A Simple Guide to Consulting Frameworks

Consulting frameworks are structured, analytical tools and mental models used by consultants to break down complex business problems into manageable components, ensuring a systematic, data-driven approach to problem-solving. They help standardize thinking, identify key issues, and develop effective, evidence-based recommendations across various industries. 

Purposes and Benefits:
Structure Complex Problems: They divide large issues into smaller, logical, and manageable parts.
Ensure Comprehensiveness: Many frameworks are built on the MECE principle (Mutually Exclusive, Collectively Exhaustive), which ensures no potential causes or solutions are overlooked.
Speed and Accuracy: They allow consultants to quickly focus on the most relevant issues and identify root causes.
Structured Communication: They provide a common language for teams to communicate findings, data, and recommendations clearly.

Entering a new market
- analyze market (competition & market share, products & services, barriers to entry)
- analyze potential methods of entry (start from scratch, acquisition of existing player, joint venture/strategic alliance)

Industry Analysis
- Current Industry structure (life cycle, competitors [major players & market share], performance [profit margins], industry changes [new players, tech], drivers [brand, size, tech])
- Supplier Industry (concentration, product availability, industry volatility)

Industry​ ​Analysis:​ ​Factors​ ​to​ ​Consider
- Industry​ ​life​ ​cycle?​ ​(Emerging?​ ​Maturity?​ ​Declining?)
- Industry​ ​performance (Client's​ ​position​ ​and​ ​performance​ ​within​ ​the​ ​industry & Major​ ​industry​ ​players,​ ​their​ ​market​ ​share,​ ​their​ ​performance)
- Recent​ ​changes​ ​in​ ​the​ ​industry:​ ​new​ ​players,​ ​new​ ​technology,​ ​increased
regulations,​ ​mergers
- Industry​ ​drivers:​ ​brand,​ ​size,​ ​technology
- Suppliers​ ​—​ ​what's​ ​going​ ​on​ ​in​ ​their​ ​industry?​ ​Can​ ​they​ ​continue​ ​to​ ​supply​ ​us?
- Future​ ​outlook​ ​for​ ​the​ ​industry​ ​—​ ​new​ ​players,​ ​players​ ​leaving
- Barriers​ ​to​ ​entry​ ​and​ ​exit

Mergers and acquisitions (M&A)
- company objectives
- analyze selling price
- due diligence
- exit strategies

Acquiring​ ​Company:​ ​Questions​ ​to​ ​Ask​ ​about​ ​Selling​ ​Price
- Is​ ​the​ ​price​ ​fair?​ ​Can​ ​we​ ​afford​ ​it?
- How​ ​are​ ​we​ ​going​ ​to​ ​pay​ ​for​ ​it?
- If​ ​the​ ​economy​ ​sours,​ ​do​ ​we​ ​have​ ​cash​ ​holdings​ ​to​ ​still​ ​make​ ​the​ ​debt​ ​payments?

Acquisition​ ​Due​ ​Diligence:​ ​Areas​ ​to​ ​Explore
- Company​:​ ​Shape​ ​and​ ​Structure
- Customers​ ​and​ ​Suppliers​:​ ​Security​ ​of​ ​its​ ​markets
- Industry​:​ ​Current​ ​and​ ​future​ ​status
- Competition​:​ ​competitive​ ​response
- Legal​:​ ​potential​ ​legal​ ​reasons​ ​why​ ​the​ ​client​ ​shouldn't​ ​acquire​ ​the​ ​target
company

