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Bain Business Case

Bain BCG business Case Mck
Edited on Feb 13, 2021
4 Answers
3.0 k Views
Anonymous A asked on Feb 09, 2021

Hi,

This is a question from Bain sample case. I attach the question and relevant graphs below. I know that the answer is 2.7 but im not sure on how to get to this. I would appreciate if someone could give me hints on how to solve this. Thank you very much!

The whole case can be found in this link if someone finds it useful: https://drive.google.com/drive/folders/1X_4awAfTq302vQyT1m7pbHj4PRontjkv?usp=sharing

(edited)

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Gianluca
Expert
replied on Feb 09, 2021
zeb | Goldman Sachs | Bocconi | HSG

Hi,

based exclusively on the question and graph you provided, I would answer as follows:

  1. Based on graph 2, ChemicalCo currently sells (1.2 + 4.5 + 7.2 + 6 + 3) = 21.9 kty of Chemical_A to local Chemical_1 producers (players A to E);
  2. If ChemicalCo acquires players C and D, my hypothesis would be that it will fulfill 100% of players C and D's Chemical_A needs, thereby gaining an additional 4.8 kty * $1.0k/ton = $4.8M in revenues;
  3. However, by acquiring players C and D, ChemicalCo will lose local customers A, B and E, losing (1.2+6.0+3.0) kty * $1.0k/ton = $10.2M;
  4. Finally, ChemicalCo will export the difference between the quantity it currently sells locally and the new quantity it will sell after the acquisitions (equal to the sum of the entire Chemical_A need by players C and D, i.e. 7.5 + 9.0 = 16.5 kty). That is, it will sell an additional (21.9-16.5) kty = 5.4 kty at a price of $0.5k/ton, resulting in additional revenues of $2.7M.

Overall, the change in ChemicalCo's EBITDA will be equal to: $4.8M - $10.2M + $2.7M = -$2.7M.

Hope this helps.

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Valeria on Feb 09, 2021

Thank you so much !

Ian
Expert
Content Creator
updated an answer on Feb 09, 2021
#1 BCG coach | MBB | Tier 2 | Digital, Tech, Platinion | 100% personal success rate (8/8) | 95% candidate success rate

Hi Valeria,

I see this is your second post in a short time for Bain sample cases.

It's great that you're using the Q&A here...that said, I highly encourage you to really think through these problems as much as possible before asking for help!

This is the classic "giving a man a fish" vs "teaching how to fish" scenario. Gianluca has given a great response...take time to reflect not on his answer, but how he decided to think about/break down the problem! Patterns should emerge.

Good luck :)

(edited)

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Clara
Expert
Content Creator
replied on Feb 09, 2021
McKinsey | Awarded professor at Master in Management @ IE | MBA at MIT |+180 students coached | Integrated FIT Guide aut

Hello!

+1 Gianluca, super didactic :)

Bear in mind that you need quite some agility to be able to do this -the overall thinking + calculations- in minutes.

Cheers,

Clara

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Anonymous B updated the answer on Feb 13, 2021

Hello,

1) Earlier market share - ( A + B + C + D + E ) = 21.9

2) New market share - ( C + D )( 9 + 7.5) = 16.5

Domestic market share lost = ( 1 - 2 ) = 5.4

Since, domestic market share has to be exported at .5 ( or half the price of domestic market revenue lost will be exactly half) = 5.4/2 = 2.7

Or 5.4 * .5 (export rate) = 2.7

Any other calculation you do will consume time & confuse you more is what I feel.

(edited)

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