in this video I'm going to teach you fundamental strategies and frameworks for tackling case interviews in roughly 30 minutes we'll cover each step of the case interview from beginning to end and go through a full case interview together by the end of this video you will not only fully understand what case interviews are but you will learn effective strategies to use on interview day to make you feel more confident in yourself we have a lot of material to cover so please give this video a quick like to support the channel and we'll get started right away so what is the case interview as you may already know case interviews are a special type of interview question that is commonly used by management consulting companies such as McKinsey BCG and Bain a case interview or case is a 30 to 45 minute exercise in which you and the interviewer will work together to develop a recommendation to answer or solve a business problem these business problems can be anything that real companies face a few examples are how can coca-cola increase its profitability what should Netflix do to increase customer retention how should a policeman I phone and where should Disney open its next Disneyland theme park at the beginning of the interview the interviewer will give you background information and the business problem and in the end you'll present a recommendation and provide two to three reasons that support your recommendation these two to three reasons will likely be both quantitative and qualitative you may need to make estimations or assumptions perform calculations interpret charts and graphs brainstorm ideas and have qualitative discussions there is usually no single right answer for a case as long as you have logical reasons and evidence that support your recommendation you will do well although there are many business problems you could be asked to solve almost all case interviews follow the same format or structure so the good news is that you can use the same strategies for every single case interview there are seven main parts of a case interview understanding the case background information asking clarifying questions structuring a framework starting the case solving quantitative problems answering qualitative questions and delivering a recommendation to best illustrate exactly how a case interview looks like we'll go through each of these parts step-by-step let's start with the first part understanding the case background the case interview will begin with the interviewer giving you the case background information let's say that the interviewer reads you the following our client is a large manufacturer and retailer of non-alcoholic beverages such as sodas juices sports drinks and teas they have annual revenues of roughly thirty billion dollars and an operating margin of roughly thirty percent our client is looking to grow and is considering entering the beer market in the United States should they enter as the interviewer reads this take notes it is important to understand what the objective of the cases and keep track of information one strategy for taking notes effectively is to turn your paper landscape and draw a vertical line to divide your paper into two sections the first section should be roughly 2/3 of the page while the second section will be roughly 1/3 of the page take notes in the second section of your page after the interviewer finishes giving the case background information confirm that you understand the situation and objective provide a concise synthesis like the following to make sure I understand correctly our client is a large manufacturer and retailer of non-alcoholic beverages they are looking to grow and our objective is to determine whether or not they should enter the u. s. beer market make sure your synthesis is concise you do not want to regurgitate verbatim everything that the interviewer has said only mention the most important pieces of information you should also make sure that you verify the objective of the case answering or solving the wrong case objective is the quickest way to fail a case interview next we'll move on to the next step asking clarifying questions now you'll have the opportunity to ask questions before you begin thinking about how to solve the case at this point only ask questions that are absolutely critical for you to fully understand the case background and objective you'll be able to ask more questions later there are four types of questions you could ask one asking for a definition of a term you're unfamiliar with two asking for information that strengthens your understanding of the company or situation three asking questions that clarify the objective of the case for asking to repeat information you may have missed so for this case you might ask the following questions is our client looking to specifically grow revenues or profits answer our client wants to grow profits is there a particular financial goal or metric our client is trying to reach within a certain time frame answer they are looking to grow annual profits by five billion dollars within five years now we'll move on to the third step of the case interview structuring a framework after you understand the case background and objective lay out a framework of what areas you would want to look into to answer or solve the case a framework is simply a tool that helps you structure and break down complex problems into simpler smaller components think of a framework as brainstorming different ideas and organizing them into different categories when creating a framework it is completely acceptable to ask the interviewer for a few minutes of silence to write it out you might say something like this would you mind if I take a few minutes to structure my thoughts and develop a framework to tackle this case most of the time the interviewer will gladly give you a couple of minutes to gather your thoughts for this case example what do you need to know in order to help the client decide whether or not they should enter the beer market you might brainstorm the following questions there's our client know how to produce beer would people buy beer made by our client where would our client sell its beer how much would it cost to enter the beer market will our client be profitable from doing this how can our client out-compete competitors and what is the size of the beer market this is not a very structured way of tackling the case instead you should organize your ideas into a