Tài liệu NX0441 - Managing for sustainable Competitive Advantage ppt

NX0441 - Managing for sustainable Competitive Advantage N o r t h u m b r i a U n i v e r s i t y S t u d e n t N a m e : T h a n h K h a n h L i n h T r a n S t u d e n t I D : w 1 0 0 2 9 3 6 6 G R O U P 3 – T E A M 1 W o r d s c o u n t : 3 , 9 7 6 w o r d s T u t o r n a m e : T o n y P u r d i e P r o g r a m m e : M S c o f H o s p i t a l i t y a n d T o u r i s m M a n a g e m e n t P a g e | 2  P a g e | 3  “Making a difference to families by offering low cost, high quality economical cars regardless of price range” is what our company - Northumbria B.L.A.C.K Automotive aims to provide the customers as well as compete within the European Car Market. Through our commitment to fuel efficient cars at a reasonable price by focusing on research and development to improve the quality and efficiency, we aim to become a prestigious company by gaining a 5% market share in the city car market and a 3% market share in the luxury car market. We will meet our challenging to become a profitable company by the third year throughout the penetration of market with a low cost car, once it is completed, we are going to offer the same car with new features at a higher profit margin. Along with the low cost car, luxury car is produced with a limited number to test the market as well as it will be a desirable product, we will increase production and profit margin to launch our brand name into the luxury market. Model Name Produced Jester 52480 Majestic 5100 Sales £764,212,100 Post Tax Profit -£149,497,113 Bank Balance Before Loan -£247,997,113 Loan Requested £250,000,000 Bank Balance After Loan £2,002,887 P a g e | 4    Northumbria B.L.A.C.K Automotive enters the European Car Market with the 2 main models are Jester (City Car) and Majestic (Luxury Car) for the first 3 years. We did use the automation and employees in manufacturing process to increase as well as improve the productivity throughout the investment in automation in needs. Through 3 years, we also got loss and profit, but the loss was bigger so we decided to introduce the new model in year 4 to gain the more market share as well as boost the Car Market with the brand new product. Actually, we got profit and succeeded with third model – Knight (Large Car) and unfortunately, we did not achieve the business objectives at all.     !""!"#$ In the beginning, we were going to enter the European Car Market with two models and target markets are: Jester (target market: 25 – 40 years old) and Majestic (target market: 41 – 55 years old). The City Car – Jester is predominantly aimed at 25 – 40 years old market and especially aimed to the couples and young families because of the affordable price, disposable income and cost control (fuel efficiency) are key factors to drive their purchasing decision. The low selling price as we decided will be a strategy to establish a considerable market share and gain a reputation as well. The Luxury Car – Majestic is aimed at 41 – 55 years old market to be dominated by older families and high income people. We continue to believe in cost control (fuel efficiency) as a critical factor to make the effect on customers’ purchasing decision. However, because of aiming to the high income people, the price is not very important to them as the quality and benefits we bring to them. Therefore, we are going to add some luxury options to the car and a better build quality. P a g e | 5 In the first year, after we get the actual performances compare to the forecast one, there are some key performances measures are pointed out as the rationales for our company in year two decisions as following: (also can be seen in the graphs and table above) • The both models production are sold as we forecasted. It leads to the market share we objected also nearly be achieved by 0.94% over 1% in Jester and 0.65% over 0.7% in Majestic. • Gross Margin for the Jester in actual is 1.21% and Majestic in actual is 10.06% lower than the forecast because of the cost of sales in actual is higher than what we expected. The rationale for the loss in gross margin is the increasing in cost of sales and overheads which caused by the increasing of materials costs, wages, professional charges and unexpected warranty claims. • As the forecast we are going to get loss by -£149.97m, however, we get loss by - £197.20m, increasing of -£47.23m. As we get loss -£180.54m in the operating profit plus with the interest on Loans £16.66m are also higher than forecast, so, it leads to the heavier loss in post-tax-profit. We recognized that the design cost is too high caused by the high option and also the take up for both models; gross margin is too low based on the flow mark-up. Thus, we aim to make some changes in year 2 as: • Increasing labour and mark-up to increasing Gross Margin; • Increasing in training (we did not spend much on training employees in first year) and wage from £425 to £450 to motivate workforce to enhance the efficiency production; • Increasing car prices to match the mark-up; • Reducing the R&D as well as continuous improving in build quality for both model and increasing the promotion due to the higher prices. % &" '"$%()(* Forecasted Actual Year 2 Year 3 Year 4 Year 2 Year 3 Year 4 Model name Produced Sold In stock Model price £ Market share % Forecast Actual Jester 52480 52480 0 9995.00 1 0.94 Majestic 5100 5100 0 46995.00 0.7 0.65 P a g e | 6 Operating profit (£m) 32,440 73,220 68,552 15,703 -79.82 211,240 Bank Balance Before Loan (£m) 8,496 -88,697 -64,774 -51,570 -372,57 -23,070 Bank Balance After Loan (£m) 4,248 -63,697 -64,774 -51,570 -347,57 -23,070 As can be seen from the table above: o Operating Profit: in year 2 and 3, our business is not running very well by the operating profit always lower than we forecasted. However, in year 4, we get the good performance through the earning profits and market share. o Bank Balance before Loan and Bank Balance after Loan in 3 years actual have the fluctuations due to the changing of the funds and investment in each model as well as the inflation rate is increasing every year. )  '+") !"