Complete Business Frameworks Reference Guide

Business Framework
Complete Consulting Frameworks
Toolkit
This 300+ slide presentation contains 50 commonly used consulting frameworks and
methodologies, spanning Strategy to Operations to Finance.
Find our other documents at http://flevy.com/seller/learnppt
• ABC Analysis
• Adoption Cycle
• Ansoff Market Strategies
• Balanced Scorecard
• BCG Growth-Share Matrix
• Benchmarking
• Blue Ocean Strategy
• Break-even Analysis
• Business Unit Profitability
• Economies of Scale
• Environmental Analysis
• Experience Curve
• Cluster Analysis
• Company & Competitor Analysis
• Core Competence Analysis
• Cost Structure Analysis
• Customer Experience
• Customer Satisfaction Analysis
• Customer Value Proposition
• Fiaccabrino Selection Process
• Financial Ratios Analysis
• Gap Analysis
• Industry Attractiveness & Business
Strength Assessment
• Key Purchase Criteria
• Key Success Factors (KSF)
• Market Sizing & Share
• McKinsey 7-S
• Net Present Value
• PEST Analysis
• Porter Competition Strategies
• Porter’s Five Forces
• Portfolio Strategies
• Price Elasticity
• Product Life Cycle
• Product Substitution
• Relative Cost Positioning
• Rogers' Five Factors
• Scenario Techniques
• Scoring Models
• Segment Attractiveness
• Segmentation & Targeting
• Six Thinking Hats
• Stakeholder Analysis
• Strengths & Weaknesses Analysis
• Structure-Conduct-Performance (SCP)
• SWOT Analysis
• SWOT Strategies
• Treacy / Wiersema Market Positioning
• Value Chain Analysis
• Venkat Matrix

2
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3
Contents
1. ABC Analysis 6
2. Adoption Cycle 11
3. Ansoff Market Strategies 16
4. Balanced Scorecard 21
5. BCG Growth-Share Matrix 29
6. Benchmarking 35
7. Blue Ocean Strategy 42
8. Break-even Analysis 48
9. Business Unit Profitability 53
10. Economies of Scale 58
11. Environmental Analysis 64
12. Experience Curve 71
13. Cluster Analysis 78
14. Company & Competitor Analysis 82
15. Core Competence Analysis 92
FRAMEWORK SLIDE

4
Contents
16. Cost Structure Analysis 97
17. Customer Experience 102
18. Customer Satisfaction Analysis 108
19. Customer Value Proposition 113
20. Fiaccabrino Selection Process 116
21. Financial Ratios Analysis 123
22. Gap Analysis 145
23. Industry Attractiveness & Business Strength Assessment 149
24. Key Purchase Criteria 155
25. Key Success Factors (KSF) 160
26. Market Sizing & Share 168
27. McKinsey 7-S 182
28. Net Present Value 190
29. PEST Analysis 199
30. Porter Competition Strategies 202
FRAMEWORK SLIDE

5
Contents
31. Porter’s Five Forces 206
32. Portfolio Strategies 231
33. Price Elasticity 238
34. Product Life Cycle 244
35. Product Substitution 251
36. Relative Cost Positioning 254
37. Rogers' Five Factors 262
38. Scenario Techniques 268
39. Scoring Models 274
40. Segment Attractiveness 280
41. Segmentation & Targeting 285
42. Six Thinking Hats 293
43. Stakeholder Analysis 398
44. Strengths & Weaknesses Analysis 303
45. Structure-Conduct-Performance (SCP) 310
FRAMEWORK SLIDE

6
Contents
46. SWOT Analysis 313
47. SWOT Strategies 318
48. Treacy / Wiersema Market Positioning 322
49. Value Chain Analysis 330
50. Venkat Matrix 336
FRAMEWORK SLIDE

