MY COMPANY IS “I” and we are currently ranked 10th…please see attachments
Individual report needed on your experience in the simulation and should be submitted in Word, which should be single-spaced, 12-point Times New Roman Font with a cover page, using APA style. The total submission should be a minimum of 5 complete pages (excluding any unnecessary spacing and references). You are encouraged to create your own section titles for your report. Below are the major topics must be addressed in the report.
- Discuss which year(s) you were most effective in running the company (see attached reports)
- Discuss why the three Competitive Intelligence Reports are important, most particularly the four-page Comparative Competitive Efforts of Rival Companies report and elaborate how your company made good and regular use of them.
- Why is it valuable to pay close attention to the benchmarking data provided on pages 6 and 7 of the Camera & Drone Journal?
- Why is it particularly important to pay attention against trying strategies and making decisions that are imprudent, highly risky, or un-businesslike?
- Identify 4 lessons learned from experiencing this simulation.
- Assess your overall performance and readiness to lead a firm. What are your strengths? What do you need to work on?
MY COMPANY IS “I” and we are currently ranked 10th…please see attachments Individual report needed on your experience in the simulation and should be submitted in Word, which should be single-spaced
PPP aaa rrr ttt iii ccc iii ppp aaa nnn ttt ’’’ sss GGG uuu iii ddd eee Created by Arthur A. Thompson, Jr. The University of Alabama Gregory J. Stappenbeck GLO -BUS Software, Inc. Mark A. Reidenbach GLO -BUS Software , Inc. Ira F. Thrasher GLO -BUS Software , Inc. Christopher C. Harms GLO -BUS Software , Inc. GLO -BUS is publishe d and marketed exclusively by McGraw -Hill Education, Inc., 1333 Burr Ridge Parkway, Burr Ridge, IL 60527 Copyright © 20 23 by GLO -BUS Software, Inc. All rights reserved. No part of this document may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written consent of GLO -BUS Software, Inc., including, but not limited to, in any network or other electronic storage or transmission, or broadcast for distance learning. GGG LLL OOO — BBB UUU SSS Developing Winning Competitive Strategies 20 23 Edition GLO -BUS : Developing Winning Competitive Strat egies Participant’s Guide Copyright © GLO -BUS Software, Inc. Back to Top 2 GLO – BUS This Participant’s G uide provides you with information about GLO -BUS and suggestions for successfully managing your camera and drone company . Here is a quick reference to the contents: How the GLO -BUS Exercise Works ………………………….. ………………………….. ………………………….. …… 3 Your Company ’s Operations ………………………….. ………………………….. ………………………….. …………….. 3 The Worldwide Market for Action -Capture Cameras ………………………….. ………………………….. ……… 5 The Worldwide Market for UAV Drones ………………………….. ………………………….. …………………………. 6 Performance/Quality (P/Q) Rating s of AC Cameras and UAV Drones ………………………….. …………. 7 The Retailers and Buyers of Action -Capture Cameras and UAV Drones ………………………….. …….. 8 The Competitive Factors that Determine AC Camera Sales and Market Share ………………………… 9 The Competitive Factors that Determine UAV Drone Sales and Market Share ………………………. 13 The Importance of the Competitive Factors that Determine Sales and Market Share …………….. 16 Crafting a Strategy to Be Competitively Successful ………………………….. ………………………….. …….. 17 Making Decisions ………………………….. ………………………….. ………………………….. ………………………….. . 19 Product Design Decisions ………………………….. ………………………….. ………………………….. ………… 20 AC Camera Marketing Decisions ………………………….. ………………………….. ………………………….. . 21 UAV Drone Marketing Decisions ………………………….. ………………………….. ………………………….. .. 24 Compensation, Training, and Facilities Decisions ………………………….. ………………………….. ……. 26 Corporate Social Responsibility and Citizenship Decisions ………………………….. …………………… 29 Finance and Cash Flow Decisions ………………………….. ………………………….. …………………………. 30 Decision -Making Procedures ………………………….. ………………………….. ………………………….. ……. 32 What the Board of Directors Expects: Results in Five Key Areas ………………………….. …………….. 32 Scoring Your Company’s Performance ………………………….. ………………………….. ……………………….. 34 Important Advice ………………………….. ………………………….. ………………………….. ………………………….. .. 35 What You Can Expect to Learn ………………………….. ………………………….. ………………………….. ……….. 36 Welcome to GLO -BUS . You are taking over the operation of a company that is in a neck -and -neck race for global market leadership in two product categories: action -capture cameras (comparable to those designed and marketed by global industry leader GoPro) and unmanned aerial view (UAV) drones that incorporate a company designed and assembled action -capture camera. Your c ompany competes against rival companies that design, assemble, and market these same two products and that are run by other members of your class . All makers of these two products — action -capture (AC) cameras and UAV drones — compete head -to-head in four market regions across the world — Europe – Africa, Asia -Pacific, L atin America, and North America, and all companies current ly have the same unit sales volumes, revenues, and global market shares in both product categories. In the most recent year , your compa ny had worldwide sales of 840,000 action -capture cameras and 14 0,000 UAV drones . Prior -year revenues were $ 334 .1 million and net earnings were $ 15 million, equal to $ 0.75 per share of common stock. The company is in sound financial condition, is performi ng well, and its cameras and drones are well -regarded by buyers . Your company’s board of directors has charged you with developing a winning competitive strategy — one that capitalizes on growing consumer interest in action -capture cameras and UAV drones an d improves the company’s overall performance year -after -year. Your first priority as a GLO -BUS participant should be to absorb the contents of this Participant’s Guide and get a firm grip on the character of the market for action -capture cameras and UAV drones , the operations of your company, the cause -effect relationships affecting various aspects of y our company’s operations , and the procedures for participating in th e exercise . GLO -BUS : Developing Winning Competitive Strat egies Participant’s Guide Copyright © GLO -BUS Software, Inc. Back to Top 3 GLO -BUS is a computer -based exercise, modeled to reflect the real -world character of the globally competitive market for A C cameras and UAV drones . The operations of your company and the companies run by other students in your class are patterned after those of actual enterprises that design, assemble, and market AC cameras and UAV drones . Cause -effect relationships and revenue – cost -profit relationships are based on sound business and economic principles. GLO -BUS enables you and your co -managers to apply what you have learned in business school and to practice making reasoned, businesslike decisions aimed at improving your company’s overall performance. Everything about your compa ny and the competitive environment in which your company operates has been made “as realistic as possible ” in order to provide you with a close -to-real -life managerial experience. Each decision period in GLO -BUS represents a year. The first set of decisio ns you will make is for Year 6. You will make decisions each period relating to the design and performance of your company’s two products (21 decisions), assembly operations and workforce compensation (up to 8 decisions for each product) , pricing and marketing ( 7 decisions for cameras and 6 for drones ), corporate social responsibility and citizenship (up to 6 decisions), and the financing of company operations ( up to 8 decisions). In addition, there are 9 entries for cameras and 8 entries for drones involving assumptions about the competitive actions of rivals ; these entries help you to make useful forecasts of your company’s unit sales (so you have a good idea of how many cameras and drones will need to be assem bled each year to fill customer orders ). Plus, there is accounting and cost data to examine, import duties and exchange rate fluctuations to consider, and shareholder expectations to satisfy. Video Tutorials for each decision page will help you get started. And there are Help sections for each page that provide valuable information about each decision entry, important cause -effect relationships, and decision -making tips. Complete results of each decision period be come available online about 15 minutes after the deadline for each decision round . Detailed i nformation and feedback provided in the Camera & Drone Journal , the Competitive Intelligence Report, and the Company Operating Reports provide essential information about each company’s performance, assorted industry outcomes, updated demand forecasts, your company’s competitive standing vis -à-vis rivals, and other statistics that enable you to determine what actions to take to improve your company’s performance in upcoming decision rounds. The decision round schedule developed by your instructor indicates the number of decision periods that you will be running the company. You should use the practice round(s) to become familiar with the software, digest all the information provided on the decision page s and in the reports, and get a glimpse of what to expect before your management team’s decisions start to count. The Corporate Lobby page functions as your “gateway” for all GLO -BUS activities . Plus , the Corporate Lobby page reports the latest interest rates and exchange rate impacts. Take a couple of minutes to familiarize yourself with the features and information on your Corporate Lobby page , all of which will come into play during the exercise. The Recommended Decision Procedures link (Participant’s Materials button) is especially worth a few minutes of your attention. Your company began operations five years ago and maintains its headquarters in Taiwan. It assembles wearable or mountable video cameras smaller than a teacup and camera -equipped drones at recently -constructed facilities in Taiwan . The company’s action -ca pture camera models deliver stunning video quality and have powerful photo capture capabilities. Once the cameras are assembled and tested, they are shipped directly to multi -store chains and online retailers that sell electronics products and to a wide variety of local retail shops selling cameras or sporting goods equipment or outdoor adventure trips in Europe -Africa, Asia -Pacific, Latin America, and North America . For example, shops selling or renting snow skis, snowboards, snowmobiles, all -terrain vehicles, go kart racers, water skis, surf boards, bicycles, hunting and fishing equipment , sky -diving gear, and scuba diving gear often sell or rent miniature, wearable action -capture cameras to customers wanting to video their How the GLO -BUS Exercise Works Your Company’s Operations GLO -BUS : Developing Winning Competitive Strat egies Participant’s Guide Copyright © GLO -BUS Software, Inc. Back to Top 4 experiences ; likewise, the providers of white -water rafting trips, sky -diving and parasailing flights, deep sea fishing trips, helicopter rides, nature trips , and other outdoor action experiences frequently sell or rent ac tion -capture cameras to their customers. The unmanned aerial view (UAV) drones assembled at the Taiwan plant are sold directly to buyers at the company’s website and to other online retailers of commercial drones. These drones are much more sophisticated and multi -featured than inexpensive toy drones sold for recreational use . Indeed , the company you will manage and the drone -makers you will be competing against produce copter drones as wide as four -feet that can be used for a variety of commercial and business purpo ses and retail in the $850 to $2,000+ range. UAV drones are commonly used by professional photography enterprises movie studios and to capture often stunning shots (panoramic scenery, hovering over an open shark’s mouth , explosive action scenes ) from heights and angles not feasible with handheld or tripod cameras. Network and local TV stations use UAV drones to take video s of fires, storm damage, a live volcano, sporting events (golf and football), and other newsworthy events where film footage taken from particular angles or heights or distances is more revealing. Insurance companies use UAV drones to document damage to homes and buildings inflicted by hurricanes, tornadoes, hail, and floods , thereby expediting the process of paying claims ; drones are particularly useful in helping insurers inspec t areas that are hard to access (such as roofs and condemned buildings) . Fire departments use camera drones to monitor fires in large building s and direct where fire hoses and other firefighting eff orts need to be aimed . Large commercial farms use camera drones to monitor crops and crop harvesting; ranchers use drones to track the location and well -being of farm animals. Construction companies use daily drone flights to gather data and 3 -D images s howing progress at project sites and identify areas where the project might be falling behind schedule . Companies use periodic drone flights to help protect against theft and vandalism at plant site s and remote facilities. Indeed, unmanned drones equipped with professional quality, action -capture cameras are being used by growing types of private and public enterprises for a growing variety of purposes , resulting in rapidly -growing market demand for U AV drones across the world . The two product categories your company competes in consists of as few as 4 or as many as 12 companies, as determined by your instructor . All companies begin the GLO -BUS exercise in the same competitive position — equal sales vol umes in each of the world’s four geographic regions, equal global market shares in both cameras and drones, and equal revenues, profits, costs, product quality and performance, brand recognition, and so on. All competing companies are thus presently on an equal footing in all respects. In upcoming years, the managers of all companies will undertake strategic actions to boost the performance of their respective companies — these actions will involve altering prices, product performance and quality, advertising, and other competitively -relevant factors that impact buyer choices of which company’s brand to purchase. The differing actions of competing companies will almost certainly result in substantially different cross -company unit sales volumes and market shares in all regions of the world because the actions of some companies will prove more effective in attracting buyers than the actions of other companies. Companies that succeed in o utcompeting rivals in the sales of either cameras or drones or both will gain sales and market share at the expense of rivals. Some companies will suffer losses of sales and market share in cameras and/or drones in one or more geographic regions — despite s triving (or hoping) to do the opposite — because they are outcompeted by one or more rivals offering what buyers consider to be more attractive product s. Bigger sales and market shares, of course, do not necessarily equate to better profitability and overall performance than below -average sales volumes and market share s— firms that sell top -quality products at premium prices often have smaller unit sales volumes and smaller revenues, yet their profits and returns on investment may well be greater than those of firms selling less expensive, lower -performing products to the mass market . Moreover, e ach competing company’s production and other operating costs for cameras and drones are certain to change over time, as managers of the compet ing companies pursue different actions to operate efficiently and build a competitive advantage linked to lower costs or better product quality or some other factor that yields competitive advantage . It remains to be seen which companies will end up being the most profitable and achieving the best overall performance. GLO -BUS : Developing Winning Competitive Strat egies Participant’s Guide Copyright © GLO -BUS Software, Inc. Back to Top 5 The company has regional faciliti es in Milan, Italy; Singapore; Sao Paulo, Brazil; and Dallas , Texas to conduct the company’s marketing efforts in the four geographic regions of the world market, to support the merchandising efforts of regional retailers who stock the company’s action cameras and UAV drones , and to process camera/drone warranty claims (including making needed repairs ). Assembly and Shipping . The company assembles cameras and drones usually within two weeks of receiving an order and strives to ship an order no later than 2 -3 days after assembly . N o camera models or drone models are assembled in advance, warehoused in company facilities, and then used to fill incoming orders. The company has a staff of people engaged in product R&D this group has the capability to develop new and improved models of cameras and drones as directed by top management. Once company co – managers set tle on the desired specifications and performance features for the company’s line -up of camera and drone models , the needed parts and components are obtained from suppliers having the capabilities to make deliveries to the company’s Taiwan assembly site on a just -in-time basis , thus eliminating the need to maintain inventories of parts or components . The company has two building s for assembling products at its Taiwan site — one for camera s and one for drones (the drone assembly process also includes assembly of an action -camera model having features and specifications suitable for use in camera -equipped drones) . Both c ameras and drones are assembled by four -person product assembly teams (PATs), with each PAT performing the needed tasks at its own assigned workstation . Shipping department personnel package orders for shipment and stack them on the loading dock for pickup by independent freight carriers. The cameras are delivered to buye rs anywhere from 3 days to 3 weeks later, depending on a retailer’s location and the means of transportation — shipments to distant retailers are shipped via a combination of air and ground freight and those to customers in select parts of Asia are shipped b y ground freight . The cost of boxing cameras, packaging them for shipment, and freight charges average $ 5 per camera . Packaging and shipping costs for drones average $60 per unit; most orders for drones air freighted to customers and delivered within 5 t o 10 business days . Many countries have opted to impose import duties on cameras and drones sourced from Taiwan . Going into Year 6, import duties equal 4% of the average price the company charges customers in Europe -Africa, and 6% of the average price being charged to customers in both La tin America and the Asia -Pacific; there are no import duties on either cameras or drones shipped to customers in North America . Import duties in all four regions of the world market are subject to chan ge in upcoming years. Competitive Efforts. To capitalize on ongoing technological advances and the pipeline of product enhancement capabilities flowing from the company’s expenditures for product R&D , each year the company typically changes the specs for important components, adds /modifies performance features, upgrades the internal software , makes assorted other design -related changes , and introduces new and/or improved models . In addition, strong competition from rival companies pu shes management to make price and market ing adjustments to improve buyer appeal for the company’s camera/ drone models and to enhance the company’s ability to compete more effectively . Stock Listings. The company’s stock is publicly traded on the NASDAQ exchange in the United States . The closin g price in Year 5 was $ 12 per share. The company’s financial statements are prepared in accord with generally accepted accounting principles and are reported in U.S. dollars. The company’s financial accoun ting is in accord with the rules and regulations of all authorities where its stock is traded. Worldwide unit sales of wearable and/or mountable , miniature action -capture cameras are reliably projected to grow 6-8% annually for the next five years (Years 6 -10) and then to grow at a slower 4-6% annual rate during the following five years (Years 11 -15). However, t he projected growth rates differ by geographic region , as shown below . The Worldwide Market for Action -Capture Cameras GLO -BUS : Developing Winning Competitive Strat egies Participant’s Guide Copyright © GLO -BUS Software, Inc. Back to Top 6 Projected Growth of Unit Sales of Action -Capture Cameras Worldwide North America Europe -Africa Latin America As ia-Pacific Years 6 -10 6.0 %-8.0% 4.5% -6.5% 4.5% -6.5% 8.5% -10.5% 8.5% -10.5% Years 11 -15 4.0%-6.0% 2.5% -4.5% 2.5% -4.5% 6.0% -8.0% 6.0% -8.0% Note: Actual growth within the forecast 2% range varies from region to region. In one region the actual growth rate may be near the high end of the forecasted range, in another region in the same year it may be near the low end, and in still another region it may be near the midpoint of the range. Moreover, the forecast growth rates are all based on the assumption that in future years the competitive efforts of rival companies will, on the whole, not differ significantly from the levels prevailing at the end of Year 5 . Future growth rates may turn out to be higher than forecast in the event more buyers are attracted to purchase action -capture cameras because of a dramatic decline in camera prices and/or significantly higher camera quality/performance and/or sharp and sustained increases in the marketing and competitive e fforts of rival companies to grow camera sales volumes. Conversely, factors that can drive away potential buyers and cause the growth in buyer demand to fall below the forecast amounts include sharply higher camera prices and/or a strong downward trend in camera quality/performance and/or complacent efforts on the part of rival companies to please buyers and capture the available growth opportunities. In other words, the forecast growth rates, while reliable, are not guaranteed in the event the competitiv e efforts in the industry become significantly stronger or weaker than the levels prevailing in Year 5. Because the growth rate in four geographic region s can be anywhere within the forecast 2 percent range, company managers have to deal with uncertainty about where within the projected growth range the actual growth rate in camera demand for a particular geographic region in a particular year will turn out to b e. Bear in mind here that the managers of real -world companies do not operate with certainty about what their industry’s growth rate in unit volume for the upcoming year will turn out to be, correct to the first decimal place —a forecast somewhere within a 2-percentage -point range is really a pretty good forecast! Competition. Competition in the worldwide market for action -capture cameras revolves around price, product quality and performance, the number of models offered, the number and types of retailers that stock and merchandise each brand of camera, the amount of merchandising support companies provide to these retailers , advertising, sales promotion activit ies (the duration of sales promotion campaigns and the sizes of the price discounts offered to retailers during these promotional campaigns) , the length of warranties, and brand reputation. Worldwide unit sales of unmanned aerial view (UAV) drones are reliably projected to grow 15.5%- 17.5% annually during Years 6 -7, 12.0 -14.0 % annual ly during Years 8-9, 9.0% -11.0% annually in Years 10 -11, 6.0% -8.0% annually in Years 12 -13, and 3.75 %-5.75 % annual ly during Y ears 14 and 15 . However, the projected growth rates differ considerably by geographic region, as shown below. Projected Growth of Unit Sales of Unmanned Aerial View Drones Period Worldwide North America Europe -Africa Asia -Pacific Latin America Years 6 -7 15.5%-17.5 % 15.0% -17.0% 15.0% -17.0% 17.0% -19.0% 17.0% -19.0% Years 8 -9 12.0%-14.0% 11.0% -13.0% 11.0% -13.0% 14.0% -16.0% 14.0% -16.0% Years 10 -11 9.0%-11.0% 8.0% -10.0% 8.0% -10.0% 11.0% -13.0% 11.0% -13.0% Years 12 -13 6.0%-8.0% 5.0% -7.0% 5.0% -7.0% 8.0% -10.0% 8.0% -10.0% Years 14 -15 3.75 %-5.75 % 3.0% -5.0% 3.0% -5.0% 5.0% -7.0% 5.0% -7.0% The Worldwide Market for