Quarter 3:
Prestige Cycling
Executive Summary
● First we went in an updated our bikes and the brand design. We decided to stop producing two of our cheaper bikes and updated a new design and added new essentials.
● We decided to add a speed bike to our company. We added this to have a spot in the market and to draw in more customers to our store.
● After we went in to our price and priority and decreased the price of the bikes as well as added price rebates of 75 to The Cruiser and Mountain Lion. We set the speed bike that we added to a price of $1300 with a rebate of 50.
● We revised our advertisement ads by reordering the number of importance to each bike and adding an AD for our speed bike
● Bought more market research
● Expanded and opened a new store in New York
● Added 2 more sales people, we put 1 for specializing under speed and added one more for people not specialized in any training
● Increased our annual salary for our sales force to $24,000 and kept the health benefits, weeks of vacation and pension the same as last quarter. Also increased production workers salary to $19,00 but kept the other benefits the same as last quarter
● Two more printers will be prepared for next quarter.
Past Performance Summary
After seeing the results from Q2 at the beginning of Q3 we noticed we were not where we wanted to be with market share. We had the second smallest market share in our universe at 11.97% of the market. This small share was partly due to having no speed bike while every other group had at least one speed bike brand. We had 18% of the market share for recreation and 16% for mountain bikes. We had priced our bikes high for being a low cost company ( with our premium bikes being at or right below the maximum willingness to pay price), and we did not offer any rebates. We also had 59 stockouts, which led us to look into the reasons behind this. We had four bike brands going into Q3, but we recognized that two of these brands did not benefit us and that we would have to discuss our plan of action going forward.
Agenda:
Attendees Present:
VP-Marketing: Ashley West
VP-Manufacturing: Kun Jia
VP-Human Resource: Lauren Barker
VP- Business Analytics: Trenton Reed
Quarter President: Trenton Reed
Objectives:
● Briefly discuss past performance results and changes
● Discuss functional areas
● Review Appendix 1: SWOT analysis and Q2: 10-Q
Q2 Results:
Q3 Information
Q3 Pessimistic Case Scenario: $359,505 Q3 Worst Case Scenario: $219,978
Functional Areas
○ Marketing: Creating new brands while taking away other brands, changed pricing and created price for new bikes, added in rebates, modified and created new ads, and discussed placement of each ad.
○ Manufacturing: After analysing the result of Q2, the mountain lion is our most popular brand and we gave it the maximum production quota. The original Super comfort and mountaineer are no longer produce any more. Since we hired more sales people and better understanding of products design, we are estimate we need to produce 730 units to meet the demand. We increase our projected worker productivity from 77% to 90% with one hour overtime to achieve production line as 12 units per day. In order to prevent out-of-stock happened again, we decided produce to have small number inventory. Two more printers will be prepared for next quarter.
○ Human Resource: This quarter we saw that we were paying our employees the least amount out of all the teams. While our other benefits were higher than other teams, the pay affects the productivity the most, so we decided to raise our pay for both production and sales people. We also decided to add two more sales employees which results to seven total sales and service people to our company. We added one sales person for our speed bike and another person under no specialized training. The last thing we decided to do was to open another store in New York. We realized that since we only had one location, this was a major reason that our sales were so low compared to other teams. We’re planning to open a third store next quarter in hopes to increase our overall sales for our company.
○ Business Analytics:
■ Seeing the results from market research, our team had a few similarities with other teams. The first is that all teams but one, including our own, decided to start business in New Amsterdam. This likely caused some kind of over saturation of the market in New Amsterdam that led the team in Rio to have 35% of the total market share.
■ Another similarity between all the teams is that we all produced at least one mountain bike. This means that this will be a highly competitive part of the market. Going forward into the next quarter, our team will be producing one brand of each type of bike. We saw how the lack of a speed bike brand was causing us to miss out on a large part of potential market share and decided to replace our lower cost bikes that did not sell well with a high quality speed bike brand.
■ Our pricing for our premium recreation bike was the most expensive at $1,100 with no rebate, and our premium mountain bike was tied for the most expensive at $1,300 with no rebate. This likely hurt our sales and does not match with our focus low cost strategy, which is why we are lowering prices and adding rebates going forward
○ Accounting/ Finance: After reviewing results from last quarter, I knew that we needed to spend more money this quarter to gain market share. I was more lenient in allowing the team to spend money. We redesigned our bikes, designed and new brand of bike, and improved our advertising. I believed that it would be beneficial to open a new store in New York because no one else had a store there. We could also attack an untapped market if we moved to New York. We also purchased more market research to better meet our customer needs.
Appendix 1:
1. SWOT Analysis
Strength: A strength of Prestige cycling is our marketing effectiveness and human resource management. In marketing effectiveness we were above average, 0.735, and close to the maximum. In this quarter to push our marketing effectiveness we placed our ads in more locations and edited the ads to catch more consumers attention. For Human resource we were also above average, 0.741, this quarter we added more employees and added to their compensation packages to create motivated employees. We are the leading company for investment in future, 14.758. Lastly we are tied for first place with Triple E bikes in manufacturing productivity at 1.000.
Weakness: We are in last place for asset management at 0.249, with the next competitor above us being at 0.293. Also we were the company with the lowest salary for our workers. Our advertising was not up to par. We received an acceptable quality rating but we need to have really good ads to help attract customers. Our bikes could have been designed better; our brand judgement scores were not what we wanted them to be. They were all just above 70. Overall, we don’t have sustained competitive advantage. I believe we only have competitive parity. Most of the other companies are focusing on recreation and mountain bikes like us. There must be very similar designs with minor differences so we need to distinguish ourselves in a clever way to take over the market.
Opportunity: This quarter we had the opportunity to open a new store in New York. We all highly agreed that we needed to open it because every company is in Amsterdam besides one. We want to attack this untapped market and gain shares of the market. If we are the only team to open a store in New York, we will virtually have no competition. Luckily, we have a great resource being capable of making our own 3D printed bikes. This eliminates much of the risk that comes with supplier power and manufacturing costs.
Threats: Four out of five of our competitors are in Amsterdam all selling recreational and mountain bikes. Also all of our competitors are pricing their bikes around the same as ours. Our business strategy is focus low cost so we needed to lower prices this quarter to stay congruent with the strategy. We were the only company to not offer rebates on our bikes, which can be an attraction to consumers. We really should have offered rebates last quarter to help increase our product adoption rate. In this simulation, there is a huge threat for substitutes; if customers do not like one thing about our bikes, they can easily find a just as good or better replacement. This also applies to buyer power. If customers are not happy with our prices, they can go somewhere that has cheaper prices, which will force one company to lower their prices to try to gain customers back.
2. 10-Q from Q2
Pessimistic Scenario Cash Flow Worst Case Scenario Cash Flow
Functional Areas
● Accounting/Finance: This quarter I discussed with the team about making design changes to the bike to further distinguish our premium models from our basic models. I conversed with Trenton on if he wanted marketing research and we ultimately decided that it’d be beneficial to buy it. Lastly, I ran pessimistic and worst case scenarios to assess if we had adequate cash flows if our demand was lower than expected.
● Marketing: This quarter as the VP of Marketing I was responsible for pricing and promoting our brands. We finalized our bike designs for all four brands. I lead the team discussion on pricing each bike, while looking at the price customers are willing to pay and our direct costs. Then we made decisions on the creation of advertisements and the placement of those ads.
● Human Resources: For Q2 I still continued to help lead our team to evolve and execute our HR strategies. I focused on setting our employees quarterly compensation package. I increased our sales force and production workers salary, health benefits, vacation period, and as well as their pension. We did this in hope that our employees will continue to work hard and bring in big sales.
● Manufacturing: For Q2, as the VP of Manufacturing, I was responsible for making a reasonable prediction on our sales volume and for making our first round of production that would enter the market. I made decisions for what our first demand projection and projected worker productivity would be with no over time. We confirmed our fixed capacity again to make sure that it would be able to handle the pressure from market right now.
● Business Analytics: For Q2, as the VP of Business Analytics, I was responsible for estimating the decisions made by other companies, along with making the decision to do market research. I focused on making sure our team made decisions that would likely place us at the top of the focus low cost strategy market and at the top of the recreation and mountain biking companies for or market location. The decision to do market research was made in hopes of getting a better, more accurate insight on what our competitors are doing in future quarters.
SWOT Analysis
VP of Accounting and Finance:
● Strengths – Continuing from Q1, capital is our biggest strength right now. We have adequate funds to handle fallbacks and to expand if we decide to do so. Even in our pessimistic and worst case scenarios, we have plenty of money if actual demand is not what we forecasted. All cash flows are in the positive right now and we hope to keep them this way.
● Weaknesses – A weakness that I am worried about is our conservatorship. We have been very careful up unto this point on how much we are spending, but it might bite us in these coming quarters if demand has exceeded our expectation.
● Opportunities – If demand is higher than expected, we have the opportunity and funds to hire more employees, build another store, or attack new markets. We can also create new designs for our current brands or create a whole new brand of bike that could better fit customer needs.
● Threats – Our biggest threat right now is if demand is drastically lower than our worst case scenario. Although we have sufficient funds, we would be in serious trouble if nobody wanted to buy our bikes. We would have to strategize and see where we went wrong. We would have to figure out how to penetrate our market and get our customers to adapt to our product.
VP of Marketing:
● Strengths- A strength of Prestige Cycling is the dedication of our team of making sure all of our decisions are based around the customer needs and desires. Also a strength of our company is the decision to purchase market research. This will allow us to gain information from customers reactions to our brands and information about competitors.
