In the previous chapter, we described some well-known frameworks for evaluating companies and industries—frameworks that are important in Management Consulting Case Studies, and can broadly be applied to many different types of Consulting Business Situation Cases. We also described a number of analytical techniques that frequently come up in Business Situation Cases. In this chapter we’ll take a deeper look into common types of Business Situation Cases, evaluating the core concepts in them and the methodologies for approaching them (using ideas from the frameworks from the previous chapter to help us organize our approach, and the analytical techniques from the previous chapter to help us drive to an answer).

Each of these Case Study categories occurs very frequently in Management Consulting Case Study interviews, so you should be familiar with the basic issues that tend to occur over and over when they come up. In short, you should practice each of these Case types multiple times until you feel confident that you could a new Case of this type in a live interview.

Here are the eight primary types of Business Situation Case Studies as we see them:

• Profitability Optimization
• Pricing Optimization
• Industry Landscape & Competitor Dynamics
• New Product or Project
• Growth Plan/Strategy
• Market Entry or Expansion
• Merger/Acquisition/Joint Venture
• Start-Up/Early-Stage Venture

Note that in most situations, a given Case will lend itself to several different categories. In the discussion below, we will attempt to enumerate the different combinations of Case Study situations that tend to occur together in the same Case.

Profitability Optimization

In both good and bad economies, companies continually seek to optimize their Revenue model and their Cost structure.  The goal, ultimately, is for the company to use Invested Capital as efficiently as possible.

The two core components of a Profitability Optimization case are a Cost Assessment and a Revenue Assessment. Sometimes, only one of the two will be required for the Case. Note that Profitability Optimization situations often arise as part of a Case Study of another type—for example, in a Case Study involving pressures from competitors or substitute products, you may need to assess and optimize the Company’s Cost structure to determine it is competitive. Or, it could be that the case revolves around the Company’s Cost structure optimization, the job candidate may need to perform some qualitative analysis of the competitor or supplier landscape.  As you can see, a variation on Profitability Optimization can arise as part of many different Business Situation Cases.

Whenever Profitability Optimization is a key issue, the interviewer will usually highlight that profitability has been declining (or is projected to decline) and the Case will involve identifying the sources of the decline and potentially how to reverse or obviate it.

Example Case Situations

• The client is a low-cost airline based in Singapore, serving 24 destinations in the Southeast Asian market.  The Airline’s profitability was strong until 2010 and has since seen a declining trend and is now only just barely profitable.  The CEO would like you to determine what is causing the profitability decline and suggest a strategy to reverse this trend.
• The client is a market-leading, niche ski equipment manufacturer based in Colorado. Profitability has remained steady but the CEO has noticed from reading industry annual reports that two publicly-listed competing ski equipment manufacturers have meaningfully higher profit margins and have also been increasing their top line (Revenue). The CEO would like to understand the drivers of these differences.

Note that both of these Cases would involve some degree of Market Landscape/Competitor Dynamics analysis in addition to Profitability Optimization.

Core Concepts and Structure

Scenario: The client has determined that profitability margins have been (or are projected to be declining) and has requested that you analyze the causes of this decline and put forth recommendations to reverse it.

Expense Analysis

• Gather current expense breakdown and historical expense breakdown (this question alone will only help to get you towards the key focus area, as the interviewer will only have so much information).
• Identify the “bang” areas (this is Consultant lingo for expense areas that account for a large percent of the total).
• Analyze the key Fixed and Variable expense components and identify any meaningful changes in expense areas.
• Fixed Expenses might include overhead, fixed equipment expenses or depreciation, distribution, rent, and/or interest
• Variable Expenses might include raw materials, labor, sales, and/or distribution costs
• Request information on competitor Cost structures from the interviewer to see where the company’s Cost structure may be inefficient.
• Assess whether any expense areas could be cut with minimal or no impact on sales.

