Consulting Business Situation Cases

Now that we have been through the frameworks/analytical methods frequently used to solve Case Study questions, as well as a discussion of the main categories of Case Study questions that are asked, it’s time to practice solving Cases.

The six Street of Walls Business Situation Case Study examples provided in this chapter are outlined in a manner that would reflect a real case. In many other guides, the Cases are presented in a much cleaner way, often applying specific frameworks with little explanation of or exploration into the thought process behind solving them. Often, these guides present all of the information up front, whereas in a real Case Study interview, the candidate will often have to ask follow-up questions to get the needed information. In short, real Case Study interviews at firms are never straightforward, and interaction with the interviewer generally involves jumping around various business concepts but tying together your responses in a thoughtful, articulate, concise, and accurate manner.

When you read through these Cases, take time to pause and think about what your next steps would be. Which questions would you ask? How would you process the response? At what point would you begin performing analysis? At what point would you begin offering recommendations or hypotheses? Go through the guide slowly and deliberately, pausing to see what you’d do next. Then compare your thoughts with the following lines. When you’re done, see where you could have improved your thought process and what you would have done differently now that you know the ending of the Case. Practice this method repeatedly, and you should find that your performance on these Cases and your confidence begin to improve dramatically.

Also be aware that many Cases will not have a clear-cut answer. The important thing in such Cases will be your ability to articulate your understanding of the key issues, make recommendations/form perspectives that are appropriate, and give guidance for what additional information and analytics you would like to perform to assist in making the decision clearer.

Here are a few additional tips before you get started:

Before diving in to the example Case Studies, be sure you have reviewed our discussions on frameworks/analytics for Consulting Case Studies as well as Consulting Case Study Types from previous chapters. The concepts and structures outlined in these chapters will be a useful reference tool as you practice cases. We see it as a mini, strategy-focused, MBA in only about 20
When you read these Business Situation Cases and the suggested approach for responding to them, you will see that most are common sense—but that this common sense develops over time and with practice, reaching ever-greater levels of understanding and sophistication.
This is a valuable skill for you to develop not only for the Case Studies, but also for your Consulting career. Being able to identify the key issues and structure your response to a business problem well is important for the Case Studies, but it is just as important in the daily life of a Consultant.
It is worth noting that the business concepts and situations highlighted in these examples do overlap, but most real-world business situations (and also most Case Study interview questions) will also include a range of business issues to address, even if there is only one core problem being asked about. For example, a company bringing a new product to market will require market size analysis, but will also a competitor analysis and industry landscape, as well as a good understanding of the customer segments.
As you practice Cases, you should rehearse responding out loud, not just in your head. You will find that you begin to speak more articulately and competently about business, regardless of whether you secure a position at a Consulting firm. This will be valuable in your career no matter what you do!

Note: by convention, Case descriptions, interviewee questions, and interviewee responses are written in normal text, while interviewer responses to interviewee questions are written in italic text.

OK, let’s get to it!

SOW Business Case Example #1

To Co-Work or Not To Co-Work: New York City

There is an increasing trend of co-working in New York City, fueled partly by the technology boom. Co-working spaces are communal work places, which freelancers and small companies can use as workspaces, while sharing the space with any number of other freelancers and/or small companies. As part of the arrangement, many resources, such as office equipment and bathroom and kitchen facilities, are also shared.

Fred Wilson of Union Square Ventures explains the trend well:

“The main benefits of this kind of setup are camaraderie (small start-ups can be lonely), knowledge-sharing, high energy, culture, and cost sharing. I have heard many stories of software developers walking to the other side of the office to talk to software developers working for another company to talk about a thorny tech issue. That same thing can happen in finance, legal, business development, marketing, product management, really all parts of the business. You can get some of the benefits of scale without being at scale.”

Matt and Tony are two real estate entrepreneurs who want to capitalize on this trend, and start New Work Labs, a co-working space that fits 75 people. They are in talks with two office buildings to lease out the space. The first one is a building near the young and trendy Union Square area, which will be $40 per square feet per annum. The second building is in the SOHO/Chinatown area, in an old loft surrounded by dumpling shops at $30 per square feet per annum.

Which building should they select?

Data List and Questions

How much space is needed for 75 people?

Normal office allocates 200-225 sq. ft. per employee. However, co-working spaces in New York can be as dense as 100 sq. ft. per person.

What is the total investment required to set up the space?

Plain vanilla build-out and retrofitting will cost $50 per square foot.

Furnishings will cost $20 per square foot.

Assume total build-out for Chinatown space is 30% cheaper than Union Sq.

What are the utilities and maintenance costs (this includes everything, e.g. electricity, wifi, water, heat, repairs to furniture, security, etc.)?

$10,000 per month.

Do they need to hire someone?

Yes, an office manager at $70,000 per annum total compensation.

What will be the rental for these desks?

$300 per month per person for monthly usage.

$30 per day for daily usage.

Assume that 1/3rd of total occupancy is for daily desks.

No weekend hours.

For simplicity, assume flat rates without any deals.

What is the occupancy rate?

Co-working spaces have been found to quickly reach 70% occupancy rate on average.

The Union Sq. location will have a higher occupancy (assume 80%). Chinatown will see average occupancy. (Note: Bonus points for assuming that Union Square might see higher occupancy rates.)

Are there any additional revenue opportunities?

Co-working spaces double up as event spots during evening hours. Average rate for an event is $5,000.

To avoid disrupting the regulars too much, a space holds no more than 6 events on average every month. (Note: Bonus points for asking this question. Also, bonus points for considering that Chinatown may have a harder time getting to 6 events per month.)

How long do Matt and Tony want to do this?

They would ideally exit in less than 10 years. (Note: Bonus points for asking this question.)

