Paragraphs highlighted in green indicate diagrams or tables that can be shared in the “Case exhibits” section.
Paragraphs highlighted in blue can be verbally communicated to the interviewee.
Paragraphs highlighted in orange indicate hints for you how to guide the interviewee through the case.
The following framework/structure gives a short overview of the case:
1. What general options does CarsCo have for his business unit?
Although told to discuss whatever comes into his mind, the interviewee should answer in a structured manner.
A good way is to build a decision tree. The first two branches could answer the questions whether pick-ups should be manufactured or not with a “YES” or a “NO”.
The structure should be developed with the candidate before discussing the next question. A general understanding of the situation and possibilities of the market can be enquired.
Share Diagram 2 with the decision tree after some brainstorming.
Usually, there are a few possibilities to develop the business (restructuring, mergers & acquisition, new business models and markets). If the candidate names more than one possibility, he should reduce it to one.
2. How would you approach the problem at hand?
As this is a profitability case, the profit equation should be discussed:
Profit = Revenue - Costs
Since the solution of the case lies within the costs, the interviewee should be led towards revenue first.
Share Diagram 3 & 4 with an overview of the revenues and margins of different pick-up manufacturers.
- Looking at revenue, CarsCo is among the average.
- Looking at the margins, all competitors have acceptable rates except CarsCo.
As a result, it could be concluded that there is a problem rather with costs than with revenue and the solution is not to be found there.
By now, the interviewee should have asked for additional Information on the costs of the pick-up business unit. Before continuing, ask the interviewee the following question.
3. What are the most important costs that occur in the automobile industry and in their relative percentage?
Share Diagram 5 with the cost structure of CarsCo afterwards.
Because the costs of material are responsible for up to 75% of the overall costs, the interviewee should focus on them in order to find potential for optimization.
At the end additional actions to reduce the costs can be discussed.
4. On which information or data should an analysis of costs of material be done?
Share Diagram 6 with an overview of CarsCo’s suppliers afterwards.
- The suppliers Sup 1 and Sup 2 have an above average and unusual high margin for a supplier in the automobile industry.
- This leads to an overall decrease of CarsCo’s margins in the market.
The next questions of the interviewee should focus on finding out how these margins were able to develop. Let her or him find creative answers and possibilities.
In this particular case, Sup1 and Sup2 were able to achieve such a high margin because the procurement director of CarsCo was corrupt and bought materials for excessive prices in order to make money for himself.
It is not expected of the interviewee to come up with this solution, it would be merely a lucky shot.
Important is that he continuously gets closer with the help of his or her conducted analysis and suggested possibilities to explain the high margin of the suppliers.