Case Practicing - [email protected] | sites.duke.edu

Case Practicing - Sites@Duke | sites.duke.edu

CASE PRACTICING DUKE APD CONSULTING CLUB 02/27/2020 1 MEETING AGENDA Skills for today Case solving skills Hypothesis Review of the frameworks: Profitability Issue tree 4Cs Drill down

Porters 5 Forces Synthesis 4Ps and value chain Note design When getting stuck Case practice 02/27/2020 2 MEETING AGENDA Skills for today Case solving skills Hypothesis Review of the

frameworks: Profitability Issue tree 4Cs Drill down Porters 5 Forces Synthesis 4Ps and value chain Note design When getting stuck Case practice 02/27/2020

3 HYPOTHESIS Hypothesis is an assumption based on some reasons or observation. Profit declining Decrease d revenue Increase d cost Hypothesis Hypothesis 02/27/2020 4

HYPOTHESIS Why we need hypothesis Many issues can be the reason to a case. It takes enormous of time to analyze everything. In a case interview, you usually only have 30 to 40 minutes to finish it. So Hypothesis driven case solving skills saves you time by at least eliminating the wrong directions. 02/27/2020 5 Case interview secretes, by HYPOTHESIS How to use hypothesis eliminate wrong directions In a business case, maybe the declining profit is caused by a decreased revenue, or an increased cost. To analyze this problem, Ill make my hypothesis that the decreased revenue is the main reason, and look for information about the revenue of my client. If I find the revenue doesnt change, Ill then switch to the cost side. By

then, Ill have to change my hypothesis as an increasing cost eats the profit. Profit declinin g Decreas ed revenue Increase d cost X ? ? 02/27/2020 6 Case interview secretes, by

HYPOTHESIS When to state your hypothesis As early as possible? After several background questions? I suggest to state it after several background questions, so that the hypothesis can be based on some specific facts. Remember, your analysis is all based on your hypothesis. So dont forget to state a hypothesis. 02/27/2020 7 MEETING AGENDA Skills for today Case solving skills Hypothesis Review of the frameworks: Profitability

Issue tree 4Cs Drill down Porters 5 Forces Synthesis 4Ps and value chain Note design When getting stuck Case practice 02/27/2020 8

ISSUE TREE Issue three: a logical argument or structure designed to test the validity of a hypothesis. Framework: An issue tree template used to solve common business problems. Like 4Cs, 4Ps, Value Chain Hypothesi s Supportin g condition Supportin g condition subcateg ory subcateg ory subcateg

ory 02/27/2020 9 Case interview secretes, by ISSUE TREE What is an issue tree should like? Hypothesis based. An issue tree is based on a hypothesis, to analyze a specific topic MECE. Mutually exclusive, collectively exhaustive. Sometimes a little overlap is allowed Example: customer segments: according to age, yes! According to income, yes! According to hobby, no Conclusive. By analyzing this issue tree, one can consolidate a

conclusion Example: Pricing: lower than all the substitute product, yes! Lower than one substitute product, no 02/27/2020 10 ISSUE TREE How to form a good issue tree: 1, state your hypothesis 2, based on your hypothesis, form your issue tree 3, you can embed some frameworks into your issue tree, or embed frameworks into a framework, or embed your sub-issue tree into a framework. 4, check is it MECE, is it conclusive? Communicate your issue tree to interviewer: To introduce every branch before delve into one.