Revenue/Sales Analysis

• Gather as detailed of information as possible on current sales volumes and pricing and historical volumes and pricing. Use this information to determine growth rates.
• Identify the “bang” areas (consultant lingo for revenue streams that account for a large percent of the total, and/or a large percentage of the growth in the total).
• Analyze the key product areas and identify any meaningful changes in volumes and prices.
• Request information on competitor Revenue models (volume and pricing) from the interviewer to see where the company is potentially missing profitable business activity.
• Assess whether any changes could be made to improve overall Revenue or Revenue per unit sold.
• Pricing change suggestions/analysis (e.g., factors behind price elasticity; see Pricing Optimization Case descriptions below)
• Volume assessment and ways to improve volumes
• Identify changing customer desires/demands and respond accordingly.
• Invest in and/or reformulate marketing strategy.
• Expand distribution channels.
• Expand sales force or customer service.
• Expand production capacity.
• Expand product/service portfolio (see New Product or Project, Growth Plan/Strategy, and Market Entry or Expansion Case descriptions below).
• Make an acquisition or enter into a joint venture.
• Assess which products/divisions might have the largest growth opportunities and allocate investments accordingly.

Pricing Optimization

Example Case Situations

• What would customers be willing to pay if Facebook shifted to a subscription model (we heard that this Case was conducted by the San Francisco office of a major Consulting firm recently, though the client being analyzed was not Facebook)?
• A long-stay hotel chain would like to maximize profitability by determining the optimal pricing for different lengths of stays and types of rooms.
• An online movie-streaming company is seeking to select the optimal price mix for its product offering in order to maximize profitability.

Like Profitability Optimization, this is a type of Case Study in which many of the other Case Study types might be relevant (for example, Industry Landscape, Competitor Dynamics, Growth Plan/Strategy, etc.)

Core Concepts and Structure

Scenario: The client is deciding how to set prices so as to maximize profitability.

• Competitor/substitute pricing is the key element here—particularly if there is no major differentiation or benefit to the client’s products relative to substitutes.
• Price of substitute products/services
• Is the product sufficiently different to justify a higher price? (This points to the threat of substitutes.)
• Customer loyalty/lock-in (as an example: many lower-priced colas have failed to successfully compete against Coca-Cola due to consumer brand loyalty)
• Remember to ask about: Price Elasticity, Price Elasticity, Price Elasticity!
• Interviewers will often give you sufficient information to assess the impact on volume with a price adjustment and expect you to make the calculation.
• The higher the absolute value of Demand Elasticity (i.e., the more volume decreases when prices increase), the more likely it is that a price reduction would be beneficial. Likewise, the lower the absolute value of Demand Elasticity (i.e., volume barely decreases when prices increase), the more likely it is that a price increase would be beneficial.
• Expense-driven pricing analysis
• What is the fully-loaded cost for the client to produce the product or offer the service? How does this compare to the price?
• How does client’s fully-loaded cost compare with competitor pricing?
• Note: In situations in which the client’s cost is higher than the competitor price, it is usually a good recommendation to exit this product or service unless it can be demonstrated that:
• There is a clear path to reduce client production costs, or
• The competitor price is temporary and unsustainable.
• Customer-driven pricing analysis
• How much would customers be willing to pay for this product?  (You are not expected to be able to answer such questions, but ideas on how you might approach such questions are important—for example, running a survey, looking at applicable Case examples, looking at pricing structures for comparable products, etc.)
• What is the current state of demand and supply for the product or service (for example: would an increase in the number of orange juice manufacturers and orange tree groves be putting significant pressure on orange juice prices)?
• What are the alternatives for the customer and the relevant prices? I.e., is the threat of substitutes substantial or can it be mitigated?

Industry Landscape & Competitor Dynamics

Example Case Situations

• A client is a large nutrition, health & wellness Company and is considering divesting its non-core infant foods subsidiary in order to free up capital to invest in higher growing industries.  The CEO would like you to assess the industry landscape of the infant foods business in Western Europe.
• A client is a global financial services firm that is considering allocating more resources to the facilitation of electronic fund transfers globally.  The CEO wants to better understand the market landscape and develop a strategic plan to increase the Company’s share of the market.

Core Concepts and Structure

Scenario: The client wants you to understand and assess an industry (this often overlaps with Market Entry, New Product or Project, or Growth Plan/Strategy Cases, described in more detail below).  Usually, the goal is to assess the characteristics of an industry and to determine whether or not it is an attractive industry to enter, to ramp up, or potentially to exit.

