Advanced Camera Lessons Learned - Coursework Example

Advanced Camera Lessons Learned Advanced Camera Competitive Strategy The digital camera company in focus, Advanced Camera, has been in a market characterized by intense competition over the past 5 years. The latter period, named year 6 to year 10, has seen the company adjust its strategic operations accordingly, in the bid to attain its leading position in the market. This report addresses the overall strategic goals adopted by Advanced Camera, competitive analysis, marketing strategy, fiscal strategy, as well as, other critical lessons drawn from the 5 year Glo-bus simulation. The company was founded upon the principal goal of offering high quality digital cameras at reasonable pricing. We sought to achieve this by utilizing the broad differentiation strategy, thus capitalizing on Advanced Camera’s strong capabilities and lowering risk linked to the company’s weaknesses. This competitive strategy aligned with other strategic objectives, enabling Advanced Camera to capitalize on both entry-level and multi-featured cameras, as opposed to providing a standardized line of products that fails to account for customer diversity in the digital camera market. Advanced Camera consistently adhered to the broad differentiation strategy, as could be discerned from the company’s product design approach, research and development efforts, marketing approach, and labor and compensation strategy, among other vital operations. For instance, in product design, the company opted to maintain reasonable P/Q rating not only for entry-level cameras, but also for multi-featured ones. This was achieved through utilization of high quality camera components, coupled with advanced technology throughout research and development, as well as, in the entire value chain. In further support of broad differentiation, Advanced Camera adopted labor and compensation measures that sought to equip human resources with the capacity necessary to manufacture products unique from those of rivals in the market. This entailed creating balance between employees’ competency, through financing training, and corresponding increment or decrease of the number of PATs. Consistency in broad differentiation strategy was also evident from the company’s use of marketing approaches that suited both product lines, but distinguished them enough to target both amateur and professional photographers in the various market segments. Defensive and Offensive Strategic Options Given the broad differentiation strategy selected by Advanced Camera, the company’s success has been hinged on strategic grouping of product attributes, promotions, production cost, and pricing. It is imperative to note that intensity of competition was elevated in entry level camera pricing. Competitors like Design Spectators, Elite Captures, and Champion Cameras chose to aggressively price their cameras low, in an attempt to be low cost providers. Rather than try to keep up with their low prices and risk incurring losses due to lower revenue and concurrent high production costs (Dess, Lumpkin, & Eisner, 200), Advanced Camera opted to differentiate its cameras by lowering cost of production while enhancing the product quality. Through application of cutting edge technical expertise, proper duty assignment to PATs and their adequate motivation, the company was able to lower production costs, while significantly improving the ultimate outcome. This meant that customers in target geographical locations would feel comfortable choosing our cameras, although slightly higher priced than those availed by our rivals, because they were assured of high quality. Maintaining camera prices and driving down production costs served as instrumental defensive mechanisms, enabling Advanced Camera to compete successfully in a global environment characterized by intense rivalry. Introduction of more high quality camera models than competitors at the entry level, coupled with multi-feature cameras bearing a relatively wide profit margin, also acted as a defensive strategic option for Advanced Camera against low cost providers. In regard to aggressive strategic options, Advanced Camera adopted an intensive marketing approach. The decision to promote our products more than any of our competitors was aimed at increasing brand awareness and enhancing brand image in the various target markets. The aggressive marketing plan featured advertisement in print media including magazines and newspapers, electronic media like television and radio adverts, as well as, the internet and affiliated social media podiums. These promotion methods sought to not only capture more prospective customers and convince them to try Advanced Camera, but also to back up the relatively high pricing linked to the company’s strategies and its quality products. The marketing campaign, which also comprised of promotion tactics like high discounts that lasted for long, covered both multi-function and entry-level cameras, thus effectively increasing the company’s overall competing capacity. Another aggressive tactic was based on the varying sensitivity of diverse regions to price alterations, and foreign currency variations. Whenever these conditions swayed in favor of Advanced Camera, the company aggressively made an effort to increase its market share and sustaining profitability. This