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12 cases > Cosentino - Basic Info > Flashcards

Cosentino - Basic Info Flashcards

0
Q

Operations Scenarios (4)

A
  1. Increasing sales
  2. Reducing costs
  3. Improving the bottom line
  4. Turnarounds
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1
Q

Strategy Scenarios (8)

A
  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
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2
Q

01) Entering a new Market - step 1

A

Why?
What’s our goal?
What’s our objective?
Does it fit overall strategy?

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3
Q

01) Entering a new Market - step 2

A

Determine the state of the current and future market:
What is the size of the market? What is the growth rate?
Where is it in its life cycle?
Who are the customers and how are they segmented?
What role does technology play in the industry and how quickly does it change?
How will the competition respond?

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4
Q

01) Entering a new Market - step 3

A

Investigate the market to determine whether entering it would make good business sense:
Who is our competition and what size market share does each competitor have?
* How do their products and services differ from ours?
* How will we price our products or services?
* Are there substitutions available?
* Are there any barriers to entry? Examples are: capital requirements, access to distribution channels, proprietary product
technology, or government policy.
* Are there any barriers to exit? How do we exit if this market sours?
* What are the risks? For example, market, regulation or technology?

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5
Q

01) Entering a new Market - step 4

A

If we decide to enter the market, we need to figure out the best way to become a player. There are three major ways to entering a market:
* Start from scratch (see Starting a New Business)
* Acquire an existing player within the desired industry
* Form a joint venture/ strategic alliance with another player with similar interests
Analyze the pros and cons of each. This is sometimes called a cost-benefit analysis. You can use this whenever you are trying to
decide whether to proceed with a decision.

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6
Q

Entering new market - External Factors

A

MARKET: size, growth rate, stage of development, technology changes
CUSTOMERS: who are they and how are they segmented?
INDUSTRY: entry/exit barriers; supplier status and substitutions
COMPETITORS: makor players and market share; strengths and weaknesses, how do their products or services differ from ours?
RISK: market, technology, and regulation risks

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7
Q

Entering new market - Internal Factors

A 
STRATEGY: does it fir our long-term strategy?
OPERATIONS:
• Marketing & Sales
• Operations and Logistics
• Finance and Control
• Organization and Culture
• R&D - Research & Development
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8
Q

02) Industry Analysis - Step 1

A

Investigate the industry overall.
* Where is it in its life cycle? (Emerging? Maturity? Decline?)
* How has the industry been performing (growing or declining) over the last 1, 2, 5, and 10 years?
* How have we been doing compared to the industry?
* Who are the major players and what kind of market share does each have?
Who has the rest?
* Has the industry seen any major changes lately? These include new players, new technology and increased regulation.
* What drives the industry? Brand, products, size, or technology?
* Profitability. What are the margins?

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9
Q

02) Industry Analysis - Step 2

A

Suppliers
* Have the suppliers been consistent? What is going on in their industry?
Will they continue to supply us?

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10
Q

02) Industry Analysis - Step 3

A

What is the future outlook for the industry?

  • Are players coming into or leaving the industry?
  • Have there been many mergers or acquisitions lately?
  • What are the barriers to entry and/or to exit?
  • Will substitutes be introduced?
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11
Q

03) M&A - Step 1

A 
Determine the goals and objectives. 
Why are they buying it? 
Does it make good business sense, or are there better alternatives? 
Is it a good strategic move? 
Other reasons could be to:
* Increase market access
* Diversify their holdings
* Pre-empt the competition
* Gain tax advantages
* Incorporate synergies: marketing, financial, operations
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12
Q

03) M&A - Step 2

A

How much are they paying?

  • Is the price fair?
  • How are they going to pay for it?
  • Can they afford it?
  • If the economy sours, can they still make their debt payments?
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13
Q

03) M&A - Step 3

A

Due diligence. Research the company and industry.

  • What kind of shape is the company in?
  • How secure are its markets and customers?
  • How is the industry doing overall? And how is this company doing compared to the industry? Are they a leader in the field?
  • What are the margins like? Are they high volume low margins or low volume high margins?
  • How will our competitors respond to this acquisition?
  • Are there any legal reasons why we can’t, or shouldn’t, acquire it?
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14
Q

03) M&A - Step 4

A

Exit strategies, looking for a way out.

