Casebook - Sloan - 2020

Management 2020-21 Recruiting
Consulting Case Book

Club
Fall 2020
The materials contained in this casebook are for the exclusive use by members of the MIT Sloan Management
Consulting Club (MCC) as part of the Club's training in the context of preparing for consulting interviews. The
casebook represents the cumulative efforts of many prior members. Please respect their work by refraining from
distributing the material outside of its intended audience and purpose.
Table of Contents
Chapter 1: Introduction to the Casebook ............................................................................................... 6
Chapter 2: The Recruiting and Interview Process ................................................................................. 7
Chapter 3: Firm Profiles ....................................................................................................................... 10
Chapter 4: Industry Overviews ............................................................................................................ 16
Chapter 5: The Behavioral Interview ................................................................................................... 20
Chapter 6: The Case Interview ............................................................................................................ 27
Chapter 7: Deep Dive- Case Frameworks ........................................................................................... 29
Chapter 8: Deep Dive- Brainstorming .................................................................................................. 32
Chapter 9: Deep Dive- Common Case Types ..................................................................................... 33
Chapter 10: Practice Frameworks ....................................................................................................... 36
Chapter 11: Practice Math ................................................................................................................... 42
Chapter 12: Practice Brain Teasers and Market Sizing ...................................................................... 43
Chapter 13: Practice Chart Interpretation ............................................................................................ 45
Chapter 14: Additional Reference Materials ........................................................................................ 54
Chapter 15: How to Use the Mock Cases ........................................................................................... 57
Chapter 16: Case Type Matrix ............................................................................................................. 59
Chapter 17: Cases ............................................................................................................................... 60
BAIN & COMPANY
1. Electrical Utility Co. (Bain Mock, Industrials, Profitability, Quantitative) ..........................................61
2. Tiger (Bain Mock, Private Equity, M&A, Balanced) ......................................................................... 64
3. Commercial Airline Amenities (Bain R1, Transportation, New Product, Balanced) ........................ 67
4. Commercial Real Estate (Bain R1, Fin Services, Profitability, Balanced) ....................................... 70
5. Dairy Farm (Bain R1, Private Equity, M&A, Balanced) ................................................................... 73
6. Domino’s Pizza (Bain R1, CPG/Retail, Growth Strategy, Balanced) .............................................. 76
7. Fruit Juice (Bain R1, Private Equity, M&A, Balanced) ..................................................................... 79
8. Industrial Tools Manufacturer (Bain R1, Industrial Goods, Profitability, Quant) .............................. 82
9. Nantucket Ice Cream Shop (Bain R1, CPG/Retail, New Product, Balanced) ................................. 85
10. Synthetic Rubber Manufacturer (Bain R1, Private Equity, Profitability, Balanced) ....................... 88
11. Potato Inc. (Bain R1, CPG/Retail, Profitability, Qualitative) .......................................................... 90
Casebook | 2020-21 Edition 2

12. Dentist Office (Bain R2, Healthcare, M&A, Balanced) .................................................................. 92
13. HDTV Remote Controls (Bain R2, Private Equity, M&A, Quantitative) ......................................... 95
14. Paper Clips Acquisition (Bain R2, CPG/Retail, M&A, Quantitative) .............................................. 98
15. VAT Tax Processing (Bain R2, Private Equity, M&A, Qualitative) ..............................................102
BOSTON CONSULTING GROUP
16. CPG Low-Income Market Entry (BCG Mock, CPG/Retail, New Market, Balanced) ...................104
17. National Fast Food Chain (BCG Mock, CPG/Retail, New Market, Quantitative) ........................ 108
18. Antidepressant Pricing (BCG R1, Healthcare, New Product, Quantitative) ................................ 111
19. CPG Conglomerate (BCG R1, CPG/Retail, New Market, Balanced) ..........................................114
20. Italian Pharma (BCG R1, Healthcare, New Market, Balanced)...................................................116
21. Media Operations (BCG R1, TMT, Operations, Balanced) ......................................................... 119
22. National Supermarket Chain (BCG R1, CPG/Retail, Operations, Balanced) ............................. 122
23. Rental Cars and Frequent Flyer Miles (BCG R1, Transportation, Profitability, Balanced) .........124
24. RollingSloan Magazine (BCG R1, TMT, Operations, Balanced).................................................127
25. Shoe Manufacturer Acquisition (BCG R1, CPG/Retail, Profitability, Quantitative) .....................129
26. Store Label Tissue Manufacturer (BCG R1, CPG/Retail, New Market, Balanced) .....................132
27. Big Data (BCG R2, TMT, Profitability, Balanced) ........................................................................134
28. Explosives Company (BCG R2, Industrial Goods, Competitive Response, Balanced) ..............137
29. Ferret Rabies Vaccine (BCG R2, Healthcare, New Product, Quantitative) ................................ 139
30. Global Health (BCG R2, Healthcare, New Market, Quantitative) ................................................141
31. Mobile Virtual Network Operator - Market Entry (BCG R2, TMT, New Market, Balanced) .........144
32. Pest Control (BCG R2, Other, Profitability, Balanced) ................................................................ 148
DELOITTE
33. TastySnack (Deloitte R1, CPG/Retail, Profitability, Quantitative) ...............................................150
34. AgChem (Deloitte R2, Industrial Goods, Profitability, Quantitative) ............................................153
35. Blue Chips (Deloitte R2, Industrial Goods, New Product) ........................................................... 156
EY PARTHENON
36. Airline Ice Costs (Parthenon R1, Transportation, Operations, Quantitative) .............................. 158
37. Publishing Company (Parthenon R1, Other, Growth Strategy, Balanced) .................................159
38. Marlin Toys (Parthenon R2, CPG/Retail, M&A, Balanced) ......................................................... 161

L.E.K.
39. Premium Paint (L.E.K. R1, Retail, New Market, Quantitative) .................................................... 163
MCKINSEY & COMPANY
40. Great Burger (McKinsey Mock, CPG/Retail, M&A, Other) .......................................................... 165
41. Quentin Tarantino (McKinsey Mock, TMT, New Product, Quantitative) ...................................... 169
42. Vitamin Universe (McKinsey Mock, CPG/Retail, M&A, Balanced) .............................................. 171
43. Airline Reward Program (McKinsey R1, Transportation, New Product, Quantitative) ................ 174
44. Art Museum (McKinsey R1, Other, Profitability, Balanced) ......................................................... 177
45. Baby Food (McKinsey R1, CPG/Retail, New Product, Balanced) ............................................... 179
46. Carpet Manufacturer (McKinsey R1, Industrial Goods, Operations, Quantitative) ..................... 182
47. Education in Burma (McKinsey R1, Other, Growth Strategy, Quantitative) ................................ 185
48. French Groceries (McKinsey R1, CPG/Retail, Competitive Response, Quantitative) ................. 188
49. Golf Club Producer (McKinsey R1, Other, New Product, Quantitative) ...................................... 191
50. Maldovian Coffins (McKinsey R1, Other, M&A, Balanced) ......................................................... 195
51. School District (McKinsey R1, Other, Operations, Balanced) ..................................................... 199
52. Simple Insurance (McKinsey R1, Financial Services, Profitability, Quantitative) ........................ 202
53. Spanish Trains (McKinsey R1, Transportation, New Market, Balanced) .................................... 204
54. Zippy Snowmobiles (McKinsey R1, Transportation, Profitability, Quantitative) .......................... 206
55. Dinosaur (McKinsey R2, Other, M&A, Balanced) ........................................................................ 210
56. Treasure Island Communications (McKinsey R2, TMT, Comp Response, Quantitative) ........... 212
57. UK Banking (McKinsey R2, Fin Services, Profitability, Balanced) .............................................. 214
58. Universal Healthcare Revamp (McKinsey R2, Healthcare, Comp Response, Balanced) .......... 216
ROLAND BERGER
59. Wildcats Lacrosse (Roland Berger, R1, Retail, Balanced) .......................................................... 219
OTHER
60. A Proposal You Can’t Refuse (Other, Financial Services, Competitive Response, Balanced) .. 225
61. Online Advertising (Other, TMT, New Market, Quantitative) ....................................................... 228
62. You Drive Me Crazy (Other, TMT, Competitive Response, Balanced) ....................................... 231
Chapter 18: Duplicate Copies of Tables and Charts from the Cases ......................................... 235
2. Tiger (Bain Mock, Private Equity, M&A, Balanced) ....................................................................... 235

3. Commercial Airline Amenities (Bain R1, Transportation, New Product, Balanced) ......................237
8. Industrial Tools Manufacturer (Bain R1, Industrial Goods, Profitability, Quant)............................ 238
11. Potato Inc. (Bain R1, CPG/Retail, Profitability, Qualitative) ........................................................ 239
13. HDTV Remote Controls (Bain R2, Private Equity, M&A, Quantitative) .......................................240
14. Paper Clips Acquisition (Bain R2, CPG/Retail, M&A, Quantitative) ............................................241
16. CPG Low-Income Market Entry (BCG Mock, CPG/Retail, New Market, Balanced) ...................243
17. National Fast Food Chain (BCG Mock, CPG/Retail, New Market, Quantitative) ........................ 244
20. Italian Pharma (BCG R1, Healthcare, New Market, Balanced)...................................................245
22. National Supermarket Chain (BCG R1, CPG, Operations, Balance) ..........................................246
27. Big Data (BCG R2, TMT, Profitability, Balanced) ........................................................................247
30. Global Health (BCG R2, Healthcare, New Market, Quantitative) ................................................248
33. TastySnack (Deloitte R1, CPG/Retail, Profitability, Quantitative) ...............................................250
34. AgChem (Deloitte R2, Industrial Goods, Profitability, Quantitative) ............................................252
35. Blue Chips (Deloitte R2, Industrial Goods, New Product) ........................................................... 253
37. Publishing Company (Parthenon R1, Other, Growth Strategy, Balanced) .................................254
40. Great Burger (McKinsey Mock, CPG/Retail, M&A, Other) .......................................................... 255
43. Airline Reward Program (McKinsey R1, Transportation, New Product, Quantitative) ................256
45. Baby Food (McKinsey R1, CPG/Retail, New Product, Balanced) ..............................................257
47. Education in Burma (McKinsey R1, Other, Growth Strategy, Quantitative) ................................ 258
48. French Groceries (McKinsey R1, CPG/Retail, Competitive Response, Quantitative) ................259
49. Golf Club Producer (McKinsey R1, Other, New Product, Quantitative) ......................................261
51. School District (McKinsey R1, Other, Operations, Balanced) .....................................................262
54. Zippy Snowmobiles (McKinsey R1, Transportation, Profitability, Quantitative) .......................... 263
56. Treasure Island Communications (McKinsey R2, TMT, Comp Response, Quantitative) ...........264
58. Universal Healthcare Revamp (McKinsey R2, Healthcare, Comp Response, Balanced) ..........265
59. Wildcats Lacrosse (Roland Berger R1, Retail, Profitability, Balanced) .......................................266
60. A Proposal You Can’t Refuse (Other, Financial Services, Competitive Response, Balanced) ..268
61. Online Advertising (Other, TMT, New Market, Quantitative) .......................................................269
62. You Drive Me Crazy (Other, TMT, Competitive Response, Balanced) .......................................270

Chapter 1: Introduction to the Casebook
Congratulations on your decision to recruit for consulting. We hope that you’ll find this to be a challenging
and fulfilling chapter of your Sloan experience.
The Casebook
The casebook is organized into two parts:
1. Part 1
(1) Consulting Overview (Chapters 2-4)
(2) Behavioral Interview Prep (Chapter 5)
2. Part 2
(1) Case Interview Prep and Practice (Chapters 6-14)
(2) Cases (Chapters 15-18)
How to Begin
Part 1 (released first) provides a great introduction to the foundations of consulting and consulting
interviews. It also provides guidance on how to best prepare for the behavioral portion of the interview.
We recommend reading it and familiarizing yourself with the material.
Part 2 (released second) introduces the case portion of the interview. It provides guidance on case skill
preparation and practice exercises as well as practice cases. This section, Cases, should only be
practiced after attending MCC Training and casing with your pilot. Additionally, cases are most
effectively practiced with a partner. Habits are formed early in the casing process and bad ones are difficult
to break.

Chapter 2: The Recruiting and Interview Process
Recruiting Events
Recruiting events begin October 1 for first year students. These include: company presentations, cocktail
hours, coffee chats, and small dinners. These events can be helpful for learning about a firm’s culture and
for meeting people at each company. Approach these with professionalism and poise. Keep the following
in mind:
• Follow through on your commitments: Don’t leave corporate presentations early or skip events
(dinners or coffee chats) that you’ve signed up for. If you must cancel, let the firms’ on-campus reps
know in a timely manner.
• Follow-up with contacts: Be sure to email your thanks after coffee chats and if you had a particularly
good conversation at a company event. Mention one or two relevant points from your conversation to
remind them how much they enjoyed meeting you as well, but keep these thank-yous brief.
• Don’t monopolize time: It’s tempting to approach a senior partner and ask a list of exciting questions.
Be polite to those around you and allow others to speak in turn. If you are part of a circle of people
talking with a single company representative or partner and you notice a classmate behind you trying
to join the conversation, make space for them.
• Dress appropriately: Recruiting events will include a dress code that will be helpful for you. Typically,
err on the side of polished business casual.
• Questions to explore through recruiting:
• Is the firm (office) structured by industry or functional group, or are most consultants generalists?
• What is the firm’s business focus? (Strategy, IT, PE due diligence?)
• Who are the firm’s typical clients? Fortune 100, Fortune 500, middle market, start-ups?
• How does the firm fit into/affect my career goals in the short-term and the long-run?
• What is the typical consultant lifestyle? How often does a consultant travel?
• What percentage of summer hires get full-time offers? What percentage accepts?
• How has the firm been growing over the last few years? What industries or functions are most
exciting?
• If I were to leave the firm, what sort of organization might I join?
Interview Basics
Consulting interviews typically have two rounds. Interviews in each round usually follow the same format:
an introduction, 15 minutes of behavioral questions, 30 minutes of casing, and a brief Q& A.
• Round One: This round is a screening round. You typically interview with two consultants or
managers. Shortly after this round, you’ll receive a phone call letting you know if you’ve been
passed to R2. Your phone call may also provide constructive feedback on your performance
during the first round.
• Round Two: The final round has two to four interviews with senior managers or partners.
Typically, this will be at your preferred office or with your preferred specialty. You may have to do
a 45min-1hr written case. You’ll receive a rejection or offer by phone shortly after R2.
Interview Etiquette
• Be early: Arrive to interviews at least fifteen minutes early. Interviews begin promptly at their
scheduled time.

• Be pleasant: Be kind to the administrative assistant who helps you check in and to all recruiting
support staff. When your interviewer meets you, shake their hand firmly, make eye contact, and
make casual conversation as you walk down the hallway to the interview room.
• Be prepared: Bring a pad of paper (lined or graph), two pens or pencils, copies of your resume
and business cards. A leather portfolio is a great way to carry these into and out of the interview.
Some students also opt to bring pre-printed casing “slide” templates.
• Be firm-focused: Remember your conversations with on-campus representatives earlier in the fall.
Explain how you fit with the firm’s culture, industry focus, or long-term goals.
• Be unflappable: Your interviewers will all be different. Some may be friendly, some may stare out
the window, and some may interrupt you with random questions to test your focus. Be patient,
determined, and willing to switch directions. Take constructive feedback in stride. Stay humble and
positive.
• Follow up with interviewers: Follow up with a short email of thanks promptly after your interview
is finished.
• Celebrate discreetly: While you may be tempted to celebrate your job offer publicly, we urge
discretion. Many of your friends are still interviewing.
Deep Dive into Round Two
In recent years, firms have been using different R2 models. Don’t worry if you encounter a case style that
you haven’t done before; the basic skills built through casing are applicable in all of these models. Below
are a few examples of alternative R2 styles that we have encountered.
• Written Case Interview

o Candidates receive a packet of slides and forty-five minutes to complete a set of
instructions. Typically, they must draw one summary slide, pull out 5-7 slides that tell a
cohesive story, and complete simple math. The candidate will then meet with an
interviewer to discuss their findings.
o Tips: Keep track of time, prioritize analyses on the most important areas (keep the 80/20
rule in mind- you will be intentionally overloaded with data), lead with the
recommendation when presenting your findings.
o Firms using this style last year: Parthenon
• Written Cases with Advance Preparation
o Candidates are given case material 48 hours in advance of the interview. When they
arrive, candidates are presented with a list of questions and they are free to choose one
or multiple questions to address. Candidates are then given 45 minutes to prepare slides.
o Tips: Anticipate questions in advance and run through analyses needed ahead of time.
• Group Case Interviews
o The group interview is similar to the individual, but packets of information are given to all
(~4-5) group members and each group member is assigned a specific focus area
(strategy, finance, operations)
o Tips: Prioritize your analyses, act natural, and collaborate. You aren’t competing with the
people in your group and the interviewers can tell when you’re trying to sell your
leadership skills.
o Firms using this style last year: Deloitte

Know MIT Sloan’s Reputation
Below we have the results of a study conducted by the CDO about recruiters’ opinions on Sloan students.
Positive Impressions of MIT Sloan Students:
• Sloanies are academically brilliant with outstanding quantitative skills

• Sloanies are approachable and friendly
• Sloanies are practical
Common Pitfalls for MIT Sloan Students:
• Sloanies historically have been weaker when answering behavioral questions (I.e., can
sometimes be interviewing “robots”)
• Sloanies were often unable to clearly articulate why they preferred a particular geography (i.e.
reasons do not appear to be aligned well with their personal or professional aspirations and/or
life context)
• Sloanies in the past have used generic rather than customized frameworks (i.e. too formulaic
and not enough creative “out-of the box” ideas)
Now that you know these negative stereotypes, work to defy them. Show that in addition to being a
smart, helpful, numbers person, you are also a creative, personable, and savvy business student
ready to articulate to a client why your ideas will positively impact their bottom lines.

Chapter 3: Firm Profiles
The following profiles are meant to provide an introduction to the firms typically recruiting on campus.
Its contents are not exhaustive. Sources: company websites, Vault and our own recruiting experiences as
of October 2020. We encourage you to do your own research for the most up-to-date and office-specific
views!

A.T. KEARNEY BAIN & CO.
Firm overview Firm overview
• 3,600 employees • 10,500 employees

• 57 offices in more than 40 countries • 58 offices in 36 countries
• HQ in Chicago • HQ in Boston
• Home-staffing model with global mobility • Home-staffing model
Marketing highlights Marketing highlights
• “A.T. Kearney is committed to providing • "We are a generalist firm, and our first
opportunities for global experience, whether differentiator is our culture: collegial, jovial,
as a self-initiated transfer to another country and supportive”
or an assignment to fill a temporary • Home-staffing model builds lasting
business need or staff a client project.” relationships, staffing cases with consultants
• Known for collaborative, personable, from the same office. Still, Bainies enjoy a
entrepreneurial culture wide range of regional and global staffing
• One of only 100 global companies selected opportunities and “50% of Bainies stamp
as a strategic partner of the World Economic their passports annually”
Forum • Emphasizes generalist tool kit to build “C-
Suite” leaders with diverse expertise
Primary functional practices • Has worked with over 2/3 of the Global 500
and private equity funds representing 75%
• Analytics
of global equity capital
• Digital
• Known for results-driven approach. “Clients
• Leadership, Change, & Organization
outperform S&P by four to one”
• M&A
• Operations & Performance Primary functional practices
• Procurement
• Strategy & Top Line • Advanced Analytics & IT
• Transformation • Customer Strategy & Marketing
• Digital (new), Digital Transformation
Interview format • M&A
• Operations/Organization
• Rd 1: 2 40-minute interviews • Performance Improvement
• Rd 2: 2 40-minute interviews • Private Equity (leader in this area)
• Strategy & Transformation
Career progression
• Sustainability & Social Impact
• Associate
Interview format
• Manager
• Principal • Rd 1: 2 40-minute interviews
• Partner • Rd 2: 3 40-minute interviews
• Known for use of graphs and data and
values answer-first responses
Career progression
• Consultant
• Manager
• Senior Manager
• Associate Partner
• Partner

BOSTON CONSULTING GROUP DELOITTE
• 21,000 employees • 33,000 employees (management consulting)

• 90 offices in 50 countries • ~100 offices in the U.S.
• Regional staffing model • Regional staffing model
• HQ in Boston • HQ in New York
Marketing highlights
• Customized, collaborative client approach • Scale and scope of Deloitte network: largest
professional services firm in the world
• Large focus on professional development
• Global experience, local knowledge, deep
and “the apprenticeship model”
bench of technical talent to support
• Known for experience curve • Large clients: serves 80% of Fortune 500
• PTO (Predictability, Teaming, and Open • Projects span both strategy and execution
Communications) to drive work-life balance • Industry leader in paid-family-leave policy;
• Diverse workforce testified before Congress July 2018 about
• Clients include many of the Fortune 500, but importance of policy and resulting decrease
also mid-sized businesses and non-profits; in employee turnover
highlights social impact in marketing
Primary functional practices
Primary functional practices
• Practice areas:
• Big data & advanced analytics • Core Business Operations
• Business portfolio management • Customer & Marketing
• Customer and supplier relationship mgmt. • Enterprise Operations
• Human Capital
• IT infrastructure, technology, digital
• Mergers & Acquisitions
• Growth strategy development and execution
• Strategy & Analytics
• Marketing and pricing
• Market offerings:
• M&A, Post-merger integration • Analytics
• People and organization • Business Transformation
• Private Equity • Digital
• Supply chain management • Finance Transformation
• Sustainability • Innovation
• Turnaround • Service Delivery
• Supply Chain
Interview format
Interview format
• Rd 1: 25-30 minutes online case
• Rd 2: 2 45-minute interviews; some offices • Rd 1: 2 30-minute interviews
utilize written case • Rd 2: 1 team case interview, 2 individual
• Values answer-first responses and for the case interviews
candidate to drive the conversation Career progression
Career progression
• Senior Consultant
• Manager
• Consultant
• Senior Manager
• Project Leader
• Partner
• Principal
• Partner

FIDELITY CONSULTING (FC) LEK CONSULTING
• 50,000+ employees • 1,600 employees

• 90+ internal management consultants • 21 offices in 12 countries
• HQ in Boston • Home staffing model
• HQ in London (global) and Boston (U.S.)
• Collaborative and entrepreneurial culture
with large focus on work-life balance • Known for analytical rigor
• 50-hour work weeks and 0% travel • Expectation to manage team early on as a
• Highly relationship driven; focus on longer consultant
term relationships with internal senior • Clients range from Fortune 500 to small
leaders businesses
• Can serve as a pipeline for talent into • Strong industrials and life sciences
Fidelity’s business practices, among others
• Fidelity invests ~20% of top line revenues • 6-month office SWAP program
back into technology each year and
maintains a strong focus on investment in Primary functional practices
innovative technologies and ideas via
• Marketing & Sales
Fidelity Labs (e.g. AI incubators, blockchain
• M&A
initiative, etc.)
• Organization & Performance
Primary functional practices • Strategy
• Asset Management (AM) Interview format

• Financial Institutions (FI)
• Rd 1: 2 30-minute interviews
• Operations
• Personal Investing (PI)
• Technology Career progression
• Workplace Solution (WS)
• Consultant
Interview format • Manager
• Senior Manager
• Rd 1: 1 40-minute case interview, 1 40-
• Principal
minute behavioral interview
• Partner
• Rd 2: 2 case interviews, 1 behavioral
interview, 1 group case
Career progression
• Consultant (“Director” level)

• Project Leader
• Principal
• Partner

MCKINSEY & CO. EY-Parthenon
• 30,000 employees • 10,000 employees

• 100+ offices in 60+ countries • 40+ offices globally
• Global staffing model • Home staffing model
• HQ in New York • HQ in Boston
• Strong emphasis on leadership development • Brings strategy expertise to EY’s global

and culture client base, operations, and implementation
• Opportunity to work on global projects capabilities
• “Make your own McKinsey” • Two-case model enables quick ramp-up and
• Work-life flexibility through Take Time and industry exposure
Pace initiatives • Cases typically tend to be shorter and
• One firm partnership involve less travel than other firms
• Serves ~90 of the top 100 companies • Analytical, unconventional, yet pragmatic
worldwide approach to cases
• 30,000+ member alumni network • Boutique and entrepreneurial culture with
“smart, nice, and driven” people
Primary functional practices • Strong private equity and education
practices
• Analytics
• Many opportunities to participate in internal
• Business Technology
initiatives
• Digital McKinsey
• Implementation Primary functional practices
• Marketing & Sales
• Operations • Corporate Strategy
• Organization • Private Equity
• Recovery & Transformation Services Interview format
• Risk
• Strategy & Corporate Finance • Rd 1: 2 30-minute interviews + market sizing
• Sustainability & Resource Productivity exercise
• Rd 2: 1 45-minute written case interview, 1
Interview format 30-minute partner interview
• Rd 1: 2 45-minute interviews Career progression
• Command and control casing style • Consultant
• Director
Career progression • Senior Director
• Partner
• Associate
• Engagement Manager
• Associate Principal
• Partner
• Director

ROLAND BERGER STRATEGY&
• 2,400 employees • 3,000+ employees

• 51 offices in 35 countries • 70+ offices in 35+ countries
• Regional staffing model • Regional staffing model
• HQ in Munich • HQ in New York
• Core values of entrepreneurship, • Formed in 2014 when Booz & Co joined

excellence, and empathy PwC
• Bulk of business in Europe and Asia • Focus on strategy through execution,
• Values end to end solutions leveraging large PwC network
• Supportive and collaborative community with
over 18,000 global Strategy& alumni
Primary competencies • Known for “Fit for Growth” approach to help
companies manage their cost in a more
• Digital strategic way
• IT Transformation • Candidates asked to preference
• Operations competency area and industry vertical
• Restructuring, Performance, Transformation
& Transaction Primary competencies
• Sales & Marketing
• Corporate, Business, and Customer
Primary industry verticals Strategy (CBCS)
• Deals Strategy
• Chemicals • Operations
• Energy & Utilities • Organizational Strategy
• Financial Services • Technology Strategy
• Industrial Products & Services
• Pharma Primary industry verticals
• Technology, Media & Telcos
• Consumer Markets
• Transportation, Tourism & Logistics
• Energy
Interview format • Financial Services
• Health Industries Advisory
• Combination of fit and case interviews; • Industrial Products & Services
sometimes a written case • Technology, Media & Telecom
Career progression • Private Equity Value Creation
Interview format
• Project Manager • 3 45-minute interviews (equivalent to Rd 1
• Principle and R2 combined in one round)
• Partner
Career progression
• Manager
• Director
• Partner

Chapter 4: Industry Overviews
The following overviews are meant to introduce the industries generally cased on.
They are not exhaustive! We encourage you to do your own research, and follow and understand trends
and events.

CONSUMER / RETAIL FINANCIAL SERVICES
Sub-sectors Sub-sectors
• Consumer staples • Investment Banking & Capital Markets
• Consumer discretionary • Corporate and Commercial Banking
Major players • Custody and Fund Administration
• Amazon • Asset Management
• Coca-Cola • Retail Banking
• Nike • Insurance
• P&G Major players
• Unilever • Bank of America
• Walmart • BlackRock
Key issues • Citi
• Consumer preferences; matching supply with • Fidelity
demand • Goldman Sachs
• Product innovation • J.P. Morgan
• Brand and customer loyalty • Wells Fargo
• Supply chain management Key issues
• Risk of a price war • Margin pressure
• Risk of cannibalization • Customer experience
• Unit-level profitability • Compliance
Industry trends • Globalization
• Shifting consumer preferences • Balance sheet / leverage
• Omni-channel sales approach Industry trends
• Dominance of Amazon and e-commerce • Increased regulation, in often disparate forms
• Preference for natural/organic globally
• Product personalization • Shifting consumer demographics
• Digital and social media marketing • Digital future
Revenue drivers • New technologies (e.g., blockchain, A.I.)
• Macro-economic health and disposable • Best and brightest taking jobs outside of
income finance
• New products Revenue drivers
• New stores • New customers
• New customers; existing customers • New locations
• Average spend per customer • Deepening spend and cross-sell with existing
• New channels customers
• Pricing power • Fee vs. commission based product rates
Cost drivers Cost drivers
• Input costs (e.g., fabrics, plastic) • Infrastructure
• Production • People
• Marketing • Physical locations
• Borrowing rate

TMT OIL & GAS
Sub-sectors Sub-sectors
• Computers • Oil markets
• Internet • Natural Gas
• IT Services • Upstream
• Semiconductors • Midstream
• Software • Downstream
• Media • Oilfield services
• Telecom Major players
Major players • BP
• Apple • ExxonMobil
• AT&T • Marathon Petroleum
• Comcast • Royal Dutch Shell
• Disney • Schlumberger
• Facebook Key issues
• Google • Market demand
• IBM • Competitive dynamics
• Microsoft • Capacity expansion
• Netflix • Operational excellence
Key issues Industry trends
• IP (Intellectual Property) • Price volatility
• Growth / scale of new technologies • Technological innovation to unlock shale gas
• New digital business models • New market entry
• Cybersecurity • New sources of supply
• Customer experience management • Heightened focus on sustainability
• Regulatory environment Revenue drivers
• Competitive dynamics • Price
Industry trends • Supply of oil & gas
• Convergence of TMT Cost drivers
• Rapid innovation • High investment costs
• Evolving customer demands • Refining
• Prevalence of digital content • Marketing
Revenue drivers • Transportation Variable manufacturing costs
• New customers – the “S” curve • Sales and marketing
• New products
• Positive network effects
Cost drivers
• High investment costs
• Cost to acquire new customers

HEALTHCARE AUTO & TRANSPORTATION
Client types Sub-sectors

• Payers / Insurance • Auto manufacturers
• Providers • Auto component suppliers
• Pharma • Airlines
• Medical Devices Major players
Major players • FedEx
• Aetna/CVS • Ford
• CIGNA/ Express Scripts • General Motors
• Blue Cross Blue Shield • Goodyear
• Kaiser Permanente • Lufthansa
• Johnson & Johnson • Toyota
• Pfizer • UPS
Key issues Key issues
• Cost effectiveness of treatments • Manufacturing and supply chain management
• FDA approval • Safety concerns and recalls
• R&D productivity • Product innovation
Industry trends Industry trends
• Aging population • Digitalization across the value chain
• Payer consolidation • Disruptive competition and innovation
• Influence of technology on personalized • Heightened focus on sustainability
medicine and prevention • Ride sharing
• New R&D technologies driving specialization Revenue drivers
Revenue drivers • Number of vehicles sold; how often people
• Number of patients (covered in target purchase vehicles
treatment population) • New customers
• Number of treatments (including frequency of • Pricing
use) • Capacity (for airlines)
• Geographic expansion Cost drivers
• Pricing • Manufacturing
Cost drivers • Marketing
• High R&D costs • Maintenance
• Insurance reimbursement

Chapter 5: The Behavioral Interview
A key part of your interview will be the “behavioral” or fit interview. We strongly recommend that you begin
thinking about and practicing these stories early in the preparation process; the behavioral interview is
vital to your recruiting success.
Overview of Behavioral
The behavioral interview will typically last fifteen minutes and consist of two to three questions about your
past experiences if it is combined with a case interview; some firms conduct standalone behavioral
interviews that can last up to thirty or forty five minutes. The interviewer wants to understand how you will
fit with the firm’s culture. The interviewer is not interested in just your accomplishments; rather, they want
to know how and why you took a particular action in a story.
Your goal of the behavioral section is to tell a compelling story that demonstrates how you would be the
ideal management consultant at the firm.
How to Tell a Successful Story:
Characteristics of any good story include:
• It answers the question that the interviewer asked

• You are the protagonist, and descriptions are phrased as “I did”
• It involves other people, whom you led, influenced, or convinced despite opposition
• There was a significant challenge for you – it really demonstrates your qualities and showcases a
moment of personal growth
• It is succinct, structured, but does not sound rehearsed
We recommend following the STAR format: Situation, Task, Action and Result
• Situation: A brief, one- or two-sentence introduction to frame the setting of your story and give the
high-level outcome
• Task: This part of the story sets up the conflict, or crisis of the story
• Action: The action is the most important part of the story and should take up the majority of your
story-telling. Describe what you did, why you did it, and how you thought about your actions. Walk
your interviewer through your thoughts at the time so that they fully understand how you are a
thoroughly thoughtful, team-orientated, and impact-driven future consultant.
o Be prepared for the ‘Why’: Always be prepared for your interviewer to stop you and ask
why you did a particular action, how a conversation went, or what you were thinking. Make
sure your story is true and has depth so that you can address these follow-up questions.
• Result: Wrap up your action with a brief line or two about the impact of your story, including lessons
learned.
How to Prepare for the Behavioral Interview
• Pre-Work
o Anticipate Resume Questions: Review your resume, and write down a list of natural
questions that would arise. For example, why did you take your last job? Tell me more
about that EM project?
o Critique Your Profile: What are the areas of potential weakness that an interviewer
might see in your background? Be sure that your behavioral responses proactively
address these areas. If your resume seems light on teamwork, be sure that you have a
few strong stories about working in teams.
o Prepare: Now that you’ve reviewed your resume and thought of natural questions your
interviewer might have, think about how you can most compellingly tell your story.

▪ Fill out the Behavioral Interview Matrix and make sure that you have stories that
cover all or most topics. Most students find that 6-9 strong stories are adequate
for answering most questions.
▪ Remember, you will have 2-3 interviewers (varies between R1 and R2). You
should not repeat stories within each round. Interviewers will talk after your
interview, and you want each one to have unique information.
▪ Step back after you sketch out your stories and ask, “Am I building a complete,
compelling picture of a star consultant? Will my interviewer walk away and
be able to easily summarize my strengths in one or two sentences?” Make
it easy for your interviewers to understand your story.
• Teamwork
o Sloanies: Make sure that your casing sessions always include a behavioral question.
When evaluating a peer’s response, consider the structure (is the response easy to
follow?), substance (does the story demonstrate consultant qualities?), and style (is the
candidate smiling, confidence, and polished?).
▪ In the beginning, it may be helpful to work on telling your story to your peers and
asking for advice on framing and impact. A story that feels important to us
may not translate well to others or may not have enough substance to be a
compelling story.
▪ By January, you should be focusing primarily on your peer’s style. Do they
continue to feel fresh, engaged, and interesting as they tell their story? Practice
makes natural, not perfect.
o CDO: The CDO offers mock interviews in December and January. We highly
recommend signing up for these. It’s a fantastic way to get outside perspective on your
style and story.
Firm Specific Guidance – The McKinsey & Co. Personal Experience Interview
The behavioral portion of Mckinsey & Co. interviews is referred to as the Personal Experience
Interview (PEI). Similar to other firms, you can expect the PEI to last approximately 15 minutes,
however instead of responding to 2-3 unrelated questions from the interviewer that focus on
multiple past experiences, the PEI is focused on a single story with a series of follow on questions
designed to uncover a significant amount of detail about your experience and direct actions. Be
prepared to reflect on not only on the specific actions you took, but also the actions, reactions, and
feelings of others experiencing the event with you.
Sample Questions
Below is a list of commonly asked questions. We would recommend that you develop a 1 sentence
(“newspaper headline”), 1-minute, and 3-minute version of each of your major stories.
Be prepared to answer all of the following questions. Good approaches to answering these questions can
be found in materials from the MIT Sloan Career Development Office and in Neil Yeager and Lee
Hough’s book, Power Interviews: Job-Winning Tactics from Fortune 500 Recruiters.
Personal Story
• Tell me a little bit about yourself.
• Tell me about a time when you handled conflict with your peers / supervisor.
• Describe an experience where you failed. What did you learn from this?
• How would you describe yourself? How would your close friends describe you?
• Where do you see yourself in 3 years? 5 years? 10 years?
• Tell me about a professional situation in which you impacted your peers.
• Are you a “details” or a “big picture” person? Why?
• Have you ever had to compromise your ethics? When and how?
• Which accomplishment(s) are you most proud of? Why?
• What are your greatest strengths and weaknesses?
• What is the most important thing not on your resume?
• Why should I bother reading your resume?
• What makes you a more interesting candidate than anyone else I interviewed today?
• Are you competitive?
• How will you know when you have become a success?
Why Consulting?
• Why consulting?
• Why do you think you would make a good consultant?
• Why do you want to be a consultant?
• What do you think it takes to make a good consultant?
• Describe a situation in the past where you had to analyze and solve a problem.
Leadership
• What does leadership mean to you?
• What have you done that demonstrates your ability to lead?
• Describe the best/worst manager you have ever worked for.
• Who is your favorite CEO? Why?
Teamwork
• What have you done outside of MIT Sloan that demonstrates you work well in a team environment?
Academics & Sloan

• Why did you choose MIT Sloan? Why business school? What have you learned?
• What has been your best experience at MIT Sloan? Your most frustrating experience?
• What has been your favorite class? Your least favorite? Why?
• Have you been satisfied with your grades?
• What is your GPA? Your GMAT score? (Be ready to explain if it’s below average)
• What do you do for fun at MIT Sloan?
Interests
• What book(s) have you read recently? Tell me about it (them).
• What magazines do you read?
• What got you interested in X hobby/interest?
Why Our Firm?

• Why do you want to work at our firm? Why us instead of another consulting firm?
• Where else are you applying and why?
• If you were offered the job right now, would you take it?
• What are your criteria for selecting a firm? How would you choose from multiple offers?
• Why should we hire you?
What are your geographic/industry preferences?

• Why X city?
• What interests you in this industry or function?

Behavioral Interview Matrix – Brainstorming Personal Stories
We encourage you to use the following matrix to brainstorm potential stories for your behavioral
interviews Although you do not necessarily need a unique story for every box, make sure you have at
least one story for every category, and a balance of work, school, and personal stories.
Work School Personal
Teamwork
Leadership
Analytics
Creative Problem
Solving
Communication
Adversity
Ambiguity
Conflict Resolution
Flexibility
Influence
Initiation/Follow-
through
Strategic Thinking
Convincing People
Failure
Weakness

Behavioral Interview Matrix – Identifying Key Stories
After you have brainstormed stories in the above exercise, it is a good idea to identify 6-8 key stories that you will further develop to present during
your interviews. Put together these stories should cover all skills identified above. Please li st your key stories below and check off which skills each
story highlights.
Teamwork Leadership Analytics Creativity Communicati Adversity Ambiguity Conflict Flexibility Influence Initiation Strategic Failure Weakness
ons resolution Thinking

Behavioral Interview Matrix – Crafting your STAR for each Key Story
With you 6-8 key stories in hand, now look to craft Situation-Task-Action-Result stories. Each should be
1-2 minutes long. Make sure you spend adequate time on the Action and Results, as one key error
candidates make is spend most of their time describing the situation!
Story:
Situation Task Action Results / lessons
1.
2.
3.
Story:
1.
2.
3.
Story:
1.
2.
3.
Story:
1.
2.
3.

Story:
1.
2.
3.
Story:
1.
2.
3.
Story:
1.
2.
3.
Story:
1.
2.
3.

Chapter 6: The Case Interview
The case is an interactive word problem based on a real consulting situation. This will typically take 20-30
minutes and will happen after your behavioral interview. This chapter provides a broad overview of the case
interview. The next two chapters deep-dive into two of the more challenging parts of this: the framework
and the brainstorming. Chapter 9 addresses common case types seen across firms.
The Purpose of the Case Interview
The interviewer is assessing you along several dimensions that are important for a good consultant:
• Analytic Skills: How do you analyze the problem? Do you employ a relevant framework to organize
your thoughts and structure your analysis of the case question? Are you comfortable with simple
math?
• Poise and Composure: Are you comfortable with ambiguity and confident under stress? Is it
enjoyable to talk with you about the case problem?
• Business Judgment: Can you differentiate important information from extraneous information?
Can you distill a complex, ambiguous problem down to a clear, actionable recommendation?
• Communication Skills: Are you comfortable explaining your analysis in front of a client? Are you
expressive and easy to understand?
Case Types and Key Differences
There are broadly 3 types of cases: candidate-led, interviewer-led, and written cases. While there are
differences, the evaluation criteria are similar, assessing analytical ability, poise, business sense, and
communication.
• Candidate-led: The expectation is that the candidate suggests a hypothesis to the case question
and drives the case. This emphasizes the candidate’s ability to identify the “So What” components
of a case. For example, given new information such as a chart, what does the graphic mean and
how does that relate to the main question at hand.
• Interviewer-led: The interviewer drives the case, asking specific main questions with follow-up
questions as necessary. The interview is more structured in the order and questions asked. Each
question can be thought of as a mini-case, requiring structure and an understanding of how that
question relates to the main, initial question.
• Written case: Typically there is a time period for the candidate to prepare alone. There may be 30-
50 slides given as background, and the candidate is instructed to pick a handful and prepare to walk
through recommendations with the interviewer. This can either take the format of a discussion (as if
talking with a partner) or a presentation (as if talking with a client). Key components of this interview
are prioritizing information, synthesizing recommendations, and structuring a concise summary.
Typical Structure of a Case Interview
• Case Stem (1-2 minutes)
o The interviewer will read a case stem. The stem sets up the situation and provides facts
about the case. It is vital to take notes during this portion.
• Clarify Problem (1-2 minutes)
o After the stem is read, you’ll have the opportunity to ask questions. Take advantage of this!
Clarify parts of the stem that you might not have understood, ask questions if you don’t
understand parts of the industry mentioned, and verify that you understand the key aspects
of the question. This time should not be used to repeat the stem verbatim.
• Framework/ Structure Approach (<2 minutes to structure, 1-2 for explanation)

o Ask your interviewer if you can have a few minutes to collect your thoughts. During this
time, write out your structure. At the end of two minutes, walk your interviewer through this
structure. End by highlighting the most important part of your structure and asking for the
data needed to solve this portion.
• Gather, Analyze Data, and Brainstorm (10-20 minutes)
o This part is the most interesting and interactive portion of the case interview. Your
interviewer will have 3-5 slides of data, but they typically won’t show you these until you
ask for them! You’ll need to use your structured framework to explain why you want specific
data and how that data will help you to solve the overall case question. The following
example is meant to illustrate how data is given throughout the case. You’ll have 2-3
conversations like this during the case.
o Example: Candidate: “Since we’re looking to improve profitability at our movie theater, we
need to understand the revenue and the costs. Let’s focus on the revenue side first. Do we
have any information about the cost per ticket, the number of tickets sold, and the average
concessions sold per ticket?”
o There are three things that are great about this response:
▪ The candidate shows that they understand the big picture by restating the goal
of the case (improving profitability).
▪ The candidate breaks down profitability into revenue and costs, showing that
they understand the two levers of this problem.
▪ The candidate is specific and targeted with their data asks. They specify the
case-specific metrics needed to solve for revenue. Avoid asking for generic data,
such as “information on revenue or cost”.
• Recommend Solution (2-3 minutes)
o During this section, you’ll summarize your recommendation for interviewer as if you were
presenting the firm’s recommendation to a client CEO. Make this clear, specific, and
‘answer first’. Support your recommendation with specific learnings (e.g., data) from the
case. It helps to lay out your slides in front of you, so that you don’t miss any crucial
information that happened during the case. Not all cases have one “correct” solution, so
support the recommendation with information learned in the case.
▪ Example: The theater should raise ticket prices, sell a greater variety of
concessions, and renegotiate its distribution contracts. Doing so gives the theater
the opportunity to improve profitability by 20%, or $2 million.
o Spend 30 seconds laying out the next steps and risks underlying your recommendation.
This shows the interviewer that you have thought beyond your problem statement and
analyzed a real-world problem.
▪ Example: We can better understand our target audience for specific concessions
by conducting consumer surveys. We should also analyze the risks of re-
negotiating with the distribution companies, e.g. can we lose our market share to
competition?
Tips to Keep in Mind for a Successful Case
• Structure: Are my points MECE (mutually exclusive, collectively exhaustive)? Is it logically
organized? Are the most important issues prioritized?
• Communication: Am I giving a clear roadmap for where I’m going? Are my written notes an
effective communication tool?
• Checking the ‘So What?’: How does this relate to the main question? What are the 2nd order
implications (risks and opportunities)? Is this solution practical?

Chapter 7: Deep Dive- Case Frameworks
In the beginning of every case, you’ll pause for 1-2 minutes to build a framework. This will be your roadmap
for the case and will help you convert your complex, difficult stem into an actionable recommendation. Once
the stem has been read and any background questions have been asked, the candidate typically says
something like “Can I take a minute to gather my thoughts before we dive in?”
Basic Structure
A framework typically has three major points and 3-5 sub-points under each major point. It is mutually
exclusive (sub-points don’t appear in more than one category) and collectively exhaustive (all questions
needed to answer the case are present in the structure). This concept is often referred to as MECE.
Characteristics of a Good Framework

A good framework is:
• Specific to the problem – don’t simply write “costs;” instead, break them into “fixed costs”, “variable
costs” and list a few in each category
• A clear roadmap that can be referred back to through the entire case
• Structured to answer the problem at hand
A good framework is not:
• The only answer to a problem, a case can have multiple correct frameworks
• A solution or recommendation – you will come to the solution or recommendation during the course
of the interview, but do not need to have all of the answers at the beginning
A Framework Example
Let’s walk through the steps to developing a strong framework. First, we’ll think about the problem in
generic, abstract terms, and then we’ll turn this into a strong, specific framework to our case.

Stem: Our client, a specialty popcorn manufacturer, is considering entering a new market. Should they?
If so, how?
A generic framework would lay out the following structure:
Risks and other

Company Market
Considerations
Revenue Competitors
Costs • Product
• Costs Cannibalization
• Fixed
• Labor • Geography
• Rent
• Variable
• Supplies
Regulatory
Product
Merging with
another firm
Geography
Acquisition

A Specific, Applied Framework
The generic framework included previously is a good starting point; you can adapt it to fit many different
stems, including this one. A specific, applied framework deepens the analysis and applies to more
closely to the popcorn industry. This would be a great start to an interview, though it isn’t the only answer
to this popcorn question!
Our company's
Objectives of our Popcorn Risks and other
relationship to the
Company Considerations
popcorn market
Revenue Product
Cannibalizing our
Price of popcorn by • Types of popcorn current products or
variety offered (sweet, savory, locations with
Volume sold by variety health) in the market introduction of new
• What is the size and products
relative growth of each
Costs product type in the
• Fixed market?
• Labor (Cooks, Sales, • Do we compete in these
markets? Merging with another
etc) firm - does it make
• Land (Factories, stores, sense to team up with
etc) a competitor in order
• Variable Profits and Costs to expand market
• Supplies • Different types of share or acquire
popcorn (speciality, someone else so that
generic) we can be a larger
• How are we priced player
Popcorn varieties currently compared to
sold competitors?
Geography Geography
• Where we are now • What markets do our
• Possible places of major competiors
expansion compete in, and are we
there?
Next Steps: After presenting your framework and walking your interviewer through the logic behind it, you
should be ready to dive in! Use your structure as a jumping off point for the questions you have or issues
you’d like to explore.
In this case, since we’re looking at entry into a new category, a natural follow-up question would focus on
exploring the size and relative growth of different popcorn types in the current market. Is there an attractive
category where we currently don’t have a product available? Your interviewer might just have a graph that
shows total popcorn spend over time broken out by category and it seems that the health category is
growing surprisingly quickly!

Chapter 8: Deep Dive- Brainstorming
Throughout the case you will often be asked to brainstorm. This is an opportunity to show your structured
thinking and creativity. The two most important things to keep in mind are structure and specificity. In
other words, bucket your responses and make them highly specific to the case question.
Airline Example
Brainstorm Question: “What are some ways our airline might increase its profitability?”
An untrained brainstorm might make a list of ways to increase profitability:
• Increase ticket prices

• Reduced headcount
• Reduce wages
However, a more structured response will be easier for you to talk through with the interviewer. It is best
practice to put answers into buckets to organize your thoughts and demonstrate structure. Examples of
buckets could be “Internal & external”, “Revenue & costs”, “Existing markets, adjacent markets, and new
markets”, or “Domestic vs. international”. Note also how this response is specific and detailed. The
candidate talks about actionable ways to increase profits in the airline industry.
Reduce Costs Increase Revenues
Fixed Costs
• Reduce Increase ticket
headcount prices
• Reduce wages
per employee
Variable Costs Fly to more

places
• Explore cheaper
fuel alternatives
Sell more seats
Anything Else?
While brainstorming, an interviewer will often ask you if there is “anything else?” While the interviewer
might be probing for something big that you missed, they also might simply be trying to test you. It’s fine
to say, “I think that I’ve hit the major categories.” Do not invent things because you think the interviewer
wants your list to be longer.

Chapter 9: Deep Dive- Common Case Types
Below, we’ve included highlights for three of the most common case types: Profitability
Improvement/Operations, New Market/Product Entry, M&A/PE. These are helpful starting points to
make sure that you’re considering all potential strategic questions when working through a case.
Profitability Improvement / Operations
The Basics Company: What do we look like?

