A growth strategy or revenue growth case interview is a common type of case you’ll see in your first round and second round consulting interviews. This type of case interview may look something like the following:
Your client, Coca-Cola, is looking for new opportunities to grow after years of flat growth. They have hired you to determine the best way to grow.
In this article, we’ll cover a comprehensive framework that you can use to structure the different ways a company can grow. We’ll also show you the five steps you should take to solve any growth strategy or revenue growth case.
Growth Strategy Case Interview Framework
You can think about growth through two major categories, organic growth and inorganic growth.
The most common type of growth that companies pursue is organic growth, which is growth driven by expanding output or engaging in internal activities. In other words, the company is growing through its own capabilities and efforts.
Inorganic growth, on the other hand, is growth driven by acquisitions, joint ventures, or partnerships.
These two categories form the foundation of our growth strategy case framework.
Organic growth can be segmented into growth through existing revenue sources and growth through new revenue sources.
Growth through existing revenue sources
Growth through existing revenue sources is either driven by an increase in quantity of units sold or by an increase in average price per unit sold.
To increase the quantity of units sold, a company can:
- Improve their product
- Decrease prices
- Sell through new distribution channels
- Target new customer segments
- Expand into new geographies
- Invest more in marketing and sales
To increase the average price per unit sold, the company can:
- Increase prices for their products
- Focus on selling higher priced products
Remember that changing prices will impact quantity of units sold, so it is important to look at the net effect price changes have on revenue.
Growth through new revenue sources
To drive growth through new revenue sources, a company can:
- Launch new products
- Launch new services
Inorganic growth can be segmented into three categories:
- Joint ventures
The first way that a company can grow inorganically is by acquiring another company. This gives the acquiring company all of the revenue that the acquisition target generates. In addition, there may be revenue synergies that the acquiring company can realize.
Acquiring a company gives the acquiring company access to the acquisition target’s distribution channels, customers, and products. The acquiring company may be able to increase revenues by cross-selling products, up-selling products, or bundling products together.
The advantages of making an acquisition are that the company increases its revenues immediately. They also have full control over how they want to manage and operate the acquired company.
The main disadvantages are that acquisitions are expensive and there could be difficulties fully integrating the acquired company.
In a joint venture, two or more companies enter a business arrangement in which they pool together resources and share risk in accomplishing a particular task. Each company in the joint venture is responsible for profits, losses, and costs associated with the project.
Joint ventures are beneficial to companies because they can share resources, expertise, and can decrease costs due to scale. Additionally, joint ventures are much cheaper than acquisitions.
A disadvantage of a joint venture is that it will take time to generate revenue. Also, the company does not have full control over the operations of its partners.
A partnership is an association between two or more companies that provides some kind of benefit to each partner. This is slightly different from a joint venture because in a partnership, companies do not necessarily have to combine resources or efforts. They just need to be associated with each other.
One advantage of a partnership is that it is most often cheaper than a joint venture since resources don’t necessarily need to be contributed. Also, all partners get the benefit from the brand names and customer access of their partners.
Similar to joint ventures, one disadvantage of a partnership is that it takes time to generate revenue. Also, companies do not have full control over their partners’ operations.
5 Steps to Solving a Growth Strategy Case Interview
Follow these five steps and you’ll be able to solve any growth strategy or revenue growth case that you get.
1. Understand what the company is trying to grow
The first step to solve any growth strategy case is to identify what the company is trying to grow. Are they trying to grow revenues, profits, number of customers, or something else?
Growing revenues versus growing profits can lead to very different strategies. Understanding what the company is trying to grow will help you determine what growth strategies will be most effective.
Interviewer: Your client, Coca-Cola, is looking for new opportunities to grow after years of flat growth. They have hired you to determine the best way to grow.
You: Is Coca-Cola looking to grow revenues, profits, or something else?
Interviewer: They are looking to grow revenues.
