• Profitability Optimization

• Pricing Optimization
• Industry Landscape & Competitor Dynamics
• New Product or Project
• Growth Plan/Strategy
• Market Entry or Expansion
• Merger/Acquisition/Joint Venture
• Start-Up/Early-Stage Venture
EXAMPLE CASE SITUATIONS

The client is a low-cost airline based in Singapore, serving 24 destinations in the Southeast Asian
market. The Airline’s profitability was strong until 2010 and has since seen a declining trend and is
now only just barely profitable. The CEO would like you to determine what is causing the
profitability decline and suggest a strategy to reverse this trend.

The client is a market-leading, niche ski equipment manufacturer based in Colorado. Profitability
has remained steady but the CEO has noticed from reading industry annual reports that two
publicly-listed competing ski equipment manufacturers have meaningfully higher profit margins
and have also been increasing their top line (Revenue). The CEO would like to understand the
drivers of these differences.

Note: Both of these Cases would involve some degree of Market Landscape/Competitor Dynamics
analysis in addition to Profitability Optimization.
Profitability Optimization is generally case of Cost Assessment and Revenue Assessment.
Scenario: The client has determined that profitability margins have been (or are projected to be declining) and
has requested that you analyze the causes of this decline and put forth recommendations to reverse it.

EXPENSE ANALYSIS
• Gather current expense breakdown and historical expense breakdown (this question alone will only help to
get you towards the key focus area, as the interviewer will only have so much information).
• Identify the “bang” areas (this is Consultant lingo for expense areas that account for a large percent of the
total).
• Analyze the key Fixed and Variable expense components and identify any meaningful changes in expense
areas.
• Fixed Expenses might include overhead, fixed equipment expenses or depreciation, distribution, rent,
and/or interest
• Variable Expenses might include raw materials, labor, sales, and/or distribution costs
• Request information on competitor Cost structures from the interviewer to see where the company’s Cost
structure may be inefficient.
• Assess whether any expense areas could be cut with minimal or no impact on sales.
REVENUE/SALES ANALYSIS
• Gather as detailed information as possible on current sales volumes and pricing and historical volumes and
pricing. Use this information to determine growth rates.
• Identify the “bang” areas (consultant lingo for revenue streams that account for a large percent of the total,
and/or a large percentage of the growth in the total).
• Analyze the key product areas and identify any meaningful changes in volumes and prices.
• Request information on competitor Revenue models (volume and pricing) from the interviewer to see where the
company is potentially missing profitable business activity.
• Assess whether any changes could be made to improve overall Revenue or Revenue per unit sold.
• Pricing change suggestions/analysis (e.g., factors behind price elasticity)
• Volume assessment and ways to improve volumes
• Identify changing customer desires/demands and respond accordingly.
• Invest in and/or reformulate marketing strategy.
• Expand distribution channels.
• Expand sales force or customer service.
• Expand production capacity.
• Expand product/service portfolio (see New Product or Project, Growth Plan/Strategy, and Market Entry or
Expansion Case descriptions below).
• Make an acquisition or enter into a joint venture.
• Assess which products/divisions might have the largest growth opportunities and allocate investments
accordingly.
EXAMPLE CASE SITUATIONS

What would customers be willing to pay if Facebook shifted to a subscription model (we
heard that this Case was conducted by the San Francisco office of a major Consulting firm
recently, though the client being analyzed was not Facebook)?

A hotel chain would like to maximize profitability by determining the optimal pricing for
different lengths of stays and types of rooms.

An online movie-streaming company is seeking to select the optimal price mix for its
product offering in order to maximize profitability.

Like Profitability Optimization, this is a type of Case Study in which many of the other Case
Study types might be relevant (for example, Industry Landscape, Competitor Dynamics,
Growth Plan/Strategy, etc.)
Scenario: The client is deciding how to set prices so as to maximize profitability.

