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Cheng's Business Situation Framework and market assesment

Anonymous asked on Aug 01, 2018 - 3 answers

Hi all!

Somehow, I find laying out the case structure the most difficult. After many trials and errors, I am sticking to Cheng's Business situation framework in many cases, because I find it very efficient. The only thing I am confused is that I do not know how properly incorporate Market evaluation in this structure.

For example, there is a New Market Entry case and our client wants to start selling its product in India. Naturally, I am interested in market size of this prodict in India and whether the market growing. Some of the aspects (for example, market share in the market and concentration) can be found in the framework in other branches, but I am struggling to understand where I should run the potential market analysis. That's why sometimes I add a new bucket of "market".

I am pretty sure I am missing something here, so I will be happy to run through your opinions.

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Benjamin updated his answer on Aug 01, 2018
ex-Manager - Natural and challenging teacher - Taylor case solving, no framework
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Hi Katya,
Cheng's framework are indeed efficient, but personnaly I think that whatever framework systeme you use, this will never be completely appropriate and enable you to build the right structure (except very simple cases).
The reason is that all this structures you can learn from the books, are very theoretical and doesn't fit really well to the cases you will receive that are mostly taken from consultant's actual experience. A unique business issue requires a unique structure

In my opinion, once you've learned the basic of structuring with the books you should move on to more personal thinking based on common sens in order to build the right structure on your own. Here is how I proceed, with two simple questions asked to my self :

1. If if sincerely put myself in my client shoes, what are the topics I need to cover to make up my mind on a decision ? This helps you not to forget a key topic

2. Do all the topic I want to cover bring a relevant element in formulating the recommandation ? If the answer is "no" or "indirectly" then you should drop this topic

Once you've identified the key topics, you must organise them following this rules

- Prioritize from most to less important : so if you don't have time to cover everything your will still be able to derive some reco from the investigation you made

- Create clusters of topics / idea to investigate that are homogenous

- Work on the labelling of your clusters, so they are self explanatory. If it takes too much time to explain, this is probably not clear enough.

Hope this helps
Best
Benjamin

(edited)

Vlad
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replied on Aug 01, 2018
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Hi,

There is no one-fits-it-all structure. So I recommend you to use a flexible approach depending on the type of the case. It definitely comes with practice. Here is an algorithm on how to develop this skill:

  1. Make sure you understand all the different types of cases that you may face
  2. Identify the most appropriate structure for each type
  3. Solve 30-50 cases and try to understand where do they fit in your categorizations
  4. Based on your experience think of the potential variations in structures within each of the case types

For the market entry cases always start with clarifying an objective:

  1. What are we going to achieve on the market and what is the timeline?
  2. What are our business model and revenue streams?
  3. Are we going to enter organically or non-organically?

Then I would use the following structure:

Market

  • Size
  • Growth rates
  • Profitability
  • Segments
  • Distribution channels
  • Bereers (mainly regulation)

Competition

  • Market shares of competitors and their segments (see the next point)
  • Concentration / fragmentation (Fragmented market with lots of small players is less mature and easier to enter fom a scratch. Concentrated market is hard to enter but has potential acquisition targets)
  • Unit econmics of the players (Margins, relative cost position)
  • Key capabilities of the players (e.g. suppliers, assets, IP, etc)
  • Previos / projected entrants

Company

  • Unit economics (Margins, costs) in current or target markets
  • Brand
  • Product mix
  • Key capabilities

Opportunities to enter - a bucket sumarizing:

  • The need of investments
  • Time to enter
  • Branding (Do we keep an existing brand / do sub brand if it is the new segment or create a new brand?)
  • Existance of acquisition / liscencing / JV targets if relevant
  • Cost and benefits

Good luck!

Sidi
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replied on Aug 01, 2018
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I agree with Vlad and Benjamin! Victor Cheng's framework (and any other standard famework) is simply not suited to approach an individual business problem! It is imperative that you LEARN HOW TO DISAGGREGATE A CONCRETE QUESTION that is asked by the (hypothetical) client and HOW TO DEFINE THE CRITERIA TO ANSWER THE QUESTION! There is no way around it!

Cheng, Case in Point, etc. are helpful to get a feeling for relevant areas that might need to be scrutinized, but you should never structure a case just by outlining a framework.

Structure DOES NOT equal frameworks!

I have explained this in a bit more detail here: https://www.preplounge.com/en/consulting-forum/is-structure-the-most-important-thing-in-case-interview-1904

Cheers, Sidi

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