Case Interviews
Do I always need to start a profitability case with revenue and costs?
For a profitability problem, should I almost always start with Revenue minus Cost, or can another structure be better? For example, if an airline has lost both profitability and market share, I'd like the framework to reflect that specific situation rather than forcing a generic profit tree.
Ian’s Answer
Revenue/Cost is so so generic! Sometimes R + C works, and it's a good backup to have, but you really want to strive to not just regurgitate the classic profitability framework!Rather, your framework should be through what lens are you looking at figuring out the issue.So, you might segment by Product, Geography, Customer, Competitor, Company, Market, etc. You mgith do internal and external. You might look at the value chain.It's all dependent on the case + industry!In this case, we note that they've lost profitability AND market share, which indicates a revenue issue. Given the goal is to regain the foothold in the industry, that's our focus (not just generic Revenue/Cost).Think through the major themes/areas in which we could regain our foothold in the industry! Once you've thought through it, message me with your approach and I'll let you know how you did :)