Glo Bus Report
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Our company was ambitious and took a plunge straight into the market taking risks, resulting in our revenues increasing in the early years. Through years 9 to 11 we mainly priced our cameras higher from what our competitors had them listed as, as our revenue began to decline, we had lost our advantage because we had to start cutting costs, such as our adverting and tech support. Promoting our products more, using our money towards adverting could have increased our sales, or decreasing our products price while we had the advantage. Stock Price
Since our stock prices were related to the earnings per share (EPS), our stock prices reflected accordingly. You could say our shareholders were fairly pleased with the results they received because it was either what they were expecting or well above it. Meeting almost all of the investors’ expectations is why we are always expected to pass the expectation in stock prices. Earnings per Share (EPS)
In our company we tried to go over or meet our investors’ expectations, but in some of the years we fell below. Some factors that affected us, in years 10 and 11 we lost the competitive advantage so the companies priced their cameras very low, which gave them more of the market share. We failed to pass the expectations for years 10 and 11 because we were too focused on paying off our loans, which lead to a bad ending. Credit Rating
Our company tried to keep a well above average credit rating, to make sure our company’s image was in good standing. From years 5 to 9 we had a good credit rating, this helped us show that we were keeping our loans to a minimum. Also in those years we were able to keep our interest rates very low, meaning we owed less money to the bank. In years 10 and 11 we didn’t pay our debts off which cost us to go below the expectations of the investors. This hurt us a lot in the end and caused us to lose easy points. Return on Equity (ROE)
In the early years we focused on our return of equity (ROE), but slowly we began to forget about it and focus on other things within the company. But then as our net income began to decrease it began to impact the percent of our ROE, which lead to us being below the investor’s expectations. As we lost our focus on our ROE our ROE dropped dramatically after year 7. Image Rating
In many of our rounds we tried to keep our image rating above the investor’s expectations, we did a fairly good job at it too except for year 11, which was the year it went below the expectation. We had both our entry and multi-featured cameras at a reasonable price, which gave us an increase on market share and not lose a lot. Strategic Vision
The majority of our strategy was collaborated together amongst all of our group members. We met every week after lecture and discussed the many possibilities that we could make in order to have the best company possible. Specifically, we had a very long discussion on if we should make one very good camera and have a bad camera or if we should have two cameras that were equal in overall quality. After coming up with our solution we decided it would be best to have two equal cameras because then our income would come from our overall performance as a company versus simply one product. Our strategic vision was to compare ourselves to companies like Apple, where they have many amazing products and don’t specialize in one area. Our strategy was to maximize all of the areas (revenue, profit, credit rating, etc.) and in doing so we would allow all of our group members to make changes as long as the expectations box increased every time.
In the beginning, our main focus was to make an entry-level camera and a multi-feature camera that had at least a 2 ½ star rating. By having an average P/Q rating we were able to maximize our products and our overall revenue and profits for the first 4 years, in which we rose to 1st place. After the results were given in the 4th year we decided not to change our strategy and to keep the same products. By doing so we never came out with any new features on the cameras nor did we have any new products surfacing from our company. This was our biggest downfall because without any products hitting the shelves, no matter what country, eventually people would lose interest in the same products we had available.
Overall I believe our strategy was good for the start-up years where we had new products that were introduced to the market, however after our first place year we should have introduced new products or features on our cameras that would have made our products different. This would have increased our revenues and profits in the following years, which would have allowed us to have a higher credit rating because we would have been able to pay off more debt with more money coming in. Also by making better products we would have had a higher image rating which would have increased our overall sales.
Performance Target Forecasting
During the first year we didn’t meet the expectations for earning per share,
however all of the other years we have met the expectations. Given this information, our group would continue with our current strategy as it has proven to satisfy the investors needs. If we were to continue based on the results in the past we would do considerably well for the next two years. We also had similar results with return on equity, credit rating, and year-end stock price. Following this trend these three categories would continue to increase gradually if we were to commit to our strategy. All of these things started off poorly but as the years progressed we managed to exceed the required expectations, for example with earnings per share we started with 1.89% while the requirement is 6.16%, but the years after our earnings per share went up. From years 7 to 11 our earnings per share went up considerably from 6.16% to 11.02%, furthermore it has never gone down once in between those years.
