Tài liệu NX0441 - Managing for sustainable Competitive Advantage ppt

Along with the low cost car, luxury car is produced with a limited number to test the market as well as it will be a desirable product, we will increase production and profit margin to l

NX0441 - Managing for sustainable

INTRODUCTION 2

COMPANY PERFORMANCE 3

I COMPANY OVERVIEW: 3

II FINANCIAL DATA PERFORMANCE: 3

1 The performance of the initial year: 3

2 The differences in year 2, 3, 4: 5

3 The performance measure in 3 continuous years: 6

3.1 Selling prices 6

3.2 Production 7

3.3 Gross Margin 8

3.4 Market share 9

3.5 Sales incomes 10

3.6 Post-tax-profit 10

3.7 Net cash position 11

3.8 Shareholders’ Funds 12

LEARNING 13

TEAM PERFORMANCE 16

CONCLUSION 18

REFERENCES 19

APPENDIXES 21

“Making a difference to families by offering low cost, high quality economical cars regardless of price range” is what our company - Northumbria B.L.A.C.K Automotive aims

to provide the customers as well as compete within the European Car Market

Through our commitment to fuel efficient cars at a reasonable price by focusing on researchand development to improve the quality and efficiency, we aim to become a prestigiouscompany by gaining a 5% market share in the city car market and a 3% market share in theluxury car market

We will meet our challenging to become a profitable company by the third year throughoutthe penetration of market with a low cost car, once it is completed, we are going to offer thesame car with new features at a higher profit margin Along with the low cost car, luxury car

is produced with a limited number to test the market as well as it will be a desirable product,

we will increase production and profit margin to launch our brand name into the luxurymarket

Model Name Produced

COMPANY PERFORMANCE

I COMPANY OVERVIEW:

Northumbria B.L.A.C.K Automotive enters the European Car Market with the 2 mainmodels are Jester (City Car) and Majestic (Luxury Car) for the first 3 years We did usethe automation and employees in manufacturing process to increase as well as improvethe productivity throughout the investment in automation in needs Through 3 years, wealso got loss and profit, but the loss was bigger so we decided to introduce the new model

in year 4 to gain the more market share as well as boost the Car Market with the brandnew product Actually, we got profit and succeeded with third model – Knight (LargeCar) and unfortunately, we did not achieve the business objectives at all

II FINANCIAL DATA PERFORMANCE:

1 The performance of the initial year:

In the beginning, we were going to enter the European Car Market with two models andtarget markets are: Jester (target market: 25 – 40 years old) and Majestic (target market:

41 – 55 years old)

The City Car – Jester is predominantly aimed at 25 – 40 years old market and especiallyaimed to the couples and young families because of the affordable price, disposableincome and cost control (fuel efficiency) are key factors to drive their purchasingdecision The low selling price as we decided will be a strategy to establish aconsiderable market share and gain a reputation as well

The Luxury Car – Majestic is aimed at 41 – 55 years old market to be dominated by olderfamilies and high income people We continue to believe in cost control (fuel efficiency)

as a critical factor to make the effect on customers’ purchasing decision However,because of aiming to the high income people, the price is not very important to them asthe quality and benefits we bring to them Therefore, we are going to add some luxuryoptions to the car and a better build quality

Year 1

-250 -200 -150 -100 -50 0

-149.97

-197.2

Post-tax-profit

Forecast Actual

 The both models production are sold as we forecasted It leads to the market share

we objected also nearly be achieved by 0.94% over 1% in Jester and 0.65% over0.7% in Majestic

 Gross Margin for the Jester in actual is 1.21% and Majestic in actual is 10.06%lower than the forecast because of the cost of sales in actual is higher than what

we expected The rationale for the loss in gross margin is the increasing in cost ofsales and overheads which caused by the increasing of materials costs, wages,professional charges and unexpected warranty claims

 As the forecast we are going to get loss by £149.97m, however, we get loss by

-£197.20m, increasing of -£47.23m As we get loss -£180.54m in the operatingprofit plus with the interest on Loans £16.66m are also higher than forecast, so, itleads to the heavier loss in post-tax-profit

We recognized that the design cost is too high caused by the high option and also the take

up for both models; gross margin is too low based on the flow mark-up Thus, we aim tomake some changes in year 2 as:

 Increasing labour and mark-up to increasing Gross Margin;

 Increasing in training (we did not spend much on training employees in first year)and wage from £425 to £450 to motivate workforce to enhance the efficiencyproduction;

 Increasing car prices to match the mark-up;

