Profitability Case
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Profitability cases
24/10/2007
CaseClub Contents
1
What’s profitability case?
2
Typical frameworks
3
Case
24/10/2007
CaseClub
What’s profitability case? Typical questions: Why our profit is so small? And moreover it’s decreasing!!! Why our costs are so large? And why they increasing? What we need to do against it?
24/10/2007
CaseClub
Typical frameworks Profit equation Profit
=
Price
Revenue
*
–
e Volum
Costs
24/10/2007
CaseClub
Typical frameworks
Customers
Competitors
Company
The Three Cs
24/10/2007
CaseClub
Typical frameworks Threat of substitutes
The Firm
Supplier power
Threat of new entrants
The Porter’s Five Forces Industry rivalry
Buyer power
24/10/2007
CaseClub
Typical frameworks Costs structure – = – – = – = – =
Revenue Cost of goods sold (COGS) (labor, materials, overhead) Gross margin Depreciation Sales, General and Administration (SG&A) Operating Profit Interest Earning Before Taxes (EBT) Taxes Net income
24/10/2007
CaseClub Case
CASE : DISTILLED SPIRITS Category: Profitability
24/10/2007
CaseClub Case
You are consulting for a major United States producer of distilled spirits. Their primary products are a line of midpriced vodkas and two brands of mid-range rum. Over the past few years, the business has become less and less profitable. The company wants to understand: (1) What are the possible causes, (2) What they need to do?
24/10/2007
CaseClub Contents
1
What’s profitability case?
2
Typical frameworks
3
Case
24/10/2007
CaseClub
What’s profitability case? Typical questions: Why our profit is so small? And moreover it’s decreasing!!! Why our costs are so large? And why they increasing? What we need to do against it?
24/10/2007
CaseClub
Typical frameworks Profit equation Profit
=
Price
Revenue
*
–
e Volum
Costs
24/10/2007
CaseClub
Typical frameworks
Customers
Competitors
Company
The Three Cs
24/10/2007
CaseClub
Typical frameworks Threat of substitutes
The Firm
Supplier power
Threat of new entrants
The Porter’s Five Forces Industry rivalry
Buyer power
24/10/2007
CaseClub
Typical frameworks Costs structure – = – – = – = – =
Revenue Cost of goods sold (COGS) (labor, materials, overhead) Gross margin Depreciation Sales, General and Administration (SG&A) Operating Profit Interest Earning Before Taxes (EBT) Taxes Net income
24/10/2007
CaseClub Case
CASE : DISTILLED SPIRITS Category: Profitability
24/10/2007
CaseClub Case
You are consulting for a major United States producer of distilled spirits. Their primary products are a line of midpriced vodkas and two brands of mid-range rum. Over the past few years, the business has become less and less profitable. The company wants to understand: (1) What are the possible causes, (2) What they need to do?
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