We are back in the 80s, and
Daewoo wants to enter the Italian market. They approach you and say
that they want to sell 100,000 cars after one year. What do you
A steel producing company
wants to cut costs. It currently operates 2 large mills at 75%
capacity and four small ones at 100% capacity. It is experiencing
profitability issues. What action would you recommend it
Our client is a retail
brokerage. We have seen our customer base decline over the past 18
months. Why this happening is and what can we do about
The client owns mines that
produce high and low grade ore and processes it into an alloy that
is then sold as an additive to strengthen steel (sold directly to
steel manufacturers). A new foreign competitor has shown up in the
market and the company is losing profits. A general manager of one
of the processing plants asks what he should do to maintain
The past few years a Health
Insurance Company has been growing at a rate of about 15% a year.
This past year it only grew by 1%. Costs are rising 12% each year.
What is the problem and what should the company do?
Company X is a chemical
manufacturer. They make a
product that is very similar to Company Y’s
product. Company X and Y are
direct competitors in many geographic markets, but each also has
unique areas in which the sales forces do not face direct
competition. Company X buys
Company Y. How do you integrate
the sales forces?
You are working for a
Brazilian soda manufacturer that is experiencing declining profits
over the last two years. Why is this occurring? [competition from
generics] What is the size of the market for canned cola? What are
the company's options for improving profitability? What are the
possible effects of a change in the cola's price?
Our client is a mid-Western
HMO. They have 300 doctors and 300,000 subscribers. They handle
mostly checkups and routine visits. The HMO outsources specific
cases to local specialists. Over the last two years the HMO has
seen their profits decrease. They've called us in to find out
A European iron mining
company bought a piece of land
in Australia with a high content
of iron. Should they proceed with extraction of the ore or not?
A PC manufacturer wants to
add a new line of pocket PCs. Should they do it? What do you tell
A health and fitness center,
a chain of gyms, like Bally's is considering building more tennis
courts. The cost of the land development is 2.5 million for 10
tennis courts per gym. Determine if the gym would break even if
they charged an additional fee of $7 per game.
Our client is Burger King.
Their growth has been slower than expected. They want to know why?
And estimate for me the size of the hamburger market.
Tell me the annual revenues
of a company you're following?
The law has recently changed.
Consumers can now switch cell companies and keep their phone
numbers. What are the effects of this legislation? What is the cost
of this legislation? And can you recommend any options for the cell
A healthcare company that
sells to individuals and small businesses has seen growth in the
last 5 years, but this last year there has been a decline. What is
going on? What sort of incentive system do we have and what kind
can we create? (There were a number of graphs and charts that the
student had to review
You and your colleagues are
McKinsey partners trying to decide which nonprofit to help. Your
goals are doubling their revenue and improving their management.
Each participant has information the others don't have. Which one
should you pick? [what criteria to use, etc.
Our client is a travel agency
in NYC which employs 25 people. They have seen their commissions
cut from 10% to 8%. They are wondering what strategy they should
adopt to increase their profits, and what else they should do to
remain profitable and grow their business?
"First, I would say that
globally, the cases had a bit of a different felt to them than many
I had worked on. All three were
business cases, however, in two of the three, there was less
opportunity to structure the cases——the questioners asked specific
questions about data that they presented to me a bit at a
time—usually in graphic
format. In two out of my three
cases, there were multiple graphs and charts that built on one
another. Conclusions drawn from
the first graph were applied to graphs presented later in the same
interview. Also, when I analyzed
the data, I was usually given a ratio or series of ratios that I
needed to calculate. At the
beginning of each graph/data series, the interviewer would explain
the significance of each of the ratios I was to
calculate. When I finished
calculating them, he asked me to explain what the results meant. To
be honest, the ratios may have been quite common, but they were new
3rd Round (Nov. 2003)
Assuming zero costs. What are
the first three industries that will appear in outer
It's October 2001, with the
current gloomy economy. One of the most affected industries is the
luxury industry: People tend to postpone buying luxury goods, and
even if they have the money, after what happened it is not the
right time for them to buy something which is unnecessary. A client
approaches our firm and asks us to increase his sales. What do we
1st Round (Nov. 2004):
Our client is a mid-sized
manufacturer of industrial batteries for the aerospace and defense
industry. For example, the
company's batteries can be found in various military missiles as
well as in the Hubble Space
Telescope. Over the last few
years, the defense and aerospace industries have been flat or
declining, so the client is looking for high-growth industries that
might be able to make use of its battery
technology. After a review of
possible industries, the client wants us to look at whether they
can enter the market to provide batteries for implantable cardiac
defibrillators. Estimate the
size of the market for implantable cardiac defibrillators, and then
tell me how you might go about helping the client decide whether or
not this is a good market to enter.
