Professor Ken Homa

Georgetown University

Frameworks, Methods & Contexts

FMC Toolkit
Situation Analysis
3 Ms Framework – 10 Core Analyses

Incomplete Without Extensive Oral Elaboration

Proprietary Material
© K.E. Homa
Situation Analysis
You have to immerse yourself deeply in a
area to put a problem into context, to grasp
its nuances and to collect the “dots” that
need to be connected.
Immersion
Situation Analysis is the standard
method for “contextualizing” a case …
Situation Analysis
The 3 Ms Framework provides an organizing
structure for doing situation analyses …

Situation Analysis – 3 Ms Framework

World Industry Company

Macro Meso Micro

Details
Situation Analysis – 3 Ms Framework

World Industry Company

Macro Meso Micro

• Three hierarchal levels of abstraction

• Many supporting analytical frameworks
• Easy to get overloaded with information
• Laser-focus on ‘impactful’ information
… speed past ‘interesting’ (but inconsequential)
Stay focused on the two
most important questions:

• How attractive is the industry ?

• How strong is the company’s

competitive position ?
Focus situation analysis on Market Attractiveness
and Competitive Position, which transcend the Ms.

Situation Analysis – 3 Ms Framework

World Industry Company

Macro Meso Micro

Industry Attractiveness

Competitive Position
Stay focused on the two
most important questions:

• How attractive is the industry ?

• How strong is the company’s

competitive position ?
 General Principle
The focal point for industry analysis is a
simple question: What determines the
level of profit in an industry?

Rob Grant, Contemporary Strategy Analysis

General Principle
More specifically, think in terms of “Profit Pools”

Simply stated, a ‘profit pool’ is the aggregate of

all profits earned at all stages of the ‘value chain’.

Key questions 
General Principle
More specifically, think in terms of “Profit Pools”
• How much value-added does the industry create ?

‘Value-added’ is the difference between ‘fair market value‘ (FMV) –

what the market is willing & able to pay for a product* – and the
‘landed costs’ – the full costs to make, deliver and install the product
… plus a minimum acceptable level of profits.

* ‘Product’ is broadly defined to include both physical products and services.

General Principle
More specifically, think in terms of “Profit Pools”
• How much value-added does the industry create ?
• How much of the added value is captured as profits
(versus ceded to customers)?

If companies price at landed costs, then they are ‘ceding’ all value-added to customers.

If they price at the prevailing FMV, then they are ‘capturing’ or ‘retaining’ all of the added value.

If they price between FMV and landed costs (which includes minimum acceptable profits)
then they are splitting the value added with customers.

The chosen price – between landed cost and FMV – is a strategic decision for the company.
 General Principle
More specifically, think in terms of “Profit Pools”
• How much value-added does the industry create ?
• How much of the added value is captured as profits
(versus ceded to customers)?
• How is the captured value split among the industry’s
value chain players?
For example, a value chain may consist of raw materials suppliers, manufacturers, distributors & retailers.

All ‘players’ in the supply chain require some return on investment (ROI) to remain solvent & motivated

The way profits are split is most often most heavily influenced by evolved industry practices and expectations.
Situation Analysis – 3 Ms Framework

World Industry Company

Macro Meso Micro

Industry Attractiveness

How big is the profit pool? *

Is it growing or threatened?
How is it split among players?

* “Profit Pool” = aggregate of all profits earned at all stages of the Value Chain
Stay focused on the two
most important questions:

• How attractive is the industry ?

• How strong is the company’s

competitive position ?

Again, eyeing the economics …

Situation Analysis – 3 Ms Framework

World Industry Company

Macro Meso Micro

Industry Attractiveness

How big is the profit pool?

Is it growing or threatened?
How is it split among players?

Competitive Position

Winnable part of profit pool?

Positioned to win that part?
How to up odds of winning ?
So, how to do it?
Rapid Scan
Speed-learn readily available information on the
company & industry … both internal & external.

Common Internal Sources Common External Sources

• Financial reports / SEC filings
• Strategic & operating plans
• Prior consultant reports
• Market research studies
• Exploratory interviews
• Analyst reports
• Syndicated research
• Government data & reports
• Trade press / business mags
• Expert interviews

General Principles
Rapid Scan
Speed-learn readily available information on the
company & industry … both internal & external.

