Strategic Management

Product Able in the Low Tech Market

Ideal customer positioning in 2025

6.8 Performance and 13.2 Size

Our positioning in 2025

6.7 Performance and 13.2 Size

Product Bravo in the High Tech Market

Ideal customer positioning in 2025

10.2 Performance and 9.8 Size

Our positioning in 2025

8.7 Performance and 11.3 Size

Product Able was introduced as our first product in 2022 specifically for the low tech market. It was initially positioned to satisfy moderate needs of both markets while our research and development department finished with our high tech product. We repositioned Able in year two and three and have been able to get it exactly where the low tech market wants it now that we have one product dedicated to each market. We are able to meet the low tech market’s ideal size and are only a tad under its ideal performance level.

Product Bravo was introduced in 2025 for the high tech market. This freed Able up for marketing only in the low tech market. Bravo did not see such a great first year, but this is to be expected as we adapt to the market’s needs. In its first year, we missed the mark in both size and performance level which caused us to overproduce and miss out on some of the market share. We are planning to adapt our strategy for Bravo in order to produce a higher performance product in a smaller size. This will appeal to the high tech market and allow us to sell Bravo at it’s peak price in line with our sales strategy.

Data on the release of Able affected its performance in the market. For low tech customers, age is ranked as second most important after price. This calls for an age around 3.0. Repositioning the product caused the age to stay low for its first three years. In year four, we left the product to age to 2.65, closer to the 3.0 mark, and it performed much better than in year three. This will be an ongoing strategy for future years. In the high tech market, age is also second most important but they prefer an age of 0 because they value innovation. This will be considered in future years as we continue to improve Bravo and look for new opportunities to launch other products.

2

Production Analysis – Years 1 & 2

Year 1 – 2022

– Capacity at 800 for shift 1 – Started planning for high tech product – Kept automation at 3.0

Year 2 – 2023

– Increase in capacity for Able (later retired) – Pushed back launch for Bravo to year 4 – Kept automation at 3.0

2

Production versus capacity can be seen here and the next slide according to year. To keep costs low, we strive to keep automation moderate and make use of our labor force. We also try to keep our capacity in line with potential demand so that we are able to satisfy the market as well as limit investment costs. We started out with 800 capacity for Able, which was mistakenly increased in year two instead of establishing new capacity for Bravo. In both years, we kept automation at 3.0, again to take advantage of our labor and resist the costs associated with upgrading it.

In year one, we used almost all of our capacity, which was perfect. In year two, we only used about half, but this was partly because of the increase in capacity. In year one, our production was right in line with that of our competitors, but in year two, we produced less than the top two producers. This was great for year two as we were in line with other competitors and we were able to forecast and produce fairly well for the demand and our potential market share.

3

Production analysis – years 3 & 4

– Established 650 capacity for Bravo – $11,700 investment was not properly financed -Overproduced Able (341 leftover)

– Retired unused capacity for Able – Introduced Bravo to market and produced 580 units – Overproduced Bravo (289 leftover) and stocked out of Able

3

Year 3 – 2024

Year 4 – 2025

In years three and four, we fixed the mistaken extra capacity as well as established 650 first shift capacity for Bravo. This investment cost our company $11,700. Due to miscommunication between departments, financing for this was overlooked and an emergency loan was needed. This will be discussed in more depth in the finance section. In this year we also overproduced for Able and had to carry over 341 units to year four.

In year four, we took the time to retire the extra capacity for Able as we haven’t needed to use it. This brought a bit of funds back to us to help offset the earlier emergency loan. We also introduced Bravo to the market, but unfortunately overproduced by 288 units. As discussed earlier, this was due to opening positioning that will be better considered in years five and six.

Going forward, we plan to aggressively hone in on accurate positioning and forecasting to avoid past inventory carry over issues. We also plan to potentially increase automation as we begin to increase profits and cash flow. Modest automation increases were always part of our strategic approach and we look forward to investing the capital needed in this area as we recover from our inefficiencies.

