DEMYSTIFYING THE CASE

INTERVIEW
LEVERETT CASE WORKSHOP

Sunday, January 31, 1999

Paul Nguyen
Business Tutor

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 AGENDA

Introduction to Case Interviews

The Business Case

The Guess the Number Case

The Brainteaser Case and Other Bizarre Questions

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THE (REALLY) BASICS: WHAT’S A CASE INTERVIEW ?

It’s a 30-45 minute interview in which you will be asked to think through a
business problem with your interviewer

Consultants use the case interview to test

– Whether you have the mental horsepower to handle the work
– Whether they’d want you on their case team

The typical case interview has

– 5-10 minutes of resume questions and chit-chat
– 10-25 minutes of a case
– 5-10 minutes for you to ask questions and for the interviewer to
wrap up

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THERE ARE THREE MAIN TYPES OF CASE QUESTIONS
One of Them is Bizarre and Rarely Used

• The Standard Business Case

– This is the most common form of case and is supposed to simulate the kind
of thinking you’d have to do as a consultant. The interviewer po s e s a
problem (often taken from a case they’ve worked on) such as “our client’s
convenience stores have suddenly begun to lose money.” You’re supposed
to ask questions to find out more about the case, and then finall y m a k e a
recommendation as to what to do.
• The Guess the Number Case
– The interviewer asks you to estimate a value using common- sense
assumptions. The typical question is “how many pay phones are there in
Manhattan?” It’s a distant second in popularity to the standard case, but still
used by interviewers who won’t bother to write a real case.
• The Brainteaser Case
– Bizarre and rarely seen, but can be deadly if used. Interviewer a s k s s o m e
sort of brainteaser and sits back silently as you scramble for an a n s w e r .

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SET ASIDE GRAND NOTIONS OF ACING THE CASE
Such Instances are Few and Far Between

Very few people (maybe 5%) actually get to the right answer. Many people never
get to the stage where they actually make the recommendation, and many more
choose the wrong one once they get there.

Nevertheless, all of these people get hired.

G etting onto the next round is not about acing the case (although that will likely get
you there), but about being sure that you sufficiently impress the interviewer with
your logic and communication during the whole case portion of the interview.

In other words, the process of looking for the answer is much more important than
actually finding it.

Ride the partial credit gravy train

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 K E Y S T O S U C C E S S ( I)
Work With Your Interviewer

Consulting is all about working in teams to solve problems. The case interview is no
different.

Always try to think out loud with your interviewer so that they k n o w w h e r e y o u ’ r e
going.

Very often, they will point you in the right direction and keep y o u f r o m m e s s i n g u p
(i.e. be alert to cues and let the interviewer guide you to the promised land).

In general, your interviewer wants you to succeed.

The interviewer is your friend

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 K E Y S T O S U C C E S S ( II)
Think in Frameworks

Frameworks are tools that consultants use to approach a big problem methodically.

Y o u s h o u l d t r y t o u s e t h e m w h e r e y o u c a n s o t h a t y o u m a k e s u r e y ou’ve hit on all

the right areas (we’ll talk about them later).

F r a m e w o r k s d o n ’ t a l w a y s h a v e t o b e c a n n e d a p p r o a c h e s l i k e t h e 3 C s, 4Ps, and
Porter’s 5 Forces. They can be anything that you make up on the spot that will
structure your thinking about the problem.

Also, let your interviewer know what your framework is so that s/he can follow along
with you and buy into your reasoning.

Consultants Don’t Understand Things That Aren’t in Frameworks

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 K E Y S T O S U C C E S S ( III)
Communicate!

Most people can think very logically and piece together the puzzles of the case quite
well. The key to succeeding in case interviews is often not thinking smarter
thoughts, but making sure that you communicate whatever thoughts y o u h a v e
more clearly and in a logical manner.

You’re only as smart as what you communicate to your interviewer

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 AGENDA
Introduction to Case Interviews

The Business Case

The Guess the Number Case

The Brainteaser Case and Other Bizarre Questions

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 F R A M E W O R K : PROFITS = REVENUES - COST
Great for “Profits” Questions

This is a great and simple framework for attacking the “Why are are profits falling?”
question. First you analyze the revenue drivers, then look at the cost drivers.

