Estimation Cases
Business Cases
Practice Case 1: Estimation Case
PROBLEM: How many pieces of luggage do you think are unloaded at LaGuardia Airport each day?
In this type of case, your job is to work through a series of estimations to produce a numerical answer to the question. As the interview proceeds on, you will need to interact with your interviewer, obtain information, and check your thinking. Explain your logic at each stage of the problem, and ask your interviewer whether your assumptions are correct. In all likelihood, your interviewer won't provide you with the hard numbers you need for intermediate steps; instead, the case asks you to make a few assumptions and devise them yourself.
As you work through the problem, think carefully about what assumptions you are making and the ways in which they could be wrong. It doesn't matter if your answer is right, as long as you have thought about it logically and recognized the parts of your solution that you could change to generate the correct answer.
The interview could sound something like this:
Interviewer: Why don't you tell me how many pieces of luggage you think are unloaded at LaGuardia Airport each day.
Candidate: Okay, let me ask a few clarifying questions first. When you say, "unloaded," do you mean baggage that is just handled or that people actually pick up?
I: That people pick up at the baggage claim.
C: Okay. Well, I think we should figure out how many people fly in to LaGuardia each day, and how many bags they carry. A good starting point is probably to determine out how many flights arrive. Now, LaGuardia is mostly a domestic airport, right?
I: Right.
C: Let's assume, then, that there are two kinds of airlines that use the airport. Major carriers that use the airport as a hub will have more flights arriving than those that do not.
I: Sounds fair. So how many major carriers do you think use LaGuardia?
C: Well, let's see. There's Delta, American, United, USAir … why don't we say four major carriers, and ten smaller airlines. Figure that the larger carriers have ten flights arriving per hour, between the hours of 8 A.M. and midnight. Does that sound correct?
I: I think 8 A.M. may be a little early for flights to arrive … that means they would have to leave at around 6 A.M., and there aren't too many of those.
C: Okay, let's say 9 A.M. to midnight. That gives us 150 flights per major carrier per day, times 4 major carriers, which gives us 600 arriving flights per day…
… and so on. The basic strategy, though, is the same for the whole problem. Ultimately, you need three facts:
- the number of flights per day
- the number of passengers per flight
- the number of bags per passenger
Once you have the number of flights, there are several factors to consider when computing the number of passengers per flight:
- Percentage of passengers, by carrier type, for whom New York is the final destination (i.e. passengers who would pick up their luggage at LaGuardia)
- Average capacity per flight
- Average percentage of seats sold per flight
Taking into account both major and minor carriers, you would arrive at an estimate of the number of passengers deplaning at LaGuardia.
The final step is to compute the number of bags per passenger:
- Here it might be useful to distinguish between passengers traveling for business and for pleasure, because business passengers tend to check fewer bags
- Once you have the approximate number of business and personal travelers for each type of carrier, estimate the number of bags you think each type of passenger carries
- Then use your number to calculate the total number of bags passing through LaGuardia each day, based on your earlier estimates and assumptions
The key to estimation cases is in recognizing that each piece of the puzzle must be divided into its parts, and that each part must be analyzed separately.
The conclusion of the estimate interview is supposed to be a number, so keep that in mind as you are driving toward the answer, and be sure to take good notes so that you can add it all up in the end.
Practice Case 2: Business Case
PROBLEM: Imagine that you are a consultant, hired by Carnegie Hall, a large concert hall in New York City. For the past several years, its profits have been declining, and management wants you to determine out how to reverse this trend and restore profitability.
Business cases tend to be more structured than estimation cases. The interview will be an interactive conversation in which your interviewer will answer your queries, ask you some questions, and provide guidance as you solve the problem.
Most case interviews proceed similarly. Your interviewer first sets up the problem. Sometimes, the interviewer will introduce the problem specifically and narrowly, so that your task is clear. Other times, the case will be more open ended, and it will be up to you to introduce greater structure.
From there, you should follow four basic steps: clarify, structure, analyze, and conclude. Let's look at each step in detail.
Step 1: Clarify the problem. Take a few minutes at first to ask some clarifying questions or restate the problem in your own words to make sure that you understand it well. When you are clear about what you are being asked to do, move on.
Step 2: Structure the problem. Perhaps the most important step is structuring the problem. Think about what the major components of the analysis should be. For instance, if the question asks about profitability, the major components would be revenues and costs. Alternatively, think about the series of questions that you have to answer in order to make a recommendation. For example, if the case is about entering a new market, some of the questions that you would have to answer to make that decision include what the company's capabilities are, how lucrative the market is, and what the competitive landscape is like. In any event, the idea is to organize your thoughts—then you can dive in and analyze each major category.
Step 3: Analyze the problem. As you conduct your analysis, keep in mind whether the information you are receiving and the conclusions that you are drawing really answer the question. Try to think about what information you will need and ask your interviewer questions to get that information. If you are trying to increase profitability and have found out that to do so, you must increase the quantity of goods sold, brainstorm ways that you can do this, and run your ideas by your interviewer.
Step 4: State your conclusion. Finally, at the end of the interview, take a minute to summarize the analysis you have conducted and the conclusions that you have drawn.
The following steps describe one possible answer to this case. There are many possible answers! The important thing is to keep a logical structure in your head as you go through the case. Keep your thoughts in order, and think carefully about what information you need, or what questions you should be asking next.
Let's run through each step of the analysis:
- Because this is a profitability question, break the issue down into two parts: revenues and costs (Profit = Revenue – Cost). You might decide to start with revenues, so ask your interviewer whether they have been declining. The interviewer says yes.
- There are many possible sources of revenues for Carnegie Hall, such as advertising, donations, and ticket sales, so list a number of possibilities and run them by the interviewer. She says that most have remained steady for the past six months, except for ticket sales, which have declined.
- Knowing that ticket sales are declining, you determine that there can be two causes for this decline. Carnegie Hall is either failing to attract audiences or it has been lowering its price. You might first consider audiences, so ask the interviewer if box office sales have been declining. It turns out that they are.
- Next, you might push this a little, and try to figure out which people are no longer coming to Carnegie Hall. You might ask about age groups, and be told that there has been a decline across the board. You might then ask about what kind of music people have been coming to hear. The interviewer tells you that classical music makes up the bulk of Carnegie Hall sales.
- Suppose you assume that younger audiences favor rock music and that older audiences favor classical. The interviewer agrees. So, one reason why younger people are no longer coming could be the lack of rock music. But that still doesn't explain why older people aren't turning out. So ask about the competition … specifically, what mix of shows Carnegie Hall's competitors are showing. Radio City Music Hall, the closest competitor, shows many more rock shows than Carnegie Hall—explaining, you might surmise, the decline in Carnegie Hall's market share among youth. Radio City shows a lower percentage of classical shows, but the same number of shows overall. So why are audiences going there?
- Thinking that there is another factor at play here, you might shift to talking about price, and you may find out from your interviewer that Carnegie Hall charges 30% more for tickets than Radio City. No wonder the classical audiences go there— same number of shows, but they cost less. How can this be?
- Staying with price, next ask about the ticket prices for rock shows. Here, Radio City is able to charge a 50% premium because younger audiences are willing to pay more to see their favorite stars. This means, you surmise, that Carnegie Hall can afford to charge less for its classical shows.
- Summing up, it looks like there are several options for Carnegie Hall to increase its revenues, and therefore (assuming costs stay constant) its profits:
- It can introduce rock shows and use the ticket premiums to subsidize classical music, or
- It can increase the frequency of shows at a lower price, or
- It can engage in a marketing campaign to promote classical music and draw younger audiences willing to pay their prices.
This practice case is somewhat simplified, but it addresses most of the major issues. In reality, costs would be a factor, especially in the second recommendation, and a good interviewer would likely want you to address that. But this should serve as a basic model of the thought process that goes into cases. The following additional examples will provide you with some extra practice.
Practice Makes Perfect
Here are some examples of both estimation questions and full cases. It is best to work on these with friends, though it will also be helpful to just think about them yourself, and try to sketch out an issue tree, describing how you would break down and analyze each case.
Estimation Questions
- Estimate the number of McDonald's restaurants in the world.
- What is the total amount of money lost by the Postal Service because of e-mail?
- What is the approximate size of the U.S. market for compact discs?
Business Case Questions
- The Chicago Cubs are interested in building a new baseball stadium and are trying to decide if they should do it. Things to consider in the decision include the demand and supply for baseball tickets (in a two-team market), the capital investment in the stadium and expected return (in all likelihood, you would only deal with these concepts if you know something about finance), and the strategic rationale for a new stadium.
- A major U.S. pharmaceutical company is trying to decide whether to open an overseas branch, and contracts you to perform some feasibility analysis for them.
View Full Article
From Job Interviews That Get You Hired. Copyright © 2006 by LearningExpress, LLC. All Rights Reserved.