The aim of the case is get $300m in revenue however the calculation was done based off of margins i.e. profits. Don't understand how this makes sense?
The margin is used to calculate the wholesale price. A wholesaler is upstream to the retailer. the exhibit only shows retailer price. To get the wholesale price : retailer price * (1- retailer margin)
Hi Akshay,
This case perfectly underscores the important of doing industry deep-dives to better understand how different markets work!
Wholesalers sell to retailers who sell to customers.
Customers pay price 100. Retailers pay price $50 (to wholesales). Wholesalers pay price $10 (to produce).
In the above example, the wholesaler makes $40 profit and the retailer makes $50 profit. With this same logic, you can backtrack from profit to revenues.
They gave you the retailer's profits from which you can deduce how much the wholesaler sold for!
(edited)
Thanks for explaining Ian, that makes sense! My interviewer said that selling to wholesalers had a margin of 60%, which didn't make sense to me.
Ah thanks for explaining, that makes sense!