Bain Case Style - Growth offensive at ChemCorp [NEW]

Information to be shared only under request:

• The Performance Chemicals division sells a range of compounds, chemicals, and solutions to fast-moving consumer goods (FMCG) companies
• The Performance Chemicals division operates and sells to clients in North America and Europe
• The goal of the client is to achieve 30% revenue growth in 2 years (growth refers to the revenues of the division of $500M)
• Revenue growth has been slowing down for the Performance Chemicals division in recent years and revenue is expected to remain stagnant unless something is done
• The client has allocated a budget of $50M for this growth strategy

Example of an excellent answer (score: 2)

GOAL CLARIFICATION

An excellent candidate would clarify the objective in terms of amount and timeframe, budget constraints, and understand how the division currently makes money.

STRUCTURE

A great candidate would include in the analysis the following elements:

1. Industry/segment potential. For each segment (current or new) where to grow, analyze
   1. Size and growth
   2. Market share estimate available (a function of competitors, barriers, and how good is the product in that segment)
2. Growth strategy
   1. Current offerings
      1. Increase price
      2. Increase volume
   2. New offerings
      1. Variation of existing offerings
      2. Diversify into brand-new offerings altogether
3. Opportunity assessment
   1. Direct results
   2. Potential synergies/cannibalizations
   3. Sufficient capabilities
4. Risks and next steps

The candidate may include additional elements, but there should be a rationale related to the objective of the Performance Chemicals division.

COMMUNICATION

An excellent candidate should present clearly the different areas in a structured way.

Moreover, the candidate should clearly present the rationale for why he/she wants to explore a particular point, connecting the answer to the objective of the client.

Suggested score

An excellent candidate should:

1. Clarify the goal of the client
2. Include the main elements in the structure as presented above
3. Communicate the structure in a clear way

Recommended score calculation: starting from 2, decrease the score by 0,5 points down to 0 for any of the following:

• The candidate did not clarify the objective
• The candidate missed points 1, 2, or 3 in the structure (not including risks and next steps is tolerable)
• The candidate included several useless elements in the structure (i.e., boiling the ocean)
• The candidate communicated the structure in a disorganized way or without a clear connection to the goal

Information to be shared only under request:

• The table shows information on the performance chemicals market across regions
• The majority of players (including our client) tend to produce and supply the entire range of performance chemicals (hence, the aggregation)
• The Number of Players is inclusive of our client (assuming they are present in that market)
• The Strength of Competitors takes into consideration factors like price and differentiation (although this is usually limited due to commoditization in the market)

Example of an excellent answer (score: 2)

• The client should look at growing its market share within Europe:
  • Europe has the best market size-to-number of players ratio; in other words, assuming each player captures a similar market share, Europe would provide the greatest revenue
  • Europe is the second fastest growing market behind Asia, which unfortunately has the highest number of players and competitive strength
  • The client’s market share is comparatively very low in Europe and there is likely much room to grow, especially since the client seems to be a leading player in North America
  • Growing in existing markets is also preferred to market expansion where possible due to lower risk and likely lower investments

Suggested score

An excellent candidate should: 

1. Ask for additional information
2. Identify that growing further in Europe is the best option, presenting his/her rationale in a clear way
3. Propose the next steps related to identifying whether the entry strategy could allow the client to reach the 30% growth objective

Recommended score calculation: starting from 2, decrease the score by 0.5 points down to 0 for any of the following:

• The candidate did not ask for additional information
• The candidate spent several minutes analyzing the information in the table without identifying the key points
• The candidate did not identify growing further in Europe as the best option
• The candidate did not properly present his/her rationale for selecting Europe and related next steps

Example of an excellent answer (score: 2)

An excellent candidate would identify at least 6 ideas. Possible answers are the following:

Growth Strategy:

