Profit Margin and High End Segment

Cost Leadership After contemplating many different strategy options and evaluating our markets, the Ferris group decided that we would utilize and follow a strategy discussed in chapter 6 of Wheelen and Hunger’s text[1]: cost leadership. This strategy focuses on â€Å"a lower-cost competitive strategy that aims at the broad mass market and requires efficient scale facilities, cost reductions, and cost and overhead control. This strategy avoids marginal customers, and aims for cost minimization in R&D, service, sales force, and advertising. If used effectively, this strategy should reduce and control your labor and overhead costs. This would in turn decrease variable expenses and simultaneously increase your contribution margins, and ultimately your net profits. To follow this strategy, we decided to take the following actions: 1. We refrained from introducing any new products in order to prevent paying large start-up costs without efficient funding. It would have been wise to introduce a new product if we had more rounds during the simulation.This would have allowed us to specialize in the markets we were efficient in and dropped those that were costing us money. If we were to introduce a product however, to see any benefits of this initiative during the simulation, the product would have had to been launched within the first few rounds. But, spending a lot of borrowed money early on in the simulation did not make sense for our cost leadership strategy. We would have had to wait until we could fund it with our retained earnings in order to be in alignment with our strategy.However, this would not have been an option until the 3rd or 4th year, and by then much too late to see positive benefits by year 6. 2. We remained quite frugal with our allocated expenses to marketing (promotion and sales budgets) to keep our costs low and contribution margins high. 3. We decided to increase our automation for products that did not have rapidly changing market buying criteria specifications (i. e. if expectations regarding size and performance stayed fairly similar throughout the six rounds because their drift rates were small, then we increased automation for that particular line within the first year). . We attempted to use a Just In Time (JIT) strategy which meant that we tried to calculate the exact quantity each market would purchase of our products and we then produced only enough to have no more or no less on hand at the end of each forecasted year. †¢To calculate this precise forecast, in each segment we took the actual sales from the previous year and multiplied it by the market growth rate for the corresponding market segment. We then multiplied that number by a conservative (i. e. 90%) and optimistic (i. e. 10%) rate to get the respective marketing and production forecasts. †¢The only time we produced a little higher than the conservative forecast calculated using the above formula was if we stocked out of an item in the pr evious year and could then expect even higher sales the following year; essentially preventing ourselves from short-changing our forecast for the next year. If this was the case for a previous year, we would be a little more aggressive with our forecast fro the following year and used conservative and optimistic rates of around 90% and 120% respectively. . We decided to decrease the Mean Time Before Failure (MTBF) of those products (The Traditional and Low End segments) in which MTBF as a buying criteria was not very important to the customer to the minimum specification within the acceptable range to the customer (i. e. If the desired range for MTBF was 22,000 – 27,000 for a product that did not base much of their purchasing decision on MTBF, we would set the MTBF for that product at the minimum of 22,000).This was done to keep costs low by decreasing the reliability (which saves money in production costs) of those products in which customers did not care about the MTBF. Ove rall Company Performance Mistakes During the simulation, we made quite a few costly mistakes that put us in a really bad spot in comparison to the other teams. These mistakes are as follows: 1. We missed the opportunity to launch a new product because right out of the gate we were focused on the products we already had and making them all profitable.We were not willing to create a new product until we could finance the investment with our retained earnings instead of taking on debt to finance such a project. The problem was that it took us about 4 rounds to build up a cushion of cash that allowed us to feel comfortable making such an investment. Unfortunately, since it takes 2 rounds to launch a new product, we did not feel that the timing was right after round 4 because we would not have generated profits for the new product by the end f the simulation; we were unable to justify the investment for a long term project with only 2 years left in the simulation. Therefore, we did not m ove quickly enough within the first few rounds in assessing our markets as a whole and making long term investment decisions. 2. My group was also quite concerned with not increasing debt and rather building our retained earnings and collecting cash as a cushion. However, this tactic was not such a great one because it cost us points for wealth creation. We should have been using that saved cash to invest in our company, rather than hanging on to the money. . We never created any long term plans during the simulation. This was probably what hurt us the most because all we were focused on was the previous year’s results and how to make them increase. We never actually set specific goals which would have then forced us to create a detailed plan of action to help us achieve those goals; rather we were blindly just trying to be or stay profitable. 