4

Market Segmentation

Year One – 2022

Year two – 2023

Year three – 2024

Year four – 2025

Product Able Forecasting: 924 Units – Low forecast causing stock out – Potential: 23.4% – Actual: 12.5%

Product Able Forecasting: 1500 Units – 35 units left in inventory – Potential: 20.9% – Actual: 20.9%

Product Able Forecasting: 1600 Units – 341 units let in inventory – Potential: 14.5% – Actual: 14.5%

Product Able Forecasting: 1300 units – Low forecast causing stock out – Potential: 18.6% – Actual: 14.8%

Product Bravo Forecasting: 580 units – 289 units left in inventory – Potential: 4.7% – Actual: 4.7%

4

In accordance with our broad differentiation strategy of providing premium products in both markets, we charge a premium price to meet the market’s expectations. Product Able is priced at $35.00 while product Bravo is priced at $45.00. Both are the maximum price customers expect to see in their respective markets. We also keep our sales and promotion budgets in line with our top competitors in order to maximize both awareness of and accessibility to each product. In year one, we spent $2,000,000 on promotion and $2,500,000 on sales. This was so much higher than our competitors that we lowered promotion to $1,400,000 and sales to $1,600,000 in year two. We stabilized our promotion budget at $1,500,00 and sales budget at $1,700,000 for Able in year three and established the same parameters for Bravo in year four. This worked well in year four and we continue to modestly increase these budgets as we become more profitable.

Forecasting has undoubtedly been a learning experience for our company. Year two was our most successful in terms of forecasting versus sales. We were left with only 35 units of Able in inventory at the end of the year. This did cause some carry over costs, but nothing that we couldn’t handle. It also allowed us to meet the demand for our segment of the market. We struggled in year three and were unfortunately left with 341 units of Able left in inventory which caused heightened holdover costs. In years one and four, we stocked out of Able products. This is better for avoiding holdover costs, but caused our company to miss out on sales and market share as you can see above.

Year four was the first year we forecasted for product Bravo. We overestimated in this area which is mostly due with our positioning not living up to the needs of the high tech market. We were left with 289 units in inventory, but were able to cover the holdover costs with our earnings and long-term loans. With our strategic repositioning in the next two years, we should be able to nail down forecasting for potential sales and avoid high levels of leftover inventory.

5

Financial Performance

Use of Retained Earnings

– Used to pay for R&D efforts, marketing budgets, and production activity – Used to avoid as much new debt as possible – Reinvested into company for improvements in R&D, Production, and TQM strategies

Taking on Company Debt

– Required emergency loan in year three (2024) – Sold unused capacity in year four (2025) – Took on $3,500,000 in long term debt in year four (2025) to avoid secondary emergency loan – Able to recover cash flow by the end of year four (2025)

5

Due to our strategic approach, we rely on our retained earnings for most operational expenses including research and development, marketing, and production needs. This is in an effort to avoid taking on debt as much as possible. We also rely on retained earnings to make improvements in all areas, which is why no dividends have been paid out yet. In year three, investment into increased capacity for a new product was made and in year four, investment into total quality management strategies were made. Capacity investments were necessary for the launch into the high tech market. Total quality management investment was not completely necessary but was a step in the right direction to improve all aspects of the company. The most notable impact resulting from total quality management efforts was a 27% decrease in our R&D cycle time and 43% decrease in administration costs. We were also able to increase demand by over 6%.

Profits in year one were non existent as we navigated the complexities of the low tech market. We also used retained earnings to retire some common stock which attributed to the -$108,000 in profits. This was greatly recovered in year two due to more efficient forecasting and production. Profits in year two went up to $7,118,245, but dropped to $3,824,876 in year three due to overproduction. Profits again dropped in year four to $1,284,988 while the company recovered from its emergency loan.

The finance department saw struggles between year three and four. Due to lack of communication between production and finance, there was a lack of financing for plant improvements in year three. This caused the need for an emergency loan in the amount of $4,827,893. An excess of production of product Able also contributed to the amount of the emergency loan. To offset this, production in year four was kept modest to avoid added excess inventory. We also opted to sell unused Able capacity while taking on long-term debt in the amount of $3,500,000. These decisions allowed us to recover our cash flow issues by the end of year four as you can see in the cash flow summary chart here.

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
$26
The price is based on these factors:
Academic level
Number of pages
Urgency
Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Benefits of our college essay writing service

  • 80+ disciplines

    Buy an essay in any subject you find difficult—we’ll have a specialist in it ready

  • 4-hour deadlines

    Ask for help with your most urgent short tasks—we can complete them in 4 hours!

  • Free revision

    Get your paper revised for free if it doesn’t meet your instructions.

  • 24/7 support

    Contact us anytime if you need help with your essay

  • Custom formatting

    APA, MLA, Chicago—we can use any formatting style you need.

  • Plagiarism check

    Get a paper that’s fully original and checked for plagiarism

What the numbers say?

  • 527
    writers active
  • 9.5 out of 10
    current average quality score
  • 98.40%
    of orders delivered on time
error: