TABLE OF CONTENTS

1. 4 P’s
2. 4 C’s
3. 5 C’s
4. Mc Kinsey’s 7 S Framework
5. BCG Growth Matrix
6. Economies of Scale
7. CVP Analysis
8. NPV & Sunk Costs
9. Porter’s 5 Forces Framework
10. SWOT Framework
11. Core Competencies
12. Value Chain Analysis
 4P’s
• Specifications of actual goods or services and how it relates to the end-

Product user's needs and wants.

• Generally includes supporting elements such as warranties, guarantees,
and support.

• How much are the intended customers willing to pay?

Price •
•
•
Decide on price don’t let it just happen.
Includes setting up of discounts as well.
The price need not be monetary – it can be time, energy or attention

• Being at the right time and right place in right quantities

Place • how the product gets to the customer; for example, point-of-sale
placement or retailing.
• Channel and effect of the environment in which the product is sold.

• Informing and educating the target group

Promotion • Weapons in the marketing armory - advertising, selling, sales

promotions, Public Relations, etc.
• various methods of promoting the product, brand, or company.

From the Producer Perspective

 4C’s
• Old product approach : develop and market a product as good as
possible to make sales
Customer Needs • Consumer approach: study consumer wants and needs, and to
manufacture products in response to those needs

• Price: measured in dollars is only a part of ‘cost to satisfy’

Cost to Satisfy • Cost to satisfy: covers wider range of costs to customers

• Place: a distribution channel that provides a place to buy

Convenience to • Convenience: one step higher than the venue level
Buy • Know how each sub-segment of the market prefers to buy and design
according to their needs

• Promotion: manipulative one way communication from the seller

• Communication: interactive ‘give and take’ by both buyer and seller
Communication • Interactive program using phone, website etc. to get response from
advertisement

From the Customer Perspective

 5 C’s
What is it used for?
It is used to assess the creditworthiness i.e. the
borrowing capability of a borrower.

Who uses it?

 Borrowers: Companies, Individuals
 Lenders: Banks, NBFCs, Housing Finance companies
 Rating agencies: ICRA, Crisil etc

What is it ?
 Character, Capital, Capacity, Collateral, Conditions
 McKINSEY’S 7S FRAMEWORK
Structure

The basic organization of the

Strategy
The direction and scope of the
company over the long term.
company, its departments,
reporting lines, areas of expertise,
and responsibility (and how they
inter-relate).

Systems

Formal and informal procedures that

govern everyday activity, covering
everything from management
Staff information systems, through to the
systems at the point of contact with the
customer
The company's people
resources and how they are
developed, trained, and
motivated.

Skills Shared Values

Style
The values and beliefs of the The leadership approach of top
The capabilities and management and the
company. Ultimately they
Hard S’s competencies that exist within
guide employees towards company's overall operating
Soft S’s the company. What it does approach.
'valued' behavior.
best.
 BCG MATRIX
Applications -
1. Analysis of product lines / business units for budget allocations and capacity planning

2. Positioning of brands against their main competitors and indicates where it might be likely to
go in the future

3. Identify the type of marketing activities that might be expected to be effective in future
Relative Market Share = Incumbent company’s sales / Largest rival’s sales
Market Growth rate = YOY Increase in Industry Sales
Stars are riding high – market share / Question marks: the initial stage
Market Growth Rate
High

growth Can move anywhere towards the stars

Require effort to maintain status quo and the dogs
Heavy cash consumption and High investment
generation
Cows are yesterday’s stars and Dogs are the cash holes and don’t
indicate maturity in the PLC generate cash
Low

Little investment and maximum profits Declining stage in PLC

Relative Market Share

High Low
 DEMAND & SUPPLY
 Key Concepts
 Supply Curve , Demand Curve , Equilibrium, Price
Discovery
 Shift along S & D curves, Shift of S & D Curves
 Price Elasticity of Demand
 Perfectly elastic, perfectly inelastic demand curves
 Normal, Inferior and Giffen Goods
 Application
 Market Estimation, Competition Analysis, Entry
Strategy etc…
 ECONOMIES OF SCALE
Average Total Cost in the Short and Long Run
External
The cost per unit
depends on the size of
Average the industry but not
Total ATC in short ATC in short ATC in short necessarily on the size
Cost run with run with run with of any one firm. An
small factory medium factory large factory ATC in long run industry will typically
consist of many small
firms and be perfectly
competitive.

Internal
The cost per unit
$12,000 depends on the size of
an individual firm but
10,000 not necessarily on
that of the industry.
Economies Constant The market structure
of returns to will be imperfectly
scale scale Diseconomies competitive with large
of firms having a cost
scale advantage over small.

