Team Baldwin - Managing Business in Competitive Market - Essay Example

? Business Policy Development and Implementation, Portfolio Project - Team Baldwin - CAPSIM Company Evaluation Introduction: Team Baldwin - Managing business in competitive market Managing business of a company effectively in a competitive market depends on the ability of the enterprise to anticipate the responses of its competitors in the planning stage and then developing strategies and implementing those strategies to combat the external market forces to support its own policies and existence. In our discussion, we are considering Team Baldwin which is a multimillion dollar company who manufactures sensors and markets those sensors to other manufacturers who uses this device in their products for selling. As a result of monopolistic market, Team Baldwin was in a better position to negotiate with the customers on its price and the market had little control on the quality of its product. With time when the monopoly market was split with the appearance of new entrants, the increased cost of manufacture of sensors could not be passed on to its customers. This led to the importance of managing its business performance in terms of delivering quality products at competitive price which could be seen from its four rounds of operation year over year (Reuvid, 2012). Comparison of 4 rounds of operation from the Annual Report of Team Baldwin The performance of Team Baldwin has been compared as given below from the Annual Reports available in order to see how effectively Team Baldwin has been able to manage its operation in the face of competitive market (Hutt and Speh, 2012). A snapshot of the major performance parameters has been presented below which has been obtained from the Annual Reports year over year from Round 1 to Round 4. Key Performance Indicator Analysis – Table A Sl. No. Performance Parameters Round 1 Round 2 Round 3 Round 4 CAGR 1 Total Current Assets 27918 24576 42401 68887 35.13%     100% 88.03% 151.88% 246.75%   2 Total Fixed Assets 66075 88141 90898 81537 7.26%     100% 133.40% 137.57% 123.40%   3 Total Liability 46006 49385 53956 54334 5.70%     100% 107.34% 117.28% 118.10%   4 Total Equity 47987 63333 79343 96090 26.04%     100% 131.98% 165.34% 200.24%   5 Cost of Goods sold 84665 104064 123552 122733 13.18%     100% 122.91% 145.93% 144.96%   6 Sales 90798 116913 155053 154514 19.39%     100% 128.76% 170.77% 170.17%   7 Inventory 8617 0 -2180 -5589 -186.56%     100% 0.00% -25.30% -64.86%   8 Net Profit 45 4346 16010 16747 619.30%     100% 9657.78% 35577.78% 37215.56%   9 Accounts payable -2277 2479 1521 379 -155.01%     100% -108.87% -66.80% -16.64%   10 Accounts receivable 845 -2146 -3135 44 -62.66%     100% -253.96% -371.01% 5.21%   11 Net cash from operation 14383 13232 21578 20942 13.34%     100% 92.00% 150.02% 145.60%   N.B. Amounts are given in dollars and () represents negative value The above represent a common-size analysis on the parameters identified to be indicative for the performance of Team Baldwin over round 1 to round 4 from 2014 to 2017. The table also indicates a Compound Annual Growth Rate (CAGR) of the key performance parameters. Total market share and revenue In round 1 in the year 2014, the market share of Team Baldwin is 19.15%, in round 2 in 2015 is 21.5%, in round 3 in 2016 is 26.64% and in round 4 in 2017 is 26.24%. Thus, an increasing trend of market share of Team Baldwin can be observed with respect to its competitors in sensor manufacturing. If we look at the Income statement of Team Baldwin in the Annual reports and subsequent comparative analysis in Table-A, we would find that the total revenue or sales of the company has shown an increasing trend from round 1 (year 2014) to round 5 (year 2017). With respect to the round 1 in the year 2014, the revenue earned by Team Baldwin has increased 28.76% in round 2 (year 2015) and over 70% in round 3 (year 2016) and round 4 (year 2017). The market share of a company increases when it is successful in managing its operations and plan strategies by anticipating responses from its competitors (Chakravarty and Eliashberg, 2005). The strategies involve deciding appropriate mixture of assets and liabilities to be maintained by the company looking at its short term and long term goals, methods of financing to be employed, volume of credit to be tolerated in the present competitive scenario, fixation of per unit sale price of the manufactured sensor keeping in the mind the total revenue to be earned keeping in consideration the cost of goods sold and the net profit margin. Inventory With the increase in sales from round 1 to round 4, the cost of inventory of Team Baldwin has also come down. According to the company’s Income statement and subsequent comparative analysis in Table-A, the cost of inventory has shown a declining trend from round 1 (year 2014) to round 4 (year2017). Reduction of inventory means that storage cost of the company has decreased. The only way it is possible is to streamline the performance of Team Baldwin and to manufacture sensors according to the market demand in the competitive scenario. Also, reduction in inventory signifies cutting down supply of old sensors to its customers that would help them sustain in the competitive market (Jenster, Hayes and Smith, 2005). This means that with appropriate price fixation and maintaining quality of the manufactured sensors, Team Baldwin has been able to meet the demands of the customer. Net Profit A view of the Income statement and subsequent comparative analysis in Table-A would show that the net profit of Team Baldwin would grow by leaps and bounds with a growth rate of around 9500% from round 1 (year 2014) to round 2 to around 35500% in round 3 to around 37100% in round (year 2017). Team Baldwin has to allocate and resort to optimal uses of its resources in various heads of expense considering opportunity cost in order to maximize its profits (OaShaughnessy, 1995). Accounts payable From the Cash-flow statement in Annual Reports and subsequent comparative analysis