Learn To “Think Business”

Develop an outstanding business sense and ace your cases.

It’s all about business

Being structured and quick at math is one thing, asking yourself the right questions and making realistic assumptions is another. The latter requires you to develop a real business sense. If you majored in biology or fine arts, no worries. Everyone can get a good business sense in very little time. Here are some steps one can use in order to learn to think business.

1. Start by reading business articles

The first step in developing a certain business sense is to see how things roll in real life. Have a look at the Wall Street Journal, Reuters and CNBC. Take a look at their “Business” sections. We highly recommend you to read one or two articles a day.

Doing this will give you a real advantage as you will be able to make better and more realistic assumptions while also having a clearer idea of where the case might go.

A more digestible way to get the information is to watch videos form CNBC, Bloomberg and the Wall Street Journal on YouTube.

2. Use a mental template

When reading about a certain piece of information, you should be able to figure out the “So What?” of the article: what does it imply for the businesses that are mentioned in the article?

In order to process the information and review the implications for each business, we suggest you to use the following template.

For every article you read, understand the external forces (using Porter’s Five Forces and the PESTEL framework) that are relevant. Also understand the internal resources and capabilities the businesses dispose of and try to predict some potential outcomes.

3. A concrete example

Connecting the dots should enable you to analyze the business event and gather key insights that help you design potential outcomes for the scenario.

Failure to do so might show that your business sense isn’t sufficiently developed. This might prevent you from making realistic assumptions during cases and come up with interesting solutions.

Consider the following article from CNBC:

We start be reviewing the global and industry forces that affect the businesses. This is done by taking clues from the PESTEL and Porter’s Five Forces frameworks.

PESTEL: What political, economic, social, technological, environmental and legal factors might be at play here?

1. Social changes: Sales of beer are declining as customers turn to more healthy alternatives. Large brewers have experienced large declines in sales as a result. However, craft breweries have managed to grow their sales.
2. Environmental changes: Patagonia is a brand that is known for its environmental positions. As consumers are becoming more environmentally conscious and favour small craft breweries, the teams at AB InBev must have thought that copying Patagonia’s beer would pay-off.

Porter’s Five Forces: What threats from suppliers, new entrants, substitutes, buyers or competitors might affect the case?

1. New entrants: Lots of new beer companies have emerged lately as the cost of brewing fell sharply. This has enabled Patagonia and lots of competitors to enter the market.
2. Buyers: Buyers can now buy from a more diverse set of beer producers. AB InBev has thus lost clients and might lose out even more clients if it fails to develop a product its customers prefer.
3. Substitutes: Beer has become less important to consumers as they favor alternatives such as cider or alcohol free.

We now review the resources and capabilities of both firms.

AB InBev is a giant beer producer with large resources. It can thus easily fight Patagonia’s claims in court.

Patagonia has a loyal customer base and might be able to discredit AB InBev’s “craft patagonia beer”. Further decreasing the appeal for AB InBev’s beers.

You may of course not know any of the facts we mentioned here above. However, the beauty of the exercise lies in gathering these bits of information by asking yourself the right questions. Finally, end up by asking yourself what the potential outcomes of the article you just read might be.

4. Gather insights

Besides these specific insights, we also encourage you to step up your general business knowledge. This can be done by looking at the following elements.

• Demographics of G7 countries (age, population, education, urban and rural population).
• Fluctuations in energy prices (petrol, gas, coal, renewables).
• Trade flows between the largest trading blocs (United States, Europe, Japan, China, India, Brazil).
• Economic landscape and industry specialization of the most important regions (China, Germany, United States, Japan).

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Credits

This article was built on great insights and articles from Kellogg Consulting Club, Wharton Consulting Club and Stanford GSB Preparation Guide, Make sure you check these out!