Issue Trees Flashcards
What are the typical structures of issue tree?
- algebra structure (i.e. Revenue - cost = profit)
- process structure (i.e. break down the production process of a product)
- Conceptual framework: categorize similar factors into big buckets and tackle high-impact drivers
- Segmentation: list out the sub-component of a topic (i.e. meals: breakfast, lunch, dinner, desserts)
- opposite words: economic vs non-economic; short-term vs long-term
How to increase a restaurant’s profit?
Revenue (Price, Volume), Cost (Fixed, variable cost)
Fixed cost (labor, utilities…), Variable cost (inventory..)
Revenue (Food, alcohol, non-alcohol)
Revenue (Morning menu, lunch, dinner)
Revenue by occasions (regular meals, special occasions like large parties or banquets, retail merchandise with its brand logo, special events like charity events, ladies nights, singles nights, book clubs, wine tasting, catering services, corporate partnership to open business accounts)
Variable cost reduction (Material - portion control, use local ingredients that are cheaper and fresher, pay vendor services partially with restaurant coupons; Control labor cost - use interns for easy jobs, reduce turnover for complex jobs to avoid training cost); Do its own marketing)
how a Russian bank enters Ukraine banking market and builds a business of 1 bio EUR in a year?
issue tree:
1. Strategy
2. “Should/Why” (market attractiveness, achievable target)
3. “Could” - capability (financial resources, know-how, human resources)
4. “Would” - this entry has highest rate of return among other projects that our client can do
5. “How” - JV/Acquisition/Greenfield
6. Risk and Exit strategy
the most important is to understand the market attractiveness, capability and opp. cost. About market attractiveness, my hypothesis is that it’s feasible for the client to get 10% market share in a year. the way to test this hypothesis is through understanding 1) total market size 2) growth rate 3) revenue and market share per segment of retail banking. 4) revenue and market share of key competitors
How to estimate the number of servers Twitter recently rents, leases or owns?
this is a demand issue since Twitter can get as many server it needs if it pays.
3 things to estimate:
1) current processing power
2) the capacity to store historical data of users (this one should be based on the total days of a user owning the account
3) back up servers (this should be same as current processing power)
How much Vodka consumed in London a year
This is a demand question: population of London * % adult * % adult drinking alcohol * % adult drinking Vodka * # times consuming per week * volume per consumption / 1000 ml * price per bottle
Estimate the total value of red paint used on Coca Cola cans worldwide.
S=D, so equation = global population * % drinking sweet drinks * % drinking sweet carbonated drinks * % drinking Coco cola * % drinking out of canned Coco Cola * # cans a person drinks per day * area on a can that is painted by red in square centimeters * volume of red paints needed to paint per square centimeter / volume of red paints per bottle of paint * price per bottle of red paints
Sanity check: use unit cost of red paint per can / total price of Coca Cola to see the % of red paints in total cost of a Coca
A learning point: we have to know how to calculate rectangle area of a can
Estimate the value of Bagels sold in US Starbucks per annum
US population * 20,000 people (we assume 1 Starbucks per 20K people) * # serving staff * time used to serve a customer * # service hours per day * 365 * % Starbucks customer ordering Bagel * # of Bagels a customer orders * price per Bagel (4$)
Estimate the revenue Google generates annually from the search business only
S=D, so equation = population * % with internet access % people using search engines * % of using google * # of days they use google per week * # times per day * # times of seeing ads * # of ads they see per time * % of times of clicking on an ad when they see one * 52 weeks * # unit price charged per view of an ad *% ad income going to google
Estimate market value of online dating in NYC
S=D, so equation = NYC population * % with internet access * % adult * % of adults searching for a partner * % searching online * % joining websites * # sites they join * % paying to join the websites * amount of payment a year
A CEO comes from London to South Africa for a business trip. I was asked to decide on a dinner menu for him at a high-end restaurant in town. How should I approach this?
First, I need to know a few things from either local contacts or people who knows CEO well in London:
- What is the scope of the menu? incl. wine?
- do we have budget limit? how many people will be eating with CEO? the budget cap is for a group?
- does CEO have any health concerns in terms of his food? allergy, total calorie intake, any diet for veggie or carnivore
- does he have any preferences of food types (favorite, like, dislike, hate, local ethnic food or more conservative)
- how many days we have to decide on the menu before the dinner?
- How is the ordering format at this restaurant? fixed menu or a la carte? Can they do dishes out of their menu? like London dish to CEO’s taste?
Second, I will categorize the factors I need to consider into 3 buckets, health, budget and preferences. I will start with health since this give us more binary answers for us to cross over items available on the menu quickly.
1) health
- cross over items that CEO are allergic to
- cross over items that CEO cannot have due to calory
- cross over items that CEO cannot have due to diet
2) budgets: by looking at total budget limit, deduct tax and tips to get a disposable budget, then divided by number of guests at the dinner to get average number of budget per person before tax.
- cross over items that exceed budget per person
3) presences:
- cross over items that CEO hate/dislike
Third, come up with a combination which meet 3 criteria at the same time.
Forth, send over the highest rank member who will accompany CEO for the dinner for a pre-look.
Fifth, call restaurant to reserve the book in advance
How to reduce US’s dependency on oil?
- clarify on definition “what is dependency on oil?” here is “consumption of oil by US” (watch out: it’s not about reduction on oil import for US)
- break down by 2 branches: demand and sources of energy
- for “demand”: break it down by industries, car, consumers, military;
- for “alternative sources of energy”: break it down by wind, solar, nuclear, hydrogen, coal. wind and solar can be an alternative for imported oil since their unit cost is much high than domestically produced oil but only a bit slightly higher than imported ones. for nuclear, hydrogen and coal, they can replace domestic ones. coal is not a clean energy so this has to watch out.
- for each sector in “demand” bucket, define a few measures how to reduce demand
- then define how to increase production of alternative sources of energy
brainstorm why # of customers dropped
1) customers are leaving more often (go to competitors, use other substitutes, don’t need any solution any more)
2) we have fewer new customers than the customers who left
