Solution of this case says to reduce the pricing and then admits that this will lower the margin but gain the market share. however, one of the goals of this gase is to increase margin and the share not one or the other I believe.
Back to overview
If factories are operating at full capacity (quantity produced can't be increased without significant investments), shouldn't price reductions lead to both decreasing revenues (same quantity x lower prices) and lower profit margins? In that case, the proposed solution doesn't solve any of the objectives of the case, since we know that the Argentinian market is growing by 10%, right?
I think the argument makes sense as the maximum capacity has been reached. Reducing price will not cause increasing units sold due to the shortage of supply unless we open new manufacturing plants, which requires another amount of up-front cost.
Be the first to answer!
Nobody has responded to this question yet.
Hi,
You are right, but it's not always possible to find a solution that satisfies every client's request.
In this case, after your analyses, the interviewer can ask you to present your findings: that lowering price will make our client to gain market share.
Usually the interviewer will then ask you to quickly brainstorm possible alternatives/solution to also increase the margins.
Hope it helps,
Luca
2 comments
Sign up for free to read all answers.
Sign up for free to read all answers.
