Bain & Company Consultant Interview Questions, Process, and Tips

DILR questions very easy

Q1. Guesstimates market sizing
Ans. 
Estimate the size of the market by making educated guesses based on available information
• Start by identifying the total population or target demographic

• Estimate the percentage of the population that would be interested in the product or service

• Consider factors such as market trends, competition, and potential growth opportunities

• Use industry reports, surveys, and data analysis to support your estimates
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Q2. Tell me about yourself
Ans. 
Experienced consultant with a background in business strategy and project management.
• Over 5 years of experience in consulting roles

• Specialize in developing and implementing business strategies

• Skilled in project management and client relationship management

• Previously worked with Fortune 500 companies on large-scale projects
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Case study on market entry

Negative Marking was there
Data interpretation
Comprehension reading

Guesstimates, case study , puzzles

Q1. Measure time by burning rope puzzle
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Q2. How many matches are played in a tournament at VIT (Guesstimate Question)
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Basic aptitude and mathematics

Case was given to us on a establishing of new company

Q1. Why you want to work in bain
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Q2. What you know about bain
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Your client is trying to come with a rewards programme - How should they go about it and what is the estimated cost of this programme?

Focus on customer life cycle and identify areas where this reward programme is helpful and what would be the target customers be for this. For estimating cost take assumptions on average order value, redemption rate, leakage and cost per loyalty benefit unit

Q1. Tell me about your previous work ex
Ans. Spoke about my expereince at a Big4 consulting firm, my projects and what I liked the most. Try to keep it short and succinct
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Q2. Why do you want to join Bain?
Ans. Spoke about Bain's culture, opportunities at global trainings and the firms leadership in PE clients
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Q1. Hi Bhavya, how has your day been so far?
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Q2. Tell me about yourself.
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Q3. How was your experience at Bain earlier this year?
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Q4. How do you like to spend your weekends prior to IIML?
Ans. 
I enjoyed exploring new places, trying new cuisines, and spending time with friends and family.
• I loved traveling to different cities and countries

• I enjoyed trying out new restaurants and cuisines

• I spent time with my friends and family, either by going out or having them over

• I also enjoyed reading books and watching movies in my free time
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Q5. What projects did you work on during your time at Deloitte?
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An IT company is seeing decline in profits. Diagnose the issue & provide recommendations.
[Please note that I stands for Interviewer and C stands for Candidate] 

I: (Interviewer realized I was a bit anxious and stressed, so had a candid conversation about Bain, her work there and general stuff about IIML for 5-7 minutes).

Okay Bhavya, let's get started with a case. Our client is one of the top 3 IT service providers, you can imagine it to be a Wipro/Infosys. It has 5 verticals: CPR, Manufacturing, Tech, Media and Financial Services. Of these, CPR, Manufacturing and Financial Services have a sales Department. The work of the IT company involves building applications, infra maintenance or building of servers, app maintenance, data work (e.g., Cloud) and IT consulting work. Now the focus here has to be on IT Consulting.

For procuring these projects, the company has salespeople. They have targets they have to meet based on which their salary is dependent.

Now, it has been observed that our sales have decreased while the salesforce commissions based on the targets have remained the same. It has also been observed that the average time period per project has decreased. Can you help us diagnose this?

C: Sure! Firstly, could I know since when this decline has been there and whether it has been there across the verticals?

I: It's a secular decline, taking place for the last 1 year.

C: Alright, secondly, I'd like to understand the salespersons' salary structure a little better. I'd imagine there would be a fixed and variable component, and the variable component is based on them meeting the sales targets?

I: Yes, and let's assume the variable component makes up most of the salary.

C: Great, could you explain how the commission structure is designed?

I: The structure is designed as No. Of projects * Conversion Factor.

C: Oh okay, what exactly is the conversion factor?

I: Good question. The conversion factor is defined two ways: 1) Number of projects won/ Number of projects bid or 2) value of projects won/value of projects bid.

C: Oh, so if I get this correctly, there's one based on no. of projects while the other is based on the sales value of projects?

I: Yes, that is correct.

C: Oh alright, I'd want to dig deeper into this a little bit before I proceed. Have both metrics seen a decline?

I: No, so while number of projects won is at par, the value won has declined.

C: Understood. So here I'd want to explore potentially something were doing wrong because of which the value we're winning is low.

I: Go ahead.

C: So, I believe there could be a couple of things. Either there's some problem with the projects itself, with the way they're being pitched by salespeople, or the competition is offering something better.

I: Hmm, well the pitch is fine. But the competition is largely providing longer term projects while we aren't.

C: Understood, so in that case, that seems to be the issue. We aren't able to pitch longer term projects which might have higher dollar value. Now, I'd want to understand differences between the competition and us in terms of securing these longer-term projects. Can I assume similar types of projects and similar salespersons?

