All cars have 1, 11 and 15. Believe its what people expect .
All models growing in the life cycle stage but have different competitive position; sleek- strong, improve penetration, invest in growth. Cubix, bfg and Fema, attempt to improve position. Penetrate market selectively. Aziz, defensible, find niche and protect it. Fema and BFG strong. P 637 lynch
16. Promotional offers- increase public awareness (see handout). Internet- customers looking f or innovative products may be more inclined to look here- technologically inclined- young middle.
PRICING
Inc quality gives lower elasticity of demand.
Sold stock at lower price.
18. Put prices up, added more options- and had no surplus stock. Naylor 20.
20. Cost plus price. Compared prices competitors charge. P 224-229
21. Innovative. Trying to do things before others: differentiate, possibly up sales. Premium price. Then did short term one to boost sales (check). Facelift. Did it?
Price ideas- raising prices is likely to remain tough even as the world economy rebounds.
managers setting prices- spent les than 0% of their time on setting prices. Raising prices by 1% can boost profits up by four times as much as a 1% cut in overhead and fixed costs.
car cos- how they do it. Stealth increases. Charging extra for features, instead of standard. Offer huge menu of margin enhancing financing schemes, Give your customer plenty of choice and they will struggle to find the deal with the cheapest price.
What we knew the market costs were, our own knowledge and also sheet. Set price according to what we thought people wanted. How much they would be prepared to pay. Didn’t really use sheet estimates as we didn’t know for what type of business they were talking about e.g. low cost, high market share or innovative like us? So didn’t worry that our prices looked to be more- we are a different sort of company offering consumers new ideals. Due to this our margins varied greatly. Could’ve looked more at margins.
Prices up n year two to cover costs of adding extra features. Cubix and Aziz up by £1000, Only 3400 for Sleek. Still wanted to keep it relatively low cost due to the market we were selling too. Also added most options to this one that year, compared to rest. Margin decreased.
Experimented with Aziz price. Sleek generally up, cubix, up. Fema up, BFG, up. Aziz started high, did best when we cut price, kept it it and market share went up again. Then put it up slightly and market share fell.
EXTERNAL ENVIRNONMENT
26. -28. LEPEST
ex
environ- emissions, r&d-cleaner, diesel car etc.
social- security, designs, sponsorship etc
economic- heading for recession- low interest rates so borrowing cheap
tech- machines over people. R&d. satellite radars. Internet.
Legal- min wage. Emissions.
Political- infrastructure, tax, congestion charges.
Resource based view- “ Combine internal analysis of phenomena within companies with the external analysis of the industry and the environment”
Inflation is likely to remain low in rich countries,. For several reasons. Globalisation has increased the number of competitors. He internet has made it easy for buyers to shop around and compare prices. The euro has made prices more transparent in Europe, even if consumers are worrying retailers have used it as an excuse to mark up their goods. Big buyers squeezing more form suppliers. (Porter). The days of annual (upward) revisions to prices lists look to be over.
COMPETIITON – lots of new entrants; simulation
Attack/defend
High barriers to entry. May be prohibitively expensive to invest in marketing and plant economies. P 638 lynch. Innovation and mistakes of market leaders open it up.
Low threat of new entrants.
Supplier power- yr 1 and 2 poss. high supp power. As more established buyer power up?
Substitutes, rail travel, smart cars, healthy lifestyle e.g. walking.
Compare your business system competitors
“Good ideas often flow from the process of taking a hard look at your customers, your competitors and your business all at once”
PROCESSES –
1. Yr1 £7m yr3 £2m auomation
Make profit after 2-3 years but short run=-more expensive than workers. C
2. In stock first year- no unsold goods
Costing us 20% of material? Costs to keep up.
Stock upkeep in year 3- £63.17m!
“Skills of Japanese auto mobile cos- first in low cost, lean manufacturing, next in high quality production and then in fast product development”
“Transform commodity inputs into superior products to make the cos that have developed them successful into the global market.”
Can improve quality of goods and services and inc productivity
Buzzell and Wiersema: study showed quality had the biggest effect on market share.
