Frameworks for cases

Profitability Framework

Price
- Consumer demand elasticity
- Competitors’ price changes
- Market power – can we charge a premium? Have we lost a previous ability to charge a
premium?
- Product differentiation
Sales volume (quantity)
- Loss of market share due to competitors’ actions
- Growth/reduction in overall market
- Increase/decrease in sales to current customers with current products
- Increase/decrease in sales to current customers with new products
- Increase/decrease in sales to new customers with current products
- Increase/decrease in sales to new customers with new products
Cost
- Portions which are fixed and variable
- Time frames in which costs are avoidable
- Allocation of costs to product, overheads etc.

Note: changing volumes can wreak havoc on profitability when looked at from the perspective of
fixed vs. variable costs. Be sure to understand what happens to fixed cost per unit when volume
declines (it increases) and how this can affect profitability in capital intensive businesses.
Company Market positioning
Marketing assessment
Market entry/ industry entry

Market entry: 2 main questions

1) What is the market potential of the product?

2) What is the client’s capability to succeed in this market?
 M&A
 4 C framework can also be used

 Stand alone value of HD

o Growth in market for doughnuts

o HD's past and projected future sales growth (break down into growth in number of
stores, and growth in same store sales)

o Competition – are there any other major national chains that are doing better than HD
in terms of growth/profit. What does this imply for future growth?

o Profitability/profit margin

o Capital required to fund growth (capital investment to open new stores, working
capital)

 Synergies/strategic fit

o Brand quality similar? Would they enhance or detract from each other if marketed side
by side?

o How much overlap of customer base? (very little overlap might cause concern that
brands are not compatible, too much might imply little room to expand sales by cross-marketing)

o Synergies (Hint: do not dive deep on this, as it will be covered later)

 Management team/cultural fit

o Capabilities/skills of top, middle management

o Cultural fit, if very different, what percent of key management would likely be able to
adjust

 Ability to execute merger/combine companies

o GB experience with mergers in past/experience in integrating companies

o Franchise structure differences. Detail “dive” into franchising structures. Would these
different structures affect the deal? Can we manage two different franchising structures at the same
time?
Porter’s generic strategy
Operational effectiveness