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A business leader or a manager needs to review his or her business’ performance from market as well as organisational perspectives. Our approach to analysis of business performance covers the following 3 aspects:

Market, includes reviewing the performance from customer and competitive perspective.

Operational, includes the analysis of performance from functional perspective, particularly production and operations.

Financial performance of a business is an outcome of what happens in operations and the market. In other words, there is a very little that one can do to improve the financial performance once the market and operational choices and performance is given.

6 Key Questions

  1. How has the volume and sales growth been in absolute and relative (to the competition) terms? Is the business growing and are we gaining share?
  2. What is driving growth – prices or volume through segment coverage (product mix) or geographic coverage, etc.?
  3. What is the pace of capacity building and its utilization? What is cost of building capacity (gross fixed assets per unit of capacity)
  4. What is cost level and how is it behaving with increasing scale and expanding scope (e.g., market coverage, product and service portfolio, etc.)?
  5. How has the firm been financed? What is the degree of financial leverage?
  6. What has been the resulting margin performance and returns to shareholders?

I have used publicly available financial and non-financial information about a large Indian passenger vehicle manufacturer to illustrate the process of analysis and raised further questions to understand the drivers of performance.

Market Performance

 

Operational Performance

Cost Performance

 

Margin Performance

 

Data Sources: Company Annual Reports, Capitaline Data Base of Capital Market Publishers India Private Limited and Society for Indian Automobile Manufacturers Website.

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