Consulting Case New Business

Consulting Case
New Business
Contents
Will People Buy Ice Cream Online?.......................................................................................................1
Aeroflot Airlines to Enter Business Jet MRO Market...........................................................................3
Esurance Starts Car Insurance Comparison Site in Germany...........................................................8
Delivery Hero Raises $110M in New Round of Funding...................................................................11
Luxury Bus Company LimoLiner to Launch Low-cost Bus Line.......................................................13
Local Ann Arbor Supermarket to Add a Pharmacy in Store..............................................................16
What to Do With a Baby Dinosaur in Your Room?............................................................................18
Aetna to Offer PFFS Billing Service to Small Healthcare Plans.......................................................20
Cheung Kong Holdings to Enter Real Estate Investment Business.................................................23
O’Reilly to Move Electronic Components Catalog Online.................................................................24
Should Your Client Start a Sports Bar in Downtown Chicago?........................................................27
Manhattan Fruit Cart Vendor Expands into Selling Vegetables.......................................................29
Uber to Offer Chopper Service Between Manhattan & JFK Airport.................................................32
NYC Rolls Out Nation’s Largest Free Public Wi-Fi Network.............................................................34
Verizon to Enter Residential Home Security Market..........................................................................36
U.S. Cellular Considers Entering Vehicle Telematics Business.......................................................39
Wilderness Therapy Program Expanded to Corporate Executives..................................................41
Mexican Billionaire Carlos Slim to Fund More Universities...............................................................44
Delivery Service Startup Zipments Receives VC Funding................................................................48
China to Build Beijing-Shanghai High Speed Railway.......................................................................51
Guardian Industries to Enter Residential Glass Market.....................................................................55
Novartis to Open Cancer Care Centers in China...............................................................................58
Chicago AAA to Offer Premium Roadside Services..........................................................................60
USA Traffic Signs to Enter Paper Label Market.................................................................................64
Rio to Bid to Host the 2016 Summer Olympics..................................................................................68
Las Vegas Gas Station Try Hand at Slot Machine.............................................................................70
MTV Networks to Launch New Country Music Magazine.................................................................72
Ritz-Carlton Hotel to Install Mini-bars in Guest Rooms.....................................................................74
Kmart to Place Kodak Picture Kiosks in Stores..................................................................................77
Lowe’s to Offer Installation Services for Home Improvement...........................................................79
Burger King Not To Introduce Customer Loyalty Program................................................................82
P&G To Not Enter Retail Laundry & Dry Cleaning Business............................................................84
Tata Motors to Set Up New Courier Company in Mumbai................................................................87
Best Buy to Modify Sales Specialist Compensation Structure.........................................................89
KeyBank Not to Enter Online Brokerage Business............................................................................93
Oakbrook Center Use Web to Drive Shoppers into Stores...............................................................96
Home Depot to Sponsor a New NASCAR Racing Team..................................................................98
PKO Bank Polski to Replace Paper Tickets with SmartCards.......................................................101
USG Interiors Not to Use Excess Capacity for Door Making..........................................................104
Is It a Good Idea to Open a Classical Music Radio Station in Philly?...........................................106
McDonald’s to Offer More Health Food Options in the U.S............................................................109
Poland Springs Create Private Label Bottled Water for Walmart...................................................111
Sun Products Considers Entering Dry Cleaning Business..............................................................112
Bill & Melinda Gates to Invest in Golf Apparel Business.................................................................113
The Nature Conservancy to Spin-off Its Database Division............................................................116
Continental Airlines Starts Charging for In-flight Meals & Snacks.................................................120
Where Would You Open a New Blockbuster Video Store?............................................................122
Subway to Roll Out New Frequent Eater Program..........................................................................123
Tire Maker Bridgestone to Develop E-commerce Strategy.............................................................125
Northeast Utilities Weighs Water Meter Reading Service...............................................................128
ADP to Not Enter Pension Check Processing Business.................................................................130
NRG Energy Considers Entering Telecommunications Market......................................................131
Optima Batteries Assess Recent Entry into Forklift Business........................................................133
Unisys to Not Enter PC Maintenance & Repair Business...............................................................135
Century Aluminum Develops New Technology in Plastics..............................................................137
Royal Bank of Canada to Install ATMs in All Branches...................................................................138
CarMax to Tighten Car Loans & Auto Finance Policy.....................................................................140
Capital One Auto Finance to Revamp Loan Issuing System..........................................................142
Philadelphia Museum of Art Uses Web to Increase Revenues......................................................144
What is US Annual Market Size for Car Tires?.................................................................................146
Carson Helicopters Considers Starting Air Shuttle Service............................................................148
Travel Agent Buys Chartered Plane to Expand Business...............................................................149
Gogo Inflight Wireless Internet to Expand to More Airplanes.........................................................150
Romance Publisher Harlequin Rejects Bookstore’s Deal...............................................................152
Discover Card to Launch Airline Miles Reward Program................................................................154
Arby’s Restaurant Plans to Test Frequent Diner Program..............................................................155
Greyhound Lines to Cut Costs and Add New Routes......................................................................157
Boston Beer Company Considers Entering Wine Business...........................................................159
EasyJet Airline to Start New Route Between Paris & London........................................................160
Encyclopedia Britannica to Enter Online Web Business.................................................................163
Medical Startup Xagenic Develops Blood Filtering Device.............................................................165
How Many Stories to Build Manhattan Apartments?.......................................................................167
Chase Bank to Open New Branch in New York City.......................................................................167
Israeli Travel Agent Eyes on US-Tel Aviv Route..............................................................................168
How Would You Start a New Business at Kellogg?.........................................................................169
American Airlines Consider New Japan-US Routes........................................................................170
Bank of America Midwest Launch Online Banking Service............................................................172
Should Bloomberg Offer Retail Brokerage Service?........................................................................172
McKinsey to Expand Firm’s IT Consulting Capabilities...................................................................173
Fuji Photo Film USA Enters Film Developing Business..................................................................174
AT&T Considers Electronic Home Security Business.....................................................................175
CitiBank Considers Opening a New Branch in Chicago Loop........................................................177
Regions Financial Replaces Branches with Telephone Banking...................................................178
Will People Buy Ice Cream Online?

Case Type: new business; market sizing.
Consulting Firm: McKinsey & Company first round full time job interview.
Industry Coverage: food & beverages; startups; information technology (IT).
Case Interview Question #00781: Our client is a fresh MBA just graduated from business school.
Encouraged by the recent technology and Internet startups boom, and also, to make the world a better
place, the client has just founded a startup company together with two business school
classmates. Their business plan is very simple: to start an online ice cream
delivery shop.
Similar to other online food ordering companies like GrubHub, Seamless, Delivery Hero, Just-Eat,
FoodPanda, etc, the client’s startup works like this: They will buy an ice cream store first, then build a
website which would list different kinds of ice cream they sell, as well as menus from local ice cream
shops. The users would then use the website to place orders online. The client would then be responsible
for arranging the ice cream delivery, either from the client’s own store or from local ice cream shops. The
client would generate revenues by charging a small commission fee to ice cream shops for every
customer order from their website.
Is this a good idea? Why or why not?
Possible Answer:
Question 1: What factors should you consider with this type of business?
Suggested Solution:
1. Internal Factors/ Value Chain
a. Supplier Types
 Local ice cream shops

 Third party bulk ice cream distributors (wholesalers)
 Buy ice cream at store and store in freezer for internally controlled distribution
b. Distribution
 Rely on local shops (similar to online florists)

 In company owned freezer trucks
2. External factors/ Market
a. Advertising
 Where to advertise? Bonus for suggesting real potential options like Google AdSense
 Which markets and segments to target?
b. Delivery Methods
 Rely on local ice cream shops {similar to online florists)

 In company owned freezer trucks
c. Competitors
 Market Size (will people order ice cream online, and why?)
 Grocery stores and other brick and mortar ice cream shops
d. Seasonality
 Can you achieve sales year round or only during hotter months
 Changing ice cream flavors, and therefore inventory, for the time of the year.
Question 2: Estimate the market size (in $) in the United States for online ice cream delivery (averaged
over the year).
Suggested Solution:
1. Determine the population of the country (To be provided if asked: approximately 300 million)
2. Calculate the portion of population that eats ice cream
 There area many types of ice cream and it is a popular food item
 Roughly half of the population eats ice cream regularly, and it is evenly distributed across income,
age, and gender
 50% * 300M = 150 million
3. Find the part of population that would be willing to order ice cream online
 20-30 year old population is more likely to order online, especially for gifts
 Average life expectancy is around 80 years, so percentage of population in the target age range
would be (30-20)/80 = 12.5%
 12.5% * 150M = 18.75 million
 Percentage of this age group population that would order online is 20%
 20% * 18.75M = 3.75 million
 To simplify calculation, let’s say 4 million
4. Estimate the average size of the order (price per order) to find the total market size (note: exact
numbers are not important, provide them if asked)
 Customers are likely to order larger quantities if ordering online due to delivery costs
 Average price of ice cream is around $3 per pint (to be provided if asked)
 Average online order is 2 pints, giving an average order of $6
 Average person orders once or twice a year
 4 million * $6 * 2 = $48 million
Question 3: Is this an attractive business?
Suggested Solution:
The short answer is no. Main reasons are:
 Market size is too small: only $48 million in total addressable market
 Business model still unproved: will people really order ice cream online?
 Competition from other brick and mortar ice cream shops.
Aeroflot Airlines to Enter Business Jet MRO Market
Case Type: new business.
Consulting Firm: Roland Berger Strategy Consultants first round job interview.
Industry Coverage: airlines.
Case Interview Question #00780: The client Aeroflot – Russian Airlines, commonly known as Aeroflot, is
the flag carrier and the largest airline of the Russian Federation. The carrier operates domestic and
international passenger and services, mainly from its hub at Sheremetyevo International Airport in
Moscow Oblast, Russia. Following the dissolution of the USSR, the carrier has
been transformed from a state-run enterprise into a semi-privatised company which ranked 19th most
profitable in the world in 2007.
You are working on a project for Aeroflot Airlines. Their current business model is purely focused on
passengers, offering Economy, Business and First class travel. They have been relatively successful in
recent years and have funds available to invest. The company’s CEO has asked you to investigate
entering the global MRO (Maintenance, Repair and Overhaul) market for business aircraft. Is business jet
MRO an attractive market to enter? Why or why not?
Possible Answer:
Question #1 – Interviewer: How would you go about structuring your analysis to this question?
Candidate: First, I would need to understand what the MRO (Maintenance, Repair and Overhaul)
business is about and establish the size of the market and its potential growth. To do this, I would (a)
identify the different segments within the market, and (b) use price/volume analysis to determine their
relative size. Then, knowing the dominant segment, or segments, I would investigate what the market
growth drivers are.
Second, I would want to investigate the intensity of competition in the market as this would indicate what
the likely market shares and margins for EuroCarrier would be. From this, I would also get a good
understanding of some of the potential risks.
Analysis of market size, growth and competitiveness will help me assess the attractiveness of the market.
If it is an attractive market, then I would need to think of potential means to enter the market. If the market
is not attractive, I would want to offer the CEO some alternative options for consideration.
Interviewer: Okay, this structure makes sense. What kind of products do you imagine are offered in the
MRO segment?
Candidate: Well, in terms of maintenance, I imagine they have to do an inspection of the plane before
each flight, to check everything is okay. They would then have some kind of planned maintenance checks
where they do a more detailed inspection. On the inside, they must maintain the seats and carpets pretty
regularly. That’s the “M” covered. “R” for repairs would be when the plane has been damaged or has
suffered wear and tear and needs fixing, and I guess “O” for overhaul has something to do with a
complete refit of the aircraft.
Interviewer: Yes, that’s most of the services offered. In industry terminology, there are three types of
maintenance.
 Line maintenance, which involves pre-flight checks

 Light checks, which are inspections of major components every 4 months and
 Heavy checks, in-depth inspections of all components and systems, which happen every three
years
The next major revenue stream within maintenance is called interiors. One product is deep-cleans, which
is cleaning and repair of carpets, seats and so on. The second product is similar to what you described as
overhaul, which involves reconfiguring the interior layout of the aircraft. How frequently do you think they
would do these interiors operations?
Candidate: I imagine a good proxy to use is that they would conduct a deep clean whenever a plane
undergoes a light check, and likewise they would undertake a modification while the plane was having a
heavy check. Since they would have to take the plane out of service to conduct these checks, they would
want to do as much as possible concurrently, to minimise overall down-time.
Interviewer: That’s a sensible assumption.
Candidate: The next thing to consider is the different market segments. The size of the aircraft would be
the major driver in determining the price of these services. So I would use three segments: large, medium
and small.
Interviewer: The large and medium aircraft are called widebody and narrowbody business liners
respectively, while the small aircraft are called business jets. This table summarises the current numbers
of these aircraft flying, together with the manufacturer (A, B, C…):
Number of aircraft in service A B C D E F Total
Business Liner – Widebody 9 47 0 0 0 0 56
Business Liner Narrowbody 23 171 0 0 0 0 194
1,54 1,17
Business Jet 0 0 8 1,124 96 4 3,942
1,54 1,17
Total 32 218 8 1,124 96 4 4,192
Candidate: The first thing that strikes me here is how numerically dominant the business jet is compared
with the business liners. Assuming that you get four times as much revenue from the larger business
liners, 80% of the market will still be from business jets. For that reason, I am going to focus on sizing the
market for business jets.
Considering the maintenance and interiors services we discussed earlier, there are two drivers that I can
think of. One is the labour charge and the second is the cost of materials. Are there any others?
Interviewer: Well, there are obviously overhead costs to consider, but generally the client is billed for
materials and labour, so these are good revenue drivers to assume. Before going further, let’s just
consider line maintenance, which is conducted before each flight. If I said this isn’t likely to be a significant
revenue stream, why might this be?
Candidate: If it’s conducted before flight, then it will be done at whichever airport the aircraft is departing.
Which means we’ll only ever get “line maintenance” revenue when an aircraft comes to the airport where
our business is based.
Interviewer: In fact, many business jets actually have an onboard engineer, who conducts the line
maintenance himself, so there’s no need for an external provider.
Candidate: So that means the market consists of “light checks” and “deep cleans” happening every four
months, together with “heavy checks” and “modifications” happening every three years.
Starting with labour prices, I would imagine you have to pay around USD 25 an hour for a trained aircraft
engineer, then on top of this you’ll have to incorporate things like training costs, indirect staff costs,
utilities, etc. into the charge out rate. Overall, you would bill about USD 100 per hour. Actually, thinking of
the services we’re offering, for the deep clean you could probably use cheaper, lower skilled staff, so they
would have a lower hourly rate.
Interviewer: That’s true. Deep cleaning labour has a fully-burdened cost of USD 60 per hour, whereas it’s
USD 120 for the other services. A light check requires 150 man-hours, a heavy check takes 1,200
manhours, a deep clean is 100 man-hours and a modification needs 1,000 man-hours.
Candidate: A quick set of calculations will now work out the labour revenue for each of them:
Light check: Labour rate x man-hours = 120 x 150 = USD 18,000

Heavy check: Labour rate x man-hours = 120 x 1,200 = USD 144,000
Deep clean: Labour rate x man-hours = 60 x 100 = USD 6,000
Modification: Labour rate x man-hours = 120 x 1,000 = USD 120,000
Of course there is also the materials to consider. I imagine they’re a much more significant proportion of
the revenue for heavy checks and modifications, where there would be lots of replacement parts.
Whereas if you are doing a deep clean, the material needed are pretty insignificant.
Interviewer: Okay, let’s ignore the material cost for deep cleaning. As an industry benchmark, material
revenues are only a tenth of the overall revenue for light checks but half of the overall revenue for heavy
checks and modifications.
Candidate: So that means the materials represent USD 2,000 for a light check, USD 144,000 for each
heavy check and USD 120,000 for every modification.
Hence the overall revenue for each type of service is:
Light check: Labour revenue + materials revenue = 18,000 + 2,000 = USD 20,000
Heavy check: Labour revenue + materials revenue = 144,000 + 144,000 = USD 288,000
Deep clean: Labour revenue + materials revenue = 6,000 + 0 = USD 6,000
Modification: Labour revenue + materials revenue = 120,000 + 120,000 = USD 240,000
There are three light checks and deep cleans each year, and a third of a heavy check and modification in
the average business jets year. Therefore the average annual MRO revenue is:
[3 x (20,000 + 6,000)] + [1/3 x (288,000 + 240,000)] = USD 254,000
Okay, so rounding the numbers, if we have 4,000 business jets, each with an annual MRO bill of USD
0.25 m, then the annual value of the business jet MRO market is around USD 1 billion.
Very roughly speaking, if I use the previous assumption that a business liner generates 4 times as much
revenue as a business jet given its larger size, that’s USD 1 m spent on MRO each per year, or USD 0.25
billion for all 250 aircraft. Hence the overall market for MRO on business aircraft is USD 1.25 billion.
Question #2 – Interviewer: Now that we’ve established the market size, let’s consider its growth potential.
What would you use as a proxy for business jet MRO demand growth?
Candidate: Well, obviously demand growth for business jet MRO is going to be directly correlated to the
demand for business jets. As business jets are generally used by senior individuals in companies and
heads of state, I would imagine that GDP growth is a sensible proxy. This would indicate that demand will
grow most strongly in regions such as Asia and the Middle East. However, I’ve also read that the number
of high net worth individuals is increasing very rapidly. So maybe you need to put a multiplier on GDP to
reflect this and get an accurate growth rate. Say somewhere between 1.5 and 2.5 times GDP.
Interviewer: The actual forecast growth for business jet MRO demand is about 7%, so taking something in
the middle at twice GDP growth will be equivalent to this. What specific factors might impact steady
demand development?
Candidate: In times of recession, you would expect there would be a lot more pressure on demand,
particularly for corporate users who need to control costs. So demand would follow a more cyclical pattern
over the periods of recession and growth. Of course, this is all volume demand. Price development will be
affected by the competitive intensity of the market.
Question #3 – Interviewer: Now seems a sensible time to assess the competitive intensity of the market
then. There are currently five major MRO providers, each with a 20% market share.
Candidate: Well, the industry seems pretty fragmented, with no real dominant company. This implies that
the market place will be relatively competitive, putting some pressure on prices and therefore margins.
As for the customers, I imagine there are some companies that have a fleet of business jets that they
charter out. If this is a sizeable operation, then they may already have internal MRO operations. Of course
some business jets may be tied to long term contracts with existing MRO providers. However, I think the
majority of customers would be open to using any MRO provider that offers the correct level of service,
reliability and quality at the necessary pricing point.
Within the market, I can’t really imagine any direct substitutes and suppliers are likely to offer parts at a
fixed aftermarket price. In addition, there are pretty high barriers to entry. You would need hanger facilities
at an airport, highly trained personnel and a significant pool of spare parts, which would collectively
require a lot of investment. So all these factors make this an attractive market to be established in, if you
are able to overcome these barriers to entry.
To conclude, at an annual value of USD 1.25 billion and 7% volume growth rate, the business jet MRO
market seems worthy of entry. The competitive situation indicates there will be no dominant player.
However, with the high volume growth, you could rapidly improve market share organically. I would
therefore recommend entering this market to the CEO.
Question #4 – Interviewer: So, we’ve decided that this is a good market to enter. What are the potential
entry methods available?
Candidate: Well, they could use the funds to set up their own business from scratch, or they could acquire
an existing business. They could also form some kind of joint venture.
Interviewer: What kind of companies might they form a joint venture with?
Candidate: The obvious choice would be with an existing MRO provider. They could use the funds to
expand existing operations, product offering or geographic location. However, another option would be to
form a joint venture with a business jet operator that already has a maintenance facility and is looking to
expand. This would provide an initial captive market base for the business, guaranteeing an initial source
of revenues. The downside of this is that margins are likely to be lower with the joint venture partner, due
to the greater transparency they have on your costs.
Interviewer: Previously you mentioned either setting up or acquiring a business. What are the advantages
and disadvantages of these options?
Candidate: Setting up a business offers the highest risks and returns. You start with no technical skills in
the sector, need to establish a base of operations and acquire market share from competitors. But you do
get to keep 100% of your profits. If EuroCarrier has existing maintenance facilities, these could be used.
With acquiring, you already have an existing operation with existing customers. However here the issue is
that there might not be any suitable companies available for acquisition, and even if there are, you need
to ensure that you are not overpaying for them.
Interviewer: So if you had to recommend one of these options to the CEO, which would it be?
Candidate: I think I would go with one of the joint venture options – the one with an existing business jet
operator. Here there is already an existing customer and skill base, so that right from the beginning the
focus can be on expansion, rather than worrying about things such as gaining technical skills and setting
up a base of operations. Unlike acquiring a company, there will be fewer issues with valuation, loss of
senior management and integration. In addition, from the perspective of mitigating risk, a joint venture
offers an easier exit route from the market, if and when required.
Esurance Starts Car Insurance Comparison Site in Germany

Consulting Firm: Boston Consulting Group (BCG) first round full time job interview.
Industry Coverage: property & casualty insurance; information technology (IT).
Case Interview Question #00774: Your client Esurance Insurance Services, Inc. is an American auto
insurance provider. The company, which is a wholly owned subsidiary of Allstate (NYSE: ALL), sells car
insurance direct to consumers online and over the phone, offering services to nearly 90
percent of the U.S. population in 40 states. Its primary competitors are other
direct personal auto writers such as GEICO and Progressive.
In order to diversify its business, the CEO of Esurance wants to create an online shopping and
comparison website for car insurance that connects car insurance agents with customers virtually. In this
website, car insurance agents could pay a fee to be listed on the website. When customers are shopping
for car insurance on the website, the site would compare quotes from the various agents for the customer
for free. The customer would then contact his or her preferred agent directly based on the price
comparison.
Does this sound like a profitable business for Esurance?
Possible Answer:
Question #1: What factors could affect the profitability of this car insurance comparison website?
Suggested Solution:
Profitability can be analyzed in terms of revenues and costs:
Revenue factors may be:
 Ability to attain large volume of customers and variety of insurance provides to participate
 Ease of use of website
 Marketing/advertising efforts to consumer
 Need for this product, revenue structure of the website (whether agents pay a flat fee, per
customer they win, etc.)
Cost factors could be:
 Maintenance of the website

 Marketing costs.
Question #2: What is the market size for this business segment if this website is operated in Germany?
Additional Information: to be provided if asked
10% people change insurance companies yearly on average. This is includes people who
i) buy new insurance
ii) change their insurance
iii) no longer have insurance.
It is unlikely that car ownership is growing in a well developed market like Germany.
Yearly car insurance fee in Germany is around 1400 Euros on average.
Extra points to the interviewee for mentioning different types of car insurance exist.
Suggested Solution:
1. Size of German population: 80 million (interviewee should know, otherwise provide)
2. Number of people that drive cars (not to be provided to interviewee; interviewee should estimate)
a. Assume average life expectancy is 80
b. Segment market by urban vs. rural:
 Urban: (60 million people)

 Rural: (20 million people)
c. Segment into families, 2 people per family: 30 million urban families, 10 million rural families.
d. Car ownership per family: 100% in rural, 70% urban

3. Number of cars in Germany = (30 million * 70% + 10 million * 100%) = (21 million + 10 million) = 31
million
4. Population who will shop for car insurance online:
 Assume people under age 20 don’t own cars

 Age 20 to 50: 90% willing to shop online for car insurance
 Age 50 to 80: none buy online (older generation)
Total = 90% of 3/8 of population will shop for car insurance online
5. People who change car insurance each year
31 million * 10% = 3.1 million
6. People who would be willing to buy car insurance online
3.1 million * (3/8) * 90% = 1 million
Revenue = 1 million * 1,400 Euro = approximately 1.4 billion Euro
Conclusion: Online car insurance market in Germany is approximately 1.4 billion Euro.
Question #3: How much could the Esurance website charge agents for listing ads?
Additional Information: to be provided if asked
 Agents pay based on how many searches customers make on the Esurance website.
 Only 10% of car insurance searches actually result in a purchase for each agent.
Suggested Solution:
Average revenue per customer search = 1400 Euro * 10% convertion rate = 140 Euro
Fee to agent per search should be less than the revenue insurance company receives per customer
search (possibly 1-5% is reasonable), therefore, fee charged to agent should be = 140 Euro * 5% = 7
Euro per customer search (the interviewee could suggest from 1.5 Euro to 7 Euro)
Excellent Response:
Suggest different pricing fees based on cost per click or even cost per displaying ad (not even for clicks).
Question #4: Please advise the Esurance CEO whether this is a profitable business.
Suggested Solution:
Yes, this is a profitable business because potential revenues are greater than costs.
Revenues:
 Large insurance market in Germany
 Good margins: 1-5% fee to insurance
Costs:
 Capital requirements are low

 Marketing costs are moderate
 Website maintenance costs are low
Potential Risks: need for extensive marketing, potentially new business model for consumers, potential for
new entrants who can easily copy the business model.
Delivery Hero Raises $110M in New Round of Funding

Industry Coverage: food & beverages; startups; information technology (IT).
Case Interview Question #00773: Our client is Delivery Hero Holding GmbH, a small Internet startup
company based in Berlin, Germany. The founders of the startup would like to start a new business in
Germany: providing online food and beverage ordering service. You have been hired to
evaluate the feasibility of the idea.

The Delivery Hero company would host a website which would list local restaurants with delivery services.
The users would then use the Delivery Hero website to find restaurants in their area, usually filtered by
cuisine and browse menus, read reviews and other information like the restaurant operating times and
order takeaway food and beverage online. Payments can then be made by credit card, PayPal or with
cash on delivery. The restaurants would then be responsible for arranging their own delivery service. The
client Delivery Hero would attain revenues by charging a small commission fee to restaurants for every
customer order from their website.
Is this an attractive business? Why or why not?
Possible Answer:
Question #1: Estimate the market size of an online foods delivery service in Germany.
Additional Information: (only provide if asked)
Population of Germany is approximately 80 million as of 2014.

Average price of each online food purchase: 12 Euro per order.
% Population that buys food online (segment by age, location distribution)

 Age 0-10: approx. 0% (no money or capability to buy online)
 Age 10-20: approx. 20%, usage: 1 order every month
 Age 20-30: approx. 30%, usage: 1 order every 2 months
 Age 60-80: approx. 0%
Suggested Solution:
a. Segmentation of population by age
 Age 0-10: approx. 10 million

b. Market Size Calculation
 Age 10-20 = 10M * 0.2 * €12 * 12 orders/year = €288M

Total = €288M + €216M + €288M + €192M = €984M
Excellent response:
An outstanding interviewee should note that the German population distribution has a disproportionately
higher amount of elderly, segmenting population in more detail, % that orders online from each age
bracket, adding considerations such as German economy (current vs. future market potential).
Question #2: What are the key success factors to gaining market share in this business?
Suggested Solution:
 Technical ability to scale the website to millions of users.
 Advertising: online vs. print, social media advertising campaign.
 Discounts/promotions: discount for first time users, free delivery, loyalty points.
 Satisfaction guarantee: money back if not satisfied (risks of this).
 Purchase Competitor: gain market share quickly.
 Ease of use of the website and possibility for online payment.
Question #3: Is this an attractive business?
Suggested Solution:
 Low maintenance costs, large marketing costs.
 Consider whether the client has strong core competencies for this business model.
 Market is not saturated but also not growing rapidly.
 Competitors: what is current competition like? – Some small players are already in this market.
 Business model is easy to copy.
 The client will not be able to have first mover advantage, although they can try to quickly get a
large market following to deter competitors.
Conclusion:
No, this is not an attractive business idea because:
 Business model is easy to copy.

 Acquiring a large enough distribution network is difficult, as online food ordering is not yet popular
in German culture.
 Small market: less than €1 billion in total addressable market (TAM).
 Large marketing budget would be necessary to gain market share.
Luxury Bus Company LimoLiner to Launch Low-cost Bus Line
Case Type: new business; business competition, competitive response.
Consulting Firm: Deloitte Consulting first round full time job interview.
Industry Coverage: transportation.
Case Interview Question #00760: Your client LimoLiner is a Northeast-based luxury bus company that
operates inter-city passenger buses along the Boston – DC corridor. The client has been in this market for
over 40 years and has been reasonably profitable for most of that time. LimoLiner buses have
larger leather seats with more legroom than typical intercity buses. In addition to
a bathroom, the bus has an attendant and a small galley provisioned with free light snacks.
In recent years, the client LimoLiner’s market share and profitability have been declining. Looking at the
competitive landscape, the CEO of LimoLiner recognizes that a number of low-cost, no-frills bus
companies have entered the market. As a result of these new entrants and high gas prices, overall
demand for inter-city bus services has been on the rise even as our client loses customers.
The client has hired us to determine whether they should launch their own low-cost bus line. And if so,
how they should compete in this market?
Additional Information: (to be provided upon request)

 The client LimoLiner targets a 40% gross margin for any new investments.
 The overall inter-city bus services market is growing at about 5% per year.
 The client LimoLiner’s two main routes are Boston – New York and New York – DC. There are 5-
6 competitors on each route.
 The low-cost bus lines (Lucky Star Bus, Fung Wah Bus, Yo! Bus, Bolt Bus, etc) typically operate
out of Chinatown in the respective cities or pick up on the street (not in stations). They tend to use
older equipment and have poor reputations for reliability and safety.
 The client LimoLiner is struggling most with “first-time riders”, who tend to be younger, perhaps in
college, and are riding inter-city buses for the first time. The client has a stable base of long-term
customers where they have not seen much erosion.
Possible Answer:
1. Suggested Framework
A good structure for this case would focus on profitability, but might also touch on issues of assessing the
market, differentiation of the competitors, the client’s capabilities, and customer segmentation. Ideally, the
case taker should ask if there are any metrics that the client focuses on before structuring the case, which
would demonstrate that profitability is going to be the focus. You can allow the interviewee to pursue
some other areas of investigation initially but try to guide them towards the profitability question
eventually.
While there could be a number of ways to look at profitability (and the interviewer should let the
interviewee or case taker think through how to approach this), the case takes a simplified approach of
looking at one bus operating on one route and assumes that this would be scalable across additional
buses. The fictional data presented below is for the Boston-New York route. Feel free to make the math a
little harder (e.g. bus makes 900 trips per year) if the interviewee needs to practice.
Once the interviewee has completed the profitability analysis, have them brainstorm responses for the
second question of the case: How could the client effectively compete in this market?
2. Analysis
A. Breakdown of Revenue (data provided on request)
 The client currently charges $40/one way on the Boston-New York City route
 Low cost competitors are currently charging an average price of $15/one way
 Each bus has capacity of 60 seats and estimated average utilization of 67%
Total revenue per one-way trip (new low-cost bus line) = $15 * 60 * 67% = $600
B. Breakdown of Costs (Note: since our focus is on gross margin the interviewee can ignore SG&A costs)
Fixed Costs: (bus operates 330 days/year at 3 trips per day, thus ~1000 trips per year)
 Bus: $250k (useful life of 10 years) = $25/trip

 O&M: $20k/year = $20/trip
 Insurance: $15k/year = $15/trip
Variable Costs:
 Labor: 1 driver at a wage of $25/hour for 5 hours = $125/trip

 Fuel: $4/gallon, 200 miles, 10 miles per gallon = $80/trip
 Tolls: $75/trip
C. Profits
 Total Costs = $25 + $20 + $15 + $125 + $80 + $75 = $340/trip

 Total Revenue = $600/trip
 Profits = $600 – $340 = $260
 Profit Margin = $260/$600 = 43.3%
Question #2: How should the client compete in this market?
Possible Answer:
Good responses to this question should recognize that customers that take the proposed new low-cost
bus lines are very price conscious and thus the client will have to compete on price (i.e. match
competitors’ low prices). However, the client should look for how they can differentiate their product from
the new competitors. Potential responses include:
 Focus on safety and reliability

 Offer additional amenities (e.g., Wi-Fi, music, movies, etc.)
 Offer food and drink service (bonus points if they mention this as an additional revenue
opportunity)
 More direct routes
 More convenient pick-up locations
 Loyalty programs
 Leverage existing brand (Warning: This would likely hasten cannibalization and is not a good
idea)
3. Conclusion
A. Recommendation
The client LimoLiner should launch their own low-cost bus line
 Meets gross profit target of 40%

 Room for new competitor in growing market
 Will continue to lose customers if they do not act
Risks:
 Cannibalization of existing customers (This is a big one!)

 Competitor Response: engaging in a price war with competitors that have lower costs
 Rising fuel costs
B. Next Steps
Potential next steps include:
 Identify opportunities to generate additional revenue sources in order to make up for lower
profitability of new bus line
 Conduct market study of “first time riders” to determine what additional amenities they would
value the most
 Develop retention strategy on existing bus service to minimize cannibalization
 Develop distinctive branding strategy for new bus line
 Launch pilot on one route to validate financial assumptions and test competitor response
Local Ann Arbor Supermarket to Add a Pharmacy in Store
Case Type: new business; math problem.
Consulting Firm: Oliver Wyman first round full time job interview.
Industry Coverage: small business; retail.
Case Interview Question #00758: After graduating from business school, you work as a consultant at
Oliver Wyman. You have a friend who owns a single supermarket (mom & pop store) in the town of Ann
Arbor, Michigan. This friend has called you for some free advice because you are an MBA and consultant.
He says that he has noticed his supermarket competitors have recently added
pharmacies to their stores and he is wondering whether or not he should do that himself.
Your friend has some data sources and can provide you with whatever you need, but first he needs to
know what data you need to help him make this decision. So, what kind of data would you tell your friend
to gather? Should your friend add a pharmacy to his supermarket? Why, or why not?
Additional Information: (provided upon request)
1. Investment Criteria
Because this is a small operation, your friend needs a payback of < 2 years (no discounting necessary).
2. Customers
 He has 10,000 unique customers every month.

 On average, 50% of the local population have prescriptions.
 People who have prescriptions average 1 filling per month.
3. Competitors
There are 2 Pharmacies and 2 Grocery Stores within 4 miles of his store.
4. Revenues
 Each grocery customer spends an average $100/month at his store (assume 1 visit/month).
 Each prescription sale brings in revenue of $50.
 Each prescription customer tends to spend 40% more on groceries at the store.
5. Costs
 Initial investment for adding a pharmacy: $1.2m.

 For an added pharmacy, assume the costs of running a pharmacy are equal to 90% of revenue.
 Current grocery operations cost structure:
 50% Food / COGS
 10% Labor
 10% Fixed Overhead
Possible Answer:
1. Suggested Framework
This is a typical “adding a new business line” kind of case. The interview is meant to be conversational
with the giver of the case to ask enough probing questions to keep the candidate on their toes and
thinking through the problem.
Additional questions that help to steer discussion. Note: not all questions need to be asked if the
candidate is leading the conversation.
 What is the population of the town/addressable market?

 What is the minimum market share needed to break even in 2 years? Is this reasonable?
 What are the two major costs of operation that the grocer will incur when opening a pharmacy?
 What margin do you asses for incremental grocery sales? (Only if the individual asks about
revenue synergies)
2. Quantitative Analysis
A. Current market size estimate:
Because there are three Grocery Stores in the local market, estimate that the current market share of
your friend’s grocery business at 30%.
10,000 / 0.30 = Total unique customers each month = 33,000
33,000 grocery customers * 3 people per household = Total Population = 100,000
Pharmacy market is then 100,000 * 50% = 50,000 customers
Odds of each household containing at least 1 pharmacy customer = 1 – 0.5^3 = 87.5%
Thus, of your friend’s 10k grocery customers, 8,750 have prescription needs
B. Incremental value of a pharmacy customer per year:
Profit from grocery sales = $100 * 40% incremental sales * 30% profilt margin (1-50%-10%-10%) = $12
Profit from drug sales = $50 * 10% profilt margin (1-90%) = $5
($12 + $5)/month * 12 months = $204 per year
C. To break even in 2 years:

1.2m / ($204 * 2) = ~3,000 pharmacy customers
Your friend only needs 3,000/8,750 = ~35% of the households who have prescriptions and currently shop
at your friend’s store to break even in two year.
3. Conclusion
A. Recommendation
 Your friend should invest / expand to include a pharmacy because there is an extremely high
likelihood that he will break even in less than two years.
 Value of a pharmacy customer is very high because of margin on drug sales and increased
grocery sales in the store.
 Only need 35% of his current grocery customers who have prescriptions to switch to his
pharmacy to make it profitable.
B. Next Steps
Some suggestions:
 Make good design plans for the pharmacy

 Get a bank loan
 Interview pharmacists
 Market the new service to customers
 Contact drug reps / determine suppliers
 Contact drug-store competitors to see if they want to do a joint venture or partnership because
you will probably put them out of business.
What to Do With a Baby Dinosaur in Your Room?
Consulting Firm: McKinsey & Company first round summer internship job interview.
Industry Coverage: small business, startups.
Case Interview Question #00751: You are a second year MBA student with a strong appetite for
entrepreneurship. The other day you walk into your apartment and you find a baby dinosaur in the corner
of your room. What do you do?
Additional Information: (to be provided to candidate upon request)

The baby dinosaur is the only one in the world, and it turns out he is friendly. No other information
regarding the baby dinosaur is available.
The candidate should layout some initial decision tree that could include:
 Take Action: run, call 911, call family or friends for help, pick up a stick to hit it with, stay there
and cry, etc.
 Take No-action: Dinosaur leaves on its own, Dinosaur is friendly, Dinosaur is not friendly and you
may die.
If the baby dinosaur is friendly, the candidate should think of ways to monetize it.
Possible Answer:
1. Structure to Steer Discussion
A strong candidate will be able to structure their thought process to include the following issues:
 Should they approach the dinosaur or run away? (depends on whether it is friendly).
 What can they do with the dinosaur? (Monetizing activities, vs. non-monetizing activities such as
research, etc).
 When monetizing the dinosaur, they should consider selling vs. building a dinosaur
business/franchise.
2. Questions for the candidate
A. What are possible ways to monetize or make money in this situation?
Sell it, or create business around it. The candidate should brainstorm possible ways to create a business
like using it for a movie, leasing it to a zoo or an entertainment show, or creating an ecosystem around
the dinosaur like a theme park.
B. What would you prefer to do, sell the dinosaur or use it for a business? Why? What are the possible
costs and revenues you can generate in each case?
C. What are the potential risks in this situation?
 Dinosaur dies
 Dinosaur attacks/eats spectators
 Government seizes dinosaur and claims right to it
 Environmental concerns, etc.
D. What are the possible ways to hedge against the possibility of dinosaur death?
Insurance, clone the dinosaur, asking science experts in field for ways to take care of it, create an
ecosystem around Dinosaur like a theme park or having it star a movie.
3. Recommendation
A good recommendation for this case will include creating an ecosystem around the Dinosaur such as a
theme or entertainment park. It will touch on other ways to hedge against the death of the baby dinosaur,
and potential risks like legal or environmental risks.
The next steps may include conducting a feasibility study around creating an ecosystem/theme park.
Aetna to Offer PFFS Billing Service to Small Healthcare Plans

Consulting Firm: KPMG Advisory first round full time job interview.
Industry Coverage: life & health insurance.
Case Interview Question #00745: Your client Aetna, Inc. (NYSE: AET) is a healthcare insurance
company that serves the Medicare population. As one of the largest managed health care companies in
the U.S., Aetna sells traditional and consumer directed health care insurance plans and related services,
such as medical, pharmaceutical, dental, behavioral health, long-term care, and

disability plans.
Over the past two years, your client Aetna and some other healthcare insurance companies have started
offering “private fee-for-service” (PFFS) to their respective Medicare patients. The benefit to the patient is
that with PFFS, the patient has access to “out-of-network” providers that otherwise would not be covered
by their health insurance plan. With the PFFS program, the patient interacts with their healthcare
insurance company directly, while Medicare compensates the insurance company for the fees involved.
As I mentioned, your client Aetna launched their PFFS program two years ago. They expect the product
to gain in popularity among their members. Other healthcare insurance companies also expect PFFS to
grow. However, many insurance companies who have started offering PFFS are concerned because they
do not currently have the additional administrative support needed in their billing departments to process
all the PFFS claims.
Your client Aetna is therefore interested in launching a “B to B” model to offer billing services to other
healthcare insurance companies that are looking to outsource the work involved in processing PFFS
claims. Is it a good idea for your client to offer this new service? Why or why not?
Additional Information:
 Your client Aetna is a large, nationwide plan.
 Your client Aetna is already offering the service for their own members, so startup costs are
minimal.
 Assume the administrative staff/infrastructure needed is already in place.
Possible Answer:
I. Areas of Discussion
Potential areas of interest:
 Company
 Customer
 Size of market
1. What types of healthcare insurance companies are offering PFFS? Who are the customers for this
service?
Although both small and large healthcare insurance companies are offering PFFS, only small plans would
need to outsource the back office services needed to process PFFS claims (since large plans already
have the necessary administrative support in place to process claims).
2. How big is the market for this new service? What is the growth rate? What percentage of Medicare
members are enrolled under PFFS?
See analysis below
Do not focus on financials/profit; if asked, let the candidate know that the client Aetna is looking to get at
least 100 customers (small healthcare insurance companies) by the year 2016. The client is confident
that, by the year 2016, they can capture at least 80% of the market for this service.
II. Quantitative Analysis

3. Provide the information from the first two rows; the interviewee should calculate the numbers from the
third row:
Year 2008 2012 2016
Total number of Medicare members from the

small health plans that want to outsource
their back office services 9.1 million 11.3 million 15.3 million
Percentage of Medicare members that will

use PFFS 22% 29% 32%
Number of Medicare members that will use

PFFS from the plans that want to outsource Approx. 2 million Approx. 3.3 Approx. 5 million
their back office services (To be calculated by (actual: million (actual: (actual:
Candidate) 2,002,000) 3,277,000) 4,896,000)
4. After the Candidate calculates the numbers above, provide the following information:
In year 2016, the average number of Medicare members in the small health plans that are interested in
the service your client is offering is 40,000 members. How many potential customers will there be in
2016?
Possible Answer:
Given that approximately 5 million members in total will be using PFFS in 2016 (calculated above), 5
million/40,000 = 125 health plans using PFFS that are interested in outsourcing their back office work.
5. At this point, let the Candidate know (if you haven’t already) that the client Aetna is confident that they
can capture 80% market share by 2016. How many customers would that be?
Possible Answer:
So, 80% of 125 clients is 80% * 125 = 100.
III. Recommended Conclusion

Only small plans that offer PFFS will look to outsource the back office services, not large plans.
In 2016, there will be approximately 125 small plans interested in outsourcing their back office services for
PFFS billing.
With 80% of the market share, the client Aetna would be able to meet its goal of 100 customers by 2016,
so yes, they should offer the service.
Risk to be considered include:
 Considering that the client Aetna launched their PFFS program only two years ago, would it be
possible for us to scale our billing department to service 80 customers.
 As customer service is important especially for Medicare members (age > 65 years), would we
maintain quality of service required with the rapid growth to 80 customers in two years (from 2014 to
2016)?
Cheung Kong Holdings to Enter Real Estate Investment Business
Case Type: new business
Consulting Firm: Capital One first round full time job interview.
Industry Coverage: financial services; property, real estate.
Case Interview Question #00740: The client is Cheung Kong Holdings Limited, an East Asian
development company headquartered in Hong Kong. Cheung Kong Holdings is one of the largest
developers of residential, office, retail, industrial and hotel properties in Hong Kong. With its long
history of property development expertise and residential estates, Cheung Kong
Holdings has built many of Hong Kong’s most notable landmark buildings and complexes.
Recently, Cheung Kong Holdings sold off its U.S. division in the property services business, which used
to make USD $100M a year in pretax earnings (EBIT). The CEO of Cheung Kong Holdings is looking to
replace these lost profits by looking at real estate investment management business. The CEO wants to
know if you can replace these lost profits ($100M a year pretax), how much money to raise for the
investment fund, and if it’s a good fit for the business. How would you go about this case?
Additional Information: (to be provided to the candidate when requested)
Do you know what the real estate investment management business is?
(Quick explanation) The fund managers create fund. Investors invest in it. Investments are real estate
assets. The fund makes money on a “2/20″ rule. 2% of assets under management (AUM) are paid to the
fund management company every year and then 20% of excess returns are paid to the management
company. This 20% is only applicable to “excess returns”.
They benchmark against anything, probably S&P index or other applicable industry index, and the fund
management company gets anything above the industry/index average. For example, S&P is 8%, so the
fund management firm gets 20% of 2% if the fund returns 10%.
Possible Answer:
1. What areas to explore?
Four different areas from a chart:
 Investors
 Fund
 Properties
 Firm
First and foremost, you will need to focus on the investors. Investors invest their money to your fund, and
those revenues from your fund need to contribute to the 2/20 that will make up the $100 M in lost profits.
The 2/20 must equal or exceed $100M in lost profits. In addition, you will need to focus on what talent you
need to get these investors, what investors you’ll need (if they exist), and how to structure the firm to get
these later.
2. How much money to raise?

