PROFIT = REVENUE - COSTS

REVENUE:
  Revenue = Price x Quantity
  |
  |-- Price
  |   |-- Has pricing changed?
  |   |-- Competitive pricing pressure?
  |   |-- Product mix shift?
  |
  |-- Quantity
      |-- Customer count changed?
      |-- Purchase frequency changed?
      |-- Market size changed?
      |-- Market share changed?

COSTS:
  |-- Fixed Costs
  |   |-- Rent, salaries, depreciation
  |   |-- Have fixed costs increased?
  |   |-- Capacity utilization?
  |
  |-- Variable Costs
      |-- COGS, materials, labor per unit
      |-- Input cost changes?
      |-- Efficiency changes?
      |-- Supplier issues?

COMPANY:
  - Core competencies and capabilities
  - Financial position and resources
  - Current product/service portfolio
  - Brand strength and reputation
  - Operational efficiency

CUSTOMERS:
  - Market size and growth
  - Customer segments and needs
  - Purchase behavior and decision factors
  - Price sensitivity
  - Unmet needs and pain points

COMPETITORS:
  - Key players and market shares
  - Competitive advantages/disadvantages
  - Barriers to entry
  - Substitute products
  - Likely competitive response

PRODUCT:
  - Features, quality, design
  - Brand positioning
  - Product line breadth
  - Differentiation

PRICE:
  - Pricing strategy (premium, penetration, skimming)
  - Price relative to competitors
  - Price elasticity
  - Discounting approach

PLACE (Distribution):
  - Channels (direct, retail, online, wholesale)
  - Geographic coverage
  - Channel conflicts
  - Distribution costs

PROMOTION:
  - Marketing channels and spend
  - Customer acquisition cost
  - Brand awareness
  - Sales force effectiveness

PRIMARY ACTIVITIES:
  Inbound Logistics --> Operations --> Outbound Logistics --> Marketing & Sales --> Service

SUPPORT ACTIVITIES:
  - Firm Infrastructure (management, planning, finance)
  - Human Resource Management (recruiting, training, retention)
  - Technology Development (R&D, process improvement)
  - Procurement (sourcing, vendor management)

ANALYSIS APPROACH:
  1. Map each activity in the chain
  2. Identify cost drivers per activity
  3. Identify value drivers per activity
  4. Compare to competitors
  5. Find optimization opportunities

STEP 1: CLARIFY (1-2 minutes)
  - Restate the problem in your own words
  - Ask clarifying questions
  - Confirm the objective
  - Identify any constraints
  Questions to ask:
    "Just to make sure I understand, the client is..."
    "When you say profitability, do you mean operating profit or net profit?"
    "Is there a specific timeframe we're looking at?"
    "Are there any options that are off the table?"

STEP 2: STRUCTURE (2-3 minutes)
  - Lay out your framework
  - Explain your approach
  - Be MECE (Mutually Exclusive, Collectively Exhaustive)
  - Prioritize branches
  "I'd like to break this problem into three areas..."
  "Let me start with what I think is the highest-impact area..."

STEP 3: ANALYZE (15-20 minutes)
  - Work through each branch
  - Ask for data at each step
  - Do math carefully and out loud
  - Test hypotheses
  - Pivot if a branch is unproductive
  "Based on this data, it seems like... Let me test that by looking at..."

STEP 4: SYNTHESIZE (1-2 minutes)
  - State your recommendation clearly
  - Support with 2-3 key reasons
  - Acknowledge risks
  - Suggest next steps
  "Based on my analysis, I recommend X because of three reasons..."

