math (with minimal rounding) under pressure. To pass
this question the candidate must correctly calculate the answer with minimal mistakes and quickly recover from any
mistakes. If the candidate does a good job of sharing their calculations, you may offer corrections.
Math Question and Solution

If we have 23% market share in Mexico, and we grow at the same rate as last year in the next year, what will our
market share be in 1 year? (Follow calculations and ask candidate to calculate to 1 decimal place)
Approach is to calculate Chefs Best growth first. This is done using the formula for index to market in the footnote.
Chefs Best Growth = (-70/100) = (x/7 -1) => -.7 = x/7 -1 => -.7+1 = x/7 -1 +1 => .3 = x/7, x = 2.1
Next part is to find the market share
Market share = (23%*1.021) / (100% *1.07) = 23.5/107 = 21.9%
168
Exhibit 2 Guidance: Product Category Overview Exhibit
Exhibit 2 Exercise
Tell candidate that you have some information to answer their questions about what is driving market share changes.
Give them Exhibit 2.
Look for:
Identification of share losses in all categories
Highlight of both channel and share losses in the butcher knives category
Prioritization of areas for focus
When the candidate identifies their focus areas (or ask them to if they do not), move on to Exhibit 3. This exhibit may only
take a few minutes.
169
Exhibit 3 Guidance: Product Category Overview Exhibit
Exhibit 3 Exercise
Tell the candidate that you have some information to answer their questions about the Butcher Knives category. Ask
them to look at Exhibit 3
Look for:
High overall growth rate (correlating to poor market share performance in Exhibit 2)
Acknowledgement of potential of retail distribution vs. direct sales model that currently accounts for majority of sales
Development of recommendations to invest behind the butcher knives category and drive increased distribution, focus
on expanding Recycled Steel distribution, Japanese & General Purpose distribution
Generally drawing upon earlier exhibits to developer broader recommendations
After about 5 minutes with this slide move the candidate and ask them to prepare the recommendation slide to present to
the Chefs Best CEO.
170
Conclusion
Recommendation Open negotiations with additional retail

Focus on growing share in Mexico, US, to retain the core business distributors to identify next steps towards
and avoid losing share and scale economies to competitors gaining additional distribution
Invest in emerging markets but recognize that top 3 markets are
60% of sales and cannot be ignored Conduct a competitive analysis in Mexico and
Invest in Butcher Knives to expand distribution and address any the US to identify specific causes for lower than
weaknesses in marketing market share growth
Begin to shift more of the business away from costlier and lower
growth potential direct sales model to retail sales (diversify away Prepare financial plans for increasing
from declining sales channels) investment plans in Butcher Knives
Risks (Make sure the interviewee mitigates)

Shift in sales method will lead to layoffs that need to be addressed
Trends in the past may differ from future trends
A star caser will provide a recommendation encompassing all three exhibits.

Candidate should think creatively, in addition to identifying the most obvious recommendations. The 3 exhibits provide 3
tests of their ability to interpret data, and include one medium-difficulty math problem.
171
Exhibit 1: Overview of Major Markets
172
Exhibit 2: Overview of Product Categories
173
Exhibit 3: Details of Butcher Knives Category
174
Case 13: Fertilizer Innovation, McKinsey (Round 1)
Problem Statement
Your client is an agricultural products manufacturer. They invented a product called Green Nutrient.
This is going to help the farmers by allowing a variable fertilizer rate. The company is interested in a
pricing strategy and go-to-market options.
Industry: Industrial Goods In this case the candidate should first focus on
understanding the product followed by a quantitative
Difficulty: Medium assessment of the products benefits to various customer
segments
Format: Pricing This should be followed by a qualitative discussion of the
various pricing mechanisms and other components of the
Concepts Tested: EVC, Price go-to-market strategy, such as placement and promotion
Discrimination, Market
Segmentation
Green Nutrient measures the amount of fertilizer Provide information only when asked
required, allowing for a variable fertilizer rate Candidate should clarify if the product is a device or the
Two main benefits: Reduces over-use (reduce costs) fertilizer itself
and increase under-use (increase yield)
Benefit #1: 20% reduction in fertilizer cost per
acre. 1 bag / acre @ $15/ bag.
Benefit #2: Improve yield 2%. Current average
yield: 100 bundles/ acre @$ 2.5/ bundle
No competition
Farm size average about 400 acres
1,000 Large farms: 1,000 acres
3,000 Medium farms: 400 acres
6,000 Small farms: 200 acres
Product lasts 10 years
Product production cost: $10K per unit
Unit works the same regardless of farm size
Discount rate: 0%
176
Possible Framework
Framework
Different pricing methods

Economic value to customer savings from reduced fertilizer use, increased revenue form yield improvement
Cost plus variable cost per unit, margin of similar product
Competitor based (market) price of similar product, margin of similar product
Go-to-market strategy
STP Analysis
Market size and segments by size of farm
Value proposition for each segment
Profitability analysis for each segment to decide targeting
4P Analysis
Placement Agriculture product retailers, direct to farmers, big box retailers, online etc.
Promotion Trade journals, trade shows etc.
Interviewer guidance: candidate should argue the pros and cons of each pricing method and decide that EVC is
the best way to go.
Give bonus points if candidate mentions price discrimination or price skimming.
177
Math Question
Pricing analysis (Interviewee led)
Math Solution
EVC/Acre
$3.00 fertilizer savings per acre (20% * $15)
$5.00 yield increase ($2.5 * 100 * 2%)
Maximum WTP per acre: $8.00 per acre
WTP for each farm type: Small - $16K ($8 * 200), Medium - $32K, Large - $80K
Customer segment analysis:

Large: If we price the product at $80k we sell 1000 profit $70M
Large & Medium: If we price the product at $32k we sell 4000; profit $88M BEST OPTION
All farms: If we price the product at $16k we sell 1000 profit $60M
178
Conclusion
Recommendation Market analysis on actual WTP and

Our client should price the device at $32K/unit and target competitive response
the large and medium farm. This will allow our client to Research on channels and promotion
maximize profits. schemes
Risks (Make sure interviewee mitigates)
New entrant comes to market in next 10 years who may
price more competitively
Customers may not be willing to pay EVC
Skimming: start by pricing at $80k and then $32k and then $16k
Offer a service to the farms at up to $8/acre that will achieve a price discrimination based on acreage
(perfect price discrimination)
179
Case 14: Airport Parking, McKinsey (Round 1)
Problem Statement
Our client is a provider of parking services in major metro areas around the United States. The CEO
recently was driving to DTW airport and noticed a rise in private providers of parking. She thought to
herself, should we enter this space? She has asked you to help her think about this and wants to
brainstorm with you.
Industry: Airlines This case is focused on estimating the market size of airport
parking lots by taking into consideration the flight details
Difficulty: Medium After market sizing there is a brainstorming exercise to
identify possible threats to entry into the market
Format: Market Entry The case ends without looking into the costs so the
interviewee should consider in next steps
Concepts Tested: Market Size,
Threat to Entry
The ultimate goal is based on the Candidate should have mentioned the market
attractiveness of the opportunity and the size within the framework
measure is open to the interviewee to decide Ask the candidate to estimate the market size
Airport opportunity to be analyzed is OHare in for OHare in Chicago
Chicago (although candidate should recognize After candidate realizes that there is an
the ability to scale this) opportunity ask them to brainstorm possible
We are a US based firm with parking lots threats to entrance
located in the cities and not the airports
When interviewee asks you the differences
between what we currently do and what the
opportunity is, have them brainstorm
New service will have attendants, may
need shuttle service, valet service, etc.
181
Possible Framework
Framework
Market Size (we will come back to this)
Existing customer base
Industry growth
Competition
Existing parking structures (local at airport)
Other offsite parking
Public transit (train, taxis, shuttles, etc.)
Existing Capability
What are the differences between running urban parking lots from those at an airport?
Busing/shuttle system, to drive customers to and from the airport
Is customer service a major factor?
Revenue
Number of spaces sold
Add on services (car wash, newspaper sales, etc.)
Pricing (consider probing about unique pricing frequent park programs, packages, etc.)
Costs
Land (rent or own)
Labor (bus drivers, ticket attendants, maintenance and security)
Insurance
Promotion (e.g. coupons)
Fuel
182
Math Question
What is the market size for OHare in Chicago?

