Download - Rice Case Workshop
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8/8/2019 Rice Case Workshop
1/22
Structured Approach to Cases
Neal Shah
Tanay Shah
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8/8/2019 Rice Case Workshop
2/22
Hypothesis driven problem solving
2
Agenda
Sample Case2
The Case Interview Roadmap, MECE, & Logical Breakdown1
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Hypothesis driven problem solving
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Case Interview Roadmap: The Flow of a Case Interview
IntroductionHypothesis
Development
Information
GatheringSolution
Interviewer ProvidesIntroductory
Information about the
Case
Ask ClarifyingQuestions
Develop hypothesisCreate a MECE IssueTree
Fill in the gaps in
InformationFormulate a
Response to the
Problem
Restate Critical
Points of IssueState Solution
Be Succinct and
Crisp
Activities:
@#$%
@#$%
@#$%
Transition Statements Between the Phases Will Help Your Interviewer Understand You
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Hypothesis driven problem solving
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Remember Minto1 The Pyramid Principle
Structured communication is a very important part of case interviews.
Combined with strong logical reasoning will prove your abilities for a case
Situation
Complication
Question
Hypothesis
PointA
Point B Point C
Summarize the situation, complication, and question to be answered in the beginning
1 Minto, Barbara. The Minto Pyramid Principle: Logic in Writing, Thinking and Problem Solving.Minto International, London 1996.
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The Importance of Mutually Exclusive Collectively Exhaustive
MECE
Mutually
ExclusiveAny points overlap?
Example
Making a Meal:
Select meal
Buy ingredients
Prepare
Collectively
Exhaustive
All possibilities covered?
Watch Types:
Analog
Digital
Automatic
Wind Up
Reasons to acquire a competitor:
Complimentary customer base
Superior technology Digestible size
Being MECE Builds Logic Into your Response, and Helps Drive Logical Communication
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MECE Exercise
Which Belong to a MECEGrouping?
1. St. Louis
2. Philadelphia
3. Amazon
4. Sierra Nevada
5. Bogot
6. Calgary
7. Panama City
8. Seattle
9. Santiago
10. Mississippi
11. Andes
12. NYC
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Hypothesis driven problem solving
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Build Out Your Issue Tree
The next step is to build a MECE Issue Tree
Question/Hypothesis MECE Logic Further Breakdown Questions to Ask
Breakdown the issue into logical categories and begin asking questions
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Hypothesis driven problem solving
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Finish the Case By Tying Together Findings with Logic
You need to investigate
selling your business to respond
to pressures from abroad
The business faces an increasing
threat from abroad
A different ownership structure
is needed
Your present ownership structure
will not enable you to respond
effectively to this threat
Deductive Logic
You must move into thecredit card industry
It will improve your
companys performance
There is a great deal of
synergy between your
current business and the
credit card business
It will improve your
competitive position
Inductive Logic
Always close with reviewing the situation, complication, question, hypothesis, and highlights that
led to the answer.
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Hypothesis driven problem solving
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Case Interview Roadmap: The Flow of a Case Interview
Develop hypothesisCreate a MECE IssueTree
Introduction Hypothesis
Development
Information
GatheringSolution
Interviewer ProvidesIntroductory
Information about the
Case
Ask ClarifyingQuestions
Fill in the gaps inInformation
Formulate a
Response to theProblem
Restate CriticalPoints of Issue
State Solution
Be Succinct andCrisp
Activities:
Situation
Complicatio
n
Question
State HypothesisState MECE Logic
Breakdown
State Desire to
Begin Filling inInformation Gaps
State Solution
Then prepare to
provide a brief
revisit of the
case
Transition Statements Between the Phases Will Help Your Interviewer Understand You
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Hypothesis driven problem solving
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Sample Case
Practice Makes Perfect
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Drug Co. has hired xxx Consulting Company
Drug Co. is a privately held retail drugstore chain located in the Northeast
Drug Co. has 40 locationsDrug Co.s business model is to be
located in smaller towns where
competition may be limited
Drug Co. also differentiates itself byoffering compounding service
We are hired to identify problem(s)
and recommend solution(s)
ComplicationSituation
Key Questions
Private equity company recentlypurchased Drug Co. and is exploring
options to create value; would like toexit within 3-5 years
Drug Co. lags against its chief
competitor, Walgreens, in terms of
operating margin (5.7% versus 2.5%)
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Hypothesis tree
Drug Co.s operating margins are lowerthat Walgreens as a result of poor
operations and lower revenue
Drug Co. generates less
revenue per location, per
square foot
Whats happening in the
market?