8
Balanced scorecard
Derive
strategic
objectives
within the
respective
perspectives
from the
strategy
Determine
perspectives
Set up cause/
effect
relationships
Determine
target values
Determine
activities and
state respon-
sibilities
Ensure
consistent
commitment
and
incorporate it
in daily work
1 2 3 5 6 7
Select
measures
4
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9
Balanced scorecard
Activity
In which processes do we
need to excel?
Internal Processes
Target
Strategic
target
KPI
Activity
Target
What do we want to
achieve in finance?
Finance
Strategic
target
KPI
TargetActivityHow can we remain
flexible and able to
improve?
Learning & Development
Strategic
target
KPI
How can we satisfy our
customers’ needs?
Customers
TargetActivity
Strat.target
KPI
Strategy
and Vision

10
Balanced scorecard
Finance Perspective
How do the investors appraise our
present position?
…
…
Learning and Development
Perspective
How can we ensure that our
customers’ needs are satisfied also in
future and what are the critical
success factors of the future?
…
…
Internal Process Perspective
How well do we satisfy our
customers’ needs?
…
…
Customer Perspective
How do our customers appraise
our performance?
…
…

11
Balanced scorecard
Strategic Objective
Finance
What do we want to achieve in
finance?
Customers
How can we satisfy our customers’
needs?
Internal Processes
In which processes do we need to
excel?
How can we remain flexible and
able to improve?
• …
• …
• …
• …
• …
• …
• …
• …
• …
• …
• …
• …
KPI
• …
• …
• …
• …
• …
• …
• …
• …
• …
• …
• …
• …
Target
• …
• …
• …
• …
• …
• …
• …
• …
• …
• …
• …
• …

12
Balanced scorecard
Strategic Objective KPIs
Frequency of
Evaluation
Responsibility for
Data Maintenance
Recipient of
Reports
…
…
…
…
…
…
…
…
…
…
…
…
…
…
…
…
…
…
…
…
…

13
Total 100% … %
Perspective Strategic Objective KPI Weighting
Frequency
of Survey
Comp.
Year 2004
Pres. Year
2005
Ongoing
Pres. Year
2005 Ex-
trapolated
2005
Target
2006
Target
Extrapol.
in % of
Target
Ongoing
in % of
Target
Finance … … ... … … … … … … …% …%
Learning and
development
… … ... … … … … … … …% …%
Internal
processes
… … ... … … … … … … …% …%
Customers … … ... … … … … … … …% …%
Balanced scorecard
y
yearly
hy
twice a year
q
quarterly
m
monthly
Target
achievement
…%

14
Balanced scorecard
Vision
Financial Perspective
• …
• If we are successful, how do
out shareholders know?
Customer Perspective
• …
• How should I see the
customer to achieve the
vision?
Internal Perspective
• …
• Which processes do I need to
optimize to satisfy the
customers?
• …
• How should I enhance my
organization to achieve the
vision?
…
…
…
…
…

15

17
 Blue Ocean Strategy is growth strategy framework focused on the idea of creating an uncontested market space--i.e. a
"blue ocean." This framework is very innovative, as its principles challenge the traditional business strategy principles
of fighting competitors head-on.
 Traditional business strategy is based on Michael Porter’s teachings of developing a sustaintable Competitive
Advantage over other players in the market.
 The Blue Ocean Strategy framework evolved from a framework called Value Innovation developed by Gemini
Consulting (now Capgemini Consulting) in the late 90s.
Blue Ocean Strategy – introduction
What It Is

18
The modern strategy thinking of Blue Ocean Strategy focuses on enabling
innovation, value creation, and effective execution
Growth Focus
Source: C. Kim, R. Mauborgne, Harvard Business Review (1997).
Value Identification
Value Creation
Effective Execution
• Start with customer needs
• Look beyond traditional
markets, industries and
competitors
• Create multi-horizon
portfolio
• Develop growth platforms
for “market mining”
• Understand what the
customer values
• Prioritize initiatives
Growth Platform
Consumer
Need
Market
Trends
Value
• Select and develop
growth option
• Align operating model to
deliver value and fair
value Concept Execution
• Venture Launch
• Organizational alignment
• Funding / Resource
Allocation
• Measurements
• Accountability
Sustainable Growth
Structure
• Infrastructure
• Culture
• Alliance Management
• M&A
Eliminate Reduce Raise Create
Costs
Value
Value
Innovation

