Business Situation Case Interview Framework (Video 7 of 12)

the business situation framework is used for wide variety of client situations or company situations everything from a new market entering a new product starting a new business opening a lemonade stand growth strategy divestiture in some cases strategy turnaround how's the company doing in general okay it's just a good way to understand what issues are driving and impacting the business overall and so let me walk you through what each of the pieces are and actually draw it out like I would in a case here's one you might want to think about whether you seems kind of silly when you have paper depending on the framework you use you actually want to practice whether you want to have it sort of vertical orientation horizontal depending on what space you need because the sort of weird if you run out of space in it to flip pages you'll get confused so you sort of have a preference but know it in advance so in this case I applied for this for me I would probably normally do it sort of landscape style but I can't show it so I'll do it this way so what I usually do is that let me just give you the demo the opening a little bit and then we'll talk about the actual framework so the way the case is usually presented is you work for a major airline company and they are thinking of it's going they are now there's some capacity issues on the way that's gonna say they're entering they're thinking of starting like a a low-cost airline provider okay but problem at that is there's a fixed constitute you are working with a okay so you're working with the National Basketball Association and they recently successfully completed a pilot program showing MBA final games in in China and they had five times more viewers in China for those games than the United States okay NBA commissioner comes to you you're working on that as a client should NDA enter the China market and televise its games in China and if so how should they do it okay that would be fairly typical of a case like that and and it's a guy that's interesting the probably four key areas when you look at to understand whether the MBA should enter that market and if so how you certainly want to look at the customers look at the products that you're providing to that marketplace you want to look at the company itself the MBA and I'm on za slide D here and then you want to look at the competition those are sort of the four key areas in this case because it's entering a new market and obviously these all these issues are important I probably want to start with the customer first and that's what I usually do you'll find in in some of the case prep books I've seen out there they they tend to like for particular situations skip the customer and I just have a preference for always wipe I just feel a lot more comfortable knowing what's going on in the marketplace and the customers have the money if they're changing their minds I want to know about it because that's implication so everything else it was an M&A situation but customers want customer needs have changed as implications for M&A has implications for Cassity so I personally just like starting with a customer because all the businesses are driven off the customer okay not everyone does that lots of ways to be right you can come back to it later but I just have a preference for starting with a customer that's what I usually do okay so that's how I usually lay it out and then depending on which branch I'm going through I'll use these sort of standard opening questions and again the purpose of these questions is not to solve the case it's very important the purpose of these questions is to get you sort of baseline information to make this case interview feel more like an HBS case see if data okay blank sheet of paper hard to solve the case how to be protagonist when you have no idea what's going on when you have data it's a lot easier so the purpose of this is really kind of get you through about 1/3 to 1/2 the way through the case ok and then the rest is really sort of based on what you discover so judgment business acumen sort of logical conclusions all sort of matter some creativity tends to matter at sort of middle of the case opt for and it tends to be sort of mechanical ok so I'm gonna go through the mechanical stuff and show you the kind of questions I typically ask okay so our first question I'll list all of them and I'll get saying what each one means so the series of questions I typically ask are who is the customer what is each customers doesn't want what did you seventh willing to pay in terms of price what distribution channel does each have and sort of what's the concentration of customers in that marketplace so sort of Porter's five forces but like a fifth of it right so with customers I always ask who is the customer and what I'm looking for I'm looking for segments okay so I want to know customers overall that's sort of very misleading I want to know we know what are the segment's the important questions there are to figure out what the segments are okay and usually I should be prepared for this when when consultants do and market researchers do segmentations of customers they tend to sort of like give them nicknames okay so it's like actually this what happened with the minivan right the minivan has this association for being with soccer moms right that's because the guy who person who did the original marker we should study says it tends to be like women with like one and a half kids with who are aged five attentively attracted minivans let's call them soccer moms okay so that names stuck so they will have nicknames and they're used to sort of amusing because otherwise it's kind of boring to sort of work with them all then and it's also easier to visualize who that customer is okay and so the segment's you want to know the segment's how big they are what share the total demand comes from each segments and then the growth rate of each and all of this is like on that first bullet if you would work should be bullet but I guess just missing a bullet but that