co4aw96 - INNOVATIVE TECHNOLOGIES - Company 4 PROVIDING...

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Unformatted text preview: INNOVATIVE TECHNOLOGIES - Company 4 PROVIDING FUTURISTIC PRODUCTS THAT FIRE THE IMAGINATION. Innovative Technologies INNOVATIVE TECHNOLOGIES B ob Vaughn V .P . o f M a r k e tin g K e n C e r im e le S r . M a r k e tin g S p e c ia lis t J e ff V a n D a m S r . M a r k e tin g S p e c ia lis t P h a s a th o o n B o o n p z ro m S r . M a r k e tin g S p e c ia lis t Company 4 Innovative Technologies Innovative Technologies Mission We provide high quality, high technology, customeroriented products in the electronic entertainment industry to satisfy the needs of the industry at a competitive price. We strive to be the leader of quality products in the industry while maximizing the return on investment of stockholders. s Innovative Technologies INNOVATIVE TECHNOLOGIES PRODUCTS 3D TV -CVE EDITMASTER -SSL TERM-A-LASER Company 4 Innovative Technologies -TST- TST - 3D TV s Total Spectrum Television (TST) is a multipurpose , in-home audio/visual entertainment system. It offers high quality picture resolution on the twelve square foot screen (4 x 3'). It has the ability to convert to a three dimensional screen and also a holographic image. The innovation is that 3D glasses are not necessary. If you depress the 3D button it activates a unique tri-color filtering system. Innovative Technologies CVE - EditMaster s The Computerized Video Editor (CVE) creates smooth flowing video presentations mirroring very expensive facilities. The CVE can be connected to any remote controlled VCR, TV monitor , or video camera. It provides the ability to rearrange scenes, add titles, insert graphics, and create special audio and visual effects. Innovative Technologies Term-a-Laser s Safe Shot Laser (SSL) is a high-tech video target game that is a combination television receiver, monitor, VCR, and mini-computer. It also can produce a variety of realistic gun battle situations making it the most realistic game on the market. It can also be used for target practice. A harmless laser light is aimed at the television screen. Scoring is simultaneous, recording both hits and misses. Innovative Technologies Product Positioning Region 1 High Price TST CVE Low quality SSL High Quality Low Price Innovative Technologies Product Positioning Region 2 High Price TST CVE Low quality SSL High Quality Low Price Innovative Technologies Product Positioning Region 3 H hP e ig ric T T S CE V Lw o qa u lity SL S H h ig Qa u lity L wP e o ric Innovative Technologies Sales Force Size by Company by Year 700 600 500 400 300 200 100 0 Co. 1 Co. 2 Co. 3 Co. 4 Yr. 1 Yr. 2 Yr. 3 Yr. 4 Innovative Technologies Advertising Expenses by Company by Period (In Millions) 14 12 10 8 6 4 2 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Co. 1 Co. 2 Co. 3 Co. 4 Innovative Technologies Innovative Technologies Strategies and Goals Return on Investment Innovative Technologies expects to achieve an ROI of 17% in year one and increase to 20% by the end of year four. Earnings Per Share Innovative Technologies expects to achieve earning per share of $ 8.00 in year one and increase to $20.00 by the end of year four. Price Innovative Technologies plans to offer a medium price product which will fluctuate to correspond with the rising quality index rating for each product in each period. Research and Development Innovative Technologies plans to invest 6% - 7% of the projected sales per period to develop a quality product while reducing production costs. Market Share Innovative Technologies plans to scheme a 30% market share for its TST product, a 28% market share for its CVE, and a 26% share for its SSL product. Advertising Innovative Technologies advertising expenditures will fluctuate from period to period to assist in achieving market share goals. Innovative Technologies Earnings Per Share Innovative Technologies Vs. Industry Average 6 5 4 3 2 1 0 Yr. 1 Innovative Technologies Industry Average 1.86 5.44 Innovative Technologies Earnings Per Share Innovative Technologies Vs. Industry Average 6 5 4 3 2 1 0 Yr. 1 Yr. 2 Industry Average Innovative Technologies 1.86 1.63 3.77 5.44 Innovative Technologies Earnings Per Share Innovative Technologies