Cracking The McKinsey Interview - An IIM Bangalore Student's McKinsey Interview Experience

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Moral - Interviewee is expected to have an in-depth understanding of all the spheres which he has worked for in the past.

GST Roller Coaster (I) – The rates game

The very next question was pertaining to GST. He asked me as to which are the four rates in which the entire GST mechanism is weaved in, and what are different products which fall in these ranges. I was further asked about my company’s products and which tax rate ranges do they fall into. The interviewer was curious to know about any changes which I may suggest to the Ministry of Finance (which looks after GST) for the product-tax range classification. I suggested some changes. Potential candidates for summers/finals may read more on this to understand the nitty-gritty.

Moral – Know your academics in depth.

GST Roller Coaster (II) - The stakes game

Then, we moved into discussing what are various stakeholders in the GST mechanism and how GST has impacted them and their businesses. I explained taking an example of my own company; where we had around 1200 suppliers and 12 distributors (our consumers) who needed to be registered under the GST mechanism. Actually, for the benefit of those who are not much aware of GST mechanism; entire indirect tax mechanism works on a chain principle. The chain is – Manufacturer, Wholesaler, Retailer and then end consumer. If anyone of the above drops out of the net (that is, does not register for GST), the entire chain breaks and the other parties also get disadvantaged.

The interviewer asked me as to how did we as a company ensure that all the parties in our chain register themselves for GST. I answered the question on a variety of fronts. For illustration purposes, I will name one – We posted letters on our letterheads, to all our suppliers, showing the benefits of registering under GST. The letter also contained assurances, which we gave to them if anything backfires on their registering under GST. We made multiple phone calls, and even some visits to convince them to come under GST Net.

Moral – Know your company well.

GST Roller Coaster (III) – The marketing mix

He asked me what changes manufacturers need to do, in the marketing mix, to address GST. I gave him various pointers – but I dwelt upon one in-depth. Consultancy is a ‘perfect package’ ballgame – you need to touch upon all, but dwell upon one. I said that earlier, giving gifts like foreign trips, valuable articles to push sales were very prevalent. But with GST setting in; producers seem to have shifted to giving ‘trade discounts’ as a method to reward performance. Potential candidates for summers/finals may read more on this to understand the nitty-gritty.

Moral – Know how a change impacts various spheres of business.

GST Roller Coaster (IV) – Facing the filing day

If you have been following the news well, there have been havocs always, on the return filing dates under the GST regime. There are various returns which need to be filed on multiple dates under the GST scenario. I was asked as to how our company managed these compliances and whether there were any problems which we faced. The major problem which every taxpayer faced was pertaining to website downtime. The website was unable to handle the traffic. I was asked what steps we took to counter this, and what steps the government needs to take.

The second question was strategically very important to answer. The interviewer was testing my knowledge about my own company as well as my ability to think through the entire GST mechanism and suggest changes in the form of a case. I answered in the form of an issue tree (the popular structure method of answering cases). One of the main points which I dwelt upon was fixing different dates of return filing for different classes of taxpayers. Classifications may be done on the tax-rate tranches which they fall into; the geographical regions; monthly taxable turnover or any other logical lever.

My knowledge about ASP and GSP (you may refer internet for these terms) was also tested, as to what role do these parties play in the GST mechanism and what alternate path government should have adopted in roles given to these parties; for smooth return filing and related compliances.

Moral – Read newspapers and have opinions!

GST Roller Coaster (V) – Changes in the GST Implementation as such

This is the concluding part of GST series. I am sure you must have been either overwhelmed or bored or both (😊) by this point of time; however, hold tight. A very important question was, what changes would I have suggested to the Ministry of Finance for implementation of GST in India. This was again a case question, where I had to first analyze the need for changes, and various alternatives available for the solution, I had also to deep dive within each alternative, judging it on the balance of pragmatism of implementation. Potential candidates for summers/finals may read more on this to understand the nitty-gritty. Just for illustration, one of the changes which I suggested was phased implementation of GST. (GST was implemented for all at a stroke, it could have been implemented in a phased manner like Ind AS)

Moral – Case solving methodology should be deeply embedded in your style!

