spidi2.iimb.ac.inspidi2.iimb.ac.in/~icon/reference/case_preparation_guide/other/c… · web...

Consulting Interview Preparation Book

Based on materials downloaded from various web-sitesDecember 1998

Table of Contents

1.Overview p. 2

2.Types of Cases and Appropriate Approaches p. 5

3.General Frameworks for Cases p 11

4.Cases p. 31

5.Preparing for Consulting Interviews p. 113

6.General Interview Questions p. 120

7. Other information p. 148

of 222

Why do consulting firms do case interviews?In a typical interview you would spend about five minutes telling the interviewer a little bit about yourself, about 20 minutes answering questions about your scholastic and extracurricular activities and leadership positions that you assumed, and the last five minutes clearing up any remaining questions or concerns you had about the firm you are interviewing with or the job that you are interviewing for. Well, a case interview is not much different except that you would spend the main body of the interview understanding and exploring a situation that may be typical in a consulting environment. And, possibly, less time on details about your favorite classes. The case interview has numerous benefits for the interviewer and for you. A case interview can be a test of many skills. While primarily an analytical exercise, an interviewer uses a case to gauge your comfort level with problem solving, your curiosity about the problem at hand and your ability to cogently articulate your insights. You can get a better understanding for the problems that consultants try to solve for their clients, and for the type of work they do on a daily basis. If you are still exploring career options this may help you figure out if consulting is right for you.

How do companies evaluate your case interview performance?A case interview is used to assess many of the same characteristics interviewers look for in the standard interview. Therefore, it is much more important that you clearly communicate your abilities and fit with the company you are interviewing with, than that you come up with the "correct" answer to the case. In general, the case interview will be used to evaluate you along three primary dimensions: creativity and common sense, analytic ability and poise and enthusiasm.To get a sense of your level of creativity and common sense the interviewer will be judging your ability to:

1. Conceptualize problems 2. Develop innovative solutions to business situations3. Make assumptions, see patterns, generate hypotheses and draw conclusions from only

partial information Your analytic ability will be assessed based on how well you:

1. Provide structure to unstructured problems2. Simplify problems into their individual components3. Apply transparent and logical thinking to each component4. Synthesize all of the pieces into a logical solution

Last, the interviewer will be trying to get a sense for your degree of poise and enthusiasm. It is important that you:

1. Seem excited by the case, which is akin to the kinds of issues and problems consultants face

2. Be not intimidated nor daunted by the process or problem presented in the case3. Assimilate information quickly and effectively4. Ask insightful questions

There are two broad categories of cases: Business problems (i.e., market share issues, capacity issues, profitability, etc.). The purpose

is to measure basic functional skills, analytics. It requires a big picture perspective

of 222

"Guesstimates and Brainteasers" (i.e., how many taxis are there in Moscow?). They are not used very often. The purpose is to measure your comfort with ambiguity (i.e., also apply structure). These cases help to assess your creativity and poise

of 222

There are no right answers but there are wrong approaches and reactions:- Forgetting important facts - Dwelling on unimportant details - Defending impractical solutions (it is OK to change your mind if you are in a dead-end) - Force-fitting a framework that just does not work - Changing frameworks several times during the case - Forgetting to do the "reality check" (test your conclusions using common sense)

More generally, here are a few Do's and Don'tsDo’s

1.Listen carefully - interviewers will drop hints regarding the case. This is an area where one can demonstrate teamwork. The interviewer will look to see if you build on the information provided. 2.Ensure that you understand the problem. Do not assume anything!!! Use questions for clarification and to gain a complete understanding. 3.Take your time, do not answer any question unless you have thought through your answer. Once the problem or case is presented to you, do not feel compelled to answer immediately. Rather, ask for a few moments and think out your approach. During the time that you spend thinking, use brainstorming to get all your thoughts on paper. Then, carefully assess them and order them into a logical format. 4.Engage yourself and get excited about the case. The interviewer has probably spent a few months working on the problem and consulting firms are looking for people who enjoy solving problems. They also want consultants who are dedicated to their client and client's problem. You can demonstrate this by being engaged. 5.Do not ask for every piece of data; the more you prompt for data without assimilating what you have and reaching conclusion,the more confused you could become. The interviewer has tons of data or will make it up. 6.Remember that some material may be extraneous 7.Individual pieces of data can often be combined to draw a conclusion about part of a problem 8.Think then speak. Thinking out loud leads to rambling. Practice phrasing statements clearly and succinctly. 9.Keep the interviewer informed of where you are going and check to see if you are on track. For example one could say: "I intend to purse ..., do you believe this is worthwhile?

Don’ts

If the interviewer suddenly asks you to name the three critical drivers to the industry, DO NOT ANSWER RIGHT AWAY!!!! Think about it and come up with 5 drivers, then order them from most significant to least significant. Then say something like this: "Well I have thought of 5 significant drivers, the three most important are..."A few things not to say...1.I need a lot more data 2.What are you looking for?; or Is this a marketing case?3.I'd like to concentrate totally on the political implications of this situation4.I can't solve this case because I haven't had Corporate Strategy yet5.This case has no answer; or There's obviously one answer to this case6.This case sounds exactly like what we did in Managerial Accounting

of 222

7.I don't believe you, you're trying to confuse me

of 222

Table of Contents

1.Overview p. 2



4.Cases p. 31




of 222

A fe w types of cases

Falling Profits: asks you to explore the possible reasons behind a company's drop in profits. What this type of Q is designed to assess: Analytical ability, drilldown from a high-level

statement, understanding of financial instruments, communication, industry knowledge Useful concepts/frameworks: Market assessment, BCG matrix, product mix assessment Example 1: Bunny New Media is an Internet content provider that has had three straight

quarters of high profit gains, followed by a 50% drop in profits this quarter. What has happened?

Example 2: Hill Construction has been under contract with the City of Los Angeles to build a new subway station. However, Hill’s latest financial statement shows a steep decline in profits relative to this time last year. What is the cause of this decline?

New Product Introduction: asks you to recommend a strategy for introducing a new product. What this type of Q is designed to assess: Analytical ability, understanding of brand

management, supply chain, communication, industry knowledge Useful concepts/frameworks: 4P’s, market analysis, competitor analysis, product portfolio

assessment Example 1: Joe’s Aircraft Engines has a new design ready for market. How should they

pursue this? Example 2: Microvilla Software has a new kitchen design application they would like to

market over the Internet. How should they go about this?

Entering a New Market: asks you to analyze whether a company should enter a new market or develop a new line of products or services (usually, the new products or services are related to the company's current business). What this type of Q is designed to assess: Analytical ability, understanding of market

dynamics, supply chain dynamics, communication, industry knowledge Useful concepts/frameworks: Market assessment, product portfolio analysis Example 1: Hasma Systems, Inc. currently assembles laser printers for several major high

tech companies. One of these companies has approached you about manufacturing calculators and has asked you to provide an analysis of your ability to provide this service. How would you go about your analysis?

Example 2: A major consumer products manufacturer currently makes soap, detergent, and canned meat products. Most of their product portfolio is considered mature, and they have identified two companies for acquisition: one makes frozen juice concentrate, the other makes hair care products. How would you decide which acquisition, if either, is best for the company?

Entering a New Geographic Market: asks you to analyze whether a company should expand into a country / region. What this type of Q is designed to assess: Analytical ability, understanding of global market

dynamics, geographic currency issues, supply chain dynamics, communication, industry knowledge

Useful concepts/frameworks: Market assessment, supply chain analysis, competitor anlaysis Example 1: Miller’s Wheat Bran wants to introduce its line of bran products in India. How

would they go about assessing the feasability of this idea?

of 222

Example 2: Billy Bo Bob’s Chili is the number one chili product in Texas and Oklahoma. They are interested in rolling out their product in California. How would you recommend the company proceed?

of 222

Where to Locate a New Facility ("Site Selection"): asks you to evaluate where a company should locate a new plant or other facility (and sometimes, whether the company should move its entire operations). What this type of Q is designed to assess: Analytical ability, understanding of global market

dynamics, regulatory environment, import/export environment, supply chain dynamics, communication, industry knowledge

Useful concepts/frameworks: Market assessment, supply chain analysis, competitor analysis Example 1: Yaya Manufacturing concern assembles bicycles exclusively in the US. Due to

cost pressures, the company is looking to move operations to Mexico. What factors would you consider in making this decision?

Example 2: A major beverage manufacturer is negotiating with the Indian government to sell its products in India. The government has demanded that the company open bottling plants in India directly and sell product in India manufactured only in India. What factors should you consider in evaluating this requirement?

Mergers & Acquisitions: asks you to determine whether a particular acquisition would be advisable. What this type of Q is designed to assess: Analytical ability, regulatory environment, supply

chain dynamics, communication, industry knowledge Useful concepts/frameworks: Market assessment, supply chain analysis, competitor analysis,

structural analysis Example 1: Club Med is considering the acquisition of a major cruise line. Describe the way

you might consider assessing the viability of this decision. Example 2: A software company is interested in acquiring a logistics company to compress

their supply chain and reduce their cycle time from manufacturer to retailer. What factors would you consider in determining whether this would be an appropriate decision?

Competitive Response: asks you to recommend a reaction to your competitor's move. What this type of Q is designed to assess: Analytical ability, supply chain dynamics,

communication, industry knowledge, market dynamics Useful concepts/frameworks: Market assessment, supply chain analysis, competitor analysis,

structural analysis Example 1: H.S. Cosmetics sells products only through major department stores. Their major

competitor, Porter Cosmetics, has just announced the opening of ten stand alone stores. How should H.S. Cosmetics react?

Example 2: Starstruck Video rents and sells video tapes. They have just learned that their competitor, Vader Video, has signed an exclusive deal with Warner Bros. which gives them exclusive rights to offer Warner Brothers videos first for 30 days before you are allowed to offer them. How should Starstruck Video react?

Changes in Government/Regulatory Environment: presents a change in the governmental / regulatory environment (e.g., change in the laws of a particular country where a company has operations) and asks you to advise your client. What this type of Q is designed to assess: Analytical ability, supply chain dynamics,

communication, industry knowledge, market dynamics, regulatory environment Useful concepts/frameworks: Market assessment, supply chain analysis, competitor analysis,

structural analysis, regulatory analysis

of 222

Example 1: La Pinata Inc. manufactures party supplies in Malaysia. The recent currency upheavals in Asia have caused the Malaysian government to impose heavy tariffs on all exports. How should La Pinata deal with these new issues?

Example 2: TSC Software is looking to hire 25 software developers from Asia. They are interested in understanding how they might employ these people without asking them to emigrate or importing them as foreign nationals. How would you investigate this?

of 222

Basic Plan of Attack

Like the framework of your analysis, you should have an overall structure in your mind for your interview. Once the interviewer presents the case, you might use the following four step plan to help you along:

A. Understand the Question:i. Be sure that you understand the question. If not, then ask for more information. There’s

nothing worse than an exquisitely structured analysis on the wrong question.ii. Ask the interviewer additional questions to add information as you flesh out the problem--

Do not assume the first question the interviewer asks is the topic of discussion. Rarely does an interviewer state the entire problem at the start. Part of what is being tested is your ability to ferret out information.

iii. Interviewers generally will lead you down a path towards the answer they want. Be open to hints they might be providing.

iv. Be careful about assumptions. Don’t make any that you don’t have to. If you have to make assumptions, communicate to the interviewer that you are making these assumptions and then why you are making them.

B. You understand the question, now choose your framework:i. Choose an appropriate model. Don’t try to match a complex product/market expansion

matrix to a question that is easily answered with a simple SWOT analysis.ii. Stick to models that you know well. No one knows every model in existence. Learn a few

models very well that you can keep in your tool bag.iii. Have a passing acquaintance with the most popular frameworks. On occasion an

interviewer will ask you to use a particular framework to analyze the scenario.iv. Once you’ve chosen a framework, don’t announce your model to the interviewer. It is

expected that the interviewer will understand what you are doing, and telling the person that you are using the value chain analysis will not help your case. This is the exception to the ‘more communication is good’ rule.

C. Analyze the case!:i. This is the meat of the matter. Using the framework you’ve chosen, conduct an analysis.ii. Ask questions to get more information; this cannot be overemphasized. Communicate

your thought process through the whole interview. Many interviewers are very helpful and will assist you if they see you stray from the path.

iii. Be willing to change tack. Sometimes it turns out that you chose an unsuitable framework for the analysis. Communicate to your interviewer what you’re doing and that a different type of analysis is warranted. You might get dinged but you might get points for being flexible.

D. Arrive at a conclusion:i. Consultants don’t do much good if they can’t come up with an answer at the end of an

analysis. Be sure to arrive at some type of conclusion even if it is a framework to further evaluate the problem.

ii. Include real recommendations for the company as applicable. Concrete actions are much more impressive than vague strategies.

of 222

iii. Do a “sanity check”, i.e. address or consider any key variables where changes could significantly impact your analysis and conclusion. Also ask yourself, “Does this answer make sense?” Use common sense.

of 222

Guidelines for the analysis

You can use these notes as guides to preparing for cases. You do not need to answer every question. Some questions are more relevant in situations than other questions.

1.ANALYZE THE CURRENT SITUATION. Define the business and/or industryLook at internal factors

FINANCIAL Look at trends in financials (Consider earnings/sales, EPS, working capital, inventory

turnover, cash flow etc..) What do financials imply? Consider where revenues, profits come from (not always the same place) Does investment in capital, R&D seem consistent with strategy? with industry?

ORGANIZATIONAL What is the organization's structure? Does structure seem consistent with strategy? with industry? Do organizational units seem to work together? in opposition? independently? Which functions or units seem to dominate and why? Consider the organization's culture

HUMAN RESOURCES Consider the TMT and CEO, any issues? Values of CEO? expressed in organization? Are there turnover/succession issues? What skills and abilities does work force have? need? Who has power in the organization? What are their interests?

PRODUCT/COMPETITIVE POSITION Assess organization's products/services pricing, promotion, position Market share (current, trends) - how important is market share in this industry? How vulnerable are the products, services to business cycles? Consider the product and product life cycle Who are the suppliers and customers? What is their relative power?

FACILITIES AND MANUFACTURING Assess relative to competition, relative to strategy quality, efficiency How easily expanded?

of 222

INTEGRATION/OVERALL ASSESSMENT What is most important to organizational success? What is past, current and proposed strategy (either stated or implied)? What are the internal strengths and weaknesses of the organization?

Look at external, industry factors:

How easy or difficult is entry into the industry by new organizations? what if any barriers to entry?

Are there substitutes for the firm's products or services? Is the industry concentrated (how many firms, have what percentage of market)? To what extent is being innovative and/or a first mover critical? To what extent is low cost important? How volatile has industry been? Consider who the key industry players are? How are they currently competing? How attractive is this industry? Does the industry appear to be growing or declining? Are there social or governmental issues to consider? Assess the external opportunities and threats facing the organization?.

2.CONSIDER THE FUTURE If nothing changes, where do you think the organization will be in 5 years? What does the organization need to do to be in a better position in 5 years? Identify and evaluate relevant alternatives. Take a position, which strategy best prepares the organization for the future. If the organization takes the route you suggest what isthe likely response of

competition? Defend your answer based on your analysis of the current situation.

3.DETERMINE HOW ANY STRATEGIC CHANGE WILL BE IMPLEMENTED A very common mistake in strategic analysis is to focus on internal factors, and ignore what the competition is doing and/or is likely to do. This is a problem with students doing case analyses and executives assessing their organization. DON'T FALL INTO THIS TRAP!

of 222

Table of Contents

1.Overview p. 2



4.Cases p. 31




of 222

Overview

The purpose of this section is to provide a summary of standard business thought written by two of the more respected and recognized authors in their field. It is important to note that student’s should focus on the principles and applications presented in the brief summary of several works presented below. In order to better understand the concepts presented in these outlines, you may find it useful to read the entire books by these authors.

Porter’s Five ForcesThe nature and degrees of competition in an industry hinge on five forces:

The bargaining power of buyers (customers): The relative bargaining power of customers and other buyers. - Is it a strong, moderate, or weak force? Why?Buyers become a stronger competitive force the more they are able to exercise bargaining leverage over price, quality, service, or other terms or conditions of sale. Buyers gain strength through size and when the objects they are purchasing are critical to their (who's?) success (particularly when they could source these items elsewhere with low switching costs).A buyer group is powerful if:1. It is concentrated or purchases large volumes relative to seller sales2. The product it purchases from the firm represents a significant fraction of the buyer’s

costs or purchases3. The product it purchases from the industry are standard or undifferentiated4. It faces few switching costs5. Buyers pose a credible threat of backward integration6. The industry’s product is unimportant to the quality of the buyer’s products or services7. The buyer has full information

The bargaining power of suppliers:: The relative power of vendors and other suppliers- Is it a strong, moderate, or weak force? Why? Suppliers to an industry are a strong competitive force whenever they have sufficient bargaining power to command a price premium for their materials or components and whenever they can affect the competitive well-being of industry rivals by the reliability of their deliveries or by the quality and performance of the items they supply.A supplier group is powerful if:1. It is dominated by a few companies and is more concentrated than the industry it sells

to2. It is not obliged to contend with other substitute products for sales to the industry3. The industry is not an important customer of the supplier group4. The suppliers group is an important input to the buyer’s business5. The suppliers group’s product are differentiated or it has built up switching costs6. The supplier group poses a credible threat of forward integration

of 222

Competitors jockeying for position (Internal Rivalry): Competitive environment in the industry- Is it a strong, moderate, or weak force? What are the weapons of competition?Often, the most powerful of the five forces is the competitive battle among rival firms which are already present in the industry. The intensity with which the competitors are jockeying for position and competitive advantages indicates the strength of this force's influence.Rivalry among existing competitors increases if:1. Numerous or Equally Balanced Competitors2. Slow Industry Growth3. High Fixed or Storage Costs4. Lack of Differentiation or Switching Costs5. Capacity Augmented in Large Increments6. Diverse Competitors7. High Strategic Stakes8. High Exit Barriers (Specialized assets / Fixed costs of exit / Strategic interrelationships /

Emotional barriers / Government and social restrictions)

Threat of entry by new participants: Barriers of entry and current profitability of the industry compared to other industries. - Is it a strong, moderate, or weak force? This requires an assessment of entry barriers.The competitive threat that outsiders will enter a market is stronger when entry barriers are low, when incumbents are not inclined to fight vigorously to prevent a newcomer from gaining a market foothold, and when a newcomer can expect to earn attractive profits.There are several sources of barriers to entry: a. Economies of Scaleb. Product Differentiation - Established firms have brand identification and customer

loyaltiesc. Capital Requirementsd. Switching Costs - One-time costs facing the buyer of switching from one supplier’s

product to another’se. Access to Distribution Channelsf. Cost Disadvantages Independent of Scale (Proprietary product technology / Favorable

access to raw materials / Favorable location / Government subsidies / Learning and/or experience curve)

g. Government Policyh. The newcomers expectations about likely retaliation of the incumbents or the slow

growth of the industry

Threat of substitutes: The degree to which the firm differentiates its product/service. - Is it a strong, moderate, or weak force? Why?The competitive threat posed by substitute products is strong when policies of substitutes are attractive, buyers' switching costs are low, and buyers believe substitutes have equal or better features.Substitute products that deserve the most attention are those that:

of 222

1. Are subject to trends improving their price-performance trade-off with the industry’s products

2. Are produced by industries earning high profits.

of 222

Exit Barriers

Low High

EntryLow Low Stable

ReturnsLow Risky Returns

BarriersHigh

High Stable

ReturnsHigh Risky

Returns

The strength of these threats determines the profitability of the market:i. Intense competition allows minimal profit marginsii. Mild competition allows wider profit margins

The goal of the strategist is to determine whether a firm should enter/exit the industry or to find a position in the industry where the company can best defend itself against these forces or can influence them in its favor. It is not a strong enough goal to simply find an ideal market position.

of 222

IndustryCompetitors

Rivalry AmongExisting Firms

Potential Entrants

Suppliers BuyersBargainingPower ofBuyers

Threat of SubstituteProducts

Threat of New Entrants

BargainingPower ofSuppliers

Substitutes

OHMAE’S THE MIND OF THE STRATEGIST (1982) :Corporate strategy implies an attempt to alter a company’s strengths relative to its competitors in the most efficient way. “Strategy” concerns actions aimed at directly altering the strength of the enterprise relative to that of its competitors. Four ways of strengthening a company’s position to that of its competitors are:

1. Business strategy based on identifying the key factors for success in the industry concerned and injecting a concentration of resources into a particular area where the company sees an opportunity to gain the most significant advantage over its competitors.

2. Business strategy based on relative superiority. Make use of the technology, sales network, profitability, and so on, of those of its products which are not competing directly with the target competitors, or make sure of any other differences in the composition of assets between the enterprise and its competitors.

3. Business strategy based on aggressive initiatives. In a mature and slow-growth industry sometimes the only answer is to upset key factors for success on which the competitor has built an advantage, i.e., changes the rules of the game or upset the status quo.

4. Business strategy based on strategic degrees of freedom. In cases of intense competition within the same industry, success can be achieved by opening up new markets or through the development of new products.

The principal concern is to avoid doing the same thing on the same battleground as the competition. First gain relative advantage through measures a competitor can not follow, and then extend that advantage still further.

Ohmae’s Strategic Triangle:

The strategic triangle consists of three players: the corporation itself, the customer, and the competition. The job of the strategist is to achieve superior performance, relative to the competition, in the key factors for success of the business while matching the strengths of the corporation with the needs and objectives of a clearly defined markets. The three different business strategies are:

1. Customer-Based Strategies – This strategy attempts to establish a strategic edge over the competition by segmenting the market and focusing on one or more subsets where it can have an advantage. There are two basic modes of market segmentation: (a) segmentation by objectives, i.e., in terms of the different customers use of the product and (b) segmentation based on the enterprise’s own ability and resources.

2. Corporate-Based Strategies – This strategy aims to maximize the enterprise’s strengths relative to the competition in the functional areas that are critical to success in the industry. The enterprise must maintain a positive differential in key functional strengths to retain an advantage in profit performance and market share. The other main advantage of functional strategies is to design and deliver cost-effective functions. This can be done in three ways: (a) reduce cost more effectively than the competitions, (b) exercise greater selectivity in terms of orders accepted, products offered, or functions performed, and (c) share certain key functions across the enterprise’s other businesses or even with other companies

3. Competitor-Based Strategies – This strategy can be constructed by looking at possible sources of differentiation in functions ranging from purchasing, design and engineering to sales and servicing. The main point is that any difference must be related to profit, volume, and/or cost.

There are three major constraints which affect strategy:(a) Reality – the strategist must always be aware of the customer, the competition, and the

company’s field of competence.

of 222

(b) Ripeness – the strategist must be concerned that the time is ripe for the proposed strategy or it will fail

(c) Resources.

of 222

Case interview tools

What follows are popular case models. This list is not meant to be an exhaustive analysis of all analytical models available to consultants. Have a passing acquaintance with those models you choose not to use.

I. Porter’s Five Forces

Read summary above. The five forces are used for industry analysis:This framework is extremely flexible and can be used for cases involving most any industry. It is best applied to cases that involve corporate strategy and new opportunity questions. By analyzing each of the five forces and their related areas you should be able to come up with insight as to what course of action should be taken for the company in question. Be careful though, don’t spend too much time dwelling on any one force because you could easily use up a whole hour. Keep your goal in mind and drive towards a solution to the question at hand.A major limitation of the Five Forces Model is that it does not take two important market forces into account: Government and Technology. Whenever appropriate try to include these forces into your analysis.

II. The 4 C’s

This is an excellent model for analyzing strategy problems involving new opportunities. Be sure to include a fifth C - What is the impact if anything changes?Company

What is our current position in the market? Are we doing well? Is this market important to us?

How big could the market be? What resources does your firm have? Possible synergies from a recent merger or acquisition? What are your firm’s unique strengths and weaknesses? What is your firm’s value proposition to the customer? Do the company's internal factors - resources, talents, objectives, values, strengths - match

the external factors - industry trends, competitor actions, government/society?Analysis: Market share / Look at current P&L (cost structure) / ...

of 222

Basic model for strategy generation

Customers

Size and definition of the market Who are the decision makers? What are their needs? Are their different segments of decision makers? (Demographics / Purchasing approach /

Situational factors / Personal characteristics) Behavior (occasions, benefits, user status, loyalty, readiness to purchase, attitude towards

product) Who are good customers? Who are bad customers? How well are their current needs being met? How will we satisfy those needs? How much are customers willing to pay?Analysis: Market sizing / market shares / potential market / Life Value of a Customer / Contribution per Customer / ...

Competitors

Who are your competitors? Current competitors? Future or indirect competitors? How are competitors positioned? Who do they serve? What are their strengths and weaknesses? What are your competitors doing? How are they meeting the customer’s demands? Current industry structure? (Recent mergers?) Is the market fragmented? Consolidated? What is their cost structure? Analysis: Market shares of competitors / Competitor margins / price positions / What will competitive reactions be? / ...

Collaborators

Who are our partners in the marketing process (distributors, etc.) What is government or regulatory influence? What are external trends which effect the market?Analysis: Unique risks in the market / Assess the attractiveness of the market / How can we work/not work with these groups? / ...

Note on margin calculations

Manufacturer’s Margin = Manufacturer’s selling price to distributors – manufacturing cost ($7.50-4.00=3.50)Wholesaler’s Margin = Wholesalers selling price to retailers – Price paid to manufacturer ($8.70-$7.50=1.20)Retailer’s Margin = Retailer’s selling price to consumers – Price paid to wholesaler ($10.00-$8.70=1.30)Retailer’s percent margin:= (selling price to consumer – purchase price from wholesaler) / selling price to consumers= Retailer’s dollar margin / Selling price to consumers

of 222

Note on the Lifetime Value of an Average Customer

Acquisition cost per customer = total acquisition expense/# new customers OR = unit acquisition expense/yield (ratio new cust to target audienceRetention cost per customer = total retention expense/# customers keptAnnual retention rate = (# previous customers- # curr. customers)/# prev. customersCumulative retention rate = Year t cum rate x Year t+1 ann rateProfit contribution per customer (Before acq & ret costs) = (revenue-var cost)/# customersAverage Customer Value = Cum retention rate x (proft contribution per customer – acquisition cost per customer – retention cost per customer)Discount Rate (given or assume)Value of Customer at n years:n=0 (Profit contr per cust) x (ann retention rate/(1+discount rate))n

Above is same as: Profit contribution per customer / (1 - (ann retention rate/(1+discount rate)))(n=0 A x Bn = A/(1-B) if B<1)

Note on the Economic Value to a Customer

EVCx = LCy – SCx – PPCx + IVx

X = Your product, Y = Reference productReference product = competitor’s productLCy = Life Cycle Cost of competitor = Purchase Price + Start up cost (SC) + Post-Purchase Costs (PPC) of competitorStart-up Costs = Initial costs not included in purchase price (i.e. modifications, space, power, a/c, training. etc.)Post-Purchase Costs = Ongoing costs borne by customer once product is in use (maintenance, repair, continual training, raw materials, operating costs, inventory costs, etc.)Incremental Value = amount by which product’s potential dollar value to customer exceeds that available from the reference productNote: EVC is the price you can charge (since it’s the value to the customer). In many cases, given EVC since have price, therefore looking for Incremental Value.

Optional note on competitor analysis

Competitor analysis is the systematic process of analyzing the competitors of your firm. While this sounds simplistic, it isn't, because a firm must first decide what business it is in. After a business has done that, the firm may proceed to analyze its competitors. A firm performs competitor analysis in order to determine each competitor's strategy, and its impact on the industry environment. Additionally, it can also help a firm identify new trends in the industry. Finally, it can pinpoint the strengths and weaknesses of a firm's competitors, which can significantly help the firm's planning process, and also its future.

of 222

Don't assume that the client's competition is acting intelligently. You don't always want to match the competition!

of 222

A firm should follow these steps in preparing a competitor assessment: 1. Identify companies that are engaged in the same industry, or provide substitute products

or services. 2. Identify the most significant firms by size, market power, or innovation, depending on the

needs of your firm. 3. Rank those firms from most to least threatening. 4. Identify the type of information that needs to be gathered for each firm, and create a

competitor document template for storing the information. 5. Identify the sources and gather information on the firms. Examples of data sources

include: News (CNN, CNBC, etc) / Press releases / Web sites / Trade shows / Financial reports (SEC EDGAR database) / Product brochures / Regulatory filings / Market information (studies,consultants, etc.)

6. Compile the information for each competitor and store in a common location (database, intranet, etc.) for future reference.

7. Update the information on a regular basis. Depending on your business, you may have full-time staff dedicated to this, or you may review the profiles on a periodic (monthly or quarterly) basis.

While the above process may sound very involved, it doesn't need to be. Large firms tend to gather mass quantities of information, but they also generate a lot. A small firm can gather considerably less information and still remain informed about the state of the industry and what its competitors are doing.

III. The 4 P’s

The four P’s model is useful for marketing / new product introduction / new market developments / market share increases case questions. Each P describes a different set of issues to be addressed when analyzing a marketing question. The four P’s are: Product:

Decisions:Brand name (tie in with brand equity - help or hurt?) / Quality / Breadth of line / Augmented services / Warranties/returns / Style/design of packaging

Concerns: Cannibalization / Does the product line fit the segments & positioning Price: Product cost, product price (& contribution margin), discounts, and profit margin

for retailers. Decisions: List price / Financing / Discounts / Leasing / Payment terms / Bundling Concerns: Margins - is the product profitable? / What will competitive reaction be?

Promotion: Advertising, reputation, consumer awareness, special promotions. Decisions: Advertising (Where? How much? What messages?) / Personal selling / Public

relations / Sales promotion (Remember breakeven) Concerns: Breakeven for each program: Can we afford it? / Value of customer: Is a

customer worth the cost? / Who, What, Where, When, How, Why! Place: Distribution, time to market, product positioning.

Decisions: Channel (Distributors, Retail, Intermediates, Direct) / Coverage / Locations / Logistics (inventory, transportation, warehousing)

of 222

Concerns: Who is most effective(info, storage, training, delivery, customization, service, maintenance)? / Who can perform this cheapest? / How do you motivate/align channel? (margins?)

of 222

IV. Value Chain

It is important to understand the internal relatedness of the many activities involved in the production of a product or service. Every business unit is a collection of discrete activities ranging from sales to accounting that allow it to compete. Michael Porter calls these value activities. It is at this level, not the company as a whole, that the unit achieves competitive advantage .The value activities are grouped into nine categories, as indicated in the exhibit above. Primary activities create the product or service, deliver and market it, and provide after-sale support. The categories of primary activities are inbound logistics, operations, outbound logistics, marketing and sales, and service. Support activities provide the input and infrastructure that allow the primary activities to take place. The categories are company infrastructure, human resource management, information systems, and procurement.Value chain analysis is useful in discerning possible synergies among various units of an organization (e.g., shared procurement), determining which value activities are best outsourced and which are best developed internally, and developing greater insight into the flow of activities in the creation and distribution of a particular product or service (e.g., what value is added to the manufacture and sale of gasoline at each point in the value chain, and by whom?). Value chain analysis is an excellent tool for: Making strategic decisions on how to compete (price vs. differentiation). Deciding if you want to enter a particular industry. Comparing yourself to competitors. Searching out reasons for low profitability.

The idea is to analyze the entire chain of events through which a product travels to get to the customer. A twist on this is to analyze how a new system will effect a products value chain, for example automation. This tool is best applied in operations type questions and can be changed to fit the particular situation. In other words, don’t be stuck on the five categories listed here, for your case maintenance or R&D might be pertinent categories. One of the most important qualities to display in interviews is the ability to adapt the tools you have to the situation at hand. Inbound Logistics: Receiving and processing of incoming raw materials and supplies. Operations: Describes the core function of the company. This could anything from data

input to manufacturing depending on the nature of the company. Outbound Logistics: Delivery to customer. This can include categories like packaging,

storage, and installation, again depending on the nature of the company. Marketing and Sales: If you need this explained to you, don’t bother interviewing. Service: This includes items from maintenance contracts to customer hand-holding. Support: This includes Finance and Accounting, Human Resources, etc.

How to Use:

Draw a picture. Use the picture to walk through your points.

Vertical Integration: In some industries. companies find it advantageous to integrate backward (towards their suppliers) or forward (towards their customers). Vertical integration makes the most sense from a management and economic perspective when a company wants greater control of a channel that has major impact to its product cost or quality or when the existing relationship involves a high level of asset specificity (assets that are specific to the relationship the company has with its supplier or customer).

of 222

V. SWOT

This is an acronym for:Strengths: Your company’s, you competition’s, objectives/values/mission, resources/systems.Weaknesses: Opposite of strengths.Opportunities: What are your markets? How are they developing? What are your likely

avenues for growth? Are there any industries related to yours that may offer greater revenue/economies of scale/economies of scope?

Threats: Industry trends, Outside constraints, trade unions, regulations, competitor activities.SWOT is a quick and dirty type analysis tool which is easily applied in numerous situations (as a general analysis tool for specific companies or entire industries). It is best used in shorter cases which don’t require a complex analysis: Clarify position for strategy formulation Often done prior to goal-setting each year Compare yourself to competitors

How to use:

Brainstorm. Decide whether the business should limit itself to opportunities where it possesses the

required strengths or consider better opportunities where it will have to develop strengths.

VI. Profitability Analysis

For profitability problems, issues on the revenue side of equation should lead you to look closer at buyers, marketing, and competition. Cost issues should lead you to look at closer at suppliers, operations, and financing.Revenues

Breakdown by business activity Customer segmentation, key clients and % recurring As a function of price and volume/units sold

Costs

Fixed vs. Variable Breakdown by steps in value chain As a function of cost volume/units consumed

A company can potentially increase profits three ways:A. Increase unit price.

Demand elasticity? Market power? Product differentiation? Is a premium justified?

of 222

B. Increase the sales volume. Increase sales to current customers with current products Increase sales to current customers with new products Increase sales to new customers with current products Increase sales to new customers with new products

C. Decrease total costs. Fixed vs. variable (manufacturing) Shared vs. branch/office (service industries)

One type of analysis involves the go/no go decision. Should a company agree to fill a special order? Is it even worthwhile for a company to stay in business? These types of questions can be answered with quick and dirty profitability analysis calculations. All the interviewer wants to see is that you can do some quick but marginally accurate back of an envelope calculations: Profit = Revenue – Cost, where:

Revenue: Revenue = (Price x Quantity) Costs: Total Costs = (Fixed Costs) + (Total Variable Costs) Total Variable Costs: Total Variable Costs = (Quantity x Variable Cost per unit) Fixed Costs: Plant, Property, Equipment, Admin., etc..

Fixed vs. Variable Costs (VC): The costs of production that vary directly with the quantity (Q) produced: these costs generally include direct materials and direct labor cost.Capacity issues: Per unit costs can jump significantly if new capacity is required to increase production (step costs).Semi-variable Costs: The costs of production that vary with the quantity (Q) produced, but not directly (typically, these are discrete costs, such as the cost of adding new production capacity when Q reaches certain levels). Fixed Costs (FC): The costs of production that do not vary with the quantity (Q) produced.Break-even Point: Break-even analysis is a managerial planning technique using fixed costs, variable costs, and the price of a product to determine the minimum units of sales necessary to break even or to pay the total costs involved. The necessary sales are called the BEQ, or break-even quantity. This technique is also useful to make go/no-go decisions regarding the purchase of new equipment. The BEQ is calculated by dividing the fixed costs (FC) by the price minus the variable cost per unit (P-VC): BEQ = (FC)/(P-VC) The price minus the variable cost per unit is called the contribution margin. It represents the amount left after the sale of each unit and the paying of the variable costs in that unit that "contributes" to the paying of the fixed costs. To determine profit, multiply the quantity sold times the contribution margin and subtract the total fixed cost: Profit = Q(P-VC) - FC

Accounting: Financial Frameworks: in profitability cases, explore costs and revenues.

of 222

Balance SheetAssetsCashInvestmentsReceivablesInventoriesProperty, plant & equipment

LiabilitiesPayablesLong-term debtOther liabilities, reserves

Shareholders EquityCommon Stock Retained Earnings

Income StatementNet Income- COGS

LaborMaterialsO/HDelivery

= Gross Margin

- SG&A= Operating Profit

- Interest= Profit Before Taxes

Efficiency Variance = (Actual Qty - Standard Qty) * Standard Price Price Variance = (Actual Price - Standard Price) * Standard Qty Total Variance = (Actual Price * Actual Qty) - (Standard Price * Standard Qty) Activity Cost Driver Rate = (Normal Cost of Support Activity) / (Normal Level of Cost

Driver)

VII. BCG Matrix

The BCG Growth-Share Matrix provides a valuable framework that enables us to identify and evaluate the company's products relative to market share and the extent to which the market, as a whole, is expanding or contracting. It can also be utilized to analyze a portfolio of companies held by a single organization by classifying within the matrix each of the held businesses. Products or businesses may be categorized as follows:• Star-product with high market share in a high-growth market; every mother's prayer.• Problem Child (also called "Question Marks")-product with low market share in a high-

growth market; mother is concerned because her child is not growing as anticipated. Another perspective is that mother shouldn't be quite so concerned if the child has carved out a little niche that is impervious to the competition; maybe slow yet consistent growth isn't so bad.

• Cash Cow-product with high market share in a low-growth market. Since the cow is generating milk (i.e., cash), the marketer may elect to "milk the cow dry," so to speak, accelerating cash flow and, not coincidentally, the product life cycle.

• Dog - product with low market share in a low-growth market. In this sense, "dog" is certainly not "man's best friend." Rather, it is analogous to "bomb" (i.e., something that fails miserably) or to "lemon" (i.e., something that is defective or undesirable). So it would seem that one would want to drop the dog from the product line.

Market Share

High LowIndustry Growth Rate

High Star New Venture

Low Cash Cow Dog

The ideal mix for a conglomerate is to hold stars and cash cows in its portfolio while unloading any dogs it owns and nurturing promising new ventures. When the case question involves a company looking to grow through acquisition, then the ideal candidates are stars or new ventures depending on available resources and the company’s intentions. A company most likely would not want to expand into a market which has little growth rate, this eliminates cash cows.

of 222

VIII. Product/Market Expansion Matrix

A good tool for marketing and competition questions, the product/market expansion matrix analyzes your product and market in a 2X2 matrix. Products and markets are differentiated as existing or new. By analyzing market and product status the appropriate strategy is determined from the matrix. If you use this, you might consider drawing the matrix for the interviewer. Matrices impress the hell out of people.

Products

Existing NewMarket Existing Market Penetration Product Expansion

New Market Development

Diversification

IX. Porter’s Generic Strategies

Michael Porter suggests that business strategies can be classified as pursuing cost leadership, differentiation, or focus. Each of these strategies is described as follows:Overall Cost Leadership: Here the business works hard to achieve the lowest production and distribution costs, so that it can price lower than its competitors and win a large market share. Firms pursuing this strategy must be good at engineering, purchasing, manufacturing, and physical distribution and need less skill in marketing. Texas Instruments is a leading practitioner of this strategy. The problem with this strategy is that other firms will usually emerge with still lower costs (from the Far East, for example) and hurt the firm that rested its whole future on being low cost. The real key is for the firm to achieve the lowest costs among those competitors adopting a similar differentiation or focus strategy.Differentiation: Here the business concentrates on achieving superior performance in an important customer benefit area valued by a large part of the market. It can strive to be the service leader. the quality leader, the style leader, the technology leader, and so on; but it is hardly possible to be all of these things. The firm cultivates those strengths that will give it a competitive advantage in one or more benefits. Thus the firm seeking quality leadership must make or buy the best components, put them together expertly, inspect them carefully, and so on. This has been Canon's strategy in the copy-machine field.Focus: Here the business focuses on one or more narrow market segments rather than going after a large market. The firm gets to know the needs of these segments and pursues either cost leadership or a form of differentiation within the target segment. Thus, Annstrollv Rubber has specialized in making superior tires for farm-equipment vehicles and recreational vehicles and keeps looking for new niches to serve.According to Porter, those firms pursuing the same strategy directed to the same market or market segment constitute a strategic group. The firm that carries off that strategy best will make the most profits. Thus the lowest-cost firm among those pursuing a low-cost strategy will do the best. Porter suggests that firms that do not pursue a clear strategy -"middle-of-the-roaders" -- do the worst.The following matrix provides a visual representation of Porter’s Generic Strategies with respect to corporate strategy for individual products. Strategy is determined by the cost of the product and the scope of the market. If your market scope is broad then your product strategy depends on product cost. If your product cost is less than the competition’s product cost, then you can differentiate your product through low cost leadership and win market share that way. If your product cost is high, then you must differentiate the product in another way for example high quality or superior service. In the case of narrow market scope, the company is best served by focusing on its niche, possibly by finding ways to raise entry barriers.

Strategic Advantage

of 222

Lower Cost DifferentiationStrategic Target

Broad Cost Leadership Differentiation

Narow Cost Focus Differentiation Focus

X. Synergies

Can be used in many situations, but is especially useful in analyzing the potential benefits of mergers or acquisitions. Synergies can come in many forms, but these are the most common:

Spreading fixed costs over greater production levels. Gaining sales from having a larger product line and extending brands. Better capacity utilization of plants. Better penetration of new geographic markets. Learning valuable management skills. Obtaining higher prices from eliminating competition.

XI. Internal/External Analysis

This framework is used in organization versus environment cases where the internal portion of the analysis refers to the organization and the external portion refers to the environment. The analysis can then be expanded by including other tools on the internal and external sides. Internally, for example, a value chain analysis and externally Porter’s Five Forces may be worthwhile.Alternatively, for a simpler case question, merely listing internal and external factors may be preferred. For example, when asked the cause of a company’s success you could list factors internally and externally that you want to look at to determine what makes the company is successful.

