How to Succeed in the New Age of Interviews

The process of securing an internship at an investment bank is both a daunting and strenuous endeavour. Through research and experiences of my own, I have gathered insights into how to prepare for and succeed in the search for an internship. I began by considering what to do to get an initial foot in the door, and how to set oneself apart from other candidates.

The beginning stages of the application process to a top-tier firm are much the same as any other. Provide your grade transcript, CV, and cover letter. You’re going to want to have top grades and a diverse range of life experiences.  The cover letter is the most important of these initial documents. A desired response from a recruitment manager would be “most cover letters I’m falling asleep. Reading your cover letter, I felt like I knew you.” Try to show your personal voice in your cover letter, don’t give some generic spiel about how you’ve graduated from ‘x’ university with ‘y’ degree. Vary your sentence length. Showing that you’re a good, emotive writer is important. Your cover letter should also be clear and easy to understand, as getting your point across is of utmost importance in the business world. In terms of CV specifications, keep your CV to one page. Write only your most impressive achievements. You want every sentence the manager reads to be a “wow” sentence. Start your CV off with a few sentences that set you apart as a candidate, be it your life background or unique experience set. Follow all of this advice and you might just get to stage two.

Stage two of the process may find you in front of your webcam, coming face to face with the recent recruiting tool developed be Hirevue. This involves being asked questions by a virtual man. You get 30 seconds to prepare a response and then two minutes to address the virtual man through the webcam. Be prepared for some difficult questions, an example being “what is a decision that you had to make in a fast-paced environment”, possibly prompting you to make the ironic response of “just now as I am taking part in this Hirevue process”. Almost certainly that is not the desired response. Whilst making realistic responses, you should also look into your webcam as if it is the eyes of a prospective manager. The webcam will record you, analysing your body language, eye contact, vocabulary, and anything else it can quantify. This will provide Hirevue with data that it will analyse to estimate how likely you are to be a successful candidate before a human even looks at your response. This can make for a very inhuman interview experience, but that is what the world is tending towards, so better get yourself acquainted with these technological advances.

If you continued to impress in step two, you’ll secure yourself an interview with a real human! This will likely be a technical phone interview in which you should have studied the potential terminology and conventions relevant to the industry. Your knowledge will be tested. This will be followed by a behavioural interview in which you give STAR (situation, task, action, result) responses to personal and teamwork questions. Just google STAR interview questions to find countless examples. It is good to have a pool of teamwork experiences to apply to the questions, considering both your internal feelings and external interactions. This step is possibly coupled with an aptitude test. These aptitude tests will assess your reading comprehension, numeracy skills, and logic skills in the form of pattern recognition. Succeed at all this and you’ll have made it to the final step!

The last stage involves being transported to the company headquarters to have face to face interviews. You’ll probably have 2 – 6 different interviews, each interview trying to pick your brain about a different aspect of your personality. These can often veer off script and you’ll do well as long as you have good conversational skills. These interviews are really to gauge your social competency. These firms want good all-rounders, and are looking for humble, kind, personable people. Teamwork skills are key. It is also pertinent that you remember all your interviewers’ names, you may be quizzed on them later in the day.

If you manage to jump through all of these hoops, congratulations, you are in! They’ll be in touch within a few hours to lock you in as you have proven that you are one of the most talented individuals around. Beyond step one all else will take place over the course of around a week, these top firms really do not mess around when securing talent. All of this makes for a difficult, stressful process, but that’s what work for a top company involves! Good luck in your endeavours, keep building a diverse range of experiences and keep on top of your studies and you’ll have a great shot.

Dean Franklet is a third year economics and finance student at the University of Canterbury where he is President of the largest commerce society on campus. Spending his life in Texas and then New Zealand with a few other stops along, he gives a unique global viewpoint to portray in his writing.

Image: Pexels

After The Interview

After The Interview

(Source: Flickr)

We have talked at length all year about consulting interviews, and in this post we provide three (3) thoughts on what to do after the interview comes to an end.

  1. Confirming the next step: To find out about the next step in the recruitment process, talk to the recruitment manager (this will probably be someone other than your interviewers).
  2. Thank you email: It is a nice courtesy to send a short thank you email to your interviewer the day after your interview. The note should thank the interviewer for her time, remind her of a few key points that you discussed, and state again why you are genuinely interested in working with the firm.
  3. Following up: If the date on which you expected to hear back from the firm has passed, then feel free to call the recruitment manager to follow up on the status of your application.

[For more information on consulting interviews, please download “The HUB’s Guide to Consulting Interviews“.]

Practice Case Questions

Practice Case Questions

(Source: Flickr)

If you want to practice case questions, I highly recommend Marc Cosentino’s book Case in Point.

You can also access sample case questions from various consulting clubs here, and from the following consulting firm websites:

  1. McKinsey & Company;
  2. Bain & Company;
  3. Oliver Wyman;
  4. Deloitte;
  5. A.T. Kearney;
  6. Accenture; and
  7. L.E.K. Consulting.

[For more information on consulting interviews, please download “The HUB’s Guide to Consulting Interviews“.]

Product Market Expansion Matrix

Product Market Expansion Matrix

(Source: Flickr)

The product-market expansion matrix may prove useful in the consulting case interview and is relevant when considering growth strategies. It might be used on a standalone basis or as part of a larger profitability framework.

Product Market Expansion Matrix

There are four ways that a company can pursue growth:

  1. Market penetration: A strategy to increase sales to existing customers and increase market share. Market penetration can be pursued through a combination of initiatives relating to pricing, product, placement and promotion (see “Four P’s Framework”).
  2. Market development: A strategy to sell existing products to new markets which might include new regions, customer segments, or distribution channels.
  3. Product development: A strategy to sell new products to existing customers to increase share-of-wallet.
  4. Diversification: A strategy to develop new products for new markets. This is the highest risk option, and so it will make sense to look for markets with strong market growth and high levels of industry attractiveness (see “Porter’s Five Forces”).

[For more information on consulting interviews, please download “The HUB’s Guide to Consulting Interviews“.]

Outsourcing Matrix

Outsoucing Decision Matrix

(Source: Flickr)

The outsourcing matrix may prove useful in the consulting case interview, either as a standalone framework or as part of a larger profitability framework.

With the view to reducing costs, there are three questions that a firm would do well to consider:

  1. How long will it take to reduce major cost drivers?
  2. Are the activities strategically important?
  3. To what extent do the activities contribute to operational performance?

Outsourcing Matrix

A company will want to eliminate or outsource costly activities that have low strategic importance. If the activity has a low contribution to operational performance it can be eliminated, and if it has a high contribution to operational performance it should be outsourced.

A company will want to retain control of activities that have high strategic importance. This can be done by pursuing business as usual or by forming a strategic alliance or increasing efficiency.

Common cost reduction techniques include:

1. Procurement

  • Consolidate procurement or renegotiate supply contracts.

2. HR Management

  • Reduce labour costs through decreasing salaries, training, overtime, benefits and healthcare, introducing employee stock ownership, and right sizing.

3. Technology Development

  • Use IT and digital technology to reduce communication and organisational costs.
  • Employ more advanced production technology.

4. Logistics

  • Partner with distribution companies (e.g. FedEx).

5. Operations

  • Outsource manufacturing to a lower cost jurisdiction (e.g. China/India/other).
  • Improve the utilisation rate of plant, property and equipment.
  • Relocate headquarters to lower cost city, region or country.

6. Finance

  • Reduce working capital including inventory and accounts receivable.
  • Refinance outstanding debt.
  • Divest non-core assets.

[For more information on consulting interviews, please download “The HUB’s Guide to Consulting Interviews“.]

McKinsey 7 S Model

McKinsey 7 S Framework 2

(Source: Flickr)

While you may not directly use the 7 S Model in the consulting case interview, it will give you a deeper understanding of how to examine the inner workings of an organisation, identify strengths and sources of competitive advantage, as well as weaknesses and reasons why an organisation may not be operating effectively.

The 7 S Model can also provide a guide for organisational change.

McKinsey 7 S Model

The seven (7) factors considered by the 7 S Model include:

  1. Shared values refer to the values that are widely practiced within an organisation and form the company’s core guiding principles.
  2. Strategy refers to the plans that a company has for gaining a competitive advantage (e.g. low cost; product differentiation; new product development; entering new markets).
  3. Skills refer to the competencies of the organisation, its staff and management.
  4. Structure refers to the way in which an organisation’s people and business units relate to each other. This includes organizational structure, communication channels, and chain of command.
  5. Staffing refers to recruitment, selection, training, development, and management of talent.
  6. Style refers to the work culture, leadership style of upper management and the way things are done.
  7. Systems refers to the organisation’s processes and procedures for things like budgeting, communication, recruitment, compensation, and performance reviews.

