Global Business Relationships.
Glo-Bus year 12
GLO-BUS – Decision for Year 12
Tiffine Bourland
&
Olusegun Awoyemi
(DigitCam Company)
BUS 4993 – Business Capstone Project
Capella University
Dr. Walter Adams
March 5, 2017
Introduction
DigitCam Company Background:
At this time, our company proposes to sell close to 800,000 entry-level cameras and 200,000 multi-featured cameras annually. Prior-year revenues were US$ 206 million and net earnings were US$ 20 million, equal to US$ 2.00 per share of common stock.
GLO-BUS – Decision for Year 12
DigitCam Company is in sound financial condition and is performing well. Its products are well regarded by digital camera users. DigitCam’s board of directors has charged the co-managers with developing a winning competitive strategy—one that capitalizes on growing consumer interest in digital cameras, keeps the company in the ranks of the industry leaders, and boosts the company's earnings on an annual basis.
Develops a strategic plan depicting reasons within a scenario, critiques team decisions and corresponding results associated with business management, and evaluates both short- and long-term implications.
At this juncture, DigitCam is ranked 5th on the GLO-BUS – Game to Date Industry Scoreboard – Year 11. This is a business need for an improvement on our company performances. With that in mind, the co-managers’ rolling analysis assessment, is looking backward and forward in time; and understanding the simulation decision results. It is especially important that the key now is to watch what the competition is doing - first investor expectations, and then the competition. Therefore, using a high-performance business management technique- include but not limited to the following:
Looking back in time, the management of our company thought consumers are willing to pay a higher price for higher quality products. Respectively, after our Decisions for Year 6,7,8,9,10, and 11 the co-managers figured out, that is not necessarily the reality. After these six rounds, we have realized that the strategic management for this global competition does not qualitatively recognize our “high quality, and high price” strategy. Quite logically, the system responds more for low prices and hence giving more market share to low priced digital cameras and products. All this being said, corporate social responsibility and business ethics now play an influential role in a company's strategic management – DigitCam was the corporate social responsibility award winner for Year 9.
With this being said, DigitCam Company is in the making of Decision for Year 12, and it would be revising the simple strategy, which largely focused on quality of the camera. For the reason, the process making our digital camera products to be the best in the market is also the less expensive. The management of this company has observed that we need to price our cameras competitively, minimize our R&D every year, going forward, determine to win the market share (for both entry-level and multi-featured cameras) and making sure that the company is hitting investor expectations the end of each year decisions.
Evidently, the co-managers are able to identify the strategic fit between the business vision and the key elements of the business strategy: market development, product development, innovation and turnaround, considering domestic and global environments. With that in mind, these are parts of the grand strategies, described by Pearce and Robinson (2015), as "a master long-term plan that provides basic direction for major actions directed toward achieving long-term business objectives" (p. 205).
As is apparent from the preceding decisions, for the past four decision years, the co-managers’ currently view the company’s anticipated results, current decisions and where we intend to be in the future vis-à-vis addressing weaknesses in the following competitive factors:
Advertising expenditures – DigitCam plans to increase our market aggressiveness in promoting its lineup of models and styles in a given geographic area
Increased Models: With an above-average number of models for our digital cameras, this will enhance our company’s competitiveness in the marketplace
Gain huge share of digital cameras market
Produce moderately priced digital cameras
Lower manufacturing costs for our digital cameras
The co-managers of DigitCam have recognized the value of having values - operating in a socially responsible manner in order to enhance the company's image. It has been observed that corporate social responsibility and business ethics now play an influential role in a company's strategic management (Pearce & Robinson, 2015).
For the reasons, practicing good corporate citizenship is often considered "the right thing to do." With regards to: charitable contributions, "Green" initiatives to promote environmental sustainability, renewable energy program, improved working conditions, and involved in dedicating our efforts to promote fair employment practices and safe working conditions at supplier factories (www.glo-bus.com).
