CASE INTERVIEW WITH FORMER MCKINSEY INTERVIEWER: FLASHFASH

hi I'm Olga Hollis I'm the founder of case coach I'm a former manager and interviewer with McKinsey in this video I will be interviewed by Rob and also McKinsey alumnus we'll be going through a case similar to the ones you'll be asked to solve in an interview at McKinsey Bain BCG or another top consulting firm Rob will interrupt from time to time to share his feedback let's get started if well that's all of my questions with regard to your background yeah there'll be a bit of time at the end if you have questions for me as well but I thought it would be good to go into a case at this stage and just okay try and solve a business problem as it were sounds good so for this one let me give you an overview of the clients and a problem before we get started with this one our client is a company called flash fashion okay they're a u.s. multinational apparel company with revenue of around twenty five billion dollars a twenty twenty-five billion dollar it's twenty five billion dollars and they're in some of the best known mid market brands in North America in the West generally they sell 70% of their products through their own network of corporate owned stores okay their own stores basically and then the remaining 30% they sell through multi brand retailers okay so it's a bit like a gap or a cerrar isn't exactly that kind of style but in addition to what I described they operate a relatively distinctive business model where instead of committing large percentages of their volume upfront ahead of a season for production they commit a small amounts and then use customer feedback and they're relatively flexible production processes to then ramp up products and replenish stores weekly in response to what they see happening in the market so they're super fast they're super fast actually it only takes 15 days for them to go from design to production oh wow and so they can observe what's happening with customer feedback and then respond to them and as part of this clients growth strategy flash flash are considering the acquisition of a company called a la mode yeah now lamode are the leading independent retailer of luxury brands online and they account for around three percent of all online apparel sales in North America sorry three percent of online apparel sales in North America that's right and you in Independence yes so they're an independent retailer of luxury fashion so they are not it's not their own brand they're basically selling other people's mostly although they have recently launched their own brand which comprises around five percent of their revenue movie but their model is in addition to being a luxury player they operate a curation model so they create products from the best brands they can find and then present a large collection of around 30,000 items all kind of in that luxury high-end segment okay so basically fleshies mormon market but la mode is really top end that's right so it's like you know thousand dollar handbag and that's the kind of thing that's exactly I mean floor I guess clothes yes yes that men and women yeah both menswear and womenswear and so flash fresh have just asked us whether they should acquire them out okay sounds good and so that's really the question should we go should we acquired or not this business that's right and do you know why they would like to acquire it is it you know what's the idea behind it yeah so they have a growth strategy right now they're obviously a reasonably large player yeah and they're looking to grow to a larger scale yeah they're looking basically for long-term sustainable profits and returns to shareholders yeah and they see acquisitions as one potential leader for them okay so they they feel like I mean their motivational business probably not going as fast as la more than that could be a way to to to accelerate their growth okay that's exactly it makes sense and do they want us to look at alternatives or should we just focus on this business we should just focus on this business forever okay do you mind if I take a few seconds to put my sauce on paper absolutely check it out there were a couple of good things about this opening to the case first you'll notice how the candidates done a good job to really clearly specify the problem he's not just determined that the candidate is considering an acquisition he's asked why they're considering it he's asked whether this is a binary decision or whether we are looking at other acquisitions as part of this so he's taken a lot of care to really clearly specify and understand what the problem is second notice how right off the bat he's driving the thinking he's suggesting particular hypotheses he's making assumptions he's asking questions he's probing so right from start he's leading the thinking he's showing good case leadership and could drive to try and solve this problem okay all right okay so basically you want us to figure out where's our flash five should require a la mode yes they're two areas that would like to look at first one is I would like to understand la mode and as a business and its standalone value so you know is it an attractive company in general without any link to us right once we figure that out a look at synergies because we combine those two business can we can we do more than just adding them up and finally our capabilities are we able to to integrate those those two businesses we have the skills the money etc okay if I if I go to the value of la mode as a business I think the one question is what's the market growth of this kind of online apparel luxury market I would assume that is probably a lot of goes in Asia where or emerging countries where you have a bigger middle class yes that can afford those type of clothes so you know I'd like to check that there's and and