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- LECG
- Cornerstone Research
- Huron Consulting Group
1. LECG
Website: www.lecg.com
Founded in 1988 by distinguished faculty from the University of California at Berkeley to provide independent testimony, authoritative studies and advisory services to inform business, regulatory, and judicial decision makers and help resolve commercial disputes. LECG has 33 offices across 10 countries. In America it has offices in Cambridge, Century City, Chicago, College Station, Costa Mesa, Emeryville, Evanston, Houston, Lake Oswego, Los Angeles, New York, Philadelphia, Phoenix, Salt Lake City, San Diego, San Francisco, Vienna, Washington D.C., and Wayne.
LECG, a global expert services and consulting firm, provides independent expert testimony, original authoritative studies, and strategic and financial advisory services to clients including Fortune Global 500 corporations, major law firms, governments and agencies worldwide.
2. Cornerstone Research
Website: www.cornerstone.com
Cornerstone has offices in Boston, Los Angeles, Menlo Park, New York, San Francisco, and Washington, D.C.
Cornerstone provides high-quality expert testimony and economic and financial analysis to attorneys in all phases of commercial litigation and regulatory proceedings.
3. Huron Consulting Group
Website: www.huronconsultinggroup.com
Founded in 2002, Huron has offices in Atlanta, Boston, Charlotte, Chicago (HQ), Dallas, Detroit, Houston, London, Los Angeles, New York, Portland, San Francisco, Singapore, Tokyo, and Washington D.C.
Huron helps clients address complex challenges that arise in litigation, disputes, investigations, regulatory compliance, procurement, financial distress, and other sources of significant conflict or change.
I have spent a lot of time writing about preparing for consulting interviews. The aim of performing well in the interview is to obtain an offer of employment. Imagine you have obtained an offer of employment from the consulting firm of your choice and you now want to negotiate the terms of the offer. Can you negotiate the terms of your offer of employment and, if so, where do you start?
1. Use your bargaining power
Your ability to negotiate the terms of your offer depends on how much bargaining power you have. As a graduate looking for a consulting job your bargaining power will depend, to a large extent, on the current balance of power in the job market. In the late 1990s, the job market was an employee’s market and companies would add extra benefits like an increased signing bonus or an extra week of annual leave in order to sign employees. Today, the job market is more of an employer’s market with a shrinking number of jobs and, one would imagine, less attractive compensation being offered.
Whatever the state of the economy, it is worth considering negotiating the terms of your offer. After you accept your offer of employment you will have virtually no bargaining power, so the time for negotiation is beforehand. If you are friendly and businesslike then negotiating needn’t create a negative impression, on the contrary, it demonstrates that you have a keen business sense and a healthy level of self confidence.
2. Obtain written confirmation
It almost goes without saying, but you need to obtain written confirmation of all of the terms you manage to negotiate.
3. Terms to negotiate
There are a number of offer terms that you might want to negotiate, including:
- office location;
- start date;
- compensation;
- starting position;
- annual leave; and
- offer response deadline.
3.1. Office location
To negotiate a change of office location, a first step might be to explain the reason for your request to HR. If they agree to look into the matter, make sure you agree on a date to follow up on the matter.
If your request is turned down, look for a person in your target office to vouch for the transfer, the more senior they are the better. When you find someone in the target office, explain your situation, describe why you want to work in that office, and ask if there’s anything he or she can do to help you. Offer to fly out to the office and meet with the consultants there in person.
3.2. Start date
Given the weak economy, you are likely to be able to negotiate a later start date. The key selling point is that the firm can start paying your salary later than planned, thus saving them money.
3.3. Salary and bonus
Given the weak economy, it will be difficult to negotiate an improved remuneration package.
The best form of leverage is to have another offer that pays more money. You can say, “I really like your firm; however I have another offer that pays $15,000 more. This is a difficult decision. I’m ready to sign with you if you can make the numbers work. Can you increase the compensation that you are offering?”
