Background
Joe Thomas, the company’s previous vice president, recently unveiled the results of his management report for Clipboard Tablet Company to its Chief Executive Officer Sally Smothers. So far, the results are positive albeit not a little too stunning. In this paper, the author proposes his own strategic and management platform for the growth, sustainability, and improved profitability of Clipboard Tablet Company from the years 2012 to 2015. The said discussions will focus mainly on price strategy and research and development (R&D) strategies and their corresponding effects on the company’s performance. In order to support the theoretical effects of the proposed strategies, a simulation will be run. The said simulation will be based on the principles of cost volume analysis for Clipboard Tablet Company’s main products. Currently, the company manufactures and sells three products namely the X5, X6, and X7.
Input Decisions for 2012
The year 2012 will be the first year where the chosen strategies will take into effect. The transition period into the current leadership position should be made as short as possible. This is the most important year for the acting vice president to showcase his strategic management talents—this is mainly because of the fact that this is an anchor year. All of the steps that will be taken during this timeframe would have a direct impact on the company’s performance and outcomes come the year 2015. If the results are positive, hopefully more positive than that of Joe Thomas, then the VP gets to keep his position with a commendation from CEO Sally Smothers most likely. If they turn out to be negative, then chances are another VP would be selected, perhaps someone who can deliver more positive results.
The year 2012 would be the year to identify and review the problem, set goals, create a master plan for all the succeeding years, set up an evaluative mechanism, and make preparations for alternative plans and strategies. What the author of this paper pushes for here is consistency. This is because driving the sales and profitability performance of an entire organization up without the introduction of new and revolutionary products is a tough challenge.
A goal is good for nothing if one would not be able to realize it. Therefore, the goals that one would have to set should be smart (acronym for specific, measurable, attainable, realistic, and time-bound). In this case, what the author is trying to accomplish is a steady double-digit improvement on the company’s profit figures year on year. Precisely, what is being aimed for is a steady 20% year-on-year improvement on profit. Over five years, that should translate to more than doubling the company’s current profits nominally. The main assumptions would be important as well because they would guide the company’s strategies and other decisions throughout the four year period. One thing that the author of this paper would like to focus on is the life cycle of the company’s three main products. A product that is on the growth phase would still have a lot of room for sales growth . This means that the company should invest heavily on the research and development of such products. Those that are on the maturity phase have a sales potential that is more on the downward trend . This means that no matter how big the research and development investment on it would be, the effects would most likely be minimal. This is why it would be a financial suicide to invest in a developmentally matured product based on the different life cycles of a product . Products that are currently on the development phase are the wild cards in the game of strategic management . They can either make or break a company’s future and even its survivability in the harsh competitive market for manufacturing where only the ones that can offer the best value to its customers get to win . The only way to get ahead in this game is to invest the heaviest on new products and hope that it would be revolutionary and innovative enough to generate a huge volume of sales and boost the company’s financial profitability while the older and legacy products are on its way out of production .
The table above shows the simulation results for the year 2012. The bottom line would be the total cumulative profit. Compared to what Joe Thomas did, this version of the simulation is more detailed and realistic. The goal is to use this more detailed approach to beat Joe Thomas’ method. The main question then is whether it did. The bottom line for the current period was $98.25 million. Doing the math, this is more than 20% of what was achieved last year. This is less than what Joe Thomas managed to achieve for the same period but the four year plan is only beginning and there are a lot of improvements waiting to take place for the sales, R&D, and price adjustments.
Input Decisions for 2013
The bulk of the plan and implantation procedures have been made in the first year. From hereon then, the goal is to make significant adjustments when necessary, taking into account each product’s life cycle phases. For this period, the summary of the plan is presented by the table below.
Based on the table above, major adjustments were made on the R&D side. The R&D percentage was maintained for the X5 for the fact that it is already a matured product. The levers were adjusted considerably upward for the two remaining products for the simple fact that the goal is to make an outstanding product that would be able to outperform the market by a huge margin in the future. As a result, the cumulative profit actually decreased significantly. This is definitely not good. But the hope is to increase sales volumes next year when new iterations of the products that carry over the new R&D results have already been released.
Input Decisions for 2014
The spending levers for R&D remained stable for this year. The most dramatic changes can be seen on the sales volume across all product types. As a result the company was able to improve its bottom line by more than 50%, which is good because it means it more than made up for the decrease in profit it experienced last year. This also shows that the current plan is working.
Input Decisions for 2015
The R&D spending was lowered to normal levels this year. The most dramatic changes this year can be observed in the sales volume side. The consumers basically realized that the products of the company are superb, thanks to its aggressive R&D efforts in the previous years. As a result, the company’s profits were multiplied by about ten times, which is completely normal for products that are revolutionary and innovative. This growth was sharp and it was mainly brought by competitive pricing and aggressive R&D.
Report Summary
In conclusion, the current administration was able to achieve its goal of increasing the profit of the company by at least 20% per year. Judging the performance of the company based on the simulator, it can be said that the results were more than enough to justify the effectiveness of the current approach on R&D and pricing. The current strategy was also able to outperform that of Joe Thomas. There were doubts along the way but in the end the aggressive pricing and R&D strategy definitely paid off.
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