McKinsey Case Interview Example - Solved by ex-McKinsey Consultant

Ex-Bain consultant interviews ex-McKinsey consultant on a McKinsey-style case about assessing market attractiveness for an e-commerce acquisition.

Ask about this video. Answers come from its transcript only — with the timestamp, so you can check them.

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Key Takeaways

Market attractiveness should be assessed through profitability, competitive advantage, customer base, and personal fit.
Customer loyalty is crucial for justifying marketing investments and sustaining sales growth.
Understanding operational demands helps determine if the business aligns with personal career goals.
A growing market with potential for differentiation and efficiency gains presents a good acquisition opportunity.
Structured case interviews can help candidates practice real-life consulting problem-solving.

What the video covers

An ex-Bain consultant interviews Bruno, an ex-McKinsey consultant, using a McKinsey-style case interview format.
The case focuses on evaluating the attractiveness of an e-commerce market for bed and bath products.
The friend wants to acquire an existing e-commerce business but is unsure if the market is attractive.
The analysis framework includes market profitability, competitive advantage, customer base, and personal business fit.
Key factors discussed include market growth, profitability of current players, price sensitivity, and barriers to entry.
Customer loyalty and behavior are analyzed to understand potential for repeat sales and marketing spend.
Strategies to increase sales include exploring new customer acquisition channels and increasing average ticket size.
Operational demands and personal fit for running the business are considered for long-term career perspective.
The market is identified as growing rapidly, with potential for competitive advantage through efficiency and differentiation.
The video is structured to allow viewers to pause and attempt answers before hearing expert analysis.

Chapters

What are the main factors to analyze when assessing market attractiveness in this case?

The main factors include market profitability, competitive advantage, customer base characteristics, and whether the business is personally attractive to run.

Why is customer loyalty important in this e-commerce acquisition case?

Customer loyalty allows the business to spend more on acquiring customers since repeat purchases increase lifetime value, making the market more attractive.

How does the case interview format help viewers prepare for consulting interviews?

The video is designed so viewers can pause at each question to think and answer themselves, then compare with expert responses, simulating real interview conditions.

Full Transcript — Download SRT & Markdown

Speaker A

In this video, you're gonna see me, an ex-Bain consultant, interviewing Bruno, an ex-McKinsey consultant, using a McKinsey-style case that would be in a real-life interview and MBB level case, probably a hard one that you could find either in a first round or any last round interview.

Speaker A

first round or any last round interview we made this video in a way that you can work through the video so on each question I asked Bruno you can pause the video if you want and try to answer like

Speaker A

We made this video in a way that you can work through the video, so on each question I asked Bruno, you can pause the video if you want and try to answer like you would, and then you can compare the answers.

Speaker A

assess that so what are the three or four factors you'd analyze to determine whether this is an attractive market or not okay so it's gonna purchase he wants to acquire that been in bet ecommerce or an e-commerce store that sells livings

Speaker A

Let's get straight to the video. Your friend wants to acquire a Bedman e-commerce business, but he's unsure whether this is an attractive market or not.

Speaker A

you just want your help to see if the market is attractive okay so no recommendation in terms of yes you should just market attractiveness purely right okay I have a couple more clarifying questions the first is is this who's this friend I mean is he

Speaker A

Okay, and he's asked you for help to assess that. So what are the three or four factors you'd analyze to determine whether this is an attractive market or not?

Speaker A

that he can run and improve she doesn't want he doesn't want to start from scratch and he has a feeling yeah good deal but she doesn't yet know with the market itself is attractive okay so if I understand he wants to

Speaker A

Okay, so it's gonna purchase. He wants to acquire that Bedman e-commerce or an e-commerce store that sells linens and sheets, bed sheets and pillows and dolls and stuff like that, and he just wants to know if the market is attractive or not. Is that right?

Speaker A

make a market attractive arounds no we'd also like your help with that okay that sounds good is he looking into a specifically commerce company no not yet Jenny yes he does have a deal in mind okay we're not

Speaker A

That's right. So if he doesn't want to know or whether he should acquire the business or not, you just want your help to see if the market is attractive.

