TheWharfConsultant1
New member
- Dec
- 50
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Management Consulting
If you are thinking about a career in management consulting, you will probably have heard that case studies are a big part of the interviewing process. Having been on the other side of the table more often than I can count, I wanted to give you some advice on the process and case studies in particular.
I have seen brain teasers being used less and less (“how many piano tuners are there in Chicago?”, “how much paint do you need for a 747?”, how many ping pong balls fit in a Mini?” and so forth) and being substituted by case studies of real or dummy companies with or without some data given. After you have been given a task, you then have some time (quite often an hour) for calculations, some simple modelling (if you can use a computer) and for preparing a short presentation to be given after that prep time. This is much closer to the actual work that you are going to do.
Other parts of the interviewing process can be a run through your CV, behavioural questions and cultural fit – probably worth another post at some point in the future.
The good thing about case studies is that you can practice them (and you should do that in preparation for your interview). Sometimes, the companies even give hints about what to expect in the process. The main thing about solving case studies is to (over)communicate throughout how you came to conclusions and show your workings. Just showing the result is usually not enough.
Let me run you through an example for a view on a real company from the outside without data available: a sample question could be “does it make sense for IKEA to sell hot dogs?”. Some of the possible answers do not necessarily require hard numbers, e.g. it is a part of the customer experience to offer food at reasonable prices (customers will stay longer in the market and potentially shop more if they do not have to worry about food and drinks), a furniture shop should focus on its core business rather than selling food. However, you would like to know if IKEA makes a loss on hot dogs (in which case they would need to be subsidised by higher sales if clients stay longer) or if it is a profitable part of the business.
You can start with the revenue side – last time I checked an IKEA hot dog was sold at £0.75.
If you look at the cost side, you start with the main ingredients: a sausage and a bun. In a supermarket, you can get a jar of 8 sausages for £2, so it would be £0.25 per hot dog, and 8 buns for £1, so £0.125 - the main ingredients are £0.375 (ignoring food waste for the moment). Assume now 2.5p for condiments, napkins and wrapping to get to a round figure (and save you a lot of hassle in calculating the cost for two splashes of mustard) - £0.40 for ingredients. Now, let’s look at labour cost – to keep things simple, assume one person behind the counter selling on average 50 hot dogs per hour, total cost at £20/hour, so £0.40 per hot dog, giving us total cost of £0.80, so no break even? Not so fast, IKEA buys the ingredients in bulk, most likely sourcing them directly from the factory (more on that below), so the costs for the ingredients are probably a lot lower. If we assume a 50% discount as they are probably sourcing directly, we are back in the green with £0.60 for ingredients and labour, leaving 15p for energy, floor space and other overhead costs. Calculating these costs will be slightly tricky as these costs will be spread across a number of products. You will probably remember from your last visit to an IKEA store that there is an area for shopping food quite close to the hotdog stand, so you can make the argument that (most of) these costs are overheads and add a generous 20% on the £0.60 and with a total cost of £0.72, we will break even. Going back to the revenue part, you can also make the argument that revenues will be higher as other items will be sold with the hot dogs as well (e.g. drinks) and that staff could be shared with the food space close by.
You might have noticed that I have avoided looking at the number of customers so far to keep things simple, especially if you only get a pen and paper to solve the case. To estimate the number of visitors per market or for the whole of the UK, let’s say that there are 10,000 visitors per day. If the market is open on 350 days a year (i.e. closed for public holidays and maybe some repairs every now and then), that gives you 3.5m visitors per year. Now assume how many visitors will buy a hotdog – probably the key assumption for this case. Let's say 25% (or 12.5% buying two) and you arrive at 875,000 hotdogs a year per market or 2,500 per day.
Some tips for solving such a case:
And in case you wonder about the assumptions made above: if you would have the help of the internet at hand during the case study, you can find the actual number of visitors for the UK is 40.4m visitors https://www.ikea.com/gb/en/customer...les/07db1d1e-5b0e-48bf-862d-d6903967gb86.html across 22 markets https://www.ikea.com/gb/en/customer...les/16b2503g-fe2f-4f1e-809e-0b5531gc438d.html
Globally, IKEA sells more than 100m hot dogs a year https://about.ikea.com/en/newsroom/...e-new-veggie-hot-dog-is-now-available-at-ikea
I have seen brain teasers being used less and less (“how many piano tuners are there in Chicago?”, “how much paint do you need for a 747?”, how many ping pong balls fit in a Mini?” and so forth) and being substituted by case studies of real or dummy companies with or without some data given. After you have been given a task, you then have some time (quite often an hour) for calculations, some simple modelling (if you can use a computer) and for preparing a short presentation to be given after that prep time. This is much closer to the actual work that you are going to do.
Other parts of the interviewing process can be a run through your CV, behavioural questions and cultural fit – probably worth another post at some point in the future.
