World 80 Team 4

2 Year Plan

Luisana Villalba Isabelle Miranda

Janet Morales Yodit Gizaw

Lilit KirakosyanMariam Hakobayan

MGMT 497

Table of ContentsSection 1 Introduction……………………………………………………………………….….. 4

Section 2 Organization……………………………..………………….……………………….. 6Section 3 Objectives & Industry Analysis………………………………………………..……… 8

3.1 Industry Analysis ………………………………………………………………..….. 83.2 Weighting Factors …..…………………………………………………………….. 133.3 Financial Objectives ………………………………………………………………. 14

Section 4 Strategies …….………………………………………………………………….. 164.1 Inflation Adjustments …………………………………………………………… 164.2 Marketing and Sale Efforts ……………………………………………………….. 174.3 Production and Operations Management ………………………………………. 214.4 Financial Management …………………………………………………………… 28

Section 5 Sales Forecast ………………………..……………………………………………. 305.1 Industry Sales ……………..………………………………………………………. 305.2 Company Sales ……………………………………………………………………. 315.3 Market Shares …………………………………………………………………….. 325.4 Regression Analysis …..………………………………………………………….. 33

Section 6 Production Plan …………….…………………………………………………… 346.1 Production Schedule …………………………………………………………… 346.2 Production and Inventory Management ………………………………………… 366.3 Production Supply Distribution …………………………………………….. 386.4 Labor and Material Cost ……………..…………………………………………… 396.5 Total Production Cost ……….………………………………………………….. 406.6 Cost of Goods Produced ……………………….……………………………… 41

Section 7 Financial Statements ………………….………………………………………….. 427.1 Pro Forma Assumptions ……………………………………………………….. 427.2 Quarterly Income Statements …………………………………………….. 457.3 Quarterly Balance Sheets………………………………………………………… 467.4 Quarterly Cash Flow Statements…………………………………………………. 467.5 Annual Consolidated Income Statements ………………………………………….647.6Annual Consolidated Balance Sheets …………………………………………….. 807.7 Annual Consolidated Cash Flow Statements ………………………………….. 967.8 Pro Forma Analysis …………………………………………………………. 108

Appendix ……………………………..……………………………………………… 110Appendix A: Historical Data for Years 1 and 2 ………………………………….. 110Appendix B: Operating Information Quarterly Report for Years 3 and 4 ………… 111Appendix C: Completed Sales Forecast ……………………………………………. 119

1.0-IntroductionEco Industries Inc. started in Los Angeles with six creative, motivated and

entrepreneurial business women ready to enter and tackle the business world by

applying all they learned from their college courses: management, accounting, and

finance. This empowered them to run a profitable business that has gained a reputable

brand name.Eco Industries produces and manufactures durable goods from recycled

material while staying on top of competitors in a society that is focused on being

environmentally conscious. Our product designs are based on research and and

customer preferences.

We have established three sales office in America and one international office

on Nystock. Our focus has always been and will continue to be our customer

satisfaction. We have consistently maintained the highest sales in Merica 1 and which

contributes to our high market share. Proving a greater competitive advantage in the

industry. Our growing manufacturing companies are equipped with the latest

technologies along with highly trained skilled professionals that help produce the finest

products in the industry.

Eco Industries goal is to provide a product that is desireable to the customers

while meeting their needs at an affordable price. Despite the intense competition Eco

Industries has maintained a reputable standing in the industry. Our innovative

management team has maintained a rigorous cost which has helped us stay on top of

the market. We are confident that we will maintain the same standing that we have for

the past years, that will yield to strong earnings in the suture.

Vision statement:

Our plan is to provide consumers with desirable and affordable products while being an

eco-friendly company. We strive to inspire suppliers and consumers to do something

that matters for our environment. our goal is to maintain a high net income, stock price,

and market share.

Mission statement:

Our company's foundation is built on our values, that are socially and economically

responsible. we are committed to our community, customers, and employees by

manufacturing products from recycled materials.

