Hello everyone
While for Revenues increase there are many basic frameworks (Ansoff Matrix, 4Ps in case of Selling process) to be used in the case, I personally found many less for Cost reduction.
Does it exist an "equivalent" of Ansoff for costs, for instance? Or some basic framework or drawing to use in case I am going to be asked how to reduce some specific cost component?
Thanks in advance
Hi,
As a candidate, I've struggled a lot with cost reduction cases since most of the case books don't have them, while you can face these cases on the case interviews. This is especially relevant for McKinsey interviews.
Based on my experience most of the candidates end up by segmenting into fixed and variable costs. Obviously, this structure is quite poor.
My recommendation is to use the process approach which is similar to what consultants usually use on a real project:
One great advantage - it is really hard to argue with that approach since it's based on the real consulting projects.
Best,
Hi Lorenzo,
in order to structure a cost case I would proceed as follows:
Step 1: Clarify the goal. Ask which is the absolute amount you should reach and which time frame you have to do so
Step 2: Identify the problem. You can proceed through the following steps:
Step 3: Propose a solution. In general, there are two main things you can do to cut costs for the specific cost component you have identified:
Step 4: Risks. As potential issues and next steps, you should take into account possible negative effects on revenues and how to avoid them.
For the specific question on how to reduce the cost components, you can focus on Step 3 above, thus dividing in ways to decrease the cost per unit or the number of units of a specific cost area.
Hope this helps,
Francesco
