Case Studies
Case Studies are an integral part of Management Consulting, it is your ability to identify your client's problems combined with your problem-solving skills which makes the magic happen. Often the clients are unable to convey their business problems and sometimes to some extent are unaware of what the problem is. It’s the consultants who have to ask questions that help clarify the scope of the case and the exact question to be answered.
Here we would be discussing case studies based on the real-life problems which consultants face. Below you would find a compilation of various case studies which I came across over the years.
At first, we would look into some of the important frameworks which might be used to solve the case studies. Here some sample frameworks have been provided. But these are just to get you started – develop your own frameworks for each case.
PROFITABILITY FRAMEWORK
Scenario –
• Client’s earnings / profits (or ‘bottom-line’ in Income Statement) has declined or stopped growing
• You need to recommend ways to increase profits
SAMPLE FRAMEWORK:
Market
1. Industry
- Growth
- Revenue
- Profit
2. Competition, Market share, new entrants in the market etc.
Revenue
1. Product Scenario
- Comparison between
Client’s product and
competitor’s product.
2. Pricing
- Competitive pricing
- Is an increase in
client’s product price
possible?
3. Market Share
- Clients market share ?
Cost
1. Client’s cost structure
(Fixed and variable cost)
- PP&E (Property plant & equipment)
- Overhead
- SG&A (Selling, General and - Administrative Expenses)
- Labour
- Raw material etc.
Customer/Channel
1. Customer segment
- Which segment does the client company mainly serve
- Should we target any other segment to be more profitable.
2. Channel
- are these low cost channel, sales mix etc.
BUSINESS SITUATION FRAMEWORK
Scenario –
New Market Entry, New Product, New Business, How to Grow, Strategy, Turnaround, Company Position Assessment
Customer
1. Who is the customer?
- identify segments(segment size, growth rate, % of total market)
- compare current year metrics to historical metrics (look for trends)
2. What does each customer segment want? - identify keys needs
3. What price is each segment willing to pay? - determine price points and price elasticity/sensitivity
4. Distribution channel -preference for each segment
Customer concentration and power* (does one customer control all the demand, the " Wal-Mart" effect)
Product
1. Nature of product (think out loud about the product, it's benefits, why someone would buy it)
2. Commodity good or easily differentiable goods (could company increase differentiation)
3. Identify complementary goods (can we piggy back off growth in complements or near complements?)
4. Identify substitutes (are we vulnerable to indirect competitors namely substitutes?)
5. Determine product's lifecycle (new vs. almost obsolete)
6. Packaging (optional) - what's bundled, included (ex. Razor vs. razor blades, with w/o service contract... can
change in packaging make product more likely to meet needs of specific customer segments.)
Company
1. Capabilities and expertise
2. Distribution channels used
3. Cost structure (mainly fixed vs. variable - is it better to have higher fixed cost with lower variable, or vice versa.
High fixed cost = barrier to entry.... compare to industry, often insightful)
4. Investment cost (optional: only if case involves an investment decision)
Intangibles (e.g., brands, brand loyalty)
5. Financial situation
6. Organizational structure (optional: e.g., is team organization in conflict with how customers want to do business.
Ex: We're organized by product line, but customers want one point of contact across all product lines)
Competition
1. Competitor Concentration & Structure (monopoly, oligopoly, competitive, market share concentration)
2. Competitor behaviors (Target customer segments, products, pricing strategy, distribution strategy, brand loyalty)
3. Best practices (are they doing things we're not?)
4. Barriers to entry (do we need to worry any new entrants to market)?
5. Supplier concentration
(optional: ex: Microsoft or Intel in PC Market... use full 5 forces if this is a likely issue)
6. Industry regulatory environment
7. Life-cycle of industry
M&A DEAL FRAMEWORK
Scenario –
• Client is considering an M&A transaction.
• Your goal is to recommend whether or not to do the deal.
SAMPLE FRAMEWORK:
Strategic Fit
• Basic deal rationale
- Cost synergy-focus ?
- Revenue-synergy-focus?
- Early-stage co. being acquired for technology?
- Response to competitor move?
• Type of deal
- Vertical integration
- Horizontal
- New market entry via deal
- Diversification move
Deal Economics
• Valuation (Know basic DCF!)
- Revenue &Costs
- CAPEX( Capital Expenditure) & Working Capital
- PBT (profit before tax)
- Taxes
- PAT (profit after tax)
- Cost of capital (R)
- Value = (PAT / r)
• Deal Price
• Synergies
- Cost and Revenue
- New Firm value
• New Value > Deal Price?
Risk Assessment
• Has the company done Acquisitions before?
- Capability test
• Organizational cultures
- Compatible (high % of M&A deals destroy value as cultures are not compatible)
• Need to manage PMI (Post merger integration process)
• Can investors not diversify by themselves
Below you will find a case related to the frameworks and company case studies