2. Quantify the specific target or goal
Next, you want to quantify the goal or target that the company is aiming for. For example, if the company wants to grow revenue, how much of a revenue increase are they hoping for? In what time period are they trying to accomplish this by?
You: How much is Coca-Cola looking to grow revenue by? And in what time period are they looking to achieve this level of growth?
Interviewer: They are looking to grow revenues by $1B over the next three years.
3. Look at potential organic growth opportunities
Once you have quantified the company’s target or goal, you can walk the interviewer through your growth strategy framework. You’ll most likely want to start by looking at organic growth opportunities first because this type of growth is more sustainable than inorganic growth.
You: To determine the best opportunities to achieve a $1B increase in revenues over the next three years, I’d like to use the following framework.
First, I’d like to consider potential organic growth opportunities. This includes growth through existing revenue sources and growth through new revenue sources.
Next, I’d like to look into potential inorganic growth opportunities. Is there a particular acquisition, joint venture, or partnership that would make sense for Coca-Cola to pursue?
Interviewer: That sounds like a great plan. How should we proceed?
You: Let’s look at organic growth opportunities first. Since Coca-Cola is a mature company that has seen flat growth, I am guessing that there won’t be significant opportunities to increase revenues from existing revenue sources.
Interviewer: That seems like a reasonable assumption.
You: Okay, so let’s look at potential new revenue sources. Are there particular drink beverage markets that Coca-Cola has no presence in that they could expand into?
Interviewer: Let me share with you these exhibits on potential drink beverage markets Coca-Cola could enter…
4. Look at potential inorganic growth opportunities
After you have thoroughly investigated the organic growth opportunities, move onto looking into inorganic growth opportunities.
Consider whether an acquisition, joint venture, or partnership would be most appropriate given your company’s situation. Each of these methods of inorganic growth have their advantages and disadvantages.
You: After looking at organic growth opportunities, we determined that Coca-Cola could increase revenues by $600M by entering three niche drink beverage markets. However, we are still $400M in revenue short of our goal. I’d like to look into inorganic growth opportunities next.
Interviewer: That makes sense. There are a few acquisition targets Coca-Cola is considering. Let me share with you some further information…
5. Prioritize and recommend the best opportunities for growth
Once you have investigated all of the potential opportunities for growth, it is time to prioritize and recommend the ones that are best for the company.
You’ll likely need to develop some kind of rubric to evaluate each growth opportunity. You can score each growth opportunity on the basis of:
- Ease of implementation
In step two, you quantified the specific target or goal that the company is trying to achieve. Make sure that your recommendation meets these goals.
You: To achieve its revenue growth targets, I recommend that Coca-Cola enter three emerging drink beverage markets and that they acquire Company X. There are two reasons that support this.
One, Coca-Cola can leverage its existing production and distribution capabilities to gain meaningful market share in these emerging drink beverage markets quickly. They could increase revenues by $600M over three years fairly easily.
Two, the acquisition of Company X would increase revenues by $500M, helping Coca-Cola achieve its revenue growth target. Additionally, there are many revenue synergies that Coca-Cola can take advantage of to grow revenues even more over the next few years.
For next steps, I’d like to look into Coca-Cola’s market entry strategy for entering these emerging markets. I’d also like to look into whether the acquisition price for Company X is fair and reasonable.
Interviewer: Great. Thank you for your recommendation.
Final Thoughts on Growth Strategy Cases
The most important part of solving growth strategy cases is to be structured and methodical in considering all of the different growth opportunities. If you lay out a comprehensive and organized framework, the rest of the case should be a simple process of elimination.
You should pay special attention to the context of the case and the company’s circumstances. The stage of the company, how much free cash it has on hand, and the level of urgency the company is facing will help you narrow down your options.
After practicing a few growth strategy cases, you’ll notice that these cases follow a predictable pattern and you’ll be able to solve any growth strategy case that comes your way.
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