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Case Interview Question #1:

Our client, Ponce Cement, is a constructions material producer in North West


Mexico. They produce cement like materials that are used in constructions. Ponce
has recently researched a new product which is a special cement to be used in
construction for single story low income houses. It cannot be used for multiple story
houses and it has a coarse finish, so it cannot be used in high quality houses.
However, there is a strong market for single story low income houses in Mexico and
Ponce says that the product will sell like hot cakes. We trust Ponces judgment on
this.
The client Ponce Cement has been approached by CEMEX, the number one building
materials company in Mexico, about this new product and Ponce has to respond to
CEMEX within a week. The options that CEMEX has given Ponce are:
A. Ponce and CEMEX will be partners. CEMEX will help Ponce in selling and
distributing the new material.
B. Ponce will sign CEMEX as the exclusive supplier of this new material.
C. CEMEX will buy over the rights to the formula for the new material and will
contract Ponce to further improve the formula.
Our consulting team is to help the CEO of Ponce Cement decide which of the three
options to take. What would you recommend?
CEMEX manufactures and distributes cement, ready-mix concrete and
aggregates in more than 50 countries. Also CEMEX is the number one building
materials company in Mexico and one of the ten largest cement companies in the
world.
Making CEMEX and Ponce partners will help Ponce boost its sales covering a
larger market, the rights to the formula will stay with Ponce, and because of mutual
interests of both companies any developments or improvements of the formula will
be through the combined efforts of CEMEX and Ponce thus benefitting both parties.
Making Ponce the exclusive supplier of CEMEX will help Ponce boost its sales
but with a risk that CEMEX, because of different interest of both companies and the
expertise of its well compensated employees, might reengineer the formula of the
special cement to a much better cement and discontinue the contract between
them.
Letting CEMEX buy over the rights of the formula for the new material will
give Ponce an instant boost to its current assets, but can potentially harm Ponce
later on. It can be harmful to Ponce if the current market that Ponce has would
patronize the special cement that CEMEX is producing.

Case Interview Question #2: Our client Johnston & Murphy is a major
global shoe manufacturer based in Nashville, Tennessee, United States.
The company specializes in handcrafted leather boots and dress shoes
for men and women. The Johnston & Murphy branded shoes are sold to
customers in the United States and 92 foreign countries.
Currently Johnston & Murphy is the #2 shoe manufacturer in the U.S.
(based on revenue) and are seeking to dethrone the #1 shoe
manufacturer. They have tried several strategies in the past and none
have worked. They are now looking to purchase the #3 shoe
manufacturer to see if combined, they can overcome #1. The #3
manufacturer has quoted a price of $480 million preliminarily for the
sale. Should they go forward with the acquisition? Why or why not?

Case Interview Question #3: Your client Mattel, Inc. (NASDAQ: MAT) is
an American multinational toy manufacturing company founded in
1945 with headquarters in El Segundo, California. The products and
brands it produces include Fisher-Price, Barbie dolls, Monster High
dolls, Winx Club dolls, Hot Wheels, Hot Birds and Matchboxtoys,
American Girl dolls, board games, and WWE Toys. Revenue in 2014 is
about USD $6 billion.
Your client Mattel is interested in potentially acquiring a smaller toy
company named Dolphin Co. which sells educational toys. Dolphin is
different from Mattel since it employs a direct selling model. They hire
independent contractors (ICs) to sell their toys for them: these ICs find
people to hold parties for them, and invite about 8-10 people whom
they sell these toys to. The ICs are paid 20% commission. If the ICs
refer a friend to sell Dolphin products and does so, that sale still
generates 20% commission for the new IC, but also an additional,
smaller commission for the person who originally referred him. This
process continues and you get an increasingly smaller cut of sales from
members that were referred by those you referred, etc. This downstream sums up to approximately 10% commission total. Dolphin has
been losing revenues lately. Two years ago they had $35M in revenue,
one year ago they had $28M, and this year they have $20M. This year
they are operating at zero profitability breakeven.
Although the cost of the acquisition is not significant due to their
relative sizes, Mattel wants to have a company that can pay its own
way. Your consulting firm has been hired to advise Mattel on this
acquisition. Specifically, you have been asked to address two
questions:
(1) What do both parties have to gain from this acquisition?
(2) Why is Dolphin losing revenues and what can they do about it?
If Mattel Inc. acquired Dolphin Co., Mattel Inc. will be benefited through
having a larger scale of operations, bring about new resources, increased revenues,
and potentially acquiring talented employees. Whereas Dolphin Co. will be benefited
through having a large addition to its existing distribution channel and get rid of
higher commission rates, escaping potential competition between a much larger
Mattel Inc. regarding educational toys, and also a better financial status.

Dolphin Co. is losing revenues because of the direct selling model scheme
implemented by Dolphin. The Commission paid to those independent contractors

and their referrals eat up what should have been the profit for Dolphin. The direct
selling model scheme should be stopped if cannot be stopped at least lessen the
negative effects. Through acquisition of Mattel Inc, which mean an additional
distribution channel, Dolphin can escape those independent contractors begging for
commissions. Its revenue will increase drastically.