Consulting Case Interview: A Profitability Case Study with ex-BCG Consultants

[@Prepmatter]

This case study is available for free as part of our 'Get the Offer' course: prepmatter.com/course/get-the-offer?lesson_uuid=67c440e9-ad0a-4c18-9082-2b84424ed51c

[@Aheadyx]

Best case performance I know on KZbin - *congrats!* Stands out for three reasons to me: ✔Realistic structure: Seamlessly combines a procedural structure with a conceptual framework - really differentiating from an 'I would look into these four buckets' answer. As projects are inherently procedural due to phases and work packages, this is much more realistic ✔Meaningful tweaks: Only an experienced interviewee can bring these to the table - e.g. proposing an evasion strategy aka what if we can't do anything about the problem upfront in your initial framework ✔Distinct flow: Needless to say after the feedback - but I once spend a small three-digit figure on a paid course and seriously: you outperform every single video in that course. So thumbs up!

[@vamsidahar]

It was so funny at 21:21- Where Deniz asks if we can't do anything what we could do?

[@thebumpkin505]

Sounds like most clients...

[@raseshdhar5504]

The idea to assess the penetration status of the current product / bucketing the major cost heads and finding alternatives to cut it down or digitizing any manufacturing process can help to cut down cost significantly. Also, the possibility for considering pricing breakdown of competitors for the same product can be touched upon.

[@GoO0f]

Hi guys, I would recommend starting with the root cause analysis since it’s the only section that actually answers the question. You can then understand and hypothesize the “context” within each driver during the root cause analysis.

[@edisonwang1765]

agree. I wasn't sure why context was necessary

[@Prepmatter]

Hi both! Having a context column isn't a must, especially if you've already clarified how the client's revenues are organized (e.g., by geography, product, customer, etc.) at the beginning of the case. We introduced this column to prevent candidates from diving into revenues and costs with generic questions.

[@minerva1046]

Hi, could you give me the step on how to conduct the root cause analysis for this case?

[@christinemaher2537]

@@Prepmatter would the client view this as a bit of a waste of time as these segmentations logically could only be leveraged when breaking down their revenue (specifically their # of goods sold/sales)?

[@lourdeselizondo1]

Other recovery strategies: (1) since the most impacted segments are bigger projects (heavy) maybe financing plans and more payment options can push sales. (2) Analyze what construction niche segments are less impacted by the negative macro outlook: commercial, versus residential, versus government infrastructure, and focus on the best segment. (3) Maybe start going B2C with a retailer like home depo, push home DIY campaigns on social media, (4) strategic partnerships to push B2B2G, (5) invest in technology to reduce direct manufacturing costs in the long term, (6) be more efficient in the production by reducing waste and increasing workers’ productivity maybe a more incentivizing compensation structure etc (7) Change suppliers. Also should not have disregarded that price stayed the same in the last two years* adjust at least with inflation.

[@Prepmatter]

I love all of your suggestions, thanks for sharing! You may want to also structure your ideas into 1) direct (revenue & cost) 2) indirect (revenue & cost).

[@simranlalwani7127]

Why did we not explore the opportunity to export our product? The Indonesian economy is impacted because of change in government policies, but other countries might still be very interested!

[@abhinandanganguly]

Very helpful content for someone like me who ain't into Bschool yet but interested into consulting. 🙌

[@vuyombuduma6782]

I'm on the same boat.

[@giuseppe.manzone]

Absolutely, this will help you get in the right mindset on how thinking about a business case and how to approach it. It will also be important that you'd prepare even before sending out your application by preparing a good consulting optimized CV. Let me know if you would need any help in the future.

[@CameronLasmore]

Instead you should just think about what really brings you joy in life and gives back to the community and pursue that instead of sacrificing your soul, dignity, imagination, and passion for a job simply for money and prestige

[@amit944449]

The candidate says at 16:20 that the COGS will go up due to low demand and constant supply, which is incorrect. The cogs will actually go down in such a scenario as demand is low.

[@Prepmatter]

Hi Amit, well spotted! I've actually addressed a similar inquiry in a previous comment, but I'll reiterate it here for clarity. As the candidate, I should've phrased it better in the case study. What I intended to convey is that a decrease in sales volume might hinder their ability to leverage economies of scale, potentially resulting in an increase in per-unit costs (COGS).

[@chiranjiv1361]

You mean as a percentage of revenue??

[@RequiredCumbee]

When looking at Exhibit 2, could it not be a possibility that the client's increase in price is what was driving the decrease in sales? I know eventually we are told that the decrease in sales is more due to external factors, but why did the candidate not consider that possibility? That it was poor pricing strategy which led to decreased sales? (ie. they priced it too high)

[@hudsongould7023]

I thought the same, they doubled the cost from $4 to $8. It seems like that would be significant.