Once you get into that, then you have to figure out the amount of assets under management (AUM)
necessary to make $100 M pretax. You will need to get costs, which is found to be 60% of the revenues.
So the total revenue needs to be $100 M / 40% = $250 M. Then you will need to understand what are
standard returns and what are our expected returns. Typical standard returns are 10% a year and our
expected returns are 20%, so the excess returns are 10%. So now we have:
2% * (AUM) + 20% * (AUM * 10%) = $250 M

AUM = $6.25 B
3. Soft portion of the case:
 what talent is needed to create the fund and solicit investors

 what real estate assets to invest in
 how to handle international barrier
 other than money what to offer.
O’Reilly to Move Electronic Components Catalog Online
Industry Coverage: Publishing, Mass Media & Communications; online business.
Case Interview Question #00739: Your client is O’Reilly Media (formerly O’Reilly & Associates), an
American media company based in Sebastopol, California. O’Reilly Media was established by Tim
O’Reilly and it publishes information technology related books and Web sites
and produces conferences on computer technology topics.

For this case, you have 20 minutes to prepare a Powerpoint presentation to give to Tim O’Reilly, the CEO
of O’Reilly Media. The client has the number 1 electronic components catalog. This catalog is distributed
at no cost to product designers. Revenues come from ads in the catalog. The CEO has noticed that
revenues have declined 60% year over year. The CEO feels that because of the quality of the product,
they are a content service provider. He is interested in converting the electronic components catalog into
an online publication. He has come to you to determine if this new business makes sense and how he
should market it. What would you tell him?
Additional Information: (Provide the following information if requested by the interviewee.)
1. Company and Product
The client company has complete editorial freedom, so they aren’t tied to the products they advertise.
The content is used by designers to determine specifications of electronic components that may be used
in product designs. This information is well-respected in the industry and typically seen as valuable to
developers.
The client company would not get as much ad revenue from an online product, because advertisers
would not pay as much for online ads.
If they went online, they would have to change to a subscription or pay-wall model, meaning developers
would have to pay to access the information. Questions: would the customers be interested in paying?
How much would you charge the developers for access to specification information?
Because it’s online, the information will have to be updated more frequently. The inventory needs of
developers can be relayed to manufacturers, which may be valuable.
We are first to market.
2. Competitions
There are two competitors in online space:
Competitor A: had been in the business for 2 years with 75% market share. Electronics distributor.
Reliability of their information was questionable. They had a lot of data and access to OEMs, but because
they are an electronics distributor they had conflicts of interests and there were questions about their
ability to objectively provide product information and recommendations.
Competitor B: had been in the business for 1 year with 25% market share. The same data as we have,
but at a higher price point than us. They also lacked functionality of our client. Our client had more robust
search capabilities.
Possible Answer:
1. Framework
a. Market Entry
 Who’s already there?

 What are competitors doing?
b. Capabilities
 Staff
 Funding
 Sales force
 Marketing efforts
2. Recommendation
Based on the client’s core competency not being violated by changing their business model, it’s just being
converted and it’s not drastically different from their core competency. Providing valuable information to
their customers. They are differentiated enough to enter the space quickly and gain market share. They
should enter the market.
Part #2: The consulting partner made the recommendation, and the client company said they would move
forward if they could recover a $6M initial investment within 3 years. What are things that they will have to
consider? Are they going to make their money back in 3 years?
Graph: Projected Total Annual Revenues and Operating Income for this Online Electronic Components
Catalog Business
Year
Year 1 2 Year 3
Revenues: 120M 160M 240M
Operating Income: 110M 80M 40M
What was the client’s estimated market share? 15% for each year.
Operating Margin: The client is estimated to have 10% operating margin.
Possible Answer:
Annual Revenues of the client:
 $120 M * 15% = 18M first year

 $160 M * 15% = 24M second year
 $240 M * 15% = 36M third year
Operating Income of the client:
(18M + 24M +36M) * 10% = 7.8M over three years, which is greater than the $6M initial investment, so
the client should move forward with the project.
Should Your Client Start a Sports Bar in Downtown Chicago?

Consulting Firm: L.E.K. Consulting first round summer internship job interview.
Industry Coverage: small business, startups.
Case Interview Question #00725: Your client is an entrepreneur who is looking to invest in new bar in
downtown Chicago. He needs your help to determine how profitable the bar will be, and convince his
primary investor, his father, that it will be a viable business. What are the areas you
would consider / investigate? What recommendation would you give to your
client?
Additional Information: (Provide the following information if requested by the interviewee)
1. Investment standpoint
 Is there an expected return? What return do you think you can make?

 Is your client’s father going to be active in management? No.
2. Customers/Marketing
 What type of bar is it going to be? Sports bar.

 Who is my customer base? Upscale men, aged 25-40.
 Will it be open at night, day, with food/no food? Hours below, will have food service.
 What is the product mix? Food and drink.
3. Location: Chicago (Interviewer leads: How would you find a good place in downtown Chicago? What
resources would you use?)
 Proximity of competitors
 Talk to real estate agents, figure out what type of properties are available
 Where does customer segment live
 Segment by district
Possible Answer:
1. Areas of Discussion
The interviewer should re-direct to a framework, asking what else might the interviewee consider to
determine the viability of a new sports bar.
Revenues (The interviewer should ask for sources of revenue)

a. Food? Interviewer asks how would we project how much we might earn.
 i. Look at capacity
 ii. Look at benchmarking of other food/bar restaurants
 iii. How much does average customer spend on food? $15/each
 iv. 10 food customers/hour (case use peak/non-peak hours for extra difficulty)
b. Drinks?
 i. How much does average customer spend on drinks? $20/each

 ii. 4 drinks customers/hour
c. Sunday-Wednesday competitor numbers
 i. between 12pm-8pm: 10 food customers/hour, 4 drink customers/hour

 ii. between 8pm-12am: 4 food customers/hour, 15 drink customers/hour
d. Thursday – Saturday competitor numbers
 i. 12pm-8pm: 15 food customers/hour, 10 drink customer/hour

 ii. 8pm-2am: 5 food customers/hour, 20 drink customers/hour
Costs (interviewer: ask what the interviewee thinks would be the list of major costs)
a. Buy, rent or lease? Lease
b. Lease? 10,000/month
c. Down payment? 1 month, Last & Security deposit
d. Labor? Need 3 types of people:
 i. Kitchen: Pay flat rate $10/hour, 4 people when kitchen open

 ii. Bar: Need one bartender at all times, because bartender works on tips: they get $5/hour
 iii. Waitresses: Need 3 waitresses at all times, because waitresses work on tips: they get $5/hour
e. What are the business hours?
 i. Sunday-Wednesday; noon-12am
 ii. Thursday-Saturday: noon-2am
 iii. The interviewee should calculate total labor costs based on # of hours and how much it costs
f. Utilities?
g. COGS?
h. Startup Costs?
i. Legal fee
j. Insurance
k. Licenses
l. Staff Training
m. Remodeling
n. Equipment
2. Analysis (Calculations to be completed by interviewee.)
The interviewee should demonstrate familiarity with numbers. The case has a lot of numbers and the
interviewee should stay organized.
 A good interviewee might make a chart to take down the data.

 Interviewee should get total weekly revenues by adding up various days –> then calculate per
week –> then per month
 Subtract COGS (based on what they guessed first)
3. Recommended Conclusion
The overall structure should include the following
a. Investment/financing
 Revenues/Costs
 Costs of financing
b. Customer/Marketing
c. Location
The interviewee should look at what the monthly expenses / monthly costs and come up with a
recommendation. Numbers are not necessarily static for the case, but the interviewee should show an
understanding of
a. Profitability
b. Break-even
c. Net present value (NPV)
Manhattan Fruit Cart Vendor Expands into Selling Vegetables

Case Type: increase profit; new business.
Consulting Firm: Capital One first round summer internship job interview.
Industry Coverage: small business.
Case Interview Question #00723: You just find out you have a long lost uncle, and he is a fruit cart
vendor at a street corner in downtown Manhattan of New York City, NY. He sells his fruit only on
weekdays to morning and evening commuters, as well as downtowners going on lunch breaks.
Your uncle realized that you are a business school MBA student, and he thinks you might be able to
make his business more profitable. He wants to increase his profit during this summer by 10%, which
would be $1,000 over last year’s profits, and he will plow these profits back into the business.
In order to do this, your uncle wants to expand into selling vegetables. He is known for having high-quality
fruits, which he gets from his buddy who is a wholesaler. He plans to use similar high-quality suppliers for
his vegetables.
Your uncle operates in a really good location: a well-trafficked spot in the central business district near a
busy train station. He wants your help to determine if he can reach his goal of increasing profits by $1,000
next year.
Additional Information: (to be provided when requested)
1. Profitability
Revenues:
 By talking to customers, your uncle has estimated a potential demand of 20 vegetables/day

 He expects to sell each vegetable for $1
 Cross-selling to certain customers will generate an additional 5% of revenue
Costs:
 The annual cost of his permit to operate is $1,000. These costs will increase by 20%
 Cost of each vegetable is 75 cents
 Cannibalization will decrease fruit sales by 5%
2. Customers
Your uncle generally serves three types of customers: morning commuters, evening commuters, and
downtowners on lunch breaks.
He sees more morning and lunch customers, but evening customers buy for home, so he sells roughly
equal proportions of his fruits to each type of customer.
3. Competition
There are no competing vegetable vendors nearby. Fruit customers generally get their vegetables from
supermarkets near home.
4. Competencies
Your uncle has been in the fruit business for 20 years, and his customers appreciate that he knows the
peak seasons for the fruit he sells. He is also a master at picking out the best fruit for his customers. His
knowledge in these respects is very limited for vegetables.
Possible Answer:
1. Areas of Discussion
Profitability:
 Revenues = volume x price

 Costs = variable costs + fixed costs
Customers
 similarities/differences to fruit
 ability to cross-sell
Competition
 Other vendors in the area?

 Where are the customers getting their fruit?
 Are the customers likely to start purchasing their fruit from uncle?
Product
 Your uncle’s product expertise

 Which vegetables will he offer (veggies for home cooking?)
 Will there be different spoilage rates that make veggies more difficult to keep on hand?
Other considerations
 Cannibalization
 Cross-selling
Resources
 Where will uncle get the financing to expand?

 Is there space in his cart to expand?
2. Analysis (Calculations to be completed by interviewee.)
 Profit on each veggie: $1 – 0.75 = 0.25 per veggie

 Profit on veggies each day = 0.25 x 20 units = $5
 Total Profit on Veggie Sales = $5/day x 5 days/week x 52 weeks/year = $1,300
 Annual profit (current) on fruit if $1,000 increase is 10% = $10,000 annual profit
 New fruit profit (from cross-selling) = 5% x $10,000 = $500
 Lost profit from cannibalization = 5% x $10,000 = $500
 Increased cost of permit = 20% x $1,000 = $200
 Total new profit = $1,300 + $500 – $500 – $200 = $1,100
3. Recommended Conclusion
At current estimated demand levels, your uncle would be able to surpass his projected profit target of
$1,000 by $100 next year. He may want to do informal surveys of his customers to determine which
vegetables would be more preferable, which could increase daily demand.
Risks to consider
 Since he will just make his target by $100, he must be confident that his lack of expertise with
vegetables will not affect his relationships with his customers.
 He must also be aware that his lack of expertise may lead to spoilage rates that could eat into his
profits to a degree that he did not anticipate.
 It is also important that he is comfortable that he can find the additional cash (at least $300 to
finance the expansion into the new product).
Uber to Offer Chopper Service Between Manhattan & JFK Airport
Consulting Firm: Accenture first round summer internship job job interview.
Industry Coverage: Transportation.
Case Interview Question #00701: Your consulting firm’s new client Uber is a venture-funded startup and
transportation network company that connects passengers with drivers of vehicles for hire and ride-
sharing services. Uber is based in San Francisco, California and rapidly expanding in the U.S. and
internationally, offering service in over 35 cities worldwide.

Uber’s founder and chairman, serial entrepreneur Garrett Camp has come to you with a new business
idea. Mr. Camp wants to start a helicopter flight service between midtown Manhattan and John F.
Kennedy International Airport (JFK). How would you begin to evaluate this opportunity and what are the
basic economics behind it? He has asked you to brief him on your conclusion in a 1-minute elevator
ride from the 50th floor to the ground floor. What would you tell him?
Possible Answer:
This “new business” case requires a cost/benefit analysis as well as an estimate for market size. Because
the interviewer explicitly asked for the “economics,” you know you will have to do some basic number
crunching. While coming up with an analysis, the candidate should also make sure to include alternatives
as to what else the client could do with the helicopter. One possible approach would begin by asking why
the client Uber wants this new route, in order to try and keep in mind the company’s objectives.
Candidate: Does the client Uber’s helicopter service idea have anything to do with the company’s current
business activities?
Interviewer: Yes, the client has a fleet of helicopters it purchased during the dot-com boom days and has
excess capacity.
Candidate: So the fixed costs for purchasing the helicopters are already sunk. Can you tell me the costs
involved with the up keep of one helicopter?
Interviewer: What would you expect the costs involved to be?
Candidate: I would assume some of the costs that go along with owning a helicopter include:
 Pilot salary/benefits
 Maintenance
 Gas
 Insurance
 Taxes
Interviewer: That’s a good list. Let’s just say that these all cost about $20,000 per helicopter per month.
Candidate: How many helicopters does the client have?
Interviewer: They recently sold off most of the fleet, but retained two helicopters for company use. (Note
to candidate: At this point you have determined the cost portion, you should now move on to the revenue
stream.)
Candidate: The people who would most value the time saving and convenience of this offer would be top
corporate executives on business trip. The economics are similar to a limo service. In order to determine
the revenue, I will need to know how much to charge per person and the number of people who would
use this service. For the latter, I can estimate this based on the total possible capacity.
To begin, I’ll assume the service is used mainly during rush hours when convenience is most greatly
valued. This includes four hours in the early morning and four hours in the evening, or eight “rush hours”
worth of flights a day. Assuming a helicopter can land every 15 minutes, there would be 32 flights per
helicopter with potential passengers to pick up (four 15-minute intervals in each hour * eight relevant
hours = 32).
Assuming 10 passengers per flight and a 10% usage rate, I would expect each flight to carry about one
person (10*0.1=1), which equals 32 passengers per helicopter per day. I would also assume that the
service is not used through out the week, but only early on and late in the week.
Let’s say it’s most needed about 16 hours per week. This gives me a weekly customer potential per
helicopter of 64 customers and a monthly potential of 256 passengers per helicopter (64*4=256). For
ease of calculations, I’ll round this to about 250 people per month per helicopter.
Now that I have a number for customers, I’ll need to figure out how much to charge them. At the very
least, the price should cover the $25,000 monthly costs per helicopter. As an initial price, let’s assume we
charged $100 per person. This would yield $100*250 = $25,000 in revenue per helicopter. For a month,
this would give us a profit of $5,000 per helicopter ($25,500-$20,000 = $5,000). For two helicopters, that’s
$10,000 in total profit per month.
Interviewer: Good, so what other issues are involved?
Candidate: Well, I would like to know the alternatives to running this service, such as selling the
helicopters. To see whether it’s a good investment, I would find out the life of the helicopters as well as
their saleable value, and see if the discounted cash flows during the life of the helicopters exceeds what I
could get by selling them today.
Interviewer: That’s a good way to consider the investment. Assume it makes sense to run the service.
What else should you consider?
Candidate: I would want to know what additional sources of revenue the helicopter could generate when
it’s not being used. For instance, the client can rent it out for private use, especially in the summer when
the wealthy are looking to be out in the Hamptons or other vacation homes in the area. In addition, the
client could work with the city to set up an emergency helicopter service for hospitals during off hours.
Interviewer: That’s a good idea. So what would you recommend to the client?
Candidate: At initial glance, this helicopter service seems to be a good business idea. Given initial
assumptions that will need to be validated, annual profits could be $120,000. There may also be other
revenue streams to consider since there will be excess capacity during off airport transport hours.
However, there are other issues that will need to be tested to see if they will affect the cost structure such
as legal and regulatory issues. My suggestion for next steps would be to validate all economic
assumptions and to look into legal rules and restrictions.
Interviewer: Very good! Thank you.
Comments:
Remember that it’s okay to make certain assumptions but always do a sanity check at the end. The
interviewer will look for that. Also, you don’t have to do complicated calculations. No one expects you to
cover all issues in the economic model, as long as you have brought up the pertinent issues. Lastly,
remember to “think out loud”.
NYC Rolls Out Nation’s Largest Free Public Wi-Fi Network

Case Type: new business; operations strategy.
Consulting Firm: PwC Diamond Advisory first round summer internship job interview.
Industry Coverage: government & public sector; information technology (IT).
Case Interview Question #00694: Your client is the office of New York City Mayor Michael Bloomberg.
Born February 14, 1942, Bloomberg served as the 108th Mayor of New York City, holding office for three
consecutive terms (January 1, 2002 – December 31, 2013) beginning with his first election in 2001. He is
the founder and 88% owner of Bloomberg L.P., the global financial data and
media company notable for its Bloomberg Terminal.
Mayor Bloomberg has asked you to come to NYC as a Diamond consultant and advise him on whether
public Wi-Fi should be accessible to all of New York City free of charge. The Mayor has looked at several
studies and has seen some research on the economic impact. What would you consider and investigate
in other to determine whether Mayor Bloomberg should or should not take this decision?
Possible Answer:
This strategy case is focused on developing an approach to the question. No number calculations are
necessary in this case. The case is broken into various levels of consideration:
Level 1 – Would this implementation be useful to the NYC population?
Analyze the number of people who current have and do not have access to the Internet.
Of those who do not have Internet access, identify the reasons for lack of access (two main groups)
 Supply side: People want access, but currently do not have it due to a number of factors: service
and geographic gaps, price, slow/subpar access speeds
 Demand side: People do not want access because the do not have a computer or do not consider
it valuable (think certain age demographics)
Level 2 – How would this implementation affect constituents that currently provide Internet access for-
profit?
 Identify affected players in the market (e.g. Comcast, AT&T, Time Warner Cable, FIOS, etc.)
 Identify repercussions that will be faced by these businesses by identifying the populations they
serve.
Level 3 – Estimate the revenue loss of affected players by sizing the population that currently subscribes
to an Internet connection.
 Households
 Businesses
 Academic Institutions: Schools and Universities
The candidate should understand that some of these may benefit from free public Internet access. How
do you justify a decision to provide free Internet access to the current providers?
Level 4 – Identify advantages and caveats of the decision.
 What positive impact will come from this decision? How do we know? Benchmark other cities that
have implemented this model to determine the upside.
 Why Wi-Fi? Is there better technology out there?
 Are there other options worth investigating? E.g. DSL, cable, subsidizing Internet access to
pockets of the population, etc.
 How do we mitigate the risk that we invest significant capital for implementation, but meanwhile
technology evolved and our investment is less valuable?
 Are there alternative ways to provide Internet access: Kiosks, Internet cafes, increased public
library Internet access
 Additional Issues: security, privacy, speed
Level 5 – Implementation
 How much will it cost?

 Who will bear the cost?
 Will the constituents agree to bear the cost?
Verizon to Enter Residential Home Security Market
Consulting Firm: Mercer Consulting second round full time job interview.
Industry Coverage: Telecommunications & Network.
Case Interview Question #00688: Verizon Communications (NYSE: VZ, NASDAQ: VZ) is an American
broadband and telecommunications company and a corporate component of the Dow Jones Industrial
Average. Verizon Communications’ operations are divided into three business units: wireless, residential
and small business services, and enterprise services. As of September 2013,

Verizon Wireless had 101.2 million wireless connections, and its 4G LTE network covered over 303
million people.
Verizon’s residential and small business services unit provides wireline phone service, Internet access,
and television to residences and small businesses, via either copper wire or fiber optic cable. Verizon
operates landline services in 12 states and Washington, D.C. As one of the nation’s largest providers of
local telephone services, they are considering entering the residential home security market
recently. Residential home security systems usually serve the purpose of burglary protection, fire alarm,
and life safety. Should they? Why or why not?
Possible Answer:
Note to Interviewer:
This case was given by Mercer in second-round interviews. This is a broad, qualitative strategy case and
was given in a very open and conversational manner. No hard data was provided – instead, the
interviewer asked the candidate to come up with assumptions and estimates to drive the case forward.
Therefore, there is no “right” answer, but the candidate must be able to come up with reasonable
assumptions and then follow them logically to a conclusion.
Give this case in an open-ended manner. Make the candidate come up with his/her own assumptions and
estimates for everything. One set of reasonable assumptions is listed below – use these to steer the
candidate back on track if they seem to be off the reservation.
1. Market Size
If the candidate asks for the size of the market, make him/her come up with assumptions and calculate
the total market size. A sample calculation based on sample assumptions follows:
 Total Households in the U.S.: 100M

 % Households serviced by Verizon: 50%
 % Households that can afford home security service: 50%
 Annual subscription price: $250
 Total Addressable Market: 100M * 50% * 50% * $250 = $6.25B
2. Cost Structure
Ask the candidate to discuss what the cost structure might be for Verizon to enter the home security
market. What are the fixed costs? Variable costs? Does Verizon have a cost advantage over other
players?
Possible Answer:
The home security business has very little fixed cost beyond the infrastructure already installed in
potential customers’ homes (i.e. the existing phone wiring).
Customer would need door / window / motion sensors installed, which could be done by a third-party
installer and billed to the customer at cost + markup and owned by the customer.
Variable costs are also very small – essentially just the cost to maintain enough call center operators to
dispatch police when alarms are tripped.
Verizon does not seem to have much or a cost advantage over other players, since they are all using the
common carrier phone network. Verizon might have some economies of scale in operating the call center,
but this effect would be slight.
3. Competition
The market is composed of a large number of mom-and-pop alarm company operators. No firm has over
5% market share overall, although there are some strong regional players.
4. Customer Segments
Ask the candidate to speculate on the various customer segments and their relative importance, size, and
value.
Possible Answer:
We can reasonably divide the customer base into urban and suburban customers, having different needs
and different price sensitivities. Urban customers are likely to have lower incomes but a high willingness
to pay due to the increased crime rate of the city. Suburban customers are likely to have a higher income
but a lower perceived threat due to a lower suburban crime rate. By first-degree price discrimination, it
may be reasonable to charge the suburban customers a higher price because they are presumably less
price sensitive. We can assume that 50% of customers are urban and 50% suburban.
5. Pricing
Have the candidate come up with a pricing scheme and prices for each of their identified customer
segments. There is no right answer, but they must justify why they are setting the price they are. Some
areas they might consider:
 Insurance companies generally give breaks on homeowner’s insurance for having a security
alarm. This will increase the Economic Value Added (EVA) to the customer and can inform pricing.
 What other services do homeowners pay for monthly? Cable, phone, DSL. How are the values of
these services perceived compared to the value of the home security alarm?
 Pricing will need to be competitive with other market players.
 The candidate might assume a net margin based on the competitive landscape and use this with
assumed market size to determine attractiveness rather than determining an end-consumer price.
6. Regulation
The market is not regulated and government regulation is not expected to play a role.
7. Marketing
Ask the candidate what advantages Verizon might have in marketing vs. its competitors. Keep points the
candidate should identify include:
 Verizon has monthly customer contact with a large pool of potential alarm services customers
through its phone bills.
 Verizon already has brand loyalty for phone service, why not alarm service?
 Shear size of the company (and deep pockets) make it more able to achieve scale economies in
marketing and reach a broad audience.
8. Conclusion
A star candidate will see that his/her time is nearly up and will present a recommendation for the client
without prompting. If the interview is within 3 minutes of the end, ask: “So, should Verizon enter into the
home security market or not?”
Possible Answer:
The short answer is “Yes”.
Verizon possesses several small but important competitive advantages for entering into this new market.
It has economies of scale in call center operations that will enable it to be highly cost-competitive in
operating a security network. It has an established brand that the consumer associates with reliability as
well as with networking and communications – the primary function of a home security system. More
importantly, Verizon already reaches 50 Million households every month through its phone services bill
that it could leverage to launch and market this new service. Also, the company has deep pockets and the
ability to advertise such a service far more effectively than the small, regional competitors.
The size of the opportunity is large enough for Verizon to consider. Assuming a potential market size of
$6 Billion in Verizon’s territory, even at only a 10% share, Verizon can add $600 Million in revenue. Given
the low cost structure of this business and the high perceived value to the customer, this is likely to be
highly profitable revenue as well. With Verizon’s marketing clout and customer reach, the company
should be able to gain significant market share and become the national leader in this space.
U.S. Cellular Considers Entering Vehicle Telematics Business

Consulting Firm: Cornerstone Research second round full time job interview.
Industry Coverage: telecommunications & network.
Case Interview Question #00682: Your client United States Cellular Corporation (NYSE: USM), d.b.a.
U.S. Cellular, owns and operates the fifth largest wireless telecommunications network in the United
States, behind Verizon Wireless, AT&T Mobility, Sprint Corporation and T-Mobile USA. The company has
its headquarters in Chicago, Illinois. As of July 2013, they serve about 4.6 million
customers in 126 markets in 26 U.S. states.
Recently, the client U.S. Cellular is interested in telematics business (wireless service to vehicles).
Telematics typically is any integrated use of telecommunications and informatics, also known as ICT
(Information and Communications Technology). Most narrowly, the term has evolved to refer to the use of
such systems within road vehicles, in which case the term “vehicle telematics” may be used.
Should your client enter this new business of vehicle telematics? If not, why? If so, how?
Additional Information: (to be provided after relevant questions)

 The client U.S. Cellular is a major wireless carrier (like AT&T, Sprint, Verizon, T-Mobile, etc) in
the U.S.
 They have their own stores and also distribute through retailers like Best Buy and Circuit City.
Possible Solution:
Candidate: What is the client’s core business?
Interviewer: They are a major wireless carrier (like AT&T, Sprint, Verizon, T-Mobile, etc)
Candidate: Do they currently have distribution channels set up with retailers?

Interviewer: Yes.
Candidate: To determine the potential for new market entry into vehicle telematics, I then needed to do
the following:
 Define customer segments:

 Individual Customers: Commuters, Local, Recreational
 Corporate Customers: Sales force, Fleet vehicles (trucks, rental cars, etc), Government
(police, municipal, etc)
 Define channels:
 Auto Manufacturers, Retailers
 Size the market for each
 List risks and rewards of each
I ended up recommending the retail channel (even though it has not become a big channel) because the
market penetration through auto manufacturers would be small (~1% of drivers per year for first 4 years of
sales) and time consuming (2-3 years from product design to release).
Final Recommendations:
In making a final recommendation to the client U.S. Cellular, I would want to answer three main
questions:
First, is Vehicle Telematics an attractive industry to enter?
 What is the market size?

 What are the growth prospects?
 What are the competitive dynamics?
Second, is Vehicle Telematics industry appropriate for our client U.S. Cellular?
 What are their core competencies?

 Can they exploit their existing resources and capabilities?
Finally, can they enter the industry Vehicle Telematics profitably?
 What will it cost to enter the market and how quickly can they grow their share?
 What will it cost to acquire and retain customers?
 What revenues will they earn from each customer?
Wilderness Therapy Program Expanded to Corporate Executives
Consulting Firm: McKinsey & Company first round full time job interview.
Industry Coverage: non-profit organization; sports, leisure & recreation.
Case Interview Question #00677: Our client Great Outdoors is a small not-for-profit organization near
Philadelphia, Pennsylvania. It provides outdoor experiences including adventure therapy and wilderness
therapy (the use of wilderness expeditions for the purpose of therapeutic intervention) to help pre-teen
and young adolescents. The nonprofit organization offers a range of different
types of wilderness therapy programs, with a range of models and approaches.
Originally, Great Outdoors is primarily concerned with providing 10-15 day primitive camping and hiking
trips for troubled teenagers. However, recently a friend of one of Great Outdoors’s founders asked the
group to provide a shorter program for corporate executives, which was a great success in the first few
iterations. The management of Great Outdoors has retained your consulting firm to make a
recommendation on whether to expand Great Outdoors to create a full-fledged executive program. What
would you recommend?
Read the Additional Information well before you give the case. Note that this case requires you (the
interviewer or case giver) to drive key points in the discussion. Allow the candidate to formulate a plan
and then prompt him/her to consider each of the topics listed below if the interviewee does not think of
them themselves.
Question #1: What issues should you consider?

Possible Answer:
Many different frameworks can work here as long as they drive to the main question and clearly account
for the not-for-profit nature of the company. This case is really designed to test candidate flexibility since
most people haven’t practiced cases on nonprofits. A candidate who approaches the question as a
standard business case without acknowledging that stakeholders are concerned with mission, emotional
benefits, philanthropy, etc. will not succeed because they have not shown flexibility or good listening
skills.
Issues that should appear in the candidate’s framework
 Economics of the two programs (don’t let them drive this yet – we’ll get to it later)
 Operational issues
 Major constraints on capacity (e.g. guide availability, permits, geographic reach,
scheduling, etc.)
 Possible synergies from the two programs (e.g., offsetting seasonality of demand,
economies of scale)
 Underutilized fixed costs (lots of idle time for guides or gear that could be utilized at no
marginal cost)
 Mission: What is Great Outdoors’ purpose? What is at risk from expanding?
 Are there constraints on engaging in commercial activity based on endowment or
foundation restrictions?
 Will the current employees revolt if “profit” becomes a factor?
 Does organizational passion become compromised by “selling out”?
 Credibility issues by straddling profit/nonprofit worlds
 Competitive situation
Question #2: Does expanding the executive program make sense economically? Provide the following
Additional Information if the candidate asks for it clearly and directly.
Competitors and Market Size – we do not have any specific information but believe we can sell out our
capacity at current prices (no demand constraints). Competitors are very fragmented.
Mission/Charter restrictions – we are not aware of any rules stipulating what the organization can or can’t
do – we don’t anticipate losing funding based on a decision here
Costs and revenues – Do not show this table directly to the interviewee; just share the numbers in a
conversational way. They should create something similar in their notes. The candidate is expected to
calculate the bold rows (Revenue, Subtotal, Subtotal, Total Margin)
Revenue and Expenses Per Trip
Executive Nonprofit
# students per trip 15 8
Program fee per student $2,000 $800
Revenue 15 * $2,000 = $30,000 8 * $800 = $6,400
Days per trip 4 11
Costs (food, equipment, insurance, etc) per

student per day $200 $125
Subtotal $200 * 4 * 15 = $12,000 $125 * 11 * 8 = $11,000
# of guides 4 2
Cost per guide per day $200 $150
Subtotal $200 * 4 * 4 = $3,200 $150 * 2 * 11 = $3,300
$30,000 – $12,000 – $3,200 $6,400 – $11,000 – $3,300

Total Margin = $14,800 = -$7,900
Question #3: At this point what is a preliminary recommendation?

Possible Answer:
Clearly the economics of the executive program are compelling. However it’s critical to think about
whether it is practical for the nonprofit organization to expand into this very profitable activity.
Question #4: What would concern you about Great Outdoors starting a regular executive offering?
Possible Answer:
A good candidate should touch on these following factors:
 Competitor response – Competitors are very fragmented (the candidate should realize this means
a response is not likely)
 Cost/Operational Savings – May be slight
 Loss of nonprofit status for fundraising, foundation charter restrictions, etc. – The company’s
lawyers believe this won’t be an issue
 Organizational
 People who are motivated to help out a non-profit may be less willing to help if they feel
that the organization has “sold out” to high-paying corporate customers
 Do corporate customers require different types of guides?
Question #5: How would you deal with employees, donors, and other supporters who feel that working
with corporate executives conflicts with Great Outdoors, an nonprofit organization’s core values? Will
working with profitable executive programs mean that traditional programs are compromised?
Possible Answer:
The candidate can brainstorm many different answers as long as they make sense. Some possibilities
include:
 Sell the idea that every corporate program funds two traditional programs; by doing more
corporate ventures we can reach more kids
 Executive programs are basically advertising Great Outdoors to a large pool of donor money;
running exec programs is a good way to drive awareness among potential mentors, philanthropists,
clients, etc.
 For some employees that are environmentally driven (think about the type of person that chooses
to work as a guide) getting executives out to nature helps promote conservation and
environmentalism.
Question #6: What is your final recommendation?
Possible Answer:
This is a fairly open ended case that doesn’t “crack” with any one insight; it is about assessing the way
the interviewee approaches the process and how thoughtful they are about each issue.
Good Answer: The organization should expand executive programs as there appears to be unsatisfied
demand and it creates other benefits – demand balancing, scale benefits, etc. However communicating
this decision to stakeholders correctly is critical to avoid alienating core supporters.
Failing answer: Any answer that focuses only on the business and economic issues of the case without
spending a considerable amount of time addressing the ideological and non-economic motives of
nonprofit operators.
Note:
This case was given by McKinsey in first-round interviews and is a “command and control” type of case.
In this style of case, the interviewer initially allows the candidate to drive the case and explore possible
routes to a solution. However, once the candidate has laid out a plan, the interviewer takes control and
asks the candidate to solve a few specific problems before coming to the final conclusion.
When giving this case, the interviewer should allow for some initial planning and brainstorming by the
candidate, but then firmly take control of each of the “modules” described below.
Try to move the candidate along through each of them, since in the actual interview only those candidates
that complete all of the sections will be considered to have done well. This case tests mental horsepower
and the ability to move to conclusions quickly.
Mexican Billionaire Carlos Slim to Fund More Universities

Consulting Firm: Strategic Decisions Group (SDG) first round summer internship job interview.
Industry Coverage: Education & Training Services.
Case Interview Question #00642: Our client is Mexican business magnate, investor and philanthropist
Mr. Carlos Slim. Mr. Slim has been ranked by Forbes as one of the richest persons in the world since
2010. His extensive holdings in a considerable number of Mexican companies through his
conglomerate, Grupo Carso, SA de CV, have amassed interests in the fields of

communications, technology, retailing, education and finance.
In Mexico, banks prefer not to lend money to not-for-profit institutions like hospitals and schools because
if one of these institutions defaults the bank worries that it will be seen as the one responsible for
liquidating their assets. We have been approached by Mexican billionaire Mr. Carlos Slim. He is
evaluating whether an opportunity exists to start a bank that would lend money to various universities in
Mexico. Specifically, there are three questions that Mr. Slim wants us to solve for him:
 Is there an opportunity to lend money to universities?
 If an opportunity exists, how big is it?
 How should he structure the bank?
Additional Information: (to be given to candidate if requested)
Mexico has a population of approximately 110 million as of 2011. Population distribution based on age
group is:
 0-15 years old: 20 million
Population growth: close to 1% (use 1% for the sake of simplicity)
Total number of universities in Mexico: 500
Recommended Approach:
The purpose of this case is to test the interviewee’s ability to determine whether it makes sense for the
client to open a bank that serves universities. In particular, the interviewee should recognize that he/she
needs to gather the necessary information to determine the market opportunity for such a bank. The
interviewee should ask questions to gather the necessary information to determine the market size.
Possible Answer:
Interviewer: So, given the facts of the case, how would you consider going about analyzing this question
for the client Mr. Slim?
Candidate: I’d like to understand a few things to evaluate this decision.
 First, I’d like to understand the size of the market to see whether there is an opportunity or not.
 Next I would like to analyze who are the competitors, if any. In particular, I am interested in the
competitors because they may decide to offer similar loans to institutions, like universities.
 Finally, I would like to know what the university can leverage from its own operations to develop
this idea, etc.
Interviewer: That seems like a good starting point. Let’s start by analyzing the market. How would you do
that?
Candidate: OK, I will start by analyzing in Mexico how many people go to university per year. If the
population grows at about 1% per year, this means that next year there could be more people attending
universities than space available. I would use a guesstimate of the percent of population enrolled in
universities to calculate the number of students currently enrolled across Mexico. For simplicity’s sake I
will assume that all potential students attend universities in Mexico, excluding the percent that attends
school abroad.
Age range Population % Enrolled in University (guesstimate) Enrolled In University
0-15 years old 20 million 0% 0
15-30 years old 25 million 30% 25 * 30% = 7.5 million
30-45 years old 25 million 2% 25 * 2% = 0.5 million
Total 8.0 million

There are roughly 25 million Mexicans between the ages of 15 and 30, and I would assume that they are
evenly distributed. That is, there are about 25 million / 15 = 1.67 million people in each year of age (e.g.
1.67 million people who are 15 years old, 1.67 million people who are 16 years old, and so on until the
age of 30). If I assume that 30% of the people between the ages of 15 and 30 go to university, that means
we have 25 * 30% = 7.5 million university students between the ages of 15 and 30.
Interviewer: Those assumptions seem to be very good ones. What else would you need to consider?
Candidate: OK, I think that I will need to figure out how many schools there are in Mexico and how many
students are enrolled in each school.
Interviewer: Sure, our client has told us that there are 500 universities in Mexico and we can assume
there they are all at full capacity.
Candidate: OK, so 7.5 million divided by 500 means that there are on average 15,000 students at each
school. I might think that this seems like a high number. In the United States we have part-time students
and full-time students. If this is similar in Mexico, the universities would likely be able to accommodate
more students without any investment.
Interviewer: No, they can’t do that as the law prohibits it.
Candidate: OK, so if the population grows at 1% per year and there are no new people going to university
for other reasons (e.g. better economy) this means that in any given year we will have 7.5 million
multiplied by 1% new students. We would have 75,000 incremental students. Given that we know the
schools are at full capacity, we would need 75,000 / 15,000 = 5 new schools.
Interviewer: OK, so now let’s focus on how would you segment the schools in order to think about the
credit scoring they may have?
Candidate: I would segment them based on three factors:
 New school or just new branch to an existing school. I believe that it is less risky to lend to a
company that already has a business in place.
 Flow of people to school: it’s much more secure to lend to a school that has plenty of students in
each year than to one that has the same number but distributed in a different way (e.g. most of the
people finishing their careers and almost nobody in the first or second year).
 Geography: We are speaking in averages. There may be areas with no population growth. There
may be an uneven dispersion.
Interviewer: How would you calculate how much money a typical school would need?
Candidate: There are two different streams of costs we have to consider. On the one side the cost of
building a new school – including buying the land, the construction of buildings, etc. – and one the other
side the funds needed until the company reaches a state in which it has a positive free cash flow.
Interviewer: Great. Tell me the number, or at least how to get it.
Candidate: The better is to rely on our client’s experience. He has a lot of business holdings, so there are
some experiences we can leverage there?
Interviewer: Let’s move on. How would you fund this project?
Candidate: I will think about a couple different ideas such as:
 Unilateral organizations (e.g. World Bank, etc.)

