Hi, I did a much much faster route for the breakeven, since you know, from the start, that to have a breakeven you need a minimum occupancy... So, what I did, much faster and not using such big numbers was: Rev./Pers= ($450+$150)-$100= $500 Breakeven= $600,000/$500 = $6,000/$5 (for those not wanting to deal with large numbers) = 1,200 minimum amount of people on board. 2,000 capacity/1,200 actual occupancy= 60%
I additionally would add to at the difference of customer segment (old vs. young) that an adaptation for cruise destination should be applied. Without doubt, there are different preferences in destinations between these target groups.
That is going to effect the global demand for cruise industries as customers would be weary about travelling due to concern about their own safety and security. Best strategy would be marketing to attract new customers and enter emerging markets.
In the second case study, we should also divide the number of tickets into two categories - Weekday sales of tickets and weekend sales of tickets. Because the number of people going for movie will vary on weekdays and weekends.
Yes, but the test is about critical thinking and how you analyse the business problem, not just about crunching numbers. You need to walk the interviewer through how you THINK about the problem as well.
Perhaps mention the location? Is The Mediterranean area in decline overall? What other destinations may increase occupancy? If you’re trying to encourage a younger market, and stick to Mediterranean, maybe visit cities or ports that cater more to a younger crowd - party cities and so on. This may decrease the older and traditional occupants, but as he said at the start, they are very price sensitive. Younger people, generally spend more on a cruise and less price sensitive. Just my two cents.
Could use the airline industry as a reference/model and relate it to the cruise industry since airlines are always looking at how to fill their planes to max capacity before taking flight because every open seat on an airplane directly relates to loss in profit.
How is fuel fixed cost? Also, before mentioning market segment diversification i would have suggested product diversification first. If you’re losing your core customer segment, chasing the next segment would be less successful. It’s a good suggestion but winning back the age group as well as considering the younger group would make more sense.
It was a good video. BUT, if the costs has been constant for the 4-5 year period. You should definitely look towards reducing both fixed and variable cost which will definitely have a great impact on the Margins. Secondly, if you are targeting newer age group, this also means that you need to change the destinations location. third, rather than getting new cruize, why can't we acquire existing cruize from the market and increase market share as the industry is seeing a decline ( 10% market share means you are a sizeble company)
Well to answer why you should not try to increase share in a declining market means that you are defacto buying more of something that will get less valuable over time.
probably, But i would like to think that any market would have at least 4-5 predominant ones with a higher market share. and a quiet of bit of inefficient small ones. Industry decline could be a economic cycle effect and will bounce back and this is the best time for acquisition. and introduce a newer brand for different age segment.
Well if total costs haven't changed (as mentioned by the interviewer) then the number of passengers haven't changed as well. So the problem isn't the number of passengers.
I think you have to remember here that these big consulting firms really exploit ambitious 'top tier' students for cheap labour and branding...as long as you have a good GMAT and an Oxbridge college on your C.V., these guys can leverage this to create an illusion of value. The truth is, their days are numbered as structured and unstructured data increases and democratises with innovative processing platforms and software frameworks. The over reliance on frameworks instead of asking the question 'have customer numbers gone down' or ignoring obvious additional revenue streams like corporate events, branded concessions, family friendly and other special screenings etc. can be put down to nerves and fact these guys are only there to crunch numbers for two years. After this, it is up the organisation or out...as long as you look the part (i.e. will appear credible enough to customers for consultants to charge them) then you are good to go. If you can max billability, keep clients on the tit, and bring in new clients this racket is for you. If you can't ask clients what they think and reflect that back to them in reports or presentations without keeping a straight face then get out while you can.
Why is no one talking about how to increase the customers, how to bring more people in, because finally, it all comes down to bringing in more customers. Why aren't they talking about advertising techniques?
I agree with you. However, I believe this case study is more focused on financial analysis rather than a marketing functional assessment. That's why its more financed driven, not discussing about marketing maneuvers.
+mushfiq saif She is great isn't she; bear in mind it is likely staged and she knew some part of the case beforehand. An easier way to do break even is as follows: Breakeven units (no of passengers) = Fixed costs/ Contribution Margin (per passenger) ; Contribution Margin (CM) is how much each passenger adds to profit and = price per passenger + variable or incremental revenue - variable costs; in this example CM = 450 + 150 (incremental food revenue) - 100 (VC per passenger) = 500; now to calculate your breakeven passengers = 600 000/500 = 1200; 1200/2000 = occupancy rate = 60%; Remember, no calculators allowed in the case interview so get comfortable and practiced with your mental maths! Best of luck!
Not really, here the route for ships is fixed and hence fuel even though variable per kms, it still is fixed irrespective of the number of customers on board. You don't change a cruise route/kms depending on customers on board!