New Product
- product analysis
- market strategy
- customers
- financing

Development​ ​of​ ​New​ ​Product:​ ​Factors​ ​to​ ​Consider
- Customers:​ ​Is​ ​there​ ​a​ ​need? (Will​ ​this​ ​expand​ ​our​ ​customer​ ​base​ ​or​ ​increase​ ​sales?)
- Competitors:​ ​Who's​ ​the​ ​market? (What​ ​will​ ​the​ ​competitive​ ​response​ ​be?)
- Product:​ ​Can​ ​we​ ​patent​ ​it? (Are​ ​there​ ​similar​ ​products/substitutes? What​ ​are​ ​the​ ​advantages​ ​and​ ​disadvantages​ ​of​ ​this​ ​product?)
- Company:​ ​Does​ ​it​ ​fit​ ​in​ ​with​ ​the​ ​rest​ ​of​ ​our​ ​product​ ​line? (Would​ ​it​ ​cannibalize​ ​current​ ​products?
- Implementation:​ ​How​ ​will​ ​they​ ​finance​ ​the​ ​development​ ​and​ ​rollout

How to Price a Product
- Competitive​ ​analysis (Competition:​ ​Competitor's​ ​prices, Product:​ ​Price​ ​of​ ​substitutes, Consumers:​ ​buying​ ​habits)
- Cost-based​ ​pricing (Breakeven​ ​point​, Desired​ ​Profit​ ​margin)
- Price-based​ ​costing (Market​ ​size [Current​ ​Players​ ​(Supply), Demand], Customers:​ ​Willingness​ ​to​ ​pay [What's​ ​it​ ​worth​ ​to​ ​them​ ​compared​ ​to​ ​other​ ​things?])

New Business
- Market: competition & market share (product, barriers to entry, distribution channels, finance)
- Cost Benefit Analysis

Increasing Sales
- Qualitative Assessment (changes in market share, customer/market growth, are prices competitive?, competitive strategies)
- Quantitative: How to increase sales? (increase volume [# units sold], increase amount/total value of each sale, increase prices, create seasonal balance [more consistent sales])

Reducing Costs
- Qualitative Assessment (analyze cost breakdowns, investigate for irregularities & isolate the problem, benchmark competitors, research labor saving devices)
- Internal Cost Analysis (unions, suppliers, economies of scale)
- External Cost Analysis (economy, interest rates, regulations)

Increasing Profits
- identify revenue streams (compute percentage total of each? unusual balance? have percentages changed?)
- identify fixed and variable costs (shifts in costs/ unusual costs? cost reductions damage revenue streams?)

The Value/Supply Chain
raw materials ⇒​ ​​​Operations​ ​⇒​ ​Delivery​ ​⇒​ ​Marketing​ ​&​ ​Sales​ ​⇒​ ​Service

Raw​ ​materials​ ​and​ ​inbound​ ​logistics​
receiving​ ​materials​ ​into​ ​the​ ​warehouse, relationships​ ​with​ ​suppliers,​ ​"just​ ​in​ ​time"​ ​(JIT)​ ​delivery,​ ​etc.

Operations
​processing​ ​raw​ ​materials​ ​into​ ​product​ ​through​ ​the​ ​use​ ​of​ ​capital equipment​ ​and​ ​labor

Delivery
warehousing​ ​and​ ​distribution​ ​channels

Marketing​ ​and​ ​Sales
marketing​ ​strategy,​ ​identification​ ​of​ ​customer​ ​base​ ​and the​ ​cost​ ​of​ ​customer​ ​acquisition,​ ​sales​ ​force​ ​issues,​ ​e.g.​ ​commission,​ ​company car.

Service
customers​ ​support,​ ​customer​ ​retention​ ​(It's​ ​cheaper​ ​to​ ​retain​ ​a customer​ ​than​ ​to​ ​go​ ​out​ ​and​ ​bring​ ​in​ ​a​ ​new​ ​one.)

New​ ​Market​ ​Entry:​ ​Questions​ ​to​ ​Consider
- Customers:​ ​Is​ ​the​ ​market​ ​growing?​ ​What​ ​is​ ​the​ ​growth​ ​rate?
- Company:​ ​Does​ ​it​ ​fit​ ​into​ ​our​ ​overall​ ​business​ ​strategy?
- Competition:​ ​Who​ ​are​ ​the​ ​major​ ​players​ ​and​ ​what​ ​market​ ​share​ ​does​ ​each​ ​have?
Are​ ​there​ ​any​ ​barriers​ ​to​ ​entry?​ ​To​ ​exit?
- Products:​ ​Will​ ​we​ ​be​ ​able​ ​to​ ​differentiate​ ​our​ ​products​ ​or​ ​services?

