Post on 05-Feb-2018
SENSORS inc. Performance Report
Organizational Strategy MANA 4322
By:
Sensors
Mission Statement
SENSORS, Inc. is one of the leading manufacturers in the sensor industry. We
believe in creating quality products that meet and exceed our customer’s expectations –
creating more value than they expect. Our employees are able to succeed only through
our customer’s success. As we are intertwined into the fabric of our larger community,
our actions are in line with such responsibility. We take responsibility in protecting our
community, our environment, protecting fair working conditions, and most importantly
focus on the individual when making decisions.
We take pride in serving in the best interests of our stakeholders. Our success in the
industry has allowed us to generate substantial wealth for our shareholders. Our ability to
adapt to our surroundings, making appropriate changes to survive in this environment
says a lot about the longevity of this company. We are focused on continuous
improvements through appropriate initiatives and strategic management. SENSORS,
Inc’s has positioned itself to be highly competitive for years to come.
SENSORS, Inc’s adopted a differentiation strategy with a product lifecycle focus.
Our strategy was to offer products with excellent design, high awareness and easy
accessibility. We will develop an R&D competency that keeps our designs fresh and
exciting as they change in appeal from High Tech to Low Tech. Our products will keep
pace with the market, offering improved size and performance. We will price above
average. We will expand capacity as we generate higher demand.
Original Strategy
Our vision is to offer premium products for mainstream customers: Our brands
withstand the tests of time. Our primary stakeholders are customers, stockholders,
management and employees. We have chosen the following tactics: In respect to
research & development, we will have multiple product lines in both segments. Our goal
is to offer customers products that match their ideal criteria for positioning, age, and
reliability.
Our marketing department will spend aggressively in promotion and sales. We
want every customer to know about us, and we want to make our products easy for
customers to find. We will price at a premium.
Our production function will grow capacity to meet the demand that we generate.
After our products are well positioned, we will investigate modest increases in
automation levels to improve margins.
Our finance department will finance our investments primarily through stock
issues and cash from operations, supplementing with bond offerings on an as needed
basis. When our cash position allows, we will establish a dividend policy and begin to
retire stock. We are somewhat adverse to debt, and prefer to avoid interest payments. We
expect to keep assets/equity (leverage) between 1.5 and 2.0. We measure performance in
terms of stock price, ROS, Asset Turnover, and ROA.
The sensor industry is divided into two main segments: low tech and high tech.
Products were placed in these segments based on their performance and size. Every
week the criteria will change slightly. Every year, consumers in the sensor industry had
higher expectations for performance and size. The buying criterion was broken down
into performance, size, price, age, and reliability.
Internal and Environmental Analysis
After the former monopoly was broken down multiple yet identical companies,
SENSORS, Inc which belonged to Andrews, began with identical financials to its
competitors. In 2008, the sensor industry had these characteristics.
December 31, 2008
As you can see, the market shares for all products were equal at 17%, and
customer awareness was at 55% across the board. Our goal was to increase market share
by creating products across the two segments with aggressive marketing in our promo
budget and sales budget. With growth rate at 10% for the low tech segment and 20% for
the high tech segment, we had to make sure to capitalize in the high tech segment as the
years progressed.
Let’s focus our attention to the industry 7 years later.
December 31, 2015
Andrew’s created five products to compete in the sensor industry: Able, Bigbr,
Brother, Action, and Bable. These products were introduced very early. Through their
early introduction, were able to increase our accessibility from 40% in 2008 to 99% in
2015. Andrews led all other companies in terms of accessibility. Unfortunately, due to
issues with cash flow in early years, Andrews made a poor decision to decrease capacity.
This decision caused continuous stock outs, which decreased potential profits and market
share. In spite of this poor decision, Andrews was able to increase its market share from
17% in 2008 to 21.1% in 2015. Andrews led the way in terms of market share greatly due
to its market share in the high end segment. The trailing market share values for its
competitors were: 15.3%, 14.5%, 19.1%, 16.3%, 13.7%.
We must, however, determine the strategy of Andrew’s competitors to evaluate
the environment.
Baldin and Chester chose to place their 3 products in very competitive locations.
Their low tech products were placed in the center of the fine cut circle on the perceptual
map, the ideal location for the low-tech segment. They placed their midlevel product in
between both segments to attract customers from both segments. Lastly, they placed
their third product in the ideal location in the high end segment, in the bottom right
portion of the fine cut circle. The ideal locations enabled them to them to price at
medium level, but their added unit sales from their ideal locations made up for the
lowered product price.
Digby placed their products in the center of the fine portion of the low tech
segment, in between both segments, and the ideal portion of the high-tech segment. Out
of all the strategies available, they seemed to have chosen differentiation with a product
life cycle focus. However, Digby may have benefited from producing another product in
the low tech segment to follow their strategy.
Erie chose the strategy of the niche cost leader. The size of their products was
larger than that of its competitors, since the low tech market did not focus as much on
small size. They focus on the low tech segment. They were able to compete on the basis
of price. Their prices of were below average.
Ferris chose a niche differentiation strategy which focused on the high tech
segment. Their average performance was greater than that of every other company. Since
they were striving to lead the market in the high tech segment, they priced their products
at a premium averaging around $43.
