Powering

Pedals

Performance Analysis Report

Tushar T. Dalvi
2016
SR. NO. TOPIC PAGE NO.

1 Introduction 1

1.1 Company information 1

1.1.1. Vision 1

1.1.2. Mission 2

1.1.3. Long term objectives 2

2. Strategy Implementation 2

3. Performance management System 5

4. Team Performance 6

5. Individual Performance 7

6. conclusion 8

7. Reference 9

8. Appendix 10
Tushar T. Dalvi 0915557

1. Introduction:

The report analyses and evaluates the Business strategies,

Functional strategies and Performance management system (PMS)
put forward by the managing board of Powering Pedals. It also
evaluates the individual and team performance of the managing
board. It attempts to correlate the strategies to the vision, mission,
goals and objectives (VMGO) of the company.

1.1. Company information:

Powering Pedals is a bicycle manufacturing and sales company. Its

core business strategy is to produce high quality bicycle in order to
satisfy increasing consumer demand.

The strategy report document produced by the managing board in

2009 (when business was taken over by the current managing board
from the previous owner) introduced the following Vision, Mission and
Long term objectives for the company.

1.1.1. Vision:

Our vision is a framework to fulfil the expectations of our

customers, shareholders and employees.
• Our Customers: to be the customers’ first choice of quality
products by satisfying their desires and needs.
• Our Shareholders: to keep our shareholders happy while
being mindful of our overall responsibility.
• Our Employees: to be the best employer where employees
are given opportunities to be their best.

1
Tushar T. Dalvi 0915557

1.1.2. Mission:

• To manufacture and deliver high quality and most reliable

bicycles which suit the desire and needs of our targeted
customers.
• To create healthy environment for our employees.
• To maintain growing shareholder value.
• To constantly seek for renewal via continuous learning and
research.
• To apply new technologies and best business practices.

1.1.3. Long term objectives:

The important long term objective for the company was to

become the market leader and sustain its position. The company
during its first two years of business managed to be the market
leader. The managing board had aimed to increase the share
holder value (SHV) of the company more than 60% and market
share of 70% within the taken timeframe. The managing board
was impractical in its decision to capture 70% of market share,
this also shows that managing board failed to consider or under
estimated the competition. The company aimed to develop and
maintain highly skilled and efficient employees and did manage to
increase the employee skill index by approximately 15 – 20%
(Appendix 1, chart 6).

2. Strategy Implementation:

This section of the report analyses and evaluates the business and
functional strategies portrayed in the 2009 Strategy Report. The
company adopts one of the porter’s three generic strategies, i.e.
differentiation (Lynch 2006). The strategy of providing products
which offer benefits different (in our case better quality) from that of

2
Tushar T. Dalvi 0915557

the competition and is valued by the customers is called

differentiation (Johnson, Scholes and Whittington, 2008). The
managing board in support of differentiation strategy agreed on
focusing only onto three segments namely Adventure, Kids and
Racers. A product development plan was also forecasted. The
forecasted project development plan couldn’t help the company to
achieve first mover’s advantage. The competitors took the advantage
and intensified the competition. Thus forecasted project development
plan underwent some drastic changes (Appendix 2). This helped the
company to diversify into new markets, capture competitors market
and try to sustain the captured market share.

The managing board had planned to increase the amount of

distributors and establishing long-term relationship by giving
continuous and steady extra support and adequate retail margin. The
managing board didn’t actually implement this plan as company got
stuck in the price war and started reducing extra cost. The appendix
1 chart 7 shows that 2011 became the beginning of the price war.
The company managing board had implemented a premium pricing
strategy which later on was replaced by competition based
pricing. This shift in pricing strategy has proved to be useful in
terms of growth in sales revenue. But couldn’t be of much help as
other expenses, such as sales expense, distribution expense,
administration expense and financial expense all together had
increased by approximately 50%. Thus the gross margin was also
eaten up to approximately 70-80% (Appendix 1 chart 8).