Three Ways to Enter a Market
DIY (enter new business segment yourself), Acquisition (buy your way in), Joint venture/ strategic alliance

Pros and Cons of DIY market entry
- Pros:​ ​bigger​ ​equity​ ​share,​ ​control,​ ​less​ ​expensive
- Cons:​ ​No​ ​name,​ ​recognition,​ ​products,​ ​or​ ​systems​ ​in​ ​place.​ ​Starting​ ​from​ ​scratch
takes​ ​time;​ ​VERY​ ​RISKY

Pros and Cons of acquisition market entry
- Pros:​ ​products​ ​or​ ​services,​ ​management​ ​team,​ ​brand​ ​recognition,​ ​customers,
distribution​ ​channels,​ ​marketing​ ​team,​ ​etc​ ​already​ ​established;​ ​Saves​ ​time;​ ​Has
established​ ​history​ ​or​ ​track​ ​record;​ ​Chances​ ​of​ ​success​ ​are​ ​higher
- Cons:​ ​Inherit​ ​deadwood​ ​employees​ ​and​ ​current​ ​problems;​ ​costly;​ ​partners​ ​forced
to​ ​share​ ​equity;​ ​no​ ​synergy​ ​between​ ​companies

Pros and Cons of joint venture market entry
- Pros:​ ​Easy​ ​way​ ​to​ ​enter;​ ​Less​ ​risk;​ ​More​ ​resources;​ ​Less​ ​investment
- Cons:​ ​Less​ ​control,​ ​relying​ ​on​ ​others;​ ​Less​ ​equity​ ​or​ ​payout;​ ​Exit​ ​is​ ​more​ ​difficult

Reasons for an Acquisition/ Merger
- Increase​ ​market​ ​access
- Diversify​ ​their​ ​holdings
- Pre-empt​ ​the​ ​competition
- Gain​ ​tax​ ​advantages
- Incorporate​ ​synergies
- Increase​ ​shareholder​ ​value

Company Growth Assessment
- Industry:​ ​Is​ ​the​ ​industry​ ​growing?
- Company:​ ​How​ ​are​ ​we​ ​growing​ ​compared​ ​to​ ​the​ ​industry? (Are​ ​our​ ​prices​ ​in​ ​line​ ​with​ ​our​ ​competitors?Financial​ ​Situation:​ ​Do​ ​we​ ​have​ ​the​ ​funding​ ​to​ ​support​ ​the​ ​growth?)
- Competitors:​ ​What​ ​have​ ​our​ ​competitors​ ​done?

5 Major Growth Strategies
- Customers:​ ​Increase​ ​distribution​ ​channels
- Product:​ ​Increase​ ​product​ ​line (Diversify​ ​products​ ​and​ ​services, Invest​ ​in​ ​a​ ​major​ ​marketing​ ​campaign)
- Competition:​ ​Acquire​ ​competitors

Declining​ ​Market​ ​Share:​ ​Questions​ ​to​ ​Consider
- Competitors: Have​ ​any​ ​other​ ​competitors​ ​picked​ ​up​ ​market​ ​share? Have​ ​our​ ​competitors​ ​come​ ​out​ ​with​ ​new​ ​products?​ ​If​ ​so,​ ​how​ ​do​ ​they differ​ ​from​ ​ours? Did​ ​they​ ​invest​ ​in​ ​a​ ​major​ ​marketing​ ​campaign?
- Overall​ ​industry:​ ​what​ ​has​ ​changed?​ ​New​ ​players,​ ​new​ ​technology,​ ​or​ ​mergers?