tactic was particularly employed in markets outside North America that is, Europe-Africa and Asia-Pacific. This approach further supported Advanced Camera’s capacity to avail affordable entry-level and multi-function cameras to its chosen markets. In addition to marketing aggressively and adjusting in accordance with prevailing market conditions, Advanced Camera continued to invest in new technology. The latter served not just as a defensive mechanism in sustaining the company’s quality production, but also as an aggressive tactic. This is because the technology investment allowed Advanced Camera to increase production capacity, hence availing products to the market in a time and cost saving manner. It is important to note that such savings were passed on to customers during later years (7 to 9) in form of affordable prices. The slightly lower pricing was implemented in new markets outside North America, thus luring more customers in these locations. These operational strengths, weaknesses, opportunities, and threats are summed up in the SWOT analysis below. SWOT Analysis Strengths Production of unique and High quality Products hence the success in its sales Strong market position Reasonable pricing for their products Good branding Implementation of well planned and executed strategies Utilization of advanced technology Skills Intensive marketing approach to enhance brand awareness Weaknesses Weak Corporate social responsibility strategies Lack of customized products in all regions Less cohesion of employees affecting decision making and productivity Opportunities Use of more strategic approaches Customized products in more regions Improve employees working conditions Expanding global market presence Threat Immense competition forcing the company to lower their prices Rapid technological advancements Strategic Competing Approach in the Global Digital Camera Market Advanced Camera had to choose a comprehensive strategic approach to compete with success in all the geographic regions targeted. For this reason, the company adopted the think global, act local strategic approach. This implies that there was a combination of strategies embracing attributes of both global and local entrepreneurship. The company recognized the fact that, in order to be effective, it had to adopt strategies that combined the universality allowed by globalization, and the distinctive characteristics of local markets (Thompson, 2014). Advanced Camera also saw potential in focusing on distinctive market clusters in North America, Asia-Pacific, Europe-Africa, and Latin America, than by considering them to be an entire similar market. This was crucial to production and profitability, since as emphasized by Slack, Chambers, and Johnston (2010), each market is different based on popular culture, and prevailing business practices, among other aspects. In the effort to sustain the think global, act local strategic approach, Advanced Camera made concerted efforts to customize cameras for the various regions, and especially Asia-Pacific. This was in recognition of the fact that it is no longer feasible for global firms to charge customers from the region, premium prices to purchase products designed and manufactured for customers in developed nations like North America. The company’s success in the Asia-Pacific region, therefore, largely depended on understanding both global and regional tastes and preferences of consumers. Local design was deemed crucial in this market, because most digital camera buyers expect a very broad array of devices within short cycles of innovation. The essence of customization of cameras in these market regions was also bolstered by the unique needs of customers (Thompson, Strickland, & Gamble, 2013). For instance, while customers in the Asia-Pacific region may opt for cameras that are sophisticated and have intricate LCD screens, others in North America, Europe-Africa, and Latin America primarily demand high resolution, thin, and portable models. These and other distinctive customer needs, therefore, paved way for the company’s strategic approach. Another aspect that prompted adoption of the think global, act local strategy was acknowledgement of the disparity in marketing approaches. The company had to learn to promote and sell its cameras across a diverse assortment of marketing channels. For instance, penetration capacity of online and tradition media is lower in developing markets like Asia-Pacific, Europe-Africa, and Latin America, compared to developed ones such as in North America. This implies that efforts to influence purchasing were more complex in the developing markets, than in developed ones. As a result, Advanced Camera had to apply not just the globalization oriented marketing channels like print, radio, TV, and the world wide web, but also local approaches that could resonate with customers in respective regions. The latter included in the company’s aggressive marketing approach included demonstration events, educational campaigns, outdoor ads, in-store promotions, and mobile messaging. Just as suggested by Hitt, Hoskisson, and Ireland (2007), effective management of multichannel advertising and sales allowed the company to achieve significant brand building. This strategic approach allowed Advanced Camera to create an adaptive business model that leveraged innovation and