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BIG RED CASEBOOK

2003 Edition
The Consulting Club
Johnson Graduate School of Management
Cornell University
www.jgsmconsulting.com
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
Table of Contents
Table of Contents............................................................................................................................... 2
INTRODUCTION.................................................................................................................................. 1
ANATOM O! A CONSULTING INTER"IE#.................................................................................... 1
INTER"IE#ING STRUCTURE BASICS.............................................................................................. $
THE CASE INTER"IE#....................................................................................................................... %
STRUCTURED &ROBLEM SOL"ING................................................................................................. '
E(te)nal Cons*lt+n, Co-.an+es/.................................................................................................... 10
!RAME#ORKS TO USE................................................................................................................... 11
CASE &RACTICE IN!ORMATION ................................................................................................... 22
SAM&LE CASE/ NE# AIRLINE ROUTE ESTABLISHMENT..........................................................21
UNITED STATES &OSTAL SER"ICE............................................................................................... $0
SHORTSTO& TO !IRST.................................................................................................................... $1
M2M CASE......................................................................................................................................... $2
BOOK ON CHINA............................................................................................................................... $$
REAL3ESTATE DI"ESTITURE.......................................................................................................... $1
&HARMACEUTICAL &RICING.......................................................................................................... $4
HAMMERJACK.................................................................................................................................. $%
MAJOR BANK.................................................................................................................................... $5
"IDEO RETAILER.............................................................................................................................. 11
SOA& !LAKE MANU!ACTURER...................................................................................................... 1$
JAM COM&AN................................................................................................................................. 16
LET7S GO8.......................................................................................................................................... 1%
DE&ARTMENT STORE...................................................................................................................... 15
TELE&HONE RE&AIR AND SER"ICE.............................................................................................. 6$
RAILCO.............................................................................................................................................. 6%
E9ISTING AIRLINE ROUTE AC:UISITION..................................................................................... 65
CABLE O&ERATIONS IN A; an< NM............................................................................................... 40
T&ICAL BANK................................................................................................................................. 42
CANADIAN TIMBER COM&AN....................................................................................................... 4$
C)e<+t Ca)< &)of+tab+l+t=.................................................................................................................... 41
BANK LOAN O&ERATIONS.............................................................................................................. 44
SUNDA CIRCULAR......................................................................................................................... 45
AMERICAN E9&RESS....................................................................................................................... %$
DIRECT MARKETING !IRM.............................................................................................................. %'
NABISCO............................................................................................................................................ '0
MOBIL/ RETAIL SALES O&ERATIONS........................................................................................... '2
COOL #HI&....................................................................................................................................... '$
!RANK7S CHEESE............................................................................................................................ '6
ENTERING MARKETS ABROAD...................................................................................................... '%
SCAN AIR........................................................................................................................................... 50
NE#S&A&ER SUBSIDIAR "ALUATION........................................................................................ 51
&ETROLEUM COM&AN SU&&LIERS............................................................................................. 52
Ben>a-+n Ca).et................................................................................................................................ 51
BAB BELL DI"ERSI!ICATION....................................................................................................... 54
GLASS MANU!ACTURING U&GRADE............................................................................................ 5%
AUTO &ARTS BUSINESS ENTR.................................................................................................... 55
REGIONAL BANK GRO#TH STRATEG...................................................................................... 100
CONGLOMERATE ROIC INCREASE.............................................................................................. 101
CONSECO........................................................................................................................................ 10$
INSURE ME8..................................................................................................................................... 104
A........................................................................................................................................................ 10%
SO!T#ARE DE"ELO&MENT !IRM............................................................................................... 105
GERMAN MARKET E9&ANSION.................................................................................................... 111
MICROELECTRONIC &LACEMENT LABS ?M&L@ INC..................................................................11$
SENATOR HARR REID................................................................................................................. 116
COCA3COLA AD"ERTISING........................................................................................................... 11%
2003 The Johnson School Consulting Club
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
SUNTAN LOTIONS.......................................................................................................................... 115
ADDITIONAL CASE :UESTIONS................................................................................................... 12$
2003 The Johnson School Consulting Club
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
INTRODUCTION
For incoming MBAs, the consulting case intervie often comes across as one of the most daunting
obstacles in the MBA recruiting !rocess" #t can be, if you let it" #t can also be a ma$or obstacle to
recruiting success if ta%en too lightly" &oever, ith !ractice a case intervie is nothing more than to
!eo!le logically or%ing out an interesting business !roblem" This caseboo% is intended to hel! facilitate
the !re!aration !rocess"
#n a s!lendid e'am!le of inmates running the asylum, the collective intervieing isdom in this nely
revised edition as com!iled by second(year MBA students )class of *++*, in the Consulting Club of the
Johnson Graduate School of Management" Source materials for this edition include recent !resentations
and case(!re!aration or%sho!s conducted by consulting firms recruiting at JGSM, the JGSM Career
Services -ffice, and consulting firms. intervieing materials" /e also gratefully ac%noledge members
of the JGSM classes of 0112(*++0, ho created the !revious editions from hich this one is based"
/hy Case #ntervies3
&ighly refined analytical and communications s%ills are critical in consulting, and the case intervie is a
great ay for intervieers to get candidates to demonstrate their abilities 4uic%ly" But the case is only
one !ortion of the consulting intervie !rocess" The overall !rocess is intended to anser these
4uestions5
Can the candidate do this job? The candidate has to demonstrate su!erior analytical and
communications s%ills in res!onses to informational as ell as case 4uestions"
Does the candidate want this job? The candidate.s overall career storyline should match the $ob"
Additionally, the candidate has to sho strong interest in 0, consulting and *, the s!ecific firm, as
demonstrated by his or her 4uality of 4uestions and %noledge of the firm"
Would the candidate fit in? This re4uires a 4ualitative assessment of !ersonality, intervieing style,
social s%ills and !oise"
Case intervies are intended to bring out ansers to these 4uestions" &oever, consulting firms rely on
significantly more information sources than $ust intervie !erformance" -ther areas include the
im!ression candidates ma%e during informal !resentations and rece!tions6 in!ut on first(years by
second(year MBAs ho interned at that firm6 feedbac% from !rofessors and TAs6 and, of course,
resumes and cover letters" 7our !erformance in these non(intervie areas is by no means the sole
criterion that firms use, but doing ell in them ill hel! hen firms begin ma%ing recruiting $udgments"
ANATOM O! A CONSULTING INTER"IE#
The ty!ical consulting intervie for a summer internshi! consists of to rounds" For the first round, you
ill normally intervie ith to consultants from the firm, one consultant for each intervie" #f you do
ell, you ill be invited bac%, often the ne't day, for a second round of intervies" #n the second round,
you may have to or three intervies ith different consultants"
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For !ermanent !ositions, the consultancies ill usually have three rounds rather than to" The third
round ill !robably be at your desired office" 8ach intervie lasts from 9+ to :; minutes" The first half
of the intervie may consist of 0; minutes of informal discussion or behavioral 4uestions, folloed by a
case"
<ersonal #ntervies
The %ey to !erforming ell in the !ersonal intervie !ortion is !re!aration" 7ou need to antici!ate the
4uestions your intervieer ill as% and have a story that incor!orates your s%ills and ties them to your
desire and 4ualifications to be a management consultant ith the firm you are !ursuing" -verall, you
should have a smooth argument for hy you ant the $ob, ith a flo of5
Ma$or <ost(undergraduate or% e'!eriences /hy JGSM3 /hy consulting3 /hy this firm3
Be careful ith using a non(linear argument )e"g", start ith business school, then cover other ste!s,"
=emember that your intervieer is li%ely seeing many candidates in a day and may not have the
!atience to follo needlessly clever ansers to basic 4uestions" Save your creativity for the case"
Because you may or may not have time to deliver a com!lete narrative covering your e'!eriences to
date, you should have ingrained in your mind some fundamentals5
>no yourself
>no the firm
?isten ell
now !ou"self
7ou need to create a storyline for yourself" /ho are you3 )e"g", education, e'!erience, interests, /hat
do you do ell3 )e"g", focus on three s%ills you have e'!ertise in", /hat do you ant to do3 )This
should be tailored to the audience", &o has your life develo!ed such that a $ob ith Firm @ is the ne't
logical ste! in reaching your goals3 The ansers to these 4uestions should !aint a !icture to your
intervieer that is not only desirable, but also s!ecific, concise, and memorable" Also %ee! in mind that
any discussion of your bac%ground li%ely on.t be one(ay, from you to your intervieer" 7ou need to be
able to al% through the items on your resume and fill in the details"
now the #i"m
To get you started, the folloing are a list of 4uestions that may hel! your evaluation !rocess" They are
useful to %no, but you may come across as not having done your homeor% if you as% them during an
intervie" This information is readily available in consulting(firm ebsites as ell as in the management
consulting guides and firm !rofiles sold by online resources such as Aault and /etFeet <ress" Also don.t
miss the com!any !resentations !rior to recruiting season" >ey areas to ta%e a loo% at5
&o is the firm structured3
/here do they have offices3
/hat is the firm.s business focus3 )strategy, o!erations, etc",
/hat is the firm.s client ty!e3 )siBe, e"g", Fortune ;++ or startu!s, and industry s!ecialties,
&o does the firm fit intoCaffect my career goals in the short( and long(term3 )Both inside and
outside the firm,
/hat is the firm.s onershi! structure3 )Dote that this is a !articularly relevant to!ic for the several
firms that have gone !ublic recently",
?ifestyle3 Dumber of days inCout of office, hoursCee%, travel3
/hat is the financial !ac%ageCfringe benefits3
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/hat !ercentage of summer(hires get full(time offers3 /hat !ercentage acce!t3
&o fast has the firm groth been over the !ast fe years3 /hat are the im!lications of that groth
)or lac% of groth,3
The folloing are !ossible to!ics that you might address ith 4uestions that are s!ecific to the firm"
&o does the firm staff for engagements3 =egionally, nationally, internationally3 #n reality, is
staffing a somehat self(managed !rocess3
/hat are the entry(level !osition res!onsibilities3 Case leadershi! res!onsibilities3 &o many
engagements is a consultant on at a time3
/hat is the career !rogression !ath and timeline for the firm3
/hat is the nature of the firm.s training and develo!ment3 &o is staffing balanced to incor!orate
the needs of the firm, client, and !ersonal develo!ment of the consultants3
/hat is the engagement design3 Team siBe, client involvement, engagement length, team
hierarchy and ma%e(u!3
/hat are the !eo!le li%e3 &omogenous, diverse, individualistic3 Stronger 4ualitative or 4uantitative
)Edata(drivenF,3
/hat is the culture of the firm3 8ntre!reneurial, structured, client focus, em!iricalC analytical3 U! or
out3
Gescribe a ty!ical ee% at the office"
Go you see the focus of the firm shifting in the future3 )a!!licable to niche consultancies,
Go you have a mentoring !rogram3
&o does the firm s!read %noledge internally, es!ecially among dis!ersed offices3
$isten Well
Go to the com!any !resentations and ta%e notes" =emember a fe highlights from the cor!orate
!resentation" /hat are the buBBords they use to describe the !eo!le they hire and the or% they do
)e"g", is their client or% called a case, an engagement or a study," #n the intervie, !ay attention to your
intervieer" /hat ma%es them loo% interested3 8laborate on these as!ects of your !rofile"
7ou may have already met your intervieer !reviously at com!any !resentations or rece!tions, but even
if you have had a good ra!!ort ith them do not be overly casual during an intervie" Alternately, in the
event that you have trouble reading the !erson, mirror them"
INTER"IE#ING STRUCTURE BASICS
Use the folloing thought !rocess hen ansering any intervie 4uestion5
Listen. Actively listen to each ord the intervieer says" Ma%e eye contact but don.t ma%e your
intervieer uncomfortable by staring him or her donHloo% aay occasionally" Gon.t try to Ebutt inF and
anser the intervieer.s 4uestion before he or she is finished"
Reflect. Ta%e a moment to thin% about the 4uestion and the %ey facts relevant to ansering it" A fe
seconds of silent thought and a ell(delivered anser are much better than a rambling 4uic% res!onse"
Organize. Structure and !rioritiBe the relevant issues you.ve come u! ith into a decisive conclusion"
Delier. Fundamentally, a good anser is nothing more than telling a smooth, logical story"
Use your best $udgment" #t.s safe to say that E&o.s it going3F !robably doesn.t arrant a three(!art
anser" ESo ho did you li%e living in BraBil3F might re4uire a more thoughtful res!onse" <roviding an
unstructured anser to even an innocuous 4uestion ill at best irritate your intervieer and at orst o!en
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BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
u! an unscheduled string of !robing 4uestions into sub$ects you !robably ould rather not s!end
!recious intervie time on"
<ersonal #ntervie Iuestions
The folloing list of 4uestions may seem daunting at first" &oever, !erha!s li%e business school
essays, the additional 4uestions become easier once you develo! a feel for ho you ant to !ortray
yourself" 7ou may ant to rite don some basic themes to refer to laterHthe res!onses and e'am!les
you thin% u! initially may not be as easy to remember once recruiting season heats u!"
%e"sonal
Tell me about yourself" &o ould you describe yourself3 &o ould others )a coor%er or
classmate, describe you3
/hat are your geogra!hic C industry !references3
/hat.s the most im!ortant thing not on your resume3
&o long ould you stay ith the com!any3
/here else are you a!!lying and hy3
/hat %inds of things do you orry about3
Are you illing to ta%e calculated ris%s hen necessary3
Are you a EdetailsF or Ebig !ictureF !erson3 /hy3
/hat do you do for fun3
#it with consulting
/hy consulting3 /hy this ty!e of consulting3
/hy this firm3 Gescribe hat ma%es this firm different and attractive to you"
/hat ould you li%e most about being a consultant3
Dame three reasons you stand out from all of your talented classmates ho also ant to or% in
consulting"
/hy do you thin% you ould ma%e a good consultant3 /hat s%ills do you have that are relevant to
consulting3
/hat do you thin% about s!ending a lot of time on the road3
Can you or% under !ressure and ho do you handle tension3
7ou have been given a !ro$ect that re4uires you to interact ith different levels ithin the com!any"
&o do you do this3 /hat levels are you most comfortable ith3
/ith your bac%ground and your interest in consulting, hy don.t you have more academic honors3
&ave you had any contact ith !eo!le or%ing as consultants ith our firm3
/hat do you forecast for our firmC industry in the future3
#f you ere offered the $ob right no, ould you ta%e it3 /hat are your criteria for selecting a
consulting firm3 #f you receive multi!le offers, ho ill you decide3
/here do you see yourself in three years3 Five years3 0+ years3
Job&s' befo"e ()school
/hat.s the most interesting business !roblem you.ve faced in a !revious $ob3
/hat did you li%eCdisli%e about your last $ob3
Tell me about the last time you felt anger on the $ob"
/hat are some of the things about hich you and your su!erior disagree3
/hat ty!es of decisions did you ma%e on your last $ob3
#n your last $ob, hat ere some of the things you s!ent most of your time on, and hy3
/hy did you choose your !revious field3
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BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
/hat did you learn from your !revious $ob)s, that you can a!!ly to this !osition3
7ou had a great $ob" /hy did you 4uit3 Are you sure you ill not go bac%3
Tell me hy you changed $obs before b(school )if a!!licable,
/ith hindsight, ho could you have im!roved your !erformance3
/hat ould your references say3
Choice of School
/hy Cornell3 /hy are you studying your chosen field of study3 /hat have you learned3
/hat is your concentration3
/hat is your G<A3 7our GMAT score3 Be ready to e'!lain if it.s belo average"
#.d be interested to hear about some things you learned in school that could be used on the $ob"
Summe" Job
Tell me about your summer"
/ere the recommendations you made to your summer em!loyer ado!ted3
7ou had a great $ob" /hy did you 4uit3 Are you sure you ill not go bac%3
*iscellaneous
/hy should # invite you to a !arty3
&ave you done the best or% you are ca!able of doing3
See this !en #.m holding3 Sell it to me"
#.m not sure you are suitable for the $ob" /ouldn.t you feel better off in another firm3
/here ould you ran% yourselfJ to! 0+K, *+K, or here3
/hat boo%s have you read lately3 /hat !eriodicals have you read3 Gescribe hat you learned"
+,am-le . Situation
/hat are your to! three strengths and ea%nesses3
Giscuss the most im!ortant event in your life"
/hat is the most difficult thing you have ever had to do3
Gescribe a s!ecific e'!erience demonstrating a valuable lesson )in or% and in school,"
/hat is your !hiloso!hy toard leadershi!3
/hat have you done that demonstrates leadershi!3
/hat have you done that demonstrates teamor%3
/hat accom!lishmentCs are you most !roud of3
Gescribe a situation hen you had an im!act on your organiBation or !eers"
&ave you ever had to com!romise your ethics3
Gescribe a or% situation that as difficult" Gescribe a time hen you or%ed ith a difficult
coor%er"
Gescribe an e'!erience here you failed" /hat did you learn3
&ave you ever encountered a situation in hich you ere rong3 /hat did you do to correct your
anser3
Give me an e'am!le of hen you led a team to achieve a ma$or goal"
Give me an e'am!le of hen you had to sell one of your ideas"
Give me an e'am!le of hen you had to ma%e a ma$or !resentation"
Give me an e'am!le of hen you had to confront a co(or%er C teammate about !erformance"
Give me an e'am!le of hen you received negative feedbac% and ho you handled it"
Give me an e'am!le of hen you a!!lied you technical %noledge to solve a !roblem"
Give me an e'am!le of hen you came u! ith an original idea"
Give me an e'am!le of hen you learned something ne and a!!lied it to solve a !roblem"
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Give me an e'am!le of hen you or%ed ith a difficult !erson"
Give me an e'am!le of hen you had to lead ithout authority"
Give me an e'am!le of hen you too% a ris%"
Give me an e'am!le of hen you shoed initiative"
Give me an e'am!le of hen you demonstrated creativity"
Give me an e'am!le of hen you or%ed effectively ith u!!er management"
Another hint5 /hen you are as%ed anything )other than small tal%,, the underlying 4uestion is E/hy
should e hire you3,F and you should anser each 4uestion in that ay" 7our ansers must be concise
and com!elling, and must relate to hy you ould be a great consultant" <osition your ansers to reflect
ho you are, but ma%e sure that they anser the 4uestion"
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BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
THE CASE INTER"IE#
This section ill first go through hat intervieers usually are loo%ing for during case intervies, then
outline the different case categories" #t then ill cover structured !roblem(solving and some s!ecific
analytical frameor%s that may be useful in solving case !roblems"
Broad #ntervie Themes
There are a number of different case(intervie ty!es, each ith their on analytical a!!roaches and
flos" &oever, there are some common themes that intervieers are loo%ing for in candidates5
Big(!icture thin%ing L Can you recogniBe the conte't of !roblems3
<roblem solving s%ills L Can you solve !roblems, do you have brain!oer3
Focus on adding value 4uic%ly L /hen !resented ith a !rofitability !roblem, do you first start ith
the fi' that affects *K of revenues or the one that affects ;+K of revenues3
Iuantitative s%ills L Are you comfortable ith numbers3
<resentation s%ills L Are you articulate, do you communicate ell3 Are your ideas ell organiBed3
<oise and !rofessionalism L Go # trust you to re!resent my firm in front of clients3 Go you have
Mstreet smarts. and the ability to o!erate in grou!s ade!tly3
Firm fit L Go # li%e you3 &ave you established ra!!ort3 Go you sho drive and energy3
8'!ertise L Go you offer something others do not3
As you !ractice your cases, remember to %ee! these attributes in mind" &oever, don.t try to force
things either" For e'am!le, if a case is clearly 4ualitative, don.t aste time doing needless 4uantitative
analysis" The same a!!lies to using your career bac%groundHif it.s a mar%eting case, you might not
need to fall bac% on your investment ban%ing or engineering e'!erience in solving it" Be ob$ective in
your thin%ing"
Classifications
There are several broad case ty!es that firms tend to use5
General !"siness case. These are business !roblems such as, E7our client is a manufacturer
loo%ing for guidance on entering the soccer ball mar%et"F These usually re4uire lots of interaction
ith the intervieer, and often guidanceHif the intervieer tells you not to go in a certain direction,
don.t go that ay" These cases are idely used by most firms"
#ar$et sizing%&at' case. E&o many light bulbs are there in #thaca3F These can either be a
limited(interaction, short(duration analytical test, or inserted into a general business case" 8ither
ay, ansers need to be structured and reasonable" For e'am!le, do you thin% your carefully
crafted conclusion of ;++ million light bulbs in #thaca "eall/ ma%es sense3 #f it doesn.t, the only true
mista%e you can ma%e is not revieing your analysis and correcting your error" Also be sure to
e'!lain verbally each ste! of your analysis so that your intervieer can follo your thin%ing"
Res"&e cases. These ty!ically are general business cases triggered by a resume item" )E# see you
or%ed for General Motors" /hat do you thin% their outloo% on electric vehicles should be3F, Be
alert for these, since they can s!ring u! unannounced during an informational intervie"
Brain teasers. E/hy are manhole covers round3F These aren.t ty!ically used but, !redictably, are
intended to test creativity and analytical thin%ing" )To get started on that !articular !roblem, thin%
about the conte't in hich a manhole cover is used as ell as hat it attaches to",
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BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
STRUCTURED &ROBLEM SOL"ING
There are a number of ays to a!!roach ambiguous !roblems in business cases" Given the time
constraints of intervies, hy!othesis(based a!!roaches or% ell" Some suggested methods are belo"
0, (nderstand t'e iss"es. As the intervieer describes the case, ta%e notes" As% yourself hat the
%ey issues the com!any.s general management is facing" ?oo% for a fit ith the general !atterns of
business !roblems" As% for clarification, but don.t get bogged don in details before you.ve e'!lored
other areas that may be im!ortant"
*, Str"ct"re. Ta%e the time to develo! a cris! hy!othesis based on the initial information" State your
hy!othesis and ho you !lan to test it based on an analysis of the com!onent !ieces of the !roblem"
9, Anal)ze. Address issues one at a time" <rioritiBe your data needs by starting ith the most im!ortant
issues, since you may not have time to go through them all" Use facts and numbers to develo! an
argument, and listen for cues" #f the intervieer says, Enice !oint but move on,F follo the advice"
:, Iterate. As you build an understanding of the !roblem, you may need more detail" Test your
hy!othesis given the ne information" >ee! coming bac% to chec% that you are addressing the
4uestion you ere as%ed"
N, Concl"de. SummariBe all the o!tions before ma%ing a definitive conclusion" State the tradeoffs and
be fact driven" Ma%e sure your recommendation relates bac% to the original !roblem"
The folloing are to gra!hical de!ictions of structured !roblem solving"
2003 The Johnson School Consulting Club &a,e '
Understand the
issues
Structure the
!roblem
<ic% a branch to
analyBe
Give dee! ith a short,
logical 4uestion se4uence
SummariBe the facts vs"
your hy!othesis
Ma%e a conclusion
!+nal AonAl*s+on an<
)eAo--en<at+ons

Sou"ce0 *cinse/
Clarify !roblem Gecom!ose
!roblem
State hy!othesis Test hy!othesis
Findings and
recommendations
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
Common <itfalls
7our case intervieing should become smoother ith !ractice" Along the ay, there are some common
errors in structuring and delivering an argument that are easy to avoid by doing these things5
*)+ot'esize" -nce you have the basic facts of the case, createHand stateHa hy!othesis that ill
anchor your big(!icture thin%ing and !roblem(solving logic" Dot having one at all means that your
4uestion se4uences ill be scattered and unstructured" &aving one but not stating it is marginally
better but ill leave your intervieer ondering here you are going ith your 4uestions"
,er!alize" At all times, tell your intervieer your thought !rocess" For any 4uestion, e'!lain hy it
is you ant the information"
Big-+ict"re anal)sis" #n going through any case, focus on value and results" Gemonstrate your
business intuition" As a !art of your analysis, ma%e sure you give the intervieer hat he or she
as%ed for" #f your intervieer gives you an e'!licit 4uestion, anser it directly"
.i&e &anage&ent" This is closely related to creating a hy!othesisHbarring a luc%y 4uestion,
analysis that has no structure ill burn more time" As a !art of time management, ma%e sure not to
get caught in the details of a case either" <rioritiBe the to! three )or so, issues, and don.t ramble into
subordinate ones"
Concl"sion" #t is easy to describe the relevant facts and findings of a case, but creating insights
based on those facts is much more difficult" Ma%e sure your conclusion is based on thoughtful
analysis of the facts, rather than a rehash of them"
The conclusion deserves s!ecial attention since it should encom!ass the results of your carefully
structured hy!othesis and logic" #n addition to the insights you may dra from the details of the case,
there are some basic business considerations you should ac%noledge as ell5
/rofita!ilit). Although our socially minded 8uro!ean friends might 4ualify this statement somehat,
the fundamental goal of a business is to ma%e money" As a result, any conclusion you ma%e in a
business case should have anything from a sim!le !rofitability statement )EThis recommendation of
course ould be sub$ect to a thorough ca!ital budgeting analysisF, to a full(scale D<A calculation"
?oo% to your intervieer for guidance on the e'tent of the analysis"
I&+le&entation. Any conclusion you ma%e should consider to im!lementation issues5 0, Can the
client actually do hat you are suggesting3 )e"g", do you "eall/ thin% a small holesale food(service
business can return to !rofitability by creating a B*B e'change3, *, #f the recommendation is indeed
reasonable, hat ste!s ill the client have to ta%e to im!lement it3 )e"g", to im!lement this, the
client should conduct a mar%et analysis and !ilot !rogram6 then invest in a first !hase of
infrastructure, then""", The e'tent to hich im!lementation is im!ortant de!ends on your intervieer
and the ty!e of firm" Ma%e a $udgment call on ho much im!lementation to cover as ell6 you li%ely
on.t have time to cover a lot of issues" #n all cases, bias your anser toards hat the client
should do ne't"
A final ord on conclusions5 7ou may never get to one" 7our intervieer may end the case abru!tly and
in mid(stream, ithout any o!!ortunity for final ords" #f you have already created a clearly articulated
hy!othesis bac%ed by ell(e'!lained and relevant 4uestions, this scenario shouldn.t be too troubling" A
second alternative is for your intervieer to interru!t you in the midst of your analysis and as% you to
ra! it u!" #n this instance, having identified the %ey issues of the case so far ill hel! immeasurably in
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BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
creating a 4uic%, cris! analysis of the im!ortant issues at hand" &urrying through a stream of
undifferentiated facts from your scribbled intervie notes on.t lead you to the same results"
E(te)nal Cons*lt+n, Co-.an+es/
Accenture
A"T" >earney
American Management Systems
Arthur G" ?ittle
Bain O Co"
Bearing <oint
Boston Consulting Grou!P
BooB Allen O &amilton
Braun Consulting
Ca! Gemini 8O7
Cambridge Strategic Management Grou!
