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Final presentation for CSULB FEMBA capstone course competition August 2011 Team Erie: Industry C43894 Jessica Archer Meredith Curry Muhammad Soomar Veronica Mimi Ta William James Woods
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Stockholders’ MeetingQ1, 2020
Executive OfficersJessica Archer, Meredith Curry, Veronica Dang, Muhammad Soomar, Will Woods
Erie Sensors Company
Edition - CapstoneIndustry C43894 CSU Long Beach, FEMBA XI; Jul.-Aug. 2011, Dr. Lohman Course Level - Graduate
Erie Co.
• Product lifecycle focus• Aggressively market : High, Low, Traditional segments• Expand capacity as needed• Increase automation to reduce labor cost• Finance, as needed (issuance of Stock and then Bonds)• Maximize recruitment spending and training• Maximize TQM investments to streamline operations
Company StrategySensor Differentiation with Lifecycle Focus
Erie Co.CEO
Will Woods•Total Balanced Scorecard
•Each year ≥ 90•Cumulative ≥ 216
• International Management Ranking•≥ 95th percentile, per year and cumulative
Erie Co.
Cumulative Point Goal216 out of 240
Company PerformanceBalanced Scorecard Scores
Cumulative Point Total 236 out of 240
Erie Co.Company Performance
Balanced Scorecard Percentiles
Overall cumulative percentile placed Erie’s management in the 99 th percentile – among the top 15 companies out of 1486 internationally!
Erie Co.R&D and Forecasting
• Customer Buying Criteria
Year 2016 2017 2018 2019Minimum Score 43 43 45 46
Erie Co.R&D and Forecasting
• Key Success Factors• Building forecast spreadsheet for best-case, worst-case,
and average-case sales scenarios• Continual review of competitor decisions• Assuming each competitor would make best possible
R&D moves• Best-case scenario: Production• Worst-case scenario: All other departments
Erie Co.R&D and Forecasting Performance
Customer Buying Criteria (Customer Survey)
• Problem: “Edge” sensor line not in line with strategy• Solution: Reposition to High segment
Erie Co.VP, Customer Acquisition
Meredith Curry• Customer Awareness ≥ 90%
• Customer Accessibility ≥ 90%
• Product Count ≥ 8
• SG&A Expense• ≥ 7% & ≤ 17% of total sales
• Market Share • ≥ 22% of total sensor market• Highest Market Share in the Traditional, High end, and Low end segments
Erie Co.Customer Acquisition
• Key Success Factors• First-to-Market with Multiple High-Profit Sensors in Segments
• 2012 - Two highly-demanded sensors in Traditional Segment • 2013 - Two highly-demanded sensors in Low end segment and
two in the High end segment
• Consistent Promotion and Sales up to or slightly above diminishing returns
• Efficient Sales spending during Advanced Marketing• Sensor-cost/Customer-benefit analysis (MTBF cost vs. benefit)
Erie Co.Customer Acquisition Performance
Awareness, Accessibility, Sensor Count, SG&A Expense
Erie Co.Customer Acquisition Performance
Target Segment Market Share ($)
Erie Co.Customer Acquisition Performance
Target Market Share ($)
8-year Average, Sales Weighted: 20.61% (Highest in Industry)
Erie Co.VP, Internal Business Processes
Veronica Dang
• Contribution Margin ≥ 36%
• Plant Utilization ≥ 100% & ≤ 180%
• Days of Working Capital
≥ 30 days & ≤ 90 days
• No Stock-out costs
• Inventory Carrying Costs ≤ 0.5%
• Operating Profit• Cumulative Profit ≥ $135M
Erie Co.Internal Business Processes
• Key Success Factors• Automation: Determine Maximum Possible Automation
• Production & Capacity: Forecast based on worst-case scenario to prevent high inventory carryover and low plant utilization
• A/P: Work with Finance department and suppliers to control leverage
Erie Co.Internal Business Process Performance
Contribution Margin, Plant Utilization, Days of Working Capital, Stock-out Costs, Inventory Carryover
Erie Co.VP, Learning and Growth
Jessica ArcherYear
2016 2017 2018 2019
Employee Turnover (max.) 5% 4% 4% 4%
Employee Productivity (min.) 112% 114% 116% 118%
TQM Mat'l Cost Reduction (min.) 6.3% 7% 7% 7%
TQM R&D Cycle time Reduction (min.) 35.7% 40% 40% 40%
TQM Admin Cost Reduction (min.) 48% 60% 60% 60%
