TheWharfConsultant1
New member
- Dec
- 50
- 32
Management Consulting
Management consultants often have to approach questions or areas where there is little prior knowledge, so they use frameworks to structure their thoughts. I thought it might be good to run you through the most commonly used consulting frameworks. Most of them are not overly complicated, but it helps to know them, be it for your interviewing process, for your daily work or for your MBA application https://www.canarywharfian.co.uk/threads/how-to-get-into-a-top-mba-programme.723/
Note that these frameworks are for different tasks (market entry, new product development, profitability improvements etc.), so not every framework will work for every given task.
Porter's Five Forces
Porter's Five Forces is a consulting framework to look at the operating environment of an organisation/company. It is often used to etermine if a market is attractive. Created by management professor Michael Porter, it enables organizations to determine their position in relation to their competitors. Porter's Five includes the following elements:
The SWOT (strengths, weaknesses, opportunities, threats) matrix helps companies create a strategic plan to determine their competitive position. It evaluates negative and positive, internal and external factors in a 2x2 matrix (management consultants love a good 2x2 matrix). The four areas of a business that a SWOT matrix includes are:
The balanced scorecard is a framework that companies use to track their performance, strategy and and spot areas for improvement. It helps them monitor the consequences of actions and make future decisions for a company. You are completely free in which KPIs Key Performance Indicators) to use – often not more than 20-30 to avoid getting lost in data. It helps to colour code findings with a traffic-light systems to make implications clear (e.g. is a low score good or bad) and to indicate where action might be required.
Common information collected for the balanced scorecard includes:
The McKinsey 7S model is a framework to determine the effectiveness of the organizational design of a company. This tool is helpful for finding and fixing internal problems before they “hit the bottom line”, i.e. the financial performance starts to deteriorate. The key elements of the McKinsey 7S are:
The 4 Ps, sometimes also referred to as marketing mix, is a framework that helps companies reach their marketing objectives and target market. This framework examines the key elements for marketing (as in taking products/services to the place of sale) a company’s products or services. The 4 Ps are:
Profitability framework (or revenue/cost tree)
This is the most basic framework in business analysis. In ist simplest form, it breaks down profit into its basic revenue and cost components. However, the deeper you dig to identify the root cause of profitability issues, the more complex in can get.
3Cs
The 3Cs framework is also commonly used to create together strategies for organisations. There is quite a bit of overlap with Porter’s 5 forces.
To prepare for your consulting interview outside of consulting frameworks, you might want to have a look at https://www.canarywharfian.co.uk/threads/how-to-solve-a-case-study-in-an-interview.748/ as well.
Note that these frameworks are for different tasks (market entry, new product development, profitability improvements etc.), so not every framework will work for every given task.
Porter's Five Forces
Porter's Five Forces is a consulting framework to look at the operating environment of an organisation/company. It is often used to etermine if a market is attractive. Created by management professor Michael Porter, it enables organizations to determine their position in relation to their competitors. Porter's Five includes the following elements:
- Threat of new entrants: The threat of new entrants is the potential for another organization/company to enter a company's industry and create issues, such as higher customer retention rates. This does not have to be a direct competitor (e.g. another ariline offering flights from the same airport, but could be a new train line as well)
- Competitive dynamics: Porter's Five also considers whether an organization has a high number of competitors to determine if they have less power than others because of higher customer retention rates.
- Supplier power: Another factor businesses can analyze is their number of suppliers, which can help them decide if they can easily change where they get resources for their products. This could also relate to availability of supplies, pricing etc.
- Buyer power: Buyer power refers to the amount of power that customers have in lowering prices for an organization's products, depending on factors like the number of customers it has.
- Threat of substitutes: This is the possibility for a company's products or services to be replaced by another company's services or products, which can give them less power in the market since it leads to more competition. In the airline example from above this could be video conferences like Zoom, abolishing the need to travel for business meetings.
