Grocery Wholesaler

At this point the interviewee should understand the company's problem and thus the interviewer should share some basic background information.

Market Economics:

• The market that the client is operating in is growing at the same rate as GDP, and high barriers to entry are present.

Client Characteristics:

• The client is the market leader, offering a range of high and low-end food products. Its main consumers consist of hotels and restaurants.

Competition:

• In each region, the client faces some competition, with most areas having a duopoly or fragmented industry.

2. What are three main points are important to mention?

Once the qualitative assessments have been made, the interviewee should identify these main points:

• The business likely has significant economies of scale and distribution, explaining their increases in market share in North America.
• For the same reason, it also makes sense that market share in Asia and Europe fell between 2012 and 2015.
• The decrease in the overall market share in Asia corresponds with the fact that Asia is mostly an emerging economy with high growth rates.

Key insights:

• Price competition should be less severe in North America than in Asia, due to the already high market share.
• Due to the company’s position as a market leader in North America, it could become a price leader.

1) The interviewee should identify that the missing label on the x-axis is price elasticity.

2) They should then be asked to illustrate what the relationship between gross margin and price elasticity is, and draw a downward-sloping line from the top left corner.

Key Insights:

• It is expected that there is a negative linear relationship between gross margin and price elasticity.

From Diagram 3, the interviewee should make the following observations:

• In reality, demand elasticity and gross margin do not have the negative linear relationship that was predicted in Diagram 2.
• Quadrants I and III are behaving in line with expectations, so nothing needs to be done.
• In Quadrant II, demand is very elastic, but high profit margins also exist – therefore, cutting prices and thus increasing profits is an option.
• In Quadrant IV, both elasticity and margins are low, suggesting that prices can be raised to gain additional contribution margin.

Key Insights:

• There are three main strategies that the client can follow to further increase profitability in each region.
• While Quadrants I and III are working well, changes need to be undertaken in quadrants II and IV.

The interviewee should come to the following conclusions:

• Decrease prices in Quadrant II
• Increase prices in Quadrant IV
• Continue the current pricing strategies in Quadrants I and III