[For more information on the consulting interview, download “The HUB’s Guide to the Consulting Interview“.]

BCG Growth/Share Matrix

Cash Cow

(Source: Flickr)

While it may not be a core framework for solving consulting case questions, the BCG Growth Share Matrix can help to broaden your understanding of how a company might want to allocate cash between products and business units.

The framework is based on the idea that the amount of cash a product uses is proportional to the rate of growth of that product in the market, and the generation of cash is a function of market share.

To be successful, the story goes, a company should have a portfolio of products with different growth rates and different market shares. Money generated from high-market-share products can then be used to develop high-growth products.

BCG Matrix

Under the BCG matrix, products are classified into four types:

  1. Stars are leaders in high growth markets. Stars grow rapidly and therefore use large amounts of cash. Stars also have a high market share and therefore generate large amounts of cash.
  2. Cash Cows are highly profitable and require low investment because they are market leaders in a low-growth market.
  3. Question Marks are low market share high growth products, and almost always require more cash than they can generate.
  4. Dogs are low market share low growth products. BCG refers to these products as “cash traps”. They require little cash but also generate little cash.

[For more information on consulting interviews, please download “The HUB’s Guide to Consulting Interviews“.]

Value Chain Analysis

Value Chain Analysis 2

(Source: Flickr)

Value Chain Analysis is another tool that may prove useful during the consulting case interview. It can be used to analyse the cost structure of a company as part of a declining profitability case, or to analyse the supply chain as part of an operations case.

Value Chain

To understand which activities provide a company with a competitive advantage, either through cost advantage or product differentiation, it is helpful to separate operations into a series of value-generating activities referred to as “the value chain”.

Value Chain Analysis involves identifying all of the important activities in which a company engages and then determining which ones give the company a competitive advantage. By doing this, a company can:

  1. Determine which activities are best undertaken internally and which ones are able to be outsourced or eliminated;
  2. Identify and compare strengths and weaknesses with the competition; and
  3. Identify synergies between activities.

The primary value chain activities include:

  1. Inbound Logistics: Receiving and storing raw materials;
  2. Operations: Manufacturing products and services; the way in which inputs are converted into final products;
  3. Outbound Logistics: Inventory storage and distribution to customers;
  4. Marketing & Sales: Identification of customer needs and preferences, marketing and sales generation;
  5. Service: Interacting with and supporting customers.

[For more information on consulting interviews, please download “The HUB’s Guide to Consulting Interviews“.]

Four P’s Analysis

Four P's Framework

(Source: Flickr)

Four P’s Analysis is a framework that may prove useful for solving consulting case questions.

It can be used to evaluate the marketing strategy for a product.

1. Price

The pricing strategy that a company employs will affect its market share and profitability. There are three key pricing strategies to consider.

  1. Competitive pricing: How do prices compare with the competition? Is the pricing appropriate given the product’s quality and relative position within the market?
  2. Cost based pricing: What is the company’s cost structure? What percentage of costs are fixed and variable? A company that has high fixed cost and low variable costs will benefit from economies of scale and so may want to lower prices to increase market share.
  3. Value based pricing: Is the product a commodity or differentiated? Do different customer segments have a different willingness to pay? Are customers price sensitive (see “Price elasticity of demand”)? If prices are changed, how will this affect sales volume and product perception?

2. Product

Is the product a low cost commodity or differentiated? Products can be differentiated where they differ in quality, features, availability or branding.

How does the product compare with what the competition is offering? Are their viable substitutes? Do customers face high switching costs?

3. Promotion

How does the company promote its products (advertising, direct sales, indirect sales, trade promotions, public relations)? Is the company reaching its target customers? Can the company afford to increase its marketing budget?

Understanding the customer’s buying decision process can help a firm decide where to influence the customer’s purchase decision.

Customer Buying Process

4. Place

What markets and market segments does the company serve? How does this compare to the markets and market segments served by the competition?

What distribution channels does the company use to get products to the customer (mail order, online store, factory outlet, retail store, supermarket, department stores, or network marketing)?

Are existing channels consistent with the company’s overall strategy? Are there other channels that the company could use?

[For more information on consulting interviews, please download “The HUB’s Guide to Consulting Interviews“.]

Porter’s Five Forces

Porter's Five Forces 2

(Source: Flickr)

The Porter’s Five Forces framework is used to determine the competitive intensity and attractiveness of an industry, and is relevant in the context of entering a new market, M&A, or starting a new business.

The intensity of competition will depend on the strength of the five competitive forces, however the significance of the forces will vary by industry.

1. Existing competition

How strong is the rivalry among existing firms?

Factors contributing to competitive rivalry include:

  • Increased number of firms;
  • Slower market growth;
  • Low product differentiation;
  • Low switching costs;
  • Industry wide excess capacity;
  • High fixed costs; and
  • High exit barriers.

2. Substitutes

What is the price performance of substitutes? Do customers have high switching costs?

3. Barriers to entry

What is the threat posed by new entrants?

Barriers to entry might include capital requirements, economies of scale, network effects, government policy, switching costs, access to suppliers, access to distribution channels, product differentiation, and proprietary product technology.

4. Supplier bargaining power

How much bargaining power do suppliers have?

5. Customer bargaining power

How much bargaining power do customers have?

[For more information on the consulting interview, download “The HUB’s Guide to the Consulting Interview“.]

Three C’s Framework

Three C's Framework

(Source: Flickr)

The Three C’s Framework may prove extremely valuable for consulting case questions.

It can help to assess the business situation in the context of entering a new market, M&A, product development, and starting a new business.

It involves examining customers, competition, and the company.

1. Customers

Eight (8) factors to consider when examining the customer.

1. Customer Identification

In general terms, who is the customer?

In trying to identify the customer, remember that the person who makes the purchase decision, the person who pays (the customer), and the end user may all be different people. For example, a doctor may prescribe medicine, paid for by an insurance company, and used by the patient.

2. Customer Segmentation

Customer segmentation can make it easier to understand customer needs and preferences, and the size and growth rate of different revenue streams.

It may make sense to segment customers by:

  1. Age group;
  2. Gender;
  3. Income level;
  4. Employment status;
  5. Distribution channel;
  6. Region;
  7. Product or product line;
  8. New versus existing customers; or
  9. Large versus small customers.

3. Size

How big is the market? How big is each customer segment?

4. Growth

How fast is the market growing? What is the growth rate of each customer segment?

5. Customer Preferences

What do customers want? Do different customer segments want different things? Are the needs and preferences of customers changing over time?

6. Willingness to Pay

How much is each customer segment willing to pay?

How price sensitive is each customer segment?

7. Bargaining Power

What is the concentration of customers in the market relative to the concentration of firms?

Do customers face high switching costs?

8. Distribution

What is the best way to reach customers (mail order, online store, factory outlet, retail store, supermarket, department stores, or network marketing)? Does each customer segment have a preferred distribution channel?

2. Competition

Competition can come from firms within an industry, or from firms in other industries who produce substitutes.

Competition can also come from suppliers and customers within the supply chain who exert bargaining power to extract a larger share of industry profits.

Eleven (11) factors to consider when examining the competition.

1. Competitor Identification

Who are the company’s major competitors? What products and services do they offer?

Who are the company’s indirect competitors? That is, which firms are producing substitutes?

2. Competitor Segmentation

Is it possible to segment the competition? This might be done by distribution channel, region, product line, or customer segment.

3. Size and Concentration

What are the revenues and market shares of major competitors? What is the concentration of competitors in the industry?

4. Performance

What is the historical performance of the competition? Relevant performance metrics might include profit margins, net income, and return on investment.

5. Industry Lifecycle

Where is the industry in its lifecycle? Early stage, growth, maturity or decline?

6. Industry Drivers

What drives the industry: brand, product quality, scale, or technology?

7. Competitive Advantage

What is the competition good at? How sustainable are these advantages?

What are their weaknesses? How easily can these weaknesses be exploited?

8. Competitive Strategy

What competitive strategy is the competition pursuing? Is the competition producing products that are low cost or differentiated? What customer segments is the competition targeting?

What is the competition’s pricing strategy, distribution strategy and growth strategy?

