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Case Prep > Things to Memorize > Flashcards

Things to Memorize Flashcards

1
Q

9 buckets for framework

A
  1. Market attractiveness
  2. Competitive landscape/benchmarking
  3. Company attractiveness/capabilities
  4. Customer segmentation and needs
  5. Financial considerations
  6. Synergies
  7. Strategic alternatives
  8. Risks and mitigations
  9. create your own (social responsibilities)
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2
Q

Market attractiveness

A

size, growth rate, average profit margins, major trends/changes, new tech, new regulations, developing or mature, converging with another market?

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3
Q

Competitive landscape

A

who else, each players market share, products of competitors, competitor capabilities, what’s unique about competitors, barriers to entry

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4
Q

Company attractiveness/capabilities

A

line of products, how are they unique, how much market share, how profitable, distribution channels, partnerships, buying power, go-to-market strategy, geographic regions, growing or declining

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5
Q

Customer segmentation and needs

A

characteristics of each segment, needs/preferences of each segment, how profitable is each sement, changing purchasing habits, view of company changed

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6
Q

Financial considerations

A

revenue, costs, profits, is implication of business decision profitable, what are different revenue elements, what are different cost elements, how to increase revenue, how to decrease cost, pricing strategy, how long to break even, cost of acquisition

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7
Q

Risks and mitigations

A

use when you need one more bucket but can’t think of one. risks? impact of risks? can we mitigate risks?

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8
Q

8 mini frameworks for qualitative questions

A
  1. internal/external
  2. short term/long term
  3. economic/non-economic
  4. quantitative/qualitative
  5. direct/indirect
  6. supply-side/demand-side
  7. upside/downside
  8. benefits/costs
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9
Q

market sizing statistics: US population, world population, average household size

A

US: 320M
world: 8B
Average household size: 2.5 people per household

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10
Q

Profit (math equation)

A 
Profit = revenue - costs
Profit = (Quantity*Price) - [(Quantity*variable costs) + fixed costs]
Profit = (Price – Variable Costs) * Quantity – Total Fixed Costs
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11
Q

breakeven equation?

A

when profit = 0
aka: revenue = costs
(QuantityPrice) = [(Quantityvariable costs) + fixed costs]

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12
Q

Structure for conclusion

A

I recommend that we (insert recommendation) for the following three reasons.
1)
2)
3)
For these reasons, I recommend that we (insert recommendation)
For next steps, I would like to look into the following two things:
1)
2)

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13
Q

Market share & relative market share formulas

A

Market Share = Company Revenue in the Market / Total Market Revenue

Relative Market Share = Company Market Share / Largest Competitor’s Market Share

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14
Q

market size

A

total revenue of all companies in that market

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15
Q

indication of a fragmented market? what does that suggest?

A

if the leader in the market has a small (I.e. 5%) of the market share = indication of fragmented market

suggests low barriers to entry

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16
Q

profit margin equation?

what do companies generally want to invest in?

A

profit margin = profit/revenue

companies generally want to invest in products with higher profit margin

17
Q

Investment formulas (ROI, payback period)

A

Return on Investment = Incremental Profit / Investment Cost

Payback Period = Investment Cost / Incremental Profit per Year

18
Q

barriers to entry (economic examples)

A

capital, economies of scale, distribution channels

19
Q

barriers to entry (non economic)

A

technical knowledge/expertiese, brand name, technology, government regulations, product differentiation

20
Q

fixed cost examples

A

space rental, worker salaries, utilities, equiptment/machines

21
Q

variable cost examples

A

depends on quantity of units made (I.e. toppings per pizza)

22
Q

supply chain (6 parts)

A 
raw materials
supplier
manufacturer
distributor
retailer
customer
23
Q

buyer power or purchasing power

A

qualitative measure of how much power a company has in setting prices of services or materials it purchases from supplier

24
Q

how to have high buyer/purchasing power (2 examples)

A
  1. high if buyers are more concentrated than sellers (I.e. only 2 buyers in market but hundreds of sellers)
  2. high if there are many substitutes to raw material needed and cost to switch is low (can either switch or threaten to switch and renegotiate price)
25
Q

examples of revenue synergies

A

access to new customer base or market, cross selling products to existing customers, overlapping distribution channels

26
Q

examples of cost synergies

A

reduced overhead or fixed costs from consolidating functions (I.e. HR, marketing, IT infrastructure, physical facilities), increased buying power

27
Q

reasons for making a merger/acquisition (4)

A
  1. company A lacks particular product/offering in portfolio and is easier/cheaper to acquire another company that does instead of investing resources organically
  2. cost/revenue synergies
  3. company A sees smaller high growth competitor as threat
  4. diversify portfolio (increase revenue resiliency to changing customer preferences. ex: beer company acquiring a soda company)
28
Q

private equity

2 ROI strategies?

A

comprised of firms that have lots of $$ and invest/purchase companies for sake of ROI

  1. flipping companies (think house flippers. underperforming companies not necessarily attractive for m&a)
  2. purchasing companies that create synergies with rest of companies in their portfolio

if you get a PE question ask what ROI strategy they’re using

29
Q

price sensitivity
(example of high)
(how to incorporate in strategy)

A

high if customers may buy less if even a small increase in price

more likely to have high price sensitivity if several suppliers/substitutes (I.e. clothes vs. insulin)

finance strategy: important to figure out if added revenue of increased price is greater than loss of revenue from selling less product (same goes for decreasing price)

30
Q

ways to increase revenue

A

organic (internal): increase quantity sold, change price, new products

inorganic (external): m&a (take in revenue of new company)

31
Q

ways to decrease cost

A

variable costs: switch suppliers (cheaper price or substitute), use less raw material per product, renegotiate contracts. be aware of decreasing product quality

fixed costs: renegotiate contracts, reduce work force/hours (harder than reducing variable costs)

32
Q

economies of scale

A

advantage a company gets in buying power as it produces and sells more product

allows company to buy raw material cheaper and consequently lower product price point and sell more. cycle ends when company reaches max benefit of economies of sale

33
Q

growth rate equation

A

growth rate = (new - old) / old

34
Q

Strategic alternatives (bucket)

A

are there alternative markets to enter? would it be better to enter via partnership or acquisition? are there alt. products we can launch? are there alt. acquisition targets? are there alt. investments we can make?

35
Q

Synergies

A

what are potential revenue synergies? cost synergies? are those synergies realizable? how long will that take?

36
Q

increasing profit vs profitability

A

increase profit: sell more product. assuming product is profitable, the more sold, the more profit made. selling more product doesn’t do much for profitability.

increase profitability: decrease costs and sell product at same price or increase price of product and have costs remain unchanged

37
Q

cannibalization

equation for change in profit?

A

reduction in revenue of one product as a result of the introduction of a new product by the company (I.e. customers might switch from buying high-profit to low-profit product)

change in profit = profit from new product - loss in profit from existing customers switching from old to new product

38
Q

Operations Formulas (output, utilization)

A 
Output = Rate * Time
Utilization = Output / Maximum Output

Case Prep (2 decks)

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