There were two deviations from our strategic plan. We were risk averse, however,
how cash flow issues in the early years created a necessity to borrow more than we wish
we could. Also, our automation levels were high, which created lower labor cost and
resulted in higher contribution margin. However, Able’s automation level was 8.0 which
did not parallel the strategy of increasing automation conservatively. Our success with
Able in early years created an incentive to increase our profits further by decreasing labor
costs even further. However, in the process it created higher production costs in a time
Deviations and Alterations to the strategic plan
where cash flow was a serious problem for us. We were in a position to begin buying
back stock and issue dividends in 2016, unfortunately, the simulation had ended.
IPO 2008: At 20%, the contribution margin needed to be increased in next few years.
Andrews enjoyed profits of $2,485,186. Andrews had 6.1% ROS and ROE of 19.3%.
Sales were roughly $40,799,953. The stock price for Andrews closed at $11.15 with a
market cap of $22 million. The EPS was $1.24 and the P/E was 9.0. Our bond rating was
BBB. Our competitors and Andrews shared an equal market share of 17% a piece.
Round 1 2009: Andrews created two products Able and Action. Able was placed in the
center of the fine cut in the low tech segment. Action was placed in the ideal location of
the high tech segment, the lower right portion in the fine cut. We allocated $1000 in our
sales and promo budget. However, we should have increased our promo budget to $1400.
We had the vision of creating five products to follow our strategy, but we wanted to
evaluate our competitors before we produced more products.
Decisions:
Round 2 2010: Andrews created began creating Bigbr to begin its line of 5 products.
However, we did not create adequate capacity for its production. This not only hurt us in
respect to our current products, but decreased our stock price. Also, we should have
increased automation and capacity at a steady rate, but we did not. No financing, HR nor
TQM initiates were created which was a bad choice. We did not revise Able in order to
increase its age so we can cater to the low tech segment.
Round 3 2011: Andrews began increasing capacity to meet demand. However, at this
point in time, we should have issued stocks and bonds to enable us to increase capacity
and automation to increase our contribution margin. Our market share was higher than
other companies; however, due to lack of profitability our stock price was dropping even
further. Our average contribution margin was less than 30%, which signaled us to
increase automation and increase HR and TQM initiatives. An emergency loan had to be
taken.
Round 4 2012: These products allowed us to attract customers from portions of both
segments. Our market share exceeded all other companies. However, our cash flow issue
was still haunting us. Our stock price was at free fall. Emergency loan interest rates were
decreasing the bottom line, and we were operating at a loss. We began increasing our
promo budget and automation.
Round 5 2013: To increase our cash flow, we began to issue bonds and decrease
capacity. We did not want to lose our customers even further, so we continued to allocate
money in marketing so we could make a comeback in the following years. We were
increasing automation at steady rate because of our multiyear plan to provide quality
products at a premium, but at low costs. We began issuing bonds for financing. We just
needed to increase our profitability and cash flow. However, we still weren’t able to
avoid an emergency loan.
Round 6 2014: We have finally avoided taking an emergency loan, and began creating
substantial wealth for the company. Our high automation levels and TQM initiatives were
allowing us to create products at low cost, increase demand, and decrease manufacturing
costs. We issue stocks increase the returns for our stockholders. Our stock raised from $1
to $27 a change of $26. We believe that our bad days are behind us, and our stockholders
will begin to benefit once again. Our net profit is $15 million.
Round 7 2015: Our stock price is soaring to $83, a change of $55. Our contribution
margin averaged over 50% across the board. We continue to allocate aggressively in our
marketing functions. We continue TQM and HR initiatives. Our profits are increasing
dramatically, and the future of the company looks great.
Round 8 Proforma
We went ahead a made decision for a round 8 just to see where the company may have
been in the following years. The numbers were astounding. Our stock price had the
possibility of soaring to over $150. Our leverage was in our ideal range to benefit our
investors. With increases in capacity, we would have avoided stock outs which would
have increased our market share and increased profits even further. We seemed to have
become a cash cow.
Andrews began with creating two products, one in the low tech segment, and one
in the high segment. Unfortunately, one of the company’s weaknesses was creating
adequate capacity as we could see many stock outs which decreased profits and customer
surveys. Also, we failed to raise adequate funds from financing in early years as what
was suggested by our strategy. After a few years of requiring emergency loans, we began
financing the company through issuing stocks and bonds. However, in the poor years we
managed to drop our stock price to $1.00. This also put us in a position where stock
issuance would not increase our cash flow as much as it would have if we issued the
stock in year 2009, when our stock price was $15.26. If we could change two decisions
in the past, it would be to allocate adequate capacity in 2009. After the company lost
dramatic revenues from not allocating adequate capacity, we should have issued stocks
Evaluation & Analysis
and bonds to raise money. After years of creating competitive products, investing in
TQM and HR initiatives, allocating generous revenue to sales and promotion budgets,
increasing automation to decrease labor costs, and finally borrowing money from stocks
and bonds we were able to compete and outperform all other companies in the industry. It
is bittersweet, however, because in real life the emergency loan would not have been
available for us and we would have gone bankrupt on multiple occasions. Overall,
finishing second place in company performance looks great, but there were too many
mistakes along the way to be proud of the results.