Case Interview Frameworks: Ultimate Guide

The case interview is the ultimate challenge for most consulting candidates. Whether you’re
just starting your preparation or you are 30 practice cases in, it’s always helpful to familiarize
yourself with the most popular case interview frameworks. However, the goal is not to
memorize the case study interview frameworks. You must understand each well enough to
know when they apply and how to blend them to create your own frameworks.
It’s always a red flag for an interviewer if a candidate tries to improperly cram a business
situation into a framework. Instead, you need to know how to mix and match across the
framework categories to create your own custom approach to solve the problem at hand. Enjoy
this breakdown of case study interview frameworks – and apply wisely!
Again, always remember that the best candidates create unique frameworks for each of their
cases. When you are structuring your thoughts during a case interview, pick and choose the
relevant parts of these frameworks that you think will help solve your client’s problem. The
best case interview frameworks are the ones that will help you solve your client’s problem.
Use of Case Interview Frameworks
In this and the following articles, we will give an overview of the frameworks we use both for
interviews and on-the-job at MC. We’ll cover what they are and how you can get to know
them well enough to use them. In the subsequent articles, we’ll explore each one in more
detail.
For each framework, we will give you:
 Knowledge of the underlying business concepts
 The questions they are supposed to address
 How to identify when to use them in a case
 How to best deliver them
 How to apply them creatively
Why Case Interview Frameworks Matter
If you’ve heard about different frameworks from different places, why should you care about
these? The frameworks enable you to solve absolutely every case, so make sure you understand
them in depth. The frameworks are useful for real-life consulting projects, not just sterile
academic case-prepping. You could memorize 12 or 15 or 20 frameworks, but you will not
gain expertise in any if you try to use all. The frameworks can be mixed and matched; a combo
may in fact be the only way to solve the case. Remember, these are not comprehensive tools.
If you understand how to properly use the concepts in these cases, you will be able to solve any
case that is put in front of you.
How to Use Case Interview Frameworks (And How Not To)
Before we give you the intro to case frameworks, here are some guidelines for how best to
use them:
Don’t expect to be given a question that only draws from one of the frameworks. It may well
be that you have to borrow from all 4 to break the case down effectively. Listen to the question
carefully so you can know which framework(s) to use. If you don’t know for sure, pick one
(profitability is a classic go-to) and just get started. Be ready for a change of direction! You
may be using one framework after the opening, only to have the interviewer ask you a question
part way through that allows you to change to another one. Do not use the word “framework”
in your interview. The moment you use that word, you’re telling the interviewer that you’re
going to fit the case into a previously memorized set of rules. Strict rigidity is not your friend.
Frameworks are only a starting point. Remember, this is an intro to case frameworks. These
frameworks are really good at helping you come to grips with the concepts being presented.
Once you understand what is being asked, adjust them to the case at hand.
Common Case Interview Frameworks:
The Profitability Framework
Ultimately, a corporation’s goal is to increase profits. Profits may also be important goals for
governments and institutions as well. As a result, profitability remains one of the most common
objectives in consulting case study interviews. Knowing how to analyze the major components
of profitability is imperative for any aspiring consultant. The profitability framework is mainly
broken into two components: revenue and costs. A profitability view requires looking into both
components. Within each of these components, you can structure your framework to analyze
the drivers within (price, quantity, variable costs and fixed costs) or the overall situation (big
picture and potential solutions).
Additionally, there will be times when your case interviewer states that your client is focused
(specifically) on increasing revenue or decreasing costs. You may be tempted to always look
at both revenue and costs, but there are many instances when the case is built around only one
of those categories. Pay close attention when your interviewer gives you a nudge in the prompt
or when answering clarifying questions, and stay laser-focused on what the client needs.
Potential Profitability Framework Categories and Questions:
Revenue
Price
 What is our client pricing its products at?
 How has pricing changed over the past few years?
 What is our pricing strategy?
 How is pricing expected to change over the next few years?
 What are competitors pricing similar products at?
Quantity
 What is the demand of our client’s products?
 How has demand been changing over the past few years?
 How is the client marketing its products? How have our marketing efforts affected
demand?
Big Picture
 What are our client’s revenue streams?
 What percent of total revenue does each stream represent?
 Have those percentages changed lately?
 Have the revenue streams been declining or growing over the past 1, 3, 5, or 10 years?
 How is our client growing relative to the industry?
 What is our market share in terms of sales compared to competitors?
Ways to Increase Revenue
 Increase prices
 Update marketing strategy
 Bundle products
Cost
Variable Costs
 What are the variable costs with regards to variable labor? Has this been changing?
 What are the variable costs with regards to materials? Has this been changing?
 What are the variable costs with regards to distribution? Has this been changing?
Fixed Costs
 What are the fixed costs with regards to salaried labor? Has this been changing?
 What are the fixed costs with regards to rents? Has this been changing?
 What are the fixed costs with regards to utilities? Has this been changing?
Big Picture
 What are the client’s major fixed and variable costs?
 How have costs changed over the past few years?
  How are our client’s relationships with its suppliers?
 Will reducing costs damage any of our revenue streams?
 How do our costs compare against our competitors?
 What does our client’s supply chain look like?
 Is there anything happening within our client’s market or the economy that is
impacting costs?
 Are there any government regulations that impact our client’s costs?
Ways to Decrease Costs
 Analyze areas of the business that aren’t producing results and reduce resources
 Create a more efficient supply chain
 Negotiate with suppliers for lower costs
The Pricing Framework
Another common case study interview framework revolves around pricing strategy. Generally,
prices greatly impact volume and ultimately profits, so this case study objective comes up
frequently. Pricing products and services is a great challenge for companies because prices
greatly influence customer decisions. Consulting firms with rich histories and long track
records can utilize their work with similar previous clients to provide the guidance needed to
get the most out of current clients’ pricing strategies.
Potential Pricing Framework Categories and Questions:

Product Information
 What is the product and how is it different from what is currently on the market?
 How innovative is this product compared to others that exist in the market?
 Is the product patented or have any rights that can protect it from being copied?
 Are there similar products in the market that can act as substitutes?
 Can the product be bundled with any existing products?
 Could the product cannibalize any of the client’s current products?
 What were the R&D costs required to create this product?
 How big is the market for this product?
Competitive Analysis
 How much are competitors charging for similar products?
 How are competitors thinking about their pricing strategies?
 How much does it cost for competitors to create similar products?
 What are substitutions to our client’s product?
Pricing Strategy
 What is our breakeven point?
 How much does it cost to create and deliver the product?
 Has there been any research completed to see how much customers are willing to pay
for the product or similar ones?
 Do customers need to be educated about the product?
 What are the potential costs with bringing this product to market?
 How much will be spent on marketing?
The 3 C’s + Business Situation Framework
The 3C’s and business situation framework overlap in categories, so they will be combined in
this section. Both case interview frameworks are focused on broad business categories that
could be the source of a client’s problem. The 3Cs focus on the Company, Customers, and
Competition. The business situation framework, coined by Victor Cheng, adds Products as an
additional category. This combination of categories makes sense with a case involving a focus
on understanding both the core elements of the client as well as the competitive landscape.
Potential 3 C’s Framework Categories and Questions:
Company
 What defines the company?
 What are the company’s core competencies?
 How long has the company been around?
 What do the company’s financial performance look like over the past few years?
 What is the company’s management team like?
 How strong is our company’s brand?
 What are our client’s competitive advantages? What are our client’s weaknesses?
Customers
 Who is the customer?
 What are the customer demographics?
 How are customers segmented? What kind of growth have each of these segments
seen over the past few years? How are they projected to grow?
 How sensitive are customers to prices?
 What are the distribution channels through which the client reaches its customers?
Competition
 Who are the competitors in the market and what is their market share?
 How quickly is each competitor growing?
 Do our competitors offer products or services that our client does not?
 How is the competition marketing their products?
 How is the competition pricing their products?
Product
 What products does the client offer? What is the client’s product mix?
 How innovative is this product compared to others that exist in the market?
 Is the product patented or have any rights that can protect it from being copied?
 Are there similar products in the market that can act as substitutes?
 Can the product be bundled with any existing products?
 How big is the market for this product?
The 4 P’s
The 4P’s is a common case interview framework used to structure thoughts on marketing
strategy. This framework is often used when a new product is launched or when reviewing
existing products.