In general, start by asking whether the industry is losing money, or whether it’s just
your client.

O n t h e r e v e n u e s i d e , w e k n o w R e v e n u e = P r i c e x Q u a n t i t y , s o a s k whether prices
have fallen (absolute and relative to industry), and then whether quantity has
fallen. If either has happened, ask why. Have tastes changed? Is there a new
competitor with a substitute product? If a store that sells a lot of products is your
client, you might want to segment the products and ask whether certain products
are losing money.

On the cost side, we might want to figure out what the major cost c o m p o n e n t s o f t h e
company are and see if one of them has gone up recently.

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 FRAMEWORK: 3Cs: COMPANY, CUSTOMERS, COMPETITORS
Great for “New Business Opportunity” Questions

This is a useful framework to make sure that you aren’t leaving out major issues or
questions when analyzing a new business opportunity such as launc h i n g a n e w
product, entering a market, or acquiring something.

Company: Why does the company want to do this? (usually for profits): Do we have
t h e m a n a g e m e n t k n o w - how and physical capabilities to enter this market?; Do
we have some sort of competitive advantage in entering this market (e.g.
synergies within our existing business)?

Customers: Who would the customers be? Is there a demand for this?

C o m p e t i t o r s : A r e t h e r e c o m p e t i t o r s ? H o w p o w e r f u l a r e t h e y ? W h a t would they do if
we entered the market? Can we be protected from them?

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 S A M P L E B U S I N E S S C A S E S ( I)

B o o z Allen & Hamilton:

1) A publisher of Law Code books (reference books that contain state and
federal laws, and come out every year or so in order to remain up-to- date)
have been receiving requests from customers that they publish the books on
C D - ROM. The demand seems pretty strong for such a product. Should they
do it?
2) A helicopter operating company wants to set up a helicopter shuttle that will
take people from Kennedy airport in Queens, NY, directly to midto w n
Manhattan, and vice versa. Should they do it?

Bain & Company:

3) Your university food service (think L o k e r C o m m o n s ) i s l o s i n g m o n e y . W h a t ’ s

the problem?
4) A cable TV station devoted to country music wants to put out a ma g a z i n e .
What should they think about?
5) A huge sporting goods chain is thinking about setting up a large store in a
mid- sized town. Should they do it?

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 S A M P L E B U S I N E S S C A S E S ( II)
McKinsey & Company:

6) Your school is losing money. W h y ?

7) A client is running a family- owned travel business that offers complete travel
packages to its customers. It has a very good relationship with an airline
company from which it buys tickets in volume and receives a nice discount.
The owner of the business is a grandfather who will eventually pa s s o n t h e
business to his children, but has heard about an interesting busi n e s s
opportunity. It has always been his dream to operate a chartered plane, and
h e n o w h a s a c h a n c e t o b u y o n e ( t h r o u g h t h e t r a v e l b u s i n e s s ) , o p erate it, and
integrate it into the travel business. Should he do it?

Treacy & Company:

8) Nike is our client and has several production plants in Asia. Nike’s buyers
(sporting goods stores) are saying that because of the recent Asian financial
crisis, Nike’s costs of production must be falling, and the buyers want Nike to
pass some of those savings onto them in the form of lower prices. W h a t
would you tell the Nike C E O t o d o ?

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 P O S S I B L E A P P R O A C H E S T O S A M P L E C A S E S ( I)

1) T h i s i s a n e w b u s i n e s s o p p o r t u n i t y , s o ‘ t h e t h r e e C s ’ i s a g o o d approach here. If you start

w i t h C u s t o m e r s , y o u m i g h t a s k a b o u t t h e d e m a n d f o r t h i s p r o d u c t . It turns out that over
50% of your customers would want to buy the books on CD. As for Competitors, no one
e l s e h a s d o n e t h i s y e t , s o t h e r e a r e n o c o m p e t i t o r s t o w o r r y a b o ut. Finally, if you look at
the Company, you would learn that they are solely a publishing company with no
experience in making CDs. However, they could outsource the production to a company
that specializes in CD production.

