Case in point
Case questions
Types of case questions
Market-sizing questions
Population-based, household, or preposterous.
Interviewer is more interested in the logic and thought process than whether
the assumptions are spot-on.
You don’t get a chance to ask questions, you can only ask for clarifications.
Population-based questions
Make assumptions and break the population down by generation
Determine the number / percentage by generation
Show the interviewer the thought process
Review the final answer (sanity check). If it sounds off, review assumptions,
no need to go through the process again.
Household questions
Break households by income levels and calculate number of households
based on an average of people per household
Household categorization : income level, rural or urban, etc. and the
percentage in each category
Make assumptions about the number of each household category
Calculate the total and add an estimated number of non-households
Worldwide market-sizing
Pick one country and extrapolate
Make a list of possible customers or users
Then determine the market size (population or household based)
Preposterous questions
Case in point 1
Type “raisonnement scientifique”. Just have fun
Factor questions
Some formulas to remember:
Net Income = Revenues - expenses
Breakeven Point in Units = Fixed Costs / (Price - Variable Costs)
Breakeven Point in Price = (Total fixed cost / Production unit volume) +
Variable cost per unit
Profit Margin = Net Income / Revenue
ROI = Profit from Investment / Investment Cost
Compound Annual Growth Rate = final value / the initial value. Raise the
result to the power of 1 divided by the number of years.
Contribution Margin = Revenue/Unit – Variable Cost/Unit
General advice
Recommendations, summaries, and the final slide
Lead with the recommendation
Make your recommendation yes or no and tell the interviewer why
State and prioritize risks based on impact and likelihood of occurrence
Lay out the next steps for the short-term and the long-term
Most important, you need to sell your recommendation
Summarize the case
Case journal
Practice cases and write down the problem, the solution, and what you didn’t
think of.
Ivy Case System
The first five steps
1. Summarize the question.
Case in point 2
2. Verify the objective(s). Ask if there are any other goals or objectives.
3. Ask clarifying questions.
4. Label the case and lay out your structure
Make sure the structure is MECE. Walk the interviewer through your thought
process.
5. State your hypothesis
Core to the case
Core questions to ask about the company
1. Profits and revenues for the last three years
2. Customer segmentations
a. Characteristics
b. Changing needs
c. Profitability by segment
3. Product mix
a. Cost / margins
b. Product differentiations
c. Market share
4. Production capabilities / capacity
Does the company have the ability to expand? Are they running at full
capacity now and if not why?
5. Brand : how strong is it?
6. Distribution channels
7. What constitues success (different from the objective)
a. Which metric to use
Core questions to ask about the market
1. Market size, growth rate, and trends
Case in point 3
Three years of data. How the industry is doing overall and how the
company is growing compared to the industry
2. Where is it in its lifecycle
a. Emerging, mature, declining
3. Industry drivers
Brand, street cred, price, content, size, economics, technology, geopolitical
events, bargaining power of buyers, bargaining power of suppliers, or
distribution channels?
4. Customer segmentation(s)
Which one(s) is the company going after, their size, their profitability.
5. Margins
6. Industry changes
M&A, new players, change in technology, new regulations
7. Distribution channels
8. Majors players and market share
Is it fragmented or dominated by one or two major players
9. Product differentiation
10. Barriers to entry/exit
To entry:
Capital, distribution channels, raw materials, technical knowledge, or
human talent.
Government regulations, customer loyalty, sticky features, market
domination
To exit:
Massive investment, non-transferrable fixed assets, contract
requirements with suppliers, government requirements, costs of leaving
the market, barriers of emotions.
The four key case scenarios, developing your
structure
Case in point 4
Basic building blocks to be used to base your thinking; they help ask the right
questions and turn the case into a well-structured conversation.
Profit and loss
1. Review external factors
If competitors’ profits have also fallen it might be an industry-wide problem.
And they vary from company to another.
For a retailer: consumer confidence, disposable income, unemployment rate,
petrol prices, etc.
For a manufacturer: how the dollar is doing against other currencies, interest
rates, petrol prices, and maybe commodities.
If not it might be just our problem: increased costs, lower revenus, or outdated
products.
Strategies can be revenue-based or cost-based (production, labor, finance).
Divide ideas into short-term and long-term solutions.
Questions to think about:
Revenues:
What are the major revenue streams, and what percentage of the total
revenue does each stream represent?
Does anything seem unusual in the balance of percentages?
Have the percentages changed lately? If so, why?
Costs:
Any major shifts in costs?
Do any costs seem out of line?
If we benchmarked our costs against our competitors’ costs, what
would we find?
Products:
Advantages and disadvantages (product cannibalization, layoffs, side
effects)
Case in point 5
Entering a new market
Clarifying question: Why does the company want to enter this market?
The steps are basically the same core questions about the company and the
market
1. Questions about the company
Profits and revenues for the last three years
Product mix
If this is about a new product:
Will it cannibalize an existing product
Is the customer segmentation(s) the same?
