Case

Pickup Manufacturer

Solved 3.2k times

Problem Definition

The automobile manufacturer CarsCo has difficulties with the profitability of his pick-up unit in Thailand. The candidate is supposed to evaluate the situation by answering a line of questions that are presented in the “suggested approach” section.


Comments

The case is focused on the company’s Pick-up unit in Thailand only. Other parts of the company (countries or business-units) are not considered. First, the interviewee can discuss general possibilities of the manufacturer’s business. Afterwards, the situation presented in the case and the company’s profitability should be analyzed with a strong focus on costs.


Short Solution

CarsCo should fire a corrupt manager.

---

This case is provided by our Expert Robert Steiner. You can schedule a meeting with Robert in our experts section.


Detailed Solution

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:

I. Business

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.

II. Profitability

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.

Main conclusion

  • 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.

III. Analysis

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.

Main conclusion

  • 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.

IV. Conclusion

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.

Difficult Questions

How would you deal with the corrupt manager?

Several solutions are possible. The aim of the question is to test the common business sense and the ability to think through possible consequences of actions.

Challenge the candidate by opposing his position with possible problems and other solutions you would prefer.

Dismiss the manager with publicity

+ Other corrupt managers are alerted and stop their illegal activities

+ You are seen as strong problem solving manager

- Indemnification can be claimed via legal action

- Bad PR and negative impact on sales that surpasses indemnification and better future supplier contract.

Dismiss the manager secretly

+ No bad PR and impact on sales

- The next manager might also fall for the corrupt offer of the supplier

- Really bad publicity if incident becomes public and legal action against company

Remove supplier

+ Other suppliers are alerted and less likely to become part of such a deal in the future.

+ You are seen as strong problem solving manager

- Bad PR and negative impact on sales that surpasses indemnification and better future supplier contract.

- Could result in a lawsuit from the supplier side.

Do nothing

- You are seen as a weak problem solving manager.

- CarsCo continues to have a negative or small margin in the market.

Related consulting question(s)
Best answer so far:
McKinsey / Accenture / More than 300 real MBB cases / Collected all Big 3 offers / Harvard Business School

Hi, 1) Youproactively ask in the beginning, even before drawing the structure (something like "What kind of products / revenue sources do we have) and then split the structure into price, qty,... (more)

Best answer so far:
McKinsey / Accenture / More than 300 real MBB cases / Collected all Big 3 offers / Harvard Business School

Hi, The general framework for pricing is: Cost base - Value based - Competitor based - pricing strategy 1. Cost based - you actually check what are the costs and apply standard industry / target... (more)

Best answer so far out of 5 answers:
Hugo
Expert
Current BCG Active Project Leader |Former A.T. Kearney |+8Y of consulting experience | Received 8 consulting offers in the past 2Y

Dear Future Consultant, At the beginning, it is tough to draw the line between the so called "initial questions" and the "structure." To master this skills would require practice, and what you have... (more)

Best answer so far out of 4 answers:
Ex BCG | MBB Specialist | #1 Expert for meetings done (900+) and recommendation rate (100%)

Hi Moji, it seems your issue is not the math computation, but rather how to structure the math part once you receive a question (that is, the logic behind that you should apply). This means you sho... (more)

[Pop Germany] * [% adult] * [% drivers license] * [% afford car] * [% owns car] * [% with internet connection] * [% aware of car sharing] * [% OK to share car] * [% actually does it] * [# of times sha... (more)

Related BootCamp article(s)

Profitability Case

Learn to crack Profitability Framework Consulting Cases, which are the number 1 reason for real consulting projects and hence are an important case type.

4 Comment(s)

The Value Chain

The Value Chain - as e.g. by Porter - is a classic framework to structure the activities of a business and add value to products by transforming resources.

3 Comment(s)
4.2 (103 ratings)
4.2 5 103
Case exhibits


1. What general options does CarsCo have for his business unit?



2. How would you approach the problem at hand?




3. What are the most important costs that occur in the automobile industry and in their relative percentage?



4. On which information or data should an analysis of costs of material be done?