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Profitability case framework approach

Anonymous A

Hi everyone!

I have a question regarding Profitability case framework. Currently I see two approaches:

1) Profit = Revenue - Cost, and then Market/Consumer/Competition/Company is covered behind either Revenue or Cost depending on the case.

2) 2 branches: External factors (Market, Consumer, Competition), Internal factors (Profit components and Company itself).

Please, kindly clarify which approach is best and why?

Many thanks in advance!

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Chris replied on 05/08/2017
BCG Consultant / Interviewed 80+ applicants at BCG / Received offers from McK (US) and BCG (DE)

Hi Anonymous!

Both are valid approaches. As a rule of thumb,
1) is more suitable for a quantitative assessment (e.g. "By how much has profit declined?"), while
2) seems like a good approach for a qualitative question (e.g. "Why has profit declined?")

As in all driver trees, the order of levels is not fixed and should be adjusted based on the question and situation at hand.

Hope this helps!

Chris.

(edited)

Ali S. Yur replied on 05/09/2017

Hi,

I think there is no single rule to choose which one might the best option.

If you are dealing with market entry case, then you could talk about for the following:

1)Profitability

2)Company/Product

3)Industry

4)Competition

All of those will be valid areas to look into since you might want to analyze how each can affect your potential goal.

In a more specific case where the client already entered into business and there is a profitability issue, you might want to breakdown as Internal/External or still use a combination of the factors I mentioned above.

The goal is to be flexible on any case and not force fit any pre-designed framework but be quick and flexible enough to create one on the spot. That's how it sounds authentic. Also there are many cases where you can't simply use any of the frameworks above (exception Profitability) like:

-Why are the number of giraffes decrease in Australia?

-Why did the elevator wait time increased in client's office last year?

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