Digby Case Summary
Analysis of Digby’s strategy
In the 8 rounds of Capstone simulation, our team placed second among the five teams, our stock price was $255.52 at the end of the simulation. We did some right decisions but also made some mistakes, our analysis is as follows:
Round 1:
Five teams all started with the same situation, we didn’t know other team’s strategy, so we simply forecasted that our market share will be 20%, our strategy is a little conserved.
R&D: We made a mistake in R&D because we used the ideal spots in the industry conditions report instead of using the ideal position in the report for round 0 plus the industry trend, We didn’t change the performance and size of the low end products because the No.1 factor customers considering was …show more content…
the age of the product. The ideal age was 7, but the age of our product was just 4.6.
Price and sale forecast: For the traditional and low end products, customers were more sensitive to price, so we lower our price to occupy more market share.
But for the rest three segments, customers were not sensitive to the price, they will buy the product as long as the product was what they want, no matter what the price was.
We used 20% as our market share in the first round, it turned out that we under estimate the need for our traditional, low end and performance products.
Promotion and sales budget: we understood that the promotion and sales budget ware very important because it would influence the awareness and accessibility not only for this round but also for the next 7 rounds, so we spent $14,400,000 on promotion and sales.
Production: Our production schedule was based on the forecast of our sales, the capacity was more than enough, so we didn’t spend any money on buying capacity this year, but we spent $18,800,000 on automation rating, because it could help to reduce the labor cost.
Human resources and TQM: We didn’t notice the important role about training and recruiting spend and TOM were playing in reducing the cost and the R&D cycle time, so we didn’t spend any money on these …show more content…
things.
Finance: We borrowed $7,000,000 long term debt to avoid emergency debt.
Result: Our high end and size products didn’t sell very well because our products’ performance and size wasn’t at the ideal spot and this was the No.1 factor customers considered, and also we under estimate the need for our traditional, low end, and performance products. Our stock price was $29.17 at the end of the round 1, fall by $5.07.
Round 2:
R&D: Still using the ideal spot in the industry conditions report, and didn’t change any performance and size of low end products. Built the new high end product DG, because the ideal age of high end products is 0, so we want to build new product with younger age to attract customers.
Price and sale forecast: Increased the price of traditional products to $26.50 because from the report of round 1, our price is much lower than the other competitors. Kept the price of low end products low and kept the price of high end, performance and size products as high as possible.
In the round 1, our traditional, low end and performance products were stock out, so we increased our sale forecast of these three products to 25%-27% of the demand, kept the forecast of the high end and size products 20%.
Promotion and sales budget: We spent $14,500,000 on promotion and sales this round.
Production: Spent $11,400,000 on plant improvement including buying capacity to low end and new products, and increasing automation rating.
Human resources and TQM: Spent $1,000,000 on recruiting and set 40 training hours. And we also spent $4,500,000 on TQM.
Finance: Didn’t borrow any money this round.
Result: Because our sells increased this year, so our stock price increased $9.53 to $38.69 at the end of the round 2.
Round 3:
R&D: started to use the ideal position in the report from round 2 plus the industry trend to get the ideal spot for round 3, and still didn’t change any performance and size of low end products.
Price and sale forecast: Keep the price of traditional and low end products low and keep the price of high end, performance and size products as high as possible.
In the round 2, except the high end products, other products all stock out. So we increased our market share forecast for these four products to 27%-30%. Because Andrews also had a new product in high end segment, we predicted the market share will be lower than before, we predicted the market share for our old high end products Dixie was 15% and 10% for the new product DG, because the performance and size were not at the ideal spot.
Promotion and sales budget: We spent $14,650,000 on promotion and sales this round.
Production: Spent $17,400,000 on plant improvement including buying capacity to low end and new products, and increasing automation rating.
Human resources and TQM: Spent $1,500,000 on recruiting and set 40 training hours. And we also spent $7,500,000 on TQM.
Finance: $2,547,000 emergency loan happened this round because our sells didn’t meet our expectations, some of our cash was in the inventory.
Result: The stock price was $48.19 in this round, increased $9.49.
Round 4:
R&D: We used 4.7 and 15.4 as performance and size for low end products instead 4.2 and 15.8 which are the ideal position for round 4, because this was the best product we could produce in one year based on the R&D cycle time.
Every time we reproduce the product, the age of the product would reduce half of the original age, which was 4.3 in the end of the round 4, but the age is the most important factor customers considered about the low end products, so after we reproduced this time, we would not change it anymore before the simulation end. For the other segments, we just used the ideal spot in the report for round
4.
