40.1 How Much Business Knowledge Do You Need?
You need enough knowledge to understand how a company makes money, what drives its costs, why customers buy, and what determines competitive success.
Standard: You should be able to reason logically about an unfamiliar business without needing detailed industry expertise.
If specialized knowledge is essential, the interviewer will generally provide the information required to solve the case.
40.2 Revenue Models
Start by understanding how money enters the business.
Common revenue models include one-time product sales, subscriptions, transaction fees, advertising, licensing, commissions, usage-based fees, and professional services.
Key question: What determines revenue?
For many businesses, revenue can be understood through some combination of customers, purchase frequency, quantity, and price.
40.3 Cost Structures
Understand the major resources required to operate the business.
Costs may include materials, labor, facilities, technology, marketing, logistics, sales, and corporate overhead.
Case habit: Identify the largest cost categories first rather than examining every expense equally.
40.4 Unit Economics
Unit economics examines the revenue and cost associated with one customer, product, transaction, or other meaningful unit.
For example, a subscription business might compare revenue per subscriber with the cost of acquiring and serving that subscriber.
Purpose: Determine whether growth creates economic value at the individual-unit level.
40.5 Fixed and Variable Costs
Fixed costs: Costs that remain relatively stable as short-term volume changes, such as rent or certain salaries.
Variable costs: Costs that increase as more units are produced or sold, such as materials or transaction fees.
This distinction helps explain margins, breakeven points, and how profitability changes with volume.
40.6 Economies of Scale
Economies of scale occur when average cost falls as output increases.
A company may spread fixed costs across more units, negotiate better supplier prices, or operate equipment more efficiently.
Case implication: Scale can create a cost advantage, but growth does not reduce costs indefinitely. Complexity and management challenges can eventually offset the benefits.
40.7 Customer Acquisition and Retention
Many businesses must spend money to acquire customers and then retain them long enough to recover that investment.
Understand customer acquisition cost, repeat purchasing, churn, retention, and customer lifetime value at a conceptual level.
Key question: Does the value generated by a customer justify the cost of acquiring and serving them?
40.8 Pricing
Pricing affects revenue, demand, margins, customer perception, and competitive behavior.
Useful lenses include cost, competitor pricing, customer willingness to pay, and value created for the customer.
Important: A higher price does not automatically increase profit if it causes substantial volume loss.
40.9 Competition
Understand why customers choose one company over another.
Competitive advantages may come from lower cost, superior products, brand, technology, distribution, customer relationships, network effects, or switching costs.
Useful question: What allows this company to win, and how difficult would that advantage be for competitors to copy?
40.10 Supply and Demand
Prices and quantities are influenced by the relationship between what customers want and what suppliers can provide.
Higher demand with constrained supply can support higher prices. Excess supply can create pricing pressure.
Case application: Consider both sides when analyzing pricing, capacity, market growth, or industry profitability.
40.11 Manufacturing Economics
Manufacturers convert materials, labor, equipment, and facilities into finished products.
Important concepts include capacity, utilization, yield, throughput, fixed costs, variable costs, and production efficiency.
Key insight: Manufacturing profitability often depends heavily on volume because significant fixed costs must be spread across production.
40.12 Retail Economics
Retail revenue is often driven by customer traffic, conversion rate, purchase frequency, units per transaction, and price.
Costs include merchandise, labor, rent, logistics, and marketing.
Useful relationship: More traffic does not necessarily create profit if conversion, margins, or transaction values are weak.
40.13 Subscription Businesses
Subscription businesses generate recurring revenue from customers who continue paying over time.
Important drivers include subscriber acquisition, price, churn, retention, and cost to serve.
Key dynamic: Small changes in churn can have large long-term effects because they change how long customers continue generating revenue.
40.14 Marketplaces
Marketplaces connect two or more groups, such as buyers and sellers, riders and drivers, or travelers and hosts.
Revenue often comes from commissions or transaction fees.
Important concepts: Transaction volume, take rate, liquidity, acquisition, retention, and network effects.
A marketplace must generally attract enough participants on both sides to create value.
40.15 Financial Services
Banks, insurers, payment companies, and investment firms have different economics, but common drivers include customer balances, transaction volumes, fees, interest spreads, credit losses, and risk.
Key consideration: Financial institutions must balance profitability with capital requirements, regulation, and risk management.
40.16 Healthcare
Healthcare often involves multiple stakeholders: patients, providers, insurers, employers, governments, and pharmaceutical or medical-device companies.
Key questions: Who receives the service? Who chooses it? Who pays? What outcome matters?
Understanding these relationships is often more important than detailed medical knowledge.
40.17 Consumer Products
Consumer-products businesses often depend on brand, pricing, distribution, marketing, product innovation, and repeat purchasing.
Important drivers: Household penetration, purchase frequency, units purchased, price, product mix, and retailer relationships.
40.18 B2B Businesses
Business-to-business companies sell to organizations rather than individual consumers.
Purchasing decisions may involve several decision makers and longer sales cycles.
Typical drivers: Customer value, sales productivity, contract size, renewal rates, switching costs, and account concentration.
40.19 Technology Businesses
Technology businesses can include software, hardware, platforms, cloud services, and other models.
Software often has high development costs but relatively low cost to serve additional customers. Hardware economics may depend more heavily on manufacturing and supply chains.
Key consideration: Identify the actual business model rather than treating “technology” as a single industry.
40.20 Developing an Industry-Learning Habit
You can build business intuition by regularly analyzing unfamiliar companies and industries.
For each one, ask:
- Customers: Who buys and why?
- Revenue: How does the company make money?
- Costs: What are its major expenses?
- Competition: What determines who wins?
- Economics: Which variables most strongly drive profit?
Spend a few minutes on industries such as airlines, restaurants, software, banking, manufacturing, healthcare, and retail. Over time, recurring patterns will become familiar.
Final principle: You do not need encyclopedic business knowledge for case interviews. Learn the fundamental drivers of revenue, costs, customers, competition, and operations, then practice applying them across different business models. Strong business intuition comes from understanding recurring economic patterns well enough to reason confidently when the industry itself is unfamiliar.