T h e 3 C s h a v e l e d t o t o a s k t h e r i g h t q u e s t i o n s a n d g a t h e r t h e r i ght data. Now it’s time to

i n s e r t s o m e b u s i n e s s t h i n k i n g . O n e t h i n g t o w o r r y a b o u t i s p r o d u ct cannibalism, i.e., if
they make the CD, will it create new customers, or merely cause their existing customers
to switch over to the new product? It turns out that since the CD would be cheaper than
the books, people who wouldn’t ordinarily buy the book would buy the CD, so there
would be new customers. However, 50% of the current book customers would switch to
the CD.

It also turns out that they would make the same profit per CD as they made per book this
past year. The numbers would therefore seem to suggest a “YES” to the CDs. The
problem, however, is that they’ve already sunk all of these fixed costs into their book
o p e r a t i o n s , a n d n e e d t o s e l l a h i g h v o l u m e o f b o o k s t o r e c o v e r t heir costs. If they lose
50% of their book customers, their book operations will collapse. T h e a n s w e r i s N O !

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 P O S S I B L E A P P R O A C H E S T O S A M P L E C A S E S ( II)

2) T h i s i s a n e w b u s i n e s s o p p o r t u n i t y , s o g o w i t h t h e 3 C s . O n t h e c ompetitor side, it turns

out that no one else is doing it. On the company side, these guys have been operating
helicopters for a long time, so they certainly know what they’re doing. The real challenge
here is to figure out who the target customers are. Is it business travelers like Gordon
G e k k o ? S t a t e d i g n i t a r i e s ? I f i t i s b u s i n e s s t r a v e l e r s , y o u m i g h t r u n into the problem that
while there’s high demand during the week, nobody wants to use it over the weekend.
W h a t t o d o w i t h t h e e x c e s s c a p a c i t y ? M a y b e g i v e h e l i c o p t e r t o u r s of the city?

3) This is a classic profit question, so go with Profit = Revenue – Cost. This question
d o e s n ’ t m a k e c l e a r w h e t h e r t h e y ’ v e a l w a y s l o s t m o n e y , o r w h e t h e r it just recently
became unprofitable, so first try to clarify this. If they only r e c e n t l y s t a r t e d l o s i n g m o n e y ,
then find out what happened during the time when profits started d e c l i n i n g . D i d a n e w
competitor pop up? If they’ve always been losing money, go into the standard revenue
a n d c o s t a n a l y s i s . F o r r e v e n u e s , i s t h e r e e n o u g h d e m a n d f o r t h e i r products (it turns out
the answer is no, since the dining hall is a good substitute and provides meals in a bag).
Are there certain products that are losing money, or is it a general loss? (General). Are
their prices competitive? (yes, pretty much the same as any other such establishment).
O n t h e c o s t s i d e , a r e t h e y p r o d u c i n g e f f i c i e n t l y ? ( N o . W a s t e f u l n ess in production).

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 P O S S I B L E A P P R O A C H E S T O S A M P L E C A S E S ( III)

4) A new business opportunity warrants the 3Cs approach. A standard 3Cs analysis would
t e l l y o u t h a t t h e r e a r e s o m e c o m p e t i t o r s ; t h a t t h e r e i s s o m e d e m and, but that our client
probably wouldn’t capture much of the market; and that while they know a lot about
c o u n t r y m u s i c , t h e y d o n ’ t k n o w m u c h a b o u t m a g a z i n e s . A l l i n a l l , this would probably
generate a net loss. The answer might seem to be “No.” However, answering the question
correctly actually requires us to know what the motive of the company is in undertaking
t h i s v e n t u r e . O r d i n a r i l y , w e a s s u m e t h a t t h e g o a l i s f o r t h e v e n ture to be profitable, and we
recommend against doing it if it doesn’t look profitable. If we h a d a s k e d u p f r o n t w h a t t h e
m o t i v e s w e r e , w e w o u l d h a v e l e a r n e d t h a t t h e y w e r e n ’ t s u r e a b o u t the profit potential of
the venture, but that their motive was actually simply to use the m a g a z i n e a s a w a y t o
build the brand of their Cable TV network, much like ESPN has done with its ESPN
m a g a z i n e a n d E S P N o n l i n e . K n o w i n g t h i s , t h e f o c u s o f t h e a n a l y s i s should fit to whether
building the brand in such a way would translate into more profit s f o r t h e c o m p a n y a s a
whole (has it worked for other companies such as ESPN?, etc.

