In this type of question, you have to give out characteristics or attributes that certain entities value the most in particular situations.
Ok, that was confusing. Let’s look at a simple example:
The client is a hotel in New York City. A major type of customer is foreign tourist. What are some things that those customers look for from hotels? In other words, what factors of hotels affect their decisions on which hotel to stay at?
Price - (for lower-end customers)
Room, hotel quality - (for higher-end customers)
Safety - (NYC has a reputation of being an unsafe city)
Availability - (sometimes tourists just book whatever hotel that has rooms available)
Value Added Services - (Foreign tourists are often not familiar with the city. Ex of VAS: tourist guides, interpreters, transportation …)
Tips for answering Value Proposition questions
In this example, imagine yourself being a foreign tourist, what would you think…?
In this example, you are a tourist from abroad, not a businessman from Boston. If you are a businessman from Boston, you will not value the VAS that much, Room-hotel quality will be emphasized, the location will need to be close to the downtown district instead…
In this example, if the location was a highly peaceful city such as Sydney, Australia instead, would you still worry that much about safety?
Be aware that sometimes you need to segment. The needs and the values of each segment can be different. In the example above, you may segment tourists into two groups: high-end customers and low-end customers. High-end tourists value Room quality and services while low-end tourists value Price.
Remember to try doing it yourselves first before looking at Value Proposition answer keys! Also, please email me if you have extra ideas or solutions to be added!
A McKinsey Partner from the Tokyo Office has to attend a last-minute appointment with a potential client in Seoul, Korea. What are things that he looks for when he chooses which airlines to fly with?
ABC is a newly start-up outsourcing company. It is considering where (what city and what building in that city) to establish its office. What are things ABC will look for in different cities and buildings to make the final decision?
( answers towards the end of the module )
10 minutes into his interview with McKinsey, Tom was given the following chart as the interviewer calmly asked:
What insights can you draw from this chart?
If you were Tom, would you be ready to answer that kind of question?
Let’s tackle the Data – Chart Insights question type in Case Interview!
A big part of a consultant’s day-to-day job is summarizing facts and data into charts and slides that tell messages and stories. In order to make good charts and slides, you must be able to read and understand them well.
Usually McKinsey, Bain, and BCG’s slides contain a “lead”, or a key message, written on the top with the illustrative and supporting facts / charts below. In this type of case interview question, the “lead” was removed leaving only the charts to you. So every chart you get in case interviews have insights. Your job is to reverse the process: coming up with the “lead” from the given charts.
There are two parts about drawing insights from charts and exhibits. Part 1 is abouthow to read charts and Part 2 is about identify the “a-ha” about them.
Charts and exhibits in consulting are usually very clear with a detailed title, description, and unit of measurement. However, it would take sometime to find those information if you are not familiar with consulting charts. Here I will show you (a) the basics of all consulting chart components (using McKinsey-style examples) and (b) the basics of most common types of charts.
(a) Components of a typical chart/slide
The key to identifying insights in most cases is to recognize the unusual or unexpected items. Let’s look at an example.
Finding insights for the question is a game of identifying the unexpected. Here are a few unexpected items on the chart:
The more expensive price one charges, the worse perception of its price is. Therefore we would expect most points to line up in an imaginary diagonal line connecting the top-left and bottom-right corners of the chart.
Amazon, unexpectedly, stays above the line, leading us to the first insight: Amazon is the top performer based on the chart. It is able to charge a high price while its customers don’t feel they are paying too much.
Physical stores vs online stores:
Theoretically, prices in physical and online stores should be the same.
However, as shown on the chart, all brands charge higher price in their online stores.
Moving from physical stores to online stores:
We would expect that the steepness of Target, JCPenny, Kohls, and Macys lines are the same.
However, Macys’ line is much less steep, meaning that it has success in moving from physical stores to online stores: charging higher prices while only slightly hurting their perception of price.
Business Valuation is a special type of Guesstimate question where the target variable is the value of a company or a business line.Example of a real McKinsey Business Valuation question:How much is Singapore Airlines worth today?
Generally, you will still follow the same 4-step approach of Guesstimate questions:
(3) Solve, and
However with Business Valuation questions, step (2) and step (4) require a little more technical concepts.We will be showing you two of the most popular Business Valuation methods. Case Interviews will not ask you about more complicated financial techniques.
The rationale behind this method is this: how much money do you need to have in the bank now to generate that much annual Cash Inflow (Income).
Why Discounted Cash Flow is not perfect?Think about this Business Valuation question. Why are the values for NBA teams are so high even though most of them neither make money nor are expected to make money?The answer is that people own teams for reasons other than just money. The Discounted Cash Flow only takes money into consideration.
Value of a Business = Base Value x Industry MultiplesThe Base Value is often a standardized value that best predicts a company\\\’s value in each particular industry. This can be Revenue, Net Profit, Number of Register Users, etc. Choosing the best Base Value depends on each industry.The Industry Multiple is the relative ratio of how many times of the Base Value the company\\\’s value is. The value of the Industry Multiple also depends on each industry.
Estimate the Value of the following.1. Southwest Airlines2. Walmart3. Harvard University4. Manchester City Soccer Team5. Apple6. This website: www.MConsultingPrep.com7. Tax Division of Deloitte in the New York City office8. Marriott9. University of Alabama Football team10. Statue of Liberty… Answer key is coming
As you know, a big part consulting is getting data and making conclusions from it.
Therefore in case interview and especially interviewer driven case interview,information questions are usually asked.
Type 1 – broad: Ok, that is an interesting hypothesis (guess). What information do you need to test it?
Type 2 – sources: So you want to find out the market share of the client? How do you do that?
In Type 1 of Information Questions, you can typically say: I would like to have information on the Market Share of the client for Product A.
In Type 2 of Information Questions, you are asked to provide the detailed sources of information. You will have to say: Several ways to get this information are reviewing annual reports, buying market reports, interviewing industry experts….
Information Sources Library – Type 2
A good way to prepare for Type 2 is to have an Information Sources Library.
This is beneficial in two ways.
First, some information sources can be used in many different situations and cases. Having them ready to give out is always good.
Secondly, the process of gathering and maintaining this library is actually very good training for your mind.
Possible sources could be:
Usually, these questions will be asked together.
First, the interviewer wants you to give a broad overview of what information you should have. Then, you are asked to give out some sources for that information.
Hypothesis: The reason for declining Sale is that the client exercises too many cost saving strategies that lead to low quality products
What information do you need to test that hypothesis?
The Client wants to find out if the supplier is able to manufacture and deliver supplies on time. How is it going to that?
Hypothesis: The reason for declining Profit is that the client has a a too complicated labor system. What information do you need to test that hypothesis?
Situation 1 Solution
Situation 2 Solution