Unmanned Aerial View Drones GLO -BUS : Developing Winning Competitive Strat egies Participant’s Guide Copyright © GLO -BUS Software, Inc. Back to Top 7 Note: As noted above in regard to the growth rates of action -capture cameras, actual growth of for UAV drone sales within the forecast range s v aries from region to region . T he forecast growth rates, while reliable, are not guaranteed in the event the competitive efforts in the industry become significantly stronger or weaker than the levels prevailing in Year 5. Again, while company managers have to deal with uncertainty about where within the projected 2% growth range the actual growth rate for drones for a particular geographic region in a particular year will turn out to be , a forecast somewhere within a 2 -percentage -point range is really a pretty good forecast! Competition. Competition in the worldwid e market for UAV drones differs somewhat from that for action -capture cameras and is centered on price, product quality and performance, the number of models offered, the relative a ppeal of rival company websites as concerns providing complete information about different models and the ease of plac ing orders, the comparative amounts competitors elect to spend on search engine advertising to help draw shopper traffic to their website (where a big percentage of drone sales are transacted), the length of warranties, the relative success competitors have in attracting third -party online retailers to display and merchandise their brand of UAV drones (and thereby broaden their access to potential purchasers of drones ), and brand reputation . P/ Q Rating s for Action -Capture Cameras. The World Digital Video Federation (WDVF) , a well – respected affiliation of camera industry trade groups and camera experts, tests the performance and quality of the action -capture camera models of all competitors and assigns a performance -quality or P/Q rating ranging from a low of 1.0 stars to a high of 10.0 stars to each company’s line of action – capture cameras — each company’s star rating is reported to the nearest tenth of a star (i.e. 2.3, 4.7, 6.5). The WDCF’s P/Q ratings are based on an array of factors: (1) image sensor size, (2) size of the LCD display screen , (3) image quality of the pictures /video , (4) number of photo modes for videos and still photos , (4) camera housing, (5) editing/sharing capabilities, (7) included accessories (such as capacity of flash memory card, recharge able batteries, a plug -in battery -charger, and carrying case) ( 8) number of extra performance features , ( 9) the number of camera models a company offers, ( 10 ) a company’s cumulative spendi ng on product R&D, and ( 11 ) the amount a company spends annually on training for each of its camera -related PATs and improving its camera -related assembly methods (since such spending can affect defects encountered and the need for repairs) . Ratings are updated annually. Currently, the action -capture camera lines of al l competitors have a 4.0-star P/Q rating. Competition among rivals is, however, likely to result in different P/Q ratings for the camera offerings of different companies in forthcoming years . This is because all buyers both within a geographic region and across the four geographic regions do not prefer to buy precisely the same quality camera with precisely the same performance features and pay precisely the same price. Diverse buyer preferences thus make it highly that some camera companies wi ll opt to cater to buyers shopping for low -priced action cameras having basic features (and perhaps a P/Q rating of 1 -3 stars), while other camera makers may decide to design cameras to satisfy buyer preferences for a premium -priced, full -featured action camera (with perhaps a 7 -star to 10 -star rating), and still other camera -makers may choose to target “middle market” buyers content with a medium -priced camera having a P/Q rating in the 4-6 star range . P/Q Rating s for UAV Drones. Three years ago, the Global Alliance for Safe and Responsible Use of Commercial Drones was formed to help lobby government authorities responsible for regulating airspace to establish drone -use regulations that would enable commercial enterprises to benefit fro m the rapidly -advancing capabilities of aerial drone s to provide valuable pictures and data. Membership quickly grew to include drone manufacturers, the suppliers of materials and components used in the production of drones, a wide variety of commercial e nterprises and trade associations with interest in using drones for various purposes, and organizations engaged in drone technology research. Two years ago, members of the Global Alliance voted overwhelmingly to develop a methodology for rating the perfor mance and quality of the hundreds of brands and varieties of drones available for sale worldwide, but most especially UAV drones suitable for a variety of commercial uses . Eighteen months ago, the first performance -quality or P/Q ratings of UAV drones wer e released for posting on the Global Alliance’s website , along with the methodology for determining the ratings . Ratings are a function of (1) Performance/Quality (P/Q) Ratings of AC Cameras and UAV Drones GLO -BUS : Developing Winning Competitive Strat egies Participant’s Guide Copyright © GLO -BUS Software, Inc. Back to Top 8 the caliber of the built -in action -capture camera, (2) the caliber of the built -in GPS/Wi -Fi/ Bluetooth component s, (3) battery life (maximum flight time per charge), (4) number of rotors, (5) rotor performance and flight controller features/capabilities , (6) body frame construction, (7) the caliber of the obstacle sensors , (8) quality of the camera stabilization device , (9) number of extra performance features, (10) the number of drone models a company offers, (11) a compa ny’s cumulative spending on drone -related product R&D, and (12) the amount a company spends annually on training its drone – related PATs and improving idrone -related assembly methods ( since such spending can affect defects encountered and the need for repairs). Each brand of UAV drones was assigned a P/Q rating of 1 .0 to 10 .0 stars , with each company’s star rating being reported to t he nearest tenth of a star . Ratings are updated annually. As of Year 5, the UAV drone offerings of all competitors in your industry group ha d a 4 .0-star P/Q rating. However, given the expected rapid advances in drone technology and the many new features and improvements that are expected to be incorporated in UAV drones in upcoming years, it is likely that the P/Q ratings of competing brands of UAV drones will quickly diverge . Drone buyers across the world are not looking for drones with the very same features, performance, and quality because the purposes for which they intend to use UAV drones vary greatly , thus creat ing a market for drones with varying combinations of fea tures — which, in turn, results in drones with varying costs being sold at varying prices. Consequently, it is likely that some drone makers will opt to cater to buyers shopp ing for low -priced drones having basic features (and perhaps a P/Q rating of 1 -3 stars) , other s will elect to target buyers willing to pay well above -average prices for a more full -featured drone (with perhaps a 7 – star to 10 -star rating) , and still other drone -makers opting to compete for the patronage of “middle market” buyers whose performance -quality requirements equate to P/Q rating s in the 4-6 star range . Action -Capture Camera Retailers. Worldwide, there are some 50,000 retailers of wearable (or mountable/attachable) , teacup -size video cameras scattered across the world — each of the four major geographic regions of the world market has 12,500 retailers of action -capture cameras , some of which are multi -store retail chains ( 100 per region), online electronics retailers (400 per region), an d local retail enterprises that sell or rent these cameras (12,000 per region). Retailers with store locations that also sell cameras on their websites are not included in the online category. Multi -store chains account for the biggest percentage of acti on -capture camera sales, with online retailers second and small local retailers third. Retail markups over the wholesale prices run 50% to 100%; thus , the models of a company with 4 -star -rated action -capture camera s wholesaling for an average of $200 could retail for an average of $300 -$400. Such markups allow retailers to put selected models or brands of cameras on sale from time -to-time at 10% to 20% off regular price and still make a decent profit margin. Retailers typically carr y anywhere from 2 -4 brands of action -capture cameras and stock only certain models of the brands they do carry, but in all four geographic markets there are around 20 “full -line” action camera retailers that stoc k most all brands and models. Most all c hai n-store retailers carry at least 2 and often 3 -4 of the best -selling brands. The makers of weak -selling brands of action camera s have difficulty convincing major retail chains to devote much display space and merchandising efforts to their models. Online retailers are, however, more amenable to merchandising low -volume brands, especially those with relatively high P/Q rat ings (favored by buyers concerned about camera performance and quality) and/or minimal performance features but ultralow prices (which are favored by bargain -hunting shoppers). Online Retailers of UAV Drones. There are 100 online retailers of UAV drones in eac h of the four geographic regions. Because your company sells its UAV drone models at the company’s own website in direct competition with other online retailers of UAV drones, these online retailers are inclined to stock and display your company’s brand o f drones only if they can purchase your drone models at an attractive per centage discount to the price being charged on your website . In other words, if you offer to sell online retailers your models of UAV drones at say 20% off the price being charged on your website, then a greater number of online retailers will be inclined to stock and merchandise your drone models than if you only offer them a 10% price discount . Moreover, the bigger the percentage discount The Retailers and Buyers of Action -Capture Cameras and UAV Drones GLO -BUS : Developing Winning Competitive Strat egies Participant’s Guide Copyright © GLO -BUS Software, Inc. Back to Top 9 you offer to these online retailers, the bi gger the sales they will generate — discounts of 15 % to 2 0% may result in 3rd-party online retailers accounting for 25% to 35% of yo ur company’s total sales volume . Generally , if your company’s price discounts are under 10%, very few online retailers will purchase your drone models for resale on their websites because their profit opportunities are minimal (even if they charge prices higher than your company’s website prices in hopes of attracting buyers who have never visited your company’s website) . The Buyers of Action -Capture Cameras. People interested in purchasing a wearable video camera in order to record their action adventures for personal viewing and also to share their experiences with others (perhaps on Facebook or other sites) are generally quite aware that there can be big differences in the prices and performance of the various brands of action -capture cameras . Many do e xtensive internet research to educate themselves about the features, performance, and prices of different action – capture camera brands and models. The World Video Camera Federation’s much publicized P/Q ratings are trusted by people who are shopping for a ction cameras or already own one , and the Federation’s frequently -visited website has detailed information concerning the results of its performance tests and the basis for its P/Q ratings of each action -capture camera brand. Moreover, both the makers of these cameras and online electronics retailers have extensive information on their websites about currently available models . There are also assorted websites and publications that publish/post information about and reviews of new and improved camera mode ls. Consequently, it is easy for most potential buyers of action camera s to do considerable comparison shopping before deciding which camera brand to buy — they tend to be quite aware of the prices and P/Q ratings of different brands, the various retail location s and websites where action cameras can be purchased, the warranties of competing brands, and the fact that retailers have periodic weekly sales promotions that feature sizable discounts off the regular retail price . Po tential buyers also pay at least some attention to the media ads they see for various action cameras brands and their purchasing decisions are to some degree influenced by these ads. Many price -sensitive consumers shopping for their first action -capture camera are inclined to wait to make a purchase until the retailers of these cameras in their geographic area have weekly sales promotions featur ing discounted prices . The Buyers of UAV Drones. Individuals and enterprises interested in purchasing a UAV drone for commercial use are generally quite aware that there can be big differences in the prices and performance of the various brands of UAV drones . many do extensive Internet research to educate themselves about the feat ures, performance, and prices of different brands and models of UAV drones. The readily available P/Q ratings for various brands of drones compiled by the Global Alliance for Safe and Responsible Use of Commercial Drones are considered trustworthy, and th e Global Alliance’s frequently -visited website has detailed information concerning the results of its performance tests and the basis for its P/Q ratings of each drone brand. Moreover, both drone -makers and third -party online electronics retailers of dron es have extensive information on their websites about the currently available models they offer for sale . Because of mushrooming interest in the features and capabilities of UAV drones, a growing number of websites and media publications have begun postin g/publishing articles about the features and capabilities of new ly-available drones and newsworthy developments in the drone industry . Consequently, it is common for likely drone purchasers to do considerable comparison shopping before deciding which drone brand to buy — they are familiar with the P/Q ratings of rival brands, the retail prices and information post ed at company websites and the websites of other online retailers of drones , and the war ranties of rival brands . Potential buyers also pay at least some attention to the search engine advertising they encounter when browsing for information about UAV drones , and their decisions to ultimately purchase this or that brand are affect ed by these ads. Competition among rival makers of action -capture cameras centers around 11 factors: 1. Average Wholesale Price to Retailers — The most important price -related consideration affecting a company’s camera sales/market share is the extent to which its average wholesale price for the camera models it sells to retailers in each region is above/below the region al all -company average . A company whose average wholesale price is above the industry (or “all -company”) average in a region is burdened by a price -based competitive disadvantage. The bigger the percentage by which The Competitive Factors t hat Determine AC Camera Sales and Market Share GLO -BUS : Developing Winning Competitive Strat egies Participant’s Guide Copyright © GLO -BUS Software, Inc. Back to Top 10 a company’s average wholesale price is above the regional average, the bigger is the company’s price -based competitive disadvantage and the bigger is the resulting negative impact on its cameras sales and market share in the region. Conversely, the bigger the percentage by which a company’s average wholesale price is below the regional average, the bigger is the company’s price -based competitive advantage and thus the bigger is the positive impact on its cameras sold and market share in the region . In other words, the further a company’s average wholesale price is above the regional average , the bigger the number of action -camera shoppers who will opt to buy lower -priced rival brands whereas the further a company’s average wholesale price is below the regional -average , the bigger the fraction of action -camera shopp ers in the region a company can attract t o buy its lower -priced brand . However, the size of any company’s pricing disadvantage/ advantage versus rivals (and the resulting loss /gain in camera sales and market share) can be decreased/increased by its competitive standing versus rivals on the other 10 competitive factor s. Any company whose wholesale price exceeds the regional average can partially offset or even overcome its price disadvantage when it has competitive edge s over rivals on some/many other relevant buyer considerations — such as an above -average P/Q rating, more models for buyers to select from , or longer -than -average warranties . But the further a company’s average wholesale price to retailers is above the regional average prices , the harder it is for a company to use non -price enticements to overcome rising buyer resistance to the company’s higher priced camera models . Similarly , any company whose price to retailers is below the average prices of its regional rivals can widen its price -based advantage over rivals when it also has a competitive edge over these rivals on some or many of the other 10 competitive factors that influence camera sales and market share in a region. In addition, t he further a company’s price is below the average being charged by regional rivals , the ea sier it becomes to offset any competitive disadvantages relating to a below – average P/Q rating , shorter -than -average warranties, a below -average number of models , and other competitively relevant factors . One other price -related factor is also relevant . The buyers of actio n cameras in Latin America and the Asia -Pacific region are more sensitive to cross -brand price differences than are camera buyers in North America and Europe -Africa . Thus when camera -mak ers raise their wholesale prices to retailers in a region this quickly translates into higher retail prices in the region because retailers mark up the wholesale price they pay camera -makers by 50 % to 100%. Consequently, when the product offerings of competing companies entail only minor differences in P/Q ratings (and other factors that shape buyers’ brand preferences), then cross -brand differences in wholesale price will have a bigger impact on unit sales and market share s in Latin America and the Asia -Pacific than in North America and Europe -Africa. 2. P/Q R ating s— The vast majority of action -capture camera shoppers consider the widely -available and much -publicized annual P/Q ratings comp iled by the World Digital Video Federation to be a trusted measure of the performance and quality of competing brands of AC cameras . Market research indicates buyers worldwide consider the P/Q ratings of competing brands of AC cameras to be one of the two most important factor s (along with price) in shaping their choice of which action -camera brand to purchase . A company whose P/Q rating is above the regional average P/Q ratings of rivals in a region enjoys an important competitive advantage on the performan ce -quality aspect of its camera models . Likewise, a below average P/Q rating constitutes an important performance -quality -based competitive disadvantage. The more a company’s P/Q rating is above the industry average, the more that camera shopp ers in the region are attracted to purchase the company’s camera brand — unless the company’s higher P/Q rating is undermined by (1) unfavorable comparisons against rivals on such other buyer -relevant features as comparatively few models for buyers to choose among, a significantly weaker brand reputation, or a much shorter – than -average warranty or (2) charging a price premium for the added performance -quality that buyers consider “too high ” or “not worth the extra cost.” Market research further reveals that the buyers of action cameras in North America and Europe -Africa are more sensitive to cross -brand differences in P/Q ratings than are camera buyers in the Asia -Pacific and Latin America region s. Thus, when two brands of action cameras have slightly different prices and P/Q ratings (and all other buyer considerations are, on GLO -BUS : Developing Winning Competitive Strat egies Participant’s Guide Copyright © GLO -BUS Software, Inc. Back to Top 11 balance, virtually identical between the two brands), then a bigger percentage of buyers in North America and Europe -Africa will purchase the brand with the higher P/Q rating while a bigger percentage of buyers in Latin America and the Asia -Pacific will pur chase the cheaper -priced brand — resulting in bigger sales for the camera brand with the higher P/Q rating in the North America and Europe -Africa regions and bigger sales for the lower -priced camera brand in the Latin America and Asia -Pacific regions. Howev er, beware of assuming the differing cross -region sensitivit ies to price and P/Q ratings mean buyers in North America and Europe -Africa care little about price or that buyers in Latin America and the Asia -Pacific care little about P/Q ratings. Camera prices and P/Q ratings matter greatly in all geographic regions . 3. Number of Models — Companies offering buy ers a bigger selection of models than rivals enhance their company’s competitiveness by giving camera buyers more opportunity to find a model well suited to their preferences. Companies offering comparatively fewer models than rivals risk losing sales and market share to competitors offering greater selection, unless they offset their narrower selection with other appealing competitive attributes (such as a lower price, higher P/Q rating, longer warranties, and so on). 4. Advertising Budget — Media advertising is used to inform the public of the prices and features of newly introduced models, to tout the merits of buying the company’s brand, and to inform shoppers of special sales promotion campaigns and discounted sales prices. Even though re tail dealers act as an important information source for customers and actively push the brands they carry, advertising on the part of camera -makers (often done in conjunction with the advertising efforts of retailers stocking its brand) strengthens brand a wareness, helps pull buyers into retail stores carrying the brand, and informs the public about the features and prices of a company’s latest action camera models. The competitive impact of advertising depends on the size of your company’s current -year ad vertising budget in each region. Companies whose advertising is abov e the all -company regional -average gain an advertising -based competitive edge that positively impacts their company’s regional sales volume and market share; the bigger the percentage com petitive advantage, the bigger the positive impact. Companies whose spending is below the regional average suffer from an advertising -based competitive disadvantage that negatively impacts their regional sales and market share; again, the bigger the percen tage competitive disadvantage, the bigger the negative impact . 