Profit = Revenue – Costs • Revenue: How can we grow this? (Potential levers:
Revenue = Price * Quantity increase price (higher priced products) or increase
Total Costs = Fixed costs + Variable costs quantity (new products, new customers, new
geographies)
To increase profitability, you must increase revenue or
decrease costs • Costs: How can we cut them? (Potential levers: fixed,
variable-> change suppliers, operational stream-line,
reduce salary, move head office to cheaper location,
Important Metrics consolidate branches, lower COGS)
Key Areas to Understand for Success:
Operating Margin = Operating Profit / Revenue • Will our profitability improvement come from revenue
increase or cost decrease? Typically, cases only have
The higher the better! Operating Profit time to focus on one lever.
excludes taxes and one-off charges, so
• What are our most and least profitable product segments?
it’s a clean way to see operating
What are our major cost centers? Where do we drive the
efficiency
most volume? How price inelastic are our customers?
• If the case stem mentions “reversing declining
Market Size = Total value of the entire market
profitability,” we need to understand where this drain is
coming from. Which product, geographic, or customer
Market Share = Our company’s % of the total market
segment is dragging down the company? The solution will
most likely come from this problem area.
If our market share is small and the market size is
large, there’s significant opportunity for revenue
Market: What does the outside market look like?
growth. If our market share is close to the entire
• Size: What is the total value and the total volume? How
market size, then cost reduction will be the best way to
have these changed over time?
drive profitability.
• Product Mix: What products are selling well currently?
How have these changed over time?
NPV of perpetuity = annual savings / discount rate
• Customers: Who purchases our product?
This is a great way to value the change • Consumers: Who consumes our product?
in profitability. 10% is often an • Competitors: Where are they located in the market? Are
appropriate discount rate (and makes they facing the same profit problems that we are facing?
for clean math) Are we at risk of setting off a price war?
• Geographic: Is there a geography that is growing or
receding in importance?
Key Questions to Ask Key Areas to Understand for Success:
• What is the most attractive product or customer segment?
What is the timeframe for profitability improvements? What are historical trends? How does our portfolio and
position lineup to major competitors?
How long has our trend of declining profitability been
observed?
Risks: brand image, cannibalization, competitor response
Are other companies experiencing similar declines in (price war).
profitability?

New Market / Product Entry
The Basics Is this an attractive market to enter?

• Trends in the Market: Size and growth?
New market or product entry cases require • Competitors: How many? Is there significant consolidation?
that three questions be answered:
• Customers: How are they segmented? What segment is growing the
(1) Is this an attractive market?
(2) Are we positioned to enter this market fastest? What is their willingness to switch products? What is the
successfully? penetration of this product?
(3) What is the opportunity cost of our • Barriers to Entry: Is a large capital expenditure needed? Do scale or
entry? network effects help competitors?
• Products: What is the mix? How is this changing?
• Profitability: Do we expect our entry to be profitable? What are the
Important metrics
expected per unit revenues + costs? What is the investment required
Market attractiveness is typically to begin producing and what is our break-even point?
determined by the future growth potential Key Areas to Understand for Success:
and current competition in a market. • How financially attractive is our potential slice of the pie? Ideally,
we’re looking for a big, easy to enter market with few competitors
Our success is determined by our core and high growth prospects.
capabilities and competitive advantages.
Do we have experience in this market? Do Company Capacities (Internal/External Facing)
our suppliers or customers overlap? There • Products: What is our current market or product portfolio?
could be opportunities for scale advantages • Suppliers: Who are our current suppliers? Will our new entry take
or we could be completely out of our depth. advantage of these suppliers?
• Consumers: Who are our current consumers? Will our new entry
When evaluating entry option, it’s helpful to cross-sell to them?
think about Opportunity Cost. Your • Branding: Does our brand translate well to this new market?
company has a set amount of resources • Channels/Customers: Do we have a developed way for moving this
and spending them on this new market product or entering this market? Will we have to build new channels
entry means that they cannot be spent on for this entry?
the core business. A new product with • Funding: Do we have the necessary cash flow to support expansion?
annual growth of 10% looks great, until you • Talent: Do we have the management and expertise needed for this
flip back to the stem and realize that our new build?
core is growing at 15% annually. Key Areas to Understand for Success:
• Do we have the ability to compete effectively in this new segment?
How to do it
• Acquisition
• Partnership/JV
• Solo Venture
• What is the best way that we can launch this product?
Risks: brand image, cannibalization, competitor response (entry into our

core market)

Mergers & Acquisitions / Private Equity
The Basics Is this an attractive market?

• Trends in the Market: Size and growth?
In an M&A case, a strategic buyer (a • Competitors: How many? Is there significant consolidation?
company) is looking to acquire a company.
• Customers: How are they segmented? What segment is
Typically, strategic buyers are looking for
synergies, scale, and long-term holding. growing the fastest? What is their willingness to switch
products? What is the penetration of this product?
In a PE case, a PE firm is looking to acquire a • Barriers to Entry: Is a large capital expenditure needed? Do
company. PE firms typically hold companies for scale or network effects help competitors?
5-8 years and then sell them to a strategic buyer, • Products: What is the mix? How is this changing?
another PE firm, or put them on the public
markets through an IPO (initial public offering).
• How financially attractive is our potential slice of the pie?
PE firms typically raise funding in advance of
Ideally, we’re hoping that our acquisition has a strong position
purchase and hold a portfolio of companies
in a big, difficult to enter market with few competitors and high
and have expertise in a specific segment of
growth prospects.
the market.
Company Capacities
Organic Growth: Revenue growth that comes
• Profitability: What is the target’s profitability? How do their
from investments made in currently held
revenue/ costs break down? How does this profitability
businesses
compare to the competitors?
Inorganic Growth: Revenue growth that comes • Tangible Assets: What property, plant, and equipment are we
from acquiring another company getting from this acquisition?
• Intangible Assets: What brand and potential synergies are we
Target: The company that will be acquired getting?
• Products: What is the target’s current market or product
portfolio?
Key Questions to Ask • Consumers: Who are the target’s current consumers?
Why are we acquiring this company? Can we • How is this target positioned in the market? Is it an attractive
build this organically? target in an attractive market? We want someone positioned for
growth or for easy cost-cutting.
Are they pursuing other growth strategies?
Risks
Do we have a strong growth record for acquiring • Price: Could there be a potentially bidding war? How much do
and integrating? we expect to pay for this
• Portfolio/Integration Risk: How does this company fit with the
PE/Strategic Buyer’s current portfolio and expertise?
• Opportunity Cost: What else could we be spending our cash
on?
• Exit Strategy: (PE Firm Only) How will we sell?
• Can we get this company for a competitive price and can we
expect to successfully integrate it or sell it successfully?

Chapter 10: Practice Frameworks
Below are thirteen case stems and framework examples. We recommend practicing these in small
groups. Typically, this works best in each person takes a turn reading the prompt, then everyone
structures and compares answers. No two structures should be the same- there are many correct
answers. Remember that the structure should answer the question specifically and have detail specific to
that industry
#1 Due Diligence on Clothing Retail Specialist
A PE fund is thinking about acquiring a clothes retail specialist, leader on the French market. The French
clothing retail market is composed of 2 segments:
• Urban: trendy, high quality, quite expensive
• Suburban: mass market, lower quality, low prices
We only have a few data on the target: total annual sales $800m, 800 stores, 4 brands on both the urban
and suburban markets. The PE fund hired us to help them do the due diligence of the firm, in order to
assess if it’s worth bidding for it or not.
Example #1
Market Company
• Size and growth • Business and revenue model
• Trends • Competitive advantage
• Market segmentation • Specific asset, knowledge, resource,
• Drivers of market capabilities?
o Buyer & supplier power • Key financials and cost structure
o New entrants & substitutes • Management
o Competition
▪ Market share & evolution
▪ Market fragmented or not
• Distribution channel
• Regulation
Example #2
Company non-financial
Market Financials Other
attributes
• Size and • Company profitability • Brand recognition / • Regulation and trade

growth o Revenue positioning policies
• Competitive ($800M); by • Distribution • Synergies with other PE
landscape store / brand • Management portfolio companies
• Geography o Cost structure expertise o Retail industry
(urban/rural (Cost of 800 knowledge/conne
and potential stores) ctions
to expand • PE deal o Operational
outside o Acquisition price efficiencies
France) o Exit plan o Management

#2 Eat Co. Profitability / Turnaround
Our client is a prepared food company known for its tasty and organic products, Eat Co. The company
sells its products in supermarkets for home preparation and also to delis for on-site preparation. Eat Co
has experienced a steady decline in its profits. The company’s main source of revenue is from its deli
products. The deli products segment had revenue of $120 million in the most recent financial year. The
client has engaged us to determine (i) why profits are declining and (ii) how to turn around its profitability.
External Financial Internal

Market growing or shrinking? Are costs increasing? What is What is the product mix?
cost breakdown?
Who are the competitors? Are revenues declining? Is it mismatched with the
market?
What is happening in economy? What are prices vs competition?
Any major trends in market? How are promos/discounts
(e.g., diet changes) impacting sales volume/margin?
What factors influence customer How do products compare to
purchasing behavior? competitors?
#3 Wine Supply Chain
Our client is a winery located in California and they sell wine all over the US. They produce various
marketing materials to be used in the displays in stores where their wines are sold. These marketing
materials are either pushed by the central Corporate Marketing team or pulled by regional sales field
offices. These marketing materials are stored in a central warehouse in Chicago and over time a lot of
obsolete materials have been accumulated. Our client needs our help in reducing obsolete materials and
improving their bottom line.
External Internal
Competitors: are competitors using marketing Mix of corporate and field sales team: who is more
materials in the same way? effective?
Customers: Are customers responsive to How does corporate push materials out?
materials? (Perhaps not the right materials?)
Suppliers: are suppliers efficient? (Perhaps not How does field sales team pull materials?
delivering on time?)
Does corporate or field have more accurate
forecasting?
#4 Office Supply Stores
Our client is Office Supply Stores (OSS), a national office products company with revenue in excess of $7
billion in its last fiscal year. OSS sells various office supplies and services, business machines and related
products, and office furniture under national and private label brands. It also provides high-speed, color
and self-service copying, other printing services, faxing, and shipping services. The company operates
approximately 1,000 brick-and-mortar stores in the United States and Canada, an e-commerce division
and catalog business. OSS has more than 12 million customers, comprising of small, medium and large
businesses as well as individual consumers. Over the past two years, Office Supply Stores has been
experiencing declining profitability. The CEO has retained our firm to help determine what is causing the
problem and how OSS might address those problems.

Market Revenue Costs Customers / Channels
• Industry (industry • Product Mix (poor • Management/Overhead (too • Segments (losing

has seen decline merchandising, sales in many middle managers, more profitable
in revenues, high margin services have higher SG&A costs as customers, change
profits and/or declined faster than lower percent of sales, distribution in mix of business
growth) margin products) costs) and personal
• Competition • Volume (sales have • Store Operations (increases customers)
(more decreased, client is losing in store rent, labor costs, • Channels (sales
competition, such market share to existing shrinkage/theft, renovations decline in stores
as online or new competition or new in store) and catalog, more
players, has entrants) • Cost of goods sold (lower customers
reduced market • Price (discounting in gross margins, price shopping online,
share and response to competition, increases from suppliers, Amazon)
revenue) increased markdowns) higher transportation costs)
#5 Gas Station
Your client is a gas company that operates in a town with a population of 1,000. There is only one other
gas company in this town, and it is 1 mile away. The other nearest gas stations are outside town, and
they are 20 miles away. Recently, our client was approached by a supermarket with the idea of selling
groceries in the gas station. Our client is a simple businessman and has hired us to evaluate this
proposal. What should our client consider?
Revenue Costs Competition

• Increased revenue from • Upfront investment costs • Do other gas stations offer
selling groceries in store such as a freezer, shelves, food options?
• More people coming to buy etc. • What is keeping the grocery
gas from this station instead • Recurring costs such as store from going to sell
of station B labor will likely be minimal; groceries at other gas
• Will there be any profit- can same staff can handle stations as well?
sharing or revenue-sharing gas and groceries?
with the grocery store?
#6 Portable Storage
Your client is a US storage company that rents out storage space at its own facilities. It is considering
entering into the commercial portable storage market where it would deliver the storage unit to you, allow
you to rent it for as long as you need it, and then pick up the container when you are done with it. Your
objective is to determine if the company should enter this market.
Market Financial Impact Considerations

• Existing market size • Costs • Insurance coverage
and trends (growing, o Upfront: additional storage / liability for
shrinking?) containers, marketing, licensing commercial
• Competitor and requirements? products
dynamics o Ongoing: sales and operations • Management/opera
• Target customers team to handle increased workload tional expertise to
(commercial, retail, • Revenue handle two different
office moves) o Prices charged to corporate types of business?
clients; pricing structure could be
one time fee or ongoing retainer
o Anticipated demand for services

#7 Household Cleaners Growth
Your client is a global consumer packaged goods company – Grime Co. Grime Co. makes paper
products (like paper towels), home cleaning products, and laundry care products. The company's Board
of Directors has set an aggressive net sales target of $2 billion by 2020 (four years). Currently, net sales
are at $1 billion. The CEO has come to you to ask for help. Specifically, our client would like you evaluate
the company's position and to help develop a strategy to deliver top-line results of $2 billion by 2020.
Market Growth Organic Growth Inorganic Growth

• Maintain market share in • Price adjustments to drive • Acquisition of competitor or
existing market volume start-ups
• What are market growth • Increased advertising • Joint venture
projections through 2020? • Expansion into new
geographies
• Vertical integration
• Promotions and deals
• Negotiation for better
placement
• New products
#8 College Football
Our client is a public university that is considering adding an inter-collegiate football team to its athletic
program. They have asked us to help them determine if this is a good idea. Their only financial
requirement is to break even.
Financials Non-Financial Impact

• Profitability; does it break even? • Increased exposure and brand
• Revenue awareness
o Tickets; single game and season tickets • Improved college experience
o Concessions
o Apparel / licensing
o TV/ radio broadcasting rights
• Costs
o Upfront: Stadium build/upgrade or rent
• Operating: Coaching staff, athletic scholarships,
equipment / uniforms, travel
#9 Publishing Company
Your client is the CEO of a publishing company producing a line of educational magazines and a line of
women's magazines. Both businesses are profitable but not growing quickly. She wants to start a third
monthly magazine in the US targeted at 25- to 55-year-old men (e.g. GQ Magazine). Her stated goal is
$12 million in circulation revenues in the first year. Should they go forward with the third monthly
magazine?
Revenue from Third Magazine Cost of Third Magazine Other Implications

• Estimate circulation • Initial: equipment, licensing / • Impact on overall brand
o Size of potential trademark, initial marketing • Target demographic
market • Ongoing: COGS (paper, accessibility
o Ability to grow ink), staff to write articles,
circulation editors
• What is market price of this • What economies of scale /
type of magazine (e.g, efficiencies could third
$5/magazine, monthly magazine benefit from (e.g,
editions) distribution channels,
sourcing of COGS)

#10 Office Products
Your client is Office Products Co., which sells office supplies directly to businesses and consumers. It is
direct retailer of office products through two channels: catalogue and internet. This market is growing,
especially the internet. Office Products Co. has experienced historic revenue growth rates of 10%/year;
however, over the past two years, revenue growth has been flat and profit margins have been trending
down. Your job is to figure out what is causing the declining performance and determine wh at the
management should do to turn things around.
Market Dynamic Company Company Dynamics

• Size and growth rates of • Revenue drivers (price, # of • New market entrants
market transactions, $ per • Changes in prices
• Is this something that is transaction), • Changes in channels (e.g.,
happening more broadly or • Cost drivers, customer online sellers with lower
specific to our client? satisfaction overhead costs could drive
prices down)
• Changes in customers
• New substitutes; such as
online presentations and
content rather than
#11 US Financial Services
A major U.S. financial services company has just implemented a Client Relationship Management (CRM)
system. The goal: To give leadership a real time view into the organization’s sales channel. For years,
sales teams have maintained client sales information in separate excel spreadsheets.
This prevented leadership from having visibility into and a holistic view of sales opportunities, which
meant sending multiple requests to sales teams for the latest and greatest information. By the end of
fiscal year, all sales teams are expected to migrate their sales data onto this new system, and use it to
manage all sales information. You are the change management lead for this project. How would you
approach getting everyone on the system?
Stakeholders and Incentives Aligning Incentives Risks

• Management; pushing for new • Rewards: financial and non- • Top-down approach
system to see aggregated results; financial for cooperation could feel out of touch
ensure management is visibly • Recognition: publicly to frontline employees
supportive of change acknowledge those who are • Consistent messaging
• Sales team; change will impact adopting new process, so it doesn’t feel like
their day to day the most; develop recognize desired “just another initiative”
implementation plan that behaviors
accommodates sales needs
where possible to limit disruptions
to their work
o Provide ample training
o Collect feedback
• IT/support functions: will be
critical to success of transition
and new system; work to make
support functions feel heard and
empowered to speed change
along where appropriate

#12 Real Estate Developer
Your client is a real estate developer, Lizette‘s Luxury Properties, and is currently assessing a new
project idea in Costa Rica. Costa Rica has a beautiful coastline which has historically been difficult to
access. The nearest airport was over six hours away. As of last year, a new airport was constructed only
a half hour away. There has been an investment boom in the region due to the increasing number of
tourists (popular with Americans and Asians). The Mandarin Oriental and The Four Seasons, two
prominent luxury hotel chains, were the first to enter this market with a 250-room hotel each. Should your
client invest in the tourism opportunity created by the new airport? Would you recommend that s/he enter
the market?
Financial Factors Other Success Factors

• Does property generate profits? • Client core competencies
o Costs: o Has client worked in beach areas?
▪ Upfront: development costs, With hotels / short term rentals?
▪ Ongoing: staff, maintenance, • Costa Rica market attractiveness
insurance, utilities, etc. o Area safety, including infections from
o Revenues: disease such as Zika could impact
▪ Quantity: anticipated demand, tourism
room fill rate • Barriers to entry: government regulation, is
▪ Prices: what price-level of beach front property available?
rooms? Discounting or longer-
term pricing?
#13 In-Flight Internet
Our client is a start-up with the ability to deliver broadband internet to commercial airlines. How would you
help them think about their offering?
Airline Market Financials Risks

• Size and growth • Structure of deal with airlines; retainer or • Government
of market case by case? regulation?
• Customer • Revenue: • Competitive
segmentation; o Demand for services response (is there
business o Pricing (how sensitive are patent protection?)
travelers vs consumers to price for this
leisure service?)
• Costs:
o Upfront: to install capability in
airplanes?
o Ongoing should be relatively low to maintain
and upgrade networks once it is up and running

Chapter 11: Practice Math
You should expect to do some math in (almost) every case. Below are some tips for acing the math
section and examples of the type of math that you should be familiar with.
Be able to convert percentages into fractions into decimals and vice versa; some cases are easier to
solve with fractions, some with decimals, and some with percentages. Recognizing these will allow you to
easily approximate calculations such as 6/7 (1-0.14 = 0.86) and 5/9 (5*.11 = 0.55) under pressure.
Practice algebra, multiplication and division. Smartphone apps such as “Rocket Blocks” are good for
sneaking in some quick practice on-the-go. Common types of calculations to be comfortable with are
below. Practice a handful of each type of calculation.
• Big division (e.g., 100,000,000 / 50,000) • Market math (e.g., if 500,000 is 20% of the
• Big multiplication (e.g., 50,000 x 15,000) market, how big is the total market?)
• Small multiplication (e.g., 600 x 20) • Growth estimates (e.g., if current revenues
• Percentages (e.g., 35% of 60,000) are $10M and growing at 10% YoY what will
• Percent * percent (e.g., 25% of 80%) revenues be in 3 years?)
Case math should be structured and easy for your interviewer to follow. Practice tabling your math
on blank sheets of paper. Tables should have headers and units should be clearly labeled. An example
table for practicing percentages is below.
Percentage Market Share Market Size Dollar Market Share

5% $800,000 $40,000
80% $90,000
30% $7,000,000
30% $3,000,000
75% $7,000,000
45% $5,000,000
Break it up when necessary. Don’t remember what 15% of 800 is? Take 10% (80), and 5% (40) and add
them together (120).
Don’t forget the distributive property. 627*53 is hard to do, right? But it is the same as
(500+100+20+7)*(53) = 26,500+5,300+1,060+371 = 33,231.
Simplify then solve. Don’t dive into the multiplication, write out the whole equation first. Often awkward
numbers will cancel out. For example, you need the profitability of 150 units sold for $136 each. Each
unit costs $36. You could do 150*136 – 150*36, or you could realize that the per-unit profit is $100 and
multiply that one by 150 – which is easier.
Use mental math shortcuts when dealing with large figures:
• hundred*hundred = 10k (200*400 = 80k)

• k*k=M (e.g., 3k * 6k = 18M, 15M/3k = 5k)
• k*M =B (e.g., 5k * 4M = 20B)
Round where possible. Trying to figure out the profitability if you sell 202 units at $99 each? Ask if it’s ok
to round to 200 units at $100 – often it is!

Chapter 12: Practice Brain Teasers and Market Sizing
Although these are not common case questions, be prepared for some curveballs. Practicing a few of
these will make you much more comfortable should a firm give you one. Like in a regular case interview,
perform the required analysis, then present a clear answer to the stated question!
1. Determine the true economic value of a soccer player in a soccer club.
Behind the scenes: This has been designed to be a very open-ended question and it can be
approached in many ways.
Possible Answers: As always, the “rightness” of a response is a factor of how logically you organize
your answer, and the extent to which the interviewer follows your analysis.
Bottom-up: Look at the player’s characteristics and previous contribution and compare them to those of
other players in a similar position. Also consider the revenues from sales of merchandise associated with
that player.
Top-down: The revenue of the soccer club (for example $100 million) is split between the different players
on the team and other parties.
Considerations: The sum of the economic values of all the players is not equal to the club’s revenue for
two primary reasons:
• A soccer club is guaranteed a certain level of ticket/season pass sales coming from loyal and
passionate supporters regardless of the team’s performance.
• The coach of the team can be very important in extracting the most out of the teams’ players and
as a result should be responsible for some of the club’s revenues.
Potential recommendation: An individual player’s economic value is that players share of the
franchise’s total profits, weighted by that player’s value relative to other players and adjusted to account
for intrinsic value in the soccer club.

2. Calculate the annual revenues of Mercedes Benz in California.
Behind the scenes: This is a market-sizing question in which you need to go through all of the numbers
and your thought process with your interviewer and then deliver your solution.
Interviewer: We are more interested in your logical thought process rather than the actual answer that
you generate.
Possible Answers: Use a series of steps to hone in on an estimate
Estimate the population of California 40M
Estimate average cost of a Mercedes 30K
Estimate # of people who could afford a Mercedes (% of above) 5% 2M
Estimate # of the subgroup who could drive it (% of above) 25% 500K
Estimate market share of Mercedes in luxury car market 20% 100K
Estimate average used lifetime of the average Mercedes 5yrs
Divide the number of people in Mercedes’ market (6) by used lifetime (7) 20,000
This is a good question on which to perform a quick reasonableness check and/or sensitivity analysis. For
instance, “If I am grossly overestimating the % of people who can afford a Benz, and if the actual number
is 2%, that would drop the total number of cars in CA from 20K down to just under 10K cars.
Conversely, Mercedes is an aspirational brand, so people might buy a Benz even if they can’t afford it,
resulting in 10% of the population being able to afford it. I think I could say with confidence that there are
between 10 and 40 thousand Mercedes Benz’s in California.”

Chapter 13: Practice Chart Interpretation
Learning how to interpret charts is an important part of case interview preparation. The following section
has several charts that you can start practicing with. After looking at each chart, write down a couple of
key insights (e.g., our client’s market share is growing in one segment of the market but shrinking in
another segment). Compare your insights to sample insights to see if there was anything you missed.
Online Video Games

Chart type: 100% stacked bar
Your team is ramping up on a new case for a tech client that creates online video games. The associate
hands you the following chart in preparation for a meeting with your manager in 5 minutes to discuss the
company’s costs. What are your thoughts?
• 2/3 of costs came in year 1, should look into potential one-time charges and/or cost cutting
initiatives that took place
• The reduction of ~$5M from year 1 to year 2 is approximately the size of legal expenses, could
the difference have come from one-time legal fees? Large and repeated legal costs seem odd for
a video game company
• Office supplies seem to be a large expense given the nature of the business, similar questions
could arise about one-time costs / cost cutting
• Marketing seems relatively small proportional to the other categories

Local Retail Banking
Chart type: Stacked bar
You are working with a local retail banking client. After categorizing the 2008 full-time employees based
on internal documents, you receive updated figures from your contact at the client. You are sitting with
the partner on the case as the data comes in, what are your takeaways?
• Overall headcount has increased 50% in 7 years, has this been consistent with revenue / pr ofit
growth? We should determine if this growth is consistent with expectations and/or industry
standards
• The majority of the difference has been in Risk Management, which has increased 100%
(doubled). A reason could be the increase in regulation following the financial crisis
• Are the costs for each full-time employee per category similar? In particular, is Risk Management
expensive from a headcount perspective? We should look to determine overall costs per
category
• Ops & Tech remains relatively constant, though it is the second largest category in 2015, down
from the largest in 2008. Is this as a result of more efficient processes or a lack of overall
growth?

Messaging Volumes
You are analyzing messaging volumes on behalf of a large mobile communications client. Your research
leads to the creation of the following graph. What key insights do you deliver to your team at the next
update?
• Messaging volume increased ~20-25% from 2011-2013 and ~30-33% from 2013-2015. This
trend seems to be a promising indicator of the future importance of messaging as a mode of
communication
• Standard texting seems to be the only category that is declining, at around ~20% annually (~0.1B
annual decline)
• WhatsApp is the most frequently used messaging platform, nearly doubling in volume over the 4
years covered
• Facebook Chat and Snap Chat have grown exponentially since 2011, are these the next areas of
growth?
• It would be prudent to scope the overall market to establish a “ceiling” on future growth
• We might want to look at the number of individuals using these messaging services to determine
if the user base is expanding or if usage per individual is driving growth

Headphone Manufacturer
Chart type: Waterfall
Your client is a producer of high-end headphones in the United States, and is looking to expand
internationally. You are working one evening with your manager when the associate on the team sends
across the following chart on the opportunity size for headphone sales in Europe. What takeaways do
you discuss with your manager?
• Country A seems like an attractive market to consider further, sales look to be ~50+% of the six
countries presented
• Since there are more than six countries in Europe, we should check the selection criteria with the
associate - are these the largest sales opportunities, areas the client has capabilities to enter, etc.
• Country E has the same approximate sales as country F, yet triple the growth, we should look
into the reasons behind this to determine what drives demand
• Country A has a large estimation error, even for its size, we should double check the components
of the estimate and the impact of over/under estimating
• The top 3 countries comprise ~90+% of sales, we can focus on them first and narrow the scope
of our future analysis
• Next steps would include looking into the composition of each of these estimates to determine
what segments generate the most sales (high-end vs low-end headphones) and if there are any
macro-economic considerations that could be driving demand. We could look into competitors in
the space, the cost of entering each country, price per headphone type, etc.

Developing Country Loan Market
Chart type: Mekko
Your client is an international bank with strong presence in a small developing country. An analyst on
your team has prepard the following chart on the loan market in this developing country. What are the key
insights that you can draw from this chart?
• ClientCo is a threat in all segments of the loan market

• SavingCo is a strong competitor, dominating three segments
• The SME market is attractive, making up over 40% of the total loan market
• The credit card segment is still very small – does this present an opportunity for the future?
• Mortgage segment may be attractive due to significant segmentation
• The total loan market in this country is $20B

Compnay-to-Industry Analysis
Chart type: Relative Market Share / Return on Sales (RMS/ROS)
The CEO of your client believes that her company is underperforming relative to the industry as a whole.
You see the chart below in an industry summary presentation prepared by the senior consultant on your
team. What do you think?
• ClientCo is the leader in terms of market share, with sales almost 2x those of its second biggest
competitor
• There is a strong correlation between market share and profitability
• Given its strong market share, ClientCo appears to be underperforming relative to its profit
potential
• Alternatively, there may be a problem with the definition of ClientCo’s business vs. the
competitors listed in the chart (e.g., does ClientCo compete in different geographic markets; does
ClientCo have business lines that don’t compete with the other competitors on the chart?)

ClientCo EBIT Margins
Chart type: Bar chart
A friend who is on the board of a large CPG company is concerned because the company’s EBIT margins
have shrunk over the past few years. He shows you the charts below. What would you tell him?
• ClientCo’s EBIT margin has clearly fallen over the past few years. The driver of this decline is the
fast growth of the lower margin value segment combined with the slow growth of the higher
margin premium segment
• Margins within each segment have remained relatively steady
• Although profit margins have declined, return on assets has increased. This suggests that the
value segment is a less asset-intensive segment to serve

Net Income Waterfall
Chart type: Waterfall
Your manager is concerned because your client has reported net income that is $19M lower than it was
last year. You’ve asked the analyst on your team to prepare a waterfall chart to bridge last year’s net
income number to this year’s reported net income. What would you tell your manager?
• Most of the decline in net income for the year was due to increased interest expense. Operating
profits were flat.
• Pricing had a negative impact on net income while volume had a positive impact, suggesting that
the company may have cut prices in order to gain market share

SG&A Analysis
You have just been staffed on a project that is focused on improving the profitability of a manufacturing
company’s aircraft division. Your workstream is focused on SG&A reduction and you are given the chart
below. What are your initial thoughts?
• General & Administrative as a % of revenue seems high for the aircraft division, suggesting
potential to cut costs in that area
• The shared corporate overhead allocation is low for the military division relative to revenues. The
corporate overhead must be allocated by a measure other than % of sales. We should look into
how corporate overhead is allocated across the three divisions

Chapter 14: Additional Reference Materials
We understand that all of you come from different jobs, majors, geographies, and life experiences. Some
of you may be more comfortable than others with talking about the challenges facing supermarkets or with
the specific language of consulting. This chapter is meant as a resource to help you understand terminology
and broaden your business knowledge.
General Resources
• Sloan Classes: Your classes are some of your most helpful learning opportunities.
Microeconomics is invaluable, as are Accounting and OP. Listen in class, contribute, and don’t be
afraid of asking questions. It’s better to learn the difference between Net Income and Operating
Profit in class than to encounter it cold in a case.
• Outside Reading: Favorite publications include: The Wall Street Journal, The Economist, The
Financial Times, and Pitchbook. Don’t read to learn about what’s happening- interviewers
rarely give you a pop-quiz about recent events and are uninterested in a factual robot. Read to
understand the lexicon of business and the basics of popular industries.
• Lectures and Lunches: Attending recruiting lectures for other industries is a great way to learn
about them and to pick up the language that they use to describe their operations.
• Your Peers: Some case groups had members give 15-minute pitches about the industry and
functions that they previously worked in. It can be a great way to get to know each other and to
better understand a wide variety of companies.
Glossary of Common Terms:
Barriers to Entry: Things that make it difficult for a new company to enter and compete effectively
against companies already established in the field. They benefit established firms and inhibit potential
entrants. Examples: patents, trademarks, copyrighted technology, a dominate brand.
Benchmarking: Gathering information about other companies in your industry to compare your
performance against them.
Blue Sky: An entirely open market or products segment that it not served by competitors.
Bottom-Line: The bottom line of the income statement (i.e.,Net Income Available to Shareholders).
When a company wants to increase their bottom line, they want to increase revenue or decrease
expenses (i.e., increase profits).
Brand Integrity: Be careful not to price too low, as doing so could compromise the reputation of the
brand.
Break-Even Point: The point at which revenue matches costs for a new product. This may or may
not include allocated fixed costs per unit, so use all information on hand.
Consumer Price Index (CPI): Changes in CPI are used to assess price changes associated with the
cost of living. CPI is one of the most frequently used statistics for identifying periods of inflation or
deflation. The CPI is calculated by taking price changes for each item in the predetermined basket of
goods and averaging them; the goods are weighted according to their importance.
Cost of Goods Sold: COGS, the direct costs of a product (e.g., costs to purchase or produce) that a
company then later sells.
Discount Rate: Rate used to calculate the present value of future cash flows.
Discounted Cash Flows (DCF): Future cash flows multiplied by discount factors to obtain present
value.

Double Marginalization: Monopolists at multiple stages in the value chain each marks up prices,
producing higher prices to the consumer. Also called ‘double markup’.
Ed : Elasticity of demand. It considers the impact of changes in price on changes in quantity
demanded. You might also see elasticity come up in charts or graphs that you are shown.
Fiscal Policy: Government spending policies that influence macroeconomic conditions. These
policies affect tax rates, interest rates, and government spending in an effort to control the economy.
Fixed Assets: Expenses that don't change based on production or sales volume. These include
salaries, rent, insurance, etc.
Gross Domestic Product (GDP): The monetary value of all the finished goods and services
produced within a country's borders in a specific time period (usually annually). GDP is commonly
used as an indicator of the economic health of a country, as well as to gauge a country's standard of
living.
Gross Profit: Sales - COGS. Gross Margin= Gross Profit/ Total Sales. This is an indicator of sales to
profitability.
Inflation: The rate at which the general level of prices for goods and services is rising and,
subsequently, purchasing power is falling. As inflation rises, every dollar will buy a smaller percentage
of a good. Most countries' central banks will try to sustain an inflation rate of 2-3%.
Internal rate of returns (IRR): Discount rate at which investment has zero net present value.
Lagging Indicators: A measurable economic factor that changes after the economy has already
begun to follow a particular pattern or trend. Some examples are unemployment, corporate profits and
interest rates.
Leading Indicators: A measurable economic factor that changes before the economy starts to follow
a particular pattern or trend. Bond yields are typically a good leading indicator of the market because
traders anticipate and speculate trends in the economy.
Market Share: The percentage of the total market for a good or service that a company holds.
Monetary Policy: The actions of a central bank, currency board, or other regulatory committee that
determine the size and rate of growth of the money supply, which in turn affects interest rates.
Money Supply: The entire quantity of bills, coins, loans, credit, and other liquid instruments in a
country's economy.
Monopoly: While such firms have significant control over prices, monopolies are also faced with
downward sloping demand curves implying that an increase in price will result in a lower sale volume.
 1
Monopolistic profit maximization is governed by the relationship MR = MC = P1+ where Ed is
 Ed 
the elasticity of demand. Note that if the demand is highly elastic then there is little advantage to
having monopoly power since MR = MC = Price (i.e., the same as that of a price-taking competitive
firm). Even if demand is inelastic, monopolistic firms must be careful in their pricing so that the market
does not become too attractive, thus inducing new market entry and competition.
Multiples: A valuation theory based on the idea that similar assets sell at similar prices. This assumes
that a ratio comparing value to some firm-specific variable (operating margins, cash flow, etc.) is the
same across similar firms. In other words, the theory is that when firms are comparable, we can use
the multiples approach to determine the value of one firm based on the value of another.
Net Present Value (NPV): A project’s net contribution to wealth is equivalent to the present value of
cash flows minus initial investment. This is the most preferred form of valuation by academics.
Oligopoly: This occurs in highly concentrated industries with significant barriers to entry. Firms have
marginal control over prices and must consider rival firms’ behavior to determine the best policy.

Resist the urge to cut prices; your competition will likely match your price cut, and you’ll both lose.
Bring game theory into play.
Opportunity Cost of Capital or Hurdle Rate: Expected return that is foregone by investing in a
project rather than in an alternative investment.
Payback Period: amount of time in which project should recover its initial investment.
Perfect Competition: Without any product differentiation, a firm will be a price taker. A competitive
firm’s demand curve is horizontal, and its elasticity of demand is infinite. MR = MC = P.
Perpetuity with Growth: A cash flow (CF) per year given that grows at a constant rate of g given a
discount rate of r is
Perpetuity: The value of a constant cash flow CF per year given a discount rate of r is
Present Value: The current worth of a future sum of money or stream of cash flows given a specified
rate of return. Future cash flows are discounted at the discount rate, and the higher the discount rate,
the lower the present value of the future cash flows.
Price Discrimination: Consider methods to enhance and support price discrimination, which allows a
firm to charge different customers different prices (e.g., charging higher prices to customers with high
willingnesses to pay)
Pricing Tactics: Consider using tactics such as “loss leaders” or “traffic builders”.
Producer Price Index (PPI): A family of indexes that measures the average change in selling prices
received by domestic producers of goods and services over time. PPIs measure price change from
the perspective of the seller.
Profitability Equations:
• Profit = Total Revenues - Total Cost
• Total Revenues = Price*Quantity
Total Costs = Fixed Costs + Variable Costs
Risk-free rate: The risk-free rate represents the interest on an investor's money that he or she would
expect from an absolutely risk-free investment over a specified period of time. Investors commonly
use the interest rate on a three-month U.S. Treasury bill since there is virtually no risk of default.
SKU: Stock keeping units, typically a retail term. Wal-Mart has around 100k SKUs in a typical store.
More SKUs= more variety and more customer types served, but this adds significant logistic costs.
Stagflation: A condition of slow economic growth and relatively high unemployment - a time of
stagnation - accompanied by a rise in prices, or inflation. Stagflation occurs when the economy isn't
growing but prices are.
Time: Consider the long-term and dynamic effects of pricing decisions. Demand may be inelastic in
the short run, but elastic long term (remember automobiles vs. gasoline).

Chapter 15: How to Use the Mock Cases
How to Be an Effective Interviewer

• Stay in the role of an Interviewer:
o Play the role of a consultant who is evaluating the candidacy of the person across the table.
o Don’t give data away. Let the Candidate ask for data on their own. Ask guiding questions only
if the Candidate is stuck for long.
o Pressure the Candidate to be specific when performing analyses, running calculations or
making recommendations.
• Respond to questions with questions:
o If the Candidate is fishing for data or direction, or if you feel that you’re being too easy on the
candidate, try answering questions with questions of your own, such as “What do you think?”
“Are you sure?” “Can you be more specific?” “Why do you need that data?”
• Take notes:
o Interviewers will often take notes during interviews. This can be disconcerting, especially
when the interviewer starts scribbling while you know you’re babbling. You want your
classmates to be ready for this situation and you want to remember specific instances for
improvement during the case.
• Give Precise and Meaningful Feedback:
o Use the feedback form on the next page to provide feedback to candidates for both
behavioral and cases. Make sure that you answer the following questions when giving the
candidate feedback.
▪ Was the initial structure effective? Did the Candidate refer back to it during the case?
▪ Was the Candidate structured throughout the case?
▪ Was the Candidate action oriented? Did they drive the case?
Sloan Values and Integrity
We base our casebook on real cases because we believe doing so provides you with the most effective
preparation material. We do not base our book on real cases to give you an unfair advantage in the event
that you are given a case in an interview that you have already seen during interview preparation. In fact,
using real cases means you may face tests of your integrity.
Consulting firms detest dishonesty. If they discover during or after an interview that you willfully received a
case with which you were familiar, you will not get the job, your reputation will be irreparably damaged
with that firm and other firms, and the MIT Sloan community will suffer from your lack of integrity.
If you hear a familiar stem, pause the interviewer and say “I’m sorry, but this sounds familiar. I
think I may have received a similar case from one of my peers during a mock interview. Could you
give me another case?” The interviewer will gladly give you another case. They have plenty to choose
from.
Do not try to get away with taking a case that you already prepared.
Earn your internship by cracking a new case on the first shot.

MIT SLOAN MANAGEMENT CONSULTING CLUB
Name of Candidate:
Interview Preparation: Evaluation Form
Please try to provide feedback on all the areas! Date:
BEHAVIORAL QUESTIONS
Leadership & Problem- Results & Passion &
Did it address… Additional feedback
collaboration solving impact enthusiasm
Question 1
CASE EVALUATION

Chapter 16: Case Type Matrix
The casebook includes a number of different types of cases to give you exposure both to different types
of cases, and different industries. Although you do not need to do all of the cases, we encourage you to
use this matrix in order to track your practice and ensure you have done different types of cases.
CPG/Retail Fin Healthcare/ Industrial Private Tech

Services Pharma Goods Equity
Profitability
Improvement
New Market
New Product
M&A
Operations
Competitive
Response

Chapter 17: Cases
The MCC Casebook can be overwhelming. As a starting point, MIT Sloan MCC recommends consulting
applicants complete these cases as part of their preparation process. While everyone’s casing process
is different, in our experience these cases represent the MINIMUM level of practice needed to
competently execute an interview.
We strongly encourage you to go beyond this selection.
Easy
• Bain Dairy Farm
• Bain Nantucket Ice Cream
Medium
• Bain VAT Tax Processing
• BCG Ferret Rabies Vaccine
• McKinsey Quentin Tarantino
Hard
• Bain HDTV Remote
• BCG Antidepressant Pricing
• EY Marlin Toys
• McKinsey Maldovian Coffins
• McKinsey Dinosaur

1. Electrical Utility Co. (Bain Mock, Industrials, Profitability,
Quantitative)
Stem
Our client is an electrical utility company that had negative earnings last year due in large part to a one -
time write-off of bad debt. Our client operates in what is essentially a perfectly competitive market with
30+ competitors. The way our client’s industry works is this: customers typically have 12-24 month
contracts and incur minimal switching costs when moving from one electrical utility company to another.
Our client has brought us in for two reasons: (1) to figure out why profitability has fallen and (2) to help
them improve profits going forward.
Provide the following information only if asked: our client does not generate its own electricity and instead
re-distributes it.
Structure
A good structure should include Profitability and Electrical Utility Market Dynamics. The structure can also
include other things such as Firm Capabilities or Customer.
Part 1 – Profitability
Candidate: I’d like to understand more about the revenue model. Do you have any information on the
price point or demand for our client’s services?
Interviewer: Great question. Our client charges $0.10 / kwh for its services, which is in line with the
market rate over the last few years. On the quantity side, our client currently serves ~1M customers per
year and has for the last several years. Furthermore, the demand for each house has remained steady at
1000 kwh / month.
Candidate: Thanks. So, it seems that our client’s price is in line with the market, which makes sense
since this market is very competitive. Also, it looks like quantity hasn’t really changed at all either. Given
that price and quantity haven’t changed much, I’d like to turn my attention to the firm’s cost structure.
Interviewer: That sounds great to me. What do you think some of our client’s key cost drivers are?
Candidate should structure his or her cost drivers into Fixed Costs and Variable Costs. Some fixed costs
include salaries, SG&A, and regulatory fees. Some variable costs include electricity, marketing,
installation, fees to the grid, and customer acquisition costs.
Interviewer: Perfect. What do you think the most important cost drivers are?
Candidate should hone in on the fact that energy costs are the highest.
Interviewer: Correct, energy costs are the largest. In fact, our client makes a 10% margin on electricity
transmission. What else?
Candidate should clue in on the fact that acquisition costs and churn are important costs since this is a
highly competitive market and switching costs are low.
Part 2 – Customer Lifetime Value

Interviewer: Great. I have a little more information about the economics of the firm. First, our client’s
relationship with a customer can be broken down into three stages: (1) sign-up, (2) on-flow, and (3)
termination.
During the sign-up phase, our client pays $50 to sign up a customer, which is an all-in figure that includes
things like installation, marketing, salaries, etc. Worth noting is that if a customer has a low credit score,
our client collects a $100 refundable deposit.
During the on-flow stage, our client pays $7 per month to service a customer.
For the termination phase, our client has two types of customers: good customers and bad customers.
Good customers pay their bills on time and leave with zero balance. Bad customers on the other hand do
not pay for their last two months. After two months of unpaid service have elapsed, our client will
disconnect a bad customer from the grid, incurring a cost of $75. At this point, a bad customer may
choose to restore his or her service or not. If he or she chooses to restore service, the customer must pay
the two months’ outstanding balance as well as a $100 reconnection charge. If the customer does not
restore service, our client sends the customer to a debt collector at a cost of $50 per customer. The debt
collector has a 50% success rate in collecting a customer’s outstanding payments.
What I would like you to do is calculate the customer lifetime value of a bad customer who c hooses not to
reconnect his or her service. Assume the customer originally signed a two-year contract.
Candidate should identify all costs and revenues. This question can be particularly tricky because
Interviewer intentionally leaves out revenue information (which can be calculated with information
previously given in the case) and cost-of-energy information (ditto). Do not provide the table below to
Candidate.
Costs Amount Notes Revenue Amount Notes

0.10/kWh * 1000
hr/mo * 22 mo [Note:
Sign-up 50 Electricity 2200 22 mo instead of 24
mo since last 2
months are unpaid]
0.09/kWh * 1000 hr/mo Refundable

Electricity 2160 100
* 24 mo deposit
Expected
200 outstanding
Revenue
Overhead 168 7/mo * 24 mo 100 balance * 50%
from debt
success rate
collector
Disconnection
75
fee
Termination
50
fee
Total 2503 Total 2400
Candidate should end up with a customer lifetime value of -103.
Candidate: Looks like the customer lifetime value is -103. Wow – right off the bat it looks like these
customers could be contributing to our client’s profitability issues. I’d love to learn a little bit more about
how prevalent these bad customers are.

Part 3 – Customer Segmentation
Interviewer: I actually have some more information on that. Why don’t you take a look at this breakdown
of our client’s customer base and let me know what you think?
Candidate: Wow! The first thing I notice is that half of our client customers are unprofitable and 30% are
wildly unprofitable. Given our client’s objective, I’d like to think about what we can do to improve
profitability.
Interviewer: Sounds good to me. What are your thoughts?
Candidate should structure his or her brainstorming in a logical way such as Increase Number of Positive-
Value Customers vs. Decrease Number of Negative-Value Customers. Some ideas for increasing the
number of “good” customers include: reducing the sign-up fee (for medium and above credit scores),
introducing “loyalty” bonuses, try to differentiate the service through high quality, etc. Some ideas for
decreasing the number of “bad” customers include: increasing the sign-up fee (for low credit scores),
charge a higher deposit, re-examining marketing channels, etc.
Part 4 - Recommendation
Interviewer: That all sounds reasonable. So, our client just walked in – what is your recommendation?
Candidate: You asked us to do two things: (1) determine why profits are falling and (2) come up with
ways to improve them. First, profits have fallen largely due to churn and your customer mix. We
determined that 50% of your customers are unprofitable and 30% are worth -$350 each. In order to
improve profitability, we recommend you decrease the number of negative-value customers by raising
your deposit and increase the number of positive-value customers by introducing loyalty bonuses. In
terms of next steps, I’d like to analyze which of these strategies to implement first. In terms of risks, it is
possible that these changes might invoke scrutiny from regulators or upset the general public. That said,
improving your customer segmentation looks like a great way to improve your firm’s profitability going
forward.

2. Tiger (Bain Mock, Private Equity, M&A, Balanced)
Stem: Our client is a PE firm that is interested in potentially acquiring a company called Tiger. Tiger is a
fashion hair products company who has seen strong EBITDA growth for the past 5 years. Tiger’s internal
team anticipates strong topline growth for the next few years to come. Should our client purchase Tiger?
Candidate: Are there any secondary considerations that we should be taking into account when
determining whether our client should purchase Tiger?
Interviewer: Yes. The client is looking to minimize capital expenditures.
Phase 1: Framework
Candidate: Would you mind if I took a moment to structure my thoughts on the matter?
Interviewer: Not at all! Take your time.
The candidate should create a framework that includes specifics about the company’s financial and
operating performance, the overall market for fashion hair products, and overall risks of acquiring this
company.
Phase 2: Analysis
Candidate: I would like to start by looking at the company. Do we have any data on the company’s
EBITDA?
Interviewer: Yes, we do!
(Interviewer shows first graph)
EBITDA: 9% 10% 12% 14% 9%
Candidate: It seems as though the EBITDA has dropped off in 2010. I would love to dive in further to see
what the root cause of this decline was.
Interviewer: That sounds like a great idea. Let’s first examine the market though.

Candidate: Interesting, so it seems that Salons, while historically the biggest distribution channel for hair
products, has plateaued over the last 5 years. If possible, I would like to examine some issues with the
decline in EBITDA margin and see how these distribution channels might be related.
Interviewer: That makes sense.
(Hand graph of distribution channels for Tiger as well as the cost breakdown)
(in M)

Candidate: Wow. The price has a 33% haircut in Drug stores. I would like to run a breakeven analysis for
drug stores to see if this 10M unit increase in that channel has created the EBITDA decline for TIGER.
Price / bottle = $5.00

VC / bottle = $4.50
Contribution / bottle = $0.50
Quantity of bottles at Drug Stores = 10M

Contribution before Fixed Cost = $5M
Fixed Cost = 5M
Client is currently breaking even at Drug Stores
Interviewer: Very good. I think that might just be the root of the problem. What are some ways you can
think of to improve EBITDA?
Candidate should focus on revenue improvements and cost. An appropriate breakdown is as follows.
Revenue side: Enter grocery stores because it has 5% CAGR. Also add marketing to salons. Could also
raise prices in drug stores if low price sensitivity.
Cost side: Abandon Drug Stores. Could also cut Sales and marketing within drug stores to increase the
margin. Improve technology to optimize processes.
Phase 3: Recommendation
Do not buy the company, because the overall status of Tiger is negative. The Salon market is stagnant
and that has been the cause for most of the growth in EBITDA so far. Also, pursuing revenue options
such as entering grocery stores requires much capital expenditure, which our client is trying to avoid.

