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Business Capstone

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by

Joanne Yeo

on 6 November 2013

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Transcript of Business Capstone

Lessons Learned
Human Resource
Business Capstone 301
Marketing
Production
Solutions Implemented
Need to establish short term and long term goals

Communication and integration between departments is crucial

Forecasting quality greatly influences business performance

Pay dividends to enhance stock price and earnings per share

Seek out opportunities in less competitive segments - Performance
Challenges Faced
Issued too many shares in Year 2013 - Year 2016
Often stocked out in Low End and Traditional, difficulty with accurate forecasting and therefore production
High End segment was very competitive
Lack of investment in Size
Insufficient returns from TQM investments
Emergency loan in First year ($3.8m)
Research & Development
Aimed to maintain ideal position with all products each round

Improve MTBF in early rounds, ended up being round 4

Not develop any new products but stop investing in products as soon as they became unprofitable
Total Quality Management
TQM:
Management approach centered on quality
Aiming at long term success
Achieved through customer satisfaction and benefits of stakeholders
Our Mission
Our mission is to produce high quality, high value sensor products that meet the demands and requirements of our customers by combining effective and transparent marketing, production and finance practices that align with the strategy chosen by our company.
Our Strategy
Company Directors
Albert Bucchino - R&D Director
Brooke Castelli - Marketing Director
Joanne Yeo - Production Director
Shuai Li - Finance Director
Cindy Bang - HR & TQM Director
Maximize production - Cake (Traditional), Cid (High end) and Cedar (Low end)

Minimize production and material costs

Maintain up to 10% inventory on hand

Purchased capacity - Cake (Traditional) and Cedar (Low end)

Avoid 2nd shift and overtime - Support employee work life balance

Automation rating
- Aim of 6.0 for Cake (Traditional) and 10.0 for Cedar (Low end).
- As of 2019, achieved 5.0 for Cake (Traditional) and 7.0 for Cedar (Low end)

Achieved our strategy to minimize material costs
Early investment in recruitment

Adjusted labour needs based on changing in production levels

Aims:
Turnover rate under 10%
Maintain 100% productivity - Achieved

Labour Negotiation
Used data from our competitors to inform decisions - specifically for pricing and promo/sales budgets
Ceased investment in TQM and reduced investment in HR to maintain higher cash levels
Retired as much long-term debt as possible
Retired maximum stock in Rounds 6+7
Bought/sold capacity as required to reflect product performance/sales forecasts
Retired High-end and Size segment products to channel investments into better performing products
The Chester company aims to maintain a cost leader position with a product life cycle focus, which centers on the High End, Traditional and Low End segments. The company will aim to compete on the basis of price by keeping R&D, production and material costs to a minimum.
Success Measures
Return on Assets (ROA)
Return on Sales (ROS)
Share Price
Cumulative Profits
Market Share
Questions?
Future Goals
Build a sustainable organization by adopting a long term view when making decisions. This is a strategic characteristic of a sustainable organization as researched by Eccles, Perkins and Serafeim.

Business practices adhere to ethical frameworks

Implement socially responsible activities - Increase community engagement, boost employee morale, improve reputation

Drive profits up by 20% by 2030

Focus on cost reduction and savings

Enhance quality and process efficiency
Return on Assets
Return on Sales
Share Price
Cumulative Profits
Market Share
Finance
In the first three years, we believe that the healthy leverage is necessary and try to keep it around 2.0.

From year 2016, we comply with Pecking Order Theory.

Keeping the cash position around 10% or more of the total asset to avoid emergency loan, which is costly.

We decided not to pay out too much dividends even if we could
Why stop issuing stock from year 2016?

The announcement of stock issue drives down the stock price.

Investors will lower the share price whenever new share issue is announced.
Stocks
Issued Retired
Year 2013: 2000 -
Year 2014: 6000 -
Year 2015: 2000 -
Year 2016: - 2000
Year 2017: - 2519
Year 2018: - 2189

Issued Retired
Year 2013: 15000 -
Year 2014: - 6950
Year 2015: - 3900
Year 2016: 22000 -
Year 2017: - 8000
Year 2018: - 13000

Long Term Debt
Firstly, borrowing money is a good news.

Secondly, long term debt is cheaper than short term.

Thirdly, it only need to pay the interests and they are fixed, which do not affect the stock price.
Actions:
Gradual increase of promo and sales budgets within focus segments
Adjusted price based on importance (significant price drop for Cedar in Round 4)
Achievements:
Market share: Trad - 19.4%, Low - 24.6%, Pfmn - 48%
Units sold: Solid increases year to year within focus segments.
Why prefer long term debt for external funds?
Aims:
Keep pace with the sales and promotions budgets of our competitors
Maintain lower than average competitive prices and maintain a market share of 25-30% within our target segments
Increase products demand/units sold each year
Recruiting Spend:
Year 2015 - $1,500
Year 2016 - $2,500
Year 2017 - $1,000
Year 2018 & 2019 - $0
Turnover Rate
Training Hours:
Year 2015 - 10hrs
Year 2016 - 20hrs
Year 2017 - 40hrs
Year 2018 & 2019 - 0hrs
1st Round - Labour Negotiation

Wages - increased 10%
Maintained within $300 difference in benefits requested
Maximized the profit sharing as demanded
5.2% on annual raise


2nd Labour Negotiation
Wages - increased as demanded
Benefits - maximised benefits as requested
Profit sharing - maximum amount
Annual Raise - increased as demanded
ZERO STRIKE DAYS
7 STRIKE DAYS
Invested:
$1,500,000 in UNEP Green Program
$1,500,000 in 6 Sigma Training
Cumulative Impacts:
0.31% in Material Reduction
0.41% in Labour Cost Reduction
0.62% in Demand Increase
References
Borgatti, S. 2004. Manual for Working in Teams

Collis, D. J. and M. G. Rukstad. 2008. Can You Say What Your Strategy Is? Harvard Business Review 86(4)

Eccles, R. G., K. M. Perkins, and G. Serafeim. 2012. How to Become a Sustainable Company, MITSloan Management Review 53(4)

Taylor, Rachel. 2013. How does your organization deal with failure? CBS Digital Media Platform. http://mcmaweb01.curtin.edu.au/segment.php?content_id=390&segment_id=6456

Total Quality Management (TQM). Chartered Quality Institute. http://www.thecqi.org/Knowledge-Hub/Resources/Factsheets/Total-quality-management/

Success Measures
Full transcript