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2

How to structure this problem without being too generic ? (growth strategy)

Hello everyone,

How would you go about structuring a case like this one, that is quite broad with limited quantitative data without being too generic ?

Case Prompt : Our client produces and sells leather products, namely leather bags and leather shoes. Our client has a mid-premium positioning and is market leader on this segment. He wants us to help him grow his revenue.

Additional data provided upon asking : Our client is present only in one country (assume USA), sells through his own shops. A typical shop is 200sqm with 80sqm dedicated to bags and 120sqm dedicated to shoes. No target number.

My initial structure was the following :

  1. Inorganic growth
    1. Horizontal M&A (Acquiring other shops from competitors)
    2. Vertical M&A (Acquiring upstream in the leather value chain)
  2. Organic growth
    1. Improve pricing (can we raise prices?)
    2. Improve sales through marketing, promotion, etc
    3. Launch new products (other leather products, accessories..) and higher-end / lower-end product lines
    4. Find new clients (other segments, other distribution channels eg. dept. stores or online, geographic expansion eg. other countries)
    5. Diversification

However, I realize in hindsight this structure is quite generic for a growth problem and therefore probably not a very good one. Another problem is that I also didn't really know where to start.

How can I make it better ? Does it make sense to go through a kind of an issue tree (Revenue branch of a profitability framework ?) before thinking about ways to grow the revenue ? Should I ask more questions (which ones?) ?

Thank you !

Hello everyone,

How would you go about structuring a case like this one, that is quite broad with limited quantitative data without being too generic ?

Case Prompt : Our client produces and sells leather products, namely leather bags and leather shoes. Our client has a mid-premium positioning and is market leader on this segment. He wants us to help him grow his revenue.

Additional data provided upon asking : Our client is present only in one country (assume USA), sells through his own shops. A typical shop is 200sqm with 80sqm dedicated to bags and 120sqm dedicated to shoes. No target number.

My initial structure was the following :

  1. Inorganic growth
    1. Horizontal M&A (Acquiring other shops from competitors)
    2. Vertical M&A (Acquiring upstream in the leather value chain)
  2. Organic growth
    1. Improve pricing (can we raise prices?)
    2. Improve sales through marketing, promotion, etc
    3. Launch new products (other leather products, accessories..) and higher-end / lower-end product lines
    4. Find new clients (other segments, other distribution channels eg. dept. stores or online, geographic expansion eg. other countries)
    5. Diversification

However, I realize in hindsight this structure is quite generic for a growth problem and therefore probably not a very good one. Another problem is that I also didn't really know where to start.

How can I make it better ? Does it make sense to go through a kind of an issue tree (Revenue branch of a profitability framework ?) before thinking about ways to grow the revenue ? Should I ask more questions (which ones?) ?

Thank you !

(edited)

2 answers

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Best Answer

Hi there,

This is a very good question. In fact, a lot of candidates struggle with the issue of making generic issue trees, some without even realizing it.

Your framework is not great but is fine - you have (pretty much) the correct high-level ideas, but you need to go deeper and tailor it to this specific case. Since there are thousands of ways to make an issue tree, I won't construct a new one here, but I will throw out a few ideas for you to consider.

Let's first take a another look at the prompt. There is a ton of info in the prompt that you can use to customize your framework.

Our client produces and sells leather products, 1) namely leather bags and leather shoes. Our client has a 2) mid-premium positioning and is 3) market leader on this segment. He wants us to help him grow his revenue. Our client is present only in 4) one country (assume USA), sells through 5) his own shops. A typical shop is 6) 200sqm with 80sqm dedicated to bags and 120sqm dedicated to shoes. No target number.

Let's go through each of the points here:

  1. So they've been making leather bags and shoes. How are these two product lines doing, revenue and profit wise? Is one of them selling much better than the other? Can the client make other leather products? How about shoes and bags of other materials?
  2. How was mid-premium positioning chosen? How does different customer segment look? What is the size and growth of these different segments (namely, premium, mid-premium, mid, value)? Should we go after a different segment?
  3. Hmm..market leader. What does this mean? Are we talking about 90% market share already? Or are we taking only 40% of market, but all other competitors are super small? How saturated is the market? What's the room for growth?
  4. How about other countries?
  5. How are its own shops operated? What's the footprint of its shops? Any revenue and revenue growth difference across its shops (maybe by region)? Ever considered finding a distributor, or selling to retailers?
  6. How was shelf-space determined? Is it optimal? (Also, why do you think the case gives you so much information about store space allocation upfront?)

