Multiquimica Do Brasil Case Study

...

The overall performance grade for Multichemical is low. This is due to the fact that they, Multichemical, was proactive in its pursuit to improve its business model and correct the currency exchange issue along with the rising inflation in Brazil. Also, Multichemical did not address the competition which may have been a lesser quality in their eyes but was eating into their market share. The grade for MB is also low since they did not challenge the parent company to seek improvement. MB should have pushed back on Multichemical when they were told to borrow locally. For MB to borrow locally when the interest rate was near 28% was a disaster. The parent company, Multichemical, could have borrowed from almost anywhere at a lower rate and helped alleviate the exchange loss. Another thing that MB could have done was lower their overall cost to reduce the market share that was being eaten up by their generic brand competitors and Hoffman brand. Our advice to Multichemical is they need to update their revenue recognition model and lending platforms. By reporting profits in US dollars when Multichemical was selling their goods in the Brazil real, there was a big translation loss reported on the books because the real was valued so high against the US dollar. Also, not recognizing profits right away left a hole in the books, they were giving product out without recognizing revenue which could look like they are losing money all year around. Lastly for MB we would suggest that you present a case for why you should not borrow locally and decrease product price to compete with other brands. All in all, the customers are going to look for a bargain on the products. If MB wants to hold and gain market share they need be competitive on both pricing and quality not just one or the other.