Cracking Case Interviews March 8, 2010

Agenda

Whatisthestructureandcontentofacaseinterview?

Whichskillsarecaseinterviewstryingtotest?

Whataresomecommonmythsaboutcaseinterviews?

HowdoIcrackacaseinterview?

Agenda

Whatistheformatandstructureofacaseinterview?

Whichskillsarecaseinterviewstryingtotest?

Whataresomecommonmythsaboutcaseinterviews?

HowdoIcrackacaseinterview?

Caseinterviewsrequireintervieweestosolvebusinessproblems onthespot

CaseInterviews

BehavioralInterviews

Themostaccuratepredictoroffuture performanceistheabilitytosolveon thejobproblemsinrealtime Focusedonproblemsolvingabilities: Theintervieweemustworkwiththe interviewertosolvebusinessproblems Q&Aformat: Interviewermovesonto successivequestionswithrelatively littlediscussionthereafter

Themostaccuratepredictoroffuture performanceispastperformanceina similarsituation Focusedonpersonalqualities: Asksthe intervieweetoprovideexamplesofkey qualitiesandsituationalperformance Conversational: Oftentimesinvolvesa backandforthdiscussionofkey examples

Caseinterviewsaregiveningrouporindividualformatsandlastfrom 3060minutes
GroupInterviews Groupreceives prompt
Usuallyabrieforal description,andalonger writtencasetoread

Groupworkstogetherto solveproblem
Interviewersobservegroup dynamicsandbehavior

Grouppresentssolution andanswersquestions
Eachindividualpresentsa partofthesolution InterviewersaskQ&A

IndividualInterviews Individualreceives prompt

Usuallyaverybrieforal description

Byfarthemostcommon interviewformat

Interviewerasks intervieweekeyquestions tosolveproblem

Intervieweeanswers successivequestionstosolve thecase

Finalrecommendation
Usuallyaverybrief summaryofkeycaseissues andfinalrecommendation

Agenda

Whatistheformatandstructureofacaseinterview?

Whichskillsarecaseinterviewstryingtotest?

Whataresomecommonmythsaboutcaseinterviews?

HowdoIcrackacaseinterview?

Caseinterviewsaredesignedtotestanumberofimportantskills

Hardskills

Softskills

Quantitativeskills: Executessimple andstraightforwardmath(nothing morecomplicatedthanmultiplication), hasageneralfacilitywithnumbers Problemsolving: Dissectscomplex businessproblemsintomoresimple andsolvablepieces,picksoutwhich issuesareimportantvs.peripheral Businessjudgment: Understandswhen simpleestimatesareoutofthe ballpark vs.whatisrealistic

Oralcommunication: Presents thoughtsandideasinaclearand structuredway Poise: Carriesoneselfwellin potentiallydifficultorpressure situations,doesnotgetrattledeasily Fit/personality: Possessesagenerally favorable,positive,likeabledemeanor

Agenda

Whatistheformatandstructureofacaseinterview?

Whichskillsarecaseinterviewstryingtotest?

Whataresomecommonmythsaboutcaseinterviews?

HowdoIcrackacaseinterview?

Complexequations

Myth

Ihavetobeabletoinstantaneouslysolvecomplexmath equationstobesuccessfulatcaseinterviews.
Fact

Caseinterviewsinvolvethefourbasicmathematical functions:addition,subtraction,multiplication,anddivision IfyoumadeitthroughAlgebra1inhighschool,youcan makeitthroughacaseinterview

Manipulatingdifficultnumbers

Myth

Ihavetobeabletoinstantaneouslymultiplynumberstothe fourthdecimalplacetobesuccessfulatcaseinterviews.
Fact

Caseinterviewerswantyoutomakesimplifyingmath assumptions (i.e.:round)wherepossible Interviewerswantyoutobecomfortablewithnumbers andgettoananswerquickly,nottospendtimeagonizing overdecimalplacesthathavelittleaffectontheultimate solution

Businessconcepts

Myth

Ihavetoknowcomplexbusinessconceptstobesuccessfulin caseinterviews.IwishItookmoreEconomicsclasses!
Fact

Tobesuccessfulincaseinterviews,itisimportanttohave agoodgraspofbasicbusinesstermsandconcepts (wewill talkaboutwhichoneslaterinthispresentation),butnot more Itiscompletelyfairgame,andoftenwellreceived,toask yourinterviewerclarifyingquestions

Clarifyingquestions

Myth

Icannotaskmyintervieweranyquestions.IfIdonotknowwhat somethingmeans,itismyfault,andIshouldbepenalized.
Fact Despitethequestionandanswerformat,itisimportanttoaskclarifying questions toyourinterviewers whetheraboutthecasebackground,orterms thatyoudonotunderstand Askingsuchquestionsisimportantandusuallyneutralorwellreceived Interviewersmayhavestructuredtheircaseinawaythatrequiresyouto askforanadditionalpieceofdatainordertoadvance Perthepreviousslide,itisnotexpectedthatyouknowallbusinessterms

Talkingtime

Myth

TalkingasmuchasIcanforaslongasIcanisagoodthing.The moreItalk,themoreIcontroltheinterview.
Fact

Itisimportanttoclearlyandlogicallyconvey whatdecisionsyou havemade,andwhyyouhavemadethem Thelengthoftimeyoutalkisnotapositiveindicator,and rehashingpointsoverandoveragainisnothelpful.Thegoalshould betocrisplymakeyourpoints,andclearlyexplainwhyyoumade thedecisionsyoudid

Smalltalk

Myth

Myinterviewerdidnotaskmeanybehavioralquestions.They justjumpedintothecase,andshooedmeoutthedoorafterIwas done.Theinterviewobviouslywentpoorly.

Fact

Caseinterviewsoftenleavelittle,ifany,timeforsmalltalkor behavioralquestions Thereisnocorrelationwhatsoever betweenhowmuchthe intervieweraskedaboutyourlifeandhowyouperformedinthe interview

Academicbackground

Myth

IamanXmajor,whichisclearlynotMathorEconomics.Ihave noshotintheseinterviews.
Fact

Onceyouareinthedoor,youracademicbackgroundwillberarely (ifever)beheldagainstyou Caseinterviewsareallaboutproblemsolvingandexecutingsimple math,whichyoumostlikelycando

Agenda

Whatistheformatandstructureofacaseinterview?

Whichskillsarecaseinterviewstryingtotest?

Whataresomecommonmythsaboutcaseinterviews?

HowdoIcrackacaseinterview?

Agenda

HowdoIcrackacaseinterview? Whataresomecommoninterviewframeworks? Whatmakesasuccessfulcandidate? WhatresourcesandstudytacticscanIleverage?

Therearetwohighlyprevalentcomponentsofcaseinterviews

1 MarketSizing

2 DecliningProfitability

Requirestheintervieweetoestimate thesizeofagivenmarketbasedon littleornodata Mosttimes,theinterviewerwill justsayletsfigureoutthesizeof theXmarketinXcountry,andyou willhavetodotherest

Providestheintervieweewitha generalsituationinwhichacompany hasdecliningprofits,andrequiresthe intervieweetoidentifykeyissuesto crackthecase

Howtocrackthemarketsizing

1 Finalizemarketdefinition
Askclarifyingquestionsto ensurethatyouaredefining therightmarket,for example: Whatisthegeography covered(U.S.,world, etc.)? Whatisthetime period(usuallythisis annualsales)? Whataretheunitswe arelookingfor(isthis sizein$,units,orsome othermetric)?

2 Layoutacalculation framework
Beforedivingintonumbers, layoutaveryclearwaythat youwillcalculatethemarket size Layingoutaframeworkto solvethemarketsizingisas importantasableto calculatetherightanswer

3 Executecalculations
Oncethemarketdefinition andframeworkareagreed upon,makethe straightforwardcalculations tosolvethemarketsize Donotbeafraidtoround numberstomakeyour calculationseasier

Finalizingthemarketdefinition:1of2

Finalizemarketdefinition Interviewer: Ourclientisaninternationalpremiumicecreammanufacturer,lookingto moveintothepremiumchocolatemarket.Theywanttoknowthesizeofthe opportunity.Letssizethemarket. Interviewee: Perfect.Beforewejumpin,itwouldbegreattoclarifyafewthings.First off,arewesizingtheglobaloronlyfocusedontheU.S.. Interviewer: WereactuallylookingattheU.S.marketonly.Althoughourclient isa globalfirm,theybelievethattheU.S.marketisthebestopportunityandwouldwantto provesuccessherebeforemovingtoothercountries. Interviewee: Andintermsofthemarket,wearelookingatpremiumchocolate. How wouldthatdifferfromnonpremiumchocolate?Aretherecertainbrandsthatyouwould considerpremiumvs.nonpremium? Interviewer: Goodquestion.Premiumchocolateismoreupscale Godiva,Lindt,etc.. CandylikeHersheysorMarsisnotpremium.

Finalizingthemarketdefinition:2of2

Finalizemarketdefinition Interviewee: Great.And,arewelookingforthemarketforchocolatebars,or all chocolateitemsincludinggiftbaskets,etc. Interviewer: Wearelookingforchocolatebars.Ignoretheotheritems. Interviewee: Lastly,Iassumethatwearelookingforanannualsalesfigure, indollars. Interviewer: Correct.Wearelookingforannualsales,in$USD.

Layingoutacalculationframeworkandsolvingtheequation:1of2
Layingoutacalculation framework

Providebasicassumptions USpopulationis300millionpeople Premiumchocolateisconsumedsimilarlybyage Ifweassumeaflatpopulationdistribution(i.e.:thenumberof peopleborneachyear isthesame),andtheaveragelifeexpectancyis80years,there areapproximately4 millionpeopleperyear 300millionpeopledividedby80years=3.75millionpeopleper year. Roundthisto4million.

