Author: LairdReedReviewers:ScottWells,

KarenHellmich

bc3C’sMarch1998Copyright?1998Bain&Company,Inc.13C’sThe3C’sframeworkToolsandstrategicquestionsansweredTakeawayslidesAgenda23C’sAgendaThe3C’sframeworkToolsandstrategicquestionsansweredTakeawayslides33C'sStrategicPurpose:Todetermineacompany’sstrategiccostpositionrelativetocompetitorsToidentifycostreductionopportunitiesToidentifyrevenueandprofitmaximizingstrategiesToachievedifferentiationandpreemptcompetitormovesTodeterminethestrategiesthatfitbestwithacompany’scorecompetenciesCostsCustomersCompetitorsCapabilitiesThe3C’sisoneofthecoretoolsusedtodeterminethemostleveragedstrategyforabusiness.Thefourth,oftenneglected,“C”Framework43C’sAgendaThe3C’sframeworkToolsandstrategicquestionsansweredTakeawayslides53C’sCostsCost-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?63C’sCustomersCustomer-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?73C’sCompetitorsCompetitor-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?83C’sCapabilitiesCapabilities-RelatedBainToolsStrategicQuestionsAnswered2.Make/BuyAnalysis2.Whatshouldthecompanymakeitselfversusbuyfromanothercompany?1.CoreCompetencies1. Whatspecialskillsortechnologiesdoesthecompanyhavethatcreatedifferentiablecustomervalue?Howcanacompanyleverageitscorecompetencies?Whatinvestmentsintechnologyandpeoplewillhelpbuilduniquecapabilities?CostsCustomersCompetitorsCapabilities3. Whatorganizationalstructurewillenablethecompanytoimplementitsstrategyeffectively?3.OrganizationalStructure93C’sAgendaThe3C’sframeworkToolsandstrategicquestionsansweredTakeawayslides103C'sTakeawaySlides-CostsRCPCostExperienceCurveValueChainAnalysisBDPQuantificationABCProcurematerialsMakeSellSupportAvg.rev/salesperson:BDPrev/person:RevimpactofachievingBDP:$$$$$$

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-----------------------Fixed/VariableCostsDirect/IndirectCostsPLPRevenue(%oftotal)UnitCost(log)AccumulatedExperience(log)R2=0.80BainSlope=70%ClientABClient$$$$$$113C'sTakeawaySlides-Customers(1)AttractivenessABCTargetsegmentSegmentFinancialAttractivenessEaseofImplementationHiLoLowpriceHighqualityFastdeliveryABCDSegmentNeedsSegmentSegmentShareTotalmarket=$Competitors(%ofTotalSales)Client$$$$$SatisfactionOverTimePercentofReplies100%TimeGoodOkayBadValuePropositionSegmentASegmentBSegmentCSegmentDProductServiceChannelSizeofsegmentRevenueandProfit#$$ClientCompetitorCombChartDPricePositioningProductAProductBProductC123C'sTakeawaySlides-Customers(2)PricePointsandProductMixAverageprice:$$ChannelAnalysis

CustomerRetentionAcquisitionCost133C'sTakeawaySlides-Competitors(1)MarketSharebyProductTypeGeographicSegmentationRevenue/ProfitOverTimeTimeDollarsSalesProfitCAGR%%StockPriceIndexedStockPriceTimeCompetitorACompetitorBIndustryAverageMarketMarimekkoSales=$100%MarketGrowthMarketCompetitorCCompetitorBTimeCompetitorASalesCAGR%%%%CashFlowNetCashFlow$$OpportunitiesStrengthsThreatsWeaknessesSWOT$$$Sales=$100%143C'sTakeawaySlides-Competitors(2)Porter’s5ForcesSuppliersPotentialEntrantsBuyersSubstituteProductsIndustryRivalryChannelMixTimePercentofSalesChannelIIIChannelIIChannelIGrowth/GrowthCompanyGr