once we've done that I also want to understand whether that business model is a winning business model you know is the company equipped to maintain or grow its its share over time you know is it going to face competition from the online stores of the luxury retailers you know Kay is chanel and all these others are they gonna distribute directly online rather than going through people like la mode I think that's an important question okay if we figure out you know that actually there's something here and and the value of the business is below you know what it could get to given the growth of the market and their positioning then that's interesting but we'd want to look after that to the synergies as I said and that's my what do you have in mind for synergies well we want stand whether if we combine the business can we can we accelerate our growth for instance you know maybe we can sell our products to their websites and and the brand and and maybe that will help us grow our core business I have to say I'm a little skeptical about this because they have a luxury positioning we haven't been market positioning so I'm not sure there's synergies there there could be some synergies in terms of cost because I'm sure we will have some and we have some overlapping footprint so I would think for instance our online operations you know logistics delivery customer service maybe maybe there is a way to combine those and and decrease our cost so you know I would look in terms of the synergies both in in customer view and capabilities here it's gonna you know I mention a few ideas before you know around our skills and our know-how obviously it looks like I'll know how flash flash is really about being super quick at manufacturing new styles yes you know not sure to what extent that would be helpful to lamode you know I'm not I'm not sure basically we're leveraging our core capabilities right okay make sense I think there's all sound like reasonable areas to explore okay here the candidates performing very well on each of the dimensions that we recommend we've already talked about how he's identified the problem very well but if we look at the other elements he's divided this problem neatly into three categories these are mutually exclusive you can solve for one of them without overlapping with the others obviously this is a very effective way to go about solving a problem next he's encompassed all of the core factors that could be important here he's talked about everything from synergies to standalone value to capabilities he's already specified that for this problem we're not looking at opportunity cost of other acquisition options so really he's captured pretty much everything you'd need to solve a problem of this type then he's adapted his structure to the situation in some respects this is a relatively standard framework for solving M&A questions but he's adapted it well by suggesting for example specific costs energy options such as logistics which would be important for an e-commerce player of this type then lastly he's begun to suggest specific insights and ideas we in each of his buckets he's got sub-elements sub drivers and even specific thoughts and suggestions which can initially signpost his thinking even at this stage and as with the introduction to the case he's again showing his strong case leadership in beginning to suggest thoughts and ideas and suggestions of his own at this stage let's make me start with one of the areas you touched upon in passing I think you you mentioned Asia as a potential area to look at and this is something that we've been interested to explore as well now the client believes that there's an opportunity for the mode to realize a third of its global sales in Asia within five years they believe this partly because I actually so assertive leopard mode sells would come from Asia that's the clients belief or at least their initial hypothesis in five years okay right now that sounds like an aggressive number but the reason they believe that is partly because of the growth rate of online apparel in Asia where the overall apparel market is expected to double in this time frame and at the same time the share of purchases made online is expected to triple so really it's a relatively fast growth rate so that means that online at parallel market in Asia should be multiplied by six over five years exactly and so the question for us is simply what share of the Asia online apparel market the mode would need to reach in order to capture this opportunity okay that makes sense okay so I think if I want to find out or share of the Asia online apparel market in five years that means I need to have our sales in Asia in five years and the size of the market in Asia in five years which we already know that that number yeah is six times the size of the market in Asia now so I think we we need a few a few more element here first you do we have an idea of the sales that we would achieve right so we know that at the moment the motors it around two billion okay we believe in this time period they can be expected to triple okay okay so basically two billion now multiply by three and then divided by 3 to get the Asia share so that's two billion for a mood and do you have an idea of the size of the market in Asia now we do it's eight billion it's eight billion okay six billion today sorry eight billion multiplied by six that will be our market size in five years so I put two billion over this so that's gonna be so billion billion and that's gonna be one out of twenty four which is gonna be four point two percent so that means that we would need to have a four point two percent share of the Asia online market in five years right sounds aggressive man well yeah because I think you said we had three percent of the online apparel market in the u.s. right now