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What is the best way to come up with a structure for cases such as 'A local Supermarket has seen its revenue decrease from its Fresh Fruit business over the past 12 months. They have helped you to determine hte cause of this trend'?
As it's a revenue question, I would ideally look at a structure such as the following
Revenue = Price x Volume
Volume = # of Customer x Average # of Purchases per Customers
One of my hypothesis would be that we are getting less customers into the store because we there has been a new store opened up nearby. Ideally I would another bucket to my framework, which is External Factors. But them I an unsure where I would put my hypothesis about a new store opening up, as it could go into both the # of Customers bucket or External Factors - so I'm having a hard time being MECE.
My other option is just to focus on the profit tree, and then brainstorm all possible ideas under Price and Volume, but then it just becomes a bit messy.
Any help would be much appreciated?
What is the best way to come up with a structure for cases such as 'A local Supermarket has seen its revenue decrease from its Fresh Fruit business over the past 12 months. They have helped you to determine hte cause of this trend'?
As it's a revenue question, I would ideally look at a structure such as the following
Revenue = Price x Volume
Volume = # of Customer x Average # of Purchases per Customers
One of my hypothesis would be that we are getting less customers into the store because we there has been a new store opened up nearby. Ideally I would another bucket to my framework, which is External Factors. But them I an unsure where I would put my hypothesis about a new store opening up, as it could go into both the # of Customers bucket or External Factors - so I'm having a hard time being MECE.
My other option is just to focus on the profit tree, and then brainstorm all possible ideas under Price and Volume, but then it just becomes a bit messy.
I would suggest the following structure to the breakdown revenue.
Let’s draw the table:
Columns: Client Journey stage, Impact on number of clients, Impact on average bill
Lines (Client Journey stages): Planning to buy fruit, Being aware of your shop, Considering to visit your shop, Visiting your shop, Visiting fresh food section, Buying fresh food
The next step is to fill this table:
Planning to buy fruit (total number of potential customers 2nd column, average budget for buying fruit for each potential customer 3rd column)
Being aware of your shop (% of total number of potential customers who are aware of your shop 2nd column, average budget for buying fruit for each potential customers who are aware of your shop 3rd column)
Considering to visit your shop (% of total number of potential customers who want to visit your shop 2nd column, average budget for buying fruit for each potential customer who wants your shop 3rd column)
Visiting your shop (% of total number of potential customers who visit your shop 2nd column, average budget for buying fruit for each potential customer who visits your shop 3rd column)
Visiting fresh food section (% of total number of potential customers who visit fresh food section 2nd column, average budget for buying fruit for each potential customer who visits fresh food section 3rd column)
Buying fresh food (% of total number of potential customers who buy fresh food 2nd column, average bill for buying fruit 3rd column)
Once you identify bottlenecks (e.g. by comparing your current client journey with the one that your shop had 12 month ago) you can develop a hypothesis structure for each stage of client journey.
Note that this structure accounts for all possible reasons for a revenue decrease. For example a decreasing % of total number of potential customers who want to visit your shop could be a signal that a new competitor has entered the market. In this case you will have to identify why your client prefers this competitor). Another example: % of total number of potential customers who are aware of your shop has decreased - it could have happened because you stopped your marketing campaign).
Have a look at my post about brainstorming- it can help you to brainstorm recommendations for this case. Here is the link:
I would suggest the following structure to the breakdown revenue.
Let’s draw the table:
Columns: Client Journey stage, Impact on number of clients, Impact on average bill
Lines (Client Journey stages): Planning to buy fruit, Being aware of your shop, Considering to visit your shop, Visiting your shop, Visiting fresh food section, Buying fresh food
The next step is to fill this table:
Planning to buy fruit (total number of potential customers 2nd column, average budget for buying fruit for each potential customer 3rd column)
Being aware of your shop (% of total number of potential customers who are aware of your shop 2nd column, average budget for buying fruit for each potential customers who are aware of your shop 3rd column)
Considering to visit your shop (% of total number of potential customers who want to visit your shop 2nd column, average budget for buying fruit for each potential customer who wants your shop 3rd column)
Visiting your shop (% of total number of potential customers who visit your shop 2nd column, average budget for buying fruit for each potential customer who visits your shop 3rd column)
Visiting fresh food section (% of total number of potential customers who visit fresh food section 2nd column, average budget for buying fruit for each potential customer who visits fresh food section 3rd column)
Buying fresh food (% of total number of potential customers who buy fresh food 2nd column, average bill for buying fruit 3rd column)
Once you identify bottlenecks (e.g. by comparing your current client journey with the one that your shop had 12 month ago) you can develop a hypothesis structure for each stage of client journey.