02/27/2020 11 MEETING AGENDA Skills for today Case solving skills Hypothesis Review of the frameworks: Profitability Issue tree 4Cs Drill down Porters 5 Forces

Synthesis 4Ps and value chain Note design When getting stuck Case practice 02/27/2020 12 DRILL DOWN Use a process-of-elimination approach to analyze. Profit declinin g Decreas

ed revenue Increase d cost X ? ? 02/27/2020 13 SAMPLE CASE Bubble Gum Manufacturer You are a consultant working for a bubble gum manufacturer. The CEO of the gum manufacturing company is concerned because his company is experiencing declining margin. My questions to you are: 1, the reasons behind declining profitability; 2, your suggestions for improving profitability. 02/27/2020

14 Wharton Consulting Casebook 2007- SAMPLE CASE Hypothesis: This is a profitability problem, the company needs to improve their revenue. Issue tree: typical profitability structure Revenue Price per unit The number of unit sold Cost Fixed cost Variable cost 02/27/2020 15 DRILL DOWN Tip #1: Start with the branch that eliminates the most uncertainty

first. Start with the most relevant, critical information. X Revenue Price per unit-----------------------------------No info The number of unit sold---------------------Has been increased Cost Fixed cost----------------------------------------No info Variable cost------------------------------------Components of Restate the hypothesis: This is a profitability problem, the company needs 02/27/2020 16 DRILL DOWN Tip #2: Use both quantitative and qualitative analyses. Always try to

quantify a problem; Feel free to ask why and how in addition to what; Variable cost: Components of the cost: Cost of goods sold (COGS): ------------------------------------------No change gum, sugar, flavor, smell, color Labor-----------------------------------------------------------------------No info Selling, General and Administrative expenses (SG&A)------------No info 02/27/2020 17 DRILL DOWN Variable cost: Two types of products: flavored and flavorless gum Both products are sold at the same price point Composition products:

Flavored gum: gum, sugar, color dye, and flavor Flavorless gum: gum, sugar, color dye Note that the gum, sugar and color day raw materials are same in size for each of the two products. 02/27/2020 18 DRILL DOWN Tip #3: Dont stop drilling down until you reach a conclusion. Either drill down until you find it supports your hypothesis or you find it disproves your hypothesis. Then move to the next item in your issue tree. Never propose a solution until youve isolated and defined the problem. Revenue Price per unit-----------------------------------No info The number of unit sold---------------------Has been increased Cost

Fixed cost----------------------------------------No info 02/27/2020 ? 19 DRILL DOWN Tip #3: Dont stop drilling down until you reach a conclusion. Either drill down until you find it supports your hypothesis or you find it disproves your hypothesis. Then move to the next item in your issue tree. Never propose a solution until youve isolated and defined the problem. Revenue Price per unit-----------------------------------No info The number of unit sold---------------------Has been increased Profit Cost Fixed cost------------------------------------No info

02/27/2020 20 DRILL DOWN Tip #4: When to stop analyzingthe minimally necessary data. Dont over analyze this branch, which makes your case solving inefficient. Variable cost: Two types of products are sold at the same price point Composition products: Flavored gum: gum, sugar, color dye, and flavor Flavorless gum: gum, sugar, color dye Note that the gum, sugar and color day raw materials are same in size for each of the two products. 02/27/2020 Conclusion for problem1: Because the increasing sales of the flavored gum, the profit margin declined despite of an increasing

21 MEETING AGENDA Skills for today Case solving skills Hypothesis Review of the frameworks: Profitability Issue tree 4Cs Drill down Porters 5 Forces Synthesis

4Ps and value chain Note design When getting stuck Case practice 02/27/2020 22 SYNTHESIS Recommended format: Final recommendation. Support info 1; Support info 2; Support info 3. Reiterate the final recommendation. Increase the margin for flavored

gums. See a declined margin; Because of selling more flavored gums; Flavored gums have lower margins. Increase the margin for flavored gums. 02/27/2020 23 SYNTHESIS More comprehensive ones: Final recommendation. Increase the margin for flavored

gums. Support info 1; Flavored gums have lower margins; Support info 2; See a declined margin is caused by Imperfection of the analysis and next step works; Reiterate the final recommendation. selling more flavored gums; Based on given information. Maybe adjust the margin for unflavored also Increase the margin for flavored

gums. 02/27/2020 24 SYNTHESIS When to synthesize: Do mini synthesis when switching gears to another branch As we can see from above analysis, the declined margin is at least partially caused by the increased revenue. Another possibility is the decreased profit, and I would like look at the profit part. Revenue Price per unit-----------------------------------No info The number of unit sold---------------------Has been increased Profit Cost Fixed cost Variable cost 02/27/2020