4. We continually implemented the same strategies that were not producing stellar results; especially with regards to individual segme nts.We continually tried executing the same tactics (i. e. low cost, JIT, etc†¦) without changing any details (i. e. more product development, repositioning, etc†¦) and kept hoping that things would get better. Our performance did get a little better within our underperforming segments after about 3 rounds, but not enough to push us ahead of our competition as a whole company. 5. We did not invest in automation for a few lines (Performance and Size) like we should have in the beginning.For whatever reason, a few team members believed that increasing the automation for a line that has a product with specifications that change rapidly from year to year (the High, Performance, and Size segments) was a bad idea. They were convinced that increasing the automation for these segments would be useless and that it would in fact return to where it originally started at each year end. Looking back, we should have dramatically increased the automation for these segments to keep our va riable costs low and in alignment with our strategy. . One of our biggest problems was that we kept making mistakes that cost us immensely. Some of those mistakes include: †¢Wrong Growth Rate. We used an excel spreadsheet to determine the forecasts for each segment throughout the entire simulation. However, we did not realize until we were making decisions for round 4 that the formulas were actually entered wrong into the spreadsheet and every segment was being forecasted at the Traditional segment’s growth rate rather than the actual growth rate that corresponded to each segment. Inversion of Specifications. We accidentally inverted the size and performance specifications for the High End segment during round 3. This dramatically reduced our net profit margin for this particular segment (Please see Exhibit 1). Sadly, this was originally one of our best markets and because of this mistake we missed a huge opportunity to increase our profits and perform well as a company. †¢Long Revision Dates. We did not notice until the round 4 processed that the revision date for the High End segment for round 4 was not until 2 years later.Therefore, we were unable to keep the product for this segment competitive for the remainder of the simulation; especially after our setback in round 3. In fact, this mistake dramatically decreased our contribution margin for this segment and even brought our net profit margin for the segment to a deep negative (Please see Exhibits 2 & 1 respectively). Again, we dramatically messed up one of our best selling products and were continually trying to play catch-up from our mistakes with this line; therefore, we missed a huge opportunity to increase our profits.Performance Measures To determine whether or not our company was doing well, we assessed a few areas of the Capstone Courier: 1. Contribution Margin Percentage (Please see Exhibit 3). We looked at this percentage after each round was processed to determine whether or no t it was increasing. If it was not increasing, we knew that our strategy of lowering our costs was not effective for the round in question; alerting us to lower our costs. 2. Contribution Margins (Please see Exhibit 2). We looked at the contribution margins for each segment to concentrate on each individually.Looking at whether or not the segment in question was increasing or decreasing was effective because it showed us which products were costing us the most in variable costs (i. e. materials, labor, etc†¦); showing us which segments we needed to cut costs for. 3. Net Profit (Please see Exhibit 4). This was our first indicator on the courier as to whether or not we did well in the previous round. We started off doing pretty badly but by round 3, we brought our net profits up by about $5,200 from round 1. However, the mistakes mentioned above led to dramatic decrease the following year 4 that put us in an even worse spot than we were after round 1. Luckily, we made strides to overcome those obstacles (discussed below in the Product Line Performance section) which increased our profits the following year by almost $9,500. 4. Net Profit Margins (Please see Exhibit 1). This measure was quite useful in determining how our net profits could be assessed for each segment. This told us the story of which products were profitable, which were most profitable, and which were actually costing us money to sell.Our goal for each round was to have each of the segments positive and turning a profit; which we accomplished in rounds 5 and 6, finally. Product Line Performance Errors We had many issues and made many errors with my particular line (High End – Fist) as mentioned above. During round 3, we inverted the performance and size specifications. In addition, during round 4 we did not realize that our revision date was 2 years away; this meant that my product was unable to be competitive within its segment for 3 rounds and the remaining year was spent catching u p to the competition.Once the mistakes were made, there was nothing we could do to correct our mistake. However, we did try to redirect our focus from staying competitive 100% within the High End segment with Fist, to using this product to be more competitive within the Traditional segment during round 4 while our revision date neared. To do this, we dropped the sell price from $39. 