This PPT slide, part of the 159-slide Strategy Frameworks Manual PowerPoint presentation, titled "Competitor Cost Structures: How to do it" outlines a structured approach for analyzing the cost structures of competitors. It emphasizes the importance of understanding how costs are built up, starting with EBIT (Earnings Before Interest and Taxes) as a foundational metric. The slide breaks down costs into 2 primary categories: Gross Margin and Operating Costs.
Under Gross Margin, it highlights the role of Sales, noting that the selling price significantly influences gross margin. A strong gross margin can arise from premium products or differentiated offerings. The Cost of Goods Sold (CoGS) is also mentioned, indicating the necessity to clarify which costs are included in this figure. This aspect is crucial for identifying potential areas for cost reduction.
Operating Costs are further divided into Staff Costs and Other Costs. Staff Costs are described as a common area for cost reduction, with some overlap with CoGS. Other Costs are contextualized as dependent on industry specifics, such as marketing and raw materials, which may require additional notes for clarity.
The slide advises on the importance of having publicly available financial information and identifies the need for organic, recurring figures. It suggests drawing out all available cost-related data from various accounts, emphasizing the need to sanitize this data to ensure comparability across companies. Key metrics to focus on include gross and operating profit, staff costs, and other significant expenses.
Finally, the slide encourages calculating appropriate ratios based on the objectives of the analysis, which may include margins, marketing spend as a percentage of sales, and industry-specific benchmarks. This structured approach provides a comprehensive framework for understanding competitor cost structures, essential for informed strategic decision-making.
This slide is part of the Strategy Frameworks Manual PowerPoint presentation.
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