XII. Microeconomics - Supply/Demand Analysis

As Prof. X would say, supply and demand is the right answer 95% of the time. We all have the basics of supply and demand curves down, I won’t waste paper on the topic. This simple model can be very useful, don’t overlook supply and demand. Supply Curve: As the price of a product or service increases, the quantity the supplier wishes to make available increases. Conversely, as the price of a product or service decreases, the quantity producers will be willing to make available decreases. Demand Curve: As the price of a product or service decreases, the quantity of the item that consumers will buy increases. Conversely, as the price of a product or service increases, the quantity consumers will buy decreases.Elasticity of Demand: The degree to which demand for a product or service can be altered by a change in priceindicates the extent of the elasticity of such demand. For example, a person who seeks to purchase a particular brand and model of automobile may decide to shop competitively from dealer to dealer for the lowest price. This would characterize demand that is elastic. However, there are circumstances where the level of demand is not altered by a change in price. For example, a diabetic person may be willing to buy insulin at any price, since the medication sustains their life. In this case, the demand is inelastic.9

of 222

Law of Diminishing Marginal Utility: Within a given time frame, the level of "satisfaction" derived from a product or service, and consequently the demand, diminishes with each additional unit consumed until no further benefit is perceived. Law of Diminishing Returns: Although additional units of labor may contribute to increased productivity in absolute numbers, each such additional unit contributes relatively less than the preceding unit to this productivity.

of 222

Comparative Advantage: It is in the interest of a nation to import an item from another nation when it cannot produce the item as inexpensively. The concept of comparative advantage goes a step further. It may be to a country's advantage to import goods from other nations even though the country can produce the goods less expensively at home. By not producing the first item, they will retain the resources to produce some other item with even greater production efficiency. Thus, the country maximizes its own production, and helps the other country's economy by importing the first item. Both countries profit. (see also ecol7(7)nie.s of scale).8Economies of Scale: Economies of scale are said to exist when the average cost (AC) declines as output increases, over a range of output. If AC declines as output increases, so must the marginal cost (MC) (the cost of the last incremental unit of output). The relationship between AC and MC can be summarized as follows: MC<AC = Economies of scale MC=AC = Constant returns to scale MC>AC = Diseconomies of scale. The paradigm shape of the cost curve is U shaped. The generally accepted explanation for this is that AC initially declines because fixed costs are being spread over increasing output and then eventually increase as variable costs increase. The minimum efficient scale (MES) is the minimum level on the average cost curve. Economies of scale are not limited to manufacturing; marketing, R& D, and other functions can realize economies of scale as well.Economies of Scope: Economies of scope exist if the firm reduces costs by increasing the variety of activities it performs. Whereas economies of scale are usually defined in terms of declining average cost functions, it is more customary to define economies of scope in terms of the relative total cost of producing a variety of goods together in one firm versus separately in two or more firms. Economies of scope may be achieved by "leveraging core competencies." For example. it may make economic sense for a manufacturer of tape to get into the business of manufacturing note pads with adhesive backings as there are commonalties in the two businesses at many points along the value chain.

XIII. Cost/Benefit Analysis

Holy cow, something else from managerial accounting. Cost benefit analysis is one of the best ways to get a quick idea of whether an opportunity makes financial sense or which way to go when facing a business decision. Start out by determining what are your options and your opportunity costs. Once you have determined your alternatives, list the costs & benefits for each alternative. This analysis generally uses the same ingredients as profitability analysis.

XIV. Leavitt's Diagnostic Model / McKinsey 7 S Model

In 1965, Harold Leavitt developed his diagnostic model. This model was developed to help diagnose organizational problems by measuring four organizational variables:

1. Task - the organization's mission, or reason for existence.2. People - these are the people who carry out the mission.3. Technology - the tools the organization uses to carry out its mission.4. Structure - authority, communication, and processes.

of 222

Building on the work done by Leavitt, McKinsey consultants Pascale, Athos, Peters, and Waterman developed a model for the McKinsey consulting firm. This model became quite popular, probably due to the level of detail it provides. The seven variables utilized by the 7 S model are:

1. Strategy of the firm.2. Structure of the organization.3. Style of management.4. Systems (processes) used by the organization.5. Staff employed by the organization.6. Skills required by the organization.7. Shared Values of the organization.

Like the Leavitt model, once information about these variables are collected, they are analyzed by the consultant to highlight inconsistencies in the workings of the organization. Since the variables are highly interdependent, a change in one would require a the organization to adjust the others. This can be done by plotting the variables on a chart with seven lines, where each line represents a spectrum of possible values. The consultant can then recommend courses of action to change variables based on the environment and goals of the organization.

XV. Lewin's Change Model

1. Unfreezing - preparing the organization for change.2. Moving - developing new behaviors, values, and attitudes through changes in

organizational structures and processes.3. Refreezing - stabilizing the organization in a new state of equilibrium.

XVI. Additional Tools

Industry and Competitive Analysis Summary Profile

1. Dominant Economic Characteristics of the Industry Environment - Includes market growth, geographic scope, industry structure, scale economies, experience curve effects, capital requirements, etc.

2. Driving Forces. 3. Competition Analysis.4. Competitive Position of Major Companies/Strategic Groups - Is each favorably or

unfavorably positioned? Why?5. Competitor Analysis - Analyze the strategic approaches and predicted moves of key

competitors. Who should the client watch and why?6. Key Success Factors - What factors are most critical to success within the industry?

Key success factors are those factors which are most critical in determining a firm's ability to survive and prosper.Attributes of key success factors are the following:Management can influence them;They impact the overall competitive position of the firm in the industry

of 222

They are an interaction of characteristics of an industry and each firm's strategies.A firm must supply what customers want and survive competition from other firms. Therefore, management should ask:

What do customers want?What does the firm need to do to survive competition?

Key success factors are those factors which lead to the answers to the above questions. For example, for wood products key success factors are owning large forests and maximizing the yield.

7. Industry Prospects and Overall Attractiveness• What factors make the industry attractive?• What factors make the industry unattractive?• What are the industries special issues and problems?• Is the profit outlook favorable or unfavorable?

What types of intracompany or intercompany relationships exist? Are there relationships with the company's union, local government, foreign government, competitors, suppliers that should be looked at? Does competitive advantage or disadvantage originate here?

Business System:

R&D: Product Development / Innovation / Responsiveness Manufacturing: Cost / Quality / Speed / Supply Marketing: 4 Ps’ Distribution: Cost / Channel

Strategic Types (Miles & Snow):

Miles and Snow have divided strategic options into four categories (in contrast to Porter's three Generic Strategies). A company can only pursue one of these strategies at a time, but it is common for a company to shift from one to another as its situation, and its industry, changes.

Defender- Those firms which have a leadership share of the market will often concentrate on staving off the competition, moving to erect as many barriers to entry as possible. They are closely related to Porter's Low Cost Producers, leveraging their advanced position along the learning curve and their name recognition to maintain a superior market position.Reactor- Such companies are second-movers, letting the others show them the way to success. They react to the changes in the market and the moves of their competitors and so must maintain flexibility. While this strategy may be profitable in the short run, its long-term value is questionable.Analyzer- Analyzers pick apart the market very carefully looking for niches and demand/supply gaps. Akin to Porter's Focused companies, these firms are not necessarily innovators, but instead concentrate their efforts in very carefully and narrowly defined efforts.Prospector- These are the first-movers and the innovators. This is a high-risk strategic avenue. but those who are successful can change the way the game is played and create very strong competitive advantages.

of 222

Value Disciplines:

Fred Wiersema and Michael Tracy of CSC Index, Inc. have developed a set of strategic foci called the value disciplines (Harvard Business Review, January-February 1993, pp. 84-93). The disciplines are: Operational excellence - Provide customers with reliable products or services at competitive

prices, delivered with minimal difficulty or inconvenience, with the goal of leading the industry in price and convenience (e.g., Dell Computer).

Customer intimacy - Segment and target markets precisely, then tailor offerings to match exactly the demands of those niches, combining customer knowledge with operational flexibility to respond quickly to almost any need (e.g., Home Depot).

Product leadership - Offer customers leading-edge products and services that consistently enhance the customer's use or application of the product, thereby making rivals' goods obsolete (e.g., Nike). Companies which push the boundaries of one value discipline while meeting industry standards in the other two gain such a lead that competitors find it hard to catch up.

"Star" Diagram/Organizational Analysis:

In doing an organizational analysis, one must consider all seven components of the organizational unit.

1 Vision.2 Vision should define Strategy.3 Strategy determines Structure.4 Strategy determines Decision Support Systems that are required to make the

organization function.5 The Reward Systems must reinforce what you are trying to accomplish strategically.6 the Human Resource Systems must select, recruit and develop the personnel the

organization needs to accomplish its objectives.7 Corporate Culture must reinforce all seven components.

Problems arise when these seven components do not reinforce one another. For example, managers will experience difficulty if they are in a decentralized structure while information and planning systems are centralized. When considering change, all seven components must be considered, and if one is changed, then, most likely, the other components will have to be changed to be consistent with each other.Does the company's culture lead to advantages or disadvantages? Take it into account when recommending policies or explaining the cause of a problem.

Learning Curve:

The learning curve refers to cost advantages that flow from accumulated experience and know-how. often through lower costs, higher quality and more effective pricing and marketing. The magnitude of learning benefits is expressed in terms of a "progress ratio" calculated as the unit cost after doubling cumulative production divided by the previous cost (C2/C1). A ratio of less than 1 suggests that some cost savings due to learning is taking place. The median appears to be approximately .80, implying that for the typical firm, a doubling of cumulative output is associated with a 20% reduction in unit costs.

of 222

Core Competencies:

A concept popularized by Professors Gary Hamel and C.K. Prahalad, core competencies are those competencies which provide a potential access to a wide variety of markets, make a significant contribution to the perceived customer benefits of the end product and are difficult for competitors to imitate. The classic example of a company which has effectively leveraged its core competencies is Honda, which has gained a competitive advantage in numerous product markets through its focus on leveraging its skill at making engines.

Reengineering:

Popularized as Business Process Reengineering (BPR)~ reengineering refers to breaking down business processes and reinventing them to work more efficiently, cutting out wasted steps and enhancing communication. Business processes are often replete with implicit rules which hamper the way in which work should truly be done. Further, processes are often viewed as discrete tasks, a habit that prevents management from making frame breaking, cohesive change. Reengineering is defined by Michael Hammer and James Champy in Reengineering the Corporation as "the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical contemporary measures of performance such as cost, quality, service, and speed."

Total Quality Management (TQM):TQM refers to the practice of placing an overriding management objective on improving quality. Whereas TQM is more of a philosophy than a specific strategy, the stated objective is often "zero defects". A higher level of quality is linked to increased customer satisfaction and thus leads to the ability to charge a higher price at what is often a lower cost. It is important to ensure that the added benefit from incrementally increasing quality outweighs the added cost associated with the quality improvement effort. TQM was initially limited to the manufacturing sector but has more recently been applied effectively to service businesses as well.

Just-in-Time (JIT):

The goal of JIT production is zero inventory with 100% quality. It means that materials arrive at the customer's factory exactly when needed. It calls for a synchronization between supplier and customer production schedules so that inventory buffers are unnecessary. Effective implementation of JIT should result in reduced inventory and increased quality, productivity, and adaptability to changes.

Pareto Principle (80/20):

The pareto principle refers to the situation in which a large amount of the total output comes from a small amount of the total input. This is typified by the "80/20 rule" which states that 80% of the output comes from 20% of the input. Typically, a pareto analysis is conducted to determine the areas on which management should focus its efforts. For example, 80% of total downtime on a production line is attributed to 2 out of 10 manufacturing steps. Alternatively, 80% of a company's profits may be generated by 20% of its products.

Net Present Value (NPV):

The NPV is a project's net contribution to wealth: present value (PV) minus initial investment. The present value is calculated by discounting future cash flows by an appropriate rate (r), usually called the opportunity cost of capital, or hurdle rate. If Ct represents the cash flow at time t (Ct can be negative, as in the initial investment, Co), the NPV is calculated as follows:NPV = Co + Cl/(l+r) + C2/(l+r)2 + ... + Ct/(l+r)t

of 222

Table of Contents

1.Overview p. 2



4.Cases p. 31




of 222

A few real cases examples

Acquisition Due DiligenceSituation: An LBO firm was interested in purchasing a fitness club company. They asked LEK/Alcar to assess the attractiveness of the target and to determine an appropriate price for the target.

Associate Role:

The case team consisted of two junior Associates, a senior Associate, a Manager and a Partner. The junior Associates began by conducting background research on the target and competitor health club chains. Reading publicly available literature and interviewing club managers allowed them to begin to understand the key drivers of the business: membership fee structures, local penetration, membership demographics, investment in equipment, ancillary revenues, and image. In several on-site visits to fitness clubs, the Associates supplemented this knowledge by benchmarking competitors' facilities and pricing structures. Meanwhile, the senior Associate built a discounted cash flow valuation model of the target based on revenue generation, membership penetration, and demographics. The team used Geographic Information System software to analyze the local demographics surrounding all of the target’s locations, and to analyze whether the locations were geographically positioned to capture the most valuable customer segments. Values for the key business drivers determined by the junior Associates, including fee structures, equipment investment, ancillary revenue sources and advertising costs, were incorporated into the model.Through these analyses, the Associates discovered that the target’s fee structures were flawed due to excessive dependence upon continued new membership. [Once an area had been penetrated, a club had small levels of ongoing revenue. The company could only grow through the opening of new clubs which would require significant ongoing investment. Furthermore, the target focused on the lowest growth and least valuable customer segments.]Outcome:

Because of the target’s unfavorable market position and revenue forecast, LEK/Alcar recommended against the investment. The client withdrew their bid for the company.

Biotech StrategySituation: A leading US genomics company discovered a number of novel genes which form the basis of therapeutic drugs for a wide range of diseases. The company asked LEK/Alcar to help it assess its options for maximizing the value of these drugs.

Associate Role:

The case team consisted of a Partner, Manager, Consultant and two Associates. The first phase of the analysis involved assessing the stand-alone value of four different drugs for six indications. TheAssociates sp ent several weeks researching the indications by contacting associations, hospitals, and care centers, and interviewing some of the country’s top authorities on diseases such as stroke, cancer, and wound healing. Associates created detailed market models for each of the disease indications that valued the drugs by forecasting patient growth,

of 222

using penetration ratios for different severity classes, and predicting US and worldwide sales for the next twenty years.

of 222

The next phase of the project involved thinking about and assessing the different development scenarios for each drug and each indication. The company’s options were to license the drugs to major pharmaceutical companies, incurring less risk, or to keep the drugs in-house, incurring greater risk but offering greater potential returns. The associates created another model that integrated the market models of phase one with a risk/return assessment of the deal options open to the company at various stages of development. In addition, internal drug development was modeled by quantifying the costs, risks, and returns associated with internal infrastructure, including clinical trial facilities and manufacturing plants. Using this fully integrated and interactive model, the team was able to quantify the value of the different options open to the company, and recommend policies for specific drugs and the overall strategic direction for the company.Outcome:

The integrated model allowed the client to make informed decisions on the specific options open to them for the drugs. Even more importantly, the client used the analysis as a framework for thinking about the strategic direction of their company: the capabilities they needed to develop, the kinds of relationships they would need to have with outside developers, and the processes by which they needed to evaluate new drugs.

New Market OpportunitySituation: A major health care client was interested in entering a new industry: Professional Employer Organizations (PEO). They asked LEK/Alcar to assess the attractiveness of the opportunity and how to be a successful player in the industry.

Associate Role:

The case team consisted of two Associates, a Consultant, a Manager and a Partner. The Associates began by gathering and reading all of the material available on the industry: investor reports, annual reports of the few public companies, newspaper articles, trade magazines, and trade association reports. Through this research they gained an initial understanding of the industry: a PEO is a company which takes over the human resource functions for a small employer, including taxes, benefits, and regulatory activities. By bringing together many employees, a PEO offers more extensive employment services and benefits at a better price. The associates then began to define the value chain of activities and factors needed to succeed in the industry. These included: regulatory expertise, economies of scale, workers' compensation insurance control, MIS capabilities, and many more. To further understand these key success factors and competitors' business designs and strategies, the Associates spoke with over 30 of the top CEOs and industry experts. Out of these discussions emerged a picture of a rapidly changing industry which could provide a visionary entrant with a significant opportunity--if it designed its business properly. Under the guidance of the Consultant, and after weeks of heated discussions, the Associates articulated five business designs that described the existing business activity in the industry and the likely direction of its evolution. Using existing competitor information and their knowledge of the key success factors in the industry, they modeled hypothetical profitability for these business designs, and also projected the growth in the market based on statistics about small company employment. The team developed recommendations on the capabilities our client needed to develop to enter the market, the business design it should pursue, and the benefits of success for its shareholders.Outcome:

Four months after the case, the client acquired several PEOs, making it one of the largest PEOs in the US. Investor reports on the PEO market began to sound suspiciously like the report developed by LEK/Alcar.

of 222

of 222

Value-Based ManagementSituation: A major international media firm sought to change its corporate planning process by instituting a Value Based Management framework; Value Based Management utilizes discounted cash flow valuation techniques in assessing various strategic options in order to provide a direct link between management’s internal decision-making and the external evaluation of the firm done by Wall Street analysts.

Associate Role:

The multi-phased project extended over several months and involved multiple teams of Associates and Consultants in several countries. In Phase I, the team was based at Corporate Headquarters and started by learning the fundamentals of the client’s business through management interviews and preliminary financial analysis. The primary objective of the project was to determine how much value was being created, and which products and/or countries were creating that value. A secondary objective was to identify the specific practices (or key value drivers) in the client’s organization which generated the most value creation. In order to achieve this goal, discounted cash flow valuation models were constructed to value 9 different product lines in 15 countries. The Associates, under the guidance of a Consultant, were directly responsible for: collecting data, identifying data deficiencies, utilizing key client personnel to fill in data holes, developing the analytical methodology, and building the financial models. These valuation models achieved the primary objective of determining the components of the value being created by the company. By utilizing the valuation model’s output, the Associates were also able to identify the organization’s key value drivers by testing various operating parameters to determine which operational functions created the most value. Phase II involved similar analysis, but on a more detailed, country-by-country level. Teams of Associates and Consultants were based in countries across Europe where they utilized the valuation model (or planning tools) developed in Phase I to identify value drivers for the individual countries. Under the guidance of a Consultant, Associates analyzed cost structure (overhead, marketing, production, and distribution costs), mapped creative process flows and identified and quantified revenue-generating activities. Finally, each country team assessed the impact on financial performance and personnel of a change in the company’s business model from a product-based model to a more customer focused model.Outcome:

The models, or planning tools, developed in Phase I were given to the Financial Planning Department and are used today in the corporate decision making process. The company continues to implement a value-based management approach throughout the operating divisions around the world. Phase II, as part of that implementation, is ongoing.

of 222

Interview cases with proposed solutions

Coke vs. RC value chainThere is very little set-up necessary for this case. It is used simply to test the interviewee's "assumption" skills and reasonable hypotheses. The interviewer does not really need to provide a great deal of detail for this case to be used effectively.The interviewee is given a piece of paper with the following representation of Coca-Cola's value chain.R&D Manufacturing Distribution Marketing OHD MarginSyrup Bottling "Base" DC Local DC$.05 $.15 $.10 $.05 $.20 $.25 $.10 $.10Price = $1.00Given Coca-Cola's value chain, the interviewee is asked to formulate the value chain for a secondary brand cola manufacturer (use RC for example).

One approach to solve the problem would be to start off at the end of the value chain with the price of RC. The interviewee may want to start here because this may be a "known" element (been shopping lately?). Now that the easy part is over, the next step is to assign percentages of the price to each portion of the value chain. For this part, the interviewee is expected to look at the percentage that Coca-Cola applies, and make reasonable inferences as to how Coca-Cola differs from RC and what effect this will have on the weighting for RC's value chain.

Reasonable assumptions might be made about the following issues:Can RC afford to fund as much R&D (as a percentage of price) as Coca-Cola? Are they a company which wants to be first in with a new product or a fast follower? Are in-house syrup production and bottling costs (%) really going to be different between companies? What type of distribution system would RC have compared to Coca-Cola? They are a more local brand so the assumption might be made that they deal only through the local DCs and do not have a large "base" DC. Does RC really do a lot of marketing by themselves or simply "ride the coattails" of Coca-Cola's marketing? If RC has similar machinery requirements, do they have to spread their OHD over fewer products / less volume? RC's % could very well be higher than Coca-Cola.Follow this line of "assumption and inference" thinking until the percentages are in place and then figure out the cents to apply to each portion.

The interviewer (who has been judging whether the assumptions you have made sound reasonable, or whether they sound like you have never even seen a bottle of Coca-Cola before) can now ask if anything looks strange to you about the value chain or if you would suggest a different way for RC to be doing business.One possible answer to this (think back to Crown Cork & Seal) is for RC to simply start their value chain at a later stage in the process. If, because of their current volumes, the syrup production in-house and the in-house bottling costs, are too large of a proportion of their costs,

of 222

they could consider buying syrup from someone else (how about it Coke, want to license your syrup knowledge!) and using an outside bottler.Again, this case, like most others, has no "right" answer. The interviewer will just be looking for the reasonableness of your approach and assumptions. Good luck!

of 222

The CEO of a large diversified building products company has asked us to help her examine the operations of her china products division. China products include tubs, toilets and urinals. Specifically, he wants to know if he should approve a $200 million capital expenditure for new manufacturing facilities.The company is one of seven producers in the United States; the largest producer has a 20 percent share; our client is number 3 at 15%.Prices for the client's products have been flat.The two largest competitors appear to earn a small return; our client is break-even.The largest competitor has just announced plans for a major modern plant.What issues must be considered?

Probable points of clarification:

Is the planned investment expected to lower costs? (Yes, but not substantially, with the major reason being that the new process will result in a better finish)Does the company rely on a limited source of raw materials? (No, materials are easy to get)

"Minimum" - level answers

Market size/growth: What has been the industry growth in units? Is the growth linked to housing starts?

Competitive Position: How much overcapacity exists? What are the competitor's relative cost positions? Market segmentation: How is the market segmented (e.g., residential vs. industrial vs. commercial) Are there different price points by market? Within markets?

"Better answers"

Customer-buying factors: Do customers demand a full-line supplier (e.g., with other building products)? Is any significant portion of sales to centralized customers (e.g., Sears)?

Barriers to entry/exit: What is the minimum-size new plant? Are most industry plants fully depreciated? Generally, how expensive is entry/exit? Has there been a history of change in the

industry players Manufacturing:

Do the plants produce other products which contribute to overhead? Are there ways in which costs can be substantially lowered?

of 222

"Outstanding answers"

Marketing: How rationale has pricing been in the industry? Have competitors ever announce capacity expansions before and then not implemented

them? Are there opportunities to rationalize the product line? Does the new finish that will result from the investment "pay for itself" with higher

prices? Competitive Position:

How important is the product line to each competitor? Are the products sold in combination (with each other, or with other products such as

fittings)? Would exiting the business affect the sales, profits or costs of other business units? Are there advantages to plants being located in specific places due to high

transportation costs? If the competitor's new plant is built, will others drop out?

External environment: Is regulation important? Are there changing demographics that will affect demand?

Logic Tree Approach

Level 1 Question: Should I invest in $200 million plant?

Level 2 Questions: Is there a sizable profitable market? Is there a better use for investment $s? Is there significant market threat? Do I have production advantages?

Level 3 Questions: Is there a sizable profitable market? Do I have good relationships with distributors? Does the market have enough size for new capacity? Can I sell at the right price? Segment the market?

of 222

A wealthy woman, Mrs. Wentworth, who is worth multiple millions wants to invest in either the Cleveland Cavaliers (a basketball team) or the Cleveland Indians (a baseball team). She is indifferent between the two sports but is profit driven. Which team should she buy?

Additional Facts

She wants to own a sports team, the candidate must recognize that there are other more profitable uses for her cash.The purchase price is the same for either franchise, let us say $100 million. The financing terms available to Mrs. Wentworth are the same, regardless of the choice of team. The Balance Sheets of both teams are the same in terms of liabilities and assets. Neither franchise owns the stadium. They must ask this to be given credit. Ticket Prices on average are $25 for Basketball & $ 6.50 for Baseball. Number of home games are 41 for Basketball and 81 for Baseball. Stadium Capacity is 20,000 for Basketball and 54,000 for Baseball. Utilization on average is 70% for both. Let them explore other streams of revenue but they are irrelevant (key streams are - Licensing of Apparel, Concessions, Parking). It is important that they recognize these as possible sources of value. The key is to figure out whether ticket prices can be raised. They must figure out a model to answer this question. Possible sources of estimation - historical sales patterns, comparable data for other franchises in other cities. After exploration, it turns out that they cannot be raised. Examine if 100% utilization can be reached. Research shows that Cleveland residents are indifferent. Don't give this away, make them probe for it.

Solution

Everything cancels out except that baseball has more seats available. Thus, potential for more revenue.Equation = # of seats * # of games * stadium capacity * utilization

Why is there no light beer in the UK?

This problem does not fit a common framework, but can be simply dissecting the alternative reasons for each component of the issues. Here is one approach:The reason there is no light beer in the UK could because (1) consumers do not demand it, (2) producers are not producing it, despite consumer demand, or (3) some outside influence, such as government, will not permit light beer in the country. Following the producer option, one can subdivide the problem as nobody wants to sell light beer in the UK or somehow, light beer producers are blocked out of the UK.

of 222

Durable Goods Distribution CaseSETUP: Large durable goods manufacturer (i.e. washing machines) / Sells products directly to customers (80% of sales) / Has 6 wholly owned subsidiaries that stock and sell products (20% of sales)What changes would you make to the organization?

Facts to find

Market will not respond to advertising - cannot create demand pull Consumer purchase frequency constant (i.e. buy one new every 6 years) Consumers buy primarily on lowest cost Parent manufactures all equipment (parent's manufacturing is not the scope of this case) Subsidiaries maintain all functions (were once bought by independent businesses, then bought by parent): Accounting / Order Processing / Sales / Management / Finance

Hypothesis 1

Would it be more efficient (i.e. cost savings) to provide central functions from parent?Maybe, but how would you measure?Study each subsidiaries functions and determine efficienciesFor example, determine the number of labor hours for a transaction for the sub and parent. Plot labor/units on vertical, units on horizontal. If parent is higher, centralize.Problems?Eliminating sales function and order processing at sub may reduce flexibility and hurt customer service?Maybe, but how would you measure?Interview clients and determine the importance of flexibility and personalized sales

Business Forms CaseA manufacturer of business forms wants to increase profitability by using pricing as a weapon. "Business Forms" include credit card receipts, multi-copy sales receipts, warranty papers, invoice forms etc.The CEO has hired you to assess and make recommendations if possible. You have ten minutes to interview the CEO before she leaves for a meeting. What will you ask? What do you need to know? What is important? Can you make recommendations?

HELPFUL INFORMATION (not to be offered unless asked)

MARKET: Market share in the Business Forms business is 4%. Fragmented market with many small local printers. Largest player - 5%. MFG.: "WORLD CLASS" mfg. The company has 4 regional plants (Midwest, east coast, west coast & Texas). Modern facilities and good cost control. The firm uses JIT, SPC and other cutting edge manufacturing techniques. Internal study indicates that the firm is the low cost producer in the industry.

of 222

PROFIT CENTERS: Mfg. and sales are profit centers. Transfer prices negotiated between Mfg. and sales. Sales sets the prices to customer. DISTRIBUTION: Extensive inf. system. Over 100 daily orders. UPS delivers most orders within 2 days for standard items. Custom orders shipped between 1-3 weeks depending on complexity and quantity. The company does not own delivery trucks. SALES FORCE: 200 person sales team that focuses on key accounts. Paid on commission. Salesperson receives 25% of all revenue above standard cost. Contacts primarily via phone, supplemented with occasional visits. All sales handled through sales force. MARKETING: Only use direct mail fliers and catalogs. Client survey reveals that company known for "High quality, wide product range, excellent return policy, ability to fulfill any order". Able to deliver larger orders faster than competition when asked for rush delivery. COST STRUCTURE: not important. However, the materials cost is less than the shipping cost or fees charged for customized work.

POSSIBLE SOLUTION

Using price as a competitive weapon, but not necessarily to increase market share by lowering price. Exploit rush order customers. Raise prices on less price sensitive customers. Use "Time Based Competition" to increase profitability.Use ABC to get "better" standard costs and empower sales force to maximize revenue. Constantly monitor standard costs because of volume fluctuations.

"High-End" Pots & Pans Company CaseThe CEO of a Pots & Pans mfg. hired you to solve her problem:Foreign competitors gaining market share Products barely profitable at market pricePots & Pans are considered to be of premium quality, sold primarily in sets and fairly expensive. According to CEO, typical customer is a newly-wed who places pots & pans on the registry at Hudson's or Marshall Fields. You have ten minutes to interview the CEO before she leaves for a meeting. What will you ask? What do you need to know? What is important? Can you make recommendations?


MARKET: Market share in overall Pots & Pans is 10%. Market share in high-end Pots & Pans is 35% MFG.: One plant in North Carolina DISTRIBUTION: Product sent to local warehouse and then to 6 regional warehouses and than to departmental stores. No product shipped directly from factory. Shipping paid by the company and not customer. RETAIL OUTLETS: High end department store (Hudson's). Each store carry one set of each line for display and one set for inventory. Low inventory levels because product is bulky and expensive to store. Dept. store demand quick replacement upon sale. MARKETING: Little advertising. 3 person sales staff works with dept. store buyers. Dept. store buyer knows company and product well. Little discussion or negotiation required. Repeat sales equal almost 100% of the business.

of 222

COST STRUCTURE: Materials-30%, Labor-20%, Var. O/H-10%, Fixed O/H-20%, Shipping/Packaging-20% POSSIBLE SOLUTION

6 Regional warehouses setup in 1950s when long distance delivery times were slow and costs high. With FEDEX etc. the cost of delivering product quickly decreased. Eliminating warehouses lead to O/H savings greater than increased shipping costs. Inventory and outdated inventory would decrease.

Paper Products Manufacturer CaseYour company makes legal pads, notebooks, and other standard paper products. A sixty year old plant in Gary, Indiana that has been producing paper for 60 years. The firm purchases 100,000 tons of white 20lb paper to produce products.You are the purchasing agent responsible for buying the white 20lb paper. New option to buy from Brazil. Currently, you buy from a US Company in Oregon. Your company values long term supplier relationships. The Brazilian firm is offering to sell at $.35 a square yard compared with $.38 a square yard from the current supplier . You will switch if you can gain a long term cost advantage.How do you determine if the Brazilian company has a long term cost advantage over the US company? What would you need to know? Why would it be important? What must be considered? How would you find out what you need to know?


Cost Structure / Facility age, technology used, amount invested Level of integration (does the firm own its own forests?)B Control over key suppliers (wood or chemical suppliers) Shipping/Distribution costs Quality of Brazilian paper over US paper Sales volume Company and Industry capacity / Capacity Utilization Political stability in Brazil Exchange rate fluctuation and ability to hedge.....MANY MORE!!!!!!!

How to find out what you need to know!: Use Lexus/Nexus , ABI Inform / Ask Brazilian and US company for inf. and study annual reports / Ask key suppliers for inf. / Examine Brazil through Brazilian governmental reports / Look for analyst reports on the industry

BONUS QUESTIONPrice war that continued till the Brazilian company stopped lowering the price once it reached $.25 a square yard. Why did the Brazilian company stop lowering its price?Realized that they were losing the price warReached variable cost level (incremental business)Found more profitable use for capacity, maybe another customer.

of 222

FertilizerYour client is an agricultural chemical company. They produce fertilizer, which is a cyclical industry that is currently in a down cycle. Lately, Russia has been selling fertilizer at a very low price. Also, their plant in Louisiana blew up costing them $600 million in damages. The plant produced $2 billion of product revenue with $100 million in profits per year.The CEO resigned in shock and the new CEO has called you in to determine what they should do.


Fertilizer uses a simple manufacturing process -> perfect commodity product Farmers are the primary customer International markets are growing at a high rate They are the low cost producer They have a strong sales force Transportation costs are in line with the industry Customers say it is cheaper to buy their fertilizer in LA and ship it themselves -> the final price charged to the farmers is very high compare to the industry

POSSIBLE SOLUTION

Transfer pricing (from manufacturing/production to distribution to sales) is adding significant additional costs to the product Even though they are the low cost producer, they are being priced out of the market by this additional cost structure The sales force may not be adding the value that the company thought/needs in order to be successful

AIRPLANE MANUFACTURERYou are consulting to a CEO of an airplane manufacturer. In the last couple of years you have gone from being number one in market share to number two. In addition, another company has announced that it will be entering the business and is presently tooling up its plant.As a consultant, what are the concern's your client might face, what additional information might you want to find out, and what recommendations would you have?

As a consultant, you are concerned with three key items:1. the condition of the airplane manufacturing industry,2. why the firm has lost market share and,3. how to prevent the new entrant from stealing market share.

of 222

The airplane industry's demand is a function of travel among two classes: business and leisure. Business travel increases as a result of globalization. Leisure travel increases with growth of middle and upper classes. Business travelers are primarily insensitive to price, leisure travelers are very price sensitive.The current competitor; a comparison:Price. service technology. heritage; safety. It turns out that the competitor'< airplane is cheaper to operate because it is more fuel efficient. The consultant should ask as a strategic .c question whether the firm is interested in the manufacture of more fuel efficient planes. The answer would depend on the future of oil prices. Instead, it may be better to try to compete on the basis of price, safety and service.Prevention of a new competitor gaining share:Key: creation of barriers to entry. Long-term contracts are preemptive. High concern, on the part of purchasers. for a proven safety track record.

OIL REFINING INDUSTRY ??Your company has 25% world-wide market share of the oil industry. You generate $40M annually in revenues through the machinery division of the company, which supplies machinery to refineries (not owned by your company) around the world.How do you assess the current operating status of this division?

Define "assess...operating status" - most likely in comparison two dissimilar pieces of information: 5>c, market share and $40M (but no idea what Sc of the market this represents). The key is to request what 'k of the market $40M represents. Assume is unknown. An estimate of the market size is therefore is needed. The way to do this is to ask how many oil refineries there are, each cost to build. how long then last (actual life. not dependent life) and what the machinery replacement costs are. From estimate of what the industry spends per year on machinery you can divide the above mentioned 9 M hs this ancl the refining division's market share can be assessed. this % can then be to the 25Cic .>nare ot the parent.

WINDMILLYou produce a Windmill with an accompanying electric generator (generator harnesses the power produced by the windmill). This costs you $10,000 to manufacture.How much are your customers willing to pay for it?

Porter's five forces dictate that industry rivalry/potential substitutes and supplier/buyer power need to be assessed. These could be an appropriate start. To narrow it down, let's assume competition and a demand/supply level far beyond your capacity. We must examine other components: the $10,000 cost is irrelevant -- you have no idea what this product is worth to anyone.Assessing the value of the product's benefits is perhaps the next step. The closest substitute to the windmill is probably utility produced electricity. Therefore, inquire how the electrical utilities measure and charge for the electricity they provide. Convert the windmill's output along these terms and assert a cost/benefit estimation of how much potential customers would be willing to

of 222

pay for it. Other considerations upon which to discount the value might be reliability, maintenance, etc.

of 222

MYSTERIOUS AUDIO CASSETTE MARKETYour client is the manufacturer of audio cassettes. They have hired you to figure out why they've been experiencing an alarmingly poor sales year. They want you to figure out the root of the problem, and what to do about it.

Additional Information:

Mature market: 5-6 major players. The client used to have a steady 30% market share, (second largest in industry), but now the firm has a 44% share. Your client offers a full range of audio cassettes -- from low bias to high bias/metal. Your client is also using the most sophisticated and quality driven cassette manufacturing techniques.The firm has been losing sales reps, yet loyal reps claim that sales are at record high levels for them this year.Firm historically targeted two consumer groups -- older, middle income enthusiasts and high school rock- 'n-roll stereo-philes.Recently. your client has been losing younger target market customers.Firm has traditionally managed its relationship with retailers well. However, the firm has recently lost several major accounts due to its inability to move your customer's (the firm's) products.

Answer:

The combined market characteristics, recent symptoms and sales decline, and increased market share suggest that your competitors are abandoning this market -- likely due to a new and better substitute technology ( the compact laser disk, for example.)Still, your clients historically flat market share suggests brand loyal customers. Moreover, your older target market is loyal -- perhaps less likely to switch to the new technology in the short run. Assume (1) that your client wants to be a provider of this new technology, and (2) that it has the capacity to manage a primary supplier position in its traditional line of business for the short-term and target your older customers as well asnew segments less likely to switch over to CD's. For the long-term, consider resource requirements, opportunities and constraints of developing or acquiring the new technology.

AGRICULTURAL EQUIPMENT MANUFACTURERYour client is a large agricultural equipment manufacturer. Their primary product line - farming tractors - is losing money. What questions would you ask of your client to help them solve their profitability problem?

It is unlikely that there are too many players in this market. You might want to start off by asking how many competitors there are. Suppose the answer is that there are two direct competitors.What is your client's market share relative to their competitor's? (Your client has 40% of the market. Competitor #1 has 30% and competitor #2 has 15% with the remaining 15% belonging to many small manufacturers.)What are the market share trends in the industry? (Five years ago, your client had 60% of the market, Competitor #1, 15%, and competitor #2, 10%. Obviously, your client has lost significant market share to its two competitors over the last few years.)Q: Do all three competitors sell to the same customers? Additional Information: Yes.

of 222

Q: How is your product priced relative to your competitors? Additional Information: Your client's product is priced higher than all others.Q: Has this always been the case? Additional Information: Yes.Q: Are the products the same? Additional Information: Essentially yes, they all have the same basic features. Of course, tractors are not commodity items, and a few differences do exist.Q: What are the differences that allow you to charge a premium for your product? Additional Information: Your client has a strong reputation/image of quality in the market and the market has always been willing to pay a premium for that reputation because it meant their product would last longer and need less maintenance. This can be critical for some farmers because they cannot afford to have a piece of equipment break down at a critical time.Q: Are sales revenues down? Are sales quantities down? Additional Information: Yes.Q: Are prices down? Are costs the same? Additional Information: No. In fact, both the price and costs are up.Q: Have fixed costs increased? Additional Information: No. material costs, {variable costs,} have gone up out of sight, and the client has no answer as to why material prices have gone up so staggeringly.Q: Do you manufacture your tractor or just assemble it? Additional Information: Primarily an assembly operation.Q: Finished part prices have gone up? Additional Information: Yes.Q: Raw material prices for your suppliers? Additional Information: I don't believe so.Q: Have labor costs increased for your supplier? Additional Information: No. Q: Have you enhanced suppliers? Additional Information: No.Q: Why are your suppliers charging you higher prices for the same products? Additional Information: They're not. The prices have increased as a result of our product improvement efforts. We've tightened tolerances and improved the durability of our component parts.Q: Why do you make these improvements? Additional Information: Because we strive to continue to sell the best tractors in the world.Q: Are your customers willing to pay for these product improvements? Are your customers willing to pay a marginal price increase which will cover your cost of implementing these improvements? Additional Information: I don't know. I guess we assume that they will.

Solution:

It turns out that prices have been raised to cover the costs of these improvements, but customers do not value these improvements unless they are essentially free - so sales are down. The client needs to incorporate a cost benefit analysis procedure into its product improvement process. Don't forget though that you must consider the long-term effects of these decisions.

of 222

BANK OF LUKEMr. Check is the Director of Retail Lock Box Services for the Bank of Luke, a medium-sized Midwestern bank. The Retail Lock Box Department consists of 100 clerks and 8 managers and Supervisors. Each year, in addition to their handling of retail lock box transactions, the Department generates $1.5 million of fee revenue processing retail credit card and mortgage payments ("items") for 15 commercial accounts. The bank has many other commercial accounts that use other companies for their item processing. In fact. the Bank recently lost the item processing business of one of its largest accounts to Vader Inc., the largest item processor in the U.S.The item processing industry has undergone dramatic changes in recent years. Types of items processed include credit card, mortgage, and utility payments (checks), airline tickets, and coupons. In the past, these items were usually processed by the issuing company (e.g., airlines would process their own tickets) or by bank item processing departments like the Bank of Luke's. At banks, the processing of payment items was done more as a service to bank customers than as a profit-making endeavor. Hence, it received little focus from management. Historically, processing was accomplished by verifying the correctness of incoming paperwork and manually sorting, filing, and totaling the items; only the largest banks were highly automated.Companies specializing in item processing have emerged in the past ten years. Vader, Inc., the largest such company is a subsidiary of a small bank in Georgia. Each year, Vader processes millions of airline tickets and retail payments for hundreds of companies, most of whom are not customers of its parent bank. Vader uses high-speed processing equipment and is highly automated. Processing time is rapid and processing costs are low. In fact, because of this speed advantage, the parent bank is beginning to profit from the float of checks processed. Although industry-wide a majority of items are still processed by the issuing company or by small processors, within five years, it is expected that most of the business will continue to migrate to Vader-and other large processors. Within five years, it is expected that Vader and the large processors will dominate this market.Vader has a significant cost advantage over smaller operations, such as the Bank of Luke, because of the great economies of scale they gain from processing such volumes of items. In addition, Vader benefits from a more constant workload by processing both airline tickets and retail lock box receipts: airline tickets have few peaks and valleys, whereas mortgage payments always peak early in the month with very low volumes the rest of the month. Mr. Check believes that Vader quotes prices 20 cents per item to large prospective customers while the Bank of Luke processes items for 40 cents per item.The President of the Bank, Mr. Kenobi, has asked Mr. Check to evaluate how the retail lock box service can be made profitable; the service lost $100,000 last year. Mr. Check believes that the bank must offer retail lock box services, and it must price the service to be competitive with companies such as Vader. Recognizing that outside expertise will be needed, the President has given Mr. Check a budget to be used to hire a consulting firm. Mr. Check has asked you to visit his office to discuss the proposed engagement. While walking to his office, you observe that the Bank's retail lock box operations remains primarily a manual system, with limited use of modern, high-speed equipment and methods. Once in Mr. Check's office, you note a picture showing the Department's staff in 1965; Mr. Check was a supervising clerks at that time. After reviewing some background information with you, Mr. Check asks you the following questions:

1) What do you see as your (the consultant's) role at the Bank of Luke?2) What steps would you take and what information would you gather to diagnose the problems facing the Retail Lock Box Department and to develop solutions to those problems?

of 222

3) From what you now know, what are the problems facing the item processing service and what recommendations would have the greatest impact on the performance of the Bank of Luke and the item processing service?

of 222

In this case, we want to test the candidate's ability to handle a case in which the events appear hopeless until the end. When an apparently easy solution (automation) is made available. The candidate should call attention to the general premise of the case, and not simply believe that the business is necessary just because Mr. Check says so. We also want to test creativity with this case. We purposely leave the case rather vague, not suggesting any particular actions and offering little data. The candidate should be given time to think about this case and propose solutions which are not readily apparent.

Why not sell the business of these customers?Why not offer increased services to justify higher fees?What is the strategic plan for the bank and how does this unit fit into it?What does Mr. Check feel his unit should be generating? (after all. $15,000 per employee is pretty low!)Has he considered acquiring other bank's customers to increase the economies of scale in his own operation?I'm sure you'll think of many other such general solutions.