9. Barriers to Entry

The threat posed by potential competitors depends on the level of barriers to entry.

Barriers to entry make it more difficult for potential competitors to enter, and so reduces competitive rivalry and allows existing firms to maintain higher prices than would otherwise be possible.

Key barriers to entry might include capital requirements, economies of scale, network effects, government policy, switching costs, access to suppliers, access to distribution channels, product differentiation, and proprietary product technology.

10. Supplier bargaining power

Factors that affect the bargaining power of suppliers might include:

  1. The number of available suppliers and the strength of competition between them;
  2. Whether suppliers produce homogenous or differentiated products;
  3. The brand recognition of a supplier and its products;
  4. The importance of sales volume to the supplier;
  5. The cost to the firm of switching suppliers;
  6. The availability of supplier substitutes; and
  7. The threat of forward integration by the supplier relative to the threat of backward integration by firms in the industry.

11. Customer bargaining power

Factors that affect the bargaining power of customers might include:

  1. The number of customers;
  2. The volume a customer demands relative to a firm’s total output;
  3. The availability of substitutes;
  4. Customer switching costs;
  5. Access to product comparison information; and
  6. The threat of backward integration by the customer relative to the threat of forwards integration by firms in the industry.

3. Company

Ten (10) factors to consider when examining the company.

1. Performance

What is the historical performance of the company? What is its market share?

2. Competitive Advantage

What are the company’s resources and capabilities? How sustainable are the company’s advantages? What are the company’s weaknesses and can they be remedied?

3. Competitive Strategy

What is the company’s competitive strategy? Does the company focus on producing products that are low cost or differentiated? Which customer segments does the company target?

4. Products

What does the company offer and how does it benefit customers? Does the product have any downsides or side effects?

Is the product a commodity or differentiated?

How does the company’s product offering compare with the competition? Are there substitutes available?

Where does the product fall within its product lifecycle?

What is bundled with the product? For example, customer service, warranties, or spare parts. Are there opportunities to bundle or unbundle the product in order to increase sales volume?

5. Finances

If the company is considering a certain course of action, does it have sufficient funds available to undertake the project? What’s the break even analysis?

6. Cost Structure

Consider the cost structure of the business. This can be done by segmenting costs into value chain activities: inbound logistics, operations, outbound logistics, sales & marketing, customer service.

Value Chain

Consider also fixed costs and variable costs. Have there been any significant changes in the company’s cost drivers? How do costs compare to the competition?

7. Organisational Cohesiveness

Understanding a company’s inner workings can be important since competitive strategies can fail if they conflict with a firm’s general way of doing business. Analysing the inner workings of an organisation can be done by using the McKinsey 7 S Model.

8. Marketing

What does the company stand for? How do customers perceive the company and its products? How does the company communicate with customers?

9. Distribution Channels

What distribution channels does the company use to reach customers (mail order, online store, factory outlet, retail store, supermarket, department stores, or network marketing)?

10. Customer Service

How does the company interact with and support customers? Does the company have a customer loyalty program?

[For more information on consulting interviews, please download “The HUB’s Guide to Consulting Interviews“.]

Profitability Framework

The profitability framework is probably the most important framework for solving consulting case questions

Profitability Framework

Profit equals revenue minus cost.

1. Revenue

Revenue is normally thought of as being a function of price per unit and units sold.

Declining revenue can derive from a fall in prices or a reduction in units sold, and can be examined in four steps.

Step 1: Segmentation

What are the major revenue streams? It will typically be a good idea to segment units sold, and this might be done by:

  1. Product;
  2. Product line;
  3. Distribution channel;
  4. Region;
  5. Customer type (new/old, big/small); or
  6. Industry vertical.

Step 2: Examination

What percentage of total revenue does each revenue stream represent? Compare current and historical figures to identify how these percentages have changed over time.

Step 3: Diagnosis

What is the underlying cause of the problem?

Step 4: Response

Develop a strategic response.

1.1 Diagnosis

If faced with declining prices or volume, factors to consider include the following.

1. Macro Economy

  • PEST Analysis: Political upheaval; Economic decline; Socio-cultural factors; Technology. Have there been any recent or impending changes?

2. Customers

  • Market growth: Has market growth slowed forcing competitors to compete over market share?
  • Customer needs and preferences: Have customer needs and preferences changed?
  • Distribution Channels: What channels are used to reach customers? Has there been a change in the cost effectiveness of these channels?
  • Price Discrimination: Can the company distinguish between customers and charge different prices to different customer segments?

3. Competition

  • Rivalry: Have competitors lowered their prices? How does the company’s product mix, product quality, and cost structure compare to the competition?
  • Substitutes: Has the price performance of substitutes improved?
  • Barriers to entry: Has it become easier for new competitors to enter the industry?
  • Buyer bargaining power: Has there been an increase in customer bargaining power?

4. Company

  • Market Power: Does the company have market power (product differentiation, proprietary technology, economies of scale, network effects)?
  • Products: What products and product mix does the company offer? How do these compare to the competition? Is there something different about the products that might allow the company to raise prices?
  • Value chain analysis: Consider value chain activities: access to raw materials; operating capacity; inventory handling and distribution.

1.2 Response

Declining prices

In response to declining prices, there are three pricing strategies to consider.

  1. Competitive pricing: How do prices compare with the competition? Is the pricing appropriate given the product’s quality and relative position within the market? How is the competition likely to respond to the firm’s pricing strategy?
  2. Cost based pricing: What is the company’s cost structure? What percentage of costs are fixed and variable? A company that has high fixed cost and low variable costs will benefit from economies of scale and so may want to lower prices to increase market share.
  3. Value based pricing: Is the product a commodity or differentiated? Do different customer segments have a different willingness to pay? Are customers price sensitive (see “Price elasticity of demand”)? If prices are changed, how will this affect sales volume and product perception?

Declining sales volume

Faced with falling sales volume, there are four growth strategies that a business might choose to employ: market penetration, market development, product development, and diversification.

Product Market Expansion Matrix

  1. Market penetration: A strategy to increase sales to existing customers and increase market share. Market penetration can be pursued through a combination of initiatives relating to pricing, product, placement and promotion (see “Four P’s Analysis”).
  2. Market development: A strategy to sell existing products to new markets which might include new regions, customer segments, or distribution channels.
  3. Product development: A strategy to sell new products to existing customers to increase share-of-wallet.
  4. Diversification: A strategy to develop new products for new markets. This is the highest risk option. Look for markets with strong market growth and high levels of industry attractiveness (see “Porter’s Five Forces”).

2. Costs

The third driver of declining profitability (after prices and volume) is rising costs.

2.1 Diagnosis

Examine the cost structure of the business to locate the source of rising costs. This might be done by segmenting costs into value chain activities: inbound logistics, operations, outbound logistics, sales & marketing, customer service.

Consider also fixed costs and variable costs. Have there been any significant changes in the company’s cost drivers? How do costs compare to the competition?

2.2 Response

In responding to rising costs, there are three questions that a firm should consider:

  1. How long will it take to reduce major cost drivers?
  2. Are the activities strategically important?
  3. To what extent do the activities contribute to operational performance?

Outsourcing Matrix

A company will want to eliminate or outsource costly activities that have low strategic importance. If the activity has a low contribution to operational performance it should be eliminated, and if it has a high contribution to operational performance it should be outsourced.

A company will want to retain control of activities that have high strategic importance. This can be done by forming a strategic alliance or increasing efficiency.

If a company wants to increase efficiency, then it will need to find ways to reduce costs.

Common cost reduction techniques include:

1. Procurement

  • Consolidate procurement or renegotiate supply contracts.

2. HR Management

  • Reduce labour costs through decreasing salaries, training, overtime, benefits and healthcare, introducing employee stock ownership, and right sizing.

3. Technology Development

  • Use IT and digital technology to reduce communication and organisational costs.
  • Employ more advanced production technology.

4. Logistics

  • Partner with distribution companies (e.g. FedEx).

5. Operations

  • Outsource manufacturing to a lower cost jurisdiction (e.g. China/India/other).
  • Improve the utilisation rate of plant, property and equipment.
  • Relocate headquarters to lower cost city, region or country.

6. Finance

  • Reduce working capital including inventory and accounts receivable.
  • Refinance outstanding debt.
  • Divest non-core assets.

[For more information on the consulting interview, download “The HUB’s Guide to the Consulting Interview“.]

Case Math

Case Math

(Source: Flickr)

In this post we outline some mathematical concepts that may prove useful for solving consulting case questions.

