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Kurt Salmon Associates KSA Sample Case
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Transcript of Kurt Salmon Associates KSA Sample Case
Management Consulting Case Interviews
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KSA Example Case
Alpha Sporting Goods
650 Fifth Ave.New York,
NY
10019T
212.319.9450
W www.kurtsalmon.com
Fall 2009 | MBA Case
OutlineIntroduction to KSA’s Interviewing Process
2
Case Introduction
4
Formulate Hypotheses
5
Section 1: Assessing Alpha’s Historical Performance
7
Section 2: Determining Industry Attractiveness
9
Section 3: Evaluating Assortment Optimization
11
Opportunities
12
Elevator Pitch
13
Exhibits
14
Page 2 | Private and confidential—not for distribution
Introduction
The primary objectives of a case interview are to evaluate your ability to:
•
Break down a problem into manageable pieces
•
Efficiently gather, interpret and analyze relevant information
•
Use logic, knowledge and experience to develop and defend a viable solution
•
Effectively communicate: strong interpersonal skills, articulate
a point of view persuasively
•
Think under pressure
Using this case, KSA is specifically looking for these additional competencies:
•
Quantitative abilities
•
Strategic thinking
Introduction to KSA’s Case Interviewing Process
Page 3 | Private and confidential—not for distribution
Suggested Practice Guidelines
Allocate ~30–40 minutes for case preparation
Try to simulate a real interview. Think about what clarifying questions you would want to ask
Do not use a calculator. You may use scratch paper and a writing
utensil
Show your work. Write down your thought process in short form. In the real interview, it will help your
interviewer assess the strength of your proposed approach
Throughout the case, you will see cumulative yard markers in the
bottom right‐hand corner to help you
pace yourself
When there are two minutes left of case time, stop and summarize
your findings in an “elevator pitch”
Introduction to KSA’s Case Interviewing Process
Page 4 | Private and confidential—not for distribution
Case Introduction
Background
Our client is a middle‐market private equity firm that is thinking about investing in a growing ~$95M (2005
revenue) sporting goods and outdoor equipment manufacturer
The target company, Alpha Inc., is a diversified manufacturer of
six primary product lines
Alpha Inc. has national distribution with several major accounts
Our private equity client has hired KSA to help decide on whether or not to invest in this business
To make a reasonable return on their investment, they would need
Alpha to generate $125M in revenue by
2011, a $30M increase, or ~6% CAGR
Assignment
Our client has asked us to assess Alpha’s business and provide perspective on their ability to grow their
sales to $125MM by 2011
0–2Min
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Formulate Hypotheses
Instructions to Candidate
Spend the next few minutes formulating hypotheses on what factors would lead you to make a
recommendation on the attractiveness of the investment opportunity
Think about what questions would need to be answered in order to
prove or disprove your hypotheses
Write down what information you would want to know if you were in your client’s position
2–5Min
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Formulating Hypotheses
Instructions to Candidate
There are many possible ways to approach this case, and KSA thought the most appropriate were to review
the following:
•
Assess Alpha’s historical performance to determine the company’s growth potential and opportunities
•
Review the industry attractiveness and opportunities
•
Analyze Alpha’s product assortment in the context of their historical performance as well as the
market size
5–6Min
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Instructions to Candidate
In Section 1, you will assess Alpha’s likelihood of achieving the required growth of ~$30M over 5 years
You should budget 10 minutes for this section
See Exhibits 1 and 2: “How would you assess Alpha’s recent performance?”
Section 1 – Assessing Alpha’s Historical Performance
6–16Min
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Instructions to Candidate
After reviewing Exhibits 1 and 2, you should have noticed a few important aspects of Alpha’s
performance:
•
Canopies and trampolines are growing extremely well and represent over half of Alpha’s revenue
•
Body Supports is declining rather dramatically
•
The business is extremely consolidated with two customers accounting for over 66% of sales—Target and Wal‐Mart
•
Toys“R”Us and Other Customers business has declined significantly
Additional observations you should have made and questions you could have asked include:
Did you identify the volatility risk with the customer base?
Did you notice the shift in retail channel from specialty to mass retailer? What implications would you
expect as a result of this?
Does the shift in channel sales lead you to assume anything about Alpha’s brand value?
Did you comment on the product mix? Did you notice the product line that just launched?
If you haven’t done so already, write down where you would want to focus when
analyzing Alpha’s product
assortment
Did you observe that historical growth is lower than what is required by your client? (4.2% vs. ~6%)
Note any additional information you would have liked to have known had you been in a live interview
situation and had the opportunity to ask
Section 1 – Assessing Alpha’s Historical Performance
16–20Min
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Instructions to Candidate
In Section 2, you will assess the industry attractiveness
You should budget 5 minutes for this section
See Exhibits 3 and 4: “How would you assess the industry dynamics of this business?”
Section 2 –
Determining Industry Attractiveness
20–25Min
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Instructions to Candidate
After reviewing Exhibits 3 and 4, you should have noticed a few important aspects of Alpha’s industry:
•
Canopies:
Good market penetration in a moderately growing category—assuming constant share, there will be moderate
growth. Likely market leader, good line of business to serve as cash cow
•
Trampolines: Moderate market penetration in a fragmented but rapidly growing category—it seems reasonable to expect
continued high growth in the category
•
In‐Line Skates: High share in a consolidated but declining market—should identify risk of a declining market to future growth.
