Course: International Business Simulation

STRATEGY ANALYSIS OF YEAR 9

GROUP 4 - INDUSTRY 11- COMPANY D

A. INDUSTRY OVERVIEW:

I. Action - Capture Camera:

1. AC Camera overview:
In general, average wholesale prices in Year 9 were much higher than in Year
8. It was $249 in comparison with $236. AC Camera demand this year ( in 000s of AC
Camera) is decreasing year by year and to this year, the demand is higher than forecast
about 0.6%. Assembly capability industry-wide was adequate to satisfy year 8 demand
as well and the units assembled/sold/shipped was up by 7.6% from last year.
However, in the next 3 years, the demand for AC Cameras is expected to increase by
about 5.7% annually.
P/Q ratings had slightly increased this year while Features remained the same.
The increase in P/Q ratings showed that most of the companies had continually
enhanced their AC Camera features and as a result, industry average P/Q ratings was
4.8, increasing 0.4.

2. Action - Capture Camera Benchmark:

There are some changes such as camera housing, editing/ sharing capability
and LCD screen display that lead P/Q ratings of company D to increase to 5.5. This
year, due to focusing on enhancing those features, then, year 9 total production and
assembly cost of AC Camera was $180.06.
R&D cumulative expenditures reached $125,000,000 with again, additional
$20,000,000 this year. The total compensation had a little decreased. Moreover, there
was an increase in operating profit margin in some specific regions such as North-
America and Asia-Pacific. Whereas, in Europe-Africa and Latin-America, this number
had reduced, especially in Europe-Africa.
 3. Financial Performance:
The highest net revenues of AC Camera belongs to the North-America market
again with $89,598,000. Europe-Africa is right after it with $70,952,000, falling
approximately $10,000,000. Latin-America is still ranked lowest in terms of revenue
with only $42,485,000, nearly the same number in comparison with last year. In total,
we had $255,295,000 of net revenues, contributing 46.65% to the whole company
income.

The business is not growing well this year because we did not meet either investor
expectation towards EPS or image ratings. Moreover, due to the decision of raising
the wholesale price to retailers, we did lose some of the market share to 4 regions.
However, we are ready to confront year 10 and hopefully, our company could gain a
bigger profit as well as market share in this year.

II. UAV Drones:

1. UAV Drones overview:

Overall, the average wholesale prices in year 9 were much higher than year 8: The
Demand Forecast numbers (in 000s of UAV drones) globally were -2.5% lower than
forecast. Assembly capability industry-wide was not able to satisfy year 9 demand, so
that there was just a clear raise in price this year (from $1351 to $1435). In the next 3
years, the demand for UAV Drones is expected to increase by about 9.2% annually.
UAV drones’ performance features had been kept the same to last year for the
industry demand as well as the company's financial statement but the P/Q rating had a
slight change from 5 to 5.4

2. UAV Drones Benchmark:

The parameters of drone components and features were higher than year 8 due to the
change of high-quality segment product. The workforce payoff and other statistics had
slight changes for a suitable average price in the market. Moreover, the marketing cost
for each unit sold in all markets had increased due to the new marketing strategy to
push more sales. R&D cumulative expenditures reached $90,000,000 with additional
$15,000,000 this year. In total, Year 9 production and assembly cost of UAV Drones
was $1,083,800.
Next year, we are planning to change from high-quality product segment to average-
quality product segment in order to gain more market share. Besides, building a new
marketing strategy is considered to push more sales and gain more profit.
3. Financial Performance:
The highest net revenues of UAV drones belongs to the North-America market with
$114,525,000. The second runner was the Europe-Africa market with $90,043,000.
Whereas, Latin-America was still ranked lowest in terms of revenue with only
$34,599,000. In total, we had $291,922,000 of net revenues, contributing 53.35% to
the whole company income.
Total market share for UAV Drone in all markets continually falls from 17.1% to
15.9%.