£12m
R and D factors;
Comfort
Safety
Speed
Green
Style
Hi tech
R&D- budget ? times the amount of rivals and should have had no trouble keeping them at bay, but price cutting by rivals meant…
Anti crash- new/innovative. Safe, on cubix. Family car.
Zero emissions- efficient.
Fingertip gear changer- reform driving. Innovate, quality.
In brief people prepared to pay more for the innovation they are receiving- check quote.
Anti crash failed. Zero emissions cam on line =year 5.
P 114
R and D can give high recognition to product in introduction phase, growth stage must seek extension before competitors and maturity means little. Many copies, not new any more. Replacements. That is why we should’ve started a new r & d project for our new models. But didn’t want to , finished in year five.
PRODUCTIVITY
3a. 30.49 30.18 29.35 28.44 27.91
1.03 1.02 1.01 0.99 0.98
Accepted 1
Increased automation and good relations can increase productivity. Automation best way 20-25 productivity low automation, 70-80 good automation. But workforce decreased- unions. Takes 2-3 years to recoup of installing auto.
What happened to productivity as the number of workers increased?
PEOPLE
Guest
Policy = recruitment, training, socialisation, communication
Hr outcome= commitment, low absenteeism and grievances
Org outcome= Innovation, Quality
5/6. av £377 min £320 average strikes/absenteeism fluctuated but never high enough to concern management.
Yr 1 set it at a middle way
Increased it just under inflation
Feel good factor. Taking on more people- doing well, happy worker. Motivated by money in this industry.
Age up £10 every year.
Low strikes.
Took on 1000 more workers in year three, even though our new model wanted 1700, shifted workers around. Was told this wouldn’t cause a problem, as far ass workers were concerned. No upset. Shown in the strikes and absenteeism figures- which were...
PERFOMANCE – bsc
Had trouble with margins. Decreased.
Aziz did better in year 3. All others sold out.
Under produced on at least one model every year!
Immediate overdraft granted in year 3, should have got bigger loan to cover this, more expensive to have an overdraft.
To get a loan in Year 1. No need for it, had a positive balance before loans, incurred interest when we didn’t need to.
Year 4- loan again. Not needed. Needed more financial planning.
On all models margins fell rather large falls. Kept adding more options and were afraid to increase price. Added more options, didn’t increase price much, if at all and still didn’t, make enough. Not aware of the success of our products. Lack of confidence.
Material costs increased each year by the same % fro each model- 2.7%, 4.7%, 6.9%, 3%?. Supplier power increased?
Gross margin: 24.34, 22.22, 15.61, 13.08 and 10.93. Didn’t think of this, worried more about what people wanted to pay.
Market share increased each year for all models, despite a few fluctuations in years 3 and 4, if we hadn’t under produced who knows!
Handouts
Suffered no tax bill –footnote of how tax is calculated. Accumulated profit is less or equal to max accumulated profit then no tax.
P&L
If stocks are high and increasing must inc sales or dec productivity.
Low or negative gross profit shows cars being sold at less then material costs, must inc price.
Operating loss= margins up, sales up or dec overheads.
CF
Negative cash flow (balance before loans less than operating bank balance) often combined with profit on P&L if significant purchases made- ok.
But can be result of purchases materials for cars which end up as stock- bad= excess capacity.
Negative cash flow, required loans and losses on P&L- reappraisal needed!
BS
Large outstanding loan- debt crisis? Overdraft should be converted to a loan- cheaper.
RATIO
Current, quick, liquidity above 1= good. Short-term financial viability.
Gross margin- 20% accepted
“Combining internal and external perspectives” –bsc
Development/slow sales- Aziz Sales volume is lower but margins are fatter, so far however, Aziz has failed to impress. Woefully slow. Fema, however, launched two years later sold twice as fast?
Shares- feeble shares fell by more than ?%, falling even further next year.
Even if they lost ? percentage points of market share and ? points of margin, it would still be in an enviable position.
(B)
MANAGEMENT TEAM
What did we discuss/ how to run it/ what aims, objectives etc
Decreased Sleek price, had stock too clear, produced roughly 100 less than last year but with 2000 stock= same. So price down, but made same, elastic industry s o should have made more- rushing. Didn’t see it.
