Team Members: Ranee Pornbowornkiat, Matt Maze,

Rich Elles

Initial Strategy Low price and high volume strategy

Increase brand awareness through

appropriate divided advertising, public relation

and product distribution (retailer margin and

sale promotion)

Advertising heavily in magazine for mountain

bike; Advertising only focus on TV for youth

bike

Control capacity depend on market share,

estimated lost sale, sale units, and idle

capacity

Decrease wastages and debt; Lower the

expenses and idle; Maintain a good level of

efficiency and quality

Advertising

The data (left) shows

why we chose to

increase magazine

for mount bike and

TV for youth bike

50% of mountain bike

customers could be

reached from

magazines

70% of youth bike

customers could be

reached from TV

TV Internet Magazines

Road 10% 40% 60%

Mountain 40% 30% 50%

Youth 70% 20% 20%

Max

Advertising $3,000,000 $3,000,000 $3,000,000

Max PR $3,000,000 $3,000,000 $3,000,000

Result of our Advertising decision

In the above graph it displays the brand awareness for all the firms in

our world. Our brand awareness rose steadily each year and during the

final year our brand was the most recognized.

Decision 1

Established a price of $650 for our bike

Estimated sales to be around 21,000 and had a production of around 22,000

The most important part of this decision was gaining a foot in the market and accurate predictions

Our SHV increased to $13.08

Our only mistake was our estimate was to low

Decision 2

We kept the price the same but increased estimated sales and produced more bikes.

We increased our brand advertising to $500,000 to make people more aware of our brand.

We gave extra support to sport stores as that is where most customers bought mountain bikes from.

Our SHV dropped to $12.02 and our mistake for this decision was too much of an increase on production.

Decision 3

We kept all decisions the same, except

cut back considerably on capacity.

We also raised our price to $675.

After this decision our SHV rose to

$13.22.

Nothing went wrong with this decision

and our forecast was very accurate.

Decision 4

We added a new line of product and that was the youth bike with a starting price of $395.

We chose youth bike because it matches our target market and our aim: lower cost with high volume

Our forecasted sales for this new product was only at 25,0000.

We only advertised on the TV for this product as that would reach 70% of potential customers.

We upped the price of the mountain bike to $685.

Result of Decision 4

Our SHV rose once again, ending at $14.46.

First major problem with this decision was that

we overestimated sales in the mountain bike

line, thus we had a large ending inventory.

Second major problem with this decision was

that our forecasted sales for the youth bike

was very low and thus we had an estimated

loss of sales at 50,000.

Decision 5

We lowered the price of our mountain bike to $680 and lowered our forecasted sales for this line.

For the youth bike we redeveloped it and increased the forecasted sales up to 35,000.

We spent $1.5 million to better our efficiency in the plants and increased our capacity.

We paid off $200,000 of our debt and paid a cash dividend of $0.50.

Results of Decision 5

With this decision our SHV jumped up to

a whopping $23.02.

The only downside to this decision was

once again, our forecasted sales for the

youth bike was to low. We had an

estimated loss of sales of only 9,000 this

time but that’s because other companies

started to offer this line of bikes.

Decision 6

For this decision the only thing changed for the mountain bike was a slight increase in forecasted sales.

For the youth bike we increased the price up to $399 and our forecasted sales up to 47,750. We also redeveloped this bike again.

Once again we had to increase capacity.

We paid another $175,000 of our debt off to decrease our D/E ratio and increased our cash dividend to $0.70.

Results of Decision 6

With this decision our SHV

increased more than it had ever

done in the past and jumped up

to $38.08.

The only setback with this

decision is that our capacity was

still too low so we missed our on

a total loss of sales for both

bikes equaling 6,000.

Decision 7

The only changes for this decision came with

a large increase in capacity and we had to

raise our forecasted sales for both bikes.

We made this bold decision because we had

a pretty high estimated loss of sales in our

last period for both bikes equaling 6,000.

Estimated sales: Youth - 60,500; Mountain -

28,000

We paid off another $325,000 of our debt and

increased the cash dividends issued to $1.25.

Results of Decision 7

With this decision we kept our hot streak going of increasing our SHV dramatically. Our SHV grew to $48.15.

The major setback for this decision is that our sales of youth bikes actually contracted resulting in an excess of youth bikes at the end of the year.

Our sales for the youth bike dropped to only 44,000.

Our sales for the mountain bike remained the same as in our last decision. We thought it could have run into a maturity stage.

Product Sales

Youth Bike – little Bike; Mountain Bike – Adv3

In the above graph you can see our sales for the youth bike skyrocket

and then after year 17, they drop and level off.

Decision 8

With this decision we redeveloped our

mountain bike instead of our youth bike.

We decreased our capacity as we didn’t need

so much anymore as we had a large portion of

idle capacity.

Our forecasted sales were: Youth – 45,100;

Mountain – 29,750

We increased the cash dividend issued to

$1.35.

Results of Decision 8

With this final decision our SHV ended at

an impressive $60.04. This was a 453%

increase over the initial SHV.

We successfully redeveloped our

mountain bike, and as the result, we got a

7,368 estimated lost sales units

With this decision, after gaining so much

experience, our only mistake was too low

of production on the mountain bike.

Demand Forecast Accuracy

In the above graph you can see that our accuracy on forecasting

demand for the mountain bike went up and down and we could really

never get a good hold on it. For the youth bike you can see that at the

beginning our forecasts were very low and then too high. At the end we

got it just right for the youth bike.

Profit

In the above graph it shows all the firms in our world profits. Our profits at

the start of the simulation are pretty consistent and than after the youth bike

is introduced in year 2015, our profits start to shoot up and then start to even

off once demand for the youth bike drops off a little.

Market Share

The above image is pie chart that represents the market share each firm

in our world held based on their retail dollar sales. At the end of the

simulation we held the largest percentage of the market in our world.

What would you have done differently if you

went through the simulation again?

Better control in production

For Little Bike, we should have produced a larger

quantity when this new product came out. If we did

that, we would not have a 52,061 units profit foregone.

Same idea for the redeveloped Adv3, we should not

have decreased the total capacity; instead, we should

have put more production in the Adv3, and so we

would not have lost 7,368 sale units, which was the

highest sale lost through out the years for this line.

We would also liked to have increased our quality

index, and we could have had a better distribution.

What were your key takeaways?

Importance of Demand Forecasting

Crucial to maximizing profit

Find your entry advantage

RMR used low price for early differentiation

Conservative pricing gives flexibility

Began low, leaving room to capitalize on demand

Other Takeaways?

Do not stockpile cash – utilize profit

Redevelop products, issue dividends, pay LT debt

Manage inventory – be mindful of storage

No need to waste funding to create stockpile

Backlog greatly limits profit

Stay aggressive in the market!

Rework products and improve the business