At the end the interviewee should make a sound and actionable suggestion for the client to increase his profits again.
A good closing could be:
After studying the client’s case, we concluded that the main cause for the declining profits has been a price war among competitors in the long-life milk and plain yoghurt industry.
In order to counter this destructive trend of industry declining profitability I suggest that DairyCo develops and commercializes more sophisticated products with clear and distinctive USPs for which it can charge clients a price premium (for instance flavored yoghurts, fresh milk, low-fat yoghurt, etc.).
There are three reasons:
1. Cutting costs
This is not a viable option. For most cost blocks, a cost optimization has already been done. For others, a very large investment would be required (decrease of production costs).
2. Selling more of the current products
This is almost impossible (be it for existing clients or for new clients) as this would require a further decrease in price (products are seen as commodities).
Doing this would make the price war worse and probably decrease even more the profitability of the whole industry.
3. Developing new products
New products with clear USPs would allow DairyCo to position itself in the market aiming at specific groups of clients (low-fat yoghurt would aim young, healthy customers for instance).
Having a price premium would allow for a much bigger profit margin per product and therefore a bigger overall profit.
This case is all about discussing ideas to improve revenues so that the client can improve its bottom line (profits). The candidate should also inquire about the possibility of reducing costs, even though it does not come into question in this specific case.
As you will notice in the “Suggested approach” section, the focus should not be on the numbers or math, but rather on concepts. This is more of an interviewer-led case interview since the interviewer is supposed to help and guide the interviewee to the point where they can brainstorm possible ways to increase revenue.
However, don’t give the interviewee too much guidance too early.