Analysis of the Company Efficiency - Case Study Example

Obviously we wanted our firm to be on top throughout the simulation and to do this we wanted to make some small decisions in the beginning to see howthe customers would react to them. Based on the reaction of our customers we would know what to do the next year and the future years (Guide to Using Consumer Behavior Research 2008). Our approach in the beginning was a mixed approach and stayed that way throughout the simulation. We reacted to the decisions that our competitors made instead of leading them. Opportunities were high in the beginning but reduced as the simulation went on. We would have done even better if we had taken advantage of opportunities in the beginning rather than trying to grab hold of them in the end. Years 10 – 11 These were the practice year and the first year of complete operations respectively. In these years we tried to lower the price on the internet and did so by $1 however we raised our prices by $5 in the wholesale market. We realized that these two markets were very price sensitive and even the slightest change in price would increase or decrease sales if everything else was held equal (Investopedia 2010). Supply and demand played a big role in these years and we found out very soon that it plays a major role in any type of business. We did not raise capacity in this year nor in any years in the future instead the emphasis was to try to supplement this with increasing worker productivity. In year 11 we barely broke even and this was due to very low sales. Years 12 – 13 We raised the wholesale price in these years again but we lowered the internet price. This allowed us to experience some increased sales in the internet segment but we failed to meet the demand in Year 13 for the wholesale segment. We did not increase advertisement in any of the years of operation and it would have been a benefit to us to increased advertising because if customers do not know that you exist then how can they buy from you (Bosman 2006)? We missed the mark when it came to advertising because our competitors were adjusting their advertising expenses but we were not. This could have caused us to miss some sales since consumers were not aware that we existed. Even though we did not meet the wholesale demand in year 13, this year proved to be our best year of operations due to our lower costs. Years 14 – 15 These were the worse years of our company’s life. In year 14 our profits were only 23,541 but dipped to a dismal 2,162 in year 15. We were content to have made a profit but we knew that we could have made more of a profit if we did not make mistakes in our decisions. In these years we did not utilize as many retail outlets, we raised wholesale prices, and we experienced a low 5.9% wholesale market share. In year 14 we were above the average in wholesale price but below average with our wholesale advertising budget. Company E in year 14 for the private sector took 100% of the private label market due to the rest of the company’s overbidding for the opportunity. Our quality in these two years were competitive but considering the higher price we were asking the consumer was not getting anything extra from paying this higher price. In these years we should have increased the quality of the shoes we offered or lowered the price. We did not do either. This led to a dismal couple of years. Years 16 – 18 Although we made profit throughout these years we still did not realize that maybe we were offering too many models and this was leading to unnecessary costs. We should have looked above and beyond the right now and planned better for the future. We should not have thought about not losing money but invested in the future of our company (Trump and Zanker 2007). In year 18 our private label market share was the largest we had ever experienced. Our bid price was low and reasonable and it showed by allowing us to grab a 71.3% market share in the North American market that spilled into the other markets. Planning in these years should have been better because even though the simulation was over we should have planned as if we were still doing the simulation. In this way we would have been looking ahead. Summary Our initial strategy was to keep pace with the competition but it seemed that during most of the simulation we were trying to catch up to them. We constantly overlooked certain key aspects of what the competition was doing and did not make the proper adjustments. We did not understand marketing and its power enough to use it properly (Marketing Teacher 2000-2008). In years 14 – 18 we missed the mark on many of the investor’s expectations due to lack of planning. However even though we made some bad decisions we never lost money and in the end we came back with a strong showing. Latin America was gravely overlooked. We made decisions as if all markets would react in the same manner but we were wrong. Culture of every market makes a difference in how they react to prices, advertising, etc (Business Week 2009). Keeping our marketing budget the same year after year was a bad decision. We should have flooded the market with advertising in the beginning and then lowered it as the years passed. We also could have made use of the celebrity appeal once we realized that we were behind the competition. This may have helped increase our market share in all market segments especially in the private label segment. How many times have we seen a shoe sell just because a certain celebrity endorsed it? Plenty of times and even though the simulation gave us an opportunity to do the same we did not take advantage of it. The main thing I learned in this simulation is about missed opportunity. First off if the demand was larger than the supply we lost sales. This may not seem to be a big deal at first but those lost sales are lost revenue that could have gone to help us improve our company. We could have donated that money, increased capacity, improved