This case can also be used to discuss cost-cutting. Again, creativity and sensitivity to the real issues should be the goals of your probe; cutting 25% of the staff is too obvious and too easy.

INSURANCE COMPANYAn insurance company pays its sales people a base monthly salary and a commission of 25% of new policy sales (2% of renewal). What is the right way to pay the sales agents?

This case is an organizational behavior scenario. Again, you must work out what the "right way is". Assume some generic definition like "the manner by which agents are both motivated and equipped to accomplish their tasks in the interests of the organization..." is applicable. Having set up a definition, the results achieved by the above mentioned composed system is examined. The only factor determining how much the agents are paid is their sales $. In essence, they are motivated to sell a policy to anyone at as high a price as possible. They are not motivated to give consideration to the company's risk in selling insurance to each customer. Absence of such a consideration could cause problems for the company in the long run. A better compensation structure might pay the agent on a sliding scale, depending on how risky (costly) an insured party proves to be.

Your client is building a new office tower in Jakarta. How many floors should it be? (Booz-Allen Asia)

Issues to address: Marginal Revenue = Marginal Cost

of 222

CANDY COMPANYYour company is a rather successful producer of candy. It originally started as a single product line. The production process consists of two basic activities: manufacturing and packaging. The firm has also expanded its sales through product line extensions. Management is concerned that sales are growing but profits are not increasing at the same rate. What can your company do?

This is a revenue v. cost exercise. Margins are shrinking.

Find out about the critical components of cost: raw materials, labor and fixed cost.Raw materials are commodities with cyclical prices that have fallen in recent years but are expected to swing up again (This makes the problem worse). Labor and fixed capital has increased per unit at a faster rate than they were increasing ten years ago. Find out what the company's controlling system is. Still focusing on the manufacturing part of production and the cost explosion occurring in packaging (Candy is candy. The product line extension is primarily an issue of different packaging.) Though manufacturing is rather efficient already, packaging is not, resulting in a slack in labor and fixed capital (small batch sizes, high setup times).Possible solutions: reduce product line, introduce controlling/scheduling measures for packaging. Qualifier: Are the company's customers (i.e. retailers) willing to accept the reduced product line?

Find out about revenues:Revenue killers: concentration of retailers; trade brand retailers demand large introductory discounts for new products; high failure rate of new products.Possible solutions: streamline product line; reduce low margin trade brand production; emphasize pull marketing; reduce introduction rate for new products.

Operational aspect: optimal plant location with respect to transportation. Possible assumptions: plant location at (x,y), national WH's at (xi. yi), demand per country given Di,. cost linear with distance. shortest travel Di hetween (x, y) and (xi, yi) allowed: TC= Sum(xiDI); solution (requires iteration): dTC/(lx = dTC/dy =())Punch Line: Should the company seek dominance now?Have the (driving forces for fragmentation disappeared? No, the fragmenting factors from the market are still in place. The company has not changed is strategy in the fragmented industry, i.e., dominance makes no sense, but the company has gained an advantage by operational changes.

SKYSCRAPERYour client is going to build a skyscraper, but is not sure how many stories to make it.How should he decide?

This is an economic supply/demand mind teaser. Clearly you don't want to lose money on the deal. The building will house tenants, who will pay to reside there. The costs of building and maintaining the structure (both fixed and incremental by story) need to be compared to the

of 222

revenue generating capacity of the project. When marginal revenue equals marginal cost the client should stop adding stories.

of 222

CONSULTING FIRM (I)You are the managing director in a large international consulting firm. Traditional strengths of your firm have been solving strategy and organizational issues. Recently, you have noticed an increasing number of your firm's proposals are being rejected because of a lack of information technology expertise in your firm. So far, your firm's growth has been strong enough that the lost proposals have not hurt annual earnings. Nonetheless, you are becoming increasingly concerned about the need to develop the firm's capabilities in information technology. Q1: Assuming your concern is valid, what reasons will you provide to other partners about the need to acquire information technology skills?Q2: Assuming you are able to convince other partners of the importance of IT expertise, what steps would you take to rapidly build IT capacity in this area?Q3: What are the major risks in executing an IT capacity-expansion?

Q1: Good answers focus on the value of IT to clients. Discussion topics include: the increasing importance of information in business, strategic value of information and information tools, and the importance of information systems for implementing new organizational structures and management control systems.Better answers focus on the costs of losing clients to competitors. Discussion includes: the switching costs of having clients talking with competitors about IT problems, and risk of losing clients by not being able to solve a problem.

Q2: Good answers will focus on various methods to build expertise: buying expertise by acquiring another firm; buying capacity by raiding IT practices of other firms for a few key consultants; building capacity through recruitment of IT experts and training them to be consultants; building capacity by training current consultants in IT practical skills; or, building capacity by establishing a strategic alliance with an ITboutique firm. Candidates should discuss the pros and cons of each method proposed: the impact on the firm's current culture, the cost to the firm, the time needed to build expertise, etc.Better answers will realize the importance of stimulating client demand as capacity builds through, for instance, seminars, articles, and strategic studies in IT areas.

Q3: Good answers depend on the expansion methods discussed, but an important issue is the loss of the firm's focus away from just strategy and organization.Better answers will focus on the difficulty of implementation in IT; rapid technological changes in the IT industry require significant ongoing training and development costs; new practice cultures may be significantly different from current culture, especially if "external experts" are brought into the organization.

of 222

CONSULTING FIRM (2)Your client is the treasurer in a privately held corporation. She is in charge of managing a portfolio of investments in addition to her treasury responsibilities. She has asked your advice about the purchase of a large position in company 456, whose stock is listed on the NYSE.Company 456 is currently selling for $22 per share. The treasurer's investment analyst predicts that the stock will pay a dividend of $l.25 for the foreseeable future. Short-term treasury bills are yielding 7 percent, and long-term t-bills are yielding 8 percent. Average market return is 13%.The treasurer is contemplating the purchase of 5000 shares of Company 456 and wants your help in determining a fair market price. How would you go about determining a fair price for Company 456?

Don't forget basic finance. If the market is efficient, $22 is a fair market share price for the company, regardless of all the extraneous information that's thrown in.

Now make it a little harder:If you have information that the market doesn't have, then the price you would be willing to pay may be different. For example, say that your corporation is planning to introduce a new product which will require purchase of a million high speed modems each year for 10 years.Company 456 is one of the larger producers of high speed modems, typically producing at full capacity at 250,000 modems per year. It is estimated that the increase in modem purchases by your company and others who try to copy your product will increase the price of high speed modems by $4/modem for the next 20 years. The market doesn't know about the increased demand for modems yet. How much should you pay for Company 456 now?

Information to give when asked:Can Company 456 increase capacity economically? No. They are constrained by a regulatory production limit of 250,000 modems per year. What is the typical return from companies like Company 456 in the market? e.g. what's the appropriate discount rate? 10% What is Company 456's tax rate? 40% How many outstanding share of stock are there? 10 million How will the cost of production change over the next 20 years? Commonly available market analysis estimated that costs will decrease $0.50 per modem each year. Increased demand will have no effect on this projection. Note: This is all irrelevant information and indicates that the interviewee needs help.

Company 456 revenue will increase by $4/modem X 250,000 modems/year = $1M/year.Company 456 costs will remain unchanged.Assume that the value of the additional 20yr revenue stream can be approximated by a perpetuity, so the increase in the value of the company will be $1M X (1-40%) / 10% = $6M.The share price will then appreciate by $6M / 10 M shares = $0.60 / share. Recommendation: Buy 5,000 shares at $22/ share and wait for the market price to increase to $22.60.

of 222

POTS & PANSA manufacturing company based in Charleston, S.C. makes high quality pots and pans which are sold throughout the U.S. in specialty and department stores. You are called in because they feel that the $l million they spent on distribution last year was way too high.How can you show your client ways that he can save money?

Distribution is basically a trade-off between cost and service level. The higher the service level, the higher the cost (more inventory pools, warehouses and shipments). So you need to ask where the inventory is being held. It turns out that stores, since they sell so few of these pots and pans, hold no inventory and thus require next-day replenishment after a sale. The next thing you need to know is where the warehouses are located, since the closer they are to the stores the lower the distribution costs. Your client has three warehouses - one in Charleston, one in Philadelphia and one in Los Angeles - from which he covers the whole country. A quick way to solve this case is to realize that if stores require next day service from these three warehouses, the only way they can do this is by shipping overnight at a premium rate. You can save them a bunch of money by closing down Philadelphia and Los Angeles, shipping everything from the plant in Charleston by UPS, and negotiating avolume rate. This can be confirmed by asking for the annual sales which turns out to be 10,000 units. When you divide this into the $1 million distribution cost you discover that they are pay $100 to deliver a pan to the store. Beat this figure and you've earned your exorbitant fee.

SEMICONDUCTORSThe domestic semiconductor industry is beleaguered - brutal price competition from the Japanese, accusations of "dumping" against the Japanese, etc. Domestic semiconductor manufacturers are clamoring for protection from Washington. Some of the public policy solutions being proposed include a research consortium sponsored by the government, trade restraints, etc. You are a consultant at a major firm. You are concerned that the public policy debate ignores basic issues regarding industry economics. You are skeptical that the solutions being proposed will solve any problems for your clients. You know that each generation of memory chips lasts only 4-5 years. What are some of the factors you will consider while looking at the economics and how might they impact the idea of shared research by U.S. manufacturers?

Some of the basic issues include:What are the cost drivers in the industry? e.g. the split between fixed and variable costs involved. The basic issue to be arrived at is that it costs huge amounts of money to be a player -- roughly $250M in research and $600M in plants. This increases exponentially for each succeeding generation of memory chip. There are high fixed costs.Negligible variable costs. Cut-rate. Volume-oriented pricing -- marginal cost of an additional chip is minimal.Need access to huge amounts of capital on a continuous basis to survive for the long term.Raise pros/cons/issues of government. participation in this. Is it feasible? What are the priorities for scarce government resources? Will relaxation of anti-trust laws help? Foreigner's access to cheaper capital? Research costs are smaller component. What will shared research accomplish?

of 222

of 222

AIRLINE INDUSTRYThe airline industry is characterized by low returns and stiff competition. In the early years after deregulation, discount carriers like People Express sprang up. Years later the discounters have gone out of business. In a price-competitive industry, why is it that the higher-cost carriers were able to survive and the low-cost carriers were not?

Some of the basic issues include:Characteristics of discounters. Low fares, but limited service. Characteristics of major carriers. Higher fares, but better coverage and service. Hub systems channeling traffic. Competitive moves by majors. Innovative use of information technology for yield management and differential pricing. Basically, they priced every seat individually based on continuously monitoring demand/supply. They wooed leisure customers with fares lower than (discounters and charged more from business travelers who were indifferent to price but sensitive to service and frequency. The major carriers stole the discounters' market and forced them out.

OIL TANKERYour rich uncle has just passed away and left you with 3 small oil tankers in the Persian Gulf. How do you determine how much they are worth?

This problem involves the interplay of supply and demand forces to determine the value of the tankers. The nature of tanker supply will be revealed by defining the different tanker types in the industry - in layman's terms, small, medium, and large - and the cost-related prices associated with operating each type. In effect, a step-function supply curve results for the industry with each step representing a different tanker type. Demand for the services of tankers is assumed to be fairly inelastic since refinery economics dominate the purchase decision. By carefully calculating the supply/demand curves, we can discover that at the given level of demand, only large and medium tankers are put into service. This renders your late uncle's small tankers suitable only for scrap at the present time.

FERTILIZERYou are hired by a fertilizer manufacturer to help them out of a difficult situation. Their market share, and profits, are in a decline and they do not know why. What are you going to do?

Some of the basic issues include:Fertilizer is a commodity. Identify the basis of competition in the industry, i.e. competition is on a cost basis. Who are the major players? What is their cost position relative to yours? Additional Information: Your client is the high-cost producer. Why is your client the high-cost producer? Examine the inputs to the process and analyze each one vis-à-vis your competitors (a long drawn out process). Are there economies of scale? Where do you stack up on that dimension?

of 222

Additional Information: You are comparable on all dimensions except for a key raw material (phosphate). Additional Information: You do not have any scale advantages.

of 222

Examine key issues relating to your disadvantage in raw material supplies. Why is the client at a disadvantage? It turns out that you probably cannot overcome this disadvantage. What are your alternatives? You should explore the possibility of competing on a scale basis. What do you look at to analyze the issue?

RETAIL ADVERTISING PRICINGYou are the new retail advertising manager of a large daily newspaper. This morning you received a call from the advertising director, your boss.He sounded extremely worried about the retail advertising division's performance. Naturally he doesn't explain why, assuming that a hot-shot like you would by now be totally familiar with the status quo!. He has to attend a meeting of senior executives convened by the publisher where he will have to defend the advertising department's performance. He also wants to make a big splash by presenting a new "strategic pricing methodology" aimed at achieving "value-based differentiated pricing". What would you do?

Find out corporate profitability objectives. Assess gap between actual departmental performance and targets. Examine both revenue and cost issues. Additional Information: Revenues have gone up steadily over the past few years. Further, costs have not risen significantly. So why the worry? Apparently, corporate pressure to improve bottom-line results has led to steep advertising price increases. A classic demand-curve scenario has led to greatly decreased cumulative ad volume with potentially serious long-term consequences.Examine competitor pricing and customer price sensitivity. Discuss heterogeneity in advertising customers based on business size, breadth of product line, price-point, etc. Understand advertising attributes of importance to different segments, e.g. color, size, frequency, discounting, etc.Use differences in needs of customers to implement price differentiation strategy based on appropriate advertising service.

AUTOMOBILE INDUSTRYYour client, one of the big three auto makers in Australia has over the last few years under-performed its competitors as measured by its profitability. All three companies current car models are "badged" Japanese designed cars, i.e. they are products of joint ventures with one of the smaller Japanese auto makers. The Japanese market is much bigger than the Australian market. These cars are then sold both in Japan and Australia, the only difference being the place of manufacture and the model names, i.e. badges. You have been asked to establish why your client has performed poorly relative to the competition.

Explore possible reasons for under-performance. Several frameworks would work, but Revenue/Cost is typically pretty effective when answering a vague profitability question. The client sells about the same volume of cars for about the same price as the other Australian competitors ---> Has to be something to do with costs. Where would you begin to look for cost information?management accounts,

of 222

published financial accounts, data from your American holding company, reverse engineering.What would you expect to be the main cost categories?labor costs raw materials manufacturing overhead design costs advertising and salesAdditional Information: Design costs are by far the most important component of costs. Does our car cost more to design than our competitors?Additional Information: No, all car models cost ~$10B to design.Explore the relevance of the Japanese connection:Are the terms of the joint venture different from our competitors?Additional Information: The terms are all similar.What are the terms of the joint venture?Additional Information: Share of design costs pro-rated between the parties based on number of cars sold by each party.Does the client's Japanese partner sell a similar volume of the partnered car as do the Japanese partners of the other two Australian producers?Additional Information: No. The partner already had a similar model which sole well, and thus sells very few of the Aussie design in Japan.However, Japanese partners of the other two Australian firms sell large volumes of the Aussie joint design.

Sufficient information has been uncovered for a solution. To recapitulate, your client sells a similar product, in similar amounts, to similar markets in Australia relative to competitors. Similar design costs in absolute numbers were incurred by your Japanese partner. The key lies in your discovery that design costs are pro-rated. Thus, the design cost defrayed by the Japanese partner's sales in Japan are relatively small, and your client's share is, consequently, significantly larger than the Japanese partner.

SCIENTIFIC INDUSTRYA manufacturer of scientific instruments is experiencing declining sales in its major product line. Why?

Here are some questions which may help isolate the key issues:Describe the instrument and what it does. (Goal: Gather background information on the product). Additional Information: The instrument, call it Y, is able to perform elemental mapping, that is, it is able to determine the specific composition of materials placed in the chamber for observation.

of 222

Y is an accessory for a larger and much more expensive instrument that functions almost exactly like a microscope, which we'll call X.What other products does our client manufacture? (Goal: Gather background information on the client).Additional Information: They recently began manufacturing X, and also produce an unrelated product.Can these instruments be used separately? Are they ever sold separately? (Goal: Understand the sales process and the potentially interactive role of the X and Y sales forces).Additional Information: X can be used by itself, but Y is essentially dependent on X for its operation. As a result, except for replacement sales, Y is rarely sold individually. In fact. X's sales force will frequently recommend that a buyer purchase a certain Y while buying an X. Two years ago, over 50% of the client's sales were generated by a manufacturer of X.What is the current %? (Goal: Determine whether this could be a cause of the sales decline).Additional Information: It is currently around 5%.Does our product X compete with other manufacturers of X? Particularly, the manufacturer that was selling our Y? (Goal: Understand reasons for our friendly X manufacturer halting its promotion of our product Y).Additional Information: Yes, our product Y does compete directly with the (formerly friendly) manufacturer of X, who introduced the product about 1 1/2 years ago. (You have discovered a significant portion of the sales decline).How does our product compare to other Y's? (Goal: Determine whether others are beating us in technological or other product features).Additional Information: Our product is regarded as one of the best in the market.Is the market for X and Y growing, shrinking or flat? (Goal: A shrinking market could be a good explanation for declining company sales).Additional Information: Both markets are flat.Who uses X and Y? (Goal: Determine market segments).Additional Information: There are two basic user groups: industry, primarily semiconductor manufacturers, and academia, in research labs.What we've noticed lately is that the specific users in each of these groups, who also happen to be the primary buyers, have become relatively less sophisticated, that is, they are hired just to run the instruments and know less about their technical qualities. These buyers have become even more dependent on the sales force. What has happened is that our client alienated itself from other manufacturers of X at a time when a strong relationship was becoming even more important than it used to be. The buyers are relying more and more on the X sales force. who is typically called well in advance of the Y sales force. (The interviewer will not likely give you all of this information at once --questions about the buying process and changing decision makers would have brought it out ).

This is the second part of the primary reason for our client's declining sales: in addition to ruining our relationship with a manufacturer of X by producing our own, we happened to do so at a time when relationships were becoming more important to sales.

of 222

ALUMINUM INDUSTRYYour client is a leading manufacturer in the Aluminum industry. Because Aluminum is a commodity, relative cost position is the primary source of competitive advantage, and as part of a strategic review you have been asked to construct an industry cost curve (cost/kg of aluminum produces vs. industry supply), for various plant-to-market combinations. Their are five major players in the industry, supplying six major geographic market segments. Your model should be flexible enough to enable various future scenarios to be run.

1) How will you estimate competitors cost management?

financial accounts? direct estimates by client management? indirect estimates by client management'?2) How will you stimulate the market mechanism?

determine what kind of market structure exists ? monopoly? perfect competition?Given perfect competition, how can you stimulate the market? back to the envelope approach? (there are lots of combinations!) linear programming approach?The use of linear programming allows considerable flexibility and provides insight into questions such as:Is the industry currently efficiently configured? If a new plant is added to the industry, which market segment is most likely to be affected? What will the equilibrium price be in the future?

MEAT-PACKING INDUSTRYYour client, a U.S. firm, owns a meat-packing plant in Spain. Over the last few periods, profits have steadily declined despite the fact that sales are growing and production costs have not changed. You have been hired to figure out why.

Try Porter's five forces here: ( many other models would work )Additional Information when asked:Suppliers are independent farmers with little power against your client. Unit costs for raw materials are unchanged.In analyzing the internal rivalry, you will discover the market is fairly regional; hence, transportation costs and competition have not changed dramatically. Barriers to entry are high due to regulatory challenges, and no new competitors have entered the market.A substitute product has not been introduced. Since there are stable costs and strong sales, the only other possible reason for profit loss is the price of your product. Investigate this avenue, and you will discover the buyer link. Your margins are being squeezed due to the increasing concentration and buying power of your customers.

of 222

CONSULTING FIRM STRATEGYYou are the newest member on the management committee of a well-known top-tier strategy management consulting firm. Eager to be accepted by your more senior peers, you volunteer to study the industry and propose a firm strategy for the 1990's, which you will present to the committee at its next meeting. As you leave the meeting, you begin to realize the enormous task to which you've committed yourself.

1) How do you evaluate the consulting environment and determine likely future scenarios?2) What information do you use in this process? How is this information obtained?3) What do you believe is most likely to happen in the consulting industry given your present knowledge?4) How did you arrive at this conclusion?5) What strategy do you propose to the management committee?

This is one of the most difficult types of cases because the answers are entirely dependent upon the path taken by the candidate and will vary substantially depending upon the his or her knowledge of the industry. This is also an interesting case since the salience is likely to be high.As an interviewer you should feel free to add information on an as-needed basis. When information isn't available, ask the candidate to develop his or her own hypotheses. What matters here is the thinking process, not necessarily the answer.

For question 1) you might begin by evaluating the industry from a competitive analysis perspective, such as Porter's five forces. The following is an abbreviated analysis:Rivalry (low to moderate): Management consulting is fragmented, with many players each holding a relatively small concentration of the total market. Firms act as competitive monopolists and differentiate themselves by specialty, type of customer (Fortune 100 v. Fortune 1000 companies), reputation (McKinsey v. accounting firms), and the resources they employ op MBAs versus all MBAs). Many companies are relationship-driven with their customers which limits competition and keeps prices high. Top tier firms in particular are able to have high price points.Potential Entry (moderate): There are no great barriers to entry into consulting; however, few new consulting firms truly compete in the top tier.It's possible new firms would enter if the industry were earning positive economic profits, and if they faced certain imitability (e.g. the ability to recreate what the top tier firms do).Substitutes (moderate): Companies can move the consulting process in-house by hiring ex-consultants and bright MBAs.Buyer Bargaining Power (moderate-high): In the last decade, the consulting market has boomed with supply generally following demand, which lowers buyer power. However, it is appropriate to ask what affect recession might have on the industry. It's possible that demand may decrease as companies quit expanding, which would reduce demand, give buyers more bargaining power, and push prices lower.Supplier Bargaining Power (low-moderate): Major suppliers are the intellectual capital employed by firm (e.g. experienced consultants who bring in sales and new consultants who provide analytics). The firm must pay market price or risk losing suppliers.

of 222

One might also consider investigating the key success factors in the consulting industry. What sets top tier firms apart from middle ones? Do any firms have specific sustainable competitive advantages. How does the marketing mix differ among firms? Does your firm have any specific core competencies or advantages that set it apart from other companies?Determining likely future scenarios can be more difficult. There are several key issues: What affect will a recession have on consulting firms?Will top tier firms suffer differently from others? How will the mix of products demanded change (e.g. cost-cutting studies rather than market expansion studies)? Will the consulting market continue to expand or suffer a cutback? Or, will certain geographical areas expand (Pacific Rim. Eastern Europe) faster than others? Again, the thought process is more important here than actual answers.2) Information gathering is a key reason companies use consultants. A candidate should have a decent understanding of business information sources and how information is gathered.Information can be broken into two groups: secondary and primary. Usually one begins with secondary material, specifically, a complete review of published literature pertaining to the question (e.g. journal and newspaper articles, investment bank research, specialized studies, books, etc.). This often points toward other good sources (e.g. industry experts, associations, major competitors, government sources, etc.).Hypotheses are often created from the secondary information. Primary research is then used to focus in on the key issues. This research includes telephone interviews, in-person interviews, mailed questionnaires, focus groups, laboratory experiments, etc.

3 & 4) This answer will depend upon the material covered in the first two. Ask the questions: What are the likely trends? What is a positive scenario? A negative one? If you had any information at your disposal. how could you get a better handle on this issue?

5) There is no right answer here, so the candidate may balk. However, you can provide some structure. What are the key success factors to succeeding in the industry? Is there any way to achieve sustainable advantage which cannot be duplicated by your competitors? Can you use non-traditional methods to achieve competitive advantage? Such as leveraging through technology? Given your firm's competitive strengths and core competencies, what is the best strategic route?

CORN FEED COMPANYA corn feed company has eight manufacturing plants located in the Midwest. These plants service the entire United States. The company's plant in Ohio is in need of refurbishing. The company has four possible options:1. Refurbish the existing plant.2. Build a larger plant at the current location.3. Build a similar size plant at a new location.4. Build a larger plant at a new location.Which is the best option for this plant?

There are two issues to this decision. The plant size and the plant location should he considered separate problems.

of 222

Size of Plant:The first consideration is the demand for the product. Corn feed is a commodity product. Pricing on the product is dependent on current corn prices as opposed to the manufacturing process. There are four main competitors - our company is the second largest. All four competitors have similar manufacturing processes and similar cost structures. The proposed largest plant will not give economies of scale not currently present at the existing plant. The capacity utilization is 65% which is industry standard. The current customers buy from all four manufacturers in order to guarantee supply. Currently, demand is being met and there are no alternative uses for corn feed.Location of Plant:Transportation cost and perishability are the main issues with location. The transportation cost for the corn stock (raw material) is much higher than the cost of transporting the actual feed. The corn is grown in the Ohio area and the feed is sold to the East Coast. The raw material is perishable whereas the corn feed can be stored for any length of time and is easier to transport. Cost analysis of the transportation cost of feed versus raw material should be completed. Included in this analysis should be the higher spoilage that occurs with longer transportation of corn stock.Conclusion:The current plant is located close to the corn fields and this is the best location for the plant from the cost/benefit analysis.

SELECTIVE BINDING CASEYour client is a major fashion magazine. Their printer has introduced a proprietary new process called selective binding which enables publishers to customize the pages included in reader's magazines based on demographic data known about the reader. For example, an ad in Better Homes & Gardens for lawn chemical services could be placed only in those issues going to subscribers who live in houses and not to those living in condominiums or apartments. In this way, advertisers can focus their communications on the demographic segment they are targeting. Would you advise your client to take advantage of this new process and offer selective binding to its advertisers?

This is a straight forward cost/benefit analysis. The magazine would want to consider offering the service to its advertisers if it would be able to enhance its earnings. It might increase earnings by being able to charge its advertisers a premium to exactly and efficiently target the demographic segment they want to reach. Of course, the increased revenue from premium pricing must offset lost revenue as advertisers stopped targeting. The candidate could start the analysis by obtaining the following information from the interviewer:

Q: What demographic breakdowns are possible to make in the magazine's database?Additional Information: The only breakdown possible on the magazine's database is between subscribers who make under $50000 and those who make over $50000.Q: What is total readership, the proportion of readers who are subscribers (as opposed to newsstand buyers), and the proportion of subscribers in each demographic category?Additional Information: There are one million readers, 80% of whom are subscribers. Twenty-five percent of subscribers make under $50.000, and 75% make over $50000. The same mix applies to the newsstand buyers, according to readership audits.Q : What proportion of the client's advertisers target each demographic category of readers?

of 222

Additional Information: Most advertisers are selling high-end fashion products, so 75% of them are targeting the high income group.Q: What is the cost of the selective binding service and what does the magazine charge for its ads?Additional Information: The service is being offered to your client free for 3 years since the printer wants to promote the service's use by getting a major magazine to start using it. The client charges $50 per thousand per full-page ad (selective binding can only be offered on full-page ads. Therefore, revenue associated with a single inserted page (front and back) in an issue is 100 per thousand.

of 222

Q: What does the client's closest direct competitor for advertisers charge for ads and what is their readership like?Additional Information: The client's closest direct competitor has 500,000 readers, 100,000 of whom are subscribers. Effectively, all of their readers make over $50,000. They charge $70 per thousand for their full one page ads.

Conclusions: Since the printing cost to the client of selective binding is zero, the client simply needs to evaluate cost on the basis of revenue per thousand gained or lost as their advertiser base uses the service to better target their ads to their desired segment. Presumably, instead of 100% of advertisers paying the full $50/thousand per page, the 25% of advertisers targeting the lower income segment will choose to advertise only to the lower income segment of subscribers. The 75% of the advertisers targeting the high income segment will advertise only to the high income subscribers (75%). Assume that all advertisers continue to advertise in 100% of the newsstand copies. The revenue effect of this change can be calculated by looking at the impact the change would have on average ad rate per thousand on subscription readership. Thus,New add revenue per page = Old ad revenue per page X [(% low income subscribers X % low income advertisers) + (% high income subscribers X % high income advertisers)]Thus,New ad revenue per page = $50 X [(25% X 25%) + (75% X 75%)] at old rate = $31.25 < $50Now the question is, can ad rates per thousand on the selective binding portion of ads sold be increased sufficiently to increase average revenue per thousand over what it is today? To answer this question, your client's ad rates must be looked at from the perspective of their advertisers. If you consider the advertisers targeting the high income group, their alternative to advertising in your client's magazine is to put their ad dollars toward the 100% high-income readership competitor. The cost per thousand high-income readers with the competitor magazine is: (Page rate X total readership)/ (portion of readers who are high income) = ($70 X 500,000)/500,000 = $70Thus, $70 is the maximum price per thousand the client can charge its advertisers for selectively bound ads before the advertisers would switch to their competitor. Note that currently the client is a cheaper buy for these high-income advertisers even though they are paying to reach readers they do not want:($50 X 1 million)/750,000 = $66.67If the client charged $70/thousand for selectively bound ads, average revenue per thousand to the client would be:$70 X [(255 X 25%) + (75% X 75%)] = $43.75Since $43.75 is less than the $50 that advertisers are currently paying, the magazine should not offer advertisers the selective binding service.Of course, there are other issues which candidates might want to mention such as the possibility of price discriminating between high- and low-income advertisers, the potential for and cost of expanding the advertising base using selective binding as a selling tool, etc. However, it is important bv the end of the interview to have reached a recommendation regarding the initial question posed by the interviewer. To mention these other possibilities and areas for further investigation is certainly worthwhile. But it is also important not to get too far off track or to complicate the issue so much that a final recommendation is never reached.

of 222

A major airline is considering acquiring an existing route from Tokyo to NY. How can it determine if the route is a good idea?

Profitability analysis looks like the best approach. Simply determine if revenue is greater than the costs. Simply analyze the factors that go into revenue and the factors that go into cost and come to a conclusion.Notes: Revenues will be determined by occupancy and expected prices. Both of these will be

determined by expected demand, the competitive environment, and the extent to which our client could win over passengers from competitor routes.

Operating costs will depend on expected fuel costs, incremental landing rights, etc. It is also very important to estimate the cost of cannibalization o existing Tokyo – LA and LA – NY routes. And last but not least, it is important to note that losing passengers to cannibalization is better than losing them to competitors.

How would you determine whether a location in NYC holds enough banking demand to warrant opening a branch?

Because this is a demand-oriented question, one should consider a marketing framework, such as the 4 C’s. To bring your case to a conclusion, consider the 4P’s as a framework.Notes: The demographics of the area surrounding the prospective branch should be examined.

Population, business concentration, income levels, etc. should be compared with those of historically successful branches.

Competitive reactions could easily make this venture unprofitable, so it is essential to anticipate them. These will depend on the importance of the area to competitors (in terms of profits, share, etc.).

The client will have to match competitors incentives to customers and should estimate the cost of these.

The client must examine if the new branch would complement their existing competence and strategy (retail or commercial; high growth or high profitability, etc.) and what purpose it would serve. If the need focuses on deposits and withdrawals only, maybe a cash machine would suffice.

How would you compare the airline industry with the baby food industry? In which would you invest your own money?

This is a classic industry attractiveness question. Use Porter’s Five Forces, or even better, create your own framework for analyzing the suitability of an industry for investment.Notes: It turns out that competition in the airline industry is intense. Fixed costs are high and

competitors keep cutting costs till they shave margins to the very bone. Customers are price sensitive. Brand equity is virtually non-existent.

of 222

Using a microeconomics argument, you see that airlines will keep cutting prices as long as they are covering variable costs. Since fixed costs are high, and probably financed with debt, these companies can end up defaulting on interest payments.

On the other hand, the baby food industry is less competitive. There are two or three large players who do not indulge in cut-throat pricing. Products are well differentiated. Customers are quality conscious: they will pay a premium for quality.

To invest your own money, baby food is better than airlines due to higher profit potential.

A newspaper publisher has been experiencing declining readership and as a result, decreasing profitability. What should it do?

First, use the profitability analysis framework to isolate the problem. It’s clear from the question that the number of units sold is too low. Form here, further analyze exactly what is happening to revenues – make sure to consider all sources. Once you have determined the core problem with revenue, then use a marketing framework such as the4 C’s to understand what is happening and the 4 P’s to structure a solution.Notes: It is important to recognize that advertisements are the major source of revenue for

newspapers. But these revenues totally dependent on readership. It turns out that all newspaper publishers share the same plight and TV is the main

culprit. To fight this, the client can, at best, study other markets where TV is prevalent but newspaper readership is high (e.g., Japan) and use any knowledge they gain to promote readership in the U.S. they could share costs via newspaper publisher associations.

To compete with other newspapers and periodicals, the client can determine customer preferences and tailor contents to them. But any differentiation created will quickly be neutralized by the competition.

The best course of action is build mechanisms to continually adapt to the changing reader tastes. This could be accomplished by market studies, flexible and versatile staff, etc.

Also, the client should focus on cost rationalization to increase profitability. This would mean consolidating operations and reengineering them. Consolidation would help in deriving economies of scale whereas reengineering would increase operational efficiencies.

Your client is a large hardware chain? Develop a growth strategy?

Notes: 50% of the market is in the hands of small independent retailers, some of them in

cooperatives such as True Value, and the other 50% is held by large chain stores. The share of large chain stores has been growing rapidly.

The market is expected to grow slowly. Customers are primarily consumers, and can be segmented as advice seekers and price

seekers. The former makes up 40% of the market and the later 60%. There are four large national hardware store chains.

of 222

Chain stores compete among themselves based primarily on price and selection. Primary costs consist of COGS, rent, and inventory holding costs. A community of 50,000 people in a 5 mile radius around the store can sustain one large

hardware store.Your client operates a steel mill and is concerned about vulnerability to market cycles. What should it do?

Notes: Fixed costs are 50% of total costs. Demand for steel is highly cyclical. Demand in the trough of a recession can be as low

as 70% of the demand at the peak of the business cycle. The market pressures the company to pay out excess cash in the form of dividends

during upturns in the economy. Labor unions are inflexible with regard to work rule changes. Increased competition from mini-mills and foreign competitors.

The CEO of a large international manufacturer of aircraft engines wants long-term strategic recommendations. What do you tell him?

Notes: The market is an oligopoly with four major producers of airline engines. The market consists of civilian passenger and cargo airlines and governments who

purchase planes for their military. Aircraft engines are typically purchased separately from aircraft. The buyer of the

aircraft specifies the engine, purchases it, and has it delivered to the aircraft manufacturer for installation.

The civilian airline industry has approximately 30% over-capacity at this time. 10% of this capacity is not fuel efficient enough to operate at current average load factors.

Demand for flights in the civilian airline industry is expected to grow by 8% per year for the next 15 to 20 years as more and more third world counties grow their economies.

Demand for military use is expected to decline by 2% per year for the next 5 years as the result of the end of cold war, and then grow by 3% per year thereafter.

The economic life of an engine is approximately 15 years while the physical life 25 years.

Engines represent 20% of the cost of a new aircraft.

You are the head of a large car manufacturer in Europe. All cars are produced in one major plant and are distributed all over Europe. You have the choice to transport the cars by train or truck. Which mode of transportation do you choose? Why?

of 222

Notes: Cars are currently shipped by train to central distribution points in the different

European countries. From there they are shipped by truck to the various car dealerships. The distribution points are owned by the manufacturer. Trains require a minimum load of 100 cars. The cost of shipping one car by train to a distribution point is $100. Trucks have no minimum load and can transport up to 10 cars at a time. The cost of transporting one truck load to any point is $1500. Trucking cost from the distribution point to the dealerships are $200 per load of up to

ten cars. Average truck load shipped to a dealer is 6 cars. There are ten European countries including the one where the factory is located. The

factory also serves as a distribution point for that country. Operating expenses of a distribution point are $1,000,000 per year. Total demand for the manufacturer’s cars is 1 million vehicles per year 50% of car buyers do not take delivery from dealer stock, but wait for factory delivery.

A U.S. auto-part manufacturer plans a market entry in Europe. How would you go about it?

Notes: A typical car manufacturer uses 5,000 different suppliers. The trend is to reduce this

number, and work closer with the suppliers. Purchase decisions are based on price, ability to adhere to quality standards, and speed

an reliability of delivery. Car makers are dispersed over Europe, with most of the plants located in Germany and

France. Your company has a reputation for high quality. Your pricing is competitive, but at the

high end. Governments offer tax incentives to locate manufacturing plants in their countries. All

your manufacturing capacity is located in the U.S. Exporting products would be 50% cheaper than setting up new manufacturing sites as a

result of avoiding fixed costs and increasing economies of scale and learning curve opportunities.

Car sales are expected to grow modestly over the next ten years, while being subject to fluctuations in the economy.

You are the head of a large steel group. You notice that one of your five product lines is losing market share. What are the possible sources? What would you do?

of 222

Notes: All of your five product lines are sold to car manufacturers. The products are: thin plate

steel for body panels, beams used for structural supports in car doors, bumper attachments, steering column parts, and engine attachments. The decline in demand is for the structural beams.

Low cost mini-mills are taking over market share. It would be extremely difficult for our client to match the cost structure of the mini-mills. Mini-mills are only able to manufacture lower grade steel. They would be able to

manufacture any of the five products mentioned above with the exception of the thin plate body panels.

Car manufacturers are trying to reduce the number of part suppliers ad forge closer ties with suppliers.

In addition to price, quality and speed and reliability of delivery are important purchasing decision factors.

A paper producer is contemplating adding capacity. Should it?

Notes: The manufacturer is currently operating at 90% of capacity. The industry is operating at 80% capacity. Demand for paper is expected to grow by 4% per year and is very inelastic. The total paper market is 100 million tons per year. The minimum scale for a new plant is 1 million tons of productive capacity. The company currently sells 9 million tons of paper per year. A new plant comes on-line two years after the decision to build it is made. Competitors are contemplating adding 10 million tons of capacity in two years. 5 million

of this has been committed to already. The break-even operating capacity of a new plant is at 70% of capacity.

Your client produces 1 commodity chemical product. They experienced a sharp decline in profit this past year. The CEO of the company hired you to find out what happened. (BCG)

I first stated that Profit = Revenue - Cost. So I will look at both cost and revenue side. First on the cost side, I would exam every step alone the value chain, and determine if its cost structure is alone the industry average. Value Chain: R&D - Raw Material - Production - Distribution - Sales/ Marketing At this point, the interviewer said that I can assume unit cost remained same. There is no significant change in output volume (scale of economies!!!). He also suggested that I move on to the revenue side.

of 222

I chose Five-force Model to analyze the market. After several Qs, I found the following information: There are 4 players in the market, each one has a similar market share (market leader,

market discipline!!!) Overall market demand declined slightly There is no addition to production capacity during last year Our client has gained market share during last year There is no new technology or replacement product developed last year

of 222

At this time, the interviewer asked what my best guess is. My solution: Our client has been gaining market share at the expense of other competitors. Since this is a commodity product, price is a major factor. Looks like our client has been cutting price to buy market share. While its cost remained the same, its profit suffered.Next, the interviewer asked me, given what I know about the market, who sets the market price?First I assume that the market has perfect competition, and demand is fixed at any giving time. Then we arrange the capacity of the 4 firms according to their cost.

A consumer product manufacturer has a factory in China to supply the local market. It has been loosing money for the last 10 years. You are hired to find out why? (BCG)

First, I used Cost/Revenue analysis. The only question the interviewer had on the cost side is how I can determine if their cost is high. If I should compare the cost structure of this plant in China with other plants in the US or other country.One the revenue side, I again used Five Force model. Issues covered are:consumer buying habit consumer educationlevel of competition market segmentmarket positioning distributionraw material supplyThen the interviewer said that their consumer survey indicated that their price is to high. However, in reality that is not true. Among the three foreign brands, their client’s product is priced in the middle. So why is this and how to correct that?The true reason is that their package size is slightly larger, so they charge more for their products. But consumer think that they are more expensive. To correct that, I suggested to change their package size, and lower their price to be the lowest. Since the prices of the 3 foreign brands are very close. Finally, the interviewer asked me how to estimate the overall market size for this client in China. After a few different suggestions, he bought the idea that consumers start buying certain type of product when their disposable income reach certain level. And data for this estimate is available in China.

How do you determine the costs of messages (email, voice mail, faxes)? (AT Kearney)

I spoke about investment in infrastructure, ongoing maintenance, which is primarily labor (e.g., email requires a lot of maintenance and voice mail does not), marginal costs (e.g., paper for fax machine, minimal for digital transmission), and discussed that all these costs then must be divided by the number of messages that are sent via each medium to determine the cost per message. We went on to have a discussion about if it is possible to influence messaging behavior so that a greater proportion of messages are sent digitally - which would reduce costs per message.

of 222

I was doing some work on a related topic and the interviewer chose to use my experience for the case portion of the interview. She approached the case in a discussion-like manner. It was very casual and interactive.

of 222

A diversified company is considering merging two consumer product divisions. One of them is very innovative and the other is not. Should the two firms be merged? (AT Kearney)

I first asked about what the impetus was behind considering the consolidation. I then explored some of the potential synergies of a merger (e.g., getting rid of redundant operations). I also asked about the firms history of similar types of mergers. I talked about the potential opportunities for increasing the level of innovation of the less creative division but also about the potential concern of just the opposite, the watering down of the more creative organization.The interviewer was interested in having me go down the innovation path and he asked me how would I go about transferring the innovation of one firm to another. I first attempted to define what made up innovation and I mentioned product development (R&D) and marketing. I discussed the need to explore the processes involved within these functions (some reengineering-type issues) and also about having the leadership for these responsibilities transferred to the more creative firm. He further probed about "processes" and I discussed cycle time and project management in the R&D department.In general, the approach of the interviewer was to ask for very big questions, listen to my big picture response then quickly choose one path and go down it in detail. The tone of the interview was very conversational.

Your client, the CEO of a national fast food chain, is considering instituting a frequent diner program to increase per store revenue. He tells you that this program will be modeled after the airlines' frequent flyer programs. For each dollar a member spends they will receive 1 point. After they have accumulated 20 points they will be eligible to receive a free sandwich priced at $2.00. The chain store has 500 stores and 20,000 customers.Armed with this information, he asks you to help him decide if he should move forward with this type of a frequent diner program.