Competitor/substitute pricing is the key element here—particularly if there is no major

differentiation or benefit to the client’s products relative to substitutes.
• Price of substitute products/services
• Is the product sufficiently different to justify a higher price? (This points to the threat of
substitutes.)
• Customer loyalty/lock-in (as an example: many lower-priced colas have failed to successfully
compete against Coca-Cola due to consumer brand loyalty)
• Ask questions about: Price Elasticity, Price Elasticity, Price Elasticity!
• Interviewers will often give you sufficient information to assess the impact on volume
with a price adjustment and expect you to make the calculation.
• The higher the absolute value of Demand Elasticity (i.e., the more volume decreases
when prices increase), the more likely it is that a price reduction would be beneficial.
Likewise, the lower the absolute value of Demand Elasticity (i.e., volume barely decreases
when prices increase), the more likely it is that a price increase would be beneficial.
Expense-driven pricing analysis

• What is the fully-loaded cost for the client to produce the product or offer the service? How
does this compare to the price?
• How does client’s fully-loaded cost compare with competitor pricing?

Note: In situations in which the client’s cost is higher than the competitor price, it is usually a
good recommendation to exit this product or service unless it can be demonstrated that:
• There is a clear path to reduce client production costs, or
• The competitor price is temporary and unsustainable.
Customer-driven pricing analysis

• How much would customers be willing to pay for this product? (You are not expected to be
able to answer such questions, but ideas on how you might approach such questions are
important—for example, running a survey, looking at applicable Case examples, looking at
pricing structures for comparable products, etc.)

• What is the current state of demand and supply for the product or service (for example:
would an increase in the number of orange juice manufacturers and orange tree groves be
putting significant pressure on orange juice prices)?

• What are the alternatives for the customer and the relevant prices? i.e., is the threat of
substitutes substantial or can it be mitigated?
Problems related to Industry Landscape & Competitor Dynamics

EXAMPLE CASE SITUATIONS

A client is a large nutrition, health & wellness Company and is considering divesting its non-
core infant foods subsidiary in order to free up capital to invest in higher growing
industries. The CEO would like you to assess the industry landscape of the infant foods
business in Western Europe.

A client is a global financial services firm that is considering allocating more resources to
the facilitation of electronic fund transfers globally. The CEO wants to better understand
the market landscape and develop a strategic plan to increase the Company’s share of the
market.
 Problems related to Industry Landscape & Competitor Dynamics

Scenario: The client wants you to understand and assess an industry (this often overlaps with
Market Entry, New Product or Project, or Growth Plan/Strategy Cases, described in more
detail below). Usually, the goal is to assess the characteristics of an industry and to
determine whether or not it is an attractive industry to enter, to ramp up, or potentially to
exit.

Market/Industry Landscape
• Current market size
• Projected market growth
• Customer mix (a.k.a. Customer Segmentation)
• Industry-wide profitability
• Mergers & Acquisitions activity in the industry
• Competitive Advantage/Barriers to Entry
• Supply chain: who are the key suppliers to the industry? (Assess this only if relevant)
• Brand loyalty
• Technology, regulatory issues, or other key topics relevant to the market
Problems related to Industry Landscape & Competitor Dynamics

Competitor Dynamics
• Key competitors in the market and their strategies
• Current market shares and shares over time
• Used to derive Market Concentration (i.e., what portion of the market is served
by the top 3/5/10 companies in the market?)
• Product/service differences among competitors
• Any recent moves/threats by a key player to the market or a new entrant?
Problems related to New Product or Project
EXAMPLE CASE SITUATIONS

A client is a durable consumer equipment manufacturer attempting to develop a “green” washing machine
that employs special technology, resulting in 60% less water use and cleaning 10% more effectively than
standard washing machines. The CEO would like help to determine the product’s market potential and the
strategy to bring it to market.

A client is a pharmaceutical company that is engaged in Research & Development on a drug that would both
lower cholesterol and reduce obesity (i.e., help in significant weight loss). The CEO would like to know
whether this drug would gain traction, and if so, what is the potential market size and the optimal price for
such a drug.

