The 16 Frameworks

“The 16 Frameworks of

Business Analysis”

Business Forensics Workshops:

D. Anthony Miles, Ph.D., MCP, RBA, CMA, MBC

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1) 3-C’s Model Framework

(Kenichi Ohmae)

2) 4-P’s of marketing Model

Framework

3) The Boston Consulting Group

Growth-Share Matrix

4) Breakeven Equation Model

Framework

5) Cost-Benefit Analysis Model

Framework

6) Internal-External Framework

7) *Force Field Analysis Model

8) Product Life Cycle Diagram

Chart

9) McKinsey 7-S’s Framework

10)Porter’s Five Forces Framework

11)The Profit Equation Model

Framework

12)Ratio Analysis Framework

(Business Analysis &

Evaluation: Using Financial

Statements) (Palepo, Bernard &

Healy)

13)Supply and Demand Model

Framework

14)SWOT Analysis Framework

15)The Value Chain Framework

16)The Value Net Framework

(Brandenburg and Nalebuff)

Source: Miles, D. (2013) The 16 Frameworks of Business Analysis

Agenda: The 16 Frameworks of Analysis

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1. 3-C’s Model Framework

Source:

http://www.vectorstudy.com/forum/viewtopic.php?nomobile=1&f=1&t=61

3C's Model

3C's Model is introduced by Kenichi

Ohmae introduces and is a model which

stands for the corporation, the customer,

and the competition.

The 3C's model (three C's framework) of

Kenichi Ohmae, a famous Japanese

strategy guru, stresses that a strategist

should focus on three key factors for

success. "In the construction of any

business strategy, three main players

must be taken into account:

* the corporation itself,

* the customer, and

* the competition".


http://www.vectorstudy.com/forum/viewtopic.php?nomobile=1&f=1&t=61

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2. 4-P’s of Marketing Model Framework

Source:

Biswas & Twitchell (1999); Management Consulting: A Complete Guide to the Industry

The Marketing Mix (The 4 P's of Marketing)

Marketing decisions generally fall into the following four

controllable categories:

•Product

•Price

•Place (distribution)

•Promotion

The term "marketing mix" became popularized after Neil

H. Borden published his 1964 article, The Concept of the

Marketing Mix. Borden began using the term in his

teaching in the late 1940's after James Culliton had

described the marketing manager as a "mixer of

ingredients". The ingredients in Borden's marketing mix

included product planning, pricing, branding, distribution

channels, personal selling, advertising, promotions,

packaging, display, servicing, physical handling, and fact

finding and analysis. E. Jerome McCarthy later grouped

these ingredients into the four categories that today are

known as the 4 P's of marketing, depicted:

The Marketing Mix


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3. The Boston Consulting

Group Growth-Share Matrix

Source: http://www.netmba.com/strategy/matrix/bcg/

The BCG Growth-Share Matrix

The BCG Growth-Share Matrix is a portfolio planning model developed

by Bruce Henderson of the Boston Consulting Group in the early

1970's.

It is based on the observation that a company's business units can be

classified into four categories based on combinations of market growth

and market share relative to the largest competitor, hence the name

"growth-share". Market growth serves as a proxy for industry

attractiveness, and relative market share serves as a proxy for

competitive advantage. The growth-share matrix thus maps the

business unit positions within these two important determinants of

profitability. There are four categories:

Dogs - Dogs have low market share and a low growth rate and thus

neither generate nor consume a large amount of cash.

Question marks - Question marks are growing rapidly and thus

consume large amounts of cash, but because they have low market

shares they do not generate much cash.

Stars - Stars generate large amounts of cash because of their strong

relative market share, but also consume large amounts of cash

because of their high growth rate;

Cash cows - As leaders in a mature market, cash cows exhibit a return

on assets that is greater than the market growth rate, and thus

generate more cash than they consume.


http://www.netmba.com/strategy/matrix/bcg/

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4. Breakeven Equation

Model Framework

Source: http://www.miraconsulting.com/breakeven_analysis.htm

Breakeven Equation Analysis Model The purpose of breakeven analysis is to determine the quantity of

output that results in zero earnings before interest and taxes. This

process requires the study of the firm's cost structure, volume of

output, and profit.

A breakeven model can help determine the minimum output

necessary to cover all operating costs as well as predict the earnings

before interest and taxes that will be achieved at various levels.

