For instance, the CEO is interested in increased profitability but you know you need to do market analysis as well. If the case specifically asks for profitability, does it make sense to start there or finish there? I use profitability and mkt analysis as an example but I assume this answer would encompass any multi-level analysis. Thank you!
What is the correct order to analyze multi-level cases?
Your objectives are
- to make the transition between the two frameworks fluent
- to facilitate your work by gathering before information that will be useful later
At this scope, I would advise to adopt the following hierarchy:
1) Market Analysis: good to place it at the very beginning, because it helps understanding how the market is and if it looks attractive;
2) Analysis of the resources and capabilities of our company: does our client even have the sufficient resources to pursue the desired strategy? Is there any obstacle there?
3) Profitability analysis: this is usually the core, present in the majority of the cases. How does the P&L look like? How is the revenues model? How the cost structure? Let´s put some numbers out there!
4) Market Entry Strategy / Competitive Response: these two frameworks almost never go together in the same case and they can both be placed at this point. Points (1) and (2) of this list will give us precious information to be able to tackle these frameworks successfully.
5) Pricing / M&A or JV / Marketing Strategy: also these three frameworks almost never will appear in the same case. They can be placed at the very end because the information from all the previous points will give a substantial help in solving them.
In this particular case:
- You start with profitability structure and split profit into revenue and costs.
- Then you split revenue into market and market share
- Market share then equals units sold and price
In general, if you have several levels in a case - try to put them in the same structure, but be smart in prioritization. I.e. if the case is the market entry, new product, M&A, etc. you'd better always start with the market to better understand the context.
I'm not yet avanced or Pro but I will try to answer using my consunting mindset under construction :)
It depends on what seems the most logical and the conditions to prove or disprove your hypothesis. In your particular example, if 1) the question from the interviewer states that the CEO wants to expand, profitability should, in my opinion, come after market analysis : you answer to the main question; which is: should/could I expand ?. If 2) the CEO only wants to increase profitability, then profitability comes first : you answer to the main question: How do I increase profitability ?. Think of it as a combination of conditions to prove your hypothesis, with one depending on anonther.
In 1) If there is no market opportunity, then profitability is of no interest. If there seems to be a market opportunity, then you should evaluate profitability. Remember that in consulting you will want to avoid unnecessary work, because there will be so much necessary work... ! In 2), you should definitely break down profitability first (which somehow always include a bit of a competition analysis at least) to evaluate where the profitability gains are possible and if market expansion is a valuable option.
Also, if you feel that the question might be multi-leveled, do not hesitate to ask where the proirity lies.
Other PrepLoungers, please do not hesitate to correct me if I'm mistaken; I'll learn from it too !
Related BootCamp article(s)
The Value Chain
The Value Chain - as e.g. by Porter - is a classic framework to structure the activities of a business and add value to products by transforming resources.
Learn to crack Profitability Framework Consulting Cases, which are the number 1 reason for real consulting projects and hence are an important case type.
LubricantsCo, a very successful Asian premium producer of lubricants in their native region, would like to further increase their revenue and profit. The product range ranges from lubricants in the automotive sector (e.g. motor and gear oil) to industrial applications (e.g. fats, heavy-duty oils). ... Open whole case
Your client, large automotive OEM WyCar, has developed its first fully electric vehicle (EV) and introduced it as a pilot on the Austrian market last year. However, sales have been far below the expected numbers. The management has engaged you to support them in understanding the reasons and advise ... Open whole case
Duraflex is a German footwear company with annual men’s footwear sales of approximately €1 b. They have always relied on the boot market for the majority of their volume. In this market they compete with three other major competitors. In the fall of 2013, Badger – one of Duraflex’s competitiors – ... Open whole case
LumCO, a company producing injection-molded components for lighting applications, has operated successfully in its native European market. The company wants to open up one production facility each in China and the United States and establish their own distribution network in both countries to serve ... Open whole case
You have been hired to support the owner of a bike-shop as a business consultant. The bike-shop has suffered a significant revenue decline during the last year, and now the owner would like you to assess the situation and options for the way forward. They want to know last year’s profit, i.e. how i ... Open whole case