Case Interview Preparation
PRACTICE SESSION 9 (FORMER 7)
The ADC Consulting Club
April 11th, 2017
2
Curriculum so far
Strategy Case Operations Case
Entering a new market Increasing sales
Industry Analysis Reducing costs
Mergers and Acquisitions Improving the bottom line
Developing a new product
Turnarounds
Pricing Strategies
Growth Strategies
Starting a new business
Competitive response
3
Curriculum so far
Strategy Case Operations Case
Entering a new market Increasing sales
Industry Analysis Reducing costs
Mergers and Acquisitions Improving the bottom line
Developing a new product
Turnarounds
Pricing Strategies
Growth Strategies
Starting a new business
Competitive response
Today’s Agenda
PEI: Why consulting?
Time value of money
Rule of 72
Porter’s Five Forces
Case scenario: Industry Analysis
Situation - What was the situation YOU / YOUR previous employer faced?
Task - What tasks involved YOU in the situation?
Action - What actions did YOU take?
Results - What were the results of YOUR actions?
Personal Experience Interview
W H Y C O N S U LT I N G ?
10 mins to think of response, 2 mins to verbalize
Time Value of Money
Money available today is worth more than the same amount in the future
Why?
You can invest the money today and earn a return on the investment such
as dividend payments or interest
Example: A bank offers an interest rate of 10%. You decide to save $1000.
How much will you get from the bank in 2 years
0 1 2
$100 $110 $121
0 x 1.1 0 x 1.1 0
Time Value of Money
Future Value1 = Present Value x (1 + rate)
PV = $1000; Rate = $10%
FV1 = 1000 * (1 + 0.1) = 1000 * 1.1 = $1100
FV2 = 1100 * (1 + 0.1) = 1100 * 1.1 = $1210
$1210 is the future value of $1000 two years from today!!
0 1 2
$100 $110 $121
0 x 1.1 0 x 1.1 0
Example
A company makes 100 glass cups at a manufacturing unit cost of $10
today. They will go on sale 2 years from now at a cost of $12.1 each.
What is the profit? ($12.1 x 100) – ($10 x 100) = $210
Now consider the time value of money @ interest rate of 10%…
The present value of $1210 = $1000 Profit = $0
General Formula: FV n = PV (1+r)n
Rule of 72
Simplified way to estimate the number of years required to double the
money at a given annual rate of return
Example: How many years will it take for $1 to grow to a future value of
$2 (i.e. double) given a rate of 9%
Years to double = 72/8 = 9 years
Porter’s Five Forces
Framework for assessing the attractiveness of a market
Potential
Entrants
Degre
e of
Supplier Power Rivalr
Buyer Power
y
Threat of
substitutes
The stronger the five forces are, the less attractive the industry
Potential Entrants
If barriers are high, the threat of entry is low.
The lower the barrier, the easier it is for new competitors to enter the market
increasing the risk of price wars and lower margins
Barriers of entry include
Economies of scale – new entrants face higher cost per unit
Capital requirements
Government policy
Access to distribution channels
Product differentiation
Proprietary technology
https://www.preplounge.com/en/bootcamp.php/case-cracking-toolbox/structure-your-thoughts/porters-
Threat of substitute products
Substitute products are alternative to products that are different but fulfill
the same customer needs
The more the substitute products, the easier it is for customers to switch
leading to higher competition
Visible comparable substitutes with similar prices are a high threat
https://www.preplounge.com/en/bootcamp.php/case-cracking-toolbox/structure-your-thoughts/porters-
Supplier & Buyer Power
Remember demand and supply laws..
The lower the number of suppliers, the greater the leverage the suppliers
have to drive cost up.
High supplier negotiating power reduces the potential margin of the
industry
Buyers can play competitors against each other at the expense of industry
profitability
Few customers per supplier, single buyer for large volume of products and
elastic demand gives the buyer high negotiating power
https://www.preplounge.com/en/bootcamp.php/case-cracking-toolbox/structure-your-thoughts/porters-
Degree of Rivalry
Influenced by the remaining four forces of Porter amongst others
High rivalry manifests as competition either for price or quality
Signs
Very similar products
High number of players in the market
Shrinking growth/ saturated market
High barriers to exit
https://www.preplounge.com/en/bootcamp.php/case-cracking-toolbox/structure-your-thoughts/porters-
Porter’s Five Forces
Framework for assessing the attractiveness of a market
Potential
Entrants
Degre
e of
Supplier Power Rivalr
Buyer Power
y
Threat of
substitutes
The stronger the five forces are, the less attractive the industry
Industry Analysis for Iphone App
Framework for assessing the attractiveness of a market
Low Barriers to
entry – little
capital
Mixed: Supplier Rivalr
High: Buyer Power;
Power; outsource y of
iPhone
can easily purchase
labor for
App competitor app
development
High Threat of
substitutes
( Android)
The stronger the five forces are, the less attractive the industry
Industry analysis
Industry
Analysis
Usually, an industry analysis is required for business case
Framework
Market size, growth rate, life cycle stage,
profitability
Company market share, growth rate, current
capabilities
Customer consumer taste, buying power,
Industry demography
Analysis brand, substitutes and complementary
Product products, evolution
Current competition, new entrants,
Competition barriers to entry
suppliers, distribution channels, marketing
Cost strategy
Cases
Columbia Casebook 2012
Pg 10 - 14: Case: TechCo Geographic Expansion
Pg 24 – 33: Case: Smartphone Acquisition
Case: Smartphone Acquisition
It‟s late 2006, and our client is a PE firm looking to acquire a company in
the emerging smartphone industry. There are currently only two firms in
the market: SmartCo and PhoneCo. Our client has decided to definitely
purchase one of the firms, but they‟ve hired us to help them figure out
which one. How would you approach this problem?
Interviewer: Read the question
Listen to the question
Take notes
Summarize the question
Make sure it is not verbatim
It is spoken clearly
It captures all the essential information
Ask for clarification
Clarification if asked should be meaningful
Case: Smartphone Acquisition
It‟s late 2006, and our client is a PE (private equity) firm looking to
acquire a company in the emerging smartphone industry. There are
currently only two firms in the market: SmartCo and PhoneCo. Our client
has decided to definitely purchase one of the firms, but they‟ve hired us
to help them figure out which one. How would you approach this
problem?
Take some time out to think
D R AW Y O U R F R A M E W O R K
One possible framework – Explain conversationally
Objective Diversification, market entry,
synergy…?
Client
firm Operation Product, customer, distribution,
marketing
Finances What we
Indebted, shares/stocks, profitable
know
Market Twopotential
Performance and firms reaction
Emerging
M&A Industry Competito
industry
Performance and potential reaction
rs Smartphon
Barriers Govt regulations, laws,
e debt,
technology
Finances Cost, future growth, current
profitability
Target Operation Customers, marketing, distribution
firm product
Synergies Should address objective @ minimum
Framework from Columbia Casebook 2012
Exhibit 1
Question 1: Exhibit 2
Here‟s some data from a survey of all smartphone customers. What does
this mean for our client? Is there any other information you‟d want to
know?
Look for
outliers!
Exhibit 3
Ideally, the candidate
should ask for this
data in the previous
question.) Here‟s that
same survey broken
out into two
segments. What does
this mean for our
client?
Concluding the Case
Recap the objective
Make the recommendation directly
Use data to explain briefly why the recommendation was made
Say how the recommendation will be carried out
› Give a timeline, if possible
State any secondary implication
Give any additional insight or future anticipated work
Recommendation
Bonus
Your thought process is what counts here
