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1

Supply-based analysis in Revenues Growth (with Ansoff Matrix?)

Good morning,

I was given a negative feedback from my case partner in a 'Revenues Growth' case. My mistake was the following: I underestimated the impact of internal capabilities (i.e. supply-centered analysis) and only focused on a demand-centered analysis.
Instead, I should have focused on the internal assets of the company (in this case: the pipeline of pharma patents).

My question is: what aspects should I consider when I'm nudged towards a supply-centered 'Revenues Growth' analysis?
This happens, for example, when the interviewer says "we don't have any information about demand, market size, etc., nor we can guess them". This happened in my recent case :)

Aspects I would consider (using Ansoff Matrix):

  • Market Penetration --> Potential addition of assets/people to penetrate a current market: - Production/R&D Level: more factories if you have capacity limits, process improvement to potentially change price/quality and have an impact on sales - Distribution Level: more distribution channels - Sales Level: more sales reps, more retails, more e-commerce effort in existing markets (depending if B2B or B2C) or brand improvement
  • Market Development --> Potential addition of assets/people to penetrate a new market: - Production/R&D Level: factories in new markets - Distribution Level: extension in new markets (thru JV, M&A, subsidiary, or local distributors) - Sales Level: extension possibility in terms of more sales reps, more retails, additional e-com platform in new market
  • Product Development --> Potential addition of assets/people to produce, distribute and sell a new product: - Production/R&D Level: existing or to-be-built assets for future production and sale of new products (e.g. patents in pharma, production expertise, etc.) - Distribution Level: existing or to-be-built distribution channels for these new products - Sales Level: development of more retails/sales-reps/e-com for new products or possibility to exploit current channels
  • Diversification --> Potential addition of assets/people to diversify: - Production/R&D Level: existing or to-be-built assets for diversification (e.g. competences in a new market, production expertise on a potential new product for a new market) - Distribution Level: possibility of development/exploitation of existing or to-be-built distribution channels for the diversification strategy. - Sales Level: development of more retails/sales-reps/e-com for diversification or possibility to exploit current channels

Does this make sense? I know that is quite generic and it must be adapted to each specific industry/case, but I still would like to have a general opinion about the usefulness of my approach. Of course, I am looking forward to new approaches or modifications!

Thank you so much for your help!

T

Good morning,

I was given a negative feedback from my case partner in a 'Revenues Growth' case. My mistake was the following: I underestimated the impact of internal capabilities (i.e. supply-centered analysis) and only focused on a demand-centered analysis.
Instead, I should have focused on the internal assets of the company (in this case: the pipeline of pharma patents).

My question is: what aspects should I consider when I'm nudged towards a supply-centered 'Revenues Growth' analysis?
This happens, for example, when the interviewer says "we don't have any information about demand, market size, etc., nor we can guess them". This happened in my recent case :)

Aspects I would consider (using Ansoff Matrix):

  • Market Penetration --> Potential addition of assets/people to penetrate a current market: - Production/R&D Level: more factories if you have capacity limits, process improvement to potentially change price/quality and have an impact on sales - Distribution Level: more distribution channels - Sales Level: more sales reps, more retails, more e-commerce effort in existing markets (depending if B2B or B2C) or brand improvement
  • Market Development --> Potential addition of assets/people to penetrate a new market: - Production/R&D Level: factories in new markets - Distribution Level: extension in new markets (thru JV, M&A, subsidiary, or local distributors) - Sales Level: extension possibility in terms of more sales reps, more retails, additional e-com platform in new market
  • Product Development --> Potential addition of assets/people to produce, distribute and sell a new product: - Production/R&D Level: existing or to-be-built assets for future production and sale of new products (e.g. patents in pharma, production expertise, etc.) - Distribution Level: existing or to-be-built distribution channels for these new products - Sales Level: development of more retails/sales-reps/e-com for new products or possibility to exploit current channels
  • Diversification --> Potential addition of assets/people to diversify: - Production/R&D Level: existing or to-be-built assets for diversification (e.g. competences in a new market, production expertise on a potential new product for a new market) - Distribution Level: possibility of development/exploitation of existing or to-be-built distribution channels for the diversification strategy. - Sales Level: development of more retails/sales-reps/e-com for diversification or possibility to exploit current channels

Does this make sense? I know that is quite generic and it must be adapted to each specific industry/case, but I still would like to have a general opinion about the usefulness of my approach. Of course, I am looking forward to new approaches or modifications!

Thank you so much for your help!

T

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Hi,
Let me break it down the case, so that I can have a better understanding:

Problem statement: Pharma company is aiming to increase revenue (in other words - to find growth in their revenue stream)

Key issues: No data about demand-side (e.g. market share, customer, etc)

Based on my experience, it would be very rare to do the REVENUE GROWTH case with having minimum data on the demand-aspect. It is definitely possible, but the answers will be just too theoretical.

I like the way you approach it using Ansoff Matrix, although one might argue using the matrix will also require a piece of better information on the demand-side to determine the right use. For instance, for market development, we should have proper knowledge of the market size/share/potential on the new market(s) to recommend the most suitable way to enter (either JV, M&A, subs, strategic partnership, online distribution, local partner, etc).

