Mini Case Study
This module applies everything: a realistic client situation, a structured approach, and the reasoning a strong candidate or junior consultant would show. Work through it before reading the model answer.
The situation
NordSteel is a mid-sized steel processor with €480M revenue. EBITDA margin has fallen from 11 percent to 6.5 percent over three years while revenue stayed flat. The CEO believes energy costs are responsible and wants approval for a €40M on-site solar and storage investment at the next board meeting in ten weeks.
You have six weeks. The board will approve or reject the investment based on your work.
Step 1 — Restate the question
The CEO's question is 'should we approve the €40M investment'. The real question is 'what is causing the margin decline, and is the proposed investment the best available use of €40M against that cause'.
Restating protects you from the most likely failure: a rigorous energy analysis that never asks whether energy is the actual problem.
Step 2 — Structure
Arithmetic first: margin decline comes from revenue effects or cost effects. Revenue is flat, so decompose it into price and mix (flat revenue can hide falling price offset by rising volume). Cost splits into direct (raw material, energy, labour, yield) and indirect (overheads, maintenance, logistics).
This structure is MECE, sizeable from the client's own P&L, and testable within two weeks.
Step 3 — Size the branches
Quick sizing from three years of management accounts: energy cost rose from 8 to 11 percent of revenue, contributing roughly 3 points of margin. Raw material spreads contributed roughly 1 point. Price realization fell approximately 1.5 points, offset partly by volume. Yield losses added roughly 0.5 points.
Energy is the largest single driver but explains under two-thirds of the decline. That single finding reframes the board discussion.
Step 4 — Test the proposed solution
The €40M solar and storage proposal must be tested on its own terms: what share of load does it actually serve given the plant's demand profile, what happens to the remaining grid-supplied portion, and what is the payback under realistic tariff and curtailment assumptions rather than nameplate output.
Compare against alternatives for the same capital: hedging and tariff restructuring (fast, low capital, reversible), efficiency and waste-heat recovery (moderate capital, immediate), and commercial repricing to recover the 1.5 points lost to price realization (near-zero capital).
Step 5 — Recommend
A strong recommendation is sequenced rather than binary: execute tariff restructuring and repricing immediately for roughly 2 points of margin at minimal capital; commit €12M to efficiency and waste-heat recovery with a two-year payback; and phase the renewable investment, starting with a €14M first phase sized to the actual base load, with the remainder contingent on measured phase-one performance.
This answers the CEO's question honestly without simply rejecting his idea — and it survives the board's inevitable question about what else the money could do.
What separates a strong answer from a weak one
Weak answers accept the client's framing and analyse only energy. They produce a competent, irrelevant study.
Weak answers also over-correct: dismissing the CEO's idea entirely, which is politically fatal and analytically lazy since energy genuinely is the largest driver.
Strong answers restate the question, size all branches before deep-diving any, test the proposal against alternatives for the same capital, and sequence a recommendation that begins with the fastest, cheapest actions.
- Restate the client's question as the decision question before starting work.
- Structure arithmetically and size every branch before deep-diving one.
- Flat revenue can conceal offsetting price and volume movements.
- Always test the client's proposed solution against alternatives for the same capital.
- Sequence recommendations: fastest and cheapest first, capital-intensive phased and contingent.
Module quiz
Pass mark 70%1. The CEO asks you to evaluate a €40M energy investment. What should you do first?
2. Revenue is flat over three years. What does this tell you?
3. Energy explains roughly two-thirds of the margin decline. What is the strongest recommendation structure?