Strategic Vision of Alpha DigiCam Team - Coursework Example

? Lesson Learnt The game that was simulated entailed four teams that managed camera companies. The Alpha DigiCam team met for about one and a half hours, once every week. This duration of meeting was informed by our aim of being rated the top camera company. The Alpha DigiCam team finished the simulation and came second after Creative Cameras team. It is a game that provided lessons on the need for teamwork, thus an appropriate application for the lessons from this course.  STRATEGIC VISION The management of the company adopted the strategy of attracting customers by giving the most favorable prices. The company also focused on expanding its market share, increasing the net revenue, shareholder's earning per share, return on equity and stock price. Furthermore, we put our effort forth in ensuring that our credit rating is maintained at "A," a rating above the expectations of investors, and a product rating quality of 3.5 stars. Global best strategy, also referred to as the "more value for money" approach, was been used by Alpha DigiCam in search for competitive advantage. This would see its products have appealing attributes to the customer and at the same time retain affordable pricing. PRODUCT DESIGN The managers had an eight-year plan to achieve the 3.5 stars rating on image quality. As such, the managers embarked on improving the quality and attributes of products for both the multi-featured and entry-level models of cameras every year. By the end of the eight years, our image rating had surpassed the expectations of the investors. In the ninth and tenth years, our image rating incrementally improved to reach the 3.5 rating. Below is a table showing our rating with regards to overall investor expectation, I.E., best-in-industry, B-I-I, and a combination of I.E. and B-I-I scores against that of our rival companies.                                            MARKETS AND DISTRIBUTIONS Varied direct and indirect channels of distribution have been used in Alpha DigiCam including local camera shops, online retailers and multi-store chains. The markets covered included Latin America, Asia-Pacific, Europe-Africa and North America. The simulation reveals that we achieved competitive advantage in North America over the eight years, specifically with regard to the entry-level cameras distributed through local camera shops, online retailers and multi-store chains and additionally due to multi-featured warranty period, budgeting for advertising and multi-featured P/Q rating. However, in the ninth year, we lost 2.4% of the market share in the region for entry-level camera models but managed to maintain an industry average with the multi-featured models. In the Europe-Africa market, we achieved 18.1% market share within the eight years for entry-level camera models. However, this was not sustained through to the tenth year. On the other hand, the Latin America and Asia-Pacific regions frequently reported market share loss with regard to both the multi-featured and entry-level camera models. The managers observed the autonomous action in each region that saw each of them adjust prices aggressively according to the specific region. Furthermore, managers increased warranty periods and promotions to enable them gain market share in their respective regions. COMPETITION The camera products market in the regions where Alpha DigiCam operates is extremely competitive. Alpha DigiCam faces stiff competition from rivals in this market who have vast experience in the industry. Thus, the company resorted to competing in pricing of products. The participant's guide clearly states that the competitiveness of the company largely depends on the prices with which it sells the cameras to its retail dealers. Additionally, a myriad of other factors play a major role in determining the competitiveness of this company: the number and duration of quarterly promotions, advertising expenditure, the amount of price discounts given to retailers during promotions, the level of technical support given to digital camera users and the reputation and image of its brand. CAMERA COMPONENTS The best-cost provider strategy that we adopted for both the multi-featured and entry-level cameras enabled us to distribute better quality products to our customers at affordable prices. Our EPS increased rapidly in the eight year after a dip in the sixth year. This increase in EPS could be attributed to improvements in the company's operations such as increasing the investment in research and development and increasing the number of honored warranty claims. Below is the performance overview of Alpha DigiCam. PERFORMANCE TARGET We worked on measurable strategic and financial objectives. We aimed at increasing annual revenues by between 10% and 15% per year. We targeted increasing the revenue collected from entry-level market for the cameras by 13%. Furthermore, our credit and bond rating was not to fall below the “A” rating. We developed a five-year plan over which the Asia Pacific and Latin America market share was to grow by at least 50%. By the sixth year, we set to increase the image rating as perceived by our customers by 10% over and above the expectation of investors. Through the eight years, we aimed at maintaining a quality P/Q rating of at least three stars for both the multi-featured and entry-type camera models. Finally, we had to maintain a maximum inventory level for both camera models in all warehouses and stores. LESSONS LEARNT Management decisions on fundamental aspects of the five year plan and the strategy of best-cost provider was largely reached at through consensus. Managers adopted the best-cost strategy by pricing the multi-featured and entry-level models of the cameras