Roses Digby

DIGBY’S

FINAL RESULTS

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1) Strategy Overview1) Strategy Overview

2) Round by Round Analysis2) Round by Round Analysis

3) Financial Overview (Final Results)3) Financial Overview (Final Results)

4) Success and Failures4) Success and Failures

5) Conclusion (what was learned)5) Conclusion (what was learned)

OUTLINE OF PRESENTATION

STRATEGY OVERVIEW


Maintain presents in both segments

Differentiate by excellent design, high awareness and accessibility

R&D to keep designs fresh and exciting

Constantly improving size and performance to keep pace

with the market

Initial Strategy – Broad Differentiator

Ultimate Strategy – Follower Strategy

Advantages:Take advantage of pioneer’s positioning

mistakesTake advantage of pioneer’s Product

mistakesTake advantage of pioneer’s Marketing

mistakesTake advantage of latest techTake advantage of pioneer’s limited

resources

Disadvantages:Lack Economies of Scale and ExperiencePioneer defines the rules of the gameLack Influence on customer choice criteria and attitudes

Ultimate Strategy – Cost Leadership

AdvantageMore cost effective than its

competition

DisadvantageAll operations must be as efficient as possible

ANALYSIS OFROUND 1 TO ROUND 6


Round 1 – The PlanRound 1 – The Plan

Research and DevelopmentResearch and Development

Pfmm

Size Age MTBF

Daze 6.4 13.6 4.1 2000

MarketingMarketing

Daze

Price $33

Promo Budget $1500

Sales Budget $2000

Sales Forecast 1600 units

Assumed the current positioning was Assumed the current positioning was suitable for Year 1. suitable for Year 1.

Dino will be in production until end of Dino will be in production until end of Year 2Year 2

Low Promo Budget due to high Low Promo Budget due to high investment costinvestment cost

ProductionProduction Increased Daze Automation from 3.0 to 6.0Increased Daze Automation from 3.0 to 6.0 Invested in 2.0 Automation for DinoInvested in 2.0 Automation for Dino Bought 350 capacity for DinoBought 350 capacity for Dino

FinanceFinance Maximize equity issueMaximize equity issue Maximize acquisitions of debt Maximize acquisitions of debt

for heavy investment activitiesfor heavy investment activities Contribution Margin of 18%Contribution Margin of 18%

Results Overall Market ShareOverall Market Share

Low Tech (Daze)Low Tech (Daze) : 18% : 18% High Tech (Daze)High Tech (Daze) : 15% : 15% (Lower compared to (Lower compared to competitors)competitors)

SalesSales : $45,158,530: $45,158,530 Sales is at 5Sales is at 5thth placing, performance is very poor as placing, performance is very poor as compared to competitorscompared to competitors

Cumulative Profit Cumulative Profit : $1,953,380: $1,953,380

Net Profit Net Profit : -$531,807: -$531,807 Due to High Financing Cost & High Variable CostsDue to High Financing Cost & High Variable Costs

Stock PriceStock Price : $6.41 (Decrease by $5.47): $6.41 (Decrease by $5.47)Due to negative earnings and information asymmetryDue to negative earnings and information asymmetry

Emergency Loan : $4,168,836Emergency Loan : $4,168,836



Pfmm

Size Age MTBF

Daze 6.4 13.6 5.1 20000

Dino 10.0 10.1 0.0 23000

MarketingMarketingDaze Dino

Price $30.5 $45

Promo Budget $2000 $1500

Sales Budget $1800 $50

Sales Forecast 1400 units 700 units

Reduced price (41% importance)Reduced price (41% importance) Based on experience, allocate high Based on experience, allocate high

amount on promo budgetamount on promo budget We do not need to create We do not need to create

accessibility for Dino in this round accessibility for Dino in this round because it will only be available at because it will only be available at the end of the around on Dec 23.the end of the around on Dec 23.

ProductionProduction Further investment in automation for daze from Further investment in automation for daze from

6.0 to 8.0 and; 6.0 to 8.0 and; automation for Dino 2.0 to 3.0 for Dinoautomation for Dino 2.0 to 3.0 for Dino Increased Dino’s capacity by 50Increased Dino’s capacity by 50

FinanceFinance Maximize equity issueMaximize equity issue Maximize acquisition of debtMaximize acquisition of debt

Results

Overall Market Share – Low Tech (Daze) : 17% Overall Market Share – Low Tech (Daze) : 17%

– – High Tech (Dino) : 12%High Tech (Dino) : 12%

Daze recorded the second highest market share. Dino had Daze recorded the second highest market share. Dino had been been

introduced on 23/12 and thus was only in the market for 8 introduced on 23/12 and thus was only in the market for 8 days.days.

