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State hypothesis at the beginning

- What is the reason you want to look at something


- How does it prove or disprove your hypothesis
- In brainstorming there are # broad areas that I would
like to consider, customer, product, competition,
investment first for customers.
- Conclusion, x number of reasons, reasons are this and
then explain reason , restate conclusion and then add on
phrase of something you are still uncomfortable with or
would make it more accurate
Market Sizing
196 countries in the world
Populations:
US: 300 million
China: 1.3 billion
UK: 60 million 8mil in London
Africa: 1 billion
GDP:
US: 17 trillion
China: 9 billion
UK: 2.5 trillion
Days worked 5 days a week 260 days a year
Product Factors to consider:
Questions to ask beforehand or summarise about product
- What kind of product is it (high end? Commercial? Specialist? Is it
an import? Are there regulations restricting)
- Is it a luxury good or a necessary good
Trends in the market
1. Population
2. Gender
3. Age
4. Income
5. Consumer market
6. How many are consumed daily?
7. If it is imported must consider whether there are restrictions
- Competitors? Market share
Profitability
- Profits= Revenue- Cost
Revenue
- Revenue: Volume x price
1) Market
- Market growth, market share, competition

2)
3)
4)
5)
Cost
-

Industry trends are we growing with the industry?


Product
Identify revenue streams? Differences in percentage and growth
Distribution channel
Distribution: opening stores in new locations? Greater density?
By customer
Price how does their pricing compare?

Costs: Fixed costs + variable costs


Get cost breakdown
Irregularities?
Benchmark competitors
o Fixed: Rent, salary, insurance, software, machinery, bills
o Variable: (things that change when production changes)
raw materials, wages, marketing based on volume, credit
card, distribution
o Economy- regulation, interest rates, shipping
- Or by Value chain raw materials, manufacturing, distribution,
customers
Increasing sales
- Marketing: advertising- seasonal/trend?
- Increase product line: New products? What is trendy or in high
demand?
- Funding for growth?
- Diversify product line
o How can you increase stores?
o Increase visits in stores- increase customers per store,
increase number of repeat visits
o Reduce pricing?
o Customer service?
- Promotion
o Product: improve product? New products?
o Placement
o Price
o Promotion- customer loyalty
- Pricing
Reducing costs
- Labour
o Cut overtime, cross train,
- Production
o Outsource
o Technology - Consider labour saving technologies
o Flexible production lines
o Consolidate production space to gain economies of scale
- Supplies - Renegotiate with suppliers, import

Finance
o Sell non-essential assets
o Have customers pay sooner
Business Situation Framework (Market entry, new product, new
business, how to grow, turnaround)
- What defines success? Why is the company trying to enter
market/launch new product etc?
Customer
- Market size/growth- industry trends (industry lifecycle)
- Who is the customer? (segments, size, growth rate, % of total
market, trends)
- What do the segments want?
- What price is the segment willing to pay?
- Switching costs
Competition
- Competitor concentration (market share, monopology)
- Competitor behaviours (target segments, pricing strategy, brand
loyalty)
- If there are little competitors is it because not profitable?
- Industry changes (new players/technology)
- Barriers to entry/exit time and cost of entry, specialist
knowledge, economies of scale, technology to protection,
regulatory barriers to entry, other entrants to the market
- Supplier concentration number of suppliers, substitutes
Company
- Capabilities and expertise, current distribution channels
- Cost structure high fixed costs = barrier to entry, investment
costs
- Intangibles (brands, brand loyalty)
- Financial situation
- Organisational structure (were organised by product line, but
customers want one point of contact etc)
Product
- Nature of product is it a commodity good or easily differentiable
- Complimentary goods and substitutes
- R&D
Possible solutions
- Start from scratch
- Acquire existing player
- Joint venture- what can both sides bring?
M&A Considerations
1. Objectives/what defines success?
a. Increase market access share
b. Economies of scale
c. Diversify holdings

d. Incorporate synergies
e. Shareholder value/tax advantages
2. Customer / Competition
a. Market size, growth, profitability,
b. Who are the customers
c. Competitor concentration
d. Threats: substitutes, imports
e. Key market trends
f. Barriers to entry (international trade restrictions, sunk
costs, advertising, customer loyalty, government
regulations, tariffs (taxes on imports, control of resources,
R&D, patents)
3. Company attractiveness
a. Profitability
b. Relative market share
c. Relative cost position
d. Key customer segments
e. Strength of customer relationships
f. synergies
g. Strength of key talent
4. Product
a. Cannibalisation, reputation
5. Due diligence
a. How secure are markets and customers
b. Cultures between the 2 companies
c. What would the competitive response be
6. Feasability and profitable exit
a. Existence of strategic buyers
b. Expected profit?
Pros and Cons
- (+) Market share, economies of scale, reduction of competition,
profit for R&D,
- Acquisitions are cheaper, easier and faster than merger (less
legal procedures, less fighting between DM and ownership)
- Culture- have to incorporate both in merger
- (+) Lower risk compared to developing new products, increased
diversification, speed to market
New Product
Product
- Special or standard
- Financing
- Patented?
- Substitutions
- Advantages and disadvantages
- Place in product line?
- Cannibalising own product? Replacing?

If Scenarios
Sales
- If sales are flat and profits are suffering analyse BOTH sides (rev
first)
- If sales are flat but market share is constant everyone else may
be same
- If decline in sales: is there just less demand for that market? Is it
possible that market has matured or become obsolete? Is it
because of substitutions?
Product:
- If emerging: focus on R&D, competition, pricing
- If in growth: marketing and competition
- Mature: manufacturing, costs, competition
- Declining: niche, analyse competition strategy, exit
Pricing
- If you lower prices and volumes rise you may reach point beyond
full capacity and costs will rise as dont have adequate resources
or employees going overtime
- Volume and costs easier to change than industry price levels
Math reminders
- Markup percentage is ON TOP of cost i.e. it costs 100 to produce
and markup is 120 so final price is 220
- CAGR = (Final value / initial value)^(1/years)
- Current ratio = current assets divided by current liabilities (ideal
ratio is 1:1)