3. Commercial Airline Amenities (Bain R1, Transportation, New
Product, Balanced)
Stem: Our client is a commercial airline that is planning to upgrade their on-board amenities during the
next round of plane purchases. They have already decided to provide on-board wi-fi for their passengers
and are considering adding individual entertainment screens for each passenger. They have asked Bain
to evaluate the proposal.
Phase 1: Framework
Interviewer: What would you consider in your evaluation?
Candidate: Before I proceed, can I clarify what is the goal of the upgrade? Is it purely profit-driven?
Interviewer: Well, that is a main goal. What other drivers would you think would cause the airline to
consider such a project?
Candidate: The airline could consider it as an additional revenue stream on its own, or to provide the
service at cost to differentiate themselves from the competition and increase overall number of tickets
sold.
Interviewer: That’s good. Let’s see where the analysis will take us. How would you think about the
project?
Candidate: Since we’re considering profitability, I would like to consider the project on its own:
- Revenues:
o Quantity
▪ Increase in total passengers
▪ Number of passengers who would purchase the additional entertainment
(dependent on length/time of flight? Class of service?)
o Price
▪ Proposed price of entertainment service
- Cost
o Fixed Cost
▪ Fixed Cost of installing entertainment system
▪ Depreciation period (or period before a replacement is needed)
o Variable Cost
▪ Subscription costs to provide entertainment
In addition, I would like to consider the project in relation to the firm and its competition:
- Company
o Synergies? (with wi-fi to be added, or existing services – possibilities for bundling?)
o Other alternatives to provide entertainment?
- Competition
o Other companies offering similar service? Customers expect similar or lowing pricing?
Interviewer: That’s good. Where would you like to start?

Candidate: I’d like to examine if there would be demand for the proposed entertainment system – both in
terms of the existing customers, as well as the competition from other airlines flying the same routes. For
example, a short flight of less than 1 hour or red-eye flights would probably not have passengers who
would care to pay for in-flight entertainment. Also, if there are competitors flying the same route, this may
be an important feature to help the client differentiate.
[At this point the interviewer may ask how the candidate would choose a route to pilot the service.
Alternatively, the interviewer may also ask alternatives for how to monetize the service – higher price in
tickets or pay-per-use, as well as the pros and cons of each. In either case, the interviewer would proceed
with the following.]
Interviewer: Let’s examine one route as an example – it’s a 4-hour direct flight along the East Coast.
There are 4 flights a day, seven days a week. Luckily, there is no direct competition f or our client along
this route.
Candidate: So that would mean that the added system is not going to be bringing in a significant number
of new customers, but existing customers may be enticed to pay for the service. The overall goal then is
to potentially use this as a new revenue stream for the airline.
Phase 2: Analysis
Interviewer: I’d like to have you do the calculations for one plane. The cost of installing the Wi-Fi per
plane is $100,000. Cost of providing Wi-Fi is $50 per flight. Cost to install the in-flight entertainment
system is $15,000 per seat. Both systems will fully depreciate after 10 years. Subscription for the
programming is $90,000 per plane per year. You may assume a negligible discount rate. The average
capacity of each plane is 300 seats. Each plane flies 4 flights a day.
In addition, here’s some data from a customer survey that the client did last month about the proposed
on-board amenities. What can you tell me about how the client should price the proposed service?
Candidate: You’ve mentioned that the capacity of each plane is 300. What’s the average occupancy for
each flight?
Interviewer: Good question. You may assume that each flight is 80% full.

Candidate:
- Ignore cost of Wi-Fi since the client has already decided to go ahead with it
- Fixed cost per plane per year is (Depreciation) 300*$15,000/10 + $90,000 = $540,000/plane/year
- Average number of passengers per flight = 0.8*300 = 240
- Assume 50 weeks per year (candidate should ask if this is acceptable)
- Table calculates profit for a single plane per year
Price # customers Total Rev/flight Total Rev/year Profit/yr
Free 204 $0 $0 -$540,000
$2 168 $336 $470,400 -$69,600
$5 108 $540 $756,000 $216,000
$8 48 $384 $537,600 -$2,400
From the calculations, it can be seen that the optimal price would be $5/flight.
Note: If the candidate did not mention alternatives to the in-seat entertainment system, the interviewer
would have either ended the interview at this point and asked for a summary, or would have asked for
other considerations in the pricing.
Phase 3: Alternatives/Conclusions
Interviewer: I’d like to examine something you mentioned earlier about alternatives. What options do you
think the company should consider?
Candidate: iPads plus an app to stream entertainment. The objective is a way for the airline to provide
entertainment you can charge for. The airline is already providing Wi-Fi. Passengers then can either rent
an iPad for the entertainment with a bundled pricing to get Wi-Fi as well, or you could have frequent flyers
get the app on their iPads for free which would allow you an additional avenue to reward frequent flyers.
The iPads would be cheaper to install and replace (~$600 per iPad, versus $15,000 per s eat; if there is a
need to replace or repair, much easier to replace a single iPad than to fix something that is physically
attached to the plane)
Interviewer: Right, we’re going to meet the CEO who has asked for an update. What do you tell her?
Candidate: I recommend that the inflight entertainment system be implemented, not by the proposed in-
seat entertainment system, but by iPad rentals, coupled with the proposed Wi-Fi installation, leading to
significant cost-savings, and increased potential profits.
Note: The candidate impressed the interviewer with a unique alternative that was not within the original
proposal and backed it up with strong reasoning, while tying it back to the original aim of the client, which
was to increase profits.

4. Commercial Real Estate (Bain R1, Fin Services, Profitability,
Balanced)
Stem: Your client is a commercial real estate brokerage that focuses primarily on Class A buildings. The
basic way the real estate market works is there are Class A, B and C buildings, which correspond to the
quality and facilities of the buildings. There’s also the residential market, and our client has considered
high volume apartment buildings, but isn’t sure if this is a good place to be. As a brokerage, our client
doesn’t own any properties, but rather acts as the intermediary between the buyer and seller. It’s now
2008. Last year they had revenues of $500M, and they’re wondering just how bad it’s going to get and
whether they need to be worried. This is particularly worrisome for them because they recently acquired
another company, and are running lower on free cash to cover any short-falls in business.
Interviewer: What do you think are some of the drivers of profitability in the industry?
Candidate should be sure to use a general profit structure to determine the drivers of profitability, but the
candidate should also be sure to include specifics of the industry and information from the stem. Some
suggested answers:
Industry: Trends, Competitors, Segments (Location, etc.)
Revenues: Price of the buildings being sold, commission rate, volume of new construction,
general economic trends, quality of buildings being constructed, occupancy rates, mix of
commercial vs. residential, types of businesses present in the region.
Costs: Salary expense, bonus payments, IT & overhead costs, possibly sourcing/lead costs,
insurance.
Interviewer: Last year they sold 2,000 properties, and have a commission rate of 5%. What was the
average price of properties sold?
Candidate: We know they have revenues of $500M, so we can figure out the average price given these
two extra data points by using:
So average price is going to be total revenues divided by the # of properties times the commission rate,
or 500 / (2000 *.05) = $5 million is the average price of properties.
Interviewer: So, it turns out this is in the top quartile of commercial real estate. Given the economic
climate, do you think this is a good place to be?
Note: There are plenty of acceptable answers here, just make sure the candidate approaches the
problem in a structured manner and arrives at a solid conclusion. Make sure he/she takes a stand – push
back and even play devil’s advocate.
Candidate: In the current economic environment, this is going to be one of the worst places to be. The
primary reasons are:
1. The client’s customer base likely includes companies that are sensitive to large economic
fluctuations: law firms, consulting firms, investment banks, etc.
2. As clients reduce costs, one of the first places is to cut back on premium office space and reduce
rent expense.
3. Their business as a brokerage is based on change: either companies trading up, since they’re in
the premium space, or with new companies entering the regions they cover, or new buildings
being built. It is unlikely any of these will be happening during a recession. The brokerage could
also be left with many properties available for long lengths of time as a result of companies
trading down.

Interviewer: Interesting. We’ve run some analyses, and have a forecast that volume is going to decline
about 25%. Will they still be profitable?
Candidate: What is their current cost structure? We also need to know what costs are fixed vs. variable
to appropriately project profitability.
Interviewer: Absolutely! Total costs last year were $400M with 50/50 split between variable and fixed.
The variable costs are compensation, which is entirely commission based, so it moves directly in
proportion with revenues.
Candidate: With a volume decline of 25%, they will now be selling 1,500 properties. If we assume that
the average price stays the same at $5M per property and their fees stay at 5%, then we have total
revenues of 5% * 1500 * 5M = $375M.
On the cost side, we have $200M of fixed costs (50% of $400M last year). Last year we had $200M of
variable costs on $500M of revenues, so this year there will be $375 * 2/5 = $150M of variable costs, for
total costs of $350M.
(Another approach would be to realize that with a volume decline of 25%, revenues would be 75% or ¾ of
$500M = $375M. Knowing the variable cost portion is $200M, one could take 75% or ¾ of $200M for
variable costs for this year of $150M. Adding this to fixed costs of $200M, this would result in total costs
of $350M)
Therefore, total profitability will be $375M - $350M = $25M in profits. This is just a quarter of the $100M in
profits they made last year. It is interesting to note that a 25% decline in volume actually leads to a 75%
decline for the bottom line. (This could also be stated as: the hit to top line revenues resulted in a 3X
effect on bottom line profits)
Interviewer: Exactly. Now we’ve also examined the pricing, which we expect to decline 20% on top of
the 25% decline in volume. Are they still profitable?
Candidate: Definitely doesn’t seem like it, but let’s run the numbers. We have average price falling to
$4M now. So total revenues will be $4M * 1500 * 5% = $300M.
Variable costs will be 2/5 * $300M = $120M (another approach would be to take 4/5 of the already
decreased variable costs of $150M: 4/5 * $150M = $120M), since this is all compensation for the brokers
and depends not only on the volume of buildings they sell but the price they get as well.
Fixed costs remain at $200M, so total costs are $320M compared to revenues of $300M, so they lose
$20M in this case. Not profitable, and definitely not good.
Interviewer: So, what might they do to get through the next several months?
Candidate: Well, they have a couple of options:
1. Enter a new business line, maybe residential or lower class buildings, unlikely to solve their
immediate problems
2. Look for opportunities to reduce fixed costs (decrease office space by asking employees to work
from home, minimize extravagant travel expenses, layoff support staff, shop around for new
insurance quotes, etc)
3. Ask for brokers to take a lower commission rate in exchange for increased likelihood of keeping
their job because the company is less likely to go under.
4. Sell the company they recently acquired
5. They could try to form a JV of some sort where they get cash in and provide some form of
proprietary service or data to their partner, or a stake in the business.
6. Look for a strategic buyer. Either a cash-rich competitor or a private equity firm.

7. Enter into chapter 11 reorganization. Unlikely to be successful as their business is driven by their
brokers’ relationships
Given the immediate nature of their problem, a JV or strategic buyer are likely to be the best options.
Interviewer: Turns out, they identified selling a minority stake as the most viable option. Now switch
perspectives, you’re the PE firm, what are you thinking about when considering this purchase? You
already know everything we’ve discussed about the numbers.
Candidate: I would primarily think about the following…
1. What price am I paying? Is it reasonable or even advantageous given they’re distressed?

2. When do I expect an economic recovery to kick in, and what will that mean for this business?
Does it lead or lag a recovery?
3. How good is the management currently in place? Will I have to find people to replace the
management?
4. What are my competencies in commercial real estate? Is this something I know where I could
stimulate the business?
Interviewer: Great.

5. Dairy Farm (Bain R1, Private Equity, M&A, Balanced)
Stem: Our client is a private equity firm deciding whether or not to invest in a dairy farm in Iowa. The farm
only produces milk. The client doesn’t have any investments in the dairy industry or in farming more
broadly. Should they purchase this dairy farm?
Phase 1: Competitive Environment
The interviewer should reveal the following pieces of case information when asked an applicable
question:
Dairy farming is a localized market:

● Bonus points for candidate who brainstorms why this might be true (e.g. spoilage during
transport, government restrictions, and co-operatives)
● Our potential target competes with other dairy farms in the same area in Iowa
Competitive sizes:
● Our potential target has 10,000 cows
● Competitor 1 has 7,500 cows
● Competitor 2 has 2,500 cows
Market shares:
● Our potential target produces 100 units of milk per cow
● Competitor 1 produces 80 units per cow
● Competitor 2 produces 50 units per cow
Not all cows produce the same amount of milk (bonus points to the candidate for asking this
question!) Cows produce more milk when they are happy – when they are more comfortable
being milked and when they are milked faster.
Candidate should synthesize the above data into a chart such as this:
# of cows Units/cow Total units Market share
Potential Target 10,000 100 1M > 50%
Competitor 1 7,500 80 600K About 33%
Competitor 2 2,500 50 125K < 10%
Candidate: So it looks like our potential target has 50% of the local dairy market in terms of number of
cows and 60% of the market in terms of total units of milk.
Phase 2: Revenue Streams
Interviewer: That’s right. And just to give you a little background on how things work in the dairy industry,
our potential target’s milk is sent to a processor who makes cheese, yogurt, butter, etc. The processor
must purchase all the milk produced by the dairy farms in its co-operative, and the price is set by the
government at $16 per unit.
Candidate: OK, so with the price fixed, and the processor required to purchase all the milk produced by
the farm, the limiting constraint on the revenue side is the amount of milk produced. Knowing that, I’d like
to think a little about costs.

Phase 3: Cost Drivers
Interviewer: Great. So what are some of the fixed and variable costs that you think go into the dairy
farm? Keep in mind that all cows are owned by our client.
Candidate: I would imagine the main costs are cows, cow feed, machinery, machinery maintenance,
labor, SG&A, land, transportation, veterinarians, etc.
Interviewer: That’s a pretty good list. And you hit on something there. The primary variable cost is cow
feed, which is $10/unit. Fixed costs scale with the size of the farm (the # of cows) and the fixed costs for
our potential target are $4M per year.
Candidate: OK, so besides cow feed, I can assume all other variables costs are negligible?
Interviewer: That’s correct.
Phase 4: Profitability Analysis
Candidate should drive to the numbers.
Candidate: So profits are:
Profits = (1M units x $16 per unit) – (1M units x $10 variable cost/unit) - $4M fixed cost =
$2M
Profit margin = $2M/$16M = 12.5%
Interviewer: How would you think about whether or not this is a good profit margin?
Candidate: I would like to compare it to that of other dairies. I would also compare this profit margin to
other companies in our client’s portfolio and consider how this level of profitability would affect the client’s
break even on this investment.
Interviewer: Well, knowing that the fixed costs scale with the size of the farm (# of cows). How does this
profit margin compare to competitors?
Candidate could synthesize the data he/she has collected into a chart such as the one below:
# of Total Total Scaling Fixed Variable Profit Profit

cows Units Revenue Factor Costs Costs Margin
Potential 10,000 1M $16M 1 $4M $10M $2M 12.5%

Target
Competitor 1 7,500 600K $9.6M 7500/10000 $3M $6M $0.6M 6.25%

= 75%
Competitor 2 2,500 125K $2M 2500/10000 $1M $1.25M ($0.25M) (12.5%)

= 25%
Candidate: The selling price and variable costs are the same, and therefore our potential target has a
higher profit margin, because they are able to produce more units of milk per cow. Competitor 1 is making
about half the margin and Competitor 2 is losing money.
You mentioned before that happier (more comfortable) cows produce more milk. Since we are seeing the
potential target successfully produce more units of milk per cow, perhaps its larger farm (with more space

to move around, etc.) is part of the reason. I would hypothesize that this is a business where you will get
higher margins with a larger farm. Our client may want to consider acquiring more than just one busine ss
or securing more land to expand.
Phase 5: Risk Assessment
Interviewer: OK, and what are some risks associated with acquiring this business?
Candidate may consider developing a mini-framework to categorize the different types of risks (e.g. cost
risks, revenue risks, regulatory risks, market risks, etc.)
Candidate: Some things that come to mind are:
● Uncertainty about the acquisition price – competition for the deal may drive price up
● Our client doesn’t have expertise in this sector (What if we can’t keep our cows happy enough to
produce this much milk?)
● Revenue uncertainties: Government could change the price of milk or the co-operative policies
● Cost uncertainties: price of feed, risk of cow disease
● Risk of change in consumer demand and preferences (substitutes to milk, people may want to switch
to soy for health reasons, etc.)
Interviewer: Great, so please summarize your findings for our PE client.
A good answer should have a strong recommendation along with next steps and potential risks.
Candidate: The client should acquire the farm given its strong relative performance in both market share
(>50%) and profit margin (12.5%). The client should proceed by performing further due diligence on the
acquisition price (e.g. examine other profit multiple comparables) and carefully weighing the risks (e.g.
lack of experience, lack of synergies with other portfolio investments, macro trends in the dairy industry,
etc.)

6. Domino’s Pizza (Bain R1, CPG/Retail, Growth Strategy, Balanced)
Stem: Back in the 1990s, Bain Capital bought Domino’s Pizza, a nationwide chain. They wanted to
identify a growth strategy.
Phase 1: Industry Landscape
Let the Candidate make his/her structure. It should include a section on the industry landscape. Propose
starting from there.
Interviewer: Let me give you a background on the industry. There are four national players.
Pizza Hut: market leader; owns mainly sit-down stores but also offers some delivery
Domino’s: no sit-down restaurants, no carry-outs; entire operation is built around delivery; 80% of
the stores are franchisees and 20% are company-owned
Little Caesar’s: marketing campaign is 2 pies for the price of 1; restaurants are cafeteria-style,
they offer carry-out; there is no delivery.
Papa John’s: new player in the market with very fast growth; no sit-down restaurants; entire
model is carry-out because stores are located on high foot traffic streets so that people can pick
up and go; marketing strategy is “better ingredients, better pizza.”
When we conducted a blind taste test, we noticed that despite the fact people showed little taste
preference between the four types of pizza, when the brand names were put on the pizza, people went
with Papa John’s.
Phase 2: Identifying Growth Opportunities
Interviewer: So, what’s the first thing you would look at to grow Domino’s business?
There are a variety of good answers to this question. Let the Candidate offer a few. Hopefully, he/she will
suggest opening more stores. If not, prompt him/her by asking the following.
Interviewer: What are some things you’d look into to identify where to open stores?
Again, there are a lot of factors to be considered. Let the Candidate brainstorm his/her list and make sure
he/she talks through each item. An example list is provided below.
▪ Best Practices: Look at where we have stores right now, which of them are doing well, and what
types of areas these successful stores are in
▪ Competitors: Look at regions where there is not already a high concentration of competitors so
there is a possibility to be first mover. (Note that competitors will also include other restaurants,
fast food, etc.)
▪ Cost structure: Look in areas where labor and rent prices are affordable
▪ Demographics: Pizza is a “youth” or young family trend. (Age: 13-35)
▪ Income: Likely low to middle income areas as high-income areas are more likely to go to higher
end restaurants.
▪ Growth: population is growing, at the least it should not be decreasing
▪ Presence of Domino’s: Is there a region of the country where Domino’s has no presence, then we
could move there assuming there is enough demand.
▪ Growth for pizza demand: Identify places where general demand for pizza is going up

The Candidate should wrap this up by saying something like, “Most and ideally all of these factors should
go hand-in-hand for us to open stores.”
Phase 3: Store Specifics
Interviewer: Ok, so what kind of place would be good to look at opening stores?
Many answers are acceptable, just ask for the reasoning behind the suggestions. Here are a few
examples.
University neighborhood: fits demographic of low income and young; students tend to order to
their dorm rooms rather than carrying-out, which fits Domino’s current strengths, the number of
students that universities take each year usually increases, leading to a growth in the market
Other good answers include: suburban strip malls, vicinity of office parks, near suburban schools,
near sporting facilities
Phase 4: Math by Store
Interviewer: Ok, let’s change gears. I told you that we are mostly a franchisee business. Let me give you
some data. Luigi, one of our franchisees, has seen that now he sells 100 pizzas per day and charges 10
dollars per pizza. If he charges 11 dollars per pizza, he’ll sell 90. Should he do it?
Make sure the Candidate asks for the cost data, don’t give it out right away.
Candidate: This will depend on his profits. What are his costs per pizza? (Bonus points for saying that
you don’t need to ask about fixed costs, because in the short run they will be the same in both cases)
Interviewer: 6 dollars per pizza. Now, you should be able to calculate.
Candidate:
Current margin: $10-$6 = $4 profit per pizza
Current profit: 100 pizzas/day * $4/pizza = $400 per day
Projected margin: $11-$6 = $5 profit per pizza
Projected profit: 90 pizzas/day * $5 profit per pizza = $450 per day
Candidate: Luigi should do it. He gets $50 more per day.
Phase 5: Looking at the Chain
Interviewer: Ok, now let’s look at the chain as a whole, and not just a single store. Would this benefit
Domino’s overall?
Candidate: Since Domino’s is mostly a franchise business, can you tell me what the royalty structure is
(i.e. how much Domino’s gets from its franchisees)?
Interviewer: The franchisees pay 5% of their sales (revenues).
Candidate: So using the numbers from Luigi’s store, Domino’s as the franchisor would get:
Current Revenue: 100 pizzas * $10/pizza = $1000/day

Domino’s Revenue: .05 * $1000 = $50/day
Projected Revenue: 90 pizzas * $11/pizza = $990/day
Domino’s Projected Revenue: .05 * $990 = $49.50/day
Candidate: If elasticity of demand for Luigi’s store is typical of those throughout the chain, Domino’s
should not raise prices because the revenues received by corporate go from $50/day to $49.50/day. I’m
not sure of the current policy, but it seems Domino’s should certainly want to have control over prices at
its stores.
Interviewer: What are some things Domino’s can do to control prices among its stores? Let’s first start
with Luigi, who we left wanting to raise prices, and then talk about stores at the national level.
Candidate: I would talk to Luigi and explain that this price increase would only offer a short-term increase
in his profit. Even if demand is relatively inelastic now, in the long-term he will likely see his customers
start buying from other pizza places. This could be demonstrated by showing the blind test results; taste -
wise people actually think all pizzas are comparable except Papa John’s.
On a more national level, I would ensure contracts with my franchisees included language which
established Domino’s corporate as the price setter and/or required Domino’s corporate to approve price
changes for each store.
Interviewer: Let’s say Luigi’s contract was for 5 years and this is only year 1. Can you think of anything
else Domino’s as a headquarters could do to discourage Luigi from increasing prices?
Candidate: Well, I would think that Domino’s is doing the marketing and advertising on behalf of the
franchisees. If that’s the case, we could use the $10 price in our advertising. Luigi would be kind of forced
to abide by this because people would complain if they walked into Luigi’s and didn’t see the price as
advertised.
Recommendation
Should walk through what has been discussed, but most basically will conclude: Open more stores, don’t
raise prices, and control franchisee prices to maximize revenue.

7. Fruit Juice (Bain R1, Private Equity, M&A, Balanced)
Stem: Bain is serving a private equity client thinking of purchasing a fresh fruit juice manufacturer. The
company operates on the West Coast and serves the high-end health food market. Currently servings are
in 16 oz. bottles. The juice is sold in high-end delis, cafés such as Starbucks, and large upscale grocery
chains such as Whole Foods. Last year they had $90 million in revenues and they have been growing at
15% for the past 3 years. They have strong sales and marketing teams and a strong brand name. The
private equity company wants us to identify whether the company is an attractive acquisition. What are
some things you would look into?
Phase 1: Structuring the problem
First part should be broad. Allow the candidate to brainstorm.
Interviewer: How would you think about evaluating this opportunity?
Candidate: Important issues to hit:
● Industry dynamics: size, growth, drivers of purchases, trends, competitors’ market share, new
entrants, customers
● Margins: price, cost structure of the firm (compare to competitors), possible future changes in the
cost structure due to outside forces
● Private Equity Fit: Is the price fair? Is there an exit strategy? How does the potential acquisition
fit with the current portfolio, and would there be any synergies?
Phase 2: Industry dynamics

Interviewer: First let’s look at the industry dynamics. The high-end juice market in the US is $1B. Our
client is the third largest presence in the industry. The number 1 and 2 players have 70% of the market.
The market overall is growing at 10% annually. What are the one or two most relevant pieces of
information you’d like to have about the industry landscape?
Candidate:
● Are the two top players only operating on the west coast or are they nationwide?
● How have they been able to capture such a big share? Is it because they’ve been in the market
longer, (our target looks like a more recently established company given it only operates on the
west coast) or because their product is better?
Interviewer: (give the following information if requested) The two top players operate nationwide. They
have been in the market for longer than the acquisition target.
Candidate: The target company has been able to be number three even though it is competing with
bigger national players. If it goes national, it has the potential to be a big player because it has been
growing faster than the industry. Our target’s growth numbers suggest that its product is comparable to
that of the top players and would be successful in the new markets.
Phase 3: Private Equity Fit
Now come back to the acquisition part of the structure. Guide the conversation to a point
where the candidate asks the following question:
Candidate: Before I dig deeper does the client have anything in their portfolio that could
generate synergies?
Interviewer: Yes, they own a low-end soda and bottle water manufacturer makes private labels in US
and Canada. The private labels are sold at retailers like Walmart and CostCo.

Guide the conversation to make sure that the Candidate hits on most of these.
Candidate: Synergies usually come from manufacturing, distribution channels, marketing etc. In terms of
manufacturing, there probably aren’t big synergies because the manufacturing of high-end juices is not
similar to sodas (different kinds of ingredients, markets, processes, quality standards).
Then one might think of trying to sell juice in these channels because there are existing
relationships but I think this would hurt the company in two ways: First, the placement of a high-
end product in a low-end retailer it would hurt the brand image. Second, retailers like Walmart will
use their buyer power to try and push prices down.
Also, the competencies of already-owned sales and marketing teams don’t line up with this business.
Interviewer: So, what is your overall feeling about this acquisition’s potential for synergies (just make
sure that there is a clear wrap-up for this section before proceeding to the next)?
Candidate: The company itself seems promising, but in terms of working with other companies in the
portfolio, I see no obvious synergies.
Phase 4: Company Profitability
Interviewer: Okay, we know this is a growing company, but now let’s look more closely at profitability.
COGS are 75 cents per bottle, manufacturing is 20% of revenue, sales and marketing is $15M,
distribution is $30M. Each bottle sells for $2.50.
Candidate:
Revenue $90M
COGS $90M/$2.5 = 36M bottles x $0.75 = 27M
Manufacturing $90M x 0.2 = 18M
Sales/Marketing $15M
Distribution $30M
Profit $0
They are not making a profit. We could look at some ways to improve this.
Interviewer: How would you go about doing that?
Candidate: I’d look at it from two perspectives, increasing revenue and decreasing costs.
Interviewer: Let’s brainstorm. What are some ways to cut costs?
Candidate: (as many of these as possible should be hit on)
● Consolidate suppliers – centralize procurement

● Automate the factory – increase efficiency
● Change packaging to make it lighter without hurting the high-end brand image – decreases fuel
spending and thus distribution costs
● Reducing employees (especially higher ranked ones)
● Get rid of less profitable juice flavors through profitability analysis and identify the lines that we could
let go. There would also be a potential to use shelf space to sell more of the profitable types.
Interviewer: Good. Now, what ideas do you have about increasing revenues?
Candidate: Look at price. We are selling this at $2.50, what’s the competitor’s price?
Make sure the candidate asks; otherwise there won’t be grounds upon which to reach real conclusions.

Interviewer: Also $2.50. Would you raise prices?
Candidate: No, because there are more established comparable products with the same price, this
is a bad idea. We would either lose market share or potentially spark a price war which would hurt
margins. But we could look at some increased distribution channel penetration. Given the product’s
high image - we could go into hotels, catering companies, restaurants, etc.
Recommendation
Interviewer: So, do we tell them that this is an attractive acquisition or not?
The key here is to be succinct. But overall, this is an attractive target. Though the company is currently
not making profits, there are areas to cut costs and increase revenue and the company is growing faster
than the industry.

8. Industrial Tools Manufacturer (Bain R1, Industrial Goods,
Profitability, Quant)
Stem: Our client is an industrial tools conglomerate. One of their businesses manufactures two lines of
products: nail and staple guns, and the fasteners used by the guns. Revenues are $1B. The Fastener
product line accounts for 70% of revenues and the Tools product line accounts for 30% of revenues. All
products are currently manufactured and sold in the US. Sales come through three channels: 1)
Construction supply stores; 2) Direct-to-Manufacturer sales; 3) Home centers (e.g., Home Depot). The
company has seen profit margins fall from 10% to 5% and they are still declining. Our client, the corporate
parent company, would like us to figure out what the maximum potential profit is.
A structure should mention a review of the market to gain understanding of the landscape, a look at the
company’s profits, and gaining an understanding of the company’s place within the conglomerate’s
portfolio.
Phase 1: The Market
Candidate: What do we know about the client’s competitive position?
Interviewer: Market share is broken down as follows:
In tools, the client owns 40% market share and is holding steady relative to industry growth (about 3%).
The client is the market leader and has great brand reputation.
In fasteners, the client owns 20% market share and is seeing that decline by about 2%/yr, while the
market grows at about 3%. The client is one of two top players who alternate for the market lead.
Candidate: OK, so with $1B in total revenues, and Tools accounting for 30% of that, the client is getting
$300M in revenues from Tools. We also know that the client makes up 40% of the total market share, so
total market size for Tools is:
$300M / 0.4 = $750M
…and the total fastener market size:
$1B (company revenue) x 70% = $700M
$700M / 0.2 (client’s fastener market share) = $3.5B
The total market size of Fasteners is almost 5x larger than that of Tools, so it is particularly concerning to
me that this is where we’re losing share, since a 1% loss of $3.5B is obviously much more than a 1% loss
of $750M.
Interviewer: OK, so what might be causing this market share?
Candidate: There could be price competition, technological improvements we’re missing out on, or other
recently introduced competitive maneuvers.
Interviewer: Actually, we know that it’s generic fastener are taking share away from the client.
Candidate: OK, generics are usually priced lower so perhaps consumers are becoming more price
sensitive.
Interviewer: Yes, the generics are 25% cheaper than our client’s. And actually, this is largely a
commodity market, which is why the lower price is effective at grabbing share from the client’s known
brand.

Phase 2: The Client’s Profit Equation
Interviewer: Since we already know fastener revenue is $700M, let’s look at the cost side of the
equation.
Candidate: What do we know about fixed costs?
Interviewer: The plant in the U.S. is very expensive and generates a lot of overhead. Our total
manufacturing cost for fasteners is 80% of revenues.
Candidate: OK, 80% of $700M is $560M.
Interviewer: OK, and what options might we have for lowering that cost?
Candidate: Perhaps we could look at outsourcing some of our manufacturing.
Interviewer should brainstorm with candidate about the potential ways of reducing cost. If candidat e does
not get to outsourcing within 5 minutes, Interviewer should bring his/her attention to what companies in
other industries (e.g. tech) are doing. If candidate doesn’t get to outsourcing even then, interviewer
should drive the discussion towards outsourcing.
Interviewer: Actually, our generic competitors’ operations are in Asia.
Candidate: I think we should look into the numbers of moving our operations to Asia.
Phase 3: Cost Analysis
Interviewer: Moving operations to China is an available option. How could we would think about the cost
savings? (Don’t worry about fixed/startup costs)
Candidate: I would imagine main categories are Materials, Labor, Freight, and Overhead.
Interviewer: Good, here is some of our cost data.
Candidate: OK, I’ll run the numbers.

Candidate should generate the following table.
Cost Components U.S. China
Materials 280M 140M
Labor 112M ~10M (11.2M to be exact)
Freight 56M 168M
Overhead 112M 112M
Total 560M 430M
Candidate: Moving to China would save $130M per year. We know that profits today must be $50M
(since $50M is 5% of $1B). Assuming all the calculated cost savings will go right to the bottom line, that
means profits will now be $180M. Therefore, if revenues remain flat at $1B, there will be an increase in
the profit margin from $50M/$1B (5%) to $180M/$1B (18%). This is quite substantial.
Phase 4: Other Considerations
Interviewer: OK, great. What other considerations might come into play?
Candidate: Looking back at what we discussed at the beginning of our conversation, I’d like to think
about portfolio impact. Are there synergies to be realized or lost by this move to China vis-à-vis the
conglomerate’s other portfolio companies? Looking elsewhere, the move overseas puts a higher wei ght
on freight costs, meaning that the company is more vulnerable to jumps in oil prices. Political factors also
weigh in—this market may be especially sensitive to the idea of using American labor so the company’s
brand image could be hurt by moving overseas.
Phase 5: Final Recommendation
Candidate should summarize what has been discussed. The recommendation will most likely be to
relocate manufacturing operations to China with the caveat of ensuring other factors (both market -related
and logistical) are carefully considered.

9. Nantucket Ice Cream Shop (Bain R1, CPG/Retail, New Product,
Balanced)
Stem: We have a client, Sally, who we know because she used to be a ‘titan of business.’ She is
currently retired and living on Nantucket. Sally owns an ice cream shop and called us to ask if we think it’s
a good idea for her to expand her business into bagels.
Let candidate ask clarifying questions and provide the following information if asked:
● Sally owns one shop only

● Expanding into bagels is only desired if profitable; there are no other motivations
The candidate should create a framework that includes at least an analysis of the market and the existing
shop, as well as the implications/risks of expanding to bagels. If the candidate does not mention
competitors/market, guide them to this by asking leading questions.
Phase 1: Market Sizing
Interviewer: How would you calculate the size of the market?
Nantucket has very different population sizes in winter vs. summer; the candidate should make note of
this.
If candidate is not familiar with Nantucket, the candidate should be told that it is a popular summer
vacation destination.
The candidate should start asking questions to determine the volume of bagels sold per year in this
market. Provide the following information as the candidate asks for it:
● We are concerned with the market in the general vicinity of Sally’s shop
● The year-round population of Nantucket is 10,000
● There is a tourist population amounting to an additional 30,000 people for 6 months out of the
year
● 25% of the year-round population are bagel buyers; they buy 4 bagels per week
● 50% of the tourist population are bagel buyers; they buy 2 bagels per week
The Candidate should use this information to calculate the total bagels sold in this market annually:
Year-round population:
25% of year-round population: 10,000 x 0.25 = 2,500 year-round bagel buyers
2,500 year-round bagel buyers x 4 bagels per week = 10,000 bagels bought weekly
10,000 x 52 weeks (Interviewer interjects that candidate can round to 50 wks/yr), so:
10,000 x 50 weeks = 500,000 bagels per year bought by year-round population
Tourist population:
50% of tourist population: 30,000 x 0.5 = 15,000 bagel buyers
15,000 tourist bagel buyers x 2 bagels per week = 30,000 bagels bought weekly
30,000 x 25 weeks (approx. 6 months) = 750,000 bagels per year bought by tourists
Total annual bagel market: 500,000 year-round + 750,000 tourist = 1.25M bagels

Phase 2: Competition and Market Share
Once the candidate gets the size of the market, they should comment on what they think of the number,
and next ask for information regarding competitors. Supply the following information when asked:
● There are 6 current bagel suppliers in the vicinity of Sally’s shop

● Of those, 2 are large chains (“think Finagle a Bagel”), 2 are specialty shops, and 2 are mixed-
use shops (health food stores, delis, etc)
Interviewer: What would you estimate the market share of the competitors to be?
Candidate should come up with something reasonable and support their answer, taking into account the
potentially different shopping habits of year-round customers and tourist customers. A reasonable
estimate could be:
● 2 large chains50%
● 2 specialty shops30%
● 2 mixed-use stores20%
Interviewer: So, what is a reasonable market share that Sally could hope to obtain?
Candidate should support their answer; something reasonable could be 10%.
Interviewer: Great, we like to be conservative at Bain. So, 10% of the market means 120,000 bagels per
year and 10,000 bagels per month (ideally candidate would make this comment). Where do you want to
go from there?
Phase 3: Cost Comparison
Candidate should transition now to evaluating profitability, asking about how much Sally can charge for
her bagels and the associated costs.
Interviewer can give the following information as the candidate asks for it:
● Bagels sell for $1.25 per bagel across all of the existing suppliers; we can assume that’s what
Sally would get also
● There are two available models for Sally to consider: making the bagels in-house or buying them
from Joe the baker
The candidate should then move on to a cost comparison between these two options. First have t he
candidate brainstorm about what the costs would be if Sally made the bagels in-house. Then reveal the
following information:
● If Sally makes the bagels in-house, she will incur a monthly equipment cost of $1,000 and all of
her other costs (electricity, labor, etc.) would amount to $0.50 per bagel
● If Sally buys the bagels from Joe the baker, it will cost her $0.75 per bagel
Interviewer: Can you set up the profitability equations for both of these options?
Candidate should come up with the following:
Make in-house:1.25x – (1,000 + 0.5x)
[Note using 1,000 will lead to a monthly indifference point. For the yearly
indifference point, the equation would be: 1.25x – (12,000 + 0.5x)]
Buy from Joe:1.25x – 0.75x

Interviewer: Great, so at what point would Sally be indifferent between these two options?
Candidate should demonstrate that Sally would be indifferent when x equals a number such that her
costs are equal across both options:
1,000 + 0.5x = 0.75x -OR-[12,000 + 0.5x = 0.75x
x = 4,000 bagels/monthx = 48,000 bagels/year]
Interviewer: So what option do you think she should go with?
Candidate should note that once Sally crosses the 4,000 bagel/month threshold (or the 48,000 bagel/year
threshold) it is more cost effective to go with the in-house option. So, if she is indeed able to secure the
10% market share previously discussed (which would mean she is able to sell 10,000 bagels/month), she
would have more than twice the indifference point, and should definitely go with in-house production.
Phase 4: Brainstorming
Interviewer: So now it’s 6 months later, and Sally has started producing bagels in-house and selling
them. She contacts us again to say that sales are way below predictions. Why? Go ahead and make a
long list.
When the candidate reads his/her list, say: “Good, what else?” and have them brainstorm more, then
repeat “Good, what else,” have them brainstorm again; repeat a few times.
Candidate can come up with answers such as:
● Inferior product
● Location of Sally’s shop
● Insufficient marketing
● Product mix (does she also sell coffee since it is a strategic fit with ice cream?)
● Shop hours
● Negative competitive response (opened another store, etc.)
● Production capacity (she is still learning how to use the machines and is unable to produce up to
full capacity/her machines are insufficient)
● Customer loyalty – existing customers are unwilling to switch from their current bagel shop of
choice
● Economy/market – bagel sales are poor on Nantucket in general?
Interviewer: OK, thanks. No formal recommendation for this case.

10. Synthetic Rubber Manufacturer (Bain R1, Private Equity,
Profitability, Balanced)
Stem: Our client is a PE firm looking to acquire a synthetic rubber manufacturer. Synthetic rubber is the
petrochemical material used in most passenger car tires in the US. The target company only sells the
product to big tire manufacturers (think Goodyear, Michelin etc.). Should our client invest in the firm?
Phase 1: Market Analysis
Let the candidate make his/her structure. It should include sections on the firm’s profitability (revenue and
cost), the deal strategy, rubber market and exit strategy.
Candidate: I think the best place to start would be analyzing the market. Do we have any information on
the size and growth of the market?
Interviewer: That sounds right. Let’s just assume flat growth for the market. Can you help me figure out
the size?
Candidate: First, we should think about the number of passenger cars and from there we can figure out
how much synthetic rubber is needed to produce a tire and then the price of the tire itself. Does that
sound like a plan?
Interviewer: Sounds good, I can tell you that synthetic rubber price is $0.50 per pound and it takes 5
pounds to produce a tire.
Candidate: Let’s assume the US has a population of 300M and has an average household size of 3,
which gives us 100M households. An average household should have 1.5 cars and each car needs tire
servicing once every two years. That gives us 100M * 1.5 * 50% = 75M sets of tires sold in a year. Of
course, a car has 4 tires and not all of the people will care enough to replace the tires on time. Let’s say
80% of the people do follow the schedule. That gives us 75M * 4 * 80% = 240M tires.
I can convert that to the market size of the synthetic rubber using the information you have given me. So,
the total market size is 240M * 0.5 * 5 = $600M. Wow, that’s a big market.
Do we happen to have the target company’s market share?
Interviewer: Great question -- it’s 50%.
Candidate: The target firm’s revenue will then be $600M* 50% = $300M. That is a reasonable revenue
figure, but in order to know whether this is a good or a bad target, I would want to know the profitability of
the firm. Do you happen to have the cost structure?
Phase 2: Profitability
Interviewer: What do you think are the main cost components?
Candidate: Let’s break this down to Fixed Costs and Variable Costs.
Fixed Costs: PP&E, SG&A, R&D, Employee Salaries and Benefits
Variable Costs: Raw Materials, Utilities, Distribution, Marketing
Interviewer: That’s a great list. To simplify this, let’s assume the profit margin is 5%.
Candidate: Okay, so the target firm’s annual profit is $300M * 5% = $15M. That’s a decent amount, but in
order to know whether this is a good or a bad profit margin, I think we need to compare it to the
competitors or industry average.

Interviewer: Everyone else is having 2-3% profit margin. What do you think are the target firm’s potential
growth strategies?
Candidate: That’s very interesting. They are currently the biggest player in the market (50%) and
enjoying the biggest profit margin. There are multiple ways to leverage that. (The list should have new
segment, promotion campaign, cost cutting, finding alternatives for rubber, etc)
Interviewer: So, the client’s calls and wants an update immediately, tell them whether you think this is an
attract target or not.
Summary should be direct and concise, touching on multiple data points as well as the growth strategies
that have been covered

11. Potato Inc. (Bain R1, CPG/Retail, Profitability, Qualitative)
Stem: Our client, Potato Inc., is a producer of fried potato crisps, also known as chips. The product is
high in sodium and fat, comes in several flavors – plain, barbecue, etc. The customers of this product are
loyal,18 to 30-year-old males that mostly reside in the Southern part of the United States. The year is
2010.
Our client makes and manufactures chips domestically and has two main product lines: premium and
price value. They sell their product in convenience stores, gas stations, drug stores, and supermarkets.
Recently, profits have been decreasing. Potato Inc. would like to understand why this is happening and
what to do about it.
Let the Candidate make his/her structure. It should include a section on the industry landscape. Propose
starting from there.
Interviewer: What do you think might be happening in the industry?
The candidate should zero in on the fact that the economy in 2010 is still recovering from the recession
and that customers may be cutting back. Keep pushing the candidate if they don’t point out that the
problem is from 2010.
Interviewer: Well, we have found that customers are buying the same amount of product as they were
before.
Candidate: Since revenue is basically price * quantity. If we set quantity constant, then the customers
may be cutting back on the more expensive chips in favor of the cheaper product.
Interviewer: Good point, but how does that affect the profitability?
The candidate should also identify that the more expensive chips have higher margins and while Potato
Inc. has been selling the same volume, the profit per sale has been decreasing.
Phase 2: Identifying Profit Enhancing Opportunities
Interviewer: So how can we improve Potato Inc.’s profitability?
There are a variety of good answers to this question. Let the Candidate offer a few. Bonus points to the
candidate if they structure their thoughts instead of simply rambling off ideas. The candidate should
identify that one way to increase profitability would be to reduce costs. The candidate should also list
potential cost areas specific to Potato Inc. Once Interviewer is satisfied that all cost areas have been
listed, he/she can show the following table to the candidate.
Case continues on next page.

100%
90%
80%
70%
60% Logistics
50% Labor
COGS
40%
PPE
30%
20%
10%
0%
2005 2006 2007 2008 2009 2010
Interviewer: What are some costs you think we can cut?
Candidate: I see a lot of interesting information here. Before I jump in, does the client have any
objectives I should keep in mind. Specifically, are they trying to achieve a certain level of profitability?
(This information should assist the candidate in understanding how much cost cutting should be done).
Interviewer: No, they are just looking to be as profitable as possible given the circumstances.
The candidate should now state the observation on the rising labor cost and explore the cost cutting
areas for consideration based on the Exhibit. The list could include outsourcing production to trim down
labor cost, automating some processes, and increasing efficiency through training or quality control.
Interviewer: Nice ideas, any risks of us implementing the ideas?
The candidate should now state the potential risks such as expertise retention, increase in logistic cost,
and the execution lead time and how to mitigate them.
Interviewer: Great conversation, the CEO has just walked in, can you give him a 30-second summary on
your ideas?
Recommendation
Should walk through what has been discussed, but most basically will conclude: Open more stores, don’t
raise prices, and control franchisee prices to maximize revenue.

12. Dentist Office (Bain R2, Healthcare, M&A, Balanced)
Stem
Interviewer: Your friend, Anne, works as a dentist at a private practice. The owner of that practice, Dr. D,
has owned the practice for 20 years and has decided that he is finally ready to retire. After searching for
years for a replacement, he believes Anne is the right person to take over the practice and has offered to
sell it to her. Anne truly enjoys her job; though she isn’t sure if she would enjoy actually owning and
managing the business. She wants your help figuring out whether or not she should purchase the
practice.
Structure
Candidate: This can be attacked like an M&A case, so three reasonable buckets are Profitability, Dental
Market Dynamics, and Fit. Some components that can be considered are:
● Profitability
o Revenue
▪ Price
● What price does Dr. D charge?
● Can Anne keep the same price points?
▪ Quantity
● How many patients does Dr. D have?
● Would patients leave when Dr. D retires?
● Can Anne manage all the patients herself or would she need to hire
someone?
o Costs
▪ Fixed
● Dental technicians
● Lease
▪ Variable
● Customer/patient acquisition
● Dental equipment
● Medication
● Dental Market Dynamics
o Number of other dentists in the area
o Macroeconomic trends
o New technologies/regulations
● Fit
o How are Anne’s skills aligned with running a private practice?
o Does Anne want to run her own practice?
o Acquisition price
Phase 1 – Profitability (Qualitative)
Candidate: I’d like to start by considering profitability.
Interviewer: That sounds great. What do you think some of the main drivers of profitability would be?
[Candidate should come up with a list including some of the above drivers.]
Interviewer: What do you think are the greatest risks to the profitability of the practice?
[The most important thing to clue in on are the fact that customers may leave if Dr. D retires.]

Candidate: Well, if I were Anne, I would be worried that customers would leave when Dr. D retires,
decreasing profitability.
Interviewer: Makes sense. What would you do to mitigate that risk?
[Candidate should come up with several reasonable ideas. Some include: having Dr. D gradually
decrease his patient work, have Dr. D send a note to his patients explaining that he is retiring and
endorsing Anne, offering some type of loyalty discount or gesture for existing patients.]
Interviewer: That sounds reasonable. Is there anything else that would worry you?
Candidate: Yes. I’d be very curious how Dr. D retiring impacts the number of patients the practice can
see. Will Anne be able to see all the patients herself or will she need to hire someone to help her?
Phase 2 – Profitability (Quantitative)
Interviewer: That’s a great point. I have some information about the profitability of the practice. After
paying all expenses (including Anne’s $100K salary), the practice generates a profit of $150K per year,
which is taken as income by Dr. D. Anne currently works for 8 hours a day (including 2 hours of
administrative work) and Dr. D sees patients for 2 hours a day. Dr. D has offered to sell the practice to
Anne for $1M. What are your thoughts?
Candidate: The first thing that jumps out at me is that Anne already has a full patient load and would
need to hire additional help to cover Dr. D’s patients. Does that sound reasonable?
Interviewer: That sounds fine to me. Assume Anne can offload all her administrative tasks by hiring a
dental technician for a salary of $50K.
Candidate: Great. When you replace Anne’s salary ($100K) with the salary of a dental technician ($50K),
annual profits increase to $200K per year. I’d like to calculate the value of the private practice assuming
the profits continue in perpetuity. Is it reasonable to use a discount rate of 10%?
Interviewer: Sure.
Candidate: With annual profits of $200K and a discount rate of 10%, the value of the private practice is
$2M [$200K / 0.10]. To calculate the NPV of the decision, we must compare the NPV of purchasing the
practice with the NPV of not purchasing the practice. The NPV of purchasing the practice is $1M [-$1M +
2M]. The NPV of not purchasing the practice, assuming Anne can keep the same salary, is likewise $1M
[$100K / 0.10]. Therefore, assuming our discount rate is accurate, Anne should be indifferent between the
two options from a financial standpoint. The next thing I’d like to understand a little more about is the
market.
Interviewer: Unfortunately, I don’t have much information on the market. For our purposes, assume the
market will stay as-is. Is there anything else you’d like to know?
Phase 3 – Fit
Candidate: In my initial framework, I indicated that Fit is an important component, so I’d like to
understand more about Anne’s ability and desire to run a private practice.
Interviewer: What types of skills do you think someone would need to run a private practice?
[Candidate should brainstorm skills in a structured manner. One example is Dental Skills, Administrative
Skills, Human Resources Skills, and Other.]
Phase 4 - Recommendation
Interviewer: That all sounds reasonable. So, what would you tell Anne?

Candidate: You asked me to recommend whether or not you should buy the private practice. I
recommend you do not purchase the practice. The financials of each path are equivalent (NPV = $1M)
and you indicated that you likely do not want to manage a practice going forward. In terms of next steps,
I’d like to understand what Dr. D. will do with the practice if you choose not to purchase it and what that
means for your salary going forward. That said, at this point, purchasing the private practice does not
seem like a wise investment.

