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Market-sizing questions surface all the time and can be found during any round of interviewing. Sometimes it’s a stand-alone question, but most often it’s embedded in a larger case. When I hear a market-sizing question I like to label it. Is it a population-based question, a household question, or a preposterous question?
Case in Point PDF Book by Marc Cosentino
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Regardless of the type of market-sizing question, your answer should be based on logic and assumptions. Other times the question is long and involved and is filled with data that comes at you as if from a fire hose. It’s difficult to capture all that information in your notes, so the first step is to summarize the question.
That way, if you missed something or wrote it down wrong, the interviewer will correct you before allowing you to move on. It puts you and the interviewer on the same page from the beginning, thus keeping you from answering the wrong question. Summarizing the question shows the interviewer that you listened, and it fills the gap of silence between the end of the question and the beginning of your answer.
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Make sure you streamline the summary; don’t repeat it back word for word. Case in Point PDF Book Download If there are numbers in the problem, always repeat the numbers because you’re not sure whether they are going to be relevant, and you want to make sure you’ve got it right. I’ve known plenty of candidates who received job offers without ever stating a hypothesis.
Think of it as icing on the cake. If you can remember to state one, they’ll love it. If you forget, though, it’s not the end of the world. But because the interviews are so competitive you’ll want to take every advantage. A simple trick to remind yourself to state a hypothesis is to lightly write the letter H in the middle of your first page of notes before you go in to the interview.
That way, as you are writing out your structure, you’ll see the H and be reminded to offer a hypothesis. In real life, consultants can take up to two days to form a hypothesis, but you have about five minutes. So don’t worry if your hypothesis is wrong. It eliminates one possibility and allows you to restate your hypothesis and focus on another aspect of the case.
Think of the process as one of elimination. Case in Point PDF Book Download The other parts to the profit-and-loss formula are price and volume. Price and volume are interdependent. You need to find the best mix, because changing one isn’t always the best answer. If you cut prices to drive up volume, what happens to the profit and next-year sales?
Do profits increase or decrease? There must be a balance. The reason behind the decision must make sense. The company strategy or objective is the first and most important component of a pricing case. Let’s take the tablet market as an example. Apple came out with the iPad.
It was first to market; the iPad’s a beautiful piece of technology, but kind of pricey. We know Apple likes big margins. Apple was going for profits. Next Samsung came out with the Galaxy. Case in Point PDF Book Download Another beautiful piece of technology, but the company’s margins were smaller and the price lower. Samsung was going for market share.
Then the Amazon Kindle Fire was launched. Amazon sold it for what it cost them to make it. The strategy was to get as many Fires as possible out into the market, because the company makes more off the ancillary sales, the books, movies, songs, and Prime membership than it would ever make from the sale of a single device.
These are three very successful companies, with three very different pricing strategies for basically the same product. By writing revenue-based strategies on your paper, you are showing the interviewer that you are well organized and thinking two steps ahead. It is easier to think of some ideas if you are looking at a heading on a piece of paper rather than at a blank page.
It also keeps you from ping-ponging back and forth between revenue-based and cost-based ideas. You want to present all the revenue-based ideas first, and then the cost-based ideas. Case in Point PDF Book The reason to ask for a moment to note down a few ideas is that it allows you to think of ideas in any order, but present them in the right order.
It also gives you some place to go. Keep in mind that the interviewer has probably given this case ten times. He knows every answer that you can think of, and he’s heard them all before. There is a good chance he will cut you off as soon as he knows where your answer is headed. It is very difficult for people to drop a thought and then come up with a new thought right away.
When cut off in mid-thought, people tend to panic, scramble, and then shut down. They can’t think of another idea to save their lives. If you take the time to jot down some ideas and you are cut off, then you can just look at your notes and offer another idea. It takes a lot of stress out of the process and makes you look more professional.
Also, if you hit a wall and can’t think of anything, go back and look at your first page of notes. Case in Point PDF Book Remember, the student told us a couple of great things about the economy: Interest rates are way down and the dollar is still down against the yen. Another thing we could do is to offer consumer financing, either at zero or 1 percent.
Offer more for trade-ins as well. We determined that it was important not to drop prices, but we still have a lot of inventory on hand. I would do venture selling, trade our inventory for stock in oil companies that are down but not out, firms that might be a target of a takeover or who have the resources to ride out the oil price downturn.
Because our client is the only competitor with Casual cups, our client exclusively has shelf space in the Drug channel and sizeable distribution in Grocery. It might be possible for our client to swap out the Casual cups for Party or Special cups in the Grocery and Drug channels. Is that a possibility?
To get the most out of this chapter, read the case out loud, pretending it is a real interview. Case in Point PDF Book Make an audio recording of yourself as you work through the first few steps, summarize the case, verify the objectives, and ask key questions. Write or draw out your notes as you would in a real interview, and then compare your notes with those found on the following pages.
It’s okay if they don’t match up. Remember, there are no right answers; the interviewer is looking to see how you think, how you structure your thoughts, and how you communicate. Play the case start back, and listen to the speed, tone, and confidence level of your voice. At first you’re not going to be happy, probably downright embarrassed, but the more you practice the stronger you become.
Summarize the case and verify the objective. Case in Point PDF Repeat the question to make sure everyone is on the same page and then verify the objectives. In this case the objectives are to grow the company, regain market share, and rebuild the brand in the eyes of consumers. There are no other objectives. I’d protect what’s mine.
I’d visit with my customers and find out what is important to them. Maybe increase my promotional efforts. Maybe come up with customer loyalty programs. Make them feel wanted and special. Everyone likes to feel appreciated. And second, I would do everything I could to establish long-term contracts to lock customers in.
To go along with that, I’d build in incentives or give commissions to our sales staff to re-sign a client. Bring in new customers. I’d increase my marketing efforts, place ads, go to conventions, lobby for state contracts. I’d try to steal sales staff and customers away from my competition. And finally, I would grow through acquisition.
You mentioned that there were a number of smaller players that had one or two big accounts. I’d see if they would like to sell their businesses. Yes, but we need to figure which part of the business. Case in Point PDF When I asked you if there were any other objectives or goals, you said profit. What you didn’t say was to become a major player in the consumer diapers market.
That means there are several ways we could enter. I’d like to list them, then look at the advantages and disadvantages of each. We could start up our own diaper company, form a joint venture, buy a smaller player and substitute our product for theirs, or manufacture the diapers and license them to a number of companies.
First, let’s look at starting our own company. We have name recognition, but not in that industry. We would have to set up a manufacturing plant, hire a management team, marketing team, and sales force, and establish distribution channels. Time consuming and expensive, but doable.
Second, we could form a joint venture with an established diaper company. The advantages are that the company already would have everything in place as far as name recognition, management team, sales force, and distribution channels. But we might find this limiting. Depending on the deal, we might be able to manufacture only for them.
I want to divide this into short-term solutions and long-term solutions. In the short term, the company has several options. It can buy the new engine and raise its prices, but that would pit it against Honda, so that’s not ideal. It could close its doors and liquidate the company, or even sell its company to Honda, who wants to enter this lower market.
Do you know how long it would take to redesign the mower and retool the factory? Case in Point PDF Their stock is even more depressed than ours. There is a chance they will fold, but in the long term I think it is worth the risk, and if they are bought out or turn it around, we would have made a larger profit while protecting our prices. We would need to do our due diligence.
One obvious conclusion is that Party cups are bought either in the grocery or through the warehouse channels, which makes sense given the quantities usually needed for a party and the value proposition of warehouses selling large quantities of most products. Again, not an ideal solution. It could eat its margins for the busy season, and then switch to the flat-top engines when things slow down.