Help! Case from Wharton 2017 Casebook

There are several common case types that occur in case interviews for management consulting roles. Profitability cases are some of the most frequent ones. These cases require a structured approach, analytical thinking, and a deep understanding of business fundamentals. Let’s take a look at what profitability cases actually are and how you can approach them successfully. Profitability Cases – The Number 1 Reason for Most Consulting ProjectsOne of the most common reasons why firms instruct consulting firms with their projects is that they struggle with their profitability. As a consultant you will have to diagnose the underlying issues, come up with potential solutions and recommend actions to improve profitability.As a candidate in a case interview, the task is pretty much the same, but on a smaller scale. The good news is: Once you have understood the basic structure of profitability cases, you can solve them no matter the industry or concrete business scenario. The underlying concept is always the same and not very difficult.Profitability issues always stem from falling revenues, rising costs, or both. It is as simple as that. Your task will be two-fold: Perform a structured and quantitative analysis of the data to isolate the problem, and then find a promising solution. In most cases, you can use the profitability framework to structure the problem, but make sure to not blindly apply it, but to really understand the problem at hand and make adjustments as needed in the concrete business scenario. The Profitability Framework – A Basic Tool to Structure Your Profitability CaseThe Profitability Framework is a fundamental tool for approaching profitability cases. It is basically an issue tree that breaks down profitability into its key components: revenues and costs.In the first place, this equation is pretty straightforward and not complicated at all. Next, it is your task to understand each side of the equation and identify the cause for declining profitability. There could be three reasons:Revenues have been declining.Costs have been increasing.Revenues have been declining and costs have been increasing.(Always make sure to remember this option. It happens pretty easily that candidates identify either revenue or cost issues as the problem, completely focus on one side of the issue tree and forget to zoom out again, take a look at the big picture and consider the other side of the equation as well.)So, the first question to get an answer to is “Have revenues been declining?”, “Have costs been increasing?”, or “Have revenues been declining and costs been increasing? And if so, which one is the bigger problem?”. Whenever you get the information that something has changed: quantify it! Ask by how much and in what time period. Depending on the answer, you will know on which side of your profitability tree you need to start your analysis. Always start with the most relevant driver (Pareto Principle).💡 Pro Tip: When trying to find out where to start your analysis, keep in mind to communicate like a consultant. A Bainie would not go to the client and bluntly ask “Have your revenues been declining?”, but rather formulate a question like “How have your revenues been developing over the past five years?”. It may be possible that your interviewer will then share an exhibit with you that not only contains revenue information, but also valuable insights on product lines, geographies or other relevant data, which you can use throughout the case. Scenario 1: Revenues Have Been DecliningLet’s assume, the profitability problem stems from declining revenues. There are many potential reasons for this and you need to find out which one applies in order to come up with a solution. Most important for your analysis is to stay structured at all times.1. Understand How the Business Makes RevenueTo structure your analysis of declining revenues, you need to understand the business model of the company you advise. So basically answer the questions:How does this company make revenue?What does the revenue consist of?Which component of the revenue has been declining?Understanding your client’s business model is absolutely crucial for your revenue analysis. Only when you know which products the company sells and which customers it serves, will you be able to give solid advice on how to solve profitability problems.2. Break Down the Revenue into its Single ComponentsOnce you have understood the general business model of your client, you can go on and break down the revenue into its components. Depending on the business model of the company, the equation can differ.Let’s take a look at some examples depending on different industries:Manufacturing and Retail IndustryRevenue = Number of Units Sold × Selling Price per UnitNumber of Units Sold: The total quantity of products manufactured or sold