It goes without saying that it’s a bad idea to invent a fake job offer in order to provide negotiating leverage.
If you are an MBA or lateral hire and your previous salary was higher this gives you additional leverage. You may be able to convince the employer that you are being undervalued.
3.4. Starting position
If the job offer is for a position at a lower level than you believe is justified given your qualifications and experience you can ask for a shorter review period, e.g. six months instead of a year. This gives you a chance to prove your worth.
3.5. Annual leave
If you don’t like the amount of annual leave days provided, you should try asking for more. If that fails, ask about the firms unpaid leave policy. If the firm doesn’t have one, obtain written confirmation that you will be able to take extra days of unpaid leave.
3.6. Offer response deadline
If you need an extension to the offer deadline, ask for it. It’s a very common thing to get more time to make a decision, so don’t hesitate to ask for it.
1. Background
Value Chain Analysis is a concept that was first described and popularised by Michael Porter in his 1985 book, Competitive Advantage
.
2. Relevance of Value Chain Analysis
In order to understand the activities that provide a business with a competitive advantage, it is useful to separate the business operation into a series of value-generating activities referred to as the value chain.
Value Chain Analysis involves identifying all of the important activities in which a business engages and then determining which ones give the company a defensible competitive advantage. By doing this, we can identify which activities are best undertaken by the company itself and which ones are able to be outsourced.
3. Value Chain Analysis explained
Michael Porter introduced a generic value chain model that comprises a sequence of activities common to a wide range of firms. Porter suggested that the activities of a business could be grouped under two headings:
- Primary activities: those that are directly concerned with creating and delivering a product; and
- Support activities: those that are not directly involved in production, but may increase effectiveness or efficiency.
The firm’s margin or profit depends on its ability to perform these activities efficiently, so that the amount that the customer is willing to pay for the products exceeds the cost of the activities in the value chain.
3.1. Primary activities
The primary activities in Porter’s model include:
- Inbound Logistics: Receiving and storing externally sourced materials.
- Operations: Manufacturing products and services – the way in which inputs are converted into final products.
- Outbound Logistics: Getting finished goods and services to consumers.
- Marketing & Sales: Identification of customer needs and the generation of sales.
- Service: Supporting customers after the product or service has been sold to them.
3.2. Support activities
The support activities in Porter’s model include:
- Human resource management: Recruitment, training, development, motivation and compensation of employees.
- Infrastructure: Includes a broad range of support systems including organisational structure, planning, management, quality control, culture, and finance.
- Procurement: Sourcing resources and negotiating with suppliers.
- Technology development: Managing information, developing and protecting new products and services, developing more efficient processes, and improving quality.
4. Application of the Value Chain Analysis
4.1. Steps to take
Value Chain Analysis can be broken down into a three sequential steps:
- Break down a company into its key activities under each of the headings in the model;
- Identify activities that contribute to the firm’s competitive advantage either by giving it a cost advantage or creating product differentiation. Also identify activities where the business appears to be at a competitive disadvantage; and
- Develop strategies around the activities that provide a sustainable competitive advantage.
4.2. Cost advantage
A business can achieve a cost advantage over its competitors by firstly understanding the costs that are associated with each activity and then organising each activity to be as efficient as possible.
Porter identified 10 cost drivers related to each activity in the value chain:
- Economies of scale
- Learning
- Capacity utilisation
- Linkages among activities
- Interrelationships among business units
- Degree of vertical integration
- Timing of market entry
- Firm’s policy on targeting cost or product differentiation
- Geographic location
- Institutional factors (regulation, union activity, taxes, etc.)
A firm can develop a cost advantage by controlling these 10 cost drivers better than its competitors.
A cost advantage can also be pursued by reconfiguring the value chain. Reconfiguration means introducing structural changes such as a new production process, new distribution channels, or a different sales approach. For example, Qantas structurally redefined its maintenance of aircraft, which was traditionally conducted by inhouse engineers, by outsourcing this function to private overseas contractors.