[@lorraine7774]

woc这个case做得太好了 太强了 而且很真实 就是可能提了一堆possible reasons 结果面官说这个也不是那个也不是

[@baraam.medhat9823]

I know the interviewer gave a context of weaker economy causing overall market decrease. Why haven't you explored the relationship between price and demand? Price per ton increased slightly between 2020 and 2021 and stayed the same in 2022. 16% drop in quantity sold first year and 13% second year. So price elasticity. Explore competitor pricing and the potential increase in revenue, market share if price goes down and quantity increases.

[@Prepmatter]

Great question. We can break this down into two parts: 1) Root cause analysis: I initially focused on the possibility of a decrease in the client's market share. However, the interviewer steered the discussion towards the issue of market shrinkage. That's why I didn't explore if a price increase led to a lower quantity sold. 2) Recovery strategies: I could have suggested a price decrease to regain market share. But the challenge here is the rising variable costs, which makes reducing prices difficult.

[@fangzhuozhang9492]

Hey I am a bit confused as you mentioned the crisis caused less demand, while supply stays the same level. Then why price goes down instead of goes up? Less demand means supplier need to lower the price, right?

[@GOAT352u]

​​@@fangzhuozhang9492 agree with this statement. Lower demand should indeed lower the price in theory. Assuming that the supply is constant

[@nonya001]

One solution that could be viable for reducing the cost structure is to go for an asset-light model. That way you can generate cash flows through the sale of heavy machinery. This way you can save on fixed costs of maintenance of the assets. As and when the projects come the way of the company, they can hire-purchase or lease the heavy equipment. Could that be a possible solution as well?

[@Prepmatter]

Absolutely, your asset-light model suggestion offers a good short-term solution. This allows us to lease heavy machinery based on project needs, reducing maintenance costs. However, long-term, leasing could be pricier than ownership. As market conditions stabilize, repurchasing equipment could be reassessed. Thanks for your valuable insight!

[@nonya001]

@@Prepmatter Hi guys, can you make a video on what a consultant sees when he is first handed the B/S of a company. Like it could be in the per-view of IB and VC fund manager. What does the analysis look like and what new information does the executive need to seek? What all opportunity analysis do they do? Some ratios or financials they look at. Not only the B/S, but also inc statement and CF statement. Good content. Cheers.

[@rishabh454]

As the problem is domestic and Tunisha is a coastal country in North Africa it can leverage its production capacity to cater to other markets - its close to Europe and also the Suez canal - therefore it can target Asian markets as well.

[@Prepmatter]

Thank you for your contribution! Suggesting expansion into other markets could indeed be an option. However, I would refrain from specifying a particular country like Tunisia, as this could lead the interviewer to question why not consider other countries like India, and so on. Furthermore, it's crucial to clarify with the interviewer your proposed strategy for market entry. If the plan is to export, it may be more logical to target neighboring countries, such as Malaysia. If the plan involves building production capacity, then your suggestion could also make sense!

[@rishabh454]

@@Prepmatter My bad, the country mentioned in the case was Indonesia, which I mistook as Tunisia.

[@srikantharugula43]

Thank you for sharing this. This was a wonderful case interview. I would like to understand what can be done to improve our ability to come up with business recommendations? Identifying the problem is one part, but it seems a great deal of experience was required to come up with even a decent recommendation in this case.

[@Prepmatter]

Deniz here, great question! While I definitely used my consulting experience while solving this case, you can easily learn the key business concepts with the right amount of practice! We recommend our trainees spend 6-8 weeks practicing 40-50 case studies. As you do this, you need to learn the theory and apply your learning with structuring/exhibit drills, etc. Hence, it requires a very methodical preparation. Feel free to check out Prepmatter's Get the Offer course if you'd like to learn more about what resources are available for you.

[@longjiD]

Really great case, thanks! Video kept shifting in and out of focus at times which was a bit distracting.

[@Prepmatter]

Glad you found the case helpful! We're indeed aware of the focus issue, which should be fixed in the upcoming videos!

[@IsilCaglaMorsunbulAlumni]

You guys are fantastic! Thank you

[@Prepmatter]

Thank you!

[@tanay123ful]

Nice! Good thought process!

[@kevinastuhuaman]

There is an error in 16:49 about supply and demand If the demand for raw materiales declines while the supply remains constant, the price of the good or service is likely to decrease. Here’s a breakdown of the economic reasoning: 1. Decrease in Demand: When fewer people want to buy the good or service at the existing price, the demand curve shifts to the left. 2. Constant Supply: Since the supply remains unchanged, suppliers will still be offering the same quantity of the good or service. 3. Excess Supply: With reduced demand, there will be a surplus of the good or service at the original price. 4. Price Adjustment: To clear this surplus, suppliers will typically lower their prices to attract more buyers, leading to a decrease in the market price. Therefore, when demand declines and supply is constant, the price generally falls.

