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Strategic Plan

Completed Posted by: srauf1975 Posted on: 25/08/2020 Deadline: More Than 3 days

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Please upload the first draft of your strategic plan in this area.
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The first draft of your strategic plan must be uploaded before your enter your competitive round 1 decisions. If I were you, I would choose either Broad Low Cost or Broad Differentiator as my strategy. In the spreadsheet, I am suggesting a set of decisions for round 1 for either strategy that you can use when you play round 1 (or you can modify those decisions to adapt them to your own thinking). Your SMART goals have to defined round by round, product by product for five rounds within each functional area. It's better to show your SMART goals using a table for each functional area. The SMART goals should indicate the decisions that you are going to make for each product in each round. That is, size, performance, MTBF, age, and material costs for R&D. Price, promotion budget, sales budget, awareness, accessibility, and sales forecast for the Marketing area. Production order, ending inventory, automation, and capacity additions or subtractions for each product, for each round, in the Production area. For the Finance area, show how you are going to fix the leverage problem in one or two rounds. You should also show your SMART goals by round for the HR and TQM areas and explain why you have chosen those SMART goals. Look at the attached examples and use the attached Excel spreadsheet to create the information for your strategic plan. You must fill in the decisions that you would make for each of the five years (i.e., rounds).

NOTE: Your strategic plan must be original. Make sure that your own strategic plan does not plagiarize from (i.e., it is not substantially similar to) any of these examples, or it will be rejected. Also, if you strategic plan is missing tables in any of the three functional areas of R&D, Marketing, and Production, or if the tables are incomplete, it will also be rejected. You have three attempts to get your strategic plan accepted by the Chairman of the Board of Directors (i.e., me).

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Strategic Plan Mission Statement:

Our mission as a broad cost leader is to produce low cost products in every segment of the market. We will maintain good profit margins and low prices to create maximum customer market share. Our Research and development will introduce new items while maintaining our existing products with current trends and obtaining new knowledge relevant to product needs. Marketing will build brand awareness while maintaining low price to increase sales and promoting our new products. Production will increase automation based on forecast and sales of each product to ensure no product stock out. Our Human Resource will compliment sufficient number of workers needed with minimal overtime hours and training to maintain products at a low cost. Our finance will be from long-term bonds and will retire bonds as soon as we meet a certain cash point.

R&D

Our research and development strategy will revolve primarily around making improvements to our current product line. We feel that focusing on our existing products will allow our company to obtain desirable profit margins whilst maintaining low costs. In order to do so, we will reduce the size and increase the performance as needed to match the ideal spots for each segment - you can reference the exact numbers we have decided on in the excel sheet attached.

We have also decided to introduce two new products to our line: a low end (Acre 2) and a traditional (Able 2). Acre 2 will be created in the first round, and Able 2 will be created shortly after in the second round.

We will ensure that all of our projects are completed before the years end in order to maximize our sales - with the exception of Able 2 and Acre 2. We expect those projects to take longer than a year due to the fact that we are creating those new products from scratch.

Able: Traditional

Round Pfmn Size MTBF

0 5.5 14.5 17500 1 5.7 14.3 17500 2 6.4 13.6 17500 3 7.1 12.9 17500 4 7.8 12.2 17500 5 8.5 11.5 17500

Able2: Traditional

Round Pfmn Size MTBF

0 - - - 1 5.7 14.3 16500 2 6.4 13.6 16500 3 7.1 12.9 16500 4 7.8 12.2 16500 5 8.5 11.5 16500

Acre: Low End

Round Pfmn Size MTBF

0 3.0 17.0 14000 1 3.0 17.0 14000 2 3.0 17.0 14000 3 3.2 16.8 14000 4 3.7 16.3 14000 5 4.2 15.8 14000

Acre2: Low End

Round Pfmn Size MTBF

0 - - - 1 2.2 17.8 13000 2 2.7 17.3 13000 3 3.2 16.8 13000 4 3.7 16.3 13000 5 4.2 15.8 13000

