Ucla Mca Casebook 2009

Case Book
2009 Recruiting Season
UCLA Anderson MCA Case Book 2009
Table of Contents
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Title
Dialysis Centers
Hawaiian Tourism
Liquid Haul
Processed Food Manufacturer
Gas Stations
Home Builders
Sporting Goods Store
Vaccines
State Medicaid Office
Large Media Distributor
Alpha Capital
Sania Healthcare
Client Troubles
Company
Bain & Co.
Bain & Co.
Bain & Co.
Bain & Co.
Bain & Co.
BCG
BCG
Deloitte Consulting
Deloitte Human Capital
IBM
McKinsey & Co.
McKinsey & Co.
Monitor
Job
Internship
Internship
Internship
Internship
Full Time
Internship
Internship
Full Time
Internship
Full Time
Internship
Internship
Internship
Round
1st
1st
1st
1st
1st
1st
1st
1st
2nd
1st
1st
1st
2nd
Page 2 of 42
Case Title:
Company:
Interview Round:
Case Tags:
Length:
Dialysis Center
Bain & Company
1st Round Summer Associate
Health care, growth strategy
25 minutes
Question:
Your client owns and operates a chain of kidney dialysis centers. Dialysis is a process
where patients are connected to a machine; their blood is cleaned and then put back into
their body. Patients who need this procedure have serious health problems and once they
require dialysis, they need it 3 times a week for the rest of their life. Your client has 1/3 of
the market and there is one major competitor that has 1/3 of the market share. The
remaining market is made up of independent doctors that own/operate their own small
dialysis center. Your client has grown through acquisition of smaller operations and the
market is at equilibrium (i.e. there are no other acquisition options). Theyve asked you to
help them grow their profits.
Things Interviewee Should Consider / Framework:
Company strategy / differentiation from competitors
Revenue streams
Costs
Growth options
o Major costs
o Expand services
o Cost reduction opportunities
o Increase prices
o Benchmark versus competitors
o Capture more market share
Facts to Share (if prompted):
Treatment centers - Because many hospitals dont have dialysis facilities, hospital doctors
and specialists must refer patients to an outside treatment facility (i.e. our client, our
competitor or one of the independent treatment centers).
Doctors - When graduating med school, kidney doctors can go work for a hospital, become
a specialist, or they can open their own independent dialysis and treatment practice (much
like a dentist does).
Referrals - Patients are referred to a dialysis treatment center by their doctor. Because
people dont know one center from another, they go where their doctor tells them to go.
Costs - Fixed costs are $300k/year, variable costs are $45k per year
Revenues - Medicare pays $300/treatment, private insurance pays $3000/treatment
Patients (product mix) - 90% of patients have Medicare, 10% have private insurance.
Summary of Key Insights:
The key to this case is that there are two types of patients: Medicare, private. Medicare
patients are not profitable so the company should focus on attracting as many privately
insured individuals as possible in order to grow their profits.
Doctors are the gatekeepers for dialysis centers and must be targeted.
Make sure that interviewee walks through revenues, costs, profit analysis (breakevens), and strategies for growth.
Page 3 of 42
Walkthrough of Solution:
Costs:
Ask what the major cost items are: building leases, equipment (dialysis machines),
labor (nurses, technicians), supplies and materials (drugs, needles), promotions.
Fixed costs are $300k/year
Variable costs include the drugs sold to patients and amount to $45k per year
Things to mention if asked: the building and machines are already leased, wages are
generally competitive. Overall, our costs are lower than our competition.
Revenue:
Medicare pays $300 per treatment
Private insurance pays $3000 per treatment
Prices are determined by the market, so the company has little control over influencing
price.
Patients:
90% of patients have Medicare, 10% have private insurance.
Profitability:
Each patients receive 52 weeks x 3 treatments/week = 156 treatments per year
Each Medicare patient provides 156 x $300 = $46,800 in revenue; $46,800 $45,000 =
$1,800 profit/yr
Each privately insured patient provides 156 x $3,000 = $468,000 in revenue; $468,800
$45,000 in costs = $423,000 in profit per year (enough to pay for the annual fixed
costs of the entire center!)
Once the candidate realizes that one privately insured person covers the yearly
expenses of the entire operation, ask them how many Medicare patients a center would
have to treat to cover their fixed costs: $300,000/$1,800 = 167 patients
Note: this section could have been solved using breakevens directly (167 for Medicare, 1
for privately insured)
Ask the candidate what they think our client can do to increase the chances that doctors
will refer privately insured patients to us instead of our competitors:
Market our centers to doctors who have private patients (using data from geographic
area, demographics, hospital information).
Because privately insured people are more likely to be wealthy, improve the facility to
make it feel more like a spa so that we can differentiate our treatment centers from the
competition.
Look into launching a marketing campaign to build brand awareness so that patients
will go to their doctors asking to be referred to our centers.
Build relationships as soon as doctors graduate from school so they have a loyalty to
our client.
Work out an incentive structure where doctors are rewarded for referring patients (if
thats legal).
Page 4 of 42
Case Title:
Company:
Interview Round:
Case Tags:
Duration:
Hawaii Tragedy
Bain & Company
Government function, market sizing
25 minutes
Question:
Youre the governor of Hawaii. A tragedy on the level of 9/11 has just occurred on the
mainland US and air travel has been shut down temporarily. How would you think about
the issues that youre facing?
Basic needs food & water
Social services police, medical, fire, education
Economic impact
o Loss of productivity
o Loss of tourism
o Social welfare (unemployment, etc)
Basic needs Water and food are brought to the island on ships.
Tourism 75% of the population of Hawaii is employed in some aspect of the tourism
industry.
Tourist origination 50% of tourists are from the United States, 50% from the rest of
the world (mostly Asia).
Impact on tourism After 9/11, tourist travel from the US went to 0% for the first 6
months, then to 50% for the next 6 months. The second year after 9/11, tourism was at
