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Erie's business presentation

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by

Ran Shi

on 15 October 2014

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Transcript of Erie's business presentation

Industry Leading
Financial Soundness

Finance
Erie Finance
Emergency Loan in the first year
Our Story of Success
Power of capital operation:
From trash to blue chips!
Implications:
Budgeted cash balance: % of sales
Fund Raising
A rational capital Structure
How we achieve that?
1. Adjust our leverage to 2.0

2. Issue same amount of debt and stock to maintain that level
Follow up strategy
3. Once our cash strength exceeded financing needs:
Financial Forecasting
Fund Raising
Cash Budgeting
Long-term or short-term?
Interest rate of capital market

Expected length to hold
Retire stocks
Pay dividends
Financial Analysis
Held accountable to our shareholders
Steadily assess all our plans
1. Net income (profitability)
2. Cash position (future cash flow)
Cash Budgeting
Our contingency plan:
Retire maximum stocks.
Borrow short-term debt to make up the deficit
A more Flexible Cash Budget
Introduce uncertainty: Best/Worst Case
The effectiveness of Improved Cash Budgeting
Our current ability to obtain cash flow (in thousands)
2018: $45,471 cash from operations
2019: $63,260
Div. policy: Money back to your pocket!
Cash Budgeting
Our contingency plan:
Retire maximum stocks.
Borrow short-term debt to make up the deficit
A more Flexible Cash Budget
Introduce uncertainty: Best/Worst Case
The effectiveness of Improved Cash Budgeting
Our current ability to obtain cash flow (in thousands)
2018: $45,471 cash from operations
2019: $63,260
Div. policy: Money back to your pocket!
Sense your future.
Performance Indicators
Effective promo and sales budgets
High accessibility and awareness


Fully utilize advanced marketing
- Break out from crowded trad seg
Effective promo and sales budgets

Generous credit policy

Constructive sales forecast strategy

Strategic pricing
-A/R lag: 45D
A $28M EMERGENCY LOAN
-- POOR SALES PREDICTION
Constructive sales forecast strategy
Factors to consider:
Basic forecasting method

Customer survey score

Competitors’ move

Mark-up
Strategic pricing
Achieve a cost leadership

Flexibly use supply-demand curve
-- seller’s market
MARKETING
Increase Market Share 30.45% ---> 34.50%

Increase Share Price $177.90 ---> $190.00

Increase Net Profit $65M ---> $80M

Decrease Worker Turnover 10.4% ---> 9.9%
2020 Focus Items:
Web Media & Email
Accurate Forecasting & Production
Support Our Workforce
Promote Fair Competition
Balancing Debt
New High End Products
Key points
Adjusting capacity
Two alternatives
2. Buy capacity
Increase automation level
Reduce material cost
Reduce labor cost
Increase contribution margin
Main problem
Stock out
Production
Improving the production line
1. Overproduce our product
Increase of capacity each year
Increase automation level
Increase automation level
Increase automation level
SOLUTIONS
Production Management
Cost Management
Cost management
HR
TQM
3 million dollars investment
TQM & HR
Ethic issues
STRIKE!!
Actions
Share more benefits and provide personal development
Benefits:
Reduce material cost, labor cost
Maximize profit ,increase demand
Aim to reach the best industrial standards, highest productivity, achieve goals
Help R&D projects

Complement
Staff capabilities
Training
Productivity index
Invest in GUNP Green Programs
References:
Brealey R A, Myers S C, Allen F. Corporate finance[M]. McGraw-Hill/Irwin, 2006.

Fama E F. Market efficiency, long-term returns, and behavioral finance[J]. Journal of financial economics, 1998, 49(3): 283-306.

Freeman, R. E., Andrew C. Wicks, and Bidhan Parmar. 2004. "Stakeholder Theory and "the Corporate Objective Revisited"." Organization Science 15 (3): 364-369. http://search.proquest.com/docview/213826951?accountid=10382.

Joyner, Brenda and Dinah Payne. 2002. “Business Ethics & Corporate Social Responsibility” Journal of Business Ethics 41(4): 297-311. http://link.springer.com/article/10.1023/A%3A1021237420663
Thank you!
Lepage, Michael, 2013, Business Capstone Interview, CBS Digital Media Platform. https://mcmaweb01.curtin.edu.au/content.php?content_id=483

Lindgreen A, Swaen V. Corporate social responsibility[J]. International Journal of Management Reviews, 2010, 12(1): 1-7.

Peter J P, Olson J C, Grunert K G. Consumer behavior and marketing strategy[M]. London: McGraw-Hill, 1999

Shephard R W. Cost and production functions[R]. PRINCETON UNIV NJ, 1953.
3 factors:
Ahmed, A. S., Takeda, C., & Thomas, S. (1999). Bank loan loss provisions: a reexamination of capital management, earnings management and signaling effects. Journal of Accounting and Economics, 28(1), 1-25

Audretsch D B, Feldman M P. R&D spillovers and the geography of innovation and production[J]. The American economic review, 1996, 86(3): 630-640.

Black S T, Porter L J. Identification of Critical Factors of TQM*[J]. decision Sciences, 1996, 27(1): 1-21.

Bodie Zvi, Kane Alex, Marcus Alan J. Investments. 9th Edition. New York: NY. McGraw-Hill/Irwin, 2011
Effects:
--maintain the increasing customer demands
--increase the efficiency of internal processes & reduce costs
Q&A
Vision & Mission
Net Profit
Research &
Development
Collaboration of minds
Be the Industry Leader

Provide our customers with
tried and tested products at
the best prices.

Streamline performance
& size products into the
traditional market
Launch new products
Total $133,713,000
Optimal level
Constant repositioning
Customers demands
& expectations
Collaboration of minds
Analyse, Research, Discuss & Formulate
New Decisions
Erie Management
David Clark
Jessica Song
Sarah Bian
Patrick Wu
Brian Shi
Verdine Gow

Expand market share
Capture Profit
Analyse, Research, Discuss
New Decisions
Welcome
Full transcript