00/unit to $28. 00/unit. We did this for a couple of reasons: 1. Fist lay most closely to the Traditional product on the perceptual map.Therefore, we figured we would make the most of our mistake, which could not be undone, by trying to stay competitive on the edge of both the High and Traditional markets. 2. Luckily, the lowest price within the range for the High End segment was $28. 00/unit and the highest price within the range for the Traditional segment was $28. 00/unit as well. For this reason, we decided to sell Fist during the segments’ crisis at a price that was acceptable for both market s; this was done in hopes of picking up customers from each market since we were well aware that we would not be very competitive during round 4 within the High End segment.Statistics/Performance Below is a table to show that we were steadily climbing in our progress for Fist during the first 2 rounds and then our mistakes made this segment unprofitable during both rounds 3 and 4 (highlighted in grey) and decreased within every statistic (our customer satisfaction dropped due to the product not being competitive in the High End market, our contribution margin percentage dramatically decreased due to fewer sales/revenue, and our market share almost completely disappeared).During rounds 5 and 6, we were slowly climbing our way back to a profitable position for this segment; once we were again able to reposition Fist within the High End market we started to improve. High End Segment (Fist) Statistics Round123456 Revenue$21,615$27,099$17,301$22,253$23,470$32,026 Market Share19%20%11%6%1 2%17% Contribution Margin$7,823$9,624$4,735$4,105$6,698$9,929 Contribution %36%35%27%10%28%31% Net Margin$2,628$3,689($1,403)($1,028)$1,814$4,449 Customer Score242910111815 Functional Area Strategies and Performancelo0Due to my expertise with regards to my educational focus and previous work experience, my functional area was marketing (alongside Ashley Barnes). Unfortunately, we were not well informed about how to maximize our marketing efforts/investments (promotion and sales expenses) for the simulation until round 4. Promotion and Sales We initially remained quite frugal with our promotion and sales budgets to keep our costs low and contribution margins high in order to follow our cost leadership strategy previously.However, by investing larger amounts into sales and promotion within the first two rounds, we would have better followed our strategy. This would have been the case because we would have paid less in expenses in the later rounds since we would’ve only had to i nvest enough to maintain our accessibility and awareness percentages after the initial higher investments; essentially reaping more benefits in the later rounds of our early investments. After we learned of the formulas for producing good customer survey results however, we did quite well in certain segments.For example, we blindly allocated money to our Size segment during the first 3 rounds and slowly climbed our customer survey score. However, once we learned how to use the formulas given in the Capstone Debrief Rubric, we were able to go from a customer survey score of 16 in round 3, to a 50 in round 4, and even higher to a 57 in round 5. The formula we used came from the Capstone Debrief Rubric and stated that in order to get: †¢3 Points – The promotional budget had to lie in between $1. 4M and $2M. The Sales budget had to lie in between $2. 2M and $3M. 2 Points – The promotional budget had to lie in between $1M and $1. 4M or in between $2M and $2. 5M. The Sa les budget had to lie in between $1. 5M and $2. 2M. †¢1 Point – The promotional budget had to lie in between $. 7M and $1M or in between $2. 5M and $3M. The Sales budget had to lie in between $. 7M and $1. 5M. †¢0 Points – The promotional budget had to be lower than $. 7M or higher than $3M. The Sales budget had to be lower than $. 7M or higher than $3M. Once we started to use these formulas, we were able to allocate the right amount of funding to each segment that was appropriate.For example: if a certain segment was projected to lose money by allocating $1. 4M to the promotional budget to get the full 3 points, we would cut the budget to about $1M and still be able to get 2 points without jeopardizing our contribution margin. This is proven in the Capstone Debrief Rubric; we were allocated 3 points to our higher performing segments (Traditional, Low, and High) for rounds 4, 5, and 6 but were only granted 2 points for our lower performing segments (Performan ce and Size).In addition, we always strived to keep our size and performance specifications at exactly the current buying criteria plus the drift rates outlined on page 2 of the Industry Conditions Report. This would keep the product at what the customer expected so that they were receiving what they were asking for. Customer Buying Criteria We made it a priority to keep our prices as high as we could in each segment without disappointing our customers; this was our way of aligning our marketing strategies with our overall company strategy of cost leadership.We noted what criteria were most important to the customer to determine if we could increase our prices for each product. For example: Price was the least important buying criteria within the Size segment; meaning that these customers were not as sensitive to price changes/increases. Therefore, we were able to charge closer to the high price for the Size segment product (Fume) because this increase would not really affect the ma rket buying decisions for the Size segment; much unlike the Low End segment