TQM Demand Increase (min.) 7.9% 10% 10% 10%
Erie Co.Learning and Growth
Human Resources• Train Employees – two weeks each year• Recruit – best employees possible
• Negotiate Fairly – aim for wages, raises & benefits between current contract and labor-demanded value
• Offer - comparable wage, benefits, profit sharing, and raise rates until complement is below 300 employees
• Overtime – aim for zero, to maintain high productivity and low turnover
Erie Co.Learning and Growth
Total Quality Management• Heavy spending, as Finance dept. goals permit• Up to $4M for each initiative, optimally split evenly over three years to maximize impact• Material cost reduction, Labor Cost reduction and
Demand Increase benefit every product line• R&D cycle time reduction benefit product lines targeted
at High end and Traditional segments• Admin. Cost reduction is lowest
priority, but TQM brings downtotal Admin cost by net ~$4Mover 5 years
Erie Co.Learning and Growth Performance
Employee Turnover, Employee Productivity, and TQM Initiatives
Erie Co.VP, Finance
Muhammad Soomar
• Market Capitalization≥ 30% of the sensor industry
• Sales ≥ $181M annually, on average
• No Emergency Loans
Year
2016 2017 2018 2019
Stock Price Per Share $51 $62 $84 $118
Profit ($M) $16 $23 $33 $50
Erie Co.Finance
• Key Success Factors• Raise Capital
• Policy for Working Capital & Cash Flow• Dividend Policy: When no additional debt is needed to
fund operations dividend policy is set to achieve desired 1.8 leverage and to assist Internal Business Processes department achieve Days of Working Capital goal
Erie Co.Profit per Year ($M)
Erie Co.Cumulative Profit ($M)
Erie Co.Stock Price
Erie Co.Market Capitalization, ($M)
Erie Co.Efficiency Metrics
Return on Sales
Erie Co.Efficiency Metrics
Return on Equity
Erie Co.Efficiency Metrics
Return on Assets
Erie Co.The Future
• Maintain competitive advantage through excellent forecasting and financial planning
• Expand sensor line as we retire aged sensors
Erie Co.Why Invest In Erie
• Effectiveness• Excellent Financial Performance• 1st Place in Market Share ($)• Highest stock price, market cap. and cumulative profit
• Stability• Never an emergency loan• Profitable every year
• Growth• Continued consistent growth in sensor industry
WHAT WE LEARNEDClassroom SettingEnd of Stockholder’s Meeting
Erie Co.
• Calculate inter-segmental sales
• Rebuild forecast to calculate sales each month rather than relying on averaging monthly sales each year
• Focus on the goals set forth by the Board of Directors• Capsim
• 50% importance: Balanced Scorecard• 25% importance: Analyst goals• 25% importance: Our own Measures
• CompXM• 100% importance: Balanced Scorecard
What We Have LearnedWhat We Would Have Done Differently
and Will Apply to CompXM
(STOCKHOLDER’S MEETING IS COMPLETE) (CLASSROOM SETTING)
Erie Co.
• Break-even analysis• Forecasting• Evaluation of company financials• Balancing goals to maintain consistent and successful
performance
What We Have LearnedReal World Applications
(STOCKHOLDER’S MEETING IS COMPLETE) (CLASSROOM SETTING)
Erie Co.
• Never completely trust a computer forecast - qualitative analysis is important!• Capsim never consistently forecasts.
• Never over-rely on human intuition – if it is measurable, then measure it and control it!• Stock outs due to strikes
• Never underestimate a competitor’s capacity to upset their overall performance to achieve a few goals• Boosting market share by cutting prices at the expense of profit,
stock price, contribution margin• Boosting stock price at the expense of leverage and days of
working capital
What We Have LearnedWhat We Could Have Done Better
(STOCKHOLDER’S MEETING IS COMPLETE) (CLASSROOM SETTING)
Erie Co.
• Goals, Strategies and Policies, and Performance
• Future Plans
• What We Have Learned
Wrap UpAgenda
Erie Co.International Sensor Conference 2011
Though Andrews, Baldwin, Digby and Erie have challenged each other for eight years, their executives continue to be close after the breakup of the monopoly in 2011. Management of Chester and Ferris could not be reached for comments.