SENSORS inc. Performance Report

Organizational Strategy MANA 4322

By:

Sensors

Mission Statement

SENSORS, Inc. is one of the leading manufacturers in the sensor industry. We

believe in creating quality products that meet and exceed our customer’s expectations –

creating more value than they expect. Our employees are able to succeed only through

our customer’s success. As we are intertwined into the fabric of our larger community,

our actions are in line with such responsibility. We take responsibility in protecting our

community, our environment, protecting fair working conditions, and most importantly

focus on the individual when making decisions.

We take pride in serving in the best interests of our stakeholders. Our success in the

industry has allowed us to generate substantial wealth for our shareholders. Our ability to

adapt to our surroundings, making appropriate changes to survive in this environment

says a lot about the longevity of this company. We are focused on continuous

improvements through appropriate initiatives and strategic management. SENSORS,

Inc’s has positioned itself to be highly competitive for years to come.

SENSORS, Inc’s adopted a differentiation strategy with a product lifecycle focus.

Our strategy was to offer products with excellent design, high awareness and easy

accessibility. We will develop an R&D competency that keeps our designs fresh and

exciting as they change in appeal from High Tech to Low Tech. Our products will keep

pace with the market, offering improved size and performance. We will price above

average. We will expand capacity as we generate higher demand.

Original Strategy

Our vision is to offer premium products for mainstream customers: Our brands

withstand the tests of time. Our primary stakeholders are customers, stockholders,

management and employees. We have chosen the following tactics: In respect to

research & development, we will have multiple product lines in both segments. Our goal

is to offer customers products that match their ideal criteria for positioning, age, and

reliability.

Our marketing department will spend aggressively in promotion and sales. We

want every customer to know about us, and we want to make our products easy for

customers to find. We will price at a premium.

Our production function will grow capacity to meet the demand that we generate.

After our products are well positioned, we will investigate modest increases in

automation levels to improve margins.

Our finance department will finance our investments primarily through stock

issues and cash from operations, supplementing with bond offerings on an as needed

basis. When our cash position allows, we will establish a dividend policy and begin to

retire stock. We are somewhat adverse to debt, and prefer to avoid interest payments. We

expect to keep assets/equity (leverage) between 1.5 and 2.0. We measure performance in

terms of stock price, ROS, Asset Turnover, and ROA.

The sensor industry is divided into two main segments: low tech and high tech.

Products were placed in these segments based on their performance and size. Every

week the criteria will change slightly. Every year, consumers in the sensor industry had

higher expectations for performance and size. The buying criterion was broken down

into performance, size, price, age, and reliability.

Internal and Environmental Analysis

After the former monopoly was broken down multiple yet identical companies,

SENSORS, Inc which belonged to Andrews, began with identical financials to its

competitors. In 2008, the sensor industry had these characteristics.

December 31, 2008

As you can see, the market shares for all products were equal at 17%, and

customer awareness was at 55% across the board. Our goal was to increase market share

by creating products across the two segments with aggressive marketing in our promo

budget and sales budget. With growth rate at 10% for the low tech segment and 20% for

the high tech segment, we had to make sure to capitalize in the high tech segment as the

years progressed.

Let’s focus our attention to the industry 7 years later.

December 31, 2015

Andrew’s created five products to compete in the sensor industry: Able, Bigbr,

Brother, Action, and Bable. These products were introduced very early. Through their

early introduction, were able to increase our accessibility from 40% in 2008 to 99% in

2015. Andrews led all other companies in terms of accessibility. Unfortunately, due to

issues with cash flow in early years, Andrews made a poor decision to decrease capacity.

This decision caused continuous stock outs, which decreased potential profits and market

share. In spite of this poor decision, Andrews was able to increase its market share from

17% in 2008 to 21.1% in 2015. Andrews led the way in terms of market share greatly due

to its market share in the high end segment. The trailing market share values for its

competitors were: 15.3%, 14.5%, 19.1%, 16.3%, 13.7%.

We must, however, determine the strategy of Andrew’s competitors to evaluate

the environment.

Baldin and Chester chose to place their 3 products in very competitive locations.

Their low tech products were placed in the center of the fine cut circle on the perceptual

map, the ideal location for the low-tech segment. They placed their midlevel product in

between both segments to attract customers from both segments. Lastly, they placed

their third product in the ideal location in the high end segment, in the bottom right

portion of the fine cut circle. The ideal locations enabled them to them to price at

medium level, but their added unit sales from their ideal locations made up for the

lowered product price.

Digby placed their products in the center of the fine portion of the low tech

segment, in between both segments, and the ideal portion of the high-tech segment. Out

of all the strategies available, they seemed to have chosen differentiation with a product

life cycle focus. However, Digby may have benefited from producing another product in

the low tech segment to follow their strategy.

Erie chose the strategy of the niche cost leader. The size of their products was

larger than that of its competitors, since the low tech market did not focus as much on

small size. They focus on the low tech segment. They were able to compete on the basis

of price. Their prices of were below average.

Ferris chose a niche differentiation strategy which focused on the high tech

segment. Their average performance was greater than that of every other company. Since

they were striving to lead the market in the high tech segment, they priced their products

at a premium averaging around $43.