 The Government as it may need to help some private schools that focus on careers that are not
available through public university.
 Banks: They may not be willing to do this on their own but may want to partner with someone that
knows about this industry.
Interviewer: OK, fair enough. Our client Mr. Slim is asking you to summarize the situation. What would be
your recommendation?
Candidate: Can I take a moment to recap all the findings?
Interviewer: Sure.
Candidate: I will tell the client that it seems to be a pretty interesting opportunity to provide capital to build
new schools which would be at least 5 per year given the 1% annual growth in the population.
Interviewer: Very good. Thank you for your analysis.
Delivery Service Startup Zipments Receives VC Funding

Case Type: new business; quantitative case, math problem.
Consulting Firm: Siemens Management Consulting first round summer internship job interview.
Industry Coverage: freight delivery, shipping services; small business, startups.
Case Interview Question #00640: The client Zipments is a British startup company based in a small
village 300 miles away from Central London. The company provides local businesses and individuals with
fast and affordable package delivery and courier service. After receiving fundings from a prominent
venture capital firm, the CEO and Founder of Zipments recently has hired your
consulting team to help them decide how many delivery trucks to lease.
There are three different truck models available, but our client has been told that he will need to have a
consistent fleet, meaning they can only lease one model type. So, we will also need to identify what
model he should lease for his company. This company provides the local delivery of packages sent to this
village through UPS next-day delivery service.
How would you suggest approaching the client’s problem?
Additional Information: (to be given to candidate if requested)

1. A quick overview of how the Zipments company operates:
 They receive every package at 5pm from UPS

 a bunch of people hired by the company then sort the packages and
 load them on a truck where they are stored overnight
 then they deliver the packages starting at 9am for 10 hours.
2. The startup company Zipments operates five days a week: Monday – Friday
 Number of packages delivered per day: 1,000.
 Dimension of package (envelope) is 1 * 1 * 1.
 It takes 8 minutes, on average, to deliver a single package and to be ready for the next one
(“assume they deliver one every 8 minutes”).
3. There are three different truck models available for lease:
 Truck A costs $150 per day and its dimensions are 3 * 4 * 5.

 Truck B costs $40 per day and its dimensions are 9 * 2 * 1.
 Truck C costs $130 per day and its dimensions are double the size of truck A, or 6 * 8 * 10
Drivers, fuel, etc. are not considered and do not make a material difference to the analysis (for the sake of
simplicity). The case will also include additional questions not addressed in the initial scope.
Possible Answer:
This quantitative case tests a candidate’s ability to analyze how many packages must be delivered and to
see if the bottleneck is the time or the truck size. Not all information is provided up front to the candidate;
he/she should be aware of this and must identify additional data that will allow him/her to solve the case.
Interviewer: So, how would you go about analyzing this problem?
Candidate: I’d like to understand a few things to evaluate this decision. First, I would like to start by
analyzing the demand. I would like to know how many packages we have to deliver and how long, on
average, it would take us to deliver a single package. Then, I would like to analyze the numbers in the
context of the three truck models our client can lease.
Interviewer: OK. We can satisfy a demand of 1,000 packages per day and it takes 8 minutes on average
to deliver each one.
Candidate: So, 8 minutes per package * 1,000 packages / 60 minutes per hour / 10 hours = 13.3 trucks.
So we need at least 14 trucks. I would like to think about the leases we can consider.
Interviewer: Ok. Let me show you the information we received from the client:
Truc
k Cost per day Dimensions
A $150 3*4*5
B $40 9*2*1
C $130 6*8*10
Truck A cost $150 per day and its dimensions (for the packages) are 3*4*5. Oh, by the way, you did not
ask about the average size of an envelope, but our client has told us that the average size is 1*1*1.
Candidate: OK, so when assessing Truck A we multiply 1,000 (total packages for all trucks) by 1*1*1
(average package size) and divide by 3*4*5. We will know how many trucks we would need of the Truck
A model. My calculations show 1000/(3*4*5) = 16.6 which would mean we would need 17 of this type of
truck. As 17 is more than the time constraint of 14 truck to ensure on-time delivery, we stick with 17.
So, this is the result of performing this analysis for each type of truck:
Truc Cost per # trucks

k day Dimensions # trucks (rounded) (minimum) Total cost per day
A $150 3*4*5 1000/(3*4*5) = 17 17 $150 * 17 = $2,550
B $40 9*2*1 1000/(9*2*1) = 56 56 $40 * 56 = $2,240
C $130 6*8*10 1000/(6*8*10) = 3 14 $130 * 14 = $1,820
Now, from a pure financial analysis, I would recommend leasing 14 trucks of the C Model because it will
allow our client to minimize the cost while ensuring on-time delivery (customer satisfaction). On the other
hand, we also might consider that there would be plenty of room for delivering other things if they can
figure out how in the future.
Interviewer: OK, it seems a good idea. Let’s move on to the next part of the case. Now imagine 6 months
have passed and your recommendation was pretty successful. Now the CEO of the Zipments startup
want us to investigate any potential risks that he should be assessing/considering.
Candidate: Can I take a minute to organize my thoughts?
Interviewer: OK.
Candidate: So, I would like to go over this problem by analyzing both internal and external factors. Here is
a list of the things I would think about:
Internal
 Need for extra drivers (e.g., people get sick) – do we have enough employees
 Unionized drivers may shift labor cost up in the future
 Need to lease more trucks because trucks can break down causing late delivery
 Insurance costs
 Extra fine tickets than forecasted because drivers want to deliver on time
External
 Only one supplier (UPS) – we are captive to UPS

 Adoption of new technology (e-mail) might reduce the need for sending packages
 Government regulation
 New competition in the city – there are no real barriers to entry, since UPS would likely partner
with any carrier who can deliver on customer service metrics at a cheaper cost
 No association with our brand, thus our supplier can switch to our competitors or start its own
operation
Obviously, I could analyze the sorting operation more to make a more profound (exhaustive) analysis but
that was not covered on our initial discussion.
Interviewer: Don’t go that direction. Let’s think of another scenario. Now we have to investigate sources
for profit growth for this startup company with one restriction, we can neither add new truck leases nor
change the existing ones.
Candidate: OK. Let me think about increasing revenues:
 Extend hours: the trucks are already paid for the day, if we extend the delivery time after 7pm we
can deliver more of UPS or from other companies, even local companies. That would go (impact)
directly to profits.
 Different packages: we may recommend to UPS to sell different (more robust) packages to some
clients and get part of it.
 Pick packages: every time we leave a package we make space to pick a package and deliver it to
another part of the village or to give it back to UPS to send it to another place.
 Get contract with a new operator: see whether we can deliver stuff to other company who is in the
delivery business but does not compete directly with UPS.
 Since we can not add new trucks we can think about utilization of current trucks.
 Advertisement: are the trucks painted with UPS logos? We can sell advertisement to them or to
other companies. Those trucks are all day in the street.
 Insurance: offer insurance of packages to clients.
Interviewer: What else?
Candidate: We can also think about streamlining operations (reducing costs). I would think about them in
terms of fixed and variable costs.
 Evaluate the route of each truck to reduce time or usage of gas (fuel)
 Improve technology usage in the sorting and loading packages. May reduce number of people at
the factory
 Re-negotiate leasing terms for trucks
 Move warehouse to a cheaper place
Interviewer: OK, we are running out of time, but thank you for the list of business challenges that the client
should assess, I am sure that some of these will lead to very interesting discussions.
China to Build Beijing-Shanghai High Speed Railway

Case Type: new business; investment
Consulting Firm: Bain & Company first round full time job interview.
Industry Coverage: railroads & trains; transportation; government & public sector.
Case Interview Question #00603: Our client is The Ministry of Railways (MOR) of China. The ministry is
responsible for the development of the rail network and rail infrastructure in mainland China, passenger
services, and regulation of the rail industry. The ministry is also in charge of the operations of China
Railways which manages 16 railway bureaus and 2 railway group companies in

China.
Recently, the Chinese MOR is considering investing a large ammount of money to build a high speed
railway between Beijing and Shanghai, the two largest cities and the two most important economic zones
in China. You have been hired by the ministry to advise them on this major project. Should they go ahead
with the investment? What issues must be considered before making a “go” or “no-go” decision?
Additional Information: (to be given to candidate if asked)
1. Comparison of regular railway and high-speed railway
 The regular railway line distance between Beijing and Shanghai is about 1,320 kilometers or 820
miles.
 Due to low speed and frequent stops, it takes about 12 hours to travel between Beijing and
Shanghai by regular railway.
 The proposed Beijing–Shanghai high-speed railway will be of similar line distance, and will be
parallel to the conventional railway.
 Designed for a maximum speed of 450 kilometer per hour, the high-speed train will take only 3
hours to travel between Beijing and Shanghai.
2. Population
 The population of Beijing is 19.5 million as of 2010.

 The population of Shanghai is 23 million as of 2010.
3. Capital requirement of the project
 Fixed costs: USD $2.5 billion, this includes the costs of railway infrastructure, railway stations,
high-speed trains, and license of technology.
 Variable costs (operational): USD $50,000 per high-speed train per day
Possible Answer:
To make a “go” or “no-go” decision, essentially one has to evaluate the projected profitability of the
project. The candidate will have to carefully weigh the costs and benefits of the proposed high-speed
railway project. The “Profits = Revenues – Costs” framework seems the right way to start with.
 Profits = Revenues – Costs

 Revenues
 Price
 Volume
 Costs
 Fixed Costs
 Variable Costs
1. Market Sizing: estimate the passenger volume of the high-speed railway
Ways to determine this:
a. Population of these two cities
The candidate should have a general sense of the population of Beijing and Shanghai. But for simplicity,
let’s say 20 million people in each city. But not everyone can afford the high-speed train service, since we
will probably charge a premium over regular railroad services.
b. Market size of competitive services
 Regular railroad
 The curent passenger volume of regular Beijing-Shanghai railways is about 8,000 people
each way per day.
 Airlines
 There are 20 flights each way between Beijing and Shanghai every day. Each flight holds
on average 150 people.
So, who is the high-speed train’s real competition?
 It takes 12 hours to travel between Beijing and Shanghai one way by regular railroad.
 The flight time between Beijing and Shanghai is 1.5 hours.
 Our high-speed train will take 3 hours to go between Beijing and Shanghai one way.
However, with travel time between city and airports, security check, waiting at the airport and everything
else, we estimate that our high-speed train will be 1 to 1.5 hour faster than airplanes. Also, if someone is
willing to spend 12 hours on a train, they are unlikely to be our target customer!
Therefore, the real competition comes from air travel.
2. Pricing: how much should we charge for high-speed train service?

a. Look at our cost to see what margins we need:
 Fixed costs (infrastructure): USD $2.5 billion

 Variable costs (operational): $50,000 per train each day
b. Look at people’s willingness to pay:
 Round trip flights between Beijing and Shanghai cost about RMB 3,000 or USD $500. Can we
charge $500 for the high speed train, too?
One way to determine customer’s willingness to pay is through customer survey.
Based on our initial study, the number 1 criterion of our target customers (business travelers) is speed,
followed by flexibility of the service schedule, i.e. we need to be servicing as frequently as the flights. We
also found that we cannot charge more than $500 as corporate clients are unlikely to reimburse a price
higher than the flight fare.
3. Cost-Benefit Analysis and Breakeven Calculation

So, to match the airlines, we need to have at least 20 high-speed train departures each way every day,
for instance, say hourly departure between 4am and 11pm.
Given our one-way travel time of 3 hours and say, another hour for cleaning, unloading, train inspection,
etc., we need at least 4 trains for hourly departure in both Beijing and Shanghai, for a total of 8 trains at
least. Given USD $50,000 per high-speed train per day, the total variable costs will be $50,000 * 8 =
$400,000 per day.
If we are able to capture 100% of the airline market and charge $500 each round trip, we have $500 per
round trip * 20 round trips * 150 passengers per round trip = $1.5 million in revenue per day. But is it
realistic for us to capture 100% of the airline market?
At this stage, the candidate should ask for the penetration rate for similar projects. The interviewer can tell
the candidate that the Thai government built a similar high-speed railroad system in Thailand before and
their penetration rate was about 30% after three years.
If we assume a similar penetration rate for the Beijing–Shanghai high-speed railway, i.e. 30%, then daily
revenue will be $1.5 million * 30% = $450,000, which is $50,000 higher than our daily cost of $400,000.
Break-even point
Given that the project has a fixed costs of USD $2.5 billion for infrastructure, it would take the Chinese
Ministry of Railways roughly $2.5 billion / $50,000 per day = 50,000 days, or 50,000 days / 365 days per
year ~= 140 years to break even.
4. Final Recommendation
Now, ask the candidate to present a summary and recommendation at this point. Based on financial
considerations, this project will be profitable eventually, but it will need to take 140 years to breakeven.
Whether this is a “go” or “no-go” decision is totally up to the candidate.
The candidate should also explore other use of the new railroad, e.g. transportation of perishable goods,
express mail, etc. (Note to the interviewer: for this case, we expect passenger fare to be the major source
of income.)
Other interesting points for discussion include:
 lower price to increase sales volume

 educate customers or heavy promotion to increase market penetration
 expected growth of the market
 national pride associated with the project, i.e. once completed, the railway will be the world’s
longest high-speed line ever constructed in a single phase.
Guardian Industries to Enter Residential Glass Market
Consulting Firm: KPMG Strategy first round job interview.
Industry Coverage: Chemical Industry; Building Materials
Case Interview Question #00602: Your client Guardian Industries is a privately held industrial
manufacturer of glass and building products based in Auburn Hills, Michigan, United States. The
company is one of the world leaders for float glass, fabricated glass products, fiberglass insulation and
building materials for commercial and automotive markets. Employing over

19,000 people all over the world, Guardian Industries has present activities in North and South America,
Europe, Asia, Africa and the Middle East.
The client Guardian Industries has been producing glass for commercial windows for years. They have
had a strong customer base to sell to and have done so over generations. Recently, the President,
Chairman and CEO of Guardian Industries William “Bill” Davidson’s son has taken over the helm of the
company. As the new CEO of the company, he is intent on growing the business to a higher level. He is
looking at selling into the residential glass marketplace and have hired you to help him figure out what to
do. Is this a viable option? How would you go about helping the new CEO?
Additional Information: (to be given to you if asked)
 Current Utilization: currently the client Guardian Industries is using only 40% of their production
capacity. Full capacity is considered 80% or above.
 New Equipment: the client company is not looking into buying new equipment over the next few
years.
 Differences in glass making process, commercial glass vs. residential glass: none.
 Switching costs in changing to residential glass market: not significant in terms of time or money.
 Sales process
 Commercial glass: smaller architectural firms and vendor companies
 Residential glass: vendors and large home builders – we can do it because of our
longstanding reputation for quality
 Market Size: based upon new construction permits and repairs.
 Repairs can be determined by the useful life of windows * the number of windows per
house * the number of houses
 Market Share of residential glass: 70% of the market is dominated by one player (PPG
Industries), the rest of the market is fragmented
Data Collection and Math
1. Guardian Industries Commercial Glass Pricing & Cost
Types of Demand Commercial Price (per Cost of Producing (per Profit

Glass Volume square foot) square foot) (margin)
A 25% $10 $5 $5 (50%)
B 50% $12 $7 $5 (~42%)
C 25% $14 $9 $5 (~36%)
2. Comparative Pricing: Guardian Industries (commercial glass) vs. Competitor PPG Industries
(residential glass)
Guardian Industries Price (per square

Types of Glass foot) PPG Industries Price (per square foot)
A $10 $4
B $12 $7
C $14 $10
3. Cost Structure of Guardian Industries Commercial Glass

Types of Glass Fixed Cost (per square foot) Variable Cost (per square foo) Total Cost
A $3 $2 $5
B $4 $3 $7
C $5 $4 $9
Possible Solution:
The candidate should be asked to focus on determining ROI (return on investment) and the viability of the
plan including discussion on risks.
Potential Frameworks
 ROI = (Investment requirements, Revenues, Costs)

 Internal vs. External (if use this, be careful of missing costs)
 Profitability (if use this, be careful of missing competitor reaction)
ROI Framework
 Investment Requirements
 Costs of new machines
 Costs of new materials
 Costs of switching back
 Revenues
 Sales Process
 Prices
 Competitive Response
 Customers
 Costs
 Variable Cost
 Fixed Cost
 Other costs
 Sales staff
 Overhead
Key to the case
 Understanding investment needs versus possible profit

 Understanding differences in commercial versus residential market
 Understanding possible competitive responses
 Understanding the client has the capacity
 Understanding Variable costs are per unit, and do not change when utilization increases
 Understanding Fixed costs do not change, therefore per unit fixed costs decrease as utilization
increases
OK Answer
We can produce in the residential market because our costs can be lower than our competitor’s price. We
should enter this market and use our extra capacity to meet it.
Good Answer
While the commercial glass sales are clearly more profitable, our low utilization rate (40% at present)
allows us to participate in both the residential and commercial markets concurrently. Selling into the
residential market would need establishing some new sales contacts, but our reputation will help us do
that quickly.
If we produce at our full capacity (80% or above), our total costs will be $3.50 for Type A glass, $5.00 for
Type B, and $6.50 for Type C (see the data table below: Projected Cost Structure and Profit of Guardian
Industries Residential Glass). At these prices we can competitively match the residential market leader
PPG Industries’ pricing and still make a profit. Additionally, this will help our profit margins in our
commercial business. What is important to note is that we should not sacrifice any commercial sales for
residential sales because the commercial sales are significantly more profitable across all three types of
glass.
4. Projected Cost Structure and Profit of Guardian Industries Residential Glass
Types of Fixed Cost (per square Variable Cost (per square Total Pric Profit
Glass foot) foot) Cost e (margin)
A $1.5 $2 $3.5 $4 $0.5 (~12.5%)
B $2.0 $3 $5.0 $7 $2.0 (~28.6%)
C $2.5 $4 $6.5 $10 $3.5 (~35%)
Novartis to Open Cancer Care Centers in China

Consulting Firm: Putnam Associates first round job interview.
Industry Coverage: healthcare: pharmaceutical, biotech, life sciences.
Case Interview Question #00584: The client Novartis (NYSE: NVS) is a multinational pharmaceutical
company based in Basel, Switzerland with international reach. It currently is the second largest
pharmaceutical company in the world in terms of revenue (USD $58.5 billion in 2011). Novartis was
created in 1996 from the merger of Ciba-Geigy and Sandoz Laboratories, both
Swiss companies with long histories.
Novartis is known in the pharmaceutical industry for their cancer drugs. For instance, matinib (originally
STI571) is a cancer drug marketed by Novartis as Gleevec in USA or Glivec in Europe/Australia/Latin
America. Gleevec is used in treating chronic myelogenous leukemia (CML), gastrointestinal stromal
tumors (GISTs) and some other diseases. By year 2011, Gleevec has been approved by the United
States FDA to treat ten different cancers.
Recently, Novartis has experienced a decline in sales growth and is considering a new business
opportunity. In the U.S. and Europe there are many private companies that focus solely on cancer care.
The client Novartis wants to open and operate a chain of private cancer care centers in China. These
would be “out patient” type medical centers where cancer patients could come in for treatments; both long
and short-term stays are possible.
How would you evaluate the attractiveness of this business opportunity?
Suggested Framework
 Customers
 Competition and Regulation
 Cost and Revenue
 Company Capabilities
Possible Answer:
1. Customers
To assess the demand for the cancer care centers, we would need to determine the number of people in
China with cancer.
We can look at the number of people currently being treated through cancer care units of hospitals,
private care, etc. Alternatively, we could estimate the percentage of the population with cancer by looking
at cancer affliction rates across various countries and then multiply by the total population of China (1.3
billion).
2. Competitors
Currently, there are no cancer care centers like this in China; it would be a completely new concept.
Hospitals, nursing homes, private nurses will be competitors. Also, China has a history of treating
ailments through herbs, Chinese medicines, and other natural substances; these old world physicians are
a major competitor, too.
3. Cost and Revenue
Revenues are comprised of the number of treatments and the price per treatment. Since the care center
would focus strictly on cancer, the quality of the service would be better than the competition. In China,
most of the public hospitals are owned by the government. The government pays for all healthcares. In
fact, the government has predetermined fees that it will pay for all kinds of treatments. They will not pay
for more than that amount.
Since our client is providing premium service, their costs are higher than those of public hospitals, etc.
The client may not even be able to cover the cost of the care they want to provide through the
predetermined rates.
The client needs to assess if there is sufficient demand amongst the wealthier segments of the Chinese
population for a cancer care center. First, segment the population of China based upon income and focus
on the top income levels. Then, apply the percentage of cancer incident to this number to estimate the
number of potential cancer patients in the selected segments. Calculate the cost of serving each patient
and fixed costs to determine a breakeven number of patients. Compare this breakeven number with the
total potential cancer patients to determine the market share the client needs before they can turn a profit.
4. Company Capabilities
Although the client Novartis is well known in the pharmaceutical industry for their cancer drugs, they don’t
own or operate any cancer care centers. There are three ways the client can develop capabilities in this
area:
 Acquisition
 This approach could be very expensive
 The client gains full control
 Fast
 Forming joint venture with another company
 The client has less control
 Brand issues with other companies
 Starting from scratch
 This approach could be very time consuming
 The client has full control
Chicago AAA to Offer Premium Roadside Services
Consulting Firm: Booz & Company final round job interview.
Industry Coverage: automotive, motor vehicles.
Case Interview Question #00583: AAA (Triple A, formerly known as the American Automobile
Association) is a federation of 51 independently operated motor clubs throughout North America. AAA is a
not-for-profit member service organization with more than 51 million members. AAA provides services to
its members such as travel, automotive, insurance, financial, and discounts. Its
national headquarters are in Heathrow, Florida.
Our client in this case is Chicago Motor Club, one of the 51 AAA motor clubs. The Chicago Motor Club
primarily provides emergency roadside assistance services to its members. These services include jump
starting an automobile, towing a vehicle, helping to change a flat tire, providing a small amount of fuel
when a vehicle runs out of it, pulling out a vehicle that is stuck in snow or helping people who are locked
out of their cars. The club members pay a yearly $50 subscription fee regardless of the number of service
requests they make every year.
A typical scenario is that a person has trouble starting the car and calls the AAA service center. The AAA
service center then sends the nearest service van to the member. The mechanic will then try to resolve
the minor defect. In case the car needs serious repair, the service van will tow it to the nearest official
dealer or repair shop where our member can have the car repaired. Internal statistics indicate that the
average time before a service person reaches the client is 25 minutes in the greater Chicago metropolitan
area. On average the defect is resolved within 12 minutes.
A recent customer satisfaction survey revealed that 85% of the Chicago Motor Club AAA members are
happy with the service. Remarkably, 20% of the members indicated that they would be willing to pay up to
10 times the current price if they were sure to have a service mechanic to help them within 30 minutes.
With this data, our client, the president of Chicago Motor Club, asked us to determine whether they
should start a new service for the 20% of the members (called premium) that are willing to pay more.
What would you recommend?
1. If he or she doesn’t completely understand, the candidate should first ask what the provided service
exactly is.
Another Example: On a winter day an AAA member wants to go somewhere and it turns out that his car
won’t start because the battery is empty. The member calls our service line and logs a request. Upon that
request the nearest available service van is sent. The service mechanic will help the member to get the
car started and so the battery recharges.
Our service only helps members out with small defects and will not replace parts. In case of big failure our
service will bring the car to the nearest official car service station (e.g. Ford) or repair shop where he can
have it repaired.
2. How is our client company organized?
Our client the Chicago Motor Club has several service vans across the Chicago metropolitan area that
can be called up. The number of vans in a certain area is a complex function of the member population,
the number of historical problems in this area, accessibility, etc.
Possible Solutions:
This is a “whether to start a new business or not” case that requires a thorough problem analysis and
creativity to generate solutions. The case giver (or interviewer) should try to question all generated
solutions and it is good to be tough and see how the candidate reacts and stays calm while his or her
ideas get bombed. The case may not progress in the same sequence as given below and the case giver
should be prepared for that.
To test the creativity: If the candidate asks for any additional information, don’t give the information
immediately but ask: What do you expect it to be? – or – What do you think? This pushes the candidate to
drive the case and be creative.
1. Suggested Approach
The framework for this case could contain the following:
Customer Demand
 Customer preferences: Why do they want to pay more?

 Customer segmentation: Who are the people that want to pay more?
 Price Sensitivity: Can we scale up the price sensitive customers to the new service?
Company
 How does the company (Chicago Motor Club) currently operate? How is it structured?
 What are the changes to the processes to offer the new premium service?
 Benefits for providing the new service (Revenue improvements -> $/Minute increase)
 Costs for implementing the new service
 Pay more to the service mechanics
 Opportunity cost of not able to deliver the service for non-premium customers
Competition
 Number of competitors providing similar premium service.

 Any sustainable advantage in creating this new service so that competition cannot provide this
service in the future.
Marketing Tactics/Next Steps
 What should be the pricing strategy for this new service

 Promotional or Advertising activities
 Can we provide this service to non-premium customers on a usage basis?
2. First, ask the candidate what he/she thinks are the demand drivers.
Possible Answer:
There are two main demand drivers:
 Seasonality:
 more service demand in winter than in summer
 It also depends on the weather
 Rush hours:
 Service request peak period between 6am and 9am, then requests slow down during the
day, then rise again between 5pm and 8pm.
3. What members want to pay more for the service? Why? (If the candidate asks this question let him/her
brainstorm by asking the question: who do you think these members are?)
Possible Answer:
 Professionals that need to be somewhere on time (meeting in the office, job interviews, airplane
to catch, etc.)
 Mothers with children (have you been waiting 1 hour in the cold with 3 children that have to go to
school?)
4. The interviewer (the case giver) should then push the candidate to think about the following: What is
these people’s real issue, besides that the car doesn’t work?
Possible Answer: They need to be at another location in time!!

5. How can you solve this problem?
Possible Answer:
Most likely the candidate will come up with one or more of the three following answers:
I. Increase overall service of the network so 90% of the calls get treatment in under 30 minutes. This is
good; however what are the practical implications?
 More service vans

 The costs of more service vans will directly impact the bottom line of our client. That is not
wanted.
 Will the member that are willing to pay $500, still pay $500 if everyone enjoys the better service?
 Can you assure in-time service delivery for all “premium” members?
II. Prioritize members
 How do you do this practically?

 Can you assure service deliver? (what happens if all service vans are unavailable because they
are working at a member?)
 What is the impact on the service level of the existing members? Will they be happy with lower
quality service?
III. Build a new network for the speedy service
 But can you assure the service?

 What is the cost of building a whole new network? You loose synergies with the existing
infrastructure.
6. If the candidate analyses the situation thoroughly, he or she understands that the main need of the
premium members is having transportation to the destination. So, how do you provide transportation and
repair? (again a creativity solution)
Possible Answer:
The solution could be: a premium member calls in. A repair person is sent if immediately available, else a
taxi is sent that makes your transportation and takes your keys. The keys are dropped off at a local
service station or repair shop and during the day a service person will repair your car or bring to the brand
service station that does major repairs. (you can go into details of how this would work in practice)
Additional advantage of this solution:
 This solution lowers the workload in the morning and can shift work for current service vans to the
afternoon.
 As a big consumer, the client company AAA will be able to negotiate good deals for taxi rides.
7. Now, let’s do some estimation on how the new service will impact our client company.
Possible Answer:
The candidate should now ask for the following information to proceed with the calculations. The
interviewer should not give any information unless asked for.
 By introducing this new service our client’s operating costs will double.
 Assume that our client currently has a million customers and only 10% of our customer base will
actually register for this new premium service.
Candidate should be able to put together the following table:
Revenues before starting the 1 million * Revenues after starting the 900,000 * $50/year +
new service (should be $50/year = $50 new service (should be 100,000 * $500/year
estimated by the candidate) million estimated by the candidate) = $95 million
Operating expenses before

starting the new service (Give Operating expenses with the
to the candidate when asked new service (should be
for) $35 million estimated by the candidate) $70 million
Profits before starting the new Profits with the new service
service (should be estimated by (should be estimated by the
candidate) $15 million candidate) $25 million
8. Wrap up: Ask the candidate to summarize his/her findings and make a final recommendation.
Possible Answer:
A potential service for the members is to guarantee them transportation and that their car will be taken
care of. A taxi-service combined with the repair service gives premium members a solution that fits their
needs. Based on the data analysis the potential service for the members is economically profitable for the
client.
The recommendation must answer the question of the member. A great candidate says what the client
company should do next and how we could help them.
9. Note to Interviewer
Things to look for in this case:
 The framework must be simple and not too detailed.

 A good candidate drives the case and regularly says what he is thinking about and where he
wants to go. If he doesn’t, ask regularly what he is thinking of, and where he wants to go.
USA Traffic Signs to Enter Paper Label Market
Consulting Firm: Boston Consulting Group (BCG) first round job interview.
Industry Coverage: manufacturing; paper products.
Case Interview Question #00581: Our client USA Traffic Signs is a $100 million manufacturer and
national supplier of public signs headquartered in Binghamton, New York. Their products consist mostly
of public road and traffic signs, street signs, sign posts, custom signs, and parking signs, but are also
used in some businesses, construction sites, or universities throughout the

United States.
Recently, the CEO of USA Traffic Signs is considering entering the paper label industry next year (year
2010). Paper labels have a wide variety of uses in many different markets (e.g. pharmaceutical labels,
business cards, etc) and so our client wants to know if there is any particular segment for them to enter,
how to enter, and whether you recommend entry into paper label industry at all. How would you go about
the case?
 Paper label industry growth is expected to be approximately 2% in next few years.
 Four major players own 70% of the paper label market, the rest is divided among many small
players.
 Some of the large segments within the paper label industry are: healthcare (pharmaceutical
labels), business (cards), manufacturing, food, and apparel.
 The four major players exist equally in all these segments. However, some segments are more
quality / premium driven, others are more cost driven.
 The management of USA Traffic Signs believe that they can capture 10% of the current market of
paper label.
Exhibit 1: Paper Label Sales from 2005 to 2010 (numbers for year 2010 are estimated)
Blue bar: Premium labels (left axis, unit sales in millions)

Green bar: Cheap labels (left axis, unit sales in millions)
Black line: Price per label (right axis)
 Average labels per roll: 35

 Average rolls per printer: 20
 Average price per printer is $10.00.
Exhibit 2: Competitors and Estimated Market Share of 2009 healthcare paper label market
Possible Answer:
1. Quantitative Analysis
From Exhibit 1, the candidate should be able to estimate the sales of paper labels for next year (2010):
700 million units sold at $3.00 per unit = 700 million * $3.00 = $2.1 billion
Plus, sales from label printers:
 700 million labels / 35 labels per roll = 20 million rolls

 20 million rolls / 20 rolls per printer = 1 million printers.
 At $10 each, this is $10 million.
Total Sales for Year 2010 = $2.1 billion + $10 million = $2.11 billion.
2. Qualitative Analysis
a. Competitors
Based on Exhibit 2, the candidate should realize that the breakdown of major competitors in healthcare
label market is representative of the entire paper label market.
A few dominant players may make entry into the healthcare segment very difficult: perhaps they are
already employing the razor-blade business model (label printers are sold at a low price or given away for
free, to earn a premium on paper labels). They currently focus on premium labels, it’s the small players
who are focused on the cheap segment.
b. Product
 If entering this market, should the client sell printers, labels, or both?
 Should the client sell service too?
c. Premium vs. Cheap label segment
 Premium label segment:

 It’s good for the razor-blade business model
 It helps maintain the client company’s current image
 Cheap label segment:
 This segment can be used to grow market share fast
 But, the cheap label segment offers less flexibility in razor-blade model or adding
services
d. Customers
What do customers value most in paper labels?
e. Approach of Market Entry
 Acquisition
 could be very expensive
 Full control
 Fast
 Forming joint venture with another company
 Less control
 Brand issues with other companies
 Starting from scratch
 Very time consuming
 Full control
3. Conclusion
From the above analysis, we see that the market opportunity is very large ($2.11 billion), but the growth is
somewhat slow and there are several large players who dominate the industry and make entry difficult.
High market capture may be difficult, however, the cllient company management’s estimate of 10%
means revenue of $211 million, over twice the size of the existing company ($100 million)! Also, the
different industry segments present interesting options for entering the market as a premium or cheap
player.
Importantly, with printers and labels, the client can use a razor-blade business model where the printer
only works with the same company’s labels, thus retaining customers (offering both labels and printers is
wise). This also suggests that the company should own the manufacturing process, and so a joint-venture
is out of the question.
This case provides no profitability metrics – a hugely important figure. Thus, an outstanding candidate
must make a recommendation without full information and should be comfortable with this kind of
ambiguity.
Rio to Bid to Host the 2016 Summer Olympics
Consulting Firm: Booz & Company first round job interview.
Industry Coverage: sports, leisure & recreation.
Case Interview Question #00567: Rio de Janeiro, commonly referred to simply as Rio, is the capital city
of the State of Rio de Janeiro, the second largest city of Brazil, and the third largest metropolitan area and
agglomeration in South America, boasting approximately 6.3 million people within
the city proper, making it the 6th largest in the Americas, and 26th largest in the
world.
Recently the City of Rio de Janeiro is considering placing a bid to host the upcoming 2016 Summer
Olympic Games. Our client, the Rio Olympics bidding committee, approached us to ask for our opinion of
what the major considerations should be. Of major concern is how to convince the State of Rio de Janeiro
and the Brazilian government that this would be beneficial not only for the city but also for Brazil. How
would you recommend they go about doing this?
The 2016 Summer Olympics are to be held over 15 days.
Costs: (give all the costs at once)
 $2.8 billion for the operation of the games (opening ceremony, security, athlete support,
transportation, closing ceremony, etc.)
 $2.6 billion for freeway upgrades
 $6.0 billion for new and upgrading venues
 $2.5 billion for new airport terminal
 $1.1 billion for athlete facilities
Revenues: (ask what the candidates think Olympics revenue streams could be, and then give out one at a
time)
 International Olympic Committee (IOC) support: $1.1 billion
 Tickets Sales: Give Exhibit 1
 Sponsorship: $75 per seat (per occupied seat*).
 TV broadcasting rights: combined with the preceding 2014 Winter Olympic Games, TV stations
pay $15 billion, and the Summer Olympic Games is expected to take 80% of this. Of this total, 25%
will go to the organizing committee and the hosting city.
* Do not say occupied seat, unless the candidate asks if this is the case. If this comes after the Ticketing
section, then tell the candidate that he / she has omitted thinking about seating occupancy, and ask how
this would affect the numbers.
Exhibit 1: Seating for Rio 2016 Summer Olympic Games
Seating Type Price Per Ticket Total Number of Seats Per Day
A $200 420,000
B $120 700,000
Possible Solution:
This “launching a new business” type of case is designed to test the candidate’s ability to generate a
framework outside of what they might be accustomed to; there is no market, no competition, a very
unusual product. The case is designed to initially revolve around profitability, which will show a great
deficit. At this point, the interviewer should ask if hosting the games is a bad idea. If the candidate says
that it is, then the case can turn into a brainstorming session on how the Rio bidding committee might
convince the government that it is a good idea after all. Let the candidate float around with some
questions, before hinting that we should be looking at this from a profitability angle.
Cost-Benefit Calculations
Total Costs = $2.8 + $2.6 + $6.0 + $2.5 + $1.1 = $15.0 billion
Revenues from ticket sales:
Seating Price per Total # of Expected Total occupied seating Total revenues (for
type ticket seats per day occupancy** (for 15 days) 15 days)
420,000 * 95% * 15 = $200 * 6 million =

A $200 420,000 95% 5,985,000 ~= 6.0 million* $1.2 billion
700,000 * 60% * 15 = $120 * 6.3 million =

B $120 700,000 60% 6,300,000 = 6.3 million $0.756 billion
Total 12.3 million ~$2.0 billion*
* allow approximation when moving forward with further calculations