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 POSSIBLE APPROACHES TO SAMPLE CASES (IV)

5) A classic case of a huge discounter moving into a small town— use 3Cs to discover that
this Company has a great cost structure because it buys in huge volumes and gets great
discounts from its suppliers. As for the Customers, there is also a large local demand for
sporting goods. The key to this problem is the Competitors. The competitors are several
m o m & p o p -t y p e s t o r e s t h a t h a v e a v e r y l o y a l l o c a l f o l l o w i n g , a n d t h a t c a n provide better,
m o r e p e r s o n a l i z e d s e r v i c e . O n e r e c o m m e n d a t i o n m i g h t b e t o p a y e x tra attention to
c u s t o m e r s e r v i c e a n d b u i l d s o m e s o r t o f r e p u t a t i o n a s a s e r v i c e -f i r s t c o m p a n y . T h i s w o u l d
be a good place to come up with other creative ways to beat down the mom & pops (the
c o r p o r a t e w o r l d i s a n a s t y p l a c e ! ) . I f y o u d i g d e e p e r , t h o u g h , i t turns out that the customer
b a s e i s q u i t e p r i c e - sensitive, and that with your significantly lower prices, you will wind up
driving mom & pop out of town.

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POSSIBLE APPROACHES TO SAMPLE CASES (V)
6) This was a mildly strange question asked of a friend of mine from Brown. He went
through a standard Profits = Revenues – Costs analysis. The general tactic would be to
t r y t o i d e n t i f y t h e m a j o r s o u r c e s o f r e v e n u e f o r t h e s c h o o l a n d what its major costs are,
a n d s e e i f a n y o f t h e m e x p e r i e n c e d a c h a n g e a r o u n d t h e t i m e p r o f its started falling. As it
turns out, the M c K i n s e y i n t e r v i e w e r w a s c o n v i n c e d t h a t t h e p r o b l e m w a s t h a t t h e
athletics department wasn’t selling enough tickets. Pretty random. Remember, the actual
a n s w e r m a y o f t e n b e o b s c u r e , s o y o u w o n ’ t a l w a y s b e e x p e c t e d t o find it. What you will
be expected to do is to go about finding the answer in a reasonable way.

7) 3Cs. Would the customers use the charted plane? (Yes, they wouldn’t know the
difference). On the Company side, would their relationship with the airline be hurt? (Yes,
it will be hurt in the short term, but will probably not have ser i o u s r e p e r c u s s i o n s b y t h e
time the grandfather hands over the company to his children). Does the company have
any know-how in operating a chartered plane? (No, they don’t really have any advantage
t h e r e ) . W h a t a b o u t i t s c o m p e t i t o r s ? ( H e a d t o h e a d a g a i n s t m a j o r airlines, it will be much
l e s s c o s t e f f i c i e n t . H o w e v e r , s i n c e t h e y d o n ’ t h a v e t o p a y f o r t he airline ticket markup,
they won’t be losing money). After all this analysis, it seems like it would help the
company, but that it wouldn’t hurt either. It turns out that what t h e M c K i n s e y partner
wanted was for the interviewee to take a stand and say, “Since it doesn’t make a
d i f f e r e n c e e i t h e r w a y , i f t h e g u y w a n t s t o d o i t , t h e n h e s h o u l d go ahead and do it.” A
friend of mine was the only person who had the guts to make a recommendation rather
t h a n s a y i n g , “ T h e d a t a a r e i n c o n c l u s i v e , ” a n d w o n r a v e r e v i e w s f or it.