• Market/Industry Landscape
• Current market size
• Projected market growth
• Customer mix (a.k.a. Customer Segmentation)
• Industry-wide profitability
• Mergers & Acquisitions activity in the industry
• Competitive Advantage/Barriers to Entry
• Supply chain: who are the key suppliers to the industry? (Assess this only if relevant)
• Brand loyalty
• Technology, regulatory issues, or other key topics relevant to the market
• Competitor Dynamics
• Key competitors in the market and their strategies
• Current market shares and shares over time
• Used to derive Market Concentration (i.e., what portion of the market is served by the top 3/5/10 companies in the market?)
• Product/service differences among competitors
• Any recent moves/threats by a key player to the market or a new entrant?

New Product or Project

Example Case Situations

• A client is a durable consumer equipment manufacturer attempting to develop a “green” washing machine that employs special technology, resulting in 60% less water use and cleaning 10% more effectively than standard washing machines.  The CEO would like help to determine the product’s market potential and the strategy to bring it to market.
• A client is a pharmaceutical company that is engaged in Research & Development on a drug that would both lower cholesterol and reduce obesity (i.e., help in significant weight loss).  The CEO would like to know whether this drug would gain traction, and if so, what is the potential market size and the optimal price for such a drug.

Once again, this is a type of Case Study where many of the other Case categories might be relevant (Industry Landscape, Competitor Dynamics, Growth Plan/Strategy, Market Entry or Expansion, etc.). Note that such cases could also involve decisions such as the purchase of a major information technology system (in this case, many of the acquisition concepts could be applied).  It could also involve the assessment of a new investment project, such as the development of a new major manufacturing or sales facility.

Core Concepts and Structure

Scenario: The client is developing a new product and would like your assessment of the feasibility of this product. Would the product be profitable and beneficial in the marketplace?

• Product Snapshot (Less relevant for New Project cases)
• Will the client have any competitive advantage that prevents competitor entry (such as a patent or a way to lock in customers) once the client has unveiled the new product?
• How is the client’s product different from and/or better than competing products? What are the substitute products?
• Pros and cons of client product (for example, environmental and social considerations)
• Is there a risk that that the new product will cannibalize another of the client’s products?
• Customer Strategy (Less relevant for New Project cases)
• What is the appropriate customer mix to target? How does this affect profitability and marketing strategy?
• What are the distribution channels? Can the client use its existing distribution channels?
• What is the methodology/strategy to attract customers to try the product and potentially switch?
• What is the methodology/strategy to retain newly acquired customers?
• Market Entry Strategy (Mostly less relevant for New Project cases)
• Competitive advantages/Barriers to Entry
• Approach to entering (Acquisition or enter organically?)
• Time/investment required to enter market
• Product pricing strategy
• Technology, regulatory or other risks to entering this market
• Market Landscape
• Current market size
• Future market growth
• Current customer and product mix
• Key competitors in the market, their strategy, Market Shares (current and historically over time), product differences and potential response to client’s actions
• Product/Project Funding
• Does the projected profit justify the required the Research and Development expenditure, the initial capital requirements, and any ongoing investment needs?
• What is the Opportunity Cost of the required funding?
• What is the required financing and how is the Research & Development being financed?
• Will the project result in Economies of Scale (i.e., cost reductions for increased production) elsewhere in the company? (Less relevant for New Product cases)

Growth Plan/Strategy

Example Case Situations

• The client is a German carpet manufacturer that has seen sales decline dramatically in its North American operation.  The client would like you to help it develop a strategic plan for sales growth in North America and to determine the root causes of the sales decline.
• The client is a surf apparel Company that has three stores on the West Coast of the United States and is looking to grow its store base significantly across the continent.  The CEO would like help designing a store rollout strategy across North America.

Yet again, this is a type of Case Study where many of the other Case categories might be relevant (Industry Landscape, Competitor Dynamics, New Product or Project, Market Entry or Expansion, etc.)

Core Concepts and Structure

Scenario: The client is seeking to grow its business, whether it involves growing a certain product’s sales, growing in a certain geographical region, increasing total sales, etc.