** Provide “expected occupancy rate” only if asked, but allow candidate to complete workings without this
first, and then ask what assumptions have been made. If the candidate doesn’t think of this, provide the
numbers.
Revenues from sponsorship: $75 per seat * 12.3 million = $922 million ~= $0.9 billion
Revenues from TV broadcasting rights: $15 billion * 80% * 25% = $3.0 billion
Total Revenues: $1.1 + $2.0 + $0.9 + $3.0 = $7.0 billion
Profits = Revenues ($7.0 B) – Costs ($15.0 B) = -$8.0 billion
Now, ask the candidate if this makes the bid a bad idea. Regardless of the answer, ask how that gap (-
$8.0 billion) could be closed. Possible answers include: official merchandise, tolls on new freeways,
increasing seat price, increasing seating capacity through marketing, utilizing semi-temporary venues and
facilities, upgrading existing facilities instead of building new facilities, etc.
After debating, concede that the gap might be narrowed to a $6 billion deficit. Now, ask the candidate if
bidding for the 2016 Summer Olympics is still a bad idea.
Explain that historically, an Olympic Games rarely shows a direct profit for the host city, however,
indirectly it has been shown that an Olympic Games can be hugely beneficial for a host city and host
country, both fiscally and emotionally. Ask how this could be the case.
Arguments that could be made to the Brazilian government that hosting the Olympics could be a good
thing:
 Tourism during and after the games would increase significantly, reducing, and perhaps
offsetting, the profitability deficit.
 Upgrading city infrastructure (e.g. airports, sports facilities, etc) is beneficial.
 Sense of pride throughout the city and the country – good for everyone living there.
 If selected, Rio will be the first South American city to host the event.
Las Vegas Gas Station Try Hand at Slot Machine
Consulting Firm: Analysis Group first round job interview.
Industry Coverage: small business; oil, gas & petroleum industry.
Case Interview Question #00558: Your friend owns a full service gas station on Las Vegas Boulevard
South right outside of the Las Vegas Strip where most of the world famous hotels, casinos and resort
properties are located. Recently, he is thinking about installing a slot machine in his gas station. He has
asked you if he should do it or not. What advice would you give to your friends?
Additional Information: (to be given to candidate)
 Your friend is looking to install only 1 slot machine, which costs $5,000 (one time cost).
 The slot has to have a minimum payout rate of 75%. You are able to set the payout rate yourself.
 There is an annual licensing fee of $1,000.
 The average Las Vegas hotel casino slot machine brings in $200 per day in revenue.
Additional Assumptions: (to be made by the candidate, provide only if asked)
 Since the slot machine will not be located in a hotel casino, assume it would bring in only 50% of
a casino slot machine’s revenue.
 Variable costs: electricity costs $1 per day
 The gas station is open every day
 Your friend is considering a payout rate of 80%
 The lifespan of a slot machine
 Taxes are 30% of revenue
Possible Solution:
 Annual revenue of the slot machine = $200 per day * 365 days * 50% = $36,500
 Revenue after payout rate: (1 – 80%) * $36,500 = $7, 300 (will vary slightly based on the actual
payout rate chosen by your friend)
 Fixed costs = $5,000 one time investment + $1,000 annual licensing fee
 Variable costs = $1/day * 365 days = $365
Profit in year 1 = $7,300 – $5, 000 – $1, 000 – $365 = $935
After taxes profit in year 1 = (1 – 30%) x $935 = $654.50
Yes, he should install it because there is a profit and because he will not need to incur the $5,000
purchase cost for several years (whatever the chosen lifespan was), which will increase his profit before
taxes by $5,000 each year
Profit in year 2 and thereafter = $7,300 – $1, 000 – $365 = $5,935

After taxes profit in year 2 and thereafter = (1 – 30%) * $5,935 = $4,154.50
Therefore, it is profitable to add the slot machine and given that the owner’s goal is profitability, a decent
recommendation is to add the machine. However, a strong analysis will consider risks and other options
before making the “yes” recommendation.
Additional Issues to discuss:

 Location of the slot machine: your friend could place it near the bathrooms to let people play while
they are waiting in line.
 Assuming the gas station sell snacks and beverages, the slot machine may increase food
purchases by drawing people inside.
 Put up signage on the highway announcing the slot machine, which may increase business.
 You can adjust the payout rate, so the friend can play around with the optimal payout.
 An average daily was provided, but your friend needs to consider the cost of the slot – $0.05,
$0.25, $1, etc. A $0.25 may encourage more people to play. People could use the change from their
recent snack purchase to play.
MTV Networks to Launch New Country Music Magazine
Consulting Firm: Mercer 1st round job interview.
Industry Coverage: mass media & communications; entertainment.
Case Interview Question #00545: Our client MTV Networks is a division of media conglomerate Viacom
(NASDAQ: VIA, VIAB, short for “Video & Audio Communications”) headquartered in New York City, New
York, United States. The company oversees the operations of many music television channels and
Internet brands, including the original MTV (Music Television) channel in the
United States and the MTV Networks International.
As a major national music cable network in the U.S., MTV Networks recently is thinking about launching a
new magazine dedicated to country music. You have been hired to help them with this initiative. Is this a
good idea? What is the economics of launching this country music magazine?
Possible Answer:
Candidate: As our client is thinking about entering into country music magazine market, before we look at
the economics of launching the magazine, I would like to first analyze the attractiveness of country music
magazine market: its overall market size, growth, competitive landscape, consumer purchasing behavior,
entry barrier and etc.
Then, if the market is attractive, I would like to look at our clients’ capability to succeed in this market:
where does it standin line with the key successful factors in the magazine business? Could we create any
synergy between the music cable network and the magazine business?
Then, I would use cost and benefit analysis to look at the profitability of launching the magazine business.
Finally, if all the above analysis is favorable to our client, I would look at different options of entering this
business: acquire a current country magazine business, form a joint venture (JV), or start a new operation
from scratch.
As we are specifically looking at the economics of launching the magazine, I would like to focus my
analysis on the cost and benefit of launching this new magazine.
Interviewer: Great! Why don’t we do that?
Candidate: Let’s start with looking at the revenue of the country music magazine business. With my
understanding of the business, there will be two main revenue streams: magazine subscription and
advertisement. Am I right? (Note: if the candidate doesn’t know this, then prompt them for “what you think
are the two main revenue streams?” – they should be able to develop them on the spot).
Interviewer: yes.
Candidate: Then I would like to ask whether we have any numbers on these revenues.
Interviewer: We might. But if we didn’t immediately have the number then how would you suggest our
project team estimate the subscription revenue number?
Candidate: Well, we could do quick market size estimation. We could divide the market into subscribers
and non-subscribers to our cable network. Let’s assume there are 100 million households in the U.S. How
many subscribers do we have?
Interviewer: Well, we know that there are totally 25 million households subscribing to country music cable
networks. 60% of them are subscribing to our client.
Candidate: Good. So 25 million * 60%, we have totally 15 million subscribers. Then there are 25 – 15 =
10 million households who subscribe to other country music cable networks. Lastly, we have 75 million
households who don’t subscribe to any country music cable networks.
My business common sense tells me that the conversion rate of our subscribers would be the highest as
they listen to our cable network already which means that they like our collection of country music. We
might be able to get some potential customers from the 75 million household who haven’t subscribed to
the country music cable network yet, but my guess is that the conversion rate would be very low. Do we
have any sense of these conversion rates?
Interviewer: I would like you to tell me how would you get these conversation rates?
Candidate: One way is to look at these numbers of a competitor. If these data are not available, we could
do a market research using customer survey or interview.
Interviewer: Good. Let’s assume 80% of our 15 million cable network subscriber would subscribe to our
country music magazine. 20% of the 10 million subscribers to other music cable network would subscribe
to our country music magazine. To make our life easy, let’s forget the 75 million non-subscribers for now.
Candidate: Great, so we have totally: 15 * 80% + 10 * 20% = 14 million subscribers to our country music
magazine. What is the revenue for an annual subscription?
Interviewer: One magazine costs $4 each and it will be published monthly.
Candidate: Then the subscription revenue will be: 14 * $4 * 12 months = $672 million. Now, let’s move
onto the advertisement revenue. Do we have any data on this?
Interviewer: We know that advertisement revenue is about 50% of the subscription revenue.
Candidate: So advertisement revenue is 672 * 50% = $336 million. Thus total revenue is 672 + 336 =
$1,008 million. Now let’s move onto the cost side. As it is magazine business, I would assume that the
major cost items would be: labor, printing, distribution, marketing & sales. Do we have any data on this?
Interviewer: Well, our competitor has a 12% margin in the magazine business.
Candidate: Good. I would assume that our competitor enjoys some scale effect and operation efficiency
while moving along the experience curve and thus has a higher margin than our client.
Then, our client’s margin would be 10%. With revenue of $1,008 million, the annual profit from magazine
business is around $100 million. It looks pretty good so far. Let’s see how significant this means to our
client’s business. How much profit our client is having right now?
Interviewer: About $500 million.
Candidate: So the magazine business will bring 20% more profit, which is pretty good. From the pure
number side, the economics looks very good. However, I would like to look more at the qualitative side.
As I laid out my structure at the very beginning of the case, I would like to further investigate those areas,
especially competitors’ possible response and customers’ feedback and our client’s resources to see
whether our client is able to get the $100 million profit for the proposed country music magazine business.
Interviewer: Very good! We will look at these later. Let’s just stop here for now.
Notes to Interviewer:
It is not a very complicated case about entering the new market. It would be nice if the interviewee could
lay out the structure for entering the new market at the beginning of the case. However, as the interviewer
is asking for economics, the focus of the case should be on benefit and cost analysis.
The interviewer is also testing the interviewees’ ability to carry out a market size estimation and to hold a
high level strategy discussion as well. As the interviewer, you should not be afraid to diverge from the
path above. Use your own industry knowledge and experiences to push the candidate to brainstorm
more. However, do use the math questions to always bring the candidate back to the case, and let them
determine the final market size for the client.
Ritz-Carlton Hotel to Install Mini-bars in Guest Rooms

Consulting Firm: Cognizant Business Consulting (CBC) 2nd round job interview.
Industry Coverage: hotel, hospitality, lodging.
Case Interview Question #00537: The Ritz-Carlton Hotel Company L.L.C. is the parent company to the
luxury hotel chain, Ritz-Carlton Hotels. Headquartered in Chevy Chase, Maryland, located in the
Washington, D.C. metropolitan area, the Ritz-Carlton hotel company is a subsidiary of Bethesda,
Maryland based hotel giant Marriott International (NYSE: MAR).

You have just been promoted to be the Chief Operating Officer (COO) of Ritz-Carlton Hotel Company and
have been put in charge of the daily operation of the hotel chain. Previous the hotel chain did not have
mini-bars installed in the guest rooms. The CEO would like to know if you think the revenue opportunity is
large enough to make it worth it. You have been asked to estimate the revenue opportunity and make a
recommendation as to whether or not they should be installed. How would you go about it?
Instruction to the Interviewer:
The objective of this “launching a new business/service” case is
 To see if the candidate can make reasonable estimates as to the revenue opportunity
 To see if the candidate can identify intangible reasons for or against this new opportunity
 To see if the candidate can determine whether or not this is significant for the business
Question #1: How would you structure your analysis to help you make a recommendation?
Possible Answer:
 Understand the cities the hotels are located in, the local areas, and the restaurants in the hotels
 Estimate the revenue opportunity
 Evaluate risk factors
Instruction to the Interviewer: Let the candidate pick one city to carry out his/her analysis (do not let
them pick a hotel in countries that do not serve alcohol) and make assumptions about the local
bar/restaurant scene and the hotel bar.
Question #2: What are some issues for or against adding mini-bars in Ritz-Carlton Hotels?
Possible Answer:
Pros:
 Mini-bars are becoming standard amenity for upscale hotels

 Business travelers may not stay without it
 Good way to sell “Ritz-Carlton branded” items
Cons:
 Hotel bar will lose business

 Bartenders will lose tips
 Need to hire staff
 Need to adjust food service catering
 High initial startup costs
 Electricity costs
Question #3: Please estimate the revenue opportunity
Instruction to the Interviewer: There is no right answer here as long as all of the candidate’s
assumptions are reasonable and are well thought out. Challenge them to defend some of their
assumptions.
Possible Answer:
1. Estimation of the Hotel size
20 floors, 15 rooms/floor, ~300 rooms
 ~20 Penthouse Suites

 ~80 King Suites
 ~200 Regular Suites
2. Estimate room days per year
Assume 75% utilization and 350 usable days per year per room
 Penthouse Suite: 20*350*75% = 5,250, ~5,000 Room Days/Year

 King Suite: 80*350*75% = 21,000, ~20,000 Room Days/Year
 Regular Suite: 200*350*75% = 52,500, ~50,000 Room Days/Year
3. Estimate average spending per room per day
Assume that cocktail costs $10, beer costs $5 each.
 Penthouse: (2 cocktails & 2 beers) $30

 King Suite: (1 cocktail & 1 beer) $15
 Regular Suite: (1 cocktail) $10
4. Yearly Revenue Opportunity
Room
days/year Average spend/day Total
Penthouse Suite ~5,000 $30 $150,000
King Suite ~20,000 $15 $300,000
Regular Suite ~50,000 $10 $500,000
$950,000
Question #4: Is this amount significant?

Possible Answer:
First, estimate one hotel’s annual revenue from hotel guest rooms
Average rate per room per
Room days/year day Total
Penthouse
Suite ~5,000 $1,200 $6 million
King Suite ~20,000 $800 $16 million
Regular Suite ~50,000 $500 $25 million
$47 million
A strong candidate would be able to recognize that the revenue from the mini-bar (less than $1 million)
may be relatively low in comparison to the hotel’s total revenue (~$48 million) but may be very necessary
for intangible reasons. In addition, the candidate should mention that this is all top line (revenue) and may
not represent a significant profit increase.
Question #5: Ask the candidate to give a 30-second summary of the case and his/her final
recommendation.
Kmart to Place Kodak Picture Kiosks in Stores
Consulting Firm: Siemens Management Consulting second round job interview.
Industry Coverage: electronics; retail.
Case Interview Question #00536: Our client Eastman Kodak Company (NYSE: EK), commonly known
as Kodak, is a multinational imaging and photographic equipment, materials and services company
headquartered in Rochester, New York, United States. Kodak is best known for photographic film and
photo paper products. During most of the 20th century Kodak held a dominant
position in photographic film, and in the 1980s had a 90% market share of photographic film sales in the
United States.
Over the past five years, however, Kodak has experienced declining profits. Our consulting team has
determined that the client’s declining profitability is due to sales volume declines resulting from digital
substitution. As a result, the client is now considering a few new business ideas to enter digital
photography. Our client has been approached by Kmart (the third largest discount store chain in the
world, behind Walmart and Target) in order to place Kodak Picture Kiosks within each of their stores.
Kiosks are self-serve printing stations that allow users to print their digital photos on the client’s photo
paper. How do you evaluate the attractiveness of this new business opportunity?
Suggested Structure:
Any new business opportunity has to be profitable at least in the medium and long run. The following
questions should be answered to get there:
 Demand – What is the market demand for the digital photography printing services at Kmart?
 Profits – Even if there is good demand can the client turn profits?
 Capabilities – What capabilities and resources does the client have to be successful in this
business?
 Risks – What are the potential risks of this agreement with Kmart?
Possible Answers:
Step #1: Size the market opportunity – Estimate the potential market demand for digital prints per year
within a single Kmart store as an example.
1. Top Down calculation:
 1 million people in Boston area

 10% are Kmart customers = 100K
 10% of customers go to Kmart to do photo finishing = 10K
 5% of these customers use a digital camera = 500 people
 average person prints 100 digital photos per year = 50,000 prints per year
2. Bottom Up calculation:
 How many people go to a single Kmart store per year?

 2,500 customers per day * 350 days/year = 87,5000 visits per year ~= 90,000 visits
approximately
 How many digital prints will this translate into?
 Average customer goes to Kmart ten times a year (90K/10) = 90K unique customers
 10% of customers go to Kmart to do photo finishing = 9K
 5% of these customers use a digital camera = 450 people
 average person prints 100 digital photos per year = 45K prints
Therefore, the market opportunity per Kmart store per year is about 45-50K digital prints.
Step #2: Is the business profitable – Will it generate a good return on investment (ROI) for Kodak and
Kmart?
One of the simple ways to determine this is to calculate the break-even demand and compare it with the
potential market opportunity
Additional Information: to be provided to candidate

 Initial investment per kiosk is $6,000
 Average price per digital print is $0.50
 Fixed cost per kiosk per year is $5,000
 Average cost of photo paper per digital print is $0.10
 Cost of printing ink per 500 prints = $75
1. Break-even Calculations:
Revenue = Cost = fixed cost + variable cost

$0.50 * Q = $5,000 + ($0.10 + $75/500) * Q
Solve the equation, the number of prints needed to breakeven Q = 20,000 prints per year
2. Payback Calculations:
Assume the market demand is 50,000 prints per kiosk. Of that only 30,000 prints contribute to the profits
(20,000 breaks even). The margin per print is $0.50 – $0.10 – $75/500 = $0.25. The total profits per year
per store are 30,000 * $0.25 = $7,500
Given that the initial investment per kiosk is $6,000, the payback time is less than 1 year.
The client would have to believe that it could sell at least 20,000 prints per kiosk in order to take this
action. Here the potential opportunity per year is greater than the breakeven quantity.
Step #3: Capabilities and Resources

The candidate should think of what kind of resources and capabilities they need to be successful in this
business. Some questions to ask could be:
 Client has to invest in photo printing machines at Kiosks. Do they have funds?
 Do they have enough production capacity to manufacture photo paper?
 Client will have to manage inventory of printing paper and ink at these Kiosks
 Client has to manage if any machine breaks down (or at least they are responsible for revenue
loss)
 They need to work out the cash flow mechanism. Will the customers directly use their credit cards
when using the self-service kiosk or will use the kiosk and later pay to Kmart?
Step #4: Potential risks and issues – Some examples
 What if the demand is not as high as expected? Should they do a pilot launch?
 What if the present printing technology becomes obsolete in the next few years?
 Will our alliance will Kmart prevent us from partnering with other major retailers?
 What if the price per print crashes because of competition from other retailers?
 We are assuming average numbers to decide on this initiative. Should we be focusing only on
stores that have more than average customers?
 What if the customers use the Kiosk machine in an incorrect way resulting in machine damage?
Lowe’s to Offer Installation Services for Home Improvement
Case Type: new business; business expansion, growth.
Consulting Firm: Deloitte Consulting (Strategy & Operations) 2nd round job interview.
Industry Coverage: retail.
Case Interview Question #00531: Lowe’s Companies, Inc. (NYSE: LOW) is an American chain of retail
home improvement and appliance stores based in Mooresville, North Carolina, near Charlotte, North
Carolina. As the second-largest home improvement retailer (behind The Home Depot) in the US, the
company now serves more than 14 million customers a week in its 1,710 stores
in the United States and 20 in Canada.
Recently, your client Lowe’s has just entered the installation services business for their home
improvement products. Their staff would go to the customer’s location for an additional fee and install the
products bought at their retail stores. Currently the company has annual revenues of about $10 billion and
the company had previously grown through some key acquisitions. Revenues are expected to grow at
10% every year.
They want their home installation services to be 20% of their total revenues in 5 years from now. To
expand they are considering three options – Internally build capabilities by hiring people, start Franchises,
Acquire other installation companies. What should they do to expand? You don’t have any other data or
information.
Suggested Approach:
This business expansion case tests a candidate for clock speed and intuition without major scope for data
crunching. The following steps represent one of many possible ways to approach this case.
 Step 1: Calculate how big the installation business should be in 5 years

 Step 2: Decide on criteria to compare among the three options
 Step 3: Come up with qualitative pros and cons of each option with regards to each criterion
decided
 Step 4: Propose recommendation
Possible Solution:
Step 1: How big the client’s installation business should be in 5 years?
Total Revenue in $billion
Year 0: 10.0
Year 1: 11.0
Year 2: 12.1
Year 3: 13.31
Year 4: 14.64
Year 5: 16.11
So in 5 years from now, 20% of $16.11 billion is approximately $3.2 billion dollars. This is a big number
and is not an easy task. The insight is that if this has to happen within 5 years then the expansion has to
be very rapid.
Step 2: The candidate can come with any number of criteria for comparison. Some suggestions are:
 Capital investment
 Market share
 Margins
 Cultural fit
 Entrepreneurial spirit
 Control of employees
 Customer relationship
 Training the employees and Learning curve
 Consistency of business processes
 Integration of IT systems
 Exit risk
Step 3: Comparison of the three options
Criterion Internally build Franchise Acquire
Capital
Investment High Low Moderate to High
Market Share Difficult to build quickly Quick expansion possible Quick expansion possible
Relatively low as
Margins Relatively high Franchise will get a % As high as internally build
Cultural Fit Easy to shape Difficult Difficult
Entrepreneurial
spirit Not easy to achieve Very entrepreneurial May or may not be
Control over
employees Strong Not possible Strong
Has to be built. Processes Can acquire customers and

can be consistent. Easy to Has to be built. But existing relationships.
Customer put a single face to the difficult to put a single Difficult to put up a single
Relationship customer face to the customer face
Learning curve Difficult Difficult Already skilled and know

the business
Consistency of Have to be built. Little

processes easier than other options Have to be built Have to be built
IT systems have to be built IT systems have to be Systems may be available

Integration of IT and integrated built and integrated with target
Exit risk High Low High
Step 4: Recommendation
From above analysis, each option has both pros and cons. The interviewer actually said the company
went in for the acquisition strategy given their previous experience and the need to quickly expand to
prevent competitors from gaining advantage.
Any recommendation is agreeable but the candidate should be able to defend it with strong logic.
Burger King Not To Introduce Customer Loyalty Program

Consulting Firm: Siemens Management Consulting first round job interview.
Industry Coverage: restaurant & food service.
Case Interview Question #00529: Burger King is a global chain of hamburger fast food restaurants
headquartered in unincorporated Miami-Dade County, Florida, United States. At the end of fiscal year
2011, Burger King reported that the chain had more than 12,400 restaurants in 73 countries, employing
more than 34,000 people; of these, 66 percent are in the United States and 90
percent are privately owned and operated.
Recently, the CEO of Burger King is planning to introduce a new customer loyalty program called “Quick
Rewards” for his chain. The program is modeled like the airline industry’s frequent flyer program:
customers earn rewards for money spent at the restaurant chain. You have been hired as a consultant to
advise him on this program. Specifically, he want to know if Burger King should go ahead with this
initiative. What would you recommend and why?
Suggested Approach:
 Step 1: Understand the features of the program first.
 Step 2: What will be the incremental benefits to the restaurant company?
 Step 3: What is the cost involved in this program?
 Step 4: Do benefits exceed costs?
 Step 5: Any other potential risks or opportunities?
1. Program features: A customer will get 2 points for each dollar he/she spends at any Burger King
restaurant. And when the customer reaches 200 points he will get some standard gifts. So for each 200
points they get one gift.
2. Benefits of the program: Data is on a per store per year basis

Number of
Customer customers per Average number Average $ % That join Average number of
Segment store of visits per year spent per visit program additional visits
Heavy 8,000 30 $4.00 20% 6
Light 12,000 9 $4.00 5% 3
Burger King’s average operation margin is 20% of the revenues.
3. Costs of the program: Each gift costs the company $1. The customer gets one gift for each 200 points.
Instruction to the interviewer: Please read out the above data and don’t give it in the table format. See
how the candidate organizes his/her data.
Possible Answers:
The candidate is expected to calculate the following to justify his conclusion
 Absolute revenue increase and percentage revenue increase for the ‘Heavy’ segment
 Absolute revenue increase and percentage revenue increase for the ‘Light’ segment
 Total profits from the program
The calculations are shown in the below table
Heavy Light
12,000 * 9 * $4.00 =
A Total revenue without program 8,000 * 30 * $4.00 = $960,000 $432,000
8,000 * 20% * 6 * $4.00 = 12,000 * 5% * 3 * $4.00 =

B Additional revenue with program $38,400 $7,200
C % increase in revenue (100% * B/A) $38,400/$960,000 = 4.0% $7,200/$432,000 = 1.67%
Incremental income @ 20% of rev (B

D * 20%) $38,400 * 20% = $7,680 $7,200 * 20% = $1,440
E Total points scored (A * 2) 1,920,000 864,000

F Cost of gifts (E / 200) $9,600 $4,320
G Net profit from the program (D – F) $7,680 – $9,600 = -$1,920 $1,440 – $4,320 = -$2,880
Conclusion: The results show that the “Quick Rewards” customer loyalty program is a losing proposition.
Why – the cost of the program is spread over all the purchases and not just the incremental spending.
Question #2: If the candidate reaches this conclusion (the program will lose money), ask for suggestions
to make this program profitable. Most candidates may not distinguish between profits from Light and
Heavy users. Hence ask if this can be implemented only for heavy segment. Candidates who get creative
at this stage will get more points.
Possible Answers:
Some suggestions to make the program profitabble would be:
Negotiate with the gift vendor and negotiate a better price for the gifts.
Increase the number of points needed for a gift (However, the incremental benefits may also change
because customers are less incentivized)
Look at co-branded customer loyalty programs with other companies like airlines, credit card issuers, etc.
This way the cost can be shared and opportunities for revenue increase are more.
Explore alternate ways of discriminating between light and heavy users.
Question #3: The CEO of the company says that the analysis is good. However he wants you to give him
advice on how to increase sales (ideas apart from the loyalty program). This question is to see if the
candidate can quickly think of various ways to increase revenue. Creativity will win points here.
Possible Answer:
A good candidate would use the following framework to increase revenues:
New Customers – New Products

New Customers – Current Products
Current Customers – New Products
Current Customers – Current Products
Question #4: Ask the candidate to give a 30 second summary of his findings and his recommendations.
P&G To Not Enter Retail Laundry & Dry Cleaning Business
Consulting Firm: Booz Allen Hamilton (BAH) second round job interview.
Industry Coverage: household goods, consumer products; business services.
Case Interview Question #00524: The client Procter & Gamble (P&G, NYSE: PG) is a Fortune 500
American multinational corporation headquartered in downtown Cincinnati, Ohio and manufactures a wide
range of household products, consumer package goods and personal care products. In fiscal year 2011,
P&G recorded $82.6 billion dollars in sales.

Recently, Proctor & Gamble wants to enter the clothes washing and dry cleaning business in the United
States. They want to set up a chain of retail shops that will offer clothes washing and dry cleaning
services to consumers. They would want about $1 billion in annual revenues and 10% operating profits
from this new business in 3 years. They have hired your consulting team to help them decide 1) whether
they should go ahead with the clothes washing and dry cleaning business; 2) whether their expected
revenues and profit margin is feasible. How would you go about it?
Suggested Approach:
This “launching a new line of business” case is more about understanding how the candidate thinks about
the problem. One way to look at it is to use Porter’s 5 forces structure but it is too common a framework
that interviewers don’t like it very much. A simple but powerful way to look at is as follows:
 The first step will be to see if there is sufficient demand for the clothes washing and dry cleaning
service and if the client P&G can obtain a significant market share to generate required revenues.
 Then even if there is sufficient demand, can they make the required profits?
 Next, what capabilities does the client P&G have to enter this business? Why can the client do
this business better than the other competitors?
 Is the new business aligned with the brand image and vision of the company?
 If the company decides to enter the new business, what will be the mode of entry?
Additional Information: to be provided when asked
 The laundry and dry cleaning industry will grow 10% in 3 years from now (About 3.25% per year).
 The industry size in the U.S. is about $9 billion. Of this 60% is retail full service shops, 20% is
industrial washing like uniform washing services and 20% is coin operated self-service.
 There are about 30,000 retail stores in the US. About 80% of them are mom and pop stores and
the remaining are small chains.
 The most common and most profitable form of dry-cleaning business is the “full plant”, companies
that perform all of the processing on the premises.
 These “full plant” firms often include additional pick-up and drop-off points that provide the main
plant with goods to dry-clean.
 The client P&G has some of the leading laundry detergent brands in the US like Tide.
Possible Answers:
A good candidate will explore the following issues:
1. How many stores should the client P&G open (or acquire) to achieve their revenue targets? However,
acquisition is very difficult as the industry is very fragmented. Provide the following details for calculation:
 On average a laundry and dry cleaning store operates 300 days a year
 Each day they process about 0.1 tons of clothes
 And they charge about $6,000 per ton of clothes
Calculation:
P&G should open at least $1 billion / (300 days * 0.1 tons per day * $6,000 per ton) = 5,556 stores in next
3 years to generate a $1 billion in annual revenue.
2. How much market share can the client P&G capture in 3 years?
In 3 years, the market size would be $9 billion * 60% * (1 + 10%) = $6 billion. To generate $1 billion from
this means capturing $1 billion / $6 billion = 16.67% of market share.
3. Is it possible for the client to achieve that kind of a market share in 3 years given the fragmented and
highly competitive nature of the industry?
Candidate should make a compelling argument indicating the strengths and synergies that P&G can bring
to make it happen (like branding, advertising, marketing, promotions, technology, economies of scale,
logistics and distribution)
4. How will P&G be able to make 10% operating profits? For this part of the case, provide the following
details and ask the candidate to calculate operating profits on a per store basis. This margin is the current
industry performance level.
 Cost of labor = $7 per hour

 5 laborers per store and they work 8 hours on average per day
 Cost of detergents, washing solvents = $2,000 per ton of clothes
 Water, electricity and effluent treatment charges = 6.667% of revenues
 Annual rental for real estate = $15,000
Calculations:
The annual revenues per store = 300 days * 0.1 tons per day * $6,000 per ton = $180,000
Labor costs = 300 days * 8 hours per day * $7 per hour per people * 5 people = $84,000
Costs of detergents, washing solvents = 300 days * 0.1 tons per day * $2,000 per ton = $60,000
Water, electricity and effluent treatment charges = 6.667% * $180,000 = $12,000
Annual rental for real estate = $15,000
Total annual costs per store = $84,000 + $60,000 + $12,000 + $15,000 = $171,000
Profits = Revenues – Costs = $180,000 – $171,000 = $9,000, which is 5% of revenues.
5. Will the client P&G generate 2 times the industry profit margins to get 10% profits? In addition, is this
business in line with the vision of P&G to be the leading branded consumer packaged goods company?
Possible Answer:
Typically 50% candidates say they think P&G should enter this business and 50% say P&G should not.
More important than the answer, the candidate’s thought process and ability to substantiate their answer
with confident arguments is what really matters in this case.
Tata Motors to Set Up New Courier Company in Mumbai

Consulting Firm: Parthenon Group first round job interview.
Industry Coverage: automotive, motor vehicles; freight delivery, shipping services.
Case Interview Question #00518: Your client is Tata Motors Limited (NYSE: TTM), a multinational
automotive corporation headquartered in Mumbai, India. Currently Tata Motors is South Asia’s largest
automobile company and the eighteenth largest motor vehicle manufacturing company in the world by
volume. Part of Indian multinational conglomerate the Tata Group, Tata Motors
was formerly known as TELCO (TATA Engineering and Locomotive Company). Its products include
passenger cars, trucks, vans and coaches.
Recently, your client Tata Motors wants to set up a new courier company that delivers messages,
packages, and mail. Couriers are distinguished from ordinary mail services by features such as speed,
security, tracking, signature, specialization and individualization of express services, and swift
delivery times, which are optional for most everyday mail services. As a premium service, couriers are
usually more expensive than usual mail services, and their use is typically restricted to packages where
one or more of these features are considered important enough to warrant the cost.
How will you help your client to evaluate if the courier service is the right business for Tata Motors to get
into?
Possible Answer:
Candidate: Very interesting case! Before I proceed with the analysis, I want to make sure I understand the
business model correctly. I think at its simplest model, a courier company basically picks up a package
from point A and delivers it to point B. The company adds value, differentiates itself and earns money
from its supply chain. Am I right on this?
Interviewer: This is a simple model, but I think it works well for our purpose.
Candidate: OK. In that case, first, I would like to get some information on the market where the client
plans to operate. What is the existing competition? What geography is the company going to serve?
Interviewer: Let’s assume that the client plans to operate in the city of Mumbai. There are, maybe, one or
two other companies operating there. Not much competition.
Candidate: OK. In that case I think I want to focus on the profitability of running such a business.
Interviewer: I think it makes sense to proceed this way.
Candidate: I will look at both revenues and costs. We can estimate daily revenues if we know the
expected daily business volume and the average price charged per customer. For the latter, I am
assuming that the client offers just one type of service (since this is an intracity courier company). Is that a
fair assumption?
Interviewer: That’s fine. You can assume the service is priced at Rs. 7.
Candidate: If the company processes 100,000 packages per day, it will earn daily revenue of Rs.
700,000. Now moving to the cost side, I think there are three main cost drivers for the company –
transportation/shipment, advertising and promotion and other general and administrative (G&A) costs.
Interviewer: Good. Why don’t you examine these in detail?
Candidate: I will look at the transportation costs first since I believe these are going to be critical in
deciding if the business is profitable. I will assume Mumbai is a linear city, 40 km in length and 10 km
wide.
We will have collection centers distributed along the length of the city at equal intervals. Our customers
will be able to drop their packages at these centers and collect the receipt. In reality of course, the
distribution will not be uniform, since some areas will warrant more stores while it may not be feasible to
have centers in some other regions.
Interviewer: That’s a fair assumption. Carry on.
Candidate: Now I need to determine the number of such centers that the company needs. From there, I
will determine the number of employees to get a sense of the costs. Let me assume that each service
center remains open from 9AM to 4PM. With a one hour lunch break, that gives us six business hours per
center. Let’s assume that each customer takes five to ten minutes to process. If each service center is
manned by one employee, then it can handle roughly 50 customers per day. Here again, the timings of
the service centers could vary across the city, but I am looking at an average shop.
Interviewer: You’re doing fine.
Candidate: So if one service center can handle 50 customers per day, to service 100,000 customers we
will need 2,000 centers spread across the city. (Brief pause) That sounds like a large number to me.
Interviewer: No, it will come up to around that. Go on.

Candidate: OK, so we will need 2,000 employees to staff these centers. Then we will also need delivery
boys.
Interviewer: Let’s assume that some of these employees can also double up as delivery boys. We can
appropriately adjust the timings at some of the stores. Let’s say there are a total of 3,000 operational staff
members.
Candidate: I think we will need to pay each employee around Rs. 6,000 per month. That means a daily
salary of Rs. 200. So for 3,000 staff members, it comes to around Rs. 600,000 per day.
Interviewer: What are your thoughts at this point?
Candidate: Well, just going by the fact that the transportation costs are coming to around Rs. 600,000 per
day when our revenue is Rs. 700,000, I don’t think this business looks very profitable. We haven’t
accounted for the advertising costs or even fixed costs yet.
Interviewer: I see. But given that this is a very rough estimate, perhaps we are in a position where the
business might be profitable and we can look at areas where we can cut costs or spend efficiently.
Candidate: I think advertising will be very important in this business. I personally think that customers will
choose a courier company that they think is reliable and safe. Since this is a new company, and the
sector is also underdeveloped in the city, I think they will have to focus on building a brand. Consumers
are more likely to consider a brand as reliable if they have heard of it. But perhaps we could structure the
employees’ salary so that a part of it is a bonus linked to the amount of business they bring in. That way
we could save on some of the advertising costs.
Interviewer: I think you have done an excellent job. We’ll end here. Thank you!
Comments: The interviewer was looking for a bottom-up analysis rather than a top-down. In a bottom-up
analysis, the interviewer is usually looking to see if the candidate is able to grasp how a business runs at
the ground level and what the key drivers will be.
Best Buy to Modify Sales Specialist Compensation Structure
Case Type: new business; HR, organizational behavior.
Consulting Firm: KPMG final round job interview.
Industry Coverage: retail; consumer electronics.
Case Interview Question #00504: Our client Best Buy Co., Inc. (NYSE: BBY) is a specialty retailer of
consumer electronics in the United States, accounting for 19% of the market. Best Buy’s subsidiaries
include Geek Squad, CinemaNow, Magnolia Audio Video, Pacific Sales, and, in Canada operates under
both the Best Buy and Future Shop label. Headquartered in Richfield,
Minnesota, United States, the company operates more than 1,150 chain stores domestically and
internationally.
Historically, Best Buy has relied on rapid opening of new stores in new locations to increase revenue
growth above GDP growth rate. However, the client’s presence is now so diffuse that it must also look
inside for internal growth. The management of Best Buy has recently tested a new pilot program for its
digital camera division in year 2010. The goal of the pilot program is to test the client’s current sales
generalist model. Previously, all the store sales agents have been generalists. Each
was expected to handle all tasks related to sales and products including client interactions, inventory
(ordering), and shelf management.
With the new program, the client interaction function is separated from the other functions and carried out
by sales specialists. The motivation is to see if specialists can target customer needs better, and thus
educate and get to know consumers better, as a result better recommend products to consumers and
increase digital camera sales.
Our client wants us to assess whether or not the pilot program is successful and whether it should expand
the test program to all the divisions of Best Buy (laptop PCs, MP3 players, cell phones, etc).
Question #1: How would you decide whether the pilot program is successful or not?
Possible Answer:
The candidate should succinctly state the problem as an analysis of a recently implemented new
program. The candidateshould then lay-out how he/she will analyze the problem: e.g. “I would like to use
cost and benefit analysis to analyze the economics of the new program. I would like to find out how much,
if at all, the new sales model increased the profit of the digital camera division per store”.
A good candidate will get at least three of the below replies. It is crucial that the interviewer take on a
client perspective here. The client will be paying significant consideration for our advice. The candidate’s
setting up the problem quickly in an efficient, confident, expert manner is key to client handling. If the
candidate is slow or hesitates in this brainstorming section then respond with clear frustration. On the
other hand, if the candidate throws out solid ideas including those listed below and others that they may
think of, then reward them with positive feedback and clear enthusiasm into their opinion.
 Since it is a program related to sales, first of all I’d like to examine the economics of the program
and conduct a quantitative costs-benefits analysis.
 Next, I would like to look at the program’s impact to the morale/motivation of the sales team.
 I would also look at the customers feedback. Do customers like the new model better? Are we
seeing increased traffic in our digital camera division?
 Finally, competitor response. Have competitors shown signs of watching and/or imitating our
program? This provides insight into the success of the program.
Question #2: As you mentioned that you would like to look at the economics of the new program. Why
don’t we look at this then? I have all the financial statements with me, which number you would like to
start with?
Possible Answer:
Eventually, I would like to look at the profit per store of the digital camera division before and after the
program. If that number is not readily available, we could first look at the revenue per store.
Additional Information about digital camera division that the candidate should ask:
1. Revenue Information
Year 2009 2010
Number of stores 100 150
Total revenue 32.5M 47.25M
Revenue/store* 0.325M 0.315M
Total # of camera sold 20,000 45,000
# of camera sold
/store* 200 300
* Candidate should quickly and confidently work out the revenue per store numbers and the camera sold
per store numbers
2. Product Information
Profit margin Quantity sold Quantity sold

Product mix ($/camera) in 2009 Quantity/store* in 2010 Quantity/store*
High end digital

camera 200 7,500 75 7,500 50
Medium end 200 7,500 75 7,500 50
Low end 50 5,000 50 30,000 200
*Candidate should work out the Quantity sold per store in 2009 and 2010.
3. Sales compensation information

The compensation of the specialist is based on the quantity of the digital camera sold.
Based on the additional information, the candidate should perform some quantitative analysis. The
following findings can be extracted from the analysis.
Total revenue of the digital camera division increased in year 2010. The growth of the revenue came from
two avenues: new stores opened and the new pilot program. However, revenue per store of the digital
camera division decreased. Possible reasons are: new stores generate less revenue as they are not
operating at efficiency; also when company grows quickly, new stores are opened in less optimal
locations.
However, the main reason is because product mix is changing due to the new program. Numbers of high
end and medium end camera (which have higher margins) sold per store are decreasing while sales of
low end camera are increasing. This is because specialists are recommending the low end digital
cameras to the consumers.
Why specialists are doing that? Because low end camera is easy to sell due to its simple function and low
price, and that specialists are compensated based on the number of cameras sold, but not profit they
bring to the store. A good candidate will derive this insight in the course of the conversation. In fact, a
good candidate will make this “discovery” during the interview and make the interviewer feel as if they did
it together. If the candidate simply solves the simple math but doesn’t involve the interviewer or create a
feeling of discovery, then they have not cracked this case successfully.
Conclusion:
The client Best Buy is selling more digital cameras due to the new program. However, selling more
cameras has not resulted in increased revenue/profit because specialists are compensated in the way
that motivates them to sell low end low margin product. Thus, the client should modify the program,
focusing on educating/training its specialist and basing their compensation not just on quantity of sales
but on the profit they generate for the store. If the modified program is successful, the client should
promote the program to other divisions. However, the client should always consider the differences of the
other divisions and the digital camera division to apply modification to the program.
Comments about the case:

It is about retail industry, thus the candidate should either realize or learn from the interviewer that profit
or revenue per store is the key measure of performance.
It is about the implementation of a new program, thus cost-benefit analysis is the main structure –
analyzing the economics of the new program – does it increase the profit of the digital camera division per
store? A good candidate will ask how much does it cost to train specialists and how much more does it
cost now that former generalist functions have been transferred to other departments. We don’t have
these numbers but you can assume they are not immaterial.
The case also contains a profitability problem. It is about a program that changes sales function, thus its
focus is on the revenue side. The candidate should focus on the rev/store. From the additional information
we know that total revenue increased while the revenue per store decreased. We know two factors affect
revenue – price and quantity. Then candidate should look at the number of camera sold per store (it is
increased). So, we have quantity increased while revenue decreased, which tells us that average price
per store decreased. This leads us to look at the product mix / customer mix. Product mix change will
change the average price and affect the margin.
This case is about a program that changes the sales function. When it is talking about sales
organization/function, sales incentive is normally involved. Then one should look at the compensation to
see whether the sales force is compensated in the right way.
KeyBank Not to Enter Online Brokerage Business

Industry Coverage: banking; financial services.
Case Interview Question #00486: Your client KeyBank (NYSE: KEY) is a regional bank headquartered
in Key Tower in Cleveland, Ohio, United States. As of 2010, it is the 19th largest bank in the United
States based on total deposits, and the 24th largest by total assets. The company KeyCorp maintains
business offices in 31 states, with more than 950 KeyBank branches in 14
states, nearly 1,500 ATMs, and more than 15,000 employees.
KeyBank has a very diverse client base, spanning over retail, small business, corporate, and investment
clients. Recently, however, the senior management of KeyBank wants to expand into the online
brokerage business. Is this a good idea worth pursuing? What would you advise the client to do?
Suggested Approach:
This is an open-ended “launching a new business” type of cases. One option is to use the 4C’s
framework: Customers, Competitors, Cost, Company Capabilities.
The candidate should stay focused on the question as the interviewer gave a lot of extraneous data on
several sheets.
 First and foremost: Should the client enter the industry?