I: Yes.

C: Okay, in that case, if the salespersons are similar and so are the projects, there might be an issue in pushing the projects from our salespersons. Is the conversion factor we talked about linked to Number of Projects or Value of Projects?

I: Yes, the conversion factor is largely linked to number of projects.

C: Understood. In that case, it's apparent that pushing longer term projects isn't incentivized adequately, is that fair?

I: Yes. However, there are other factors at play too, since till last year the value of projects was at par.

C: Understood. Are there other attributes of longer-term projects that differentiate themselves from the short-term projects? Potentially in terms of nature of projects, time to convert for salespersons or effort involved even in shorter time periods?

I: Yes, the second is the case. It takes more time on average to close the project which is causing the issue. Do you have any recommendations for this issue?

C: Yes, for our current sales,

1) We could incentivize longer term projects better through value-based approach

2) We could train the salesforce to pitch the projects in a shorter time period and close it earlier

3) We could increase the quality/composition of Salesforce that could be more equipped to deal longer term projects. Alternatively, we could think of identifying new areas of sales that could compensate for lost sales through longer term projects, potentially specializing in short term projects and increasing volume there.

I: Great, thanks Bhavya. How do you think it went?

C: Umm, I think I diagnosed the problem, but it took a lot of time to reach there. Could've been more efficient.

I: Yep, I felt it was alright as well, you could've been more efficient. But thanks for your time, and best of luck!

Havells Chief Logistics Head is thinking of employing Bain. What ideas can we propose? (I had worked in the Transportation & Logistics space during Deloitte Consulting, so case made potentially keeping that in mind)
[Please note that I stands for Interviewer and C stands for Candidate] 

(Interviewer proceeded to tell me about himself and experience at Bain. He asked me questions including why don't you tell me about yourself, what was your work like at Deloitte, how do you spend your weekends, post that to ease me into the case)

I: So, you know how these interviews go, I am obligated to give you a case while I'd like to keep chatting. Let me give you something maybe slightly related to what you've worked on.

Your client is head of logistics of Havells. This is our 1st meeting with him, and we're supposed to have a conversation to pitch ideas.

C: Great, just so I understand this correctly, we have to pitch some ideas to Havells' Logistics head regarding potential improvements in their department for reducing logistics costs?

I: Yes.

C: I'd like to understand Havells a bit better before I proceed. Is it the electrical goods company? What sort of products does it have and what is its value chain like?

I: So yes, Havells has multiple factories and produces wires, switches, etc. They manage their own logistics.

C: Okay, and just to be sure about this, they procure raw material, there's inbound logistics, they manufacture the goods, there’s out outbound logistics, they store goods at their own warehouses and sell it to distributors?

I: Yes. You can ignore inbound logistics, however. Just focus on factories to distributors.

C: Great, also are there any specific objectives Havells has, going into this meeting?

I: Yeah, so you can assume they want to improve cost of logistics as a % of revenue. So even a 5% improvement for 10K crore company is high.

C: So, the structure I'd like to proceed with involves assessing Transportation & Warehousing. I can potentially proceed with transportation here.

I: Go ahead

C: Under transportation, aspects I'd want to look at include 1) The Modal Mix 2) The Route design 3) Effectiveness of covering routes.

I: What do you mean by Modal Mix? Havells just uses Road.

C: Oh okay, I could have looked into any scope for efficiency from transports mix that could reduce costs. Is there a constraint only on using roads on?

I: Yes, go ahead with route design?

C: Sure. So, there we could explore the potential routes decided at a network level between plants to minimize time and cost. The permutations could be explored that work best for Havells.

I: How can a consulting firm here provide value? Havells must know it's routes well already.

C: I understand, but:

1) Consulting firms typically have access to huge amounts of data and analytics tools that are unique solutions for such kinds of problems. We could leverage them to optimize route design for them.

2) Business owners/heads have their own biases while approaching such issues, an objective route mapping could help check for any bottlenecks.

I: Okay, go ahead?

C: Under route effectiveness, I'd want to look at if there's any internal or external factors that inhibit truck owners from covering these routes adequately. In internal issues, aspects such as truck capacity/truck effectiveness in carrying goods, driver issues can be explored. In external issues, aspects such as stoppages, bribery etc. could be explored.

I: Okay, but why does this even matter?

C: Improving effectiveness in routes would mean lesser time taken on these routes.

I: And how does that help? They pay fixed amount per ton to drivers.

C: Well time saved would mean more tons delivered in the total time present. Then the incremental revenues in the time saved would be the benefit to Havells.

I: Hmm, let's move forward.

C: Right, I'll move to warehousing now. Herein, I believe again either optimization at the network level can be done or within warehouses can be done.

I: What sort of optimization at network level are you talking about? And how would we do it?

