Author: LairdReedReviewers:ScottWells,

KarenHellmich

bc3C’sMarch1998Copyright?1998Bain&Company,Inc.1CU7030298IMB3C’s

The3C’sframeworkToolsandstrategicquestionsansweredTakeawayslidesAgenda2CU7112497ECA3C’s

AgendaThe3C’sframeworkToolsandstrategicquestionsansweredTakeawayslides3CU7112497ECA3C's

StrategicPurpose:Todetermineacompany’sstrategiccostpositionrelativetocompetitorsToidentifycostreductionopportunitiesToidentifyrevenueandprofitmaximizingstrategiesToachievedifferentiationandpreemptcompetitormovesTodeterminethestrategiesthatfitbestwithacompany’scorecompetenciesCostsCustomersCompetitorsCapabilitiesThe3C’sisoneofthecoretoolsusedtodeterminethemostleveragedstrategyforabusiness.Thefourth,oftenneglected,“C”Framework4CU7112497ECA3C’s

AgendaThe3C’sframeworkToolsandstrategicquestionsansweredTakeawayslides5CU7112497ECA3C’sCosts

Cost-RelatedBainToolsStrategicQuestionsAnsweredCostsCustomersCompetitorsCapabilities1.RelativeCostPosition1.Howdoourcostscomparetocompetitors’costsby product/service/business?Whatisourfullpotentialcostposition?2.ExperienceCurve2.Towhatextentisthecompanyusingitsaccumulatedexperiencetodrive downunitcosts?3.CostSharingAnalysis3.Arethereanyopportunitiestosharecostswithinthecompany?Whatare thepotentialsavingsfromcostsharing?4.BestDemonstratedPractice4.Whatarethebestinternalandexternalpractices?Towhatextentarethey transferable?Whatwillbetheimpactofimplementingthemmorebroadly?5.ValueChainAnalysis5.Howcanweoptimizeateachstepinthevaluechain?Whatarethecost

driversateachstep?6.ProfitHunt6.Whatarethequickhitoperatingimprovements?Whatisthesavingspotential?7.ProductLineProfitability/

CostAllocation/ActivityBasedCosting7.Howdoweallocatecoststoeachbusiness/product/customersegment?8.OverheadAnalysis8.Isthecompany’soverheadanefficientuseofresources?9.Fixed/VariableAnalysis9.Whatisthefixed/variablesplitofthecompany’scosts?10.Direct/IndirectAnalysis10.Howmuchofthecompany’scostsaredirectly,vs.notdirectly,associated withtheproductionofaproduct?6CU7112497ECA3C’sCustomers

Customer-RelatedBainToolsStrategicQuestionsAnswered1.CustomerSegmentation1.Whataretheappropriatecustomersegments?Howcaneachsegmentbedescribed?2.PurchaseCriteriaRating(ImportanceAnalysis)2.Whatisimportanttoeachsegmentwhentheypurchaseaproductorservice?3.CompanyPositioning(EffectivenessAnalysis)3.Howwellpositionedisthecompanywitheachsegment?4.AttractivenessAnalysis4.Whichsegmentsaremostattractivefrombothafinancialandanimplementationperspective?revenueopportunitycosttoservestrategicfit5.ValuePropositionDevelopment5.Whatproduct/service/channelofferingwillmeetthetargetsegment’sneeds?8.CustomerRetentionandLoyalty8.Howcanweincreaseourretentionofourbestcustomers?HowmuchofanimpactwillincreasingretentionbyX%haveonourbottomline?9.CustomerAcquisition9.Howcanweacquireprofitablecustomers?CostsCustomersCompetitorsCapabilities6.PricingStrategy6.Whatpricewillmaximizelongtermprofits?7.DistributionChannelAnalysis7.Whataretheappropriatechannelsforeachproduct/service?Whatarethe economicsofeachchannel?7CU7112497ECA3C’sCompetitors

Competitor-RelatedBainToolsStrategicQuestionsAnswered1.MarketOverview1.Whatisthemarketsize?Growth?Profitability?Whatiseachcompetitor’s marketshare?Profitshare?2.CompanyOverview2.Whatisthecompany’srevenueandprofitbyproduct,channel,andgeography? Whatisitsfinancialperformance?3.SWOT3.Whatareeachcompetitor’sstrengths,weaknesses,opportunities,andthreats?5.Benchmarking5.Howiseachcompetitorperformingonkeymeasures?6.ScenarioAnalysis6.Howdoweexpecteachcompetitortoact/reactindifferentsituations?7.MergersandAcquisitions7.Whichcompaniesarepotentialtargets?Howcanwerealizevaluefrom mergersandacquisitions?8.