[@kevinastuhuaman]

Let me know if BOTH are valid hypothesis: 1. With a decreasing demand and a constant supply we could see a decrease in the price of raw materials. Thus, we will be DECREASING variable costs 1. With a decreasing demand we wouldn't be able to leverage economies of scale, potentially resulting in an increase in per-unit costs. Thus, we will be INCREASING variable costs

[@akbar3913]

It would be so much better if we could see what Deniz is writing on his paper. Overall this is a very good case study.

[@Prepmatter]

Deniz here. That’s a great point, I often follow a top down writing style, and I use plenty of abbreviations to make sure that I am caught up with the interviewer at all times.

[@waadabdullah2191]

Very helpful, please can you share with me the deck template?

[@dawar.hussain]

In these types of case studies, can we take the approach of reducing operating expenses? Let me explain...can we suggest we reduce the cost of entertainment expense, move to another building with lower rent or create vacant space in our builsing and rent it to othwr businesses? Xan we refinance our loans? Focus on recovering bad debts and restructure or reduce the cresit cycle of accounts receivable? Reduce energy expense fr businesses by introducing work from home? I hope you understand what i am talking about. Further, we can reduce bonuses, dividen payout, if any, close loss making projects, assign idle assets as for-sale to eliminate depreciation expense, re look at liabilty provisions...ww can look at their financial statements and sww the expense side and try to figure out what we can eliminate.

[@Prepmatter]

Thanks for sharing your thoughts! Your ideas make sense, but please keep in mind a few key points: 1. Ensure you prioritize what the client should implement. We don’t want a candidate to suggest 10 ideas without indicating which ones to implement first. 2. It’s always good to start with direct strategies, followed by indirect strategies. Direct strategies are those that can address the issue directly, e.g., in this case study: subpar contracts with suppliers abroad. Indirect strategies would be the ones you said, such as moving to cheaper office space, working on energy reduction initiatives, etc. 3. Clarity in terminology used in case studies is vital. For instance, if you're referring to operating expenses (OPEX), you're likely talking about variable and fixed costs (mostly above EBITDA level items). If you're referring to initiatives that help refinance loans, reduce depreciation, or manage dividend payouts, we're talking about below EBITDA level. In this case study, these initiatives would be valid (again, as indirect strategies), but in many case studies, profitability improvement objectives focus on EBITDA improvement.

[@abdulelahsm]

hi, i followed your approach of being specific and having my bucket as context, root cause.. and etc. My Bain & Co interviewer rejected me because it. They simply are too dum dum and want revenue bucket and cost bucket. I'm so mad

[@Prepmatter]

Deniz here, sorry it didn’t work out! We've had a substantial number of trainees who received offers from Bain, and we’re quite confident in our approach. As you can imagine, many factors lead to rejection. Specifically, regarding the frameworks, you need to customize them to the case, prioritize the right areas, and be timely with your explanations and exploration post-framework. I would be more than happy to meet and help you understand how to improve your performance next time. You can book a free 15-minute call here: prepmatter.com/case-interview-coaching/deniz.

[@penintended9214]

At 16:30 He said that when demand falls and supply is constant the prices can rise. Isn't it the other way? Unless demand falls and supply falls and procuring those supplies becomes difficult, then prices can rise for the company right?

[@Prepmatter]

Well spotted! As the candidate, I should've phrased it better in the case study. What I intended to convey is that a decrease in sales volume might hinder their ability to leverage economies of scale, potentially resulting in an increase in per-unit costs (COGS).

[@willthompson2905]

Hello Prepmatter, If I were to inquire about distribution networks for cement in Indonesian (I would imagine largely by boat) and suggest possibly selling to places like Malaysia or Singapore would this be unreasonable? The interviewer noted that Indonesia's public infrastructure spending was hurt especially. This way they could possibly reach their goal of 500M Thank you for your video

[@Prepmatter]

That's a great idea. We didn't explore this option much, given how cheap cement is and how expensive it may be to distribute. In fact, I did a quick search online, and it seems only 5% of the cement is exported; it's largely consumed locally.

[@prannaydeshpande78]

Doesn't the recovery stratgies and risks come in the later part? As what can be done to solve the problem?

[@yisongYANG-i4s]

Thank you for sharing such helpful context! I just had one confusion at 16:23, regarding the demand and supply effect. The candidate said that "due to lower demand, if the supply doesn't change, the price of raw materials (e.g., things that are used to make cement) should go up and therefore the procurement cost should go up." However, in a typical market, when the demand declines and supply doesn't change, shouldn't the price be going down, instead of going up?