and you know it looks like this is a calm market so it means not only we're gonna have to you know go into Asia which is not alcohol market and and take shares that are way above what we currently have in our know market so again I would be curious to see how we can achieve this because that sounds extremely ambitious okay no I agree it sounds somewhat aspirational on the face of it this is on the whole a very strong quantitative section of the interview now of course the candidates computed the numbers quickly and proficiently but there are many other things he's done quite well here notice how he opened the section by describing what he's going to calculate and how he's going to calculate it by laying out the approach first he's able to show structure he's also able to allow the interviewer to engage and intervene if perhaps the structure he's setting up is not the right one next notice how he sanity checks his numbers as he's going through he's testing them to see if they make sense whether intuitively they feel right so you can minimize the risk of any errors coming through last notice how he describes not just what the answer is but what it means he thinks this answer is aggressive and he connects that to particular information he's gleaned from earlier on in the interview stylistically notice how it's also very open and conversational it's tempting in these sections of the interviews to go away calculate numbers and then come back but all else being equal you want to be doing your calculations visibly and out loud this allows your interviewer to see what you're doing and if nothing else it allows them to jump in and correct you if perhaps you might be making a mistake which otherwise you would only announce at the end so it's quite a useful style and it's effective in this instance okay let's move on so you touched upon a couple of other elements of your structure and I think one aspect that's interesting to look at is synergies yes sure we do have a reasonable amount of data on this and we've compiled this exhibit with information on both our client and the target I'd like you just have a look at this and let me know your thoughts on whether overall there seemed to be potential synergies which seemed appealing between the companies based on the information that you have okay so here we have some information about Flash fashion lamode we have the cells by geography and an idea of Daniel gross we have the share of the online cells then we have some information about the transaction cost average purchase so that's the average purchase of a client I assume that's right and the transaction cost just so you know is a combination of fulfillment costs customer service and payment processing primarily okay and then cost of goods sold okay so we understand the cost and then our own brand okay so how much within our sales come from our own brand which you know is Android % at flash flash of course sounds good okay so if we look at synergies so the first thing is there is definitely la mode is really concentrated in North America and Europe and and pretty much absent from Asia so again like that well enough recently you know even more aggressive when you look at this way if we have zero presence at the moment and they're great from scratch them yeah so I think you would need probably to acquire an existing business or do something else but so in any case there is an opportunity for flash flash to help lamode grow outside of North America and Europe definitely you know la mode is going faster than flash flash 31 percent it gets 4% that doesn't surprise me it's an online business it's on a you know probably a growing market would be interesting to know whether it grows faster than the market but you know I don't think that means that we have particular synergies here online presence so obviously so la mode is does 2 billion online and we do 22% of our business online which actually is yeah so it's like a above 5 billion so it's interesting because flash flash which is meant to view a more traditional business actually does you know two to three times more sales online than la mode I was expecting maybe we could gain expertise on the online marketing etc from la mode but we're probably you know as knowledgeable as them about this no that's right in absolute terms we're doing far greater sales online and we have decent expertise in that area yeah so not sure you know there is something there what's interesting in the transaction cost is we can see like the average purchase is very different 413 dollars for lamb modes 78% dollars for flash Paschal we're in very different markets so that's kind of confirming that our clients are probably not the same I don't think the flash flash products being distributed by that mode make sense you know it's just not the same level in the market yeah cost of goods sold and transaction cost what's really fascinating is Lambos transaction cost is $48 again 6 for flash flash so it looks like because we're a luxury online retailer we'll probably give a five-star service to our clients in terms of delivery it must be super fast they assume you know like free returns like a moans you know like customer service that he's like tip-top or you can call someone and get some help you know I asked you know it makes sense yeah so everything from the packaging itself to the delivery experience to the support experience is really in the premium tier so it's interesting is because our cost of goods sold is 46% as flash flash flash and our purchase average is $78 it means that in terms of you know margin we probably we make around $40 at flash flash when you on a sale yeah which is less than the transaction cost on a fly mode so that means that even if the clients wanted to buy flash flash products on the landlord website if we deliver the same