5. Sales Promotion s (number of weeks )— Rival companies can run from 0 to 20 week -long sales promotion campaigns annually to tout their action -capture cameras — all such campaigns involves offering retailers a discount of some size off the regular price . Periodic sales promotion campaigns are of interest to retailers stocking the company’s m odels because they call attention to the brand, spur consumer interest and store traffic, and help increase unit sales. Market research indicates that the competitive impact of sales promotion s depends on whether the number of sales promotion events a company has annually is above/below the industry average in each region . Companies having above -average number of sales campaigns gain a promotion -based competitive edge that positively impacts their regional sales volume and market share. Conversely, a below -average number of weekly promotions results in a competitive disadvantage that negatively impacts a company’s regional sales volume and market share. The bigger the percentage competitive advantage/disadvantage, the bigger the positive/negative impa ct. 6. Sales Promotion s (% discount) — Retailers that are offered, say, a 15% discount off regular wholesale price on units sold during a sales promotion event can be counted on to pass the savings along to consumers in the form of corresponding sale prices of 15% off the regular retail price. In the camera business, just as in most other businesses, big ger sale s price discounts attract more buyers than small er price discounts. Thus , promotional campaigns involving sale prices of 15% to 20% off the regular price have substantially greater sales -enhancing impact than promotions offering only 5 or 10% discounts, e ven if a company holds more sales with such small discounts. In other words, t he size of the discounts off regular price a company offers during sales promotion events is a very crucial factor in determining the sales -enhancing impact of its promotion al campaigns , more so than the number of promotional events . Companies offering discounts above the regional average gain a competitive advantage that positively impacts the company’s regional GLO -BUS : Developing Winning Competitive Strat egies Participant’s Guide Copyright © GLO -BUS Software, Inc. Back to Top 12 sales volume and market share, with the size of the p ositive impact depending on the size of the competitive advantage. Companies offering discounts below the regional average have a competitive disadvantage that negatively impacts the company’s regional sales volume and market share, with the size of the ne gative impact depending on the size of the competitive disadvantage. 7. Retailer S upport Budget — Support for regional retailers involves providing retailers with in -store signs, up -to-date product -information brochures, and engaging video -enabled point -of-purchase (POP) displays that showcase uses of the company’s camera models and accessories. A portion of the retailer support budget is also used to support the trips of company marketing personnel to visit the stores of high -volume retailers and work with store managers/clerks in expanding/improving the footprint of the company’s POP displays. Companies whose retailer support expenditures are above the regional average gain a competitive edge in attracting retailers to stock their brand compared to companies providing below -average amounts of retailer support — the bigger a company’s retailer network in a region, the stronger is its brand ex posure to camera shoppers and the stronger the resulting positive impact on its regional sales and market share. 8. Website Product Displays / Info — The level of expenditures for website displays and information is a proxy for the time, effort, and creativity that a company puts into (1) posting periodically refreshed and visually appealing display s of its various camera models , along with ample and useful information about each model’s features, capabilities, and specifications , ( 2) providing site visitors with the capability to create side -by -side model comparisons , (3) enabling site visitors to post their reviews of particular models, and ( 4) providing good after -the -sale product support to cust omers . Many potential buyers make a point of visiting the company’s website to gather information about the company’s models and research how the features, capabilities, and specifications of its models compare against those of rival brands. The product displays , informational content , and customer reviews at each company’s website, along with the website’s visual appeal and functionality , is thus an important element in prompting buyers to visit a nearby retailer of the company’s brand, personall y inspect the company’s various models, and perhaps make a purchase. Visits to a company’s website also enable customers to obtain needed after -the – sale technical support, download apps and software updates for previously -purchased camera models, browse p roduct manuals, discover how to file a warranty claim, and use the chat function to pose questions to online personnel . 9. Retail Outlets — A company’s sales and market share in a geographic region are strongly influenced by the number and type of retailers (multi -store chains, online electronics retailers, and local retail shops) it can convince to stock its brand and display its models. In general, having more of each type of retailer selling the company’s br and is better than having fewer retailers because of the added display exposure and the added convenience to camera buyers of being able to buy a given brand at more locations. Companies with an above -average number of retailers in a region enjoy a compet itive edge that positively impacts their regional sales volume and market share. Companies with a below -average number of retailers in a region suffer from a competitive disadvantage that negatively impacts their regional sales volume and market share. In the last two months of each year, camera retailers decide whether to stick with the camera brands they are currently stocking or whether to make some adjustments based on five considerations : (1) which camera brands in their region are growing in popularit y and declining in popularity among buyers (as measured by changes in each company’s market share in the region ), (2) each camera maker’s P/Q ratings for its line of action cameras as compared to the regional average , (3) the number of week -long sales promotion campaigns each company undertook as compared to the regional average , (4) the size of the promotional discount each company offer ed during these weekly sales promotions relative to the regional average , and ( 5) each company’s expenditures to support the merchandising efforts of camera retailers in the region relative to the regional average . 10. Warranty Period — Camera buyers, of course, find longer warranties more appealing than shorter warranties. A company whose warranty period exceeds the regional average gains a competitive edge that positively impacts its regional sales/market share, whereas a company whose warranty period is below the regional average suffer a competitive disadvantage that negatively impacts its regional sales volume and market share . The further a company’s warranty period is above/below the regional average, the bigger the positive/negati ve impact. GLO -BUS : Developing Winning Competitive Strat egies Participant’s Guide Copyright © GLO -BUS Software, Inc. Back to Top 13 11. Company Image (b rand reputation )— The “image rating” for each company in the industry is based on its P/Q rating for action -capture cameras, its P/Q rating for UAV drones, its global market share of action camera sales , its global market share of UAV drone sales , and its actions to display co rporate citizenship and conduct operations in a socially responsible manner over the past 4 -5 years — a total of 5 factors. All companies had an overall worldwide image rating of 70 at the end of Year 5 . Image ratings /brand reputations are updated at the end of each year, using the latest P/Q ratings, year -end global market shares, and information relating to the social responsibility efforts of rival companies. Newly -released brand image ratings are widely -publicized and become quickl y known to buyers considering the purchase of action cameras and UAV drones. Market research confirms that the latest company image ratings (brand reputations ) of rival companies have a moderately strong influence on the brand choices of camera buyers in the upcoming twelve months . Thus, companies with current image ratings above the industry average have a meaningful competitive edge over rivals with below -average image ratings in attracting camera buyers to purc hase their brand and in recruiting additional retailers to stock and merchandise their camera models for a period of 1 year (at which time new end -of-year company image ratings /brand reputations are released ). The importance of a strong brand reputation in attracting camera buyers is big enough that c ompanies with comparatively weak reputations must exert enough extra effort on the other 10 competitively relevant factors to boost overall buyer appeal for their brand and overcome their image /rep utation disadvantage . When weak image companies significantly improve the overall buyer appeal and competitiveness of their camera models from one year to the next , they can definitely win market share from strong image rivals despite having an image rating disadvantage . Should companies with once -weak brand reputation s continue to improve their overall image ratings over a period of several years , they can definitely turn the liability of a weak brand reputation into a strong brand reputation and competitive asset. Competition among rival makers of UAV drones centers around 9 factors: 1. Average Direct -Sale Price to Online Customers — Companies charging a price that is below the regional av erage gain a pric e-based competitive advantage that positively impacts their regional sales and market share , whereas companies charging a price that is above the regional average results in a price -based competitive dis advantage . The bigger the percentage by which a company’s average retail price is below/above the regional average, the bigger the resulting positive/negative impact on its regional sales volume and market share. How ever, any company whose direct sale price is above the industry average in a region can partially offset or even totally overcome its price disadvantage when it has a competitive edge over rivals on some or many other important sales -determining factors — such as a P/Q rating that is above the industry average P/Q rating , an above -average number of models , longer -than -average warranties , an above -average number of third -party online retailers , above -average expenditures for search engine advertising , and a n above -average brand reputation . Price disadvantages become progressively easier to overcome as a company’s P/Q rating rises further above the industry average . P/Q ratings that are 1 -2 stars (or more) above the industry average can command prices hundreds of dollars above the industry average because a sizable fraction of the commercial enterprises that purchase UAV dron es place a high value on the added performance of drones with P/Q ratings of 7 stars and higher — perhaps as many as 5% of the world’s drone buyers can be enticed to pay prices perhaps as high as $2,000 -$2,500 for UAV drones with 9 -star or 10 – star P/Q rating s. But the further a company’s price to retailers is above the industry average in a region , the harder it is for a company to use enticements other than higher P/Q ratings to overcome rising buyer resistance to higher retail prices for its drone models. Likewise, the further a company’s price is below the industry average in a geographic region, the easier it becomes to offset any competitive disadvantages relating to lower P/Q ratings, shorter warranties, fewer models, and so on. One other price -related factor is also relevant . The purchasers of drones in Latin America and the Asia -Pacific regions are more sensitive to price differences than are drone purchasers in The Competitive Factors t hat Determine UAV Drone Sales and Market Share GLO -BUS : Developing Winning Competitive Strat egies Participant’s Guide Copyright © GLO -BUS Software, Inc. Back to Top 14 North America and Europe -Africa . In other words, when the drone offerings of competing companies entail only minor differences in P/Q ratings (and other factors that shape buyers’ brand preferences), then price differences will have a bigger impact on uni t sales and market share in Latin America and the Asia -Pacific than in North America and Europe -Africa. 2. P/Q Rating — The vast majority of drone shoppers consider the widely -available and much – publicized annual P/Q ratings comp iled by the Global Alliance f or Safe and Responsible Use of Commercial Drones to be a trusted measure of the performance and quality of competing brands of drones . Market research indicates buyers worldwide consider the P/Q ratings of competing drone brands to be one of the two most important factors (along with price) in shaping their choice of which brand to purchase. A company whose drones have a P/Q rating above the industry average thus has an important competitive advantage over rivals, whereas a below -average P/Q rating constitutes an important competitive disadvantage . P/Q ratings that are more than 1 star above or below the industry average result in particularly strong competitive adva ntages or disadvantages and thus have strong positive or negative impacts on sales volumes and market shares in each region . The competitive advantage that attaches to an above -average P/Q rating can make a company’s drone brand even more appealing to buyers (and thus translate into even bigger sales volume and market share) if it is supplemented by charging an attractively small price premium for the added performance -quality, by also offering a longer -than -average warranty and/or an above – average n umber of models to choose from , and so on. Likewise, a company se lling drones with an above -average P/Q rating can erode its performance -quality advantage by charging a price that buyers consider “ unreasonably high” for the added performance and quality or by weakening the competitiveness of its product offering with other subpar characteristics (a short warranty or a weak brand reputation or an unappealing website ) that undercut the P/Q rating advantage . Market research further reveals that when two brand s of drones have slightly different prices and P/Q ratings (and all other buyer considerations are, on balance, an even tradeoff between the two brands), then a slightly bigger percentage of buyers in North America and Europe -Africa will purchase the brand with the higher P/Q rating while a slightly bigger percentage of buyers in Latin America and the Asia -Pacific will purchase the cheaper -priced brand . 3. Number of Models — An above -average nu mber of models enhance s a company’s competitiveness in the marketplace by giving drone buyers wider product selection and thus more opportunity to find a model with the features and specifications that best matches how they plan to use the drone. Companies with a below -average number of models risk losing sales and market share to competitors offering greater selection, unless they offset their narrower selection with other appealing competitive attributes (a lower price, a higher P/Q rating, a l onger warranty , etc.). 4. Retailer Recruitment / Support Budget — This expenditure cover s the costs of calling on prospective online retailers to (1) personally communicate the expected rapid growth of the UAV drone market, the advantages of a company’s dron e models, and the R&D effort the company is making to improve future models of its drones, (2) build a relationship with these prospects via a face -to-face visit, and (3) explain the kinds and amount of merchandising support the company provides. Retailer support includes providing periodically -refreshed pictures of the company’s various drone models for online retailers to display in their webstores , supplying comprehensive and up -to-date information about each model, and engaging in collaborative efforts to service buyer requests for various kinds of after -the -sale product support (filing warranty claims, downloading product manuals, obtaining software updates and useful apps, and so on). Companies whose expenditures for website displays are above the reg ional average have website display -based competitive edge that positively impacts their regional sales volume and market share. Conversely, below -average expenditures for website displays results in a competitive disadvantage that negatively impacts a comp any’s regional sales volume and market share. The bigger the percentage competitive advantage/disadvantage, the bigger the positive/negative impact. 5. Discount Offered to 3 rd-Party Online Retailers — While exerting efforts to recruit third -party retailers and support their efforts to merchandise the company’s drone models is important, the crucial inducement to securing the commitment of 3rd-party online retailers to market a company’s drones is the size of the percentage discount off the price that a drone -maker is GLO -BUS : Developing Winning Competitive Strat egies Participant’s Guide Copyright © GLO -BUS Software, Inc. Back to Top 15 selling drone models at its website . Understandably, t hird -party online retailers have zero interest in buying a drone -maker’s models at the same price the drone -maker is charging at its website , then marking the purchase price up by some percentage (10% or more to cover their own costs and allow for an attractive profit) and trying to secure orders at prices above a drone maker’s website prices. Hence, a drone -maker wanting to gain wider buyer access and additional sales volume through 3rd-party online retailers can do so only by offering to sell its drones to these online retailers at an attractively large percentage discount off its own website price . The bigger the percentage discount offered, the greater the number of 3rd-party retailers that will agree to stock and merchan dise a drone -maker’s brand. But, as should be expected , the bigger the amount by which a drone -maker’s percentage discount offer exceeds the industry regional average, the bigger the number of 3 rd-party online retailers it will attract to sell its brand of drones in that region and the greater will be the resulting regional sales volume and market share it achieve s. 6. Search Engine Advertising — Search engine ads are a means of attracting more drone shopper traffic to a company’s website and thereby helping achieve a bigger unit sales volume and market share in a region . A c ompan y whose expenditures for search engine advertising is above the all – company regional -average gain s a search engine advertising -based competitive edge that positively impacts its regional sales volume and market share; the bigger the percentage competitive advantage, the bigger the positive impact. A c ompan y whose expenditures are below the regional average suffer s from a search engine advertising -based competitive disadvantage that negatively impacts its regional sales and market share; again, the bigger the percentage competitive disadvantage, the bigger the negative impact . 7. W ebsite Product Displays / Info — The level of expenditures for website enhancement is a proxy for the time, effort, and creativity that a company puts into (1) posting periodically refreshed and visually appealing displays of its various drone models, along with ample and useful information about each model’s features, capabilities, and specifications, (2) providing site visitors with capability to create side -by -side model comparisons, (3) enabling site visitors to post their reviews of particular models, (4) making it easy and quick for buyer s to place orders and pay for their purchase via credit card or wire transfer , and (5) providing good after -the -sale product support to customers . Bigger than average expenditures for website expenditures attract more website visitors because of the resulting enhanced visual appeal, functionality, f eatures and information. Many potential buyers make a point of visiting the company’s website to gather information about the company’s models and research how the features, capabilities, and specifications of its models compare against those of rival bran ds. Visits to a company’s website also enable customers to obtain needed technical support, download apps and software updates for previously -purchased drone models, browse product manuals, and discover how to file a warranty claim. Companies whose expend itures for website displays are above the regional average have website display -based competitive edge that positively impacts their regional sales volume and market share. Conversely, below -average expenditures for website displays results in a competitiv e disadvantage that negatively impacts a company’s regional sales volume and market share. The bigger the percentage competitive advantage/disadvantage, the bigger the positive/negative impact. 8. W arranty Period — Shoppers for UAV drones find longer warranties more appealing than shorter warranties. A company whose warranty period exceeds the regional average gains a competitive edge that positively impacts its regional sales/market share, whereas a company whose warranty period is below the regional average suffer s a competitive disadvantage that negatively impacts its regional sales volume and market share. The further a company’s warranty period is above/below the regional average, the bigger the positive/negative impact. 