Growth/ShareMatrix8.Howcanwedescribeacompany’sportfolioofbusinessesintermsofmarket

shareandgrowthpotential?4.Porter’s5ForcesAnalysis4.Howattractiveistheindustry?Whatarethecompetitivedynamicsof

theindustry?9.

Growth/GrowthMatrix9.Howisthecompanygrowingrelativetotheindustry?Isthe companygainingorlosingshare?10.ROS/RMS10.Whatisacompany’srelativemarketshareandwhatisitsreturnon sales?Whereistheindustry’snormativeband?CostsCustomersCompetitorsCapabilities11.CompanyOwnership

andManagement11.Whoarethemajorownersofthecompany?Howexperiencedisthe

managementteam?8CU7112497ECA3C’sCapabilities

Capabilities-RelatedBainToolsStrategicQuestionsAnswered2.Make/BuyAnalysis2.Whatshouldthecompanymakeitselfversusbuyfromanothercompany?1.CoreCompetencies1. Whatspecialskillsortechnologiesdoesthecompanyhavethatcreatedifferentiablecustomervalue?Howcanacompanyleverageitscorecompetencies?Whatinvestmentsintechnologyandpeoplewillhelpbuilduniquecapabilities?CostsCustomersCompetitorsCapabilities3. Whatorganizationalstructurewillenablethecompanytoimplementitsstrategyeffectively?3.OrganizationalStructure9CU7112497ECA3C’s

AgendaThe3C’sframeworkToolsandstrategicquestionsansweredTakeawayslides10CU7112497ECA3C'sTakeawaySlides-Costs

RCPCostExperienceCurveValueChainAnalysisBDPQuantificationABCProcurematerialsMakeSellSupportAvg.rev/salesperson:BDPrev/person:RevimpactofachievingBDP:$$$$$$

$$$Region

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-----------------------Fixed/VariableCostsDirect/IndirectCostsPLPRevenue(%oftotal)UnitCost(log)AccumulatedExperience(log)R2=0.80BainSlope=70%ClientABClient$$$$$$11CU7112497ECA3C'sTakeawaySlides-Customers(1)

AttractivenessABCTargetsegmentSegmentFinancialAttractivenessEaseofImplementationHiLoLowpriceHighqualityFastdeliveryABCDSegmentNeedsSegmentSegmentShareTotalmarket=$Competitors(%ofTotalSales)Client$$$$$SatisfactionOverTimePercentofReplies100%TimeGoodOkayBadValuePropositionSegmentASegmentBSegmentCSegmentDProductServiceChannelSizeofsegmentRevenueandProfit#$$ClientCompetitorCombChartDPricePositioningProductAProductBProductC12CU7112497ECA3C'sTakeawaySlides-Customers(2)

PricePointsandProductMixAverageprice:$$ChannelAnalysis

CustomerRetentionAcquisitionCost13CU7112497ECA3C'sTakeawaySlides-Competitors(1)

MarketSharebyProductTypeGeographicSegmentationRevenue/ProfitOverTimeTimeDollarsSalesProfitCAGR%%StockPriceIndexedStockPriceTimeCompetitorACompetitorBIndustryAverageMarketMarimekkoSales=$100%MarketGrowthMarketCompetitorCCompetitorBTimeCompetitorASalesCAGR%%%%CashFlowNetCashFlow$$OpportunitiesStrengthsThreatsWeaknessesSWOT

$$$Sales=$100%14CU7112497ECA3C'sTakeawaySlides-Competitors(2)

Porter’s5ForcesSuppliersPotentialEntrantsBuyersSubstituteProductsIndustryRivalryChannelMixTimePercentofSalesChannelIIIChannelIIChannelIGrowth/GrowthCompany