Potential 4 P’s Framework Categories and Questions:

Product
 What is the product and how is it different from what else is on the market?
 How innovative is this product compared to others that exist in the market?
  Is the product patented or have any rights that can protect it from being copied?
 Are there similar products in the market that can act as substitutes?
 Will the product cannibalize any of the client’s current products?
Price
 What is our current pricing strategy?
 What is our breakeven point?
 Has there been any research completed to see how much customers are willing to pay
for the product or similar ones?
 Do customers need to be educated about the product?
Promotion
 What marketing strategies have been implemented so far? Which have been
successful, and which have not?
 What are the ways competitors have been marketing their products?
 How much is spent on marketing?
Place
 Which distribution channels are used to distribute the products?
 Which channels best reach our customers?
 Is a salesforce needed to reach our customers?
 What channels have been most successful for our client in the past? How about
competitors?
Porter’s 5 Forces
Porter’s Five Forces is one of the most well known business frameworks in the world. Named
after its founder, Michael Porter, the tool provides a structured way of analyzing an industry
and understanding how companies fit into the overall competitive picture. The Porter’s Five
Forces model focuses on five undeniable factors that shape a market, regardless of the industry
the company is in. Studying these forces can allow consultants to understand how competitive,
attractive, and profitable an industry may be.
Potential Porter’s 5 Forces Framework Categories and Questions:
Threat of New Entrants
 What are the barriers to entry in this industry?
 How do economies of scale work in this industry?
 What are some cost advantages our client has?
 What kind of access does our client have to distribution channels?
 How is our client’s product protected from new entrants?
Competitive Dynamics
 Who are the other competitors in the market and what are their market shares?
 How quickly are the other competitors growing?
 What are our client’s competitive advantages? What are our client’s weaknesses?
 Do competitors compete on price in this market?
Supplier Power
 How many suppliers are there in the market?
 Who are the key suppliers?
 How much bargaining power do suppliers have in the market?
 Is there a lot of differentiation amongst suppliers?
Buyer Power
 Who are the key customers?
 What is the cost for buyers to switch to different competing companies?
 How much bargaining power do customers have?
 Do customers have equal information to the products on the market?
Threat of Substitutes
 Are there any notable substitutes in the market for our client’s products that have
similar prices and qualities?
 What is the cost for switching to other similar products for the customer?
Market Entry Framework
Companies often need to enter new markets to grow their businesses. This is exciting for
businesses because new markets represent new opportunities, but of course, more challenges.
Case study interview frameworks for new markets should first include categories and questions
that are open-ended, since there are a wide range of possibilities. Once you have a better idea
of where the case is going based on the data and information you’re provided, drill into those
categories.
Potential Market Entry Framework Categories and Questions:
Market Situation
 What is the size of the market?
 What is the projected market growth or decline over the next 1, 3, 5, or 10 years?
 At what rate has the market been growing or declining over the past 1, 3, 5, or 10
years?
 Where is the market in its life cycle?
 Who are the customers and how are they segmented?
 Will our client’s products become less useful over time with technological advances?
 Have there been any major changes in the market lately?
 What are the key factors that drive the industry?
Competition
 Who are the main competitors and what are their market shares?
 How do the competitors’ products compare to our client’s?
 How will the competition respond?
 What are our client’s competitive advantages?
Market Entry Considerations
 What are the key risks to consider?
 Are there any barriers to entry?
 Would it be more profitable to enter through an acquisition, a joint venture, or by
creating a business from scratch?
 How will the client exit the new market if things don’t go well?
New Product Framework
Like entering new markets, companies need to develop new products to grow. This problem
is intimidating for clients due to potential high costs and fear of the unknown. Your case
study interview framework should dive deep into the new product before anything else.

Potential New Product Framework Categories and Questions:

New Product and Product Portfolio
 What is the new product and how is it different from what is currently on the market?
 How innovative is this product compared to others that exist in the market?
 Is the product patented or have any rights that can protect it from being copied?
 Are there similar products in the market that can act as substitutes?
 How does the product fit within the client’s current product line?
 Can the product be bundled with any existing products?
 Will the product cannibalize any of the client’s current products?
 Is the client replacing an existing product?
Market Strategy
 Who are our customers and how can we best reach them?
 How will this product expand our customer base and increase sales?
  Is there any data or research supporting that customers want this product?
 Who are the main competitors and how much market share does each firm have?
 How will competitors respond to this new product?
 Are we entering a new market or are we serving the market we currently serve?
Feasibility
 How much funding does this new product require?
 Where will the funding be coming from?
 If debt is required, can the client support debt?
 Does the client have the manufacturing or production capabilities to produce this
product on its own or does it need help from other parties?
 Do we have relationships with the right suppliers that will help us create this product?
 How will this new product impact our client’s profitability?
M&A (Mergers and Acquisitions) Framework
Because they aren’t as common, mergers and acquisitions (M&A) problems often can catch
candidates off guard in case interviews. Though you aren’t recruiting for a finance position,
it’s still important to have a decent understanding of what M&A case interview frameworks
should focus on.
Additionally, a potential merger or acquisition may be a small part of a larger case. For
instance, if the company wants to grow, an option the client could be considering is acquiring
a smaller competitor. In this case, it will be important for you to be able to structure an M&A
framework to systematically discover if this is a good idea for your client.
The first key to nailing an M&A framework question is to understand who the acquirer is. All
different types of firms will want to increase cash flow. But the type of acquirer will determine
how long of an investment they want to make. Look at the types of acquirers that would
influence the term of the investment:
Types of M&A Acquirers:
Financial Acquirer- e.g., PE Firm
100% ownership. Typically, the goal would be to sell the company for a quick return. They’ll
usually do this by rapidly decreasing costs and increase top-line revenues and profits with
cash injections. They’re not looking for a long-term investment.
Financial Investor- e.g., Hedge Fund
Non-majority owner. The goal is that their involvement would positively affect the share
value. Once that takes place, they would look to sell the shares for a profit.
Corporate Acquirer- e.g., Multinational Firm
100% ownership. Typically, these types of acquirers will operate the purchased company for
a period of time. Additionally, they may have bought the company for a specific purpose and
integrate it into their overall company operations.
How To Use The M&A Framework:
With M&A frameworks, remember this key concept. Most of the time, interviews are going
to be focused on due diligence strategy. They are looking to understand if one company
should buy or invest in another. Look at these 4 key areas:
The Target Market
What is the market like? Is it saturated with competitors? Is the market growing, stagnant, or
contracting- and why? Obviously, investors are looking for attractive markets. Typically, one
of the biggest questions to answer is whether the overall market is big enough for your client’s
end goals.
The Target Company
This is all about helping your client understand not only if the market is right, but if the
company they are looking at buying is the best target company within that market. So you must
understand everything about the target company. What are their finances like? Do they have
strong profits? What do their forecasts look like? What is their competitive positioning? Are
they a top performer, generating strong revenues, or do they have room for improvement with
the potential to gain significant market share?
Post-Acquisition Strategy
This is really about understanding your clients goals and objectives for the investment, plus
how much your client could make over time. The market and the company valuations help you
understand how much your client should pay for the target company. So the post-acquisition
strategy ties the first two sections together, and also send the message that things will change
post purchase..
Is there potential to decrease costs in the target company and increase revenues? Is the culture
of the target company conducive to integrating into the purchasing company? Questions like
these need to be answered to better understand if the target company would be a beneficial
acquisition.
Risks and Benefits
Risks and benefits can be a bit more difficult to determine. For example, does the target
company have intangible assets, like Intellectual Property? How do you determine the value of
their IP? Or what about their management team? Does their management have the capacity to
take the company where it needs to go? Are there government restrictions or litigation that
they’re experiencing? These types of questions have to be quantified in order for your client to
understand if the target company is actually a good value and something that they want to take
on.
One bright spot in M&A frameworks is that the recommendations are typically one of the
easiest to create because it’s ultimately a yes or no question. And if your answer is yes, your
recommendation should be strong and direct!
Potential M&A Framework Categories and Questions:
Target Market
 If our client doesn’t purchase the company, will a competitor?
 How healthy is the industry the target is in?
 How will competitors respond to this acquisition?
Target Company
 How are the potential acquisition target’s financials?
 Has the target’s revenue and profitability been increasing or decreasing over the past
few years?
 How unique are the target’s products?
 What is the target’s customer base like?
Post-Acquisition Strategy
 How much is our client going to be paying? What are the terms of the deal?
 Is the price fair?
 How will the deal be financed?
 Will our client be taking on debt, and if so, can the client support it?
 Why is our client thinking about purchasing the asset or company?
 Are there any potential alternatives?
 How does the company fit within our client’s broader product portfolio and strategy?
 Are there a lot of potential revenue and cost synergies from the deal?
Risks & Benefits
 How are the potential acquisition target’s financials?
 Has the target’s revenue and profitability been increasing or decreasing over the past
few years?
 How special are the target’s products?
 What is the target’s customer base like?
 How healthy is the industry the target is in?
 How will competitors respond to this acquisition?
 Are there any legal or regulatory reasons this acquisition may not work?
 Are there any financial reasons like tax advantages that make this a good transaction?
Conclusion
Case interview frameworks are great to quickly assess specific business situations. Yet, they
each have their limitations and proper uses. Remember, the best case interview frameworks are
the ones that allow a good result for you client. Don’t try to force the framework for the sake
of using a framework. Be creative and mix and match the frameworks based on the problem
given to show your business acumen. We trust that our list of case interview frameworks were
beneficial to that end. If you want to know how to apply the case frameworks, blend them, and
build your own, reach out for expert coaching. Good luck in your interview!
MECE Framework: Case Interview Example
The Mutually Exclusive, Collectively Exhaustive (MECE) framework is an important problem
structuring principle that consultants use to organize data efficiently and comprehensively. In
this article, we will cover how to utilize MECE in a case interview setting.
MECE in a Market Entry Case Interview
Imagine you’re sitting across from a consultant during an interview. She says to you, “Our
client is ABC Tech Corp and they currently have three major revenue segments – smartphones,
computers, and tablets. They are now looking into entering the TV market but want your help
understanding which geographical market to enter into first. What would you recommend?”
If you’ve never heard of consulting case interviews, this kind of question might seem
overwhelming, or even almost impossible to solve at first. However, let’s see how we can use
the Mutually Exclusive Collectively Exhaustive (MECE) framework to find the relevant data
needed to answer this question.
Building a MECE Framework: Case Interview Example
ABC Tech Corp is looking for advice on the right geographical market to enter with new TV
products. Therefore, the following MECE categories could be one way to tackle the case:
 North America
 South America
 Asia
 Europe
 Rest of World

