There are two dimensions to consulting

Process

Project structuring

Roles and responsibilities

Execution

Sequencing - Workplan
Client management

Consulting

Tools

seniority

CONSULTING DIMENSIONS

Frameworks
Analysis Tools

Typical 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

1

Frameworks and Tools

Different frameworks / tools are available to address specific questions

TOOLS
Question

Theory
Framework / Tool

Which industry will be

globally competitive in the
long term?

Porters Diamond

How attractive is this

industry?

Porters Five Forces

What is the demand likely

to be?

Demand Estimation

How is the industry

evolving

Value chain analysis

International Case Studies

Which business to focus

on? Which to divest?

GE-McKinsey
BCG matrix
SWOT

Different frameworks / tools are available to address specific questions

TOOLS
Question

Theory
Framework / Tool

What are the broad

competitive strategies?

What are the opportunities

for growth?

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

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?

Different frameworks / tools are available to address specific questions

TOOLS
Question

Theory
Framework / Tool

What is the competitive

situation like?

Competitive landscape

What is the synergy benefit

/ value to be paid?

Incremental cash flow

analysis

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

Contribution per resource

analysis

4 Ps framework

3 C framework

Different frameworks / tools are available to address specific questions

TOOLS
Question

Theory
Framework / Tool

Which are the most

important factors affecting
value? By how much?

Tornado Analysis

What does the strategic

roadmap look like

Three horizons

How should my
warehouses / factories be
geographically distributed?

LP

Which of the capital item is

a better alternative?

Life cycle analysis

What will be the impact of

this discontinuity?

Butterfly analysis

Frameworks and Tools for Industry Analysis

Value chain analysis can be used to understand industry evolution

VALUE CHAIN ANALYSIS

Case

CONTRACTING WORKFLOW - INDIA V/S INTERNATIONAL

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

Much bigger role for an AC contractor in India

8

Value Chain analysis can also be used to understand industry structure

VALUE CHAIN ANALYSIS

Case

Content Origination
& Generation

Marketing &
Distribution

Aggregation

Last Mile/
Exhibition

Platforms
TV

Production Houses

Broadcasters

Films

Producers/Directors

Studios

Cable

Artists/Recording
Studios

Radio
Newspaper

Internet

Video Stores/Retail
Retail

Internet

Radio Stations
Newspaper Houses

Magazine
Print

Music Companies

Music Cos./Artists

DTH

Cinema Halls
VCD/DVD Cos.

Music

Terre
strial

Retail /

Publishers

Web

Franchisee

Books
Website/Niche
Players

Third Parties

Telcos / ISPs

Wire line/Wireless

VCA can be used to identify gaps / strategic fit of acquisition candidate

VALUE CHAIN ANALYSIS

Backbone
Intnl

Dom

Case

LD
Services
Intnl

Dom

VA
Services

Access
Fixed

Mob

Cable Satcom Voice

ISP

Data

Content
Video

Aggr.

Gen.

S/W, Apps
& Tech.
Serv.

Prod.

Player1

Player2
Player3

Player 4
Player 5
Player6
Player 7
Player8
Significant
Presence

Recent / Small
Presence

Limited Geog.
Presence

WIP / Under Evaluation

10

Value chain can also be used to identify opportunities for efficiency improvement

Domestic
Exports

VALUE CHAIN

Farms

Key
Stakeholders
Cost Build
(Org. Retail)

Farms/
Fisheries/

Village
Mandis

SemiWholesalers

Poultry

Large
Mandis

Factory

Warehou
se

Port of
Origin

Port of
destinatio
n

Wholesalers Manufacturers
Or
Consolidators
33.5

50

53

59

Selling
Price

Distribut
or
Warehou
se
Distribut
or
Warehou
se

Clearing
& Distributors
Forwarding
Agents

Retailer
Warehou
se

Consume
r

Retailer
Warehou
se

Consume
r

Traditional/
Organized
Retail

End
consumers/
Caterers

27.0 (17.0)

18.0 (18)

