Frameworks

Question 1

Improve Profits

Answer 1

1. Revenue
   - volume
   - price
2. Costs
   - Fixed Costs (don’t change with q)
   - Variable Costs (change based on q)

Question 2

Grow the Business

Answer 2

1. Grow the core business
   - grow within current segments (acquire, retain, or increase spend of customers)
   - focus on fastest-growing segments (geographies, customer types)
2. Grow outside the core business
   - sell new products to existing clients
   - get into new businesses (using capabilities)

Question 3

Reduce Cost

Answer 3

1. Reduce the need
   - eliminate need entirely
   - reduce service level
2. Meet need with less resources
   - eliminate waste
   - improve productivity
3. Reduce resource costs
   - find cheaper alternatives
   - renegotiate costs

Question 4

Enter New Market

Answer 4

1. Market Opportunity
   - market size
   - market growth
2. Potential share
   - Competitors
   - Customer needs
   - Our offering
3. Potential Profit
   - Investment
   - Running Costs
   - Revenue
4. Capabilities & Risks

Question 5

Launch New Product

Answer 5

1. Choose target segments
   - size & growth
   - competition
   - customer needs
2. Define our strategy
   - product
   - price
   - distribution
   - brand & advertising
3. Implementation

Question 6

Whether to Make an Investment

Answer 6

1. Impact on costs
2. Impact on revenue
   (breakeven?)
3. Implementation

Question 7

Breakeven

Answer 7

Investment/Marginal Profit = units necessary for breakeven

Marginal Profit = Marginal Revenue - Marginal Cost

Question 8

Response to Competitive Threat

Answer 8

1. Potential Impact on our business
   - segment affected
   - estimated loss
2. Opportunity pursued by competitor
   - size
   - profitability
3. Possible responses?
   - do nothing
   - mitigate
   - align
   - replicate
   - collaborate

Question 9

Optimize a Process

Answer 9

1. Map out current process
   (capacity, utilization, bottleneck)
2. Look into each step of the process
   - eliminate
   - reduce cost
   - increase speed
   - increase quality
   - anticipate
3. Estimate Gains

Question 10

Price New Product

Answer 10

1. Costs
   - Variable Costs
   (+ enough margin to cover investment and fixed costs)
   - Investment Costs
   - Fixed Costs
2. Clients’ willingness to pay
3. Competitors or substitutes
   - should we price above or below?

Question 11

Business Acquisition

Answer 11

1. Standalone Value
   - Future revenue
   (net present value of future cash flows)
   - Future costs
   - Valuation multiples: how much have similar businesses in similar industries been valued
   as a multiple of their revenue
2. Synergies
   - Revenue growth
   - Cost reduction
3. Capabilities & Risks