  • How long are they planning to keep it?
  • Did they buy it to break it up and sell off parts of it?
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15
Q

04) New Product - Step 1

A

Think about the product.
* What’s special or proprietary about our product?
* Is the product patented?
* Are there similar products out there? Are there substitutions?
You can approach the next four steps in any order you like.
* What are the advantages and disadvantages of this new product?
* How does the new product fit in with the rest of our product line?

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16
Q

04) New Product - Step 2

A

Think about our market strategy.

  • How does this affect our existing product line?
  • Are we cannibalizing one of our existing products?
  • Are we replacing an existing product?
  • How will this expand our customer base and increase our sales?
  • What will the competitive response be?
  • If its a new market, what are the barriers to entering this market?
  • Who are the major players and how much market share does each firm have?
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17
Q

04) New Product - Step 3

A

Think about our customers.

  • Who are our customers?
  • How can we best reach them?
  • Can we reach them through the Internet?
  • How can we ensure that we retain them?
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18
Q

04) New Product - Step 4

A

Think about financing.

  • How is the project being funded?
  • What is the best allocation of funds?
  • Can we support the debt? ( What if interest rates change? What if the economy sours? )
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19
Q

05) Pricing Strategies - Step 1

A

Investigate the product.

  • What’s special or proprietary about our product?
  • Are there similar products out there, and how are they priced?
  • Where are we in the growth cycle of this industry? (Growth phase? Transition phase? Maturity phase?)
  • How big is the market?
  • What were our R&D costs?
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20
Q

05) Pricing Strategues - Step 2

A

Choose a pricing strategy.
Is the company in control of its own pricing strategies, or is it reacting to suppliers, the market, and its competitors?
COST-DRIVEN PRICING
( The Deadly Business Sin )
Cost-driven pricing is the reason there is no American consumer-electronics industry anymore. It had the technology and the products.
But it operated on cost-led pricing - and the Japanese practiced price-led costing.
* Cost-based pricing vs. price-based costing (i.e., do you decide pricing based on how much the product costs to produce or on how much people will pay?)
? How much does it cost to make or deliver/provide?
* What does the market expect to pay?
? Is it a “must have” product?
* Do we need to spend money to educate the consumer?

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21
Q

05) Pricing Strategies - Step 3

A

Supply and demand (you’ll win big points for graphing your answer)
* What’s the supply? How’s the demand?
* How will pricing have an affect on the market equilibrium?
* Matching competition: What are similar products selling for?
* Are there substitutions? (in this case, Microsoft Word, typewriters, etc.)
Basically, there are three main ways to price the product: competitive analysis, cost-based pricing and price-based costing.
Competitive analysis: Are there similar products out there? How does our product compare to the competition? Do we know their
costs? How are they priced? Are there substitutions available?
Cost-based pricing: Take all our costs, add them up and add a profit to it. This way you’ll know your breakeven point.
Price-based Costing: What are people willing to pay for this product? If they’re not willing to pay more than what it costs you to make,
then it might not be worth making. On the other hand, they may be willing to pay much more than you would get by just adding a profit
margin. Profit margins vary greatly by industry. Grocery stores have a very thin profit margin, while drug companies traditionally have a
large profit margin.
When solving a pricing problem, you need to look at all three of these strategies and see where, or if, they intersect.

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22
Q

06) Growth Strategies - Step 1

A

Ask your feeler questions. Growth strategies could mean focusing on a certain product, division, or the company overall. This is a true strategic planning question, and you must determine the direction of questioning.
* Is the industry growing?
e How are we growing relative to the industry?
* Are our prices in line with our competitors?
* What have our competitors done in marketing and product development?
* Which segments of our business have the highest future potential?
* Do we have funding to support higher growth?

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23
Q

06) Growth Strategies - Step 2

A

Choose a growth strategy. Increasing sales is one of the ways you grow, though not the only one. You need to determine if all
or some of the following strategies for growth fit the question.
* Increase distribution channels.
* Increase product line.
* Invest in a major marketing campaign.
* Diversify products or services offered.
* Acquire competitors or a company in a different industry.

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24
Q

07) Starting a new Business - Step 1

A

Starting a new business encompasses entering a new market as well - the first step is the same. Investigate the market to determine whether entering the market makes good business sense.