quality of service we would be we would be basically losing money that's right so we can't really serve the flash flash clients profitably with the la mode model so again something against that idea that we can all of a sudden distribute our products yes today well are there any potential opportunities in terms of cost synergies between these two players there might be there might be I'm thinking obviously in the own brand you know we know we do that meaning you know that's what we do right I assume la mode is is outsourcing a lot of the production of their products and maybe we can help them decrease their their cost the cost of goods sold on the on the one brand products but overall you know when I look at this my conclusion is in terms of revenue synergies it's a pretty weak case there might be something in terms of international developments but the idea of combining the two businesses to distribute the products of one in the other doesn't seem to make a lot of sense to me so at this stage I would say on the basis of this analysis it's kind of confirming that it's probably not a good acquisition target for us the candidate starts this section by kind of describing what he sees in the exhibits this is useful as a means to check his understanding but it also buys time by opening the discussion around what's on the exhibit discussing this with the interviewer and so on he's able to buy himself time to start thinking about what the insights are in this exhibit which he then goes on to comment on when it comes to how he describes the insights he's able to glean from the exhibit you'll notice how the candidate is not only generating standalone insights from particular data points but he's combining them he's looking for opportunities to spot connections between data points or comparisons for example when he comments on the absolute sales online that he's seen with flash cash dinner notice again how at every stage the candidate is commenting on not just what the numbers are but what they mean in the context of his emerging hypothesis and the question he's been asked and you can see throughout that generally the candidate is seeing that this exhibit supports his emerging view that this acquisition is not going to be very compatible from a synergies perspective no I think it's a reasonable assessment they have very different structures they operate in quite a different way okay let's switch gears again to look at just a broader area okay so beyond potential synergies with flash cash which we've looked at what ideas do you have to accelerate the organic growth of lamode accelerate the organic okay that's interesting because it's already going pretty fast yeah they're doing pretty well already so if we step back a little bit so lamode is a so it's an online retailer of fashion right luxury products that's right mostly in the developed world so the question is can we do more I think we talked about the first one is obviously the geography so accelerate that geographical footprint is clear luxury you know there is a question could we use that model maybe launch a different brand when launch is slightly less at market version of la mode and and start to go much more mass-market so it drifts slightly in that direction but still be towards the premium end well I think what you would do is you probably launch a different to be honest you use some of the same infrastructure not all because obviously the service level is not gonna be the same but you could presumably you've gained some expertise in this yes and you can imagine is slightly less expensive copycat okay makes sense so that's one obvious at the month we're doing fashion I'm wondering to what extent we could penetrate other categories you know you could you see ow big brands like Armani are fashion brands obviously perfume is one thing so they do cosmetics but now they start doing furniture as well and so you could imagine selling furnitures and all sorts of fashion accessories so you know there are some luxury categories beyond fashion where I sing because of our positioning we could be legitimate yes and then online demand we are pure online player could we start having some flagship stores in airports for instance where we're gonna meet some of our the same clients who are you know buy expensive fashion and like the curtain model because they don't have a lot of time so they like to be able to go somewhere and find some really good things right so I think physical retail is Thanos already so these are all kind of new business ideas there might be an other categories around how can we do what we already do but better I can we sell more to our existing clients I can we accelerate our client acquisition how might you go about doing that well I would think like in terms of selling more to existing clients you know there's a lot of things happening with data science we're now able to pinpoint exactly what's the next product that one person is going to be likely to want to buy because of their past purchase and online behavior you know are we doing this in terms of acquiring new client you know I'd love to see our our online marketing is working you know are we is our advertising really our spend optimized and again I think some new technologies can help with that so you know here it's hard to tell is it as an opportunity we like we need to look at their current practices but we'd want to check their state of the autumn's definitely something to explore I think so this of course was a creative thinking section and the candidate handles it quite well he suggests ideas in a number of categories from new product categories to opening physical retail stores to simply finding ways to extract more growth opportunity from our current customer base the way he sets up these categories is quite effective it can be hard to