You realize that answering this question will require an analysis to determine whether or not this program will be profitable. As you begin the case, you correctly assess that in order for you to recommend that the frequent diner program be instituted you will need to determine that the additional revenue is greater than the additional costs. In starting the analysis you notice that there are several pieces of data that you need that have not been provided to you. At this point it is generally fair game to ask your interviewer for additional information. When asking for additional data, it is a good idea to explain your logic and why you think you need the information you are asking for. For example: you may tell your interviewer that to calculate revenue and profit enhancement you need to know the total number of customers, the number of visits they make to the restaurant annually, and the amount they spend on each visit. You also want to know if some people come more often than others and therefore have a greater number of points. Finally, in order to answer the real question you need to determine how much additional business the restaurant would gain by offering diners this option. In asking these questions the interviewer will offer you the following data:Custmer Segment # customers per store Avg # visits per year Avg $ per visit % that join program Avg. # addt'l visits Heavy 8,000 30 4.00 20 6 Light 12,000 9 4.00 5 3

of 222

Using this information you create the following chart during the interview:Segment Members Current Visits New Visits Total Visits Current Revenue

New Revenue Total Revenue Heavy 1,600 48,000 9,600 57,600 192,000 38,400 230,400 6 Light 600 5,400 1,800 7,200 21,600 7,200 28,800 Total 2,200 53,400 11,400 64,800 213,600 45,600 259,200

In the above chart you calculated the additional revenue per store that will be brought in as a result of the new program ($45,600). The other side of the equation is the increase in costs due to program administration and the cost of fulfilling redemptions.There are a few key issues that you need to express here. First is the actual set up costs of the program in terms of labor and equipment. The other is expense of reward redemption. The three issues to understand here are that points are driven off total volume, that while the price of a sandwich may be $2, its cost could be as little as $1, and finally that not all rewards are redeemed. It is probably safe to assume that 50% are actually redeemed. So, in order to go forward with the frequent diner program the net benefit should be positive. The summary of your exploration of this idea can be expressed as follows:Net Benefit in First Year = Additional Revenue - Reward redemption expensesSince you have already calculated the additional revenue, you now move on to calculate the redemption expenses as follows:(Member revenue/20 points per reward) * cost per sandwich * assumed redemption rate($259,000/20) * $1 * 50% = $6,480 From here you determine that the net benefit excluding set-up and transaction costs would be $39, 120 and you suggest that your client pursue the frequent diner program. While this problem is simple in concept there are a number of subtleties that are important to catch. The trap that is easy to fall into is trying to use all the data that is provided. Some data may not be provided or too much data may be available. You should always stay focused on what data will help you answer the questions at hand and request data where you do not see it.

Frequently the data is available and the interviewer is waiting to give it to you. It is not expected that you will address all of the above issues in an interview. Case interviews are focused discussions asopposed to brainstorming sessions. Try to view the case as a structured discussion or an oral paper--first, discussing the initial evidence (or facts that the interviewer gives you); second, drawing immediate conclusions from the evidence; finally, proposing possible solutions or recommendations. It is important that you discuss cases in this manner so that your interviewer can easily follow your train of thought. Your interviewer is looking for you to arrive at logical conclusions from the information he/she gives you. Be sensitive to feedback from interviewers; often they will help steer you away from less important information or issues. Nonetheless, it is useful to address at least some of the above issues to demonstrate a broad understanding of the business. Finally, keep in mind that most cases will not have prescriptive solutions. Using a variety of resources to prepare for case interviews will help you develop additional frameworks in which to analyze problems.

of 222

An eat-in ice-cream parlor in a college-town is losing money. The owner buys ice-cream already made from a supplier and makes a variety of products such as cones, shakes and sundaes. How would you help the owner evaluate the business?

There are a few basic steps you should follow in all case interviews. First, make sure you understand all the terms being used and ask any questions that might help increase your general understanding of the problem. The question indicates that the parlor is "losing money." Therefore, it is reasonable to assume that you should evaluate the profitability of the owner's business; you may want to suggest this approach to the interviewer to test your hypothesis. Since, profitability is equal to revenue minus cost, the next step involves understanding the drivers of revenue and cost. Revenue is a function of demand for and pricing of the products, whereas cost refers to the fixed and variable costs of producing and distributing these products. On the demand-side you will want to understand the products' consumers, their purchasing behavior and decision criteria. You will also want to understand what else would influence demand for the product, such as competitive products, price, convenience and substitutes.On the supply-side, you will want to examine what will impact cost. Think about relationships with suppliers. Is your product custom-made or similar to a commodity? How does this affect pricing? Think about the parlor's operations: are there ways to make the process more efficient and reduce costs?Of course, you may not be able to address all of these issues, but try to address the most important ones. 1. What are some of the issues you would consider about the products?2. What are some of the things that you would want to consider about customers?3. How could local market conditions influence the parlor's sales?4. What influence would pricing have? 5. What factors on the supply-side would you consider?Next, we have attempted to outline some of these questions in greater detail. By no means does this list include all of the relevant issues you may want to address. In fact, you may have thought of some items which we have not covered.Demand-side Product

Are the products seasonal? How does this limit potential sales? (More ice- cream is probably consumed when the weather is warm; perhaps the owner could evaluate selling products which consumers enjoy in winter, such as coffee and cakes, etc.) Is it trendy? Do they sell products which are in demand? (e.g., the parlor may specialize in sundaes and cones, but customers may want products like "Blizzards" or Starbuck's Frappacinos to-go.) Are there opportunities to differentiate the product? (e.g., is the parlor's ice-cream better-tasting or less caloric? If the parlor's ice-cream was less- caloric, for instance, maybe it should be marketed towards weight- conscious individuals as opposed to kids and families.) Are there substitutes? (e.g., consider demand for frozen yogurt or comparable products in grocery stores, do these products cut into demand for the parlor's products?) Customers

of 222

What are the basic demographic characteristics of the parlor's typical customers? (e.g., since the parlor is in a college town, most of its business may come from students; does it lose money by remaining open when students are gone during summer break?) What are the customers purchasing patterns and decision criteria? (e.g., are the store hours convenient to customers? If students tend to buy ice-cream late in the evening and the store closes by 5:00 p.m., this could definitely limit sales.) Have there been changes in preferences or shifts in product mix to lower- margin products? (e.g., Let's say cones and shakes cost the same amount of money to make--$1.00, but shakes are more priced at $3.00 and cones are priced at $2.00; if people move toward purchasing products with smaller margins, such as cones, the parlor's profitability will decrease.) Local Market Conditions

How has spending on food a way from home (food eaten out) changed over time? (If people are spending less on food from restaurants, this may indicate a dip in demand for ice-cream from parlors as well.) Has disposable income or employment remained steady in this community? (Ice-cream is probably a "luxury" item for most consumers. Consuming ice-cream costs money and time to go the parlor. If people are not doing well financially, they may forgo consuming ice-cream. Similarly, students may enjoy eating at the parlor, but during exam periods they may not have enough time and may forgo it. The owner might consider offering promotions, specials or reducing prices during exam periods.) Pricing

Are the products optimally priced? (If the product is too expensive, people will buy substitutes or ice-cream from competitors. If the price is too low, the parlor loses potential profits.) Supply-side How has the cost of ingredients or labor changed over time? (e.g., if milk has become more expensive, but the parlor has not changed their prices, profitability will decrease. Similarly, if wages have risen for waitstaff, cashiers, etc., the cost of serving customers may cut into the parlor's profits.) How can the parlor optimize distribution? (e.g., the parlor may be owned by an independent person. However, if the owner considered becoming part of a franchise where the costs of running the parlor are spread over many such stores, he/she may be able to buy ice-cream, equipment, etc. at discounts. Perhaps, more importantly, he/she can use the company's brand-name--such as, Baskin Robins or TCBY--and increase sales.) Are there scale advantages? (Scale simply refers to a concept whereby increasing production of an item reduces the per unit cost. This relationship does not hold true for all businesses. But you can imagine a scenario where the owner has to pay rent for the store and pay for equipment and staff to operate it. He needs to sell enough products to cover his fixed cost X. If he sells ten ice-cream cones, his per unit cost is X/10. On the other hand, if he sells 30 ice-cream cones his per unit cost is X/30. In the second scenario, his per unit cost is much lower than in the first.) While there are issues to consider on the supply-side, a problem like this is probably more demand-oriented. Ice-cream parlors are not in a business with technological advantages or patented products. For instance, a high technology firm may have to evaluate their production costs versus a competitor's because the spread can be substantial, giving one firm a significant advantage over the other. Ice-cream parlors are not likely to have opportunities to get such cost advantages over their competitors. Ice-cream can probably be purchased from a variety of suppliers. No one supplier has enough influence to raise his prices significantly without losing his business to a competitor. Therefore, ice-cream might be considered a commodity item with stable prices.

of 222

It is more likely that revenue is too low for the given cost of running the parlor. The owner may want to investigate a variety of strategies to improve sales or possibly increase prices if it won't result in too much lost demand. One possible case scenario could be: Interviewee gives a general overview of some of the demand-side and supply-side components, then asks if costs are comparable to competitors. If the answer is yes, then you may want to focus on the demand-side. If the answer is no, try to determine what is giving the parlor a cost advantage or disadvantage, and how can those circumstances be better leveraged. Remember, you are not expected to discuss all of the above items in great detail. In fact, it is likely that you will only focus on two or three such issues in the course of your interview. Your interviewer will also give you plenty of feedback to help keep the discussion more focused. Be open to their comments and keep your composure and you'll do fine!

The Royal Opera Company has been facing declining profits over the past few years. Why?

Has there been a drop in attendance? No, attendance has been fairly constant, and it may have actually increased a bit.Have revenues declined? No.I am assuming that there has been an increase in costs. Have there been any major changes in any of the cost drivers?Well, what do you think are the main costs?Salaries (players and administrative personnel), fixed overhead (electricity, depreciation, etc.), marketing and advertising, etc. How would you determine where the cost problem is?First, I would want to see if there a change in the pattern of current vs. past spending. Second, I would want to benchmark the Royal Opera Company vs. other similar companies. Actually, the opera company has been trying to meet public demand for variety by putting on more different shows per season.I would assume that there is a high fixed-cost with developing an opera rehearsal time, sets, etc., and a relatively lower variable cost with each production. Yes... What would you suggest?The Royal Opera Company could cut costs by developing fewer operas per season, but still maintain variety by sharing productions with other opera companies. So, the Royal Opera Company could send some actors to, say, the Sydney Opera and get some actors in return for several productions?Yes. But what if the actors don't want to spend a great deal of time on the road? How would you handle that?I would present the travel as a prestigious opportunity to increase exposure on the international circuit. If necessary, you might have to divide the company into traveling and permanent groups.

An overseas construction company firm wants to expand by establishing a presence in a growing U.S. regional market. How should it go about doing this? What factors are critical for its success?

of 222

What are the diversifying firm's distinctive competitive advantages? What is its capacity for funding an acquisition? What is the competitive environment like in the proposed region? How does this environment differ from the current markets of the diversifying firm?

Diversification could be affected through joint ventures or through acquisitions. Which of these two strategies would prove the most suitable would depend upon the availability of funds and upon the nature of the companies operating in the region.

of 222

However, the success of the venture would no depend solely on the means of entry. Other critical factors include:The presence of a distinct sustainable competitive advantage such as: Non-unionized labor might help support a low-cost production strategy, but how long will it take for your competitors to leverage the same labor cost advantage? Proprietary technology Tacit knowledge in a high-growth area (multimedia, toxic waste disposal, etc.) Access to distribution channels Finite number of distributors Expensive to expand or build a distribution network from scratch

A concrete manufacturer is considering acquiring a small local firm. What factors should be considered?

What are the current profitability and market share opportunities of the acquirer and target firm? What is its capacity to fund this acquisition? Is the market a growth market? Who are the customers and end users of the product? What are the competitive conditions in this market? How does the line of business of the target differ from that of the acquirer? Do synergies exist? A number of salient market features should be noted: Although concrete is a homogeneous commodity, the cost of its transportation means that the applicable market is not of a product, but of a product-region. Thus, considerable potential may exist for gaining small-scale monopolistic power through the acquisition. The basic viability of the acquisition also requires consideration of: Forthcoming government projects in the area (since they are probably the largest end-user) The condition of the target's facilities The acquiring firm's availability of funds The quality of the target's management An examination of the local anti-trust legislation and competition in the region

of 222

A large health care company has decided it is interested in substantially increasing the size of its operations. It's goal is to double total sales and profits in less than two years.As a consultant brought in to assist them, what would you do?

What is the current scope of the operations? In what area of health care does the company deal? What is the current market share in these areas? What plans have the company already considered or are in the process of considering? What is the competitive nature of the industry? How would reducing the prices and margins affect the sales and profits? What potential is there for expansion by acquisition? Do potential targets exist?

A business can increase profits by: increasing sales increasing prices decreasing costs

However, if the company's margins are found to be consistent with the industry norms, it would seem unlikely that either increasing prices or cutting costs are viable means by which to double sales and profits, particularly if the company is operating in a moderately competitive environment. This leaves only sales increases, which could be achieved by: selling more of the current products to current customers selling new products to current customers selling current products to new customers selling new products to new customers

The suitability of these options will again depend on the particular environment. In the particular example of this case, it turned out that only selling new products to new customers via some form of diversification could hope to achieve the company's goals. You should then consider the potential for increasing sales by means of diversification through acquisition or joint venture. The relative benefits of each will depend on financial resources as well as the existence of otherwise suitable targets.

of 222

If you were the CEO of a company, how many people would you want reporting to you and who would they be?

What is the nature of the business? Is it a service or manufacturing business? What is the size of the business ( in terms of revenues and in geographic diversification)? Is the organizational structure already in place? How flexible is it? What are the overall objectives and strategy of the company? Who your "direct reports" should be depends upon many issues other than your own personal style. Perhaps most important is the corporate strategy of the firm and the type of organization -- centralized or regionalized, tightly supervised or largely autonomous, etc. A suitable solution would focus on minimizing bureaucracy and facilitating decision-making. However, profit and sales accountability are also key issues. The heads of either individual product lines or functional areas should report directly to you or the COO.

A large health-care company has brought in a team of consultants to determine an appropriate strategy for improving profitability through growth in the size of its operations. They hope to reach their profitability goals over the next three years. As one of the consultants, what would you do?

This case has no single answer. Rather, the interviewer is interested in seeing how you approach the problem. The key is to appear logical and to demonstrate an ability to move from the specifics of the case to the general issues involved in improving profitability anywhere... In other words, the case isnt about health-care at all. So dont panic if youre not an expert in the industry. Remember that the interviewer is principally looking for you to demonstrate analytical skill: How you think, how you structure a problem, and whether you are skilled at building a framework for thinking about a situation. You should be able to draw on models from competitive strategy, finance, marketing, operations, organization, or behavior. The point is this, however: You dont need to reference them -just use them. Opening... A good way to begin this case is to question whether expansion of operations is the right way to achieve profits.Are they currently profitable? If not, growth just further destroys value and perhaps they must attack profitability from the cost side. If they are currently profitable, then they have three options: increase sales, lower costs, or both. Don't assume that growth is the only answer.. .show the interviewer that you would consider all options and understand both drivers of profitability - cost and revenues. How to Proceed... Once you structure the options, the interviewer will lead you down the relevant path for this case, so follow the lead. If youre told that the company has low costs relative to the industry...then pursue the sales growth option.... One way to structure your thinking about this problem would be to use a Growth Tree framework. Use the tree to think aloud for the interviewer and guide your questioning:"If the company has two possible growth options - they can expand into existing businesses or diversify into new business. I think that growth in existing businesses should be considered first because that's where they have core skills.In existing businesses they can grow their product market or consider vertical integration. ..." Feel out the interviewer: Where are the opportunities? What might be some options you can readily eliminate, e.g. is vertical integration really a viable option for a health-care provider? Continue to work through the tree systematically. If you ask about opportunities for pushing new

of 222

products into existing markets and the interviewer seems very interested, pursue this path by offering suggestions for potentially viable new products.

of 222

A super-regional bank is attempting to increase its operating efficiency as a way to boost profitability. You have been asked to look at the non-interest, non-personnel expense base (i.e purchases expenses as a possible source of cost reduction opportunities. How would you determine the potential size of the opportunity for increased operating efficiency? What issues might you run into as you begin such as study?

This case is asking you several questions simultaneously -- most of them are related to the size of opportunity and the means by which you could measure and manage the opportunity.

Opening... Explore what kinds of information you would need to conduct such a study. Where would it come from? Often General Ledger and Accounts Payable systems do not provide the necessary information.

Probing...What is the total expense base of the bank? What portion of it consists of purchases? Is the organization centralized or decentralized in the way it purchases? How would you determine whether certain groups of goods and services are more promising for reductions?

Make assumptions based on the replies you get from the interviewer and clearly articulate them. The point is to interact with the interviewer and develop the case --and its solution-- together. The interviewer is checking to see that you are good at establishing rapport, at listening, and at adapting to changes he/she makes in the basic structure of the situation.

"Our client is a small defense contractor who manufactures nose cones for the Patriot Missile, so plant production is running at 50 percent. The client plans to diversify into the consumer electronic industry. One of its engineers has developed a new product that hooks into the common VCR. This product allows the consumer to freeze-frame the videotape, hit a print button, like the print button on your computer, and print out a 4" x 6" color photograph.The company holds the patent, and currently there are no other products like this on the market. They have called us in to help identify some of the problems that they will be facing in entering the market with this product, and how best to handle them. Our consulting firm believes that our client has about three years before a company like Sony, Sharp, or Toshiba gets around the patent and starts to compete with them.Let's brainstorm and come up with some problems and ideas."

Step One. Back translate what you have just heard.

Student: Let me make sure I have this right. We have a client who is in the defense industry. It's a small firm that manufactures nose cones for the Patriot Missile. Demand for the missile is down, and, therefore, the firm plans to diversify into the consumer electronics industry. The company has developed a new product that allows the consumer to freeze-frame a videotape and print a picture of the VHS tape. The company has the patent, but is concerned

of 222

that a big consumer electronics company, like Sony, is going to be able to compete within three years. The company has hired us to help identify some of the problems that they will face competing in the consumer electronics market. This is a market analysis question, so there are several steps you want to cover. Again, ask some key questions.Step Two. Ask, identify, and confirm.

Student: What are the long-term objectives and goals set for this product and the company? Interviewer: First, to make money. The company has a manufacturing plant in Massachusetts that is only running at 50 percent capacity. They might have to shut it down and combine it with their operations in Texas. They'd like to save some jobs and increase their bottom line. Student: Who is their competition? Is there a similar product out on the market? Interviewer: No, this is a completely new technology. Student: Is it important that the company become a household name? Interviewer: No. They are just looking to become more profitable. Step Three. Analyze the market. Next, try to identify the makeup and size of the market. Who would buy this product? What would they use it for? Is this a luxury product, or does everyone need one of these machines? It is okay to think out loud, because you are brainstorming. You need to consider the following factors:Who would buy this product? Consumers with VCRs, since you need a VCR to work this product. How many people have VCRs? The population of the U.S. is 250 million. The average household size is 2.5 which translates into 100 million households.Assume (all you have to work with are assumptions) that 90 percent of the households own at least one television, which means 90 million televisions, and out of those households, 60 percent own VCRs, which equals approximately 54 million VCRs. This estimate takes into account the VCRs used by businesses and schools, as well as those homes that have more than one VCR and television. Determine the segment of the market. Would everyone who owns a VCR want this product? If not, then what segment of the VCR market would? Could they afford it?There may be a small population that would want pictures of their favorite film, television, or sports stars; however, the real market lies with those consumers who own camcorders, especially middle class families with young children. This is a luxury item, as is a camcorder, so the demographics will be similar.How many camcorders are there in the U.S.? How could we determine what kind of appeal this product would have? It has already been assumed that there are a 100 million households in the U.S. with 54 million VCRs. We could estimate that 20 percent of all VCR owners have camcorders. What about other markets? How is the general public going to respond to this product? Remember, the VCR and the personal computer went through the same process. One approach is to hold a focus group. A focus group is a small group of people, usually between 10 and 25 in number, who are representative of, in this case, the general public. We need to determine the appeal of this product across various demographics. Who would have predicted ten years ago that 80 percent of American households would own a VCR? (Eighty percent is the actual number. Our assumption was wrong, but it didn't matter because we were interested in the process, not the actual number.) If there were ten people in each focus group and three out of ten stated that "they had to have it," then the assumption could be made that 30 percent of the VCR market would make a purchase during the first two years. We assume the first two years because it would take time to

of 222

build product awareness as well as distribution channels. If another three said that they like it and would eventually buy it, then you could make the assumption that probably another 20 percent would purchase it over the next three to five years. So assume that within five years 50 percent of the people who currently own a VCR would purchase the company's print production component. Price would also be a topic of conversation during the focus group.Interviewer: Well, let's talk about price for a second. There are two pricing methods that I would like to examine. The first is called cost-based pricing and the second is price-based costing. With the first, you add up all the costs, add a profit, and that's what you set as the price. In the second, you go out into the marketplace and figure out what you think consumers are willing to pay for this product. Then you set this price by reducing your costs to ensure that there is enough of a profit margin. Student: Knowing what the consumer is willing to pay would help us determine a price for the product that is market-driven. This means price-based costing, not cost-based pricing. Too many firms figure out their costs and then add a profit margin on top. It is much better to determine the price by estimating what the market will bear. If this number allows for a sufficient profit, then we can proceed. Once I have determined whether or not it is going to be profitable, I would compare the estimated profits against various investment options. Would it be a wiser investment to just stick the money in the bank or pay some outstanding debt? Interviewer: Okay, we're talked about the market and we have discussed pricing. What other problems will this company face? Step Four. Identify and prioritize strategize issues.

Student: We would have to sit down and figure out how to set up distribution channels. Remember, the company has spent its time and energy on marketing to the government, not the consumer. It doesn't have a trained sales force. It might be a good idea to go to the large electronic stores first to see if they are willing to place an advanced order. If we got enough advance orders, we would know that this product is likely to be accepted. We would then go to distributors with orders in hand confirming the stores' interest. This would make it easier to convince the distributors to take the product. In addition we would need to help the company set up a PR campaign and develop a marketing plan. And we would need to establish booths at the national and regional electronic trade shows. Interviewer: Okay, good. We have discussed marketing, market analysis, pricing, and distribution. What other problems do you anticipate?Student: Name recognition, since the company has none, and even if they did, it would probably be negative because of their base industry. Also you told me that they are moving their nose cone operations to Texas, which means that the Massachusetts plan needs to be retooled for new production and the workers have to be retrained. Interviewer: Good. Anything else? Steps Five and Six. Analyze issues/identify options.

Student: You mentioned that it is not important that the company become a household name, that they just want to manufacture. This makes sense because that is where their expertise is. Perhaps they should consider a strategic alliance. Could they develop a joint venture with another company which has established distribution channels, a trained sales force, consumer name recognition, and an established marketing department? This would cut their risks, lower their capital investment, and maintain a good return on investment (ROI). Not to mention that the engineers of the other company could help them in the retooling of the plan so they could make a better product. Interviewer: Okay, good. What else?

of 222

Student: Our client could license the product to other manufacturers which would give them an immediate influx of cash and a steady stream of income through royalties. It would also help them share the costs of educating the public about this product. But it would still allow them the opportunity to win a sizable market share. Step Seven. Make a decision.

Student: Once all the options are laid out, I would then make a decision on the most attractive opportunity. In this case it would be a strategic alliance with a major industry player.

of 222

"Why can't General Motors compete?"

This is a pretty broad question and even if you know nothing about GM, you can still give a good answer by using the 4C method.Student: Well, in order to answer this, I think it is important to look at some major issues. The first issue is the company itself. GM is a large, bureaucratic corporation with many levels of management. Decisions and changes are hard to make and implement. Thus GM has rested on its laurels while other firms have come out with new designs. During the late seventies and throughout the eighties all GM cars looked alike. The second problem GM had was that their prices increased but their quality didn't improve. People weren't getting the value they expected. Some people blame the unions for the high costs, but it is probably a combination of labor costs and health care costs. Third, GM remained stagnant as the competition hit it from all sides. Ford came out with the aerodynamic Taurus. The Japanese imports seemed to many to be better built and they got better gas mileage. Finally, GM didn't seem to listen to, nor value its customers. GM seemed to think it could rely on the loyalty of customers whose families had purchased GM products time and again. They were wrong and now they are paying for it.

There was nothing earth shattering about this answer, yet it addressed the major aspects of the case and it opened the door for a conversation on the auto industry or large corporations that have had a difficult time competing against smaller, more decisive companies.

Pizza Hut wants to know whether it should enter the Malaysian market.

Write the question down, and begin to structure your questions. Company. Environment. Customers. Competitors. ManagementWhat is Pizza Hut? How do they make money? (foreign exchange, pizza sales, salad sales, soft beverage sales, hard beverage sales?) Are they international? Do Malaysians eat pizza? Do they know what pizza is? Do they have a competitive product? Are there competitors in the market? What is the penetration of pizza products in the Malaysian market?What is the current Malaysian diet? Do they eat cheese? Do they drink alcohol? Do they eat out? Do they eat fast food or sit-down dinners? What sort of restaurant would Pizza Hut build in Malaysia? Would the product mix differ than in other countries? What is the government environment? Does the government require local partnerships? Can Pizza Hut source internationally? What is their international experience? Why should Pizza Hut enter Malaysia? With what Pizza Hut goal or strategy is it consistent? What is the expected ROI? Who would manage it? Then begin to ask your questions.

After about 25 minutes of questions, you should synthesize and explain your recommendation.

of 222

You are consulting the CEO of a large natural gas utility. The utility supplies natural gas in a regulated market in New York State. They also have a business unit that sells home appliances. The CEO wants to know whether the company should stay in the business of selling these appliances. Describe how you would decide on a recommendation.

Further information:

The regulations in New York state that the firm can earn a guaranteed 12% return on assets.The appliances division is just breaking even.

A travel agency receives 10% commission on all of its sales. Their current annual profit is $1MM, but the competition is making $3-4MM. Why are their profits below industry average?


Business tickets 60% of revenue, leisure 40% of revenueBusiness volume 300,000, leisure volume 700,000Total revenues $10MMCost per transaction: $9 (business or leisure)Run the numbers and you’ll find that the company makes a $3.3MM profit on business tickets, but loses $2.3MM on leisure. What kind of deal could they negotiate with the airlines to make a profit on both?

The CEO of a global company that makes electromechanical components (i.e., relays, switches, etc.) has asked you to review their manufacturing and distribution strategy. How would you recommend they modify their strategy? The company’s facilities are currently located as follows:

Europe Latin America North AmericaAsia

Manufacturing Plants 4 2 4 US, 2 Mexico3

Engineering Facilities 2 0 1 US 1


The product is a commodity with no product specialization by plantThe facilities have evolved through acquisition, not planningCustomer base is globally disperse (not relevant to answer)

of 222

A maker of fine furniture is concerned about the cyclical nature of their business, and is considering a line extension into wood burial cabinets. How would you assess their ability to produce caskets cost effectively, and what would you recommend as an entry strategy?


Need $100 million in casket sales to break even (market is $3 billion)Company is a regional distributor and can quickly make custom productsThree national competitors (NCs) have approximately 70% of the marketNCs have direct sales forces, 24-hour turnaround, and 95% fill ratesRemaining 30% of market held by regional players with similar service

You are serving a retail jeweler with $500 million in sales. They currently have an exclusive relationship with one client (i.e., Dillard’s or Macy’s) in which they lease store space at 400 of the department store locations. There are 2 years remaining on their contract, but the relationship with the client has deteriorated and there is no way the contract will be extended. Therefore, the retail jeweler will not have any outlets and no other leasing options are available. What should they do?


Core competency of jeweler is the purchase, control, and sale of jewelryThey have a state-of-the-art tracking and inventory systemOptions: becoming a wholesaler, acquiring another retailer, or liquidatingConsider size, brand name, financial position, supplier source, competition

The CEO of an oil company want advice about what to do with land the company owns in Costa Rica. The company has been approached by Tropicana to form a joint venture to produce orange juice. The company would donate the land, Tropicana would do everything else, and all profits and investment would be split. How should the CEO view this opportunity?


Options include: Tropicana JV, studies/drilling for oil, other (?)JV profits depend on price of oranges – how would you forecast this?

of 222

Your client wants to enter the raw material market for a specialty plastic (i.e., Teflon) that is slippery, does not interfere with electricity, and is resistant to heat, flame, water, and chemicals. The client is an Asian company that is constructing a plant to produce the powder that manufacturers use to create this plastic – they will not manufacture the plastic themselves. They are about two months from completing the plant and want to know how best to enter the market.


DuPont invented the material and holds 70% of the marketThree other players have 10% of the market eachThere are about 125 fragmented processors of the raw materialThere are three ways to supply the powder:Molds (Compression) - 40% of market, DuPont has 60%Foams (Extrusion) - 35% of market, DuPont has 100%Liquids (Dispersion) - 25% of market, DuPont has 60%Foam is hard to make – client cannot do this successfullyMold/Liquid – Customers demand high quality, dependable delivery, good technical support, and strong relationshipsCompetitors offer different grades within product lines, have filled a latent demand for 2nd source providers, and have fairly high margins

You are the city manager in a large metropolitan area (Charlotte). The owner of the local basketball team is demanding that the city help pay to build a new arena or he will move the team. The current arena is 8 years old, and the NBA "encourages" new arenas. The proposal requests that the city pay for $49.5 million of the expected total $158.5 million cost. What should the city manager do?


If the city pays, the team will commit to stay 30 yearsThere is a tax benefit from having the team there ($3 million per year)The team estimates they bring $100 million into the city directly, and another $70 million indirectly (this is supported by a local economist)If the city loses the team, it will cost at least $150 million get another oneA city poll had overwhelming support for the team but equally strong opposition against a tax for the stadium

of 222

You are working for a company that manages "coupons" used as employee incentives in Brazil. The coupons are sold to companies, are not taxed, and can be used by the employees to spend at network restaurants. Your client is considering the current paper-based system with an automated smart card system. Is this a good thing for them to do?


Possible benefits: reuse of card, reduced processing costs, revenue streams from other card usesPossible drawbacks: system development cost, cost/logistics with issuing cards, cost of point-of-sale machinesProcessing cost at member restaurants is high, and you could charge them a higher percent of revenue if you automated the process for them

A $2 billion manufacturer of personal computers has enlisted you to help determine why they lost $60 million in 1994 and $100 million in the first six months of 1995. What could have caused this poor performance in a strong, rapidly growing industry?


Force full investigation of revenue/cost equationEventually focus on product introduction curveCompany is systematically 3-6 months late to introduce latest modelNew models rapidly deteriorate in price, but costs remain constant

You are serving the COO of a company that manufactures premium brand refrigerators and stoves. Over the past few years, profit margins have declined from 15% to 0% while market share has slid from 20% to 15%. His direct reports have little insight, and less data, for you to rely on. What is the source of their problems?


The premium segment market is growing – client share is decliningPrices are increasing in line with the overall marketThe client has added customers and new warehouses for fewer total salesThere are fewer sales per store and total inventories have increasedCore problem is providing too many customized product versions

of 222

An Australian soda beverage company has some extra cash and wants to use it to expand into the fast food business in the US. Would you recommend that they pursue this plan?

Key Segments & Players:Burgers: 90% of fast food market. McDonald’s, Burger King, Wendy’sChicken: Chic-Fil-A, KFC, Boston MarketPizza: Domino’s, Little Caesar’s, Pizza Hut, and many small, local playersMexican: Taco Bell, Chi-Chi’s (declining in importance)Other: Alternative segment is growing with many local players - major one is Subway


There is a trend toward traditional, prepared meals (Boston Market) Population is getting older – remembers home-cooked mealsPeople are too busy or are unable to cook home-cooked mealsGrocery stores have greatly expanded their prepared food offeringsOne niche the client could try to meet is families and older people who want convenient home-cooked meals at home for around $20 to $25Given that the company is a beverage company, they bring marketing and distribution strengths which are needed to compete in this market

Given that the Australian company decides to enter the fast-food market (see above case), how should they do it?

Key industry factors:

Need national presence (scale and marketing) to survive, brand is important, labor and training important to a lesser extentFast food success has been accomplished primarily through franchisingFranchising allows for economies at the national levelConvenience/location - real estate availability is criticalBuying established chain with brand name and location is viable option

of 222

Client is the marketing director for a major national brokerage house within three months of launching a web site that will be offered to the company’s 1 million "gold account" customers. The web site will provide four services:

- Up-to-date account information - Electronic bill payment- Ability to e-mail broker- On-line purchase of analyst reports

Client has to develop a daily demand forecast for the next year and has asked you to help him. How do you go about doing it?


Company sees this complementing, not replacing, existing servicesCompany sells itself on trust, confidence, and understanding client needsA survey conducted eight months before suggested that 40% would use electronic bill payment, 30% would buy analyst reports, and 35% would use the e-mail featureThe survey did not address paying for servicesNeed to recognize key role brokers play in driving demand and the impact incentives (or the lack thereof) will have on willingness to push productSimilar experiences: Bay Bank got 7% of its subscriber base signed up for an online banking product in the first 4 months, AOL grows 20% per year

The client is a Research & Development company that is thinking about introducing a new product. They have 25 to 30 scientists/engineers who have been developing a blood substitute for the past few years. The blood substitutes has certain attributes such as - it does not require refrigeration, there is no danger of spoilage, and it is free from any disease.The company obtained several patents and expects approval from the FDA to begin marketing the product within the next year. What price should the company charge for the blood substitute?


There is no substitute except for real bloodAssume any price for obtaining a liter of human bloodThe new product can charge a premium over the price of real bloodThe premium cannot exceed the "per liter" cost of refrigeration, spoilage, and other handling costs associated with real blood

of 222

You are consulting a new cable firm introducing a new TV-satellite system in Australia that will compete with the new cable system being developed. We know that satellite will be introduced 6 months before cable. What price should you set? (Booz-Allen Asia)

Issues to address:

Price ceiling vs. Price FloorDifference’s in cost structure

The client is a 65 year-old owner of a speedboat business. He thinks he will run the company for another 10 years and then pass it to his son. Where will the business be in 10 years?


Focus on prior year sales, target market, and expected growth of this segment of the market. Use any numbers, and introduce the thoughts of competition and reinvesting in the business.

You are consulting the CEO/owner of a cruise line. The industry has flat revenue and the CEO wants to cut back operations by selling some ships and eliminating some routes. What things do you think about and what questions do you ask as his consultant?


Important costs include ship’s capital expenditures, loan payments, fuel, and maintenance (look across the ships to see if some are less efficient) Other costs are labor (see if there is higher turnover on some ships) and supplies (complex – may consider a hub system like airlines)On the revenue side, it is important to determine the appropriate segments to pursue based on revenue per passenger and geographic location

of 222

You are consulting an elevator company. Their profit slid into negatives numbers the last two years after 10 profitable years before. Internally, the company is divided into 2 divisions, manufacturing and service. How can you restore profitability? Financials for the two divisions are as follows:

Manufacturing ServiceSales $125 Million $50 MillionCost $150 Million $35 MillionProfit ($25 Million) $15 Million# of Elevators 500 produced. 2,500 serviced


The last profitable year for the manufacturing department had sales of $120 M, costs of $100 M, and 300 elevators producedAll elevators manufactured are serviced by the company through 10-year service contractsPrice cannot be increased because of the competitive environment, and in fact have declined ($120/300 > $125/500)Manufacturing volume has increased (300 to 500)Costs cannot be decreased significantlyOn a per elevator basis, the company is profitable:- Loss on manufacturing: ($25) / 500 = ($0.05)- Gain on service: $15 / 2,500 * 10 = $0.06- Profit per elevator: $0.06 - $0.05 = $0.01The current loss is due to an increase in the unprofitable manufacturing but will turnaround as the future service revenues are realized – the company is actually healthy

Your are consulting a Thai bank who is interested in improving its mortgage business. What would you look at? (Booz-Allen Asia)

Industry analysisCountry/regulatory issuesMarket Share-- segmenting the marketInternal Factors-- cost structure, savingsRevenue Generation-- Risk Management

of 222

Your client wants to undertake a major advertising effort in Chicago as a regional launch for a new concept in hair care.In order to understand how much to spend on this effort your client asks you to estimate the size of the shampoo market in Chicago.

There are several approaches that you may take to this problem. The most common approach, and the one interviewers like most, is one that involves a build-up towards the answer. With this process you can go through a number of iterations that will continue to refine the answer. The steps are, therefore, as follows:1. Your first reaction should be a recognition that total sales of shampoo in Chicago depends on how many bottles of shampoo are sold and what price is paid for them. 2. In order to estimate how many bottles of shampoo are sold in Chicago you should try to understand how shampoo is used. Shampoo usage is a product of the number of people who use shampoo and the frequency with which they make new purchases. As a first estimate you would want to know how many people live in Chicago.Your interviewer may or may not have this data available for you. If the data is not available, you should just make a logical assumption, say 3 million. You would also want to know how often they buy shampoo. You should clearly talk through your thought process around this. Initially, for simplicity you should assume that there is an average bottle size that is purchased, say 6 times a year. This gives you an annual consumption of 18 million bottles of shampoo. 3. At this point there should still be a few questions nagging you. You recognize that not all people will purchase shampoo with the same frequency because different people use varying amounts of shampoo over the course of a year. So you begin to try to understand why people use differing amounts of shampoo. Either they are washing their hair more/less often or they have longer/shorter hair which requires them to use more/less shampoo. It is going to be tough to find out how much shampoo each person uses and aggregate that to determine the size of the shampoo market in Chicago. So you may think of some basic groups of people whose use of shampoo may be consistent among the group but differ from group to group. (This type of analysis is typically referred to as segmentation.) A very simple segmentation could be done by understanding the composition of households.Different parts of the household are likely to consume shampoo in different amounts but it is most likely that, for example, different children across various households will consume similar amounts of shampoo. You might say that your earlier assumption of 6 bottles of shampoo per year was based on an average of 4 shampoos a week. If most children only shampoo twice a week they are likely to consume less shampoo. Furthermore you might also say that your earlier assumption around shampoo usage was based on an average hair length. If you now refine that to say that one-quarter of women (and only a very small fraction of men) have hair that is twice as long as "average" hair length then they may consume twice as much shampoo as the average person and therefore have to purchase shampoo twice as often. Finally if you assume that the average household is made up of one man, one woman, and two children (this estimate should be close enough since statistically the U.S. has been moving from 2.2 children per household to closer to 2) your earlier assumption would have put this household at 24 bottles of shampoo per year. If the children consume only one half of the shampoo they were originally thought to have consumed this total decreases by 3 bottles of shampoo times 2 children or by 6 bottles of shampoo down to a total of 18. If, furthermore, a quarter of all women use twice as much shampoo as the other three quarters a woman in each household is using one and a quarter times what had originally been assumed for her. The total consumption of the average woman in a household rises to 7.5 bottles (even though in a sample of women in 4 households you expect to find 3 women who use 6 bottles of shampoo a year and one who uses 12 for a total of 30 and an average of 7.5) and the total household consumption rises to 19.5 bottles of shampoo per year. This refined estimate is approximately 20% lower than the initial rough estimate.

of 222

4.We are almost done now. The revised estimate of the number of bottles of shampoo consumed in the Chicago area is down from 18 million to 80% of that figure or approximately 14.5 million bottles. For a moment you should now try to understand the price that the consumer pays for shampoo. Based on your personal consumption you may estimate that the cost of a 20 oz. bottle of shampoo is $4. You can continue with this estimate if you believe that most bottles of shampoo do cost around $4 and that there are as many cheaper bottles of shampoo as there are more expensive brands of shampoo. (Or to use mathematical jargon the mean and the median are approximately $4 with a normal distribution.) The total size of the shampoo market in Chicago would therefore be approximately $58 million. There are a number of other subtle but important refinements that could be made to this rough estimate of usage of shampoos in a situation where further detail was available and relevant. These could include the number of times consumers apply shampoo while washing their hair, or the differences in the number of times men and women wash their hair. You can probably think of a few more variables that will bring us closer to the answer. In essence, though, it is not the answer that is important it is the process that you go through to get to the answer. If you have thought clearly and articulated yourself consistently in moving through a case example you will no doubt come to a conclusion that is intuitively consistent and logical in its reasoning.

DIAPERSYou have been retained jointly by Pampers and a federal commission on waste management to estimate the volume percentage of disposable diapers in the total U.S. household garbage.

This is strictly a mathematical exercise. You need a numerator (diapers) and a denominator (total U.S. household garbage). Let's assume this will be done in pounds. For diapers, you could take the total $ sales of disposable diapers and divide by the average price per total unit (box, etc.).Multiply this number by the average weight per unit, yielding the estimate of total diaper weight (numerator). Figures on garbage tonnage (denominator) are probably available in some federal report, or could be estimated by multiplying total population by average garbage generated per person.

Pianos"How many pianos do you estimate there are in the United States?" (Similar cases involve American Express cards, gasoline stations, etc.) In this type of case, the right number is not necessarily the right answer for the interviewer. Like all cases, methodology is key.

Sample approach

Along with a basic framework methodology, certain "commonly known facts" should be in your hip pocket when going into case interviews.One of these facts is the approximate population of the United States. This fact can serve as your starting point for cracking this case.1.Split the population (~250 million) into households. Make an assumption about the "average household". Say 3 and come up to about 84 million households.

of 222

2.Now, split the number of households into income quartiles.Quartile # householdsUpper 21 millionMid-Upper 21 millionMid-Lower 21 millionLower 21 million3.Assign a % to each quartile to calculate the number of households with a piano (assume households usually do not have more than one piano).Quartile # households % with piano # pianosUpper 21 million 20% 4.2 millionMid-Upper 21 million 10% 2.1 millionMid-Lower 21 million 5% 1 millionLower 21 million 0% 0

Using this methodology, the "answer" to the case would be 7.3 million.

Better Answer: You have just estimated the number of pianos in homes in the United States. For a "better answer" to the question, you should state that schools, music halls, stores, etc. need to be considered. Be careful how you word this, the interviewer could very well say – Well then, how would you come up with those numbers?

Now that you have been able to calculate a number of pianos (the number itself does not matter so much, it is your approach that counts), the interviewer may choose to expand on the case.For instance -- Given the number just calculated, how many piano tuners do you think there are in the United States?The approach to this can be very similar to the one above.1.Assign a "number of times tuned" to each of the income quartiles. Assume that the upper quartile tunes their piano once every year, the next quartile once every three years, and the next quartile once every ten years. This will give you:Quartile # households % with piano # pianos # tuningsUpper 21 million 20% 4.2 million 4.2 millionMid-Upper 21 million 10% 2.1 million 0.7 millionMid-Lower 21 million 5% 1 million 0.1 millionLower 21 million 0% 0 0

2.This tells you that 5 million pianos need to be tuned each year. Assume a piano tuner can tune 4 pianos a day for 250 day a year, or 1000 pianos a day. 3.Using this methodology, the number of piano tuners that you come up with is 5000.

of 222

PIANO TUNERS - repeat previous caseHow many piano tuners are there in Chicago?