Com!uter Sciences Cor! )CSC,
Geloitte Consulting ??<P
8merald Solutions
&eitt Associates
&oard Consulting Grou!
#BM Consulting
>urt Salmon Associates
Mains!ring
Mc>insey O Co"
- O * Consulting Cor!oration
<e!!ers O =ogers
<erot Systems
<ittiglio =abin Todd O McGrathP
<riceaterhouseCoo!ers ??<
=aBorfish
Sa!ient
Toers <errin
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BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
!RAME#ORKS TO USE
The secret to !erforming ell on case intervies is to use frameor%s as guidance, not an e'haustive
chec%list" A frameor% is a ay to !rom!t you to e'!lore certain areas, as% good 4uestions, and
maintain a structured thought !rocess" >ee! in mind that no list is com!lete" /hile you should not rely
on the frameor%s L they are no substitute for an actual anser L they are very useful" Go not use a
frameor% e'!licitly" The tric% is to !erform naturally, guided by a sense of logic, not as if you are
merely folloing a chec%list )they don.t !ay MBAs to follo a list, they !ay them to thin%," 8ventually,
you ill internaliBe these frameor%s and learn to use them naturally as you thin%"
The folloing !ages illustrate some of the classic case(intervie frameor%s" Dote that !rofitability,
mar%eting, and strategy cases, in some instances, involve more than one ty!e of frameor%" For
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BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
e'am!le, a mar%eting analysis may !oint toard a !roblem in !rofitability" #n the intervie, you ill be
e'!ected to consider all of these dimensions in a com!lete case solution"
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BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
Three CQs5 Customer ( Com!etition ( Com!any
This frameor% is sim!le but all(encom!assing, and is a good ay to get your analysis started" As you
!ractice cases, begin to develo! a series of !otential 4uestions related to each RCR that ill hel! you to
drill don further toards the root causes of the !roblem at hand" A ord of caution5 7our intervieer
ill %no this frameor% !robably better than you do so don.t bore him or her by e'!licitly al%ing
through each category" Mas% it as a !art of an overall analysis" Additionally, if the intervieer gives you
a direct clue li%e, E-ur customers love us,F ta%e the hint and move on" The folloing list is an illustrative
set of drill(don 4uestions for each category"
CUSTOMER
#ndividual
/ho is the customer3
/hat is the unmet need3
/hich segments are eCshould
e target3
Are they !rice sensitive3
<erce!tions
?oyalty
Aolume
Sitching costs
<rofitability of customer
Consumer !references
<urchase behavior
Usage
Mar%et
SiBe
Groth
Segmentation
Shares
Maturity
Trends
<roduct
<rice
Gifferentiation
?ife cycle
Technology
Substitutes
COM&ETITION
#ndustry analysis ); Forces,
SiBe, number of com!etitors,
mar%et share
/hat are strengthsC
ea%nesses3
COM&ETITION ?Aont.@
&o many are there and ho are they
concentrated3
Com!etitor.s res!onse
Current strategy" Strategic value of !roduct and
commitment to !roduct
Cor!orate goals
Ca!abilities
8conomies of scaleCsco!e
Cost structure
8'!erience curve
=esources
- Financial
- Channels
- -rganiBation
- #ntangibles )brand loyalty, culture,
Mar%et structure
- =elative !roduct !ositioning
- Substitutes
COM&AN ANALSIS
8conomics
Costs
<rofitability
Ca!acity to develo! !roduct
Ca!acity to !roduce !roduct
Brea%even analysis
8'!erience curve
Financials
Channels
-rganiBationCstructure
#ntangibles
- Fit
- Strategy and vision
- StrengthsCea%nesses
- Culture
- =esources
- Brand e4uity
- Core com!etencies
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BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
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<rofitability Analysis
This analysis is integral to nearly every case discussion" For e'am!le, once you %no mar%et
siBe and !atterns )customer,6 hat other com!anies are going for those customers )com!etition,
and your client.s ca!abilities )com!any,, a !rofitability analysis is a !otential screen for testing
hatever hy!otheses sha%e out of the 9Cs analysis"
As you %no, <rofit S =evenues L Costs" =evenues are sales !rice ' 4uantity sold, costs are
unit costs ' 4uantity sold, !lus indirect costs" The three ays to change !rofitability are to5
#ncrease revenue by increasing unit !rice
#ncrease revenue by increasing sales volume
Gecrease costs
This basic frameor% can be used if a com!any is e'!eriencing !oor !rofitability due to lo
revenues or high costs" #f it a!!ears to be more of a revenue !roblem, then it could be that the
com!any is selling too little or not getting enough !er unit sold" Alternately, if it is a !roblem ith
the number of units sold, then you can analyBe hy the com!any is selling feer !roducts" >ee!
in mind that a firm may have multi!le revenue streams, so !rioritiBe ith the most im!ortant one
and then move to subordinate ones"
<rofitability analysis and value(chain analysis )see the ne't frameor%, is often useful to conduct
together, since the latter frameor% ill hel! you identify the different com!onents of a
com!any.s cost structure" General areas to consider in analyBing a com!any.s !rofitability
include5
InA)ease ReBen*e
#ncrease unit !rice
Goes the firm have mar%et
!oer3
Consider demand elasticity
#s the !roduct differentiated3
&igher !rices of substitutes
Su!erior customer service
#ncrease sales volume
#ncrease mar%et share
<romotion
#ncrease groth
#m!rove technology
Find more efficient channels
Sell ne !roducts to current customers
Sell !roducts to ne customers
DeA)ease Costs
Understand cost structure of firm and try to
reduce ma$or costs first"
Cost reduction techni4ues5
#m!rove utiliBation of e4ui!ment )increase
volumes,
-utsource manufacturing
DeA)ease Costs ?Aont.@
Cost reduction techni4ues )cont",
Consolidate !urchasing
=elocate to loer cost areas
<artner ith distribution com!anies, e"g",
Federal 8'!ress
Strategic use of #T
Fi'ed vs" Aariable Costs
/hat are the main cost drivers3 /hich
costs can be decreased3 /hat are the
com!etitorsQ cost structures3
&o have our costs changed over time3
/hat is our ability to reduce each cost3
Girect costs
Materials
?abor )ages O benefits,
Cost allocation )e"g", factory overhead,
#ndirect costs
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#ncome statement items )SGOA, ca!ital
e'!enditures, de!reciation, =OG,
Cor!orate overhead
Ca.aA+t= Cons+<e)at+ons
8'!anding !roduction ca!acity is a consideration for a !rofitability !roblem" &oever, ca!acity
e'!ansion has some issues of its on5
(enefits of inc"eased ca-acit/ D"awbac2s of inc"eased ca-acit/ 1lte"nati3es
=es!onsiveness to future mar%et groth #ndustry or firm e'cess ca!acity -utsourcing, leasing, subcontracting
<roductivity enhancement -!!ortunity cost" Alays consider5
Gecrease in marginal cost P D<A and #== of e'!ansion
#ntroduction of ne technology P Brea%even analysis
Alternate uses of ca!acity P <aybac% !eriod
Aalue Chain Analysis
The value chain is a useful tool for identifying a com!any.s core com!etencies, as ell as the
com!onents of its com!any.s !rofitability and cost structure" #t can be a very useful tool for
identifying s!ecific areas to address as a !art of an overall !rofitability analysis"
TCe "al*e CCa+n
&)+-a)= AAt+B+t+es
#nbound ?ogistics5 receiving, storing, materials handling, arehousing, inventory control, vehicle
scheduling and returns to su!!liers"
-!erations5 transforming in!uts into final !roduct form )e"g" machining, !ac%aging, assemble,
e4ui!ment maintenance, testing, !rinting and facility o!erations,"
-utbound ?ogistics5 distributing the finished !roduct )e"g" finished goods arehousing, material
handling, delivery vehicle o!eration order !rocessing and scheduling,"
Mar%eting and Sales5 induce and facilitate buyers to !urchase the !roduct )e"g" advertising, sales
force, 4uoting, channel selection, channel relations and !ricing,"
Service5 maintain or enhance value of !roduct after sale )e"g" installation, re!air, training, !arts
su!!ly, and !roduct ad$ustment,"
Su!!ort Activities
<rocurement5 !urchasing of fi'ed assets as ell as consumable items such as ra materials and
su!!lies"
Technology Gevelo!ment5 %no(ho, !rocedures, and technological in!uts needed in every
value chain activity"
&uman =esources Management5 selection, !romotion, !lacement, a!!raisal, reards,
management develo!ment and laborCem!loyee relations"
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Firm #nfrastructure
&uman =esource Management
Technology Gevelo!ment
<rocurement
-!erations #nbound
?ogistics
Mar%eting and
Sales
-utbound
?ogistics
Service
<rofit
Margin
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
Firm #nfrastructure5 General management, !lanning, finance, accounting, legal, government
affairs, and 4uality management"
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BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
The Four <.s5 <roduct, <lace, <romotion, <rice
This frameor% is suitable for mar%eting cases" #t is not usually a!!ro!riate for beginning an
analysis since it is more s!ecific than other frameor%s such as the 9 Cs, but it can be very hel!ful in
develo!ing im!lementation ste!s"
&)o<*At
Must fit ithin !ositioning and mar%et segmentation )e"g" high end, lo end6 consumer, industry,
Gifferentiated good vs" commodity
Features and ca!abilities
=eliability, 4uality, brand name
<ac%aging, siBe
Service, arranties
&laAe-ent ?D+st)+b*t+on@
Channel )decision based on !roduct s!ecifics, level of control desired and margins desired,
Coverage, availability
#nventory
Trans!ortation
&)o-ot+on
(u/ing -"ocess
Consumer aareness for the !roduct
#nterest for the !roduct
Trial offers
?oyalty
Sales method
<ull ( generate consumer interest to !urchase
<ush ( generate merchant interest to sell
5 catego"ies of -"omotional effo"ts0
Advertising5 medium, reach )share of target mar%et reached, and fre4uency )number of times
reached,"
<ersonal Selling5 hen direct contact ith buyer is needed"
Sales <romotion
- #ncentives to consumer, sales force and channel members"
- Consumer incentives5 cou!ons, refunds, sam!les, !remiums, and contests"
- Trading force incentives5 sales contest, !oint of !urchase dis!lays, s!iffs )!ayments
to dealers,, trade shos, in(store demonstrations"
<ublic =elations and !ublicity
Girect sales
&)+Ae
/hat strategy3
- MC S M=
- s%im )high !rice, ma%e !rofits no,
- !enetrate )lo !rice, gain mar%et share,
See% volume or !rofits3 8stablish barriers to entry"
<erceived value, cost(!lus(margin !ricing3
&o does !rice relate to the mar%et, siBe, !roduct life(cycle, com!etition"
8conomic incentives to channel )commissions, margin,"
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BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
<orter.s Five Forces
This frameor% can be hel!ful for evaluating threats to !rofitability in an industry" The frameor%
analyBes the effect of each of the forces on an industry and the firm.s ability to achieve greater than
normal !rofits" The ob$ective is to find a !osition here the effects of these forces can be
minimiBed"
Geterminants for De 8ntrants
8conomies of Scale
<ro!rietary <roduct Gifferences
Brand #dentity
Sitching Costs
Ca!ital =e4uirements
Access to distribution
Government !olicy
#ncumbent reactions
Geterminants of Buyer <oer
Buyer concentration
Buyer volumes
Sitching costs
Bac%ard integration
<roduct differentiation
Iuality
Buyer !rofits
Geterminants of #ndustry Com!etitionC=ivalry
#ndustry groth trends
Macroeconomic sensitivity
Fi'ed costs
-verca!acity
<roduct differences
8'it barriers
?evel of standardiBation
Threat of Substitutes
<rice ceiling
<roduct technology
Consumer demogra!hics
<rice elasticity
8ase of sitching
Geterminants of Su!!lier <oer
Gifferentiation of in!uts
Sitching Costs
<resence of substitute in!uts
Su!!lier concentration
#m!ortance of volume to su!!lier
Threat of forard integration
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Su!!liers
#ndustry com!etition
Buyers
Substitutes
De entrants
(a"gaining %owe"
of (u/e"s
(a"gaining
%owe" of
Su--lie"s
Th"eat of 6ew
+nt"ants
Th"eat of 6ew
Substitutes
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
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BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
CASE &RACTICE IN!ORMATION
&o To Use These Cases
These !ractice cases are designed to simulate the case intervie e'!erience for you and a !artner"
7ou should !roceed as you ould in an actual intervie" This is your o!!ortunity to shar!en your
!resentation, analytical and other critical s%ills hile under fire" 7ou should have a !en and a !ad of
!a!er on hich to ta%e notes, and a natural but !rofessional dis!osition" =ead the 4uestion, but only
read the recommended solutions hen you have first e'!lored and e'hausted all !ossible ansers"
About The Iuestions
Many of the 4uestions !resented are ta%en from actual case intervies ith to! firms" -thers ere
develo!ed s!ecifically for this boo%" The 4uestions vary in sco!e and length, and cover a broad
range of industries and business !roblems" They are often intentionally vague" #t is u! to you to
define the !roblems !resented ithin the case materials" -nly through !ractice ill you develo! a
sense of the ty!es of 4uestions fre4uently as%ed" Ac%noledgements and than%s go to the res!ective
management consulting clubs of Chicago, Michigan, M#T, Stanford, Tuc% and /harton, from hich
some of these cases are derived"
About The Solutions
There are no correct solutions !er se, only effective and ineffective methods of investigating the
!roblem" The solutions !rovided are only recommended )and in some cases e only !rovide
information and no solution at all,, and !rovide you ith some guidance as to hat a ty!ical anser
might entail" Some may find the !ro!osed solutions to be inade4uate or factually incorrect" 7our
ansers may be better" #nformation !resented in the solutions is not necessarily correct or factual"
Solutions are often incom!lete" #t is u! to the intervieer to !rovide additional information" 7our
!artner, in administering the moc% intervie, should not necessarily adhere to the solutions too
strictly" #nstead, your !artner should be creative and fle'ible to %ee! the e'!erience real" /hile you
are being tested for your ability to structure a solution, do not sim!ly use a frameor% as a crutch"
/hile !racticing, learn to develo! your on methods and frameor%s" Finally, don.t memoriBe
ansers L hat you need are intervie s%ills, not ansers"
7our =ole As The #ntervieee
Conduct moc% case intervies as if they ere live" 7ou are a hunter sniffing for clues, a doctor
determining whe"e does it hu"t" Go not try to merely !rovide an anser to the 4uestion as%ed" 7our
goal is to investigate the 4uestion and e'!ose !roblems, then e'amine solutions" 7ou should
demonstrate your ability to assess facts, !rioritiBe information, organiBe lines of investigation, and
!resent a thorough and trans!arent thought !rocess" The !ur!ose of the case intervie is to test
your analytical and !resentation s%ills, and your mettle" =emain !oised, calm, and enthusiastic"
Dever lose your tem!er or your cool, $ust remain !rofessional and deal ith adversity" 7ou should
ma%e your thin%ing !rocess available to the intervieer" SChe should %no e'actly hat you are
thin%ing and hy" Too often, intervieees !rovide solid ansers to difficult 4uestions, but fail to
ade4uately e'!lain ho they deduced their conclusions or hy" As you !ractice, see% feedbac% on
many as!ects of your conduct, not merely hether or not you nailed the anser"
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7our <artner.s =ole As The #ntervieer
Conduct each moc% case intervie as you might a live intervie" Aary your degree of aloofness and
armth, and the hel! you !rovide to your !artner" Further, do not merely follo the suggested
solution6 use your creativity to fill in blan%s" But %ee! your !artner on trac% ith hel!ful hints" 7our
main goal is to simulate the case e'!erience for your !artner, and to !rovide meaningful feedbac%
that hel!s your !artner im!rove her intervie s%ills"
Ty!es -f Cases
/hen the case !ortion of the intervie begins, you can e'!ect to receive a descri!tion of a business
!roblem, ith varying amounts of related information" 7ou are e'!ected to ascertain, using
4uestions and ansers, the e'act nature of the !roblem, and to offer !ro!osed solutions"
S!ecifically, identify main issues and Edrill dee!erF to find the source !roblem" Then recommend
actions" This !ortion of the intervie may not begin ith clear Eready, set, goF command, so be
!re!ared to sitch into case(intervie mode" For e'am!le, sometimes the case may be based on an
item in your resume"
The ty!es of cases you may see ill reflect a variety of business !roblems" Many cases ill involve
one or more different ty!es of !roblems" Some ty!es of cases are as follos5
8stimation cases5 Getermine something you could not !ossibly %no by ma%ing reasonable
assum!tions about critical variables"
Mar%et siBing5 Getermine the siBe and attributes of a mar%et for a !roduct"
<rofitability5 AnalyBe changes in an o!eration.s !rofitability, revenues and costs
Mar%eting5 AnalyBe causes for stagnant or declining sales or groth
8conomics5 A!!ly basic economics conce!ts to understand mar%et and !ricing dynamics
/hat To >ee! #n Mind Guring Case #ntervies
?isten ell and loo% for hel!ful hints as the intervie !rogresses
Use !a!er and a !enC!encil )but as% first if it is o%ay to do so,
As% for a minute to thin% before you !roceed, reflect on the 4uestion and organiBe your thoughts
#dentify the !roblem ty!e, and determine hich frameor%s ill be hel!ful
Clarify the 4uestion and summariBe the business !roblem bac% to the intervieer
Getermine the main issues and focus on these )remember the 2+(*+ rule,
Gather information, assess its im!ortance, and follo only critical issues
As% 4uestions )related to the main issues,, and be ready to e'!lain hy the 4uestion as
im!ortant
Gra !ictures and diagrams, if hel!ful" The goal is effective communication
Ma%e your thought !rocesses trans!arent" That is, e'!lain hat you are thin%ing and hy at
every ste!
Maintain your !oise and !rofessionalism under A?? circumstances )remember, they may be
testing you,
Be action oriented and !rovide solutions that relate to the !roblems you have discussed
SummariBe, SummariBe, and SummariBeT
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BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
SAM&LE CASE/ NE# AIRLINE ROUTE ESTABLISHMENT
T/-e0 +stimation case
A -a>o) U.S. a+)l+ne +s Aons+<e)+n, establ+sC+n, neD )o*tes f)o- ToE=o to seBe)al s+tes +n
tCe Un+te< States. #o*l< =o* )eAo--en< tCat tCe= taEe tC+s aAt+onF #Cat +ss*es -+,Ct tCe
a+)l+ne enAo*nte)F
Solution Structure
As you may recogniBe, there is not a uni4ue solution to this 4uestion" /hat ill count is ho you
structure your res!onse, and if the ay you structured your res!onse enables you to give a concise
concluding recommendation" After a 9+(minute meeting ith you, ould a client be confident that
you could go out and come bac% to her ith a definitive recommendation in a matter of days or
ee%s3
Cla)+f= tCe &)oble-G TCen St)*At*)e It/
0
st
L /hat is the 4uestion you are as%ed3
1t this -oint7 /ou might as2 fo" some time to thin2 as /ou -u"sue the following0
*
nd
L Given that 4uestion, hat ill your anser loo% li%e3
9
rd
L Given you understand hat %ind of an anser you are loo%ing for, hat methodical a!!roach of
in4uiry ill generate that anser3
Time to di3e in0
:
th
L -nce you thin% you.ve got a good analytical a!!roach L describe your a!!roach to the
intervieer, then im!lement it"
1lte"nati3el/7 /ou might as2 se3e"al -"elimina"/ 8uestions about the case and.o" business
in3ol3ed befo"e /ou -ic2 /ou" a--"oach.
HoD to a..)oaAC tCe Aase
Gefine hat %ind of an anser you ill deliver5
7ou could !rovide a chec%list of criteria you ould use to evaluate the o!!ortunity
7ou could define a !rioritiBed decision tree
<ossibly, but less li%ely, the intervieer ould have s!ecific dollar values in mind, in hich case
you might define a s!ecific function to give a !reliminary recommendations or $ustifications for
further investigation"
Whate3e" /ou do7 be su"e to indicate what the main decision -oint will be &e.g.9 4 would "ecommend
this mo3e if its benefits outweighed its costs7 measu"ed in the bottom line.9'
/hat you do D-T ant to do is aim to give a definitive yes or no anser" Consider confirming ith
your intervieer that hat you have in mind as an anser matches their e'!ectations"
Def+ne =o*) a..)oaAC an< +-.le-entat+on .lan
Consider diagramming your a!!roach or riting out a chec%list of !oints you ill cover" ?egibility and
Etrans!arencyF ill also hel! an intervieer feel included and follo your logic"
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BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
!)a-eDo)Es tCat -a= be a..l+e< to tC+s Aase/
9 Cs5 Consider as%ing some of the 4uestionsCbringing u! the !oints listed in the table" <roceed in
an orderly fashion )i.e. focus on the com!any, then move to the customerCmar%et!lace6 don.t
bounce around more than necessary," A?/A7S let the intervieer %no hy you are as%ing
your 4uestion" As you as% your 4uestions, begin building your EanserF by constructing a list or
decision tree"
Move on to a costCbenefit analysis that covers !rofitability )see belo," #f the intervieer gives
you lots of information through hich you can evaluate the costsCbenefits, you may be able to
build toards a !articular recommendation"
Consider e'!anding your analysis of the !rofitability and economics of the case ith discounted
cash flo, brea%(even and demand elasticity estimates" Although you may not go through these
analyses com!letely, your intervieer may be interested in seeing ho you ould set them u!"
2003 The Johnson School Consulting Club &a,e 26
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
Sam!le 9C Analysis
Co-.an=
Iuestion Areas >ey Case(S!ecific Ansers












C
o
m
!
a
n
y

A
t
t
r
i
b
u
t
e
s
Airline.s value !ro!osition )brand image, !rice !oint,
service 4uality," Use this in assessing the a!!ro!riate
fit to the relevant mar%et
Gomestic or int.l airline, fit into o!eration or ne line
Go they serve To%yo already, ould ne line lead to
cannibaliBation of e'isting route
Synergies )ould ne line com!lement e'isting lines
or stand alone,












<
r
o
f
i
t
a
b
i
l
i
t
y
AirlineQs current financial situation )cash sur!lus,
ma$or losses, etc",
<rofitability relative to the industry and margins )ho
to com!ete ith other airlines,
Sources of !rofitability )business travelers, tourists,
etc",









>
e
y

A
a
l
u
e

C
h
a
i
n

C
o
m
!