B. COMPETITOR ANALYSIS:

Competitive Intelligence Reports — Comparative Competitive Efforts

🔻North America:

I.Action-Capture Camera

⇒ According to the data, we can see that:

- Our company price base was higher than the Industry average, which was the
highest price in the market - at $301 per unit. Along with the high price, our
P/Q was also the highest with 5.5 stars.
- Our company’s Brand reputation was lower than the Industry average. Our
company got 72 prior-year images.
- Our Retailer Support was almost equal to the Industry average and was in the
middle range compared to the rival Company - at 7.52$ per unit.
- Our company didn’t invest much on Website Displays and Advertising Budget,
it was quite low compared to Industry average.
- Our Sales Promotion and Promotion weeks were likely the same to the rival
Company.
- All companies in the Industry have the same Warranty Period - 180 days.
- For the Demand for ACC, the rate shows that our consumers’ demand was
309,900 units, in the last range and was 19.1% less than the Demand of
Industry. Due to Company B’s stockouts, we got a plus about 1.100 units, so
our AC Camera total units sold was 311,000 units.
- Our Market Share is very low, in the last range, got 3.8pts lower than Industry
average.
- In this year, we offered for the Special ACC Contract at the discount for 18%
and got 61 points in the Value Index. We lost to Company C in this market.
✦ Overall, we got a market share of 15.2%, which is the last position in the
industry.
⇒ What we learn from our competitor:
- Our company is one of the top of the industry. But our market share was very
low compared to the rival company.
- Overview, other companies kept their P/Q and price in the middle range, which
was either in the high or low end.

=> We should discuss again and offer a more reasonable price to fit with the
market. We should have a clearer plan for the direction and segmentation for
customers that we want to make the largest consumer market, to adjust the
more fittable P/Q rate. As other companies keep their P/Q rate and Price in the
middle range, we are considering reducing our both P/Q rate and price.

II.UAV Drone
⇒ According to the data, we can see that:
- Our company got the highest price in the Industry with $1,737 per unit, which was
18.6% higher than the Industry Average.
- We were among the companies with the highest rate of Discount to online retailers
of 15%.
- Our company product-quality rating of this product was highest with 6 stars.
- We decreased the number of models for UAV drone: 2 models, same as the rival
company.
- We invested the least in website display and search engine advertising, and got a big
space compared to the highest invest company.
- We paid 161.46$ per unit for retailer recruitment, which was a little bit higher than
the Industry.
- Our warranty period lasted for 120 days which was the shortest period of rival
companies.
- The demand for our product comes from 2 sources: directly from the company
website and 3rd-party retailers.
+ The demand for drones directly from the company website is the lowest
of all.
+ The demand for drones from the 3rd-party retailers was in the middle
range.
=> To sum up, our Demand for drone was still the least of all
✦ Generally, our company has a 15.9% market share ratio in the industry for UAV
drone products at Asia-Pacific market, dropped down 1.7%.

⇒ What we learn from our competitor:

This week, our company’s market share decreased compared to the previous year and
got a big gap to company C. This shows that we have to make an adjustment to our
price and P/Q rate, to make it more reasonable to sell. We may reduce our Price and
P/Q rate.

🔻Europe - Africa:
I.Action-Capture Camera

According to the data from Competitive Intelligence Report, we can see that we still
had the lowest market share with only 15% in this market.
- We had a competitive advantage about P/Q Rating in industry average with 5.5
stars. And the strong spending on Retailer Support with $9.58 per unit, we are
taking a competitive advantage in this segment.
- However, our company had a price-based competitive disadvantage of +24.2%.
- In terms of Advertising Budget and Websites Displays, compared to Industry
Average, we didn’t invest much on those.
- We can clearly see that our competition for Warranty Period was equal to the
Industry average and same as the rival company with 180 days.
- For the Demand for ACC, the rate shows that our consumers’ demand was
243,200 units, in the last range and was 25.2% less than the Demand of
Industry. Due to Company B’s stockouts, we got a plus for 900 units, so our
AC Camera total units sold was 244,100 units.
- => Our company’s competitive disadvantages in the AC Camera segment had
equally-sized negative impacts in causing our company’s market share to be
5% points below the regional average.
★ Next year, in this market, beside paying attention to Advertising Budget, and
Websites Displays. We also should consider our P/Q and Price to be more
concordant to the Industry.

II.UAV Drone
⇒ According to the data, we can see that:
- Our company had a competitive disadvantage on price-based 14.4% and product-
quality rating with 6 stars. Our price is the highest price with the quality only lower
than company E.
- Our Website Display was 2,515 which was 22.9% lower than the Industry average.
- Our Search Engine Advertising was 2,904 which was 34.6% lower than the Industry
average.
- Our Warranty Period lasts for 120 days, which was 28.6% lower than the industry
average.
- Our Drone Units sold in both direct and 3rd-party retailers are quite high but it was
still penultimate.
- Our Market Share was in the last range, 16.3%.
⇒ Learn from competitor:
Company A and Company C had the highest market share as:
- We can see that Company A had the lowest price, but their P/Q rating was very
high when considering their price.
- Company C had the lower price with the lowest P/Q rating, but they invested
more in Website Display, Search Engine Advertising, Retailer Recruitment and
Warranty Period.
=> To gain the higher market share, we should decrease our price a little bit and
invest more in Website Display and Search Engine Advertising