production scale throughout the various market regions. The tendency to think globally but act locally also explains the company’s leading position for the past five years. This is because tailoring products and business practices to meet tastes, needs, and requirements at the local level, supported faster and low-cost value chains that the company initially sought to create and sustain. The think global, act local approach to successful international competition also supported Advanced Camera’s ability to sell a high volume of entry-level cameras despite their low profit margin, which is vital to sustainable business success. Resource Management Decisions In the first year of operation, that is, Year 6 started out relatively alright for Advanced Camera. The company, however, only focused on meeting standards set by stakeholders, without much focus on exceeding expectations. As a result, the company accrued total revenue (in 000s) of $212, 596, while the projected revenue was $212, 279. This shows an excess of $317 even though the net profit was lower by $400, while the earnings per share (EPS) was 2.33, as opposed to the projected 2.33, ROE of 23.8 instead of 24.1, a credit rating of B+ and image rating of 70, while the projected was 73. Although there was not much variation between the projected and actual performance in year 6, the outcome was partially disappointing, calling for strategy refinement. While we initially invested in energy efficiency, as a CSR tactic, during year 6, we found out that the decision was not viable at that point in time. In year 7, Advanced Camera shifted its focus towards meeting and exceeding stockholders’ expectations by taking keen consideration of product design, marketing strategies, labor and compensation measures, all aimed at improving outcomes in terms of EPS, ROE and various ratings. For instance, in regard to marketing, we opted to reduce the number of multi-store chains, online retailers, and local camera shops in North America and Europe-Africa market regions, while increasing technical support and sustaining quarterly advertising. In the Asia-Pacific and Latin America markets, the company increased the number of multi-store chains, online retailers, and local camera shops, in order to exploit the untapped market potential. Technical support was also increased in these markets, with quarterly advertising being maintained in Asia-Pacific region, and increased from $250 to 400 (000s) in Latin America. In regard to compensation and labor strategy, the company increased Base Wage per PAT from 1 to 2%, incentive pay from $1.5 to 2 per unit assembled, and quarterly attendance bonus from $100 to 150. These measures bolstered the company’s goals of increasing market share and adequately differentiating products in terms of quality, as could be discerned from increased net profit at $43, 982, EPS at 4.44, ROE at 43.7, credit rating at B+, and image rating at 78. Continued alteration of these strategies in subsequent years continued to foster the company’s growth. For example, sustained product design and number of units assembled for both entry-level and multi-function cameras, alteration of marketing approaches to suit the various market regions, continued provision of labor incentives, as well as, balancing debt and equity, all played a combinative role in enhancing the company’s overall growth and industry leadership. By year 9, Advanced Camera had managed to maintain its first position in the industry, with a net profit of $72, 344, an EPS of 6.52, ROE of 46.5%, a credit rating of A- and image rating of 84. The fiscal performance outcome measures demonstrated a significant competitive edge over industry rivals. In year 10, Advanced Camera opted to maintain most of its strategic decisions as those of the preceding year. For instance, all product design decisions stayed the same, with the company supplying the same models and number of cameras for both entry-level and multifunction cameras. The same applied to the company’s marketing decisions, with the only difference being in increased investment in quarterly technical support and quarterly advertising in the Latin American market by $200 and $300 (000s) respectively. This was aimed at luring a greater customer base, since this is the only market that the company had not fully captured. In regard to assembly decisions, the company decided to decrease the number of entry-level cameras supplied to the North America and Asia-Pacific markets, while increasing them in the Europe-Africa and Latin America markets. Further, Advanced Camera decreased the number of multi-featured cameras in all markets by an average of 2 units, in an effort to stabilize costs and capitalize on generated profits. In terms of labor and compensation, the company increased incentive pay by $0.1 per unit from the previous year, and quarter attendance bonus from $160 to $170. The other operational elements including financial management and CSR remained fairly constant. Given the company’s consistency and investment in areas deemed weak in the preceding year, Advanced Camera was able to attain its most exceptional performance in the five years of operation. This was evident from the company’s net profit of $90, 119, EPS of 7.9, ROE of 48.6%, an A+ credit rating, and an image rating of 86. The improved efficiency of the company