 Second: If so, how should the client enter the industry?
In terms of prioritization, the candidate need to understand the market first!
 How does an online brokerage make money?
 What are the relevant segments?
 Are there any unmet needs?
Then, look at the competitors.
 Do they cater to certain customer segments?

 What are cost structures?
 What competitive advantages do they possess?
Note: The candidate could wrote the 4C’s on a sheet of scratch paper, but only to keep track of his/her
own thoughts.
Possible Answer:
1. Customers
Candidate started with the customers (from the 4 C’s) and wanted to look at their size and segmentation.
The interviewer provided data on people with brokerage accounts. He then asked the following question.
Candidate: What are the revenue streams for brokerage business?
Interviewer: The three main revenue streams would be – commission, spread, and online fees.
Candidate: I’d like to see if I could segment the customers. What are the different customer types and
how do they contribute?
Interviewer: There are three types of customers: active day traders, retired, and in between. Day traders
are the most profitable (The candidate then gave a quick summary of all the information given: online
customers and different revenue customers).
2. Competitors
Candidate: What are competitors doing? Is there any differentiation?
Interviewer: What do you think?
Candidate: Well, since we are providing trading services, I don’t think there would be too much
differentiation. Perhaps, some competitors might provide more research capacity.
Interviewer: Any other ways?
Candidate: Advertising for the most part. We can observe from the information sheets that there has been
a huge increase in advertising. Moreover there are no real differences in product features. How about
differences in cost structures?
3. Costs
Interviewer: What does it mean to you that there is only limited differentiation?
Candidate: Well, this would imply that demand in this market could be very sensitive to price, which could
lead to a low-margin, high-volume kind of environment. In that scenario, the cost structure would be very
important. Do you know anything about their cost structures?
Interviewer: (Interviewer already provided all the cost data) Well, we don’t have too much information on
that. I don’t think we would have a cost advantage though. The biggest portion of total operating costs
tends to be advertising and marketing.
Candidate: How do customers perceive the client?
Interviewer: How do you find that out?
Candidate: Surveys.
Interviewer: Well, the customer is quite happy with the bank and view it as very reliable. They consider it
as a convenient, middle of the road, kind of like a local-bank-on-the-corner type of regional bank.
Geography is key driver.
Candidate: What are the internal capabilities of the bank to provide the online brokerage services?
Interviewer: Like any other bank, they have IT department, but no web based online banking system.
Candidate: I see, in that case if we decide to do this we must partner up for IT. We would have to commit
to a new investment in IT infrastructure.
Interviewer: Would there be any synergies that we could realize?
Candidate: There would be some synergies because the bank already has an existing customer base,
and it should be easier to expand the service offering to a given customer base than it would be to go out
and seek customers from scratch. I also think that the bank already has a brand name because of the
advertising from the other divisions, and this would allow us to expand the brand at a relatively lower cost.
However, both the brand and customer base are local, and this would not be of tremendous benefit in an
Internet based business where the goal is to draw customers from across the country.
Interviewer: Well, we have to wrap up now. What do you think overall?
Candidate: (Note: Always try to provide your key points or recommendations in a structured, bullet like
fashion)
 Based on the customer segmentation, there is somewhat of a misfit between the bank’s clientele
and the profitable online segments.
 In addition the bank has a mostly local presence, so it cannot benefit from synergies on a national
scale.
 Moreover, the bank does not have the right capabilities and would need to invest in additional
infrastructure.
Interviewer: So, what is your final recommendation to the client? Go or no-go?
Candidate: I would therefore recommend the client not to do it. We could explore some kind of a link up
where we partner with an established online brokerage and generate some kind of referral fee based on
sending customers to their site.
Interviewer: Excellent job! Let’s just stop here. Do you have any questions for me?
Oakbrook Center Use Web to Drive Shoppers into Stores

Case Type: ; increase sales; new business, new technology.
Consulting Firm: Diamond Management & Technology Consultants (now PwC Advisory) 2nd round
summer associate interview.
Industry Coverage: Retail; E-commerce, Online Business.
Case Interview Question #00484: Your client General Growth Properties, Inc. (NYSE: GGP) is a publicly
traded real estate investment trust based in Chicago, Illinois, United States. The company owns
and manages many shopping malls throughout the United States, for instance,
Oak Brook, Illinois based Oakbrook Center.
Oakbrook Center is an upscale super-regional shopping center located near Interstate 88 in Oak Brook,
an affluent suburban neighborhood of Chicago. Managed and co-owned by General Growth Properties, it
is the second largest shopping center in the Chicago area, by gross leasable area. Current anchor stores
include Bloomingdale’s Home, Lord & Taylor, Macy’s (formerly Marshall Field’s), Neiman Marcus,
Nordstrom and Sears.
Historically, the Oakbrook Center shopping mall has been highly successful. Recently, however, the CEO
of General Growth Properties has noticed a disturbing trend where teens are beginning to spend less and
less time in the shopping mall and more time online. Responding to this trend, your client hired an IT
consulting firm to build a website on the Internet. Unfortunately, the website is not generating the kind of
traffic he was expecting, or if it is, he can’t tell. How should he improve the website to drive more traffic to
the Oakbrook Center shopping mall? How will he measure the results?
Possible Answers:
This IT strategy case requires creativity as well as critical thinking. The client’s goal is to use their website
to drive customers to the physical stores in their shopping mall. Rather than use a traditional framework,
the candidate should explore a broad range of options and support them with logic and data provided.
Candidate: The first place I would like to start is the current design of the website. What features does it
already contain?
Interviewer: Good start. The website contains basic mall information, a chat function with occasional
celebrity guests, a bulletin board for special announcements and teen discoveries, and a wish list where
teens can list what they want, parents can download the list, take it into the appropriate store in the mall
to buy it for their kids.
Candidate: Does the site currently have an e-commerce section where people can buy directly online?
Interviewer: No. Because the site is maintained by the mall, the objective of the site is to specifically drive
traffic into the mall stores. The owner does not want to drive traffic to Macys.com or nordstrom.com.
Candidate: So the issue then is to figure out a way to drive customers into the store from the website.
Interviewer: Yes.
Candidate: OK, I would first start with the wish list function on the website. How does a retailer know that
a parent is purchasing something off the wish list downloaded from the website?
Interviewer: Currently, they don’t know.
Candidate: So, one option is going to be to connect the two up. You might offer a discount off items
purchased from a wish list. If the customer mentions a code or brings in a printed coupon, they receive
the discount.
Interviewer: Sounds good. What else could we try?
Candidate: They might also look at doing special promotions through their celebrity chat room events. By
doing “Internet Only” promotion, they might be able to measure shopping volume changes for specific
events.
Interviewer: Excellent. Are there any other options you might suggest?
Candidate: They might look more carefully at their current affiliation with retailers. Perhaps they could
earn a percentage of sales from directing customers to other retailers’ websites like macys.com or
nordstrom.com. In this way they can truly behave more like an online shopping mall.
Interviewer: Interesting idea. I think you have given some great options. The owner will look closely at
what you suggested.
Note: Depending on allocated time, the case can be expanded even longer. The idea behind this case is
to not stop at just one answer. There is truly no single “right” answer here. The interviewer should ask the
candidate to continue to develop innovative ideas that meet the client’s need (use website to drive
customers into stores).
Home Depot to Sponsor a New NASCAR Racing Team
Consulting Firm: Accenture second round job interview.
Industry Coverage: sports, leisure, recreation; automotive, motor vehicles.
Case Interview Question #00482: Your client Yates Racing is an American stock car racing team that
competed in the NASCAR (National Association for Stock Car Auto Racing) until the 2009 season when it
merged with Richard Petty Motorsports. The Yates family owned the team
(previously known as Robert Yates Racing) since purchasing it in October 1988.

Yates Racing is the owner of UPS #88, a race car on the NASCAR tour. It races in the Sprint Nextel Cup
Series, a points-based championship where points are given according to driver’s finishing placement and
laps led and the season winner has accumulated the most points over the course of the racing season.
There are 36 races in total, running from February to November. Dale Jarrett, a well-known celebrity
driver, races for the team. Dale helped win the Nextel Cup three years ago, and so far this year is eighth
in a field of 43 drivers.
A close friend who is the VP of marketing at Home Depot (NYSE: HD) recently contacted the Yates
family. She inquired about sponsoring a second racing team with the client. She recognizes that NASCAR
is the fastest growing segment among males ages 18-45. She also has talked to a successful driver from
a regional drag racing circuit to try out as the driver of the second racing team. The Yates family has hired
you to advise them. How would you evaluate the potential of this opportunity?
Possible Answers:
This is a “new business” case with an interesting choice of industry – professional car racing. The case
hinges on a profitability (profit = revenue – cost) framework and introduces the candidate to the unique
aspects of the industry’s revenue model, namely sponsorship, merchandising, licensing rights, etc. While
the scope of the case may de defined by the revenue-cost analysis, the candidate has ample opportunity
to explore various other aspects of launching a new business decision-making that come into play.
Part #1: Revenue Sources

The candidate should present an overview of his approach to the case and develop a framework. A
profitability analysis should follow, with the candidate requesting revenue and cost information. The
interviewer should probe candidate on the sources of revenue in this market before providing the
following information. This question is designed to evaluate candidate’s approach to analyzing an
unfamiliar industry; the interviewer should be aware that some/all of his/her answers may not be match
the following information.
Additional Information: (to be given if asked)

Exhibit 1. Revenue Sources
Revenue Sources of % of
UPS#88 Revenues
UPS dominates, other sponsors include Outback Steakhouse and

Sponsorships 60% 3M
Nextel Cup Race One can win from $50K to $1MM depending on how one finishes
Winnings 25% and the significance of the particular race
Strong R&D shop. Engines are sold to professional drivers

Selling Engines 10% domestically
License out production to third-party. T-shirts and caps are a

Merchandising 5% small revenue source
Part #2: Cost Structure

The candidate should continue within the profitability analysis, now looking at costs. Allow the candidate
to breakdown the costs into relevant cost categories before providing the following information.

Total Costs = $20 million
Exhibit 2. Cost Structure
Cost Sources of % of
UPS#88 Costs
“Race-facing” costs make up 50% (Mechanics and Dale Jarrett’s salary); “Non
race-facing” costs make up the remaining 50% (engine shop technicians, HR,
Salary 40% accounting, etc)
Equipment 25% Race cars, engines, parts (sheet metal)
Travel 5% Getting to and from races

Leisure, engine
shop 10% Leasing of land in rural North Carolina
R&D 20% Engine shop technology improvements
Part #3: Marginal Cost of New Team

The candidate should naturally progress into inquiring about the incremental costs associated with adding
another racing team to the fold. If interviewer observes that the candidate needs direction, prompt him/her
by asking: “What is the minimum amount of money that the client should ask for from Home Depot?” The
candidate should take this as a clue to discuss the costs of the new team.

The costs affected w.r.t. addition of a new racing team are Salaries, Equipment, and Travel. The other
two cost components are associated with the engine shop. Specifically,
 Race-Facing costs will double

 Equipment costs will double
 Travel costs will double
Note: This information has been provided for the candidate to compute the sponsorship fees that the
client should charge Home Depot for the deal.
Possible Answer:
 Race-Facing costs = $20M * 40% * 50% = $4M
 Equipment costs = $20M * 25% = $5M
 Travel costs = $20M * 5% = $1M
Total = $4M + $5M + $1M = $10 million, assuming that the entire marginal cost of new team is borne by
Home Depot.
Part #4: Potential for charging premium – The interviewer should ask the candidate to evaluate the
possibility of charging a premium to Home Depot for the sponsorship. Note that there is no right or wrong
answer here; rather the interviewer should evaluate response based on candidates’ rationale. Multiple
answers are acceptable here. This answer provided below is not exhaustive.
Possible Answer:
Option 1: Yes, we should charge a premium – Home Depot seems to have already made some
commitment to the deal by conducting initial negotiations with the potential driver. Therefore client has
bargaining power. Premium can be justified by providing Home Depot with an acceptable Return on
Investment (ROI) analysis.
Option 2: No, we should not charge a premium – Home Depot has several other options to sponsor,
including
 another racing team

 another sport, e.g., baseball, football
 another racing circuit, e.g., Formula One
Part #5: Conclusion
Ask the candidate to wrap up the case. Inform him/her that the Yates family, the owner of the UPS #88
racing team has called for an update and that the candidate should inform the client of his/her findings
with a clear go/no-go decision.
Comments:
The candidate may take this case in several different directions, including questions about the Sprint
Nextel Cup season, driver eligibility, and if points are tallied based on team or individual driver
performance (individual driver). Some candidates might recommend waiting until the beginning of the next
racing season in order to spread costs across more races.
Other potential points include the natural tension between adding a new racing team and the allocation of
resources, e.g., high quality mechanics from Dale’s team may work with the Home Depot car, thus
diluting the quality of performance of Dale’s.
Potential risks certainly include adding a new driver who has only drag racing experience. This driver
would probably not contribute to merchandising revenue, due to his relative anonymity. There is some
validity, however, to the point that salaries for the new team may be lower because the new driver lacks
the name recognition of Dale Jarrett.
Finally, the total cost of equipment may be lower than average due to the ability to leverage the engine
shop technology. Some candidates might recommend closing the engine shop, but we have no margin
information to substantiate this.
PKO Bank Polski to Replace Paper Tickets with SmartCards

Case Type: new business, new technology.
Consulting Firm: Accenture 2nd round job interview.
Industry Coverage: financial services; restaurant.
Case Interview Question #00475: The Republic of Poland is a country in Eastern Europe with a
population of over 38 million people. Currently the tax code in Poland allows for Polish companies to pay
their employees in tax-free food tickets. These food tickets comprise only a fraction of the total
compensation employees receive, yet they have created a sizable food ticket
industry in the country. Because all employees receive these tickets, almost all restaurants in Poland
accept them as cash.
The current system works as follows. Employers contract with food ticket producers to produce the tickets
and track the food ticket compensation of each employee. The ticket producers deliver these tickets to the
employers who in turn enclose the food tickets with weekly or monthly paychecks. The employees then
exchange these food tickets at restaurants for food. The tickets have “same as cash value” at restaurants.
PKO Bank Polski (WSE: PKO) is the largest food ticket issuer and producer in Poland. Recently, PKO
Bank Polski is thinking of replacing these paper based food tickets with SmartCards. Under this system
employees would be issued a single SmartCard that they could charge once a week at a Card Charger
(like an ATM) and then swipe their cards at a Card Reader at participating restaurants.
What issues should PKO Bank Polski think about in regards to the decision to switch to SmartCards?
Possible Answer:
The key to this case (adopt a new technology) here is to weigh the costs of such a move with the benefits.
The candidate should identify key issues like:
 customer reactions
 competitor reactions
 governmental regulation changes
 technology concerns
Essentially the question to address remains: do the economic benefits outweigh the costs? The following
conversation represents one of the many possible solutions to the case.
Candidate: Let’s see. It would seem to me that we should begin by comparing the economic benefits of
installing the new Sma1tCard with the systems costs. First, I would like to determine how much the
system will cost to install. What investments will SmartCard require?
Interviewer: Obviously the system requires the chargers and the readers. Is there anything else you could
think of?
Candidate: Well, there are the SmartCards themselves.
Interviewer: Yes, and?
Candidate: Perhaps the IT systems to track all of the data on the SmartCards?
Interviewer: Right.
Candidate: Let’s see what investments we have identified so far: Chargers, Readers, SmartCards IT
systems. What are the costs for each one?
Interviewer: Let’s say the cards cost $15M and the IT systems cost $20M.
Candidate: How about the card readers and chargers. How many of those would we need?
Interviewer: PKO Bank Polski believes it will have to install 100,000 card chargers and there are 150,000
restaurants in Poland that currently accept food tickets. Both the card readers and chargers cost $500
each to install.
Candidate: OK, now we have $20 million for IT systems, plus $15M for cards, plus $75M for the card
readers ($500 per reader x 150,000 restaurants = $75M) + $50M for card chargers ($500 x 100,000
chargers = $50M) = $160 million in total.
Interviewer: Great! Now what are the benefits of the system?
Candidate: It appears to me that the benefits would be the cost savings each player in the value chain
obtains from the system. Let’s start with PKO Bank Polski itself. How much would they save?
Interviewer: PKO Bank Polski would save $10M on the printing and distribution costs it currently incurs.
What about the employers how much would they save?
Candidate: I think they would be negligible since PKO Bank Polski does all of the distribution. Also the
employees wouldn’t gain any actionable cost savings. That leaves the restaurants. They must have a cost
for each ticket transaction.
Interviewer: You’re right. In fact it currently costs each restaurant $0.30 per transaction and each
restaurant does 20 transactions a day on average.
Candidate: That means each restaurant incurs $1,500 per year in transaction costs ($0.30 x 20 x 50
weeks per year x 5 days per week = $1,500 per year). How much would the restaurants save?
Interviewer: PKO Bank Polski expects the restaurants to reduce their transaction costs by 2/3.
Candidate: That means each restaurant would incur only $500 per year. Thus, the total transaction cost
savings is $150M ($1500 – $500 = $1,000 per restaurant x 150,000 restaurants = $150M). That makes
the total cost savings of $160M ($150M transaction costs + $10M printing = $160M). This equals the
investments, so it only breaks-even on an economic basis.
Interviewer: That’s right. How else could PKO Bank Polski make this a positive investment?
Candidate: Well, if PKO Bank Polski is one of the many food ticket issuers and producers, perhaps they
could license their SmartCard system to other ticket producers who could then supply additional
customers to increase the network’s utilization. Or they could simply acquire a competitor.
Interviewer: Excellent! Now summarize your recommendations for me.

USG Interiors Not to Use Excess Capacity for Door Making
Consulting Firm: Oliver Wyman 2nd round job interview.
Industry Coverage: Building Materials.
Case Interview Question #00473: Your client USG Interiors Inc. is a leading manufacturer of home
building supplies and construction materials, i.e. sheet-rock, lumber, etc. The company is a wholly owned
subsidiary of Chicago, Illinois based USG Corporation (NYSE: USG, a.k.a. United States Gypsum
Corporation), a Fortune 500 manufacturing company of building materials.

Recently, the management of USG Interiors realizes that they have excess capacity at their plants and
warehouses, and they are looking to utilize this capacity. They are thinking about entering the door
making business in the United States. First, estimate the number of new doors installed in new houses
and apartments each year in the U.S, and second, do you think this is a good business for the client?
Possible Answers:
This is a market sizing and estimation case with some strategy thrown in about launching a new business.
The following dialog is shown to provide you with one of many possible approaches.
1. Market sizing
 Assume that among the 300 million people in the US, 60% or 180 million live in houses and 40%
or 120 million live in apartments.
 The average house has 10 doors per house, and the average apartment has 5 doors per
apartment.
 People move into new houses every 10 years, and into apartments every 5 years.
 There are an average of 5 people in each house, and 3 people in each apartment.
House doors: there are 180,000,000/5 = 36,000,000 houses. 10%, or 3,600,000 new houses are built
each year. 10 doors in each new house for 36,000,000 house doors.
Apartments doors: there are 120,000,000/3 = 40,000,000 apartments. 20%, or 8,000,000 new apartments
are constructed each year. 5 doors in each apartment or 40,000,000 apartment doors.
Total: 36,000,000 + 40,000,000 = 76,000,000 new doors are installed each year in the U.S.
2. Launching new business

Candidate: Can you tell me about the current providers of new doors in the U.S.?
Interviewer: The market is composed entirely of morn and pop door makers who supply to builders within
their geographic location.
Candidate: Is there anyway our client can provide better service?
Interviewer: You tell me!
Candidate: Let us begin with costs. Can the client produce the doors more effectively? Does he have any
cost advantage (i.e. economies of scale)?
Interviewer: Maybe, but we don’t really think that is relevant. The client just wants to know if he should
utilize excess capacity and enter the doors market.
Candidate: Let us then look closer at the market. How do the current mom and pop outfits serve the
market?
Interviewer: They get an order for doors, for which there are approximately 10 different styles, and they
generally deliver the finished products within two to three weeks.
Candidate: Could our client deliver a more differentiated product in less time?
Interviewer: Our client has six warehouses and production facilities across the U.S. and he believes he
can deliver an order of doors anywhere in the US within two days.
Candidate: Time is one way in which our client can differentiate his business. Can he also produce a
differentiated product?
Interviewer: The client can deliver whatever the customer wants.
Candidate: If this is the case, then our client can differentiate his business. The question now arises as to
whether this industry needs this type of differentiation, or “consolidation”, and whether it is sustainable in
the long run. I’ll start by asking if anyone has tried this before?
Interviewer: Not that we know of, but I am interested in your thinking. What are you trying to discover?
Candidate: If there is a reason that this industry is so fragmented, and if there is a reason that 10 styles of
doors delivered within two to three weeks has proven a successful business model.
Interviewer: We believe that is correct! The business exists in its current form because that is what the
market demands. There is no great need for more than 10 different styles of doors. In fact, builders prefer
fewer styles because it makes their plans more uniform. As for time, builders know well in advance when
they need doors, so they plan their orders accordingly. Quick turn around is of no great benefit to them.
So what is your advice to the client?
Candidate: I’ll tell him to stay out of this market. It is fragmented for a reason. He can bring no great
competency to the market through which he will derive competitive advantage and his capacity could
probably utilized in a more fruitful manner.
Interviewer: Great! That’s actually what the client ended up doing.
Is It a Good Idea to Open a Classical Music Radio Station in Philly?

Consulting Firm: ZS Associates first round job interview.
Industry Coverage: mass media & communications.
Case Interview Question #00470: The Philadelphia WFLN was primarily a classical music radio station.
The call sign WFLN (which stood for “Franklin Broadcasting”) was originally assigned in 1949 to a
Philadelphia FM radio station located at 95.7 MHz. In 1956, WFLN (900 kHz) was started as a simulcast
of the FM programming. WFLN was sold in 1985 and became WDVT. WFLN-
FM continued operations until 1997 when it was sold, changed format and was renamed WXXM.
For quite some time WFLN was the only classical music radio station in Philadelphia, but recently it
changed its format to alternative music after it was bought out by a new owner. As a result, there is now
no classical music radio station in Philly. What do you think about the prospects of opening a new
classical music radio station in Philly?
Possible Answer:
Candidate: Very interesting case. I’d like to take a look at four major “buckets of questions”.
First, is there in fact a Market for classical music in Philadelphia? How many people are interested in
classical music? What types of segments exist among radio audiences?
Secondly, let’s look at the Customers, not just the consumers who will listen, but actually the advertisers
who will be generating revenue for the radio station.
Also, what sort of Competition exists, not just radio stations, but other forms of entertainment media for
this audience.
Finally, what sort of Company would need to be built, and how would I get the resources and expertise
needed to run a classical music radio station?
Interviewer: Sounds like a good structure. Let’s talk about the market first. Philadelphia has about 2
million people in it, but let’s take the entire listening audience of the greater Philadelphia area to be about
4 million.
Candidate: OK. The first segment I’ll look at is what I’ll call the “mature” segment – listeners who are 60+
years old. Assuming a uniform distribution of people across ages 0-80 (approximate average life
expectancy), that places a quarter of the total audience, or 1 million people in this segment. This is
probably a good target for classical music, since these people probably have had greater exposure to
classical music during their lifetimes, and are probably more receptive to classical music than other types.
Next, let’s take the “youth” segment for children aged 10 and under. This segment, using the same logic,
is about 500,000 people. This is a terrible segment for our classical music radio station.
Next, let’s talk about a “professional” segment. These are people in white-collar jobs, with higher
education and income, and also some exposure to classical music. This is another good segment for our
station, and I’ll estimate their number at about 1 million.
Last, the “other” segment consists of everyone else in the Philly listening audience, most of whom are not
classical music fans. This last segment, numbering the remaining 1.5 million, has a wide range of
individual tastes, and thus may be a fair segment for us.
Assuming 100% of the mature segment, 50% of the professional segment, 33% of the other segment,
and 0% of the youth segment are potential listeners, this makes a maximum audience of 1 million * 100%
+ 1 million * 50% + 1.5 million * 33% = 2 million people.
Interviewer: Good, but why do you assume that the professional segment is more likely to listen to
classical music than the other segment?
Candidate: Professional workers tend to have higher than average education and income levels, thus
allowing them broader exposure to music beyond the pop music our other segment receives.
Furthermore, much interest in classical music may be due to having music lessons as a child, which are
expensive and predominantly available to only higher income, professional consumers.
Interviewer: OK. Let’s talk about the customers.
Candidate: Given that we have a potential audience of 2 million listeners, I think we can convince
advertisers that we have a compelling targeting potential for their brands, products, and services. This is
particularly true since there is no real competition for us in classical music radio.
Interviewer: Are advertisers the only source of revenue?
Candidate: Not really. We can always try to get donations from consumers and corporations as a sort of
“arts” sponsorship, as public radio and television do frequently.
Interviewer: Great! For now, let’s concentrate on advertisers. How much money do you think we can raise
using advertisements for revenue?
Candidate: Advertisers are willing to pay a higher CPM (cost per thousand views) for specific, targeted
opportunities that reach consumers who are likely to be interested in their brands. From my own
background, I’m familiar with CPM rates for Web banner ads, which range from $20 to $75 CPM
depending on how focused your Web page is. Since we offer a reasonably specific customer segment
base, I’ll assume we can charge $50 CPM, which is towards the high end, but not as high as a very
specific Web site.
I’ll assume that we don’t get the entire potential audience of 2 million, but only one-twentieth of that. With
an audience of 100,000, that yields $50 per thousand * 100,000 = $5,000 per ad.
Interviewer: How do you feel about that figure?
Candidate: It sounds way too high to me.
Interviewer: You’re right. Why do you think it’s too high?
Candidate: Since radio is a mass broadcast medium, there’s really no way to tell if anyone is listening or if
the right people are listening. With a Web page, you can definitely keep track of traific and ensure you are
getting your money’s worth in pageviews from consumers if nothing else.
Interviewer: Good. Let’s use a figure of about 1% of what you had calculated.
Candidate: If ads cost $50 for advertisers, we then need to determine how many ads we can run per day.
Assuming one-tenth of airplay time is ads, that makes about 2.5 hours per day of ads. Let’s further
assume the average ad is 30 seconds long. This yields $50 per ad * 2 ads per minute * 60 minutes per
hour * 2.5 hours per day = $15,000 per day in advertising revenue. Since you can sell ads every day,
$15,000 times 365 days per year = $5,475,000 in potential advertising revenue per year.
Interviewer: Does this sound like an attractive opportunity to you?
Candidate: We have to look at the costs of establishing and running the business first. Since I don’t have
any experience in radio or classical music, I need to hire a station manager who can run the daily
operations. Let’s assume a salary plus benefits package of $150,000 annually is required. Next, let’s
assume a rotation of 10 DJ’s to play different programs and provide variety, at a package worth $60,000
each per year. We’ll also need some MBAs to do marketing to get advertisers and drum up publicity, say
3 MBAs at a package of $100,000 per year. Finally, let’s assume a staff of 10 people for various support
and service functions, each at a cost of $40,000 per year. This makes total staff costs $1,500,000 per
year.
Next, we’ll have to get the equipment lined up. We can probably lease a tower instead of buying one, so I
will assume a cost of about $20,000 per month for $240,000 per year. Also, we’ll have to lease the land
and building that we’ll place the tower on. We won’t have to set up directly in downtown Philly, so we can
probably get a small building lease for about $5,000 per month, or $60,000 per year for the real estate.
Next, we’ll need to lease the radio equipment—receivers, amplifiers, etc. This will be a bit more expensive
than a standard home system, so let’s assume another $5,000 per month for $60,000 per year. Finally,
let’s go and buy the CD library we’ll need-assume 1,000 CDs at $10 each for $10,000. This brings the
facilities costs to $370,000.
Last, let’s make an initial advertising blitz for $50,000, and then spend $5,000 on advertising per month
after that. This makes the first year’s marketing budget $110,000.
Total costs of running the station are thus $1,500,000 + $370,000 + $110,000 = $1,980,O00.
Interviewer: Does this sound like a good opportunity to you? Should we do this?
Candidate: With an upside of nearly $5.5 million per year for an annual cost of only $2 million. Yeah, I
think this is a great idea. We should definitely do this!
Interviewer: Excellent job! Let’s just stop here for the case. So, tell me why you want to be a management
consultant.
McDonald’s to Offer More Health Food Options in the U.S.

Consulting Firm: LEK Consulting first round job interview.
Industry Coverage: restaurant & food services.
Case Interview Question #00459: McDonald’s Corporation (NYSE: MCD) is the world’s largest chain of
fast food restaurants, serving around 64 million customers daily in 119 countries. Headquartered in the
Chicago suburb of Oak Brook, Illinois, United States, McDonald’s primarily sells hamburgers,
cheeseburgers, chicken, french fries, soft drinks, breakfast items, shakes and
desserts. The company recently has also expanded its menu to include healthier food options like salads,
wraps, smoothies and fruit.
Recently, in response to changing consumer tastes, McDonald’s is thinking about offering more health
food in the United States. In broad terms, it is considering three strategic options:
 Roll out dedicated health food restaurants

 Integrate a health food menu into their current restaurants
 Forget the entire health food business all together
How would you analyze this business opportunity for McDonaId’s? Which of the three strategic options
would you recommend McDonald’s to adopt?
Possible Answers:
The point of this strategy case is to have the interviewee analyze various related issues McDonald’s must
face in regards to its decision and then conclude with an actual recommendation. The interviewer’s task is
to assist the interviewee, drive towards a solution, and then assess the thoroughness of the
recommendation.
There are many ways to solve this case. However, the interviewee should be able to discuss the following
basic analyses during the interview:
1. Market Definition
What is health food? McDonald’s defines health food as all non-red meat-based food, for example food
from restaurants like Kenny Rogers Roasters, Koo Koo Roo, Boston Market, etc. *Red meat in traditional
culinary terminology is meat which is red when raw and not white when cooked. In the nutritional
sciences, red meat includes all mammal meat, e.g. pork, beef, lamb.
2. Competitor & Industry Analysis

Determine overall industry attractiveness based on the degree of competitor rivalry and each competitor’s
positions. Clearly there are a large number of competitors but they share common weaknesses: they are
smaller than McDonald’s; they lack the multi-unit management expertise of McDonald’s, and lack the
advertising resources of McDonald’s.
3. Market Analysis
Determine overall market demand for health food. The market analysis can be conducted in numerous
ways: Look at sales of other health food restaurants; look at sales of health food products in grocery
stores; survey current McDonald’s customers; survey potential customers.
What core competencies and transferable skills would McDonald’s be able to leverage from its traditional
fast food business?
Clearly McDonald’s will be able to leverage its marketing skills and administrative skills (e.g. overhead
activities). However, McDonald’s will need to develop an entirely new set of operational routines. They will
need a new “assembly line” , identify new “raw materials”, and probably new equipment.
5. Costs and Risks

What are the costs (fixed and variable) in establishing a chain of new health food stores. What are the
risks involved? Both of the potential “Go” options involve high costs and risks.
Key issues to consider: How does any new initiative affect McD0nald’s brand name. The firm will most
likely have to develop a new name if they launch a full scale chain of health food stores.
What additional costs will be incurred with each option: training, new store locations, menu design costs,
store start-up costs, etc.
6. Recommendation
Clearly there is no right or wrong answer here. Rather it is more important to be able to discuss what
approach you would take and what you would want to analyze. Moreover, your recommendation should
be based on the logic you discussed during the interview. If you said a new brand name was important,
you shouldn’t recommend that McDonald’s should launch a health food menu in its existing stores.
Poland Springs Create Private Label Bottled Water for Walmart

Consulting Firm: LEK Consulting first round job interview.
Industry Coverage: consumer products; food & beverage; retail; general merchandisers.
Case Interview Question #00457: We are going to look at a growing trend in the Consumer Packaged
Goods industry. Our client in this case is Poland Springs, a bottled water company. As a wholly owned
subsidiary of Vevey, Switzerland based food and beverage company Nestlé

(SIX: NESN), Poland Springs sells its bottled water in the United States only. Named after the Poland
Spring in Poland, Maine, it is one of the top selling bottled water brand in North America.
Recently, a major retailer Walmart (NYSE: WMT) approached our client Poland Springs with a new
business proposal. Walmart wants to create a private label version of our client’s product. In other words,
in addition to our client’s bottled water which they already carry, they want the client to make an
additional, lower-priced bottled water which will be sold under their own brand label, e.g. Walmart Great
Value Bottled Water. Should the client take Walmart’s offer? What are the pros and cons of doing this?
Possible Answer:
As it was given in the interview setting, this case question is more of a situation analysis and
brainstorming exercise rather than a business case to drill down on and crack. As such, there may be
many more pros/cons beyond what is listed in the example solution below. In general, it is important to be
structured and try to put the pros and cons into clear buckets. Considering the 3C’s framework (e.g.
impact on Customer relationship, Company’s operational issues, and Competitivedynamics) could also
be helpful in this case.
1. Pros
 Improved relationship with a powerful merchant. Client may get better shelf space and better
terms on other products Walmart purchases from us as well as cross-marketing arrangements.
 Larger production may achieve better economies of scale in both fixed costs (cost/unit to
produce, especially if certain operational procedures are synergistic) and variable costs (delivery,
distribution, etc) in addition to the potential to negotiate better terms with suppliers due to larger
orders.
 Huge potential revenue growth for our client company. Lower price but potentially very high sales
volume.
2. Cons
 Cannibalization of our own private label’s water sales (cost/benefit analysis of whether the
volume of Wal-Mart’s brand will make up for it).
 Possibility of lessening our power with the merchant as a supplier if private label takes off and
supplants our own product.
 Higher costs (Fixed costs such as additional plant requirements due to potential capacity
constraints – will the investment be worth it?)
 More complicated distribution adding additional SKU (stock-keeping unit) into the mix.
 Potentially a different market for our product which does not work synergistically with our
marketing focus, for example if our product is about prestige and image, we would be catering to a
different customer segment with a lower priced product.
Sun Products Considers Entering Dry Cleaning Business
Consulting Firm: Cognizant Business Consulting (CBC) first round job interview.
Industry Coverage: household goods, consumer products; business services.
Case Interview Question #00447: The Sun Products Corporation is a leading North American
manufacturer and marketer of detergents, fabric care and household products with annual sales of more
than $2 billion. Headquartered in Wilton, Connecticut, Sun Products was formed in September 2008 from
the combination of Unilever’s North American fabric care business and Huish
Detergents, Inc, a leading manufacturer of private label laundry and dish products.
The client Sun Products Corporation’s main product lines include laundry detergents and household
cleaning products, such as floor and glass cleaners, oxygenated stain removers, pre-wash formulas,
antibacterial soaps, bleach, and fabric softeners under the Sun, All, Wisk, Sunlight, Surf, and Snuggle
brand names.
Recently, the client is thinking about entering the clothes washing and dry cleaning business in the US.
Their initial plan is to set up a chain of retail shops that will offer washing and dry cleaning services to
consumers. Is this a good idea?
They would want about $500 million annual revenues and 10% operating profits from the new line of
business in 3 years. They have hired your consulting team to help them determine whether this goal is
feasible. How would you go about it?
Additional Information: (to be given to you when asked)

The market for clothes washing and dry cleaning service is more attractive in the urban areas, as
compared to the rural because of the higher disposable income, and more need to dry cleaning service in
urban areas.
Existing competition is quite fragmented and currently no large chains dominate the market.
Sun Products’ current brands of detergents are well established and there is a possibility of cross
selling/promotional marketing campaigns.
The costs in establishing the new line of business will include fixed costs (land, rent, etc), material, labor,
and potential environmental costs.
Environmental issues are key. Dry cleaning requires the use and disposal of thousands of gallons of
corrosive chemicals each year.
Environmental issues make it a risky preposition. The costs to the client could increase because of
potential lawsuits, expenses related to disposing corrosive chemicals, insurance, etc.
Possible Answers:
For Part 1 of the case, to evaluate whether this new business is a good idea, Porter’s 5 Forces framework
can be used to determine the market attractiveness. While considering the market entry, the candidate
should also consider the role of regulations/environmental issues as one of the potential barriers to entry.
Next, client’s current capabilities and how the client can leverage those to gain synergies in the dry
cleaning business should be explored. Marketing/advertising is one potential area and the value of cross
promotional marketing campaign should be considered, too.
For Part 2 of the case, to determine whether the client can have $500 million in annual revenues and
10% profit margin in 3 years, first the candidate should be able to discuss return on investment (ROI)
analysis using the NPV (net present value) of dry cleaning facilities in major metros areas (e.g., first
estimate the potential market size for dry cleaning business in the US).
In addition, the candidate should be able to identify various costs associated with establishing the new
venture, the various revenue centers, and compare the estimated cash flows for value added.
Finally, the candidate should explore the various risks associated with environmental issues and how
these issues could make the cost of market entry prohibitive.
Bill & Melinda Gates to Invest in Golf Apparel Business

