Further Cost Information to be Provided
Of the costs listed below, ask
Of the costs listed below, ask the candidate which would change and why.the candidate which would change and why.(good answers would be mileage (as it is a new technology) and maintenance and repair (possibly higher insurance costs as the technology is untested and thus a higher insurance premium would be charged)
# of vehicles: 2000 Cost of fuel per gallon: $3.00
Fuel tank size: 50 gallons Average miles travelled per week: 1000 Average mpg: 20 Average annual maintenance and repair: $3500
Insurance: 3K / year Labor: 20K / year
Breakdown of Future Costs when EV
Breakdown of Future Costs when EV technology is adoptedtechnology is adopted
Find the current and future annual fuel costs and savings per vehicle.
Math Question 1 Math Question 1
Math Questions and Solutions Math Questions and Solutions
Current fuel costs Current fuel costs
• Miles driven per tank = 10 mpg * 50 gallons = 500 miles
• Miles traveled per week = 1000 miles
• # of times tank is filled per week = 2
• Total cost of fuel per week = 2 * 50 gallons * $3.00 per gallon = $300
• Average yearly fuel costs (~50 weeks) * $300 = $15K
Future fuel costs (candidate can perform calculations again or receives a bonus for realizing that
Future fuel costs (candidate can perform calculations again or receives a bonus for realizing that doubling fueldoubling fuel efficiency reduces fuel costs by half for the year)
efficiency reduces fuel costs by half for the year)
• Miles driven per tank = 20 mpg * 50 gallons = 1000 miles
• Miles traveled per week = 1000 miles
• # of times tank is filled per week = 1
• Total cost of fuel per week = 50 gallons * $3.00 per gallon = $150
• Average yearly fuel costs (~50 weeks) * $150 = $7.5K Annual fuel savings per vehicle: $15K –$7.5K = $7.5K$7.5K
Math Solution
Math Solution – –Fuel Savings per vehicleFuel Savings per vehicle
Find the total annual costs and savings for the entire fleet.
Math Question 2 Math Question 2
Math Questions and Solutions Math Questions and Solutions
Total current costsotal current costs
• Fuel: $15K
• Annual maintenance: $500
• Labor: $20K / year
• Insurance: $1K / year
• Total: $36.5K
Total future costs Total future costs
• Fuel: $7.5K
• Annual maintenance: $3.5K
• Labor: $20K / year
• Insurance: $3K / year
• Total: $34K
• Switching to EV thus saves $2.5K per year.
• The current vehicles have a remaining useful life of 10 years.
• Thus, switching to EV saves: $25K$25K – – $5K (retrofit cost) =$5K (retrofit cost) =
$20K
$20Kover the lifetime of each vehicle.
• At a fleet level, this would save the company $20K * 2K vehicles = $40M$40M over the lifetime of the vehicles.
• Candidate can ignore time value of money/discounting, but should receive bonus points for considering it.
Math Solution
Math Solution – –Total Costs and savings for entire fleetTotal Costs and savings for entire fleet
Recommendations Recommendations
Our client should proceed with retrofitting its vehicle fleet to EV since it would save $40M over the remaining useful life.
Risks Risks
• Our client would be the first in the industry to use EV technology, therefore its effectiveness in commercial transportation is untested.
• The vehicles need to commute 1000 miles per week and current EV technology is limited to short range use.
• There are limited recharging stations
• There may be unanticipated costs in using the new technology.
Recommendation
• Work with suppliers to test the effectiveness of the new technology.
• Run a pilot test to determine whether EV technology works and does not negatively impact normal transportation operations.
• Gain input from drivers on efficacy of EV technology.
• Perform research to determine whether there are government incentives for EV adoption.
• Perform research to determine whether EV adoption grows customer base/revenue.
Next Steps Next Steps
Candidate would identify issues with adoption of new technology. Candidate would recommend conducting pilot tests for launching the program. This case would also test the candidate’s capabilities to complete calculations more efficiently.
