BenchMark

1.  Executive Summary

a. WeTech is an innovative company that invested in a new technology. The Personal Computer has untapped potential that can better serve the workforce, if utilized correctly. WeTech’s aim is to offer quality products at competitive prices that will service the needs of clients. The goal is to always anticipate and surpass the ever-changing needs of the customers.  

2.  Financial and Market Performance

a. Financial Performance

i.  Following Quarter 1, WeTech had a -$337,000 net operating cash flow in order to complete research and development, and to open the first sales office.

ii.  Quarter 2 led to -$692,430, as the brands were further developed, and marketing efforts were started.

iii. As sales increased through Quarter 3, net operating cash flow went to -$231,375. Quarter 4, however, saw a large increase in common stock, allowing R&D investment. This led to a net operating cash flow of -$2,671,055.

iv. Through all of this, the net operating cash flows were largely offset by the increase in common stock. However, quarters 1-4 still saw earnings per share of -$17, -$20, -$11, and -31 respectively.

b. Financial Projections

i.  While quarters 1-4 showed overall negative performance, WeTech is projected to make a drastic financial turn in quarters 5 & 6. Quarter 5 is projected to have a net operating cash flow of $1,028,863, and Quarter 6 is projected to be at $1,841,035.

ii. With this, the earnings per share are expected to increase to $10 in Q4, and then $19 in Q5.

iii. This projected growth is promising and will keep growing past quarter 5 ensuring long term financial success.  

c. Market Performance

i.  Through Quarter 4, WeTech is maintaining a strong 42% of the overall market share. This is broken down into a 96% share of the Mercedes market, 35% share of Traveler, and 3% share of Workhorse.

ii. Of the two brands, the WeTech Monitor ranks first in brand judgement with the Mercedes market, and second in Workhorse. Furthermore, the WeTech Tablet ranks second in brand judgement in the Traveler market, and fourth in Workhorse. 

3. SWOT Analysis

a. Strengths: Effective marketing, competent sales force, increasing demand for product, market performance, and line distinction.

b. Weakness: The products are not being recommended to customers by the Customer Union. This is a major concern since they determine if the product is meeting customer’s needs. Also, the balanced scorecard indicates that the company’s financial performance needs adjusting. While the rate is above the minimum of -6.620, it is below the average of 6.587 by 3%. In addition, workers satisfaction is currently at 66.1% falling behind both competitors, by an average of 7%. Lastly, the total performance is below the average by 2.3%.

c. Opportunities: The personal computer is new technology that has potential to change how industries conduct business on a daily basis. WeTech can increase its market share by analyzing the leading company’s strategy and utilizing it to restructure the company’s current market plan. The front runner has a Market share of 50% leading WeTech by 8%, they are also leading in two out of three sectors. Currently WeTech is dominating in the Mercedes market with 96%, however being consistent across the broad, will lead to more confidence in the company.

d. Threats: WeTech must find a way to balance the needs of the customers, while not under selling the product. The leading company will be aiming to dominate in all three sectors, which could lead to WeTech losing its position in the Mercedes sector. There is also a chance of workers leaving the company in favor of an increase in compensation from the competitors.

4. Marketing Strategy

a. Brand Strategy: WeTech has several successful brands, however one stands out amongst the rest.

i. WeTech Monitor is by far the most successful brands and brings in an average of $1,354,193, which is 5x more than the other brands. Since this product brings in the most revenue for WeTech the Brand Strategy is to invest a high-speed networking capability to make the monitor even more desirable amongst the competitors.

ii. This investment cost WeTech $1,563,413, although this number is high, the return on investment is much higher the company will be able to raise the product price due to the new capabilities.

b. Pricing Strategy: WeTech prices are competitive amongst the competitors in the market.

i. WeTech has 3 products available to their customers, WeTech Budget friendly laptop, WeTech Tablet laptop, and the very popular WeTech Monitor desktop computer. WeTech priced the products based on the cost of production and the competitors. The goal was to have successful products with low costs so they can be available to everyone.

ii. WeTech does has products priced on the higher end of the market as they have more capabilities available. They also have products on the lower end of the market due to the more basic capabilities, giving everyone an option.

c. Advertising Strategy: WeTech targeted the needs and wants of the consumers and specifically strategized their advertising based on the target market per product.

i. WeTech has an effective advertising strategy, emphasizing simple, yet strategic ads to catch the eye of the consumer and hook them on the main features of the product.

ii. WeTech’s main target market was Mercedes and that influenced the Media Platforms that WeTech chose to push their advertising on.

d. Sales Strategy: Through each quarter, WeTech has been adding more sales employees to the team, as well as adding new office locations to broaden the market.

i. The main influence behind opening the sales location in Paris was the large target market for Mercedes, and secondly Workhorse.

ii. WeTech plans to implement more training for the Sales workers when the training becomes available so the Sales employees can grow with the company.

