If Company well managed & you make right decisions…

2. If Company well managed & you make right decisions… • Production #’s • Plant Utilization=150%+ • Turnover ratio 1+ indicates no idle assets • Inventories= 1-90 days • Marketing • Customer satisfaction=40+ • Awareness=80% • Accessibility=80%+ • Balance Sheet • Current ratio= 2-2.5 • Leverage= 1.5-2.5 • Sales/Current assets= 3-5 • Income Statement • Contribution Margin= 30%+ • ROS=5%+

4. BUSINESS PLAN GUIDELINE Page 1: Mission & Vision Statements – SECTION I : SITUATION ANALYSIS 1.1: External Environment - Opportunities & Threats: MARKET STRUCTURE MARKET DEMAND MARKET SEGMENT VALUE MARKET SEGMENT DYNAMICS 1.2: Internal Environment- Analysis & Evaluation of Company's Strengths & Weaknesses Marketing Management Production & HR Management Financial Management 1.3: Situational Analysis Results: SWOT Analysis  SECTION II: STRATEGY, OBJECTIVES & TACTICS 2.1: Select one of the Six Basic Strategiesdelineated in your Online Guide – Describe your Company's Growth & Competitive Strategy; be specific regarding any plans for new product development (What products? Which segments? What years?) 2.2: Functional Domains- Objectives & Tactics Marketing + R&D- Production & HR Financial- DECISION GUIDES…

5. “Generically, profits are driven by the company’s asset base and by its efficiency working those assets”

6. Key Demand Consideration: Key Capacity Consideration: • Overall market growing @ ~ 14%/yr • “Average” company should/could double - sales in 6 years

7. How effective will u b in building your Co’s asset base? • At outset should be spending ~$10-25M / round on plant improvement • By end should expand asset base to min $140M to $160M+

8. Rounds 6,7,8 should be most profitable • NET PROFITS $$ • Year 1 $6 million • Year 2 $8 million • Year 3 $10 million • Year 4 $12 million • Year 5 $16 million • Year 6 $21 million • Year 7 $27 million • Year 8 $35 million

9. Which most often selected … but least preferable to do? • Pay off Debt • Invest in growth • Buy-back stock • Pay dividends Things you can do w/ your $$$:

10. Reducing Leverage • Says to stockholders— “We can think of nothing better to do w/ $$ than save you interest payments” • More debt eliminated the greater target you become for a takeover.. • No reason not to maintain Co. Financial Structure that got you to position of high profitability…

11. Most Basic Principle Guiding Your Decisions: • will itIncrease Demandfor Product • Decrease Cost • of Mfgg Product

12. Increase Product DemandDriven by Effective Mgt of 4 P’s • Product Mgt. • Introduce new brands, Repositioning / killing old brands • Promotional Mgt. • Optimizing Segment & Media Vehicle budget allocations • Distribution Mgt. • Optimizing Outside & Inside Sales-force & segment allocations • Pricing- • Competitive pricing & Fine-tune A/R

13. Decrease Mfgg Costs Effective Mgt of two other P’s: • People • Investments in HR,TQM & PI • Plant • Investments in automation & capacity mgt.

14. Increase Demand • Driven by Effective Mgt of 4 P’s

15. Product Mgt. Options For every product - 3 options • Improve it- • Reposition it • Kill it-sell off capacity- reinvest recovered capital Reposition Improve Kill

16. Consequences:Improving a product… PRO: • Increase sales & market share • Con’s: • offering a better- price, design and/or higher awareness- accessibility- costs $$$ • High Tech segments can take 2+ years- • Will increase SG&A budgets & squeeze margins…

17. Questions need to answer if plan onimproving a product… • What are your limits -How much can you cut price? Increase R&D… Promotion… Sales Budget? • Competitor moves- improving existing brands in seg. and/or introducing new brands in seg.

18. Variation on Improving… Can Reposition Can allow product to age gracefully and ride the life cycle Can redirect trajectory of brand position into adjacent segment

19. Questions need to answer if plan onrepositioning a product… • How long will it take? • Material & labor cost implications? • Impact on products in segment entering? Leaving?

20. In final analysis– You Could decide to Kill

21. Questions need to answer if plan onKilling a product… • How many products do you plan to have overall? • Going to add a replacement in this or another segment? • Kill immediately-or phase out? • Other options- Improve? Reposition? • How will competitors react?

22. Consequences:Killing a product… 1) Makes it difficult maintain Overall Market Share • Even if Niche strategy-should increase share in selected niche(s) to offset loss in abandoned segments… • Investors-like to see Co. maintain overall starting share….

23. Consequences:Killing a product… If not replaced: 2) Hands over Market Share to competitors 3) Removes strategic opportunity for distribution $$ efficiencies….

24. Segment Consequences:Killing a product… • LOW TECH Segments: Kill the Cash Cow • In opening years 2/3’s volume & profit from Low & traditional sectors • HIGH TECH Segments: Difficult to re-enter, could take up to 3 years to launch new prdt.