1. Break Even Analysis:

Relevant when trying to decide whether to launch a new product or invest in a project with high fixed costs.

Break Even Analysis

2. Customer Lifetime Value:

Customer lifetime value is a prediction of the entire future value that a company expects to derive from its relationship with a customer. It is a useful tool for a company that is trying to decide which customer segments to target and how much to spend on customer acquisition.

Customer Lifetime Value

3. Net Present Value:

The NPV of an investment is the present value of the series of expected future cash flows generated by the investment minus the cost of the initial investment.

Net Present Value

Where r = discount rate; CFt = expected cash flow in year t; CFn = expected cash flow in final year; g = long term cash flow growth rate.

4. Perpetuity:

A perpetuity is a constant stream of identical cash flows with no end.

Perpetuity

5. Price elasticity of demand:

Price elasticity of demand is a measure of the responsiveness of quantity demanded to a change in price, and is relevant when formulating pricing strategy.

Price elasticity of demand

If demand is elastic (Ed > 1) then changes in price will have a relatively large effect on the quantity demanded, and total revenue will rise if prices are lowered.

If demand is inelastic (Ed < 1) then changes in price will have a relatively small effect on the quantity demanded, and total revenue will rise if prices are raised.

6. Product life cycle:

The product life cycle is relevant when calculating the expected lifetime revenue of a product.

Product Life Cycle Product Revenue 2

7. Profit Margin:

Gross Profit Margin: Gross profit margin measures how much of every dollar of sales revenue remains after subtracting the cost of goods sold.

Gross Profit Margin

Net Profit Margin: Net profit margin measures how much out of every dollar of sales revenue a company actually keeps. Net profit margin is useful when comparing companies in similar industries. A higher net profit margin indicates a more profitable company that has better control over its costs compared to its competitors.

Net Profit Margin

Contribution Margin: A cost accounting concept that allows a company to determine the profitability of individual products.

Contribution Margin

8. Return on Investment:

ROI is a performance measure that a company can use to evaluate the efficiency of an investment or to compare a number of different investments.

Return on Investment

9. Rule of 70:

The Rule of 70 is a simple rule of thumb that can be used to figure out roughly how long it will take for an investment to double, given an expected growth rate.

The rule can be described by the following equation:

Rule of 70

 

[For more information on the consulting interview, download “The HUB’s Guide to the Consulting Interview“.]

Sample Consulting Case Questions

Sample Consulting Case Questions

(Source: Flickr)

Below we provide a selection of sample consulting case questions.

The questions are broken down into seven (7) question types to make them easier to digest.

1. Declining Profitability

  1. Our client is eBay. Its share price fell from $310 to $200 per share on reports of declining profits. What’s going on and how can we turn this around?
  2. A large American beverage company acquired a fruit juice company for $350 million five years ago with the goal to increase revenues tenfold. Revenues have instead fallen 50% to $20 million. What’s going on and how can we turn this around?
  3. Our client is a mid-sized retail bank in Kazakhstan. The bank has achieved sustained revenue growth over the last two years but its profits have consistently declined. What is causing the decline in profits? What can we do about it?

2. Entering a New Market

  1. Your client is a low-cost airline headquartered in Philadelphia with frequent service to cities along the East Coast of the United States. The CEO is interested in expanding service into a small town in the Midwest; let’s call it Greenville. What is your recommendation?
  2. A large Korean electronics company is thinking about entering the market for tablet computers. Is this a good idea?
  3. A South Korean company is acquiring a U.S. smart phone maker. What factors do they need to take into account?

3. Pricing Strategy

  1. The CEO of a large Asian electronics firm has come out with a new smart phone, which is much like the iPhone. How should it price this product?
  2. Dr Pepper is trying to boost profitability by raising prices. It’s focusing on supermarkets. How is raising prices likely to affect profitability? Should it go ahead with the plan?
  3. Toyota has invented a car with incredible durability, it can be driven a thousand times further than cars currently on the market before needing to be serviced. The CEO asks you, “How should Toyota price this car?”

4. Growth Strategy

  1. Our client is the Museum of Fine Arts in Boston. They want to develop a growth strategy for the next five years. What would you advise them to look at, and what are your recommendations for growth?
  2. You have been brought in as the CEO of Blackberry. The company started making handheld wireless devices in 1999 and gained substantial market share in the initial smart phone market prior to the release of the iPhone in 2007. The company missed the trend towards touchscreen smart phones and has fallen into serious financial difficulty. How can we regain market share, and return Blackberry to its former glory?
  3. Emirates Airline is considering signing an agreement with Ben and Jerries Ice-cream, which would allow them to serve several flavours of ice cream on Emirates flights. Is it a good idea for Emirates to sign this agreement?
  4. Virgin Galactic has developed a new rocket that can take off and land like a normal plane. Virgin Galactic wants to give customers the opportunity to see the earth from space and experience low gravity on a five hour flight. The prototype rocket will cost $1 billion to produce. Each additional rocket will cost $100 million.
    • Estimate the size of the global market
    • What price should Virgin Galactic charge for a ticket?
    • How many rockets should it produce?
    • Should it sell rockets to competitors?
  5. P&G has just discovered a new lightweight metallic compound that could be used to produce metal containers like soft drink cans. What should they do with it?

5. Operations

  1. Coca Cola has a bottling plant in Mumbai. Over the past three months, inventory has tripled and customer complaints have doubled. What should the company do?
  2. Cabana Surfboards manufactures surfboards at a factory in California. It is currently summer, and Cabana is having trouble meeting demand. Cabana’s surfboards are distributed through surf shops located near popular tourist beaches and, in recent years, Cabana has developed a strong reputation among first time surfers. What should the company do to keep up with demand?
  3. A leading financial services company is trying to reduce operating expenditures. How can it achieve its savings target?

6. Competitive Response

  1. CanadaCo, the largest discount retailer in Canada, currently holds the dominant market share in the industry. USCo, the largest discount retailer in the United States, has decided to expand into Canada by purchasing CanadaCo’s competition. How should the CEO of CanadaCo respond?
  2. Our client, let’s call them AcmeCo, is a specialty shoe manufacturer with retail stores in New York, San Francisco and London. AcmeCo has discovered that Nike is planning to enter its segment of the market. What should it do?
  3. Our client is Kellogg’s, a leading international manufacturer of branded cereals. Over the past five years, supermarkets and distributors in America have started selling private label goods including private label cereals. Private label goods are produced by manufacturers and sold by retailers and supermarkets directly to the end user. The private label trend has started to impact Kellogg’s market share. How should Kellogg’s respond to this competitive threat?

7. Turnarounds

  1. Radioshack, an American consumer electronics giant of yesteryear, faced chaotic trading on Wednesday as analysts predicted the company would report its 10th straight quarter of losses. Assuming RadioShack averts bankruptcy and achieves a successful refinancing, what should the strategy be to turnaround and save this iconic company?

[For more information on consulting interviews, please download “The HUB’s Guide to Consulting Interviews“.]

Saving RadioShack

When the business landscape changes, how can you turnaround a failing company?

Turnaround

(Source: Flickr)

RADIOSHACK, an American consumer electronics giant of yesteryear, faced chaotic trading on Wednesday as analysts predicted the company would report it’s 10th straight quarter of losses.

RadioShack has hired a law firm to provide restructuring advice in an attempt to avert bankruptcy. Assuming this leads to successful refinancing, what should the strategy be to turnaround and save this iconic company?

When faced with a broad turnaround question, it is important to ask a variety of questions to determine the source of the problem.

Why is the company failing?

What have been the prevailing trends in the industry?

Are competitors facing the same problems?

Looking at the stock price of RadioShack over the past fifty years, it is apparent that the dotcom boom represented the height of success for the company.

RadioShack had developed a reputation as the ultimate shopping destination for budding innovators and engineers. Unfortunately, the company has struggled to modernize, doing little to transform itself into a destination for mobile buyers.

By comparison, rivals Amazon and Wal-Mart have continuously adapted and maintain a significant competitive advantage in pricing these products due to scale.

In a competitive landscape fraught with declining sales of consumer electronics and falling margins, RadioShack has fallen into a precarious situation.

What strategy can be implemented to save the company?

Marc Consentino in his book Case In Point suggests the following possible actions for a company turnaround.

Possible Actions

I believe the most applicable actions for Radio Shack involve a thorough examination of current product offerings as well as a transition in company culture.

