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Suaheli (Subject) / Frameworks (Lesson)

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  • Categories ECONOMICS PRODUCT COST RISK TIMEFIT COMPANY INTERNAL EXTERNAL MARKET CUSTOMERPRODUCT OTHER ENVIRONMENTAL
  • Investment Decision 1. Financial - Quantitative  Lifetime Discount Rate Inverstment Cost ΔRevenues ΔCost Reduction => Amortization, ROI, Ewige Rente, Multiples or Due Diligance  2. Qualitative - Internal FIT Synergies 3. EXTERNAL MARKET ACCEPTANCE ENVIRONMENTAL COMPEITITORS
  • "Company A is looking to acquire or merge with Company B and the 2 companies are different. Is this a good idea?"                                Customer          Products          Company       Competition Company A Company B Company A+B                   Synergies? Opportunities? OTHER FACTORS: CULTURAL FIT EXECUTION LEGAL
  • BUSINESS SITUATION FRAMEWORK Goal:                                                       H1:                                                                   Customer               Products               Company         Competition 1. CUSTOMER WHO are the segments? WHAT do they want? WHAT PRICE are they willing to pay? WHAT CHANNELS do they use? WHAT POWER do they have? + SYNTHESIS 2. PRODUCT / PROCESS WHAT is it? (customer hat) DIFFERENTIATION? WHAT is included? LIFE CYCLE COMPLIMENTARY GOODS? SUBSTITUTES? +SYNTHESIS 3. COMPANY CAPABILITIES COST STRUCTURE DISTIRBUTION CHANNELS ORGANIZATION + SYNTHESIS 4. CURRENT MARKET MARKET Size > Growth Rate (Trend) COMP: Major Players + Market Share, Strength & Weaknesses MARKET ENTRY (Barriers to entry) +SYNTHESIS
  • Strategy Scenario 1. Entering a new market 2. Industry analysis 3. Mergers and acquisitions 4. Developing a new product 5. Pricing strategies 6. Growth strategies 7. Starting a new business 8. Competitive response
  • Operations Scenarios: 9. Increasing sales 10. Reducing costs 11. Improving the bottom line 12. Turnarounds
  • COST BENEFIT ANALYSIS Think of 3 options Cost / Benefit Analysis on each of the 3 Decide for the best!
  • "Your client Company Z manufactures hair products. The company is thinking about entering the sunscreen market. Is this a good idea?" Goal: Entry Yes Or No?                     H1: Market Entry will ↑Brand ↑Profits  WHY? -  CURRENT MKT - RISK  WHY ENTER? REVENUES > Trends COSTS > Trends PRODUCT MIX > Trends CUST Segments WCS? CURRENT MKT                                      MARKET Size > Growth Rate (Trend) CUST Segmentation PRODUCT Differentiation COMP: Major Players + Market Share, Strength & Weaknesses RISK: Barriers to Entry 2.) ENTERING YES/NO Start from Scratch Acquisition JV                           ->> Cost Benedit Analysis of each!