o
n
e
n
t
s
-!eration structure
Com!anies either on or lease !lanes )fi'ed costs
because long(term,
Ca!acity utiliBation is %ey issue )add ca!acity, sitch
ca!acity, unused ca!acity,
Gate feesCfuelCcatering vary beteen air!orts Fees at To%yo air!ort are
e'tremely high due to significant
croding
Gates can be limitedCavailability
Com!etition
-ther airlines servicing this destination -ther airlines at To%yo
-ccu!ancy rates and fares
2003 The Johnson School Consulting Club &a,e 24
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
Com!etitors. value !ro!ositionCmar%et niche
#ndustry segmentsCmargins
-ther ne entrants )recent increase in ca!acity,
Com!eting destinations )de!arture, destination, De air!ort being built in -sa%a
<otential alliance !artners as substitute for ne line
Customer
Segment the customer base
?eisureCbusiness traveler
<oint(to(!ointCcontinuing traveler
Both segments
<oint of origin3
US(Ja!an5 decline in business travelers of
about *;K, fast increase in leisure travelers
Ja!an(US5 about ;+K leisure travelers
Customer mi'Cmargin mi'3 Business travelers !rovide a much higher
margin than leisure
#s the mar%et groing, declining or steady, and does
this vary by segment3
?eisure is increasing6 business travel
decreased about *;K last year" Trend is
e'!ected to continue"
#m!act of line addition on these factors
)cannibaliBation, to hom ill it a!!eal,
Current demand and ca!acity utiliBation
)attractiveness of destination,
To%yo is inconvenient es!" for leisure
travelers5 heavy congestion and higher
!rices" -sa%a is e'!ected to attract an
increasing number of leisure travelers at
cost of To%yo here those could decrease
by *;(9+K
2003 The Johnson School Consulting Club &a,e 2%
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
CostCBenefit Analysis
Cost(Benefit analysis
Consider the !rofitC cost of entering the industry" A !ositive D<A, or one that yields the desired
return on investment )=-#,, suggests the investment is orthhile" Also consider the cost of
not entering the industry" #t is !ossible that not entering ill be more costly in real or strategic
terms"
2003 The Johnson School Consulting Club &a,e 2'
0
st
(See if the route as an inde!endent line ould be
!rofitable
<rofitability analysis5 <rofit S =evenue(Cost (
CannibaliBation
=evenue S IP< S f )!rices, segment mi', 4uantity,
Costs S IPAC U FC6 ACSf )segment mi', AC by
segment,
Brea%even !oint3 IP)<(AC, S Contribution to
defraying fi'ed costs
GCF relative to ca!ital investment
GonQt forget o!!ortunity cost of ca!ital
Air!lanes are a significant fi'ed cost
-!erating costs5 fuel, landing costs,
mileageCde!reciation, servicing, etc"
*
nd
( Consider netor% effectsCsynergies of adding the
line
9
rd
( Consider costs of D-T adding the line
:
th
( Go the benefits outeigh the costs3
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
S-?UT#-D ST=UCTU=8
AnalyBe current infrastructure use and current travel trends
Getermine a decision rule for each infrastructure o!tion
S-?UT#-D ADA?7S#S
This 4uestionHa ty!ical Monitor intervie 4uestionHtests your ability to e'amine and !rioritiBe
trade(offs ithin a ell(develo!ed frameor%" #t.s not enough to sim!ly choose a strategy"
7our recommendations must consider and eigh the facts of the case and the needs of the
client" The 4uestion is hether the To%yo routes should be established or not" Good ansers
must focus on this 4uestion, driven by the additional facts that have been !rovided" Clearly,
the need is to assuage immediate groing !ains of increased tourist traffic" Good ansers
should e'!lore the infrastructure o!tions and identify a clear strategy that accommodates both
!resent and future needs, and should include a su!!orting rationale" -utstanding ansers
e'!lore these o!tions and eigh the !ros and cons of each, and might e'!lore the value and
return of each o!tion )for e'am!le, an D<A analysis is alays good,"
The second 4uestion tests your creativity to loo% beyond the facts and determine hat
!roblems the airline might encounter" Be careful to limit the sco!e of your res!onse to those
faced by the airline" &oever, there is a lot of room for discussion" Good ansers must
address the !otential for future groth6 the strengths and limitations of To%yo as a tourist
destination, e'!lore customer segments )e"g", tourists vs" business travelers, and differences
beteen U"S" destinations," -utstanding ansers identify s!ecific action(oriented
recommendations for these segments, and might also e'!lore !otential $oint ventures ith other
members of the tourism and travel value chain"
2003 The Johnson School Consulting Club &a,e 25
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
UNITED STATES &OSTAL SER"ICE
T/-e of case0 +stimation
HoD -an= .eo.le Do)E fo) tCe .ost off+AeF
S-?UT#-D ST=UCTU=8
This is a !ure estimation case" /hat matters is the ay you get to an anser, not necessarily
the anser itself" As the intervieee is or%ing through the !roblem they should ma%e it
abundantly clear hat their assum!tions are" To test the intervieee, you could alays as%,
E/hy did you ma%e that assum!tion3F or E/hat is your reasoning for that assum!tion3F #t can
be tac%led many ays but here is an e'am!le of one ay it could be done5
Assum!tions5
There are four %inds of em!loyees5 drivers, tellers, admin", and sorters" The air trans!ort
side is mostly com!osed of !rivate carriers"
-f all the Bi! codes !ossible )11,111,, all are allocated to an area and used" )round to
0++,+++,
8very Bi! code has one !ost office"
8very !ost office serves the same number of entities"
There is an average of three indos )tellers,, three sorters, and four letter carriers attached
to each Bi! code" )0+ em!loyees,
Add on 0+K for the admin and intrastate drivers"
Go the math5 )0++,+++ ' 0+, ' 0"0 S 0,0++,+++ !eo!le or% for the !ost office
#n reality5
21+,+++ !eo!le or% for the !ost office" There are 92,+++ !ost offices and *9:,+++ letter
carriers"
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BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
SHORTSTO& TO !IRST
T/-e of case0 +stimation
In .)ofess+onal baseballG CoD lon, <oes +t taEe fo) a baseball to t)aBel f)o- tCe
sCo)tsto. to f+)st baseF
S-?UT#-D ST=UCTU=8
Assum!tions5
The bases are 1+ feet a!art"
The distance from shortsto! to first base is about 0*+ feet"
A ma$or league !itcher can thro about 1+(1; m!h"
A ma$or league shortsto! can thro about 2+ m!h"
The %ey is to be able to convert miles !er hour to feet !er second"
2+m!h to feetChour5
;*2+ feetCmile5 )2+ ' ;*2+, S :**,:++ feetChour
Convert units5
N+ minutes !er hour, N+ seconds !er minute S 9N++ secondsChour ):**,:++C9N++, S 00V
feetCsecond
0*+ feet from shortsto! to first base, thron at 00V feet !er second S )0*+C00V, S $ust over a
second )0"+* seconds,"
Gon.t be afraid to round off these large numbers
;+++ feetCmile ' 2+ S :++,+++
:+++ secondsCminute5 :++,+++C:+++ S 0++ ftCsecond
0*+C0++S$ust over a second
#t.s much easier this ay" They.re not loo%ing to see if you have calculator for a brain, they ant
to see your logic and ability to convert"
2003 The Johnson School Consulting Club &a,e $1
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
M2M CASE
T/-e of case0 +stimation
HoD -an= M2Ms of eaAC Aolo) ,o +nto a $3o*nAe ba,F
AGG#T#-DA? #DF-=MAT#-D
*+ MOMs ma%e u! a 9 ounce bag
There are si' colors of MOMs5 yello, red, green, blue, bron, orange
They all cost the same to !roduce
=esearch indicates that customers have no !references of color"
Color is added on at the end of the mfr !rocess
They are mi'ed in the same ratio that they are !roduced
Ca!acity of adding color5
9 tan%s hold the 9 !rimary colors5 yello, red, blue
0 remaining tan% used to mi' colors to !re!are5 green, bron, orange
8ach of the : tan%s has e4ual ca!acity"
The 0 mi'ing tan% !ulls yello, red, and blue as needed from the same su!!ly that fills
the three !rimary tan%s"
They only refill the !rimary tan%s hen all three have em!tied"
Tan%s are alloed to run out before they refill for batch control !ur!oses
<ro!ortion to mi' bron5 *C9 yello, 0CN red, 0CN blue
<ro!ortion to mi' green5 W yello, W blue
<ro!ortion to mi' orange5 W yello, W red
S-?UT#-D ST=UCTU=8
This case is designed to get you into a manufacturing state of mind" The idea is that you ill
burn through yello faster than any other color since it is needed the most" Therefore, there
should technically be more red and blue MOMs in every bag" They ill still be !roduced after
the su!!ly of yello has run out, sto!!ing !roduction of yello, green, orange, and bron"
2003 The Johnson School Consulting Club &a,e $2
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
BOOK ON CHINA
T/-e of case0 *a"2et si:ing
o*7Be -a<e tCe f+nal )o*n<G =o* DalE +nto a sen+o) Aons*ltant7s off+Ae an< Ce tells =o*
Ce7s been tC+nE+n, abo*t D)+t+n, a booE on HB*s+ness +n CC+naI an< )et+)+n, f)o- tCe
Aons*lt+n, b*s+ness. He Dants to EnoD +f +t7s a ,oo< +<ea an< +f Ce7ll -aEe eno*,C
-one= to )et+)e.
#Cat D+ll =o* tell C+-F
S-?UT#-D ST=UCTU=8
Both 4uestions are driven by the same anser ( &o much money ill the boo% ma%e for the
consultant"
&o big is the mar%et for business boo%s on China3
&o much of the mar%et value does the author actually receive3
&o much does the consultant re4uire in order to retire3
Mar%et for Business Boo%s on China5
8stimate the number of adults in the United States S 0*; million
8stimate the number interested business boo%s S *+K S *; million
8stimate the number interested in boo%s on China S ;K S 0"*; million
Gut chec%5 Go you really thin% he can sell over a million co!ies3 Do ayT
=e(estimate5 0*; million ' 0+K ' 0K S 0*;,+++ co!ies )more realistic,
&o much does the author receive3 )Assume X0; retail,
Aalue Chain5
( =etailer Cut X*"++
( Mar%eting Costs X9"++
( Manufacturing Costs X9"++
( <ublisher Cut X9";+
( Author X0";+ Total Ta%e5 0*;,+++ ' X0";+ S X022M
( Total X0;"++
Can he retire3
/ra!(u! by as%ing if X022,+++ is enough to retire L doubtful"
2003 The Johnson School Consulting Club &a,e $$
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REAL3ESTATE DI"ESTITURE
T/-e of case0 *a"2et si:ing
o*) Al+ent +s a la),e )eal estate <eBelo.-ent Ao-.an= Aons+<e)+n, b*=+n, a .+eAe of
)eal estate +n Colo)a<o. HoD <o =o* ,o abo*t anal=J+n, tCe +nBest-entF
AGG#T#-DA? #DF-=MAT#-D
The !ro!erty has ;,+++ acres of o!en, undevelo!ed land"
The !ro!erty is :; minutes from Telluride, a s%iing area, a home of a large summer film
festival, and a five(star resort and s!a" The land has several small hills and abuts a
mountain"
There are V horse(riding stables in the area, to of hich offer cattle drives, li%e in Cit/
Slic2e"s"
Com!any currently ons hotels, stri! malls, and office buildings nationide"
S-?UT#-D ADA?7S#S
7ou need to determine the highest and best use for the land in order to assess its value" To
do this, you should start ith the 9Cs5
Com!etitors ( AnalyBe other similar !lots of land that have been develo!ed ith li%e
characteristics L Utah, Montana, even 8astern regions such as De &am!shire"
/hat other commercial develo!ments e'ist in the area3 #s there an abundance of any one
ty!eHhorsebac% riding stable, fly(fishing cam!s3 #s there enough demand to handle
another com!etitor, or do you need to branch out3
Customers ( Consider e'isting activities that many !eo!le do ithin the area as this may
sho hat !eo!le are interested in doing ith the land"
Segment the !otential mar%et5 residents, vacationers )summer and inter," /hich grou!s
are the largest and hich are groing3
AnalyBe the unmet needs of each grou!6 can you fulfill them in some ay3
Go you ant to try attracting a ne grou! that does not already vacation or reside in the
area3 )Aery e'!ensive and ris%y,
Com!any ( /hat s!ecific s%ills do you have to im!rove or manage this land3
/hat s!ecific characteristics does the land have that might differentiate it for better or for
orse3
Then you need to analyBe5
2003 The Johnson School Consulting Club &a,e $1
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
Financials5 &o investment fits in !ortfolio5 geogra!hic or !roduct diversification6 li4uidity
ris% of the investment6 investment time horiBon
/hether any im!rovements can have multi!le uses in case our original idea fails
#f you have the s%ills to manage the !ro!erty
&o you intend to ard off !otential com!etitors by creating a uni4ue value !ro!osition"
2003 The Johnson School Consulting Club &a,e $6
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
&HARMACEUTICAL &RICING
T/-e of case0 %"ofitabilit/
A .Ca)-aAe*t+Aal Ao-.an= <eBelo.e< a <)*, tCat Aan A*)e sCo)ts+,Cte<ness. It +s
Don<e)+n, CoD -*AC +t sCo*l< .)+Ae tCe <)*, at. #Cat +s tCe *..e) bo*n< an< loDe)
bo*n< .)+Ae fo) tCe <)*,F
AGG#T#-DA? #DF-=MAT#-D
There is a substitute !roduct, laser surgery, but it costs X0,+++ and there is ;K failure rate"
The !harmaceutical com!any has a mono!oly on the drug for the ne't 9 years"
The drug is ta%en only once and can cure you ithin one ee%" #t does not have any failure
rate"
S-?UT#-D ADA?7S#S
LoDe) bo*n< .)+Ae should be !rice of its substitute such as eyeglasses and contact lenses"
8yeglasses5
Assum!tions5
Guration of earing eyeglasses is from age 0; to age :; )from age :; they have to ear other
ty!es of glasses such as bifocals,"
<eo!le change their eyeglasses once every to or three years"
The average !rice of eyeglasses is X*++"
Giscount it bac% at 0+K"
<rice5 ))):;(0;,C9,P*++,C0"0Yn )8'am!le is for eyeglasses re!laces every three years" Contact
lenses are calculated the same ay",
U..e) bo*n< .)+Ae is slightly more e'!ensive than the !rice of the laser surgery since the
com!any has a mono!oly and the drug has a +K failure rate"
2003 The Johnson School Consulting Club &a,e $4
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
HAMMERJACK
T/-e of case0 %"ofitabilit/
Ha--e)>aAE +s a )e,+onal ACa+n of KloAal Ca)<Da)e sto)esK loAate< +n n*-e)o*s
ne+,Cbo)Coo< st)+. -alls an< sCo..+n, Aente)s. TCe= Ca< en>o=e< e(Aellent
.e)fo)-anAe fo) tCe .ast 16 =ea)s b*t CaBe e(.e)+enAe< <eAl+n+n, .)of+ts +n tCe .ast tDo
=ea)s. TCe= a)e AonAe)ne< abo*t tCe+) .)of+tab+l+t= an< CaBe C+)e< =o* to e(.la+n tCe+)
s+t*at+on an< .)oB+<e )eAo--en<at+ons to ,et tCe- baAE on t)aAE.
AGG#T#-DA? #DF-=MAT#-D
Com!etitive issues5
Costs5 =evenues5
CGS L no change -verall sales ( don
?ease of s!ace ( no change Dumber of customers ( don slightly
SGOA, -verhead ( no change Gollar amount of !urchase (don heavily
Franchise costs ( no change
All other drivers ( no change
Assum!tion5
/e are losing customers and based on the heavy decrease in dollar amount !urchased, e are
losing high s!ending customers" )There must be substantially different customer segments,
Iuestion5
/hat do e %no about our customer segments3 A5 9 segments )as follos,5
Maintenance <eo!le Go #t 7ourself(ers Contractors
Z of visits 0 0+ 0++
X s!entCvisit X0++ X0,+++ X0+,+++
Z of !eo!leCsegment 0++ million 0+ million 0+,+++
Assum!tion5
&ammer$ac% is losing customers and dollar revenue, there is a strong !ossibility of increased
com!etition" A5 7es, &ome Ge!ot and other huge RarehouseR hardare stores have entered
&ammer$ac% regional locations"
Assum!tions about R/arehouse StoresR5
?oer !rices due to buying !oer )economies of scale," A5 7es
<rovide additional services such as training courses, information, ti!s" A5 7es
2003 The Johnson School Consulting Club &a,e $%
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
Stealing contractors due to substantially loer costs and G#7Qs due to !rice and hel!" A5 7es
S-?UT#-D ST=UCTU=8
AnalyBe drivers of !rofitability5 <rofit S =evenue ( Costs"
Based on the above information, you can determine hich segments are most valuable to
&ammer$ac%"
Maintenance
<eo!le
Go #t 7ourself(ers Contractors
Total segment orth5 X0+ Billion X0++ Billion X0+ Billion
7ou determine that the RGo #t 7ourself(ersR are the most im!ortant category"
#ssues5
Maintenance segment is still loyal because they only sho! once a year and for a loer dollar
amount" /e !robably canQt %ee! the contractor segment due to !rice" &o do e %ee! the
G#7Qs3
<otential Solutions5
-ffer the training courses ith an em!hasis on the local %noledge of the neighborhood"
Antici!ate the !roducts needed by G#7Qs and offer com!etitive !rices on those items"
Ac4uire or align ith other local chains to gain buying !oer"
2003 The Johnson School Consulting Club &a,e $'
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
MAJOR BANK
T/-e of case0 %"ofitabilit/
O*) Aons*lt+n, f+)- Cas been )eta+ne< b= a -a>o) banE to Cel. +-.)oBe tCe .)of+tab+l+t=
of tCe+) la),est A)e<+t Aa)< offe)+n,. TCe+) Aa)< ?+n tCe sa-e Alass as a "+sa o)
Maste)Ca)<@ .)oB+<es aBe)a,e )et*)ns +n Ao-.a)+son to tCe +n<*st)=G CoDeBe)G o*) Al+ent
bel+eBes +t Aan beAo-e -o)e .)of+table. o* nee< to anal=Je tCe s+t*at+on an< -aEe
)eAo--en<at+ons.
AGG#T#-DA? #DF-=MAT#-D
Costs =evenue
Mar%eting, SGOA, <ersonnel )Can.t change, Annual fee ( currently X;+ )Could change,
Bad Credit theft etc" )CanQt change, Annual !ercentage rate ( 0:K )Could
change,
-ther costs )CanQt change, Merchant fee S 0";K )Can.t change,
S-?UT#-D ST=UCTU=8
-!!ortunity to decrease costs or increase revenues ( analyBe drivers
-!!ortunity to vary the annual !ercentage rate or the annual fee
Benchmar% com!etition for o!!ortunities
>ey #ssues
CanQt affect the cost structure, therefore have to increase revenues
-nly revenue variables available are changes to the annual fee and A<=
Com!etition5
#ntervieer tells you it is a very com!etitive environmentHmove on"
Assum!tion5
Customers use the card differently, there may be different customer segments based on the
balance held, ho 4uic%ly balances are !aid off and the
E
needF for the card
Case #ntervieer suggests there are three distinct categories5
<ayoff in full every month
&old small debt for short !eriods of time
&old heavy debt for long !eriods of time )basically !ay off the interest, (2+K of our revenue
2003 The Johnson School Consulting Club &a,e $5
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
&eCshe then as%s ho you ould tailor card services to each of these grou!s5
=ecommendations
&a= In !*ll MontCl= Hol< S-all Debt SCo)t Te)- Hol< HeaB= Debt Lon, Te)-
charge high monthly fee increase the A<= slightly aive the annual fee
!rovide numerous services decrease the annual fee increase their credit limits
)detailed re!orts, small benefits, cash bac% !rograms, !oints
access to cash advance, etc"
>ey #ssues5
These heavy debt cardholders are the %ey to our !rofitability, it is im!erative to get them to sign
u! for the card )no annual fee,, use the card )cash bac%, !oint systems, and run u! debt
)automatic credit limit increases,"
Dote to Case #ntervieer5
As soon as the intervieee had identified the %ey drivers of revenue and cost, the focus of the
case as shifted to customer segmentation and tailored services for each segment"
2003 The Johnson School Consulting Club &a,e 10
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
"IDEO RETAILER
T/-e of case0 %"ofitabilit/
O*) Al+ent +s a -a>o) ente)ta+n-ent Ao-.an= on tCe #est Coast. One of tCe+) <+B+s+ons +s
a lea<+n, Co-e )eta+le). D*)+n, tCe late L'07s an< ea)l= L507s tC+s <+B+s+on Ca< a ,)eat )*n3
o.en+n, 1G000 sto)es an< )eal+J+n, Aons+<e)able .)of+ts. In tCe last tDo =ea)s botC
,)oDtC an< .)of+t CaBe <eAl+ne< s*bstant+all=. o* CaBe been b)o*,Ct +n b= tCe CEO to
assess tCe s+t*at+on an< .)oB+<e )eAo--en<at+ons.
BaAE,)o*n</ O*) Al+ent7s <+B+s+on +s not *nl+Ee a ACa+n of BloAEb*ste) B+<eo sto)es. TCe
-a>o)+t= of tCe+) b*s+ness +s +n -oB+e )ental D+tC a -*AC s-alle) .o)t+on +n sales.
S-?UT#-D ST=UCTU=8
Start ith a sim!le5 )<rofit S =evenue L Costs, structure
AnalyBe the com!etitive situation
AnalyBe the EsubstitutionF factor L ho else are consumers getting movies3
Costs5 =evenues5
Cost of the ne movies5 &1ctuall/ dec"eased' Z of rentals5 &dec"eased7 t"affic down'
-verhead5 &6o change' <rice of rental5 &6o change'
SGOA5 &6o change' Sale of rentals5 &dec"eased'
?eases, other5 &6o change' Accessories5 &6o change'
>ey ?earning5
Costs have actually decreased, but not enough to offset the decreased store traffic"
Com!etitive AssessmentCSubstitutes5 )?ist !otential causes of decreased traffic,
De movie stores5 &6o "eal change'
De #n(home sources L cable on demand5 &%otential fo" futu"e but no "eal cu""ent affect'
Sales of movies for home use and collection5 &Sales ha3e inc"eased d"amaticall/'
2003 The Johnson School Consulting Club &a,e 11
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
[-nce the %ey issues have been identified, the intervieer describes the changing industry5\
/hen division as groing, it could buy e'cess numbers of the ne releases to satisfy
customer demand" ?ater, they ould send the e'cess co!ies to the ne stores as !art of their
ElibraryF of e'isting ta!es" /ith feer ne stores o!ening, this is no longer an o!tion(therefore
feer ne releases have been ordered"
=ecently, the studios have alloed ne releases to be sold through arehouse stores )/al(
Mart, at the same time they are made available to the rental retailers" Thus, many of our
customers are !urchasing rather than renting" #n addition, hen customers rented a ne
release, they 4uite often rented an e'isting ta!e from the library )additional lost revenue,"
Based on this industry outloo%, hat ould you recommend for the division3
<rovide a reca!5
#t a!!ears as though the ma$or issue facing the division is a reduction in store traffic for ne
releases" This is mainly due to the sale of these same releases through alternate channels"
&o can e regain store traffic or offset the rental losses3
=ecommendations5 )these are $ust a fe of the !otential o!tions,
Gevelo! ne, more convenient locations(%ios%s, !ic%(u!Cdelivery
Gevelo! !ricingCbundling formats combining ne releases ith e'isting movies
-ffer Erent to buyF !rograms L rent the first time, then have o!tion to !urchase
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BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
SOA& !LAKE MANU!ACTURER
T/-e of case0 %"ofitabilit/
o*) Al+ent +s a -an*faAt*)e) of soa. flaEes. TCe Ao-.an= +s loAate< +n Aent)al NeD
o)EG DCe)e +t Cas )es+<e< s+nAe +ts fo*n<+n, al-ost 100 =ea)s a,o. Its A*sto-e)s a)e
.)+-a)+l= -a)Eet+n, AonAe)nsG not *nl+Ee &2GG tCat b)an< =o*) Al+ent7s .)o<*Ats. Des.+te
=ea)s of stea<= b*s+ness an< .)of+tsG tCe last tC)ee M*a)te)s CaBe been beloD
e(.eAtat+ons. In faAtG tCe Ao-.an= +s los+n, -one=G an< sCa)eCol<e)s a)e not Ca..=.
o* CaBe been C+)e< b= tCe CEO to +nBest+,ate tCe Ao-.an=7s .)of+tab+l+t=. SCe +s
e(.eAt+n, so-e )eAo--en<at+ons.
AGG#T#-DA? #DF-=MAT#-D
The !roduct is unchanged L no ne formulas, siBes, etc" L nothing that ould affect sales
<rofit margins are generally steady )but very smallT L soa! is a commodity, after all,
The economy is normal L no e'ogenous variables )i"e", customer out of business, etc" L
nothing going on here,
=ecent donsiBing reduced labor force by 0;K
-ld e4ui!ment as recently scra!!ed L the !lant as almost 0++ years oldT
De !lant e4ui!ment L !urchased on credit )yes, this results in a ne fi'ed cost, if as%ed,
=evenue Grivers
I5 /hat are the revenue drivers3 A5 7ou tell me, you.re the consultant L hy don.t you outline
hat you thin% they are"
I5 /hat has changed3 A5 Dothing5 sales, !rice, volume, mar%et siBe, customer base, etc" are
all steady"
Aariable Costs
I5 /hat are the variable costs3 A5 7ou tell me, you.re the consultant L hy don.t you outline
hat you thin% they are"
I5 /hat has changed3 A5 =a materials unchanged, labor reduced"
Fi'ed Costs
I5 /hat are the fi'ed costs3 A5 7ou tell me, you.re the consultant L hy don.t you outline hat
you thin% they are" =educed labor costs from donsiBing means less fi'ed costs" ?oan and
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interest !ayments for e4ui!ment ] e'isting !rofit margins )this is the %ey," Dothing else has
changed, if as%ed"
S-?UT#-D ST=UCTU=8
Frameor%5 <rofits S =evenues L )FC U AC,
8'amine revenue drivers5 /hat.s changed3
8'amine variable costs5 /hat.s changed3
8'amine fi'ed costs5 /hat.s changed3
SummariBe analysis
<rovide recommendations
S-?UT#-D ADA?7S#S
Give u!3 The com!any recently !urchased !lant e4ui!ment to re!lace old !lant e4ui!ment"
The old e4ui!ment as !aid for but the ne e4ui!ment gave rise to fi'ed !ayments for the loan
and interest" These are greater than the !rofit margins" &ence there is no a loss"
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BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
JAM COM&AN
T/-e of case0 %"ofitabilit/
o*) Al+ent +s tCe oDne) of a Boston >a- Ao-.an=. SCe Cas +<ent+f+e< tCat Ce)
Ao-.et+t+on +s -aE+n, abo*t N1MM .e) =ea) +n .)of+t -o)e tCat sCe +s. TCe +-.aAt of tC+s
+s tCat tCe Al+ent +s <)+B+n, an ol<e) AA*)a an< tCe Ao-.et+to) Cas a neD BM#8 Hel.8
AGG#T#-DA? #DF-=MAT#-D
Both com!anies are a!!ro'imately e4ual in5
=evenue S X0+MM
Z of $ars sold !er year
Mar%et share S *K
<roduct mi'5 *;K straberry, V;K other
?ocations5 client is in Boston, com!etitor is in a rural area
Client !rides herself on technological savvy" <roud that she has $ust gone to J#T, the first one
in the industry" Client $ust installed a ne, X0MM com!uter system to su!!ort J#T"
Client has a very loyal or%force ith average time at the com!any of 0; years" A or%er.s
average !ay is 0*;K of the industry, !rimarily due to overtime"
Client has their on trans!ortation fleet )com!etitor does not,5 li%es the feeling of control
<roduct costs5 )client,
=a materials5
Sugar 0+K
Fruit V+K
Jars *+K
?abor and overhead5 e4ual to the ra materials costs
Com!etitor !urchases fruit only hen in season L leading to significant savings" Client does
not"
Com!etitor !roduces in large batches and has loads of inventory"
&igh changeover costs in $am !roduction !rocess at both the client and the com!etitor L
there are no dedicated lines for different ty!es of fruit"
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BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
S-?UT#-D ADA?7S#S
This is not a numbers case !er se, although intervieee should attem!t to #G the %ey
com!onents of the X0MM e'tra cost that the client has" The e'tra costs arise from5
Changeovers C J#T system
&igh overtime
Buying fruit out of season
Gedicated fleet
=ecommendations5
Move to larger batch siBe"
Gitch J#T and !roduce to forecast to smooth !roduction and overtime"
Buy fruit in season"
Consider outsourcing trans!ort"
>ey underlying !roblem5
&o do you gently tell the client that her X0MM ne com!uter system is a bad decision and a
sun% cost3
Bonus5
#G the !otential !roblems ith the or%force hen your recommendations decrease overtime
and affect their !ay dramatically"
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BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
LET7S GO8
T/-e of case0 %"ofitabilit/
o*) Al+entG Let7s Go8G +s a .*bl+sCe) of t)aBel3)elate< booEs. ReAentl=G .)of+tab+l+t= of tCe
f+)- Cas been <eAl+n+n,. TCe= CaBe C+)e< =o* to +nBest+,ate. #Cat faAto)s Do*l< =o*
looE atF #Cat )eAo--en<at+on Aan =o* .)oB+<eF
AGG#T#-DA? #DF-=MAT#-D
Boo%s cover a ide range of countries" Boo%s are generally about ho to travel on the
chea!"