++'$' The continuous 3 financial years of our company, we continuously and carefully monitored the running of the business and its performance with the solutions/ strategies and overall report provided by Board of Management for all functions. We are going to standing out some key performance measures as the following: 3.1 ##"," ' are increased compare to the first year for each model. The price we decided was not match the mark-up, thus, it leads to get loss in profit because low gross margin as well as the design cost too high caused by high options and the take up for both car do so. Thus, we decide to increase the selling price for both models in next three years. However, due to the remain stock of City Car, and the popularity is not high as the Luxury Car, so, we decide to reduce 4% the price as change the option by sound system replace for safety package in year four due to the popular of this system (Safety package: 40, Superior Sound System: 95) and the suitable to the new target market – under years old that we had changed. P a g e | 7 The price of Luxury Car continue increasing due to the popular and best-selling, so the price increase following 38% in year two, 8% in year three and 4% in year four. In the last year, we are looking for the new model to boost the sales and gain more profit from the failure in selling City Car caused by increasing stock in year two and three (18787 cars in stock) of the City Car model. As compare to the options and selling prices of MLS International Company who also produces the Large Car with the price is £29640. We decide to add some additional options suit to the target market and based on our objectives to provide the low cost car with high quality to attract the customers from new market. At last, we did well with the new model by sold out 91% of production. 3.2 &+ !" is increased 39% for City Car and 83% for Luxury Car (April Report). However, due to the stocks we got in City Car Model, we had reduced the production by 6% and 29% in year three and four. In contrast, the Luxury Model performance well as we sold all the production every year, and decide to increase the production as well as price every year by 18% and 15% in the third and fourth year. The market share for Luxury Car therefore increases every year and it becomes our key production to keep up its performance and revenue. The third model – Knight (Large Car) is produced by 23400 units by the decreasing in the City Car production to boost the revenue and target to the new market. The third model also performs well enough by sold out 92% of production. 3.3 -''," in the next three years of our company is lower than we forecast as following graph has shown. As can be seen in the graph, the gross margin in actual always lower than what we forecasted for three years business. Compare each year performances; we perform P a g e | 8 well in the third year and fourth year than the second year which the gross margin grows up 3.69% and 0.69%. The rationale for the lower gross margin than forecast is caused by the increasing in cost of sale includes of material costs, wages and closing stock. However, in the three years, the cost of sales we forecast always higher than actual but we did get the lower gross margin by actually because of the low mark-up on the product. 3.4 .!' for each model of our company in four year working is increased and reach the highest market share for each model in the fourth year. For the City Car, we do not performance well on it as the Luxury Car does, so, the market share we aim to achieve in the second year and third year is lower 0.6% and 0.36% than forecasted. However, in the fourth year, after we change an option from car design as well as the target market to people less than 25 years old, we achieve the target market objectives by growing 0.3% than forecasted. For the Luxury Car, it performs very well each year by selling all the production, which is why we always nearly reach and grows in market share as lower 0.01% in year 2 and higher 0.03% and 0.09% in year three and four. For the Large Car, we did not achieve the forecasted market share by the actual is less than 0.13%. )/ #'" ' The gap between the actual sales incomes in year two is approximate what we forecast because of the selling volumes of both models and less stock in City Car by 6,555 units over 66,425 units produced. The gap in year three is higher due to the P a g e | 9 increasing in production of both car and prices but just only Luxury Car perform well, thus, we get more stock on City Car by 18,787 units and the sales income is lower 13.6% than forecasted. However, in year three the actual sales income is increased 35.4% than forecasted due to we did not think that Large Car can perform very well as the City Car boost the new market with sold all production and stock while Luxury continuous its strengths with all production sold and increases in market share. )0 '!1!213"! In year 2, the actual post-tax-profit is increased 51% than we forecasted due to the increasing the prices to match the mark-up then lead to increasing in gross margin. In year 3, there are some problems like we change the target market to people less than 25 years old and the price increased for City Car, it dues to the increasing in stock of this model. Moreover, we also spend more funds on promotion with 10% promotional offers, increase in wages and also investment for new model. Thus, the post-tax-profit is decrease by -£135.191m than we forecasted. In year 4, we decided to decrease the selling price of City Car to attract the customers also to introduce the new model – Knight (Large Car) to the market to boost the sales and gain more market share for the company. We sold all the production of City Car and Luxury Car, the Large Car also perform well, thus, the post-tax-profit is increased massively by £113.767m. 3.7 ! ''"!" of our company is fluctuated in every single year as the graph below shows. In the first year, our company had to spend a big investment for the both models and the promotions/ market research/ data on competition. Moreover, we also borrowed £250m from the bank, which is why the net cash position of our company is - £298.66m in the