Frameworks for Interviews
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Transcript of Frameworks for Interviews
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0There are two dimensions to consulting
CONSULTING DIMENSIONS
Consulting
Process
Tools
Project structuring
Roles and responsibilities
Execution
Sequencing - Workplan
Client management
Frameworks
Analysis Tools
se
nio
rity
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1Typical Elements of Consulting Process
Problem Structuring : Key Issue Identification
Team formation and Work-plan creation
Problem Solving
Data collection and analysis
Option generation and evaluation
Recommendation
Syndication
Implementation
The process is not sequential but iterative
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2Frameworks and Tools
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3 Porters Diamond
Porters Five Forces
Demand Estimation
Value chain analysis International Case Studies
GE-McKinsey BCG matrix SWOT
Different frameworks / tools are available to address specific questions
Question Framework / Tool
TOOLS
Which industry will be globally competitive in the long term?
How attractive is this industry?
What is the demand likely to be?
How is the industry evolving
Which business to focus on? Which to divest?
Theory
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4Different frameworks / tools are available to address specific questions
Question Framework / Tool
TOOLS
What are the broad
competitive strategies?
What are the opportunities
for growth?
What is the heterogeneity
of the market?
At what price to sell?
Which capabilities should
be developed / improved to
be competitive?
How much cost to cut to
survive competition / import
threat?
Which are my most
lucrative customers?
Discipline of market leaders
Generic strategies
Ansoff Matrix
7 degrees of freedom
Market segmentation
Pricing model
Benchmarking (on CSFs,
process, costs)
Cost curve
Import price parity
Pocket margin analysis
Theory
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5Different frameworks / tools are available to address specific questions
Question Framework / Tool
TOOLS
What is the competitive
situation like?
What is the synergy benefit
/ value to be paid?
Which products to
manufacture to maximize
profits given resource
constraint?
Acceptability of a new
product in the market/
launch of existing product
in a new market
Company strategy during
changing market conditions
Competitive landscape
Incremental cash flow
analysis
Contribution per resource
analysis
4 Ps framework
3 C framework
Theory
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6Different frameworks / tools are available to address specific questions
Question Framework / Tool
TOOLS
Which are the most
important factors affecting
value? By how much?
What does the strategic
roadmap look like
How should my
warehouses / factories be
geographically distributed?
Which of the capital item is
a better alternative?
What will be the impact of
this discontinuity?
Tornado Analysis
Three horizons
LP
Life cycle analysis
Butterfly analysis
Theory
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Frameworks and Tools for Industry Analysis
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8Value chain analysis can be used to understand industry evolution
CONTRACTING WORKFLOW - INDIA V/S INTERNATIONAL
Much bigger role for an AC contractor in India
Responsibility
Activity International India
Project planning Architect Architect
System design AC consultant AC contractor
Preparation and evaluation of tender documents
AC consultant AC consultant
System performance responsibility
AC consultant AC contractor
Sourcing equipment AC contractor from independent manufacturers
AC contractor is also a manufacturer
System integration and commissioning
AC contractor AC contractor
Service and repairs AC contractor and manufacturer AC contractor
VALUE CHAIN ANALYSIS Case
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9Value Chain analysis can also be used to understand industry structure
VALUE CHAIN ANALYSIS Case
Content Origination
& GenerationAggregation
Marketing &
Distribution
Last Mile/
Exhibition
TV Production Houses Broadcasters Cable Terre
strial
DTH
Films Producers/Directors Studios Cinema Halls
VCD/DVD Cos. Video Stores/Retail
Music Artists/Recording
Studios
Music Companies Retail Internet
Radio Music Cos./Artists Radio Stations
Print
Newspaper Newspaper Houses
Retail / Web
Franchisee
Magazine
Books
Publishers
Internet Website/Niche
Players
Third Parties Telcos / ISPs Wire line/Wireless
Platforms
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10
VCA can be used to identify gaps / strategic fit of acquisition candidate
CaseVALUE CHAIN ANALYSIS
AccessLD
Services
Intnl
Backbone
Dom Intnl Dom Fixed Mob Cable ISP Data Video
V A
ServicesContent
S/W, Apps
& Tech.
Aggr. Gen. Serv. Prod.