Well I could do it swiftly and calculated 1200 passenger occupancy in just 2 seconds for break-even...But I quickly realised that additional 150 GBP spend was all taken in as profit...what about the cost of products or services provided to customer in lieu of that per passenger revenue...don't think that can be accounted in fixed costs. Have many other ideas too - fill the rest of the missing occupancy even at discounted rates and you still profit more given you stay above the break-even barrier for that segment - many ways to achieve it.
Fuel is a fixed cost. First of all, it would vary depending on a number of passengers and distance traveling. Second, the price of gas is changing In addition, if the number of passengers has declined, that means the cost has decreased
It's both. Consider a cruise ship with 10,000 people and a ship with 100 people. It would take more fuel for the ship with 10,000 people considering their weight and everything but if you consider the entire ship sailing, it may or may not be a huge difference. That ONE ship will still sail regardless of the occupancy rate. but overall it will depend on how far they sail and such so I think in an interview setting you can choose one.
madhur kalgutkar I believe it's a fixed cost. With the cruise business, they will generally be visiting the same locations, so after a few times the total fuel cost can be accurately measured. If the cruise line stops in the same locations each time, then they can classify it as a fixed cost.
I worked in a yacht company and I can tell you is a fixed cost. Since the variation by the amount of people is negligible compared with the one caused by the distance.
While the constant cost doesn't imply the problem is not from cost side. As technology evolves, it is better to compare cost ratio of client to industry. If cost ratio is much higher than industry level, that implies that the client needs to work on cost optimization. Cost optimization is the hardest job for company!!! Second, as recommending client focusing on younger customers to increase the occupancy, the cost will definitely goes up!!!
There is a mistake in the occupancy calculation diagram (adding the word occupancy as an additional term), even though the calculation itself is correct.
Good start to the case however; before proposing solution on what can the company do about it, she should go deeper in understanding the key issue that is causing the revenue to go down. That key issue needs to be addressed. For example, if service has deteriorated, reducing price (if hypothetically can reduce) or increasing promotional activities just won't help - may help in short-term but cannot be sustained until the underlying problem (improving service) is fixed.
Why is she subtracting the the Fixed Costs (600,000) from the variable costs? Aren't you supposed to Add both Fixed Costs + Variable Costs in order to get Total Costs?
If you do the math like this: profit = RV - (FC + VC) you will get after removing the brackets () in the end the same result. + becomes - and it is the same, :)
Hey guys! could u please recommend me any good website or even books, video tutorials in order to prepare for strategy interviews? Unfortunately at College i am not taught how to interprete charts, diagrams or even think into business issues they way we are required at consulting interviews! Thanks a lot in advance
If anyone can shed their experience - how detailed would you go before it becomes unnecessary? I quickly wrote down my thoughts for this case before watching the full video and for example, one thing i did was breaking down the people attending into three groups - (1) weekends, (2) mon-fri (day time), (3) mon -fri (evenings) as i would expect attendance rates to vary significantly between them. It may make the calculations slightly longer (but obviously not really any more complex). In the context of that situation would that "breakdown" be considered unnecessary from an interviewer perspective? I just think that estimations questions would require slightly more detail to reflect variations in the real-life case than pulling out the overall rough estimations presented here. Just curious if anyone has any thoughts. Cheers.
When he asked her in the first question why are profits are declining , she should've mentioned Porters five forces and going through each force . That would have shown him that shes the ability to run a case study for a top down perspective. Thats IMO
Why not just acquire another company to boost market share. If the whole market is depressed you should be able to buy another company at a discount. Or even better acquire a Cruise company targeted toward the younger generation. Also just increase costs on the ship, your customers can't go anywhere while onboard and if you are discounting tickets already you need to make back money while on the ship. Customers can't be price sensitive while on board because you own 100% of the market for anything they could buy.
I couldn't imagine having to have these kinds of MBA style conversations that lack any kind of business acumen or vision. Blockbusters profits are declining because they aren't fucking innovating. The hell with focusing on fixed costs and revenue equals price x volume.
John Fulton Revenue for Netflix = Price * Volume of subscriptions -- so, yea, that's a pretty relevant business question. Blockbuster failed because they didn't understand that the game had changed underneath them, and they applied the strategies that helped them put ma & pa stores rental shops out of business. They would have had to painfully gut the company in order to pivot to compete with Netflix. Essentially what happened to them is the business equivalent of an animal refusing to gnaw off its own arm in order to escape a trap, and inevitably dying because of this.
Slurpy Hooves Blockbuster had the opportunity to purchase Netflix before it took off. They failed to see the vision. Savvy is useful but business acumen and vision is what keeps companies alive. MBA curriculum has not evolved to be relevant to the commercial model that has risen from the demise of the brand centric mass marketing models that flourished before the digital revolution. MBAs are not a prerequisite for making good business decisions. Blackberry, Radioshack, Blockbuster, Circuit City, all good examples of how a companies fail when you try to solve the problem by throwing MBAs at it.