Can we use the same distribution channels?
Can we use the same sales force?
How and where will this new product be produced?
Will we have to hire new workers or retrain current workers?
How strong is the brand
WCS
2. Determine the state of the current and future market
What is the size of the current market?
What is the growth rate? (Ask for trends.)
Case in point 6
Where is the industry in its life cycle?
Who are the customers and how are they segmented?
What role does technology play in the industry and how quickly will it
change?
How will the competition respond?
3. Investigate the market to determine whether entry makes good business
sense
Who are the competitors and their market share
Product differentiation
Our pricing
Are substitutions available
Barriers to entry/exit
What are the risks
4. If we decide to enter this market, we need to figure out the best way to
become a player. Four majors ways to enter a market:
Start from scratch and grow organically
Acquire an existing player from within the industry
Form a joint venture / strategic alliance with another player with similar
interest. What can each side bring to the venture?
Outsourcing
Cost-benefit analysis; pros and cons of each strategy.
Case in point 7
M&A
If the buyer is a PE firm, ask why it wants to buy the company, what else it
owns, and what it plans to do with it.
If the M&A involves one company acquiring another, ask not only “why” but
also what other products they sell and what are the synergies involved. The
acquisition needs to make good business sense.
Reasons to purchase:
Increase market access, boost the brand, and increase market share.
Diversify the company’s holdings.
Pre-empt the competition from acquiring the company.
Target company is a threat.
Inherit management talent.
Obtain patents or licenses or products.
Gain from synergies, cost savings, cultural integration, expansion of
distribution channels and customer base. Cross-sell products.
Gain tax advantages.
Increase shareholder value.
Due diligence. Research the company and industry:
Case in point 8
What kind of shape is the target company in? Management? Products?
Profitability? Brand? What is the stand-alone value? What has been its
growth rate? Why is it on the market? Consider all the items in the core
box about analyzing a company.
How secure are its markets, customers, and suppliers?
What are the margins like? Are they high volume, low margin, or low-
volume-high-margin?
How is the industry doing overall? And how is the company doing
compared with the industry? Is it a leader in the field?
How will competitors respond?
Are there any legal reasons we can’t or shouldn’t acquire the target
company?
Are there technology risks?
How much will it cost? Will the client overpay?
Does the buyer have enough cash or access to capital markets?
Pricing strategies
Can be stand-alone questions or part of a larger case.
1. Investigate the company:
What is the pricing objective: profits, market share or brand positioning?
Is it in charge of its own pricing strategies or is it reacting to suppliers,
the market and competitors?
2. Investigate the product:
How does it compare with that competition? Are there substitutions or alts?
Where it is in its growth cycle. Is there a supply and demand issue at work?
3. Determine pricing strategy.
Competitive analysis:
Are there similar products out there?
How does our product compare with the competition?
Do we know the competitors’ costs?
How are its products priced?
Case in point 9
Are there substitutions available?
Is there a supply and demand issue?
What will the competitive response?
Cost-based pricing: Costs + profit.
Price-based costing
What are people willing to pay for this product?
Growth and increasing sales
Clarifying questions: by what rate have the revenues grown for the last three
years and do you have any forecasts?
1. Learn about the company and its size, resources, and products
2. Investigate the industry
Increase volume / revenues:
Expand the number of distribution channels.
Increase product line through diversification of products or services
(particularly with products that won’t cannibalize sales from existing
products).
Analyze the segments of the business with the highest future potential and
margins.
Invest in a marketing campaign.
Acquire a competitor (particularly if the question is about increasing market
share).
Adjust prices (Take into account the price sensitivity of the customer. Lower
prices to increase volume and raise them to decrease demand or increase
profits per unit).
Create a seasonal balance. (Increase sales in every quarter – if you own a
nursery, sell flowers in the spring, herbs in the summer, pumpkins in the
fall, and Christmas trees and garlands in the winter).
Key questions for additional scenarios
Industry Analysis
Case in point 10
Investigate the industry overall
Where is it in its life cycle? (Emerging? Mature? Declining?)
How has the industry been performing (growing or declining) over the last
one, two, five, and ten years?
How have we been doing compared with the industry?
Who are the major players and what market share does each have? Who
has the rest?
Has the industry seen any major changes lately? These might include new
players, new technology and increased regulation.
What drives the industry? Brand/street cred, price, quality, endorsements,
fads, marketing, products, size, economics, or technology?
Profitability. What are the margins?
Suppliers:
How many are there?
What is their product availability?
What’s going on in their market?
How is the supply chain? Are the companies that supply you getting what
they need from their suppliers?
The Future:
Are players entering or leaving the market?
Are any mergers or acquisitions going on?
Are there any barriers to entry or exit?
Substitutions, what alternatives are there?
