Team Chester had several strategies implemented throughout the four years to position us to an ideal spot. Our strategy utilized a phased targeted strategy that incorporated synergy of efforts from all departments. In our initial strategy Chester Company sought to provide three quality products in the traditional, low, and high tech markets to provide awareness to utilize market shares this strategy helped us invest in establishing quality products and production capacity. In the second phase of our strategy our goal was to focus on low prices and high contribution margins. The foundation provided by R&D positioning and production allowed Chester company to provide quality products. Chester Company goal was to maximize shareholder's wealth by providing products that met the customers' demand in the low and high tech markets in terms of performance, price, and size. The strategy saw our prices align in the first three rounds while struggling to increase our contribution margin to standards.
1. Our company had an ideal positioning of products in both segments of the market. At Chester Corporation, we aimed to deliver sensors to our customers in respect to their various needs. We had a high projection that each segment has their own needs and therefore different criteria should be used when assessing our products.
2. Higher product accessibility and customer awareness was our goal. We allocated enough resources for the promotional budget because at Chester Company we focus lower sales and budget promo as well as customer service. We also aim to improve accessibility every year to reach out to every potential customer.
3. Highly knowledgeable and well trained employees. We strived for production of quality products. It was important to have skilled staff in the manufacturing, selling and distribution of our three products. We allocated resources to out HR for training our staff. This is our major strength because it enables us to have a lower turnover rate while keeping our staff satisfied by the reduced overtime.
1. R&D utilization was low and needed improvements to position ourselves each round to obtain ideal positioning. In the R&D department, major improvement will help us in the future to meet the consumer demand and achieve the desired productivity.
2. Production for Chester failed to meet the demand in the market the first three rounds and we stocked out in year one, two, and three but needed an emergency loan in year 4. Market demand is one of the things our company is assessed of and our anticipation on production capacity was high in meeting the market demand but sales and budget derailed our stock out plan. We aimed at carefully forecasting the market capacity so that we can successfully meet the market demand throughout the cycle of our products.
Company Performance/Competitive Advantage:
Chester Company initially developed its business plan to promote a broad differentiation strategy as we progressed yearly it appears that we were in a phased targeting strategy. With quality low and high tech products and aggressive marketing of sales and promo budgeting we had a steady and strong growth rate realizing a significant cumulative profit.
Chester Company had huge successes and were threatened with mistakes that hurt our team throughout the simulation.
• Chester company had excellent financial leverage of 2.24 and sound financial structure. The financial structure refers to a mixture of long-term debt and equity that a company uses to finance its operations.
• Chester Company had a sound competitive advantage and an excellent cost effective strategy with high cumulative profits.
Our financial metrics that trended positive throughout the rounds and reflect fairly solid performance are:
Category Start Finish
Return on Equity 10.15 42.73%
Asset Turnover 1.50 1.65
Return on Assets 6.0 19.09%
Sales $49,033,569 $134,670,072
Cumulative Profit $4,450,980 $37,914,591
Contribution Margin 25.1% 36.0%
Stock Value per Share $13.47 $48.07
Earnings per Share $0.82 $7.21
During years 1-4 we made mistakes that hinder Chester company:
1. Low Contribution Margin: The contribution margins consistently under 30% for year 1-3. Simulation guidelines indicate that companies with a contribution margin of less than 30% may have difficulty maintaining long-term success.
2. Automation: Team Chester did not have increased automation from year 1 to 2 as suggested for the next round. This performance change could have increased the quality of our products and could have made Chester competitive in the market. Automation is a key factor for decreasing labor cost we also lost potential sales. At the end of year 4 Chester company rebounded successfully.
3. Plant/Capacity utilization: we failed to push our production beyond ideal capacity from year 2 to year 4. We unfortunately did not produce to capacity in which we had ample room to produce more and lost sales opportunities. Overall plant utilization was excellent.
4. Our need for an emergency loan of $ 13,436,201. The simulation gives us every benefit of the doubt, but since we ran out of cash at the end of year, "Big Al" arrived to give us just enough cash to bail us out -- at a 7.5 percentage point premium, of course. In the real world this often refer to emergency loans as "a liquidity crisis" and our S&P rating of ‘CCC' which can leave Chester vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.
5. Overall Actual Vs Potential Demand was in trouble as we meet less than potential demand.
6. Chester Company had bloated inventories at year 4 which was a sign that our customers were not turning out in the numbers they did in previous years. Chester Company stocked out in two products however Coat and Cedar had bloated inventories.
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