Argentinian toy manufacturer

Information that can be shared on the interviewee’s inquiry: 

The company segments their customers into local and international markets. Since there are no significant local competitors, the company charges local customers premium prices. The global toy market is growing at an average of 1% per year. (If the interviewee asks for a more detailed breakdown, say that every year, India’s market grows 10% and China’s market grows 15%. However, the U.S. and European markets are shrinking at a yearly rate of 5%.) The Argentinian toy market is growing at a yearly rate of 10%. U.S., Chinese and Indian imports threaten our client’s local position.

Key Insights

There are NO significant competitors in the region. However, imports could provide some competition.

The interviewee should ask about the company’s product portfolio: Type of products Prices & Margins Number of sold units

The interviewee should ask about the percentage of products sold in local and international markets.

(The interviewee should realize that different average prices indicate that different market segments have different price points.)

Key Insights

Product 1 & 3 are more profitable locally. Product 2 is more profitable internationally.

Information that can be shared on the interviewee’s inquiry:

• Factories are operating at full capacity.
• Production lines cannot be easily altered to produce different products. It will cost a lot to alter production lines.
• The only local distribution channels are specialized toyshops that our client owns. Products sold internationally are sold to big importers.
• 90% of international sales are to the U.S. market.

Key Insights

The factories are running at full capacity. Without significant investment, factories cannot easily change the production mix.

After calculating profit margins, we know that Products 1 & 3 are more profitable locally while Product 2 is more profitable internationally.

In order to maintain their leading position in the Argentinian market, the client could consider reducing its price to compete with Indian, Chinese and U.S. imports. Although this would reduce profit margins, the client’s market size could increase, thus increasing the client’s overall profitability.

The client should also consider partnering with Argentinian clients to develop new products and to establish new distribution channels (e.g.: franchising, selling at supermarkets, selling online) to increase their client base.

The client should ask the local Argentinian government to help its exports become more successful.

Ways the Argentinian government could help our client:

• Subsidies
• International commerce chambers
• Customs tax partnerships

The client should also consider acquiring companies in more promising markets (e.g.: China and India) because their main export market, the U.S., is shrinking.