• Increasing Revenue (this is the heart and soul of most Growth Plan/Strategy Cases)
  • Ways to increase number of units sold
  • Optimize prices (See description of Pricing Optimization above)
  • Increase share of wallet (fancy term used by Consultants to mean that the client captures more of a typical customer’s spending in a particular area than it previously did; analogous to Market Share)
  • Determine which products/divisions have the largest growth opportunities and allocate investments accordingly
• Growth Drivers (approaches to growth and factors that influence capacity for growth)
  • Identify changing customer preferences/demands and respond accordingly
  • Invest in and/or reformulate marketing strategy
  • Investigate means and requirements to expand distribution channels
  • Investigate means and requirements to expand capacity
  • Investigate means and requirements to expand sales force / customer service
  • Investigate means and requirements to expand product/service portfolio (see description of Market Entry or Expansion below)
  • Make an acquisition or enter into a joint venture (see description of Merger/Acquisition/Joint Venture below)
• Always drive towards Profitable Growth: in any growth case, be sure to discuss this issue. Growing Revenue in and of itself is usually not a good outcome if the Costs of the growth exceed the Revenue, or if there were other growth opportunities that would have yielded a higher return on investment but are mutually exclusive (see Opportunity Cost).

Market Entry or Expansion

Example Case Situations

• The client is an online yoga apparel retailer looking to enter the European market. The CEO would like help in formulating an entry strategy.
• A high-end watch manufacturer has developed a high quality watch called the “outdoors” watch in order to attract the wealthy, younger audience.  The CEO would like to develop a strategy to attract this customer segment.

This category of Case Study frequently overlaps with several other Case categories (Industry Landscape, Competitor Dynamics, New Product or Project, Growth Plan/Strategy, etc.)

Core Concepts and Structure

Scenario: A client is seeking to expand or enter into a new market, whether it be a new geographical region or an additional customer segment.

• Market/Industry Landscape
• Current market size
• Future market growth
• Customer mix (a.k.a. Customer Segmentation)
• Industry-wide profitability
• Mergers & Acquisitions activity in the industry
• Competitive advantage/Barriers to Entry
• Supply chain: who are the key suppliers to the industry? (Assess this only if relevant)
• Brand loyalty
• Technology, regulatory issues, or other key topics relevant to the market
• Competitor Dynamics
• Key competitors in the market and their strategies
• Current market shares and shares over time
• Used to derive Market Concentration (i.e., what portion of the market is served by the top 3/5/10 companies in the market?)
• Product/service differences among competitors
• Any recent moves/threats by a key player to the market or a new entrant?
• Entry Strategy
• Approach to entering (acquisition or enter organically?)
• Time/investment required to enter market
• Customer mix/segmentation
• Product pricing strategy

Merger/Acquisition/Joint Venture

Example Case Situations

• Your client is a European online white goods retailer that is considering acquiring a North American online furniture retailer.
• Your client is a U.S. specialty chemical producer that is considering acquiring a regional specialty chemical producer in Indonesia.

As you might expect by now, this is a type of case where many of the other case segments are relevant. In particular, Merger/Acquisition/JV activity often represents one method of implementing a Growth Plan/Strategy, a New Product or Project, or a Market Entry or Expansion.

Core Concepts and Structure

Scenario: The client is considering either acquiring a company or entering into a Joint Venture, driven by many potential factors such as wanting to increase market share, widen product portfolio, take out a potential competitive threat, etc.

Important: For this Case type, you should ask questions as to why the Company is contemplating such an action. The responses to these questions can help steer you to the right analysis, as the responses will often indicate what the key considerations behind the acquisition/JV are from the client’s perspective. Thus you should perform a standard Merger/Acquisition/JV analysis as outlined below, but then generally pivot to the right framework for analyzing the business scenario from the aforementioned categories, depending on the situation.

• Investment Considerations in entering the Merger/Acquisition/JV agreement
  • Evaluate price to acquire (use back-of-the-envelope Valuation techniques to consider whether the deal is reasonably priced, such as those based on Comparable Company Analysis or Precedent Transaction Analysis)
  • Perform Target company-specific analysis
    • Market position
    • Customer Concentration and customer certainty
    • Supplier relationships and supplier certainty
    • Barriers to Entry
    • Reputation and brand loyalty
    • Product/regulatory/technology risks
  • Compute expected profitability resulting from acquisition
    • Pay-Back Period/Net Present Value/Internal Rate of Return based on current operations and growth estimates
    • Add in Cost or Revenue improvements from Synergies (see below)
    • Subtract out Integration and Restructuring expenses (also determine whether the project is feasible)
    • Compare with similar projections if the Company were to endeavor to grow organically (required capital expenditures, cost of marketing strategy, etc.)
  • Estimate Synergies
    • Ability to combine or leverage joint distribution channels across products produced by acquirer or target
    • Value of expending geographic/market reach
    • Cost synergies (such as spreading overhead costs across a larger combined business or combining redundant IT systems)
  • Evaluate other transaction dynamics
    • Strategic fit
    • Cultural challenges
    • Competitor response
  • Assess the medium-to-long-term plan for the acquisition
    • Plan to exit (if relevant—note that this will always be relevant for Private Equity firms)
    • Plan to restructure the organization, if any, and how/why