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 POSSIBLE APPROACHES TO SAMPLE CASES (VI)

8) This fits less neatly into a framework, although you can try a Profits = Revenues – Costs
to figure out whether Nike’s Profits really are increasing as the i r b u y e r s c l a i m . O n t h e
R e v e n u e s s i d e , N i k e h a s e x p e r i e n c e d a l m o s t n o c h a n g e d u e t o t h e Asian crisis, since so
many of its markets are unaffected by the crisis. So now the challenge is to see if the
A s i a n c r i s i s r e a l l y h a s l o w e r e d c o s t s . E s s e n t i a l l y , y o u n e e d t o figure out what the major
components of Nike’s cost structure are, and see which of those would be affected by the
Asian crisis. As it turns out, the labor and capital expenses of operating the Asian plants
are only a tiny part of the cost of taking a shoe to market. There are still the huge
marketing costs, which are unaffected, and the cost of the physical components of the
sneaker, which are imported from regions outside of Asia. Therefore, Nike’s costs have
not really dropped all that much in the midst of the crisis, and t h e y h a v e l i t t l e s a v i n g s t o
pass onto their buyers.

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 AGENDA
Introduction to Case Interviews

The Business Case

The Guess the Number Case

The Brainteaser Case and Other Bizarre Questions

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 THREE BASIC FACTS TO KNOW FOR GUESS THE NUMBER
For All Other Figures, Just State Your Assumption

About 250 Million People in the US

About 100 Million Households
About 6 Billion People in the World

Your interviewer will believe whatever else you assume

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 SAMPLE GUESS THE NUMBER CASES

AT Kearney:
1) Estimate the number of gas stations in the US. How would you really do it?

McKinsey & Company:

2) How much should our client pay for the Prudential Building?

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 POSSIBLE APPROACHES TO NUMBER CASES

1) The old gas station question. So many possibilities. The key is to pick an
approach and go with it. Perhaps (100 million households) x (one car per
household) x (one fill- up per week per car) / (1000 cars per gas station per
week) = 100 thousand gas stations. Note that your assumptions may b e w a y
off, but your interviewer doesn’t know any more than you do.
T h e a n s w e r t o h o w y o u r e a l l y w o u l d d o i t s t u m p e d m e . T h e a n s w e r is, you
would go on the internet and find the gas stations trade association of
A m e r i c a ( e v e r y s o r t o f b u s i n e s s s e e m s t o h a v e o n e ) a n d t h e y ’ l l t ell you how
many there are.

2) First estimate the amount of rent that could be taken in each month. This
requires an estimate of the total square footage, what percent of that could
be rented out, and what the average rent per square foot would be (might be
different for retail vs. office space, and low floors vs. high floors with
corporate views). Then subtract out whatever the costs of operating the
building would be. Multiply by 12 to get the yearly amount of cash that this
building would generate. Now it can be valued like a consol, which would be
(Annual cash) / (Discount rate).

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 AGENDA
Introduction to Case Interviews

The Business Case

The Guess the Number Case

The Brainteaser Case and Other Bizarre Questions

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SAMPLE BRAINTEASER AND OTHER BIZARRE QUESTIONS

B o o z Allen & Hamilton:

– Below is the graph of the rate at which water is flowing into a cylinder. Draw a
graph of the volume of water in the cylinder.

A Boston- Based Consulting Group:

– Explain how you decided to go to Harvard.

AT Kearney:
– Explain your entire thesis to me.
– I’m your manager on the case team, and we’re at the client site. I l e a v e y o u i n
a room at 9AM with some work to do, and you discover it will take 16 hours to
do, but we need it done by 5PM. I pop my head into the room. “Paul, how’s it
going?” Answer.
– OK. Now give a different answer.

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 ANSWER TO BOOZ’S “THINKING QUESTION”
Also Includes Paul’s E- mail Address

Essentially, the interviewer drew the derivative of the volume function, and wanted
me to draw the volume of the function itself. This yields:

Finally, if you have any questions, contact me by e- mail at

p a u l _ n g u y e n @ p o s t . harvard. e d u . Good luck on your interviews!

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