the price the same.
Interviewer: Okay, good. Give me two long-term, revenue-based ideas and two long-term, cost-based ideas.
Student: Can I take a moment to make a couple of notes?
Interviewer: Certainly.
Student: [30 seconds later] ...Okay. On the revenue-based side, the first thing I’d do is come up with a new bike that is geared not only toward women but also to younger men. This will give us something besides garb to market to women. I’d also look to see if we can acquire a scooter company. We couldn’t put the Harley name on it, but we could take advantage of the fastest-growing segments of the market, women and scooters. Besides, there will be a number of synergies we would be able to take advantage of. On the cost side, we’re concerned about the price of steel. We can buy some steel futures to hedge against a steel increase. We could stockpile some steel at the current price, and because we are developing a new bike, we can make more parts from composites instead of steel. We could modernize the plant with new technologies and maybe have some parts made overseas.
Interviewer: Good. Why don’t you take a moment and summarize the case for me.
Student: Our client is Harley-Davidson. Its stock dropped around 10 percent on news of declining profits. We looked at external factors first and determined that it was more of a Harley problem rather than an industry problem. Harley is out of step with the two fast-growing segments of the industry, women and scooters. So we came up with some short-term and long-term strategies on both the revenue and cost sides. An example of a short-term, revenue-based strategy is offering low financing to customers. On the cost side, we could refinance our debt. In the long term we could produce a new bike geared toward women and younger men, and acquire a scooter maker. Also on the cost side, we could hedge steel prices and have certain new parts made out of composite instead of steel. If Harley follows these strategies as well as some of the others we talked about, it should be on its way to higher profits in 24 to 36 months.
Analysis: She came on very strong at the end. The turning point was when she defended her decision to keep the price the same. That gave her additional confidence, and it showed through the rest of the interview.
been advertising the fact that a key ingredient in Coors beer is Rocky Mountain spring water. The CEO calls you in to his office and says that Coors is considering entering the bottled water market. I want you to analyze the market, identify any key issues, and make a recommendation.
Student: So our client is Coors and it’s thinking of entering the bottled water industry. Besides conducting an industry analysis and identifying major issues, are there any other objectives I should be concerned with?
Interviewer: Yes. The CEO told the board of directors that he would increase revenues by 50 percent in five years or he would resign.
Analysis: It was important that the student asked about other objective, or he would never have learned about the needed 50 percent increase in revenues. If he hadn’t asked about this, the interviewer would have had to feed him the information during the case, and he would have lost points.
Student: I’m assuming that’s overall company revenues. So my initial hypothesis is that by entering the bottled water industry, Coors will increase overall company revenues by 50 percent. I just want to take a moment to draw out my notes.
Analysis: Because this is an interviewee-driven case, he put forth a hypothesis within the first five minutes of the case. He also took time to lay out his structure.
Once he’s done, he turns his notes toward the interviewer and walks her through them.
Student: First I’d like to look at Coors, then the water market and finally the best ways for Coors to enter the market. And if we decide that Coors shouldn’t enter the market, I’d like to come up with an alternative plan, which will help the company reach its goal of increasing revenues by 50 percent.
I’d like to start by looking at the company. Why does it want to enter this market?
If it needs to increase revenues by 50 percent, I need to know what its revenues are today. I’d like to know what its product line looks like and get an understanding of its production process. Is bottling beer similar to bottling water?
Branding is also important. Will it call this Coors water or will they use another name? Next is distribution. I’ll assume that it currently has beer distributors all around the United States; will it use those same distributors to distribute their water? Will the customer segmentation be similar? I’m betting a lot more people drink water than beer. And finally what constitutes success in the mind of the client? What percentage of the bottled water market does Coors expect to capture in five years?
Next, I’d like to look at the bottled water industry. What were its revenues last year and how has it been trending over the last three years? Do we have any
forecasts? I’d like to know who the major players are and what market share they have? How do their products differ from Coors‘? Are there any other companies that sell Rocky Mountain spring water? Then the last thing I’d like to know about the industry is whether there are any barriers to entry or barriers to exit.
Finally, I’d like to think about how best to enter the market. Coors can start from scratch and grow organically; it can buy its way in or it can do a joint venture. I’d like to look at the advantages and disadvantages of each.
Analysis: He did a great job. By turning his notes toward the interviewer he brought her into the case and made her feel more like a client and less like an interviewer.
The student started off analyzing the client company. Many students make the mistake of starting off with the water industry. It’s important to understand why Coors wants to enter. He also made a pretty exhaustive list of company issues that he wanted to investigate, particularly what constitutes success in the eyes of the client. It’s critical to know this, so you have a goal and can reality-test the client’s response.
Next he asked for all the important industry information. And finally he laid out options on how to best enter the market.
Interviewer: Sounds good. Where do you want to start?
Student: Why enter the water market?