to customers.Selling Price per Unit: The price at which each unit of product is sold to distributors, retailers or customers.Subscription-Based Services (e.g., Streaming Services, Software as a Service)Revenue = Number of Subscribers × Monthly Subscription FeeNumber of Subscribers: The total number of customers who subscribe to the service.Monthly Subscription Fee: The amount charged to each subscriber on a monthly basis.E-commerce IndustryRevenue = Number of Transactions × Average Transaction ValueNumber of Transactions: The total number of orders placed by customers.Average Transaction Value: The average amount spent by customers per transaction.Advertising Industry (e.g., Digital Advertising, Print Media)Revenue = Impressions or Clicks × Cost per Impression or ClickImpressions or Clicks: The total number of times an ad is viewed or clicked by users.Cost per Impression or Click: The cost charged to advertisers for each impression or click generated.Hospitality Industry (e.g., Hotels, Restaurants)Revenue = Number of Rooms or Seats Occupied × Average Room Rate or Meal PriceNumber of Rooms or Seats Occupied: The total number of rooms booked or seats occupied by guests.Average Room Rate or Meal Price: The average price charged per room or meal.It becomes obvious that there is no one-size-fits-all-solution for a revenue analysis. You need to adjust your approach according to the client’s business model and needs.3. Analyze the Single Components of the Revenue ModelOnce you have a clear picture of what the revenue of your client is composed of, you can go on with your analysis by focusing on the component of the equation that appears to be the problem. For example, if your client is a manufacturer with declining revenues, you should find out if the number of units sold has been decreasing or the selling price per unit has been lowered (or a combination of both).If the number of units sold has decreased, you go on with a further analysis on the reasons behind. These can be manifold, so make sure to stay structured and use segmentation to get to the root cause of the problem.The segmentation you use needs to be customized to the case at hand. Make sure to let your interviewer know your thoughts and guide him or her through the case. That way, you will usually get valuable hints on which direction to go.Examples for segmentations are:Product segmentation: Product types? Price ranges? Packaging sizes?Customer segmentation: Small / medium-sized / large businesses? Age groups? Sex? Income groups?Market segmentation: Geographies? Industry verticals?Channel segmentation: Distribution channels?If you’ve found the biggest driver of the problem, you oftentimes have to switch to a more qualitative framework (for example the 4 Cs) to find the underlying root cause. For example: when you have less revenue, but the price is the same and units sold dropped, you have to find out why. Is there a new competitor on the market? Do you have quality problems, or did you just stop a marketing initiative that you ran for years prior to this drop?The same procedure applies if pricing seems to be the issue for declining revenues. “Let’s increase prices” might be an easy recommendation to give, but most likely too easy to be valuable. It is crucial to understand first, why prices have decreased and again, the reasons might be diverse. Make sure to use a structured approach in order to pinpoint the exact problem.Possible reasons and forces for decreasing prices may be:Internal:Increased Supply: Overproduction or excess inventory can lead to discounted pricing to clear out stock.Competitive Pricing: Aggressive pricing strategies by competitors can force companies to lower prices to remain competitive.External:Price Sensitivity of Customers: Changes in customer price sensitivity and purchasing behavior can influence demand and pricing strategies.Market Saturation: Increased competition and market saturation can lead to price wars and downward pressure on prices.Economic Conditions: Economic downturns or recessions can impact consumer purchasing power and demand for products.Exchange Rates: Fluctuations in exchange rates can affect import/export prices and overall cost structure. It may not be surprising that when looking out for the reasons of the client’s revenue problem, staying structured is most important. Come up with solid hypotheses and validate or neglect them in the dialogue with your interviewer and based on the data that will be provided to you throughout the conversation. This requires flexibility and spontaneity, so learning frameworks by heart will not help you here. It is important to internalize the way of thinking a consultant uses and solve cases with peers to put it into practice.👉 To find like-minded candidates for mock interviews, take a look at our Meeting Board and simply accept one of the open invitations.