Once again, this is a type of Case Study where many of the other Case categories might be relevant (Industry
Landscape, Competitor Dynamics, Growth Plan/Strategy, Market Entry or Expansion, etc.). Note that such
cases could also involve decisions such as the purchase of a major information technology system (in this
case, many of the acquisition concepts could be applied). It could also involve the assessment of a new
investment project, such as the development of a new major manufacturing or sales facility.
Problems related to New Product or Project

Scenario: The client is developing a new product and would like your assessment of the
feasibility of this product. Would the product be profitable and beneficial in the marketplace?

Product Snapshot (Less relevant for New Project cases)

• Will the client have any competitive advantage that prevents competitor entry (such as a
patent or a way to lock in customers) once the client has unveiled the new product?
• How is the client’s product different from and/or better than competing products? What
are the substitute products?
• Pros and cons of client product (for example, environmental and social considerations)
• Is there a risk that that the new product will cannibalize another of the client’s products?
Problems related to New Product or Project

Customer Strategy (Less relevant for New Project cases)

• What is the appropriate customer mix to target? How does this affect profitability and
marketing strategy?
• What are the distribution channels? Can the client use its existing distribution channels?
• What is the methodology/strategy to attract customers to try the product and potentially
switch?
• What is the methodology/strategy to retain newly acquired customers?

Market Entry Strategy (Mostly less relevant for New Project cases)
• Competitive advantages/Barriers to Entry
• Approach to entering (Acquisition or enter organically?)
• Time/investment required to enter market
• Product pricing strategy
• Technology, regulatory or other risks to entering this market
Problems related to New Product or Project

Market Landscape
• Current market size
• Future market growth
• Current customer and product mix
• Key competitors in the market, their strategy, Market Shares (current and historically over
time), product differences and potential response to client’s actions

Product/Project Funding
• Does the projected profit justify the required the Research and Development expenditure,
the initial capital requirements, and any ongoing investment needs?
• What is the Opportunity Cost of the required funding?
• What is the required financing and how is the Research & Development being financed?
• Will the project result in Economies of Scale (i.e., cost reductions for increased
production) elsewhere in the company? (Less relevant for New Product cases)
Problems related to Growth Plan/Strategy

EXAMPLE CASE SITUATIONS

The client is a German carpet manufacturer that has seen sales decline dramatically in its North
American operation. The client would like you to help it develop a strategic plan for sales
growth in North America and to determine the root causes of the sales decline.

The client is a surf apparel Company that has three stores on the West Coast of the United
States and is looking to grow its store base significantly across the continent. The CEO would
like help designing a store rollout strategy across North America.

Yet again, this is a type of Case Study where many of the other Case categories might be
relevant (Industry Landscape, Competitor Dynamics, New Product or Project, Market Entry or
Expansion, etc.)
Problems related to Growth Plan/Strategy
Growth Drivers (approaches to growth and factors that influence capacity for growth)
• Identify changing customer preferences/demands and respond accordingly
• Invest in and/or reformulate marketing strategy
• Investigate means and requirements to expand distribution channels
• Investigate means and requirements to expand capacity
• Investigate means and requirements to expand sales force / customer service
• Investigate means and requirements to expand product/service portfolio (see description
of Market Entry or Expansion below)
• Make an acquisition or enter into a joint venture (see description of
Merger/Acquisition/Joint Venture below)

Always drive towards Profitable Growth: in any growth case, be sure to discuss this issue.
Growing Revenue in and of itself is usually not a good outcome if the Costs of the growth
exceed the Revenue, or if there were other growth opportunities that would have yielded a
higher return on investment but are mutually exclusive (see Opportunity Cost).
Problems related to Growth Plan/Strategy
Growth Drivers (approaches to growth and factors that influence capacity for growth)
• Identify changing customer preferences/demands and respond accordingly
• Invest in and/or reformulate marketing strategy
• Investigate means and requirements to expand distribution channels
• Investigate means and requirements to expand capacity
• Investigate means and requirements to expand sales force / customer service
• Investigate means and requirements to expand product/service portfolio (see description
of Market Entry or Expansion below)
• Make an acquisition or enter into a joint venture (see description of
Merger/Acquisition/Joint Venture below)