19
Modern thinking moves away from a traditional focus on competition to
“blue oceans” of opportunity
Traditional Thinking Modern Thinking
Industry
Industry conditions are given – compete in
existing market space
Industry conditions can be shaped – create
uncontested market space
Strategy
Companies must build competitive
advantages to beat competition
Make competition irrelevant
Market
Exploit existing demand Create and capture new demand
Resources
Make the value-cost trade-off Break the value-cost trade-off
Organization
Align the whole system of a firm’s activities
with its strategic choice of differentiation or
low cost
Align the whole system of a firm’s activities in
pursuit of differentiation and low cost
Offerings
Maximizing the offering’s value within industry
boundaries
Offering buyers the total solution that
transcends the industry

20
Building a new value curve is at the heart of Blue Ocean Strategy
Which of the attributes
that our industry takes
for granted should be
eliminated?
Which attributes
should be reduced
well below the
industry’s standards?
Which attributes should
be raised well above the
industry’s standards?
Which attributes should
be created that the
industry has never
offered?
Evolution of Value Curves
Eliminate
Value
Innovator
Value
+
-
Reduce Raise Create
Traditionals

21
Value Curve – template
Source: Blue Ocean Strategy, Kim and Mauborgne
Insert bumper – takeaway statement.
Eliminate Reduce Raise Create
Company
Value
+
_
Competition

22
20. Fiaccabrino Selection Process

23
 The Fiaccabrino Selection Process is a powerful methodology for interviewing and screening the best people for your
organization. The objective is to select those people who will be the highest performers with the lowest turnover.
 The methodology was developed by Charles Fiaccabrino, a sales executive who helped grow Roche Diagnostics from
its onset to a multi-billion dollar company. He worked at Roche for 22 years, where each year, he was the top sales
performer each year. During his career at Roche, he earned the Presidents Achievement Award 20 times and was
known internally as “Mr. Roche.” He credits much of his success to his ability to build a winning team, which he later
condensed in this methodology.
 In most sales organizations, your top 20% sales performers generate 80% of the revenues. The question is, why are
the other 80% hired? What would happen if sales managers hired sales people who were more like the top 20% and
less like the bottom 80%? The result is your sales would significantly multiply and your sales turnover will also drop.
This framework teaches you how to identify the top 20% sales performers--the best of the best.
 The core of the framework is to understand 16 critical Humanistic Attributes. In order for candidate to be hired, he or
she must excel across all 16 of the Humanistic Attributes.
 While the genesis of this framework is within a salesperson or sales manager context, it can be applied to a variety of
other fields (e.g. marketing, research, pharmacist).
Fiaccabrino Selection Process – introduction
What It Is

24
16 Humanistic Attributes - overview
The basis of this methodology is to evaluate our candidate across 16 humanistic attributes, as listed below. A
successful candidate must excel across each of these attributes.
With the exception of the last attribute, Behavioral Quadrant, each attribute can be numerically scored on a 10
point scale. For the Behavioral Quadrant attribute, the candidate is categorized into one of 4 behavior
buckets.
INTELLIGENCE ORGANIZATION AND PLANNING
ABILITY TO RELATE TO
CONCEPTS
COMPETITIVENESS
AND DRIVE
HONESTY AND INTEGRITY
VERBALIZATION AND
COMMUNICATION
VALUES SYSTEM ENERGY LEVEL
FLEXIBILITY OF THOUGHT
PROCESS
SUCCESS FACTORS LEADERSHIP TEAM ORIENTATION
EMPATHY WORK ETHIC LOYALTY [EXPRESSED] BEHAVIORAL QUADRANT [Q4]