75% of normal. In the third year, it was back up to 100%. Only tourism from the US
was affected, no effects were seen on international tourism.
Tax rate 10%
Airlines Headquartered in mainland US states and dont pay state taxes to Hawaii
Discount rate assume 0% okay for short-term
Biggest impact to consider is loss in tax revenue and its effect on government function
Interviewee must estimate lost taxes by estimating number of tourists, total tourism
revenues, then taxable portion of tourism revenues.
Ask interviewee about strategies for dealing with lost taxes.
Page 5 of 42
Initial thoughts:
Basic needs okay? Yes, food and water comes on boats.
Basic government functions okay? Yes, lets say its okay.
Conclusion is that economic impact will be biggest issue. Assume governor is concerned
about tax revenue.
In the following sections, the candidate needs to estimate loss in taxes. Only numbers in
bold should be provided to the candidate. All other numbers should be generated by
the candidate:
Because only US tourism affected, candidate needs to estimate the number of tourists from
US to Hawaii:
300 million people in the US
Only the top 1/3 will be able to afford a vacation = 100 million
People take a major vacation every 5 years, which is 20 million people.
Of those 20 million, assume 15% go to Hawaii, leaving 3 million people (no matter
what the candidate comes up with, be sure to give them this 3 million number to work
with)
Now the candidate must estimate the average amount each person spends while in Hawaii:
Assume that the average person stays for an average of 7 days, 6 nights.
Hotel: 6 nights @ $300/night = $1,800; but assume triple occupancy so the total per
person is $600
Food: Average breakfast+lunch+dinner = $10+$20+$50 = $80 per day x 7 days = $560
Recreation: Suppose the average person spends $500 in additional recreation activities
(renting a surfboard, touring local sites, etc)
Total per person = $1660, well round it to $1700.
So $1700 x 3 million people = 5.1 billion per year in revenues, well call it $5 billion.
How much revenue will Hawaii lose?
Candidate can assume discount rate of 0%
In first 6 months, the local economy loses 100% of $5 billion x year = $2.5 billion
In next 6 months, they lose 50% of $5 billion x year = $1.25 billion
In second year, they lose 25% of $5 billion = $1.25 billion
In the 3rd year the revenues are back to normal, so the total lost in the local
economy is $2.5B + $1.25B + $1.25B = $5 billion.
Hawaiis tax rate is 10%, so the government has lost 10% x $5 billion = $500 million
Ask the candidate what the loss in revenue means to the government:
With such a drop in tourism, unemployment will increase meaning that unemployment
claims will increase, but the governments unemployment funds may be affected
Page 6 of 42
With higher unemployment, crime will probably rise but the government may struggle
to provide basic services like police and fire
The education system may suffer without adequate funding
Public health services could be impacted and clinics may be shut down
Ask the candidate what the government should do to address this loss in revenue
Because the rest of the world is not affected, Hawaii should focus on marketing
internationally (particularly in Asia):
o If the candidate brings this up, ask them what they would want to know if they
were to do this?
They should make sure that they have the ability to measure the return on
their marketing dollars. Make sure that their dollars are able to generate
new tourism dollars
They should also be sure that they target markets that have a lot of potential
new customers; for instance, if Japanese market is saturated, they should not
advertise in Japan
The government could work out deals with airlines and hotels to provide discounts to
help tourism, but they would have to make sure the increase in tourism dollars is
greater than the discounts given.
Receive aid from federal government
Cut non-essential government programs
Issue bonds / borrow money
Page 7 of 42
Case Title:
Company:
Interview Round:
Case Tags:
Duration:
Liquid Haul
Bain & Company
Market Sizing
25 minutes
Question:
(1) Our client is a manufacturer of liquid trailers. These are the liquid storage units you see
being pulled behind tractors on the highways, and are used to transport petroleum. How
would you estimate the size of the liquid trailer market in the United States? What kind of
numbers do you think you could realistically find.
(2) After having answered #1: Assume the demand for gas increases by 5% a year. Also
assume each trailer lasts 20 years. What would be the demand for new trailers next year?
(3) After having answered #2: What if Liquid Haul has 20% of the domestic market, how
much of that demand would be attributed to Liquid Haul?
(4) After having answered #3: What if Liquid Hauls demand was higher than 3,000
trailers? What are some of the possible reasons for this?
Option 1: Look at the number of consumer gas stations/industrial filling locations and
how much fuel is sold per day. Then determine how many of those consumer gas
stations/industrial filling stations are serviced by Liquid Haul. Then find out how many
gallons can be filled by 1 trailer, and how long itd take for 1 trailer to operate one run.
Option 2: Look at total annual gas consumptions in United States. Then find out how
many gallons fit in one trailer, and how long it takes for one trailer to do one run.
Have Interviewee estimate all numbers, use below to guide Interviewee if their
estimates are much different:
o Annual Fuel Consumption = 150B Gallons/year
o Trailer capacity = 2,500 Gallons
o Assume 1 delivery per day
Interviewee should generate 2-3 different ways of estimating the market size and
choose whichever one he thinks is best to solve the problem.
Choose round numbers to make estimates easy. The numbers in this case should not be
difficult, giving a chance to shine talking about the relevant business drivers.
Anchor the estimation in something that resonates (e.g. I know I use 10 gallons/week)
Be sure to state all assumptions clearly.
This was an actual case that a Consultant worked on, in which he had to gather a great
deal of information from various sources. His interest was piqued when I asked many
questions about his experience and how he managed to get these numbers from so
many private sources.
Page 8 of 42
Question 1:
Option #1 seemed to have more attainable numbers, so estimated:
Question 2:
Question 3:
Question 4:
Competitions prices went up