/ritten by the ?et.s GoT staff L !rimarily students )all from the same school, hose travel
e'!enses are reimbursed"
Target segment is lo(cost travelers"
Dothing about the manufacturing !rocess is relevant"
Gistribution5 boo% stores
<romotion5 ord(of(mouth
Costs
Fi'ed costs have not changed"
Aariable costs are increasing, !articularly labor costs5 /hy3
-ther variable costs are unchanged"
Com!etition5
Many regional !layers on a small share of the mar%et )very fragmented,, es!ecially in the
/est )college tons,"
There are a fe big !layers, but none that dominate the lo(end segment as effectively"
S-?UT#-D ADA?7S#S
Students are learning to game the system, and are ma'imiBing the e'!ense reimbursement
system )AC increasing," =egional !layers out est are groing, sa!!ing mar%et share
)revenues declining,
=ecommendation5
Change the reimbursement formulas5 tighten controls, consider a sti!end(based system"
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The estern mar%et is fragmented5 many ste!s available to increase !resence5 list and
eigh !ros and cons"
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DE&ARTMENT STORE
T/-e of case0 %"oduct Costing . %"ofitabilit/
Sou"ce0 (ain &final "ound'
O*) Al+ent +s a la),e <e.a)t-ent sto)e ACa+n. TCe CEO EnoDs tCat -en7s <)ess sC+)ts a)e
-*AC less .)of+table tCan tCe )est of C+s .)o<*At l+nes. He bel+eBes tCat +f tCe= De)e
eBal*ate< on a f*ll= loa<e< bas+s tCat tCe= Do*l< +n faAt be *n.)of+table. He +s
Aons+<e)+n, taE+n, aAt+on to Ao))eAt tC+s .)oble-.
#Cat Do*l< =o* Dant to EnoD to <ete)-+ne DCetCe) o) not tCe CEO +s Ao))eAtF
#Cat Ao))eAt+Be aAt+on Do*l< =o* )eAo--en<F
Inte)B+eDe) Inst)*At+ons/
Share the information on the table belo )share all of it at once, in ritten form if you li%e, only
hen some information in it is re4uested" #ntervieee should as% about SGOA or for detail on
other allocated costs and then receive the entire table" #f intervieee as%s for clarification on the
!hrase Efully loadedF, res!ond ith Eincluding all costs associated ith the !roduct"F
Men.s Gress Shirts Men.s Ge!artment
Sales X0,+++ X;,+++
Gross Margin *;K 9;K
SGOA 3 X:++
-!erating Costs 3 X9++
#nventory X0;+ X0,+++
S4uare footage allocated to !roduct or
de!artment
*;+ 0;++
A<<+t+onal Info)-at+on/
SGOA includes floor sales staff costs as ell as !romotional and advertising costs"
-!erating Cost mainly com!rises cost of maintaining and stoc%ing inventory"
The store can be thought of as similar to Dordstrom.s or Macy.s"
Debrief
The information in the table as shared )in form of <oer<oint slide, only after a s!ecific
re4uest as made for elements of the table"
Goal is to logically allocate costs and then determine a!!ro!riate action" 8ssentially, it is a cost
accounting !roblem" Good deal of leeay given logical arguments in allocating and suggested
actions"
-!erating Costs ( These relate to inventory" Could argue that number of stylesCsiBes should
re4uire more than the de!artment norm" &oever, inventory as K of sales is 0;K as o!!osed to
*+K for the de!artment" Maybe e allocate less instead if e use this metric" =eal data is
!robably more sound a!!roach"
SGOA L <romotions and sales" May argue that shirts are !romoted more or less than other
items" My !reference as that they are not EfeaturesF in ads )usually suits and shoes instead,"
May consider dress shirts a necessity !urchase that drives traffic and thus sales of
com!lementary items )t(shirts, ties," Also, sales time for dress shirts li%ely less than that of suits
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BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
and shoes" This leads to a loer !ercentage allocation of SGOA" C8- should !erha!s
reassess"
Suggested action should recogniBe im!ortance of dress shirts in the value !ro!osition for a
de!artment store" 7ou cannot afford to not have them in your offering" Also should !ic% u! on
com!lementary relationshi! among shirts, suits, ties, etc"
Be sure not to deduct inventory as a cost" This is a balance sheet item"
Sales !er s4uare foot is an im!ortant measure for retailers and should be mentioned" This
measure reflects o!!ortunity costs of offering one !roduct on your shelf instead of another"
=ecommended actions could include !rivate label, vendor change, move u! or don scale,
!romote more or less, J""
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BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
REGIONAL TRUCKING COM&AN
T/-e of case0 %"ofitabilit/
A )e,+onal t)*AE+n, Ao-.an= Cas C+)e< =o* beAa*se tCe= a)e sloDl= los+n, -one=. #C=
a)e tCe= los+n, -one= an< CoD <o =o* f+( tCe .)oble-F
AGG#T#-DA? #DF-=MAT#-D
?ocated in Dorth Carolina and serving a fe large mar%ets )D7, Atlanta, <ittsburgh, Chicago,
They shi! to ty!es of items5 s!ecialty furniture and commodity items
The furniture truc%ing mar%et5
?oyal clients
&igh !rofit for the truc%ing com!any
The commodity mar%et5
Do loyalty
?osing money to com!ete L eroding your client.s !rofit margin
Sales force5 located in ma$or mar%ets to drum u! business )ty!ically commodity orders,
Com!etition is increasing as a fe large national truc%ing com!anies have entered their
mar%et"
?ogistics of delivery
Furniture shi!ments are generally one ay, i"e" they don.t have any furniture to haul bac%
from their delivery !oints and must return em!ty if they ant to shi! furniture e'clusively
)ay too e'!ensive to run a truc% em!ty,
The sales force finds stuff )ty!ically commodity items, to bac%haul to utiliBe the em!ty
truc% s!ace
They could lease the em!ty s!ace to a national carrier but they are the com!etitors and
the revenue is loer than their current commodity truc%ing business
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S-?UT#-D ADA?7S#S
A ty!ical ay to loo% at this !roblem is <rofit S =evenue L Costs" The revelation that the
commodity business is losing money and !ulling the !rofit don a!!ears to be a %ey !iece of
information" #t leads you toards the idea of either getting rid of the commodity truc%ing, and
running the truc%s em!ty one ay, or forming an alliance ith a national carrier" The !roblem is
that running the truc%s em!ty is ay too e'!ensive, and ould cause you to loose even more
money, and the revenue from an alliance is loer than the revenue you currently en$oy to truc%
commodity items around" So hat do you do3
A good candidate should ignore the loer revenue" =evenue is not necessarily the issue, hat
is the !otential !rofit3 By going ith an alliance the com!any ould be able to substantially
reduce their sales force )costs, as they mostly drum u! commodity business, hich ould be
unnecessary" The loer revenue is offset by an even larger dro! in costs"
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BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
TELE&HONE RE&AIR AND SER"ICE
T/-e of case0 %"ofitabilit/
o*) Al+ent +s a tele.Cone Ao-.an= t)=+n, to )e<*Ae tCe Aosts an< +-.)oBe .e)fo)-anAe
+n tCe )e.a+) se)B+Ae o.e)at+on. HoD <o =o* a..)oaAC tCe .)oble-F HoD Do*l< =o* ,o
abo*t +-.le-ent+n, =o*) sol*t+onF
AGG#T#-DA? #DF-=MAT#-D
The com!any has ; regional centers in ; different cities and a cor!orate head4uarters"
7ou have been brought in through a !rocess im!rovement initiative currently underay at
cor!orate" The regional centers are not aare that their re!air service is being e'amined"
S-?UT#-D ST=UCTU=8
Begin ith the 9 C.s to get details about your client and the nature of the com!etition in the
industry" Ultimately you can go through a !rofitability analysis to try and drill don to the root
cause of the high costs in re!air service" Gon.t forget to outline a !rocess to follo to
im!lement your solution"
S-?UT#-D ADA?7S#S
This is a regulated industry ith a unioniBed labor force that ill !lay a large role in your
analysis"
Generally, the utilities industry has faced very little com!etition for local service and has thus
had almost no need to institute and trac% !erformance measures ith its management
control systems" 7ou ill almost certainly have to develo! ne baselines for measuring
!erformance in the re!air service de!artment ithin the com!any" Some !ossible measures
could be5 time to re!air, time to dis!atch, customer satisfaction e'!ressed through callbac%,
etc"
#f these baselines are ne to the com!any, your team ill need time for these baselines to
generate information that can be com!ared ith other Ebest(of(classF com!anies in this
industry"
The !rofitability analysis should touch u!on recent ca!ital e'!enditures, deteriorating
infrastructure, high ages, escalating re!air materials costs, lo !roductivity in the
de!artment6 anything that might contribute to high costs in re!air service"
Gon.t forget the im!lementation !art of this 4uestion" Basic ideas here include develo!ing a
!ilot !rogram to test out your solution and selecting a !ilot site, getting buy(in and
coo!eration at the regional center level, establishing ob$ective measurements to gauge the
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success of the !ilot, and finally, develo!ing and !resenting a cor!orate(ide rollout of the
!ro!osed changes"
Changing the culture of the regional centers is going to be a huge barrier to success in this
!ro$ect" This com!onent is largely the function of the EChange(ManagementF area of the
firm" #ssues here might be union age !ressure, $ob security, changing the demands on the
or%force, gaining commitment from informal leaders that can cham!ion your solution"
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BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
INSURANCE COM&AN
T/-e of case0 %"ofitabilit/
An +ns*)anAe Ao-.an= Cas tDo ann*+t= .)o<*Ats/ a f+(e< ann*+t= .)o<*At an< a Ba)+able
ann*+t= .)o<*At. TCese .)o<*Ats CaBe a ta),et ROI of 16O b*t a)e onl= ea)n+n, 6O )+,Ct
noD. TCe f+(e< ann*+t= .)o<*At .a=s tCe Al+ents a f+(e< +nAo-e st)ea- at f+(e< +nte)est
)ates. TCe Ba)+able .)o<*At Cas )et*)ns tCat Ba)= D+tC tCe -a)Eet. TCe -a)Eet +s <o+n,
,)eat an< tCe Ao-.an= +s Don<e)+n, CoD to +-.)oBe tCe+) )et*)ns on tCese .)o<*Ats.
HoD Do*l< =o* ,o abo*t tC+nE+n, abo*t tC+s .)oble-F #Cat a)e so-e .otent+al a)eas
fo) +-.)oBe-entF
AGG#T#-DA? #DF-=MAT#-D
-n the fi'ed !roduct, the com!any ma%es money based on the s!read beteen the fi'ed
income stream they.re !aying out and the money they.re earning on the investment in the
mar%et"
-n the variable !roduct, the com!any earns money through charging fees"
The com!any sells *+K of the fi'ed !roduct and 2+K of the variable !roduct"
S-?UT#-D ST=UCTU=8
Start ith the 9Cs to understand the ris% !rofile of the com!any, the nature of the com!etition it
faces, and the customers that buy these instruments" Then move to a !rofitability analysis to
identify here this com!any is losing money" #f you are not familiar ith annuity !roducts, you
should as% sufficient 4uestions to ensure that you understand ho the !roducts ma%e money for
the insurance com!any"
S-?UT#-D ADA?7S#S
The obvious anser seems to be that they need to get into higher !aying investments to
achieve higher mar%et returns" &oever, %ee! in mind that they have fi'ed annuity !roduct
they are committed to !aying"
The com!any could calculate the duration of their liabilities )the fi'ed stream of cash
outflos, to ensure that they have ade4uate assets to su!!ort their liabilities"
The com!any could also focus on cutting costs to raise their returns" They have mar%eting
)ads, !am!hlets, !hone !ersonnel,, bro%er fees, sales !ersonnel, transaction fees" The
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BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
com!any does all of this in(house" They could !robably outsource and have these services
!erformed more chea!ly"
The fees the com!any charges for the variable rate !roduct could be com!ared to the
com!etition" #f they are too high, the com!any may ant to loer fees to get a higher
volume of customers" #f they are too lo, they may ant to raise rates to be more
com!etitive" Chances are, the e'isting customers ith an annuity !robably on.t ithdra
their funds"
The mi' of !roducts could also be considered" The com!any only earns a flat fee on the
variable !roduct" The amount of return made on the fi'ed !roduct can vary idely, but has
the !otential to ma%e a very good return ith smart investing" The com!any should shift
mar%eting and sales efforts to the fi'ed !roduct"
Since more and more !eo!le are investing in :+0> !lans and other retirement !lans, this
could be a !otentially large target mar%et for a secure fi'ed annuity !roduct"
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BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
RAILCO
T/-e of case0 %"ofitabilit/
Sou"ce0 (ain)final "ound
O*) Al+ent +s Ra+lCo a <+B+s+on of D+Be)sAoG D+Be)sAo +s a <+Be)s+f+e< Col<+n, Ao-.an= D+tC
n*-e)o*s b*s+nesses. T)a<+t+onall=G Ra+lCo Cas been tCe HCasC CoDI of tCe .o)tfol+o.
TCe= a)e a )a+l f)e+,Ct Ao-.an=. Sales +n 2000 De)e N1 B+ll+on an< ea)n+n,s De)e N60
-+ll+on. HoDeBe)G +n 2001G tCe f+)- sD*n, f)o- a N60 -+ll+on .)of+t to a N60 -+ll+on loss.
Mana,e-ent tooE a,,)ess+Be aAt+on to Ao))eAt tCe .)oble- an< ass*)e< tCe Boa)< tCat
tC+s Das an ano-al= an< Do*l< not Ca..en a,a+n. HoDeBe)G +n tCe f+)st tDo M*a)te)s of
2002G tCe Ao-.an= Cas lost N26 -+ll+on.
#C= +s Ra+lCo. los+n, -one=F
#Cat sCo*l< tCe= <oF
Case Interviewer Instructions:
#f the candidate drifts into !ortfolio or synergy 4uestions relating to Giversco, steer them bac% to
=ailCo" They can ignore the other firms in Giversco.s !ortfolio" =ailCo is the !roblem"
A<<+t+onal Info)-at+on/
Feel Free to Share in conversationJ""
=ailco carriers freight over rail to businesses" They are not a !assenger railay"
They on their trac%s and do business regionally ith little direct rail com!etition"
The firm ado!ted ne de!reciation !olicy hich loered de!reciation of assets slightly"
Share hen as%edJ"
The shi!!ing industry )this includes rail, truc%ing, marine, and air, groth rate is
!ro$ected at 9K for the foreseeable future" <rices are flat in real terms"
The com!any negotiated a very com!etitive contract ith labor that too% effect late
*++0" The negotiated age rates are loer than the industry average"
Fuel costs have been stable"
Com!any serves to ty!es of customers5 direct, larger firms and bro%ered smaller firms"
Girect customers number 2++" Bro%ered customers number ;+++"
Bro%ered customers come to =ailCo through an aggregator that organiBes smaller freight
shi!ments" They ty!ically ta%e 0"*;K as a commission"
Girect customers account for a!!ro'imately 2+K of =ailCos revenues"
Sales !ersons don.t %no hat the !roblem is, nor do shi!!ing managers"
Girect customers are shi!!ing less6 moving to truc%ing"
Aery fe customers have been lost"
Shi!!ing revenue for direct customers is don 0+K"
Fi'ed costs re!resent 1+K of =ailCo.s cost structure"
Slight reduction in variable costs from *++0 to *++*"
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BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
Debrief
The information in the o!ening as !resented in slide form" #nformation as shared fairly
begrudgingly"
This case is easiest solved as a systematic !rofitability case" Iuestions about variable costs
)fuel for e'am!le, come u! dry" =ule them out 4uic%ly and as% about fi'ed costs" #ntervieee
should %no that de!reciation )allocated cost of oning trac%s, engines, and cars, is a fi'ed cost
and that labor may be effectively a fi'ed cost )es!ecially if there are contract im!ediments to
layoffs," These have not gone u! hoever" /hat is u!3
Girect shi!!ing revenue is don 0+K S 2+K @ X0 Billion S X2+ million" Since costs are fi'ed,
almost all of this goes to the bottom line" Sing in !rofits is X0++ million and you have found
2+K of the cause in revenue dro!"
#m!ortant to !ic% u! that truc%ing is cause of !roblem" >ee!ing <orter Model running in the
bac%ground is good to !ic% this u!" #ndustry groth rates sho relative health )9K groth, but
this includes truc%ing"
A!!ears that !roblem is that com!etition from truc%ing is causing revenue dro!, hich destroys
com!any.s ability to cover fi'ed costs"
-ther insights5
#m!act of J#T on rail freight is negative" &ave to get smaller loads out 4uic%er, not good
for rail"
=ail !robably rarely gets shi!ment directly to, say, a semiconductor !lant" ?i%ely alays
had to integrate ith truc%ing in old environment to some degree"
S*,,este< AAt+ons/
Givest
<artner ith or buy truc%ing firm"
<artner ith com!etitors to fill return train loads once load is dro!!ed off"
Sell assets and focus on most !rofitable lines or customers"
-therJ
2003 The Johnson School Consulting Club &a,e 6'
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
E9ISTING AIRLINE ROUTE AC:UISITION
T/-e of case0 %"ofitabilit/
A -a>o) a+)l+ne +s Aons+<e)+n, aAM*+)+n, an e(+st+n, )o*te f)o- ToE=o to N. HoD Aan +t
<ete)-+ne +f tCe )o*te +s a ,oo< +<eaF
S-?UT#-D ST=UCTU=8
<rofitability analysis loo%s li%e the best a!!roach" Sim!ly determine if revenue less costs
e4uals a !ositive !rofit" Then, analyBe the factors that go into revenue and the factors that go
into cost to come to a conclusion"
S-?UT#-D ADA?7S#S
-ccu!ancy rates and e'!ected !rices ill determine revenues" Both of these ill be
determined by e'!ected demand, the com!etitive environment, and the e'tent to hich our
client could in over !assengers from com!etitor routes" Mentioning fare ars and
com!etitor reaction is a good idea" ?oo%ing at com!etitor occu!ancy rates and fares could
be used as a !oint of research"
-!erating costs ill de!end on e'!ected fuel costs, incremental costs for landing rights, etc"
Most air!lanes are fi'ed costs because they are oned or under long(term leases" &oever,
is there another route that is more !rofitable that these !lanes could be dedicated to3 #t is
also very im!ortant to estimate the cost of cannibaliBation of e'isting To%yo(?A, ?A(D7
routes" /ill these routes be continued at the same level of o!eration3 And last but not
least, it is im!ortant to note that losing !assengers to cannibaliBation is better than losing
them to com!etitors"
2003 The Johnson School Consulting Club &a,e 65
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
CABLE O&ERATIONS IN A; an< NM
T/-e of case0 %"ofitabilit/
TDo =ea)s a,o a Bent*)e Aa.+tal Ao-.an= .*)ACase< a Aable T" s=ste- tCat Ca< aAAess
to $ -+ll+on Co*seCol<s +n A)+Jona an< NeD Me(+Ao. TCe "C f+)- Das att)aAte< to tCe
e(t)e-el= la),e s*bsA)+be) .otent+alG an< tCe .otent+al fo) Aons+<e)able )et*)n. Des.+te
tCe+) best effo)tsG tCe= CaBe fa+le< to t*)n a .)of+t +n tCe .ast tC)ee =ea)s. o* CaBe been
C+)e< to <ete)-+ne +f tCe= Aan t*)n a .)of+t o) +f tCe= sCo*l< sell.
AGG#T#-DA? #DF-=MAT#-D
The cable system features fiber(o!tic lines to each street corner, but not yet direct to the
home"
Fi'ed costs are e'tremely high due to the distance beteen cities in the system"
The debt and maintenance costs are also higher than system in metro!olitan areas"
The current system is only at :9K ca!acity )Z of subscribers, vs" a N9K industry average"
?o subscri!tion rate ):9K, is not attributable to life(style or cable !rogramming" <eo!le in
the service area actually atch more TA than the national average6 the !rogramming offers
hat they li%e to atch"
The cable com!any covers an even mi' of small city urban, suburban and rural areas"
The !o!ulation is rising faster than the national average, groth is suburban"
There are : netor% stations )reaching the hole area,, and 1 inde!endent regional
broadcast stations" Also, 0V !ercent of the residents have satellite systems in o!eration
)GirecTA, 8choStar, etc,"
The 4uality of the rece!tion of local broadcasts5 for those in the immediate area, signal is
very strong"
The signal is free, but those subscribing to satellite services !ay a monthly fee e4ual to that
of the cable service"
#t ta%es 0+ !aying customers !er s4" mile to brea% even, at least *+ !otential !er s4" mile to
even consider entering the mar%et" Although the area averages *+U residents !er s4" mile in
rural areas, total actual subscribers is ^ 0+"
2003 The Johnson School Consulting Club &a,e 40
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
S-?UT#-D ST=UCTU=8
At a minimum, the anser should5
AnalyBe current revenues and cost structures L do revenues ] costs3
AnalyBe the mar%et !otential of the area L is there groth !otential3
AnalyBe the com!etitive situation and substitutes L is this !roductCservice a inner3
<rovide recommendations L establish a clear decision rule
C-STS =8A8DU8S
Fi'ed costs associated ith laying cable Subscribers. monthly fees for basic services
Aariable costs of ne customers )e4ui!ment, Subscribers. fees for !remium channels
Maintenance of the cable system Subscribers. fees for other !remium services
Gebt associated ith fi'ed costs Advertising fees from commercials
Franchise fees to munici!alities Commissions from sho!!ing channels
S-?UT#-D ADA?7S#S
This is a straight !rofitability analysis to determine hether or not the AC firm should continue
or ithdra" G--G ansers identify a decision rule that includes an analysis of5 )0, !rofitability
L hether or not the venture is !rofitable )*, ade4uate return L hether or not the return
e'ceeds the AC firm.s o!!ortunity costs )9, management e'!ertise L hether or not the client
has the managerial s%ills to ma%e the venture succeed"
&igh fi'ed costs are overhelming the current revenues, and the current subscriber rate is lo"
Good ansers should investigate hy and if it can be fi'ed" Good ansers also might identify
the insight that distance beteen customers is im!ortant" The rural character of this subscriber
area means the sell(rate must be higher since there are feer !otential customers !er s4" mile"
-utstanding ansers might uncover that as the cable TA business evolved, many rural
residents already have satellite dish systems that afford multi!le channels" /hat ould it ta%e
to in these customers over, or hy can.t they be on over"
2003 The Johnson School Consulting Club &a,e 41
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
T&ICAL BANK
T/-e of case0 %"ofitabilit/
A banE tCat loans to )eal estate <eBelo.e)s Cas a loDe) tCan +n<*st)= aBe)a,e )et*)n.
o* a)e asEe< to Cel. +-.)oBe .)of+tab+l+t=. HoD Do*l< =o* a..)oaAC tC+s .)oble-F
AGG#T#-DA? #DF-=MAT#-D
Ban% borros from the Fed at a rate of NK and lends money at 0+K"
Ma$or source of loss is the loan officers at the rate of X*++,+++ each !er year"
8ach officer s!ends the same amount of time on each loan, no matter hat the siBe"
Aariable costs increase ith the number of loans"
S-?UT#-D ADA?7S#S
The ban% is ta%ing too many small loan a!!lications" They should reduce the amount of time on
small loans, increase the rate for small loans or e'it the small loan business entirely"
/hat is the brea%even volume of loans each officer must !rocess3
=evenues U s!read" Costs are s!lit into variable costs )chargeoffs, and fi'ed costs )salary,"
Given that the s!read is 0+K ( NK S :K assume chargeoff is 9K )intervieee may have to
estimate,"
Therefore at brea%even5
:K )@, S 9K )@, U X*++,+++
@ S X*+ million" S volume of business each !erson should handle each year"
2003 The Johnson School Consulting Club &a,e 42
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
CANADIAN TIMBER COM&AN
T/-e of case0 %"ofitabilit/
o* CaBe been C+)e< b= a Cana<+an t+-be) Ao-.an= tCat .)oAesses t)ees f)o- tCe fo)est
to t+-be) .)o<*Ats ?boa)<sG etA.@. TCe= CaBe been -aE+n, -o)e .)of+ts tCan tCe+) <+)eAt
Ao-.et+to)s an< <o not *n<e)stan< tC+s .Ceno-enon. o* CaBe been C+)e< to f+n< o*t
DC=.
AGG#T#-DA? #DF-=MAT#-D
#n Canada, the timber com!anies on their on natural resources )forests,"
There are many com!etitors in this industry"
Timber com!any !rices are the same as their com!etitors"
Use same e4ui!ment"
&ave the same labor s%ills"
/ood is the same 4uality"
There is not much of a trans!ortation difference beteen the forests, the mills, and the !oint
of sales
S-?UT#-D ADA?7S#S
Thin% of !rofit as a cost vs" revenue issue" #t turns out that lumber !roducts industry is a
commodity industry" So you may ant to thin% about the ste!s in the !rocessing flo and
analyBe differences beteen com!etitors at each ste!"
-n average, the timber com!any has thic%er trees in their forests than their com!etitors" They
can get a higher yield for the same amount of !rocessing time, meaning a loer !rocessing
cost !er unit"
2003 The Johnson School Consulting Club &a,e 4$
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
C)e<+t Ca)< &)of+tab+l+t=
T/-e of case0 %"ofitabilit/
Com-an/0 *cinse/
o*) Al+ent +s tCe .)es+<ent of a banE. TCe A)e<+t Aa)< .)o<*At of tCe banE Cas been
.)of+table fo) tCe last 16 =ea)s. HoDeBe)G .)of+ts CaBe <eAl+ne< 26O oBe) tCe last $ =ea)s.
TC)ee =ea)s a,o .)of+t Das N100 -+ll+on P =ea). TCe C*))ent A)e<+t Aa)< -a)Eet +s
sat*)ate<.