  • Who is our competition?
  • What size market share does each competitor have?
  • How do their products/services compare to ours?
  • Are there any barriers to entry? These include: capital requirements, access to distribution channels, proprietary product technology, or government policy.
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25
Q

07) Starting a new Business - Step 2

A 
Once we determine that there are no significant barriers to entry, then we should look at the company from a venture capitalist point of view. Would you, as an outsider, invest in this start-up? Would you risk your own money? Venture capitalists don't simply buy into an idea or product, they invest in:
* Management
? What is the management team like?
? What is its core competencies?
? Have they worked together before?
* Is there an advisory board?
* Market & Strategic Plans
? What are the barriers to entering this market?
? Who are the major players and what kind of market share does each firm have?
? What will the competitive response be?
* Distribution Channels
? What are our distribution channels?
* Products
? What is the product and technology?
? What is the competitive edge?
* What are the disadvantages of this product?
? Is the technology proprietary?
* Customers
? Who are our customers?
* How can we best reach them? Can we reach them on the Internet?
* How can we ensure that we retain them?
* Finance
* How is the project being funded?
? What is the best allocation of funds?
? Can we support the debt? (What if interest rates change? What if the economy sours?)
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26
Q

08) Competitive Response - Step 1

A

If a competitor introduces a new product or picks up market share, we want to first ask such questions as:

  • What is the competitor’s new product and how does it differ from what we offer?
  • What has the competitor done differently? What’s changed?
  • Have any other competitors picked up market share?
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27
Q

08) Competitive Response - Step 2

A

Choose one of the following response actions:

  • 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 (e.g., Amazon.com vs. BarnesandNoble.com).
  • Hire the competitor’s top management.
  • Increase our profile with a marketing and public relations campaign.
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28
Q

09) Increasing Sales - Step 1

A

Increasing sales doesn’t necessarily mean increasing profits. Think about the relationship. What can be done? What do we need to know?

  • How are we growing relative to the industry?
  • What has our market share done lately?
  • Have we gone out and asked customers what they want from us?
  • Are our prices in line with our competitors?
  • What have our competitors done in marketing and product development?
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29
Q

09) Increasing Sales - Step 2

A

There are four easy ways to increase sales. Determine which action (or combination thereof) is your best strategy:

  • Increase volume. (Get more buyers, increase distribution channels, intensify marketing.)
  • Increase amount of each sale. (Get each buyer to spend more.)
  • Increase prices.
  • Create seasonal balance. (Increase sales in every quarter - if you own a nursery, sell flowers in the spring, herbs in the summer, pumpkins in the fall, and trees and garlands in the winter.)
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30
Q

10) Reducing Costs - Step 1

A

Ask for a breakdown of costs.

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31
Q

10) Reducing Costs - Step 2

A

If any cost seems out of line, investigate why.
If there has been a surge in costs, you need to approach this question by focusing on the internal and external costs that could account for the rise (e.g., if labor costs have skyrocketed, is it because of the good economy and because good workers are hard to find? Or is it that your workforce has unionized?) Examples of:
* Internal costs: union wages, suppliers, materials, economies of scale, increased support systems
* External costs: economy, interest rates, government regulations, transportation/shipping strikes

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32
Q

10) Reducing Costs - Step 3

A

Benchmark the competitors.

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33
Q

10) Reducing Costs - Step 4

A

Determine whether there are any labor-saving technologies that would help reduce costs.

34
Q

11) Improving the bottom line - Step 1

A

Whenever you hear the words “bottom line” or “profits” you should immediately think:
Profits = ( Revenues - Costs ). However, I’m going to change this formula to: ?(Profits = Revenues - Costs)? The question marks represent what is outside the company (industry, competitors, economy, interest rates, etc.), where the formula focuses on the inside of the company. To truly understand how to increase the bottom line, you need to have info on both the outside and inside factors. I’d start on the outside so I had a good understanding of the environment, then focus on the company. Because profits are an underlying theme in many cases, you need to make sure that profit is the main subject of the question before choosing to focus exclusively on this case scenario. (Asking feeler questions can help determine this - How have we been doing compared to the rest of the industry? How is the overall economy performing?) Price, costs and volume are all interdependent. You need to find the best mix, because changing one isn’t always the best answer. If you cut prices to drive up volume, what happens to profit? Do profits increase or decrease? There
needs to be a balance. The reason behind the decision needs to make sense.
Step 1 : Always look at the revenue (“price” is sometimes substituted) side first. Until you have identified your revenue streams, you can’t know where best to cut costs.
* What are the revenue streams? (Where does the money come from?)
* What percentage of the total revenue does each stream represent?
* Does anything seem unusual in the balance of percentages?
* Have those percentages changed lately? If so, why?