C: This would involve the ideal placement of warehouses on the routes to minimize time and costs, as discussed earlier for route design using data and analytics. Herein the aspects to optimize would include:

1) Number of warehouses

2) Location of warehouses.

I: Hmm. Can you provide aspects within warehouse improvements?

C: Sure, this would include aspects such as improving turnaround time of trucks at warehouses and improving logistics operations within the warehouse.

I: Examples of within warehouse improvements?

C: Few that come to mind include improving inventory management, assembly and roll out of goods in shortest time. Labor and Role of automation here could be explored for improvements in time.

I: Hmm. Alright, we can stop here. How do you think it went?

C: I think it was alright, I tried to cover the board but there could've been improvements.

I: Right, I think you largely covered everything. Just could've taken more pauses and been more concise. But that's fine. Alright, best of luck and take care Bhavya!

Q1. Tell me something about yourself apart from your resume.
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Q2. Why consulting? Why Bain?
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Q3. Are you a team player or an individual player (asked to give an example of both)?
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Q4. What is your biggest fear about consulting?
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Q5. Tell me about your experience in filmmaking, how did you go about making a 12M+ views video?
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Q6. Roles and responsibilities at Texas Instruments.
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My friend is a Financial Advisor. He is looking to buy a smart gallery. How will you value it?
[Please note that I stands for Interviewer and C stands for Candidate]

C: What is a smart gallery?

I: Smart Gallery is an art gallery portraying works of upcoming as well as local artists.

C: What are the revenue streams for the art gallery and where is it located?

I: Located in Mumbai. It has three kinds of revenue streams:
1) Buying & Selling of Paintings
2) Commission from tickets on Exhibitions organized
3) Renting the space for private events like corporate parties.

C: Number of paintings the art gallery currently has, the number of exhibitions and private events that are organized each year and the revenue from each?

I: Lets focus on the paintings for now, the art gallery currently has 50 paintings.

C: We can value these paintings by looking at Competitors' prices of similar paintings or find out the cost of acquisition and use cost plus method or even use value-based method depending on the product attributes to value the paintings.

I: How will you use the value-based method?

C: We can start with a Base price of paintings and add value to the painting based on factors such as: price of artist's similar works, price of similar style of paintings, price of paintings at similar art galleries.

I: Any other lever to value the painting.

C: I am not sure which one I am missing.

I: You have covered all, apart from this there could be an X-factor to each painting.

C: Yes surely, it could be possible if the painting has some story or historical incidence related to it.

Bain has been hired by a PE firm who is evaluating investing in a hospital in Gurgaon. Help them decide how much they should value the business if they are looking at a 25% IRR in a 5-year horizon.
[Please note that I stands for Interviewer and C stands for Candidate]

C: What kind of investments have the PE firm made before and how long have they been operating?

I: Mostly in Healthcare industries only, have several ventures.

C: Can you help me understand more about the hospital they are currently evaluating; in terms of the services, it provides and customers it caters to.

I: It is a specialty hospital with premium services and serving high-income individuals.

C: What are the sources of revenues for the hospital?

I: It is a 1000 bed hospital with 80% utilization factor and 2 Crores p.a. revenue from each bed, having a 20% EBITDA. We can explore other revenue sources.

C: Based on the data given, I calculated the initial investment cost to be done using NPV and discounting. I would next want to evaluate the decision based on some Macro and Industry level factors.

I: Macro parameters are good, let us look at the Industry level factors.

C: (Asked about the competitors, supplier buying powers and customers.)

I: Faces competition from some of the known brands like Apollo, Vedanta, etc. prices are similar. How do you think we can increase the revenue of the hospital?

C: We can break it down into factors such as No. of customers, the customer mix, Average duration of stay for a customer and the price per customer.

I: What can be some of the other sources of revenue for the hospital?

C: We can list down other services that the hostel can start, explore treatment of diseases that are not covered till now, establish a loyalty program with customers for consultations, launch health checkup packages, extend the pathology services of the hospital, increase revenues from the canteen, parking space.

Q1. Tell me something about yourself.
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Q2. What do you want to do in the future? What are your short term and long-term goals?
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Q3. Can you explain to me the major decision you have taken in your life and the rationale behind those choices?
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Q4. Tell me about your professional experiences.
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Our client is in the IT industry, primarily working in the USA, with $1Bn of annual revenue
(75% from the USA itself). They operate software development, maintenance, and data
center management for BFSI clients, which provides 80% of the revenue. They have recently
acquired a software company working in the USA for five years, and its revenue has been
constant at $20 Mn. We must decide whether we should sell this company and invest further
in it.
[Please note that I stands for Interviewer and C stands for Candidate] 

C: Understood. There are a few questions I have with respect to the problem statement itself as well as some clarifying questions. Why did we invest in this specific company? Were we looking for any synergies?

