What I like about this one is the interviewee did not take the “simple” maths for granted. You can easily mess up, like he did with the 7.36B. Lay it out point for point! 👍🏼
This is a great business and consulting class. I liked so much this case. You've came up with issues relating market problems, finance and costs, macroeconomics, geopolitics and supply chain issues. That is a really classroom of "brainstorming" in a business environment. Thanks so much for the work and I'm looking forward to have some classes with you guys. Cheers.
This is amazing! I once had a consulting interview and I loved how they where more interested in hearing how I think about solving a problem, today I'm starting a consulting for small businesses and this video is a great feedback of how to break down problems, pretty much like Ray Dalio see's everything as a machine
Hey Juan, So true that Ray Dalio has a similar thought pattern. I see the same in Elon Musk, who sees most problems as a basic "first principles" formula. Most people don't realize this, but the same thought pattern is embedded in the thinking of a ton of successful people. My guess is that no one realizes this because this type of thinking doesn't really have an accurate name (structured-thinking is one of many facets of this).
Really great in the structure of the case. I have one issue with the math part of the problem though. Bruno was focused on trying to explain a $2Billion gap in cost. But the real gap wasn't that high. Since revenues also went up by 1.5B the real gap wasn't the full $2Billion amount. You need to compare the cost if profitability remained at 5% vs. the new 2.5%. So for revenue of 22.5B and a profit of 5% the costs should have been $21.375B. When you subtract that from the $22B of actual costs you find the gap to bring profitability back to 5% was only $0.625B. Then you have to do the same thing with the materials cost and you find that materials costs actually explains $0.7525 B of cost increase, which means the materials were actually offset a little by other decreasing costs. Then you do the same for the auto parts and find again that auto parts explained $1.024 B in costs and were offset by other costs. It doesn't change the answer to the case, other than it seemed like in this case he was saying materials only explained a portion of the cost difference, when really it explained more than the full amount of the cost difference. And the logic behind the calculations were flawed because they didn't normalize the cost for the revenue increase. I'm pretty sure this is the right way to do it, but please correct me if I'm wrong. Thanks a ton for all the help on this channel, overall really great stuff!
Actually I do not agree. I understand how you are thinking but you are most likely simplyfying the issue. The real key indicator you should be looking for is hidden in the product mix, i,e which cars or category of cars are profitable and which are not. Once you get that insight you have a much more firm platform to guide your decisions moving forward as this will allow you to bring the pricing component to bear as well.
@@kennethskjttstagistoft7203 He is not simplifying the issue, he's making the issue at hand more advanced than it needs to be. And if I'm interpreting what you are writing, you are talking about the start of the case, which is not what Scott M was referring too.
@@alexlejd6601 Thanks for your comment. In the real world ensuring that you have the right data and breaking those down to operationally viable and transparent cost ratio´s rather than focusing on cost categories would be the way to go. In fact much like the approach which made Toyota the most profitable car manufacturer in the world for many years. The trick is to look at the value chain as a whole.
@@kennethskjttstagistoft7203 I think what Scott M is trying to say is that while the revenue of the company has increased, the cost needs will increase (ideally % cost increase must be lower than the % increase in revenue or worst case equal to the % increase in revenue) but in this case specifically the cost increased disproportionately by 0.625 billion dollars. We need to explain what's triggering these 0.625 billion dollars first and not look at the overall 2 billion cost increase. The trigger is the material costs, but some part of the increase in material costs is being offset by decreases in other costs ( case in point, factory).
The guy didn’t inspire much confidence at the beginning when he incorrectly summarised the facts, but this actually was a masterful job. Really well done and thank you for your insight
The last question was pretty amazingly answered. I can imagine even if I have some great understanding of automotive industry, I would have struggled to come up with a structure and some points as good as him.
🎯 Key points for quick navigation: 00:00:00 *🎥 Introduction and Case Overview* - Introduction of the consultants and the case scenario, - Explanation of the case: a U.S. auto manufacturer facing profitability decline. 00:02:05 *🔍 Initial Clarifying Questions* - Clarifying competitors' profitability and industry context, - Establishing the client's market and product range. 00:04:02 *📊 Identifying the Core Problem* - Differentiating between revenue and cost problems, - Reviewing revenue and cost trends to identify cost increase as the core issue. 00:06:57 *🏭 Cost Structure Analysis* - Breaking down cost categories (materials, labor, factory, indirect costs), - Noting specific changes in cost percentages and identifying materials as the main area of concern. 00:09:08 *🧮 Deep Dive into Material Costs* - Analyzing which materials contributed most to the cost increase, - Performing calculations to confirm the significant rise in auto parts costs. 00:12:56 *🛠️ Investigating Auto Parts Costs* - Generating hypotheses on why auto parts costs increased, - Exploring factors such as supplier pricing, negotiation, and supply chain changes. 00:17:40 *🌍 Considering Outsourcing to China* - Discussing the potential shift to Chinese suppliers, - Factors to consider: cost, quality, supply chain predictability, risks, and alternatives. 00:24:42 *✅ Evaluation and Feedback* - Feedback on the analysis and recommendations, - Emphasizing key learnings and areas for improvement in problem-solving approach.- 00:00:00 🎥 Introduction to the Case - Giulio introduces the purpose of the video: showcasing a real case interview scenario, - Bruno is introduced as an ex-McKinsey consultant. 00:00:52 *📉 Problem Statement* - The client is an auto manufacturer in the U.S. facing profitability issues, - Competitors' profitability has increased while the client's has decreased. 00:02:14 *❓ Initial Clarifying Questions* - Bruno asks about competitors' profitability trends, - He inquires about the client's market segment and geographic focus. 00:04:02 *💲 Revenue vs. Cost Analysis* - Bruno determines whether the problem is due to revenue or costs, - It is identified that revenues have increased slightly, but costs have risen significantly. 00:06:14 *🔍 Cost Breakdown* - Detailed examination of cost categories: materials, labor, factory, and indirect costs, - Material costs have notably increased, identified as the primary area of concern. 00:08:00 *🛠️ Analysis of Material Costs* - Bruno breaks down material costs into specific components like steel, auto parts, plastics, and others, - Auto parts are identified as the major contributor to increased material costs. 00:12:56 *🔍 Focus on Auto Parts* - Deep dive into why auto parts costs have increased, - Hypotheses include increased quantity of parts, higher costs per part, and changes in suppliers. 00:17:40 *🌐 Considering Outsourcing to China* - Evaluating the possibility of outsourcing auto parts to China, - Factors include cost, quality, supply chain predictability, and risks. 00:24:42 *🎯 Final Analysis and Recommendations* - Comprehensive evaluation of outsourcing factors, - Considering alternatives like developing American suppliers, negotiating with unions, and other countries. 00:26:02 *💡 Feedback and Lessons* - Feedback on Bruno’s performance and areas for improvement, - Emphasis on understanding the client's problem before diving into solutions. 00:27:52 *🎯 Approach to Solving Profitability Issues* - Step-by-step method to address profitability issues, - Identify root causes: whether it's a cost problem or a revenue problem and pinpoint the specific product line or region, - Develop solutions for identified problems and explore other drivers if direct solutions aren't found, - Quantify the potential impact of each solution and assess its practicality and strategic fit. 00:29:24 *📚 Additional Resources and Course Promotion* - Mention of a video specifically addressing profitability case interview tactics, - Introduction of a free course on case interview fundamentals, focusing on teaching candidates to think like consultants rather than memorizing frameworks, - Encouragement to subscribe to the channel for more content on case interviews and consulting strategies. Made with HARPA AI
Really good. Thanks a lot. I am a Product Manager in big tech, not looking to be a consultant, but find this stuff to be super helpful for in-house strategy work.