Breaking down the market into these geographies is clearly MECE – mutually exclusive given
that there are no overlaps between any category, and collectively exhaustive because they
covers all possible areas of the world.
For each of these geographical categories, you might ask for data for the following
areas:
 Size of TV market
 Historical and future growth of TV market
 Profit margins
 Key competitors
 Customer segmentation
 Products
From here on out, you would continue to assess the data provided by your interviewer for each
sub-category (size of market, historical and future growth, profit margins, key competitors,
customer segmentation, and products). This MECE framework ensures that the data you
uncover for each sub-category can be compared across the different geographies, helping you
ultimately pinpoint the right geography for ABC Tech Corp to enter.
Example of a non-MECE Framework
Using the same case example with ABC Tech Corp, let’s imagine you want to study the overall
market and so you structure your framework into the following categories:
 Competition – Who are the major TV players and how intense is the competition?
 Market size – How big is the TV market and at what rate is it growing?
 Customers – Who are the major TV consumers and what kind of products do they buy
today?
 Profitability – What do profit margins look like in the TV market and have they been
increasing or decreasing?
 Regulation – Are there any barriers to entry in the TV market?
As you may presume from looking at this framework, there is a way to ask questions that limit
the overlap between each category. However, you could ask questions that cause the categories
to not be Mutually Exclusive, such as asking what the profitability profile is like for each major
competitor in the market or the market size of each customer segment.
Additionally, you could fall into a trap of not being Collectively Exhaustive with this
framework. For instance, you may ask for data about the size of the market and find that the
largest opportunities based on the current players are in North America, Asia, and Europe. If
you only end up focusing on those markets, you may fail to study the other geographical
markets. It may be that ABC Tech Corp happens to have a strong presence in Australia and
entering that market turns out to be the most profitable.
MECE case framework example is great for understanding how to be MECE during your case
interview. You must be able to structure your case in a way that demonstrates to your
interviewer than you understand how to be mutual exclusive and collectively exhaustive. If
not, it’s unlikely that you’ll get a consulting offer. Listen to Jenny Rae as she expertly lays out
an example of how to structure your case interview in a MECE manner.
This is something that we are often asked about in our case interview workshops, that we do
on campuses at over sixty campuses around the world. And this is something that I think would
be really helpful for you to understand. So I’ve prepared a prompt as well as an example, of
two kinds of structures. A MECE case framework example that is MECE, and one that is not.
Just to give you an idea of what it means to have a MECE case structure.
The Case Prompt
The prompt is just a basic business story. It’s a colleague of mine and a friend who now has
launched, what is the fastest growing organic deodorant in the country. It’s made largely from
charcoal, and you have to apply it in a stick format. And they just recently were adopted at
Target as one of their entrant points for retail. So this is a really exciting growth plan for them.
Right now they’re in the United States and they’re doing about twenty million dollars in
revenue. But they’re interested in international expansion. And our goal is to help them think
about that as the consulting firm. So you’re gonna get this in a case, just as an aside, this is a
pretty clear market entry case. And the structure that we’re gonna use just to demonstrate what
a MECE structure looks like, it’s not the only structure that you could use to solve it.
The Business Case Summary
But the fundamentals are:
this is a pretty small business, at twenty million in revenue, they have a consumer product, it’s
a new product in a niche segment, and they’re interested in not market expansion in their
current market, but actually overseas market expansion which is a market entry framework.
We’re going use for this one the market study framework from source. And that has five
standard pieces to it that you can use or not use as you’re thinking about it.
5 Key Areas
So the first one, a non MECE framework, I’m just gonna talk through five of the key areas.
 The first one is the market.
 The second are competitors.
 The third are customers.
 The fourth is the company and its’ capabilities.
 And the fifth is the product.
In this case when we think about those five areas, there are some that could naturally overlap.
And I’m going to demonstrate how you can make the mistake of letting them overlap.
Mistake Of Overlap
In market, for example, you could look at data that includes the fragmentation of the market.
That’s a pretty clear overlap with a competitor segment. You could also look at the market
share breakdown, inside the market. That’s also an overlap of the competitors segment. And
you could look at market growth rates, which is not an overlap. When you go to the competitor
segment, you could talk about how market share has changed over time. That’s a different data
point but it’s still overlaps with what you talked about inside the market.
Relative Market Share
In addition, you could talk about relative market share. And even though we talked about
fragmentation before, relative market share is going to use similar data. So again, that’s one
key area where you could have some overlap. In addition for customers if you said the overall
growth rate of customers using the product, that could be a little bit similar to what you looked
at inside the market category. And we could keep going, but it’s not necessary to demonstrate
that this is an issue.
Competitors
Especially in these first three categories, when you’re thinking about market, and you’re talking
about competitors, they’re thinking about customers. Fundamentally when you sum up all the
customers in a market, then they add up to the market in total. And when you fundamentally
sum up all the competitors that are selling in the market, not their total revenues, but the revenue
in this segment, then you get the market. So these could be some naturally overlapping buckets.
And you’re not going to be able to be MECE or mutually exclusive and collectively exhaustive
by using them.
MECE Case Framework Example
So in contrast, if you wanted to solve this problem using a structure that was more MECE, you
want to make sure that you don’t have any overlap in data. And the key way to do that is to
think about the market as a whole, and then to think about just the competitor breakdown, and
the customer breakdown.
What To Identify
So just to exemplify that, we want to identify the growth rate of markets outside of the US, that
are top-ten markets. We want to identify the size in revenues of markets outside the US. And
we want to identify regulatory concerns about entering new products in markets outside of the
US. We want to be very specific that we were thinking only about the macro market, and not
about customers, or about competitors in those markets.
Dominance Of Competitors
Secondarily we want to think about the dominance in the competitors bucket of certain areas.
We want to think about market share by market, of key international global players. It’s likely
by the way that this kind of product would be ripe for acquisition by a large multinational
company, like Procter & Gamble. So we want to identify what their market share was in key
markets. If one of their key market share areas was Germany, we might want to enter Germany
first. And we want to be really specific that were thinking about the competitor bucket in terms
of the future plan for the business.
Fragmentation
We also might want to identify fragmentation of cross current markets. We might want to
identify the growth rate of competitor products. We might want to identify three key features
of competitor products, such as their price, their brand positioning, and their marketing
strategy.
Customer Segments
When we go over to customers, we want to make sure that we aren’t thinking about the market
as a whole, but we’re thinking about customer segments. Who are the three major customer
segments that are buying these products. What are the age demographics of the customer
segments. We really want to make sure that we identify what customer segments are being
used, inside those areas. And you don’t want to roll it back up to the market.
Concluding Thoughts on being MECE in the Case Interview
Ensuring that your structures are Mutually Exclusive Collectively Exhaustive (MECE) will
help you become a stronger case interviewee. However, keep in mind that your frameworks
don’t always need to be 100% MECE for you to crack a case. Given that case interviews are
so short, it may not be possible or even necessary to be fully MECE. If there are some overlaps
between your categories that cause you to not be totally Mutually Exclusive, or if you focus on
the crux of a case’s problem but don’t cover all potential bases, you can still pass the case
interview.
Therefore, our rule of thumb is to be as MECE as possible, but if you must choose, focus on
being Mutually Exclusive. More importantly, be sure you are properly addressing the business
problem within the case via a focused and relevant framework.
So as you’re going through your interview process, make sure in a situation like this or any
others that you come across, that you’re being MECE. That you’re not overlapping any of your
categories. You don’t have to worry as much in cases about being the “C”, the collectively
exhaustive, it’s not as important. But being mutually exclusive is key to efficiency in solving
case interviews.
MARKET STUDY: CASE INTERVIEW FRAMEWORKS
To continue on case interview frameworks, we bring you our personal favorite – and the most
versatile – the Market Study case interview framework.
Market Study Framework
The Market Study framework basically takes the Profitability framework and flips it on its
head. Whereas the Profitability framework is an internal focus and seeks intimate knowledge
of the client’s revenue and costs, the market study framework has an external focus.
The market study framework includes five categories: market, competitors, customer,
company, and product/service.
We start with the market study framework when it is important to understand these various
external elements of the market and industry landscape in addition to some internal elements
about the client. The categories of ‘market’ and ‘competitors’ include fully external questions.
The ‘customers’ category includes a mix of internal and external questions, while ‘company’
and ‘product/service’ are purely an internal view of the client.
We can still get to all key profitability elements utilizing the market study framework.
‘Market’, ‘competitors’, and ‘customer’ categories can help you calculate a company’s revenue
(if not provided to you directly in your line of questioning about the company). Inquiry in the
‘company’ category can also address fixed costs, while the product/service category can
address variable costs.
Almost every case that can be solved with a Market Study framework can be solved with a
Profitability framework and vice versa. Decide which framework to use by asking whether
your core focus should be on the internal profit drivers of the client (profitability framework)
or on the broader landscape and players around the client (market study framework).
Market Study Questions
There are three key categories of case objectives that should utilize the market study
framework. Within these categories are a wide variety of possible case objectives, some of
which are provided below:
Market Entry – Should the client enter this new market or not? Would it be profitable for the
client to enter this new market?
Market Growth – How can the client increase their revenues? Should the client increase their
prices?
Market Share – Why is the client’s market share decreasing? How can the client become the
#1 leader in their market?
How to use the Market Study Framework
There are many important questions you can ask while utilizing the market study framework.
As with any framework, you need to customize these basic questions below to the exact case
prompt scenario you are given in your case interview.
Overall Market
 What is the overall size of the market? (Globally, regionally, by country)
 Is the market growing? What have been the recent growth trends?
 Are some segments of this market growing disproportionately?
 Is there any seasonality or cycles that are relevant in this market?
Competitors
 Who are the main competitors to our client? Does that differ across geographies?
 What is the size and market share of each of the key competitors?
 What are the products offered by each competitor? What key features do they offer?
What is their brand identity?
Customers
 Who are our current customers? How has the client defined customer segments? What
do we know about each of these customer segments?
 Is our market share per customer segment growing or declining in any areas?
 How are we currently engaging with our customers?
 Do we know our customers’ needs? Are we meeting and addressing those needs?
Company
 Where do we operate? Where are the client’s locations?
 What is the client’s revenue currently? Has this been growing or declining?
 What capabilities exist within the client organization?
 What are the key fixed costs of the business? Have these been changing?
  What is the company’s culture like? Is it a high performing culture with a properly
incentivized workforce?
Products/Service
 What is the product mix of our client? What are the features and price points per
product/service?
 What is our marketing messaging across the product mix?
 Is the client currently working on any new product/services to add to their product
mix?
Asking questions in these five areas will help you fully build out your market study framework.
You may also decide to utilize less than five categories. Make sure you have at least three
questions in each category you include. With this framework, it is possible to combine
categories rather easily (e.g., market and competitors).
Even if you decide not to use the Market Study framework in a case, knowing the difference
between an internal framework (profitability) and an external framework (market study) will
help you stand out as a candidate.
Finally, remember that you can and should include questions around profitability and financial
impact, even when you lead with this framework. But utilizing market study (over the
profitability framework) gives you more space to dive into an external view of the broader
market landscape and players within it.
McKinsey Frameworks
The McKinsey frameworks have been used for decades to help organizations break down
problems and make informed decisions about their future. In fact, the frameworks McKinsey
helps its clients utilize have made the firm synonymous with “best of the best”. It’s the most
prestigious consulting firm in the world for a reason.
Maybe your organization or client has a change management, profitability, or competitive
advantage issue. If so, there’s a McKinsey framework that you can use to at least begin to tackle
the problem.
GE McKinsey Matrix Framework
The GE McKinsey matrix framework was developed in the 1970s. It is still often used by
companies to make investment decisions to optimize future profit. The GE McKinsey matrix
framework is relatively simple because it is based on only two factors. One, “the attractiveness
of the relevant industry”, and two, the “unit’s competitive strength within that industry”.
McKinsey 7s Framework
It is management’s job to take the entirety of the business into account when thinking about
either introducing a change or optimizing profitability. However, it can be difficult to
understand how disparate parts of a company influence each other. The McKinsey 7s
framework is a seminal concept in measuring organizational effectiveness. It shows how to
assess the different parts of an organization and the role they play in influencing organizational
change. The focus here is not on evaluating structure, but the role of coordination in change.
The McKinsey 7s framework examines seven components of an organization, all held together
by shared values.
The Business System Framework
The Business System framework is an iconic approach to product development and strategy.
Its specific eye is to achieve and maintain competitive advantage. So why is it a “system”?
Each step of the process should tie back into the company/product’s value proposition. Keep a
clear-eyed focus on the value proposition as you go through the iterative process.
Business strategy involves an integrated set of actions designed to help companies gain
sustainable advantage over competitors. The business system is a framework that allows a
company to formulate the set of actions most likely to achieve this advantage. First introduced
in a McKinsey staff paper in 1980,1 the business system was later presented to the public by
McKinsey’s Fred Gluck,2 who stressed its usefulness in forming strategy. In 1985, Harvard’s
Michael Porter introduced a similar framework—the value chain—and cited the business
system concept in the book Competitive Advantage.3
The business system charts all the steps involved in creating and delivering a company’s
product. At each link in the chain, from product development to sales and service, managers
have a choice of how to conduct business. From a strategic point of view, the most important
assessment is how the choices made at each step reinforce the company’s overall value
proposition and, hence, its competitive advantage. The word system in business system
emphasizes the importance of aligning conduct at every step with the value proposition.