I: This new company is operating in an emerging industry, with a lot of potential. We acquired it at a reasonable market price and were looking for long-term profits and not synergies.

I: Is the company profitable? Did we focus on improving the revenue in the last five years?

I: Yes, it's profitable, and we haven't made any investment till now.

C: Can I know about the market landscape in terms of market share and revenue growth?

I: The market is dominated by 5-6 large players having 70% of the market share. They are growing at the industry growth rate of 7-8%.

C: I would also like to understand this new company we acquired, specifically their business model and major revenue streams.

I: Let's not focus much on the company because the IT sector and the company will be very new to you, but to give a basic understanding, this new company provides core software solutions to insurance clients in the USA, helping them to serve the clients. (He talked about CRM/ERP, which I could not follow up on completely).

C: Should I also exclude the product-related aspect and take it up further in the case?

I: Yes, you can assume a standardized product for the time being.

C: Also, who runs this company, separate management?

I: Yes, they are run independently as a subsidiary.

C: Since it's in B2B, what are the primary customer segments we are serving?

I: We price the product at a premium. There are four major customer segments: Large private players (50%). Govt (20%), regional players (20%) and local players (10%). We primarily serve the local players, which are geography-specific, which have a niche client need.

C: I think I have a fair bit of understanding of the business problem.

My decision to invest or not invest will be based on three factors: Current market value of the firm, future market value with investment, future market value without investments but with better management or operations.

I: Okay, and how will you go about doing this?

C: I will try estimating the revenue/incremental revenue under each of this category and compare it with the additional investments.

I: Okay, Emil, that's a sound approach. Let's focus on the investment bucket, assuming the current market value is only $18 Mn. How will you proceed with the same?

C: Also, I want to understand the quantum of investment we are making because it will affect my future value and growth.

I: Let's take a step back here, Emil. If you exclude the investment amount, how will you approach this?

C: I will look at the future value and growth potential. What are the avenues for the firm to increase the revenue in the future specifically?

I: Yes, perfect. Let's focus on this.

C: I think we can focus on our current operation, looking at the revenue from the existing and new clients, or looking at new operations concentrating on new products or new geographies.

I: Let's exclude the new geographies since we want to focus on the USA. What do you mean by new products?

C: New products for our current customers or targeting a new customer segment.

I: Okay, and would you like to add anything?

C: Can I take a few moments to think through this situation?

I: Yes, take your time.

C: For our current clients, we can focus on any cross-selling opportunity with respect to our parents' offerings, bundling of our products, and customization.

I: Yes, useful suggestions, let's focus on new clients now.

C: We can focus on new customers from the current segments or try serving govt or large private players. For the former, we can focus on S&M techniques along with better product differentiation. For the latter, since there are larger players than us, it won't be easy to compete. We need to look for a niche product/space we can enter initially.

I: Okay, make sense. Let's assume we have decided to enter the larger private players segments. How will you go about doing this?

C: I will approach this from the demand and supply side. From the supply side, I will look at my current and potential capabilities in terms of servers and software developments, R&D and the quality of my employees, sales team and their reach, and marketing techniques. I will focus on these larger clients' product and price requirements from the demand side, offering customized/niche products, value-added service and long-term contracts, and differentiation from current market players.

I: Good points. Now let's try estimating the value of the company if we incorporate all these suggestions.

C: Do you want me to estimate the future revenue of the company?

I: Let's try focusing on your approach here first, specifically for the new segment we are entering.\

C: To estimate revenue, I need to know the price, the product mix/range of offerings, and the number of clients we will have. For estimating the price, I will look at our competitors' current market price, our cost of entry, and the future price growth/bargaining power using inflation, GDP growth rate, and industry growth rate as proxies. Also, due to the Covid outbreak and boom of the insurance sector, we might be able to price our products better in the future. To estimate the number of clients, I will start calculating the total number of local insurance players in the local market by assessing the need for insurance products (using proxies like population, age, income, insurance affinity, average customer base per insurance player) and multiply it by expected market share.

I: Emil, this is the bottoms-up approach. Let's focus on the top-down approach, and for the new segment we are entering, the potential market or the projected market share.

C: I will start with the current market for large private players and estimate how much we can acquire while competing with other similar B2B players. Since there are large established players in the market, it won't be easy to get a fair market share initially. I would like to look at proxies that will help me understand the market we can capture.

I: What are those?

C: Since IT is a sales team-based industry, revenue/employee can be one metric. Also, the server capability or any patent-related information can be useful. Marketing expenses can also indicate how aggressive the competitors are. And finally, since we are looking for at large players, data regarding long-term contracts and customer retention is critical.

I: Thank you, Emil. Can you explain the approach you have taken to solve the problem?

C: Yes (I then summarized the case, and the interview ended there).

Our client is a manufacturer of nets used in the fishing industry, agriculture, and construction. Their revenue has been growing at the rate of 3-4% for the last five years.

They would like to accelerate their growth to 15% YoY. Can you help them?
[Please note that I stands for Interviewer and C stands for Candidate] 

C: Why precisely 15% here? Does the client think they have the potential to grow at this level in the future?

I: That's something we must decide internally. So, you have a dual problem here: understanding our company's potential and finding out ways to grow the revenue! Also, let's focus only on the fishing net industry for the time being.

C: What is the timeline for the same? Also, any specific budgetary constraint I should keep in mind?

I: Probably as soon as possible. Also, we have enough cash in our account.

C: Understood. Where does our client operate in the value-chain? Do they have their production and distribution facility?

I: Yes, the client operates across the value chain, from production to distribution through 3rd party dealers. Retailers buy it from them and sell it in the market.

C: What are the major product segments we are having?

I: We are into all product categories that the industry requires.

C: How is our product priced with respect to our competitors?

I: There is a 5% premium on our product, mainly because of the quality. It is the best in the industry in terms of quality.

C: What is the market share of our company? And what has been the industry growth rate?

I: We are the market leaders with 70% of the market share. The rest of the market is captured by the unorganized sector. The industry is also growing at a rate of 3-4%.

C: What are our primary customer segments? I believe organized fishers buy the products from the dealers and unorganized fishers from retailers in rural areas.

I: Yes, this is how the industry operates.

C: The approach I want to follow is to look at our company's potential in terms of production and supply chain specifics to see if we can support a 15% YoY revenue growth (focusing on the volume part) and looking at the current capabilities and capacity utilization. And then try to understand avenues available for us to increase the revenue through organic and inorganic routes.

I: Let's focus on revenue maximization first and focus only on organic growth.

C: I want to focus on three aspects here: Customers, dealers, and logistics/supply chain.

I: Let's focus on customers first.

C: There are two kinds of customers: Bigger organized players and smaller unorganized ones. For the more prominent players, we can look at establishing a long-standing relationship with them. Customize nets according to their needs, in-house maintenance and repairing of the nets, bundling of the products, or discounting since purchasing in bulk quantities.

For the smaller players, we can try getting closer to the end-user, probably the D2C model. For them, word of mouth matters a lot and bases their purchase decision on historical purchase experience and usage. We can set up small retail shops along the coastal lines, trade fairs or discount periods during the major festival season, and some engagement activities for the local people sponsored by us.

I: Anything else?

C: Since our product is at a premium price, there is an internal trade-off we must make between price and quality. Since the customer and the local players are price-sensitive, we can help them buy the net with suitable price incentives like EMI, partnership with local panchayats or banks, and replacement of old nets.

I: Okay, agreed. What about the distributors?

C: We can integrate forward to have our exclusive distributors or increase our presence in areas where we are not a market leader.

I: How do you assess and bridge the gap in the current distribution network?

C: For assessing the gap, we can look at proxies like the number of dealers per area or the number of retail customers per dealer. Also, revenue per dealer or total orders served, along with the growth rate in orders, can be used here.

For bridging the gap, you can look at the hub and spoke model, like having regional centers on major shores. Also, you can focus on an exclusive dealership, a better incentive structure for the dealers to push our products and focus on areas where we currently don't have any presence.

I: Okay, that is it, Emil. How will you estimate the annual revenue for the client?

C: After taking time to structure my thoughts, I gave my approach to estimate the total units sold per year.

I started from the total population and then used filters like age, average employment rate, and percentage of workers in the primary and fishing industries. Then I took an estimate of people working as fisherman among the people working in the value chain. Then I estimated the total number of fishing boats by segmenting the customers into organized and unorganized. I also incorporated product lifecycle and reserve nets per boats within the model.

He was also looking for the numbers and my rationale for each assumption I made.

Q1. Tell me about yourself.
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Q2. Where are you from?
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Q3. How have you been coping with COVID's impact in Delhi?
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Q4. What's a Startup Studio's business model like?
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Startup Studios build and launch startups using their own resources and expertise.
• Startup Studios provide resources such as funding, office space, and mentorship to startups in exchange for equity.

• They typically have a team of experts in various fields such as marketing, product development, and finance to help startups succeed.

• Examples of successful startup studios include Betaworks, Science Inc., and Idealab.

• Startup ...read more
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The client is a billion-dollar IT services player (application and infrastructure management). They have been lagging behind in profitability and need help with this problem.
[Please note that I stands for Interviewer and C stands for Candidate]

C: What is the quantum of the lag in profitability? Is there any data available for how short is the company falling of its targets? Also, since when has the company been facing this issue?

I: Yes, the company has been clocking 12-13% EBITDA compared to a 15-16% expectation. The issue has come to light in the last 3-4 years.

C: Thank you. As I am not too aware of the concerned industry here, could you help me understand what do we exactly mean by ‘application and infrastructure management’ services?

I: Application services are simply app development and maintenance while infrastructure management services range from cloud-based data management to ERP solutions to core system maintenance and a few other add-ons.

C: I would like to know a bit about the client to establish some context here. Can you help me the following details? Location, Areas of operations (client bases), age/maturity of company, size of the company (in terms of workforce- as it is an IT services company).

I: Sure! The company is based in India and has offices in Bangalore, Chennai, Pune, and Trivandrum. It is a mid-90s company and has approx. 2500 employees. 80% of the client base is in US.

C: Sounds good. To understand the offering better, is it safe to assume that the company offers customized solutions to every client given different scales of client firms?

I: Yes absolutely. The requirements of every client would differ based on its scale and specific solution needs.

C: Also, I would assume that there would be a fair amount of competition in India in this industry. Can I get some information on the competitive landscape here?

I: Yes, that is correct. There are 3 tiers of companies serving as good competition. Tier-I would be the likes of TCS & Infosys, we would be a part of Tier-II followed by smaller local players.

C: Thank you. I have sufficient information to dive into the issue. As the company is experiencing a profitability issue, I can define profits as Revenues - Cost considering a single stream of revenue which is service fees.

I: Yes, ignore revenues for now, let us look at costs for the client.

C: Sure! As it is an IT services company servicing mostly US-based clients, people’s costs would be a major component of total costs for the client apart from other operational and non-operational costs like.

I: Yes, ignore other costs for now. Let us focus on personnel costs which forms 80% of total costs.

C: To ascertain personnel costs, I would like to use the following equation = No. of offices x No. of projects x Avg. no. of people per project x Avg. CTC.

Moreover, Avg. no. of people and CTC will be different for different tiers of employees.

I: Yes, that seems fine but on what other ‘lever’ would the costs depend?

C: Further, the projects would have different tiers of personnel and their CTCs will be different based on level of skill/seniority.

I: Yes correct. Can you think of any other ‘lever’ that could vary costs in this context?

C: I have a few questions which I need more clarity on. Is the employee structure top-heavy or bottom-heavy? Moreover, could efficiency of certain tiers of employees also be a cost driver here?

I: In such a firm, the structure is almost always bottom-heavy. Also, what do you mean by efficiency, can you explain your thought process behind this. You can also consider the office space available as a factor of personnel costs in this context.

C: Sure. By efficiency I meant the amount of time that an average team would take to complete a project and benchmarking that with that of other competitors, we could get an idea about the relative efficiency of the workforce. Also, I think I missed the space aspect earlier. Different office locations would have different office space available and hence, the costs could vary across these locations. Would you want me to explore this further?

I: Yes, that sounds good. How would you benchmark the efficiency of employees when projects are customized and not uniform across various clients in different industries?

C: Yes, I agree that benchmarking would not be fully accurate, but it is just to get an idea of relative costs. If we take a hypothetical project and allocate a group of employees and compare across competitors for the same, we might be able to assess if we are less or more efficient than them and get an idea of relatively higher/lower costs.

I: Alright, that makes sense but like you said, it is not possible to have this data and hence is a hypothetical scenario. Also, we have ¾ mins. left with us. Can you quickly think of some additional points that could drive personnel costs?

C: I have a few more points which could be cost drivers. Firstly, we could look at benchmarking the salaries of different tiers of employees with that of the competitors. Secondly, we can compare the utilization of employees per annum and compare it with that of competitors.

The client is a specialized chemicals manufacturer and is facing issues with its profitability. They need us to help them figure the problem and recommend solutions.
[Please note that I stands for Interviewer and C stands for Candidate]

I: Focus only on structure and idea generation.

C: Sure! Since how long has the client been facing these issues? Also, I would like to know a bit about the client and the industry it operates in and the timeline in which the client is looking to resolve the issue.

I: Let me help you with some initial information. The client manufactures chemicals used further to produce plastics, paints, textiles, and leather goods. It has 400 different SKUs and clocked revenues of INR 160 Cr. last year. They require quick solutions which can be implemented within a 2-3-week period.

C: Thank you for that information. (Made some assumptions and confirmed with the interviewer: B2B clients pan-India and business model/value chain were from Sourcing-Manufacturing-Sales & Distribution). Asked a few more questions about the competitive landscape.

I: Yes, you can go ahead with that understanding. Ignore the competitive landscape. Although could you tell me the kind of clients this company could have?

C: Yes, I would assume consumer durables, apparel, lifestyle brands to be key clients. Is that a good assumption?

I: Yes, that sounds good. Go ahead!

