Cell Phone Manufacturer

ProHub Comment

This is a classic profitability paradox case where revenue growth masks margin decline due to product mix shift. The candidate must recognize that the client's #1 global position actually constrains their thinking—they're losing share in low-margin segments where they dominate volume but gaining nothing in the high-growth, high-margin $100+ segment. The strategic tension between short-term market share recovery (low/very low end) versus long-term profitability (high-end growth at 24% CAGR) is the core insight.

Estimated Time 15 minutes
Difficulty Medium
Source Cornell
50 / 100
This is 1996. Our client is a major cell phone manufacturer that has #1 market share globally, but are now #3 in the US. The US cell phone market has been growing at 15% CAGR and has an annual volume of 100M units. They would like to know what has happened to their market share in the US and how to go about restoring it to #1. They believe that the US market is key to their global dominance. Revenues have been increasing, while profits have remained flat; however, they believe this is due to the change in market share and is not a cost issue.

Clarifying Information

  1. It is essentially an oligopoly with 3 companies controlling almost the entire market.
  2. If ask about international market: answer is to focus on US for now.
  3. Timeframe: Mid-nineties. iPhone is not the answer!