RadioShack will be forced to close a significant proportion of its brick and mortar stores as part of any restructuring plan. This should present the company with the opportunity to reinvent product offerings and create a new culture.

RadioShack needs to return to its roots as a place of innovation by offering specialty and niche products that are unavailable through the company’s major rivals. Shifting the product focus must also be accompanied by a shift in employee training, encouraging hiring practices that target inventive individuals that can appropriately engage with the new desired consumer base.

Rather than attempt to compete with pre-existing rivals, RadioShack needs to carve out a new niche in the consumer electronics market that celebrates the pioneers and the mavericks.

What strategy would you recommend for RadioShack?

Let us know your thoughts in the forum! (The person with the best response in the next 48 hours will win a copy of Marc Consentino’s Case In Point or another book from the Bookshelf.)

Growth Strategies

Growth strategy begins with identifying the source of the problem – you will want to look at customers, products, the company and its competitors

Growth Strategy

(Source: Culturamix)

THE frequently used term business growth simply describes the process of improving some measure of an enterprise’s success, ranging from promotion, product development, new market entry or improving employee productivity.

How can we more closely define the objectives a company desires when it speaks of growth?

Addressing this type of case question is achievable, provided you can identify the root of the problem.

Below we look at a specific case scenario.

Our client is the Museum of Fine Arts in Boston. They want to develop a growth strategy for the next five years. What would you advise them to look at, and what are your recommendations for growth?

Before we can begin discussing growth strategy, the direction of the case must be determined by asking vital questions regarding the current state of the museum.

  1. Competitors: How are other museums across the city performing? How are we growing relative to the industry?
  2. Customers: Who are our patrons? For example, they might be senior citizens and middle aged women. How is the mix changing over time, and what do they say about us?
  3. Product: Does our revenue come primarily from ticket sales or other sources? What distinguishes our offering from our competitors in regards to pricing, marketing, and curatorial development?
  4. Company: What is our cost structure? Do we have the financial backing to support higher growth?

Let’s assume Bostonians have decided to reduce spending on museums in favor of other leisure activities such as baseball games and musical performances. The stagnant growth our client is experiencing is caused by a decline in the industry overall.

My recommendation would be to increase revenue by attracting new audiences to the museum by investing in popular exhibitions supported by a major marketing campaign. Engaging local teenagers and university students through social media promotions would increase awareness of new museum programming. By appealing to a wider and younger audience, our client could attract visitors who previously were uninterested in the museum’s offerings, leading to more sustainable ticket sales over the next five years.

What recommendations would you provide the Museum of Fine Arts? Share your thoughts in the forum. The person who provides the best response in the next 48 hours will win a copy of Marc Consentino’s Case In Point (or another book from the Bookshelf).

The scenario above is adapted from Case In Point, a case interview preparation book written by Marc P. Consentino. Case scenario used in the book looked at the New York City Opera. Many firms use a version of this case.

For a more in-depth look at growth strategy, check out this case study by McKinsey that outlines the Three Horizons of Growth framework to develop a growth strategy for a major retailer.

Mergers & Acquisitions: Valuation

“Price is what you pay. Value is what you get.” ~ Warren Buffett

LAST post, I highlighted the importance of strategy when considering the viability of a potential acquisition; however, before a final decision can be made, a consultant needs to estimate the value of the target company.

Building on information provided in Management Consulting: A Guide to the Profession, I highlight three approaches that a consultant can use when performing a valuation:

  1. Balance sheet valuation;
  2. Market based valuation; and
  3. Valuation of discounted expected future cash flows.

Target Valuation v4

Each valuation method will result in a different estimate, and the method you select will depend on the situation.

If you are working for the target company, then the obvious goal is to choose the method that yields the highest possible valuation for the company.

However, if you are working for the acquiring company, then the valuation method you select depends on the objective for the merger. If the goal is diversification, then calculating the present value of future cash flows would be appropriate (DCF valuation). If on the other hand the company is being acquired for its resources and capabilities, then valuation should be based on either the market value or replacement value of assets. The replacement value is simply an estimate of how much it would cost to build similar resources and capabilities from scratch.

In addition to valuing the target company, you also need to estimate the value of potential synergies.  Revenue synergies and cost synergies are the revenue streams and cost savings that would be available to a combined entity but not to the target or acquiring company acting by itself.

During a case interview, it is important to thoroughly explain your reasons for using a particular valuation method as well as describe the appropriate process for implementation.

Mergers & Acquisitions: Strategy

MERGERS have had a ubiquitous presence in the news recently as leaders in the airline, publishing, and telecommunications industries have taken steps to consolidate. Just this week, two of the largest advertising entities, Omnicom and Publicis, announced a $35.1 billion merger. In recent months, tech giants Google and Yahoo have acquired dozens of companies, most notably Waze and Tumblr respectively.

Despite the frequency of these deals, a large number of market studies have indicated that “50% to 70% of mergers and acquisitions fail to create incremental shareholder value”. As a result, consulting firms have an opportunity to provide valuable expertise at each step in the M&A process with the goal of preventing these failures.

One of the most vital components of a successful acquisition is the financial valuation: determining the value of the target and ensuring that your client avoids paying too much. However, determining whether the acquisition would be a good strategic fit is the first step.

Clarifying why your client wishes to undertake the acquisition is a good place to begin, both in a case interview and in a real-life consulting engagement. Potential rationale’s for pursuing an M&A deal include:

  1. Performance Improvement: restoring performance of the target company through revenue growth and cost cutting,
  2. Growth Potential: picking winning early stage companies and helping them develop,
  3. Market Access: increasing market access for the products of the acquirer or the target,
  4. Market Power: removing excess capacity from the industry,
  5. Capability Acquisition: acquiring new production capabilities, skills or technologies more quickly or at lower cost than would otherwise be possible,
  6. Synergies: achieving revenue synergies or cost synergies not available to the target or acquirer if acting alone,
  7. Business Transformation: using the merger as a catalyst to change the combined entity into an entirely new company, for example, with new strategic focus, organisational structure, key processes, etc. According to McKinsey, transformational mergers are rare “because the circumstances have to be just right, and the management team needs to execute the strategy well.”
  8. Bargain Price: buying the target at a price below the target’s fundamental value. The ‘bargain price’ rationale is also rare since the acquirer typically has to pay target shareholders a takeover premium in addition to the target’s current market price.

Regardless of the reasons concocted by management to justify action, the vast majority of acquisitions should never take place. Due to the high failure rate and inherent problems arising from the attempt to consolidate distinctly different organisational cultures, the most valuable advice a consultant can give might be to persuade senior management not to become seduced by the allure of a potential acquisition. In the long-term, managerial decisions should support the creation of shareholder value.

Next week I will introduce the various methods consultants use when conducting a financial valuation.

Merger and Acquisition Strategies adapted from Management Consulting: A Guide to the Profession, edited by Milan Kubr and published through the International Labour Office.

Competitive Response

CanadaCo, the largest discount retailer in Canada, currently holds the dominant market share in the industry. USCo, the largest discount retailer in the United States, has decided to expand into Canada by purchasing CanadaCo’s competition. How should the CEO of CanadaCo respond?

WHEN considering a case that requires a competitive response, first take a look at the action which forced the company to respond.

In the example above, we should test the hypothesis that USCo has a cost advantage due to economies of scale. This advantage would allow USCo to provide lower prices to Canadian consumers compared with CanadaCo. As a result, USCo’s entry into the Canadian market would probably cause our client to lose market share.

Without a full understanding of the facts, a response could be determined prematurely, neglecting vital characteristics of the case. What other factors would you ask about?

If I were presented with the case above, I would ask questions specifically pertaining to the differences between the Canadian market and the US market in order to determine the magnitude of USCo’s advantage.

Once the situation has been fully fleshed out, the next step would be to recommend a course of action. CandaCo could opt to do nothing, or respond in one or more of the following ways:

  1. Change its pricing strategy,
  2. Hire top executives away from USCo,
  3. Acquire or merge with a competing company,
  4. Rouse customer loyalty through rewards programs and customer service,
  5. Mimic USCo’s new product offering,
  6. Market CanadaCo’s products and build brand awareness.

Competitive Response

Let’s assume USCo is relatively unknown in Canada and will incur costs resulting from challenges in establishing a Canadian distribution network, but not enough to cause costs to rise to CanadaCo’s level.

