Consulting Tools For Case Study Interviews: Business Frameworks
Table of Contents
What is a Business Framework?
Why are Frameworks Important?
2 Basic Frameworks that can Help you Structure any Case Study Interview Question
Commonly Used Business Frameworks that will Help you Ace your Case
What is the Most Efficient Way to Learn these Frameworks?
How Should You Use these Frameworks?
In Case Study Interview Prep, we talked about what consulting interviewers look for in answers to case study interview questions. It’s not a canned solution from the front page of the Wall Street Journal or a business school textbook.
Management consultants look for candidates who have a structured process for thinking through the key aspects of a business problem to find its solution.
Because a consultant who has memorized a textbook solution to fixing a business problem will know what to do when they see a client with that particular problem.
But all clients—even ones in the same industry—are different. They might have different fixed and variable costs, sell to a market segment with unique requirements, have a different management structure, or use a different technology or production process to manufacture their product.
Because of this, even if they face a similar problem to the one in the textbook, the tools needed to solve the problem might be different.
Because all client problems are different, management consultants don’t memorize answers to business problems. They use a structured process that helps them find the solution, no matter what the client’s problem is.
The prospect of figuring out the solution to a business problem you’ve never seen before might sound intimidating. Luckily, business frameworks can help identify the key issues to be addressed. You can think of them as containing the building blocks you can use to solve a case study problem.
Ready to learn more?
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What is a Business Framework?
A business framework is a structured way of thinking about a particular type of business problem. It breaks a business problem into the component parts that need to be analyzed to identify the root cause of the problem and develop a solution.
Multiple different business frameworks exist because companies face many different types of problems. A framework that will help a company think through the marketing approach needed to support a new product launch is not the same as the one it will use to decide if it wants to cut costs.
Commonly used business frameworks include:
- The BCG 2 x 2 Matrix
- The 4 P’s
- The 3 C’s
- The Profitability Formula
- The McKinsey’s 7S Framework
- Porter’s 5 Forces
Why Are Frameworks Important?
A list of commonly used business frameworks can look more like alphabet soup than something that can help you solve a consulting case study problem. Are they really worth learning?
Yes. Frameworks can help you make sure you don’t forget key aspects that need to be considered to address a particular type of business problem. Because of this, they’re valuable tools when you’re doing interview prep. Take one of the simplest business frameworks: Profitability.
If you are given a case study interview question that involves profitability, you’re going to want to be familiar with this formula. It’s not important that you use the exact same terms in precisely the same order. What’s important is that you remember the key components of profitability. If you examine each of these 4 key components, you’ll find out where to look more closely to find the answer to the client’s problem. If you forget one of these key components of profitability, you could spend the twenty-five minutes you have to solve the case study interview question probing the wrong areas and never find the solution.
Frameworks are tools that ensure you look at all the key aspects of a business problem. From there, you still need to interpret the information you receive from your interviewer and use your findings to develop a solution. But getting the key facts you need to solve the case is a critical first step in your consulting interview prep.
2 Basic Frameworks that Can Help You Structure Any Case Study Interview Question
If this is the first time you’ve even heard of a business framework, the best place to start your case interview prep is with 2 basic frameworks you can use to address any business problem. Continue reading this section to learn about them.
If you’ve studied business at the undergraduate or graduate level, the basic frameworks can still help you. But you may want to skip down to Commonly Used Business Frameworks to begin your consulting interview prep.
The most basic way of looking at a case is to consider whether it asks you to solve a profit and loss issue, or not. This is the most common case type you will encounter because as management consultants we are paid to grow businesses and growing businesses is measured in profits and revenue.
If the interview question addresses a business’s profits and losses (P&L), you can apply the profitability formula to solve the problem. If the question only addresses one component of profitability — either costs or revenues, you can use the relevant segment of the formula to address it.
As mentioned above, the profitability formula is:
Price – How much does the product sell for?
Units Sold – How many products were sold over the period being considered?
Fixed Costs – Costs that you incur just because you are in business regardless of how many units you sell. Examples: factory rent, equipment depreciation, compensation for salaried employees, and property taxes. A way to think about fixed costs is that a cost that does not change over the short-term, even if a business experiences increases or decreases in its sales volume.
Variable Costs – Costs that only incur when you begin to produce units (if you sell nothing you have no variable costs). Examples: sales commissions, credit card transaction costs, and sales taxes. A way to think about variable costs is that a cost that does change over the short-term. More sales volume will mean more variable costs.
The first thing you want to do in a profitability case study interview question is to understand which component of the profitability formula has the biggest impact on the client’s bottom line over the time period you’re considering. Go through each of the 4 parts of the formula to figure that out.
Next, you’ll want to look beyond the formula. If nothing internal to the client has caused the change in profitability, there must be an external factor affecting it. External factors that might affect a company’s profitability include a new product introduction, price change, or promotion made by a competitor. They could also include a change in the regulatory environment or in the level of demand from customers.
