Consulting Frameworks

Cheatsheet Content

### Introduction to Consulting Frameworks - **Purpose:** Structured approaches to analyze business problems, identify solutions, and communicate recommendations. - **Benefits:** Provides a systematic way to break down complex issues, ensures comprehensive analysis, and facilitates clear communication. - **Usage:** Not rigid templates; adapt them to the specific context of each case. Combine elements from different frameworks as needed. ### Profitability Framework - **Core Idea:** Profit = Revenue - Costs. Used to diagnose why profits are declining or stagnant. - **Breakdown:** - #### Revenue - **Price:** Price per unit, discounts, pricing strategy (e.g., premium, penetration). - **Volume:** Number of units sold, market share, customer segments, sales channels. - #### Costs - **Fixed Costs:** Rent, salaries, depreciation, administrative expenses. - **Variable Costs:** Raw materials, production labor, sales commissions, packaging, distribution. - **Key Questions:** - Is revenue down due to price or volume? - Are costs up due to fixed or variable components? - What are competitors doing? - Are there external factors (e.g., economy, regulations)? ### Market Entry Framework - **Core Idea:** Evaluate the attractiveness of entering a new market or launching a new product/service. - **Breakdown:** - #### Market Attractiveness - **Market Size & Growth:** Current size, growth rate, future potential. - **Trends:** PESTEL analysis (Political, Economic, Social, Technological, Environmental, Legal). - **Customers:** Needs, segments, purchasing behavior. - **Competition:** Number of players, market share, strengths/weaknesses, barriers to entry. - #### Company Capabilities - **Strengths & Weaknesses (Internal):** Resources, expertise, brand, distribution channels. - **Synergies:** Fit with existing products/services, cross-selling opportunities. - **Financials:** Capital requirements, ROI, funding sources. - #### Entry Strategy - **Organic:** Build from scratch. - **Acquisition:** Buy an existing player. - **Joint Venture/Partnership:** Collaborate with another company. - **Licensing:** Use intellectual property of another firm. - **Key Questions:** - How large is the market and how fast is it growing? - Who are the key competitors and what are their strategies? - Does our company have the capabilities to succeed? - What is the best way to enter the market given our goals and resources? ### 3 C's Framework - **Core Idea:** Analyze a business problem from three critical perspectives: Company, Customers, and Competition. - **Breakdown:** - #### Company - **Strengths & Weaknesses:** Capabilities, resources, brand, cost structure, innovation. - **Goals & Objectives:** What does the company want to achieve? - **Product/Service:** Features, quality, pricing. - #### Customers - **Segments:** Who are they? Demographics, psychographics. - **Needs & Preferences:** What do they want? Why do they buy? - **Buying Behavior:** Decision-making process, channels. - **Customer Lifetime Value:** How valuable are different segments? - #### Competition - **Competitor Identification:** Direct and indirect rivals. - **Strengths & Weaknesses:** What are they good at? Where do they fall short? - **Strategies:** Pricing, product, marketing, distribution. - **Market Share:** Who holds what share? - **Key Questions:** - What are our company's unique advantages? - What do our customers truly value? - How are our competitors positioned, and what are their next moves? - How can we leverage our strengths to meet customer needs better than competitors? ### 4 P's (Marketing Mix) Framework - **Core Idea:** A classic marketing tool to analyze and develop marketing strategies. - **Breakdown:** - #### Product - Features, quality, branding, packaging, services, warranty. - #### Price - List price, discounts, allowances, payment period, credit terms. - #### Place (Distribution) - Channels, coverage, assortments, locations, inventory, transport. - #### Promotion - Advertising, personal selling, sales promotion, public relations, direct marketing. - **Key Questions:** - Is the product meeting customer needs and expectations? - Is the pricing strategy aligned with value and market position? - Is the product available where and when customers want it? - Are promotional efforts effectively communicating value and driving sales? ### Porter's Five Forces - **Core Idea:** Analyze the competitive intensity and attractiveness of an industry. - **Breakdown:** - #### Threat of New Entrants - Barriers to entry (e.g., capital, regulation, brand loyalty). - #### Bargaining Power of Buyers - Number of buyers, switching costs, buyer information. - #### Bargaining Power of Suppliers - Number of suppliers, uniqueness of supply, switching costs. - #### Threat of Substitute Products or Services - Availability of alternatives, price/performance trade-off. - #### Rivalry Among Existing Competitors - Number of competitors, industry growth, product differentiation. - **Key Questions:** - How easy or difficult is it for new companies to enter this industry? - How much power do customers have to drive down prices? - How much power do suppliers have to drive up input costs? - What alternative products or services could customers use instead? - How intense is the competition among current players in the industry? ### SWOT Analysis - **Core Idea:** Identify internal Strengths and Weaknesses, and external Opportunities and Threats. - **Breakdown:** - #### Internal Factors - **Strengths:** What the company does well, competitive advantages, resources. - **Weaknesses:** Areas for improvement, disadvantages, resource gaps. - #### External Factors - **Opportunities:** Favorable external conditions, market trends, unmet needs. - **Threats:** Unfavorable external conditions, market shifts, competitor actions. - **Key Questions:** - What are our core competencies and unique selling propositions? - Where are we vulnerable or lagging behind competitors? - What emerging trends or market gaps can we exploit? - What external challenges could harm our business? ### Value Chain Analysis - **Core Idea:** Understand how a company creates value by breaking down activities into primary and support functions. - **Breakdown:** - #### Primary Activities - Inbound Logistics, Operations, Outbound Logistics, Marketing & Sales, Service. - #### Support Activities - Firm Infrastructure, Human Resource Management, Technology Development, Procurement. - **Key Questions:** - Where in our process can we reduce costs? - Where can we differentiate our product/service to add more value for customers? - Are there any activities that are not adding value? - How do our value chain activities compare to competitors? ### Important Considerations - **No Silver Bullet:** No single framework fits all problems. - **MECE:** Mutually Exclusive, Collectively Exhaustive. Ensure your analysis covers all relevant areas without overlap. - **Data-Driven:** Always support framework analysis with data and evidence. - **Client Focus:** Tailor analysis and recommendations to the client's specific situation and objectives. - **Hypothesis-Driven:** Formulate initial hypotheses and use frameworks to test and refine them. - **Adaptability:** Frameworks are guides, not rigid rules. Be prepared to combine or modify them to suit unique situations. - **Storytelling:** The best analysis is useless if not communicated effectively. Structure your findings into a compelling narrative.