Very often the 1st question of a McKinsey-style case about profitability is something like: Profits are declining, how would you approach the client's problem?
I find that the common Profitabilty analysis (any kind, but let's take Cheng's framework as an example) is too narrow.
Especially because of how it's worded (how would you approach the problem), I feel I would like to include:
- Macroeconomic trends;
- Industry trends & profitability;
- Company's capabilities, value prop and Profitability analysis;
- Competition, segments&concentration;
- Customers, segments, price sensitivity and preferences;
- Product, nature of, mix, pricing strategues and promotion.
Is it too general? I just think a lot could be missed in a profitability analysis if we do not look at all these aspects.