Bookl

Hi Elisey,

I would personally not recommend to use a single framework for all the so-called business situations (M&A, Entry, New product, Operations etc). Although this would help to more easily remember the framework, it would make more difficult to present a customized structure when the interviewer asks the initial question. Moreover, since every business situations has some peculiar key elements (eg how to enter in a market-entry case, price valuation in M&A, etc), this could lead to completely miss one core bucket.

Based on my experience, it thus make sense to make the extra effort to learn 3-4 different structures for business situations (potentially with some elements in common), and be able to present from the beginning something ad hoc when needed.

Moving to the framework per se, using as an example market entry, this is how I would structure it:

1) Goal clarification. It is always good to start with the end in mind – thus what is the specific reason why you want to enter the market? Is it revenues, profits or specific synergies?

2) Industry. There are two macrovariables here.

• Key industry numbers/facts. This includes for the market and potential subsegments the following
  • Growth
  • Size
  • Barriers to entry
• Key industry players. This includes:
  • Customers segmentation
  • Competition
  • Occasionally for some cases: suppliers and substitutes.

You should present this area connecting with the goal, and not purely listing the elements to analyse as if it was a laundry list. The best way to do so is explain how a certain variable will help you to achieve you goal. Eg, if your goal is to increase revenues, don’t simply say “I want to look at growth, size and barriers”, rather “I want to look at growth and size – this will tell me if the market has the potential to provide enough revenues for our client. I would also like to check the barriers, to understand which are the obstacles in entering such a market and thus increase revenues”.

3) Company - Target objective feasibility. Here you want to check the fit between the client and the selected industries.

• Can our specific client reach its objective in the selected market (eg profits, revenues, market share, etc)?
• Are there positive or negative synergies in such industry?

In the first point, you will probably have to go through a profitability/revenue/cost framework, to calculate the effective result.

4) Best way to enter. Once you know the industry is attractive and you can reach you goal, you should consider the entry options.

• Which are the possible ways to enter the market? Usually you should consider (i) starting from scratch; (ii) M&A; (iii) Joint Venture or licencing
• Which option meets better our capabilities to enter the market? Each specific way to enter will require some different capabilities. If you start from scratch you may need skilled people in all the phases of the value chain; if you buy another company you may need less people, but more upfront capital, etc.

5) Risks and next steps. What are the major elements that we should further analyse based on the previous points (eg regulator decision, unexpected competitor reactions, potential wrong pricing in the new market, etc)?

This would include all important market metrics, presenting barriers to entry into the industry. I would not consider the price or the product in the first or second level for a market entry, but rather as a possible third level once reached step 3, when we have to understand if/how we can meet the client's goal.

Hope this helps,

Francesco

Hi Aditya,

I would suggest you the following points to start the structure:

1. Identify the main revenue streams of the client
2. Understand which revenue stream has an abnormal cost compared to the others
3. For that area, divide in fix and variable costs. Identify which particular cost is out of control
4. Try to understand what is the reason for the particular increase in cost: usually it is something related to either (i) suppliers/industry; (ii) competitors; (iii) mistake of our own company

Once reached this point, you may have two possible evolutions for this case.

Option 1: you understand you have to decrease the overall costs in absolute terms. In this case the next step would be:

• Identify how to correct the cost. You could decrease the cost mainly (i) decreasing the cost of each unit or (ii) decreasing the number of unit of that particular cost

Option 2: either directly point 4 or after exploring Option 1, you understand you have to solve an efficiency problem of the client. In this case the next step would be:

• Understand what is creating the inefficiency: (i) labour; (ii) technology; (iii) a structural increase in demand
• Find the proper solution for that inefficiency: (i) increase the efficiency of labour (eg more incentives or training); (ii) increase the efficiency of technology (new investment); (iii) cover the structural increase in demand (eg: increase supply)

Hope this helps,

Francesco

Broadly agree with Jonathan. A couple extra suggestions:

1) Subscribe to Finimize: They will send you daily updates with recent business/finance news, and explain what is happening (and why) in Layman terms. It's an excellent way to both stay up to date with most recent events in a couple of minutes (e.g. on the commute to work) and also improve your business acumen.

2) Read up on some basic business/microeconomics: Any decent first year of University or even advanced highschool economics should do - to get the basics and understand some key terms (e.g. economies of scale, breakeven point, etc.)

3) Also read through cases to further improve if you run out of cases to watch/listen to

Hope this helps!

Hi,

There are two ways to use the hypothesis:

First - presenting a structure using the hypothesis. For example, if you are having a PE (private equity) case, you should do the following:

1) Make classic structure (market, company, competitors, feasibility of exit)

2) Make subpoints (e.g. in market: size, growth rates, profitability, segmentation, etc)

3) Present your 1st level Hypothesis:

• - "In order to understand whether we should invest in Company A, I would like to check that the Market is Attractive, the Company is Attractive, the competition is favorable and we have good opportunities for of exit"

4) Present the main 2nd level Hypothesis:

• "In the market, I would like to make sure that the market is big enough and growing;
• In the company I would like to find additional opportunities for growth;
• In competition I would like to check that the market is fragmented enough;
• Finally, I would like to check if we have potential buyers and can achieve desired exit multiples"

Another way to use hypothesis is using the hypothesis to prioritize your analysis:

1) Make a structure: "Problem in sales may be related to Sales Motivation, Sales Strategy, Sales Coverage, and Sales Process:

2) Prioritize a part of the structure based on your knowledge / common sense / available data: "Taking into account that motivation is the core problem of the sales organization, I would like to prioritize this part of the analysis"

Good luck!h

Hi,

Focus on the most common industries in the following priority (sorted by probability of geting a case): 1-retail and CPG; 2-airlines; 3-Telecom; 4-banking; 5-natural resources; 6-tech

There are several sources of info to develop business sense:

1) Cases - you simply solve 50-70 cases and get a broad knowledge of different industries, common pitfalls and questions. The key here - find good partners who already had case interviews with MBB companies

2) Company reports, equity reports, IB roadshow docs - usually have a good overview of company and industries.

3) HBS cases - quite useful, but not sure if lot's of them available publically. Probably worth buying

4) Books - one good book about airlines with numbers and industry analysis can give you all needed industry knowledge

5) News, Industry blogs

For each industry, you should understand:

• Revenue streams
• Cost structure
• Margins
• Key performance indicators
• Key revenue drivers
• Industry trends

I strongly recommend practice drawing structures for each industry - profitability, value chain, etc

Then I will switch to getting functional knowledge: Marketing, supply chain, finance

Good Luck