How to Structure and Choose Framework for Profitability Case

Question

Hi guys,

I just started to study for the case interview and began with the profitability problems (as many of you suggested), and I do have a couple of questions regarding the framework...

1. I'm studying with the case library and found that the 'structure' given in those cases is pretty different from the ones typicall used - they use terms like prioritization, strategy, and even background, which don't sound like components belong to a framwork...

2. I know that it's basically needed for every profitability case to have cost and revenue analysis, but how about competitors? Some have competitor analysis right after profit analysis as you need to benchmark competitors to see what they are doing right, while some cases, like the 'Chewing Gum' one, don't really have a competition analysis. I'm a bit confused that, since we are structuring framework before we get all the info, we actually don't know where this whole thing will go to - then how to determine which components to include? How to decide whether we will need a competition analysis?

This is like my very first day of case prep so please excuse if you think I'm asking bad questions. Any inputs would be appreciated!

Answer 1

Hi,

Given this is your first day, I'm going to take a step back and answer the question you're really asking: How do I use frameworks in a case?

If there's anything to remember in this process, is that cases don't exist just because. They have come about because of a real need to simulate the world you will be in when you are hopefully hired. As such, remember that they are a simplified version of what we do, and they test you in those areas.

As such, remember that a framework is a guide, not a mandate. In the real-world, we do not go into a client and say "right, we have a framework that says we need to look at x, y, and z and that's exactly what we're going to do". Rather, we come in with a view, a hypothesis, a plan of attack. The moment this view is created, it's wrong! Same with your framework. The point is that it gives us and you a starting point. We can say "right, part 1 of framework is around this. Let's dig around and see if it helps us get to the answer". If it does, great, we go further (but specific elements of it will certainly be wrong). If it doesn't, we move on.

So, in summary, learn your frameworks, use the ones you like, add/remove to them if the specific case calls for it, and always be prepared to be wrong. Focus rather on having a view, refering back to the initial view to see what is still there and where you need to dive into next to solve the problem.

Hope this helps :)

Answer 2

You can check those links:

https://www.preplounge.com/en/consulting-forum/how-to-structure-a-profitability-case-1274

https://www.preplounge.com/en/consulting-forum/profitability-caseframework-approach-570

https://www.preplounge.com/en/consulting-forum/profitability-case-structure-product-customer-distribution-channel-mix-691

Answer 3

Hi,

Regarding your 2nd question - there is a difference between the data analysis and something being the part of the framework:

When you are analyzing some numbers, you can do 3 things:

Compare with historical data
Compare with competitors
Segment the data further

When you want to analyze the competitors you might want look into:

Their market shares and growth rates
Profits
Unit economics (Products, Prices, Cost per unit)
Key capabilities

As you can see, just comparing the data with the competitors does not have much in common with in-depth competitive analysis.

Best

Answer 4

Dear A,

Congratulations with your first day)

For structuring I would recommend you the main formula of what profitability is about.

Profitability = revenues - costs.

There are 3 typical ways on how you can structure the revenues and segment them:

1. by customers,

2. by products

3. by geographical markets

Regarding the costs you may structure them either in the fixed and variable cost, or may also structure them by different kinds of cost - like personell cost, material cost, etc. The other way to look about it is to structure the cost along value chain.

So, depending on the case you might use different approaches and segment your revenues and cost side.

Regarding you Q2, I agree with Vlad here that sometimes comparing the data with the competitors doesn't have much in common with competitive analyisi.

Also, I've uploaded a profitability case “Deep Water rescue” (available in English & German) here on Preplounge:
https://www.preplounge.com/en/management-consulting-cases/candidate-led-usual-style/advanced/deep-water-rescue-206

I used similar cases when I was interviewing candidates on my own in Central Europe (Germany & DACH Region), Eastern Europe (Ukraine & Russia) as well as Middle East (Dubai, KSA, Lebanon, and Qatar). So, this case is very advanced and could be typically used in the 2nd or 3rd interview rounds by the leading consulting firms.

Try, whether you can crack it.

Best,
André