25. Your & Your Competitors Product Mgt. Decisions Impact Arenas of Competition

26. Let’s assume…… • LOW END: 0-1 product killed.. 0-1 repositioned or introduced • TRADITIONAL: 3-6 repositioned from High…0-1 killed…1-2 introduced • SIZE: 0-1 killed, 0-1 repositioned to Traditional, 1-2 introduced • PERFORMANCE: 1-2 killed, 0-1 repositioned to Traditional, 0-1 introduced • HIGH: 1-3 killed or repositioned to Traditional, 1-3 new products arrive in rounds 2 or 3

27. Round 3- Forecastnature, magnitude & arena of Competition • LOW END: 6 products=rivalry unchanged • TRADITIONAL: 9 products, w/ 3 repositioned= increased competition • SIZE: 7 products, w/ 2 new= increased competition • PERFORMANCE: 4 products, w/ 1 new= reduced competition • HIGH: 6 products, w/ 2new= increased competition 6 4 9 6 7

28. -Given Round 3 Scenario-How should adjust your production capacities?

29. Optimal levels of capacity?

30. Most Basic Principle Guiding Your Decisions: • will it Increase Demand for Product • Decrease Cost • of Mfgg Product

31. Optimal levels of automation?

32. Once have optimal levels of capacity– Need to have most efficient levels of production costs

33. How to have most efficient levels of production costs • Reduce Material costs • Proffer minimal/optimal level MTBF • TQM/Sustainability Initiatives • Process Management Initiatives • Reduce Labor costs • TQM & PI Initiatives • Increase automation • Invest in employee recruitment & training • Utilize 2nd shift • Increases length R&D on product line-–makes re-positioning take longer • Incur employee separation costs • w/ maximum expenditures can realize 18% improvement in productivity in 6 years! ?

34. Why run 2nd shift –when labor costs 50% higher?

35. Why run 2nd shift –when labor costs 50% higher? Answer by using your proformas: 1- On production spreadsheet build at capacity- if have 1000 units – build 1000 units 2-On Marketing display- FORECAST 1000 UNITS 3.-ON Proforma Income statement- note NET MARGIN – THE BIQ Q: If we double sales will we double our net margin?– Will we make less because labor costs are 50% higher for 2nd shift?

36. Why run 2nd shift –when labor costs 50% higher? Answer by using your proformas: 1- On production spreadsheet double output-run full 2nd shift 2-On Marketing display- double forecast 3.-ON Proforma Income statement- NET MARGIN –will more than double When run 1 shift- must pay all fixed costs- 2nd shift gets a free ride-only has to pay labor premium & Material costs

37. Now that that you are producing-- in the most efficient manner-- a “perfectly designed” product • need to make sure “maximum #” consumers are aware ofit&can “easily” buy it…

38. Moving Product • Message Weight & Media Planning • Breadth, Depth & Heft of Distribution Network • Optimal Pricing & Credit Terms

39. Advertising Budget Drives Awareness New products are newsworthy events. The buzz creates 25% awareness at no cost.

40. Sales Budget Drives Access

41. Fine tuning your Promo, Sales & Pricing…

42. Promo Budget

43. Sales BudgetTime Allocations Decide on how many salespeople & Mfr Reps will have: How much effort will be focused on market segments: • OUTSIDE sales-meet face-to-face (cost $120K/each) • INSIDE sales-works leads & operates website & customer support systems (cost $50K/each) • Distributors: push product (cost $100K/each)

44. Pricing / Credit terms • A/R Lag: (in days) is the time between customers receiving products & when they are expected to pay for ‘em • No credit - demand falls to~ 65% of normal. • At 30 days - demand is 92%. • At 60 days - demand is 98.5% • At 120 days - demand is 100%. • The longer the lag, the more your cash is tied up in receivables.

45. Made all the Right Decisions --product design, pricing, positioning, promotion, distribution… credit terms… production line capacity, automation, hiring training, TQM & PI…

46. IF • Your Competitors produce a better product • &/or You produce too much of your “great” product You’ll be left w/less revenue than anticipated PLUSproduction & inventorycarrying costs that must be paid.. Then

47. Big Al arrives -- pays your bills, and leaves you with a loan & a stiff interest payment Then You’re left w/less revenue than anticipated and did not plan & allocate enough cash to cover yourproduction & inventorycarrying costs.... IF

48. Maintain Adequate working capital & cash reserves In order to: Need to: • Avoid “Big AL” & a Liquidity Crisis- • Have realistic/ accurate sales forecasts

49. Quick N’ Dirty • Consumer Pref’s • Best / Worst Case

50. Estimate FAIR & EARNED Share • 2 Q’s: • What will the average product sell in the segment next round? • To what degree is your product above or below average-on consumers'’ buying criteria?