McKinsey Case Interview Example - Solved by ex-McKinsey Consultant

in this video you're gonna see me an X bein consultant interviewing Bruno and X McKinsey consultant using a McKinsey style case that would be in a real life interview and mbb level case probably a hard one that you could find either in a first round or any last round interview we made this video in a way that you can work through the video so on each question I asked Bruno you can pause the video if you want and try to answer like you would and then you can compare the answers let's get straight to the video your friend wants to acquire a Badman ecommerce business but he's unsure whether this is an attractive market or not okay and he's asked you for help to assess that so what are the three or four factors you'd analyze to determine whether this is an attractive market or not okay so it's gonna purchase he wants to acquire that been in bet ecommerce or an e-commerce store that sells livings and sheets bed sheets and pills and dolls and stuff like that and he just wants to know if the market is attractive or not is that right that's right so if he doesn't want to know or whether he should acquire the business or not you just want your help to see if the market is attractive okay so no recommendation in terms of yes you should just market attractiveness purely right okay I have a couple more clarifying questions the first is is this who's this friend I mean is he because I think it's weird that an individual is purchasing a company okay so we're really rich or yeah he's all about the financial market he's he's made a lot of money there and he wants to go out and just have his own business that he can run and improve she doesn't want he doesn't want to start from scratch and he has a feeling yeah good deal but she doesn't yet know with the market itself is attractive okay so if I understand he wants to acquire himself into intrapreneurship yeah okay good and the second question is does he have a specific way of understanding attractiveness and I know this is kind of the question of the case but are there any specific things that he thinks make a market attractive arounds no we'd also like your help with that okay that sounds good is he looking into a specifically commerce company no not yet Jenny yes he does have a deal in mind okay we're not gonna look into that there okay because we're looking at the market yeah okay that sounds good so I'm gonna take maybe a couple of minutes to to structure the case if it's all right okay I'm ready just in seven okay all right blood okay so I'd look into four broad areas and I kind of came up with this framework to evaluate market attractiveness in this specific scenario of a individual purchasing in e-commerce company okay so I'd look into four areas the first is if the market is attractive in the sense that they can make money so our companies in this market profitable and likely to make money in the future the second aspect is if you can hold a competitive advantage in this market so and coming from the assumption that some markets allow for more competitive advantage than others the third one is if you can build a customer base so if he can build a basically a list of customers that he can monetize and serve in the future so another long term view okay and I know this overlaps a bit with can he make money or not put in the can he make money I'm looking at the current companies in the market and then the customer base I'm looking more into customer behavior okay and then the fourth is is this a nice business to run I mean he's with another business it has to be attractive for him personally as well make sense okay so with him he can he make money within the first bucket and look into three factors the first is the size and growth of the market that InBev ecommerce I'd love to see a big markets that grows a lot okay and specific segments that were all even more I'd like to see the profitability of the current players so maybe this is a big markets and losing money not very attractive and the third one is the price sensitivity of the customers if everyone on the internet is charging the same price for the same items it's really hard for you to try to premium or to differentiate in some way unless these companies are really profitable then you can charge less and maybe grab a higher market ship okay okay the second book is competitive advantage and look into three things as well the first is waste different shades what are ways to differentiate your company in this market and differentiation will enable you to get more market share or charge more for the same products okay the second one is ways to be more efficient are there ways to be more efficient in this market one example that comes to mind is maybe you can have a more efficient warehouse and logistics or a more efficient [Music] IT development things like that so this will help you keep costs down maybe purchasing as well and then the third bonus barriers to entry I honestly don't see many in this market perhaps the initial investment that you need to make but this is important because if it's a really attractive market with a lot of ways to differentiate yourself with very little barriers to entry what's stopping people from signing other companies and making this market a price war in the future for example okay right within customer base I'd look for how easy it is to get traffic even if this is a wonderfully attractive market with lots of ways to differentiate if we can't get traffic is not going to be able to grow his site second one is customer loyalty so if he gets a customer is this a customer for life is this person likely to buy from him in the future or is this someone who's just shopping for price and I know there's some relationship with sincerity but I'm looking to different things here pricing services they're looking for the cheaper price customer loyalty is they're more likely to shop from you if he's bought from you in the past okay and then the third one is opportunities for cross selling so if he gets customers and then he can he has lots of types of products that he can sell in the future that's a more attractive market than the market that you have nothing else to sell right and then the last item if this is a nice business room from a personal perspective I'd look at two things the first is what are the operational demands of this business is this a business that it's gonna wake him up at 3:00 in the morning or not okay my guess is probably not I mean you can ship stuff every day and have people handling that and usually nowadays websites don't crash in the middle of the night so doesn't seem like a business with too many operational demands but I would Mack the operations of this site and see if there are any critical points that can make his life a nightmare all right and the second one is how much strategy work is he gonna do versus operational firefighting work and the reason why I'm doing this is he came from the financial markets so I'm guessing that this guy wants to think about strategy about long term planning versus just run an operation and it's