Crack the Case. D. Ohrvall

C

Pages

23-30

Candidate

•Working with an interviewer: Remove pages 3 through 6 to take notes and do your work. Give the rest of the pack to your interviewer. Interviewer prep is about 10 minutes for this case.

•After the Interview: Rate yourself using the Self Assessment sheet in the back of the case pack. Review the feedback score and comments from your interviewer and discuss ways to improve. Review the suggested answers in the case.

•Self-study: Remove pages 3 through 6 to take notes and do your work. Remove any data handouts and place them face down. Follow the three Self Study Steps listed on these sheets. This self study method will help you form your plan, practice asking good questions and improve your ability to pull insights from the data slides. Keep in mind that you will benefit most from working with an interviewer who can evaluate your performance objectively.

Throughout these notes references will be made to the MVM™ (Maximum Value Model) and the FRAME Method™, the building blocks of the One Model/One Method™ approach to case interviews. Full descriptions of these unique tools, as well as additional cases, can be found in the book, Crack the Case: How to Conquer Your Case Interviews, available at www.consultingcase.com.

Interviewer Fact Sheet

Pack: 006 page 7 of 30

IntroIntroFactsFacts

(Tell(Te lthetheCandidateCandidateififAsked)Asked)

•Major assumption: Airlines still pay

•Major assumption: Airlines sti l pay

commissions regardless of today’s current commissions regardless of today’s current

practices. Otherwise all other current trends practices. Otherwise a l other current trends

in travel are applicable. in travel are applicable.

•Commission rate: Stress that these rates

•Commission rate: Stress that these rates

are set by country of origin for all flights. are set by country of origin for a l flights.

They vary by country. The US rate is 10%. They vary by country. The US rate is 10%.

•Leisure travel business: Management

•Leisure travel business: Management

does not want to pursue this option. does not want to pursue this option.

•Service line: Basic airplane reservations

•Service line: Basic airplane reservations

are about 90% of NLT’s business. are about 90% of NLT’s business.

•Locations: Over 500 agents in “travel

•Locations: Over 500 agents in “travel

departments” of customers; 3 call centers departments” of customers; 3 ca l centers

(East, Mid, West).

(East, Mid, West).

•Financial targets: Management needs to

•Financial targets: Management needs to

know whether NLT can survive profitably in know whether NLT can survive profitably in

this industry. this industry.

•Competitors: Some are out-performing

•Competitors: Some are out-performing

NLT due to more international travel. NLT due to more international travel.

•Suppliers: Airlines “supply” the travel

•Suppliers: Airlines “supply” the travel

routes and pay a commission routes and pay a commission

on each ticket sold. on each ticket sold.

•Government/ Legislation: No barriers or

•Government/ Legislation: No barriers or

legislation at this time. legislation at this time.

On-Track Indicators

Data driven – asks for sales or cost information early in the case

Pulls out insights – each handout has several insights necessary to reach a solid conclusion

Creative - discusses new opportunities to increase revenue that are creative, relevant and actionable

KeyKeyInsightsInsights

(Do(DoNotNotTellTe lthetheCandidate)Candidate)

•Revenue Calculation: Revenue = ticket

•Revenue Calculation: Revenue = ticket

volume x price x commission rate (the volume x price x commission rate (the

portion of the ticket price NLT receives). portion of the ticket price NLT receives).

Lines four and five on Handout B only come Lines four and five on Handout B only come

into play if they ask additional questions at into play if they ask additional questions at

the end (see Heavy Lifting). the end (see Heavy Lifting).

•Revenue Drivers: Commission and ticket

•Revenue Drivers: Commission and ticket

price have a big impact on overall revenue. price have a big impact on overa l revenue.

The commission varies by country of origin The commission varies by country of origin

with many European countries having with many European countries having

commissions over 10%. Also, long distance commissions over 10%. Also, long distance

tickets are usually more per unit when tickets are usually more per unit when

compared to domestic tickets. compared to domestic tickets.

•Costs: There are few variables you can

•Costs: There are few variables you can

push on here to make a significant push on here to make a significant

difference. Increasing ticket price is the difference. Increasing ticket price is the

most critical action one can take. most critical action one can take.

•Profit: Competitors are clearly making

•Profit: Competitors are clearly making

more profit than NLT. Refocusing the more profit than NLT. Refocusing the

business is the solution if NLT wants to business is the solution if NLT wants to

increase profit. increase profit.

Off-Track Indicators

Experience first – talks about all the changing trends in the travel industry and relies on personal experience and general knowledge to try to solve this case

Starts with costs – with profit maximization cases, start with revenue to understand how the company makes money

Misses the importance of commission – miscalculates revenue due to misunderstanding the revenue equation

Case at a Glance

Pack: 006 page 8 of 30

Part

A

Case at a Glance

Pack: 006 page 9 of 30

Candidate Review Sheets

Pack: 006 page 10 of 30

Handout Guide

Pack: 006 page 11 of 30

Interviewer: After verbally giving the problem, hand him/her this sheet and ask him/her to review it. S/he can start the case when ready.

Candidate: What about the other two divisions? (“ignore these for now”)

When will the commissions be cut? (“it’s just a potential issue for now”)

Main Insight: This is a profit maximization case, so stay focused on revenue and costs.

Candidate: Do you have any sales information? Interviewer: Here’s sales information by competitor.

What jumps out at you as you look this over?

You Must Say: Calculate revenue for me. Please only use the top 3 lines. What’s driving the revenue for Excursions? Others?

Main Insight: No single driver, but key elements are price and volume.

Candidate: Do you have any cost information? Interviewer: I only have it on a per ticket basis.

What are your thoughts here?

You Must Ask: Which costs seem to have the most impact? Who is leading in terms of cost control or economies of scale?

Main Insight: Spread between lowest cost per ticket and highest is $4. A $40 ticket price increase at 10% achieves the same profit increase for less effort.

Candidate: Do we know anything about the market focus of each company?

Interviewer: Here’s some qualitative info a consultant put together quickly. What can you infer about each player?

Main Insight: Regional players make less money. Those that book international flights are getting higher commission rates. Flights originating from certain countries must pay more than the US rate of 10%.