Reading...
Play button
Play button
Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
44 Cards in this Set
- Front
- Back
|
Listen closely while
|
Being given key facts about the case
|
|
|
After being given the facts of a case ___ in your own words
|
Clarify and re-phrase them in your own words
|
|
|
Don't jump in to giving recomendations. Focus on the following in order:
|
1. Clarify and re-phrase the facts and problem given.
2. Ask for a moment to draw up some notes 3. State 3 areas plan to explore to solve the clients problem 4. Ask questions for more details 5. Restate the problem "Firm X is facing problem Y" 6. Restate the Analysis "Through our analysis of A, B & C" 7. Clarify discoveries "We found that E, F & G are occurring" 8. and make your recomendations "I recommend that the firm implement H, I & J." |
|
|
Always establish what kind of case think it is. What are examples?
|
- Market Sizing
- Market Growth - Decreasing Profits - Introduction of a New Product or Service - Merger and/or Aquisition |
|
|
What are the 5 steps in doing a Market Sizing?
|
Establish:
1. The Market Segments Region (ie US, Canada, Int'l) 2. The Number of Business'(B2B) or households (Consumer)/consumers in the Region Segment 3. The number of Product or Service used annually per Business or Household/Consumer 4. What kind of Market Share can expect to achieve based on competition and scale of production |
|
|
When doing a Product Launch, Market Sizing or Profitability Case how should you organize your numbers on your sheet?
|
- Put the diff. Market Segments across the top (Columns), and do the P&L measures down the side starting with Total Number of B2B/Household/Customers in the Region Segment, our % of Market, Frequency of purchase, Qty Orders, Revenue/Order, Total Revenue, COGS, GM%, Fixed and Variable OPEX, Net Income/OPINC & %, CAPEX (Amortization & Depreciation), Interest, Equity (# Shares, Retained Earnings & Dividends)
|
|
|
What do you always need to remember when asking questions or doing analysis?
|
DON'T jump to recomendations - focus on:
1. Clarify PROBLEM and CONTEXT 2. Gather INFORMATION and ANALYZE 3. Restate Problem, Analysis and make RECOMENDATIONS |
|
|
What are the 5 different types of Cases?
|
Increasing Profits, Market Entry, Bringing new Product to Market, Where to locate a new facility, Competitive response
|
|
|
When valuing ENTERING A NEW MARKET how do you structure your numbers and what’s the order of operations?
|
Create 2 columns, one for per unit of sale (ie. Qty or per household) and the other for total. Describe out loud what you’re doing as you’re writing it out.
List out vertically, Total market size, market share, addressable market size, annual consumption, total qty expect to sell, revenue per qty and total potential revenue beside it Then list out all the same things as a PROFITABILITY CASE |
|
|
For improving PROFITABILITY cases how do you structure your numbers and what’s the order of operations?
|
Create 2 columns, one for per unit of sale and the other for total. Describe out loud what as you’re doing as you write it out.
Potential Revenue, % of market share, gross revenue, refund/returns, net revenue, unit of sales (qty, acres, lbs. etc.), revenue per unit of sale Variable Costs which includes = Material Costs, variable Wages, Logistics and other Contribution Margin (per unit) Fixed Costs which includes = Lease or mortgage, utilities, fixed salaries and general admin. Costs, Depreciation and Amortization Net Profit before tax by subtracting fixed costs from contribution margin Net Profit after Tax by multiplying by 1-the tax rate |
|
|
When valuing a R&D PROFITABILITY how do you structure your numbers and what’s the order of operations?
|
Create 2 columns, one for per unit of sale and the other for total. Describe out loud what you’re doing as you’re writing it out.
Remember to always discount the total profits back to present value by dividing the Future Value of total cash flows by 1 plus the discount rate (use GDP or 5% if unknown) to the power of the number of years you’ll be tieing up the cash for. To calculate the Net value subtract the initial cost of investing in the option. List out vertically Potential Revenues, Market Share, Cost to Market, Ongoing Variable and Fixed Costs, time to market, lifetime of product, key milestones, probability of success at key milestones and the expected value. |
|
|
In PROFITABILITY case what are the top cost drivers?
|
Purchasing scale (supplier power), Quantity yield (from resources used), Capacity Utilization, Raw goods standardization, Method of shipping, Plan location, Product complexity, Process technology, Demand variability, Efficiency of plant layout, Scrap rate
|
|
|
What’s the quickest way to calculate the average cost/unit? What 2 factors increase or decrease your average cost/unit?
|
Variable cost/unit + Fixed cost/qty of units sold = average cost/unit
1. Increased Demand with the same variable and fixed costs 2. Decreasing your variable cost by using more of the available capacity (eg. Produce more units by working at 80% capacity vs. 60%) |
|
|
What’s a quick way to calculate the product of a percentage of a number (i.e. 3% of $1800)?
|
Multiply the numbers together and net out the number of zeros. For example, 3 x 18 = 18 + 18 = 36 + 18 = 54 plus the two zeros after the 18 minus the 2 zeros in moving the 3 down to a .03 gets you quickly to $54.
|
|
|
What’s a good way to lower fixed costs in entering a new market?
|
Lease resources rather than purchase (Plant, land, circuits/telephone lines)
|
|
|
What’s a good way to demonstrate a products value vs. a competitor? What happens if someone is to the right or left of this curve/line?
|
On a price to performance graph. On the left vertical axis put the price starting at the lowest amount, then put the performance measure across the bottom increasing from left to right.
