CONSULTING NOTES

Coaching:

Correct answers arent the only important thing in case solutions

How can knowing Mckinsey case help you? Prep is key

GMAT/GRE are standardized tests - they have features that reoccur

We figure out in a form how to prepare - at case prep lounge

Weve figured out how conventional thinking exists to digest as quickly as possible how to
make things work

Standardized features of Mck Cases

ASSESSMENT FOCUS
Listening
Critical Thinking
Verbalization
90% of failures - Not listening to the question / information provided
Not using the info provided
All cases are verbal exercise - majority is based on acquiring information and working with that
info
For communication - take the lessons form boot camp and apply it to your interviews/classes
One big problem interviewers speak of:
Theyre trying to turn a switch / be a certain way, to get an offer. It takes time to develop as a
person and effectively communicate and be precise
Your efficiency and effectiveness will be critical - youll look smarter; look like a consultant with
practice
NOTE TAKING
Get a standard 8.5 x 11
Draw a line in the middle
Do not bring copy paper to an interview

 Bring it in a binder; or bring a spiral bound notebook

Dont shuffle individual sheets - youll get lost with your sheets and become nervous => no
offer
Minor detail, but important
If you start poorly - youre framework is going to be weak and youre going to close poorly
CAVEAT: you dont have the real estate; you gotta write fast and small
CASE CRACKING

Lets assume youre a consultant at Mck

Youre working for a family owned office

Benjamin carpets Co.

Maker and seller of both resi/commercial carpets

Retailers + in user specific markets

Manufactures 5 days a week

16 hours a day

Their carpet making process

1. purchase colored yarn
2. Load the yarn by the 1000s in a specific color order into the machine
3. Weave the carpet
4. backing is applied via backing machine
5. cut /roll/store the carpet
Benjamin is considering new tech - that will change process as follows
1. purchase undied yarn
2. load the undied yarn under the weaving machines
3. Weave the carpet
4. Theyll run the carpet through this new technology - like a giant inkjet printer
5. back of the carpet on via backing machine
6. cut/roll/store carpet
The total investment - 25 Mln EUR
The problem were trying to solve is - should they invest in the project or not? What are the
areas to investigate ?

(circle the problem definition)

CLARIFICAITON IS PART OF THE CASE - USE IT ASK QUESTIONS AT THIS POINT
Q: What areas would you like to investigate?
A: Can I take a moment to think and build a roadmap and think through the process? (Slow with
the right answer is always better)
Were adding a step or reducing a step?
A: Were adding a 6th step to a current 5 step process
Q & A - everyone asks questions
Best answer - you have to figure out the ROI on the investment
Youre answer should be comprehensive; but not too detailed; big picture
You would evaluate both price & volume
USE PROFITABILTY FRAMEWORK
Profit = Revenue - Cost
Price x volume =REV
Customers / Competitors / Company frameworks
Customer - resi/commercial
They are engaged across different distribution channels
Competitors
Direct competitors / substitute competitors
Company
Sales / Marketing / HR/ Production
Costs
Fixed costs (-25 MlN)
Other costs - incremental from a capital standpoint

Variable side
Changes in variable costs - from what they are today
Both cost reductions / cost increases
Creatively talk about existing process - time / production etc.
CASE PARTIICIPANTS ANSWERS
COACHING: you can be far more successful in life - once you learn this disciplined thinking. It
feels like a game, but its meant to evaluate your discipline to become a CEO.
Q: tell me what costs do you think will go up/down
A: Fixed costs(already stated)
Var costs.
etc
CORRECT ANSWER: Lets not make a laundry list of items - dont list all the ideas you have, just
the best idea you have
MCK has to find an excuse to get rid of you
Easiest elimination - made a laundry list, sounded unstructured
Heres what I want you to do:
You wanna immediately say, Im going to evaluate into two parts:
1. Verbalize that Mr. interviewer - i want to look at cost increases(dont forget this !)
2. Costs decreases
Just mention Materials(COGS)
Labor costs(DL)
SG&A
Coaching: MCKINSEY doesnt have smart people
Just regular people - who are empowered to do amazing things
INCORPORATE IN YOUR INTERACTION - ALL YEAR AROUND in class as well