[@Prepmatter]

As the candidate, I should've phrased it better in the case study. What I intended to convey is that a decrease in sales volume might hinder their ability to leverage economies of scale, potentially resulting in an increase in per-unit costs (COGS).

[@kevinastuhuaman]

​@@Prepmatter But even considering that happening that effect could easily be offset by a decrease in price. Am I right? Let me know if BOTH are valid hypothesis: 1. With a decreasing demand and a constant supply we could see a decrease in the price of raw materials. Thus, we will be DECREASING variable costs 1. With a decreasing demand we wouldn't be able to leverage economies of scale, potentially resulting in an increase in per-unit costs. Thus, we will be INCREASING variable costs

[@agustoso]

When as a final solution to the external root causes of the declines in revenue and increases in vC, selling assets or shrinking business was advised I thought what could have been done or asked before coming up with a solution like this because this feels like the last thing any firm would like to hear as they are to receive a solution to their problem. could there be a better use of customer segments of the firm? for instance, large infrastructure companies correspond to 65% of revenue in 2022, but how many of these companies are captured? meaning, is 975M$ coming from the large infrastructure companies segment the most our client can reach in that line? and for each customer segment couldn't the interviewee investigate forward? Would it be then possible to establish a P&L statement with greater reveneus as market share increases by setting a goal of reaching to x% of each segment over 3 years? also, to be able to find a forecast of cumulative 500m$ profit in the next 3 years, would it be helpful for the interviewee to ask about estimated growth in the related industries like infrastructure or general economy recovery? These were some of my thoughts I wondered as I watched this case study. Thanks for the video by the way it was very informative!

[@nicolasamaya5838]

Great video! Quick question... On a case like this, would it not have been beneficial asking a clarifying question regarding whether or not we are the only firm in the industry experiencing declining profits? I feel like that would have saved some time that would be better spent during the case. Then for example if the answer was "no, all other cement firms within the area are experiencing declining profits", how would the root cause analysis bucket change? Would you still communicate the quantitative causes with more of an emphasis on the qualitative causes? Thanks so much!

[@Prepmatter]

Thank you for your question! We recommend not asking this question at the beginning of the interview. Most interviewers prefer that candidates delve deeper into the financials later in the discussion. It is generally good practice to start by internally understanding the root cause of the problem before inquiring whether it is specific to our client or a market-wide issue.

[@dynamicdybala6276]

I'm a freshman at Cal this year, I was wondering what major would be best to persue to develop the skillset and technical abilities Deniz shows here? I realize there's a lot of practice involved but I'd love to be pointed in the right direction (Econ, Finance, Applied math, etc.). Thanks and appreciate the video!

[@Prepmatter]

Deniz here. I'm glad you found the video insightful! I pursued economics in my undergrad and later completed my master's in management. This combination offered me a good understanding of how businesses operate. Degrees in accounting and finance can also be highly beneficial. That being said, if I had encountered this case during my university days, I might not have tackled it with the same proficiency. A lot of the business acumen and skill set truly develop when you step into the consulting world. Until you reach that stage, I'd recommend going through at least 50 case studies before your interviews to continually refine and build upon your skills!

[@dynamicdybala6276]

@@Prepmatter Deniz, thank you so much and keep up the great work!

[@giuseppe.manzone]

Hello @dynamicdybala6276, practice is important but it's not everything. I have mentored and interviewed people who did 40-50 cases in 3 months and still they were not ready. Mastering the case interview is a methodology that only when it is well understood will enable you to really go in front of an interviewer confident that you could solve all kind of cases.

[@KirandeepKaur_1]

Could have proposed exploring other markets outside Indonesia.

[@Prepmatter]

This is definitely an option. However, since cement is not easily exportable and building facilities outside the country would require significant investment, it may not be the best way to improve profitability.

[@gursimarsahni8157]

Hi! thanks for the video! I dont understand why we didnt look into EBITDA ? becuase that is falling QUITE drastically so my first intuition was to look at that ? is there any reason we focus only on TVC ?

[@giuseppe.manzone]

The drastic decrease in EBITDA is mainly due by 2 factors: 1. The revenues are going down (from 1,800 to 1,500) in the past 2 years, and 2. The cost in absolute numbers are remaining the same increase the cost/revenue ratio. Therefore, by tackling these 2 factors, you'll be looking into also in EBITDA performance. I hope this is useful

[@barbiejie]

Thank you for this mock case interview. On cost reduction, I was wondering if the company could source its raw materials within the country so that its costs are less affected by fluctuations in foreign exchanges. On recovery strategy, could the company look into acquiring or merging with a player within its market and create some cost synergies?