Landed Cost of
Fresh Produce- 30.9

Of Farmer
Includes wastages,
transportation etc

Organized players demand

greater margins

11

Du Pont analysis helps in understanding the drivers of profitability

Du Pont : PROFITABILITY
Receivables turnover
Working Capital
turnover

Inventory turnover
Payables turnover

Asset or CE turnover
(Sales / CE or Total assets)

Fixed Asset or Fixed

CE turnover

ROCE

Revenues

By regions / Products /
Customers

Costs

Material, Conversion

Margins (%)
(NOPAT / Sales)

Benchmark Trend, Industry etc

12

Margins have improved, however current asset turnover has declined

Fixed Asset Turnover

/ Net Fixed Assets)

Total Asset Turnover

(Sales / Total Assets)

1.5

1.62
1.2

1.27

2000

2001

ROCE (%)
(NOPAT / Capital Employed)

10.6%

11.6%

1.7

1.7

1.8

2001

2002

2003

1.56
2000

2002

(Sales

2003

Current Asset Turnover

(Sales / Net Current Assets)
30.24

11.0%

12.98

5.8%

5.85

5.41

2000

2001

Margins (%)
(NOPAT / Sales)
2000

2001

2002

2003

8.8%

9.1%

2002

2003

7.0%
3.6%

2000

2001

2002

2003

13

Demand supply analysis helps understand industry situation

Case

DEMAND - SUPPLY
Domestic demand supply situation (000 tonnes)
2396
Player 1

420

Player 2
Player 3

96
115

Player 4

365

Player 5

525

Player 6

Total

2370

95% Utilisation

2190
2025
1905
Overcapacity
till 07-08

CAGR 4%
Domestic
consumption

875

Capacity

2001/02

2002/03

2003/04

2004/05

2005/06

2006/07

2007/08

2008/09

Total Industry Capacity

14

Ansoff matrix is used to generate opportunity ideas for the client

New Products

PRODUCT
DEVELOPMENT

DIVERSIFICATION

New Products /
Services

Unrelated
diversification

OPPORTUNITIES
(Indicative only)

New applications for existing products

New product development
MARKET
PENETRATION

Existing
Products

Market Needs
Product Type

IDENTIFICATION OF GROWTH OPTIONS

Maximize sales with

existing customers

MARKET
DEVELOPMENT
Redefine market to
attract new customers
Expand into new

Strategic alliances/ acquisition to become

dominant international player in chosen
niche
Diversify into new unrelated business

geographical segments
Served

Unserved
Market Type

15

Seven Degrees of Freedom is a good framework to identify opportunities

DEGREES OF FREEDOM

Theory

Maximisation of
existing
customers
Existing
products and
services

Existing
industry
structure
Existing
geography
Existing
competitive
arena
versus

versus

Expansion
into new
geographies

versus

Acquisition and/
or consolidation
within current
industry

Existing value
delivery
system
versus

Innovation of
value
delivery
system

versus

versus

Attraction of
new customers

Innovation of
products and
services

Step-outs
into new
competitive
arenas
16

Seven degrees of freedom framework was used to identify strategic growth options for an
airline catering company
STRATEGIC OPTIONS FOR GROWTH

Case

Maximisation of existing
customers

Attraction of new
customers

Private label to retailers

Railway catering

Innovation of products
and services

LCC Segment

Innovation of value
delivery system

Frozen Foods

Expansion into new

geographies

International expansion

Step-outs into new

competitive arenas

Domestic expansion
Airport lounges, restaurants / snack bars
Airline laundry
Cabin service
Options selected
through
discussions with
client team

Ground handling
Full service restaurants (FSR),
Quick service restaurants (QSR)
Retail / institutional laundry
17

The BCG Matrix would help in capital allocation across the portfolio of businesses

OBJECTIVE

Case

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

18

PRODUCT GROWTH RATES

Case
Product

Historical Growth%

Future Growth %

4-5

0.1

3-4

5.5

5-6

8.5

5-7

2.0

2-3

3-4

6.0

6-7

6.0

6.5

19

MARKET SHARE

Case
Clients
Share (%)

Leader/ No. 2 Player

Share of Leader/ No.