Key Items Tested in Case

Calculate the build-out costs.
Calculate the operating costs.
Generated revenues must exceed operating costs. This tests a candidate’s creativity to maximize revenues, and allow him/her to explore additional avenues. Take account of consideration for the community, which may mean letting go of some money generating opportunities.
Which building offers a faster payout? This must be seen in light of earnings run rate, therefore also see which building will offer a better exit opportunity in 5-10 years.

Sample Calculation

(Note that during the case, you would need to do this on paper and estimate to some degree. You may even want to concentrate mostly on the differences between the two offices to gain a perspective on which facility to rent.)

Takeaways

The Union Square office takes longer to repay the initial investment but generates more income n an ongoing basis. Ignoring discounting, the Union Square office offers more income potential over a 10-year time frame.
The decision is a close one, however, and is largely driven by assumptions about the relative occupancy rates and the number of events per month.
If, in fact, the number of events per month is the same in each office, then the Chinatown facility dominates the Union Square facility (less investment and more cash flow per month).

SOW Business Case Example #2

Telecom Company: Growth Opportunities

Assume that the year is 2006, and the largest Indian Fixed Line Telecom Co., Telca, which has global ambitions, wants to double its Revenue over the next 5 years. To meet this aggressive target, its strategy team scanned the universe for acquisition targets and identified two options:

SeaLink, the largest undersea cable provider on the Trans-Atlantic route
Afmob, the largest mobile telephone service provider in Africa

You have been hired as a Consultant to help Telca pick the most ideal option—the company cannot acquire both. The following Exhibits are available. How would you go about this project?

Exhibits

Exhibit E: Undersea cable map

Initial Response/Key Issues

The key is to quickly analyze and realize from the data that the two choices present completely different growth strategies: expand in a mature, crowded market closer to the core strength of the Company (SeaLink) or in a rapidly-growing market where the Company has limited experience (Afmob). Either strategy can be justified.

A sample thought process is outlined below, including some questions for the interviewer:

Exhibit A questions and inferences

Enterprise fixed line and wholesale voice/data are the primary business segments for Telca.
Consumer mobile is growing fast, but is still a small share of the total
Q: Is wholesale data and voice for Telca carried on the same international cable?

A: Yes—the same is true for SeaLink.

Exhibit B questions and inferences

Primary markets for Telca are domestic (India), Europe, and North America.
Limited presence in Africa and the rest of the world
Q: What does a region’s revenue mean for wholesale data/voice—particularly with regard to international calls?

A: This is the location where the sales originated.

Exhibit C questions and inferences

Q: What does the “% Capacity in use” figure represent?

A: Undersea cables have more capacity than what is currently being used. This is similar to your computer’s hard disk. The figure represents the total for voice and data combined.

Q: Telca’s shares are listed in terms of the proportion of installed capacity; what about its shares for “% Capacity in use”?

A: Assume a split equal to that of the whole market.

Telca has a dominant position in Africa–Asia, South Asia–East Asia, and East Asia–North America (Trans-Pacific) routes (assume probable #1 position for all). It has marginal status in North America–Europe (Transatlantic) and Europe-Africa.
Sealink’s acquisition will make Telca the #1 player in the wholesale data/voice business in each of the major routes.
There is significant unutilized capacity in Transatlantic. This means that even if a player has dominant market share, it cannot control pricing because other players will simply light up additional unused capacity.

Exhibit D questions and inferences

The African mobile market is exploding, i.e., growing at 14% annually.
Afmob is growing even faster, i.e., it is gaining market share and is already the dominant player.
The overall market is relatively small at the present time.

Exhibit E questions and inferences

Illustrates Exhibit C data visually while also giving visual inferences to the magnitude of each route’s relative market size/capacity.

Takeaways

SeaLink’s acquisition strengthens Telca in its core business.
However, the core business is slow growing and facing a capacity glut.
Mobile is not the core business for Telca but is the fastest growing market.
Telca has limited experience in running a mobile business, and no experience in running it in a foreign environment.
Afmob’s acquisition will give Telca a foothold in the fastest growing high potential market.
In your response, you should take a position after carefully reviewing all of the evidence. There is reason to believe that either acquisition could be better. Afmob provides entry into a new, fast-growing market in which Telca has limited exposure, but the market is still small and the move has a number of strategic hurdles to face. Meanwhile, SeaLink is a leading player in Telca’s core business, serving routes in which Telca has marginal-player status. This market is not growing rapidly, and there may be pricing pressure due to the substantial unused capacity.
A good follow-up to your conclusion would be to highlight areas of research to help make a better informed decision, such as:

Profitability of each business
Quality of management at each business
More detail on Competitor landscape, including pricing trends and market positioning
Relative cost to acquire each business
Technological or regulatory risks (and in the case of Afmob, potential political risks)
Current Revenue for SeaLink

Remember, however, that the key goal of this case was Revenue growth, not Profit. One could reasonably infer from the Exhibits that, if pricing per volume is similar at SeaLink to Telca’s pricing, that SeaLink is likely to have much more current revenue than Afmob. In that case, an acquisition of SeaLink immediately gets Telca much closer to its stated goal.

SOW Business Case Example #3

Mind That Heat: Sticky Labels

Sticky Inc. manufactures heat-shrink labels. You might recall noticing these labels on Arizona Tea or 5 Hour Energy bottles–they are completely wrapped from head to toe and have 360 degree graphics printed on them. This is achieved through label sleeves that shrink by applying heat to conform to the shape of the bottle. This makes handling and storage of the labels tricky. Label materials can start shrinking at temperatures over 90 degrees Fahrenheit.

Sticky Inc. is struggling to decide whether to manufacture these labels in China or the U.S. and is soliciting your assistance to help the company make an informed decision.