🔻Asia Pacific:
I.Action-Capture Camera

At this market, our company still had the lowest market share with only 13.1%.
- This year, we had a competitive advantage about P/Q Rating in industry average
with 5.5 stars. Besides, the strong spending on Retailer Support and Sale Promotion
(discount) made us have the competitive advantage in these segments.
- However, our company had a price-based competitive disadvantage of +22% and
had the competitive disadvantage in Advertising Budget, Websites Displays, Warranty
Period and Sale Promotions (number of weeks).
- The total demand and units sold for AC Camera is $190 100.

=> Our company’s percentage competitive advantages and disadvantages on the 10

competitive factors affecting AC Camera sales and market share resulted in a net
overall competitive disadvantage of a size sufficient to produce a market share that
was 6.9 percentage points below the regional average.
As we can see from the report, although both Company C and B had the price that
were higher than ours, they spent on Advertising Budget, Websites Displays,
Warranty Period a lot. Therefore, they got the high market share.
=> Next year, we should pay attention to sales promotions and Websites Displays.
Besides, we can consider decreasing the price.

II.UAV Drone
- In this year, we had the highest P/Q Rating. However, our company had a
competitive advantage of product-quality rating with the highest rank being 6 stars.
Besides, we also had competitive advantage about Discount to Online Retailers.

- However, company D had a price-based competitive disadvantage of +17.4 %.

Besides, we also had competitive disadvantages in Website Displays and Search
engine advertising.

- The total demand and units sold for UAV drone was the same (33 800 units)

According to the data from Competitive Intelligence Report, we can see that Company
A and C had the lowest price. In terms of Company C, they had a lower price and P/Q
rating than ours but they invested more in website display and Search Engine
Advertising. Therefore, they had more UAV Drone Units Sold than us. => Next year,
in this market, we should pay attention to Search Engine Advertising and Websites
Displays.

🔻Latin America:

I.Action-Capture Camera

⇒ According to the data, we can see that:

- Our company price base was higher than the Industry average, which
was the highest price in the market. This made us have small market
share. Along with the high price, our P/Q continued to be the highest
one.
- Our retailer support was a bit higher than the industry average.
- Our company was in the bottom range in the website displays section.
- Our Sales Promotion and Promotion weeks were likely the same to our
rivals.
 - Our Warranty Period was the shortest one, same to company B and E.
- For the Demand for ACC, the rate shows that our consumers’ demand
was the smallest one, which was 23.1% less than the average demand of
this industry, same as our ACC units sold.
- In this year, we offered for the Special ACC Contract at the discount for
15% and got 61 points in the Value Index. We lost to Company C in this
market.
- Our Market Share is at the bottom of the list, with only 13.4%.
⇒ Learn from competitor:
- Company C got the highest market share because: their Warranty Period was
longest up to 180 days, their Retailer Support, Advertising Budget and Website
Displays were also highest. Company C spent much on Marketing but their
price was low, leading to their ACC units sold and market share was highest.
- Company A’s P/Q was 4.3 stars with the price 225$, which was quite cheap.
Company A got high Promotion Weeks, Promotion Discount and Warranty
Period. Those things make them have competitive advantages, which leads to
their high market share.
⇒ If we want to increase the market share, we have to decrease our cost and
increase Retailer Support, Advertising Budget and Website Displays.
II.UAV Drone

⇒ According to the data, we can see that:

- Our price for Drone in this market was highest compared to the others, 16.5%
higher than the Industry average.
- Our P/Q is the highest with 6 stars.
- We did not spend much on Website Displays,Search Engine Advertising and
Retailer Recruitment.
- Our Drone Units sold in both direct and 3rd-party retailers were low.
- Our Market Share was also the smallest and 7.1% lower than the Industry
average.
⇒ Learn from competitor:
Company A and Company C had the highest market share as:
- We can see that Company A had the lowest price, but their P/Q rating was
high.
- Company C had the lowest price and P/Q rating, but they invested more in
Website Display and Search Engine Advertising, Retailer Recruitment.
 - They had a long warranty period.
=> To gain the higher market share, we should decrease our price a little bit, and
push more on marketing.
● To sum up, overall across 4 markets North America, Europe - Africa,
Asia-Pacific and Latin America, we still didn't get the high market share
for both products. Therefore, next year, company D needs to promote and
pay attention to website displays, search engine advertising.

C. STRATEGY ANALYSIS:

❖ Objectives of Company D - Industry 11:

For each product line, our company employs different strategies. To be more specific,
we aim at a “global differentiation strategy” that sets our AC Cameras apart from rival
brands based on such attributes as a higher P/Q rating, more advertising, longer
warranties, retailer support, or website displays. And for UAV Drones, we employ a
“global best-cost” or “more value for the money” strategy since we want our products
to be affordable for many people. We combine the two strategies in order to deliver
superior value to buyers by satisfying their expectations on key features/ performance
attributes and beating their expectations on price. From a competitive positioning
standpoint, the advantage of these strategies is lower costs than rivals in incorporating
good-to-excellent attributes, putting our company in a position to underprice rivals
whose products have similar appealing attributes.

Moreover, our company has a strategy aimed at being the market leader in both
wearable video cameras and camera-equipped drones. And for different geographic
regions, we pursue different competitive approaches. For example, in Asia - Pacific
and Latin America markets, the customers are more sensitive to the price, so our
company focuses more on promotion and sets lower prices. On the contrary, the
buyers of action cameras and UAV Drone in North America and Europe - Africa are
more sensitive to cross-brand differences in P/Q ratings than camera buyers in the
Asia-Pacific and Latin America regions. Thus, our company focuses on enhancing the
product quality in these two markets (North America and Europe - Africa) more than
the other markets (Asia - Pacific and Latin America).

I. Action-Capture Camera Design - Marketing

● We strongly upgrade our P/Q rating AC Camera from 5.1 stars to 5.5 stars.

● In North America, Asia - Pacific and Latin America markets, we target a

strategy creating high promotion and lower price than the other markets.

● In Europe - Africa markets, users tend to be concerned more about the

quality, so our company upgrades our wearable video cameras. Moreover,
we set a reasonable price.
 II. UAV Drone Design - Marketing

● About our UAV drones, we also advance the quality from 5.2 stars to 6
stars.

● In Asia - Pacific and Latin America markets, we have invested in website

displays and search engine advertising in order to boost our market share
and attract more customers. However, our budget is not full enough to boost
our advertising rather than competitors.

● In North America and Europe - Africa markets, consumers are less sensitive
to the price elastic so we have planned to set a higher price than two other
markets. We also invest more in marketing strategy including website
displays, search engine advertising. The demand for UAV Drones in North
America is higher than other markets, so we offer more discounts to third
party online retailers in order to secure those retailers that sell our drones on
its website then we can widen our buyer access and additional sale volumes.

III. Compensation and facilities

We put more money into UAV Drones than the AC Camera workforce because the
production process of UAV Drones needs more time, more complexibility and
requires workers to have a highly qualified skill to complete the products. To be more
specific, our company decides to decrease the attendance bonus and fringe benefit
package for AC Camera workers, respectively from $750 to $600 per worker and
$1800 to $1200 per worker.

Moreover, we didn’t invest in any AC Camera Facility and UAV Drone facility as we
didn’t have the overtime production. Here are some investment statistics:
 IV. Corporate social responsibility:

Our company carries out some activities that give back to the community through
renewable energy programs by spending $2000 on incorporating renewable energy
resources at Taiwan assembly facilities.

Beside social responsibility, our company takes effort to increase working conditions
such as safety equipment, improved lighting and ventilation. Moreover, we also try to
promote fair employment practices and safe working conditions at supplier factories
through institution of a supplier code of Conduct and Compliance monitoring of
suppliers.

V. Finance:

This year, our financial situation is still sustainable, so we don’t take the loans from
the bank. We repurchase 1050k shares outstanding with the price of $113.24.
Moreover, in year 9, we decided not to pay dividend for the shareholders because our
company cash is not enough. And here is our income statement, balance sheet and
cash flow statement of year 9.
VI. Special contract offers:

In this year, we decided to offer discounts to retailers in North America and Latin
America respectively 18% and 15%. According to that discount, our AC Camera gets
the value index of 61 points in these both markets. However, those offers are all
declined since our products are not as attractive as other rivals’ products. Thus, we
must spend more budget on product quality and adjust price to get a higher
comparative advantage than other competitors in the future.

❖ PERFORMANCE HIGHLIGHTS:

Generally, through this strategy, our company’s performance:

Earning per share increases from $3.29 to $5.96 (higher than investors’
expectation)
● ROE has increased from 41.4% to 33.1%, but still higher than investors’
expectation)

● Stock price decreases from $49.9 to $107.08

● Credit rating still keeps the same A level

● Image rating increases from 71 to 72.