Competitions customer service went down
Regional growth for Liquid Haul
Were selling to other liquid transporters (water?)
Customers for Liquid Haul experienced higher growth
Replacement Cycle 20 years ago there was spike in purchase, so now more are coming
up for replacement
Page 9 of 42
Case Title:
Company:
Interview Round:
Case Tags:
Duration:
Processed Food Manufacturer

Bain & Company
Profit growth
25 minutes
Question:
Our client is a processed food manufacturer based in Australia. Their market position is
very strong (theyre either #1 or #2 in each food segments). They were acquired by a
private equity firm a year ago for $1 per share. However, in the last year, share prices have
dropped to 50 cents. Our goal is to help the food manufacturer regain profits.
Whats affecting profits
o Revenue streams
o Cost structure
Changes in market
o Clients market share
o Competitive landscape
Changes in customers
How has client achieved growth
Competitive Landscape Exhibit 1
Revenue Information Exhibit 2
Acquisition Information Exhibit 3
The key to this case is chart analysis by the Interviewee.
The Interviewee should guide the discussion through the charts and ask the relevant
questions to prompt distribution of the charts. However, if this does not happen, try to
guide them to ask the right questions.
The Interviewer should ask many follow up questions to test the Interviewees
understanding of the charts.
Page 10 of 42
Explanation of Exhibits and Guidance for Interviewer
Exhibit 1: Competitive Landscape
RMS Chart is a chart that shows Relative Market Share. It shows how strong our
company is in comparison to the competition, as well as how fragmented the
competitive landscape is. The larger the area of the square, the stronger the competitive
position of the company is.
Key takeaway: the companys strengths lie in Flour, Sugar and Pastries, and the Cookie
and Cake industry is much more fragmented, thus the majority of their income is
coming from more commodity type products.
Exhibit 2:
Shows Revenues and EBIT (Earnings Before Interest and Taxes = Profit) over the last 3
years
Key takeaway: From these two graphs we surmise that the majority of the growth is
fueled by acquisitions that is why our client has seen declining profits with increasing
revenue, despite operating in an industry (foods) thats driven by economies of scale.
Exhibit 3:
Shows the source of Growth in Year 1 and 2.
Key takeaway: It shows that the majority of growth came from acquisitions, so Year 3s
EBIT
Q: Where do you think the food manufacturer is making these acquisitions and why?
The purpose of acquisitions is to increase margins and grow revenues. They most likely
would have made purchases in the food segments in which they have small RMS, and
profits would be larger (meaning not in commodities such as flour or sugar). So that
would be in cookies and cakes.
Q: How much cost would our client need to cut to meet the industry margin of 15%?
Remember : current Profit is $100m and current Revenue is $2.0B (Exhibit 2)
In other words, the industry margin of 15% indicates that Profit should be $300m on
$2B of Revenue. However, Profits are only currently $100m. So, the client will need to
cut costs by $200m in order to increase Profits to $300m.
Q: What if the industrys annual growth is 3%?
(Ask if we can assume that the two year compounded growth is 6%? Yes.)
This question means costs would have to be cut by an additional 6% in the 3rd year:
Page 11 of 42
Exhibit 1:
RMS chart of the food segments that our client is currently in:
FLOUR
Comp #1
Comp #2
SUGAR
US
Comp #1
Comp #2
US
PASTRIES
US
Comp #1
COOKIES
Comp #1
Comp #2
Comp #3
US
Comp #4
CAKES
Comp #1
Comp #2
US
Comp #3
Comp #4
Our total RMS is 1.9x
Page 12 of 42
Exhibit 2:
Page 13 of 42
Exhibit 3:
Growth
8
7
$ Million
6
5
Acquisition
O rga nic
4
3
2
1
0
1
2
Year
Page 14 of 42
Case Title:
Company:
Interview Round:
Case Tags:
Duration:
Gas Station
Bain & Company
1st Round Full Time
Market sizing
25 minutes
Question:
How many gas stations are there in Japan?
Follow-up question: If you had 2 hours to refine your data, how would you spend them?
(i.e. which assumptions are most important; the drivers)
There are several other ways to attack this one, including a simple scale-up (a town of 80k
might have 20 gas stations, so just proportion that up to 120M people) or some sort of
parallel to the United States, as long as cultural differences are considered.
Population of Japan = 120 million
Public transportation is very convenient and widely used, so car ownership and usage is
much lower than in the U.S.
Be sure to have a couple of suggestions on how to approach the problem. You will be asked
for multiple solutions, and why one is better than another. Be organized with your
numbers.
Page 15 of 42
The following is a sample solution:
Equate supply with demand:
Work in tanks filled, since we will deal with the amount of time it takes to fill a tank
Demand = households * % car ownership * tanks filled per month * days/month
+ business demand = above # * (ratio of trucks to cars on the road) * (ratio of frequency of
fill-ups, i.e. every day vs. once/month)
40M * 40% * 1 tank/month * month/30 days = 500,000 tanks/day +
500,000 * (1 truck/20 cars) * (one fill-up per month/every day, or 30) = 750,000
Total supply = 1.25 M tanks per day
Each station has about 10 pumps
It takes about 5 minutes for each fill-up.
Under 100% utilization, that would equal 10 pumps * 12 * 24 = 3000 fill-ups per gas
station per day
To figure out utilization, divide up the day and make some assumptions
0:00 6:00 = 5%
6:00 10:00 (around rush hour)= 50%
10:00 16:00 = 20%
16:00 20:00 (around rush hour) = 50%
20:00 24:00 = 20%
Take the weighted average = (6*.05 + 4*.5 + 4*.2 + 4*.5 + 4*.2)/24 = 25%
So there are 25% of 3000, or 750 fill-ups per station per day
1.25M/750 = about 6600 gas stations
Follow-up question: 6600 seems low. Go through each assumption and do a gut-check
Over a 24-hour span, are gas stations really 25% utilized? Probably not
% car ownership and fill-ups per month will be big drivers
Since business use is so large, the ratios used in that equation are also quite important
Page 16 of 42
Case Title:
Company:
Interview Round:
Case Tags:
Duration:
Home Building Company

