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Bain case: Asian

lubricants producer
Topic Difficulty Style
Market analysis, Market entry, Beginner Candidate-led (usual style)
Growth strategy

Case Prompt

LubricantsCo, a very successful Asian premium producer of lubricants in their native region,
would like to further increase their revenue and profit. The product range ranges from
lubricants in the automotive sector (e.g. motor and gear oil) to industrial applications (e.g.
fats, heavy-duty oils).

According to preliminary examinations, further growth potentials in the Asian core market are
rather limited. Thus, LubricantsCo would like to investigate options to internationalize in the
passenger car business – also outside the premium segment which is given priority.

Therefore, your consulting firm was instructed to elaborate a market entry strategy for the
European market.

Transaction ID: 116103 ([email protected])

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Additional Information

Information that can be shared if inquired:

Project phase 1 aims at prioritizing a test market within Europe and its neighboring
countries with the help of a structured selection process on the basis of typical evaluation
criteria.
Germany, Turkey, and Russia can be internally chosen.
In order to identify the test market that is the most appropriate for LubricantsCo, the two
typical dimensions of market attractiveness and probability of success should basically
be analyzed.
Market attractiveness is composed of the following dimensions:
Market size
Market growth
Market profitability
The prioritization of a test market, as well as the relevant dimensions of a market entry
strategy, should be summarized in a convenient design for the discussion with the
management board of the client.

Note for Interviewer

Share table 1 about a market review with the interviewee.

Market growth

Transaction ID: 116103 ([email protected])

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Information that can be shared if inquired:

Russia and notably Turkey are countries with relatively high market growth compared to
Germany.
This information can be used to estimate the market growth of car oils since more
motor oil will be used in growing economies in the future.
Russia and Turkey also have a growing market for premium motor vehicles.

Market profitability

Information that can be shared if inquired:

Profitability cannot be calculated directly, since no data is available.

Germany and Russia:
High intensity of competition
Low profitability
In Russia, the percentage of old vehicles is higher than in Turkey. The profitability is lower
than in Turkey since used motor oils generate barely any margins for old vehicles.
Due to the growing demand for high-quality oils as well as moderate competitive
conditions, Turkey has the highest qualitative profitability.

Note for Interviewer

Share table 2 with a template with the interviewee. Share table 3 with the solution if the
interviewee has difficulties with the task or has already set up the matrix.

Chart 2 shows an overview of the analysis.

Transaction ID: 116103 ([email protected])

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Information that can be shared if inquired:

Product

The product range that is offered in the domestic market ranges from lubricants in the
automotive sector (e.g. motor and gear oil) to industrial special oils and fats.
There are high regulatory guidelines for individual products for the European market.

Production / Supply Chain

In a best-case scenario, LubricantsCo continues to produce its lubricants in Asia only and
transports them to Turkey.
In this case, they can, on the other hand, only react very slowly to local fluctuations in
demand in Turkey or they need to have large stocks.

Channels of distribution

The sale of lubricants to automobile manufacturers (OEMs) for the first fill during
production is an important channel.
Another channel is the numerous chains of workshops, which sell a large number of
motor oils to car owners.
Furthermore, there are smaller local workshops.

Transaction ID: 116103 ([email protected])

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 An additional channel of distribution is gas stations, which, however, only offer their own
brands (e.g. Shell).

Brand

In order to lend the marketing campaign the necessary credibility and to emphasize the
attractiveness of the brand from the beginning, an important automobile OEM should be
won as a so-called lead customer for the Turkish market.
Next to B2C marketing, the B2B marketing on the lubricant market also has however a very
important role including for example workshops.

Price

LubricantsCo presents itself as a premium supplier in Asia and wants to pursue this
strategy in Turkey.

Transaction ID: 116103 ([email protected])

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Sample Structure

The following framework/structure would be a good approach for the problem at hand:

I. Background

Additional Information

Information that can be shared if inquired:

Project phase 1 aims at prioritizing a test market within Europe and its neighboring
countries with the help of a structured selection process on the basis of typical evaluation
criteria.
Germany, Turkey, and Russia can be internally chosen.
In order to identify the test market that is the most appropriate for LubricantsCo, the two
typical dimensions of market attractiveness and probability of success should basically
be analyzed.
Market attractiveness is composed of the following dimensions:
Market size
Market growth
Market profitability
The prioritization of a test market, as well as the relevant dimensions of a market entry
strategy, should be summarized in a convenient design for the discussion with the
management board of the client.

Solution

At this point, the interviewee should understand the situation and structure the problem-
solving strategy.

II. Prioritization

Transaction ID: 116103 ([email protected])

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Additional Information

Note for Interviewer

Share table 1 about a market review with the interviewee.

Market growth

Information that can be shared if inquired:

Russia and notably Turkey are countries with relatively high market growth compared to
Germany.
This information can be used to estimate the market growth of car oils since more
motor oil will be used in growing economies in the future.
Russia and Turkey also have a growing market for premium motor vehicles.

Market profitability

Information that can be shared if inquired:

Profitability cannot be calculated directly, since no data is available.