● Total net revenue for both AC Camera and UAV Drone goes up from
$510,400,000 to $540,196,000.

● Total market share for AC Camera in 4 markets has a small rise from 16% to
16.4%, but it is still low compared to the other rival companies. To be more
specific, only Asia-Pacific among the 4 markets slightly fall by 1%, and the
market share in North America goes up by 1.4% compared to last year.

● Total market share for UAV Drone in all markets strongly decreases by
0.7% from 17.8% to 17.1%. Especially, the market share in Asia Pacific
dramatically decreases by 2% compared to Year 7.
In this year, our company intended to spend more money on marketing strategy,
particularly on promotions. As a consequence, we have got some strategic highlights
of year 9:

● Performance/ Quality rating of AC Camera increases from 5.1 to 5.5 stars

and P/Q rating of UAV Drones goes up to 6 stars

● Compensation per PAT member decreases slightly from $26,142 to $25,827

for AC Camera and rises from $26,684 to $27,091 for UAV drones.

● Marketing cost for AC Camera has a dramatic rise from $23.92 to $25.22
per unit while UAV Drones grows up from $126.91 to $133.56 per unit.

● The operating profit our company gets from both AC cameras and UAV
Drones increase compared to last year. To be more detailed, the operating
profit margin we gain from AC Camera and UAV Drones grows up
respectively by 0.4% and 0.2%.

● ASSEMBLY AND FACILITY OPERATIONS

In year 9, our company invested $20 million for AC Camera and $15 million for UAV
Drone. We also spend our budget to invest in planting facility at $1,000,000 for both
AC Camera and UAV Drone.
 SWOT:

● Strengths:

❖ Our company’s performance/ quality rating is quite high compared to

other competitors in the same industry.

❖ We have more experience in developing product quality following

the strategy combining “global differentiation strategy” with “more
value for the money”, so we can easily adapt to new innovation if the
company focuses on new product development orientation.

❖ The ROE, stock price of our company are higher than investors’
expectations.

● Weaknesses:

❖ Our market share has a dramatic decrease compared to last year.

❖ Our company has predicted the market share inaccurately which is
still lower than other companies in the same industry.
❖ Our company has offered a fairly high price for the customers
compared to the other competitors, which has led to losing market
share and customers.
❖ Our EPS and image rating are lower than investors’ expectation
because our two special offers in North America and Latin America
are both declined.

● Opportunities:
 ❖ Become the first company to pioneer in developing products and
services under strategy combining “global differentiation strategy”
and “more value for the money”, so that our company can keep a
vital presence in this Industry 11.

❖ Retain the Top 1 position in Industry 11 in the following years.

● Threats:

❖ Our credit rating reaches the same level as investors’ expectations, so

it is highly likely that next year, we won’t be able to increase our
credit rating to be equal or higher than the investors’ expectation.
And so does EPS.

❖ In the following years, due to the objectives of improving and

developing our products, finance company D may not be stable,
which means we may be under the control of investors and we may
take a loan from the bank.

❖ Due to the high competition from others in the market, our company
may fail and go bankrupt.

D. STRATEGY FOR YEAR 10:

Due to the fact that market share of our company in year 9 is quite lower than other
rivals, we want to gain more market share in year 10. Our company comes to the final
strategy for our company in year 10:

- Our company strategy is “global differentiation strategy” for AC

Camera based on such attributes as more advertising, retailer support
and website displays. And our company employs a “more value for
the money” strategy with the aim of delivering superior value to
buyers by enhancing the quality of the UAV Drone and giving some
discounts on price.

- We will focus more on North America than the other markets due
to its large market size.

- We have a strategy aimed at being the market leader in both

wearable video cameras and camera-equipped drones.
- If our company has excess cash on hand, we will use that cash to
make an early payment for loans in order to reduce the interest
payment in the following years.

- Our company decides to decrease the P/Q and price of both AC

camera and UAV drones in order to gain more market share instead
of reaching high profit for each product.

- We will concentrate more on advertising (website displays/info

and search engine advertising) and giving promotions, discounts to
attract more retailers and customers to access our products.

+ AC Camera: we will boost our marketing strategy by increasing

sales promotions for this product to 16 weeks and spending more
on advertising budget in Europe - Africa market (25%).
+ UAV Drones: we put money into website displays, search engine
advertising and retailer recruitment.

- Our company will consider the operating profit of each region then
choose the market with the highest profit. Thus, we will spend those
profit margins offering higher discounts to retailers to those markets
to achieve the higher value index and win the special contract against
rivals.