13. HDTV Remote Controls (Bain R2, Private Equity, M&A,
Quantitative)
Stem: It is 2005 and your client is a Private Equity firm looking to purchase an HDTV Remote Control
manufacturing company. The firm would like to sell the company after 3 years. Should they go forward
with the acquisition?
Phase 1: Framework
The candidate should take some time to come up with a simple, logical, MECE structure that includes a
bucket for the Market (Size, Growth, Competition, etc.), the Target Company (Revenues, Costs, Market
Share, Product, etc.), and the client/PE Firm (Strategy, Cannibalization, Synergies, Risks, ROI, etc.)
Candidate should first look to analyze the market’s attractiveness by starting to look at size and growth.
You can assume that the only real competition is 2 main players, but otherwise fragmented.
Candidate should attempt to size the market as follows, but if not, guide him/her to do so.
Candidate should recognize that TV Remotes are innately tied to the TV’s they control, and should
therefore look to size the market via # of households (HH’s) in the US…
- 300M people in the US

- 3 people/HH
- 100M HH’s
- 3 TV’s / HH
- 300M TV’s
Candidate might assume that the useful life of a normal TV is 10 years, and will therefore want to divide
the 300M TV’s by 10 to get a total of 30M TV’s sold/year. However, they should think about a potential
consumer’s buying process when it comes to upgrading to an HDTV. Most people don’t switch to HD
because their old TV is broken, but rather, they switch to HDTV because it’s the latest and greatest in
technology.
Phase 2: Target Company
The interviewer should then guide the candidate to focus on the Target Company. When prompted, the
interviewer can provide the following information:
- Revenues for the last 3 years have been $25M, $50M, and $100M.
- They’ve maintained a 25% market share throughout.
- Remotes sell at $10 each.
- You can assume margins are attractive.
- If they haven’t figured this out already, candidate should recognize that TV Remotes are tied to the
TV’s they control.
Candidate should infer that the market has been growing from $100M to $200M to $400M, or 100%
growth year over year.
Candidate should now look at the growth rate for the next 3 years, and the 3 years after that.
Interviewer: How would you expect the market to behave over this time frame (6 years)?

Candidate: Let’s assume that all the TV’s will be replaced gradually based on momentum. A few people
will try HDTV’s at first. Then once momentum builds and HDTV’s become very popular, demand will pick
up such that most of the purchasing comes in the first few years and then evens out towar ds the end.
Interviewer: Tell the candidate that the client expects that all normal TV’s will be replaced by HDTV’s and
that from start to finish this will take 9 years.
Behind the Scenes: Looking at the data we have…
To fill the rest of the table out, we know that total # of TV’s = 300M.
Average # of TV’s sold/year in remaining years = 40M
However, we know most of this will be front-loaded.
Ask candidate to draw a chart of what he expects the market penetration of HD remotes to look
like. It should look something like this:
Interviewer: Before asking for the final recommendation, share the following table with the candidate.
Ask the candidate to assess whether or not the PE firm should acquire the company and why. If
necessary, interviewer should guide the candidate to think about what drivers the purchase price.

Note: A good candidate will recognize the following sequence of events and what they mean in terms of
the company’s value.
2002 - 2004: High Growth = High Multiples

2005: Acquisition Date
2005 - 2007: Sustained Growth = High Multiples
2008: Sell Date
2008 - 2010: Decline = Low Multiples
Interviewer: So what can you surmise about what we would have to pay for the company now and what
we could sell it for later?
Conclusion: From this, candidate can conclude that this is a bad deal despite the growing market and
profitability of the company, because of the high multiples they would have to pay to acquire the
company, and then the low multiples they would command 3 years later when they sell the company.

14. Paper Clips Acquisition (Bain R2, CPG/Retail, M&A, Quantitative)
Stem: Our client is Paper Clips, a publicly-traded office supplies manufacturer based in the US. Due to slow
growth in the office supplies market, the client is considering an acquisition of a company in another industry
to boost sales growth. Bain has identified the safe industry as a good fit for the client and is helping the
client to find the right target company to acquire. The CEO of the company has stated that she has three
primary criteria for an acquisition target: 1) the acquisition candidate must have high sales growth potential,
2) the acquisition candidate must be a leader or have the potential to become the leader of at least one
segment within the U.S. safe market, and 3) the acquisition candidate cannot dilute Paper Clip’s EBIT
margin – which is currently 12%. How would you select the best acquisition target for the client?
Candidate’s structure should focus on the three areas that the CEO has prioritized: 1) sales growth potential,
2) relative market share, 3) impact on operating profitability (EBIT margin). Candidate can point to other
factors and areas to consider but should clearly prioritize these areas that the client has highlighted. Let the
candidate drive the case and ask for the appropriate data. If the candidate asks for clarification on the
market segments within the safe industry, state that there are three primary market segments: commercial
safes, premium home safes, and value home safes. Commercial safes are safes provided to businesses.
Premium home safes are higher end safes for residential homes while value home safes are lower end
safes for residential homes.
Candidate: Given that high sales growth potential is a key requirement for the company, I’d like to see if
we have any information on sales projections for companies in the safe industry or for the industry overall.
Interviewer: Our analyst put together these projections for sales in the safe industry. Which segment looks
most attractive from a sales growth perspective?
Note: If the candidate asks whether the data is for U.S. or global market, state that the client is focused on
the U.S. market and that all data is for the U.S. market.
Projected Safe Sales for the Next Five Years
Average Selling Price per Unit

Market Segment Unit Sales CAGR* CAGR
Commercial 0% 6%
Premium Home 6% 5%
Value Home 8% 3%
*CAGR = Compound Annual Growth Rate
Candidate should get to projected sales by using the data on unit sales and average selling price per unit.
Candidates can estimate the sales growth rates without doing all of the calculations and be able to quickly
see that sales growth is projected to be stronger for the Premium Home and Value Home segments (11%
CAGR vs. 6% CAGR for Commercial).
Commercial Segment Projected Sales CAGR = 6%

Premium Home Segment Projected Sales CAGR = 11.3% (1.06 * 1.05 – 1) or approx. 11% based on 6%
+ 5%.
Value Home Segment Projected Sales CAGR = 11.3% (1.08 * 1.03 – 1) or approx. 11% based on 8% +
3%.
Candidate: Based on these numbers, the projected sales growth rate for the Premium Home and Value
Home segments are above 10% annually while the projected sales growth rate for the Commercial segment
is only 6%. Therefore, the Premium Home and Value Home segments look to be more attractive segments

and we’re more likely to find an attractive acquisition candidate in those segments. I’d like to now consider
the CEO’s focus on segment leadership. Do we have any market share data that could help us identify
market leadership in these segments?
Interviewer: Here’s the data that we have on market shares within each segment. What can you tell from
this?
Market Share By Segment
Valuesafe
14%
Commercial Safeco Vanguard Safes

41% Shiny Safes 13%
48%
Safes R Us
13%
Safety First
11%
Guardian Norton Safes
31% Vanguard Safes 9%
23%
Safes R Us Others
20% 40%
20%
Others Others
8% 9%
Commercial Premium Home Value Home
Note: Market share data based on annual sales
Candidate: Based on this chart, it looks like the Value Home segment is much more fragmented than either
the Premium Home or the Commercial segment. The market leader in the Value Home segment has less
than 15% market share and there are a number of close competitors. In the Premium Home segment, Shiny
Safes has close to 50% market share and a relative market share of over 2. Combining this data with the
sales growth data, Shiny Safes looks like a strong acquisition candidate because it has clear market
leadership in a high growth segment of the industry. However, I’d also like to look at profitability since the
CEO is concerned about any dilution of operating margins. Do we have any data on profitability?

Interviewer: Yes. Here’s some data on profitability of the leading company in each market segment.
If the candidate recommends Commercial Safeco based on current EBIT margins, push the candidate to
think about synergies and changes in cost structure that may happen post-acquisition.
Candidate: Based on current EBIT margins, only Commercial Safeco can be acquired without diluting our
client’s operating profits of 12%. However, there may be potential for the client to improve the targets profits
margins through cost reductions or revenue improvements. Do we have any data on expected synergies
from an acquisition?
Interviewer: In past acquisitions, the client has consistently been able to reduce SG&A expenses of
acquired companies by approximately 10% and the client believes that similar reductions are achievable
for this acquisition. In addition to SG&A expense reductions, the client can also reduce freight expenses at
Shiny Safes by 10% because of significant overlaps in distribution channels. We expect only a 5% reduction
in freight expenses for Valuesafe and no freight expense reductions for Commercial Safeco.
Candidate: For Shiny Safes, the expected SG&A reduction will boost EBIT margins by 3% (30% * 10%)
and the expected freight expense reduction will boost EBIT margins by a further 1.5% (15% * 10%). This
will boost Shiny Safes post-acquisition EBIT margin to 15.5% (11% + 3% + 1.5%). For Commercial Safeco,
the expected SG&A reduction will boost EBIT margins by 2% (20% * 10%). This will boost Commercial
Safeco’s post-acquisition EBIT margin to 14%. Valuesafe’s EBIT margin looks too low to make the company
an attractive acquisition candidate even after accounting for synergies so I’ll ignore it for now. Combining
this analysis with our earlier analysis of expected sales growth and market share, Shiny Safes looks to be
the best acquisition candidate.
Interviewer: Great. What are some other factors that you would consider in evaluating potential acquisition
candidates for the client?
Candidate should brainstorm some key factors while using a structured approach. There are many other
potential factors to consider including financial considerations (e.g., price of acquisition, ability to finance
acquisition), operational factors (e.g., access to distribution channels), and people issues (e.g., cultural fit
of target company, quality of target’s management team).
Interviewer: Those all seem like good things to consider but we’re running out of time. Can you wrap things
up by presenting a recommendation to the client’s CEO based on the work we’ve done so far?
Candidate: We recommend that Paper Clips acquire Shiny Safes as it is the most attractive acquisition
candidate based on the factors that you’ve prioritized. First, Shiny Safes competes in a relatively fast-
growing segment of the market that is expected to experience over 11% annual sales growth over the next

five years. Second, Shiny Safes is a dominant market leader in its segment with a relative market sh are of
over 2. Third, the acquisition of Shiny Safes will be accretive to Paper Clip’s operating profits after
accounting for expected synergies. As we continue with our work, we’ll focus on other factors such as
financing considerations and cultural fit to make sure that this is the best acquisition candidate for Paper
Clips.

15. VAT Tax Processing (Bain R2, Private Equity, M&A, Qualitative)
Note: This is a conversational case that is testing the candidate’s ability to talk through a problem logi cally
and think through various drivers. Encourage the candidate to think creatively and logically about all
aspects of the case.
Stem: Our client is a PE fund who is considering buying a Value Added Tax (VAT) processing company.
A VAT is a form of consumption tax that is utilized is many countries outside the US. Foreign travelers are
entitled to a refund on the VAT of purchased durable goods that they plan on taking out of the country.
Refunds can be obtained by mailing in a VAT refund form, which can take 4 – 12 weeks, or by taking the
VAT refund form to a processing kiosk at their departing airport.
The target makes money by operating refund-processing kiosks in 36 countries and taking a 25%
commission on any transaction. The target has an 85% market share for VAT refund-processing kiosks.
The PE firm is concerned about their ability to grow the company and wants our opinion o n potential
growth and risks, particularly those that are outside of their control. The target has been in business for
over fifty years, since post WWII, and the management team is comprised of 20-year veterans.
Note: If candidate asks, clarify the VAT business model with an example. “If I travel to the EU, and I buy
something in a VAT country, I ask for a VAT refund form. I complete the form and take it to customs. They
verify the goods and the form, and stamp it. I then take the stamped form to a VAT refund processor, who
then gives me 75% of the refund value on the spot. The processor then sends the receipt to the
government and collects the full VAT, thus earning a 25% commission. In EU countries, the VAT is
eligible for non-EU citizens who are taking products out of the country.”
Candidate should develop a framework that includes profit growth (revenues and costs) and risks.
Interviewer: Let’s start on the revenue side, what do you think is the biggest opportunity?
Candidate: The main drivers of revenue are the number of transactions processed, the value of the
refund, and our commission rate. The value on each receipt is out of our control. I know that when I
travel, VAT tends to be an afterthought. This leads me to believe that volume of transactions is the
biggest opportunity. Transaction volume would be driven by the percentage of people that are aware of
VAT, and the percentage that actually redeem. Do we know what percentages of travelers are aware of
VAT?
Interviewer: We know that 40% of VAT purchasers are aware of the refund.
Candidate: Do we know of those that are aware, what percentage actually redeem?
Interviewer: 50%.
Candidate: That means only 20% of the potential transactions that could be processed are. If we can
increase this to 30%, that would be a 50% increase in revenue.
Interviewer: Great. And what do you think are some ways to drive additional transaction volume?
Candidate: Customer awareness, ease of transaction, and promotion. Awareness may include: retailer
incentives to inform customers; general marketing, online marketing on travel websites, target online
presence, social media. Ease of transaction may include: moving the kiosks out of airports and into cities
or retail hubs where people can obtain immediate refunds and avoid lines, online refunds, or streamlining
the in-airport refund process. Also, promotions, such as quicker refunds, get an additional percentage
back.
If candidate then tries to go to price as a revenue driver (e.g., commission percentage), push them to
determine whether or not price is a big factor, and what determines price. Ask whether or not customers
would be price elastic or inelastic. The correct answer is inelastic because 1: there are few other players

in the market, and 2: VAT refunds are like free money. Should they raise prices...? Open ended.
Interviewer: Great. Now let’s look at the cost side. What do you think some of the costs are?
Candidate: On the fixed side, I would think primarily overhead costs such as finance, sales, marketing,
and administration. Also, the costs of the kiosks and kiosk support staff. On the variable side, I would
think about any transaction costs such as processing, paper, and any fees we pay. You mentioned the
company has been operating for 50+ years, and the management team has been in place for 20+ years. I
would hypothesize that they haven’t shaken up their cost structure in quite a while.
Interviewer: What do you think the biggest opportunity is?
Candidate: This sounds like a primarily fixed cost business, where the number of transactions doesn’t
really affect our bottom line. We could reduce fixed costs by centralizing operations or technology. We
could also look at ways to automate administrative processes, reducing the need for staff. A nother big
opportunity could be in creating a web-based system for redemption, reducing the need for kiosks and
kiosk staff.
Interviewer: Ok, now let’s talk about risks. What do you think?
I think there are three buckets: regulatory, macroeconomic, and competition.
● Regulatory: There is a chance that the government might want to take a piece of the action. Or
they could nationalize in certain countries, or take away VAT overall, or change the VAT
redemption policies.
● Macroeconomic: I know VAT is largely driven off of tourism and international travel, which is
cyclical based on the economy. If there is a recession in 3 – 5 years, it may be tough for our
target to make money regardless of what the PE firm does.
● Competition: For competitors, the fact that we have 85% market share is a bit surprising. It
doesn’t sound like there are any real barriers to entry here. I would worry about an upstart
competitor coming in with a new model and a better cost structure that is able to undercut us and
take share.
There is no formal recommendation at the end of this case.

16. CPG Low-Income Market Entry (BCG Mock, CPG/Retail, New
Market, Balanced)
Stem:
Your client is SmartCity, a large multinational CPG company operating in over 200 countries. SmartCity
primarily serves the middle to high income consumer segments with premium to high end products and is
considering targeting the lower-income (LI) demographic in the US, which is defined at average
household income at the poverty line or below. Currently, the lower income demographic in the US is
experiencing double digit growth. The client would like help with three things specifically, 1) Should they
target the low-income segment 2) What tactics should they employ if they do, and 3) What are some risks
with targeting the low-income segment?
Note: Candidate should drive the entire case. Interviewer should provide hints or gentle suggestions
along the way. Candidate should focus on answering the three questions systematically and should draw
conclusions from all the data provided by the interviewer
STRUCTURE (possible):
Low Income Market
● Number of customers
● Growth rates
● Percentage of overall market spend
● Product segmentation (how do they spend their money?)
● SmartCity market share vs. competitors for low income segment
● Profitability
Synergies with Current Operations

● Existing products (where is there overlap or potential for growth?)
● Supplier purchasing power (will we use the same suppliers?)
● Marketing and branding (will they employ the same marketing strategy?)
● How will this affect their brand?
● Distribution channels
● Where do low income populations shop?
● Do they need to establish new channels?
Strategies to Employ:
● Adjusting pack sizes?
● Do LI purchase in smaller pack sizes? Larger pack sizes?
● Adjusting prices?
● Establishing new distribution channels
● Offering new products?
Risks
● Cannibalization of existing products
● Lack of experience with LI segment
● Brand / Reputation
Candidate should drive to the first step and be relatively specific with what type of data they want to look
at first.

Candidate: First, I’d like to look at SmartCity’s overall market share and its market share with the LI
segment.
Interviewer: Can you be a little more specific? Do you want their total revenue?
Candidate: I’d like to compare their market share by revenue for a sample product mix.
Interviewer should show candidate table 1.
Table 1: Category Sales for Total Market and LI segment ($MM)
Product Total Market Client Category LI Category Client LI

Category Sales Total Sales Category
Sales Sales
Shampoo 400 100 100 33
Cold Medicine 200 40 75 7.5
Diapers 800 400 400 100
Baby Food 300 100 100 33
Candidate should take a minute to analyze the data and to walk the interviewer through the high -level
observations with back of the envelope calculations. Possible responses include:
● LI segment is attractive since they comprise a high percentage of the total market spend for the
four products.
● If SmartCity does not target the low-income segment, they could be missing out on a large market
and huge growth opportunities
● At a high level, with the information given, it appears like targeting the low-income segment would
be a good idea, but of course, we need to take into consideration the risks of this strategy as well
as possible tactics to employ
Candidate should quickly realize that they should calculate SmartCity’s overall market share vs. LI market
share. Candidate should write out an organized table of calculations (example below):
Product Category Market Share LI Market Share
Shampoo 25% 33%
Cold Medicine 20% 10%
Diapers 50% 25%
Baby Food 33% 33%
Here are some possible insights from the candidate:

● In the Shampoo segment, SmartCity has a higher share in the LI market than the overall
category. It might be tough to grow the LI market share, but we can take lessons from our

Shampoo division and apply them to other categories looking to grow LI market share.
● In the Cold Medicine segment, we are only at 10% LI share, which could be a growth opportunity.
● SmartCity is strong in the diapers segment, and there could be a large revenue opportunity if we
can bring the LI market share in line with the broader category.
● SmartCity is doing well with baby food for the LI segment (33% for LI vs 33% overall). It would
seem that their brand is known in the LI segment, we should be able to apply this to diapers.
● Final takeaway: Diapers appears to be the most attractive opportunity for growth in the LI market.
I would want to apply practices from Baby Food to the diaper market.
● Extra points: Diapers and baby products have brand synergy, and are also attractive as people
are generally less price sensitive to baby products as they want the best for their children and
don’t want to take risks with inferior products (provide real life or news examples if possible, i.e.
China and baby milk formula circa 2008).
Interviewer: What additional revenue could the client expect if they could increase their market shares
for Cold Medicine and Diapers?
Candidate: (adding to their table): Additional revenue for Cold Medicine is another 10%, which is $7.5M.
Additional revenue for diapers is 25%, which is $100M. Total additional revenue is $107.5M. Thi s is
attractive, and another reason why XYZ should pursue the LI segment.
Interviewer: What other opportunities exist to grow revenue?
Candidate should drive to the next step. Once the candidate mentions pack size and pricing, the
interviewer should provide them with Table 2:
Table 2: Product Pack Sizes and Prices
Product Client Package Avg. Competitor Client Price ($) Avg. Competitor
Size Package Size Price ($)
Shampoo 10 mL 12 mL 20 15
Cold Medicine 8 mL 10 mL 12 10
Diapers 40 diapers 32 diapers 20 16
Baby Food 16 oz 20 oz 20 25
Candidate should take a minute to analyze the data and to walk the interviewer through high level
observations (possible responses):
● This table shows us pack sizes and prices compared with average competitors. We can use this
data to see what SmartCity’s unit pricing is compared to their competitors.
● Candidate should follow train of thought of comparing Diapers and Baby Food.
Candidate should calculate the per unit price of diapers and baby food. Here are possible responses:
● The per unit price of diapers for SmartCity is the same as it is for competitors ($0.50/diaper). The
only difference is that the diapers are offered at a higher price for higher volume.
● Baby food on the other hand is offered in lower pack size with the same per unit price as the
competitor ($1.25/oz)
● SmartCity should consider offering a lower pack size for diapers, similar to what they’ve done with
baby food.
● Extra points: Large diaper pack size might be unattractive to LI community, as they may not have
the means to buy large volumes at once.

● Extra points: SmartCity can maintain its brand and reputation and still be attractive to the LI
segment as previously mentioned, people are generally price insensitive for baby products as
they want brands that they can trust
Candidate should drive to the next step which is to determine the risks of this strategy:
Candidate: It looks like changing the pack size and pricing is a good strategy for now. Let’s look at the
risks of this strategy
Risks (possible):
Customer/Branding
● Brand could diminish if targeting low income

● Cannibalization of existing product sales
● Brand confusion among customers
Operational
● Need to establish new distribution channels

● More complexity with additional SKUs
● Investments or changes in machinery to change pack size?
Financial
● Competitive response could lead to price war
● Profit margins could narrow if targeting LI with smaller pack sizes
● Shareholder response to new strategy?
Interviewer: The client has walked in and wants to hear your final conclusion. What do you have to say?
Recommendation (possible): We recommend entering the LI segment as it represents a large percentage

of the total sales of the CPG products analyzed. Specifically, we recommend focusing on baby
products, and specifically on diapers as SmartCity has the opportunity to gain significant market
share. We advise experimenting with smaller pack sizes and keeping the per unit price the same.
This will help LI people afford the product, and likely increase our market share. However, moving
forward, we’d like to investigate the risk of this strategy on SmartCity’s brand and reputation, as well
as their ability to establish the best distribution channels to reach these customers.

17. National Fast Food Chain (BCG Mock, CPG/Retail, New Market,
Quantitative)
Stem: Your client is a small National Fast Food Chain considering a frequent diner program. For every $1
that is spent, customers will gain one point. With 20 points customers receive a free movie ticket. The
Chain’s goal is to increase per-store revenue. Should your client undertake this program?
Candidate should lay out a framework reviewing the following:
● Company (type, size, where stores are located, customer segments, trends, product mix)
● Market (trends, size, sub-segments, suppliers, channels)
● Incremental Profit of the program (Revenue – Costs)
● Risks
Phase 1: Background
Interviewer should let the Candidate drive the discussion completely. He/she should preview his/her logic,
explaining to the interviewer how he/she will go about solving this problem.
Candidate: I know that customer loyalty programs are about changing customer behavior, incentivizing
the customer by getting current customers to spend more or by acquiring new customers. Can you tell me
a little bit about the Fast Food Chain, how many customers we have, how much they spend, and what our
goals are for each of these items?
Interviewer should only respond with the following if asked:
Interviewer: We are a burger and sandwich chain. We have 500 stores nationwide with an average of
30,000 customers per store per year.
Candidate: OK, so we have a total of 15,000,000 (500 x 30,000) customers per year. Do we know how
these customers are segmented?
Interviewer: Yes, we have some information on customer segmentation. How do you think a fast food
chain might segment its customer base?
Candidate: Probably by age, demographics, and loyalty/frequency of visit.
If Candidate does not get to “loyalty,” prompt him or her by asking “how else?”
Phase 2: Revenue Calculations
Interviewer: OK, good. We have two types of customers: loyalists and occasionalists. What would you
like to know about these customer segments?
Candidate should preview his/her logic for the interviewer (what information he/she needs and why
he/she needs it). If Candidate does not get to this right away, Interviewer may gently prompt the
Candidate by, for example, revealing that there is market research proving that neither segment will
increase the spend per visit, but that both segments would increase in the frequency of visits. Interviewer
should reveal the following graph when he/she feels that Candidate has asked all relevant questions:

Candidate: OK, great. Do we have any information on how many of each type of customer would
actually join the loyalty program?
Again, if the candidate does not ask for this right away, gently prompt him/her to do so by referring to the
graph.
Interviewer: Yes, we know that 20% of the loyalists would join the program and 5% of the occasionalists
would join the program.
Candidate should now have enough information to calculate the additional revenue per store. If he/she
does not drive there, prompt him/her to do so:
Loyalists per store:

1/3*30,000*20% = 2,000 loyalists will join the program and visit 5 more times per year (still spending
$4/visit):
- $4/visit x 5 additional visits per person = $20 additional spend/loyalist

- $20*(2,000 loyalists) = $40,000 additional revenue from loyalists
Occasionalists per store:
(2/3*30,000*5% = 1,000 occasionalists will join the program and visit 2 more times per year (still
spending $4/visit):
- $4/visit x 2 additional visits per person = $8 additional spend/occasionalist

- $8*(1,000 occasionalists) = $8,000 additional revenue from loyalists
➔ $40,000 + $8,000 = $48,000/year additional revenue from program per store
Candidate: So now that I have calculated the revenues, I would like to talk about costs.
Phase 3: Cost Calculations
Interviewer: Good. What kind of costs do you think are associated with a program like this?

Candidate: There will be both fixed and variable costs associated with this program. I would like to know
the cost of the physical frequent diner cards, marketing, food, and cost of movie tickets.
When candidate has developed this list, provide the following information (Candidate may forget the cos t
of the food itself – let him/her start calculations without this figure, then prompt to ask if he/she forgot
anything):
● There is a $10,000 startup cost per store for the program (this includes all cards, marketing, etc)
● Redeemed movie tickets cost $1 (candidate should ask about the redemption rate of these
tickets: 50% are redeemed)
● Margins on food are 50%
The candidate should now have enough information to calculate the costs of the program (Candidate
must recall that the redeemed ticket cost must be based on the ENTIRE spend of the customer, not just
the incremental spend):
- Initial startup costs: $10,000

- Redeemed ticket costs: $8,200
o 2,000 loyalists * 35 visits * $4/visit = $280,000
o 1,000 occasionalists * 12 visits * $4/visit = $48,000
o $280,000 + $48,000 = $328,000
o $328,000 / 20 points per ticket = 16,400 tickets issued
o 50% * 16,400 = $8,200 for tickets redeemed (with 1 point = $1)
- Food: 50% margin on the additional revenue from food sales = $24,000
o (0.5*(2,000 loyalists * 5 more visits * $4/visit + 1,000 occasionalists* 2 more visits *
$4/visit)) = $24,000)
o Or note 50% of $48,000 is $24,000
- Total cost = $10,000 + $8,200 + $24,000 = $42,200
➔ Incremental profit per store = $48,000 - $42,200 = $5,800
Interviewer: Good. So what is your recommendation for our client?
Candidate: Our client should adopt this program because it will meet the client’s goal of increasing per -
store revenue. Per-store profit will increase by $5,800 per year as a result of this program. Potential
risks to be mindful of as the program moves forward are shifting consumer preferences and any price
increases from the movie tickets supplier. The client may want to roll out a pilot program before
instituting the loyalty program firm-wide.

18. Antidepressant Pricing (BCG R1, Healthcare, New Product,
Quantitative)
Stem: Our client, Dopamine, is the fourth largest manufacturer of drugs internationally. Two years ago,
Dopamine invented a drug – tentatively branded Soma – to treat acute depression. Unlike most
antidepressants, the drug is preventative rather than responsive. Whereas most antidepressants attempt
to treat diagnosed cases of depression, Soma is designed for consumption before symptoms emerge. It
is aimed at individuals who are deemed “high-risk” for acute depression due to family history, an acute
trauma, or a variety of other factors. The drug is available by prescription only and it has no known side
effects. Soma received regulatory approval by the FDA, and Dopamine is considering how to price the
drug in the United States. You have been asked to size the market and recommend a price.
Provide only the following information only if explicitly asked. If the candidate asks for other information
state that “we may get to that.”
1. The drug has not yet been covered by insurance.

2. Medical bills for acute depression average $10,000 annually per case (i.e. per patient). This
includes costs associated with drugs, therapy, and hospitalization.
3. Development costs were $500M.
4. The drug is a single tablet taken on a daily basis.
Candidate should develop a framework to assess the problem. This case has components of market
sizing, new market entry, and pricing. As such, the framework should at least include: Market (size,
competitor drugs, market share), Product (strengths, weaknesses, etc) and a Pricing model (either cost -
based or price-based).
Phase 1: Insurance Coverage
Interviewer: What factors do you think are most critical to the price of the drug?
This is meant to serve as a brainstorming moment to assess intuition and creativity.
Answers could include uniqueness (a lack of substitutes), the extent to which the public and doctors
accept a radically new way of understanding mental illness prevention, etc. Ultimately however, the key
issue will be whether insurers cover the drug. If insurers do not cover Soma, it will not gain traction in the
market. Allow the Candidate to brainstorm until he or she runs out of gas. If the insurance issue is not
mentioned, guide the Candidate with questions like, “what constituencies are critical to establishing the
price of drugs?”
Interviewer: How would the insurance company decide whether to cover the drug?
Although other considerations are nominally relevant, this is really a question about costs: is the current
treatment model cheaper than a treatment model that includes the prospective drug.
Interviewer: One price that has been floated is $50. How would you assess whether or not an insurer
would cover the drug at this price if the company covered the entire cost?
Allow minimal rounding.
The Candidate should see that he or she must compare the costs associated with current treatment
model and the costs associated with the new drug treatment model. If the Candidate doesn’t begin to
perform this comparison, provide clues. Make sure that the Candidate uses the following assumptions:
● 300 million people in the United States

● 1 in 200 Americans suffer from acute depression every year.
● 1 in 100 Americans are considered at risk and of that group, only 1 in 5 are considered high-risk
for acute depression. Assume that all individuals considered high-risk would develop acute
depression. (Note: This means that more Americans suffer from acute depression than are

identified as high-risk.)
● Soma is a tablet taken on a daily basis. The drug price covers ten tablets.
● Annual treatment for acute depression costs $10,000 per case.
● Soma is 70% effective. That is, of people considered high-risk taking Soma, 70% will not develop
acute depression and 30% will. For simplicity, assume that the 30% who develop acute
depression will also cost insurers $10,000 each, in addition to the cost of the Soma.
● For simplicity, assume that all individuals who suffer acute depression receive treatment.
Current costs to insurers:
● 300M people in America * 1/200 Americans suffer acute depression = 1.5M cases
● 1.5M cases * $10,000 per case = $15B
New drug costs:
● New drug costs = cost of identified individuals treated by Soma + additional cost of identified
individuals unsuccessfully treated by Soma + cost of unidentified individuals treated
conventionally
● 300M people in America * 1/100 considered at risk * 1/5 considered high-risk = 600,000 high-risk
individuals
● 600,000 high-risk individuals * $50 per package / 10 pills per package * 365 days = ~$1B
● Additional costs associated with individuals for whom the drug is not effective:
600,000 high-risk individuals * .3 failure rate * $10,000 = $1.8B
● Don’t forget that there are 900,000 individuals (1.5M cases - 600,000 identified cases) who are
not identified as high-risk. This $9B (900,000 * $10,000) must be added to the annual cost of the
new drug treatment model.
● Because current costs of $15B exceed the ~$12B in costs associated with the new drug scenario
(~1B+1.8B+9B), insurers would likely cover the drug.
Phase 2: Follow-up
Interviewer: What would you charge for the drug? No calculations are necessary, but do you think you
could get more for the drug?
There is no correct answer here. One might answer that insurers would accept a price that brings new
drug costs up to the current costs. Alternatively, the question of adoption may necessitate a lower price.
Again, this is more of a check on intuition, creativity and logic.
Interviewer: What single factor would allow Dopamine to raise prices?
Candidate: Improved screening. Although 1/200 individuals develop acute depression, only 1/500 are
identified.
Phase 3: Production Economics
Interviewer: Our client liaison from Dopamine is a bumbling guy who learned all his economics from
Wikipedia. He thinks the $500M development costs for the drug must be covered by future revenue
streams, or else we shouldn’t proceed with large-scale production.
Candidate: That is not the correct thinking since $500M is a sunk cost. What matters is that revenues
cover variable costs of production.
Interviewer: Excellent. So, the variable costs of production work out to $10 per package of 10 pills. Fixed
costs are zero. What’s the margin? What’s the markup?

Candidate:
● Margin = $(50-10) / $50 = 80%
● Markup = $(50-10) / $10 = 400%
Interviewer: Ok, so indulge the client anyway. They recognize that the developmental costs are sunk, but
still want to know the breakeven period for this drug. Assume a negligible discount rate.
Candidate:
● Annual profits = 600,000 high risk individuals * $(50-10) per package / 10 pills per package * 365
days = ~$0.8B
● Breakeven period = (500M / 0.8B) yrs ~ between 7-8 months
Interviewer: What is your final recommendation?

The Candidate should deliver a formal recommendation that restates the market size, recommends a
sensible price, and synthesizes any other witty insights that arise along the way.

19. CPG Conglomerate (BCG R1, CPG/Retail, New Market, Balanced)
Interviewer: Our client is a conglomerate that manufactures and sells CPG products across Europe.
They hired BCG to help them review the operation in those markets. How would you evaluate those
markets?
Phase 1: Framework
A good framework includes:
Criteria of evaluation:
● Market
Opportunities
o Competitive landscape/trends for current products
o Opportunities for new products
o Consumer trends
o Macroeconomic environment
▪ Population trends
▪ Available income
▪ Regulatory framework/tariffs
● Company Performance
o Relative market share for each country
o Profitability margin for each country
o Labor relations
o Efficiency of manufacturing and distribution
Candidate: I would look at the current market landscape for each country/region we are operating in and
evaluate our client’s performance vis a vis those conditions. Ultimately, the question I would want to
answer is where there is room to improve current operations and if/where there other opportunities we
can take advantage of i.e. develop new products or sell our existing products to a new type of customer.
Interviewer: Ok. Makes sense. Suppose our client wants to evaluate selling olive oil in the Italian market.
How you would go about it?
Candidate: Well, Italians are known to be consuming a lot of olive oil but the market could also be very
saturated in terms of competition. In terms of sizing, a good measure would be to see how many
households there are in Italy and what the average consumption per household is. Then I would take a
look at the competitive landscape and see how much market share we can capture. It would also be
worth looking if there is a specific “niche” we can exploit i.e extra virgin olive oil or reduced fat oil.
Interviewer: Ok. Suppose the population of Italy is 60M and the average household consumes 30 LT a
year. We are able to establish sourcing agreements with producers from Lazio for extra virgin oil that
would allow us to capture 5% of the total market.
Candidate: Great. Well, let’s say the average household in Italy has 3 members, so we are looking at
60M/3=20M households. In total 20M x 30LT = 600M Liters of olive oil are consumed every year. How
much is the average price for olive oil in Italy per liter?
Interviewer: 10 Euros.
Candidate: At 10 Euros per liter, we have a market size of 6B Euros a year, and since we are able to
capture 5% of it, we are looking at market share/revenues of about 300M Euros. So, now the question is
it worth penetrating the market. Is there estimation about profit margin?

Interviewer: Let’s say our EBITDA is 10% of the top-line and we would have to lay down 50M upfront.
How long would it take to break even?
Candidate: Well, that means we are making a profit of 10% x 300M = 30M a year so we will be able to
recoup the investment in little under 2 years.
Interviewer: Ok. If the discount rate is about 10%, what would be the total value of the investment?
Candidate: Over its life, it will be 30M/0.10=300M minus our cost of our initial investment, so 250M.
Clearly, it is a net positive investment, but we would have to compare it with other possible investments
that may yield more.
Interviewer: Great. Thank you. That’s all.

20. Italian Pharma (BCG R1, Healthcare, New Market, Balanced)
Stem: Our client is an Italian pharmaceutical company. They have the right to sell a cardiovascular drug
that was developed and previously sold by a multinational pharmaceutical company in the Italian market.
The multinational company is leaving the Italian market and gave the rights to sell this drug to our client
based on a royalty. The drug regulates blood pressure and has 5 competitors (substitutes) in the market.
Our client has asked us to size the field force (sales reps) needed to reach to physicians.
Notes: Sales reps simply go to physicians and illustrate features of the drugs; physicians decide which
drugs to prescribe.
Framework: A good framework includes:
Market Size / Competition
• Overall market size

• Growth
• Client’s and other competitors’ respective market share
• Characteristics of the market
o Doctor visits by cardiovascular patients
o Population
Activities of the Sales Force
• During visit
o Telling about product features
o Answering physician questions
• Before/After visit
o Prioritization
o Appointment making with physicians
Patterns related to Physicians
• # of physicians
o Specialization / Type (General practitioners vs. specialized physicians)
• Decision making process of physicians
o Other stakeholders? (i.e. insurance companies)
o Correlation between # of visits and probability of prescribing client’s drug
Interviewer: OK. Let’s assume that as a result of our studies to date, we’ve determined that there are
three basic groups of physicians:
• A: Physicians to be visited 10 times/year

• B: Physicians to be visited 5 times/year
• C: Physicians to be visited 2 times/year
If we assume that we can place all of the regions in Italy into the below table (figure 1) with the number of
potential cardiovascular patients on the X axis and our client’s market share in a given region on the Y
axis, can you show me where on the table you would place each of the three physician groups?

Figure 1
L H
Candidate: Sure. I would definitely put A-type to the southeast and C-type close to the north of the chart.
The rest would be B-type.
Interviewer: Why?
Candidate: I want to visit the doctors in the regions where our client’s share is low and market potential is
very high the most. The southeast part of the chart has that characteristic and is great for A -type.
Similarly, I want to visit the doctors in the regions where our client’s share is high the least because there
won’t be much marginal improvement as a result of those visits. The north part of the chart has that
characteristic and this is why I would label that part C-type. To improve our share in potentially big
markets, I would put B-type to the rest, probably dedicating most of the reps close to the center of the
chart.
Interviewer: Sounds good. Let’s put some numbers to the discussion and try to calculate the number of
reps our client needs. This next chart (Figure-2) shows the percentage of physicians serving each part of
the market. There are 50K physicians who prescribe cardiovascular drugs. Based on that info can you tell
me how many physicians will be A-type and how many visits will be made to them per year?
Figure 2:
10%
40%
30% A
20% A A
20% 30% 40% 10%
Candidate: Sure. Based on the percentages, I can calculate how many physicians are serving each part.
For example, at the lowest row of the matrix there has to be the 20% (i.e. 10,000) of all physicians. As
10% of them are serving at the square lying in the southeast end of the matrix, that square represents
1,000 (10%x10,000) physicians. A similar calculation for the other 2 squares occupied by A-type doctors
gives me a total number of 6,500 A-type doctors and a required 65,000 visits per year to them.
Interviewer: Good. Let’s assume that we did the similar calculation for the whole matrix and calculated
total number of required visits per year as 270,000. What is the number of required reps?

Candidate: To calculate that I need to know on average how many visits a sales rep can do per day and
how many working days per year are there for a sales rep. Can I assume that a sales rep can do 5 visits
per day and works 220 days per year?
Interviewer: Let’s assume a sales rep can do 7 visits per day and works 200 days per year.
Candidate: OK. Based on that information, our client needs a sales force of 200 people. (270,000 / (200
x 7) = around 200)
Interviewer: Thank you. That’s all the time we have today. (No formal recommendation is needed).

21. Media Operations (BCG R1, TMT, Operations, Balanced)
Stem: Our client is a large media company in Los Angeles. It currently has two offices. One in Santa
Monica and one in Century City. They have decided to consolidate their operations into one location and
will choose one of their existing buildings, but are unsure which one to choose. What should they do?
Candidate should look at two main things:
1. The economics of the move

2. The non-financial (social, political, and cultural) issues about integration
Phase 1 – The Economics
Candidate should identify rent, capacity requirements, switching costs associated with the move, the cost
to upgrade the existing structure to make it usable by the increased number of employees, etc.
Candidate should also ask if the client leases or owns the locations and what each office is used for (i.e.
what divisions of the operation are housed in each).
Once they ask for these things, you can provide the following information…
Interviewer: The client requires 100k ft 2 of space. Their buildings are both under lease for 10 years. They
plan to sub-lease (rent) any space they don't use.
Santa Monica Century City
Purpose Video Games DVD's
Space (in ft2) 200,000 400,000
Cost / ft2 / year $40 $40
Build-out cost (over 10 years) $1,500K $500K
Avg. vacancy rate of city 10% 18%
Key Assumptions:
• Assume they can sub-lease any and all unused space.

• The remaining time on the current leases is 10 years.
Interviewer: What do you think about the vacancy rate in these two cities as it pertains to the rent our
client will be able to charge for a sub-lease?
Candidate: The higher the vacancy rate, the more supply, and therefore the lower the price our client will
able to charge.

Interviewer: Given that, let’s assume that the price our client can charge per sq ft is $40 for Santa
Monica and $30 for Century City.
If the candidate has does not begin to do so on their own, ask them to calculate the financial impact of
each option (may be in total OR per year). The candidate should realize that the client is already locked
into a 10-year lease with both buildings.
Annual Financial Impact of each alternative:
($) Occupy Santa Monica Occupy Century City only

only
Santa Monica Rent ($8,000,000) ($8,000,000)
Century City Rent ($16,000,000) ($16,000,000)
Build-out Cost (per year) ($150,000) ($50,000)
Total Cost / Year ($24,150,000) ($24,050,000)
Sub-lease Income - Santa Monica 4,000,000 8,000,000
Sub-lease Income - Century City 12,000,000 9,000,000
Total Sub-lease Income 16,000,000 17,000,000
Net Impact ($8,150,000) ($7,050,000)
Calculations:
• Santa Monica Rent = 200k sq ft * $40

• Century City Rent = 400k sq ft * $40
• Build-out Cost = Total build-out cost / 10 years
• Sub-lease Income of Client occupied building = (Total sq ft - 100k sq ft) * sublease rate
• Sub-lease Income of 100% subleased building = (Total Sq ft) * sublease rate
Candidate should quickly see that moving to Century City is optimal.
Alternate Approach
Candidate may also calculate the marginal difference between the two options by noting the rental costs
and majority of sublease revenue will be the same across both options. In this case, the candidate
calculates:

Build-out cost (per year) ($150,000) ($50,000)
Marginal Sub lease Income – Santa Monica $0 $4,000,000
Marginal Sub-lease Income – Century City $3,000,000 $0
Marginal Impact $2,850,000 $3,950,000
Century City is the better option by $1.1M
Note: A good candidate will note that so far, we've only looked at the financial aspects of the situation.
This is NOT enough information on which to base a decision.
Phase 2: The integration issues
Interviewer: Besides the economics, what else should our client consider?
Answers should include the following:
• Workforce integration issues

• Proximity to clients/customers
• Proximity to employee homes
Interviewer: Good. How would you recommend our client inform its employees of this move?
Note: There is not necessarily a perfect answer but a good candidate will identify several alternatives
(which could a few possibilities from the following list). It is important that they identify the pros and cons
of each alternative and clearly communicate the ramifications of each option (business strategy, talent
retention, office politics, etc.).
• Office wide-meeting
• Starting with top employees to ensure they are retained
• E-mail or memo
• One on one discussions between managers or employees
Interviewer: Are you sure that’s the best approach? What are some the cons of using that strategy?
Candidate should defend their view, while also noting the negative aspects of their approach / potential
alternatives that might balance out the cons.
Interviewer: Our client’s CEO is walking in now. What is your formal recommendation for her?
Candidate makes final recommendation. It should be direct while providing potential risks. Extremely
good answers will have next steps such as identifying where employees live using HR to look up the zip
codes, drafting up a survey to ask employees where they want to work, etc.

22. National Supermarket Chain (BCG R1, CPG/Retail, Operations,
Balanced)
Stem: Our client is a national supermarket chain with $25B in annual sales. The client's sales have been
growing at 5% annually compared to 2.5% for the overall market. However, the client projects revenue
growth to trend back to market growth rates over the next few years and is looking for ways to boost its
profitability. The client has brought BCG in to evaluate one of its options for boosting profits: the introduction
of large format grocery stores. How would you evaluate this opportunity for the client?
Provide the following information if the candidate asks for it: Typical grocery store = 70K square feet; Wal -
Mart = 200K square feet; A large format store = 120K square feet.
Candidate should develop a MECE structure that evaluates the costs and benefits of entering the large
format grocery store category. On the benefits side, candidates could consider how large format stores
could boost sales volumes, how the new store formats would impact prices, etc. On the cost side,
candidates could consider Capex / leasing requirements for larger stores, potential costs for sourcing /
warehousing more inventory, cannibalization of existing store sales etc. Candidates may also want to
consider alternative revenue growth strategies (e.g., smaller format stores, pushing organic foods).
Let the candidate drive the case but the discussion should turn to the projected revenues and costs for the
large format stores since we need to evaluate the profitability of these large format stores. Push the
candidate in that direction if necessary. When the candidate asks for the profitability of large format stores,
present the following chart.
Interviewer: What can you tell from this data?
Large Format Stores Typical Grocery Stores
Sales Composition Groceries: 50%, Health & beauty Groceries: 75%, Health & beauty
products: 30%, Personal products: products: 15%, Personal products:
20% 10%
Monthly Revenue $960K $640K
Monthly Profit $96K $32K
CapEx Required $21M $11M
Interviewer: First, revenues of large format stores are 50% higher than those of typical grocery stores.
Second, profitability is also higher for large format stores with 10% profit margins compared to 5% margins
for typical grocery stores. Perhaps this is because non-grocery products such as health & beauty products
carry higher margins and make up a larger percentage of sales at large format stores. However, large format
stores do require more CapEx to build than typical grocery stores.
Interviewer: So how do you suggest we compare the two options?
Candidate: We could try to calculate an NPV for each type of store by discounting future profits. We could
also compare the two options by calculating and comparing payback periods.
The candidate may see that monthly profits are 3x higher for large format stores while the required CapEx
is less than 2x higher and conclude that the large format stores are probably the better option. Bonus points
for candidates who point out this insight before doing any math! Have the candidate do the calculations
anyways.

Interviewer: I like the payback period option.
Candidate should use the information in the table to calculate the payback period for the two options. Allow
for some rounding if the candidate asks.
Large format stores: $21M / ($96K * 12 months) = ~18 years

Small format stores: $11M / ($32K * 12 months) = ~29 years
Candidate: Based on payback period, the large format stores seem like a better option as they yield a
better return on Capex.
Interviewer: Good. Now what other factors might you have to consider before concluding that large format
stores are a good option?
Candidate can talk through some options but should ultimately point out the potential for sales
cannibalization (i.e., will the new large format stores take sales away from the existing store locations?).
Interviewer: Good. We have some data on cannibalization. Based on studies that we’ve done, adding large-
format stores to areas in which the client has existing stores will increase sales at existing stores by 2%.
Candidate: Interesting. So, there’s positive cannibalization?
Interviewer: Correct. What are some reasons why that might be?
Candidate should brainstorm some ideas using a structured approach. The main thing to point out is the
potential for network effects. For example, new customers who are attracted to the large format store may
now join loyalty programs that will draw them to the existing stores.
Interviewer: Excellent. It turns out that network effects are important enough that they can lead to positive
cannibalization effects. We’re running out of time so can you wrap up with a recommendation for the client?
Candidate: I recommend that the client introduce large format stores in order to boost profitability. First,
large format stores generate higher profit margins on higher sales than regular grocery stores. Second,
investments in large format stores are a better use of capital based on a payback rule analysis. Third,
large format stores will boost sales at existing store locations through positive cannibalization. Before
moving forward with the introduction of large format stores, I would like into implementation challenges
that the client may face while also looking at alternative uses of capital that may provide even better
returns.