0 1,000 1,200 Quantity of Both types of scale

economies are important
Cars per Day causes of international
trade.
 The CVP Model
(P× N) = FC + (VC × N) + Profit ; NBEP = FC/(P-VC)

LIMITATIONS $1.5 Total Revenue

• CVP is a short run, marginal analysis

Total Cost
• Assumes that fixed costs, unit variable costs and unit $1.0 Losses @ 25,000 units
revenues are constant = -25,000 x $3
= -$75,000
• Assumes a neat division between fixed costs and variable
costs, though in the long run all costs are variables $.5
Fixed cost/yr. $150,000
Variable cost/ unit $9
Price $12
$ .l5 Contribution margin $3
OPERATING LEVERAGE
25,000 50,000 75,000 Output in Units
• The extent to which a business uses fixed costs $1.5 Total Revenue
(compared to variable costs) in its operations is
referred to as "operating leverage."
Losses @ 25,000 units
= – 25,000 x $10
= – $250,000
MARGIN OF SAFETY Total Cost

Fixed cost/yr. $500,000

$.5 Variable cost/ unit $2
• In break-even analysis, MOS is how much output or sales level Price $12
can fall before a business reaches its break-even point (BEP) Contribution margin $10
• Margin of safety = ((Budgeted sales - break-even sales)
/Budgeted sales) x 100% 25,000 50,000 75,000
 NPV
 Widely used Project Evaluation Technique
 Determination of Cash Inflows & Cash Outflows
 Generally 3 parts:
 Period 0 – Investment & Working Capital (WC)Outflow
 Period 1 to (n-1) – Revenues & Cost and additional WC
 Period n – Sale of Assets & Release of WC

 Rate of Discount – Determined taking inflation and expected returns into account

 NPV - The difference between the present value of cash inflows and the present value
of cash outflows of a particular project

NPV Meaning Decision

NPV > 0 Profitable Accept the project

NPV < 0 Loss Making Reject the project

Indifferent – may consider strategic
NPV = 0 Neither Profit nor Loss
benefits

Advantages Disadvantages
• Considers Time Value of Money • Sensitivity to forecasted cash flows
• Simple Methodology of calculation • Sensitivity to Discount Rates
 SUNK COSTS
SUNK COSTS FALLACY
“When you’re too concerned about wasting a previous investment is
when you’re most likely to waste even more”

TIPS TO AVOID FALLACY

1. Get some fresh eyes on the issue
2. Don’t be afraid to give up on a problem
3. Remember that even good decisions can turn out poorly
4. There’s a difference between waste and investment
5. Keep in mind the Long term goals and compare with status quo
6. Avoid exaggerating switching costs
 PORTER’S 5 FORCES FRAMEWORK
• Supplier bargaining power is likely to be high when:
• The market is dominated by a few large suppliers rather than a fragmented source of supply
Bargaining
• There are no substitutes for the particular input
Power of
Suppliers • The switching costs from one supplier to another are high
• There is the possibility of the supplier integrating forwards in order to obtain higher prices and
margins.
• Customers bargaining power is likely to be high when:
• They buy large volumes, there is a concentration of buyers
Bargaining • The supplying industry comprises a large number of small operators
Power of
• Switching to an alternative product is relatively simple and is not related to high costs
Customers
• Customers have low margins and are price-sensitive
• There is the possibility for the customer integrating backwards
• The threat of new entries will depend on :
• Economies of scale
Threat of New • High initial investments and fixed costs
Entrants • Protected intellectual property like patents, licenses etc
• Scarcity of important resources
• Legislation and government action
• The treat of substitutes is determined by factors like :
• Brand loyalty of customers
Threat of
• Close customer relationships
Substitutes
• Switching costs for customers
• The relative price for performance of substitutes
• Competition between existing players is likely to be high when :
• There are many players of about the same size
Competitive • Players have similar strategies
Rivalry between • There is a price competition, as products are same
Existing • Low market growth rates (growth of a particular company is possible only at the expense of a
Players competitor)
• Barriers for exit are high (e.g. expensive and highly specialized equipment)
 SWOT FRAMEWORK

Used to create a simple view

of where a particular entity
Resources and
e.g. a company/business Capabilities that
An absence of certain
unit is at one point of time. can be used as a
strengths
basis for gaining
competitive
Often used by market teams advantage
and external analysts as a
Any factor in the
way of summarizing external Changes in the
internal capabilities and environment that external
is an enabler for environment that
external market positioning. profit & growth can degrade a firm’s
competitive position

These above factors are identified as part of an external analysis and examples of tools
used to conduct such an analysis also include Five Forces Model and PESTLE.
 CORE COMPETENCY
•Is something a company does
especially well relative to its
competitors
•Refers to a set of skills or
experience in some activity
typically achieved by long-term
development of processes
•Are not seen as being fixed;
should change in response to
changes in the company's
environment

Build world leadership in the design and development of a particular class of product
functionality to meet ever-changing market demands and to enter new and future
markets.
GENERIC VALUE CHAIN
METHODOLOGY FOR VALUE CHAIN ANALYSIS

Step 1 • Customisation of the generic value chain eg, a company has outsourced its HR
function

• Analysis of customised value chain- identification of linkages between activities(

Step 2 Linkages exist if the performance or cost of one activity affects another) eg, the
inbound logistics of raw materials need to be on time to avoid disruptions to the
manufacturing process.

• Analysis of key industry players’ value chains and their relationship to the company
Step 3 ( termed value system))- how does our product fit into their value chain eg, a food
manufacturer delivering food to a large retail chain.

• A Value Chain Analysis is performed in the following steps:

• Identification of improvements in the coordination and / or optimisation of
activities. Example:

Step 4 • Optimisation: reducing the end to end manufacturing time of a product or the
number of rejects.
• Coordination: service engineers communicating to R&D product design faults
and recurring product problems so that the product can be continually
improved.