The quickest way to learn to solve cases better is by taking our free course at www.craftingcases.com/freecourse. You'll learn the 6 Building Blocks to solve any case, learn a step-by-step process to solve each of them, and get tons of video practice drills to internalize the techniques.
brilliant exchange between you two. good work. I like how Bruno didn't just accept the recommendation, but went ahead and said "let's work on that now"
Thx for sharing. The basics are all about drilling down to the constituents level. What I’d love to learn is the basic fundamental constituents of how businesses work - and I believe the first level drill down helped paint the picture.
Just learn to do it. I couldn't either before I ever prepared. Acceptance rates are low -- I know no one who can do this without thorough preparation, yet a ton of people who learn to do this well.
This channel is amazing and these guys are awesome teachers. As somebody with an Arts/non-business degree, their videos helped me prepare for several rounds of case interviews and successfully land an MC offer. P.S. they also have a podcast (I used to listen in the shower lol)
To cut out the revenue Problem @3:51 was inaccurate. Revenue is x • p - so it could be the pricing but it is not - but it could also be the (x) the amount of Sales. It is possible to optimize sales or marketing strategy, you have to look at the activitys regarding Marketing & Sales from your competitors. It could also be a production Problem in Terms of undercapacitive manufacturing....
Taking sales into consideration would have been ideal if they were discussing revenue problem. But revenue has actually increased. So sales is not a problem. They are discussing the shrinking profit margin problem, which is dependent on cost, unless you've lowered your prices.
Or if your condenser mic had a “figure 8” pattern setting you could put it between you and it will pick up front and back equally. Right now it’s picking up a lot of room noise. Great video by the way👍🏼
@@markgtownsend It is a figure 8 pattern, but the Mic had to be a bit far from both of us and the room was echo-y. We've bought ourselves more gear for future videos. Glad you liked it!
Julio's time out alert made me laugh - prob because I got the $7.4bn right by rocking the math part and did notice Bruno's mistake. I missed the supply chain risk analysis but picked on the sustainability of supply chain point. Very realistic performance from bruno, which I love it.
This was an excellent case study to understand how to drill down into factors. I also liked that you are showing how the candidate writes down the alternatives, profitability blocks, captures new information etc. I was curious to see if the company did not pass the cost to their customers, as the competition profitability went up, and our sales went up, any potential in increasing price was possible. It might still point to it being only a cost problem, but understanding if competition increased prices and hence their profitability I think was not covered. Am I chasing an irrelevant factor? Curious to know. Very very informative and helpful. Thank you guys..
2:50 - based on the revenues and cost provided, profit margins are not 5% and 2.5% 3:42 - at this point, it cannot be concluded that we do not have a pricing problem, as it could be that the competitors simply increased their prices, while we did not
why not just give him a calci? I mean at such a professional level, do you think we should waste time on calculating 65 % of 11.44. the case and his line of thinking is just amazing. edited: ohh am sorry, just checked and found that most of the consulting firms don't allow calculator. Amazing content team craftingcases. pls go on and make more on other sectors/industries.
So making a simple arithmetic error while trying to do 0.65*11.44 which we generally stop doing by hand around the age of 12 could have meaningfully affected the outcome of this interview?
I find that ridiculous. In no situation would I leave this to mental math regardless of how talented the person would be. I would argue that we have left the age of memorization behind. Understand the problem is much more critical.
Really enjoy your videos. It teaches me a lot and I have been watching all of your videoes multiple times. I am aspiring to work in the consultant industry (McKinsey, BCG, Bain, etc.), so this really helps me a lot. Thank you!
Vocês são excelentes, obrigado por cada vídeo e material disponibilizado online. Além disso, é muito gratificante ter dois BRs ensinando um conteúdo tão importante não somente para consultoria, mas para vida, esse tipo de pensamento/análise vou levar para qualquer lugar/empresa que eu passar.
It was always going to come down to domestic supply chain vs international supply chain whether it was forex fluctuations or domestic cost increases. The unionizing was a nice spin.
What I find frustrating about modern day consultancy is that the strategy nearly ALWAYS focuses on only reducing costs. The clients are at fault too because they have a preconceived idea of how to improve their profitability when they call in the consultants. Invariably that results in either reducing production and product quality or cutting conditions for staff, who unfortunately are just seen as a cost rather than an asset. This is even referenced here in this mock interview when it comes to salaries/unions. Very rarely do consultants get asked to or advise on how to improve product/service quality and appeal as a priority or simply advise on keeping a sustainably profitable business. Instead, directors and senior managers, with the aid of the consultants, cut costs to the extreme to make good profits for their share holders in the short term before they move onto their next high profile post, leaving the company’s reputation damaged in the long run and the staff poorer and unmotivated. The bane of impatient and selfish modern capitalism.
Well, this is a cost reduction case so it leaves that impression for sure. No one goes to the revenue growth case and make a comment on it saying that it’s nice that consultants help companies grow, nor do they go to the public sector case and say it’s nice that they help with vaccine distribution or literacy rates. As for the real job, in my experience there are cost cutting projects and projects focused on growth. Usually when the economy is down most clients want to cut costs and when the economy is up they care more about growth. Of course, the media doesn’t give headlines to the later, only to the former. I was once in a cost cutting project where the explicit goal of the “evil capitalists” running the company was to cut costs without having to do lay-offs. We got to help them achieve this goal and helped keep everyone’s jobs. Again, no headlines of this anywhere. Not saying that all consultants are saints and that everything is roses and rainbows. There are things to be improved in consulting, as there are things to improve in medicine, law, academia, government, NGOs. The list goes on. Just saying that there are HUGE biases in public perception (availability bias being the main one) because the nice outcomes of the work are very private and lay-offs are are public (and also make clickable, rage-inducing headlines).
@@CraftingCases I completely appreciate your reply and my comment wasn’t meant to criticise any individuals or demean the work of consultants. I was just expressing that there is a big culture these days of blindly cutting costs to make a quick dollar that extends far beyond the “bad times”. Although I’m not in the sector directly, my ex associates who are have honestly expressed that all they are ever asked is “where can we cut costs”. I now work for a company where leadership has changed every few years with only short term goals in mind, which as I said, has led to damaged brand reputation and poor staff morale. I hope for a more refreshing approach in the future. I have no doubt that consultants are a necessity and help create a lot of positive outcomes for companies and society. As an ex banker, I’m more than aware of the unfairness of everyone being tarnished with the same brush. No offence was intended and thanks again for your reply
@@pb4012Oh, not personally offended at all. I've been out of consulting for 8 years now, so not attached to the profession. I just commented because there's been a surge of comments criticizing the profession in my channel in the last few months (probably because of that skit on John Oliver and the second order effects of that). Now, my channel isn't even defending the consulting industry (not more than an SAT prep channel is "defending" the university system in the US), so I find that both odd and a bit unfair given my experience. As for the culture of blindly cutting costs, I partially agree with you. I think many companies (and consultants) do indeed have poorly structured incentives that make them do "dumb" cost cutting (aka: long-term unwise), but at the same time I think there's more bloat than ever in the average corporation. It's a weird conundrum.