REMEMBER: Basic math only/your objective is not to do the math right, but to do the math and
explain that the math correctly and easily
CASE INFO:
Material costs - will go down by 50 cents / metre
Inventory cots - will go down by 50 cents / metre
Labor costs - will go down by 25 cents / metre
All costs increases:
Utilities + Training + Inks / dyes - 1 EUR / m
Q: From this information - calculate the actual change in cost structure?
A: What is the volume?
We produce 10 million meters / year
Life in machine = 10 years = >depreciation costs =xx, its directly symmetrical to the cost
structure
CORRECT: Theres no change in cost structure - its just testing your knowledge. The depreciation
will bridge the missing piece
The focus of the question, is to make sure that youre not forgetting that
OUR ROI BASED ON THE COST STRUCTURE IS ZERO (SAY IT OUT LOUD)
CASE INFO:
New technology will actually give us a new format that will appeal to new customers
New carpet = $20/ metre (+25% from before)
Q: Incremental revenue from producing these new patters?
$20 is the new price for the product
=>$16 for the old price
(So you estimated the cost ?)

COACHING: You have to verbalize the basics = say the basics about your mathliterally the
basics about whats going on
CASE INFO:
The high end market currently buys = 70 Mln
Benny gets = 5%
In addition to that, a large portion of existing customers = 30% revenues are going to switch
from old to new product
COACHING: 70 Million meters - not customers (units are important)

$4 x cannibalization = 12 Mln
82 Mln = final answer for incremental revenue (DETAILS TO BE WORKED BY CANDIATE)
Incremental revenue is given
Mr. Interviewer - what Ive observed that our volume is increasing a little - our revenue is
increasing significantly
Q: What are the risks in taking this?
A: We have a non-incremental cost structure
It sounds too good of a deal - let me tell you about a few things which make this look so
What are the risks that could damage the zero change in cost structure hypothesis (snifftest..makes NFC)
Also, sensitivity analysis - that the market is 70 Mln
Maybe its not the case
Consumer taste changes
GENERAL END NOTES:
Engagement managers do the interviews

Are you going to be self-governing or not?

Final rounds: Some partners do an unstructured case - based on a real client engagement

Most people who go to McKinsey - dont survive

Most people actually leave

Either they cant cut it - or they dont want to do it

We treat our associates with an iron Gauntlet - we hit them hard

When we wanna fire them - we put on a velvet glove aka we treat them nicely

If you dont get up that curve, youre gonna be rated below average

Youre gonna be told that youre thinking is wrong

If you exhibit these faults - youre gonna be told whats wrong, and how to fix it

When they wanna fire - A partner will take out to a nice dinner and tell you that youve got 6
months

Associates who leave McK are future clients - but when youre actually an associate, youre gonna
get your ask kicked
THINGS TO DO:
Prep lounge
Mgmt consulting club
You will burn out and feel defeated if you do it by yourself
More cases tomorrow

CONSULTING NOTES: DAY 2

BUY NOTEPAD
Make sure you work on your pitch for the International consulting forum
Define Smart
How do we define it for a child
Their academic performance as a child
How they talk

Actually: Its not IQ: well see how

LADIES - please stand up and come join the front row for case cracking
(everyone lol's)
CASE #1
MCK consultant
Globe Global
Paris based travel agency
Series of retail brick and mortar travel agencies
Intermediate b/w travel operations & airline and cruise lines
travel customers
recently the largest airline in the metro area have reduced commissions from 10->8 percent; all
other airlines followed suit
This reduction is material - we will lose money
CEO has hired you to evaluate what has been done to increase profitability
How can go Global increase profitability?
Q: What areas would you evaluate in order to consider how to increase profitability?
A: First lets use a standard profitability framework
R - C = profit
Q: What else?
A: Commissions / how to renovate
Sales - how to increase; maybe the commissions are not the issue
Other internal issues
COACHING: how to make the answer more robust? Possibly segment the customer list80/20
3cs possibly (increase profitability; not return to profitability or turn around)
Quality - its not a problem youre looking for
What areas you would explore - not what levers you would pull
We ask for areas to make you struggle for ambiguity
What other means would you consider?