9. Company Image (b rand reputation )— Just a s with action -capture cameras, market research confirms that the current company image ratings ( which reflect company brand reputations ) of rival drone -makers have a moderately strong influence on the brand choices of drone buyers in the upcoming twelve months . Thus, c ompanies with current image ratings above the industry average have a competitive advantage over rival companies with below -average image ratings in attracting drone buyers to purchase t heir brand for a period of one year (at which time new end -of-year image ratings and brand reputations become available and widely publicized) . The bigger a company’s GLO -BUS : Developing Winning Competitive Strat egies Participant’s Guide Copyright © GLO -BUS Software, Inc. Back to Top 16 image rating advantage or disadvantage against the industry average , the bigger the positive or negative impact on its sales of UAV drones in the upcoming year. Companies with comparatively weak brand reputations must exert enough extra effort on some (or many) of the other 8 competitive factors to overcome a weak image d isadvantage and boost overall buyer appeal in order to increase sales and market shares above prior -year levels . Winning big chunks of sales and market share away from rivals with strong image ratings in a single year is difficult. But it is certain ly feasible for drone -makers with below -average image ratings to nibble away at the business of strong -image rivals, gaining 1 or 2 points of market share in a single year, (maybe more ) if they significantly improve the overall buyer appeal and competitive ness of their drone models relative to the models of rival s. Should companies with below -average brand images boost their image ratings to above -average over a period of several years, they can definitely turn the liability of a below -average brand image into a strong er brand image and competitive asset . Just as in the real world, the 11 competitive factors for action cameras have differing impacts — some carry more weight than others in a company’s sales volumes and market shares in each geographic region. As indicated above, the prices and P/Q ratings of camera rivals are the two most important competitive factors affecting buyer decisions of which camera brand to purchase . Moreover, buyer decision s to purchase one brand instead of another a re more influenced by brand reputation, number models, number of retail outlets , advertising, the warrant y period , and the size of promotional discounts than by differences in the number of promotion al campaigns , in retailer support expenditures , and in website expenditures . The weigh t for brand reputation fall s somewhere in between the weights for the most and least important competitive factors. Similarly, the 9 competitive factors for UAV drones have differing impacts on which drone brands have more buyer appeal than other. The prices and the P/Q ratings of rival brands are usually the two most i nfluential competitive factors affecting buyer dec isions of which UAV drone brand to purchase . Furthermore, the brand preferences of drone shoppers are likely to be more influenced by such competitive factors as brand reputation, the number of models, and warranty periods than they are by search engine a ds and the efforts of rival companies to enhance their websites (where many sales transactions occur) and market their drones at the websites of other online electronics retailers. The influence of brand reputation falls somewhere in between the importance for the most and least important competitive factors. The Weight ing of Each Competitive Factor Is Not a Fixed Amount . The weight ing placed on the 11 competitive factors for action cameras and the 9 competitive fac tors for drones closely mirror what is believed to actually prevail in real -world marketplaces. While knowing precise ly the weight ing used for each competitive factor might seem helpful, such knowledge is not as useful as you might think . Price is most definitely a very influential competitive factor. Big price differences in a region matter a lot in accounting for differences in sales/market s hare. But as the spread between the highest -priced company and the lowest -priced company becomes smaller and smaller, the weaker is the unit sales/market share impact of price differences and the greater is the role of the differences on other competitive factors in causing the sales and market share s to differ . For example , in the rare instance that all companies should happen to charge the same price in a region, then price becomes a total competitive non -factor and has zero impact on buyer appeal for one brand versus another — in such a case , 100% of t he regional sales and market share differences among rivals will stem directly from differences on the other competitive factor s. So how much price matters in determining a company’s unit sales/market share in a region is not a fixed amount but rather is an amount that varies from “big” (when price differences are also “big) to “small” (when prices differences are “small”) to “zero” (w hen the prices of rivals are identical). Precisely the same is true for the other competitive factors . So while it is true that some competitive factors affect buyer brand preferences more than others, what matters most in determining sales and market shares is the sizes of the differentials on each competitive factor . Big differences on a less important competitive factor like the length of warranty The Importance of the Competitive Factors t hat Determine Sales and Market Share GLO -BUS : Developing Winning Competitive Strat egies Participant’s Guide Copyright © GLO -BUS Software, Inc. Back to Top 17 periods can end up having a bigger sales/market share impact than very small /insignificant differences on more important competitive f actors (like price and P/Q rating) . Essential u nderstanding: The more that a company’s brand appeal to buyers on any one competitive factor (whether it be price, P/Q rating, brand reputation, number of models to choose from, length of warranty, and so on) is above/below the industry average in a region , the bigger is the we ighting /impact of that factor in accounting for why its regional ne t sales/market share is above/below the industry average . Conversely, the closer to the industry regional average is a company’s price or P/Q rating or brand reputation or number of models and so on, the smaller is the weighting/ impact of that factor in accounting for why its unit sales/market share is above/below the industry average. When a company’s competitive effort on each of the various competitive factors approximates the industry averages in a region, then its resulting unit sales volume/ market share will also approximate the region’s industry average . So which particular competitive factors actually turn out to be most important all depends on how that company’s competitive effort stacks up against the industry average competitive effort , factor by factor. All unit sales and market share outcomes in all regions are thus 100% competition -based and are a function of the size of each company’s competitive advantage or disadvantage versus the industry averages for all the competitive factors . Special Note: After each decision round, you can review a Comparative Competitive Efforts Report (1 -page for each geographic region) showing each company’s competitive effort on each of the competitive factors for action cameras and UAV drones. It is imperative that you review this information to determine how well your company’s competitive effort on each f actor compares to the industry averages — on which factors d oes your company have a competitive advantage and on which factors is your company at a competitive disadvantage ? This information puts you in position to correct any important competitive disadvantages and to consider ways to further exploit any competitive advantages in the upcoming decision round. Ignoring the information in the Comparative Competitive Efforts report puts your company in the risky position of heading into a market contest with little or no clue as to competitors’ prior -year prices, P/Q ratings, brand reputations, models, warranties, and so forth and the extent to which your company was or was not outcompeted by rivals. With so many competitive factors determining unit sal es and market shares of and with the sales and market share impacts of these factors varying from year -to-year because of shifts in e ach company’s competitive advantage/disadvantage versus rivals on all these factors , you have wide -ranging options for crafting a strategy capable of producing good overall company performance and competing successfully in the AC camera and UAV drone market segments . For example, you can : • Employ a low -cost leadership strategy and pursue a competitive advantag e keyed to operating more cost -efficiently than rivals and thereby being in a strong position to profitably sell action cameras and/or drones at prices below those of rivals. • Employ a strategy to differentiate your company’s cameras and/or drones from rival brands based on such attributes as product performance and quality , number of models, warranties, and other competitive factors that matter to buyers — and thereby outcompete rivals with a product offering that has greater overall appeal to a high ly profitable number of buyers . • Employ a “more value for the money ” strategy ( for example, sellin g 8-star cameras and drones at lower prices than other 8-star brands) where your competitive advantage is an ability to incorporate “upscale” product attributes with high buyer appeal at a lower cost than rivals — and thereby underprice rival brands having comparable attributes and P/Q ratings . • Focus your strategic efforts on being the clear market leader in either action -ca pture cameras or UAV drones . • Focus your company’s competitive efforts on gaining sales and market share in those geographic markets where your company already has high sales and/or attractively large profit margins (as compared to other regions) and putting less emphasis on winning sales in Crafting a Strategy to Be Competitively Successful GLO -BUS : Developing Winning Competitive Strat egies Participant’s Guide Copyright © GLO -BUS Software, Inc. Back to Top 18 those regions where your company has a low market share or small profit margins and regions where competition is especially fierce (as comp ared to other regions) . • Pursue essentially the same strategy and competitive advantage across all four regions or, instead, craft regional strategies tailored to improve the company’s competitiveness region – by -region and counteract/overcome the strategic a ctions and competitive maneuvers of specific rivals in specific regions . There’s a very big window of opportunity for you to craft some version of the above strategic approaches . And because GLO -BUS has no built -in bias that favors any one strategy over all the others , there are multiple strategic approaches and sets of competitive efforts/action that , if properly designed and well -executed , are capable of producing competitive success in the global market for cameras/drones, provided they are not overpowered or thwart ed by even more potent strategi c approache s and competitive actions/efforts that are well -executed by rival companies . No One Strategy for Competing “Guarantees” Success . Because the sales and market share outcomes for a company are 100% -based on the competitiveness and overall buyer appeal of its brand versus the competitiveness and overall buyer appeal of rival brands , it is neither conceptually nor competitively possible for there to be some preselected surefire strategy or competitive approach or some undefeatable combination of competitive efforts/ actions that is “guaranteed” to propel a company into the ranks of the top -performing companies, irre spective of the strategies and competitive efforts undertaken by rival companies. Consider the following : • Are the companies that are being outperformed by the company pursuing a so -called surefire strategy going to sit idly, do nothing, and watch that company overwhelm them , decision round after decision round thereby running the risk of a poor grade? Not likely . It is unreasonable to expect any company to passively accept competitive de feat and unconditionally surrender. • Do managers of rival companies whose performance is suffering have strong incentives to aggressively pursue actions to boost the performance of their companies? Certainly . • Do all the managers of rival companies lack the capacity figure out why their companies are being outcompeted and outperformed? Very unlikely . • Aren’t the reasons fairly obvious ? Don’t these reasons revolve around prices and/or P/Q ratings and/or number of models offered and/or warranties and/or assorted marketing efforts that are not sufficiently competi tive with those of the high -performing company and that have resulted in weak buyer appeal ? Most certainly . • Might part of the reason for their underperformance also be due to “high” unit costs that are squeezing profitability? Yes — at least for some companies . • Can one or more of the companies being outcompeted and outperformed be reasonably expected to launch a strong cou nterattack and initiate new and potentially potent competitive efforts to improve their company’s performance ? Yes . T here is nothing to prevent any company from reducing prices and/or increasing P/Q ratings and/or adding models and/or lengthening warranties and/or boosting its marketing efforts (perhaps by significant amounts ), and there is plenty of reason for underperforming companies to pursue such actions aggr essively . • Might such actions prove effective in bolstering the competitiveness and overall buyer appeal of their brands , thereby narrowing the competitive gap and the performance gap between the underperforming companies and the industry leader? Definitel y. I t is common for underperforming companies to reverse their fortunes by undertaking actions t hat succeed in boost ing buyer appeal for their product offerings and greatly improving their overall performance — this occurs both in GLO -BUS and in the real world . • Is there a reasonable chance that one or more companies could even overtake the industry leader by devising a potent strategy and series of competitive actio ns/maneuvers that enable it to outcompete the former industry leader in the marketplace and become the best – GLO -BUS : Developing Winning Competitive Strat egies Participant’s Guide Copyright © GLO -BUS Software, Inc. Back to Top 19 performing company in the industry? It should come as no surprise — there are many instances, both in GLO -BUS and the real -world, where well -managed trailing companies have overtaken industry leaders. There is no such thing as an “unbeatable ” strategy and competitive approach that will always overpower and outperform all other strategies, irrespective of the strategies and competitive efforts employed by rival companies . W hat drives the sales/market share success/ failure of any one company’s strategy for competing in the marketplace is always how well the overall buyer appeal and competitive ness of its cam eras/drones matches up in each decision round with the overall buyer appeal and competitiveness of the camera s/drone s of rival companies on each of the competitive factors . As long as your company’s competitive efforts/actions and operating decision s produce an overall buyer appeal for your camera/drone product line as compared to the offerings of rival companies and so long as your company exerts sufficiently aggressive c ompet itive efforts , then you can expect a satisfactory percentage of buyers to prefer purchasing your cameras/drones over rival company brands . W hile it is important to win attractive sales/market shares in each region, such outcomes are not sufficient to produce the best profit outcomes. For a company to rank among the industry’s top -performers , its net r evenues must cover costs by an amount sufficient to produce good -to-excellent profitability. This requires not only sufficient competitive success in the marketplace to produce attractively large revenues but also consistent managerial success in operating the company cost – efficiently — operating inefficiencies and wasteful spending impair a company’s profitability and overall performance . Jus t as in real -world companies that operate in competitive marketplaces, your company’s strategy and competitive actions/efforts will need to evolve as the decision rounds unfold in order to respond and adjust to the shifting strategies and competitive efforts of rival companies . So even if your company’s performance in the year just completed is quite good, do not expect to lock your competitive efforts and decisions entries in concrete — some adjustments (mayb e many adjustments) will almost certainly be needed to counter the freshly initiated competitive efforts/actions of rivals. Be Very Wary about Following the Advice of Outside Sources. You are well -advised to be highly skeptical about following any advice and tips regarding what to do that comes from prior participants in the GLO -BUS exercise at your school or from sources you discover from internet searches . While you might be tempted to view such anecdotal information as “helpful” or “important to know” or “worth considering,” just bear in mind that your company will be competing against companies run by students in your class — any information you run across a bout the experiences of companies run by other teams of students in other industries at your school or elsewhere in the near or distant past are of dubious relevance. Why? Because the chance that the head -to-head competition and outcomes in whatever past i ndustries produced the tips and advice you have gotten will closely match the exact levels of competitive effort in each region that the companies in your industry have already undertaken and will undertake in the future is very small (most likely close to zero) . So , following such advice carries significant risk of being “off the mark ” or even “dead wrong” in helping you identify what levels of competitive effort are needed to compete effectively against the rival companies in your class. The most accurate and dependable source of information for guiding your efforts to compete successfully is always found in the Competitive Intelligence Report you receive after every decision round . As indicated earlier, there are 56 different types of de cision entries and 17 entries involving assumptions about the competitive actions that rivals are likely to take . In some cases, entries for the same decision type (like selling price or advertising and the length of warranties ) are required for each of t he four geographic regions of the world market. Each of the decision page s displays the projected outcomes of your decision entries. These project ions appear instantaneously as soon as each decision is entered, allowing you to isolate the incremental impacts of each decision entry . Also, o n e ach decision page are calculations showing projections of earnings per share (EPS) , return on average equity investment (ROE) , credit rating, image rating, revenues, net profit , and year -end cash balan ce . Making Decisions GLO -BUS : Developing Winning Competitive Strat egies Participant’s Guide Copyright © GLO -BUS Software, Inc. Back to Top 20 These , too, are instantly updated with new entry, allowing you to see the probable impacts of each new decision entry on company performance. You will find these built -in decision support calculations invaluable in evaluating alternative decisions an d deciding what to do. You can easily try out any number of “what if we do this” decision alternatives, review the projected outcomes, and thereby search for a combination of decision entries that appears to offer the best overall performance and meets with the consensus approval of you r company’s management team . The first time you visit a decision entry page , you will need to take time to explore the page and digest all the information. If you feel the need for additional information while you a re working on a particular page , click the Help button at the top -right . The Help sections provide detailed entry -by – entry guidance, including important cause -effect relationships , explanations of all on -screen calculations , and decision -making tips . Totally ignoring the Help information is unwise. Most likely, you will find the information valuable in making wiser decision entries and avoiding the desperation of entering “some number” in hopes that the outcome will be “good” or “okay.” Upon visiting a decision entry page, t he numbers you see in the entry boxes represent either (1) the decision s made in the prior year or (2) the latest decision entries you and/or your co -managers saved while previously work ing on the current decis ion round . No decision entry for the upcoming year is considered final until the deadline (set by your instructor ) for entering decision s arrives . GLO -BUS considers the last set of decision entries saved prior to the decision round deadline as “final”. It is critical that you and your co -managers save your entries for the decision round before the deadline passes. Product Design Decisions The product desig n page involves deciding on the components , enhancements, and extra performance features to incorporate in your cameras/drones, the number of models to have in each product line , and how much to spend on product R&D . Initially t he numbers appearing in the decision entry fields (or beside the decision filed for product R&D) are the entries from the prior round (year) . The Product Design entrie s are important because they determine the P/Q rating s assigned to your cameras/drones. The better the design -related specifications and the greater the number of extra performance features , the better the resulting performance and quality (but the higher the associated production costs). As decisions are entered , you can review the on -screen calculati ons of the expected P/Q ratings and the associated costs to determine which combination of design specifications is “best” for implementing the strategy you have chosen to pursue. All part s, product enhancements, accessories, and components needed for extra performance features are purchased from outside suppliers; these suppliers sell essentially the same items at the same prices to all companies . The costs of extra performance features increase as the number incorporated into the designs of cameras/drones increases (the cost impacts are shown in the Production Costs section of the page). Number of Models. Prior management elected to have a product line -up consisting of 3 action camera models and 2 drone models. While there i s considerable merit in trying to expand sales by adding more models, the addition of more models introduces quality control difficult ies that negatively impact P/Q ratings and warranty claims and that also reduces the number of cameras /drones that product assembly teams (PATs) can assemble annually . PATs cannot assemble 5 models of cameras/drones as proficiently and as problem -free as they can assemble 3 models. Model increases reduce camera/drone PAT productivity by some percentage that depends on whether the model increase is 1 model, 2 models, 3 models, or 4 models. The addition of more models also tends to increase warranty costs because of faulty assembly and /or components that prematurely become defective . Reducing the number of models has the reverse effects . It is easy enough to track the effects of increasing or decreasing the number of models by observing the changes in the on -screen calculations of the P/Q rating, warranty costs, and labor costs. Product R&D Expenditures. In Year 5, prior management spent $2 0 million on product R&D for cameras and $15 million on product R&D for drones . Substantial R&D spending is required to improve product performance , discover and test easier -to-assemble camera/drone designs, develop new and GLO -BUS : Developing Winning Competitive Strat egies Participant’s Guide Copyright © GLO -BUS Software, Inc. Back to Top 21 improved models, and program more sophisticated software capabilities for both cameras and drones. The R&D challenges for improving drone performance are more formidable than for action cameras, partly because video camera technology is better understood and more mature, partly becau se drones are a relatively new product , and partly because the company just recently entered the drone marketplace and has yet to fully develop its drone design s. Drone buyers, of course, are highly interested in drones that can stay up in the air longer than the current maximums of 15 -30 minutes , fly distances well beyond the view of the person operating the flight controller , and avoid crashing into obstacles in their flight path — such capabilities present formidable R&D challenges that will require susta ined R&D efforts. The combination of current year spending and cumulative spending over time for product R&D (1) reduc e the costs of components, accessories, and enhancement features used in assembling cameras/drones , (2) provide a pipeline of tested ways to add more features, improve performance, and buil d the company’s proficiencies in designing new and improved camera/d rone models , (3) improve a company’s camera/drone P/Q rating s— higher P/Q ratings are realized as soon as current and cumulative R&D spending reach levels sufficient to produce better camera/drone performance and quality , ( 4) reduce warra nty claims and cost s (these two benefits stem from the positive impact of R&D expenditures on P/Q ratings) , and (5) increase the productivity of PATs in assembling camera /drone models — productivity gains occur as soon as current and cumulative R&D spending reach levels sufficient to identify and develop eas ier to assemble product design s. AC Camera Marketing Decisions At the top of th is second decision page is a section display ing the 7 marketing -related decisions your company will make for action cameras . Just below the entry fields for the 7 marketing decisions is a section labeled Market Segment Statistics. The first two lines show your company’s (1) actual sales of cameras in the prior year and projected sales in the current year and (2) camera market share in the prior year and projected market share in the current year. The last three lines of this section report the number s of multi -store chains, online retailers, and local retail shops in each region stock ing and merchandising your brand of action cameras in the prior -year and the current year — the current year number s were updated at the end of the prior year to reflect the year -end appea l of your company’s camera models , and there’s nothing you can do in the current year t o attract additional retailers (the updated number s of retailers willing to stock each company’s camera brands are reported in the Competitive Intelligence Report s). The company’s regional sales offices (Milan, Singapore, Sao Paulo, and Dallas ) are staffed with people who help recruit and service the accounts of retailers in the region. Each time you enter a different value for any of the marketing decisions, you will see the effects on projected unit sales and projected market share. In addition, you will see on -screen calculations showing the projected price -cost -profit outcomes associated with the marketing decision entries. The decision entries on the page are pretty much self -explanatory, but click on the Help button at the top -right if you have questions, want additional information, or need guidance. The re are several things you need to keep in mind as you make entries for the marketing decisions : • All seven marketing decision s (along with your company’s P/Q rating and number of models offered , both of which are determined by your entries on the Product