Project 3

Ngozi Onyewu

Team Chester

Cake, Cedar & Coat

USA

MBA 670

1121 Strategic Decision Making

Prof Elena Zavialova

February 23, 2021

1. What strategy were you implementing? Give examples of any three decisions over the four rounds that were consciously driven by your chosen strategy. Explain.

The strategy I implemented was the marketing strategy for team Chester. Based on our capsim strategy on differentiator and local, we focus on the high-tech segment in one country (local) and look at our vision statement to premium tailored products for technology-oriented customers in the local region; our brand defined the cutting edge.

Examples of three decisions over the four rounds that were consciously driven by my chosen strategy are pricing, customer accessibility, and customer awareness.

For pricing for a high-tech buyer, they want the top quality, they are not worried about the price, but still, I had to consider and pay attention to what the customer wants and what the competitor is offering, so I don't lose the market share to a competitor that has a lower price than me. So, I checked the competition price in each round so that I can price our products accurately. Another area I had to consider when I was setting the price was the contribution margin. Here, the contribution margin is the difference between the sales and variable cost. For example, in round 1, sales ($62,778) – total variable cost ($44,776) which equals $18,002 which is the contribution margin. And this is how much we make on our product after considering the cost in making each unit. I have to keep an eye on my prices to improve each year. When setting the price, I had to pay attention to customers' acceptable buying price range for either segment. For this case, we are focusing on the high tech and customer buying criteria by the country or segment as given to us in the Capsim Market Condition report.

The other areas I made marketing decisions on all four rounds are awareness and accessibility. Here, we're letting the customers know we have a product and how they can obtain the product. According to our course material at UMGC, awareness is the percentage of the market that is aware of our products cake, Cedar, and Coat. A promotion budget was utilized to drive awareness. In round 1, I spent $3000 on promotion to obtain 87% awareness for our product cake. I paid $3000 on the sales budget to get 61% accessibility, the whole amount allocated for advertising and sales budget utilized in year 1. Still, for subsequent years, year 2, for our cake customers, we had a 100% awareness and use $1800 for promo budget; this explains the fact that promotion efforts have a diminishing return and 75% of customer accessibility and paid $1350 for sales budget, this means 75% of customers find it easy to work with us and 25% didn't find us accessible. If my competitor and I have the same product, if I have higher accessibility than them, I will sell more than them. For the sale budget, the product in the same segment will have the same accessibility; for example, in year 2, our product cake and cedar had the same accessibility of 75%. In year 3, our product cedar and coat had the same accessibility of 85% with a sale budget of $3000 since we had introduced a new product but in the same market segment.

2. Which country and customer(s) did you target with your product (high tech, low tech, or both)? Why? Give examples of two decisions in R&D and two decisions in marketing that you implemented over the four rounds to enable your desired targeting.

We targeted the USA and customers interested in high tech because according to our vision statement, which states, premium, tailored products for technology-oriented customers in the local region, our brands define the cutting edge. So, for our R&D, we decided on: (1) produce a new product yearly that will have a competitive advantage, keeping the design fresh and exciting. We created a new product, cedar to meet customer demands, managed our existing products to keep them relevant in the marketplace, managed cake, and kept it appropriate in year 2 until cedar launched. We retired products from the market that no longer fit our strategic direction; by year 3, we retired cake and introduce our latest high-tech product coat.

Speed &accuracy: The device analyzes a sample and displays results in a time frame known as speed. The material cost correlates directly to the rate of your product. The more expensive the product, the more momentum it has to run the test. The high-tech customer is not worried about the money; they want the device with the highest speed and quality. For our product, cake in year 1 had a speed of 6.5, in year 2, cedar was introduced, our new product had a speed of 7.1, and in year 3, our latest product was introduced, and it had a speed of 9.5, was the fastest.

On the other hand, while accuracy is the likelihood of the testing device providing a correct result. Higher accuracy rating devices are less likely to give a false positive or false-negative effect. Also, in year 1, our product cake's accuracy level was 6.4. In contrast, our next new product in the second year cedar had an accuracy of 7.1, improved, and the latest product coat in years 3 and 4 had an accuracy level of 9.5. The accuracy had improved tremendously. Also, the accuracy of our products cake, cedar, and coat is directly correlated to the cost of producing them.

Example of the two decision for marketing is pricing and forecasting: since we are dealing with the high-tech segment, the price range falls within $25 to $45, so we started our pricing at $33 for cake in year one, and we sold 863 units, in year two we also produce cake but we lowered our price to $30, so we can get sale while we wait for our new product cedar which had a revision or releases the day of May 26, 2023. So, cake sold 825 units, and cedar released, sold 816 units. In year three, we dropped cake, increase the price for cedar to $38.00, and it sold 771 units more than its potential unit sold of 754. In the same year, we introduced our latest product coat on January 3rd, 2024, we priced it at $45, it was our latest product, fully equipped, coat sold 1,860 units and in our last year, which is year four, cedar sold 596 at a price of $35, we lower the price so we can sell the remaining product, and we up the cost of coat to $46 since it is our latest high -tech product. It sold very well, 1,987 units. We did well with our pricing.