Example Using the Profitability Framework in a Case Interview
The manufacturer of fidget turners, a simple toy that allows children to expend their excess energy without getting out of their seat and disrupting their classroom, needs help with a profitability problem. While their toys are widely popular, the company is losing money. What is the source of their problem?
The consulting candidate asks questions and finds that:
- Price – There have been no recent changes in the price the fidget turner is sold for.
- Units sold – Demand for the product has risen substantially. It’s popular among children with attention deficit disorder. The market for the fun toy has expanded to other children and even adults.
- Fixed cost – There have been no recent changes in the company’s fixed costs.
- Variable cost – The cost of the underlying materials used to make the product have risen substantially. The product is comprised primarily of plastic and ball bearings. The cost of plastics has increased with an upward trend in the prices of petrochemical products.
As a result of this analysis, the candidate says that the change in the manufacturer’s profitability is driven by a change in their variable costs – specifically plastics. She recommends that the company either find a substitute material that it can use to manufacture its products at lower cost or increase the price of fidget turners.
If the case study interview question you’re asked to answer does not focus on profitability or one of its components, then you need a different approach to address it. We call this a non-profit question. A non-profit question might have a charitable organization, an educational institution, or a government agency as the client. They might also have a business client, but address an issue that is not related to profit and loss such as employee retention or branding.
The key to answering a non-profit case study question is to understand the key performance index for the client. The key performance indicator, or KPI, is the measure the client is trying to improve or maximize. For example:
- A public school system might be trying to improve student scores on a state-wide standardized test.
- A government agency might be trying to increase the number of free lunches provided to children of families under a certain income threshold over the summer months.
- A fast-food chain might be trying to reduce employee turnover.
When addressing a non-profit case study interview question, first, determine what the client’s key performance indicator is. Once you’ve determined the KPI, break it down into relevant components that allow you to dive deeper into the problem and understand where the client is performing well and where things have taken a turn for the worse.
For example, if the client is a government agency trying to ensure that low-income children have enough to eat over the summer months when free school lunches aren’t available, the KPI might be the number of qualifying free lunches provided. These lunches could be further broken down geographically, by either town or county.
Because these lunches are often provided by schools, the KPI could also be broken down by the age of the child receiving the lunch (grammar-school-aged, middle-school-aged, and high-school-aged). These breakdowns would let you understand whether a decline in lunches was caused by an issue affecting one town, or an issue primarily affecting a particular age group. Or, perhaps the decline in free lunches served was consistent across the entire program area and target population.
As with a profitability case, you also want to consider both factors internal to your client and external factors that affect your client’s KPI. Benchmarking your client’s performance relative to similar agencies in other states, or relative to the results of groups that provide different types of assistance to the same target audience in the same geographic region can help.
Example Using the Non-Profitability Framework in a Case Interview
- A state agency that provides free lunches to low-income children found that the number of lunches served over the summer declined substantially from the prior year. The agency wanted to understand the root cause of this decline.
The candidate asked questions about the operations that the agency oversees. He found that:
- Overview – The agency spent 10% less on its summer lunch program this year than in prior years.
- KPI – That the agency’s key performance indicator is the number of lunches provided to low-income children.
- Benchmarking –
- The overall economic health of the state had not changed substantially from the prior year.
- The decline in lunches was focused specifically in a couple of geographic regions – low-income cities where schools were closed over the summer for renovations and where lunches could not be served.
As a result of his analysis, the candidate concluded that while coming in below budget is usually a good thing, for this state agency, it was not. The agency’s KPI was the number of meals served to needy children and the savings came from not being able to provide services in a couple of cities. This meant that children were going hungry.
The candidate recommended that each year, the agency find out in advance if schools that serve the free lunches they fund will be closed over the summer. If they will be closed, the agency can look for an alternate location where they can provide lunches for children, such as a community center.
Practice using the profitability and non-profit frameworks to solve case study interview questions until you feel comfortable using them. You can find more about How to Practice Consulting Case Study Questions and find Examples of Consulting Case Study Questions on the My Consulting Offer website.
Commonly Used Business Frameworks that Will Help You Ace Your Case
Once you have mastered the profitability and non-profit frameworks, you can add frameworks that have been developed to analyze specific types of business problems to your case study interview prep tool box.
While it is important to know these frameworks to build out your own business acumen, remember that coming in with a canned framework such as these will likely not get you the offer. So we recommend you become familiar with these frameworks but DON’T MEMORIZE THEM JUST TO USE THEM ON THE INTERVIEW.
Case Prep Tool 1: BCG 2 x 2 Matrix
The BCG 2 x 2 matrix is a useful framework for examining the businesses segments of a large company and deciding which are attractive and which aren’t. This framework can be used to identify which business segments the company should continue to invest in, and which should not receive capital or should even be sold off. This framework is called a 2 x 2 it categorizes each segment by 2 different factors:
- Market growth and
- Market share relative to the competition.
This categorization puts each business segment into one of four buckets:
Star – A business segment that has high growth and high market share is often very profitable. These business segments should receive further investment so they can continue to grow.