framework that has three to four broad areas also known as buckets that you want to investigate an easy way to develop these buckets is to ask yourself what are the three to four things that absolutely must be true for you to 100% recommend that the client should enter the beer market in an ideal world these four things would need to be true one the beer market is an attractive market with high profit margins two competitors are weak and our client will be able to capture a significant market share three our client has the capabilities to produce an outstanding beer product for our client will be extremely profitable you can rephrase these points to be the broad categories in your framework you can write your framework in the first section of your paper notice that the four buckets in the framework correspond to the four things that we believe need to be true to be confident in recommending that our client should enter the beer market next let's add a few bullet points under each category to give more details on exactly what information we need to know to decide whether our client should enter the beer market notice that each bullet in a bucket is a question that helps answer the overall question of the bucket for example in the first bucket knowing the market size the market growth rate and average profit margins helps us determine whether the beer market is an attractive market this entire process of brainstorming ideas and developing a structured framework should only take a few minutes so how do you come up with a framework so quickly most candidates make the mistake of either using a single memorized framework for every case or memorizing a different framework for every type of case the issue with memorized frameworks is that they aren't tailored to the specific case you are solving for when given an atypical business problem your framework elements will not be entirely relevant interviewers can easily tell that you are regurgitating memorized information and not thinking critically so instead of memorizing frameworks I recommend memorizing a list of eight to ten broad business elements such as the following market attractiveness competitive landscape company capabilities or attractiveness customer segments or needs profitability or financials strategic alternatives risks and mitigations and creating your own bucket when given a case mentally run through this list and pick the three to four elements that are most relevant to the case this will be your framework if the list does not give you enough elements brainstorm and add your own unique elements to your framework this strategy guarantees that your framework elements are relevant to the case it also demonstrates that you can create unique tailored frameworks for every business problem or situation using this strategy for this case you would run through your list of memorized business elements and select the following market attractiveness competitive landscape company capabilities and profitability as you can see this strategy is a shortcut for creating unique tailored frameworks for every business problem you do not need to develop a framework entirely from scratch each time now that you have your framework turn your paper to face the interviewer and walk them through it it might sound something like this to decide whether or not our client should enter the market I want to look into four main areas one I want to look into the beer market attractiveness is this an attractive market to enter I'd want to look into areas such as the market size growth rate and profit margins to I want to look into the beer competitive landscape is this market competitive and will our client be able to capture meaningful market share to do this I want to look into questions such as the number of competitors how much market share each competitor has and whether competitors have any competitive advantages 3 I want to look into our capabilities do they have the capabilities to succeed in the beer market I want to look into things such as whether they have the expertise to produce beer whether they have the distribution channels to sell that beer and whether there's any existing synergies they can leverage for I want to look into expected profitability well our client be profitable from entering the beer market I'd like to look into areas such as expected revenues expected costs and how long it would take to break-even at this point the interviewer might ask a few questions on your framework but will otherwise indicate whether they agree or disagree with your approach moving on to the next step of the case interview starting the case there are two different styles of case interviews interviewer led cases and candidate led cases if this is an interviewer led case the interviewer will propose which area of your framework they would like to dive deeper into they might say something like the following your framework makes sense to me why don't we start by estimating the size of the US beer market if this is a candidate led case you will be expected to propose an area to look into there is no right or wrong answer as to which area to start first so feel free to propose any area of your framework as long as you have a reason for it you could say something like the following to start I'd like to look into the beer market attractiveness I'd like to first understand the market size to determine if the beer market is an attractive market if you end up picking an area that the interviewer does not want you to explore they will redirect you to an area that they do want you to explore so these two styles of case interviews are nearly identical the only difference is whether or not you have to proactively propose what area to explore first and what area you want to explore next so once the case has been kicked off by either you or the interviewer you'll have to solve quantitative problems and answer qualitative questions and in this section we'll focus on solving quantitative problems first there are three different types of quantitative problems you may get asked to solve market sizing or estimation questions profit or profitability questions and charts and graphs questions let's start with the first type market sizing or estimation questions these types of questions ask you to estimate the size of a particular market or calculate a particular figure let's say that the interviewer asks you the following what is the market size of beer in the u.