a guess we have to check with him of course but I think this will be interesting from a career perspective is this the kind of thing that he wants to run okay all right very interesting just a question that I've addressed yeah so you mentioned customer loyalty sure and I didn't quite grasp one thing would it be good for their position or would it be bad for their position if there is customer loyalty sure that's that's a good question customer is awesome and the reason is and hey guys probably not use the word awesome in the real piece but I'm with customer is is really good say you spent $20 to a fire customer and this guy's buys from you once a $40 item and you have 50 percent marginal net you broke even to get this customer if you don't sell anything to him in the future you're not gonna make money now if this person is likely to shop with you five or ten times in the future you can even spend $50 $100 to to to get him in and you're still gonna make a profit so customer loyalty is a really good feature of a market here because either you can have higher margins because you're spending less in marketing to get the same number of customers or you're spending more on marketing and you've gotta grow faster and super profitable compared to a market with low customer loyalty Karen co-found good now your friend has decided that it will make sense for him to acquire the company but only if he can increase sales significantly okay and he's asked for help to come up with ideas on how to increase sales okay what are some options we can think of how to increase sales okay do you have any information on where the sales come from in the current business no we don't okay can I assume that they sell sheets towels oh you mean product wise yeah sure and also if there are b2c it versus b2b sales I'll try to figure out the notes of revenues okay right they found Paul b2c okay and all kind of products within the bed and the bathroom in the towels and brothers part okay is it just fabrics or do they sell mattresses and furnitures no they don't sell mattresses furniture soap holders everything that's not fabric they will sell ok ok so our goal is to increase sales right if we're gonna increase sales we can increase sales in the business as is right or we can change the business excess if we change the business I think we can get new types of customers do you know if there's specific segments of the market that hit targets nowadays no we don't know that okay so this could be a b2b for example we can get well sell actually sell new types of products that are related to this market or we can enter other markets okay and in the business as is we can also sorry we could also go offline in the business as is we can get new customers right we can increase tickets yeah so the average sale or we can increase number of sales per customer right okay and just to be clear here get new customers is new customers of the current type of customer getting and in the bottom part of my issue tree is getting new types of customers ok ok so just some ideas to get new custom you could explore new channels I don't know how he gets the customers nowadays if it's Google ads or Facebook ads but he can try other types of strategies to get new customers even offline advertising maybe content marketing I don't know there's a bunch of channels you could explore here to increase ticket average sale I could of course increase prices and that could be increasing prices on the current products or putting more premium products he could improve his recommendation algorithm as Amazon does he could also cross cross sell by adding new categories so you can sell other products to buyers by having better recommendations but also adding new categories so what do people who buy sheets and towels and things like that are doing they're probably moving perhaps getting married having kids and what what else are these people shopping for they're shopping for decoration maybe kitchen appliances so he could expand and this is actually sell new types of products so I'm kind of getting ahead of myself here all right within sales number of sales per customer work in our customer relationship so sending emails doing the basic ecommerce stuff we could send coupons for that for the next sale yeah I think these are my best ideas in changing the business you can get new types of customers so b2b you can focus on hotels hospitals who else shops for towels yeah I think that's that's mainly it may be all the air B&B folds were renting their apartments nowadays selling new types of products I would look for products that are similar to the cells I said before so certain types of furniture mattresses and other things that you shop in the specific occasion that these customers are shopping and we need to study that just to know what what really are discussed immers doing and then entering other markets would be setting up other e-commerce stores I don't think it makes a lot of sense and going offline I don't think it makes a lot of sense either unless that's something that our client wants to do a lot but it would be opening retail stores okay are there other identical I surely can think of more ideas within these buckets but I'm not sure I can think of other buckets not really within the buckets that's what I'm looking for just couple more ideas okay sure do we know if let's focus on the businesses it's right there doesn't want to change any bases at first do we know if has problems with getting your customers or increasing ticket or because I want to focus on where they the problem so we don't really know the problems that this company has beforehand but we do believe that we if we want increase sales significantly it's probably going to be through getting new customers okay so I would try to do this by increasing awareness what right and then there is a percentage of people who are aware who visit okay right so by increasing awareness I think they're there is their ads so I'm good for all the channels that make sense for ads Facebook Instagram Instagram is actually a really good one because it's a really visual product it's Instagram and Google basically so people who are looking for these types of products or warrant specific type of situation just got married I put an ad on face right I'd also use influencers to raise awareness and by influencers I mean digital influencers true but also architects home decorators we can do deals with them for promoting your products or write them and then there is also PR normal TV ads things like that now to increase the percentage who visit what I think would make sense is to do some kind of promotion so if you access our site now you get a free pillow if you spend more than $300 or get 10% discount so some sort of incentive to have this person visit and also something that's not really measurable but tends to work is to work on the branding of the website is there a really professional websites are the ads professional doing every I mean we're working with design in a certain way right so you try out pretty websites and okay all right sounds good now one more ideas sorry we