end of first year. However, in the second year, we did not borrow from the bank and change the strategy by increasing labour and mark-up to increase the gross margin; no design changes but increase the car prices due to match the mark-up; reduce the R&D but P a g e | 10 focus more on promotions. This cause the lower 83% than first year, and it means that we have well performance and control the cash flow of this year which leads to earning profit by £5.5m. In the third year, it seems a worst year performance compare to the four year. In this year, we continue to borrow £25m from the bank to invest for the new model will be produced in year four, increasing in training, wages to motivate employees as well as the balance before loans of our company is high by -£372.57m and opening bank balance is -£51.57m. It shows that the profit we earn still not enough to pay for the loans and operating the company as though we also increase the selling prices, cut down the cost for R&D. In the fourth year, we again did not borrow from the bank and the best-selling for three models help our company to have the highest net cash position in four year. We sold all the stock of City Car, the cost of sales also lower than forecast and the revenue we earn from selling car is high, that why although the opening bank balance is high as -£347.57m but we still can over the difficulties in last year to boost the net cash position back to the positive position to make a well performance in selling car and earning profit for the company. )4 #&'5+&' As can be seen from the graph that the shareholders’ fund of our company in each year is increasing quite good, even year three we got the shareholders’ fund lower 36% compare to year two. It means that the retain profit of our company in the third year is not good. [...]... occurring to create the sustainable competitive advantages for the company 3 Human Resources Management According to Hill (2005), Human Resources Management presents significant issues for the analysis and operation of employment relationship The management of employees is one of the key elements in the coordination and general management of work organizations, and the workforce also be considered... efficiency ways together with the high quality to reduce the inventory stocks I also suggested the Total Quality Management (TQM) and Just-in-time (JIT) as the tool to improve the performance as well as to support the inventory management and production planning and scheduling for product line According to Tennant (2001), TQM aims to achieve practically zero defects, reduce variation in output, and innovative... results in term of Return On Investment (ROI) Following the discussion of Stone (2005) that human resources function performs the “bottom line” for achieving the organization’s objective In supporting the workforce to work more effective, we decide to increase the wage every year for £25 by £425 in the first year and £500 in the fourth year As the good result we got in every year, the strike day is... g e | 15 term of in every round, he always give the ideas for us to thinking and then explain, improve and go for the best decision as possible Our team use the delegation, empowerment and negotiating skills through this business game in way of as the Managing Director, Andrew will delegate the tasks of each round to the suitable person and force us to have the responsibilities to our tasks Furthermore,... the key successful factor towards the organizations This statement also affects on and supports our company to go for a strategy from year two till four to increase the training for employees Moreover, Blanchard and Thecker (2010) mentioned that training is considered as the input by transforming the processes in effective training units into output by the P a g e | 13 quality employees that meets the... Afterwards, we have to make decision on product designs and options based on market research about customers’ trend, expectation as well as the data of competition The evidence for this learning is we targeted the 2 5-4 0 years old market for City Car in the first two year and did not successful in this target market Thus, we changed the target market to people less than 25 years old with the small change in... discourage new entrants into the market by way of low margin on sales This pricing strategy is applied for our team in four year operating which leads to achieve the objectives of reach 5% and 3% market share of City Car and Luxury Car model P a g e | 14 TEAM PERFORMANCE Leadership in its traditional form was conceived of as being a personified attribute, and effective leadership was concerned themselves... CEO in the highest position as the following chart: Managing Director - CEO ANDREW Finance Director Marketing Director Human Resources Director Operations Director KESAVAN BASIL LINH CORRION “A leader is one who knows the way, goes the way, and shows the way” – John C Maxwell As an important role of the leader, so, we decide to nominate Andrew as the Managing Director because he is always able to identify... productivity improvements and high skill jobs The business cycle is then ready to repeat itself if the warehouses are restocked with excess inventory which can’t be sold, therefore, it’s going to force the company to sell out the stock first before invest or innovate the new product lines From year two, we got some stock of model one which due to increase the expenses and overheads Thus, the operations manager... e | 16 CONCLUSION The Northumbria B.L.A.C.K Automotive after four year trading in European Car Market get the profit in the ending of year four with the post-tax-profit is £133.23m We get loss in the first year and third year also due to the mark-up we put in each production line is not match enough to the selling prices we given However, we recognized what we are weak at and try to make the best improvement . -7 9.82 211,240 Bank Balance Before Loan (£m) 8,496 -8 8,697 -6 4,774 -5 1,570 -3 72,57 -2 3,070 Bank Balance After Loan (£m) 4,248 -6 3,697 -6 4,774 -5 1,570 -3 47,57. NX0441 - Managing for sustainable Competitive Advantage N o r t h u m b r i a U n i v e r s i t y S