Benefits of Break Even Analysis

• Capital expenditure analysis

•Pricing policy

•Labor costs

•Firm's cost structure

•Financing decisions

Q = FC / (UP - VC)

where: Q = Break-even Point, i.e., Units of production (Q),

FC = Fixed Costs,

VC = Variable Costs per Unit

UP = Unit Price

Therefore,

Breakeven = Total Revenues = Total Costs (FC + VC)


http://www.miraconsulting.com/breakeven_analysis.htm

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5. Cost-Benefit Analysis Model

Framework

Source: Stephanie Riegg Cellini & James Edwin Kee. COST-EFFECTIVENESS AND COST-BENEFIT ANALYSIS. Chapter 21.http://home.gwu.edu/~scellini/CelliniKee21.pdf

Cost–benefit analysis (CBA) is often used by

governments and other organizations, such as private

sector businesses, to evaluate the desirability of a given

policy.

The French economist Jules Dupuit, credited with the

creation of cost-benefit analysis

It is an analysis of the expected balance of benefits and

costs, including an account of foregone alternatives and

the status quo. CBA helps predict whether the benefits of

a policy outweigh its costs, and by how much relative to

other alternatives (i.e. one can rank alternate policies in

terms of the cost-benefit ratio).[2] Generally, accurate

cost-benefit analysis identifies choices that increase

welfare from a utilitarian perspective.

Assuming an accurate CBA, changing the status quo by

implementing the alternative with the lowest cost-benefit

ratio can improve Pareto efficiency.[3] An analyst using

CBA should recognize that perfect evaluation of all

present and future costs and benefits is difficult, and while

CBA can offer a well-educated estimate of the best

alternative, perfection in terms of economic efficiency and

social welfare are not guaranteed.[4]

Benefits vs. Costs

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6. Internal-External Issues Framework

Source:

Biswas & Twitchell (1999); Management Consulting: A Complete Guide to the

Industry

The internal-external framework simply divides the

analysis of a case into two parts, as seen in the

diagram. There are internal issues (e.g. outside the

company, an industry, a country), and external issues

(e.g. outside the same company, industry, country).

Because of its simplicity and generic applicability, this

framework can be helpful in starting an analysis to a

case question, especially when you are flustered. For

example, if an interviewer wanted you to determine

why profits at a company had been steadily

decreasing for the last year, you naturally to use the

profit equation (described here). If cannot remember

the equation you can save yourself by using the

internal-external framework to look for causes of

declining profits first inside the company, and then

outside the company.

Looking internally, you could discuss the elements of

the balance sheet to determine whether the cause is

hidden there. Perhaps a new factory was built

recently that necessitated a rise in prices? This in

turn might have negatively impacted sales because of

a highly elastic consumer demand function, and

therefore the decline in profits would be likely be due

to diminishing revenues. Notice we took an internal

diagnosis and moved our analysis to the external in

this example.


http://skukre1.files.wordpress.com/2010/06/picture-4.png

http://skukre1.files.wordpress.com/2010/06/picture-5.png

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7. Force Field Analysis Model

Source: http://www.valuebasedmanagement.net/methods_lewin_force_field_analysis.html

The Force Field Analysis was created by Kurt Lewin

in the 1940s. Lewin originally used the tool in his

work as a social psychologist. Today, however, Force

Field Analysis is also used in business, for making

and communicating go/no-go decisions.

Force field analysis is an influential development in

the field of social science. It provides a framework for

looking at the factors (forces) that influence a

situation, originally social situations. It looks at forces

that are either driving movement toward a goal

(helping forces) or blocking movement toward a goal

(hindering forces). The principle, developed by Kurt

Lewin, is a significant contribution to the fields of

social science, psychology, social psychology,

organizational development, process management,

and change management.

Lewin, a social psychologist, believed the "field" to be

a Gestalt psychological environment existing in an

individual's (or in the collective group) mind at a

certain point in time that can be mathematically

described in a topological constellation of constructs.

The "field" is very dynamic, changing with time and

experience. When fully constructed, an individual's

"field" (Lewin used the term "life space") describes

that person's motives, values, needs, moods, goals,

anxieties, and ideals.


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8. Product Life Cycle Diagram

Source: http://www.quickmba.com/marketing/product/lifecycle/

The Product Life Cycle

The product life-cycle theory is an economic

theory that was developed by Raymond Vernon

in response to the failure of the Heckscher-Ohlin

model to explain the observed pattern of

international trade.

A new product progresses through a sequence of

stages from introduction to growth, maturity, and

decline. This sequence is known as the product

life cycle and is associated with changes in the

marketing situation, thus impacting the marketing

strategy and the marketing mix.