I like how the guy structured the answer if they should outsource, however, I believe that he should have selected some more generic buckets, like: Financial / Technical / Supply Chain / Social / Geopolitical / Market (i.e. if that place may be potential market so that the outsourcing could be considered local content)
I feel that having an accent that makes it more natural for you to talk slow and clear when explaining simple concepts is a requirement for passing a case interview. If the interviewee had no accent in this example he would sound ridiculous talking so slow and using such simple phrasing.
We still make videos, but mostly in our own platform. Highly recommend you join our free course. There are 30-40 videos there organized in a way that will actually help you improve your skills!
I question why the automobile company would ever need the help of a consulting company, such as McKinsey or Bain to help figure out this situation. This is something that the company should be looking at, and not just at that time. It would be monitored day-in, day-out, quarterly and yearly. There should be no entity understanding this more than the automobile themselves. Cost containment is definitely something that companies can do. What's usually harder is understanding revenue. That's often where an outside consultant can come in to give fresh insight to buying preferences of the market.
Hey Eric, You're right in the sense that nowadays companies rarely need help to figure that out. In the past, it used to be more common to call in management consultants for these tasks as data storage, collection and analysis was trickier. Still, firms still use these cases as they're good to test a candidate's reasoning skills (think of it this way: if you can't work your way through a problem like this in a structured, methodical and efficient fashion, you likely won't be able to solve more complicated problems). And one more thing: you'd be surprised how many companies (even big ones) have their cost accounting messed up. I've personally seen it a couple times and heard of about a dozen situations where companies thought a certain line of product was highly profitable, only to hire McKinsey and find out they were losing money on every sale. It's not common, but far from unheard of.
@@CraftingCases For sure. Often, for large companies, especially ones that grew quickly, when they grow so fast and their expenses also grow fast, they don't recognize the forest because of the trees. Also, they don't know whether they're off or not if they don't have other similar companies to compare to, and unfortunately, other companies aren't going to offer their internal cost data to let you compare. Consulting companies can offer generic data that they collected to help identify where costs are higher than they should be. In that aspect, consultants can bring value.
@@ericdew2021 Yep, what's also common is companies that do their accounting focused on minimizing taxes. That usually has attribution models that are less than optimal for managerial purposes. Only the best companies have both types of accounting in parallel and that misleads decision-makers.
@@CraftingCases Sort of like Robert McNamara's folly of applying operational discipline in automotive manufacturing and sales to prosecuting a war in the Southeast jungles.
Could someone explain what he means at 14:45 when he says The company is paying more per part because of the supplier making more money? Isn’t it obvious that if the supplier increases the prices they charge to us they will increase their margin? Or does he mean the supplier increased their margin and THEN they increased their prices? That second scenario is what can’t make sense of.
Great video, and it's a very good decision tree process that you've gone through. I would suggest however for future videos to pick numbers that are actually representative of what the figures you describe, i.e. the increase in profitability from 21 to 22.5 and costs from 20 to 22, does not actually represent a starting profitability of 5% and 2.5% respectively, but rather slightly less.
Glad you liked it! What do you mean by cases on business model/financial model? We're not currently recording anything, but once we go back to it we may incorporate.
i'd like to comment from the angle of a purchaser from mfg industry: quality is by design, so unless the design has changed, quality should be consistent as well and so is the cost to maintain it. There are possibilities that the regulations (safety and other) has changed or the user expectation's gone up, so generally higher/more spec, and that is a design change and not quality change.
It's an excellent video and was really insightful. One thing I would like to say is, since the interview is based on a real life business scenario , addition mistake shouldn't "put him in trouble" as said in the video. In real life, such problem solving is done using a computer or a calculator after collecting all relevant data. Also, we are so used to doing our calculation using electronic devices that an addition error should be that much of an issue. At this level , that shouldn't be that big a deal coz in real world we no longer do the calculations using just pen and a paper.
Initial assessment should focus on units produced vs increase in costs , then he should check the cost per unit not just the absolute numbers. If cost per unit is going up then focus should be on supply chain/ cost reduction measures.
Guys, if i am not mistaken you can get more numerical. So the goal was to get to 5% of profits and we currently have 2.5%. 2.5% of 22.5B = -600k. Current Autoparts Cost (22)*(52%)*(65%) = 7.44 B, vs the "should have been" of (22*50%*60%) = 6.6B. Delta = 0.84 B, so in the end I would address that the China option should at least deliver those 600k and if we would go back to previous materials cost % we would have deliver even further. Other ways around it too, so if we sold 30k cars a year, and we need to get 600k in savings, I would need to increase 2 USD in profit per car sold. Some stuff like that makes it more grounded.
Which of the 5 ways of MECE did you use for the decision to outsource to China- I can't seem to fit it within Conceptual Frameworks and others don't relevant
I’m unsure but didn’t the labour cost not increase ? Still at 20% and why will the interviewer say the union came in and cost increase all throughout the USA??
This could be an issue and it would've been a good idea to raise that in the interview. The suppliers can probably produce parts already as they do so to this company's competitors, but it could be the case that we have some slightly different parts that need different production facilities and/or different training.
@@CraftingCases yes thanks I was just building further on the fixed costs and operational consideration you mentioned would be required to be taken into account while deciding whether to go to China. Thank you so much
@craftingcases at 16:00 its seen that there is an increase in Worker Costs because of unionisation. why did not it reflect in Labor Cost (it was stable) section of the Client company? can somebody please clarify ?
Hey Vignesh, labor cost was stable as a % of costs, but not in $ value. It rose in $ value. Why didn't it raise as much as material costs? Well, several hypotheses - most likely one is that the auto manufacturer was more automatized than its suppliers.
can anybody explain the real-world relevance of potentially diving deeper into why supplier costs are up? (15:34) if that were to occur in real life, wouldn't the ideal solution be to streamline inefficiencies within the client's company instead of attempting to change things on the supplier side?
Loads of companies that integrates hundreds of suppliers optimize their suppliers’ operations to bring down costs on the whole value chain, auto companies are the ones who made this practice common.
Interesting, it's all accounting. It's a lot simpler than I thought! I always thought that well run companies would be doing audits of its financials on a quarterly or semi-annual or annual basis. It seems that some businesses don't have the resources or foresight to employ such procedures in their company.
All business do to a certain extent. It so happens that accounting doesn't necessarily give you what you need for managerial purposes. Most importantly, this is an interview, so it's a test of your ability to get the relevant data at the expense of everything that doesn't matter. It doesn't mean that real engagements don't go deeper than this.
Not really. I got bored and didn't watch it all but if I was hiring a consultant it wouldn't be for their ability to do simple mental arithmetic to 2DP. I wouldn't need a consultant if that was the issue.