John Fulton even if somebody comes up with an innovative vision for a company, you need to understand how that vision will impact the bottom line if acted upon. The skills utilized by MBAs and consultants are necessary to execute on the strategies you mention. It's really a combination of both skills that drive business.
Estimation problem for the guy is pretty reassuring since apparently you can pull out figures out of your ass. "When me and my friends go to the cinema we get refreshments 50% of the time". Hahahaha. I am gonna use this percentage I pulled out of my ass to give you a sensible estimation. lol
mytwocents100 wow... do you think the point of these interview questions is a) to see how much random information a given candidate has memorized or b) how a potential consultant breaks down something unknown into component pieces that can be estimated and aggregated?
+Irmina Włodarczyk I never said they are easy. Please read my comment. I am saying that case interviews are much harder then this. I can say that because I have been there and none of them were this easy. Also FYI - I am strategy and business transformation consultant with oil and gas clients.
Dear Camillo, Try looking for videos from prep lounge. Sign up on that website. You can get free trials if you invite a friend. If all fails msg me and I can add you to a WhatsApp group that prepares people for cases interviews. I also do 1-1 sessions.
I wouldn't even bother looking into the company, or the numbers, I would look into the competition and try to find a cruise company thats target group falls into 50-70's and is successful. Then breakdown what they are doing and copy them. If there isn't a company that fits, then your business is too narrow and need to broaden it to bring back appeal.
Emineo At first sight, it would seem like a good way to break down the problem, however, that's not exactly what the management consultant firms are looking for. It's not all about the solution or fixing the problem. It's about breaking the whole situation down in to little pieces that each form a possible independent cause of the problem. Stating the obvious may seem irrational in a high profile interview like this, but it's precisely what the interviewers are testing. There are multiple, but yet simple reasons for it. 1. By breaking down the case step by step you can solve almost any problem (or at least the find out what the cause is) and that is what they want from a consultant. Projects vary in different fields of operations. Searching for a successful cruise firm and copying it's strategy may or may not work in the cruise industry, but finding the cause of the real problem and fixing it almost definitely will despite the industry you're working at. 2. If you search for a company that has a focus group of 50-70's and copy their MO, you're going to be stuck with the same client base which originally caused your client firm's profits to decline. By expanding the focus group to e.g. 40-70's you give the firm more possibilities to grow and find profitable investments. Growing and increasing revenue is the reason why people invest in companies. If there isn't any investments that have a better rate of return than the opportunity cost of capital, there's no reason for the company's existence. 3. Last but not least: being analytical and staying coherent regardless of the situation is the single most important quality of a successful consultant. It's not about the framework, it's about the ability of adjusting the framework in to different situations.
Tommi Bergström Thanks for the great reply! I will agree with everything that you've said. I do understand the emphasize of having the same strategic approach, which will standardize the firm's solutions for specific situations, and in better isolation of the problems that exist within the company. (Even getting to the solution doesn't necessarily mean that the company will successfully implement it. After all it's the implementation that leads to growth down the road. Although analytics can be useful in providing a plan of action, would you say there is a psychological(Management and workers) aspect as to having it work?) My opinion can you breakdown the Implementation part, of what you see ? Or does Implementation in the advice always prove successful and is the advice solely based on numbers, or is there a psychological aspect plaguing the numbers? Curious as to your take! Thanks in Advance
oh my god, such a bad case study, what's the point of listing down all the factor when you never even elaborate on the main point. It just shows that you are not well-versed in that industry, and probably you have not asked the correct question. If you just do it right, a few simple sentence will be able to drive down to a conclusion. This interviewee really needs to buck up
Too much "hi I know accounting, revenues - costs". Go straight to the point, I would ask why the business is declining, are they cost inefficient or are revenues declining and if so, is it because they are being outcompete or substitute products. And why is the business focusing on old people only? Families with children are an obvious target for Cruise vacations.
I didnt like her approach: she ignore the variable cost perspective and didnt go to the root cause. If the variable cost is the same and profits has gone down, then clearly the number of passengers is not the cause behind the decline but diminshing profit margin( decreased revenue) per customer.
1. If the interviewer says costs have remained static, its better for interview purposes to not beat the corpse and keep plugging at it. Its simply to save time for the interview. But a more drawn out analysis should have considered potential cost changes (probably increases in fixed costs and maintenance costs actually) and pricing changes given the new target market after they determined that the generally declining number of customers was an issue. A competitor analysis should probably also have been mentioned (e.g. Disney already runs these for the same target market) in addition to a more thorough customer analysis (e.g. Do younger people like taking cruises in the mediterranean? What are the segments among the younger populations?). Thought the "ask 100 people" answer was somewhat weak as well. 2. If variable cost is the same and profits have gone down, the number of passengers may still be a cause of declining profits if you consider the effect of fixed costs in the profit calculations. For a simple example: Fixed cost = 100,000. Var cost = 500. Rev per customer = 1000. Lets do a super simplified example and say that currently, the company is only breaking even at 200 customers per ship and the ship only runs once per year. Profit = Rev - Cost = 1000*200 - (100,000 + 500*200) = 0 If you double the number of customers, the math works out to a profit of $100,000. = 1000*400 - (100,000 + 500*400) = 100,000 Of course, revenue per customer could also be a reason. 3. I think this level of difficulty is for 1st round interviews.