Brownie Point

Every interviewer asks the concluding question – “Do you want to ask anything?”. Interviewees should make the maximum use of this opportunity. Attend PPTs carefully, the facts of the company shared there may help you here. I am hugely interested in public policy and so I was very intrigued about Sagarmala project in which the Indian Government had consulted McKinsey. I had learnt about this fact from the PPT. I asked the interviewer some question about this, and he was very happy to answer. Co-incidentally he happened to have led the Sagarmala study.

This struck a good chord between my interest and interviewers’ interest.

A Transcript Of A McKinsey Case Interview

He - There is a pharma company, which wants to launch an innovative product. Should it?
Me - Before I proceed with answering your question, can I ask some clarifying questions?
He - Yes.
Me - Can I know as to where the operations of the company are in? And where does it want to launch the product?
He - All over India
Me - What is the objective which the company wants to achieve?
He - Profitability, after breaking even.
Me - And one last question, can I know what is the product all about?
He - A very good question. It is a drug which cures diabetes.
Me - How it is then innovative?
He - It's an inhaler.
Me - That’s awesome. Profitability = Revenue – Costs. Do you want me to analyze revenues first?
He - Yes.
Me - Revenue is Price of the product * Product Mix * No of Units sold. Is inhaler available in one type only?
He - Yes.
Me - Then Revenue is Price*No. of units sold. Should I start estimating the number of units sold?
He - Yes.
Me - This can be done by finding out the market size and market share. Market size would be the number of diabetics present in India.
He - (Cutting me) Aren’t you missing something?
Me - Yes. I would also have to consider the future diabetics. So, there would also be a component of market growth.
He - You are right.
Me - Say 130 crore is the Indian population. Diabetes is highly prevalent in the age group of 25+. Hence, that comes around 60% of the Indian population. Out of this 60%, can I assume that at least 10% would be suffering from diabetes?
He - In absence of facts, that seems to be a reasonable assumption. What about growth?
Me - That would be around 10% every year.
He - Fair enough.
He - What about market size?
Me - We can think of capturing the entire market of insulin injections, gradually.
He - That’s right. Can you guess the present cost of insulin injection?
Me - Rs. 100 a day.
He - True that.
Me - Can you tell me the estimated price at which we would like to sell the inhaler?
He - 100
Me - But, can I know the usage frequency of inhaler and insulin injection?
He - Insulin injection is to be replaced, very frequently (say everyday). But, inhaler can be used 3-4 times atleast.
Me - That’s great. That means we can capture the entire market.
He - Can we now move upon the cost analysis?
Me - Yes, sure. Costs can be classified into two major categories – Fixed Costs and Variable Costs. Can I know as to whether we would be making any capital expenditure specifically for producing this product, or we may able to use the current land, machinery etc.?
He - We will be using the factory premises only but will have to purchase new machinery for that purpose. What will be the most important cost driver in this connection?
Me - The probability of research going successful.
He - That’s very right. What do you think about that?
Me - I would like to know the estimated probabilities of the project going successful or not.
He - What would you do these probabilities?
Me - I would find the Net Present Value of the project, at a decided discount rate. Then I will find expected NPV of the project by using the probabilities of success and failure scenarios.
He - That’s awesome. Please tell me what more data you need.
Me - The probabilities as we talked for. Then the cost of research and development. Also, the operating costs every year (i.e. Variable costs). I would also like to know the salvage value of plant and machinery if any.
(The interviewer gave me all the required data. I am not posting here, as it is not at all needed).
He - Aren’t you missing something out?
Me - Just give me a few moments to think. (After a long pause) Yes, the marketing costs.
He - Absolutely correct.
Me - The marketing costs would be a sort of fixed in the short run.
He - Here’s that cost amount. (Gives me the cost amount).
[Then I start working on the costs. NPV rule is simple – It is -> (Initial Investments – Present value of all discounted future cash flows). But, I could not complete calculations, as the interview was getting longer).
He - We could conclude the interview.
Me - Can I summarize?
He - Yes.
(I summarized)