25
Behavioral Quadrant analysis
• The last of the 16 Humanistic Attributes seeks to evaluate what behavioral model the candidate falls under.
• There are 4 basic behavior quadrants:
• Dominant Hostile [Q1]
• Dominant Warm [Q4]
• Submissive Hostile [Q2]
• Submissive Warm [Q3]
• For the sake of brevity, as part of my humanistic attributes
evaluation, perhaps the crowning aspect of the entire process
is the evaluation of the behavioral quadrants as it relates to
the candidate.
• The candidate must be perceived by the
evaluation process as a definitive Q4 or Dominant Warm
individual.
• Without this designation, the candidate is rejected.
DOMINANT
HOSTILE
[Q1]
DOMINANT
HOSTILE
[Q1]
SUBMISSIVE
HOSTILE
[Q2]
SUBMISSIVE
HOSTILE
[Q2]
DOMINANT
WARM
[Q4]
DOMINANT
WARM
[Q4]
SUBMISSIVE
WARM
[Q3]
SUBMISSIVE
WARM
[Q3]
BEHAVIORAL QUADRANT
Dominant
Submissive
Hostile Warm

26
It is important to understand how to translate one’s evaluation of the
candidate to a numerical score on the 10-point scale
There are a number of interpretive uses of the 10-point scale. The most obvious is of course the clear cut
comparative use in evaluating more than one candidate for a particular position. By comparing the graphs of
each candidate, the evaluator has another specific set of attribute parameters to refer to in the decision
making process.
Below, let's review the actual numbers and what they mean.
5 6 7 8 1098.5
10-POINT SCALE
• Let’s start with #5.
• This score indicates "meets
standards." Candidates that achieve
that evaluation can be considered
qualified, but to what extent and are
these candidates "the best of the
best?"
• In my set of circumstances, these
candidates do not meet my
expectations and are therefore not
considered.
• What about numbers 6, 7, and 8?
• As the hiring manager makes these
evaluations, they should be noted and
can be stored for future reference.
• Again, based upon my overall
experience, any number less than an 8.5
score would not be considered.
• Let us now consider a
score of 8.5 and greater.
• Looking back on historical
perspectives, candidates
scoring in the 8.5 to 10.0
range are the very best and
therefore designated the
"best of the best."

27
Sometimes, the difference between each candidate can be marginal—and
sometimes, there may only be a single candidate to evaluate
As we consider candidates in this high level area, the difference between each is usually marginal. The graph can
help to determine the most qualified by virtue of this system when the evaluator can only select one of the two to
three candidates. At this high level of virtually marginal differences between candidates, it is usually true that any one
of the three finalists can be selected for the position with the same potential for success.
This situation might be analogous to the final contest at an Olympic event where tenths of seconds separate the gold,
silver, and bronze finalists. In hiring the best of the best, one would tend to select the gold medal winner and why not.
But, let's not forget that the silver and bronze winners are at the virtually same level of the champion with the potential
to be number one at the next event.
Clearly, sales and sales management are a science and the foregoing is in my judgment analogous to that
with one additional caveat. Its implementation is an Art.
Learning the science of the system is not difficult. The art form is in its implementation. It takes practice, perception,
sensitivity, and the ability to ask the best question—and to learn and understand through the power of listening.
Not all positions require two to three candidates to evaluate and that is optional as it relates to the hiring manager.
For example, understanding and with prior positive evaluation results, there might come a time when the hiring
manager has only one candidate to evaluate. Because of a full understanding and success in using the system,
should the one candidate be at the 'best of the best" level, there is very little reason to look further if that is the
decision of the manager/leader.

28
Worksheet:
Candidate:
§ Intelligence
§ Organization and Planning
§ Ability to Relate to Concepts
§ Competition and Drive
§ Honesty and Integrity
§ Verbalization and Communication
§ Values System
§ Energy Level
§ Flexibility of Thought Process
§ Success Factors
§ Leadership
§ Team Orientation
§ Empathy
§ Work Ethic
§ Loyalty [Expressed]
§ Behavioral Quadrant [Q4]
5.0 8.5 10.0
Q1 Q2 Q3 Q4
Legend: 5.0 Meets standards
8.5+ “best of the best” and considered qualified for consideration
Notes and comments: It is important to make notes and comments, which
can aid in the selection process. Also, the grid system allows for a
comparative evaluation of candidates.
NOTES