The managing board had decided to give more importance to internal

processes to fulfil its VMGO. The managing board concentrated its
attention towards increasing productivity, implementing Total
Quality Management System (TQMS) and increase
responsiveness within its internal process. To increase the
productivity the managing board focused on increasing production
capacity and maximizing capacity utilization. The managing board
made following year over year changes such as increased the

3
Tushar T. Dalvi 0915557

workforce and plant size, made huge investments on setup time

reduction, supplier relations, raw material and finished goods
warehousing, etc. Thus managing board achieved 93% production
utilization but couldn’t achieve the planned production and targeted
sales volume. The reasons for these could be inappropriate demand
forecasting and/or market saturation of our products. The demand
for product of any company is determined by variables such as
‘Value for Money’ or Attractiveness, which is based upon
attributes, price, advertising, quality, distribution, and delivery of the
product to the segment. This helps to identify the segment share of
the product, which is further used with segment demand to
determine the share of the product of any company with in the
overall segment demand (See Description Demand, Mikes bikes
Advance Help). The implementation of our original strategy in the
first year helped us to achieve the leading position in the market.
However, we didn’t meet the targeted sales volume which resulted in
losing the leading position in the market, and let competitors take a
lead in the market.

The company as per its core business strategy of producing high

quality bikes had invested a significant amount of money on
developing and maintaining TQMS. The company had both proactive
and reactive policy of quality control which increased our TQMS
budgets. The huge percentage of money invested on TQMS was
contributed towards inspection cost. The huge investments made
before entering the price war paid off as we were able to provide the
best quality products (Appendix 1 chart 4). But after entering the
price war and focusing on reducing cost the company saw negative
variances for quality system index and warranty claims. This explains
the direct relation between the investments made on TQMS and
quality system index and inverse relation between investments made
and warranty claims (Appendix 1 chart 4 & 3).

The company had decided to increase its responsiveness by reducing

manufacturing cycle time or production lead time and stocking

4
Tushar T. Dalvi 0915557

adequate amount of raw materials and finished goods. The company

successfully achieved the desired delivery index and was producing
almost as much as planned production (during certain years) but
couldn’t achieve the required sale volume. There are two possible
reasons: first, the company overshadowed the main element of
balancing the capacity and demand; over purchased the
capacity and produced more than its share of product segment
demand. Second, their existed a demand saturation.

The company had planned to maintain the increasing earnings per

share which has ultimate impact on share price and share holder
value. This was planned to achieve through adopting minimum risk
policy by maintain low gearing debt/equity ratio. This helped us for
few months in the beginning by giving approximate average of 30%
of the sales revenue as profit, but as the business started growing
bigger, more and more products were launched in the market (2014-
2015) the cost started increasing leaving back only approximately
5% or -5%(loss) of the sales revenue made.

3. Performance management system (PMS):

The PMS is also termed as Strategic Performance management

by Waal, Kourtit and Nijkamp 2009. The management decide to use
Balance Score Card (BSC) which according to Kaplan and Norton as
cited in Lawrie, G. et al. (2004) combines traditional financial
measures with non financial measures and provide managers with
critical information about organizational performance. The BCS
containing the variance analysis helped the company in identifying
the areas of improvement and overall performance of the company.

The appendix 1 chart 1 shows that EPS had a sudden drop in 2014
and 2015 which is consistent with outcomes of other KPIs during
these periods of business. The appendix 2 explains the density of the
business activities taken place during 2014 and 2015. In 2014 we

5
Tushar T. Dalvi 0915557

had 7 products in the market and one product in development phase

where as 8 product in market in 2015. The sales volume raised as
the no of products in market during 2014 and 2015 was almost
double that of previous years(Appendix 1 chart 2), prices were
dropped as the company changed its strategy of premium pricing to
competition based pricing (Appendix 1 chart 7). The decrease in EPS
can be explained by the Income and Expense chart (Appendix 1 chart
8) which portrays sales revenue, cost of goods sold, gross margin,
other expenses and income. It is clear from this chart that the
company made best sales revenue compared to other years but the
cost of goods sold and other expenses were huge which reduced the
income and made loss during 2014 and 2015 respectively. This is
also reflected on Share holder value (SHV) of the company (appendix
1 chart 9).

The Key Performance indicators selected by the company served

their purpose. They were useful to determine elements of the
business that need more attention and those which were doing well.

4. Team Performance:

Team performed the role of managing board members of Powering

Pedals Company. Each member performed according to the allocated
areas of roles and responsibilities as decided in our RACI chart.
Company adopted functional structure, where in members were
allocated responsibility of different functions.

