HISCO Summary Annual Report

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Student: Reginald Whimbush

Annual Operating Review

How well did you meet your commitments? (Pre-tax Income Variance to plan),

and where did the growth come from? (Pre-tax Income Variance to prior year) Comparing the business from 2020 2021, we did not fair as well as I had hoped. We performed

worse and had negative growth than the previous year in Market Share (-$1.1M) and VC (I) (-

$116.4K). Although we finished in the red, we had less of a loss in Base Cost (-707.9K) than the

previous year. We ended the year in gains in Year Plan ($793K), Growth ($882.9K) and Price

($155.6K), but the results were not as good as the previous year. The only category that showed

positive growth over the previous year was VC (P) ($170.3K). I attribute the results to bad decision

making on my part. I put too much emphasis on the company’s reputation for having a good product

and client base. I should have concerned myself more with product development which could have

increased/improved our market share and inventory levels which affected the amount of product we

were able to produce.

How well did your initial strategy work and did you maintain that strategy

throughout the year? Overall, I veered from the plan that I initially created. I managed to reduce operation and production

costs, but it was at the expense of total units we were able to produce. Late in the year, I invested in

improving our processing time, but not enough to close the gap in overall production. Part of the

strategy was to improve the reader’s performance, features and aesthetics. After the first quarter, I

had to divert funds from project funding to help with other deficits. That decision ended up costing

us throughout the year. The plan should have focused more on acquiring the capital we needed. That

could have resulted in us ending the year ahead of our competition. That said, an element of the plan

should have focused on market research and competitive analysis.

What revisions would you make to your original SWOT analysis going forward

over the next 2 to 3 years? Looking forward, I would restructure the terms of credit line, possibly increasing our limit. I would

put more emphasis on getting the capital needed to improve our resources. I would invest heavily in

product development and marketing of our products. I would do a better job at partnering with

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Student: Reginald Whimbush

hospitals and scheduling demos of the product. Maybe even select a few hospitals to use the reader

for a month or two at a time. I would also improve our technology, hopefully resulting in reduced

manufacturing costs. I would alter the strategy to focus on one or two key areas. I was overly

ambitious thinking that we could improve all key areas in one year.

What inference can you draw about your competitor’s strategy? A business strategy should reflect management's best guess about what customers want, how they

want it, and how the business can organize to best meet those needs, get paid for doing so, and make

a profit (Teece, 2010). Matek (winner) and Redex put an emphasis on product development and

market share. It would seem that they invested in marketing and sales. Both also had higher than

average technical quality which no doubt helped their sales. Both companies had better cash

management as evidenced by the fact that they did not exceed their credit limits.

Teece, D.J. (2010). Business models, business strategy and innovation. Long Range Planning, 43

(2-3) , pp. 172-194.

From both a qualitative and quantitative perspective, how would you value your

business relative to Redex and Matek? From a quantitative perspective, Hisco sales were $1.8M behind Redex and $1.2M behind Matek.

Both of them sold more units at a lower cost than our readers. Both of them more than quadrupled

our net income and had a double digit increase over our return on capital. Hisco lagged behind in

unit market share at 18.92% while Matek had 38.45% and Redex had 38.13%. Both had similar

results in $ market share, 37.66% and 39.22% respectively. While Hisco has a strong manufacturing

capacity and a high-quality product, we exceeded our credit line beyond the limit of three which

precluded us from coming in first or second place. Although the results don’t show it, I would place

a high value on the company.

Were you surprised by the final team rankings in the value creation winning?

Why or why not? Actually, I was not surprised. Although I wanted Hisco to finish in second place at least, we did not

largely due to the fact that we exceeded our credit limit more than the number allowed. We did

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Student: Reginald Whimbush

better job than Redex at retaining our shareholders which speaks to their confidence in us as a

company. We had a good market share, but the increase in price hurt our sales. Matek and Redex

made better business decisions in key areas that ultimately allowed them to have better overall

performance than Hisco. Both companies invested in new markets giving them an edge over Hisco.

Where will organic growth come from over the next 2 to 3 years? What are

potential new market/product/service opportunities? Although growth rate is growth rates is not a guarantee of high profitability (Roper, 1999), I believe

it is the key to our come back. I think organic growth will happen as we continue improve our

internal efficiencies around labor, technology, inventory levels and production. We have opportunity

to increase our market share. We can do this by partnering with more hospitals in our current

footprint as well as venturing into new areas. We can demo the product for them and allow a few to

use it, thereby creating product ambassadors that “sell” the readers for us. We can invest more in

product development adding features and improving its longevity.