The Boston Consulting Group
1st Round Summer Consultant
Real Estate, Cost Structure, Demand Supply
25 minutes
Question:
Our client is a leading home building company. This year the company had annual revenues
of $3B, and sold about 10,000 houses. Given the state of the economy, they have seen
home prices fall dramatically, and thus, lost significant revenues. How low can they go on
their price? Additionally how bad is the business going to get, and when can we expect it to
turn around?
Cost structure
o Land
o Raw materials / Labor
o Project Management / Contracting
o Marketing / Commission
o Interest expense
o Tax / Insurance / Property Management Fees etc.
Prices/volumes driven primarily by demand (consumers) and supply (Competition)
Facts to Share (if prompted for Question 1):
Land bank investment by the client: $1Billion for houses sold last year
Marketing Expense:
$250 Million / year
Size of Avg. House:
1500 sq. ft.
Cost to build on average:
$100 / sq. ft.
Results:
Avg. prices to be calculated from the question: $300,000 / home
Total yearly costs = $1B + $0.25B + $1.5B = $2.75B
Profit margins of ~8% are thin considering other costs have not been factored in.
Facts to Share (if prompted for Question 2):
Demand had fallen by 25% from last year
Prices had tanked from $400,000
The interviewer said he did not have any other trends
Results:
Price elasticity of supply was 0.8
Recognize that the cost of land is a sunk cost. So the company might have to lower prices if
demand continues to drop depending on cost of capital.
Page 17 of 42
Sub-question 1.) What affects the price of a home?
Possible answers: Prices are primarily impacted by demand, supply and costs. Costs
include price of land that the home sits on, raw materials used, labor, project management
and contracting fees, marketing costs and commission on sales, interest expense, tax,
insurance, property mgmt fees etc.
Sub-question 2.) Lets say our marketing budget was $250 million and the client paid $1
billion for the land bank. How would you go about estimating the other costs?
Possible answers: I was surprised by the high marketing expense. My suggestions included
labor rates, no. of labor hours per home, estimate cost of raw materials per house,
estimated fees for project management, etc The interviewer nudged me to consider an
approach which uses cost per square foot on an average. Whats the size of the avg. home
and prevailing costs per sq. ft.
Sub-question 3.) Average house size for client is 1500 sqft and cost to build is $100/sqft
Possible answers: Building and associated cost per house = 100*1500 = 150,000. Hence for
all houses as a whole costs = $1 billion (land) + $0.25 billion (marketing) +
$150,000*10,000 = $2.75 billion. That earns the company a profit of ~8%
Sub-question 4.) How much did houses sell for?
Answer: The current revenue of $3B is divided by 10,000 houses i.e. price per house =
$300,000.
Sub-question 5.) Are there other costs that you might have missed? Do you think this is a
good year?
Possible answers: Interest cost on the $1 billion, management fees, taxes and legal costs,
costs associated with delay etc My guess was housing development was an industry
commanding 15 20% margins (said I had seen it in my country) and 8% with some
additional costs to consider, was low.
Sub-question 6.) How low should builder be willing to drop prices?
Answer: Pre-purchased land is already a sunk cost, so the builder should be willing to drop
to cost to the sum of variable costs. Maybe even be willing to ride out a small loss, if the
economic outlook improves.
Page 18 of 42
Sub-question 9.) Good! What do you think about the supply economics of this business?
Possible answers: Asked for additional data on change in demand and supply to which he
said the year earlier prices were $400,000 per houses and demand was 25% higher. I drew
this supply demand curve and said the supply elasticity was dQ /Q / dP/P = -2.5/12.5 / 100/400 = 4/5 = 0.8.
Sub-question 10.) What determines peoples ability to pay for a house?
Possible answers: Household income, employment levels, interest rates, ability to get a
loan, tax incentives etc.
Sub-question 11.) Do you know what the current unemployment rate is?
Answer (then): 7.5%
Sub-question 12.) How long do you think recovery is going to take?
Possible answers): Assuming another year of downturn a slow recovery for the economy
and a growth rate of 5% for demand it is probably going to take 5-6 years to get to older
levels of profitability unless the company cuts some cost cutting. (I was not too
convinced/happy about this part)
Sub-question 13.) What should our client do?
Possible Answers:
Stay in business at least until point when prices fall to level of variable costs
(recognizing that land is a sunk cost)
Promote remodeling/renovation/expansion services, rather than from scratch
building, in response to peoples declining ability to pay
Limit selection available, and seek volume discounts (i.e. only offer 5 kinds of counter
tops, instead of 50, and try to set up deals with the 5 suppliers)
Look to expand in hot international markets
Diversify in to commercial property development (not just housing)
Get in the business of building things that might be promoted through administrations
stimulus package interviewer kind of poked fun at me, and said like building
bridges? and I said, no, but maybe town halls, fire stations, rest stops, toll booths etc.
I think I was more than a little off base, but got points for creativity, and responding to
his challenge.
Page 19 of 42
Exhibit A:
Page 20 of 42
Case Title:
Company:
Interview Round:
Case Tags:
Duration:
Sporting Goods Store