29

31
 The McKinsey 7-S Model is a business framework used to evaluate organizational effectiveness. The basic premise of
the model is that there are seven internal, interrelated aspects of an organization that need to be aligned for the
organization to be successful.
 This framework can be used to understand our organization and leverage it to maximize efficiency and profitability. It
can also be used in situations where an alignment perspective is useful. The scope of these situations doesn’t matter
—for instance, it can be applied to elements of a project or of a team.
 The 7-S Model was developed by two McKinsey consultants, Tom Peters and Robert Waterman.
McKinsey 7-S Model – introduction
What It Is
Structure
Systems
Style
Staff
Skills
Strategy
Shared
Values

32
This diagram is the typical presentation of the McKinsey 7-S Model
We must act on all S’s in parallel—as all S’s are interrelated and must align equally.
Structure
Systems
Style
Staff
Skills
Strategy
Shared
Values

33
Shared Values is centrally located, because all others elements stem and
evolve from it
Structure
Systems
Style
Staff
Skills
Strategy
Shared
Values
• Placing Shared Values in the
middle of the model emphasizes
that these values are central to the
development of all other critical
elements
• The company's structure, strategy,
systems, style, staff and skills all
stem from why the organization
was originally created, and what it
stands for
• The original vision of the company
was formed from the values of the
founders--as these Shared Values
evolve, so do all the other
elements

34
1
These seven elements are categorized into so-called Hard S’s and Soft S’s
Hard vs. Soft Elements
Structure
Systems
Style
Staff
Skills
Strategy
Shared
Values
HARD ELEMENTS
• Hard elements are Strategy, Structure, Systems
• They are feasible and easily identified
• These elements are also easier to change than
soft elements
• They can be found in strategy statements,
corporate plans, organizational charts, and
other business documents
SOFT ELEMENTS
• Soft elements are Shared Values, Skills, Staff,
and Style
• These are harder to change directly and usually
take longer to change
• They are harder to describe, since capabilities,
values, and elements of corporate culture and
continually evolving
• These elements are highly determined by the
employees of the organization
HARD ELEMENTS
SOFT ELEMENTS

35
When conducting 7-S analysis, it’s best to use an iterative approach
starting with Shared Values, followed by hard S’s, and then soft S’s
Approach
Start with your Shared Values.
Are they consistent with your structure, strategy, and systems? If not, what needs to change?
Next, look at the hard elements.
How well does each one support the others? Identify where changes need to be made.
Then, evaluate the other soft elements.
Do they support the desired hard elements? Do they support one another? If not, what needs to change?
As you adjust and align the elements, you will need to use an iterative and typically time-consuming
process of making adjustments; and then reanalyzing how that impacts other elements and their
alignments.
1
2
3
4

36
McKinsey 7-S – template
Structure
Systems
Style
Staff
Skills
Strategy
Shared
Values
Hard S
Soft S
Insert kicker.

37
McKinsey 7-S – current state template
Shared
Values
Strategy Structure Systems Style Staff Skills
Shared
Values
Strategy
Structure
Systems
Style
Staff
Skills

39
Portfolio strategies
Strategic planning
Derivation of
Norm Strategies
Analyze portfolio
Determine target system of company
Evaluate as-is portfolio
Develop target portfolio
Derive measures and control progress
1
2
3
4

40
Strategic planning
Question marks
• Selection of business units rich of
opportunities
• Investment strategy, when market
share can be significantly increased
by employing resources
• Otherwise, disinvestment
Stars
• Growth strategies
• Investments in ensuring the
competitive advantages, aiming at
confirming the own market
leadership via competitive barriers
Poor dogs
• Consistent disinvestment strategy
• Fastest possible withdrawal from
stagnating markets to employ capital
in a more effective fashion
Cash cows
• Absorption strategy
• Low direct reinvestments
• Transfer of generated funds to
finance Question Marks and Stars
Relative market share
Marketgrowth
– +
+
–
Market share/ market growth portfolio norm strategies (BCG)

41
Strategic planning – example
Question marks Stars
Poor dogs Cash cows
Marketgrowth
– +
+
–
Dis-
investment
Dis-
investment
Dis-
investment
= as-is position of business unit
= target position of business unit

