Isolation of scenarios in a CIP case

Analytical profitability
New answer on Jun 09, 2022
2 Answers
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Anonymous A asked on Jun 07, 2022

Hi, 

My question regards the structure of the following profitability case for which only the prompt is given.

“Palm Tree Plantation Exports grows, sells and leases twenty different varieties of tropical plants throughout the US. They posted a net income of USD 95 M, down from USD 105 M last year. Yet their market share grew by 7 %. What is going on and how can we turn it around?”

I would assume that the issue here is either: 

a. The industry is doing badly and the client happens to be just doing a little better than others. Could be a revenue or a profit issue. 

b. If it is not an industry wide problem, it must necessarily be the case that the client suffers from increased costs. 

Is what I am thinking correct or are there any other scenarios that I am missing? 

Thank you, 
Maria

 

 

 

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Ian
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replied on Jun 07, 2022
#1 BCG coach | MBB | Tier 2 | Digital, Tech, Platinion | 100% personal success rate (8/8) | 95% candidate success rate

Hi Maria,

That is almost correct. Either 

1) The pie itself shrank and the market is smaller, or

2) Their costs have increased and therefor margins/profits have gone down, or

3) They lowered their prices to gain market share, but due to high VC, this actually resulted in lost profits

 

 

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Anonymous on Jun 11, 2022

Thank you!

Clara
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replied on Jun 09, 2022
McKinsey | Awarded professor at Master in Management @ IE | MBA at MIT |+180 students coached | Integrated FIT Guide aut

Hello!

Yes Maria, well done. Either the pie is shrinking for all, or the problem is internal and cost-related

 

Cheers, 

Clara

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Anonymous on Jun 11, 2022

Thank you!

Ian gave the best answer

Ian

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