The commercial vocabulary and conceptual models every consultant uses daily. If any case interview topic feels like a foreign language, this is where you fix that.
Every case interview is ultimately about a business. Before you can diagnose a problem, recommend a strategy, or size a market, you need to understand what a business actually is and how it creates value.
A business takes inputs (labour, materials, capital), transforms them through some process, and sells the result to customers at a price higher than the cost of those inputs. The difference is profit. Simple — but every case interview question is a variation of this.
Revenue only moves in two ways: price goes up or down, or volume goes up or down. In a case, whenever revenue is the problem, decompose it into these two drivers first.
The amount charged per unit. Can be affected by competition, customer willingness to pay, pricing strategy, discounting, and mix (the blend of products/segments sold).
The number of units sold. Driven by market size, market share, new customer acquisition, retention, and repeat purchase rate.
Costs split into two types. The distinction matters enormously in cases because the levers to fix them are completely different.
Don't change with volume — rent, salaries, depreciation, software licences. These create operating leverage: high fixed costs mean profitability is very sensitive to revenue changes.
Scale with output — raw materials, packaging, commissions, shipping. The variable cost per unit is relatively stable. Total variable cost moves with volume.
Revenue is flat, so costs must have risen. Split costs into fixed and variable. Ask: did fixed costs increase (new stores, headcount, leases)? Or did variable costs increase (supplier prices, shipping, returns rate)?
This is the structure — now you can ask specific questions to identify the root cause rather than guessing.
The Profit & Loss statement (also called the Income Statement) is the most important financial document in case interviews. Understanding its structure lets you decompose any profitability problem systematically.
| Line item | $bn | % of Revenue |
|---|---|---|
| Revenue | $32bn | 100% |
| COGS | $24bn | 75% |
| Gross Profit | $8bn | 25% |
| OpEx (stores, staff, logistics) | $6.4bn | 20% |
| EBITDA | $1.6bn | 5% |
| D&A | $0.6bn | 2% |
| Net Profit | $0.8bn | ~2.5% |
Notice the thin margins — grocery is a scale game. A 1% increase in COGS wipes out $320m in profit. This is why supermarkets obsess over procurement and supply chain efficiency.
These are the numbers consultants and interviewers reach for first. Know them cold — what they are, how to calculate them, and what they tell you about a business.
Gross Profit ÷ Revenue
Measures how much money is left after direct production costs. High gross margin = pricing power or low production cost. Watch for margin compression in profitability cases.
EBITDA ÷ Revenue
The operating efficiency of the business. Industry benchmarks: retail ~5–8%, software ~20–35%, mining ~40–50%. Comparing to the benchmark is always your first move.
Net Profit ÷ Revenue
The bottom line: what percentage of every dollar of revenue becomes profit after all expenses, interest and tax. Useful for investor comparisons.
NOPAT ÷ Invested Capital
Return on Invested Capital. Measures how efficiently a business converts invested money into profit. A business creating value must have ROIC > cost of capital (WACC).
( End ÷ Start )^(1/years) − 1
Compound Annual Growth Rate. Expresses growth as a smooth annual rate. If revenue grew from $10m to $16.1m over 5 years, CAGR = (16.1/10)^0.2 − 1 = 10%.
Fixed Costs ÷ Contribution Margin
Contribution margin = Price − Variable Cost per unit. Break-even tells you how many units must be sold before the business starts making money. Essential for market entry cases.
Memorise the order of magnitude for these sectors — they come up constantly in cases.
| Industry | Gross Margin | EBITDA Margin | Key driver |
|---|---|---|---|
| Software (SaaS) | 70–80% | 20–35% | Near-zero COGS; scale economics |
| Pharmaceuticals | 60–75% | 25–35% | IP protection, pricing power |
| Mining / Resources | 45–60% | 35–50% | Commodity price, ore grade, volume |
| Banking (NIM-based) | N/A | 30–40% | Net interest margin, cost-to-income ratio |
| Healthcare services | 35–50% | 10–20% | Labour-intensive, regulatory overhead |
| Consumer goods (FMCG) | 40–55% | 12–20% | Brand premium, supply chain efficiency |
| Retail (grocery) | 22–28% | 4–8% | Volume play, thin margins at scale |
| Airlines | 15–25% | 8–15% | Yield management, fuel, load factor |
Why are airline profits so thin while pharmaceutical profits are so fat? Industry structure. Porter's Five Forces explains the structural factors that determine how attractive — and how competitive — an industry is.
The intensity of competition between existing players. High rivalry destroys margins — competitors undercut on price, over-invest in marketing, and commoditise products. Low rivalry (e.g., oligopolies) allows pricing power.
How easy is it for a new competitor to enter? High barriers (capital requirements, regulation, brand loyalty, network effects) protect incumbents. Low barriers invite disruption.
Can customers switch to an alternative that meets the same need? Video calls substituting for business travel. Streaming substituting for cinema. High substitution risk caps pricing power.