Although we did pretty well in these sections there are some parts where we did well at first and then dropped soon after. One of the sections that show this is return on equity. At first we recovered and went further then what was required, but after a while we started fluctuating from going up and down, in the end we started to go down. If we were to continue for the next two years we would probably go down if we were to continue with our current strategy. To conclude if we are to use our current business strategy for the next two years we would do well in some areas, but not do so well in others, as a result we wouldn’t be able to maximize our profits and not do well in the long run. Strategy in Entry-Level Cameras
Dream Team’s original strategy was to focus on and make the best high quality entry-level cameras. This made us one of the top competitors in our industry. We started advertise and have warranties on our cameras so that people could trust our company but the thing we messed up in was no creating clientele. Our demand was decreasing. We tried maintaining a good PQ rating but we sacrificed that for clientele which we believe will somewhat work. We should have thought of it earlier because now we are running out of years. Our strategy from the beginning was to sell above average multi-featured cameras and we haven’t changed the brand-specific components because we looked out on core-components the most since demand varied. Image ResolutionLCD Display ScreenLens Quality
– Average: 7.5 – Average: 3.0×4.0- Average: 2x
– Year 12: 10.5- Year 12: 4.5×6.0- Year 12: 2x
The average total production cost is $82.43 per unit and in year 12 ours was $115.76 per unit. Overall reputation for our entry-level cameras was good throughout the whole years but near the end we wanted to lower prices because we seen a decrease in demand. Our plan was to attract more customers and let them know that our cameras were worthy but we couldn’t do that in just 3 years so it probably failed. This camera definitely gave us a huge increase on profits. Competitor Analysis
(1) Entry-level cameras
When we started to work on GLOBUS, we didn’t pay much attention to the competition between companies in the industry. In fact, we spent a lot time on developing our own strategies to win. It worked well at the beginning. However, after 3 decisions were made, our company was left behind the strongest companies. Started from the third decision, “Chronos” took the lead for the followed 4 weeks. The strategy we use for entry-level cameras has a lot of differences. As for our closest competitors in entry-level cameras, the “God Camera” has almost the same market share as ours in decisions of the year 11. Here is a table consist of information of entry-level cameras from these companies in the market of North America.
As it was showed above, “Chronos” has fantastic credit rating during these weeks, whereas “God camera” and our company’s credit rating fluctuated from A to C. A good credit rating cannot only help them save money on interest, but also provide opportunities and stableness when the company face the changing of economic environment. (2) Multi-featured cameras
As for multi-featured cameras, G Company is still our first competitor since we have the same market share as 9.7%. “Chronos” has the biggest market share as 35.1%. Here is the information about multi-featured cameras in these companies.
For multi-featured cameras, “Chronos” still used the same strategy as they used for entry-level cameras. They provide the largest discount among the whole industry and sell their product at a very attractive price. As a result, they still have the highest market share among these companies and gained a lot of revenue. The changes to this strategy brought them a huge effect on market share. When other companies still struggling on product designing, “Chronos” has already won on customers. Here is a chart that demonstrates the market share of these three companies.
The column this chart demonstrates is the market share between three companies. It is clear that the strategy of “Chronos” works out best among the companies.
Strategy of Out-Compete Closest Competitors
In order to regain the domination among industry, we need to learn from the “Chronos” and make changes in it to make it fits our company. First, we will try to gain more market share by offer customer a lower price and make changes to product designing so that we won’t lose money on selling our product. Secondly, we are going to increase the P/Q rating for multi-featured cameras. By increasing the quality and price for multi-featured cameras, we will have more margin revenue and profit.
Thirdly, our company should pay more attention on charities and the working environment for our workers. Although this may bring a decrease in the profit, it will increase the image rating for our company, which is also an important feature for judging a company. Finally, we will repurchase common shares to increase the ROE. However, we won’t start this work until our company has already implement those previous strategies successfully so that we will have enough profit to repurchase common shares. Lessons Learned
After weeks of competition with other students, we have found some mistakes that we made on company’s decision. We also gained experiences for business both in GLOBUS and real life. We studied the figures of revenue of “Chronos”, “God Camera” and ourselves’. The result is showed in the line chart below, revenues are showed in 100000. As it is demonstrated above, “Chronos” successfully develop their own winning strategy and took lead from the year 8 with continuous increasing revenue. Here is the mistakes we made and the lessons we learned: a) After dominating in the whole industry for 2 weeks, we stopped working on new strategies because we thought that we have already found a way to win. However, the truth is innovation is somehow the most important idea for a company. If we stayed at a point and refuse to change, the only result is losing. b) When we started to make decisions on entry-level cameras features, I found that provide customers with long warranty period will lead to more revenue and profit for the year.
Therefore, we made all the warranty period into 3 years. As a result, the warranty cost for the following years became a huge burden for our company. Thus, we knew that whatever decisions we are going to make, we should consider its outcomes in long-term. c) During these weeks of working, we mainly focus on increasing the profit for the company. As a matter of fact, profit is not the first important features of a company. When our company just started its business, we should mainly emphasize on revenues and market share in order to keep enough cash to run our business smoothly. d) When Chronos started to lead in the industry, we didn’t learn from them and make changes to our strategy as soon as possible.
Instead, we still worked on developing our own strategy, which turned out to be a wrong one. It is always important for companies to avoid e) After studied our performance in Glo-bus, we discussed about the business in real life. It is obvious that no one has as many chances as they do in Glo-bus when doing business in real life. The environment changes faster and the competition is tighter between companies. Only the strong survive in competitions and sometimes we may even do not have a chance to fix our mistakes. Therefore, market and customer analysis will be extremely important as it provide information for companies to make decisions. Besides, immediately correcting errors and changing strategies when facing the different environment will benefit the company much more than focus on companies’ existing strategies.