We apply economics to markets, organisations and policies.

Transcription

1 OUR STRATEGY WORK

2 We apply economics to markets, organisations and policies. Frontier is an economics consultancy that understands the intricacies and interrelationship between markets, organisations and government policies. We support our clients on some of the most interesting, topical and high-profile issues across these areas. We help our clients to analyse and understand their markets and to formulate strategies based on sound economics. The methods and models we use are often complex, but our advice is always succinct, clear and honest. We use our analysis to provide insight into complex situations, giving clients jargon-free opinions and results that can withstand even the closest scrutiny. We advise across sectors and countries and are one of the largest economic consultancies in Europe (with offices in Brussels, Cologne, Dublin, London and Madrid). We re enthusiastic about what we do. Whatever the task in hand - reviewing strategy, dispute support or getting best value for taxpayers we tackle it with energy, expertise and determination. Enjoyable Ideas Succinct Telecoms REGULATION Financial Services STRATEGY Media Water Listening Open Unbiased Solutions Consistent Professional Health Energy Insightful Teamwork Listeners FRONTIER ECONOMICS Retailing Transport POLICY Flexible Analytical First class Education Post Environment COMPETITION Clear direction Commitment Purpose FRONTIER ECONOMICS 1

3 Frontier Economics approach to providing strategic advice. Giving good advice means turning powerful analysis into straightforward, clear, actionable recommendations. Economics helps Frontier to home in fast on the behaviour of customers and competitors and help our clients make better commercial decisions. We work with clients in many ways: from undertaking and managing comprehensive reviews of corporate strategy, to designing tests for a new proposition. Whatever the assignment, we will always make sure that our advice is grounded in an understanding of the economics of both the market environment and the client s company. To help us find quickly the right analysis for the right question, we adopt a hypothesis-based approach. We typically build the hypotheses with our clients to make sure there is a clear and common understanding of the question being addressed, and of the chosen approach for analysis. First, let us consider how and why we base our strategies on an understanding of the economics of both the environment and the company (see the diagram on the opposite page). We like the way they think, the way they act; their team provokes new thinking and does so with great skill. Philip Clarke, CEO, Tesco Plc DELIVERING EFFECTIVE STRATEGIES THE ENVIRONMENT Truly understanding markets and the basis of competition What is the nature of the markets in which the firm competes? What are the sources of advantage that drive profit in these markets? How do customers behave? How do competitors behave? THE FIRM Getting to the truth of the position of the firm today What are the goals and values of the firm? What resources and capabilities does it control? What is the true economic performance of its businesses? How is it structured / organised? Corporate Strategies Business Unit Strategies Customer Strategies Regulatory Strategies 2 STRATEGY FRONTIER ECONOMICS 3

4 Understanding the environment. Markets are dynamic. Perhaps the most common reason for management to review strategy is a change in the environment in which a company operates. And in today s world, environments are changing faster than ever. New entrants, new technologies, changes in regulatory environment and shifts in consumer behaviour can affect the sources of advantage and the performance of products, business units or channels. These will mean reappraising strategies. We help our clients to anticipate, understand and adapt to these changes and the opportunities and challenges they present. Scarcity drives advantage. The strategies that Frontier helps its clients develop are always grounded in an understanding of what drives the economics of advantage in the relevant market. Perhaps the most important factor is a basic foundation of market economics: profits go to scarcity. That is, the basis for sustainable competitive advantage is the ability to do something that your customers value, but that your competitors can t copy. Our starting point is clear: what can our client do that others can t, or how could our client build that capability? Customer behaviour is key. The key to understanding how a given market works is establishing how customers in that market behave and the nature of demand. Economics provides us with powerful tools for analysing demand. Tools that can describe and anticipate how customers respond to changes in price, quality and the range of competing products, as well as to changes in their circumstances. Understanding customer behaviour is a core strength of Frontier. Our team includes leading experts in customer insight, behavioural economics and consumer psychology. We draw on economics-based technical and data analysis skills to help clients develop and exploit their customer data. Importantly, we base our analysis on how customers actually behave, not on how they say they would behave. As evidence-based economists, we look at both the rational and irrational (behavioural) economics of customers. Competitor behaviour can be anticipated. Commercial success can depend as much on what your rivals do as what your customers, suppliers and you do. While we can t foretell the future, we can put some science behind anticipating how competitors behave. Our competition economics experience allows us to apply leading-edge techniques for understanding and anticipating the behaviour of other market players. For instance, we assess competitors economic models, build market cost and capacity curves and apply game theory for a particular market to provide insights into the likely behaviour of your competitors under different scenarios. For example you might ask: How are our competitors likely to respond if we change our pricing/ promotion/ property strategy? Strength in depth. Our ability to understand environments and consumer and competitor behaviour is based on the same skills that have made our reputation as world-class competition economists. Our strategy experience now covers retailing, consumer goods, telecommunications, healthcare products, financial services, transport, television and new media. DELIVERING EFFECTIVE STRATEGIES THE ENVIRONMENT Truly understanding markets and the basis of competition What is the nature of the markets in which the firm competes? What are the sources of advantage that drive profit in these markets? How do customers behave? How do competitors behave? THE FIRM Getting to the truth of the position of the firm today What are the goals and values of the firm? What resources and capabilities does it control? What is the true economic performance of its businesses? How is it structured / organised? Corporate Strategies Business Unit Strategies Customer Strategies Regulatory Strategies 4 STRATEGY FRONTIER ECONOMICS 5

