Decision Making Experience of Sleek Bikes Company - Case Study Example

PERFORMANCE, PLANNING & DECISION MAKING Executive Summary Sleek Bikes is a manufacturer of Bikes and has been in operation since 2008. Over an 8 yearperiod, the company has expanded to producing bikes under three different brands, each of which caters to the needs of a specific segment of the market. Through the brands Adv4, Easy ride and Kiddo, the company has been serving Bikers from the professional, regular and young segments. However, running the business requires constant monitoring and evaluation of operations and requires requisite decisions and improvements to be undertaken in order to achieve the necessary improvements. This is desired to be achieved by analyzing the various reports and results that have been provided by the simulation of the company’s performance over the 8 year period. By analyzing the figures within the reports, it is aimed to provide a detailed analysis of the performance of the company across several dimensions that would evaluate the working of the various departments, brands as well as the management of the company. Each of these evaluations have been presented in the sections described below: Introduction Managing any business is a complex task. It encompasses the tasks of monitoring day to day operations across several perspectives and undertaking the necessary actions to correct defects, enhance the scale and volume of business and operation as well as ensure maximum profitability with the subsequent minimization of time, effort and costs. In order to undertake a comprehensive and an integrated measurement and assessment of the performance of the business and to be able to forecast the possible scenarios in the coming future require a constant effort to analyze and apply information through the use of balanced decisions, which are formulated on the basis of structured plans for the evolution and development of the business (Richard Rudman, 2003). One of the primary prerequisites of enhancing the pace of growth of the business lies in being able to plan a decisive plan and monitor the performance of the business accordingly. This can be done though the analysis of various parameters such as the profit and loss, cash flows, the sales and marketing aspect as well as the impact from competitors within the market. All these aspects provide for a critical review of the business thus helping in making the correct decisions in the course of planning and budgeting for the coming future. Additionally, one needs to appraise and understand the complex interrelationships through which a business operated and ensure that all these functions run in a smooth and integrated manner through a cohesive framework (Mark Lutchen, 2003). This can be achieved through the use of simulation, which can help understand the performance of the business over a period of time in numerous situations and scenarios. such an evaluation further helps in identifying all risks apart from planning several approaches for the purpose of mitigating them and judging their impact on the performance of the business. a) Review of performance during the first 2 years. Businesses operate with two primary objectives in mind namely, maiming profit apart from minimizing all costs. It is therefore deemed necessary to begin with discussing the profit earned by the company during the first 2 years of operation. The company has managed to earn a modest profit during this period, which it has been doing through the sale of a single brand during these initial years, namely the Adv4. Sleek Bikes has been able to earn increasing profits along with a gradual rise in the retail price of Adv4 during this period, leading to a conclusion that the product had been largely accepted by the consumers. However, the profit margin is rather lesser than the figures posted by its competitors, which indicates that there is room for improvement. Despite a constant manufacturing capacity during the first year, the subsequent year (2010) witnessed a marked increase in the production capacities of a few competitors although Sleek Bikes chose to maintain a constant pace of production. This was partly due to the early stages in the company’s history, wherein the focus was primarily on consolidating and sustaining any available space within the market (Carlos W. Moore, 2008). As such, it was deemed important to ensure that the company had a firm footing, before it began to diversify more products or worked towards enhancing production capacities. However, given the fact that Sleek Bikes has managed to post considerable profit margins, it is advised to work towards assessing the possibilities towards increasing production volumes to ensure growth and better sales, which must be decided by considering the anticipated market demand for the company’s products. Despite the higher sale price of Adv4, the company has been unable to keep up with its competitors over sales revenues and this is also found to be directly proportional to the production volumes produced. This suggests that the supply is lesser than the demand in the existing market, which signifies the need to increase production if any further market consolidation is to be achieved. Better profits and sales lead to better overall growth. This cannot be better justified apart from the growth in the shareholder value (Wayne W. Eckerson, 2005). Sleek Bikes’ shareholder value has remained rather consistent over a period of two years and the addition to its value has been rather insignificant in comparison to what other manufacturers such as Joech, Chameleon bikes or Knight riders. This indicates a relatively lesser investor confidence in Sleek Bikes, which calls for the immediate need to channel extensive resources and effort towards improving on this front through better sales figures in the near future. additionally, the company also feels the need to be better known in the public, which cannot be achieved through the offer of a single brand Adv4, which happens to target a very specific and smaller subset of the overall biking populace (Mats