2 player (%)

Relative Share

64 1

12

5.33

92

26

0.34

15 3

37

0.40

37

25

1.48

60

23

2.60

36

26

1.38

70

27

2.59

64

35

0.17

Product

20

STPP, Salt and Soda Ash are the cash cows, Bi Carb is the star product

BCG MATRIX (PAST GROWTH)

Case

High

Star

Growth (%)

What is the flaw in this portfolio analysis?

Low

6%

Dog
Low

Cash Cow
1.0

High

Relative Market Share1

21

Usage of future growth reveals that the company may not have any star business in future

BCG MATRIX (FUTURE GROWTH)

Case

High

Growth (%)

Low

Star

6.5

Dog

Cash Cow

Low

High
1.0

Relative Market Share1

22

Similarly, the A/C matrix was applied to rationalize Company Xs portfolio

ATTRACTIVENESS- CAPABILITY MATRIX

Case

High

Commercial RAC-Institutional
Textiles Mining
HE&PS Machine Tools

Attractiveness

RAC-HH

Contract

Chemicals

VAI
WC
Furniture
Construction
PM

VSGL

Pumps

Water Poll.
MHBD

LTR

Low
Low

High

Capability
Priority

Watch / Improve

Non priority

23

Pocket margin analysis helps in improving realisations without increasing list price
POCKET MARGIN ANALYSIS

Theory

24

Build Up (Waterfall) analysis helps understand how an aggregate entity stacks up

WATERFALL ANALYSIS

Case

Sales and
Distribution Costs

All figures in Rs.

Cr

Manpower and
Other Fixed
Expenses26
53

Material Cost

246

Raw Material2

23

Packing
Material

38

12

Conversion Costs
31
34

510

41

Interest on
RM/WIP
Inventory3

Manpower

Corp.
Overheads

S&D
Costs4

Interest
on
Debtors5

Interest
on
Inventory5

Utilities &
Other
variable
costs

Fixed
Manf.
Expenses

Addressable
cost base

25

Incremental cash flows can be used to calculate value of opportunity

INCREMENTAL CASH FLOW

Case

Production capacity
826
804
775

Bicar
b

802

740

Likely value
created by the deal
~ Rs X Cr

771
722
741

SA

713

Post-Deal

685

678
659

615

'00-01

597

'01-02

'02-03

'03-04

'04-05

'05-06

'06-07

'07-08

'08-09

Expected Sales (000 tonnes)

01-02

02-03

03-04

04-05

05-06

06-07

07-08

08-09

SA Qty (000 t)

18

55

55

55

55

55

54

30

Bicarb Qty (000 t)

12

12

12

12

12

Year

26

Applying ICC along with IPP(Import parity Price), we could infer how the industry will fare
in future
INDUSTRY COST CURVE

Case

IPP Max. Rs. x1/ MT ($

x2/MT)

Player 21
Player 22
Player 23
Player 24
Player 25

Player 20

Player 19

Player 18

Player 17

Player 16

Player 15

Player 14

Player 13

Player 12

Player 11

Player 10

Player 9

Player 8

Player 7

Player 6

Player 3
Player 4
Player 5

Player 2

Player 1

EXPECTED CAPACITY
TO BLEED OFF
5.989 MMTPA

Cost of Prod, Rs. / MT

IPP Min. Rs. x3 / MT

($ x4/MT)

Prod. Capacity 000 MTPA

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

27

Michael Porter has defined five generic competitive strategies for businesses
GENERIC STRATEGIES

Theory

Market Target

Type of competitive advantage being pursued

A Broad
CrossSection of
Buyers

Lower-Cost

Differentiation

Overall Low-Cost Leadership

Strategy

Broad Differentiation
Strategy

Best-Cost
Provider Strategy
A Narrow
Buyer
Segment (or
Market Niche)

