Consulting Interview Common Frameworks

Growth Strategy - Client would like help defining a near-term (3-5 year) growth strategy

(1) Market Analysis

• Customers

  • Market size & Growth

  • Segments

  • Drivers of Demand

• Competition

  • Market share

  • Consolidation over time

  • Differentiation

• Recent Trends

  • Technological advances

  • Regulatory changes

(2) Growth Opportunities

• Existing Products

  • Change Pricing: analyze elasticity effects on volume

  • Sales + Marketing to grow volume

  • Grow market size/share

• New Products / Business

• New Markets / Customers

• Others

  • Product Mix

  • Customer Segments

  • Distribution channels

  • Increase service quality

• Infrastructure for growth

  • R&D

  • Sales Team

  • Marketing

(3) Key Considerations

• For all strategies proposed, analyze:

  • Investment / entry cost & breakeven period

  • Cannibalization

  • Competitive response

  • Long-term viability

  • Fit with current portfolio

• Ways to grow

  • Organic through R&D and investment, long term focus

  • Inorganic through acquisition - short term focus

New Market Entry - Clarify if the goal is revenue growth, profitability, market share, etc. Should a banana producer start selling coconuts?

(1) Coconut Market

• Market size / growth

• Key Market Drivers

• Customers

  • Largest Segments

  • Preferred Channels

  • Preferences for coconut consumption (i.e. juice, whole, etc.)

• Competition

  • # of competitors and market share - concentrated vs fragmented

  • Barriers to entry

  • Competitive response

(2) Product Fit

• Capabilities - producing coconuts vs bananas

  • Sourcing

  • Processing

  • Distribution

  • Labor

• Brand fit

(3) Entry Profitability

• Revenues

  • Pricing decision

  • Expected volume

  • Synergies to sell

• Product mix

  • What kind/type of coconuts

  • Cannibalization

• Costs

  • Initial Investment

  • Ongoing fixed costs

  • Ongoing variable costs

  • Opportunity costs

• Breakeven time period / ROI target

(4) Others

• Finances - do we have money?

• Strategic moves for entry - are we acquiring existing coconut producers?

Despite strong historical performance, margins have been declining

(1) Market

• Market size

• Competition

  • Current share

  • New entrants

  • Source of competitive advantage

  • Adjacent markets (substitutes, complements)

• New consumer trends being observed

• Regulatory changes impacting industry

• Macroeconomic conditions

(2) Revenue (Industry Specific)

• Prices (up/down

• Volume (up/down)

• Product mix

  • Examine shifts in volume

  • Examine shifts in pricing decision

• By channel/geography

  • Contribution from different segments

• By customers

  • Customer segments

  • Shifting customer needs

(3) Costs (Industry Specific)

• Fixed costs

  • Capacity

  • Rent/depreciation

  • Insurance

  • Cost centers

    • R&D

    • Marketing

• Variable costs

  • Materials

  • Labor

  • Overhead

• Benchmark and adopt best practices

Should a private equity (PE) client acquire a company?

(1) Market

• Size of market & growth

• Trends

• Customers

  • Segments

  • Buying behavior

  • Channels

• Competition

  • Market share

  • Barriers to netry

  • How do players compete (price/service/etc.)

(2) Target Company

• Capabilities / sources of competitive advantage

  • Customer loyalty

  • Patents

  • Distribution network / relationships

  • Quality

  • Brand equity

  • Management team

  • Operational improvement

• Deal economics

  • Is company profitable?

• NPV vs deal price

• Exit Opportunities

• Due dilligence

(3) Acquirer / Client

• Investment strategy

• Portfolio size

• Hurdle rate

• Opportunity cost

• Expertise in industry

• What constitutes success?

(4) Risks

• If deal is strategic in nature

  • Cultural fit

  • Competitive response

What should a conglomerate looking to reduce costs do?

(1) Current Processes

• Value chain

• Most and least essential processes

• Any organization/industry changes

(2) Assess Costs

• Analyze existing processes

• Identify outliers/trends

• Benchmark

  • Competition

  • Across business units

  • Past performance

• Supplier power

(3) Reduce Costs

• Internal

  • Labor: cheaper sources, increased efficiency

  • Economies of scale

  • Rent vs own

  • In house vs. outsource

• External

  • Suppliers

  • Distributors

  • Source cheaper

  • Discounts

(4) Risks

• Drop in quality

• Workforce morale

• Keep best people/practices