35
Q

11) Improving the bottom line - Step 2

A

Examine your costs.

  • Identify the major variable and fixed costs.
  • Have there been any major shifts in costs? (e.g., labor or raw material costs)
  • Do any of these costs seem out of line?
  • How can we reduce costs without damaging the revenue streams?
  • Benchmark costs against our competitors.
36
Q

11) Improving the bottom line - Step 3

A

Determine whether you want to pump up the volume. If so, you can:

  • Expand into new areas.
  • Increase sales force.
  • Increase marketing.
  • Reduce prices.
  • Improve customer service.
37
Q

12) Turnarounds -Step 1

A

Gather information.

  • Tell me about the company.
  • Why is it failing? Bad products, bad management, bad economy?
  • Tell me about the industry.
  • Are our competitors facing the same problems?
  • Do we have access to capital?
  • Is it a public or privately-held company?
38
Q

12) Turnarounds -Step 2

A

Choose the appropriate actions from the following list. While this isn’t a quick fix for all troubled companies, these are the main actions you should be thinking about.

  • Learn as much about the business and its operations as possible.
  • Review services, products, and finances. (Are products out of date? Do we have a high debt load?)
  • Secure sufficient financing so your plan has a chance.
  • Review talent and temperament of all employees, and get rid of the deadwood.
  • Determine short-term and long-term company goals.
  • Devise 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.
39
Q

Costs

A

What are the major costs?
How have its costs changed in the past year?
How do its costs compare to others in the industry?
How can we reduce costs?

40
Q

Company

A

What do you know about the company?
How big is it?
Is it public or private company?
What kinds of products or services does it offer to its clients?

41
Q

Competition

A

Who are the biggest competitors?
What markets share does each player hold?
Has market share changed in the last year?
How do our services or products differ from the competition?
Do we hold any strategic advantage over our competitors?

42
Q

Consumers/Clients

A 
Who are they?
What do they want?
Are we fulfilling their needs?
How can we get more?
Are we keeping the ones we have?
43
Q

Channels

A

Distribution channels.
How do we get our product into the hands of the end users?
How can we increase our distribution channels?
Are there areas of our market that we are not reaching?
How do we reach them?

44
Q

Product

A

What are our products and services?

What is the company’s niche?

45
Q

Price

A

How does our price compare to the competitions’?
How was our price determined?
Are we priced right?
If we change our price, what will that do to our sales volume?

46
Q

Place

A

How do we get our products to the end user?
How can we increase our distribution channels?
Do our competitors have products in places that we don’t?
Do they serve markets that we can’t reach?
If so, why?
And how can we reach them?

47
Q

Promotions

A

How can we best market our products?
Are we reaching the right market?
What kind of marketing campaigns has the company conducted in the past?
Were they effective?
Can we afford to increase our marketing campaign?

48
Q

Potential Entrants

A

The threat of new or potential entrants. This includes new companies or acquisitions of established companies by a new player. If barriers are high or if newcomers can expect entrenchment or retaliatory measures from existing competitors, such as a price war, then the threat of entry is low. Include:

  • economies of scale
  • capital requirements
  • government policy
  • switching costs
  • access to distribution channels
  • product differentiation
  • proprietary product technology
49
Q

Competition

A

Intensity o rivalry between existing competitors

50
Q

Substitute

A

Pressure from substitution products, e.g., sugar vs. high-fructose corn syrup and artificial sweeteners

51
Q

Buyer

A

Bargaining power of buyers. Buyers compete with the industry by forcing down prices, bargaining for higher quality or more services, and playing competitors against each other - all at the expense of industry profitability.

52
Q

Supplier

A

Bargaining power of suppliers. Forces 4 and 5 have to do with supply and demand. When there are many suppliers but few buyers,
the buyers have the upper hand. When there are many buyers, but few suppliers, the suppliers have the advantage.

53
Q

Raw Materials

A

Raw materials and inbound logistics: receiving materials into the warehouse, relationships with suppliers, “just in time” (JIT) delivery, etc.

54
Q

Operations

A

processing raw materials into product through the use of capital equipment and labor

55
Q

Delivery

A

warehousing and distribution channels

56
Q

Marketing and Sales

A

marketing strategy, identification of customer base and the cost of customer acquisition, sales force issues (i.e. commission, company car, etc.)