S+t*at+on/ &o to get ban% credit card !rofit bac% to X0++ million C year3
/hat caused the dro!3
&o do e counteract it3
/hat ne !roducts can be offered3
:*est+on/ &o ould you structure your investigation and solve the !roblem3
Info)-at+on/ <roduct K of Ban%.s <roduct K of Mar%et !roducts
=eard Cards +K 99K
Affinity Cards )<icture, +K 99K
Credit CardsP 0++K 99K
P Do !oints and no real reards
Getting Customers
=egional Focus L Mid Atlantic O D8 L believe they understand the ris%s
associated ith this customer grou!
0C; customers ac4uired through the ban% branches L signed u! during visit
:C; customers ac4uired through direct mail
Ban% Costs
Cost K of Ban% Costs Com!arison
Mar%eting O Customer Ac4uisition 9;K &igh )0+K,
Fi'ed Cost )!rocessing, :+K Average
Credit ?oss *;K ?o
Cost <er Ac4uisition )C<A,
Aery high L ;+K higher than com!etition
Cost !er solicitation is average"
Sol*t+on/
/hat caused the dro! in !rofit3
o Saturation
o Com!etition
o Substitute !roducts
/hat !roducts are !eo!le using3
o Segments
o Access
o /hy
/here do ban%s ma%e their money3
o =evenue
2003 The Johnson School Consulting Club &a,e 41
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
o Costs
o =is%s
&it rate is lo, volume is higher"
AnsDe)/ Gro current credit cards in ne regions of the country"
-ffer !oints or additional !roducts"
Use information to better target customers to loer C<A"
Should try and 4uantify these ne mar%ets
Can they actually gro revenue by 99K to reach X0++ million3
#s this here their com!etitive advantage lies3
Should they be in this business3
2003 The Johnson School Consulting Club &a,e 46
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
BANK LOAN O&ERATIONS
2003 The Johnson School Consulting Club &a,e 44
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
T/-e of case0 %"ofitabilit/
A banE Cas a loan +ss*+n, o.e)at+on tCat )eM*+)es tCe folloD+n, ste.s/
loan a..l+Aat+on ,ene)at+on at b)anAC banE
Ao-.lete a..l+Aant baAE,)o*n< ACeAE at b)anAC banE
sen< a..l+Aat+on an< baAE,)o*n< ACeAE to loan .)oAess+n, off+Ae
*.<ateP)eACeAE baAE,)o*n< ACeAE ?taEes -*AC less t+-e tCan o)+,+nal ACeAE@
loan +s a..)oBe< o) <en+e<
TCe banE +s Aons+<e)+n, ,ett+n, )+< of tCe f+)st baAE,)o*n< ACeAE an< onl= )el=+n, on
tCe loan .)oAesso)Qs ACeAE to s.ee< tCe+) se)B+Ae fo) A*sto-e)s. If tCe loan .)oAesso)
<oes tCe DCole ACeAE D+tC a neD softDa)e s=ste-G tCe ACeAE taEes 1 a<<+t+onal Co*) at
tCe .)oAesso)Qs off+Ae .e) a..l+Aat+on.
TCe aBe)a,e .)of+t -a),+n .e) loan oBe) t+-e +s N0.20 .e) <olla) loane< fo) a K,oo<K
loan ?loan +s )e.a+<@
TCe aBe)a,e -a),+nal loss .e) loan oBe) t+-e +s N0.60 .e) <olla) loane< fo) a Kba<K
loan ?loan +s not )e.a+<@
60O of tCe a..l+Aants .ass tCe f+)st baAE,)o*n< ACeAE
50O .ass tCe seAon<
SCo*l< tCe banE .)oAee< D+tC tCe neD s=ste-F
AGG#T#-DA? #DF-=MAT#-D
Cost of branch ban% bac%ground chec% S X0++Cloan )eliminate this cost ith the !ro!osed
system,"
<rocessorQs labor hour costs XN+ )at branch and at !rocessing office,"
Dumber of loan a!!licants is only 0,+++ !er year"
Average value of loan is X0+,+++"
The !ro!osed !rocessing !rogram has a :+K acce!tance rate"
Additional cost of ne !rogram is X;+ !er loan a!!licant"
The original loan !rocessing system has 0+K bad loans"
The !ro!osed system has ;K bad loans )it is more discriminating,"
2003 The Johnson School Consulting Club &a,e 4%
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
S-?UT#-D ST=UCTU=8
This case obviously tests your analytical s%ills" Go not anser the 4uestion ithout !a!er or
calculator to im!ress the intervieer if your math s%ills are !oor, since this strategy could easily
bac%fire, ma%ing you loo% stu!id" This case is straightforard, but ma%e sure that you have all
the information necessary to develo! an anser"
7ou should calculate a com!arative !rofit !er year for the original and !ro!osed Systems"
&ereQs an e'am!le5
-riginal System5
)0+++ a!!lications, ' )+":; loans !er a!!lication, ' )[1+K good loans ' X+"*+ !er dollar for a
good loan, ( )0+K bad loans ' X+";+ !er dollar for a bad loan,\ ' )X0+,+++ !er loan, S ):;+
loans, ' )X+"09 e'!ected !er loan dollar, ' )X0+,+++ !er ?oans, S X;2;,+++ e'!ected !rofit
But this method costs an additional X0++ !er loan a!!lication5
<rofit S X;2;,+++ ( )0+++ a!!lications, ' )X0++Ca!!lication, S X:2;,+++ com!arative !rofit
<ro!osed System5
)0+++, ' )+":, ' [)1;K ' X+"*+, ( );K ' X+";+,\ ' )X0+,+++, S XNN+,+++ of !rofits
But, thereQs an additional cost of 0 hour !er a!!lication at the !rocessing office !rofit S
XNN+,+++ ( [)XN+Chr, ' )0 hrCa!!lication, ' )0+++ a!!licationCyr,\ S XN++,+++
And thereQs the cost of the ne !rogram5
<rofit S XN++,+++ ( )X;+Ca!!lication, ' )0,+++ a!!lication, S X;;+,+++ of total com!arative !rofit
S-?UT#-D ADA?7S#S
Based on the ra data, the ban% should !rogress ith the ne system" &oever, you need to
discuss hether the ban% can ma%e the change" Mention any retraining and system installation
costs that are necessary to change the system, and don.t forget to evaluate the cost of the ne
system itself" Also you may ant to mention that a faster loan !rocessing s!eed may hel! the
ban% get more business"
2003 The Johnson School Consulting Club &a,e 4'
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
SUNDA CIRCULAR
T/-e of Case0 %"ofitabilit/
Sou"ce0 Deloitte
Case SAena)+o
7our client is a ma$or mass merchandise retailer in a turnaround situation" To im!rove
!rofitability and in bac% /all Street confidence, the retailer is !ursuing significant cost
reductions"
The Advertising de!artment has been charged ith reducing Sunday circular advertising
costs by X*; million in *++0" This re!resents a 0+K cost reduction and translates into ;
million circulars !er ee% from a baseline of ;+ million"
The =egional A<s res!onsible for store sales believe that the distribution of Sunday
circulars to individual homes is strongly correlated ith sales" They ill !ush bac% on
any cuts in their individual regions"
The industry standard for coverage )circulation divided by households in a given area, is
a!!ro'imately N;K" &oever, at this retailer, coverage levels in individual mar%ets and
individual Bi! codes vary idely from this norm"
Finally, the CF- is one of your e'ecutive s!onsors and has set e'!ectations for
immediate cost reductions, as ell as a longer(term sustainable !lan to maintain Sunday
coverage levels in the future"
>ey #nformation to Consider
0" Sunday circulation is !urchased at the Emar%etF level for each of ;++ US
mar%ets" 8ach mar%et is su!!orted by hundreds of nes!a!ers ca!able of
distributing the Sunday circular" /hen buying coverage from a nes!a!er, a
retailer ty!ically selects the s!ecific Bi! codes for hich distribution is desired"
*" 7ou have access to Sunday circulation data for the entire US that identifies the
number of circulars delivered by each !articular nes!a!er to each Bi! code,
and the cost of distribution" #n addition, you.ve been given !o!ulation and
demogra!hic information for each Bi! code and mar%et"
9" -ver the !ast fe years, circulation decisions have been driven by those regions
and stores that Escream the loudestF for additional circulation"
:" The retailer has a robust customer database ca!tured from chec% and credit
card data that identifies here customers live and here they sho!"
Ke= Inte)B+eD :*est+on?s@
0" &o can you address the CF-.s demand for immediate and longer(term cost
reductions3
*" &o ould you identify hich ; million !ieces to cut hile being cogniBant of the im!act
on sales3
&oss+ble ReAo--en<at+ons 2 Ke= &o+ntsPIss*es Can<+<ate SCo*l< CoBe)/
Iuestion 05 EIuic% &itsF folloed by a rational a!!roach to assigning circulation by mar%et
Iuestion *5 -verall A!!roach O Measurement
Iuic% &its(#mmediate Savings
o Measure the !roductivity of the Bi! codes" _i! code metrics could include5 high
coverage, far distance from the store, lo sales !er households, high
advertising e'!enseCsales ratio, lo salesCcirculation ratio"
o Create fre4uency distributions to evaluate the metrics" 8liminate coverage in
the most un!roductive Bi! codes, !articularly Bi! codes that are on the tail end
of several of these metrics"
2003 The Johnson School Consulting Club &a,e 45
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
o The =A<.s ill be more li%ely to agree to cuts in Bi! codes here sales are
already lo"
?onger(Term Coverage Getermination Model
o <rioritiBe mar%ets based on 4uantifiable metrics that indicate ho
valuableC!otentially valuable they are to the retailer" Such metrics might
include5 sales !er household, com!etition indicator, total sales )mar%et siBe,
and mar%et groth"
o Assign target coverage levels based on this value"
o /ithin each mar%et !rioritiBe Bi! codes based on the value to the retailer"
o Buy coverage ith this !rioritiBation as a guideline"
#m!lement a Sales #m!act Trac%ing Mechanism
o Monitor Bi! codesCmar%ets here cuts have been made to see ho sales are
im!acted
Case #)a.3U.
Iuic% hits ere identified and im!lemented first to start the ball rolling ith savings"
This accounted for around 0;K of the overall reduction in Sunday circulation"
The longer(term a!!roach involved a mar%et scoring methodology that ould hel! us
assign target coverage levels to each mar%et" /ith target coverage levels based on
sales !er household, mar%et !otential, and com!etition, instead of !erce!tion, the team
as able to identify cuts that ere $ustifiable" Understanding mar%et and Bi! code
!riorities hel!ed the team identify the additional 2;K savings"
The team or%ed ith the client and an outside !rint media(buying vendor, to ma%e
s!ecific )hich nes!a!er3, ho many co!ies3, recommendations by Bi! code and
4uantify the savings"
8ven though the target coverage levels reduced coverage significantly in some of the
largest mar%ets, the client moved forard and made the cuts since the scoring model
shoed that these mar%ets may not be as valuable as !reviously thought"
Sales trac%ing has $ust begun" So far the im!act of the cuts has been minimal"
2003 The Johnson School Consulting Club &a,e %0
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
&ARCEL DELI"ER
T/-e of case0 St"ateg/
TCe Al+ent +s tCe la),est .aAEa,e <el+Be)= se)B+Ae +n Cana<a. D*)+n, tCe .ast $0 =ea)sG
tCe f+)- Cas establ+sCe< a netDo)E tCat alloDs +t to <el+Be) .a)Aels to KeBe)= a<<)ess +n
Cana<aK. Unt+l last =ea)G Ao-.et+t+on Ca< been non3e(+stent an< .)of+ts De)e Be)=
st)on,. Sta)t+n, abo*t 16 -ontCs a,oG a neD Ao-.an= be,an .a)Ael .+AE*. an< <el+Be)=
to tC)ee ?an< onl= tC)ee@ Cana<+an A+t+es 3 Mont)ealG To)onto an< "anAo*Be). AltCo*,C
oBe)all .a)Ael t)aff+A Cas <eAl+ne< b= onl= 10O fo) o*) Al+entG .)of+ts CaBe <eAl+ne< b=
al-ost $0O f)o- last =ea)Qs n*-be). O*tl+ne =o*) C=.otCes+s fo) tCe ala)-+n, <eAl+ne +n
.)of+tab+l+t=.
E(.la+n DCat anal=t+Aal -eas*)es =o* Do*l< *se to <+a,nose tCe .)oble- an< DCe)e
=o* Do*l< ,atCe) tCe <ata neAessa)= to .e)fo)- tCe <+a,nos+s. #Cat a..)oaAC Do*l<
=o* offe) to o*) Al+ent fo) tCe )esto)at+on of )easonable .)of+ts an< DCat st)ate,= Do*l<
=o* e-.lo= to .)eBent f*)tCe) <ete)+o)at+on of .)of+tsF
AGG#T#-DA? #DF-=MAT#-D
The ne entrant has a fleet of older semi(trailer truc%s that run beteen the three cities"
-ur client has a very ne fleet )more efficient, that services all of Canada" The clientQs fleet
mi' has been o!timiBed such that efficiency and ca!acity utiliBation are high considering the
netor% of locations covered"
The ne entrant charges a!!ro'imately ;+K less than our client for delivery beteen the
three cities that they cover"
-ur client and the ne entrant charge by the lb(mile" -ne !ound carried one mile is a lb(
mile
2003 The Johnson School Consulting Club &a,e %1
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
S-?UT#-D ST=UCTU=8
Start off ith a !rofitability analysis to !in!oint here the !roblem lies" Then, use the 9 C.s to
see hat about the mar%et is causing the !roblem" Finally, ta%e a loo% at the costs of this
industry5 does one of these firms have an inherent advantage3 Are certain customers better off
than others3 This is a com!le' case, so ta%e your time and %ee! digging"
S-?UT#-D ADA?7S#S
The ne entrant has initiated service in the three mar%ets here economies of scale are
!resent" Because a large number of !ac%ages move beteen these three cities, larger
truc%s and efficient distribution centers ma%e such limited service very !rofitable"
A more im!ortant facet of this case is ho the intervieee reaches this conclusion" &eCshe
should use a cost measure li%e XClb(mile to e'!lain that the ma$or city routes have alays
subsidiBed delivery to smaller cities and tons"
=ealiBe also that our delivery to all addresses in Canada is a tremendous advantage to our
client" Businesses that shi! to customers outside of the ma$or cities cannot afford to lose our
service"
8m!loy a ne !ricing strategy that ill increase charges for rural delivery" Dote that this
may invite the ne entrant to begin rural delivery"
Gevelo! long(term contracts ith ma$or business clients ho use our rural delivery
ca!ability" -ffer a flat delivery rate only hen the business agrees to use our client for rural
and city delivery"
Search for synergies ith other com!anies that also deliver to rural areas )this client actually
!aired ith several groceryCbeverageCsnac% delivery com!anies in the most rural areas,"
2003 The Johnson School Consulting Club &a,e %2
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
AMERICAN E9&RESS
T/-e of case0 St"ateg/
A-e)+Aan E(.)ess ?A-e(@ +s a Aons*-e) se)B+Aes Ao-.an= .)oB+<+n, a Ba)+et= of
se)B+Aes to +ts Aa)<Col<e)s. Its .)+-a)= se)B+Ae +s +ts Dell3EnoDn ACa),e Aa)<G tCat
enables H-e-be)sI ?+.e.G Aa)<Col<e)s@ to .*)ACase ,oo<s an< se)B+Aes f)o- -+ll+ons of
-e)ACants tCat aAAe.t tCe Aa)<. Unl+Ee otCe) A)e<+t Aa)<sG Aa)<Col<e)s a)e )eM*+)e< to
.a= off tCe+) aAA)*e< balanAes eaAC -ontCG an< +nte)est +s not ACa),e<.
ReAentl=G A-e( Cas faAe< st)on, Ao-.et+t+on f)o- neD A)e<+t Aa)<s ente)+n, tCe -a)Eet.
TCe= CaBe Aons+<e)e< <)o..+n, tCe N66 ann*al fee. #Cat a)e tCe eAono-+As of s*AC a
<eA+s+onG an< sCo*l< tCe= <)o. tCe fee o) notF
S-?UT#-D ST=UCTU=8
Getermine ho American 8'!ress ma%es money"
8valuate the !ros and cons of dro!!ing the annual fee"
8'!lore o!tions for re!lacement revenue"
Ma%e a recommendation"
=evenue Grivers5
X;; ' the number of members )could round to X;+ for sim!ler math,"
I5 &o many !eo!le have the American 8'!ress Card3 A5 /hat is your best estimate3
The number of cardholders is a!!ro'imately 0: million )you can round to either 0+ or *+ to
sim!lify the math,"
Do additional revenues from consumers, since balances are !aid monthly" )Ame' doesn.t
enforce late fees,
0K merchant fees for all transactions from merchants honoring the Ame' card"
8st" annual transactions are X0,+++"++ !er cardholder" )X0,+++ ' 0K ' 0+mm S X0++ million,
#ssues to be addressed5
If tCe ann*alR fee +s <)o..e<G A-e( loses N66 ( n*-be) of Aa)<Col<e)s.
Ame' ould have to generate ne or additional revenues to overcome the loss of annual(
fee revenue"
Using a conservative estimate, lost revenue ill be 0+mm ' ;; S X;;+ million"
I5 /ill consumer s!ending increase sufficiently to generate merchant(transaction revenue3
2003 The Johnson School Consulting Club &a,e %$
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
A5 Dot li%ely, since cardholders must still !ay(off balances at the end of the month"
Therefore, must increase number of cardholders to increase merchant(transaction revenue"
I5 #s it !ossible to sufficiently increase the number of cardholders3 A5 &o ould 7-U
estimate this3
The average annual transaction revenues are X0,+++ ' 0K S X0+ !er member"
Therefore, the number of ne customers re4uired to overcome the revenue loss ould be
;;+mmC0+ S ;; million
Do, is it !ossible for Ame' to gain ;; million ne members this year3 Dot li%ely, is itT
Also !ossible to raise transaction fees5 more revenues, but must address conse4uences for
vendor relations"
I5 Goes Ame' enforce late fees3 A5 Do, but most credit cards charge X*+ ( X*; for late
!ayments"
SCo*l< A-e( ACa),e +nte)est an< alloD Aa)<3-e-be)s to Col< a balanAeF
/ould the ne revenues from interest offset losses from dro!!ing the annual fee3 Ge!ends
on rate of interest and average balance" I5 /hat is the average A<= and average monthly
balance3 A5 7ou tell me" )use 0;K and X;++,
#f average balance S X;++ at `0+K A<= S X;+ !er member ' 0+ million members S X;++
million annually"
=ecommendations
Based on economic analysis, don.t dro! the fee" #t is difficult to re!lace the lost revenue"
/hile some o!tions e'ist )i"e", charging interest on balances, the conse4uences should be
e'!lored"
Ame' could issue an interest(driven credit card under a ne brand name )in fact, Ame' did
so ith the -!tima card,"
S-?UT#-D ADA?7S#S
The client s!ecifically in4uires about the economics of ending the annual fee" Good ansers
should focus on this issue, and should !rovide recommendations based on the analysis" Good
ansers should e'!lore the issue of rival credit cards entering the mar%et, ho their !roduct
offering is similar or different from the American 8'!ress card, and the strengths and
ea%nesses of American 8'!ress.s !osition" Alternative revenues should be e'!lored" -ne
2003 The Johnson School Consulting Club &a,e %1
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
o!tion is charging interest and alloing cardholders to hold a balance" Ansers should address
ho this ould this affect the AM8@ brand, i"e", the conse4uences of becoming a $ust another
ordinary credit card" Another is enforcing late fees, or raising merchant fees" The
conse4uences of these should be addressed also"
-utstanding ansers should additionally e'!lore the effects of com!etition among credit cards
for revenues, and recommend ho Ame' could increase revenues ithout dro!!ing the X;;
fee" For e'am!le, comment on the 4uality of ne members ac4uired, since com!etition is
forcing many credit card com!anies to issue cards to ris%ier consumers"
2003 The Johnson School Consulting Club &a,e %6
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
STANDARD OIL COM&AN IN 1560
T/-e of case0 St"ateg/
TCe =ea) +s 1560. o* a)e Stan<a)< O+l Co-.an= of NeD Je)se= ?noD EnoDn as
E((onMob+l@G a Ao-.an= tCat e(Aels +n tCe )ef+n+n, an< -a)Eet+n, of .et)ole*-
.)o<*Ats. TCe s*AAess of =o*) Ao-.an= <e.en<sG +n .a)tG on =o*) ab+l+t= to -a+nta+n
a<eM*ate leBels of .et)ole*- s*..l=. !olloD+n, nat+onal ene),= sCo)ta,es e(.e)+enAe<
<*)+n, ##IIG +t +s Alea) to =o*) Ao-.an= tCat seA*)+n, a so*)Ae of fo)e+,n o+l +s Ee= to
-a+nta+n+n, =o*) s*..l=G an< CenAe =o*) -a)Eet sCa)e. o* CaBe been a..)oaACe<G
se.a)atel=G b= tDo otCe) .et)ole*- Ao-.an+es to ente) +nto >o+nt Bent*)es. One
Ao-.an=G G*lfG +s +nte)este< +n establ+sC+n, <)+ll+n, )+,Cts to a la),e f+el< loAate< +n tCe
s-all A)ab+an3.en+ns*la nat+on of K*Da+t. TCe= CaBe offe)e< =o* a la),e staEe +n tCe
Bent*)e. A seAon< o+l Ao-.an=G Ro=al D*tACPSCellG Cas offe)e< =o* an eM*all= la),e
staEe +n a Bent*)e to establ+sC <)+ll+n, )+,Cts to a la),e f+el< loAate< on tCe bo)<e) of I)an
an< I)aM. o* <o not CaBe tCe )eso*)Aes to ente) +nto botC Bent*)es. #C+AC one <o =o*
ACoose an< DC=F
AGG#T#-DA? #DF-=MAT#-D
To some of the intervieee.s 4uestions, re!ly ith E8'!lain ho the anser to your 4uestion
ould determine hich !artner is !referable"F
Some variables and information to consider hen com!aring >uait vs" #ra4
<olitical stability and ris% )domestic !olitics, L both areas, as of 01;+, are unstable states"
>uait.s government is currently more stable, but the head of state is very old"
<olitical stability and ris% )#nternational, (( >uait does not have as many border dis!utes as
#ra4, and both have a tradition of or%ing ith foreign develo!ers" >uait invited develo!ers
into the country around 010*"
?egalC=egulatory environment5 ?egal ris% due to mar%et instability )legal foundation to
enforce contracts and !rotect investments, L both areas have good legal systems, but la is
de!endent on the stability of the government" =is% is considerable" Fe regulations e'ist in
either country"
Socio(cultural environment L are s%illed or%ers available or ill they be im!orted3 #n both
countries, s%illed labor is unavailable" Both countries are in favor of foreign oil develo!ment,
but there e'ist elements against the !resence of foreigners, and against !erceived economic
e'!loitation"
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BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
#nfrastructure )Ability to get !roduct to mar%et, L Both countries have significant access to
!orts and nely develo!ed !i!elines )that cross neighboring country.s soil,
#nfrastructure )Ability to e'tract oil, L This is the most significant cost to you, since the
infrastructure does not naturally gro in the desert" -il does, but you.ll have to find it"
&uman =esources and Management Talent L your com!any has the talent, but lac%s
e'!erience in the Middle 8ast"
-ther o!tions L can you go it alone3 L 7ou need oil, here else ould you develo! it3 The
costs and ris%s are too !rohibitive L assume a $oint ventureCstrategic alliance is necessary"
=GS vs" Gulf
Both have e'!erience in the Middle 8ast" Both com!anies are com!arable in every ay, but
=GS is much bigger, and has its mar%et focus in Asia and 8uro!e" Gulf is a US com!any
focused in the US and 8uro!e" Both see% a long(term !artnershi!" =GS has e'!erience ith
$oint ventures )in Asia,, both good and bad"
S-?UT#-D ST=UCTU=8
Good ansers ill outline the conditions that ma%e a $oint venture or%able" There is little
information from hich to base a rational choice, so the anser matters little" #nstead, focus on
defining decision rules"
S-?UT#-D ADA?7S#S
/hat are your strategic ob$ectives3
/hat are the variables affecting the decision3
Getermine the decision rule for hether to go or not go"
8'amine and com!are the offers5 hich of your ob$ectives are fulfilled or not3
/hat are the conse4uences of $oining6 hat are the conse4uences of not $oining3
<rovide im!lementation and e'it strategies, and other conditional !rovisions"
2003 The Johnson School Consulting Club &a,e %%
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
DIRECT MARKETING !IRM
T/-e of case0 St"ateg/
o*) Al+ent +s tCe .)e-+e) <+)eAt -a)Eet+n, f+)- +n tCe Un+te< States. TC+s f+)- also oDns
<+B+s+ons <eal+n, D+tC softDa)e <eBelo.-entG -a)Eet+n, )esea)ACG CotelsG Aa) )entalsG
)eal estate an< )elate<G ta( an< f+nanA+al a<B+so)= se)B+AesG an< -an= otCe)s. o*) Al+ent
+s Aonf+<ent tCese s*bs+<+a)+es aAC+eBe Aons+<e)able oBe)all s=ne),= an< .)oB+<e tCe
.a)ent D+tC e(.an<e< o..o)t*n+t+es fo) <+)eAt -a)Eet+n,. o*) Al+ent +s also Aonf+<ent
tCe b*s+ness f*n<a-entals a)e Be)= so*n<. TCe .)oble- tCe= faAe +s tCat tCe+) stoAE
.)+Ae Cas been se)+o*sl= affeAte< b= a )eAent aAAo*nt+n, sAan<al. AltCo*,C tCe
aAAo*nt+n, .)oble-s CaBe been Alea)e< *.G +nBesto)s a)e Da)=.
