Common Consulting Frameworks (How and When to Use)

Common Consulting
Frameworks
(How and When to Use)

Contents
3
Page
Objectives 1
Overview 3
Frameworks
1. Industry Analysis 5
2. Company Analysis 20
3. Prioritisation 36
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6
Five forces analysis helps identify sources of advantage and pressure in an industry
and can also be used to identify how to defend against or influence the forces
5. Industry competitors
Intensity of rivalry
2. Barriers to Entry
4. Threat of Substitutes
1. Supplier Power 3. Buying Power
• Differentiation of inputs
• Switching costs of suppliers and firms in
the industry
• Presence of substitute inputs
• Supplier concentration
• Importance of volume to supplier
• Cost relative to total purchases in the
industry
• Impact of inputs on cost or differentiation
• Threat of forward integration relative to
threat of backward integration by firms in
the industry
• Buyer vs. firm concentration
• Buyer volume
• Buyer vs. firm switching costs
• Buyer information
• Ability to backward integrate
• Substitute products
• Relative price performance of
substitutes
• Switching costs
• Buyer propensity to substitute
• Industry growth
• Fixed (or storage) cost / value added
• Intermittent over capacity
• Product differences / Brand identity
• Switching costs
• Concentration and balance
• Informational complexity
• Diversity of competitors
• Exit barriers
5 Forces Template
Frameworks – Industry Analysis
• Economies of scale
• Proprietary product differences
• Brand identity
• Switching costs
• Absolute cost advantages
• Access to distribution
• Government policy
• Expected retaliation
• Capital requirements

9
Strategic
Paradigm
Key events
Key players
Other
• Fixed routes/prices
• Costs passed to consumer
• Guaranteed profit
• Distinct players in domestic/int’l
• Airline Regulation Act
• American
• United
• TWA
• Pan AM
• Some cost control
• Customer service
Regulated Period
• Competition for routes
• New entrants
• Pricing innovation
• Passenger traffic slumped
• Hub and spoke
• Chapter 11s
• Union
• American
• United
• Delta
• Northwest
• Deep pockets
• Routes
• Cost structure
Early Deregulation
• Merger/acquisition
• Fewer players
• Globalization
• Amended airline deregulation
• Sale of Pan Am Int’l to United
• Partnership with Int’l partners
• American
• United
• Southwest
• US Air
• Yield management
• FFPs
• Segmentation strategies
Restructuring
1978 Mid ‘80s1938
• Eastern
• Braniff
• Continental
• TWA
• Northwest
• Texas Air
Industry era analysis can also be performed based on the SCP framework and
incorporating additional details to describe the competition in each era
Industry Era Analysis Example 1 – US Airline Industry

12
Industry cost curve analysis can be used to explain price competitiveness by
player / site for a given level of demand
Demand / Supply Analysis Template
Price
High
Small
Supplier Capacity
Big
Low
Quantity
Demand Curve
Supply Curve
Changes that cause Demand Shift
• Product value/quality
• Price of substitutes
• Consumer preferences
• Disposable income of consumers
• Price of complementary products
• Trends (economic, social, cultural)
Changes that cause Supply Shift
• Technology
• Input costs
• Government regulation

15
0
200
400
600
800
1000
1200
It is important to consider competing sites when analysing the cost curve;
e.g. the production cost structure is similar for competing plants
Variable
costs
Fixed costs
Cost Curve Example 3
Location 1 Location 2 Location 3

18
Differentiable
Substantial
• Measurable
• Potential
Actionable
• Accessible
• Implementable
• Segments show significant variations in
product demand, institutional
characteristics or purchase and usage
patterns
• Size and purchasing power of each
segment can be measured
• Size and profitability of each segment
makes it worth targeting
• Segments can be effectively reached and
served
• Programs to attract and serve segments
can be formulated
• Determination of meaningful customer
groups
• Identification of distinct segments
• Quantification of economic significance
• Design of advertising and channel
strategies
• Match with internal capabilities
Criteria Description Relevance
Segmentation Requirements
In order to be useful, all segmentations must be differentiable,
substantial and actionable

