Forecasting a Competitor’s Cost Structure
Our client, a global industrial research firm, was hired by an autoparts maker to better understand the future cost structure of their rival who was planning a new factory in northern Mexico.
The plant was due to be opened eight months in the future and our client needed to forecast the competitor’s cost structure so he could optimize his own pricing schedule.
Americas Market Intelligence (AMI) built its hypothesis of the likely cost structure of the new plant based upon known parameters such as output levels and employment forecasts as well as unknown variables such as the HR structure, tax and investment incentives negotiated with the state government, HR benefit policies, capital equipment investments, and rent infrastructure costs. Through interviews with a series of suppliers assisting the competitor with the factory build-out, actual and former employees, investment promotion officials and some desk research, AMI was able to construct a reasonable estimate of cost structure.
AMI’s undercover work armed the client with a confidential estimate of its competitor’s new cost structure. As a result, the client was able to adjust its own pricing to ward off any threat to its market share.
The client was able to understand its main competitor’s price structure and adjust its own pricing so as to remain competitive.