Broad Statement

2.0 OrganizationCommitment was the key to the company's success, where the foundation was

build through its key successors. In order to keep our company profitable we hold

corporate meeting on a regular basis where crucial decisions are made.

Luisana Villalba Chief of Executive Office As Chief of executive officer Luisana Villalba delegates and communicates with

her peers what actions plans need to be taken into place. With the experience that she

has gained in Sales, Marketing, and Management has placed this company in a

reputable standing. Luisana is the driving force behind the company. Her job is to keep

focus on the company's’ vision and mission statement. While always looking for a

competitive edge to always be one step ahead of the competitor.

Yodit Gizaw Vice President As Vice President Yodit is the right hand of the CEO (Luisana Villalba). She

oversees financials that to meet budgets and objectives of the company. As well as

optimizing operations performance. Yodits’ priority is to oversee budgets of all

financials to ensure that proper procurement. Giving ideas and feedback as to how to

maximize revenue is top priority.

Isabelle Miranda Vice President of Human ResourcesAs the director of human resources, her responsibilities entail; hiring and training

all personnel to effectively support rapid growth of multiple businesses, developing

progressive and proactive compensation and benefits programs to provide motivation,

incentives and rewards for effective performance, continually assess the

competitiveness of all programs and practices against the relevant comparable

companies, industries and markets, and manage the budget and other financial

measures of the Human Resources Department.

Lilit Kirakosyan Chief Finance Officer Her role as the CFO includes financial planning, analysis,identifying and

minimizing risk for the longevity of the company. Provide strategic financial input and

leadership on decision making issues affecting the organization

Janet Morales Chief Operating OfficerJanet’s role as Chief Operating officer encompasses managing day to day

operations and overseeing all operational policies such as production schedules making

sure Eco Industries Inc. has enough inventory every quarter to effectively make

decisions for the company.

Mariam Hakobyan Chief Marketing Officer

As a Chief Marketing Officer, Mariam is responsible for advertising products for

the company. In addition, she is always looking for ways to reduce costs for the

company by taking into consideration past trends of Eco Industries Inc and that of its

competitors to make informed decisions for the company's growth.

3 .0 Objectives and Industry Analysis

3.1 Industry Analysis Here we will provide and industry analysis for that past two years that will provide

a better understand as where we stand as a company. We will be focusing on analyzing

the past 8 quarters this will include sales, Net Income, Return on Assets, Return on

Equity, and stock price. Being able to analyze this will help us determine a strategy

against our competitors as to where we will be by the end of year 6.

Sales *we are company number 4 (C4)

Having stable sales is one of the most crucial elements to the company’s

success because the main source of revenue is generated here. Due to the fact that

due our strategy we don’t want any loans or stocks from banks because that entails

paying interest. Analyzing our sales in comparison to the industry we have had the

highest sales for the past eight quarters most consistently. As we prepare to go into

years 5 and 6 we are expecting to to have an increase in sales with new products. We

plan to achieve his by investing in R&D, advertising, and training to maintain our

industry leadership.

Net IncomeNet income is the deduction of taxes and expenses from our total revenue. This

is the determinate whether we have been profitable or not. As any other company in our

industry we have had our highs and our lows. However, we have always been able to

maintain a more consistent outcome than our competitors. In the past eight quarters we

have not earned a high negative income as our competitors which comes to a

recognition to our management team that has been able to really analyze situation and

come to conscious decisions. Our strongest quarters were between year 3 quarter 4

and year 4 quarter 4. With Eco- industries strong management system we plan to strive

to be number one until the end of year 6.

Return on AssetsAnalysing our return on assets gives us a better understand as to how we are

utilizing our assets to generate income. The graph below demonstrates that we have a

high ROA from the beginning. This is because we have invested in our company

expansion with cash. This helps us keep our debt and our equity high. We are

converting or investment into net income, this is primarily due to the fact that we have

invested in manufacturing plants that help produce more productivity which turns into

more sales. We plan to continue investing for plant expansion so that our return yields

to a higher income.