Speaker A

right blood okay so I'd look into four broad areas and I kind of came up with this framework to evaluate market attractiveness in this specific scenario of a individual purchasing in e-commerce company okay so I'd look into four areas

Speaker A

Okay, so no recommendation in terms of yes, you should, just market attractiveness purely, right?

Speaker A

competitive advantage in this market so and coming from the assumption that some markets allow for more competitive advantage than others the third one is if you can build a customer base so if he can build a basically a list of

Speaker A

Okay, I have a couple more clarifying questions. The first is, who is this friend? I mean, is he... because I think it's weird that an individual is purchasing a company.

Speaker A

companies in the market and then the customer base I'm looking more into customer behavior okay and then the fourth is is this a nice business to run I mean he's with another business it has to be attractive for him personally as

Speaker A

Okay, so we're really rich or... yeah, he's all about the financial market. He's made a lot of money there, and he wants to go out and just have his own business that he can run and improve. He doesn't want to start from scratch, and he has a feeling, yeah, good deal, but he doesn't yet know whether the market itself is attractive.

Speaker A

markets that grows a lot okay and specific segments that were all even more I'd like to see the profitability of the current players so maybe this is a big markets and losing money not very attractive and the third one is the price sensitivity of

Speaker A

Okay, so if I understand, he wants to acquire himself into intrapreneurship?

Speaker A

less and maybe grab a higher market ship okay okay the second book is competitive advantage and look into three things as well the first is waste different shades what are ways to differentiate your company in this market and

Speaker A

Yeah, okay, good. And the second question is, does he have a specific way of understanding attractiveness? And I know this is kind of the question of the case, but are there any specific things that he thinks make a market attractive?

Speaker A

can have a more efficient warehouse and logistics or a more efficient [Music] IT development things like that so this will help you keep costs down maybe purchasing as well and then the third bonus barriers to entry I honestly don't

Speaker A

No, we'd also like your help with that.

Speaker A

people from signing other companies and making this market a price war in the future for example okay right within customer base I'd look for how easy it is to get traffic even if this is a wonderfully attractive market with lots

Speaker A

Okay, that sounds good. Is he looking into a specific e-commerce company?

Speaker A

him in the future or is this someone who's just shopping for price and I know there's some relationship with sincerity but I'm looking to different things here pricing services they're looking for the cheaper price customer loyalty is they're more likely to shop

Speaker A

No, not yet.

Speaker A

sell in the future that's a more attractive market than the market that you have nothing else to sell right and then the last item if this is a nice business room from a personal perspective I'd look at two things the

Speaker A

Jenny, yes, he does have a deal in mind.

Speaker A

handling that and usually nowadays websites don't crash in the middle of the night so doesn't seem like a business with too many operational demands but I would Mack the operations of this site and see if there are any

Speaker A

Okay, we're not gonna look into that there, okay, because we're looking at the market.

Speaker A

guessing that this guy wants to think about strategy about long term planning versus just run an operation and it's a guess we have to check with him of course but I think this will be interesting from a career perspective is

Speaker A

Yeah, okay, that sounds good. So I'm gonna take maybe a couple of minutes to structure the case if it's all right.

Speaker A

would it be bad for their position if there is customer loyalty sure that's that's a good question customer is awesome and the reason is and hey guys probably not use the word awesome in the real piece but I'm with customer is is really

Speaker A

Okay, I'm ready. Just in seven.

Speaker A

money now if this person is likely to shop with you five or ten times in the future you can even spend $50 $100 to to to get him in and you're still gonna make a profit so customer loyalty is a

Speaker A

Okay, all right, Bruno.

Speaker A

market with low customer loyalty Karen co-found good now your friend has decided that it will make sense for him to acquire the company but only if he can increase sales significantly okay and he's asked for help to come up with

Speaker A

Okay, so I'd look into four broad areas, and I kind of came up with this framework to evaluate market attractiveness in this specific scenario of an individual purchasing an e-commerce company.

Speaker A

towels oh you mean product wise yeah sure and also if there are b2c it versus b2b sales I'll try to figure out the notes of revenues okay right they found Paul b2c okay and all kind of products within

Speaker A

Okay, so I'd look into four areas.

