Pickup Manufacturer

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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.

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 of whether pick-ups should be manufactured or not with a “YES” or a “NO”.

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.

• 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.

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.

• The supplier 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.

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.

Several solutions are possible. The aim of the question is to test 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.

+ Other corrupt managers are alerted and stop their illegal activities

+ You are seen as a 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.

+ No bad PR and impact on sales

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

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

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

+ You are seen as a 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.

- You are seen as a weak problem-solving manager.

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