This case tests the candidate's ability to analyze market dynamics through financial calculations and strategic positioning. The core insight requires recognizing that competitors segmented the market by geography and profitability, forcing Aces to either match their pricing strategy or differentiate through cost leadership in specific segments.
Our client, Aces, is a package delivery firm that operates in Country XYZ. Five years ago, XYZ’s government deregulated the package delivery industry, leaving three identical firms to fill the void. The only requirement for the firms is that each must operate in each municipality in the country.
The market in XYZ has been constant for nearly 3 decades (300 million packages per year). Since deregulation, Aces has charged $0.44/lb and seen an average weight per package of 5 lbs.
For the first 45 months, Aces, along with Deuces and Jacks, maintained 33.3% of market share with each earning 10 cents in profits for every dollar it charges its customers.
About 15 months ago, Aces saw a dramatic drop market share (falling to 20%) and revenue. Three months later, they rebounded (market share reached 40% and revenue grew as well).
We have been hired to determine if any changes should be made within Aces in this new dynamic.