1
Q
Market Attractiveness (Business Areas)
A
- What is the market size
- What is the growth rate?
- What are the average profit margins?
- Is the market attractive?
2
Q
Competitive Landscape (Business Areas)
A
- Is there heavy competition? / How tough is the competition?
- How many competitors are there?
- How much share do they have?
- Competitive Advantages?
3
Q
Company Capabilities/attractiveness (Business Areas)
A
- Do we have the capabilities to enter?/Does the company have the capabilities to enter the market?
- Are there significant capability gaps?
- Are there significant synergies we can leverage?
4
Q
Customer Segments/Needs (Business Areas)
A
- Have customer needs changed?
- Have purchasing habits changed?
- Do customers view the company differently?
5
Q
Profitability/Financials (Business Areas)
A
- Will entering be profitable? / Will the company be profitable from entering the market?
- What are expected revenues and costs?
- How long will it take to break even?
6
Q
Strategic Alternatives (Business Areas)
A
Ex. Are there other more attractive markets the company/Coca-Cola should enter?
7
Q
Risks & Mitigations (Business Areas)
A
Ex. What are the risks of entering the market?
8
Q
CREATE YOUR OWN
A
Ex. Brand Awareness, Technology, Sustaintability, Management capabilties
9
Q
Market Entry (What needs to be true for recommendation?)
A
- The market is attractive
- The company can capture meaningful market share/competition is weak
- The company has the capabilities to enter the market
- The company will be profitable from entering the market/or meet its desired metric of success
10
Q
Profitability (Evaluation on Two Fronts)
A
- Quantitative: revenue, costs (address first)
- Qualitative: changes among customers, competitors, or changes happening in the market overall
11
Q
Investment (M&A) (What needs to be true?)
A
- The company’s market is attractive
- Competition in the market is not strong
- The target company is attractive
- The acquisition will generate high returns
- acquisition generates meaningful synergies
- acquisition target is at a great price and will generate high returns on investment
12
Q
Profit Formulas (6)
A
- Profit = Revenue - Costs
- Revenue = Quantity x Price
- Cost = Total Variable Costs + Total Fixed Costs
- Total Variable Costs = Quantity x Variable Costs
- Profit = (Price - Variable Costs) x (Quantity - Total Costs)
- ROI (Return on Investment) = Profit / Costs
13
Q
Profitability (Profitability Framework)
A
- Has there been a decline in revenue?
- Decrease in quantity sold
- decrease concentrated on product line, geography, or
customer segment - Decrease in Price
- Selling products @ a lower price, sales mix change (selling more lower priced products than higher priced) - Has there been an increase in costs
- increase in variable costs (what cost elements have gone up ex. product parts)
- increase in fixed costs
14
Q
Customer Needs & Preferences (Profitability Framework)
A
- Have customer needs changed?
- Have customer purchasing habits changed?
- Do customers view the company differently?
*Good framework to use if revenue is the issue
15
Q
Market Trends (Profitability Framework)
A
- Are there new technologies impacting the market?
- Are there new regulations impacting the market?
16
Q
Suppliers (Profitability Framework)
A
- Have suppliers increased their prices?
- Have suppliers costs increased?
- Good framework if costs are the issue
17
Q
Competitors (Profitability Framework)
A
- Have new players entered the market?
- Have existing competitors made any recent strategic moves?
- Are competitors also experiencing a decline in profitability/revenue
- Are competitors also experiencing an increase in costs
18
Q
Market Attractiveness (Market Entry Framework)
A
- What is the market size?
- What is the market growth rate?
- What are the average profit margins?
*should be the first framework used with a market entry case
19
Q
Competitive Landscape (Market Entry Framework)
A
- How many competitors are there?
- How much share do they have?
- Do competitors have any competitive advantages?
20
Q
Company Capabilities (Market Entry Framework)
A
- Are there significant capability gaps?
- Are there significant synergies we can leverage?