Adam: High End

Round Pfmn Size MTBF

0 8.0 12.0 23000 1 9.8 10.2 23000 2 10.7 9.3 23000 3 11.6 8.4 23000 4 12.5 7.5 23000 5 13.4 6.6 23000

Aft: Performance

Round Pfmn Size MTBF

0 9.4 15.5 25000 1 10.4 15.3 25000 2 11.4 14.6 25000 3 12.4 13.9 25000 4 13.4 13.2 25000 5 14.4 12.5 25000

Agape: Size

Round Pfmn Size MTBF

0 4.0 11.0 19000 1 4.7 9.6 19000 2 5.4 8.6 19000 3 6.1 7.6 19000 4 6.8 6.6 19000 5 7.5 5.6 19000

Marketing

As outlined in our attached spreadsheet, our promotion budget for each round and for each category is based on building up to 100% awareness. Once we have reached 100% awareness we will only spend enough on promotions in order to maintain 100%. We will also not invest more than $2250 for each product in each round, because beyond that point we receive diminishing returns.

We will utilize the same procedure with our sales budget in promoting accessibility. Diminishing returns; however, are met at $3000 dolors for sales. For this reason we will never exceed this amount for any given product in any given round. Accessibility will be much more difficult to achieve 100% status.

Our strategy for price will be to lower the price of each product by $0.50 during each round. This will allow us to meet the customers expectation without reducing our profits too greatly.

Our sales forecast is based completely on our current market share, and what percentage that the Capstone Courier predicts each category will grow.

Able: Traditional

Round Promotion Budget Awareness Sales Budget Accessibility My Price Sales

Forecast 0 $1,000 55% $1,000 54% $28.00 - 1 $2,250 82% $3,000 67% $27.50 1092 2 $2,250 100% $3,000 76% $27.00 1192 3 $1,400 100% $3,000 82% $26.50 1302 4 $1,400 100% $3,000 86% $26.00 1422 5 $1,400 100% $3,000 89% $25.50 1553

Able2: Traditional

Round Promotion Budget Awareness Sales Budget Accessibility My Price Sales

Forecast 0 - 0% - - - - 1 $0 0% $0 0% - - 2 $2,250 45% $3,000 31% $27.00 1192 3 $2,250 75% $3,000 52% $26.50 1302 4 $2,250 95% $3,000 66% $26.00 1421 5 $1,500 100% $3,000 75% $25.50 1552

Acre: Low End

Round Promotion Budget Awareness Sales Budget Accessibility My Price Sales

Forecast 0 $900 52% $900 54% $21.00 - 1 $2,250 80% $3,000 67% $20.50 1970 2 $2,250 98% $3,000 76% $20.00 2200 3 $1,500 100% $3,000 82% $19.50 2458 4 $1,400 100% $3,000 86% $19.00 2746 5 $1,400 100% $3,000 89% $18.50 3067

Acre2: Low End

Round Promotion Budget Awareness Sales Budget Accessibility My Price Sales

Forecast 0 - 0% - - - - 1 $0 0% $0 0% - - 2 $2,250 45% $3,000 31% $20.00 2200 3 $2,250 75% $3,000 52% $19.50 2457 4 $2,250 95% $3,000 66% $19.00 2745 5 $1,500 100% $3,000 75% $18.50 3066

Adam: High End

Round Promotion Budget Awareness Sales Budget Accessibility My Price Sales

Forecast 0 $800 49% $800 48% $38.00 - 1 $2,250 78% $3,000 63% $37.50 424 2 $2,250 97% $3,000 73% $37.00 493 3 $1,500 100% $3,000 80% $36.50 573 4 $1,400 100% $3,000 85% $36.00 665 5 $1,400 100% $3,000 88% $35.50 773

