CASE PRACTICING DUKE APD CONSULTING CLUB 9302020 1

CASE PRACTICING DUKE APD CONSULTING CLUB 9/30/2020 1

MEETING AGENDA Brief review of last meeting Market size estimation Mental math tips and practicing Business situation framework Skills for today: Business situation framework (4 C’s) BCG Matrix (product protfolio matrix) Case practice 9/30/2020 2

MEETING AGENDA Brief review of last meeting Market size estimation Mental math tips and practicing Business situation framework Skills for today: Business situation framework (4 C’s) BCG Matrix (product protfolio matrix) Case practice 9/30/2020 3

THREE STEPS FOR MARKET SIZE ESTIMATION Determine and label the question, and lay out the structure: population-based, household, or preposterous question? Make assumptions: The total population/ the total household/ the total area of the U. S…. Do calculation: Be accurate enough but not necessarily to be precise 9/30/2020 4

SUMMARY FOR MARKET SIZE ESTIMATION Key numbers to keep in mind: U. S. population is 320 million Life expectancy of an American is 80 years Even distribution between the ages (so there is the same number of 2 -year-olds as 72 -year-olds. We 100 million U. S. households 9/30/2020 5 CASE IN POINT: Complete Case Interview Preparation, 8 th

SAMPLE ESTIMATION A man lives on a small hill, and he has to walk down the hill to take a bus to work every day. Question: the slope of the ramp from his home to the bus stop? 9/30/2020 6

SAMPLE ESTIMATION Solution 1: 1, Since this man has to walk down the hill, the slope should be negative. 2, Not considering special circumstances, the bus can’t drive up to the hill, the absolute value should not be very low, let’s say higher than 30 degrees. 3, This man can still walk down and up, the absolute value of the slope should not be very high, let’s say lower than 45 degrees. 4, Our estimation is: -30 to -45 degrees. Take a midpoint mark, -37 degree. 9/30/2020 7

SAMPLE ESTIMATION Solution 2: Well it’s hard to estimate the slope because of lack of information. But I can tell you how to estimate. Suppose this man is very, very fat, like a 500 lbs ball. We can just crouch at his door and watch him walk to the bus stop every day, until he falls off one day. If he rolls down the hill at a constant speed, and we know the friction of the ground, then we can know the slope! 9/30/2020 8

MEETING AGENDA Brief review of last meeting Market size estimation Mental math tips and practicing Business situation framework Skills for today: Business situation framework (4 C’s) BCG Matrix (product protfolio matrix) Case practice 9/30/2020 9

MENTAL MATH Tips: First, match the digits, and ignore third digit from left and the rest after that Second, for plus and minus questions, do calculation on the highest two digits Second’, for multiply questions, round up or round down, and keep in mind how many zeros should be there; for dividing questions, after rounding up or down, cancel out the zeros, and put it into this form: XXX/X Third, do the calculation and don’t forget to put zeros afterwards. 9/30/2020 10

MENTAL MATH PRACTICE Mental math practice: (1 min, error should be controlled under 20%) 9/30/2020 11

MEETING AGENDA Brief review of last meeting Market size estimation Mental math tips and practicing Business situation framework Skills for today: Business situation framework (4 C’s) BCG Matrix (product protfolio matrix) Case practice 9/30/2020 12

MARKET SITUATION FRAMEWORK Customer Who is the customer What does each customer segment want Price sensitivity Distribution channel preference by segment Customer concentration and power Company Capabilities and expertise Distribution channels Cost structure Investment cost Intangibles Financial situation Organizational structure Product Nature of product Commodity of differentiable good Identify complementary goods Identify substitutes Products life cycle packaging Competitor market share concentration Competitor behaviors Best practices Barriers to entry Supplier concentration 9/30/2020 Regulatory environment 13

INTRODUCTION TO CASE PRACTICE SERIES Items to cover: ü Mental math, ü Market size estimation, ü Case interview frameworks, ü Basic case interview skills, 9/30/2020 14

MEETING AGENDA Brief review of last meeting Market size estimation Mental math tips and practicing Business situation framework Skills for today: Business situation framework (4 C’s) BCG Matrix (product protfolio matrix) Case practice 9/30/2020 15

BUSINESS SITUATION (4 C’S) 4 C’s framework: Consumers/customers Company Competitor Collaborator 9/30/2020 16

