BCG Interview - Round 2

Question

Hi All,

If a case is presented, along the lines of “A company has a higher running cost than industry and CEO is asking where this high cost comes from and how to reduce it”? How would you go about making a framework for this, specially if you are unsure of the value stream/processes where costs are incurred in that industry (like banking or utilities)? Are you allowed to ask the interviewer to give you the areas of cost to make your framework?

Answer 1

Hi there,

First of all, in regards to “Are you allowed to ask the interviewer to give you the areas of cost to make your framework?” please never do this! It is your job to break things down, not theirs (picture them as the client).

My framework might be:

Segment costs by largest contributors (within our client)
Compare costs across history (which have been changing)
Benchmark costs against competition

Depending on the industry I may also break it down across the value chain for that given industry.

Alternatively, I may create buckets that are the key cost segments. So, for banking, I would probably have a Products/Business Units, Geographies, and Customer costs breakdown.

Or, I might do front-office costs and back-office costs.

Ultimately, it depends on the specific case/prompt + industry and you need to break it down in a MECE, objective driven way!

Answer 2

No, you cannot ask the interviewer for the areas of cost, as this would be replying them with the same question they just gave you! :)

I understand your frustration, but a couple of notes here. First, is that you are expected to have some business knowledge. Not deep knowledge, but some knowledge. And then use that knowledge to gain insights on how a company may work or what their business model will look like.

Second, you are touching a relevant point. If you don't know their value streams… why isn't that part if your framework? I mean, you may have higher costs because you are inneficient…but they may be higher because you have a different business model. So your approach should be about considering the costs related to your specific business model.

Third, there is always valuable information in the prompt. First is industry, but you may have other things as whether they are a B2B or B2C company, a manufacturer or retailer, etc. This is insight you should use in your structure.