Italian Beauty Company

Style:

Interviewer-led (McKinsey style)

Topics:

Market analysis , Profitability analysis

Rating:

4.3 (500+ ratings)

11.8k

Times solved

Intermediate

Difficulty

Rating

Problem Definition

Your client is Italian Beauty Company (IBC), a high quality beauty products company. It is well established in Italy.

One of their major product lines is high quality home hair-color kits. They manufacture these products in-house and sell it through retail outlets and drugstores.

Recently their market share has declined. Their competitor Cosmetica INT. has also become more popular.

IBC would like your firm’s advice.

Comments

Since this is an interviewer-led case, the interviewer should guide the candidate through the interview.

There are two parts to this case.

The first part is more qualitative. The open-ended questions should prompt the interviewee to think about the problem and its solution.

The second part is more quantitative in nature. In order to solve the questions, the interviewee should perform calculations.

The questions in the big boxes should be read out to the interviewee.

Short Solution

Show short solution

Solution

Paragraphs highlighted in green indicate diagrams or tables that can be shared in the “Information to share” section.

Paragraphs highlighted in blue can be verbally communicated to the interviewee.

1. How would you start thinking about this problem?

Since this is a very open question, there are a number of ways to approach it.

A good interviewee will mention the following aspects:

1. Product

Attributes
Ease of use
Value proposition
Price
Benchmark the product against competitor’s products
Trends

2. Customer

Target market segments
Brand loyalty
Price sensitivity
Important attributes
Customer preferences
Buying habits

3. Distribution channel

Distribution network
Shelf space and product position relative to competitors
Share of distribution network relative to competitors

2. Women are one of IBC’s biggest segments. However, their market share in this segment has been declining. How would you identify the reasons behind this trend?

Some suggestions:

Market research to investigate brand awareness
Benchmarking against competitor products

Suggested case structure:

Diagram 1

I. Product / Market

First we should have a look at the current market situation:

3. What is the current market [in $] for the company?

Share Table 1 (market development overview) and Diagram 1 (market share overview) if inquired by the interviewee.

Information that can be shared on the interviewee’s inquiry:

Market shares have been declining or stagnating in the last two years:

	10% p.a. for the women’s segment
5% p.a. for the men’s segment
± 0% for the teenagers’ segment

Key insights

IBC’s market share in the men’s segment is quite low.
The company’s market shares are declining.

The interviewee should calculate the current and future market share.

Current market

= 0.5 * $400 m+ 0.1 * $100 m + 0.25 * $50 m
= $222.5 m

Current total market share

Future market in two years

If we assume the current market share trends hold for women, men and teeneagers, the following sales will be the result:

Future market share

Market share change = 0.297 - 0.4045 = -0.1075

If the current market share trends hold, IBC will lose about 10.75% in market share over the next two years.

II. Customer / Brand awareness

4. What is the current level of brand awareness?

Information that can be shared on the interviewee’s inquiry:

IBC and Cosmetica INT. have the highest brand awareness in the market.
IBC and Cosmetica INT. are perceived as having high quality products.

 Share Table 2 (brand awareness overview) and Table 3 with the perception of quality.  

Key insights

Compared to IBC, Cosmetica INT. has higher brand awareness amongst customers and non-customers.
IBC should improve its brand awareness via advertising.
IBC should improve its perceived quality by investing in promotions and partnering with retailers to launch marketing campaigns.

III. Conclusion

A good recommendation will include the following statements:

Market information shows that compared to Cosmetica INC., IBC has lower brand awareness and perceived quality. This is one of the reasons for IBC’s declining market share.
If this trend holds, the company will lose a lot of market share.
To regain market share, the company should focus on advertising and marketing.
The company has low market share in the men’s segment. The company should target this segment because the women’s segment seems to be maturing,
The company’s market share in the teenagers’ segment seems to be very low. The company could increase their market share by producing innovative products and increasing acceptance and usage of hair color products.

Difficult Questions

How would you increase brand awareness amongst men? Can you increase brand awareness among both men and women?

We should first further segment the men’s segment, according to different needs.

Young men, using hair color for fun
Older men, using hair color to conceal grey hair

Then, we should target these segments by advertising channel.

In order to successfully target both men and women together, we must further segment the women’s segment. Then, we need to find advertising channels that can reach both segments. The advertised content must fulfill the needs of both segments.