Case Flashcards
MECE for customers of restaurant
Walk in Drive in internet order Phone order 3rd party (just eat, uber eats)
MECE rules
1) Small elements can not overlap (mutual exclusive)
2) Sum of parts = whole (Collectivley exhaustive
3) Small elements must parallel one another (e.g. all customers of same restaurant)
4) Leverage magic three (aim for three-four items per group)
5) Use logic to look for oversights
5)
Profitability framework
Revenue Vs Cost
Revenue = Price per unit X total units sold
Cost = fixed cost per unit + (variable cost per unit X units sold)
3CP rule of a framework
Consumer: Is there a demand, would this inc customers and retention, inc order size. Surveys etc to find out.
Company: Cost (method of implement, stat up, innovations)
Competition: Are they doing similar
Products: pricing strategy, cost of product and means of execution
Market sizing rules:
- number per age group
- income groups
- world pop
0-80 = 750 people per age group (60 mill total)
income: 30% high, 50% med, 20% low in UK
UK X 100 = 600mill
What is a fixed cost
Price stays constant
E.g. electricity, rent, machinery, salaries
What is a variable cost
Fluctuate
E.G Raw materials, freight.
What is Net income
Revenue - costs
Profit margin
Net income / Investment cost
Return on investment
Profit from investment / cost of investment
How to summarise in the case interview
Recap problem.
2-3 points of recommendation backed up with reasoning
If a question of should they e.g. enter a new market be definitive with answer. I.e. Yes because of …. risks are ….
5 steps to solving the case:
1) Summarise Q:
- ensure you’re clear
- any number changes convert straight away to %
2) Verify objectives: e.g. what would be considered successful (profit, market share etc)
3) Clarifying Qs only if needed
- E.G why do they want to do a certain thing
4) Decide structure and label case
- MECE
- 3-4 high level (e.g. for market entering CCCP = analyse client, competition, customer, product)
- discuss these with the interviewer to ensure comprehensive
5) Hypothesise
- Do this early e.g. I think Y is important, odds are it will be disproved but it helps to narrow scope -> case solving is one of elimination
- E.g. I hypothesis that profits have fallen because costs have risen
Company & market factors
Profit/Revenue trends (how are they doing) and typical margins
Market share
Company reputation: market leader?
Capability: are they running at capacity
industry changes: M&A, New Tech, New regulations, Recession, new gov regulation, BREXIT
USP
Talent
Market trends and lifecycle (emerging, mature, declining
What is metric used to measure success
Customer factors
Customer demographics
Changing needs/characteristics (e.g. rise of phone based ordering food)
Current spend, retention, loyalty
Competition factors
Market share of major players
USP/What makes them different
Product factors
USP
How is distributed (can this be expanded)
New tech/products offered by competition
Is current production at capacity
Innovations in production and distribution
Product mix, Cost/Revenue
Profit and loss case structure
e.g. Sales are up but profits are down, how do we fix it?
Env(Profits = Revenue - costs)Market
Revenue = Price X quantity Costs = Fixed costs + (quantity x variable costs)
Things to think about
- Have competitions profits fallen: industry wide, look closer at external factors (e.g. natural disasters, new regulations, new entrant to market)
- If no external changes, may be our problem (increased costs, lower revenues - smaller sale size/fewer customers, reduced availability compared to competition e.g. delivery etc), outdated products
UKs Current:
- unemployment rate
- petrol prices
- disposable income
- strength of £
- unemployment rate: falling, now 4%
- petrol prices: slightly higher 127p/L
- disposable income = income - tax. Currently £26000 in UK (increasing)
- £1 = $1.27 (this was higher pre referendum
- Interest rate (was 5% pre crisis and 0.5% 2009-2017) now 0.75%
Profit and loss: (Use CCCP)
When brainstorming/fleshing out tree
Internal factors:
Revenue =
Company: Profit and revenue trends, Reputation, Market share, marketing
Costs =
Product: USP, Quantity being made, Cost/Revenue factors, distribution, raw materials and exchange rates (natural disasters can affect), tech used in production/shipping
External factors:
Competition/industry: How is client doing in comparison (Profits AS WELL AS costs), market share, new entrants, technology, Industry changes (M&A, New regulations, New gov, BREXIT), Talent, Market trends (emerging, mature, declining
Consumer market: demographics, env changes (recession, interest rates), retention, consumer confidence, disposable income, petrol prices, things affecting internal pricing (Raw materials)
P&L Tree should include Three arms
Revenue (target inc)
Costs (target dec)
External factors (industry/env/market specific solutions)
Ways to increase revenue
Inc customers
- Increase availability (distribution channels)
- Inc marketing
- Enter new markets
- Develop new products/keep up
- pricing (need to be profit but competitive
Make customers buy more often (inc loyalty, sales and deals)
Make customers spend more (Upselling and multi buy, delivery etc)
P&L Cost factors
Labour (fixed cost)
Production (Variable cost) X quantity (also fixed cost of machine running etc)
Finance (Refinance debt, Hedge, Sell assets, IPO)
P&L total structure
1st look at possible external factors (Economy/customer, markets, competition)
Now do P&L tree
Revenue (no. customers, Buying frequency, Average spend, also cost of product)
minus
Costs (Labour costs, Production costs, Delivery etc costs, Streams/ability to fund - Finance)
Market entering question
Do we entering
How do we enter
Advantages and disdvantages of each