[@Prepmatter]

Thanks for contributing to the discussion here! Here are some thoughts I've shared: If there's a local supplier available and willing to work with the local currency, this could be a good move. However, considering the client's market-leading position (hence, large scale), it would be interesting to see if they can secure enough supply. Also, the question arises: why haven't they worked with a local supplier yet? Maybe there isn't any suitable supplier available in Indonesia. Merging with another company might be a viable option, however, it would require high CAPEX, and it might also take some time to realize the synergies. Moreover, the synergies need to be significant enough to make up for the profit loss.

[@davidgoldstein1856]

Can you explain why your framework is process-oriented rather than idea-oriented? Your framework is "First I will analyze the context, then I will find the root cause, then I will develop the strategies" This is notably different from other prep resources which suggest a framework built around the ideas you need to prove for the hypothesis i.e. "Client should execute [X] because of three reasons: [A], [B], [C]" and then dive into A, B, C So your framework actually does not provide any organization to that regard. Could you please explain the pros and cons of either approach?

[@Prepmatter]

Great observation! As we developed our 10 main frameworks at Prepmatter, we drew on our real-life project experiences. Typically, in proposal documents, we outline a project plan that covers the main steps to address the client's business problem. Since case studies are a condensed form of these projects, sharing your framework in this sequential manner makes you sound more like a consultant, systematically laying out the steps. Regarding the alternative approach of presenting the hypothesis earlier: in consulting, it's not common practice to state a hypothesis and then work to prove or disprove it at the project's onset. This usually occurs at a more detailed level when a consultant is dealing with a specific aspect of the project. For example, if we want to understand why labor costs have increased over time, we might form hypotheses using a decision tree. In case studies, you can certainly frame your framework around a hypothesis; it's not mandatory to follow the approach the candidate here proposed. However, it's important to note that initial hypotheses might not be comprehensive. We often advise our trainees to adopt a hypothesis-driven approach after completing the framework phase of the case study. I hope this clarifies our approach. Ultimately, you should follow the methodology that best suits your problem-solving and communication style. Best of luck with your preparation!

[@jw23800]

Hello! This is a great example case and was very helpful to me with practice. I had a question about the framework approach in the first set of critique. It was stated that it was undesirable to approach the case with a cost/revenue analysis first, rather it was better in coming up with a general, exhaustive framework. Why would approaching the case with segmenting a cost/revenue analysis first, then launching into an analysis of the product framework be the wrong way to approach it?

[@Prepmatter]

Great question. While there's no one right answer, our recommendation is to start with understanding the basics first, such as what kind of products the client produces, where and who they sell to, etc. Understanding these will help ask more targeted questions when analyzing revenue and cost drivers (and prevent you from sounding generic).

[@giuseppe.manzone]

@jw23800 I think that @Prepmatter is quite right here! Although, what you're suggesting could work just fine, outlining a comprehensive framework gives confidence to the interviewer that you are able to look at a problem in a MECE (and therefore comprehensive way).

[@jamesrichardson2191]

I have a case study with BCG one week from today and I’m a sophomore in college. Does anyone have any advice?

[@knishkakhandelwal8122]

Hey, even I have ,my interview with BCG in the coming 3 days. How was your interview?

[@jamesrichardson2191]

@@knishkakhandelwal8122 It was good, but the online case was hard to study for. Best of luck!

[@yashwantgavade7147]

Please guide: Which are the USA target undergraduate colleges for recruitment in MBB?

[@Prepmatter]

Thank you for your question! Here is a list of some target undergraduate colleges in the USA for recruitment in MBB. It's important to note that this list is indicative and not exhaustive, so it's always a good idea to reach out to the firms or the career services of the universities to double-check the current recruiting status. Columbia University Cornell University Dartmouth College Duke University Emory University Georgetown University Georgia Institute of Technology Harvard University Indiana University Massachusetts Institute of Technology Northwestern University Rice University Southern Methodist University Stanford University University of California, Berkeley University of California, Los Angeles University of Chicago University of Michigan University of Minnesota University of North Carolina-Chapel Hill University of Pennsylvania University of Southern California University of Texas, Austin University of Texas, Dallas University of Virginia Vanderbilt University Washington University Yale University

[@yashwantgavade7147]

@@Prepmatter Thank you so much

[@faridabayramova4851]

Amazing video. Very helpful!

[@super30able]

For recovery options, cant the firm explore new markets where the economic factor is comparatively better than the present area of concentration? Strategic alliances with other firms, Incorporate ecofriendly and green sustainable raw materials can also be a consideration in reducing the recurring costs to some extent. Please advise

[@Prepmatter]

Yes, all of them are quite good areas to explore. Perhaps raw material cost reduction is a direct strategy, and new market exploration could be considered an indirect strategy.

[@TomChen-o3s]

On exhibit 3 for the calculation, how did you know 1350 and 1800 can both be divided by 450? Is it just intuitively or is there some sort of 'clue'? thank you!