Think about what else can I get a travel agency - hotels, cars, FX, trip interruption insurance
Put yourself in the shoes of that industry and think about the drivers
Q: What could be the answers?
A: The hypothesis that was stated first - were going to sell other products is essential to this case
CASE INFO:
Sales agent costs - 60K EUR / year
In addition to this - 20% / year as benefits
Next year the salaries are going to go up by 10%, and their benefits are going to decline by 10%
CLARIFY FACTS
Q: I want you tell me what their hourly rate is next year?
Cost = 60 + 12 = 72
(Given that they work 40 h / week - 50 weeks / year)
Total hours =40 * 50 = 2000
Hourly wage = 36/ hour currently
NEXT YEAR:
Cost = 66 + 10.8 = 76.8
Hourly wage = 38.4/hour
Verbalize the answers to Mr. Interviewer
COACHING: You guys did it the interview gave it to you - so that youre sitting there and
struggling with the math; Im gonna verbalize the math for you in a different manner
First thing - you identify the # with the most zeros aka 60K
How many hours are we working per year?
Work with hourly wages - get rid of all the 0s
You have to believe that these calculations are easy - then work with them
At one point the interviewer says - put your pen down and verbalize the answer to me
How important is the answer - well its important/ if you get the calculation is wrong, Ill give you

help as an interviewer to get you back on track

But its a balance because sometimes they are trying to trick you
At the interview youll have pressure and time on top of this
Reality: The client will give you information in a dirty way -youll have to change it to a more
intuitive fashion
Q: What are the implications to raising the hourly wage?
A: Labor costs are DL costs => Variable costs are going up
Profitability will go down
So assuming the cost is not changing any further - look at revenue
Q: Given that sales agent labor costs are high/ even higher next year - what could you do to
change that?
COACHING: Give me a roadmap of what you wanna talk about - just 3 things no laundry list
Person answers:
Reduce labor costs
Increase revenue
Let me tell you details now.
Ideas: Change to variable cost structure - increase quota - its not the raw $ cost, but cost per
revenue
COACHING: Talk in FTEs as a notional equivalent labor
CORRECT ANSWER:
How do we get that # lower. Part time / full time employee
Part-time employees dont get benefits
Another promising idea - go online; currently its mostly brick and mortar
Making assumptions about revenue is not the core solution
The sales agent labor cost is the biggest problem - save revenue for bonus
COACHING:
Dont go out of scope and dont make definitive statements. Just talk within scope of the

problem - not what the real world is.

Were not looking for detailed solutions, just a way to explore creativity
Never brainstorm out loud at a MCK interview. If you start talking out loud in an interview
=>Laundry list=>no offer
CASE INFO:
Your team wants to know what is the hourly profit earned for planes, cruises
Commissions on plane tickets = 8%
Commissions on cruises = 15%
Avg. rev for plane ticket = EUR500
Avg. rev for Cruise ticket = EUR2000
Assume that the hourly cost of sales agent = 36 EUR
It takes 5 hours for sales agent to sell a cruise
30 mins to sell plane
profit plane
80-36 = 44
Cruise
60-36 = 24
To increase profitability - we have to shift our product mix to airlines in order to become better
Q: What do we do - given that airline tickets are more profitable than cruise lines?
A:
COACHING: The first thing you wanna do when you summarize - spit out the answer first
NOW SPEAK LIKE THIS TO SOUND LIKE A HERO
We realize that the price of tickets are 4x in difference
commissions are polar apart from each other
Time required = 10 x difference
Lets look through the analysis Mr. Interviewer - seems like there are some opportunities
How do you find the intelligence level required?
Not just math - root cause analysis