25 MEETING AGENDA Skills for today Case solving skills Hypothesis Review of the frameworks: Profitability Issue tree 4Cs Drill down Porters 5 Forces Synthesis

4Ps and value chain Note design When getting stuck Case practice 02/27/2020 26 NOTE DESIGN Two sets of paper: One for issue tree and important conclusion One for calculation Use diagrams to visualize your analysis, and use lines to separate each section, and tables to organize your information. Product A

B Price/unit Variable cost Unit contribution 02/27/2020 27 case in point 8th edition, 3: CASE QUESTIONS MEETING AGENDA Skills for today Case solving skills Hypothesis Review of the frameworks:

Profitability Issue tree 4Cs Drill down Porters 5 Forces Synthesis 4Ps and value chain Note design When getting stuck Case practice 02/27/2020 28

WHEN GETTING STUCK Go back and review what you have already. Do a small summary helps you clear your mind. Go back to see any trivial clues were neglected from the stem of the case. 02/27/2020 29 case in point 8th edition, 3: CASE QUESTIONS MEETING AGENDA Skills for today Case solving skills Hypothesis Review of the

frameworks: Profitability Issue tree 4Cs Drill down Porters 5 Forces Synthesis 4Ps and value chain Note design When getting stuck Case practice 02/27/2020

30 FOUR TYPES OF QUESTIONS Profit or loss Growth and increasing sales Entering a new market Pricing 02/27/2020 31 CASE IN POINT: Complete Case Interview Preparation, PROFITABILITY Cost Fixed cost (value chain) Variable cost (suppliers) Revenue Price per unit (4Ps)

The # of unit sold (4Ps or buyers) 02/27/2020 32 FOUR TYPES OF QUESTIONS Profit or loss Growth and increasing sales Entering a new market Pricing 02/27/2020 33 CASE IN POINT: Complete Case Interview Preparation, BUSINESS SITUATION (4CS) Consumers/customers Identify the consumers and customers Define the market: decision making unit,

process, situations Company Competitor Competitive analysis: what drives the competitor; what are they doing Market signals: announcements, industry analysis Competitive move: risks, retaliation Internal analysis: key success factors (KSFs), Collaborator value chain, financial analysis External analysis: general trend, industrial analysis

Buyers: identify good buyers; create good buyers and eliminate unqualified buyers Suppliers: identify good suppliers, supplier strategy (avoid switching cost) 34 FOUR TYPES OF QUESTIONS Profit or loss Growth and increasing sales Entering a new market Pricing 02/27/2020 35 CASE IN POINT: Complete Case Interview Preparation,

PORTERS FIVE FORCES The competitive advantage in an industry depends on five forces: The threat of new entrants The bargaining power of buyer/customers The bargaining power of suppliers The threat of substitute products Rivalry with competitors 02/27/2020 36 CASE IN POINT: Complete Case Interview Preparation, Harvard Business School Management Consulting Club, Case 8th Edition

FOUR TYPES OF QUESTIONS Profit or loss Growth and increasing sales Entering a new market Pricing 02/27/2020 37 CASE IN POINT: Complete Case Interview Preparation, 4PS FRAMEWORK More product focused, can be used when analyzing the price of a product 4Ps: Product Price Place/Distribution Promotion

02/27/2020 38 Harvard Business School Management Consulting Club, Case INTRODUCTION TO CASE PRACTICE SERIES Items to cover: Mental math, Market size estimation, Case interview frameworks, Basic case interview skills, 02/27/2020 39 MEETING AGENDA

Skills for today Case solving skills Hypothesis Review of the frameworks: Profitability Issue tree 4Cs Drill down Porters 5 Forces Synthesis 4Ps and value chain Note design

When getting stuck Case practice 02/27/2020 40 CASE PRACTICING 02/27/2020 41

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