Decreasing Factors

Adjust Answer

Increasing Factors

Adjust Answer

Analyze Results
Implications?

Calculate
Use Round Numbers!
Common sense check!

Make Assumptions

Determine The Key Drivers

Bottom Up or Top Down?

Case Interview Frameworks

Market Sizing

Decreasing
Comp. pressure?

Price

Increase

Higher Marg. Costs

- Org. Dysfunction
- Overtime

Decrease

- Market Conditions
- Competition

Volume

Revenues

Analyze Using
Profit Equation

Selling Less
Profitable Items

Fixed Costs

- Added Capacity?

Gather Information

What's Driving
the Decline?

Product Mix

Case Interview Frameworks

- Raw Material Prices

Variable Costs

Expenses

- Writeoffs
- Lawsuits

Unusual Expenses

Declining Profits

New Markets
- Geographic
- Economies of Scope

Competitive Environ.
- Substitutes

Inventory Mgmt.
- Carrying Costs
- Shrinkage

Scale Economies
/Diseconomies
- Supply Constraints

Direct Material

Replace w/machines
- Union?

Direct Labor

COGS

Cost Acctg.
- Allocation Drivers
- Does pricing
reflect Cost

Variable O/H

SG&A

Increase Profitability

Can we explore economies of scope with entry into adjacent industry?

Existing Market
- Promotion
- Place

Unit Volume

Price Sensitivity
- Elasticity

Price

Revenues

Case Interview Frameworks

Competitors Plans

Substitutes

Global Competition

Threats

Industry Capacity

Market Demand

Design for manuf.

Economy
Consumer tastes

Bottlenecks

Improve Productivity

Outsource

Acquire

Add shifts

Add Capacity

Investment vs. Improvement

Increase Capacity?

Cyclical / Seasonal

Market Trends

Should We Increase Capacity?

Case Interview Frameworks

Disposable income?

Demographics of our target?

Do new substitutes exist?

Price
Have sensitivities changed?
Overpriced versus our competition?

Place
Is our distribution getting squeezed out?
Are Customers Changing Channels?

Promotion
Are we spending?
Push vs. pull?

Has public image changed?

Tastes changing?

Customer

Product
Is quality sagging?

Company

Are they offering our customers

special incentives to switch?
(particularly with substitutes)

Are competitors integrating

into distribution and
shutting us out?

Are diffentiated competitors

stealing from us?

Any new regulations

restricting the use of our
product and favoring substitues?

Do new tax
incentives exist?

Regulatory

Customer Turnover

Are low cost competitors

stealing from us?

Competition

What Has Changed in

the Following Environments?

Case Interview Frameworks

Normal good?

Bundled product?

Distribution channel

Purchasing Habits

Promotion

Price

Place

Product

Competitor
- Where are we positioned?
- Where is the competition?

Finances

Intangible

Tangible

Cost structure

Resources to respond?

Customer

Vendor

Distributor

Business relationships

Company
- How do we add value?

Competitive Response

Given the above, is it worth making a competitive response?

How will the competition react?
Applying game theory or PARTS analysis may help.

Mature market?

Demographic changes

New customers?

Disposable income

Price Sensitivity

Susbsitutes

Values/Tastes

Customer
- What do they want?
- How do they choose?

Case Interview Frameworks

Place
Is distribution aligned with customer?
Are we experienced in this channel?

Promotion
Push or Pull?
Cost of launch?
Will current promotions help?

Price
Have we explored sensitivity?
Can we make a profit at this price?

Product
Have we done homework?
What does the segment want?
Proliferation of products already?

Customer
Does product met a need?

Can we eat the young?

Is market growing?

Many

Yes

No
Can we erect some?

Yes
Can we beat them?

No

Any precious resource

that we own?
(Ricardian rents)

Will we be first movers?

M arketing
Will we cannibalize existing products?
Is this a complement / bundled good
Does it build on resources?

Operations
D0 we have capacity?
Supply network?

Finance
Are we able to finance the launch?
Should we buy an existing producer?

Company
Can we do it?

New Product Introduction?

Are there barriers to entry?

Competition
Is there any?

What wil be the strategy?

Low cost or Differentiated?

Few

Case Interview Frameworks

Methods of Conducting Business

- Introductions
- Government contacts

Educational Differences

Economy & Exchange Rates

Seasonality
- Weather

Alliance with local firm?

- Joint venture/distributor

Can our resources succeed overseas?

- Flexible enough to adapt?

Is organization consistent
with overseas 'autonomy'

Corporate Values
- Bribery
Worker's conditions / child labor

Local Market
- Size
- Competition

Political Climate
- Instability

Distribution system
- Transportation infrastructure
- Different channels

Cultural Differences of Customers

- Tastes / product preferences
- Values / gender roles

External

Discount Rate

Timing
- Startup / disposition
- Operating

Amount

Cash Flows

ROI / Hurdle Rate

Quantitative

International Expansion

Doesit match our growth strategy?

- ROE/ROI

Internal

Case Interview Frameworks

Useful Life

- Risk Free Rate

- Inflation
- Risk Adjust

Timing
- Opportunity Cost

Size
- Market Potential
- Outflows
- Working Capital

Discount Rate

Cash Flows

NPV Analysis

Strategic Fit

- Missing Links
of Value Chain

Synergies

Investment Decision

Case Interview Frameworks

- Seasonality
- Volatility
- Inflation
Demand Cycle

Environmental

Other Factors

Stability
Regulation

Political

- Current Supply
Potential Demand

Competitors

Investment Decision

Strengths & Weaknesses

Acquisition Fit

Strategic Objective

Resources

Internal Factors

Porter's Five Forces

Three C's

Hard Issues
- Price
- Balance Sheet

Soft Issues
- Culture/Fit
- Management

Identify Acquisition
Candidates

External Factors

Company Acquisition

Industry Attractiveness

Analyze Opportunity

Understand Purpose
Diversification?
Gain Market Share?
Geographic Expansion?

Case Interview Frameworks

No
Can We Release Good News
to Raise Stock Price?

Issue Debt, Buy Back Stock

Do We Have Cash?

Yes
Then Buy Back Stock
to Raise Stock Price

No

Cultural Fit

Strategic Compatability

Has Financial Strength

Classic M&A
Is there a Firm That...

Are We Highly Levered?

(Relative to the Industry)

Yes

White Knight

Hostile Takeover Defense

Self-Help

Two Options Both

Designed to Raise the
Value of the Company

Case Interview Frameworks