To develop improvements to any one link, managers can ask a series of open-ended questions
about current practices and alternate possibilities: How does the company perform at this stage?
Is there a better way? How do competitors behave? Who achieves lower costs—the company
or its competitors? By varying the questions, examining scenarios, and evaluating all in light
of the company’s total strategy, a company can discover new strategic moves to make within
an existing business—for example, whether to expand or diversify. When used to evaluate
acquisitions, the framework forces managers to look for synergies between the target’s own
activities and the company’s current business system.
A surprisingly simple concept, the business system continues to be a serviceable tool. Deeper
examination of current conditions and potential changes at each stage can reveal the forces
likely to shape a business over time—and the competitive capabilities required to meet them.
Industry Cost Curve Framework
Knowing how to price products for optimal profit is crucial. The industry cost curve framework
is one valuable tool to help companies choose the best price point for their product. The
industry cost curve framework takes price elasticity – as well as other factors – into account to
help companies price their products effectively.
In this interactive presentation—one in a series of multimedia frameworks—McKinsey
director Rob Latoff offers insight into the industry cost curve, a business school classic for
understanding pricing. By bringing discipline and a practical set of definitions to bear, this
framework can be applied to real-world, competitive markets.
Under many conditions, the level of demand for a product and the cost of the next available
supplier’s capacity determine the market price. In theory, the industry cost curve allows
companies to predict the impact that capacity, shifts in demand, and input costs have on market
prices. In practice, however, a multitude of questions can muddy the waters. Do competitors
have access to a number of markets? Will reinvesting profits in a product shift the market’s
economics? Does the product’s real or perceived value differ among user segments? Faced
with such complexities, before the 1980s many businesses relied on a gut-level approach to
pricing.
A narrated interactive on a business school classic for understanding pricing.

Early in that decade, McKinsey consultants started looking for ways to unravel the complexity.
They defined the important variables involved in this curve and the methods for applying it to
real-world, competitive markets. Linear programming helped to unscramble a number of
options for products, users, and locations, yielding a series of simpler market situations for
which the curve can be plotted. By weighing the trade-offs, a company can ground its strategy
on the market’s predicted price and profit sensitivities, as well as its competitors’ actions.
The industry cost curve brings microeconomic rigor to pricing analyses, while still requiring
some finesse in teasing out the most powerful insights. Ideally suited to commodity products,
it is also applicable where real quantifiable differences in value exist—for example, the length
of time for ocean transit. The cost curve’s enduring power is evident in its use in addressing
climate change. By plotting the costs of various levers for abating carbon emissions,
organizations can identify the most economically viable options.
SPC Framework
The SPC framework suggests that business performance is dependent on structure and conduct.
And, that this impact flows both ways (i.e. structure doesn’t just affect performance, but
performance affects structure as well). More specifically, industry structure affects producer
conduct, and vice versa. The SPC framework is an illuminating way to examine the
interdependent relationship between producers and industry.
he Structure Conduct Performance (SCP) model dates back to the pioneering work of the
Harvard economist Edward Mason, in the 1930s, and of his doctoral student Joseph Bain, in
the 1950s. Originally used by the US government in crafting antitrust policy, the model gained
popularity among corporate strategists when Michael Porter (Competitive Strategy, 1980) used
it as an analytic tool for businesses striving to compete within a market. The model's original
form depicts the influence of an industry's structure (for example, the growth of demand and
barriers to entry) on the conduct of producers (pricing, for example) and the performance of
both the industry and the producers.
An extension that added a dynamic element to a static framework. The dynamic version
suggests that the relationships among structure, conduct, and performance are not
unidirectional; they flow in the opposite direction, too. This approach allows companies to
consider the influence of their own conduct on an industry's structure and, ultimately, on their
own performance. Many companies use the revised model to "play through" various scenarios
that might affect them, to gain an understanding of what's happening in their industries, and to
develop their strategies. The seemingly timeless dynamic SCP framework is useful across
regions and industries.
The SCP Framework
A dynamic model that explores the relationships among an industry's structure, conduct, and
performance—and the effects of external shocks on all three
Strategic Control Map Framework
Wall Street nerds rejoice! We’re finally talking about a framework that takes market
capitalization into account – not usually a focus of consultants. Specifically, the Strategic
Control Map framework plots a company’s market cap against its market-to-book value (what
it delivers to shareholders). You may be asking – what’s the point? This framework is a useful
tool to help organizations identify unique opportunities and threats. AKA, it shows how to
become the acquirer instead of being an acquisition target.
he strategic control map uses market capitalization dynamics to help companies identify their
biggest opportunities and threats, as well as to boost their odds of hunting for acquisition targets
rather than being hunted themselves. Developed in 1996 by McKinsey’s Vijay D’Silva, Bob
Fallon, and Asheet Mehta, the framework tracks the relationship between the two dimensions
of market capitalization by plotting a company’s size (measured by book value) against its
performance for shareholders (measured by market-to-book ratio).
The strategic control map
Companies mapped in this way fall into four groups, each with its own challenges and
corresponding strategic imperatives. The large, high-performing companies in the upper-right
quadrant are the least likely to be acquisition targets. Their challenge is to maintain a strong
position by pursuing fresh opportunities without watering down returns. Companies in the
lower-left quadrant, the most vulnerable to takeover, must improve the performance of their
existing businesses or reinvest in others and divest losers. Companies in the upper-left quadrant
often possess proprietary knowledge or skills that enable them to earn high returns from
intangibles. They can largely maintain strategic control unless their performance drops, making
them vulnerable. Finally, if large companies in the lower-right quadrant don’t improve their
performance, they could become inviting cost-consolidation targets for even-larger, better-
performing industry leaders.
The strategic control map
Market capitalization dynamics help companies identify acquisition opportunities and threats.

The enduring power of the framework lies in its ability to visualize how changes in market
capitalization affect the market for strategic control. You can see at a glance which companies
in a given industry are likely to be acquirers and which are likely to be acquired. When
companies map their or their competitors’ performance trajectories, they can get a sense of the
combination of size and performance that will enable them to remain competitive and
independent.
The Three Horizons of Growth Framework
Mature companies from Amazon to Apple face a common problem – how to continue
innovating while focusing on the core business. That’s where the Three Horizons of Growth
framework comes in. It’s a helpful structure to assist organizations in assessing potential
growth areas while not neglecting what they’re already focused on.
As companies mature, they often face declining growth as innovation gives way to inertia. In
order to achieve consistent levels of growth throughout their corporate lifetimes, companies
must attend to existing businesses while still considering areas they can grow in the future. The
three horizons framework—featured in The Alchemy of Growth,1 —provides a structure for
companies to assess potential opportunities for growth without neglecting performance in the
present.
Horizon one represents those core businesses most readily identified with the company name
and those that provide the greatest profits and cash flow. Here the focus is on improving
performance to maximize the remaining value. Horizon two encompasses emerging
opportunities, including rising entrepreneurial ventures likely to generate substantial profits in
the future but that could require considerable investment. Horizon three contains ideas for
profitable growth down the road—for instance, small ventures such as research projects, pilot
programs, or minority stakes in new businesses.
Time, as noted on the x-axis, should not be interpreted as a prompt for when to pay attention—
now, later, or much later. Companies must manage businesses along all three horizons
concurrently. Rather, it suggests the cycle by which businesses and ventures move, over time,
from horizon two to horizon one, or from horizon three to horizon two. The y-axis represents
the growth in value that companies may achieve by attending to all three horizons
simultaneously.
The three horizons framework offers a way to concurrently manage both current and future
opportunities for growth.

The framework continues to be useful, especially in uncertain times. The immediacy of

concerns around horizon-one businesses can easily overwhelm other efforts important to the
future of a company. C-suite leaders can use the three horizons model as a blueprint for
balancing attention to and investments in both current performance and opportunities for
growth.

Portfolio of Initiatives Framework

We live in a fluid, uncertain world. In this new world, diversification is the best way to ensure
long-term success. There are two factors to consider when plotting your organization’s future:
familiarity and time. If you can deploy distinctive knowledge relative to your competitors, you
garner the potential of familiarity, which increases your risk appetite. Simultaneously, the
Portfolio of Initiatives framework requires that you spend time gaining distinctive knowledge
in multiple other areas. Some will prove unfruitful, but others will prove prescient medium-
and long-term bets. As the old adage goes, there is safety in numbers. Classic approaches to
business strategy assume a foreseeable future based on reasonable assumptions about
developments in markets, technologies, or regulation. In an increasingly uncertain world, this
approach falls short. The portfolio-of-initiatives framework, developed in the early 2000s by
McKinsey director Lowell Bryan, draws on ideas such as the three horizons of growth and
Hugh Courtney’s levels of uncertainty1 and offers a way to develop strategy in a more fluid,
less predictable environment. In the article “Just-in-time strategy for a turbulent world,” Bryan
compares such a portfolio to a convoy of ships in wartime: their numbers and diversity improve
the likelihood of survival for any one of them.
The framework takes into consideration two aspects of initiatives: familiarity and time.
Initiatives that allow a company to deploy a larger amount of distinctive knowledge than its
competitors have give it the advantage of familiarity and the possibility of reaping superior
rewards for a given level of risk. Such initiatives warrant the largest commitment of resources.
Next come initiatives that require a company to acquire certain kinds of knowledge. In
developing initiatives over time, a company must have enough of them not only to ensure large
current returns but also to place bets that could help it grow in the medium and long terms.
In this interactive presentation—one in a series of multimedia frameworks—McKinsey
director Lowell Bryan talks about the origins of the portfolio-of-initiatives framework.
Developed to address the need for strategy in a more fluid, less predictable environment, this
approach treats strategies as actions that require continual monitoring and evaluation.

To apply the portfolio-of-initiatives approach, companies must take three steps: undertake a
disciplined search for a number of initiatives that provide high rewards for the risks taken;
monitor the resulting portfolio rigorously, reinvesting in successes and terminating failures;
and take a flexible, evolutionary approach that allows for midcourse corrections. The resulting
strategy, like a conscious form of natural selection, identifies the strongest initiatives and sheds
the rest. The increasing uncertainty of today’s business environment and the importance of
balancing risks with rewards make the portfolio-of-initiatives framework more relevant than
ever.

Consumer Decision Journey

Every consumer goes through a decision-making process when purchasing a product – this is
called the consumer decision journey. However, this process has changed considerably in this
new digital age. As consumer attention spans shorten and information is around every corner,
marketers covet the “touch points” with consumers, where they are most malleable. Hit on
these touch points, and you’ve built brand loyalty.
f marketing has one goal, it’s to reach consumers at the moments that most influence their
decisions. That’s why consumer electronics companies make sure not only that customers see
their televisions in stores but also that those televisions display vivid high-definition pictures.
It’s why Amazon.com, a decade ago, began offering targeted product recommendations to
consumers already logged in and ready to buy. And it explains P&G’s decision, long ago, to
produce radio and then TV programs to reach the audiences most likely to buy its products—
hence, the term “soap opera.”
Marketing has always sought those moments, or touch points, when consumers are open to
influence. For years, touch points have been understood through the metaphor of a “funnel”—
consumers start with a number of potential brands in mind (the wide end of the funnel),
marketing is then directed at them as they methodically reduce that number and move through
the funnel, and at the end they emerge with the one brand they chose to purchase (Exhibit 1).
But today, the funnel concept fails to capture all the touch points and key buying factors
resulting from the explosion of product choices and digital channels, coupled with the
emergence of an increasingly discerning, well-informed consumer. A more sophisticated
approach is required to help marketers navigate this environment, which is less linear and more
complicated than the funnel suggests. We call this approach the consumer decision
journey. Our thinking is applicable to any geographic market that has different kinds of media,
Internet access, and wide product choice, including big cities in emerging markets such as
China and India.
We developed this approach by examining the purchase decisions of almost 20,000 consumers
across five industries and three continents. Our research showed that the proliferation of media
and products requires marketers to find new ways to get their brands included in the initial-
consideration set that consumers develop as they begin their decision journey. We also found
that because of the shift away from one-way communication—from marketers to consumers—
toward a two-way conversation, marketers need a more systematic way to satisfy customer
demands and manage word-of-mouth. In addition, the research identified two different types
of customer loyalty, challenging companies to reinvigorate their loyalty programs and the way
they manage the customer experience.
Finally, the research reinforced our belief in the importance not only of aligning all elements
of marketing—strategy, spending, channel management, and message—with the journey that
consumers undertake when they make purchasing decisions but also of integrating those
elements across the organization. When marketers understand this journey and direct their
spending and messaging to the moments of maximum influence, they stand a much greater
chance of reaching consumers in the right place at the right time with the right message.
How consumers make decisions
Every day, people form impressions of brands from touch points such as advertisements, news
reports, conversations with family and friends, and product experiences. Unless consumers are
actively shopping, much of that exposure appears wasted. But what happens when something
triggers the impulse to buy? Those accumulated impressions then become crucial because they
shape the initial-consideration set: the small number of brands consumers regard at the outset
as potential purchasing options.
The funnel analogy suggests that consumers systematically narrow the initial-consideration set
as they weigh options, make decisions, and buy products. Then, the postsale phase becomes a
trial period determining consumer loyalty to brands and the likelihood of buying their products
again. Marketers have been taught to “push” marketing toward consumers at each stage of the
funnel process to influence their behavior. But our qualitative and quantitative research in the
automobile, skin care, insurance, consumer electronics, and mobile-telecom industries shows
that something quite different now occurs.
Actually, the decision-making process is a more circular journey, with four primary phases
representing potential battlegrounds where marketers can win or lose: initial consideration;
active evaluation, or the process of researching potential purchases; closure, when consumers
buy brands; and postpurchase, when consumers experience them (Exhibit 2). The funnel
metaphor does help a good deal—for example, by providing a way to understand the strength
of a brand compared with its competitors at different stages, highlighting the bottlenecks that
stall adoption, and making it possible to focus on different aspects of the marketing challenge.
Nonetheless, we found that in three areas profound changes in the way consumers make buying
decisions called for a new approach.
Brand consideration
Imagine that a consumer has decided to buy a car. As with most kinds of products, the consumer
will immediately be able to name an initial-consideration set of brands to purchase. In our
qualitative research, consumers told us that the fragmenting of media and the proliferation of
products have actually made them reduce the number of brands they consider at the outset.
Faced with a plethora of choices and communications, consumers tend to fall back on the
limited set of brands that have made it through the wilderness of messages. Brand awareness
matters: brands in the initial-consideration set can be up to three times more likely to be
purchased eventually than brands that aren’t in it.
Not all is lost for brands excluded from this first stage, however. Contrary to the funnel
metaphor, the number of brands under consideration during the active-evaluation phase may
now actually expand rather than narrow as consumers seek information and shop a category.
Brands may “interrupt” the decision-making process by entering into consideration and even
force the exit of rivals. The number of brands added in later stages differs by industry: our
research showed that people actively evaluating personal computers added an average of 1
brand to their initial-consideration set of 1.7, while automobile shoppers added 2.2 to their
initial set of 3.8 (Exhibit 3). This change in behavior creates opportunities for marketers by
adding touch points when brands can make an impact. Brands already under consideration can
no longer take that status for granted.
Empowered consumers
The second profound change is that outreach of consumers to marketers has become
dramatically more important than marketers’ outreach to consumers. Marketing used to be
driven by companies; “pushed” on consumers through traditional advertising, direct marketing,
sponsorships, and other channels. At each point in the funnel, as consumers whittled down their
brand options, marketers would attempt to sway their decisions. This imprecise approach often
failed to reach the right consumers at the right time.
In today’s decision journey, consumer-driven marketing is increasingly important as customers
seize control of the process and actively “pull” information helpful to them. Our research found
that two-thirds of the touch points during the active-evaluation phase involve consumer-driven
marketing activities, such as Internet reviews and word-of-mouth recommendations from
friends and family, as well as in-store interactions and recollections of past experiences. A third
of the touch points involve company-driven marketing (Exhibit 4). Traditional marketing
remains important, but the change in the way consumers make decisions means that marketers
must move aggressively beyond purely push-style communication and learn to influence
consumer-driven touch points, such as word-of-mouth and Internet information sites.
The experience of US automobile manufacturers shows why marketers must master these new
touch points. Companies like Chrysler and GM have long focused on using strong sales
incentives and in-dealer programs to win during the active-evaluation and moment-of-purchase
phases. These companies have been fighting the wrong battle: the real challenges for them are
the initial-consideration and postpurchase phases, which Asian brands such as Toyota Motor
and Honda dominate with their brand strength and product quality. Positive experiences with
Asian vehicles have made purchasers loyal to them, and that in turn generates positive word-
of-mouth that increases the likelihood of their making it into the initial-consideration set. Not
even constant sales incentives by US manufacturers can overcome this virtuous cycle.
Two types of loyalty
When consumers reach a decision at the moment of purchase, the marketer’s work has just
begun: the postpurchase experience shapes their opinion for every subsequent decision in the
category, so the journey is an ongoing cycle. More than 60 percent of consumers of facial skin
care products, for example, go online to conduct further research after the purchase—a touch
point unimaginable when the funnel was conceived.
Although the need to provide an after-sales experience that inspires loyalty and therefore repeat
purchases isn’t new, not all loyalty is equal in today’s increasingly competitive, complex world.
Of consumers who profess loyalty to a brand, some are active loyalists, who not only stick with
it but also recommend it. Others are passive loyalists who, whether from laziness or confusion
caused by the dizzying array of choices, stay with a brand without being committed to it.
Despite their claims of allegiance, passive consumers are open to messages from competitors
who give them a reason to switch.
Take the automotive-insurance industry, in which most companies have a large base of
seemingly loyal customers who renew every year. Our research found as much as a sixfold
difference in the ratio of active to passive loyalists among major brands, so companies have
opportunities to interrupt the loyalty loop. The US insurers GEICO and Progressive are doing
just that, snaring the passively loyal customers of other companies by making comparison
shopping and switching easy. They are giving consumers reasons to leave, not excuses to stay.
All marketers should make expanding the base of active loyalists a priority, and to do so they
must focus their spending on the new touch points. That will require entirely new marketing
efforts, not just investments in Internet sites and efforts to drive word-of-mouth or a renewed
commitment to customer satisfaction.
Aligning marketing with the consumer decision journey
Developing a deep knowledge of how consumers make decisions is the first step. For most
marketers, the difficult part is focusing strategies and spending on the most influential touch
points. In some cases, the marketing effort’s direction must change, perhaps from focusing
brand advertising on the initial-consideration phase to developing Internet properties that help
consumers gain a better understanding of the brand when they actively evaluate it. Other
marketers may need to retool their loyalty programs by focusing on active rather than passive
loyalists or to spend money on in-store activities or word-of-mouth programs. The
increasing complexity of the consumer decision journey will force virtually all companies to
adopt new ways of measuring consumer attitudes, brand performance, and the effectiveness of
marketing expenditures across the whole process.
Without such a realignment of spending, marketers face two risks. First, they could waste
money: at a time when revenue growth is critical and funding tight, advertising and other
investments will be less effective because consumers aren’t getting the right information at the
right time. Second, marketers could seem out of touch—for instance, by trying to push products
on customers rather than providing them with the information, support, and experience they
want to reach decisions themselves.
Four kinds of activities can help marketers address the new realities of the consumer decision
journey.
Prioritize objectives and spending
In the past, most marketers consciously chose to focus on either end of the marketing funnel—
building awareness or generating loyalty among current customers. Our research reveals a need
to be much more specific about the touch points used to influence consumers as they move
through initial consideration to active evaluation to closure. By looking just at the traditional
marketing funnel’s front or back end, companies could miss exciting opportunities not only to
focus investments on the most important points of the decision journey but also to target the
right customers.
In the skin care industry, for example, we found that some brands are much stronger in the
initial-consideration phase than in active evaluation or closure. For them, our research suggests
a need to shift focus from overall brand positioning—already powerful enough to ensure that
they get considered—to efforts that make consumers act or to investments in packaging and
in-store activities targeted at the moment of purchase.
Tailor messaging
For some companies, new messaging is required to win in whatever part of the consumer
journey offers the greatest revenue opportunity. A general message cutting across all stages
may have to be replaced by one addressing weaknesses at a specific point, such as initial
consideration or active evaluation.
Take the automotive industry. A number of brands in it could grow if consumers took them
into consideration. Hyundai, the South Korean car manufacturer, tackled precisely this problem
by adopting a marketing campaign built around protecting consumers financially by allowing
them to return their vehicles if they lose their jobs. This provocative message, tied to something
very real for Americans, became a major factor in helping Hyundai break into the initial-
consideration set of many new consumers. In a poor automotive market, the company’s market
share is growing.
Invest in consumer-driven marketing
To look beyond funnel-inspired push marketing, companies must invest in vehicles that let
marketers interact with consumers as they learn about brands. The epicenter of consumer-
driven marketing is the Internet, crucial during the active-evaluation phase as consumers seek
information, reviews, and recommendations. Strong performance at this point in the decision
journey requires a mind-set shift from buying media to developing properties that attract
consumers: digital assets such as Web sites about products, programs to foster word-of-mouth,
and systems that customize advertising by viewing the context and the consumer. Many
organizations face the difficult and, at times, risky venture of shifting money to fundamentally
new properties, much as P&G invested to gain radio exposure in the 1930s and television
exposure in the 1950s.
Broadband connectivity, for example, lets marketers provide rich applications to consumers
learning about products. Simple, dynamic tools that help consumers decide which products
make sense for them are now essential elements of an online arsenal. American Express’s card
finder and Ford’s car configurator, for example, rapidly and visually sort options with each
click, making life easier for consumers at every stage of the decision journey. Marketers can
influence online word-of-mouth by using tools that spot online conversations about brands,
analyze what’s being said, and allow marketers to post their own comments.
Finally, content-management systems and online targeting engines let marketers create
hundreds of variations on an advertisement, taking into account the context where it appears,
the past behavior of viewers, and a real-time inventory of what an organization needs to
promote. For instance, many airlines manage and relentlessly optimize thousands of
combinations of offers, prices, creative content, and formats to ensure that potential travelers
see the most relevant opportunities. Digital marketing has long promised this kind of targeting.
Now we finally have the tools to make it more accurate and to manage it cost effectively.
Win the in-store battle
Our research found that one consequence of the new world of marketing complexity is that
more consumers hold off their final purchase decision until they’re in a store. Merchandising
and packaging have therefore become very important selling factors, a point that’s not widely
understood. Consumers want to look at a product in action and are highly influenced by the
visual dimension: up to 40 percent of them change their minds because of something they see,
learn, or do at this point—say, packaging, placement, or interactions with salespeople.
In skin care, for example, some brands that are fairly unlikely to be in a consumer’s initial-
consideration set nonetheless win at the point of purchase with attractive packages and on-shelf
messaging. Such elements have now become essential selling tools because consumers of these
products are still in play when they enter a store. That’s also true in some consumer electronics
segments, which explains those impressive rows of high-definition TVs in stores.
Sometimes it takes a combination of approaches—great packaging, a favorable shelf position,
forceful fixtures, informative signage—to attract consumers who enter a store with a strong
attachment to their initial-consideration set. Our research shows that in-store touch points
provide a significant opportunity for other brands.
Integrating all customer-facing activities
In many companies, different parts of the organization undertake specific customer-facing
activities—including informational Web sites, PR, and loyalty programs. Funding is opaque.
A number of executives are responsible for each element, and they don’t coordinate their work
or even communicate. These activities must be integrated and given appropriate leadership.
The necessary changes are profound. A comprehensive view of all customer-facing activities
is as important for business unit heads as for CEOs and chief marketing officers. But the full
scope of the consumer decision journey goes beyond the traditional role of CMOs, who in
many companies focus on brand building, advertisements, and perhaps market research. These
responsibilities aren’t going away. What’s now required of CMOs is a broader role that realigns
marketing with the current realities of consumer decision making, intensifies efforts to shape
the public profiles of companies, and builds new marketing capabilities.
Consider the range of skills needed to manage the customer experience in the automotive-
insurance industry, in which some companies have many passive loyalists who can be pried
away by rivals. Increasing the percentage of active loyalists requires not only integrating
customer-facing activities into the marketing organization but also more subtle forms of
organizational cooperation. These include identifying active loyalists through customer
research, as well as understanding what drives that loyalty and how to harness it with word-of-
mouth programs. Companies need an integrated, organization-wide “voice of the customer,”
with skills from advertising to public relations, product development, market research, and data
management. It’s hard but necessary to unify these activities, and the CMO is the natural
candidate to do so.
Marketers have long been aware of profound changes in the way consumers research and buy
products. Yet a failure to change the focus of marketing to match that evolution has undermined
the core goal of reaching customers at the moments that most influence their purchases. The
shift in consumer decision making means that marketers need to adjust their spending and to
view the change not as a loss of power over consumers but as an opportunity to be in the right
place at the right time, giving them the information and support they need to make the right
decisions.
INFLUENCE MODEL
Every organization goes through large changes in the course of its lifetime. These massive
changes need to be managed as effectively as possible. The Influence Model is one of the best
frameworks we’ve found to guide business leaders through the challenges of change
management. Influence Model – McKinsey’s Change Management Model
Influence Model, McKinsey’s change management model, is one in a long list of potential
frameworks one can draw upon during a case interview. Of course, it’s also relevant if you are
a young professional experiencing large-scale change at your employer. Or, if you are a
seasoned professional tasked with designing or leading a corporate transformation. The
influence model is a change management framework you can use to navigate the shifts in
people, processes, and focus when an organization must begin to operate much differently than
it has in the past.
Let’s discuss the model in a bit more detail from an academic or theoretical perspective. Then
we’ll apply the model to an actual business situation. Finally, we will discuss why the model
is useful and should be well understood.
Influence Model Overview
It might be helpful to start by defining “organizational change”. There is an infinite range of
examples where an organization experiencing substantial change requires leaders and
employees to behave in new ways.
Imagine what happens when a company has decided to sell one or more business units and put
all of its focus on a smaller number of remaining business units. Or, imagine a company has
decided to acquire its major competitor. Finally, consider a brand that used to invest its entire
marketing budget in traditional news, radio, and TV advertisements, manufacture its products
in the U.S., and sell through brick and mortar retail outlets. But now, that brand has decided to
build a digital marketing strategy and begin manufacturing overseas. In all these scenarios, the
organization is going through change and must find ways to manage it as effectively as
possible.
The building blocks of this change management model from McKinsey include:
 Fostering understanding and conviction
 Reinforcing changes through formal mechanisms
 Developing talent and skills
 Role modeling
The idea is that these four types of actions, which reinforce one another, will change employee
mindsets and positively influence behavior when consistently taken together. These are the
building blocks of the Influence Model. That is one reason it is also called an Influence Model
for Change.
Building Blocks Of The Influence Model
Fostering Understanding and Conviction
McKinsey’s research shows that people have a very difficult time performing any given task
or behaving in a particular way. This is also true when the task is simple and easy, since this is
when they do not understand “why” they are supposed to be acting differently. Furthermore,
business leaders tend to dramatically overestimate their communication. The extent to which
“the why” behind a new way of doing things is clear to the rest of the organization. What is
obvious to them is not obvious to others.
The key then is to consistently communicate the rationale behind the new way of doing things.
Develop a clear narrative for the change effort. Constantly ask questions and seek feedback to
understand the extent to which people seem to be “buying into” the process.
Reinforcing Changes Through Formal Mechanism
Leaders often don’t realize that, although they are undertaking a serious change effort, their
incentive systems are still rewarding the “old way” of doing things. For example, imagine a
company making a dramatic shift towards selling “services” instead of products. Yet, they still
give its sales personnel revenue targets that don’t differentiate between products and services.
If you want people to change their behavior, don’t reward A but hope for B.
Developing Talent and Skills
If an organization wants its people to behave in a different way, it must recognize that its
employees may need to build dramatically new skills. McKinsey quotes research that shows
humans of all ages have a surprising capacity to learn new things and build new skills. But if a
business is trying to penetrate an entirely new market, it must recognize the importance of first
building the confidence and skills of its commercial team. It must take the time to train, teach,
and develop its commercial talent.
Role Modeling
Have you ever noticed that you might start using a new expression after your best friend adopts
it? Or that you start signing emails a certain way to mimic your new boss? Unconsciously,
people often copy others without realizing it. But they may also consciously align their actions
with those of others to learn, improve, or just fit in. The insight here is that for change to be
successful, it’s critical for leaders to be acting and communicating in ways that are aligned with
the desired change. People will mimic them, whether they realize it or not.
Influence Model Example
Imagine you are sitting in a case interview and the interviewer asks you a very open-ended
question. She says: “What can Amazon do to maximize the value of Whole Foods after the
acquisition?” Now you could approach this open-ended question by getting into questions of
price point, product mix, cost reduction, new delivery model options, etc. But you could also
apply the McKinsey influence model.
You would want to note that this is really a change management question, and that’s how you
are going to address it. If the organizational change isn’t managed effectively, execution will
suffer, and financial performance will surely not meet expectations.
First, you could highlight the importance of ensuring everyone at Whole Foods and Amazon
understand the “why” that was used to justify the acquisition. This will help them get
comfortable with the new behaviors that will be required. Next, you could make sure that any
key synergies that the acquisition was based on – i.e. people who use Amazon being
encouraged to shop at Whole Foods – was explicitly incentivized. Someone at Amazon needs
to have marketing Whole Foods baked specifically into their goals and objectives for the year.
People will need to be trained appropriately as well. Whole Foods employees will be asked
many questions about the acquisition, including how to use the Amazon or Whole Foods apps
to checkout, etc. Training will be key. Finally, how successful will the endeavor be if key
Amazon or Whole Foods leaders are not “onboard” with the merger? It is remarkable how role
models can influence lives and behaviors. You need to ensure individuals in key spots are
functioning as role models.
Explain Influence Model to Your Team
The change management framework from McKinsey is useful to students and professionals
alike. Maybe you are a student considering a career in management consulting? It’s an excellent
back-pocket framework that allows you to analyze a situation without getting into any detailed
math or analytics. If you are a professional experiencing or leading change, it’s one of the more
intuitive change management models to help you better navigate the situation around you.

PROFITABILITY: CASE INTERVIEW FRAMEWORK

Why is the profit formula most important, you ask? Think of it like this: if business is like our
solar system, then profit is the sun around which the celestial bodies revolve. As hard as it may
be for some of you to admit, without the sun (the green stuff, Benjamins, clams, coin)
everything falls to pieces – quickly. It’s not that we’re saying the profit equation makes the
world go round…well except when it comes to business, we kinda are.
With that in mind, nailing profitability analysis is an absolute must; so without any further
delay, here are the 4 situations in which you can be sure to apply the case interview profitability
framework.
4 Ways To Use The Profitability Framework:
Growth Strategy
This seems like a bit of a no-brainer here; don’t all companies want to grow, all the time?
Yes.
But what’s likely true about the case interview you will be presented with is that your client
is ready to launch all-out, no-holds-barred business growth strategies to take on the future in
the hopes of seeing significant growth in a short period of time, rather than just incremental
growth over a longer period.
It could be that your client wants to grow revenues, market share, profits, or all of the above,
but just increasing revenues won’t be enough, because increasing revenues often means
increasing costs. How can you take the profit and loss statement, demonstrate an
understanding of how to calculate profit margin, and run through profitability ratios to
demonstrate your finesse?
In short – how can you help your client in its quest: how to find profit?
Then, you’ll need to include cost volume profit analysis. In other words, you’ll need to factor
in which operating costs are going to be increased for the new initiative, any costs to the
client for launching the new initiative, and maybe even calculate the payback period to
demonstrate the true impact on the business.
Here’s a rule for profitability – every time revenues are included (growth usually implies
revenue growth), cost should also be included. Leaders don’t trade off revenue vs. profit –
they manage to both revenue AND profit. Even if you get pointed squarely towards either
cost or revenues by your interviewer, make sure you keep the cost benefit analysis in your
mind (and in your structure) at all times.
Declining Profits
This is every CEO’s biggest nightmare, but just identifying declining profits won’t do you
any favors. You’ll be expected to present a plan that will:
Stop the decline in its tracks
Get the business going in the right direction
If you get a case that deals with declining profits, the first question you should ask is “why?”
Declining profits can be caused by one or both of the following:
Declining sales
The basic question here is, “why have sales gone down?” It may be that the customer needs
have changed, or it may be that some new fierce competitor has come on the scene.
Whichever it is, you need to figure out what is happening and then why it is happening.
Rising Costs
Either the variable costs or the fixed costs have gone up. The goal here is to once again figure
out what has happened and why it has happened.
The good news? Corporate profits, when mentioned in cases, usually refer to operating
profits (the purview of consultants), not net profit (the purview of tax advisers like at the Big
4). At least that means you can cross off “how to calculate net profit” from your “things-to-
learn” list.
Creative Cost Benefit
In disruption, potential benefits are either increased revenues or decreased expenses. In these
questions, the cost is often investment costs; how much is needed to facilitate the new idea.
The cost vs benefit is defined as the return on the cost.
These types of cases are often used for non-profit clients whose ultimate success is not based
upon profitability, but social measures or the greater good.
“The City of New York is considering shifting their parking meters from coin-operated to
digital. Is this a good idea and why or why not?”
However, in a world of increasingly high profile disruptors like Uber, Netflix, and Dollar
Shave Club, cost benefit questions do not apply exclusively to non-profits.
Weighing Scenarios
Your client is looking at option A vs option B, but needs the benefit of your top level
analytical skills and insight before making their decision. In this situation, you need to
quickly assess the revenues and costs associated with each option, ascertain which is the
more profitable, and provide your recommendation based on your findings.
How to Calculate Profit
For the purposes of cases, which are simplified versions of real life, you do not have to
demonstrate wizardry in Accounting. You do not have to memorize all of the possible
profitability ratios.
However, you do need to know how to calculate gross profit (Revenue – COGS).
Then, you need to know how to calculate EBITDA (Gross profit – OpEx).
Then, you need to know how to calculate Operating Profit or EBIT (EBITDA – Depreciation
– Amortization).
You also need to know which of these is larger, and what is included and excluded in each.
You need to have a strong enough grasp for a situation where, when someone says “profit,”
you can meaningfully defend which profit you believe they mean, and why.
Finally, it’s nice to know how to calculate Net Profit (EBIT – Interest – Taxes – One-time
expenses), although as mentioned before you should not have to use it.
How to Use the Profitability Framework
The first thing you need to do is identify which question you’re addressing. Then you can
begin to apply the case interview profitability framework – creatively.
Next, determine the revenue/revenue drivers. Remember, as a consultant, you will need to
look at revenue by segment. This means that instead of doing a simple revenue calculation of:
Average Price x Quantity = Revenue
In reality, with more complicated software (or at least Excel), you’ll do it as follows:
Profitability Equation:
[(Price Segment 1 x Quantity Segment 1) – COGS Segment 1] + [(Price Segment 2 x
Quantity Segment 2) – COGS Segment 2] = Gross Profit
Aside from knowing the profitability equation, you should also be aware of factors that
impact profitability:
Factors That Impact Revenue:
Price
Overall market demand

“Are there a lot of companies providing an identical service?