Price and sale forecast: Kept the price of traditional and low end products low and keep the price of high end, performance and size products as high as possible.
We have better products this round than round 3, so although we didn’t sell very well in round 3 and had a lot of inventory, we still believe our products can occupy 25%-32% of market share.
Promotion and sales budget: We spent $14,800,000 on promotion and sales this round.
Production: Spent $20,600,000 on plant improvement including buying capacity and increasing automation rating.
Human resources and TQM: Spent $1,500,000 on recruiting and set 40 training hours. And we also spent $9,000,000 on TQM.
Finance: Retired the $2547 emergency loan and $34750 long term debt, issued new long term debt with the same amount, because the interest rate was lower than before.
Result: The stock price was $73.79 in this round, increased $25.61.
Round 5:
R&D: We used the ideal position in the report for round 5 except the low end segment, we didn’t change anything about the low end segment.
Price and sale forecast: Keep the price of traditional and low end products low and keep the price of high end, performance and size products as high as possible.
Because the traditional products were sold out last year, so we increased the predicted market share to 35%. Other segments stayed as the same amount of market share as last year.
Promotion and sales budget: We spent $14,800,000 on promotion and sales this round.
Production: Spent $20,100,000 on plant improvement including buying capacity and increasing automation rating.
Human resources and TQM: Spent $2,000,000 on recruiting and set 40 training hours. And we also spent $4,500,000 on TQM.
Finance: Didn’t borrow any money this round.
Result: Because Andrews increased their production in traditional products and our products are similar so the market share was not as better as we expected before, lots of our traditional products was left. The stock price was $119.96 in this round, increased $46.17.
Round 6:
R&D: We used the ideal position except the low end products, we didn’t change anything about the low end segment.
Price and sale forecast: Keep the price of traditional and low end products low and keep the price of high end, performance and size products as high as possible.
Our market share for each segment was expected between 25%-30% except the low end product because our low end products was better than our competitors, so we predicted our market share would be 35%.
Promotion and sales budget: We increased the expenditure on promotion and sales to $21,150,000 this round because our customer awareness and accessibility is a little bit behind our competitors.
Production: Spent $35,700,000 on plant improvement including buying capacity for low end products and increasing automation rating.
Human resources and TQM: Spent $3,000,000 on recruiting and set 80 training hours. And we also spent $2,500,000 on TQM.
Finance: Didn’t borrow any money this round.
Result: The stock price was $159.78 in this round, increased $39.82.
Round 7:
We made a big mistake in this round, we forgot to update our decisions, so the data is exactly same with round 6. Our products’ size, performance, and age were one round behind our competitors, and the capacity for low end products didn’t increase to the amount that what we want it to be. We left a lot of inventory this round especially our size products because costumers were more sensitive to the position of the products. Our stock price was $188.29 at the end of round 7, still rising but it left a lot of problems to the last round.
Round 8:
R&D: We were already behind the other competitors one round, we could build the ideal position products in one year, but that would be at the end of the year, so even if we built the ideal position products, we could only sell them several days at the end of the year, before that we could only sell the same products with round 6, so we decided to set the position between round 6 and round 8.
Price and sale forecast: We increased the price of low end products to $20.99 because Baldwin was out of market in round 7, so no matter what our price was, customers would buy them.
For the market share, we used the same market share we sold in the round 7 except the low end products, our low end products’ forecast was limited by the capacity, we could sell more but we didn’t have enough capacity.
Promotion and sales budget: We spent $20,225,000 on promotion and sales this round.
Production: Because we had a lot of inventory left from round 7, and we predicted that our sell this round would not be very good, so we didn’t need to use all of our capacity. We sold $32,357,000 of our capacity.
Human resources and TQM: We didn’t spend any money on human resources and TQM this time.
Finance: We retired $18,829 common stock.
Result: The stock price was $255.51 in this round, increased $67.22.
Things we learned from the simulation:
1. Build the new products as earlier as possible, not only just high end products, our performance and size products were not very competitive in the last several rounds, new product line will help to occupy more market share.
2. Spend money on automation rating, training, and TQM as soon as possible, it will reduce costs and R&D cycle time and increase demand.
3. Holding enough cash on hand to avoid emergency loan.
4. Always pay attention to your competitors, predict their next step, and value your products among all products to know how competitive your products are, so you can predict the market share more accurately by this way.