21
Q
Profitability (Market Entry Framework)
A
- What are the expected revenues?
- What are the expected costs?
- How long will it take to breakeven?
22
Q
Merger & Acquisition (M&A) Framework - 2 Common Business Situations
A
- Company looking to acquire another company to:
- access a new market
- access new customers
- grow revenues and profits - Private equity company looking to acquire the company as an investment:
- GOAL: grow a business using operational expertise to sell the company years later for a high return on investment (ROI = Profit / Costs)
23
Q
Market Attractiveness (M&A Framework)
A
- What is the market size?
- What is the market growth rate?
- What are the average profit margins?
*Profit margins (portion of sales revenue kept as profit after subtracting costs = profit/revenue x 100%
24
Q
Company Attractiveness (M&A Framework)
A
- How much market share does the company have?
- Is the company profitable?
- Does the company have any competitive advantages?
25
Synergies (M&A Framework) - Revenue
1. Are there potential revenue synergies?
- access to new customer segments
- access to new markets
- access to new distribution channels
- cross-selling opportunities (selling related products)
- up-selling opportunities (selling higher end version of product)
26
Synergies (M&A Framework) - Costs
1. Are there potential cost synergies?
- eliminating cost redundancies
- consolidating functions or groups
- increasing buyer power with suppliers, manufacturers, distributors, or retailers
27
Financial Considerations (M&A Framework)
1. Is the acquisition price reasonable?
2. What is the expected return on the acquisition?
3. What is the expected increase in annual revenue?
4. What are the expected cost savings?
5. What is the projected return on investment
28
Market Sizing Framework/Estimation Questions
Ask you to determine the size of a particular market or to estimate a particular figure
Two different sizing approaches
-Top down approach: start w/ a large number and then refine and breakdown the number until you get your answer
- Bottom up approach: start w/ a small number and then build up and increase the number until you get your answer
*framework consists of writing bullet points of the exact steps you would take to calculate the requested market size or estimation figure
29
Pricing Framework (3 ways)
1. Pricing based on costs: set a price by applying a profit margin on the total costs to produce or deliver the product or service
2. Pricing based on competition: set a price based on what competitors are charging for products similar to yours
3. Pricing based on value added: set a price by quantifying the benefits that the product provides customers
30
Pricing Based on Costs (Pricing Framework)
1. How much does it cost to produce this product?
2. What is the profit margin that the company is trying to achieve?
*this determines the minimum price you can set
31
Pricing Based on Competition (Pricing Framework)
1. How much do competitors price their products for?
2. How does our product compare to competitors' products?
*this determines which price in between these two price points you should set - costs vs value added
32
Pricing Based on Value Added (Pricing Framework)
1. What benefits does this product provide to customers?
2. How much value does this provide to customers?
* will determine the maximum possible price
33
Recommendation (Pricing Framework)
Pricing based on costs will determine the minimum price you can realistically set. Pricing based on value added will determine the maximum possible price. Pricing based on competition will determine which price in between these two price points you should set.
In order to get customers to purchase your product, the difference between your price point and the customer's maximum willingness to pay must be greater than or equal to the difference between your competitor's price point and the customer's maximum willingness to pay for their product.
34
New Product Framework (What needs to be true?)
used to help a company decide whether or not to launch a product or service
1. The product targets an attractive market segment
2. The product meets customer needs and is superior to competitor products
3. The company has the capabilities to successfully launch the product
4. Launching the product will be highly profitable
35
Market Attractiveness (New Product Framework)
1. What is the market size?
2. What is the market growth rate?
3. What are the average profit margins?
36
Product (New Product Framework)
1. Are customers' needs being met?
2. Is the product superior to competitors' products?
37
Company Capabilities (New Product Framework)
1. Does the company have the designed production expertise?
2. Does the company have the right distribution channels?
38
Profitability (New Product Framework)
1. What are the expected revenues?
2. What are the expected costs?