The SWOT (strengths, weaknesses, opportunities, threats) matrix helps companies create a strategic plan to determine their competitive position. It evaluates negative and positive, internal and external factors in a 2x2 matrix (management consultants love a good 2x2 matrix). The four areas of a business that a SWOT matrix includes are:
- Strengths: Strengths are internal areas where an organization succeeds. These strengths, such as strong branding or unique technology, can separate an organization from its competitors.
- Weaknesses: Weaknesses are internal areas for improvement or factors that prevent a company from performing at its best, like a larger-than-average inventory or a high staff turnover rate.
- Opportunities: Opportunities are external factors that create a positive impact and can give an organization an advantage over its competitors, such as suppliers selling raw materials at lower prices.
- Threats: Threats are factors that may negatively affect an organization, such as an increase in competition when new companies entering the market.
The balanced scorecard is a framework that companies use to track their performance, strategy and and spot areas for improvement. It helps them monitor the consequences of actions and make future decisions for a company. You are completely free in which KPIs Key Performance Indicators) to use – often not more than 20-30 to avoid getting lost in data. It helps to colour code findings with a traffic-light systems to make implications clear (e.g. is a low score good or bad) and to indicate where action might be required.
Common information collected for the balanced scorecard includes:
- Financial data, e.g. revenue, sales, profitability (note that financial data is always ex-post, so you might want to take action before losing money)
- Business processes: often operational KPIs, like production number, incidents, error rates etc.
- Customer perspectives: Aggregated customer feedback like net promoter scores
- HR-related figures: staff turnover, absence, trainings taken, staff satisfaction
The McKinsey 7S model is a framework to determine the effectiveness of the organizational design of a company. This tool is helpful for finding and fixing internal problems before they “hit the bottom line”, i.e. the financial performance starts to deteriorate. The key elements of the McKinsey 7S are:
- Structures: looks into how a company organizes its workforce and units, including the chain of command and relationships for accountability.
- Strategy: the planning a company uses to reach a competitive advantage in the market and achieve its mission.
- Skills: Skills are the capabilities that an organization and its employees have that help it achieve its business objectives and overall goals.
- Systems: the processes and procedures that an organization follows when working and making decisions.
- Shared values: an organisation’s mission and objectives that guide employee behaviour and the company's actions.
- Style: how management leads a company, interacts with others and makes decisions for an organization.
- Staff: Staff includes the human resources of a company and talent management, e.g. recruiting and implementing compensation/reward systems.
The 4 Ps, sometimes also referred to as marketing mix, is a framework that helps companies reach their marketing objectives and target market. This framework examines the key elements for marketing (as in taking products/services to the place of sale) a company’s products or services. The 4 Ps are:
- Product: the goods or services a company offers to the public to reach an existing or new demand.
- Price: how much customers are willing or expected to pay for a company's products based on perceived value and other factors, such as competitor’s prices and seasonal discounts.
- Promotion: the strategies used to show consumers why they need a company's products and why they pay a particular price for them.
- Place: the location a company sells its products and the methods for delivering them to the market, such as the location in a store or television advertisement.
Profitability framework (or revenue/cost tree)
This is the most basic framework in business analysis. In ist simplest form, it breaks down profit into its basic revenue and cost components. However, the deeper you dig to identify the root cause of profitability issues, the more complex in can get.
3Cs
The 3Cs framework is also commonly used to create together strategies for organisations. There is quite a bit of overlap with Porter’s 5 forces.
- Customers: Who is the customer? Key elements to consider include: customer demographics (E.g. age, sex, income, etc.), customer needs, customer segments' size and growth rates, customer willingness to pay and price sensitivity, etc. You might also want to distinguish between users, decision makers and payers (just think of kid’s toys).
- Competition: What are the competitive dynamics? Key considerations are: competitors’ value proposition and brand, competitors’ market share and growth, competitors’ financial health and so on
- Company: What defines the company in question? Key elements to look at could be: product offering, profitability, core competencies, unique selling point, financial performance and resources.
To prepare for your consulting interview outside of consulting frameworks, you might want to have a look at https://www.canarywharfian.co.uk/threads/how-to-solve-a-case-study-in-an-interview.748/ as well.