NIB Workshop 1


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NIB Workshop 1

  1. 1. Workshop I<br />Strategy<br />
  2. 2. The Five C’s is an elementary framework for examining a company<br />Company<br /><ul><li>How big is the company?
  3. 3. Is it public or private?
  4. 4. What are its core competencies?</li></ul>Costs<br /><ul><li>What is the split between fixed and variable costs? How are they likely to vary?
  5. 5. How do the company’s costs compare to industry peers?</li></ul>Competition<br /><ul><li>Who are the biggest competitors and their market shares?
  6. 6. Has market composition changed recently?
  7. 7. What are the company’s strategic advantages?</li></ul>Consumers/Clients<br /><ul><li>What are their preferences for price, quality, and availability?
  8. 8. Is the company fulfilling their needs?
  9. 9. Can the company segment them?</li></ul>Channels<br /><ul><li>How does the company get its products into the hands of end users?</li></li></ul><li>SWOT is another simple framework for company analysis <br />PROS<br />CONS<br />STRENGTHS<br />WEAKNESSES<br />INTERNAL<br />OPPORTUNITIES<br />THREATS<br />EXTERNAL<br />
  10. 10. Porter’s Five Forces analyzes the structure of an industry<br />POTENTIAL ENTRANTS<br />SUBSTITUTES<br />Threat of substitute products<br />Threat of new entrants<br />INDUSTRY COMPETITORS<br />Rivalry Among Existing Firms<br />Bargaining power of suppliers<br />Bargaining power of buyers<br />BUYERS<br />SUPPLIERS<br />Regulatory impact of government<br />Pressure of NGO’s<br />GOVERNMENT<br />NGO’S<br />
  11. 11. Consider trends beyond the industry level<br /><ul><li>Macroeconomy: How’s the market doing? What’s the risk-free interest rate? Are investors facing uncertainty/volatility? Are we in a recession?
  12. 12. Politics: Who controls Congress? What’s the U.S. budget situation? What legislation is relevant to [company]? How are political conditions in potential foreign markets?
  13. 13. Consumer trends: What’s the unemployment rate? Which sectors have gained from the economic downturn?Is consumer demand in [sector] going up or down?
  14. 14. Technology: How does the internet affect [company]? How can this company leverage the growth of social media/mobile users/clean energy/etc.? How many people are on Facebook?</li></li></ul><li>Profitability underlies most business problems<br />Price-based costing<br />E(∏ = P * V – (FC + VC))M<br />Price<br />Cost-based pricing<br />Competitive pricing<br />Revenues<br />Increase marketing<br />Economy<br />Volume<br />Reduce prices<br />Expand into new areas<br />Profit<br />Cost of capital<br />Fixed<br />Market/Industry<br />Rent and utilities<br />Costs<br />Manufacturing<br />Variable<br />Labor<br />Delivery costs<br />Debt on inventory<br />
  15. 15. An issue tree is an effective issue disaggregation tool<br />Question of Fact<br />Sub-Issue<br />Question of Fact<br />Issue<br />Question of Fact<br />Sub-Issue<br />Question of Fact<br />Central Question<br />Question of Fact<br />Sub-Issue<br />Question of Fact<br />Issue<br />Question of Fact<br />Sub-Issue<br />Question of Fact<br />Pick a sensible framework or pattern to apply; group the issues into buckets using framework<br />Branches should be mutually exclusive, collectively exhaustive (MECE)<br />Client’s critical issues are at higher levels of the tree<br />Issues at lowest level should be able to be answered by analysis (can you pass it to a teammate?)<br />
  16. 16. Building an issue tree: the problem<br />Our client, a retailer of fine and expensive oriental rugs in Manhattan, is experiencing declining profits. Why and what can they do about it?<br />
  17. 17. Building an issue tree: disaggregating the problem<br />What are the profit margins of the company’s three main competitors?<br />Is the industry as a whole doing well?<br />Have there been new entrants to the Manhattan luxury rug market in recent years?<br />Industry-related factors<br />Are macroeconomic factors hurting consumers’ ability to buy luxury goods?<br />Have consumer preferences shifted?<br />Are consumers turning to substitute products rather than rugs?<br />What is causing profits to decline for the rug company?<br />How are the political conditions in the supplier countries?<br />Are there issues along the supply chain?<br />Is the price of raw materials increasing due to lowered supply?<br />Is the company selling fewer rugs than before?<br />How have the company’s revenues changed?<br />Has the company lowered prices recently?<br />Company-specific factors<br />Has the cost of rent changed?<br />How have the company’s costs changed?<br />Have labor costs changed?<br />Is the company experiencing high debts on inventory?<br />