Which Framework for Weird Case


Which framework should one use for the following case:

Case question: "Due to quality issues, a cereal manufacturer had to recall $20 million worth of products. Management does not want the 20 million loss to show on their Profit and Loss statement. They have to save the money somehow. How would you approach this? what questions would you ask?"

I have read through your slides but I dont quite get it . Please correct me if I am wrong ? should I use your profit model ? where I break down profit and cost etc..so the solution would be to find out where cost was the highest and cut cost down from there , so that the 20 million lost would not show up ?

My Reply:

I would probably start with the Profit framework and say there are two options for compensating for the unexpected expense. They could increase sales or reduce costs.

Then I'd ask, is attempting to increase sales an option in this scenario? Or is the client only want to focus on cost savings opportunities?

It's good to be thorough here and not assume too much.

The interviewer will probably steer you to costs, and I think I would either use the standard cost break down - fixed vs. variable, or I might do a little twist to the cost portion of the framework and split the costs into:

1) Recall costs
2) Other operating costs

And further break down other operating costs most likely into fixed vs. variable.

So this is just a little adjustment to the framework that I made up on the fly. And its possible the interviewer deliberates wants to focus on recall costs or deliberately wants you to assume you can't change it.

Again, it's good to be thorough and not assume one way or the other.

Additional Resources

If you found this post useful, I suggest becoming a registered member (it's free) to get access to the materials I used to pass 60 out of 61 case interviews, land 7 job offers, and end up working at McKinsey.

Members get access to 6 hours of video tutorials on case interviews, the actual frameworks I used to pass my interviews, and over 500 articles on case interviews.

To get access to these free resources, just fill out the form below:

First Name *
Email *

This form collects your name and email so that we can send you login information for the free materials you requested. If you check the Yes button we also will add you to our email list. Check out our Privacy Policy below for details on how we protect and manage your submitted data.

Read Our Privacy Policy

1 comment… add one
  • Case Cracker Jun 10, 2010, 11:48 pm

    Is it right to explore as below:

    First, understand the quality issue (reason for recall).

    Second, explore the options:

    A. Can the quality issues be fixed and the product be used as raw material?
    B. Can the product be sold in a different market where quality is not an issue

    Third, analyze the associated revenues and costs

    Finally, conclude

Cancel reply

Leave a Comment