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Consulting Interview Questions

 by Victor Cheng

Consulting interview questions (also called "case interview" questions) differ dramatically
from traditional interview questions. In a traditional or behavioral interview, the interviewer
will ask questions that tend to begin with "tell me about a time." For example: "Tell me
about a time you had a conflict with a teammate and what you did to resolve that conflict."

Consulting interview questions, by contrast, begin by immersing you in a business

scenario. They often begin with "our client." For example: "Our client is a $2 Billion
distributor of office equipment whose profits have declined in the last four years. What
should they do?"

When tackling consulting interview questions, your goal is not to draw from your
background, experience, or opinions. Instead, you want to engage in an interactive
problem-solving dialogue to provide a data-driven recommendation or solution to the
question being asked.

You can perform better in consulting interview questions by having an upfront preview of
what types of questions might be thrown your way. Below you'll find nine categories of
questions and a few tips on areas worth exploring within each:

1. Profitability
2. Growth
3. Pricing
4. New product
5. New market
6. Mergers & Acquisitions

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7. Competition
8. Should we undertake this particular initiative?
9. Totally unique

1) Profitability

Profitability cases directly tackle the amount of money a business is generating. For
example:

Our client is a manufacturer of ceramic mugs. Profits have declined over the last
three years. They want us to diagnose the problem and come up with the solution.
Our client is a distributor of propane and propane accessories. Their CEO was
recently taken to task by a Wall Street analyst for having margins well below the
industry standard. He wants us to help him figure out where the opportunities for
margin expansion lie.

If you're tackling a profitability problem, don't be shy about going directly after the drivers
of profitability -- revenue and cost. You can split revenue down further into quantities,
prices, and product mix. Segment the revenues however helpful. Then be sure to
examine both the fixed and variable costs.

Often looking at revenue first provides clues as to what may be driving the costs. If
possible, some benchmark data -- either internally (against different stores, regions,
plants, etc.) or externally (against competitors) can really help shed light on what might
be going on inside the company.

2) Growth

Growth cases are all about a company getting bigger--usually in terms of dollars of
revenue, but the measure might also be market share or number of customers. For
example:

Our client has promised Wall Street 5% revenue growth each year over the course of
the next decade. We need to figure out how he's going to get there.
Our client demands to know why they've been growing at 3% a year while the

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competition has been growing at 5%.

Mathematically, the only ways to grow revenues are to increase quantity sold or the price
per unit sold. This mathematical thought process can add some useful structure to your
approach, but don't let it curtail your creative thought process.

A company can grow by expanding or adding new forms of distribution channels (e.g.
retail stores, online, catalogs, or affiliate partners). It can also introduce new products or
tweak existing products to better satisfy their customers. They can also refresh their sales
and marketing approaches. Finally, they can grow in giant steps by acquiring another
whole company.

3) Pricing

Consulting interview questions about pricing ask for the optimal price -- or way to
determine the optimal price -- for a given product or service. For example:

Our client has invented the food replicator from "Star Trek" that can instantly create
any delicious meal you can conceive. They need to know how much to charge for it.
Our client is readjusting their prices for their whole condiment product line. How
should they think about tackling this problem?

When it comes to determining prices, there are three basic ways to frame your approach.
The first is cost-based pricing. This tends to be how engineers think of pricing. You
determine your cost per unit, then add a reasonable margin on top of that. This is an
incomplete approach, but it does help give you some perspective on the minimum
possible price.

The second is alternative-based pricing. With this approach, you look at how the
alternatives (e.g. competitors or substitute) are priced and how your product stacks up
against these alternatives.

The final approach is the customer's maximum willingness to pay. Think about the
ultimate underlying benefit created by the product (e.g. cost-savings, time-savings) and
attempt to put a dollar amount on it. For example, if a product reduces the time a heart
surgery takes by 10 minutes, and you can calculate the total hourly cost of running the
operating team, 1/6th of that amount gives you an estimate of the value of that time

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saved.

Generally, the cost-based approach will give you a theoretical floor for the price (if you
sold for any less, you'd be losing money), while the willingness to pay approach offers
you a theoretical ceiling (no logical customer will ever pay any more than that). Getting
the final price often depends on using qualitative factors to choose a reasonable figure
somewhere between the two.