[@Prepmatter]

It's quite intuitive actually. The difference between both figures is 450, so as the candidate, I figured this number could be divided between 1350 and 1800 nicely. Feel free to practice mental math over here; hope you'll find it helpful! prepmatter.com/dashboard/math-drills

[@christianpark9716]

Hello, Thank you for the content! Fantastic video. One question. It was said after looking at Figure 2 that we should focus on the drop in volume. Can you expand as to why you focused on this? Furthermore, could you please expand on why a drop in volume of the 2 segments would be due to the overall market decreasing or from the company losing market share? How I understand it, price has increased following the drop in volume/quantity to perhaps account for this loss in quantity sold. Is this why the focus is on quantity drop? In this case, why are the only two reasons because 1. market decline or 2. loss in market share? Furthermore, how do we know this wasn't a result of price sensitivity in customers and because of an increase in price, it led to an even further drop in quantity sold?

[@Prepmatter]

Hello, thanks for your kind words! I typically like to approach these cases like a mathematical equation: Revenue = quantity * price. The quantity is going down, but not the price. Hence, I suggested focusing on the decline in quantity. There are only two ways the quantity could have decreased: 1) a decline in market share and/or 2) market shrinkage. There’s simply no third possibility. As for why I didn’t tackle price at first, it's because, mathematically, the price didn’t drop. But you’re absolutely correct that a price increase may have led to a drop in quantity. However, I would’ve only addressed this if I had observed a market share decline. A price increase (alongside many other factors, such as product or service quality) may lead to customer loss and, hence, a decline in market share. So, to wrap up: Level 1: Revenue went down Level 2: Quantity went down Level 3: Market shrinkage (but if it was a market share decline, I would’ve highlighted the effect of a price increase here). Hope this makes sense!

[@christianpark9716]

​@@Prepmatter Thank you for the breakdown and clarification!

[@abhijeet1699]

Team Have one Question that what are indicators in a Case study of Company or for a Product that point at Market Decline? Is there a way know through case study.

[@Prepmatter]

Market decline typically refers to a revenue decline across most (if not all) players in the market. If you inquire about the revenue trends of the client and its competitors, you can gauge whether the issue is market-wide or specific to the client. Unless you have specific knowledge about the product or service outside of the case, you most likely won't know if there's a market decline until you're at the diagnosis section.

[@PamelaRamirez-qm8vv]

Hello, can you explain the process of divide 1200/1500 using the 300?

[@Prepmatter]

Sure! Instead of directly dividing 1,200 by 1,500, I used a common factor of 300. By dividing both the numerator (1,200) and the denominator (1,500) by 300, we get 4/5, which is equivalent to 80%.

[@irsmohsen4833]

such a heavy case

[@udayaryanchowfla4084]

this is is genuine content, appreciate it @Prepmatter

[@kingo_of_bingo]

I'm a bit concerned about the "selling some of their assets" solution. One cannot give this advice before even looking at the balance sheet to see the debt to asset ratio, especially knowing that the true value of a company comes from its tangible assets. Also, you might have to sell your assets for a discounted price in a bad economic environment. This solution might be quick bucks for the short term, but is it really effective for the long term ?

[@Prepmatter]

Hi, Deniz here. Thank you for sharing your thoughts. I agree that selling assets is usually considered a last resort for generating cash in the short term. Interestingly, while at BCG, I once had to fly to the other side of Europe just to communicate a factory closure recommendation. Situations like these are not always straightforward. In our case studies, we often aim to keep things simple and might not always have the time or requirement to delve into the balance sheet. However, I definitely agree that a strong candidate should express concerns regarding this strategy, as you have done.

[@cai-7076]

hi! Thanks for the amazing video. May I ask how you can tell there's an increase in variable cost by the graph? what do the numbers 1800/1500 and 1350/1200 stand for in the cost data? Thank you💕💕💕

[@Prepmatter]

Thank you! I've suggested taking the variable cost-to-revenue ratio and seeing if that increased over time. Normally, you'd expect the variable cost-to-revenue ratio to remain the same, but in this case, it increased from 75% (variable cost of 1350 / revenue of 1800) to 80% (variable cost of 1200 / revenue of 1500) in the last 2 years. Note that I've used numbers like 1350 for brevity, but they actually represent larger values, such as $1.35B.

[@sreelakshmirs522]

It's the "contribution ratio" that he calculated to compare the relationship between the revenue trends nd variable cost trends

[@brianchallita1050]

Is this how a case interview should be delt with for a fresh graduate job??

[@Prepmatter]

Your performance doesn't need to match Deniz's to secure the offer, but it should be as close as possible.

[@jialincheong]

May I ask if this is a MBA Consultant-level or a non-MBA Associate type of interviews? Your reply is much appreciated, Thank you.