Player1
Player2
Player3
Player 5
Player6
Player 7
Player 4
VoiceSatcom
Player8
Significant Presence
Recent / Small Presence
Limited Geog. Presence WIP / Under Evaluation
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11
Value chain can also be used to identify opportunities for efficiency improvement
VALUE CHAIN
Farms/
Fisheries/
Poultry
Semi-
Wholesalers
Wholesalers
Or
Consolidators
Manufacturers Clearing &
Forwarding
Agents
Distributors Traditional/
Organized
Retail
End
consumers/
Caterers
50
Selling
Price
Of Farmer
53 59
33.5Landed Cost of
Fresh Produce- 30.9
27.0 (17.0) 18.0 (18) X Y
Z A B C D
Domestic
Exports
FactoryWarehou
se
Distribut
or
Warehou
se
Retailer
Warehou
se
Consume
r
Port of
Origin
Port of
destinatio
n
Distribut
or
Warehou
se
Retailer
Warehou
se
Consume
r
Key
Stakeholders
Cost Build
(Org. Retail)
FarmsVillage
Mandis
Large
Mandis
Organized players demand
greater margins
Includes wastages,
transportation etc
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12
Du Pont : PROFITABILITY
Du Pont analysis helps in understanding the drivers of profitability
ROCE
Asset or CE turnover(Sales / CE or Total assets)
Margins (%)(NOPAT / Sales)
Fixed Asset or Fixed
CE turnover
Working Capital
turnover
Receivables turnover
Inventory turnover
Payables turnover
Revenues
Costs
By regions / Products /
Customers
Material, Conversion
Benchmark Trend, Industry etc
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13
Margins have improved, however current asset turnover has declined
ROCE (%)
(NOPAT / Capital Employed)
10.6% 11.6%
5.8%
11.0%
2000 2001 2002 2003
Margins (%)
(NOPAT / Sales)
3.6%
9.1%8.8% 7.0%
2000 2001 2002 2003
Total Asset Turnover
(Sales / Total Assets)
1.2 1.271.62 1.56
2000 2001 2002 2003
Fixed Asset Turnover (Sales
/ Net Fixed Assets)
1.51.7 1.7 1.8
2000 2001 2002 2003
Current Asset Turnover
(Sales / Net Current Assets)
5.85 5.41
30.24
12.98
2000 2001 2002 2003
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1905
2370
2190
2025
2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09
14
Demand supply analysis helps understand industry situation
2396
875
525
420
365
11596
Capacity
Player 6
Player 5
Player 4
Player 3Player 2
Player 1
Overcapacity
till 07-08
Total Industry Capacity
Total
95% Utilisation
Domestic
consumption
Domestic demand supply situation (000 tonnes)
CAGR 4%
DEMAND - SUPPLY Case
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15
Ansoff matrix is used to generate opportunity ideas for the client
IDENTIFICATION OF GROWTH OPTIONS
New Products / Services
Unrelated diversification
Maximize sales with existing customers
Redefine market to
attract new customers
Expand into new
geographical segments
New
Pro
ducts
Mark
et
Need
s
Pro
du
ct
Typ
e
Exis
tin
g
Pro
ducts
Served Unserved
Market Type
MARKET
PENETRATION
PRODUCT
DEVELOPMENT
MARKET
DEVELOPMENT
DIVERSIFICATION OPPORTUNITIES
(Indicative only)
New applications for existing products
New product development
Strategic alliances/ acquisition to become
dominant international player in chosen
niche
Diversify into new unrelated business
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16
Seven Degrees of Freedom is a good framework to identify opportunities
DEGREES OF FREEDOMMaximisation of
existing
customers
versus
Step-outs
into new
competitive
arenas
Existing
competitive
arenaversus
Expansion
into new
geographies
Existing
geography versus
Acquisition and/
or consolidation
within current
industry
Existing
industry
structureversus
Innovation of
value
delivery
system
Existing value
delivery
system
versus
Innovation of
products and
services
Existing
products and
servicesversus
Attraction of
new customers
Theory
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17
Seven degrees of freedom framework was used to identify strategic growth options for an
airline catering company
Innovation of products
and services
STRATEGIC OPTIONS FOR GROWTH
Step-outs into new
competitive arenas
Ground handling Full service restaurants (FSR), Quick service restaurants (QSR) Retail / institutional laundry
Expansion into new
geographies International expansion
Innovation of value
delivery system Frozen Foods
Options selected
through
discussions with
client team
Maximisation of existing
customers
Attraction of new
customers Private label to retailers Railway catering
Domestic expansion Airport lounges, restaurants / snack bars Airline laundry Cabin service
LCC Segment
Case
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18
The BCG Matrix would help in capital allocation across the portfolio of businesses
OBJECTIVE
A large chemicals manufacturer, wanted assistance in capital allocation decisions across its existing
businesses
BCG Matrix was used to assist in capital allocation decisions across businesses
Over a period of time, the same matrix will be used to track the trajectory of each business
Case
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19
Product Historical Growth% Future Growth %
A 3 4-5
B 0.1 3-4
C 5.5 5-6
D 8.5 5-7
E 2.0 2-3
F 4 3-4
G 6.0 6-7
H 6.0 6.5
PRODUCT GROWTH RATES
Case
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20
Product Clients Share (%)
Leader/ No. 2 Player Share of Leader/ No.