Jeremy Kim Hi - but I thought the interviewer said "costs" are the same not variable cost being the same. Costs = Fixed cost + [Variable cost/passenger x # of passengers] If total costs is the same over 5 years - Fixed cost are the same regardless of # of passengers. - Doesn't this imply, the Variable cost has stayed the same ? If true, # of passengers have stayed the same over the past 5 years.
Jermey Muren I have to say i agree fully with you. This is one kind of case study that doesn't even test your critical thinking. No point having a case study like tat
Jaideep Bhattacharya If you listen carefully, the interviewer says that nothing has changed in the cost STRUCTURE. The idea is that he doesn't want you to explore that further. You could insist on harping on that detail, but he's given you a clue not to explore it further, and you should probably move on to the revenue side. That's just how these interview questions work.
" Tomorrow's Back Up visions and Investment Social" is an organization nonprofit, why i have chosen that name ? First of all, he has chosen to be his servant, i have known in the Bible that his only son, Jesus has come On earth to preach and act, the Gospel is not only Word But it's Action. Imagine your brother or sister is hungry, and you have Things to feed him or her, Will you pray or Act ? Some Will pray but like some Act, me, i will act because you have means to take care instead of praying but it's Gospel. We have our brothers and sisters are homeless, suffering, weakness, hungry, naked and son fourth... On October 2016, i have got this vision because i couldn't sleep and wake up with his Awesome vision to help Kids specially and i have chosen to take care of them with their Family. I am so far in the process but i am working on to help them but as we have already known it's an easy process but he never gives a vision without provisions but he is faithful to his vision, a great to save life. There are some organization pretend to help but they enrich on them but i would love to do different But it 's not easy because i Will have other people in the project with me, i don't know but God knows them better than us. Whatsapp : 509-37748846
lolol not consultant material. Your thought, "if every single movie coming out of Hollywood is "shit", what then?" shut down completely? shut down for a few months when "good" movies come out? If it's temporary, there are no guarantees "good" will ever come.
I You my son he was my father and I said I would never know if he was a child or 👶 he would be my favorite person ever to be have Ktytu is r the way you are and you are the one ☝️ and I love think 💭 will get be you the only person I know want a man to know about you
such a boring answer! the client would've already thought about the classic causes, what he'd be looking for is something they don't typically see because they are overly involved in the business. boring.
![Gunna - back in the a [Official Video]](http://i.ytimg.com/vi/oBrbejOHjLw/mqdefault.jpg)
Hi, I did a much much faster route for the breakeven, since you know, from the start, that to have a breakeven you need a minimum occupancy... So, what I did, much faster and not using such big numbers was:
Rev./Pers= ($450+$150)-$100= $500
Breakeven= $600,000/$500 = $6,000/$5 (for those not wanting to deal with large numbers) = 1,200 minimum amount of people on board.
2,000 capacity/1,200 actual occupancy= 60%
ketochi thanks! I hated how she calculated it.
I additionally would add to at the difference of customer segment (old vs. young) that an adaptation for cruise destination should be applied. Without doubt, there are different preferences in destinations between these target groups.
Glad I'm watching it now. This will definitely help with my interview.
This was unbelievably helpful, thank you.
The case seemed just too easy for a typical consulting interviews... still informative, no doubt
Wouldn't sinking a few ships of their competitors help increase the market share of this struggling cruise company?
Or one of their own to boost the occupancy 🤔
That is going to effect the global demand for cruise industries as customers would be weary about travelling due to concern about their own safety and security. Best strategy would be marketing to attract new customers and enter emerging markets.
lOlollolo
🤣🤣🤣
Expected reply of the russian kind
brilliant breakdown of problem statement
In the second case study, we should also divide the number of tickets into two categories - Weekday sales of tickets and weekend sales of tickets. Because the number of people going for movie will vary on weekdays and weekends.
Prashant Dagar Great point.
Easier way to solve it:
Profit per passenger is (600 -100) = $500. How many 500s do we need to equal 600k ? 1200.
1200 is 60% of 2k
Yes, but the test is about critical thinking and how you analyse the business problem, not just about crunching numbers. You need to walk the interviewer through how you THINK about the problem as well.
Amazing!
This was great, thank you.
Perhaps mention the location? Is The Mediterranean area in decline overall? What other destinations may increase occupancy? If you’re trying to encourage a younger market, and stick to Mediterranean, maybe visit cities or ports that cater more to a younger crowd - party cities and so on. This may decrease the older and traditional occupants, but as he said at the start, they are very price sensitive.