first line item on this framework sheet okay so who are the customers what are the segment's you want to understand them at a qualitative level so who are these people right and then you want to understand it mathematically so for example I'll make stuff up for for China it could be it turns out there are three major segments of there were three major segments of viewers in China for the NBA games about 80 percent were men 20 percent were women okay let's do school right great and that's sexual and within the men do we have any more information on what kind maybe age demographic and how old were they younger older were they interested in sports was a novelty thing what they play basketball and the interviewer might say what's a good question amongst the man 80% were under the age of 20 oh that's interesting okay so it's a youth market that's watching and amongst that well are these kids are they playing are they playing basketball or was it sort of a novelty thing turns out eighty percent of the eighty percent actually play basketball okay turns out by the way Michael Jordan is extraordinary popular in China I'm like my brother visit is sort of rural China in the middle and they call them Michael Jordan for like a week and they have like no TV dirt poor but they all know who Mike is it means pretty crazy and so you can start getting a flavor right for who this customer is it's kids a lot of ways like like American kids I'm again making all this up and that gives you some sense of okay I understand the context what's going on here all right next question is what does each customer segment want ok oftentimes the needs are very different and you may want to tackle the markets in a very different way you might want to target one segment over another you might want to ignore one you might want to sort of attack both but in a different way so using the tunnel the whole China example it could be that you know half of them half that half the viewers were like young kids and half of them were like sort of adults well that's interesting why they don't swatching why the kids watching what are they getting out of it kids are watching because they get to learn new moves right adults are watching cuz you know they're really into sports in general so they're like the sports widows of China sorta like Americans like okay that's interesting now sort of an idea of what's driving them okay now probably not appropriate for this case but if it was more of a product purchase rather than the media viewership you know what is the price each segment is willing to willing to pay so in this case if this was the China NBA saying I might want to know who the advertisers okay are these American companies or the you sort of you know local companies the big companies and small companies why they advertising what's driving their need to advertise so it might be that P&G China you know has a really tough time reaching sort of the younger age market because the way there's not as much media there I thought you and and so that's the and companies like that are driving the bulk of advertising sales in the pilot program okay that's useful to know those whole time we're doing is we're sort of just gathering information you don't want to you want to sort of synthesize sort like do a little mini summary as you go you don't want to just like gather information for like forty minutes okay you want to sort of refine what you're thinking think out loud yeah just like I was interesting oh so these are like like like sports kids who just want to be like Mike but they want to be like Mike in Chinese okay I got that that's one group and then they're sort of like the sports waiter okay know kind of what that is I'll make the analogy and then I might say what seems like so far my hypothesis is that the market break out in China seems to be very similar so far to a mini-computer ship as I understand it okay that might be or hypothesis and so if I'm favoring and that the underlying tone is so far favoring that this seems like a good fit so far but we have looked at other factors but my hypothesis so far is that looks like might be a good thing to worth considering well he's testing further for the other questions I usually ask our distribution channel preferences free segments so again in China the they do a lot of like Avon lady stuff you know so person the person selling which is like not so popular here and more but it's really populated because more of leadership culture so in every market there's like always big biases in terms of how customers want to be served in certain technology markets so like really expensive software packages fortune finders CIOs they tend to like to deal with one person so they want to deal with one person from some one person from HP one person from I don't know Apple whatever or IBM and that may be different than how these companies are organized right so you may have an issue where you're losing market share because the customer wants to deal with one person but your company is organized by product line so the CIO of Pepsi has to deal with five sales people and their complaint is one person from your company knows my entire system okay and I find an acceptable and that's why I'm going with IBM something like that so by understanding the distribution channel preferences or actually that's why bad example for this particular point but maybe it's like I like working with my system integrator partners so I want to buy my hardware on and buy my software through my Accenture consulting partner because that guy knows everything and I trust him I don't want to deal with IBM directly I want I want you to go through that guy okay that's my preferred way of doing business for some younger segments I prefer to buy things on the internet I don't want to go to I don't want to go see talk someone in person right for certain kinds of things I want to buy over like SMS right or texting or whatever and I can see sort of on the internet a lot of younger kids want to buy through Facebook like this one all the time and Facebook that kind of thing so there's