Provide the following facts as the right questions are asked but do not give them away freely:
Flights per day
Average passengers/flight
% of fliers that drive to the airport and hence need to park at the airport
Average parking stay
Average price/day for parking
Math Solution
Total Passengers / Year = 2600 X 80 X 360 = ~ 75M

Divide by 2 to avoid double counting departing and arriving passengers = 37.5M
Airport parking market size

Passengers/Year = 20% of 37.5M = 7.5M
Parking Days/Year = 7.5M X 3 = 22.5M
$/Year = 22.5M X $10 = $225M
183
Brainstorm Question
Brainstorm possible threats to the attractiveness of this opportunity
Brainstorm Solution
Decline in airline travel growth caused by

Higher fuel prices
Security concerns (e.g. terrorism)
Substitutes (high speed rail network)
Alternative travel to the airport such

New public transit
Improved ride sharing possibly the result of social networking
Number of competitors and their response to clients entry into the market
184
Conclusion
Recommendation We need to look carefully at the

There is about $225M of parking business at OHare competitive landscape and the
Take advantage of our knowledge gained from urban economics at each airport and evaluate
parking, this large, and probably growing, market could local competition and costs
present a real opportunity for our growth Determine if any new transportation
Appears an opportunity to explore further substitutes are in the pipeline
Risks (Make sure interviewee mitigates) If candidate does say go forward,
Those gained from brainstorming piloting before full scale implementation
Costs could outweigh the benefits would be ideal
Certain markets may be oversaturated
Star candidates will realize that this is an opportunity to explore further before determining if the
company should implement the idea or not
Start candidates will also point out benefits of diversification with their current portfolio offsetting
declines in business travel
Candidates should not forget that we are in many cities and are able to scale beyond this airport
185
Case 15: German Luxury Car Maker, BCG (Round 1)
Problem Statement
The German luxury car maker wants to grow business and is looking into selling cars in Bangladesh.
The GDP growth in Bangladesh is 5% per year. Currently, the only luxury car sold in Bangladesh is
Mercedes-Benz and they have been in the market for the past 10 years.
The CEO wants to find out if the company enters the market, can they break even in three years?
Industry: Automotive Interviewer should ask candidate how to estimate market

size if the candidate does not bring this up on their own
Difficulty: Medium A break-even analysis will follow the market share
calculation
Format: Market Entry
Concepts Tested: Market entry,

Customer Lifetime Value,
Competition, Economy
Mercedes-Benz imported and sold 10,000 cars Ask candidate how to estimate market share
in this market over the past 10 years, and has
their own dealership in Bangladesh Possible answers:
There are 1,000 new buyers each year Understand customer needs through survey
The price Mercedes-Benz charges is $100,000 and estimate how well we could meet those
per car needs and therefore how much market share
Existing owners replace their car every 10 we could gain.
years (the interviewee should calculate how
many new cars are sold to existing owners Find benchmark
1000 per year, and therefore the total market It turned out that our client already
size per year is 2000 new cars) entered Vietnam and other markets
We will have 30% market share (dont give this similar to Bangladesh and on average
info out right away, ask candidate to brainstorm gained 30% market share in each of
how to estimate market share) each year these markets
Assume the discount rate is zero
187
Math Question
Will the company break-even after within 3 years (Interviewee should determine the need to calculate
this after estimating the market share)
Math Solution
Cost Structure
Initial Investment $7M
Variable Cost/Car
Manufacturing $20K
Transportation $24K = 120% (manufacturing cost)
Customs/Taxes $41.8K = 95% (manufacturing + transportation)
SG&A $10.296 = 12% (all the above costs)
The variable cost per car rounds up to $96K/car
Therefore the profit on each car is $4K.
With 30% market share, the clients annual profit will be $2.4M and will break even in 3 years
188
Evaluate potential risks of entering this market
Assumptions might be inaccurate
Bangladesh is not stable politically and economically, therefore our client will bear more risk
There could be other new entrants
Mercedes-Benz could react to our entry by

Reducing price (the best answer might also mention that with the low income level in the
country, customers who can afford luxury cars might not be price sensitive)
Ask candidate what price Mercedes-Benz will reduce their car to.
Answer: $96K/car or less
Improving their services if thats the differentiating factor of our product\
Blocking some local resources
189
Conclusion
Recommendation Market analysis on competitive

The profit on each car is $4K response and target customer
With 30% market share, the clients annual profit will be Determine best way to enter the market
$2.4M and will break even in 3 years (JV, Greenfield, etc.)
Look into ownership structure
Risk Factors (franchise or owned showrooms)
Those gained from brainstorming
Star candidates will inquire on their own about ways to estimate market share
Should recommend a price sensitivity analysis to determine the correct price
190
(Round 1)
Your client is a large retail bank in the U.S. looking to move its current outsourced call center from
India to Africa and is currently evaluating 3 possible countries as a target location
How would you evaluate each of these sites?
Industry: Financial Services, Call center is focused on two types of calls:

Outsourcing Customer Service Calls (Account locked, password
reset, etc.)
Difficulty: Medium Sales Calls (pushing new services to new and
existing clients e.g. credit cards)
Format: Cost Reduction Candidate should recognize case is about cost reduction
Bonus: Candidate should identify inherent upfront risks of
Concepts Tested: Payback period, moving call center to new market and should question
Quant Heavy rationale of the African market given availability of
infrastructure, political stability, etc.
This is the banks first time in Africa and it has Guide the candidate towards evaluating various
no other current operations in the area aspects of cost reduction.
Other competitors have moved their operations
192
Possible Framework
Possible Framework
Candidate should structure the framework to consider the elements for evaluating 3 countries
Financial
All of the following should be focused on isolating the change from current to future
Operating costs (Labor, Rent, Utilities, Transport for employees, Overhead)
Investment Cost (Important that this can be recovered over a reasonable amount of time)
Other Considerations
Firm
Alignment with firm strategy
Experience in Africa
Opportunity Cost
Risk to customers (quality)
Market (Africa)
Availability of Labor (English speaking, Banking knowledge)
Political stability
Availability of Infrastructure (Internet, Electricity, other basic needs)
Competitors have they already done this?
193
What are some typical costs associated with running a call center?
Which of these would be lower in Africa?
Key insight is to identify (push candidate to drive towards Exhibit 1) that labor will be the key savings from the initiative
(all other costs will remain the same)
Share with candidate that existing cost is $60M per year
Candidate should move towards the labor costs to isolate the differences by using the utilization rate and number of
calls made by each call center to calculate number of employees.
Strong candidate will recognize that new call centers will not be effective but interviewer should push candidate in that
direction and share Exhibit 2
Candidate should work through solution to determine that financially, Country B is the best option. A strong candidate
will note this immediately, as the effectiveness of A and B are the same, but the cost is lower by $2/hr
Strong candidate will recognize that Utilization should increase over time (ignore during calculations)
Bonus: Security may be an added cost given political environment in some countries acknowledge but inform
candidate it is included
Bonus: Cost of infrastructure may be higher acknowledge but inform candidate it is included
194
Math Question
If the investment in each country is $36M, what is the payback period for the country the candidate
selected?
Math Solution
This question will test basic finance concepts of payback period

Strong candidate will mention discount rate (candidate can ignore it in calculations)
Are there ways the Call Center can generate revenue?
Candidate should brainstorm possibilities for revenue generation from the call center:
Cafeteria that sells food to employees
Day Care facilities for working parents
Alternate use of facilities as a training center
Advertising revenue from posters, etc. Internet cafe (leverage infrastructure) On-site
bank/ATM
Vending machines
Gym
195
Math Question
Calculate total cost for each country and payback period
Math Solution
Call Demand Current Country A Country B Country C

Employees 400 600 600 1200
Avg Call Duration (Min/Call) 4 4 4 4
Total Working Time (Hours) 8 8 8 8
Utilization 75% 50% 50% 25%
Total Calls 36K 36K 36K 36K
Employee Cost $24K $14.4K $11.52 $17,28
Difference 0 ($9.6K) ($12.48K) ($6.72K)
Cost/Employee $60K $24K $19.2K $14.4K
Employee Cost/Hr $25 $10 $8 $6
Investment Cost $36M
Savings/Year $12.48M
Payback Period 2.88
196
Brainstorm Question
Evaluate the potential risks
Brainstorm Solution
Political Stability in the region

Quality of Service will it remain the same?
No experience in Country B
Long term ability to ensure low hourly rates
197
Conclusion
Recommendation Work with local governments to gain

