Profitability

Big Picture Revenues Costs

• Product • Price: • FC
– Change in features – Premium pricing • VC
• market – Market power • Capacity utilization
– growth – Product mix
• Short run / long run costs
– developmental stage • Volume
• Benchmark vs. competition
– Profitability levels – Volume per type of
product • Weighing of different costs
– Demand elasticity
– Distribution issues components (COGS, etc.)
• Competition
– Supply chain / logistics /
– Rivalry inventory management
– New entrants
– Substitutes
• Consumers
– Change in needs /
preferences
– Segments
– WTP
– What is most important

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Decrease in sales

Big Picture Revenues Company

• Product • Price: • Core competencies /
– Change in features – Premium pricing resources
• market – Market power • Positioning
– growth – Price war
– developmental stage – Product mix
– Profitability levels • Volume
– Demand elasticity – Volume per type of
product
• Competition
– Distribution issues
– Rivalry – Supply chain / logistics /
– New entrants inventory management
– Substitutes
• Customers
– Change in needs /
preferences
– Segments
– WTP
– What is most important

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Expansion

Big Picture Success Factors Alternative Opportunities

• Market • Current profitability: • Acquisition
• Competition – Volume • JV
• Consumer – Prices • Outsourcing / leasing
– Product mix
• Franchise
– Costs
• Core competences and BTE
for other potential entrants
• Potential benefits of
expansion
• How to expand:
– Available location /
resources
– Proximity to customers
– Technology
– Capital costs
– Labor costs
– Time required to complete
expansion
• Cost/benefit analysis
• Risks

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Market Entry

Big Picture Success Factors Alternative methods of entry

• Market • Investments and costs • Build/acquire/partner
– Size and growth • Revenues • Investments costs and
– Profitability • Fit of company with the risks
– Developmental stage new market: • Past experience – has the
– Relevant trends – Core competences firm been successful in
• Competition – Potential positioning penetrating markets in the
– Rivalry – Source of volume (steal past?
– Substitutes share? Expand category)
– Core competences & – Cost structure
resources (economies of scale /
– Likely reaction to entry scope)
• Consumer • BTE:
– Drivers of purchase – Product differentiation
behavior – Brand loyalty
– Segmentation – Switching costs
– Gap in needs – Regulation
– WTP – Access to distribution
channels
– Other

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Industry analysis (how to increase market
share?)

Big Picture Company Opportunities and risks

• Market • Revenues • Opportunities:
– Size and growth – Price – Expand to new product
– Profitability – Volume categories
– Developmental stage • Costs – Change focus
– Relevant trends • Core competences & • Risks:
• Competition resources – Competitors reaction
– Rivalry – Loss of focus
• Product
– Substitutes – Lack of fit between new
– Features vs. competition
– Positioning business and company’s
competences
• Consumer
– Drivers of purchase
behavior
– Segmentation
– Gap in needs

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Acquisition

Rationale for acquisition Success factors Strategic aspects

• Company (acquiring and • Investment
acquired) • Revenue increase / costs
– Value chain
– Core competences and • NPV analysis
resources
– Profitability
• Market and competition
(acquiring and acquired)
– Size and growth
– Rivalry
– Developmental stage
– Relevant trends
• Consumers of acquiring and
acquired
• Potential synergies
– Economies of scale
– Economies of scope
– Brand expansion
– Technology
– Access to distribution
channels / customers
If NPV positive
• Organizational issues:
decrease – Realization of synergies
– Changes that need to be
made pre-acquisition
– Financing
– Discount factor • Risks:
– Growth – Likely response of
competition
• Sensitivity for main
assumptions
If NPV negative
• Alternatives to acquisition:
– Other target
– JV
– Organic growth
• In what conditions would
the acquisition be
economical

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