Bain Business Case

Question

Hi,

This is a question from Bain sample case. I attach the question and relevant graphs below. I know that the answer is 2.7 but im not sure on how to get to this. I would appreciate if someone could give me hints on how to solve this. Thank you very much!

The whole case can be found in this link if someone finds it useful: https://drive.google.com/drive/folders/1X_4awAfTq302vQyT1m7pbHj4PRontjkv?usp=sharing

Answer 1

Hi,

based exclusively on the question and graph you provided, I would answer as follows:

Based on graph 2, ChemicalCo currently sells (1.2 + 4.5 + 7.2 + 6 + 3) = 21.9 kty of Chemical_A to local Chemical_1 producers (players A to E);
If ChemicalCo acquires players C and D, my hypothesis would be that it will fulfill 100% of players C and D's Chemical_A needs, thereby gaining an additional 4.8 kty * $1.0k/ton = $4.8M in revenues;
However, by acquiring players C and D, ChemicalCo will lose local customers A, B and E, losing (1.2+6.0+3.0) kty * $1.0k/ton = $10.2M;
Finally, ChemicalCo will export the difference between the quantity it currently sells locally and the new quantity it will sell after the acquisitions (equal to the sum of the entire Chemical_A need by players C and D, i.e. 7.5 + 9.0 = 16.5 kty). That is, it will sell an additional (21.9-16.5) kty = 5.4 kty at a price of $0.5k/ton, resulting in additional revenues of $2.7M.

Overall, the change in ChemicalCo's EBITDA will be equal to: $4.8M - $10.2M + $2.7M = -$2.7M.

Hope this helps.

Answer 2

Hi Valeria,

I see this is your second post in a short time for Bain sample cases.

It's great that you're using the Q&A here...that said, I highly encourage you to really think through these problems as much as possible before asking for help!

This is the classic "giving a man a fish" vs "teaching how to fish" scenario. Gianluca has given a great response...take time to reflect not on his answer, but how he decided to think about/break down the problem! Patterns should emerge.

Good luck :)

Answer 3

Hello!

+1 Gianluca, super didactic :)

Bear in mind that you need quite some agility to be able to do this -the overall thinking + calculations- in minutes.

Cheers,

Clara

Answer 4

Hello,

1) Earlier market share - ( A + B + C + D + E ) = 21.9

2) New market share - ( C + D )( 9 + 7.5) = 16.5

Domestic market share lost = ( 1 - 2 ) = 5.4

Since, domestic market share has to be exported at .5 ( or half the price of domestic market revenue lost will be exactly half) = 5.4/2 = 2.7

Or 5.4 * .5 (export rate) = 2.7

Any other calculation you do will consume time & confuse you more is what I feel.