MC - Risks, Synergies, costs, clarifying questions and profit/loss decision making

Question 1

Uncontrolled risk

Answer 1

Question 2

Controlled risks

Answer 2

Question 3

Synergies: Revenue

Answer 3

Question 4

Synergies: Costs

Answer 4

Question 5

Cutting costs: Labor

Answer 5

Short term
1. Pay, 401k, healthcare
2. 4 10 hour workdays
3. Layoffs
4. Offshore (customer service, sales, MNF)

Long term
1. Cross train
2. Equity in company, lower pay, higher incentive to work more, cut costs

Question 6

Cutting costs: Production

Answer 6

Short term
1. Reduce inventory
2. Outsource MNF (other countries) - outsource capital intensive parts of business
3. Import parts
4. Renegotiate/consolidate Suppliers (buying more reduces costs)

Long term
1. Tech
2. MNF own materials
3. Scopable (flexible) production lines/areas of bus
4. Scalable production/areas of bus

Question 7

Cutting costs: Finance

Answer 7

All relatively short term
1. Customers pay sooner
2. Refinance debt
3. Sell nonessential assets
4. Marketing costs/channels

Question 8

Disrupting factors/macro events to consider

Answer 8

Question 9

Product scenarios: emerging, growth, mature, decline

Focus on following frameworks:

Answer 9

Question 10

Profits declining because drop in revenue- focus on:

Answer 10

Marketing issues

Distribution issues

Question 11

Profits declining because of rising expenses

Answer 11

Concentrate on reducing costs (in ST or LT)

Through:
- Operational/production
- Financial/marketing
- Labor

Question 12

Profits declining but revenues are up - focus on

Answer 12

1. Costs: Changes in costs/ New expenses
2. Product prices: Changes in price (lower price, more revenue, but higher costs since more units); Product mix (lower margin products selling)
3. Market dynamics: Changing customer needs, increased tech for competition

Question 13

Revenue declining - focus on:

Answer 13

1. Declining market demand
2. Market is mature or product is becoming obsolete
3. MS loss due to subs

Question 14

R and MS increasing, profits declining

Answer 14

d

Question 15

Clarifying questions

Answer 15

Business:
- the company: Is it public or private? How big is it? Is it growing?
- the product: If it’s a new product, ask about both the advantages and disadvantages
- customers: who do they sell to?

Geo
- MNF location
- sales geo
- location of HQ

Objective:
- R/P/C
- #

Timeline

Market
- the industry: Where is the industry in its life cycle?
- competition: Both internal (Who are the major players? What is our market share?) and

external market factors (i.e., substitutions, the economy, interest rates, unemployment
rate, price-cutting by competitors, rising material costs).

Answer 16