5. Pro Forma or financial projections.

a. As Q5 begins, WeTech has modified its focus on maximizing workforce productivity and minimizing expenses in order to limit inventory and increase their net income. 

b. WeTech begins Q5 with a cash balance of $2,300,545. This figure is 81% higher than the previous quarter. There is a projected revenue increase of 45%, which would yield a dollar of $4,317,375. This falls in line with the increases the company has seen in Q2 to Q3 (46%), and from Q3 to Q4 (45%).  

c. WeTech operating cost for Q5 is set at $1,912,010. With the already stated projected revenues, the cash balance at the end of the period is anticipated to equate to $2,793,901.  

d. WeTech has lowered its expenses by $1,944,683 (50.5%) from Q4 to Q5. The biggest decreases have occurred in the R&D sector and system improvement costs. WeTech is predicting an increase in Sales Force Expense of $35,122 as the increased base pay for the production worker and production supervisor compensation.  

e. WeTech current cash assets sit at $388,536 with $120,335 in the finished goods inventory. The company net fixed assets are $2,566,667. WeTech total assets, as it currently stands, are $3,075,537. With projected revenues, WeTech anticipates an asset increase to $5,869,438 by the end of the quarter.  

f. WeTech has zero conventional and emergency loans and doesn't anticipate an increase in debt.

g. In terms of equity, WeTech has $9,000,000 of common stock. After the retained earnings reduction, total equity equals $3,075,537.

6. Tactical plan

a. Quarter 1, an initial $220,000 was spent to open up WeTech’s first office in Chicago, where the company manufactured its new WeTech laptops and desktops in hopes of providing an easy to use and reliable product that simplifies the day-to-day lives of consumers. This was done by utilizing the experience from each team member to assign positions that were best suitable for each person’s expertise. This process secured a common stock increase of 100 shares at $20,000 a share totaling $2,000,000 and invested $200,000 in a 3-month certificate of deposit in anticipation of earning 1.5% totaling $3,000 for the first quarter.

b. Quarter 2, focused on selecting target segments, Workhorse was the first priority, Mercedes second priority, and Traveler as last priority. WeTech decided to focus on providing value to price sensitive markets when designing technology. Desktops and laptops were the initial design, with a cost of approximately $60,000 each. WeTech also opened a second location in Paris totaling $370,000 for both Chicago and Paris offices. The company encountered this cost in quarter 2, due to new technology and high demand in this geographical location, and also projected high sales for the brand.

c. In Quarter 3, WeTech had a total of 11 salespeople split between two locations, which consist of support workers, Workhorse workers, Mercedes workers, and Traveler workers. The production workers were initially compensated $17,639, while production supervisors were compensated $34,169, and the sales force was compensated $52,086. All compensations will cover each employee’s annual salary, health benefits, weeks of vacation, and pensions. In quarter 3 adjustments were made to the brand by taking the needs of the customers into account. This was done by designing two new brands called WeTech Tablet and WeTech Monitor, costing another $60,000 each. The company also Changed the priority of the target markets, to Mercedes being top priority, then Workhorse, followed by Traveler.

d. In quarter 4, an additional re-design to the laptop was released, called WeTech Budget. WeTech is currently spending $147,000 to market the laptops and desktop through business newspapers, computer magazines, general news magazines, new venture magazines, and science and technology. The compensation package was also increased for all our employees across the board.

