Structure your thoughts

Structure your thoughts

1. 4C FRAMEWORK

   • Useful for cases: market analysis, market entry and introduction of a new product
   • External view
     • CUSTOMER
       • Market size in terms of revenue
       • Growth
       • Customer segmentation and types of customer
       • Loyalty
       • Distribution channels
       • Attraction in terms of revenue and expected growth
       • Special needs and wishes
     • COMPETITION
       • Performance, for example profitability relatively to ours
       • Dynamics of new entrants
       • Growth of the last years and expected growth
       • Competitive position portrayed through the share and relative share of the market
       • Fragmentation
       • Other trends
   • Internal view
     • CAPABILITIES
       • Understanding of resources helps to judge what kind of strategies a company can imply to bust it's performance
       • Human resources
       • Core competencies
       • Technology
       • Value for customers
       • Financial resources
     • COST
       • Economies of scale and scope
       • Relative cost position, cost advantage compared to competition
       • Profitability by customers, product lines, geographic
       • Introduction of a best practices
       • Exiting unprofitable areas
       • Reorganization of business units

2. 4P FRAMEWORK

   • Helpful framework for the introduction of new products
   • PROMOTION
     • Free gifts
     • Joint ventures
     • Direct mailing
     • Posters
     • Endorsements
     • Special offers
     • Social media
   • PRICE
     • The “right” price is the one, which maximizes the revenue. To sell the greatest amount to the best price possible, we need to know how people value the product; therefore a value-based pricing is usually recommended.
     • Cost-cased pricing
     • Competitive analysis
     • Value-based pricing
   • PLACE
     • Retail
     • Internet
     • Wholesale
     • Peer to peer
     • Direct sales
     • Multichannel
   • PRODUCT
     • Warranties
     • Usefullness
     • Value
     • Design
     • Accessories
     • Packaging
     • Technology
     • Branding
     • Product life cycle
       • Introduction
       • Growth
       • Saturation
       • Maturity
       • Decline
     • Services

3. PORTER'S FIVE FORCES

   • Porter’s analysis is used to assess market attractiveness both for new entrants and existing companies. In general, the stronger the five forces are, the less attractive is the industry. Porter's five forces are especially relevant for Market entry and Market analysis cases since you need to assess the market attractiveness here.
   • Be cautious when applying Porter's Five Forces in a case interview You should be aware that interviewers often see the usage of the Porter's five forces as a forced approach to solving a case. As if you had no better way to structure the solution and had the five forces as last resort. Ideally, you should resort to the forces within a bigger, more general framework (e.g. cost-benefit analysis). This will demonstrate to the interviewer that you are not "force-fitting" the case into a framework.
   • SUPPLIERS
     • Supplier's power to negotiate. Their amount of leverage. High power = higher prices/lower quality -> lower margin in the industry
     • Highlu specialized suppliers, no substitute for the suoolied sood
     • High switching cost for a buyer to change suppliers
     • Relatively lower threat to get acquired by another company
     • Availability og only few suppliers
   • BUYERS
     • This concept is analogous to the supplier power discussed above. If buyers have a lot of negotiating power, it generally implies strong leverage to enforce low prices.
     • Low switching cost
     • Ability of buyers to produce the product easily
     • Large volume of product bought by a single buyer
     • Better or easy alternatives for buyers to switch
     • Only a few customers relative to number of suppliers
     • Leverage to enforce prices
   • NEW ENTRANTS
     • The lower the barriers for market entry, the easier it is for new competitors to enter the market leading to higher competition increasing the risk of price wars and a lower margin. Hence, an attractive industry usually has high entry barriers. It’s hard to enter an attractive industry, but once a company is able to enter, it is in a good shape.
     • Economies of scale because new entrants sell lower volumes and face higher costs per unit
     • High learning effects because established players’ experience leads to better contracts, operations, customer relationships
     • High capital intensity and investment costs
     • Governmental regulations
     • Competitive environment
     • Low accessibility to suppliers and customers
   • SUBSTITUTE PRODUCTS
     • Substitute products are alternatives to products that are obviously different but fulfill the same customer needs. The more the substitute products, the easier it is for the customers to switch leading to more competitive environment.
     • Current products are old and at the end of product life cycle
     • High comparability of substitute products and high visibility as substitute
     • Similar prices
   • COMPETITION
     • The level of industry rivalry is influenced by the remaining four forces of Porter but is also subject to other causes. A high rivalry appears either as competition in terms of price or in terms of quality.
     • Very similar products
     • High number of market players competing against each other
     • Low or shrinking growth as competitors fight for a saturated market
     • High barriers of exit due to high sunk costs