4) New product

New product cases deal with a fresh invention or idea for a company. For example:

Our client has developed an iPhone case that looks like a cassette tape player. How
should they proceed?
Our client has stumbled into a chemical compound that permanently removes body
hair from a given area. Should they launch it?

New product cases require you to take a look at a wide variety of issues. A basic
understanding of the product, company, customers, competition, and go-to-market
approach will be critical.

Some new product cases delve into the numbers associated with expected costs and
prices. When these numbers materialize, interviewers often want you to calculate a
breakeven volume (or the volume necessary to reach pre-determined business goals)
and determine if such a volume is achievable.

5) New market

New market cases are similar to new product cases, except they tend to be broader and
require a global perspective on a whole industry. For instance:

Sharper Image is considering entering the personal computing market. What should
they be thinking about?
Chemco is considering entering the personal grooming space; is that a good idea?

When evaluating the attractiveness of a new market, Porter's Five Forces provides a
great starting point to think through. The forces to consider are: threat of new

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competition, threat of substitutes, bargaining power of buyers (your customers),

bargaining power of suppliers, and competitive intensity.

Knowing the general attractiveness of the market is a great first step. You'll also want to
know if your client is a good fit for entering the market and what approach they'll use to
enter that market.

6) Mergers and Acquisitions

M&A cases are all about the implications associated with rolling another company into an
existing one. They might sound like:

Our client is considering purchasing its 4th-largest competitor. Should they do it?
SnackCo is looking to find $25 million of synergy from their recent acquisition of
Snackers, Inc.

Before the merger, think through whether the target is a good fit and can be acquired at a
good price that meets the business's objectives. Calculating synergies is all about
identifying overlap opportunities.

On the cost side, determine how much each is spending on overlapping items.For
instance, if both are purchasing potatoes, but one company is getting a 20% better price,
apply that 20% savings to the amount of spend occurring at a less-favorable price. That
approach will estimate how much one could save if the company were able to realize the
per-unit pricing that the other company is getting.

On the revenue synergy side, it helps to think about cross-selling opportunities and
expand the products sold to each company's customer list by including the new offerings
made available through the merger.

7) Competition

Consulting interview questions about competition deal with beating out other industry
contenders or responding to something they've done. For example:

Our client's market share has dropped by 15% to 9% over the last decade. What's
going on?

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Pepsi has slashed its prices by 30% across the board. How should Coke respond?

Competition cases can take many different twists and turns. It's ideal to understand the
full implications associated with the competitive move and then use other case
approaches as necessary.

If it's a declining market share scenario, it's ideal to understand potential changes in
customer preferences and how well they're being met. If it's a price war scenario, it's key
to understand how loyal the customers are and the relative cost base.

8 ) Should we undertake this particular initiative?

These consulting interview questions are really just other types of cases thinly-veiled. For
example:

Should we launch this marketing campaign?

Should we launch this loyalty program?

Whenever you hear a "should," think, "based on what objectives?" First, get real clarity on
the objectives. Asking about the goals of the loyalty program may quickly reveal that
you're really trying to determine whether having a loyalty program will generate more
profit than not having one. Then you're off to evaluating revenue and cost in each
scenario.

9) Totally unique

Some consulting interview questions fall completely beyond categorization. For example:

Our client is a chemical company concerned about the green movement. Will this
environmental enthusiasm affect their bottom line?
Our CEO is taking a 3-day trip next week. Here's a catalog. Pick out what two items
she should take with her.

When you get a case that seems to fall way outside the bounds of a traditional consulting
interview question, stay calm. All the normal case interview rules apply. You'll still want to
clarify the objectives, hypothesis, provide a plan, be data-driven, and deliver a succinct
recommendation. It just might sound a little different in the process.

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Having a familiarity with these types of consulting interview questions will reduce the
odds of getting caught off-guard when the moment strikes, and will help you to "ace the
case". But don't spend too much time agonizing over the list. It's really not a good use of
your efforts to try and memorize all of these.

Rather, the value comes from having done a quick preview to plant some seeds that
sharpen your ability to identify relevant issues. Remember: the case interview is primarily
a test of problem-solving -- not memorization.

Additional Resources

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 Mar 26, 2012

Tagged as:  case interview questions,  consulting interview questions,

 interview questions

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 1 comment… add one

TBL Aug 17, 2017, 5:33 pm

Super helpful – thank you!!

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