Expert case by Ian

Bain + BCG - Hot Wheels

This is a candidate-led case, the style of which could be seen across a range of consultancies, but particularly BCG and Bain. The case is split into 3 main parts:

Market Analysis
Competitor / Product analysis
Supply chain solutioning

In addition to the above, this case tests a candidate's understanding of profitability, the automotive industry, globalisation, and, of course, chart reading.

The following can be verbally provided to interviewee if asked:

Our client serves the Japanese, Korean, and US markets
They specialize in the production of 5 products: carburetors, A/C units, wheels, airbags, and seatbelts
Profits have been steady in Asian markets, but they've noticed a big drop in profitability in the US
They care a lot about profitability, as they have limited capital – as such, efforts need to be focused in areas with the highest profitability

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Scoring Criteria: Use the following grading system for each skill area:

a. Structured Thinking (Frameworking):

1 = Lacked a coherent structure

5 = Pinpointed the appropriate issue, segmented it into a complete set of non-overlapping components (e.g., MECE), presented a plan to tackle the case, and offered valuable insights.

b. Numeracy/Math:

1 = Committed numerous errors and required assistance in setting up equations

5 = Performed calculations accurately and with confidence, identified implications, designed a clear and efficient approach, and demonstrated exceptional speed.

c. Judgement and Insights (Charts & Exhibits): 1 = Missed basic insights 5 = Connected findings to develop practical recommendations, made reasonable hypotheses, shared impressive insights, and flagged far-reaching implications.
1 = Overlooked fundamental insights

5 = Linked observations to devise actionable recommendations, formulated plausible hypotheses, conveyed strong, objective-driven insights, and highlighted impact.

d. Case Leadership (unless interviewer-led):

1 = Frequently disoriented and dependent on guidance

5 = Advanced autonomously and maintained focus on the question and the client's objective.

e. Creativity:

1 = Had difficulty generating original ideas

5 = Offered a variety of strong and diverse ideas, tailored to the industry and business context.

f. Presence:

1 = Not client-ready

5 = Exhibited professionalism, charisma, enthusiasm, and self-assurance.

g. Communication:

1 = Unclear and disorganized

5 = Demonstrated active listening, spoke precisely, and communicated concisely.

h. Synthesis (Final Recommendation):

1 = Failed to provide a coherent and well-founded recommendation

5 = Justified recommendation with key considerations, potential risks, and subsequent steps to address those risks.

During the Interview: As the candidate progresses through the case, take notes on their performance in each skill area. Be prepared to provide feedback at the end of the interview.

Post-Interview: After the interview, grade the candidate's performance in each skill area based on your notes and the scoring criteria. Share the scores and any specific feedback with the candidate to help them understand their level of readiness for the actual interview.

Improvement: Encourage the candidate to focus on areas where their performance was weak and provide guidance on how they can improve in those areas.

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Style:

Candidate-led (usual style)

Topics:

Competitive response, Growth strategy, Market analysis, Operations strategy, Profitability analysis

Rating:

4.6

(300+ Ratings)

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4.6

300+ Ratings

Intermediate

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Case Prompt

Problem definition: Our client is Korean Car Parts (KCP), a multi-national original equipment manufacturer (OEM) of car parts based in Korea. They've recently seen a decline in profits and have brought us in to understand how to address this falling profitability.

Exhibits

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I. Geographic/Market Analysis

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The following information can be shared if asked:

KCP serves the Korean, Japanese, and US markets
They are seeing good, growing profits in Japan and Korea, but US profits are falling
The US Market is not declining overall, it’s increasing/growing (KCP's competitors in the US market are seeing growth)

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In the first phase, the candidate needs to figure out if there is a geographic specificity to the client's falling profits. The interviewee needs to ask if we’re seeing differences in the different markets the client serves.

The candidate needs to realize that our client's presence in the US market needs further investigation.

II: Parts Analysis - Part 1

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If asked, you can provide the following information:

Our clients sells the same products across all markets
They specialize in 5 different products – carburetors, A/C units, wheels, airbags, and seatbelts

Note for Interviewer

If the candidates asks for a breakdown of sales by product, exhibit 1 can be shared.

Note for Interviewer

If you want to test the interviewee's math, prompt them to calculate how much profitability will decrease next year in total, and across all parts. They are allowed to round to the nearest million.