The other example the marketing team decided on was forecasting; here, we created a sales forecast to predict the amounts of units we think we'll be selling in the coming year. We were mindful that the production team would utilize our sales forecast to determine how many units they will produce. The financial team will also use it to determine or predict profits, variable costs, and contribution margins. Also, we adjusted our forecast to reduce stocking out and having excess inventory. In years one and two, with our product cake, we had a stockout. Still, for the next product, cedar and coat, we adjusted our forecast, so the production department didn't produce too much, which could have led to inventory buildups or too little, which means lost sales opportunities to our competitors, either way, would have been costly.

So, we utilize last year's sales as a starting point for this year's forecasts. The segment growth rate for high-tech for the upcoming year is 13 percent; we can expect to sell 13 percent more units this year than last year. The upcoming year's market will not be similar to the previous year due to changes made by our company that produces a new product every year and our competitors also has a new product out, which will affect sales.

3. In the market segment that you were focused on, what do your customers want most? Did your market share for the country where your products are sold change over the four rounds? Comment on how it changed and why.

The market segment was I'm focused on is the high-tech segment; my customers want a top-quality product, they want speed, accuracy, age, service life, they are not worried about the price. They actually will pay for a high-priced product—the market share for the country USA where my products are sold changed over the four rounds. In the first year, our market size was 23.9% compared to round zero; our company took the most significant share of the market; also the 2nd year the market size increased to 40.2%, 3rd year the market size went up further to 57% and the last year it was 49.6%. The change was due to we had the highest accessibility from year one through four respectively accessibility was 61%, 75%, 85%, and 91%. And we also had one of the highest awareness and the highest customer satisfaction. In addition to this, the age was zero; we had new products every year, the speed and accuracy increased with each new product, and service life was at the top of the range.

4. Did you meet your potential demand in Round 1? Round 2? Round 3? Round 4? Hint: Look at Section 3 of the report (marketing). If you observed a stockout (inability to meet demand) in one or more rounds, pinpoint the reasons behind each instance.

In round 1, I didn't meet my potential demand due to a stockout; the potential sold was 1,106 of our product cake, and the actual unit sold was 1,040.

In round 2, we had our existing product cake, which we still produce since the new product cedar would be released on May 26, 2023, actual cake units sold are 903, and the potential unit sold is 1,231 had a stockout. While the new product cedar actual unit sold was 344, and potential sold is 117. The market share for our team is 19%, and it's the low-tech segment. Our primary market is the high-tech segment; we tapped into the low-tech market, our product cake priced within the high end of the low-tech price range at $33 for round 1 and $30 for round 2. The stockout, which was unable to meet demand, might have been from our high-tech end user customers like a new product, so we didn't make too much knowing that we didn't want leftover.

In rounds 3 & 4, there was no stockout, demand was met; although our price for cedar in round 3 was above the low-tech market, at $38, we still took a small portion of the low-tech market. In round 4, we lowered cedar price to $35 since we were introducing a new product coat, but amazingly cedar took 14% of the market compared to round 3, where cedar took 5.6% of the market. In round 4, we were able to take a portion of the low-tech market for $35, which is the low-tech high end of the cost; we sold 1,034 units, and the potential sold was 1,004; we sold more with price range within the low-tech.

5. Based on Section 1 (High-Level Overview) of the Round 1 Report, how did your sales results compare to those of the other five teams? If your sales results were extreme (top two or bottom two among the six teams), explain what other than sheer luck, caused that to happen. In other words, what decisions in Round 1 might have caused your sales to excel or suffer in comparison to its competition?

Base on section 1(High- level overview) of the round 1 report, my sales result compare to the other six teams was low, the 3rd from the bottom because in this round we introduce our new product cedar against releasing it next year, we had to borrow current loan to utilize in the research and design, promo budget and sales to increase awareness and accessibility, and since is a product for high-end users, we spent money to make sure it had the highest quality. In so doing, our sales suffered in comparison to our competitors.

6. Based on the Round 4 Report, were your sales after Round 4 higher or lower than your sales after Round 3? How do you explain this change in sales in view of your team's decisions in Round 4?

