Corveta Motors Faces a Discount Entrant
Strategy
medium45 min0 submissionsGoldman Sachs
Scenario
Corveta Motors is the share leader in automotive in Europe, with 30% of the market, €444 M of revenue and a 20% operating margin.
A venture-backed entrant launched nine months ago at a price roughly 24% below Corveta Motors's. It has taken about 6 points of share, concentrated in the price-sensitive segment. Its product is credibly good, though narrower in scope.
What is known:
- 40% of Corveta Motors's revenue comes from premium customers with switching costs and multi-year contracts
- The entrant has raised heavily and is understood to be operating at a loss
- Corveta Motors's sales team is asking for authority to discount to hold accounts
The board wants a considered answer, not a price war.
Supporting data
entrant
- profitable
- false
- price discount pct
- 24
- share taken points
- 6
incumbent
- revenue
- 444
- market share pct
- 30
- operating margin pct
- 20
- premium revenue mix pct
- 40
derived hints
- operating profit
- 89
- margin if matched pct
- 0
Your task
Recommend a competitive response. Your answer should provide:
- Analysis — the entrant's position and economics, and what is actually at risk.
- Risks — what could go wrong with your response, and what you would monitor.
- Recommendation — a specific course of action, including what you would not defend.
State any assumptions you make.
Ready to move forward? Up next: Quantile Capital: Where Should the Acquisition Budget Go?Next question
How you'll be graded
100 points, 60% to pass.
- recommendation25
- competitor analysis25
- problem structuring25
- quantitative analysis25
Hint
Reveal suggested structure
Segment the base; entrant sustainability; match vs hold economics; targeted response