  • "Our client manufactures high-end athletic footwear. Sales are up but profits are down in the US. What’s going on, and how do we fix it?" “bottom line,” “profits,” “costs” or “revenues,” T: Fix Profits to normal --> Wer will was warum?  By how much has it been down? How much should profits rise What time frame?  Is this industry-specific or company wide? What are the revenue streams?  External 1. Economy Unemployment Less disposable income Weather changes HIGH Petroleum Costs Crisis 2. Market Market Size Market Growth Competitors same issue? Market Life Stage Market Changes > Trends Supply of Materials Internal 1. Company: 1.1 Segment Revenues Revenue Mix by Products, Channels, Customer Segmentation, Customer needs Revenue Trends Number of customers Change in prices 2.1 Segment Cost ANY ♦ IN COSTS? > Trends COSTS OUT OF LINE? Strategy → Revenue-based strategies                            → Cost-based strategies
  • [ Company E wants to increase its sales so it can claim that it is the largest distributor of the K-rod. How can they reach their goal? ] Goal: become largest distributor of K-rod H1 By lowering its prices, Company E can increase its sales to become the largest distributor [ WHY ] TARGET VOLUME = VOLUME OF COMPETITOR Y Ego Economies of Scale Prepare to sell company High margin Item that brings in ancillary sales [ INSIDE COMPANY X ] CURRENT SALES > Trends BREAKDOWN OF SALES RESOURCES WCS  [ EXTERNAL: LARGEST COMPETITOR ] COMPETITORS > Trends COMPETITORS 4 P'S
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  • Increase Sales Revenues Increase volume:  more buyers, increase distribution channels, intensify marketing. Increase amount of each sale. Get each buyer to spend more or more often Increase prices. Create seasonal balance. Increase sales in every quarter
  • Ben & Jerry’s is buying a mid-size cream cheese manufacturer. Does this make sense? What should the company be thinking about? Goal: diversify their holdings.                          H1: The merger will help to diversify holdings OBJECTIVES - COSTS - DUE DILIGENCE - EXIT STRATEGY => ↑shareholder value - two cultures? COMPANY WHY MERGE? SHAPE OF CMY > FIT > SYNERGIES > SHAREHOLDER VALUE DUE DILIGENCE: MKT LEADER? SHAPE OF ECONOMY SECURITY  MARGINS RISKS LEGAL COMPETITIVE RESPONSE EXIT STRATEGY CULTURAL INTEGRATION
  • "Our client has developed a new biodegradable product, which is both a soft drink and a car wax. What should the company be thinking about?" Goal: ....                                     H1: WHY? - PRODUCT - MARKET - CUSTOMERS - RISK WHY? CANIBALIZATION - REPLACEMENT NEW PRODUCT:  WHY NEW PRODUCT?  WHY SPECIAL? PATENT: Is the product patented? SIMILAR PRODUCTS?/ SUBSTITUTES? ADVANTAGE & DISADVANTAGE FIT with the rest of product line MARKET STRATEGY STRATEGY EFFECT on existing products  COMPETITIVE RESPONSE BARRIERS TO ENTRY COMPETITION CUSTOMERS WHO WHAT do they want? WHAT price are they willing to pay? WHERE do they buy?  HOW can we reach them?  RISK FINANCING: Can we support debt? What if interest rate changes? EXIT STRATEGY
  • Two Brothers want to start a new Business. They want you to help them develop a Business plan. How would you help them out? T: Start-Up Setting Up & Funds External: Market: Market SizeMaret Growth RateMarket Growth TrendProduct Differentiation Customer: Customer Segmentation Competitor: Major Players' Market Share, Strategic Positioning, Strength & Weaknesses Internal ( Venture Capitalist Hat ) Company & Business Plan Managemt Team Fit Organization Purpose Strategic Positioning Advisory Board Product Why special?  Competitive Edge Pro's & Con's  Patents Marketing Mix: Promotion, Placement, Price Customers + Target Group Finance Fundings Alocation of funds Debt?  Alternative: Exit plan, Risks, (What if interest rates change? What if the economy sours?) 
  • Sperry Topsider® has developed a new non-slip sailing shoe that has been eating into the sales of our bestseller, The Commodore 2000. How can we respond? Goal: Keep sales up                                                                     H1: - COMPETITIVE ANALYSIS WHY SPECIAL? ADVANTAGE & DISADVANTAGE WHAT has changed? Have they or others picked up market share? RESPONSES ACQUIRE the competitor or another player in the same market. MERGE with a competitor to create a strategic advantage and make us more powerful. COPY the competitor HIRE the competitor’s top management. MARKETING AND PR campaign.