Germany and Russia:
High intensity of competition

Transaction ID: 116103 ([email protected])

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 Low profitability
In Russia, the percentage of old vehicles is higher than in Turkey. The profitability is lower
than in Turkey since used motor oils generate barely any margins for old vehicles.
Due to the growing demand for high-quality oils as well as moderate competitive
conditions, Turkey has the highest qualitative profitability.

Note for Interviewer

Share table 2 with a template with the interviewee. Share table 3 with the solution if the
interviewee has difficulties with the task or has already set up the matrix.

Chart 2 shows an overview of the analysis.

Solution

At this point, the interviewee should locate the test market. To do so the interviewee needs to
determine market attractiveness with the help of market size and profitability.

Transaction ID: 116103 ([email protected])

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 Market size

In Germany, each of approximately 40 million households has on average one car. This
corresponds to a stock of approximately 40 million cars and accordingly a density of 500
cars per 1.000 inhabitants (population: 80 m.).
calculation
Hide
Main conclusion

The interviewee should set up a comparison matrix.

It becomes obvious that Turkey is the most promising market and should therefore be selected
as a test market. Germany drops back due to low growth, Russia due to the difficult
competitive environment and structural disadvantages.

III. Strategy

Additional Information

Information that can be shared if inquired:

Product

The product range that is offered in the domestic market ranges from lubricants in the
automotive sector (e.g. motor and gear oil) to industrial special oils and fats.

Transaction ID: 116103 ([email protected])

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 There are high regulatory guidelines for individual products for the European market.

Production / Supply Chain

In a best-case scenario, LubricantsCo continues to produce its lubricants in Asia only and
transports them to Turkey.
In this case, they can, on the other hand, only react very slowly to local fluctuations in
demand in Turkey or they need to have large stocks.

Channels of distribution

The sale of lubricants to automobile manufacturers (OEMs) for the first fill during
production is an important channel.
Another channel is the numerous chains of workshops, which sell a large number of
motor oils to car owners.
Furthermore, there are smaller local workshops.
An additional channel of distribution is gas stations, which, however, only offer their own
brands (e.g. Shell).

Brand

In order to lend the marketing campaign the necessary credibility and to emphasize the
attractiveness of the brand from the beginning, an important automobile OEM should be
won as a so-called lead customer for the Turkish market.
Next to B2C marketing, the B2B marketing on the lubricant market also has however a very
important role including for example workshops.

Price

LubricantsCo presents itself as a premium supplier in Asia and wants to pursue this
strategy in Turkey.

Solution

Here the interviewee should set up a possible strategy for the market in Turkey. The 5 classic
dimensions of a how-to-win strategy should be addressed:

Product
Production / Supply Chain
Channels of distribution
Brand

Transaction ID: 116103 ([email protected])

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 Price

Main conclusion

Product: In order to keep the complexity to a minimum, you recommend LubricantsCo to

focus on motor and engine oils for the market entry phase, since this product domain
not only represents the largest volume of the Turkish market but also promises profit
margins above average.
Production: As soon as you calculate the costs for transportation and stock-keeping you
will realize that production in Asia for the Turkish market no longer makes sense – also if
only small amounts are produced. As the market entry in Europe should not continue to be
in a subcritical domain, you suggest a local production which will be supported by the
smaller production costs in Turkey compared to other European countries.
Distribution: OEMs generally have a preferred or exclusive supplier who covers a large
part of the volumes. However, this channel is very important for the branding and for
this reason for the perception of the end customer. Consequently, the OEM channel has
significant impacts on the business in the aftermarket which is dominant in terms of
volume. Not only does the value of an oil brand grow by connecting it with a popular car
brand, but it is also easier to win the authorized workshops of these OEM contract
customers as customers – at much higher margins.
Brand: In order to win a lead client, negotiations should commence with AsiaAutoCo, a
client who has been successfully supplied on the Asian market over the past years and
who is already active on the Turkish market. An essential component for success in the
B2B area is to convince the mechanics in the workshops. This will be guaranteed by the
quality and intense customer relations with the help of the Key Account Manager as
well as the local sales team.
Price: That is why the price strategy should be adjusted to the upper segment of the
Turkish market. This strategy will be supported by the planned partnership with AsiaAutoCo
and the high-quality product offer for the premium as well as the middle-quality segment.

IV. Conclusion

Solution

Transaction ID: 116103 ([email protected])

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The interviewee should draw a conclusion from the analysis:

Turkey is the most promising market and should therefore be chosen as a test market.
The dimensions of product, production, channels of distribution, brand, and price strategy
should be analyzed more closely for the market entry strategy.

Transaction ID: 116103 ([email protected])

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Further Questions

How would an inorganic growth in Turkey (acquisition or joint venture)

proceed?

Solution

Possible answers:

The company has to run through a target screening process in order to identify
attractive investment candidates or joint venture partners in this region.
The following investment categories should mainly be evaluated:
the attractiveness of the company
Fit with LubricantsCo (synergies, value proposition)
Furthermore, you have to check the availability of the acquisition candidate as well as
the financial side of a possible deal (e.g. financing options, price) for LubricantsCo as early
as possible in the process.

Further questions can be added by you, the interviewer!

At the end of the case, you have the possibility to suggest challenging questions about the case
(for instance, these can be used for further meetings in which the interviewee solves the case very
quickly).

Transaction ID: 116103 ([email protected])

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