How much leverage do customers have? Large buyers buying in bulk (supermarkets vs. food suppliers) have high power — they can demand lower prices. Fragmented buyers have little power.
How much leverage do suppliers have over the industry? If there are few suppliers of a critical input (e.g., TSMC for semiconductors), they can dictate terms. Many competing suppliers means low supplier power.
Rivalry: Oligopoly of four — implicit coordination on mortgage rates, limited price competition.
New entrant threat: Very high barriers — APRA licensing, capital requirements, trust, distribution network. Neobanks have struggled to gain scale.
Substitute threat: Moderate — mortgage brokers, fintechs, but customers are sticky and switching costs are high.
Buyer power: Low per individual customer; higher for large corporates.
Supplier power: Moderate — wholesale funding markets are competitive but banks have diversified access.
Conclusion: Five Forces analysis shows a structurally attractive industry — which explains the persistent high returns despite what looks like a commodity product.
Michael Porter's value chain is a way of breaking a business into its component activities to understand where it creates value — and where it might be losing it. Vital for operations and strategy cases.
Receiving, storing, and distributing inputs. For a retailer: supplier relationships, warehousing, inventory management. Cost driver in lean supply chains.
Transforming inputs into the final product or service. Manufacturing, assembly, software development, service delivery. Where most COGS is generated.
Getting the product to the customer — distribution, warehousing, delivery. Critical for e-commerce and FMCG. Last-mile delivery is a major cost driver.
Creating awareness and converting customers. Advertising, pricing, channel management, sales force. The revenue driver in high-margin consumer businesses.
After-sale support, warranties, maintenance. Increasingly a profit centre — consulting firms, software companies, and equipment manufacturers all monetise service.
These enable the primary activities — firm infrastructure (finance, legal, management), HR, technology development, and procurement.
Map their value chain: inbound (equipment and consumables procurement) → operations (extraction and processing) → outbound (rail/port logistics) → marketing/sales (commodity pricing is external).
Ask: which activity has seen the cost increase? Then drill into that activity: is it a volume problem (lower ore grade = more tonnes moved per unit of output) or a unit cost problem (higher input prices, lower equipment utilisation)?
The business model determines how a company captures value. Different models have radically different economics, cost structures, and failure modes. Recognising the model instantly changes what you look for in a case.
Revenue per transaction. High customer acquisition cost relative to revenue. Must continuously find new customers or drive repeat purchase. Examples: consumer electronics, automotive, FMCG.
Recurring revenue. Key metrics: MRR, churn rate, LTV, CAC. Profitable at scale because of low COGS and high retention. Front-loaded costs (acquisition) with back-loaded revenue. Examples: Salesforce, Netflix.
Takes a commission on transactions between buyers and sellers. Network effects create a winner-take-most dynamic. Key metrics: GMV, take rate, liquidity (supply/demand balance). Examples: Airbnb, Seek, REA Group.
Gives users a free service; monetises their attention to advertisers. Driven by engagement, DAUs, CPM. Zero marginal cost of distribution. Examples: Google, Meta, Nine Entertainment.
Sell the "razor" cheap (or free); sell the high-margin "blade" repeatedly. Creates lock-in and recurring revenue. Examples: printers + ink cartridges, Nespresso machines + pods, medical devices + consumables.
Revenue = people × time × rate. Utilisation rate and billing rate are the key levers. Structurally constrained by headcount. Scaling requires hiring. Examples: consulting firms, law firms, accounting firms.
| Model | Key revenue driver | Key cost driver | Failure mode |
|---|---|---|---|
| Product (B2C) | Volume × price | COGS, marketing | Volume decline, margin erosion |
| SaaS | Net revenue retention | R&D, sales & marketing | High churn, CAC > LTV |
| Marketplace | GMV × take rate | Trust, supply acquisition | Disintermediation, liquidity collapse |
| Advertising | Engagement × CPM | Content, infrastructure | Engagement drop, ad market downturn |
| Razor & Blade | Consumable attach rate | Hardware subsidy | Third-party consumable substitutes |
| Prof. Services | Utilisation × rate | Talent acquisition | Low utilisation, rate compression |
"Strategy" is the most overused word in business — and the most misunderstood. Most people confuse it with goals, tactics, or operational plans. Understanding what strategy actually is will make you sharper in cases and more credible to interviewers.
Michael Porter defines strategy as making choices about where to compete and how to win — and critically, what not to do. Strategy is about being different from competitors, not just better at doing the same things.
A.G. Lafley and Roger Martin distil strategy into two questions. Every good strategic recommendation should answer both clearly.
Which markets, segments, geographies, and channels will we compete in — and which will we deliberately ignore? Choices: customer segment, geography, product category, price point, distribution channel.
What will be our source of competitive advantage in the chosen arena? Choices: lowest cost, best product, strongest brand, fastest service, most powerful network, proprietary technology or data.
