Strategic Management DQ Response Week 5
Jaylin001
CapsimCompanyPerformanceSummary.pptx2022-2024 Company Performance Summary
OL 421: Strategic Management and Policy
Prepared by Jerome Udit
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Products
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Perceptual Maps December 31, 2024
| Able | ||||||
| Year | Segment | Age | MTBF | Performance | Size | Price |
| 2022 | Low | 4.1 | 21000 | 6.4 | 13.6 | $34.00 |
| 2023 | Low | 2.8 | 15000 | 4.8 | 15.5 | $35.50 |
| 2024 | Low | 3.8 | 15000 | 4.8 | 15.5 | $35.00 |
| A_Excel | ||||||
| Year | Segment | Age | MTBF | Performance | Size | Price |
| 2023 | High | 0.7 | 22000 | 7.4 | 12.6 | $38.00 |
| 2024 | High | 1.7 | 22000 | 7.4 | 12.6 | $42.00 |
Able was designed to be in the low-tech segment. At the end of 2022, it accounted for 19% of the market share and was the top selling product. The specs are as follows: Age – 4.1, MTBF 2100, Performance 6.4, size 13.6, and it was priced at $34.00. It was also the oldest product, but it was on par with the customers expectations in 2022 for the low-tech segment. In 2023, the specs did not change but the price increased to $35.50. The year end reports from 2022 suggested that the price should be increased to help achieve the desired 30% contribution margin, this strategy did help us to achieve a contribution margin of 30.9% but it led to a decrease in sales and increased inventory carry over.
In 2022 started R&D for a new high tech product A_Excel. The specs are: MTBF 22000, performance 7.4, and a size of 12.6. In 2023 it was priced at $38.00. By the time we hit the market, the specifications did not align with the customers expectations, but we did stock out. The ideal specs were 9.5 for performance, and 10.5 for size. The price and age were still on par.
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Production Analysis
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Dec. 31, 2022
Dec. 31, 2023
Dec. 31, 2024
| Product | Production | Capacity |
| Able | 1450 | 801 |
| A_Excel | Started R&D | 1 |
| Product | Production | Capacity |
| Able | 1450 | 801 |
| A_Excel | 1300 | 1 |
| Product | Production | Capacity |
| Able | 1450 | 801 |
| A_Excel | 200 | 101 |
The graphs shown are from the year end reports and the charts provide an overview of our production and capacity. In 2022-2024 the production schedule and capacity were unchanged. The focus was on creating a new high-tech product but there were some miscommunications with the capacity needs so production was negatively impacted.
In 2024 the automation was slightly increased for Able, the low-tech product, and it had a negative impact on the organization. It contributed to the need for additional emergency loan funding. The high-tech product did not increase automation as a strategy to maintain a high quality and not add additional costs to the organization.
No products were discontinued.
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Market Segmentation
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| Able | ||||||
| Year | Price | Promotional Budget | Sales Budget | Sales Forecast | Production Ordered | Contribution Margin |
| 2022 | $34.00 | $1200 | $1500 | 1400 | 1450 | 22% |
| 2023 | $35.50 | $1500 | $1500 | 1600 | 1600 | 31% |
| 2024 | $35.00 | $1500 | $1500 | 1200 | 1600 | 26% |
| A_Excel | ||||||
| Year | Price | Promotional Budget | Sales Budget | Sales Forecast | Production Ordered | Contribution Margin |
| 2022 | Started R&D | |||||
| 2023 | $38.00 | $1800 | $1500 | 1300 | 1 | 29% |
| 2024 | $42.00 | $1000 | $900 | 200 | 200 | 35% |
The tables show the product price, promotional budget, sales budget, sales forecast, production ordered, and contribution margin for each product each year.
In 2022, the difference between accounts receivable and accounts payable was a net income of $1,113. In 2023, this dropped to $219 and then we had a net loss of $390 in 2024. Due to the issues with production and capacity and carrying either too much or too little inventory, the debt increased significantly in 2024. In 2022 – 2023 we carried very little debt.
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Financial Performance
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| Year | Net Profit (loss) | Sales | Inventory Costs | Dividends Paid | Sales of common Stock | Emergency Loan | Cash Percentage |
| 2022 | $2,358 | $49,155 | $1,813 | $1,045 | $1,000 | $0 | 36.6% |
| 2023 | $1,449 | $38,444 | $12,972 | $0 | $0 | $767 | 0% |
| 2024 | ($1,230) | $31,931 | $30,097 | $0 | $2,000 | $17,225 | 0% |
This table provides an overview of the financial performance for the entire company from 2022-2024. R&D expenses, marketing expenses, and production were all funded by sales and stocks initially, but in 2023 and 2024 the emergency loan helped to cover the expenses as well. No bonds were retired, nor did we buy back any stock.
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Strategy Recap
Broad differentiator
Keep existing product line, introduce at least one more product, offer customers products that match their ideal criteria for positioning, age, and reliability.
Spend aggressively for promotion and sales, customers need to know about our excellent designs and make products accessible to customers. Price at a premium.
Grow capacity to meet demand, investigate modest increases in automation levels to improve margins.
Finance investments primarily with stocks and cash from operations, adverse to debt and prefer to avoid high interest loans. Keep assets/equity (leverage) between 1.5 and 2.0.
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This strategy will be beneficial in the long term, and we have met some of the objectives, such as adding a new high-tech product, spending aggressively for promotion and sales, pricing at a premium, and modest increase in automation.
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Summary and looking ahead
GOAL: Increase sales and profits to eliminate emergency loan
Immediate action:
Inventory management
Accurate forecasting
Capacity changes
Middle:
Increase automation
Increase TQM initiatives
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2022 was a successful launch year and provided valuable insight on the sensor industry and its market. In 2023 and 2024 there were some missteps and communication issues that led to poor management of inventory, trouble forecasting, and inefficient capacity changes that will all be addressed. Our top priority and main objective is to increase sales and profits to eliminate the emergency loan. Immediate action will be needed on inventory management, accurate forecasting, and capacity changes. Once those issues have been resolved, we will address our automation and try to increase it and invest in TQM initiatives to support our previous efforts. In 2025, we expect an overall upward trend. We will align our products will customer expectations and reposition ourselves as a top competitor in the market. Our efforts will be seen and measured by the sales, profits, and gradual elimination of the emergency loan.
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References
Capsim Foundation. (2021). Capsim Management Simulations, Inc. Retrieved from https://ww3.capsim.com/student/portal/index.cfm?template=reports
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