Younger people, generally spend more on a cruise and less price sensitive. Just my two cents.
Very good.
Could use the airline industry as a reference/model and relate it to the cruise industry since airlines are always looking at how to fill their planes to max capacity before taking flight because every open seat on an airplane directly relates to loss in profit.
Very informative.
It seems rather easy, especially the calculations. Is this a realistic scenario for bcg/mckinsey/bain?
How is fuel fixed cost? Also, before mentioning market segment diversification i would have suggested product diversification first. If you’re losing your core customer segment, chasing the next segment would be less successful. It’s a good suggestion but winning back the age group as well as considering the younger group would make more sense.
It was a good video. BUT, if the costs has been constant for the 4-5 year period. You should definitely look towards reducing both fixed and variable cost which will definitely have a great impact on the Margins. Secondly, if you are targeting newer age group, this also means that you need to change the destinations location. third, rather than getting new cruize, why can't we acquire existing cruize from the market and increase market share as the industry is seeing a decline ( 10% market share means you are a sizeble company)
You stole my idea. :P
Well to answer why you should not try to increase share in a declining market means that you are defacto buying more of something that will get less valuable over time.
probably, But i would like to think that any market would have at least 4-5 predominant ones with a higher market share. and a quiet of bit of inefficient small ones. Industry decline could be a economic cycle effect and will bounce back and this is the best time for acquisition. and introduce a newer brand for different age segment.
👏🏽👍🏼
Amazing but little more preferable to situation
Well if total costs haven't changed (as mentioned by the interviewer) then the number of passengers haven't changed as well. So the problem isn't the number of passengers.
not true. Total cost might stay the same with number of passengers went down
Total costs have declined as passenger numbers have fallen. I think what they meant was the variable cost per passenger hasn't changed.
So is this a model for a perfect performance?
thanks man
i have an interview this tuesday and i dont have any idea that there will be this type of case study
I think you have to remember here that these big consulting firms really exploit ambitious 'top tier' students for cheap labour and branding...as long as you have a good GMAT and an Oxbridge college on your C.V., these guys can leverage this to create an illusion of value. The truth is, their days are numbered as structured and unstructured data increases and democratises with innovative processing platforms and software frameworks. The over reliance on frameworks instead of asking the question 'have customer numbers gone down' or ignoring obvious additional revenue streams like corporate events, branded concessions, family friendly and other special screenings etc. can be put down to nerves and fact these guys are only there to crunch numbers for two years. After this, it is up the organisation or out...as long as you look the part (i.e. will appear credible enough to customers for consultants to charge them) then you are good to go. If you can max billability, keep clients on the tit, and bring in new clients this racket is for you. If you can't ask clients what they think and reflect that back to them in reports or presentations without keeping a straight face then get out while you can.
Why is no one talking about how to increase the customers, how to bring more people in, because finally, it all comes down to bringing in more customers. Why aren't they talking about advertising techniques?
I agree with you. However, I believe this case study is more focused on financial analysis rather than a marketing functional assessment. That's why its more financed driven, not discussing about marketing maneuvers.
I guess you missed the part where she explained how a younger market would bring more customers onto the cruise ship?
@@tylergable2445 You're forgetting about attracting more customers from the original target market
the problem of the case is we only know the difference in profit among the companies but have no idea about the competitor's revenue and cost.
thank you
she is just brilliant! i,m still stuck on the break-even portion!
+mushfiq saif She is great isn't she; bear in mind it is likely staged and she knew some part of the case beforehand. An easier way to do break even is as follows:
Breakeven units (no of passengers) = Fixed costs/ Contribution Margin (per passenger) ;
Contribution Margin (CM) is how much each passenger adds to profit and = price per passenger + variable or incremental revenue - variable costs; in this example CM = 450 + 150 (incremental food revenue) - 100 (VC per passenger) = 500; now to calculate your breakeven passengers = 600 000/500 = 1200; 1200/2000 = occupancy rate = 60%;
Remember, no calculators allowed in the case interview so get comfortable and practiced with your mental maths! Best of luck!
mushfiq saif i
No no. It's a Very simple formula.
Fuel is variable.. it increases and decreases with output (along with wages)
Not really, here the route for ships is fixed and hence fuel even though variable per kms, it still is fixed irrespective of the number of customers on board. You don't change a cruise route/kms depending on customers on board!
A consultant complaining cinema refreshments are overpriced! that's some cheek.
Well I could do it swiftly and calculated 1200 passenger occupancy in just 2 seconds for break-even...But I quickly realised that additional 150 GBP spend was all taken in as profit...what about the cost of products or services provided to customer in lieu of that per passenger revenue...don't think that can be accounted in fixed costs. Have many other ideas too - fill the rest of the missing occupancy even at discounted rates and you still profit more given you stay above the break-even barrier for that segment - many ways to achieve it.
can someone tell me did she get the offer based on her performance---if it is a real interview
Fuel is a fixed cost. First of all, it would vary depending on a number of passengers and distance traveling. Second, the price of gas is changing
In addition, if the number of passengers has declined, that means the cost has decreased
what was not discussed was cost reduction opportunities to improve profitability
VENKATA RAMANAN That was mentioned. The interviewer shut that down in the beginning.
