Case interviews rarely require deep industry expertise, but candidates should understand the basic economics of how businesses create value, generate revenue, incur costs, and compete.
Revenue, Costs, and Profit
Revenue: Money generated from selling products or services. A common equation is Price × Volume.
Fixed costs: Costs that generally do not change with short-term volume, such as rent or salaried overhead.
Variable costs: Costs that increase or decrease with activity, such as materials or transaction fees.
Profit: Revenue minus total costs.
Profit margin: Profit expressed as a percentage of revenue.
Contribution margin: Revenue remaining after variable costs, available to cover fixed costs and profit.
Markets and Competition
Market size: The total sales, customers, or units within a defined market.
Market share: A company’s sales divided by total market sales.
Competitive advantage: A capability or position that allows a company to outperform competitors, such as lower costs, stronger differentiation, or superior distribution.
Barriers to entry: Factors that make entering a market difficult, including capital requirements, regulation, technology, scale, or brand strength.
Pricing and Customer Economics
Cost-based pricing: Setting prices based on costs plus a target margin.
Competitor-based pricing: Setting prices relative to competing alternatives.
Value-based pricing: Setting prices according to the value customers perceive.
Customer acquisition cost: Sales and marketing spending required to acquire a customer.
Customer lifetime value: The economic value expected from a customer throughout the relationship.
Churn: The percentage of customers who stop buying or cancel during a period.
Operations and Capacity
Capacity: The maximum output a business can produce within a period.
Utilization: The percentage of available capacity currently being used.
Productivity: Output generated per unit of input.
Bottleneck: The process step that constrains overall output.
Economies of scale: Lower average costs achieved as production or purchasing volume increases.
Supply Chains and Business Models
Supply chain: The network through which materials, products, information, and services move from suppliers to customers.
Inventory: Materials or products held before sale or use.
Business model: How a company creates, delivers, and captures value.
Unit economics: Revenue and costs associated with one customer, transaction, or unit.
Final principle: In case interviews, business concepts matter because they help you identify the drivers behind a problem. Focus on how each concept affects revenue, cost, customers, competitive position, and ultimately the client’s objective.