23. Rental Cars and Frequent Flyer Miles (BCG R1, Transportation,
Profitability, Balanced)
Stem: Our client is a US airline with a popular frequent flyer mile program. They sell frequent flyer miles
through partnerships with credit card companies, hotels, and rental car agencies. While the business
overall has been healthy, they have noticed a sharp decline in their frequent flyer miles revenue from the
rental car segment: a 50% drop in the last two years. They have asked us to determine the cause for this
loss in revenue, and what they can do to reverse the trend.
Phase 1: Case Facts
Let the candidate and their structure drive the first part of this interview, but give the following information
if they ask questions about the following topics.
• History of frequent flyer program: The frequent flyer program has been in place for over 20 years.
It was created for two reasons: 1) competitive advantage, and 2) customer retention. Our client
was among the very first to implement such a program, but now almost every airline has frequent
flyer miles.
• How do car rental agencies sell these miles? An agency will advertise that customers c an get X
frequent flier miles per car rental day. When customers request the frequent flier miles, they get
the miles and the agency pays the airline for the transaction.
More facts about revenue from car rental agencies (only if the candidate asks for it):
● There are 7 major car rental agencies in the country

● 5 out of the 7 agencies are partners with our client
● These 5 agencies comprise 97% of all rental car business in the US
● Number of cars rented has not gone down
● Days per rental have not gone down
● It is fair to assume that our frequent flyer members would strongly prefer to rent a car that came
with miles as compared to a car that did not come with miles
Candidate: It seems what has decreased is the number of frequent flyer miles sold per day. Perhaps the
rental car companies wanted to lower their own costs per rental transaction by paying less for frequent
flyer miles.
Interviewer: Actually, they asked the airline to lower the price per frequent flyer mile, but the airline said it
couldn’t do that. In response, the agencies have simply started offering fewer miles per rental.
Phase 2: Possible solutions to problem
Interviewer: What could the airline do to help fix this problem?
Candidate: The airline could offer exclusive partnership(s) rather than having everyone as partners. It
could then explain the value to these rental agencies of having a lock on this airline‘s frequent flyer
customers.
Interviewer: Interesting idea. Why don’t you try figuring out the rental agencies’ willingness to pay for the
miles under an exclusive partnership agreement? How much could our client benefit from such an
arrangement? Structure a math problem using the following assumptions:
• 10M rentals/year by our frequent flier members

• $45 car rental per day on average
• Average rental is 3 days
• Approximately 10% margins on the car rentals for the rental car agencies before paying for any
frequent flier miles
• Assume 5 partners now, cut down to 3 partners
• Current payments from rental cars to our client are $3 per transaction
Candidate should note the distinction between fixed and variable costs to the rental agency and the
implications on profit. Marginal profit from extra rentals generated by the program should be calculated
based on variable costs, ignoring fixed costs that will be incurred regardless. For simplicity, assume that
all costs of the fleet are variable.
Candidate:
Current profit to rental agencies from our frequent flyer customers:
• (10M rentals/year) / (5 companies) = 2 M rentals per company per year

• Profit per transaction is (10% x $45/day * 3 days/rental) – ($3 for frequent flier payment) =
$10.50
• Total profit (based on variable cost only) to any one agency is $21M. This can also be seen as
$27M in incremental profit before paying for frequent flier miles, minus $6 M in total frequent flier
mile fees.
Potential profit to rental agencies under 3-partner model:
• Assuming same number of total rentals, each rental agency will now get (10/3) M customers from
the frequent flier program.
• The potential profit before paying for frequent flyer miles is: (10%)*($45/day) * (3 days/rental) *
(10/3 M rentals) = $45 M.
• So total theoretical WTP for the semi-exclusive arrangement, for a single rental agency, is $45 -
$21 MM = $24 M. Incremental WTP compared to the current arrangement is the incremental
profit of $18 MM (or new WTP – current WTP which is $24 – 6 M). Note we can equate WTP to
price in this case because the rental agencies are basically setting their own prices.
So total WTP comparison is:
• WTP(new) = $24M * 3 = $72M

• WTP(old) = $6M * 5 = $30M (assumes current fee structure equals max WTP)
• Key Insight: This represents up to $42M in additional revenue to our client, the airline. How much
of the $42M in value our client can capture? But even if we capture, say, half, we should have a
67% increase in revenue from car rental agencies.
Phase 3: Other considerations to explore
Interviewer: What considerations would need to be made in considering restructuring the way we
currently partner with rental car companies?
This should be a conversational brainstorming session.
Candidate: In thinking how to pick agencies to partner with (particularly if we’re considering moving to an
exclusive arrangement) we could do an auction, base it on geographical coverage, survey our frequent
flyer customers for preference or go with existing market shares among our frequent flyer customers. I’d
also want to think about:
• Do customers have loyalty to particular rental agencies, such that the total number of rentals
might shrink under an exclusive partnership agreement?

• Actual fixed vs. variable cost for the rental car agencies to get a better sense of profit. By
assuming all costs are variable we may be underestimating the profit impact of our program.
• Do we price the new partnership based on a higher price per mile, or do we mandate that the
exclusive partners offer a minimum number of ff miles per rental day?
• If it is profitable to have fewer partners in the rental car space? Could we profit from similar
exclusive agreements with hotels?
Recommendation
Interviewer: Our client has just walked into the room. What is your final recommendation?
A good recommendation should sum up the facts and discoveries of the case. There is definitely a
possibility to reverse the trend. The recommendation should also take into account the strongest other
considerations from the last section, but wrap up firmly and positively.

24. RollingSloan Magazine (BCG R1, TMT, Operations, Balanced)
Stem: Our client is RollingSloan, a national magazine. Their CEO has asked us if they should consolidate
their two plants. Is this a good idea? If so, which plant should they keep?
Let the Candidate make his/her structure. It should include sections on the firm’s current process,
proposed scenario, costs, and risks/options.
Phase 1: Cost Analysis
Information to provide the Candidate upon request:
• Plant locations are in Idaho and New Jersey

• Cost breakdown by option:
o Separate Plants:
▪ Paper – 40 cents/mag
▪ Printing – 35 cents/mag
▪ Distribution – 35 cents/mag
o Consolidated Plants (Idaho):
o Consolidated Plants (NJ):
Candidate should be able to see that consolidating to Idaho provides an increased cost of 1 cent/mag
while consolidating to NJ provides a decreased cost of 5 cents/mag.
Interviewer: Great, so it seems like we’d save money by consolidating to NJ – are there other ongoing
benefits or costs we should consider?
Candidate: Benefits to consolidating may include:

• Synergies
• Simplifying processes
• Labor cost reduction
• Overhead reduction
• Rent reduction
• Asset disposal gain (if we own both plants)
Other costs may include:

• Increased distribution costs
• Build out to increase capacity
• Labor/HR implications
• Timing
Interviewer: Great, so let’s look at some of those items you mentioned. We had our analyst run some
numbers and we know that moving to the NJ plant would cost us an extra $5-10M in labor per year, an
extra $2M per year in NJ insurance, and upgrades to the plant of $10M per year. We also know that we’d
gain $500,000 by selling the Idaho land, and $2-5M by selling the Idaho equipment.

Candidate: Well next I’d like to calculate their cost savings from consolidation and compare them to the
increased costs you mentioned. Do we have any information on how many copies of the magazine are
printed?
Interviewer: Yes, we know that currently, we print and distribute 12M magazines a week.
Candidate: Ok, so in that case, assuming we print 52 weeks of the year, we’d print (52*12M) = 624
million magazines/year. At 5 cents savings/mag from consolidating to NJ, that’s total cost savings of (624
million*0.05) = $31.2 million. We also benefit from the sale of land ($500,000) and equipment ($2-5
million). Let’s assume a conservative number for the sale of equipment of $2 million. That would give us
$33.7 million in cost “savings”. (A really good candidate will then go on to point out that the equipment
and land is a one-time benefit rather than an actual ongoing cost saving).
So, next I’m going to look at the increased costs from moving our operations. To be conservative, we’ll
say we have increased labor cost of $10M. That plus an increase in NJ insurance of $2M and plant
upgrades of $10 million per year, bring us to $22 million per year in ongoing increased costs.
Looks like we’re going to save about $11.7 million by consolidating. (If you strip out the one time benefits,
the savings are $9.2 million).
Interviewer: Great, so is there anything else you’d want to consider.
Candidate should brainstorm risks/other options. May include qualitative considerations like brand
reputation, print industry declining in general, can NJ plant handle printing all 12 million magazines/week,
does our distribution to the west coast slow down significantly now that everything is out of NJ, etc.
Interviewer: Our client’s CEO has just walked into the room. What final recommendation do you give
her?

25. Shoe Manufacturer Acquisition (BCG R1, CPG/Retail, Profitability,
Quantitative)
Stem: Our client is a major global shoe manufacturer. They are currently #2 in the US and are seeking to
dethrone the #1 shoe manufacturer. They have tried several strategies in the past and none have worked.
They are now looking to purchase the #3 show manufacturer to see if combined, they can overcome #1.
Manufacturer #3 has quoted a price of $480M preliminarily for the sale. Should they go forward with the
acquisition?
Structure should include target attractiveness, economics of deal / financials, fit with acquirer (with factors
like synergies, cannibalization risk etc.), and alternatives to acquisition.
The candidate should start methodically gathering data about the specific situation with questions about
the three players and their target customer segments.
When asked by the candidate, the interviewer can release the following data:
• Both manufacturers make similar shoes (primarily dress shoes)

• Both manufacturers sell in roughly the same places
• The #3 manufacturer’s shoes are perceived as being of lower quality
• Despite being one company, the two brands could remain separate, however they would not want
to market against each other in advertising as they have been in the past
• There is a risk of market cannibalization, leading to total sales being lower
• If the brands were to be seen as being produced together, they could affect consumer
perceptions, also affecting sales
• There is a possibility for synergies leading to more efficient operations and improved profit
margins for both companies
The key part of the case is economics and valuation and the candidate should get there quickly.
Phase 1: Valuing the company
Interviewer: What would you take into account when going through a valuation of this deal?
Candidate: I would look at multiples/comparables, NPV of cash flows, book value.
Interviewer: Not bad suggestions. Let’s actually do an aggregate cash flow analysis, like an NPV, but for
simplicity we’ll assume that the time value of the money is constant and no cost of capital needs to be
taken into account:
• The payback period would be 8 years

• The current revenues/yr for the #2 manufacturer are $1B, with a 10% profit margin
• The current revenues/yr for the #3 manufacturer are $750M with a 8% profit margin
Candidate: So as the #2 manufacturer, our client is making $100M in profits per year ($1B * 10%). The
#3 manufacturer is making $60M in profits per year ($750M * 8%). With an 8 year payback period, our
client should be willing to pay $480M ($60M * 8 yrs) for the #3 manufacturer which, coincidentally, is
exactly the preliminary quoted price.
However, the important question to ask is: Will the revenues and profit margins of each manufacturer
remain at the same level after an acquisition? If the acquisition leads to a lot of restructuring costs,
employee turnover, or other issues, sales and profit margins could go down in either or both companies,

and $480M would not be paid back in 8 years. However, if synergies are realized, costs go down, and
sales are increased by a larger distribution network, $480M could be paid back much faster.
Phase 2: Synergies
Interviewer: OK, so let’s try to quantify those synergies a little. What if our expectations were that the
deal would increase the total profit for #2 by 15% and would increase the total profit for #3 by $10M per
year?
Candidate: Increasing profits for manufacturer #2 by 15% would mean an additional $15M per year.
Acquiring #3 would lead to new profits of $70M per year (previous level of $60M + additional $10M).
Adding these together gives us $85M of additional profit per year from the acquisition. Applying the 8 -year
payback period, this suggests #2 should be willing to pay up to $680M for #3. Assuming the synergy
expectations are reasonable, $480M would be a great deal.
Interviewer: Good, you seem a little skeptical of these synergy assumptions. What type of synergies do
you think #2 might be hoping to realize?
Candidate: Revenue and cost, with more opportunities in cost. On the revenue side, there are volume
pricing synergies and negotiation tactics with large retailers as a large manufacturer. On the cost side the
value chain is Material -> Labor / manufacturing -> Distribution -> Retailer / Customer. On Materials,
there's an opportunity to negotiate and consolidate. On manufacturing, we could potentially consolidate
plants. I think I already mentioned getting a bigger client base for both products by combining distribution
networks.
Interviewer: OK, so let’s talk about consolidating plants. The client has 3 US plants and the target has 3,
how would you determine how many to shut down?
Candidate: I'd evaluate the existing capacity in plants, the economics/profitability of each plant, the
strategic rationale for their existence (e.g. distance to inputs, outputs), and the cultural and political
underpinnings of each plant relative to the combined company. Also, the marginal cost to produce
products from each plant is a key consideration: the lower the better. We could also even look at
outsourcing to plants outside of those owned by #2 and #3.
Phase 3: Addressing the Risks
Interviewer: OK, let’s move on to a discussion about possible risks of the acquisition.
Candidate: Sure, there could be some cannibalization or brand dilution due to lower quality of #3
manufacturer.
Interviewer: Cannibalization and brand confusion are actually two of our concerns. What could be done
to mitigate these risks?
Candidate: You could get a representative focus group together to see how they would react to brand
differences, or if they would care if the two were owned by similar companies. You could also send a
survey to a larger group of customers, or the general population to assess the effects. It will be important
to track sales and identify customer demographics.
Other reasonable answers equally valid. Overall, listening to the voice of the customer could give insight
to how customers would react to the deal and the idea of the two shoe manufacturers are working
together.

The candidate should remark that the company should go ahead with the acquisition at the price #3 has
stated, as the potential profit given the synergy assumptions leads to a much shorter break even than #2
requires. The candidate should state that they need to make sure that the synergy assumptions are
sound, and that market research should be done to make sure that customers will not have adverse
reactions to the merger or that their brand awareness will be impacted so as to potentially damage sales.

26. Store Label Tissue Manufacturer (BCG R1, CPG/Retail, New
Market, Balanced)
Stem: Our client is a paper manufacturing company specializing in store label tissue paper. This covers
toilet paper, paper towels, napkins, and facial tissues. The client’s key customers are grocery chains, in
the Western US. They would like to double in size, but this is a slow-growing market; it’s been growing
at 8-9% a year, but has hit a plateau. They have hired us to see how we can re-accelerate growth and
if this goal is attainable.
Phase 1: Case Data
Let the candidate go through the structure and ask for data. Give data only when asked for.
• The firm has two plants, one near Las Vegas, and one in Idaho
• The biggest customers are in the Rockies and in California
• The whole market for these products is 500M cases per year (all four kinds combined).
• 400M cases are branded (ie., not what this company makes) and 100M are store label.
• There are four types of customers for these 100M cases
o 40 million sold in supermarkets
o 30 million sold in mass market stores (ex. Walmart)
o 20 million sold in club stores (ex. Sam’s Club, Costco)
o 10 million sold in dollar stores
• Customers (mostly chains) make their purchasing decisions regionally, not store by store.
Candidate: The firm is limited right now to the West Coast market because the plants are located
there. There’s no reason why these products wouldn’t be popular in the east, especially since the
same chains exist there. This could be solved either by opening new plants in the east or by
shipping.
Phase 2: Costs
Interviewer: Let’s look at the possibility of shipping to stores on the East Coast---how much it
would cost and what kinds of margins we could expect. What would you need to know in order to
calculate this?
Let the candidate ask for these, but if time is going by and a variable hasn’t been hit on, give the data.
• Retailers pay $20 per case of product
• It costs $1 to ship a case from either plant to California
• It costs $750 to send a truckload of product to Boston, plus 75 cents per mile (the width of the
US is 3,000 miles)
• 1,000 cases can fit in a truck
Candidate:
• $0.75 * 3000 + $750 = $3000 cost to ship a case to Boston
• 1,000 * $20 = $20K revenue per truckload
• $20K - $3K = $17K left to cover costs after shipping to Boston
• 1,000 * $1 = $1,000 costs to ship a truckload to California
• $20K - $1K = $19K left to cover costs after shipping to California
Shipping is too expensive to the East Coast to consider expanding from the current plants (lower profits
on shipping to the East Coast). The client would need to open plants on the East Coast, possibly in less
expensive areas.
Phase 3: Product Mix & Marketing

Interviewer: Now that we’ve looked into shipping and geography, let’s talk about the product mix.
Do you think it’s split evenly between the four types, and if not, what percentages of each do you
think are sold?
Possible answers: Facial tissues have stronger brands (Kleenex being an actual word, for
example); paper towels seem almost as strong. Probably stronger sales in napkins and toilet
paper, with weaker brand images.
Interviewer: You’re right. Actually, the company sells a lot more of the napkins and toilet paper.
Candidate: Maybe manufacturer should make more of the better selling products and decrease
production of facial tissues and paper towels.
Recommendation
Interviewer: So, what should we tell the CEO?
The answer should refer back to the goals stated in the stem of doubling size and re-accelerating
growth. This can happen only by opening new plants further east to serve markets there without the
high shipping costs. Redistributing the product mix is also key.

27. Big Data (BCG R2, TMT, Profitability, Balanced)
Stem: Our client is a big data firm that maintains a comprehensive database of information relating to
consumer purchases linked by credit card numbers. The client creates profiles of consumers that are
highly accurate and sells the data on buying patterns to retailers, financial service firms, etc. The
company has seen its performance stagnate recently, and has approached BCG to help turn things
around in the next 2-3 years.
If the candidate asks, the company measures performance by improving profitability. It does not have a
specific target to reach. The client is US-based, and although they’re located in the South East, they
have a national client base. They are not considering international opportunities at this time.
Candidate should lay out a structure that discusses short-term strategies for improved profitability, and
addresses the following areas for further evaluation:
● Revenues –
o Prices by product/data sold
o Volume of sales to repeat customers vs new customers
o Volume of sales by size of client
● Costs –
o Fixed costs – data center facilities, servers for data storage, SG&A, etc.
o Variable costs – Data collection costs, energy costs to power data centers, etc.
● Changes in the marketplace – competitors, alternative product offerings, demand changes, etc.
Let the candidate drive the case, if they go into an area other than costs allow them to delve deeper with
the rationale behind their suggestion before redirecting them to think of another way to improve
profitability. When the candidate asks about costs …
Phase 1: Brainstorm
Candidate: I think this may be a scenario where we could improve near-term profits by lowering our
costs, do we have any information on the operating costs for this company?
Interviewer: Yes, that sounds like a good place to start, why don’t you brainstorm a few of the costs that
may be important for our client?
Candidate can refer back to their stem if they’ve already thought of some, but should create a structured
list of costs that the company may have. Make sure that they identify sales cost before moving on. Once
the candidate has listed at least 4-5 costs present them with the following chart.

Phase 2: Analysis
Interviewer: This seems like a pretty comprehensive list, we were able to gather the following information
from the client, what do you think given this data?
Candidate: It looks like 60% of our costs are coming from sales, although this is a revenue generating
aspect of the business, I wonder if it isn’t an area we can cut some expenses from. Do we have more
information on our sales costs? Specifically, I’d like to know the size of the sales force so we can
determine the cost per employee and determine the impact and feasibility of any cuts.
Phase 3: Additional Brainstorm
Interviewer: Good point, we do in fact have some information from the client. They break their sales
force down by the size of the customers they sell to. They have three groupings: large, medium, and
small. The large clients have a sales force of 50 employees, medium have 175, and small have 375.
How should we go about prioritizing which area to look into?
Candidate can come up with multiple ways to gauge the value of each employee, let them brainstorm
until they come to analyzing revenue per sales person for each segment.
Phase 4: Additional Analysis
Candidate: I think I would like to look at how much revenue each of these groupings is responsible for,
and then I can calculate how much revenue each sales person generates for the company.
Interviewer: Yes, let’s do that. Large customers are responsible for $40M in revenue, medium for $40M,
and small for $20M.
Let the candidate structure this into a table, but before they calculate revenue per employee …
Interviewer: While we could calculate revenue per employee as it stands today, the client does have an
idea of what an optimal revenue per salesperson would be. They think for large customers they should
have $400K in revenue per employee, for medium $200K, and for small $80K.

Candidate should come to the following table and derive the # of employees to add/remove
Sales Force Revenue Optimal Optimal Sales Implied +/-

Rev/Employee Force
Large 50 $40M $400K 100 +50
Medium 175 $40M $200K 200 +25
Small 375 $20M $80K 250 -125
Candidate: It looks like we can restructure where some of our sales force focuses their efforts in order to
improve customer service, and we can also reduce overall headcount by 50.
Interviewer: What would be our overall annual savings as a result of this?
Candidate: I would need to know the annual cost per employee, do you happen to have t hat information?
(Candidate could have solved this on their own given the chart, but if they did not notice this provide them
with the following)
Interviewer: Yes, we know that each person works 40 hrs/week and earns $12.50 an hour. You can
assume 50 weeks in a year.
Candidate: We would save $25K per employee, or $1.25M annually. We would also want to consider
any severance costs as well as morale on the rest of our sales force when looking into this option.
A strong candidate will refer back to the chart discussed earlier to provide context for how much savings
this represents. If there is time left prompt them to do so, otherwise continue on to the recommendation.
******************************************************************************
(optional)
Interviewer: How much would this represent as a percentage of cost reduction?
Candidate: We had $25M in costs before, and we would eliminate $1.25M which represents 5%.
Interviewer: What about the impact on profitability?
Candidate: We had 75% margin prior to the reduction ($100M-$25M/$100M) and we now have a 76.25%
margin ($100M-$23.75M/$100M; or preferably solve for the difference $1.25M makes) thus a margin
improvement of 1.25%. We can see that the cost savings go right to the bottom line, which is meaningful.
(they could also solve that 76.25%/75% ~ 1.5% increase)
******************************************************************************
Interviewer: Very good, what would be your recommendation to the client?
Candidate should state their recommendation concisely and up front, provide relevant supporting
information, and identify next steps.

28. Explosives Company (BCG R2, Industrial Goods, Competitive
Response, Balanced)
Stem: Your client is an explosives manufacturer who offers ammonium nitrate, initiation systems, and
setup services for large blasting projects. One of their long-term customers is approaching the end of a
long-term contract and has decided to put the work out for a competitive bidding process. The client hired
us to help determine how to handle the situation.
The Candidate’s structure should include the basic industry landscape areas, competitive strengths,
client’s strengths, degree of differentiation in the product/service offerings, deeper dive into % of revenues
derived from each stream and customer, pricing, and possible strategies for how to handle the situation.
Phase 1: Background Info

The following information may be given when requested by the Candidate.
• The demolition market is broken into 2 main areas:

o Big players like our client handle large scale projects like mines, quarries, etc.
o Small players handle buildings.
• There are 3 main players in large-scale projects, our client is 1 of them. The other 2 players do
not offer setup services, and have lower quality initiation systems.
• The market is split up 30% for each of the top players; the remaining 10% is fragmented.
• The customer we are discussing owns 2 coal mines (one in Kentucky, one in Wyoming).
• The industry has been growing at about half the GDP growth rate.
Candidate: So, it is likely that when our client’s customer opens the work for competitive bid, there will be
3 main bidders. We need to understand their pricing and offering.
Phase 2: Pricing Calculations

The candidate should proactively move from the background info to questioning the existing pricing
structure currently under contract with the client and ways in which the competition may differentiate their
offerings.
Candidate: So do we know what our client is currently charging vs. what their competitors are currently
charging? I would also be interested to know our margins on each offering.
Interviewer: Our client charges $1000/ton for ammonium nitrate, and $250/ton for the required initiation
systems (setup services are free). The customer we are talking about uses 40,000 tons of ammonium
nitrate/year. Margins are 20% for ammonium nitrate and 80% for initiation systems. Our competition is
charging $950/ton for ammonium nitrate and $150/ton for initiation systems.
Candidate: Well first of all, our client is overpriced when compared to its competition. We can calculate
the total revenue and profit as shown on the next page.

Product Price Customer’s Total Margin Profit
Annual Vol. Price
Ammonium $1000/ton 40,000 $40M 20% $200/ton

Nitrate
Initiation $250/ton 40,000 $10M 80% $200/ton

Systems
Candidate: Our client is charging a 2/3 higher initiation system price than its competitors and a slightly
higher price for chemicals. This could hurt them in a competitive bid unless they have a value proposition
to back up the higher price.
Interviewer: Why do you think they can realize such a high margin on initiation systems?
Candidate: Do they have a superior product and/or do they command a higher price because of their
free setup services?
Interviewer: Yes. Ammonium nitrate is pretty much a commodity, but our client has superior initiation
systems and setup services that allow them to provide better control of the size of blast fragments. This
saves the customer $16M/year in post-demolition processing costs.
Candidate: Dividing $16M by 40,000 tons, shows that our client is saving our customer $400/ton in post -
demolition costs. Therefore, the customer is getting an “effective” price of $850/ton (1000+250-400) vs.
the competition’s price of $1100/ton (950+150).
Recommendations:
Interviewer: So what would you recommend our client do to ensure they remain successful when the bid
opens up?
Candidate: Our client should ensure that its customer is aware of the $400/ton ancillary benefit it
receives from setup services and superior initiation systems. They also should consider adjusting their
ammonium nitrate price to $950/ton to match the competition. Finally, they should continue focusing on
R&D and setup services to retain their position as the technology and value-added service leader in
initiation systems.

29. Ferret Rabies Vaccine (BCG R2, Healthcare, New Product,
Quantitative)
Note: If candidate is practicing for 2nd round interview, the candidate should be driving the entire case.
Candidate should be using any information from the case to draw concluding statements and takeaways.
Otherwise, interviewer can push candidate to the different phases.
Stem: Our client is a large pharmaceuticals manufacturer, specializing in animal health care. One of their
manufacturing plants makes a rabies vaccine. The client has found a new formula of the vaccine that also
works on ferrets, in addition to cats and dogs. Currently, the plant is underutilized, and the client wants to
know if they should bring the new updated vaccine to market.
Candidate should create structure and ask clarifying questions. The following information can be given
upon request.
U.S. Industry:
Animal health industry: $4B
Total pharmaceutical industry: $50B
Competition: Client is one of the largest players, however, there are other players selling rabies
vaccines for similar prices. Client’s market share of veterinarians is 50%.
Customers: Manufacturer sells to veterinarians, veterinarians sell to pet owners.
Product: New vaccine is expandable to ferrets. Vaccines are given to pets only once.
Costs: Assume overhead costs to expand vaccine are $1M – assume this is all overhead, including
changing labels, adding formula, etc.
Phase 1: Market Sizing
First estimate how many ferrets there are:
If candidate asks for any info about the pet market:

• 50M dogs
• 40M cats
Any logical assumptions are fine, but the intuition should be that there are much fewer ferrets than
dogs/cats. Or interviewer can give market size as 1-2M ferrets, or 1.5M to average it out (the rest of the
case will use 1.5M).
Interviewer can drive the candidate to estimate the total number of animals who need rabies vaccines per
year:
• Avg lifespan for dogs/cats: 10 years

• Vaccines (dogs & cats): (50M dogs +40M cats) / 10 years = 9M
• Avg Lifespan for ferrets: 5 years
• Vaccines (ferrets): 1.5M ferrets / 5 years = 300K
• Total: 9M before (dogs & cats only), 9.3M after (dogs, cats, & ferrets)
Candidate: Based on a 50% of market share, the client serves 4.5M animals now, and would serve
4.65M with the new formula.
Phase 2: Profitability
Candidate should ask specifically for all data:

Current vaccine:
• Price of drug when client sells to veterinarians: $4 for old vaccine
• Price of drug when veterinarians sell to customers: $25 per vaccine
• Margin: 70%
• Total cost = $1.20 (per unit)
• Fixed cost = 75% of total cost
• Variable cost = 25% of total cost
Candidate concludes the following:

• Margin = $4 * 70% = $2.80 (or = $4 - $1.20)
• FC = $1.20 * 75% = $0.90 per vaccine
• VC = $1.20 - $0.90 = $.30 per vaccine
• Profit = $2.80*4.5M vaccines sold = $12.6M
New formula:
Since the new vaccine expands the use and doesn’t offer additional value to the dog/cat population, the
candidate can conclude that the price remains the same. Candidate can also touch upon the value
proposition of the new vaccine to veterinarians.
Candidate should then recalculate the fixed cost per vaccine, distributing the total fixed cost across the
new volume of 4.65M vaccines (due to economies of scale).
• Total fixed cost = 4.5M vaccines * $0.9 fixed cost/vaccine = $4.05M

• Redistributed fixed cost: $4.05M / 4.65M = $0.87 fixed cost/vaccine
• Variable cost remains at $0.30/vaccine, so total cost/vaccine = $1.17/vaccine
• Margin = $4 - $1.17 = $2.83/vaccine
• Profit = $2.83 * 4.65M = $13.16M
• Incremental profit from the ferret population: ~$560K; break-even is less than 2 years
Interviewer: Knowing that animal health market is $4B and the total pharmaceuticals market is $50B,
what do you think?
Candidate: Obviously ferrets are a small portion of the overall market. It is possible there are more
profitable ways to utilize their excess plant space. Alternatives should be evaluated and considered.
However, with a 2-year break-even and an increase in profits, this is definitely not a bad investment.
Interviewer: The manufacturing plant manager asks you what else he can do about the excess capacity.
What do you suggest?
Candidate should brainstorm logical ways to use excess capacity. Lease or sell extra space, manufacture
for another drug company, look for other new and compatible products, etc.
Interviewer: Given what we’ve discussed, what is your final recommendation?
Candidate should make a clear recommendation that gets to the point. Should include whether or not to
expand, other uses for excess capacity, and overall market share. May discuss value to company and
customers.

30. Global Health (BCG R2, Healthcare, New Market, Quantitative)
Stem: Our client is an organization trying to incentivize pharma and biotech firms to develop treatments
and vaccines for diseases that are prevalent in developing countries. Their challenge is to identify where
to focus as there are many possible diseases.
Interviewer: Please take a look at this graph.
When asked, provide the following details:
● DALY stands for Disability-Adjusted Life Year and is a measure of how much impact a disease
has on peoples’ productivity. Diseases which cause people to die young or which cause disability
starting in childhood have the highest DALY scores.
● Pipeline indicates the number of drugs that are currently under development.
● All these data are made up, as are some of the disease names.
Interviewer: Which diseases represent the best opportunity for our client?
Candidate: HIV and Hep represent the greatest disease burden for developing countries, but there are
also many treatments already under development for these diseases, so our client probably doesn’t want
to focus there. (Hard to incentivize more development, as the competition looks tough) It probably makes
more sense to focus on the three diseases with the next-highest disease burden, TB, Malaria, and
Diarrheal Disease. Of these, I would recommend focusing on Diarrheal disease as there are the fewest
products in the pipeline.
Interviewer: You’re right about diarrheal disease: that is where the client decided to focus. What does
this tell us about diarrheal disease? Show candidate second graph.

When asked, provide the following details:
● Etiology means the causes of the disease.

● Antigen is a general term that can refer to anything which provokes an immune response,
whether bacteria, virus, etc.
● The Y-axis scale, incidence, indicates that 5% of cases are caused by Antigen A, and so forth. If
someone adds up all the bars, he or she will realize that they don’t sum to 100%. This is because
some cases are caused by antigens that have not yet been identified—so the picture is even
worse…
● Data are recent (last year) and the sample sizes are large: n=1500 for the local population data
and n=256 for the military data. Subjects in the local population data are children under 18 years
old. Subjects in the military data are soldiers of all ages.
Candidate: It looks like diarrheal disease is not caused by a single primary antigen, but can be caused by
a large number of different ones. I imagine this is kind of similar to the flu. Each year when I get a flu shot,
there are different “strains” that it covers, and I might still get the flu if I catch a strain that wasn’t included.
This means that developing a treatment or vaccine will be difficult because it can’t just attack one of the
antigens, it will need to be effective across a large number of them. This helps explain why there are so
few current treatments and vaccines available to treat diarrheal disease.
Interviewer: Who do you think would be the main customers if we could encourage someone to produce
a treatment or a vaccine for diarrheal disease?
Candidates: Governments of the countries where this disease presents a major problem. Probably also
some nonprofits who help provide healthcare in those areas: International organizations, such as the
World Health Organization of the United Nations.
Keep asking who else and provide hints until the candidate realizes that foreign tourists and the military
would also provide significant sources of revenue for such a product.

Interviewer: What are some of the issues or risks that the drug maker would face with each of these
customers?
Candidates: Both governments and the military are attractive customers because they buy in large
volumes, but because of that they have significant negotiating power. If the military decides not to buy,
that single loss of a sale could cause the whole project to become unprofitable. The drug maker and the
client should consider trying to set up pre-commitment contracts with the governments and the military.
Interviewer: OK, take a look at this graph and assume that this is the prescribing data for a product like
the one that our client may help launch for diarrheal disease. Assume that market 1 and market 2 are two
different geographic markets. What does this show and which market seems like a better target?
If the Candidate needs a little help with interpretation, the chart shows the physicians in each market
arranged by their prescribing level of this product horizontally in descending order. So the physician who
prescribes the most is on the left, and those who prescribe the least are on the right. The height of the
line represents the cumulative total of all the units they have prescribed.
Candidate: Market 1 is more consolidated than Market 2. 80% of the units of this product are prescribed
by about a third of the physicians in Market 1, but in Market 2 to account for 80% of the units we have to
include closer to 60% of the physicians. This means that it is probably easier to sell in Market 1 because
fewer physicians would have to be informed about the new product, so I would be a better target.
Interviewer: So, what is your recommendation?
Any well thought out recommendation based on the data presented will be fine.

31. Mobile Virtual Network Operator - Market Entry (BCG R2, TMT,
New Market, Balanced)
Stem: The year is 2003. A client has asked us to evaluate whether or not they should enter the US
wireless market. Our client is an international wireless carrier that successfully operates in Asia and is
looking for international growth opportunities. They came to us to understand 1) whether or not they
should enter and 2) what key challenges they might face upon entry.
Our client intends to enter the market using an arrangement known as an MVNO (Mobile Virtual Network
Operator), in which they will lease network capacity from an existing wireless network operator in the US,
referred to as an MNO (mobile network operator) or Host Operator.
Phase 1: Big Picture Analysis
Give out information as the Candidate asks for it. They should ask detailed questions about the market,
growth, competition (interviewers should give the entire competition block at one time), and marketing.
Market:
• Forecast for 2004: 180M wireless subscribers in the US with an annual growth rate of 10%
Competition:
• The market can be divided into three main categories:

o National carriers
▪ This includes larger network operators, such as Verizon (25% market share),
AT&T/Cingular (25%), Sprint/Nextel (20%) and T-Mobile (15%)
o Regional carriers
▪ Includes smaller network operators, such as Alltel and Dobson
▪ Represent 10% of the market in total
o Other MVNOs
▪ Includes Virgin Mobile, Tracfone, etc.
▪ Represent 5% of the market in total
Value Proposition / Target Customers:
• Other MVNOs have focused on targeting niche segments, such as low-credit consumers, teens,
and ethnic groups, using no-frills prepaid services
o Virgin Mobile was able to capture 4M subscribers
• Our client intends to leverage its existing assets and experience, specifically next-generation
handsets from Asia and a platform for mobile applications, to target high-end consumers
o These exclusive technologies are several years ahead of the competition
o They already have a successful wireless application platform they can replicate in US
o Although US wireless data is under-penetrated relative to Europe and Asia, new 3G
networks and entertainment services are expected to accelerate adoption
• Between 10 and 20% of US subscribers would be willing to pay for a premium mobile handset
with wireless data services

Phase 2: Profitability and Breakeven Analysis
Interviewer: How can we calculate the number of subscribers needed to cover the initial investment and
the annual fixed costs?
Candidate: First, we would need to determine the contribution margin of each individual subscriber.
Interviewer: Here are some points that can help simplify this complex problem. First, you don’t have to
discount the cash flows. Also, you can ignore the $10/month for data services (with 60% gross margins).
Finally, you can assume that you get all subscribers during first year of service due to pent up demand for
this business. Now, knowing these facts, what data would you like me to provide in order do this
calculation?
Let the Candidate ask for as many of these as he/she can think of. After the list has been exhausted,
prompt questions that will let you give the rest. For example, make sure the Candidate asks about
margins, fixed costs, investment costs, administrative costs, and customer statistics (such as tenure and
minute usage).
• Average customer tenure = 4 years (48 months)

• Revenue
o Price per minute = $0.06
o Average monthly minutes of use (MOUs) = 900
• Costs
o Initial investment = $25M (it will take one full year to develop and integrate new platforms
with MNO before launching)
o Annual fixed costs after launch = $25M
o Per customer costs
▪ Marketing and advertising cost per customer = $100
▪ Sales commission per contract = $50 (for 24-month contract)
▪ Subsidy per handset = $200
▪ Average handsets purchased / contract period (every 24 months) = 1 (so 2 for 48
months)
▪ Cost per minute = $0.04 (based on contract with mobile network operator)
Interviewer: Ok, now I think you’re ready to make some calculations. We’re looking for how many
subscribers we need to get us to the breakeven point.
Calculations don’t necessarily have to be done exactly as shown below, as long as the Candidate arrives
at the answer.
Candidate:
• Customer Lifetime Value = (average monthly revenue – average monthly costs)* tenure –
acquisition costs
• Revenue per month per customer = 0.06 * 900 * 48 = $2,592
• Customer acquisition/maintenance costs = [(200 + 50) * 2] + 100 + (0.04 * 900 * 48) = $636
• Lifetime value = $2,592 – $2,328 = $264
• Subscriber breakeven volume = Total Costs (initial investment + annual fixed costs) / subscriber
lifetime value
• Total fixed costs = 5 x 25 = $125m (5 comes from 4 years of customer tenure and 1 year of
development)
• Breakeven volume = $125m / $264 = 473K subscribers

Candidate: The company will need to sell close to 500K subscriptions in order to break even. Given that
this is only 1% - 3% of the premium market (36-18M) and Virgin Mobile was able to achieve ~8x that
number, this seems reasonable (especially since we ignored some data services).
Phase 3: Critical Success Factors / Execution Challenges
Interviewer: What do you think are the potential challenges and other issues the company will face in this
endeavor?
Let the Candidate brainstorm. A variety of answers are acceptable, but make sure he/she is thinking
about this specific market, and not just saying generic things.
Interviewer: OK, and what kind of branding is necessary for this service?
Candidate: The company will need to invest heavily in marketing and advertising campaigns to develop a
new brand in the US. They will need to establish a brand that can overcome the switching costs of
changing carriers, including the loss of free in-network mobile to mobile calling. Once customers are in
the door, they will need to reward loyal customers and encourage referrals.
Interviewer: The company has no existing relationships with customers and will likely have to rely on a
3rd party to sell on its behalf. Evaluate some of the tradeoffs between different options.
Candidate:
• Online: While an important, low cost channel, most customers will still want to experience the new
handsets and data services in person
• Build Your Own: Maximizes brand control and customer experience, but requires significant
capital investment, trained sales force, and locations in urban markets
• Carrier owned stores: Strong distribution capabilities, geographic footprint, and sales skills, but
incentives may not be aligned to promote your devices/services over their own
• Big box retailers (e.g., BestBuy): While they have expertise in selling electronic equipment and
data services, it may be challenging to stand out from all of the other electronic devices sold in
their channel
• Non-traditional (e.g., high-end department stores, jewelry stores): Although these channels may
help differentiate as a luxury good and target premium consumers, they may not have the
technical expertise to sell wireless services
Interviewer: How do you think the company should go about developing content?
Candidate: First and foremost, they must understand the entertainment needs / preferences / habits of
US consumers, which are likely different than current customers in Asia.
Once that is established, they could develop content in-house, license existing / new content from
external developers, and begin to localize existing content (e.g., translate into English, etc.).
Interviewer: Are there any other issues you think need to be looked at?
Candidate:
• Customer service / billing

• Handset logistics / maintenance

• Extra charges for roaming, directory assistance
• Regulatory environment must remain friendly
Interviewer: What do you think are some issues to consider when partnering with an MVNO?
Candidate:
• Requires the ability to differentiate MVNO services from the network owner to avoid
cannibalization
• Must target customer segments where network operator is less profitable (either through lower
acquisition costs, longer tenure, or higher margin / month)
• MVNO arrangement avoids capital requirements for spectrum and network rollout, but requires
excess capacity of partner’s network
• Host network operator must be willing to accept some loss of customer control and offer
competitive rate in exchange for improved network utilization
• Must also be willing to ensure network quality and customer support
Interviewer: OK, great, so what would you tell our client?
Candidate should concisely summarize findings, pointing out that this looks like an attractive market, and
the potential for profit is high. The recommendation should also include some of the biggest
issues/challenges to come out of the brainstorming phase, but overall, this seems like a good
investment.

32. Pest Control (BCG R2, Other, Profitability, Balanced)
Stem: Our client is a major pest control company operating in the US South East. The client sells
extermination services for the home and garden. The client is looking to improve their profitability, and is
asking for specific recommendations to effect this. They do not have a target profit margin, but they are
interested in exploring the full range of options presented to them. What areas should we consider?
Candidate should lay out a structure that looks specifically at profitability for this business. The structure
need not follow a specific format, it is more important that it be logical, MECE, and specific to this
industry/client. It should address at a high level how we reduce costs and increase revenues (e.g.
assessing product offerings, efficiency of territory coverage, customer acquisitions/marketing, etc.)
It is important for this case to allow the candidate to brainstorm as much as possible. The goal is for them
to be specific to the industry and to speak clearly and logically as to why their recommendations make
sense. Ask them for the rationale behind their thinking frequently.
Phase 1: Brainstorm
Once the candidate has presented their structure, guide them towards a discussion on revenues,
specifically pricing and customer acquisition/retention. Make sure that they hit on these in some way
(they are analyzing P * Q but it should be done in an industry specific way).
Interviewer: These all seem like reasonable options to consider, but as we look at our client’s revenues
what aspects do you think are important for a pest control company?
Candidate: The price that they charge for their different services, for instance the charge for a one-time
fumigation vs. routine sprayings, as well as their customer acquisition and retention.
Interviewer: Can you brainstorm some of the factors that would play into a customer’s decision of
whether or not to buy our client’s services?
Candidate should brainstorm ideas with a logical structure. Allow the candidate to exhaust their list and
then prod for one / two more.
Phase 2: Analysis
Interviewer: It turns out the client has seen their customer acquisition stagnate over the last year,
although the market for pest control is growing at a healthy rate, they are currently operating at 0%
customer growth (i.e. not gaining nor losing clients). We have information on the effectiveness of their
call-center, which we’ll assume covers all of their customer interactions.
Present candidate with the figure below.
Interviewer: On the left you’ll see how effective the client is at turning a prospective caller into a
customer, and on the right we have the turnover of the customer base. How many clients are gained/lost
from each?
Candidate should double check the right side is an annual figure if they are uncertain. Ask that they
round the annualized calls figure to 50K from 4,200 * 12 = 50,400 once they complete the calculation.
Candidate: You had mentioned initially that we aren’t gaining or losing customers, so I’d expect that the
net effect should be 0, and after doing the math I see we would gain 10k from call-in’s and lose 10k from
our annual turnover.

Interviewer: Great, you had brainstormed pricing as one of the areas we should look into, can you
calculate the average price that the client charges for their services?
Candidate: Yes, I know from the figure that we have 500K accounts, but I’ll need the revenue of the
company in order to calculate P.
Interviewer: The company generates $50M in revenue.
Candidate: In that case our average price would be $100 since $100 * 500K = $50M.
Interviewer: That’s right, given all this information what could we hope to change?
Phase 3: Additional Brainstorms
Allow the candidate to list off ideas or brainstorm again. They should come to the conclusion that
adjusting pricing would be difficult in this industry, and that 2% attrition is already rather low. Therefore,
we should look to improve our 20% yield from calls.
Candidate: I think that we should look to improve the yield of our calls from prospective customers.
Interviewer: Yes this is an area that they can consider, how do you think they could improve their yield?
Candidate brainstorms further – ensure it remains structured.
Interviewer: The company has looked into the performance of their call center staff and found that 1/3
have a 30% yield, 1/3 have a 20% yield, and 1/3 have a 10% yield. Based on this, what would you
suggest the company do to improve their overall yield?
Candidate brainstorms further, ideally on a new sheet to remain clear and not simply laundry list ideas.
Should they ask, the employees within each bucket are indistinguishable from one another and it seems
within the first week you can determine relatively quickly if an employee will be in the top bucket or the
bottom bucket.
Phase 4: Conclusion
Once the candidate has concluded their list, end the case abruptly but in a friendly way. Do not accept a
recommendation. The goal is that the candidate not get flustered, and remain engaged, potentially
asking how the case ended or transitioning to the next talking point in a professional way.
Interviewer: Great, these all seem like solid ideas and I appreciate your continued interest in our firm.
We think you’re a great candidate and are really looking forward to potentially having you here this
summer.
Candidate: Thank you, I’ve really enjoyed our conversation, out of curiosity was this a case you worked
on? I’d be interested to know how it turned out.
Interviewer: Yes actually, this was the first case I ever worked on as a partner. We ended up
implementing a training program where the top 1/3 coached new hires. We also turned over the bottom
1/3 in order to have more high-quality customer interactions.

33. TastySnack (Deloitte R1, CPG/Retail, Profitability, Quantitative)
Stem: Our client, TastySnack, is a global company with 4 distribution channels. Their stock price is down
by 50% and has missed earnings for 3 quarters. They have not been able to focus on growth. They hired
Deloitte to answer why TastySnack is unprofitable and what action steps they can take to improve the
company’s situation.
Interviewer: We have half an hour before meeting the CEO. What info should we ask her for?
Candidate: Industry (size, share, competitors, customers, growth/trends), revenue (product, channel),
and costs (COGS, SG&A, PPE, etc)
Interviewer: Here’s what she gave us: I’d like you to do some quantitative analysis.
Show all tables to the candidate at once.
Table 1
2007 2008 2009
Revenue $60M $50M $45M
COGS $30M $25M $22.5M
SG&A $8M $9M $10M
Candidate: Revenues have decreased significantly (25% over two years). SGA grew by 25% while
COGS remained in proportion and fell 25%
Table 2
Competitor 1 Competitor 2 Competitor 3
2007 Revenue $9.9M $18M $29M
2009 Revenue $10M $20M $30M
2009 COGS $4.5M $10M $15M
2009 SG&A $1.8M $3.5M $5M
Candidate: TastySnack is the only one losing revenues. Are there new entrants? SGA and COGS are in
similar proportions to other companies but closest competitors still far away – potential for economies of
scale?

Tasty Snack Revenue Breakdown by Market
Retail 10%
Wholesale
12%
Mass market
45%
Supermarket
33%
Table 3
3 Year CAGR Change in Price
Mass market -15% -2%

Supermarket 1.5% 1%
Wholesale 1% 1.5%
Retail 1% 2%
Candidate: Largest portion of the client’s revenues is in the segment of the market that is shrinking. It
may be important for Tasty Snack to refocus its marketing efforts on other segments if it has not already.
Table 4
Supermarket Mass market
Price to customer $3.35 $3.33

Price to end consumer $3.72 $3.45
Candidate: Margins for supermarkets are 10% ($0.37/unit) and margins for mass markets are only about
3.5% ($0.12/unit). The industry shift away from mass markets could be an opportunity for improved
overall company margins if Tasty Snack can increase share in the supermarket segment.
Interviewer: If they decide to increase prices by 10 cents for their supermarket customers, what will be
the impact on revenue?
Candidate: Assuming total unit sales remain constant despite the increase in price:
• Total Company Revenues = 45M

• Supermarkets = 33% of revenues or 1/3 = 15M
• % Increase in Unit Price = $0.10 / $3.35 = about 2.9% (rounding that to 3%)
3% of 15M = incremental revenue of $450K
Interviewer: Our client’s CEO is ready to meet with us. What action steps can we recommend her?
Candidate recommendation should build on discussion and can include:

• Channel – Determine feasibility of refocusing on supermarket business due to higher margins and
positive CAGRs

• Customer – change pricing? (risks: competitor response, customer price elasticity, etc) Would
supermarkets be able to pass the increase in price on to the end consumers as well?
• Product – bundle, new products, loss leaders
• Competitors – acquisition of competitor with large presence in supermarkets?
• Management – poach successful leaders from competitors?

34. AgChem (Deloitte R2, Industrial Goods, Profitability, Quantitative)
(Note that this interview was an hour long)
Stem: Our client is AgChem, a private company in the U.S. with $5B in revenue in 2009 that
manufactures and distributes crop protection products. They sell products in two ways: proprietary
branded and vended manufacturer branded. Their revenues have seen strong growth but margins are
falling. The company has 10% market share in both segments. The CEO called in Deloitte to ask why
profits are falling and to develop a strategy.
Interviewer: What factors should we consider?
Note: if there is confusion over the term “vended manufacturer branded,” explain that it is branded with
the vendor’s brand.
A structure should include the following: Market effects (size, share, competition, growth/trends, and
barriers to entry/new entrants); Revenues (product mix, customers, geographies, etc.); and Costs (FC
and VC – Candidate should brainstorm some for each).
Interviewer: What do you think of this data?
Show the candidate the below table only:
Revenues Profit
Proprietary $1B $80M
Total $5B $200M
Candidate should use the data to calculate the overall margin and margin on each of the proprietary and
vended products. Upon noticing that proprietary products have a substantially higher profit margin,
candidate should ask about trends by category over time or move into brainstorming ideas on how to
grow the proprietary share of the mix. Otherwise, prompt them for this information.
Candidate should end up with the following information:
Revenues Profit Margin
Proprietary $1B $80M $80M/$1B = 8%
Vendor $4B $120M $120M/$4B = 3%
Total $5B $200M $200M/$5B = 4%
Interviewer: OK, let’s brainstorm some ideas on how to grow the proprietary share of the mix.
Candidate: Sure, this could be done by looking at customers, distribution, and products.
Customers: Evaluate customers and determine whether they are segmented and targeted
appropriately. Does this match the sales force strategy/resources?

Distribution: Look at distribution channels and determine whether existing partnerships could be
revamped, new partnerships could be made, and whether the internet is an appropriate
distribution tool.
Products: Is the proprietary product differentiated enough from the vendor-branded product? Is
the price of the products in line with those of competitors? Invest in a new marketing campaign to
promote the proprietary products.
Interviewer: OK, I have another table for you. Estimate the profit (in $) for FY09-11 if the client is able to
obtain this revenue structure.
Provide the following data:
Revenue from Vendor ($B) Revenue from Proprietary ($B) Total Revenue ($B)
FY09 4 1 5
FY10 4.34 1.86 6.2
FY11 4.2 2.8 7
Candidate should notice that the proprietary products are going up as a percentage of total sales (20% in
2009, 30% in 2010, 40% in 2011) and therefore the overall profit margin is increasing.
Candidate should recall that vendor margins are 3% and proprietary margins are 8% and should therefore
be able to calculate the following profit numbers:
Vendor Profits Proprietary Total Profits Total Profit Margin

($M) = 3% of Profits ($M) = ($M)
Revenues 8% of Revenues
FY09 120 80 200 4%
FY10 130.2 148.8 279 4.5%
FY11 126 224 350 5%
Interviewer: Please calculate the incremental profit that AgChem will receive if they are able to
successfully shift their product mix so that it reflects the FY11 numbers.
• 2011 without changed mix: $7B in profit with initial 4% margin = $280M
• 2011 with changed mix: $7B in profit with 5% margin = $350M
• The difference (incremental profit) is $70M
Candidate should discuss the significance of the $70M; i.e., this represents 35% percent of the 2009
profit of $200M and this is the amount that AgChem should be willing to spend to shift the product mix
(depending on their time horizon).
Interviewer: If instead they choose to expand geographically, how would this change marginal profit?
Provide the following data table to the candidate.