In +ts -e-be)sC+. b*s+nessG =o*) Al+ent -a)Eets -e-be)sC+.s +n sCo..+n,G t)aBelG a*toG
A)e<+t .)oteAt+onG an< otCe) .e)sonal se)B+Aes. It <oes so b= off3b)an<+n, +ts .)o<*Ats to
banEsG A)e<+t *n+onsG A)e<+t Aa)<sG Al*bsG an< -an= otCe) o),an+Jat+ons. Its .)+-a)=
so*)Ae of )eBen*es +n tC+s b*s+ness +s -e-be)sC+. fees. Its <+st)+b*t+on ACannels a)e
<+)eAt -a+lG tele-a)Eet+n,G tCe Inte)netG an< A-e)+Aa Onl+ne. TCe Inte)aAt+Be <+B+s+on
also o.e)ates a n*-be) of E3Ao--e)Ae s+tes tCat ,ene)ate -e-be)sC+.sG an< so-e
a<Be)t+s+n, <olla)s. Mana,e-ent Cas .laAe< a n*-be) of +-.o)tant +n+t+at+Bes on Col<
<*e to laAE of f+nanA+al )eso*)AesG an< <*e to a laAE of -ana,e-ent foA*s )es*lt+n, f)o-
)eAent .)oble-s.
AGG#T#-DA? #DF-=MAT#-D
The subsidiaries are recent ac4uisitions, most ithin the last to years"
The com!any as a hole formed as the result of a merger beteen to e4ual firms"
The business fundamentals are very sound6 but investors may not believe the numbers"
The core business is membershi!s )selling the auto, travel, sho!!ing, etc, service !roducts,"
The core com!etency is effectively leveraging subsidiaries and mar%eting !artners for cross(
mar%eting o!!ortunities to sell membershi!s6 these are yet unta!!ed due to diversion of
management focus"
There is com!etition ithin sub(categories )i"e", your client com!etes ith AAA for auto clubs
services, but little com!etition at the scale at hich the client o!erates6 there are fe !layers
in the national mar%et"
<rices of membershi! services are stable )recent !rice increases did not affect membershi!
flo,"
2003 The Johnson School Consulting Club &a,e %'
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
Membershi! flos )ho many !eo!le $oin or 4uit, have remained constant6 membershi!s are
increasing ra!idly"
The current situation is such that the individual !ieces of the firm are more valuable than the firm
as a hole" i"e", the firm is currently undervalued" But this is due to a lac% of investor confidence
in the numbers !roduced by the com!any resulting from the recent !roblems"
S-?UT#-D ST=UCTU=8
Getermine hat drives investor confidence"
Assess the client.s situation ith res!ect to these variables"
Getermine hat the client can do to affect these variables and offer o!tions"
/hat drivers affect investor confidence3
good management team in !lace L yes, no anyay"
inde!endent audits to ensure data is accurate L yes, com!leted"
!ros!ect for a good return on investment L absolutely, if you believe the numbers"
therefore earnings that e'ceed e'!ectations ma%e a good investment L lo stoc% !rice is a
buying o!!ortunity"
or undervalued assets L !articularly the softare and interactive divisions"
mar%et climate in general"
/hat has management done ith res!ect to these drivers6 hat can management do3
The chairman resigned, as did several senior e'ecutives in the a%e of the accounting
scandal"
#nde!endent auditors com!leted a forensic analysis of the boo%s L the boo%s are no solid"
The C8- has begun meeting ith investors to sell a ne strategic !lan"
The De !lan involves s!inning off the softare, interactive, and other !rofitable divisions to
enable the com!any to focus on %ey businesses"
This is a tric%y case, because there are no obvious actions left out L most of hat can be done
is being done and being done ell )e'cluding radial ste!s that ma%e little economic sense,"
The %ey is ca!ital mar%et behavior, not the client" The mar%et )these days, reards #nternet
based com!anies, but has failed to !erceive the value in your client.s interactive and softare
divisions" A s!in(off folloed by an #<- may result in enough cash to fuel further investments"
Action, !erha!s, ill restore overall investor confidence"
2003 The Johnson School Consulting Club &a,e %5
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
NABISCO
T/-e of case0 St"ateg/
Nab+sAo7s Table S.)ea<s o.e)at+n, Ao-.an= Das looE+n, to b*= tCe &a)Ea= b)an< of
-a),a)+ne. No -an*faAt*)+n, eM*+.-ent o) faA+l+t+es Do*l< be +nAl*<e<G onl= tCe b)an<
na-e an< fo)-*las. !)o- a f+nanA+al .e)s.eAt+BeG tCe <eal +s a .os+t+Be N&" .)o>eAt.
!)o- a st)ate,+A .o+nt of B+eDG sCo*l< Nab+sAo aAM*+)e &a)Ea= ?not a f+nanA+al n*-be)s
Aase@F
S-?UT#-D ST=UCTU=8
$Cs Anal=s+s
Com!etition
Understand the com!etitive mar%et!lace"
An oligo!oly ith Unilever );+K mar%et share, and Dabisco )9;K after ac4uisition,
The mar%et is bro%en into three segments5
&ealth Unilever.s <romise vs" Dabisco.s Fleischmann.s
Taste Unilever.s # Can.t Believe vs" Dabisco.s <ar%ay )3,
<rice Unilever.s Country Croc% vs" Dabisco.s Blue Bonnet
This information should !rovo%e the ideas of !ortfolio diversity" /hy is that
goodCbad3
=etail !rices5
Fleischmann.s S X0"V1Clb"
<ar%ay S 0"*1Clb"
Blue Bonnet S "21Clb"
Customers
Dothing relevant for this case"
Com!any
Brea%don by brand5
Fleischmann.s5 ;+,+++,+++ lbs annual demand and :+ cents !rofit margin !er lb" Mar%et
share declining at 9K !er year"
<ar%ay5 0;+,+++,+++ lbs annual demand and 9+ cents !rofit margin !er lb" Taste
category is increasing, but <ar%ay is currently decreasing" #nvestment in advertising can
hel!"
2003 The Johnson School Consulting Club &a,e '0
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
Blue Bonnet5 9++,+++,+++ lbs demand and V cents !rofit !er lb" Mar%et share
steady"
"al*e CCa+n/ anal=Je a<Banta,esP<+sa<Banta,es of aAM*+s+t+on
<rocurement
Synergies of buying oil, containers
Manufacturing
Dabisco does not have ca!acity to integrate 0;+,+++,+++ of <ar%ay into their e'isting !lant
ca!acity" /hat are some o!tions for getting around this !roblem3
Third(!arty manufacturing is not an o!tion because of tight margins and high
trans!ortation costs"
Ca!ital e'!enditures are not feasible because Dabisco has s!ace utiliBation issues )not
enough s!ace in !lants to add machines,
Solution5 use customer !rice sensitivity to induce shifts in demand among the three
segments" /hat direction ould you shift these !rices3
Blue Bonnet has loest margin and highest !rice sensitivity, therefore raise the !rice
to reduce demand"
=educe <ar%ay.s !rice !oint to ca!ture some of the lost customers"
Maintain Fleischmann.s"
Gistribution
Current distribution center doesn.t have enough ca!acity to house !ro!er safety stoc%
levels" An addition has to be made costing X*+ million" The !aybac% !eriod is *"0
years" #s this a orthhile investment3
Best anser5 =ealiBe that !aybac% !eriod is not the best measurement of a !ro$ect.s
orth" Using D<A or GCF is better"
Another anser5 *"0 is an acce!table !aybac% !eriod, realiBing that in a mature
business, the consistency of cash flos ma%es it a strong investment"
#ncreased volume ill also reduce trans!ortation costs"
Customers
=etail stores on.t react negatively to the !rice change as their !rofit margins ill also increase"
2003 The Johnson School Consulting Club &a,e '1
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
MOBIL/ RETAIL SALES O&ERATIONS
T/-e of case0 St"ateg/
TCe sales fo)Ae at Mob+l +s Ao-.ose< of Aolle,e ,)a<*atesG eaAC of DCo- Aalls on abo*t
tDent= stat+ons. #Cat sCo*l< tCe= talE abo*t D+tC tCe ,as stat+on oDne)sF
TCe st)*At*)e of tCe )eta+l ,asol+ne b*s+ness +s as folloDs/
Mob+l oDns tCe ,as stat+ons DC+le tCe stat+on -ana,e)PoDne) oDns tCe b*s+ness.
Mob+l sells ,asol+ne to tCe stat+on at tCe DColesale .)+Ae ?DT#@ DC+le tCe stat+on
-ana,e)PoDne) sets tCe st)eet .)+Ae.
Mob+l -aEes a .)of+t of abo*t 10 Aents .e) ,allon.
S-?UT#-D ADA?7S#S
e/ %oints b/ 4nte"3iewee0
<roduct5 Gas is a commodity"
<romotion5 Gone nationally, not this grou!"
Gistribution5 Fairly automatic"
<rice5 Mobil does not set street !rice" &o is street !rice determined3
;ecommendations0
Mobil ants the street !rices as lo as !ossible )close to GT/,, hich increases volume"
Iuestion5 ho does station ma%e a !rofit3
Anser5 Convenience store and auto care are high margin )but lo volume," Sales force
should hel! station oner to set u! !rofitable convenience store and use lo gas !rices to
attract volume"
2003 The Johnson School Consulting Club &a,e '2
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
COOL #HI&
T/-e of case0 St"ateg/
o*QBe been C+)e< b= tCe K)aft Desse)ts D+B+s+on Mana,e) to Cel. solBe a .)oble- D+tC
Cool #C+. ?tCe non3<a+)= <esse)t to..+n,@. Cool #C+. Cas been a AasC AoD fo) K)aft. It
Cas an '0O sCa)e of -a)EetG loD .)o<*At+on Aosts an< e(t)e-el= C+,C -a),+ns. Sales of
Cool #C+. CaBe been flat fo) tCe .ast tC)ee =ea)s <es.+te a,,)ess+Be sales effo)ts. TCe
<+B+s+onal -an,e) bel+eBes sales CaBe .eaEe< ?'0 O sCa)e@ an< +s )ea<= to s+t baAE an<
-+lE tCe .)of+ts.
Befo)e .)esent+n, C+s )eAo--en<at+on to tCe Ao-.an= .)es+<ent Ce C+)e< =o* to
<ete)-+ne +f tCe)e a)e/
3 O..o)t*n+t+es to +nA)ease )eBen*es +n tCe US
3 O..o)t*n+t+es to ente) a fo)e+,n -a)Eet
AGG#T#-DA? #DF-=MAT#-D
Cool /hi! is 1+K air, 0+K ater and chemicals"
The manufacturing facility is only running at V+K ca!acity"
Cool /hi! ons a !ro!rietary technology that allos the !roduct EcarryR a very high
!ercentage of air"
S-?UT#-D ST=UCTU=8
8'!lore areas to increase !roduct sales in the US
8'!lore alternate o!!ortunities for increased revenues in the US
AnalyBe the o!!ortunities of entering a foreign mar%et
S-?UT#-D ADA?7S#S
De <roduct Sales -!!ortunities
-ffer ne flavors )cherry, straberry, etc",
Suggest ne uses )Arm O &ammer,
-ffer ne !ac%aging )!um!, !ressuriBed single serve, etc"
8'!lore ne channels )food service, convenience stores, coffee houses, etc",
Co(!ac% ith other !roducts )!ies, coo%ies, etc",
2003 The Johnson School Consulting Club &a,e '$
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
-ther, other, other
The division head tells you these are all great ideas that have been attem!ted ( hat else3
Alternate =evenue Generating -!!ortunities
Sell or license the Eair holdingF technology to other industries(#nsulation, Styrofoam, building
materials, shi!s etc"
UtiliBe the e'cess ca!acity to !roduce generic or !rivate label version of the !roduct
The di3ision head tells /ou these a"e good ideas7 what about fo"eign e,-ansion?
#ssues #nvolved in 8ntering a Foreign Mar%et5
#s there mar%et !otential for Cool /hi! in foreign mar%ets3
/hat are the com!etitive factors3
Can e su!!ly !roduct at an a!!ro!riate cost structure3
Go e have any foreign !resence to ta%e advantage of3
<ow might /ou dete"mine the answe" to these issues?
Area of Analysis5
?oo% for mar%ets ith a high incidence of dessert consum!tion )France,
=esearch the e'istence of com!etitors or substitutes )ice cream, other to!!ings,
Conduct consumer research to determine if consumers ould acce!tCtry the !roduct
=esearch >raft.s current manufacturing, distribution mar%eting ca!abilities in these mar%ets"
=ecommendation5
#nvest in addressing these issues and ma%e a recommendation to the !resident"
2003 The Johnson School Consulting Club &a,e '1
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
!RANK7S CHEESE
T/-e of case0 St"ateg/
!)anEQs ACeese Ao-.an= Cas been .)o<*A+n, Be)= C+,C M*al+t= ACeese fo) <+st)+b*t+on
an< sales +n tCe *..e) East Coast fo) oBe) tC+)t= =ea)s. TCe+) -a+n Ao-.et+t+on oBe)
tCese tC+)t= =ea)s Ao-es f)o- JoeQs ACeese Ao-.an=G DC+AC also .)o<*Aes Be)= C+,C
M*al+t= ACeese.
TCese tDo Ao-.et+to)s CaBe Ca< a f)+en<l= )+Bal)= oBe) t+-e an< eaAC Col<s abo*t a $0O
sCa)e of tCe -a)Eet. ReAentl=G !)anE an< Joe CaBe seen tCe+) .)of+ts <)o.. !)anE bla-es
tCe <eAl+ne +n .)of+ts on +nA)ease< a<Be)t+s+n, an< .)o-ot+onal s.en<+n,.
o* CaBe >*st a feD -+n*tes to <ete)-+ne +f !)anE +s Ao))eAt an< s*,,est sol*t+ons.
HoD <o =o* .)oAee<F
S-?UT#-D ST=UCTU=8
Iuic% chec% for changes to the costs or revenues
Analysis of com!etition, Joe and other
Analysis of other !otential !roblems
Cost Griver Assum!tions5
Any changes in5 Gairy !roducts )ra materials,, !roduction costs, distribution costs, mar%eting
costs, other3
A5 Do ma$or changes e'ce!t for an increase in !romotional costs )cou!oning and retail !rice
reductions,
=evenue Griver Assum!tions5
I5 Any changes in5 <rice, number of accounts, sales levels, ty!e of cheese sold, 4uality of
cheese3
A5 &ave ta%en !eriodic !rice reductions6 Do ma$or changes"
Assum!tions5
Fran% has increased !romotional s!ending and reduced !rices, most li%ely due to an increase
in com!etitive !ressure" &ave e seen increased com!etition3
A5 7es, many of our accounts are offering !rivate label cheeses at half our retail !rice
/hat do e %no about the !rivate label cheese3 Iuality3, Consumers3
2003 The Johnson School Consulting Club &a,e '6
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
A5 ?oer 4uality than Fran%.s to consumer segments5 Those ho do a lot of home coo%ing
and use only Fran%Qs or JoeQs, and those ho $ust sto! in and !ic% u! a bloc% of cheese"
/hy have e been discounting3 Are e losing our loyal customers3
A5 Do" /eQre $ust under a lot of !ressure from the retailer to match !rices"
#ssues5
Gue to com!etitive !ressure from !rivate label, Fran% and Joe have ta%en !eriodic !rice
reductions" This has hurt their margins and may also cause them to lose their loyal customers
)and lose their high(4uality brand image,"
=ecommendations5
Maintain !remium !rice levels for Fran%Qs current line of high 4uality cheese"
Manufacture a loer cost !roduct under a different brand name to com!ete ith !rivate label
brands"
UtiliBe advertising revenues to communicate the benefit of using high 4uality cheese"
2003 The Johnson School Consulting Club &a,e '4
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
ENTERING MARKETS ABROAD
T/-e of case0 St"ateg/
o*) Al+ent +s a Aons*-e) .aAEa,e< ,oo<s f+)- tCat s.eA+al+Jes +n <ental Aa)eG oBe)3tCe3
Ao*nte) -e<+Aal Aa)eG Aan<=G an< .e)sonal C=,+ene .)o<*Ats. TCe= a)e base< +n tCe
East Coast of tCe U.S.G b*t CaBe e(.e)+enAe< st)on, ,)oDtC tC)o*,Co*t tCe U.S.G Me(+AoG
an< Cana<a. Bolste)e< b= tCe Aonf+<enAe +n tCe+) <o-est+A sales ,)oDtC an< .)of+tsG tCe
Ao-.an= )eAentl= la*nACe< an +n+t+at+Be to ente) -a)Eets +n So*tC A-e)+Aa ?.)+-a)+l=
B)aJ+lG A),ent+naG an< &e)*@ an< So*tCeast As+a ?Hon, Kon,G Ja.anG S+n,a.o)eG an< tCe
&C+l+..+nes@. TCe= also so*,Ct to e(.an< tCe+) .)esenAe +n Hollan< an< Bel,+*-.
Last =ea)G +n So*tC A-e)+Aa an< So*tCeast As+aG <es.+te )+,o)o*s -a)Eet anal=s+s
sCoD+n, a st)on, <e-an< fo) tCe+) .)o<*AtsG .)of+ts De)e Dell beloD e(.eAtat+ons. TCe
Ao-.an= also e(.e)+enAe< a Cost of .)oble-s +n a Ba)+et= of a)easG +nAl*<+n, labo)
*n)estG .oo) lo,+st+AsG an< *n-et fo)eAasts. TC+s =ea)G tCe)e a)e no s+,ns of
+-.)oBe-ent +n an= a)eas. In faAtG tC+n,s a)e looE+n, Do)se an< tCe Ao-.an= +s
Aons+<e)+n, D+tC<)aD+n, f)o- tCese -a)Eets. MeanDC+leG eBe)=tC+n, +s ,)eat +n E*)o.e.
TCe= CaBe C+)e< =o* to <ete)-+ne ne(t ste.s.
TC+s +s a -eet+n, D+tC tCe CEO of tCe f+)- S DCat <o =o* tell Ce)PC+-F
AGG#T#-DA? #DF-=MAT#-D
6ote to inte"3iewe"0
<lay the role of C8- L be A8=7 American" The heart of the !roblem is that the American
managers assigned abroad ere un!re!ared to ade4uately deal ith different business
environments" This includes language barriers, cultural differences affecting business
!ractices, and managing a diverse multi(national staff" Further, the local com!any managers
hired had tremendous e'!erience in their home countries, but have never or%ed in the U"S",
and %no little about your client" This resulted in tensions, misunderstandings, and
mismanagement" This is the source of the trouble6 the other !roblems are sym!toms" Anser
each 4uestion the intervieee as%s accordingly"
Com!any #nformation
8'cellent su!!ly chain logistics enables this com!any to com!ete ith <OG, Colgate, etc in
US"
2003 The Johnson School Consulting Club &a,e '%
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
#nternal training !rogram enables managers to learn and !re!are their system, !rior to ta%ing
the helm"
The regional managers ere area managers in the US regions, and all !erformed above
e'!ectations in the US6 this as the basis for their transfer abroad"
The country managers are local hires6 e'!erience in other local industries, none ith this
firm"
8uro!e
Currently o!erating in : 8uro!ean countries )Belgium, &olland, 8ngland, and ?u'embourg, L
only o!erations outside D" America" )All staff s!ea% 8nglish",
-riginal entry com!leted by buying e'isting leading brand in Benelu'"
Gistribution is ty!ical for similar !roducts )no !roblems here,"
Southeast Asia
<erson ho runs o!erations used to run ChicagoCMidest area so s%ills are solid"
&ired local !eo!le ith many years industry e'!erience, none ith this firm"
#n &ong >ong, 9 GMs have 4uit6 others threaten to 4uit"
<roblems ith labor )stri%es,, shi!!ing delays, distribution com!lications, missing inventory"
<ositioning5 !roducts are !remium !roducts, loer !riced than other !roducts )irrelevant to
!erformance,"
South America
<erson ho runs o!erations used to run De 8ngland area, so s%ills are solid"
&ired local !eo!le ith many years industry e'!erience6 none ith this firm"
<roblems ith labor )stri%es,, shi!!ing delays, distribution com!lications, and missing
inventory"
<ositioning5 !roducts are !remium !roducts, loer !riced than other !roducts )irrelevant to
!erformance,
S-?UT#-D ST=UCTU=8
#dentify the factors that may affect a !roduct launch C ne mar%et entry and o!erations
8'ternal factors L economics )is 8uro!e different3,
#nternal Factors L staff s%ills O training )hat is different in 8uro!e,
2003 The Johnson School Consulting Club &a,e ''
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
#dentify !roblems5 loo% at )0, !roduct !ositioning, )*, distribution, )9, target segment needs,
):, !romotional activities, );, !ersonnel
Getermine the source of !roblems
<rovide recommendations
2003 The Johnson School Consulting Club &a,e '5
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
SCAN AIR
T/-e of Case0 St"ateg/
Com-an/0 *cinse/
o*) Cl+ent +s Scan Air, a mid siBe Scandinavian airline" The airline has 0++ aircraft, **,+++
em!loyees orldide, a strong cash flo and nearly Bero debt" The airline focuses on buseinss
!assengers" The current C8- is leaving" Most flights fly into or out of a single hub in
Scandinavia" Most flights have flights connecting in central 8uro!e and D" America ith Asia"
Scan Air has !reviously ignored the trend toard global alliances"
S+t*at+on/ <rofits are eroding" Scan Air ants to Eget in sha!e 4uic%ly"F They ant to
maintain their !revious situation, fend off com!etition, and decrease their cost
base"
:*est+on 1/ /hat things do you ant to loo% at3
:*est+on 2/ Scan Air is currently not engaged in alliances ith other airlines and the C8-
ants recommendations on hat they should consider hen determining if they
should enter into one"
:*est+on $/ Scan Air has entered into negotiations ith a !otential alliance !artner" /hat
ill be the ma$or issues you thin% they ill discuss3
:*est+on 1/ The ne C8- ants to announce that Scan Air ill achieve a 0+K !rofit margin
before ta'" /hat load factor !er flight is re4uired to achieve this goal3 #s this
ratio achievable3
:*est+on 6/ 7ou are having a team meeting ith the C8-" /hat do you !lan to say3
Info)-at+on/ 4nfo"mation to gi3e
?oad factor S Z of !assengers C Z of seats
Average flight S 0+++ miles
Seats !er !lane S *++
Fi'ed cost !er !lane !er flight S X*+,+++
8arn X+"*; !er !assenger !er flight mile
Cost C mile S X+"0+ !er seat )filled or not,
4nfo"mation if as2ed
Current load factor S V;K
AnsDe) 1/ <rofit S =evenue L Costs
=evenue S <ricing P Aolume
<ricing
o Business <ricing L last minute, fre4uent flyers, !ay higher !rices
o Aacation <ricing L !urchased in advance, fly on holidays, !rice
sensitive
Aolume
o De cities
o De times
o #nvestigate !lane utiliBation and ca!acity
o Alliances
2003 The Johnson School Consulting Club &a,e 50
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
Costs S Aariable Costs U Fi'ed Costs
Fi'ed Costs
o Gates
o Air!lanes
o Maintenance
-ut source
Sell out
=ent
Aariable Costs
o Fuel )&edge3,
o ?abor
UnioniBed
&iring O <ay differences
o Tic%et boo%ing
o Food etc"
AnsDe) 2/ &o ill an alliance hel! Scan Air3
#m!rove ability to attract and retain customers
=educe costs
=educe com!etition, com!ete better
/ill !artner fit ith Scan Air3
#mage, service, systems
AnsDe) $/ &o to share revenue
&o to integrate systems
&o to s!lit advertising costs, and maintain brand image
AnsDe) 1/ Costs S Fi'ed costs U Aariable costs
Costs S X*+,+++ U X+"0+ P *++ seats P 0+++ miles S X:+,+++
<rofit margin S )=evenue L Cost,C =evenue
0+K S )=evenue ( X:+,+++, C =evenue
=evenue S X::,:::
=evenue S revenue !er mile P Z mile P Z of !assengers
Z of !assengers S =evenue C )revenue !er mile P Z mile,
Z of !assengers S X::,::: C )X+"*; P 0+++, S 0VN
?oad factor S Z of !assengers C Z of seats S 0VN C *++ S 21K ` 1+K
V;K 1+K is a *+K increase, and is a difficult number to reach
NE#S&A&ER SUBSIDIAR "ALUATION
T/-e of case0 St"ateg/
A neDs.a.e) Ao-.an= ?Da+l= NeDs@ +n s*b*)ban NeD o)E Cas a s*bs+<+a)= +n NeD o)E
C+t=. TCe s*bs+<+a)= +s los+n, a lot of -one=.
#Cat +s tCe Bal*e of tC+s s*bs+<+a)=F
2003 The Johnson School Consulting Club &a,e 51
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
AGG#T#-DA? #DF-=MAT#-D
Des!a!er in suburban D75
The nes!a!er com!any in suburban D7 is very !rofitable, it has number 0 mar%et share
)2+K share,"
Subsidiary that is losing money in D7C5
Costs are not increasing"
=evenues are not decreasing"
The subsidiary is only to years old" Target segment is loer to middle income families"
Mar%et share is 0+K" =evenue drivers are subscri!tions and advertising" The brea%don is
;+K C ;+K"
Usually, in a nes!a!er com!any, advertising is the ma$or source of revenue" Subscri!tions
are not that much since the mar%et in D7C is very com!etitive" #t is dominated by lots of
other big firms such as the De 7or% Times, etc" Conse4uently, advertising !rices are very
com!etitive and do not generate lots of revenue in the subsidiary" )Big firms do not ant to
advertise in nes!a!er that has little mar%et share,"
Mar%et condition in D7C5
Aery com!etitive, very hard to differentiate since there are lots of com!etitors and e'cess
ca!acity" This is adversely affecting !ricing and !rofitability in the mar%et"
S-?UT#-D ADA?7S#S
The financial value of the subsidiary is negative" &oever, lots of com!anies in De 7or% City,
including the D7 Times, are trying to enter suburban areas of D7 because they are very
!rofitable" Therefore, this com!any )Gaily Des, is trying to enter the D7C mar%et to distract
the attention of those com!anies that try to enter its mar%et, as ell as signal that if the D7C
nes!a!ers try to grab share in the suburban area, Gaily Des could do the same thing in
D7C" The value of the subsidiary is its strategic value"
&ETROLEUM COM&AN SU&&LIERS
T/-e of case0 St"ateg/
A la),e o+l an< ,as Ao-.an= tCat Cas o.e)at+ons Do)l<D+<e +s <+B+<e< +nto tC)ee
b*s+ness se,-ents/ *.st)ea-G <oDnst)ea-G an< ACe-+Aals. U.st)ea- +nBolBes <)+ll+n,
an< e(t)aAt+n, o+lG <oDnst)ea- +s )ef+n+n, tCe .)o<*At +nto ,as an< sell+n, +t at stat+onsG
an< ACe-+Aals +s .)o<*A+n, .et)ole*-3base< .)o<*Ats. TCe *.st)ea- b*s+ness se,-ent
+s <+B+<e< +nto a..)o(+-atel= $0 Ao-.an+es Do)l<D+<e tCat fall *n<e) tCe .a)ent
2003 The Johnson School Consulting Club &a,e 52
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
Ao-.an=Qs *-b)ella of b*s+nesses. TCese Ao-.an+es *se n*-e)o*s s*..l+e)s an< tCe
.a)ent Ao-.an= Do*l< l+Ee to A*t s*..l+e) s.en<+n, an<G +n .a)t+A*la)G tCe .a)ent
Ao-.an= Do*l< l+Ee to EnoD DCetCe) tCe= a)e *s+n, tCe ACea.est s*..l+e)s +n all Aases.