This assorting of responsibility was limited to the RACI and Strategy

report, where as in real life the responsibilities were shared, passed
on and most of the time taken by some other department head. Most
of the time the allocated tasks for the meeting were completed by
every member but sometimes whole group had to waste their time
just because a member had failed to accomplish his/her task, was
late or couldn’t come to meeting. As every other team even we had

6
Tushar T. Dalvi 0915557

different ideas and opinions, disagreements, debates and sometimes

arguments. The debates and arguments were both helpful and
sometimes misleading and time consuming. The amount of these
useless debates and arguments decreased over period. There was an
inverse relation between the time and the failure to complete the
task, coming late and not-attending the meetings. This also proved
the increasing involvement of every member. As we were passing
through every decision we started realizing the importance of
technical skills. Being new to actual business environment we had to
learn new terms, concepts, theories, etc. and revises the previously
learned. Till the final year of business every member was more or
less an expertise in his or her department.

5. Individual Performance:

Performing the role of Managing Director of Powering Pedals was a

learning experience. It helped me in developing leadership skills,
understanding team members and responding accordingly,
appreciate the qualities of colleagues/subordinates and delegate
roles accordingly. The position made be accountable for almost all
the activities within and outside the company. Along with the
department heads I was responsible for every decision taken for that
particular department. It was a huge responsibility and a lot of new
things to learn. Being accountable and responsible for all activities I
was expected to know every bits and pieces of the company. This
also made me realize my lack of knowledge. Hence it motivated me
to learn the technical terms and concepts of the business.

Looking back through the past meetings I could see myself

developing into a good listener. In the beginning we used to get
into debates and arguments to justify our opinions and ignore others.
This use to lead in a heated discussion and waste significant amount
of time. Later on after realizing the mistake I use to listen to other

7
Tushar T. Dalvi 0915557

member and respond accordingly. I also made other members listen

and cool down the heated discussions between them.

Working in a team helped me in becoming a good team player. It

made me understand the importance of individual contribution
towards team performance.

6. Conclusion:

The some of the strategies put forward by the company helped,

where as some had to be replaced considering the competition. The
main issues that came forward through this report were as follows:
Inappropriate use of finance, distribution and advertising
expenditures were reduced where as huge investments were made
on increasing workforce and plant size. Under estimating
competitors, the managing board under estimated the competition
and missed the opportunity of first movers in some segments. But,
then continuous competitor analysis was implemented. Inappropriate
demand forecast; overestimated planned production, lost of sales
and accumulating closing inventories.

The PMS implemented by the managing board utilised appropriate

KPI’s which helped the business to survive the competition and rise
from the downturn. The managing board could have done better if it
had given more attention towards the variance analysis.

The members slowly evolved into team members and developed a

good communication and coordination within. Despite the mistakes
done the managing board performed well as a team and helped
Powering Pedal to rise up, develop and diversify its business.

Finally, at certain times the passion of winning use to overrule the

determined strategies. Powering Pedal as a company did perform well
but its competitors did better.

8
8. Reference:

JOHNSON, G., SCHOLES, K. and WHITTINGTON, R., 2008. Exploring

Corporate Strategy: Text and Cases. 8th ed. Harlow: Pearson Education Limited.

LAWRIE, G., COBBOLD, I. and MARSHALL, J., 2004. Corporate

performance management system in a developed UK governmental
organization: a case study. International Journal of Productivity and
Performance Management. 53 (4), pp. 353-370.

LYNCH, R. L., 2006, Corporate Strategy, 4th ed. Harlow: Financial Times
Prentice Hall - Pearson Education Limited

WAAL, A., KOURIT, K. and NIJKAMP, P., 2009. The relationship between
the level of completeness of a strategic performance management system and
perceived advantages and disadvantages. International Journal of operation and
Production Management. 29 (12), pp. 1242-1265.
 9. Appendix

a. Appendix 1:
i. Chart 1:

$20.00

$15.00
EPS
$10.00

$5.00

$0.00

-$5.00 Target
Actual
-$10.00
Variance
-$15.00
2009 2010 2011 2012 2013 2014 2015 2016
Target $2.07 $3.87 $14.0 $13.8 $14.8 $4.50 $3.00 $8.50
Actual $2.87 $8.21 $8.70 $4.57 $2.95 $2.54 -$2.4 $11.4
Variance $0.80 $4.34 -$5.3 -$9.2 -$11. -$1.9 -$5.4 $2.95

ii. Chart 2:

Sales Volume
5,00,000.00
4,00,000.00
3,00,000.00
2,00,000.00
1,00,000.00
0.00
-1,00,000.00
-2,00,000.00
2009 2010 2011 2012 2013 2014 2015 2016
Target 27,500 78000 1,43,0 1,15,7 1,89,1 3,44,4 3,80,6 2,46,5
Actual 25,312 76836 76,530 1,09,3 1,00,8 1,78,7 2,31,7 2,18,2
Variance -2,188 -1164. -66,47 -65,30 -88,36 -1,65, -1,48, -28,33

Target Actual Variance

 iii. Chart 3:

Warranty Claims
900.00
800.00
700.00
600.00
500.00
400.00
300.00
200.00
100.00
0.00
-100.00
-200.00
2009 2010 2011 2012 2013 2014 2015 2016
Target 100.0 33 293 550 532 600 700 750
Actual 66.00 96 216 532 455 721 766 490
Variance 34.00 -63.0 77.00 18.00 77.00 -121. -66.0 260.0
Target Actual Variance

iv. Chart 4:

Quality System Index

1.00
0.80
0.60
0.40
0.20
0.00
-0.20
-0.40
2009 2010 2011 2012 2013 2014 2015 2016
Target 0.74 0.80 0.71 0.72 0.72 0.63 0.55 0.65
Actual 0.75 0.58 0.71 0.63 0.63 0.49 0.59 0.69
Variance 0.01 -0.22 0.00 -0.09 -0.09 -0.14 0.04 0.04

Target Actual Variance

 v. Chart 5:

Supplier Relation Index

1.00
0.80
0.60
0.40
0.20
0.00
-0.20
2009 2010 2011 2012 2013 2014 2015 2016
Target 0.61 0.82 0.86 0.87 0.87 0.89 0.90 0.90
Actual 0.72 0.83 0.86 0.87 0.89 0.90 0.90 0.89
Variance 0.11 0.01 0.00 0.00 0.02 0.01 0.00 -0.01

Target Actual Variance

vi. Chart 6:

Employee skill Index

0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00
-0.10
2009 2010 2011 2012 2013 2014 2015 2016
Target 0.57 0.57 0.62 0.64 0.68 0.73 0.74 0.70
Actual 0.55 0.58 0.62 0.68 0.73 0.74 0.74 0.69
Variance -0.02 0.01 0.00 0.4 0.05 0.01 0.00 -0.01

Target Actual Variance

 vii. Chart 7:

Product Price
4500
4000
3500
3000
2500
2000
1500
1000
500
0
2009 2010 2011 2012 2013 2014 2015 2016
Rock Hopper (Adv5) 2200 2600 2600 2100 1950 1950 1900
Rock Glider 2200 2150 2150 2000 1900
Active Champ (P) 600 600 400 400 400 380 300
ChampPlus 370 330
Speedz 4300 4100 3850
LeisureKing 440 440 420
JusRide 345 300 280

viii. Chart 8:

Income and Expenses

$12,00,00,000

$10,00,00,000

$8,00,00,000

$6,00,00,000

$4,00,00,000

$2,00,00,000

$0
2008 2009 2010 2011 2012 2013 2014 2015 2016
-$2,00,00,000

Sales Revenue Cost of goods Gross Margin Other Expences income

 ix. Chart 9:

SHV
100
90
80
70
60
50
40
30
20
10
0
2008 2009 2010 2011 2012 2013 2014 2015 2016
SHV 10.58 23.07 46.01 71.75 86.48 72.62 69.41 34.82 40.52
 Appendix 2:

Product Development Plan

Target Product /
Segment Year 2009 2010 2011 2012 2013 2014 2015 2016

Rock 2nd 3rd 4th 5th 6th 7th 8th

Adventure Hopper year year year year year year year *
Rock 1st 2nd 3rd 4th 5th
Adventure Glider PD year year year year year
Active 1st 2nd 3rd 4th 5th 6th 7th
Kids Champ PD year year year year year year year
Active 1st 2nd
Kids Champ + PD year year
1st 2nd 3rd
Racers Speedz PD year year year
LeisureKi 1st 2nd 3rd
Leisure ng PD year year year
1st 2nd 3rd
Commuter JusRide PD year year year

PD - Product Development
* Product Withdrawn (abandoned)