In the 8 rounds of Capstone simulation, our team placed second among the five teams, our stock price was $255.52 at the end of the simulation. We did some right decisions but also made some mistakes, our analysis is as follows:
Round 1:
Five teams all started with the same situation, we didn’t know other team’s strategy, so we simply forecasted that our market share will be 20%, our strategy is a little conserved.
R&D: We made a mistake in R&D because we used the ideal spots in the industry conditions report instead of using the ideal position in the report for round 0 plus the industry trend, We didn’t change the performance and size of the low end products because the No.1 factor customers considering was …show more content…
the age of the product. The ideal age was 7, but the age of our product was just 4.6.
Price and sale forecast: For the traditional and low end products, customers were more sensitive to price, so we lower our price to occupy more market share.
But for the rest three segments, customers were not sensitive to the price, they will buy the product as long as the product was what they want, no matter what the price was.
We used 20% as our market share in the first round, it turned out that we under estimate the need for our traditional, low end and performance products.
Promotion and sales budget: we understood that the promotion and sales budget ware very important because it would influence the awareness and accessibility not only for this round but also for the next 7 rounds, so we spent $14,400,000 on promotion and sales.
Production: Our production schedule was based on the forecast of our sales, the capacity was more than enough, so we didn’t spend any money on buying capacity this year, but we spent $18,800,000 on automation rating, because it could help to reduce the labor cost.
Human resources and TQM: We didn’t notice the important role about training and recruiting spend and TOM were playing in reducing the cost and the R&D cycle time, so we didn’t spend any money on these …show more content…
things.
Finance: We borrowed $7,000,000 long term debt to avoid emergency debt.
Result: Our high end and size products didn’t sell very well because our products’ performance and size wasn’t at the ideal spot and this was the No.1 factor customers considered, and also we under estimate the need for our traditional, low end, and performance products. Our stock price was $29.17 at the end of the round 1, fall by $5.07.
Round 2:
R&D: Still using the ideal spot in the industry conditions report, and didn’t change any performance and size of low end products. Built the new high end product DG, because the ideal age of high end products is 0, so we want to build new product with younger age to attract customers.
Price and sale forecast: Increased the price of traditional products to $26.50 because from the report of round 1, our price is much lower than the other competitors. Kept the price of low end products low and kept the price of high end, performance and size products as high as possible.
In the round 1, our traditional, low end and performance products were stock out, so we increased our sale forecast of these three products to 25%-27% of the demand, kept the forecast of the high end and size products 20%.
Promotion and sales budget: We spent $14,500,000 on promotion and sales this round.
Production: Spent $11,400,000 on plant improvement including buying capacity to low end and new products, and increasing automation rating.
Human resources and TQM: Spent $1,000,000 on recruiting and set 40 training hours. And we also spent $4,500,000 on TQM.
Finance: Didn’t borrow any money this round.
Result: Because our sells increased this year, so our stock price increased $9.53 to $38.69 at the end of the round 2.
Round 3:
R&D: started to use the ideal position in the report from round 2 plus the industry trend to get the ideal spot for round 3, and still didn’t change any performance and size of low end products.
Price and sale forecast: Keep the price of traditional and low end products low and keep the price of high end, performance and size products as high as possible.
In the round 2, except the high end products, other products all stock out. So we increased our market share forecast for these four products to 27%-30%. Because Andrews also had a new product in high end segment, we predicted the market share will be lower than before, we predicted the market share for our old high end products Dixie was 15% and 10% for the new product DG, because the performance and size were not at the ideal spot.
Promotion and sales budget: We spent $14,650,000 on promotion and sales this round.
Production: Spent $17,400,000 on plant improvement including buying capacity to low end and new products, and increasing automation rating.
Human resources and TQM: Spent $1,500,000 on recruiting and set 40 training hours. And we also spent $7,500,000 on TQM.
Finance: $2,547,000 emergency loan happened this round because our sells didn’t meet our expectations, some of our cash was in the inventory.
Result: The stock price was $48.19 in this round, increased $9.49.
Round 4:
R&D: We used 4.7 and 15.4 as performance and size for low end products instead 4.2 and 15.8 which are the ideal position for round 4, because this was the best product we could produce in one year based on the R&D cycle time.
Every time we reproduce the product, the age of the product would reduce half of the original age, which was 4.3 in the end of the round 4, but the age is the most important factor customers considered about the low end products, so after we reproduced this time, we would not change it anymore before the simulation end. For the other segments, we just used the ideal spot in the report for round
4.
