McKinsey

1st Round:

1)        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 tell them?

2)        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 takes?

3)        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 it?

4)        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 profits.

5)        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?

6)        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? 

7)        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?

8)        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 why.

2nd Round

1)        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? /

2)        A PC manufacturer wants to add a new line of pocket PCs. Should they do it? What do you tell the CEO? 

3)        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.

4)        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.

5)        Tell me the annual revenues of a company you're following?

6)        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 phone companies?

7)        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

8)        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.

9)        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?

10)        "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 to me."

3rd Round (Nov. 2003)

1)        Assuming zero costs. What are the first three industries that will appear in outer space?

1)        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 tell him?

BCG

1st Round (Nov. 2004):

1)        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.

2)        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?

3)        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 students.

4)        The industry is the Yellow Pages. What is the business? What do they do for money? What is their profit?

5)        A small agrichemical company wants to triple its revenue by 2005. What are some of its options, and how would you evaluate those options?

6)        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?]?

7)        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? 

8)        How would you increase recruitment and retention in the military?(

9)        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)：

1)        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 given)

2)        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

3)        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)

1)        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?

2)        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?

3)        The U.S. Post Office lost millions last year. How would you advise the new CEO to turn the Post Office around?

4)        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 $300 million.

+ Draw a graph showing the income stream for the next ten years (assume that full adoption is reached in year 7)

+ The pharmaceutical company is looking for a buyer. How much should it ask for? 

Booz

1st Round

1)        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 do it?

Bain

1st Round (Nov. 2003)

1)        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 it?

2)        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?

3)        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 specialty restaurant? 

4)        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.

5)        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 sales?

6)        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 attractive?

7)        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.

8)        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.

9)        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.

10)        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.

A.T. Kearney

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 are: 

1. Pro's and Con's of pursuing exclusive contracts

2. Identify the categories that should be explored for exclusive contracts

3. How would you operationalize these contracts?

2) Case setup (facts offered by interviewer): 

    Your client 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 fail.     Understanding 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 asset. 

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 day. 

 

Question: 

    Whatq opportunities exist to increase profits?

What recommendations can you make to capture savings related to the identified opportunities? 

      What is the cost savings associated with your recommendations? 

 

Suggested solutions: 

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 opportunities. 

How does the maintenance department track its costs? 

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 year. 

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 

Craftsmen    Daily work    Turnaround    Total 

Client        $ 8MM       $ 2MM        $ 10MM 

Contractor    $ 5MM       $ 9MM        $ 14MM 

Total         $ 13MM     $ 11MM        $ 24MM 

 

Supervisor    Total 

Client        $ 1MM 

Contractor    $ 0.5MM 

Total        $ 1.5MM 

Since the Craftsmen table represents a larger dollar amount than the Supervisor table, it is logical to pursue cost savings opportunities in this area first. 

What is the utilization of Craftsmen in the assets? 

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 refinery-sized basis (i.e.,  $cost / per barrel of crude oil processed) compare with industry averages? 

Consulting your industry data base shows that costs appear to be about 20% above the average of peer refineries. 

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 average!) 

Is there any particular reason why turnaround work is so heavily skewed toward contractors? 

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 plant. 

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 is: 

Annual cost of client craftsmen = $10MM/ (11 Craftsmen/asset x 9 assets   + 100 Craftsmen in Central maintenance) = $50,000 / year 

Annual cost of contractor craftsmen = $ 14 MM/ 140 contractor Craftsmen = $100,000 / year 

Again, this difference should provoke a series of questions to understand the difference. 

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 quality. 

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 indifferent. 

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 designations. 

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 contract? 

The present labor contract is a three year contract that is due to be renegotiated/renewed in six months. 

Will the union resist changes to the existing contract? 

Indeed!! 

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 an additional $2.5MM ($4MM existing contractor expense - $2MM required to hire additional client craftsmen  + $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 less. 

 

Key takeaways: 

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.

 

Mercer

1st Round 

1)        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 do?

2)        If I gave you $10 million dollars to invest in any one business, which would it be?

3)        Should Kraft Foods expand and incorporate ice cream into their product mix? If yes, how should they enter this market?

4)        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?

5)        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.