Sensitivity Analysis Framework for improving profitability and Valuation using our sustainable value equation formula which is being from McKinsey's Zen of Corporate Finance Formula.

1. NV= e0 + e1*ln(PP1) + e2*ln(PP1_Prior_Week) + e3*ln(PP2) + e4*ln(PP3) + …
e5*ln(CPCP1) + e6*ln(CPCP2) + e7*ln(CPCP3) + e8*ln(CPCP4)…
e9*Brand Equity + e10*Holiday -> For Details Read On…
Every Day
Retail Price ($/Unit)
Trade
($/Unit)
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50 4.50 5.50 6.50
Trade Adj.= (CO Rate – ED
Rate)*(Trade Eff. Fac. – 1)
Trade
Adjustment
Core
Mega
Special
Promotion TypesNorth
Central
P1
PROD
RMA
South
East
West
P2 P3 P4 P5
CV1 CV2 CV3 CV4 CV5
CV1 CV2 CV3 CV4 CV5
CV1 CV2 CV3 CV4 CV5
CV1 CV2 CV3 CV4 CV5
CV1 CV2 CV3 CV4 CV5
Operating
Margin For
Each Cell
(1) (V2/V1) = ((P2/P1)^E)*(Pcannb2/Pcannb1)^Ecannb)* . . . ((Pcomp2/Pcomp1)^Ecomp)
Margin
per unit
New
volume
x
-
Gross price
Average
trade per
unit
% Δ in
prices
-
x
Optimization
objective
Boundary
conditions
/
ƒ
ƒ
Constants/other inputs(1)
Key inputs
Key outputs
Temp calculations
New
retail
price
Current
retail
price
Comp
scenarios
Elasticity
with other
Product
Models
Net
revenue
per unit
% change
in volume
due to
Cost
per unit
Current
volume
Retail to
trade price
conversion
3
New retail
price
ƒ(1)
3 Scenarios
•SAME PRODUCT
•SELF CANNIBALISM
•COMP
Within the log-log
equation format ,
coefficients are the
price elasticities-
e.g - e1 and e2 for
SELF PROMO, e3
and e4 for SELF
CANIBALISM, e5 –
e8 for COMP, e9
and e10 for TREND
and HOLIDAY etc.
1. PRODUCT/RMA
MATRIX VOLUME
2. ADJUSTED PRICE
BASED ON TRADE
EFFICIENCY
•Recommendation
to price up or down
in each cell.
•Projected volume,
profit, share and
valuation changes
from price changes
•Optimization
recommendations
for comp. response
scenarios.
KEYOUTPUTS
KEY INPUTS
THE CORE MODEL
http://strategywithapurpose.blogspot.com/2010/11/sensitivity-analysis-framework-for.html