Developing a new product
Think about the product itself:
What’s special or proprietary about it? Is the product patented? For how
long?
Are there similar products out there? Are there substitutions?
What are the advantages and disadvantages of this new product?
Case in point 11
How does this new product fit in with the rest of our product line?
Can our sales force sell it?
Think about market strategy:
How does this strategy affect our existing product line?
Are we cannibalizing our own sales from an existing product?
Are we replacing an existing product?
How will this strategy expand our customer base and increase our sales?
What will the competitive response be?
If we are entering a new market, what are the barriers to entry?
Who are the major players and what are their respective market shares?
Think about customers:
Who are our customers and what is important to them?
How are they segmented?
How can we best reach them?
How can we ensure that we retain them?
Funding:
How is this product being funded? Does our company have the cash or are
we taking on debt? And can we support the debt under various economic
conditions?
What is the best allocation of funds?
Customer adoption rates:
Case in point 12
Starting a new business
Encompasses entering a new market as well. Same first step: market
investigation.
Once we determine that there are no significant barriers to entry, we should
then look at the company from a VC pov.
Management:
How experienced is the management team?
What are its core competencies?
Have they worked together before?
Is there an advisory board?
Market and Strategic Plans
What are the barriers to entering this market?
Who are the major players and what are their respective market shares?
What will the competitive response be?
Distribution Channels
Which, and how many, distribution channels can we rely on?
Products and services
What is the product, service, or technology?
What is the competitive edge?
What are the disadvantages?
Is the technology proprietary?
Case in point 13
Customers
Who are the customers?
How can we best reach them?
How can we ensure that we retain them?
Finance
How is the project being funded?
What is the best allocation of funds?
Can we support the debt under various economic conditions?
Competitive response
If a competitor introduces a new product or picks up market share, we first
want to ask questions such as:
What is the competitor’s new product and how does it differ from what we
offer?
What has the competitor done differently? What changed?
Have any other competitors picked up market share?
Have the consumer’s needs changed?
Did they increase or expand into new channels?
Potential responses:
Analyze our current product and redesign, repackage, or move upmarket.
Introduce a new product.
Increase our profile with a marketing and public relations campaign.
Build customer loyalty.
Cut prices.
Lock up raw materials and talent.
Acquire the competitor or another player in the same market.
Merge with a competitor to create a strategic advantage and become more
powerful.
Copy the competitor.
Case in point 14
Turnarounds
Analyze the company and industry.
Why is it failing? Bad products or services? Bad management? Bad
economy?
Are our competitors facing the same problem?
Do we have access to capital?
Is the company publicly traded or privately held?
Possible actions:
Learn as much as possible about the company and its operations.
Analyze services, products, and finances.
Secure sufficient financing so your plan has a chance.
Review the talent and temperament of all employees, and get rid of the
“deadwood.”
Determine short-term and long-term goals.
Devise a business plan.
Visit clients, suppliers, and distributors – and reassure them.
Prioritize goals and get some small successes under your belt ASAP to
build confidence.
21 ways to cut costs
Labor
1. Cross-train workers.
2. Cut overtime.
3. Reduce employer 401(k) or 403(b) match.
4. Raise employee contribution to healthcare premiums.
5. Institute four 10-hour days instead of five 8-hour days.
6. Convert workers into owners (if they have a stake in the company they will
work longer and harder and constantly think of ways to cut costs in ways
they may not have done before).
Case in point 15
7. Contemplate layoffs.
8. Institute across-the-board pay decreases.
Production
1. Invest in technology.
2. Consolidate production space to gain scale and create accountability.
3. Create flexible production lines.
4. Reduce inventories (JIT).
5. Outsource.
6. Renegotiate with suppliers.
7. Consolidate suppliers.
8. Import parts.
Finance
1. Have customers pay sooner.
2. Refinance your debt.
3. Sell nonessential assets.
4. Hedge currency rates.
5. Redesign health insurance.
“If” scenarios to remember
Decline-in-sales problem
Overall declining market
Mature market or obsolete product
Loss of market share because of substitutions
Profit scenarios
Drops in revenues → marketing and distribution issues
Rising expenses → operational and financial issues, labor, rent, marketing
costs
Product scenarios
Case in point 16
What to concentrate on
Emerging growth stage → R&D, competition and pricing
Growth stage → marketing and competition
Mature stage → manufacturing, costs, and competition
Declining stage → niche market, competition’s play, exit strategy
Pricing scenarios
Prices are stable only when three conditions are met:
the growth rate for all competitors is approx. the same
the prices are paralleling costs
the prices of all competitors are roughly of equal value
The volume and the costs are easier to change than the industry price levels,
unless all parties change their prices together (airlines, gas). The perfect for
the high-cost producer is one that convinces competitors that market shares
can’t be shifted except over long periods of time. Therefor the highest practical
industry prices are to everyone’s advantage.
Case in point 17
