Paper Product Overseas Growth

Note for Interviewer

A great candidate would ask clarification questions about the company's target, the business models etc. When asked, interviewer can provide the following information.

• The focus is on top line growth, i.e. revenue. Cost is not in scope.
• The client is a B2B seller. The paper board is sold to downstream processors (the “customer” in this case) who would make the paper board into different types of products, before the processors sell to retailers.

Note for Interviewer

Step 1: The candidate’s initial structure should include comparison of the two markets. Given the objective is increasing overall top-line growth of the company, it is important that the candidate ask about each market’s growth rate earlier in the process. If the candidate couldn’t get to ask this data point, ask him/her to revisit the objective of the client.

Step 2: If a candidate has already mentioned growth rate in the structure, as candidate starts asking for data, tell the candidate that the client has been growing at 1% in Indonesia (which is also in line with the overall Indonesia market growth), and ask the candidate to calculate what is the current client growth in the US market. 

Step 3: Once the candidate has arrived at the correct answer for client growth rate in the US, interviewer can provide the following additional market information, and ask the candidate which market should the client focus on, based on information provided.

• Market growth information (note this is different from client growth rates in the markets): Indonesia market grows at 1% (in line with client); in the US, top competitors have been growing at 15-25%
• Competition landscape: For Indonesia, there are only 2 players on the market; client takes up 55% and the other one takes up 45% of market; in the US, the market is more fragmented; the top player takes up 25% of market, the 2nd player about 20%, and client takes up about 15% market share, with the rest highly fragmented with many small players

Note for Interviewer

Step 1: After the candidate has arrived at the interim answer that the client should focus on the US market, share with them that the client has been trying to grow their business in the US faster but so far made not much progress. “The client wants you to help them understand what went wrong and how to fix it?”

Step 2: Provide the following information when asked:

• Manufacturing & logistics:
  • The client manufacturers in Indonesia, ships product to the US to store in its US warehouses, and then supplies from US warehouses.
  • Assume product lead time is not an issue, as the client keeps enough inventory in warehouses.
• Product: Assume product is a commodity and quality is similar to competitors’
• Pricing: Assume product is a commodity and therefore price is tagged to a public marker and the difference is very small amongst players
• Sales:
  • The client works with US distributors, while at the same time also has some direct sales to customers
  • The client has not been able to get long term contracts, only spot deals with smaller customers with duration no more than 12 months; while main competitors have locked in long term contracts with bigger customers
• After sales service:
  • Customer claim handling has been a big pain point for the client's customers.
  • Competitors process claims within a week and some give unconditional refund.
  • The typical handling process for client can drag to a couple of months.

Step 3: Once the candidate identifies the key gaps in sales and after-sales service, an excellent candidate would probe further to uncover the why behind the gaps. Additional information can be provided when asked:

• Sales: The client has hired a local US sales team. However, the sales team is compensated based on mostly fixed salary with a small portion of variable commission (similar to their colleagues in Indonesia), while competitors’ sales are paid on mostly commission.
• After sales service:
  • There is no dedicated PIC for claim handling in the US; claims have to be approved by HQ in Indonesia which also require a lot of internal communication and coordination.

Note for Interviewer

Now it should be pretty straightforward what the client could do to improve their business and grow faster in the US market. Ask the candidate “assuming you have been working on this case for a few weeks, and now you need to give an update to the BoD. What would you tell them?”