The Boston Consulting Group
1st Round Summer Consultant
Revenue drivers, profitability improvement
25 minutes
Question:
Our client is a large sports goods store. The sporting goods industry is stable; however,
they are experiencing decreases in revenues from their sport machines department
particularly treadmills, and elliptical machines. What explains this decline, and what can
they do about it?
Revenue drivers
o Competitive landscape / price war
o Change in customer demographics / income level
o Buying influencers: Friends, family, coaches / advertisements / sales personnel
o Changes in product mix / quality
o Increased popularity of substitutes / other distribution channels
Industry growth rate (last year and projected)
Key competitor growth rate
Clients growth rate
Current sales level
Salary of additional employee
Profit from additional equipment sold
Working hours and days
4%
8%
Flat
125 units per month
$15/hour
$500
8 hours/day and 250 days/year
Results:
Break even sales of 5 per month with additional sales force
This represents a 4% increase which matches industry growth rate
Increase in revenue/profitability might need additional investments at times
Page 21 of 42
INTERVIEWER: What do you think explains the decline in sales for the client?
CANDIDATE: Some things that come to my mind immediately are
External factors
o Industry growth / change in customer demographics / income level
o Competitive landscape / price war
o Increased popularity of substitutes / other distribution channels
Internal factors
o Marketing strategy, advertisement spend to target consumers, coaches, etc
o Store setup / customer service
o Changes in product mix / quality
Do we have any data on the industry trends or competitor pricing?
INTERVIEWER: The industry grew at 4% last year and is expected to grow at the same
rate. One of our key competitors had a good year clocking an 8% growth rate. Prices have
remained stable and that is not an issue. Who do you think compete with our client?
CANDIDATE: Direct competitors include specialty sports shops, big box retailers, and
online retailers. However there are several substitutes or indirect competitors including
gyms, fitness centers, athletic clubs, Wii etc. Have the spurt in popularity of any of these
impacted the sales of our client?
INTERVIEWER: No
CANDIDATE: Is the key competitor a similar sports goods store? And can I assume that
were advertising at similar levels, if not more heavily than our competitors? The key
influencers in the purchase decision for such equipment are fitness enthusiasts and
coaches. Does our client advertise to them specifically?
INTERVIEWER: Yes the key competitor is very similar to our client and advertising levels
havent changed. Good suggestion about targeted advertising though.
CANDIDATE: Has the clients competitor introduced a new product or are there any quality
issues with the clients products?
INTERVIEWER: No for both!
CANDIDATE: Lets talk about the store experience, and how these machines relate to our
bottom line. Im guessing that since they are bigger ticket items, they are very profitable for
us. I would like to know where they are located in the store, and if we might look into store
layout to see if customers are easily able to see our machine offering.
INTERVIEWER: Customers are making it to our machine aisles, but just not purchasing.
Page 22 of 42
CANDIDATE: In that case, it sounds like we might have a service problem on our hands. Do
we have designated staff available to help with sales? Since these machines are fairly hightech, and most buyers are inexperienced, it seems like we might need a specific sales force.
INTERVIEWER: Good point. We dont have one yet: how would you establish one?
CANDIDATE: I would like to evaluate the marginal benefit of adding dedicate sales
personnel. Do we have any data on the labor rates?
INTERVIEWER: The salary of the employee $15/hour. And assume operating hours to be 8
per day and operating days to be 250 per year.
CANDIDATE: That results in 15*8*250 = $30,000 of additional costs per year. Will this be
the only added cost? And what are the profit margins on the equipments?
INTERVIEWER: Profit earned from each sale of a machine on an average is about $500.
What other costs are you referring to?
CANDIDATE: There will not be an increase in fixed costs. But I am concerned about other
variable costs like health benefits and additional overheads.
INTERVIEWER: Assume everything has been factored in
CANDIDATE: Breakeven analysis ($30,000/$500) implies that the client needs to sell an
additional 60 units/yr to cover costs. What is the current sales level to compare this with?
INTERVIEWER: The client currently sells 125 units per month in individual stores. Do you
think the additional level is achievable?
CANDIDATE: On a percentage basis, additional sales of 5 units/month (60/12) represent
4% (5/125) of monthly sales. This sounds achievable, as it matches the industry growth
rate. However the client will have to sell more to keep up with competition.
INTERVIEWER: Summarize the case and give me suggestions to match competition.
CANDIDATE: Our client is a major sports store and is seeing dismal sales within the sport
machines department. After consciously eliminating several alternatives we have
concluded that customer service is an area that the client needs to focus on. Hiring
additional personnel might sound like a costly solution but given low sales conversion
rates and the handholding customers need to make the buying decision, BCG would
definitely recommend it. A break even occurs at 4% additional sales. Some suggestions:
Tie the salaries of the sales personnel to actual sales made
Attractive incentives to personnel for sales beyond the targeted 4% increase
Market the product heavily to coaches at fitness centers and fitness enthusiasts as they
are gatekeepers to the purchase decision
Page 23 of 42
Case Title:
Company:
Interview Round:
Case Tags:
Duration:
Vaccines
Deloitte Consulting
1st Round Full Time
Health care, pharma, drugs
25 minutes
Question:
The client is a global health care distribution company with $90B in revenues. They
currently distribute pharmaceuticals and medical equipment, and are considering
expanding into vaccine distribution. Size the market and determine if and how they should
enter this market.
Divide market into developed and developing nations
Market size: consider initial vaccination and recurrences
Pricing/expected revenue
Value chain (us, hospitals, patients)
NGOs only cover a small percentage of the developing world (20% or so)
Pharmaceuticals are usually sold to pharmacies, whereas devices are sold to hospitals
(different channels). Vaccines are also sold straight to hospitals.
Our client has some unused global capacity in both the developed and developing world
In the developed world, close to 100% of people get vaccinated. In the developing
world, assume 20%. Developed world market growing at GDP, developing world
growing much faster (25% CAGR)
Vaccine Pricing (end consumer): $100 in developed world, $60 in developing
(purchased by NGOs, etc)
Vaccine average cost to our client: $40
Hospitals buy from our client at $60 and mark it up to $100
Babies get a group of vaccinations (10 to 12) once in their life shortly after birth
(developed world). Recurring vaccinations: 2 every ten years. Assume half of that for
the developing world.
Vaccines require refrigeration and have expiration dates from 6 months to years
Exhibit 1
Before using the comp. chart, its important to know what you are calculating and why
When what other issues questions come up, the top candidates will ask details about
the product (to realize it needs refrigeration) and whether or not there is more capacity
One of the trickier parts of this case is the terminology health care, pharmaceuticals,
devices, vaccines must be careful not to overlap or switch words. Also, the vaccine
market should be considered external to the health care distribution market, which is
the industry in which our client currently operates.
Page 24 of 42
Size the market
Developed world
North America
Europe
Part of Asia Pacific
Total ~1.2billion
Rest is undeveloped: ~4.8 billion
Make initial determination of level of demand, and our ability to meet it
Based on facts given in the case, its somewhat logical that this is true since only the
20% are covered by NGO, and we have excess capacity
Next: is this market actually attractive?
Dive further into demand analysis; look at financial market size
At this point the interviewee must ask for cost and pricing numbers
Multiply market sizes (calculated above) by potential revenue from each
Its key to discover that costs and pricing (for the client at least) is the same in both
developed and developing.
Analysis of the current market situation
Qualitative analysis looks good competitors are not well-represented in vaccine field
However, quantitative analysis reveals that market is 90% saturated (this is done
backwards by using the fact that our client is $90B in revenue and has 35% market
share).
Thus conclusion is that in order to enter this market effectively, our client must expand
the market to those who are in need but are not currently using product, mostly those
in the developing nations.
Page 25 of 42
Exhibit 1:
Client
Competitor 1
Competitor 2
Competitor 3
Share of US Market
25%
40%
20%
10%
Share of Global Market

