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Business Strategy Frameworks Guide

The document provides summaries of several business analysis frameworks: 1. The McKinsey 7-S framework analyzes how well an organization can implement change based on seven components: strategy, structure, systems, skills, style, staff, and shared values. 2. The Product/Market Expansion Matrix structures discussion of a company's growth options in current/new markets and products, with diversification being riskiest. 3. The Product/Technology Life Cycle model accounts for time, with products/technologies going through introduction, growth, maturity, and decline phases depicted as an S-curve. 4. Core Competency Analysis identifies a firm's strongest processes to determine new business opportunities, like Honda expanding

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207 views2 pages

Business Strategy Frameworks Guide

The document provides summaries of several business analysis frameworks: 1. The McKinsey 7-S framework analyzes how well an organization can implement change based on seven components: strategy, structure, systems, skills, style, staff, and shared values. 2. The Product/Market Expansion Matrix structures discussion of a company's growth options in current/new markets and products, with diversification being riskiest. 3. The Product/Technology Life Cycle model accounts for time, with products/technologies going through introduction, growth, maturity, and decline phases depicted as an S-curve. 4. Core Competency Analysis identifies a firm's strongest processes to determine new business opportunities, like Honda expanding

Uploaded by

Sai Neeraj
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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McKinsey 7-S Framework

This framework can help you analyze how well a change can be implemented in an organization or can give
you an idea of the general well being of the organization. Problems arise when these seven components do no
reinforce one another.
Use this framework with caution, though, because it can be misused as a checklist and it is very easy to forget
one of the S’s during the interview. The seven factors are:
1. Strategy
2. Systems
3. Structure
4. Style
5. Staff
6. Skills
7. Shared Values

Product/Market Expansion Matrix


This framework can structure a discussion about growth options for a company. The options are whether to
grow in current or new markets and/or products. Each strategy carries different risks, with the diversification
strategy being the riskiest and the penetration strategy the most conservative.
Products
Current New
Current Market Penetration Product Expansion
Markets
New Market Development Diversification

Product/Technology Life Cycle


This concept takes into account the passage of time when discussing the sales of a product or technology. Both
tend to go through four phases: introduction, growth, maturity, and decline.
If drawn in a diagram, the life cycle curve is S-shaped; thus, the name “Product/Technology S-Curve” is
sometimes used for this idea. Each stage requires a different strategy and management style. The model can
be especially useful when discussing the sales patterns of a new computer or other technology. The following
figure is an example of a generic S curve.
Introduction Growth Maturity Decline

Core Competency Analysis


C.K. Prahalad and Gary Hamel brought core competencies to the forefront of business strategy. Very briefly,
one of their ideas is that by analyzing which processes a firm executes very well, you can determine how they
may be able to expand their business into new, and sometimes unexpected, areas.
An example is Honda, who translated their core competency of engine building into cars, lawnmowers, boat
motors, motorcycles, etc. When in a case interview, think about what processes a company executes
particularly well and determine whether these processes could be valuable in different businesses. This
framework is often useful in analyzing the value chain of a business.

Relative Cost Position


The relative cost position of a firm can be determined by stacking up the variable costs and allocated (as best
possible) fixed costs of a unit produced by one firm to the costs of a unit produced by a competitor. The key
insights from this analysis can be (1) whether a company is more or less competitive with its competition and
(2) whether the company with the largest market share has the lowest unit costs. All else equal, this should be
the case because of experience curve effects. If it is not, the market leader may be vulnerable to price
competition by smaller firms.

Synergies
This idea is used in many settings, but it can be especially useful in analyzing the potential benefits of mergers
or acquisitions (a popular case interview topic). Synergies can come in many forms, but here are a few to look
for:
 Spreading fixed costs over greater production levels
 Gaining sales from having a larger product line and extending brands
 Better capacity utilization of plants
 Better penetration of new geographic markets
 Learning valuable management skills
 Obtaining higher prices from eliminating competition (beware of antitrust, though)
If a merger or acquisition offers none of these benefits and few others, you may wonder if all the transaction is
accomplishing is the creation of a bigger, not better, corporation.

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