General Principles
• Start with a high-level panoramic view

• Adopt industry definitions and jargon

• Be alert to patterns and discontinuities

• Sort facts & opinions …“trust but verify”

Key frameworks …
General Principle
Accelerate the initial immersion process
by leveraging road-tested frameworks …

Closing the loop …

 Situation Analysis - Key Frameworks

World Industry Company

Macro Meso Micro

• PEST Analysis • Strategic GameBoard • Portfolio Matrix

Politics Where & how to play Market, competitive position
Economics
Social • Five Forces • McKinsey 7-S Model
Technological Plus SOGs and Scorecard
• Value Chain
• Tech Frontiers • Profit - ROI Tree
Applicable Innovations • Profit Pools Investment, revenue, costs

• Best Practices • Value Map • Marketing 6 Ps

Broad panorama CSM, CVP, EVC

Appendix …
1. Frame complex problems - Context Appendix

10 Core Situation Analysis Frameworks

1. Portfolio Matrix 6. Five Forces

2. McKinsey 7S+2 7. Value Chain

3. Profit - ROI Tree 8. Profit Pool

4. Marketing 6 Ps 9. Value Map

5. Strategic GameBoard 10. PEST Analysis

© K.E. Homa
1. Frame complex problems - Context Appendix

10 Core Situation Analysis Frameworks

1. Portfolio Matrix 6. Five Forces

2. McKinsey 7S+2 7. Value Chain

3. Profit - ROI Tree 8. Profit Pool

4. Marketing 6 Ps 9. Value Map

5. Strategic GameBoard 10. PEST Analysis

© K.E. Homa
 Framework 1
Portfolio Matrix
For additional information see
FMC Toolkit: Portfolio Matrix

Background

• Origin: BCG, McKinsey, GE

• Axes: Market Attractiveness

and Competitive Position

• Many approaches for

positioning along axes

• Multiple variants & uses:

 Opportunity scanning
 Investment allocation
 Portfolio balancing
1. Frame complex problems - Context Appendix

10 Core Situation Analysis Frameworks

1. Portfolio Matrix 6. Five Forces

2. McKinsey 7S+2 7. Value Chain

3. Profit - ROI Tree 8. Profit Pool

4. Marketing 6 Ps 9. Value Map

5. Strategic GameBoard 10. PEST Analysis

© K.E. Homa
7S + 2 Framework Framework 2

SOGs For additional information see

FMC Toolkit:7S+2 Framework
Superordinate
Goals

• Adapted from McKinsey’s 7-S *

Strategy
• Elevates Strategy as a driver

• Resurrects Superordinate Goals

Skills
Core Comps
• Adds Scorecard to close the loop
* Adapted by K.E. Homa
Staff Systems
People Processes
Shared
Values
Structure Style
Roles & Resp. Culture

Scorecard
Performance
1. Frame complex problems - Context Appendix

10 Core Situation Analysis Frameworks

1. Portfolio Matrix 6. Five Forces

2. McKinsey 7S+2 7. Value Chain

3. Profit - ROI Tree 8. Profit Pool

4. Marketing 6 Ps 9. Value Map

5. Strategic GameBoard 10. PEST Analysis

© K.E. Homa
 Framework 3
Basic ROI Tree
For additional information
see FMC Toolkit: ROI Trees Price

Revenue

Volume

Profit
Variable
Cost

Var.Cost
Cost
ROI Per Unit

Fixed Capacity
Cost
Investment
1. Frame complex problems - Context Appendix

10 Core Situation Analysis Frameworks

1. Portfolio Matrix 6. Five Forces

2. McKinsey 7S+2 7. Value Chain

3. Profit - ROI Tree 8. Profit Pool

4. Marketing 6 Ps 9. Value Map

5. Strategic GameBoard 10. PEST Analysis

© K.E. Homa
 Framework 4
Marketing 6 Ps People
For additional information see
Acquire & retain Homa Note: Marketing Overview
‘good’ customers

Who?
What ? How much ?
Customer
Product Satisfaction Price
Model
Deliver benefits Create & extract
at ‘right’ cost Customer ‘real’ value
Satisfaction

Market
Share

Where? How ? Why? Why now?