preferences as to how they prefer to buy how they want to access vendors and it's useful to know that in advance particularly by segments so virtually everything here you want to sort of break it out by segments whenever you can especially customers and then the final one is the customer concentration of power and we're looking for here is what I call the Walmart effect is there one big customer right that P&G cannot afford with nor do they have so much power that driving out all the profitability earlier in the value chain so this is sort of from Porter's five forces that's really useful not because if that happens in an industry it has implications for you might want to do okay you react differently if you knew that were to be the case if you miss that fact that there's a Walmart customer out there your recommendations could be off okay because they're not they don't work as well in that kind of situation so those are sort of like the five questions I typically ask and usually if I honey get through the five I got a good feel for what's going on on the demand side and again you can add your own in there or I suggest you do but sort of have your stock opening four or five questions in each category that gets you sort of information you need and I found these five tend to work well for me yes question yes so the question is you always want to just or while you're asking for more information and you want to sort of continue dress apply each step actually in a business situation context you get a little more leeway okay so in a clear plan for ability case you want to be high pot it's very mathematical right so it's clear case hypothesis data test refine and keep going in this there's there's a lot of contextual information you need so you can actually start asking you get a little more leeway you can go a couple questions without saying why you want it but it's good once you sort of reach a sort of an interim conclusion to actually state that because then you're sort of sympathizing in little steps yes yeah actually that's a good point should in that prior example I sort of compare the Chinese market the American market I did make some assumptions I'm gonna make it I should state it but it's actually better to ask it seems to mean it seems like it's similar to the American market do we know that's true or not okay so that would be a better way of phrasing so you see it's good because subtle word changes right make a difference in how in terms of housing interpreted so make no assumptions at all and if you do state you're thinking about making one and see if they think it's a good idea that sometimes I'll say I don't think that's a good idea when they tell you it's not a good idea it's not a good idea for a variety of reasons either it's wrong or they're not prepare to talk about it or they have no data what's sort of logically inconsistent cuz they made up the case and they want you to go somewhere else take the lead and go somewhere else yes so thing is it almost always just focus all your effort now your recommendation around that my first instinct is when that's happening that the problem tends to be sort of the problem what do you do with Walmart and versus everyone else so that's my initial reaction of how I was at segmenting my my analysis in the way my approach because they got there's one big elephant that the rules are really different for them so the questions could be okay if I'm a small company and I got a Walmart type customer sort of down my demand chain if you would what do I do they have 50% of the buying comes from that one customer the remainder are the other 50% and that's fragmented over by other customers or a thousand or five thousand customers what should we do well so we could look at each one separately let's first analyze the whole Walmart thing are we likely to win that game lots a byte used to a segment sort of customers competitors for Walmart competitors for everybody else products sold to Walmart product sold everybody else right what are our efforts as a company towards Walmart towards everybody else it's still a business situation framework right the same key issues but when I know there's a Walmart type customer I started splitting everything along that segment because it seems relevant that's just my first impression and so in that situation you might have a we should devote all resources to Walmart okay or we already are devoting all resources to one more and we're getting crushed okay and it could be that there's a capacity issue which would be like a creative framework as you realize that why we're being crushed okay and turns out we have we don't have a low-cost position well we don't have low-cost position and there's a structural issue with the market we're in the mansion there's one big customer then you seems like you can't win that game okay so let's look at our other options around the normal more customers where's our position there who else is in that market in terms of competitors and again same framework with sort of you just sort of split it and you may find that with Walmart it's a losing proposition everyone else other than Walmart it seems like you can win and there's some segments in there and that's how you tie sort of have that conversation okay next up is is the product let me back up for one second there are a lot of a lot of general frameworks out there that's that are sort of similar to this like three C's forces whatever C's and what you'll find is they all tend to cover the same thing but they tend to organize a little differently so I broken out product just out of habit you could very easily lump product in with company for example some companies some frameworks have cost as a separate category it's like the four C's is like paying customer company cost and competition I tap on the role cost underneath company because I think the classes within a company and it's an interesting cost issue I'll have treat that separately inside of competition so it's all fairly flexible sort of more ways a lot of ways to be right you sort of it's good to pick the way you