below what the industry had as its average. At the same time, they increased the attributes of the products. This way, they became more attractive and gave customers value for their money. Despite the global approach to business by the managers, the implementation of our strategies was local because we had to simulate our strategies to the specific regions. It became difficult to stick to specific strategies due to the need to adjust based on the stiff competition. One area that was affected was the warranty period. Alpha DigiCam had set its warranty period to two years for all its entry-level cameras. However, due to increased competition, it increased the period beyond two years in the eight year. In the subsequent two years, it became difficult to further gain market share with the same strategy. Consequently, the warranty period for multi-featured camera models was increased to three years in the Latin America market. In spite of the increased labor costs as a result of adopting these strategies, a positive effect was reported on the market share, net profit, ROE and EPS. Furthermore, managers learnt of the difficulty involved in assembling and shipping units so as to meet the demand. The managers would engage staff in working overtime to assemble the cameras needed to meet the demand as a way of containing its labor costs. The third quarter marked the peak season for manufacturing and Alpha DigiCam had to hire more PATs to fully utilize the available 100 workstations. With severance cost amounting to 50% of the yearly pay, the firm laid off these additional PATs in the fourth quarter as a way of avoiding such costs. Alpha DigiCam also deviated on the strategy of spending on research and development of new products. In the fifth year, the then management had its expenses on research and development, design and engineering amount to $2 million for entry-level cameras while the same expenses for multi-featured cameras amounted to $4 million. Managers found a way of cutting down on these costs and found out that a reduction in warranty claims and boost on productivity required spending money on research and development, design and engineering. This observation is supported by the Glo-bus Help who states that investing in research and development of a new product promotes the P/Q rating of a company, reduces cost and warranty claims and improves on PATs’ productivity. Nonetheless, the full P/Q rating benefits would only be realized after the four quarters had passed. To expand sales, managers added more camera models at the entry level. However, they soon observed that this aroused challenges with quality control in the assembly because PATs were unable to assemble more models with the proficiency and swiftness they did with fewer models. Moreover, it was observed that this increase in models saw an increase in warranty costs due to the increase in the number of faulty cameras and consequent problems reported by buyers within the warranty period. Therefore, managers opted to adopt five models and one model for the entry-level and multi-level cameras respectively. This approach was further informed by the competition which provided various models for their various camera segments. It therefore became apparent to us that it would have been possible to deliver better products through keeping of four models for the multi-featured camera. Finally, consideration of compensation and labor costs enabled the company post an increase in its net profit. Considering the production costs and operating costs provided an appropriate mechanism for managers to assess and evaluate labor costs and how this impacted on profitability. The annual basic pay, attendance and productivity incentive bonuses and employee training costs informed the evaluation of compensation. It was the practice at Alpha DigiCam to evaluate and compare the company’s overall performance to the industry’s average. Managers learnt that continuously increasing the compensation increased productivity and improved on employee retention. As a way to mitigate absenteeism, the company set $50 every quarter for those whose attendance was perfect. Through this strategy, the company’s productivity and profitability improved. Additionally, Alpha DigiCam trained its employees so as to impart on them knowledge that would improve on the techniques it used for assembly. FINANCIAL PERFORMANCE Alpha DigiCam founded its financial strategy on critical areas to help it achieve its vision of growing profitably: credit line, right product pricing, promotions, warranties and technical support. The financial goal that Alpha DigiCam had was to supersede the expectation of investors by adopting right pricing, increasing stock price, growing their market share where they operated and increasing image rating, earnings per share, return on equity and net revenues. The managers preferred to reduce the company’s debt every year and not acquire long-term debt. Thus, the major objective was aimed at reducing outstanding debt. Between the 6th and 10th years, Alpha DigiCam relied on its operations cash flow and cash at hand to meet its liabilities and reduce the overall interest of the company while at the same time improving on the credit rating of the company. In the first quarter of the tenth year, the company had repaid all outstanding debt and attained A+ credit rating. This was an achievement of one of our financial goals as stipulated in the financial strategy that entailed increasing our credit rating to A+ so as to enable us enjoy the best available interest rates. The managers of Alpha DigiCam used cash at hand for repurchasing and retiring outstanding shares with the anticipation of boosting the stock prices, return on investment and earnings per share. Read More