Research and Development
The R&D portion of Round One I felt that I had a key responsibility in the market because my segment (Dune) is the size segment. Because the size is of importance in the industry, my size specification was 11.0. This is the lowest in the market. This allowed for a shorter project length and a smaller specification, which is a long-term goal within the industry. Dune sold 504,404 units. Its inventory was 142,223. Dune had the third highest customer survey score in the market, which needs to improve. A good balance between product, price, promotion and place can help to maintain the customer feedback score that I desire. I feel like I am focusing on one area within the segment and I need to focus on all attributes in the R&D department to get a better score. My perceived age was 1.5. The length of time to revise a sensor varies, and while slight revisions can be complete in 3-4 months and longer ones can mean 2-3 years (Capstpme, 2014). The Mean Time Before Failure (MTBF) for Dune 19000. This was the third highest for the Digby team, and pretty much the average number. I feel like this gave us a reliable product that could be counted on as quality in the market. This helped my contribution margin and also helped with profitability.Material cost was set at 13.25 which is considerably low.
The price for our product was 34.5. This price was pretty much in the middle of other segments. It was set lower at $33.00 early on, but it needed to be raised to increase my gross revenue which helped my contribution margin. The next round it my raise again, depending on how expensive variable costs are. Customer awareness was achieve with a sales and promotional budget of $900 each respectively. The customer survey score was 15.7 which needs to come up greatly. All facets of sales forecast, sales force and distribution channels need to be increased in order to achieve better results next round. My forecast of 600 should be higher, but I had to watch my contribution margin and by going higher it started reducing revenue.
In production, new equipment and automation was purchased in order to increase our financial position in future operations. I felt like I needed to stay conservative with the lot I had drawn, but in order to grow felt it necessary. The buy and sell capacity of my product was left at 0. The production capacity for my product seemed to work well for the existing shift and demanded no other shift resources.
Our financial goal was to reduce our long term debt while holding onto our stock and working capital. Because of expansion that was unfunded (a poor decision), we took out an emergency loan for a 12 month period. The loan worked against Team Digby’s positive financial success but over the long term I believe it will bear fruit.
I am currently the COO for team Chester. After the end of the practice round we came up with a different approach with regard to making decisions for our product sensors. Each VP made their decisions for their product and as a group we reviewed them and made a group decision to make any changes to our products. We made improved decisions because we came together as a team and helped each other make decisions to improve our product and where they stand in the market.
For each of our product segments we paid close attention to our customer buying criteria from our previous round because they assisted us in understanding the customer demand for each segment. Understanding the consumer demand is a key success factor in ensuring that you are creating a product that meets their expectations. As a team I believe we need to utilize round 1 results to make enhancements to our product with regard to performance and size for round 2. “Over time, your customers expect products that are smaller and faster. This causes the segments to move or drift a little each month.” (Capsim, 2014) Our consumers are looking for an improved product as the years go on and in this round 2 it’s up to us to work towards that.
When we reviewed the MTBF for each segment we focused on having the hours towards the top of the range because that is what the consumer expects to get from the sensor and we will see the demand for the product increase. On the other side if the MTBF is below the consumer expectations we will the customer demand for the product because the sensor has lower shelf life.
When we looked at the age score we tried to get it as close to our customer buying criteria as possible because we understood that customer preference for new and improved product that fell in the age scores was important. For example, if one of our segments had an age of 1.5 years than we knew that after that time frame the consumer preference decreases.
I noticed that the MTBF made an impact on the contribution margin. Based off of these decisions it would impact whether the contribution margin would increase or decrease. I didn’t notice a direct impact on the materials cost based off of decisions made in r&d, but that is something that I will look at closely in the next round.
We utilized the customer buying criteria and our competitors’ prices to determine how we would price our products . The customer preference is key in achieving the target sales for each segment because some of them are price sensitive and some aren’t. Our prices were relatively close to our competitors in our perspective segments. We were able to stay competitive but comparable with our pricing strategy. In the next round we need to utilize price to our advantage in an effort to achieve the maximum profit in our segments.
All of our segments had a customer awareness of over 50% because we invested the money in our promotion budget. The promotion budget is what allows us to market our products to the consumers and this is how we stand out from our competitor in each of our segments.
Our customer accessibility was a little lower than I would have liked them to be because it impacts our distribution channels. One of our segment was at 51% and every other segment was below that and that was due to under projecting the sales budget. “The more products you have in the segment’s fine cut, the stronger your distribution channels, support systems, etc. This is because each product’s sales budget contributes to the segment’s accessibility. “ (Capsim, 2014) It’s important in the next round to ensure that we increase our sails budget so we can build a stronger distribution channel in each of our segments.
As far as sales forecasting goes we used the following formula:
Total Industry Unit Demand x Next Year’s Segment Growth Rate
Take that answer and add it to total industry unit demand and divide that by 6.
We used the results of this sales forecast formula to make our sales forecast. We observed that some of our segments ran out of product or were relatively close to running out. We will probably utilize the same strategy next round however, the segments that ran out will have to add some units to their sales forecast.
We did not purchase machinery to automate our facilities because we weren’t prepared to make that decision at the time. We felt that before making the investment in equipment pre-maturely would have been a mistake because we wanted to see our success rate for our product segments without the enhancements to the facility.
We didn’t buy or sell capacity because we felt that we were in a solid financial decision that it didn’t warrant us to buy or sell capacity that we could possibly need later on down the line.
The production schedule was auto populated based off of the results from the marketing decisions. We chose not to make any modifications to this as well because we didn’t want to increase labor and materials cost.
Yes we did acquire capital to fund capital expansions. Based off of our decisions we were able to handle all of the operating expenses while maintaining a net profit. I feel that all of our decisions were extremely important in ensuring our company was operating at a high level, because if we over priced above the customer expectation we could lose customers. If we under price a product than we could lose sales on the segments depending on what category they fall under. Either way we go we lose profits which can cause the company to underperform and lose money.
In round 2 I would like to focus a little on re-investment in the plant so we can see improvements being made in production to improve the capacity of the facility. We also need to work on each segments customer accessibility by increasing our sales budget. The more access consumers has to our product can improve sales and market share.
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