These are just some examples. Of course, this is an unstructured laundry list of some issues that could be related to the problem, but with these ideas, think about two things

  1. How can I bring all these things into a structured framework? You actually have covered many points, but think about:
    • How can I further expand/extend my framework to include all these little things (while being MECE)
    • Can I restructure my framework so that it is not organic vs. inorganic growth (which is very generic), and make it into something more interesting and special?
  2. Which parts of my current framework are not closely relevant to the info I can learn from the prompt, but I nevertheless put into my framework simply because it's in "the framework"?

Hope this helps.

Hi there,

This is a very good question. In fact, a lot of candidates struggle with the issue of making generic issue trees, some without even realizing it.

Your framework is not great but is fine - you have (pretty much) the correct high-level ideas, but you need to go deeper and tailor it to this specific case. Since there are thousands of ways to make an issue tree, I won't construct a new one here, but I will throw out a few ideas for you to consider.

Let's first take a another look at the prompt. There is a ton of info in the prompt that you can use to customize your framework.

Our client produces and sells leather products, 1) namely leather bags and leather shoes. Our client has a 2) mid-premium positioning and is 3) market leader on this segment. He wants us to help him grow his revenue. Our client is present only in 4) one country (assume USA), sells through 5) his own shops. A typical shop is 6) 200sqm with 80sqm dedicated to bags and 120sqm dedicated to shoes. No target number.

Let's go through each of the points here:

  1. So they've been making leather bags and shoes. How are these two product lines doing, revenue and profit wise? Is one of them selling much better than the other? Can the client make other leather products? How about shoes and bags of other materials?
  2. How was mid-premium positioning chosen? How does different customer segment look? What is the size and growth of these different segments (namely, premium, mid-premium, mid, value)? Should we go after a different segment?
  3. Hmm..market leader. What does this mean? Are we talking about 90% market share already? Or are we taking only 40% of market, but all other competitors are super small? How saturated is the market? What's the room for growth?
  4. How about other countries?
  5. How are its own shops operated? What's the footprint of its shops? Any revenue and revenue growth difference across its shops (maybe by region)? Ever considered finding a distributor, or selling to retailers?
  6. How was shelf-space determined? Is it optimal? (Also, why do you think the case gives you so much information about store space allocation upfront?)

These are just some examples. Of course, this is an unstructured laundry list of some issues that could be related to the problem, but with these ideas, think about two things

  1. How can I bring all these things into a structured framework? You actually have covered many points, but think about:
    • How can I further expand/extend my framework to include all these little things (while being MECE)
    • Can I restructure my framework so that it is not organic vs. inorganic growth (which is very generic), and make it into something more interesting and special?
  2. Which parts of my current framework are not closely relevant to the info I can learn from the prompt, but I nevertheless put into my framework simply because it's in "the framework"?

Hope this helps.

(edited)

One thing that jumps out and which you haven't addressed is to look at the optimize how much floor space is dedicated to shoes and how much is dedicated to bags. The amount of revenue a square meter of floor brings in is a common KPI in retail.

Other than that, you can rephrase a lot of your framework to be more specific to the problem. For example, you know that the client has a mid-premium positioning. You could therefore rephrase "can we raise prices" to "move towards targeting a premium customer segment". Not quite the same, but would lead you to a similar analysis (competitors, price-sensitivity etc.).

Alternatively, you could make the buckets a better fit by giving specific examples, such as: "Improve sales through marketing, promotion, etc: Hire a celebrity spokesperson, appear at fashion shows". Both are somewhat common for mid-premium fashion and give your framework a more specific touch.

Just some ideas, and I'm sure other experts will chime in with a more refined approach. Until then, I hope that this helps!

One thing that jumps out and which you haven't addressed is to look at the optimize how much floor space is dedicated to shoes and how much is dedicated to bags. The amount of revenue a square meter of floor brings in is a common KPI in retail.

Other than that, you can rephrase a lot of your framework to be more specific to the problem. For example, you know that the client has a mid-premium positioning. You could therefore rephrase "can we raise prices" to "move towards targeting a premium customer segment". Not quite the same, but would lead you to a similar analysis (competitors, price-sensitivity etc.).

Alternatively, you could make the buckets a better fit by giving specific examples, such as: "Improve sales through marketing, promotion, etc: Hire a celebrity spokesperson, appear at fashion shows". Both are somewhat common for mid-premium fashion and give your framework a more specific touch.

Just some ideas, and I'm sure other experts will chime in with a more refined approach. Until then, I hope that this helps!

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