1. Current offerings
   1. Increase price
      1. Invest in R&D to develop higher quality/differentiated chemicals
   2. Increase volume
      1. Decreasing price (assuming that price elasticities make sense)
      2. Offering better payment terms
      3. Offering bulk discounts
      4. Training sales team to better source and convert leads
      5. Expanding sales team presence to underserved/unserved regions
      6. Improving customer service
      7. Increase production capacity (assuming supply is the bottleneck)
2. New offerings
   1. Variation of existing offerings (e.g., other forms of Performance Chemicals)
   2. Diversify into brand new offerings altogether (e.g., fertilizers, cleaning detergents)

Suggested score

An excellent candidate should: 

1. Take some time to think of the question
2. Identify at least 6 possible ideas
3. Structure the ideas and illustrate them clearly
4. Present ideas that are tailored to the situation of the client

Recommended score calculation: starting from 2, decrease the score by 0.5 points down to 0 for any of the following:

• The candidate did not take time to answer
• The candidate did not present a structure to answer the question
• The candidate provided few answers / answers that are too generic / answers that are not focused on the goal
• The candidate did not present answers tailored to the chemical company

Example of an excellent answer (score: 2)

The candidate should realize that:

• Demand is the constraint here – i.e., Demand = 4.5% of 3M tons = 135k tons; Plant capacity = 150k tons; if the candidate does not realize this, prompt them with questions like “Do you think demand or supply is the constraint here?”
• The decision should be based on whether the incremental revenues exceed the growth target (i.e., 30% of $500M = $150M)

Approach:

1. New demand per year = market size (tons) * market share = 3M * 4.5% = 135k (# new volume will be 135k instead of 150k as the capacity is not fully used)
2. Incremental tons sold = new tons sold – current tons sold = 135k – 45k = 90k
3. Incremental revenues = incremental tons sold * avg. price/ton = 90k * $2,000 = $180M

The incremental revenues exceed the amount needed to meet our growth target and the financial constraint can be met; therefore, we should proceed with the European plant expansion.

Suggested score

An excellent candidate should: 

1. Take a reasonable amount of time to think of a way to set up the analysis
2. Identify that demand is the constraint without help from the interviewer
3. Complete the computations clearly
4. Contextualize the incremental revenues in terms of the growth target

Recommended score calculation: starting from 2, decrease the score by 0.5 points down to 0 for any of the following:

• The candidate did not set up the right analysis (e.g., missed that demand is the constraint)
• The candidate did not communicate the approach before beginning with the computation
• The candidate made mistakes in the computation
• The candidate did not connect the math results to the goal

Example of an excellent answer (score: 2)

The candidate should:

1. Recap the objective
2. Provide an answer-first approach to the question asked
3. Mention risks and the next steps to take

RECAP OF THE OBJECTIVE

“Our client asked us to help develop a growth strategy that will grow their revenues by 30% in 2 years.”

ANSWER-FIRST APPROACH TO THE QUESTION

“Based on our analyses, we recommend focusing on the European market by expanding the existing plant there. This is because:

• The European market is large, the second fastest growing, and has relatively weak competition
• We have much room to grow as we have a low market share there due to capacity constraints
• Expanding the plant will generate an additional $180M in revenues per year, exceeding our growth target and meeting our financial constraints"

RISKS AND NEXT STEPS

“The identified risks behind this analysis include the overestimation of the demand for our chemicals as we are expecting a 3X growth. Also, even if such growth is possible, it might take longer than 1 year to ramp up to such an amount. 

As for the next steps, we would like to analyze additional elements to ensure that the growth strategy is successful, such as: 

• Conducting a more rigorous risk analysis and coming up with mitigation strategies for the identified risks
• Review the expansion plan to ensure any operational impact is minimized during the expansion
• Double check the business case and potentially develop worst-, base-, and best-case scenarios”

Suggested score

An excellent candidate should: 

• Recap the objective of the case
• Present growing in Europe through plant expansion as the best option, with reasons
• Mention possible risks and propose the next steps related to the original structure and to implement the suggested approach

Recommended score calculation: starting from 2, decrease the score by 0.5 points down to 0 for any of the following: 

• The candidate did not have an answer-first approach
• The candidate presented the conclusion in a disorganized way
• The candidate did not provide reasons why growing in Europe through plant expansion is the best option
• The candidate did not conclude the recommendation proactively, mentioning the next steps