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Finally, recommend specific steps that VieTire can take to protect themselves from increased competition.
Lay Out Your Thoughts
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Specify what steps we must take to understand the cost differences now, and in the future, of VieTire and its competitors
Dig Deeper: Gather Facts/Make Calculations
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What would you say are the major costs associated with making a tire? Raw material comprise about 20% of the cost, labor 40%, and all other costs such as overhead 40%. The average tire cost about $40 to make.
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It seems that labor is a major cost, $16 per tire. Why? Things are done more manually. Most of technological advances in the industry have not yet been implemented in Vietnam. What about the cost structure of the competition? An average tire manufacturer in the US produces tires at a cost of
$30 each.
HBS Case Interview Guide, Page 43
o
Assuming shipping cost to Vietnam of $4 each tire, and a tariff of 50%, the average cost of an imported tire in Vietnam amounts to $51.
So currently, even though the cost to produce a tire in the U.S. is much cheaper due to technological advances, foreign competitors are out of luck because of the …show more content…
In a market research study we commissioned, the product was seen as very similar to the number two product in our technology segment, slightly inferior to the number one product, and slightly better than the generic products. The new technology was viewed as far better due to a lower level of sedation.
Candidate:
So to summarize the market environment, although the anti-depressant market is attractive, the segment that we would be participating in is relatively unattractive and runs the risk of becoming smaller and more competitive over time. Additionally, within this unattractive segment, we have limited ability to differentiate ourselves relative to our competitors, and thus, will not be able to charge a premium price.
I would think that this unattractive market and relatively undifferentiated position within that market would translate to a lower market share. I would estimate that our share might be lower than either of the branded products given our new presence in the market, say maybe a 2-4% share and this, like the rest of the segment, would probably decline over the next couple of years.
Interviewer:
That sounds about right.
Commentator: In understanding the revenue potential, the Candidate did several key
Finally, recommend specific steps that VieTire can take to protect themselves from increased competition.
Lay Out Your Thoughts
•
Specify what steps we must take to understand the cost differences now, and in the future, of VieTire and its competitors
Dig Deeper: Gather Facts/Make Calculations
•
What would you say are the major costs associated with making a tire? Raw material comprise about 20% of the cost, labor 40%, and all other costs such as overhead 40%. The average tire cost about $40 to make.
•
It seems that labor is a major cost, $16 per tire. Why? Things are done more manually. Most of technological advances in the industry have not yet been implemented in Vietnam. What about the cost structure of the competition? An average tire manufacturer in the US produces tires at a cost of
$30 each.
HBS Case Interview Guide, Page 43
o
Assuming shipping cost to Vietnam of $4 each tire, and a tariff of 50%, the average cost of an imported tire in Vietnam amounts to $51.
So currently, even though the cost to produce a tire in the U.S. is much cheaper due to technological advances, foreign competitors are out of luck because of the …show more content…
In a market research study we commissioned, the product was seen as very similar to the number two product in our technology segment, slightly inferior to the number one product, and slightly better than the generic products. The new technology was viewed as far better due to a lower level of sedation.
Candidate:
So to summarize the market environment, although the anti-depressant market is attractive, the segment that we would be participating in is relatively unattractive and runs the risk of becoming smaller and more competitive over time. Additionally, within this unattractive segment, we have limited ability to differentiate ourselves relative to our competitors, and thus, will not be able to charge a premium price.
I would think that this unattractive market and relatively undifferentiated position within that market would translate to a lower market share. I would estimate that our share might be lower than either of the branded products given our new presence in the market, say maybe a 2-4% share and this, like the rest of the segment, would probably decline over the next couple of years.
Interviewer:
That sounds about right.
Commentator: In understanding the revenue potential, the Candidate did several key