Layingoutacalculationframeworkandsolvingtheequation:2of2
Layingoutacalculation frameworkandsolvingthe equation Layoutaframework
Agegrouping Peopleper group

Numberofbars consumedper personperyear

Priceperbar

MarketSize

Solvetheequation 012 1325 2640 4165 6680 Total 48M 52M 60M 100M 60M 320M 0.5bars 1bar 2bars 1bar 0.5bars N/A $5/unit $5/unit $5/unit $5/unit $5/unit N/A $120M $260M $600M $500M $150M $1630M ($1.6B)

Therearetwohighlyprevalentcomponentsofcaseinterviews

1 MarketSizing

2 DecliningProfitability

Requirestheintervieweetoestimate thesizeofagivenmarketbasedon littleornodata Mosttimes,theinterviewerwill justsayletsfigureoutthesizeof theXmarketinXcountry,andyou willhavetodotherest

Providestheintervieweewitha generalsituationinwhichacompany hasdecliningprofits,andrequiresthe intervieweetoidentifykeyissuesto crackthecase

Howtocrackthedecliningprofitabilitystrategy

1 Layoutprofitability equation
Clearlylayoutthe profitabilityequationfor yourinterviewer Profit=Revenue Costs

2 Allowyourinterviewerto guideyoutofocusofcase
Allowyourinterviewerto guideyouonwhetheryou arefocusingontherevenue orcostside Donot goagainstthe grainonceyour interviewerhastold youwheretofocus (i.e.:iftheysaythe problemisrevenue,do notfocusonthecost sideevenifyouthinkit hasmerit)

3 Identifykeyissuesand crackthecase
Onceyouhavebeengiven thefocusofthecase,itis yourtasktoidentifythekey driversofrevenue/cost,and honeinonthekeyissues Revenue=Price* Quantity TotalCosts=Fixed Cost+VariableCost Fixedcostsare presentregardlessof howmuchproductyou sell(i.e.:rent),andare usuallyafixed$ amount Variablecost=Cost perunit*#ofunits

Understandingtheprofitequationisessentialtocrackingdeclining profitabilitycases
TotalProfit

Revenue

Costs

Priceperunit

Totalunitssold

FixedCosts

VariableCosts

Costper unit

Totalunits sold

Agenda

HowdoIcrackacaseinterview? Whataresomecommoninterviewframeworks? Whatmakesasuccessfulcandidate? WhatresourcesandstudytacticscanIleverage?

Thereareanumberofkeydifferencesbetweenstrongandweak candidates

Strongcandidates

Weakcandidates

Areconfidentbutnotcocky Remaincomposedinpressure situations Clearlyarticulatetheirthoughtsand ideas Logicallyjustifytheirviewpointsand calculationmethodologies Takedirectionfrominterviewers

Arearrogantorinsecure Becomevisiblynervousorrattled duringtheinterview Aredisorganizedcommunicators, oftentimesbabbleorrehashpoints Lackclearlogic,ormakeseemingly arbitraryassumptions Becomedefensivewhengiven feedbackordirection

Controllingnervousnessisoftentimesakeyconcernforcandidates

Itisnaturaltobecomenervousinaninterviewsituation Thekeyistoacceptthisasafactoflifeandutilizeconcrete tacticstocontrol yournerves Somemethodsthatyoucanusetoovercomeyourfearsareasfollows: Takeadeepbreath: Realizethatnooneinterview,orjob,willmakeor breakyourcareer Listentomusic: Agreatwaytocalmyourselfdown,orpumpyourselfup! Talktoyourfriendsorfamilybeforehand: Oftentimes,justtalkingto someonebeforeaninterviewcancalmyoudownandgetyouintotheflow ofconversation

Agenda

HowdoIcrackacaseinterview? Whataresomecommoninterviewframeworks? Whatmakesasuccessfulcandidate? WhatresourcesandstudytacticscanIleverage?

Recommendedresources

Readings: VaultGuidetotheCaseInterview, EricChung.CaseInPoint: CompleteCaseInterviewPreparation,MarcCosentino

Practicecasesfromcompanywebsites: Bain,BCG,McKinsey,etc.provide practicecaseinterviewsontheirwebsites

Careerdevelopmentcenter: Providesadditionalreadings,samplecases, mockinterviews,etc.

Recommendedstudytactics

Practice,practice,practice.
Selfguidedtactics Memorizekeyconceptsandterms Makeflashcardsofeachterm,see ifyoucanexplaineachonein10 15seconds Readthroughcaseinterviews Readaninterviewortwotogeta generalflavorforthetypesof questionsandmodelanswers Practicecaseinterviews Coverupthequestions,compare youranswerstothemodels Collaborativetactics Mockinterviewsfromfriends,family, CareerDevelopmentCenter

Importantconceptsanddefinitions

Definitions Revenue Volume Price Fixedcosts Variablecosts Profit Profitmargin(%and$)

Concepts Profitequation:thisequationis essentialtoyoursuccessincase interviews Economiesofscale Keyfactorsformarketentry Marketsize Marketgrowth Numberofcompetitors Sizeofcompetitors Barrierstoentry