Graphs

Pro Forma Balance Sheet

Report Item Quarter 1Quarter 2Quarter 3Quarter 4Quarter 5Quarter 6

Cash 363,000270,570439,1952,168,1403,097,0035,838,038

+ 3 Month Certificate of Deposit 200,0000 0 0 0 0

+ Finished Goods Inventory 0146,575 0 0 0 0

+ Net Fixed Assets 1,100,0001,654,1672,183,3332,687,5003,666,6674,600,000

= Total 1,663,0002,071,3122,622,5284,855,6406,763,67010,438,038

Conventional Bank Loan 00 0 0 0 0

+ Emergency Loan 00 0 0 0 0

+ Common Stock 2,000,0003,000,0004,000,0009,000,00010,000,00012,000,000

+ Retained Earnings -337,000-928,688-1,377,472-4,144,360-3,236,330-1,561,962

= Total 1,663,0002,071,3122,622,5284,855,6406,763,67010,438,038

Current Assets

Long Term Assets

Debt

Equity

Cumulative Results for Quarter 3

Indicator MinimumMaximumAverageWeTech

Cumulative Total Performance 0.0002.1920.7970.198

Cumulative Financial Performance -7.28811.1761.9902.081

Cumulative Market Performance 0.0780.4660.3100.386

Cumulative Marketing Effectiveness 0.5100.6660.5870.584

Cumulative Investment in Future 3.74511.6606.8295.081

Cumulative Wealth 0.5470.8930.6980.656

Cumulative Human Resource Management 0.6260.7050.6710.681

Cumulative Asset Management 0.1240.5810.3930.475

Cumulative Manufacturing Productivity 0.4280.7300.6050.659

Cumulative Financial Risk 1.0001.0001.0001.000

Cumulative Reputation 0.5500.6310.5930.597

Tactical Plan

Plan Item Quarter 1 Quarter 2 Quarter 3 Quarter 4 Quarter 5 Quarter 6

Segments Targeted

Workhorse

Mercedes

Traveler

Workhorse

Mercedes

Traveler

Mercedes

Workhorse

Traveler

Mercedes

Workhorse

Traveler

None None

Number of New Brands 2 0 2 1 0 0

Names of New Brands

WeTech Laptop

WeTech Desktop

WeTech Tablet

WeTech Monitor

WeTech Budget

Brands for Sale & Price

WeTech Laptop (2800)

WeTech Desktop (3100)

WeTech Tablet (2700)

WeTech Monitor (3200)

WeTech Tablet (2700)

WeTech Monitor (3200)

WeTech Budget (1900)

WeTech Tablet (2700)

WeTech Monitor (3200)

WeTech Budget (1900)

WeTech Tablet (2700)

WeTech Monitor (3200)

WeTech Budget (1900)

Average Selling Price 0 3,065 3,082 2,964 2,964 2,964

Brand Feature R&D Projects None None None High speed None None

Brand Feature R&D Expense 0 0 0 1,563,413 0 0

Advertising Budget 0 132,500 162,000 237,000 250,000 275,000

Sales Offices Opened Chicago-NORAMParis-EMEA None None None None

Sales Office Expense 220,000 370,000 270,000 270,000 270,000 270,000

Number of Office Sales People 0 5 9 11 12 13

Unit Demand per Office Sales Person 0 59 112 113 150 200

Projected Demand 0 296 1,005 1,243 1,800 2,600

Revenue from Unwanted Inventory 0 0 65,810 0 0 0

Projected Revenue 0 907,100 1,668,310 3,684,252 5,335,200 7,706,400

Cost of Goods Sold 0 630,286 991,615 2,304,522 3,337,200 4,820,400

Production Worker Compensation 0 17,189 17,639 21,105 23,105 25,105

Production Supervisor Compensation 0 34,169 34,169 48,186 49,186 50,000

Average Sales Person Compensation 0 52,086 52,086 57,823 58,823 60,000

Sales Force Salaries 0 65,107 117,193 159,013 176,469 195,000

Total Sales Force Expense 0 65,107 117,193 159,013 176,469 195,000

Addition to Fixed Capacity 50 25 25 25 50 50

Investment in Fixed Capacity 1,100,000 600,000 600,000 600,000 1,100,000 1,100,000