Case Type: new business; investment.
Consulting Firm: Cognizant Business Consulting (CBC) 2nd round job interview.
Industry Coverage: apparel, clothing; sports, leisure & recreation.
Case Interview Question #00434: Our client is American business magnate, investor and philanthropist
Mr. Bill Gates, the former CEO and current chairman of software company Microsoft Corporation
(NASDAQ: MSFT and NYSE: MSFT). Bill Gates is consistently ranked among the world’s wealthiest
people, with an estimated net worth of USD $59 billion in 2011.
Melinda Gates, the wife of Bill Gates, is a really good golfer. Recently, Melinda is thinking of entering the
golf apparel business for women. You have been hired by Bill & Melinda Gates to find out if this idea is a
good investment and how much money would they need to invest. As a business consultant, how would
you go about helping the Gates analyze the women’s golf apparel business?
Possible Answers:
Part 1: Gather additional information
At the very beginning of the case, the interviewer should let the candidate ask for the relevant information.
Here are some of the questions the candidate should be asking. The exact numbers are not very
important, they are just meant to give the candidate a directional sense.
1. How big is the women’s golf apparel industry?
Historically golf has been a rich man’s game. However in the recent years, there has been an increase in
the number of women playing the game, both professionally and casually. The industry is projected to
grow at about 25% for the next 5 years and then ramp down to a 5% growth by the end of 10 years.
2. Are there any competitors?
There is just one firm that currently makes golf apparel for women. This company is primarily a men’s golf
apparel manufacturer that has just started making apparel for women too. However it is currently a very
small part of the business.
3. What kind of return is the Gates looking for?
Bill Gates is not doing this for the money. He just wants to make his wife happy. However he does not
want to lose any money (hence the candidate should figure out that the NPV should not be negative).
By this point, the candidate should be convinced that it is an investment worth pursuing. If the candidate
has any other questions, answer them so that the candidate thinks it is a worthwhile investment.
Part 2: The interviewer should ask the candidate to now focus on what is required to make the new
business work. Probe the candidate to figure out how the competitor (a predominantly male golf apparel
company) would approach the women’s golf apparel business. Discuss what the key aspects of the
business are.
Possible Solution:
The candidate should figure out that apart from manufacturing and distributions facilities, designers also
play a key role in the women’s apparel business.
The candidate should ask about the competitor’s strategy:
 It turns out that the competitor has not hired any new designers for the women’s apparel
business.
 They are also using the same distribution channel as they were for men (through sports stores).
The candidate should then broach the following issues into details:
1. Designers
Discuss how the designers for men may not be doing justice for women’s apparel (women are more
particular about the designs, the cloth quality, and the fitting).
2. Distribution
 Discuss what the optimal distribution channel for this should be.
 Tell the candidate that the women are a lot less price sensitive and typically visit sports stores a
lot less frequently. Women also buy more dresses (men typically have 3 golf dresses whereas
women have 6 at any given time).
3. Manufacturing
 When the candidate is evaluating whether to set up a facility, discuss the merits of setting up one
locally vs. off-shoring the production.
 Also discuss whether they should set up their facility or let someone else manufacture for them.
 In general, since the profit margins are reasonably high, and given the focus on quality and
execution of design are critical, manufacturing locally or in Latin America is probably a good idea.
Local manufacturer also makes more sense given that Melinda has no experience in the industry. As
for the merits of setting up a facility vs. letting someone else manufacture for you, given the huge
capital cost for setting up a manufacturing facility, it may be better at this point to let someone else
manufacture for them.
Part 3: How should Melinda Gates set up her firm to occupy this niche market?
Possible Answer:
Melinda Gates needs to hire designers, tie up with sports & high-end clothing stores and outsource
manufacturing from a low-cost location.
If the candidate does not bring it up, ask him/her on how the firm should go about advertising. Tell him
that Gates wants to minimize his investment so what options do they have to advertise on a budget.
Some good ideas would be to advertise in any women’s sports magazines especially golf magazines, co-
advertise with higher end women clothing stores, etc.
Notes for the interviewer:

As a second round interview case question, this case is meant to evaluate how candidate approaches
new business opportunities – basically a broad industry analysis, 3Cs and 4Ps. The focus here is not on
the actual calculations but on the ideas generated. This should be about a 30-45 minute case. The
candidate should finish the first section in 10-15 minutes and spend rest of the time on the second
section. In case the interviewer wants to test the candidate on quantitative abilities, feel free to put in
some numbers to calculate the industry size, profit margins, NPVs, cost of manufacturing locally vs.
outsourcing etc.
The Nature Conservancy to Spin-off Its Database Division

Consulting Firm: Bridgespan Group first round job interview for full-time Associate position.
Industry Coverage: non-profit organization; forestry, timber; publishing.
Case Interview Question #00392: The Nature Conservancy is a large nonprofit nature conservation
organization located in Washington, DC. The Nature Conservancy has a division that maintains a
database that tracks the biodiversity (all of the different types of plants) in the United States. This
information includes how many plants of each type of plant are included in
certain sections of each state.
The data was collected by volunteers in each of the 50 states. There was one volunteer organization per
each of the fifty states who would collect the data and send it to Washington DC. This division of The
Nature Conservancy was created 20 years ago to help the parent company to determine which lands to
buy and protect. The parent company began to think that maybe other people would be interested
in using this data. They recently agreed to spin the division off as its own separate entity.
I want to give you deeper detail about the volunteer organizations that collect the data. There were some
volunteers who called themselves Nature Conservancy affiliates who only collected data for the parent
organization. There were some volunteer groups who were nature conservation organizations themselves
and who did the collection as only a part of their total mission and services. Finally, there were some
universities / biology departments who worked to collect the data and share the data with The Nature
Conservancy. It was noted that some of the data collectors dropped out of the system every once in a
while and that people actually had to pay a nominal fee in order to be a data collector for the parent
company.
There were three main requirements of the spin-off:
1. The parent company The Nature Conservancy allowed the spin-off to keep all of its people, office
equipment and buildings, but the spin-off would have to be financially responsible for themselves.
2. The parent company would in-turn provide a tapering grant (going to zero after a couple of years) back
to the spin-off for expenses.
3. The spin-off would be required to hire Bridgespan Group to help them design a strategic business plan
for survival.
How would you go about the case?
Possible Answers:
Interviewer: First of all, what are the big buckets of things they should consider when looking at spinning
this organization off?
Candidate: Since our client is the spin-off of a not-for-profit organization, I’d like to know a bit about the
Mission of the parent company first. Next, I want to know their current funding source and organizational
structure in order to understand better their operations.
Interviewer: OK, you mentioned Mission, Funding Stream and Organization Structure. Let’s just focus on
funding right now. What if I told you that they were expecting to have a $1 million deficit in the first year?
Candidate: Can you tell me something about their costs?
Interviewer: What would you want to know about their costs?
Candidate: Do you have any information about the costs breakdown of the $1 million deficit?
Interviewer: I don’t have information about the costs breakdown (one time costs verses ongoing costs).
Just brainstorm issues here.
Candidate: I would say that the client probably has very high operating costs, but not enough revenues.
Does that make sense?b
Interviewer: Yes. So what are some ways you can think of that they could generate revenue?
Candidate: You said earlier that the client maintains a national database, they can make some money by
analyzing the data and selling their research to other companies.
Interviewer: OK, so you mentioned analyzing and selling the data. That is actually what the client did.
What types of organizations would be interested in purchasing the data?
Candidate: Hmmm…off the top of my head, people who are interested in nature conservation research
may want to buy the data, and some market research firms and consulting companies maybe.
Interviewer: Ok, you may not know this industry, but oil/gas companies, mining and timber companies
would be interested in the information as well. Let’s focus on the timber industry and nature lovers, which
you mentioned, right now.
In the timber industry they are required to produce custom data reports every time they are about to go
and cut down large tracks of trees. This data could be generated by the spin-off using the data they
typically gather.
In terms of the nature lovers, let’s assume that the data and pictures from the states could be compiled
into a book called, “Biodiversity in the USA” to be used as a general reference book or coffee table book.
The book could be detailed enough to be used both by universities, but scaled down enough to be used
by nature enthusiast.
If their greatest concern was breaking even in year 1 – what type of analysis would you do in order to
determine which option would be a better choice for the client? Just speak in general terms about what
you would want to know.
Candidate: I would like to know more about the profitability of each of the two options: their costs and
potential revenues.
Interviewer: OK, that makes sense – so let’s actually explore these profit differences of these two choices
and then you can give me a suggestion of which choice makes the most sense based on your
calculations.
Candidate: I am going to start with the timber industry first. Do you have any data on how much the timber
reports costs?
Interviewer: Yes, I do. They run about $12,000 per report.
Candidate: What type of information do you have about the costs of the reports?
Interviewer: Well, what type of costs do you expect to have?
Candidate: labor costs, lab costs and data collection costs.
Interviewer: Well, let’s assume the majority of the costs are labor costs. So, let’s assume that the
scientists who write the reports earn $100,000 per year. It takes a scientist about a week to complete one
report. Also, each report has be specifically written for individual customer, there is no “one-size-fits-all”
report that can be sold over and over again.
Candidate: Ok, can I assume that it is one business week to complete a report?
Interviewer: Yes, you can.
Candidate: Can I assume the scientists take two weeks vacations and work 50 weeks out of the year?
Interviewer: Yes, that sounds reasonable.
Candidate: So, the profit is: revenue – cost = $12,000 – ($100,000 / 50 weeks) = $10,000 per report. Do
we have any information about the total amount of reports sold?
Interviewer: No, can you actually calculate how many reports you have to sell to break even in year 1?
Candidate: Sure, $1,000,000 / $10,000 = 100 reports.
Interviewer: Great! Can you do the same for the book option?
Candidate: Sure, what do they think books could sell for?
Interviewer: $50 per book.
Candidate: Do you have information about the costs of making the books?
Interviewer: What costs do you think you would have?
Candidate: Writing and printing costs.
Interviewer: Actually they did have to have the publisher do all of that. Their publisher charged a flat fee of
80% of the sales price to cover their costs.
Candidate: OK, so $50 * 80% = $40 to publisher, and the rest $10 to us.
Interviewer: Yes, that’s right.
Candidate: What about the costs?
Interviewer: It takes three scientists a year to write the book.
Candidate: OK, so the labor costs would be $100,000 * 3 = $300,000, total cost = $1,000,000 + $300,000
= $1,300,000, and the books to be sold = $1,300,000 / $10 = 130,000 books.
Interviewer: So what would you say to the client about these numbers? Which one of these numbers
seems more reasonable to attain?
Candidate: From my personal experience, I think it is easier to sell 100 research reports than to sell
130,000 copies of a book. I know this because I read an article somewhere that some New York Times
best sellers only sell for ~100,000 copies or so.
Interviewer: OK, if you had one day to see if these numbers are attainable, who would you call or where
would you look to figure it out?
Candidate: I would call a few big publishers and ask for the annual sales number for their best selling
books. Just to make sure, I would also call some market research companies to see on average how
many copies of a research report do they usually sell per year.
Interviewer: Great! Can you give a final summary of your findings and recommendations for the client?
Candidate: OK, so our client is expecting to have a $1 million deficit in the first year. In order for them to
generate more revenues, I would recommend the client sells their data to other companies. The client
could either sell data reports to timber companies, or sell their data as a book.
Our calculations show that the client needs to sell either 100 copies of data reports or 130,000 copies of
the book to break even. While it seems the data report option is more attainable at this moment, further
analysis needs to be done to make sure this is indeed the better option.
Interviewer: Excellent! I think we have covered everything of the case. Do you have any questions about
Bridgespan Group?
Interviewer’s Comments:
This case is more of a traditional “starting a new business” type of case. Press the candidate to generate
ideas in the beginning, but when you finish the “funding possibilities” section, have the candidate drill
down on calculating numbers.
Continental Airlines Starts Charging for In-flight Meals & Snacks

Consulting Firm: Oliver Wyman second round job interview.
Industry Coverage: airlines; food and beverage.
Case Interview Question #00389: After the September 11, 2001 terrorist attack, air travel in the U.S.
declined to unforeseen levels and most of the American airlines were looking at every possible ways to
cut their costs. Our client, Houston, Texas-based Continental Airlines (IATA: CO, ICAO: COA) had
recently cut the in-flight meal that previously provided to Continental passengers
for free.
It is year 2003 now and the client Continental Airlines wants to introduce retail sales of in-flight meals,
beverages and snacks on the plane for which the passengers will pay. The client has not thought through
any of the options, risks and opportunities, and have called you at the very thought of this new service
introduction. To introduce this initiative, what are your considerations from an operational perspective?
Most candidates start evaluating the benefits and costs of this initiative with the objective of giving a ‘Go’
or a ‘No Go’ to the proposal. Please emphasize that the decision to ‘Go’ has already been made and the
candidate has to look at operational considerations.
Possible Solution:
Operationally, the following things are important for an airline company.
 Material flow
 Cash flow
 Information flow
 People and their capabilities
1. Material flow
Some of the questions that need to be answered include:
 What items to be sold? Meals, beverages, packaged foods, snacks.

 Where to buy them? Or should the airlines start a kitchen and food be made in-house? If it goes
for only snacks, then they can just buy it from the major retailers.
 How much inventory to maintain in the flight for each item? What is the distribution system till it
reaches the plane?
 How to maintain the freshness of food? Certain food types will have to be disposed if freshness is
lost.
 What type of food to be sold in each type of flight like long-haul, short haul, point to point, etc?
2. Cash flow
If items are to be sold, then money needs to be collected.
 Will the passengers pay in cash or credit card or debit card etc?
 If they pay by credit or debit card, how to establish connectivity? And what equipments are
required for that?
 How to make sure that the connectivity is very reliable and secure?
 How will the collected money reach client’s accounting department?
3. Information flow
 The quantity of inventory has to change according to the number of passengers traveling. How
will the passenger related information be integrated with the procurement function?
 How and at what frequency will the details of money collected be entered into the accounting
systems of the company?
 What systems will be in place to monitor the inventory levels at their distribution centers or at
warehouse?
4. People and their capabilities
 Do we have enough staff on board to serve the customers?
 How do we train the staff on board to handle inventory and cash/credit/debit card payment?
 When will the staff take orders from passengers – before airplanes take off or on-need basis
during flight?
 How many selling trips will the staff make in the cabin per flight?
 Who will be primarily responsible for managing inventory and money?
Where Would You Open a New Blockbuster Video Store?
Consulting Firm: Oliver Wyman first round job interview.
Industry Coverage: entertainment.
Case Interview Question #00388: Blockbuster Inc. (NYSE: BBI, now owned by satellite TV provider Dish
Network, NASDAQ: DISH) is an American-based provider of home video and video game rental services,
originally through video rental shops (both owned and franchised), later adding “DVD by mail”, streaming
video on demand, and kiosks. With its headquarter located in McKinney, Texas,
Blockbuster had around 1700 Blockbuster stores in the U.S. at its peak in 2009, and also had stores in 17
countries worldwide.
Let’s suppose that after you graduate from business school you want to start a Blockbuster video rental
franchise. The store should be opened within the U.S. How will you go about deciding the location for
your new Blockbuster video store?
Possible Answer:
Candidate: For this “starting a new business” case, a step by step approach can be deployed to arrive at
some options.
1. The store should be located in a city or town or suburb that has a large pool of the type of
customers we intend to target.
2. Once we have a few options, we need to evaluate the competitive situation in those selected
areas.
3. In areas we are sure we can compete, the cost of operation has to be considered. For example:
In some areas the real estate value can be high and some it can be low.
4. Of the locations chosen, ones that can be accessed easily by the customers will be preferred.
The above steps will help one narrow down on very few choices from which the best location suited to
conducting business can be selected.
Interviewer: Great. So how would you decide what types of customers to target? What are the different
ways to segment customers?
Candidate: Customers can be segmented by age, gender, income levels, movie watching habits,
occupation, marital status, family size, etc.
Interviewer: What type of customers would you target?
Candidate: Well – people who have a lot of free time are the ones who will watch movies at home.
Typically these are housewives, students and people retired from work. Also kids watch animation and
cartoon movies a lot. Of these segments the ones that have more money at their disposal are the ones
who are likely to rent videos.
Interviewer: Let us say you have identified 10 such markets where there are a large number of customers
that you are looking for. What do you do next?
Candidate: I will try to find the number and type of competitors in those markets and also understand their
business model and service levels. That will help me understand who I can compete with and who I
cannot. Also it will help me understand the gaps in service levels which can be crucial in the decision to
open a store in a particular location.
Interviewer: What kind of gaps do you think may exist?
Candidate: Say the store is not easily accessible to many customers who may have to drive a long
distance to reach a rental store. Or a store could be small and stock only a few copies of new movies
resulting in waiting lists – This means the demand is more than supply and there is an opportunity for a
new store.
Interviewer: You also mentioned about cost of operations. Can you explain a bit more about that?
Candidate: The major costs in a retail set up are real estate costs, store maintenance costs, labor costs,
and promotion. These costs will have to lower. It is not necessary that I will choose the locations with the
lowest cost. The costs have to be optimum for the demand levels anticipated.
Interviewee’s Comments:
The case can build beyond this with more questions. But the interviewer was more interested in
understanding the candidate’s ability to break a simple problem down into simple steps without putting
pen to paper.
Subway to Roll Out New Frequent Eater Program

Consulting Firm: Capital One final round job interview.
Case Interview Question #00376: The client Subway is an American restaurant franchise that primarily
sells submarine sandwiches (subs). It is owned and operated by Doctor’s Associates Inc. (DAI).
Headquartered in Milford, Connecticut, Subway is one of the fastest growing fast food franchises in the
world with more than 35,000 restaurants in 98 countries and territories as of

September 2011.
Recently, the CEO of Subway wants to introduce a ‘frequent eater’ program. He has hired your consulting
team to evaluate the feasibility of this new program. Two questions will have to be addressed by you:
1. Is this a good idea or not?
2. What are the potential risks/issues that Subway must consider?
Additional Information: (to be provided to you if asked)
For every $1.00 a customer spends in any Subway stores, they get 1 point. The frequent eater plan is to
give away coupon that can be redeemed for a free sandwich once a customer accumulates 20 points.
Candidate can start working assuming an average store and fine-tune later. An average Subway store
has around 8,000 ‘heavy’ eaters and 12,000 ‘light eaters’ per year – segmentations beyond ‘heavy’ and
‘light’ are not very relevant for this case.
Market research survey indicates that heavy eaters will increase the frequency of visits from 30 to 36
times a year; light users will increase frequency of visits from 10 to 12 times a year.
Customers spend an average of $5.00 for every visit – this is the same for both heavy and light eaters.
Heavy users just come more often.
Around 20% of the heavy users are expected to participate in the frequent eater program. Around 5% of
the light users are expected to participate.
The “give-away” free sandwiches cost $2.00 to make and there is a 50% gross margin on the average
items sold.
Only 50% of the customers who participate in the frequent eater program actually redeem/use the
coupons.
Possible Solution:
A cost-benefit approach works best for this case. The goal is to determine if this frequent eater program is
profitable for the average store. The candidate should structure his/her analysis to determine the revenue
and cost drivers, thereby getting the information listed above. It is ok to make some calculation errors, but
it is important to identify all the revenue and cost drivers and the participation rates.
 Number of heavy user participants = 20% * 8000 = 1600.
 Increase in revenue for heavy users = 1600 * (36 – 30) * $5.00 = $48,000.
 Gross increase in earnings (50% margin) = $24,000.
 Number of light user participants = 5% * 12000 = 600.
 Increase in revenue for light users = 600 * (12 – 10) * $5.00 = $6,000.
 Gross increase in earnings (50% margin) = $3,000.
Net increase in gross earnings = $24,000 + $3,000 = $27,000.
 Cost of providing free sandwich to heavy users = 1600 * (36 * 5 / 20) = $14,400. At 50%
redemption rate, the cost is $7,200.
 Cost of providing free sandwich to light users = 600 * (12 * 5 / 20) = $1,800. At 50% redemption
rate the cost is $900.
Total Cost of free sandwich giveways = $7,200 + $900 = $8,100.
Net value to average store = $27,000 – $8,100 = $18,900.
So, from a simple cost-benefit point of view the conclusion is that Subway’s planned frequent eater
program will be profitable to the average store.
Potential risks/issues:
Once you prove the program is valuable for the average store, think about potential problems associated
with the frequent eater program:
 Different kinds of stores may have different outcome: stores along highway may not benefit as
much as stores in urban areas, for example.
 What if competition comes up with a similar program?
 Will there be any increase in visits? What if customers didn’t come more frequently as they
claimed in survey?
 What about the costs associated with setting up the program (software upgrade, maintenance
cost, marketing, etc)?
 Risks with fake coupons if the paper coupons are too easy to forge.
Structure all your calculations so that they are easy to follow – this way, if you make a mistake, the
interviewer can correct your numbers. Also, it is OK to approximate / ball-park, but you should state your
approximations loudly.
Tire Maker Bridgestone to Develop E-commerce Strategy

Consulting Firm: Samsung Global Strategy Group (GSG) 2nd round job interview.
Industry Coverage: e-commerce & online business; automotive, motor vehicles; chemical industry.
Case Interview Question #00358: You are having lunch with a former client, the CEO of Bridgestone
Americas Holding Inc. (BSAH), a major automotive tire producer. BSAH is the U.S. subsidiary of
multinational rubber conglomerate the Bridgestone Corporation. Bridgestone is a leading manufacturer of
tires for cars, light trucks and SUVs. BSAH and its subsidiaries develop,
manufacture and market Bridgestone, Firestone, Dayton and associate brand tyres for consumers,
automotive and commercial vehicle original equipment manufacturers (OEMs), and those in the
agricultural, forestry and mining industries.
The CEO of BSAH explains to you that they have been toying with the concept of the company making a
foray into e-commerce business. He hasn’t devoted much thought to the strategy involved and would like
your input regarding the attractiveness of such a move. How would you help your client assess this
strategic move?
 Bridgestone is currently the largest player in the automotive tire industry, but facing traditional
domestic competition in addition to increased foreign competition.
 Bridgestone’s competitive advantages have traditionally been brand, customer relationships and
technological innovation.
 Bridgestone’s main business is supply to original equipment manufacturers (OEMs).
 Secondary existing distribution channel includes franchised service and retail outlets.
 Third distribution channel is direct sales to industrial clients (fleet services).
Possible Answers:
At a minimum, the candidate should consider these key issues (3C’s framework) in evaluating the client’s
planned move into e-commerce:
1. Company
What is client’s motive in making such a move? What are their capabilities of e-commerce?
 Direct sales
 Service complement via customer service, product information, etc.
 Sourcing data/order management system
 Channel data/order management system
 Other intranet capabilities
It turns out client is primarily interested in direct sales opportunities. Other uses of electronic data
interfaces are either already in use or currently under development.
2. Customers
Targeted market segment and market size:
 Who would buy tires over the internet? What about tire installation?
 Break the market down;
 Draw a pie chart! How big of a slice can the client get?
 What are the advantages to the consumer for buying tires online?
 Does that overlap with segments served by existing distribution channels?
3. Competitors
 What are competitors (Michelin, Goodyear, Continental, etc.) doing?
 How will they respond to client’s move into e-commerce?
 How quickly will they respond?
Other possible issues to consider include:
 What are the alternatives to e-commerce? (Phone orders, direct mail, etc.)
 What are the advantages of this distribution channel to the client? Disadvantages?
 Cost reductions?
 Margin comparison to other distribution channels?
 Underserved segments?
 What investment is required? What is the relative ROI (return on investment) compared to other
channels?
 What will be the impact of an e-commerce strategy on existing distribution channels? What will
that do to channel relationships?
 How is client’s automotive tire product delivered? Installed?
 Is there an advantage to forming a strategic alliance with an e-commerce merchant prior to
developing our own capability?
An excellent candidate will also consider the following:
Consider the problem from both marketing and operational perspectives. Framework starts from “where’s
the market going?” and goes to operating tactics to enable necessary innovation, “how do we get to
there?”
Identify what segments might want to buy online (“bargain hunters”, “web surfers”, etc.). Why do they
want to buy online? (Price, convenience) How big are these segments? (pie chart to get percent of total
market then size total market). Which segments are most profitable to serve? Why? Which are growing
the fastest? Why?
How do you deliver the “order winning criteria” (OWC) that the segments demand? (do not use the term
OWC, they’ve heard it 20 times so far that day). One concept is to use the existing service and retail
outlet channel in combination with just in time (JIT). Customers would purchase tires and schedule an
appointment for installation online. Installation would occur at a local service and retail outlet of the
client’s. If convenience is the OWC, then perhaps the vehicle is picked up at the consumer’s home or
business and returned later that day.
The online order might initiate the delivery of the merchandise to the outlet via company shipping or
expedited shipping (UPS?) and be connected to the company’s inventory and manufacturing
management systems (manufacturing resource planning — MRP, enterprise resource planning — ERP).
This saves money for the company while allowing channels to maintain a margin. It also reduces costs for
the service and retail outlets through lower inventory levels and smaller stores while increasing customer
satisfaction through guaranteed stocking and improved service (appointments).
Same concept could be used with alternative channels (Sam’s Club, Kmart) in areas without service and
retail outlets to allow expansion without incurring the administrative costs related to outlets (which may no
longer be the most efficient/profitable means of selling tires to consumers).
Does the company have the capabilities required to enable this strategy? If not, how do they develop or
acquire them? How will competitors react? Is the company better off regardless of what competitors do?
How does the company sustain an advantage in the electronic marketplace? Does it make sense? Should
the company do this itself or seek a partner?
Northeast Utilities Weighs Water Meter Reading Service

Industry Coverage: utilities.
Case Interview Question #00357: Your client Northeast Utilities (NYSE: NU) is a Fortune 500 energy
and utility company headquartered in Berlin, Connecticut, with several regulated subsidiaries offering
retail electricity and natural gas service to more than 2.1 million customers in New England. NU is New
England’s largest utility system, with more than 3,140 circuit miles of electric
transmission lines, 32,802 pole miles of distribution lines throughout the region, and a natural gas
distribution system encompassing 2,088 square miles in Connecticut.
Northeast Utilities is a monopoly utility provider in this region. They send out service men monthly to read
both the electric and gas meters at each residence. Currently, 200 small water companies service the
New England region. Each small town owns its own water company. Would it be worthwhile for your client
NU to contract the reading of the water meters for these small water companies (i.e., charge the water
companies to read the water meters for them)?
Possible Solution:
I did not follow a particular formal structure or framework, but I basically wanted to find out about two
issues:
1. costs involved in reading the water meters, both from the perspective of the small water companies and
the client.
2. revenues that could be charged by the client to the water companies. If the client NU could provide the
service to the small water companies at some type of cost advantage, then I think that there would be
some money to be made for NU.
1. On the cost side, I asked the following basic questions:
Candidate: Would it be simple for our servicemen to do this on their routes? How much incremental time
would it take to do this water meter reading service?
Interviewer: It would take very little extra time, as the water meters were right next to the other two meters
(gas and electricity).
Candidate: (I next asked more about how the meters were currently read, to learn more about the costs
involved) How are the water meters read by Northeast Utilities v.s. by the water companies?
Interviewer: The client has fancy hand-held computers to record the readings, while the small water
companies only use paper and pen.
Once I learned this, I hypothesized that it might be beneficial for the client to contract the new business, in
order to amortize the cost of these computers over additional meters. Additionally, the labor costs could
be much lower and accuracy increased through the use of the hand-held computers, which would benefit
the water companies as well.
Candidate: (I then further investigated the cost of doing this water meter reading service) What are the
additional costs involved in reading the water meters?
Interviewer: In addition to trucks and fuel, the only really significant cost was labor of the servicemen. The
client pays its service workers $20/hour, while the water companies only paid their servicemen $7/hour.
Candidate: (I highlighted this as a major concern, in that it may not be cheaper for us to do it given this
wage differential. Continuing with the issue) Why the large difference – are either of the labor forces
unionized?
Interviewer: The client’s employees are unionized but the water company workers at not.
Candidate: (In order to pursue some of the cost savings) Could the water companies save significant
dollars by reducing the number of trucks as a result of not having to read the water meters?
Interviewer: The water companies could not eliminate the number of trucks, as they would still be needed
to serve all of these houses for other types of service anyway. They could save on fuel costs, but this
would be fairly marginal.
Conclusion:
As the interviewer pushed me, I decided to determine that it was not a wise endeavor, due to the large
wage difference. I concluded that the client had too high a cost structure to provide the services more
cheaply, and therefore to be able to charge for the service.
However, I did not have time to explore the revenue side, in terms of how much we could charge the
water companies for this service. I imagine that we could only charge them a bit less than the $7 an hour
that they were paying their service workers now in order to make it an attractive option. But in addition to
considering the substantial labor wage differential, we must also look at what revenue we could generate
by doing this service. It may result in profits, since the client’s service workers are already right there now
reading other meters, in which case I would recommend that the client contract the water meter reading
business.
ADP to Not Enter Pension Check Processing Business

Consulting Firm: KPMG Consulting final round full time job interview.
Industry Coverage: HR & business service; software, information technology (IT).
Case Interview Question #00353: The client Automatic Data Processing Inc. (NASDAQ: ADP) is a
global provider of integrated computing and business outsourcing services. Headquartered in Roseland,
New Jersey, United States, ADP offers a wide range of human resources (HR) management, payroll, tax
and employee benefits administration services for approximately 570,000 clients.

The client ADP is very successful in the payroll processing business, allowing other companies to
outsource their entire payroll function. Recently, ADP is considering an expansion into the business of
processing pension checks other for banks and financial institutions. Does this service extension make
sense for a low-cost producer like ADP? And how can the client ADP best penetrate this new market?
Possible Answer:
The crucial question to this “launch a new business” type of cases is how the pension checks are
currently being processed for other financial institutions (in-house by fund managers and banks or out-
sourced to other service providers) and why.
It turns out that virtually all financial institutions which disburse checks on a regular basis process them in-
house and are relatively cost inefficient in doing so. This however, does not necessarily present a market
opportunity on the basis of cost reduction. The check processing fees are an attractive profit center for all
but the smallest financial institutions because they can pass the costs (plus a huge margin) on to their
clients.
Since the check processing fees are a relatively small part of the total fund management expense, the
margins can be very large without customer complaints. This makes the sub-business of in-house check
processing very attractive to many of the potential customers of the proposed outsourcing business.
Another factor which makes this service extension unattractive is the importance of accuracy and
timelines in check disbursement. The financial institutions would lose a great deal of goodwill if their “out-
sourced check” processor screwed up, and they had to explain to thousands of upset pensioners that it
was another company’s fault. Spending a little more to have it done in-house was considered prudent by
many fund management institutions.
Note: The check processing business is not always cost driven (i.e., low cost might be critical to small
employers but quality may be more important to fiduciary service providers) and that a cost center for
some potential clients (businesses) might be a profit center for others (financial institutions).
NRG Energy Considers Entering Telecommunications Market
Case Type: new business; business competition.
Consulting Firm: A.T. Kearney final round job interview.
Industry Coverage: energy industry; utilities; telecommunications.
Case Interview Question #00352: Our client NRG Energy Inc. (NYSE: NRG) is an American energy
company and utilities provider headquartered in Princeton, New Jersey. NRG Energy offers gas and
electricity services to New Jersey and some surrounding areas. The company owns and operates
one of the industry’s most diverse generation portfolios (including nuclear, wind
and solar power) that provides nearly 26,000 megawatts of electric generating capacity, or enough to
support nearly 21 million homes. NRG’s retail businesses, Reliant Energy and Green Mountain Energy
Company, combined serve more than 1.8 million residential, business, commercial and industrial
customers.
With recent deregulation, our client NRG Energy is considering getting into the lucrative
telecommunications market. You have been hired by the senior management of NRG to advise them on
their planned market expansion. Should the client do it or not? Why?
Possible Solution:
My approach to this “start a new business” type of cases was a basic industry analysis of the
telecommunications market (size and growth), and then a four C’s analysis: our competitors, our
competencies and how they would apply to this market, the cost of playing in this market, and finally, the
different customers and their needs.
Basic Industry Analysis: What is the telecommunications market like today, in terms of market size and
growth trend?
As I had expected, this market is huge and growing very rapidly. With convergence everyone wants to
compete in this industry, but no one really knows where it is going.
I then went to first of the 4 C’s — Competition: What does the competitive landscape look like?
I note that telecommunications is certainly a global market and we are currently only a regional player,
which will certainly affect our strategies if we plan to enter this market. This becomes apparent as we
analyze the competition. The big players: AT&T, Verizon, Sprint, T-Mobile, the Regional Bell Operating
Companies are all either global or becoming global.
I also note the emergence of non-traditional players in this market: satellite providers who are attempting
to provide all of these services wire free. Although I recognize their presence, I note that it will probably be
some time before this becomes a cost effective option for most customers. I at this point hypothesize that
we may not have the resources to go head to head against the big boys, but there may be a profitable
niche.
I then switched to the 2nd “C” — Company Competencies (Competitive Advantage): What are our
core competencies, that would provide the client with a competitive advantage?
Before asking this, however, I noted that we already have wires (electricity) running to the houses in our
regions and thus have an infrastructure advantage that we should be able to leverage. In addition, we
have significant contact with our market and thus have some consumer knowledge that global players
may not have.
There may be another advantage for our client. Another important player in the value chain is the CAPs
(Competitive Access Providers, some type of telecommunications provider company that competes with
other, already established carriers), and these small companies are the link between the global players
(AT&T, Verizon, Sprint, etc.) and the local market. Our client might have the capability to bypass the
CAPs in our region because they can provide the same services that the CAPs do.
I also propose some other potential alternatives: we could be a lender to some of these CAPs, as they are
small players who often do not have access to capital. We could also potentially have joint ventures with
some CAPs.
I switched to the 3rd “C” — Customers
My analysis of the customers points to some potentially profitable niches for our client. I confirm that there
are two distinctly different segments of customers in this market. There are the business customers and
the residential customers, each with very different needs. I confirm that business customers would be
more profitable (less price elastic) than residential customers.
I also note that there are a number of different services that telecommunications companies provide:
cable, local phone service, long distance phone service, internet access, etc., and that the demand for
these services would differ for each of the two customer segments.
Finally, I switched to the 4th “C” — Costs

From a cost perspective, I note that the cost of becoming a global player, and investing in the necessary
infrastructure will probably not be a profitable endeavor. The industry is highly capital-intensive, and this
would put us at a large disadvantage relative to larger, global players like AT&T, Verizon, Sprint, etc.
Recommendations for Client:

To summarize, I recommended the following for our client:
Although more rigorous analysis needs to be performed, at first glance it seems that if our client avoids
going head-to-head with the big, global players, they could potentially leverage its internal capabilities in
order to compete in a profitable niche in this large, rapidly growing market of telecommunications.
Optima Batteries Assess Recent Entry into Forklift Business

Case Type: increase sales; new business.
Consulting Firm: ZS Associates 2nd round job interview.
Industry Coverage: automotive, motor vehicles.
Case Interview Question #00348: Our client Optima Batteries (acquired by Johnson Controls Inc. in
2000, NYSE: JCI) is a global manufacturer of high quality car batteries based in London, United Kingdom,
with sales in over 60 countries. The company has been a leading producer of car
batteries in the UK domestic market for thirty years and is currently the quality
leader throughout the United Kingdom.
The client has retained our consulting firm to evaluate its recent diversification into a new business
market. A few years ago, the client’s product line was expanded to provide batteries for forklifts and other
motorized loading trucks. The initial entry into this market was quite successful, but since then, sales have
decreased steadily every year. What recommendations would you have for this company?
Our consulting firm has been able to dig up the following background information:
 The client entered the forklift battery business to utilize the company’s excess capacity during
periods of inactivity.
 This industry is very mature and annual growth rates have been very small over the past few
years.
 Competitors in the industry include:
 4 domestic UK producers (experiencing decreasing market share)
 1 French producer (experiencing stagnant share)
 1 Spanish producer (experiencing increasing market share)
 The Spanish firm offers low priced but inferior quality batteries.
 The client’s forklift batteries are sold to industrial dealers by captive salesmen.
 Free maintenance service is a part of every sale.
 Purchases of automobile batteries in the consumer market are highly seasonal.
 Larger customers are sophisticated in their buying practices, focusing decisions on both quality
and price. Smaller customers are less sophisticated and make purchase decisions based solely on
price.
 The client’s management style could be defined as ‘old school’, with the original owner/founder
still in charge.
Possible Answer:
The Spanish batteries maker’s product is inferior in quality and may offer buyers a worse deal in the long
run, but is targeted to smaller dealers who buy only on the basis of price. Service is not a problem for
these smaller dealers who do not knowmuch about preventive maintenance, so the product appears a
better deal.
Issues Addressed:
 Market Segmentation: Differences between large vs. small customers – size, needs, buying
behavior
 Product/Service Bundling: How do different segments want to but our services according to their
needs (stand-alone or bundled?)? What is better for us?
 Customer Profitability: How can we best profit in each segment?
 Competitor Analysis: What do competitors offer? What segments do they serve? Do they have
flexibility with respect to cost, product functionality, and price?
Possible Recommendations:
Option A: Establish an Off-Brand for Forklift Battery
1. An off-brand would allow the firm to develop a product better positioned in the forklift battery business
(perhaps of lesser quality but more price competitive), while maintaining its product quality image in the
automobile industry.
2. Cost savings with an off-brand could come from:
 Redesign of product using cheaper materials or a different manufacturing process.

 Offer the free maintenance service as an option, not a guarantee quoted as part of price in the
low-end segment. Keep product and service bundled in high-end segment.
 Eliminate the sales force and sell factory-direct to industry dealers or use brokered distribution.
3. Sell the current product at a cheaper price with a strategy to promote market share instead of current
profits.
Option B: Focus Sales and Marketing Efforts to Educate the Consumer Market
1. Develop and promote product positioning. Offer warranties, long-run cost-savings estimates, etc. to
send quality signals that competitors cannot match. Communicate ‘true cost’ of buying low-priced
batteries and try to change consumer-buying behavior.
2. Leverage strength of quality leadership position in automotive markets.
3. Focus only on high-end of forklift battery market and target larger dealers. Set higher prices to signal
quality and extract highest level of consumer surplus. Refocusing of resources would need to be
evaluated in terms of dedicated assets and return on investment.
Option C: Exit the Forklift Battery Business

1. If competing in this industry means lowering quality standards may be putting core automotive business
at risk.
2. May be able to find other opportunities that better fit with company’s strengths and image.
 Forward integration into end products – industrial loaders and equipment, golf carts, etc.
 Backward integration into chemicals, plastics, etc.
Option D: Do Nothing
1. Wait to see how market reacts to product over a longer period of time or reacts to minor marketing
changes.
2. Difficult to sell this strategy to owner given investment in expensive consulting advice, although this
may in fact be the most logical approach.
Unisys to Not Enter PC Maintenance & Repair Business

Consulting Firm: PricewaterhouseCoopers (PwC) second round job interview.
Industry Coverage: software, information technology (IT); consulting, business services.
Case Interview Question #00340: Your client Unisys Corporation (NYSE: UIS) is global information
technology (IT) services provider and computer maintenance & repair company with a revenue of $4
billion in 2010. Headquartered in Blue Bell, Pennsylvania, United States, Unisys hires more than 25,000
staff worldwide.
80% of their current business is in servicing mainframes (high-end commercial machines used primarily
by corporate and governmental organizations for critical applications, bulk data processing such as
census, industry and consumer statistics, enterprise resource planning, and financial transaction
processing) and the other 20% in servicing network servers. While the server segment has been growing
at 25% per year for the past 3 years, the mainframe segment has been declining at about 9% per year for
the past 3 years. The operating margins for the mainframe segment is 20% while that for the server
segment is 8%. Your client is thinking of entering the personal computer (PC) segment because it has
been growing at 40% per year. However, the operating margins in this segment are only 1%.
Question 1: Should your client Unisys enter the PC segment?
Question 2: Given your answer to Question 1, what should your client’s operational structure be?
Possible Answers:
1. I started with the 3 C’s: Company/Cost
Candidate: How does my client’s cost structure stack up against potential competitors?
Interviewer: Your client’s cost structure is higher than potential competitors because they employ highly
qualified technicians, who are capable of servicing mainframes, servers and PCs.
Candidate: What value-added does my client offer that might justify a price premium?
Interviewer: The client guarantees a 4-hour turnaround, and has a great reputation.
2. 3C’s #2: Customer
Candidate: Who are potential customers, and what level of service would they expect?
Interviewer: Customers would likely be individuals or small companies who cannot afford long-term
computer maintenance contracts.
3. 3C’s #3: Competition
Candidate: What would be the nature of competition, both current and potential?
Interviewer: There are a large number of small competitors, as well as a handful of well-heeled
companies.
Questions for operational structure follow-up question:

Candidate: What is the current operational structure?
Interviewer: In each country, there’s a centralized 24-hour hotline for customers to call in for servicing and
the technicians are dispersed throughout the country in vans. Once a service request is received by the
call center, the nearest available technician to the customer is dispatched.
Candidate: Can all technicians service all types of computers?
Interviewer: Yes, every technician is trained to service all types.

I recommend the client company to not enter the PC segment because:
 My client does not have competitive advantage in this segment. Basically the PC segment is a
commodity business that any computer literate high school kid can enter. The segment would have
thousands of competitors.
 My client’s cost structure is too high to cost effectively compete in this segment. One could argue
that the client could employ high school kids for the PC segment but there’s always the company’s
reputation to consider.
 Customers would likely be value conscious and wouldn’t go for ‘branded’ servicing.
I also recommended a change in the client’s operational structure:
The new operational structure should be more decentralized, i.e., number of call centers should be
appropriately matched to the number of customers in each country, and there should be 2 types of
technicians – one type can service both mainframes and servers while the second can only service
servers. This will:
 Reduce the operating cost because a smaller number of highly paid mainframe technicians are
required.
 Increase the technician utilization rate (currently at 50%) because each call center is now keeping
track of fewer vans. This is especially important for a big country like the US.
 Enable each call center to be closer to the customers and better anticipate their needs.
Century Aluminum Develops New Technology in Plastics
Case Type: new business; industry analysis.
Consulting Firm: Cornerstone Research 2nd round job interview.
Industry Coverage: metals production; manufacturing.
Case Interview Question #00338: Your client Century Aluminum Company (NASDAQ: CENX) is the
second largest primary aluminum producer in the United States. Century Aluminum was formed in 1995
by Glencore International of Switzerland as a holding company for its aluminum-producing assets. Based
in Monterey, California, the company manufactures molten aluminum, as well as
standard-grade ingot, extrusion billet, and other value-added primary aluminum products.
Century Aluminum is experiencing decline in sales over the last several years. Also, over the past year it
has been working on developing new technology in plastics. The client is slightly ahead of competition in
this technology development. Should the client continue development of plastic or remain in the aluminum
industry?
Possible Solution:
Essentially there are three parts to this case question.
 First, is plastic an attractive industry and is it more attractive than aluminum in the long term?
 And second, does the client company have capabilities to become a profitable player in the
plastic industry?
 An additional consideration is what is to become of the client’s aluminum business. Can the two
businesses be run together without adding significant complexity costs? Is there any sizeable
synergy between the two (production and/or distribution)? If not, can the aluminum business be sold
for the right price?
1. Let us consider aluminum market first. Explore the reason for client’s sales decline in aluminum market.
 Is plastic replacing aluminum?

 What about cannibalization of existing aluminum products?
 What are the likely actions of competitors? – High rivalry in declining aluminum industry will lead
to price wars and declining profits.
2. Evaluation of plastic market:
 Does plastic offer significant benefits to customers?

 Are their needs satisfied by plastic?
 What is the cost of entry into the plastic market? – Minimum efficient scale for plastic is 10% of
the volume of the aluminum market.
 Are there any other substitutes to aluminum and plastic?
No specific answer was required for this case. The key issues were:
 potential cannibalism
 high rivalry in a declining industry (aluminum) that will lead to price war and declining profits.
Royal Bank of Canada to Install ATMs in All Branches
Case Type: new business/technology.
Consulting Firm: Mercer Management Consulting 2nd round job interview.
Industry Coverage: banking.
Case Interview Question #00335: The client Royal Bank of Canada (RBC, TSX: RY, NYSE: RY) is one
of the Big Five Canadian banks. The company’s corporate headquarters are located in Toronto, Ontario
and it has operations in Canada, the United States, and 51 other countries. In Canada alone, the bank
serves approximately ten million clients through its network of over 1,200
branches.
Royal Bank of Canada recently decided to install ATM’s in all of its Canadian branches. The research
concerning the cost and vendors of choice has all been done. However, the CEO of RBC is still not 100%
sure that the benefits from this move will outweigh the enormous costs. So, he hired you to advise him on
this matter. How would you analyze the benefits from the ATM’s, and what data would you
need? Concentrate on the main issues only.
Possible Answer:
I did a three C’s analysis (Company, Competitors, Customers), and added a fourth part on technology.
Candidate: (The first C: company/cost) Are there cost savings associated with the use of ATM’s? I
assume that some of the tellers could be replaced, and possibly some of the branches consolidated.
ATM’s could allow some transactions to be processed more efficiently.
Interviewer: Yes, 30% of tellers were redundant, and there is room for substantial savings by laying them
off (salaries and benefits).
Candidate: (Next I moved to competitors) Are the competitors doing the same thing?
Interviewer: Yes, four of the client’s largest competitors (the other four of the Big Five: Toronto-Dominion
Bank, Bank of Nova Scotia, Bank of Montreal, Canadian Imperial Bank of Commerce) have all installed
them in the last 2 weeks.
Candidate: (I finished the three C’s with customers) Do customers want the service? How do they value
it? Also, does the bank see this as a way to get new customers or simply to keep existing customers?
Interviewer: In a recent survey, the RBC bank determined that 20% of its current customers would never
use an ATM, another 50% might use them, and the remaining 30% are so fed up that the bank does not
have ATM’s that they are about to leave the bank as customers.
Candidate: (I closed my analysis with a discussion of technology issues) By using the technology, could
related information be used to offer new products (i.e., creating a database, market segmentation)? Are
there new trends in the industry using ATM’s to offer new banking products/services?
Interviewer: This is something the client would need to look into.

I summarized the case by saying that:
The client RBC bank had to act fast, given that its major competitors are all quickly installing ATM’s, and
that some customers are about to pack up and leave. I highlighted the need to respond to both
competitors AND customers.
I noted that it was also important to look at the segments of customers: were some of the longest-
standing, high net-worth customers the ones who were about to leave? If so, then the issue becomes
more time sensitive. In other words, beware of the different types of customers you have, and value those
that are the most valuable.
There are real cost saving opportunities associated with the decision, too, as discussed above. The RBC
bank could make use of the space left by laying off some tellers to produce additional revenues. New
products, such as credit cards or investment related services, could be offered, or even less traditional
banking items such as food/refreshments (putting refreshment stand or vending machines right next to
the ATMs?).
The interviewer said that these were all central issues to the case. She mentioned as an aside that the
bank had problems initially, because customers who originally said that they might use the ATM’s ended
up being very technology averse, and in fact did not like to use the ATM’s. This meant that they needed to
be encouraged to use them (advertisements, promotions, etc.)
This was a good example of thinking outside of the box: the interviewer really liked my idea of putting in a
refreshment stand in the bank (and it is actually being done by some California banks that are selling café
lattes in the bank!).
CarMax to Tighten Car Loans & Auto Finance Policy

Case Type: math problem; new business; finance.
Consulting Firm: Capital One 2nd round job interview.
Industry Coverage: automotive, motor vehicles; retail; financial services.
Case Interview Question #00334: Our client CarMax (NYSE: KMX) is a used car retailer and dealership
headquartered in Richmond, Virginia, USA. Their business has been stagnating in recent years. They are
located in a low to middle-income area and in the past have only sold cars to
customers who are willing to pay 100% of the cost up-front or can obtain bank financing. In order to boost
sales, CarMax is considering offering car loans to customers that the dealership itself will finance.
To be eligible for a loan, customers must undergo a complete credit check (which we assume to be
accurate). The credit check rates potential car buyers on a scale of 0 to 100, where 0 corresponds to a
0% chance of paying off the loan and 100 corresponds to a 100% chance of paying the loan in full. Each
loan only lasts 1 year in which payments are made monthly and the entire loan will be paid off in 1 year’s
time. Buyers ultimately fall into two categories, those that pay off the loan entirely, and those that default.
The Question: What should be the cutoff level where CarMax decides to give potential buyers the loan?
What issues might cause you to alter this cutoff-level?
Additional Information: (to be given to you when asked)

 Average cost of a used car to CarMax: $6,000.
 Average price of car sold to customer: $7,000.
 Minimum down payment for all customers: $1,000.
 Average loan defaulter makes three months of payments before defaulting.
Possible Answer:
Although this case looks like a typical “starting a new business/service” case, I did not really use any
framework because this case is more of a question of establishing where the break-even marks would lie.
I did all the calculations on the average.
Candidate: So what is the average cost of each car and how much does our client CarMax sell them for?
Interviewer: The dealership’s average cost per car is $6,000. We sell them for an average of $7,000.
Candidate: What is the minimum down payment? Do all customers default at an amount relative to their
credit report (i.e. a potential buyer with an 80 credit rating will pay the down-payment and 80% of the
remaining loan)? How much do we make on the loans?
Interviewer: The minimum down payment is $1,000 regardless of credit rating. The average default is
after three months. Assume we make nothing on the loans; they are only used to entice in additional
customers.
At this point, I stated to crank through some of the math. We make a profit margin of only $1,000 on each
car. For this to be worthwhile we must make more on additional cars sold and paid for in full than what we
lose in loan defaulters.
 Net profit to the dealership for a good loan: $7,000 – $6,000 = $1,000.
 Total loss to the dealership for a default: $6,000 (average cost of car) – $1,000 (down payment) –
$1,500 (three months payment before default) = $3,500.
This means that we need to have 4 good loans
for every 1 bad loan to turn a profit/not lose

money. If 4/5 of loans must be good, then a credit rating of 80 should be our cutoff. At this point I drew the
following graph for the interviewer to illustrate my point and to discuss other issues to consider:
I would probably be tempted to raise the cutoff above 80, at least in the beginning. This is for two
reasons:
(1) We are not sure how successful our client will be with this process, so it would be better to start more
conservatively and if successful, ramp up the operation.
(2) At the 80 cutoff we are working very hard for diminishing profits, where at the 90 cutoff the potential
rewards are much higher.
Alternative solution and other possible issues to consider:

 Another possible solution would be to lower the cutoff level for higher risk loans but raise the
minimum down payment required. This would change our risk profile.
 Look at the cash flow situation of the client. If a few unexpected bad loans in a row would
bankrupt our client, then we may want to raise the cutoff.
 Examine expected economic conditions looking forward. If we sense that the economy will be
poor in the future, we also may want to increase the cutoff point.
 The use of warranties or add-ons, paid at the time of purchase, that force customers to pay more
up-front would also allow us to lower the cutoff levels. For example, it we allow a customer to
purchase a two-year warranty for $1,000 that is paid for in full at the time of purchase, it reduces our
overall risk exposure.
Capital One Auto Finance to Revamp Loan Issuing System
Case Type: new business; math problem; finance.
Consulting Firm: Capital One 2nd round job interview.
Industry Coverage: financial services; banking.
Case Interview Question #00329: Capital One Financial Corp. (NYSE: COF) is a McLean, Virginia,
United States-based bank holding company specializing in credit cards, home loans, auto loans, banking,
and savings products. Based in Plano, Texas, Capital One Auto Finance (COAF) is the auto loans
division of Capital One. It is the largest Internet auto lender, as well as one of the
top US auto lenders overall.
The COAF division has a loan-issuing operation that requires the following steps:
 The car loan application is generated at a branch office.

 A complete applicant background check is performed at the branch office.
 The application and background check are sent to a loan processing office.
 The background check is updated and verified (this takes much less time than original check).
 The car loan is either approved or denied.
Recently, Capital One Auto Finance division is considering getting rid of the first background check and
only relying on the loan processor’s check to speed the process. If the loan processor does the whole
check with the proposed new software system, the check takes one additional hour per application at the
processor’s office. Should Capital One Auto Finance implement the revised new system or not? Why?
 The average profit margin for a “good” loan (i.e., loans which are repaid) is $0.20 per dollar
loaned.
 The average marginal loss for a “bad” loan (i.e., loans which are not repaid) is $0.50 per dollar
loaned.
 50% of the applicants pass the first background check.
 90% pass the second background check.
Possible Answers:
What I would like to do first is to calculate the annual profits of the original system and compare those to
the annual profits of the proposed new systems. With that in mind, I would ask the interviewer how many
auto loan applications are filled out per year in Capital One Auto Finance division.
What followed were a series of questions designed to help calculate the annual profits of the two systems.
For the sake of brevity, the actual questions have been left out. The following facts, however, were
revealed:
1. General:
 Number of auto loan applicants is roughly ~100,000 per year.

 Average value per car loan is $10,000.
 Given: Average profit margin for a “good” loan: $0.20 per dollar loaned.
 Given: Average marginal loss for a “bad” loan: $0.50 per dollar loaned.
2. Original system:
 Default rate under the original system: 10%.

 Processing costs under the original system: $100/application.
 Given: Acceptance rate under the original system: 45%.
 50% of the applicants pass the first background check.
 90% pass the second background check.
3. Proposed new system:
 Default rate under the proposed system: 5% (estimated).

 Processing costs under the proposed system: $60/hour.
 Processing time per application under the proposed system: 1 hour.
 Expected acceptance rate under the proposed system: 40%.
 Additional costs for the new program: $50/application.
4. Based on the information provided, the following profit calculations could be made for both the original
system and the proposed new systems.
A. Original System:
 Revenues:
 Dollars loaned: 100,000 applications * 45% loans per application * $10,000 per loan =
$450MM.
 Revenues per dollar loaned: (90% Good * $0.20 – 10% Bad * $0.50) = $0.13.
 Total revenues: $450MM * 0.13 = $58.5MM.
 Costs: $100 processing fee per application * 100,000 applications = $10MM.
 Profit: $58.5MM – $10MM = $48.5MM.
B. Proposed New System:
 Revenues:
 Dollars loaned: 100,000 applications * 40% loans per application * $10,000 per loan =
$400MM.
 Revenues per dollar loaned: (95% Good * $0.20 – 5% Bad * $0.50) = $0.165.
 Total revenues: $400MM * 0.165 = $66MM.
 Costs:
 Processing fee: $60/hour * 1 hour/application * 100,000 applications = $6MM.
 Additional costs: $50/application * 100,000 applications = $5MM.
 Total costs: $11MM.
 Profit: $66MM – $11MM = $55MM.
At first glance, it seems that Capital One Auto Finance should progress with the proposed new system.
There are additional costs, however, that the auto loan division should consider, such as costs associated
with retraining employees, system installation costs, and so on. That said, there might be additional
benefits, as well. For example, a faster loan processing speed may help the company get more business.
Interviewer’s Comments:
This case obviously tests your analytical skills. Do not attempt to answer this question without working
through the calculations on a piece of paper. If your math skills are poor, this strategy could easily
backfire, making you look stupid. This case is relatively straightforward, but make sure that you have all
the information necessary to develop an answer.
Philadelphia Museum of Art Uses Web to Increase Revenues

Case Type: increase sales/revenues; new business.
Consulting Firm: ZS Associates 2nd round job interview.
Industry Coverage: leisure, recreation; entertainment, arts; online business.
Case Interview Question #00326: The Philadelphia Museum of Art is one of the largest art museums in
the United States. Established in 1876 and currently located at the west end of the Benjamin Franklin
Parkway in Philadelphia’s Fairmount Park, the Museum houses more than
225,000 objects highlighting the creative achievements of the Western world

since the first century A.D. and those of Asia since the third millennium B.C.
The Philadelphia Museum of Art has recently built a website (www.philamuseum.org) that is basically set
up just for users to look at. Your client, the head of the Museum, feels that there must be some way to
increase the museum’s revenues through use of the website. Therefore, he asks you to explore this issue
as part of your summer research project. What would you recommend to the head of the museum?
Possible Solution:
Given that the question asked how to increase revenues (as opposed to profits), I started out saying that I
would only focuson revenues, and therefore I would not address costs (but suggested that someone else
do this for their summer project).
I therefore used a framework based on existing forms of generating revenues and new forms of
generating revenue. The logic behind this is that there would be two ways to increase revenues:
(1) use the website to increase sales of existing products and services (i.e., an increase in existing
sources of revenue), and
(2) use the website to market and sell new products and services (i.e., a new source of revenue).
I started out by first asking the interviewer how the museum generates revenue currently: How does the
museum generate revenue currently?
Interviewer: Currently, the museum earns revenues from membership fees, entrance fees, catalog sales,
and corporate sponsorship of blockbuster shows. Blockbuster shows are major art exhibitions that are
sponsored by companies when the collections come to town. For example, a blockbuster show might be
called the “United Airlines” presentation of Monet’s Garden at Giverny.
I then suggested that the museum do the following to use the website to increase the Revenue
generated by these existing forms:
1. Offer online catalog ordering via the web site. Currently, they do these sales of museum memorabilia
and other gifts through the traditional gift shop at the museum and through mail-order catalogs. The web’s
easy access would allow customers who have never visited the museum to see and maybe order the gifts
online.
The museum could set it up such that a consumer could place an order, supply the credit card number,
and the item could be sent out right away to whatever address the consumer wanted. The museum could
negotiate a deal with USPS, FedEx or UPS to handle the deliveries. Of course we would have to actively
educate the consumer as to the security of ordering through the web site, because there may be
resistance in the market to giving out a credit card number online. The museum could guarantee security
and back any fraud that might negatively affect our customers. The museum could even advertise a little
on the website about what great gifts these souvenirs make.
The special benefits include:
 more cost effective, since less overhead costs involved and fewer mistakes during order
(because consumers enter the information directly).
 more convenient for customers, because they do not have to be in the store or have a catalog
handy.
 better service for customers, since gifts are ordered directly with faster turnaround.
2. Advertise the museum’s regular and special events. In general, use the website to advertise the
museum’s collections and services by providing photos and other information about art at the museum.
Utilize this powerful and interactive form of communication! Provide a complete description of what the
services include for current members. Use hotlinks from corporate sponsor company web pages (i.e., link
from United Airlines’ home page), local and national tourist web pages (i.e., visitphilly.com,
philadelphia.com), and other sources to bring new customers to the web pages. The goal here is to
increase membership and entrance fees simply by advertising through the web.
3. Provide an opportunity for customers to join the museum as members conveniently and directly on
web. This is to boost revenues from membership services through the convenience of the web, as
opposed to having to be in the museum, or to call during office hours to join.
I then suggested the following new ways for the museum to generate New Revenue:
1. Form chat groups about art and other interests of our members. Members pay an annual fee for
unlimited access to the museum and special events; we could add special services and features on our
web site for these dues-paying members as an attempt to increase membership.
2. Offer advertising spots on our website for relevant and appropriate products for art lovers. Naturally we
would screen advertisers so that we weren’t advertising Bud Light beer or Marlboros Cigarettes on our
website.

As stated above, use the web site to enhance revenues from existing forms, including catalog sales and
membership/entrance fees. Also, use the web and its powerful capabilities to offer new services, such as
chat groups, and online advertising spots for companies.
The key to this case was to come up with creative solutions for the museum to generate revenue. There
was not a lot of material or detail to probe for in the form of questions. It was important to have some type
of structure, rather than to list ideas, but it was even more essential to be creative.
What is US Annual Market Size for Car Tires?

Case Type: market sizing; new business.
Consulting Firm: Samsung Global Strategy Group (GSG) first round job interview.
Industry Coverage: chemical industry; automotive, motor vehicles.
Case Interview Question #00300: A friend of yours wanted to start his own business. His start-up idea
was to open up a new car tire manufacturer in the US despite there being another 7 major players in the
car tire market (Bridgestone, Goodyear, Michelin, Continental, Cooper, Pirelli,

Hankook).
Since you work as a management consultant at a top firm, you were asked by your friend to help estimate
the potential for the business. First of all, you’d have to estimate how many car tires your friend’s
company can sell in a year in the US. You should walk me through your analysis and come up with a
reasonable number quickly.
Possible Answers:
This a market sizing case to estimate the US annual market size for car tires. One could start by
estimating the number of cars in the US. From there, making some assumption about average
replacement rate for car tires, one could calculate the number of car tires that need to be consumed every
year. The job candidate might say something like:
So, there are about 300 Million people in the US at the moment. I’d say 2/3 own a car, so lets say 200M
cars at the moment.For the sake of simplicity, let’s assume that my friend only wants to sell car tires and
not truck tires (the interviewer will correct me if I’m wrong), so we can forget about long haul trucks and
the like, let’s forget about SUVs with spares, etc. Of course, there are also regular cars for business use,
so let’s say roughly 100M business cars (not including trucks), so we have a total of 300M cars for
personal and business use in the US.
The next question here is what is the replacement rate? The average tire lasts, I don’t know, maybe
60,000 miles? The average person maybe travels about 12,000 miles a year, so tires last 5 years on
average. So, let’s say that roughly speaking of the 300M cars out there, every year about 60M need to
have new tires. Cars have four tires last time I checked, so that’s about 240M tires. Of course, new cars
are made each year as well, on the click of about 20M a year, and every new car needs 5 new tires (4
regular tires and 1 spare), so we could say about 240M + 100M = 340M new tires a year – that’s said,
presumably, about 20M cars also go out of commission each year, so let’s just go with 240M new tires a
year.
The next issue is how much of that total annual tire market we can capture. You had mentioned that there
are 7 major competitors, so one possible metric is simply what our “fair share” would be – and then we
can adjust from there. Based on that, I’d expect that we could theoretically capture up to 1/8 market
share, or 30M tires a year. Now, we might capture more if we have a better tire product, or a lower cost
product or some other competitive advantage. Why don’t we explore our product a bit more – are there
any obvious advantages to our product v.s. that of our competitors?
At this moment, the interviewer might reply something like:

(A) “That’s OK, assume we get 30M a year. What’s our profit?”
or he might say
(B) “Actually yes, our tire lasts forever. It never wears out.”
With (A), one might go down the path: “Well, that depends on price and cost. There are three ways we
can determine price, price based costing, cost based pricing, or comparables. Can you tell me the cost of
making this product?” The interviewer responds: “Yes, it costs us about 20x as much to make a tire as
anyone else.” You say “What?? Why? What’s so special about our tire?” He says “It never wears out”…
and then you move to B … the point here is that getting to B is critical to solving this case – if you don’t
get there you never solve it. You have to get used to digging and finding the right answer.
With (B), one might say “It never wears out? So it’s a one time sale? Well, in that case, I imagine we
could capture a LOT of the market, but it’s a one time sale, so once we’ve sold the tires what do we do
next? How much does it cost us to manufacture the tire? ” He replies, just like in A “20x as much”. At this
point, I’ll spare you the rest of the case, but essentially what you find is that if the tire costs 20x as much
then I need to price my tires at, at least, 20x that of my competitors, so a tire costs something like $2500
instead of $125 Each. Yes it lasts forever, but does that matter? The question becomes whether or not
consumers care. You’ll notice this case has gone from a market sizing/estimation problem to a pricing and
costing problem to finally a market and customer analysis problem.
Note: The last part of the case (car tires that last forever) is somewhat similar to the two “eternal light
bulb” cases “GE Defines Pricing Strategy for Eternal Light Bulb“, and “GE Develops Eternal Light Bulb
That Lasts Forever“, so you may want to check out solutions to those two cases too.
Carson Helicopters Considers Starting Air Shuttle Service
Consulting Firm: Aon Hewitt final round job interview.
Industry Coverage: Tourism, Hospitality & Lodging; Transportation.
Case Interview Question #00259: Your client Carson Helicopters, Inc is a helicopter operating company
based in Perkasie, Pennsylvania, United States. Founded in 1963, Carson operates a fleet of Sikorsky S-
61 helicopters in aerial lift services and aerial firefighting. Carson is best known for its development of the
“Carson Blade” for the S-61 and H-3 Sea King. Recently, the CEO of Carson
Helicopters is considering setting up a helicopter shuttle service that will take people from John F.
Kennedy International Airport in Queens, NY, directly to midtown Manhattan, and vice versa. What would
you advise him? Should they do it?
Possible Answers:
This is a “develop a new business” type of case, so go with the 3C’s framework:
1. On the Competitor side, it turns out that no one else is doing it right now. Other competitions to
consider in this case are taxi, limousine and car rental companies. What are the advantage and
disadvantage of client’s helicopter shuttle service?
2. On the Company side, the client’s company has been operating helicopters for a long time, so they
certainly know what they’re doing.
3. The real challenge here is to figure out who the target Customers are. Is it business travellers like
Gordon Gekko? State dignitaries? If it is business travellers, you might run into the problem that while
there is high demand during the weekdays, nobody wants to use it over the weekend. What do to with the
excess capacity? Maybe give helicopter tours of the city?
Travel Agent Buys Chartered Plane to Expand Business
Case Type: new business; growth, business expansion.
Consulting Firm: Aon Hewitt final round job interview.
Industry Coverage: Tourism, Hospitality & Lodging; Airlines; Small Business & Startups.
Case Interview Question #00258: A client is running a successful family-owned travel business that
offers complete travel packages to its customers. It has a very good relationship with a major airline
company from which it buys tickets in volume and receives a nice discount. The
owner of the business is a grandfather who will eventually pass on the business to his children, but has
heard about an interesting new business opportunity. It has always been his dream to operate a chartered
airplane, and he now has a chance to buy one (through the travel business), operate it, and integrate it
into his current travel business. Should he do it or not?
Possible Answer:
3C’s framework (Customer, Company, Competitors) seems a good starting point to analyse the case:
 Would the Customers use the charted plane? (Yes, they wouldn’t know the difference).
 On the Company side, would their relationship with the airline be hurt? (Yes, it will be hurt in the
short term, but will probably not have serious repercussion by the time the grandfather hands over
the company to his children).
 Does the client Company have any know-how in operating a chartered plane? (No, they don’t
really have any advantage there).
 What about its Competitors? (Head to head against major airlines, it will be much less cost
efficient. However, since they don’t have to pay for the airline ticket markup, they won’t be losing
money).
Recommendation: After all this analysis, it seems like it would help the company, but that it wouldn’t hurt
either. It turns out that what the interviewer, an Aon partner, wanted was for the interviewee to take a
stand and say, “Since it doesn’t make a difference either way, if the guy wants to do it, then he should just
go ahead and do it.” A friend of mine was the only person who had the guts to make such a
recommendation rather than saying “The data are inconclusive” and won rave review for it.
Note: This case looks similar to the “Israeli Travel Agent Eyes on US-Tel Aviv Route” case (Case
Interview Question #00145), so you may want to check out the solution to that case too.
Gogo Inflight Wireless Internet to Expand to More Airplanes
Consulting Firm: Boston Consulting Group (BCG) second round job interview.
Industry Coverage: telecommunications & network; airlines; startups.
Case Interview Question #00253: Our client Aircell is a start-up company with a technology to deliver
broadband internet service to commercial airlines. Aircell offers the Gogo Inflight Internet which allows
airline passengers to connect to the Internet through a system of cell towers on the
ground. The towers have been outfitted to point their signals at the sky rather
than along the ground. The aircraft picks up the signal through a receiver installed on its underside. Once
in the aircraft, the data signal is distributed throughout the cabin via a Wi-Fi wireless system. As a
consultant hired by the CEO of Aircell, how would you help them think about their offering?
Part #1: Industry and Market Size – The candidate should include the industry and market size in
his/her framework.
 Broadband for the airlines: There is general interest in the broadband internet from the airline
industry. The start up would have to invest relatively little up front and would keep most of the
revenues. They would charge the customers on a per flight pricing model.
 Size of the Market: Ask the candidate to estimate the market size and hand over the first Exhibit
1. Also inform the candidate that there are 3000 planes.
Exhibit 1.
 Annual flights legs per plane: 2000

 Average seats per plane: 200
 Average load factor: 75%
 Cabin seating: First class 10%, Coach 90%
 Passenger mix by cabin:
 First class: Business 100%, Leisure 0%
 Coach: Business 30%, Leisure 70%
 % travelers who carry laptops: Business 90%, Leisure 0%
Possible Answer:
First class Coach
Seats per plane 20 180
x load factor 75% 75%
= 15 135
x business travelers 100% 30%
Laptop users/plane 15 40.5

Total laptop
users/plane 55.5
3000 planes * 2000 legs/plane * ~55 laptop users/plane = 330 million approximate annual potential user-
legs.
Part #2: Pricing – In order to finish the market size, the candidate should ask for the price per flight.
Hand out Exhibit 2 (Inflight internet price elasticity) and ask candidate to set the price.
Possible Answer:
Assume 100 passengers (for ease) at the various price/penetration combinations:
 30 users at $5 = $150/flight
Therefore, the client should set price at $15.
Part #3: Break Even – Given the information already revealed in the case and the information below the
candidate should calculate a break-even point.
Additional Information: (to be given if asked) The company has discovered that if they can generate
$250,000 per plane in annual revenue, they will be profitable installing the technology on that plane.
Possible Answer:
250,000/2000 legs/plane = $125/leg, to break-even they will need $125/$15 = 8.3, about 9 users/leg.
From Part #1, we already figure out 55 laptop users/leg, and at $15 there’s a penetration rate of 20%, so
we estimate 55 x 20% = 11 users/leg. Yes, they should be able to break even.
Part #4: Other factors – Probe the candidate for breadth and understanding of new market entry. Ask
him/her about the following two aspects of this project.
 Competition – The interviewer should probe deeper into the competition especially w.r.t.
Intellectual Property. For this case, the company has the patent on the high speed connection. But,
what about low-speed?
 Risks – Ask the candidate which risks are associated with the business model. Use your
judgment when considering their answers.
Note to Interview: This is a new business development case where candidate is required to evaluate the
feasibility of a new product/service offering in conjunction with the airline industry. The candidate should
use a comprehensive framework, walk the interviewer through it and be prepared for analytical detours
throughout the flow of the case. The calculations represented here are only one approach and
interviewees may take other approaches, depending on the assumptions made. The interviewer should
be mindful of this and allow for flexibility.
Interviewee’s Comments: Like some cases, we just crunched numbers until we were out of time. The
interviewer had a lot of different exhibits. There was no way someone could get through all of them.
Cases don’t always flow neatly. The interviewer will jump around and direct you where he wants to be at
that particular time. Other people who did the case the same day talked about different things. He also
didn’t ask me to wrap up. When I got feedback on the case, he told me I did a really good job, so don’t let
things like that bother you.
Romance Publisher Harlequin Rejects Bookstore’s Deal
Case Type: operations strategy; new business; math problem.
Consulting Firm: IBM Global Business Services 2nd round job interview.
Industry Coverage: mass media & communications.
Case Interview Question #00233: Your client Harlequin Enterprises Limited is a Toronto, Ontario-based
publishing company owned by the Torstar Corporation (TSX: TS.B), the largest newspaper publisher in
Canada. Harlequin Enterprises is the world’s leading publisher of series romance and women’s fiction
with approximately 120 new titles published each month in 29 different languages in 107 international
markets on six continents.

Harlequin Enterprises sell its romance novels directly to bookstores. Typically, the company reimburses
its customers at the end of the year for any unsold inventory. Now, one of Harlequin’s customers, a large
retail bookstore, has come to it with an offer for a deal. In return for a 10% discount on wholesale prices,
the bookstore will no longer send back any books at the end of the year. Should Harlequin do the deal or
not? Why?
Additional Information: (to be provided to you if asked)
 Romance novel sales have been flat for a decade, and sales are expected to remain so in the
coming years.
 Harlequin’s clients have to sell books at a price they dictate, no cheaper.
 In 2008, Harlequin sold 10,000 books to this retail bookstore. At the end of the year, the
bookstore sent back 20% of its books to Harlequin.
 It costs Harlequin $5 on average to make a single book, and Harlequin previously sold books to
the bookstore at $10.
 Harlequin’s Salvage Value for unsold books = 0.
 Note to interviewer: Have the interviewee explain how he/she will estimate/guess at a figure of
how many books the bookstore will order this year, then give the projected number of 7500.
 MSRP of books is not relevant in this case.
Possible Answers:
Key elements of analysis to solve the case:

1. Math: Margin calculations.
 Don’t forget salvage value.

 Ask the candidate to explore rationale for the projected number (7500) of books that will be
ordered this year (directionally up, down or flat?).
2. Opportunities:
 Reduction in operational complexity.

 Good will meeting customer/channel request.
 Open up new business model – may lead to additional distribution channels.
3. Threats:
 Cash Flow (with new model, Harlequin will get less cash flow upfront – a big problem in this kind
of economy).
 Market Share (assuming fewer units sold).
 May affect other clients’ choices as well (i.e. first of many, not isolated case).
 Relationship with client (supply them with less books, they will view you as less important).
Note to interviewer: When mentioning cash flow, have candidate do the calculations. Previously, get
$100,000 upfront, now only get $67,000 (see part 4 Calculations below).
4. Calculations:
 Pre-change: profit = 8,000 * ($10-$5) – 2000 * $5 = $30,000

 Post-change: profit = 7,500 * ($9-$5) = $30,000
 Pre-change: cash-flow: 10,000 * $10 = $100,000 upfront
 Post-change: cash-flow: 7,500 * $9 = $67,500 upfront
 Pre-change: market share at 8,000 books
 Post-change: market share at 7,500 books
Conclusion: The expected profit is the same, but initial cash flow is lower and market share is lower.
There does not seem to be a direct financial incentive to take the deal.
Final Recommendation: The deal does not seem attractive on a financial or strategic basis. The
expected profitability is the same but cash flow and market share will decline. Such problems are
complicated by the fact that others in the industry may follow the lead of the first bookstore.
Recommendation is not to accept the deal.
 Possible Risk: By not accepting the request of your client, you risk alienating the bookstore if
other publishers shift business models.
 Possible alternative: Consider the differences in “blockbuster” books vs. lower-volume books.
Perhaps new business model (at different pricing) may make sense for some titles.
Note to Interviewer: This case is primarily a quantitative math problem with margin calculations. Make
sure that the candidate explore the calculation part in the case first and foremost; discussion of business
and strategic alternatives can come later.
Discover Card to Launch Airline Miles Reward Program
Consulting Firm: Capital One 1st round job interview.
Industry Coverage: financial services; airlines.
Case Interview Question #00220: Your consulting team has been hired by the CEO of Discover Card, a
major credit card issued primarily in the United States by Discover Financial Services (NYSE: DFS).
Discover Card’s CEO is interested in partnering with all major airline companies in the US to launch
an airline frequent flyer program.

This new frequent flyer program would give qualified Discover Card users one frequent flyer mile for every
dollar charged on their Discover card. Customers can redeem the miles for one domestic round-trip ticket
with any airlines (within the U.S.) for every 10,000 miles. The program is intended for a new type of credit
card called Miles by Discover Card that the company is planning to roll out very soon. Question to you: Is
this program a good idea? Should Discover Card do it or not, and why?
 There is no limit to the number of miles one can earn and miles have no expiration date.
 Discover Card gets 2.0% for every transaction from merchants.
 Average customer is expected to have a balance of $2,000 on the card and have transactions
worth $5,000 a year.
 The new Discover credit card will have an interest rate of 14.99% APR (Annual percentage rate).
 Cost of the redeemed domestic round-trip flight ticket ~ $300.00.
 No new investment or system upgrading is required – existing systems/personnel can be used for
the new program.
Possible Answer:
This case does not have any specific information – the job candidate will be tested for structure,
organization and creativity in his/her analysis. The candidate is also expected to make estimates of
market size. The case are best discussed in a profitability (Profits = Revenues – Costs) or cost-benefit
analysis framework as outlined below.
Revenues:
The new frequent flyer program would be attractive to people who fly frequently. First, do a back of the
envelope calculation to estimate the target segment. For example: 100 million families in the US, 50%
have credit cards – 50MM size of base segment. 25% travel more than once a year – so a potential
12.5MM cardholders will consider the program favorably. The conclusion for this market sizing part is that
there is an attractive target segment.
Next, estimate the potential revenue per customer per year: $2000 * 0.1499 (interest) + $5000 * 0.02
(transaction fee) = $400.00 per customer per year.
Costs:
 Cost of infrastructure/support for the new frequent flyer program – negligible as Discover Card
already has an infrastructure in place.
 Cost of redeemed ticket $300.00 * 5,000 / 10,000 = $150.00 per customer per year.
 Also need to think about marketing cost: Discover Card may have to give away promotional miles
to lure customers to apply for the new card, say 5,000 free miles for new customers, thus another
~$150 per customer. Note, this is a one-time cost that will not incur every year.
Strategic Issues:
 Sticky customers (good).
 Blackout problems with flight tickets (bad).
 Will other major credit cards (Visa, MasterCard, American Express) provide similar program?
 Is it a competitive advantage in the long term?
Arby’s Restaurant Plans to Test Frequent Diner Program
Consulting Firm: Boston Consulting Group (BCG) 1st round internship interview.
Case Interview Question #00216: Your client is the CEO of national fast food restaurant chain Arby’s
Restaurant Group, Inc., which operates more than 3,500 restaurants owned by corporate and by
franchisees. Headquartered in Sandy Springs, Georgia, Arby’s is a wholly owned subsidiary of
Wendy’s/Arby’s Group (NYSE: WEN) and it is primarily known for selling roast beef sandwiches and curly
fries.
The CEO of Arby’s is thinking of instituting a frequent-diner program. The program would be modeled
after the airlines industry’s frequent-flier programs. Each dollar spent in the fast food chain restaurant by a
member would earn one point. After 50 points have been accumulated they can be redeemed for a
Combo’s (Includes Sandwich, Small Curly Fry, and Small Drink, choose from the Regular Roast Beef,
Patty Melt, French Dip & Swiss, Roast Chicken Ranch, and Roast Beef Gyro) priced at $5.00. How would
you determine if this frequent-diner program is a good business proposition? Should Arby’s institute this
program?
Additional Information: Table 1. Focus-group Results by Customer Segments (job candidates will be
asked to do some calculations to complete the table)
Customer # of customers per # of visits per average $ spent per visit per
segment percentage store year customer
big fan 10% ??? 60.0 10.00
heavy 30% ??? 30.0 15.00
light 60% ??? 10.0 5.00
total 100% 20,000 ?? ??
Possible Approach:
1. Key questions to think about

 How will the frequent-diner program impact customers’ behavior?
 Will the program impact different customer segments differently?
2. Develop a framework
 Suggest a hypothesis on what Arby’s wants to do: increase revenue, loyalty with customers, etc.
 Will want to look at what competitors (McDonald’s, Burger King, KFC, Wendy’s) are doing: Is this
becoming a necessity to compete, or is it a way to differentiate chain? Even if others are doing it,
candidate may want to think about how can make this one unique.
 Interviewee need to assess how frequent-diner program will impact customers’ behavior:
frequency of visits, dollars spent at each visit.
 Recognize that it may impact different customer segments differently (i.e., those that already
come very frequently vs. those that just stop in once in a while).
 Also need to assess the costs associated with setting up the program (software upgrade,
maintenance cost, free meals given away, marketing, membership cards, etc.) and whether or not
they are less than the additional revenues brought in by the program.
3. Dig deeper into a couple areas: additional revenue expected and expenses.
 Focusing on the revenue side, interviewee should outline the factors they would consider, data
needed and ideas for getting the data.
 Interviewee should be able to use the data from the focus group (Table 2) to estimate the
additional revenue.
 Interviewee should then move on to the cost side and identify and estimate the relevant expenses
(can estimate free meal costs from focus group data, and guesstimate other expenses, e.g. frequent-
diner software).
 Give a recommendation as to whether to go ahead with program or not.
4. Other areas to think about:
 Likely competitor responses.