Forsgren, Jan Johanson, 1992). If the company is to make any further inroads into the domains of its competitors, it needs to understand that the reasons for the relatively higher success in the case of others has been due to the fact that they have been offering products that cater to the needs of a relatively larger customer base. Children and normal commuters happen to be a larger sub segment in comparison to adventure bikers and the company needs to take cue from this aspect and work towards launching itself into these bigger market segments. b) Review of results The performance of Sleek Bikes as a firm is deemed necessary to be undertaken across several frontiers in order to provide an overall perspective over the performance as well as the strategic position of the company. Sleek Bikes operates in the market through three individual products, each of which caters to distinct subsets of the bikes market. Apart from the ‘Kiddo’ brand in the Kids segment and the ‘Easy Ride’ brand within the Commuters section, the company also caters to the needs of professional and adventurer bikers by offering the Adv4. The company has maintained a constant emphasis on quality as is evident from the corresponding rating, which stands at 0.88 on a scale of 0 to 1.0. However, despite a continued awareness within the customer base at around 0.5, which is similar to its standing among its competitors, the company has not been able to reach the top within any of the sub segments of operation. As such, this is one area where additional effort needs to be put in if a increasing share of the market is to be consolidated. The Kiddo Brand has witnessed the largest volume of sales within its segment despite it being offered at the highest price among existing brands. It is believed that working towards offering the product at better competitive prices will help it gain a bigger share of the market. This is further substantiated from the offer price for Easy ride, which the company has been able to provide within the cheapest prices within the market. The company has also been able to maintain a higher distribution rate in the case of the latter brand. Therefore, it is proposed to follow a similar marketing strategy in the case of the Kiddo brand to help brighten up the performance within this sector. In the adventurers segment, the company has further not been performing convincingly as it has been able to sell only a third of the largest rival, Adv2 (Michael J. North, 2007). Despite offering better quality, lack of similar effort in PR as well as distribution have been identified as the main sources of trouble and efforts are on to address concerns in these areas for this particular segment. Analyzing the demand forecast chart for the company’s products has led to the conclusion that the analysis was accurate to within highly acceptable limits in the case of Adv4, while the seems to be no conclusion whatsoever for the other two brands. This shows the need to gather requisite data in a quick and efficient manner and undertake the necessary effort in order to provide the required analysis, which could help the company determine the future course of action. Though the sales over the 8 year period have remained constant for the Adv4 and Easy ride brands, the constant rise in sales for the Kiddo brand has led to the conclusion that the product is more appealing to an increasing group of potential customers (J. T. Li, 2001). As such, reducing costs without compromising on quality and promotion is seen as an important factor in driving up sales within this segment. In terms of product awareness, the Adv4 brand has managed to stay on top of most competitors although its share as an individual entity has been dropping over the recent 3-4 years. Also, it has been found that other brands have been able to score a better share over Easy ride within this segment and the fact that its awareness has remained constantly below the half way mark is a cause for concern. The company can also take note from the relatively appreciable performance of the kiddo brand during the same period, during which it risen constantly thereby effectively eclipsing very successive competitor. c) Performance of the management The analysis of the decisions of the management is an important aspect in the context of the company under study and is believed to provide a very deep insight into some of the major trends within the company’s performance during the 8 year period. Marketing is an important segment of a company’s operation and determines the efficiency with which it is able to sell and promote its products. Analyzing the Sales margin for the three individual products of the company, it has come to light that despite Adv4 being the oldest of the brands in production, the company has continued to sell the least number of units in this segment. Additionally, the revenue spent towards advertising Adv4 is almost 50% higher than the sum spent on the remaining brands. On this aspect, the company seems to be spending too much on promoting Adv4 in comparison to the other brands. On the number of lost Sales, it has been observed the figures are very high for Kiddo at almost 26,000 units, which is nearly 5 times more than the figures for Adv4 and more than twice the number of lost sales in the case of Easy Ride. This shows that there are several problems in this brand, which could lie in any component ranging from product quality, discrepancies in supply and demand to lack of access to the requisite quantities of raw materials. All these problems must therefore addressed by Sleek Bikes if any improvement is to be made in this area. The company has maintained a constant inventory of 4 weeks for the finished products, which denotes a remarkable effort on the part of the company to ensure that demand is always met on time. While it seems that the company has spent adequate amounts in the PR for Adv4 and Kiddo, allocating just 150,000 for promoting easy ride is seen as a setback in allowing the customer base for this segment to grow to desired levels (Angie Mohr, 2004). In terms of the sales figures