From Decision for Year 11, the co-managers decisions are to likely reverse our strategy to make DigitCam the “numero uno” in the digital market: head-to-head completion against other competitors. Therefore, we plan to manufacture the cheapest possible products, and also sold at the cheapest price in all regions: North America, Asia-Pacific, Europe-Africa, and Latin America.
Upon closer reflection, this could result in lower P/Q Rating, and image rating, lower customer support, and likely compensations reduction – collectively, in comparison with the competitors in the digital camera industry. However, we plan to turn the situation around once our company starts making profits. In what follows DigitCam plan to improve the workers working conditions, wages and compensation to further increase our image rating with product quality.
Upon closer reflection, DigitCam would be increasing its market share, which is good because even though could be selling our products at a lower price – subsequently, our company would be manufacturing more digital cameras/products and creating a huge market share within the four regions. Therefore, the co-managers as strategic planners have established good long-term objectives vis-à-vis: profitability, productivity, competitive position, employee development, employee relations, technological leadership, and public responsibility – as core ideas for keeping DigitCam a globally competitive company.
The following competitive factors were used for Decisions Year 12:
Reviewing selling price for our entry-level and multi-featured digital cameras, comparing these against the corresponding industry wide average price in each of the four geographic regions: North America, Europe-Africa, Asia-Pacific, and Latin America
Ensures be a trusted measure of the company’s digital camera performance and quality in the much publicized annual world-wide P/Q ratings
Improves on the present numbers of special promotions each quarter of the year. Increases the intervals at which our company conducts special quarterly promotions
Increases the size of the discounts off the regular wholesale price by having special promotions involving sale prices range of between 15 or 20%
Formulate a strategy similar to competitors’ high quality-low price – increasing the warranty period to one year from 180 days.
Provides successful financial results within a scenario, critiques team decisions and corresponding results associated with financial results management, and evaluates both short- and long-term implications.
From the perspectives of the truth-seekers, successful and best-performing companies worldwide are based on four performance variables in relations to: Overall Score, Earnings Per Share (EPS), Return on Equity (ROE), and Stock Price.
In the same vein, DigitCam’s overall performance will be measured in Decision for Year 11 based on four performance variables. The co-managers most recent decisions are to increase EPS by buying back shares as soon as possible. For the reason, economists and financial observers use observations on numerous economic variables to understand that less outstanding shares means higher EPS. In what follows, DigitCam’s Stock Price would increase the stock price by increasing EPS. Likewise, our company’s Return on Equity would be increased by higher sales and higher profits.
Here again, as is apparent from the preceding decisions, the co-managers’ plan to implement strategy with regards to view the company’s anticipated results, current decisions and where we intend to be in the future vis-à-vis addressing weaknesses in the following financial strategies:
DigitCam’s financial strategy for Decision for Year 11, was formulated to eventually increase the value of the company
The co-managers have discovered that it is important for DigitCam to capture our marked market share at the earliest moment after decisions for Year 11. For the reasons, the truth-seekers convey that our company should hold onto their market share because it would be very difficult for us to gain it back if we loose it.
With that in mind, DigitCam would be generous with our marketing and tech support costs
On the balance, we would be aware of our competitor's strategy. It is especially important that our differentiation in financial strategy would be giving us the competitive edge we need to succeed head-to-head in this digital camera business
Continuously meeting our investor expectations
At this juncture, the co-managers are interested to make a special wholesale 10% discount offer to supply Action-Capture Cameras at a discount from regular wholesale prices. For the reasons, it could not have negative impact on our: combination of price, P/Q rating, and number of models of our digital cameras. However, the co-management are aware of anticipating the cash flow and profitability impact of winning one or more special contracts.
In keeping with that, DigitCam in its third year, is determined to exceed our investors and consumers expectation by increasing performance measures: Earning Per Share (EPS) and Return on Equity (ROE); providing “second to none” customer service; and by maintaining at all times an “A+” credit rating for a foreseeable future time. The DigitCam’s Decision for Year 12 on EPS is improving significantly, and it is been expected that the company would rebound to be one of the leaders in the digital camera industry on the long run.