Design page ) will largely determin e the degree to which your company’s camera products are competitive with the camera products of rival companies and whether your company’s brand will be sufficiently appealing to buyers to generate net sales revenues big enough to cover operating costs and yield attractive operating profits and operating profit margins. • The accuracy of the on -screen projections of your company’s unit sales and market shares is a function not just of your company’s competitive efforts but also the competitive efforts of rival compa nies (which will almost certainly include adjusting their P/Q ratings, number of models, wholesale prices, advertising, sales promotion efforts, and so forth) . At the bottom of this page is a section labeled Competitive Assumptions containing entry fields for the competitive factors affecting sales and market share in each region. The first time you visit GLO -BUS : Developing Winning Competitive Strat egies Participant’s Guide Copyright © GLO -BUS Software, Inc. Back to Top 22 this page the se entries represent the prior -year average competitive efforts of rival companies . U nless the se are updat ed, the o n-screen projections of your company’s unit sales /market share s will be based on how your company’s competitive effort for the current year compares against the competitive condition s your company faced last year . Note: The reason there are entry boxes for only 9 of the 11 competitive factors is that the two missing competitive factors — number of retailers and brand reputation — are already known for the current year because they are updated at the end of every decision rou nd and are reported in the Competitive Intelligence Report. Needless to say, the managers of rival companies can be counted upon to alter aspects of their competitive effort in all four regions as they prepare their current -year decisions and seek to boost the performance of their respective companies. This means that the on – screen projections of your company’s unit sales and market share in each region are of questionable validity because they are based on how your company’ s competitive effort in the current year stack up against the prior -year competitive efforts of rival companies, not their forthcoming competitive effort s. If you believe that rival companies are likely to alter their competitive efforts by raising or lowe ring prices, P/Q rating s, models offered, advertising, and so on, then you will definitely need to enter your anticipated changes in the some/all of the industry average marketing efforts in the Competitive Assumptions section . The whole purpose of updating the prior year industry -average levels of competitive effort is to obtain projections based on the forthcoming -year industry -average levels of competitive effort in ea ch region. Make a point of consulting the historical data in the Regional Average Competitive Efforts selection in the Competitive Intelligence menu which shows the historical changes of the regional averages for all year completed to date — this information will prove highly valuable in making your updates. Consequently, before you get very far along in making entries for the 7 marketing decisions, it makes sense to first enter your anticipated updates of the industry averages for the 9 competitive factors. Yes, especially for Year 6, these are likely to be “guesst imates ” or “approximations” , but sales/market share projections based on reasonable assumptions of what rivals are likely to do may be more reliable than projections based on what rivals did a year ago. The updates will be easier to make in later y ears, as more historical information becomes available. It is reasonable for you to expect that the competitive efforts of rivals will, on average, be stronger than in the prior year, if only because poorly -performing companies that were outcompeted last year have strong incentive to initiate actions to boost their competitiveness and because al l competitive have incentives to correct any competitive disadvantages and to try to improve their overall financial performance. Even if you overestimate the strength of competition from rivals in the upcoming year (which, in turn, will lower the project ed sales/market shares for a given level of marketing effort on the part of your company) and actually end up with bigger sales/market shares than were projected, your company will still assemble, ship, and sell the unexpected units demanded provided you r company has sufficient idle workstation capacity to assemble the unexpected orders . It is far better to have the pleasant surprise of selling more than the projected sales volume (and enjoying the accompanying extra revenues and profits) tha n having the unpleasant surprise of selling less than the projected sales volume because you underestimated the strength of the competitive efforts from rivals. Trying different decision entries and experimenting with different assumed changes in the industr y average levels of competitive effort for the current year, enables you to evaluate the merits of different decision entries and arrive at a consensus of what strategic actions to take in striving to combat the anticipated strategies and competitive maneu vering of rivals. Exchange Rate Adjustments . In the section labeled Price -Cost -Profit Breakdown, you will notice that in the Revenue Projection entries just under selling price is a line labeled “± Exchange Rate Adjustment .” Exchange rate adjustment s result from the fact that (1) the exchange rate of one currency GLO -BUS : Developing Winning Competitive Strat egies Participant’s Guide Copyright © GLO -BUS Software, Inc. Back to Top 23 for another fluctuates on a daily basis and (2) the company assembles, ships, and sells action cameras in Taiwan (where the local currency is Taiwan dollars) to buyers in other parts of the world (where local currencies are different). Fu rther, the orders tend to occur at some agreed price in a period when exchange rates are one value while buyer payments are not received until some later period (when exchange rates are very likely a different value). There’s a second reason for exchange rate adjustments: the local currency payments the company receives from buyers over the course of a year must be converted into Taiwan dollars and ultimately into U.S. dollars (since the company reports its financial statements in U.S. dollars and the comp any’s stock is traded on a U.S. stock exchange ). Thus , the company’s business is one with potentially significant foreign exchange risks. To help manage these risks, company officials have negotiated a long -term currency exchange agreement with the Glob al Community Bank through which the company does most of its business. The agreement calls for the bank’s foreign currency department to handle the company’s many foreign currency transactions. For simplicity, the agreement entails combining both of the reasons for currency adjustments (enumerated in the above paragraph) into a single adjustment whereby the net revenues the company actually receives on cameras assembled and shipped from its Taiwan assembly facility and sold to buyers in various parts of t he world to be adjusted upward or downward is based on the real -world currency swings during the period from one decision round to the next as concerns the U.S. dollar against the Taiwan dollar, the euro against the Taiwan dollar, the Brazilian real agains t the Taiwan dollar, and the Singapore dollar against the Taiwan dollar. Specifically: • The net revenue per camera the company actually receives from camera sales to retailers in North America is a result of adjusting the company’s average wholesale price up or down for exchange rate changes between the U.S. dollar and the Taiwan dollar. • The net revenue per camera the company actually receives from camera sales to retailer s in Europe -Africa is a result of adjusting the company’s average wholesale price up or down for exchange rate changes between the euro and the Taiwan dollar. • The net revenue per camera the company actually receives from camera sales to retail ers in the Asia -Pacific is a result of adjusting the company’s average wholesale price up or down for exchange rate changes between the Singapore dollar and the Taiwan dollar. • The net revenue per camera the company actually receives from camera sales to retailers in Latin America is a result of adjusting the company’s average wholesale price adjusted u p or down for exchange rate changes between the Brazilian real and the Taiwan dollar. The procedures for adjusting revenues on sales to retailers in Latin America, Asia -Pacific, and North America are handled in like fashion. The sizes of the exchange rate adjustment each year are always equal to 5 times the actual period -to-period percentage change in the real -world exchange rates for US$, €, Brazilian real, Sing$, and Taiwan$ (multiplying the actual % change by 5 is done so as to translate exchange rate c hanges over the few days between decision periods into changes that are more representative of a potential full -year change). However, because actual exchange rate fluctuations are occasionally quite volatile over a several -day period, the maximum exchang e rate adjustment during any one period is capped at 20% (even though bigger changes over a 12 -month period are fairly common in the real world ). All the pertinent calculations are done automatically, thus relieving you from mastering the intricacies of t he exchange rate adjustments. In making sales to buyers in Europe -Africa, the company provides price quotes in terms of both the buyer’s local currency and in euros. Buy ers, while making payment in their local currency (which can be either euros or some o ther denomination), agree when the order is placed to tie the amount of their local currency payment per camera to the local currency equivalent of that number of euros per camera — the company’s global bank handles converting the local currency payments of Europe -Africa buyers into the equivalent of euros and then into Taiwan dollars at the appropriate exchange rates. Should the exchange rate of euros per Taiwan dollar fall from one decision period to the next, say from 0.0250 to 0.0249 euros per Taiwan dol lar, then buy er payments of the agreed number of euros per camera at the time the order was placed equate to more Taiwan dollars at the time of payment and an upward adjustment in the company’s revenues. Conversely, when the exchange rate of euros per Taiw an dollar rises, say from 0.0250 to 0.0251 euros per Taiwan dollar (meaning that a specified GLO -BUS : Developing Winning Competitive Strat egies Participant’s Guide Copyright © GLO -BUS Software, Inc. Back to Top 24 number of euros equate to fewer Taiwan dollars), then the company does not receive as many Taiwan dol lars in payment for the cameras sold and shipped to Europe -Afr ica buyers and net revenue is accordingly adjust ed downward . The size of the Europe -Africa revenue adjustment is equal to 5 times the actual period -to-period percentage change in the exchange rates of euros to Taiwan dollars (multiplying the actual % change by 5 is done so as to translate the exchange rate change over a few days into a change that is more representative of what might realistically occur over a full year ). Thus, if the exchange rate between euros and Taiwan dollars should change by −0.40% from one decision period to the next, the size of the excha nge rate adjustment will be −2.0% ( −0.40% x 5 = −2.0%). Because actual exchange rate fluctuations are occasionally quite volatile over a several day period, the maximum exchange rate adjustment during any one year is capped at 20%, thus limiting the size of gains and losses from exchange rate adjustments. Since the sizes of the expected exchange rate adjustments in dollars per camera /drone are known during the course of making the current -year decisions, you can pursue actions to mitigate the adverse effe cts of unfavorable (those with a minus sign) exchange rate adjustments. One option is to adjust sales and marketing efforts in a manner that results in (1) added sales in those areas where the exchange rate adjustments are positive (favorable) and (2) som ewhat smaller sales in the regions where the exchange rate adjustments are negative (unfavorable). Another option is to raise the selling prices in a particular region to help offset negative revenue adjustments and realize higher net revenue per camera s old. Because all competing companies have assembly facilities in Taiwan and are thus subject to comparable exchange rate impacts on net revenues per camera sold , you may be able to make offsetting price adjustments without much risk of putting your compan y at a price disadvantage. Consult the information in the Help section for mo re details on the mechanics of the exchange rate adjustments and their managerial relevance in making decisions . There will be no exchange rate adjustments in Year 6. The prevai ling real -world exchange rate values at the beginning of Year 6 and the real -world rates at the beginning of Year 7 will serve as the base for calculating the Year 7 exchange rate adjustments . The real -world changes in the exchange rates between the beginning of Year 7 and the beginning of Year 8 serve as the basis for exchange rate adjustments in Year 8. And so on through out the exercise. Since the company’s financial statements are reported in U.S. dollars, company accountants go through the necess ary accounting procedures to accurately record and report the revenues collected in Taiwanese dollars in U.S. dollars and to otherwise accurately portray the company’s financials in U.S. dollars. The procedures are in full compliance with generally accept ed accounting procedures and have been approved by the company’s auditors. UAV Drone Marketing Decisions At the top of th is third decision page is a section displaying the 6 marketing -related decisions for UAV drones. Initially t he numbers appearing in the decision entry fields (or beside the decision filed for product R&D) are the entries from the prior round (year) . Just below the entry fields for marketing decisions is a section labeled Market Segment Statistics. The first two lines show your company’s (1) actual sales of drone s in the prior year and projected sales in the current year and (2) drone market share in the prior year and projected market share in the current year. The last line of this section displays the number of third -party online retailers marketing your drone models at their websites in the prior -year and the current year — the curr ent -year number was updated at the end of the previous year to reflect the year -end appeal of your company’s drone models and there’s nothing you can do in the current year to attract additional 3rd-party online retailers (the updated numbers of 3 rd-party online retailers willing to stock and merchandise each company’s drone brands in the current year are reported in the Comparative C ompetitive Efforts report ). Each time you enter a value for any of the marketing decisions, you will see the effects on projected unit s ales and projected market share. The third section of the UAV drone marketing page show s price -cost -profit breakdowns flowing from the marketing decision entries and the projected sales volumes in each region. At the bottom of the decis ion page is a section for entering your anticipated changes in the industry averages for 8 of the 10 competitive factors affecting each company’s sales/market shares in each region. The current -year GLO -BUS : Developing Winning Competitive Strat egies Participant’s Guide Copyright © GLO -BUS Software, Inc. Back to Top 25 industry averages for 2 of the 10 competitive factors — the number of third -party retailers merchandising each company’s drone models and company brand reputation — are already known (and can always be viewed in the Comparative C ompetitive Efforts report ). Just as was the case with the AC Camera Marketing Decision page , before you get very far along in making entries for the 6 drone marketing decisions, it makes sense to first enter your anticipated updates of the industry averages for the 8 competitive factors in the Competitive Assumptions section at the bottom of the page . Again, your will be entries are “guesst imates ” (especially in Year 6), but starting in Year 7 and thereafter, the historical changes in the regional averages shown in the Regional Average Competitive Efforts report will prove very valuable in entering updates for the regional averages for the forthcoming year. Bear in mind that sales/market share projections based on your best judgment of the forthcoming -year industry -average levels of comp etitive effort in each region may be a less risky basis for evaluating the profit prospects of alternative marketing decision entries than relying on sales/market share/ profitability projections based on the prior -year regional average levels of competiti ve effort . Furthermore, it is wise to expect that the competitive efforts of rivals will, on average, be stronger in the current year than in the prior year , because of the incentives that all companies (and most especially poorly -performing companies ) ha ve to correct their competitive disadvantages, strengthen their overall competitiveness and thereby improve company performance . Again, even if you overestimate the strength of competition from rivals in the current year (which, in turn, will lower the projected sales/market shares for a given level of marketing effort on the part of your company) and actually end up with bigger sales/market shares than projected, your company will still assemble, ship, and sell the unexpected units demanded provided your company has sufficient idle workstation capacity to fill the unexpected orders from buyers . You will quickly find i t is better to have the pleasant surprise of selling more than the projected sales volume (and enjoy ing the accompanying extra revenues and profits) than having the unpleasant surprise of selling less than the projected sales volume because you underestimated the strength of the competitive efforts from rivals . Note: In the first several decision rounds, updating the regional average levels of competitive efforts in the Competitive Assumptions section admittedly involves more guesswork than insightful judgement because there’s little hard evidence about what actions rivals will take. Thus, i t is usually wise to be cautious and make relatively small adjustments in the averages. But making reasonably accurate guestimates become easier as the number of completed decision rounds increases; this is because with more data points in the Regional Average Competitive Efforts report , trends in one or more of the industry averages become more evident and because careful analysis of the data in the Time Series Competitive Efforts report for specific companies will help you judge what moves industry -leading companies and companies you consider as close competitors may make next . Your task on this decision page is to try out a variety of combinations of the 6 market decisions in each region and search for a set of entries which, in conjunction with your company’s P/Q ratings for drones and number of drone models (as determined from your entries on the Product De sign page ), number of 3rd -party online retailers, and prior -year brand reputation, produces an overall competitive effort versus rival companies with appealing projected outcomes for u nit sales, market shares, operating profits, and operating profit margin s. Exchange Rate Adjustments . Exchange rate adjustment s in the company’s selling price s for drones have to be made for all the same reasons as for action cameras and the adjustment procedures are identical . The adjustments appear in the section labeled Price -Cost -Profit Breakdown on the line j ust under selling price labeled “± Exchange Rate Adjustment.” As explained earlier, a negative adjustment represents an unfavorable shift in exchange rates that results in the company receiving net revenue per drone sold that is below the company’s selling price in the region . A positive adjustment represents a favorable exchange rate shift that causes net revenue per drone sold to be higher than the posted selling pric e. It is up to you to decide whether to just ignore favorable/un favorable exchange rate shifts or whether to make proactive adjustment s. One option is to adjust sales and marketing efforts in a manner that results in (1) added sales in regions where the e xchange rate adjustments are positive (favorable) and GLO -BUS : Developing Winning Competitive Strat egies Participant’s Guide Copyright © GLO -BUS Software, Inc. Back to Top 26 (2) somewhat smaller sales where the exchange rate adjustments are negative (unfavorable). Another option is to raise the selling prices in regions with negative revenue adjustments by amount s sufficie nt to recover the lost revenue and preserv e the company’s profit margins. There will be no exchange rate adjustments in Year 6. The prevailing real -world exchange rate values at the beginning of Year 6 and the real -world rates at the beginning of Year 7 will serve as the base for calculating the Year 7 exchange rate adjustments. The real -world changes in the exchange rates between the beginning of Year 7 and the beginning of Year 8 serve as the basis for exchange rate adjustments in Year 8. And so on through out the exercise. Compensation, Training, and Facilities Decisions This page contains 4 decision entry fields for compensating workers engaged in assembling action cameras and 4 decision entr y fields for compensating workers engaged in assembling drones. The compensation decisions are the same for both types of workers: (1) how much to raise/lower the base pay of PAT members, (2) whether and by how much to change each PAT’s assembly quality incentive payment per unit assembled, (3) whether and by how much to alter the annual bonus for perfect attendance, (4) whether and by how much to raise/lower payments for fringe benefits . It is up to you whether to establish identical or different compen sation packages for the two types of workers. PAT Productivity. Just under the compensation -related decisions is a field for entering the amount management wishes to spend for training PAT members and improving PAT productivity . The productivity of each four -person PAT (how many units they can assemble in a given year) is influenced by 8 factors: • Annual base wage increases — Annual increases in base pay of 2% or more lead to higher levels of productivity, chiefly because higher annual base wages help attract and retain workers with better skills and work habits. The maximum annual base pay increase is 10%. Cuts in base pay are allowed, up to a maximum of 15% in any one year; as might be expected, base pay reductions act to reduce PAT productivity. Sm all pay cuts do not entail a “big ” drop in productivity but cuts of 5-15% will have a major negative impact. • The assembly quality incentive — Experience indicates that b igg er assembly quality incentive payments per unit increase productivity and reduce warranty claims . PATs have responsib ility for fully testing the functioning of each action camera /UAV drone assembled and correcting any performance problems, including replacing malfunctioning components — the costs of replacing de fective or malfunctioning parts/component s are borne by suppliers . Prior management instituted the practice of paying each PAT an assembly quality incentive for each unit assembled, the thesis being that such incentives spur red PAT members to propose ways to cut assembly and testing times while still accurately assembl ing and thoroughly test ing each camera or drone after assembly . Thus far, PAT members in the assembly facilit ies have taken pride in coming up with better and mor e efficient procedures t hat help reduce warranty claims and boost productivity. In Year 5 , the incentive payment s were $2.40 per camera per PAT and $4.80 per drone per PAT ; these payments are divided equally among all PAT members . • Attendance bonus — Absenteeism on the part of PAT members has a strong negative impact on the functioning and performance of the remaining team members. When team members fail to show up for work a team’s assembly procedures are disrupted; and substitutes must be assigned to fill -in for