Hi,
I would recommend the following approach:
1) Ask clarifying questions:
- Clarify the business model (i.e. how the business works and what are the revenue streams / core products or business lines). Why do you need to know the revenue streams? Because it's one of the most critical pieces in understanding the business model. An example is Oil&Gas with up-, mid- and down- streams that are completely different businesses.
- Clarify the objective both in money terms and timeline (e.g. Our objective is to increase profits by 5M in 5 years). When you have a to select from several options in a case - clarify the selection criteria
- Clarify other possible limitations if you feel that it's necessary
2) You make a classic profitability structure adapting it to the case. Sometimes cases are not that easy as just declining profits. For example, if the profits are lower than planned, it is either because we have problems with profits or we have problems with planning. Try to be MECE here.
3) While you do your structure and split revenues into price and quantity - add proactively the 3rd box with the "Mix". Thus you show your business sense and demonstrate that you know the most common case traps. Pls note that the "mix" can be anything - geography, customer, product, etc. You split the costs into fixed and variable.
3) Costs I would split into Fixed and Variable
4) I would start the case by checking whether its increasing revenues, declining costs, or both - so that you could eliminate the part that is irrelevant
5) If it is the quantity problem I would further analyze whether it's the external market problem or internal one
Best!
I suggest to do 2 things while solving these types of cases:
You proactively ask in the beginning, even before drawing the structure (something like "What kind of products / revenue sources do we have) and then split the structure into price, qty, product mix. Distribution and customers I usually check within qty part
1) In the beginning of the case, you should ask the clarifying question: "Could you pls tell me more about the business model and what are the revenue streams?". I suggest to ask this question with any case, even if it is not a profitability type.
2) While you do your structure and split revenues into price and quantity - add proactively the 3rd box with the "Mix". Thus you show your business sense and demonstrate that you know the most common case traps.
Pls note that the "mix" can be anything - geography, customer, product, etc.
Good luck!