Vs. Industry Average 10 8 6 4 2 0 Yr. 1 Yr. 2 Yr. 3 Industry Average 5.44 4.78 3.77 1.86 1.63 9.7 Innovative Technologies Innovative Technologies Earnings Per Share Innovative Technologies Vs. Industry Average 25 20 15 10 5 0 Yr. 1 Yr. 2 Yr. 3 Yr. 4 Innovative Technologies Industry Average 9.7 5.44 3.77 4.78 1.86 1.63 21.18 11.66 Innovative Technologies Market Share Summary by product for the game 30 25 20 15 10 5 0 TST CVE Goal SSL Actual 30 21.49 28 19.96 26 22.36 Innovative Technologies Cumulative R & D for Quality to TST(In Millions) Innovative Technologies Vs. Industry Average 20 15 10 5 0 Yr. 1 Yr. 2 8.86 6.14 2.12 14.54 17.72 19.08 12.01 9.83 Yr. 3 Yr. 4 Innovative Technologies Industry Average Innovative Technologies Cumulative R & D for Quality to CVE(In Millions) Innovative Technologies Vs. Industry Average 20 15 10 5 0 Yr. 1 Yr. 2 13.28 7.43 2.12 19.07 17.15 7.89 5.57 9.26 Yr. 3 Yr. 4 Innovative Technologies Industry Average Innovative Technologies Cumulative R & D for Quality to SSL (In Millions) Innovative Technologies Vs. Industry Average 10 8 6.45 6 4 2 0 0.22 Yr. 1 Yr. 2 Yr. 3 Yr. 4 3.12 1.51 3.61 2.66 7.55 8.33 Innovative Technologies Industry Average Innovative Technologies Cumulative R & D to Costs to TST (In Millions) Innovative Technologies Vs. Industry Average 11.94 10.66 8.3 6.29 4.82 1.33 Yr. 1 Yr. 2 Yr. 3 Yr. 4 3.8 7.31 12 10 8 6 4 2 0 Innovative Technologies Industry Average Innovative Technologies Cumulative R & D to Costs to CVE (In Millions) Innovative Technologies Vs. Industry Average 6 5 4 3 2 1 0 Yr. 1 Yr. 2 Yr. 3 Yr. 4 Innovative Technologies Industry Average Innovative Technologies Cumulative R & D to Costs to SSL (In Millions) Innovative Technologies Vs. Industry Average 6 5 4 3 2 1 0 Yr. 1 Yr. 2 Yr. 3 Yr. 4 Innovative Technologies Industry Average Innovative Technologies TST Production Costs Innovative Technologies Vs. Industry Average 3600 3500 3400 3300 3200 3100 3000 Yr. 1 Yr. 2 Yr. 3 Yr. 4 Industry Average Innovative Technologies 3372 3349 3338 3247 3566 3442 3565 3418 Innovative Technologies CVE Production Costs Innovative Technologies Vs. Industry Average 380 370 360 350 340 330 320 310 Yr. 1 Yr. 2 Yr. 3 Yr. 4 Industry Average Innovative Technologies 348 343 341 337 377 374 379 374 Innovative Technologies SSL Production Costs Innovative Technologies Vs. Industry Average 44 42 40 38 36 34 Yr. 1 Yr. 2 Yr. 3 Yr. 4 Industry Average Innovative Technologies 38 37 39 38 42 43 42 43 Innovative Technologies Product Quality Index - TST 120 115 110 105 100 95 90 Yr. 1 Yr. 2 Yr. 3 Yr. 4 Industry Average Innovative Technologies 106.5 102 113 105 120 116.75 111 111 Innovative Technologies Product Quality Index - CVE 110 108 106 104 102 100 98 96 Yr. 1 Yr. 2 Yr. 3 Yr. 4 Industry Average Innovative Technologies 103.5 101 106.5 103 104 105 109 109.75 Innovative Technologies Product Quality Index - SSL 110 108 106 104 102 100 98 96 94 108 109.25 105 102.5 100 100 109.75 105 Yr. 1 Yr. 2 Yr. 3 Yr. 4 Industry Average Innovative Technologies Innovative Technologies Market Share Summary - TST 30 25 20 15 10 5 0 Yr. 1 Yr. 2 Goal Yr. 3 Actual Yr. 4 18.95 27 28 21.1 29 20.79 30 24.09 Innovative Technologies Market Share Summary - CVE 30 25 20 15 10 5 0 Yr. 1 Yr. 2 Goal Yr. 3 Actual Yr. 4 25 16.32 26 21.49 27 21.1 28 22.01 Innovative Technologies Market Share Summary - SSL 30 25 20 15 10 5 0 Yr. 1 Yr. 2 Goal Yr. 3 Actual Yr. 4 25.5 25 18.55 23.58 25.8 22.01 26 25.61 Innovative Technologies TST Market Share % by Company in Region 1 60 50 40 30 20 10 0 1 2 3 4 5 Co. 1 6 7 8 9 10 11 12 13 14 15 16 Co. 3 Co. 4 Co. 2 Innovative Technologies TST Market Share % by Company in Region 2 50 40 30 20 10 0 1 2 3 4 5 Co. 1 6 7 8 9 10 11 12 13 14 15 16 Co. 3 Co. 4 Co. 2 Innovative Technologies TST Market Share % by Company in Region 3 50 40 30 20 10 0 1 2 3 4 5 Co. 1 6 7 8 9 10 11 12 13 14 15 16 Co. 3 Co. 4 Co. 2 Innovative Technologies CVE Market Share % by Company in Region 1 60 50 40 30 20 10 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 CO 3 CO 4 CO 1 CO 2 Innovative Technologies CVE Market Share % by Company in Region 2 50 40 30 20 10 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 CO 3 CO 4 CO 1 CO 2 Innovative Technologies CVE Market Share by Company in Region 3 50 40 30 20 10 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 CO 3 CO 4 CO 1 CO 2 Innovative Technologies SSL Market Share % by Company in Region 1 70 60 50 40 30 20 10 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 CO 3 CO 4 CO 1 CO 2 Innovative Technologies SSL Market Share % by Company in Region 2 70 60 50 40 30 20 10 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 CO 3 CO 4 CO 1 CO 2 Innovative Technologies SSL Market Share % by Company in Region 3 70 60 50 40 30 20 10 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 CO 3 CO 4 CO 1 CO 2 Innovative Technologies Profit Margin Summary by Year 35 30 25 20 15 10 5 0 Yr. 1 Yr. 2 Goal Yr. 3 Actual Yr. 4 30 24.07 31 27.26 32 30.59 33 28.5 Innovative Technologies Year 1 - Summary s s s By the end of year one, we had not met many of our goals established before the game began including the actual Earnings Per Share figure of $ 5.44. However, the EPS figure we had established in year one was high enough to be the leader by $ 2.98 per share. Although our team was leading the EPS battle, marketing decisions made during the year would allow other teams to profit in years three and four. The team decisions proved too conservative. Our operating expenses were kept low to provide a profit. Research and Development costs during the year were only 4.0% of sales, which was well below the industry average. Advertising expenses were only 4.6% of sales. Market shares for all 3 products averaged 7.0% below our goal. The product quality index for the 3D-TV (TST), EditMaster (CVE) and TermaLaser (SSL) were 4.5%, 2.5% and 2.5% below the industry average respectfully. The profit margin during the year was 24.07% compared to an industry average of 27.7% and our goal of 30%. Our sales force of 143 was 20 employees less than our next highest competitor and our commission percentage of 2.0% was the lowest in the industry. The decisions made by Team 4 during the first year in hind sight were too conservative based on our competitors moves and growth. Our reaction pattern was more of a laid back competitor approach and not that of a tiger competitor to adjust to industry trends. We sat back and watched the changes our competitors made for several quarters instead of reacting quickly. Innovative Technologies was also not paying attention to competitors position. Although we knew what our competitions position on product quality, pricing policy, salesforce strategy, and advertising and sales force commission rates were our laid back approach eventually lead to the belief that our earnings per share position made us the leader. Instead of taking the marketing initiative to adjust to changing trends, we allowed other teams to out position us. Innovative Technologies Year 2 - Summary s s s s Our conservative marketing approach and decisions that followed in year two managed to earn a profit during year 2. Earnings Per Share during year two was $3.77 and $9.22 for the game to date. This represented a figure substantially above our closest competitor by $4.20. The EPS was above the other teams due to our low operating expenses when compared to other teams. During the year our market share increased by about 4% for each product but still was 4% below our established goal. The increase in market share was due to doubling both our advertising (8.4%) and R & D (5.9%) expenditures. However, we were still below the industry average. This was due to our now stochastic competitor reaction pattern (sometimes reacting, sometimes not) and our ignorance to what the rest of the industry was spending in all areas from allocating minimal amounts on marketing research. Our below average R & D expenditures caused our product quality index to fall in all categories compared to the competition. This resulted in further loss of market share to industry rivals. The higher than average industry production costs for all products had caused our gross profit margin to be 2% below the industry average and 4% below our goal. As operating expenses increased during periods 5 and 6 we generated an operating loss for the first time in period 6. This caused us to react by reducing the expenses that had caused the negative trend. We decreased advertising and R & D during period 7 to make a profit but sacrificed market share and product quality in later years we desperately needed. It became obvious to us by the end of year 2 that our conservative decisions may cause us to increase costs and lower market share in years 3 and 4. We survived the strike during period 8 in region 1 by building up inventory during period 7. No sales were lost. To prepare for the potential strike in periods 9 and 10 in regions 2 and 3 we increased inventories to cover several periods. During period 7 it was considered to stop production of the CVE or SSL products due to operating losses and dedicate efforts to provide and sell the TST. This however, was not initiated because of its unknown impact on the market. Innovative Technologies Year 3 Summary s s s By the end of period 10 our EPS for the game had dropped to 2nd place and by the end of the 12th period we were at 3rd place. The problems during year three started with poor pricing decisions during period 9. During period 8 inventories were increased to cover the potential strike for region 2 and 3. However, lower than industry sales prices for CVE and SSL caused customers to purchase more of our product than anticipated in period 9 leaving our company with little or no inventory to provide Region 2 with in period 10. This poor decision not only cost our company profits but allowed other companies to raise prices and generated increases in profits. Market share in the 3rd year decreased slightly from the 2nd year. We were now 6% below our budget. Advertising (6.9%) and Research and Development (6.2%) expenditures were reduced from Year 2 levels. The determination was made by period 11 that it may be to late to increase our product quality index during our initial four years and still be competitive. We had underestimated what effect this would have on our market share. Sales price now had to be reduced to compensate for a quality index that averaged 5% below the industry average. Production costs for the TST were now $ 124.00 above the industry average. The gross profit margin increased to 30.06% for our company but still failed in comparison to the industry average of 36.8%. At the end of year 3 it became obvious that we had not positioned ourselves in a manner to be the leader in the industry. Our conservative decisions were successful for the short run but allowed others to overtake us in year 3. Innovative Technologies Year 4 Summary s s s EPS for year 4 was $11.66, our most profitable year of the game, but still below our goal of $20.00. It was our impression that the earnings per share were from the potential sales for the year and not from marketing decisions made during the year. Market share for all the products was at its peak during the year but still we averaged 4% below our goal. The increased market share was due to cutting prices on all products in all regions and increasing salesforce commissions by 3% to 5%. It became obvious that we could not compete with the companies that invested in R & D in earlier periods. Their production cost and product quality indexes were significantly better than ours. Gross profit margin for the year was $28.50 compared to the industry average of $33.60 and a year 4 goal of $33.00. The margin figure was $2.09 less than year 3. This decrease was due to the price decreases offered on all products during the year. The increase in unit sales accounted for the earnings per share increase. By the end of the year the salesforce size was increased to 220 persons but still fell short of our competitors. Advertising and R & D expenditures each averaged 2.5% of sales, the lowest figure of all four years. As in prior years, we reduced operating expenses to increase our profits. In the long run this restricts the potential of the company. Innovative Technologies Innovative Technologies - Future s s s In the fifth year of business, Innovative Technologies plans to continue its strategy of offering a medium quality product at a low price. We will continue to increase the quality of the product while reducing the costs of production and distribution. This will assure us that our market share will remain constant or perhaps increase. One of our major objectives is to regain our status as the earnings per share leader in the industry as we were in the first few years of operation. We