Interviewer: The CEO has a goal of increasing company sales by 50 percent in five years. He will never make it with beer alone. Assuming the beer market to be a zero-sum market, beer sales have been flat and are forecasted to remain that way for the next five years. Any new product would only cannibalize sales from an existing product.
Student: What were its revenues last year?
Interviewer: $5.2 billion.
Student: So it would have to increase its revenues by [quick calculation] $2.6 billion for a total of $7.8 billion.
Interviewer: That’s right.
Student: I know it produces Coors and Coors Light; what other products does it have?
Interviewer: Besides those two, it has Keystone and Keystone Light. That’s the beer you buy when you have only $1.50 left to your name. It also produces Killian’s Irish Red and Blue Moon.
Student: No non-beer products?
Interviewer: Assume no. You asked about brand and distribution channels and we’ll talk about them in a little bit. Who do you think drinks Coors?
Student: Blue-collar beer drinkers, construction workers, college students, and sports fans, mostly male.
Interviewer: Okay. In your notes you also asked what percentage of the water market did Coors expect to get in five years. It expects 10 percent. What else do you want to know?
Student: I want to know about the bottled water industry, growth trends, major players, market share, product differentiation, and barriers.
Interviewer: Last year, the bottled water industry did $11 billion in revenues. It’s forecasted to grow 5 percent a year, every year for the next five years. Flat water makes up 96 percent of the market compared with sparkling water’s 4 percent.
The three major players are Coke, Pepsi, and Nestlé. Assume that together they share 60 percent of the overall water market. There are about a dozen other players, some international and some regional. Some of the regional players produce private-label water as well as producing under their own names. They make up 36 percent of the market. The final 4 percent is the sparkling water. The major players there are San Pellegrino, Perrier, Voss and Poland Spring Sparkling.
Also, assume that there are three levels of water. The premium level consists of brands like Fiji, Evian, and San Pellegrino, to name a few. The big three, Coke, Pepsi, and Nestlé, dominate the national mid-level water market. This is where Coors wants to enter, at mid-level. The lower tier is made up of regional waters, which are usually priced lower. What’s next?
Student: I just want to take a minute and figure something out. Coors needs $2.6 billion in five years. It thinks it can take 10 percent of the market in five years. Is 10 percent of the bottled water market greater than or equal to $2.6 billion? If the market was $11 billion last year and it is growing 5 percent a year for the next five years, we need to figure out what the water revenues are five years from now.
[The student writes down A = 11b (1+.05)5, but then thinks better of it.]
Student: If the industry is growing at a rate of 5 percent a year for the next five years, that’s 25 percent. However, we need to take compounding into consideration. So I know that it’s going to be more than 25 percent but less than 30 percent. So my best guess is around 28 percent. So $11 billion times 1.28 equals ... [writes out the calculation] around $14 billion. Ten percent of that is $1.4 billion, so that’s going to be short by $1.2 billion.
Analysis: He almost made the math more complicated than it needed to be.
Interviewers make you do math without a calculator for two main reasons: to see how you think, and to see if you think before you speak. No interviewer would want to sit there and watch that student struggle with the exponents or do the same calculation over and over again if he had decided to take 5 percent of 11 billion, then 5 percent of that number, and so on.
The other concern would be if he had trouble with the zeros and came up with
$140 billion instead of $14 billion; $140 billion doesn’t make any sense and even if he caught his mistake right after he had said it, you can’t un-ring a bell like that.
You’re not thinking before you speak and if you do that in an interview, what are you going to do in front of a client? I can’t trust you. And if I can’t trust you, I’m not going to hire you.
Interviewer: What percentage of the bottled water market would we need to get in order to reach the goal of $2.6 billion?
Student: Well, 10 percent is 1.4, and 20 percent is 2.8, so a little less than 20 percent. Around 18 percent.
Interviewer: Good. There is no way we’re getting 18 percent of the bottled water market in five years. We’ll be lucky to get 10 percent. What’s the quickest way to increase market share?
Student: Lower prices.
Interviewer: What’s the quickest way to increase market share?
Student: A marketing campaign?
Interviewer: What’s the quickest way to increase market share?
Student: An acquisition?
Analysis: He lost his confidence. The interviewer asked him a question, didn’t like the answer, and asked him the same question two more times. While the student was confident about his first answer, he stumbled when he was asked again and again. If you take this whole case interviewing process and boil it down, the two most important things are structure and confidence. Usually one follows the other.
Interviewer: Good. Say that Coors is going to buy a regional player called Bulldog Water, out of Athens, Georgia, with 4 percent national market share. Now, Bulldog’s water source is Athens tap water, and Coors’ water is Rocky Mountain spring water. Two very different water sources about 2,000 miles apart. So Coors will run two separate companies, which is fine. Coors will be in the middle tier and Bulldog in the lower tier. Besides the increase in market share, what are two
other advantages to buying Bulldog?
Student: Expertise. Coors is new to the water ...