Company​ ​Turnaround:​ ​Factors​ ​to​ ​Consider
- Product:​ ​Review​ ​products/services
- Financial​ ​Situation:​ ​Secure​ ​funding
- Expertise​ ​&​ ​Capabilities:​ ​Review​ ​talent​ ​and​ ​culture
- Determine​ ​short-term​ ​and​ ​long​ ​—​ ​term​ ​goals
- Develop​ ​a​ ​business​ ​plan
- Reassure​ ​clients,​ ​suppliers,​ ​distributors​ ​—​ ​key​ ​stakeholders
- Prioritize​ ​goals​ ​and​ ​develop​ ​some​ ​small​ ​successes​ ​for​ ​momentum

Pharmaceutical​ ​Products:​ ​Questions​ ​to​ ​Consider
- How​ ​effective​ ​is​ ​the​ ​drug?​ ​Effectiveness​ ​compared​ ​to​ ​existing​ ​options?
- What​ ​will​ ​R&D​ ​and​ ​test​ ​trials​ ​cost?​ ​Duration?
- How​ ​will​ ​the​ ​product​ ​be​ ​sold?:​ ​OTC​ ​(high​ ​volume,​ ​low​ ​price)​ ​or​ ​prescription​ ​and covered​ ​by​ ​insurance​ ​(low​ ​volume,​ ​high​ ​price)?
- Who​ ​will​ ​sell​ ​- doctors?​ ​Pharmacists?​ ​Retailers?
- Seriousness​ ​of​ ​illness,​ ​growth/decline​ ​of​ ​market
- Side​ ​effects
- Dosage​ ​and​ ​frequency,​ ​ease​ ​of​ ​use
- Off-label​ ​uses

Biotechnology​ ​Products:​ ​Questions​ ​to​ ​Consider
- What​ ​does​ ​the​ ​product​ ​do?​ ​What​ ​is​ ​significance?
- How​ ​accurate​ ​is​ ​the​ ​product?​ ​How​ ​well​ ​does​ ​it​ ​work​ ​compared​ ​to​ ​existing
options?
- FDA​ ​approval?​ ​If​ ​no,​ ​how​ ​long?
- R&D​ ​costs?​ ​Test​ ​trials?
- Will​ ​developer​ ​be​ ​a​ ​manufacturer,​ ​supplier,​ ​or​ ​marketer?
- Product​ ​life​ ​cycle?
- Complementary​ ​products​ ​that​ ​must​ ​be​ ​purchased​ ​to​ ​go​ ​with​ ​it?
- Commercialize​ ​product​ ​-​ ​license​ ​technology,​ ​get​ ​funding,​ ​start​ ​business/jv​ ​or
strategic​ ​alliance/acquire​ ​existing​ ​company

The 5 C's
- Company​:​ ​What​ ​do​ ​you​ ​know​ ​about​ ​the​ ​company?​ ​How​ ​big​ ​is​ ​it?​ ​Public or​ ​private?​ ​Products/services​ ​offering?
- Costs​:​ ​What​ ​are​ ​the​ ​major​ ​costs?​ ​How​ ​have​ ​its​ ​costs​ ​changed​ ​in​ ​the​ ​past year?​ ​How​ ​do​ ​its​ ​costs​ ​compare​ ​with​ ​those​ ​of​ ​others​ ​in​ ​the​ ​industry?​ ​How can​ ​we​ ​reduce​ ​costs?
- Competition​:​ ​Who​ ​are​ ​the​ ​biggest​ ​competitors?​ ​What​ ​​market​ ​share​​ ​does each​ ​hold?​ ​Has​ ​market​ ​share​ ​changed​ ​in​ ​the​ ​last​ ​year?​ ​How​ ​do​ ​our services​ ​or​ ​products​ ​differ​ ​​from​ ​the​ ​competition?​ ​Do​ ​we​ ​hold​ ​any strategic​ ​advantage​​ ​over​ ​our​ ​competitors?
- Consumers/clients​:​ ​Who​ ​are​ ​they?​ ​What​ ​do​ ​they​ ​want?​ ​Are​ ​we​ ​fulfilling their​ ​needs?​ ​How​ ​can​ ​we​ ​get​ ​more?​ ​Are​ ​we​ ​keeping​ ​the​ ​ones​ ​we​ ​have?
- Channels​:​ ​Distribution​ ​channels.​ ​How​ ​do​ ​we​ ​get​ ​our​ ​product​ ​into​ ​the hands​ ​of​ ​the​ ​end​ ​users?​ ​How​ ​can​ ​we​ ​increase​ ​our​ ​distribution​ ​channels? Are​ ​there​ ​areas​ ​of​ ​our​ ​market​ ​that​ ​we​ ​are​ ​not​ ​reaching?​ ​How​ ​do​ ​we​ ​reach them?

The 4 P's
- Product​:​ ​What​ ​are​ ​our​ ​products​ ​and​ ​services?​ ​What​ ​is​ ​the​ ​company's niche?
- Price​:​ ​How​ ​does​ ​our​ ​price​ ​compare​ ​with​ ​competition?​ ​How​ ​was​ ​our​ ​price determined?​ ​Are​ ​we​ ​priced​ ​right?​ ​If​ ​we​ ​change​ ​our​ ​price,​ ​what​ ​will​ ​that​ ​do to​ ​our​ ​sales​ ​volume?
- Place​:​ ​How​ ​do​ ​we​ ​get​ ​our​ ​products​ ​to​ ​the​ ​end​ ​user?​ ​How​ ​can​ ​we​ ​increase our​ ​distribution​ ​channels?​ ​Do​ ​our​ ​competitors​ ​have​ ​products​ ​in​ ​places​ ​that we​ ​don't?​ ​Do​ ​they​ ​serve​ ​markets​ ​that​ ​we​ ​can't​ ​reach?​ ​If​ ​so,​ ​why?​ ​And​ ​how can​ ​we​ ​reach​ ​them?
- Promotions​:​ ​How​ ​can​ ​we​ ​best​ ​market​ ​our​ ​products?​ ​Are​ ​we​ ​reaching​ ​the right​ ​market?​ ​What​ ​marketing​ ​campaigns​ ​has​ ​the​ ​company​ ​conducted​ ​in the​ ​past?​ ​Were​ ​they​ ​effective?​ ​Can​ ​we​ ​afford​ ​to​ ​increase​ ​our​ ​marketing campaign?

Brainstorming Ways to cut costs
- Labor (Cross-train​ ​workers, Cut​ ​overtime, Institute​ ​four​ ​10-hour​ ​days​ ​instead​ ​of​ ​five​ ​eight-hour​ ​days, Convert​ ​workers​ ​into​ ​owners​ ​(if​ ​they​ ​have​ ​a​ ​stake​ ​in​ ​the​ ​company​ ​they​ ​will work​ ​longer,​ ​and​ ​harder​ ​and​ ​constantly​ ​think​ ​of​ ​ways​ ​to​ ​cut​ ​costs​ ​in​ ​a​ ​way that​ ​they​ ​might​ ​not​ ​have​ ​done​ ​before), Contemplate​ ​layoffs, Institute​ ​across-the-board​ ​pay​ ​decreases)
- Production (Invest​ ​in​ ​technology, Consolidate​ ​production​ ​space​ ​to​ ​gain​ ​scale​ ​and​ ​create​ ​accountability, Create​ ​flexible​ ​production​ ​lines, Reduce​ ​inventories​ ​(JIT), Outsource, Renegotiate​ ​with​ ​suppliers, Consolidate​ ​suppliers, Import​ ​parts)
- Finance (Reduce​ ​A/R​ ​Turnover​ ​Have​ ​customers​ ​pay​ ​sooner, Refinance​ ​your​ ​debt, Sell​ ​nonessential​ ​assets, Hedge​ ​currency​ ​rates, Redesign​ ​health​ ​insurance)