Issue Tree Structuring

Case Structuring hypothesis issue tree structuring
New answer on Nov 17, 2019
2 Answers
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Anonymous asked on Nov 14, 2019


I have read the articles and found them very useful on here, what I am having issues with at the moment is structuring the hypothesis and the issue tree.

Using the LumCO case as an example, I have created my own Hypothesis and Issue Tree (based on Victor Cheng's framework).

Original Information Given

  • Produces injection-moulded components for lighting applications.
  • Has operated successfully in its native European Market.
  • Wants to open up one production facility in China and the US and establish their own distribution network in both countries to serve as a hub for the entire region.
  • LumCO’s products can be categorised as
    • Speciality
      • These are designed and produced by LumCO according to customer specifications
        • E.g. Head lamp casing and lenses in vehicles, luminaries for design lighting applications.
    • Standards
      • Encompasses an assortment of components for multiple lighting applications for different industries (fixtures, lenses, luminaries).
  • Based on the only slight but stable growth in Europe, LumCO is eager to establish production sites in China and the US asap and to begin to distribute their products directly.
  • As a consultant, you are asked by the board to assess this lan considering your knowledge of each region and the lighting market in particular.

Restate the Objective: To clarify, LumCO is looking to expand from its native European market by establish production and distribution facilities in China and US?

Hypothesis: LumCO should open production and distribution facilities in China and the US so that it can better access the Asian and North American markets and improve profitability.

Issue Tree:

  • Customers
    • Who are the main customers of LumCO?
      • What are their segments?
      • What does each segment require?
    • Do Customer requirements differ between Europe, the US, and Asia?
  • Products
    • Understand a bit more about the product
      • What does it do, how is it used?
      • Commodity or differentiable good?
      • Any substitutes or alternatives?
  • Company
    • Do we have access to the Asian and US markets at present?
      • What are our current distribution channels to the US and Asia?
    • What is our cost structure?
    • Can we afford to create new production facilities?
  • Competition
    • Who are the main competitors in the US and China?
      • What is their market share?
      • What will they do if we enter?
    • Any barriers to entry?
    • Any regulations/government subsidies to consider?

I would love some feedback on my issue tree if possible. Also in an interview, would I be required to actually write it all down and show it to the interviewer?

One thing I am unsure of here is, if a competitor has a better product than ours/cmparing their product to ours. Do I add this into the Products section or the Competition branch to be MECE?


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Best answer
Anonymous A replied on Nov 14, 2019

I would structure the issue tree more as a logic/criteria that has to be met for the decision to make sense, rather than buckets of data to look into.

IE: decision is sensible if 1) economics are viable, 2) capapbily to execute exists or can be acquired, and 3) risks are minimal or can be mitigated.

Economic viability means that the additional value the client could generate over it's investment horizon would have to significantly outweigh the up front investment costs, therefore i would structure this with a logic criterion as follows:

[Incremental Annual Profit] x [Investment Horizon] >> [Investment Costs]

You can then break down profit into it's numerical drivers (revenue and costs), and then map quantitative and qualitative data to perform the required calculations. For this scenario, it is likely that the lever will be on the cost side, and cost savings associated with not having to transport products from Europe to the US/China or pay for import tarifs etc, but there may also be an impact on revenue if you can alter pricing given your costs may change - this data would have to be requested and evaluated throughout the case.

At the start, I would just map out the logic tree/criteria to assess and provide examples of qualitative data that maps to the numerical driver tree.


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Anonymous B on Nov 17, 2019

You were trained by Sidi, weren't you? ;)

Anonymous C on Nov 18, 2019

hahaha, yes (s)he was

Anonymous A on Nov 18, 2019

it's a shame that people actually believe in this. It would never work in an interview. I myself believed in it for a while and used it, thank god I got the tips to stop. Consultants do not work like this. E.g. in a Due Diligence consultants usually does the commercial part

replied on Nov 17, 2019

It's okay, but try to make your own frameworks instead of just doing viktor cheng's excact, I do not think it will look good. And make it specific to the prompt. I think you should put "competitor's difference from us" under competitors.

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