Interviewer: Good. What else?
Student: Production facilities ...
Interviewer: Coors isn’t going to ship water by tanker 2,000 miles to save on production costs. What else?
Student: Distribution channels. They ...
Interviewer: Good. Coors can piggyback on Bulldog’s distribution channels.
Analysis: The student handled that well. He was cut off in the middle of an answer and was able to come up with additional answers.
Interviewer: Before, you asked me about branding. Should Coors call its water Coors Water or something else?
Student: What will be the market acceptance of a beer company selling water?
That’s the question. Is the Coors name too closely associated with beer? I’m betting that it is. Water is seen as pure and healthy, beer is not. I don’t think mothers would like to see their kids drinking Coors. Besides that, Coke, which is one of the best-known brands in the world, didn’t call its product Coke Water;
they called it Dasani.
Interviewer: Coors ships beer to independent beer distributors all over the U.S.;
should they use their beer distributors to distribute water?
Student: Yes. It will save on shipping and the cost of building a new network.
Interviewer: Let me tell you why you’re wrong. Water is sold in three times as many places as beer. You can’t buy beer in a vending machine; you can‘t buy it at McDonald’s and you can’t buy it at school. If Coors wants 10 percent of the water market, it has to have its product in every possible venue. Besides, I don’t want a beer truck pulling up in front of an elementary school and unloading water. It sends a bad message. And my last point is that if Coors is interested in increasing revenues, why are you focusing on costs?
Student: Those are all valid points. I think you’re right. They should build a new network of distributors.
Analysis: Interviewers will often take the other side of a question to see whether you can defend your answer without becoming defensive, and then come back with a persuasive argument. In this case the student was wrong and he knew it. There is no shame in admitting you are wrong. It is better to admit it than to come back with a weak case just because you don’t want to admit you are wrong.
Interviewer: Okay, so say Coors calls its water Rocky Mountain Spring Water; it builds a new network of distributors, it comes out with a national marketing campaign, maybe even gets a celebrity spokesperson and offers an introductory low price. How will Coke respond, or will it?
Student: To quote Churchill, I think Coke will try to strangle the baby in the cradle. Coors is too much of a ...
Interviewer: Wait a minute. You’re comparing Coors to fascism?
Student: The quote was about Bolshevism: Strangle Bolshevism in its cradle.
Interviewer: Are you sure? I was a history major at Williams.
Student: Positive. Coke will respond, and quickly. It won’t want Coors to get a foothold in the market and start stealing market share.
Analysis: The case almost went off track there, but the student kept the focus. It would have been easy to go off on a tangent about Churchill or World War II, but he took control and steered it back.
Interviewer: Say Coors does all that. We are still $1.2 billion short. How are we going to close the gap? And keep in mind that we already spent our allowance and can’t buy another company, and the margins aren’t there for exporting.
Student: [Thinks for a minute.] Coors spent a lot of time, effort, and money building a new brand. They spent a lot of time, effort, and money building new distribution channels. And they did it all for one bottle of water. They’ve done all the hard part. So now they increase their product mix. They could add flavored waters, but also Rocky Mountain Spring lemonade, iced tea, green tea, and maybe sports drinks. Not only under the Rocky Mountain label, but under the Bulldog label as well.
Interviewer: Excellent. Let’s say we did all that and we figure that we will be $50 million short of our goal. You have a meeting with the CEO. What are you going to tell him?
Student: I’d like to take a moment. Because if I go in now, I’m going to have to tell him that we’ll be short of his $2.6 billion revenue increase. I’d like to think about how I can go in and tell him yes to everything. First, the economy will be in better shape five years from now. So most of that $50 million will come from increased beer sales. Second, we can look at other alcoholic products, such as vodka, tequila, or alcapops – like Mike’s Hard Lemonade. I’d also like to point out that the original assignment was to analyze the bottled water industry and determine whether it was a good idea for Coors to enter. The water takes us 95 percent of the way there. Do we throw the baby out with the bathwater even if we
are $50 million short?
Interviewer: So what’s your recommendation?
Student: Yes, we enter the water market. We do it under a new brand, Rocky Mountain Spring; we do it by acquiring Bulldog Water for its market share, expertise, and distribution channels. We build a new network of distributors and then introduce additional products to the mix, such as lemonade and iced tea.
Interviewer: Good.
Analysis: He came on strong in the end. The interview was starting to get away from him, and he was just answering questions instead of driving the question. He was creative in coming up with additional products for both of the water companies. But what clinched it was the fact that he was determined to go in to the meeting with a “yes” and a way to get there. Most students would have left it at “It looks promising but we’re going to be $50 million short.”
In addition, he stated his recommendation first, then backed it up with a plan. He got beat up along the way, but he kept his cool and regained control of the interview. Still, he didn’t enumerate the risks associated with his recommendation. It is important to state not only the next steps, but also the associated risks.