The clear structuring of the problem (development of a profitability driver tree for BeautyCo as well as strong quantitative skills (calculation of profit margin, market assessment) are important. This case also tests the candidate's creativity (generation of possible countermeasures).
Question 1: After deriving a profit tree, the candidate should conclude that the high product price is the cause of declining profitability (through hypothesis building and concrete question asking).
Question 2: The candidate should calculate the margin and costs for BeautyCo and compare these with its main competitor. The margin for the exemplary product is 8%. A lower purchase price can be the solution to BeautyCo’s profitability issues, which can mainly be achieved by purchasing products on the grey market.
Question 3: Amazon has 100% of grey market products. The grey market share amounts to 30% of the overall market.
Question 4: BeautyCo should consider exerting slight pressure on suppliers, while positioning itself as a strategic partner to jointly protect the market from grey goods.