1. SPJIMR
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IBSAP- Group 7
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Company- 2-3 (Hoelderlinstrasse)
Group – 7
Midhu Ragunathan, Jaikishan Gianani, Dexter Socorro Vaz, Himanshu Sharma, Shreesh Soni
1 Copyright Universum 2010
1
Copyright Universum 2010
3. 1
In the long run become an innovation driven company and get 40%
of our profits from Carti (an innovative product).
Market leaders in the Innovation category. Alesa will be phased out
and Carti and Bordo will be continued. Bordo will soon become the
cash cow while Carti will continue to remain the star.
Goals
There is a shift of power from the West to East and hence focus will gradually
be shifted from West to the East over the four quarters. Growth will happen
mainly in India and China.
Our goals are three fold: 1) Profitability, 2) Market Share and 3) Sustainability.
3
4. 1
Period Milestone/Goal
1st Period Increase penetration of Carti into all the markets by increasing
Communication and Product Policy.
Milestones-Period by Period
2nd Period Phasing out of Alesa starts. Production to be transferred to
Bordo. The positioning of Borto to change from Innovation to
functional.
3rd Period Focus shift from West to East. More promotions, greater
selling and increasing market share in China and India
4th Period 40% profits from innovation products achieved across all four
countries
4
5. 1
•Strong presence in growing
markets like India and China. •Economies of two major markets:-
•Sizeable base for existing product Germany and US in decline.
called Bordo.
•Profitability affected by high
•Successful introduction of new exchange rates.
innovative product called Carti.
•High fixed costs.
SWOT Analysis
•Demand for two major products
of the company:- Bordo and Carti •Stiff competition from other
to increase in all four countries. players in the emerging markets.
•Economy of China and India is •Further economic slowdown
up beat. The growth in these possible in US and Germany,
regions will drive the growth of which could further reduce the
the company. demand.
5
6. 1
Star Question Mark
Carti
BCG Matrix
Cow Dog
Alesa
Bordo
6
7. Marketing & Sales Strategy
2
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8. 2
Our Strategy
Alesa Bordo Carti
Product Policy - Reduce - Maintain expenses - Increase expenses to
expenses to increase demand
reduce demand
Communication - Reduce - Increase expenses - Increase expenses
Policy expenses
Pricing Policy - Reduce price - Maintain price - Maintain price
Economic - Negative impact - Negative impact in - Negative impact in
Condition in Germany, US Germany, US but positive in Germany, US but positive in
but positive in China and India China and India
China and India
Product lifecycle - Degeneration. - Product in growth phase, - Product in growth phase,
So demand will hence demand will increase hence demand will increase
reduce
8
9. 2
Selling Expenses for each product
Product Policy
Communication Policy for Alesa Communication Policy for Bordo
Alesa Bordo Carti
Germany U.S.A. China India Germany U.S.A. China India
900,000
300,000 700,000
800,000
250,000 700,000 600,000
600,000 500,000
200,000
500,000
400,000
150,000 400,000
300,000 300,000
100,000
200,000 200,000
50,000 100,000
100,000
0
0
Period 0 Period 1 Period 2 Period 3 Period 4 0
Period 0 Period 1 Period 2 Period 3 Period 4 Period 0 Period 1 Period 2 Period 3 Period 4
Communication Policy for Carti
Germany U.S.A. China India
250,000
Expenses for product policy
and communication policy as
200,000
per the strategy
150,000
100,000
50,000
0
Period 0 Period 1 Period 2 Period 3 Period 4
9
10. 2
Demand Forecasting and Actual Sales
Forecasted New Orders Actual Sales
180,000
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
0 1 2 3 4 0 1 2 3 4 0 1 2 3 4
Alesa Bordo Carti
High Demand forecasting error due to adoption of incorrect model &
Low order fulfillment for Period 3
10
11. 2
Sales Branch Expenses
Sales Branch Expense
Germany U.S.A. China India
800,000
700,000
600,000
500,000
400,000
300,000
200,000
100,000
0
Period 0 Period 1 Period 2 Period 3 Period 4
Typo in putting values for decision for period 3 for India
11
12. 2
Pricing Policy for Products
Prices of Alesa Price of Bordo
Germany U.S.A. China India Germany U.S.A. China India
155 220
218
150 216
214
145 212
210
140 208
206
135 204
202
130 200
Period 0 Period 1 Period 2 Period 3 Period 4 Period 0 Period 1 Period 2 Period 3 Period 4
Prices of Carti
Germany U.S.A. China India
Decrease the price in period 4 for all the
280
products due to error
275
270 Competitors focused on Bordo and
Carti, so we shifted our focus to Alesa
265
260
255
Period 0 Period 1 Period 2 Period 3 Period 4
12
13. 2
Country wise market share
Market Share of Alesa Market Share of Bordo
Germany U.S.A. China India Germany U.S.A. China India
45.00 40.00
40.00 35.00
35.00 30.00
30.00
25.00
25.00
20.00
20.00
15.00 15.00
10.00 10.00
5.00 5.00
0.00 0.00
Period 0 Period 1 Period 2 Period 3 Period 4 Period 0 Period 1 Period 2 Period 3 Period 4
Market Share of Carti
Germany U.S.A. China India Expenses on
70.00
60.00
communication and
50.00 product policy increased
40.00 by almost 75% for India
30.00
20.00
10.00
0.00
Period 0 Period 1 Period 2 Period 3 Period 4
13
14. 2
Market Leader in 9 out of 12 segments in period 4
Company wise Market Share for Alesa Company Wise Market Share for Bordo
Blue Chip BRUSS Hoelderlinstrasse SuperNova Blue Chip BRUSS Hoelderlinstrasse SuperNova
45% 30%
40%
25%
35%
30% 20%
25%
15%
20%
15% 10%
10%
5%
5%
0% 0%
Germany U.S.A. China India Germany U.S.A. China India
Company wise market share for Carti
Market leader in all segments for Alesa
Blue Chip BRUSS Hoelderlinstrasse SuperNova
Market leader in three segments for
35%
Bordo
30%
25%
20%
Market leader in two segemetnts for
15%
Carti
10%
5%
0%
Germany U.S.A. China India
14
15. Production
University Report 3
15
15
Copyright Universum 2011
Copyright Universum 2008
16. Production Decisions 3
Period 1 Period 2
Alesa - 53863 Alesa - 0
Bordo - 126857 Bordo – 94,393
Carti – 4723 Carti – 72,837
TQM – 200,000 Euros TQM – 220,000 Euros
Production tech – 500,000 Production tech – 550,000
Training – 115,000 Training – 115,000
Period 3 Period 4
Alesa - 52000 Alesa - 50000
Bordo - 142000 Bordo - 50000
Carti – 0 Carti – 0
TQM – 200,000 Euros TQM – 160,000 Euros
Production tech – 400,000 Production tech – 400,000
Training – 95,000 Training – 115,000
Notices served to 120 employees in quarter 3
Will be recalled in Year 2, quarter 1
16
18. 4
Purchase Decisions : Period 1
As per strategy
•No production of Alesa; enough stock
•Exhaust raw material required for Alesa during period 2
and outsource Alesa for the coming periods
Orders to be made
Aurit Bekat Calot Dimut
Order of Raw
Materials(Unit
s) 0 328071 374742 36380
Alesa Bordo Carti
Order of Bought in
Goods(Units) 17000 0 0
19. 4
Purchase Decisions : Period 1
• Things were revised in the morning by the production team.
• It planned to exhaust the raw materials for Alesa in Period 1 itself in
order to utilize the idle capacity.
• Decisions for Period 2 were changed keeping in mind that there was
vacation coming up during Period 3
• Hence Actual decisions taken
Aurit Bekat Calot Dimut
Order of Raw Materials(Units) 0 267670 350867 67847
Alesa Bordo Carti
Order of Bought in Goods(units) 0 0 0
20. 4
Purchase Decisions : Period 2
Decision Making Criterion:
Completely outsource Alesa, no ordering of Aurit to be done
Demand of Alesa in Period 2 is met by the inventory of Alesa
40,000 units of Alesa outsourced to meet demand in Period 3
Decisions taken
Aurit Bekat Calot Dimut
Order of Raw Materials(Units) 0 480,663 512513 67847
Alesa Bordo Carti
Order of Bought in Goods(units) 40,000 0 0
21. 4
Purchase Decisions : Period 3
Situation
The competitors were entering into Bordo and Carti. So we decided to enter into Alesa
market once again to gain market share and hence thought of producing Alesa
Blunder Done in Period 3 order
Order of 512513 for Calot was a mistake. Half the order was actually required for
production in Period 3
Hence Decisions taken
Aurit Bekat Calot Dimut
Urgent orders of raw materials 141,039 0 39,080 0
Aurit Bekat Calot Dimut
Orders of raw materials 90,000 0 0 0
22. 4
Purchase Decisions : Period 4
No raw materials ordered, as sufficient inventory was there to meet the
production demand of Period 4.
Since business is a going concern, we ordered the finished goods
through outsourcing, as their payment is done of delivery only,
thereby reducing the cash burden on Period 4.
Hence Decisions taken
Aurit Bekat Calot Dimut
Orders of raw materials 0 0 0 0
Alesa Bordo Carti
Orders of bought-in goods 25,000 20,000 20,000
24. 5
Total Revenues
Revenues Revenue Share of each product
40.00 37.99
Alesa Bordo Carti
34.39
35.00 31.75 31.45 100%
30.00
24.30 80%
25.00
20.00 60%
15.00
40%
10.00
20%
5.00
0.00 0%
Period 0 Period 1 Period 2 Period 3 Period 4 Period 0 Period 1 Period 2 Period 3 Period 4
•Revenues are growing year on year (except period 3)
•Followed our strategy till period 3 and then focus on Alesa
instead of Carti due to high competition
24
25. 5
Total Profits and D / E Ratio
Total Profit / Loss D / E Ratio
2.00 160% 147%
1.22
140% 128%
1.00 0.55 119%
120% 107% 107%
0.00
100%
Period 0 Period 1 Period 2
-0.25 Period 3 Period 4
-1.00 80%
-2.00 60%
-2.14 40%
-3.00
20%
-4.00 0%
-4.17 Period 0 Period 1 Period 2 Period 3 Period 4
-5.00
•In Period 3, profits are low because of the revenue sales lost
and excess inventory of raw material
•In period 4, factoring done to retire loans of 9 mn
euros, incurring extra cost of 0.7 mn euros and high inventory
of Carti
25
27. 6
Going Concern
•Market leader position restored in period 4 in 9 segments
•Cash Reserve of 9 mn.
•Short term debt to be taken as factoring has been done in this
period.
•Outsource the products if enough capacity is not there
•Hold the market leader position in the Alesa
•Improve the market position for Carti.
27
29. 7
Key Takeaways
•Small mistake make big difference
•Integrating the various functions of the business
•Product costing helps in taking pricing policy decision
•Demand forecast accuracy should be measured
•Trade off
•Raw Material v/s Finished Good
•Make v/s Buy finished goods
•Effect of communication policy, product policy, economic variables
on demand
•Maintain D / E ratio below threshold limit
29