  • "XYB Corporation has a high cash reserve (lots of cash on hand). How can we best use that money to grow the company?" S Goal: Growth ↑ PRODUCT/ DIVISION / COMPANY?         1. PORTFOLIO ANALYSIS EXTERNAL - MARKET SIZE & GROWTH Is the industry growing? How are we growing relative to the industry? - COMPETITORS Are our prices in line with our competitors? What have our competitors done in marketing and product development? INTERNAL Which segments of our business have the highest future potential? Do we have funding to support higher growth? 3. GROWTH STRATEGY Distribution channels Product line Marketing campaign Diversification New Markets New Products Acquire competitors or a company in a different industry.
  • "A publishing company is having a cash flow problem and needs to reduce its costs; otherwise it will have to lay off staff. How should the company proceed?" Step 1: Ask for a breakdown of costs. Step 2: If any cost seems out of line, investigate why. Step 3: Benchmark the competitors. Step 4: Determine whether there are any labor-saving technologies that would help reduce costs
  • "EEC’s sales are flat and profits are taking a header. How can we fix things?" Goal: Cost ↑ Fix                                            H1: Cost-Problem WHY? BREAKDOWN: Get cost breakdown. Investigate for irregularities. BENCHMARK: competitors. Consider labor-saving technologies COST ANALYSIS: INDUSTRY-WIDE or COMPANY-SPECIFIC Problem 1. Internal costs: SUPPLIER -> RAW MATERIALS -> WAGES -> ECON. OF SCLAE ->SUPPORT SYSTEMS   2. External costs:  interest rates, government regulations, transportation/shipping strikes
  • [ Company X is in trouble and you’ve been brought in to save it. What do you do? ] S    Goal: R↑                                   H1: Revenue Problem [ INTERNAL: COMPANY X ] - Public l Private?- BUSINESS MODEL - OPERATIONS  - REVENUE STREAMS > Trends  [ REVIEW: COMPANY X ] Services l products (Are products out of date?)  Finances (Do we have a high debt load?) Talent and Organization [ EXTERNAL: INDUSTRY ] BENCHMARK COMPETITORS > trends (same Problem?) ACCESS TO CAPITAL? STRATEGY SECURE FINANCE FOR PLAN FIRE DEADWOOD TALENT AND MANAGEMENT Determine short-term and long-term company goals. WRITE A BUSINESS PLAN Visit clients, suppliers and distributors, and reassure them. Prioritize goals and get some small successes under your belt ASAP to build confidence.
  • [ 4 P's ] [ PRODUCT ] WHAT DOES IT DO? WHAT VALUE DO THEY OFFER? ADVANTAGES AND BENEFITS? COMPETITIVE EDGE WHAT IS OUR NICHE? [ PRICE ] STRATEGY BENCHMARK COMPETITORS PRICE ELASTICITY OF DEMAND (If we change price, what will it do to sales volume?) [ PLACE ] REACH: How do we reach consumer?  BENCHMARK COMPETITORS (Do they have channels that we do not? Do they serve markets that we do not? Why?) INCREASE: How can we increase our distribution channels? [ PROMOTION ] BEST PRACTICE : How do we best market our product? REACH RIGHT MARKET COMPARE TO HISTORY > kind of marketing campaigns, were they effective? BUDGET -> Can we afford to increase our marketing campaign?
  • The Value Chain Raw materials and Inbound logistics: receiving materials into the warehouse relationships with suppliers “just in time” (JIT) delivery Operations: processing raw materials into product through the use of capital equipment and labor Distribution: warehousing and distribution channels Marketing and Sales: marketing strategy, identification of customer base and cost of customer acquisition sales force issues (e.g., commission, company car, etc.) Service: customers support, customer retention (It’s cheaper to retain a customer than to go out and bring in a new one.)
  • + Income Statement How do the costs stack up? Do any numbers seem out of line or a bit high? For example, if Joe’s Shoe Company’s labor costs were $50,000 instead of $15,000, that should send off warning bells that something is wrong. Why are labor costs $50,000, or 50% of gross revenues?

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