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Practice Round 1 Analysis

Practice Round 1 Analysis

Carlos Pagan

Bellevue University
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Practice Round 1 Analysis

Introduction

In the first year of production, Andrews company sought to design their sensors toward

the low-tech segment of the market. With the start of the fiscal year, Andrews company had an

equal share of the market against its competition. The goal was to appeal to the low-tech sector

without increasing any of the marketing budget and increasing our factory automation.

Product

The first sensor that Andrews company created was named Able. Able is a larger sensor

compared to the competition, but it is a perfect fit for the low-tech market. The size and

performance of the sensor allowed us to reduce the material cost for the product. Able out of all

the sensors on the market has the lowest variable cost.

After the first year of sales, Andrews company had 16% of the market with the highest

number of shares to a company going to Baker company with 18% of the market. While Baker

company may have most of the market, they are not the most profitable. Digby company sold

less but for a slightly higher price and had less of a variable cost for their sensor. Andrews

company stayed near the middle with an ok profit and an ok number of sales, but I believe that

was their goal based off their plan. They played it safe with the market and got safe results.

Customer needs

Able was designed specifically for the low-tech target market. This market cares more

about the price and age of the product, and less about the size and performance. They just want

something that will get the job done and is affordable.

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Practice Round 1 Analysis

Able was made with the lowest costing parts that still would be acceptable by this market,

and while Able is the lowest performing sensor on the market and is $1.90 more than the

cheapest sensor on the market. This would explain why Able did not sell as much as the other

sensors in this segment.

Production and Labor

Our production capacity this year was 8 units, allowing us to potentially produce up to

1,600 units. To reduce some of the labor costs, we did increase automation within the factory.

The increase in automation also allows us to reduce the amount of overtime and 2nd shift that the

company requires. While some overtime is essential in the production of the sensors, employees

get to spend more time away from the plant and with their families.

We produced 1,253 of the Able sensors, and we sold 1,243 this year, leaving us with 10

sensors for the upcoming year. This is beneficial to us to not have so many of the original Able

sensor left in inventory because it allows to immediately start selling a new version of Able that

could potentially be cheaper for the consumer and market itself better against the competition.

Marketing

In addition to Able being overpriced for the sensor that it is, we did not put much into a

budget for marketing. With only $1,000 put to market the sensors, we stayed in the competition,

but we obviously were not striving to the best product in the world.

When it comes to marketing, it’s not specifically how much money the company puts

into the budget. Baldwin company is the company with the largest market share at 18%. They

put $1,300 towards their marketing budget, while Ferris company spent $1,500 and has the least
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Practice Round 1 Analysis

number of shares for the low-tech segment, but to be fair to Ferris company they are tied for the

highest percentage of shares in the high-tech segment.

Debt

To help with the cost of increasing the automation in the factory, and to help with the

material cost for Able, a high-interest rate loan was taken out with the expectations to pay it off

quickly. We also sold off $2,000 in stock to help increase our current cash position. With this

year’s net profit of $2,461 we are able to pay off the high-interest rate loan, but we would have

to turn around and take out another loan or sell more shares of stock if we want to continue to

develop Able as we should.

As of the beginning of this fiscal year we are and will still be in debt as a company. Our

goal should be to continue to pay off our current debts this year, but to form new debts in hopes

to create a better sensor that can outperform its competitors in sales.

Conclusion

As a company we may not make the fastest or the best, but we strive the give a quality

product that our target market wants. The low-tech segment of the sensor market wants a newer

product that works regardless of the size or performance if it is affordable. This year we may

have not done our potential, but we do see where and what we lacked and can improve our

product to regain our position in the market. Possible solutions include possibly increasing the

marketing budget to show the customer our product off better.

Another solution would be to either reduce the price of the sensor or to increase the

performance on the sensor itself while keeping the price the same. Our long term goal will be to
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Practice Round 1 Analysis

join the high-tech market within the next five years, but starting off with the low-tech market has

proven to still be profitable and cost effective for now.