Start-Up/Early-Stage Venture

While consulting firms rarely work for Start-up companies due to the high fees typically charged, there are increasingly Case Study questions that discuss start-ups. Some Consulting firms have even begun the practice of working for Start-up companies and receiving equity compensation from the Start-up in exchange for reduced cash Consulting fees.

Importantly, this topic is in many ways covered when thinking about a company entering a new market or developing a new product, although there are usually some additional issues to consider for a Start-up company. (Most of these additional issues fall into the “Business Plan” category for a Start-up company.) Additionally, there is generally significant overlap with the industry landscape section.

Example Case Situations

• Two real estate entrepreneurs are contemplating setting up a co-working space in downtown Chicago to attract the increasing number of young IT entrepreneurs in the area.  Discuss the key considerations for a business plan for such a venture.
• Siggi, a student from Iceland at Stanford University, has determined that there is an enormous opportunity for Icelandic-style yogurt in the North American market. He is in the process of securing funding to produce the yogurt on a farm in Oregon and would like input regarding the key considerations for the yogurt to be a success.

Core Concepts and Structure

Situation: A potential client has launched a new company to develop a new product or technology that is expected to have positive yet disruptive consequences for a particular market or industry. The client would like your advice regarding specific issues in the company development or product rollout, and any thoughts regarding optimal company strategy.

• Market Landscape
• Competitive advantage/Barriers to Entry (with a Start-up, this is a crucial piece of the analysis—can the Start-up enter the market successfully? Will the Start-up will have some sort of competitive advantage, whether it be proprietary technology or access to particular distribution channels?)
• Current market size (if the product a new concept, then you would typically be asked to assess the industry of a substitute product or service, or use relevant comparable products or services to estimate the potential market size for the new concept)
• Future market growth
• Key competitors in the market, their strategy, current market shares and shares over time, product differences and potential response to entry
• Likely customers and customer mix (a.k.a. Customer Segmentation)
• Industry-wide profitability (to the extent applicable)
• Supply chain: who are the key suppliers to the industry? (Assess this only if relevant)
• Brand loyalty
• Technology, regulatory issues, or other key topics relevant to the product or market
• Business Plan (the interviewer might ask you to compile a very simple business plan, after he or she gives you some information; key components are given here)
• Product/Service
• What is the product/service? What are pros and cons of this product/service? How does this compare to existing products on the market?
• What will be the competitive advantage and/or barriers to entry for a product of this type?
• Customers and Distribution
• Who are the target customers?
• What are the core distribution channels?
• What is the marketing plan?
• Financing/Profitability
• What are the initial funding requirements prior to cash flow Break-Even? How does this compare with expected future profitability?
• What are the projected Revenue and Costs for the next three years?
• Management and Oversight
• Management: experience and abilities
• Preliminary Investors: reputation, expertise, and ability to add legitimacy to the new enterprise (and potentially invest more in the company)
• Key Directors and Advisors

Being able to discuss the core aspects of analyzing a Start-up company highlights your ability to quickly answer questions about a new project or idea that may be thrown at you when you are with clients.

Additional Resources

There are a number of guides published and online that attempt to discuss different types of Consulting Case Study questions in a comprehensive and informative way. Our feeling is that most of them are not particularly helpful or are too expensive. There are two, however, that we have found to add quite of a bit of value as an “add-on” to the discussion above, and are therefore worth checking out. Please comment on this page or email us directly if you have a suggestion for an additional resource:

• INSEAD Consulting Club Handbook (see pp. 47-53 for discussion of different Case Study Types)
• Crack the Case System by David Ohrvall

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