C: I will break down profits into Revenue-Cost. Assuming multiple revenue streams and cost centers for 4 different types of products, would you like me to focus on any of these specifically or can I explore each one by one?

I: Yes, that is a good point. Leather products are driving down the profitability primarily. Can you explain about the cost structure/heads of this company?

C: Sure. On the nature of costs, I could divide them into Operational & Non-operational costs. On the basis of behavior, I could use a Fixed, Variable & Semi: variable classification.

I: Good. Name a few operational & non-operational costs here and let us proceed with it then.

C: Under operational costs, I would list down raw material costs, labor costs, in-bound logistics cost, production process costs, warehousing & storage costs and distribution costs including outbound logistics, R&D costs, Administrative costs, and technology costs. Under non-operational I would consider depreciation and finance costs.

I: Alright, let us move to the revenue aspect now. How would you proceed?

C: Before I dive into it, could you help me with an SKU distribution across all 400. This is to determine how heavy is the leather products’ SKU share among the overall SKUs offered.

I: Sure. Consider it as 50, 70, 120 & 160 SKUs for plastics, paints, textiles, and leather goods, respectively.

C: Thank you. As we can observe that leather goods for the highest share of the overall SKU mix, the top line can be majorly affected by leather goods. Following this, I would break the revenue as no. of leather goods’ units produced avg. price of leather SKUs. Do we have any information on the quantity produced or the pricing policy/trends that the client has observed for their goods in the past?

I: Good observation. So, the client follows a cost + mark-up pricing model. The quantity of production has not changed. Anyway, can you quickly suggest some ideas for a company like this to improve profitability?

C: As we have a short timeline to improve profitability, I would look at the SKU mix offered. We would have to increase sales effort on certain SKUs and reduce or phase out a few. Producing and selling larger SKUs could reduce carrying costs and packaging costs. Since our clients are all B2B, if the smaller SKUs are not truly relevant, we could look at reducing sales of these and reallocate resources towards larger SKUs. Would that be a fair suggestion?

I: Yes, although the cost of producing the primary material is the same across all SKUs, the other product costs could be tweaked. I like the idea of pushing large SKU sales although phasing those out would not be recommended as there are certain buyers for its who would not purchase beyond a certain limit due to many reasons. If phased out, the revenue and profits from that segment could get totally wiped out.

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Q4. Asked about work experience in BFSI.
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Your client is a Brick Manufacturer. A new player has entered the market and slashed the price by 10%. The client is asking us what they should do.
[Please note that I stands for Interviewer and C stands for Candidate]

C: To understand our client better, can you tell me how old is the company?

I: The client is an old company in this line.

C: Does the client also have other lines of business?

I: No. The client only manufactures bricks and sells it directly to customers.

C: As we are selling directly to customers, can I assume that most of our customer base is builders?

I: Yes. Most of our customers are small builders.

C: Okay. Where is the Client located? Also, what is our scale of operation?

I: The Client is located in East India. It has a single plant in a catchment. It is one of the biggest players in East India.

C: Who are our competitors? Also, is it a fragmented industry?

I: Yes. It is a fragmented market with 30 odd players in the market. There are 2-3 big players in the market and our client is one of them.

C: Okay. What is the price that we are currently charging for the brick? Is that the price that our competitors are charging as well?

I: We are currently charging Rs. 10 per brick. Yes, the price throughout the market currently is more or less similar. However, the new player has entered and cut price by 10%.

C: As we have to decide if we should cut the price by 10% or not, we can consider the following before taking a decision. Our Market Share in the current market, the current pricing of the product, the process of manufacturing, our customer base and their perception of a price cut, the quality of our product vis a vis our competitors.

I: This sounds good. Let us look at the market share but I want you do a few calculations for me first.

C: Sure.

I: Let us say we are selling 100 thousand bricks. Should we reduce our price? Is it feasible?

C: I would like to decide the feasibility of price reduction on the basis of our profitability. To understand more about it, do we have any information about the costs incurred for production as well as the fixed costs?

I: Yes. The variable costs are around Rs. 3 per brick and the fixed cost is Rs. 20000 currently.

C: (Asked for some time for calculating profit) Currently, we are selling a 100 thousand bricks at Rs. 10 per brick. Thus, our sales are Rs. 10 Lakhs. The variable cost of producing 100 thousand bricks is Rs. 3L. Contribution is 10L minus 3L i.e., 7L. The fixed costs are 2L thus our profit is Rs. 5 Lakh. We have a profit margin of 50% currently. If we reduce the price 10% per brick for the same sale quantity, the sales would be 9L and the profit would be 4L. Although our profit margin would reduce from 50% currently to around 45%, it still seems a feasible option.

I: Sounds Fair. How many bricks will I have to produce and sell if I still want to earn a profit of Rs. 4L without reducing the price by 10%.