Porter argues there are only three sustainable competitive positions. Trying to occupy more than one results in being "stuck in the middle" — beaten on price by cost leaders and on value by differentiators.
Produce at the lowest cost in the industry and either pass savings to customers (lower price) or capture the difference as profit. Requires scale, process discipline, and relentless cost management. Examples: Kmart, Ryanair, Aldi.
Offer something customers value enough to pay a premium for — brand, quality, design, service, speed. Margins are high; the risk is that the premium erodes as competitors close the gap. Examples: Apple, McKinsey, Qantas Business.
Target a narrow segment and serve it better than anyone else — through cost focus or differentiation focus. The segment must be large enough to be profitable but distinct enough that broad-market players ignore it.
| Phase | What happens | Key tools |
|---|---|---|
| 1. Diagnose | Understand the current situation — what's working, what isn't, and why | Five Forces, value chain, benchmarking |
| 2. Define the problem | Sharpen the strategic question — what decision actually needs to be made? | Issue tree, MECE decomposition |
| 3. Generate options | Identify the realistic strategic choices available | Ansoff matrix, scenario planning |
| 4. Evaluate & choose | Assess each option against criteria — fit, feasibility, risk, return | Decision criteria matrix, financial modelling |
| 5. Build the plan | Define the implementation roadmap — what, who, by when | Workplan, business case, initiative tracking |
Where to play: Australian SMEs with $5–50M revenue in construction, professional services, and retail — segments underserved by the Big Four.
How to win: Faster credit decisions (48 hours vs. 3 weeks) enabled by proprietary cash-flow underwriting models using transaction data we already hold.
The strategy: Focus differentiation — we won't compete across all SME segments, and we won't win on price. We'll win on speed and approval rates for businesses the big banks find too complex to assess quickly.
Frameworks are tools, not answers. The mistake most candidates make is reciting a framework at the start of a case rather than using it to structure their thinking. This section covers the most important frameworks — and how to actually apply them.
The most important structuring skill in consulting. MECE stands for Mutually Exclusive, Collectively Exhaustive — your categories don't overlap and together cover everything.
MECE split: Profit = Revenue − Costs. These two are mutually exclusive and collectively exhaustive — everything that affects profit sits in one of these buckets.
Then drill: Revenue = Price × Volume. Costs = Fixed + Variable. Each branch is also MECE. You've built an issue tree — now you identify which branch holds the problem before diving in. This stops you fishing randomly through the case.
The most used framework in case interviews. Memorise this cold.
Use this when a client is considering entering a new market, launching a new product, or expanding geographically. Structure your answer around these four questions in order.
Size, growth rate, profitability of incumbents, structural dynamics (Five Forces). A market can be large and still unattractive if margins are structurally thin.
Do we have the capabilities, assets, or advantages to compete? What would our position be against incumbents? Are there regulatory or capital barriers we can't clear?
Build (organic), buy (acquisition), or partner (JV, licensing)? What's the speed, cost, and risk of each? Where's our beachhead — which segment do we crack first?
NPV of the investment, payback period, ROIC vs. hurdle rate. What assumptions drive the case? What does the downside look like?
A versatile diagnostic framework for understanding a business's commercial position. Works well for growth strategy and competitive positioning cases.
Who are they? What do they need? How are needs changing? What drives purchase decisions — price, quality, convenience, brand? How segmented is the market?
What are our strengths and weaknesses? Where is our competitive advantage? What's our cost structure, revenue mix, and key strategic assets?
Who are the key players? What are their strategies, market shares, and cost positions? Is the landscape stable or shifting? Who are the emerging threats?
Suppliers, distributors, partners, regulators. Who in the ecosystem do we depend on? Where is the supply chain vulnerable? Where are the partnership opportunities?
Used to analyse a portfolio of business units or products. The two axes are market growth rate (industry attractiveness) and relative market share (competitive strength).
| Quadrant | Growth | Market Share | Strategic implication |
|---|---|---|---|
| ⭐ Stars | High | High | Invest to maintain leadership; becomes a cash cow as growth slows |
| 💰 Cash Cows | Low | High | Milk for cash; use proceeds to fund stars and selected question marks |
| ❓ Question Marks | High | Low | Invest selectively to build share — or divest before they drain cash |
| 🐕 Dogs | Low | Low | Harvest remaining cash or divest; rarely worth investing in |
Say what you need to understand, not which framework you're using. "I need to understand the revenue picture before costs" — not "I'll apply the profitability framework."
No case perfectly fits a textbook structure. Use the framework as scaffolding, drop irrelevant branches quickly, and add branches the framework doesn't cover if the case needs them.
After structuring, tell the interviewer where you want to start and why. "I'd like to look at pricing first — the brief mentioned a price change last year." This shows hypothesis-led thinking, not box-filling.
At the end of each section, say what it means. "Revenue is down 12% — all volume, with price flat — which suggests a market share problem rather than pricing pressure." Insight, not summary.
Start with a profitability case — the concepts and frameworks you just learned are exactly what you'll need.