- The financial performance of the South American division of a chemical conglomerate* was highly unsatisfactory, since most of the Regional Business Units (RBUs) were struggling with:
- decreased contribution margins
- high fixed costs
- negative EBIT
- External factors also negatively affected the division's performance
- devaluation of Brazilian Real
- economic slowdown
- increased competition from national low-price products
- overcapacity in the industry
- Since the external factors were unlikely to change, the company needed to adjust to the new environment and find ways to achieve profitability.
- The company launched a company-wide effort, and required that all RBUs revise their current strategies and develop strategic plans to restore short-term profitability. The company asked Bain to support this endeavor.
Over a 12-15 month period, most RBUs were involved in a thorough full potential review of their:
- business environment
- current strategy
- sales performance
- variable and fixed costs
- production assets
- investment plan
- supply chain management
- financial performance
Each RBU was analyzed in a ten-week cycle, working closely with the Bain team. A proposed full potential strategy for one of the RBUs consisted of six strategic imperatives, as shown here.
The six strategic imperatives encompassed 14 key initiatives, focused on both market side actions and operations improvements.
The full potential strategy that the company adopted paid off even faster than it expected: within six months, the business units had exceeded their 12-month goals.
* We take our clients' confidentiality seriously. While we've changed their names, the results are real.