 Reducing the R&D as well as continuous improving in build quality for bothmodel and increasing the promotion due to the higher prices

2 The differences in year 2, 3, 4:

As can be seen from the table above:

o Operating Profit: in year 2 and 3, our business is not running very well by theoperating profit always lower than we forecasted However, in year 4, we getthe good performance through the earning profits and market share

o Bank Balance before Loan and Bank Balance after Loan in 3 years actual havethe fluctuations due to the changing of the funds and investment in each model

as well as the inflation rate is increasing every year

3 The performance measure in 3 continuous years:

The continuous 3 financial years of our company, we continuously and carefullymonitored the running of the business and its performance with the solutions/

strategies and overall report provided by Board of Management for all functions Weare going to standing out some key performance measures as the following:

3.1 Selling prices are increased compare to the first year for each model

City Car Luxury Car Large Car 0

The price we decided was not match the mark-up, thus, it leads to get loss in profitbecause low gross margin as well as the design cost too high caused by high optionsand the take up for both car do so Thus, we decide to increase the selling price forboth models in next three years

However, due to the remain stock of City Car, and the popularity is not high as theLuxury Car, so, we decide to reduce 4% the price as change the option by soundsystem replace for safety package in year four due to the popular of this system(Safety package: 40, Superior Sound System: 95) and the suitable to the new targetmarket – under years old that we had changed

The price of Luxury Car continue increasing due to the popular and best-selling, sothe price increase following 38% in year two, 8% in year three and 4% in year four

In the last year, we are looking for the new model to boost the sales and gain moreprofit from the failure in selling City Car caused by increasing stock in year two andthree (18787 cars in stock) of the City Car model As compare to the options andselling prices of MLS International Company who also produces the Large Car with

the price is £29640 We decide to add some additional options suit to the targetmarket and based on our objectives to provide the low cost car with high quality toattract the customers from new market At last, we did well with the new model bysold out 91% of production

3.2 Production is increased 39% for City Car and 83% for Luxury Car (April

However, due to the stocks we got in City Car Model, we had reduced the production

by 6% and 29% in year three and four In contrast, the Luxury Model performancewell as we sold all the production every year, and decide to increase the production aswell as price every year by 18% and 15% in the third and fourth year The marketshare for Luxury Car therefore increases every year and it becomes our keyproduction to keep up its performance and revenue

The third model – Knight (Large Car) is produced by 23400 units by the decreasing inthe City Car production to boost the revenue and target to the new market The thirdmodel also performs well enough by sold out 92% of production

3.3 Gross Margin in the next three years of our company is lower than we forecast as

following graph has shown

Year 2 Year 3 Year 4 0%

As can be seen in the graph, the gross margin in actual always lower than what weforecasted for three years business Compare each year performances; we performwell in the third year and fourth year than the second year which the gross margingrows up 3.69% and 0.69% The rationale for the lower gross margin than forecast

is caused by the increasing in cost of sale includes of material costs, wages andclosing stock However, in the three years, the cost of sales we forecast alwayshigher than actual but we did get the lower gross margin by actually because ofthe low mark-up on the product

3.4 Market share for each model of our company in four year working is increased

and reach the highest market share for each model in the fourth year

City Car Luxury Car Large Car0.0%

For the Luxury Car, it performs very well each year by selling all the production,which is why we always nearly reach and grows in market share as lower 0.01% inyear 2 and higher 0.03% and 0.09% in year three and four

For the Large Car, we did not achieve the forecasted market share by the actual is lessthan 0.13%

3.5 Sales incomes

0 500

The gap between the actual sales incomes in year two is approximate what weforecast because of the selling volumes of both models and less stock in City Car by6,555 units over 66,425 units produced The gap in year three is higher due to theincreasing in production of both car and prices but just only Luxury Car perform well,thus, we get more stock on City Car by 18,787 units and the sales income is lower13.6% than forecasted However, in year three the actual sales income is increased35.4% than forecasted due to we did not think that Large Car can perform very well

as the City Car boost the new market with sold all production and stock while Luxurycontinuous its strengths with all production sold and increases in market share

In year 4, we decided to decrease the selling price of City Car to attract the customersalso to introduce the new model – Knight (Large Car) to the market to boost the salesand gain more market share for the company We sold all the production of City Car

and Luxury Car, the Large Car also perform well, thus, the post-tax-profit is increasedmassively by £113.767m