Note that this structure accounts for all possible reasons for a revenue decrease. For example a decreasing % of total number of potential customers who want to visit your shop could be a signal that a new competitor has entered the market. In this case you will have to identify why your client prefers this competitor). Another example: % of total number of potential customers who are aware of your shop has decreased - it could have happened because you stopped your marketing campaign).
Have a look at my post about brainstorming- it can help you to brainstorm recommendations for this case. Here is the link:
I think the main problem here is Revenue. So, let's just focus on that.
Hypothesis: more stores' competitors nearby the client's presences (following yours)
Structure I:
Quantity
How is the overall trend in the past 12 months?
What is the product mix?
How has the mix changed in the past 12 months? Specifically for the top 5 products
How is our goods-sold number compared to the market?
Where are we right now in terms of the goods sold compared to competitors/market?
Price
Is there any change in the overall pricing in the past 12 months?
How is the pricing for the top 5 products change in the past 12 months?
How is the pricing compared to market practice?
From these 2 factors alone, then we can understand the high-level root cause from quantity or pricing or both, and a little bit of why from the 2nd layer.
You can use that, but you might need to be creative and have to come up with the next structure once you know the high-level issues (example: if pricing is the issue, then you need to ask on why there is change, is the customer price sensitive, etc).
This could be used in a candidate led interview, as it will just appear to be more conversational. You identify the high-level problem, then you go deeper only to the main issue.
Structure 2:
Market
How is the overall fruit market condition in the past 12 months?
Who are their customers currently (age, income, location)?
Did the client have any defined segmentation?
Did the client change direction of segmentation in the past 12 months?
How is the performance of each segmentation in the past 12 months?
Product Mix
What are their top 5 products in the past 12 months? and how much each product allocates to revenue?
How is the performance of those products in the past 12 months?
How are the products being priced? Is there any change to this?
What is the pricing component? Is there any change?
Competitor
Who are the competitors? Is there any change in the past 12 months?
Where is our market share, and how does it change in the past 12 months?
Is there any new entrant? how has it performed?
Operations
Is there any change to organization int the past 12 months
Did we change any personnel in the past 12 months?
How is the process starting from customer searches to checks out? Is there any change to that?
Now, the 2nd structure might appear to be more MECE, but putting this into a conversational kind of interview (candidate led) might sound a bit unnatural.
However, it is extremely recommended using 2nd structure in an interviewer led setup.
Hope that helps!
Hi Nin,
I think the main problem here is Revenue. So, let's just focus on that.
Hypothesis: more stores' competitors nearby the client's presences (following yours)
Structure I:
Quantity
How is the overall trend in the past 12 months?
What is the product mix?
How has the mix changed in the past 12 months? Specifically for the top 5 products
How is our goods-sold number compared to the market?
Where are we right now in terms of the goods sold compared to competitors/market?
Price
Is there any change in the overall pricing in the past 12 months?
How is the pricing for the top 5 products change in the past 12 months?
How is the pricing compared to market practice?
From these 2 factors alone, then we can understand the high-level root cause from quantity or pricing or both, and a little bit of why from the 2nd layer.
You can use that, but you might need to be creative and have to come up with the next structure once you know the high-level issues (example: if pricing is the issue, then you need to ask on why there is change, is the customer price sensitive, etc).
This could be used in a candidate led interview, as it will just appear to be more conversational. You identify the high-level problem, then you go deeper only to the main issue.
Structure 2:
Market
How is the overall fruit market condition in the past 12 months?
Who are their customers currently (age, income, location)?
Did the client have any defined segmentation?
Did the client change direction of segmentation in the past 12 months?
How is the performance of each segmentation in the past 12 months?
Product Mix
What are their top 5 products in the past 12 months? and how much each product allocates to revenue?
How is the performance of those products in the past 12 months?
How are the products being priced? Is there any change to this?
What is the pricing component? Is there any change?
Competitor
Who are the competitors? Is there any change in the past 12 months?
Where is our market share, and how does it change in the past 12 months?
Is there any new entrant? how has it performed?
Operations
Is there any change to organization int the past 12 months
Did we change any personnel in the past 12 months?
How is the process starting from customer searches to checks out? Is there any change to that?
Now, the 2nd structure might appear to be more MECE, but putting this into a conversational kind of interview (candidate led) might sound a bit unnatural.