generate ideas in a vacuum but if you're able to come up with categories of ideas going from those to generate specifics is relatively easy and this provides a platform for him to generate quite creative insights such as perhaps moving from purely fashion products through to perhaps launching perfume or other products using our luxury brand to help with that so ever all its strong performance on this section of the interview good ok so look I think we've covered a fair amount of ground yep there's more that we would want to look at if we were doing this as a longer project but based on what you've seen so far what's your overall message to the client at this stage so I mean you've asked us whether it makes sense for you to acquire lamode I did say at this stage we don't think so at least not because of the existing growth plan and synergies we think that the growth plan in Asia is probably overly optimistic you need to capture a 4.2% to share in five years of a market where you have zero percent change in scent share now in terms of synergies we really haven't found menu of new synergies beyond like accelerating your geographical penetration of developed developing countries which is not a lot so on that front it doesn't seem to make sense no lamode is an interesting business it's going pretty fast we have identified ways to develop that franchise beyond this immediate scope so you could still realize it's a good acquisition just for pure financial standpoint and we would happily look into this the concluding synthesis here is short and effective the candidate uses a standard framework we've discussed elsewhere in the materials he starts after reminding us of the question by giving the overall answer itself that this doesn't seem to make sense as an acquisition target next he lists out his key supporting points and reasons for why this is the case then last he concludes with some next steps and the idea that this might be good as a standalone acquisition is a fair comment - indication so again this is a model interview but this performance reflects an outstanding overall case performance and the rare example of a case that's really strong across the board now if we look first at the way he develops rapport and presence really this is a good example the candidate does a good job of showing poise showing confidence and pushing the thinking in such a way that he comes across almost as a consultant working on a problem rather than an interviewee so he performs very well when it comes to presence communication the same applies the candidate is very concise very clear very organized in his thinking he uses visuals when effective and this works very well to communicate the points he wants to convey lastly when it comes to case leadership I'd say this is really a distinctive performance you'll notice how the candidate right from the beginning of the interview was beginning to generate ideas and hypotheses beginning to test his thinking at every stage even though this was mostly an interviewer LED interview he's developing ideas and pushing the thinking forward so it's a very good approach from these characteristics when it comes to the more technical aspects of the interview this is clearly a very strong performance - if we go through the list of assessment criteria on structuring the candidate performs extremely well when it comes to going through the ideas criteria we've laid out in the materials in everything from identifying the problem well to suggesting specific insights about how he could solve it the candidates doing a very good job here on numeracy I'd say it's really a distinctive performance not only as the candidate organized and structured in his approach but he simply deals with the numbers very quickly and very accurately both in the specific maths question we set earlier in the case and in the exhibit exercise where he's combining as in using them in effective ways of judgment and insight while the perhaps aren't a ton of opportunities here to go through conceptual problem solving and show your kind of qualitative analysis the candidate does show fantastic judgment in connecting information he finds in one part of the case to other parts of the case which makes this a very much above the bomb performance on judgment and insight on creative thinking this is a distinctive performance the candidate displays a wide range of ideas in five categories on the specific question we asked on creative thinking and many of them are non obvious cease displaying a good ability to come up with ideas and generate just new ideas and insights lastly I'd say it's really distinctive to when it comes to synthesis the candidate synthesizes well throughout the case but in the conclusion itself he's both concise and structured and he's able to communicate the insight in a way that seems very compelling and captures the essence of the problem he's managed to solve thank you for watching till the end if you found this video helpful don't forget to give it a thumbs up now if you'd like to get more free video and prep material including the PDF solution of flash flash just follow the link below to sign up to our mailing list see you soon on case course calm

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Keywords: case study, casecoach, mckinsey style case, case interview, case interview example, mckinsey case interview, management consulting, best case interview example, consultancy, mckinsey, bain, bcg, mbb, consulting study example, case practice example, consulting interview, associate, vocaprep, preplounge, victor cheng, consulting interview example, management consulting prep, mckinsey interviews, bain interviews, bcg interviews, case interview questions and answers, Case, Mckinsey

Id: fuys5fWCxJM

Length: 30min 10sec (1810 seconds)

Published: Mon Mar 11 2019