Our clients are a consortium
of 10 commercial real estate companies (2-3 big companies, 4-5
mid-sized companies, and 1-2 small companies) that collectively own
350-400 buildings in downtown areas of cities all over the country.
Together, they spend $1 billion/year on all of the non-sexy aspects
of owning commercial real estate: cleaning and general maintenance,
plumbing and electrical repair, etc. They have come together to
explore the possibility of setting up a "buying pool" to realize
cost reduction by achieving economies of scale in purchasing
products and contracting for services to conduct this general
maintenance. This "buying pool" will cost $40 million (one-time
fixed cost) to set up and will cost $10 million/year to maintain.
Is this a good idea? What kind of information do you need to know
to help your clients decide if this is a good idea?
The client is a four-year
music university in Boston that
specializes in classical music for pre-professional students. The
university is under performing in three key areas when compared to
its biggest competitor. The areas are: applications per seat,
high-quality applications, and accepted applicants that enroll. The
mission of the university is to increase the number of high-quality
The industry is the Yellow
Pages. What is the business? What do they do for money? What is
A small agrichemical company
wants to triple its revenue by 2005. What are some of its options,
and how would you evaluate those options?
A Vietnamese manufacturer of
cooking oil wants to improve its revenue. How would you figure out
how big the domestic market is [not a back of envelope calculation;
assume you had a week—— whom would you talk to?]?
Constantly breaking down. The
government is fighting over how to fix and fund it. The train
drivers’ union says it will go on strike unless the government
guarantees that there will be no layoffs. What steps would you take
to "fix" the problem?
How would you increase
recruitment and retention in the military?(
BCG gave me a lot of data to
sift through to determine which demographic of cell phone users it
should target to increase revenues.
2nd Round(Nov 2004)：
A cleaning product supply
company's profits and revenues have been falling, but market share
has remained the same. What's going on? (Charts and graphs
Our client owns 120 hotels.
He has left the management of the properties to a management
company. Since 2001 they haven't broken even even though occupancy
rates averaged 80 percent. - Charts given
A music company is bringing
out a CD for a new artist. How would you market and price, knowing
that you'd like to charge a premium for the cd?
Final Round (Nov. 2002)
You are consulting to the
manufacturer of airplane engines (2 main engines: for wide body
planes and narrow body planes ——> regional and low cost
airlines, which are growing, use the narrow body planes). The
client is considering entering the airplane leasing market, because
one of its competitors (GE) is already there, and the client
hypothesizes that GE's presence in leasing helps its engine sales.
What do you tell him?
Last year, lawsuits cost
corporations $200 billion compared with $70 billion in
1990. How would you advise a
roundtable of CEOs to attack tort reform?
The U.S. Post Office lost
millions last year. How would you advise the new CEO to turn the
Post Office around?
We have been hired by a
Mexican company that has a dominant position in all of its markets
but one: ketchup. Although its ketchup sales have been increasing,
its market share is stagnant (10%) and its profit margin remains
below that of its competitors. What do you think might be
happening? What would you suggest the client do in order to
increase market share and profits?