Sales Operations and Planning Assignment Example | Topics and Well Written Essays - 1750 words

Sales Operations and Planning - Assignment Example With a good reputation and dedicated service delivery, we are sure of conquering this new market. However, unlike in USA, we will have to adopt new strategies which will enable us coax and maintain a large pull of clients. Although we will only focus on business customers, we are sure of realizing a success which has of course been associated with our company since its inception. However, it will not be an easy task because it will be a challenging moment to our company. Therefore, in order to succeed, we will have to adopt well-researched appropriate strategies. As an organization, we will have to properly plan to sell our commodities to this new market. Among the most important activities to be undertaken to ensure a successful utilization of this market is the selling of products. As suppliers, we are always aiming at distributing our commodities to a team of target clients. However, before launching such a new market, it is the responsibility of the management to liaise with the Sales and Marketing Manger to conduct a market research in order to find out more information about the new market. Hence, it implies that, as pat of our promotional activities, we will have to conduct and intensive and rigorous research to enable us understand much about the clients’ attitudes, level of competition in the market and pricing strategies before settling on our target market (Kerin 117). Based on this, I would like to categorically state to you that we will settle on personal selling as one of our sales strategies. This means that we will have to recruit a team of sales executives who will have to traverse different regions of the country to communicate with our potential customers face-to-face. This, in our opinion, is one of the most innovative ideas which will enable our sales team to personally meet with our target clients, engage them in discussions and persuade them to buy from us.

Organizing for uncertainties in a dynamic market Assignment

Organizing for uncertainties in a dynamic market - Assignment Example The author further argues that dynamic environment provide the best opportunistic environment in the corporate world. However, dynamic environments need proper management since they are accompanied by many uncertainties. Many project portfolios fail due to dynamic environment. The article describes how dynamic environments can easily destroy a project portfolio. From the evidence provided in the article, one project out of five ventured in a dynamic environment have failed due to poor management. Coming up with project portfolios require a lot of consideration with the type environment a project location is based. The issue behind dynamic environment is the management of the uncertainties presented by this environment. In words by Yvan (2012) the richness in opportunities the dynamic environment presents are the same uncertainties resented by the same environment. Characteristics in a dynamic environment include high level of profits in one season while the fate of other financial ye ars is unknown. This uncertainty makes it essential to have programs and strategies to manage their project portfolio. To curb this problem the article involves the use of dynamics capabilities frameworks. These frameworks are aimed at studying project portfolios in dynamic environments. ... The dynamic capabilities frameworks are aimed to achieve three prospects: Provision of a better understanding on the management of projects facing uncertainties. Analyzing the relationship between the measures put in place by organizations to minimize the impact caused by uncertainties and the sources of uncertainty in dynamic environments. Provide recommendations and possible improvements in the standards and models of project portfolios. From the author of the article these three objectives can secure an organization’s assets in any case of an occurrence of an uncertainty. If the assets are not completely secured they effects of the uncertainties are also minimized. Project managers are therefore advised on how to ensure a proper implementation of the dynamic capabilities frameworks. In some cases these frameworks only involves means of insurance in any occurrence of risk. In the dynamic environment, the frameworks are more important since projects require total quality mana gement. According to Yvan (2012) the completion of projects depends mainly on the ability of the project manager to foresee the transition from and to each face of the project. This is made easier by the implementation of the dynamic capabilities framework. From the article, there are claims that project management in dynamic environments. Organization and project doing enough to ensure that project portfolio are being managed effectively. This is after many approaches have been developed. Do project managers have the intent of making projects suitable for the dynamic environment? Having successful projects portfolio also includes having proper organizing mechanisms in the organization. Proper organization mechanisms include the methods of

