SAMPLE STRUCTURE
The structure of this case should be mainly about profitability. The candidate should notice there are external and internal factors that may influence in the company and should highlight which of those can be potentially harming the company’s revenues (market trends, competition, customer needs, etc.). Most of REEVE’s costs are from R&D. The company has no factories and has a tiny sales force, mostly focused on the aftermarket.
Why is profitability decreasing?
Revenues
- Quantity
- Market: Car sales decreased in Europe?
- Competitors: Do they have any expiring patents? Are competitors including new products? Are competitors becoming more profitable? Are existing competitors consolidating? New competitors?
- Customer needs: OEMs switching to a different technology? Is new regulation affecting the industry (OEMs forced to use more efficient solutions to improve car consumption rates)?
- Product mix: Are we selling less high-priced products? Has product bundling changed?
- Price
- This is a competitive market, has the company run any excessive discounts recently?
- Are OEMs holding a bargaining position and have they adjusted our prices?
Costs
- Variable costs
- Have any of the Cost of good sold raised sharply recently?
- Fixed costs
- R&D: Research and development
- Labor
- SGA: Sales, General and administration
- Recall costs