How can the occupancy be the problem if the costs are constant ? They should fall in this case atleast a bit.
Fuel is a variable cost.
It's both. Consider a cruise ship with 10,000 people and a ship with 100 people. It would take more fuel for the ship with 10,000 people considering their weight and everything but if you consider the entire ship sailing, it may or may not be a huge difference. That ONE ship will still sail regardless of the occupancy rate. but overall it will depend on how far they sail and such so I think in an interview setting you can choose one.
It's a variable cost in the sense that it varies with the number of trips made. It's not a fixed periodic cost.
Uhm, depends on the business. In this case, I tend to agree with the fixed cost definition. People weight on a cruise ship is absolutely trivial.
madhur kalgutkar I believe it's a fixed cost. With the cruise business, they will generally be visiting the same locations, so after a few times the total fuel cost can be accurately measured. If the cruise line stops in the same locations each time, then they can classify it as a fixed cost.
I worked in a yacht company and I can tell you is a fixed cost. Since the variation by the amount of people is negligible compared with the one caused by the distance.
For the second case, he didn't mention anything about reducing cost.
Because if you reduce cost, you raise profit, not revenue. (Profit = revenue - cost)
While the constant cost doesn't imply the problem is not from cost side. As technology evolves, it is better to compare cost ratio of client to industry. If cost ratio is much higher than industry level, that implies that the client needs to work on cost optimization. Cost optimization is the hardest job for company!!!
Second, as recommending client focusing on younger customers to increase the occupancy, the cost will definitely goes up!!!
There is a mistake in the occupancy calculation diagram (adding the word occupancy as an additional term), even though the calculation itself is correct.
Marcus Soori agreed.
Associate Consultant Interviews - Bain & Company, London Office!
Profit formula
More practical situations and good analysis of answer with available inputs.
Good start to the case however; before proposing solution on what can the company do about it, she should go deeper in understanding the key issue that is causing the revenue to go down. That key issue needs to be addressed. For example, if service has deteriorated, reducing price (if hypothetically can reduce) or increasing promotional activities just won't help - may help in short-term but cannot be sustained until the underlying problem (improving service) is fixed.
Why is she subtracting the the Fixed Costs (600,000) from the variable costs? Aren't you supposed to Add both Fixed Costs + Variable Costs in order to get Total Costs?
She isn't! Thats the complete equation. Try doing the calculation on your own, you'll get the same answer.
If you do the math like this:
profit = RV - (FC + VC) you will get after removing the brackets () in the end the same result. + becomes - and it is the same, :)
Hey guys! could u please recommend me any good website or even books, video tutorials in order to prepare for strategy interviews? Unfortunately at College i am not taught how to interprete charts, diagrams or even think into business issues they way we are required at consulting interviews! Thanks a lot in advance
The McKinsey mind might help
If anyone can shed their experience - how detailed would you go before it becomes unnecessary? I quickly wrote down my thoughts for this case before watching the full video and for example, one thing i did was breaking down the people attending into three groups - (1) weekends, (2) mon-fri (day time), (3) mon -fri (evenings) as i would expect attendance rates to vary significantly between them. It may make the calculations slightly longer (but obviously not really any more complex). In the context of that situation would that "breakdown" be considered unnecessary from an interviewer perspective?
I just think that estimations questions would require slightly more detail to reflect variations in the real-life case than pulling out the overall rough estimations presented here. Just curious if anyone has any thoughts. Cheers.
When he asked her in the first question why are profits are declining , she should've mentioned Porters five forces and going through each force . That would have shown him that shes the ability to run a case study for a top down perspective. Thats IMO
Why not just acquire another company to boost market share. If the whole market is depressed you should be able to buy another company at a discount. Or even better acquire a Cruise company targeted toward the younger generation. Also just increase costs on the ship, your customers can't go anywhere while onboard and if you are discounting tickets already you need to make back money while on the ship. Customers can't be price sensitive while on board because you own 100% of the market for anything they could buy.
Not sure about this Michael McIntyre sketch...
I couldn't imagine having to have these kinds of MBA style conversations that lack any kind of business acumen or vision.
Blockbusters profits are declining because they aren't fucking innovating. The hell with focusing on fixed costs and revenue equals price x volume.
John Fulton Revenue for Netflix = Price * Volume of subscriptions -- so, yea, that's a pretty relevant business question. Blockbuster failed because they didn't understand that the game had changed underneath them, and they applied the strategies that helped them put ma & pa stores rental shops out of business. They would have had to painfully gut the company in order to pivot to compete with Netflix. Essentially what happened to them is the business equivalent of an animal refusing to gnaw off its own arm in order to escape a trap, and inevitably dying because of this.
