Pickup Manufacturer

The following framework/structure gives a short overview of the case:

The structure should be developed with the candidate before discussing the next question. A general understanding of the situation and possibilities of the market can be enquired.

Although told to discuss whatever comes into his mind, the interviewee should answer in a structured manner.

A good way is to build a decision tree. The first two branches could answer the questions of whether pick-ups should be manufactured or not with a “YES” or a “NO”.

As this is a profitability case, the profit equation should be discussed:

Profit = Revenue - Costs

Since the solution of the case lies within the costs, the interviewee should be led towards revenue first.

• Looking at revenue, CarsCo is among the average.
• Looking at the margins, all competitors have acceptable rates except CarsCo.

As a result, it could be concluded that there is a problem rather with costs than with revenue and the solution is not to be found there.

Because the costs of material are responsible for up to 75% of the overall costs, the interviewee should focus on them in order to find potential for optimization.

At the end additional actions to reduce the costs can be discussed.

• The supplier Sup 1 and Sup 2 have an above-average and unusual high margin for a supplier in the automobile industry.
• This leads to an overall decrease of CarsCo’s margins in the market.

In this particular case, Sup1 and Sup2 were able to achieve such a high margin because the procurement director of CarsCo was corrupt and bought materials for excessive prices in order to make money for himself.