If someone’s to the left of it their out of price position because they’re charging too much for the performance their providing. If a product or firm is to the right then they’re pushing the curve further out and have a competitive advantage relative to the competition. |
|
|
If pricing is regulated or fairly un-elastic then what could you do to increase profitability without lowering costs or increasing market share?
|
Raise price since this market segment doesn’t primarily buy based on price.
|
|
|
When doing a QUICK ASSESMENT of how a FIRM IS DOING what are seven good questions to ask?
|
The 3 C’s
Who are the firms target CUSTOMER segment? Who are their main COMPETITION? Do we know anything about our COMPETITION’s past, present or future actions? What’s the core value or competitive advantage the COMPANY (Firm) has vs. its competitors (VRIO)? The 4P’s How does the industry and our firm typically PRICE the PRODUCT? Where do we (PLACE) sell the product and how do we PROMOTE it? |
|
|
What are two different growth strategies?
|
Blue (Create new markets through innovation) and Red ocean (dominate existing market via low cost or product differentiator) strategies.
|
|
|
Do Industries have financial norms? If so name 6.
|
Yes. Costs, Gross and Net Profit, Investments as a % of Revenues and Break-even-point
|
|
|
What are 5 key things you must remember when doing MARKET SIZING?
|
1. START HIGH LEVEL
2. Include MARKET SHARE, OCCUPANCY RATE and/or QTY CONSUME ANNUALLY 3. WALK the INTERVIEWER through your LOGIC 4. Use “EASY” NUMBERS (eg. 10% not 8.5%, ¼ not 1/6) 5. Always give your answer a “SNIFF TEST” before committing to it |
|
|
What’s their CONTRIBUTION MARGIN? When is it used and how is it CALCULATED?
|
Contributing margin is the amount of revenue “contributing” to paying fixed costs of production after subtracting variables costs (Material Costs of producing units and variable wages) from revenues. It’s used as part of calculating profit and break-even point.
Contribution Margin/Unit = Revenue/Unit – Variables Cost/Unit Break-Even (BE) = Fixed Costs/Contribution Margin/Unit = # of Units of sale needed to BE Profit = Qty*(contribution Margin or Price/unit – Variable Cost/unit) – Fixed costs |
|
|
How do you measure a firm’s COMPETITIVE ADVANTAGE?
|
VRIO – Is what they provide VALUABLE, RARE, INIMITABILE and are they ORGANIZED enough to sustain it?
|
|
|
When considering OPENING A NEW PLANT or assessing a firms OPERATIONS STRATEGY, what 4 things should you consider?
|
1. COST – Low, competitive or high
2. QUALITY – high, low, perception and reality of reliability & durability, source ability 3. DURABILITY – speed and reliability 4. FLEXIBILITY – ability to scale volume, come out with new products and shift product mix |
|
|
What 2 things should you consider 1st when DECIDING to ENTER A NEW MARKET?
|
a. How attractive is the market on your own?
b. How valuable is acquiring a firm or establishing a partnership? |
|
|
When does it make sense to be MORE VERTICALLY INTEGRATED vs. not? If so how do you achieve it?
|
If you’re heavily DEPENDANT on your suppliers impact on PRODUCT COST or the END product requires a HIGH LEVEL OF SPECIFICITY.
You achieve it through MERGER or ACQUISITION with the SUPPLIER or BUYER. |
|
|
What are 3 areas to look into for escalating costs in Profitability cases? Provide 3-4 drivers for each.
|
Materials/COGS (Commodity prices, changes in product makeup costs or scrap levels)
Direct Labor/Variable Costs (Productivity, Wage rate & staff size) Overhead/Fixed Costs (Utilization, Allocation methods, staff size & office expenses) |
|
|
When evaluating the likely hood of NEW SUBSTITUTE PRODUCTS being introduced in to the market what 2 things do you need to asses?
|
1. How low are the SWITCHING COSTS (mfg, log’s, S&GA plus –‘ve cross-selling impact)
2. How easy is it to INTRODUCE more ATTRACTIVE FEATURES. |
|
|
When deciding WHERE TO LAUNCH new product(s) what’s really important to consider?
|
Whether you launch it Globally, locally or multi-domestic. If customers are more open to standardized products then a Global structure makes more sense to get economies of scale especially if there’s a low need for local responsiveness. However, if your product needs to be more locally tailored or you need to be more responsive in terms of shorter time to market. This can be best show through a 2 axis chart with vertical “need for economies of scale” vs. horizontal “need for local responsiveness”.
|
|
|
How do you do SCENARIO MODELING?