Client should move its call center to Country B as it is support for investment
the most cost effective based on employee rate and Consider pilot/phased approach to
productivity address service quality
Work towards identifying other revenue
Risk Factors opportunities and cost savings
Those gained from brainstorming initiatives to offset any rise in labor
costs
Implement measures to increase
utilization of Country B employees
Candidate should consider the security as an added cost due to political instability in some countries
Cost of infrastructure may vary by country and will be typically higher in Africa
198
Exhibit 1
Exhibit 1
120%
Typical Cost Structure for Call Center
20% 100%
100%
40%
80%
60%
10%
40%
30%
20%
0%
Rent Utilities Labor Misc. Total
- 110 -
199
Exhibit 2
Call Demand Current Country A Country B Country C
Utilization Rate 75% 50% 50% 25%
Labor Rate $25/Hr. $10/Hr. $8/Hr. $6/Hr.
Avg. Call Duration (Min/Call) 4 4 4 4
Total Working Time (Hours) 8 8 8 8
Current call center has 400 employees
Assume 300 days/year in calculating annual cost of labor
200
Case 17: Little Bud Co - Beer Company, Bain (Final Round)
Problem Statement
Our client, Little Bud Co, is a beer company in a small country in Latin America. Little Bud and its main
competitor, Geineken, are the only players in the market. Geinekens operations are significantly
bigger than Little Bud.
Little Buds CEO asked us to provide him with strategic options for the company and a
recommendation on what he should do.
Industry: Food/Beverages If interviewee asks What are the CEO goals?, turn the
question back: What are the goals of a company? Then
Difficulty: Medium rapidly lead conversation to the goal of maximizing
shareholder's value.
Format: Growth Strategy This case is focused on a discussion on how scale
economies create competitive advantage and will touch on
Concepts Tested: Valuation valuation principles at the end.
methods, Growth Strategies Its important for the candidate to rapidly start comparing
the two companies. For the purpose of this case, other
competitors can be disregarded. The analysis should be
focused on Little Bud and Geineken.
Market is mature (growth is low) At the beginning of the case (after candidate presents
his framework):
10% of sales are made through large retailers and What are the two most relevant information that
90% through bars, restaurants and small retailers you need to start this analysis? Suggested answer:
market size and P&L for Little Bud and main
Focus on market of regular beer; market for small competitor
brewers/specialty beers should be disregarded Once the candidate asks for market size data,
(very small market) present Exhibit 1 and ask for initial insights
Exhibit 2 provides financial comparison
information. What are the margins for each player?
What are the possible reasons for the margin
differences? (suggested answer: Geineken could
have higher margins due to higher prices, lower
costs or both).
When candidate raises the hypothesis of selling
the company, hand over Exhibit 3.
What are the strategies that Little Bud should
consider? Suggested answer: go to niche market,
go to related markets, sell to competitor
202
Possible Framework
Possible Framework
Profit = Revenue Costs Supply Chain

Revenue: Economies of Scale
Market Size Geographies/Related
Distribution Markets
Retailers
Restaurant/Bars
Price
Product Mix
Competition:
Compare Financials
Operations
Pricing
Buy/Sell
Costs:
Fixed Costs:
Plant and Equipment
Distribution
Marketing
Variable Costs:
COGS
Labor
Company:
203
P&L Calculations
On the basis of the Exhibits, candidate should derive the following results for Exhibit 2
Solution
Pricing P&L Comparison

Little Bud Geineken Little Bud % of Rev Geineken % of Rev
Unit Price 1.00 1.10 Revenues 100M 700M
COGS 30M 28M COGS 30M 30% 178M 25.5%
Gross Profit 70% 75% G&A 10M 10% 70M
10%
Sales/Dist. 30M 30% 175M 25%
Marketing 25M 25% 127M 18.1%
EBITDA 5M 5% 150M 21.4%
204
At this point, the candidate should try to compare the two players, in order to identify the possible
sources of competitive advantage.
The table below presents information on Geineken costs as a percentage of sales (so the candidate
can calculate the P&L) and the rational behind the cost differences between Little Bud and Geineken.
Ask the candidate to provide a hypothesis on the rational before explaining Geinekens competitive
advantages
G&A: Assumption here is that Little Bud operates on a model in which there is no more scale
economies in G&A.
Sales & Distribution: Due to market regulations, there is a limit in the truck size. Due to its larger
share, Geineken achieves higher asset utilization.
Marketing: Even with lower percentage, the marketing expenses are much higher in the absolute
terms.
205
Evaluate potential options for Little Bud
Increase market share:

Product innovation: consumer taste is already well defined. There is no room for new products.
Price war: its virtually impossible for Little Bud to enter a price war against Geineken.
Marketing: Geineken spends 5x more in marketing. Trying to compete against this big player on
marketing expenditures is not a good strategy.
Reduce costs: There are no opportunities for further reducing costs.
Focus on niche market: Interviewer should say that niche market for beer in this country is very small.
Move into related markets (e.g.: carbonated soda, juices, etc.): interviewer should say that the company has
already conducted analysis and decided its not a good alternative, due to competition
After comparing both companies, the candidate should understand that scale economies are a major source
of competitive advantage in this market and propose some strategic alternatives to Little Bud. The interviewer
should rapidly move the discussion towards selling the company.
206
Valuation of Little Bud
The interviewer should propose to focus on the valuation of the business

Ask the candidate to propose how to value the company
Solution
The candidate should be able to propose at least the two most common valuation methods: DCF and
multiples (multiples are use for quick assessments and we have EBITDA figures). Once asked for it, the
interviewer should give the multiple to be used: EV/EBITDA = 10x
What is the market value for Little Bud?
Suggested answer: based on the multiple and EBITDA figures, $50M
What is Little Buds value to Geineken?
Suggested answer: considering Geineken margins and Little Bud revenues, Little Buds value to its
competitor is $214M (potentially higher, due to the fact that Geineken would become a monopoly and
be able to increase price and further squeeze suppliers)
How to force Geineken to pay more than $214M?
Suggested answer: Little Bud should open bid to other companies. Geineken has the incentive to
maintain its market dominance and doesnt want a big international player to enter the market,
207
Evaluate potential risks
There might be legal issues by the anti trust agencies that would prevent a transaction
Loyal customers might not perceive it positively
Jobs may be lost due to the realized synergies and this may cause friction
Company cultures could clash/cause problems
208
Conclusion
Recommend the CEO to sell Little Bud Hire an investment bank to structure
The company has no competitive advantage. Geineken the deal
has margins high enough to enter a price war that Evaluate risk of ruling from antitrust
would lead Little Bud to bankruptcy agencies
Also, through an open bid to the market, Little Bud Identify potential cost saving
could achieve a higher valuation opportunities in case Geineken
responds by reducing prices
Star candidates will showcase business skill in identifying the correct valuation model and price
Should justify reasons on selling the company and why not increase price or reduce cost
Realize that a price war may not offer as high a valuation as discussed as Geineken is the only other
potential candidate at the moment and more analysis must be done to determine if there are other
prospective companies that would be interested in entering the market
209
Exhibit 1:
Revenues per Channel
Exhibit 1: Revenues by Channel
Figures in USD millions
- 70 -
210
Exhibit 2: P&L for Little Bud and Geineken
Little Bud ($M) Geineken ($M)

Revenues 100 700
COGS 30
Gross Profit 70
G&A 10
Sales & Distribution 30
Marketing 25
EBITDA 5 150
211
Exhibit 3: Gross Profit Detail
Little Bud Geineken

Unit Price 100 110
COGS 30 28
Gross Profit
212
Case 18: Midwest Hospital, BCG (Round 2)
Problem Statement
Midwest Hospital is a research-based hospital and takes pride in its joint replacement surgery
department. Recently Midwest Hospital did a P&L analysis for all departments and found that the joint
replacement surgery department is providing losses
The CEO has asked us to help out
Industry: Healthcare If the candidate asks tell him/her that there are no financial
targets.
Difficulty: Hard Candidate should figure out during the course of the case
that there are several levers that can increase profitability:
Format: Profitability Increase price
Change patient mix
Concepts Tested: Average Increase total number of surgeries
Variable Cost, Competitive analysis Decrease costs
Provide post surgery services such as physiotherapy
At some point near the start of the case,

Give the Exhibits in the subsequent slides interviewer should take the lead and ask these
only when the candidate asks for the relevant questions after Exhibits has been given
data. Exhibit 1: Would it be advisable to not cater to
Focus of this case is only on joint Medicare patients (assume no backlash)?
replacement surgery Exhibit 2: What is the number of surgeries that
Midwest needs to conduct in a year to
breakeven?
Exhibit 3: Why is Company D able to stay
profitable despite having fewer patients and
unfavourable patient mix?
214
Possible Framework
Possible Framework
Profit = Revenues Costs Customers:

Revenues: Age Group
No. of Surgery Paying with Insurance
Complexity of Surgery
Patient Mix
Price
Other Charges eg: Bed, Medicines
Post Surgery
Visits
Medicines
Competition:
Price
Patient Mix
Better facilities/Equipment
Costs:
Fixed Costs
Hospital
Doctors
Equipment
Insurance
License
Variable Costs
Visiting Doctors/Surgeons
Govt. regulation
215
Math Questions
Exhibit 1: Would it be advisable to not cater to Medicare patients (assume no backlash)?

