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1. Leaving on a Jet Plane

A major airline is considering the purchase of 24 new planes. They are unclear how this purchase will

affect their business performance in the short term as well as the long term. You are the Senior

Consultant, meeting with the Operating Committee for the first time. I am the Chief Operating Officer

of the company. What would you need to know from me in order to assess the situation?

Here is a good example of a directed question combined with a role-playing

exercise. Not only will the interviewer be assessing your analysis and

deductive abilities, but she will also be evaluating your poise and

professionalism in front of a senior executive. In many cases, consultants

find themselves in front of key client personnel who are older and more

experienced in the industry, so your ability to cope with this type of situation

is essential. How will you actually go about assessing the situation and

finding information once you arrive at the client? (This case was given to an

MBA-level candidate.)You: What is the planned delivery cycle of the new aircraft?

Will it be staggered, serial, or all at once?

Interviewer: Aircraft will be delivered as they are manufactured over

the next five years, at approximately four per year.

You: How many planes are in the current fleet? Are there any

plans to sell off older aircraft as the newer aircraft are

delivered?

Interviewer: There are 120 planes in the current fleet. There are no

plans to get rid of our older aircraft as the new ones

arrive.

You: What is the current average cost per flight-hour of the

fleet?

Interviewer: It varies by aircraft type. The range is anywhere from

$1,000 to $5,000.

You: Do you have any frameworks in mind for assessing this

situation?

Interviewer: No. What would you suggest? (This is a tough response

because it asks you to put a stake in the ground.)

You: Well, in many cases I have used a companys cost of

capital, relative to the average cost of capital in the

industry, industry-specific metrics like the cost per

flight-hour, as I already mentioned, and depreciation

method choice. I would also want to assess the new

efficiencies brought about by your purchase, as in fuel

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You: Do any of your competitors manufacture overseas?

Interviewer: Our number one competitor produces all of its

appliances in Indonesia. (Heres your clue

manufacturing outside the country significantly lowers

costs.)

You: It probably suffices to say that some of your decline in

profit can be attributed to the increased costs you are

facing relative to older manufacturing techniques and

higher costs associated with manufacturing

domestically. This is especially troublesome in a mature

market where consumers are mostly aware of the

product category and the product may be considered a

commodity. (A commodity marketplace is one in which

customers make their purchasing decisions largely on

price. For example, toilet paper is largely a commodity

market, where consumers buy whatevers on sale.)

Lets talk about market share now. Can you tell me

about any recent market research you have regarding the

strength of your brand, price, your products position,

and any promotional activity you have had?

Interviewer: Our market research department has told us that

consumers are confused about the product category, that

they do not understand the differences between our

brand and our competitors brands. We sell to all majorappliance retailers in the U.S. We promote aggressively

twice a year and have smaller promotions once a quarter.

(This is consistent with the description of a commodity

product. The ways of breaking out of commodity

markets include promotions and making value-added

differences in the brand like, in the case of toilet paper,

introducing new designer colors and specially quilted

cotton-blend paper.)

You: What form does your promotional activity take?

Interviewer: We offer a price discount to consumers twice a year. We

regularly advertise in major magazines targeted to our

consumer, and we have an active outdoor campaign

underway.

You: It would appear you are competing in an undifferentiated

marketplace, and there may be an opportunity to capture

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additional share through an aggressive brand

differentiation effort. I believe it would also be worth

investigating the efficacy of your current promotional

programs, relative to your competition. The consumer

may be responsive to other types of promotions that

havent been utilized by the company as of yet.