productivity, or countless other things. Lost sales leads to missed opportunity to expand and cover costs. Another thing about missed opportunity is that when you fail to take advantage of something sometimes the opportunity does not come around again. For example, when given the opportunity to grab some celebrities to endorse our products we did so but we probably could have done more. Also the opportunity to increase capacity was always present and we did not do anything about it. This could have led to lower costs and better working environments. It could have also led to lower shipping by having more locations to ship from. We did well considering all of the things we missed out on. We tried to keep pace with the competition but should have been a leader and made them keep pace with us or at least gave them more competition. We did not change with the results and I think this simulation shows that business is always changing. People tend to have different things they like and those things change often. We also had many retail outlets at our use and did not take enough advantage of them. We could have sold more if we had. You have to run your business as if you are always thinking ahead into the future. Business changes and so do your decisions sometimes need to change. Our marketing information was valuable information that went overlooked. We did not realize that Latin America’s prices should have been different and we did not realize that prices could be higher or lower in different countries. Also advertising has a different impact on various countries. If you advertise heavily in a country where people can barely a television, radio, or newspaper then your advertising dollars will go to waste. The same is true if you do not advertise heavily in a country where it seems like everyone has a radio, television, or access to some media. This results in lost opportunity and lost sales. These two things can break a company and it almost broke us. It is ok to test the market but you still have to be prepared to go with it when it starts to go at a faster pace. We were not ready most of the time and it showed by our barely breaking even and not fulfilling investor’s expectations. In the real world we may not have been in business long if we did not satisfy the investor more often than not. Appendix Exhibit 1 – Unit Sales Exhibit 2 – Net Revenues Exhibit 3 – Market Share Exhibit 4 – Earnings per Share Exhibit 5 – Stock Price Exhibit 6 – Summary of Year 10 Results SUMMARY OF YEAR 11 RESULTS ----------------------------------------------------------------------- Revenue EPS ROE Stock Credit Image Company Name ($000s) ($) (%) Price Rating Rating --------------------- ------- ------ ------ ------ ------ ------ AAlpha PLC 126083 1.85 11.5 17.14 B+ 49 B Shu-d 284744 3.85 23.2 75.47 A– 87 C NMIC 268550 2.78 17.3 38.89 B+ 70 D Company 295000 4.81 27.4 89.89 A 79 Ecandi 294064 2.89 17.9 45.33 B+ 73 F Company 104582 -0.74 -5.4 16.57 C– 58 GFeets Care Solution 268337 3.85 22.5 64.03 A 67 Hcompany 244931 2.26 13.9 23.27 B+ 69 I Company 244997 2.67 16.7 33.53 B+ 68 J Company 244997 2.67 16.7 33.23 B+ 68 K Company 244997 2.67 16.7 33.56 B+ 68 L Company 244997 2.67 16.7 32.89 B+ 68 Exhibit 7 – Summary of Worse Year SUMMARY OF YEAR 15 RESULTS ----------------------------------------------------------------------- Revenue EPS ROE Stock Credit Image Company Name ($000s) ($) (%) Price Rating Rating --------------------- ------- ------ ------ ------ ------ ------ AAlpha PLC 302163 5.40 21.3 110.39 A+ 63 B Shu-d 499207 10.75 24.7 209.93 A+ 88 C NMIC 229091 0.22 0.7 31.50 A– 60 DShoe4U 415161 6.42 17.2 100.19 A+ 80 Ecandi 624302 6.78 15.5 112.48 A+ 100 F Company 395602 1.64 10.0 16.64 B– 71 GFeets Care Solution 275411 5.34 13.9 62.97 A+ 56 Hcompany 205931 1.10 4.5 11.55 B+ 57 I Company 249477 3.06 13.7 35.99 A 52 J Company 249477 3.06 13.7 36.41 A 52 K Company 249477 3.06 13.7 36.07 A 52 L Company 249477 3.06 13.7 35.99 A 52 Exhibit 8 – Summary of Year 18 Results SUMMARY OF YEAR 18 RESULTS ----------------------------------------------------------------------- Revenue EPS ROE Stock Credit Image Company Name ($000s) ($) (%) Price Rating Rating --------------------- ------- ------ ------ ------ ------ ------ AAlpha PLC 236724 5.16 18.5 66.17 A+ 58 B Shu-d 1028258 24.96 29.2 524.45 A+ 100 C NMIC 353329 6.10 16.1 69.76 A+ 72 DShoe4U 565664 13.93 22.9 164.78 A+ 83 Ecandi 570126 2.04 3.3 27.03 A+ 89 F Company 600694 4.02 16.0 67.15 A+ 82 GFeets Care Solution 387241 8.45 14.0 116.24 A+ 68 Hcompany 211895 -2.48 -11.3 7.34 C– 57 I Company 227813 2.77 10.4 31.76 A+ 44 J Company 227813 2.77 10.4 31.79 A+ 44 K Company 227813 2.77 10.4 31.54 A+ 44 L Company 227813 2.77 10.4 31.92 A+ 44 Exhibit 9 Latin America Information References Bosman, Julie. Media & Advertisement. September 7, 2006. http://www.nytimes.com/2006/09/07/business/media/07adco.html?ex=1315281600&en=9c35ded4236dcfe3&ei=5088&partner=rssnyt&emc=rss (accessed February 11, 2010). Business Week. Diversity: Culture Clash. 2009. http://www.businessweek.com/adsections/diversity/diverseclash.htm (accessed February 12, 2010). Creative strategies in advertising. February 22, 2008. http://en.wikipedia.org/wiki/Creative_strategies_in_advertising (accessed February 12, 2010). Guide to Using Consumer Behavior Research. 2008. http://www.work.com/using-consumer-behavior-research-240/ (accessed February 11, 2010). Internet Center for Management and Business Administration, Inc. ERG Theory. 2007. http://www.netmba.com/mgmt/ob/motivation/erg/ (accessed February 9, 2010). Investopedia. Economic Basics: Demand and Supply. 2010. http://www.investopedia.com/university/economics/economics3.asp (accessed February 13, 2010). Marketing Teacher, Ltd. The Marketing Environment. 2000-2008. http://www.marketingteacher.com/Lessons/lesson_marketing_environment.htm (accessed February 9, 2010). Trump, Donald, and Bill Zanker. Think Big and Kick Ass in Business and in Life. New York: Harper Collins, 2007. Read More