Speaker A

goal is to increase sales right if we're gonna increase sales we can increase sales in the business as is right or we can change the business excess if we change the business I think we can get new types of customers do you know if

Speaker A

The first is if the market is attractive in the sense that they can make money, so are companies in this market profitable and likely to make money in the future?

Speaker A

enter other markets okay and in the business as is we can also sorry we could also go offline in the business as is we can get new customers right we can increase tickets yeah so the average sale or we

Speaker A

The second aspect is if you can hold a competitive advantage in this market, and coming from the assumption that some markets allow for more competitive advantage than others.

Speaker A

so just some ideas to get new custom you could explore new channels I don't know how he gets the customers nowadays if it's Google ads or Facebook ads but he can try other types of strategies to get new customers even offline

Speaker A

The third one is if you can build a customer base, so if he can build basically a list of customers that he can monetize and serve in the future, so another long-term view.

Speaker A

products he could improve his recommendation algorithm as Amazon does he could also cross cross sell by adding new categories so you can sell other products to buyers by having better recommendations but also adding new categories so what do people who buy

Speaker A

Okay, and I know this overlaps a bit with can he make money or not, but in the can he make money, I'm looking at the current companies in the market, and then the customer base, I'm looking more into customer behavior.

Speaker A

types of products so I'm kind of getting ahead of myself here all right within sales number of sales per customer work in our customer relationship so sending emails doing the basic ecommerce stuff we could send coupons for that for the

Speaker A

Okay, and then the fourth is, is this a nice business to run? I mean, he's with another business, it has to be attractive for him personally as well.

Speaker A

folds were renting their apartments nowadays selling new types of products I would look for products that are similar to the cells I said before so certain types of furniture mattresses and other things that you shop in the specific occasion

Speaker A

Makes sense.

Speaker A

going offline I don't think it makes a lot of sense either unless that's something that our client wants to do a lot but it would be opening retail stores okay are there other identical I surely can think of more ideas within

Speaker A

Okay, so within he can make money, within the first bucket, I'd look into three factors. The first is the size and growth of the market, that Bedman e-commerce. I'd love to see a big market that grows a lot.

Speaker A

to change any bases at first do we know if has problems with getting your customers or increasing ticket or because I want to focus on where they the problem so we don't really know the problems that this company has

Speaker A

Okay, and specific segments that were all even more. I'd like to see the profitability of the current players, so maybe this is a big market and losing money, not very attractive.

Speaker A

percentage of people who are aware who visit okay right so by increasing awareness I think they're there is their ads so I'm good for all the channels that make sense for ads Facebook Instagram Instagram is actually a really

Speaker A

And the third one is the price sensitivity of the customers. If everyone on the internet is charging the same price for the same items, it's really hard for you to try to premium or to differentiate in some way.

Speaker A

awareness and by influencers I mean digital influencers true but also architects home decorators we can do deals with them for promoting your products or write them and then there is also PR normal TV ads things like that now to increase the percentage who visit

Speaker A

Unless these companies are really profitable, then you can charge less and maybe grab a higher market share.

Speaker A

have this person visit and also something that's not really measurable but tends to work is to work on the branding of the website is there a really professional websites are the ads professional doing every I mean we're working with design in a certain way

Speaker A

Okay, the second bucket is competitive advantage, and look into three things as well. The first is ways to differentiate. What are ways to differentiate your company in this market, and differentiation will enable you to get more market share or charge more for the same products?

Speaker A

purchase and then we get new customers and repeat buyers all right cool so you and your friend ran some analysis of the of three large revenue levers and you watch the following data this after acquisition your friend starts selling

Speaker A

Okay, the second one is ways to be more efficient. Are there ways to be more efficient in this market? One example that comes to mind is maybe you can have a more efficient warehouse and logistics or a more efficient IT development, things like that.

Speaker A

organically grow 80% due to the increase of the total market and increase off share the happens online through e-commerce okay so bed and bath ecommerce as combined category is gonna grow eighty percent yeah that's right partly because bottom bath market will

Speaker A

So this will help you keep costs down, maybe purchasing as well.

Speaker A

be their market share after those two years mm-hmm current market share is twelve percent and we need the new market share in two years that's right that's what we want yeah and this market share is within barren bet ecommerce

Speaker A

And then the third bucket is barriers to entry. I honestly don't see many in this market, perhaps the initial investment that you need to make, but this is important because if it's a really attractive market with a lot of ways to differentiate yourself with very little barriers to entry, what's stopping people from signing other companies and making this market a price war in the future, for example?