Aft: Performance

Round Promotion Budget Awareness Sales Budget Accessibility My Price Sales

Forecast 0 $700 46% $700 48% $33.00 - 1 $2,250 76% $3,000 63% $32.50 426 2 $2,250 96% $3,000 73% $32.00 510 3 $1,500 100% $3,000 80% $31.50 611 4 $1,400 100% $3,000 85% $31.00 732 5 $1,400 100% $3,000 88% $30.50 877

Agape: Size

Round Promotion Budget Awareness Sales Budget Accessibility My Price Sales

Forecast 0 $700 46% $700 42% $33.00 - 1 $2,250 76% $3,000 59% $32.50 373 2 $2,250 96% $3,000 71% $32.00 441 3 $1,500 100% $3,000 78% $31.50 522 4 $1,400 100% $3,000 83% $31.00 618 5 $1,400 100% $3,000 87% $30.50 731

Production

As outlined in our attached spreadsheet, our production schedule is based on 110% of our predicted sales. We are taking an optimistic outlook in production based on our sales forecast.

We will attempt to increase automation more rapidly in each round for categories that are more inclined toward automation. We predict that the “sweet spot” for automation in each category will match the below guidelines. Once we have reached this “sweet spot” will add no further automation:

Traditional: 8 (increasing by 1 per round up to 8)

Low End: 10 (increasing by 1.5 per round up to 10)

High End: 5 (increasing by 0.5 per round up to 5)

Performance: 6 (increasing by 0.75 per round up to 6)

Size: 6 (increasing by 0.75 per round up to 6)

We will add enough capacity each round in order to match 50% in Overtime for each category. Some items are not at 50% currently, so we will not add capacity. Other items are currently over 50% so we will need to work our way to this benchmark over a couple of rounds. The prediction for the amount of capacity needed is based on our intended production, which is, in turn, based on our sales forecast.

Able: Traditional

Round Production Schedule Automation Capacity Needed

0 - 4.0 - 1 1201 5.0 - 2 1312 6.0 - 3 1432 7.0 - 4 1564 8.0 - 5 1708 8.0 -

Able2: Traditional

Round Production Schedule Automation Capacity Needed

0 - - - 1 - - 900 2 1311 4.0 100 3 1432 5.0 100 4 1564 6.0 100 5 1707 7.0 150

Acre: Low End

Round Production Schedule Automation Capacity Needed

0 - 5.0 - 1 2167 6.5 300 2 2421 8.0 150 3 2704 9.5 200 4 3020 10.0 200 5 3373 10.0 200

Acre2: Low End

Round Production Schedule Automation Capacity Needed

0 - - - 1 - - 1650 2 2420 5.0 200 3 2703 6.5 200 4 3019 8.0 200 5 3373 9.5 200

Adam: High End

Round Production Schedule Automation Capacity Needed

0 - 3.0 - 1 466 3.5 - 2 542 4.0 - 3 630 4.5 - 4 732 5.0 - 5 850 5.0 -

Aft: Performance

Round Production Schedule Automation Capacity Needed

0 - 3.0 - 1 469 3.8 - 2 561 4.5 - 3 673 5.3 - 4 806 6.0 100 5 965 6.0 100

Agape: Size

Round Production Schedule Automation Capacity Needed

0 - 3.0 - 1 410 3.8 - 2 485 4.5 - 3 574 5.3 - 4 679 6.0 - 5 804 6.0 100

Human Resources

We will maintain 1st shift production line until 2nd shift or overtime is necessary. Recruitment of a maximum of $5000 per worker to acquire a higher caliber worker. Higher productivity will come from training hours at a cost of $20.00 per worker. This will ensure that all workers are highly trained and productivity is at its maximum.

Finance

Our financial strategy consists primarily of financing company activities through long term debt. The majority of our investments are financed through long-term bond issues, however when financing through long-term debt is not sufficient enough to cover our capital needs, we will acquire funds through stock offerings. As our company becomes profitable, and our net income increases, we will establish a dividend policy as well begin to retire stock that was issued. The remainder of our net income will be reinvested into the firm. Our company plans to to keep leverage between 2.0 and 2.8.