The solution I would propose is that CanadaCo should focus on reputation. Unfortunately, attempting a price war with USCo would appear to be futile, and so I believe the best response would be to attempt to retain existing customers by developing CanadaCo’s customer loyalty program and by focusing on customer service.

How would you respond?

Strategy and framework adapted from Case In Point, a case interview preparation book written by Marc P. Cosentino. Case scenario is a derivation from a practice case provided by The Boston Consulting Group.

[For more information on consulting concepts and frameworks, please download “The Little Blue Consulting Handbook“.]

Entering a New Market

Your client is a low-cost airline headquartered in Philadelphia with frequent service to cities along the East Coast of the United States. The CEO is interested in expanding service into a small town in the Midwest; let’s call it Greenville. What is your recommendation?

THE first step in approaching a question such as this one is simply to summarise the information provided. Considering the brevity of the question above, this process may seem unnecessary; however, by repeating the question in your own words you will be able to differentiate between relevant and irrelevant information. Furthermore, this engages you in a conversation with the interviewer as opposed to enduring an uncomfortable silence.

Once the important information has been identified, it is valuable to verify the client’s objectives. Consultants often begin their working relationship with a client by asking about objectives and determining the feasibility of those goals. In this scenario, it is vital to understand why the client wants to expand service to this area. Is it strictly profit related? Or is there a desire for diversification?

Grasping the objective will enable you to ask the right questions. This part of the interview allows you to understand the case, provide a suitable recommendation, and demonstrate your thought process when dealing with new information. What is the size of the market? What is the current growth rate? Who are the potential customers in Greenville? Who is the competition? This is also a good time to explore details about the product and pricing.

Finally, you determine whether to advise the client to enter the market and, if so, what is the best way to do so?

By organising your thoughts in a simple diagram such as the one below, you can ensure that you are providing a truly comprehensive answer.

Entering a New Market - Diagram 4

Strategy and framework adapted from Case in Point, a case interview preparation book written by Marc P. Cosentino.

Mastering the Case Interview

Demonstrating that you have the business acumen required for the job

AFTER impressing interviewers with tales of leadership ability and applicable work experience, the hard part commences: demonstrating that you have the business acumen required for the job.

Cases allow consulting firms to see how applicants would react in front of a client when faced with difficult situations, as well as provide insight into an individual’s thought process. While certain skills can be taught, an ability to rationalize logically, act objectively, and think creatively can often only come naturally. Consulting firms seek to discover whether you possess those necessary skills.

Over the next few weeks, I will explore the various methods used to approach these interviews as well as introduce cases used by top consulting firms.

I encourage you to collaborate together in the comment section to discover new solutions or present a different angle than the one I have chosen.

To start with, please take a look at the video below which presents an introduction to the case interview from Ernst & Young Advisory.

The Hospital Bed Question

THE guesstimate question is a usual type of question that you can expect to be asked when interviewing for a position at a consulting firm.

Here is one to test your mettle.

The Hospital Bed Question

The question is this: How many hospital beds are required in New York city to provide for all of its pregnant women? 

You can assume that:

  1. pregnant women stay in hospital for one night only (American hospitals are very expensive); and
  2. hospital beds in New York are used exclusively by New York residents (no sharing).

If you are game to test your skills, then this is what you need to do.

Please respond in the comments below, covering the following in your answer:

  1. set out the steps that you would take to answer the question;
  2. note any additional assumptions that you would make at each step; and
  3. provide a final numerical guesstimate to the question.

To spice things up, I will be happy to send the best answer (as judged by me) a copy of an interesting book by Lawrence Weinstein (nuclear physicist) and John Adam (professor of mathematics). The book is called Guesstimation: Solving the World’s Problems on the Back of a Cocktail Napkin.

Note that the comments section remains open for 14 days only, so you have a limited time in which to respond…

Happy guesstimating.

Understanding the Competition

“Know your [competition], know yourself and you can fight a hundred battles without disaster.”
~ Sun Tzu

YOU are running a company, advising companies or would one day like to be.  A company needs to understand its competition, and here are 11 points to help you do that.

1. Identify the competition

Who are the company’s major competitors? Taking Cadbury as an example, some of its major competitors are Lindt, Ferrero, Nestlé, Hershey and Mars.

2. Segment

Are you able to segment the competition in a meaningful way? You may be able to segment by distribution channel, region, product line, or customer segment. For example, the FOX Broadcasting Company may want to segment its competition by region. In America, some of its major competitors include PBS, NBC, CBS and ABC. In Australia, its competitors include Channel 7, 9 and 10 as well as ABC and SBS.

3. Concentration

What is the concentration of competitors in the market? That is, are there lots of small competitors (a low concentration industry) or a few dominant players (high concentration industry)? Examples of high concentration industries include oil, tobacco and soft drinks. Examples of low concentration industries include wheat and corn.

4. Size

What is the sales volume and market share of the major competitors?

5. Growth

What are the historical growth rates of the competition?

6. Performance

What is the historical performance of the competition? Relevant indicators of performance include profit margins, net income, and return on investment.

7. Competitive Advantage

What is the competition good at? What are the competition’s capabilities? How sustainable are these advantages?

What are their weaknesses? How easily can these weaknesses be exploited?

8. Competitive strategy

What are the competition’s strategic priorities? What motivates them? What are their plans? How can these plans be upset?

9. Competitive response

How will the competition respond to the company’s actions?

10. Substitutes

Are there any other products that people can use that are as good or almost as good as the company’s products? These substitute goods represent a form of indirect competition, think Coke and Doctor Pepper, Vegemite and Nutella, coffee and tea, pizzas and hamburgers, tennis and basketball. Not the same, but it may be a decent substitute.

11. Barriers to entry

Are there barriers to entry that would stop competitors from entering the market? If the market has low barriers to entry then we can expect that the market, if not already heavily contested, will soon be filled with a large number of competitors.

Understanding the Customer

“One of the deep secrets of life is that all that is really worth doing is what we do for others.”
~ Lewis Carol

IF THE GOAL in life (and business) is to help others, then a good first step would be to try to understand the people we are aiming to help so that we can figure out who they are and what they want.

Here are 8 things to think about when trying to understand the customer.

1. Identify the customer

In general terms, who is your customer?

2. Segment

What are the important customer segments?

Dividing customers into groups can help you better understand their specific needs and preferences. For example, you may want to segment by:

  1. age group
  2. gender
  3. income level
  4. employment status
  5. distribution channel
  6. region
  7. product preference
  8. new versus existing customers
  9. large versus small customers

3. Concentration

What is the concentration of customers in the market?

This question is important because of the Wal Mart Effect. Is there one customer in the market who is so big that you cannot afford to ignore them? If so, you may need to play by their rules, or look for a different market where you have a competitive edge.

4. Size

How big is the market? How big is each customer segment? How many customers are there and what is the dollar value of those customers?

5. Growth

How fast is the market growing? What is the growth rate of each customer segment?

6. State of the Economy

What state is the economy in?  What stage of the business cycle are we at?

7. State of Technology

What role does technology play in the industry? How quickly is the state of technology changing?

8. Recent and impending changes

Have there been any recent changes in the industry? Are there any impending changes?  For example, new players, mergers & acquisitions, substitutes, technology or government regulations.

9. Industry Drivers

What drives the industry: brand, product quality, scale of operations, or technology?

10. Customer Preference

What do customers want? Do different customer segments want different things?

Have you asked them?

11. Willingness to Pay

What price is each customer segment willing to pay? How price sensitive is each customer segment?

For example, students are extremely price sensitive (i.e. students have a high elasticity of demand). This means that by offering students lower prices for your products you should be able to increase quantity sold enough to boost total revenues.

12. Distribution

What is the best way to reach customers? Does each customer segment have a different distribution preference? For example, younger customers may prefer purchasing online while more mature customers may prefer buying products through traditional retail outlets. Here are 6 ways to reach customers:

  1. mail order
  2. online store
  3. factory outlet
  4. retail store
  5. department store
  6. network marketing

Understanding the Product

WHETHER you are entering a new market, launching a new product, growing market share, developing a pricing strategy or managing costs, you will want to understand the products that you are dealing with.

Here are 9 things to think about when trying to understand a product.

1. Identify the product

What is the product? What does it do?

For example, News Corporation produces newspapers, magazines, film, television and cable.

2. Advantages

What’s special about the product? Why do people buy it? Why is it useful?

For example, News Corporation provides people with media brands that they know and trust, and media content which keeps them entertained and informed.

3. Disadvantages

What are the disadvantages of the product? Are there any side-effects?

