Widget Manufacturer in Brazil

Question:

A widget manufacturer in Brazil has a 60% national market share and has a leadership position in South America. However, it only has a 5% international market share. The top 20 clients buy 80% of its products and the manufacturer is concerned with increasing margins and exploiting new sources of revenue. Their CEO has asked you to gather data and brainstorm potential ideas for increasing margins and market share.

Interview Guidance (general information to be given if asked):

Market Information:

• Market is growing at 5%
• No significant competitors in the region
• Greatest threat comes from U.S., Chinese and Indian imports
• Premium pricing for national customers

Company Information:

• Plants are operating at 100% capacity
• Plants can’t shift from producing one product to another
• Currently company sells products directly to customers

Interviewee should ask to understand the products and profitability of each. Remind them that the company sells its products in local and international markets. ***Please use Exhibit A when asked this question***

Interviewee should ask about the breakdown of international and national markets. ***Please give Exhibit B when asked this question***

• Ask them to calculate profit margins (should use the unit costs in Exhibit A).
• Assume no freight costs, taxes, etc

Logical Conclusion:

Product A is more profitable nationally while Product B is more profitable internationally. (Please see Exhibit C). For national markets, the client should consider reducing prices to gain market share from India, China, and the U.S. to maintain their leadership position. They should also consider developing new products in partnership with local clients and establishing new distribution channels to better serve smaller clients. Internationally, the client should seek support from the government to aid in the export of products. For example, create commercial partnerships at the government level. They should also consider acquiring a company in the markets they would like to enter as well as setting up distribution channels to reach these customers.

Successful Roadmap:

The interviewee should understand the market dynamics, which products are more profitable than others and where this happens, and should brainstorm to figure out how to exploit this information.