What is meant by the term sustainable development How has this concept Essay

What is meant by the term sustainable development How has this concept contributed to the amelioration of environmental degradation - Essay Example Generally speaking, human needs must be met and economic growth must be nurtured keeping intact the available natural resources and environmental integrity (Willers, 1994, p. 1147). Requirements of both ecological balance and economical development must be satisfied. These conditions would be lasting forever or for a very long period. Hierarchial management of sustainable development is necessary and it must be able to result in the essential performance of main requirements, satisfying the various interests. It is essential to overcome the environmental pollution and its effect in aggravating the ecological situation which is a global problem (Ougolnitsky, 2009, p. 428). The concept of hierarchial controlled dynamic management has the chances of providing better decisions. The three constituents of hierarchial management are the administrative, economic and psychological. Private interests of organizations, aiming at short term interests, collide with the objective strategies of the global system (Ougolnitsky, 2009, p. 429). . This contrast in ideas needs to be solved by the hierarchial management which had better be a two tier management. The individual interests should be coordinated into a common group of interests with common objectives. Different methods are employed in the management: compulsion, impulsion and conviction (Ougolnitsky, 2009, p. 431). Compulsion is when a participant is forced to undertake or accept a common interest or objective. Impulsion is when the participant is offered the opportunities or economically advantageous background to promote the common interests. Both levels have common interests and both are equally committed in conviction. Compulsion is an inefficient method to produce a combined effort. Voluntary cooperation is evident in conviction which is actually a psychological approach and the best in the sustainable development (Ougolnitsky, 2009, p. 432). The

Art Appreciation Essay Example | Topics and Well Written Essays - 750 words

Art Appreciation - Essay Example It had a gabled roof, which was over 100 feet at the centre. The atrium of Old St. Peter's Basilica was known as the "Garden of Paradise." It had five doors leading inside the church. The atrium was added in the 6th Century. ("Old Saint Peter's Basilica," Wikipedia 2007) The nave ended with an arch holding a mosaic of Constantine and Saint Peter. The walls had 11 windows and were decorated with frescoes. The Basilica contained the tomb of St. Peter in the apse of the church. The most significant architectural element was the 'transept,' which marked the cross axis to the nave. "The cross axes of the nave and transept allowed for the concentration of attention on the tomb of Peter." ("The Romanization of Christianity," 2007) The Hagia Sophia, built as the new cathedral of Constantinople by Emperor Justinian in 532 to 537 A.D., is supposed to realise the "ideal" Byzantine model. ("Hagia Sophia," Great Buildings Online 2007) "It combined a longitudinal basilica and a centralised building, with a huge main dome supported on pendentives, and semi domes on either side." ("Hagia Sophia," 2003) This was the first instance of the use of pendentives, which "enable the round dome to transition gracefully into the square shape of piers below." ("Hagia Sophia," Wikipedia 2007) The building itself measures 102 feet by 265 feet along its main floor. The central space is a 100 feet square, which is extended to 200 feet by adding two "hemicycles" covered by semi domed "exedras" to the east and west of it. These are extended further with three minor apses eastward and two to the west. The main dome is 102 feet in diameter, and 184 feet high. It contains a corona of 40 arched windows, which reflects light into the interior of the nave. "Flanking the nave on the north and south are side aisles, with galleries over them." ("Hagia Sophia," 2003) Their massive vaults are carried at both levels by monolithic columns, thus receiving the weight of the dome and its arches. The Dome of the Rock This is the earliest architectural monument of Islam. It was constructed to cover the Noble Rock, in 691-2 A.D. in the old city of Jerusalem. The Dome of the Rock is octagonal shaped. It consists of a Dome which is 20m 20cm in diameter and its height is 20m 48cm. The dome rises to a height of 35 meters over the Noble Rock. The Noble Rock is surrounded by inner circular and outer octagonal arcades. Each side of the octagon has a door and 7 windows. ("Dome of the Rock," Islamic Architecture Org 2007) Common Structural Elements The Old St. Peters Basilica and The Dome of the Rock are, both, built in the shape of a Byzantine "Martyria." A martyrium is used for the housing and veneration of saintly relics. ("Byzantine Architecture," Wikipedia 2007) In the former case, it is the tomb of St. Peter, and in the latter the Noble Rock, venerated by Christian, Jews, and Muslims alike. The church of Hagia Sophia and the Old St. Peters Basilica, both follow the basic Roman architectural design of a longitudinal basilica. But, a central or circular type of structure is also found in the Hagia Sophia, and it is very similar to the domed circular structure of the Dome of the Rock. The windows on the main dome of the Dome of t