Return on Equity

This is where we are able to analyze the how much of the net income is being

returned to the investors. This is where investors can see how effectively the company

is using their money to generate profit. Eco Industries has effectively been able to

achieve this in the past eight quarters. We have been able to have a high rate of return

between year 3 quarter 4 and year 4 quarter 3. This then entails to make our investors

very happy because their investment has a high return rate. According to the data in

comparison to the rest of the industry, we have had the most consistent and high ROE

in the entire industry.

Stock Price

Stock price determines how well the company is doing against its competitors.

Stock prices have been a more constant competition than any other section as an

industry. Eco Industries has been number one for the past 8 quarters however the

competitors have been right behind us. This has been one of our fortes since the

beginning, where there has been a steady increase of 2% every quarter. Eco Industries

We have high hopes that for the future we will maintain a high ROE and therefore, our

shareholders and stock prices will keep on increasing.

3.2 Preliminary Weighting Factors

Our preliminary weight factors vary little from

those of the final ones. Without a doubt as

company, Eco Industries strong potential was in

its market share. At the end of year 3 we were

ended second place with 20.74%. However, by

the end of year 4 we has the highest market

share of 23.26% where as the industry average

was 19.18%. This demonstrates a 4% above the

industry average.

After two quarters of making decisions we were able to notate what our strongest

points were. This help us as to where to focus

our goal for year 5 and 6. There were some

weight factors that we changed because we

knew that those were going to be our strongest

points. We wanted to give our attention more to

our shareholders with market share and stock

price. As management of Eco industries

believed that if we gained a greater market

share our customer loyalty would be consistent. As well as our stockholders and

investors would be greatly compensated. Which we have not had a problem with for the

past years and we will be able to deliver for the coming years.

3.3 Financial Objectives

For the next couple of years ( Year 5 & 6) we plan to meet our weights factor

goals. Our goals and objectives are to are going to take into recent consideration in our

recent performances according to our financials and the ever changing economic

environment.

4.0 Strategies (JANET)STRATEGIES: Marketing

Price, on Year 3 Quarter 1 our company decided to increase product to $10.10 on Area

1, 2, and 3 to reduce Cost of Goods Sold. Unfortunately, this increase affect our sales

comparing to last quarter results. On the following quarter, prices were reduced to

$10.05 on the same areas so we can increase our revenues.Our decision was then to

make price changes with caution. Also, we tried to avoid making drastically changes on

the price so our sales won't suffer.

Advertising, on Year 3 Quarter 1 we failed to increase on advertisement to promote our

product. Prices were increased that quarter so this error cost our sales. On the following

quarters, we took a different approach by increasing this expense so our product can be

consistently purchased by our customers.

Salary, on the salary section we decided not to make any changes at all because we

believed that commision was more important for our employees. "the higher the salary,

the less the need to earn commission by selling".

Commissions, we started to increase commissions on Year 3 Quarter 2 because this

was our first peek season of the year. We wanted to motivate our employees by giving a

little extra so they can sell more products. We also took in consideration that Area 1 was

making the most of sale across the company so employees for Area 1 received better

commissions.

Dividends I AM NOT SURE HOW TO ANALYZE THIS!!! we have negative numbers

from year 3 quarter 2 to year 3 quarter 4

Hiring. Our strategy was to hire salespeople on low season so these people could be

ready for peak season such as quarter 2 and quarter 4. Also, our hiring process was

based on how many employees would resigned a particular quarter.

Sales Workforce

Eco Industries Inc strategy is to hire personnel in slow quarters being 1 and 3 to

so that we can prepare to for the busy sales seasons of quarters of 2 and 4. In the past

we noticed a constant trend of people were resigning in Merica 2 and 3. Therefore, our

strategy to compensate the loss of employees is to hire 2 employees each in those

areas. Eco Industries Inc believes that with a sales force of fifteen people is sufficient for

our production needs, and as a result will increase our return on assets contribute to

our growth in market share.

Advertising By Market Area

With the industry growth there, we plan to maximize profit to increase sales. By

doing so we plan to increase advertising expense during the busy quarters by 10%

percent, while for Nystock there was an increase of 5%.

