How to screw up a company in fast growing market with competitive rivals …

1. How to screw up a company in fast growing market with competitive rivals … Key take-away from Baldwin Strategic Management simulation

2. R&D • Industry Intelligence • Mission of Statement • Initial Overall Strategy • Strategy and Actions of 1-8 rounds • Lessons Learned Production Finance Marketing

3. Mission Statement Customer focused Service • Our mission is to closely working with customers provide service and leverage different strategies • We focus on three major market segments-high end, traditional and low end • Financially we need to investment R&D to enrich the product pipeline. The existing product can allow us to reap sales for many years based on the product life cycle. The products will maturely move from high end to traditional, Low End products Our Slogan: 高的更高，低的更低

4. Low Tech Performance Traditional High Tech Size Our customer focused strategy • Our Target segment on customer’s top concern are: Traditional, Low end, high end • The differentiation strategy: • Invest R&D strongly according to the needs of the high end customer’s need to lead the market growth • Cost leadership strategy: • Extend the market share improve the production efficiency and ensure the competitive price. H-end:newer products, prefer products near the leading edge of their fine cut circles. T: products Traditional customers prefer products in the exact center of the circle L-end: older technology ideal spot is near the upper left edge of the circle. As time goes by, customers want smaller, more powerful sensors.

5. R&D Round 1 Production Finance • What we did: • Reduce material cost by redesign the low end product for lower selling price and bigger market share in L-End. • In order to increase the production, we purchase the capacity of the L-End product. (not realizing it will only be utilized in the next year.) • Increase marketing promotion on L-End market product • Adjust sales force budgeting in to L-End product Marketing

6. Round 1 • Result • The stock price: 25.59$ • We capture market share@ 20.96% • The cont. margin is 27.1% • The product capacity was under utilized. • Size market product had stock out. • We have emergency loan. • Balanced score card:

7. R&D Round 2 Production Finance • What we did: • Invest R&D and 15-month development phase new product to be launched in high end market (actually spend more than 3 yr to launch) • Reduce price existing H-End product 1.0$ (higher than market deprecation average) to establish image in high end marketing. In order to get ready for the new product • Increase sales forecast on H-end and L-end products. • Increase marketing promotion on H-End market product. maintained other products’ promotion • Increase High-E product sales force budgeting • Ensure the High end product production, we set up production line of the coming product. • Increase the account payable term from 30 to 45 days Marketing

8. Round 2 • Results • The stock price: 25.67$ from 25.59$ Y-1 • We capture market share@ 17.5% from 20.96% Y-1 • The cont. margin drop 27.4% from 27.1% % Y-1 • The product capacity was under utilized 66% in low-End product. • Traditional, size, performance product had stock out. • We hold L-end market had inventory but still capture market share. (we did not reduced the price change)

9. R&D Round 3 Production Finance • What we did: • Invest R&D to satisfied our customer in size market (though we strategically will not focused at ) • Reduce price of L-End, Tradition, H-End product 1.0$ • Plan for big launch campaign of our new H-end product (acutely not yet developed) • Hire working labor for 100 heads • Increase the production productivities (no movement on TQM ) Marketing

10. Round 3 • Result • The stock price: 27.66$ • We capture market share@ 22% • The cont. margin drop 20.4% from % Y-1 • The product capacity was under utilized 66% in low-End product. • New product did not launched due to mis-understanding of the “rules” • Traditional, size, performance product had stock out. • We hold L-end market had inventory but still capture market share. (we did not reduced the price change)

11. R&D Round 4 Production Finance • What we did: • Invest R&D improve Traditional product in quick win • Reduce price existing H-End product and increase sales allocation. • Improve the automation rate and Increase the L-end product production • Move existing H-end product into traditional market with lower price • Maintain the production of size and performance product • Plan for big launch campaign of our new H-end product (acutely not yet developed) • Provide for employee training • Invest in TQM to improve production Marketing

12. Round 4 • Results • The stock price: 12.47$ • We capture market share@ 19% from 22% Y-1 • The cont. margin 19% • Traditional, size, performance product had stock out. • The production utility is less than 50% of size and performance product lines. • Whole size and performance markets also short of supply • We hold L-end market had inventory

13. R&D Round 5 Production Finance • What we did: • Invest R&D on performance and size products (improvement launched in the same year) • Start selling on new H-End product (due to mis-operation of the tool, it’s already aged=2yr) • Increase the sales forecast on performance and size products • Plan for a conservative sales forecast on our new H-end product • Increase High-E product sales force budgeting • Increase working labor Marketing

14. Round 5 • Result • The stock price: 11.97$ • We capture market share@ 19% from % Y-1 • The cont. margin drop 18.5% from 19% Y-1 • New for H-end, size, performance products had stock out. • By studying the perceptual map, found our quickly improved products in size and performance is about to drop out the rough cut.

15. R&D Round 6 Production Finance • What we did: • Invest R&D on all products • Decrease the price of 2 traditional products (after quick R&D improvement ) • Increase the sales forecast for 2 traditional products • Purchase production captivity for other 3 products (will be ready after 1 yr from the R&D lab) • Maintain marketing and sales spending • Invest on TQM and JIT as well as training • Give divend Marketing

16. Round 6 • Result • The stock price: 7.95$, from 11$ Y-1 • We capture market share@ 18% from % Y-1 • The cont. margin drop 13.1% from % Y-1 • We hold huge inventory of L-end market and traditional products (due to product feature is close to drop out the rough cut of perceptual map)

17. R&D Round 7 Production Finance • What we did: • Invest R&D for traditional product and H-End • Increased the price of H-end product after review the competition and marketing promotion as well • Lower the price of Low end and tradition product (dropped out of rough cut) • Sell production line of 2 L-end and traditional products. • Increase H-end production and production capacity • Increase working labor to 1200 Marketing

18. Round 7 • Result • The stock price: 4.2$ • We capture market share@ 12.23% from % Y-1 • The cont. margin drop% from 9.6% Y-1 • We clear up the inventory and sell 2 production lines. • Our traditional product meet the needs of customer, sold very good and out of inventory • size, performance product needs existing • H-end product start to have inventory

19. R&D Round 8 • What we did: • Invest R&D for size and performance products • Low the price of H-end product after review the competition • Spend limited marketing spending on H-end price (due to short of cash flow) Production Finance Marketing

20. Results after round 8

21. Lessons Learned and take-away R&D • Be familiarized with rule of games and technology. • Stick to the mission and vision • Keep R&D wheel running to fill up the product pipeline • R&D investment not sufficient (1%) • R&D not focus in our key propriety products • Be sensitive to customer needs (perceptual map) and adjust R&D direction according. Production Finance Marketing

22. Lessons Learned and take-away • The production capacity shall be fully initialized. • Foresee the capacity increase and sequenced investment aligning marketing forecasting and R&D timing. • TQM and training is not only sufficient enough. • Finance control shall be strong. Cash flow is king R&D Production Finance Marketing

23. Lessons Learned and take-away R&D • Marketing forecasting shall be accurate and close to market trend. • Marketing forecasting not aggressive on new product. • Price strategy shall consider the market trend and product nature. • Marketing promotion shall be highly aligned with our scheduled plan. • Sales allocation Production Finance Marketing