|
DEFINE the scope of the analysis > IDENTIFY major stakeholders, basic trends and key certainties > CONSTRUCT initial scenario THEMES > TEST for consistency and PLAUSIBILITY > DEVELOP LEARNING scenarios of strategically relevant groups > IDENTIFY future RESEARCH NEEDS > CREATE QUANTITATIVE MODELS to examine scenarios > EVOLVE towards DECISION scenarios
|
|
|
When you’re assessing whether to ENTER A MARKET in which the future of that market is unknown what do you need to do before looking at the Macro (PEST), Micro (PORTERS) and Industries VALUE CHAIN?
|
Do scenario modeling on the various factors (Macro PEST, Micro PORTERS and VALUE CHAIN) to assess the risk changes could have.
|
|
|
What are the 3 main CUSTOMER questions you ask about?
|
What are their DEMOGRAPHICS(age, ann. Income, height, socioeconomic status), GEOGRAPHIC or PSYCHOLOGICAL/BEHAVIORAL segments?
|
|
|
What are the 3 main MARKE/T questions you ask about?
|
Who and how much COMPETITION is there? Are there FINANCIAL NORMS that are relevant? What would a PORTERs 5 forces model of this market look like?
|
|
|
What are the 4 main FIRM fundamentals you need to ask about?
|
Value Prop’n (Company Goals, Product Segment Focus & Core Activities)
Competitive Advantage (VRIO – Valuable, Rare, Inimitable and Organized) Value Chain (what does the firm look like in terms of how it delivers margin) Resources (people, intellectual property etc.) |
|
|
How do you approach financials like Revenue, Profits etc. in a case?
|
PRICE X QUANTITY= REVENUE
Minus COSTS= Qty x VARIABLE (COGS, Wages and Marketing) FIXED (Lease, Utilities, S&GA and Depreciation) Equals profit |
|
|
How do you establish what a company’s value proposition is?
|
It’s at the core of the triangle consistency of Goals, Product Market Segment Focus and Core Activities.
|
|
|
When you have too few competitors in a zero sum game? What often happens and what’s it called?
|
Game Theory or Prisoners Dilemma – Consumers end benefiting if firms undercut each other but if they hold together united at holding prices up, Consumers end up paying more. Much like if two prisoners don’t fink on each other they’ll often get let off and the public good isn’t done.
|
|
|
How do you PRIORITIZE where to invest across a COMPANIES BUSINESS’?
|
Use the BCG Matrix which is made up of high and low from left to right across the top representing MARKET SHARE and high over low on the GROWTH RATE vertical axis. The matrix comprises in a z pattern starting from top left of HOLD, BUILD, using CASH COWS and DIVESTING the bottom right DOGS.
|
|
|
When assessing the MATURITY of a PRODUCT in its LIFECYCLE or a MARKET SEGMENT of products what are the 4 parts and add’l 5th if it’s an online service?
|
Upwards Logorithmic Ascending on a graph and rapid descending in the order from left to right INTRODUCTION of EARLY ADOPTERS, GROWTH of EARLY MAJORITY, MATURITY of LATE MAJORITY, DECLINE of LATE ADPOTERS and LONG TAIL to INFINITI with the Horizontal axis is TIME and Vertical axis being VOLUME.
|
|
|
What are the 6 AREAS OF SYNERGY in a MERGER or ACQUISITION? What if an M&A offers none of these?
|
Spreading Fixed costs over greater prod’n costs
Gaining halo Sales from higher sales capacity or product synergies Better cross-capacity utilization of multiple plants Penetration of new markets Intellectual Capital (Mgmt, Marketing & R&D) Cutting redundant HC (i.e. Duplicate R&D, Marketing, Sales etc.) If none of these are present then all you’re doing is creating a larger firm, not a better one. |
|
|
What are the 3 areas to look at and question when considering ACQUIRING or MERGING with another firm?
|
Do you have the same CUSTOMERS (MARKETING) SALES CHANNEL (SALES) and/or similar MANUFACTURING or DISTRIBUTION CHANNELS (OPERATIONS).
|
|
|
When CREATING a STATEMENT OF EARNINGS/INCOME STATEMENT or determining a company’s equity/earnings what’s the order of operations?
|
Revenue less Returns equals Net Revenue
minus Cost of Goods Sold equals Gross Margin less other Variable Costs (Wages & other) minus Fixed Operating Expenses (Lease or Mortage, Utilities, Salaries & general Administrative, Depreciation and Amortization plus any other that don’t vary directly with Sales volume) equals Net Income (EBIT or Earnings before interest and taxes) less Interest OPEX equals (EBT or earnings before taxes) minus Tax equals Equity or Earnings (EAT or earnings after taxes) Note that Amortization and Depreciation expenses are deducted prior to the Tax as is Interest on debt Less common stock and both common and preferred Dividends equals your retained earnings or the profit within the business |
|
|
What type of change is the most difficult to achieve?
|
Behavioral
|
|
|
What are some examples of ORGANIZATIONAL capabilities?
|
1. Innovation - entering new markets, launching new products or process.
2. Productivity – achieving cost efficiencies and lower prices 3. Speed – ability to be first to market, gain gov’t approvals and offer a fast response to customer needs 4. Cross-cultural synergies – gain competitive advantage through cultural diversity amid multiple business units |
