After looking at the table, the candidate should be able to come up with the following observations:
- The overall industry has shrunk
- The client's overall market share has declined
- Value-added is the largest segment and the firm has lost market share in this segment as well
From the above observations, the candidate should be able to make the following conclusion:
- It is a bad business to be in as the overall industry has shrunk, both on a price and volume basis
Since the overall volume has decreased, it could mean that the client and competitors are getting cut out from the value chain - the manufacturers may be directly selling to the resellers or to the end consumers.
Falling prices can be a result of the price wars which are happening because of the shrinkage of the industry. We can see that the industry is rapidly aging. Since there are no opportunities for product differentiation, there is little the firm can do to increase profitability. The firm should recognize this and look for options for exiting the industry.
The case is designed to be presented to the candidate by an interviewer, who plays the role of a representative of a telephony technology warehouser.