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Vlad

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7

What's the best way to structure a revenue growth case?

I'm tempted to start with p * q, but it sometimes feels unnatural to shoehorn the necessary questions (distribution channels, marketing, customer, market characteristics, competition, product, company,etc. depending on the case) under either "price" or "quantity". At the same time, it feels odd to ignore the p * q structure altogether. How should I approach this?

I'm tempted to start with p * q, but it sometimes feels unnatural to shoehorn the necessary questions (distribution channels, marketing, customer, market characteristics, competition, product, company,etc. depending on the case) under either "price" or "quantity". At the same time, it feels odd to ignore the p * q structure altogether. How should I approach this?

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Hi!

It depends very much on the industry. In some cases (Growth strategy) I will use a broad structure, in others (e.g. “how to increase the excessive luggage revenues for an Airline”) I will use P, Q and the Process. Here is the broad structure that you can adapt to your industry:

Analyze the market:

  • Size and growth rates
  • Segments (geographical, customer, product)
  • Distributors / Suppliers
  • Regulation
  • Key market trends

Analyze the competitors:

  • Market shares, growth rates, profits
  • Product / customer / geographical mix
  • Products (Value proposition)
  • Unit economics (Value proposition vs. price vs. costs)
  • Key capabilities (Distribution, supply, assets, knowledge, etc)

Analyze our company:

  • Market share, growth rates, profit
  • Product / customer / geographical mix
  • Products (Value proposition)
  • Unit economics (Value proposition vs. price vs. costs)
  • Key capabilities (Distribution, supply, assets, knowledge, etc)

How to increase revenues:

  • How to increase the scope: Product / customer scope, geographical scope
  • How to improve value proposition (How to fix your weaknesses and improve your strengths; Potential increase in price and volumes)
  • How to answer the competitors (Unique or hard to build property and contracts; Customers / suppliers / complements with lock-in; Reputation and relationships; Organizational capabilities; Product features and know-how)
  • Other benefits of scale (Spreading Fixed costs, Change in technology, Bragaining power)

Best!

Hi!

It depends very much on the industry. In some cases (Growth strategy) I will use a broad structure, in others (e.g. “how to increase the excessive luggage revenues for an Airline”) I will use P, Q and the Process. Here is the broad structure that you can adapt to your industry:

Analyze the market:

  • Size and growth rates
  • Segments (geographical, customer, product)
  • Distributors / Suppliers
  • Regulation
  • Key market trends

Analyze the competitors:

  • Market shares, growth rates, profits
  • Product / customer / geographical mix
  • Products (Value proposition)
  • Unit economics (Value proposition vs. price vs. costs)
  • Key capabilities (Distribution, supply, assets, knowledge, etc)

Analyze our company:

  • Market share, growth rates, profit
  • Product / customer / geographical mix
  • Products (Value proposition)
  • Unit economics (Value proposition vs. price vs. costs)
  • Key capabilities (Distribution, supply, assets, knowledge, etc)

How to increase revenues:

  • How to increase the scope: Product / customer scope, geographical scope
  • How to improve value proposition (How to fix your weaknesses and improve your strengths; Potential increase in price and volumes)
  • How to answer the competitors (Unique or hard to build property and contracts; Customers / suppliers / complements with lock-in; Reputation and relationships; Organizational capabilities; Product features and know-how)
  • Other benefits of scale (Spreading Fixed costs, Change in technology, Bragaining power)

Best!

Hey Liam,

There's several different ways of approaching the same case (and they can all be right!), that said, below you can find the one I often prefer:

1. Analyze the external factors/market (I do like to know what's going on in the market before even understanding what's going on with the company; as you can imagine it's different if a company wants to grow revenues by 10% in a market growing 20% vs. a market that is even declining!)

- Evolution of market (previous and future)

- Competitive landscape

- Consumer tastes and trends

- Regulation

2. Analyze the internal factors

- revenue tree (try to avoid simply stating Price * Quantity, try to give some tailoring to the industry you're talking about; e.g., for gyms you can say the number of clients who have a monthly pass * the monthly fee.. it will positively impress your interviewer!); if company is multi-product you should take that into consideration here and open multiple revenue streams in the branches!

- sometimes I also include company capabilities as a separe point, depending on the specifics of the case and goal

Hope this can be helpful, any query on it just let me know :)

Best

Bruno

Hey Liam,

There's several different ways of approaching the same case (and they can all be right!), that said, below you can find the one I often prefer:

1. Analyze the external factors/market (I do like to know what's going on in the market before even understanding what's going on with the company; as you can imagine it's different if a company wants to grow revenues by 10% in a market growing 20% vs. a market that is even declining!)

- Evolution of market (previous and future)

- Competitive landscape

- Consumer tastes and trends

- Regulation

2. Analyze the internal factors

- revenue tree (try to avoid simply stating Price * Quantity, try to give some tailoring to the industry you're talking about; e.g., for gyms you can say the number of clients who have a monthly pass * the monthly fee.. it will positively impress your interviewer!); if company is multi-product you should take that into consideration here and open multiple revenue streams in the branches!