SalesSales : $42,685,954: $42,685,954

Cumulative ProfitCumulative Profit : $810,817: $810,817

Net ProfitNet Profit : -$1,142,563: -$1,142,563

Stock PriceStock Price : $5.79 : $5.79 (Decrease by $0. 62)(Decrease by $0. 62)



Pfmm

Size Age MTBF

Daze 6.8 13.2 3.2 20000

Dino 11.0 9.0 0.6 23000

MarketingMarketing

Daze Dino

Price $30.5 $45




Maintained low pricingMaintained low pricing Increase promo and sales Increase promo and sales

budget for both products due to budget for both products due to unsatisfactory market shareunsatisfactory market share

ProductionProduction Further investment in automation for daze from Further investment in automation for daze from

8.0 to 9.0 and; 8.0 to 9.0 and; For Dino from 3.0 to 4.0For Dino from 3.0 to 4.0

FinanceFinance Maximize equity issueMaximize equity issue Maximize acquisition of debtMaximize acquisition of debt

Results

Overall Market Share – Low Tech (Daze) : 16% Overall Market Share – Low Tech (Daze) : 16%

– – High Tech (Daze) : 8%High Tech (Daze) : 8%

– – High Tech (Dino) : 6%High Tech (Dino) : 6%

Daze ranked 5Daze ranked 5thth highest market share. Dino suffered due to highest market share. Dino suffered due to bad bad

positioning.positioning.

SalesSales : $52,645,048: $52,645,048

Cumulative Profit Cumulative Profit : ($2,619,282): ($2,619,282)

Net Profit Net Profit : ($3,430,099): ($3,430,099)

Stock PriceStock Price : $2.69 : $2.69 (Decrease by $3.09)(Decrease by $3.09)


Research and DevelopmentResearch and DevelopmentPfmm

Size Age MTBF

Daze 6.8 13.2 4.2 2000

Dino 11.0 9.0 1.6 2300

MarketingMarketing

Reduce Daze price because the market is Reduce Daze price because the market is highly competitive highly competitive

To use Dino to increase overall To use Dino to increase overall profitability profitability

Daze have achieved 100% awareness, Daze have achieved 100% awareness, scale down on promo budget while scale down on promo budget while focusing on Dinofocusing on Dino

Sales budget at optimumSales budget at optimum Sales forecasting is obtain by Sales forecasting is obtain by

anticipating total demand by each anticipating total demand by each segment and divide it among number of segment and divide it among number of competitors competitors

Daze Dino

Price $28 $42




ProductionProduction Production Schedule is a rough estimate on Production Schedule is a rough estimate on

sales forecast from Marketing departmentsales forecast from Marketing department No changes made on automationNo changes made on automation

FinanceFinance No changes were madeNo changes were made We hope that sales were forecasted We hope that sales were forecasted

accurately so that we do not run into accurately so that we do not run into

emergency loanemergency loan

Results Overall Market Share - Low Tech (Daze)Overall Market Share - Low Tech (Daze) : 19% : 19%

- High Tech (Daze)- High Tech (Daze) : 6% : 6% - High Tech (Dino)- High Tech (Dino) : 6%: 6%

Daze recording the second highest market share while Dino Daze recording the second highest market share while Dino recorded the lowest market share as compared to recorded the lowest market share as compared to

competitors.competitors.

SalesSales : $57,863 : $57,863 Increase by 9% with Daze contributing to the overall sales.Increase by 9% with Daze contributing to the overall sales.

Cumulative Profit Cumulative Profit : -$2,243,932 : -$2,243,932

Net Profit Net Profit : $375,350 : $375,350 Increase by 11%Increase by 11%

Stock PriceStock Price : $2.67 (Decrease by $0.02): $2.67 (Decrease by $0.02)Digby has shown poor successDigby has shown poor success



Pfmm

Size Age MTBF

Daze 7.2 12.8 2.6 2000

Dino 10.9 9.1 1.7 2300

MarketingMarketing

Prices are maintained after observing Prices are maintained after observing competitors pricingcompetitors pricing

Dino promo budget have been scaled down Dino promo budget have been scaled down while maintaining sales budget for both while maintaining sales budget for both productsproducts

Sales forecasting is obtain by Sales forecasting is obtain by anticipating anticipating total demand by each segment and total demand by each segment and divide divide it among number of competitors it among number of competitors

Daze Dino

Price $28 $42





sales forecast from Marketing departmentsales forecast from Marketing department

FinanceFinance Repurchase common stocks and retire long term Repurchase common stocks and retire long term

debt to increase ROE debt to increase ROE

With sufficient profits at hand, we hope With sufficient profits at hand, we hope

we do not run out of money because it we do not run out of money because it would lead to emergency loan.would lead to emergency loan.