Exhibit 2: What is the number of surgeries that Midwest needs to conduct in a year to breakeven?
Exhibit 3: Why is Company D able to stay profitable despite having fewer patients and unfavourable
patient mix?
Math Solutions
On a fully cost allocated basis Medicare patients are unprofitable but they are still paying $1K above
the variable cost (marginal cost). This helps cover the fixed costs of the department. So, it is not
recommended to stop conducting surgeries for Medicare patients
Average revenue per patient is 19K. Average variable cost is 14K. Gross margin per patient is 5K.
Fixed costs are 7M, so 1400 surgeries are required for breakeven. Assuming same proportion as in
Exhibit 1 the hospital requires 140 commercial, 420 insurance, and 840 Medicare patients
Comp D might have a lower cost structure or may be able to negotiate better pricing from payers
216
Evaluate potential risks to increasing the number of surgeries
There might not be enough market demand and increasing surgeries would mean stealing market
share from competitors
The competitors might reduce the price and enter a price war
217
Conclusion
Recommendation Analyze scope for cost reduction,

Increase total number of patients to cover starting with competitive benchmarking
Change mix of patients to have a higher proportion of Analyze scope for increase in price,
commercial and insurance customers starting with competitive benchmarking
See if you can negotiate with insurance and gov. Analyze profitability of post care
services provider
Risk Factors Start conversations with
Those gained from brainstorming reimbursement providers
Star candidates quickly identify the competitor D has a similar patient mix but is still profitable
Candidate should provide a reason as to why the client should not eliminate Medicare patients
Candidate should bring up idea that joint replacement department may be a loss leader and provides
synergies with other department offerings
218
Exhibit 1: Patient Mix
Payer Type # Surgeries List Price Invoiced Price

Commercial 100 $40,000 $40,000
(Enterprises)
Insurance 300 $40,000 $20,000
Medicare 600 $40,000 $15,000
(Government)
219
Exhibit 2: Joint Replacement Department P&L
$M
Revenue 19
VC Physician 5
Materials 5
Others 4
FC Facilities 3.5
Others 3.5
Total Costs 21
Profit ($2)
220
Exhibit 3: Competitive Benchmark
Surgeries Commercial HMO Medicare Profitable

Midwest 1000 10% 30% 60% No
Hospital
Comp A 1200 20% 20% 40% Yes
Comp B 800 30% 20% 50% Yes
Comp C 900 10% 20% 70% Yes
Comp D 1000 5% 25% 75% Yes
221
Case 19: Apache Helicopters, Bain (Round 1)
Problem Statement
Our client is a US defense contractor and one of its divisions manufactures Apache helicopters for military
operations. The company is considering setting up a new plant to meet increasing demand in the attack
helicopter space. These helicopters are fully equipped with guns and ammo when delivered to the client.
The client has considered three sites to setup operations: Brazil, France and the US.
How would you go about defining the parameters for decision and where should they setup the plant based
on that analysis?
Industry: Defense Help the candidate only when he/she asks for information
The critical thinking around how a country might alter
Difficulty: Hard purchases based on country of origin is a thought that good
interviewees will bring up.
Format: Market entry The other key aspect is the interviewees ability to capture data
and not get lost in it
Concepts Tested: Quant heavy,
Synthesis
The client has 3 plants in the US; 2 in Kansas NA

and 1 in Michigan
The plants operate at full capacity today
One of the US plants can accommodate an
additional assembly line at the cost of $500M;
the other 2 are landlocked in residential areas
and cannot be expanded
223
Possible Framework
Possible Framework
Candidate should structure the framework to consider the elements for evaluating 3 countries
Export control restrictions between the US and FR & BR; this is important because if the transfer of
technology is disallowed, then the only option is to setup the plant in the United States
Financial analysis of operating up the plant in different locations
Costs (FC, VC)
Revenues that accrue from sales
Where are the profits?
Customers
Where are they based?
Need to be close to the customer for design inputs
Suppliers
Spare Parts
Raw materials
Logistics
Whats it going to take to get the product to the customer?
Manpower (availability of skilled managers, technicians)
224
Math Question
Information to be provided to candidate when requested

Cost Information
Initial plant setup costs are $500M (US), $2B (BR), $3B (FR)
Fixed Costs are $100M annually in all three countries
Variable costs are $15M (US), $20M (BR), $25M (FR)
Market Size and Revenue Information
Defense Budget for next 5 years: $100B (US), $15B (BR), $10B (FR)
% of Defense Budget to be spent on our helicopters over the next 5 years
Sales information
The helicopter sell for $100M a piece, but if they are imported into the US, then the US Govt. require them to
be certified and the certification process costs $15M per chopper.
225
Math Solution
Math Solution
If plant in US
US revenues over 5 years = 20% of 100B = 20B
# of choppers = $20B / $100M = 200 helicopters Total Cost = 500M + 500M + (200) x ($15M) = $4B
PROFIT = $16B
If plant in Brazil
US revenues over 5 years = 20% of 100B = 20B
BR revenues over 5 years = 50% of 15B = 7.5B
# of US-bound choppers = $20B / $100M = 200 helicopters
# of BR-bound choppers = $7.5B / $100M = 75 helicopters
TOTAL COST = 2B + 500M + {(# of US bound units) x ($20M + $15M} + {(# of BR bound units) x
($20M)}
= 2B + 500M + (200) (35M) + (75) (20M) = 2B + 500M + 7B + 1500M
= $11B
PROFIT = $16.5B
Having the plant in Brazil will give us profits higher than the US by $500M
226
Evaluate the potential risks to acquiring helicopters in the selected location
Political stability in the country

Quality of products may be different
Cultural customs are different and may affect business relationships
Export/Import implications
National security may be an issue as helicopters/defence equipment will be manufactured outside of
the US
Know how in other countries
227
Conclusion
Recommendation What is the potential for selling

Based on the financials, Brazil appears to be a more choppers outside of these 3 countries
attractive candidate for setting up the new plant because: to the worldwide market
Our profits over 5 years will be higher by $500M What will labor reaction at our existing
We wont be entirely dependent on one single country plants be if we off-shore production to
(US) for sales Brazil
Are US relations with Brazil likely to be
Risk Factors cordial over the next 5 years for us to
Those gained from brainstorming benefit from
Export control laws and sales to both
nations
Star candidates will realize that calculations relating to France are unnecessary due to the relatively
lower revenues and higher costs
Excellent candidates will also not get lost in the data and will cleanly set up tables to make calculations
228
Case 20: Lawn Co., Bain Original
Problem Statement
Lawn Co. specializes in residential lawn fertilization, weed control, and disease prevention. Lawn Co.
is a large US residential lawn care company with ~20% market share. Lawn Co is highly profitable
with margins driven through an aggressive focus on cost
However, Lawn Co. has seen little top line revenue growth in recent years
Should Lawn Co. focus on organic growth or should it pursue inorganic acquisitions to grow?
Industry: Industrials This question is heavy on exhibits. Show Exhibit 1-6 as the
interviewee asks for information.
Difficulty: Hard When the interviewer asks for industry trends, show exhibits
1-2. Show exhibit 3 when they ask about industry growth.
Format: Growth
Concepts Tested: Customer

lifetime value, profitability
Possible Framework
Framework
Market
Industry growth
Competitive landscape (share of market, number of competitors)
Growth
Acquisition
Gain new customers (New geographies, marketing channels)
Existing customers (Promotions, loyalty programs)
Profit
Costs (acquisition costs of other firms or customers, marketing spend, SG&A spend, labor, PP&E etc.)
Revenue
Customer
Price sensitivity
Customer lifetime value
Cash flows over years from customers
Acquisition costs
230
Exhibit 1-3 Guidance
Question
What are the key insights from these exhibits?
Solution
Market is growing faster than the client

Possible reasons could be better product, better reach, better pricing
Market is very fragmented
Easy to make acquisitions
Will need to make many to result in substantial growth
231
Exhibit 4-5 Guidance
Question
How much does it cost to acquire one new customer organically?

How much does it cost to acquire on new customer inorganically?
Why might inorganic customers cost more to acquire?
Solution
Cost to acquire in both cases is total acquisition costs / number of new customers acquired.
Interviewees should round both the number of customers and total costs to numbers easy to work with
Reasonable answers are $360 for inorganic customers ($18M / 50K) and $100 for organic customers
($100M / 1M)
The best candidate here might discuss purchase premiums or customer attrition during the sales
process (e.g. dont want to be a Lawn Co customer)
232
Exhibit 6 Guidance
Question
How much does each type of customer spend over the course of their tenure?
Given the information you know, which type of customers are better for Lawn Co.?
Solution
Total spend in both cases is average spend per year * total lifetime. Interviewees should round all
numbers to numbers easy to work with
Reasonable answers are $800 for organic customers ($400 * 2 years) and $760 for inorganic customers
($380 * 2 years)
Interviewees should calculate the profit or contribution for each customer type by subtracting the
acquisition costs they calculated from the potential revenue Yields $700 for organic customers and $360
for inorganic customers
The strongest candidates here might first ask if the cost to serve both types of customers is the same to
see if subtracting the two values gives you a good proxy for relative attractiveness
Interviewees should identify organically acquired customers as more attractive
233
Conclusion
Recommendation Understand changing customer