Is the market declining?”
Competitors

“Are they driving prices down?”

Customer (remember, customer does not necessarily equal final consumer)

“How much buying power do they have?”

Quantity
Overall market demand

“Is it decreasing? Is this industry-wide?”

Competitors

“Are they stealing customers?”

Customers

“Are their needs being met?”

Channels

“Are we marketing through the best and most effective channels?”

That was a brief look into revenues, now let’s look at what can affect the costs side of the
equation in the profitability framework.
Factors That Impact Costs:
Fixed Costs
Fixed Labor
Marketing
Overheads
Interest/Depreciation
Taxes
Other fixed costs, e.g insurance
Variable Costs
COGS (Cost of Goods Sold)
Variable Labor – Have wages increased without a corresponding increase in price?
Distribution Costs
Other Variable Costs
Breaking Down Case Interview Frameworks – M&A (Mergers and Acquisitions)
These cases can be some of the scariest because you feel tested on various finance principles
and market intricacies, but on the other hand, they’re really easy to recognize. The most
important part of an M&A question is knowing what type of acquirer you are dealing with.
All acquirers will want to increase cash flow, but the length of their investment in the
company will differ, depending on the type of investment they’re looking to make.
– Financial Acquirer, like a PE firm
They will seek to own 100%, usually in the hopes of selling the company for a significant
return. To do so, they will often want to rapidly decrease costs and increase top-line revenues
and profits through cash injections and quickly-implemented operational changes.
– Financial Investor, like a hedge fund
They will seek to own a non-majority share (<50% ownership of the entity) in the hopes of
positively affecting the value of the shares before selling them on at a higher price than they
originally purchased them for. The deal likely includes seats on the Board where they aim to
influence corporate decisions that lead to greater profitability.
– Corporate Acquirer, like a multinational firm
They will seek to own 100% of the entity, adding it to their portfolio of companies/offerings.
Many choose to integrate the target with their current operations, and the company may have
no current intentions of the future sale of the company or its assets.
How to use the Mergers and Acquisitions Framework
There are many important questions you should ask while utilizing the M&A framework. As
with any framework, you need to customize these basic questions below to the exact case
prompt scenario you are given in your case interview.
While most M&A cases are going to be focused on due diligence strategy (the yes/no
question of whether one company should buy another), this framework is also helpful for any
other large scale financial transaction (e.g., an investment resulting in a minority or majority
stake, a departmental merger). In any of these cases, you should develop a robust line of
questioning in 4 key areas:
– The (target) Market
What is the size and composition of the target market? Is it growing?
What’s the competitive landscape in this space? Is the market flooded with competitors?
What are the barriers to entry in this market?
Note: Most investors do not want to buy a company that is in an unattractive market. The
question you want to ask yourself is whether or not the market is big enough for your client’s
ultimate goals.
– The (target) Company
Does the company have strong profits?
What is the company’s business model and offerings? Are they well positioned against
competitors?
Is it a top performer with revenue growth, or does it have room for improvement with
potential for a greater market share in its field?
What are the company’s projections regarding revenue growth?
Note: The client wants to make sure they’re picking the right company (within the right
market). Once again, it all comes down to finances.
– (The Client’s) Post-acquisition strategy
Does the client have an expected timeframe to sell or specific revenue/growth targets in
mind?
Is the client positioned to grow revenues or decrease costs?
(If your client wants to integrate the target:) Is there potential for synergy, either by
piggybacking one company’s strong areas onto the other’s to increase sales or by reducing
operating costs?
Note: This category ties the first two together, while also sending the message that once the
company is bought, things are going to change. A market and the company valuation can help
you figure out how much you should pay, while the post-acquisition strategy helps you figure
out how much you can make over time (and whether it will meet the client’s targets).
– Risks and benefits
How much of a risk is it to integrate two different sales departments, each of which with its
own bonus structure?
What do we know of the compatibility of organizational cultures and leadership styles?
Are there any IP concerns in the purchase?
Will governmental regulations hinder the buying process?
Note: One thing that is always difficult to determine is how to assess and value intangible
assets, such as Intellectual Property (IP) or the strength of the management team. And if there
are risks, what would the worst scenario be? What would the medium scenario be? What
would the best-case scenario be? Having a category to explore various risks and benefits is
the way to quantify some of the intangible issues that go into assessing an M&A opportunity.
Advanced Technique: How to Calculate Acquisition Value
The last thing to cover is a brief example of how to value an acquisition. Most candidates are
rarely asked about how to value a target company, but some practices, like Bain PEG or
McKinsey Private Equity & Principal Investors, will include this as part of the case interview.

The best thing to remember for this discussion is that there are three main ways to calculate
the value of an acquisition.
Revenue Comparative Multiples
EBITDA Comparative Multiples (Earnings Before Interest, Taxes, Depreciation, and
Amortization)
NPV Calculation (where the acquisition is just a long “project”)
Net Present Value
Net present value (NPV) is a concept that allows you to calculate the value of future cash
flows at the present time. Finding this value is pretty straight forward using the Net Present
Value formula. It’s possible to figure out Net Present Value using Excel, but there are also
online calculators that make it even easier to find. Sound confusing? Don’t worry, we’ll help
explain.

The Time Value of Money

Net present value is based on what’s known as the time value of money. The time value of
money is a concept that states that money today is worth more than money tomorrow (or any
future time period). This is because you could use that money to invest in financial
instruments like equities in the stock market to earn more than what you started with.
For instance, would you rather want $100,000 today or $100,000 fifty years from now? In all
likelihood, you would take the money today because you could use the cash to start a
business or invest and grow your initial $100,000 into much more. Of course, there is also a
chance that you could lose everything, but the time value of money focuses on the positive
potential.
Net Present Value
Net present value takes the concept of the time value of money one step further. The net
present value is the sum of present values of money in different future points in time.
Calculating your NPV is a helpful method of comparing projects or investments that produce
different cash flows over time.
The Interest Rate
One key additional component of NPV is the interest rate (also called the discount rate) used
to discount the future value of cash into present value. This interest rate in essence is the
estimated return you would receive each year if you invested your money and therefore, what
you would lose if you did not invest your money.
This interest rate depends on the riskiness of your investment. Generally speaking, the higher
the risk, the higher the interest rate because there is less certainty about your future potential
earnings. An increase in your interest rate results in a lower NPV, while a lower interest rate
results in a higher NPV.
Net Present Value Formula
 NPV
Formula
NPV = present value
FV = future value
i = interest rate or discount rate for a specific period
n = the number of periods between present and future
Net Present Value Example
For example, let’s say that you had two potential investment options, and they both have
an Initial Investment of $5,000. Option A allows you to invest in a shoe manufacturing
company that would generate $5,000 annually over the next 5 years. Option B allows you to
invest in a grocery store that would generate $3,000 for the first 3 years and then $8,000 for
the last 2 years. If you do the math, both eventually generate $25,000 over 5 years.
However, based on the net present value of these two investment options, one option is
financially more attractive than the other. Assuming both opportunities are equally risky and
have a discount rate of 10%, here are how the numbers shake out:

Finally, subtract your initial investment of $5,000 from both totals, and you are left with an
NPV of $13,954 for Option A, and $12,892 for Option B. You might wonder why we don’t
discount the Initial Investment. This is because we only discount values that are in future or
past years, whereas the Initial Investment is already a value in the current year, so we don’t
discount it.
As you can see, even though both investment options generate $25,000 over 5 years, Option
A results in a higher NPV. In this example, this is largely due to the fact that you earn higher
amounts of cash earlier. Due to the exponential factor in the denominator of the NPV
formula, and the time value of money, receiving more cash later vastly reduces distant future
cash flows.
Net Present Value in the Case Interview
The NPV concept may be helpful in case interviews where you have two potential options
that you would like to compare in terms of financial attractiveness. This is highly possible
given that problems in case interviews usually involve businesses dealing with the unknown.
You are most likely to run into NPV, and may be forced to use NPV, if you are interviewing
for finance-specific consulting practices, such as Bain PEG or McKinsey Private Equity &
Principal Investors.
Many businesses use NPV calculations to weigh multiple possible options as they are making
business decisions. Be on the lookout for this scenario in the case interview and earn bonus
points by suggesting the use of the NPV formula to find the best solution for your client!
There are multiple Net Present Value calculators free to use on the web. Using an online
calculator is an good way to determine Net Present Value. Net Present Value calculators
online are easy to use and most of the time free. Here are a couple of our favorites:
Investopedia
Calculator Soup

The first two examples follow the same logic. The difference is that Revenue Multiples are
commonly used for early-stage companies, which might have negative EBITDA and/or
profit, and EBITDA multiples are generally used for mature companies with positive
EBITDA and profit.
These methods can get very complicated, but for a case interview, all you need to remember
is that you can estimate the expected value of an acquisition by taking the Revenue or
EBITDA and multiplying it by the industry average. You can usually ask for these values
from your interviewer, or they will give you the data points to calculate them.
If you are forced to use the NPV method, then you are likely interviewing for a finance-
specific consulting role. Check out our NPV guide for a refresher on how to calculate NPV
and remember to think of the annual profits of the new company as the “project revenue”,
and use the length of the acquisition investment as the project timeline.

Recommendations for M&A are some of the easiest to construct because you’re either for the
investment or against it. If you are for it, make sure you utilize quantitative data from the case
to build your rationale. If you aren’t, make sure you lay out your reasons clearly, concisely
and confidently. In any M&A recommendation, you should be direct with your yes/no
answer, evidence-based as you lay out your rationale why, and finally lay out 3 next steps (or
risks) to further explore the investment opportunity.