Market size AgChem share of market
Canada $10B 2%
Brazil $8B 2%
California $5B 3%
Minnesota $5B 1%
Candidate should calculate expected revenues from each new market and multiply by the original 4%
profit margin:
(200M + 160M + 150M + 50M) * .04 = $22.4M
Candidate should reflect on the difference between the $22.4M earned by geographic expansion
compared with the $70M earned by shifting the product mix. Additionally, there may be risks associated
with geographic expansion such as uncertainties surrounding new markets or industry growth trends by
region which are relevant.
Interviewer: What other factors would affect their ability to change product mix?
Candidate should brainstorm factors such as: competitive response, customer satisfaction, speed to
market for new products/promotions, ability to finance different options, geographical/cultural barriers, and
operational capacity. The best brainstorms are done categorically (internal vs. external, etc)
Candidate’s response should be in line with prior analysis but will likely include a recommendation to shift
product mix toward proprietary products.

35. Blue Chips (Deloitte R2, Industrial Goods, New Product)
Stem: Our client is called Blue Chips. They run a silicon manufacturing business, specifically making the
quartz that goes into wafers. They are thinking about expanding into the wafer manufacturing business.
Wafers come in two diameter sizes – 6 inches and 8 inches. It would cost our client about $200M to
expand their factory. Demand in the industry is expected to grow. Should Blue Chips get into the wafer
business? If so, what size of wafer should they produce?
Give the candidate a few minutes to write out the structure. It should include industry landscape,
investment size, expected revenue, and cost.
Interviewer: Let’s start by calculating the market size for wafers.
Hand candidate exhibit.
Candidate to calculate total 6-inch wafer market size of $1.5B and 8 inch wafer market size of $1.68B.
Total market size of $3.18B, round to $3.2B.
Candidate: That’s a sizable market. In order to understand more about the attractiveness of each type, I
would need to know more about the competitive landscape.
Interviewer: I have some data on that. For the six-inch wafer, the leading competitor has $700M in
revenues, the second $350M and the third $220M. The rest of the market is fragmented. For the eight -
inch model, there is only one big player with revenue of $1.4B. The rest is fragmented as well.
Candidate to calculate how much share of market is taken up by the top 3 competitors percentage -wise
and give initial take on this number. Regarding the eight-inch wafer market, it seems challenging as it is
near monopolized. The candidate should ask for data on profitability of each type before making any
concrete decision. If he or she doesn’t, prompt the candidate to do so.
Candidate: It seems like a six-inch market is more attractive, but it will depend on how profitable each
business line is. Do you happen to have data on that?

Interviewer: I have some data on the profitability. It turns out that we are looking at 7% for 6 inch wafers
and 15% for the 8 inch ones. Would that change your opinion of the situation?
Candidate should develop a view point on any of the two sizes with considerations on potential
profitability and competitive landscape.
Interviewer: Do you think this is a good investment?
Candidate: It surely is profitable, and the demand growth is expected to be strong. I think it will all
depend on how big of a market share we can potentially get.
Interviewer: Any idea on how to maximize that?
Candidate should list out a few ideas on how to enter the new market successfully. There is no need to
ask for calculation here, this is meant to be a brainstorming exercise.
Interviewer: I like your ideas. Let’s move on to choosing actual processing methodologies.
Phase 2: Analyzing Different Manufacturing Processes
Interviewer: There are two different ways to produce wafers – the Cz process and the Ky process. When
it comes to the 6-inch Cz process, one can produce a high yield of chips, the process has been around
for over 20 years and there are five other manufacturers producing the product in this fashion. The 8-inch
Cz process has a very high yield, two other manufacturers are producing chips this way, it requires a
complicated process with a high tech burning to finely develop each chip. The 6-inch Ky process involves
low yields and is used by many other competitors. The 8-inch Ky process has low yields, is similarly made
to the 6 inch Ky process without any high tech burning and two other manufacturers are producing chips
in this fashion. Which process should they use for each chip size, the Cz or Ky process?
Regardless of which product the candidate chooses, he/she should identify the Cz process as the best
way to produce chips given its competitive advantages. The candidate should also try to explore the cost
differences between the two options. Feel free to say there is none.
Interviewer: Our client’s CEO is walking in now. What is your final recommendation for her?

36. Airline Ice Costs (Parthenon R1, Transportation, Operations,
Quantitative)
(Note: 30-minute case interview – actual case ended in 20 minutes)
Stem: Our client is a national airline looking to determine the total cost of ice it needs to purchase to
serve its customers onboard for the entire fiscal year. How would you think about this?
Candidate should brainstorm a MECE structure in order to thoroughly evaluate an accurate cost
calculation. At a minimum, this would include capacity, ice consumed per customer, and cost of ice
consumed per customer. Let the candidate drive the case.
Candidate: In order to determine the total annual cost of ice consumed by the airline, I would need to
know or assume a few things. First, I will need to determine the number of customers served by the
airline. Second, I will need to know how much ice is served in every drink. And lastly, I need to figure out
the cost of ice consumed per customer.
Interviewer: Ok. Where would you like to start?
Candidate: Let’s start with the number of customers served. How many flights does the airline have
daily? How many seats does each flight have and what is the occupancy rate?
Interviewer: The airline has 40 one-way flights daily, each flight has a maximum capacity of 120
passengers and the average occupancy rate is 80%.
Candidate: Assuming the airline operates 40 flights every day of the year, the annual number of flights is
40*365 = 14,600 flights. Average occupancy per flight = 0.8*120 = 96. Therefore, the total number of
customers served annually is 14,600*96 = (14,600*90) + (14,600*6) = 1,401,600.
Interviewer: Great – what next?
Candidate: In order to figure out how much ice is consumed per customer, I need to know how many
drinks are consumed by each customer and the amount of ice used per drink.
Interviewer: You can assume that on average, each customer consumes 1 drink. How would you go
about estimating the amount of ice used per drink?
Candidate: Hmmm, one drink usually has about 4-5 small ice cubes on planes. Do we have any
information on how much 1 ice cube weighs?
Interviewer: Well, what we do know is that a five-pound bag of ice can serve 25 customers.
Candidate: How much does this five-pound bag of ice cost?
Interviewer: $15.00
Candidate: Ok. So if each bag serves 25 passengers and there are 1.4M passengers flying in a year,
you need 56K bags of ice. 56K * $15 = $840K.
Note: Sometimes the interviewer may not require you to calculate the final answer as long as they are
satisfied with your thought process.
Interviewer: Great –thanks. Do you have any questions for me?

37. Publishing Company (Parthenon R1, Other, Growth Strategy,
Balanced)
Stem: Our client is a major book publishing company. They've noticed recently that their revenues are
down by 1% while the industry, on average, is up by 3-4%. They want us to help them figure out the
cause for this reduction in revenue, and what they can do to reverse the trend.
Candidate should layout their structure which should include gaining an understanding of the company's
profitability and product mix by book genre and trends.
When asked, interviewer should reveal the following data:
Revenue by Genre (product mix is the same as the competition):
Genre growth:
● History: no movement
● Romance: up 1%
● Mystery: up 1%
● Fantasy: ???
● Bibles: no movement
Interviewer: Can you tell me what is happening with Fantasy revenues?
Candidate: Sure. First, I’d like to clarify these growth numbers per genre. Are these the growth numbers
for the total industry or the growth of our particular company? Although there is usually a positive
correlation between industry growth and company growth, sometimes this does not hold.
Interviewer: Good point. These numbers are the growth for our client, not the industry.
Candidate: Great. Since overall revenue is down by 1% and there has been no movement in History or
Bibles, all of the revenue shift is coming from the other 3 genres. Romance is contributing positive 0.2%
(1% * 20%), as is Mystery. So, Fantasy must be pulling down overall revenue by (negative) 1.4% (0.4% +
1%). Since Fantasy contributes 25% of overall revenue, Fantasy revenues must have been down 5.6%
(1.4% ÷ 25%).
Interviewer: OK, good, what customer segment do you think is the driver of Fantasy segment sales?
Candidate should brainstorm with interviewer.

Candidate: Well, a lot of segments come to mind, actually. More recently, books like Twilight have
brought in a lot of teenage girls, and potentially their mothers. Harry Potter has an even younger
audience, which means their parents are actually the purchasers. These books also appealed to
teenagers and those in their twenties, albeit a little less so. More classically, I think of books like Lord of
the Rings, which probably brings in predominantly males in their twenties and thirties.
Interviewer: Interesting thoughts. We’ve actually done a little market research and know that the main
customer segment for Fantasy sales is women aged 22-40, specifically stay-at-home moms. So, with this
information about the segment, what are some issues that could be driving the negative trend in sales?
Candidate: Perhaps this company has different authors or less attractive products than the competitors?
Or maybe a less robust selection?
Interviewer: No, our company’s selection/offerings are no different than the competition.
Interviewer should continue to push the candidate to brainstorm until the candidate arrives at differences
in retail strategy.
Interviewer: Where does this customer segment buy books?
Candidate: Probably at malls, department stores, grocery stores, drug stores, anywhere a stay-at-home-
mom would already be running errands. I would imagine they are also purchasing online at an increasing
rate to get the best prices.
Interviewer: OK, well, it turns out that we are in all the same retail outlets as our competitors, but we are
having far fewer sales in grocery stores and drug stores. Why might that be?
Candidate and Interviewer should brainstorm until candidate asks about where the books are located in
the store.
Interviewer: Ah, good question. As it turns out, Fantasy books purchased by this customer segment are
usually impulse buys. The retailers (grocery stores and drug stores, in this case) had not been locating
the books near the registers, where impulse buys occur.
No formal recommendation is needed for this case. It is important that the candidate stays calm
throughout these difficult brainstorming sessions, and shows his/her creativity in arriving at these
conclusions.

38. Marlin Toys (Parthenon R2, CPG/Retail, M&A, Balanced)
Stem: Your client is a large toy manufacturer named “Marlin” (think of a company such as Hasbro or
Mattel) with $3B in sales. They are interested in potentially acquiring a smaller company named “Dolphin”
which sells educational toys.
Dolphin is different from Marlin since it employs a direct selling model. They hire independent contractors
(ICs) to sell their toys for them: these ICs find people to hold parties for them, and invite about 8 -10
people whom they sell these toys to. The ICs are paid 20% commission. If the ICs refer a friend to sell
Dolphin products and does so, that sale still generates 20% commission for the new IC, but also an
additional, smaller commission for the person who originally referred him. This process continues and you
get an increasingly smaller cut of sales from members that were referred by those you referred, etc. This
“down-stream” sums up to approximately 10% commission total.
Dolphin has been losing revenues lately. Two years ago, they had $35M in revenue, one year ago they
had $28M, and this year they have $20M. This year they are operating at zero profitability - breakeven.
Although the cost of the acquisition is not significant due to their relative sizes, Marlin wants to have a
company that can pay its own way. Two questions:
1. What do both parties have to gain from this acquisition?

2. Why is Dolphin losing revenues and what can it do about it?
One example structure is to include the following buckets for question 1: revenue synergies, cost
synergies, Marlin itself, and the educational toy industry; and the following buckets for question 2:
external vs. internal factors or decrease in price vs. decrease in quantity. Candidate should ultimately
recognize question 2 as higher priority.
The following information can be given when asked for by the Candidate:
● The educational toy market is growing at a rate of 3%; overall toy market is flat
● Dolphin is the only company currently selling educational toys with direct sales method
● There were no recent competitor entries in educational toys
● Other educational toys are sold through retailers such as Target and Walmart
● Marlin does not have any educational toys now, but other large toy manufacturers do
Interviewer: Why might Dolphin be losing revenue?

Candidate: Perhaps Dolphin has reached market saturation, they have old or under-preferred products,
their prices are too high, or the sales force isn’t big enough or effective.
Interviewer: Good thoughts, but Dolphin products are actually in high demand, and while they do sell at a
premium price, people are willing to pay it. In fact, many people have been complaining that they cannot
find a party when they want to. This is because recently the number of ICs has been declining at a rate of
10%. Dolphin is proactively adding IC’s, but more ICs are leaving than joining. Average party revenue has
remained constant at $200.
Candidate: Dolphin’s decline in revenue is not an external factor since the market is growing. There is
demand for this product, but it is not being sufficiently distributed. We know that IC’s are declining at a
rate of 10%, but this does not account for the total decline in revenue (which is > 20% per year). Since
revenue per party is constant, each IC must be putting on less parties.
Interviewer: Why might each IC hold less parties than before?

Candidate: Their compensation may not be using proper incentives or they may be having a hard time
finding the right areas to hold their parties.
Interviewer: Correct, as I mentioned, Dolphin parties generate $200 on average. The IC commission rate
is 20%, so $40 per party. Industry average (similar job functions) is 30% with party revenue of $300, so
$90 per party. These sellers may pursue multiple jobs and prefer to hold parties for products ot her than
Dolphin. Management believes that by increasing commission rate to 30% but maintaining the
“downstream” rate, the number of parties will double. Assume these parties still have $200 sales on
average. Will this solve their company’s problems?
Candidate: The increase in commission will lead to $60 per party for the IC which, granted, is 1.5x more
than they’re currently getting with Dolphin, but is still considerably less than the $90 ICs get with
competitors. I think the expectation that the number of parties will double is a little aggressive, but I’m
happy to run the numbers. Can you tell me about the current cost structure?
Interviewer: COGS = 50%, Fixed Costs = 20%, Selling Cost = commission + “downstream”
The candidate should create the following chart:

Before
Costs
Candidate: Increasing the commission rate to 30% gives us no difference in profitability, and the doubling
of parties held seems unlikely. Perhaps we can increase commission further to determine impact on
profitability or explore other distribution channels.
Interviewer: How do you think Marlin and Dolphin can help each other in this respect (i.e. revisit Question
1)?
Candidate: In terms of revenue synergies, Dolphin will benefit from using Marlin’s current store
locations and distribution channels. Because Dolphin products are in high demand, they should do well in
stores. This will bring in additional revenue and help solve the profitability problem for Dolphin as a stand-
alone business. Marlin can gain brand desirability and increased sales by adding educational toys to its
product line and exposing Dolphin’s education customers to its other products. The acquisition would
ultimately improve Marlin’s competitive position relative to other large toy manufacturers. In terms of cost
synergies, most toys are made from similar physical materials, so an acquisition should allow both
companies to enjoy economies of scale by decreasing raw materials costs, sharing manufacturing
facilities, and streamlining operations.
Interviewer: OK, thank you.
No formal recommendation was required for this case

39. Premium Paint (L.E.K. R1, Retail, New Market, Quantitative)
Interviewer: Our client is a premium paint manufacturer based in the UK. They have an established
brand and stable market share in the UK, but are interested in pursuing other markets. Although they
currently do not have a presence in the US, they are interested in entering the market and have hired us
to help. Specifically, the client has hired us to size the market opportunity for the residential interior paint
market in the US as part of their overall decision to enter the market.
Note: if asked, the paint market is broadly divided into premium and value. Premium paint is typically ~4x
as expensive and typically comes in curated colors. Residential includes places where people live
(houses, apartments, etc.) and excludes commercial properties. Interior paint covers all locations inside a
house and is less resistant to wear from weather.
Candidate: This is a market sizing question, so I’d like to structure my thoughts using the following
structure. I’ll then make some assumptions and we can work through the numbers to get the total size of
the US residential interior paint market.
Note: an candidate should lay out the approach and explain the reasoning. Then, reasonable
assumptions should be made to get to the final market size. Alternative structures could include second
or third homes, segment the market by apartments vs. houses, segment the market by rural vs. urban,
etc.
Candidate: Painting a house happens either when you repaint a room or when you build a new house. I
will make some assumptions to get to the US residential interior paint market. Starting with population,
there are about 330 million people in the US. With a household size of 3 people per house, that gives
us 110 million households.
Repainting a room happens every few years. I’ll assume that on average, homeowners repaint every five
years, which means in any given year, 20% of households are repainting. That means that 22 million
households are repainted each year (110million x 20%). A typical house has a kitchen, living room,
dining room, three bedrooms, plus 3 bathrooms that I will count as one full room for a total of seven
rooms per house. It seems like a room might need two gallons of paint per room, so that would be 14

gallons per household. Multiplying that by the number of households, that gives 308 million gallons of
residential interior paint for renovations.
New construction replaces some old housing and also accommodates the growing population. Assuming
that new housing adds an extra 2% of housing to the market, that gives 2.2 million households.
Multiplying by the same 14 gallons per household we found earlier, that gives 30.8 million gallons of
residential interior paint for renovations.
Interviewer: Ok, great. As you may know, the new housing market is very cyclical. Some years it can be
more than 10% per year and others it can be near zero. Given that information, how cyclical do you
expect the paint market to be?
Candidate: Since most of the market - >90% in these calculations – is made up of the renovation portion
of the market, I would expect paint to be somewhat insulated from swings in new housing construction
when compared with other building products like lumber. However, if the new housing market downturn
happens at the same time as a general recession, homeowners may be less likely to splurge on
repainting.
Interviewer: How should the client think about entering the US market?
Candidate: You can enter a new market organically or inorganically. On the organic side, the client
could use existing capacity in the UK and ship material to the US market. This would have a low capital
cost and allow the client to control quality, but potentially risk shipping heavy chemicals across the US
and potentially have regulation issues. Inorganically, the client could either acquire or do a joint venture.
An acquisition target would need to fit with the brand or be able to meet the quality standards our client
demands, but would already have access to distribution channels and some brand recognition. A joint
venture seems unlikely because our client does not have any assets in the US to contribute to the new
entity. Given these, I’d like to explore entering the market organically more and see if we have the
capacity or cost structure to allow this.
Interviewer: Can you give a quick summary of what we know so far and where you’d like to evaluate
next?
Candidate: Sure. We’ve looked at the size of the US residential interior paint market as part of a market
entry evaluation for our client, a UK based paint manufacturer. The market is about 340 million gallons of
paint per year, more than 90% of which is used in remodels and renovations, which could reduce volatility
in the market despite a housing market prone to swings. Pursuing an organic market entry might make
sense as we can control the quality and product better, but a key area of concern is distribution and
customer awareness. I’d also like to explore the marketing strategy – how we might actually get
consumers to buy this premium product and who to target (such as interior designers and luxury
homeowners).

40. Great Burger (McKinsey Mock, CPG/Retail, M&A, Other)
Interviewer: Our client is Great Burger (GB), a fast-food chain competing with the likes of McDonald’s,
Wendy’s, Burger King, etc. GB is the fourth largest fast-food chain worldwide, measured by number of
stores in operation. As most of its competitors do, GB offers individual food items and “combos” for 3
meals a day – breakfast, lunch, dinner. GB owns some of its stores, but it mainly operates under a
franchising model, with 85% of stores owned by franchisees (individuals own and manage stores and pay
franchise fee to GB, but major business decision like marketing and setting menu is controlled by GB).
As part of its growth strategy, GB has analyzed potential acquisition targets including Heavenly Donuts
(HD), a growing doughnut producer with both US and international presence. HD operates under
franchising model too with one difference – GB franchises restaurants, whereas HD franchises areas or
regions where a franchisee is required to open a certain number of stores.
GB’s CEO has hired us to advise him on whether or not they should acquire HD.
Question 1:
Interviewer: What areas would you want to explore to determine if GB should acquire HD?
Answer: A reasonable structure may include the following:
● Value of HD (donut market - size, growth; HD’s market position – market share, growth; HD
profitability, competition)
● Synergies/Strategic Fit (rev synergies – cross sell products, open new stores; cost synergies –
sourcing inputs (COGS), combining overhead (SG&A), marketing)
● Fit/Implications (acquisition cost, cultural fit between management and employees, GB’s ability to
do post-merger integration)

Question 2:
Interviewer: Let’s think about potential synergies that could be achieved by acquiring HD
Present Exhibit to candidate:
Stores GB HD
Total 5,000 1,020
North America 3,500 1,000
Europe 1,000 20
Asia 400 0
Other 100 0
Annual growth in stores 10% 15%
Financials GB HD
Total Store Sales $5,500M $700M
Parent company revenues $1,900M $200M
Key expenses (% of sales)
Cost of Sales* 51% 40%
Restaurant operating costs 24% 26%
Restaurant property & equipment costs 4.6% 8.5%
Corporate general & administrative costs 8% 15%
Profit as % of Sales 6.3% 4.9%
Sales/Store $1.1M $0.7M

Industry Average $0.9M $0.8M
*Variable costs, mostly food costs
Interviewer: what potential synergies do you see?
Candidate: Revenue: open HD stores abroad (skills), cross-sell products (but possible
cannibalization), transfer GB’s skills in finding good store locations to HD, provide investment capital
to HD to grow faster, group/package products and sell as combo
Cost: reduce COGS (inputs) through bargaining power and consolidation, combine overhead (SG&A),
transfer skills related to property cost management

Question 3:
Interviewer: We think that with synergies it should be possible to double HD’s US market share in the
next 5 years. We also think that GB’s access to capital will allow it to expand the # of HD stores by
2.5X. If these goals can be attained, what will be the resulting sales per store? You should assume:
● Doughnut consumption/capita in the US is $10/year today
Provide if asked:
● Doughnut consumption is projected to double in 5 years.
● Assume US population is 300M
(Candidate sets up table to do math calculations)
Candidate:
● Today’s market share is $700M / $3B = 25% approximately
● Expected US market in 5 years is $20/person *300M = $6B
● IF HD doubles their market share, they will have 50% market share, so their sales will be
50%*$6B = $3B
● They will also have 2.5*1000 stores = 2500 stores
● So, their sales/store = $3B / 2500 = $1.2M
[A good observation is that this is a realistic growth target, because this requires store sales to less
than double, since we already provided that per-person consumption of donuts will double]
Question 4:
Interviewer: One synergy to focus on is the idea of selling donuts in GB stores. How would you
assess the impact of this move on overall profitability?
Candidate: I need to calculate the incremental profit from this move. I should:
● Calculate incremental revenues from selling donuts in GB stores (how many, at what price, etc.)
● Calculate incremental costs (additional staff, training, marketing, distribution)
● Additional store investment (extra space, new equipment, reconfiguring)
[A good answer will also include cannibalization – selling donuts might decrease sales of existing
burger products]
Question 5:
Interviewer: What will be the incremental profit per store if we think we are going to sell 50,000
donuts/store at a price of $2/donut at a 60% margin with a cannibalization rate of 10% of GB’s sales?
Cannibalization rate = % of GB products we think will not be sold because they will be displaced by
donuts.
Info to give when asked:

Current units of GB (burgers) sold per store: 300,000
Sales price/unit: $3
Margin: 50%
● Donut sales will bring in an additional $60,000 in profit/store ($2 price*50,000*60% margin)
● Cannibalization loss will be $45,000 ($3*300,000*50%*10% cannibalization)
So, this will mean $15,000 incremental profit/store

41. Quentin Tarantino (McKinsey Mock, TMT, New Product,
Quantitative)
Situation:
Your client received a call last night and was given the opportunity to make a bid for the rights to
Quentin Tarantino’s next movie. She has 24 hours to make a bid. How much should your client bid?
Do not disclose the following unless asked.
• Objective: 40% return threshold

• Description of film: low budget film, no famous actors
Question 1:
Interviewer: What do you think drives box office success?
Candidate should brainstorm a list. Pause for a minute and come up with a few high level buckets, then
go into subcategories (organized brainstorming instead of a “data dump”; try to be MECE). Possible
answers include but not limited to:
• Actor: famous actor

• Type of movie: special effects / 3D
• Studio: marketing, distribution
• Timing: seasonal effects, other movies to be released at same time frame
Many times it is good to have 1-2 out of the box brainstorms to show you are able to think from a
nontraditional perspective. For example: positive could be special partnerships with advertisers that can
further bring in publicity, negative could be if the movie is on a controversial topic or has explicit content.
Question 2:
Interviewer: How would you estimate film studio profits?
Candidate: By looking at the average of his past movie releases.
Interviewer: How else?
Candidate: By calculating (estimating) revenues and costs.
Interviewer: Ok, let’s walk through that. What information would you need?
Have the candidate ask for information needed to calculate revenues and costs. Do not disclose data
unless asked for it.
Box Office Revenue:
• # theatres: 2,000
• # shows: 5/week
• Capacity: 500 seats/show
• Occupancy: 50%
• Cost per ticket: $10
• Length of showing: 10 weeks
Costs:
• Film costs: $25M

• Marketing: $25M
• Distribution cost: 50% of box office revenue
Candidate: Box office revenue per movie: 2,000 theaters * 5 shows/week * 10 weeks * 500 seats/show *
.5 occupancy * $10/ticket = $250M
Costs: $25M film + $25M marketing + (0.5* $250M) distribution = $175M
Profit: Revenues – Costs = $250M - $175M = $75M
Question 3:
Interviewer: What are some additional sources of revenue?
Candidate: Brainstorm, including the following:
• DVD sales
• Merchandising
• Royalties
o Video rentals (Netflix, Amazon prime)
o Video OnDemand (cable companies, airlines)
o Movie channels (HBO, Showtime)
Interviewer: Ok, let’s incorporate that into our previous calculation. Assume profits from DVD sales and
royalties are $25M and profits from merchandising are $25M.
Candidate: Ok so that would mean…
Total profits: $75M + $25M + $25M = $125M
Total bid: $125/1.4 = $90M
Note that the 1.4 comes from the 40% return threshold (objective).
Question 4:
Interviewer: What is your final recommendation for our client?
Note that the candidate should address the total bid (the original question). Final recommendation should
be succinct but include a summarizing statement, key points to support it, and risks and next steps.
Example statements are given but they do not necessarily need to be exactly this.
Candidate (Summarizing statement): I would recommend that she bid up to $90M for the movie.
Candidate (Support/Findings): First, we know that the movie will be low-budget with no big-name
actors. Second, given our estimates of revenues from movie tickets sales and additional revenue from
merchandising, royalties, DVD sales less the cost of the movie, we would see total profits of $125M.
Targeting a 40% return, we would bid $90M.
Candidate (Risks/Next Step): However, a major risk is that movies often run over-budget, and given
Quentin’s past track record, the probability of this may be higher than normal. Also, we need to think
about what other movies could be direct competition to Quentin’s movie at the same release time. We
should also consider who else may be bidding for this movie and what their risk and behavior profiles are.
Next steps would be to work through these and other externalities to iterate on the bid within the 24-hour
period.

42. Vitamin Universe (McKinsey Mock, CPG/Retail, M&A, Balanced)
Situation:
A private equity company has approached McKinsey to analyze whether to buy Vitamin Universe. Vitamin
Universe has a chain of over 1,000 stores across shopping malls all over the country. They focus on
selling vitamins, minerals, and nutrition, diet and herb supplements. It also focuses on food products,
nutrition and diet drinks for sports and fitness enthusiasts.
Question 2:
Interviewer: What factors do you think our client should consider when determining when analyzing
whether to buy Vitamin Universe?
Candidate should take a moment to put together a structure. Example structure:
• Market: size, share, growth, trends, customers, competition, cyclicality

• Company: core competencies, product mix, distribution/channel, management team
• Financials: revenue, cost, profitability, acquisition price, growth, exit strategy
• Other: synergy/fit within PE portfolio, risks & challenges
Question 2:
Interviewer: Good. So, can you tell me who the main competitors for Vitamin Universe would be?
Candidate should take a moment to structure his/her answer instead of coming up with a random list.
Candidate: I see competition falling into 3 major buckets:
• Direct brick and mortar competitors such as specialty stores like BNC and Vitamin World who
essentially have the same business operating model
• Indirect brick and mortar competitors who sell similar products such as grocery stores, general
retailers, and drug stores
• Pure-play online and e-commerce businesses
Interviewer: That is a good list. So what would be some drivers for market growth in this industry?
This is another brainstorming question. The key is to be structured and then go deep with examples
within each MECE bucket.
Candidate: I see 3 main drivers for growth and potentially a 4 th.
• Economic: Supply & Demand

o Raw materials (availability, pricing)
o Population: demographic shifts particularly in prenatal/young kids and senior citizens
• Health Trends
o Doctors/clinics/health journals
o Media and cultural fads
o Government policies, health campaigns
• Competition
o Market saturation
o Innovation and R&D
• Others: education, awareness
Question 3:
Interviewer: Okay. So, what would be some good ways to measure health trends?
Yet another brainstorming question. Interviewer should keep asking “what else?” until candidate has hit
major points below, as well as one or two more creative answers.
Candidate: The key measures that come to mind are:

• Historical sales numbers for different types of vitamins and nutrition supplements
• Market survey and research
• Hospitals, physicians, nutritionist surveys and journals
• Gym memberships
Question 4:
Interviewer: Okay, shifting gears now. I would like to understand customer profitability. Here’s what we
know. 1/4 of men aged 18-34 are heavy users of supplements and spend $50/month on average.
Currently 30% of these men shop at Vitamin Universe. What would be the effect on profitability of a 5%
increase of share of this segment? Assume a profit margin of 50%.
Candidate: I’d like to start by finding the total number of men that are heavy users.
• I know there are about 320M people in the US.

• The male/female split is about 50/50 so there are about 160M men in the US.
• Our age range of 18-34 covers 16 years of an average life span of 80.
• This means approximately 1/5 men fall into this age bracket, bringing us to 32M young men in
the US.
• Only 1/4 of these are the heavy users, which is 8M. Of these 8M heavy users, Vitamin Universe
has a 30% market share which implies 2.4M customers
(320M people in the US)(50% men)(16 years in segment/80 years in life)(1/4 of men in
segment)(30% market share) = (160M)(1/5)(1/4)(3/10) = 2.4M heavy users
• A 5% increase in this segment would mean bringing in 120,000 new customers (2.4M*5%) to
Vitamin Universe.
• Knowing the profit margin is 50%, the profitability of each heavy user is $25/mo ($50/mo*50%).
• Therefore, a 5% increase in these customers would bring in an additional 120,000 * $25/mo =
$3M in profits per month.
• So, in a year, we’re looking at a $36M ($3M * 12 months/year) increase in profits.
• Achieving this increase in market share would be very profitable for Vitamin Universe but it
depends how we would achieve this 5% growth in the customer segment (aka the cost of
customer acquisition).
Question 5:
Interviewer: The team has completed additional research that indicates the cost of acquiring new
customers can sometimes be quite high. How can we increase our margins in order to justify a high cost
of acquisition?
Candidate: There are two levers when it comes to profit margins, the revenue side and the cost side. In
terms of revenue, we can certainly look at ways to either increase price and/or increase quantities of
products sold. Profit margins probably vary a lot by product as we have hundreds/thousands being
offered, so perhaps we can offer promotions and look for ways to sell more of our higher margin products
(improve product mix). Finally, we might want to consider looking into opening new stores in high traffic
locations of our target demographic.
In terms of cost reduction, we can consider the following:
• Capital/Manufacturing: renegotiate real estate leases, close down cash-flow negative stores
• Labor: reduce sales force and/or manufacturing personnel
• Distribution/Channels: possible consolidation

• COGS: reduce cost of procurement
• Marketing/Advertising: reduce campaigns or ads
Question 5:
Interviewer: Do you think the threat of mass retailers such as Wal-Mart is substantial enough to push out
specialty stores such as Vitamin Universe?
Candidate: When it comes to competition from mass retailers `like Wal-Mart, you really need to think
about the value proposition that a store like Vitamin Universe offers. The main ways to compete in retail
are through: price, product offerings, convenience, customer service, and cost control.
I do believe there are certain mass appeal products, such as basic vitamins and sports drinks, for which
Wal-Mart will be able to offer better prices, have better overall cost control, and may prove to be
convenient to a shopper who is already getting other things at the SuperCenter.
However, in terms of specialty products, Vitamin Universe should be able to maintain a competitive
advantage. Wal-Mart has limited shelf space for vitamins and health-related products. By offering a huge
selection of both basic and specialty products, along with a dedicated and knowledgeable sales force,
Vitamin Universe is going to win out in the specialty space and doesn’t face a real threat of being pushed
out by mass retailers.
Question 6:
Interviewer: Great. So, what is your final recommendation for the PE firm?
Candidate: I recommend the PE firm go forward with its purchase of Vitamin Universe. There is certainly
a market for products sold by Vitamin Universe. It has healthy profit margins of 50%, and a targeted
increase (of 5% growth in the “heavy users” customer segment) in market share would increase annual
profits by $36M. Additionally, we have identified ways Vitamin Universe could further increase revenues
and cut costs, which would allow them to justify the cost of acquisition for this customer segment.
Next steps would be to understand the acquisition price and see if that is in line with the profit potential of
Vitamin Universe. I would also want to take a deeper look at the risks and challenges of
maintaining/increasing market share and the threat mass retailers pose on the more “mass appeal”
products in the mix.

43. Airline Reward Program (McKinsey R1, Transportation, New
Product, Quantitative)
Question 5:
Our client is a major global airline considering a co-branded credit card with a major bank. They’ve hired
McKinsey to evaluate what the effects of this program would be, and whether or not they should revise
their loyalty program to incorporate the co-branded card.
Interviewer: As the airline, what are the benefits and risks you would think about when evaluating the co-
branded credit card?
Candidate should be sure to structure his/her response.
Candidate:
Benefits Risks
● Reach the bank depositors and/or credit card ● Counterparty risk: one bank
holders to expand loyalty members ● Large overlap between current loyalty
● Increased customer loyalty leads to increased customers and bank customers
revenues; customers will fly the airline more ● Mispricing of miles sold to credit-card company
often to obtain more points ● Who’s going to cover marketing costs?
● Possible revenue-sharing opportunities with
credit card company (i.e. 1% of interest
payments, etc)
Phase 1: Pricing
Interviewer: Great. The way the program would be structured is the bank would purchase batches of
miles from the airline to give away as rewards for purchases & promotions. How would you think about
the price of a mile in this situation?
Candidate: Well, we could think about the price of a ticket, how many miles/points it takes to ‘buy’ a
ticket, and use those to calculate the value of a mile.
Interviewer: Great. So, we know that the average purchase is about $50 and that a customer will make
an average of 1,000 purchases per year. For every dollar purchased, a customer gains 1 poi nt. Flights on
average cost $500 dollars.
Candidate: Ok, so we know that on average, a customer will use the credit card for $50,000 ($50 * 1,000
purchases/year) in purchases, which translates into 50,000 points per year. We also know the flights cost
$500 dollars each. However, we’re missing one piece, namely the # of flights a customer could take per
year with the 50,000 points. Do we know what the exchange rate of points to flights would be?
Interviewer: Yup, 10,000 points per flight.
Candidate: Okay, so with 50,000 points on average, a customer could redeem 5 flights. At $500 dollars
each, the retail value of these 5 redemptions is $2,500. This translates into a retail value of about 5 cents
per point ($2,500/$50,000). One quick clarification. I know I don’t always exchange my miles at the end of
every year, so do we know the probability that a customer will redeem their miles at the end of the year?
Interviewer: Yes, it’s about 50%.
Candidate: Ok, so in expectation, a mile is worth 2.5 cents. So we would want to price the mile between
2.5-5 cents when selling it to the credit card company.
Phase 2: Frequent Flier Program

Interviewer: Great. Now let’s switch gears a little. We previously talked about the airline’s plan t o
overhaul their frequent flier mile program. Currently, the program looks like this:
Miles Range Status Benefits
0 – 25,000 Member ● Miles flown accrue to reward balance
25,000-50,000 Super Member ● Miles flown accrue at 25% bonus

● Free upgrades when available after SAM & SDAM
50,000-100,000 Super-Awesome ● Miles flown accrue at 50% bonus
Member (SAM) ● Free upgrades after SDAM fliers considered
● Free access to president’s lounge on international
flights
● Free drink coupons in event of delays
>100,000 Super-Duper-Awesome ● Miles flown accrue at 75% bonus
Member (SDAM) ● Free upgrades when seats available
● Access to president’s lounge for free
● Free drink coupons in event of delays
The airline is considering revising the program such that it takes 1,000 miles to gain 1 point. Also, once
they reach a specific level, their points reset back to zero. Under the new point system, it will take 20
points to get to Super, 40 points to get to Super Awesome, and 60 points to get to Super Duper
Awesome. Based on the airline customers, we know they fly according to this distribution:
So, can you calculate the impact on the customers in the rewards program?
Candidate: Sure, let me build a quick table for the percentage of customers that fall into each status
under both the old system and the new. For the old system, I will assume that percentages are evenly
distributed across the number of miles so that I can get approximate percentages. Under the new
program, I am interpreting the resetting function as follows: It will take 20,000 miles to make it to Super.
To get to Super-Awesome, it will take 20,000 miles + 40,000 miles = 60,000 miles, because the mile
count resets to zero once the customer reaches Super. Following the same logic, to reach Super -Duper-

Awesome, it will take 120,000 miles (20,000 + 40,000 + 60,000). Knowing this, we have the new,
compared to old, distribution as:
Old System Old Percentage New System New Percentage
Member 0-25,000 40%+ ¼ * 20% = 0-20,000 40%

45%
Super 25,000-50,000 ¾*20% + ½*15% = 20,000-60,000 20%+15% = 35%

22.5%
Super-Awesome 50,000-100,000 ½*15% + 7.5% + 60,000-120,000 7.5%+4%+4% =

4% = 19% 15.5%
Super-Duper- >100,000 100% - (45% + >120,000 100% - (40% +

Awesome 22.5% + 19%) = 35% + 15.5% =
13.5% 9.5%
Interviewer: Great. So, what do you think this might mean for the airline?
Candidate: They’re going to have to handle this carefully since some of their most frequently flying
members are losing their status. However, they have made it easier to get to the Super level compared to
the old system.
Interviewer: Exactly. So how might the airline go about communicating something like this?
Candidate: They want to promote the fact that they are making it easier to gain perks on their airline. But
they don’t want to lose their high-volume customers, as they may be a big contributor to profitability
compared to the lower volume flyers. In order to do this, I think they need to consider revising the perks to
make the initial change easier. Maybe they change the bonus percentages at which miles flown accrue,
making things more attractive for the frequent fliers with higher status (so instead of 25%, 50%, 75%,
maybe 33%, 67% and 80%). Another option might be to grandfather in current customers so t hat they are
in whichever status is higher – current vs. original.
As far as the media used, they should definitely use e-mail, maybe personal mailing, calls to their high-
volume customers, incorporate it into the pre-flight safety video, etc.
Interviewer: Great. So, you’re sitting down with the CEO, what do you tell her?
Candidate: Link the rewards program to the segment of customers that are the most profitable (as this
may not always be the highest volume customers based on the amount of perks they are receiving
already).

44. Art Museum (McKinsey R1, Other, Profitability, Balanced)
Stem: Our client is an art museum in New York City that specializes in 17 th and 18th century European
art. They usually put $150K into a fund every year, with money in the fund going towards various future
expenses. Last year, revenues decreased, and the client could only put 50% of what they normally put
into the fund. They have asked us to figure out how to turn this around.
Interviewer: What are some potential reasons for this decrease?
Candidate: Lay out revenue sources: membership fees, admission fees, sponsorships/grants
Possible sources of revenue decrease:
● Membership fees: lapsed renewals, reduced number of new members

● Admission fees: lower visitor volume, increased competition from other museums
● Sponsorships/grants: budget crunches in sponsor organizations
Interviewer: If we lower the membership fee by 20%, what is the increase in membership volume needed
to bring the fund’s annual deposit back to its original levels?
Assume, as a simplification, that all revenues come from membership fees.

现在75k revenue, amount of $to fund / ppl=current # of members
● Current membership fee is $150/year
● 25% of membership fee is used to cover costs (Candidate should deduce that this means that
75% of each membership fee is put into the fund)
Candidate: With current membership fee ($150/yr)
● Current number of members = (50% x 150K) / (75% x 150) = 667

● With future membership fee = 80% x $150/yr = $120/yr
● Amount per member entering fund = 75% x $120/yr = $90
Number of members required for annual deposit of $150K into fund = 150K/90 = 1,667
● Therefore, required increase in membership = 1,667 – 667 = 1,000
● 1,000 new members are needed for the membership fee reduction to be sufficient in helping us
achieve our goal.
Interviewer: What do you think of that?
Candidate: It is hard to imagine that a mere 20% drop in membership price will cause member numbers
to more than double. This strategy cannot stand alone.
Interviewer: What are the pros and cons of this strategy?
Candidate:
● Pros: Low cost strategy; if successful in increasing membership strength, will lead to sustainable
revenue increases (recurring renewal fees, other complementary revenue streams like sales of
special tickets or merchandise to members and discounted rates driving volume sales etc.)
● Cons: Risky; if demand for memberships is price-inelastic, it can backfire horribly. Also, certain
beneficiaries/donors of the museum may be strongly opposed to a low-cost strategy.
Interviewer: What other strategies can the museum employ?
Candidate: Revisit original structure. Suggested answer: revisit each alternative revenue source in a
systematic fashion, and lay out ways to boost revenue and therefore annual deposits into that fund
Membership fees

● Investigate real source of reduced membership fees.
● Are new members’ joining rate declining? If so, boost advertising for new members (and increase
perks which are low-cost), without necessarily lowering fees.
● Are existing members letting their memberships lapse? Release early bird renewal specials, to
encourage more renewals.
Admission fees
● Analyze visitor patterns, and employ creative promotion and price discrimination strategies (e.g.
weekend special rates, family specials, co-promotions with other museums or nearby
entertainment/restaurant spots)
● Boost other revenues associated with admission, such as food and merchandise sales on
museum premises. Improve gift shop and cafeteria operations to attract more dollars.
Sponsorships/grants
● Court sponsors more aggressively, and persuade them that 17th/18th century European art is the
right artistic cause to invest in for the betterment of New York cultural life!
Other potential sources
● Rent out museum grounds after-hours for private parties/functions

● Loan art pieces to other museums
Candidate should present a short and concise answer based on their findings.

45. Baby Food (McKinsey R1, CPG/Retail, New Product, Balanced)
Stem
Our client is BabyInc, a global producer of baby food.
The overall market is segmented into Premium, Mid-line, and Value (high, middle, low). Our client
competes in the premium and mid-line product categories. The baby food products consist of mashed up
fruits and vegetables. The market has two players – BabyInc and YumYum, and BabyInc controls 90% of
the market. However, last year profitability slipped, as YumYum and generic brands have been
aggressively entering and competing in the Value segment. The CEO has asked us if it’s a good idea to
launch a BabyInc value-targeted product, and if this can reverse the profitability decline.
Structure (possible):
Risks of adding value

product and other
opportunities
Do we risk
cannibalizing our
current products by
high/middle/low
Present exhibit to Candidate

QUESTION 1: What does this tell you – are you excited about the possibility of launching into the Value
segment?
Industry overview
Revenue ($M) 3 years ago 2 yrs ago 1 yr ago

Premium 550 650 800
Midline 600 550 500
Value 480 560 650
Price ($) 3 years ago 2 yrs ago 1 yr ago

Premium $2.25 $3 $4
Midline $1.75 $2.40 $2.50
Value $1.30 $1.30 $1.30
Profit ($M) 3 years ago 2 yrs ago 1 yr ago

Premium 200M 250M 270M
Midline 165M 150M 135M
Value 100M 100M 100M
Key takeaway: Revenue and market size are increasing, but profits are flat. Therefore, there’s a cost
issue, as costs are increasing.
Possible answers: No, market players are fighting over fixed profit pool. Better answer: Does BabyInc
have a superior cost position to other market players? If so, they can compete effectively.
QUESTION 2: OK, can you brainstorm what the major costs of this business are?
FC
● Advertising
● SG&A
● PP&E – factory, machinery
VC
● Food inputs
● Jars
● Labor
● Inventory / Warehousing
● Distribution
QUESTION 3: Our client, the CEO, has promised the board that she will be able to capture 30% of the
value segment this year (in units). How many units will need to be sold to hit this goal? Our client also
believes that a BabyInc value-focused product could be priced at $1.50.

If candidate asks: Value segment will grow 8% from last year to this year.
650*1.08 = $702M
$702M/$1.50 price = 468M units.
30% of 468M = 140M units.
[A good takeaway should be a comment on the difficulty of this goal and how exactly Baby Inc will
achieve it]
QUESTION 4: What percentage increase in total units shipped (across all 3 segments) will BabyInc see, if
it hits its 30% of value segment target? Assume that units of premium and midline shipped do not change
year over year.
Last year: Units of Premium + Midline = X, units of Value = 0.

This year: Units of Premium + Midline = X, units of Value = 140M (from previous question).
You can calculate units of premium and midline from:
$800M / $4 = 200M * 90% share = 180M (90% market share given in stem)
$500M / $2.50 = 200M * 90% share = 180M
Increase = (140+360) /360 = 38%.
Takeaway: Huge increase in capacity, unlikely to be able to meet using existing production facilities.
Unlikely target.
Recommendation: Any well-justified recommendation is fine. However, it is important that the

recommendation answers both whether or not the value targeted product should be launched and
whether or not that will reverse the profitability decline. A discussion of risks, including cannibalization is
also important.

46. Carpet Manufacturer (McKinsey R1, Industrial Goods, Operations,
Quantitative)
Stem: Your client is a carpet manufacturer that sells to both commercial and residential customers. Your
current production process is as follows:
Buy dyed/pre-colored yarn → Load yarn spools in a specific order onto machine → Weave yarn
into carpet → Run carpet through carpet backing machine → Cut, roll, and store the finished
carpet
You are considering investing in a new technology that will cost $25M (initial investment). With the new
technology, your production process will change to the following:
Buy un-dyed yarn → Spool yarn → Weave yarn into carpet → Die carpet through a printing
process, much like an inkjet printer → Cut, roll, and store the finished carpet
The client wants to know if he should invest in the new technology.
Candidate: If I may clarify, will the carpet made with the new technology be different in any way from the
current product?
Interviewer: We can assume that the new carpet will have a better texture and can therefore be sold at a
higher price point. Now, how would you expect this new technology and process to impact our costs?
Candidate:
● Yarn costs likely decrease because you would buy un-dyed yarn
● There is a new cost for ink/dying
● Required labor decreases since spools no longer need to be loaded by color
● New machine will have different maintenance requirements
● Electricity costs may increase
● Training costs for new machine
● Warehousing costs decrease from ability to quickly make to order
Interviewer: OK, not a bad list, so what would you take into account to decide if this was a good
investment?
Candidate: I’d like to dig a little deeper on the costs and try to actually quantify the potential cost savings.
Additionally, we discussed that these could potentially be sold at a higher price point. So, I would like to
look at incremental revenues as well to get a good idea of how this will impact the bottom line.
Interviewer: We have aggregated the changes in costs, and it turns out that we will save 25 cents per
finished yard of carpet. How would you value the investment?
Give the following information when asked.
● 10M yards of finished carpet is produced per year

● The new machine has a 10-year useful life
Candidate: 10M yards * .25 savings ➔ $2.5M savings per year.
$2.5M per year * 10 years = $25M savings over the lifetime of the machine.
Conveniently, that’s exactly what the new machine costs. However, there are some things this number
doesn’t take into account. The time value of money for one: so, the price of the machine is not justified by

these savings alone, at least in today’s dollars. Additionally, I would imagine the aggregated cost savings
number you gave me addresses variable costs, so there might be some other things we’re missing like
machine maintenance and training. I’m still curious about what we might see in incremental revenues.
Interviewer: So, what would you have to believe in order to justify this investment?
Candidate: That in addition to these cost savings, we would also be able to increase revenues somehow,
whether that’s by selling at a higher price, winning market share from competitors, serving new markets.
We would be able to be more flexible in our offerings, since we can dye the yarn on demand, instead of
forecasting which pattern will be the most successful.
Interviewer: Turns out we can sell the new, higher quality carpet for $20/yard, which is a 25% premium
over the standard carpet. We would still be able to produce and sell the standard carpet as well. What
types of things would you think about in this scenario?
Candidate: Knowing that we could sell both means we can still potentially reach new customers, but that
there could also be some cannibalization of old/current customers. We were previously at 10M yards of
the standard carpet. How would our capacity increase and what would the split be between premium and
standard?
Interviewer: Let me give you some numbers to help you out with that. We expect that 30% of our existing
customers would upgrade to the new carpet. Also, there is a 70M yard/year market for higher quality
carpet that we couldn’t sell to previously. We estimate we could capture 5% of that market. What would
the incremental revenue be given we start selling the high-quality carpet?
Candidate: Standard carpet price must be $16/yard (if the higher quality is sold at a 25% premium of
$20/yard).
● With current production of 10M yards, assuming we can sell all that is produced, new production
levels will be → 30% are cannibalized → 7M yards of the standard carpet
● New sales and market capture (high quality): 3M yards moved from standard + (5% of 70M) of
new market = 6.5M yards of high quality
● Old revenue: 10M*16 = $160M
● New revenue: 7M*16 + 6.5M*20 = 112M + 130M = $242M
● Incremental revenue: 242M – 160M = $82M
Interviewer: Given this new information, what would you say about the NET incremental revenue from
this machine?
When asked, the following information can be provided.
● The cost per yard of the original carpet was $10/yard
Candidate should recall that the new carpet saves $0.25 per yard and is therefore $9.75/yard.
Candidate: We are selling 3.5M yards more than before so there would be an additional production cost.
This would be the difference between the production cost of 10M yards of standard carpet, and 7M
standard and 6.5M new carpet.
● Old production costs: 10M * $10/yard = 100M

● New production costs:
o Standard carpet: 7M * $10/yard = 70M
o New carpet: 6.5M * 9.75/yard = (roughly) 65M – 1.6M = ~63M (exactly 63.36)
o Total new costs: 133M
● Net incremental costs: 133M – 100M = 33M
● Net Incremental Revenue: 82M – 33M = $49M per year

Interviewer: OK, so what is your recommendation to our client?
Candidate: I would suggest going forward with the acquisition of the new machine. By tapping into a new
high-end market, the client can make an additional $49M in net revenue per year with an initial
investment of only $25M. To ensure the reliability of these numbers I would further analyze our market
capture and cannibalization assumptions, as well as look into the expected maintenance costs, and the
potential variability and cost trends for the ink itself.