The client should pursue an organic strategy for growth preferences to identify opportunities for
as profit/customer is 2x in organic vs. inorganic growth
($700/customer) Product/Service
High control premiums Geography
Quality of organic customers is better Marketing channel
No M&A integration costs
Risks
Time taken is longer
Stealing market share can be difficult if competitive
response is strong
Identify that customer profitability (lifetime value) is key to understanding which growth option is better.
Strong interviewees should lay out a profit tree-like framework.
Strong interviewees will ask about clients past M&A experience as a factor to consider when evaluating
inorganic growth strategy.
234
Exhibit 1: Growth at 5% p.a. of overall market since 2004
235
Exhibit 2: Growth of 4% p.a. of Lawn Co since 2004
236
Exhibit 3: Lawn Co. leads lawn services market with ~20% share
237
Exhibit 4: Lawn Co. spent $120M to acquire ~1.1M new customers
238
Exhibit 5: Customers acquired inorganically spend less per year than
organic customers
239
Exhibit 6: Customers acquired inorganically stay Lawn Co. customers
for slightly longer
240
Case 21: Maries Caf, McKinsey (Round 1)
Problem Statement
Maries Cafe is a small local coffee shop that serves coffee and latte. Maries has been around for decades and is
known for its high quality drinks and cozy atmosphere. The caf has seen declining profits over the last few quarters,
and the owner has hired you to increase its profits.
Industry: Hospitality This is an interviewer led case. It is a case heavy on quant and has
certain elements of brain-storming.
Difficulty: Hard
Format: Profitability/Operations
Concepts Tested: Profitability,

Operations, Process Optimization
There are two other coffee shops in the nearby area that If the candidate touches on prices or costs, show Exhibit 1
sell coffees and pastries. (There is no further information and ask to calculate avg. profit/customer
on these competitors.) Next give candidate the relevant data points including Exhibit
2 and ask to calculate avg. profit/day
Caf currently serves two items (coffee and latte) in
three different sizes.
242
Possible Framework
Framework
External factors
Market
Market growth
Changing consumer preferences (Product, atmosphere)
Competition
New low cost competitors
New substitutes (restaurants or fast food chains close-by)
Internal factors
Company
Foot traffic in the coffee store (Increase number of customers)
Process Efficiency (average time to cater to each customer)
Capacity of the cafe
Product
Product Diversification (limited product range)
Price sensitivity of customers
Complimentary products and services (wireless services)
Quality of products/brand image (Building on brand)
243
Math Question
How much profit Maries cafe currently makes per customer?

Each customer only purchases one drink per visit.
Strong candidates will point out the larger sizes yield larger profit margins, and suggest new profit increasing strategies
(like promoting sales of larger sizes, introducing a 20 oz size, eliminating 8 oz sizes, etc.). Profit here does not include
the baristas
Average Profitability = $1.5/customer. See calculations below in the table.
244
Math Question
Ask the candidate, what is the average profit that Maries cafe earns per day?
Each customer purchases exactly one beverage.
Two baristas are working at any given time. Baristas are paid $15 per hour.
Hours: 7 am to 10 pm, Monday through Friday. Closed on weekends
The number of customers per hour is listed below. Customers leave if they cannot be served quickly
On average, it takes 2 minutes for a barista to complete an order. Coffee is served fairly quickly while latte takes
significantly longer to make.
Candidate should realize that the caf is losing money in the evening hours. Candidate should suggest adding or
Math Solution
Candidate should realize that the caf is losing money in the evening hours. Candidate should suggest adding or
subtracting baristas based on demand. Assuming 2 baristas per hour, the average profitability would be $607.50. By adding
a third barista in the morning shifts and reducing one at night, the new profit would be $787.50. See the next page for the
complete solution.
245
Math Solution
246
Maries Cafe does not offer wireless access for its customers. Should the cafe add this service?
Positives
More customers
Potentially charge customer for services
Customers may order larger size of drinks
Negatives
Cost of wireless setup, outlets
Sufficient room for customers
Customers stay longer, slowing sales during busy period
Image of caf may change current atmosphere
247
If candidate mentions that competitor sells pastries, while Maries cafe does not. What factors should Maries cafe
consider before purchasing an oven to sell pastries?
Revenue
Doughnut sales, increased synergies with coffee/volume of customers
Costs
Fixed costs purchasing/maintaining oven, setting up display case, storage, advertising.
Variable costs ingredients, hiring/training staff
Capacity
Rooms in cafe for oven and ingredients
Baristas available to accommodate for increase in demand
Brand Image Maries is known for its coffee and atmosphere; adding pastries may change image and drive away loyal
customers, especially if they are low quality.
Competition price and quality compared to competitors.
Alternative Opportunities purchasing doughnuts from somewhere else.
248
Math Question
A new espresso machine, priced at $2000, can greatly decrease the time it takes to make a latte. The average time it
takes to complete an average customers order decreases from 2 minutes to 90 seconds. How long would it take to pay
back the machine?
Math Solution
Daily Profit shown below, calculated with the optimal number of baristas
Machine would be paid back in 14.8 days(2000/(922.5 787.5) from Question 3)
4 Baristas in the 7-10 AM would also yield similar profits with the advantage of turning away few customers.
249
Conclusion

Focus on driving profits through larger size of coffee due to higher Hire 4 baristas for peak time or use the new
profit margins machine.
Hire 4 Baristas during peak time and 2 Baristas during down-time Sell food along with coffee. As baristas are
Offer complimentary add on services such as wireless services fewer currently, think about buying
Diversify product range. Include food food/pastries from third-party
Risks
Offering wireless services might make customers stay for longer
and the capacity of the cafe might not be enough to hold the
customers.
Baristas unable to accommodate demands
A star caser will provide both pros and cons of starting wireless services. He/she would also be able to highlight capacity
and process optimization issues.
250
Exhibit 1: Products, costs and customer split
251
Exhibit 2: Demand of coffee per hour
252
Case 22: PD Gas Buyout, Based on BCG &
McKinsey (Round 2)
Problem Statement
Your client is PD Inc., a large US based grocery supermarket chain. PD Inc. also runs 999 gas stations
next to its retail stores.
Last week, PD Inc. was approached by a large US based oil and gas distributor which offered to buy
out the entire portfolio of 999 gas stations from your PD Inc.
Your PD Inc. immediately reached out to you and has sought your advice on whether to sell these gas
stations or not and what factors to consider when making this decision.
Industry: Retail This is a interviewee driven case in the first half and an interviewer
driven case in the second half. A few answers to general questions:
PD Inc. has not been offered a specific price by the buyer. Interviewee
Difficulty: Hard
can be told to consider price as part of his recommendations though.
The key is to first decide whether the PD Inc. should sell or not.
Format: Divestiture PD Inc. cannot choose to sell a part of the portfolio of gas stations. It will
either sell the entire portfolio of 999 gas stations or nothing at all.
Concepts Tested: Synergy / No information on competition is available.
Revenue Driver Analysis No information on the buyers scale, geographic presence or reason to
buy is available
PD Inc.'s stores are spread across the United States. All stores have a
gas station next to them.
Possible Framework
Possible Framework
Profit = Revenue Costs Customers:

Revenue: Trends in buying gas because of groceries or
Direct Sales Gas station vice versa
Cross-Selling between grocery and gas station
Price:
# of gas stations
Price per gallon
Any trends
Loyalty programs
Competition:
Price war
Consolidation
Costs:
Fixed Cost
Facility and Equipment
Approval and Licensing
Insurance
Utilities
Marketing
Variable Cost
Fuel
Labor
254
Information for Candidates to be Provided Upon

Answers to Additional Questions
Request
A good candidate will identify that initially, PD Inc. needs to value it PD Inc. has been making losses in the
gas station business based on cash-flows and also identify the gas station business since the past 3-4
synergies with the retail stores. Information to be provided upon
years
request (in Millions):
Revenue for each gas station each year: 60 There is no information on the growth of
Cost of fuel sold at gas stations (COGS): 59.98 the fuel and the retail business for PD Inc.
Cost of licensing fees paid to distributor: 3.02 The gas industry as a whole has a similar
Cost of rent, land, and equipment: 2 cost structure
The gas station has no additional
Cost of labor, utilities, insurance, and
revenue streams
miscellaneous 1
Net Profit -6 (carwash/repair/convenience store)
Really good candidates identify that that the Gross Margin is PD Inc. has no other business verticals
extremely low either because its a very low margin business or other than fuel and grocery retail
because PD Inc. is discount prices on purpose to attract customers.
In this case, PD Inc. is using its fuel stations as loss leaders
Candidate should ideally then enquire about retail revenue and
synergies.
255
Solution Frameworks/Guides
Revenue Side
For revenue on the retail (grocery) side, upon request, candidate should be told that fuel station revenue accounts for 20% of overall
revenue. Hence, retail revenue will be $240 million per store.
Upon request, candidate should also be told that we are very proud of the way we manage our suppliers and have fairly high profits
margins relative to the retail (grocery) industry. The margins on the retail (grocery) side are 16.66%. Candidates intuitively good with
numbers will identify this as the fraction 1/6. if they dont, tell the candidate to consider it as 1/6.
The consolidated revenue and cost figures for PD Inc.'s business are given below:
Revenue (in $M) Cost (In $M) Profit (In $M)
Gas Stations 60 66 -6
Retail Stores 240 200 40
Total 300 266 34
After Sale 204 170 34
256
Synergy Side
Potential synergies are additional walk-ins to retail stores, joint loyalty program, supply chain synergies (cheaper fuel for
PD Inc.'s trucks, same trucks used to deliver goods etc.)
Additional information on synergies:
-15% of Inc.'s customers on the retail side come to buy groceries only because they came to the gas station to fill up gas
-40% of PD Inc.'s customers on the retail side come to buy groceries but also end up buying gas at the gas stations later
(i.e., they dont really care if there was no gas station next door) Candidate should realize that the 15% of the customers
who came to buy gas first are the one which account for synergies on the retail side directly attributable to the gas station
Revenue (In $M) Cost (In $M) Profit (In $M)