Results

Overall Market Share - Low Tech (Daze)Overall Market Share - Low Tech (Daze) : 17% : 17% - High Tech (Daze)- High Tech (Daze) : 3%: 3%

- High Tech (Dino)- High Tech (Dino) : 20%: 20%Daze market share fell taking the third position. Dino Daze market share fell taking the third position. Dino

market market share rose and came second right before Ace. share rose and came second right before Ace. SalesSales : $88,831,677: $88,831,677 Sales peaked to the highest after 5 years. Sales peaked to the highest after 5 years. Cumulative Profit Cumulative Profit : $9,386,384: $9,386,384 Net Profit Net Profit : $11,630,316: $11,630,316 Profits rose by 200% from the previous yearProfits rose by 200% from the previous year

Stock PriceStock Price : $17.47 (Increase by $14.79): $17.47 (Increase by $14.79)Post a record high because of high ROE and EPSPost a record high because of high ROE and EPS


Research and DevelopmentResearch and DevelopmentPfmm

Size Age MTBF

Daze 7.2 12.8 3.6 2000

Dino 11.6 8.4 1.6 2300

MarketingMarketing

Prices are maintained Prices are maintained Both sales budget and promo budget for Both sales budget and promo budget for

Dino and Daze are maintainedDino and Daze are maintained Sales forecasting is obtain by anticipating Sales forecasting is obtain by anticipating

total demand by each segment and divide total demand by each segment and divide it among number of competitors it among number of competitors

Daze Dino

Price $28 $42



Sales Forecast 2000 units

1500 units


sales forecast from Marketing departmentsales forecast from Marketing department

FinanceFinance Repurchase common stocks and retire long term Repurchase common stocks and retire long term

debt debt

Paid dividendsPaid dividends

Results Overall Market Share - Low Tech (Daze)Overall Market Share - Low Tech (Daze) : 19% : 19% - High Tech (Daze)- High Tech (Daze) : 2%: 2%

- High Tech (Dino)- High Tech (Dino) : 20%: 20%Daze market share rose again from the previous year whileDaze market share rose again from the previous year whileDino’s market share is the sameDino’s market share is the same

SalesSales : $103,559,431: $103,559,431 Cumulative Profit Cumulative Profit : $24,737,163: $24,737,163 Increasing profits from previous years contributed to higher Increasing profits from previous years contributed to higher cumulative profitcumulative profit

Net Profit Net Profit : $15,350,779: $15,350,779 Profits rose marginally based on prior yearProfits rose marginally based on prior year

Stock PriceStock Price : $29.71 (Increase by $12.24): $29.71 (Increase by $12.24)Stock price rose higher but the increasing at a slow pace Stock price rose higher but the increasing at a slow pace

FINANCIAL OVERVIEW


Digby’s Net Profits: Round 1 - 6

($532) ($1,143)($3,430)

$375

$11,630

$15,351

($4,000)($2,000)

$0$2,000$4,000$6,000$8,000

$10,000$12,000$14,000$16,000

Sale

s($'0

00)

Round 1 Round 2 Round 3 Round 4 Round 5 Round 6

Sales Comparison

Digby’s ROS, ROA, ROE: Round 1 - 6

-100%-80%-60%-40%-20% 0% 20% 40% 60% 80%100%

Percentage (%)

Round 1

Round 2

Round 3

Round 4

Round 5

Round 6

ROS, ROA & ROE

Return on Sales (ROS) Return on Asset (ROA) Return on Equity (ROE)

Digby’s Asset Turnover: Round 1 - 6

1.3

0.9

0.7

0.9

1.8

2

0 0.5 1 1.5 2

Round 1

Round 2

Round 3

Round 4

Round 5

Round 6

Asset Turnover

Digby’s Market Share: Round 1 - 6

16.90%13.90% 14.70%

13.90%

18.40% 18.70%

0%

5%

10%

15%

20%

Perc

enta

ge (%

)


Market Share

Digby’s Stock Price: Round 1 - 6

Stock Price

$2.67

$17.47

$6.41 $5.79$2.69

$29.71

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00


($)

Market Share (as at Round 6):Digby vs. Competitors

Stock Price (as at Round 6):Digby vs. Competitors

SUCCESSES & FAILURES


Decisions We Regret of Taking… Pricing

Very low price for low tech Drastic drop in high tech price Loss of higher profit potential hence

loss of higher cumulative profit

Low Tech Pricing

0

5

10

15

20

25

30

35

40

Andrew Baldwin Chester Digby Erie Ferris

Companies

Pri

ce Low Tech Pricing

High Tech Pricing

34

36

38

40

42

44

46

Andrew Baldwin Chester Digby Ferris

Companies

Pri

ce Series1

Decisions We Regret of Taking…

Positioning Overestimated Dino’s ideal positioning

Loss in sales Emergency loan Higher Inventory Loss of market share

Worst Year- Round 4 followed by Round 3

Doing The Right Things…

Realize our mistakes and take appropriate actions

Positioning For Dino its near the edges of the inner circle

Capital Structure Lower debt to reduce high interest payment

High Automation Helped to reduce price and still maintain a

good contribution margin

Best Year- Round 5

Doing The Right Things…

Starting all over again Positioning Dino-inside the inner circle rather

than out of it Price

Study Competitors and adjust price accordingly

Production Capacity To Be Optimistic and increase

production capacity

CONCLUSION

Market is unpredictable

It is vital to analyze competitors persistently

Each department is not able to function independently – requires countless coordination

Documents

Roses Digby