Exit a Business or Market

MVM Roadmap thought process

1. starting in Zone 1: we are divesting meaning leaving a market or industry. Consider how this will impact costs and revenues in the long run. Is the organizations ready and is this a good move?

2. Next look at zone 2: how have the main cost categories performed over time? what portion is fixed vs variable? how do we compare with benchmarking and is outsourcing an option?

3. Next look at zone 5: external issues: how are competitors doing with similar product lines? are they exiting?

4. Lastly look at zone 3: Full time equivalent reduction and workload shift for remaining employees

Plan out on paper

Strategy: Why do we need to exit? how will this effect remaining company?

Revenue and Cost Impact: Total revenue drop? will customers buy other products? Overall savings? Eliminate some fixed costs

Industry/Cpmpetitors: how will competitors respond? Are other players leaving? How will this industry shift make new opponents?

People/R&D: who in the organization need to go and who needs to be repositioned? How will workload shift to current employees? Will R&D suffer with fewer people?

Presentation Example

Since we are evaluating whether or not to keep this product line, I want to keep checking in on two strategic questions: first, why are we doing this; and then, if we do this, what is the total impact on the remaining company? To answer these questions, some useful analysis would first assess the total anticipated drop in revenue and the potential savings on costs. We might find that certain fixed costs can be eliminated, which would lead to significant savings, or there may be new ones, like severance or paying off vendors. As for competitors, we need to forecast how they might respond and whether other players are also exiting. Finally, how will we manage our team? Who will be let go, and how will we shift the remaining workload?

MECE Mode

Revenue assessment

• calculate the revenue loss breaking down the volume and price

Cost assessment

• calculate the total costs saed, breaking out the variable costs and the fixed costs

Other factors

• emphasize how the revenue will go to zero with exist, but not all costs may disapear

Hypothesis examples

Exiting will help us focus on other divisions and product lines

Exiting will help us streamline our operations and remove extra costs

Exiting will hurt our business by weakening our offering and economies of scale

Mining for an answer

Demand: how much will volume drop after exiting product line? with other products in our portfolio suffer related volume losses?

Product: If we exit, will there be any impact on our current pricing? Will this exit shift the image of our company (for example removing low value line), allowing for higher prices?

Internal Support: are there niche markets where we sell or under sell? Do we have the skills to reach these customers? How will our team suffer the most? What is our competitor’s offering in relation to one we are exiting? Will they modify their products or capture new share due to our absense?

Customer response: will customers continue to buy our other products? Will this exit prompt them to try other brands, leading to additional losses? How will this change their perception of us?

end the case

answer the main question: I would assess the market exit by…

if pushed to be very MECE stay with rev and costs