15% Synergy 36 (15% of 240M) 30 6 (16.66% or
Candidate should now realize that the losses on the fuel business are getting covered by the synergies from the
Impact
fuel business on the retail side. Hence, it is a wash.
257
Positives and Negatives from Sale
Now is when you turn the case into a discussion and ask the candidate to evaluate the positive and negatives for PD Inc.
if it chose to sell the business. It is important to keep questioning the candidates assumptions.
Positives from Sale

Increased cash flow due to cash received from sale
Lesser working capital (reduced by $5.5 B --- Annual cost of $66Bn divided
by 12 months = approx. $5.5 B in working capital)
Increased focus on existing business
Leaner operation with higher margins (refer to next slide for details)
It is important to keep asking candidate for more positives and negatives and question the candidate. Are there really
Negatives
any negatives from thefrom Sale
sale since there seems to be no impact on profits and for a business, profits are the best metric to
gauge Drop in Why
impact?, economies
will the 15%of scale not
customers ascome
PD toInc. no longer
the stores buys
any more? Etc. $30 B worth of
goods. This also results in excess warehouse, transportation, store
capacity hence downsizing costs
These 15% customers will go to competition which will get economies of
scale hence lower prices and this may result in further erosion of our
customers
Stock market may react negatively to drop in revenue
May impact inventory turnover etc. 258
Loss of Revenue from Transaction
Most candidates will assume that PD Inc will lose the 15% of the customers once it sells the business but it is important
for them to identify the exact reason why PD Inc will lose these customers.
Question the candidates assumption by stating that the gas station is still next door so why will the customers stop
coming.
The correct reason is that PD Inc is currently selling the fuel at discounted prices to get customers to come to the fuel
station and then buy groceries but the buyer has no incentive for doing so and is likely to raise prices to market levels and
hence the customers will stop coming to the gas station.
You can further question the candidate by showing him the resulting expected impact on margins after selling the
business. The actual impact will differ as this margin does not include downsizing and other costs. These figures are given
to candidate only to see if he/she can realize that the actual figures may be very different because of the negatives listed in
previous slide. The margins as %age of revenue are given below:
Revenue Cost Profit

Pre-Sale 100% 86.66% 11.33%
Post-Sale 100% 83.33% 16.66%
259
Conclusion
An ideal recommendation is to advise PD Inc to sell the

business but contractually obligate the buyer to three 1. Conduct a market survey to test price
sensitivity of customer
conditions:
2. Discuss the stipulated conditions with buyer.
The buyer will keep all fuel stations open/seek approval The 40% of customers that end up buying fuel
before closing stations can be used as a leverage
The buyer will not open any competing establishment 3. Discuss potential for co-branded loyalty card to
(convenience stores) at the fuel stations further increase customer overlap
The buyer will keep the prices discounted by allowing PD
Inc to subsidize the prices. (the key is to realize that PD Inc
does not have to discount so heavily since fuel is highly
price elastic. Even if the buyer sells fuel at prices 5% below
competition (assuming competition sells to entirely
breakeven, i.e., at $66 bn, buyer will sell it at ~ 63 bn) the
customers will still come. PD Inc. can reimburse ~ $ 3 B to
buyer and hence still end up making a net profit of ~ 3 B on
the retail side along with getting benefits from all the
positives of selling the business.
260
Case 23: Office Vending Services, Bain (Mock Case)
Problem Statement
Office Vending Services Inc. (OVS) is the market leader in office vending machine services. The
business services provided include sales and delivery of product, restocking of machines, and
repair of faulty equipment. Profits are substantially down in the business.
The CEO of Office Vending Services needs Bain to assess the root causes of the profitability
decline.
Industry: Retail This is a great case for a candidate to display structured

thinking. Candidate is expected to start with the problem on a
Difficulty: Hard high level and each exhibit further provides more details to the
problem.
Format: Profitability
Concepts Tested: Profitability

decline, competitive advantage
Possible Framework
Framework
Profit
Revenue
Price
Volume of product
Product mix (unprofitable products)
Costs
Fixed costs (e.g., SG&A, PP&E)
Variable costs (e.g., COGS (costs of products in vending machines from suppliers), labor, delivery, maintenance)
Competition
Competitive prices
Better sales and marketing
Better products
Better delivery and repair services
Customer
Price sensitivity
Market
No. of players and share
Industry growth
Other
262
Office Vending Services Exhibit Key Takeaways
Exhibit 1 - 5 insights
Exhibit 1
OVS revenue decreased over the past 2-years
Rate of decrease is increasing - Down 8% from 96 97; down 13% 97 98.
Interviewee should begin to think about what the drivers of the revenue (e.g., lower volume of sales, lower prices of products)
decrease are and may ask for if a revenue breakout is available.
Exhibit 2
OVS costs decreased over past 2 years
Rate of cost decrease is increasing, but is not keeping pace with the rate of revenue decline - Down 4% from 96 - 97; down 7.5%
97 98
Interviewee should begin to think about where the cost reductions are coming from (e.g., lower costs of raw materials, decrease in
units manufactured) and what the drivers are. Interviewee may ask for a cost breakout for OVS.
Exhibit 3 - Volume of deliveries are dropping over past few years. Brainstorm for reasons (e.g., better product/prices by competitors)
Exhibit 4 - Average price per delivery has remained stable; so revenue per delivery has not dropped.
Exhibit 5
OVS is dominant player in market but has been losing market share 20% over the past 2-years. Interviewee should be able to
estimate the competitors market size(Direct them to the correct revenue numbers in the bullet below as it is not very clear in the
graph) as well as the percentage of the market OVS currently has.
Revenue figures: OVS: $200M (40% of market) ; Vend Int.: $130M (26% of market) ; Candy & Pop: $110M (22% of market) ; $60M
(12% of market).
It is also important for the interviewee to see that Vend has grown the fastest at 40% and explore the possible reasons.
263
Exhibit 6 8 insights
Exhibit 6
The top two attribute of importance for customers (Price and Delivery Reliability) are where OVS scores the lowest. Conversely,
Vend scores the highest in these two categories.
OVS scores very well in Product Variety and Machine Service/Repair, yet these are not nearly as important to customers.
Interviewee should begin to make links between what has allowed Vend to grow (meeting customer needs) while OVS loses
market share.
Exhibit 7 Same as Exhibit 6, just in graphical format; same key information should be obtained.
Exhibit 8
Firstly, interviewee should see that OVSs COGS, SGA and Repair costs are higher (roughly 100%) than the competition. This can
correspond to the higher market share. However, OVSs costs for delivery are in line with their competitors, despite higher market
share which would correlate to the poor customer satisfaction when it comes to delivery.
This may begin to suggest that OVS could reduce costs in COGS (reduce product variety since it isnt as important to customers
and get better prices for larger volumes of fewer product types from suppliers and provide customers better prices in return)
OVS could also reduce repair costs (again, not as important to customers) and reallocate some of this to delivery to increase
customer satisfaction.
SGA may also see a slight reduction as complexity in ordering, labor and other line items as fewer products are ordered and
repairs are reduced.
Also, interviewee can calculate each firms profit margin in order to compare them in a more direct manner: OVS: 200/200 = 0%;
Vend: 117/130 = 10% ; Candy: 98/110 = 11%. This clearly shows that OVSs profit margin is non-existent and that their competitors
are running a more efficient operation.
264
Exhibit 9 10 insights
Exhibit 9
OVSs cost per delivery is 9.5% higher than the competition. Also, the breakout of the overall costs within each delivery differs:
OVSs COGS and SGA per delivery are higher (roughly 70% of total delivery cost versus 50%)
OVSs delivery bucket of the overall cost per delivery is roughly half the cost of the competition again, not meeting customers
need and spending less than other vendors.
Exhibit 10
OVS has been reducing costs across the board, but the largest reduction has come from deliveries which is clearly impacting the
overall business.
The small decreases in the other large buckets, has not significantly impacted overall costs.
265
Conclusion
Recommendations Increase spend on delivery to improve customer

Find the product types with most demand and discontinue the product satisfaction (more research needed)
types with lesser demand More drivers
Look to reduce COGS, SGA and repair costs. A reduction in product Better vehicles
variety could decrease COGS through economies of scale OVS would More efficient delivery routes
purchase higher volumes of fewer products, lower cost/unit Work with suppliers of products in vending
Reduction in variety may also reduce costs of delivery as there machines to discontinue contracts for products with
would be fewer products to carry in vehicles (more deliveries less demand
possible) and may reduce the time/complexity of refilling a machine Train sales force to get new clients and position
Reduce costs spent on repairing (e.g., modify maintenance clauses) OVS as a player with reliable delivery and better
Risks prices
Supplier existing contracts for large number of product types on vending
machines might make decreasing product types difficult
Changing the distribution network for delivery might be a slower change
and initial investment would be high

