The client
Headquartered in Asia, the client is one of the world’s best-known names in consumer electronics.
The situation
The client had been steadily growing and profitable for decades. But despite its overall success, the company was dissatisfied with the performance of one of its core business units. The business unit had been losing money, and sales did not meet the company’s aspirations. The outlook wasn’t encouraging, either: The market was flat, and competitors were growing stronger. The client had previously sought help from other consulting groups, with lackluster results. Some managers were skeptical of another attempt. Because of our trusted relationships with the company’s senior leaders, a strong presence in Asia, and our expertise in operations and global marketing, they turned to McKinsey.
McKinsey’s contribution
- Global reach. We tapped into our global network to quickly develop and apply insights gathered from retailers and consumers in markets worldwide.
- Local expertise. Our team included people who understood the local culture and could forge strong relationships with the client while working onsite.
- Manufacturing expertise. Our knowledge of manufacturing and supply chains enabled us to find ways to simplify processes and save costs.
- Long-term relationships. The client trusted our knowledge of the company and its culture. This gave the company the confidence to overcome resistance to change and accept challenging—but necessary—recommendations. Our close relationship with the CEO and the business unit assured that the recommendations would be implemented.
Impact
Although it will take up to three years to see the full effect of the study, the client has made significant progress in transforming its organization, with a 40 percent increase in profitability the first year.
- Better product mix. Rather than offering all of its products in all of its markets, the client is committed to selling the right products in its best markets. It is cutting its product lines from six to three, and making more focused investments in R&D and marketing.
- Lower costs. Companywide efficiencies and improvements will ultimately reduce the client’s manufacturing and supply chain costs by 15 percent. The company is relocating a manufacturing plant, centralizing purchasing, improving management of design-to-cost, and making changes in product quality aimed at increasing customer satisfaction.
- Stronger infrastructure. The client is increasing its marketing and sales staff, creating dedicated product and category managers, and adding a market intelligence group.