42
Strategic planning – template
Question marks Stars
Poor dogs Cash cows
Marketgrowth
– +
+
–
= as-is position of business unit
= target position of business unit
= failure path
= success path
= market dynamics

43
Strategic planning
Selection
Selective growth/
investment
Growth and
investment
Absorption/
disinvestment
Selection
Selective growth/
investment
Disinvestment
Absorption/
disinvestment
Selection
low middle high
lowmiddlehigh
Competitive strength
Industryattractiveness
• Attractive
markets with
profit potential
• Gone
competitors
• Attractive
industry = high
growth rates
• High capital
need
• High competi-
tiveness
• Neutral
conditions
• No specific
opportunities
• No specific
strengths
• Saturated
markets
• Insignificant
market
presence
• Poor prospects
of success
• Predominance
on weak
market
• High influence
of own actions
low middle high
lowmiddlehigh
Competitive strength
Implications Norm strategies
Market attractiveness/ competitive strengths portfolio norm strategies (McKinsey)

44
Strategic planning – template
… … …
… … …
… … …
low middle high
lowmiddlehighCompetitive strength
Market attractiveness/ competitive strengths portfolio
norm strategies (McKinsey)

45

47
 Based on the age of a product category, predicts
how sales will develop
 Distinguishes five stages of development:
– Introduction
– Growth
– Maturity
– Saturation
– Decline/termination
 Length of time in each period varies tremendously:
– Some products have very short cycles, others take
decades or even centuries to go through the cycle
 Growth is still possible in mature categories, but
typically will require greater investment or greater
creativity than in less mature categories
Product life cycle – introduction
Phases of sales
growth
Phases of sales
decline
What It Is Why We Use It
 Strengths:
– Most useful as one of several sources of
evidence, e.g. with conjoint analysis
 Limitations:
– Any prediction is tricky
– Companies can affect the shape of the growth
curve through product innovation and
repositioning
Strengths & Limitations
 Predict sales growth, and associated customer
and competitor behaviours
 Prescribe appropriate marketing strategy
 Assess strengths/weaknesses of product
portfolio

48
Product life cycle – how to use it
Establish if the concept is
applicable
Predict how sales will
develop
Predict the timing of future
developments
 Look to the category’s past
behaviour and compare with
similar products
 Look out for:
– Technology shifts
– Lead markets
– Substitute products
– Telecoms/e-commerce
 It is important to predict the
highest level that sales will
reach, e.g. for a household
appliance the simplified
formula might be:
Annual Sales =
 (Number of new
households) x (percentage who
will buy) +
 (Number of existing
owners) x (percentage who
replace each year)
 The uptake percentage must be
established using:
– Customer surveys
– Industry forecasting models
where available
 Data required:
– Sales figures/timeframe:
• Either actual past/current
sales
• Or forecasted figures
 Use statistical/graphical analysis:
 Plot past category sales data in a
spreadsheet, in such a way that a
long term pattern is easily shown
 Use strategic/judgmental analysis:
– Use the theoretical curve to
evaluate where the category
stands
 Consider use of conjoint analysis

49
Product life cycle – illustrative output
Household Durables in Early 1970s
Time
Saturation/Sales
Introduction
Introduction Growth Maturity Saturation
Decline/
Termination
Compactor
Dishwasher
Colour TV
Room A/C
Automatic Washers
Freezers
Refrigerators
Ranges & Ovens
B&W TV
Wringer
Adoption
Innovators
2.5%
Early
Majority
34%
Late
Majority
34%
Laggards
16%
Early Adopters
13.5%
Source:
Mac Group Core Practice Manual.