Aziz-Added gadgets, rushed out. Was/was not way to go- sales up or down? Hastiness- usually right?
Sales forecasting for Sleek better. Worse for Aziz- 17273 stock!
Quality circles.
Belbin
Did have one or two who kept mentioning costs and calculations were made but perhaps should’ve assigned someone to be there with the calculator. We had com finisher (orderly and anxious), Co-coordinator (Calm, Self confident Controlled), Monitor evaluator (sober unemotional), team worker (social, sensitive)
Theory X/Y; Employees- low pay but still happy so value ideas in innovative company. Knowledge.
F S N P.
24. already knew each other quite well and the way we worked. Had a relaxing chat.
25. did have disagreements, democratic vote. Persuasion often needed though. Relatively short learning curve before we developed a way of working together successfully.
Started relatively high in the experience curve, knew each other already.
Democratic leadership.
Groupthink.
P 358-360
Avoided groupthink through diversity of membership but do suffer from one or two of the symptoms; self-censorship e.g. me saying loan no none else agreeing but didn’t say. Illusion of superiority- outsiders equal. Especially as we knew of many new entrants.
“Because all resources depreciate, an effective corporate strategy requires continual investment in order to maintain and build valuable resources.”
“In corporations with a traditional divisional structure investment in the corporations resources often takes a backseat to optimising divisional profit”
“Good corporate strategy requires continual reassessment of the companies scope”
“Sharp eye on the dynamic industry context and competition situation”
“When you arrive at a procedure that has involved everybody and taken their views into account, the chances are that the procedure is going to work”
“Management as taken the time to develop systems which are geared to the future, not just catering for today”
“discuss, debate, and argue”
“Create new knowledge, disseminate I widely throughout the organisation and quickly embody it in new technologies and products- define a knowledge creating company, whose sole aim is continuous innovation”
“The essence of innovation is to re-create the world according to a particular vision or ideal”
“Making tacit knowledge explicit has direct implication for how a company design its organization and defines management roles and responsibilities”
“Team is divided into competing group that develop different approaches to the same project and then argue over the ads and is of their proposals. This encourage the team to look at a project forma n variety of perspectives”
“Under guidance of a team leader a team eventually develops a common understanding of the ‘best’ approach”
Ability to create/look objectively/implement concepts
Rotation between departments “Helps employees understand the business form a multiplicity of perspectives”. More fluid knowledge flow.
R&D failed but made decision to continue trying- “to stop the project would mean giving up on the companies dream of revolutionizing” driving etc. “continuing the project reinforced the individual commitment of the team members to that mission and the organisation”
“Conflict pushes employees to question existing premises and make sense of their experience in a new way”
“Innovative companies are lead by innovative leaders”
“Innovative companies have lots of experiments going on all the time”
Encourages risk taking, as people don’t think they will succeed every time.
4 key inputs in order to foster creative activity:
Champion who believes new ideas is critical
Sponsor who is high up enough to marshal its resources
Mix of bright, creative minds Process that moves ideas through quickly
Innovative company- people important – ideas come form people not machines
To innovate- improve/expand on what’s already there
Make mistakes because of a lack of resources, not overspending on developing an innovation. Stretch resources to finance too many projects at once.
Hurry to get new product on market and neglect launch considerations.
Manager- safe hands, steer through a crisis. Meet targets for improving/introducing etc.
Teething problems, still not got it quite right as inconsistent results show but making profit. Too cautious? Under produced year on year. Will upset customers. Bad at sales foresting.
If you don’t gamble you can loose!
Hardly 0-60 in 30 seconds but..
Avoided shrinking luxury market.
Haven’t decided on objectives.
Unnecessary loan in year…
FUNCTIONAL INTEGRATION- how did we ensure it all worked together
All aware of every department. All had a say. Quote- all working together bound to be better here.
Automation and workers looked at together, not in isolation. Considered how one would affect the other.
ADDING VALUE, VALUE CHAIN- customer value chain (automation leads to better quality products so why didn’t we use it?)