Damn... I have never get on such interview but thank god, it didn't happen to me yet. Structured thinker or not, this is going to take much practice to hit it right. I don't see why mental calculation part should be a big problem, in fact I would have use my mobile calculator app,(or my financial calculator in the bag) not great for impression but better than making mistakes? Thanks for this video.
If i was asked how I would improve the interviewee's performance.. would be general body language, and more firmer toner in his speech. As consultants, we should exert a more leader like aura
agree, i don't think his manner or demeanour was attractive to a potential employer. His speech also seemed slow and monotonous. no personality in his delivery. In an Australian or UK MC interview he would be marked down
I couldn't understand "fixed costs of developing new suppliers". If we're going to outsource our supplies then won't it be a variable cost? Because outsourcing manufacturing is normally done to change fixed costs into variable costs. Please tell me where I'm wrong.
one thing was missed in this discussion though. He tried working on cost reduction which is a viable one. However they could have concentrated on increasing revenues through various ways
The idea is to prioritize the most effective action. Increasing revenue is great but not that effective if your margins are low due to higher variable costs
Inventory increase can alleviate the supply chain uncertainty. And the good news is that this can be done cheaply as the cost of capital these days are negliable.
super great content thanks guys. I have one question. someone advised me to lay out a framework rather than an issue tree in the beginning for the profitability problems. so that framework would include financial factors (revenue/cost) and non-financial factors (supplier, company etc). My concern is that if I lay out this extensive framework before I tackle the problem, wouldn't the framework be not specific enough as I haven't identified it's a revenue or cost problem or not? what are your thoughts? thanks in advance!
Well yeah mate surely laying out the framework first nd then rooting the issue tree in it helps us configure the fine tune in analysis nd thus give us a deep insight into aggregate modular factors allowing us to rectify or transform it with near perfection and also a robust workout on multi dimensional approaches of the mega factors like audit assurances taxes finances supply resiliency on a quantum celluloid quantum deriving fluid efficiencies too..
@@CraftingCases getting my hands on every resource i can find to get to where you guys are. Is there a MECE framework for the types of case studies used by consulting firms?
@@FM-dm8xj well, in this case profits dropped so they need to fix that specific number. The number is composed by many other numbers (the profit tree) so it helps to know which one changed the most to make profits go down. Otherwise you’ll spend a lot of time talking about pricing or market share without even realizing those things are fine.
Hey guys great case! One doubt when Bruno was presenting his structure though. He had clarified that revenue was not a focus for the case and costs were important instead. Can we do that in the beginning of the case itself? I guess he was scoping out what to focus on in his structure
I’m just watching these for fun as I’ve owned and operated many companies I’ve founded and would love to do this as a career for fun but I’m extremely terrible at doing math without a calculator.
On the job you can use it if the situation allows. In the interview, they want to test your numeracy/comfort with numbers because the situation doesn't always allow it. Two examples: #1: You're in a meeting with finance execs who all do mental math, and you don't want to be the expensive consultant who slows the meeting down because you can't do it. #2: You're reviewing a presentation filled with tables/charts and want to do quick math with the numbers to reality check them and potentially catch any mistakes (you could use a calculator, but it's faster if you can do it in your mind and fast matters when you're reviewing a large doc especially if it's in a room with other people). I know it's a bit frustrating, but it's a bit like business sense -- you could, on the age of Google, learn about all sorts of industry-specific facts/practices at the tip of your fingers, but there's something to be said about having it in your mind and there's value in being fast.
You can always ask the interviewer. There is a nuance, though... Most would be ok with rounding 11.44 to 11.5 (tiny difference) but wouldn’t really like that you even asked to round from 1.144 to 1 as that is a 14.4% difference and will most likely change the results and recommendations. They’d expect you to see that this was the case before asking. The fact that you wouldn’t do this mental assessment of whether the difference was likely to change the recommendation before asking signals to them that you’re only trying to make your life easier, not giving the best advice possible while being 80/20.
Just a few thoughts on it: why did he made all this calculations? Material costs in absolute numbers gives us nothing useful. Why just not to calculate material costs per unit sold?
Material cost has increased because number of cars sold has increased!! Revenue increased --> price and product mix remains same--> so car sales has increased. Require more material to produce more cars. Do we need further investigation around material costs?? Any opinion!
Is the 2nd ques it says labour cost has increased but in the first question it was told that labour cost remained the same, so are the 2 ques not related to each other?
I really liked how the guy is not only structurally, but emotionally consistent as well. No ups at familiar stuff or downs with the unfamiliar
Bruno is a machine, pumps out framework branches like factory
What I like about this one is the interviewee did not take the “simple” maths for granted. You can easily mess up, like he did with the 7.36B. Lay it out point for point! 👍🏼
This is a great business and consulting class. I liked so much this case. You've came up with issues relating market problems, finance and costs, macroeconomics, geopolitics and supply chain issues. That is a really classroom of "brainstorming" in a business environment. Thanks so much for the work and I'm looking forward to have some classes with you guys.
Cheers.
This is just beyond excellent! Totally inspired and will keep coming back to your channel for more, please keep 'em coming.
This is amazing! I once had a consulting interview and I loved how they where more interested in hearing how I think about solving a problem, today I'm starting a consulting for small businesses and this video is a great feedback of how to break down problems, pretty much like Ray Dalio see's everything as a machine
Hey Juan,
So true that Ray Dalio has a similar thought pattern. I see the same in Elon Musk, who sees most problems as a basic "first principles" formula.
Most people don't realize this, but the same thought pattern is embedded in the thinking of a ton of successful people. My guess is that no one realizes this because this type of thinking doesn't really have an accurate name (structured-thinking is one of many facets of this).
Really great in the structure of the case. I have one issue with the math part of the problem though. Bruno was focused on trying to explain a $2Billion gap in cost. But the real gap wasn't that high. Since revenues also went up by 1.5B the real gap wasn't the full $2Billion amount. You need to compare the cost if profitability remained at 5% vs. the new 2.5%. So for revenue of 22.5B and a profit of 5% the costs should have been $21.375B. When you subtract that from the $22B of actual costs you find the gap to bring profitability back to 5% was only $0.625B. Then you have to do the same thing with the materials cost and you find that materials costs actually explains $0.7525 B of cost increase, which means the materials were actually offset a little by other decreasing costs. Then you do the same for the auto parts and find again that auto parts explained $1.024 B in costs and were offset by other costs.
It doesn't change the answer to the case, other than it seemed like in this case he was saying materials only explained a portion of the cost difference, when really it explained more than the full amount of the cost difference. And the logic behind the calculations were flawed because they didn't normalize the cost for the revenue increase.
I'm pretty sure this is the right way to do it, but please correct me if I'm wrong. Thanks a ton for all the help on this channel, overall really great stuff!
Actually I do not agree. I understand how you are thinking but you are most likely simplyfying the issue. The real key indicator you should be looking for is hidden in the product mix, i,e which cars or category of cars are profitable and which are not. Once you get that insight you have a much more firm platform to guide your decisions moving forward as this will allow you to bring the pricing component to bear as well.