like and sort of stick to it so you sort of get process repetition and get used to it okay so for product my sort of four or five key questions I typically ask is at purely a qualitative level I just want to understand the product like what does it do why do people buy it why is it useful and and sort of put on my customer hat and make sure I understand that because you will get some insights particularly combined with other information as to well maybe if the product is is very good at being fast you know it's faster than the other the competitive offerings are there other segments that value fast if you don't understand it qualitatively it's hard to do that so that's the first thing I ask is just really understand the product at a customer level a second thing I want to know is this kind of widget is it like a commodity good like rice or is it a differentiable good like a service so you want to know how much flexibility do I have in changing the product itself so if I'm selling coffee beans hard to change okay if I'm selling coffee at a Starbucks lot you can change okay so it's useful to know what kind of product you're dealing with usually you get like an actual product sometimes you get like a widget right but either way it's worth asking to what degree is there variation differentiation amongst the parts that are in the marketplace next thing I usually ask are I want to understand what the complementary goods so selling if I'm selling ketchup I want to know what's happening to french fries right and vice versa because I tend to go together and if my compliment is is that markets getting beat up that has implications for me so way if all of a sudden the government decided that french fries will like kill you in a month then I'm sure ketchup sales will fall okay so you want to know that because if you don't know that sometimes you're solving this you saw with the ketchup industry problem what the problems in potatoes okay and so you're going to miss the whole point and you're a synthesis in your conclusion is going to be off substitutes as well again this from Porter's five forces are there other things people can use other than our product so this is really sort of indirect competitors right so maybe the substitute I don't know for ketchup is honey mustard I don't know the substitute for traditional MBA could be a online MBA okay anybody that didn't exist before so it really is useful to them to get some sense of how vulnerable you the company is to substitute products again it changes your conclusion sometimes I've known about the product lifestyle is this product on its last legs that we have to sort of retire it anyway or is it sort of in its infancy sometimes it sort of Allens last legs then you you're more apt to sort of kill the product because you know you got to do it anyway soon and so I'm making investment something to replace it might make more sense but it sort of wants early stages maybe it's better to try to get to fix the marketing in that business for example get it to work then to kill it because it takes a little bit long it's like a long cycle for develop new products like cars to get a new car out the door it's like four or five years or something like that so if you're in the first year and you want say well there's a flaw on the product well you can't fix it you can't fix the platform to like from now five years from now well then let's not look at there because we need some something better to make some improvements more immediately and last thing and this is sort of depends on the nature of the product sometimes I ask packaging questions what's included what's not included sometimes you can differentiate the product by based on what's bundled in so it's like razors with razor blades actually what computers go it was like cell phones with service planes so you drop the cell phone price to close to free but you bundle in a mandatory service plan and that really drove a lot of adoption okay same product same fitna that you didn't change manufacturing right you just change the nature of the packaging and that dramatically changed market penetration adoption and ultimately sales okay if you didn't sort of think about that you that industry would have missed a very big opportunity okay so you're seeing this is really sort of like a checklist you know I sort of think of it like you're trying to fly an airplane standard questions you ask every single time just to sort of cover your bases and usually what happens is when you ask these questions it flushes out useful information that will lead you in the right direction okay so again this is really the open that's my standard opening night sort of wick with middle nights I have my five questions for customer my five for products and so on and so forth and it's just to sort of get you in the right direction get enough information to sort of use your Annika breezing skills to kind of continue so that's product next up is sort of company or clients and key questions there are what is the company good at ok this is sort of like a squishy qualitative thing you want to know what are the company's capabilities and expertise and and this is where some some interviewees and actually some consultants to this is where they kind of get screwed up because you know in like a in a theoretical business case the answers are very clean okay in a real world situation it's not all about the hard data in fact a lot of its the soft data ok so one of the things you want know what the company is what are they good at doing sort of as individuals at and as an enterprise and the reason it's important is sometimes it will you'll have an opportunity where a client where market opportunity exists there's a competitive vacuum but the company is not good at what that market wants a customer segment so then theoretically business plan wise you know maybe it's a good opportunity to pursue but not let's say for that particular company so you have to know what they're good at and I'll give you an example that a little bit because we've asked customers what the tribution channels