for the three individual brands, the company has spent as much as $600,000 for supporting distribution in the case of Sports Stores, which is similar to the amount allocated for regular bike shops and department stores. Sports stores are bound to sell only the Adv4 brand, which primarily targets professional bikers. As such, diverting a portion of the sum spent in Sports shops to the other forms of outlets is believed to improve the efficiency of distribution on an overall basis. The company spends almost $2 million towards maintenance and this high maintenance cost stems from two primary factors. Firstly, the average training time is just 55 hours, which is not adequate to educate workers on the technical nuances of the various varieties of bikes. Further, only 20% of the bikes produced ever get inspected, which means that 4 out of 5 bikes have the likelihood of being returned for unsatisfactory performance. To eliminate high spending in activities other than production, it is strongly recommended that the company divert more resources and time to enhancing the quality and competitiveness of workers apart from increasing the percentage of bikes that get inspected (Jonathan Reuvid, 2005). This will reduce the number of bikes that would get returned thereby driving down all additional costs at the service department of the company. The company has not succeeded in raising any equity and lack of progress on this aspect over a 8 year long period is a issue of concern and must be addressed by the company immediately. There is however, no outstanding debt in the company’s cash book, which projects a healthy prospect for the company from a financial perspective. d) Learning from the simulation On an overall basis, it is being seen that though Sleek Bikes has been doing good business during the 8 year period, it has not managed to overcome several of its competitors due to a number of factors that have been listed above. The management of the company is strongly recommended to do the needful in improving the workflow and procedures in several of these aspects to ensure enhancement of the business on multiple fronts. Simulating the company Sleek Bikes has provided a critical insight into several aspects of the company ranging from the quality of decisions across the promotional, managerial, financial and supply and distribution scenarios. Analyzing the various results obtained as part of the simulation have provided a very good oversight into several of these aspects and have highlighted the importance of cost, effort and time in each of these areas. One can now easily understand the complexity involved in running a company and the added pressures of striving to stay in business, make profits and force through competition in the market (Donna-Marie Boulay, 2003). Succeeding in all these aspects requires extreme care, planning and precise implementation, which upon thorough and regular monitoring will ensure the relevant success and enhance the learning process for the management and the company. Conclusion The preceding paragraphs have highlighted the importance of performance and planning in the context of the decision making process towards managing a business organization. The various aspects of performance planning have been highlighted through the analysis of a simulated firm known as Sleek Bikes. The study of the company’s performance over a period of 8 years has provided a thorough overview on the growth of the company and its operation in the market through its three individual brands, each of which cater to an individual segment of the market. The analysis during the initial two years of operation has shown that the company was producing units for professional bikers alone and was making a modest profit within this period. However, the relative analysis over the prolonged period of 8 years has shown that the introduction of two successive brands of bikes in the subsequent periods has not helped much in enhancing the market share of revenue per bike of the company. Apart from mismatches in expenditures in areas such as marketing and promotion, Sleek Bikes is also experiencing high maintenance and repair costs owing to certain compromises on quality control. Also,. It has been found that sales with respect to individual brands have not been uniform and the company has so far not been in a position to outpace many of its competitors on many fronts. Several remedies have been suggested to improve the performance of Sleek Bikes on all these fronts, many of which primarily concentrate on aiding the process of taking decisions through the effective use of measuring performance and planning strategies in advance. With the implementation of the proposed improvements, the company is expected to improve in several perspectives with respect to its current position, which ultimately depend on the effectiveness with which the recommendations are implemented. References 1. Richard Rudman (2003), Performance planning and review: making employee appraisals work. New York: Allen & Unwin. 2. Mark Lutchen (2003), Managing IT as a business: a survival guide for CEOs. Boston: John Wiley. 3. Carlos W. Moore (2008), Managing Small Business: An Entrepreneurial Emphasis. London: Cengage. 4. Wayne W. Eckerson (2005), Performance dashboards: measuring, monitoring, and managing your business. New York: John Wiley. 5. Mats Forsgren, Jan Johanson (1992), Managing networks in international business. London: Routledge. 6. Michael J. North (2007), Managing Business Complexity: Discovering Strategic Solutions with Agent-based Modeling and Simulation. Oxford University Press. 7. J. T. Li (2001), Managing international business ventures in China. Singapore: Emerald. 8. Angie Mohr (2004)., Managing Business Growth: Get a Grip on the Numbers That Count. Ontario: Self-Counsel Press. 9. Jonathan Reuvid (2005), Managing business risk: a practical guide to protecting your business. New York: Kogan Page. 10. Donna-Marie Boulay (2003), The Entrepreneurs Legal Guide: Strategies for Starting, Managing, and Making Your Business Profitable. New York: Sphinx. Read More