4.3. Product differentiation
Product differentiation can be achieved by a business by focusing on its core competencies in order to perform them better than its competitors.
Product differentiation can be achieved through any part of the value chain. For example, procurement of inputs that are unique and not widely available to competitors, providing high levels of product support services, or designing innovative and aesthetically attractive products are all ways of creating product differentiation.
5. Issues arising from the Value Chain Analysis
5.1. Linkages between Value Chain activities
Value Chain activities are not isolated from one another. Rather, one value chain activity often affects the cost or performance of other ones. Linkages may exist between primary activities and also between primary and support activities.
Consider the case in which the design of a product is changed in order to reduce manufacturing costs. Suppose that the new product design inadvertantly results in increased service costs; the cost reduction could be less than anticipated and even worse, there could be a net cost increase.
5.2. Business unit interrelationships
Business unit interrelationships can be identified using the Value Chain Analysis.
Business unit interrelationships offer opportunities to create synergies among business units. For example, if multiple business units require the same raw material and the procurement process can be coordinated then bulk purchasing may result in cost reductions. Such interrelationships may exist simultaneously in multiple value chain activities.
5.3. Outsourcing
Value Chain Analysis assists management decide which activities should be outsourced. It is rare for a business to undertake all primary and support activities internally. In order to decide which activities to outsource managers must understand the firm’s strengths and weaknesses, both in terms of cost and ability to differentiate.
6. Case example
For example, Coca-cola might have the following value chain elements:
- Research and development (Will cherry taste good with cola?)
- Manufacturing (How much does the bottling plant cost to build and run? How often do factories need to be re-engineered?)
- Cost of goods sold (How much does it cost to manufacture cola? Is there a frost in Florida that will drive up the cost of cherries?)
- Packaging and shipping (How much does that new design of packaging cost? Are many cans of cola lost in transit? What are the fixed costs of shipping?)
This is a useful framework for evaluating the marketing strategy for a product.
The Four P’s consist of:
- price ;
- product ;
- position/place; and
- promotion .
1. Price
The pricing strategy employed by a firm for a particular good or service will have a significant effect on profit.
There are many different pricing strategies that can be employed in different combinations, including:
- Price differentiation – setting a different price for the same product in different segments of the market. First degree price discrimination involves charging each customer a different price. To do this, the seller must be able to observe each customers willingness to pay, this is very difficult to do in practice. Second degree price discrimination involves varying the price according to quantity sold. Third degree price discrimination involves varying the price by location or market segment. For example, charging discounted prices for students.
- Dynamic pricing – a form of first degree price discrimination, dynamic pricing is a flexible pricing mechanism that allows online companies to adjust the price of identical goods to correspond to a customer’s willingness to pay. This is made possible by using data gathered from a customer including where they live, what they buy, and how much they have spent on past purchases.
- Predatory pricing – aggressive pricing intended to undercut competitors and drive them out of the market.
- Limit pricing – a low price charged by a monopolist in order to discourage entry into the market by other firms.
- Using a loss leader – a loss leader is a product sold at a low price to stimulate other profitable sales. For example, the 30 cent soft serve cone at McDonalds.
- Penetration pricing - the price is set low in order to gain market share.
- Marginal cost pricing - the practice of setting the price of a product equal to the cost of producing one extra unit of output.
- Market-orientated pricing – setting a price based upon analysis of the targeted market.
- Psychological pricing – pricing designed to have a positive psychological impact. For example, selling a product at $3.95 instead of $4.
- Skimming – charging a high price to gain a high profit, at the expense of achieving high sales volume. This strategy is usually employed to recoup the initial investment cost in research and development, commonly used in electronic markets when a new product range is released.
- Premium pricing – involves keeping the price of a good or service artificially high in order to encourage a favorable perception among buyers.
- Target pricing – a method of pricing whereby the selling price of a product is calculated to produce a particular rate of return on investment.
- Seasonal pricing – adjusting the price depending on seasonal demand.