BUSINESS SITUATION (4 C’S) Consumers/customers: Harvard Business School Management Consulting Club, Case Interview Guide Consumers and customers can be two different entities. Identifying and meeting the needs of both entities are crucial. Consumers: people who consume the product Customers: people who buy the product Define the market: Decision making unit: Who’s the consumer and customer? Who makes the choices? Who influences the choices? Who pays for the product? Decision making process: what triggers the needs? Product use: how much? How often? When, where, and with whom? Product nature: salient aspect? Meet or exceed expectations? 9/30/2020 Situational factors: Purchase occasion? 1 st time? Customer loyalty? Existing of alternatives? 17

BUSINESS SITUATION (4 C’S) Company: Internal analysis: Key Success Factors (KSFs): Can be operational factors: product mix, inventory turnover, competitive standing: customer loyalty, trend setter, organizational structure: management structure, highly-skilled labor Value Chain: Raw Materials >>> Operations >>> Delivery >>> Marketing & Sales >>>Services (customer retention) Financial Analysis: Balance sheet, financial ratios, cash flow analysis, time value of money, net present value, cost accounting External analysis: 9/30/2020 18 Harvard Business School Management Consulting Club, Case Interview

BUSINESS SITUATION (4 C’S) Company: Internal analysis: External Analysis: General trends: Supply/demand, demographics, socio-cultural, political forces, technology, macroeconomics/global Industry analysis: Industry evolution, fragmented industry, emerging industry, maturing industry, declining industry 9/30/2020 19 Harvard Business School Management Consulting Club, Case Interview

BUSINESS SITUATION (4 C’S) Competitors: Competitive analysis: What drives the competitor: future goals (at all levels of management), assumptions (held about itself and the industry) What is the competitor doing and what can the competitor do: current strategy, capabilities (strengths and weaknesses) Market signals: prior announcement, or after the facts, discussion of the industry, or competitors historical relationship Competitive moves: risks, retaliation… 9/30/2020 20 Harvard Business School Management Consulting Club, Case Interview

BUSINESS SITUATION (4 C’S) Collaborators: strategies to deal with suppliers and distributors Buyers selection: Four broad criteria to determine the quality of a buyer Purchasing potential Growth potential Structural position: intrinsic bargaining power and propensity to use it Cost of servicing Good buyers can be created through: Build up switching costs (discounts or loyalty program) High-cost buyers should be eliminated 9/30/2020 Supplier strategy: 21 Harvard Business School Management Consulting Club, Case Interview

BUSINESS SITUATION (4 C’S) Collaborators: strategies to deal with suppliers and distributors Buyers selection: Supplier strategy: Stability and competitiveness of the supplier pool Optimal degree of vertical integration Allocation of purchases among qualified suppliers Creation of maximum leverage with chosen suppliers – avoid switching cost, threat of backward integration 9/30/2020 22 Harvard Business School Management Consulting Club, Case Interview

MEETING AGENDA Brief review of last meeting Market size estimation Mental math tips and practicing Business situation framework Skills for today: Business situation framework (4 C’s) BCG Matrix (product protfolio matrix) Case practice 9/30/2020 23

BCG MATRIX “Product Portfolio Matrix” To be successful, a company should have a portfolio of products with different growth rates and different market shares. High growth rate product needs more cash inputs to grow, while low growth rate product functions as earning excess cash. 9/30/2020 case in point 8 th edition, 5: ADDITIONAL TOOLS AND FRAMEWORKS 24

BCG MATRIX Four rules determine the cash flow: 1. margins and cash generated are a function of market share. High margins and high market share go together; 2. growth requires cash input. The added cash required to hold market share is a function of growth rates; 3. high market share must be earned or bought; 4. no product market can grow indefinitely. The payoff from growth must come when the growth slows. The payoff is cash that cannot be reinvested in that product. 9/30/2020 case in point 8 th edition, 5: ADDITIONAL TOOLS AND FRAMEWORKS 25

BCG MATRIX Four sections in the Matrix Low growth, high market share: Cash Cows, generate excess cash Low growth, low market share: Cash Pets, may show some accounting profit, but the profit must be reinvested to maintain the share, worthless. High growth, low market share: Question mark. Require far more cash than they can generate. It’s a liability of a company unless it becomes a leader. High growth, high market share: The star. It’s the leader of the industry, and if it can stay as a leader, when the growth slows down it will eventually become the Cash cow. 9/30/2020 case in point 8 th edition, 5: ADDITIONAL TOOLS AND FRAMEWORKS 26

BCG MATRIX 9/30/2020 case in point 8 th edition, 5: ADDITIONAL TOOLS AND FRAMEWORKS 27

MEETING AGENDA Brief review of last meeting Market size estimation Mental math tips and practicing Business situation framework Skills for today: Business situation framework (4 C’s) BCG Matrix (product protfolio matrix) Case practice 9/30/2020 28

CASE PRACTICING 9/30/2020 29