However, it is extremely recommended using 2nd structure in an interviewer led setup.
In general when looking ad profit I would brek down the problem in the classif revenues-costs, and I would additionally break down those as follow, simple and mece solution:
Revenues:
- volumes
- price
- mix
Costs:
- variable
- fix
I hope this is useful, best,
Matteo
In general when looking ad profit I would brek down the problem in the classif revenues-costs, and I would additionally break down those as follow, simple and mece solution:
Revenues:
- volumes
- price
- mix
Costs:
- variable
- fix
I hope this is useful, best,
Matteo
Thanks Matteo, that is the way I am trying do it. But then would I just brainstorm different hypotheses in each bucket? Or would I create an external factors bucket? —
Nin on May 07, 2020
Both ways are feasible, external factors cna influence all of them, so it can be better to include the external factor in each bucket, but that is a personal preference :) —
Matteo on May 07, 2020
First, besides price and volume, you should ask about product mix and see whether there is change, i.e. are they selling more volume of cheaper fruit and less more expensive fruits, compared to before?
For competition e.g. new store opened, it doesn't have to be at the same level as # of customers in your framework. It can go under (or after) # of customers. # of customers (if indeed in this case has problem) answers the question of "what/where goes wrong". Once you identify the what, you need to switch to the "why it goes wrong" before you can further proceed to the "how to fix it". External factor answers the question of "why".
Hope it helps,
Emily
Hey there,
First, besides price and volume, you should ask about product mix and see whether there is change, i.e. are they selling more volume of cheaper fruit and less more expensive fruits, compared to before?
For competition e.g. new store opened, it doesn't have to be at the same level as # of customers in your framework. It can go under (or after) # of customers. # of customers (if indeed in this case has problem) answers the question of "what/where goes wrong". Once you identify the what, you need to switch to the "why it goes wrong" before you can further proceed to the "how to fix it". External factor answers the question of "why".
The previous answers are very thorough and I have nothing to add. However, take a look at the below Q&As that talk more in dept about profitability overall.
The previous answers are very thorough and I have nothing to add. However, take a look at the below Q&As that talk more in dept about profitability overall.
The case study is the most important element of the case interview, which you'll have to nail in order to get into strategic consulting. Here you can learn the specific skills and concepts necessary to solve them.
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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 disadvantaged areas.
The client is considering starting operations for its services in the Chicago area. They hired us to understand if that makes sense. Due to the nonprofit regulation, SmartBridge should operate on its own in the market, without any partnership.
How would you help our client?
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 disadvant ... Open whole case
Hot WheelsProblem definition: Our client is Korean Car Parts (KCP), a multi-national original equipment manufacturer (OEM) of car parts based in Korea. They've recently seen a decline in profits and have brought us in to understand how to address this falling profitability.
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Open whole case
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They've brought you in to first investigate what can be done immediatedly to prevent hemorrhaging cash and surive in the short-term. They are also looking to see how the current situation can be viewed as an opportunity, and what can be done to prepare for the future.
Sky China, a government-backed Chinese airline, has recently seen profits plummet due to COVID-19. Profits are down 80% in the months of February and March, but are showing early signs of a rebound in April.
They've brought you in to first investigate what can be done immediatedly to prevent hemor ... Open whole case
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Our client’s upstream division has offices in Australia and Indonesia. Their work is highly dependent on their IT systems, as they have to constantly monitor wells and pipes (pressure, hydrocarbon count, fluid makeup, etc.)
The upstream division has two large legacy IT systems that are primarily used for downstream operations but have been modified for upstream purposes.
These systems are managed by a central team in the US which is responsible for all IT issues across the business. They triage issues/enhancements and then manage development teams in India and Finland who complete the work.
[PLEASE NOTE: This is a technically difficult case and should only be completed by those coming in as a Technology specialist, i.e. recruiting for McKinsey Digital, BCG Platinion, etc.]
Our client is a multinational oil and gas company. While they are vertically integrated and have upstream, midstr ... Open whole case
YodaPhoneOur client is Yoda's Phones, a national telecommunications company. They have embarked on a three-year, multi-million dollar digitization program. Unfortunately, two years into the program, they realize they are significantly behind schedule and over budget.
You have been brought in to right the ship and ensure the digitization program is delivered as planned.
Our client is Yoda's Phones, a national telecommunications company. They have embarked on a three-year, multi-million dollar digitization program. Unfortunately, two years into the program, they realize they are significantly behind schedule and over budget.
You have been brought in to right the sh ... Open whole case
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