Problem Statement Problem Statement
Case 12: Chef’s Best Cutlery and Co., McKinsey (Round 1) Case 12: Chef’s Best Cutlery and Co., McKinsey (Round 1)
• Our client is an international manufacturer of medium and high quality kitchen knives. Chef’s Best sells knives in more than 20 countries, with a focus on Latin America, US & Canada, and global emerging economies.
• Chef’s Best produces five types of knives: Steak Knives (used at the table), Butcher Knives (used for chopping meat), Carving Knives (used for carving slices from large pieces of meat), Paring Knives (used for cutting small fruits &
vegetables), and Chef’s Knives (large all purpose knives).
• Chef’s Best has experienced slowing sales growth in the past few years. How can Chef’s Best increase revenue growth for the next 5-10 years?
Industry:Industry:CPG
Difficulty:Difficulty:Medium
Format:Format:Market Growth
Concepts Tested:Concepts Tested:Market Share Analysis, Competitive Analysis, Sales
channels, Distribution channels
• This is an interviewer led case consisting of three exercises whereby the interviewer will let the interviewee know they have certain information and will hand out the exhibits one-by-one.
T
Tyyppe e oof f CCaassee IInntteerrvviieewweer r GGuuiiddaannccee
Interviewer Guide to Case and Exhibits Interviewer Guide to Case and Exhibits Clarifying Information on Request
Clarifying Information on Request
• Chef’s Best sells primarily through a direct sales method (individual sales people throughout each region).
• Chef’s Best sales are largest in Mexico, the US, and Brazil.
• Phase 1: Ask candidate to brainstorm and tell you how they would approach the problem. Prod for depth/creativity in framework then move the candidate on to Exhibit 1 after 7-10 minutes.
• A good framework should include major areas (e.g. product, customer, company, competition) but this is really a test of creativity and ability to derive a logical framework & brainstorming for this question with only ambiguous information.
See a possible framework on the next page.
• The framework will not be important for the next steps.
Clarifying Information and Case Guidance Clarifying Information and Case Guidance
• After interviewee prepares and explains framework, interviewer will prompt the interview to move forward with Exhibit 1, which covers growth and profitability. (Guidance on following pages)
• After the interviewee has answered the math question in Exhibit 1, the interviewer will lead to Exhibit 2 and Exhibit 3.
• After synthesizing the information in Exhibit 3, the interviewer will prompt for a
recommendation.
Possible Framework Possible Framework
Framework Framework Market Market
• Market size and growth (Across geographies, product segments, customer segments) Competition
Competition
• New players: capturing share due to better distribution channels/marketing efforts
• Low-cost competitors: More competitive prices offered in market
• Substitutes (e.g., electronic choppers and food processors) Customer
Customer
• Segmentation of customers (e.g., chef’s knives to be sold more to restaurants and not households)
• Price sensitivity of customers Product
Product
• Product mix (Is our product mix aligned with consumer preferences?)
• Complimentary products and services (e.g., napkins with steak knives)
• Quality of products/brand image (Has quality of our products gone down or brand image suffered?) Company
Company
• Insufficient coverage due to limited distribution channels
• Inadequate cross-selling for different kind of knives
• Sales force effectiveness
• Tell candidate that you have some information to answer their question on growth and profitability. Hand out Exhibit 1.
• See if the client has a keen eye for details and if he notices the footnotes and multiple details on the graph
• Ask the candidate to tell you what they have learned from this and what this information means.
• Look for:
• Identification of largest profit centers (Mexico & Brazil)
• Identification of poor growth in Mexico
• Candidate should be able to confidently reach conclusions about important areas and risk areas.
• Ask Math question. This is a test of the candidates ability to do math (with minimal rounding) under pressure. To pass this question the candidate must correctly calculate the answer with minimal mistakes and quickly recover from any mistakes. If the candidate does a good job of sharing their calculations, you may offer corrections.
Exhibit 1 Exercise Exhibit 1 Exercise