the person(s) absent or else the team must try to assembl e units as best it can. To discourage absenteeism, prior management instituted the practice of paying an $800 year -end bonus to each PAT member with a record of perfect attendance (de fined as working 2000 hours per year — 50 weeks at 40 hours per week, with 2 weeks off for holidays and personal leave); missing as much as ½ day during a 2000 -hour work yea r constituted disqualification for the bonus . Prior management believed the attendance bonus was successful in keeping absenteeism at a tolerable minimum, thereby enabling most PATs to operate at full -strength and assemble at least a reasonable number of cameras/drones each shift. However, you hav e the authority to discontinue the practice of paying a bonus for perfect attendance, to continue the program as is, or to raise the size of the bonus periodically as you GLO -BUS : Developing Winning Competitive Strat egies Participant’s Guide Copyright © GLO -BUS Software, Inc. Back to Top 27 see fit. It is up to you to determine whether diverting the $ 800 bonus per PAT membe r to other types of compensation (such as bigger incentives or higher base pay or bigger fringe benefits ) could lead to even better PAT productivity. • Fringe benefits package — PAT members and other company personnel view a generous company -paid fringe benefits package (health insurance, disability insurance, term life insurance, and retirement plans) as an important element of a “good job” because the components of fringe benef it packages add to an employee s’ overall well -being . • Total compensation — How well your company’s PAT members are being compensated relative to rival companies with regard to base pay, assembly quality incentives, the perfect attendance bonus, and fringe benefit packages is a major factor in the company’s ability to attract/ retain better -caliber, more productive employees. The best, most productive workers are inclined to leave jobs at lower -paying companies for jobs at higher -paying companies . Li kew ise, job seekers that exhibit mot ivation, pride of workmanship, good work habits, and aptitudes for teamwork are drawn to work for those companies having the best overall compensation package . Thus , PAT productivity tends to be higher at the companies with the highest total compensation packages per PAT member . • Best Practices / productivity improvement budget — The productivity of PATs is enhanced by training PAT members in better assembly techniques , post -assembly product testing, ways to reduce warranty claims, and overall productivity improvement . You have the authority to raise/lower annual spending per PAT for such training. While spending greater amounts per PAT increases productivity , the benefits from greater annual training expenditures per PAT are subject to diminishing marginal returns (that is, the benefits become smaller and smaller , eventually reaching a point where the added costs ou tweigh the added benefits ). Annual training expen ditures per PAT may be reduced without losing the previous productivity gains . • Product R&D expenditures (cumulative) — A portion of R&D expenditures is always devoted to improving the designs of all camera/drone models in ways that reduce the amount of time it takes PATs to assemble and test the m, thus increasing the annual productivity of PATs. • Number of models — Increasing the number of models will reduce PAT productivity, due to lower PAT proficiency in assembling more models and increased model change -over time. Reducing the number of models boosts productivity because PAT s have fewer assembly and post -assembly product testing procedures to master and less model change -over time. • The total compensation of camera PATs versus drone PATs — A small difference between the compensation packages of a company’s camera and drone PATs will be tolerated by PAT members . However, a significant disparity in the compensation packages of camera and drone PATs can cause dissatisfaction among the PAT members receiving the smaller compensation package, thus negatively affecting productivity. In Year 5, the compens ation packages of camera and drone PATs were identical. At the end of year 5, the productivity of PATs assembling action cameras was 3,000 unit s annually. There is reason to believe that over the next several years the productivity of camera PATs can be increased to 3,5 00 to 4,000 cameras annually . Productivity could go even higher, if managers aggressively pursue productivity gains via attractive compensation, additional training, and robot – assisted assembly techniques . At the end of year 5, the productivity of PATs assembling drones was 1,500 units annually (drone assembly is more complicated and involves assembling the built -in action camera, as well as the drone itself ; moreover, thoroughly flight testing all the pe rfo rmance features of a UAV dron e is consi derably more time -consuming) . The productivity of drone assembly PATs could rise to perhaps 2,000 units annually, if company managers are willing to invest in attractive compensation packages , additional training, robot -assisted assembly method s, and more time -efficient flight -testing (via product R&D) . Assembly Capacity, Facilities Expansion, and Workstation Additions . The remainder of this decision page is devoted to decision entries and on -screen calculations that enable you to (1) fill growing buyer demand fo r your company’s cameras/ drones by having PATs work overtime — the GLO -BUS : Developing Winning Competitive Strat egies Participant’s Guide Copyright © GLO -BUS Software, Inc. Back to Top 28 maximum number of cameras/drones that can be assembled at overtime is 20% of annu al PAT productivity (the number of units a PAT assembles each year), (2) add additional workstations as may be needed to fill incoming orders for cameras/drones during the current year, ( 3) initiate projects to expand the size of the assembly facility for cameras and/or drones whenever additional workstation space is needed , and ( 4) order a robotics upgrade for all existing camera and/or drone workstations that enables the size of PATs to be reduced from 4 persons to 3 persons and that also. Your company’s AC Camera assembly facility for currently has space for 300 workstations, but only 280 workstations have been installed (thus, there is enough vacant space to add 2 0 more workstations) . The UAV Drone assembly facility currently has 110 workstation spaces, but only 10 0 drone workstations have been installed and 1 0 spaces are vacant (which can be filled with workstations whenever you see fit). New camera /drone assembly workstations can be installed at a cost of $125 ,000 each for cameras and $175,000 each for drones ; adding workstations can be done quickly (usually during a single weekend ) at the beginning of each year. Your company will in all likelihood need to expand both the camera and drone assembly facilities in the years to come in order to have enough workstations for PATs to assemble the numbers of cameras and drones it will take to meet growing buyer demand. Additional space for camera/drone workstations can be built at a cost per space that declines as the size of the space expansion increases . Space expansions are undertaken at the beginning of a year and take several weeks to complete; however, both the camera and drone assembly facilities have enough extra storage area to accommodate the immediate delivery of additional workstations and set them up temporarily in the extra storage space until a facility expansion is completed . Th is gives you the ability to gain full -year assembly capability for newly -purchased camera/drone workstatio ns pending completion of a workspace expansion project . The ca pital costs of new workstations, facilities expansions , and robotics upgrades are paid in full in the year they occur. The company has enough land at its Taiwan plant site to permit expansion of the camera assembly facility to accommodate 1000 workstations and expansion of the drone assembly facility to accommodate as many as 800 workstations (although it is highly improbable that you would ever need this many workstations ). Fixed as sets (primarily facilities, workstations, robotics upgrades, office equipment , and furnishings) are depreciated over 20 years at the rate of 5% annually. The two big camera/drone assembly -related decisions that have to be made each year concern (1) how man y new workstations to add and (2) whether additional facility space for workstations is needed and, if so, how many workstation spaces to add. Just below the se decision entry fields are several on – screen calculations that will be of assistance. There is a line showing the number of units that can be assembled with and without the use of overtime (given the projected productivity of PATs). There’s a second line showing projected unit sales (which could prove too high if you have underestimated the strength of rivals’ competitive efforts or too low if you have overestimated the strength of rivals’ competitive efforts) and a third line showing whether you will be unable to assemble the number of units to fill expected orders . It is up to you to determine whether it is more economic to have PATs work overtime to fill incoming orde rs from buyers (which can have the benefit of delay ing the purchase of additional workstations and/or the expansion o f assembly facilities ) or whether it is more economical to always have in place sufficient workstations/workstation space to avoid paying PATs 1.5 times the regular hourly rate for overtime assembly . It is a quick exercise to view the on -screen projected cost -profit outcomes of using overtime , then make the “what if we add workstations/expand facilities by amounts sufficient to avoid overtime ” entries , view the projected cost -profit outcomes, and decide which option is “best.” If the on – screen calculations show a shortfall in the number of units assembled (meaning that projected buyer demand for your company’s brand of cameras/drones exceeds assembly ca pability with maximum use of overtime , then more workstations and/or workstation space will definitely be needed (assuming you wish to be able to fill all of the projected orders) , and it is your responsibility to enter numbers for any new workstations and /or workstation spaces. The GLO -BUS system will automatically employ the “optimum” number of PATs needed to fill actual incoming orders for cameras/drones. Here is how it works: GLO -BUS : Developing Winning Competitive Strat egies Participant’s Guide Copyright © GLO -BUS Software, Inc. Back to Top 29 1. If actual orders turn out to be less than assembly capability without the use of overtime then the GLO -BUS system will “right -size” the workforce , staff ing only the number of workstations needed to assemble the units ordered . 2. If actual orders are greater than assembly capability without the use of overtime, the n the GLO -BUS system will have PATs work overtime (up to the maximum 20% of annual PAT productivity) to assemble e nough additional units to satisf y buyer demand . 3. If actual orders for cameras/drones exceed assembly capability of all installed workstations with maximum use of overtime , then your company is stuck with a shortfall in assembly capability and orders in the amount of the shortfall will go unfilled ( forcing the affected buyers to purchase rival brands). The company ma intains an updated list of several hundred appropriately -skilled workers living within commuting distance of the company’s assembly plant that it can draw upon to form new PATs to staff any idle workstations that are needed to fill incoming buyer orders . These workers have sufficient experience and qualifications that they can be adequately trained in a matter of days to assemble cameras /drones at productivity rates equal to the company average. Robotics Upgrades. You have the option to shift to robotics -assisted assembly of cameras and/or drones — there is a section near the bottom of this page for entering decisions to shift to robot -assisted assembly . The manufacturers of robot s have recently developed small robots capable of perfor ming some of the tasks in assembling both action cameras and UAV drones. Installing one of these robots at each workstation enables the size of PATs to be cut from 4 members to 3 members. These robots cost $150,000 each. If the company decides to shift from manual assembl y to robotics -assisted assembly , all existing workstations in a camera or drone assembly facility must be upgraded to include the use of a robot at a cost of $150,000 each , and all future workstations the company purchases for that facil ity must include use of a robot (which means that (1) the capital cost of each additional camera workstation will increase from $ 125 ,000 to $2 75 ,000 and (2) the capital cost of each additional drone workstation will increase from $1 75 ,000 to $ 325 ,000 ). Robot -assisted assembly can be used in one facility and manual assembly can be used in the other facility , either indefinitely or until such time as management decides to shift over to robot -assisted assembly. Once robot -assembly has been adopted for a fa cility, it is not feasible to revert back to manual assembly. The on -screen calculation s will help in evaluating the cost impact of a robotics upgrade. Cash outlays for capital costs associated with robotics upgrades of existing workstations and any new r obot – equipped workstations are incurred in the year of purchase . Depreciation of these assets occurs over 20 years at the rate of 5% annually. As with all types of capital expenditures, the associated cash outlays can be paid for from cash on hand, by issuing new shares of stock , or by borrowing. Shifting to robot -assisted assembly also results in added annual maintenance costs of $9,000 per workstation, pushing the total maintenance cost per workstation from $6,000 annually to $15,000 annually. Corpor ate Social Responsibility and Citizenship ( CSRC) This decision page concerns spend ing for such things as charitable contributions, “green” initiatives to promote environmental sustainability, the use of renewable sources of energy , improved working conditi ons for plant personnel, and instit uti on of a supplier code of conduct and compliance monitoring of supplier factories. The decisions on this page are straightforward, and you will find ample information and calculations on this page and in the Help section to guide your entries. The degree to which your company displays good corporate citizenship and conducts operations in a socially responsible manner affects your company’s image rating . However, the image gains are minimal unless your compa ny’s actions are “comprehensive” (involve several, but not necessarily all, of the optional citizenship and social responsibility programs), entail more than token efforts (as indicated by how much money is being spent), and represent an ongoing effort of at le ast 4 -5 years. GLO -BUS : Developing Winning Competitive Strat egies Participant’s Guide Copyright © GLO -BUS Software, Inc. Back to Top 30 Finance and Cash Flow Decisions The Finance and Cash Flow decision page involves 8 decision entries and provides projections of cash inflows and cash outlays for the current year, along with projections of other important year -end financial statistics . Going into Year 6, your company has a B credit rating and a reasonably strong balance sheet. At the end of Year 5, the company ’s total assets were financed with 59 % debt and 41 % equity, putting the company in good position to cover its interest and principal payments on loans outstanding to the Global Community Bank (GCB ), with which the company does all of its banking, financing, and foreign exchange transactions. Interest Rates. Officials at GCB , under terms of the long -term banking agreement with your company, have agreed to lend the company additional monies should you elect to use debt to help finance growth and other financial needs . The interest rate on such loans is tied to the company’s credit rating and the going rates of interest in world financial markets. Just as interest rates in real -world financial markets change intermittently and unpredictably, there is no way to predict in advance what future interest rates will be. The interest rate on 1 -year (short -term) loans for companies with an A+ credit rating can range from a low of 4% to a high of 7%; the interest rate on 1 -year loans for companies with a C − credit rating can range from a low of 10% to a high of 13%. Going into Year 6 , the interest rate on 1 -year loans for companies with an A+ rating is 4.5 %; C − rated companies pay 11% interest on 1 -year loans. The GCB ’s present interest rate for 1 -year loans carrying a B rating is 6.5%. Longer -term loans are available at somewhat hi gher interest rates — a 5 -year loan carries a 0.50% interest rate adder and a 10 -year loan carries a 1.0% interest rate adder; these adders apply to 5 -year and 10 -year loans granted at all credit ratings. New interest rates for 1 -year, 5 -year, and 10 -year l oans are announced at the beginning of each year and appear in the Interest Rates table on the Corporate Lobby page . The company’s banking arrangement with GCB calls for the company to be paid interest on any positive cash balance in the company’s checking account at the beginning of each year. The agreed – upon interest rate is set at 2.5 percentage points below the prevailing interest rate for short -term loans carrying an A+ credit rating . Going into Year 6, the interest rate of A+ -rated 1-year loans is 4.5%, which means the money market rate paid on cash balances will be 2.0%. If the company overdraws its checking account, GCB will automatically issue your company a 1 -year “O verdraft ” loan in an amount sufficient to bring your ending cash bala nce up to zero. The interest rate charged on overdraft loans is always 2% above whatever interest rate your company would otherwise pay for a 1 -year loan, given the company’s credit rating . The potential for overdrawing your checking account is signaled by a negative “Ending Cash” number in the Projected Performance box at the left of each decision page (however, even a very small positive Ending Cash number runs the risk of having an overdraft loan, since there is always uncertainty whether sales volumes , revenues, and cash inflows will be as high as projected). Factors Determining the Company’s Credit Rating. Analysts at independent credit rating agencies review the company’s financial statements annually and assign the company a credit rating ranging from A+ to C −. A company’s credit rating is a function of three factors: (1) its debt -to-equity percentages (defined as the percentage of total assets financed by debt and the percentage financed by shareholder equity investment in the business) ; (2) its interest coverage ratio (defined as annual operating profit divided by annual interest expense ); and (3) its current ratio (defined as current assets divided by current liabilities ). Your company’s prior -year and projected performance on these thr ee credit rating measures is shown in the section at the bottom right of the Finance Decisions page . This allows you to see when actions are needed to maintain a good credit rating. (See the Help section for full details about how the three factors combin e to determine the company’s credit rating .) Financial Decisions . Finance decision entries should always come last in the decision -making process . Until all of the other decision entries have been finalized there is no way to get reliable projections of cash inflows and outflows for the year and estimate the company’s projected year -end cash balance. The eight finance -related decision entries revolve around the following issues: • Borrow ing money — To finance operations the company may take out loans with 1-year, 5 – years, and/or 10 -year terms . One -year loans are granted at interest rates corresponding to the company’s current credit rating; 5 -year loans carry an additional 0.50% and 10 -year loans carry GLO -BUS : Developing Winning Competitive Strat egies Participant’s Guide Copyright © GLO -BUS Software, Inc. Back to Top 31 a full 1% interest rate adder. In addition to a lower interest rate, a 1 -year loan has the ad vantage of quicker debt pay -down and smaller total interest costs, but also has the disadvantage of having to re -finance the debt in the following year at perhaps less favorable interest rates should cash flows not be sufficient to fully fund a 1 -year loan repayment. Longer 5 or 10 -year loans have the advantages of locking in what may be an attractive long -term interest rate and lowering annual principal payments; however, 5 -year or 10 -year loans, in addition to their higher interest rates, have the furthe r disadvantage of paying out bigger sums for interest over the life of the loan (which, in turn, depresses the company’s interest coverage ratio over a longer period of time ). • Issuing shares of stock — Additional capita l may be raised by issuing new shares o f common stock. New issues of common stock have the effect of diluting earnings per share and ROE and should be done cautiously. From time to time, you may determine that the company needs to raise additional equity capital to (1) help pay down a portion of the outstanding loans (because of burdensome interest costs or because lowering debt is the best way to improve the company’s credit rating) or (2) help pay for added assembly capacity and/or robotics upgrades. The company’s board of directors has established a 40 -million share maximum on the total number of shares outstanding and there’s an on -screen calculation showing the maximum number of shares that can be issued in any one year ( given the compan y’s financial condition ). The company cannot issue new shares in the same year that it elects to buy back (retire ) outstanding shares. At the end of Year 5 the company had 2 0 million shares outstanding. Each time you make an entry specifying how many sh ares are to be issued, there are accompanying calculations showing the total amount of new equity capital raised (see the cash inflows section) and the price at which investors will agree to buy the newly -issued shares (the price declines as more shares ar e issued because additional shares dilute earnings per share). In deciding how many shares to issue, you can try several “what if” entries and check out the effects on earnings per share, return on equity, and the amount of money raised. • Early repayment o f long -term bank loans — You may accelerat e debt retirement (or refinanc e high interest debt) by using excess cash on hand , new issues of stock, or proceeds from new loans to pay off the outstanding principal on up to 2 of the outstanding 5 and 10 -year loans . This is accomplished by simply selecting the number of the loan you want to pay off (loan numbers are indicated in Note 8 to your company’s balance sheet). All such loan repayments are considered end -of-year repayments; thus, the company will still mak e the current -year annual principal payment and interest payment on any long -term loan that is repaid early. • Paying dividends — The company paid no dividend to shareholders in Year 5. You have the authority to declare a dividend, subject to certain conditions. The maximum allowable dividend entry is 2 times projected earnings per share; mo reover, projected total shareholder equity must always remain at or above $100 million after any and all dividend payments. No dividend can be paid should project ed total sha reholder equity fall below the $100 million minimum established by the company’s board of directors (a policy that won the enthusiastic approval of credit rating agencies). Higher dividends are welcomed by share holders and have a positive eff ect on the company’s stock price (unless dividend payments exceed earnings per share and can’t be sustained at present levels). • Repurchasing shares of stock — Using cash on hand to repurchase and retire outstanding shares has the advantage of increasing earn ings per share, returns on equity investment, and the company’s stock price. While you have the authority to initiate stock repurchases, the Board of Directors has reserved the right to limit the number of shares repurchased in any given year — such limits vary from year to year and are shown on the Finance Decisions page just below the stock repurchase entry field . The company must maintain a minimum of 15 million shares outstanding and a minimum total shareholder equity of $100 million . The c ompany cannot repurchase outstanding shares in the same year that it elects to issue new shares. Each time you enter a number for share repurchases, you are provided calculations showing the total cost of the repurchased shares (see the cash outlays listi ngs) and the price at which investors will agree to sell the shares you want to buy back (the price rises as more shares are repurchased because of the upward impact on earnings per share and the bigger fraction of ownership that fewer shares represent). GLO -BUS : Developing Winning Competitive Strat egies Participant’s Guide Copyright © GLO -BUS Software, Inc. Back to Top 32 Decision -Making Procedures It is feasible (often normal) for co -managers to log -on simultaneously and each be engaged in entering decisions. In the communication section at the bottom -left of all decisions/reports pages there is a microphone button that co nnects teammates to audio mode (live voiceover internet communication) . The adjacent button (with the arrows ) enables collaboration mode , synchronizing each connected team member so that all see the same page at the same time. You will find it highly desirable to work jointly in “audio mode ” and “collaboration mode ”. Any time a co -manager clicks the Save button (upper -right) , all of the entries on all decision entry pages are written to the GLO -BUS server. Any and all co -managers can enter save decisions, and a ll entries can be changed and resaved as many times as desire d prior to the decision round deadline set by the course instructor . The last set of decision entries saved (by any team member) before the decision round deadline are the entries used to generate the results for the round . Coordination and consensus on the decision entries is strongly urged but is left as a m atter for you to work out with your co -managers. The Board of Directors has charged you with developing a strategic direction and crafting a strategy that delivers consistently good results. Board members have set five clear -cut performance objectives fo r the company’s management team: 1. Grow earnings per share from $ 0.75 at the end of Year 5 to $1. 