they prefer you want to know for your client or for the company but distribution channels do you got and what's the mix between them so if there's a mismatch this helps you flush out the mismatch so while the customers want channel a but all your resources and channel being that's a mismatch okay so that's an insight and then you can start brainstorming about how you'd fix that I understand why it's that way historically and then we make some changes along the way okay a cost structure so this is sort of embedding a little bit of our leader framework in here the general questions are sort of you know are you the low-cost producer II the high cost producer sometimes if you're dealing with a case that's just kind of conceptual that's all you need to know you know like the precise cost structure like the number but that that we're the leading low-cost producer in the market okay and and that's that's good enough for this family if they gave you information around well at this wall meaning we can produce at this cost at a higher volume you can produce at that cost that's like a cost curve that's more of a supply curve and that's usually a hint you got a switch to potentially switch the supply demands okay so conceptual you keep it here merely specific you switch to supplying man other things with costs a - just to do certain more notes rather than questions but the understanding the proportion of fixed cost versus available cost is very important because it indicates a barrier entry issue okay some example I I sort of I gave kind of time is Amazon early on when they first started the online bookstore it was a low it was a low fixed cost business totally virtual high margins they sort of had a websites and then they had a drop shipping relationship with a number one wholesaler in books Ingram books or whatever they are and and besos in 98 did an interesting thing where he deliberately decides when even of the cup was bleeding money decided to build out 300 million dollars worth of warehouses okay pissed off Wall Street to no end because you can like make the margins like worse for like four years it's like damn straight I am here's why number one I don't want to be tied to my one supplier okay so there's like an industry concentration issue right so it's what it's a reverse of the Walmart effect it's the Intel effect all right I gotta buy all my chips of Intel so they're getting all the profits and they're sucking it out of all like you know Dell and HP and compact wake up actually I need a favor what did I just say I lost my train of varied entry okay so when when the fixed costs are are very high that indicates a barrier to entry so you have to deal with what's existing competitors are the barrier to entry is low then you're gonna get new entrance that's what happened with Amazon so they're like a thousand and one bookstores that within the year okay so he said well screw you I went I didn't IPO I raised a billion dollars boom $300 and chips on the table you want to come play with me put in three million bucks okay and it kind of was pretty effective right and then so Amazon in particular has been very good at sort of adding various to entry so they went from physical warehousing infrastructure was sort of one barrier to entry so they raised the fixed cost that business be much higher much more difficult to compete and then did a lot of things on the rebel costs like with book reviews scanning scanning scanning now scan a lot of the books so you can kind of keyword search them they play up a couple hundred thousand books sort of scan so if you want to compete with Amazon you gotta go out and scan a hundred thousand books another big fixed cost so they're just adding it up so you want to go play ball Amazon you need like a half a billion to a billion big payment but no one does it so they got the business to myself okay so that's why that's important another thing one do is you want to compare the cost structure of the company to again to the marketplace so this class is over a little bit and you just want to understand are you in line higher or lower and sometimes there's an insight there and again all this was just trying to flush out an interesting insight that sort of puts together a paints a picture what's going on and how you can what what options you have for trying to fix the situation if there is sort of the case of sort of investment oriented you would want to include investment cost intangibles are useful sort like a brand effect and those are sort of a strong emotional loyalty customers have to the product that's would the hard to con that sort of analytically right so analytically it ought to work but customers just really love I don't know aunt jemima like maple syrup and then they just refuse use anything else because it would be like heresy in the South I have no idea then shal situation and then organizational structure I talked about the example I give here is you know if you're organizing your company by product line but customers want to be served sort of a sort of a cross product lines so one point of contact are you out of sync with what the market wants so if you if you ask the so in the customer portion of framework you're asking how do they want to be served what the district and channels are what do they want if that's an issue they'll any what if eclis mention it so when you come back to the company you want to ask what the organizational structures are you in sync with the marketplace if you're out of sync okay that's an insight what we do about it that's where the conversations sort of begins okay last one is around competition I usually ask around I start with market shares so who are the competitors and what's the market share mix how concentrated is it is it a monopoly oligopoly was it highly competitive because the competitor names for vastly different in those situations okay well funny story at McKinsey we were actually banned from talking about pricing in the context of price fixing we had really had antitrust attorneys because we were work with fortune 500 so you know and oftentimes we