MUTUALLY EXCLUSIVE:
  - No overlap between categories
  - Each item belongs to exactly one bucket
  - Bad: "Online sales" and "Sales to millennials" (overlap)
  - Good: "Online sales" and "In-store sales" (no overlap)

COLLECTIVELY EXHAUSTIVE:
  - All possibilities are covered
  - Nothing falls through the cracks
  - Bad: "Domestic" and "European" (misses Asia, etc.)
  - Good: "Domestic" and "International"

MECE STRUCTURES:
  - Internal vs External
  - Revenue vs Costs
  - Short-term vs Long-term
  - Qualitative vs Quantitative
  - Supply vs Demand
  - Organic vs Inorganic growth

EXAMPLE: Estimate annual revenue of coffee shops in Chicago

Total US population:               330M
Chicago metro population:           9.5M (2.9% of US)
US coffee shop market:              $48B annual
Chicago share (population-weighted): $48B x 2.9% = ~$1.4B

Adjustment factors:
  - Higher urbanization (more coffee shops per capita): +15%
  - Cold weather (more hot beverage consumption): +10%
Adjusted estimate: $1.4B x 1.25 = ~$1.75B

EXAMPLE: Same question, bottom-up

Number of coffee shops in Chicago:  ~3,000 (estimate)
Average transactions per day:        200
Average ticket size:                 $5.50
Operating days per year:             360

Revenue per shop: 200 x $5.50 x 360 = $396,000
Total market: 3,000 x $396,000 = ~$1.2B

Sanity check: Within range of top-down estimate (~$1.2B vs ~$1.75B)

EXAMPLE: Estimate number of gas stations in the US

Known: ~280M registered vehicles in the US
Assume: Average vehicle fills up once per week
Weekly fill-ups nationwide: 280M
Average station serves: ~200 fill-ups per day = 1,400/week
Stations needed: 280M / 1,400 = ~200,000

Actual: ~150,000 (reasonable - some stations are larger)

ESSENTIAL CALCULATIONS:

Percentages:
  10% of X = X / 10
  5% of X = X / 20
  15% = 10% + 5%
  33% = roughly X / 3
  25% = X / 4

Growth:
  Rule of 72: Years to double = 72 / growth rate
  10% growth for 7 years ≈ doubles

Large numbers:
  Million = 10^6
  Billion = 10^9 (1,000 millions)
  Trillion = 10^12 (1,000 billions)

Quick multiplication:
  X x 1.1 = X + 10% of X
  X x 0.9 = X - 10% of X
  Break complex multiplication: 47 x 8 = 50x8 - 3x8 = 400-24 = 376

COMMON BENCHMARKS:
  US population: ~330M
  US households: ~130M
  Global population: ~8B
  US GDP: ~$28T
  Average US household income: ~$75K
  US life expectancy: ~78 years

STRUCTURE:
  1. Form an initial hypothesis based on available information
  2. Lay out what data you would need to test it
  3. Ask for that data
  4. Confirm or reject hypothesis
  5. Refine and test next hypothesis

EXAMPLE:
  "Based on the fact that revenues are flat but profits are down,
   my initial hypothesis is that costs have increased.
   To test this, I'd like to look at the cost breakdown
   over the last 3 years. Could you share that data?"

RECOMMENDATION (top line)
|
|-- REASON 1
|   |-- Supporting data
|   |-- Supporting data
|
|-- REASON 2
|   |-- Supporting data
|   |-- Supporting data
|
|-- REASON 3
    |-- Supporting data
    |-- Supporting data

EXAMPLE SYNTHESIS:
  "I recommend the client enter the Indian market through a joint venture
   for three reasons:
   First, the market is growing at 12% annually with limited competition.
   Second, regulatory requirements make a local partner essential.
   Third, the estimated ROI of 25% over 5 years exceeds the client's hurdle rate."

SETUP:
Your client is [Company], a [industry] company with [revenue].
Over the past [timeframe], profits have declined by [X%].
The CEO has asked you to identify the cause and recommend a path forward.

