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Medium Profitability Operations Market Entry

Ganbei

#Consumer Goods
ProHub Comment

This is a structured profitability case requiring candidates to balance revenue opportunities against cost optimization through production network rationalization. The case progresses from basic variable cost analysis (China brewery vs. UK production) to identifying fixed cost savings through facility consolidation, ultimately requiring candidates to integrate both quantitative calculations and qualitative risk assessment.

Estimated Time 26 minutes
Difficulty Medium
Source IESE
10 / 100

Your client, Salford Breweries, is a medium sized brewer who has recently experienced sales growth in the Chinese market. While this is excellent news, Salford Breweries is facing difficulty growing in a profitable manner.

The CEO of Salford Breweries has been instructed by the board to improve the company’s net profit by 10% in 2019. She has asked for your help in achieving this target.

Clarifying Information

  1. Revenue in 2018 was £220 million, and the net profit margin was 50%.
  2. The client currently has three breweries, all of which are in the United Kingdom.
  3. Sales in China is currently 360,000 hectolitres (hL), and 1.1M hL for the whole business (1 hL = 100L).
  4. Salford Breweries currently only sells to the China and United Kingdom markets.
  5. Salford Breweries sells a Lager, an IPA, and a Wheat Beer. The IPA became their best-seller in 2017.
Mock Interview
Interviewer

Your client, Salford Breweries, is a medium sized brewer who has recently experienced sales growth in the Chinese market. While this is excellent news, Salford Breweries is facing difficulty growing in a profitable manner. The CEO of Salford Breweries has been instructed by the board to improve the company's net profit by 10% in 2019. She has asked for your help in achieving this target.

You

Thanks. Before analyzing, I'd like to clarify a few key questions...

Interviewer

Good question. Let me provide some background information...

You

Based on this, I suggest analyzing from these dimensions...

AI Score
Structure Analysis Communication Business Sense Quantitative
Practicing...
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Practice this case with AI Mock Interview

Salford Breweries needs to improve net profit by £11M (10% increase) to reach £121M by 2019. The solution involves opening a brewery in China to supply IPA (saving £5M on variable costs), while closing the Manchester brewery and consolidating Lager production at Sheffield (saving an additional £6.5M in fixed costs), totaling £11.5M in savings.

Key Insights:

  1. Strategic location decisions require considering both variable costs (production, logistics) and fixed cost absorption across the network
  2. Capacity utilization analysis across multiple facilities can reveal optimization opportunities through facility closure or consolidation
  3. Qualitative risks including operational execution, financial estimate accuracy, and stakeholder management must accompany quantitative recommendations in international operations