From the expected performance in year 11, it would be justifiable to note that DigitCam Company has positive financial prospects. The company’s Actual Years 6, 7, 8, 9,10, 11 and 12 scoring measures are as follows:
Actual Year 6 Performance
Scoring Measures Year 6 Investor Expectation
Earnings Per Share $2.31 $1.00
Return On Equity 33.6% 17.0%
Credit Rating A– B+
Image Rating 71 70
Other Measures Year 6 Change from Y5
Net Revenues ($000s) 413,810 +23.8%
Net Profit ($000s) 46,253 +208.4%
Ending Cash ($000s) 23,422 +18,422
Actual Year 7 Performance
Scoring Measures Year 7 Investor Expectation
Earnings Per Share $3.37 $1.75
Return On Equity 36.30% 20.0%
Credit Rating A B+
Image Rating 72 70
Other Measures Year 7 Change from Y6
Net Revenues ($000s) 483,045 +27.10%
Net Profit ($000s) 67,309 +81.30%
Ending Cash ($000s) 65, 278 +47,317
Actual Year 8 Performance
Scoring Measures Year 8 Investor Expectation
Earnings Per Share $4.58 $2.75
Return On Equity 36.80% 25.0%
Credit Rating A B+
Image Rating 68 70
Other Measures Year 8 Change from Y7
Net Revenues ($000s) 539,618 +29.20%
Net Profit ($000s) 91,546 +79.20%
Ending Cash ($000s) 130,175 +74,274
Actual Year 9 Performance
Scoring Measures Year 9 Investor Expectation
Earnings Per Share $5.80 $4.00
Return On Equity 33.20% 30.00%
Credit Rating A B+
Image Rating 67 70
Other Measures Year 9 Change from Y8
Net Revenues ($000s) 598,271 +16.10%
Net Profit ($000s) 116,679 +37.20%
Ending Cash ($000s) 318,773 +193, 377
Performance on Credit Rating Measures Last year Year 9
(projected)
Debt / Equity Percentage (D:E) 31:69 33:67
Interest Coverage Ratio (operating profit ÷ interest exp.) 19.16 30.60
Current Ratio (current assets ÷ current liabilities) 3.28 2.54
Actual Year 10 Performance
Scoring Measures Year 10 Investor Expectation
Earnings Per Share $8.17 $5.25
Return On Equity 34.60% 32.50%
Credit Rating A B+
Image Rating 64 72
Other Measures Year 10 Change from Y9
Net Revenues ($000s) 614, 505 +16.20%
Net Profit ($000s) 164, 379 +69.50%
Ending Cash ($000s) 476, 612 +169,806
Performance on Credit Rating Measures Year 9 Year 10
(projected)
Debt / Equity Percentage (D:E) 33:67 28:72
Interest Coverage Ratio (operating profit ÷ interest exp.) 30.66 38.68
Current Ratio (current assets ÷ current liabilities) 2.54 3.78
Actual Year 11 Performance
Scoring Measures Year 11 Investor Expectation
Earnings Per Share $10.49 $6.50
Return On Equity 35.80% 35.00%
Credit Rating A+ A-
Image Rating 58 72
Other Measures Year 11 Change from Y10
Net Revenues ($000s) 731, 633 +73.90%
Net Profit ($000s) 211, 198 +119.40%
Ending Cash ($000s) 381, 432 - 53,109
Performance on Credit Rating Measures Year 10 Year 11
(projected)
Debt / Equity Percentage (D:E) 29:71 7:93
Interest Coverage Ratio (operating profit ÷ interest exp.) 23.07 134.68
Current Ratio (current assets ÷ current liabilities) 3.53 11.06
Actual Year 12 Performance
Scoring Measures Year 12 Investor Expectation
Earnings Per Share $16.10 $7.50
Return On Equity 37.70% 37.50%
Credit Rating A+ A-
Image Rating 51 72
Other Measures Year 12 Change from Y11
Net Revenues ($000s) 893, 060 +19.60%
Net Profit ($000s) 323, 931 +47.90%
Ending Cash ($000s) 715, 163 +327,902
Performance on Credit Rating Measures Year 11 Year 12
(projected)
Debt / Equity Percentage (D:E) 7:93 7:93
Interest Coverage Ratio (operating profit ÷ interest exp.) 139.63 1000.00
Current Ratio (current assets ÷ current liabilities) 10.63 24:45
Evidently, it has been noted that we achieved a return on equity of 37.70%, while the investor expectation was 37.50%, while 26.60% was projected. Accordingly, it has been observed that the return on equity indicates the profitability of a company. Further, the company generates the money that has been invested by shareholders of our company. It has been observed that our expected Earnings Per Share of $16.10 is relatively high, while investor expectation was $7.50, while $10.66 was projected. Hence on basis of the specific ratio it is justifiable to claim that our company has positive financial prospects; when compared to our performance the previous years vis-à-vis our financial tools: net revenues, net profit, earning per share (EPS), returns on equity (ROE), credit rating, image rating, cash balance and loans outstanding (www.glo-bus.com).