- sometimes I also include company capabilities as a separe point, depending on the specifics of the case and goal

Hope this can be helpful, any query on it just let me know :)

Best

Bruno

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Hi Liam,

This is the structure I would suggest for a growth strategy case:

  1. Clarify goal. How much do we want to grow, in which period of time and constraints (eg specific budget). If needed, clarify business model.
  2. Identify segments where to grow. To do so you can consider the following:
    1. Analyse growth and size for segment covered by client and competitors. Compare the client to competitors performance to spot potential areas where to grow further
    2. For segments that could potentially allow to meet the goal, analyse further competitors, customer segments and barriers to entry
  3. Identify feasible grow strategy for the selected segments. To do so you can consider the following strategies:
    1. On current product
      1. Ways to increase price
      2. Ways to increase volume
    2. On new product (either to perform organically or inorganically)
      1. Product variety
      2. Diversification
  4. Select grow strategy providing the maximum result with the minimum amount of resources required, and meeting constraints identified at step 1
  5. Consider risks/next steps following grow strategy. Eg increasing the price may lead to higher decrease in volume than expected – could be better then to test on specific areas.

Hope this helps,

Francesco

Hi Liam,

This is the structure I would suggest for a growth strategy case:

  1. Clarify goal. How much do we want to grow, in which period of time and constraints (eg specific budget). If needed, clarify business model.
  2. Identify segments where to grow. To do so you can consider the following:
    1. Analyse growth and size for segment covered by client and competitors. Compare the client to competitors performance to spot potential areas where to grow further
    2. For segments that could potentially allow to meet the goal, analyse further competitors, customer segments and barriers to entry
  3. Identify feasible grow strategy for the selected segments. To do so you can consider the following strategies:
    1. On current product
      1. Ways to increase price
      2. Ways to increase volume
    2. On new product (either to perform organically or inorganically)
      1. Product variety
      2. Diversification
  4. Select grow strategy providing the maximum result with the minimum amount of resources required, and meeting constraints identified at step 1
  5. Consider risks/next steps following grow strategy. Eg increasing the price may lead to higher decrease in volume than expected – could be better then to test on specific areas.

Hope this helps,

Francesco

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Hi Liam,

You've already received excellent responses. What I will build on is the higher level structure when approaching problem solving (i.e. after asking clarification questions and understanding the objectives).

You should start with thinking about how revenue growth is achieved: organically or inorganically (or both). Under organic growth, you can achieve that through

1. Increasing the price, as you've mentioned

2. Increasing the quantity - either by increasing your market share with existing customers or by targeting new customers

3. Launching new products/services - could be complementary produts, or entirely new ones

4. Entering new markets

Out of the box answers:

5. Increase the utilization of your existing products - the toothpaste example is great. DM me for more details.

6. Target non-customers and make them customers - increase the entire market size

You can achieve inorganic growth through:

1. An Acquisitions - of companies or products

2. A Merger

Now that you've defined the high level structure, you cover all grounds to grow revenue and will not make the mistake of forgetting any points as you go along with the case, especially when the interviewer asks you how else could you grow revenue (under each category you could expand. Ex: licensing deals, contract manufacturing, commercial agreements etc...).

After defining the high level structure, you could then figure out where to start based on the case and your clarification questions to the interviewer and begin with the points mentioned by the other experts that have responded to you (analyze market, competitors etc...).

Hope this helps.

Rakan

Hi Liam,

You've already received excellent responses. What I will build on is the higher level structure when approaching problem solving (i.e. after asking clarification questions and understanding the objectives).

You should start with thinking about how revenue growth is achieved: organically or inorganically (or both). Under organic growth, you can achieve that through

1. Increasing the price, as you've mentioned

2. Increasing the quantity - either by increasing your market share with existing customers or by targeting new customers

3. Launching new products/services - could be complementary produts, or entirely new ones

4. Entering new markets

Out of the box answers:

5. Increase the utilization of your existing products - the toothpaste example is great. DM me for more details.

6. Target non-customers and make them customers - increase the entire market size

You can achieve inorganic growth through:

1. An Acquisitions - of companies or products

2. A Merger

Now that you've defined the high level structure, you cover all grounds to grow revenue and will not make the mistake of forgetting any points as you go along with the case, especially when the interviewer asks you how else could you grow revenue (under each category you could expand. Ex: licensing deals, contract manufacturing, commercial agreements etc...).

After defining the high level structure, you could then figure out where to start based on the case and your clarification questions to the interviewer and begin with the points mentioned by the other experts that have responded to you (analyze market, competitors etc...).

Hope this helps.

Rakan

(edited)

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Agreed with above. As stated by Bruno, the correct way to think about market expansion is to think about:

-demand evolution (external)

-supply evolution (external AND internal)

-effect on price (it's a market after all)

Now, two things that should never be forgotten, even if it's a revenue growth case

-how much does it cost and does it increase profits?

-what is impact to profit margins (a lot of times you don't go for market expansions that are margin dilutive, due to impact on stock price)

ask to your interviewer if there are any objectives for the two points above or any thresholds or you can ignore for the case.

hope it helps,

andrra

Agreed with above. As stated by Bruno, the correct way to think about market expansion is to think about:

-demand evolution (external)

-supply evolution (external AND internal)

-effect on price (it's a market after all)

Now, two things that should never be forgotten, even if it's a revenue growth case

-how much does it cost and does it increase profits?

-what is impact to profit margins (a lot of times you don't go for market expansions that are margin dilutive, due to impact on stock price)

ask to your interviewer if there are any objectives for the two points above or any thresholds or you can ignore for the case.

hope it helps,

andrra

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