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BCG Hard Comparison Cost Optimization Operations

Mickey Tires

#Consumer Products #Manufacturing #Automotive #Tires
ProHub Comment

This is a candidate-led comparison case requiring structured financial analysis of two strategic options. The case tests the candidate's ability to build a comprehensive framework evaluating cost reduction, financial impact, strategic benefits, and risks while performing incremental profit calculations. The Chinese facility option emerges as financially superior ($36M vs $27M), but requires weighing geopolitical risks, operational complexity, and long-term strategic considerations.

Estimated Time 15 minutes
Difficulty Hard
Source PeterK
50 / 100
Mickey Tires is a U.S.-based tire manufacturer. In 2020 their sales shrank by 10% due to the pandemic-related drop in car mileage as states were locked down. With changing consumer habits, such as working from home and sky-rocketed appetite for e-commerce, the client expects downward pressure on demand for tires in 2021 and onwards as people will use vehicles less often. To ensure healthy margins the client is considering cost optimization strategies including moving their production to China or investing in more advanced production process at their current facility in Ohio. What option should they pursue?

Clarifying Information

  1. Mickey Tires offers tires for a wide variety of passenger vehicles
  2. Mickey Tires sells 80% of their tires in the U.S. and 20% in the international markets
  3. Mickey Tires sells tires for new cars and replacement tires
  4. In order to move the production to China, Mickey Tires would need to start a JV (joint venture) with a manufacturing company in China
  5. Mickey Tires has only one production facility (in Ohio)
  6. No specific goals provided