Cow – A business segment with low growth but high market share is likely to be a stable, profitable business. The profits of this type of business can be reaped over time to invest in other, higher growth business segments.
Dog – A business segment with low growth and low market share is often not profitable and not likely to improve without substantial investment. The company should consider divesting these business segments to free up cash for more profitable businesses.
? – A business segment with high market growth but low share requires further study. Is further investment likely to result in market share growth, allowing this business segment to become a star? Or is it likely to become a dog over time?
Case Prep Tool 2: SWOT Analysis — Strengths, Weaknesses, Opportunities and Threats
A SWOT analysis is a simple yet helpful way of assessing the risks to a business and deciding what opportunities to pursue. Like the BCG 2×2 Matrix, the SWOT analysis also uses a 2 x 2 matrix. It breaks down the factors that impact whether a business is successful into:
- Internal or external — Are they something the company has control over or not, and
- Helpful or Harmful.
This categorization puts each factor affecting the business into one of 4 buckets:
Strengths – A factor that is internal to the organization and helps it to achieve its objectives is a strength that can be leveraged to improve performance over time. Example – strong engineering capabilities.
Weaknesses – A factor that is internal to an organization and harmful is a weakness. This is something the company will need to work to overcome. Example – weak brand awareness in the target market.
Opportunities – A factor that is external to the business that is helpful is an opportunity that can be leveraged to improve profitability. Example – a competitor experiencing production constraints.
Threats – A factor that is external to the business but harmful is something the business should seek to overcome or the limit risk of. Example – new government regulation in their market.
The SWOT Analysis framework can be used to identify actions that a company should take to capitalize on strengths and opportunities and minimize weaknesses and threats.
Case Prep Tool 3: 3 Cs Framework
The 3 Cs framework is a tool that helps identify factors a company needs to consider to when developing its competitive strategy. The 3 key factors are:
The Customer – Questions to consider include: Who is the customer? What are their requirements for the product or service? What segments exist in the market? What does each segment look like in terms of growth rates, price sensitivity, etc.?
The Company – Questions to consider include: What is the company’s current product or service offering? How is it differentiated from that of the competition? Does the company have internal capabilities that they can use to create an advantage relative to competitors? What are the company’s current market share and growth rate? How strong is it financially?
The Competitors – Questions to consider include: What competitive products or services are in the market and how do they compare to the company’s product? This analysis should include not only products that are directly competitive, but also substitutes for the company’s products. What internal capabilities do competitors have that could give them an advantage relative to the company’s product? Are their barriers to entry into the market or is it easy for new competitors enter at any time?
The better a company understands its customers, develops a differentiated product to better serve their customers, and creates barriers that prevent competitors from bringing equivalent products to market, the better strategic position the company is in.
Case Prep Tool 4: 4 Ps Marketing Framework
The 4 Ps framework is a tool used in developing a marketing strategy that will help differentiate a company’s product from competitive products. The 4P framework breaks down the key components of analysis into:
Product – Whether the company is selling a tangible product or a service, they must be clear on what they are offering customers. Is their offering a bare-bones product or does it have a quality level or features that set it apart from alternatives?
Price – The price charged for a product can be set high or low, depending on what it will command in the marketplace. Price has an important impact on sales but also (and inversely) on the company’s bottom line.
Promotion – Potential customers must be made aware that the product exists, understand what distinguishes it from competitive products, and be encouraged to buy it. Promotion includes advertisements, public relations, social media, email marketing, discounts, etc.
Placement – Potential customers need to be able to purchase the product, either at a store or online. Placement can be prominent — at the front of a store or on an endcap — or not. Placement is about making the product easy to find and convenient to buy.
What Is the Most Efficient Way to Learn Frameworks?
The most efficient way to learn frameworks is to first focus on the 2 that can help you analyze any case study interview question—the profitability and non-profit frameworks. You do not need a degree in business to be able to use these tools. Once you feel comfortable using the profitability and non-profit frameworks, you can add other business frameworks to your consulting interview prep.
How Should You Use these Frameworks?
The most important thing to remember about frameworks is that no one expects you to present one straight from a business textbook and use it in a case interview. In fact, consultants prefer candidates to create their own structure for analyzing a case rather than to use an off-the-shelf framework. Creating your own framework shows that you’ve taken the time to consider the specific client problem you’ve been asked to address and have the capability to come up with the key elements of analysis on your own.
This is the secret to how many of our clients are able to gain their offers. They begin their consulting interview prep by learning what a framework is, then mastering the profitability and non-profitability frameworks, and finally learning to build their own frameworks during the case interviews.
Congratulations on making it to the end of our crash course on business frameworks!
Now, you’ve got a firm understanding of the 2 basic frameworks you can use to ace any case – the profitability and non-profit frameworks. You’ve also been introduced to a number of traditional business frameworks you can turn to as you practice structuring cases.
What did we miss?
If you have a question of business frameworks for our case coaches, leave it in the comments below.
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