Duke APD Consulting Club Case Practicing Duke APD Consulting Club 11/11/2018

Meeting Agenda Brief review of last meeting Skills for today: Basic steps for case solving How to give feedback Mental math tips Profitability framework Skills for today: Mental math practice Market size estimation Sample Case – Framework No.2 Case practice 11/11/2018

Meeting Agenda Brief review of last meeting Skills for today: Basic steps for case solving How to give feedback Mental math tips Profitability framework Skills for today: Mental math practice Market size estimation Sample Case – Framework No.2 Case practice 11/11/2018

Basic steps for case solving Summarize the case and clarify the objectives Make hypothesis and develop issue tree Drill down on each topic Summarize the results First five steps: Summarize the question Verify the objective(s) Ask clarifying questions Label the case and lay out your structure State your hypothesis 11/11/2018 case in point 8th edition, 4: IVY CASE SYSTEM

Time: usually 20 to 30 min. It can be extended for beginners How to give a feedback Time: usually 20 to 30 min. It can be extended for beginners Track down the partners performance during the practicing, where they did good and where they got stuck Summarize their strong points and weak points 11/11/2018

Tips for mental math: Mental math tips Round up or round down: keep it in mind, you don’t have to be precise, just be accurate enough Be sensitive to some relations: like 1/4=0.25, 1/6= 0.16, 1/7=0.14 or 0.15, 1/8=0.125, 1/9=0.1 Break it down to several easier parts: 10/6 * 24, 24*25 To avoid unnecessary calculation: 25*40,000 and 65*20,000, which is bigger Practice more: www.caseinterviewmath.com 11/11/2018

Profitability framework Framework 1: profitability 11/11/2018 Case interview secretes, by Victor Cheng

Introduction to Case Practice series Items to cover: Mental math, Market size estimation, Case interview frameworks, Basic case interview skills, Case practice with peers 11/11/2018

Meeting Agenda Brief review of last meeting Skills for today: Basic steps for case solving How to give feedback Mental math tips Profitability framework Skills for today: Mental math practice Market size estimation Sample Case – Framework No.2 Case practice 11/11/2018

Mental math practice Mental math practice: (1 min, error should be controlled under 20%) 11/11/2018

Meeting Agenda Brief review of last meeting Skills for today: Basic steps for case solving How to give feedback Mental math tips Profitability framework Skills for today: Mental math practice Market size estimation Sample Case – Framework No.2 Case practice 11/11/2018

Market size estimation Why market size estimation In interviews, it can be a single question in the first round, or embedded into a case in the following rounds Clients ask a lot How to do a market size estimation Structure: population based, house-hold based, or preposterous types Assumption: based on common sense, or other evidences Math: calculation 11/11/2018 CASE IN POINT: Complete Case Interview Preparation, 8th Edition

Sample market size question How many gas stations are there in the U.S.? Step 1, Structure: # of cars / # of cars a gas station serve Or Gas station density * total area of the U.S. Other structure? 11/11/2018

Sample market size question How many gas stations are there in the U.S.? Step 2, Assumptions: # of cars: 320 million of total population; evenly distributed by age; every 20-70 year-old- person has a car. # of cars a gas station serves: each gas station has 6 pumps; each pump serves 2 cars at the same time; every 20 minutes a car comes to the pump; cars come mostly between 7:00 am to 7:00 pm; each car has to refuel every month. 11/11/2018

Sample market size question Step 3, Calculation: # of cars: Total population = 320 million Age of 20-70 population = 200 million (evenly distribution, with the average life expectancy of 80) # of cars = 200 million 11/11/2018

Sample market size question # of cars a gas station serves: each gas station has 6 pumps; each pump serves 2 cars at the same time; every 20 minutes a car comes to the pump; cars come mostly between 7:00 am to 7:00 pm; each car has to refuel every month. Between 7:00 am to 7:00 pm, # of cars served by each pump = 12 hr * 60 min/hr * 1 car/20min * 2 = 70 cars For 1 month, # of cars served by each pump = 70 car/day * 30 day = 2,000 cars For each station, # of cars served in 1 month = 2,000 cars/pump * 6 pumps = 12,000 cars # of gas station = # of cars / # of cars each station serves = 200 M cars / 12,000 cars/station = 19,000 stations ? 11/11/2018

Estimation tips Know the imperfection of your estimation; Segmenting estimates to minimize estimation imperfections; Solving the sub-estimates via assumptions 11/11/2018 Case interview secretes, by Victor Cheng

Estimation tips Imperfection: Fix: Each 20-70 year-old-person has a car, every 20 minutes comes a car to a pump Fix: 1, find other clues to estimate this value; House-hold, and the average # of cars in each home? 2, segmenting this portion According to people’s income, people aged 20-25 on average has 1/3 car for each, people aged 25-40 one car each, and for people aged 40-70, 2/3 of them has one car, 1/3 of them has more than one car (let’s say 3). 11/11/2018

Summary 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 11/11/2018

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 11/11/2018 CASE IN POINT: Complete Case Interview Preparation, 8th Edition

Meeting Agenda Brief review of last meeting Skills for today: Basic steps for case solving How to give feedback Mental math tips Profitability framework Skills for today: Mental math practice Market size estimation Sample Case – Framework No.2 Case practice 11/11/2018

Market situation framework Customer Product Who is the customer What does each customer segment want Price sensitivity Distribution channel preference by segment Customer concentration and power Nature of product Commodity of differentiable good Identify complementary goods Identify substitutes Products life cycle packaging Company Competitor Capabilities and expertise Distribution channels Cost structure Investment cost Intangibles Financial situation Organizational structure Competitor market share concentration Competitor behaviors Best practices Barriers to entry Supplier concentration Regulatory environment 11/11/2018

Meeting Agenda Brief review of last meeting Skills for today: Basic steps for case solving How to give feedback Mental math tips Profitability framework Skills for today: Mental math practice Market size estimation Sample Case – Framework No.2 Case practice 11/11/2018

Sample case Your client is the CEO of a paint manufacturing company. Our consulting team has previously worked on optimizing their cost structure. The CEO wants to further improve their profitability. How would you analyze the situation? Industry: Customer: Products: Company: Competitor: 11/11/2018

Case Practicing 11/11/2018