Hi guys, I am bit struggling with approaching "change in profitability" questions. I see these differently as change in absolute profit, since the drivers could be a bit different. I am trying to come up with some thinking framework to capture how to investigate these cases (similar to declining Profits = declining Revs or inclining Costs or both).
Anyway, if speaking directly about decliling PROFITABILITY (not absolute profit), I was thinking that I could approach it as follows:
Declining PROFITABILITY can be cause by
- declining PROFIT/product
- declining REVENUE/product (=PRICE)
- inclining COST/product
- change in PRODUCT MIX (towards less profitable products)
So the question is, is this MECE approach or am I missing something important?
Thanks a lot, folks!