1. Bankrupt or Bust Industry 2 – Firm 1 December 5, 2000 Nathan Head Nicole Carlson Dan Geurts Chris Battles

2. 2 Topics  Industry Analysis  Company Analysis  Recommendations for the Future

3. 3 Industry Analysis – 5 Forces  New Entrants – Product differentiation is low, capital requirements are low, and switching costs are low. Normally a high risk but game limitation makes this a zero risk

4. 4 Industry Analysis – 5 Forces  Substitution – A wide variety of substitutes exists including other transportation and other entertainment activities. Normally a high risk but game limitation makes this a zero risk

5. 5 Industry Analysis – 5 Forces  Buyers – Threat of backwards integration for game purposes is low but product differentiation is also low. The bargaining power of buyers is medium.

6. 6 Industry Analysis – 5 Forces  Suppliers – The information on suppliers is relatively unknown for game purposes. Our group assumed low risk. The bargaining power of suppliers is low.

7. 7 Industry Analysis – 5 Forces  Rivalry – Although most of the other forces are relatively low for the industry, the threat of rivalry among competing firms is high. In fact, it is the driving force of the simulation. Product differentiation is low, switching costs for consumers are low, exit barriers are high, and strategic stakes are high. The threat of rivalry among competing firms is high.

8. 8 Industry Strategies Each firm in the industry began with equal financial resources, equal products, and equal information. All of this added to the need for each firm to develop a strategy that would help their firm to gain a competitive advantage over the other firms. Strategies:  Differentiation strategies: u Expand into additional product lines (Racer, Leisure, etc.). u Increase awareness and image of current products. u Increase quality.  Cost leadership strategy: u Reduce price and reduce internal costs.

9. 9 Bankrupt or Bust Strategies Employee Level Strategy We want our employees to be satisfied with their jobs and motivated to increase the company’s performance through increased quality and increased production levels. Additional strategies to achieve the above goals:  Increase training levels.  Continuously increase salaries every year.

10. 10 Bankrupt or Bust Strategies Manufacturing Level Strategy Initiate a total quality management (TQM) approach to manufacturing. Our goals are to maintain the highest quality level for our products, attempt to achieve zero defects, and reduce finished goods inventory to a level of zero. We also want to maximize productivity. Additional strategies to achieve the above goals:  Increase batch size.  Decrease setup times.  Increase supplier relations.  Increase training.  Cause demand for our products to be higher than supply.  Reduce breakdowns.  Increase quality control and inspection.

11. 11 Bankrupt or Bust Strategies Market Penetration Strategies: We want our product to be the most widely known product in the industry. We want our brand name to have the best image. Our company’s end goal is to increase our market share as high as possible and squeeze out the competition. Additional strategies to achieve the above goals:  Increase advertising every year for each product.  Increase PR every year for each product.  Increase support for distributors every year.  Increase brand advertising every year.  Increase plant size and employees every year.

12. 12 Bankrupt or Bust Strategies Product Development Strategies We want our products to conform to the exact specifications our customers’ desire. Using market research, our company will continuously develop new products and redevelop old products to match the market’s needs. In addition, we will work to decrease the cost of our products through product development. Additional strategies to achieve the above goals:  Develop new products until all 5 product lines are complete.  Once we have a product for all 5 markets, our company will begin redeveloping existing products in order to match the customer specifications for each product line and also decrease the costs to manufacture each product line.

13. 13 Bankrupt or Bust Strategies Financial Strategies Our main financial goal is for our share value to be higher than any other company’s share value in the industry. We also want to maximize shareholder benefit by increasing sales and net profit each year. Finally, our company needs to maintain a respectable debt to equity ratio. Additional strategies to achieve the above goals:  Continually pay dividends at an increasing rate.  Issue additional shares of stock each year.  Eventually pay off all our long-term debt.  Increase our investor PR every year.

14. Manufacturing Capacity Usage

15. Manufacturing Capacity

16. Industry Sales

17. Industry Profit

18. Market Share

19. Industry Share Value

20. 20 Summary of Financial Results – 2006  Total sales were $138 million.  Total profit was $35 million (Approximately 25% profit per sales dollar).  Share price was $105.10 per share.  Plant production time was 91.3% of total operating time.  Total market share was 71.8%.  The warranty rate for our products was less than 0.1%.  Our cash on hand was $107 million dollars.  Our debt to equity ratio was 17%.  Book equity totaled $100 million.

21. 21 Bankrupt or Bust Strengths  Low Cost  Skilled Employees  High Quality, Zero Defects, Zero Inventories, and High Efficiency (TQM)  High Awareness/Product Image  R&D  High Capacity  Increased Channel Support

22. 22 Bankrupt or Bust Weaknesses  Price – Due to the increased quality, advertising, and PR, our company was not able to achieve the lowest price in the industry.  Delivery – Due to our zero inventory strategy, it was not uncommon for distributors to be sold out of our products. As a result, if a store sold out of our bikes, the customer simply purchased our competitor’s bikes.

23. 23 Recommendations for the Future Although our company currently has a competitive advantage, it is an advantage that could easily be imitated within a few years simulation time.  The firm should continue to expand and grow by following the company strategies.  The firm should attempt to lower costs and also lower prices.  The game does not allow a company to open a second plant, therefore if the option were enabled, our firm would purchase one of our competitors in order to expand into a second plant.

24. 24 Questions?

25. 25 Thank You for your time!