For example, MySpace is a social networking platform that caters for musicians but does not offer a community building platform which encourages trusted connections and privacy protection. Facebook and LinkedIn have done a better job of protecting user privacy and encouraging meaningful connections.

4. Differentiation

Is the product a commodity or is it a differentiated from other offerings?

For example, Fox has produced an animated sitcom known as “The Simpsons”; one of a kind.

5. Malleability

Can we change the product?

Our ability to change a product will depend, in part, on how narrowly we define the product. If your product is “blue ball-point pens” then you will have limited ability to change the product. However, if your product is “small plastic products” then you can change the colour of the pen (red, green, purple), the type of pen (ballpoint, rollerball, fountain, felt tip) or even the type of plastic product (stapler, cigarette lighter, highlighter).

6. Legal protection

Is the product protected by copyright, trade mark, or patent?

For example, Fox has protected any information, text, files, images, video, sounds, musical works, works of authorship, applications, and any other materials or content relating to “The Simpsons” by using copyright, trademark, patent and other laws.

7. Complimentary goods

What is happening to the complimentary goods? If the market for complimentary goods is suffering, this will affect the product.

For example, if our product is the SUV Hummer and the price of petrol (gas) has doubled then that will negatively affect the value of our product in the mind of consumers.

8. Product lifecycle

Where is the product in its product lifecycle?

9. Packaging

What does the product include?

For example, if the product is an annual hard copy newspaper subscription, does that include online access?

Why consulting?

You will be more likely to succeed if you can clearly articulate why you are getting into the consulting industry

BEFORE applying for interviews, one question that you will want to ask yourself is “why consulting?”

Relevance of the question

The question is important for at least two reasons:

  1. You will be asked this question in your interview so it is a good idea to be prepared; and
  2. You will be much more likely to succeed (in the interview and afterwards) if you can clearly and passionately articulate in your own mind the reasons why you are getting into the industry.

How to answer the question

The way you respond to the question is more important than what you say. The most important thing is to be sincere and passionate about getting into the industry.

Think about why you want to get into the industry and write down each reason as a dot point. Memorise your dot points before you step into the interview room.

Your reasons

It is important that you are true to yourself, and have your own reasons for wanting to enter the industry.

Here are the 4 reasons why consulting is an obvious choice:

  • Solving business problems: Working with high profile clients to solve challenging business problems
  • Learning from the best: Working with and learning from super intelligent and energetic people
  • Building relationships: Working on a consulting engagement would be a great opportunity to build relationships with colleagues and business leaders
  • Travel: Consulting is a great way to combine travel with work

What are/were your reasons for wanting to get into the industry?

Respond in the forum.

12 Tips for Nailing the Guesstimate Question

AS WE found out in the previous post, the guesstimate question is a usual type of question that you can expect to be asked when interviewing for a position at a consulting firm.

Here are 12 tips to help you nail the guesstimate question:

  1. Practice: We live in a world where most of us use a calculator or computer every day and it can be easy to forget how to do basic arithmetic in your head. Practice doing some guesstimate questions before the interview so that you are prepared. It is a good idea to bring a pen and paper to the interview to keep track of your calculations.  The Vault.com has also suggested bringing graph paper to the interview so that you can graph your results.
  2. Know some basic facts: It will help to know a few basic facts to give you a starting point from which to make reasonable assumptions. It is a good idea to know some key country and city population estimates.  For example, estimates for the population of the world (7 billion), America (300 million), Australia (20 million), New York (20 million), Sydney (4 million) and Melbourne (4 million).
  3. Use round numbers: You are responsible for doing the calculations so pick numbers that are easy to work with. For example, estimate the population of America as 300 million not 309.3 million.
  4. Get into character: An easy way to calm your nerves and improve your performance is to role play. You are not a university graduate desperate for a consulting job, you are a professional consultant. Game on!
  5. Take a moment: It is important to maintain your composure so before starting to answer the guesstimate question take a moment to consider your approach. You can buy yourself some time by saying, “That’s an interesting question” and then pausing to think.
  6. Have a clear approach: It is important to have a clear approach to help you answer the question.
  7. Ask questions: Your interviewer may be able to provide you with direction. If the question is “How many ping-pong balls will fit inside a 747?” the first question you might want to ask your interviewer is “What is the volume of a ping-pong ball?”
  8. State your assumptions: The interviewer may not know the answer or may not want to give you direction so you’ll have to make assumptions.  It is a good idea to clearly state your assumptions. For example, “let’s assume that the diameter of a ping-pong ball is 4cm. The formula for the volume of a sphere is 4/3.pi-r^3. The volume of a ping-pong ball would therefore be about 11-pi centimetres cubed”.
  9. Think out loud: The interviewer is trying to assess your thought process in getting to the answer, not the answer itself. If you don’t think out loud, you make it difficult for the interviewer to give you points.
  10. Explain your logic: As you make your way through the problem it is helpful to explain the logic behind each of your assumptions. Instead of saying “a 747 is about 100 metres long” you could say “I know that  an average car is about 5 metres long and based on my experience I would say that 20 cars lined up end to end would be about the same length as a 747. So I will assume that a 747 is 100 metres long”.
  11. Answer the question: After doing all of the calculation remember to answer the question that has been asked.
  12. Be prepared for the follow-up question: After you answer the guesstimate question, you may be asked “If you had to find the real answer to the question, how would you do it?” This is a test of your creativity and resourcefulness.

The Guesstimate Question

THE guesstimate question is a usual type of question that you can expect to be asked when interviewing for a position at a consulting firm.

What will you be asked to do

A typical guesstimate question will require you to estimate a number by doing a rough “back of the beer coaster” calculation. You are supposed to reach a final answer by using a series of narrowing assumptions.

Your assumptions should have a sound basis and you should explain the logic behind your assumptions, however it is not important that your assumptions be 100% accurate.

What is being assessed

Your response to the guesstimate question will help the interviewer evaluate your strengths in the following areas:

  1. professionalism and ability to remain level-headed when placed in a tricky situation;
  2. creativity and sound judgement in being able to come up with plausible assumptions;
  3. logic and structured thinking; and
  4. numerical skills and level of comfort with doing basic arithmetic in your head.

The guesstimate question is quite different from the kind of interview questions that you are probably used to.  For the guesstimate question, it is better to arrive at the wrong answer with good assumptions and clear logic than to know the right answer because you saw it on the Discovery Channel last week.

Examples

Here is a list of example guesstimate questions to give you an idea of the kind of questions to expect:

  1. How many births are there in America each day?
  2. How many petrol stations are there in Sydney?
  3. How many bottles of wine are consumed in France each month?
  4. How many cups of tea are drunk in England each day?
  5. How far does the average Premiership footballer run in a single game?
  6. How much does Mount Kilimanjaro weigh?
  7. How many pounds are spent on haircuts in the UK each year?
  8. How many ping-pong balls will fit inside a 747?
  9. How many weddings are performed in China each year?
  10. How many men’s suits were sold in the United States last year?
  11. How many tennis balls fit in a swimming pool?
  12. What is the annual size of the golf ball market in Japan?
  13. Estimate the total revenues obtained from the movie Avatar.
  14. What is the size of the market for mobile phones in America?
  15. How many white cars are there in Australia?
  16. How many people are buried each year in England?
  17. What is the annual market for apples in America?
  18. What is the annual revenue of Harrods in London?
  19. What is the market for bicycles in America?
  20. How many taxis are there in New York?

Top 5 Tips to Nailing the Management Consulting Interview

This guest post is by Neal Dodd, a former McKinsey consultant who has interviewed and prepared well over 100 potential candidates over the years. Neal currently manages Briefcases Direct.

TOP tier management consulting companies are the preferred destination for many MBA graduates, as well as graduates with less traditional backgrounds. In general, the consulting positions for those straight out of an undergraduate program are fewer and farther between. That’s because the more junior analyst positions typically don’t lead to partner track consulting positions in most firms; analysts are expected to return to graduate school and only then, should they return, be on a partner track. This can vary from firm to firm but is definitely true for the McKinsey, Bain and BCG type firms.