C: In this scenario, the price of the brick is Rs. 10. We need to earn a profit of Rs. 4L. The fixed costs will not change due to change in quantity of sales and production. Thus, the contribution will be 6L. Per brick contribution is Rs. 7, thus, I will have to produce and sell around 85,000 bricks.

I: Yes, that makes sense. What does the contribution signify?

C: The contribution is that portion of revenue which is not used up by variable costs and used to cover the fixed costs. Contribution is also considered while calculating the break-even quantity essential to keep the business running in the short term.

I: Good. All the factors you listed while considering a price cut make sense. However, as we are short of time, can you tell me why would you consider customers while deciding a price cut?

C: As we are an established player manufacturing since many years and amongst the Top 3 players, can I assume we would be having a specific loyal customer base since many years?

I: Yes, we do have some loyal customers who value our quality.

C: Customers might perceive price cut as reduction in our quality of bricks. It can create a lower perceived value for the product and buyers might consider our product less valuable.

I: That sounds fair. So, what do you think should we do?

C: As currently the pricing in the market is more or less similar, 10% reduction by one player will affect the pricing of other competitors as well. Based on the calculations, a 10% price reduction will affect our profitability by 5%. We are a big player in the market, and we have the capacity to reduce our prices and focus on increasing our volume to compensate for the reduction in profit. Also, since most of our customers are small builders, a 10% saving in brick cost might also be an attractive opportunity for them to shift to another manufacturer since the product offered by all players is similar. Thus, we can also go ahead with reducing our price by 10%.

I: Correct. Seems good. That will be all.

Your Client is the manufacturer of fishing nets. These nets are used in agriculture, fishing, and construction. The growth has slowed down. It wants to grow at 15%.
[Please note that I stands for Interviewer and C stands for Candidate]

C: (Clarified the problem statement). What is the current growth rate of our client? Has there been a fall in our growth rate?

I: The client is currently growing at 5%. It is a well-established player and was growing at 10% earlier but the growth has gradually reduced to 5% over the last few years.

C: What is time period within which we need to achieve this target of 15% growth?

I: We need to achieve this target in the next 3 years. Let us only consider the fishing industry for this problem.

C: Okay. I would like to understand at what rate is the fishing industry growing.

I: The industry is also growing at 4-5% and our growth currently is in line with the growth of the industry.

C: Okay. Where is the client located? Also, what is the distribution channel that the client uses?

I: The client is located in India. It operates through dealerships and has a distribution network all over India.

C: I would like to understand a little more about our competitors and their share in the market.

I: We are one of the major players in the market. Our market share is about 70%. We have not been able to grow much as the market has now stagnated.

C: Okay. In order to grow at 15%, I would like to explore the existing market and also explore new geography or businesses.

I: Let us consider the existing market for now.

C: While exploring the existing market, I would look at increasing the volume of sales or increasing the price of our nets.

I: I would like you to look at increasing the volume of sales first.

C: The volume of sales can be increased by increasing our customer base or increasing the quantity sold to a particular customer.

I: Can you help me estimate the size of the market for fishing net?

C: Sure. Fishing net can be used for sea water as well as freshwater fishing. I would divide the population of the country on the basis of access to coast or river and those with no water body around for fishing.

I: Let us consider only seawater fishing here. Since we are short of time, tell me the approach first and then you can calculate.

C: Sure. I would divide population of India who live along the coast and those who live in landlocked areas. Out of the people living along the coast, I would divide them into those living in rural areas and those in urban. The population practicing fishing as a profession in urban areas would not be much thus, I would first look at the professions practiced in rural areas along the coast. On the basis of their professions, I would divide the population majorly between agriculture/farming, poultry/animal husbandry, fishing and other. Out of the population that practices fishing, I would consider the number of households here and divide the population assuming 5 people per household. This would give me a number of fisherman and assuming every fisherman buys his own net, that would be the number of nets required. However, the fishermen would not buy a new net every year so we also need to factor in the number of years after which they would buy a new net.

I: This is a good approach. Can you also tell me what other strategies can we look at to grow in the existing market?

C: Firstly, we can increase the overall distribution network that we have. Currently, we are only selling through dealership. We can increase our distribution channels and also venture into setting up our own retail stores. Or we can also increase the number of dealerships we have within the same channel.

Second, we can analyze the current market and try to onboard more customers.

Third, we can diversify our product. We can introduce different sizes for the fishing net. We can also introduce a variety in the shapes of the mesh.

Fourth, we can market our product better. As most of the customers we are targeting are from rural areas, we can market our product through radio or local bazaars and trade fairs.

Fifth, we can also consider acquiring other players in the market. However, that depends on two factors – their willingness to sell and our capacity to buy.

Sixth, we can look at the pricing of the product.

I: This sounds good. I think you have covered all. We can stop here. Do you have any questions for me?