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How to Solve Case Studies at Consulting Interviews

by TheWharfConsultant on April 16th 2023
If you are thinking about a career in management consulting, you will probably have heard that case
If you are thinking about a career in management consulting, you have probably heard that case studies are a big part of the interviewing process. Having been on the other side of the table more often than I can count, I wanted to give you some advice on the process and on case studies in particular.

The Shift from Brain Teasers to Case Studies

I have seen brain teasers being used less and less (“how many piano tuners are there in Chicago?”, “how much paint do you need for a 747?”, “how many ping pong balls fit in a Mini?”, and so forth) and being replaced by case studies of real or dummy companies, with or without some data given. After you have been given a task, you then have some time (quite often an hour) for calculations, some simple modeling (if you can use a computer), and for preparing a short presentation to be given after that preparation time. This is much closer to the actual work that you are going to do.
Other parts of the interviewing process can be a run-through of your CV, behavioral questions, and cultural fit—probably worth another post at some point in the future.

Why Case Studies Are Important for Preparation

The good thing about case studies is that you can practice them (and you should do that in preparation for your interview). Sometimes, the companies even give hints about what to expect in the process. The main thing about solving case studies is to (over)communicate throughout how you came to your conclusions and show your workings. Just showing the result is usually not enough.

An Example Case Study: IKEA and Hot Dogs

Let me run you through an example, providing a view on a real company from the outside without data available: a sample question could be “Does it make sense for IKEA to sell hot dogs?” Some of the possible answers do not necessarily require hard numbers; for example, it is part of the customer experience to offer food at reasonable prices (customers will stay longer in the market and potentially shop more if they do not have to worry about food and drinks), or a furniture shop should focus on its core business rather than selling food. However, you would like to know if IKEA makes a loss on hot dogs (in which case they would need to be subsidized by higher sales if clients stay longer) or if it is a profitable part of the business.

Revenue Side of the Case Study

You can start with the revenue side—last time I checked, an IKEA hot dog was sold at £0.75.

Cost Side of the Case Study: Ingredients

If you look at the cost side, you start with the main ingredients: a sausage and a bun. In a supermarket, you can get a jar of 8 sausages for £2, so it would be £0.25 per hot dog, and 8 buns for £1, so £0.125—the main ingredients are £0.375 (ignoring food waste for the moment). Now assume 2.5p for condiments, napkins, and wrapping to get to a round figure (and save you a lot of hassle in calculating the cost for two splashes of mustard)—£0.40 for ingredients.

Labour Costs

Now, let's look at labour costs—to keep things simple, assume one person behind the counter selling on average 50 hot dogs per hour, total cost at £20/hour, so £0.40 per hot dog, giving us a total cost of £0.80. So, no break-even? Not so fast—IKEA buys the ingredients in bulk, most likely sourcing them directly from the factory (more on that below), so the costs for the ingredients are probably a lot lower. If we assume a 50% discount as they are probably sourcing directly, we are back in the green with £0.60 for ingredients and labour, leaving 15p for energy, floor space, and other overhead costs.
Calculating these costs will be slightly tricky, as these costs will be spread across a number of products. You will probably remember from your last visit to an IKEA store that there is an area for shopping food quite close to the hot dog stand, so you can make the argument that (most of) these costs are overheads and add a generous 20% on the £0.60. With a total cost of £0.72, we will break even.
Going back to the revenue part, you can also make the argument that revenues will be higher as other items will be sold with the hot dogs as well (e.g., drinks) and that staff could be shared with the food space close by.

Estimating Customer Numbers

You might have noticed that I have avoided looking at the number of customers so far to keep things simple, especially if you only get a pen and paper to solve the case. To estimate the number of visitors per market or for the whole of the UK, let's say that there are 10,000 visitors per day. If the market is open on 350 days a year (i.e., closed for public holidays and maybe some repairs every now and then), that gives you 3.5 million visitors per year. Now assume how many visitors will buy a hot dog—probably the key assumption for this case. Let's say 25% (or 12.5% buying two), and you arrive at 875,000 hot dogs a year per market or 2,500 per day.

Tips for Solving a Case Study

Here are some tips for solving such a case:
- Always have pen and paper ready, regardless of whether it is a remote interview or in person—it helps with shaping thoughts and calculations.
- Use rounded numbers if you do not have a calculator at hand—it makes life easier for you and you can quickly calculate figures if questions come during the presentation.
- Make reasonable assumptions to simplify things—you can spend a lot of time calculating the cost of mustard per hot dog sold (£4 retail price for a 1 L bottle of mustard, so maybe £2 actual cost if buying in bulk; every second customer will take a squeeze of 10 mL, so 1p per hot dog sold) and then argue how many customers will take ketchup or mustard or both, but that risks missing the point.
- Be prepared to show your working by running the audience through your calculations.
- If asked to present, prepare a couple of slides (if you have a computer at hand), but put the calculations in the appendix.
- Your interviewer will know that you are working under pressure—they would rather see okayish slides with the correct answers than beautiful slides with the wrong calculations or conclusions.
- As part of your interview preparation, try to find (and memorize) assumptions that are quite common (e.g., for marketing, salary ranges, profit margins, commissions for sales, tax rates, rebates for buying in bulk, etc.). You do not have to make the right call each and every time but should be in the right range; for example, with the salary for the person selling the hot dogs above. In a case with one hour of preparation, no one will put you on the spot about whether it should be £19 or £20, but if you would put £5 or £50, I would question you on the reasoning behind these numbers.

Real-Life Data on IKEA Hot Dogs

And in case you wonder about the assumptions made above: if you had the help of the internet at hand during the case study, you can find that the actual number of visitors for the UK is 40.4 million visitors https://www.ikea.com/gb/en/customer-service/knowledge/articles/07db1d1e-5b0e-48bf-862d-d6903967gb86.html across 22 markets https://www.ikea.com/gb/en/customer-service/knowledge/articles/16b2503g-fe2f-4f1e-809e-0b5531gc438d.html.
Globally, IKEA sells more than 100 million hot dogs a year https://about.ikea.com/en/newsroom/2018/08/09/more-plants-for-the-many-people-the-new-veggie-hot-dog-is-now-available-at-ikea.

How to Solve Case Studies at Consulting Interviews

by TheWharfConsultant
on April 16th 2023
If you are thinking about a career in management consulting, you will probably have heard that case
If you are thinking about a career in management consulting, you have probably heard that case studies are a big part of the interviewing process. Having been on the other side of the table more often than I can count, I wanted to give you some advice on the process and on case studies in particular.

The Shift from Brain Teasers to Case Studies

I have seen brain teasers being used less and less (“how many piano tuners are there in Chicago?”, “how much paint do you need for a 747?”, “how many ping pong balls fit in a Mini?”, and so forth) and being replaced by case studies of real or dummy companies, with or without some data given. After you have been given a task, you then have some time (quite often an hour) for calculations, some simple modeling (if you can use a computer), and for preparing a short presentation to be given after that preparation time. This is much closer to the actual work that you are going to do.
Other parts of the interviewing process can be a run-through of your CV, behavioral questions, and cultural fit—probably worth another post at some point in the future.

Why Case Studies Are Important for Preparation

The good thing about case studies is that you can practice them (and you should do that in preparation for your interview). Sometimes, the companies even give hints about what to expect in the process. The main thing about solving case studies is to (over)communicate throughout how you came to your conclusions and show your workings. Just showing the result is usually not enough.

An Example Case Study: IKEA and Hot Dogs

Let me run you through an example, providing a view on a real company from the outside without data available: a sample question could be “Does it make sense for IKEA to sell hot dogs?” Some of the possible answers do not necessarily require hard numbers; for example, it is part of the customer experience to offer food at reasonable prices (customers will stay longer in the market and potentially shop more if they do not have to worry about food and drinks), or a furniture shop should focus on its core business rather than selling food. However, you would like to know if IKEA makes a loss on hot dogs (in which case they would need to be subsidized by higher sales if clients stay longer) or if it is a profitable part of the business.

Revenue Side of the Case Study

You can start with the revenue side—last time I checked, an IKEA hot dog was sold at £0.75.