 Ways to use the program to gain other advantages: more effective marketing, test new products,
etc.
Table 2. Focus-group Results by Customer Segments
Customer # of customers per # of visits per average $ spent per visit per
segment percentage store year customer
big fan 10% 2,000 60.0 10.00
heavy 30% 6,000 30.0 15.00
light 60% 12,000 10.0 5.00
total 100% 20,000 21.0 10.71
Greyhound Lines to Cut Costs and Add New Routes

Case Type: reduce costs; new business.
Consulting Firm: Gallup Consulting 2nd round internship interview.
Industry Coverage: transportation; automotive, motor vehicles.
Case Interview Question #00212: Our client Greyhound Lines, Inc., is the largest intercity bus
transportation company maintaining routes between major cities in North American. Based in Dallas,
Texas, Greyhound Lines transports passengers by bus serving more than 130 regular routes, 2,400
stations and 3,700 destinations in the United States, Canada and Mexico.
The company has lost money for the past several years and over-operated routes as well as recent route
additions are suspected to be responsible. A new CEO has now taken charge and determined that the
company needs to aggressively cut costs in order to return to profitability. The CEO has approached your
consulting team for advice. How would you approach the problem?
Additional Information: (to be provided if requested)
1. Bus routes are of three types: short, medium or long. More than half of the revenue comes from long
distance trips.
2. The company has a substantial real estate investment in bus terminals.
3. The prior CEO focused on top line; instituted plans like anywhere pickup.
4. Cash position is pretty tight – the company had a recent brush with bankruptcy.
5. Client’s equipment and fleet of buses are quite old.
6. The largest cost for a bus company like the client is fuel.
Possible Solution:
To approach this cost-cutting case, the candidate is expected to use a profitability framework, and focus
more on costs than other aspects because of the nature of the problem.
Costs can be divided into Fixed Costs and Variable Costs.
 Fixed Costs: Buses, stations and other buildings, salaried employees, etc.
 Variable Costs: Gas, hourly employees, maintenance (debatable whether maintenance is a
variable cost).
Costs could be cut on possibly all of the above areas. Here are some specific suggestions:
 Determine which routes are profitable and cut back on the unprofitable routes – a good metric to
use would be the Passenger load factor (PLF).
 Change routes in a way that can improve the load factor, defined as the number of passenger-
miles travelled as a percentage of the total seat-miles available.
 Think about buying oil future contracts to protect against oil price fluctuations.
 Lease new equipment to decrease maintenance costs, downtime, and fuel efficiency.
 Reconsider “anywhere pickup” and utilize more freeways to improve schedules and utilization of
equipment (bonus point).
The other part of cost cutting would be to compare the services provided to customers with what they
really want. For example, there may be costs involved with extra terminal services or increasing leg room
on new seats that are not valued by consumers. Essentially, the offering must be realigned with customer
needs.
Follow-Up Question: If the company Greyhound Lines figures out 25 new routes that may be profitable,
how would you recommend they go about starting new service on those routes?
Possible Answer: The company would need to look at the operating costs per route, competition on
each route, whether the company’s infrastructure could support the new routes, and what potential
customers on these routes want (they are likely not riders on the company’s existing routes).
Boston Beer Company Considers Entering Wine Business
Case Type: new business; industry analysis.
Consulting Firm: Cognizant Business Consulting (CBC) second round job interview.
Industry Coverage: tobacco & alcohol; food & beverages.
Case Interview Question #00206: The client Boston Beer Company (NYSE: SAM) is a large American-
owned brewery headquartered in Boston, MA. Best known for its Samuel Adams brand of beer, Boston
Beer Company is looking for opportunities to generate more revenue. It is facing a very competitive
market in the beer industry and wants some diversification in its product
portfolio. Currently, they do not have too much cash at hand and are open to the idea of financing projects
through debt.
After a vacation in California one of the VPs of the company suggests that they should consider venturing
into the wine business. According to him, it’s still in the alcoholic beverage industry, and there seems to
be evidence that wine drinkers is a growing demographic. Thus, they might be able to make some
money through the wine business. Is this a good idea?
Possible Answer:
This case does not have any specific information – the candidate must be tested for structure,
organization and creativity in his/her analysis. The candidate should perform an industry analysis to
determine what to do. One of the suggested approaches is to:
1. Determine the current landscape – How is wine made, what does one need? Vineyards -> grapes ->
processing -> bottling -> aging -> distribution.
2. How much expertise is involved? Are there any similarities between beer brewing and wine making? A
lot of expertise is involved since there are no similarities between beer brewing and wine making, i.e.
negligible techniques from the beer industry can be utilized.
3. The candidate at this point should realize that wine making is a very different beast, and in addition the
aging process implies storage costs and capital investment lockup. These two points should be
considered the main barriers to entry
 How many winemakers are currently in the market place

 What is the capacity utilization of the current wine makers
 What is the current profit margin in the business
 Perform a market analysis/assessment – is the wine market really growing?
 How loyal are the customers, are they price sensitive, brand sensitive?
 Are there economies of scale involved
 Advertisement costs, distribution channels, preexisting alliances.
 Are there economies of scope possible (Most probably not, but can be broached if a interesting
option is thought of)
 Touch on financial requirements
Based on the above answers the candidate should suggest that this will not be a viable option due to:
Lack of expertise required to make wine, excessive cash required due to storage costs. No significant
economies of scale except maybe distribution channels, but don’t have to enter the wine business for
that.
EasyJet Airline to Start New Route Between Paris & London

Case Type: pricing & valuation; new business.
Consulting Firm: Hitachi Consulting first round full time job interview.
Industry Coverage: Airlines.
Case Interview Question #00198: Our client EasyJet Airline Company (LSE: EZJ) is a global airline
headquartered at London Luton Airport (IATA: LTN, ICAO: EGGW, previously Luton International Airport),
United Kingdom. It carries more passengers than any other UK-based airline, operating domestic and
international scheduled services on 500 routes between 118 European, North African, and West Asian
airports.
EasyJet Airline has proven successful with their efficient operations, even during the recent financial
crisis. They are now considering starting a new flight service between Paris and London. There is a larger
effort ongoing in making a business case for this flight service and you have been giving the assignment
of setting a price for the new Paris-London flight. How would you go about pricing the tickets?
Possible Answer:
Interviewee: So, our client EasyJet is a global airline considering launching a new flight route between
London and Paris, and they want to know how to price the tickets?
Interviewer: Yes.
Interviewee: Can you give me more information about the flight and service, and how deep pricing
considerations you need? Flight tickets can have very different classes and prices, also depending on the
time of purchase.
Interviewer: That’s a very good point. This flight is supposed to be a discount-only flight, so there is one
discount class on the whole flight. The client will operate with fixed prices when customers order the
tickets at latest 1 week prior to departure. Then the price will increase – but let’s forget about that and find
a baseline price.
Interviewee: Alright. Can I have a minute to structure my thoughts?
Interviewer: Sure, go ahead.

Interviewee: There are three ways to decide a price: value based price, cost-based pricing and
competitor-based pricing. As these are discount tickets in a competitive market, it would not make much
sense to use value-based price as the price levels would be given to us from the current market. So there
are two ways in which we can price discount tickets. I assume that there is a significant competition
already with other airlines, and there are also substituting products. So we need to look at the alternatives
and use competitor pricing as input. Also we need to make sure that we cover our costs.
Interviewer: Sounds like a good approach. Our costs would be 45 euro per passenger. This will include all
variable costs, as well as staff, flight lease and airport fees.
Interviewee: Alright, so we will need to look at the competitors offerings. There are three types of
alternatives: Other airlines, the Eurostar train service or driving by car. Do you have any information about
the prices?
Interviewer: Yes, the other airlines charge between 40 and 60 euro for discount airlines, and the
traditional flag carriers like Air France and British Airways charge 50 – 70 euro for discount tickets. The
Eurostar train service has varying prices between GBP 70 and 100. The price to get a car through the
English tunnel is 50 euro. How will you do the analysis?
Interviewee: First task is to compare the different competitors’ prices v.s. features so that we are
comparing the right things. I would not include the car product as this is simply a different product in terms
of costs, time and convenience. I will assume that almost all competition comes from other flights and the
Eurostar train service. It is important to compare with the relevant alternatives when pricing. I would not
include the car alternative, as the product.
Interviewer: Ok, fair enough.
Interviewee: First we need to calculate the price of the Eurostar in to euro in order to make it comparable.
I know the exchange rate for EUR/GBP is approximately 1.10. Does that seem reasonable?
Interviewer: It is reasonable estimate, but I can give you the actual exchange rate. Currently it is 1.18.
Interviewee: So we say 1.18 times GBP 70. That equals 82.60 euro. GBP 100 times 1.18 equals EUR
118.00.
Interviewer: Right on.
Interviewee: Now we need to adjust the price of the alternatives with the product content. I am assuming
that the alternative flights use the same airports, hence the product is directly comparable in regards to
convenience and time. The Eurostar train travels slower than the planes, but since the train departs and
arrives at the city centers of London and Paris, it is actually faster and more convenient. This means that
all other things being equal, the consumer should be willing to pay a premium for the train ticket. This
means that train price of EUR 82.60 — 118.00 serves as an upper bound in this pricing exercise.
Interviewer: OK.
Interviewee: Next we need to look at complementary products that can be sold with the tickets
Interviewer: Why are you interested in that?
Interviewee: Well, I noticed that our competitors can sell tickets below our cost base and that made me
think that there might be some additional revenue per customers. For example revenue from baggage
handling, car rent, hotels and similar.
Interviewer: True.
Interviewee: I would estimate this additional revenue to be EUR 5 per passenger on average.
Interviewer: That is a rough estimate, but okay.
Interviewee: This means that from a cost perspective, the lower bound is not EUR 45 but EUR 40. Based
on the analysis we can now make a comparison:
 Alternative discount flights: EUR 40 — 60

 Traditional flag carriers: EUR 50 — 70
 Eurostar train: EUR 82.60 — 118.00
Based on my analysis, I would recommend the client to price its ticket between EUR 40 — 60, i.e. similar
pricing as the direct competition.
Interviewer: I came to a similar conclusion, but I still have one question: Why do you think the price is
given as a range and not as single data point?
Interviewee: Well, there can be multiple explanations for that. The price range can represent differences
in service levels, timing of the flight, brand equity and the carriers choice of distribution channel.
Interviewer: Okay, I think we covered most elements of the case, so let us stop here. Thank you very
much for your time. We will get back to you with some feedback soon.
Encyclopedia Britannica to Enter Online Web Business

Case Type: new business; industry analysis; mergers & acquisitions.
Consulting Firm: ZS Associates final round job interview.
Industry Coverage: E-commerce, online business; mass media & communications.
Case Interview Question #00194: A wealthy Swiss trader who has amassed large amount of money
while working for UBS Global Asset Management (SIX: UBSN, NYSE: UBS) wants to invest part of his
personal fortune. He has just bought the Encyclopedia Britannica, Inc., an old and respected
encyclopedia company. He now wants to enter the Internet and online business field. You have been
hired as a consultant to help him put a plan together. How would you advise him?
 The Swiss trader has no prior expertise in web-related business services.
 Encyclopedia Britannica is the best brand name in the world for encyclopedia.
 Current product line of Encyclopedia Britannica include print edition of encyclopedia and CD
ROM version.
 Capital is not a constraint for the wealthy Swiss trader.
In this case, it turns out the Swiss trader has no idea what the final “web” product looks like. The
candidate should first narrow down the possibilities, for example:
 Search engine – (free/pay for use)

 Web-site that peddles information (free/pay for use).
In this case, the Swiss trader wants a new search engine/site.
Possible Answers:
First, the candidate should try to determine the Swiss trader’s purpose of entering the new business of
web-services. – To design a product that is much better than existing products, and to capitalize on the
brand name at the same time.
What is the value proposition? – To provide a search engine that provides accurate information without
hassles, quickly and efficiently.
Other key areas for discussion:

A. Competition There are two dimensions to choose from:
1. Compete on quality
 Big 3 search engines: Google, Yahoo, Bing and Wikipedia are the main competitors.
 Requirements: human input to rate quality of content on websites.
2. Compete on powerful search engines, with no human intervention
 Alta Vista, Excite, HotBot are the main competitors

 Technology is the key competence.
Choose the following metric to measure performance against competition, and to measure progress.
 Number of hits, page views, visits, etc.

 Page rank, authority ranking, authority index.
 Ratings by internet magazines, and other reviewers/raters on the Web, online reputation.
 Number of websites accessed or “listed”, number of backlinks.
B. Revenue Sources Possible sources of revenue include:
1. Advertisers:
 Advantage: Revenue stream more certain, need a smaller number of payers to support
operations
 Disadvantage: Hassle of loading pages with ads to users
2. Customers: ( Pay per use / periodic subscription)
 Advantages: Users can be assured of ad-free operation, greater credibility.

 Disadvantage: Need a much higher customer base quickly to support operations. Also future
revenue stream is uncertain as it depends on future usage.
C. Customers
1. Who are the new business’ potential customers?
 Advertisers
 Visitors to web-site
a. Current audience– based on current usage data and current profiles, e.g., age, income groups,
types of sites visited, and main purpose of using the Internet.
b. Future audience – will depend on trends in the industry, and emerging major uses of the Internet.
(Note: The resolution of this issue needs to be done simultaneously with the issue of Revenue
Sources outlined above. Since client is still only exploring options, lay down the issues anyway)
2. What does your target market want? – Client doesn’t have any data. Need to find out. Methods: Online
surveys, etc. Be prepared to discuss what exact questions you will put on this survey, what information
you are trying to elicit, and how you will use that information.
3. How best to give customers what they want? – This will revolve around web design, and selection of
most appropriate technologies to implement the site.
D. Core Competencies:
1.What core competencies are required to succeed in the business?
 Depends on whether client wants to compete on “quality” or “quantity”

 Competing on quality makes more sense given their known expertise in information, and their
respected brand name.
 If competing on quality, key competencies required are:
 Access to current, accurate information.
 Brand name.
 Ability to constantly update information and new websites. This is especially important if
customers are paying for service.
2. What core competencies does the client currently possess?
 Brand name
 Expertise in the information business.
 Key take away from this analysis is that client lacks the technological capability to maintain
current information at the speed required in an Internet-based business.
3. How is the gap between the two going to be bridged?
 Acquire the technology.

 Acquire skilled programmers.
 Issues to consider here are the cost of such acquisition versus the benefit, and the time it will take
to execute.
Note: This case has no real “solution” as it is open ended. The client is just looking to you to lay down the
issues in entering a new business. An exceptional answer will summarize the key points in a visual
manner via a chart or table.
Medical Startup Xagenic Develops Blood Filtering Device
Case Type: new business; pricing & valuation
Consulting Firm: Cornerstone Research 2nd round job interview.
Industry Coverage: Healthcare: Hospital & Medical; Small Business & Startups.
Case Interview Question #00188: The client Xagenic is a Boston-based medical start-up company. It
was founded by a professor at Boston College with past commercialization experience, whose research
lab recently developed a new device that can efficiently filter blood. The client has hired you as a
consultant because she wants to know the market potential and optimal price for this medical device. How
would you approach the case?
 The only substitute for this new blood filtering device is bagged blood.
 Approximately 30 million pints of bagged blood in the U.S. was used last year.
 The filtration system is superior to bagged blood, for the increased assurance that the blood has
been appropriately filtered.
 The price of using bagged blood in an operation is $2 per pint (equivalent to 1 bag), plus the cost
for the attendant – $10.
 The cost of the new filtration system is the fixed cost for the machine, the cost for each filter (one
used per operation), and $10 for an attendant.
 Operations can be segmented into 3 categories: Type 1 using 1-2 bags per operation (50%),
Type 2 using 3-5 bags per operation (25%), and Type 3 using more than 5 bags per operation (25%).
Type 2 and 3 operations use 90% of total bagged blood consumed.
Possible Answer:
To identify the market potential, the candidate should inquire what substitute products are on the market
(only bagged blood), and what the sales of that substitute product are each year (30 million pints).
To determine what should be the price charged for the new filtering device, the candidate should inquire
about the price for bagged blood:
 For Type 1 operations, the average cost is $13 (1.5 bags of blood at $2 per bag plus $10 for the
attendant),
 For Type 2 operations, the average cost is $18 (4 bags of blood at $2 per bag plus $10 for the
attendant)
 For Type 3 operations, the average cost is $20 (5 bags of blood at $2 per bag plus $10 for the
attendant)
The candidate should explore what the costs of the new filtration system are:
 The cost of the new device

 The cost for filters (1 used per operation)
 The cost for the attendant (same as for bagged blood – $10)
Conclusion: The conclusion should be that the client should charge a minimal price for the cost of the
device so that hospitals will be willing to switch, and then charge a price for filters that is comparable to
the cost of bagged blood. Since 90% of the blood is used in operations of 3 bags or more, which would
cost a minimum of $6 for bagged blood, the client could charge $7 or more for each filter. The use of a
chart or table, summarizing the above information would make for an excellent answer.
How Many Stories to Build Manhattan Apartments?
Case Type: new business; finance & economics.
Consulting Firm: PA Consulting Group second round job interview.
Industry Coverage: Property & Real Estate.
Case Interview Question #00158: Your rich uncle, Chairman of the real estate development company
LeFrak Organization, passed away in 2003 and left you a piece of prime real estate in lower Manhattan in
New York City. If you were building apartments on the property, how many stories high would you build?
Possible Answers:
This case is very similar to the “How Many Stories in Trump Tower Chicago” case, so look at those
suggestions also. This is a starting new business and financing decision type of cases and is all about
options, opportunity costs, and net present value (NPV). Profit maximization is the ultimate goal.
Questions and issues you should raise include:
 Is there an existing building on the property or is it empty land?
 Are there any liens or mortgages on the property?
 Are there any factors that might threaten ownership or development?
The first decision is whether or not to build apartments at all. Considering that the property is located in
lower Manhattan, it may be that you can make more money by simply keeping the land or by selling the
property to someone else who values the property more than you do.
The second decision is whether to build apartments versus office buildings, homes, houses, etc. You
would need to ask if the property is zoned for apartment buildings. Are there limits on how high
apartments in this area can be? What is the neighborhood in lower Manhattan like? Are there any condos,
apartments or slums?
Solution: If you are indeed going to build apartment buildings and have freedom to make them as high as
you want, then the number of floors is a marginal revenue/marginal cost question. The marginal revenue–
marginal cost method of profit maximization is based on the fact that total profit in a perfectly competitive
market reaches its maximum point where marginal revenue equals marginal cost. You build an additional
floor if its marginal revenue is greater than its marginal cost.
Chase Bank to Open New Branch in New York City
Case Type: new business; market entry/new market.
Consulting Firm: Towers Watson first round job interview.
Industry Coverage: Banking.
Case Interview Question #00155: Your client CHASE is the consumer and commercial banking
subsidiary of J.P. Morgan Chase & Co. (NYSE: JPM). The bank was known as Chase Manhattan Bank
until it merged with J.P. Morgan & Co. in year 2000. With more than 5,100 branches and 16,100 ATMs
nationwide, J.P. Morgan Chase is one of the Big Four banks of the United
States with Bank of America, Citigroup and Wells Fargo.
Encouraged by recently reported better-than-expected earnings, CHASE is considering adding capacity in
New York City. How would you help them decide whether a location in midtown Manhattan holds enough
banking demand to warrant opening a new branch?
Possible Answers:
This case is very similar to the “CitiBank Considers Opening a Branch in Chicago Loop” case, so look at
those solutions too. Marketing framework, such as the 4 P’s (Product, Price, Place, Promotion) or 5C’s
(Company, Customer, Collaborator, Competitor and Industry Context) seems like a good starting point.
Company: You need to assess your client Chase Bank’s motives for opening a new branch: profitability,
expansion into new markets, drive out existing competitors, etc. You must examine how or if the new
branch would complement your client’s existing competitive strengths and business strategy (retail or
commercial, high growth or high profitability) and what purpose the branch would serve. If your client is
focused on deposits and withdrawals only, an ATM may be sufficient.
Industry Context: Examine the demographics of the area surrounding the prospective branch.
Population, business concentration, income levels, etc. should be compared to those of historically
successful branches. Is the area too saturated or can it sustain another branch? What is the economic
climate of that area – is it a growing business community or are people and companies leaving the area?
Customers: Perform market research to determine the drivers of success in this area. What do potential
customers place the highest premium on (e.g., cost, service, accessibility, etc.)? How do these qualities fit
into your client’s business profile?
Competition: Anticipate what competitors’ (CitiBank, Bank of America, Wells Fargo, etc) reactions to
Chase’s entry could be. This would depend on the importance of the area to competitors in terms of
profits, market share, diversity of business operations, etc. Chase will have to match competitor’s
incentives to customers and should estimate these costs.
Israeli Travel Agent Eyes on US-Tel Aviv Route
Consulting Firm: Compass Lexecon second round job interview.
Industry Coverage: Tourism, Hospitality & Lodging; Airlines; Small Business & Startups.
Case Interview Question #00145: Your client is an Israeli travel agent who has been very successful in
recent years. His primary source of revenue is customers who fly to and from the U.S. He manages to fill
up over two planeloads on a daily basis. Given his huge success, he is

considering buying an aircraft and flying the US-Tel Aviv route himself. What advice would you give him to
start his new venture?
Possible Answers:
First, find out the source of the client’s success. In this case he is attracting customers due to his own
promotion and reputation. He will probably continue to do so if he buys his own aircraft.
Second, assess the client’s complete understanding of the industry and venture he is considering. He
should clarify issues such as hub space availability, international air traffic regulations, and other specifics
of the industry.
Also, assess your client’s capital resources. Does he have the funds to support this venture? In this case
he probably does.
More importantly, analyze the current state of this segment of the airline travel market. As a travel agent,
he knows the pulse of the consumer fairly well. Is the market in a growth trend? Who are the dominant
competitors and what would you anticipate their reaction to be? If the US-Tel Aviv route is very busy, it is
probably very lucrative for other airlines.
Competitor’s reaction: The major operator of the US-Israel route happens to be El Al Israel Airlines, the
flag carrier airline of the State of Israel which has deep pockets. If your client enters the industry he would
probably trigger a price war. If not, other small operators would follow and El Al would begin to lose an
important source of profits.
The only way your client could fight this war would be to differentiate himself from El Al and other airlines
by charging a lower price. However, El Al would match any such move and your client would be forced
out of business very soon.
To conclude, it seems the best recommendation would be not to enter the market as a small operator.
How Would You Start a New Business at Kellogg?

Case Type: new business; pricing & valuation.
Consulting Firm: Pearl Meyer & Partners first round job interview.
Industry Coverage: Education & Training Services.
Case Interview Question #00138: Think of a business that you could start at the Northwestern
University Kellogg School of Management (i.e., catering to students and faculty at Kellogg). Walk me
through the analysis of starting that new business and provide a brief pricing strategy for your new
business.
Possible Answer:
This is a rather open case question that can have many different answers. The key is to have a well-
defined business idea (it doesn’t even have to be a creative idea), estimate the market size for your
proposed product/service, and come up with an effective pricing strategy for your product/service.
My idea was to start a company that provided online videos of Kellogg MBA student interviews for
recruiters on the web.
The interviews would be conducted by a licensed, regulated third-party like an ETS (Educational Testing
Service) type organization. The interview could consist of resume, fit and case questions which would be
video-recorded by the company. The company would then put the videos on the web, and charge
consulting (and other) firms a fixed fee to access the site. The key benefit is that it would eliminate the
need for first round interviews.
I tried to calculate how much value would accrue to the consulting firms (e.g., 4 interviews at an average
billing rate of $250/hour times 8 hours) to drive my pricing. I also tried to gauge acceptance from the key
stakeholders (Kellogg, students, the Career Management Center, recruiters).
American Airlines Consider New Japan-US Routes

Consulting Firm: Cornerstone Research 1st round job interview.
Industry Coverage: Airlines.
Case Interview Questions #00121: Your client American Airlines (AA) is the world’s second largest
airline in terms of passenger miles transported, passenger fleet size, and operating revenues. American
Airlines is a subsidiary of the AMR Corporation and is headquartered in Fort Worth, Texas, adjacent to its
largest hub at Dallas/Fort Worth International Airport. American Airlines

operates an extensive international and domestic network, with scheduled flights throughout North
America, Latin and South America, Europe, Asia/Pacific and the Caribbean.
Recently, the senior management team of American Airlines is considering establishing new routes from
Tokyo to several sites in the United States. Would you recommend this action to your client?
Possible Answers:
This case is different from the United Airlines Acquiring Tokyo-NYC Route question because it deals with
establishing new routes as opposed to acquiring existing ones. As always, determine your client’s motive
for this business decision. What is your client’s ability to fund this new business and how does it fit into
their overall operations strategy?
This case requires a complete examination of the Customers and the Competition. You need to assess
if there is a demand for these new routes to support your decision and what carriers already exist in these
markets and how they are operating.
1. Customers consist of both business and leisure travelers. While business travel from Japan to the
U.S. has been declining at about 25% over the last year, leisure travel has increased at a faster rate. It is
expected that leisure travelers will continue to grow at a faster rate than business travelers do. Currently,
about 50% of all Japanese travelers to the U.S. are leisure travelers.
Examine what the market is like and if this trend is sustainable in the short and long term. Can the market
withstand another entrant? Identify any anti-trust or regulatory statutes that would impede the
establishment of these routes. What issues need to be considered in the Japanese market/government?
2. Look at what Competition presently exists in these markets and what competitor reactions will be.
As it turns out, it is extremely expensive to buy gates at Tokyo’s crowded airport. As a result, competition
will not only come from other airlines at Tokyo airport, but also from a new airport that is being built in
Osaka.
Furthermore, Osaka is expected to attract a very high percentage of the leisure travelers. It is very
inconvenient for leisure travelers to fly out of Tokyo, where the prices tend to be higher. It is estimated
that once the Osaka airport is built, leisure travelers at Tokyo could decrease by 25-30%.
If your client continues with his/her plans to buy gates in Tokyo, he/she will find it difficult to attract the
growing number of leisure travelers needed for their new routes to the U.S. It probably makes more sense
to buy gates in Osaka instead.
Another insight is the recognition that Osaka will increase the number of airport gates in Japan. The
intense demand for gates in Tokyo will decrease with the greater supply of gates in Osaka. While this
does not change the benefits of buying gates in Osaka, it may create new, cheaper opportunities to buy
gate space in Tokyo in the future to establish new business traveler routes to the U.S.
Once you have a good idea of what the demand will be like, analyze the various cost components of this
business decision to determine whether or not you will have enough revenue to cover your cost in both
the short and long terms and what your margins will be like.
Bank of America Midwest Launch Online Banking Service

Consulting Firm: Zolfo Cooper 1st round job interview.
Industry Coverage: banking.
Case Interview Questions #00120: You have been asked by the regional president of Bank of America’s
(NYSE: BAC) midwest operations to see if PC-based or online banking is something that his bank should
pursue. His bank is operating in three states (Wisconsin, Illinois and Indiana) and has #2 market share
(behind JP Morgan Chase).

He is skeptical and does not think that he can generate much profit because his competition does not
charge for their online banking services, yet there are fixed costs in setting up such an endeavor.
However, he is concerned because the large banks in east and west coast regions are entering the
business and offering online banking. What would you advise he to do?
Possible Answer:
The 3C’s Model (Corporation, Customer, Competitors) seems a good framework to tackle new business
case. After a series of questions, I discovered the nature of the customer segment that such online
banking service would target (i.e. families and individuals with a lot of financial transactions that would be
find value with the convenience of at home banking). I had to do a quick market sizing estimation (i.e. 100
mm households, 30% with PCs, 10% use PCs for more than email, games and word processing, etc.) to
realize that the products purchased by the few customers who would tend to use online banking provided
the majority of the profits for a bank (i.e., sort of like an 80-20 Pareto rule, 80% of the profits come from
20% of the products sold). The fixed costs of launching the online banking project were found to be
somewhat small.
I ended up recommending that the regional bank should launch an online banking service because of the
need to retain the high profit contribution customers.
Should Bloomberg Offer Retail Brokerage Service?

Consulting Firm: Cambridge Group 1st round job interview.
Industry Coverage: Financial Services; Software, Information Technology.
Case Interview Questions #00096: Bloomberg L.P. is a privately held financial software, news, and data
company headquartered in New York City, New York. A year after the recent financial turmoil, Michael
Bloomberg, founder and major owner of Bloomberg L.P. is considering diversifying his business
model. He has just received a business proposal from the Chief Operating
Officer that plans to offer retail brokerage service. Details of the proposed brokerage service are as
follows:
 Free trading if customers have a combined (stocks and options) account balance of over
$100,000.
 If balance is between $25,000 and $100,000, customers have to pay for sell side only and
purchase is free.
 For balance less than $25,000, customers need to pay both buys and sells at $14.95 per trade
flat rate.
 Free trades are only valid if the position is held overnight.
Michael Bloomberg wants to hear your advice regarding the business proposal. Should Bloomberg L.P.
offer retail brokerage service or not? And why?
Possible Answers:
I structured this case based on the economics of the situation and the proposed strategy. Economics
include operational costs of clearing, which was already built for their retail base. Issues include
scalability, cannibalization, and economies of scale.
The second issue was regarding strategy. Judging from the proposed pricing policy, their strategy seems
to have a cost focus and increase market share. Bloomberg is a late entrant to retail brokerage business
and their pricing policy clearly indicates their target customer segment. How will they generate additional
revenue – the holy grail of cross selling (interviewee should come up with this one)? Is this feasible? Be
ready to defend your answer. Do not forget to mention brand value. Also, one needs to consider
competitions from well-established online discount retail brokerage firms like Charles Schwab, ETrade,
Scottrade, Interactive Brokers, TD Ameritrade, etc.
McKinsey to Expand Firm’s IT Consulting Capabilities

Case Type: add capacity, business expansion, growth; new business.
Consulting Firm: Mckinsey & Company final round internship interview.
Industry Coverage: Consulting, HR & Business Services; Software & Information Technology.
Case Interview Questions #00048: Your are the managing director of McKinsey & Company, a large
global management consulting firm. Traditional strengths of your firm have been solving strategy and
organizational issues. Recently, however, you have noticed an increasing number of your firm’s proposals
are being rejected because of a lack of information technology (IT) expertise in your
firm. So far, your firm’s growth has been strong enough that proposals lost have not hurt annual earnings.
Nonetheless, you are becoming increasingly concerned about the need to develop the firm’s capabilities
in information technology.
Question #1: Assuming your concern is valid, what reasons will you provide to other partners about the
need to acquire information technology skills?
Question #2: Assuming your 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?
Question #3: What are the major risks in executing an IT capacity expansion?
Possible Solution:
Answer #1: Good answers focus on the value of IT to clients: discussion topics include the increasing
importance ofinformation in business, strategic value of information and information flows, importance of
information systems for implementing new organizational structures and management control systems.
Better answers focus on the costs of losing clients to competitors: discussions included the encroachment
costs of having clients talking with competitors about IT problems, risk of losing credibility with clients by
not being able to solve a problem.
Answer #2: Good answers will focus on various methods to build expertise: buying expertise by acquiring
another firm, 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 practice skills, establishing a strategic alliance with a IT boutique firm. Candidates
should discuss the pros and cons of each method proposed; impact on firm’s current culture, cost to the
firm, time needed to build expertise, etc.
Better answers will realize the importance of stimulating client demand as capacity builds through
seminars, articles strategic studies in IT areas…
Answer #3: 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.
Fuji Photo Film USA Enters Film Developing Business

Consulting Firm: Cambridge Group 1st round job interview.
Industry Coverage: electronics; office equipment.
Case Interview Questions #00026: Your client Fuji Film (NASDAQ: FUJIY) is a multinational company
best known for its photographic film and cameras, headquartered in Tokyo, Japan. As the world’s largest
photographic and imaging company, Fuji Film operates 223 subsidiary companies for research,
manufacture and distribution of products, with major manufacturing facilities in

Asia, Europe, and the United States of America.
Fuji Film USA Inc. is the largest domestic manufacturer of photo film in the United States. Recently, the
CEO of Fuji Film USA wants to enter the film developing business. He needs your advice on how to go
about evaluating this idea. What would your approach be?
Possible Answer:
This is an industry entry and launching a new business type of case questions. One should first look
at the new industry’s attractiveness with Porter’s Five Forces analysis. Then, think about what part of the
marketing mix (4 P’s) would be best for entering film developing business. Finally, analyze potential
competitive response.
1. Distribution channels are the key factor in the film developing business. Major discount stores sell the
service.
2. Also, film developing is a scale economy business in the back-office, so profits are easier with high
volume. This makes the business tough to enter.
This client company ended up establishing a “store within a store” concept with supermarket chain Wal-
Mart.
AT&T Considers Electronic Home Security Business

Consulting Firm: IBM Global Business Services 2nd round job interview.
Industry Coverage: Electronics; Telecommunications & Network.
Case Interview Questions #00024: Your client AT&T Inc. (NYSE: T) is a multinational
telecommunications company headquartered in Dallas, Texas, United States. It is the largest provider of
mobile telephony and fixed telephony in the United States, and is also a provider of broadband and
subscription television services. The company is the 20th largest mobile telecom
operator in the world with over 96 million mobile customers.
Recently, the management of AT&T is interested in diversifying into other business areas besides
telecommunications. They are considering entering the market for electronic home security systems (aka.
perimeter security systems or intrusion detection systems, used in residential and commercial properties
for protection against theft or property damage). Would you recommend that they do so? And why?
1. Your client AT&T Inc. is a large holding company. They have previously made unsuccessful forays into
software and into real estate.
2. The electronic home security business is highly fragmented. The top five players in the industry
generate less than 4% of the total industry revenues. This implies that the industry largely consists of
small, regional companies.
3. 10% of all residences currently own an electronic security systems.
4. This is some sense a “razor and razor blade” sort of business. The economics are:
Item Retail Price Cost / Margin
Equipment and Installation $500 – $1,500 0-10% margin
Monthly Service $20 / month $5 / month
5. What strengths / competencies of AT&T are useful in this market? Consider: Installation expertise,
operator services, transmission system (phone lines).
Possible Answer:
1. Suggested Frameworks:
Use an industry attractiveness framework, such as Porter’s Five Forces, to determine whether this is a
business you want to be in, or at least to determine what kind of returns you can expect to achieve. Then,
use the value chain to look at where value is added in the home security business. Finally, once you feel
you understand the market, determine if the core competencies of AT&T are likely to match the demands
of the home security markets.
2. Possible Solution:
It turns out that the “expensive home” segment of this market is saturated. Growth has been slow in
recent years. Price sensitivity is unknown in “moderate-priced home” segment. The conclusion is that this
business is a reasonably good fit for the client company, but that more market research needs to be done
to assess the growth and profit potential of each segment of the market.
CitiBank Considers Opening a New Branch in Chicago Loop

Case Type: new business; market entry/new market.
Consulting Firm: Towers Watson 1st round job interview.
Industry Coverage: Banking.
Case Interview Questions #00018: Your client CitiBank is the consumer banking arm of multinational
financial services giant Citigroup (NYSE: C). As of March 2010, Citigroup is the third largest bank holding
company in the United States by total assets, after Bank of America and JP Morgan Chase. More than
half of Citi’s 1,400 offices are in the United States, mostly in New York City,
Chicago, Los Angeles, the San Francisco Bay Area, Washington, D.C. and Miami.
Recently, the Chief operating officer of CitiBank has hired your consulting team because he wants you to
help him find out whether a location in the Chicago Loop area (central business district of downtown
Chicago) holds enough banking demand to warrant opening a new branch. How would you go about the
case?
Suggested Framework:
Because this is a demand-oriented market entry case question, one should consider a marketing
framework, such as the 4 P’s (Product, Price, Place, Promotion) or 5C’s (Customer, Company,
Collaborator, Competitor and industry Context).
Possible Answer:
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.
Competitor reactions could easily make the new branch unprofitable, so it is essential to anticipate them.
These will depend on the importance of the area to competitors, e.g. Chase, Bank of America, Wells
Fargo, (in terms of profit, share, etc). The client will have to match competitors’ incentives to customers
and should estimate the cost of doing so.
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 an ATM machine would suffice.
Note: This case is very similar to the “Chase Bank to Open New Branch in New York City” case, so look
at the solution to that case too.
Regions Financial Replaces Branches with Telephone Banking
Consulting Firm: McKinsey & Company internship interview.
Industry Coverage: Banking; Financial Services.
Case Interview Questions #00006: Your client Regions Financial Corporation (NYSE:RF) is one of the
nation’s super regional banks. A member of the S&P 100 Index, the company provides retail and
commercial banking, trust, securities brokerage, mortgage and insurance products and services. Regions
has more than $137 billion in assets as of 2010, making it the 22nd largest bank
in the United States. Its banking subsidiary, Regions Bank, operates some 2,000 branches and 2,400
ATMs across a 16-state network in the South, Midwest, and Texas.
The management team of Regions Financial has recently concluded that the old “local branch” way of
business is no longer viable. Typically, this bank has canvassed its territory with small free-standing
branches; however, the new age of electronic banking and commerce is changing all of that.
They are considering replacing many branches with Calling Centers. Calling Centers offer both live and
phone automated services that may be accessed by phone. The new Calling Centers would offer virtually
all of the services currently offered through local branches plus some additional things.
The question to you is: how would you go about setting up the engagement to determine the viability of
this new concept? Specifically, what kinds of things would you investigate? And what hypothesis would
you form?
Possible Answers:
This is a very open broad-brushed case that involves “starting a new business service”. There certainly is
no right answer here; however this type of case occurs frequently. The following is a guideline of some
things you should probably consider:
1. Market Analysis:
 What kinds of customers would be attracted to this no service?
 What kinds of customers would be turned off? (Hypothesis: younger people would be heavier
users and more attracted than older)
 Of the people attracted to this new service, how profitable are they?
 How profitable are the people who are turned off by this service? (Hypothesis: older people have
more money and thus are more profitable)
2. Added Revenues:
What types of new services could be added to increase revenues? Automatic bill payment, fund transfer,
etc.
3. Cost Savings:
 How much would it cost to establish a Calling Center and what are the risks involved?
 Do we have the expertise in-house to do this? How many branches could we close?
 Can we cut down on traffic to existing branches – thus requiring less tellers?
Summary: This case probably is best to set up as a cost-benefit analysis. The number of new customers
times the expected revenue from them plus the additional revenue generated by potential new services
plus the cost savings must outweigh the forgone revenue generated by the customers you end up driving
away.

Consulting Case New Business

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What factors should be considered when evaluating the viability of replacing bank branches with calling centers?

What factors should be considered when evaluating the viability of replacing bank branches with calling centers?

What types of analyses would be important to conduct for this evaluation?

What types of analyses would be important to conduct for this evaluation?

Consulting Case

Will People Buy Ice Cream Online?

 Local ice cream shops

 Rely on local shops (similar to online florists)

 Rely on local ice cream shops {similar to online florists)

2. Calculate the portion of population that eats ice cream

 Line maintenance, which involves pre-flight checks

Interviewer: That’s a sensible assumption.

Number of aircraft in service A B C D E F Total

Business Liner – Widebody 9 47 0 0 0 0 56

Business Liner Narrowbody 23 171 0 0 0 0 194

Light check: Labour rate x man-hours = 120 x 150 = USD 18,000

Hence the overall revenue for each type of service is:

[3 x (20,000 + 6,000)] + [1/3 x (288,000 + 240,000)] = USD 254,000

Esurance Starts Car Insurance Comparison Site in Germany

Revenue factors may be:

 Maintenance of the website

Yearly car insurance fee in Germany is around 1400 Euros on average.

a. Assume average life expectancy is 80

b. Segment market by urban vs. rural:

 Urban: (60 million people)

d. Car ownership per family: 100% in rural, 70% urban

4. Population who will shop for car insurance online:

 Assume people under age 20 don’t own cars

5. People who change car insurance each year

31 million * 10% = 3.1 million

6. People who would be willing to buy car insurance online

3.1 million * (3/8) * 90% = 1 million

Revenue = 1 million * 1,400 Euro = approximately 1.4 billion Euro

 Capital requirements are low

Delivery Hero Raises $110M in New Round of Funding

evaluate the feasibility of the idea.

Population of Germany is approximately 80 million as of 2014.

% Population that buys food online (segment by age, location distribution)

 Age 0-10: approx. 10 million

 Age 10-20 = 10M * 0.2 * €12 * 12 orders/year = €288M

 Business model is easy to copy.

Additional Information: (to be provided upon request)

A. Breakdown of Revenue (data provided on request)

 Bus: $250k (useful life of 10 years) = $25/trip

 Labor: 1 driver at a wage of $25/hour for 5 hours = $125/trip

 Total Costs = $25 + $20 + $15 + $125 + $80 + $75 = $340/trip

 Focus on safety and reliability

 Meets gross profit target of 40%

 Cannibalization of existing customers (This is a big one!)

Potential next steps include:

 He has 10,000 unique customers every month.

 Initial investment for adding a pharmacy: $1.2m.

 What is the population of the town/addressable market?

A. Current market size estimate:

B. Incremental value of a pharmacy customer per year:

C. To break even in 2 years:

 Make good design plans for the pharmacy

Additional Information: (to be provided to candidate upon request)

A. What are possible ways to monetize or make money in this situation?