Candidate would identify how reducing product types could reduce delivery costs and SGA expenses.
266
Exhibit 1: Office Vending Services revenue ($M)
300
250
200
150
250 230
100 200
50
0
1996 1997 1998
267
Exhibit 2: Office Vending Services cost ($M)
230
225
220
215
210
205 225
200 216
195
200
190
185
1996 1997 1998
268
Exhibit 3: Office Vending Services volume sold
269
Exhibit 4: Office Vending Services historical pricing
270
Exhibit 5: Office Vending Services market trend
Percentage change in
market sales
3% (Total)
17%
22%
44%
(20%)
271
Exhibit 6: Customer satisfaction
272
Exhibit 7: Customer satisfaction
273
Exhibit 8: Competitor comparison (1998)
274
Exhibit 9: Office Vending Services cost per delivery (versus competitors)
275
Exhibit 10: Office Vending Services cost structure(historical trend)
Percentage
decrease in costs
(11%)
0%
(14%)
(25%)
(8%)
(7%)
276
Case 24: Acme Packaging, Bain (Sample from Website)
Problem Statement
Gulf Partners, a private equity fund specializing in leveraged buyouts, has

asked Bain to evaluate an investment in Singapore-based Acme
Packaging. A private equity firm is a company that has raised money from
individuals and institutions to invest in companies that may be a riskier
investment but offer the promise of higher returns. Acme Packaging
manufactures and sells intermediate bulk containers (IBCs), which are
metal
Type frame crates stacked within
of Case shipping
Interviewer containers for the transport of
Guidance
goods. Acme Packaging has manufacturing operations in Singapore and
Industry: Private This case is a good case for understanding how
sales offices throughout Asia. 100% of sales are from Asian markets with
Equity/Packaging a B2B business is dependent on the growth of
80% of sales from rubber customers - mostly tire manufacturers from
the customer industries. This is also a case
Japan and Southeast Asia. Acme Packaging has 65% market share within
Difficulty: Hard which requires inferences and assumptions to
the rubber IBC market and has increased share in the Asia IBC market by
get the correct answers.
5% over the past 3 years. Gulf Partners prefers to sell their investments
Format: Investment
within 5 years with a minimum 40% return on their investment. In order to
Gulf Partner wants to know
evaluate whether Acme Packaging can generate high returns, Gulf
Concepts Tested:
Partners would like Bain to assess the growth potential for Acme
Revenue Analysis / Question 1: Can Acme Packaging double its
Packaging.
Business Growth operating income by year 5 (2006)?
Possible Framework
Framework
Company
Revenue (Sales by region and customer) trends for 5 years
Cost trends for 5 years (Valuation will follow from the revenue and cost trends)
Sales force effectiveness
Competitors
Market share by customer segment and geography
Customers
Segmentation (tire manufacturers, rubber footwear, industrial goods of rubber, non-rubber customers etc.)
Growth in the customer industries
Price sensitivity/Selection of products
Potential Buyers
IBC competitors looking to expand in Asia or acquire the rubber customers
Manufacturers looking at vertical integration (e.g., a tire manufacturer wants to manufacture IBCs for shipping)
Private Equity Company
Players in portfolio (e.g., a manufacturer in the portfolio could have needs for shipping containers and would result in synergies after
the acquisition of the company)
Management expertise
Others IBC Industry growth rate
Other
278
Acme Packaging Exhibit Key Takeaways
Exhibit Insights
Exhibit 1
The chemical IBC industry in Asia is larger than the rubber IBC industry and is
increasing at a faster rate. The market is fairly fragmented, and a fragmented
market is easier to penetrate than a market dominated by strong competitors.
Acmes presence in the chemical industry, as well as other companies selling
across industries, indicates that selling across industries is possible.
Exhibit 2 Operating income percentage has been steadily increasing.
Exhibit 3 Any of the companies in the portfolio (e.g., consumer products or
manufacturing) which ships bulk of items would result in synergies for the private
equity company.
Exhibit 4 Potential buyers exist and are especially looking for Acmes presence
in Asia and the rubber market. In order to keep increasing the value of Acme,
opportunities should be pursued in Asia and the rubber industry.
Exhibit 5 Prices have been increasing in IBC industry
Exhibit 6 IBC sales in Asia increased at 15% CAGR and now is $180M in 2006
compared to $90M in 2001.
Exhibit 7 It takes 4 years after setting up the office to generate profits.
Exhibit 8 - Asia is seeing a growth rate of 15% compared to U.S (5%) and 279
Math Question
Can Acme Packaging double its operating income by year 5 (2006)?
Math Solution
1. Step 1: Determine market size in year 5 2006

100% of Acmes sales comes from Asia. As a result, the relevant market
to size is the IBC market in Asia
According to Exhibit 6, the sales of IBC in Asia in 2006 is $180M
2. Step 2: Estimate Acmes market share in 2006
According to Exhibit 2, revenue for Acme is $15M. According to Exhibit
6, total IBC sales in Asia is $90M.
Market share in 2001 was $15M/$180M = 17%
Assumption: Acme will maintain or increase their share.
3. Step 3: Calculate revenue
Based on assumption that share in 2006 will be 17% and using the
2006 IBC Asia sales figure of $180M, revenue of Acme in 2006 = 17% * 280
Brainstorming questions and solution
Brainstorming question
What growth opportunities should Gulf Partners pursue to increase the value of
Acme Packaging?
Brainstorming solution
1. Expand presence in Asia by increasing sales in non-rubber customer

industries
The chemical IBC industry in Asia is larger than the rubber IBC industry and is
increasing at a faster rate. The market is fairly fragmented, and a fragmented
market is easier to penetrate than a market dominated by strong competitors.
Acmes presence in the chemical industry, as well as other companies selling
across industries, indicates that selling across industries is possible.
2. Aggressively increase market share within the rubber IBC market in Asia
Acme currently has a 65% share in the rubber IBC market. Although Acme
could leverage its current position to gain additional market share, the
opportunity is not large. The remaining market share is divided between only
two companies, and the remaining customers may not be as profitable. The
281
Conclusion
Recommendations
Look to reduce COGS and provide better Increase spend on delivery to
prices to customers. A reduction in product improve customer satisfaction
variety could decrease COGS through (more research needed)
economies of scale More drivers
Reduction in variety may also reduce costs Better vehicles
of delivery as there would be fewer products More efficient delivery
to carry in vehicles (more deliveries routes
possible) and may reduce the Define the sales strategy to
time/complexity of refilling a machine cater to chemical customers
Identify shipping needs and potential Find out variations needed in
customers in the PE portfolio metal crates to cater to
Focus on sales to consumers in chemical customers in chemical industry
industry as the industry is growing at a
higher rate.
Candidate Keep
would focusing
identify whoon the
the rubber buyers would be and explore the
potential
industryofas
concept well because
leveraging of thewith
synergies predicted
the existing portfolio. As the case does not
growth
have somein tire
datasales
points, the candidate would brainstorm ways to use the existing
data
Enter the to
to get U.S. marketthe
estimate as operating
it is more income. 282
Exhibit 1: IBC Market in Asia by Industry (Singapore dollars)
283
Exhibit 2: Acme Packaging Income Statement ($M)
1999 2000 2001
Revenue 10.0 12.0 15.0
COGS 5.0 6.0 7.5
Gross Margin 5.0 6.0 7.5
Operating Costs 4.1 4.8 5.7
Operating Income 0.9 1.2 1.8
Net Income 0.8 0.8 1.5
Gross Margin % 50% 50% 50%
Operating Income % 9% 10% 12%
284
Exhibit 3: Gulf Partners Portfolio
Consumer Financial Manufacturing Retail Other

products Services
Lennon Asia Bank Astratech Home Store Instar
Johnston Extronics Go-mart Services
Mellon FX Convers Consumer JNXE
Medco depot
285
Exhibit 4: Potential buyers
A Pack sells IBCs in all geographies and has been growing through acquisition. Acme Packaging would
fit its growth strategy and strengthen A Packs position in Asia
Hoover sells IBCs primarily in Northern Asia due to its limited sales and distribution network. Acme
would provide it with a larger network as well as entry into rubber IBCs.
Grief, the leading IBC company in Europe, is investigation entry into Asia, and they have previously
expressed interest in acquiring.
286
Exhibit 5: Worldwide IBC Pricing Trends
287
Exhibit 6: Size and growth of IBC Sales in Asia (Singapore dollars)
288
Exhibit 7: Profitability/Average financials of a new sales force office
(Singapore dollars)
289
Exhibit 8: Worldwide IBC Market by Geography 2001 (Singapore dollars)
290
Exhibit 9: Annual Tire Sales for Asian Tire Market (Singapore dollars)
291
Exhibit 10: Customer acquisition costs indexed to Acme Packaging
292
Exhibit 11: Customer Purchasing Criteria
293
Case 25: Balke-Collender Corp. (Ross Original)
Problem Statement
Balke-Collender Corp. (NYSE: BCC) is a publicly traded chemical company. Several Chinese companies
have entered the market since 2008, putting enormous pressure on BCCs bottom line. As a result, BCC
stock has stagnated around $48 since 2010. Raider Capital Partners (RCP), an infamous Wall Street
activist investor, has taken a 14% stake in BCC and is threatening to change the board and fire the CEO,
unless he brings up the stock price. The CEO has asked us two questions:
1. How can we achieve 100% total shareholder return (TSR) within 5 years to get RCP off our back?
2. How can we restore the companys long-term competitiveness?
Industry: Chemicals This case has multiple jargons, candidate should try to
Difficulty: Hard understand them all before proceeding to the framework
Format: Investments Note: Do not hand out Exhibit 1 immediately. There is a math
Concepts Tested: ROI, EPS, other question requiring calculation of net income
Finance related concepts
BCCs is currently trading at $48, and has a This case has multiple possible solutions and
P/E ratio of 20. the candidate should try to explore them
BCC has 125M shares outstanding. through the framework. Do not show the Exhibit
1 till the candidate gets to the answer of the
Current demand for ethylene is 210M tons. first question.
There are no opportunities to cut SG&A.
All D&A comes from our Ethylene cracker
Company has the ability to raise debt.
Ethylene is a petrochemical used in a wide
variety of applications. It is made from a
variety of hydrocarbons, but the most
common feedstocks are naptha (derived from
oil production), ethane and propane (both
derived from natural gas)
295
Possible Framework
Framework
How can we achieve 100% TSR in

5 years?
Decrease
Increase Return Capital
Cost of
Share Price to Investors
Capital
Decrease Increase P/E Increase Increase

Increase EPS Sell Divisions
FDSO Multiple leverage Dividends
Increase Decrease
Revenue costs
Decrease VC
Increase
capacity
Decrease FC
P/E Multiple = Price-Earnings Multiple = Share

Price / EPS
EPS = Earnings per share = Net Income /
FDSO
FDSO = Fully-diluted shares outstanding 296
Math Question 1
What is the incremental net income required?

Note: Exhibit 1 has the breakdown of net income. Do not show the exhibit 1 before candidate arrives at
the answer.
Math Solution 1
To calculate the required incremental net income, we start from the share price and PE Ratio to
calculate Net Income.
Share Price 48
(/) P/E 20
= EPS 2.4
(x) FDSO 125M
= Net Income 300M
Req. Improvement 100%
Incremental NI 300M
297
What is the price of Ethylene in the market?
Because industry demand is only 210M tons, then BCC is the marginal producer.
Therefore prices must be set such that the next producer (Delta Chem) makes zero profit and thus has not
incentive to enter the market.
The price is therefore just under $750/ton. Candidate may assume $750/ton.
BCC has a capacity of 20M units, and full utilization (dividing revenue by $750, gives total units of 20M)
Total VC = Unit VC * Units = 550 * 20M = 11B, however COGS = 13B, so there must be $2B in fixed COGS (labor,
overhead, etc).
Because taxes, interest and D&A cannot be changed, candidate must figure out there are four ways to improve
performance:
Expand capacity (hand out exhibit #3)
Decrease VC (hand out exhibit #3). Candidate should notice Naphta plants are more expensive.
Decrease FC (tied to plant layout, goes back to option one)
Decrease SG&A (no scope for this)
298
Math Question 3
What is the value of all three investment options? (Exhibit 4)
Math Solution 3
If capacity increases by 20M tons then Delta becomes the swing producer and price drops to $650 /
tons. Therefore the value of each option is given by:
Feedstock Expansion Both
Plant 10,000 15,000 20,000
Pipeline 15,000 0 15,000 Change Feedstock and
Total Investment 25,000 15,000 35,000 doing both expansion and
feed stock conversion have
the same net income. Since
Units 0 20 20 changing feedstock has
Price 750 650 650 lower investment than doing
VC 350 550 350 both (and hence higher
Contribution 8,000 4,000 12,000 NPV), change feedstock.
FC -4,000 -2,000 -7,000
Gross Income 4,000 2,000 5,000
D&A -2,500 -1,500 -3,500
Tax -600 -200 -600
Net Income 900 300 900
299
Conclusion
Recommendation Determine competitor reaction, e.g.

can they and will they also switch to
Convert current plant to using ethane feedstock for
ethane and how will this affect relative
a $900M improvement in Net Income
cost positions.
Investment will increase EPS 1.5x, and will
Secure appropriate financing to retool
therefore increase share price by 150%
the ethylene cracker.
Risks
Quantify the effects of downtime for
all three options and refine
calculations.
The candidate would look at the ratios and reach the income statement. Candidate would realize that
there are changes in variable costs as the capacity is expanded.
300
Exhibit 1: BCC Income Statement
BCC Income Statement

(In $ Million)
Revenue 15,000.0
COGS (13,000.0)
Gross Income 2,000.0
SG&A (1,000.0)
D&A* (500.0)
Operating Income 500.0
Interest 0.0
EBT 500.0
Tax (200.0)
Net Income 300.0
*BCC depreciates its assets over a 10 year

301
Exhibit 2: Ethylene Cost Curve
1000
900
800
700
Variable Cost ($ / ton)
600
500
BCC Delta
400 Gamma Epsilon Omega
Chem
Chem Chem Chem
300
200
Beta Chem
100
Alpha Chem
0
0 25 50 75 100 125 150 175 200 225 250 275 300
Capacity (in M tons)
Crackers using Crackers using

ethane feedstock naphta feedstock 302
Exhibit 3: Estimated VC Breakdown at BCC Plant
Variable Cost / Ton

600
Freight-Out
500
Power
400
Freight-In
Freight-Out
300
Power
200
Freight-In
Feedstock
100
Feedstock
0
Naphta Ethane
303
Exhibit 4: Investment Options
Feedstock Capacity
Both
Conversion Expansion
Plant Investment $10B $15B $20B
Pipeline Investment $15B - $15B
Incremental Fixed Cost $4B $2B $7B
Change in Capacity - 20M 20M
304
Additional Recommended Cases
For additional practice, RCC Casebook team recommends few other cases. A list of
recommended cases has been uploaded at the following Ross Consulting Club website:
Directory: Ross Consulting Club>>Resources>>Casebooks>> Recommended Cases

Link: (http://cglink.me/d199252)
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What are the different investment options available for BCC?

What are the different investment options available for BCC?

What is the recommended investment option and why?

What is the recommended investment option and why?

ROSS CASEBOOK 2016

Ross Consulting Club

Best of luck in the upcoming recruiting season!

RCC 2016 Casebook Team

Gabriel Iatarola (MBA 2017)

Interview process overview Career path

Interview process overview Career path

S&O interview process overview Career path

Technology interview process overview

Human Capital interview process overview

Interview process overview Career Path

Interview process overview Career Path

First Round (on campus): Senior Associate

About Quick Facts

Interview* process overview Career Path

Interview process overview Career path

Consolidation in industry Ticket sales to economy and Fuel

Leisure travelers (generally price sensitive)

Automakers, Original New car sales Labor

Cars, vans, pickup trucks and SUVs Commercial purchasers

Savings and loan Traditional checking Microfinance

Change in savings behavior

Consumer confidence Urbanization Interest rate

Affordable Care Act Hospital care Dependent on segment

Hospitals Outpatient surgery centers

Regulation for health & medical insurance Aging population

Implementation Feasibility New infrastructure cost IT systems, office

Upstream, midstream, downstream Crude oil Exploration: seismic studies,

Cost per gallon Natural gas Production: refining

OPEC Refining products such as Pipelines

GDP growth lubricants Gas station: oil, labor, insurance,

Access to reserves Political pressures

For the 2014-2015 changes in O&G industry read: http://www.nytimes.com/interactive/2015/business/energy-

Affordable Care Act Insurance payments Research & Development

Medical patients Government insurance programs

Department Stores/Big box retailers Demographic retailers

Changes in disposable income Easy entry invites competition

Customer Residential and Small Business (Price sensitive)

Retail stores - carriers and mass retailers

Rapid development of technology

Commercial and Industrial

Clean energy threatens the future of traditional power generation methods

Other recommended sources include

Understand the Develop Form

Porters Five Forces Analysis

Bargaining Power Internal Bargaining Power

Concept Key Drivers

Bargaining Power of Supplier concentration Threat of forward integration

Bargaining Power of Buyer concentration Ability to backward integrate

Topic Key Drivers

Topic Key Drivers

Topic Key Drivers

Breakeven Breakeven = Fixed Cost (FC) .

Ways to value a Discounted Cash Flow

Marginal Cost Cost of one more unit of output.

Monopoly Entity is the only supplier of a particular good.

LOW GRADE 40%600 = =240M/1200 =200120% $200 PER =240K * 200