Cost Side of the Case Study: Ingredients

If you look at the cost side, you start with the main ingredients: a sausage and a bun. In a supermarket, you can get a jar of 8 sausages for £2, so it would be £0.25 per hot dog, and 8 buns for £1, so £0.125—the main ingredients are £0.375 (ignoring food waste for the moment). Now assume 2.5p for condiments, napkins, and wrapping to get to a round figure (and save you a lot of hassle in calculating the cost for two splashes of mustard)—£0.40 for ingredients.

Labour Costs

Now, let's look at labour costs—to keep things simple, assume one person behind the counter selling on average 50 hot dogs per hour, total cost at £20/hour, so £0.40 per hot dog, giving us a total cost of £0.80. So, no break-even? Not so fast—IKEA buys the ingredients in bulk, most likely sourcing them directly from the factory (more on that below), so the costs for the ingredients are probably a lot lower. If we assume a 50% discount as they are probably sourcing directly, we are back in the green with £0.60 for ingredients and labour, leaving 15p for energy, floor space, and other overhead costs.
Calculating these costs will be slightly tricky, as these costs will be spread across a number of products. You will probably remember from your last visit to an IKEA store that there is an area for shopping food quite close to the hot dog stand, so you can make the argument that (most of) these costs are overheads and add a generous 20% on the £0.60. With a total cost of £0.72, we will break even.
Going back to the revenue part, you can also make the argument that revenues will be higher as other items will be sold with the hot dogs as well (e.g., drinks) and that staff could be shared with the food space close by.

Estimating Customer Numbers

You might have noticed that I have avoided looking at the number of customers so far to keep things simple, especially if you only get a pen and paper to solve the case. To estimate the number of visitors per market or for the whole of the UK, let's say that there are 10,000 visitors per day. If the market is open on 350 days a year (i.e., closed for public holidays and maybe some repairs every now and then), that gives you 3.5 million visitors per year. Now assume how many visitors will buy a hot dog—probably the key assumption for this case. Let's say 25% (or 12.5% buying two), and you arrive at 875,000 hot dogs a year per market or 2,500 per day.

Tips for Solving a Case Study

Here are some tips for solving such a case:
- Always have pen and paper ready, regardless of whether it is a remote interview or in person—it helps with shaping thoughts and calculations.
- Use rounded numbers if you do not have a calculator at hand—it makes life easier for you and you can quickly calculate figures if questions come during the presentation.
- Make reasonable assumptions to simplify things—you can spend a lot of time calculating the cost of mustard per hot dog sold (£4 retail price for a 1 L bottle of mustard, so maybe £2 actual cost if buying in bulk; every second customer will take a squeeze of 10 mL, so 1p per hot dog sold) and then argue how many customers will take ketchup or mustard or both, but that risks missing the point.
- Be prepared to show your working by running the audience through your calculations.
- If asked to present, prepare a couple of slides (if you have a computer at hand), but put the calculations in the appendix.
- Your interviewer will know that you are working under pressure—they would rather see okayish slides with the correct answers than beautiful slides with the wrong calculations or conclusions.
- As part of your interview preparation, try to find (and memorize) assumptions that are quite common (e.g., for marketing, salary ranges, profit margins, commissions for sales, tax rates, rebates for buying in bulk, etc.). You do not have to make the right call each and every time but should be in the right range; for example, with the salary for the person selling the hot dogs above. In a case with one hour of preparation, no one will put you on the spot about whether it should be £19 or £20, but if you would put £5 or £50, I would question you on the reasoning behind these numbers.

Real-Life Data on IKEA Hot Dogs

And in case you wonder about the assumptions made above: if you had the help of the internet at hand during the case study, you can find that the actual number of visitors for the UK is 40.4 million visitors https://www.ikea.com/gb/en/customer-service/knowledge/articles/07db1d1e-5b0e-48bf-862d-d6903967gb86.html across 22 markets https://www.ikea.com/gb/en/customer-service/knowledge/articles/16b2503g-fe2f-4f1e-809e-0b5531gc438d.html.
Globally, IKEA sells more than 100 million hot dogs a year https://about.ikea.com/en/newsroom/2018/08/09/more-plants-for-the-many-people-the-new-veggie-hot-dog-is-now-available-at-ikea.
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