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

Liam asked on Feb 15, 2018 - 6 answers
40+ cases solved in total

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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Vlad
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replied on Feb 16, 2018
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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!

Anonymous replied on Feb 15, 2018

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

Francesco
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replied on Feb 15, 2018
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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

Andrea
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replied on Feb 15, 2018
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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

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