URGENT HOMEWORK DUE IN 6 HOURS

Note : In the Lecture Notes Folder, you will find an Excel template that is designed to assist you with calculations contained in parts I, II, and III of this assignment.

●   Enter your data in the gold cells.

●   The aqua cells contain values that are calculated for you by the spreadsheet.  

Part 1: Forecasting Sales Demand (1 Person) -

Research

1. Identify a segment that is critical to the implementation of your company’s strategy.  Calculate the forecasted sales for the segment you chose (Note: You should use the Capsim Courier data for your calculations, and explain your calculations). (low end)

Respond

Explain why the segment you chose is critical to the implementation of your company’s strategy.  Identify two factors you should consider when you forecast sales for the segment. For both of these factors, explain how you could capitalize on (if you have an advantage over your competitors) or counteract (if your competitors have an advantage over you) the impact of these factors.  

The segment that was found to be the most critical to the implementation of our company’s strategy would be the low end segment. In our company, Digby’s, case that would be product Dell. In the previous round, Dell had the highest demand which in turn lead to it having the highest forecasted demand in the coming year. Last year, the demand was 9,316 units with a future growth rate of 11.7%. With those numbers, we were able to calculate next year’s forecast to be 10,406 units - the highest of all five of our products/segments.

When forecasting sales, the two most important factors to consider are last year’s demand vs. actual sales, and the growth rate of demand.

Part 2: Coordinating Marketing Expenditures

Research

Focus on Low End since we have highest contribution margin for this segment and decided to create a second product, Dandy, for it.

1.     Perform a cost-benefit analysis for your marketing expenditure in the segment you chose, by completing the following steps:

a.     In your Capsim decision-making spreadsheet, click on “decisions,” then “marketing,” then “pricing and forecasting.”

b.     Note the computer’s prediction for your product’s sales volume with your current Promo and Sales budgets.

c.     In your Capsim decision-making spreadsheet, click on “decisions,” then “marketing,” then “promotion and sales.”

d.     Change your promotion and sales budgets for your product to reflect an increase in marketing costs. Go back to “pricing and forecasting” and note the sales volume for this level of marketing expenditures.

e.     Follow step “d” for a decrease in marketing costs.

f.      Use the “Marketing Cost/Benefit” worksheet in the Excel template provided for this assignment (located on ANGEL in the Lecture Notes Folder) to determine the impact of these changes on your company’s profitability.

Respond

2.     For the segment you’ve chosen, use the Boston Consulting Group (BCG) Matrix to determine whether your company’s product(s) in that segment are question marks, stars, cash cows, or dogs.  Explain your reasoning for your product’(s) classification in this segment.

Note: For an overview of the BCG matrix concepts, please access the following link: http://www.netmba.com/strategy/matrix/bcg/ .

We chose to look into our Low end segment because it is a steady stream of income with a high contribution margin, so we decided to invest in another product line for this segment. Our Low end segment is a cash cow because it has relatively high market share of 28% which is up 6% from last year and is continuing to rise. It is also a cash cow because it provides us with high sales and returns in comparison to the variable costs, with a contribution margin of 45.9%. This cash cow is very reliable and we can always count on our low end segment to provide high returns with little cost. To get the most out of our marketing efforts we performed a cost/benefit analysis. We were originally spending $4,313 on promotion and sales for our low end segment (our spend is higher in this segment than others). After running the cost/benefit analysis we found that some money being spent wasn’t producing returns. We adjusted our marketing budgets by decreasing it by $800 in the low end segment and saw a .02 return on investment. By adjusting our budget in year 3, we will be able to keep our low end market segment as a cash cow, and reduce our costs by cutting out waste in the budget.

3.     Given the results of your cost/benefit analysis, explain specifically how you will market your product(s) in the segment you’ve chosen.  Discuss how and during which year of operations this strategy will position or advance your products in the BCG matrix (for example, moving from a current question mark product to a star by year 4 of operations).  

Part 3: Planning Production Capacity (2 People) -

Research

1.     Perform a capacity analysis to determine if your company’s capacity in the segment you chose is adequate to meet forecasted demand by completing the following steps:

a.     Enter the segment’s total industry unit demand (located at the top of your selected segment’s page in the Courier) in the spreadsheet cell labeled “unit demand in segment.”

b.     Now calculate your competitors’ total production capacity in the segment for the next round, by completing the following steps:

                                              i. Go to page 4 of the Courier

                                            ii. Scroll down to the production information.

                                           iii. Add together the amounts in the “capacity next round” column for each of your competitor’s products in your chosen segment.

                                           iv. Enter this total in the spreadsheet cell labeled “competitors’ capacity in segment.”

c.     Finally, examine the “guaranteed unit sales”, which is the difference between the totals you calculated for “a” and “b” above (i.e., the difference between the unit demand in the segment and your competitors’ total production capacity).

Respond

2.     Discuss the impact this analysis will have on your capacity investment decisions in the segment.

3.     What other plans do you need to make (e.g., financing, etc.) to take advantage of this opportunity?  Note: Remember that capacity investments take a year to take effect.

4.     What elements will your company need to incorporate into its strategy to make sure that adequate capacity is available each year?  For example, should you employ a “capacity trigger” to assist in your decision-making process, where if capacity utilization reaches a certain percentage, you will invest in set amount of additional capacity?