AGG#T#-DA? #DF-=MAT#-D
The !arent com!any has u!stream com!anies in four regions5 Asia, 8uro!e, the U"S", and
Africa
There are three su!!liers that have a !resence in all four regions )com!anies A, B, and C,
The u!stream com!anies and the to! to lo cost su!!liers in each region are5
Asia ( 0+ u!stream com!anies, : su!!liers, ran%ings5 A, B
Africa ( : u!stream com!anies, : su!!liers ran%ings5 A, B
8uro!e ( 0+ u!stream com!anies, N su!!liers, ran%ings5 B, C
U"S" ( N u!stream com!anies, 2 su!!liers ran%ings5 C, B
S-?UT#-D ST=UCTU=8
A good ay of attac%ing this case is to find out here the !arent com!any has u!stream
o!erations geogra!hically and then analyBe the su!!liers in each region and across the regions"
Guring an actual intervie, the case intervieer li%ed this a!!roach and alloed me to
concentrate on one ty!e of su!!lier in !articular, the su!!liers of drilling e4ui!ment"
?i%e all other cases, there is no one anser" #nstead you should mention several things5
?oo% at the strengths of each su!!lier )do they have s!ecific e4ui!ment that gives them an
advantage even though they may not be lo cost,
/ill the su!!liers reduce their !rices if the !arent com!any offers a larger volume of
business or a sole(sourcing agreement, and do the su!!liers have the resources for a larger
volume
#f A is chosen as sole su!!lier to the 0+ com!anies in Asia and C for the N in the U"S", can
you transfer the cost cutting ideas beteen the to com!anies to receive further cost
reductions3
2003 The Johnson School Consulting Club &a,e 5$
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
Ben>a-+n Ca).et
T/-e of case0 St"ateg/
Com-an/0 *cinse/
o*) Al+ent +s tCe fa-+l= oDne) of a Ao-.an= tCat se)Be)s )es+<ent+al an< Ao--e)A+al
-a)Eets an< o.e)ates 6 <a=sPDeeE an< 14 Co*)sP<a=. AnsDe) tCe folloD+n, M*est+ons/
:*est+on 1/ Should Ben$amin Car!et Co" !urchase the machine3 &o ould you structure
your solution3
Current !rocess
<urchase colored yarn
?oad correct colored yarn onto s!ools
/eave car!et ith colored yarn
Bac% car!et
Cut, roll, store
Considering ne !rocess
<urchase uncolored yarn
?oad s!ools
/eave car!et
D8/ MAC&#D8 )#n% Gye Gry,
Bac% car!et
Cut, roll, store
Machine costs X*;M
:*est+on 2/ /hat are some of the categories that ill effect the calculations3
:*est+on $/ Given the folloing information is the machine orth investing in3
:*est+on 1/ /ith the folloing additional revenue is the venture orth !ursuing3
A<<+t+onal Info)-at+on/
Currently !roduce O sell 0+mm yards of car!et !er year"
Current fully loaded cost X0+Cyard
De fully loaded costs
Un(died yarn (X+";+ C yard
#nventory (X+";+ C yard
?abor (X+"*; C yard
-! Cost X0"++ C yard
(X+"*; C yard
Machine lasts 0+ years
De technology allos for the creation of car!et ith ne te'tures and !atterns"
To ty!es of ne customers5
Current customers !ay X0N C yard
De customers ill !ay *;K more 0"*;P0N S X*+ C yard
Mar%et
&igh(end V+ million yards C year ill ca!ture ;K
Current 0+ million yards C year
2003 The Johnson School Consulting Club &a,e 51
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB

AnsDe) 1/
Understand all alternatives
o -nly to, buy this machine or don.t
D<A of costs and future cash flos
o =evenue
Additional Aolume3
Additional <rice3
o Costs
Additional -!erations
-!eration Savings
Access to ca!ital
o Do !roblem
=is% to business of changeover
o Minimal
AnsDe) 2/ #nvestment
?abor
7arn )inventory management, aste, loer cost,
Utilities
-!eration Costs )Gie, 8lectricity, Maintenance,
AnsDe) $/ #m!act X0+ C yard X1"V; C yard
0+,+++,+++ yards P )X0+(1"V; C yard, S X*,;++,+++
X*,;++,+++ P 0+ years S X*;,+++,+++ ith +K discount rate" /ith any realistic
discount rate generated cash flo ill not dis!lace the X*;mm cost"
AnsDe) 1/ V+ million yards C year P +"+; P X*+ C yard S X V+ million
0+ million yards C year P +"9+ P X*+ C yard S X N+ million
0+ million yards C year P +"V+ P X0N C yard S X00* million
De X*:* million
-ld X0N+ million
Additional Sales X 2* million
Fully ?oaded Cost X 9: million
<rofit X :2 million
Annual !rofit of X:2 million easily overcomes X*; million cost and over 0+ years
ill be very !rofitable"
2003 The Johnson School Consulting Club &a,e 56
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
BAB BELL DI"ERSI!ICATION
T/-e of case0 St"ateg/
A Bab= Bell Ao-.an= +s +nte)este< +n <+Be)s+f=+n, +nto otCe) a)eas bes+<es
teleAo--*n+Aat+ons. TCe= a)e Aons+<e)+n, ente)+n, tCe -a)Eet fo) eleAt)on+A Co-e
seA*)+t= s=ste-s. #o*l< =o* )eAo--en< tCat tCe= <o soF
AGG#T#-DA? #DF-=MAT#-D
The com!any is a holding com!any" The com!any has !reviously made unsuccessful
forays into softare and into real estate"
The home security industry is highly fragmented" The to! five !layers in the industry
generate less than :K of the total industry revenues" This im!lies that the industry largely
consists of small, regional com!anies"
0+K of all residences currently on an electronic security system"
This is in some sense a raBor and raBor blade sort of business" The economics are5
#tem =etail !rice CostCMargin
84ui!ment O #nstallation X;++(X0;++ +(0+K margin
Monthly service X*+Cmonth X;Cmonth
/hat strengthsCcom!etencies of the Baby Bell com!any are useful in this mar%et3
#nstallation e'!ertise
-!erator services
2003 The Johnson School Consulting Club &a,e 54
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
Transmission system )!hone lines,
#t turns out that the Re'!ensive homeR segment of this mar%et is saturated" Groth has been
slo in recent years"
<rice sensitivity is un%non in Rmoderate(!riced homeR segment"
S-?UT#-D ST=UCTU=8
Use an industry attractiveness frameor%, such as <orter.s Five Forces, to determine hether
this is a business you ant to be in, or at least to determine hat %ind of returns you can e'!ect
to achieve" Then, use the value chain to loo% at here value is added in the home security
business" Another !ossibility is a basic 9 C.s to analyBe the mar%et !otential" Finally, once you
feel you understand the mar%et, determine if the core com!etencies of the Baby Bell are li%ely
to match the demands of the home security mar%et" The conclusion is that this business is a
reasonably good fit for the com!any, but that more mar%et research needs to be done to assess
the groth and !rofit !otential of each segment of the mar%et"
GLASS MANU!ACTURING U&GRADE
T/-e of case0 St"ateg/
A .)o<*Ae) of ,lass Aonta+ne)s +s Aons+<e)+n, -aE+n, a N1 -+ll+on +nBest-ent to
*.,)a<e so-e .)oAess eM*+.-ent. #o*l< =o* )eAo--en< tCat tCe= <o soF
AGG#T#-DA? #DF-=MAT#-D
This com!any has only one, albeit large, facility" There are 4uite a fe other glass
!roducers"
Margins and !rofits of the entire industry have been eroding for several years"
There has been and continues to be some cannibaliBation by !lastic and metals" &oever,
glass remains the material of choice for many a!!lications, es!ecially food !roducts"
The main in!ut material, sand, is ine'!ensive and !lentiful"
Some of this com!anyQs com!etitors have already made a similar u!grade to their on
!rocess e4ui!ment
S-?UT#-D ST=UCTU=8
Start ith a sim!le costCbenefit analysis" ?oo% at the !otential benefits from u!grading the
e4ui!ment and com!are that to the X0 million cost" To loo% at the benefits, consider the <orter
2003 The Johnson School Consulting Club &a,e 5%
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
Five Forces frameor% to loo% at li%ely returns from the industry" =emember that future cash
flos from this investment must be discounted at the com!any.s cost of ca!ital"
S-?UT#-D ADA?7S#S
The %ey insight in this case is to recogniBe the high com!etitive intensity in this industry" The
!rofit !otential, at least in the short term, a!!ears !oor"
Given the fact that there are too many !layers and too little !rofit, some consolidation andCor
e'it of some com!anies from the industry a!!ears inevitable" This com!any must decide
hether it is orth it to try to ride out this sha%eout"
At least in the short term, the return on the X0 million investment ill li%ely not be ade4uate
to $ustify ma%ing it" &oever, one interesting !ossible $ustification for ma%ing the investment
might be to Rdress u!R the com!any in order to sell it
2003 The Johnson School Consulting Club &a,e 5'
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
AUTO &ARTS BUSINESS ENTR
T/-e of case0 St"ateg/
A s.eA+alt= Ae)a-+A -ate)+als f+)- Cas <eA+<e< to ente) tCe a*to-ot+Be .a)ts s*..l=
b*s+ness. TCe= CaBe <eBelo.e< neD Ae)a-+A en,+ne Ao-.onents tCat DCen *se< +n a
stan<a)< +nte)nal Ao-b*st+on en,+ne D+ll +nA)ease f*el -+lea,e b= 20OG <eA)ease
.oll*t+on b= $0OG an< +-.)oBe lon,eB+t= b= 20O. o*) Al+ent Dants to EnoD CoD to
.)oAee<.
AGG#T#-DA? #DF-=MAT#-D
There is 4uite a bit of internal rivalry in the automotive !arts business" This has driven !rofit
margins don to a minimum level" Buyer !oer is 4uite concentrated ith the big three
automa%ers coming first, then the large engine manufacturers, and then !ossibly the large
automotive su!!ly centers" There are very fe su!!ly issues as the com!onents for ceramics
are easily found" De entrants should not be an issue because the formulation for our !roduct
is a mi' of !atented materials and !rocesses" Substitutes are the traditional steel com!onents"
<rofitability analysis shos that our com!onents costs X;++ !er engine set, hile traditional
steel com!onents costs X;+ !er engine set"
S-?UT#-D ST=UCTU=8
The first !lace to start is ith an industry analysis, !erha!s using <orter.s ; Forces to get an
understanding of the automotive !arts business" From there, loo% at the ne venture.s
!rofitability and finally a mar%eting !lan5
The best !lace to determine cost benefit is on miles !er gallon savings" For e'am!le, for a
9+(m!g car, the ne com!onents ill get 9N m!g" The average !erson drives 0*,+++ miles
!er year, hich is :++ gallons ith the old com!onents and 999 gallons ith the ceramics"
At X0"*; !er gallon, this is an X29 dollar a year savings" #t ill ta%e the average driver over ;
years to save the e'tra X:;+"
&oever, the average semi(truc% ill drive over 0++,+++ miles !er year" At 0+ m!g to 0*
m!g the annual savings are over X*,+++"
The ne't ste! is ho to go to mar%et" This com!any lac%s any automotive distribution
netor% or sales force" The com!any should form a $oint venture for distribution ith a
current automotive !arts su!!ly com!any"
2003 The Johnson School Consulting Club &a,e 55
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
REGIONAL BANK GRO#TH STRATEG
T/-e of Case0 St"ateg/
Sou"ce0 *cinse/
:*est+on ?.ose< b= tCe +nte)B+eDe)@/
o*) Al+ent +s tCe CEO of a Re,+onal BanE DCo +s be+n, .)ess*)e< b= tCe boa)< to obta+n
.)of+table ,)oDtC. AnsDe) tCe folloD+n, M*est+ons/
:*est+on 1/ /hat o!!ortunities does the ban% have for !rofitable groth3
:*est+on 2/ Focus on Cross selling" /hat !roducts should be cross sold3
:*est+on $/ #s X;M incremental !rofit obtainable from cross selling to #nvestment Accounts3
:*est+on 1/ /hat are the ris%s associated ith !ursuing the suggested !roduct )choose
one,3
Information to be given if asked:
( Ban% has !resence in four states
( -ne million commercial customers
( Average balance S X;+,+++
( 8ach account generates revenue of 0K on balance
( Contribution margin S :+K
AnsDe) 1/
De Services )Credit cards, insurance, J,
o Current Customers
o De Customers
Same region
De region
8'isting Services
o Cross sell to Current Customers
o De Customers
Same region
De region
Ac4uisition
<artnershi!
-ther mar%ets
Gifferent mar%ets )small businesses, J,
AnsDe) 2/
<roducts K of Current
Customers
=eturn on
84uity
Ban%.s Strength in
Area
Com!etitive ?andsca!e
Ge!osit Account 0++K *;K &igh Threat from bro%ers and mutual funds
?oans ;+K 0;(02K &igh Threat from s!ecialist"
#nvestment Accounts VK 0*(0;KP Medium Full service O discount bro%ers"
Ban%s beginning to gain m%t" share"
2003 The Johnson School Consulting Club &a,e 100
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
#nsurance 0K ^;KP Medium Agents dominate this mar%et"
P =-8 could increase ith larger volume"
# choose to investigate loans then investment Accounts"
AnsDe) $/ X;+M S )+"+0,P)+":+,P);+,+++P@,
@ S *;+,+++ ne subscribers
Total subscribers S *;+,+++ U V+,+++ aVK +f 0Mb S 9*+,+++
9*+,+++ C 0,+++,+++ S 9*K
# don.t thin% this is li%ely"
AnsDe) 1/
Customer
o <erce!tion
Business ris% of !roviding the service"
Com!etition from other ban%s to get accounts could lead to loer !rofit"
o ?ose of entire customer if you convince them services can be
bundled
o CannibaliBation of =-8 associated ith movement of X from
Ge!osit Accounts to #nvestment Accounts"
CONGLOMERATE ROIC INCREASE
T/-e of Case0 St"ateg/
Sou"ce0 *cinse/ &2nd "ound'
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BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
:*est+on ?.ose< b= tCe +nte)B+eDe)@/
o*) Al+ent +s a 6B <olla) Aon,lo-e)ate D+tC 60 .lants nat+onD+<e. TCe= De)e fo)-e< b=
aAM*+s+t+on of Ba)+o*s s-all f+)-s oBe) tCe last 10 =ea)s an< tCe)e a)e st+ll so-e
+nte,)at+on +ss*es. TCe CEO Do*l< l+Ee to +nA)ease tCe ROIC of tCe f+)- f)o- 10O to 20O
+n $ =ea)s. Is +t .oss+ble an< CoD Do*l< =o* aAC+eBe tC+sF
Information to be given if asked:
=-#C Gefinition
( =-#C is =eturn on #nvested Ca!ital" This can be achieved by groing the !rofits of the firm
andCor by
decreasing the invested ca!ital"
( There are firms in the industry that have *+(9+K =-#C" &ence the client.s target loo%s
achievable"
Customers
( Client has 9+K customers in 8uro!e, 0+K in Asia, ;+K in Dorth America and 0+K in
=-/"
( The client has * ty!es of !roducts L Standard )almost a commodity, and 8ngineered
)designed s!ecifically for
the client,"
( The standard !roducts are getting commoditiBed, hence have significant !rice !ressure"
( The engineered !roducts have good margins in the 0st year and then the margins decrease
in subse4uent 9(:
years"
( The client has 9+,+++ S>Us in their !roduct !ortfolio"
( The industries that the client serves are as follos5
#ndustry K of =evenues Standard !roduct 8ngineered !roduct
Automotive ;;K N;K 9;K
8lectronics *;K :;K ;;K
Construction 0+K V;K *;K
-thers 0+K V+K 9+K
D-T85 The intervieee should recogniBe the folloing by no based on the Customer
#nformation
2003 The Johnson School Consulting Club &a,e 102
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
( Client K revenues from 8lectronics industry are 4uite lo and that industry has the highest
K of 8ngineered
!roducts" The client should focus more closely on that industry"
( 8ngineered !roducts offer much higher margins"
9+,+++ S>U seem li%e a lot, and should address that in the case as ell" There ill be
interde!endencies among these !roducts"
Com!etitive ?andsca!e
( This is a highly fragmented industry ith *+,+++ com!etitors"
#nvestmentCCost
( There are integration issues among the small com!anies under the client umbrella" The
issues !ertain to decentraliBed sourcing, sales staff and bac% office o!erations" These should
be centraliBed to decrease cost )economies of scale, and im!rove coordination"
( The !roduct !ortfolio needs to be o!timiBed" 8valuate !rofitability of each !roduct along
ith its interde!endency, i"e" its im!ortance in a !roduct !ortfolio su!!lied to im!ortant
clients" 8valuate !rofitability of each client as ell" Suggest using databases for this
analysis"
( Givest assets !ertaining to certain non(!rofitable lo volume standard !roducts to decrease
ca!ital investment" #f these com!onents are still needed for a client !ortfolio investigate
outsourcing their !roduction and having e'clusive contracts to maintain 4uality"
( 8valuate the ca!acity utiliBation and su!!ly chain for the ;+ !lants" Gecrease investment if
!ossible"
Solution5
( The client can increase the =-#C from 0+K to *+K by the folloing initiatives5
o -!timiBe !roduct mi' hile %ee!ing !roduct interde!endencies in mind
o Sell more engineered !roducts by groing business in electronics industry
o Gecrease cost by im!roving the internal integration
CONSECO
T/-e of case0 St"ateg/
2003 The Johnson School Consulting Club &a,e 10$
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
Com-an/0 (C=
DesA)+.t+on5 All of the data in this case is !ublic domain" Conseco is a com!any at the financial
services industry and more s!ecifically at the business of life and health insurance" Guring the
years 29(12 Conseco as a great !erformer and lead the SO< ;++" Conseco.s main groth
engine as its successful ac4uisitions" -n average, the com!any ac4uired a target every N
months" Guring 12, Conseco ac4uired Green Tree Financials" Sur!risingly, the day after the deal
as announced Conseco share !rice dro!!ed *+K and a year after the share as don ;+K
from its !rice the day before the announcement" 7ou ere hired by the C8- to e'!lain this dro!
in the share !rice and to suggest a course of action"
A<<+t+onal <ata5
Green Tree Financial is a !rovider of loans for homebuyers"
Green Tree Financial is charging higher interest rates than Conseco"
Green Tree deal as much larger than Conseco.s !revious deals"
Conseco share !rice before the ac4uisition as X;V"V"
Green Tree Financial share !rice before the deal as X*1"
The deal as a fi'ed e4uity e'change deal here +"10N; shares of Conseco ere
aarded for every share of Green Tree Financial"
Conseco.s mar%et ca! before the deal as XVB"
Green Tree oned a!!ro'imately ;+K of the com!any created by the MOA transaction"
A year after Green Tree needed an additional investment of X0B"
Sol*t+on St)*At*)e/
#dentify the !layers attributes"
#dentify the e'act deal structure"
#dentify misalignments in the deal that might cause the share !rice dro!"
Try to !redict hat ill ha!!en ne't and suggest course of action accordingly"
Sol*t+on Anal=s+s/
<roblems ith the deal structure5
o Misalignment in the com!anies business"
o The almost 050 stoc% e'change didn.t reflect the different mar%et values of the
to com!anies"
o Conseco.s e'!ertise as in smaller and more ra!id ac4uisitions and this
ac4uisition asn.t something they could handle"
<roblems ith the ac4uisition target5
o From the last bullet in the additional data section it is obvious that Green Tree
as at a difficult situation before the ac4uisition and asn.t a good target for
ac4uisition"
The mar%et ad$usted Conseco.s share !rice to reflect these misalignments"
/hat to do no )after a year,3
o #nvestigate the financial state of Green Tree after a year )it is evident it asn.t
good,"
o #f Green Tree continues to be in distress suggest dum!ing it"
Conclusion
o Green Tree continued to suffer big loses and dragged Consico ith it
o After several years Conseco as unlisted from the SO<"
Additional 4uestions
o /hat as Conseco.s management thin%ing3
o /here as Conseco.s board of directors3
2003 The Johnson School Consulting Club &a,e 101
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
2003 The Johnson School Consulting Club &a,e 106
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
INSURE ME8
T/-e of case0 St"ateg/
Com-an/0 (C=
DesA)+.t+on5 #nsure me is a Global Financial Services com!any at the insurance business"
=ecently, the C8- of the com!any as fired and too% ith him all of the 0+ em!loyees of the
com!any.s !rivate funding division, hich as his !et !ro$ect" Do one that is left in the com!any
%nos hat is going on in that division, and there is no re!orting system to rely on )the C8- too%
all of the data ith him," &o ould you go about managing this division3
A<<+t+onal <ata5
The com!any is o!erating in the US and 8uro!e"
The com!any !rovides car, life and other ty!e of insurance"
The com!any is one of the : leading !layers at its mar%et ith over X0B of annual
revenues"
The !rivate funding division is ty!e of a AC"
/e have a data sheet )see a!!endi', hich list : of the division.s current investment"
These : investments are only around *+K of the number of investments but form 2+K
of their value"
Sol*t+on St)*At*)e/
#dentify the com!any.s business and core com!etency"
#dentify the assets under the division management"
#dentify any financial and strategic synergies beteen the division.s assets and the
com!any"
AnalyBe ays to leverage the division and its assets moving forard"
Sol*t+on Anal=s+s/
As mentioned the com!any.s core com!etency is in the insurance field"
As could be observed from the a!!endi' to assets are not com!limentary to the
com!any.s business"
From the remaining ones one is forecasted to lose money ne't year"
As such there is one com!any it ma%e sense to %ee! and the other are not a real asset
to the com!any"
ReAo--en<at+ons/
>ee! the com!any ith the strategic fit that ma%es money and try to sell the others )for a
good deal,"
For the one that ma%es sense try to increase the com!any.s holding in it"
The com!any ith the fit ill serve both to hedge the bets and in order to %ee! the finger
on the !ulse of the ne mar%et needs"
As for the division, try to find hat ould be needed )funds, time, efforts, &= etc", in
order to bring it to an o!erational mode"
Find hat are the estimated o!eration costs"
#f it ma%es sense from the financial as!ect you might ant to %ee! this division as it
hedge your bets"
2003 The Johnson School Consulting Club &a,e 104
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
Na-e of
Ao-.an=
A
B C D
!+el< &igh Aalue
commodities
insurance
Stadiums
renovation
Golf clubs
design
8'ecutive
insurance
TC+s =ea)7s
)eBen*e
X0;+M X9++M X0++M XV+M
TC+s =ea)7s
e(.enses
X0++M X*2+M X0;+M X;+M
Ne(t =ea)7s
)eBen*e ,)oDtC
?a<<+t+onal on
to. of tCe
A*))ent@
9++K *++K 0++K 9++K
Ne(t =ea)7s
e(.enses ,)oDtC
?a<<+t+onal on
to. of tCe
A*))ent@
;++K *++K 0;+K :++K
2003 The Johnson School Consulting Club &a,e 10%
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
COCA3COLA "S RC COLA
T/-e of case0 *a"2eting
TCe folloD+n, )e.)esents tCe alloAat+on of eaAC <olla) s.ent to b)+n, a bottle of CoAa3Cola to
tCe Aons*-e).
Resea)AC an<
DeBelo.-ent
6O
S=)*.PBottl+n, 26O
D+st)+b*t+on 26O
Ma)Eet+n, 21O
OBe)Cea< 10O
&)of+t 10O
D)aD a ACa)t D+tC tCe <olla) .e)Aenta,e alloAat+ons fo) RC Cola.
S-?UT#-D ST=UCTU=8
1--"oach0
To ma%e it easier, start ith the larger !ercentages"
=C doesn.t have the economies of scale Co%e en$oys, therefore their manufacturing is a higher
!ercentage of costs"
They do not have as efficient a distribution system )feer !roductsC same Z of locations,,
therefore it re4uires a higher !ercentage"
Both of these leave less money available for =OG )loo% at the lac% of ne !roducts,, mar%eting
and !rofit"
-verhead is actually loer because they re4uire feer front(office !eo!le to run the business"
=C Cola5
=esearch and Gevelo!ment 9K
Syru!CBottling 9;K
Gistribution 9;K
Mar%eting 0;K
-verhead VK
<rofit ;K
2003 The Johnson School Consulting Club &a,e 10'
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
SO!T#ARE DE"ELO&MENT !IRM
T/-e of case0 *a"2eting
Con,)at*lat+ons8 TCe f+)- of =o*) <)ea-s Cas >*st C+)e< =o*. !o) =o*) f+)st ass+,n-entG
=o*) Al+ent +s a softDa)e <eBelo.-ent Ao-.an= tCat s.eA+al+Jes +n s.)ea<sCeet a<<3+n
.)o<*Ats. TCese .)o<*Ats enable s.)ea<sCeet *se)s to <o Ao-.le( n*-e)+Aal anal=s+sG )*n
s+-*lat+onsG l+nea) o.t+-+Jat+onG <+st)+b*t+on f+tG <eA+s+on3t)eesG DCat3+f anal=s+sG an< a Cost
of otCe) C+,C3oAtane -atCe-at+Aal f*nAt+ons.