35%
10%
5%
15%
Product mix
80% pharma, 20% devices
40% pharma, 50% devices, 10% vaccines
20% devices, 80% vaccines
50% pharma, 50% devices
Margins
7%
9%
8%
6%
Case Title:
Company:
Interview Round:
Case Tags:
State Medicaid Office

Deloitte Human Capital
2nd Round Summer Associate
HR Transformation
Question:
The state Medicaid office has called on Deloitte to help them with the new claims
processing unit. Claims have been paying out incorrectly, and the client would like you to
find out why. After some initial investigation, the Deloitte team has discovered that the
problem is not just technical. In fact, there is also a training issue with the people in the
department. The incentives are outdated and misaligned. Analyze the situation and walk
us through your findings and recommendations.
Who are the stakeholders in the transformation?
How much of the problem can be attributed to the system versus the people in the
organization?
Make sure to align performance management, selection and compensation to the
departments strategy.
Think about how turnover might affect the quality of the processes.
The amount of human error in the claims processing group was too high.
Focus on the process and the incentives.
Benchmark current processes and procedures to what they are looking to do in the
future.
Make sure you align the incentives and training to the strategy (in this case, find a way
to compensate the workers for quality, not quantity).
The interviewers like to see your framework/structure on your page and will offer
suggestions from there. Make sure that you show the interviewers your work while you go
through the case.
The 2nd round is with two interviewers. Don't get thrown off if they aren't as friendly as
the interviewers in the first round. They want to see how well you perform under
pressure. You may not get much feedback while going through the case, but you will
probably receive feedback immediately following the case.
STAKEHOLDERS
Doctors
Medicaid Office
o Directors
o Managers
o Claims Processors
Patients
Who is most directly affected? Most likely the Claims Processors, as they will have to
change their behavior. However, the Managers will also be greatly affected, and have their
bottom lines change the most, as they will have to train and manage the Claims Processors,
as well as be ultimately responsible for their performance
SYSTEM VS. PEOPLE
There is not much information here, but it is good to investigate how much of the problem
is the System vs. the People. As it turns out, it is not a technical problem, but rather a
people/training issue.
INCENTIVE ALIGNMENT
It is important to discuss and brainstorm how you would change incentives to align claims
processors with better performance. Possible ideas (there are more and probably better):
Pay people incrementally for correctly paid out claims
Punish people incrementally for incorrectly paid out claims
Train people for quality, not quantity
Manage around quality metrics (correct claim %), not quantity (claims processed /day)
o Probably some hybrid of the two would be best
Change hiring process to focus on accuracy, not quantity
TURNOVER
How would changing the staff dramatically affect output? Probably for the worse, as youd
have to retrain all new people, and have many new problems. So, it is best to try to keep
turnover down.
Page 28 of 42
Case Title:
Company:
Interview Round:
Case Tags:
Duration:
Large Media Distributor

IBM
1st Round Full Time
Accounting (Accounts Receivable)
25 minutes
Question:
Our client is a national distributor of media (VHS tapes, DVDs, Blue-Ray discs, etc) with
$12.0B in revenues. The clients profitability has been affected by an increase in Accounts
Receivable (A/R). Theyd like you to diagnose the problem and make a recommendation.
Consider the revenue model and the value chain for the media distributor.
Value chain: Movie studio -> Distributors -> Retailer -> Customer
Revenue Model
o Basically: Movies Sold to Retailer * Price
o However, there are returns, movies that the Retailer cannot sell that come
back to the Distributor, these are the key problem in this case
Industry growth and company growth are both flat
There has been no change in percentage sold of different formats
(i.e. the case is not about Blu-ray vs. DVD vs. VHS)
Current A/R is $3.0B
Average collection period has increased from 90 days to 120 days
Assume uncollectible accounts are immaterial
Customers are evenly dispersed throughout the US
Customers include small, medium and large retail stores
8 large customers (like Walmart) make up 70% of revenues
As distributors, our client handles physical distribution and sales. The sales force
decides which movies to put into stores
There has been an increase in returns. This is not due to the product being defective. It
occurs when a movie sits on the shelf and doesnt sell for a certain period of time, so it is
returned to the client.
Sales force commission is calculated as a percentage of revenues at the point of sale.
Returns do not affect commission
On the surface, this case appears to be about A/R terms or bad accounts, but the problem
the client is facing primarily stems from misaligned sales force incentives. The structure
that would lead candidates to this answer involves breaking down A/R, asking clarifying
questions if necessary, and brainstorming about why returns would be increasing, taking
into account both internal and external forces.
Page 29 of 42
The key is to ask about sales force incentives. The sales force is incentivized at the point of
sale and is not penalized for returns, so salespeople have been stuffing the shelves. The
solution involves improving the compensation structure by basing commissions off sales at
the retail end or by reducing commissions for returned products.
Calculations:
Based on the change in A/R days (average days it takes to collect on accounts: 90 days to
120 days), you can calculate A/R ($3B increased to $4B).
Page 30 of 42
Case Title:
Company:
Interview Round:
Case Tags:
Duration:
Alpha Capital
McKinsey & Company
Private equity
25 minutes
Question:
Alpha Capital is a private equity firm that is looking to buy a high-end male fashion retail
chain, named BNG. This is a private retail chain, and was started in California 20 years ago.
Alpha Capital is looking to see a 25% ROI in 3 years time. They want us to help them
decide whether to buy BNG, and to assess BNGs economic growth in 3 years.
Macroeconomic conditions
Competitive landscape
Comparisons between locations of a multi-site retail business
BNG has 10 retail outlets, all in California, and its annual revenue is $60 million
BNG sells mens jeans, shirts, and shoes, all of which are sold only in their own
boutiques to control the high-end image
All clothing is manufactured in the U.S.
The owner will sell the chain for a one-time payment
Since this is a McKinsey case and the interviewee will be asked specific questions,
please see the walkthrough for additional information
Its important to be able to come up with as many ideas as possible to answer the
interviewers questions.
Focus on analytics of the visual aide(s), as it gives great clues to the solution the
interviewer may be hoping for.
Page 31 of 42
Q1: What factors would you look at to assess BNGs prospect of growth?
Context
o Macroeconomic Factors
o Industry size / growth rate
o Competitive Landscape
Positioning
o Consumer Perceptions (e.g. what is the size and growth rate of current
demographic? Can brand be leveraged to appeal to different/wider target?)
o Pricing (potential for optimization?)
o Channels (e.g. potential to sell in department stores?)
o Product (potential to expand product line to wallets, etc.? lower-end line?)
o Brand awareness (especially outside California for potential growth)
Operations/Organization
o Strength/Incentives of management team
o Efficiency of operations (potential to manufacture overseas?)
Q2: The owner of BNG is willing to sell the chain for a one-time payment. The chain
currently experiences 20% profit, and will earn $60million next year. What factors should
Alpha Capital look at to determine the maximum price to pay for BNG?
Additional information provided after relevant questions