work with all the key companies in an industry and if profit sucks in one business you know it would've been very easy to say lunch nudge wink wink over lunch you tell your CEO Tom I see we should open price of 10 percent that's like highly illegal so I just sort of came to mind so you can't talk about that and actually I actually got reprimanded for talking about it because we really applied about that so but knowing the concentration helps you understand the competitive dynamics that's very different Porter's five will get I've sort of incorporated elements of Porter's five forces in here if you're not familiar with its worth sort of reading competitive strategy of the book or even just googling it and getting a summary of it very useful I mean I've sort of just very insightful framework I sort of very impressed with it I have sort of used it a lot and let's see competitive behaviors what the competitors doing what so basically think of all the company questions you asked and you want to know for the competitors same deal best practices do they really excel at something that we stink that useful to know again barriers to entry for the industry overall we talked about and in supply a concentration so the Intel effect you got one supplier that kind of controls it are they suck in I always think as the porters light forces is you got the suppliers the company competitors and then the customers and it's like it's one big vacuuming sort of like suck profits out you suck it out of the man chain is suck it out of supply chain and it's useful to know that if you have that that pressure on your business it's useful to know them and then last one just to be complete or complete her or more complete rather industry regulatory environment in like lifecycle of the industry so we sort of been in a trough it is it a cyclical business so like in mortgages I work in finance for a number of years right now we're sort of in a credit crunch thing and it's highly predictable goes back 50 years every ten years this happens banks do you do stupid things ask for bailout just crazy and then you know people borrow more than they should market tanks because all bleeding they got a write-off loans and then there's no credit and and they come comes back next seven years later okay so that's sort of the the checklist I use you have questions yes on you here's please start you try to figure out where the issue is likely to be given what information you have okay if you don't know so it would no I wouldn't get I wouldn't do what I just did I would not do what I just did in the real case okay yeah you don't do that I'm just explaining it does it would be very boring what you are what you want to do is I typically service customer first unless unless dive information that's just it's like a competitive issue and in my sort of competition okay so you sort of figured what information you have initially before you even touch the framework and use that as your starting point and I tend to go on each of these I might spend five ten minutes but usually what happens is I almost never get through the whole thing before I discover something really interesting that's very indicative what's going on what's driving the problem and at that point this is where the creativity comes in okay see if your mechanical get good at this you'll do what I just did just bang bang I gotta ask these 40 questions and and and the interview will drop useful information that if you're paying attention is insightful but if you're mechanically going through it and you miss it it's clearly just cramming through a framework okay and that's like not good because it doesn't show your palm something you're sort of regurgitating stuff so we look what you're looking for is you're looking for an opportunity to branch off from this okay so you're looking for the critical insight in each piece and that tells you what's going on tells you starts telling the story what's going on and then you might sort of go ahead and sort of skip certain things alright so if the nature of the business is such that I sort of clear there's not like a Walmart effect an Intel effect I wouldn't use Porter's five forces all right once I understand the nature of the color of the customers are who the competitors I would sort of skip some those things so you start tailoring these things based on the information you get and that's where I don't know call-out minute fifteen a minute twenty you start deviating from the framework a little bit or you start breaking things out doing things within the framework so it's still organized but it's not part of like the standard questions so this is where the whole you know talent comes in it's less mechanical it's more about look at the situation in analyzing it laid out you told them like I want to talk yeah customer product company yep competition and you got an insight on customer which is where you start it do you dig deep then or do you go ahead and still get a broad picture before you go it depends on that sort of actually more of a judgement question like if if I sort of got the aha and I'll keep moving if that's intriguing unexpected counterintuitive I don't understand why it's happening I'll keep digging okay sometimes there's underlying there's like underlying trends as to why things happen so it's important I'm saying not just what's happening but why okay so this sort of gets the frameworks get you to what right and as you get drilled down lower and lower you start getting the why and once you know why then it's a lot easier know what to do about it and then that sort of becomes more like the HBS cases you've got all the information you know what's driving the whole situation now what are you guys protagonists do and so that's sort of how that process tends to attends to evolve you

Channel: caseinterview

Views: 462,689

Rating: 4.8103304 out of 5

Keywords: case interview, consulting interview, victor cheng, bcg, bain, mckinsey, boston consulting group, lek, at kearney, roland berger

Id: lhQvl0wo6Fs

Length: 35min 9sec (2109 seconds)

Published: Sat Apr 23 2011