Hey all,

wondering how to best structure and present the classical profitability framework at McKinsey. I often hear that in contrast to BCG and Bain, the framework must be broader, more specific and customized to the client situation. I struggle a bit in incorporating all these requirements without being too lenghty.

• Before presenting the framework ask clarifying questions about business model, customer segments served, markets, distribution channels
• Setup framework consisting of the classical profitability tree

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My presentation approach to the interviewer so far:

1) Investigate what is the main element causing the decline

a. Revenue Side:

• Check out the historical development, mention you want to differentiate between product lines, customer segments, geopgraphies (if possible) and compare market/competitor development

b. Cost Side:

• Check out historical development, mention to differentiate and compare cost basis with competition/industry average

2) Identify the root causes of the development

If problem lies on the revenue side:

• Screen PRICE and QUANTITY
• PRICE: Price could have decreased due to firm decision to lower price (i.e. to gain market share), competition could have changed their pricing or customers have changed their willigness to pay (i.e. due to economic developments)
• QUANTITY: Quantity decline could be caused by internal or external issues:
• Internal: Name a 3-4 examples that could have changed like 1. we changed our products or have quality issues, 2. capacity problems, 3. stopped/changed our marketing...
• External: Name 3-4 examples that could be a reason: 1. New competitors emerge, 2. Existing competitors changed their products/use new distribution models, 3. Customers changed their product preferences...

If problem lies on the cost side:

• Screen fixed and variable costs, analyze the value chain
• Fixed costs: Name 2-3 fix costs client will have
• Variable costs: Name 2-3 variable costs client will have (if any)
• Benchmark to see which costs are above competition and understand what they are doing better

3) Give an outlook what will happen afterwards - develop solutions to the problem, qualitatively assess chances and risks of the available options

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Would this presentation be okay for McKinsey or too long?

Thanks in advance!!