57
Q

Service

A

customers support, customer retention (it’s cheaper to retain a customer than to go out and bring in a new one)

58
Q

Overview

A

Its goal was to help managers analyze their organizations and their effectiveness. It studies seven key elements that make the organizations successful: strategy, structure, systems, style, skills, staff, and shared values.
The model differentiates between the “hard” side and the “soft” side of an organization. The hard “S’s” are strategy, structure and systems. The soft “S”s are style, skills, staff and shared values.
The key thing to remember if you plan to use the Seven S’s is to look at both the hard side of the organization as well as the soft side when analyzing the internal environment of the company.

59
Q

Strategy

A

Can be aimed toward growth, higher profits, lower costs, new product development or entering a new market. It’s the action or plan the company has to make it more competitive.

60
Q

Structure

A

The structure refers to the organizational structure - lines of authority, chain of command, and channels of communications.

61
Q

Systems

A

Systems refer to more than just information systems (which was probably the first one to come to mind). It also refers to budgeting, planning, innovation, compensation, and performance measurement. These are the systems that govern everyday business activity.

62
Q

Style

A

Style, refers to leadership style of upper management and the management style of the company - meritocracy, etc.

63
Q

Skills

A

Skills are the company’s competencies, what it does best.

64
Q

Staff

A

Staff refers to the company’s people, how they are trained, managed, and motivated.

65
Q

Shared Values

A

Shared values are the values and principals that the company operates by and stands for - things like vision, corporate citizenship or being the best or biggest.

66
Q

If sales are flat and profits are taking a header,…

A

…you need to examine both revenues and costs. Always start with the revenue side first. Until you identify and understand the revenue streams, you can’t make educated decisions on the cost side.

67
Q

If sales are flat but market share remains relatively constant, …

A

that could indicate that industry sales are flat and that your competitors are experiencing similar problems.

68
Q

If your case includes a decline-in-sales problem, analyze these three things:

A

Overall declining market demand (e.g., soda sales have dropped as bottled water becomes the drink of choice)
? The current marketplace might be mature or your product may be obsolete (e.g., vinyl records give way to CDs, which gives way to digital).
* Loss of market share due to substitutions (e.g., video rentals have declined because there are numerous substitutions vying for the leisure dollar, such as going out to dinner, going to the movies, pay-per-view, direct TV, and the Internet).

69
Q

If sales and market share are increasing, but profits are declining, then

A

You need to investigate whether prices are dropping and/or costs are climbing. However, if costs aren’t the issue, then investigate product mix, and check tosee if the margins have changed.

70
Q

If profits are declining because of a drop in revenues,

A

concentrate on marketing and distribution issues.

71
Q

If profits are declining because of rising expenses,

A

concentrate on operational and financial issues, i.e., COGS (cost of goods sold), labor, rent, and marketing costs.

72
Q

If profits are declining, yet revenues went up, review:

A 
? changes in costs;
? any additional expenses;
? changes in prices;
* the product mix; or
? changes in customers' needs.
73
Q

If a product is in its emerging growth stage,

A

concentrate on R&D, competition, and pricing.

74
Q

If a product is in its growth stage,

A

emphasize marketing and competition.

75
Q

If a product is in its mature stage,

A

focus on manufacturing, costs, and competition.

76
Q

If a product is in its declining stage,

A

define niche market, analyze the competition’s play, or think exit strategy.

77
Q

If you lower prices, and volume rises, and you are pushed beyond full capacity,

A

then your costs will shoot up as your employees work overtime, and consequently your profits will suffer.

78
Q

Prices are stable only when three conditions are met:3

A
  • Growth rate for all competitors is approximately the same.
  • Prices are paralleling costs.
  • Prices of all competitors are roughly of equal value.
79
Q

The volume (the amount that you produce) and the costs are easier to change than the industry price levels,

A

unless everyone changes their prices together (e.g., airline tickets or gas prices).

80
Q

The perfect strategy for the high-cost producer is one that

A

convinces competitors that market shares cannot be shifted, except over long periods of time, and therefore, that the highest practical industry prices are to everyone’s advantage’- meaning that price wars are detrimental and everyone will profit more by keeping prices high.

81
Q

Internet

A

How the Internet affects the company should be in the back of your mind in every case.

82
Q

Economy

A

How the economy affects the company should be in the back of your mind in every case.

83
Q

Competition and Substitution

A

How the competition, both internal to the industry and external (substitutions), affects the company should be in the back of your mind in every case.

12 cases (4 decks)

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