Bain + BCG Hot Wheels - Part 2 WITH VIDEO SOLUTION

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The candidate should hone in on the fact that some competition is succeeding in a tough market. Their primary goal should be to figure out what is going on in the market, and how/why competition is succeeding.

The candidate should note that Wheels, Seatbelts, and Airbags are declining markets while Carburetors and A/C units are growing markets.

If they want to calculate CAGR, allow them to, but it is not necessary for the purposes of the insight/takeaway.

Next, that candidate should recognize that, in the context of this new market information, we want to compare competitors. A hypothesis might be that the winning competitors have either:

1. Focused solely on these growing markets
2. They’ve done a good job in gaining market share across markets (even declining ones)
3. They’ve cut costs aggressively so as to maintain profitability

The candidate should ask for information relating to any of the above.

The candidate should note that the two players who have seen growing profits (Competitor A and B) also do not offer Wheels, Seats, or Airbags. They should note that this indicates that the path to profitability is in picking the “winning” market in Carburetors and A/C Units.

Q: Have we investigated any opportunities to return our falling product lines (Wheels, Seatbelts, Airbags)? This could be price changes, reduction in costs, or anything else.

A: We have and unfortunately the macro factors at play (falling demand and rising costs) are expected to continue.

Q: Have any of our competitors seen profitability across Wheels, Seatbelts, and Airbags?

A: They have not.

Q: I can go ahead and calculate our new profit/profitability if we were to cut out these 3 products.

A: Not necessary.

Q: Is our client ok with cutting 3 out of our 5 products? I see a good amount of risk in cutting such a sizeable part of our business.

A: Ultimately, our client will do whatever is necessary to return to profitability.

The ideal solution for our client is to stop selling the product lines that are in declining markets. That is, our client should stop selling Wheels, Airbags, and Seatbelts.

Additionally:

• They could look to increase the prices we charge on carburetors and A/C Units, or promote them more aggressively
• They could look to identify parts with characteristics similar to carburetors and A/C units that can be sold in the US and Japanese markets to replace lost profits and create new revenue streams

Possible Answers:

• Really anywhere where we can easily (quickly) supply parts AND has car manufacturing. Since we are in Korea, this may include (Eastern) Russia, China, Vietnam, Thailand, Malaysia
• We may have exhausted our geographic options, in which case we should expand into other product markets. We should identify other parts that we can sell to our existing Japanese and US buyers