This is a brain teaser case. Its purpose is to test your logic and quick mathematical thinking. There is no right answer. The test is to see if you can come up with an answer based on the information you estimate.You need to start by asking questions about the key factors. One way to solve it is:1) First, estimate the number of households in the Chicagoland area. Additional Information: There are approximately 2,000,000 households. 2.Next, you can break the income of the households into four quarters (500,000 each). Estimate, for instance, that 20% of highest income quarter have pianos, 10% of second quarter, 5% of third, and 0% of fourth.Thus:Income quarter Population % w/Pianos #of Pianos1st 500,000 20 100,0002nd 500,000 10 50,0003rd 500,000 5 25,0004th 500,000 0 0

4) With 175,000 pianos to tune, you can estimate how often these pianos are tuned. Estimate that the top income quarter tunes their pianos once a year; the second quarter once every three years; and the third quarter once every 10 years. This gives you (100,000 + 50,000/3 + 25,000/10) = 119,167 or approximately 120,000.5.Estimate that a piano tuner can tune four pianos a day, 250 days a year. Finally, 120000 pianos / 250 days = 480 pianos a day to tune. 480 pianos / 4 (pianos/tuner) = 120 pianos tuners needed.7) How could you check this? Look in the yellow pages. Would all the piano turners be in there? You could guess half. By the way, there are 46 piano tuners listed in the Chicago Yellow pages.

Estimate the number of Porsches that will be sold this year in the U.S.

Assumptions:

Average U.S. car buyer spends 60% of their gross annual income on a car, once every five years. 250 million people in U.S. Average of 4 people per household Average Porsche costs $50,000

Who can afford a Porsche?Gross annual income = $50,000/60% = $85,000 (approximately)

of 222

How many people will buy a car this year?(250M people)(1 household)(1 car purchased)= 12.5M cars/year(4 people)(5 years)(1 household)

How many of these households make over $85,000 per yer?Assume 0.1% of U.S. households earn more than $85,000 per year Potential consumers: 12.5M * 0.1% = 125,000Potential substitutes:Ferrari, Lamborghini, LotusAston Martin, Maserati, JaguarVector, McLaren, Bugatti Cadillac, BMW, Mercedes Benz Range Rover

Assume Porsche captures 5% of this market125,000 * 5% = 6,250 Porsches

Estimate how many Mazda dealers are there in the US: (BCG)

1 10 million new car/light trucks are sold in the US every year2 Japanese has 25% of the market share3 Toyota, Honda, and Nissan each have 25% of that; five secondary manufacturers, including

Mazda, have 5% each4 So Mazda sells about 125000 car in the US per year5 Assume profit for each car is $400 for the dealer - total dealer profit is $50 million6 Assume normal profit margin is about 10%, i.e., total dealer cost is about $500 million7 Assume operating cost for a dealer ship is $2.5 million/year8 So there should be around 200 dealers

of 222

Next the interviewer asked that Mazda North America wants to know why certain dealer has a much higher profit than other dealer?I used the Five-Force model to analyze the market. Issues covered includes: difference in consumer taste in different region difference in household income in different region different level of competition consumer buying habit different dealer size (scale of economies)Then the interviewer asked what if there are two dealers located close to each other, everything else is also very similar, except one dealer is a lot more profitable than the another.After several guesses, the solution is that the one with high inventory turnover would be much more profitable.Finally, the interviewer asked me to list all sources of dealership revenue and rank them by profitability: Parts - it is a captive market that dealers can charge high price. Also, once the dealership is

setup, there is no fixed cost. And dealers buy on credit, very little working capital is required.

Accessories, add-on insurance, and others - same reason as above. Car sales - high competition and high fixed cost prevent dealers to make economic profit Services - high competition and high fixed cost prevent dealers to make economic profit

I own a shopping mall. How many pennies are in it at any given time?

Sources of Pennies:

Merchants Registers Safes Gumball Machines Public water fountains/Wishing wells Banks Registers Safes People Young (0-18) Middle (18-50) Old (50 up)

of 222

Merchants:How many stores? 55 How are they segmented? 50 small, 5 large How many cash registers per store? 2 per small store, 5 per large store How many safes per store? 1 each How many pennies per register? You tell me! How many pennies per safe? 20 times amount in each register

Estimate 100 pennies per register # registers = (50 small x 2) + (5 large x 5) = 125 registers ==> 12,500 pennies in merchant registers There are 20 x 100 = 2,000 pennies /safe There are 55 stores x 1 safe/store = 55 safes ==> 110,000 pennies in merchant safes

Gumball Machines:How many are there? Guess Estimate 25 machines, each with 20 pennies ==> 500 pennies in gumball machines

Wishing wells:How many are there? 4 How many pennies are normally in each? 200 ==> 4 wells x 200 = 800 pennies

Banks:How many banks? 1 How many registers? 7 How many pennies per register? 200 How many safes? 1 How many pennies in the safe? 50 times total in all registers ==> 7 registers x 200 pennies/registers = 1,400 pennies in bank registers ==> 50 x 1,400 = 70,000 pennies in bank safes

People:What percent of people are young, middle-aged, and old? 40% young, 40% middle-aged, 20% old How likely is it for each age group tp carry pennies? Guess

of 222

Almost all young people will have pennies (90%) because they tend to make small purchases and do not have credit cards. Very few middle-aged people will have pennies (est. 30%) because they will use credit cards for larger purchases. Almost all old people (est. 95%) will have pennies because they "fear" credit cards and get a kick out of having "exact change." How many pennies does the average person carry? You tell me. I rarely have more than 5. What is the average number of people in the mall at any one time? 5,000 Young: ==> .40 x 5,000 people x .90 x .05 = 9,000 pennies ==> .40 x 5,000 people x .30 x .05 = 3,000 pennies ==> .20 x 5,000 people x .95 x .05 = 4,750 pennies ==> Sum totals:

12,500 merchant registers 110,000 merchant safes 500 gumball machines 800 wishing wells 1,400 bank registers 70,000 bank safe 9,000 young people 3,000 middle-aged people 4,750 old people 211,950 pennies total at any one time

How many barbers are there in Chicago? (McKinsey & Co.)

Possible answer: There are 2.7 million people in Chicago; assume half, or 1.35 million, are men. If every man gets 6 haircuts a year; that's a total of 8.1 million haircuts a year. Figure the average barber handles 15 people day and works 6 days a week.That's 90 haircuts a week, or 4,680 a year. To handle 8.1 million haircuts a year, there would have to be some 1,730 barbers in Chicago.Official answer: Not available. But there are 2,853 licensed barbers in Cook County, which includes Chicago. The population of Chicago represents 53% of Cook County; 53% of Cook County's barbers is 1,512.

of 222

How many golf balls does it take to fill the swimming pool used at the Atlanta Olympics? (Booz)

Since the pool is 50 meters x 25 meters x 3 meters, its volume is 3,750 cubic meters, or 228,837,667 cubic inches. The diameter of a golf ball is 1.68 inches. Its radius: 0.84 inches. The formula for measuring the volume of a sphere is: [4 x (Pi) x radius cubed] / 3. So, the golf ball's volume is 2.48 cubic inches. Since the densest packing of spheres possible is 74%, the volume of the pool must be lowered to 169,339,874 cubic inches.Result: It takes 68.28 million golf balls to fill the pool.

"You and I are sitting in an empty room with no telephone, reference books, or computers. Can you tell me how many disposable diapers were sold in the U.S. last year?"

In answering this question, all you have to work with are assumptions. If you are unsure about an assumption or unsure about what is being requested from you, do not hesitate to ask questions of the interviewer.The following is one possible answer:I am going to assume that the population of the U.S. is 250 million people. I am going to further assume that the average life expectancy in the U.S. is 75 years. For simplicity's sake, I am also going to assume that there is an equal number of people in each age group. So 250 million people divided by 75 different age groups equals 3.3 million people in each age group. Children wear diapers from age zero to age three, so that's three years. Three point three million children times three years equals 9.9 million, so let's say ten million children. Out of those ten million children, I am going to assume that 80 percent of them wear disposable diapers. That's eight million children. I also think that children go through about five diapers a day. Newborns maybe more than five, three-year-olds maybe less, so we will assume five diapers a day. Eight million kids times five diapers a day equals 40 million diapers a day. So 40 million diapers a day times 365 days a year is your answer.

Another possible answer is:I am going to assume that the population of the U.S. is 240 million people. I am going to further assume that the average life expectancy in the U.S. is 80 years. These 80 years represent four generations. So 240 million people divided by four generations equals 60 million people per generation. Each generation represents 20 years, so 60 million people divided by 20 years equals three million people per year. Children wear diapers from ages zero to three, so that is nine million children. Out of those nine million children, I will assume that one- third wear cloth diapers, so six million wear disposable. Children wear about five disposable diapers a day. Six million children wearing five diapers a day equals 30 million diapers a day. So 30 million diapers a day times 365 days a year is your answer.

of 222

You are visiting a new client who sells golf balls in the United States. Having had no time to do background research, you sit on the plane wondering what is the annual market size for golf balls in the US and what factors drive demand.Your plane lands in 15 minutes, how would you go about answering these questions?

Golf ball sales are driven by end-users. You have to determine the numbers of end-users; this will be some fraction of the total US population (say 300mil). If you assume a uniform age distribution and an average life expectancy of 80 years (you have to make these types of assumptions), you can then estimate that only people in the ages 20-70 will be potential buyers. Thus you eliminate 30 of 80 years or 3/8 of the 300 mil population. So, now you are down to a potential buyer pool of about 110 million.Now you might estimate how many people out of 10 play golf- say 4- so now 4/10 of 110 gets you down to 44 million people who play golf. Now you have to estimate purchase frequency, how many balls per month an average person buys (you may want to temper this "average purchase" assumption by a least mentioning that retired people play much more than students). A good guess might be 15. So demand per month is now 15 x 44 million, or 660 million. Finally, you need to estimate the number of months per year that people play golf - 12 months in good climate regions, maybe 5 in regions with cold winters - so on average 8 is a decent estimate: 8 x 660 = 5280 million golf balls per year.

How Many Bicycle Tire Tubes Are Produced Annually in U.S.?

Segment MarketAssume Size of each SegmentDetermine a Factor to Drive ConsumptionUse Chain Ratio to Arrive at an Answer

U.S. Mkt: Children + Bike EnthusiastsU.S. population 300 million20% kids1/4 of kids ride 10 hr/week5% Adult/Youth Bike EnthusiastsRide 5 hr/weekAssume Tube Life = 500 hours

Children Annual Usage300 million x 20% x .25 x 10 x 52 =7.8 billion riding hoursEnthusiasts Annual Usage300 million x 5% x 5 x 52 = 3.9 billion hours7.8 + 3.9 = 11.7 Billion Riding HoursEach Hour on Two Tubes=>23.4b Tube Hrs

of 222

23.4 b Tube Hrs divided by 500 Hrs/Tube = 46.8 Million Tubes Consumed per YearAssume Export and Bike Manufacturers together use 20% of Consumption46.8 x 1.2 = 56.16 Million Tubes ProducedKey Assumptions: Population %’s, Usage Rate, Tube Life

Unreasonable Answer? No Problem, as long as you:Build Structured FrameworkBreak Problem into ComponentsMake and State Key AssumptionsDevelop a Logical SolutionComment on Sensitivity of Assumptions

How much does a Boeing-747 weigh?

My car weighs 2,600 pounds empty and can carry approximately 600 lbs. of passengers and cargo.Ratio of cargo to maximum gross weight 600/(26000+600) = 19%Assumptions:

A 747 can carry about 350 people. Each person weighs 150 lbs, then 350*150=52,500 lbs. Each person brings 50 lbs. of luggage, then 350*50 = 17,500 lbs. 52,500+17,500 = 70,000 lbs.70,000/.19 = 370,000 lbs.Since a plane must fly, I would expect that it would be designed to minimize weight (substitute aluminum and titanium for steel).However, I would expect a plane to be more robustly constructed to carry voluminous quantities of fuel and to withstand 150+MPH landings. Consequently, I estimat that a 747 weighs 370,000 lbs.Or be creative! Placing the plane in a large tank of water and measuring the water displacement (Engineering Dept. answer). Checking the shipping invoice (Accounting Dept. answer).

“What is the total square footage of artificial turf in major league baseball stadiums?”.

“How many major league baseball teams are there?”“Assuming that one-third of the baseball teams reside in climates that justify the use of artificial turf...”“We can assume that all playing fields are circular...also we can net out 10% of the surface area to allow for the infields and warning tracks....”

of 222

How much water flows through the Mississippi daily?

Ask about the bottleneck (the point where the Mississippi is narrowest) in terms of its diameter and water speed (in knots) and average depth. After converting to suitable dimensions, multiply water speed at bottleneck by dimensions of bottleneck (width x average depth). Multiply product by the length of the river.

Lowest point of measurement is Vicksburg, MS. (Source: U.S. Geological Survey, Water Resources Division, Chief Office of Surface Water) 600,300 cubic feet per second each day. 1 cubic foot per second = 0.646 million gallons per day (600,300). (0.646 million) = 387,793.8 million or 388 billion gallons each day.

How long would it take to move Mount Fuji (Booz Allen & Hamilton)

What is the shape of Mount Fuji? What is the formula for the volume of a cone? What is the height of Mount Fuji. What is its radius? Is Mount Fuji solid? What is the volume of a dump truck? etc.

You have 100 pounds of potatoes. They are 99% water. After leaving them in the sun for a day, they're now 98% water. How much do the potatoes now weigh?

The 100 pounds of potatoes was 99 pounds of water and one pound of potato. It now weighs X pounds and is 98% water and 2% potato. 2% of X is one pound. If 0.02X =1 then X=50 pounds. (Source: A Mathematician Reads the Newspaper by John Allen Paulos)

You are in a boat in a lake holding a rock. You drop the rock into the lake. Will the water level of the lake rise?

What kind of boat? Is the lake fresh water or salt water? What type of bottom does the lake have? Is it stream fed? Is the rock sedimentary or conglomerate or igneous? What is the outlet for the water?

If you took all the snow that was plowed in New York City during the 1995/96 winter and laid it out, one inch think, along a standard single city street lane, how many miles would it extend?

According to New York City's public affairs office, 89.75 inches of snow accumulated during the winter of 95/96. There are 6,200 miles of street in New York, which is about 15,000 lane miles (For instance, Fifth Avenue has five lanes, each of which would be plowed). This number includes the highways. 15,000 lane miles x 90 inches=1.35 million miles of snow.

of 222

of 222

In Italy there are 28000 gas stastions. How many gas stations are there in U.S.

I have used the average distance driven, the number of car per person (or per family) as primary drivers for the solution (plus some other less important factor)

Suppose you have a balloon filled with air that's underwater and at equilibrium. What happens when you lower the balloon by 10 feet?”

An underwater balloon filled with air invites a multitude of creative answers. You could safely assume that the balloon would flatten or contract, given that 10 additional feet underwater would apply more pressure on the vessel. You could also assume that the air in the balloon would already be in a liquid state, and that the additional pressure would cause a corresponding drop in temperature and volume of air.

Why are manhole covers round? (Microsoft)

a) Because manholes are round;b) Round manhole covers are easier to roll down the street than a square or triangular cover;c) A round manhole cover can't fall into a manhole, but a square manhole cover could fall into

a square manhole if placed diagonally, and a rectangular one could fall back through the long end;

d) Our natural shoulder line allows us to drop into a round hole more easily than an oblong hole.

Four people on the same side want to cross a bridge. You have 17 minutes to get them across. A maximum of two people can cross at one time. Because it is dark, any party that crosses-- either one or two people -- must have the flashlight with them. The flashlight must be walked back and forth, it cannot be thrown, etc. Each man walks at a different speed. A pair must walk together at the rate of the slower man's pace. Person 1 takes one minute to cross; Person 2 takes two minutes to cross; Person 3 takes five minutes; Person 4 takes ten minutes. How do you get everyone across?

Persons 1 and 2 cross together (2 minutes have elapsed). Person 1 runs back with the flashlight (3 minutes have elapsed). Persons 3 and 4 lumber across (13 minutes). Person 2 trots back with the flashlight (another two minutes) and 1 and 2 return together for a total of 17 minutes.

of 222

You are in a room with three light switches. Each one controls one lightbulb in the next room. You have to figure out which switch controls which bulb. You may flick only two switches, and you may enter the room with the lightbulbs only once. (Boston Consulting Group)

Flick on switch #1, wait five minutes, then flick it off. Flick on switch #2. Now enter the room with the bulbs. The bulb that's on connects to switch #2. The bulb that feels hot goes with switch #1. Theremaining bulb goes with switch #3.

Why do Coke cans have an indent at the bottom? (Booz, Allen & Hamilton)

Because the can is a pressure vessel, without the indent (or "dome," as it is officially called), the can would bulge out the opposite way and wouldn't stand up properly. This is called a dome reversal.

Race on the Ice Rink: The office team is out racing at the skating rink during a long lunch hour. Samantha beat Jim. Louise was not last. Dennis was beaten by Jack and Louise, in that order. Jim was not first. Jack lost to Jim. Who won?

Let's find out who is most comfortable on ice.Samantha won the race. Build a chart with names along one axis and the positions (1-5) on the other. Use the information from the question to eliminate which people could not have arrived at which position. Narrow the chart information until only one person could logically have finished at one position.

1 2 3 4 5Samantha Louise Dennis Jack Jim

You and your neighbor, who aren't necessarily friends, are planning tag sales for the same day. You're both selling the exact same used TV. You feel the TV will sell for $100. He insists on selling it at $40.What do you do?

Buy his for $40 and sell each for $100.

of 222

Outre Ornaments, Inc. sells baubles, gewgaws, and trinkets; while there I spoke to three different salespeople.[1] The first salesperson I talked to told me any 7 baubles together with any 5 gewgaws have the same value as any 6 trinkets. [2] The second salesperson I talked to told me that any 4 baubles together with any 9 trinkets have the same value as any 5 gewgaws. [3] The third salesperson I talked to told me any 6 trinkets together with any 3 gewgaws have the same value as any 4 baubles. [4] When I bought some of each kind of ornament I found out exactle one of these salespersons was wrong. Which salesperson was wrong?

The three value equivalents must be considered in pairs to determine which one value equivalent is false. The false value equivalent leads to two derived value equivalents that are impossible; the true value equivalents lead to one derived equivalent that is not impossible. Let b represent baubles, g represent gewgaws, t represent trinkets. [1] 7b + 5g = 6t [2] 4b + 9t = 5g [3] 6t + 3g = 4b Using [2] , substitute 4b + 9t for 5g in [1]. Using [3], substitute 6t + 3g for 4b in [2]. Using [1], substitute 7b + 5g for 6t in [3]. Then simplify. [1] 7b + 4b + 9t = 6t simplified 11b + 9t = 6t [2] 6t + 3g + 9t = 5g simplified 15t + 3g = 5g [3] 7b + 5g + 3g = 4b simplified 7b + 8g = 4b

[1], using [2], is impossible because some baubles and 9 trinkets cannot have the same value as 6 trinkets. [3], using [1], is impossible because some gewgaws and 7 baubles cannot have the same value as 4 baubles. Because only one salesperson was wrong, from [4], neither the second nor the third salesperson was wrong; otherwise more than one salesperson was wrong. So only the first salesperson was wrong.

of 222

Other interview cases

A man who enjoys watching trains likes to walk to a nearby railroad track to wait for one to go by. Each time, upon his return, he makes note of whether the one he saw was a passenger train or freight. Over the years, his figures show that 90% of the trains have been passenger trains. One day he meets an official of the railroad and is surprised to learn that in fact passenger and freight trains are precisely equal in number. Why did the man, whom we may presume to have made random trips to the railroad tracks, see such a disproportionate number of passenger trains?

A nationwide company sells insurance policies to fund future funerals. The company is considering centralizing regional processing centers. The company has poor customer satisfaction because of the lengthy time required to process new policies and policy changes. What factors should be considered in centralizing the processing centers and give your recommendations.

An amusement park has stagnant revenues compared to a neighboring park. Analyze issues and recommend a solution.

A downstream oil company has developed an additive that increases gas mileage by 40 Mpg. Should they bring it to market. If so, how?

Three oil companies are in a joint venture. Company A has 20% of the revenues, B has 40%, and C has 40%. A's SAP implementation has been active for 18 months, B has coded 75% of A's implementation over 6 months, and C is considering JD Edwards. What should C do?

We are a pharmaceutical company and we have 9 distribution centers disseminated in the country. We need to change the distribution system. What issues are the most compelling and what are your recommendation?

A pharmaceutical company is experiencing changes in its competitive landscape. The case takes place about the time of the 1992 elections so health care reform and related issues have become prominent with the American public. Also, the American public is pressuring pharmaceutical companies to decrease prices because these companies are seen as inconsiderate profiteers. These changes have caused the pharmaceutical service industry to consolidate the historically segmented market.Services previously provided by small, independent drug stores are now more effectively provided by large retailers such as Wal-Mart and Eckerds. The two problems to address for this pharmaceutical company are:1) Take costs out of their branch operating centers (re-engineer their order fulfillment, financial

services, customer service, and warehouse processes)2) Increase the company's responsiveness to customer needs.How should the company best address these problems?

of 222

There is a problem with a magazine: the revenues are going down drammatically : find the problem and propose 2 strategies for the solution, then evalue them.

A pharmaceutical goods distributor has a profitability problem. How yould you go to identify the causes and find a realistic solution?

A cheese manufacturer is facing a worse and worse profitability . Why?

An energy power municipality has the chance to "buy" the customers from the national state-owned power company. What would the fair price be?

In your opinion would a merge between Pirelli and Continental a good idea?

A bank must decide how much to charge a customer for a loan. The investment has 80% of probability of success and the current Risk free rate is 8%. How would you go?

A company manufactures telecommunication equipment and it is facing (for the first time in his life) a dramatic decrease of profitability? What is going on?

A ship manufacturer actually purchases air conditioning systems from a supplier. How would you go to find a solution for reducing the purchasing costs ?

A multinational group produces and sells copper bars.It is facing a decrease of profitability. How would you face the problem? How would you solve It?

A paint manufacturer is facing the following problem: The stock is increasing and the level of service is getting worse and worse. Try to simulate your first interview with the CEO.What questions would you ask him?

If you are driving in a motorway and there is only one junction left before the end,how can you decide if keep going driving to the end or to exit at the next junction?

You are consulting a Southeast regional bank who is thinking about going into the Northwest. What would you look at? (McKinsey)

What metrics would you use to analyze the management consulting industry? (Mitchell Madison Group)

You are consulting a full-service brokerage firm who is concerned about the competition from discount brokers? What analysis would you do to help them understand what’s going on? (McKinsey)

of 222

You have been hired by the New York Rangers who have been approached by Continental Airlines Arena to move the team to New Jersey. What would you look at and how would you advise the Rangers?

Explain to your grandmother why the price of her bonds go down whenever interest rates go up?

You have been hired by a major credit card issuer who wants to grow their card business. Without changing fees or interest rate structures, how would you go about this?

How would you measure success between two retailers? What may explain differences in per store sales in the office superstore retail business?

You are hired by the National Ski Industry to do a study on why industry performance has been flat. What would you look at to improve the industry’s overall profitability?

What do you do if you are driving a sports car (2 seats) and while standing at a red light you see the girl that you are dating, your grandmother, and a McKinsey partner from your office who you know needs to speak to you right away. The three of them are standing in the corner, it is raining heavily and they all see you an wave you at the same time. (McKinsey)

What is the value of this hotel? (McKinsey)

How do you determine the efficiency of a chicken farm? (McKinsey)

Your client wants to buy a bank, what do you do? (McKinsey)

Your client produces sugar at a cost higher than the world price and he wants to compete in the world markets. What do you recommend? (McKinsey)

How do estimate the cost structure of the steel industry in Latin America? (McKinsey)

The world pulp market is compose of 10 producers. Because of intense competition margins have disappeared, so they decide to create a secret cartel and fix the price. The group finds consensus at a 50% increase, but two producers are concern with the potential decrease in volume. They hire you to estimate the impact of a price hike in the world demand for pulp and to advise them in their actions. What do you do? (McKinsey)

The publisher of "the cross-effects of US drugs book" has experience a reduction in profits the last three years. The drug manufactures are publishing the cross-effects of their drugs on their web sites and your client is worried that this could be affecting his product. What do you recommend? (McKinsey)

of 222

If you have an appointment with the CEO of a $500 million conglomerate in Latin America, and you only have one chance to tell him that he has very serious problems and that you can help, what would you say? (Booz.Allen & Hamilton)

An academic hospital wants to reduce expenses by 25%. Analyze the issues and recommend strategies.

I am the largest network HMO in the US, but my sales are growing at only 1% per year while my competitors are experiencing 20% growth. What should I do?

You are consulting for an insurance company that has two lines of business: Indemnity & Managed Care. Indemnity is showing no growth but neither is the indemnification industry an a whole. Managed care industry growth has been 30%, but the company's client growth was 1%. Why isn't the HMO business growing for this company and what can they do to improve?

Monsanto's patent on Nutrasweet is about to run-out. Now anyone can make Nutrasweet substitutes. What should Monsanto do?

Give an example of a strategic problem you experienced at your previous employer. What was the issue and what did you or would you have recommended to overcome this problem?

You have been asked to consult with an aircraft engine manufacturer to help them grow their company. The aircraft engine market has three major players and market growth is stable. Name several possible growth opportunities that leverage core competencies.

You are a company that is planning to introduce new eye drops which will cure far-sightedness if used two times a day. There are no side-effects. Project the first-year revenues.

You are company A and you are in the industrial gas industry, meaning that you sell large quantities of gasses to large clients such as hospitals and chemical manufacturers. Your stock price has remained relatively flat over the past five years. One of your competitors, company B, has also experienced relatively stable stock prices. Meanwhile, a third competitor's stock has grown substantially -- Company C. You all share the industrial gas market equally, but company C has also entered the "mom and pop" gas industry -- by providing canisters for helium balloons.. What might be the reason their stock price is higher?

You are in the residential construction industry. You have realized a compounded annual growth rate of 20% over the last five years. You are happy with your performance, and decide to compare yourself with ten other firms that started the period with a similar market value. When you do, you see that your stock price has underperformed the average of your ten benchmarks. Why might the other firms have higher stock prices, and how might you increase your stock price?

of 222

Your client is the CEO of a major airline. He is considering painting the aircraft, which are currently buffered aluminum. What factors should he consider in making this decision?

Your client is the head of a National Oil Company, meaning that it is owned and operated by the government. Your client has been looking at trends of liberalization and privatization throughout the world and would like to prepare his company for competition. What might he do?

The president of a nationally owned oil company wants to increase the competitive attitude of his/her employees. What should be done? How should performance be measured? Assume that you are the manager of the ethylene plant owned by the company. How do you want your input materials priced? Assume that you are the manager of the E&P division. How do you want to price your ethane? How should the president of the company tell the two managers to price the ethane? Draw a supply curve for ethane. What happens if the low-cost ethane plant is constructed. Should you build the plant?

A major airline company is thinking about moving their hub city in the hopes of saving money. How would you approach this problem to analyze the cost-effectiveness of such a move?

Muddying the WatersThere is a client in the bottled-water industry. Their market is high in Southern California. Sales are increasing, but profits are decreasing. What information do you need to assess what is happening?

A client has invented a new type of a battery that is compact and has a much longer life than normal batteries. It will only be about twice as expensive as ordinary batteries, but will last ten times as long. Where would the market be for super batteries? What are the broader implications for such a product?

French Fry Vending MachinesA major Idaho potato producer wants to increase demand for its product and stumbles upon the idea of vending machines for French fries. The machines would have a stock of frozen fries, heating them up and dispensing them into a bag for the customer. Assume this process yields fries that taste good. What factors would you take into consideration to determine if this is an economically feasible venture?

Green TiresA client approaches you at a party with an idea for selling green automobile tires. Without expertise in the auto or tire industries, how would you estimate the overall market for tires, the percentage of people who might be interested in green tires and the profitability of such an idea? What factors need to be considered in determining profitability?

Hotel HeadachesYour client is the owner and manager of an exclusive hotel and she seeks to improve profits, which have been declining in recent years. She states that occupancy during the weekends is usually quite good, but during the week it is slow. She also knows that visitors to the hotel have recently become less satisfied with the service. The client states further that she has had to

of 222

reduce staff in response to the lower occupancy rates. What factors would you want to take into consideration and what suggestions would you offer your client in order to help improve profits?

of 222

Coffee Vending in San FranciscoA chain of gourmet coffee shops from the Northwest is considering expansion into the San Francisco area. They sell coffee, coffee beans, light snacks, and coffee-making equipment. This chain has been highly successful in the Northwest and has an extensive distribution system and well-known name there. What factors should they consider before opening in the San Francisco Bay Area? What would you expect major cost areas to be in the new location? How could you reduce those costs? How should the chain determine the locations of its Bay Area stores? What other factors are important for this client to consider?

The CEO of Citibank doesn't understand the Year 2000 issue and the need to spend such a large amount of money to address the problem. Explain the problem, the reasons for addressing the problem, and the business impact to the company if the problem is not fixed. Also discuss other means of addressing the problem.

A company that makes clothing and distributes their products to Sam's Club for retail is having problems managing demand for their clothing. In many cases, the products are overstocked or out of stock. The main products are a Dallas Cowboys t-shirt, a NY Yankees hat, and a Green Bay Packers parka. How would you address the problem? What kind of data do you think would be available and helpful?

You work for AT Kearney, and your consulting client is seeking to put your contract for open bid. Assess the situation and recommend a strategy

You have been asked to consult with the president of a medium sized mining company in California. They have been in business for a long time and profits have declined over the last several years. They want your help. Once you have a recommendation, tell me how you will staff the project and how long it will take.

You have just merged two large consumer products companies. What three departments should you integrate first? Ok, now name three more. OK, name three more.

You are consulting with a company that manufactures the additives that go into motor oil. You want to grow the business. What do you recommend?

You are consulting with a company that is a leading manufacturer of golf bags. They have excess capacity in the summer, and may have to lay off their employees. What recommendations would you give so they could utilize their excess capacity.

The CEO of XYZ Corp., a large, diversified chemical company, has asked us to help her decide whether to remain in the nylon business:XYZ's synthetic fiber business includes nylon, polyester and acrylic.At the moment, none of the synthetic fiber business units is performing up to corporate goals, but nylon actually lost money last year and is expected to lose more this year.XYZ Corp. is the second-largest producer of nylon in the United States and holds a market share of 35%.

of 222

Should XYZ exit the nylon business?

A large trucking company (Truck Corp.) has asked for help with entering related business:Since deregulation of the trucking industry in the early 1980s, the industry has become extremely competitive, and the margins at Truck Corp. have ranged from poor to fair over the last ten years.Truck Corp. believes that the small package-delivery business, currently dominated by UPS and Federal Express, look attractiveShould Truck Corp. enter the small package-delivery business?

The Chairman of a large retail stock brokerage firm has asked us to help her develop a long-term strategy for the firm.The firm is currently the largest regional firm in the Northeast.The Board of Directors is considering moving beyond the firm's traditional retail brokerage base to more fee-type businesses, including securities origination and mergers and acquisitions for smaller companies located in the Northeast.Should the brokerage firm pursue this strategy?

A large snack manufacturer has asked for help in thinking through an appropriate distribution strategy in Mexico. In the United States the snack maker distributes the snacks directly to stores itself through a wholly owned fleet of trucks and company-employed drivers.Is this the right strategy for expanding to Mexico?

The CEO of a large diversified entertainment corporation has asked a McKinsey team to examine the operations of a subsidiary of her corporation that manufactures video games. Specifically, he needs to know if he should approve a $200 million capital request for significantly expanding the division's capacity.The division is only number 3 in the industry and is significantly smaller than the market leaders.Sales have increased rapidly from a small base, yet: remaining less than 20% of parent company sales, have increased faster than profits.The division manufactures the player unit (which attaches to the TV) not the software (which is licensed).What are the critical issues to examine and why?Should the brokerage firm pursue this strategy?

You are working for the manager of a plastics company. The division is unprofitable and is known for poor customer service. What would you do?

Draw a supply and demand curve for heroin in the US. Now what would it look like if it were legalized?

of 222

I own a gas station and I am thinking of laying off the attendant and going completely automated. What should I do?

I am thinking of buying a coal burning power plant. What are some of the issues I should consider in valuing the plant?

I am a Costa Rican brewery facing the end of my monopoly status. Budweiser and a South American company are about to enter my market. What should I do?

How do I assess the profitability of the tar that comes out of my refinery?

My company just developed a new additive for gasoline that improves mileage by 10% What should I do with it?

A company is losing money for the past year.How to improve the situation?

Toyota is going to introduce a new model. What factors should they consider?

A Swiss watch manufacturer is entering the U.S. market.What should they think about?

How to deal with distributors' delay in getting to the retailers?

How to improve PDY at the MacDonald's?

What do you think of AA's Frequent Flier Program? Is it good or bad? Why?

The CEO of a small biotech company has one product on the market, a couple of pending products and a burn rate of $30 million/year. It's been 5 years and the stock holders are getting antsy. If you were the CEO, what would you do?

A huge bank has a separate catalog business that has not done well recently. It went from + 3, +4, +5 growth to -3, -4, -5 growth over the past 3 years. You're meeting with the Chairman of the bank in 1 month. What would you look at in the 1 month period to come up with a presentation to the chairman?

A chain of grocery stores currently receives its stock on a decentralized basis. Each store deals independently with its suppliers.The president of the chain is wondering whether the firm can benefit from a centralized warehouse. What are the key considerations in making this decision?

of 222

A magazine publisher is trying to decide how many magazines she should deliver to each individual distribution outlet in order to maximize profits. She has extensive historical sales volume data for each of the outlets. How should she determine delivery quantities?You are called by a U.S. manufacturer of mens tailored suits. The company sells roughly 500,000 suits a year exclusively in the U.S. through specialty and department stores retailers. Currently, wholesalers buy the suits from independent sales reps who earn a commission of 5% or roughly $10 per suit. The manufacturer wants advice from you on whether or not to hire a sales force in-house.

A major investment bank is worried about its bond trading operation. They suspect that their government bond desk may have violated securities laws by bidding for more than 30% of a new issue of U.S. Treasury notes. One individual, in particular, has been earning considerably more than the historical average...

During your last trip to the supermarket, you notice a large price difference between competing brands of cocoa powder.Noting the markets shares for each brand from a magazine article, you compile the table below. What can be said about the structure of this market? The supermarket manager offers Firm A an opportunity to produce under private label for the supermarket, should Firm A accept this offer?

Brand Share Price/unitA 40% $4.00B 29% $3.80C 14% $3.55D 17% $3.35

A pharmaceuticals manufacturer is worried about health care reform. In particular, they wonder whether they should be carrying on business as usual.

You are an MD/MBA and have invented a cure for multiple sclerosis (in pill form). The pill still needs some further testing to get FDA approval. How do you get this pill to market? After some discussion of using pharmaceutical companies vs. individual efforts for distribution, suppose the United Nations requests you give them the drug to distribute free throughout the world. How would you reply, and why?

Our client is healthcare firm in the United States that makes and sells gases and delivery machines for anesthesiologists. They are trying to determine whether or not to enter the pharmaceutical business. Current products include:1.Top Gas (volume and price are down thus profits are down) 2.Recent Gas (performing below expectations) 3.R&D Gas (Unique lifesaving gas - not anesthetic - 2 years from FDA approval)Major customers include 6-10 teaching hospitals. Should they enter the pharmaceutical business?

of 222

A major oil company is having difficulty setting retail prices. Sales are volume focused with each city representing a market. Currently the sales force has no methodology to set prices. How should they go about determining what price to charge in each market?

A major soft drink manufacturer is experiencing sales per square foot of 50% the industry standard at oil company convenience stores. With twice the total sales volume of a normal site, why are sales per square foot so much less?

A high-end jewelry store has 50 locations and processes all accounting information in the back office. As a relationship tool, the store issued a private label credit card. Two years ago an outsourcing company offered to perform full-service processing of the cards for 10% less than the jewelry store’s cost. Last year the outsourcing firm offered to do it for 20% less and last week offered to do it for 30% less and said this was their final offer. Why has he been able to constantly cut the price? Should the jewelry store take the offer?

An electric utility ($10MM in regional sales) wants to diversify out of its core business and purchase a PCS license (to provide wireless services) at an upcoming FCC spectrum auction. Does this opportunity make sense?

Our client is the largest supplier of juices (full-line) but is losing money. It has grown through acquisition (not development) with the exception of orange juice (where they are vertically integrated). Their sales approach is "close to the customer" and includes 100 individually operated branches serving geographic regions.There are two primary competitors: Competitor A is a specialty company (only orange and apple juices) which has long-term procurement relationships with its suppliers and focuses on gourmet grocery sales. Competitor B offers bulk discounts through a national sales force and central distribution methods. Why is our client losing money and what should they do to restore profitability?

You are approached a group with the rights to a new NBA franchise. They are examining two cities as prospects for their new franchise - Baltimore and Toronto. Your task is to recommend which city is better. Describe the issues to consider and how you would decide.

You are consulting a supplier of calcium carbonate to the paper industry. For the past 3 years profits and sales have been declining slowly. In the last 6 months profits and sales have dropped precipitously. Your job is to help this company return to profitability. Describe how you would approach the problem.

How do you go about estimating the market share of a telecommunication company in an underdeveloped country with no public information? (McKinsey)

Your client is considering purchasing a U.S. tire manufacturer. To get a better fix on the projections for the value of the company, the client wants you to determine the size of the U.S. tire market. You are in a car with the client for 2 hours and have 1 hour to determine the size of the market. Describe how you would determine the size of the market.

of 222

How many passengers fly in and out of JFK each day?

Estimate the number of cars in California (McKinsey)

How much does a Toyota Camry weigh (McKinsey)

How many sodas are sold annually in the US? (Mitchell Madison Group)

How would you estimate the number of gas stations in the US? (Booz Allen)

Estimate the total sales of the soap market in Ecuador? (Booz.Allen & Hamilton)

How many marriages are there in the United States per day?

Describe how you would determine how many quarters there are in Vance Hall (or any other known landmark/building). When asked by the interviewee, give a specific time and date for the analysis (e.g. Friday at 10:30 am).

You have a 10x10 rubix cube. If you dip it into a bucket of paint, how many surfaces will be painted? (AT Kearney)

How many cubes are there on the surface of a 10x10x10 cube made up of 1000 1x1x1 little cubes?

You have 12 balls, and one has a different weight than the others. Using a two-plate scale only three times, how would you figure out which ball was different and whether it was lighter or heavier?"

A smart explorer is captured by savages who order him: "Make a statement. If what you say is true, you will be hanged. If it is false, you will be shot." What does the explorer say that saves his life?

Three boxes are labeled "Apples," "Oranges," and "Apples & Oranges." Each label is incorrect. You may select only one fruit from one box. (No feeling around or peeking permitted.) How can you label each box correctly?

How long could you live in a grocery store if you were locked in with plenty of water and electricity? Hint: evaluate the store’s yearly sales, average inventory turnover, and your personal cost for groceries each week

of 222

of 222

Table of Contents

1.Overview p. 2



4.Cases p. 31




of 222

Are you missing an Earring?The 30-Second Details Check Before the Interview

Susan Bixler, author of The Professional Image recommends that job candidates perform a 30-second detail check in front of a mirror prior to any interview. For maximum impact, she writes, the detail check provides the reassurance to concentrate on people and on matters at hand. We don't need to wonder about a broken zipper, lunch remnants on our tie, or a run in our hosiery.To perform the detail check, start from the top of your body and work down. Check you hair, teeth, makeup, and earrings. If you lost the back to your earring, borrow one or use the back of a pencil eraser. Secure your scarf, straighten your tie; check for dandruff, stains, and open buttons. Then check your belt, zipper, hosiery, and shoes. Are your shoes shined?

Paying Attention

During the interview, remember to be an active listener, pay attention, and ask good questions. You should show respect to the recruiter, answer clearly, and keep your enthusiasm high. Exhibit good posture and maintain eye contact. When shaking the hand of a recruiter, use one firm squeeze and do not break eye contact. Susan Bixler recommends that if the recruiter doesn't extend his or her hand, the candidate should wait one beat, and immediately extend his or her hand. This shows a high level of confidence and business awareness.Get Rid of that Chewed up Pen

Get rid of any chewed up pens and invest in a nice pen for your interviews. Both men and women should bring a nice pen into their interviews for note-taking.Clean Nails

You don't have to get a manicure, but if you're interviewing between classes, check your nails. You need to maintain a well-groomed appearance during your interviews.Name Tags on The Right, Not The Left

If you have to wear a name tag, wear it on your right lapel, not your left. Although 95% of America probably would naturally put their name tag on their left, Senator Bob Dole will tell you that it's better on the right. Why? Because if your name is on the left lapel, the person you meet has to shake your right hand and turn their head right to read your name off your left lapel.However, it's a much smoother move for the person you are meeting to shake your right hand and see your name on your right lapel. Try it out, and you'll see what we mean.

Before you interviews, make sure that you've done the following

(1) Can you exceed the position's initial requirements (2) Are you ready to explain your past successes (have them memorized) (3) Do you know the company's culture. Does your image, traits, personality fit in. (4) What can you tell the recruiter that would boost his bottom line. (5) Have you done your homework on the company. It's past sales, top products, industry outlook, strategy, goals. (6) Remember to be confident and maintain your composure.

of 222

Overview

IntroductionThere are a number of concrete steps you can take to increase the probability that a job interview will be successful-i.e., that you will receive an offer or will be invited to return for additional interviews. Being well prepared will increase your self-confidence and peace of mind which will in turn improve your performance in the interview.First, a word about interviews in general. Remember that while interviews can occasionally be adversarial, more often an interviewer wants to find an outstanding candidate for the job as much as you want to find a fulfilling job. Put another way, he or she needs to hire as much as you need to be hired. It helps to think of the process as one where both parties are hoping for a positive outcome. Throughout your life you will be interviewed by some people who are skilled interviewers and by others who are not. There is no one "right" way to interview, and no matter what the format, it is your responsibility to do the best you can in each situation.Because interviewing is an unrehearsed conversation between two strangers, the discussion can take as many paths as there are people. For that reason, it is crucial to be comfortable with the unfolding of the process. That comfort comes in large measure from advance preparation. The only thing you can know for certain is that every interview is unique!

The InterviewThe information in this section applies to job interviews in general. If you are going to an informational interview, a recruiting interview, a "second" interview, or a consulting company interview, read this section first and then go on to read the specific section that follows.