2 player (%)
Relative Share
A 64 1 A 12 5.33
B 9 2 B 26 0.34
C 15 3 C 37 0.40
D 37 D 25 1.48
E 60 E 23 2.60
F 36 F 26 1.38
G 70 G 27 2.59
h 6 4 H 35 0.17
MARKET SHARE
Case
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21
STPP, Salt and Soda Ash are the cash cows, Bi Carb is the star product
Relative Market Share1
Gro
wth
(%
)
BCG MATRIX (PAST GROWTH)
?
Low
Cash Cow
Star
High
Low
High
Dog
1.0
6%
What is the flaw in this portfolio analysis?
Case
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22
Usage of future growth reveals that the company may not have any star business in future
Relative Market Share1
Gro
wth
(%
)
BCG MATRIX (FUTURE GROWTH)
?
Low
Cash Cow
Star
High
Low
High
Dog
1.0
6.5
Case
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23
Similarly, the A/C matrix was applied to rationalize Company Xs portfolio
Low High
Low
High
Att
rac
tiven
ess
Capability
RAC-InstitutionalCommercialMiningTextiles
HE&PS
Furniture
Machine Tools
Contract
WC
Construction
PM VSGL
Pumps
MHBDLTR
VAI
Water Poll.
Priority Non priorityWatch / Improve
Chemicals
RAC-HH
ATTRACTIVENESS- CAPABILITY MATRIX Case
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24
Pocket margin analysis helps in improving realisations without increasing list price
POCKET MARGIN ANALYSIS Theory
-
25
Build Up (Waterfall) analysis helps understand how an aggregate entity stacks up
WATERFALL ANALYSIS Case
510
38
3134
12
4126
53623
246
All figures in Rs.
Cr
Material Cost
Interest
on
Debtors5
Addressable
cost base
Raw Material2 Packing
Material
Utilities &
Other
variable
costs
S&D
Costs4Fixed
Manf.
Expenses
Corp.
Overheads
Manpower Interest
on
Inventory5
Manpower and
Other Fixed
Expenses
Sales and
Distribution Costs
Conversion Costs
Interest on
RM/WIP
Inventory3
-
26
678
659
685
713
741
771
802
597
826
615
804
775
740
722
'00-01 '01-02 '02-03 '03-04 '04-05 '05-06 '06-07 '07-08 '08-09
Incremental cash flows can be used to calculate value of opportunity
INCREMENTAL CASH FLOW
Expected Sales (000 tonnes)
Post-Deal
Production capacity
SA Qty (000 t)
Bicarb Qty (000 t)
18
3
Bicar
b
SA
Year 01-02
55
12
02-03
55
12
03-04
55
12
04-05
55
12
05-06
55
12
06-07
Likely value
created by the deal
~ Rs X Cr
54
0
07-08
30
0
08-09
Case
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27
Exchange rate of Rs A per USD
Average Urea Price Taken as $ X / MT FOB Black Sea as the lower limit
NG Units Naphtha Units Fuel Oil Units Mixed Energy
Co
st
of
Pro
d, R
s. / M
T
IPP Max. Rs. x1/ MT ($
x2/MT)IPP Min. Rs. x3 / MT
($ x4/MT)
Prod. Capacity 000 MTPA
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EXPECTED CAPACITY
TO BLEED OFF
5.989 MMTPA
Applying ICC along with IPP(Import parity Price), we could infer how the industry will fare
in future
INDUSTRY COST CURVE Case
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28
Michael Porter has defined five generic competitive strategies for businesses
GENERIC STRATEGIES Theory
Overall Low-Cost Leadership
Strategy
Broad Differentiation
Strategy
Focused Low-Cost
Strategy
Focused Differentiator
Strategy
Best-Cost
Provider Strategy
A Broad
Cross-
Section of
Buyers
A Narrow
Buyer
Segment (or
Market Niche)
Mark
et
Ta
rget
Lower-Cost Differentiation
Type of competitive advantage being pursued
-
29
Generic Strategies: Examples
Nirma
Wheel Lemon
Wheel Active
Ghari
Ariel
Surf Excel
Washing machine powders by local
manufacturers
Genteel
Ariel Matic
Surf Quick Wash
Type of Competitive Advantage
Lower Cost Differentiation
Mark
et
Targ
et Bro
ad
Ran
ge
Fo
cu
sed
/ N
ich
e
GENERIC STRATEGIES: WASHING POWDERS Examples
-
30
