1. Please refer the original case description and analysis in the "Vault Guide to the Case Interview, p 79".
2. All right reserved by Joe Hao.
Situation
A customer came to ask you to enhance their bank operating efficiency. He hope you and your fellow consultants to look at the non-interest, non-personnel expense in order to cut costs.Items
Operating efficiency: A ratio of the actual output of a piece of equipment, department, or plant as compared to the planned or standard output. (Formula: actual output of a period x 100 / maximum rated output).Full value procurement (FVP): An analysis of non-interest, non-personnel expense is actually a evaluation of FVP. FVP is the degree of expense optimization on common purchase and services. The measurement of FVP is the amount of reduced expense which is used to spend on common purchase and services.
Brain Storm
There is no formal frame work to analyze the FVP. As per the definition of FVP, finding the products and services which are shared among all business functions is the point.Analysis
I would like to drill down this case by asking following questions:
1. I would like to have a general idea of this "bulge bracket". Following points are the ones I will pay more attentions:
* How is the general financial performance?
* How much is the general revenue and cost? (Well, this question seems not that professional, someone helps me?)
* How is their market? - How many branches? How many states do they cover?
* Is there any big upcoming events, like M&A, market expansion, ad promotion, investment on infrastructure?
2. After grab a general idea of back current status, I am going to analyze if the high cost is triggered by recent events, for example, M&A, market expansion or even in a lawsuit.
3. If the high cost is not triggered by current events, I would take an assumption of common purchases and service in a bank based on my common sense. (Remember, first tell your interviewee that you are going to make assumptions. Second, ask for confirmation after doing so )
4. After understanding of major business functions, purchase and products shared among all business units, suggestion can be made with reasonable explanation. Four major suggestion are listed:
* Cut off unnecessary or non-profitable branches, departments, plants, machines. Reduce the number of employees.
* Using high tech digit to cut cost. For example, company could use collective intelligence tools and cooperative system in order to save common office products and travel fee. On-line marketing and promotion would be a efficient and cheap way for bank.
* Out source some business functions, say, customer service, information center, website design, document management.
* Minimize the number of products and service providers.
1. I would like to have a general idea of this "bulge bracket". Following points are the ones I will pay more attentions:
* How is the general financial performance?
* How much is the general revenue and cost? (Well, this question seems not that professional, someone helps me?)
* How is their market? - How many branches? How many states do they cover?
* Is there any big upcoming events, like M&A, market expansion, ad promotion, investment on infrastructure?
2. After grab a general idea of back current status, I am going to analyze if the high cost is triggered by recent events, for example, M&A, market expansion or even in a lawsuit.
3. If the high cost is not triggered by current events, I would take an assumption of common purchases and service in a bank based on my common sense. (Remember, first tell your interviewee that you are going to make assumptions. Second, ask for confirmation after doing so )
4. After understanding of major business functions, purchase and products shared among all business units, suggestion can be made with reasonable explanation. Four major suggestion are listed:
* Cut off unnecessary or non-profitable branches, departments, plants, machines. Reduce the number of employees.
* Using high tech digit to cut cost. For example, company could use collective intelligence tools and cooperative system in order to save common office products and travel fee. On-line marketing and promotion would be a efficient and cheap way for bank.
* Out source some business functions, say, customer service, information center, website design, document management.
* Minimize the number of products and service providers.
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