The interviewer guided you towards a smart hypothesis - but perhaps the hypothesis is wrong
The client cant solve the problem - even though they are an expert in their business?
Because they have tried solving the problem - and it didnt work
Or try and convince Wall Street by hiring Mck and convincing them
Youre gonna get tough ass problems and you have to solve them
IN SUMMARY:
FOR THE COSTS: FTE reduction
FOR THE REVENUE: Sales channel mix modification
Working hard is never enough - by yourself especially
If you can follow patterns, and make linkages - youre set
Theres no really smart people at Mck. Its really the process with which you think that empowers
you and affords you to think clearly
BREAK
nick.oak@icloud.com
HOW DO YOU APPLY THIS IN THE CLASS?
Case info:
Lets assume youre a consultant for Bavarian chocolate company
It has recently added a new chocolate
called nougat filling chocolate
Its a light sweet filling, used at specific time of the year
at easter, christmas, halloween
People wanna buy more of it - given that bavarian chocolate can make more of it
Create a manufacturing strategy to increase production of nougat
PROBLEM: Whats the best way to increase production?

Case info:

They want to manufacture more than they can make at their moses lake factory, washington
Demand exceeds production at this time
You can store this product
They keep selling this product after the holiday
The packaging is different - but costs are not
Q: What factors might bavarian consider - in determining in creating more capacity?
A:
Evaluate the demand
Production
Costs
On the demand side: aggregate annual amount demanded
average amount that is demanded each year
spike in demand during holiday season
for production - our ability to product on average and the peak easter/halloween production
levels aka spikes
Further in the value chain - look at the four additional things
Costs - ways you can increase production and the associated with increase production
increasing shifts
adding lines
outsourcing
CASE INFO:
The current demand for nougat = 55 Mln pounds / year
How much capacity does the company need?
Chocolate nougat is made in a batch process - with a bottle neck cycle time of 3.5 hours
Kettle capacity at the bottleneck step = 55K pounds
Ask for additional case info:
CASE INFO:
one eight hour shift per day - 30 minute break for lunch
and two 15 min breaks

300 days per / year

SOLUTION:
7 hours / day
Clarification:
For the peak season - demand is so high - nothing is going to storage
3.5 / batch
2 batches per day
2 x 50000 = 100K / day
30 Mln = full year production
Extra demand = 55 - 30 = 25 Mln
Q: The team has measured that the actual output of the line = 1.9 Mln / month. Why might
this be happening?
Coaching: Once answer is not good - structure your exploration methodology
A: 2.5 mln/ month
1.9 / month currently
Shortfall = .5 Mln / month
The four categories to investigate across value chain:
Poor maintenance
Machines may be improperly tuned
Maintenance may be poorly scheduled
Scheduling
Orders may be poorly scheduled
Changeovers and reloads may take a lot of time - and this might not take into account the
lost time
Production/people
Workers may not be properly trained
Short stops - breaks may be hurting productivity

Workers may be slowing the production to get overtime

Plant factors
Demand may be too cyclical
Things like packaging / pre-prep that either replenishes may not be able to handle the
amount that is being produced
Management might be diverting resources / labor to other than production
Knowing that the line is short of demand - what options would you consider to increase
capacity?
Add, Outsource, Acquire

Q: First option is outsourcing / 2nd is adding another shift?

The team has decided to evaluate these two
Outsourcing will go to Munchen Cocoa.
The other option is adding another shift
Munchen coco can manufacture @ 6 cents / pound - includes delivery
Coaching: DONTT HAVE AN OPINION at this point
The team has found that maintenance would need to include the line to operate at higher
capacity - 250 K $ per year
Line requires 5 people to run it - each with a fully burdened labor rate of 20 / hour

Theres a one time training charge of 100K (not per person)

Plant can add a shift - but no new working days
300 days / year
Raw material is basic commodity - same for both - were going to ignore in calculating
What will be more cost effective?
A: Munchen = 800 $ / day
800 * 300 = 240K $
Outsource = 1.5 Mln (6 cents x 25 Mln)
In-house = 560K
Outsourcing could be more valuable - considering the seasonality of the plan
Articulate the two options and explore risks at this point
BREAK
Relationship / Behavioural interview stuff