I'm tempted to start with p * q, but it sometimes feels unnatural to shoehorn the necessary questions (distribution channels, marketing, customer, market characteristics, competition, product, company,etc. depending on the case) under either "price" or "quantity". At the same time, it feels odd to ignore the p * q structure altogether. How should I approach this?
Hi!
It depends very much on the industry. In some cases (Growth strategy) I will use a broad structure, in others (e.g. “how to increase the excessive luggage revenues for an Airline”) I will use P, Q and the Process. Here is the broad structure that you can adapt to your industry:
Analyze the market:
Analyze the competitors:
Analyze our company:
How to increase revenues:
Best!
Hi Liam,
This is the structure I would suggest for a growth strategy case:
Hope this helps,
Francesco
Hey Liam,
There's several different ways of approaching the same case (and they can all be right!), that said, below you can find the one I often prefer:
1. Analyze the external factors/market (I do like to know what's going on in the market before even understanding what's going on with the company; as you can imagine it's different if a company wants to grow revenues by 10% in a market growing 20% vs. a market that is even declining!)
- Evolution of market (previous and future)
- Competitive landscape
- Consumer tastes and trends
- Regulation
2. Analyze the internal factors
- revenue tree (try to avoid simply stating Price * Quantity, try to give some tailoring to the industry you're talking about; e.g., for gyms you can say the number of clients who have a monthly pass * the monthly fee.. it will positively impress your interviewer!); if company is multi-product you should take that into consideration here and open multiple revenue streams in the branches!
- sometimes I also include company capabilities as a separe point, depending on the specifics of the case and goal
Hope this can be helpful, any query on it just let me know :)
Best
Bruno
Hi Liam,
You've already received excellent responses. What I will build on is the higher level structure when approaching problem solving (i.e. after asking clarification questions and understanding the objectives).
You should start with thinking about how revenue growth is achieved: organically or inorganically (or both). Under organic growth, you can achieve that through
1. Increasing the price, as you've mentioned
2. Increasing the quantity - either by increasing your market share with existing customers or by targeting new customers
3. Launching new products/services - could be complementary produts, or entirely new ones
4. Entering new markets
Out of the box answers:
5. Increase the utilization of your existing products - the toothpaste example is great. DM me for more details.
6. Target non-customers and make them customers - increase the entire market size
You can achieve inorganic growth through:
1. An Acquisitions - of companies or products
2. A Merger
Now that you've defined the high level structure, you cover all grounds to grow revenue and will not make the mistake of forgetting any points as you go along with the case, especially when the interviewer asks you how else could you grow revenue (under each category you could expand. Ex: licensing deals, contract manufacturing, commercial agreements etc...).
After defining the high level structure, you could then figure out where to start based on the case and your clarification questions to the interviewer and begin with the points mentioned by the other experts that have responded to you (analyze market, competitors etc...).
Hope this helps.
Rakan
Agreed with above. As stated by Bruno, the correct way to think about market expansion is to think about:
-demand evolution (external)
-supply evolution (external AND internal)
-effect on price (it's a market after all)
Now, two things that should never be forgotten, even if it's a revenue growth case
-how much does it cost and does it increase profits?
-what is impact to profit margins (a lot of times you don't go for market expansions that are margin dilutive, due to impact on stock price)
ask to your interviewer if there are any objectives for the two points above or any thresholds or you can ignore for the case.
hope it helps,
andrra
Hi Anonymous,
I would suggest to use the first method, but with a switch; you won’t need indeed to know price and volume for all the segments. More specifically:
The reason I believe this method is superior to an initial division of revenues in price * volume is that will allow to understand immediately the real reason for the problem, and for which segment. With an initial division in price*volume, that may not always be the case.
Assuming for example that the problem of the company is a decline in volume of the more expensive product A by 10 units and at the same time the cheaper product B increased by 20 units, dividing in price*volume will show an increase of volume and a decrease of the average price – thus apparently a price issue. Although you may eventually identify the issue is volume for product A, and thus not price related, this would take longer than following the previous steps.
Hope this helps,
Francesco
Hello,
So my approach is as follows:
1) New business areas
1a: New Products
1b: New Customer Segments
1c: New Geographical markets
2) Existing business areas
2a: Increase price
2b: Increase volume from existing customers
2bi) Selling more frequently of the same products
2bii) Cross sell different products to existing customers
All the best!
Rushabh
Hi OP,
It's totally fine to use the P*Q framework. But the way I'd use it would be more nuanced. For example:
The above only covers growing the core business. There's also the option of using the company's existing capabilities to enter new markets, e.g. Amazon leveraging their existing database centers and starting AWS.
With both types of growth opportunities, I would pressure-test the feasibility and impact:
Hi,
First of all, In the clarifying questions, I ask proactively how many products / revenue streams we have
Then:
Best
No please do not structure it like that in MBB, 95% chance you will fail. Rather group it in buckets relevant to the case. Warm regards, Frederic
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