21
• Activities that will make the ‘C’ happen
• No more than 5 or 6
• Need to be specific and measurable
• Requires right resources and level of
authority
• The hypothesis or proposition for change,
expressed as a sentence
• Under sentence identify 3-4 discreet areas
of action, eg: Marketing, Financial, Skills,
Systems etc.
• Key facts on the external & internal
environment (Competitors, industry,
IT, Public sector etc.)
• System in focus (Area of work team
is responsible for)
• Design challenges (Issues affecting
business)
• Develop the “Focusing Question”
(what is the question we are going to
answer)
Where are we now?
How do we get there?
How do we make this happen?
A
C • To have target customer
segments seek to do business
with us as their preferred
company
• To deliver above industry
financial results to enable
continued investment in the
business and improved returns
for shareholders
• To add value in the community by
giving peace of mind in turbulent
times
Where do we want to be?
B
D
The AcdB template is an effective strategic planning framework
Strategic Planning - AcdB Template
Frameworks – Company Analysis

24
The 7S template details how the overall vision drives the strategy, skills and shared
values, the other 4 S’s build an organisations structure, staff, systems and style
7S Template
Staff Style
Structure
Systems
Shared
Values
Skills
The commonly held beliefs
of the organisation, ie:
“what is important”
Activities the organisation
must be good at to deliver a
winning value proposition
An integrated set of actions to
deliver superior value to a
chosen set of customers, with a
cost structure that allows
continuing excellent returns
The overriding goal
of the organisation -
a clear compelling
statement
StrategyVision

27
• Identify sources of profit(including inefficiency, excess staff)
• Generate options for accruing profit
• Quantify potential value & feasibility of option
• Choose best option
1. COMPETE for revenue/profit from direct competitors
2. CONCENTRATE profit from other elements of the industry
chain (eg: complements), via vertical integration or price negotiation
3. CAPTURE profit via identifying consumer potential, by
effective segmentation and pricing
4. CREATE new demand, by improving quality, adding features,
displacing substitutes or cutting costs
5. COOPERATE with suppliers, customers or competitors, via
joint ventures or alliances to improve purchasing power
Price
Volume
D2
D1
4. Create demand
by improving
quality etc.
2. Concentrate profit from other elements of the industry chain
Price
The 5 C’s framework considers all elements of the industry chain, identifying some
less obvious ways for generating profit.
5C Template

30
• Leisure/business
• West
Coast/Midwest
• International
Target Customers
• West Coast hubs
• Apollo
• Largest fleet
• Full service
• Alliances
• Largest fleet
• Large percentage
of gates in hubs
1. Exploit leisure travel
market
2. Exploit Chicago hub
for East Coast
expansion
3. Build and strengthen
alliances
4. Reinforce and expand
workforce cross-
utilization to reduce
labor cost base
Business Strategy
Recommendations
Company Competitors
Customers
…
Strategic Triangle Example – US Airline
Airline example of how to apply the Strategic Triangle to strategic thinking

33
Deliverables
• Determination of who the
stakeholders are and their
impact on the company
• Determination of the most
critical stakeholders and their
relative levels of power
• For example:
Shareholders
Media Corporation
Strategic Partners Creditors
Local Community Top Management
Government and
Regulatory Bodies
Employees
Suppliers Unions
Customers
Company
Stakeholder analysis reveals the pressures that a company faces from its
constituents and the degrees of freedom that are available to the company
Stakeholder Analysis – Potential Stakeholders to Consider
Decision
Makers
Stakeholders
Interested
Parties

Contents
36
Page
Objectives 1
Overview 3
Frameworks
1. Industry Analysis 5
2. Company Analysis 20
3. Prioritisation 36

39
Medium Priority High Priority
Low Priority Medium Priority
Ease of
Implementation
Easy
Small
Impact
BigHard
Ease of Implementation / Impact Template
The prioritisation template helps illustrate the high priorities that are easy
to implement and deliver a strong impact
Frameworks – Prioritisation

1
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