John Smith is the President of “ABC Co”, a local company that manufactures industrial products

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John Smith is the President of “ABC Co”, a local company that manufactures industrial products.  ABC Co sells several product lines, each having multiple individual items (SKUs).  ABC Co sells directly to their customers with their own sales force and provides each customer a negotiated price quotation for each product they may want to purchase.   ABC Co does not have a published “List” price for their products.

John has a problem.  For the past 2 years, he has been experiencing cost inflation in his raw materials and, as a result, his margins have declined to an unacceptable level.  Early this year, John tried to address this situation by announcing a price increase to his customers, with an effective date of February 1, 2008.  The price increase was set at 5% across the board for all customers and products.

Several months have since passed and the profit improvement he expected has not materialized.  John’s sales manager assures him that the sales persons implemented the price increase everywhere they could, except for “a few” exceptions due to competitive reasons.  So, John doesn’t understand why his bottom line did not improve. 

John is feeling pressure from the Board of Directors to recover his cost inflation and get his profit margins back to acceptable levels.  He feels that another price increase to his customers is needed but is concerned about the ability of his organization to deliver the benefits of an increase to the bottom line. 

Yesterday, John called you for advice on the next price increase.  At your request, he has sent you a sample of invoice data for 3 customers, covering 2007 and 2008 year to date.  This is a representative sample of the data. You have a couple of days to review this data and formulate your answer to his request for help.

 

Instructions:

Please plan to present the following:

 

•             Executive Presentation to “ABC CEO” of your analysis, findings & recommendations (PowerPoint Presentation)

•             Presentation should include Executive Summary, clear visuals, and communicate your findings and recommendations at a high level

•             Be sure to call out your most significant findings

•             Completed Analysis (MS Excel). Please be prepared to walkthrough how you performed your analysis and calculated your results to support your findings and recommendations

•             Timeframe – The entire session will take between 1 - 1 ½  hours. (Your slide presentation should take about 20 minutes, then you will walk through your data and answer questions, the remainder of the session will be for behavioral interview questions etc..)

 

We want you to be creative and have latitude in what/how you present, however, please be sure to fully answer the following questions in your analysis and presentation:

1)            Using the data provided:

a.            Determine the price change amount for all customers and for all products – this should be completed at the customer – SKU level.  

b.            Any concerns about volume decreasing with the price increases?  Is there a relationship between these two? 

c.             Why do you think volume is down? What would you do next?

d.            Were the price increases successful (or not) across all customers/products?  Why?

e.            Any other insights?  What jumps out to you looking at the data?

2)            Please prepare and present your specific recommendations and advice for John & ABC Company

3)            We want our clients to view us as ‘trusted advisors’ and our goal is to stay engaged with them and help drive continuous improvements to their pricing practice long into the future.  Please include a slide on how you would approach continuous improvement with this client  

Our team will review the materials and may ask for additional work or details prior to your case presentation.