PreparationIt is difficult to overemphasize the importance of being well prepared for a job interview. Your degree of preparation speaks volumes about your interest level and conscientiousness. In addition to increasing your confidence, solid preparation will help you to give articulate answers and ask pertinent questions.In order to make the best case for your candidacy for a particular job, you need to be prepared with information about yourself AND about the job, company, and field. It is difficult to make a case for a match if you only have information about one side of the equation.

Researching YourselfMany people incorrectly assume that they know themselves well enough and that they don't need to spend time thinking about themselves before an interview. It is important to think about yourself specifically in a job setting and to reflect on how your experiences have prepared you for work in that setting. It is also important to be able to articulate to a stranger what he or she is interested in knowing about you. It may seem awkward at first to talk about yourself if you are not accustomed to it. If you are not shy about discussing your talents and accomplishments, it may take some practice to sound confident but not arrogant. If you tend to be humble, it may take practice to avoid sounding overly self-deprecating.To think about yourself, consider the following topics:Long-standing as well as brand-new interests and hobbies Talents and abilities that you have and would like to use in a job setting Skills that you would like to develop or improve

of 222

Activities and tasks that you would like to avoid in a job setting Lifestyle, salary, location Kinds of people and environments that you prefer Current career and educational goals Past experiences that you would like to highlight and what you have learned from them. These could be ANY kind of experience including work, volunteer, academic, athletic, artistic, and travel. Think broadly. Reviewing the sample interview questions in this publication will also help you to "research" yourself and discover what is most important for you to communicate to a potential employer.

Researching a Company or OrganizationTo research an organization or a company, begin by reading their own promotional literature. If it is not available at any library, call the organization or company and ask if they would send you their annual report or any other literature.Your organization research can begin in the OCS Resource Collection with such resources as:OneSource-a CD-ROM database of corporate information Public Interest Profiles Federal Agency Career Information Binders Various directories of specific fields such as: International Affairs Directory of Organizations O'Dwyer's Directory of Public Relations Firms Handbook of Private Schools Gale Directory of Publications and Broadcast Media Research Centers Directory CorpTech Directory etc.

First ImpressionsMost interviewers will admit (and research supports) that they have largely made up their minds about a candidate within the first five minutes of meeting him or her. Important "first impression" indicators? A firm handshake, sustained eye contact, a warm smile, good posture, and introducing yourself in a relaxed and confident manner.Even before you can make a first impression, you must arrive on time. If it means getting somewhere an hour early because you are uncertain about the traffic, parking availability, or public transportation connections, do it! You can always find a coffee shop or a lobby in which to wait and review your thoughts. You'll want to arrive at the location of your interview about 10 minutes ahead of your scheduled appointment.A few basics about superficial presentation bear repeating. A well- groomed, professional appearance is essential. Anything else will detract from the best possible presentation you can make. Decide what to wear well before the day of your interview, allowing time for dry cleaning or pressing as necessary. If your outfit is new, wear it once before your first interview. Make sure that all buttons and zippers work. You don't want to give your clothes a second thought as you go to the interview. You do want to feel comfortable and confident in whatever you choose to wear.

of 222

A good way to determine suitable attire is to look at what people in your particular field are wearing. Men and women should generally plan to wear a fairly conservative suit in a fairly conservative color. In some creative fields you may have more leeway in terms of formal vs. casual attire, but it is always safer to err on the conservative side. Long hair should be kept in place with barrettes, a headband, or a ponytail unless your style is one that stays put. Very long hair should be pulled back. In any case, leave at home the wild ties, attention-grabbing jewelry, strong scents, and gum.You should always bring along extra copies of your resume, something to write on, and something to write with. An expensive portfolio is not necessary-a clean folder and pad of paper will suffice. You may also want to consider bringing additional items that you have produced and that you think would support your presentation. These might include writing samples, published articles, spreadsheets, software programs, photos, and videos. Writing samples are the most common item for people (particularly students and recent graduates) to bring to an interview. If you have questions about something else, ask an OCS counselor. If possible, you should be willing to leave anything you bring, so make sure you have good- quality, clean copies.

Heart of the InterviewThe age-old advice to "be yourself" is still the best general thought to keep in mind as you prepare for an interview. People can get into all kinds of trouble trying to be someone they are not. If you obtain a job offer through impersonation, it will be a shock for both you and your employer when the real you is revealed.When you think about being yourself, however, concentrate on being your "best self." This thought extends from the suit you wear to the examples from your past that you choose to highlight. An interview is a brief period of time in which to make an impression. You want yours to be a positive one. Present the highs and not the lows, the enthusiasm and not the doubt. No one denies that most people have negative experiences, low moments, and uncertainty about major decisions, but in 30- 45 minutes, there simply is not time to discuss them. By focusing on positive elements, you will help to make the tone of the entire interview a positive one.If you are asked to describe a failure, a weakness, or a negative experience, try to finish your response on an upbeat note. You can do this by mentioning a lesson learned, how you have grown from a difficult experience, or what you are doing to improve a weakness. You can also discuss a failure that you later turned into a success or a weakness that sometimes works as a strength for you. This approach will communicate that you are a positive and forward-thinking person. If you must bring up something negative, be brief, and return the conversation to a positive subject as soon as you are able.Among the most tempting negative subjects are previous bosses and boring tasks. While your assessment may be quite true and perfectly justified, choose something else to talk about. You don't want to give the impression that you are a negative person. You may leave someone with the mistaken impression that you might speak about a future manager in the same way or that you are unwilling to dig in and do the mundane part of a job.Without being too rigid about it, you will want to have three or four key points in mind that you make sure to discuss in the interview. These might be personal characteristics, skills you have learned, or experiences that you have had, that would help show that you could perform well in the job. Thinking beforehand about what these points should be for a particular interview will make it easier to include them in the discussion.You will also want to have in mind specific examples and anecdotes from your past to illustrate important points about yourself. Generalities are usually weaker than specifics in trying to prove a point. For example, instead of saying only that you can see a project through from start to finish, elaborate by describing how you had an idea for a particular magazine and led the effort to have it published. When generalizing about your strong sales skills, describe how you sold more t-shirts than anyone on your softball team had ever sold. Remember, however, that during the interview, you may want to bring up an achievement you hadn't considered as one of your examples, simply because it would make the strongest answer to a question.

of 222

A prospective employer's impression of you will be considerably enhanced if a genuine air of enthusiasm accompanies your responses. If you are competing against a group of candidates who all have little or no direct experience in the field, enthusiasm might be the deciding factor. If you are not enthusiastic about a position, it will be difficult to feign interest in the interview. If you are sincerely enthusiastic, don't be afraid to communicate it.

of 222

If you are puzzled about the qualities and characteristics an employer seeks, put yourself in his or her shoes for a moment and imagine what kind of person they would like to hire. When reviewing your resume and thinking about your past, focus on stories that demonstrate flexibility, adaptability, creativity, initiative, leadership, and responsibility. These are general traits that most employers seek in the people they hire. You will also want to give examples that show progress, growth, and achievement.Feel free to take time to think before you answer, particularly when asked a thoughtful question. Five or ten seconds may seem like an eternity, but it is perfectly acceptable to take that time before beginning to speak. In fact, taking a few moments is preferable to beginning an aimless answer or blurting out something you will later wish you hadn't said. If you are unsure about the meaning of a question, repeat it aloud or ask a clarifying question.You may have to say "I don't know" in an interview, if you don't have the information requested at hand or if you simply don't know the answer to a question. If it is appropriate, offer to find out and get back to the interviewer later in the day or early the next day. Otherwise, be honest; some questions are designed to stump you, and it is riskier to make up an answer than to tell the truth.If you feel that you have made a mistake, or said something you wish you hadn't, you can address it directly. You may say something such as, " I would like to rephrase my answer to the previous question..." This may be particularly important if you are so disturbed by what you said that you do not think you will be able to give focused answers to the remaining questions.If you are being interviewed by more than one person, be sure to address all of the people in the room when you are answering questions. Even if one person is doing most of the talking, or if interviewers are alternating questions, it is polite and professional to maintain eye contact with each person.Communicating information about yourself is your responsibility. It is not up to the interviewer to drag it out of you. The interviewer will often signal the end of the interview by asking if you have any questions. If you feel you haven't discussed some key points, take the initiative and say, "Before I ask my first question, there are a couple of points I would like to mention."If you have prepared for your interview, there is only a slight chance that you will be completely surprised by a question posed to you. Of course, the possibility exists, and some people may indeed try to shock you, but those experiences are few and far between. If that happens, try to remain calm and poised; it may just be a test of your composure.It is natural to feel nervous before an interview. Your goal is to eliminate unnecessary nervousness by being well prepared. A good night's sleep, a healthy breakfast, and plenty of travel time can also have a soothing effect on your nerves. Remember, the ideal is to be comfortable with the unfolding of the process. If you can truly enjoy the interview, you will communicate self-assurance and positive energy.

Interviews During a MealIt is rare that a first interview will take place during a meal; more commonly second interviews could involve lunch or dinner (but not always). In any case, if you are having a discussion in an office which then continues over a meal, remember that you are being "interviewed" in both settings. What you say and do will be under review until you say goodbye.A few guidelines will help to make the meal less stressful. If you have questions about table manners, brush up with an etiquette book. Order something that is easy to eat-stay away from items such as shish-kebab, french onion soup, and spaghetti or linguine. Beware of finger food. You will want to be able to eat small bites of your food without dropping or spilling anything.Follow the lead of your host(s) regarding which courses and generally which items to order. You may want to ask, "What do you recommend here? " so that you will have an idea of what they are likely to order. Order items within the same price range or lower, and never order the most expensive item on the menu. If others are ordering an appetizer and an entrée, you should do the same. If no one orders dessert, you should refrain.

of 222

Ninety-nine percent of the time it is unwise to drink alcohol in an interview setting. If you are at a group dinner or a cocktail reception where wine is served and your host(s) are having a glass, you may want to have a glass to be sociable, but don't drink all of it. Even a small amount of alcohol can impair your judgment. Be prepared to ask a few questions during the meal, or you may end up with a full plate of food when others are ready for coffee. A meal may be a good time to ask your interviewer(s) about his or her career path(s). Whatever happens, remember what your parents told you about never talking with your mouth full!

Follow-UpBefore leaving an interview you should be clear as to the next step. Your interviewer will usually tell you when you can expect to hear from them. If he or she says nothing, you may ask, "How should we proceed from here?" or "When might I expect to hear from you?" As soon as possible, take notes about what happened. If you are going to another interview in the same day, this is particularly important, because you don't want to confuse any details. This information will become crucial if you are invited back for a second interview. Be sure to note what you learned about the company or the field, impressions of the people with whom you met, what you would like to find out more about, your responsibilities as far as any follow-up call, and when you can expect to hear from them. If you did not receive business cards from the people you met (or see their names on a diploma on the wall), you may call the company directly when you get home and ask the receptionist for the correct spellings of their names and titles.As always, writing a prompt thank-you note is a must. The note can be brief and should not exceed one page. Your correspondence will serve to accomplish the following: you can express your appreciation, reconfirm your interest in the job, underline how you think your background and skills would fulfill the responsibilities of the position, and demonstrate that you listened carefully.

of 222

Table of Contents

1.Overview p. 2



4.Cases p. 31




of 222

Questions Types

Behavioral or Situational Questions: In order to hear more than generalities from a candidate, interviewers may ask questions about specific experiences from your past. Since research has indicated that the interview is not always the most effective means of selection, more and more companies are using this method. It assumes that past performance is a predictor of future behavior, Therefore, questions are targeted to measure your potential in several critical areas,such as leadership, problem solving, and decision-making, by asking you to cite specific examples of your past performance in each of the designated areas. This has also been referred as the STAR method. Situation (describe a problem, decision, project, etc.)

Task (what were the major tasks involved?)

Action (what did you do?)

Result (what were the outcomes of your actions?)

Responses to these types of questions must be prepared ahead of time; think about various situations from work, classes or activities. Do not use examples from your personal life. Examples: Tell me about a time when you demonstrated initiative. Describe an example of your leadership ability. Tell me about an experience that you have had working on a team when the group could not proceed due to an interpersonal conflict-how did you respond and what role did you play on the team? Interviewers will assume that your answers to these questions will reveal interesting information about you and may be reliable predictors of your behavior in future situations. Role Play Questions: Some interviewers like to ask you to role play, posing a question such as "Imagine that you were the Director of Marketing and the CEO presented the following problem to you, how would you handle it?" The variations are endless. Remember to think for a moment or two before you begin to answer. Industry-specific Questions: Even for entry-level positions, some interviewers will want to get a sense of how much you know about the industry. For example, they might ask a question like, "Can you explain the difference between an investment bank and a commercial bank?" Current Events Questions: Sometimes in an effort to be conversational or to actually gain information about your political views, an interviewer will ask for your opinion on an upcoming election or a current event of particular interest. Be wary of expressing strong political opinions when you don't know about the political culture of the organization or the orientation of the person interviewing you. It is best to be brief and to say something nonpartisan. Of course, if you are interviewing for a political position, for example with the Democratic or Republican National Committees, they will certainly want to confirm that your views are in line with those of their party. In that case, you may well have an in-depth political discussion. Illegal Questions: Most employers know that it is illegal to ask about age, ethnic background, national origin, marital status, family planning, or sexual, religious, or political preference. Try to think about why the question was asked and respond directly to that concern without answering the question.For example, if you are asked if you plan to marry or how many children you plan to have, you may choose to answer, "If you are concerned about my ability to travel, I can assure you that my family responsibilities will not interfere with my ability to do the traveling that is necessary for this position."If you think that your answer will help you, you may choose to answer the question directly. You should take the incident into account when evaluating the organization and also let an OCS counselor know about it.

of 222

Case questions: Generally asked by consulting companies, case questions will be discussed in detail in the final section of this handout.

of 222

Don't Commit One Of The Worst Interview Sins

One of the worst "sins" an interviewee can commit is to speak in generalities rather than specifics. It is not enough to say, "I'm a very goal-oriented person." You have to back it up with specifics. For example: "I'm a very goal oriented person. In fact, I regularly update a list of personal and business goals with specific time frames. Since I started keeping this goal list three years ago, I've successfully reached or surpassed over 95% of these goals. I'm confident that the other 5% are also within reach in the coming year."

If you are prone to using generalities, a sharp interviewer will usually follow with the behavioral question "Can you give me a specific example?" So beware! In fact, a favorite dual interview question of mine is: "Do you consider yourself to be goal-oriented?" (which to date has been answered 100% of the time with "Yes"), followed by: "Can you give me a specific example?" It's amazing how many people could not answer the second question or (worse yet) attempted to snow their way past it. The best answers came from those who didn't even need the prompting of my second question, but gave specifics in response to my initial question. That is what a good interviewer will be looking for.

An important aspect of being specific is to use the quantitative approach. Don't just say, "I increased productivity." Instead use, "I increased staff meeting productivity 25% in one year within my department by implementing a video teleconferencing system for participants at our other location, thereby reducing unnecessary travel time. And as a by-product of this focus on the needs of our employees, meeting attendance is up over 10%. In fact, the teleconferencing system was showcased in the August newsletter. Let me show you a copy."

of 222

Frequently Asked Questions

Some questions may seem rather simple on the surface--such as "Tell me about yourself"--but these questions can have a variety of answers. The more open-ended the question, the wider the variation in the answers. Once you have become practiced in your interviewing skills, you will find that you can use almost any question as a launching pad for a particular topic or compelling story.Others are "classic" interview questions, such as, "What is your greatest weakness?" Questions which most people answer inappropriately. In this case, the standard textbook answer for the "greatest weakness" question is to give a veiled positive--"I work too much. I just work and work and work"--which ends up sending the wrong message. Either you are lying or, worse yet, you are telling the truth, in which case you define working too much as a weakness and really don't want to work much at all. Think about it. The following answers are provided to give you a new perspective on how to answer tough interview questions. They are not there for you to lift from the page and insert into your next interview. They are there for you to use as the basic structure for formulating your own answers. While the specifics of each reply may not apply to you, try to follow the basic structure of the answer from the perspective of the interviewer. Answer the questions behaviorally, with specific examples that show clear evidence backs up what you are saying about yourself. Always provide information that shows you want to become the very best _____ for the company and that you have specifically prepared yourself to become exactly that. They want to be sold. They are waiting to be sold. Don't disappoint them!

Tell me about yourself. Tell us about your resume

This is a great opportunity to cell yourself Start with "I'm good at what I do " relate specific accomplishments and abilities to the company's needs How can you contribute to their success?Keep your answer to one or two minutes; don't ramble. Use your resume summary as a base to start.My background to date has been centered around preparing myself to become the very best _____ I can become. Let me tell you specifically how I've prepared myself ...

What are your major strengths?

"Team player with strong people skills "Creative problem solver" "Proven dependability-- it gets done " "I take my job and career very seriously. Give examples.

What is your greatest weakness?

I would say my greatest weakness has been my lack of proper planning in the past. I would overcommit myself with too many variant tasks, then not be able to fully accomplish each as I would like. However, since I've come to recognize that weakness, I've taken steps to correct it.For example, I now carry a planning calendar in my pocket so that I can plan all of my appointments and "to do" items. Here, let me show you how I have this week planned out ...Try not to cite personal characteristics as weaknesses, but be ready to have one if the interviewer presses. Turn a negative into a positive answer: "I am sometimes intent on completing an assignment and get too deeply involved when we are late."

What are some of your biases or hang-ups?

of 222

"People who don't take there work seriously and waste my time. I am biased in favor of organizations that challenge employees and encourage a team approach to problem solving.

of 222

What is the nicest thing you have ever done in your life?

If you can’t think of anything, go do something nice! Offer to volunteer in a "Big Brother/sisters program" or donate some blood. Demonstrate a "big heart" and you'll have a competitive edge.

What was the toughest decision you ever had to make.

Think of a work-related decision that could have negatively affected other people. Describe how you evaluated the options and developed the best solution while minimizing employee concerns.

What has been your biggest disappointment.

"Nothing major, mostly temporary setbacks " Describe a work-related situation where your expectations were not met. How did you overcome the problem and what did it teach you?

Tell me about a time when you cut your foot it your mouth.

"A friend once overheard me talking about his surprise party I felt terrible ad as a result. I am now much more careful about what I say I am especially cautious with work related issues "

What have you learned from your mistakes?

"That I can always learn and improve. I enjoy new challenges but realize that they include risk. My mistakes have taught me valuable planning and problem solving skills.'' Give examples.

What are the biggest pressures in your present job?

Describe your constant efforts to increase efficiency and productivity while maintaining quality and customer satisfaction. This is challenging and can be stressful at times."

What areas of your job do you most dislike?

"I like most things about my job and have no major complaints. I feel that I make a valued contribution and wish everyone did.I do get annoyed with employees who complain or don’t work hard."

Why are you leaving your present job?

Do not discuss negative issues, no matter how relevant. "I’d like to stay, but feel that I’ve outgrown the position. I’m looking for new challenges and better opportunity for growth."

What is your idea of success?

"I measure success in terms of job satisfaction and happiness. I feel I’m successful we I’m valued as an employee and when I’m frequently challenged. I thrive on day-to-day successes."

What major trends do you see in the future for our industry?

Always stay abreast of industry trends by reading newspapers, trade magazines. etc. Be prepared to describe three positive trends and their potential impact on the future of the industry.

of 222

Why do you want to work here?

Research everything about this company starting with a copy of their annual report. Discuss what you like about their products or services. Praise their reputation, performance record and quality. Don't talk about what you want; first, talk about their needs: You would like to be part of a specific company project; you would like to solve a company problem; you can make a definite contribution to specific company goals.

If hired, how would you benefit the organization?

Knowledge of the organization will help you here. What problems can you solve? Discuss people skills, efficiency productivity, and unique abilities. Give specific examples of previous successes.

How long would it take you to make a contribution to our company?

"It will take me a couple of weeks to settle-in and learn my way around. After that, I’ll take the initiative to prove my worth by offering my skills and abilities where they can be useful." Not long at all -- you expect only a brief period of adjustment to the learning curve.

If hired, how long will you work here?

Don't infer that you would never leave. "I would stay as long we both feel I'm contributing, achieving, growing, etc. I take my job and career very seriously and hope to be a long-term asset.

How sensitive are you to criticism?

"No one like blank criticism. I encourage constructive criticism because it helps me to learn and improve. By learning from my mistakes, I became a more skilled and valuable employee. Describe a situation where your supervisor criticized your idea. Describe as idea that seemed good at the time. Emphasize how well you handled the criticism and worked with your supervisor to implement a variation of the idea. How did it benefit the company?

What motivates you?

"I thrive from daily challenges and from the satisfaction of performing well. I particularly enjoy being part of a productive team and contributing to the overall success of the company."

What do you know about our company?

Do your homework before the interview! Spend some time online or at the library researching the company. Find out as much as you can, including products, size, income, reputation, image, management talent, people, skills, history and philosophy. Project an informed interest; let the interviewer tell you about the company.

What about the job offered do you find the most attractive? Least attractive?

List three or more attractive factors and only one minor unattractive factor.

of 222

Why should we hire you?

Because of your knowledge, experience, abilities and skills. Relate past experiences that show you've had success in solving previous employer problem(s) that may be similar to those of the prospective employer.Because I sincerely believe that I'm the best person for the job. I realize that there are many other college students who have the ability to do this job. I also have that ability. But I also bring an additional quality that makes me the very best person for the job--my attitude for excellence. Not just giving lip service to excellence, but putting every part of myself into achieving it. In _____ and _____ I have consistently reached for becoming the very best I can become by doing the following: ...

What do you look for in a job?

An opportunity to use your skills, to perform and be recognized.

Please give me your definition of a .... (the position for which you are being interviewed).

Keep it brief -- give an actions- and results-oriented definition.

What is your long-range objective? Where do you want to be 10 or 15 years from now?

Although it's certainly difficult to predict things far into the future, I know what direction I want to develop toward. Within five years, I would like to become the very best _____ your company has. In fact, my personal career mission statement is to become a world-class _____ in the _____ industry. I will work toward becoming the expert that others rely upon. And in doing so, I feel I will be fully prepared to take on any greater responsibilities that might be presented in the long term.

How has your education prepared you for your career?

As you will note on my résumé, I've taken not only the required core classes in the _____ field, I've also gone above and beyond. I've taken every class the college has to offer in the field and also completed an independent study project specifically in this area. But it's not just taking the classes to gain academic knowledge--I've taken each class, both inside and outside of my major, with this profession in mind. So when we're studying _____ in _____, I've viewed it from the perspective of _____. In addition, I've always tried to keep a practical view of how the information would apply to my job. Not just theory, but how it would actually apply. My capstone course project in my final semester involved developing a real-world model of _____, which is very similar to what might be used within your company. Let me tell you more about it ...

Are you a team player?

Very much so. In fact, I've had opportunities in both athletics and academics to develop my skills as a team player. I was involved in _____ at the intramural level, including leading my team in assists during the past year--I always try to help others achieve their best. In academics, I've worked on several team projects, serving as both a member and team leader. I've seen the value of working together as a team to achieve a greater goal than any one of us could have achieved individually. As an example ...

of 222

Have you ever had a conflict with a boss or professor? How was it resolved?

Yes, I have had conflicts in the past. Never major ones, but certainly there have been situations where there was a disagreement that needed to be resolved. I've found that when conflict occurs, it's because of a failure to see both sides of the situation. Therefore, I ask the other person to give me their perspective and at the same time ask that they allow me to fully explain my perspective. At that point, I would work with the person to find out if a compromise could be reached. If not, I would submit to their decision because they are my superior. In the end, you have to be willing to submit yourself to the directives of your superior, whether you're in full agreement or not. An example of this was when ...

If I were to ask your professors to describe you, what would they say?

I believe they would say I'm a very energetic person, that I put my mind to the task at hand and see to it that it's accomplished. They would say that if they ever had something that needed to be done, I was the person who they could always depend on to see that it was accomplished. They would say that I always took a keen interest in the subjects I was studying and always sought ways to apply the knowledge in real world settings. Am I just guessing that they would say these things? No, in fact, I'm quite certain they would say those things because I have with me several letters of recommendation from my professors, and those are their very words. Let me show you ...

If you had to live your life over again, what would you change?

I realize that it can be very easy to continually look back and wish that things had been different in the past. But I also realize that things in the past cannot be changed, that only things in the future can be changed. That's why I continually strive to improve myself each and every day and that's why I'm working hard to continually increase my knowledge in the _____ field. That's also the reason why I want to become the very best _____ your company has ever had. To make positive change. And all of that is still in the future. So in answer to your question, there isn't anything in my past that I would change. I look only to the future to make changes in my life.

Experience and Management

You may be overqualified for the position we have to offer.

Strong companies need strong people. A growing, energetic company is rarely unable to use its people talents. Emphasize your interest in a long-term association, pointing out that the employer will get a faster return on investment because you have more experience than required.

What is your management style?

(If you've never thought about this, it's high time you did.) "Open-door management" is best ... And you get the job done on time or inform your management.

Are you a good manager? Give an example. Why do you feel you have top managerial potential?

Keep your answer achievement- and task-oriented; emphasize management skills -- planning, organizing, controlling, interpersonal, etc.

What qualities do you feel a successful manager should have?

of 222

The key quality should be leadership--the ability to be the visionary for the people who are working under them. The person who can set the course and direction for subordinates. A manager should also be a positive role model for others to follow. The highest calling of a true leader is inspiring others to reach the highest of their abilities. I'd like to tell you about a person who I consider to be a true leader ...

What do you look for when you hire people?

Skills, initiative, adaptability.

Did you ever fire anyone? If so, what were the reasons and how did you handle it?

You have had experience with this and it worked out well.

What do you see as the most difficult task in being a manager?

Getting things planned and done on time within the budget.

What do your subordinates think of you?

Be honest and positive ... they can check your responses easily.

What is your biggest weakness as a manager?

Be honest and end on a positive note, e.g. "I don't enjoy reprimanding people, so I try to begin with something positive first."

Describe the ideal supervisor.

"The ideal supervisor is a firm, but fair, leader who is goal-oriented and has high expectations. (he/she) provides guidance in meeting goals, yet allows me to work independently." Role-model.

In what areas do you feel that your supervisor could do better.

"I’m fortunate to have a great supervisory. I attribute much of what I've learned and accomplished to (his/her) leadership abilities. I would like to receive feedback more frequently."

What is the worst thing your supervisor could say about you?

The fear of legal liability may affect your supervisor’s response, so don’t assume the worst. If you are unsure, ask. You could say "I sometimes set goals to high" or "I get too involved in work"

Your Career Goals

If you could start your career again, what would you do differently?

Nothing ... I am happy today, so I don't want to change my past.

What career options do you have at the moment?

of 222

"I see three areas of interest..." Relate those to the position and industry. How would you describe the essence of success? According to your definition of success, how successful have you been so far?

Think carefully about your answer and relate it to your career accomplishments.

Your Work Habits and Style

If I spoke with your previous boss, what would he say are your greatest strengths and weaknesses?

Emphasize skills -- don't be overly negative about your weaknesses; it's always safer to identify a lack of a skill as an area for improvement rather than a shortcoming.

Can you work under pressures, deadlines, etc.?

Yes, it's a way of life in business.

How have you changed the nature of your job?

Improved it ... of course.

Do you prefer staff or line work? Why?

Depends on the job and its challenges.

In your present position, what problems have you identified that had previously been overlooked?

Keep it brief and don't brag.

Don't you feel you might be better off in a different size company? Different type company?

Depends on the job -- elaborate slightly.

How do you resolve conflict on a project team?

First you discuss the issues privately.

What was the most difficult decision you ever had to make?

Try to relate your response to the prospective employment situation.

Salary Questions

How much are you looking for?

Answer with a question, i.e., "What is the salary range for similar jobs in your company?" If they don't answer, then give a range of what you understand you are worth in the marketplace.

of 222

How much do you expect, if we offer this position to you?

Be careful; the market value of the job may be the key answer, e.g., "My understanding is that a job like the one you're describing may be in the range of $______."

What kind of salary are you worth?

Have a specific figure in mind ... don't be hesitant.

Job Search Questions

Why haven't you found a new position before now?

Finding a job is easy; finding the right job is more difficult. (You are being "selective.")

Had you thought of leaving your present position before? If yes, what do you think held you there?

Challenge, but it's gone now.

What do you think of your boss?

Be as positive as you can.

Would you describe a situation in which your work was criticized?

Be as positive as you can.

What other types of jobs or companies are you considering?

Keep your answer related to this company's field.

Personality Questions

Do you generally speak to people before they speak to you?

Depends on the circumstances.

What was the last book you read? Movie you saw? Sporting event you attended?

Talk about books, sports or films to show that you have balance in your life.

What is the toughest part of a job for you?

Be honest; remember, not everyone can do everything.

of 222

Are you creative?

Yes. Give examples

How would you describe your own personality?

Balanced.

It is the 15th Century. How do convince the Pope that the Earth is round?

If I gave you an elephant, where would you hide it?

What do you think of Chiat / Day's concept and application of a virtual office?

How much RAM does a PC need to run Windows95?

If it rained music, what would grow?

Describe your best friend and what he or she does for a living. In what ways are you similar or different from your best friend?Are you a happy person? Should Prozac be added to the water supply? You have a wealthy aunt who weighs 300 pounds. Tell me how you would redesign her toilet.What are your short-range objectives? What is your philosophy of management? Do you prefer staff or line work? Why? What were your five biggest accomplishments in your present (or last) job? What were your five biggest accomplishments in your career? Why didn't you do better in college? What new goals or objectives have you established recently? Why? What features of your previous jobs have you liked? What features of your previous jobs have you disliked? Would you describe a few situations in which your work was criticized? Would you object to working for a woman? How would you evaluate your present firm? Will you be out to take your boss's job? How would you describe your personality? What are your career objectives? What factors did you consider in making those objectives? Why did you choose to go into this field? What are your most significant work/non-work achievements? Are your grades a good indicator of your academic ability? If you do not get into consulting what will you do? Describe a problem you have encountered in a work environment and how you have handled it Give me an example of where "you dropped the ball" Give me an example of where you did something unpopular and had to stand up for yourself at work Describe a situation where you had to present orally to an important group of people

of 222

How do your MBA classmates describe you?Describe a situation where you had to make a very difficult decision.Why are you getting your MBA?What are three misperceptions that people have about you?Do you really know what kind of sacrifices you will need to make in your personal life for a career in consulting?Why did you choose to attend Wharton? How did you choose your major?What classes have you enjoyed the most and why? The least?If you could go back and change any part of your MBA experience, what would it be? Why?What changes would you make in your college or university? Why?What have you learned from your participation in extra-curricular activities?In what kind of work environment are you most comfortable?What is it that you do really well?If you were hiring for this position, what qualities would you look for in a candidate?Describe your ideal job.What criteria are you using to evaluate the company for which you hope to work?How do you feel about traveling/working overtime/spending weekends in the office?What factors are most important to you in a job?What do you really want to do in life?What motivates you to put forth your greatest effort?Do you prefer to work in a group or alone?What has inspired you the most in your life?How do you spend your spare time?What percentage of college expenses did you earn? How?Do you prefer any specific geographic location? Why?Which of your college years was most difficult? Why?Tell me about your (management/educational) philosophy.What have you done that shows initiative and willingness to work?What frustrates you?Describe yourself with one word.Have you ever had any difficulty getting along with fellow students or faculty?What do you think it takes to be successful in a company like ours?In what part-time or summer jobs have you been most interested and why?What major problem have you encountered and how did you deal with it?How have you changed since you started your MBA?Describe the course that has had the greatest impact on your thinking. How did you find your summer jobs? Describe the job or the activity which has had the greatest impact on your career goals.

of 222

If you could make a major policy change at Wharton, what would it be? What interests/impresses you about this company? With what kind of people do you like to work? What kinds of tasks and responsibilities motivate you the most? Have you ever failed at anything? What has been your greatest challenge? If you had six months ahead with no obligations and no financial constraints, what would you do? If you could invite anyone you would like to a dinner party (famous or historical figures, dead or alive), which ten people would you invite?If you could trade places with someone for a week, who would it be? What is your favorite book/movie/song/painting-or author/actor/singer/artist?Which magazines/newspapers do you read regularly? Which books have you read recently? What would you like me to know about you that is not on your resume? What would you like your lasting impression to be? Do you have a final statement? Do you have any questions you'd like to ask of me? What does "failure" mean to you?What if I told you that you'd work very hard, but recognition of your contributions would be nil? In the past year, what have you been dissatisfied about in your performance? What can you tell me about your past bosses? Which is more important to you: money or the type of job? What have you learned from your activities? What two attributes are most important in your job? What major problem have you encountered and how did you deal with it? Who do you admire? Why? What do you get passionate about? Have you ever managed a conflict? How? What concerns you about our company?Give me an example of a time when you faced a conflict and how you resolved it. Tell me about a project you started/finished on your own. Tell me about a problem you uncovered. Do you find problem-solving rewarding? What advice would you give to a public speaker? Describe a situation where you had to talk to an individual or group who was causing a problem. Tell me if you have ever had difficulty getting others to accept your ideas.

of 222

Your Questions for the Interviewer

In traditional employment interviews, once the interviewer has asked all their questions, they will ask if you have any questions for them. You would prefer to be able to ask questions as early in the interview as possible to get some feeling for the employer's situation and needs. Unfortunately, many interviewers -- especially those from HR -- will tell you right away that they aren't interested in hearing any of your questions until they've finished theirs. Trained interviewers invariably use some form of "structured interview". They have been taught that skilled interviewers come in with a prepared list of questions and don't allow the interviewee to "take control" by asking their own questions. I can guarantee that you're not going to convince them to abandon this approach, so just accept it and work with it. Unlike many other interview guide writers, I don't recommend that you try to take over the interview by answering questions with questions or using similarly irritating techniques. You should try to gauge your interviewer's receptiveness to adopt a more give-and-take approach, and have the flexibility to respond appropriately. If they're open to questions, by all means go ahead. If they want you to wait until they've finished, comply with their wishes and be patient ... you'll get your turn. If you've arranged the interview with a company that doesn't have an advertised opening, the interview will be less structured and more balanced between their questions and yours. You can't walk in expecting the interviewer to have planned out the first 85 percent of the interview.You must be prepared to ask questions to reveal their problems and position yourself as the answer to those problems. If you don't have any questions, the interviewer will likely be left with one or more of these impressions of you: You're not really interested in the position or the organization You're so lazy you couldn't be bothered to put any thought into it You're so desperate you'll go anywhereNot the image you're trying to project in any case. Despite this, very few people go into an employment interview prepared to ask questions. There's a reason employers usually leave so little time for questions at the end. They know they don't need any more than a couple minutes to answer the dull, perfunctory queries that interviewees routinely ask. Most interview books go on at length describing techniques and strategies for "getting control" of the interview from the interviewer (books aimed at interviewers talk about maintaining control -- both sides are trained for a confrontational atmosphere). And now here the interviewee is being handed "control" and the best they can come up with is something like "What would my hours be?" Not that there's anything wrong with wanting to know the hours you'd be working! It's often a perfectly acceptable question. But if this is all you ask, you've missed a wide-open opportunity to reinforce your credibility and help the employer see the value that you offer. There are three ways to handle this part of the interview:

OPTION 1: Wing itThe most common approach is to go in unprepared and scramble to come up with something when the employer asks you if you have any questions. The result is almost always a couple of inane questions that do nothing to tap into the employer's aspirations or address their concerns. Often, you won't even really care about the answer, or the answer will be something you already know.

of 222

This is the approach you want to avoid. These questions don't help you in any way except to fill an otherwise embarrassing silence. They save you from saying "No, I can't think of anything right now" and looking like a complete dullard, but that's it. A blown opportunity. OPTION 2: Show the interviewer that you've thought about the organization and the work you'd be doing for themThe second way to handle the "Do you have any questions for me?" stage is to prepare a few questions to get some additional information about the company and the position. They may just be simple fact-finding questions, but the areas you address will reveal what your priorities and values are. Done properly, it's a way of communicating to the employer that you understand what's important for success in the position and how you can help the organization achieve its objectives. Anyone can do this. It's simple. You can write the questions down and refer to your notes during the interview. We'll talk about some specific questions you can ask in just a minute. The only excuse for not preparing some questions for the interview is abject laziness. Fortunately for you, this disease inflicts many of the people you'll be going up against.

OPTION 3: Probe the employer's objectives, expectations and desiresThe third approach requires a little more work, but it is the most effective. Back in Chapter 1 we talked about how the employment interview is different from an effective sales call because, according to tradition, the employer asks the questions and you do the talking. Now's your chance to turn it around. All through the interview you've been trying to excite the employer's hopes -- to show them how you can help them to achieve their objectives and solve their problems. In most cases, you've done this without ever being told what those hopes, objectives, and problems are. Now you can explore the employer's goals, ideas, concerns, feelings, and situation directly. This is how you can really show your interest in the organization and in the work you'd be doing for them. Instead of using some hackneyed interview book technique -- a superficial reference to a story you read in the paper, for example -- you can use questions to demonstrate to the employer that you're interested in their needs, concerns, and hopes. If you're meeting with an organization that does not have an announced opening, you should go into the interview prepared to begin with these kind of exploratory questions. Your goal is to begin a dialogue -- something that is missing from most employment interviews -- and to uncover the employer's needs, problems, and desires so that you can address how you would be able to help them.

a) Exploring the current situation and previous experiencesTony Alessandra, Phil Wexler, and Rick Barrera have developed an approach to exploring a prospective customer's needs (described in their book Non-Manipulative Selling and in Alessandra & Barrera's subsequent book Collaborative Selling), most of which can be applied directly to an employment interview. The first step is to explore the employer's current situation. Most of the general information questions you might ask (including the "option 2" questions) can be classified as relating to the employer's current situation. These can include questions about the employer's customers, competitors, or management style, for example. We'll come back to these kind of questions in just a moment (see "General questions to ask the interviewer" below). In addition to basic fact-finding questions, however, you may also want to find out more about how the employer is currently handling the specific problems that you see yourself being able to help them solve. To adopt a self-centred view for a minute, you can think of these questions as

of 222

"How are they getting by without me?" (I'm sure I don't need to point out that you would never ask such a pompous question directly). If you believe that the employer would benefit by hiring you, it follows that there is something about their current situation -- or an impending situation -- that you can improve. Since you probably know relatively little about their current situation, this is your chance to ask.

Asking about their current situation allows you to: Confirm your suspicions about how you'd be able to make a contribution. Uncover any inaccurate beliefs you may have. Probe for any other opportunities that you hadn't thought of previously. Find out how the employer feels about their situation. Get new information on the organization.Examples (NOTE: All example questions in this chapter need to be customized to suit your situation and even then may not be applicable. You'll have to come up with your questions yourself. I can only help show you the general approach that you can take): How are you handling [specific situations/problems] now? How has that been going? How do you feel about the results you've been getting? So until now you've just had one sales rep and now you want to add two more, is that right? Along with questions about the current situation, you may also want to ask about their previous experiences with people who do the kind of work that you do. If they've had bad experiences in the past, the employer will be even more cautious about hiring someone now. Good experiences will shape the employer's expectations of what someone who will succeed in the position is like. They may be trying to duplicate the experience, skills, and personality of someone who has succeeded in the kind of work you're looking to do. Examples: What has been your experience with people who have done this kind of work before? What

have you liked about the way this work has been done? What would you like to see done differently?

Who has been doing this work up until now? What happened to them? How long were they in this position? Were they successful?

b) Exploring the employer's desired situationFor the first part of the interview, you've had to go on your assumptions about what the employer's desired situation is -- on the benefits that they're hoping to receive . Now you have the opportunity to ask them about their hopes for how the person they're hiring will make a difference to their organization. Get involved in the conversation here. You want this to be a two-way discussion, showing that you're in tune with the employer's aspirations and that you have something to contribute. As we've said before, you want to tap into their desires and expectations. Begin a dialogue and show that you can take an active role in helping them achieve their objectives. Examples: What would you like to see happening in the future? Where do you see this organization

going from here? Would you like to see any changes in the next year?

of 222

What are your objectives for this company / office / department? What are some of the challenges you see this organization facing in the next year?

of 222

c) Success criteria and expectationsThis overlaps with questions about the desired situation. These questions relate to the specific benefits that the interviewer is expecting the person they hire to deliver, or at least help to bring about. Again, you should try to work with the interviewer here. Don't be afraid to provide your comments or suggestions to show that you also have expectations of yourself and are willing to be judged in accordance with those expectations. Examples: How do you expect the person in this position will benefit your organization? What objectives

do you expect to achieve with this person's help? Six months from now (or a year, or 3 months), what do want the person in this position to

have achieved? Six months from now, when you're evaluating how successful the person you select has

been in this position, what factors will you consider?

d) Questions about the decision processThere are at least two questions you may want to ask about the hiring process itself. If your interview is for an announced opening, you should find out how long they expect the decision process to take. You want to get a commitment from the employer that they will notify you by a specific date what their decision is. You may also want to find out if the person you've been talking to is the one who will make the hiring decision or if they're just screeners for the real hiring authority. Examples: When can I expect to hear back from you? What is your decision-making process? Is anyone else involved in the decision? Will you

make the decision now, or do you expect that you will want a second meeting? When would you want me to begin?

e) The employer's decision criteriaOf course you'd love to know exactly what the employer is looking for, but there is a danger in coming right out and asking too soon. Once you've been told their decision criteria, you can easily seem merely to be parroting their answer when you address those areas -- particularly if you haven't brought them up in the interview up until now. For example, if you ask the interviewer about their decision criteria and they mention, say, customer service, it's going to be hard for you to score any points just by talking about your customer service focus. It now seems prompted -- no matter how genuine your service skills and beliefs may be. On the other hand, had you talked about your strong beliefs in service and building customer commitment before the interviewer had told you that this was something they're looking for, you might have made a strong impression just by bringing up the topic yourself. It would have shown the interviewer your awareness and insight into skills that are important for success. I suggest that you first ask about specific areas that you suspect will be included in the decision criteria and for which you have some examples of your related abilities ready.

of 222

Examples: How much importance do you put on [specific skill, e.g. customer service skills] in choosing

someone for this position? What are some of the qualities or abilities you're looking for in the person you hire for this

position? What other traits or abilities do you feel are important for success in this kind of work?

f) Competitive standing and interviewer concernsYou may feel uncomfortable asking these questions, but it can only help. In Chapter 13 we talked about how, unless you're being actively recruited, the odds are still in favour of the interviewer deciding that you're not the one they want to offer the position to. This may be your only chance to turn that around. Examples: How many other people are you interviewing for this position? At the moment, how would you say I stack up against the others? What concerns do you have that I might not be able to achieve the objectives you've set for

this position? What have you liked in others that I might not be able to match? Any general strengths or weaknesses to the group as a whole?