will also battle for increased market share by constantly monitoring advertising expenditures and Research and Development compared to our competitors. In the 3rd quarter of the final year in the compete game, we committed ourselves to a much higher level of competitive monitoring. The reason it took so long to do this that we were doing so well in the beginning of the game and did not think the moves our competitors were making would require major reaction. We learned just how fast our competition could catch and surpass our efforts. In year 5 and year 6 we are forecasting a EPS of $ 7 - 9, and an overall market share of 24%. We plan to achieve this by increasing advertising expenditures by 10%, our R & D by 8%, and increase our salesforce by 15%. Our product focus will continue to favor our 3D-TV product because of its market demand and fairly steady sales history. However, we will still focus on the long term success of our other products. In years 7 and 8 our forecast calls for continued improvement in EPS with a goal set at $ 8-10. We are estimating that the overall market share will achieve a 25% level by the end of year 7. We will begin to redesign our 3D-TV product in the first quarter of year 7 in order to establish the most technologically advanced product of its kind. The completion of the re-design of the 3D-TV is set for for the beginning of the third quarter. We will continue sales of the old unit during the transition to the new. It will be supported by a major marketing campaign and a month long introduction by the salesforce. Innovative Technologies Final Evaluation s s s s Innovative Technologies One of the reasons for the failure of Innovative Technologies to hold onto our Year 1 and 2 our position as earnings leader was our failure to pay attention to the strategies of our competitors. We did not react to the amount of expenditures invested in R & D by our competitors. While the others were increasing their product quality index and decreasing production costs we were taking the action of the laid back competitor. We were not reacting to our competitors. Our company was also slow to react to our competitors pricing policies, salesforce strategies, advertising and salesforce commission rates. Our low rate of advertising caused Innovative Technologies to be under positioned, as customers possibly only have a vague idea of our products. The high production costs and low quality index possibly caused customers to shift their loyalty from our products to our competitors. For a period we were formulating a strategy to limit our production to TST only. This was not followed through on and rather than limiting our market we continued to pursue the larger market. Innovative Technologies did not meet any of the goals established before the game started. During year one, we expected to make $8 per share and increase to $20 per share by year 4. The actual E.P.S. was $5.44 in year 1 and $11.66 in year 4. Another goal was to increase product price to correspond with the quality index rating. For TST, the price averaged a 15% increase while the index rating increased 11%. For CVE, the price increase was 15% with a 4% quality index improvement. SSL price increased 13% when the quality index increased 5%. R&D expenditures were expected to average 6-7% of sales by year 4. The actual expenditures in year 4 was only 2.6% of sales. Market share goals for TST, CVE, and SSL were 30%, 28% and 26%. Actual figures were 21.5%, 20%, and 22.4%. The goal for advertising was to gradually increase expenditures with each year. The numbers for each year came to 4.6%, 8.4%,6.9%, and 2.5% of sales. In years 1 and 2, we realized we were not going to meet the goals established with our product strategies. At that time, it was our belief that our conservative strategy would succeed and the strategy at our competitors would drown them in debt. If the game was to start over from year 1, we would increase advertising, R&D, and salesforce size in period 1. More attention would be given to our competitors. Our reaction would be that of a tiger competitor. By following this pattern, we could challenge our competition in years 3 and 4 and lead our industry into the future. ...
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