Bain & Co.
This article is our first in a series of articles sharing with all undergraduates important career information about elite companies, straight from the recruiters' mouths and slide decks.
Who: A Bain manager and two associates.
What: A roughly 40 minute-long PowerPoint presentation by the manager, and a 20 minute-long improvised example case interview.
– There are about two back-to-back case interviews in the typical Bain application process, both are around 20 minutes long (firm cutoff). This differs from the ~ 40-minute case interviews discussed in guides like Case in Point.
– You should be prepared to use quantitative skills from courses in Microeconomics and econometrics, which you can't get from Case in Point.
– Do not give answers that strictly fit frameworks of the popular case interview guides, as the interviewer will be bored by hearing the same uncreative answer repeatedly. Also, these guides often fail to capture the nuances of actual cases
– You should always sanity check your answers before you speak – that is, you should double check if your answer seems like it is within an order of magnitude of the real answer, as you are often only afforded enough time to guesstimate.
– Miscellaneous rule of thumb: when considering market entry, one key indicator of a capturable or underdeveloped market is a lack of market fragmentation, as you can easily carve out some space by establishing your niche within the market. Assuming the market is not very fragmented, you can expect to capture 10%-15% of the market by entering with a good, differentiated strategy.
Exclusive Mock Case Interview, between the two associates (Chris and Steve)
Chris: We want to know if it is feasible for a new firm to enter the Princeton frozen yogurt market?
Steve: Do we know if M&A with incumbents would be feasible?
C: M&A is not feasible.
S: Are we looking to move into other markets in addition to froyo, such as other desserts or other competing uses of people’s time?
C: No, we’re only entering the Princeton frozen yogurt market.
S: I’ll take 2 minutes to gather my thoughts.
… writes notes …
We want to understand the Princeton froyo market, its competitors, and how profitable entering this market would be. Are these good questions and goals?
S: Okay, so I am going to figure out the size of Princeton’s froyo market, so that I can see if the client can profitably enter. We will size the market in units of cups of froyo [this is Case in Point’s “hometown/population” market-sizing framework]. We can reasonably include tourists in Princeton’s population, which will bring us to a total of 80,000 people in Princeton. We also assume a linear distribution of population across all ages.
Now lets assume 50% of Princeton’s 80,000 eat froyo at all. Then we can split from that 50% how much froyo this population eats. 25% of 40,000 are “evangelists”, who eat froyo once a week (52 cups * 10,000 people). Another 20,000 eat froyo 10 times a year (10 cups * 20,000). And another group eats irregularly 4 cups a year for the last 10,000 (4 * 10,000). 52cups(10,000 people) + 10(20,000) + 4(10,000) = 760,000 = roughly 750,000 cups a year.
So Princeton’s froyo market sells about 750,000 cups of froyo a year. Now we need to know how many cups out of 750,000 the client needs to sell to be profitable, which means that we need to know the client’s costs.
What are the operating costs, such as rent?
C: There is a one-time startup cost of $100,000, and a total fixed operating cost of $100,000 annually.
S: What are the variable costs?
C: There is a 50% profit margin on each $4 priced cup.
S: How many cups of yogurt get us to $200,000? So ($200,000 cost)/($2 per cup) = 100,000 cups. Since our market is 750,000 cups big, we see that 100,000/750,000 = 13%. So we need to capture roughly 13% of the market to breakeven with annual costs.
Well, I attended Princeton, so I know the Nassau Street (university downtown) froyo market pretty well. There is Fruity Yogurt, which is a typical frozen yogurt shop. Besides this, all other shops that serve frozen yogurt focus more on their ice cream sales. So given only one specialty froyo shop, and several other shops that sell froyo as an afterthought, we can assume that Princeton’s market is objectively underdeveloped and unfragmented, which means that it is likely to capture at least 13% of the market if we enter with good strategy.
A good strategy may be to posture ourselves to sell to a niche – maybe we target our marketing towards health nuts, those who want fresher ingredients, and other brand-competitive market positions.
My ultimate recommendation: entry to the Princeton froyo market is feasible because the costs of entry are low and there is a lack of need to capture a dauntingly large portion of the market. Looking forward, we must consider what flavors do Princeton residents and students like? Could we form partnerships with other shops or businesses? Could we get in on Princeton’s thriving catering market? How do we successfully do digital marketing and social media?
End of mock case interview (11/10/2016)