If scenarios to remember Flashcards
If sales are flat and profits are taking a header
Investigate both revenues and costs, always start with revenue
If sales are flat, but market share remains relatively constant
This could indicate that industry sales are flat and that your competitors are experiencing similar problems
Three things to analyse if your case includes a decline in sales problem
- Overall declining market demand
- The possibility that the current marketplace is mature
- Loss of market share because of substitutions
If sales and market share are increasing, but profits are declining (3)
- Investigate whether prices are dropping and/or costs are climbing
- Investigate changes in product mix and margins
- Analyse if players are leaving the market
If profits are declining based on a drop of revenues
Concentrate on marketing and distribution issues
If profits are declining because of rising expenses
Concentrate on operational and financial issues:
COGS, labour, rent and marketing costs
If profits are declining yet revenues have gone up (5)
- Changes in costs
- Any additional expenses
- Changes in price
- Product mix
- Changes in customer needs
If a product is in its emerging growth stages
Concentrate on R&D, competition and pricing
If a product is in its growth stage
Emphasise on marketing and competition
If a product is in its mature stage
Focus on manufacturing, costs and competition
If a product is in its declining stage
Define niche markets, analyse the competition’s play or think exit strategy
If prices are dropped while capacity is full
Volume goes up, costs will shoot up and employees will work overtime causing cuts in profit
Prices are only stable when three conditions are met
- The growth rate for all competitors is approximately the same
- Prices are paralleling costs
- The prices of al competitors are roughly of equal value