in Table-A, it can be observed that the Accounts payable has shown a declining trend from round 1 (year 2014) to round 4 (year 2017). Team Baldwin has to decide upon the amount of debt that the company is going to acquire in order to sustain in the competitive market. The acquiring of debt may be in the form of acquiring fixed assets required for operation or cash credit loan for running of daily operation (Coade, 1997). In order to be more effective considering the demand of its manufactured sensors, the Team Baldwin may reconsider its policy on the amount of accounts payable if it could be raised in tolerable limits. Accounts receivable From the cash-flow statement in Annual reports and subsequent comparative analysis in Table-A, the accounts receivable has shown a sharp declining trend from round 1 (year 2014) to round 2 (year 2017). In order to improve its operations more effectively, the Team Baldwin may reconsider its decision on accounts receivable considering the repayment feasibilities of their line of credit. Net Cash-flow from operation The net cash-flow from the operation of Team Baldwin has increased in round 3 (year 2016) and round 4 (year 2017) as compared to round 1 (year 2014). The net cash flow indicates excess of cash inflow over cash outflow of the company. This means that Team Baldwin has kept tight control on the debt incurred and subsequent repayment dues as well as kept good control over their line of credit in terms of recoveries. Also, the revenue earned with respect to the cost of goods sold has increased. This means, with increased demand, the supply has also increased and the rate of growth in sales is more than the rate of growth of cost of sensors manufactured. In order to be more effective, Team Baldwin should have focused on similar strategies in round 2 (year 2015) as they have performed in round 3 and round 4 to increase the net cash from operation where it has shown a slight dip. Total Current Assets As compared to round 1 (year 2014), the total current assets of Team Baldwin has shown a slight dip of around 12% in round 2 (year 2015) and an increase of around 52% in round 3 and increase of around 147% in round 4. The slight dip in round 2 can be explained as the monopoly market was split and new entrants started to offer sensor in competitive price. But with symbols of resilience, Team Baldwin as per suggestive action has looked at the market demands, revised per unit competitive price and maintained quality. For all these, proportion of currents assets has increased to meet the manufacture of sensors as per demand (Navarro, 2006). Total Fixed Assets From the balance sheet of Team Baldwin contained in the Annual Reports, it can be observed that the total fixed assets have increased with respect to round 1 (year 2014) by 33% in round 2 (year 2015), 37% in round 3 (year 2016) and 37% in round4 (year 2017). The company needs to look at the efficiency of its fixed assets, plants and machineries to meet the demands of increased production. An effective measure would be to categorize the dead assets and sell them for acquiring new fixed assets if required for the growth of the company in a competitive market which focuses at the highest quality of the product. Total Liability As can be seen from Table-A, the total liability of the company has not increased beyond control from round 1 to round4. From round 1, total liabilities increased by around 18% in round 4. This is a good symbol in a competitive scenario. A company having control over its liabilities has wider scope of retained earnings. This will help the company to sustain in the competitive market. Total Equity The closing stock price of Team Baldwin has increased from $30 in round 1 to $80 in round 4 which is at par with its competitors. A look at Table-A would also show that the total equity of the company has also increased by 100.24% from round 1 to round 4. Thus, the company has been able to gain the faith of its stakeholder through improved performance in the competitive market. Conclusion: Success and Failures of Team Baldwin in managing operations Team Baldwin’s success and failures in managing its operations in the competitive market can be inferred with the following examples or facts derived during the analysis of key performance indicators in Table-A. Team Baldwin has been successful in achieving a Compounded Annual Growth Rate (CAGR) of 619.3% in its net profit from round 1 to round 4. Sales recorded a CAGR of 19.39% from round 1 to round 4. The company has also been successful in increasing its cash flow from round 1 to round 4 by 13.34%. Stake of shareholders increased by 26.04% which indicates goodwill that Team Baldwin has been able to sustain in the competitive market (Chaston, 2004). As a failure, the company has not been able to offer dividends to its stakeholders from round 1 to round 4. Another failure of Team Baldwin is that after the split of monopolistic market, the company has not been able to retain its position as a market leader in terms of market share capitalization, remaining as second largest from round 1 to round 4. Reference Chakravarty, A. K. and Eliashberg, J. (2005). Managing Business Interfaces: Marketing and Engineering Issues in the Supply Chain and Internet Domains. Springer; Germany. Chaston, I. (2004). Knowledge-Based Marketing: The 21st Century Competitive Edge. SAGE; India. Coade, N. (1997). Managing International Business. Cengage Learning EMEA; UK. Hutt, M. D. and Speh, T. W. (2012). Business Marketing Management: B2b. Cengage Learning; USA. Jenster, P. V.,  Hayes, H. M. and Smith, D. E. (2005). Managing Business Marketing & Sales: An International Perspective. Copenhagen Business School Press DK; Denmark. Navarro, P. (2006). The Well-Timed Strategy: Managing the Business Cycle for Competitive Advantage. Pearson Prentice Hall; USA. OaShaughnessy, J. (1995). Competitive Marketing: A Strategic Approach. Routledge; New York. Reuvid, J. (2012). Managing Business Risk: A Practical Guide to Protecting Your Business. Kogan Page Publishers; USA. Read More