A small pharmaceutical research company is about
to start clinical trials for a new and promising molecule. The
trial process has three phases, with different associated costs and
probabilities of success:
Costs (million) Pr. Success
- Phase 1 $10 .40
- Phase 2 $5 .2
- Phase 3 $80 .105
If the process is successful and the new drug is
introduced in the market, it would generate total income flows of
+ Draw a graph showing the income stream for the
next ten years (assume that full adoption is reached in year
+ The pharmaceutical company is looking for a
buyer. How much should it ask for?
Our client is a magazine
publisher. They are considering a new pricing program where the
price for subscriptions would increase every year. Evaluate how
such a decision would impact their business. Would you advise they
1st Round (Nov. 2003)
Our client is Apple
Publishing, the largest publisher of children’s fiction in the
industry. Seven years ago the CEO became concerned that childhood
literacy rates were low and decided to make a
difference. He entered the
telemetry textbook market. He thinks they are the best now, but
hasn’t been rewarded. Seven years later he has 70 million dollars
in sales and 20 million dollars in losses. They are less than 5% of
the market, but the CEO wants to stay in the market, how can he do
Our client produces 2-inch
wrenches. They sell to Home Depot and also to auto-mechanics
directly. If you were a store manager at Home Depot, how many
varieties of wrenches would you display to sell and at what price
points? How are the Home Depot wrench buyers different from the
auto mechanics? If you wanted to provide discounts to the auto
mechanics, which of them would you target and why? What information
would you want from them first?
University town has a
population of 40,000 students. Currently there are nine
restaurants. You're client is thinking about opening up the tenth.
Is this a good idea and should she open up a fast food or a
A major airline is thinking
about going head to head with the discount airlines by offering
"cheap" fares. Does this make sense? Estimate the size of the
European "discount" airline market.
Your client sells coffee on
the five Japanese Bullet trains (high speed trains). Estimate the
size of the market. How would you advise them to increase
Our client, a private equity
firm, is considering an investment in a manufacturer of digital
inkjet printers (printing large billboards). The manufacturer wants
to enter the screen printing market (printing signs and point-of
purchase posters, e.g. for supermarket sales). How big is the
screen printing market? Which particular segment is the most
Estimate the market size of
printers in Hong Kong. A U.S.-based PC manufacturer now wants to
get into the printer market. Assess the opportunity.
We have been hired by a
global wealth management company that has 2 divisions: asset
management and private banking. Our asset management profits have
been decreasing, and our private banking profits have been
increasing. We need to help our client determine strategy to
increase all his profits.
We have been hired by the
Board of a company that is loosing money. The Board has asked us to
determine whether any of this loss can be attributed to the Leer
jet that the management team uses.
We have been hired by a
company that has just finished making the Millennium Eye, a large
Ferris wheel that will be placed in the middle of London. Our
client wants to know how big the market is and how much we should
charge per ticket.
1st Round (Oct. 2003)
1) The CFO of a top 3 retailer wants you to
evaluate the viability of developing exclusive contracts with
distributors. The three questions you should address
1. Pro's and Con's of pursuing exclusive
2. Identify the categories that should be explored
for exclusive contracts
3. How would you operationalize these
2) Case setup (facts offered by
is a U.S. basedq oil refinery. The refinery has a
single location and is a small to medium-sized refinery. Your
client, although profitable, believes it is lagging behind the
competition and could improve. You are brought in as part of a
joint consultant-client team that will review overall operations
and make recommendations on ways to improve the bottom line. You
have been assigned to work with the maintenance division. The
maintenance department’s primary objective is to prevent equipment
failure and to repair equipment when it does
of its organization is important. It consists of three primary
areas: nine assets areas, one central maintenance area and one
group of contractors. The first two areas are employees of the
client, the third an external source of labor. An asset is a
physical area of the plant that contains various pieces of
equipment (pumps, heat exchangers, etc.). There are nine assets.