50
Product life cycle – potential insight
Typical Insight Provided by Product Life Cycle Analysis (1 of 2)
Buyers and
Buyer
Behaviour
Introduction
• High-income purchaser
• Buyer inertia
• Buyers must be convinced
to try the product
Growth
• Widening buyer groups
uneven quality
Maturity
• Mass market
• Saturation
• Repeat buying
• Choosing among brands is the rule
Decline
• Customers are
sophisticated
buyers of the
product
Products and
Product
Change
• Poor quality
• Product design and
development key
• Many different product
variations; no standards
• Frequent design changes
• Basic product designs
• Products have
technical and
performance
differentiation
• Reliability key for
complex products
• Competitive product
improvements
• Good quality
• Superior quality
• Less product differentiation
• Standardisation
• Less rapid product changes—more minor annual
model changes
• Trade-ins become significant
• Little product
differentiation
• Spotty product
quality
Marketing • Very high advertising/sales
(a/s)
• Creaming prices strategy
• High marketing costs
• High advertising, but
lower percent of sales
than introductory
• Most promotion of
ethical drugs
• Advertising and
distribution key for
non-technical products
• Market segmentation
• Efforts to extend life cycle
• Broaden line
• Service and deals more prevalent
• Packaging important
• Advertising competition
• Lower a/s
• Low a/s and
other
marketing
Manufacturing
and
Distribution
• Over capacity
• Short production runs
• High skilled-labour content
• High production costs
• Specialised channels
• Under capacity
• Shift toward mass
production
• Scramble for
distribution
• Mass channels
• Some over capacity
• Optimum capacity
• Increasing stability of manufacturing process
• Lower labour skills
• Long production runs with stable techniques
• Distribution channels pare down their lines to improve
their margins
• High physical distribution costs due to broad lines
• Mass channels
• Substantial
over capacity
• Mass
production
• Speciality
channels
Source:
M.E. Porter, Competitive Strategy, 1980, pp. 159–161.

51
Product life cycle – potential insight (cont.)
R&D
Introduction
• Changing production
Growth Maturity Decline
Foreign Trade • Some exports • Significant exports
• Few imports
• Falling exports
• Significant imports
• No exports
• Significant imports
Overall
Strategy
• Best period to increase
market share
• R&D engineering are
key functions
• Practical to change
price or quality image
• Marketing the key
function
• Bad time to increase market share
particularly if low-share company
• Having competitive costs becomes key
• Bad time to change price image or
quality image
• “Marketing effectiveness” keys
• Cost control key
Competition • Few companies • Entry
• Many competitors
• Lots or mergers and
casualties
• Price competition
• Shakeout
• Increase in private brands
• Exits
• Fewer competitions
Risk • High risk • Risks can be taken
here because growth
covers them up
• Cyclically sets in
Margins and
Profits
• High prices and
margins
• Low profits
• Price elasticity to
individual seller not as
great as in maturity
• High profits
• Highest profits
• Fairly high prices
• Lower prices than
introductory phase
• Recession resistant
• High P/Es
• Good acquisition
climate
• Falling prices
• Lower profits/lower margins
• Lower dealer margins
• Increased stability of market shares
and price structure
• Poor acquisition climate:
–Tough to sell companies
• Lowest prices and margins
• Low prices and
margins
• Falling prices
• Prices might rise in
late decline
Source:
M.E. Porter, Competitive Strategy, 1980, pp. 159–161.
Typical Insight Provided by Product Life Cycle Analysis (2 of 2)

52
Product life cycle – top tips
Hints and Pitfalls
Data Sources
Related Analytics
 Market surveys, Nielsen databases for:
– Benchmarks against similar products
– Consumer take up
– Segment sales
 Client sales data
 Do:
– When creating the curve, beware of seasonal, non-recurring sources of fluctuations:
• May be necessary to smooth those fluctuations
– Ensure you understand if life cycle of a product has been extended by line
extensions/modifications
 Don’t:
– Ignore version change
 Key purchase criteria and comb analysis
 Needs-based segmentation
 Product portfolio analysis
 Scenario modeling

53
You can download a Strategy Development Discussion deck for free from
Flevy.com
PARTIAL PREVIEW
Download a Strategy Development Discussion Deck
for Free here:
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DESCRIPTION
• This is a discussion deck template for a
corporate strategy development session.
• In this discussion, we go through a 2-prong
approach to growth and evaluate the merits of
various growth drivers.
• From the 2-prong approach, various scenarios
can be generated in the discussions and
dashboards are used to evaluate each
scenario.

54

55
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