To calculate profitability, the candidate will need to know the following profit margin:

Carburetors = 52%
Wheels = 25%
Airbags = 20%
A/C units = 40%
Seatbelts = 50%

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It’s very important that the interviewee asks about what types of original equipment our client manufactures.

The interviewee needs to identify that total profits have been decreasing, and that falling sales in Wheels, Airbags, and Seatbelts is the culprit.

Profitability will decrease by

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If our client stays the course, profitability will decrease by $43M

The breakdown is as follows ($ in Millions):

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II: Parts Analysis - Part 2

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At this point, the interviewee needs to figure out what parts matter and what is causing sales to drop. If they ask, you can clarify the following:

Our client has not seen rising costs
We have seen falling revenues
Our client has not changed prices at all
No unusual government regulations/tariffs

Note for Interviewer

If the interviewee asks for any information as to why they are falling, turn it around on them. A good brainstorm question to examine the candidate’s thought process would be something like “what do you think could be causing falling quantities?”

If the interviewee suggests a change in consumer preferences or market share, you can share exhibits 2 and 3 with them, saying “well we have some competitor analysis/product research/analysis and here’s what we’ve found so far”.

The interviewee may inquire about the current delivery time. Our client currently manufactures in Asia, where costs are low, then ships the products eastward, over the Pacific Ocean to the US.

It takes our client 2 days to manufacture a product once ordered. It then takes 20 days to ship across the pacificand ~2 days to transport by road and rail in the US
Local competitors do not have to ship to the US, so they only take a total of 4 days to manufacture and ship to buyers

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Other answers can be given on the spot for other suggested possibilities, but they should all lead to the realization that profits are falling because of lack of demand for those products translating into fewer items sold.

What do you think could be causing falling quantities? → Possible answers to this question include:

Brand issues (answer - the client is a reputable brand)
Failure to meet orders (answer - we are supply constrained and need to prioritize production, but we have not been failing to meet orders)
Change in consumer preferences (answer - this could be something to look at)
Less demand for certain products (answer - the products are in high demand)
Competitors taking market share (answer - this is currently happening. We are losing sales to competitors)

The candidate should come up with the following insights from the exhibits:

For our client’s struggling products (Wheels, Airbags, and Seatbelts), consumers really care about time to delivery, which our client isn't providing but local competiton is
For carburetors and A/C units, those really align with our client’s strengths

The candidate should realize the 20-day difference in delivery times, and recognize that this is where our disadvantage in time to delivery comes from.

III. Solution

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Now that the interviewee realizes that the failing product lines are failing due to the transit of goods across the Pacific ocean, they must brainstorm some methods to fix this.

Some possible answers are:

Moving operations to the US
Building a warehouse in the US to store goods in anticipation of orders
Flying products over

Ultimately, the interviewee needs to realize that all of those options are both more expensive and take time + capital to implement, dramatically affecting margins. They should also realize that it is not an option to price compete, as this will also reduce margins.

The ideal solution for our client is to stop selling the product lines that are currently selling poorly in the US: Wheels, Airbags, and Seatbelts.

Additionally:

They could look to increase the prices we charge on carburetors and A/C Units, or promote them more aggressively in the US
They could also look to continue to leverage their presumed strengths regarding time to delivery in Japan and Korea for Wheels, Airbags, and Seatbelts
They could look to identify parts with characteristics similar to carburetors and A/C units that we can be sold in the US market to replace lost profits and create new revenue streams

Further Questions

Question: Why do you think our client decided to get involved in the US market in the first place, given today's just-in-time supply chains?

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Possible Answers:

An imperative/mandate for growth
The US market is growing and attractive (as stated) - they probably thought they could compete on quality (which they can for some parts)

Question: Are there any other markets you would recommend our client expand into? Why?

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Possible Answers:

Really anywhere where we can easily (quickly) supply parts AND has car manufacturing. Since we are in Korea, this may include (Eastern) Russia, China, Vietnam, Thailand, Malaysia
We may have exhausted our geographic options, in which case we should expand into other product markets. We should identify other parts that we can sell to our existing Japanese and Korean buyers

Question: Do you have any suggestions as to how our client can increase their delivery speed in their local markets?

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Possible Answers:

Build our manufacturing plants next to our buyers
Use predictive analytics to anticipate orders
Store already produced items in a warehouse (either on site, in a convenient holding spot in between our buyers, or right next to our buyers)
- Note: Bottle production companies do this for beverage companies

9.4k

Times solved

Intermediate

Difficulty

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