TQM

TQM (Total Quality Management)/Sustainability initiatives can reduce material, labor and administrative costs, shorten the length of time required for R&D projects to complete and increase demand for the product line. The impacts of the investments produce returns in the year they are made and in each of the following years.

Assuming positive revenue, we will be using our budget on a few TQM initiatives. In our strategy, we will maximize overall profits by reducing total SG&A cost primarily in materials, labor, and administrative cost. In order to achieve those goals, we will invest in cce/6 sigma training to reduce labor cost, CPI systems to reduce material cost, benchmarking to reduce administrative cost. For our strategy we will use a conservative budget between $1500-$2000 which may increase depending on our sales.

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Strategy

We are pursuing the Broad Cost Leader basic strategy in our industry.

Mission Statement

We provide value to our stakeholders by developing, producing and marketing products

that provide quality in both excellence and reliability, at competitive prices. We achieve this

through an organizational culture that values efficiency across all functions.

Vision Statement

Our goal is to be the ideal corporate citizen in our industry, by providing the immense

value that each of our stakeholders deserve. These stakeholders include: our customers,

employees, suppliers, stockholders, creditors, governments and the general public.

Tactics (SMART Goals)

R&D

We will develop products that provide quality in both excellence and reliability. Our

existing product in the Traditional market segment will be continuously upgraded to meet

customer expectations of its age, while our existing product in the Low-end segment will not be

upgraded, to meet customer expectations of its age. Our existing products in the High-end,

Performance and Size segments will be continuously upgraded to meet customer expectations.

Eventually, we will introduce a second product in the Traditional and Low-end segments.

Marketing

We will price our products competitively, but never at the sake of a contribution margins

below 30%. We will continue to spend just over $1,000,000 per round for both the promotion

budget and sales budget for our product in the Traditional segment. We will increase our

spending to this level for our product in the Low-cost segment. Once we introduce a second

product to these segments, we will increase the promotion and sales budget to $1,500,000 each,

per round, to grow and maintain our market share. We do not plan on increasing our spending on

the promotion or sales budgets beyond this level, due to the diminishing returns achieved beyond

this point. We will increase our spending on the High-end, Performance and Size markets

gradually, until maxing our spending out just above $1,000,000 per round.

Production

We will aggressively increase our automation levels for products in our Traditional and

Low-end market segments. This strategy will reduce our labor costs, allowing us to price these

products competitively, while retaining a contribution margin above 30%. We will pursue a more

gradual increase in the automation levels of our products in the High-end, Performance and Size

market segments. This strategy will allow us to continually upgrade these products within a

competitive timeline. We will not buy additional capacity, unless the plant utilization for any of

our products nears 200%. Once plant utilization reaches 150% for any of our products, we will

increase our capacity by 1,000 units for every additional increase of 10%. This strategy will keep

our plant improvement costs low, with investments made only when stock-out concerns arise.

Finance

Our investments in R&D, Marketing and Production will be initially financed through

current debt borrowing. This initial strategy will be used, as opposed to issuing long-term debt,

because it has a comparatively lower interest rate and no brokerage fees. Also, by retiring the

current debt annually, we will keep our leverage ratio on the lower-end of the ideal range for a

broad cost leader: 2.0-3.0. We will also issue long-term debt and/or sale common stock, if it is

necessary to maintain a debt/equity ratio above 2.0. By aggressively investing in automation,

effectively increasing the value of our plant and equipment, we ensure that we have this option at

our disposal. In later rounds, we will issue dividends and/or extend our accounts receivable credit

policy, if necessary to maintain a debt/equity ratio under 3.0.

Human Resources

Starting in round 2, we will begin to invest in recruiting and scheduling training hours.

Since our goal is to reduce the cost of goods sold, we will spend and schedule conservatively.

We will spend $2,000 per employee on recruiting and schedule 25 hours of training for each

employee annually.

Total Quality Management (TQM)

Starting in round 4, we will begin to invest in the Process Management and TQM

initiatives that reduce the cost of goods sold. We will invest $500,000 for each of the following

Process Management initiatives, totaling $2,000,000 annually: Continuous Process Improvement

(CPI), Vendor/Just in Time (JIT), Quality Initiative Training (QIT) and The United Nations

Environment Program (UNEP Green Program). We will invest $750,000 for each of the

following TQM initiatives, totaling $1,500,000 annually: Concurrent Engineering/6 Sigma

Training (CCE) and The Global Environmental Management Initiative, Total Quality

Environmental Management (GEMI TQEM).

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Broad Differentiator

For our company, we have decided to seek a broad differentiator strategy. Our goal with this strategy is to rule every portion within the market. The company will gain a competitive advantage by creating products with an excellent design, high awareness and easy accessibility. The company will develop an aggressive R&D strategy that keeps designs new and exciting. Our R&D strategy will stick to release deadlines religiously and will bring innovative products to the market in a quick time span. Most products will keep pace with the market, offering improved size and performance. Prices will be above average. Capacity will be expanded as higher demand is generated.

Mission Statement

Premium products for the industry: Our brands withstand the test of time. Our stakeholders are customers, stockholders, management and employees.

Tactics

Research & Development: We will keep our existing product line, maintaining a presence in every segment. Our goal is to offer customers products that match their ideal criteria for positioning, age, and reliability. The company will do this by ensuring that product revisions are completed within a timely manner. The overall goal is to develop products that will be completed and released before the end of June or July of the current year. The purpose of this is to maximize the amount of sales for the current year. To do this, each products reliability or MTBF will need to be set as soon as possible. Since the Performance segment is the only segment that prioritizes MTBF, the company’s product, Aft, will be set at a maximum of 27000 MTBF to satisfy the needs of the consumer. As for the rest of the segments, they will be all set to the minimum MTBF, Traditional will be set to 14000, Low will be 12000, High will be 20000 and Size will be 16000. The other reason for this is to reduce the cost of the products and maximize profitability. Marketing: Our company will spend aggressively in promotion and sales in all segments. We want every customer to know about our superb designs, and we want to make our products easy for customers to find. We will price at a premium. Our company is planning to price our products based on the competition and customer expectations. For the Low end segment, price is an important factor and because of this the price of the product needs to be either the same as the competition or lower. As for the remaining segments, the prices will most likely be priced at the maximum possible to make the product profitable as well as to cover the costs involved with the product. The main goal of marketing for the company is to ensure that each product is budgeted correctly for both sales and promotion. Our company’s primary objective is to get every product to 100% awareness by the end of round 4. We will do this by budgeting 1,500 to

2,000 for each product based on how much funds are available. Our best selling products will most likely receive a budget of 2,000 and as for the lower selling products, they will receive a budget of 1,500 until they improve. Once a product has reached 100% awareness, the budget will be reduced to 1,400 because that is the area whether it will maintain 100% awareness and help the company save money for other areas. As for the sales budget, this is will most likely be the same as the promotion budget. The only difference is that since it takes a lot longer for accessibility to reach 100% than awareness, the goal of 100% by the end of round 4 is unreasonable. So, the goal for the sales budget is to reach that 100% threshold before the 7th round at the latest.

Product Segment Round Price Promo Awareness Sales Accessibility Forecast Able Tradtional 0 $ 28.00 $ 1,000 25% $ 1,000 25% 1,049

1 $ 29.50 $ 2,000 50% $ 2,000 50% 1,251 2 $ 29.00 $ 2,000 75% $ 2,000 75% 1,366 3 $ 28.50 $ 2,000 90% $ 2,000 90% 1,491 4 $ 28.00 $ 1,400 100% $ 2,000 100% 1,628 5 $ 27.50 $ 1,400 $ 2,000 1,778