Always drive towards Profitable Growth: in any growth case, be sure to discuss this issue.
Growing Revenue in and of itself is usually not a good outcome if the Costs of the growth
exceed the Revenue, or if there were other growth opportunities that would have yielded a
higher return on investment but are mutually exclusive (see Opportunity Cost).
Problems related to Market Entry or Expansion

EXAMPLE CASE SITUATIONS

The client is an online yoga apparel retailer looking to enter the European market. The CEO
would like help in formulating an entry strategy.

A high-end watch manufacturer has developed a high quality watch called the “outdoors” watch
in order to attract the wealthy, younger audience. The CEO would like to develop a strategy to
attract this customer segment.

This category of Case Study frequently overlaps with several other Case categories (Industry
Landscape, Competitor Dynamics, New Product or Project, Growth Plan/Strategy, etc.)
Problems related to Market Entry or Expansion

Scenario: A client is seeking to expand or enter into a new market, whether it be a new
geographical region or an additional customer segment.

Market/Industry Landscape
• Current market size
• Future market growth
• Customer mix (a.k.a. Customer Segmentation)
• Industry-wide profitability
• Mergers & Acquisitions activity in the industry
• Competitive advantage/Barriers to Entry
• Supply chain: who are the key suppliers to the industry? (Assess this only if relevant)
• Brand loyalty
• Technology, regulatory issues, or other key topics relevant to the market
Problems related to Market Entry or Expansion

Competitor Dynamics
• Key competitors in the market and their strategies
• Current market shares and shares over time
• Used to derive Market Concentration (i.e., what portion of the market is served by the
top 3/5/10 companies in the market?)
• Product/service differences among competitors
• Any recent moves/threats by a key player to the market or a new entrant?

Entry Strategy
• Approach to entering (acquisition or enter organically?)
• Time/investment required to enter market
• Customer mix/segmentation
• Product pricing strategy
Problems related to Merger/Acquisition/Joint Venture

EXAMPLE CASE SITUATIONS

Your client is a European online white goods retailer that is considering acquiring a North
American online furniture retailer.

Your client is a U.S. specialty chemical producer that is considering acquiring a regional specialty
chemical producer in Indonesia.

As you might expect by now, this is a type of case where many of the other case segments are
relevant. In particular, Merger/Acquisition/JV activity often represents one method of
implementing a Growth Plan/Strategy, a New Product or Project, or a Market Entry or
Expansion.
Problems related to Merger/Acquisition/Joint Venture
Scenario: The client is considering either acquiring a company or entering into a Joint Venture,
driven by many potential factors such as wanting to increase market share, widen product
portfolio, take out a potential competitive threat, etc.

Important: For this Case type, you should ask questions as to why the Company is contemplating
such an action. The responses to these questions can help steer you to the right analysis, as the
responses will often indicate what the key considerations behind the acquisition/JV are from the
client’s perspective. Thus you should perform a standard Merger/Acquisition/JV analysis as
outlined below, but then generally pivot to the right framework for analyzing the business
scenario from the aforementioned categories, depending on the situation.

Investment Considerations in entering the Merger/Acquisition/JV agreement

• Evaluate price to acquire (use back-of-the-envelope Valuation techniques to consider
whether the deal is reasonably priced, such as those based on Comparable Company
Analysis or Precedent Transaction Analysis)
Problems related to Merger/Acquisition/Joint Venture
Perform Target company-specific analysis
• Market position
• Customer Concentration and customer certainty
• Supplier relationships and supplier certainty
• Barriers to Entry
• Reputation and brand loyalty
• Product/regulatory/technology risks