The GROW model, an acronym for Goal, Reality, Options, and Will, was developed in the late 1980s by Sir John Whitmore and his colleagues Graham Alexander and Alan Fine. It emerged from the realization that traditional training methods often failed to achieve sustainable performance improvements. Whitmore, a former racing driver and a pioneer in the field of executive coaching, played a significant role in popularizing the model and establishing it as a method for performance enhancement in the business world.The model is rooted in the principles of performance-oriented coaching and is heavily influenced by humanistic psychology, particularly the work of Timothy Gallwey, who developed the "Inner Game" concept. This concept emphasizes the importance of internal attitude for external performance and forms the basis for the GROW model.The four phases of the model are designed to help users move from abstract goals to concrete plans:Goal: This phase focuses on defining clear, measurable, and achievable goals. It's about creating a vision that motivates and provides direction.Reality: Here, the current situation is analyzed. It's an inventory that helps to understand the environment and identify obstacles as well as resources.Options: In this creative phase, all possible courses of action are considered. It's about brainstorming ways that could lead to the goal, without prematurely limiting oneself.Will: The final phase is about implementation. Here, decisions are made about the steps to be taken to achieve the goals, and an action plan is created. Since its inception, the GROW model has spread worldwide and is now used in many areas, from personal coaching to sports and corporate leadership. Its simplicity and flexibility make it a valuable tool for anyone who wants to achieve their goals – including those preparing for case interviews.Since its creation, the GROW model has spread around the world and is now used in many areas, from personal coaching to sport and business management. Its simplicity and flexibility make it a valuable tool for anyone who wants to achieve their goals - including those preparing for case interviews.M&A TransactionsGoal: Determine the objective of the M&A transaction. Is it to achieve growth, market access, or synergy effects?Reality: Analyze the current market position and financial health of the involved companies. What cultural and operational challenges could arise during integration?Options: Develop strategies for integration, identify potential synergies, and assess risks. How can resistance be minimized and the employees of both companies be involved?Will: Decide which integration approach should be pursued and create a detailed plan for the first 100 days after the merger.Market Entry StrategiesGoal: Define the objective of the market entry. Is it about tapping into new customer segments or expanding into new geographical markets?Reality: Examine market conditions, competitive landscape, and customer needs. What regulatory hurdles exist?Options: Work out different market entry strategies such as joint ventures, franchising, or establishing own subsidiaries. Which strategy promises the most success considering the company's resources?Will: Choose the appropriate market entry strategy and plan the implementation steps, including timeline and budgeting.PricingGoal: Formulate the pricing objective. Is it to increase market share, maximize profitability, or introduce a new product?Reality: Evaluate the cost structure, customer willingness to pay, and the competition's pricing. How does the product position itself compared to alternatives?Options: Develop pricing models based on value-based, cost-plus, or competitive pricing. Which pricing strategy fits the company's image and customer requirements?Will: Decide on a pricing strategy and plan the implementation, including communication measures and monitoring market reactions.By applying the GROW model, you can demonstrate in case interviews that you are capable of structured and goal-oriented thinking, while considering all relevant aspects of a business problem.Structuring Questions and AnswersA clear structure is essential in case interviews. The GROW model helps you organize your answers:GoalQuestion: What is the primary objective that the company wants to achieve with this initiative? Answer Introduction: "The primary objective of the company is to ..."Question: What long-term effects are intended with this decision? Answer Introduction: "In the long term, the company aims to ..."Question: How does this objective fit into the overall strategy of the company? Answer Introduction: "This objective supports the overall strategy of the company by ..."Question: What financial or market-related objectives are associated with this measure? Answer Introduction: "Financially, the company aims to ..."Question: What qualitative objectives, such as customer satisfaction or brand strengthening, is the company pursuing? Answer Introduction: "Qualitatively, the company seeks to achieve ..."Reality (Reality)Question: What internal and external factors are currently influencing the company's situation? Answer Introduction: "Currently, the company faces the following internal and external factors ..."Question: How do you assess the company's competitive position compared to its main competitors? Answer Introduction: "Compared to the main competitors, the company stands ..."Question: What strengths and weaknesses does the company have concerning the defined objective? Answer