There were two deviations from our strategic plan. We were risk averse, however,

how cash flow issues in the early years created a necessity to borrow more than we wish

we could. Also, our automation levels were high, which created lower labor cost and

resulted in higher contribution margin. However, Able’s automation level was 8.0 which

did not parallel the strategy of increasing automation conservatively. Our success with

Able in early years created an incentive to increase our profits further by decreasing labor

costs even further. However, in the process it created higher production costs in a time

Deviations and Alterations to the strategic plan

where cash flow was a serious problem for us. We were in a position to begin buying

back stock and issue dividends in 2016, unfortunately, the simulation had ended.

IPO 2008: At 20%, the contribution margin needed to be increased in next few years.

Andrews enjoyed profits of $2,485,186. Andrews had 6.1% ROS and ROE of 19.3%.

Sales were roughly $40,799,953. The stock price for Andrews closed at $11.15 with a

market cap of $22 million. The EPS was $1.24 and the P/E was 9.0. Our bond rating was

BBB. Our competitors and Andrews shared an equal market share of 17% a piece.

Round 1 2009: Andrews created two products Able and Action. Able was placed in the

center of the fine cut in the low tech segment. Action was placed in the ideal location of

the high tech segment, the lower right portion in the fine cut. We allocated $1000 in our

sales and promo budget. However, we should have increased our promo budget to $1400.

We had the vision of creating five products to follow our strategy, but we wanted to

evaluate our competitors before we produced more products.

Decisions:

Round 2 2010: Andrews created began creating Bigbr to begin its line of 5 products.

However, we did not create adequate capacity for its production. This not only hurt us in

respect to our current products, but decreased our stock price. Also, we should have

increased automation and capacity at a steady rate, but we did not. No financing, HR nor

TQM initiates were created which was a bad choice. We did not revise Able in order to

increase its age so we can cater to the low tech segment.

Round 3 2011: Andrews began increasing capacity to meet demand. However, at this

point in time, we should have issued stocks and bonds to enable us to increase capacity

and automation to increase our contribution margin. Our market share was higher than

other companies; however, due to lack of profitability our stock price was dropping even

further. Our average contribution margin was less than 30%, which signaled us to

increase automation and increase HR and TQM initiatives. An emergency loan had to be

taken.

Round 4 2012: These products allowed us to attract customers from portions of both

segments. Our market share exceeded all other companies. However, our cash flow issue

was still haunting us. Our stock price was at free fall. Emergency loan interest rates were

decreasing the bottom line, and we were operating at a loss. We began increasing our

promo budget and automation.

Round 5 2013: To increase our cash flow, we began to issue bonds and decrease

capacity. We did not want to lose our customers even further, so we continued to allocate

money in marketing so we could make a comeback in the following years. We were

increasing automation at steady rate because of our multiyear plan to provide quality

products at a premium, but at low costs. We began issuing bonds for financing. We just

needed to increase our profitability and cash flow. However, we still weren’t able to

avoid an emergency loan.

Round 6 2014: We have finally avoided taking an emergency loan, and began creating

substantial wealth for the company. Our high automation levels and TQM initiatives were

allowing us to create products at low cost, increase demand, and decrease manufacturing

costs. We issue stocks increase the returns for our stockholders. Our stock raised from $1

to $27 a change of $26. We believe that our bad days are behind us, and our stockholders

will begin to benefit once again. Our net profit is $15 million.

Round 7 2015: Our stock price is soaring to $83, a change of $55. Our contribution

margin averaged over 50% across the board. We continue to allocate aggressively in our

marketing functions. We continue TQM and HR initiatives. Our profits are increasing

dramatically, and the future of the company looks great.

Round 8 Proforma

We went ahead a made decision for a round 8 just to see where the company may have

been in the following years. The numbers were astounding. Our stock price had the

possibility of soaring to over $150. Our leverage was in our ideal range to benefit our

investors. With increases in capacity, we would have avoided stock outs which would

have increased our market share and increased profits even further. We seemed to have

become a cash cow.

Andrews began with creating two products, one in the low tech segment, and one

in the high segment. Unfortunately, one of the company’s weaknesses was creating

adequate capacity as we could see many stock outs which decreased profits and customer

surveys. Also, we failed to raise adequate funds from financing in early years as what

was suggested by our strategy. After a few years of requiring emergency loans, we began

financing the company through issuing stocks and bonds. However, in the poor years we

managed to drop our stock price to $1.00. This also put us in a position where stock

issuance would not increase our cash flow as much as it would have if we issued the

stock in year 2009, when our stock price was $15.26. If we could change two decisions

in the past, it would be to allocate adequate capacity in 2009. After the company lost

dramatic revenues from not allocating adequate capacity, we should have issued stocks

Evaluation & Analysis

and bonds to raise money. After years of creating competitive products, investing in

TQM and HR initiatives, allocating generous revenue to sales and promotion budgets,

increasing automation to decrease labor costs, and finally borrowing money from stocks

and bonds we were able to compete and outperform all other companies in the industry. It

is bittersweet, however, because in real life the emergency loan would not have been

available for us and we would have gone bankrupt on multiple occasions. Overall,

finishing second place in company performance looks great, but there were too many

mistakes along the way to be proud of the results.