5 Understanding the firm. Everyone s different. Every company, situation, issue, opportunity and assignment is different. Our approach and advice is always tailored to our client s specific needs. This means we make sure there is a common understanding of a company s goals, the reality of its economic performance and what is driving value in its business. We take time to make sure we understand each company individually and that we don t apply a cookie-cutter approach. What s your question? When building a clear understanding of both the market environment and the firm, we work closely with our clients to address their specific questions across a range of situations: from undertaking and managing comprehensive reviews of corporate strategy, to designing tests for a particular new proposition. Being clear on the goals. As well as understanding the business environment, effective strategies have clear goals. In most cases an organization s goals may be clear, and remain so for many years (it s more likely that the environment changes). But it is important from time-to-time to reassess or question those goals. We help clients take a fresh look at their goals and the ways they use to track them. For example clients have asked: Should we be going for growth or returns, or both? Knowing strengths and weaknesses. A company applies its resources and capabilities to execute its strategy. Having a clear and dispassionate view of a company s strengths and weaknesses in the marketplace is an important foundation for developing or adapting a strategy. Independent view. Frontier is well-placed to provide an independent, evidence-based appraisal of the resources and capabilities that are relevant to a particular market or issue. You might ask would it help to have an outside-in view of the strengths and weaknesses of our [brand /network / portfolio / proposition...] relative to the market? The Frontier team combined rigorous analysis and strategic thinking with a flexible working style that fitted well with my team. Gill Whitehead, Director of Audience Technology and Insights, Channel4 Television DELIVERING EFFECTIVE STRATEGIES THE ENVIRONMENT Truly understanding markets and the basis of competition What is the nature of the markets in which the firm competes? What are the sources of advantage that drive profit in these markets? How do customers behave? How do competitors behave? THE FIRM Getting to the truth of the position of the firm today What are the goals and values of the firm? What resources and capabilities does it control? What is the true economic performance of its businesses? How is it structured / organised? Corporate Strategies Business Unit Strategies Customer Strategies Regulatory Strategies 6 STRATEGY FRONTIER ECONOMICS 7

6 Delivering effective corporate strategies. Examples of questions that we have helped our clients address include: Corporate (as opposed to business unit) strategy deals principally with deciding which markets a company should be in and what are the company s boundaries. Developing strategic responses to shifts in technology, regulation and consumer behaviour is vital when making sure that a company develops and meets its goals. And that the company is well-positioned for advantage in its market as that market changes. We help chief executives and their boards tackle issues such as these by applying the economics of strategy and competition rigorously and impartially. This includes: understanding and exploiting competitive advantage; economic modeling and assessment of specific markets; scenario development and modeling; anticipating competitor strategies and responses; market entry and exit, M&A support and valuation; and capital allocation and portfolio optimization. What role can our infrastructure play in a multichannel world? How do we create sustainable advantage from our content and our brand as the market shifts to digital? How do we defend against decreasing returns in our home market? At what point do we shift investment from bricks and mortar to online infrastructure? Do the economics of entry into market [ ] add up for us? How will our main competitor react if we enter another of its markets? Hard thinking, clear communication and the right balance of challenge and support. Colin Holmes, Chairman, Go Outdoors Frontier combines rigorous economics with practical judgement, based on their experience with diverse retail clients. The result is sound advice and workable solutions. David Wild, CEO, Halfords 8 STRATEGY FRONTIER ECONOMICS 9