25 in Year 6, $ 2.00 in Year 7, $ 3.00 in Year 8, $4. 25 in Year 9, $5.5 0 in Year 10, $ 7.00 in Year 11, $ 8.50 in Year 12, $10 .50 in Year 13, $ 12 .50 in Year 14, and $1 4.50 in Year 15. 2. Grow return on average stockholders’ equity investment (ROE) from 1 4.0% at the end of Year 5 to 17 .5% in Year 6 , 20% in Year 7, 25% in Year 8, 30% in Year 9 , 35% in Year 10, 40% in Year 11, and by an additional 2.5% annually in Years 1 2 through 15 (thus reaching 50% in Year 15 ). The return on average stockholders’ equity is defined as net income divided by the average of total shareholder s’ equity at the beginning of th e year and the end of the year. Average ROE for each company is reported on page 2 of the Camera & Drone Journal . Data for calculating your company’s average ROE appears on page 4 of the Company Operating Report s in the notes to the compan y’s Balance Sheet . 3. Achieve stock price gains from $ 12 at the end of Year 5 to $ 20 in Year 6, $ 35 in Year 7, $60 in Year 8, $ 100 in Year 9, $ 150 in Year 10, $ 200 in Year 11, $ 250 in Year 12, $ 300 in Year 13, $ 330 in Year 14, and $ 350 in Year 15. Board members believe these stock price gains are within reach if the company meets or beats the annual EPS targets, achieves the targeted rates of return on average shareholders’ equity (ROE), rewards shareholders with growing dividends , and from time to time prudently uses its financial capabilities to rep urchase shares of stock . The company’s stock price was $ 12 per share at the end of Year 5. Note: Stock price is a function of revenue growth, earnings per share growth, average ROE, credit rating, the rate of growth in the annual dividend paid to shareholders, and management’s ability to consistently deliver good results (as measured by the percentage of each year’s 5 performance targets that yo ur company achieves ). 4. Maintain a healthy credit rating , defined as B+ or higher in Years 6 and 7, at least A – in Year 8 through Year 10, and at least A in Year 11 through Year 15 . The company’s credit rating was B at the end of Year 5. 5. Achieve an image rating (brand reputation) of 70 or higher in Year 6, 72 in Years 7-8, 75 in Years 9 -10, 77 in Years 11 -12 , and 80 in Years 1 3-15 . The image rating is a function of (1) your company’s P/Q ratings for action cameras and UAV drones, (2) your company’s global market shares for both action cameras and UAV drones (as determined by your company’s market shares in the four geographic regions), and (3) your company’s actions to display What the Board of Directors Expects: Results in Five Key Areas GLO -BUS : Developing Winning Competitive Strat egies Participant’s Guide Copyright © GLO -BUS Software, Inc. Back to Top 33 corporate citizenship and conduct operations in a socially responsible manner over the past 4-5 years. Your company had an image rating of 70 at the end of Year 5. Board members believe all of the performance targets for Years 6 -15 are reasonab le and achievable by company managers, given the strong growth and profit opportunities that exist in the global market for action cameras and UAV drones during the Year 6 to Year 15 period. The Board of Directors has given you broad strategy -making and op erating authority to pursue the achievement of these 5 performance objectives, subje ct to two primary constraints: (1) your company may not merge with another company — the Board wishes the company to remain independent, and (2) company co -managers are expec ted to comply fully with all legal and regulatory requirements and to conduct the company’s business in an ethical manner. Furthermore, the Board has made all of the above performance targets publicly available to all shareholders and to the investment co mmunity; thus, investors are expect ing the company to achieve these annual targets . Reporting the Results When the deadline for a decision round passes, the GLO -BUS system processes the decision entries of all companies in the industry and sends an e -mail notification that the results for the round are ready (usually less than 20 minutes after the deadline). The results are present ed in the form of three reports: • The Camera & Drone Journal which contains (a) a 3 -page company performance scoreboard, (b) a 1 -page statistical overview of the global market for cameras and drones and unit sales forecasts of cameras and drones for the next two years — with breakouts by geographic region , (c) 1 page of comparative financial statistics for all companies, and (d ) 2 page s of data containing comparisons of how certain costs and profitability measures for your company compare against in dustry low, average, and high benchmarks . • The Competitive Intelligence Report which has highly useful three menu selections: (1) a Comparative Competitive Efforts report that shows the levels of competitive effort exerted by each company on all 11 competitive factors for AC cameras and all 9 competitive factors for drones, plus unit sales and market share outcomes, for each company in each region ; (2) a Regional Average Competitive Efforts report that shows the all -company regional -average levels o f competitive effort in each region for all years completed to date, and (3) a Time Series Competitive Efforts report for any company of interest that enables you to easily track the competitive maneuvering of any rival company for all years completed to d ate . • A set of Company Operating Reports consisting of 1-page showing your company’s assembly and facilities operations , 1-page detailing the performance of your company’s action camera business in each of the four geographic regions and worldwide , 1 -page showing the performance of your company’s UAV drone business in each of the four geographic regions and worldwide , and 1 -page with your company’s financial statements. You will find the information in these reports essential in guiding your decisi ons for the current year . Yo u are strongly urged to click on the Help button at the top of each report page to see discussions of (a) how to use each report and what some of the numbers mean , (b) cause -effect relationships, and ( c) analysis recommendations and decision -making tips. W hen you receive e -mail notification that the results for a round are ready , the first thing you should do is review the three reports. You may access the current -year and all prior -year reports through the Decisions/Reports program at any time, but you may also find it advantageous to have printed copies of the reports during decision -making . It is especially important to evaluate how we ll your company fared on the company performance scoreboard (the first three pages of the Camera & Drone Journal ). Also, you should r eview the benchmarking data on p ages 6 and 7 of the Camera & Drone Journal to determine whether some of your company’s costs are out -of-line with those of rivals . Further, always make a point of carefully scrutinize the information on all four pages of the Comparative Competitive Efforts repo rt to discover the competitive factors where your company ha d a competi tive advantage versus rivals and where your company suffer ed from a competitive disadvantage . Do not fail to read the Help pages for this GLO -BUS : Developing Winning Competitive Strat egies Participant’s Guide Copyright © GLO -BUS Software, Inc. Back to Top 34 report for guidance about how to properly interpret the information and for decision -making suggestions . Also, you should use the data in the Regional -Average Competitive Efforts report to help make you make informed updated competitive assumptions entries on the AC camera marketing and UAV marketing decision screens. Finally, you should study pages 2 and 3 o f the Company Operating Report s to discover how your company’s camera and drone businesses performed in the four geographic regions . Then you can begin to assess what corrective actions need to be taken to improve company profitability and consider the changes you want to make in the next decision round. Your instructor has placed weight ed the relative importance of the five scori ng variables: Earnings Per Share ( EPS ), Return on Average E quity (ROE ), Stock Price , Credit Rating, and I mage Rating . These weights translate into some number of points for each of the scoring variable , with the sum of the points adding to 100. Your company’s performance on the five scoring variables is measured using two different scoring standards : 1. The Investor Expectations (I.E. ) Standard . Th is scoring standard involves calculating an annual “Investor Expectation Score” based on the extent to which your company meets or beats the annual performance targets for EPS, ROE, stock price , and image rating and the ultimate credit rating of A+ . There is also a Game -to-Date Investor Expectation Score that measures the degree to which your company achieves or exceeds the expected performance targets over all years of the exercise completed so far. Meeting each expected performance target is wor th some percentage of 100 points, as determined by your instructor. For example, if the scoring weight for EPS is 20% or 20 points , meeting the EPS target earns a score of 20 on the EPS scoring variable . Beating one of the performance target results in a point award of 0.5% for each 1% the annual target is exceeded (up to a maximum of 20%). So , if achieving the EPS target is worth 20 points, a company can earn a score of 24 points if it exceeds the annual EPS target by 40% or more. Failure to achieve a given target results in a score equal to a percentage of that target’s point total (based on its weight out of 100 points). If your company earns an EPS of $2.00 at a time when the EPS target is $4.00 and achieving the investor -expected ROE target is wort h 20 points, then your company’s EPS score would be 10 points (50% of the 20 points awarded for meeting the EPS target). Exactly meeting each of the 5 performance targets results in an Investor Expectation Score of 100. With potential point awards of up to 20% for exceeding each performance target by 40% or more , it is possible to earn an Investor Expectation Score as high as 120. 2. The Best -In-Industry (B-I-I) Standard . Th is scoring standard is based on how your company’s performance compares (1) to the industry’s best performing company on EPS , ROE, Stock Price, and Image R ating and (2) to the ultimate Credit Rating of A+ . After each decision round , company performance s on EPS, ROE, Stock Price, and Image Rating are arrayed from high to low. The Best -In-Industry performer on each of these 4 scoring variables earns a perfect score (the full number of points for that measure as determined by the weights chose n by your instructor) — provided the industry leader’s performance equals or exceeds the investor -expected performance target established by the company ’s Board of Directors . Each remaining company earns a fraction of the points earned by the Best -In- Indust ry performer that is equal to its performance divided by the performance of the industry -leading company. For instance, if ROE is given a weight of 20 points, an industry – leading ROE performance of 25% (that is above the investor -expected ROE) gets a scor e of 20 points and a company with an ROE of 20% (which is 80% as good as the industry leader’s 25% ROE ) gets a score of 16 points (80% of 20 points). Likewise, if EPS is given an instructor -assigned weight of 20 points, a company with an industry -leading EPS performance of $ 4.00 gets a score of 20 points and a company with an EPS of $ 3.00 (which is 75 % as good as the industry leader’s EPS ) gets a score of 15 points ( 75 % of 20 points). Scoring Your Company’s Performance GLO -BUS : Developing Winning Competitive Strat egies Participant’s Guide Copyright © GLO -BUS Software, Inc. Back to Top 35 The procedure for assigning best -in-industry scores for credit rating is a bit different . Each credit rating from A+ to C − carries a certain number of points that scales down from the maximum for an A+ credit rating to 1 point for a C − rating. Each compan y’s combined point total on the five scoring variables is its score for the B est – In-Industry standard . Your company will receive an annual Best -In-Industry score as well as a B-I-I score for all years completed. In order to receive a score of 100, a company must (1) be the best -in-industry performer on EPS, ROE, stock price, and image rating, (2) achieve the investor -expected targets for EPS, ROE, stock price , and image rating set by the company’s Board of Directo rs, and (3) have an A+ credit rating. After each decision round, you will be able to review all company performance scores for both the Investor Expectations and the Best -In-Industry standard, along with an overall “game -to-date” (G -T-D) score for each sta ndard. The annual and game -to-date Overall Scores are determined by combining the I -E Score and the B -I-I Score into a single score using whatever weighting your instructor has chosen (often 50 -50 ). All scores are reported on the first 3 pages of each issue of the Camera & Drone Journal , and you can read the full scoring details by clicking on the Help but ton for each of these pages. In making decisions, you are strongly encouraged to manage your company in a serious, professional manner . Running a GLO -BUS company entails practicing and experiencing what it takes to develop winning strategies in a globally competitive marketplace and being held fully accountable for the results of your actions — just as managers in the real -world are held accountable for the p erformance of the companies they run. Be wary of trying something that is highly risky , managerially irresponsible, or un -businesslike (things that might get a manager fired in a real company) — operating a GLO -BUS company like a daring adventurer with no r egard for the dangers of “shoot -from -the hip” decision -making can result in poor company performance . The odds of success are better when you assume the role of a business professional who is trying to achieve the best possible company performance using managerially prudent and competitively astute business approaches. Also, be alert to the dangers and risks of following the advice of friends or acqua intances (who have previously participated in the GLO -BUS exercise) or relying on tips from Internet sources regarding what to do to “win” or get a good grade . The GLO -BUS exercise is very much a contest where the success of your company’s competitive efforts and overall performance depends on competing effectively against the rival companies in your particular industry — whatever went on in other industries at other times and places has little bearing on the competitive circumstances of your industry . So following tips and advice recommended by outsiders carries significant risk of being “wrong” or “off the mark” when it comes to figuring out what your company needs to do to combat the specific actions and decisions that other companies in your class are. Stay focused on the fact that the upcoming decision rounds invo lve a series of head -to-head battles among the strategies , competitive maneuvering, and operating decisions of the companies competing in your particular industry. At the same time your company’s management team is crafting maneuvers to outcompete and outperform rivals , rival company managers are scheming to outcompete and outperform your company. Co nsequently, it is critically important for you to (a) use the information in the 4-page Comparative Competitive Effort Report to learn exactly how the attributes of rivals’ product offerings stack up against the attributes of your company’s brand of camera s/drones, (b) try to match wits with rivals and anticipate their next moves (to raise/lower prices, increase/decrease their P/Q ratings, and so on), and (c) make competitive moves and decisions of your own that you believe hold good prospect for delivering good profitability and achieving other investor -expected outcomes. Just as in sports where it is customary for every team to scout its next opponent thoroughly and develop a game plan to defeat them, so also in GLO -BUS you are called upon to scout the st rategies and competitive maneuvering of rivals, try to judge what moves they will make next, and then craft a competitive strategy of your own aimed at “defeating” their strategies and boosting your company’s overall performance. Important Advice GLO -BUS : Developing Winning Competitive Strat egies Participant’s Guide Copyright © GLO -BUS Software, Inc. Back to Top 36 Therefore, our recommended recipe for success in becoming one of the top -performing companies in your industry is to stay on top of changing market and competitive conditions , try to avoid being outmaneuvered and put into a competitive bind by the actions of rival companies, strive to price and market your brand of cameras/drones in ways that produce acceptable revenues and profits, be diligent in operating your company cost -efficiently, and observe sound financial management practices. When the exercise is over, th e only thing separating high -performing compan ies from those with weaker performances will be the caliber of the strategies and decisions of each company’s manage – ment team. All that the GLO -BUS system does in processing the decision entries is to referee the competitive contest and declare whose decision entries produced the best results. GLO -BUS is a hands -on, learn -by -doing exercise designed to: • Connect directly to the material in your textbook and give you practice in applying basic strategy concepts, using the tools of strategic analysis, and crafting strategies. GLO -BUS provides the opportunity to put into play much of what you hav e read and gain some proficiency in utilizing the concepts and tools of str ategic analysis. You will have to assess industry developments and competitive conditions in the different market segments, chart a long -term direction for your company, set and achieve strategic and financial objectives, craft strategies that produce goo d results and perhaps lead to competitive advantage, and adjust strategic plans in response to changing conditions. You will be provided with competitive intelligence on what rivals are doing and anticipate what moves they are likely to make next. You wi ll be responsible for doing the strategic thinking needed to successfully lead your company in a globally competitive marketplace. Learning these things and understanding of why they matter are the heart and soul of a business strategy course . • Draw together the information and lessons of prior courses, consolidate your knowledge about the different aspects of running a company, and provide a capstone for your business school education. GLO -BUS incorporates a wealth of material covered in earlie r business courses. Wrestling with accounting and financial data, production operations, workforce compensation, marketing , and financial management issues will give you a stronger understanding of how all the different functional pieces of a business fit together and teach you the importance of looking at decisions from a total -company perspective and unifying functional area decisions to create a cohesive strategy. You will see why and how decisions made in one area spill over to affect outcomes in othe r areas of the company. GLO -BUS is very much a capstone learning experience that tie s together material from other core courses and gives you a better grasp of what running a business is all about. • Deepen your understanding of revenue -cost -profit relation ships and build your confidence in utilizing the information contained in company financial statements and operating reports . The numbers -oriented nature of GLO -BUS , where you repeatedly make decisions and immediately see their impacts on revenues, cost, profits, cash flow, and other important factors, and where you are confronted with all kinds of statistical information about your company and your industry, has the beneficial result of helping you gain command of “all the numbers” that surround the tasks of managing a company’s operations. The power of having the computer instantaneously calculate the consequences of each decision will make you appreciate the importance of basing decisions on solid numbers instead of the quicksand of “I think”, “I believ e”, and “Maybe it will work out okay.” Moreover, because you will have frequent occasion to review all kinds of operating data , identify costs that are out – of-line and take corrective action, try to boost the profitability of the company’s business in und er-performing geographic regions, and pursue proactive approaches to take to improve your company’s performance, you will see why you cannot hope to make prudent decisions without full command of the numbers — you won’t have to participate in the GLO -BUS exercise very long to appreciate why shooting from the hip is a sure ticket for disaster. What You Can Expect to Learn GLO -BUS : Developing Winning Competitive Strat egies Participant’s Guide Copyright © GLO -BUS Software, Inc. Back to Top 37 • Provide valuable decision -making p ractice and help you develop better business judgment . While making the strategic and operating decisions that arise in GLO -BUS , you will get practice in deciding what to do. You will experience the thrill of “good” decisions (good in the sense they cont ributed to above -average or superior company performance) and the consequences of “bad” decisions (bad in the sense that the company’s performance turned out worse than expected). Repeatedly making decisions on the factors that make up GLO – BUS will sharpe n your sense of business judgment. With of all this decision -making practice, you will get to test your ideas about how to run a company, and there will be prompt feedback on the caliber of your decisions. The bottom line is that being an engaged particip ant in the GLO -BUS exercise will make you better prepared for a career in business and management. Further, we predict that GLO -BUS will make your competitive juices flow and that you will have a lot of fun.