General and Other Selling Expense

Inflation Adjustments

Salaries and Commission for Sales People

The management team at Eco Industries Inc. recognizes that our employees are

a major strength to the company. Without them we would not be the profitable company

that we are. In order to keep our success going, we believe by compensating our

employee’s quarterly salary base by 5% increasing from 3000 to 3150 along with

increasing commission by 5 cents every quarter will contribute to our thriving future.

Product Pricing Plan and Projected Sales

OPERATIONS

Research and Development, our strategy was to increase this operation expense every

quarter so a new model can be developed for future production. Increase was done

gradually to avoid adding too many models before the right time.

Training, to assure productivity in our production process we increase training expense

gradually every quarter to prepare our employees for complex assignments and

increase efficiency.

Product Introduction, when we decided to introduce model 2 to the market we analyze

the results from the Consumer Preference Study II to analyze consumer preferences

according to quality and features of our product. We choose quarter 2 of year 4 to

introduce our new model because its a peak season and we designed an specific

quality and features in each area according the study.

Quality Level, company strategy was to follow the study to narrow down which area

would receive our product more favorable.

Assumptions behind our plan -to achieve sales and production, we added lines to speed

up production. Overtime was given to employees during peak season.we also our

spreadsheets table to accommodate the right quantity in specifics areas to we won't

encounter short of inventory or overstock.

FINANCE

Dividends ????

CD's, our company made a mistake by purchasing CD on year 3 quarter.

Debt Position ?????

5.0 Sales Forecast

Company Sales Our company uses variable sources to forecast sales on of them being the

regression model. We used historical data to be able to compute future forecast.

Illustrated in the tables shown below are the forecast for years five and six. From this

we can also extract that there are high season which as well as some low season, these

are quarters two and four. This forecast gives us a better understanding as far as where

we will be in the next years.

Regression Analysis The regression model that was used was based on either two variables,

dependable(Y) or Independable variable (X). The dependable variables are based on

time, real GDP, and average price for each region. Where as the (Y) variable we used

adjusted seasonality. There are the four different types of models that we used to run

the regressions to figure out sales forecast. Which were:

Model #1:SA Sales= B0+B1 x Time

Model#2:SA Sales=B0+B1 x Real GDP

Model#3:SA Sales= B0+B1 x Average Price

Model#4:Sa Sales=Time x Real GDP

To be able to forecast for the best sales all regressions had to be ran and

examine the R-Square, which gives is a percentage of sales variation. We then looked

at the examined the coefficients to make sure weather they had the appropriate positive

or negative values. Once all of them were ran we selected the one with the highest

adjusted R-Square. We were then able to figure out which ones worked better in Merica

1,3 and three as well as in Nystock. From running the regression analysis we came to

the conclusion that in Merican 1,2, and 3 the best model to use was model. For

Nystock because of the different economic environment the best model to use is model

2. The regressions are as shown:

6.0 Production Plan

For the production plan, the management team we have decided that in order to meet

future production and keep inventory low, we would only open operate with 14 lines

total. This would allow us to keep inventory low and meet customer demands. Put of

these 14 lines, 10 will be in Merica and 4 will be in Nystock. The beginning of year 5

quarter 3 production to full capacity will be produced giving a total production of 728

uniter per quarter which will be enough to cover sales orders and have a safety stock of

20%.

Production and Inventory Management

For Production and inventory management we need to keep a tight inventory

throughout years five and six due to the fact that we planning to release two new

models. One will be released in year five quarter 2 and the second will be released on

year 6 quarter 1. We need to keep in mind these release because that affects the

inventory that we have left over that will be leftover will be sold as liquidation.

Production Supply Distribution

lON

Labor and Material Cost

Labor cost seems to increase every quarter by 4% which makes sense because

the new models with enhanced features require more maintenance and technological

advances.

Whereas in Nystock

there has been a

steady increase of 1

Deanr every two

quarters.

Appendix: