How would you structure this Baby formula case?

Baby formula case structure Case Structuring Structure
New answer on Jun 30, 2021
2 Answers
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Anonymous A asked on Jun 22, 2021

Hello everyone!

I would like to know everyone opinion on this case structuring, based on the case Baby Formula, which says:

Problem Definition

Our client is a producer & distributor of baby formula. They sell worldwide and have around 30% market share. Currently, they're looking at ways to boost their market share whilst maintaining profitability. Recently, a welfare program for poor children was started to give poor people vouchers to purchase baby formula. Each state is opening up for bidding. The producer is thinking about bidding in the program to be sole supplier, but they're not sure how much to bid for these contracts.

They hired you to help them come up with an approach on how to determine the amount they should bid for those supply contracts.

My structure come as follows:

1. Evaluate Bidding amount 

There are 3 methods I would like to explore:

1.1 Based of competitors evaluation
To answer this I would like to explore:
- What are other suppliers going to be bidding amount?
- What has been the previous bidding amounts on contracts of this level that have won?

2.2 Based on our own capabilities
To answer this I would like to explore:
- What is the quantity of Baby Formula we need to produce? 
- What are our costs to produce this?
- What is the profit margin we expect to achieve from this innitiative? 
- What is the maximun and minimun amount we are able to ask to be sustainable?
 

2.3. Based on government or contractor preferences
- What is the asking amount they expect to get on this bidding contract?
- How flexible are they to changes on this?

2. Evaluate risks
- How this project is going to impact our brand?
- What are the exits barries of this contact?
- Is this project sustainable over the long run?

3. Evaluate better options

- Is this contract the best option in the market?
- What are other contracts?

Thank you very much

 
 

(edited)

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Marco-Alexander
CoachingPlus Expert
Content Creator
replied on Jun 30, 2021
Former BCG | Case author for efellows book | Experience in 6 consultancies (Stern Stewart, Capgemini, KPMG, VW Con., Hor

Hi A, feel free to contact me about this topic, so we can have a call. Best regards.

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Udayan
Expert
Content Creator
replied on Jun 26, 2021
Top rated MBB coach with many offers /Ex McKinsey EM in New York /6 years McKinsey recruiting experience/Real cases

This can be a little complicated depending on the format for who wins:

  • For example is it a closed or an open bid auction?
  • Is there a RFE that the govt has and are they demanding clarity on profit margins?
  • Is it a lowest price wins or is it the 2nd lowest price that wins the contract

Your approach will first need to define how the bidder wins the contract and then go into how to price it appropriately.

Udayan

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