Place Profits Promotion
Provide access, Frame perceptions
availability & support to stimulate buying

For what?
Performance
Generate profits:
© K.E. Homa ROI
1. Frame complex problems - Context Appendix

10 Core Situation Analysis Frameworks

1. Portfolio Matrix 6. Five Forces

2. McKinsey 7S+2 7. Value Chain

3. Profit - ROI Tree 8. Profit Pool

4. Marketing 6 Ps 9. Value Map

5. Strategic GameBoard 10. PEST Analysis

© K.E. Homa
 Framework 5
Strategic Game Board For additional information
see FMC Toolkit:
Strategic GameBoard

Market Orientation
Micro Macro
Basis of Competition
Innovate

New Game
Differentiate Revolutionize • Continuous
(from competition) (entire industry) • Disruptive

Nextel: Push-to-Talk Southwest, Amazon

Dell Small Business PCs Walmart Wannabes How?

Conform

Resegment Emulate Old Game

(underserved niche) (the leader)

Niche(s) Mass

Where?
1. Frame complex problems - Context Appendix

10 Core Situation Analysis Frameworks

1. Portfolio Matrix 6. Five Forces

2. McKinsey 7S+2 7. Value Chain

3. Profit - ROI Tree 8. Profit Pool

4. Marketing 6 Ps 9. Value Map

5. Strategic GameBoard 10. PEST Analysis

© K.E. Homa
 Framework 6
Porter’s 5 Forces 1 of 2

For additional information see

Understanding Porter
5 Forces - Competing for Profits
(HBS packet)

Grant, Contemporary Strategic Analysis

 Framework 6
Porter’s 5 Forces 2 of 2

For additional information see

Understanding Porter
5 Forces - Competing for Profits
(HBS packet)

Grant, Contemporary Strategic Analysis

1. Frame complex problems - Context Appendix

10 Core Situation Analysis Frameworks

1. Portfolio Matrix 6. Five Forces

2. McKinsey 7S+2 7. Value Chain

3. Profit - ROI Tree 8. Profit Pool

4. Marketing 6 Ps 9. Value Map

5. Strategic GameBoard 10. PEST Analysis

© K.E. Homa
Value Chain For additional information see Framework 7
Understanding Porter 1 of 2
Value Chain – P&Ls
(HBS packet)

Source
Value Chain For additional information see Framework 7
Understanding Porter 2 of 2
Value Chain – P&Ls
(HBS packet)
1. Frame complex problems - Context Appendix

10 Core Situation Analysis Frameworks

1. Portfolio Matrix 6. Five Forces

2. McKinsey 7S+2 7. Value Chain

3. Profit - ROI Tree 8. Profit Pool

4. Marketing 6 Ps 9. Value Map

5. Strategic GameBoard 10. PEST Analysis

© K.E. Homa
 For additional information see Framework 8
“FMC Toolkit: :Intro to Profit Pool Analysis
Profit Pool Analysis

Source: Breakthrough Imperative

1. Frame complex problems - Context Appendix

10 Core Situation Analysis Frameworks

1. Portfolio Matrix 6. Five Forces

2. McKinsey 7S+2 7. Value Chain

3. Profit - ROI Tree 8. Profit Pool

4. Marketing 6 Ps 9. Value Map

5. Strategic GameBoard 10. PEST Analysis

© K.E. Homa
 Framework 9

For additional information see

FMC Toolkit: Value Map”
1. Frame complex problems - Context Appendix

10 Core Situation Analysis Frameworks

1. Portfolio Matrix 6. Five Forces

2. McKinsey 7S+2 7. Value Chain

3. Profit - ROI Tree 8. Profit Pool

4. Marketing 6 Ps 9. Value Map

5. Strategic GameBoard 10. PEST Analysis

© K.E. Homa
 For additional information see Framework 10
PEST Analysis MindTools “PEST Analysis”

Source
Professor Ken Homa
Georgetown University

Frameworks, Methods & Contexts

FMC Toolkit
Situation Analysis
3 Ms Framework – 10 Core Analyses

Incomplete Without Extensive Oral Elaboration

Proprietary Material
© K.E. Homa