7 Delivering effective business unit strategies. Companies often have business units working in several different markets, each with their own dynamics, customers, competitors and regulators. Strategic decision-making at this level requires a sharp focus on what drives value and who you really compete with for different customers. We work in supporting businesses with questions relevant to their product markets. And help them organize themselves and their data to develop winning propositions and secure the best from their position in the value chain. This includes: product and proposition development and innovation; designing and running effective tests and trials of propositions; pricing strategy including multichannel and online; supply and procurement strategies; and improving management information (MI). Examples of questions that we have helped our clients address include: Have we got the right balance of price investment versus promotions? How will removal of this revenue stream affect our markets? How could we get more out of our data my MI doesn t seem to tell me what I need to know? Are these levels of advertising spending justified economically? How do we defend against our competitors channel cost advantage? How can we design a robust test of this new proposition? Frontier is unlike any other consultancy I have worked with. They are totally trustworthy, worryingly bright, amazingly insightful, and have made a real economic difference to the businesses. A class act! John Gildersleeve, Deputy Chairman, Carphone Warehouse 10 STRATEGY FRONTIER ECONOMICS 11

8 Delivering effective customer strategies. Examples of questions that we have helped our clients address include: Economics provides powerful tools for analyzing and understanding demand. Demand for your products and services. Insight into customer behaviour is a core strength of Frontier where we combine behavioural economics and customer psychology expertise with in depth strengths in data analytics and econometrics and statistical techniques. We help clients to develop their competitive advantage through customer strategies, including: identifying the main drivers behind customer behaviour; developing and assessing real CRM and customer loyalty schemes; embedding an understanding of customer behaviour in management systems, and ensuring decision-makers know the right levers to pull; developing and executing segmentation strategies for the customer base; conducting customer switching and retention analysis; developing and building in-house insight capabilities; and measuring the price sensitivity of specific customer segments. What do we need to do to develop deeper customer relationships to help secure our position as technology changes our sector? Can behavioural economics help us nudge customers into new patterns of channel usage? How do we become truly customer focused? What s is really driving customers to behave in this way? At what point would we be better off focusing on retention rather than acquisition? What s the best way to segment our customer base? A combination of rigourous analytics and a real focus on what their customer needs. Rachel Osborne, Finance Director, John Lewis 12 STRATEGY FRONTIER ECONOMICS 13

9 Delivering effective regulatory strategies. For many businesses, regulation is a serious constraint on commercial decision-making. Changes in, and uncertainty over the future direction of, regulation can complicate strategy formulation and can have significant implications for a firm s position and its economic model. Having a pro-active regulatory strategy and response capability can be a competitive advantage. Our wide experience in advising businesses in heavily regulated environments and in helping those before economic regulators and inquiries (Office of Fair Trading, Competition Commission, European Commission, Directorate General for Competition, Independent Commission on Banking etc...) equips us better than anyone in designing robust regulatory strategies including; regulatory strategy development; regulatory brand audits; regulatory risk and scenario assessment; and support in engaging regulatory authorities and in particular investigations. Examples of questions that we have helped our clients address include: How do you gain competitive advantage through interacting with these regulators? How do we best prepare for a major inquiry/ investigation? How do the regulators perceive us? How closely is what we do aligned with what we say to the regulators? What might be next on the regulator s agenda and how might it hurt us? A deep understanding of competition economics and a real-world understanding of commercial organisations means that Frontier s advice is second to none. Niamh Grogan, Group Director of Competition, Lloyds Banking Group 14 STRATEGY FRONTIER ECONOMICS 15

10 Where you can find us. Brussels, Belgium Place Stephanie Avenue Louise 65 Box 11 Brussels 1050 T: F: Cologne, Germany Kranhaus Mitte Im Zollhafen 18 Cologne D T: F: Dublin, Ireland Fitzwilliam Hall Fitzwilliam Place Dublin 2 T: Madrid, Spain Larra, 12 Madrid T: F: London, UK 71 High Holborn London WC1V 6DA T: F: For more information please visit:

11