Sample consulting case study questions

Interview process/preparation
#1

Hi guys! For those who are currently thinking about or preparing for consulting case study interviews, I wanted to offer a few sample questions to get you started. If you want a detailed response of how I would approach any of the questions let me know in the comments.

  1. How would you decide whether to buy a coffee shop?
  2. A large hotel Hard Stone Cafe wants to know whether they should increase their room rate by $20?
  3. How would you quantify how much sugar an average American consumes per year?
  4. A US airline has a frequent flyer program and they sell these miles to partnerships like hotels and credit card companies. They recently noticed a precipitous drop in frequent flyer miles revenue from rental car companies (a 50% drop in the last two years). How would you determine what the cause of this loss of revenue is and how would you remedy it?
  5. Your client is a major pharmaceutical company that has two drugs in development for Alzheimer’s. The development for the drugs is 10 years but the final 3 years of testing takes up 50% of the total cost. You have to decide whether to test booth drugs, only one, or neither.
  6. Your client, DJ Minn, is the largest discount retailer in the UK (in terms of market share and profitability) with 500 stores in the country. The second largest retailer in the UK has 300 stores. However the largest discount retailer in France, BonMagasin, just bought all of DJ Minn’s competition and plans to convert the 300 stores to BonMagasin stores. DJ Minn is worried and needs you to decide whether they should be concerned and what they should do in response.
1 Like
#2

Hi, thanks for this. Can you give a good answer for question 2?

#3

Of course! The answer is inspired by something I’ve seen in the past. I’d break down the analysis into several parts:

First ask, what are the room rates now? $200.

Overall industry: the overall market is stable. The hotel industry has two main segments: business and vacation.

You should explore the properties of each segment. For instance, hotels catered towards business are usually in metropolitan areas, smaller in size, provide services such as technology, are more flexible when it comes to cancellation policies etc. On the other hand, vacation hotels can be in more scenic and tourist-filled areas, have more variation when it comes to price and facilities, and seasonal demand.

The Hard Stone Cafe is one of the leaders in business hotels but average in the vacation hotel segment.

Internal Company Analysis:

Interviewer: should the client focus on the business hotel unit or vacation hotel and why?

Answer: Business hotel for a few main reasons:

  1. Location advantage: as the client already has an advantage here, they already have the best locations in metropolitan areas. The supply of these locations is fairy limited.

  2. Stable revenue stream: since it’s less seasonal than the vacation business, demand is more stable and linear. This implies that the hotel will be more occupied for most of the year and so a fixed price can be set more easily too.

  3. Lower maintenance cost: business hotels are often smaller and need fewer facilities.

Interviewer: from the perspective of the company, why do you think they would want to increase the room rate?

Answer: To increase profitability. Profit = Revenue – Cost = Price*Quantity – (Fixed Cost + Variable Cost) function.

Interviewer: the client can’t really save more costs since they just went through a major layoff and restaurants are operating efficiently.

Answer: then on the revenue part, increasing occupancy rate and room rate would increase its revenue.

External Consumer Analysis:

Interviewer: How is the price increase going to affect consumer behavior?

Answer: Discuss the “end user” (the business travelers staying in the hotels) and the “customer” (companies/corporations that tHard Stone Cafe has contracts with). Since end users aren’t paying for their stay, they won’t really be affected as long as the customer service and features of the hotel don’t change. As for the customer, we assume that they’ve had longstanding relationships with the hotel and will only look for other options if the price is way higher than the other competitors, if the price exceeds their travelling expense (ask for this number, which is $280), or if no extra benefits come with the price increase (the client can offer better services, better facilities etc.)

Interviewer: Assuming the client successfully increases the price, what can they do for the “end user” to increase demand?

Answer: (be creative here!) some possible answers include

  1. Differentiation: On the product side, Hard Stone Cafe can offer transportation to and from the airport, put laptop and phone chargers in rooms, upgrade rooms (like a nice office chair) etc. As for the service, the client can create specific room experiences personalised for the customer. They can also offer traveler specific promotions such as shopping coupons to the end users.

Conclusion:

Yes, you should increase prices.

Hard Stone Cafe has competitive advantage given its superior location, great service and existing stable relationships with corporations. Considering these factors, increasing price is definitely feasible as even after the $20 increase, the price is still far below its customer’s max and is still competitive given its location/type. Since it can’t really further decrease costs, increasing profits has to come from revenue growth. As long as occupancy rate does not decrease, total revenue will increase.

2 Likes
#4

Could you also work through question 3 (market sizing type questions)? Thanks!

#5

Sure, here is my approach:

One way to start is to look at the total number of calories the average American consumes. To calculate approximately the number of calories per gram of sugar has, let’s look at a can of coke which has 140 calories and 39g sugar. Then that would mean around 3.6 calories per gram of sugar. If we assume the average American consumes 2500 calories a day (which is likely a fairly conservative estimate) and assume that sugar is around 25% of total calories consumed, then that would mean 625 calories are coming from sugar. Then that’s around 174g of sugar per day, which is around 0.38 pounds of sugar per day. Then assuming 365 days in a year, that brings us to 138.7 pounds of sugar per American per year.

Another simpler approach is that if you assume the average American consumes 1 cup of sugar per day, that’s 6 ounces, which is 2190 ounces in a year. That’s 137 pounds of sugar per year.

Both approaches involve an assumption of how much sugar the average American consumes in a day relative to calories or in absolute amount. If you check the actual figures it’s around 152 g per year according to national surveys. Hope this helps!

1 Like
#6

Thanks so much!