Afm 131 Mikes Bikes Report - Winter 2010 - Sproule

Instructions: Complete a five year simulation, and answer the following questions on the actual approach you used for the simulation. You may type your answers directly on this form, but the completed document must be 2-3 pages in length (please do not change the margins). Due November 25, 11:59pm

“When the simulation began, we felt confident in our team’s vision, goals, and strategic plan. After the first rollover, we quickly became aware that the success of a company relies heavily on the dynamics of the market. The strategic decisions of competitors weigh heavily on the overall direction of a company. Our original plan quickly became obsolete in the tumultuous bike industry, and we were forced to re-evaluate our competitive positioning. To this end, we learned

our business. As the president and the CEO of Bikes Bikes Bikes, I am proud to present to you the

The company started off producing 20,000 units of mountain bikes. We did not change the production quantity. Last year our forecast sales were 24,000 when we only sold 19,866; therefore we thought it would be best to leave production at 20,000 bikes. Having excess inventory, we concluded that 20,000 units should be enough considering our quality has not changed and our advertising will not increase the sales dramatically. Although we had the choice to produce as much as 30,000 units, we felt as though we did not have sufficient money to increase production. We were interested in allocating the money towards marketing as opposed to production. We realized that without awareness, no matter how many units we make, sales would be inefficient.

Owens & Minor is a distributor of surgical and medical supplies to hospitals and other health care facilities. Due to changing demand from customers, the company is facing increased operating costs, which has resulted in lower profit margins and even losses. In 1993, O&M recorded an $18 million profit, which was reduced to a loss of $11 million in 1995. The entire industry is experiencing similar difficulties. In an effort to resume profitability, O&M is evaluating alternatives to “cost-plus pricing”. Cost-plus pricing does not reflect the true cost of the services provided by O&M. Customers are demanding more of O&M while

Although the company did show an increased gross profit of $8,255,000 with $6,358,000 less Net Sales in 2013 versus 2012, that increase is due to the reduction in product Cost of Goods Sold by $14,613,000. Since increases in product price will negatively affect sales, one of management’s primary goals is to keep prices stable. This objective is achieved through implementation of cost cutting programs, investing in more efficient equipment, and automation of more steps in the production process.

Starting from a company of less than 75 workers and owning less than 20,000 SCU for production, research, quality assurance and conduct warranty work Off The Chain Bikes has doubled the plant capacity and hearing doubling the workforce within two short years. The company is successful by targeting and capturing lucrative market shares by heavily investing in the desired technical specs and design styles of one of the most influential Racing bikes. Our keen ability to thoroughly research market demands, predicting competitive strategies between the four market majority shareholders by reviewing and interpreting the marketing reports and our aggressive design and development plans have significantly increased our market share and increase shareholder value. Our core competencies and strategic goals will be realized by carefully following our established plans and aggressively price our bikes to increase total market share.

The major driving forces in the motorcycle industry‘s external environment includes; growth rate changes in the industry. Two, there is change in the buyers of motor cycles and how they use it. In the recent years motor cycles have been associated with robbery and drug trafficking. Three is the marketing innovation. The motor cycle industry is yet to fully embrace the new internet technology. Four, there has been numerous entry of major firms that have brought imbalanced competition in the industry (Raman, 2004).

As shown in Exhibit, profitability has been a concern to Kootenay - gross margins are below industry average of 28-50% for its complete bike products (Entrée; -0.83%, Dlux; 7.76%, and Ultra;-6.73%) where materials have represented a high percentage of the costs (58 – 74%). Selling frame alone has shown stronger profitability (23.33%) but overall returns needs to be improved (ROA/ROE are -14%/-22%).

We adjusted focus to our niche market, sold off capacity in the low end and traditional markets, and proceeded to decrease our production going into the next round. While selling capacity was the correct financial decision to combat our emergency loan, we were then left with stock outs in all of our product lines. As a result, we continued to struggle with overproduction and avoiding stock outs, but made improvements resulting in less drastic inventory swings in the later

Lyon, Robert, Citi Bike’s road trip: where next?.New York . New York University Stern School Of Business. 2014. Print.

* The variances are due to the Mile High Cycle company not forecasting for increased production. The company budgeted for the production of 10,000 cycles but the actual production was 10,800 units. When the company increased production, the production efficiency decreased. The company had to use or rework parts that added extra cost to the expenses; the reworked parts added $25,000 of extra expenses to the wheel assembly production and $45,000 to the final assembly process. The material,

Lastly, the company suggest to expand their current inventory through increasing production and capacity. With the increase in production rate the company can gain more consumers as a whole through supply and demand. Doing this would give the company an opportunity for more exposure and perhaps better brand recognition.

Among the factors pointed out in Question 1., Oval sales price and quantity sold variance is the biggest and Marelie should be held responsible for it. It is probably because of the wrong estimation on the loss during the strike week. She estimated the loss to be 5% in unit sales (about 400 baskets) however, total decreased of unit sales was around 10%. We cannot be certain that the total 10% decrease was due to the strike, but we think the percentage decrease in sales due

First, we have identified if there is really an insufficiency in the amount of selling prices set by the Sales Department, in reference to Exhibit 1 of the case. We did this through identifying the maximum amount of overhead costs that the company can incur for the three products and comparing it with the total overhead costs. See Table 1 for details.