Nevertheless, if I were asked that kind of case, I would use this approach to get a suitable recommendation in getting growth thru internal capabilities (with no demand data) :

Approach to focus on

Production limit from the value chain

This is essential to understand if we should solve the volume or pricing aspect in the revenue. if there is any production limit then you know we need to look at that in more granular. Ask questions such as (not limited to):

  • Do we know if our current suppliers are able to increase their production capacity?
  • Is there any logistic problem if we increase our purchases?
  • Do we have enough warehouse to store the new increased inventories?
  • How many people do we need to hire every x% increase in purchasing/inventory?

Distribution channel effectiveness

Okay, now you got a better understanding of what is going to happen if we increase our volume of inventory. Now, we need to know how to sell and distribute the product more effectively.

Ideally, it will be very helpful if data that shows the current and future customer distribution based on each channel is present. Let's just say it's not there, then what we can ask for is the following questions:

  • Do we have the %proportion data of each distribution channel (historically - last 1 or 2 years) and the trend?
  • What are the top 3 channels that the company is currently focusing on? why?
  • What is the most expensive channel to maintain? and why?
  • What is the cheapest channel to maintain? and what's the %?
  • Which channel does have the best conversion ratio (USD 1 generating X customers)?

Product Innovation or Development

You are able to increase the volume, you know where to sell the most - now, how to sell it? how do you package it? So that your current or new segments will buy that once it hits the market.

But, you have to ask these questions first:

  • Does the company have a budget to do product development? and what are the top priorities to be implemented from the budget?
  • What are the top 3 key issues/complaints from the customers on the current product?
  • What are the top 3 key USPs of the current product?
  • Is there any key technology/R&D focus from the company to improve the current product?
  • What are the top 3 market needs that we haven't been able to deliver? and why?

I think from those 3 factors alone, you would be able to conclude if the company is able to get the growth based on their internal/supply capabilities. And, yes the questions do not require any data nor number on demand-side.

Yet again, the framework should be expanded or even follow the Ansoff matrix if we have a better understanding on the demand-side.

Happy to explain further, should you have any questions. Thanks!

Hi,
Let me break it down the case, so that I can have a better understanding:

Problem statement: Pharma company is aiming to increase revenue (in other words - to find growth in their revenue stream)

Key issues: No data about demand-side (e.g. market share, customer, etc)

Based on my experience, it would be very rare to do the REVENUE GROWTH case with having minimum data on the demand-aspect. It is definitely possible, but the answers will be just too theoretical.

I like the way you approach it using Ansoff Matrix, although one might argue using the matrix will also require a piece of better information on the demand-side to determine the right use. For instance, for market development, we should have proper knowledge of the market size/share/potential on the new market(s) to recommend the most suitable way to enter (either JV, M&A, subs, strategic partnership, online distribution, local partner, etc).

Nevertheless, if I were asked that kind of case, I would use this approach to get a suitable recommendation in getting growth thru internal capabilities (with no demand data) :

Approach to focus on

Production limit from the value chain

This is essential to understand if we should solve the volume or pricing aspect in the revenue. if there is any production limit then you know we need to look at that in more granular. Ask questions such as (not limited to):

  • Do we know if our current suppliers are able to increase their production capacity?
  • Is there any logistic problem if we increase our purchases?
  • Do we have enough warehouse to store the new increased inventories?
  • How many people do we need to hire every x% increase in purchasing/inventory?

Distribution channel effectiveness

Okay, now you got a better understanding of what is going to happen if we increase our volume of inventory. Now, we need to know how to sell and distribute the product more effectively.

Ideally, it will be very helpful if data that shows the current and future customer distribution based on each channel is present. Let's just say it's not there, then what we can ask for is the following questions:

  • Do we have the %proportion data of each distribution channel (historically - last 1 or 2 years) and the trend?
  • What are the top 3 channels that the company is currently focusing on? why?
  • What is the most expensive channel to maintain? and why?
  • What is the cheapest channel to maintain? and what's the %?
  • Which channel does have the best conversion ratio (USD 1 generating X customers)?

Product Innovation or Development

You are able to increase the volume, you know where to sell the most - now, how to sell it? how do you package it? So that your current or new segments will buy that once it hits the market.

But, you have to ask these questions first:

  • Does the company have a budget to do product development? and what are the top priorities to be implemented from the budget?
  • What are the top 3 key issues/complaints from the customers on the current product?
  • What are the top 3 key USPs of the current product?
  • Is there any key technology/R&D focus from the company to improve the current product?
  • What are the top 3 market needs that we haven't been able to deliver? and why?

I think from those 3 factors alone, you would be able to conclude if the company is able to get the growth based on their internal/supply capabilities. And, yes the questions do not require any data nor number on demand-side.

Yet again, the framework should be expanded or even follow the Ansoff matrix if we have a better understanding on the demand-side.

Happy to explain further, should you have any questions. Thanks!

(edited)

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