Each asset has a Maintenance Supervisor who is responsible for all
maintenance to be performed in his/her asset. Working for the
Maintenance Supervisor in each asset is, on average, eleven
“craftsmen”. The craftsmen are the actual workers that perform the
maintenance. The craftsmen are
unionized and divide into twelve different craft designations (e.g.
electricians, pipefitters, welders, etc.). Each craft designation
has a defined set of skills they are qualified to perform. They are
not allowed to perform skills outside of their defined craft, or
help in the performance of activities involving skills beyond their
craft. Collectively the twelve different crafts can perform any
maintenance job that might arise at the refinery. The maintenance
supervisor and his/her assigned craftsmen are “hardwired” to their
asset. That is, they work only on equipment in their given
Central maintenance is a centralized pool of
Maintenance Supervisors and Craftsmen, who are dispatched to
support the different assets during times of high workload. They
are employees of your client and fit the description contained in
the above Asset explanation. The only difference is that they may
work in any of the different assets as determined by workload.
There are a total of 11 Maintenance Supervisors and 100 Craftsmen
that comprise Central Maintenance
Contractors are a group of outside Supervisors and
Craftsmen who support your client during times of high workload.
They also are capable of performing any maintenance job that may
arise, but differ from your client’s Craftsmen in that they divide
the collective skills required into five designations rather than
twelve. Thus, the craftsmen of the contractor are capable of
performing a broader set of skills. They, like your client’s
craftsmen, don’t perform skills outside of their defined craft but
do allow different craft designations to help each other. There are
an average of 7 contractor Maintenance Supervisors and 140
contractor Craftsmen at the refinery on any given
Whatq opportunities exist to increase
What recommendations can you make to capture
savings related to the identified
What is the
cost savings associated with your
The first question involves identifying
opportunities to improve profits. The candidate must start with
either revenues or costs. Although one could make the argument that
maintenance supports revenue by maximizing the operating time of
the refinery equipment, maintenance should be seen to be a support
function. Thus, it is more appropriate to focus on costs and cost
reduction. The following questions will help the candidate gain
insight into cost reduction
How does the maintenance department track its
If the candidate phrases the question about
material or overhead costs, the interviewer would inform the
candidate that detailed reviewed showed no major opportunities. The
candidate would be steered toward labor costs and given the
following tables regarding maintenance labor costs for the past
To support understanding of the following tables,
Turnaround work is long term preventive maintenance (e.g. complete
rebuilding of a boiler) that may be performed once every few years.
All other work (short term emergency repairs, small scale
preventive maintenance, other routine work, etc.) fits into the
category of Daily work
Since the Craftsmen table represents a larger
dollar amount than the Supervisor table, it is logical to pursue
cost savings opportunities in this area
What is the utilization of Craftsmen in the
In central maintenance?
And for contractors?
Assume each area is utilized 100% of the time, 50
weeks per year, 40 hours per week.
How does the labor cost of craftsmen ($24MM) on a
(i.e., $cost / per barrel of
crude oil processed) compare with industry
Consulting your industry data base shows that
costs appear to be about 20% above the average of peer
This is an important question to determine if
there is a problem with costs (don’t assume there is, the client
may be performing better than industry
Is there any particular reason why turnaround work
is so heavily skewed toward
Turnaround work tends to be more cyclical. An
external workforce is used to absorb some of this additional work.
Keep in mind that both client and contractor Craftsmen are capable
of performing any maintenance job at the
After further analysis of the tables the key fact
that should become appear odd is the large difference in the cost
per unit of labor between your client’s Craftsmen and the outside
contractor’s Craftsmen. Often candidates will ask for the hourly
wage rates of these two groups. There is sufficient data to
calculate these numbers. The calculation
Annual cost of client craftsmen = $10MM/ (11
Craftsmen/asset x 9 assets +
100 Craftsmen in Central maintenance) = $50,000 /
Annual cost of contractor craftsmen =
$ 14 MM/ 140 contractor Craftsmen = $100,000 /
Again, this difference should provoke a series of
questions to understand the
Is there any difference in the work performed by
the client and contractor craftsmen?
No, other than the different levels of Turnaround
work vs. Daily work performed as noted in the previous table. Both
groups are capable of doing any job with roughly equal levels of
Is there any difference in efficiency between the
two groups of Craftsmen?
The candidate would at this point be asked how
they would measure this.
After reaching an understanding of the difficulty
involved in measuring the efficiency of a workforce (especially a
unionized workforce), the candidate would be told that through a
series of interviews with maintenance supervisors, there is a
consensus that contractor Craftsmen are roughly twice as productive
as client craftsmen.
This is a critical point in the case. The
candidate must recognize that in the present environment the client
is largely indifferent about units of labor. You can have a client
worker who is half as efficient or a contractor worker who is twice
as expensive. The key now is to determine if there are ways to
create an opportunity where the client would no longer be
What is causing the inefficiencies associated with
the client’s labor?
Again, the candidate would be encouraged to offer
their own ideas.
After some discussion the candidate would be told
that many of the Maintenance Supervisors complain endlessly about
restrictions placed on them by the existing union labor contract
and the tightness of craft
The interviewer would probe to ensure the
candidate understands why the present craft designation creates the
inefficiencies. Essentially work is too finely divided. It makes
planning and supervision extremely cumbersome. As an example, if
one of six crafts required to perform a job is absent or late, the
entire job must shut down, as craft designations are not allowed to
support other craft designations.
Is it possible to change the existing union
The present labor contract is a three year
contract that is due to be renegotiated/renewed in six
Will the union resist changes to the existing
At this point, the candidate should recognize a
major (albeit difficult) opportunity to reduce labor costs. The
client would essentially like to have its own employees look and
function like its contractors, but continue to get paid at present
rates. In reality, management will need to make wage concessions in
order to change present work practices. However, through planned
negotiations a scenario can be created which presents a favorable
opportunity for your client to begin to replace outside contractors
with its own Craftsmen.
There are several ways to address the third
question of the case, the actual savings that might be
achieved. One quick method is to
assume that these changes would bring maintenance costs back in
line with industry average. Utilizing the cost benchmark mentioned
earlier, one could assume costs could be reduced to $24MM/1.20 =
$20MM, a $4MMsavings.
A second, and more detailed, method would be to
take the extreme scenario where the client’s Craftsmen is paid its
present rate, but is made as efficient as the contractor’s
Craftsmen. In this case, you begin with the present level of 200
client craftsmen who are functioning as 100 equivalent contractor
Craftsmen (they’re one-half as efficient). By improving their
efficiency, you are effectively “creating” 100 equivalent
contractors. Thus, you are immediately able to replace 100
contractors and save $10MM. This could be taken one step further by
assuming you would want to replace all contractors. This would save
$2.5MM ($4MM existing contractor
expense - $2MM required to hire additional client
$0.5MM in contractor supervisors). As noted
earlier, in reality, this approach would require wage concessions
to the union, so actual savings may be something significantly
This case requires the candidate to quickly digest
a large amount of organizational issues and then quickly check some
ratios to uncover the basic problem (the client workforce is
inefficient). Creativity must then be used to structure a
recommendation that would create a more favorable situation for the
client. As in other cases, acceptable solutions need not follow the
exact method above nor cover all of the above points.
A New England telephone
company is thinking of entering the home security market. What is
the potential market size and what would you recommend they
If I gave you $10 million
dollars to invest in any one business, which would it
Should Kraft Foods expand and
incorporate ice cream into their product mix? If yes, how should
they enter this market?
You are starting a new
business, a gourmet coffee shop. The shop is located next to a
train station. You're building the business with the hope of
selling it within two years. What is your strategy?
How big is the market for
window display marketing books?
2nd Round(Nov 2004)：
We have been hired by a client to help her
evaluate his product mix and determine the best one going forward.
Refer to graphs.