[@Prepmatter]

Interviews for consultant or associate levels don't differ much. As a junior candidate, if you perform exceptionally well, the interviewer might push you even further to see what more they can extract from you. However, in this case study, as the candidate, my performance aligned more closely with what we typically observe in MBA consultant candidates.

[@jialincheong]

@@Prepmatter alright thank you for the info! May I request if you can make more of non-MBA Associate or Consultant level type of interviews? Just to see the stark difference of what can we expect from a MBA or a non-MBA. Thank you!

[@ikramhisan6056]

Corruption don't take considerablity?

[@Prepmatter]

Can you elaborate more on your question?

[@alexanderdiva5982]

Hi, Prepmatter! Thank you so much for providing a quality content! I cannot emphasize enough how insightful this video really is! One quick question: In the beginning, there's this specific information about the decrease in profit margin by 8%. It seemed to me that this information was not directly utilized during the entire framework creation, recovery strategy, and the risks bucket. Another piece of information was about the goal they're trying to achieve (i.e., their objective to capture $500M in the next 3 years). I noticed that the final recommendation is weighted more heavily towards recovery strategy formulation rather than how to achieve the $500M initial goal. Would it be tolerable if a candidate accidentally left that information unused? Or is that one of the examples of you trying to demonstrate the 80/20 approach? (p.s. you just earned a new subscriber from Indonesia! Great work, Deniz and Doğa!)

[@Prepmatter]

Thanks for subscribing and supporting us! When I shared my framework, I verbally mentioned the 8% decline in profit margin, but as I progressed through the case, I encountered more granular data like quantity and price evolution per segment, as well as variable and fixed cost trends. I didn't need to refer back to the 8% drop, as I could directly identify root causes and devise initiatives or risks without that information. During the case, I mentioned that achieving the objective may not be feasible. Though, as you can see in my reply to another comment below, I could've spent more time explaining my train of thought. And since I didn't have a robust analysis, I didn't explain the quantification of the impact of the recovery strategies in my recommendation. As you've said, it's an example of the 80/20 rule!

[@SanaOmar-u7y]

LOVE YOU

[@mohammadmousavi1]

I am very new and don’t have any idea about consultancy. I have PhD in physics and electronics engineering but want to switch to consultancy… what field if consultancy is this interview about? How can I get into consultancy job do I need MBA ?

[@Prepmatter]

Hi Mohammad! This case interview exemplifies management/strategy consulting roles in MBB, Tier 2, and boutique consulting firms. PhD candidates are highly sought after in consulting, so you don't need an MBA to join top consulting firms. In fact, PhD graduates are considered at the same level as MBA graduates, meaning you'll be joining in a post-MBA role.

[@gamesforyou4961]

Here i think that the problem being their internal affair they can do some changes As the already changed their suppliers from last year but as the interviewer already mentioned earlier that their currency depriciation against dollar may be a cause for their decrement so , one thing may be that those some materials they are taking from other countries can be supplied by some company of their own country indonesia Second the market is declining but the reason is not known so they can do a survey that if the companies now dont like their product or is there some other reason Third as compared to fy 2020 they reduced revenue much in the large manufacture firms so the company can take a look in it that either the firms ended the contract or they made someone else their supplier and. Can make their strategy according to it One measure is also present that can help them to increase their profit that is merger So if they agree with it they can do a merger with a large construction firm and as the market is declining , with the merger they will be able to run their own construction projects and directed in the right way their construction projects can make them profit and may help them to acquire more percentage share of the market One last is export to other developing countries such as india These are the measures i thought

[@Prepmatter]

Thanks for sharing your thoughts! 1) Correct, seeking local suppliers could be a solution to mitigate the currency devaluation problem. 2) It's mentioned that the market is shrinking due to the economic crisis leading to budget cuts. However, if we've also experienced a decline in market share, it'd be beneficial to engage with (ex)customers to understand their reasons for switching. 3) Agreed on regaining customers, but given it's a market-wide issue, trying to recapture customers and thereby increasing our market share might be challenging. 4) M&A could be a potential strategy. Two crucial factors need consideration: firstly, ensuring anti-trust laws permit market consolidation, and secondly, assessing if the client has sufficient funds for an acquisition, especially considering their current cash constraints. 5) Absolutely, but we need to check if the product is easily transportable. I believe the transportation costs are quite high in this sector, making it an uncommon model. Last tip: When presenting your recommendations, you might want to structure them into direct and indirect strategies for clearer understanding. Hope this helps!