Introduction: "Regarding the defined objective, the company has the following strengths and weaknesses ..."Question: How has the market developed in recent years, and what does that mean for the company? Answer Introduction: "The market development in recent years indicates that the company ..."Question: What legal or technological changes could affect the situation? Answer Introduction: "Legal and technological changes could influence as follows ..."OptionsQuestion: What strategic alternatives are available to the company? Answer Introduction: "The company could strategically consider A, B, or C, where ..."Question: How could different solution approaches affect the company's objectives? Answer Introduction: "Solution approach A could affect the company's objective by ..."Question: What risks and opportunities are associated with each option? Answer Introduction: "Option A entails the following risks and opportunities ..."Question: How would stakeholders react to the different options? Answer Introduction: "The stakeholders' reaction to option A could be ..."Question: What short- and long-term effects would the different options have?Answer Introduction: "In the short term, option A would cause the following, while in the long term ..."WillQuestion: How could the company effectively implement the preferred solution? Answer Introduction: "To effectively implement option B, the company could ..."Question: What resources are required for the implementation of the chosen option? Answer Introduction: "For the implementation of option B, the company needs the following resources ..."Question: How can the company ensure that the chosen option leads to sustainable success? Answer Introduction: "To ensure the sustainability of option B, the company should ..."Question: What measures are necessary to prepare the employees for the implementation of the option? Answer Introduction: "To prepare the employees for option B, the following measures are necessary ..."Question: How will the success of the implementation be measured and evaluated? Answer Introduction: "The success of option B will be measured and evaluated based on the following criteria ..."Developing Solution StrategiesThe GROW model is your navigator through the jungle of solution possibilities. It helps you systematically think through all options and evaluate them in terms of their feasibility, potential, and impact on the company's objective.Ask yourself for each option: "How realistic is the implementation, and how much does it contribute to achieving the goal?" Compare the options with each other and decide not only for the feasible but for the most effective strategy that advances the company.Improving Self-Reflection and Self-PresentationThe GROW model acts like a mirror for your thoughts and actions. It promotes self-reflection by encouraging you to think about your personal strengths and weaknesses in the context of case resolution. This self-knowledge is crucial to sharpen your self-presentation in the interview. You learn to present your arguments confidently while being open to feedback. This not only shows your professional competence but also your personal maturity and adaptability.Practical ExercisesTheory is one thing, practice another. To master the application of the GROW model, you should regularly practice it in training scenarios. Use real or constructed cases to train the application of the model. Whether alone with self-reflection or in a group with peer feedback – each practice makes you more confident in using the model. This way, you sharpen your argumentation and become a master of structured problem-solving.By integrating the GROW model into your preparation strategy, you will not only shine in case interviews but also develop valuable skills for your future career as a consultant. It is a tool that helps you master complex challenges and shows that you are ready to think and act at a high level.Conclusion on the GROW ModelWith its clear structuring into the phases of goal setting, reality check, options evaluation, and will formation, the GROW model provides a foundation for systematically tackling and solving complex business problems.For aspiring consultants, the GROW model is interesting for several reasons:Structured Thinking: It forces you to think in structured ways and promotes a clear, logical approach to problems – a skill that is invaluable in the consulting industry.Effective Communication: The model trains you to articulate thoughts precisely and present them convincingly. This is crucial not only for passing case interviews but also for later work with clients.Self-Reflection: It encourages self-reflection, which helps to better understand and communicate one's strengths and weaknesses – a key competency for personal development and leadership tasks.Decision-Making: The GROW model supports the development and evaluation of action options and promotes informed decision-making.Adaptability: By applying the model, aspiring consultants learn to react flexibly to different situations and adjust their approach accordingly.Practical Application: It is directly applicable in practice and can be used both in real projects and in simulated case interview situations.In short, the GROW model helps you master the challenges of case interviews and prepares you for a successful career in consulting. It sharpens the skills necessary for the consultant's daily routine and supports you in positioning yourself as a competent and reflective candidate.