Is there a better way to brainstorm decrease in costs that shows breadth and depth in ideas other than just segmenting into FIxed and variable costs (and it's corresponding levers like labor, procurement) or along value chain?
(edited)
Get Active in Our Amazing Community of Over 452,000 Peers!
Schedule mock interviews on the Meeting Board, join the latest community discussions in our Consulting Q&A and find like-minded Case Partners to connect and practice with!
Brainstorming decreasing costs
Overview of answers
Upvotes
Best answer
Hi there,
FC and VC is a pretty elementary way of doing it and it doesn't do anything to "impress" the interviewer. industry/business context, the company context, and the situationally/problem context. Only then can you create an appropriately tailored cost breakdown. As an interviewer I really don't care that you know how to split into FC and VC. What I care about is that you've correctly identified the major costs!
In general, for determining cost issues, you need to break down the problem into a tree/root-cause analysis and ask the highest level (but specific) questions first! In this way, you essentially move down the tree.
How do you identify where to look? Well, you need to look into whichever of the following 5 make the most sense based on where you are:
- What's the biggest? (i.e. largest piece of the pie...most likely to change the end result)
- What's changing the most? (I.e. could be driving the most and most likely to be fixable)
- What's the easiest to answer/eliminate? (i.e. quick win. Yes/No type of question that eliminates a lot of other things)
- What's the most different? (differences between companies, business units, products, geographies etc....difference = oopportunity)
- What's the most likely? (self-explanatory)
(edited)
Was this answer helpful?
I feel you're on the right track where it's not about a "better" way but the most "relevant" way. Fixed vs. variable is meaingful if the unit economics are meaningful, it could be direct vs. indirect costs especially for a manufacturing business, or procured vs. in-house costs where there is a large supply chain, etc.
To go deeper, the technique I like to use is to explore both the unit cost of the cost item as well as the unit volume. It's allows you to be MECE while also taking a more "first principles" approach. Let's take an airline business, most candidates will identify fuel cost to be a major cost item and often offer a hypothesis that oil prices have gone up. A more meaingful answer could be to explore what else could be impact the unit cost of fuel - e.g., poor contract management (you're over paying), supply chain issue with supplier, hedging loss, adverse mix based on location of refuelling, etc. On the other hand, unit voume could be impacted by fleet mix where your newer more fuel efficient aircraft get grounded, poor fuel management by the pilot, operational inefficiency in terms of routing or at the airport, etc.
Was this answer helpful?
Related Cases
Expert case by Francesco
Our client is SmartBridge, a nonprofit educational institution offering face-to-face tutoring services. The client operates in the US.The mission of SmartBridge is to help as many students as possible to complete studies and prevent that they drop from the school system, in particular in disadv
...
Our client is SmartBridge, a nonprofit educational institution offering face-to-face tutoring services. The client operates in the US.The mission of SmartBridge is to help as many stude
...
(Open whole case)
31.7k
Times solved
Advanced
Difficulty
Expert case by Francesco
Style:
Our client is a BlissOttica, an Eyewear Manufacturer that is looking to reach a 10% increase in profits. How would you help our client?
Our client is a BlissOttica, an Eyewear Manufacturer that is looking to reach a 10% increase in profits. How would you help our client?
(Open whole case)
13.7k
Times solved
Intermediate
Difficulty
Expert case by Ian
Style:
Our client is Energy England, one of northern England’s largest electric utility companies. They were created over the past decade through an aggressive series of mergers of existing utility companies each specializing in a single energy generation source.Recently, the CEO has embarked on an initiat
...
Our client is Energy England, one of northern England’s largest electric utility companies. They were created over the past decade through an aggressive series of mergers of existing utility
...
(Open whole case)
7.3k
Times solved
Intermediate
Difficulty
Expert case by Ben
Our client is RedBus, one of several operators of iconic double-decker public transport buses in London. Over the past three years RedBus have experienced declining profitability, as a result of reduced demand for buses due to growth in affordable taxi services, such as Uber.The client is looking to
...
Our client is RedBus, one of several operators of iconic double-decker public transport buses in London. Over the past three years RedBus have experienced declining profitability, as a resul
...
(Open whole case)
6.0k
Times solved
Intermediate
Difficulty
Expert case by Vai
Johnny Depp, now 56 years old, has started to feel that his acting career is about to get over. His net worth crossed over $650 million at the peak of his career but has since dwindled, amid lawsuits and lifestyle expenses. As such, he thinks that his current wealth might not be enough for
...
Johnny Depp, now 56 years old, has started to feel that his acting career is about to get over. His net worth crossed over $650 million at the peak of his career but has since dwin
...
(Open whole case)
2.4k
Times solved
Intermediate
Difficulty
Content Creator
#1 BCG coach | MBB | Tier 2 | Digital, Tech, Platinion | 100% personal success rate (8/8) | 95% candidate success rate
1,097
Meetings
77,718
Q&A Upvotes
232
Awards
151 Reviews