KEY DATA TO REVEAL (when asked):
  Revenue: [trend - flat/up/down]
  Price: [changed/stable]
  Volume: [changed/stable]
  Fixed costs: [trend]
  Variable costs: [trend]
  Market growth: [trend]
  Competitor actions: [any changes]

EXPECTED ANALYSIS PATH:
  1. Revenue vs Cost decomposition
  2. Drill into the changing driver
  3. Identify root cause
  4. Quantify impact
  5. Recommend solution with expected impact

SAMPLE SOLUTION:
  Root cause: [e.g., raw material cost increase of 15%]
  Impact: [$XM annually]
  Recommendation: [e.g., renegotiate supplier contracts + pass 5% to customers]
  Expected recovery: [80% of lost profit within 12 months]

SETUP:
Your client is [Company], a [industry] leader in [home market].
They are considering entering [target market].
Should they enter, and if so, how?

FRAMEWORK:
  1. Market attractiveness (size, growth, profitability)
  2. Competitive landscape (players, barriers, differentiation)
  3. Client capabilities (fit, gaps, investment needed)
  4. Entry mode (organic, JV, acquisition)
  5. Financial analysis (investment, timeline, ROI)
  6. Risks and mitigation

ENTRY MODE COMPARISON:
  | Mode | Speed | Risk | Control | Investment |
  |------|-------|------|---------|------------|
  | Organic (greenfield) | Slow | Medium | Full | Medium |
  | Joint Venture | Medium | Medium | Shared | Medium |
  | Acquisition | Fast | High | Full | High |
  | Licensing/Franchise | Fast | Low | Low | Low |
  | Partnership | Medium | Low | Low | Low |

DEBRIEF QUESTIONS:
  1. Did I clarify the problem before diving in?
  2. Was my structure MECE and prioritized?
  3. Did I ask for data or make assumptions? (Asking is better)
  4. Were my calculations accurate and narrated?
  5. Did I synthesize with a clear recommendation?
  6. Could I articulate 2-3 supporting reasons?
  7. Did I acknowledge risks and next steps?
  8. How was my time management?

FOCUS: Framework mastery and basic math
  - Practice profitability decomposition trees
  - Simple market sizing (top-down only)
  - Mental math drills (percentages, multiplication)
  - Framework selection for different case types
  - Practice stating structures out loud

FOCUS: Analytical depth and hypothesis testing
  - Multi-step profitability cases
  - Market entry with competitive dynamics
  - Bottom-up and analogy market sizing
  - Graph and chart interpretation
  - Pivoting when initial hypothesis fails
  - Interviewer-led vs candidate-led formats

FOCUS: Business judgment and creativity
  - Non-standard cases (public sector, nonprofit, operations)
  - M&A cases with synergy valuation
  - Cases requiring 2+ frameworks combined
  - Time-pressured mini-cases
  - Behavioral integration ("Tell me about a time...")
  - Estimation + strategy combos
  - Unconventional structures (not from textbook)

LEADERSHIP:
  "Tell me about a time you led a team through a difficult situation."

PROBLEM SOLVING:
  "Describe a complex problem you solved. What was your approach?"

TEAMWORK:
  "Give an example of a time you worked with someone difficult."

IMPACT:
  "What is your most significant professional achievement?"

FRAMEWORK FOR ANSWERS (STAR):
  Situation: Set the context (2 sentences)
  Task: What was your responsibility (1 sentence)
  Action: What you specifically did (3-4 sentences, use "I" not "we")
  Result: Quantified outcome (1-2 sentences)

WEEKLY PLAN (8-week preparation):

Week 1-2: Foundation
  - 2 profitability cases
  - 2 market sizing exercises
  - Daily mental math (15 min)
  - Read "Case in Point" or equivalent

Week 3-4: Core Cases
  - 3 cases per week (mix of types)
  - Start practicing with a partner
  - Focus on structure and math
  - Begin behavioral prep

Week 5-6: Advanced Practice
  - 4 cases per week with partner
  - Include M&A and non-standard cases
  - Timed practice (30-min cases)
  - Mock interviews with consultants

Week 7-8: Polish and Peak
  - 3 partner cases per week
  - Full mock interviews (fit + case)
  - Review weak areas
  - Rest day before each interview