@@kennethskjttstagistoft7203 He is not simplifying the issue, he's making the issue at hand more advanced than it needs to be. And if I'm interpreting what you are writing, you are talking about the start of the case, which is not what Scott M was referring too.
@@alexlejd6601 Thanks for your comment. In the real world ensuring that you have the right data and breaking those down to operationally viable and transparent cost ratio´s rather than focusing on cost categories would be the way to go. In fact much like the approach which made Toyota the most profitable car manufacturer in the world for many years. The trick is to look at the value chain as a whole.
@@kennethskjttstagistoft7203 I think what Scott M is trying to say is that while the revenue of the company has increased, the cost needs will increase (ideally % cost increase must be lower than the % increase in revenue or worst case equal to the % increase in revenue) but in this case specifically the cost increased disproportionately by 0.625 billion dollars. We need to explain what's triggering these 0.625 billion dollars first and not look at the overall 2 billion cost increase. The trigger is the material costs, but some part of the increase in material costs is being offset by decreases in other costs ( case in point, factory).
I liked your way of calculation of the "should have been" costs. It could be improved a bit by taking into consideration the share of the fixed costs
The guy didn’t inspire much confidence at the beginning when he incorrectly summarised the facts, but this actually was a masterful job. Really well done and thank you for your insight
This shows reality, not scripted. this is what happens
The last question was pretty amazingly answered. I can imagine even if I have some great understanding of automotive industry, I would have struggled to come up with a structure and some points as good as him.
🎯 Key points for quick navigation:
00:00:00 *🎥 Introduction and Case Overview*
- Introduction of the consultants and the case scenario,
- Explanation of the case: a U.S. auto manufacturer facing profitability decline.
00:02:05 *🔍 Initial Clarifying Questions*
- Clarifying competitors' profitability and industry context,
- Establishing the client's market and product range.
00:04:02 *📊 Identifying the Core Problem*
- Differentiating between revenue and cost problems,
- Reviewing revenue and cost trends to identify cost increase as the core issue.
00:06:57 *🏭 Cost Structure Analysis*
- Breaking down cost categories (materials, labor, factory, indirect costs),
- Noting specific changes in cost percentages and identifying materials as the main area of concern.
00:09:08 *🧮 Deep Dive into Material Costs*
- Analyzing which materials contributed most to the cost increase,
- Performing calculations to confirm the significant rise in auto parts costs.
00:12:56 *🛠️ Investigating Auto Parts Costs*
- Generating hypotheses on why auto parts costs increased,
- Exploring factors such as supplier pricing, negotiation, and supply chain changes.
00:17:40 *🌍 Considering Outsourcing to China*
- Discussing the potential shift to Chinese suppliers,
- Factors to consider: cost, quality, supply chain predictability, risks, and alternatives.
00:24:42 *✅ Evaluation and Feedback*
- Feedback on the analysis and recommendations,
- Emphasizing key learnings and areas for improvement in problem-solving approach.- 00:00:00 🎥 Introduction to the Case
- Giulio introduces the purpose of the video: showcasing a real case interview scenario,
- Bruno is introduced as an ex-McKinsey consultant.
00:00:52 *📉 Problem Statement*
- The client is an auto manufacturer in the U.S. facing profitability issues,
- Competitors' profitability has increased while the client's has decreased.
00:02:14 *❓ Initial Clarifying Questions*
- Bruno asks about competitors' profitability trends,
- He inquires about the client's market segment and geographic focus.
00:04:02 *💲 Revenue vs. Cost Analysis*
- Bruno determines whether the problem is due to revenue or costs,
- It is identified that revenues have increased slightly, but costs have risen significantly.
00:06:14 *🔍 Cost Breakdown*
- Detailed examination of cost categories: materials, labor, factory, and indirect costs,
- Material costs have notably increased, identified as the primary area of concern.
00:08:00 *🛠️ Analysis of Material Costs*
- Bruno breaks down material costs into specific components like steel, auto parts, plastics, and others,
- Auto parts are identified as the major contributor to increased material costs.
00:12:56 *🔍 Focus on Auto Parts*
- Deep dive into why auto parts costs have increased,
- Hypotheses include increased quantity of parts, higher costs per part, and changes in suppliers.
00:17:40 *🌐 Considering Outsourcing to China*
- Evaluating the possibility of outsourcing auto parts to China,
- Factors include cost, quality, supply chain predictability, and risks.
00:24:42 *🎯 Final Analysis and Recommendations*
- Comprehensive evaluation of outsourcing factors,
- Considering alternatives like developing American suppliers, negotiating with unions, and other countries.
00:26:02 *💡 Feedback and Lessons*
- Feedback on Bruno’s performance and areas for improvement,
- Emphasis on understanding the client's problem before diving into solutions.
00:27:52 *🎯 Approach to Solving Profitability Issues*
- Step-by-step method to address profitability issues,
- Identify root causes: whether it's a cost problem or a revenue problem and pinpoint the specific product line or region,
- Develop solutions for identified problems and explore other drivers if direct solutions aren't found,
- Quantify the potential impact of each solution and assess its practicality and strategic fit.
00:29:24 *📚 Additional Resources and Course Promotion*
- Mention of a video specifically addressing profitability case interview tactics,
- Introduction of a free course on case interview fundamentals, focusing on teaching candidates to think like consultants rather than memorizing frameworks,
- Encouragement to subscribe to the channel for more content on case interviews and consulting strategies.
Made with HARPA AI
Really good. Thanks a lot. I am a Product Manager in big tech, not looking to be a consultant, but find this stuff to be super helpful for in-house strategy work.
The way the interviewee structures and answers with poise is beyond excellent
Awesome add-on to a seemingly straightforward profitability case! Great content guys
Glad you liked it!
The quickest way to learn to solve cases better is by taking our free course at www.craftingcases.com/freecourse. You'll learn the 6 Building Blocks to solve any case, learn a step-by-step process to solve each of them, and get tons of video practice drills to internalize the techniques.
brilliant exchange between you two. good work. I like how Bruno didn't just accept the recommendation, but went ahead and said "let's work on that now"
I love this I wrote this comment so the algorithm recommends more of this content
I am so inlove with this channel and all content. Its so structured, everything makes sense, and its relatively simple!
Glad you like it Rome!
Thx for sharing. The basics are all about drilling down to the constituents level. What I’d love to learn is the basic fundamental constituents of how businesses work - and I believe the first level drill down helped paint the picture.
thank you for ending my MBB internship dreams. I can't do that problem that quick, not even close. It's over.
Just learn to do it. I couldn't either before I ever prepared.
Acceptance rates are low -- I know no one who can do this without thorough preparation, yet a ton of people who learn to do this well.
This channel is amazing and these guys are awesome teachers. As somebody with an Arts/non-business degree, their videos helped me prepare for several rounds of case interviews and successfully land an MC offer.
P.S. they also have a podcast (I used to listen in the shower lol)
Where can i find the podcast?
My first time watching from case study and I really enjoyed it. Thanks!