Speaker A

have added get into new online faster as well yeah my fault okay okay let me think for a bit just to structure this analysis so we can can we assume that we will grow with the market at eighty

Speaker A

Okay, right. Within customer base, I'd look for how easy it is to get traffic. Even if this is a wonderfully attractive market with lots of ways to differentiate, if we can't get traffic, he's not going to be able to grow his site.

Speaker A

that's right that's right so we're gonna grow 40 percent revenues with marketplaces and I will assume that the rest of the markets on average will not do that yeah and we're going to 30% with no product categories and I

Speaker A

Second one is customer loyalty. So if he gets a customer, is this a customer for life? Is this person likely to buy from him in the future, or is this someone who's just shopping for price?

Speaker A

and by 1.3 which include the new product categories effect and I will compound both because we're gonna be selling new product categories in marketplaces as well okay make sense yet so let me compound this issue effects first marketplaces times you product is the

Speaker A

And I know there's some relationship with sincerity, but I'm looking at different things here. Pricing, services, they're looking for the cheaper price. Customer loyalty is they're more likely to shop from you if they've bought from you in the past.

Speaker A

30% to 1.4 okay so 10% of 1.4 is 0.14 right times 3 that if this was 0.15 this would be 0.45 and then I take 3 decimals of it so point 42 right the other trial and so 1 point 4 plus OH point 42 equals

Speaker A

Okay, and then the third one is opportunities for cross-selling. So if he gets customers and then he has lots of types of products that he can sell in the future, that's a more attractive market than a market that you have nothing else to sell, right?

Speaker A

okay ten times 1.82 is 18.2 mm-hmm and two times 1.82 is three point sixty four okay okay so eighty four sorry so we have twenty we will have twenty one point two eighty four percent market share okay what do you think of that

Speaker A

And then the last item, is this a nice business to run from a personal perspective? I'd look at two things.

Speaker A

because we're compounding 40 percent and 30 percent if you sum those up seven seventy percent so it should be slightly higher than that so the figure seems fine okay in terms of the business and whether this is an interesting market or

Speaker A

The first is what are the operational demands of this business? Is this a business that is gonna wake him up at 3:00 in the morning or not?

Speaker A

is really good in two years right by any standards and we can still almost double our presence in the market and have some sort of market power and recognition at least on the online channel just by doing two simple actions so it seems

Speaker A

Okay, my guess is probably not. I mean, you can ship stuff every day and have people handling that, and usually nowadays websites don't crash in the middle of the night, so it doesn't seem like a business with too many operational demands.

Speaker A

talking about adding new product categories and any new channel okay all right that makes sense now well you're meeting with your friend is almost over and you're gonna go back to doing consulting is gonna go back to looking into man-bat ecommerce

Speaker A

But I would map the operations of this site and see if there are any critical points that can make his life a nightmare.

Speaker A

yeah but I will say that this market looks like a really good opportunity right it's a growing market we haven't seen if it's profitable or not but just for the fact that it's growing a lot and that with small changes you can get

Speaker A

All right, and the second one is how much strategy work is he gonna do versus operational firefighting work?

Speaker A

trust these figures okay the second is I would do a quick to jib diligence on the company its numbers and its operations and then the third thing if our friends skills match what's needed to run this business and

Speaker A

And the reason why I'm doing this is he came from the financial markets, so I'm guessing that this guy wants to think about strategy, about long-term planning versus just run an operation.

Speaker A

watch more of our videos on case interviews just subscribe to our Channel hit the bell button and you'll get notified when we send out new ones also I've also recorded myself interviewing a real candidate with this very same case and I've added my

Speaker A

And it's a guess, we have to check with him, of course, but I think this will be interesting from a career perspective. Is this the kind of thing that he wants to run?

Speaker A

and we'll e-mail you the full video well I hope to see you in the next video [Music]

Topics:McKinsey case interviewcase interview examplee-commerce market analysismarket attractivenesscompetitive advantagecustomer loyaltybusiness acquisitionconsulting case studyMBB interview prepCraftingCases

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