MY COMPANY IS “I” and we are currently ranked 10th…please see attachments Individual report needed on your experience in the simulation and should be submitted in Word, which should be single-spaced
The GLO BUS Simulation Assessment Report of Company A by the member of Michael Hicks on the date of 11/25/2014 Slogan: “We want to provide our global customers cameras that are as memorable, and as uniquely remarkable as the moments they capture.” – SAMPLE – Table of Contents: Executive Summary________________________________________________________________________ 3 Strategic Approach_________________________________________________________________________ 4 Performance Analysis________________________________________________________________________9 Conclusion____________________________________________________________________________________ __13 Appendix A______________________________________________________________________________________14 To provide an adequate understanding of this strategic assessment it is appropriate for this report to include a proper definition of the simulation experiment A Team was involved in. “ GLOBUS is a computerbased exercise modeled to reflect the realworld character of the globally competitive digital camera industry in which you run a company in headtohead competition against companies run by other class members.” 1 2 – SAMPLE – Executive Summary Company A’s strategic operations, in summation, can be described as a broad differentiated strategy 2 that applied strategic decisions consistent with this approach throughout the simulation process. This strategy can be seen in the company’s vision: “ATeam’s main drive is to provide higher quality and higher performing cameras to the industry’s market. We will thrive by investing in strategic components that will increase value to all of our partners, maximizing the return for our stakeholders, creating a productive yet safe and healthy atmosphere for our labor force, innovation through our R&D department, and delivering a higher performing and higher quality camera to the market.” 3 A Team targeted and delivered high performance and high quality cameras to valueconscience consumers who have a desire for luxury, image, and performance. The company acquiesced to this strategy to achieve greater profit margins, obtain positive brand image, and, in regards to a broader scale, to achieve greater market share, while satisfying a higher ended market demand. As a company at the beginning of the simulation, Team A started out on year 5 (SY5: Simulation year 5) with the other companies in the class’s industry on total equal footing in regards to financial performance. 4 At the end of the simulation at year 13, Team A achieved 2 nd place in Industry 3 as overall best company meeting/exceeding investor expectations on the simulation game to date scoreboard. Strategic Approach The basis of these principles translated into a strategy over the course of the simulation gave A Team the edge on competition and are the principles the company attributes its success. The way this strategy translated into the implementation of the company’s differentiated decisions were primarily in regards to the higher p/q rating, longer warranty periods, larger volume of retail dealers, more models, lucrative compensation, involved corporate responsibility, larger investment in innovation, and the added value turned into higher priced cameras for both the entrylevel and multi featured models. In this implementation of company decisions, it is easy to see a broad differentiated strategy and A Team stayed roughly consistent with these implementations throughout the simulation years which provided success in meeting investor expectations and obtaining corporate strategic and financial objectives. A Team pursued 3 – SAMPLE – the same strategy for both cameras and in all available markets so that the predictability of market change and the implementation of strategy to meet objectives were easier to manage and therefore less complex for the company to over complicate. Some major market forces that affected the intensity of rivalry between companies in the industry were price, p/q ratings, and customer demand 5 . Year 6 was an important year for A Team to consider that this year did not determine the success of the company’s future nor did it determine the industry’s leader. The year played a role in helping A Team understand the market more. In this year, A Team understood what the general competition was delivering to the market and what type of strategies the competitors committed to. As the years continued, the company gained more and more understanding of the competitors they were engaged with. Company A was one of the two only broad differentiated companies in the industry and Company B was the lone low cost leader out of 10 companies which set the stage for the rest of the simulation as far as the consistency of strategic development and decision making. In years 7 and 8 , A Team led the industry as the market leader. An important note is that from year 8 on to the end of the simulation A Team remained debt free. The reason for the debt payoff was so that the credit rating would remain far above the board’s expectations as well as not having to pay interest and tax incentives. The strategy for A Team remained consistent as the company entered into as many retail dealers as possible through out each of the regions of the global market to broaden market share and thicken sales revenue. In year 7 the team decided to increase the investment in Tech Support to provide more value to the customer and provided more models to choose from to provide the sub segments within the target market more value to increase market share and therefore sales. During these two years, A Team’s weaknesses only consisted of price. The company’s competitive strengths, compared to the competition, were exceeding. Every decision point on the product design and marketing side of business, other than price, was A Team’s competitive strength in relation to the industry. This type of implementation of strategy could be seen as an offensive strategic move because the intention of the strategy was to win market share. 4 – SAMPLE – In the beginning of year 9 , A Team adopted a poor decision that changed the course of strategy for the following two years. A Team decided to embark upon raising the P/Q ratings and prices for the entry level camera for the notion of greater profit margins of entry level cameras, during the major trend of industry wide lowering of prices. This mistake cost A Team a sales reduction of 30%. These reduced sales turned into an explosion of market share for Company F and positioned them as the industry leader. The false projected trend for year 9 was a continued increase in prices and a continued increase in P/Q ratings; however, actual year 9 resulted in, not increasing prices, but a sharp decrease in prices. This sudden declination of prices and the company’s decision to increase prices and P/Q ratings made A Team’s weakness highly exposed and therefore it was only natural to see market share decrease and sales diminish during year nine. In year 10 , A team resolved the issue out of reaction of the misguided projections the company made by drastically making provisions for the reduction of prices by decreasing investment in R&D, CSR, and Advertising to gain back more market share because of the price sensitivity trend and price war threat. Although this worked to a certain degree, to have strengthened the resolution, A Team should’ve reduced investment in product design qualities instead of the decisions chosen to provide for a means to reduce prices. Either way, the strategic decisions of reduction in prices put A Team in a better position 5 – SAMPLE – financially and the company made the largest comeback of the simulation game according to the Leap Frog Award 16 . All the while this year represented the year of increased rivalry among companies due to market saturation and various other causes that slowed growth for all companies. Years 11 and 12 provided no anomalies for A Team to consider as devastating market effects that hindered the success and continued growth of sales and profits resulted from the strategic decisions made in year 10. The company decided to continue reducing prices for the entry level cameras while leaving the Multi Featured Cameras price the same. A Team decreased the investment of R&D for entry level cameras, Advertising, and Design Components of the entry level cameras leaving the models at a minimal 4 star rating to keep the price trending down. By year 12, the R&D investments for both multi featured and entry level were reduced more as well as prices for the cameras incrementally. This was a defensive move to reduce the risk of loss of market share and sales of price sensitive consumers to ensure continued growth for A Team to the end of the simulation. 6 – SAMPLE – Performance Analysis To put the results into a frame of context, it is necessary to show A Team’s performance charts from years 5 to 13 inside each performance metric section. The graphs are formatted by bars resembling the year to unit of measure. The investors’ expectations 12 can be seen as the small dots within the bars to identify a standard of meeting those expectations. From top to bottom: Sales Revenue 6 , EPS 7 , ROE 8 , Stock Price 9 , Credit Rating 10 , and Image Rating 11 . EPS: “Earnings per share (EPS) equal net profit divided by the number of shares of common stock outstanding at the end of the report year. 23 ” The reason why this metric is a good measure of performance is realized through its direct relation to net income. Higher EPS values indicate the company is earning more net income per share of stock outstanding. The expectations of the board of directors are to grow earnings per share (EPS) at least 8% annually through Year 10 and at least 4% annually thereafter 12 . In years 58, A Team gradually increased Net Income and exceeded board expectations of EPS by 16% 17 , 18.8% 18 , and 8.7% 19 consecutively from years 6 to 8. As seen in the strategic approach section of this report in year 9, the company mistakenly assumed the forecast of market trends and the result was missing the mark in regards to EPS expectations and corporate objectives. In year 9, Company A saw a 70% 20 negative change in EPS, while the expectation was an 8% growth. That is a 62% deviation from expected performance. In years 11, A Team missed the mark by 5% 21 . In years 12 and 13, A Team exceeded expectations by 31% 22 and nearly 50% in year 13. ROE : “Return on equity (ROE) is defined as net income (or net profit) divided by total shareholders’ equity investment in the business. 23” The greater the percentage the more the company is earning profit per 7 – SAMPLE – dollar of equity that the shareholders own of the business. This measure resembles the EPS metric because this too is a direct measure of profitability. The expectations of the board of directors are to maintain a return on equity investment (ROE) of 15% or more annually 12 . The results reflect the EPS results throughout the simulation years. Stock Price : The stock price is the highest amount someone is willing to pay for the stock, or the lowest amount that it can be bought for. The stock price is a good growth potential indicator as well as how confident others are in future business. The expectations of the board of directors in regards to the stock price are to achieve stock price gains averaging 8% annually through Year 10 and 4% annually thereafter 12 . A similar trend can be seen from the chart showing the stock price of A Team from years 5 to years 13. Debt rating : The Company’s credit rating is a function of four factors 26 : (1) The debt equity ratio 25 which is defined as longterm debt divided by total shareholders’ equity and indicates the extent to which the company’s long term capital has been supplied by creditors or by shareholders. There are only 4 measures of the debt equity ratio Company A has accounted for in years 5, 6, 7, and years 8 through 13 are accounted for as one measure. In year 6 A Team had 18:82 debt to equity, in year 7; 4:96, and in years 8 to 13 A Team was debt free with a 0:100 debt to equity ratio 27 . 8 – SAMPLE – (2) Times Interest Earned Ratio 25 which is defined as operating profit divided by annual interest payments and is a measure of the safety margin that creditors have in assuring that company profits from operations are sufficiently high to cover annual interest payments. Company A’s Times interest earned was 16.86x, 32.5x, and 99.99x for years 6, 7, and 8 through 13 consecutively 27 . (3) The percentage of line of credit used 25 . In year 6, A Team used 34% credit to finance operations. In year 7, the company used 20%. In year 8, Company A used 3%. In the succeeding years, A Team used no line of credit 27 . (4) The amount of years it will take to pay off the company’s outstanding loans 25 based on the most recent years free cash flow. The number of years it takes to pay back outstanding loans is equal to loans outstanding divided by free cash flow 26 . For years 6, 7, 8, and 9 through 13, the debt payoff capability was 1.4 years, .07 years, .1 years, and 0 years consecutively. The overall credit rating, as seen below in the chart, were B+ in year 5, A in year 6, A in year 7, and A+ in years 8 through 13. A Team met and exceeded the expectations of the board of directors throughout the simulation as the expectations were to maintain a B+ or higher credit rating. Image Rating : The image rating is comprised of a total of 11 factors 26 , but to generalize, it is easier to categorize them into 3 factors : P/Q ratings, Market Share , and Corporate Social Responsibility . In year 6, company A maintained the expectation of an image rating of 70. In year 7, the company achieved the surpassing score of 82, then 87 in year 8. In year 9, due to a decrease in market share, the image rating dropped to 77. Then, the image rating grew steadily to 89 in year 12 and to 95 in year 13. Our market share shows very similar trends throughout the simulation 28 . In years 11 through 13, A Team invested 9 – SAMPLE – more into CSR and that could be the explanation of the gradual growth. A Team met the board of expectations for all the simulation years for the expectations in regards to Image Rating were to achieve an image rating of 70 or higher. 10 – SAMPLE – Conclusion In conclusion, A Team’s strategy succeeded. The company’s investor expectation score ended with 115; BestInIndustry score ended with 89; Gameto Date score with 102. The way that these scores are calculated helps to understand that the strategy implemented was a strategy that went beyond requirements and supplemented and sustained a fierce competitive edge. The company ended 2 nd in the industry based on overall score. Below are the Companies objectives 29 made by the managers towards the beginning of the simulation: Financial : Always remain in positive cash flow year after year; increase net profit by 100% in next five years; uphold all investor expectations year after year; acquire an A+ credit rating within five years; increase ROE by 25% yearly; increase net profit by 20% yearly. Strategic : Keep increasing investment in R&D make more models in 2 to 4 years’ time; obtain and maintain at least a 14% market share for both cameras yearly; lure in talent and increase productivity by 5% yearly; diminish warranty claims. The way this strategy translated into the implementation of the company’s differentiated decisions to meet the financial and strategic objectives: Higher p/q rating Longer warranty periods Larger volume of retail dealers More models Lucrative compensation and incentives Involved corporate responsibility Larger investment in innovation 11 – SAMPLE – These decisions contributed to the successful execution of a differentiated strategy that for the majority of the simulation met the objectives purposed by the managers and the expectations of the board of directors. 12 – SAMPLE – Appendix A: References : References: 1. GLO_BUS Participant’s Guide How the GLOBUS Exercise Works (pg.1) 2. Crafting and Executing Strategy, 19 Ed, by Thompson, Peteraf, Gamble, Strickland. McGraw Hill Irwin (ISBN9780077537074). (pg. 129 Broad Differentiated Strategies). 3. Taken from Team A’s Class Preparatory Assignment (CPA #2) on Corporate Vision, Mission, and Strategy. 4. GLO_BUS Participant’s Guide What Your Board of Directors Expect (pg.23) 5. Taken from Team A’s Class Preparatory Assignment (CPA #3) on External Factors. 6. Performance Charts taken after year 12: Sales Revenue Graph 7. Performance Charts taken after year 12: Earnings per Share Graph 8. Performance Charts taken after year 12: Return on Equity Graph 9. Performance Charts taken after year 12: Stock Prices Graph 10. Performance Charts taken after year 12: Credit Rating Graph 11. Performance Charts taken after year 12: Image Rating Graph 12. GLO_BUS Participant’s Guide What Your Board of Directors Expect (pg.23) 13. Dual Score Chart of the company’s overall results throughout the simulation years (113). 14. Entry Level Chart showing the relation of profit and sales through SY12 from A Team Scorecard from year 12 15. Industry Market Entry Level Trends chart taken from the industry overview portion of the Statistical Review 16. Leap Frog Award for most improved overall score found in the bonus point award section of the statistical review 17. EPS taken from score card for year 6 in the key metrics table 18. EPS taken from score card for year 7 in the key metrics table 19. EPS taken from score card for year 8 in the key metrics table 20. EPS taken from score card for year 9 in the key metrics table 21. EPS taken from score card for year 11 in the key metrics table 22. EPS taken from score card for year 12 in the key metrics table 23. Financial Ratios Used in GLOBUS on profitability ratios.( pg.1) 24. Financial Ratios Used in GLOBUS on profitability ratios.( pg.1) 25. Financial Ratios Used in GLOBUS on credit rating ratios. (pg.4) 26. GLO_BUS Participant’s Guide Finance Decisions(pg.20) 13 – SAMPLE – 27. Comparative Financials in Statistical Review: Balance Sheet Data 28. Company Performance Review on page 3 of the Statistical Review 29. Taken from Team A’s Class Preparatory Assignment (CPA #2) on Corporate Vision, Mission, and Strategy. Personal Assessment (bonus): In the simulation process, the way that I contributed in the management of the company’s strategy can be seen in the decision making, market analysis, and strategy construction for the company. During the construction of the strategy, I categorized the strategies and explained the pros and cons of each for better understanding of the strategies in relation to the simulation game and offered the suggestion that we pursue a best-value strategy. This option was turned down by majority and I gratefully pursued a differentiated strategy with Markus and Joshua. I lead the decision making in PY7, by which that lone year we ranked 1 st in the practice round. This was the main reason why Markus and Joshua wanted to pursue a differentiated strategy. Before the simulation process began, I read and kept up with most of all the material, including the entire participants guide, most of the help guides, and most of the videos, as well as manipulated the simulation for a couple of hours before practice round decision making to ensure my helpfulness and productivity for the team. Every other day after the simulation began, for about 30 minutes to an hour, I looked at where the company was in regards to competition and in comparison to board of director’s expectation. I was always prepared for meeting with the group whether on the phone or in the computer lab. I missed one meeting because I was traveling out of town and without reception, though I was still prepared if I were to have reception at the time. The reason for my high involvement is because I am very competitive and I love to conceptualize what I am doing before I do it. I was surprised at how one basic decision could change the entire course for a company’s success in an intense competitive environment. The critical thinking involved in a decision was realized as much more vital. I also was surprised at how important it is to have sufficient knowledge. Without detail knowledge about what is going on in the market you would lose this game, and I am sure that is also the case for the real world. This experience has matured my mind in preparation for the business career. I have drawn from other classes the material that has all been subsumed into this over aching category of business strategy. This simulation and class has helped me conceptualize and consolidate the knowledge that I have obtained in my previous courses. This has prepared me for working in the industry because now I can articulate and communicate in a more meaningful fashion and solve problems in a more efficient and effective manner because of the understanding I have now. 14 – SAMPLE – 15 – SAMPLE –
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