General questions to ask the interviewerThe questions you'll want to ask to find out more about the company will vary with your strengths and interests -- and with the interviewer's. In general, you'd like to include questions that reveal your awareness of the employer's concerns and that relate to the areas where you feel you may have an advantage over the competition.

Here are some possible questions to get more information about the organization:

What is management style (where you'd be working) / organizational culture? Do you have a mission statement / values statement? What is senior management's vision for this company in the future? How has this company evolved over the last five years? Would you say that this organization is customer-focused? How? Who are the company's primary customers? Are you going aftern any new markets? What customers would I be working with? How do you determine the value customers are receiving from your products or services? What new products / services have you recently introduced to serve your customers? What are you working on now? Who are your competitors? How do they compare to you? How are employee suggestions and innovations received? What would you say are important factors in determining the profit/surplus that this business earns? What principles or beliefs have influenced your management style?

of 222

What training opportunities are available?

You might also consider asking to speak with some of the people you'd be working with, although you may want to leave this request for a second interview or for when they come back to you with an offer. Some people recommend talking about chances for advancement to show that you're motivated to do well. I think that's mistaken. You run a much greater risk of seeming like someone who'll be unsatisfied in the position being discussed. If you work in an area where incentive programs are common, you could ask about what programs the company has in place. Last chance! -- What value do you offer the employer that you haven't discussed yet?The interviewer isn't psychic. Any skills, abilities, or knowledge you possess that could offer value to the employer but that you leave unsaid in the interview can never do anything to help you get the job. The interview's almost over. Speak now or forever hold your peace. Many interviewers will end with a question like "Is there anything else you'd like to tell me?" but not everyone will. You don't have to wait to be invited. If there's something else you think they need to know to make an informed decision, you must tell them ... NOW. You're not doing them or yourself any favours by remaining silent. You have one more chance to bring out any of your key strengths that may differentiate you from the competition. You can ask the employer a question relating to your value-adding strength, and follow up with your evidence that you have something to offer. For example, let's say you're interviewing for a position that requires working with customers, and from your preparation you have some good examples ready of how you can resolve customer complaints or requests for refunds. If you haven't been able to work this into the interview up until that point, you could ask: Since I'd be working closely with customers in this position, I imagine that I'd occasionally deal with a customer who isn't entirely satisfied with the product or service they've received from us. I have some good experience in that area, and I was wondering how you handle these situations when they do come up. Unless the interviewer says something like "No, that never happens" you'll be able to follow up with the example(s) that you have ready of how you've successfully handled these circumstances before or a thoughtful discussion of how you would handle them. You can do this with any important aspect of the job that you've identified as one of your strengths list that hasn't been addressed in the interview -- ask a question about it, and follow up with your evidence that you possess that ability.

Don't ask questions to make the interviewer look bad

While tradition makes it acceptable for interviewers to ask questions that make you squirm, the interviewer will not be pleased if you turn the tables on them. It's pretty simple to come up with some deep, probing questions that the interviewer would probably not be able to answer very well. Some people try to ask these kind of questions to impress the interviewer with how bright and insightful they are. It doesn't work. Instead of being awed by your brilliance, the interviewer will be left thinking you're just another arrogant know-it-all. Of course, you want the employer to think you're bright and insightful, but you don't communicate those traits by trying to speak over their heads. A condescending attitude has never won a job offer. Should you ask about salary if it not been raised by this point?

of 222

There's an old saying in sales that you should never discuss price before establishing value. Until the prospective buyer is convinced that you can provide something they want, the question of price is irrelevant. It can only scare them away. Ideally, you'd love to wait until the employer decides that they must have you before the subject of salary is brought up. You'll never be in a better bargaining position than if you can first get them salivating over the prospect of having you join their team first. Now, it's quite likely that the employer will never be quite that excited by you, no matter how brilliant and skilled you are. But if they're going to choose to give you an offer (the question of salary is irrelevant otherwise) they will come closest to feeling this way once they've had a chance to evaluate what they have to choose from and begin to see you as standing out from the pack. They probably won't reach the "we really want this person" stage until all the interviews are finished. This means that you wouldn't want to bring up salary questions in the initial interview. In fact, you should try not to discuss it until you've received a job offer or have some indication that you're their first choice. If you're going to run up a lot of expenses or be required to devote a considerable amount of time on the selection process, then it might be best to find out quickly if there is at least a possibility of a match. In most situations, though, it is best not to discuss salary until as late in the selection process as possible. This gives you time to present the value you offer to the employer, and lets you gain an understanding of the requirements of the position so you can determine what you consider to be an acceptable salary. In order to make sure that you have a couple of excellent questions to ask, you must prepare more than two! An interviewer may answer some of your questions during the course of the conversation, and you don't want to be caught short. In order to prevent a last-minute "blank," you may want to write out a list of at least five to bring with you to the interview. Be sure to list your top questions first.It sounds obvious, but you should ask questions that you want to know the answers to. Otherwise, your questions may sound canned or someone may feel that you are simply going through the motions.A general guideline to follow is to ask broad questions first and then move to the more specific. For example, ask a question about a new division of the company, or the changing mission of the organization before asking about the specific responsibilities of the open position or the training provided.It is very important to consider who will be answering your questions. You obviously won't want to ask all of the same questions of the CEO and a human resources representative. Think about asking someone higher up in the organization about the group's strategy or future plans or overall mission. If you are talking to someone whose responsibilities are closer to those of the position in question, ask more about a typical day and common challenges.Another general hint for formulating questions is to bring up a current event, piece of proposed legislation, or demographic trend, and ask about the impact on a particular company's strategy, their business in a certain part of the world, or their competitors.It is best not to ask about salary, vacation, and benefits until you are offered the job. There will be time for detailed questions and negotiation later in the process if you receive an offer. Concentrate on asking questions that will help you to learn more about the responsibilities of the position and the culture of the organization. Use the suggestions below to help you brainstorm for your own questions.

Suggested questions:

What are the opportunities for personal growth?

of 222

What is the typical career path for this position? What is a realistic time frame for advancement? How is an employee evaluated and what are the criteria for promotion? What is the retention rate of people in this position? What is the company’s record of employment stability? Can you describe the typical first year assignments? Tell me about your initial and future training programs? What are the challenging aspects of the job? What are the company’s plans for future growth? What industry trends does your company anticipate? What makes your firm different from it’s competitors? What are the company’s strengths and weaknesses? How would you describe your corporation’s personality and management style? Is it company policy to promote from within? Can you describe the work history of the top managers? What are the company’s expectations of new employees? Can you describe the work environment? What are typical characteristics of a successful people in the company? When can I expect to hear back from you?What is the management structure of the company? How would you describe the growth potential of the company? What do you like/dislike about the company?Is there a defined career path?Who would I work for and what level are they? What hours/travel/locations are required? How much supervision would I receive? How structured is the job? Are promotions based on seniority or ability?Does this position lead to a management position? What is the time frame? Is there a training program and, if so, how long does it last? What are the actual job requirements? Who else would I be working with? Individual? Team? Rotation? Is there a required continuing education program? Do promotions require relocation? What are the company’s/department’s future plans? What would a typical day be like?

of 222

What are some of the challenges I might encounter on this job? How many people have held this job in the past 5 years? Why did the previous person leave? What are the biggest challenges facing your company right now? Your department or division?What are your company's strengths and how do you capitalize on them? What are your companies weaknesses and how are you dealing with them? What changes do you anticipate in the industry? What risks will your company face due to industry changes? What are the best opportunities at your firm for new hires? How have you strategically responded to the competition? What legislation is pending that will affect your firm? Where will the major sources of your business be in the next 5 years? How is worker performance measured and reviewed? Do you have a mentor program? How about formal training programs? What is your company's management style? What challenges are facing this company? Do you think your company is reacting to them?Why do people leave? Why have you stayed with the company? Describe my initial assignments? If you hire me, what are the three most pressing issues you need resolved?What might a typical work day in this job be like?What are some typical trainee assignments?How does this position relate to other positions within the organization?What type of career paths do people typically follow within this organization?What kind of supervision will I receive?How will my performance be evaluated?What opportunities exist for continued training?What are the organization's short-range and long-range goals?I was reading about ________ in your organization's literature, and am interested in learning more about it. Can you tell me more?Do your employees participate in any professional associations or conferences?As an employee of this organization, what do you see as some of its outstanding attributes?How would you describe the work environment in your organization?What makes your organization different from your competitors?Who are the people with whom I will be working? May I talk with some of them?In the last five years, how many persons have held this position? Where are they now?Do you expect the person you hire to assume responsibilities in new areas?What might be a typical first assignment?

of 222

What type of immediate and ongoing training can I expect?What do you consider the ideal background for this position?Why do you think this job might be the right spot for me?How successful has the company's business in Latin America been thus far? Can you tell me which new markets the company is currently considering entering? What will be the impact of the new tax law on this business? I'm interested in learning more about the company's new technology that was mentioned in the Wall Street Journal last week. I understand that you have just introduced a new product. How has it been received thus far? How is the marketing department structured? How has the recent restructuring of this organization affected this department? How much interaction do reporters at this newspaper have with one another? How is the working relationship between this office and the governor's office?How are projects obtained in this department? How is project work allocated among the consultants? How many projects does a person work on simultaneously? How did this particular social service program get started? I'm interested to learn more about the history of this small, innovative company. Does this company have many strategic partnerships? What are the potential career paths that might be taken by those who begin as editorial assistants? Can you tell me more about the phases of the six-month training program for new hires?

The One Question To Ask Every InterviewerThe opportunity for you to ask a question often comes only at the end of the interview. In fact, you are typically offered the chance when the interview is over: "Are there any questions that I can answer for you?" However, there is a question you should ask of every interviewer as early as possible during the course of the interview: "Can you tell me about the position and the type of person you are seeking?" Properly positioned, this question can provide you with your single greatest opportunity for understanding more about the job and your ability to fill the role. The answer can show you the specific areas of need which you should address during the course of the interview. So it is important to inject this question into the interview as early as possible. You can do this with an out-take question. As you finish an answer, use it as a lead to your question. Be careful not to use this technique as an attempt to control the interview. You merely need to use this technique to inject this critical question. For example, in answering a "What do you know about our company?" question, you can answer directly with what you know about the company (you have done your research, right?), then state that you do not know as much about the specific position. Turn your answer into the out-take question: "Can you tell me more about the position and the type of person you are seeking?" Find the strategic opportunity to inject this question as early as possible in the process. Then, as appropriate, frame your answers around what they are seeking in the person to fill the position. Stay within practical and ethical bounds in directing your answers, yet keep in mind the perspective of the interviewer and seek to meet their needs for the position. You will be further

of 222

ahead in the interview than if you merely take shots in the dark, hoping for your answers to magically hit the mark.

of 222

Types of questions students might want to ask at the second interview

Further clarification on what might be the initial assignment. What are organizational relationships of this department to the rest of XYZ Corporation? How would you describe the work environment here? How would you describe the professional environment here? What types of performance appraisal would I have? When? When are salary reviews scheduled? Based on what?Performance, experience, cost of living?What are the plans for the future of my potential department and XYZ Corporation? Have you had layoffs or cost-reduction programs recently? What was the problem? Were the employees assisted in finding new jobs? What degree of interdepartmental or interplant contact is there in this job? What are the transfer possibilities? What background and training do the department heads and their assistants have? What functional area has been the major supplier of top management people? From where were the graduates hired during the last two years?What are your policies concerning benefits (vacation, pension, insurance, and so on)? Is there a tuition refund plan? What is covered in relocation reimbursement? How much travel might there be in this job? How long are the typical assignments?

Rating the employerDoes the organization meet its obligation in terms of verbal agreements, travel, and other expenses incurred in the employment procedure? Does the employer seem to operate efficiently and properly, as far as you can judge from correspondence, plant facilities, and personnel? As you talked with the various echelons within the organization during your plant visit and interviewing process, did the people you met represent the kind of persons you would like to work with for five, ten, or twenty years? Does there seem to be a great deal of dynamics within the organization, or do the employees seem to be lethargic and going through the motions? Does the prospective employer seem to have a salary schedule that is competitive? Does the employer have a philosophy of operation that fits with your expectations and life-style? Does the organization seem to be highly structured, or does it seem to pay off on ability and individual progressiveness? Does the organization seem to be fundamentally sound from a financial point of view? Is the working environment one you would enjoy? Is the location geographically right for you? Does the community represent the type of community where you would like to live? Do the job and organization fit your interests and qualifications, and provide potential satisfaction for your expectations and lifestyle?

of 222

Handling Objections and Difficult Questions

Everyone who has gone through the interview process while on a job search has, sooner or later, been confronted by an objection or a difficult question. How you react at that time can spell the difference between success and failure as a prospective candidate. If your immediate response is to become defensive, flustered, or aggressive, you may have just lost out on the best job of your career. If, on the other hand, you remain poised, thoughtful and take control of the situation, you may have come out the winner.The difference in response can mainly occur in how you perceive the role of the interviewer and the nature of the question. If you perceive the interviewer to just be doing his or her job, you are half-way to being in charge of yourself and the situation.When you think about it, the role of the interviewer is to test and verify the information on the resume, validate the appearance and mannerisms noted in the process so far, define the person's style and probe for flaws in all the above. In summary, it is to get to know you as you really are and not be taken in by the courtship of the process which could potentially result in a "bad hire" situation.On the other hand, it is your job to present yourself well -- being the best "you" that you can be so that you are evaluated fairly.In as much as there is no such thing as a perfect candidate for any job, there are bound to be trade-offs on either side of the match equation. Not adding confusion and emotion to those trade-offs is the name of the game as far as the candidate -- you -- are concerned. Therefore, it is your job to screen yourself in where there is a good fit of background and style. The more you can depressurize yourself through preparation, the better you will be able to present yourself. Anticipation of how you will respond to logical questions about your background and preparation and practice of the responses are the keys to being successful.The title is a clue to the fact that there are differences between "objections" and "difficult questions." A clear understanding of the difference is helpful in learning how to handle each one. For our purposes here, we will define an objection as "any statement about your background that appears to be of concern or deficiency to the interviewer -- and that happens to be true." Examples of objections could be as follows:Lack of a college degree or a particular major, advanced degree, etc.Lack of a certificationLack of multiple languagesInsufficient number of years of experience to that which was advertisedHaving only worked for one companyHaving worked for too many companies in too short a time periodNot being from a particular industryNot having worked in that kind of position beforeLack of a particular skill

There are probably as many objections as there are situations and positions and candidates combined. However, you can most likely see that there are some in your background which you can anticipate an interviewer asking about. Now is the time to prepare and practice for them. Waiting to be in the situation and "winging" it is NOT a good idea.

"But," you say, "I can't memorize answers -- it'll sound too canned and rehearsed." If that is the case -- AND you have recorded your answers on tape at least 10 times each, I suggest that you

of 222

at least memorize the bulleted outline for each objection or question so that you are truly prepared and can relax in the situation knowing that you are as ready as you can be to deal with it. Now that you are ready to prepare for the main event, let's talk about how to handle the situation when it arises.

As we indicated above, the first step is to realize what the job of the interviewer is -- and to realize that he/she is just doing a good job by raising the objection. The next step is to think like an interviewer and outline what the possible objections to your background could be. To get help in this area makes sense. One of the things that you should be asking about in your networking or informational interviews is what the possible objections to your background might be. That will give you a head start. You might also run it by a spouse, best friend, colleague, mentor, etc. to see what they could come up with. Armed with this information, ask them how they would answer it. Look for all the logical facts that could support your candidacy in spite of the fact that the objection has stated something about you that is true and that, to this point, doesn't fit with their "ideal person."Now you are ready to handle the moment. The following are some practical tips to assist you:Do not react negatively or show your frustration, anger, disgust, irritation, disappointment, panic, or any of the other things that whip through your mind at the time.Do take a moment to collect your thoughts before you begin. Contrary to popular thought and feeling, no interviewer has keeled over in a faint when the candidate paused to frame a good answer.

Try the following sequence of responses:

1."I appreciate your concern" -- this is just the opposite response that most people attempt. Most people try to immediately argue the person out of their point of view. To do that just intensifies the resistance and you then fight up-hill all the way. Start by agreeing with the person. Your both on the same side. In fact, you can even build it higher by adding, "In fact, if I were you, I'd be wondering the same thing myself and I'm glad that you've brought it up." This honors the point even more and also says that you are not afraid of it.2."As I understand your requirements for this job, you are looking for a person that has A, B, C, etc., is that correct?" Here you have identified and outlined your logical reasons, so far as you could, that will support your position. You have also gotten clarification about the job and its' requirements so that you don't miss anything in your response.3."If I could show you that I can do A,B,C, etc., would that affect how you view my candidacy?" If the answer is "yes," you are then home free. All that you do next is proceed to give the information about your background that fits the outline and ask if he/she is satisfied at the end of it. If the answer is "No," then you must ask the critical question, "What's missing?" If the important aspect of that response is something that you can't provide a suitable response, move to number 4.4."How important is that fact? Could I expect the company to help me to grow in this area?" This shows the interviewer that you recognize the importance and are willing to do something about it. The something might be formal schooling or training [Do they give you time or financial support in this area?] or is there an opportunity to be coached on-the-job or via a mentor, etc. "Perhaps we can make that a priority in my goals and objectives for next year."5."Does that help you with your concern about __________________?" You've done the best that you can with that area and it's time to move on an not dwell on it.

of 222

You may wish to reinforce your response to this objection in the thank you letter that follows the interview. You will have to use your own judgment about how well you think you handled it or how important it was to the interviewer.

The most important objection, however, is the one that you know should come up -- and never does. This is the "silent objection" that doesn't get raised and you haven't had a chance to handle and present your side of the case. If you think that this is happening, you had better get you word in NOW -- there will probably never be another chance. They will sit with their perception and it will stay with you through the evaluation process. When it comes time for a decision -- you'll be handicapped if you did nothing to dissuade them. In the case of a silent objection, you must do the following when they ask you, "Do you have any other questions that I might answer?":"I've wondered why you haven't asked me about something that I thought would be important to you." [Here pause to let them ask what it is -- or for dramatic effect.] "What about ___________________. Is that something that concerns you?"If it is, proceed to attack it as above, remembering to start with an agreeing statement.If "no" you must again use judgment about how much importance or what kind of disadvantage vis-a-vis your competition this objection places you in.

NOTE: Contrary to popular belief [and wishful thinking], -- bringing up a silent objection will not plant the idea in their mind to be held against you in the future. Rather, it will show that you have prepared yourself for the interview. AND, it will also present yourself in the best light possible to compete with the other candidates who may or may not have the same objection in their background.

Remember, as in answering any question, use the following tips to present yourself well:Be certain that you heard the question correctly and understand it.Be BRIEF and don't ramble.Use positive language wherever possible.Illustrate your points with a short "war story" for good effect.Ask if that satisfies the interviewer; clarify if it doesn't.If you can't speak to the objection say so. Answer later through the thank you if necessary.

of 222

Table of Contents

1.Overview p. 2



4.Cases p. 31




of 222

General industry knowledge

In this section, we will try to provide a broad overview of management consulting including why industry hires consultants, different segments of consulting, how consulting firms are structured, and a glimpse into consulting life.

Why Do Companies Hire Consultants?

1) To obtain an objective viewpoint of the given business problem or issue. Consultants are relatively unaffected by the company’s politics and past habits compared to internal resources of the company. Because politics, sins of the past, and protection of internal fiefdoms are less important to consultants, the consulting firm can deliver a more objective analysis. A more objective analysis can serve to minimize internal strife with new business decisions and lend credibility to management when communicating plans to investors.2) To utilize the specific expertise of the consulting firm. This one gets quite sticky at times. Client confidentiality is of upmost importance to consulting firms, because a single mistake can cost millions of dollars of lost revenue and profit due to a tarnished reputation. However, there is quite a bit of industry expertise and knowledge which can be shared with or recreated for a new client.3) To provide resources to address a specific problem. It is quite difficult for a client to be cost effective in their personnel budget and also have enough staff on hand to handle all problems that might arise. For this reason, companies will utilize consulting companies to augment their own workforce during times of peak workload of higher level tasks.

How are consulting firms segmented?

Even consultants can be segmented, but how? Like many other industries, consulting services have proliferated such that the market is quite complex. Some firms have sought the ultimate vertical integration, equity sharing with clients while others may focus on strategy development, implementation, specialized services, or providing a one-stop-shop for all of it. This is not meant to be the last word on consulting segmentation, only to inform you of some of the more common segment descriptions of which you should be aware.Size. Perhaps the most apparent segmentation is size. Most consulting firms are small: half of all consulting firms generate less than $500,000 in annual billings, and one-third employ less than four people ("The Management Consulting Industry, David J. Collis, Harvard). However, the typical consultant works for a large firm: an estimated three quarters of all consultants work in firms employing more than 100 professionals. This skewed size distribution reflects the low barrier to entry into this industry. Corporate downsizing, early retirement policies, and outsourcing have created both the supply and demand for consultants. Internal vs. External. Ever look through the UMBS placement statistics and wonder why there is more placement in consulting when viewed by function than when viewed by industry? (It was 27% vs. 24% in 1996) That’s because some positions within companies, typically large corporations, are consultative in nature. The Journal of Management Consulting (Vol 3, summer 1984) claimed that external consultants outnumber internal consultants by 5:1. Whether you believe this statistic or the Michigan numbers which place the ratio at approximately 9:1, there is some limited opportunity to do consulting within companies. It would be the author’s assumption that these positions would provide less breadth of experience, but would probably offer a more direct progression to line management.Project Types: Strategy, Implementation, and Specific Services. Because of the proliferation of service offerings by consulting firms, this segmentation is probably the most difficult to use. In fact, David Collis of Harvard Business School claims that it is no longer a relevant distinction as evidenced by the fact that large consulting firms themselves have stopped differentiating and

of 222

commonly claim to be involved in most or all project types. However, they are still commonly used to describe a particular firms service focus.Strategy. This is the most difficult of all to describe. The word strategy can be found in the literature of any consulting firm worth its salt. Generally a strategy project involves some sort of "crossroads" analysis for the client, resulting in a recommended course of action. It could be as broad as defining a new strategy for an entire company, or as narrow as an analysis for a single product. The apparent measure of breadth of a strategy project is to consider the level of the client management who the consultant works with. A project that includes presentations to the CEO or board of directors is guaranteed to be a high level analysis designed to steer the future of the company. A project that involves only the VP of Marketing is likely focused on singular product strategies. None the less, they are all called strategy in consulting literature. You’ll have to ask some specific questions to discern where a firm fits in.You may have noticed that most consulting literature mentions their "partner ratio". This is a vital indicator of whether a firm is doing high level strategy work or lower level implementation work. A firm with a low ratio of non partners (or consultants, watch the use of units!) say 8:1 is probably involved in high level work and probably deploys relatively small project teams. Conversely, a firm with a high ratio of non partners, say 20:1, may work with lower level client management and probably with much larger project teams, commonly an indicator of an implementation focused firm.Implementation. Once again, the list of those who don’t claim to implement strategy is quite small. However, there are clearly degrees of focus within consulting firms. Bain claims to implement by providing key guidance to client management. Firms such as Deloitte & Touche are on the other end of the spectrum, with a reputation for doing whatever it takes from writing code to leading focus groups of line workers. As mentioned, a high ratio of non partners can be an indicator of an implementation focused firm. Reengineering probably fits best under this segmentation. Reengineering was coined after Hammer and Champy’s book Reengineering the Corporation became a best-seller. Often, when a company or particular process is judged to be inefficient relative to competition, a reengineering project may be undertaken. Reengineering refers to the process of first mapping current activities, identifying what is actually needed, and then defining and implementing new processes which eliminate the unneeded activities and associated personnel. Reengineering engagements almost always result in an implementation phase of the project.Specific Services. This is an elegant segment description for "Everything Else". Many of the numerous small consulting firms previously mentioned will fit most appropriately into this category. There are consulting firms which specialize in price setting analysis, sales force structuring, organizational structure, personnel morale, creative thinking, and anything else that will fit on a business card.

How are consulting firms structured?

As mentioned, most consultants work for large, external consulting firms and the current trend in external consulting firms is growth, both from natural growth as well as mergers. For this reason, this section will generally discuss how the larger external consulting firms are structured.Though the title names may be different, the functional positions are fairly similar across the large consulting firms.Analyst or Business Analyst. These positions are held by the most capable graduates from the top undergraduate programs. The analyst position is typically held for 1-3 years and has a very high turnover rate. The most successful analysts typically move on to graduate business school, frequently with some or all of their expenses paid by the firm. The analyst’s responsibilities range from research and data manipulation to functioning on a level equal to a post-MBA consultant.

of 222

Associate, Consultant, or Senior Consultant. This is the typical entry level for MBA graduates. The consultant is typically given vague or unstructured direction and is expected to be creative and thorough in development of final product. It involves research, analysis, and presentation of conclusions. Research will commonly include client interviews, customer interviews, secondary data (i.e. internet, trade magazines, other) compilation, or financial data gathering such as 10-K’s. Analysis will require the consultant to use the research in a structured manner to develop conclusions useful to the client. It is quite common for new consultants to make presentations of their work to the highest level of client management involved in the project. Consultants may also supervise a small client team, depending on the nature of the engagement.Project Manager, Senior Associate, Engagement Manager. Prepare to lose some hair. This position is commonly regarded as the "weeding ground" for those who have the right stuff to be a partner some day. This position is responsible for day-to-day supervision of projects and includes project budget stewardship and performance evaluation of team members. The manager will manage client team members, consultants, and analysts. When a project is not going well, expect the manager to be a blur of activity.Principal / Associate Partner / Senior Manager. At this level begins the transition into a sales machine, a.k.a Partner. The principal is expected to either manage multiple projects simultaneously or to manage one very large project full-time. Client relationship is even more critical at this level than at any previous level. Frequently the principal will have more contact with the client than any other team member and probably more than the partner. The frequent client contact results in honed selling skills, as the principal will commonly negotiate engagement extensions or new engagements with the client.Partner / Vice President. Sell, sell, sell, and provide high level management for ongoing projects. Partners are responsible for negotiating new engagements and for reviewing the work from those engagements. In addition, the success of ongoing projects rests on the shoulders of the partner. For this reason, partners may be the hardest working people in the firm. The travel schedule is substantial. With so many projects going on, the partner may only visit individual projects periodically. The partner usually expected to be present for all key meetings with senior client managers.

Putting them all to work.

Consulting firms will have a structure which resembles a pyramid. There are lots of associates and consultants at the bottom and a few partners at the top. Managers and principal populations will be somewhere in between. The equation that runs the whole business is derived from leverage: Lots of low level people earning less than $250,000 per year running projects that generate millions. There are usually no assets other than the people, so consulting firms are typically pace setters when it comes to personnel development programs. Anything a firm can do to increase an employees ability to do more work or charge more for higher level work is a positive investment. Andersen Consulting actually has their own accredited college where all employees are sent during their careers for training.

What is Consulting Life Like?

Compensation. The median base salary for ‘96 graduate UMBS MBA’s going into consulting firms was $80k/year with an average signing bonus package of $25k. Total first year compensation packages ranged from $40k - $138k. If you’re lucky enough to have had a successful internship with a consulting firm, it is becoming common for the firm to include an offer to pay for second year tuition in addition to the compensation package offered others. Once on the job, there is sometimes a performance bonus after the first year. It is enough for most people to live comfortably and pay off their school debt in two years.Farther into your consulting career, the compensation will increase substantially. Partners will make between $500,000 and $3,000,000 a year depending on the structure of the firm. The

of 222

salaries between consultant and partner are somewhat skewed toward the lower end, such that salary increases from level to level within a firm will have a hockey stick distribution. This should come as no surprise, as most game theorists suggest that this is the optimum salary structure for maximum performance.Lifestyle. Okay, so you get excellent pay, lots of real responsibility, and the opportunity to make a difference at the executive level of companies right out of school. It requires a lot of work. Consulting is frequently regarded by industry as a training ground for young and talented people. All that training may come at the expense of your free time. Consultants may frequently work 60 or 70 hours a week and may also spend much of that time at a client site while living out of a hotel. This does ramp up the learning curve, in the same way that drinking from a fire hydrant will increase your intake of water. For consultants, projects change but deadlines often don’t, resulting in workloads that fluctuate dramatically to meet the high expectations. All levels of the client are typically aware that consultants are expensive, and they set their expectations accordingly.

After reading the preceding paragraphs, you may now realize why everyone keeps talking about the "airport test". You won’t be hired if you can’t pass the mustard on this one. The consulting life is quite demanding, and will force you to spend endless hours and meals with your coworkers. The last thing that anyone can tolerate in this environment is personality conflict, so being able to get along socially is critical. As a result of this priority, those in consulting reap the reward because they find themselves surrounded with very bright, capable, and interesting people who are also fun to hang out with. However despite the collegiality and high compensation, the result of these circumstances is high attrition which is both forced and by choice. Because of the quality training, many high quality consultants will be offered good opportunities and will choose to leave the firm. Additional attrition comes from the "up or out" promotion policy of many firms. A new consultant can generally count on about a 2yr stint, after which a careful evaluation will be made. The consultant will either be promoted or "counseled out" which means they are advised to polish the resume and find another job.The "up or out" policy is really not as cold as it sounds. Consulting firms know that their people are regarded as very high quality so any consultant that was counseled out will probably wind up working in industry and could easily be on the signing end of a consulting contract someday. In addition, reputation is critical in the consulting industry, and no consulting firm wants industry to think that they had sub-optimal personnel. The result is a very professional and honest system which honestly tries to help those that leave and generally works to the advantage of both parties.

SELF ASSESSMENT

Like any career choice, the most vital and frequently overlooked step is an honest self assessment of fit. Unfortunately many students develop a self assessment by scanning down the compensation column of a list of job functions. This inevitably leads to very high stress and premature career switches which can be emotionally and financially costly. Improve your odds and reduce your stress during the recruiting period by taking the time to do an honest assessment of your fit with consulting. The information will be invaluable to you, regardless of your final career choice.

The ABC’s

Brains + either appearance or charisma = success

Brains + appearance + charisma = superstar

of 222

Typical description of successful consultants

Consulting process awareness: Understanding and utilizing the human and organizational dynamics at each stage of an engagement. / Recognize that a client’s problem does not arise in a vacuumKnowledge needed: Something to differentiate the individual from the hundreds of thousands of MBA’s from top schools / In-depth knowledge of a particular industry, function, or technique / Generalist or specialist / Problem-solving vs. TeachingSkills required

Technical skills - ability to apply expertise to client problems; creativity; competence at both finding and solving problems

Communication skills - and the ability to tailor the communication to the client Interpersonal skills - ability to effectively use the behavior of the consultant and the

client during the engagement; reluctance to rely on the role of the consultant for credibility Administrative skills - ability to operate many facets of a project

Credibility: Established with knowledge, skills, and work or consulting experience / Build a reputation for good judgment, objectivity, character, and performancePersonality

Self-starters - need little outside motivation or direction; high energy levels Self-confidence - ability to deal with rejection and failure High tolerance for ambiguity - level-headed Curiosity and creativity - enjoy learning about new organizations, new ideas, new

problems, new challengesNetworking: Source of emotional support / Source of future projects / Source of additional help for large or unwieldy projectsCode of ethics: Place client’s interests ahead of their own / Avoid conflicts of interest / Conduct regular self-assessments

of 222

Lifestyle lowlights

Expect to spend 20-60% of your time traveling Living out of a suitcase, long hours, intense pressure, uncertain living conditions all contribute to a tremendous amount of stress

Lifestyle highlights

Autonomy - especially later in the career Chance to help and influence clients High earnings, status, respect High income stream and high career mobility allows consultant to be choice-driven rather than need-driven

of 222

So You Want To Be A...Management Consultant

Let's start by talking about the structure of the management consulting industry. Tell me who the major firms are, how competitive the business is, what kind of growth there is right now—just a general overview.

Sure. Essentially you're looking at three classes of firms. You have the top-tier strategy consulting firms like Bain, BCG [Boston Consulting Group], Booz Allen & Hamilton, McKinsey. Then you have a second tier of firms. These are large firms that tend to focus on IT [Information Technology] and business process reengineering —the Big Six with consulting arms fall in this category.

When you say "Big Six" you're referring to…?

The accounting firms: Coopers & Lybrand, Deloitte and Touche. You have some new entrants in there like EDS [Electronic Data Systems] and so on who are going from a general IT strength and moving to address more strategic issues and business concerns. But generally the bulk of what they do is still information technology.Some of these companies do work in operations and HR [Human Resources], like Towers Perrin. I would probably categorize them as a little different from the Big Six but still in that second tier. The third tier consists of a myriad of boutique consulting firms specializing in particular "products" or industries. Firms with 100 consultants down to four or five. Essentially any downsized middle management person is a good candidate to be a consultant. When you're looking for jobs, the last tier of firms clearly has potential, but they are kind of scattered so your search is going to be somewhat more, shall we say, hit-and-miss. Finding a job just depends on what you happen to come across.

Who are the customers for management consultants?

Major buyers typically are large companies—Fortune 1000, Fortune 500. You rarely see small start-ups buying consulting. In the biotech industry you did find some of that happening, and now, I think, in the high technology space you're starting to see some of that.

And new media, I imagine?

In new media sometimes. It all has to do with the fact that consultants typically have not taken payment for services in equity.As long as they're willing to do some of that [take equity], I think there will be an opportunity there. In terms of the people making the purchasing decisions, they tend to be heads of these large businesses or business units. These would be the kinds of people who would sanction the large strategy studies, the large process studies, and so on. Mid-level management would buy focused market or product-related studies, as in "How do I launch this product?" or "Which segment should I target?" Or particular implementation issues, as in "We need to have a new billing system that can do X, and how would I go about doing that?" That in a nutshell reflects the kind of buying that happens.

Isn't it true that at the high end you have firms hiring consultants for multi-million dollar projects down to the low end where people are hired for several thousand dollar projects?

Yes. You hear that word "transformation." Transformation-oriented projects tend not to be duration oriented, but rather the term implies working with a client over the long term to make

of 222

the change happen. These efforts go on for a long time, so you're easily talking about two or three million dollar jobs. These kinds of projects can be growth or "downsourcing" focused.

What are the major trends that are going on right now in management consulting?

One of the things that's happening is that there's a focus towards implementation that's been going on for some time.Consultants are being asked to, in many cases, go beyond just making a recommendation and actually being around to see at least some levels of implementation or guide an implementation. Lots of work is also going on in the IT and the operations space. Previously a lot of consulting would happen at the strategic level. But now people are getting smart about using consultants in a tactical sense. This parallels the use of outsourced white collar staff. Outsourcing of higher level professionals is also happening more and consultants fall into this category. So implementation is one theme, the other theme is IT, operations, and integration across them. Also you're starting to see a little more of venture consulting, and we'll see how that plays out.

I'd like to talk a little bit more about your work specifically. What does your work entail?

I'm a manager. Consulting teams tend to be small—three or four consultants at most. You're looking at an equal number of clients, depending on the job. The job manager is essentially the point person who is responsible for the delivery of the project.You have senior people above you—partners and senior managers — who are more oriented towards client handling and insuring that the project is headed in the right direction to address the client's issue. You do tend to play a role in that. But you kind of form the linkage between addressing these client issues that have been determined by the clients and the senior partners and marshaling the resources of the team to actually deliver the project. Ultimately the rubber meets the road at the manager position

I see. Can you describe a typical day or week on the job?

Sure. I'd say that two days out of the office is typical, on strategy studies. On implementation oriented engagements you are likely out for four days. Looking back across the past four years my average has been about three days out of the office per week.In terms of work days themselves, the start, depending on client environment and your own particular preference, is fairly flexible—between 8:00 and 9:30. The day can stretch past 7:00, so there can be long days.It is hard to define a typical week. Going back to the past week, a day could start with a couple of calls to clients to obtain clarifications. The team is working towards intermediate objectives that were set last week. Team members could interrupt any time, as I would much rather clarify and address issues as they arise rather than have the team barking up the wrong tree. In the middle of the day, we may have a review/brainstorming session to set objectives for the next day or two, checking off against client deliverables that have been promised. Now a typical day probably involves some interaction with a client in terms of meetings, insuring the project is headed in the right direction, insuring that intermediate goals are being met, insuring that deliverables to or from the client are on target. This could be followed by a client meeting, with a client wanting to spend a quality hour digging deeper into something that was presented last week. In the midst of all this client oriented work, there could be some recruiting commitments or industry conference issues that need to be addressed. Days typically tend to be very busy as you move to manager levels and up as there are a number of "dishes" cooking each at different levels of completion.

Are you working weekends?

of 222

I'd say on average you spend one weekend day out of about three weeks or so. So one weekend day out of six. I do check my e-mail on weekends both Saturdays and Sundays, and maybe I'll spend one or two hours on the weekends doing administrative work, but it's at your convenience and usually not too intrusive.

of 222

Time management is an issue?

Time management and also they way you think about—or not think about—work. There's enough work there and enough pressure that you can spend weekends thinking about it. If you are able to forget about it and just go do your fun stuff, then you're better off.

What would you say are the most interesting and challenging parts of your job?

I'd say that the variety of work —you're going to get what seems like a canned answer here—is always challenging. It's been my experience that the people you interface with at the client level are extremely sharp people, people who are dealing with very material problems. Engaging at that level is a great learning experience. So the problems are challenging; you're learning a lot. I work with high technology firms in general and it's an area I'm particularly passionate about.

What would you say are the worst aspects of your job?

I guess the worst parts of the job is the element of travel involved and an element of pressure. You have to draw a line in terms of managing your time, and it's definitely a challenge to do so. I don't have any children right now, but when you have to balance a family life against that, I can image it getting pretty difficult.

Can you describe your work history for me? What did you do before you came to this company?

I've been with this company for four years, and before that I spent two years in business school doing my MBA. Prior to that I worked for a computer manufacturer in California doing engineering work for them. Prior to that I earned a Masters in Computer Science and I have an undergraduate degree in electronics. At a general level, most people in consulting have two or three degrees.

Is an MBA necessary?

It certainly helps, and I'd say the majority of people among the larger consulting organizations tend to have MBA's. I would say about 70-80% have MBA's.

But the firms do hire people directly out of college as well, yes? And then they want them to go back and get their MBA's after a couple of years.

That's correct. You also do hire some Ph.D's who do not have MBA's. Or you hire Masters or undergraduates who have been in an industry for some time—"industry" hires.

Can you describe the career ladder in the field?

Essentially, without getting into firm-specific titles, you have roughly four levels of people. You have the analyst-type people, undergraduates who would be around for a couple of years doing a lot of quantitative, analytical kind of work, as the name might suggest. Then you have the associates who are incoming industry hires or out of business school. The next level up is the manager who has usually been at the associate level for two or three years. At the senior manager level where you spend two to three years, you do some client handling and start to do some selling-oriented work. Then the fourth and highest level is partner.

And on the partner level, is it mostly about bringing in business?

Yes, it's very much selling oriented.

of 222

How common is it for consultants to move laterally? That is, to move from one area of the organization to another?

Actually, within a consulting organization people do move around. It's a matter of changing interests and as you learn more and are exposed to more, you discover that you have facility with one particular area or another. It's rare that people move from one consulting organization to another—at least among the larger firms. It happens less than you might think.

That's interesting. So people do tend to stay at one firm for their entire career?

Yes. And when they leave it's usually for an opportunity outside the consulting industry, rather than an opportunity with another firm.

And how common is that? I remember a management consulting presentation where the woman said her firm was essentially an HR firm, because all of their employees move to their clients!

That's right. It happens a lot. I don't know the firm-specific statistics, but numbers like 20% turnover per year would not surprise me. And there are two dimension to that phenomenon. One, the work itself is demanding and at a point in life situations may change and you may decide it is too much. The other issue is that there are plenty of opportunities out there. You do a good job and very often the client will want you to carry on. Also, there are plenty of head hunters who keep calling you.There's no dearth of offers out there, so when life situations change people find it very easy to move on.

I imagine there's a lot of burnout from the traveling.

Well, yes, you could say there is. But it's more often that life moves on and you no longer can afford to or want to spend so much time away.

What kind of personality traits or skills do you think a person needs to have to be a good management consultant?

You hear all the stuff about being smart and analytical. Beyond that I think the key issue is that you're very delivery oriented. You need to be able to get to the core of a problem quickly and deliver a practical solution quickly. You don't have the time to do 100% analysis on everything. What clients hire you for are your business judgment skills as much as your analytical and quantitative skills. Your ability to be practical is crucial.

Are there any courses a college student or an MBA should focus on?

All the tool kit kinds of skills, such as basic finance, marketing, and strategy are essential. In addition to that, a real focus on your team skills will get you far, and I would focus on your own dynamics within the work groups and study groups. The abilities to write, communicate and present are very useful as well.

So an English major would not be out of the ordinary.

No. Actually an English major who has bolstered their clear communication skills with other kinds of quantitative, pragmatic skills would certainly do as well.

of 222

How hard is it to get an entry level job in consulting?

It's just the law of numbers. There are few jobs and a lot of people who apply for them. It's not easy, but the good news is that you generally will not lack for an opportunity to be interviewed, especially if you're coming from a big school. The net is fairly wide as far as entry-level recruiting is concerned.

How hard is it to move up?

The 20% turnover numbers affect that a lot.

So if you can stick it out and you do a good job, you have a reasonable chance of being promoted.

Right. Many people leave not because they don't make it to the next level, but because they've found a better opportunity or their life situation has changed.

Do the firms offer training programs?

Oh yes. Firms have different capabilities in that dimension, but almost all consulting firms offer extensive training. Both training and feedback are the core of a consulting firm's infrastructure. People resources are all a consulting firm has, and so unless you can identify people's needs and provide vehicles to address those needs, the firm will not have a business.

Can you tell me about the salary ranges and how that works?

Sure. In general when you're looking at the analyst level, you're probably looking at about $40,000 or so and no bonus. Associates earn anywhere between $60,000 and $100,000 with about a 20% bonus on top of that. So unlike investment banking, the bonus is reasonable, but not huge.

It's not the overwhelming portion of your pay.

Exactly. The larger firms, the top firms, would be somewhere in that middle range. Some of the smaller firms tend to provide the higher salaries, for obvious reasons.

To be more competitive.

Exactly. When you're up at the manager level, you're probably making somewhere between $100,000 and $150,000 and you probably have another 30% in bonus. Senior manager is probably between $100,000 and $170,000 and 40% or so in bonus.By the time you're at the partner level, it just depends on the firm, and I'm sure you make anywhere between $200,000 to maybe $750,000.

Do you have any special advice for a young person entering this industry?