- Cost-plus pricing – a very basic pricing strategy where a firm sets price equal to unit cost of production plus a margin for profit.
2. Product
Product differentiation is a source of competitive advantage. Product differentiation is the process of describing the differences between a good or service in order to demonstrate the unique aspects of the good or service and create an impression of value in the mind of the consumer.
The major sources of product differentiation include:
- Vertical differentiation –where products differ in their quality. For example, BMW and Hyundai.
- Horizontal differentiation – where products differ in features that cannot be ordered. For example, different flavours of ice-cream.
- Availability – where products are available at different times (e.g. seasonal fruits) and locations (e.g. location of an ice-cream store near the beach). See section 3, “Position/Place”.
- Perception – branding, sales, and promotion can be used to distinguish a product in the market. See section 4, “Promotion”.
Successful product differentiation leads to monopolistic competition. In a monopolistically competitive market consumers perceive that there are non-price differences between products. As a result, even though there are a large number of producers, each producer has a degree of control over price.
3. Position/Place
The physical location of a good or service can be a source of competitive advantage. For example, imagine we have two ice-cream stores. One ice-cream store (Store A) opens next to a popular tourist beach, and one ice-cream store opens in the backstreets of a quiet suburb (Store B). We expect that Store A will be able to charge a higher price and sell more ice-cream than Store B, other things being equal.
4. Promotion
Promotion is used to enhance the perception of a good or service in the minds of consumers. A promotion will draw peoples attention to any features of a product that people might find attractive including its quality, specialised features, availability, brand name, or image.
Promotion can be carried out in various ways including:
- advertising (developing brand awareness);
- publicity (sponsoring a sports team);
- public relations (donating to charity);
- celebrity appearances;
- door to door sales;
- price discounting (see section 1, “Price”); and
- quantity discounting (two for one offers, bundling).
1. Background
Developed around 1978, the 7-S framework first appeared in a book called The Art of Japanese Management
by Richard Pascale and Anthony Athos, and also featured in In Search of Excellence
by Thomas Peters and Robert Waterman.
McKinsey has adopted the 7-S model as one of its basic analysis tools.
2. Benefits of the 7-S framework
The 7-S framework is a useful diagnostic tool for understanding the inner workings of an organisation. It can be used to identify an organisations strengths and sources of competitive advantage, or to identify the reasons why an organisation is not operating effectively. As such, the 7-S framework is an important analysis framework for mangers, consultants, business analysts and potential investors to understand.
The 7-S framework provides a guide for organisational change. The framework maps a group of interrelated factors, all of which influence an organisation’s ability to change. The interconnectedness among each of the seven factors suggest that significant progress in one area will be difficult without working on the others. The implication of this is that, if management wants to successfully establish change within an organisation, they must work on all of the factors, and not just one or two.
3. McKinsey’s 7-S framwork explained
The 7-S framework describes seven factors which together determine the way in which an organisation operates. The seven factors are interrelated and, as such, form a system that might be thought to preserve an organisation’s competitive advantage. The logic is that competitors may be able to copy any one of the factors, but will find it very difficult to copy the complex web of interrelationships between them.
- Shared values (also called Superordinate Goals) refer to what an organisation stands for and believes in. This includes things like the long term vision of the organisations, its charitable ideals, or its core guiding principles. For example, the core guiding principle at McKinsey is professionalism.
- Staff refers to the number and type of people employed by the organisation.
- Skills refers to the learned capabilities of staff within the organisation.
- Style refers to the way things are done within the organisation, that is, the work culture.
- Strategy refers to the plans an organisation has for the allocation of its resources to achieve specific goals.
- Structure refers to the way in which an organisation’s business units relate to each other. For example, a company may use a centralised system where all key decisions are made at the head office.
- Systems are the practices and procedures that an organisation uses to get things done, e.g. financial systems, information systems, recruitment and performance review systems, etc.
As a consultant, you will need to ask targeted questions to identify the organisation’s strengths and weaknesses on each of the above factors.