● Weaknesses- A weakness I see us facing after this quarter is our bikes being priced a little high for being focus low cost business. Also, we did not offer any rebates at this time. We wanted to see how customers react first to our prices and then make decisions about lowering them.
● Opportunities- If our pricing meets the expectations of our consumers and the bike features meet their needs we have the opportunity to gain market share and be number one in the market. We also have opportunities to gain knowledge on competitors and consumers from the market research.
● Threats- A threat Prestige Cycling could face is our bikes being priced too high and us not being able to react fast enough to this issue and lose consumers to our competitors.
VP of Human Resources:
● Strengths- A major strength we have right now over our employees is that we have increased our compensation packages a good amount. I think this is a big strength for us because it will keep our employees motivated to come to work as well as to make big sales for our company.
● Weaknesses- Since we still haven’t started making sales in the company, we haven’t run into many weakness. However, a potential weakness may that could affect overall sales is the amount of employees we hire. At the moment, we have a total of 5 employees and if sales take off quickly and rapidly we may need to hire more employees for the store.
● Opportunities- I think an opportunity that our company can benefit from is the two type of bikes we are selling. Since we are selling recreation and mountain bikes in Amsterdam and this is the top two locations for both bikes, our employees should be able to attract more customers as well as sell more.
● Threats- An upcoming issue that may result as a threat, is that we don’t bring in enough demand for our company to stay running and to outbeat the other companies we are competing against. We need to do something that will keep our business apart from the others and to make ourselves stand out.
VP of Manufacturing:
● Strengths : The major strength we have right now in manufacturing is that we used all of our manufacturing productivity and leading the competition. Our estimated sales volume is really close with the estimated demand. After analyzing the results of Q2, and because we know our products are priced higher than we prefer right now, we are planning lower the price after achieving higher levels of production.
● Weaknesses : A major weakness we have is that we may have less demand when compared with our competitors since we only have one market. We will have to open more market locations to have more demand and meet these demands. We may also need to improve our production and sales of the Super Comfort and Mountaineer brands since they are less quality bikes.
● Opportunities : The majority opportunity our company has lies in the stock-out issue and how it damages the assets of the company. However, we can have a immense benefit after we deal with stock out question by increasing our fixed capacity and by hiring more people to have higher projected worker productivity. At the same time, having more market demand by opening new market will provide us with massive production potential as long as we can meet that increased demand.
● Threats : From the results of Q2, the majority of our threats are our competitors has more market shares. We are in 4th place with leading 1% by 5th. And we do not produce any speeding bike yet. The Pantheon company are considers our largest competitor because they have the same target market as us which mostly focus on recreation bike and mountain bike. At the moment they are leading in both segment market by 25%, 26% comparing with 18% and 16% of our company. Although they only have three products, their design are more popular with consumers. We must modify and innovate our products to stay competitive. After confirming the innovated products, we will expand the production scale and try to regain the market.
VP of Business analytics:
● Strengths: I believe a strength that our team held in this area was our ability to estimate what decisions needed to be made in regards of pricing/ marketing/ market expansion in comparison to our competitors. With having the limited information we had, I believe our team was able to make very good estimates of what decisions would place us competitively in our market for the size we wanted to be this quarter. Another strength came in the decision to do market research. With this we will be able to have more knowledgeable estimations about our competition in coming quarters.
● Weaknesses: Our weaknesses lie in the same area as where our strengths lie. While I believe we were able to make good estimations about what occured in the rest of our universe during Q2, we could not be sure of what our competition would be doing. This lack of knowledge I believe is why our team has less of the market share than we wanted (12%).
● Opportunities: Opportunities in this quarter included the ability for our team to set our company apart through our marketing decisions, our employee pay/ benefits, our price points, and our brands. We had the opportunity to set our standards high early on for what we want to be as a company and for what we believed would set us apart from other companies’ decisions. After receiving more information from our marketing research report, we have the opportunity to change our tactics to improve our market share. Seeing that every other team had a speed bike brand, I believe that this would be a good way for us to increase our share of the market.
● Threats: Threats in this quarter came from other teams decisions, and our inability to accurately know these decisions. We were farther off in our estimations of what we needed to do as a company to stand out, and we face the threat of going into Q3 behind the rest of the teams. Specifically, teams that share the focus low cost strategy and teams that are focusing on recreation and mountain biking in the New Amsterdam location our our direct threats.
Identify concepts and analytical frameworks that were covered in this class or other classes and then explain in detail why they were needed and how they were applied in the course of your quarterly decisions within the Marketplace Simulation. Because Marketplace Live is a comprehensive simulation that combines elements from your entire degree curriculum, you are expected to be able to identify at least three items that you used from BUAD 453 and two items from other courses. Again, this is an individual assignment. I expect that you will identify different concepts and frameworks that are more relevant to your specific functional area and responsibilities within the simulation. The reflection paper serves as a jumping-off point for class discussions and debriefing after each quarter.