Focused Low-Cost
Strategy

Focused Differentiator
Strategy

28

Generic Strategies: Examples

Broad Range

Focused / Niche

Market Target

GENERIC STRATEGIES: WASHING POWDERS

Washing machine
powders by local
manufacturers

Nirma
Wheel Lemon
Wheel Active
Ghari

Lower Cost

Examples

Ariel
Surf Excel

Genteel
Ariel Matic
Surf Quick Wash

Differentiation

Type of Competitive Advantage

29

Competitive landscaping can help understand competitive intensity across segments

COMPETITIVE LANDSCAPE

Case

Current Offering
Future Planned Offerings
Potential Offerings

Current Scenario

New Offerings/ Future Products

Tractor Trailer

M/HCV Truck

L/ ICVs

Buses

Player 9

New Player 6

New Player 5

New Player 4

New Player 3

New Player 2

New Player 1

Player 8

Player 7

Player 6

Player 5

Player 4

Player 3

Player 2

Player 1

Player 8

Player 7

Player 6

Player 5

Player 4

Player 3

Player 2

Player 1

Pick ups

30

Benchmarking along CSFs help identify strengths and weaknesses

BENCHMARKING

Case

Key Success
Factors

Player
1

Play
er 2

Play
er 3

Play
er 4

Track Record

Engineering &
Design Skills

Financial
Strength

Companys
achievement over
last year
Co
Comments
mpa
ny

Play
er 5

Player
6

Most large players are at par.

System providers will not be able

to take up mega projects due to
financial constraints.

System
Providers

Companys performance has

improved over last year, would
improve further with IT based
control.

Project
Management

High

Low

Improvement

Decline

No Change
31

Internal Benchmarking across locations / time helps understand variations

BENCHMARKING

Case

Fuel Adjusted Economy Index

Energy Economy Index
2500

Fuel Costs (Rs/Gcal)

2.8

2000

2.6

Ludhiana emerges as the

2.4

most energy efficient plant in

1500

2.2
2

1000

1.8
1.6

500

terms of thermal energy

However, Sangrur is the
most cost effective plant due

1.4
1.2

to its fuel mix

1
Jalandhar Hoshiarpur Sangrur

Bathinda

Ropar

Ludhiana

Patiala Gurdaspur Amritsar

32

Radialized passenger car aftermarket is most likely to generate demand for Kevlar
Case: Demand Estimation in Tires

KEVLAR: NEAR TERM DEMAND FROM TIRES

1995

1979
Radials primarily in replacement
market for passenger cars

JK introduces radial
tires in India

Radials introduced by car

OEM market

Performance improvement promised by radials resulting in faster switch in replacement segment

Radialization (2006-07)
% of tires sold

90%

70%

Understanding the
Industry evolution
to identify future
developments

49%

11%

10%
2% 1%
'98-99
Passenger Cars

3%

2%
'01-02
LCVs

'05-06
MHCV
33

Like radialization, Kevlar tires likely to have initial demand from passenger car market

KEVLAR: NEAR TERM DEMAND FROM TIRES

Passenger Car
Tires- Aftermarkets

47,000 tons

Radialization ~90%
Quantity of Aramid/Tire ~9%
Penetration of Kevlar ~1%

140

Potential Kevlar Demand (tons)

100

40
Potential Kevlar
Demand

~40 tons
2007

2010

2012

34

Going ahead significant increase in Trucks & Buses radialization can be expected

INFLECTION POINT: INDIA 2010

Radialisation Trends

Surge in
radialisation
once it reaches
9-11%

100
90

Percentage Radialization

80
70
60
50
40

Inflexion Area

India
approaching
Area of
inflexion

30
20
10
0

1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2006 2010
Western Europe

Japan

North America

China

Russia

India

India will most

likely be in the
area of
inflection in
2010

Experience of
other markets
to estimate
trends

Global trends indicate a sharp increase once 9-11% radialization is

achieved
35

Demand for Kevlar has potential to grow beyond X tons by 2012

TYRE KEVLAR DEMAND

Estimates from
past industry
evolution in Indian
market

Potential Kevlar Demand (tons)

140
Overall
opportunity

Opportunity from
past industry
evolution in other
market

100

40

2007
Kevlar PVs Demand

2010

Kevlar CVs Demand

2012

Total Demand
36