Regulatory changes?
Industry trends?
Consolidation?
Diversification of product
base?
Competitors?
Walgreens
Eckerd?
Substitutes?
Drug Co.s operations are
not as efficient as
Walgreens Store specs?Size of store
Hours of operation
Product mix?
Prescription versus
general merchandise
Brand prescriptions versus
genericCompounding as a % of
prescription
Locations?
Do Drug Co.s locations
hurt the business?
Traffic at a Walgreens
versus Drug Co.
COGS?
Does Walgreens have an
advantage due to buying
power?
How does product mix
affect COGS?
Pricing?
Fixed costsRent Is Drug Co.
cheaper as a result of
location?
Wages and salaries?
Size of locations?
Number of employees?
Variable costs?
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INNOVATION
Lack of desiredfeatures (espdual sim) in lowpriced segment
High cost due toquality parts
Indifference ofthe ruralsegmenttowards quality
RURAL
MARKET
Has the ruralmarket beenignored in thesmart phonerace?
Does Nokiahave a deepreach within therural market?
Are the newentrants playinga differentmarginalizationgame?
URBAN
MARKET
Is Nokiacomparable withthe other smartphones in thecoolnessquotient
MARKET
CHANGES
Reduction inproduct lifecyclefor a customerleading todemand forlower pricedhandsets
TELECOM
POLICY
Will theimpending banon importedmobile handsetsfall through?
Nokia is losing out on market share
to new entrants because of
changing market conditions and
feature competition
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Marginalization
Lack of features in the lower priced segment high cost due to better quality indifference of the ruralsegment regarding quality
Distribution network
Low end losing out on aspirational value, high end losing out on the coolness quotient.
14
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Walgreen's is more profitable than Drug Co.
5.7
21.3
73.0
2.5
21.0
76.5
Walgreens Drug Co.
0
20
40
60
80
100%
COGSSGAEBIT
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General merchandise has the best margin
50.0
50.0
10.0
60.0
30.0
Walgreens Drug Co.
100 100
0
20
40
60
80
100%
Product Mix
General merchandisePrescriptionCompound
Gross Margins
39%
15%
28%
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Walgreen's sells more per store
8,184,199
6,450,500
Walgreens Drug Co0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
Sales per store
27%
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Hypothesis driven problem solving
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Walgreen's sells more per square foot
677
476
Walgreens Drug Co0
200
400
600
800
Sales per square foot
42%
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Hypothesis driven problem solving
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Drug Co. has hired xxx Consulting Company
Drug Co. is a privately held retail drug
store chain located in the Northeast
Drug Co. has 40 locations
Drug Co.s business model is to be
located in smaller towns where
competition may be limited
Drug Co. also differentiates itself by
offering compounding service
We are hired to identify problem(s) and
recommend solution(s)
ComplicationSituation
Key Questions
Private equity company recently purchased
Drug Co. and is exploring options to create
value; would like to exit within 3-5 years
Drug Co. lags against its chief competitor,
Walgreens, in terms of operating margin
(5.7% versus 2.5%)
Do locations have anything to do with the revenues?
What does product mix do to the operating margins? More specifically, to the gross margins?
Does Walgreens have any cost advantage when it comes to suppliers as a result of volume?
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Hypothesis driven problem solving
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Hypothesis tree
Walgreens lower COGS combined withmore revenue drives higher operating
margins compared to Drug Co.
Product mix?
Prescription versus general
merchandise
Brand prescriptions versus
generic
Compounding as a % ofprescription
Buying power/suppliers?
Same suppliers?
Volume discounts?
Collaborative planning?
Vendor managed inventor?
Store locations andlayout?
Demographics
Population?
Average income?
Traffic?
Proximity to competitors?
Store layout?
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Important Points
1.Practice, Practice, Practice
2.Approach the Case Methodically3.Learning and Understanding Frameworks only Provides Basic Business
Knowledge, and is Only a Baseline NeverDirectly Reference a
Framework
4.Effective Communication of your Methodical Approach to the Case andthe Answer will Differentiate You
5.Keep the Case Roadmap in Mind
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Important Points to Remember
Approach the Case Methodically2
Learning and Understanding Frameworks only Provides You with Basic Business
Knowledge. This is only a baseline. Never directly reference a framework.3
Effective Communication of your MethodicalApproach and Answer to the Case
will Differentiate You.4
Keep the Case Interview Roadmap in Mind5
Practice, Practice, Practice1