4. BCG MATRIX

   • Helps in assessing a company’s current product portfolio based on the product life cycle and the experience curve. IMPORTANT: Should only be referred to as BCG matrix when interviewing with BCG, otherwise it is the growth-share matrix
   • Dogs
     • Low relative market share in a slow growing mature market
     • Divest, as these products have a negative effect on the overall profitability of the company
     • Products mostly do not generate profit and may usually just break even
   • Question Marks
     • Low relative market share in a relative young but promising market (growing)
     • Potential of becoming stars if market share can be increased
     • If necessary market share is not reached, likely to turn into a poor dog, as soon as the market gets more mature
     • Careful analyses are needed to determine if to invest or not
   • Cash Cows
     • High market share in a slowly growing/ mature market
     • No further investment due to limited/ no growth potential, but trying to “milk” as long as possible
     • Creates the highest cash flow
   • Stars
     • High market share in a promising market
     • To turn a star into a future cash cow, heavy investment is needed to fight competition and expand market share

5. ANSOFF MATRIX

   • Key takeaways for the Ansoff matrix: 1) Helps in answering how future growth should be achieved 2) Each strategy has a different growth and risk potential
   • Market Penetration
     • Company is trying to grow within an existing market with existing products
     • Low risk and growth potential
     • Can be achieved by attracting new customers (first buyers), which bought previously from competitors (stealing market share)
   • Product Development
     • Company is trying to grow within an existing market but with new products
     • New products do not need to be necessarily new, but can also be adaptions or updates to existing products developed using companies core competencies
     • Risk and growth potential are comparable to these of a market development strategy
   • Market development
     • Company is trying to grow in a new market with existing products
     • New markets could be on a regional, national or international level
     • Risk and growth potential are considered to be higher than the ones of a market penetration strategy
   • Diversification
     • Company is trying to grow in a new market with a new product
     • 3 diversification strategies can be distinguished: horizontal, concentric and lateral
     • Horizontal diversification: products are often unrelated to current products, but have the potential to attract current customers
     • Concentric diversification: products often display synergies with current products and have the potential to attract new customers
     • Lateral diversification: new products have no relation or synergies with current products
     • Risk and growth potential are the highest of all strategies

6. STRUCTURE

   • ISSUE TREE
     • Method to break a complex problem down into its component parts. Focus on the most pressing problems by using a hypothesis-driven approach.  Use hypotheses when analyzing your issue tree to come quickly to the root causeTrees have to be MECE to avoid inefficient dependencies between branches
     • Solution-based tree
       • Can be used to determine the recommendation and understand the “how” to solve the problem
     • Problem-based tree
       • Can be used to determine the root cause of the problem and understand the "why" the problem exists
   • MECE
     • Elements should “exclude” each other, i.e. be distinct and should “exhaust” the relevant field, i.e. contain everything that belongs to it.
     • Mutually Exclusive
       • Aims at reducing complexity by avoiding overlaps. You need to make sure that the possible solutions or groups are not accidentally considered twice. Proving exclusiveness forces you to carefully look at each option, consequently leading you to a much deeper understanding of the issue.
     • Collectively Exhaustive
       • Aims at ensuring a comprehensive collection without leaving alternatives. Exhaustive means that all possible options have been considered. The trick is to divide a problem into categories with a finite number of general groups. For example, if you need to make “means of transportation” MECE, don't start just collecting “per foot, train, plane, bicyle, bike etc.” Try to find categories, because this practice will prevent you from forgetting important options: wheels vs. no wheels OR air vs. water vs. land.
   • PYRAMID PRINCIPLE
     • Structure to present your synthesis and recommendation
     • 1) What: theory, hypothesis, recommendation or conclusion
     • 2) Why: the reasons
     • 3) How: how you want to implement it

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