Slurpy Hooves Blockbuster had the opportunity to purchase Netflix before it took off. They failed to see the vision. Savvy is useful but business acumen and vision is what keeps companies alive. MBA curriculum has not evolved to be relevant to the commercial model that has risen from the demise of the brand centric mass marketing models that flourished before the digital revolution. MBAs are not a prerequisite for making good business decisions. Blackberry, Radioshack, Blockbuster, Circuit City, all good examples of how a companies fail when you try to solve the problem by throwing MBAs at it.
John Fulton even if somebody comes up with an innovative vision for a company, you need to understand how that vision will impact the bottom line if acted upon. The skills utilized by MBAs and consultants are necessary to execute on the strategies you mention. It's really a combination of both skills that drive business.
Sarah Wolf if you're romantic about the degree than no evidence will change your mind...
www.amazon.com/The-MBA-Bubble-Getting-Degree/dp/1490942939
Could you please put a bit more of pixels on this video, it is really interesting , but it looks like a really old video.
Its all about common sense....but I doubt McKinsey would ask such an easy case study :/
Anyone else confused why Michael Mcintyre is interviewing her
Estimation problem for the guy is pretty reassuring since apparently you can pull out figures out of your ass. "When me and my friends go to the cinema we get refreshments 50% of the time". Hahahaha. I am gonna use this percentage I pulled out of my ass to give you a sensible estimation. lol
mytwocents100 wow... do you think the point of these interview questions is a) to see how much random information a given candidate has memorized or b) how a potential consultant breaks down something unknown into component pieces that can be estimated and aggregated?
it cant be this easy and simple????
+Ozair Shaiq you think it's easy because you don't sit there.
+Irmina Włodarczyk I never said they are easy. Please read my comment. I am saying that case interviews are much harder then this. I can say that because I have been there and none of them were this easy. Also FYI - I am strategy and business transformation consultant with oil and gas clients.
good for ya. :)
+Ozair Shaiq would you suggest a video which is closer to what these kind of interviews are?
Dear Camillo,
Try looking for videos from prep lounge. Sign up on that website. You can get free trials if you invite a friend. If all fails msg me and I can add you to a WhatsApp group that prepares people for cases interviews. I also do 1-1 sessions.
I wouldn't even bother looking into the company, or the numbers, I would look into the competition and try to find a cruise company thats target group falls into 50-70's and is successful. Then breakdown what they are doing and copy them. If there isn't a company that fits, then your business is too narrow and need to broaden it to bring back appeal.
Emineo At first sight, it would seem like a good way to break down the problem, however, that's not exactly what the management consultant firms are looking for. It's not all about the solution or fixing the problem. It's about breaking the whole situation down in to little pieces that each form a possible independent cause of the problem. Stating the obvious may seem irrational in a high profile interview like this, but it's precisely what the interviewers are testing. There are multiple, but yet simple reasons for it.
1. By breaking down the case step by step you can solve almost any problem (or at least the find out what the cause is) and that is what they want from a consultant. Projects vary in different fields of operations. Searching for a successful cruise firm and copying it's strategy may or may not work in the cruise industry, but finding the cause of the real problem and fixing it almost definitely will despite the industry you're working at.
2. If you search for a company that has a focus group of 50-70's and copy their MO, you're going to be stuck with the same client base which originally caused your client firm's profits to decline. By expanding the focus group to e.g. 40-70's you give the firm more possibilities to grow and find profitable investments. Growing and increasing revenue is the reason why people invest in companies. If there isn't any investments that have a better rate of return than the opportunity cost of capital, there's no reason for the company's existence.
3. Last but not least: being analytical and staying coherent regardless of the situation is the single most important quality of a successful consultant. It's not about the framework, it's about the ability of adjusting the framework in to different situations.
Tommi Bergström Thanks for the great reply!
I will agree with everything that you've said. I do understand the emphasize of having the same strategic approach, which will standardize the firm's solutions for specific situations, and in better isolation of the problems that exist within the company.
(Even getting to the solution doesn't necessarily mean that the company will successfully implement it. After all it's the implementation that leads to growth down the road. Although analytics can be useful in providing a plan of action, would you say there is a psychological(Management and workers) aspect as to having it work?) My opinion can you breakdown the Implementation part, of what you see ? Or does Implementation in the advice always prove successful and is the advice solely based on numbers, or is there a psychological aspect plaguing the numbers? Curious as to your take!
Thanks in Advance
oh my god, such a bad case study, what's the point of listing down all the factor when you never even elaborate on the main point. It just shows that you are not well-versed in that industry, and probably you have not asked the correct question. If you just do it right, a few simple sentence will be able to drive down to a conclusion. This interviewee really needs to buck up
That moment when you know you're going to smash the chick on your desk after you hire her 17:13
Too much "hi I know accounting, revenues - costs". Go straight to the point, I would ask why the business is declining, are they cost inefficient or are revenues declining and if so, is it because they are being outcompete or substitute products. And why is the business focusing on old people only? Families with children are an obvious target for Cruise vacations.
