Capstone Simulation Ferris (25055) May 26, 2008 Group 2

Ferris Strategy What is our competitive advantage? All competitors equal at beginning Must establish core competency and invest to maintain market leadership Commodity? – Not our focus (not sustainable) Differentiation? – Focus R&D to generate profit Capacity? – Need to fill capacity with competitive products while building technology Strategy – Focus on high value products Build sustainable advantage through R&D Support all segments to utilize open capacity Over time, products will drift to low end

Competitor Analysis Andrews – focus on traditional and low end markets with low price leadership Digby – focus on high end market Baldwin – little attention to high end but very successful in performance and size Erie – focus on promotion of diverse product mix with competitive pricing

Round 1 Strategy -- Market share leader of low end to generate profit -- Increase traditional market share through size/performance -- Invest R&D to develop new high end, performance, and size markets Implementations -- Reduce low end to industry leading price (generate profits) -- Improve Fist, Foam and Fume, keep the price -- Invest $1.6M to develop a new industry leading of high end (Fancy) -- Add employee to meet production capacity Performance -- Stock Price $46.94 (1) -- Profit $12.5M (1) -- Sales 143M (1)

Round 2 Strategy -- Maintain low end volume while continuing R&D investment -- DIFFERENTIATE! Implementations -- More promotion expense on traditional -- Add sales and marketing staff -- Reduce traditional price to market leading. -- Add employees to meet production forecast -- Improve automation rate Performance -- Stock Price $56.12 (1) -- Profit $9.8M (2) -- Sales $ 198M (1)

Round 3 Strategy -- DIFFERENTIATE! Implementations -- Continue R&D investment to improve high end -- Buy production capacity for high end -- Continue to improve size and performance to lead market -- Move Fist (high end) to traditional focus -- Add employees to meet production capacity -- Add sales for high end promotion. Performance -- Stock Price 58.29$ (1) -- Profit $ 7.7M (1) -- Sales $ 223M (1)

Round 4 Strategy -- DIFFERENTIATE! Implementations -- Continue R&D spend of $2M -- Begin development of new high end product (Future) -- Increase marketing for high end -- Reduce inventory on hand -- Buy production capacity for high end, performance and size products -- Add employees to reduce OT Performance -- Stock Price $77.48 (1) -- Profit $16M (1) -- Sales $267M (1)

Round 5 Strategy -- DIFFERENTIATE! Implementations -- Continue development of high end products -- Pay dividend -- Improve traditional products to maintain differentiation -- Continue to increase buying capacity for high end, performance and size products -- Increase marketing on low end and traditional products to use capacity -- Extend AP and AR Performance -- Stock Price $115.36 (1) -- Profit $26M (1) -- Sales $324M (1)

Round 6 Strategy -- DIFFERENTIATE! Implementations -- Continue to pay dividend -- Improve traditional to competitive level -- Continue high end, performance and size R&D -- Longer AP and AR -- Add high end marketing -- Add more capacity to capture potential segment share Performance -- Stock Price $145 (1) -- Profit $30M (1) -- Sales $387M (1)

Round 7 Strategy -- DIFFERENTIATE! Implementations -- Increase dividend to $1 -- Reduce traditional price to consume inventory -- Maximize performance production to take 80% market share -- Maximize production capacity of high end -- Beginning to see market competition between other Ferris high end products -- Reduce price of “traditional” business to support low end market Performance -- Stock Price $142 (1) -- Profit $ 27M (1) -- Sales $ 497M (1)

Round 8 Strategy -- DIFFERENTIATE! Implementations -- Pay dividend of $1.5 -- Buy back stock of $1.9M -- Technology leading and price competitive on high end -- Adjust price (first time) to capture size market -- Must reduce inventory holding costs -- Very difficult to capture more than 60% of market Performance -- Stock Price $188 (1) -- Profit $ 37M (1) -- Sales $ 549 M (1)

Marketplace Map Performance → Size→ High→

Group 2 Introduction CEO _ Bill Muck Marketing _ Zhang Shuhua, He Yi Production _ Zhuang Jianbin R & D _ Tang Nanxun Finance _ Whole team GREAT TEAMWORK!

Questions?