The 4C Framework is a good framework to structure a firm's positioning
Get a broad overview of a business unit and its market with the 4C Framework
The 4C Framework is composed of four elements: Customer, Competition, Cost and Capabilities. The structure is useful to get a better understanding of the client and important during your case interview. While the former 2 provide information of external market conditions, the last 2 provide internal information about the company. The framework belongs to the basic tools, which serve as general roadmap and reminder of the major aspects to cover. The 3C Framework – Customer, Competition and Company is very similar except that the internal aspects of cost and capabilities are combined within the company.
Think about the 4 Cs when the case is about analyzing a market, entering a new market or introducing a new product
Within the first segment, the focus lies on the customer of the company
It is important to realize that the customer of the firm is not necessarily the end customer who buys the product. To find out more about the customer, questions should concentrate on:
- Market size in terms of revenue
- Segmentation by geography, products and/or other segments
- Customer segmentation and types of customers
- Attractiveness in terms of revenue and expected growth
- Special needs and wishes
- Distribution channels
The second part of the analysis should focus on the competition
It is important to understand the market position of the competitors as well as how the competition differentiates itself from the client's company.
- Competitive position portrayed through the share and relative share of the market
- Growth of the last years and expected growth
- Performance, for example profitability, relatively to ours
- Dynamics of new entrants
- Other trends
Moving to the third dimension - costs - the view changes from an external to an internal view
Here, we compare our client’s cost structure with the competition’s cost structure and try to reduce our costs if certain components of competition costs are lower.
- Relative cost position, cost advantage compared to competition
- Profitability by customers, product lines, geography
- Economies of scale
- Introduction of best practices
- Exiting unprofitable areas
- Reorganization of business units
The fourth and last area deals with capabilities
If we have a better understanding of the resources of a company, we are able to judge more precisely what kind of strategies a company can apply to boost its performance. Furthermore, we can decide if a company should rather make something by itself (organic) or buy the competencies from outside (inorganic - e.g., buying a new firm). Following are some examples of company's capabilities:
- Core competencies
- Human Resources
- Value for the customers
- Financial resources
Read a case using the Customer, Competition, Cost and Capabilities Framework.
Key takeaways for the 4C Framework
- 4 elements of interest: Customer, Competition, Cost and Capabilities.
- Customer and Competition provide an external view.
- Cost and Capabilities provide an internal view.
- Useful for market analysis, market entry and introduction of a new product.