I didnt like her approach: she ignore the variable cost perspective and didnt go to the root cause. If the variable cost is the same and profits has gone down, then clearly the number of passengers is not the cause behind the decline but diminshing profit margin( decreased revenue) per customer.
1. If the interviewer says costs have remained static, its better for interview purposes to not beat the corpse and keep plugging at it. Its simply to save time for the interview. But a more drawn out analysis should have considered potential cost changes (probably increases in fixed costs and maintenance costs actually) and pricing changes given the new target market after they determined that the generally declining number of customers was an issue. A competitor analysis should probably also have been mentioned (e.g. Disney already runs these for the same target market) in addition to a more thorough customer analysis (e.g. Do younger people like taking cruises in the mediterranean? What are the segments among the younger populations?). Thought the "ask 100 people" answer was somewhat weak as well.
2. If variable cost is the same and profits have gone down, the number of passengers may still be a cause of declining profits if you consider the effect of fixed costs in the profit calculations.
For a simple example:
Fixed cost = 100,000. Var cost = 500. Rev per customer = 1000.
Lets do a super simplified example and say that currently, the company is only breaking even at 200 customers per ship and the ship only runs once per year.
Profit = Rev - Cost
= 1000*200 - (100,000 + 500*200) = 0
If you double the number of customers, the math works out to a profit of $100,000.
= 1000*400 - (100,000 + 500*400) = 100,000
Of course, revenue per customer could also be a reason.
3. I think this level of difficulty is for 1st round interviews.
Jeremy Kim Hi - but I thought the interviewer said "costs" are the same not variable cost being the same.
Costs = Fixed cost + [Variable cost/passenger x # of passengers]
If total costs is the same over 5 years
- Fixed cost are the same regardless of # of passengers.
- Doesn't this imply, the Variable cost has stayed the same ? If true, # of passengers have stayed the same over the past 5 years.
Jermey Muren I have to say i agree fully with you. This is one kind of case study that doesn't even test your critical thinking. No point having a case study like tat
Jaideep Bhattacharya If you listen carefully, the interviewer says that nothing has changed in the cost STRUCTURE. The idea is that he doesn't want you to explore that further. You could insist on harping on that detail, but he's given you a clue not to explore it further, and you should probably move on to the revenue side. That's just how these interview questions work.
Jermey Muren 👍🏼
Cost of crimes ?????? Cost of Lies ???? Cost of hate ????? Cost of False teaching ?? Cost of not being fair ??/ Cost of religious freedom?????????????
Lol, she got the way to increase market share completely wrong, is this a real interview?
" Tomorrow's Back Up visions and Investment Social" is an organization nonprofit, why i have chosen that name ?
First of all, he has chosen to be his servant, i have known in the Bible that his only son, Jesus has come On earth to preach and act, the Gospel is not only Word But it's Action.
Imagine your brother or sister is hungry, and you have Things to feed him or her, Will you pray or Act ?
Some Will pray but like some Act, me, i will act because you have means to take care instead of praying but it's Gospel.
We have our brothers and sisters are homeless, suffering, weakness, hungry, naked and son fourth...
On October 2016, i have got this vision because i couldn't sleep and wake up with his Awesome vision to help Kids specially and i have chosen to take care of them with their Family.
I am so far in the process but i am working on to help them but as we have already known it's an easy process but he never gives a vision without provisions but he is faithful to his vision, a great to save life.
There are some organization pretend to help but they enrich on them but i would love to do different But it 's not easy because i Will have other people in the project with me, i don't know but God knows them better than us.
Whatsapp : 509-37748846
Break-even Question:
Costs = Revenue
600,000 + 100(people) = 450(people) + 150(people)
people = 1,200 = 60% of capacity.
To increase profit of a Cinema stop showing shit movies.
lolol not consultant material. Your thought, "if every single movie coming out of Hollywood is "shit", what then?" shut down completely? shut down for a few months when "good" movies come out? If it's temporary, there are no guarantees "good" will ever come.
It was a joke u idiot
⁰p
What about the price of discrimination of LGBT persons??????????? try 7. 7 million
Wow this is such a bad interview.... ok its getting a bit better later on.. Nice video though! Thx!
on which basis do you say that?
average performances.
I You my son he was my father and I said I would never know if he was a child or 👶 he would be my favorite person ever to be have Ktytu is r the way you are and you are the one ☝️ and I love think 💭 will get be you the only person I know want a man to know about you
such a boring answer! the client would've already thought about the classic causes, what he'd be looking for is something they don't typically see because they are overly involved in the business. boring.
this girl is terrible...