Metamorphosis Essay Example | Topics and Well Written Essays - 250 words

Metamorphosis - Essay Example The value of family, money and changes are included in the important lessons presented in Kafka’s story. The metamorphosis experienced by the man character can be considered as a representation of the challenges present in life that people have no control of. In terms of the financial aspect of the story, despite the dependence of a family to the breadwinner, things may change as the former harmonious relationship may become conflicting as represented by the primary character. The author also showed how people usually look at the appearance instead the attitude and inner character of a person before judging him or her. Also the limits of human beings for understanding were shown in the novel as the reader can feel how sympathy may be lost. Even though a family is expected to be close enough, it may occur and ruin the relationship. In terms of the mood of the story, it does not tackle the usual flow of the story as it distorted the common view or expected flow. The readers may have the expectation that it would be a light novel, but it was filled with problems and negativities. The novel is really good in capturing the attention and curiosity of the readers as it twisted the story into something that is not expected while sharing insights and lessons in life that may seem valuable and

Autobiographical Narrative Essay Example | Topics and Well Written Essays - 750 words

Autobiographical Narrative - Essay Example As a result, I have started to see new things with my own eyes which I never used to see before; feel new things with the same heart which never gave me those feelings before! Of course, things have changed considerably since I overcame this ultimate test of my life, but the test was never an easy one! It was the first and most crucial challenge in my entire life up to the last fifteen years when my doctor advised me to become a vegetarian in order to improve my health. For a person who was born and brought up as a ‘pure’ non-vegetarian, the ‘mere’ idea behind this vegetarianism was anything but easily digestible. And, no doubt, I became too upset too fast! â€Å"It is going to be in the best interest of your life!† – my physician was clear-cut in his voice. I tried my best to avoid such a situation – I debated a great deal with the doctor on the idiocy of the idea, and organized my arguments against concept of vegetarianism. But, in the end, I had to give up my idea, and then started the most challenging phase of my life. â€Å"Hope it’s not going to be the end of my happy life† – thought I, as I came out of the physician’s room.... I never knew, in my short life, what it means to adjust or compromise, because I have never been of that type. â€Å"I want a play-station today† – I would demand my mom, and it was there in the evening. Even my elder brother was not fortunate in enjoying this distinction, as he was always directed to make the adjustments for me! â€Å"You ought to make the compromise, Jerry,† my father used to tell my brother, â€Å"because John is much younger to you.† In other words, there is not a single child in the whole world who was fortunate to enjoy the more satisfying things in life and I lived like a king in my own empire. Life seemed terribly changed once I was expected to make adjustments for the first time in my entire life – that too, on the very matter which is most crucial in my life. I think I’m yet to introduce myself as a person who is deeply addicted to eating too much, but it is the most telltale feature of my life. I’m widely kn own among my friends and relatives as a youngster who was an ardent admirer of non-vegetarian items in the menu. Yes, I have been a ‘pure’ non-vegetarian for the last fifteen years or more! I just love to come across more recipes in non-vegetarian and I had a craze for Italian and Chinese cuisine. I enjoyed almost all the items in my non-veg. menu and it was almost clear from the way I looked. I’m under treatment for the same reason – that I’m an obese now. I was prescribed to turn to be a vegetarian for the same reason – as part of the overall strategy for weight control, cholesterol reduction, and blood pressure reduction. It was a Himalayan task for me to adjust myself to the requirements of my new life which is totally devoid of the presence of fish, meat,