Base on the round 4 report, my sales after round 4 were higher than sales after round 3. The change in sales from round 3 to 4 is due to the new product coat that was released; it is a high-tech product, so the high-tech market interested in quality, high tech, speed, accuracy, age, and service went for it. Base on our team decision in round 4, we spent $1,050 on sales budget to make sure we had the highest accessibility, which was 91%, and spent $2,650 on promo budget, which gave us 100% customer awareness; we also used the region kit, to boost demand by 10% over our competitors, we noticed our competitor Echo doesn't have a region kit, we also increased our price to $46 compared to our competitors Echo whose price was at $42. Due to their decrease accessibility and awareness, we had an advantage over them; Echo’s accessibility and awareness were 52% and 53%, respectively. In comparison, ours was 91% and 100%, respectively; we invested more on our promo budget and sales budget, we had the highest accessibility and awareness among all the teams. We also sold 1,987 units compared to Echo that sold 889; our revision date was earlier Feb 22nd, 2025, compared to Echo, whose revision date was Nov 1, 2025, towards the end of the year.

7. Did you need an emergency loan in any of the four rounds? If so, why? If you did not need an emergency loan in any of the four rounds, explain the decisions that you made to ensure that your company would not need an emergency loan to survive.

We didn't need an emergency loan in any of the four rounds to survive. In round 1, R&D had decided to design cedar and coat for subsequent years, since our company which is high -tech, was supposed to come up with a new product each year, so for each product, it had to be designed the year before being released in the market the following year. We didn't have enough funds for our new product, cedar, so we borrowed $9,300 a current debt loan, which we'll pay back within 12months. In round 2, we paid back the current debt loan of $9,300 when it was due, then we borrowed another current debt of $9,000, which we are to pay back the following year, and also took some bonds of $17,300, which we are to pay back in 10years (long- term debt) to design and produce coat. In round 3, we paid back our current debt of $9,000. And in round 4, we bought a stock of $4,397 to help increase our company's value shares. In so doing, we didn't have the need to obtain an emergency loan.

8. Explain your capacity decisions, including whether or not to use a second shift in each round. Compare the available plant capacity in each round (first and second shift) versus the number of units produced. Was there idle capacity in any round? Is it possible that you could you have used capacity more efficiently while increasing your plant utilization? Explain why or why not.

For capacity, since the plant can produce 1700 units of capacity in the first shift and additional 1700 units in a second shift, in round 1, our team decided since we had only one product cake, we put in a production order for 1850 base on the forecast of 1800, we utilized 109% of the plant, also we added capacity change of 1500 for our new product cedar that will be released the next year which is in our round 2. We used second shift in some of the rounds where we had more than 100% plant utilization. We didn't have idle capacity in any round. We used capacity more efficiently while increasing our plant utilization, since we had to produce a new product every year based on our market segment. In round 2, we had two products to make, cake and cedar; which we produce 1728 units of cake and we used 106% of the plant, and for the cedar, we make 1440 units and utilize 100% plant, by round 3, we stop producing cake, and we introduced coat our newest product, we put capacity for 1850, but we produced 2,016, and utilize 114% of the plant, and round 4 for coat, we put the capacity for 2,100, we made 2016 and operated a 100% plant, we didn't need to use second shift.

9. See Finance Section of the Round 4 report. At the end of Round 4, do you have any current debt? Explain the presence or absence of current debt at the end of Round 4. At the end of Round 4, do you have any long-term debt? Explain the presence or absence of long-term debt at the end of Round 4.

Looking at the Round 4 report's Finance section, at the end of round 4, the current debt we have is $3,733, which was a long-term debt but is now due this 2025. And our company has a bond of $5,600 due 2027 for payoff and $17,300 due 2033 for a payoff, which combined is $22,900 is our long-term debt. The long-term debt is borrowed loans we utilized to carry out our project of researching & designing a new distinguishing product with excellent design to meet our local market needs. Also, we use the loans for branding and sales for high awareness and easy accessibility and capacity expansion as needed per demands.

10. Did your team's decisions in Rounds 1–4 always align with the chosen strategy? If you found yourself deviating from your strategy, explain why. In hindsight, what decisions would you have made differently? Explain.

Our team decision from round 1 to round 4 aligned most of the time with the chosen strategy; we as a team based on our company's vision to build a distinguished product with excellent design, quality, service life, age, speed, and accuracy for our market segment. We decided to borrow current loans in round 1 and round 2. A long-term loan for research and design, for our new product which we have to produce yearly and keep the design fresh and exciting, the tailoring product with specific region kit, to obtain the 10% market demand in our market segment, for marketing in paying for our promo budget and sales budget to make sure we had the maximum awareness and accessibility compare to any other company especially the ones in the same market with us, our competitors. Our round 1 and 2, since we borrowed, we didn't see much profit, but by round 3, our market share in the high-tech segment was 57%, we paid off our current debt, by round 4, we decided as a group to purchase some stocks to increase the valuation of our company. In round 4, we captured the right size of the market 49.6% of the high-tech segment, and with our other product, cedar was able to capture 14% of the low-tech market on round 4, with us setting the price at $35, which the high end for the low-tech customers. Our prices were set above average; in round 4, our price was $46, above the high-tech group range because it was a new product. We also utilized our plant for maximal production; some rounds we went over slightly, but on round 4, 100% operated the plant without going above. I conclude, as a team, we did very well.

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