3.7 Net cash position of our company is fluctuated in every single year as the graph

Net cash position

Actual net cash position

£250m from the bank, which is why the net cash position of our company is

-£298.66m in the end of first year

However, in the second year, we did not borrow from the bank and change thestrategy by increasing labour and mark-up to increase the gross margin; no designchanges but increase the car prices due to match the mark-up; reduce the R&D butfocus more on promotions This cause the lower 83% than first year, and it means that

we have well performance and control the cash flow of this year which leads toearning profit by £5.5m

In the third year, it seems a worst year performance compare to the four year In thisyear, we continue to borrow £25m from the bank to invest for the new model will beproduced in year four, increasing in training, wages to motivate employees as well asthe balance before loans of our company is high by -£372.57m and opening bankbalance is -£51.57m It shows that the profit we earn still not enough to pay for theloans and operating the company as though we also increase the selling prices, cutdown the cost for R&D

In the fourth year, we again did not borrow from the bank and the best-selling forthree models help our company to have the highest net cash position in four year Wesold all the stock of City Car, the cost of sales also lower than forecast and therevenue we earn from selling car is high, that why although the opening bank balance

is high as -£347.57m but we still can over the difficulties in last year to boost the netcash position back to the positive position to make a well performance in selling carand earning profit for the company

3.8 Shareholders’ Funds

Year 1 Year 2 Year 3 Year 4 0

50 100

1 Operations Management

According to Waters (2002), operations management is the management function that

is concern with all aspects of operations The competitive advantage the organizationcould gain from good operations management, especially in car manufacturing like:reduce the development times so that new products can be brought to the marketquickly like what Toyota does (Waters, 2002, p 23) However, the important element

of operations management especially in the manufacturing car industry is about

“inventory planning and planning” as well as “inventory management and productionplanning and scheduling”

As Silver, A E., Pyke, F D., and Peterson, R (1998) stated that the importance ofinventory management and production planning and scheduling in car manufacturing

is considered as is often the source of innovation, productivity improvements and highskill jobs The business cycle is then ready to repeat itself if the warehouses arerestocked with excess inventory which can’t be sold, therefore, it’s going to force thecompany to sell out the stock first before invest or innovate the new product lines.From year two, we got some stock of model one which due to increase the expensesand overheads Thus, the operations manager has to make a good judgement anddecision about capacity management as well to reach the demands of customers andalso utilize the capabilities in efficiency ways together with the high quality to reducethe inventory stocks

I also suggested the Total Quality Management (TQM) and Just-in-time (JIT) as thetool to improve the performance as well as to support the inventory management andproduction planning and scheduling for product line According to Tennant (2001),TQM aims to achieve practically zero defects, reduce variation in output, andinnovative new procedures and processes in manufacturing industry and it alsorecognizes the importance of employee As what we did in the business game, wealways focus on employees by increasing the training every year to increase theeffectiveness in production as well as continuous improving in build quality for bothmodels to satisfy the customers with the best ones

2 Marketing Management

According to Blyth (2003), the manager has to decide which segment of the marketshould targeting to in order to get the benefits of high growth potential or lowcompetitive pressure to compete with the competitor within the industry Choosingwrong segment to target leads to lost opportunities and wasted resources Afterwards,

we have to make decision on product designs and options based on market researchabout customers’ trend, expectation as well as the data of competition The evidencefor this learning is we targeted the 25-40 years old market for City Car in the first twoyear and did not successful in this target market Thus, we changed the target market

to people less than 25 years old with the small change in car option and at the end ofyear four, we sold out all production and also the stock Besides, positioning is thatthe product places in the chosen market, as perceived by the relevant group ofcustomers McDonald (2007) supported that the marketing mix involves the tools andtechniques of marketing in order of matching the process positioning company In thisbusiness game, the marketing mix is applied through some functions as: productdevelopment, pricing strategies, positioning and promotional offers

Moreover, one thing that I had learnt from the business game is that we cannot make ajudgement or forecast the market just based on the market research or datacompetition Because of the changing all the time of the market and the complex ofmarket structure so the market will become the imagination situation Thus, in myopinion, I suggest that the manager has to have a clearly understanding about thechosen market, the key influence factors of the industry and market, the alternativeresources as well as to have strategies fit the segmentation or alternative solutions tosolve the problems if occurring to create the sustainable competitive advantages forthe company

3 Human Resources Management

According to Hill (2005), Human Resources Management presents significant issuesfor the analysis and operation of employment relationship The management ofemployees is one of the key elements in the coordination and general management ofwork organizations, and the workforce also be considered as the key successful factortowards the organizations This statement also affects on and supports our company to