47. Education in Burma (McKinsey R1, Other, Growth Strategy,
Quantitative)
Interviewer: Our client is the minister of education in Burma (Myanmar). School attendance rates have
decreased approximately 10% over the past five years and the minister has been charged with reversing
this trend. Through a combination of public funds, grants, and donations, the education budget has
increased by an additional 150MM MMK (local currency) this year. The minister has hired McKinsey to
help him allocate these funds to improve both the attendance and quality of the country’s schools. What
are some areas you would first explore to determine why attendance rates have been decreasing?
Note: Candidate should develop a MECE structure. One possible structure is as follows:
1) Customer / Demographics
a. % of population that is of school age (possible that overall school-age population is
decreasing)
b. Child employment rates (families could be opting to have their children work rather than
attend school)
c. Crime rates (possible that crime/gang prevalence has increased)
d. Drug usage rates
2) Infrastructure
a. Transportation issues (there could be a lack of access to schools)
b. # of schools (school closures could prevent access)
c. Teacher/administration quality
3) School conditions
a. Number and quality of teachers
b. Student/teacher ratio
c. Extracurricular and tutoring options
d. School lunch offerings
Interviewer: That’s a great list of ideas. You touched on an interesting point about child employment
rates. In fact, we’ve learned that child employment has increased over the past few years due to higher
overall unemployment rates. Families are in tough situations and therefore need their children to
contribute to the household incomes. One idea we have discussed in problem solving is to incentivize
families with a cash voucher per student which would be sent to homes at the end of the month if a
student reaches an attendance goal. We’d like for you to assess whether or not this is a good idea. First,
let me give me you some important information.
Population of school aged children: 10MM
Current population regularly attending school: 6MM

Assume that students are in school an average of 10 months each year.
We tested the voucher system on a sample set of schools and found the following results:

Impact of voucher program on truants
Increase in attendance rate
1 2 3
Voucher amount per student (MMK)
Candidate: I’d like to calculate the total cost of each voucher program as well as the overall impact on
attendance rate.
Impact on overall attendance rate and total cost
Current attendance rate: 6/10 = 60%
$1 voucher calculations:
Additional students attending: 20% × 4MM = 0.8M
New attendance rate: 6.8/10 = 68% (8% increase)
Total cost = 6.8MM * $1 * 10 months = $68MM


Overall, the $1 voucher seems to have the best ROI (can argue intuitively based on data or calculate cost
per incremental student = $85/student per 10-month period, lowest of all three options)
There are definite pros and cons to each of these programs. The pros are that attendance rates increase
significantly – this could reverse the trend moving forward.
Cons: Difficult to implement and distribute funds, long-term sustainability is questionable, total cost is
quite high over 10-month period, quality of education is not necessarily improved, many students being
paid are already attending school
So far, I would not recommend the $2 or $3 voucher as they are very expensive relative to the budget. I
would consider the $1 voucher, but would do so in combination with other investments.

Interviewer: Got it, OK. Now that you mentioned it, what other additional areas would you consider for
potential investments?
Candidate: I would definitely make investments at the actual school level. Here’s a way we can think
about this list
Note: candidate should have a MECE list of investments. One possible solution is below, however, there
are many other possibilities.
1) Classroom related
a. Teacher training
b. Teacher salary increases or overtime for outreach
c. Additional school supplies or equipment (SMART boards, projectors, etc)
d. Books
2) Non-classroom related related
a. Outreach programs
b. Logistics (bus services for children)
c. Meal plans for schools (important for children who live in poverty)
Interviewer: Great list. We actually identified a few of the same investments and did a pilot in a similar
sample size of schools. Here’s what we found in terms of attendance rates.
Making a one-time investment to schools of $10 per child who currently attends school results in a 50%
decrease in the truant population. You can assume that the proportion of truants/non-truants holds at the
school level.
What do you think about this plan relative to the cash voucher program?
Candidate: Let’s do a few calculations first to determine what the impact of this program will be overall.
Cost of program = 6MM * $10 = $60MM
Current number of truant students = 4MM

Increase in students attending from investment = 4MM × 50% = 2MM
Total # of students attending = 2MM + 6MM = 8MM
New attendance rate = 8/10 = 80%
Benefit = 80% - 60% = 20% increase
It looks like this program is definitely better than the cash voucher system. With a smaller overall
investment ($60M vs $68M), you get a 20% increase in student attendance as opposed to an 8%
increase with the $1 voucher system. In addition, since you are directly investing in schools and
infrastructure, you will likely get a higher quality of education. I would definitely recommend going with this
investment program instead of the cash voucher. Moving forward, I would look into other types of
investments I could make with the remaining $70MM in budget. Examples relate to my initial list, such as
logistics, or perhaps co-op program where students can earn household income while attending school.
Interviewer: Great. The client just walked in, how would you summarize your recommendation?

48. French Groceries (McKinsey R1, CPG/Retail, Competitive
Response, Quantitative)
Interviewer: Our client is a large grocery store chain owner in France. The chain operates 150 stores
across France, through two types facilities, large grocery stores and small convenience stores. The
client’s annual revenues are €45B a year, 85% of which is through large grocery stores. Our client, Jean -
Paul LeTrouc has indicated that recently, sales have been declining. Jean-Paul believes that online
grocery sales may be one cause for the decline in sales, and has asked McKinsey to look into it.
Interviewer: What are some key areas for Jean-Paul to consider when thinking about an entry into the
online grocery market?
Possible structure:
External:
• Size of French grocery market

• Size of online grocery market
• Online penetration trends
• Competition
Internal:
• Incremental revenues
• Incremental costs
Candidate: Do we have any information on the size of the market for French groceries, both through
traditional channels and online?
Present the candidate with the following information.
Online grocery penetration rate for select countries
Online Grocery Penetration Rate

Population
Sales / Year
(% of groceries bought
(In Millions)
(in Millions of Euro) online)
U.K. 60 6,000 4%
Spain 50 750 1%
Sweden 9 175 1%
France 65 ? ?
Candidate: I’d like to calculate the size of the online market for France. To do that, I’m going to calculate
the per capita consumption, and then estimate a penetration rate for France.
Per Capita Consumption:
UK: 6,000/60 = 100 €/Year/Person

Spain: 750/50 = 15 €/Year/Person
Sweden: 175/9 = ~20 €/Year/Person
It looks like the UK is spending much more per capita. Do we have an estimate for where France’s per
capita consumption will land?
Interviewer: We know that it will be less than the UK, but more than Spain / Sweden. Feel free to
estimate it given your knowledge of the countries.
Candidate: Ok. If we double that of Spain, we get a per capita consumption of 30 €/Year/Person (any
reasonable esimtate is alright). Multiplying that by France’s population of 65M, we get an annual market
size of € 1,950M.
Interviewer: Great. Do you think our client should enter the market?
Candidate: Based on the market information alone, I would say yes. Even at a conservative estimate for
per-capita consumption, there is €2B in top line revenue for online sales. I would also imagine that the
penetration rate will increase as more consumers get comfortable with making purchases online, driving
up per capita consumption. As a next step, I would want to understand the economics of the decision to
determine if we are more or less profitable in the online space.
Interviewer: Our client agrees and asked to determine the difference in profit between the retail-only
model and a retail and online model.
Present the candidate with the following information:

Candidate should point out that contribution is roughly 25% of the average basket size. Candidate should
also make note of the differences in contribution makeup, and note that the retail store operating income
(consider this profit) is €3, and the online store operating income is €2.
Interviewer: Based on the given information, will our client be more profitable if they move online?
Candidate: To determine an overall profit impact, I would want to understand what share of the €1950M
our client is going to take, and how much of that is new sales versus cannibalization of existing sales.
Interviewer: Let’s assume that our client is going to take the entire online market, and that 70% of the
online sales are taken from retail stores, and 30% of them are new sales.
Candidate:
To determine if the client should enter the market, I’ll look at the net impact to operating income from
changes in retail and online sales mix.
● Retail sales:
o Decline by €2B * 70% = €1.4B
o Operating margin = 3/120 = 2.5%
o Operating income decline by €1.4B * 2.5% = €35M
● Online sales:
o Increase by €2B
o Operating margin = 2/120 = 1.66%
o Operating income increase by €2B * 1.66% = €33M
The net effect on income is €33M - €35M = - €2M.
Interviewer: Ok. What are some other key areas to consider for the store to move online?
There is no right answer for this question. If the candidate says that the client may be able to close
physical stores, push them and ask them if that is a good idea given that 85% of current sales come
through brick and mortar stores. The candidate could discuss other ways that the cost position may
improve as online sales scale. The candidate may also discuss risks associated with the online business,
such as an unproven market, unwilling French consumers, or competitive threat.
There was no formal recommendation at the end of this interview.

49. Golf Club Producer (McKinsey R1, Other, New Product,
Quantitative)
Stem: Our client is the CEO of a family owned business called GCP, which produces golf clubs in the
United States. They used to produce clubs that were easy to use, so most of their customers are
beginner players. They recently received a patent for a new club that would enhance the performance of
amateurs and professionals alike. Product innovation is paramount in this industry and they want help
capitalizing on this development with a strong product launch.
The interviewer did not give the candidate time to come up with a structure and instead presented to chart
right away.
1st phase: Analyzing the market
Interviewer: There are two main ways to produce clubs: liquid and solid production. GCP currently uses
liquid production only, but some competitors use solid production. The chart below represents the number
of golf club sets sold in each year. We have historical data from 2007 and 2008, and estimates for 2009
and the next two years. What do you see?
Give the candidate 20 seconds to look at the chart. He/she should begin to share insights. If candidate
doesn’t answer questions 1 and 2 below, push for it.
1) What do you think of this market?
2) Does being one of the top producers matter? Why do you think so?
Candidate: The market has been growing rapidly: more than 100% in two years, which certainly makes it
attractive. The top 10 liquid producers have a huge market share, so being at the top is clearly important.
I would imagine they enjoy economies of scale in production, distribution, and advertising. They are
probably also better able to invest in product innovation.

2nd phase: Should we build a new plant or expand ours?
Interviewer: OK. I have some more information for you. We estimate demand for our new club to be
60,000 sets next year. Given the following information, do you think we should build a new, additional
plant or expand the current plant? (All machines are equally durable)
You can give all information at once, rather than waiting for questions. The intent is to give all information
quickly and let the candidate work with it.
Building a new, additional plant:
Initial one-time investment of $2M.
Two types of machines are available:
Machine line I: 2000 sets/month, costs $12.5M
Machine line II: 1250 sets/month, costs $8M
Restriction: Can only have total of 3 lines operating there.
Expanding the current plant:
Initial one-time investment of $2M
Two types of machines are available:
Machine line I: 1250 sets/month, costs $8M
Machine line II: 7500 sets/year, costs $5.5M
*All machines last for exactly the same time.
Candidate: Ok, let’s compare the total costs in each case. The one-time investment is the same in either
case so we can ignore it when comparing:
For building a new plant:
Machine line I produces 2,000 sets/month which is 24,000 sets/year
Machine line II produces 1,250 sets/month which is 15,000 sets/year
Since we can only have 3 total lines, in order to hit demand and produce at least 60,000 sets/year, we
can either have:
a) two type I and one type II (for a total of 24k + 24k + 15k = 63k sets/year)
i. cost of 12.5 + 12.5 + 8 = $33M
b) three type II (for a total of 24k * 3 = 72k sets/year)
i. cost of 12.5 * 3 = $37.5M
Option a) at $33M is the most cost effective.
For Expanding the existing plant:
Machine line I produces 1,250 sets/month which is 15,000 sets/year
Machine line II produces 7,500 sets/year

Type I is doing twice the output at much less than twice the cost. We should use all type I machines. In
order to hit target, we need 4 machines (15,000 * 4 = 60,000). This will cost $32M ($8M * 4).
Candidate: Costs are roughly the same (the extra million for a new plant could be offset by future
capacity needs), so we need to include further considerations to decide what to do.
3rd phase: Other issues in deciding which project to pursue
Interviewer: Given that the calculated costs are roughly the same, what other issues would you want to
analyze? What are the pros & cons of each of them? Which would you choose?
This is a brainstorm session. Keep asking “what else” to get the most out of the candidate. If candidate
runs out of ideas, you can help by saying “what about … how do you think that impacts the decision?”,
but that clearly hurts candidate overall performance in the case.
Candidate:
● Management/Admin: Lower labor and G&A costs if you only have one plant
● Product quality: easier to have a standard if you only have one plant
● Distribution: might be cheaper if you can distribute from two different locations
● Event risks: insurance would be cheaper with 2 plants (diversifying event risk)
● Capacity for future: new plant has higher capacity (3k club sets per year more)
● Impact of implementation on current production capacity for other club lines
● Time to implement
4th phase: Possible problems:
Interviewer: So, the CEO actually decided to expand, and there are two main issues regarding the
expansion project that don’t allow him to sleep at night. Assuming our market estimates are 100% right,
what do you think these issues are?
This is, again, a brainstorm session. If candidate is stuck, ask something like “have you ever remodeled
your house? What were your main concerns?”.
Candidate:
● Timing: We said product innovation is important and the market is quickly expanding, so it’s
important to launch the product on time.
● Costs: It’s important to guarantee that construction costs won’t raise after he decides to go for
the expansion project.
Interviewer: And how might the CEO protect himself against these things?
Candidate: The CEO could protect himself by buying an insurance policy.
5th phase: Insurance Price
Interviewer: OK, what do you think the insurance price will be? What information do you need in order to
calculate that?
There is more than one way to come up with a price, so let the candidate ask for information first, but
guide the candidate to calculate it through the data we provide.

Interviewer:
● GCP has contracts to sell 60,000 sets for $500 each.

● If GCP can’t produce more than 90% of the 60 thousand in the next eight months, they lose 10%
of the contracts. This happens with probability 20%.
● If GCP produce 90% or more in the next eight months, they don’t lose anything.
● The insurer operates with 10% margin.
If candidate asks whether he/she can simplify the calculations, the answer is no.
Candidate: From the insurer perspective: with probability 80% they have zero loss, and with probability
20% they have a loss of 10%*$60,000*500 = $3M.
Therefore, the expected expense is 20%*$3M = $600,000
Since they operate with 10% margin, this expense should represent 90% of their price.
Therefore, the price charged is $600,000 / 0.90 = $666,667.
Wrap-Up
There is no need to do a wrap-up in this case, but it doesn’t hurt if the candidate proactively comes up
with a conclusion/summary.

50. Maldovian Coffins (McKinsey R1, Other, M&A, Balanced)
Note: this case is on the longer side - so you may want to allow extra time or stop the interview after 30
minutes has elapsed. Also note, this case is not recommended to be given as a candidate's first
few cases.
Stem: Our client is a coffin maker in the Eastern European country of Maldovia. He has seen substantial
change in his market in recent years and is contemplating the future of his business. Up until now, he has
been in the business of building high-quality, hand- crafted coffins largely by hand with a skilled labor
force. Recently, however, he has become aware of technology that would allow him to build machine -
made coffins with much less labor. Should he invest in this new technology, and should he even remain in
the coffin business in the first place? What strategic alternatives should the owner consider?
Most candidates will want to dive into the industry and the market – ensure that they spend time at the
beginning outlining a sound structure.
Candidate: We need to decide firstly whether to stay in business at all and if so, whether he uses the
new technology:
Do not invest in new technology

Continue Operating
Invest in new technology
Sell the business to a third party

Exit the business Sell the assets of the company and shut it down
Potential Stem might include:
● Market: industry trends (e.g. declining profitability), competition (e.g. entering or exiting the
market), total market size, market share, we know technology has begun to disrupt the market
● Our client: competitive advantages (e.g. skilled labor), profitability (e.g. margins compared to
competition, declining or increasing, etc.), total assets (e.g. property, equipment, buildings, etc.)
Interviewer: First, let’s go ahead and calculated the market size. What would you need to know?
Provide the following information when asked, ensuring that eventually the candidate gets all the facts.
● Population of Maldovia: 4M
● Population Growth: 0%
● Life Expectancy: 75 years
● Age Distribution: Assume a flat distribution (i.e. the same number of people at all ages)
● Burial Customs: 75% of deaths are buried in coffins
Candidate: 4,000,000 people x 1/75 people * 75% of people = 40,000 coffins purchased / year.
The candidate needs to realize that every year, 1/75th of the population will turn 76 and therefore (on
average) will die.
Interviewer: What would you like to know about the industry? (Interviewer can also choose to let the
candidate guide the conversation to the next step)
● Competition – Maldovian Coffins has a 10% market share and a relative market share of about 1
(if asked, you may explain that relative market share is the ratio of the company’s market share to
that of its nearest competitor)
● Market Trends, Regulation, etc. – If asked about any exogenous factors, simply tell the candidate
to assume that the market is expected to continue as it currently is.

Interviewer: Would you mind telling me what the value of the business is both with and without the new
technology?
Provide the following:
● Price – Coffins are priced at $5,000 for a hand-made coffin.

● Current Costs – Material accounts for 10% of the direct cost, while labor accounts for the other
90%. COGS is $4,800 per coffin. Fixed costs for the business are $700,000 per year. Assume all
assets are fully depreciated and ignore taxes.
● Investing in the new technology will cost $1M. Material costs will remain the same, but labor
costs will be reduced by 50%.
Provide the following when asked about the investment:
● Proprietary Nature of Technology – The new coffin-making technology is currently offered for
sale by a machine tool company, who holds the patent. They are not offering exclusivity to any
customers (i.e. they will sell to Maldovian Coffin’s competitors if possible).
● Competitive Threat – It is not known whether the competitors have acquired or are planning to
acquire this technology.
● Customer Preferences – While the machine-made coffins are not “hand-made”, the quality
perceived by the customer is the same or better. It is believed that the customer will be indifferent
between the quality and appearance of a hand-made and a machine- made coffin.
Before the candidate begins diving into the calculations for the new technology…
Interviewer: How might competitors react if our client adopts the new technology?
Candidate: Since Maldovian Coffins has no proprietary control over the technology, it is likely that
competitors will also acquire it, resulting in an overall lowering of the industry cost structure . If
this is the case, price will also fall as competition cuts price in an attempt to gain share.
If need be provide guidance on the following.

Interviewer: Let’s assume that the pricing for the coffins in an industry with new technology conforms to
the same gross margin as in the current case (e.g., 4%).
Gross Margin = $200 / $5,000 = 4% Labor Cost = (4800 x 90%) x 50% = $2,160 Material Cost = $480
COGS = $2,160 + $480 = $2,640, Price = $2,640 / (1 - 4%) = $2,750
Current With new

technology
Price 5,000 2,750

COGS 4,800 2,640
Labor Costs 4,320 2,160
Material Costs 480 480
Contibution Margin 200 110
Gross Margin 4% 4%
Units Sold 4,000 4,000

Market Size 40,000 40,000
Market Share 10% 10%
Contribution 800,000 440,000

Less Fixed costs 700000 700,000
Profit 100,000 -260,000
Discount Rate 10% 10%

Perpetuity 1,000,000 -2,600,000
Less Investment Cost 0 -1,000,000
Value of Option 1,000,000 -3,600,000
Assuming a discount rate of 10%, a perpetuity with cash flows of $100k / year has a PV of
$100,000 / .1 = $1M. So, the current business is worth $1M whether they keep it or sell it.
It clearly does not make sense to implement the new technology.
Brownie Points for candidates who realize that: The introduction of the technology to the market might be
expected to reduce industry profits, making this entire business completely unprofitable. Therefore the
$1M is likely untenable going forward.
Interviewer: So now what would be the value of the company if it were shut down and its assets sold?
(Interviewer can also choose to let the candidate guide the conversation to the next step)
Information to give if asked:
● Assets – Since the firm has been building coffins by hand, the fixed assets are essentially only
the land and improvements. The company owns assets outright.
When the candidate asks for the value of the land, have them brainstorm ways that they might determine
this. They should come up with at least 3 good ways, such as:

● Look for comparable real estate and determine recent selling price
● Find comparable commercial real estate and determine the rent per square foot, then discount
the cash flows generated by renting the property
● Determine rate of appreciation for property in the area and then apply to book value of current
land and improvements
Give the candidate the following information and have them calculate the value of the property:
● Book Value of Land: $20,000

● Book Value of Improvements: $80,000
● Years Owned: 48
● Avg. Real Estate Appreciation: 6% / year
Candidate: Using the “rule of 72,” a 6% growth rate will double the investment every 72/6 = 12 years.
Since the property was held for 48 years, the current value will be $100k * (2 ^ 4) = $1.6M.
Since the assets ($1.6M) are higher than the value of the discounted cash flows ($1M), then it would
make more sense to liquidate the business and sell the assets.
Interviewer: What is your final recommendation for our client? (Liquidate the business)

51. School District (McKinsey R1, Other, Operations, Balanced)
Part 1: Brainstorming
Interviewer: Our client is a mid-size school district with 150 schools, serving grades 1st through 12th.
The district has had poor performance over the past five years and recently hired a new Chancellor to
improve performance. In turn, the Chancellor hired McKinsey to identify ways to improve the district. What
are some of the key drivers that may be affecting performance?
Candidate: First, has the client shared what type of performance needs to be improved? For example,
does he want to drivers that affect student performance as measured by standardized tests, or budgetary
performance?
Interviewer: Just student performance.
Candidate: The drivers could be bucketed into internal factors within the school districts control, and
external factors beyond their control. Some of the internal factors would be facilities, back -office support
(IT/Finance/HR), curriculum, enrichment programs, teacher quality, and management quality. Some of the
external factors would include the proportion of well-educated parents in the school district compared to
the national (or state) average, student engagement, poor student preparation prior to beginning 1 st
grade, and the social environment (crime rate, drug use prevalence, alcohol abuse prevalence).
Note: Candidate should generate a MECE structure, for example, internal/external. If candidate does not
have a MECE structure, press the candidate. When the candidate is done ask for a few more drivers!
Part 2: Back-office Support
Interviewer: The Chancellor believes a key driver affecting performance is back-office support from
central headquarters. Below is a chart, what insights does it provide?
Function % of Principals Average # of requests Average days of

Surveyed identified per Principal per month effort for the
function as key factor function to answer
affecting performance per request
Finance 15 1.5 2.5
Human Resources 60 2.00 5.0
Facilities 50 2.00 4.0
Information Technology 44 1.75 3.5
Counseling 19 1.25 3.0
Food Preparation 26 1.00 3.0

If asked by candidate, provide the following clarifications:
● Functions are related to central headquarters
● Average # requests are requests or complaints made by the individual school principals to HQ
● Days effort is equal to the amount of time required for the HQ to respond to the principal's’
request or complaint
Candidate: Clearly Principals believe HR, Facilities, and IT are the most important functions affecting
performance. Interestingly, Facilities and HR are also the functions most utilized by the principals and
take the longest to respond to their requests. So, I would prioritize improving HR and Facilities.
Interviewer: The Chancellor agrees and would like to focus on improving the Human Resources function.
He estimates that additional training will reduce the number of days it takes for them to respond to a
request by 20% on average. However, the Principals will see this improvement and add an additional
10% requests. How many days of effort will be saved per month?
Candidate: We can calculate that by comparing the number of days HR spends answering requests
before and after the new training:
Before After
# of Principals (= # of schools) 150 150
Requests/Principal/month 2 2*1.1 = 2.2
Days/Request 5 5x0.8 = 4
Total Days of HR Effort/month 150*2*5 = 1,500 days 150*2.2*4 = 1,320
Thus, total days saved will be 1,500 – 1,320 = 180 days/month.
Note: Before/After tables are particularly powerful, and will keep you from making a mistake. Try using
them in other cases!
Part 3: math curriculum
Interviewer: The chancellor also noticed a dramatic improvement in the 8 th grade class at one of the
schools, which improved math performance by 10% this year. A teacher there implemented a new math
curriculum. On average, the school district is scoring at 65% for 8 th grade math, where 85% is the national
average and our target. If this 10% performance was sustained and replicable across the school district,
how long would it take for the school district to catch up to the national average?
Candidate: Can we assume similar 10% gains in 9 th, 10th, and 11th grades?
Interviewer: Yes.
Candidate: After 1 year, performance would be 65%+10%*65%=71.5%. After two years, it would be
71.5%+10%*71.5% = ~79%. After three years, it would be ~87%. Thus, it would take slightly less than
three years to catch-up to the national average.
Interviewer: Great, the Chancellor has decided he wants to implement this improved 8 th grade math
curriculum across the school district. Which next steps would you recommend he take?
Candidate: First, he should speak with the 8 th grade teacher who implemented it and get his perspective
on the new curriculum (e.g. challenges he faced, etc.). Next, he should acquire licenses and rights to use
the new curriculum. Third, he should communicate this change to all impacted stakeholders –

parents/teachers/principals/students. Finally, he should consider a pilot/experiment before expanding all
at once across the 150 schools to ensure this is the right approach.
Interviewer: Great, so why do you want to work for McKinsey?

52. Simple Insurance (McKinsey R1, Financial Services, Profitability,
Quantitative)
Stem: Our client is a market share leading insurance company called Simple Insurance. They have three
business units, auto (50%), fire (30%), and engineering (20%). Currently the ROE is 10%, but the CEO
would like to find out if they can make it 15%.
The candidate should ask for a moment to structure his/her thoughts. He/she should write ROE =
Profit/Equity with the structure containing market, revenue, cost, options, and risks.
Interviewer: First, how do insurance companies make money?
Candidate: Well, they sell policies to different customers across a range of products (like car insurance,
renter’s insurance, etc.). These policies are priced best on risk associated with the policy holder’s profile.
Risk is spread out across all policy holders and the insurance company makes a margin off the top.
Interviewer: I like your idea on revenue and cost from your structure, what do you think are the main
revenue streams and cost components?
Candidate: Revenue should be from premium and investment return (insurance companies invest
payments made by policyholders). Cost should be mainly claims, SG&A, PP&E, and Labor (e.g. claims
agents, actuaries, etc.).
Interviewer: Great, let me give you this data.
Business Unit Claim Ratio (claim/total premium) Expense Ratio (non-claim expenses/total
premium)
Auto 40% 60%
Fire 50% 30%
Engineering 60% 20%
*Key:
● Claim-the expense from a policy holder on a yearly basis (e.g., the amount charged for repairs on
a damaged car)
● Premium-the amount a customer pays on a yearly basis
The candidate should notice that our biggest business, auto, is not making any profit (the Claim Ratio
plus the Expense Ratio equals 100%), and the expense ratio is disproportionately high compared to other
business units.
Interviewer: Why do you think we are still offering the auto insurance when we are not making money?
Candidate: We are not making money directly but we might be making money off the investment return.
Specifically, because auto insurance is so common, it helps drive branding and perception, so the
company is willing to not make any profits because is it driving brand value.
Interviewer: That’s the correct answer. Let’s move along to only focus on the auto business. Currently
we have 10M policyholders. We have a 6% claim rate and each claim costs us $6,000. If we could reduce
each claim to $4,000, what would that do to our ROE, assuming we have $30B in equity.
Candidate: The claim payout at 10M*6%*$6000 = $3.6B. This number is going to come down by 1/3,
therefore the additional profit would be $1.2B. Currently we have ROE of 10%, which means our profit is

$3B. The new profit of $4.2B would give us (4.2/30) = 14% ROE -- still short of our 15% goal. Let’s
explore back to the high expense ratio of auto business.
Interviewer: Great idea, one of the main reasons the expense ratio is so high is that we are using 15
companies for our dispatching service. They are being paid a flat rate to be on the ground and assess the
damage. The car is then sent to the garage where we pay at most $6,000 for each claim (depending on
what the dispatcher’s estimate is). Is there any way we can reduce this cost?
The candidate should come up with the list that includes, but is not limited to the following:
1. Renegotiate the flat fee

2. Align incentive between the estimate and the fee paid
3. Reduce the number from 15 companies
4. Build our own, in-house dispatching service
Interviewer: So – given these options you have laid out, what would be your criteria to decide which
option to investigate first?
The Candidate should provide sound logic behind their reasoning. Feel free to probe and pick at their
response.
Interviewer: Okay now you have only 30 seconds to explain all of this to the CEO, what do you tell her?

53. Spanish Trains (McKinsey R1, Transportation, New Market,
Balanced)
Stem: The railway company of Spain (RENFE), a former monopoly, is now opening to competition.
RENFE has been divided into two separate companies: RENFE (train operation) and ADIF (company that
manages the tracks, train stations and traffic control). A friend of yours has 90M € and has approached
you for advice on starting a new train operation company to compete against the new RENFE. In
particular, he wants to start by opening a new high-speed train route between Madrid and Barcelona.
Should your friend go ahead and launch the business?
Phase 1: Industry Overview
Let the candidate to lay out his framework and start brainstorming about the current situation in the
industry: competitors, and competitive situation. Give the following information when asked the proper
question. Let him or her focus on competition, and the differences between this new venture and the
competition.
Provide the following information if asked:
● Main competitors: RENFE and air travel. Evaluate price, time and convenience.
● Us vs. RENFE:
o We are less expensive
o We are more efficiently run (as a former monopoly, RENFE is very inefficient)
o Equal travel time
o We are equally convenient (same stations and tracks) Us vs. air travel
Candidate: As a result of this high-level analysis, it is possible that we have a chance in this market.
Now let’s evaluate profitability.
Phase 2: Business Overview
Interviewer: Now that we have identified the main issues in the market, it is time to see whether we can
be profitable. How would you evaluate the viability of your friend’s business? What do you think the main
costs and revenue streams are?
Candidate: Possible forms of revenue: tickets (main revenue driver), ads in trains, food and drinks, and
any others are good for the brainstorming but should be ignored for the calculations.
Costs: Marketing, Operations and maintenance, trains, personnel, IT, etc.
Interviewer: Great. Now, before moving on let me tell you about operations. You can travel by train
between Madrid and Barcelona in ~ 3 hrs. Trains run from 8am until 9pm. Taking into account all different
factors, we can run two round trips per day. We will need three trains, as well as one for backup in case
of breakdown, i.e. total 4 trains and 4 trips per day (per train).
Phase 3: Break-even Calculations
Interviewer: What do you need to calculate expected profits? Keep in mind that the company only has 10
years to pay back the investment.
The candidate should ask specifically for all the costs needed.
● Trains: 30M € per train (tell the candidate to think of this only at the end)

● Marketing: 45M€ per year (for entire company)
● Operations/Maintenance: 10M€ per year per train
● Train fares: Trains have a capacity of 500 people
o If tickets cost 40€ at 95% occupancy
Interviewer: Given this data, how much do you think the tickets cost?
Candidate:
● 40€ at (.95 * 500) * 40 = 19,000€ per trip

● 50€ at (.8 * 500) * 50 = 20,000€ per trip
● 60€ at (.6 * 500) * 60 = 18,000€ per trip
Key Insight: It is most profitable to set prices at 50€.
Interviewer: Now figure out the profits per year (assuming above costs are per train)
Candidate:
● 365 days * 20,000€ per trip * 4 trips per day = 29.2M€ in revenue per year
● 29.2M - 25M (marketing and operations) = 4.2M€ profit per year per train
o 25M is 10M operations per train plus 15M (45M/3) for marketing
● Because we on average operate only 3 trains we disregard the cost in opex and maintenance for
the fourth train. Total estimated operating profit is therefore 12.6M €.
● Key Insight: This does not look great – it would take almost 10 years to recoup the 120M€
investment in 4 trains.
Recommendations
Interviewer: What would you recommend to your friend? What options could you consider to make the
business more profitable?
Candidate: He should not invest under the current circumstances, but may also explore options such as
leasing trains, additional revenue from onboard sales and advertising, JV with a foreign operator with
excess capacity, etc. (ask for brainstorming ideas)

54. Zippy Snowmobiles (McKinsey R1, Transportation, Profitability,
Quantitative)
Stem: Our client is the president of Zippy Snowmobiles. It makes snowmobiles for recreational users
only. Zippy has faced falling sales over the past 7 years, of 7% per year, or about 40% over that period.
Zippy’s president has hired McKinsey to investigate and reverse this trend.
Interviewer: What areas would you like to explore?
The candidate may outline the following high-level issues:
- Market: Extent of market, Size/Growth overall, Competition, Criteria for Success

- Revenue: Pricing, Volumes, Product Mix & Seasonal Balance
- Costs: While addressing revenue issues, make sure solutions do not overextend costs (e.g.
diseconomies of scale if there is rapid growth) and hurt profitability
- Risks: Stress-test any sales improvement proposal by considering potential risks/barriers
Phase 1: Examine the Market
The interviewer should lead the conversation and show the candidate Exhibit 1.sk for an assessment.
Suggested candidate answers:
● Overall market has shrunk about 40% over 7y period. Zippy’s problem reflects industry-wide
problem.
● One player Northpoint has disappeared. It could have been acquired by Gemco, which had a
revenue spurt after Northpoint was gone. It might be a good idea to study Northpoint’s demise for
cautionary lessons.
● Sierra’s market share has actually increased in a declining market. This firm’s strategies may
offer clues as well on best practices.

Interviewer: Can you consider some revenue growth strategies?
Suggested answers by Candidate:
● M&A with other players

● Organic growth strategies (iaw Ansoff Matrix)
● Maximize revenues per sales e.g. use bundling, tying, loss-leader strategies
● Extend product line in current market (create seasonal balance; produce complementary products
that can sell well in summer months when snowmobiles do poorly)
● Extend same product line to new markets (overseas, more regions etc).
● Potential segmentation strategy: Seek out customer segments that have specialized needs
(children? Physically challenged?) and try to reach them (carve out blue-ocean) before other
competitors
Interviewer: The CEO wants to know what increase in market share is needed in 2009 compared to
2002, in order to maintain the same revenue dollars as in 2002.
Only when asked, indicate that the overall market is expected to decline 8% from 2008 to 2009.
Calculations:
- Total Market in 2002 = $190M

- Zippy Revenue in 2002 = $75M
- Zippy 2002 Market Share = 40% (approx.)
- Total Market in 2009 = (1-8%)*120M = 110M (rounded is fine)

- Share required in 2009 = $75M / $110M = 70% (approx.)
- Increase in '09 market share vs. '02 = 70% - 40% = 30% (Or about 75% when taking a
percentage of the percentage)
Interviewer: The Chief Marketing Officer has come up with ideas to increase sales. He would like our
team to access the incremental profits generated by his plan. (See Exhibit 2)
NUMBER OF ZIPPY SNOWMOBILES SOLD IN ONE YEAR
Interviewer should provide the following facts:
● Snowmobile buyers will get a $200 gas card with every Zippy snowmobile purchase. This entitles
them to pump $200 worth of gas.
● The expected redemption rate is 30%.
● Zippy bears full costs of redeemed gas dollars.
Interviewer can provide these extra facts only when prompted:
● Retail price of each snowmobile = $50,000

● Variable cost of producing each snowmobile = $20,000
Calculations:
- Incremental profits from promotion

- = Additional customers x (Price – VC) – Cost of Gas Cards
- = 100 x (50,000-20,000) – (30% x $200 x 1,100 cards)
- = 3,000,000 – 66,000
- = 2,934,000 OR $2.93M
Interviewer: What will you tell the President of Zippy’s?

Candidate:
Recap objective: “We were asked to investigate and reverse the trend of Zippy’s falling revenues.”
Answer first: “Zippy’s falling revenues mirror a decline of the industry as a whole. Reversing Zippy’s falling
revenues require a mix of organic growth measures and likely strategic M&A moves.”
Elaborate: “Under organic growth measures, Zippy can extend its product line to improve seasonal
balance, or extend to new markets. The gas-card promotion is one means of boosting revenue growth
and plough in profits that can finance future growth.
Under strategic M&A moves, we will need to conduct due diligence and valuation on possible candidates,
such as Sierra which appears to be a strong company albeit smaller than Zippy’s. The McKinsey team
would be happy to study such options further.”

55. Dinosaur (McKinsey R2, Other, M&A, Balanced)
Part 1: brainstorming
Interviewer: Our client is an explorer in the Amazon rainforest. He just discovered the last living dinosaur,
and has hired us to price it for him.
Candidate: If I understand correctly, we are going to help the client price a living dinosaur. Let’s first
brainstorm who the potential buyers of the dinosaur might be, then identify the potential sources of value
the dinosaur would provide each buyer, and finally decide on a pricing strategy.
Note: Candidate *should*ask a clarifying question very early on as to what type of dinosaur it is – a
Tyrannosaurus Rex would probably sell for much more than an iguana-sized plant-eating dinosaur. If the
candidate does not, don’t mention it now. Instead, at the end of the case, ask the candidate what type of
dinosaur it is – then give him a hard time at the end of the case by showing how his answer could change
depending on what type of dinosaur it is.
Candidate: Ok, let’s divide the potential customers into a couple of different categories:
Public/government institutions, Private collectors (rich people!), Research institutions/scientists/other non -
profits, and Corporations (theme parks and zoos).
Note: Candidate should try to generate a MECE structure. When the candidate is done, ask the candidate
for a few more ideas.
Part 2: revenue sources
Interviewer: Great! Let’s assume that the most likely buyer for the dinosaur will be the Disney Animal
Kingdom. How do you think the Disney Animal Kingdom could generate incremental revenue after
purchasing the dinosaur?
Candidate: There are several categories of revenue that the dinosaur could help generate, both inside
the theme park and outside the theme park:
Inside the park:
- Tickets – the change in quantity of tickets sold plus any change (increase) to the price of the
tickets
- Apparel (in-park sales)
- Concessions
Outside the park:
- TV/Internet – Disney could develop a “Dinosaur Channel” and sell subscription streaming video
- Apparel (online and in third-party shops)
- Naming rights – Disney could sell the naming rights to the dinosaur. For example, AT&T might
pay a lot to brand the dinosaur as the “AT&T Rex”.
- DNA licensing
Note: Candidate should try to generate a MECE structure. When the candidate is done, ask the candidate
for a few more ideas. Candidate should incorporate information from their prospective customer list; for
example, Disney could license DNA to other corporations
Interviewer: Excellent. Let’s focus on the increase in revenue from tickets. Can you estimate that for our
client?
Candidate: We will calculate the increase in revenue as the sum of the increase in revenue from
incremental ticket sales at existing prices plus any increase in average ticket price times the total number

of tickets sold. Do we know how many visitors there are currently (before the dinosaur), the average ticket
price, and how those will change if the dinosaur is added to the park?
Interviewer: The average ticket price is $40, and will double once the dinosaur is added. The number of
visitors to the park (= tickets sold) will increase by 25% after the dinosaur is added, but you will have to
estimate the baseline ticket sales. Restrict yourself to considering tickets sold to those in the United
States.
Candidate: I’m not too familiar with theme parks, but let’s assume that approximately 25% of people in
the US will be able to afford visiting the Disney Animal Kingdom at some point in their life. There are
approximately 300M people in the US; thus, 75M will be able to visit at some point. Assuming an average
lifespan of 75 years per person, there will be on average of 1M people visiting the Disney Animal
Kingdom each year.
Therefore, ticket sales will increase from 1M to 1M*1.25 = 1.25M/year, while average ticket prices will
increase from $40/ticket to $80/ticket.
Therefore, revenue will increase as follows:
● Current revenue (without the dinosaur): 1M visitors * $40/ticket = $40M/year

● Future revenue (with the dinosaur): 1.25M visitors * $80/ticket = $100M/year
● Increase in revenue = $100M/year - $40M/year = $60M/year
Note: Candidate should structure this as a table, with one column for “before” and one column for “after”,
with visitors/year, price/ticket, and revenue/year on the left
We can use this information to price the dinosaur if we are able to estimate the risk associated with
purchasing and housing the dinosaur, plus the risk that it might die, by modeling the increase in annual
revenues as a perpetuity.
Note: Let the candidate remember to link back to the original question. If the candidate is unable to do so,
ask how their answer relates to the clients request in order to get them back on track. If they do not think
to use an NPV or perpetuity to value it, prompt them.
Interviewer: Assume a discount rate of 40%, inclusive of all the risks you mentioned.
Candidate: In that case, the value of the dinosaur would be $60M/40% = $150M. Note that this is only
considering the increase in revenue from ticket sales, but does not consider the other revenue sources
we discussed such as Apparel or Concessions, nor does it consider the costs of housing the dinosaur.
Interviewer: Ignore all those factors. How would you summarize your recommendation for the client?
Candidate: We recommend that the client aim to sell the dinosaur to a theme park such as the Disney
Animal Kingdom with an initial price of $150M. $150M is the value that the dinosaur would provide in
terms of ticket revenue, presumably there is additional value that the dinosaur could provide to Disney –
such as selling tissue samples to scientists, or naming rights to sports teams – that would provide upside
to the purchaser.
Interviewer: Excellent job. Now tell me, what are your two biggest weaknesses?

56. Treasure Island Communications (McKinsey R2, TMT, Comp
Stem: Our client is the CEO of Treasure Island Communications (TIC), a telecommunications company
on Treasure Island which has enjoyed a government-protected monopoly for many years. TIC provides
mobile services as well as fixed-line services for both international and domestic lines.
In a year’s time, the government will deregulate the industry and invite other companies to enter the
Treasure Island market. Our client has engaged McKinsey to discuss ways to deal with this new
environment.
Candidate: OK, just a clarifying question, what are the government’s motivations for deregulating this
industry?
Interviewer: There are two reasons: (1) The government will collect more revenues in the form of
spectrum licensing fees, and (2) Allowing for more competition will reduce prices, which is better for
consumers.
Now, our client would like help in drawing up some possible scenarios. What information would you need
in order to flesh out realistic scenarios?
Candidate:
● Market Size / Structure: Given the market size and number of customers, is the market more
likely to remain a natural monopoly or evolve into a duopoly / oligopoly / monopolistic
competition?
● Characteristics of Potential Competitors: What are their capabilities and which segments (mobile,
domestic/international fixed) are they likely to target?
● Entry Barriers: What entry barriers can TIC use or muster?
o Natural barriers include high set-up costs, high fixed costs etc.
o Artificial barriers: TIC could lobby government to set higher spectrum-licensing fees etc.
Interviewer: Could you tell me more about the financial information on TIC that you’d like?
Candidate: Yes, I would like to know:
● Revenue: How is pricing done for the different service segments? What are the volumes? What
are the trends across time?
● Costs: What are the set-up costs, recurring fixed costs, and variable costs?
Interviewer: I will give you some data on the international fixed-line services.
Latest revenue = $90M

Total Costs = $30M (all annual fixed costs)
Assume that with new entrants and competition, prices will drop 50% but usage volumes do not change.
What market share does TIC need to maintain in order to break even?
Candidate:
New Market Size = 50% * 90M = $45M
TIC’s break-even revenue = $30M
TIC’s required Market Share = 30 / 45 = 2/3
Given that TIC is currently serving the entire market, it can afford to lose only 1/3 of its market share to
competition.

Interviewer: OK, Let’s use more realistic assumptions this time. Assume that volume of usage does
increase when prices fall 50% due to competition. Please take a look at the following data and tell me
what you see. Then tell me what market share is needed in order for TIC to break even.
INTERNATIONAL FIXED LINES
Usage Revenues ($) Total User Minutes
2009 (latest) 90M 90,000,000
2008 120M 60,000,000
2007 120M 60,000,000
2006 160M 40,000,000
Candidate should use the information to derive prices charged in the past and the price-volume (demand)
relationship.
Usage Revenues ($) Total User Minutes Price (Candidate’s Calculation)
2009 (latest) 90M 90,000,000 $1/min
2008 120M 60,000,000 $2/min
2007 120M 60,000,000 $2/min
2006 160M 40,000,000 $4/min
Candidate may draw a demand curve to predict volume based on a price of $0.50, but the trend can also
be stated as below.
Candidate: So, it looks like each time the price is cut in half, the volume increases by 50%. Therefore,
with a price of $0.50/min, we would expect to see 135M user minutes.
New Mkt Revenue = $0.50 x 135,000,000 = $67.5M
Break-even TIC Revenue = $30M
Required Market Share = 30M/67.5M = 44%
This suggests that with more competition, user volumes will also rise and TIC’s required market share to
break-even is not as high as initially assumed.
Interviewer: OK, thank you.
No formal recommendation was requested.

57. UK Banking (McKinsey R2, Fin Services, Profitability, Balanced)
Part 1: brainstorming
Interviewer: We are consulting for a UK consumer bank in 2010. The client offers products including
credit cards, debit cards, insurance, mutual funds, checking accounts, and mortgages. Its mutual fund
business, called Mutual Co., has experienced a decline in profitability over the past 5 years. It sells to new
accounts through both its direct channel of in-house tele-sales representatives and indirectly cross-selling
its mutual fund products through its insurance business. Mutual Co. earns revenue by charging an annual
fixed percentage management fee times each account balance. Mutual Co.’s new CEO has hired
McKinsey to identify why profitability has declined within the unit and to recommend specific actions t o
improve it.
Candidate: Let’s identify what is causing the decline in profitability and then figure out what actions can
be taken to reverse the trend.
Note: Candidate should generate a MECE structure, such as internal/external or revenue/cost. If

candidate does not have a MECE structure, press the candidate. When the candidate is done ask for a
few more drivers!
Example MECE structure:
1) Revenue might be falling; this could be caused by a decline in assets managed or a reduction of
the fee % charged per asset. A decline in assets could be caused by a reduction in the number of
accounts or in the average balance per account.
2) Alternatively, costs could be increasing. Fixed costs that could be increasing could be compliance
costs caused by recent financial reform legislation including Dodd-Frank, or by general SG&A
increases. Variable costs could be increasing due to increase exchange fees/transaction,
paperwork costs/transaction, or customer service costs (which in turn could be caused by an
increase in the time spent per customer service call or the number of customer service calls).
Note: Only provide the following pieces of information in response to questions from the candidate:
- Variable costs have not increased

- Fixed costs have not increased
- The number of accounts hasn’t decreased
- Competitors have experienced a similar decline in profitability
Note: The candidate should identify that the only remaining factor is that the average balance per account
must have decreased. If after several minutes of brainstorming the candidate does not identify this is the
cause, guide him to this cause (or state it explicitly) and move on to the next section.
Part 2: account balance
Interviewer: Over the past five years, the average account balance has decreased. Why do think that
might be?
Candidate: One cause might be the financial crisis. On average, US equity prices are lower than they
were in 2007… it’s probably the same in the UK.
Interviewer: Yes, the client believes that is the primary cause and would like to know what the average
account balance would need to be to have a 10% profit margin.
Note: Only provide the following pieces of information in response to questions from the candidate:
- Management Fees are 0.5% of the account balance

- There are 1,000,000 accounts
- The average account balance is currently $5,000
- The costs of managing each account are $20 (these are the variable costs)
- All other costs are $35M in total (these are the fixed costs)
Candidate: First, I will calculate the costs per account. Then, I will multiply by 1.11 to calculate the
revenue necessary to achieve a 10% profit margin. Finally, I will divide that by the management fee
percentage to find the average account balance necessary to achieve that profit margin.
Interviewer: That seems like a logical approach.
Candidate: Fixed costs are $35M, supporting 1M accounts. Thus, each account has on average $35 of
fixed costs. Since variable costs are $20/account, total costs per account are $55. To achi eve a profit
margin of 10%, there would therefore need to be an average of just over $61/account of management
fees. Since management fees are 0.5% of the account balance, that means the minimum average
account balance needs to be $61/0.005 = $12,200.
Part 3: profitability
Interviewer: Great job! Next, the client would like us to help them think of specific actions they can take
to increase profitability. Have any ideas?
Note: Candidate should generate a MECE structure, revenue/cost. If Candidate does not have a MECE
structure, press the candidate. When the Candidate is done ask for a few more ideas! Example ideas
include: Revenue: review/improve the incentives that the parent company’s indirect sales force have to
sell Mutual Co.’s products, have a new promotion, see whether the management fee percentage is below
industry average and can be safely raised depending on demand elasticity, and expanding
geographically. Variable Costs: ensuring the client is using electronic communications rather than paper
costs ($20/account seems like a lot of variable cost!) and using 3 rd party mutual funds rather than those
managed in house (may be cheaper). Fixed Costs: consolidate support functions (HR, IT, Finance) with
the parent company, consolidate locations to save on rent expenses.
Interviewer: Wonderful. So, tell me about an achievement you are particularly proud of?