The product revenue and profits can be plotted

as a function of the life-cycle stages have four

components:

• Introduction

•Growth

•Maturity

•Decline

•(new) Reinvention


http://www.quickmba.com/marketing/product/lifecycle/

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9. McKinsey’s 7-S’s Framework

Source: http://www.mindtools.com/pages/article/newSTR_91.htm

While some models of organizational

effectiveness go in and out of fashion, one

that has persisted is the McKinsey 7S

framework. Developed in the early 1980s by

Tom Peters and Robert Waterman, two

consultants working at the McKinsey &

Company consulting firm, the basic premise

of the model is that there are seven internal

aspects of an organization that need to be

aligned if it is to be successful.

The 7S model can be used in a wide variety

of situations where an alignment perspective

is useful, for example to help you:

•Improve the performance of a company.

• Examine the likely effects of future changes

within a company.

• Align departments and processes during a

merger or acquisition.

•Determine how best to implement a

proposed strategy.

McKinsey’s 7 C’s Model


http://www.mindtools.com/pages/article/newSTR_91.htm

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10. Porter’s Five Forces of the

Industry Framework

Source: Porter, Michael E., Competitive Strategy: Techniques for Analyzing Industries and

Competitors

Porter's Five Forces

A Model For Industry Analysis

Developed by Harvard professor Michael Porter. The

model of pure competition implies that risk-adjusted

rates of return should be constant across firms and

industries. However, numerous economic studies

have affirmed that different industries can sustain

different levels of profitability; part of this difference is

explained by industry structure.

Michael Porter provided a framework that models an

industry as being influenced by five forces. The

strategic business manager seeking to develop an

edge over rival firms can use this model to better

understand the industry context in which the firm

operates. There are five forces that affect the

industry:

1) Power of Suppliers

2) Power of Buyers

3) Threat of New Entrants

4) Threat of Substitute Goods


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11. The Profit Equation Model

Framework

Source: Biswas & Twitchell (1999); Management Consulting: A Complete Guide to

the Industry

The Profit Equation Model can be used as

a guide to step through most profit-related

scenarios.

The profit model is the linear, deterministic

algebraic model used implicitly by most

cost accountants. Starting with, profit

equals sales minus costs, it provides a

structure for modeling cost elements such

as materials, losses, multi-products,

learning, depreciation etc.

It provides a mutable conceptual base for

spreadsheet modelers. This enables them

to run deterministic simulations or 'what if'

modeling to see the impact of price, cost

or quantity changes on profitability.

Profits = Total Revenue - Total Costs

Or

= 9 (P X Q) – (FC + VC(Q))

Profit Equation Model


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12. Ratio Analysis Framework (Business Analysis & Evaluation: Using Financial Statements)

Source: http://www.valuationtutor.com/btchp2/topic5/topic5.htm

Ratio Analysis assess a company’s

financial performance and health. This is

achieved by evaluating the company’s

ability to execute the key drivers of

profitability and growth: product market,

and financial market strategies.

Ratios can be used in three ways:

1) They can be compared over time to

determine relative performance

improvement or decline

2) Ratios for one company may be

compared against the aggregate

ratios of other companies.

3) Ratios may be compared with a

benchmark value to evaluate

perforrnance to some predetermined

standard (e.g. financial performance

gold).

Business Analysis & Evaluation: Using Financial Statements


http://www.valuationtutor.com/btchp2/topic5/topic5.htm

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13. Supply and Demand Model

Framework

Source: http://economics.about.com/od/supply-and-demand/a/The-Importance-Of-The-Supply-And-Demand-Model.htm

In a capitalistic society, prices are not determined by a

central authority but rather are the result of buyers and

sellers interacting in markets. A market, in an economic

sense, is just a collection of buyers and sellers of a

particular good or service.

Unlike a physical market, however, buyers and sellers

don’t have to all be in the same place, they just have to be

looking to conduct the same economic transaction.

Buyers’ preferences comprise the demand side of the

market, and sellers’ preferences comprise the supply side

of the market. Prices and quantities are then determined

by the point where supply and demand come together.

It’s important to keep in mind that prices and quantities are

the outputs of the supply and demand model, not the

inputs. It’s also important to keep in mind that the supply

and demand model only applies to competitive markets,

i.e. markets where there are many buyers and sellers all

looking to buy and sell similar products. Markets that don’t

satisfy these criteria have different models that apply to

them, and these are described in the “Types of Markets”

category.


http://economics.about.com/od/supply-and-demand/a/The-Importance-Of-The-Supply-And-Demand-Model.htm



















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14. SWOT Analysis Framework

Source: http://www.managementstudyguide.com/swot-analysis.html

SWOT Analysis is the most renowned tool for audit and analysis of

the overall strategic position of the business and its environment. Its

key purpose is to identify the strategies that will create a firm specific

business model that will best align an organization’s resources and

capabilities to the requirements of the environment in which the firm

operates.

The SWOT Analysis was developed by Albert Humphrey, who led

a convention at the Stanford Research Institute (now SRI

International) in the 1960s and 1970s using data from Fortune 500

companies.[

In other words, it is the foundation for evaluating the internal

potential and limitations and the probable/likely opportunities and

threats from the external environment. It views all positive and

negative factors inside and outside the firm that affect the success.

A consistent study of the environment in which the firm operates

helps in forecasting/predicting the changing trends and also helps in

including them in the decision-making process of the organization.

SWOT is an acronym for Strengths, Weaknesses, Opportunities and

Threats

Strengths (S) and Weaknesses (W) are considered to be

internal factors over which you have some measure of

control.,

Opportunities (O) and Threats (T) are considered to be

external factors over which you have essentially no control.


http://www.managementstudyguide.com/swot-analysis.html



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15. The Value Chain Framework

Source: http://www.mindtools.com/pages/article/newSTR_66.htm

Understanding how your company creates value, and looking

for ways to add more value, are critical elements in developing

a competitive strategy. The concept comes from business

management and was first described and developed by

Michael Porter in his 1985 best-seller,.[1] Competitive

Advantage: Creating and Sustaining Superior Performance

A value chain is a set of activities that an organization carries

out to create value for its customers. Porter proposed a

general-purpose value chain that companies can use to

examine all of their activities, and see how they're connected.

The way in which value chain activities are performed

determines costs and affects profits, so this tool can help you

understand the sources of value for your organization. The

Value Chain consists of two components:

1) Primary Activities. Primary activities relate directly to the

physical creation, sale, maintenance and support of a

product or service.

2) Support Activities. These activities support the primary

functions above. In our diagram, the dotted lines show that

each support, or secondary, activity can play a role in each

primary activity. For example, procurement supports

operations with certain activities, but it also supports

marketing and sales with other activities.


http://www.mindtools.com/pages/article/newSTR_66.htm

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16. The Value Net Framework (Brandenburg and Nalebuff)

Source: http://www.strategyhub.net/2012/06/framework-of-week-82-value-net.html

The Value Net, developed by Adam Brandenburger and Barry

Nalebuff, is inspired by Porter’s Five Forces.

It was developed by Brandenburger and Nalebuff in 1996,

combining strategy and game theory, in order to describe and

analyze the behavior of multiple players within a given industry or

market.

The authors’ fundamental idea is that cooperation and competition

coexist. It is often necessary to do both at the same time, cooperate

with other players in order to foster market growth, but also

compete with the same players in order to maximize your market

share. Grow the pie, vs. splitting up the pie.

Brandenburger and Nalebuff suggest to define your business

strategy based on five components, using the acronym PARTS:

•Players: The obvious first task is to categorize who the relevant

players are and what roles they play.

•Added Value: Identify your company’s added value from the

perspective of each of the market participants.

•Rules: Just as the prisoner’s dilemma has certain rules, each

industry and market also has rules and regulations.

•Tactics: What actions can one player take to shape the strategies,

actions and perceptions of other players in the market?

•Scope: Often, a market is not isolated, but is linked to other

markets.

The Value Net: Coopetition and PARTS


http://www.strategyhub.net/2012/06/framework-of-week-82-value-net.html











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1) 3-C’s Model Framework

(Kenichi Ohmae)

2) 4-P’s of marketing Model

Framework

3) The Boston Consulting Group

Growth-Share Matrix

4) Breakeven Equation Model

Framework

5) Cost-Benefit Analysis Model

Framework

6) Internal-External Framework

7) *Force Field Analysis Model

8) Product Life Cycle Diagram

Chart

9) McKinsey 7-S’s Framework

Summary: The 16 Frameworks of Analysis

10)Porter’s Five Forces Framework

11)The Profit Equation Model

Framework

12)Ratio Analysis Framework

(Business Analysis &

Evaluation: Using Financial

Statements) (Palepo, Bernard &

Healy)

13)Supply and Demand Model

Framework

14)SWOT Analysis Framework

15)The Value Chain Framework

16)The Value Net Framework

(Brandenburg and Nalebuff)


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The 16 Frameworks

Their uses in different situations

Summary

Summary


Business Forensic Workshops:

D. Anthony Miles, Ph.D., MCP, RBA, CMA, MBC

Questions?

Documents

The 16 Frameworks