Curious how you would structure that case taken from Case In Point. I am not fan of Cosentino structure on that one.
Our client is a global automaker headquartered in Detroit. Its motor parts division, with 20% industry market share, carries almost 500,000 parts, options, and accessories for vehicle customisation. The client has not been profitable for several years and the CEO suspects that the company's high degree of ventical integration is hurting it. The client makes about 80% of its own parts, compared with 40% at its primary competitors. The CEO has asked for our help. How would you approach this issue ?
Hi Abdelrahman, My confusion comes from the fact that it's a sub department within a bigger company. The mother company profits are suffering because of a potential non optimal vertical integration. How are you going to run a profitability framework on this one ? Would you do it on the mother company ? If yes, there would be a lot of factors that would not lead to solve the case. If you do it on the department, you'll miss the big picture.
I think this is a fair point. I see two solutions to this: 1- that could probably be asked as a clarifying question to the interviewer at the beginning of the case in real life. 2- You run the framework on the big company, but you start with revenue first and analyze if there were any changes relative to competitors. That way you eliminate the possibility of the problem being revenue-driven. I hope this helps!