Compute expected profitability resulting from acquisition

• Pay-Back Period/Net Present Value/Internal Rate of Return based on current operations
and growth estimates
• Add in Cost or Revenue improvements from Synergies (see below)
• Subtract out Integration and Restructuring expenses (also determine whether the project is
feasible)
• Compare with similar projections if the Company were to endeavor to grow organically
(required capital expenditures, cost of marketing strategy, etc.)
Problems related to Merger/Acquisition/Joint Venture
Estimate Synergies
• Ability to combine or leverage joint distribution channels across products produced by
acquirer or target
• Value of expending geographic/market reach
• Cost synergies (such as spreading overhead costs across a larger combined business or
combining redundant IT systems)

Evaluate other transaction dynamics

• Strategic fit
• Cultural challenges
• Competitor response

Assess the medium-to-long-term plan for the acquisition

• Plan to exit (if relevant—note that this will always be relevant for Private Equity firms)
• Plan to restructure the organization, if any, and how/why
Problems related to Start-Up/Early-Stage Venture
While consulting firms rarely work for Start-up companies due to the high fees typically charged, there are
increasingly Case Study questions that discuss start-ups. Some Consulting firms have even begun the practice of
working for Start-up companies and receiving equity compensation from the Start-up in exchange for reduced
cash Consulting fees.

Importantly, this topic is in many ways covered when thinking about a company entering a new market or
developing a new product, although there are usually some additional issues to consider for a Start-up
company. (Most of these additional issues fall into the “Business Plan” category for a Start-up company.)
Additionally, there is generally significant overlap with the industry landscape section.

EXAMPLE CASE SITUATIONS

Two real estate entrepreneurs are contemplating setting up a co-working space in downtown Chicago to attract
the increasing number of young IT entrepreneurs in the area. Discuss the key considerations for a business plan
for such a venture.

Siggi, a student from Iceland at Stanford University, has determined that there is an enormous opportunity for
Icelandic-style yogurt in the North American market. He is in the process of securing funding to produce the
yogurt on a farm in Oregon and would like input regarding the key considerations for the yogurt to be a success.
Problems related to Start-Up/Early-Stage Venture
Situation: A potential client has launched a new company to develop a new product or technology that is
expected to have positive yet disruptive consequences for a particular market or industry. The client would like
your advice regarding specific issues in the company development or product rollout, and any thoughts
regarding optimal company strategy.

Market Landscape
• Competitive advantage/Barriers to Entry (with a Start-up, this is a crucial piece of the analysis—can the
Start-up enter the market successfully? Will the Start-up will have some sort of competitive advantage,
whether it be proprietary technology or access to particular distribution channels?)
• Current market size (if the product a new concept, then you would typically be asked to assess the
industry of a substitute product or service, or use relevant comparable products or services to estimate
the potential market size for the new concept)
• Future market growth
• Key competitors in the market, their strategy, current market shares and shares over time, product
differences and potential response to entry
• Likely customers and customer mix (a.k.a. Customer Segmentation)
• Industry-wide profitability (to the extent applicable)
• Supply chain: who are the key suppliers to the industry? (Assess this only if relevant)
• Brand loyalty
• Technology, regulatory issues, or other key topics relevant to the product or market
Problems related to Start-Up/Early-Stage Venture
Business Plan (the interviewer might ask you to compile a very simple business plan, after he or
she gives you some information; key components are given here)

Product/Service
• What is the product/service? What are pros and cons of this product/service? How does
this compare to existing products on the market?
• What will be the competitive advantage and/or barriers to entry for a product of this
type?

Customers and Distribution

• Who are the target customers?
• What are the core distribution channels?
• What is the marketing plan?
Problems related to Start-Up/Early-Stage Venture
Financing/Profitability
• What are the initial funding requirements prior to cash flow Break-Even? How does this
compare with expected future profitability?
• What are the projected Revenue and Costs for the next three years?

Management and Oversight

• Management: experience and abilities
• Preliminary Investors: reputation, expertise, and ability to add legitimacy to the new
enterprise (and potentially invest more in the company)
• Key Directors and Advisors

Being able to discuss the core aspects of analyzing a Start-up company highlights your ability to
quickly answer questions about a new project or idea that may be thrown at you when you are
with clients.