Available Fixed Capacity 0 3,250 4,875 6,500 8,125 11,375

Starting Inventory 0 0 70 0 0 0

Unwanted Inventory 0 0 70 0 0 0

Production Volume 0 366 520 1,243 1,800 2,600

Available Inventory 0 366 520 1,243 1,800 2,600

Ending Inventory 0 70 0 0 0 0

Lost Sales 0 0 485 0 0 0

Average Unit Production Cost 0 2,123 1,907 1,854 1,854 1,854

Total Production Cost 0 776,862 991,615 2,304,522 3,337,200 4,820,400

% Lost Capacity Due to Production Productivity 30 31 33 31 31 31

Operating Capacity to Satisfy Production Volume 0 527 776 1,801 2,609 3,768

System Improvement Actions None None None

SPC

Parks

None None

Total System Improvement Costs 0 76,395 105,458 794,682 200,000 200,000

Total R&D Cost 120,000 0 120,000 1,623,413 0 0

Conventional Bank Loans 0 0 0 0 0 0

Emergency Loan 0 0 0 0 0 0

Total Debt Level 0 0 0 0 0 0

Equity Investment 2,000,000 3,000,000 4,000,000 9,000,000 10,000,000 12,000,000

Total Assets 1,663,000 2,071,312 2,622,528 4,950,686 5,500,000 6,000,000

Pro Forma Cash Flow

Report Item Quarter 1Quarter 2Quarter 3Quarter 4Quarter 5Quarter 6

Beginning Cash Balance 0363,000270,570439,1952,168,1403,097,003

Revenues 0907,1001,668,3102,697,6005,335,2007,706,400

- Rebates 040,80065,600103,30000

- Production 0776,862991,6151,515,3393,337,2004,820,400

- Research and Development 120,0000120,0001,623,41300

- System Improvement Costs 076,395105,4581,373,165200,000200,000

- Advertising 0132,500162,000237,000250,000275,000

- Sales Force Expense 079,107146,193194,169176,469195,000

- Sales Office Expense 220,000370,000270,000270,000270,000270,000

- Marketing Research 015,00015,00015,00000

- Shipping 015,17623,81937,26972,668104,965

- Inventory Holding Cost 014,6580 000

- Excess Capacity Cost 079,0330 000

- Income Taxes 000 000

+ Interest Income 3,00000 000

- Interest Charges 000 000

+ Licensing Income 000 000

- Licensing Fees 000 000

+ Other Income 000 000

- Other Expenses 000 000

= Net Operating Cash Flow -337,000-692,430-231,375-2,671,0551,028,8631,841,035

Fixed Production Capacity 1,100,000600,000600,000600,0001,100,0001,100,000

= Total Investing Activities 1,100,000600,000600,000600,0001,100,0001,100,000

Increase in Common Stock 2,000,0001,000,0001,000,0005,000,0001,000,0002,000,000

+ Borrow Conventional Loan 000 000

- Repay Conventional Loan 000 000

+ Borrow Emergency Loan 000 000

- Repay Emergency Loan 000 000

- Deposit 3 Month Certificate 200,00000 000

+ Withdraw 3 Month Certificate 0200,0000 000

= Total Financing Activities 1,800,0001,200,0001,000,0005,000,0001,000,0002,000,000

Cash Balance, End of Period 363,000270,570439,1952,168,1403,097,0035,838,038

Starting Inventory 00146,575 000

+ Production 0776,862991,6151,515,3393,337,2004,820,400

= Available Inventory 0776,8621,138,1901,515,3393,337,2004,820,400

- Cost of Goods Sold 0630,2861,138,1901,515,3393,337,2004,820,400

= Ending Inventory 0146,5750 000

Receipts and Disbursements from Operating Activities

Investing Activities

Financing Activities

Cost of Goods Sold

Pro Forma Income Statement

Report Item Quarter 1Quarter 2Quarter 3Quarter 4Quarter 5Quarter 6

Revenues 0907,1001,668,3102,697,6005,335,2007,706,400

- Rebates 040,80065,600103,30000

- Cost of Goods Sold 0630,2861,138,1901,515,3393,337,2004,820,400

= Gross Profit 0236,014464,5201,078,9611,998,0002,886,000

Research and Development 120,0000120,0001,623,41300

+ System Improvement Costs 076,395105,4581,373,165200,000200,000

+ Advertising 0132,500162,000237,000250,000275,000

+ Sales Force Expense 079,107146,193194,169176,469195,000

+ Sales Office Expense 220,000370,000270,000270,000270,000270,000

+ Marketing Research 015,00015,00015,00000

+ Shipping 015,17623,81937,26972,668104,965

+ Inventory Holding Cost 014,6580 000

+ Excess Capacity Cost 079,0330 000

+ Depreciation 045,83370,83395,833120,833166,667

= Total Expenses 340,000827,702913,3033,845,8491,089,9701,211,632

Operating Profit -340,000-591,688-448,783-2,766,888908,0301,674,368

+ Licensing Income 000 000

- Licensing Fees 000 000

+ Other Income 000 000

- Other Expenses 000 000

= Earnings Before Interest and Taxes -340,000-591,688-448,783-2,766,888908,0301,674,368

+ Interest Income 3,00000 000

- Interest Charges 000 000

= Income Before Taxes -337,000-591,688-448,783-2,766,888908,0301,674,368

- Loss Carry Forward 000 0908,0301,674,368

= Taxable Income 000 000

- Income Taxes 000 000

= Net Income -337,000-591,688-448,783-2,766,888908,0301,674,368

Earnings per Share -17-20-11-311019

Gross Profit

Expenses

Miscellaneous Income and Expenses