To cut out the revenue Problem @3:51 was inaccurate. Revenue is x • p - so it could be the pricing but it is not - but it could also be the (x) the amount of Sales. It is possible to optimize sales or marketing strategy, you have to look at the activitys regarding Marketing & Sales from your competitors. It could also be a production Problem in Terms of undercapacitive manufacturing....
Taking sales into consideration would have been ideal if they were discussing revenue problem. But revenue has actually increased. So sales is not a problem. They are discussing the shrinking profit margin problem, which is dependent on cost, unless you've lowered your prices.
Vinit Tibrewal It could also be caused by undercapacitive manufacturing.
@@VinitTibrewal how does decreasing price affect the cost
Just a little feedback, if you had 2 mics, one on each person, the audio would've been much more clean! Anyway, congratz to the good content.
Thanks Marco! We will buy a couple of lav mics and do just that. We might even have them available before the next shooting!
Or if your condenser mic had a “figure 8” pattern setting you could put it between you and it will pick up front and back equally. Right now it’s picking up a lot of room noise. Great video by the way👍🏼
@@markgtownsend It is a figure 8 pattern, but the Mic had to be a bit far from both of us and the room was echo-y. We've bought ourselves more gear for future videos. Glad you liked it!
Julio's time out alert made me laugh - prob because I got the $7.4bn right by rocking the math part and did notice Bruno's mistake. I missed the supply chain risk analysis but picked on the sustainability of supply chain point. Very realistic performance from bruno, which I love it.
This was an excellent case study to understand how to drill down into factors. I also liked that you are showing how the candidate writes down the alternatives, profitability blocks, captures new information etc. I was curious to see if the company did not pass the cost to their customers, as the competition profitability went up, and our sales went up, any potential in increasing price was possible. It might still point to it being only a cost problem, but understanding if competition increased prices and hence their profitability I think was not covered. Am I chasing an irrelevant factor? Curious to know. Very very informative and helpful. Thank you guys..
Seen so many ex MBB consultants’ case prep channels. This one is so far the best. Also bit curious about why so many consultants enter this business
And thus 6 months later they go into a company and say "lay off 30%"
Lol'ed
Everything theyll be doing is drawing pp slides for 3 years.. And I am saying that even though I want to get there
2:50 - based on the revenues and cost provided, profit margins are not 5% and 2.5%
3:42 - at this point, it cannot be concluded that we do not have a pricing problem, as it could be that the competitors simply increased their prices, while we did not
why not just give him a calci? I mean at such a professional level, do you think we should waste time on calculating 65 % of 11.44. the case and his line of thinking is just amazing.
edited: ohh am sorry, just checked and found that most of the consulting firms don't allow calculator. Amazing content team craftingcases. pls go on and make more on other sectors/industries.
So making a simple arithmetic error while trying to do 0.65*11.44 which we generally stop doing by hand around the age of 12 could have meaningfully affected the outcome of this interview?
I find that ridiculous. In no situation would I leave this to mental math regardless of how talented the person would be. I would argue that we have left the age of memorization behind. Understand the problem is much more critical.
@@Prediculous that's right man, I found that extremely picky.
I would just use 0.6*12 to get an estimate, after all what matters is why the costs increased and offer potential solutions
Really enjoy your videos. It teaches me a lot and I have been watching all of your videoes multiple times. I am aspiring to work in the consultant industry (McKinsey, BCG, Bain, etc.), so this really helps me a lot. Thank you!
Did you get your job in consulting?
Vocês são excelentes, obrigado por cada vídeo e material disponibilizado online. Além disso, é muito gratificante ter dois BRs ensinando um conteúdo tão importante não somente para consultoria, mas para vida, esse tipo de pensamento/análise vou levar para qualquer lugar/empresa que eu passar.
27:45 the fact that I did that while practicing this case makes me so happy. At first I thought I made a mistake!
It was always going to come down to domestic supply chain vs international supply chain whether it was forex fluctuations or domestic cost increases. The unionizing was a nice spin.
This was such a wonderful case to learn from, I loved the professionalism in your discussion
Great video, this seems like cost accounting.
This is a brilliant breakdown and helps a lot for case prep - esp for cost analysis. Thanks!
You guys are great, love these videos. Very educational content.
This is really great! I would love to learn more from these case studies.
What I find frustrating about modern day consultancy is that the strategy nearly ALWAYS focuses on only reducing costs. The clients are at fault too because they have a preconceived idea of how to improve their profitability when they call in the consultants. Invariably that results in either reducing production and product quality or cutting conditions for staff, who unfortunately are just seen as a cost rather than an asset. This is even referenced here in this mock interview when it comes to salaries/unions. Very rarely do consultants get asked to or advise on how to improve product/service quality and appeal as a priority or simply advise on keeping a sustainably profitable business. Instead, directors and senior managers, with the aid of the consultants, cut costs to the extreme to make good profits for their share holders in the short term before they move onto their next high profile post, leaving the company’s reputation damaged in the long run and the staff poorer and unmotivated. The bane of impatient and selfish modern capitalism.
Well, this is a cost reduction case so it leaves that impression for sure. No one goes to the revenue growth case and make a comment on it saying that it’s nice that consultants help companies grow, nor do they go to the public sector case and say it’s nice that they help with vaccine distribution or literacy rates.
As for the real job, in my experience there are cost cutting projects and projects focused on growth. Usually when the economy is down most clients want to cut costs and when the economy is up they care more about growth.
Of course, the media doesn’t give headlines to the later, only to the former.
I was once in a cost cutting project where the explicit goal of the “evil capitalists” running the company was to cut costs without having to do lay-offs. We got to help them achieve this goal and helped keep everyone’s jobs. Again, no headlines of this anywhere.
Not saying that all consultants are saints and that everything is roses and rainbows. There are things to be improved in consulting, as there are things to improve in medicine, law, academia, government, NGOs. The list goes on.
Just saying that there are HUGE biases in public perception (availability bias being the main one) because the nice outcomes of the work are very private and lay-offs are are public (and also make clickable, rage-inducing headlines).
@@CraftingCases I completely appreciate your reply and my comment wasn’t meant to criticise any individuals or demean the work of consultants. I was just expressing that there is a big culture these days of blindly cutting costs to make a quick dollar that extends far beyond the “bad times”. Although I’m not in the sector directly, my ex associates who are have honestly expressed that all they are ever asked is “where can we cut costs”. I now work for a company where leadership has changed every few years with only short term goals in mind, which as I said, has led to damaged brand reputation and poor staff morale. I hope for a more refreshing approach in the future.
I have no doubt that consultants are a necessity and help create a lot of positive outcomes for companies and society. As an ex banker, I’m more than aware of the unfairness of everyone being tarnished with the same brush. No offence was intended and thanks again for your reply
@@pb4012Oh, not personally offended at all. I've been out of consulting for 8 years now, so not attached to the profession.
I just commented because there's been a surge of comments criticizing the profession in my channel in the last few months (probably because of that skit on John Oliver and the second order effects of that). Now, my channel isn't even defending the consulting industry (not more than an SAT prep channel is "defending" the university system in the US), so I find that both odd and a bit unfair given my experience.
