Case Prep

Framework Memorizing

[Entering a New Market] clarifying questions

What is the size of the market?

What is the market growth rate?

Where is the company in its life cycle?

How are the customers segmented?

What role does [current technology] play in the industry, how fast is the industry changing?

[Entering a New Market] framework

• Current Market

  • competition

    • major players strengths/weaknesses

    • market share

  • strategic fit

    • how will we differentiate

    • how will we price

  • barriers to entry

    • capital requirements, economies of scale, distribution channels, regulations

  • risks

    • regulation, technology

• Methods of Entry

  • start from scratch

  • acquire existing player

  • joint venture/strategic alliance

[Industry Analysis] framework

Current Market

• life cycle

• growth

• major players and market share

• industry changes

  • new players, technology, regulation

• profitability

Suppliers

• how many?

• product availability

• any changes in supplier market

Future

• are players entering/leaving

• M&A

• barriers to entry/exit

• substitutes

[M&A] framework

• Objectives

  • market access

    • boost brand

    • increase market share

  • diversification

  • pre-empt competition

  • synergies

    • cost savings

      • fixed

      • variable

    • culture

    • distribution channel

  • shareholder value

• Acquisition Costs

  • Fair price?

  • How will we pay?

  • integration costs

• Risks/Due Diligence

  • economic landscape

  • market stability

    • customers

    • suppliers

  • technology risk

  • competitive response

  • regulatory

• Exit Strategy

  • Hold for how long?

  • Sell for parts?

[Product Development] framework

• Product

  • differentiation

  • patents

  • substitutions

  • fit with product line

• Market Strategy

  • cannibalization risk

  • expanding customer base

  • competitive response

  • competitor market share

• Customers

  • who is target audience

  • how will we acquire and retain them

• Funding

  • how are we paying for production

  • up front investment?

[Pricing Strategy] framework

• Competitive Analysis

  • competitor prices

  • substitution prices

  • consumer buying habits

• cost-based pricing

  • COGS

  • Breakeven point

  • profit margin

• price-based costing

  • customer WTP

  • supply and demand

• company objectives

  • market share

  • profit

[Growth Strategy] questions

is the entire industry growing?

how are we growing relative to industry?

where are our prices compared to competitors?

are competitors increasing marketing or development?

which business segments have the highest future potential?

do we have funding to support growth?

[Growth Strategy] framework

• growth strategies

  • increase distribution channels

  • increase product line

  • marketing campaign

  • diversify products

  • acquire competitors

[Starting a New Business] framework

• Market

  • major player market share

  • client positioning/differentiation

  • barriers to entry

• Cost Benefit Analysis

  • management

  • market strategy

  • distribution channels

  • product

  • customers

  • funding

[Competitive Response] framework

• competitive analysis

  • what changed

  • any changes in market share

• response options

  • acquire competitor

  • merge with competitor

  • copy competitor

  • hire from competitor

  • no change, but market ourselves

four ways to increase sales

1. increase volume (# buyers)

2. increase spend per sale

3. increase prices

4. create seasonal balance

ways to cut costs

• labor

  • cross train workers

  • cut overtime

  • pay workers in equity

  • layoffs

  • pay cuts

• production

  • efficiency technology

  • reduce inventory

  • outsource

  • renegotiate supplier contracts

• finance

  • refinance debt

  • sell assets

[Improve Profits] Framework

• External factors

  • market

  • economic trends

• Internal Factors

  • revenue

    • what are the revenue streams

    • percentage of total revenue for each

    • price

    • volume

      • expand into new areas

      • increase sales force

      • increase marketing

  • costs

    • fixed

    • variable

    • (any changes? how do these compare to competition?)

[Turnaround] framework

• company

  • management

  • product

  • customer segments

• industry

  • growth or decline

  • competitor market share

  • suppliers

• financials

  • public or private

  • access to capital

  • profit margins

• goals

  • short-term

  • long-term

BCG Product Portfolio Matrix

high growth high market share: star

high growth low market share: question mark

low growth high market share: cash cow

low growth low market share: dog

Porter’s Five Forces

threat of entrants

threat of substitution

industry rivalry

supplier power

buyer power

value chain

raw materials and inbound logistics

operations

delivery

marketing and sales

service

if sales are flat but profits dip…

examine both revenues and costs

start with revenues to ID and understand revenue streams

then make decisions on cost side

if sales are flat but market share consistent…

indicates industry-wide sales are flat

if decline in sales problem…

consider:

overall declining market demand

possibility that current marketplace is mature or product is obsolete

loss of market share due to substitutions

if sales and market share both increasing but profits declining…

investigate whether prices are dropping and/or costs are increasing

if costs not the issue, check if margins changed on product mix

if profits down because of dropping revenues…

focusing on marketing and distribution issues

if profits declining bc of rising costs…

focus on operational and financial issues (i.e. COGS, labor, rent, marketing)

if profits declining but revenues increasing…

review:

changes in costs

additional expenses

changes in prices

product mix

changes in customer needs

if product in emerging growth stage…

focus on R&D, competition, and pricing strategy

if product in growth stage…

focus on marketing and competition

if product in mature stage…

focus on manufacturing, costs, and competition

if product in declining stage…

define niche market

analyze competition strategy

consider exit strategies