Module 3 - SLP

Session Long Project #1 2

MGT 599: Strategic Management

Session Long Project #1

Joseph Wineman

Trident University International

Strategic Management Process/Vision, Mission, Goals and Objectives

After analyzing Mr. Thomas’s performance during 2012, 2013, 2014 and 2015, I have identified what I believe to be some major flaws in his decision making process and have included changes in our planning strategies that will produce better results, and better profits for the company. My selected strategy was to increase the Research & Development funding of both X5 and X6 during 2012 and 2013. Additionally, I increased the price of the X6 to capitalize on the public’s burgeoning awareness and excitement as the new product was introduced to the market. I allowed the price of the X5 to remain unchanged, until public demand, and sales revenues, began to decline. During the years 2014 and 2015, funding for the Research & Development on the X5 will be reduced while the capital for the X6 will be increased. After studying the financials on the X7, I decided to eliminate that product line all together as it nothing more than a financial drain on the company.

Year 2012

I priced the X5 at $270 per unit, which was slightly higher than Mr. Thomas’ price point, as our financial analysts stated that the X5 was in the growth phase. This price also supports an increase in Research and Development expenditure (up 50% from 33%), as I expect that the increase in funding will lead to the development of enhanced features and a better overall product. I also increased the price point of the X6 from $430 to $460 as our analysts stated that Clipboard customers are not yet sensitive to the price while the X6 is still in the growth phase of the product’s life cycle. Additionally, the potential number of customers far outweighs the current number of X6 owners. Finally, the strategy to discontinue the X7 product line was adopted this year to avoid the unnecessary profit losses.

Strategy based Simulation: 2012

Product	Price	R&D	Results	X5	X6	X7
X5	270	50%	Marketing	2,064,017	1,059,527	-
X6	460	50%	Financial	557,284,699	487,382,302	-
X7	-	-	Advisor Remarks	X5 performance compares favorably with others.	X6 is less expensive to buy that similar products, but currently in the growth phase, there are customers who have not bought it.	Total Score: 388,765,674

The results of the new strategy for 2012 lead to a better return than Mr. Thomas’ attempts and thus, justify my identified changes.

Year 2013

I recommend that our pricing and Research and Development funding on the X5 remain constant at $270 per unit as it cannot be determined as to when the X5 will reach the maturity phase of its life cycle. However, I would consider raising the price point of the X6 by another $10 per unit to $470. The increase in price would, in turn, increase total company revenues as the customers purchasing the X6 are not price sensitive, and are willing to pay more for the product. The X7 product line remains discontinued for this year, as it still is nothing more than a drain on company resources.

Strategy based Simulation: 2013

Product	Price	R&D	Results	X5	X6	X7
X5	270	50%	Marketing	2,982,727	1,834,592	-
X6	470	50%	Financial	805,282,162	862,258,409	-
X7	-	-	Advisor Remarks	X5 is in the shakeout phase.	Customers willing to pay more for X6.	Total Score: 967,914,367

For the second year in a row, this new strategy outperformed the initial plans set in place by Mr. Thomas. Once again, our financial advisor’s comments support the decisions we have implemented with regards to pricing and research and development funding. The X5’s price point was not changed as the X5 is in the shakeout phase of the product life cycle. Additionally, our advisor’s analysis indicates that customers are willing to pay more for the X6.

Year 2014

I recommend that we slightly reduce the price of the X5 to $265, it has a large fixed cost and reducing the cost quickly can lead to losses. I suggest that the price point of the X6 be lowered as well, as it may have reached the maturity phase in the product lifestyle. Additionally, I would begin to cut back on the Research & Development funding for the X5 and increase the expenditures for the X6. The increased spending should equate to new features and a more polished operating system for the X6, which should translate to higher profits.

Strategy based Simulation 2014

Product	Price	R&D	Results	X5	X6	X7
X5	265	40%	Marketing	1,208,512	3,429,907	-
X6	430	60%	Financial	320,255,782	1,474,859,911	-
X7	-	-	Advisor Remarks	Customers pay the same price for Clip products.	X6 has reached the shakeout phase.	Total Score: 1,502,028,840

We are continuing the trend of outperforming my predecessor. 2014 saw a drastic decline in X5 sales, indicating that the product has reached the decline stage in the product life cycle. In this situation, our advisor states that the X5’s price point must be comparable to similar competitor products. Additionally, our advisor has warned us that the X6 has reached the shakeout phase and we will need to adjust our sales strategy going forward. .

Year 2015:

The 2105 strategy for both the X5 and X6 devices will be to slash prices in order to protect the company’s market share. Our advisor has already indicated that the X6 has reached the shakeout phase in its life cycle, thus I intend to reduce its price to $420. I will also reduce the price of the X5 to $260 in order to capitalize on the X5’s overpriced competitors. The Research & Development expenditures for both the X5 and X6 will be continued at 40% and 60% respectively.

Strategy based Simulation: 2015

Product	Price	R&D	Results	X5	X6	X7
X5	260	40%	Marketing	675,659	1,189,284	-
X6	420	60%	Financial	174,671,364	499,499,335	-
X7	-	-	Advisor Remarks	Customers pay the same price for Clip products as they do for other products.		Total Score: 1,612,297,539

The final results indicate how the adoption of a new strategy improves the company’s results from what my predecessor was able to achieve. The company’s initial score, utilizing default inputs, totaled $1,513,237,527. The company’s new score achieved under my implemented strategy equaled $1,612,297,539.

Resources:

http://forio.com/simulate/alikassim/tablet-development-sim-23/run/#p=page1

Total Score 2012 2013 2014 2015 388765674 967914367 1502028840 1612297539