Competitive landscaping can help understand competitive intensity across segments
Current Scenario New Offerings/ Future Products
Tractor Trailer
M/HCV Truck
L/ ICVs
Buses
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yer
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yer
2
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New
Pla
yer
1
New
Pla
yer
2
New
Pla
yer
3
New
Pla
yer
4
New
Pla
yer
5
Current Offering
Future Planned Offerings
Potential Offerings
New
Pla
yer
6
Pla
yer
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Pick ups
COMPETITIVE LANDSCAPE Case
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31
Benchmarking along CSFs help identify strengths and weaknesses
BENCHMARKING
Key Success
Factors
Track Record
Engineering &
Design Skills
Financial
Strength
Project
Management
Player
1
Play
er 2
Play
er 3
Play
er 4System
Providers
Comments
Most large players are at par.
System providers will not be able
to take up mega projects due to
financial constraints.
Companys performance has improved over last year, would
improve further with IT based
control.
High Low
Improvement Decline No Change
Co
mpa
ny
Companys achievement over
last year
Play
er 5
Player
6
Case
-
32
Internal Benchmarking across locations / time helps understand variations
BENCHMARKINGCase
0
500
1000
1500
2000
2500
Jalandhar Hoshiarpur Sangrur Bathinda Ropar Ludhiana Patiala Gurdaspur Amritsar
1
1.2
1.4
1.6
1.8
2
2.2
2.4
2.6
2.8
3
Fuel Adjusted Economy Index
Energy Economy Index
Fuel Costs (Rs/Gcal)
Ludhiana emerges as the
most energy efficient plant in
terms of thermal energy
However, Sangrur is the
most cost effective plant due
to its fuel mix
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33
Radialized passenger car aftermarket is most likely to generate demand for Kevlar
KEVLAR: NEAR TERM DEMAND FROM TIRES
49%
70%
90%
2%10% 11%
1% 2% 3%
'98-99 '01-02 '05-06
Passenger Cars LCVs MHCV
% of tires sold
Radialization (2006-07)
1979
JK introduces radial
tires in India
1995
Radials introduced by car
OEM market
Radials primarily in replacement
market for passenger cars
Performance improvement promised by radials resulting in faster switch in replacement segment
Understanding the
Industry evolution
to identify future
developments
Case: Demand Estimation in Tires
-
34
Like radialization, Kevlar tires likely to have initial demand from passenger car market
Passenger Car
Tires- Aftermarkets
Potential Kevlar
Demand
47,000 tons
~40 tons
Radialization ~90%
Quantity of Aramid/Tire ~9%
Penetration of Kevlar ~1%
2007 2010 2012
40
Potential Kevlar Demand (tons)
100
140
KEVLAR: NEAR TERM DEMAND FROM TIRES
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35
Going ahead significant increase in Trucks & Buses radialization can be expected
INFLECTION POINT: INDIA 2010
Surge in
radialisation
once it reaches
9-11%
India will most
likely be in the
area of
inflection in
2010
Global trends indicate a sharp increase once 9-11% radialization is
achieved
Inflexion Area
Radialisation Trends
0
10
20
30
40
50
60
70
80
90
100
1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2006 2010
Perc
en
tag
e R
ad
iali
zati
on
Western Europe Japan North America China Russia India
India
approaching
Area of
inflexion
Experience of
other markets
to estimate
trends
-
36
Demand for Kevlar has potential to grow beyond X tons by 2012
TYRE KEVLAR DEMAND
Kevlar PVs Demand Kevlar CVs Demand
2007 2010 2012
40
Potential Kevlar Demand (tons)
Overall
opportunity
100
140
Total Demand
Estimates from
past industry
evolution in Indian
market
Opportunity from
past industry
evolution in other
market