Consulting Case Interview Flashcards

Framework Buckets

1. Market Attractiveness

2. Competitive Landscape

3. Company Attractiveness OR company capabilities

4. Customer segmentation and needs

5. financial considerations

6. risks and mitigations

7. Synergies

8. Create Your own Bucket

Market Attractiveness

the overall appeal of a specific market, industry, or customer segment to an organization or investor. It defines the potential for long-term growth, profitability, and success within that space, establishing the boundaries of what a company can potentially achieve

Sub questions:
What is the market size?

What is the market growth rate?

What are average profit margins in the market?

What are the major trends/changes going on in the market?

Are there new technologies in the market?

Are there new regulations?

Is the market developing or mature?

Is the market converging with another market?

Competitive landscape

refers to the list of options a customer could choose rather than your product. The list includes your competitors’ products and other types of customer solutions. A customer might also choose to purchase a product.

Sub questions:

Who are the competitors in the market?

How much market share does each player have?

What products do the competitors sell?

What capabilities do competitors have?

What do some competitors do to differentiate themselves from others in the market?

What are the barriers to entry?

Company attractiveness/company capabilities

The first measures how appealing a firm is to external stakeholders (investors, talent, and customers). The second represents the internal, actionable skills, resources, and operational proficiencies that allow the company to execute its strategy and deliver value.

Sub Questions:

What line of products does the company offer?

In what ways do the products differentiate themselves from other products?

How much market share does the company have?

How profitable is the company?

What distribution channels does the company have?

What partnerships does the company have?

How much buying power does the company have?

What is the go-to-market strategy of the company?

In what geographic regions is the company based in?

Is the company growing or declining?

Customer segmentation and needs

dividing a customer base into distinct groups based on the specific problems they want to solve rather than just demographics. Examining who the customers are and why they buy.

Sub questions:

What are the different customer segments?

What are the characteristics of each customer segment?

What are the needs/preferences of each customer segment?

How profitable is each customer segment?

Financial Considerations

Things to think about regarding revenue, costs, and profit

Sub questions:

Is the implication of this business decision profitable?

What are the different revenue elements?

What are the different cost elements?

How can we increase revenue?

How can we decrease cost?

What is the pricing strategy?

How long will it take to breakeven?

What is the cost of acquisition?

What is the financial exit-strategy of this business decision?

Synergies

the concept that the combined value or performance of two entities (like departments or merged companies) is greater than the sum of their individual parts. Simply put, it's the idea that 1 + 1 = 3. Cost synergies = saving money by streamlining operations. When two teams or companies combine, they can eliminate redundancies, negotiate better prices with suppliers through economies of scale, and consolidate overlapping tools or software. Revenue synergies = This involves making more money by cross-selling products to a combined customer base, entering new geographical markets, or leveraging each other's technology and talent.

Sub questions:

What are the possible revenue synergies?

What are the possible cost synergies?

Are synergies realizable?

How long will realizing these synergies take?

Risks and Mitigations

What could go wrong and how can we minimize/fix that. Broad bucket.

Sub questions:

What are the risks of this business decision?

What is the likely impact of such risks?

Can these risks be mitigated?

Needs for an exceptional framework

1. All buckets must be relevant to the objective of the case

2. Buckets should not have any overlap with each other

3. there should be three to four buckets

4. the framework is not generic

5. under each bucket, there are two to three sub bullets, which add detail and specifics about what each bucket means

6. the sub bullets are all relevant to the objective of the case

7. the sub bullets do not have any overlap with each other

Market Sizing Problem

an exercise where you make assumptions about how large a market is.

Usually has the unit of dollars.

Ex: How big is the contact lens market in the U.S.?

• Start by estimating the US pop (340 mil)

• Segment US pop

• Estimate the percentage of each group with vision problems

• figure out how many contacts the avergae customer would use in a week

• extrapolate how many contacts they would need in a year

• estimate avergae price of contacts

• multiply population w vision probs by number of contacts in a year by the price of contacts

Breakeven analysis

what would have to be true in order for you to achieve zero profits.

Profit = (Quantity *Price) - ( [Quantity *Variable Costs] +Fixed Costs )

Need to know equations:
Profit = Revenue - Costs

Revenue = Quantity * Price

Costs = (Quantity * Variable Costs) + Fixed Costs

Market Share

a way of measuring how much of a presence a company has in a particular market. Calculated by taking the revenue of a company in a given market and dividing that by the size of the market. It should be a percentage.

Profit Margin

measures how much a company takes in from selling a product once costs have been accounted for. It is calculated by taking the profit and dividing it by the price of the product or revenue

Return on Investment

a metric used to determine how attractive a particular investment is. It is calculated by taking the profit from the investment and dividing it by the total investment cost for a given period of time (usually one, three, or ten years)

Barriers to entry

the obstacles that a compnay would need to overcome to enter a new market.

Examples:

• capital

• technical knowledge/expertise

• brand name

• distribution channels

• economies of scale

• technology

• governmental regulation

• product differentiation

Variable Costs

Costs that increase directly with the number/quantity of product being made by a company.

Fixed Costs

Costs that do not increase directly based on the number of products being made by a company.

Fragmented Market

a market composed of many different companies, with none of them having a significantly large market share. This is good for market entry. Represents low barriers to entry

Concentrated Market

a market with a few key players that collectively have a large market share. Has high barriers of entry.

Supplier

the company that sells raw materials to another company, who then uses the raw materials to create a product to sell in the market

manufacturer

the company that uses the raw materials to create the final product

Distributor

a company that transports the final product to places where the product can be sold

Retailer

the company that sells the product

Pricing strategy

methods for pricing a product.

Ways of pricing:

1. determine how much a customer is willing to pay for the product. this is usually done through customer surveys or focus groups. The most straight forward approach. But sometimes customers don’t know how much they would pay for a product

2. price a product based on what competitors are charging. Only works if competitors sell the same or a very similar product to you.

3. price based on how much it costs to produce the product and assign a profit margin. Does not consider customers willingness to buy the product at the given price point.

Buying/purchasing power

qualitative measure of how much power a company has in setting the price of raw materials or services that it purchases from a supplier.

high if buyers are more concentrated than sellers or if there are many substitutes for the raw materials.

Merger/Acquisition reasons

1. might be easier/cheaper to acquire a missing product into the portfolio rather than developing it from scratch

2. synergies

3. seeing a smaller, high growth competitor as a threat. By acquiring the company, it eliminates the threat

4. a company may purchase another company just to diversify its portfolio

Private Equity

comprised of firms that generally have a lot of money, that they invest and/or purchase other companies for the sake of getting an ROI in one way or another

Ways to get ROI:

1. purchasing companies that are not performing well and turning them around to be profitable

2. purchasing a company to create synergies with the rest of their portfolio

Price sensitivity

measures the change in quantity of a product that a customer will purchase if the price changes

Ways to increase revenue

Organically: revenue growth that a company achieves through its own efforts, internal to the company,

Inorganically: growth through a merger or acquisition, done externally

Ways to decrease costs

1. reduce fixed costs. Generally more difficult because fixed costs tend to be contracted/long term

2. reduce variable costs by switching suppliers or using less of each raw material in the production process

3. negotiate costs with contractor or supplier

Economies of scale

the advantage that a company gets in terms of buying power as it produces and sells more and more products. cost advantages a business obtains due to its scale of operation, where the cost per unit of output decreases as total production increases. Larger companies achieve this efficiency by spreading fixed costs over a greater number of goods, benefiting from bulk purchasing, and utilizing specialized labor.