Conclusion
In particular, the DigitCam’s strategy that we would will be implementing as the most recent decisions include but not limited to watching closely and beating the competitors on what the competitive assumptions are offering on Product Design, AC Camera Marketing, and UAV Drone marketing vis-à-vis: average retail price, price to retailers, P/Q rating, number of models, retailer support, advertising budget, website displays, sales promotions, and warranty period. For example, Website display, search engine advertising costs have been significantly increased by100% compared to the competitors. Warranty periods have been increased from competitor’s 275 days to one year. Sales promotions are been increased competitors’ 9 weeks to our projected16 weeks at 30% discounts. Likewise, the co-managers have initiated upgrade for the company’s “robotic upgrade for all ACC and all UAV workstations. Lastly, retailer recruitment / support budget was significantly increased to support our anticipated result and where DigitCam is going in the future.
Taken together, it is our major organizational objective to maximize the wealth of the shareholders. The management of DigitCam Company has assessed the viability of gauging the company’s quest to maximize the wealth of the shareholders - as a major factor to consider. Thinking it through, our company has a promising return on equity, as an indication that we could be maximizing profitability over time - a justification that our company has positive financial prospects. It is also worth noting that the ending cash has a positive change on Decision and Reports for Year 12 (Brigham & Ehrhardt, 2013).
Collectively, DigitCam’s Decision and Reports for Year 12 has positive change in revenues between year 6, year 7, year 8, year 9, year 10, and year 11. This is an indication that the company is undertaking to maximize its sales volume; which is likely to maximize profitability with all other relevant factors held constant. Certainly, the rolling analysis assessment of the liquidity of our company is thus promising - a factor that would further be used as a basis of justifying the viability of investing in DigitCam Company. Optimally, our company’s balance sheet is considered to be “stronger” at Debt / Equity Percentage (D:E) of 4:96, Interest Coverage Ratio: 1,000.00 and Current Ratio of 24.45. For the reasons, the higher the percentage of our company’s capital structure that is equity-financed the ” the lower the percentage of its capital structure that is debt-financed (Brigham & Ehrhardt, 2013).
On the balance, the Management of DigitCam Company would continue to utilize public relations for multiple purposes vis-à-vis, promoting our brand digital cameras. Hence, public image plays a major role in the future of the DigitCam Company because we are addressing the basic business goals of survival, growth, and profitability (Pearce & Robinson, 2015, p. 26).
References
Brigham, E. F., & Ehrhardt, M. C. (2013). Financial management: Theory & practice. Cengage Learning.
GLO-BUS Software. (2011). GLO-BUS: Developing Winning Strategies: An Online Simulation. McGraw-Hill: Irwin. Retrieved January 22, 2017 from http://www.glo-bus.com
Pearce, J. A., & Robinson, R. B. (2015). Strategic management (14th ed.). New York, NY: McGraw Hill.