s. most candidates jump right into the math stating the US population and then performing various calculations doing math without laying out a structure often leads to making unnecessary calculations or reaching a dead end instead lay out an upfront approach to help avoid these mistakes and demonstrate that you are a logical structured thinker for this market sizing problem you could structure your approach in the following way start with the US population estimate the percentage that are legally allowed to drink alcohol then estimate the percentage that drink beer then estimate the frequency in which people drink beer and then finally estimate the average price per can or bottle of beer multiplying all of these steps together will give you the answer by laying out an approach upfront the interviewer can easily understand how you are thinking about the problem with the right structure the rest of the problem is just simple arithmetic sometimes the interviewer will give you numbers to use for these calculations but other times you'll be expected to make assumptions or estimates when performing your calculations make sure to do them on a separate sheet of paper calculations often get messy and you want to keep your original paper clean and organized a sample answer to this question could sound like the following following my approach I'll assume the u. s.
population is 320 million people assuming the average life expectancy is 80 years old and an even distribution of ages roughly 75% of the population can legally drink alcohol this gives us 240 million people of these let's assume 75 percent of people drink beer that gives us a hundred and eighty million beer drinker on average a person drinks perhaps five beers a week or roughly 250 beers per year if we're assuming roughly fifty weeks per year so that gives us a hundred and eighty million people times 250 beers per year or forty five billion cans or bottles of beer assuming the average canner bottle costs $2 this gives us a market size of ninety billion dollars now that you have your answer you should not only just answer the question but tie your answer back to the case objective in other words how does knowing the US market size of beer help you decide whether or not our client should enter the beer market you could say something like the following given that our client has annual revenues of thirty billion dollars a ninety billion dollar beer market represents a massive opportunity the market size makes the beer market look attractive but I'd like to understand if your margins are typically high and determine how much market share our client could realistically capture the second type of quantitative question you could be asked is to calculate profit or profitability to answer profit or profitability questions you only really need to know the basic formulas for profit these are that profit equals revenue minus costs revenue equals quantity times price costs equal total variable costs plus total fixed costs and finally total variable costs equal quantity times a variable cost per unit putting these equations together we can rewrite them in the following simplified way profit equals price minus variable costs times quantity minus total fixed costs you should also know that profit margin equals revenue minus costs all divided by revenue and you should also know what a break-even point is a break-even point occurs when a company sells enough product such that it has exactly recouped all of its costs in other words breakeven occurs when profit equals zero to solve for the break-even point you would simply set profit equal to zero and solve for the unknown variable in the has an example of a profit or profitability problem let's say that the interviewer asks you the following assume that a 12 ounce can of beer sells for $2 on average to produce a keg of beer it costs $100 for raw materials $95 for labor and $75 for storage if a keg of beer holds 1,800 ounces of beer what is the profit margin for beer as with any other type of quantitative problem make sure to structure your approach before you begin doing any calculations a sample answer could look like the following to calculate the average margin for beer I will first calculate the total costs to produce a keg of beer next I will divide the total volume of a keg by the total volume of a can to determine how many cans a keg of beer produces afterwards I will divide the total cost of producing a keg of beer by the number of cans to determine cost per can finally I can use the price and cost per can of beer to calculate the average margin of beer following this approach the total cost of a keg of beer is $100 plus 95 dollars plus $75 or 270 dollars the number of cans of beer in a keg is 1,800 ounces divided by 12 ounces or a hundred and 50 cans therefore the cost per can of beer is 270 dollars divided by 150 cans or a dollar and 80 cents since the average price of beer is $2. 00 per can the profit is 20 cents per can this makes the margin 20 cents divided by 2 dollars or a 10% profit margin now that you have your answer remember to tie your answer back to the overall case objective compared to our clients overall operating margin of 30% the beer market profit margin of 10% is significantly lower although the market size for beer is large the low margin makes the beer market less attractive the third type of quantitative question you could get asked is interpreting charts and graphs the types of charts and graphs you should be familiar with include bar charts pie charts graphs bubble charts and waterfall charts returning to our case example the interviewer may show you the following a helpful strategy is to start your analysis by explaining what the axes of the chart show this will help you understand the chart better don't just read what numbers the chart shows but instead interpret what those numbers mean for the case objective a sample answer might sound like the following for this chart we have market share on the y-axis and different categories of beer on the x-axis for each category we see that market share is concentrated among a few large players this implies a highly competitive market with high barriers to entry because of this the beer market does not look attractive because it is so competitive in addition to asking quantitative questions the interviewer will also ask qualitative questions there are two types of qualitative questions brainstorming questions and business opinion questions looking at brainstorming questions first the interviewer might ask what are the barriers to entry in the beer market most candidates answer by listing ideas that immediately come to mind such as brewing equipment B your production expertise distribution channels or brand name this is a highly unstructured way of answering the question make sure to use a simple structure to organize your thoughts a simple structure such as thinking about barriers to entry as either economic barriers or non economic barriers helps facilitate brainstorming and demonstrates logic and structure with this structure you might come up with the following answer for economic barriers you have equipment raw materials and other capital for non-economic barriers you have beer brewing expertise brand name and distribution channels examples of other simple structures that you can use include the following we have internal external short-term long-term economic non-economic quantitative and qualitative direct and indirect supply side and demand side upside and downside and benefits and costs additionally take your answer and connect it back to the case objective in this example are these barriers to entry high or low in your opinion do you think our client can overcome these obstacles to enter the beer market you might answer this question in the following way I'm thinking of barriers to entry as economic barriers and non economic barriers economic barriers include things such as equipment or on material and other capital non-economic barriers include beer brewing expertise brand name and distribution channels looking at these barriers I think it will take our client a lot of work to overcome these barriers while our client does have a brand name and distribution channels they lack beer brewing expertise and would have to buy a lot of expensive equipment and machinery these barriers make entering the beer market difficult the second type of qualitative question our business opinion questions the interviewer may ask you something like the following do you think there are significant production synergies in producing non-alcoholic beverages and producing beer as always structure your answer and connect your answer to the case objective here is a sample answer production involves equipment raw materials and labor there is likely some overlap in equipment such as using the same bottling machines but our client will likely need new equipment for brewing beer raw materials on the other hand are completely different our client will need to source barley hops and yeast which it currently does not use in its existing beverages finally the same labor can be used but employees will need new training since producing beer is fairly different from producing a non-alcoholic drink overall I think there are only a few production synergies that our client can leverage which makes entering the market a bit more difficult you've done a ton of work and now it is time to put everything you've done together into our recommendation throughout the interview you should have been making notes of key takeaways after each question that you answer take a look at the key to we've accumulated so far and decide whether you want to recommend entering the beer market or not entering the beer market throughout the case you may have identified the following key takeaways the u. s.
beer market size is ninety billion dollars compared to our clients annual revenue of thirty billion dollars the beer market profit margins are ten percent compared to our clients average margin of 30 percent the beer market is highly concentrated across all categories barriers to entry are moderate and there are some synergies with existing production remember there is no right or wrong recommendation as long as you support your recommendation with reasons and evidence secondly regardless of what stance you take make sure you have a firm recommendation you do not want to be flimsy and switch back and forth between recommending entering the market and not entering the market third make sure your recommendation is clear and concise and finally include next steps in your recommendation you can use the following structure when delivering your recommendation first clearly state what your recommendation is then follow that with two to three reasons that support your recommendation and finally state what potential next steps would be to further validate your recommendation next steps can include a number of different things you could include buckets in your framework that you were not able to cover you could also include open questions that you still have regarding the case finally you could name potential risks relating to your recommendation that you would like to explore typically the interviewer will prompt you for a final recommendation they might say something like let's say that you bump into the CEO in the elevator he asks what your preliminary recommendation is what would you say the conclusion of this case might sound like the following I recommend that our client should not enter the beer market for the following three reasons one although the market size is fairly large at ninety billion dollars the margins for B are just 10% significantly less than our clients overall operating margin of 30 percent to the beer market is very competitive in all beer segments market share is concentrated among a few players which implies high barriers to entry our client lacks beer brewing expertise to produce a great product to compete with incumbents three there are not that many production synergies that a client can leverage with its existing products our client would need to buy new equipment source new raw materials and provide new training to employees which would be time-consuming and costly for next steps I want to look into our clients annual expected profits if they were to enter the u. s.