[@gamesforyou4961]

@@Prepmatter okk thank you for your reply 😊😊

[@gamesforyou4961]

@@Prepmatter it will definitely help

[@boningzhang4697]

Hi Prepmatter, really great video and I got a lot of valuable takeaways! Just one small thing, around 16:10 where Deniz was outlining the potential reasons for the variable cost/revenue ratios going up, he mentioned that the procurement cost might be going up because the supply of the raw material remains constant while demand for it is lower due to the broad economic crisis. Wouldn't that make raw material price go down, thus lowering the procurement cost? The logic chain should be that because of the broad economic crisis, demand for cement goes down, so firms like our clients here consequently have a lower demand for raw material. If the raw material producers are still producing as much raw materials as before, then the price of raw material would be lower.

[@Prepmatter]

Great point! From a macroeconomics 101 perspective, you're correct: a decrease in demand with no change in supply leads to a lower price. However, when considering it from a "per unit" standpoint, the client might not have been able to leverage economies of scale, resulting in a less favorable deal, i.e., higher COGS per unit. Thanks for posing this question, and I hope this response clarifies the matter!

[@gold9994]

@@Prepmatter Hi, could you please elaborate what do you mean with "per unit standpoint"? Does it mean that the client could not buy a lot of raw materials, so the price (which should decrease) instead increases? Probably because the raw materials supplier wanted to cut their loss?

[@Prepmatter]

Spot on! When the client doesn't purchase as much raw material, the cost per tonne can go up. It's not so much about the supplier trying to cut their losses, but rather a common occurrence when lesser quantities are bought - the per unit price often rises.

[@bhaviklalitkumarparmar1784]

I would like to present one more points to risk, if this is correct. It is just my opinion. Future regulations constraints. Since Indonesia is surrounded more by the ocean, leaving a small but sufficient amount of land, increases the risks of land acquisition for expanding the business in future. Second risk is the pollution that cement industries produce. In future, government may put some regulations on carbon emissions on these companies as the threat of global warming keeps surrounding Indonesia. If someone is out there, could rate this with their postive or negative review towards my opinion whether you liked it or want to rectify me some where. Thank you.

[@Prepmatter]

Thank you for your insights. Regarding the first risk: While Indonesia is indeed a group of islands, its landmass still ranks as the 14th largest globally. So, constraints on land availability may not be as significant a concern for our client. The second risk is indeed important. With the global trend leaning towards enhanced sustainability measures and the evolution towards Industry 4.0, there's a higher likelihood of stricter environmental regulations in the future. Companies, including our client, must be ready to adapt to more sustainable solutions.

[@mohitsingha210]

What is the financial objective? $ 500 Mn requirement is cash to be generated? Already they are doing $ 1.5 Bn in sales all of which should soon be cash.

[@Prepmatter]

The objective is to generate $500M in cash. It's important to clarify that 'cash' in this context doesn't equate to revenues. In the business realm, 'cash' typically refers to free cash flow. This encompasses operating profits after accounting for expenses such as tax, interest payments, etc.

[@rasimhajiyev9114]

Thank you so much for this content! I have a question and would be thankful if you can address it. Could you please tell me why he says that pricing is not an issue on exhibit 2 ( minute 11:30 )? As far as I understand it, prices and the quantity sold decreased for large infrastructure and heavy construction. He says that we increased the price but it decreased over the course of two years. Sorry if this may sound silly, I just need clarification. Thank you!

[@Prepmatter]

Thanks for your question! The price is the same for all customer segments: $72 in 2020, $75 in 2021, and $75 in 2022. This indicates a price increase over the past two years. Please refer to the legend for further clarity: the left Y axis refers to the quantity (green bars), and the right axis refers to the price point (red square).

[@LauraOliveira-ub4ts]

This interview was incredibly helpful! Quick question why wasn’t the 500 million feasible?

[@Prepmatter]

It's a great question! Since I've spent a lot of time already in the case as a candidate, I didn't delve much into this particular detail. Allow me to share my thoughts here. The client is generating $1.5B in revenues. Typically, an asset turnover ratio (revenue/total assets) of 1 is considered an industry standard, so the company's assets could be around $1.5B. While you're not expected to know this ratio, you should have a rough idea about the size of the client. The goal of generating $500M presents a challenge; assuming the business won't become even more unprofitable (and considering the macroeconomic situation, we might even face negative EBITDA), we would need to sell 1/3 of our client's business. This may not be a feasible strategy. I hope this explanation clears up any confusion. In retrospect, I should've elaborated a little more on my thinking process in the case interview.

[@emiliomvm6400]

Does this interview also apply for entry-level candidates?

[@toukka4]

Of course, this is easy

[@AndreeaA-h9x]

👏🏻👏🏻👏🏻

[@AZNxLEGZ]

Lol - "You guys need to look at your goals again because it's a joke. BTW, we can charge you more money to help you do something about it if you think of a solution because we couldn't. You'll be seeing an invoice tomorrow for us telling you you're screwed."