Capstone Strategy

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Regarding our high end product, we perhaps lowered it too much on round 1 as we sell it at 37 making is the cheapest product on the market. However, in this market, the price isn’t important in the buying process therefore we could have kept a higher price in order to increase our margin. We then decreased it to 36,50 on round 2 and 3 but realised that was a mistake and we increased the price to 37 on round 4 and onwards. In fact, the price we really not an important criterion. Especially that we were only 2 on this market thus when Atchum was sold out customers had no choice but to buy our product no matter the price.

As mentioned earlier we drop the size and performance market but for the few rounds at the beginning we set up a price of 31,50 for both. We didn’t change this price as we were the lowest on the market and though that the attributes of our product were matching this price.

Promo and sales budget

Chapter III. Results (Year Reports).

OUR OBJECTIVES

- Increase market share in order to become a leader on the 2 selected markets namely traditional and low-end segment - 50% of market share for round 6

- Maintain an efficient cost control with profit margin at 40% for round 6

- Create a rotation with 2 products in traditional and low end segment each in order to always have a perfect match with the customers’ expectations.

FINANCIAL PERFORMANCE OF BALDWIN

- CASH FLOW STATEMENT

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- INCOME STATEMENT

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ANALYSIS YEAR BY YEAR

YEAR 1

R & D Decision:

- We created a new low-end segment product, Blair (new low end) for round 3 with performance and size better than the existing low end product Bead.

- No specifications changed for Bead (low end)

- Reposition Baker which is the original traditional segment product to match customer expectations for round 2

- Reposition Bid (high end), Bold (Performance), and Buddy (Size) which is the original traditional segment product to match customer expectations for round 2

Production and Capacity:

- Bought additional capacity of 500 units for the Blair (new low end) and 200 units of additional capacity for Bead (existing low-end) in order to be ready for the next round and reduce variable costs in the future rounds.

- Focus on automation for low end and Traditional products in order to optimize efficiency

- Produce 2100 units of Bead (existing low-end) including 720 units in shift 2 as in this case using overtime is less costly than buying capacity (short term vision with our low cashflow) and 1650 units of Baker(exisiting traditional), 500 units of Bid (existing high end) , 510 units of Bold (existing performance) segment, and 480 units of Buddy (size segment)

Pricing:

- Reduced prices for the existing traditional and low end products by 3$ as the segments are price sensitive.

- Reduced prices of the other segment products by 1$ only.

Marketing:

- Since the focus was mainly on Low end and traditional segments the sales and Promo budget for the two segments was maximized to $2,000 each.

- For the remaining segments in order for the products to be merely visible and generate sales the sales and promo budget was kept at $1500.

Financial:

- Stock Issuance: 13 000

- Long Term Debts Issuance: 18 000

- A/R Lag: no change (30 days)

- A/P Lag: no change (30 days)

Year 1 decisions taken

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POSITIVES FROM ROUND 1

- We had an excellent presence in all markets with, 33% in traditional segment, 30% in low end segment, 27% in high end segment, 34% in the size segment and 37% in performance. This reinforced our strategy where they kept their prices low in comparison to the other groups.

- We understood the need to invest in automation for the low and traditional segment. They ended with the most amount of sales of close to 139 million dollars and a contribution margin of nearly 26%.

NEGATIVES FROM ROUND 1

- As a result of our early investment in automation, we took a significant amount of emergency loans, which resulted in zero cash on hand and a net loss.

- we had the second lowest stock price and marketCap. Unfortunately for the group as well, we did not understand inventory goals in terms of capacity and production as we stocked out in all of their primary segments except for one. Financial results were deplorable with -1.2% on ROS, -1.5% on ROA, and -3.5% on ROE.

- Not enough production capacity to reduce the variable direct labour cost for producing Bead (Existing low end). Producing more than 700 units in shift 2.

YEAR 2

R & D Decision:

- We created a new Traditional segment product, Bloom (new traditional) for round 5 with performance and size better than the existing traditional product Baker.

- No specifications changed for Bead (low end),

- Reposition Baker which is the original traditional segment product to match customer expectations for round 3

- Reposition Bid (high end), Bold (Performance), and Buddy (Size) which is the original traditional segment product to match customer expectations for round 3

Production and Capacity:

- Bought additional capacity of 500 units for the Bloom(new low traditional) and 200 units of additional capacity for Bead (existing low-end) in order to be ready for the next round and reduce variable costs in the future rounds.