Rachael Troughton
Former Accenture
The 3 C’s, the 4 P’s – using business frameworks to crack a case can feel as muddled as alphabet soup. Walk through the Business Situation Framework step by step with us in this case example. We’ll make using this framework crystal clear.
In this article, we’ll:
- Explain what the Business Situation Framework is
- Provide a case example using this case interview framework
- Provide links to other business frameworks that will help you ace your consulting case interviews
Let’s get started
What Is the Business Situation Framework?
A business framework is a structured way of thinking about a business problem so that you can solve it.
The Business Situation Framework helps with analyzing a business’s current situation to improve its performance. The 4 components of analysis in this framework are:
- Customer
- Competitors
- Product
- Company
The Business Situation Framework was derived from a classic framework developed by Kenichi Ohmae, a Japanese organizational theorist. Ohmae believed that, to be successful, business strategy should concentrate on the customer, the competitors, and the company. This framework simply adds product to Ohmae’s model.
The Business Situation Framework is most useful when exploiting a business opportunity, such as scaling the existing business, entering a new market, or developing a new product.
So if your consulting case is about any of these areas, it makes sense to take these factors into consideration.
Let’s look at each factor in more detail.
Customer
In this part of the analysis, you want to get really clear about who the customer is and what exactly they want.
You’ll need to consider demographics, market segments (groups of customers with similar preferences), the factors that influence their buying decisions, and trends in segment growth.
You’ll also need to understand the customer needs your product could satisfy and how much they’d be willing to pay.
Competitors
Next, you’ll need to consider business competitors.
- What is the market like for your product?
- How are your competitors organized?
- What share of the market do they have?
- What are their strengths and weaknesses, and how do we compare?
Product
In this part of the analysis, examine what features the product should have to meet customer requirements, its unique selling point, and how it should be branded, priced, and distributed.
Company
Finally, you need to analyze the company itself.
- What are its strengths and weaknesses?
- What capabilities does it already have in place? A strong distribution network? Significant brand loyalty? These are competitive advantages that could make it easier to exploit new opportunities.
The Business Situation Framework: A Case Example
Let’s move on to the bit you really care about — how to apply the Business Situation Framework during a consulting case interview.
Consider this problem statement from the UCLA Anderson School of Management’s case book:
This is a market entry case. There are 3 key elements you need to answer in this question:
- Should they launch the product?
- If so, how should they enter the market?
- What should the marketing strategy be?
Using the business situation framework gives us issues to consider.
In case interviews, you may not be initially given all the information you need to solve the case. Asking your interviewer logical questions will get you more information.
In this case, when you ask your interviewer questions from the ‘Competition’ element of the model — “What is the size and breakdown of the flavored water market?”, and “How much market share do our main competitors hold?”— you’ll be provided with the following information.
From these charts, it’s clear to see that the non-sparkling water category represents just a small amount of the overall market.
Within that category, there are 2 main competitors with a large portion of the market captured by multiple, smaller competitors. This provides an opportunity for our client to capture market share from smaller competitors and become a 3rd large competitor in this category.
What’s the Size Of the Opportunity?
Once you’ve grasped the current market situation, you need to estimate the size of this market entry opportunity. Then the client can decide whether it’s worth pursuing. Here comes the math!
The market share of non-sparkling flavored water is 10% of the total market for flavored water, so there are:
- 8 million US fluid gallons x 10% share for non-sparkling = 800,000 gallons.
Each drink is packaged in 16oz bottles, and there are 128 oz in a gallon:
- 128 oz/16 oz = 8; therefore, there are 8 bottles in a gallon.
800,000 gallons are sold each year, therefore:
- 800,000 * 8 bottles/gallon = 6.4 million bottles sold each year.
Each bottle costs, on average, $1 a bottle therefore:
- 6.4 million bottles * $1 = $6.4 million total revenue per year.
What About Risk?
The information above suggests there’s a potential opportunity for the client, so now you should consider costs and potential risks before offering your conclusion.
For example, how long would it take to break-even should the client launch a new product?
Let’s assume the following:
- The costs per bottle of non-sparkling flavored water is 90 cents.
- Start-up launch costs are $400,000.
A $400,000 investment / a 10-cent profit per bottle = sales of 4 million bottles needed to break even.
To work out the number of years it will take to break even, you need to make an assumption about % of the market the client could capture. This assumption should be backed up by a logical argument.
For example:
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Given this information and any other risks identified — such as changing customer preferences and competitive response to our client’s entry into the market — you should recommend that the client launch the product but put in place a marketing plan to exceed 15% market share and get the payback period down.
In deciding how to launch the product, you should focus on:
- Key capabilities identified in the ‘Company’ analysis — their strong brand and established distribution network.
- Best practices identified in the ‘Competition’ analysis — particularly product launch best practices, since the competitors have more experience with this.
How Should the Client Market the New Product?
Using the ‘Customer’ questions in the Business Situation Framework, you should consider consumer trends and how other competitors are marketing to them. When you ask your interviewer for information on this, you’ll get the following information:
From this you should identify the following insights before offering your final recommendation:
- The new product will fall into the ‘Other’ category.
- Given this, the company should market the new product as a sports drink or leisure beverage — rather than a health drink — as the potential market size of the ‘Other’ category is larger in these categories.
Links to Other Resources that Will Help you Ace Your Case
Hopefully, you’re now crystal clear on how using the Business Situation Framework can help you solve a case interview question. Read our article on other case interview frameworks to find more tools to help you solve your consulting case interviews. This article also discusses making your own tailored case framework, which will set you apart from other candidates.
Our article on case interview examples provides links to tons of case interview questions you can use to practice.
In this article, we’ve covered:
- What the Business Situation Framework is
- How this framework helps “solve” a consulting case
- Where you can find more information on other business frameworks
Still have questions?
If you have more questions about this case interview frameworks, leave them in the comments below. One of My Consulting Offer’s case coaches will answer them. Other people prepping for consulting case interviews found the following pages helpful:
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