As for the culture of blindly cutting costs, I partially agree with you. I think many companies (and consultants) do indeed have poorly structured incentives that make them do "dumb" cost cutting (aka: long-term unwise), but at the same time I think there's more bloat than ever in the average corporation. It's a weird conundrum.
I really apreciate what hv u done! Telling us profitability case study. Hopefully i can join McKinsey Consultan for my journey. Amin
Great video, great content! Keep up the good work!
Thank you hellghard. We'll keep doing more videos such as this one. If you have any suggestions on what other topics we can tackle, let us know!
I like how the guy structured the answer if they should outsource, however, I believe that he should have selected some more generic buckets, like: Financial / Technical / Supply Chain / Social / Geopolitical / Market (i.e. if that place may be potential market so that the outsourcing could be considered local content)
I feel that having an accent that makes it more natural for you to talk slow and clear when explaining simple concepts is a requirement for passing a case interview. If the interviewee had no accent in this example he would sound ridiculous talking so slow and using such simple phrasing.
Great material, congratulations! And of course, thanks for sharing.
Thanks so much guys for all the stuff you do! Hopefully will see more in a nearest future
You're welcome! We will publish more videos from time to time, but for now, check out our free course as there's a ton of content there!
Why did you guys stop making videos? This was golden. Please keep it on.
We still make videos, but mostly in our own platform. Highly recommend you join our free course. There are 30-40 videos there organized in a way that will actually help you improve your skills!
Clever! Suppliers increased costs and they're being transfered to us, not obvious
Glad you liked it juan!
Very informative and structured video. Really good.😀
At minute 14:10, he mentioned a change in product mix... Didnt they already establish that there was no change in the product mix? Please help!!
I question why the automobile company would ever need the help of a consulting company, such as McKinsey or Bain to help figure out this situation. This is something that the company should be looking at, and not just at that time. It would be monitored day-in, day-out, quarterly and yearly. There should be no entity understanding this more than the automobile themselves. Cost containment is definitely something that companies can do. What's usually harder is understanding revenue. That's often where an outside consultant can come in to give fresh insight to buying preferences of the market.
Hey Eric,
You're right in the sense that nowadays companies rarely need help to figure that out. In the past, it used to be more common to call in management consultants for these tasks as data storage, collection and analysis was trickier.
Still, firms still use these cases as they're good to test a candidate's reasoning skills (think of it this way: if you can't work your way through a problem like this in a structured, methodical and efficient fashion, you likely won't be able to solve more complicated problems).
And one more thing: you'd be surprised how many companies (even big ones) have their cost accounting messed up. I've personally seen it a couple times and heard of about a dozen situations where companies thought a certain line of product was highly profitable, only to hire McKinsey and find out they were losing money on every sale.
It's not common, but far from unheard of.
@@CraftingCases For sure. Often, for large companies, especially ones that grew quickly, when they grow so fast and their expenses also grow fast, they don't recognize the forest because of the trees. Also, they don't know whether they're off or not if they don't have other similar companies to compare to, and unfortunately, other companies aren't going to offer their internal cost data to let you compare. Consulting companies can offer generic data that they collected to help identify where costs are higher than they should be. In that aspect, consultants can bring value.
@@ericdew2021 Yep, what's also common is companies that do their accounting focused on minimizing taxes. That usually has attribution models that are less than optimal for managerial purposes. Only the best companies have both types of accounting in parallel and that misleads decision-makers.
@@CraftingCases Sort of like Robert McNamara's folly of applying operational discipline in automotive manufacturing and sales to prosecuting a war in the Southeast jungles.
Could someone explain what he means at 14:45 when he says The company is paying more per part because of the supplier making more money? Isn’t it obvious that if the supplier increases the prices they charge to us they will increase their margin? Or does he mean the supplier increased their margin and THEN they increased their prices? That second scenario is what can’t make sense of.
Now i understood why math is asked in MBA entrance exams
Thank you so much!!!! Very good case interview!!! Really impressed!!!!
Glad it helped Aigulya!
Great video, and it's a very good decision tree process that you've gone through. I would suggest however for future videos to pick numbers that are actually representative of what the figures you describe, i.e. the increase in profitability from 21 to 22.5 and costs from 20 to 22, does not actually represent a starting profitability of 5% and 2.5% respectively, but rather slightly less.
Exactly, that would be from 4.8% to 2.2%
These guys are legit, diamonds on youtube
You guys are just awesome! Very insightful. Could you please do some cases on business model and financial models?
Glad you liked it! What do you mean by cases on business model/financial model? We're not currently recording anything, but once we go back to it we may incorporate.
Question on the 15:00 mark: why is "we are buying higher quality parts" not an important option?
i'd like to comment from the angle of a purchaser from mfg industry: quality is by design, so unless the design has changed, quality should be consistent as well and so is the cost to maintain it. There are possibilities that the regulations (safety and other) has changed or the user expectation's gone up, so generally higher/more spec, and that is a design change and not quality change.
@@jackzhang631 That's a very insightful answer.
thank you guys, these are extremely helpful!!
It's an excellent video and was really insightful. One thing I would like to say is, since the interview is based on a real life business scenario , addition mistake shouldn't "put him in trouble" as said in the video. In real life, such problem solving is done using a computer or a calculator after collecting all relevant data. Also, we are so used to doing our calculation using electronic devices that an addition error should be that much of an issue. At this level , that shouldn't be that big a deal coz in real world we no longer do the calculations using just pen and a paper.
Initial assessment should focus on units produced vs increase in costs , then he should check the cost per unit not just the absolute numbers. If cost per unit is going up then focus should be on supply chain/ cost reduction measures.
Guys, if i am not mistaken you can get more numerical. So the goal was to get to 5% of profits and we currently have 2.5%. 2.5% of 22.5B = -600k. Current Autoparts Cost (22)*(52%)*(65%) = 7.44 B, vs the "should have been" of (22*50%*60%) = 6.6B. Delta = 0.84 B, so in the end I would address that the China option should at least deliver those 600k and if we would go back to previous materials cost % we would have deliver even further. Other ways around it too, so if we sold 30k cars a year, and we need to get 600k in savings, I would need to increase 2 USD in profit per car sold. Some stuff like that makes it more grounded.
Which of the 5 ways of MECE did you use for the decision to outsource to China- I can't seem to fit it within Conceptual Frameworks and others don't relevant
I’m unsure but didn’t the labour cost not increase ? Still at 20% and why will the interviewer say the union came in and cost increase all throughout the USA??
What about time taken in setting up production in China? And training the Chinese factories in the production process could be a fixed cost
This could be an issue and it would've been a good idea to raise that in the interview.
The suppliers can probably produce parts already as they do so to this company's competitors, but it could be the case that we have some slightly different parts that need different production facilities and/or different training.
@@CraftingCases yes thanks I was just building further on the fixed costs and operational consideration you mentioned would be required to be taken into account while deciding whether to go to China. Thank you so much
Excellent! Thanks for doing this.
@craftingcases at 16:00 its seen that there is an increase in Worker Costs because of unionisation. why did not it reflect in Labor Cost (it was stable) section of the Client company? can somebody please clarify ?
Hey Vignesh, labor cost was stable as a % of costs, but not in $ value. It rose in $ value. Why didn't it raise as much as material costs? Well, several hypotheses - most likely one is that the auto manufacturer was more automatized than its suppliers.
can anybody explain the real-world relevance of potentially diving deeper into why supplier costs are up? (15:34) if that were to occur in real life, wouldn't the ideal solution be to streamline inefficiencies within the client's company instead of attempting to change things on the supplier side?
Loads of companies that integrates hundreds of suppliers optimize their suppliers’ operations to bring down costs on the whole value chain, auto companies are the ones who made this practice common.
But knowing the reason also helps you figure out if should change suppliers or something else
didn't expect a response from a 4-year old video, thanks!@@CraftingCases
so much value here! Thank you!
Great job! Very reallistic!
Interesting, it's all accounting. It's a lot simpler than I thought!
I always thought that well run companies would be doing audits of its financials on a quarterly or semi-annual or annual basis. It seems that some businesses don't have the resources or foresight to employ such procedures in their company.
All business do to a certain extent.
It so happens that accounting doesn't necessarily give you what you need for managerial purposes.
Most importantly, this is an interview, so it's a test of your ability to get the relevant data at the expense of everything that doesn't matter. It doesn't mean that real engagements don't go deeper than this.
Not really. I got bored and didn't watch it all but if I was hiring a consultant it wouldn't be for their ability to do simple mental arithmetic to 2DP. I wouldn't need a consultant if that was the issue.
Fantatstic Job man ! really helpful
Starts at 0:47
Best video - please make more case videos.
Damn... I have never get on such interview but thank god, it didn't happen to me yet. Structured thinker or not, this is going to take much practice to hit it right. I don't see why mental calculation part should be a big problem, in fact I would have use my mobile calculator app,(or my financial calculator in the bag) not great for impression but better than making mistakes?
Thanks for this video.
This is an amazing video!!! TY!!!
If i was asked how I would improve the interviewee's performance.. would be general body language, and more firmer toner in his speech. As consultants, we should exert a more leader like aura
agree, i don't think his manner or demeanour was attractive to a potential employer. His speech also seemed slow and monotonous. no personality in his delivery. In an Australian or UK MC interview he would be marked down
Great interview!
I couldn't understand "fixed costs of developing new suppliers". If we're going to outsource our supplies then won't it be a variable cost? Because outsourcing manufacturing is normally done to change fixed costs into variable costs. Please tell me where I'm wrong.
one thing was missed in this discussion though. He tried working on cost reduction which is a viable one.
However they could have concentrated on increasing revenues through various ways
The idea is to prioritize the most effective action. Increasing revenue is great but not that effective if your margins are low due to higher variable costs
Inventory increase can alleviate the supply chain uncertainty. And the good news is that this can be done cheaply as the cost of capital these days are negliable.
super great content thanks guys. I have one question. someone advised me to lay out a framework rather than an issue tree in the beginning for the profitability problems. so that framework would include financial factors (revenue/cost) and non-financial factors (supplier, company etc). My concern is that if I lay out this extensive framework before I tackle the problem, wouldn't the framework be not specific enough as I haven't identified it's a revenue or cost problem or not? what are your thoughts? thanks in advance!
Well yeah mate surely laying out the framework first nd then rooting the issue tree in it helps us configure the fine tune in analysis nd thus give us a deep insight into aggregate modular factors allowing us to rectify or transform it with near perfection and also a robust workout on multi dimensional approaches of the mega factors like audit assurances taxes finances supply resiliency on a quantum celluloid quantum deriving fluid efficiencies too..
Its insane to think about these in a matter of minutes
I thought so too when I was starting out.
It’s a mix of technique, practice and pattern recognition.
@@CraftingCases getting my hands on every resource i can find to get to where you guys are.
Is there a MECE framework for the types of case studies used by consulting firms?
When doing profit cases do you not write a qualtitatieve framework (such as business situation)?
If it's a numerical problem you need to find the numerical root cause first.
@@CraftingCases How would you determine if its a numerical problem vs qualitiative? Thanks!
@@FM-dm8xj well, in this case profits dropped so they need to fix that specific number. The number is composed by many other numbers (the profit tree) so it helps to know which one changed the most to make profits go down.
Otherwise you’ll spend a lot of time talking about pricing or market share without even realizing those things are fine.
Hey guys great case! One doubt when Bruno was presenting his structure though. He had clarified that revenue was not a focus for the case and costs were important instead.
Can we do that in the beginning of the case itself? I guess he was scoping out what to focus on in his structure
I’m just watching these for fun as I’ve owned and operated many companies I’ve founded and would love to do this as a career for fun but I’m extremely terrible at doing math without a calculator.
It's a learnable skill. Plus, in the real job you most often do use calculators!
Glad you're having fun watching this!
excellent video and a very nice approach to solving. I would like it if I am allowed to use a calculator in the age of technology and data science :)
On the job you can use it if the situation allows. In the interview, they want to test your numeracy/comfort with numbers because the situation doesn't always allow it.
Two examples:
#1: You're in a meeting with finance execs who all do mental math, and you don't want to be the expensive consultant who slows the meeting down because you can't do it.
#2: You're reviewing a presentation filled with tables/charts and want to do quick math with the numbers to reality check them and potentially catch any mistakes (you could use a calculator, but it's faster if you can do it in your mind and fast matters when you're reviewing a large doc especially if it's in a room with other people).
I know it's a bit frustrating, but it's a bit like business sense -- you could, on the age of Google, learn about all sorts of industry-specific facts/practices at the tip of your fingers, but there's something to be said about having it in your mind and there's value in being fast.
Such a good job guys!
Thank you Sophia! If you have any suggestions for future videos, I’d love to hear them
sophia you are fucking hottttt!!!
Excellent, thank you for sharing
Thank you guys!👌👍
The guy with white shirt is born to be a consultant
Excellent content!
Is being that precise in the calculation is a must-do? can't we just assume that for example 11.44 = 11.5 or 1.144 = 1 ?
You can always ask the interviewer. There is a nuance, though...
Most would be ok with rounding 11.44 to 11.5 (tiny difference) but wouldn’t really like that you even asked to round from 1.144 to 1 as that is a 14.4% difference and will most likely change the results and recommendations.
They’d expect you to see that this was the case before asking. The fact that you wouldn’t do this mental assessment of whether the difference was likely to change the recommendation before asking signals to them that you’re only trying to make your life easier, not giving the best advice possible while being 80/20.
Just a few thoughts on it: why did he made all this calculations? Material costs in absolute numbers gives us nothing useful. Why just not to calculate material costs per unit sold?
This is great! Thanks so much!
Total costs have increased by 2bn. But in the breakdown, the only cost increase is 1.44bn. So what about the rest? Am I missing something?
you guys are awesome thanks for the videos
Material cost has increased because number of cars sold has increased!! Revenue increased --> price and product mix remains same--> so car sales has increased. Require more material to produce more cars.
Do we need further investigation around material costs??
Any opinion!
If that were the only reason, profit margins would’ve gone up, not down.
Is the 2nd ques it says labour cost has increased but in the first question it was told that labour cost remained the same, so are the 2 ques not related to each other?
Nice Video. Can you also share some case study on e-commerce category selection ?