May be an opportunity to refine products to better meet consumer
demand
•
Skateboards: High share in fragmented but stable market—minimal upside but also minimal downside
•
Body Supports: Big market with low share, and performance has been poor over past three years. Marketing is growing, so it
seems like an opportunity for improvement
•
Folding Chairs: Large market that is growing with significant potential. However, folding chairs are a commodity. Margin
pressures are probably very high
Additional questions your interviewer could have asked include:
•
Is it better to compete in a fragmented or a consolidated market?
•
Which of these lines of business seem most attractive?
•
Where should Alpha focus if it needs to grow $30M over the next 5 years? Can its current product mix support this?
•
How would you summarize the industry attractiveness for Alpha?
Note any additional information you would have liked to have known had you been in a live interview situation and had
the opportunity to ask
Section 2 –
Determining Industry Attractiveness
25–29Min
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Instructions to Candidate
In Section 3, you have decided based on what you learned in Section 2 that the Body Supports product
category is worth exploring because of its large market size, growth potential and that Alpha’s market
share is relatively low. You want to analyze it to see if Alpha could make improvements in this area
You should budget 5 minutes for this section
See Exhibit 5: “What does this information tell you about the Body Supports market?”
Section 3 –
Evaluating Assortment Optimization Opportunities
29–34Min
Body Supports
0%20%
40%60%
80%100%
0 10 20 30 40 50 60
Number of SKUs
Cum
mul
ativ
e %
of
Sal
es ($
)
Exhibit 5
BODY SUPPORT SKUs(as a % of sales)
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Instructions to Candidate
After reviewing Exhibit 5, you should have noticed a few important aspects of the Body Supports market:
•
There are a substantial number of SKUs that are not selling well
•
Perhaps the product assortment is too large; retailers are purchasing a more narrow line of products
•
More expensive to manage/maintain this breadth of SKUs (increased product development costs, higher likelihood of
inventory issues, fewer economies of scale)
•
Analysis of the SKUs should be performed to determine next steps
Additional observations you should have made and questions you could have asked include:
•
Why would retailers carry the SKUs at the tail end of the curve?
Integrated with other SKUs in the assortment (e.g., component parts)
Retailers require them as part of the product line
Traffic builders
Loss leaders
•
What other approaches did you think about to address this problem?
Examine whether SKUs can be eliminated (based on the filters above)
Replace lost sales from eliminated SKUs with increased sales of productive SKUs
Attempt to “fix”
low‐selling SKUs by improving product quality/design, addressing marketing/pricing or increasing
distribution channels (4 Ps)
Note any additional information you would have liked to have known had you been in a live interview situation and
had the opportunity to ask
Section 3 –
Evaluating Assortment Optimization Opportunities
34–38Min
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Instructions to Candidate
You have just encountered our client in the elevator and they requested a two‐minute synopsis of our
initial findings. Should they buy this business or not? And why?
•
Be concise—put yourself in the position of the client. What information would they want to know?
•
Be sure to use quantitative information to support your recommendation
•
Be sure to include qualitative information where required
•
Be sure to take a position—Yes or No?
Elevator Pitch
38–40Min
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12.9 17.16.7
15.8
9.39.4
9.6
9.7
20.726.3
31.8
33.08.2
8.19.2
15.031.3
30.128.2
19.8
2002 2003 2004 2005
Exhibit 1: Historical Sales
ALPHA INC. CONSOLIDATED NET REVENUE 2002–2005 BY PRODUCT CATEGORY($ Millions)
$82.4
$90.9$85.5
$93.2
Skateboards
Trampolines
In‐Line Skates
Body Supports
Canopies
22.2%
16.9%
1.3%
6.9%
2002–2005CAGR4.2%
(14.2%)
Note: Folding Chairs launched late in 3Q05 and generated >$500k in sales
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$16.7
$82.5
$105.6 $98.6
$78.1
$39.8$0.0
$23.1
$8.2 $15.2
$20.5 $15.1
$8.2
$19.5
$4.3$23.7$3.3
$22.5 $37.6
$78.1
2002 Wal‐Mart Kmart Toys'R'Us SportsSpeciality
Target 2005
ALPHA INC. CONSOLIDATED GROSS REVENUES 2002–2005 BY CHANNEL($ Millions)
Exhibit 2: Historical Sales By Channel
$82.4
$93.2
Wal‐Mart
SportsSpecialty
Kmart
Toys“R”Us
Target
Page 16 | Private and confidential—not for distribution
Trampolines(fragmented)
$115–$130 Million
Exhibit 3: Category Landscape
CATEGORY LANDSCAPE AND COMPETITIVE INTENSITY(Wholesale Sales $)
High>10%
Action Sports
Skate Boards (fragmented)$75 Million
In-Line Skates(consolidated)
$115 Million
Outdoor
Moderate0%–10%
Declining<0%
Body Supports
(consolidated)$267 Million
Canopies(consolidated)
$75–$130 Million
Folding Chairs(fragmented)
$130–$150 Million
Growth
Page 17 | Private and confidential—not for distribution
Trampolines$15.0 Million
Exhibit 4: Market Position
ALPHA SPORTING GOODS MARKET POSITION(Wholesale Sales $)
High Share>30%
Action Sports
Skate Boards$9.7 Million
In-Line Skates$15.8 Million
Outdoor
Moderate Share
10%–30%
Low share/TBD(recent entry
into thesecategories)
<10%
Body Supports$19.8 Million
Folding Chairs(TBD)
Canopies$33.0 Million
Page 18 | Private and confidential—not for distribution
Body Supports
0%20%
40%60%
80%100%
0 10 20 30 40 50 60
Number of SKUs
Cum
mul
ativ
e %
of
Sal
es ($
)BODY SUPPORTS SKUs
(as a % of sales)
Exhibit 5: SKU Analysis
Management Consulting Case Interviews
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