Roper, S. Modelling Small Business Growth and Profitability. Small Business Economics 13,

235–252 (1999). https://doi.org/10.1023/A:1008104624560.

How will you create economic value for your Customers going forward? Hisco is only as valuable as our customers and in our effort to keep them, we have to meet their

specific needs. The more value they perceive in the product we offer and the service we deliver, the

more likely they are willing to pay us and remain loyal. I mentioned this in the previous question, I

think we can create value by improving upon the reader’s features, accuracy and shelf life while

coming up with a price structure that benefits the customer and our shareholders. I would also

partner with hospitals to form focus groups that could give us feedback on the current product, make

suggestions for future enhancements and pricing/design ideas.

What are 4 to 5 risks to Hisco’s continued growth over the next 2 to 3 years, and

what options would you pursue to mitigate those risks? Are these risks

controllable or non-controllable? Limited resources – because we failed raise/save enough money internally, we had to raise/seek

money externally at a higher cost (Zhang et al., 2020). can limit our ability to attract investors –

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Student: Reginald Whimbush

non-controllable

Ability to increase market share – the competition having too strong a hold on the market, hospitals

unwilling to hear our pitch – controllable

Pricing – bringing our pricing in line with our competitors such that the customer is receiving

comparable or better features from Hisco – controllable

Market analysis – staying attuned to what the market needs/wants, changes in technology and

manufacturing practices – controllable

(Zhang, H., Zhang, Y., Zhou, S., & He, Y. (2020). Corporate Cash Holdings and Financial

Constraints--An Analysis Based on Data on China at Company Level after the Global Financial

Crisis. Emerging Markets Finance and Trade, 56(7), 1490–1503.

How did you use role play to create value over the year? Going forward? Once I got the hang of the role play (after the first quarter), I selected who I spoke with carefully. I

chose to speak with those who could help the business during that quarter. I was able to make some

deals that helped improve our productivity and give us some much-needed capital. I also used the

role play to gain insight into my competitors as well as customers. I do not know if it was me or the

simulation, but I really wanted to role play with Mr. Fix It. I believed that if I could, he would have

given me good advice on how to bring the company back into the green in our key metrics.

What were the 3 toughest decisions made during the year? Raising the price of the readers. Once I realized that we were not going to be able to cut costs

enough to make up our deficit, I made the decision to raise our price. It was a risky move that did

not payoff for us in the end. Not investing in new projects. I missed the opportunity to invest in new

projects that could have improved the features and quality of our readers.

Cutting our marketing budget. I thought that we could do more with less, but that not the case. We

were not able to spread into new markets or even expand our reach in our current market.

What are 5 key learnings from the year? My key learnings from the year were adjusting the strategy to account for market fluctuations and

limited cash flow, the importance of investing in product development and technology,

understanding market trends and customer needs, the importance of staying attuned to my

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Student: Reginald Whimbush

competitor’s and not exceeding our credit limit. That alone significantly impacted our ability to

operate and raise outside funds. I think the biggest lesson I learned came from failing. As a leader, I

realize that I must have a commitment to learn from the mistakes of this past year and not repeat

them going forward. This is a very humbling lesson to learn.

If you could re-play what would you do differently? Why? If I could re-play, I would invest more into market analysis, build stronger relations with potential

customers, invest in technology improvements, bring in investors sooner and invest more

time/energy into projects and product development. I would also focus on the overall growth of the

company. Growth should be a priority goal for every company, as there is one of the main factors of

market value changes of the business, making the enterprise investment attractive (Pushkar &

Dragunova, 2016). I believe had I focused on these things; it would have resulted in Hisco winning

the competition. I could have had pricing in line with the largest of competitors, built upon the

company’s solid foundation of having good quality products and kept all of our original

shareholders.

Pushkar, D. I., & Dragunova, E. V. (2016). Financial analysis as a tool for company strategy

developing. 2016 13th International Scientific-Technical Conference on Actual Problems of

Electronics Instrument Engineering (APEIE), Actual Problems of Electronics Instrument

Engineering (APEIE), 2016 13th International Scientific-Technical Conference On, 03, 279–283.

https://doi-org.proxy-library.ashford.edu/10.1109/APEIE.2016.7807072.