o Growth will be 10% for the next 3 years
Q3: Calculate the maximum amount Alpha Capital would be willing to pay for BNG.
Additional information provided after relevant questions

o Assuming no cost of capital (interviewee should state this assumption or ask if
there is a discount rate thats appropriate)
To receive 25% ROI, Alpha Capital would be willing to pay $31.6 million.
Q4: BNAs 10 stores have been experiencing dramatically different revenue. What do you
think are the causes for this variability?
Location
o Consumer population/demographics
o Foot traffic - walk-by (mall) vs. drive-to (strip mall)
o Proximity to competitors
o Marketing support (are there local marketing campaigns?)
o Proximity to supply chain possibility of stock-outs?
Human Resources
o Quality/ experience of store managers / salespeople
Page 32 of 42
o Monetary incentives of store managers / salespeople

Others include local differences in Product Selection, Store Size, Store Layout, Signage,
In-Store Promotions, etc. As the interviewer, reject these hypothetical sources of
variability, saying things like No, all stores have the same product selection and all
stores are the same size, etc.
Q5: What are some of the drivers of growth of BNG?
External Drivers
o Macroeconomic conditions
o Competitive pressures
o Fashion trends
Internal Drivers
o Products variety, quality, etc.
o Marketing communication
o Channel selection location of stores, lower-end line in department stores?
o Operational efficiencies manufacture overseas?
Q6: (Exhibit B) shows the price sensitivity graphs for 1. Belts/shoes and 2. Shirts & Pants.
We see that BNG is in the inelastic portion of a double-kinked demand curve for
belts/shoes, and they are in the elastic portion of the demand curve for shirts/pants.
From this chart, what do you think BNG can do to increase their profits?
Firstly, they should increase price on belts/shoes
Instead of a current revenue of Price * Volume = 1 * 1 = 1, they could increase price to
1.2 and volume would only lower to 0.9, so they would have revenues of 1.2 * 0.9 = 1.08
This would increase profits by AT LEAST 8% because they would boost revenue 8%
while decreasing variable costs through selling less product.
Secondly, in shirts/pants, they could decrease price to 0.8, which would increase
volume to 1.8, for total revenue of 0.8 * 1.8=1.44, BUT we cannot tell whether this
would increase total profitability unless we knew more about their cost structure
One tactic could be to:
Decrease price of J/S/P to increase traffic into stores
Increase price of B/S to extract more profits
What do you think is the meaning of the two kinks in the belts/shoes demand curve?
These kinks are our competitors price points. Perhaps our competitors have a highend line of belts/shoes as well as a low-end line of belts/shoes.
Q7: BNG is considering opening 14 new stores. The CEO wants you to tell him what factors
are the most important for him to consider as he opens these stores.
Summarize findings.
Page 33 of 42
Exhibit A:
Profit
Year 1
$12.0 million
Year 2
$13.2 million
Year 3
$14.5 million
Total
$39.5 million
Page 34 of 42
Exhibit B:
Page 35 of 42
Case Title:
Company:
Interview Round:
Case Tags:
Duration:
Sania Healthcare
Company: McKinsey & Company
1st Round Summer Associate (Generalist)
Healthcare
25 minutes
Question:
The government of Sania offers all of its citizens free health services. The country has
achieved middle-income status. Its citizens have good life expectancy and low infant
mortality rates. There are 30 primary care facilities, and 2 hospitals, all of which are public
and maintained by the Ministry of Health. To get treated by specialist doctors in private
practices, patients have to pay a high out-of-pocket fee.
For the last 5 years, health expenditures have risen at 10% a year. Government revenues
have only grown at 5% a year.
The Prime Minister, Minister of Health, and Minister of Finance asked McKinsey to help
solve this funding problem, and to increase the sustainability of the Sania healthcare
system.
This McKinsey case has structured questions that the interviewer should ask in the next
section of this case book. Please ask those questions of the interviewee.
All citizens are offered free health services
The country has middle-income status
Citizens have good life expectancy and low infant mortality rates
30 Primary care facilities
2 Hospitals
Specialists require a high out-of-pocket fee
Health expenditures have risen 10% a year over the last 5 years
Government revenues have grown 5% a year
Be structured in your answer (put answers/recommendations into at least 3 to 5
buckets, or in short/medium/long term).
Be creative and think of out-of-the-box ideas
Page 36 of 42
Q1: What factors would you look into to improve the sustainability of funding of Sanias
healthcare system?
Increase funds
increase taxes
o increase types of taxes, tax immigrants?
o increase contribution/amount
shift budget allocation
shift health insurance partly to employers
Decrease costs
introduce co-pay system (will also lead to decrease in demand)
increase productivity (doctor training, technology)
increase efficiency (doctor training, technology)
improve technology and automation
promote preventative/early diagnoses/family planning
change doctor prescription/diagnoses/referral behavior (possibly by restructuring
doctor/hospitals reimbursement incentives, increase enforcement/institutional checks
of coverage)
increase private specialists or referral to privates
decrease coverage for elective treatments
Change patient behavior
promote healthier lifestyle
increase education so they dont come to hospital as much
Q2: What do you think are the drivers of demand for healthcare services?
Patients
aging population (demographic shift)
increase in population (long life expectancy, immigration)
increase in wealth levels (increase frequency and quality demanded of health services)
poor lifestyle/habits
changing awareness/preference for health services
increase in demand for elective procedures
Doctors
changing treatment patterns
o increase in # of referrals
o increase in # prescriptions
o increase in # of tests
o more expensive, newer treatments
Page 37 of 42
decrease efficiency/quality
different compensation system
Technology
more expensive technology/features
more expensive pharmaceuticals
new diagnostic equipment that can test new diseases
External
requirements by employees for tests
shift in diseases from infections to terminal illnesses (heart disease, cancer) or
pandemics
resistance of diseases to vaccines
Q3. (Give Exhibit A) Please see this chart. Calculate what would be the growth in Sanias
healthcare costs in 10 years. Feel free to ask me any information youd need.
Additional Information Provided After Relevant Questions
Total population in year 0 is 1 million. Total population in year 10 is 1.3 million
Assume average annual cost will be same per age group in year 10
Calculate average annual cost/citizen
$1000 x 20% = $200
$500 x 60% = $300
$4000 x 20% = $800
Total average cost = $1300/citizen x 1.3million = $1.69 x 1012
This is a 69% growth!!
Q4: If the government installed a co-payment scheme, what would be its impact?
Patient
change behavior: decrease # of visits/person
decrease kinds of patients (some patients may not be able to afford co-pay)
long term: may increase patients if diseases are undiagnosed today
Cost
decrease total healthcare costs for government
Others
possibly increase revenue if the co-payment goes to the government
political repercussions (citizens wont be happy)
opposition from employers and workers
could affect economy?
Page 38 of 42
Q5: What would be the governments savings in healthcare costs if they installed a $5 copay? Assume that the average Sanian visits the hospital/PCP facilities 5 times a year, and
each visit costs an average of $50.
Additional Information Provided After Relevant Questions
the # of visits overall will drop by 10%
assume the 1 million population
1 million x $5 savings x 5 visits = $25 million (savings from co-pay)
100,000 x $45 cost x 5 visits = $22.5 million (savings from decrease in demand)
Total = $47.5 million in savings
Q6: What are some of the risks associated with this co-pay scheme?
Patient
poor patients cant afford it
increase dissatisfaction
Cost
growth in healthcare costs still cant be covered by this scheme
may see growth in costs in the future as diseases are left undiagnosed today
Planning
risks in planning and implementation
o timeframe
o cost
o logistics/training
Political unrest
Q7: What are some of the issues to look into for planning out this scheme?
Implementation
who
when
how
cost
System infrastructure
technical issues
design of system
Population
idle services/manpower due to decreased demand
Change management
publicize scheme + persuade citizens
train personnel
Page 39 of 42
Exhibit A:
Age Group
0-14
15-64
65+
Overall
Today
30
60
10
Population
Breakdown %
In 10 years
(estimate)
20
60
20
Average Annual
Cost per Citizen ($ 000)
Today
1,000
500
4,000
1,000
Page 40 of 42
Case Title:
Company:
Interview Round:
Case Tags:
Duration:
Client Troubles
Monitor Group
2nd Round Summer Consultant
Client Role Play
25 minutes
Question:
Your client is a large pharmaceutical company. Your main contact, John, is the CFO.
John joined the company just a few months ago and hired Monitor to perform an analysis of
the Finance departments organizational structure. This is the first time the company has
worked with Monitor.
You and your teammates have conducted interviews with most of the members of
the Finance Department. You have also spoken with some of the Finance departments
internal customers. You and your team have pulled together a deck that summarizes the
findings from your interviews. You have already met with John and walked him through
the findings, in preparation for the upcoming meeting with the CEO (scheduled for next
week). John seemed to be generally happy with the deck we presented; however, as you
and your team prepare to leave the client site, John pulls you aside and asks to speak with
you in private, while the rest of your team exits the building.
John: Im concerned about the findings youve pulled together in the deck.
Specifically in Slide 13, I think the information is incomplete and should be taken out. The
quotes on the slide state that I am a source of stress in the department, which I think is
completely false. Who made those comments anyway?
How would you handle this situation? What would you tell John? (You may be
asked to role play, or you may be asked to talk through what you would do.)
What is John feeling?
How will his job be affected by the findings you present?
What are the risks (to Monitor & to the client) involved with removing the information?
What will happen if you reveal the names of the interviewees?
How will the clients relationship with Monitor be affected by this situation?
N/A
There is not one right answer to this role-play exercise. You should be able to describe
the situation from the perspectives of the different constituents (John, the interviewees,
Monitor, yourself, your teammates, etc.). The names of interviewees should remain
anonymous regardless of the findings. If the findings are critical to the project and will
drive the direction of your recommendations, you need to find a way to include the
information in your presentation. Think creatively there may be a way to still include the
data without making John look bad, or you may need to collect more data to ensure your
original findings were accurate.
Page 41 of 42
The interviewer is evaluating whether you fit in the Monitor culture. Your response should
be natural and should reveal how you would genuinely react in this situation. Your
response should show your integrity, courage, tact, and sensitivity to the situation.
The client role-play interview is just one portion of the 2nd round interview process with
Monitor. There is also a group interview and a feedback session. Although this is a
qualitative interview, it is important to take it seriously and consider all the perspectives
involved.
Page 42 of 42

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2009 Recruiting Season

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Competitions prices went up

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Our total RMS is 1.9x

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Share of Global Market

State Medicaid Office

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Additional information provided after relevant questions

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o Monetary incentives of store managers / salespeople

Q5: What are some of the drivers of growth of BNG?

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