could also be discerned from the reduced percentage variance between the projected and actual performance from 17.6% in the previous year to a meager 2.5%. However, although we managed to uphold our performance, Dezign Spectators took up the industry headship position, perhaps because of low cost leadership in the global multi-featured camera market. Figure 1 Advanced Camera Progress from year 6-10 Corporate Social Responsibility and Corporate Citizenship Efforts Corporate social responsibility (CSR) undertakings wield the ability to create various forms of value for consumers. It is consumers’ perception of such value that influences the association between a CSR activity and resultant financial performance (Peloza & Shang, 2011). In our company’s case, a key CSR investment was in energy efficiency programs. The latter took place in year 6 of operations, with an investment of $2,000. In conceptualizing this CSR approach, the company sought to embrace the increasingly recognized importance of saving energy, hence saving costs and being environmentally conscious. We thought that this activity would make it possible for the company to save production costs, while increasing sales through provision of energy efficient digital cameras (Rand, 2011). However, we found out that the investment was not viable, since no profit was derived from it, hence its cessation from year 7 and subsequent years. Other CSR activities undertaken by the company included charitable events, sponsored from years 7 to 10. These activities served as proof that Advanced Camera was not only interested in promoting its financial objectives, but also in safeguarding the social values and interests of regions in which it operated. Other undertakings include sponsorship of green initiatives, in the bid to lure the environmentally conscious buyers, as well as, improvement of employee working conditions, in order to motivate them and heighten their productivity capability. Advanced camera also invested in CSR activities aimed at putting suppliers’ conduct in check, thus saving on sourcing costs. Overall, the company accrued a 2% profit from its collective CSR activities, from year 7 through 10. Decision Making Style and Conclusion In summation, Advanced Camera successfully increased its market share in various market regions, while becoming a leader in both entry-level and multi-function digital cameras. This would not have been possible without the decentralized decision making frame work adopted by the company. The distribution of decision making mandate throughout a large group of managers made it possible for us to come up with a comprehensive set of strategic goals and an equally broad strategy to achieve them (Thompson, Strickland, & Gamble, 2013). The dispersion of authority to different partisans further allowed candid communication and cooperation in formulation of operation tactics (Cohen, 2004). This form of decision making also laid the foundation for different stakeholders to come together in resolving contentious issues, thus ensuring that everyone involved was supportive of the strategy and its constituent duties and responsibilities (Hambrick & Fredrickson, 2005). There was also transparency in every area of decision formulation and overall communication hence fostering consensus and accuracy (Wang, Chiang & Tung, 2012). The primary disadvantage, however, was the excessive time spent in the attempt to ensure that all participants agreed to a single decision. It was also relatively difficult to ensure that all people agreed to something, with some feeling that their input was more valuable than others. Advanced Camera will strive to sustain its leadership in production and supply of both entry-level and multi-function cameras, through broad differentiation to meet diverse customer needs and market conditions. References Cohen, A. (2004). The Art of the Strategist: 10 Essential Principles for Leading Your Company to Victory. New York, NY: AMACOM. Dess, G., Lumpkin, G., & Eisner, A. (2006). Strategic Management: Text and Cases. Boston: McGraw-Hill Irwin. Hambrick, D. & Fredrickson, J. (2005). Are you sure you have a strategy? Academy of Management Executive, 19(4), 51-62. Hitt, M., Hoskisson, R., & Ireland, D. (2007). Management of Strategy: Concepts and Cases.7th ed. Mason, United States: Thomson South-Western. Peloza, J. & Shang, J. (2011). Investing in CSR to Enhance Customer Value. Retrieved from http://www.conference-board.org/retrievefile.cfm?filename=TCB%20DN-V3N3-111.pdf&type=subsite Rand, I. (2011).Unlocking the Benefits of Energy Efficiency: An executive Dilemma. Retrieved from http://www.cees.ingersollrand.com/CEES_Documents/Economist_Ingersoll_Rand_Energy_Efficiency_Report.pdf Slack, N., Chambers, S. & Johnston, R. (2010). Operations management. Harlow: Prentice Hall/Financial Times. Thompson, A. (2014). Strategy: Core Concepts and Analytical Approaches. New York, NY: McGraw-Hill/Irwin. Thompson, A., Strickland, A., & Gamble, J. (2013). Crafting and executing strategy: The Quest for Competitive Advantage: Concepts and Cases. New York, NY: McGraw Hill. Wang, K., Chiang, C., & Tung, C. (2012). Integrating Human Resource Management and Knowledge Management: From the Viewpoint of Core Employees and Organizational Performance. The International Journal of Organizational Innovation 5 (1): 109-137. Read More