58. Universal Healthcare Revamp (McKinsey R2, Healthcare, Comp
Response, Balanced)
Stem: Our client is the health minister of a small country. The country is small and on the upper end of
the GDP spectrum for countries of its size. The country’s health system is completely free to its citizens,
and is funded by taxpayer money. The way that the health care system works is that patients can visit
one of 30 clinics spread throughout the country for a primary care visit, and then get referred to one of 2
larger hospitals if more intensive procedures are required. There are a few private systems for the richest
citizens, but they are so small in comparison to the public system that they won’t be considered at all in
our study. The GDP, and thus the tax returns for the country have been growing at a 5% rate. However,
the healthcare budget has required 10% growth to keep up with demand. The health minister of the
country is concerned that at this rate, the healthcare system will become unsustainable. The health
minister has hired us to figure out why the healthcare budget is requiring this level of growth and what can
be done to reduce it.
Phase 1: Examining possible reasons for budget growth
Interviewer: What factors do you believe are going into the budget growth?
The candidate should come up with a framework that should explore:
● Demand-driven growth reasons such as

o demographic changes leading to a larger number of people visiting hospitals
o changes in health perception or awareness in the population such that citizens go to the
doctor in response to problems for which they formerly stayed home
o the incentive systems of doctors and hospitals who may be encouraging patients to come
in so that they get paid more for more visits or who may be referring more patients to the
2 bigger hospitals than is necessary
● Supply-side effects such as

o shortage of doctors or resources bidding up prices for the same services
o a lack of preventative care services making patients less healthy and thus needing of
more healthcare when they actually do get ill
Interviewer: Now that you have identified some reasons for budget growth, let us address how we can
cut costs. What are some of the things they could do and what would be the potential risks associated
with those?
Candidate: There are a few things I can think of.
● Transparency: if physicians don’t currently know what various treatments cost, making them
aware and helping them take that information into account would be a first step
● Quotas/Rules: We can require that physicians prescribe a certain number of generic drugs rather
than branded, or that simpler, outpatient procedures be used when possible rather than allowing
people to stay several nights in the hospital
● Risks: We need to ensure that the rules don’t reduce the quality of care overall, so physicians
need to be involved in crafting the rules.
Phase 2: Forecasting Healthcare Needs Growth
Interviewer: The client’s census bureau has printed out some information. What do you make of this?

Age % of population today % of population in 10 years Average HC cost per
person per year
0-21 20 10 $1000
22-65 70 70 $500
65+ 10 20 $4000
Candidate: The population will be redistributed, with the percentage that is 65+ actually doubling in 10
years. This group is by far the most expensive, and this shift will increase the overall costs to the
healthcare system. Healthcare spend will increase by an even greater rate than what we are currently
seeing, which is bad news for the health minister. It would be helpful to quantify exactly how bad the
problem will become.
Interviewer: Could you figure out how much the country currently spends on health care, and how much
they are projecting to spend in 10 years?
Candidate: Yes, do we have an estimate for the population now, and what it will be in 10 years?
Interviewer: Yes, the population is currently 1M and the census estimates it will grow by 30% in 10
years.
Candidate: OK thank you, let me run the numbers.
[(20% * 1000) + (70% * 500) + (10% * 4000)] * 1M = $950M in current spend
[(10% * 1000) + (70% * 500) + (20% * 4000)] * 1.3M = $1.625B in future spend
With costs staying the same, the expected increase in population, along with its redistribution, is expected
to create a 71% [($1.625B – $950M) / $950M] increase in spending.
Push the candidate to calculate this percentage if he/she doesn’t do it on his/her own.
Phase 3: Copayment Idea
Interviewer: OK, let’s change gears. Before we started on this project, the health minister was toying with
the idea of beginning a $5/visit copayment. This would cover all individual visits regardless of specialty.
Currently, the average citizen goes through the healthcare system 5 times a year, at an average cost of
$50/visit. What do you think would be the impact of the copayment?
Candidate: This means the government’s costs should go down to $45. Additionally, if visits are no
longer completely free, patients may start going to the doctor less frequently, and visits per citizen will
decrease.
Interviewer: You are right, we estimate that visits/citizen/year will go down to 4.5 as a result.
The candidate should drive to figuring out what percent of the budget will be saved by this change, but if
not, make this suggestion.
Candidate:
Current costs: 5 * $50 * 1M = $250M
New costs: 4.5 * $45 * 1M = $202.5M

This change will lead to a 19% [(250 – 202.5) / 250] decrease in spending on these visits. With total
spending of $950M, this $47.5M decrease represents about a 5% reduction in overall spending.
Phase 4: Copayment Risks
Interviewer: Although the copayment seems like a good idea, do you think that there are any risks to the
idea? How could those risks be alleviated? Are there any other ideas that come to mind aside from a
copayment that could help out the situation?
Allow the candidate to brainstorm. It is important to remain structured.
Candidate:
Risks:
● Looking out for the poorest citizens – perhaps they can’t afford the $5 copay. Care should be
taken to make sure that it’s affordable for all, and perhaps, there can be a sliding scale based
on per capita income
● Public unhappiness in response to the copayment – The public will probably be unhappy with
this change, which could have political repercussions for the health minister. Perhaps a
survey could be taken to gauge how unpopular this idea would be.
● Will the copayment be enough to affect anyone who may abuse the system – Is $5 enough of
a deterrent for people who go to see the doctor for superfluous visits? Perhaps there should
also be a sliding scale based on frequency or visit type.
● Emergency attention – Could the $5 copayment make it difficult to obtain care in an
emergency? Perhaps the fee should be waived in emergency situations.
Alternatives to copayment system:
● Limiting types of visits – Some regulation could be put in place for types of visits that really
only need to take place once a year, like eye exams.
● Increasing spending on preventative care – If people lead healthier lives, they will need less
healthcare. More attention could be placed on encouraging preventative care habits for the
general population.
Interviewer: Ok, wrapping up, what should we tell the healthcare minister?
In this answer, the most important thing is for the candidate to be structured and concise.
Candidate: We’ve looked at the healthcare spending situation, and we estimate that there will be a 70%
increase over the next 10 years, driven by two factors: a population increase and an aging population.
A copayment is a good way to immediately address the healthcare spending situation, as it could
decrease overall costs by roughly 5% from initial estimates. However, more analysis needs to be done to
make sure that the copayment will not have adverse effects on quality of care delivered, and that it will be
politically feasible.
From a long-term perspective, the population’s healthcare needs will grow substantially, and more
thought must be given to creating a sustainable system. Initiating visit type regulations and focusing on
preventative care are two good places to start to make sure that the healthcare system can continue to
meet the needs of the population at a reasonable cost.

59. Wildcats Lacrosse (Roland Berger, R1, Retail, Balanced)
Interviewer: Our client, Wildcats Lacrosse, is a leading US sporting goods company. They manufacture,
market and sell two primary products: 1) women's lacrosse masks, 2) women's lacrosse sticks. They sell
these products exclusively to the US market. Wildcat masks sell very well and are the market leader.
Their lacrosse sticks, on the other hand, do not sell well despite Wildcats' best efforts. Wildcats is worried
that they are missing out on an opportunity with their lacrosse sticks. They have discussed a number of
options including discontinuing the sticks and instead focusing on making only masks. They would like to
better understand their options and have come to us for guidance.
The candidate should investigate the comparative profitability of both of Wildcats' products to develop a
plan to determine whether Wildcats should keep producing sticks and how overall profitability of the firm
can be improved.
Candidate: I understand the main question we want to answer is what to do about these lacrosse sticks,
but it sounds like our client may also be concerned about their firm’s overall profitability. Is that correct?
Interviewer: Your intuition is correct. While the main question we must answer is about the lacrosse
sticks, Wildcats has come to us to improve their performance generally.
Candidate: Got it. Is it OK if I take a moment to organize my thoughts?
Interviewer: Of course.
Candidate should take a moment to organize a framework exploring the profitability of Wildcats’ business,
exploring the revenues and costs associated with both lacrosse sticks and masks.
Information to provide candidates only if asked:

• We can assume little to no market growth
• There have been no new entrants into the markets for either Masks or Sticks and the products
are not substitutes for one another in the market
• Wildcats has not seen its market share change in the near term and expects it to be steady into
the future
• Wildcats does not have any information on price elasticity
• Wildcats uses a cost plus pricing scheme (10% above total cost)
• Wildcats has a single manufacturing facility, assume there is some reasonable utilization rate
below 100% to allow for some production increases without the need for capex
• Variable costs include transportation/logistics
• Masks are very equipment intensive, have high R&D spend, change rapidly and must meet
stringent safety requirements
• Sticks are very labor intensive (stringing the "pocket" of the stick is time-consuming and requires
skill), have fairly low R&D spend, has fairly long product life cycles with high quality expectations.
• Wildcats sources the crosse portion of the lacrosse stick (the "shaft") from a third party. This is
usually a metal alloy (e.g., aluminum) or carbon fiber. Final painting is completed by Wildcats.
• Wildcats is able to sell all products that they manufacture
Candidate: I’d like to start by examining the revenues associated with each of the products that Wildcats
manufactures and sells.

Interviewer: The revenues of both products is important, but let’s start with the costs first.
Candidate: That sounds great. We can think about the costs associated with both the products that
Wildcats produces as being broken out between fixed costs (like PP&E) and variable costs (like ma terials
and labor). Do we have any information about Wildcats’ current costs position?
Interviewer: Yes. Take a look at this and let me know what you think.
Interviewer presents Candidate with Exhibit 1.
Exhibit 1
Production Costs (USD)
25
20
15
15
10
5 10
0
Masks Sticks
Variable costs
Fixed costs (based on allocation of labor hours per part)
Candidate: It’s interesting to see that both the fixed and variable costs associated with sticks are 5x
those of masks.
Interviewer: Absolutely. Take a look at this as well.

Exhibit 2
Fixed Costs allocation based on Capital Spending (USD, k)
1000 600
1000
750
500
300
250
100
0
Total FC Masks Sticks Shared
Candidate: That’s really interesting. Based on actual capital spending, masks account for twice the fixed
costs of sticks (not including the shared portion of fixed costs). That might be a good area for us to
investigate. Perhaps using labor hours to determine the fixed cost allocation across these two products
isn’t the best course of action.
Interviewer: That’s a good point.
Candidate: Thank you. Of course, these numbers cannot tell us the whole story. We also need to think
about the volume of production associated with these products.
Interviewer: Good point. Take a look at this.

Exhibit 3
Candidate: OK. So each year Wildcats produces 250K masks and 50K sticks.
Interviewer: Correct.
Candidate: If we look at actual costs per product with overhead allocated by actual usage (assuming a
50/50 split for the shared costs), we get:
• Masks: $650k OH / 250k units = $2.60
• Sticks: $350k OH / 50k units = $7.00
Candidate: That is different from the actual allocation we saw in Exhibit 1. If we were to use these fixed
costs in addition to the VC we saw earlier, we would get the following costs for each product:
• Masks: $3 in VC + $2.60 in FC = $5.60 (old cost $5 so a 12% increase)
• Sticks: $15 in VC + $7 in FC = $22 (old cost $25 so a 12% decrease)
Interviewer: What are some potential difficulties in adjusting the cost allocation scheme to more of an
activity-based system?
Candidate: Some challenges that could arise include Wildcats’ ability to track activities accurately, their
data quality, and the constant potential for changes in volume. Of course, while this new cost allocation
may make sticks look more appealing, it will not change overall profitability for the firm. That said, there
are advantages to more accurately allocating costs such as better transparency into true product
profitability.
Interviewer: Good. Let’s move on to look at revenues and profitability.
Candidate: Sounds great. Do you have any additional information for me about Wildcats’ revenues?
Interviewer: I think you have all the information you need.
Candidate: Good point. Using the information from the exhibits you’ve already shared, I can calculate:

• Masks:
o Revenue: 250k units * $5.50 = $1.375m
o Profit: ($5.50 - $5.00) * 250k units = $125k
• Sticks:
o Revenue: 50k units * $27.50 = $1.375m
o Profit: ($27.50 - $25.00) * 50k units = $125k
Candidate: That’s interesting. Using this new cost allocation method, it appears that sticks and masks
are equally profitable, quite contrary to our client’s initial hypothesis.
Interviewer: That’s right. Now, Wildcats has historically priced at 10% above costs. If they were to use
the new cost structure you calculated, what should they price at?
Candidate: Given the costs we found earlier, we can calculate:

• Masks: $5.60 * 1.10 = $6.16
• Sticks: $22 * 1.10 = $24.20
Candidate: This is interesting because the previous exhibits made it seem like Wildcats is competing in a
fairly price sensitive market. It might be beneficial to look at the price elasticity of demand among
Wildcats’ customer base.
Interviewer: That’s a good point. Wildcats has not determined price elasticity for either of its products to
date and I can confirm that Wildcats’ products are fairly undifferentiated from those of its competitors,
though there are some brand loyalists.
Candidate: In that case, price levels should play a big role in determining the share that each firm is able
to capture. If Wildcats were to change their prices to reflect the new cost allocation, that would likely
change its sales volume as well.
Interviewer: Yes. Would you mind estimating what the new volume levels might look like if Wildcats were
to adopt the new price levels?
A reasonable estimate might look something like this:
Masks Masks
Price Market Share Volume Price Market Share Volume
Wildcats $5.50 50% 250,000 Wildcats $6.16 40% 200,000
Blue Devils $7.50 20% 100,000 Blue Devils $7.50 25% 125,000
Quakers $7.00 30% 150,000 Quakers $7.00 35% 175,000
500,000 500,000
Sticks Sticks
Price Market Share Volume Price Market Share Volume
Wildcats $27.50 20% 50,000 Wildcats $24.20 26% 65,000
Quakers $23.50 30% 75,000 Quakers $23.50 28% 70,000
Terrapins $21.00 50% 125,000 Terrapins $21.00 46% 115,000
250,000 250,000
The candidate should recognize that total volume for Wildcats decreases in this instance and so total OH
coverage per part should increase. The interviewer can direct the candidate to ignore this for the
purposes of the case. With different assumptions, total volume may increase, it is merely important that
the candidate recognizes that OH coverage must either increase or decrease.

Candidate: Shifting these volumes of course would have an implication on Wildcats’ overall profitability.
Comparing the current state to the projections associated with these estimates and assumptions, we can
calculate:
Current State Projection

Product A 125,000 112,000
Product B 125,000 143,000
Total 250,000 255,000
Candidate: Reallocating costs and keeping Wildcats’ cost-plus pricing strategy could result in moderate
improvements to overall profitability, but dropping the cost-plus approach may be more beneficial. Under
our new cost allocation system, masks are still much less expensive than the second place offering. If
Wildcats were to raise the prices of masks (independent of any cost considerations), they could raise
profits. A simple calculation verifies this:
• Assume $7 price and 35% market share (conservative) = ($7-$5.50 – assuming original price
structure) * 175k units = $262.5k (original profit = $125k).
Interviewer: Great. The CEO of Wildcats just walked into the room. What do you say to her?
Candidate: Despite being the market laggard, Sticks are quite profitable for Wildcats and there is no
immediate need to discontinue their production. However, pricing should be reevaluated for both
products. Cost-plus is not providing the maximum overall profitability and they should consider breaking
from this strategy. Additionally, cost allocation should be reevaluated. While labor-intensive, Sticks are
not responsible for large portions of the fixed costs (e.g., floor space, equipment), and it may be possible
to adjust cost practices to provide Wildcats with a better overall picture into actual profitability of each
product type.

60. A Proposal You Can’t Refuse (Other, Financial Services,
Competitive Response, Balanced)
Stem: Our client is a large international financial service organization. Among its many divisions, it offers
commercial banking services, investment management, wealth management, treasury management
services and foreign exchange. Over the past year, our client has seen a decline in RFP (requests for
proposal) wins. They have hired us to figure out why and help come up with a plan to reverse this trend.
Candidate: May I have a minute to structure my thoughts?
Structure should include the following:

• Banking Industry/Market: Client’s top competitors (whether or not they are also seeing decline in
RFP wins), new entrants into market (potentially super-regional bank expanding into client’s
markets) market segmentation, industry trends (increase in technology, international focus of
clients, etc.)
• Our Client: Current product offering (compared to competition), pricing (again compared with
competition), competitive advantages (if any)
• Other Considerations: Regulatory changes that may impact our client, media or reputation hits
recently, economic conditions, competitor responses to any changes we make, etc.
Candidate should start with market, if they don’t please steer them in this direction.
Market (Interviewer should provide the following information when prompted/asked):

• Our client has 4 primary competitors of a similar size and international reach
• While there are no new market entrants, some super-regional banks have begun to target some
of our client’s client segments
• Our client has 4 main client segments:
• Large Corporate (companies with more than $3 billion in annual revenue)
• Upper Middle Market (companies with $500 million -$3 billion)
• Lower Middle Market (companies with $50 million - $500 million)
• Business Banking (companies with less than $50 million annual revenue)
• Trends: increases in technology and ease of access to international markets have caused many
firms that did not originally have international banking needs to require such. These banking
needs could be foreign currency options, international bank accounts, letters of credit or other
trade products, etc.
Candidate: Is the decline in RFP wins consistent across all 4 client segments?
Interviewer: That’s a great question, let me show you some segmentation information and let me know
your thoughts.

Candidate: (Insights should include)
• Not all segments are seeing a decline
• Large Corporate has been steadily increasing so our client appears to be doing well with clients
above $3 billion in annual revenue
• Business Banking remains flat year over year so it might not be a target segment for our client
• Middle Market (both lower and upper) appears to be declining in RFP wins though so this is
where our client should focus.
Interviewer: So, looking at this segment information, why might our client be seeing a decline in RFP
wins in the middle market?
Candidate: (should create a bucketed list with the following ideas)

• Economic shift that could be effecting this segment (although an economic downturn would also
hit small businesses so we would expect to see a decline in business banking too)
• Competition (clients in this segment might be moving over to a competitor, a competitor might be
targeting our clients specifically, etc.)
• Pricing (did our client increase prices over this time-period that cause a decline in our
competitiveness)
• Product Offering (does our client’s products compare to that of our competition)
• Other…
Interviewer: Those are good ideas. To give you a little more background, our client’s product offering is
not lacking and there has not been an economic shift to impact our clients recently. Let me show you the
following and you can let me know your thoughts.

Candidate: (Insights should include)
• Our client’s product capabilities/international product offering appears to be better than its
competitors
• However, the price of our capabilities lies outside of what is perceived acceptable to clients
• In order to be more in line with competition, our client can either choose to decrease the price or
invest in additional capabilities
Interviewer: Do you think our client needs to increase capabilities given they are already ahead of
competition?
Candidate: In the long-run yes, but short-run it’s probably not the cause of the decrease in RFP wins so
no.
Interviewer: Ok, so how about the decrease in pricing of current products. What are some of the risks
that our client might face if they decrease price?
Candidate: (Bucketed structure should include the following risks)

• Decrease in price may cause decrease in overall revenue among all 4 client segments (this isn’t
good since we aren’t having any issues with large corporate clients)
• Competitors may decrease price in response (potentially causing price wars)
• Other
Interviewer: So, what could our client do instead of decreasing the price of its current products? (If the
candidate struggles with this question, ask them if they think all four segments require the same level of
product capabilities?)
Candidate: While our client may be able to offer all the bells and whistles to all 4 customer segments,
some clients may not be as sophisticated as the large corporate clients. As such, our client could offer
some form of “lite” version of the same international products to appeal to the middle market and even
business banking clients. These products would have slightly less features, but would be priced lower as
well. This would prevent our client from cutting into the large corporate revenue, as well as compete more
competitively on pricing in the middle market space.
Interviewer: Great, so the CEO has just walked in, what is your recommendation?

61. Online Advertising (Other, TMT, New Market, Quantitative)
Stem: Our client is an advertising firm with $400 million in annual profits based in the United States with
operations all around the world. The client primarily generates revenue through digital display format
advertisements and is evaluating whether it should invest resources in alternative digital format ads that
are emerging. What should our client do?
Candidate should recognize that this problem requires the emerging markets to be sized and that the
client will have to do a forecast on the expected profitability for the alternative markets.
If asked, provide the following information for the candidate:
Digital display: Static image and/or text based ads found on web pages. One of the largest sources of
online advertising revenue.
Client is a leading digital advertising demand and supply-side firm; that is, our client connects advertising
brands on the demand-side (like P&G and Coca Cola) to online publishers on the supply-side (like ESPN
and NYTimes.com).
Candidate: Can I have a few moments to structure my thoughts?
Interviewer: Sure.
Candidate walks interviewer through case framework. The framework should include data points that
cover market sizing as well as expected resources and revenue breakdown for entering a new market.
Interviewer: Please take a look at this table and tell me what you think.
Candidate: Sure. I’d like to clarify whether these numbers are global or only cover the U.S.?
Interviewer: This is a global forecast.
Online Advertising Market
USD, bn 2012 2013 2014 2015 2016 2017 2018 2019
Display $10 $14 $18 $19 $19 $20 $21 $22

advertising
Search $5 $4 $5 $6 $7 $8 $8 $8
advertising
Mobile $3 $7 $10 $14 $16 $19 $24 $30

advertising
Video $1 $3 $6 $11 $15 $20 $25 $30

advertising
Candidate: It appears that the display advertising market has been the largest digital advertising market
within the U.S. in recent years but that is no longer going to be the case in the coming years. In fact,
growth will slow considerably in the display advertising market while video and mobile advertising will
grow rapidly. Mobile and video advertising can represent a better opportunity for our client. Is there any
overlap between mobile and video advertising?
Interviewer: Good question. Video is an ad creative format and mobile is a platform. Video ads can run
on either mobile or desktop platforms.

Candidate: So that means that mobile advertising includes video advertising - so in fact, the video format
market will be driving growth within mobile. I’d like to move on to understanding what it would for our
client to enter the video advertising market.
Interviewer: Okay.
Candidate: Do we have data on what resources the client will need to invest in order to participate in
video?
Interviewer: What would you like to know?
Candidate: I’d like the following data:
Fixed costs: up-front engineering cost of building out a video product, marketing costs for spreading
awareness about the client’s product
Variable costs: salaries for sales staff needed to acquire new customers that use video, salaries for new
product or engineering staff needed to maintain the video product, contractual fees paid to ad supply
exchanges to enable ongoing access to video ad inventory online
Interviewer: I have the following data that our analyst put together by reaching out to the various
departments in our client’s company:
Show candidate the following data:
Projected resources needed by department:
Engineering and Product: $50K for year 1, $20K - $30K for every year after
Sales: $300K for year 1, $300 - $400K for every year after
Marketing: $20K for year 1, $30K for every year after
Candidate: Interesting - it looks like we might already have much of the technological infrastructure built
out to enter this new market but our client does not have the right industry relationships to actually sell
this product and will have to hire new sales staff to bring in and foster those relationships.
Interviewer: That’s right.
Candidate: Okay - I’d like to estimate how much revenue our client might be able to bring in by entering
this market so that we can then figure out how profitable this opportunity will be.
Interviewer: Google and AOL will be the leaders in the global video advertising market, with expected
shares of 40 and 25 percent, respectively. Given the nature of online ad inventory supply and the slow
pace of change in media buying habits across large media buying agencies and brands, we can assume
that those shares will remain constant throughout our forecast horizon.
Candidate: That leaves 35 percent of the global video advertising market. Do we have data on our
relative market share with our closest competitors?
Interviewer: Yes - there are two other competitors in our peer group and our RMS is 1 with both. There is
10 percent of the market that we will not be able to compete in because of existing contractual
agreements. It will take our client one year to build the commercial relationships that they need to operate
in this market.
Candidate talks through her thought process while creating a neatly formatted table on a new slide that
includes the information shown below.

2016 2017 2018 2019
Video market size $15 bn $20 bn $25 bn $30 bn
Client market 8% 8% 8% 8%
share
Client revenue $1.2 bn $1.6 bn $2 bn $2.4 bn
Client cost $350 - $460k $350 - $460k $350 - $460k $350 - $460k
Client profit $1.2 bn $1.6 bn $2 bn $2.4 bn
Candidate: The video advertising market is a very lucrative opportunity for our client, with the potential to
quadruple our client’s bottom line to $1.6 billion in year 1 of operation alone. Given the fixed cost and
scalable nature of a software product based business, our client will have to focus efforts on expanding its
sales force and building the right commercial relationships. For next steps, our client should identify the
target verticals and brands and media buying agencies within those verticals that it should try to acquire.
Interviewer: Great, thanks. Let’s talk more about your experiences prior to Sloan.

62. You Drive Me Crazy (Other, TMT, Competitive Response,
Balanced)
Stem: Our client is a large international software technology provider. News has just surfaced that the US
Congress is preparing to pass a bill that will take effect in 6 months and will legalize unmanned, self -
driving cars and trucks, as long as the vehicles do not carry any passengers. Our client is one of two
vendors that, within this window, will be poised to deliver the Simultaneous Localization and Mapping
Technology (SLAM software) which is needed to operate any and all self-driving vehicles. Their only
competitive vendor is a large international computer chip manufacturer. While there are many
technologies that enable self-driving cars to work, we are only focused on the mapping and car
intelligence software, again known as SLAM. SLAM software runs “in the cloud”, meaning that it runs on
large servers connected to the internet and not on the vehicles themselves.
The client has contacted us to propose the best go-to-market strategy for their SLAM technology. How
would you approach this problem?
(Note for questions: It is not important to know how the SLAM solution works; all the candidate needs to
know is that it is a software program that runs on internet servers. All other technologies for self -driving
cars, besides SLAM, are also expected to be ready for sale at the time of the legislation passing. The
marginal cost to retrofit a vehicle to work with SLAM will be assumed to be negligible discounted over the
life of the vehicle.)
Candidate: Okay, I have broken the problem up into three areas: the customers, the competitor, and our
client. First for the customers, there are many types of customers from small carrier and delivery
companies, to large freight trucking companies. Each of those customers would have different needs,
have different number of vehicles, and have different willingness to pay. Next, I would want to understand
what their competitor, the large chip manufacturer is doing? What price are the selling the solution for?
How many customers can they capture? What are their costs? And finally, I would want to know what our
client’s options are for pricing and margins, and how that will affect units sold. To know that I would want
to understand the fixed and variables costs associated with their solution.
Interviewer: Great! To start, let’s think about the customers. Who do you think would be the potential
customers for this solution right from the start?
Candidate: Well since no people will be in these vehicles, I think the major customer segments are all in
logistics: trucking companies, package companies like UPS, food delivery services, store drop-off
services, mining and oil companies, and even some construction services like laying road could probably
be automated.
Interviewer: And what would you want to know about the customers to begin thinking about how to
productize the SLAM technology?
Candidate: Yes, I would like some information on the number of potential customers and how many
vehicles each owns.
Interviewer: Great, so our client has broken the customer groups into three segments, Large interstate
freight, cross state mail and package delivery services, and last mile drop off services (e.g. delivery from
a local warehouse to the end user – think Amazon Fresh!).
Take a look at figure 1 and tell me what you think?

Candidate: Okay, we can see that the vast majority of companies have less than 10 cars in total, with a
decreasing number of companies in each category as we observe increasing fleet sizes. We can also see
that interstate companies have a larger proportion of bigger fleets in comparison with the other two.
Next, I would like to know about what these customers are willing to pay? So, it would be good to
understand these companies cost for drivers today. Something like the number of drivers, their working
hours and their pay.
Interviewer: Great! Take a look at figure 2 and tell me what you think.
Candidate: As expected, the longer route interstate drivers demand higher wages as compared to the
last mile drivers who drive less and work fewer hours on average.
(Note: the candidate should begin calculating the cost per driver per year based on this data, if not,
prompt them to do so)

Okay, to figure out the willingness to pay, I can calculate the total cost per employee by segment:
Hours per Hourly wages Weekly wages Weeks per Annual wages
week ($) ($) year ($)
Last mile 30 10 300 50 15,000
Cross state 40 15 600 50 30,000
Interstate 50 20 1,000 50 50,000
Interviewer: Great, now before you continue, I have some competitor information for you. Our client’s
competitor, the only other company in the market with a SLAM solution is planning to sell their product to
customers for $14.4 million each. Each product can support up to 500 vehicles. Industry experts expect
that the hardware will have a shelf life of 4 years.
Candidate: Got it, since it’s only going to be useful for 4 years, the annual cost is $3.6 million. Let me
quickly figure out how many cars you would need to have to justify that expense.
Last mile $3.6M/$15K = 240
Cross state $3.6M/$30K = 120
Interstate $3.6M/$50K = 72
So right away we can see the majority of the market is priced out of being able to afford this hardware
device. If only the largest players make this purchase, they should only expect to sell a few hundred units
to the largest companies. So, this means that there should be a large market opportunity here. Do we
know how much our client’s device costs to make?
Interviewer: Yes, we do. Our client’s device costs $14 million to make, but can support up to 1,000
vehicles. However, it’s also expected to be have a shelf life of 4 years but only if it’s run at 50% of its total
vehicle capacity, and only a 1-year shelf life at 100% capacity.
Candidate: Okay, so if they simply sell the device at cost they are not going to have much of an
advantage. Can they sell the individual vehicle spots to companies instead of selling the actual device?
(Note: for a hint, you can remind the candidate that our client is a software company and their competitor
is a hardware vendor. So, it makes sense that our client would be able to sell a software license while the
competition is only setup to sell hardware.)
Interviewer: Yes absolutely! Since they are a software company and their competitor is a hardware
vendor, they can sell support for each device as a yearly software license. That way they never sell the
actual server, but instead run it from their datacenter. It would cost them about $1,000 per vehicle to
support per year.
Candidate: Great, so the cost to them would be 14M/1K = $14,000 plus the $1,000 for the setup cost for
a total cost of $15,000. Given that the cost is not justified for the last mile market, I would not focus on
them and instead price it for the cross state and interstate customers. If they priced it just below $30K we
could expect them to have a very nice 50% margin and still be attractive to the entire cross state and
interstate markets.
Interviewer: Great! At that price model, the client would expect to sell 20,000 licenses in the Interstate
and cross-state markets.
Candidate: If they sell 20K licenses at $30K each, that’s over $600M in revenue, with $300M as profit!
Interviewer: Okay, there are a lot of numbers to crunch to find the best price and the client is on his way
here. We would like use to give them our current thoughts, what’s your recommendation.

Candidate: I would recommend that the client sell individual vehicle subscriptions for just under $30K
each, giving them a margin of 50% and a potential market of over 20K licenses, or over $600M in
revenue and 300M in profit.
As a next step, I would like to run some more calculations to find the ideal price and vehicle load per
device mix. Also, I would want to look into ways that they could price discriminate in order to extract more
value from the different groups willingness to pay.

Chapter 18: Duplicate Copies of Tables and Charts from the
Cases
2. Tiger (Bain Mock, Private Equity, M&A, Balanced)
EBITDA: 9% 10% 12% 14% 9%

(in M)

3. Commercial Airline Amenities (Bain R1, Transportation, New
Product, Balanced)
100%
Fraction of passengers willing to purchase
90%
80%
entertainment option
70%
60%
50%
40%
30%
20%
10%
0%
$0 $2 $5 $8
Price of entertainment per flight per passenger

8. Industrial Tools Manufacturer (Bain R1, Industrial Goods,
Profitability, Quant)

11. Potato Inc. (Bain R1, CPG/Retail, Profitability, Qualitative)
100%
90%
80%
70%
60% Logistics
50% Labor
COGS
40%
PPE
30%
20%
10%
0%
2005 2006 2007 2008 2009 2010

13. HDTV Remote Controls (Bain R2, Private Equity, M&A,
Quantitative)

14. Paper Clips Acquisition (Bain R2, CPG/Retail, M&A, Quantitative)
Projected Safe Sales for the Next Five Years
Average Selling Price per Unit

Market Segment Unit Sales CAGR* CAGR
Commercial 0% 6%
Premium Home 6% 5%
Value Home 8% 3%
*CAGR = Compound Annual Growth Rate
Market Share By Segment
Valuesafe
14%
Commercial Safeco Vanguard Safes

41% Shiny Safes 13%
48%
Safes R Us
13%
Safety First
11%
Guardian Norton Safes
31% Vanguard Safes 9%
23%
Safes R Us Others
20% 40%
20%
Others Others
8% 9%
Commercial Premium Home Value Home
Note: Market share data based on annual sales

Commercial Safeco Shiny Safes Valuesafe
Revenue 100% 100% 100%
Materials 30% 21% 29%

Direct Labor 31% 23% 28%
Freight 7% 15% 18%
Total COGS 68% 59% 75%
Gross Margins 32% 41% 25%
SG&A 20% 30% 22%
EBIT 12% 11% 3%

16. CPG Low-Income Market Entry (BCG Mock, CPG/Retail, New
Market, Balanced)
Table 1: Category Sales for Total Market and LI segment ($MM)
Product Total Market Client Category LI Category Client LI

Category Sales Sales Total Sales Category Sales
Shampoo 400 100 100 33
Cold Medicine 200 40 75 7.5
Diapers 800 400 400 100
Baby Food 300 100 100 33
Table 2: Product Pack Sizes and Prices
Product Client Package Avg. Competitor Client Price ($) Avg. Competitor
Size Package Size Price ($)
Shampoo 10 mL 12 mL 20 15
Cold Medicine 8 mL 10 mL 12 10
Diapers 40 diapers 32 diapers 20 16
Baby Food 16 oz 20 oz 20 25

17. National Fast Food Chain (BCG Mock, CPG/Retail, New Market,
Quantitative)

20. Italian Pharma (BCG R1, Healthcare, New Market, Balanced)
Figure 1:
Client's Market Share
L H
# of potential users
Figure 2:
10%
40%
30% A
20% A A
20% 30% 40% 10%

22. National Supermarket Chain (BCG R1, CPG, Operations, Balance)
Large Format Stores Typical Grocery Stores
Sales Composition Groceries: 50%, Health & beauty Groceries: 75%, Health & beauty
products: 30%, Personal products: products: 15%, Personal products:
20% 10%
Monthly Revenue $960K $640K
Monthly Profit $96K $32K
CapEx Required $21M $11M

27. Big Data (BCG R2, TMT, Profitability, Balanced)
Sales Force Revenue Optimal Optimal Sales Implied +/-

Rev/Employee Force
Large 50 $40M $400K 100 +50
Medium 175 $40M $200K 200 +25
Small 375 $20M $80K 250 -125

30. Global Health (BCG R2, Healthcare, New Market, Quantitative)

33. TastySnack (Deloitte R1, CPG/Retail, Profitability, Quantitative)
Table 1
2007 2008 2009
Revenue $60M $50M $45M
COGS $30M $25M $22.5M
SG&A $8M $9M $10M
Table 2
Competitor 1 Competitor 2 Competitor 3
2007 Revenue $9.9M $18M $29M
2009 Revenue $10M $20M $30M
2009 COGS $4.5M $10M $15M
2009 SG&A $1.8M $3.5M $5M
Tasty Snack Revenue Breakdown by Market
Retail 10%
Wholesale
12%
Mass market
45%
Supermarket
33%

Table 3
3 Year CAGR Change in Price
Mass market -15% -2%

Supermarket 1.5% 1%
Wholesale 1% 1.5%
Retail 1% 2%
Table 4
Supermarket Mass market
Price to customer $3.35 $3.33

Price to end consumer $3.72 $3.45

34. AgChem (Deloitte R2, Industrial Goods, Profitability, Quantitative)
Table 1
Revenues Profit
Proprietary $1B $80M
Total $5B $200M
Table 2
Revenue from Vendor ($B) Revenue from Proprietary ($B) Total Revenue ($B)
FY09 4 1 5
FY10 4.34 1.86 6.2
FY11 4.2 2.8 7
Table 3
Market size AgChem share of market
Canada $10B 2%
Brazil $8B 2%
California $5B 3%
Minnesota $5B 1%

35. Blue Chips (Deloitte R2, Industrial Goods, New Product)

37. Publishing Company (Parthenon R1, Other, Growth Strategy,
Balanced)
Revenue by Genre (product mix is the same as the competition):

40. Great Burger (McKinsey Mock, CPG/Retail, M&A, Other)
Stores GB HD
Total 5,000 1,020
North America 3,500 1,000
Europe 1,000 20
Asia 400 0
Other 100 0
Annual growth in stores 10% 15%
Financials GB HD
Total Store Sales $5,500M $700M
Parent company revenues $1,900M $200M
Key expenses (% of sales)
Cost of Sales* 51% 40%
Restaurant operating costs 24% 26%
Restaurant property & equipment costs 4.6% 8.5%
Corporate general & administrative costs 8% 15%
Profit as % of Sales 6.3% 4.9%
Sales/Store $1.1M $0.7M

Industry Average $0.9M $0.8M
*Variable costs, mostly food costs

43. Airline Reward Program (McKinsey R1, Transportation, New
Product, Quantitative)
Table: Frequent Flier Program
Miles Range Status Benefits
0 – 25,000 Member • Miles flown accrue to reward balance
25,000-50,000 Super • Miles flown accrue at 25% bonus

• Free upgrades when available after SA & SDA
50,000-100,000 Super-Awesome (SA) • Miles flown accrue at 50% bonus
• Free upgrades after SDA fliers considered
• Free access to president’s lounge on international
flights
• Free drink coupons in event of delays
>100,000 Super-Duper- • Miles flown accrue at 75% bonus
Awesome (SDA) • Free upgrades when seats available
• Access to president’s lounge for free
• Free drink coupons in event of delays
% of customers by miles flown

45. Baby Food (McKinsey R1, CPG/Retail, New Product, Balanced)
Industry overview
Revenue ($M) 3 years ago 2 yrs ago 1 yr ago

Premium 550 650 800
Midline 600 550 500
Value 480 560 650
Price ($) 3 years ago 2 yrs ago 1 yr ago

Premium $2.25 $3 $4
Midline $1.75 $2.40 $2.50
Value $1.30 $1.30 $1.30
Profit ($M) 3 years ago 2 yrs ago 1 yr ago

Premium 200M 250M 270M
Midline 165M 150M 135M
Value 100M 100M 100M

47. Education in Burma (McKinsey R1, Other, Growth Strategy,
Quantitative)
Increase in attendance rate Impact of voucher program on truants
1 2 3
Voucher amount per student (MMK)

48. French Groceries (McKinsey R1, CPG/Retail, Competitive
Present the candidate with the following information.
Online grocery penetration rate for select countries
Online Grocery Penetration Rate

Population
Sales / Year
(% of groceries bought
(In Millions)
(in Millions of Euro) online)
U.K. 60 6,000 4%
Spain 50 750 1%
Sweden 9 175 1%
France 65 ? ?

49. Golf Club Producer (McKinsey R1, Other, New Product,
Quantitative)

51. School District (McKinsey R1, Other, Operations, Balanced)
Function % Principal said was Average # of requests Average days of
key factor affecting per Principal per month effort for the
performance function to answer
per request
Finance 15 1.5 2.5
Human Resources 60 2.00 5.0
Facilities 50 2.00 4.0
Information Technology 44 1.75 3.5
Counseling 19 1.25 3.0
Food Preparation 26 1.00 3.0

54. Zippy Snowmobiles (McKinsey R1, Transportation, Profitability,
Quantitative)
Number of Zippy Snowmobiles Sold in One Year

56. Treasure Island Communications (McKinsey R2, TMT, Comp
INTERNATIONAL FIXED LINES
Usage Revenues ($) Total User Minutes
2009 (latest) 90M 90,000,000
2008 120M 60,000,000
2007 120M 60,000,000
2006 160M 40,000,000

58. Universal Healthcare Revamp (McKinsey R2, Healthcare, Comp
Response, Balanced)
Age % of population today % of population in 10 years Average HC cost per
person per year
0-21 20 10 $1000
22-65 70 70 $500
65+ 10 20 $4000

59. Wildcats Lacrosse (Roland Berger R1, Retail, Profitability,
Balanced)
Exhibit 1
Production Costs (USD)
25
20
15
15
10
5 10
0
Masks Sticks
Variable costs
Fixed costs (based on allocation of labor hours per part)

Exhibit 2
Fixed Costs allocation based on Capital Spending (USD, k)
1000 600
1000
750
500
300
250
100
0
Total FC Masks Sticks Shared
Exhibit 3

60. A Proposal You Can’t Refuse (Other, Financial Services,
Competitive Response, Balanced)

61. Online Advertising (Other, TMT, New Market, Quantitative)
Online Advertising Market
USD, bns 2012 2013 2014 2015 2016 2017 2018 2019
Display $10 $14 $18 $19 $19 $20 $21 $22

advertising
Search $5 $4 $5 $6 $7 $8 $8 $8
advertising
Mobile $3 $7 $10 $14 $16 $19 $24 $30

advertising
Video $1 $3 $6 $11 $15 $20 $25 $30

advertising

62. You Drive Me Crazy (Other, TMT, Competitive Response,
Balanced)

Chapter 18: Indices
Categorical Index
1: Cases for Beginners 5: Qualitative Cases

#3: Commercial Airline Amenities #9: Nantucket Ice Cream Shop
#5: Dairy Farm #10: Synthetic Rubber Manufacturer
#9: Nantucket Ice Cream #11: Potato Inc.
#12: Dentist Office #14: Paper Clips Acquisition
#13: HDTV Remote Controls #15: VAT Tax Processing
#17: National Fast Food Chain #16: CPG Low-Income Market Entry
#24: RollingSloan Magazine #38: Marlin Toys
#36: Airline Ice Costs #42: Vitamin Universe
#39: Premium Paint #51: School District
#51: School District #55: Dinosaur
2: Challenging Cases 6: Candidate-Led Cases

#18: Antidepressant Pricing #16: CPG Low Income Market Entry
#21: Media Operations #22: National Supermarket Chain
#29: Ferret Rabies Vaccine #27: Big Data
#38: Marlin Toys #36: Airline Ice Costs
#41: Quentin Tarantino #47: Education in Burma
#50: Maldovian Coffins #59: Wildcats Lacrosse
#54: Zippy Snowmobiles #61: Online Advertising
#59: Wildcats Lacrosse
7: Cases with Ambiguity
3: Chart Heavy Cases #6: Domino’s Pizza
#2: Tiger #14: Paper Clips Acquisition
#14: Paper Clips Acquisition #15: VAT Tax Processing
#19: CPG Conglomerate #29: Ferret Rabies Vaccine
#30: Global Health #38: Marlin Toys
#33: TastySnack #55: Dinosaur
#34: AgChem #59: Wildcats Lacrosse
#48: French Groceries
#49: Golf Club Producer 8: Quick Cases
#54: Zippy Snowmobiles #7: Fruit Juice
#59: Wildcats Lacrosse #9: Nantucket Ice Cream Shop
#60: A Proposal You Can’t Refuse #10: Synthetic Rubber Manufacturer
#62: You Drive Me Crazy #11: Potato Inc.
#12: Dentist Office
4: Quant Intensive Cases #22: National Supermarket Chain
#4: Commercial Real Estate #36: Airline Ice Costs
#8: Industrial Tools Manufacturer #39: Premium Paint
#17: National Fast Food Chain #45: Baby Food
#18: Antidepressant Pricing
#21: Media Operations 9: Long Cases
#29: Ferret Rabies Vaccine #6: Domino’s Pizza
#36: Airline Ice Costs #27: Big Data
#39: Premium Paint #29: Ferret Rabies Vaccine
#40: Great Burger #40: Great Burger
#47: Education in Burma #48: French Groceries
#48: French Groceries #59: Wildcats Lacrosse
#49: Golf Club Producer #62: You Drive Me Crazy

Industry Index
CPG/Retail Private Equity

#6: Domino’s Pizza #2: Tiger
#9: Nantucket Ice Cream Shop #5: Dairy Farm
#11: Potato Inc. #7: Fruit Juice
#13: HDTV Remote Controls #10: Synthetic Rubber Manufacturer
#14: Paper Clips Acquisition #13: HDTV Remote Controls
#16: CPG Low Income Market Entry #15: VAT Tax Processing
#17: National Fast Food Chain
#19: CPG Conglomerate Public Sector
#22: National Supermarket Chain #44: Art Museum
#25: Shoe Manufacturer Acquisition #47: Education in Burma
#26: Store Label Tissue Manufacturer #51: School District
#33: TastySnack
#37: Publishing Company Tech / Media / Telecom
#38: Marlin Toys #21: Media Operations
#39: Premium Paint #24: RollingSloan Magazine
#40: Great Burger #27: Big Data
#42: Vitamin Universe #31: Mobile Virtual Network Operator
#45: Baby Food #41: Quentin Tarantino
#48: French Groceries #56: Treasure Island Communications
#49: Golf Club Producer #61: Online Advertising
#50: Maldovian Coffins #62: You Drive Me Crazy
#59: Wildcats Lacrosse
Transportation
Financial Services #3: Commercial Airline Amenities
#4: Commercial Real Estate #23: Rental Cars and Frequent Flier Miles
#43: Airline Reward Program #36: Airline Ice Costs
#52: Simple Insurance #43: Airline Rewards Program
#57: UK Banking #53: Spanish Trains
#60 A Proposal You Can’t Refuse #54: Zippy Snowmobiles
Healthcare / Pharma
#12: Dentist Office
#18: Antidepressant Pricing
#20: Italian Pharma
#29: Ferret Rabies Vaccine
#30: Global Health
#58: Universal Healthcare Revamp
Industrials
#1: Electrical Utility Co.
#8: Industrial Tools Manufacturer
#28: Explosives Company
#34: AgChem
#35: Blue Chips
#46: Carpet Manufacturer
#55: Dinosaur

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Management 2020-21 Recruiting

Consulting Case Book

Chapter 2: The Recruiting and Interview Process ................................................................................. 7

Chapter 3: Firm Profiles ....................................................................................................................... 10

Chapter 4: Industry Overviews ............................................................................................................ 16

Chapter 5: The Behavioral Interview ................................................................................................... 20

Chapter 6: The Case Interview ............................................................................................................ 27

Chapter 7: Deep Dive- Case Frameworks ........................................................................................... 29

Chapter 8: Deep Dive- Brainstorming .................................................................................................. 32

Chapter 9: Deep Dive- Common Case Types ..................................................................................... 33

Chapter 10: Practice Frameworks ....................................................................................................... 36

Chapter 11: Practice Math ................................................................................................................... 42

Chapter 12: Practice Brain Teasers and Market Sizing ...................................................................... 43

Chapter 13: Practice Chart Interpretation ............................................................................................ 45

Chapter 14: Additional Reference Materials ........................................................................................ 54

Chapter 15: How to Use the Mock Cases ........................................................................................... 57

Chapter 16: Case Type Matrix ............................................................................................................. 59

Chapter 17: Cases ............................................................................................................................... 60

BAIN & COMPANY

1. Electrical Utility Co. (Bain Mock, Industrials, Profitability, Quantitative) ..........................................61

2. Tiger (Bain Mock, Private Equity, M&A, Balanced) ......................................................................... 64

5. Dairy Farm (Bain R1, Private Equity, M&A, Balanced) ................................................................... 73

6. Domino’s Pizza (Bain R1, CPG/Retail, Growth Strategy, Balanced) .............................................. 76

7. Fruit Juice (Bain R1, Private Equity, M&A, Balanced) ..................................................................... 79

11. Potato Inc. (Bain R1, CPG/Retail, Profitability, Qualitative) .......................................................... 90

Casebook | 2020-21 Edition 2

BOSTON CONSULTING GROUP

20. Italian Pharma (BCG R1, Healthcare, New Market, Balanced)...................................................116

24. RollingSloan Magazine (BCG R1, TMT, Operations, Balanced).................................................127

27. Big Data (BCG R2, TMT, Profitability, Balanced) ........................................................................134

33. TastySnack (Deloitte R1, CPG/Retail, Profitability, Quantitative) ...............................................150

34. AgChem (Deloitte R2, Industrial Goods, Profitability, Quantitative) ............................................153

Casebook | 2020-21 Edition 3

MCKINSEY & COMPANY

55. Dinosaur (McKinsey R2, Other, M&A, Balanced) ........................................................................ 210

2. Tiger (Bain Mock, Private Equity, M&A, Balanced) ....................................................................... 235

Casebook | 2020-21 Edition 4

20. Italian Pharma (BCG R1, Healthcare, New Market, Balanced)...................................................245

27. Big Data (BCG R2, TMT, Profitability, Balanced) ........................................................................247

33. TastySnack (Deloitte R1, CPG/Retail, Profitability, Quantitative) ...............................................250

34. AgChem (Deloitte R2, Industrial Goods, Profitability, Quantitative) ............................................252

51. School District (McKinsey R1, Other, Operations, Balanced) .....................................................262

61. Online Advertising (Other, TMT, New Market, Quantitative) .......................................................269

Casebook | 2020-21 Edition 5

The casebook is organized into two parts:

Casebook | 2020-21 Edition 6

Casebook | 2020-21 Edition 7

Deep Dive into Round Two

• Written Case Interview

Casebook | 2020-21 Edition 8

Positive Impressions of MIT Sloan Students:

• Sloanies are academically brilliant with outstanding quantitative skills

Common Pitfalls for MIT Sloan Students:

Casebook | 2020-21 Edition 9

Casebook | 2020-21 Edition 10

Firm overview Firm overview

• 3,600 employees • 10,500 employees

Marketing highlights Marketing highlights

Casebook | 2020-21 Edition 11

Firm overview Firm overview