couldn't remember get member campaign some websites do this if you shopped with us and you recommend a friend you get 30% off in your next purchase and then we get new customers and repeat buyers all right cool so you and your friend ran some analysis of the of three large revenue levers and you watch the following data this after acquisition your friend starts selling in marketplaces like Amazon for example not only in their own website their sales will increase by 40% okay if they start selling complementary categories of products like you've sent their sales will increase by 30% and the e-commerce market segments will organically grow 80% due to the increase of the total market and increase off share the happens online through e-commerce okay so bed and bath ecommerce as combined category is gonna grow eighty percent yeah that's right partly because bottom bath market will grow and partly because the sheriff e-commerce will grow yeah okay and that's all within the next two years okay so that's two years so it's good and knowing that the company's current market share is twelve percent what will be their market share after those two years mm-hmm current market share is twelve percent and we need the new market share in two years that's right that's what we want yeah and this market share is within barren bet ecommerce yeah not within the overall bed net market yeah that's right okay sounds good so I can assume that they're gonna execute on the marketplace idea and the new product categories yeah okay and I just noticed that I could have added get into new online faster as well yeah my fault okay okay let me think for a bit just to structure this analysis so we can can we assume that we will grow with the market at eighty percent yeah okay okay so this factor alone market growth will not impact our market share right because we're gonna grow eighty percent the overall market is gonna grow up 80 percent as well so for this factor it doesn't really matter that's right that's right so we're gonna grow 40 percent revenues with marketplaces and I will assume that the rest of the markets on average will not do that yeah and we're going to 30% with no product categories and I will assume that the rest of the market will not grow that either yeah that's right okay right so to find the new market share all I have to do is to multiply our current market share of 12% by 1.4 to include the marketplace effect and by 1.3 which include the new product categories effect and I will compound both because we're gonna be selling new product categories in marketplaces as well okay make sense yet so let me compound this issue effects first marketplaces times you product is the multiplier that I will do with the current market rate that's 1.4 because it's 40% times 1.3 right okay so I think it's easier to do the math here I could do 30% of 124 actually that's easier and it's right 30% to 1.4 okay so 10% of 1.4 is 0.14 right times 3 that if this was 0.15 this would be 0.45 and then I take 3 decimals of it so point 42 right the other trial and so 1 point 4 plus OH point 42 equals 1 point 8 2 which is our multiplier to 12% okay okay so now I just have to do the new market share is going to be one point beta 2 times 12 percent let me find a quick way to do this if I can okay ten times 1.82 is 18.2 mm-hmm and two times 1.82 is three point sixty four okay okay so eighty four sorry so we have twenty we will have twenty one point two eighty four percent market share okay what do you think of that this question I think that makes sense it's slightly less than so first the calculation I think my calculation seems right because this is likely less than twice the 12% figure who I have nowadays and it should be a bit less than twice because we're compounding 40 percent and 30 percent if you sum those up seven seventy percent so it should be slightly higher than that so the figure seems fine okay in terms of the business and whether this is an interesting market or not I think just by doing two relatively simple actions we can get 1/5 of the market or just over 1/5 of the market this seems like a pretty good opportunity because we're dealing with a market that will grow 80 percent which is really good in two years right by any standards and we can still almost double our presence in the market and have some sort of market power and recognition at least on the online channel just by doing two simple actions so it seems like our markets that well obviously it's going to grow out we can trust this figure but also a market that you can capture a lot of it with simple improvements I mean we're not talking about crazy algorithm changes in e-commerce you're just talking about adding new product categories and any new channel okay all right that makes sense now well you're meeting with your friend is almost over and you're gonna go back to doing consulting is gonna go back to looking into man-bat ecommerce businesses and he was just your partial opinion just based on what you have what you know should he acquire this business or not okay good question I can't tell him that you should acquire this business because we haven't looked into the business yet yeah but I will say that this market looks like a really good opportunity right it's a growing market we haven't seen if it's profitable or not but just for the fact that it's growing a lot and that with small changes you can get twenty two percent market share would be a nice play to just acquire the company grow it a lot and then perhaps sell it later to confirm that I will just look at three things the first is if we can trust these figures okay the second is I would do a quick to jib diligence on the company its numbers and its operations and then the third thing if our friends skills match what's needed to run this business and implement these changes and other changes that we can okay all right well thank you very much yeah thank you all right guys this was it for today I hope you like this video I hope you were able to learn from it and if you want to watch more of our videos on case interviews just subscribe to our Channel hit the bell button and you'll get notified when we send out new ones also I've also recorded myself interviewing a real candidate with this very same case and I've added my comments to it on what she did wrong what she did right and what was going through my mind as I was interviewing her if you want to get that video - just go to Crafton cases comm slash bad and and we'll e-mail you the full video well I hope to see you in the next video [Music]

Channel: CraftingCases

Views: 679,420

Rating: 4.8868399 out of 5

Keywords: case interview example, mckinsey case interview, mckinsey style case, mckinsey, bain, bcg, interviewer led case, out of the box case interview, consulting interview, management consulting, management consulting interview, mbb, crafting cases, crafting cases interview, crafting cases interview example, best case interview examples, real case interview, consultancy, realistic, unusual, partner, case interview

Id: orsNS3YG_KE

Length: 28min 57sec (1737 seconds)

Published: Tue Nov 27 2018