Is this a MECE structure ?

Hey,

On the revenue side, I don't think it's quite MECE. Frequency should be a sub-bucket under volume. I.e., [Volume of transactions] = [number of customers] * [frequency of transactions]. 

You can then break down both [number of customers] and [frequency of use] further according to some kind of customer segmentation, be that B2C vs. B2B or by region within the USA. 

On the cost side, I also am not sure that this structure is MECE. You may be better off splitting it into [fixed costs] + [variable costs]. Fixed costs will include things like rent, depreciation, machinery, etc. Variable costs will include COGS, payment processing fees, etc.

Bear in mind that this is a question about margin, rather than overall revenue. If the competitors in question are able to achieve the same margin while discounting on some product categories, then one or both of the below statements must be true. 

1) They are pricing some categories of product higher, to offset the margin erosion from the discounts they offer on other categories.

2) They have found a way to reduce their cost base relative to our client - either via fixed costs (e.g., optimized footprint requiring fewer facilities) or variable costs (e.g., better supplier management and negotiation to bring down COGS).

The volume is likely to be less important in this case, except if competitors' high volume of transactions is the reason for being able to better negotiate with suppliers and bring down the COGS.

Hope this helps and let me know if you'd like to work through a similar case together.

Hi!

“Their competitors offer lower prices for some product categories while maintaining the same profit margin as your client.” 
Questions: the PM is equal across all sales or for these specific products? Are we talking about overall profits or profitability per product? Does the client and the competitor share the same geo? By product category we mean the same products or brands differ?

See that without knowing more about the prompt, it’s hard to come up with a structure that makes sense to the case. Clarification questions are always a must to make your plan of attack (structure) sharp and meaningful.

Assuming we are talking about profitability per product, considering those specific categories, that client and competitor are in the same geo and products are equal (phew!), my hypothesis would be that the deep dive should be on costs, as profit margin = net income/revenues. Meaning that if PM is the same and revenues are lower, the only explanation is that their cost structure is also lower.

That being said, I will talk only about costs here. Your structure in this point is too generic (not specific to the retail grocery business) and not in depth enough. I know it is generic because I cant tell what business are you talking about just by looking at it. There is no specific metric related to the business. It is also shallow because it doesn’t touch all the relevant points, specially considering costs are relevant to this case and deserve more attention.

I would break costs down as it follows:

Variable costs: Cost of purchase (cost per product as it was negotiated with the supplier), logistics costs to transport the goods (usually these costs are high considering the food must sometimes be refrigerated and these requires special equipment), cost of the warehouse to keep those products (depending on the geo, it may be that it is more or less expensive compared to competitors), cost of waste (spoiled goods due to how they were handled, or natural expiration considering purchased volume vs the speed of sales, or deterioration due to poor storage), and finally, costs of sales in POS (credit card fees, other financial fees such as the intermediates between client and credit cards). See that this structure was based in a process, from the very beginning when items are purchased from suppliers until the end, when they are sold.

Fixed costs (may be relevant or not depending on the answers to the clarification questions): Rent (cost per SQF * average size of the stores, it may be that the client is overpaying rent OR having stores that are unnecessarily big), Rent of Warehouses, Utilities, Labor (cashiers, cleaning and maintenance staff, SG&A, warehouse personnel). 

Besides process and known categories, you can use a mental hack to think about costs: pre sales (what do I need to have in place to be able to sale groceries in retail?), sales (what do I need to make grocery sales in retail) and post sales (what does this specific business requires once sales are done?).

See that you should be able to explain why each category and point is relevant to solve the case. E.g.: why would customer experience be relevant to solving the problem? How does it impact profitability per item category? 
That means your structure should answer the main question of the case and nothing else. Cases are a simulation of a project that has a closed scope.

Let me know if that makes sense!

If you are interested in learning more about how to come up with structures based on logic that are specific to the businesses evaluated, happy to chat about my working method over a 20min call.

Best,

Mari

Hi there,

I would be happy to share my thoughts on your question:

• First of all, the structure is not yet fully MECE. In the revenue section, "Frequency of Use" overlaps with "Volume."
• Moreover, and more importantly, your structure does not answer the interviewer's questions, so it is basically off-topic.
• Lastly, I would therefore strongly advise you to work with an experienced coach like me on this. I developed the “Case Structuring Program” to help exactly such candidates like you who struggle with case study structures.

You can find more on this topic here: How to succeed in the final interview round.

If you would like a more detailed discussion on how to best prepare for your upcoming pre-interview assessments and/or interviews, please don't hesitate to contact me directly.

Best,

Hagen