Hi Anonymous,

one of the biggest problems that candidates have in properly thinking through cases stems from the flawed way in which the approach to business problems has been taught in the classical case books. In fact, the "bucket logic" is the very reason why people fail to understand the fundamental principles underlying strategic decision making. It starts already from the wrong assumption that there is an essential difference between, for example, "Market entry cases", "Company acquisition cases", "Product launch cases", "Capacity expansion cases"etc. But the truth is: **at the core, there is absolutely no difference between these scenarios!** The core of the issue is absolutely identical:

**Can the client create value or not?**

Hence, juggling around with different frameworks, trying to map and match them to these questions is just demonstrating this fundamental non-understanding of the candidate. I will say it again and again: **cases should be approached and solved from **__first principles!__

- One of these first principles is that
** you start EVERY case from the core question that you need to answer! **This core question is the starting point of a **rigorous logic tree, **and each element that you want to analyze needs to clearly **relate back to the core question! **This principle forms the basis of any structure.
- Another first principle is, e.g, to define the
**criterion or criteria** that need to be met in order to anwer this core question in one way or another.

The big advantage is that this is making "frameworks" unneccessary for the structuring of cases! You need to learn and internalize the logic, then you have a bullet-proof toolbox under your belt, far more rigorous then a "framework-learning" approach.

I will illustrate it based on your **example. **Please think it through -** I hope you will realize that the same logic, centered around value creation, can be applied to ALL situations that I have outlined above (new market, new product, m&a, etc.). **It also works indepent of whether Profit is the primary objective or not. As long as the objective(s) is/are clear, the criterion to answer the core questions can be adapted accordingly.

**EXAMPLE:**

Question:

*"A German car manufacturer is considering entering the Chinese market, should he do it?"*

Approach:

This is a strategic investment decision. A very clear approach would be:

**1. Core Question:** "Should the client invest into entering the Chinese Market?"

**2. Identify criterion to make this decision:** The (i) __additional value__ we can create over the client's (ii) __investment horizon__ has to be __significantly higher than the (iii) investment cost__. Moreover, the (iv) __required capabilities __need to be in place and the (v) __risks __need to be manageable.

**3. Compile base information:** Upfront investment need in order to get going (need for manufacturing facilities? distribution network? agency fees? other investment needs? / investment horizon of client (by when do they need to recoup the investment?)

**4. Deep dive into the value creation potential by means of a profitability tree:** what are the levers of value here? Compare Scenario A (entering the Chinese market) to Scenario B (not entering the Chinese market). How many cars can we realistically sell? What is the profit per car? Is there a large yearly fixed cost block (hence,, economies of scale?), etc. Analysis is done by first disaggregating profit into its numerical drivers. these are the branches of your tree. Then you can map qualitative drivers to the numerical drivers (e.g., market growth and market structure influence the quantity you can sell; the brand position influences the price point; operations and manufacturing influence fixed and variable costs, etc.)

**5. Calculate annual value (delta between Scenario A and B).** If entering the Chinese market indeed increases annual profits by a certain amount, you then divide the upfront investment cost by this additional yearly profit. This gives you the break even point (number of years after which the investment becomes profitable). If this point comes earlier than the investment horizon (which depends on alternative investment opportunities of the client), then this is a beneficial investment and the client should proceed with the move (purely based on financials).

**6. Don't forget to discuss capabilities and compile potential risks and mention them in your summary**

Cheers, Sidi

P.S.: Please have a look at another example here - it follows the same core principle to address a similar issue. Even though the primary question is different (about capactiy expansion): https://www.preplounge.com/en/consulting-forum/how-would-you-structure-this-1737

Hi Anonymous,

one of the biggest problems that candidates have in properly thinking through cases stems from the flawed way in which the approach to business problems has been taught in the classical case books. In fact, the "bucket logic" is the very reason why people fail to understand the fundamental principles underlying strategic decision making. It starts already from the wrong assumption that there is an essential difference between, for example, "Market entry cases", "Company acquisition cases", "Product launch cases", "Capacity expansion cases"etc. But the truth is: **at the core, there is absolutely no difference between these scenarios!** The core of the issue is absolutely identical:

**Can the client create value or not?**

Hence, juggling around with different frameworks, trying to map and match them to these questions is just demonstrating this fundamental non-understanding of the candidate. I will say it again and again: **cases should be approached and solved from **__first principles!__

- One of these first principles is that
** you start EVERY case from the core question that you need to answer! **This core question is the starting point of a **rigorous logic tree, **and each element that you want to analyze needs to clearly **relate back to the core question! **This principle forms the basis of any structure.
- Another first principle is, e.g, to define the
**criterion or criteria** that need to be met in order to anwer this core question in one way or another.

The big advantage is that this is making "frameworks" unneccessary for the structuring of cases! You need to learn and internalize the logic, then you have a bullet-proof toolbox under your belt, far more rigorous then a "framework-learning" approach.

I will illustrate it based on your **example. **Please think it through -** I hope you will realize that the same logic, centered around value creation, can be applied to ALL situations that I have outlined above (new market, new product, m&a, etc.). **It also works indepent of whether Profit is the primary objective or not. As long as the objective(s) is/are clear, the criterion to answer the core questions can be adapted accordingly.

**EXAMPLE:**

Question:

*"A German car manufacturer is considering entering the Chinese market, should he do it?"*

Approach:

This is a strategic investment decision. A very clear approach would be:

**1. Core Question:** "Should the client invest into entering the Chinese Market?"

**2. Identify criterion to make this decision:** The (i) __additional value__ we can create over the client's (ii) __investment horizon__ has to be __significantly higher than the (iii) investment cost__. Moreover, the (iv) __required capabilities __need to be in place and the (v) __risks __need to be manageable.

**3. Compile base information:** Upfront investment need in order to get going (need for manufacturing facilities? distribution network? agency fees? other investment needs? / investment horizon of client (by when do they need to recoup the investment?)

**4. Deep dive into the value creation potential by means of a profitability tree:** what are the levers of value here? Compare Scenario A (entering the Chinese market) to Scenario B (not entering the Chinese market). How many cars can we realistically sell? What is the profit per car? Is there a large yearly fixed cost block (hence,, economies of scale?), etc. Analysis is done by first disaggregating profit into its numerical drivers. these are the branches of your tree. Then you can map qualitative drivers to the numerical drivers (e.g., market growth and market structure influence the quantity you can sell; the brand position influences the price point; operations and manufacturing influence fixed and variable costs, etc.)

**5. Calculate annual value (delta between Scenario A and B).** If entering the Chinese market indeed increases annual profits by a certain amount, you then divide the upfront investment cost by this additional yearly profit. This gives you the break even point (number of years after which the investment becomes profitable). If this point comes earlier than the investment horizon (which depends on alternative investment opportunities of the client), then this is a beneficial investment and the client should proceed with the move (purely based on financials).

**6. Don't forget to discuss capabilities and compile potential risks and mention them in your summary**

Cheers, Sidi

P.S.: Please have a look at another example here - it follows the same core principle to address a similar issue. Even though the primary question is different (about capactiy expansion): https://www.preplounge.com/en/consulting-forum/how-would-you-structure-this-1737