NIB Workshop 1
- 2. The Five C’s is an elementary framework for examining a companyCompanyHow big is the company?
- 3. Is it public or private?
- 4. What are its core competencies?CostsWhat is the split between fixed and variable costs? How are they likely to vary?
- 5. How do the company’s costs compare to industry peers?CompetitionWho are the biggest competitors and their market shares?
- 6. Has market composition changed recently?
- 7. What are the company’s strategic advantages?Consumers/ClientsWhat are their preferences for price, quality, and availability?
- 8. Is the company fulfilling their needs?
- 9. Can the company segment them?ChannelsHow does the company get its products into the hands of end users?SWOT is another simple framework for company analysis PROSCONSSTRENGTHSWEAKNESSESINTERNALOPPORTUNITIESTHREATSEXTERNAL
- 10. Porter’s Five Forces analyzes the structure of an industryPOTENTIAL ENTRANTSSUBSTITUTESThreat of substitute productsThreat of new entrantsINDUSTRY COMPETITORSRivalry Among Existing FirmsBargaining power of suppliersBargaining power of buyersBUYERSSUPPLIERSRegulatory impact of governmentPressure of NGO’sGOVERNMENTNGO’S
- 11. Consider trends beyond the industry levelMacroeconomy: How’s the market doing? What’s the risk-free interest rate? Are investors facing uncertainty/volatility? Are we in a recession?
- 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. 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. 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?Profitability underlies most business problemsPrice-based costingE(∏ = P * V – (FC + VC))MPriceCost-based pricingCompetitive pricingRevenuesIncrease marketingEconomyVolumeReduce pricesExpand into new areasProfitCost of capitalFixedMarket/IndustryRent and utilitiesCostsManufacturingVariableLaborDelivery costsDebt on inventory
- 15. An issue tree is an effective issue disaggregation toolQuestion of FactSub-IssueQuestion of FactIssueQuestion of FactSub-IssueQuestion of FactCentral QuestionQuestion of FactSub-IssueQuestion of FactIssueQuestion of FactSub-IssueQuestion of FactPick a sensible framework or pattern to apply; group the issues into buckets using frameworkBranches should be mutually exclusive, collectively exhaustive (MECE)Client’s critical issues are at higher levels of the treeIssues at lowest level should be able to be answered by analysis (can you pass it to a teammate?)
- 16. Building an issue tree: the problemOur client, a retailer of fine and expensive oriental rugs in Manhattan, is experiencing declining profits. Why and what can they do about it?
- 17. Building an issue tree: disaggregating the problemWhat are the profit margins of the company’s three main competitors?Is the industry as a whole doing well?Have there been new entrants to the Manhattan luxury rug market in recent years?Industry-related factorsAre macroeconomic factors hurting consumers’ ability to buy luxury goods?Have consumer preferences shifted?Are consumers turning to substitute products rather than rugs?What is causing profits to decline for the rug company?How are the political conditions in the supplier countries?Are there issues along the supply chain?Is the price of raw materials increasing due to lowered supply?Is the company selling fewer rugs than before?How have the company’s revenues changed?Has the company lowered prices recently?Company-specific factorsHas the cost of rent changed?How have the company’s costs changed?Have labor costs changed?Is the company experiencing high debts on inventory?