The good thing about case studies is that you can practice them (and you should do that in preparation for your interview). Sometimes, the companies even give hints about what to expect in the process. The main thing about solving case studies is to (over)communicate throughout how you came to conclusions and show your workings. Just showing the result is usually not enough.
Let me run you through an example for a view on a real company from the outside without data available: a sample question could be “does it make sense for IKEA to sell hot dogs?”. Some of the possible answers do not necessarily require hard numbers, e.g. it is a part of the customer experience to offer food at reasonable prices (customers will stay longer in the market and potentially shop more if they do not have to worry about food and drinks), a furniture shop should focus on its core business rather than selling food. However, you would like to know if IKEA makes a loss on hot dogs (in which case they would need to be subsidised by higher sales if clients stay longer) or if it is a profitable part of the business.
You can start with the revenue side – last time I checked an IKEA hot dog was sold at £0.75.
If you look at the cost side, you start with the main ingredients: a sausage and a bun. In a supermarket, you can get a jar of 8 sausages for £2, so it would be £0.25 per hot dog, and 8 buns for £1, so £0.125 - the main ingredients are £0.375 (ignoring food waste for the moment). Assume now 2.5p for condiments, napkins and wrapping to get to a round figure (and save you a lot of hassle in calculating the cost for two splashes of mustard) - £0.40 for ingredients. Now, let’s look at labour cost – to keep things simple, assume one person behind the counter selling on average 50 hot dogs per hour, total cost at £20/hour, so £0.40 per hot dog, giving us total cost of £0.80, so no break even? Not so fast, IKEA buys the ingredients in bulk, most likely sourcing them directly from the factory (more on that below), so the costs for the ingredients are probably a lot lower. If we assume a 50% discount as they are probably sourcing directly, we are back in the green with £0.60 for ingredients and labour, leaving 15p for energy, floor space and other overhead costs. Calculating these costs will be slightly tricky as these costs will be spread across a number of products. You will probably remember from your last visit to an IKEA store that there is an area for shopping food quite close to the hotdog stand, so you can make the argument that (most of) these costs are overheads and add a generous 20% on the £0.60 and with a total cost of £0.72, we will break even. Going back to the revenue part, you can also make the argument that revenues will be higher as other items will be sold with the hot dogs as well (e.g. drinks) and that staff could be shared with the food space close by.
You might have noticed that I have avoided looking at the number of customers so far to keep things simple, especially if you only get a pen and paper to solve the case. To estimate the number of visitors per market or for the whole of the UK, let’s say that there are 10,000 visitors per day. If the market is open on 350 days a year (i.e. closed for public holidays and maybe some repairs every now and then), that gives you 3.5m visitors per year. Now assume how many visitors will buy a hotdog – probably the key assumption for this case. Let's say 25% (or 12.5% buying two) and you arrive at 875,000 hotdogs a year per market or 2,500 per day.
Some tips for solving such a case:
- Always have pen and paper ready, regardless if it is a remote interview or in person – it helps with shaping thoughts and calculations
- Use rounded numbers if you do not have a calculator at hand – it makes life easier for you and you can quickly calculate figures if questions come during the presentation.
- Make reasonable assumptions to simplify things – you can spend a lot of time calculating the cost of mustard per hot dog sold (£4 retail price for a 1l bottle of mustard, so maybe £2 actual cost if buying in bulk, every second customer will take a squeeze of 10 ml, so 1p per hot dog sold) and then argue how many customers will take ketchup or mustard or both, but that risks to miss the point.
- Be prepared to show your working by running the audience through your calculations
- If asked to present, prepare a couple of slides (if you have a computer at hand), but put the calculations in the appendix
- Your interviewer will know that you are working under pressure – they would have rather see okish slides with the correct answers than beautiful slides with the wrong calculations/conclusions
- As part of your interview preparation, try to find (and memorise) assumptions that are quite common (e.g. for marketing, salary ranges, profit margins, commissions for sales, tax rates, rebates for buying in bulk etc.). You do not have to make the right call each and every time, but should be in the right range, e.g. with the salary for the person selling the hot dogs above. In a case with one hour preparation, no one will put you on the spot whether it should be £19 or 20, but if you would put £5 or £50, I would question you on the reasoning behind these numbers
And in case you wonder about the assumptions made above: if you would have the help of the internet at hand during the case study, you can find the actual number of visitors for the UK is 40.4m visitors https://www.ikea.com/gb/en/customer...les/07db1d1e-5b0e-48bf-862d-d6903967gb86.html across 22 markets https://www.ikea.com/gb/en/customer...les/16b2503g-fe2f-4f1e-809e-0b5531gc438d.html
Globally, IKEA sells more than 100m hot dogs a year https://about.ikea.com/en/newsroom/...e-new-veggie-hot-dog-is-now-available-at-ikea
). Just try to practice these brain teasers before the actual interview, not to memorise answers, but to be comfortable with solving these types of questions.