I'd say be organized and focused in your search. It's easy to say, but be practical and structured in your interviews, and listen very hard.

You're referring to the case method interviews?

Yes. I can't overemphasize listening. Listening is a skill that you need with clients and it's skill you need to show in the interviews. The interview is a very interactive process, being calm and

of 222

listening to the questions and where the interview is heading are probably among the best things you can do. And get lots of sleep.

of 222

The Inside Scoop on Case Interviews

Consultants look for the ability to synthesize, analyze, and deal with ambiguity. They want you to demonstrate analytical horsepower. You're expected to be a good listener and ask a few clarifying and insightful questions. Everyone stressed the importance of answering the case under a framework. In other words, they want you to take an outlined strategic approach where you break the problem down into components and explore them. You should restate the problem in your own words. Then, form hypotheses, explore the issues, draw conclusions, and finally, make your recommendations. You need to demonstrate that you're good at organizing information. Consultants want you to comfortably discuss broad areas encompassing technical, functional, organizational, and cultural issues as well as demonstrate strategic and creative thinking. Try to answer from a CEO perspective. The ideal is to come up with answers that they wouldn't have thought of. However, coming up with major Eureka's! is icing on thecake but demonstrating structured thought process is essential. Some alumni feel that different types of cases deserve different focuses. One alumnus sees three case types: strategy (Why?), organization (Who?), and Process (How?). Answering a strategy case involves looking at the underlying causes and taking an external focus and a broad view. An organization case involves exploring the culture. A process case requires understanding the capabilities of the firm and the mechanics of the business and technological infrastructure. Another alumnus mentioned five basic types. For an industry analysis case, you could consider the market size, trends in the industry, and the competition. For a market expansion, you might analyze the size of the market and understand the competition and customer needs. The third type of case is investments in PPE where you could explore the sustainability of profits and the market size. A profitability case involves looking at costs (fixed/variable), customer price sensitivity, the price-cost-volume relationship, plant utilization, and economies of scale. To do well on a pricing case, try considering the type of market (monopoly / oligopoly) elasticity of demand, price sensitivity, strategic tactics and loss leaders. Although there is a lot of overlap, in the 10 to 15 to 30 minutes allotted, tailoring your answer to the type of case could be helpful. Other alumni feel that the underlying rational is the same across all cases. Consultants look for your personality and presentation. They want to see how you think on your feet. As they admittedly put you on the spot, they want you to be relaxed, confident, and engaging. Besides doing all the above shiningly well, alumni have some specific recommendations. During the initial chit chat , try to find out what your interviewer does. Since each interviewer is different, try to adjust to his or her style. Even though they do not want a specific answer, interviewers will inevitably compare how you approach the case to how they approach it. Most alumni stress the effectiveness of practicing cases. Do the team thing and practice cases over and over with friends. Also, practice doing the cases in 10 to 15 to 30 minutes so that you develop the ability to cover the important issues in the allotted time.Glance over notes from classes to make sure you understand concepts because you will use them extensively. Also, it is OK to ask if you can take notes (i.e. if they are rattling numbers off at you). If the interviewer thinks it is necessary , he or she will let you. Finally, relax; you're just taking a problem and demonstrating how you would solve it. There are common problems we should avoid in our quest for the consulting dream job. Alumni frequently mention the myopic mistake of focusing on one little area without discussing the whole picture. Rambling in a disorganized fashion and jumping to conclusions without logic do not demonstrate creativity. However, applying a canned academic/generic framework does not work either. Using buzzwords without real understanding as to how they apply to the client won't win points. Alumni have seen candidates try to impress with knowledge instead of answering the case. Stick to the process of answering the case. Industry knowledge is usually not important. Sometimes, due to nervousness, personality does not come through. Arrogance and, on the other extreme, self-deprecation are big no-nos. Don't be defensive or

of 222

argumentative. When an interviewer suggests another way of looking at something, consider it and don't just defend your answer. He/she is not trying to trick you.

of 222

The McKinsey Method of Cracking the Case Interview – Chicago B-School

Jenny Wallace - CBS alumni - McKinsey. Ms. Wallace explained that many consulting firms had chosen to use case interviews because there is no right background for consulting. Consulting requires working in unfamiliar territories, thinking on your feet, and performing in situations where you never have enough time. The case interview gives everybody a relatively equitable chance. Ms. Wallace described the cases as business dilemmas that are open-ended and usually taken from real situations. The cases are used to test an interviewee's problem solving skill (logical reasoning), tolerance for ambiguity, ability to synthesize findings, and communication skills. Ms. Wallace suggested a 4-step approach to approaching these cases: clarify, structure, analyze, and conclude. Clarify means making sure that you have a complete understanding of the problem. She suggested maybe paraphrasing the question as a way to ensure this. Structure means choosing an approach to solving the problem. Some examples were Porter's five forces (barriers to entry, replacability, power of purchasers, power of suppliers, competition) or the 5 P's (it might be 4 P's) in marketing. Then, analyze the problem by requesting information to test the hypothesis. Finally, conclude by synthesizing your findings into a recommendation. Ms. Wallace emphasized that coming to a conclusion was extremely important for successfully completing a case. In attacking the cases, Ms. Wallace gave helpful hints and warnings against wrong approaches. Wrong approaches included ignoring or forgetting important facts, defending impossible ideas (gracefully concede when you're wrong), and force fitting the wrong structure onto a problem (you can't always use Porter). Don't worry if you don't know anything about the industry. They are only trying to see if you can think logically and structure problems. Ms. Wallace stated that a ski industry case will deliberately not be chosen for you if you once ran a ski store. The hints Ms. Wallace came up with included listen carefully (take notes if you wish), ask logically progressing questions (not 20 random questions), organize your thoughts (don't be afraid of silence), explain your thought process, work from a hypothesis, do the calculations if they give you numbers, and most of all don't get frustrated. Ms. Wallace suggested rehearsing as much as possible (in the CRC or consulting club). Many sources have emphatically stated that you get better and better at these interviews with practice. After Ms. Wallace finished with her overview, two other McKinsey consultants came on to give a mock interview. Jennifer Sturman was the interviewer and Neil Platt was the interviewee. Having never seen a case interview before, I was most struck by how interactive the process was. Ms. Sturman started out by saying a pharmaceutical company was thinking about acquiring a cough syrup company and she wanted to know whether Mr. Platt would recommend the acquisition. Mr. Platt started his response by noting that one company had only prescription products and the other company had OTC products. He then went on to define his structured approach by saying he would look at the implications on R&D, sourcing and purchasing, distribution, sales, marketing, and production. He then asked Ms. Sturman about each aspect of the companies. He said that if they have similar R&D requirements, then one of the facilities could be eliminated. Ms. Sturman responded that they did have similar requirements. He then moved on to marketing and stated that they would need different marketing strategies for the different products. Ms. Sturman asked him to elaborate further on this. Mr. Platt went through each of the structured aspects he defined to analyze the company. After finishing, this case, Ms. Sturman asked another question, how the company might enter the cough drop market if they wanted to. Once, the mock interview was completed, the other McKinsey consultants gave their observations of the interview. They all agreed that while it was a good interview, it was not a perfect interview. They complimented Mr. Platt on clearly laying out his structure (R&D, production, etc.) upfront and referring back to it. However, Mr. Platt did not come to any conclusion on the case. He just said how he would analyze the case. They guaranteed that the interviewer would have enough information to allow an interviewee to come to a conclusion. Mr. Platt was complimented for pausing before speaking. However, he could have come to a quicker conclusion by knowing that the pharmacy industry is R&D intensive and prioritizing the rest of the company aspects he was analyzing. One student noted that Mr. Platt did not ask any

of 222

questions about the company's goals, whether they were profit driven or market share driven. The McKinsey people also warned that if you ask a question, don't be alarmed if they ask you why you want to know. They also warned that two traps are spouting all the facts you know about the industry to try to hit a conclusion and don't assume dynamics in the industry that aren't there. The cases they use can be 10 years old and have no bearing on the current nature of the industry.

of 222

What is behavior-based interviewing?

Behavior-based interviewing focuses on experiences, behaviors, knowledge, skills and abilities that are job related. It is based on the belief that past behavior and performance often predicts future behavior and performance.

Employers are looking for 3 types of skills in a behavioral interview:

Content Skills - Knowledge that is work specific such as computer programming, financial statement analysis, etc., expressed as nouns.

Functional or Transferable Skills - Used with people, information or things such as organizing, managing, developing, communicating, etc., expressed as verbs.

Adaptive or Self-Management Skills - Personal characteristics such as dependable, team player, self directed, punctual, etc., expressed as adjectives.

There are 3 types of questions typically found in behavioral interviews:

1.Theoretical questions - Questions that place you in a hypothetical situation. These are more likely to test your skill at answering questions rather than in doing a good job. 2.Leading questions - Questions that hint at the answer the interviewer is seeking by the way they are phrased. 3.Behavioral questions - Questions that seek demonstrated examples of behavior from your past experience and concentrate on job related functions. They may include:

A complete answer to a behavior-based question must explain the task or problem for which you were responsible, the specific action you took, and the results of your actions.

Tell the interviewer a "story" (with a beginning, a middle, and an end) about how you used a practical skill. Problem (P) - Advertising revenue was falling off for the Daily News and large numbers

of long-term advertisers were not renewing contracts. Action (A) - I designed a new promotional packet to go with the rate sheet and compared

the benefits of DN circulation with other ad media in the area. I also set-up a special training session for the account executives with a Business professor who discussed competitive selling strategies.

Result (R) - We signed contracts with fifteen former advertisers for daily ads and five for special supplements. We increased our new advertisers by 20% [numbers are always a good idea] over the same period last year.

How can I prepare for a behavioral interview?

Analyze the type of positions for which you're applying. Try to get an actual job description. What skills are required by employers? Analyze your own background. What skills do you have (content, functional, and adaptive) that relate to your job objective? Identify examples from your past experience where you demonstrated those skills. How can you tell a story about your use of particular skills or knowledge? Concentrate on developing complete PAR answers and remember that a good story has a beginning, middle and end.

of 222

Wherever possible, quantify your results. Numbers illustrate your level of authority and responsibility. Be prepared to provide examples of when results didn¹t turn out as you planned. What did you do then? Before starting the interview process, identify 2 to 3 of your top selling points and determine how you will convey these points (with demonstrated PAR stories) during the interview. REMINDER! Be prepared for your next lateral move (common in consulting)...Once employed, keep a personal achievement diary to help document demonstrated PAR performance.

The following are three key mistakes that candidates frequently make:

Giving Just The Facts - While you want to be concise and direct, behavioral questions can't be answered well in 15 seconds. It is important to take the time to reply to the questions, then support your answer.

Rambling - To avoid making the interviewer feel bombarded, gauge the effectiveness of your responses by their content, not on the length of time or quantity of words you're using.

Twisting - To avoid revealing negative information about themselves, interviewees may twist their responses to make it seem like they are responding to a hypothetical, rather than a behavioral questions. If you really can't think of an example from your background that will address the interviewer's question - say so, then go into a hypothetical mode.

Here are some questions you might be asked during a behavioral interview:

Describe a team situation when an individual didn't pull his or her own weight. What did you do? What was the outcome?

Describe a team situation where one person was not on the same page. How did you gain this person's "buy-in"? What was the outcome? Describe a leadership position you've been in. Describe a team situation when you were not in a leadership position. Describe a situation when you had to "think on your feet". What was the outcome? Describe a time when you had to juggle several tasks at once. Describe how you deal with changing deadlines. Describe a situation that best demonstrates your ability to get things done through

others. Describe a situation where you failed. What did you learn? How did you change?

In addition to thinking about how you might answer these questions, try listing the following:

three strengths (be sure they're taken from bullets on your resume) two weaknessness two successes two failures two leadership roles

of 222

Finally, don't forget - the behavioral interview is still an interview! Be sure to come up with at least three reasons that answer the question "Why consulting and - more particularly - why our firm?"

of 222

Informational Interviews

Informational interviews are conversations, in person or by phone, with individuals in your desired field. The purpose of these conversations is twofold-information gathering and network building. Informational interviewing is a skill that will be valuable to you throughout your career.Think broadly to assemble a group of potential interview subjects. Sources may include alumni, alumni of your high school, extended family members, parents' friends, friends' parents, professors, former employers, House tutors, teammates, classmates, etc. Begin with the least intimidating contacts first; your discussions with them will prepare you for future meetings. Also, if you are able to find a contact at a place where you would really like to work, you may want to wait a bit to arrange an interview. Information you gather from other interviews along the way will make you better informed and poised to finally meet with that person.The most polite and probably easiest approach is to write a letter and then follow up with a phone call. When you write, be sure to mention how you got that person's name-"I found your name through the Harvard Career Advisory Service," or "my uncle John Smith recommended that I write to you," etc. Include your resume and mention that you are doing so as a means of introduction or for their information. While an informational interview has an entirely different purpose than a job interview, the two have some common characteristics and may even have similar results. The most striking difference is that you will be asking the questions, and therefore the person you are interviewing should be doing most of the talking. If, however, the person with whom you are speaking does ask about you (and they usually do), be prepared to share some key highlights about your background and more importantly about your career goals.You should dress and behave exactly as you would for a regular interview. The exception might be if the person suggests that you meet not at his or her office but rather at home or at a coffee shop or other informal location. It would then be acceptable to dress a bit more casually, but never in blue jeans, shorts, sundresses, or other distinctly "play clothes."Because you requested the meeting, it is your responsibility to monitor the time. If you asked for a half-hour, you should point out that you are asking your final question as it gets close to that time. If the person with whom you are speaking encourages you to continue or says that he or she would be willing to talk for another twenty minutes, you can thank them and continue. Otherwise, stick to the original plan, and take responsibility for bringing the interview to a close: "This conversation has been most helpful to me, Ms. Smith. Thank you very much for your time."Although the purpose of an informational interview is to obtain information, research and preparation are still essential. You should learn something about the person you are going to see, starting with his or her title. You also need to have information about the company or organization, products or services, size, and place in the market. You should not have to ask for information that you could have found easily available elsewhere. The more you know, the more specific and interesting information you will be able to learn from an informational interview.Bring a couple of copies of your resume with you as an efficient "in- person" means of introduction, even if you also sent it ahead. Even when you are not applying for a specific position, your resume can offer a summary of your background at a glance. Moreover, if the person with whom you are speaking asks to keep it, it can serve as a reminder of you.Although you are not being evaluated with respect to a specific position, you can be sure that the person with whom you are speaking is forming impressions of you. There are innumerable reasons to strive for the best impression you can make, just as you would if you were interviewing for a job. Here are just a few: (1) The person might be thinking of hiring someone in the near future; (2) he or she might be told the next day that the company would like to hire someone; (3) a professional colleague of this person might ask if he or she could recommend any good candidates for an opening; and (4) you may work with this person in another capacity, as a client, customer, or colleague sometime in the future. Last, but certainly not least-in fact this is really the first reason-you have asked someone a favor. You would certainly like them to

of 222

remember that you were gracious and appreciative, as well as enthusiastic, bright, and articulate.

of 222

At the end of this section, you will find a list of suggested questions for informational interviews. As a result of your research, you may develop some industry-specific questions for your discussion. It is usually helpful, however, to begin a conversation with a few broad or general questions. Remember to be sensitive to the age and title of the person with whom you are speaking. Certainly you will ask different questions of a Chief Executive Officer than of a marketing assistant.Your contact should not cease with a thank-you note. It is courteous, but also can be helpful to keep the people you meet informed of your progress, by writing to let them know when you find a job or change jobs. You may write a handwritten note if you wish, but make sure the tone is professional. When someone has assisted you, he or she becomes a stake holder in your success, and will, except in rare instances, be delighted and interested to know what happens to you.

Questions to Ask

What are the rewards/challenges/frustrations of your work? How is your time allocated among your different responsibilities? How much autonomy do you have? What would you change about your job if you could change something? How much of your work is done individually, how much in a team? How much of your day/week can you plan, how much of your work comes up

unexpectedly? In what ways does your job/profession impact your lifestyle? How did you choose this profession? Would you choose it again? How did you get to your current position? Is there anything you wish you had done differently to prepare yourself for your current

position? What was the best advice you received from someone in your field when you were just

starting? What qualities do you think that successful people in your field have? What kinds of things do you do (or can one do) outside of work to enhance your work

performance? What training and/or degrees are required/recommended for advancement? Which schools are most highly regarded for training in your field? What changes do you foresee as being the most dramatic in your field in the next

several years? How is technology impacting on the nature of your work and how you do your work? How do you think the prospects for entry-level workers have changed in your field since

you entered? What do you think are the most common misconceptions that people have about your

line of work? Do you have suggestions of trade journals or books that I should read, professional

associations that I should be aware of, or events that I should attend?

of 222

How Do I Make That Killer Call?

Experts in business communication will tell you that next to public speaking, making a phone call strikes fear in the hearts of even the most seasoned executives. They call this phenomenon "telephone reluctance." To overcome this phobia, we've assembled a list of telephone tips. Review these points, plan your calls, practice what you are going to say and start dialing.

1.Say "hello" and acknowledge (and note) the name of person you are speaking with.2.Tell why you are calling and who you wish to speak with. If you are conducting a follow up call, quickly describe previous communications.3.Assess the status of your candidacy, confirming whether your fax or mailed documents were received, and, focus on identifying appropriate next steps.4.Request an appointment for a job or informational interview, be assertive about this, if the person you are speaking with cannot schedule one, request suggestions for next steps, additional resources or referrals.5.Thank the person you are speaking with and confirm spelling of all names, mailing and e-mail addresses, phone and fax numbers.

And don't forget...Never be impolite, impatient, or pushy. You can always call back if you don't get the information or results you expect.Stay focused and know what you want before you call. Goal-oriented conversations get the best results. Be realistic about what can be achieved with each call.Whenever possible, ask to see or speak with someone "who can tell me about entry level options."Always write, e-mail, or fax thank you notes.

What if I get an answering machine?Don't be shy, always leave a message. Ask for "confirmation that you received my resume and cover letter," or for "information about the position recently posted on the Internet." Leave your name and number.

How do I develop a Conversation Outline?

Use the above list to develop a "conversation outline," but don't try to memorize a script. Below is a basic sample. Create your own and don't wait until it is perfect to give it a try. The more phone calls you make, the more natural you will become and the easier calls will be to make.

Conversation Steps1.Say "hello" and acknowledge (and note) the name of person you are speaking with."Hello, my name is .... And, your name please?"Tell why you are calling and who you wish to speak with. If you are conducting a follow up call, quickly describe previous communications.

of 222

"I am calling about the marketing assistant position and I would like to speak with the director of marketing, please."or:"I saw on the Internet that your firm offers wonderful entry-level sales options. Is there a specific person who could tell me more about these positions? Good. That person's name, phone and fax number is? Does he/she have email?"

2.Assess status of your candidacy, confirming whether your fax or mailed documents were received, and, focus on identifying appropriate next steps. Be assertive about this -- request an appointment for a job or informational interview. If the person you are speaking with cannot schedule one, request suggestions for next steps, additional resources or referrals."I e-mailed a resume to ... of your human resources office. Can I speak with Mr./Ms. ...? I would like to confirm that the resume was received and clarify next steps. Ask to see the appropriate person, "I'd like to schedule an appointment with Mr./Ms. ..."

3.Request an appointment for an employent interview or information conversation. If the person you are speaking with cannot schedule one, request suggestions for next steps, additional resources or for a referral."Yes, I understand that decisions regarding formal interviews won't be made for a few weeks. In the meantime could you refer me to someone who is in a sales position? I would like to informally learn about what it is like and ask questions about their experiences. Who would you suggest I speak with?"

4.Thank the person you are speaking with and confirm spelling of all names, mailing and e-mail addresses, phone and fax numbers."Thank you so much. You have been very helpful. If I have additional questions would it be appropriate to call you again? Again, Mr./Ms. .... is the best person to contact and their phone and fax number is... Is that correct?"

Create additional outlines and rehearse with friends and family. Let common sense be your guide, but start now!

of 222

Follow-up letters

You should send a thank you letter to the interviewer, recruiter or person who coordinated your visit as soon as possible following the interview (within three days).Follow-up letters jog the memory of the person to whom you spoke; they help the interviewer to recall who you are and for what position you are applying. The main purpose of the letter is to extend your appreciation to the interviewer for taking time to meet with you, but it also serves to give you more exposure.You should include:A statement thanking the interviewer. Mention the position for which you were interviewed, the date, and the location of the interview.A reaffirmation of your interest and your confidence that you can do the job. Mention specific job duties that were discussed in the interview and which of your traits or experiences would provide a foundation for further growth and contribution.An expression of your willingness to provide additional supporting information. Also include here any information requested at the interview.A simple, cordial closing.

Sample Letter:

123 Main Street

Hamilton, NY 13346

March 1, 1997

Mr. Jason Michaels, Director

Carelton Corporation

Boston, MA 02134

Dear Mr. Michaels:

It was a pleasure to have met with you during my visit to your company earlier this week. Our conversation confirmed to me that the Assistant Director of Human Resources position is exactly the type of quality experience in which I am interested.

I was especially impressed to learn that the Assistant Director plays a significant role in contracting with insurance companies. As I mentioned in our interview, I have extensive experience in the health care industry performing exactly these types of activities. I think my skills would be of benefit to you in exploring and developing the new area of HMO contracts.

I would like to express my sincere interest in working for the Carelton Corporation. If there is any further information you would find helpful in making a decision regarding my employment, please feel free to contact me.

I look forward to hearing from you.

Sincerely,

of 222

Letters - Convincing Correspondence

The purpose of the cover letter is to tell the prospective employer what you can do and why you feel you are qualified to do it. A well-planned cover letter is just as important as an impressive resume, and together they are important resource in a job campaign. Your letter is a reflection of you and how you approach your work.

The Cover Letter

A cover letter consists of three paragraphs: the opening, a middle section that discusses your strengths, and the closing. Remember, keep it brief and to the point. The letter should refer the reader to the resume, which is always enclosed with the cover letter.1. Opening: The opening should catch the reader’s attention in a businesslike manner; avoid gimmicks or catchy phrases. It may: Reply to job listing. "The Office of Career Services at The Ohio State University has a job opening in file for a production trainee with your company." Name a mutual acquaintance: "Professor Jane Smith, chairperson of the accounting department, has informed me that your firm is looking for an accounting major who is interested in managerial accounting."News Item: "A recent Business First article indicated your plans to open a branch office in Columbus. Summary of outstanding qualifications: "Retailing experience in a department store similar to yours, business knowledge gained academically, plus a sincere interest in these areas have helped me to learn the basic requirements for running a department efficiently. I would like to contribute the practical skills I have acquired by becoming a part of your management training program." Question: "Will you need a sales representative in June who believes she can increase profits? If so, please consider me as a sales representative trainee."

2. Middle: After you have caught the reader’s attention, you must present your basic qualifications for the job. Select and emphasize key points in educational credentials, work experience and relevant personal qualities. Show you have both a broad business background and depth in a particular major. Highlight how education has prepared you for the job you seek. Explain how electives such as writing, communication, or computer courses reinforce and diversify your qualifications. Give examples of how you’ve supplemented academic experience with work experience. Give examples demonstrating that you can handle responsibility and manage your time well. Show that you have the ability to work well with other people. Show desirable personal qualities, such as responsibility, organizational skills, etc.

3. Closing: The last paragraph of the letter calls for action without begging or commanding. You ask for an interview and, if appropriate, say you will come to the employer’s office. Make action easy by giving your telephone number and hours to call if someone can’t answer the phone during the day or evening. An answering machine makes you even more accessible to potential employers; just make sure your machine has a simple, clear message for callers. Avoid gimmick or "cute" messages. If you are sending resumes to a company hundreds of miles away and don’t

of 222

expect them to pay for your expenses for an interview, ask if you could speak to a local or regional representative closer to where you live.

of 222

Important Points:

Prepare a separate, personalized cover letter for every resume you send out and use the same paper on which your resume is printed.Use regular business format. Be brief. A cover letter should be no longer than one page. Watch grammar and spelling. Don't overuse the word "I." Provide evidence regarding why you are a good match for the available position. Close each letter with a statement of the action you will take, i.e.,the specific date you will call to schedule an interview.

Thank You Letters

Perhaps the second most frequent type of correspondence with employers, the thank-you letter should follow every employment or informational interview.It is important to send a letter expressing your appreciation and re-confirming your interest in a position. The letter has a number of purposes, including reminding the employer that you exist, correcting any negative impressions or clearing up confusing issues that may have surfaced during the interview, stressing relevant points that strengthen your candidacy. After a company visit, where you may have been interviewed by more than one person, it is a good idea to send a thank-you letter to each individual who interviewed you. This means you must get the names and titles of all who interviewed you during your visit.Format

1.Thank the employer for his/her time. 2.Identify the specific position for which you were interviewed and date/place of interview. 3.Reiterate interest in the position and why you fit well with the organization.4.Close with your phone number and indicate that you look forward to hearing from the employer at the time specified during the interview.

Correspondence Regarding Offers:

Although job offers usually take place over the telephone, you may want to follow up the conversation with a letter. Be sure to state any conditions you agreed to on the phone (starting or decision date, travel plans, etc.)

Acknowledgment of Offer: Acknowledgment receipt of offer / Express appreciation regarding offer / Notify company of date you expect to make a decision / Ask for any specific information you may need for your decision.Acceptance of Offer: Accept the offer / Notify of travel plans and anticipated arrival date, if applicable / Indicate that you look forward to receiving a contract / Review the details of the offer, including salary, start date, and any other negotiated items / Express appreciation and pleasure in joining the company. Declining Offer: Decline offer politely / Express appreciation for the offer and company’s interest in you.

of 222

123 W. 9th Ave. Apt. G Columbus, OH 43201 June 7, 1997

Judith Green Vice President 200 Van Ness Dr. San Francisco

Dear Ms. Green:

I am pleased to accept your offer and am looking forward to joining you and your staff next month.

The Customer Relations position is ideally suited to my background and interests. I assure you I will give you my best effort inmaking this an effective position within your company.

I will be arriving in San Fransisco on June 23 and will notify your office of my new address and phone number onceestablished.

I understand that I will begin work on July 1. If, in the meantime, I need to complete any paperwork or take care of any othermatters, please contact me at (614)299-5100.

I enjoyed meeting with you and your staff and appreciated the professional manner in which the hiring was conducted.

Sincerely,

Joan Kimer

of 222

123 W. 8th Ave. Apt. C Columbus, OH 43201 March 8, 1997

Barbara Thomas SRM Associates 421 91st St. New York, NY 11910

Dear Ms. Thomas,

It was indeed a pleasure to meet with you and your staff on February 25th. I appreciate the opportunity to learn more aboutyour organization and the Accounts Manager position.

The position and your organization seem well-suited to my background and interests. However, there are many factors for meto consider in making a final decision.

As we discussed on the telephone on March 5th, I will inform you of my decision by March 14th.

Thank you again for your interest in me and for the hospitality of you and your staff during my visit. I look forward to speakingwith you again soon.

Sincerely yours,

John Albert

of 222

1775 Main St. Apt. A Columbus, OH 43201 September 8, 1996

Sharon T. Avery Vice President, Sales Bentley Enterprise 529 Washington St. Sheridan, PA 20145

Dear Ms. Avery:

Thank you for giving me the opportunity to interview for the Customer Services Representative position. I appreciate yourconsideration and interest in me. I learned a great deal from our meeting.

Although I am disappointed in not being selected for your current vacancy, I want you to know that I appreciated the courtesyand professionalism extended to me during the entire selection process. I enjoyed meeting you, John Roberts, and othermembers of the sales staff. My meetings confirmed that Bentley Enterprises would be an exciting place to work and build acareer.

I want to reiterate my strong interest in working for you. Please keep me in mind should another position become available inthe near future.

Again, thank you for the opportunity to interview. Best wishes to you and your staff.

Yours truly,

Gail S. Tropper

of 222

655 Providence Ave. Apt.0 Columbus, OH 43214 January 29, 1997

Ms. Judy Schehr Staff Assistant General Mills Corporation P.O. Box 1113 Minneapolis, MN 55440

Dear Mr. Schehr,

Thank you for taking time to interview me for your Distribution Intern position while you were at Ohio State University onJanuary 28. I enjoyed meeting you and learning more about General Mills. I hope the predicted snow did not delay your flightback to Minnesota.

I am very excited about your Distribution Internship program. I feel my academic achievements and my strong motivation willenable me to make a significant contribution to General Mills through this program. I am enclosing a copy of the syllabus for ourOperations Design course, which you requested during my interview.

I hope to hear from you the week of February 14, as you indicated in the interview. Please feel free to contact me at(614)297-0100 should you need further information.

Again, thank you for your time and consideration.

Sincerely,

Craig A. Zeroski

of 222

655 Providence Ave. Apt. O Columbus, OH 43214 November 30, 1996

Ms Judy Schehr Staff Assistant General Mills Corporation P.O. Box 113 Minneapolis, MN 55440

Dear Ms. Schehr,

As an undergraduate business student at Ohio State University, I am very interested in the business world. Through TheProfessional Experience Program at Ohio State, I have learned that you are seeking a Distribution Intern for the summer of1994. Being aware of the outstanding world-wide reputation of your company, I would greatly appreciate being considered forthe position.

As my high level of achievement in the classroom indicates, I am very motivated individual willing to put forth the effort to dothings properly. I feel the business program which I am currently following at Ohio State, as well as my past work experiences,have given me the tools necessary to perform well in the business world.

Enclosed is a copy of my resume for your review. I understand that you will be on campus January 28 to conduct interviews. Iwill arrange to speak with you at that time concerning the position. Thank you for your time.

Sincerely,

Craig A. Zeroski

Enclosure

of 222

123 Main St. Columbus, OH 43229 November 21, 1996

Mr. H. Charles Loew Personnel Director Price Waterhouse 1900 Central Trust Center Cincinnati, OH 45202

Dear Mr. Loew,

I expect to receive a Bachelor of Science in Business Administration, with a major in Accounting from the Ohio StateUniversity in June 1994. Dr. John Smith, my accounting professor, advised me to contact you directly concerning a positionthat may be opening in the Accounting Department at Price Waterhouse.

As my enclosed resume indicates, I have significant experience in customer relations, which is a must for the accounting fieldtoday. My work included determining customer's needs, getting efficient responses, and interacting regularly via computer withthe home office.

My personal plans are to visit Cincinnati for about five days in late April. If I do not hear from you by then, I will call your officebefore I arrive to arrange a convenient time for an interview. Please feel free to reach me at 614-471-5743 if it would be moreconvenient to make an earlier appointment. I look forward to hearing from you.

Sincerely yours,

Patricia I. Medley

Enclosure

of 222

Business Buzzwords

Management Barriers to entry - Any factor that prevents the entry of a competitor into an industry or

market. Examples include high start-up costs and heavy competition. Chapter 7/Chapter 11 - The two legal methods for a company to file for bankruptcy.

Under Chapter 11, the company is allowed to continue in operation while it attempts financial restructuring and payment of debts. Under Chapter 7, the company is shut down and its assets liquidated in order to pay off its debts.

Competitive advantage - The aspects of a company that make it more competitive than other companies in the same market or industry; examples include high quality, customer service, and brand equity.

Corporate culture - The general feeling of a company reflected in the particular values, norms, and behaviors that are expected of employees by management; the "way things are done" in the company.

Decentralization - A management strategy that involves the diffusion of power throughout different levels of a company.

Diversification - A strategy of spreading risk between several markets, industries, or product lines. Investors diversify, and thus spread risk, by choosing several different types of investments.

Employee stock ownership plan (ESOP) - A program in which employees receive shares of stock in the company for which they work. This transfer of stock to the employees is a form of compensation or reward that is often used by management as a source of motivation.

Empowerment - A strategy intended to increase emloyees' motivation by increasing their involvement in their work.

Idle time - The time spent waiting to continue working on a process because of some delay or bottleneck.

Incentive plans - Incentive plans include any form of reward used to motivate employees, often based on increasing profits, sales, productivity, or maintaining market position.

Intellectual property - Ideas or works with legal rights to ownership held by their inventors, creators, or owners such as patents, copyrights, and artistic works (films, books, etc.).

Job depth - The amount of influence that individuals have over their job and workplace. Job satisfaction - The combined attitudes and beliefs (positive or negative) that one

holds about the various aspects of a job. Joint venture - A legal agreement between two or more companies to work together in

cooperation to achieve some particular goal. Mission statement - A short statement by a company stating its values, purposes, and

strategies. Quality circle - A company-sponsored activity in which several employees from different

areas of the company work together to discuss and solve problems related to the quality of a product or service.

Strategic planning - The formation of goals and the development of strategies to achieve these goals.

Synergy - The idea that the combination of two efforts will create a benefit that is greater than the sum of the individual efforts. For example, the value of the production of two

of 222

companies working together on a project is greater than if the two companies had worked independently on the same product.

of 222

Marketing

Available market - The group of consumers who have an interest in a product or service, access to it, and sufficient income to purchase it.

Bundling - The grouping of several products and/or services into one package. Bundling benefits buyers by condensing several purchases into one. Companies benefit by reducing the ability of consumers to compare individual product prices with those of competing companies.

Cherry picking - Purchasing several products individually that are usually sold as a bundle by one company from a variety of companies.

Cold call - Frequently used in telemarketing; basically, an unannounced sales pitch or sales call to a potential customer.

Cost per thousand (CPM) - The cost to an advertiser of reaching one thousand people with an advertisement. Marketing departments can use CPM to compare two sources of advertising within the same medium.

Differentiated marketing - A marketing strategy used by companies to increase sales volume. The company will segment a market and offer specially tailored goods/services to each separate and distinct element.

Direct marketing - Marketing strategy intended to make sales, rather than create preferences or name-brand recognition, by interacting directly with a target market and giving its members a chance to respond. An example would be a telemarketer calling a person from a target market and giving her an opportunity to purchase a product.

Discretionary income - The income remaining after taxes and after paying for the essentials (housing, food, etc.).

Distribution channels - Paths by which goods move from the manufacturer to the ultimate consumer. (Also known as marketing channels)

Events marketing - The associating of advertising for a product, service, or company with an event of interest to a target market. Companies will typically sponsor these events in exchange for advertising during the event.

Focus group interview - A group of several individuals who are involved in a discussion on a particular topic lead by a facilitator. The discussion can be effective at further defining the question at issue as well as revealing new questions.

Freelance - A type of work that is completed on a job-by-job basis by an independent contractor.

Global marketing - Marketing activity with a goal of achieving production efficiencies by producing standardized products for all consumers without a particular emphasis on local or regional differentiation.

Latent market - A group of people with a similar need or desire for a product that does not yet exist.

List broker - One who arranges for the sale or rental of specific lists of people within a target market.

Market share - Total number of units sold by a particular company expressed as a percentage of the total number of units sold by the entire market. An effective means of benchmarking competitive progress.

Media buyer - A person who plans for the purchase of space and time for advertising in several mediums for various companies.

Niche marketing - The specializing by a company to serve a small, particular segment of a market that is usually of little interest to major competitors.

of 222

Penetrated market - The customers within the potential market who have already purchased the market's product.

Potential market - The group of consumers who have access to and sufficient income to purchase a product or service.

Press release - A prepared statement that is distributed to the media. Product mix - The collection of products a company offers to the market. A product mix

can be either wide/broad (offering a large number of products) or narrow/limited (offering only a few products).

Public relations (PR) - A strategy used to increase the public's knowledge and acceptance of a company, its products, or its services; often used to counter negative publicity.

Public-service advertisement (PSA) - An advertisement focusing on the public's welfare usually displayed on donated time or space.

Rate card - A brochure that lists the costs of advertising on a particular media, such as radio, television, newspapers, magazines, or web sites.

Target market - The segment of the market actively pursued by a company. Telemarketing - A direct marketing tool in which a consumer is called by a seller, or the

consumer calls the seller, the product or service is described, and the consumer decides whether or not to purchase.

Trademark - The legal right of a seller granted by the government to the exclusive use of a symbol or brand.

Transit advertising - A form of advertising appearing on vehicles (buses, subways, taxis, etc.) used to target specific geographic markets.

Undifferentiated marketing - A marketing strategy that considers the market as a whole, that is with no segmentation. Also know as mass marketing.

Unearned revenue - Used to describe payment in advance for services not yet rendered or future goods.

Finance American Stock Exchange (AMEX) - The second largest stock exchange in the United

States (after the NYSE). AMEX has a larger listing of smaller businesses as its requirements for listing are less rigid than those of the NYSE.

Annuity - A contract that guarantees periodic payments at some future point in time, often after retirement.

Balance of trade - The net difference, in currency, between a country's imports and exports over a certain period of time.

Bearer bond - A security that does not have a registered owner; possession determines ownership.

Blanket purchase order - A contract that allows for the purchase of items from a supplier over a fixed period of time; it is used to reduce the number of purchase orders.

Blue chip - A common stock that has consistently paid dividends over a long period of time.

Bond - A debt obligation of an organization to pay a specific amount at a specific time, often used to raise capital.

Carrying costs - The costs of holding inventories to a company.

of 222

Common stock - Documents that represent ownership in a corporation. Owners of common stock, shareholders, usually are involved in the election of corporation officials.

Consolidation - The inclusion of subsidiaries in the financial statements of the parent company.

Disclosure - The part of a company's financial statement that includes an explanation of the its financial position and operating results.

Diversification - A strategy of spreading risk between several markets, industries, or product lines. Investors diversify, and thus spread risk, by choosing several different types of investments (for example, a mix of stocks, bonds, and cash).

Dividend - The transfer of a company's earnings to stockholders in the form of cash, property, or additional stock.

Dow Jones Industrial Average (DJIA) - The average value of a representative group of about 30 blue-chip stocks used to judge entire market movement and value.

Finance lease - A contract between lessor and lessee wherein the lessee agrees to make payments totaling the purchase price and finance charges for an asset for the life of the asset.

Fixed costs - Expenses, such as rent and utilities, that do not change even if there is an increase or decrease in sales.

Going private - The change in which a company goes from public ownership to private ownership through the repurchase of its shares from the public.

Going public - When a company sells to the public a portion of its common shares to raise capital.

Gross domestic product (GDP) - A measure of the total output produced and income earned within the United States. This measure includes exports and subtracts the value of imports.

Indirect cost - An expense not directly attributable to a particular unit of production, such as marketing expenses.

Long-term asset - An asset expected to provide economic benefits over a period of several years.

Market risk - The group of factors that affect the price of stocks, such as inflation and interest rates.

Money markets - Markets for the sale of short-term debts, such as certificates of deposit and Treasury bills.

National Association of Securities Dealers Automated Quotation System (NASDAQ) - A primary market for over-the-counter trading of stocks. Stocks quoted on NASDAQ are simultaneously listed on the NYSE as well as other regional stock exchanges.

New York Stock Exchange (NYSE) - The largest stock exchange in the United States that lists primarily larger companies.

Opportunity costs - The amount lost by choosing one activity over its next best alternative when both options cannot be chosen. For example, the opportunity cost of leaving a job to go to school is the salary of the job because it will no longer be earned.

Overhead - The costs of running a company that are not directly attributable to the products or services produced, such as utilities and maintenance.

Par value - The face value of a security. Preferred stock - A type of stock that gives its owner preference over common

stockholders in the distribution of earnings and rights to the company's assets, often paying dividends.

of 222

Price controls - A power of the government to set the price of a product or service above or below its market price.

Privately held company - A company whose shares of ownership are not traded publicly. Securities & Exchange Commission (SEC) - The governmental agency that regulates

financial reporting, accounting, and the trading and auditing of public companies. Simple interest - The interest paid on the principal of a loan when no compounding of

interest occurs. Spin-offs - Turning a portion of a company into a separate company that functions

independently. Spreadsheet - A table with rows and columns of numbers often used with financial

statements. Stock index - An indicator used to report and measure changes in value of a

representative group of stocks, such as the Dow Jones Industrial Average. 10-K - An annual filing made by a company to the Securities and Exchange Commission

detailing its financial information. Trade deficit - The debt incurred by importing products with a value greater than the

value of the products exported (see balance of trade). Transfer price - The price one part of a company charges another part within the same

company for a product or service that is often an input for a final product. Underwriting - The guarantee of a bank to a company issuing securities that it will

purchase any remaining securities at a fixed price if all are not sold. Write-down - The reduction in book value of an asset when there is an indication that its

value has decreased.

Benefits & Compensation Copayment - The portion of a medical expense, often a percentage, that must be paid

by the patient even after paying a deductible. Example: A patient's medical expense is $1200 and she has a $200 deductible and a copayment of 20%. After paying the $200 deductible, $1000 remains to be paid. Having a 20% copayment, the patient will pay $200 (20%) and the insurance will pay $800 (80%).

Covered expense - The medical services and products for which an insurance company agrees to pay. Some services typically not covered are cosmetic surgery or experimental drugs; these must be paid by the patient.

Deductible - The amount of a medical expense (usually a fixed amount, say $200) that a patient must pay before the insurer will consider paying any medical expenses.

Employee stock ownership plan (ESOP) - A program in which employees receive shares of stock in the company for which they work. This transfer of stock to the employees is a form of compensation or reward that is often used by management as a source of motivation.

401 (k) plan - An employee retirement plan that allows an employee to set aside a certain percentage of his/her income in a retirement account. The money in the account is usually invested, and often the employer will contribute to this account on behalf of the employee. The money placed in this account is not taxed until it is withdrawn.

Health maintenance organization (HMO) - A form of managed care that emphasizes preventative and early primary care, often with little or no copayments or deductibles. The patient is usually restricted to seeing a provider who is a part of the HMO. This provider is the primary care physician who must approve any specialty care.

of 222

Hygiene factors - The workplace conditions (compensation, working conditions, management policies, etc.) required to keep employees satisfied.

Incentive plans - Incentive plans include any form of reward used to motivate employees, often based on increasing profits, sales, productivity, or maintaining market position.

Keogh plan - A retirement account for the self-employed or for the employees of unincorporated businesses. Contributions, as with a 401 (k) plan, are not taxed until they are withdrawn.

Managed care - A form of medical care designed to control costs by having the medical provider accept discounts, share risk, or use case managers.

PPO - A preferred provider organization (PPO) is designed to reduce costs by having patients see providers who have agreed to offer service at reduced costs. Patients are allowed to see other non-PPO providers, but they are subject to higher deductibles and copayments.

Pension plan - An agreement by an employer to pay for retirement benefits for employees. This money is usually placed in a pension fund.

Sexual harassment - Any physical or psychological abuse based solely on sex that threatens the victim's employment status or interferes with his/her work performance.

Universal coverage - A system that provides access to health care for all citizens within a country.

of 222