CHAP 6
Raising value of outputs delivered to customers Or lowering costs of inputs. We increased sales route.
Value chain: inbound logistics- receiving goods, storing etc
Ops- procedures; Under produced
Outbound; distribution.
Infrastructure- planning and control. Hr- highly motivated staff- hard for competitors to copy. Guest here.
Did we exploit the relevant resources of Ipc when compared with competitors? Auto etc.
Does it? Doing r & d adds value to the model your developing it on.
COMPETITVE ADVANTAGE
Chosen area of activity should be related to the competitive advantage of the organisation. P 437
P 280 “Innovation likely to deliver a real breakthrough in ca that others will have difficulty matching for a lengthy time”
Ahead of game, started r and d early.
“Retention, exploitation and sharing if knowledge are extremely important to stay ahead of rivals” p287 knowledge company.
Technology can lead to competitive advantage. We didn’t do this.
P 564-568
Porter Generic
Cost leadership, differentiate, and focus. First two lead to ca. Ca and broad scope= differentiate. Therefore can charge a higher than average price. Market segment improved. Differentiation- better service, more luxury materials and better performance. Also good for brand recognition. But do customers recover the extra costs differentiation incurs. Costs associated with being the first e.g. spent £ on to find it didn’t work. Could’ve waited for others to do it then not bothered.
CHAP 4
Attack through innovation:
To gain ca through innovation must take significant market share and expect to invest in the flank for sometime.
Emphasis on teams, not necessarily vision and attack.
Lean thinking can deliver value for customer and therefore deliver ca through superior value. Ref?
WHAT NOT CONSIDERED AND WHY
BSC? BPR? Portfolio?etc. Theories not mentioned elsewhere.
LMITATIONS OF SIMULATION
Objectives set for us to try and reflect the nature of our business. But at times it was not what we felt we wanted to do but still had too. Governed many decisions. Good and bad thing- gave guidance but we didn’t feel all these objs were appropriate.
When we took unnecessary loan in year one we could’ve afforded to pay al of it of but the simulation only allowed us to pay half of it off, therefore still in debt in year 2.
Kept thinking in terms of simulation not real life. I.e. market research suggested shrinking market in year? but we assumed they wouldn’t make this too drastic because not everyone would have bought the data. Also the exact predictions came true, we knew that. Perhaps wouldn’t in real life. Also material increased by same amount each year- not imitating real life cases.
Didn’t realise of minimum wage increasing so had to put it up when entering figures. Thought all along we were giving above the average, but were actually very near to the minimum.
Limitation- didn’t tell you how many people wee choosing each option. We were forced to make assumptions. Also, not allowed to have any as standard, which we wanted to add customer value, added but as far as pricing goes we prefer this. Btu image of being quality suggests to us that we offer these certain features as standard. Quality product/brand name.
LIMITATION yr five had to up what we thought it should be because weren’t aware the min wage kept increasing- weren’t made aware)
SHORT TERM DECISIONS- examples e.g. No rd after year 5. All wanted to see a profit, knew we were leaving so didn’t do it but not in keeping with policy etc.
LONG TERM ONES- did we make any? Where why you were making short-term decisions? Where you making sustainable decisions? E.g. stock. What did you decide to do that wont help long term? Thought about immediate figures. Not long term survival/ growth.
Tactical decisions= short term and specific, bound by strategic decisions.
Strategic cm decisions= set the direction for the entire company. Broad in scope and long term.
490-507 Naylor
GENERAL- include?
Distribution networks matched rivals?
R&D failed- kept it going. Rushed. Not a conscious decision- too much rushing- simulation limitation but also in life things are overlooked.
“Quality and market share drive profitability” p 638 Lynch
Intel- did this happen to IPC? Parts A and B
Running on empty
All over
Price is wrong
Para 30 changing prices- Aziz
Para 13-Power. Buyer power- Porter
Quality Management Safeway
Fiat redux
Restructure- why. Sales- BPR.
Ciao Paolo
Competing on Resources
Knowledge creating company
Tough minded ways to get innovative
Tqm in Malaysia
