CanadaCo, the largest discount retailer in Canada, currently holds the dominant market share in the industry. USCo, the largest discount retailer in the United States, has decided to expand into Canada by purchasing CanadaCo’s competition. How should the CEO of CanadaCo respond?
WHEN considering a case that requires a competitive response, first take a look at the action which forced the company to respond.
In the example above, we should test the hypothesis that USCo has a cost advantage due to economies of scale. This advantage would allow USCo to provide lower prices to Canadian consumers compared with CanadaCo. As a result, USCo’s entry into the Canadian market would probably cause our client to lose market share.
Without a full understanding of the facts, a response could be determined prematurely, neglecting vital characteristics of the case. What other factors would you ask about?
If I were presented with the case above, I would ask questions specifically pertaining to the differences between the Canadian market and the US market in order to determine the magnitude of USCo’s advantage.
Once the situation has been fully fleshed out, the next step would be to recommend a course of action. CandaCo could opt to do nothing, or respond in one or more of the following ways:
- Change its pricing strategy,
- Hire top executives away from USCo,
- Acquire or merge with a competing company,
- Rouse customer loyalty through rewards programs and customer service,
- Mimic USCo’s new product offering,
- Market CanadaCo’s products and build brand awareness.
Let’s assume USCo is relatively unknown in Canada and will incur costs resulting from challenges in establishing a Canadian distribution network, but not enough to cause costs to rise to CanadaCo’s level.
The solution I would propose is that CanadaCo should focus on reputation. Unfortunately, attempting a price war with USCo would appear to be futile, and so I believe the best response would be to attempt to retain existing customers by developing CanadaCo’s customer loyalty program and by focusing on customer service.
How would you respond?
Strategy and framework adapted from Case In Point, a case interview preparation book written by Marc P. Cosentino. Case scenario is a derivation from a practice case provided by The Boston Consulting Group.
[For more information on consulting concepts and frameworks, please download “The Little Blue Consulting Handbook“.]