Acre Low 0 $ 21.00 $ 900 25% $ 900 25% 1,671 1 $ 21.00 $ 2,000 50% $ 2,000 50% 2,085 2 $ 20.50 $ 2,000 75% $ 2,000 75% 2,329 3 $ 20.00 $ 2,000 90% $ 2,000 90% 2,602 4 $ 19.50 $ 1,400 100% $ 2,000 100% 2,906 5 $ 19.00 $ 1,400 $ 2,000 3,246

Adam High 0 $ 38.00 $ 800 25% $ 800 25% 424 1 $ 39.50 $ 1,500 50% $ 1,500 50% 573 2 $ 39.00 $ 2,000 75% $ 2,000 75% 666 3 $ 38.50 $ 2,000 90% $ 2,000 90% 774 4 $ 38.00 $ 1,400 100% $ 2,000 100% 899 5 $ 37.50 $ 1,400 $ 2,000 1,045

Aft Pfmn 0 $ 33.00 $ 700 25% $ 700 25% 374 1 $ 34.50 $ 1,500 50% $ 1,500 50% 543 2 $ 34.00 $ 2,000 75% $ 2,000 75% 651 3 $ 33.50 $ 2,000 90% $ 2,000 90% 780 4 $ 33.00 $ 1,400 100% $ 2,000 100% 934 5 $ 32.50 $ 1,400 $ 2,000 1,119

Agape Size 0 $ 33.00 $ 700 25% $ 700 25% 364

1 $ 34.50 $ 1,500 50% $ 1,500 50% 509 2 $ 34.00 $ 2,000 75% $ 2,000 75% 602 3 $ 33.50 $ 2,000 90% $ 2,000 90% 713 4 $ 33.00 $ 1,400 100% $ 2,000 100% 843 5 $ 32.50 $ 1,400 $ 2,000 997

Production: We will grow capacity to meet the demand that we generate. After our products are well positioned, we will investigate modest increases in automation levels to improve margins, but never at the expense of our ability to reposition products and keep up with segments as they move across the perceptual map. The goal for production is to produce 120% of the forecasted amount to prevent a stockout situation if the possibility occurs that the company sells more than what was forecasted. As for capacity, the company will increase these amounts only for two segments, the low end and the traditional segments. So, the company will increase capacity for low end products by 200 a round and traditional products by 100. These numbers will be adjusted based on the amount of financing available and low end capacity will have priority over the traditional. The reason for this decision is that the size of the other three segments will not grow to the point where the top company will sell over 2,000 units. So, the best capacity for these other three segments will be 1,000 because at maximum production it will produce 2,000 units.

Product Segment Round Forecast Production Capacity Automation Able Tradtional 0 1,800 4.0

1 1,049 1,032 1,800 5.0 2 1,251 1,501 1,800 6.0 3 1,366 1,639 1,800 7.0 4 1,491 1,789 1,800 8.0 5 1,628 1,954 1,800 8.0

Acre Low 0 1,400 5.0 1 1,671 1,959 1,400 6.5 2 2,085 2,502 1,600 8.0 3 2,329 2,795 1,800 10.0 4 2,602 3,122 1,800 10.0 5 2,906 3,488 1,800 10.0

Adam High 0 900 3.0 1 424 461 900 3.0

2 573 688 900 3.0 3 666 799 900 4.0 4 774 929 900 5.0 5 899 1,079 900 6.0

Aft Pfmn 0 600 3.0 1 374 355 600 3.0 2 543 652 600 3.0 3 651 781 600 4.0 4 780 936 600 5.0 5 934 1,121 600 6.0

Agape Size 0 600 3.0 1 364 362 600 3.0 2 509 611 600 3.0 3 602 723 600 4.0 4 713 855 600 5.0 5 843 1,012 600 6.0

Finance: We will Finance our investments primarily through stock issues and cash from operations, supplementing with bond offerings on an as needed basis. When our cash position allows, we will establish a dividend policy and begin to retire stock. We are somewhat adverse to debt, and prefer to avoid interest payments. We expect to keep assets/equity (leverage) between 1.5 and 2.0.

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