Hi, what are the good ways to structure the costs except for the cliche FIX & VARIABLE costs?
Thanks!
Hi, what are the good ways to structure the costs except for the cliche FIX & VARIABLE costs?
Thanks!
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 real consulting projects.
Best,
I would go for Direct (related to production/service the company is selling) and Indirect (everything else) costs, as an alternative.
But applying the right structure highly depends on what's the case study you are analyzing, thus what's the focus of the case and what you can obtain from the categorization you are applying.
Cost could also be broken down by, for example:
As Giulia mentioned above, it very much depends on the case. The way you break down the cost should best help you find the underlying problem and solve the case. Also, the cliche "fix vs. variable" breakdown actually applies in a lot of situations, so don't be afraid of using it :)