That doesn’t mean that fresh graduates cannot find positions, even in financial times as difficult as these. Believe or not, consulting companies are busier now than in the prior recession of 2001, so don’t lose hope. I have personally coached over a hundred potential candidates and many were truly amazed that they were able to secure the coveted offer letter during a competitive interviewing season. In order to maximize your chances during the interviewing process, it’s important to prepare carefully, below are some tips to help you ace the interview:

1. Make a good first impression

This goes for any interview you’re on but is particularly true for fields like management consulting. Make sure you look like a consultant – what does that mean? Many of the smart people that interview for consulting positions have not interviewed anywhere before or only for academic type positions. Others are foreign born graduates of top MBA or other programs – whatever, the case may be, they have never interviewed for a top tier management consulting job or similar positions in companies. The fact that these firms interview the brainy types only makes the situation worse. Invest in well made suit, dark blue or grey with or without pinstripes is perfect for men, for women, black can also work. A tie with a splash of color is fine, it can convey a little bit of energy or pizzazz, but nothing too flashy, they like energy but not attention seekers. A briefcase or attaché is a perfect complement to an outfit, you can always borrow a friend or colleague’s and it doesn’t necessarily have to be new to convey a polished look.

2. Keep your poise

Much of the interviewing process is very intense, with some companies intentionally playing “good cop, bad cop” between their interviewers. All this means is that you need to remain poised, don’t let them ruffle your feathers with abrupt or unfriendly behavior, pushing paper around or looking angry. Remember, you’re not here to make friends, you’re here to get a job and they’re here to test whether you can deal with nasty clients, managers and co-workers should the occasion arise. Keep smiling and a resilient positive attitude, you’re interviewers will find it irresistible.

3. Think and listen

This might sound obvious, but most people don’t do this during the case interview and miss the boat on what the interviewer is asking for or don’t get the hints that are being dropped during the discussion. A classic issue for interviewees is writing too much instead of listening to the question being asked. Practice listening to case questions and writing very few words, use symbols for profit (π), revenue (R) and other common words and don’t write down the fluff in the questions, flowery language is there to confuse, good consultants can spot the key facts quickly. Listen and then think about the implications of the question being asked. If there are declining profits in a business that is becoming commoditized, then opine as much and state your rationale. You can be thoughtful and comment on the question at hand based on what you know. Continue this process throughout the case interview, each piece of information is a clue, not just a plug into an equation or out of the box framework so common in business schools.

4. Ask questions

Now that you’re thinking about the case and the information you’re being given, be sure to ask intelligent questions; start a dialogue rather than barreling down a path that is preconceived or based on early inferences on the case at hand. Remember, you are expected to be engaging during team problem solving situations, be sure to appear this way during the interview and engage the interviewer. There is probably a lot you know about a particular industry based on general reading (you should be reading business publications to build your business acumen if you don’t have a typical business background). If the case is about the magazine industry, you should be able to guess what their sources of revenue are without having worked in the business – that’s just common sense, practice applying this common sense. Curiosity is a relentless trait in good consultants, mix this curiosity with intelligent thought to come up with hypothesis driven questions: “One would think that the roofing industry is seasonal…..are there seasonal variations in this company causing cash flow issues?” rather than, “is there uneven earnings throughout the year?”

5. Pass the airport screen

Consultants always ask, is this someone I’d like to be stuck at an airport with for 4 hours or in a small team room for 8 – 12 hours per day for weeks on end? Be sure you’re the type of person that is tolerable, hopefully enjoyable, to be around. Be yourself, don’t be too pushy or aggressive, it just turns people off. Have fun with the interview, if you’ve prepared well it should be fun for both you and the interviewer. Be sure to prepare well for the interview and the fit questions on your background, resume, interests, strengths and weaknesses – these all count, remember, they’re looking for the next round of leaders for their organizations, their people are their product so show them what a great product they’re looking at!

Case Interview Guides & Books

THIS list of guides and books is a a work in progress. If you come across any other useful resources that I haven’t listed here, please let us know.

Online case interview guides

  1. Make Your Case: Master Consulting Interviews | WallStreetOasis.com
  2. ATKearney – interview casebook
  3. Deloitte – 2007 Boston College – Conducting Case Interviews
  4. Deloite – 2005 Michigan State University – Case Workshop
  5. University of Pennsylvania – interview guide
  6. Yale School of Management – sample interview questions

Books

  1. Case in Point: Complete Case Interview Preparation by Marc P. Cosentino
  2. Crack the Case: How to Conquer Your Case Interviews by David Ohrvall
  3. How to Get Into the Top Consulting Firms: A Surefire Case Interview Method by Tim Darling
  4. Management Consulting: A Complete Guide to the Industry by Sugata Biswas and Daryl Twitchell
  5. Mastering the Case Interview: The Complete Guide to Management, Marketing, and Strategic Consulting Case Interviews by Alexander Chernev
  6. The Fast Track: The Insider’s Guide to Winning Jobs in Management Consulting, Investment Banking, & Securities Trading by Mariam Naficy
  7. The Harvard Business School Guide to Careers in Management Consulting by Maggie Lu
  8. Vault Case Interview Practice Guide
  9. Vault Guide to the Case Interview
  10. Ace Your Case! Consulting Interviews (WetFeet Insider Guide)

The consulting case interview: 10 tips for a successful performance

THIS is the first of a series of posts looking at the consulting case interview. Below, I provide ten insightful tips that will help you achieve success in your case interview. The information below is from my own thoughts and by reference to Vault Guide to the Case Interview.

1. Practice, practice, practice

Preparation is important for three main reasons:

  1. The interview process is extremely competitive. You are unlikely to succeed without a lot of practice;
  2. Case problems are indicative of the type of work that you will have to do as a consultant. So, your ability to answer case problems indicates your readiness to start work as a consultant; and
  3. Your preparedness for the interview is an indicator of your motivation and passion to be a consultant. If you can’t be bothered to prepare, then you don’t want the job badly enough.

2. Take notes

You should take notes when the interviewer is giving you the facts of the problem question.  Remember to bring a notepad and pen to the interview because the benefit of writing things down is that:

  • It helps ensure that you don’t need to ask the same question twice;
  • It helps you to structure your thoughts; and
  • It allows you a moment to pause and think before addressing the question.

3. Don’t make assumptions

Your interviewer will most likely leave information out when giving you the facts. You should not assume facts that have not been given to you. The interviewer has more than likely drawn the business case from the interviewer’s experience of a real world business problem. In answering a business case problem, you should assume the persona of a consultant trying to learn about an assignment. For example, you should ask if the company, or another company in the industry, has encountered a similar business problem, and what they did about it. Although your interviewer may not release that information, the interviewer will be impressed that you asked these sensible questions.

4. Ask questions

Your interviewer expects you to ask questions in order to obtain an accurate picture of the relevant facts in the case. For example, if you don’t know the first thing about the automobile market, ask how much it costs to manufacture an engine. If you are asked to estimate the demand for hamburgers in Sydney, feel free to ask how many people live in Sydney and the surrounding areas. Your interviewer is likely to direct your line of questioning to a specific area, but you must always be ready to control the conversation in case the interviewer does not direct your reasoning.

5. Engage in active listening

It is not wise to stick religiously to asking a list of pre-prepared questions. Listen to the information that you have received and the answers you get to your initial questions and how this affects your understanding of the problem. What is unclear and what do you still not know? Make sure you respond to the information you receive and incorporate it into your analysis.

6. Maintain direct eye contact

Eye contact is important because it demonstrates confidence and authority. As a consultant you will have to meet with upper management and boards of directors regarding matters that you have been briefed on only hours before. The case interview is a practice for the real thing.

7. Take your time

It’s okay to take a minute to collect your thoughts. However, it’s probably not such a good idea to leave the interviewer hanging for 5+ minutes while you ponder the deeper aspects of the problem. In short, it is more important to give a well thought out and structured response than to respond immediately.

8. Clearly structure your answer

Clearly structure your answer by identifying to the interviewer the analysis framework you are going to use and the structure of your answer. For example, “firstly I will consider X, secondly I will consider Y, and finally I will make a recommendation.” A large part of a consultant’s job is to explain complex ideas clearly and succinctly. By structuring your answer, this will help you to structure your thoughts and may alert you to factors that you would have otherwise failed to consider. Providing a clear structure will impress your interviewers by avoiding the impression that you “made it up as you went along”. I will consider the main analysis frameworks that you might be able to use in a later post.

9. Think out loud

The business case is an opportunity to show the interviewer how you think. As you analyse the elements of the business case, be sure that you talk out loud and explain your reasoning. This is the only way the interviewer can assess your performance.

10. Summarise your conclusions

You have limited time in your case interview to make your point. It is important to be able to briefly summarise the conclusion you have come to based on your analysis of the facts and to make a recommendation.