Price and sale forecast: Kept the price of traditional and low end products low and keep the price of high end, performance and size products as high as possible.
We have better products this round than round 3, so although we didn’t sell very well in round 3 and had a lot of inventory, we still believe our products can occupy 25%-32% of market share.
Promotion and sales budget: We spent $14,800,000 on promotion and sales this round.
Production: Spent $20,600,000 on plant improvement including buying capacity and increasing automation rating.
Human resources and TQM: Spent $1,500,000 on recruiting and set 40 training hours. And we also spent $9,000,000 on TQM.
Finance: Retired the $2547 emergency loan and $34750 long term debt, issued new long term debt with the same amount, because the interest rate was lower than before.
Result: The stock price was $73.79 in this round, increased $25.61.
Round 5:
R&D: We used the ideal position in the report for round 5 except the low end segment, we didn’t change anything about the low end segment.
Price and sale forecast: Keep the price of traditional and low end products low and keep the price of high end, performance and size products as high as possible.
Because the traditional products were sold out last year, so we increased the predicted market share to 35%. Other segments stayed as the same amount of market share as last year.
Promotion and sales budget: We spent $14,800,000 on promotion and sales this round.
Production: Spent $20,100,000 on plant improvement including buying capacity and increasing automation rating.
Human resources and TQM: Spent $2,000,000 on recruiting and set 40 training hours. And we also spent $4,500,000 on TQM.
Finance: Didn’t borrow any money this round.
Result: Because Andrews increased their production in traditional products and our products are similar so the market share was not as better as we expected before, lots of our traditional products was left. The stock price was $119.96 in this round, increased $46.17.
Round 6:
R&D: We used the ideal position except the low end products, we didn’t change anything about the low end segment.
Price and sale forecast: Keep the price of traditional and low end products low and keep the price of high end, performance and size products as high as possible.
Our market share for each segment was expected between 25%-30% except the low end product because our low end products was better than our competitors, so we predicted our market share would be 35%.
Promotion and sales budget: We increased the expenditure on promotion and sales to $21,150,000 this round because our customer awareness and accessibility is a little bit behind our competitors.
Production: Spent $35,700,000 on plant improvement including buying capacity for low end products and increasing automation rating.
Human resources and TQM: Spent $3,000,000 on recruiting and set 80 training hours. And we also spent $2,500,000 on TQM.
Finance: Didn’t borrow any money this round.
Result: The stock price was $159.78 in this round, increased $39.82.
Round 7:
We made a big mistake in this round, we forgot to update our decisions, so the data is exactly same with round 6. Our products’ size, performance, and age were one round behind our competitors, and the capacity for low end products didn’t increase to the amount that what we want it to be. We left a lot of inventory this round especially our size products because costumers were more sensitive to the position of the products. Our stock price was $188.29 at the end of round 7, still rising but it left a lot of problems to the last round.
Round 8:
R&D: We were already behind the other competitors one round, we could build the ideal position products in one year, but that would be at the end of the year, so even if we built the ideal position products, we could only sell them several days at the end of the year, before that we could only sell the same products with round 6, so we decided to set the position between round 6 and round 8.
Price and sale forecast: We increased the price of low end products to $20.99 because Baldwin was out of market in round 7, so no matter what our price was, customers would buy them.
For the market share, we used the same market share we sold in the round 7 except the low end products, our low end products’ forecast was limited by the capacity, we could sell more but we didn’t have enough capacity.
Promotion and sales budget: We spent $20,225,000 on promotion and sales this round.
Production: Because we had a lot of inventory left from round 7, and we predicted that our sell this round would not be very good, so we didn’t need to use all of our capacity. We sold $32,357,000 of our capacity.
Human resources and TQM: We didn’t spend any money on human resources and TQM this time.
Finance: We retired $18,829 common stock.
Result: The stock price was $255.51 in this round, increased $67.22.
Things we learned from the simulation:
1. Build the new products as earlier as possible, not only just high end products, our performance and size products were not very competitive in the last several rounds, new product line will help to occupy more market share.
2. Spend money on automation rating, training, and TQM as soon as possible, it will reduce costs and R&D cycle time and increase demand.
3. Holding enough cash on hand to avoid emergency loan.
4. Always pay attention to your competitors, predict their next step, and value your products among all products to know how competitive your products are, so you can predict the market share more accurately by this way.