TCe f+)- Das sta)te< b= an en,+nee)+n, .)ofesso) at Co)nell Un+Be)s+t=G an< Cas ,)oDn to +ts
A*))ent s+Je of $% f*ll3t+-e e-.lo=ees. T+)e< of .)o,)a--+n, a -a+nf)a-e Ao-.*te) to Cel.
D+tC C+s )o*t+ne b*t so.C+st+Aate< AalA*lat+onsG Ce <eBelo.e< a .)o,)a- fo) C+s Do)E. He
soon )eal+Je< tCe -a)Eet .otent+al an< be,an tC+s f+)- to Cel. )eaAC tCat .otent+al. NoDG 11
=ea)s late)G tCe .)o<*At Cas <eBelo.e< a lo=al folloD+n,G b*t Cas =et to b)eaE D+<e o.en.
C*))ent *se)s of tCe -a+n .)o<*At l+nes +nAl*<e .)ofess+onals +n tCe .et)ole*- +n<*st)=G
f+nanA+al -a)EetsG -an*faAt*)+n,G CealtC Aa)eG aAa<e-+aG an< otCe)s.
AGG#T#-DA? #DF-=MAT#-D
I5 &o large is the mar%et3 A5 /e don.t %no" &o ould 7-U figure it out3
Main substitute is enter!rise systems )customiBed softare systems, but these systems are far
more e'!ensive"
There is one com!etitor, only 9 years old" >ey difference5 chea!er, less so!histicated !roducts"
/hat is the !rice of the !roduct3 Softare !rice is generally irrelevant" 8nd(users are not as
!rice sensitive"
Com!any costs are not im!ortant" The com!any is very lean and ell managed from a cost
!ers!ective"
=evenues ere X0+MM in the last fiscal year, but so hat3 The com!any is !rofitable and
groing, $ust not fast enough"
Current distribution is through resellers L !eo!le call them to order the !roduct )resellers sell a
large variety,
Most softare is sold direct to customers ho contact the firm" These are current users
!urchasing u!(grades, additional site licenses for co(or%ers, or !eo!le ho.ve seen hat the
!roduct can do for them"
Many ne leads come from trade shos, direct mail, and !rint ads in technical $ournals" These
!rograms are effective but small"
I5 /ho are the users3 A5 /e don.t really %no, since very little information is %e!t on buyers"
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BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
Solution Structure
Getermine a mission L hat is the !ur!ose of this engagementCcase3 To hel! increase !roduct
sales for the client"
Gefine the !roblem and analyBe hy"
8'amine target segment L ho uses the !roduct, ho isn.t but should use the !roduct3
AnalyBe the !roduct L ho ould use it and hy3 /hat are the substitutes and com!etition3
8'amine channels of distribution"
S-?UT#-D ADA?7S#S
The %ey issue is the means of selling the !roduct" The current channels of distribution are not
ade4uate to sell the !roduct" Good ansers should identify that the !roduct is very com!le',
difficult to use, but also a very !oerful tool for users in s!ecific industries" Therefore, the
mar%eting !rogram must educate end(users" Good ansers ill e'!lore, then !rovide
recommendations to im!rove channel !erformance" -utstanding ansers may !rovide s!ecific
recommendations for $oint ventures"
Critical insight5 &o large is the mar%et3 Good ansers should !rovide hat(if scenarios for
various !ossibilities, i"e", if the %ey industries have been reached but on a small scale, mar%eting
efforts should focus on finding ne users ho match current user !rofiles" But if %ey industry
segments have yet to be identified, !erha!s mar%eting !rograms should focus on introducing the
!roduct to ne segments of users"
2003 The Johnson School Consulting Club &a,e 110
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
GERMAN MARKET E9&ANSION
T/-e of case0 *a"2eting
A la),e A-e)+Aan A*tt+n, tool -an*faAt*)e) DCo Cas tCe <o-+nant -a)Eet sCa)e +n tCe USG
b*t -+n+-al .)esenAe +n otCe) .a)ts of tCe Do)l<G +s Aons+<e)+n, ente)+n, tCe Ge)-an
-a)Eet. TCe= bel+eBe tCe Ge)-an -a)Eet Ao*l< be att)aAt+Be beAa*se of tCe la),e +n<*st)+al
base. HoD sCo*l< tCe= ente)F
AGG#T#-DA? #DF-=MAT#-D
The cutting tools that this com!any manufactures are many different ty!es of drill bits that go
onto machine tools, and are used in metal or%ing a!!lications ( from machine sho!s to auto
manufacturers, and many other industrial a!!lications"
The business is divided beteen standard !arts, and custom(designed !arts for s!ecific
a!!lications" The standard !ieces are sold through distributors and direct through a sales force,
and the custom designed !ieces are sold through a direct salesforce" The custom(designed
!ieces are much more !rofitable than the standard !ieces, and our client is interested in this
mar%et"
)At the time of this case, Germany is a groing mar%et for cutting tools, due to a strong industrial
base, es!ecially in heavy industries here there is the !ossibility to sell many custom designed
!ieces in large volumes to customers"
Germany a!!ears attractive because it could !rovide a foothold to enter the rest of 8uro!e,
here again our client has a negligible !resence" France and #taly also a!!ear to be attractive
mar%ets, and the e'!erience gained in Germany ith 8uro!ean manufacturers could hel! to
establish a 8uro!ean name for the com!any"
There are about ten com!etitors in this mar%et, all German, none of hich has more than a
tenty !ercent mar%et share" There isn.t a lot of movement among the com!etitors in terms of
stealing share from each other" They are all basically groing along ith the groth of the
mar%et in general"
Some of the com!etitors are stronger in the custom designed tools and other com!etitors are
stronger in the standard !ieces" All of the com!etitors have both direct and indirect salesforces"
8ach of the com!etitors has a very strong relationshi! ith their customers" The loyalty of the
customers is so strong that the cutting tool firms send sales!eo!le to customers of com!etitors
every day for years in a ro before inning the account" -nce a su!!lier has established a
relationshi! ith the customer the su!!lier can be almost assured of a cash stream over a !eriod
of years" This ma%es the cost of ac4uisition of ne customers e'tremely high"
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BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
S-?UT#-D ST=UCTU=8
This case is ada!table to a fe frameor%s6 you could try using Five Forces, but don.t get loc%ed
into running through all five" Another a!!roach you could use is to use a hybrid of the 9 C.s and :
<.s"
S-?UT#-D ADA?7S#S
Because the direct salesforce is the %ey to inning customers, and the strategic focus of our
client, our client could not enter through distributors" -n the other hand, they could not ho!e to
enter ith their on direct salesforce because of the !rohibitively e'!ensive and long customer
ac4uisition !rocess"
They established a $oint venture ith a com!any that had a strong customer base, but did not
have su!erior engineering ca!abilities to custom design !ieces"
2003 The Johnson School Consulting Club &a,e 112
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
MICROELECTRONIC &LACEMENT LABS ?M&L@ INC.
T/-e of case0 *a"2eting
M&L +s a seBen3=ea) ol< Aont)aAt3-an*faAt*)+n, f+)- loAate< +n ItCaAaG NeD o)E. TCe
fo*n<e) an< &)es+<entG SCane !)enACG Cas fo*n< a n+ACe +n tCe Aont)aAt -an*faAt*)+n,
s.aAe b= .)oB+<+n, C+s A*sto-e)s C+,Cl= A*sto-+Je< se)B+AeG .a)t+A*la)l= D+tC )es.eAt to
.)o<*At+on sACe<*les an< s-all lot s+Jes. Cont)aAt -an*faAt*)+n, +sG fo) e(a-.leG .laA+n,
-+A)oeleAt)on+As on .)+nte< A+)A*+t boa)<s ?a.E.a. -otCe)boa)<s@ fo) s*AC Ao-.onents as
Ao-.*te)sG lase)sG an< eleAt)on+A +te-s. C*))entl=G A*sto-e)s .)oB+<e M&L D+tC .a)ts
+nBento)=G an< M&L .e)fo)-s tCe asse-bl=. !)enAC +nBest+,ate< tCe f+el< an< +s Aons+<e)+n,
offe)+n, t*)nEe= sol*t+ons. TCat +sG .)oB+<+n, )ea<=3-a<e boa)<s fo) Al+ents ?base< on
A*sto-e) s.eA+f+Aat+ons@. TC+s Do*l< )eM*+)e an +nBest-ent +n +nBento)=G b*t M&L Ao*l<
Ao--an< a 20O -a)E3*. on .a)ts alone. TC+s +s CoD -an= Aont)aAt -an*faAt*)+n, f+)-s
,)oD )eBen*es. SCo*l< M&L offe) t*)nEe= sol*t+onsF
AGG#T#-DA? #DF-=MAT#-D
The com!etitive environment is very fragmented in the niche !ortion of the industry"
M<? has been !rofitable each year, groing 9+K annually"
M<? has very little debt, and ons all its e4ui!ment )X9+,+++ ban% loan for e4ui!ment,"
Customer relationshi!s are critical5 M<? has a solid customer base"
M<? has a customer base of about 0+ firms S 1+K of its business is from re!eat customers"
=elationshi!s are not steady L client needs vary from time to time, $ob siBes vary considerably"
Business is strong but variable6 customer demand comes and goes in aves, un!redictable"
-ffering turn%ey solutions ould not smooth the !roduction cycle"
M<? s!ecialiBes in filling niche needs6 small lot siBes, unusual delivery schedules"
M<? is currently not see%ing ne clients, lac%s the ca!acity to service ne clients"
M<? lac%s the resources )s%ills, to forecast demand"
There is not enough s%illed labor in the area to increase ca!acity L hich is hy they.re turning
customers aay"
-ffering turn%ey solutions ould re4uire an increase in ca!acity"
<arts su!!lies are !lentiful6 discounts are !ossible for bul% !urchases"
2003 The Johnson School Consulting Club &a,e 11$
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
S-?UT#-D ST=UCTU=8
Getermine a decision rule"
#dentify the %ey factors for consideration"
#nvestigate the !ros and cons of these factors"
Ma%e a recommendation"
S-?UT#-D ADA?7S#S
Good ansers should uncover5
Advantages of turn%ey5 more X, more customers"
Gisadvantages5 re4uires greater ca!acity, ould not smooth o!erational cycle )demand is highly
variable,, large investment in inventory is financially unfeasible )!aybac% ould only occur over
time,, M<? lac%s scale"
#dentify ste!s to mitigate demand issues"
#ncreasing in ca!acity is a Este!F function, not linear"
Giscuss issue of resources )s%illed labor,"
2003 The Johnson School Consulting Club &a,e 111
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
SENATOR HARR REID
T/-e of case0 *a"2eting
Ha))= Re+< ?D3N"@ +s an +nA*-bent Un+te< States Senato) f)o- NeBa<a )*nn+n, fo) )e3
eleAt+on. In 1551G Re+< eas+l= Don )e3eleAt+on. Des.+te C+s sen+o)+t= an< sol+< )eAo)< of
aAAo-.l+sC-entsG Ce +s +n t)o*ble tC+s NoBe-be). #C=F He7s C+)e< =o* to anal=Je tCe
s+t*at+on. H+s o..onent +s tDo3te)- Re.*bl+Aan Con,)ess-an JoCn Ens+,nG f)o- Las
"e,as.
S-?UT#-D ST=UCTU=8
<oliticsHin a !erverse senseHis mar%eting" This is a mar%eting case" The :<.s is a good !lace to
start"
8'amine : <.s
Giscover hat is different this election from last election
<resent analysis and recommendations
<roduct and <ositioning
>ey differences5 ideological, age, a!!eal to voters )i"e", charisma,, target base
=eid S ell(%non and res!ected, his !ersonality is all business, his record is moderate(liberal
Best %non for fighting nuclear !oer and aste dum!s in Devada, environmentalist
8nsign S young, brash, religious(right conservative, recently divorced, charismatic
Do established legislative record, a Det Gingrich disci!le
<lace
For both candidates, distribution of E!roductF is !romotions"
<romotions
Both candidates send constituent mail stateide, cam!aign mail stateide, and broadcast stateide
radio and television commercials, cam!aign events, debates
<rice
Dot relevant L the !rice is 4ualitative for the sides that lose5 both sides stand much to gain or lose
from electoral victory" =eid en$oys a slight fund(raising edge"
2003 The Johnson School Consulting Club &a,e 116
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
Segmentation
=eid L target segment is traditional Gemocratic base5 elderly voters, environmentalists, minorities,
educational community, blue(collar or%ers, omen, urban voters in ?as Aegas and Carson City
8nsign L target segment is conservative base5 ne(right Christians, suburban families, ealthy
individuals, anti(government activists, develo!ers, ranchers, miners"
A-T8= S8GM8DT )not e4ual 0++K, 011: *+++
<o!ulation *"; million 9"1 million
Devada 8lderly *:K *+K
De =etirees )ne arrivals, 0NK *:K
/omen ;*K ;0K
Men :2K :1K
Suburban **K 91K
Urban :1K :+K
=ural *1K *0K
Blue Collar 0;K 01K
/hite Collar 0VK *0K
Minority +VK +:K
Gemocrats 90K 9+K
=e!ublicans 9*K 9;K
-ther 9VK 9;K
?iberal *0K 01K
Conservative :+K :;K
2003 The Johnson School Consulting Club &a,e 114
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
COCA3COLA AD"ERTISING
T/-e of case0 *a"2eting
Is CoEe s.en<+n, eno*,C on a<Be)t+s+n,F o* CaBe been )eta+ne< b= tCe CEO to f+n< o*t.
AGG#T#-DA? #DF-=MAT#-D
Coca-Cola
1"ea %osition &sales' *a"2et
Sha"e
1ds &*ln' > of *2tg (udget
United States 0 :0K X00: ;+K
-ther Dorth America 0 :+K X;2 :;K
South America 0 99K X*+ 9;K
Southeast Asia * *+K X*; 9+K
#ndia * **K X0; 9+K
/estern 8uro!e * 0*K X*0 *;K
8astern 8uro!e 9 09K X01 *+K
Africa * 0*K XV 09K
0earest co&+etitor
1"ea %osition
&sales'
*a"2et
Sha"e
1ds &*ln' &> of *2tg (udget'
United States * 90K X12 ;;K
-ther Dorth America * 9+K X92 ;;K
South America * 09K X0: *;K
Southeast Asia 0 *:K X9; *;K
#ndia 0 9VK X*: *;K
/estern 8uro!e 0 *+K X** 9+K
8astern 8uro!e 0,* 02, 0V X0:, X09 *:K, 9+K
Africa 0 **K X0* 0VK
I5 /hat is the goal3
A5 To be leading non(alcoholic EentertainmentF beverage in every mar%et"
I5 #s the com!any satisfied ith its current !osition3
A5 7es, but com!etition is closing in"
I5 #s there a correlation beteen ads and mar%et share3
A5 7ou tell me, you are the consultant L ho ould you figure that out3
I5 Tell me about other !romotions
A5 -ther !romotions include !rice discounts, cou!ons in some areas, in(store shelf arrangements
)very e'!ensive but effective,
2003 The Johnson School Consulting Club &a,e 11%
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
S-?UT#-D ST=UCTU=8
/hatT3 The correct anser is Eit de!ends,F but a better anser is to e'!lain hat you mean"
Gefine a goal or decision rule )i"e", hat constitutes EenoughF,
Focus on one geogra!hical area )i"e" mar%et, at a time
Getermine factors to consider
AnalyBe each factor to determine if it meets the rule
<resent analysis and ma%e recommendations
Gecision =ule
The e'tent to hich s!ending more for advertising results in achieving 4uantifiable goals in terms of
mar%et share or sales volume" )#n economist(s!ea%, here marginal costs do not e'ceed marginal
!rofits,
Factors to consider and analyBe in greater de!th
Correlation beteen ad s!ending and mar%et share
-!!ortunity cost of other s!ending L ho else the goals can be achieved ithout ads
Com!etitive !osition5 direct correlation beteen s!ending and com!etitive !osition vs" other
brands
2003 The Johnson School Consulting Club &a,e 11'
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
SUNTAN LOTIONS
Ty!e of case5 Mar%eting
o*) Al+ent +s a sta)t3*. Bent*)e +n So*tCe)n Cal+fo)n+a. TCe= -a)Eet a s+n,le tann+n, lot+on
.)o<*At to beaAC3,oe)s f)o- San D+e,o to Los An,eles. AltCo*,C sales Bol*-e +s la),eG +t
Cas not )eaACe< ant+A+.ate< leBels. o* CaBe been C+)e< to f+n< o*t DC=G an< DCat Aan tCe=
<o abo*t tC+s .)oble-. TC+s +s tCe Ao-.an=7s seAon< s*--e) +n b*s+ness.
AGG#T#-DA? #DF-=MAT#-D
Anser only if directly as%ed, or anser E/hat do you thin%3F or E/hy is that im!ortant3F
/hy start the business3
They have conducted e'tensive mar%et research and have found that their !roduct should do
4uite ell"
There are currently no other !roducts targeting the &aaiian Cocoa butter segment"
The !roduct did 4uite ell ith consumers in focus grou!s that ere conducted !rior to launch"
These focus grou!s are re!resentative of the target mar%et, and indicate a real mar%et need for
this !roduct"
The goal as to attain a ; !ercent mar%et share L sales at this level ould result in !rofitability"
Tell me about their o!eration
The o!eration is three !eo!le L !artners" They handle mar%eting )including distribution, and
finances" <roduction is out(sourced to a local manufacturer that is reliable and chea!"
Tell me about the mar%et
The mar%et is 4uite fragmented, ith no dominant !layer" Co!!ertone, the leading brand, has a
0;K mar%et share"
There are at least 0+ different brands com!eting in several lotionCoil sub(categories"
Tell me about their !ricing and !ositioning
The target mar%et is !eo!le ho !urchase sun(tanning !roducts at the beach"
The !ositioning is &aaiian cocoa butter" This is a !remium !roduct, and is !riced in the middle
of the high(end"
Co!!ertone, a more e'!ensive brand, is the leading seller"
2003 The Johnson School Consulting Club &a,e 115
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
Tell me About Gistribution
The !roduct is sold e'clusively at bungalos L !ro!rietor oned and o!erated al%(u! shac%s on
the beach that ty!ically sell soda, snac%s, and basic !roducts to beach goers"
The !roduct sits on the shelf, and buyers see it and select it" There are no additional shelf
!romotions"
-ne !artner drives u! and don the beaches refilling stoc%"
These bungalos do not charge slotting fees, hile drug stores and grocery stores do"
Their lac% of so!histication ma%es little o!!ortunity to !rovide incentives to have them !ush the
!roduct"
Tell me about !romotions
Brand aareness as built through s!onsorshi! of beach volleyball tournaments" There are no
other !romotions"
All signs, including follo(u! mar%et research, indicate this has been successful"
&o have they been doing3
The ;K mar%et share goal as reached, but estimates !ro$ected at least VK"
They sell out of their !roduct at each location the !roduct is available" #n fact, the !roduct sells
very ell"
The firm is very !rofitable, but could be more so if sales attained !ro$ected levels"
S-?UT#-D ADA?7S#S
This tests your detective abilities" The anser is small and s!ecific L can you find it3 Use the :
<.s, and don.t give u! so easily" As%, hat are the conditions necessary for high sales3 )0, There
must be buyers for the !roduct, )*, the !rice must be right, )9, the !roduct must be available" #n
this case, the !roduct as not available so !eo!le ere not buying it" Solution3 Ma%e it available"
<roblem solved" The %ey to this !roblem is distribution" =emember that this is a !rofitable firm"
Their !roblem is not economics, segmentation, com!etition, !rice, !romotions, or the !roduct L it.s
distribution" S!ecifically, it is the delivery schedule of the !roduct" The !roduct sells out at each
location, but it is some time before the shelves are re(filled" An easy solution is to re(fill and chec%
the bungalos more fre4uently" Future considerations may entail a loo% at !romotions and greater
distribution, but for no the client is only interested in one !roblem5 meeting !ro$ected sales
volume"
2003 The Johnson School Consulting Club &a,e 120
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
Labo)ato)= Test+n, S He.at+t+s C
T/-e of case0 *isc.
Com-an/0 *cinse/
A Cos.+tal +s =o*) Al+ent. TCe Cos.+tal Cas tCe folloD+n, test+n, +nfo)-at+on/
Info)-at+on/ To ty!es of testing
S!ecificity
&ave false negatives and fe false !ositives"
Sensitivity
&ave some false !ositives but never ant false negative
&e!atitis C test
#n the US C current !o!ulation
0+K has &e!atitis C
1+K doesn.t have it
Sensitivity test
&as it Test <ercent
U U 1+K
U ( 0+K
( ( N+K
( U :+K
:*est+on 1/ #f a test result is !ositive, hat is the !robability that the !atient actually has
&e!atitis C3
:*est+on 2/ Goctors don.t ant to tell !atients that they are only *+K certain so hat else can
doctors do to increase their certainty3
AnsDe) 1/ Use Bayes Theorem
Method 05 N+K ( ;:K
C )(,
1+K
C )(, c )U, 1K C )1KS9NK, S 1C:; S 20O
C :+K ( 9NK
0++K
c 1+K ( 1K
c )U, C )U,
0+K
c )(,
0+K ( 0K
Method *5 N+K ( ;:K
C )(,
;;K
C )(, c )U, 1K C :;K S 20O
C :+K ( 9NK
0++K
c 1+K ( 1K
c )U, C )U,
:;K
c )(,
0+K ( 0K
AnsDe) 1/ *+K
2003 The Johnson School Consulting Club &a,e 121
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
AnsDe) 2/ =un multi!le tests L e'!ensive
?oo% for other related sym!toms L good !hysical
Ta%e a com!lete medical history L family history, ris% factors
2003 The Johnson School Consulting Club &a,e 122
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
ADDITIONAL CASE :UESTIONS
By no, you are an e'!ert" #t.s your turn to fill in the solutions6 none are !rovided here" As you ill
find out in intervies, not all case 4uestions have ansers, but all re4uire structured and reasonable
logic" 8n$oyT
?#G&T B88= #D T&8 U>
/hy is there no light beer in the U">"3
G-?F BA??S #D T&8 US
&o many golf balls are sold in the U"S"3
DBC ?-G-
DBC is considering using its !eacoc% logo on a collection of ne !roducts" They have hired
you to estimate a value for the logo" &o ould you go about estimating this value3 They do not
ant you to actually come u! ith ne !roduct ideas, only estimate the logoQs value"
C-DSU?T#DG 8DGAG8M8DT =-AGB?-C>
7ou are entering a client engagement as a team manager for your firm" Four consultants
have already been or%ing on this engagement for several months" The clientQs !rogram manager is
4uitting the firm for R!ersonal reasonsR and you ill be ta%ing over for her" 7ou sense that she is
4uitting because of her frustration ith her boss, but she ill not admit to this" /hat she does tell you
is that she thin%s her boss does not believe this !ro$ect ill yield results and has been a Rroadbloc%R
to the reengineering !rocess" &o should you !roceed3 Should you alter the teams3
G=88T#DG CA=G C-M<AD7
A greeting card com!any has four different functional areas along its !roduction chain5 idea
generation, develo!ment, manufacturing, and sales" #dea generation comes u! ith ne ideas for
cards and develo!ment turns them into designs used by manufacturing" The com!any has been too
slo to get ne cards to mar%et" /hy3
2003 The Johnson School Consulting Club &a,e 12$
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
-#? O GAS C-M<AD7
7ou are !art of the consulting firmQs strategy team that develo!s an a!!roach for the
im!lementation team to follo" 7ou have been hired by an oil and gas com!any !resident" &is
com!any has three functional areas5 u!stream, donstream and midstream" Midstream is a
misnomer"""they actually !rovide services to the u!stream and donstream areas )and donQt sit
beteen them in the !roduct flo," The !resident feels that the midstream area is ine!t and ants
you to find out hy"
BAD>.S =8A? 8STAT8 G#A#S#-D
The real estate credit division of a ban% ants to increase their revenues((ho can they do
this ithout increasing their ris% and ithout alienating customers3
?-ST #D A SU<8=MA=>8T
7ou are tra!!ed in a su!ermar%et and you donQt %no ho long you ill be there before
someone comes to let you out" /ater and air are no !roblem" &o do you determine ho many
ee%s you can survive ith the amount of food in the Store3
GAS STAT#-DS -D #(1;
/hat is the number of gas stations beteen De 7or% City and Miami on #(1;3
8?8CT=#C UT#?#T7 CUST-M8=S
7ou are an electric utilities com!any and some of your best customers are leaving" /hat can you
do3
C&8M#CA? #DGUST=7 <=-F#TAB#?#T7
A chemical com!anyQs !rofits have been falling recently" &o ould you advise the
com!any to im!rove !rofits3
2003 The Johnson School Consulting Club &a,e 121
BIG RED CASE BOOK JOHNSON SCHOOL CONSULTING CLUB
8?8CT=#C UT#?#T7 G8=8GU?AT#-D
A De 8ngland electric com!any is facing com!etition due to deregulation in their industry"
Soon, the carrier )ires, business ill be se!arate from the generation )!oer !lant, business" Any
com!any generating electricity ill soon be able to sell in their mar%et" /hat should the com!any
do3
FA= 8AST ST=AT8G#C -<8=AT#DG <?ADS
A multinational oil com!any has called you in to !re!are a five(year strategic !lan for its Far
8ast o!erations" &o ill you go about !re!aring it and hat actions ould you suggest3
A#=C=AFT <U=C&AS8S
A ma$or airline ants to !urchase aircraft for its To%yo hub" &o many should it !urchase3
A#=?#D8 #DGUST=7 #DA8STM8DT
/hy do airline com!anies batter each other over !rices des!ite !oor !rofits3 /ould you
invest in this industry3
?-S#DG 7-U= D--G?8
7ou are the !roduct manager for a noodle !roduct com!any" 7ou have to ma$or !roduct
lines5 cu! !roducts and bloc% !roducts" 7our !roduct lines are losing money" /hat should you do3
AA?U#DG ACIU#S#T#-DS
-ur client is considering diversifying into the insurance business" &o ould you go about
valuing an ac4uisition in the insurance industry3
STAFF <=-GUCT#A#T7 C-DC8=DS
The !roductivity of the sales O trading staff of an investment ban% is much less than that of
the com!etition" &o ould you go about im!roving it3
2003 The Johnson School Consulting Club &a,e 126

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