THE CUSTOMER VALUE CHALLENGE

Sustainable

An opportunity to run, from the General Management

perspective, a car manufacturing company, producing and
selling several ranges of cars.

A unique environment to practice, share, verify and reinforce

your business knowledge

A great experience of transforming the largest industry in the

world
CONTENTS

1. MEGA: An Experience of General Management .........................................3

2. Your Company and the Environment .............................................................. 4

3. The Marketplace ........................................................................................................ 7

4. Manufacturing Operations................................................................................... 13

5. Employee Morale and the “HR & Quality” Program ................................. 18

6. The Finance and Funding Structure............................................................... 20

7. Economic Forecasts ............................................................................................... 23

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 THE CUSTOMER VALUE CHALLENGE

1 MEGA: AN EXPERIENCE OF GENERAL MANAGEMENT

Congratulations! You have just joined the management team of a MEGA

company. In your team you will have to determine priorities, a typical
responsibility of General Management, to optimize the manufacturing
and sales of several ranges of cars. Hopefully, this experience will take
place in two stages, first regionally, and eventually, when politics and the
economic environment allow, on a global scale.

You will discover the necessity of putting in place an effective

management system. This will allow you to evaluate correctly current
activities, to identify the potential opportunities of your company, and to
interpret past results to help establish the company’s future objectives.

You will be facing tough competition, you will have to learn to evaluate
the situation accurately, to put in place an appropriate strategy, and you
will experiment with several decision-making processes how to
implement the selected strategy.

The decisions will concern facility investments, car manufacturing, pricing

and expenses in marketing, engineering and HR & Quality.

To better illustrate the reality of a management team, your decisions will

need to be taken under time pressure and taking into account the
fluctuating economic environment and the morale of your employees.

MEGA’s aim is to enable you to participate in a life-like competitive

experience in a group environment that you and your Management Team
will perceive as very high added value learning.
 THE CUSTOMER VALUE CHALLENGE

2 YOUR COMPANY AND THE ENVIRONMENT

 The competitive environment

 The historical background
 The company structure
 The corporate mission

THE COMPETITIVE ENVIRONMENT

The MEGA Industrial Environment consists of several competing

companies, each managed by an executive team like yours. These
companies compete in 4 different product lines of business. The ranges
of cars are as follows:

 Low Cost presents a range of models in which cost and design

simplicity are the major preoccupations of the target customers.
Engineers should not be focused on aesthetics but on “design to
cost” and economic issues.
 Family is intended for families with children.
 Eco-Friendly is intended for customers who want to save the planet
by focusing on reduction of consumption and pollution.
 Image, the premium car reflecting the owner’s standard of living.
 THE CUSTOMER VALUE CHALLENGE

Each Executive team will take a series of 6 to 8 corporate decisions for the
company it is running. These decisions will be taken despite the
difficulties and conflicts of interest the Executive teams will be facing as
they seek to allocate resources effectively within the corporation in terms
of engineering, manufacturing and marketing strategies.

These decisions will also be taken in a changing economic climate, which

will be reflected in the Business and Production Cost Index (see Section
7). The WW Gas Price Index illustrates the evolution of gas price during
the simulation; the gas price will impact the sensitivity of customers to
consumption.

Initially, because of current political and economic constraints, each

company can ONLY operate in its own regional markets and is not allowed
to quit any of the markets where it operates before the merger. However,
it is anticipated that when the shareholders have reached an agreement
for the merger, there will be outstanding opportunities to achieve global
optimization.

THE HISTORICAL BACKGROUND

Each company has a strong financial and commercial potential, but

return on investment is low, and the level of price of some products allows
little or no profit.

THE COMPANY STRUCTURE

Each of the competing companies operating in the MEGA experience is

identical in structure. Each has a corporate headquarters, which issues
consolidated financial statements at the end of each simulation period.
Financial policy is determined at corporate level, together with decisions
as to the amount and frequency of share dividends, and requests for bank
loans. HR & Quality program and subsequent budgets are decided at
corporate level too.

Reporting to each company's corporate headquarters are 4 product lines

of business: Low Cost, Family, Eco-Friendly and Image. Each of these units
 THE CUSTOMER VALUE CHALLENGE

has its own engineering department, production facility, marketing and

dealers’ network.
Consequently, each of these units has the capacity to make its own
decisions regarding:
■ Pricing
■ Marketing expense (Car dealership proximity, Purchasing
experience (at dealership), After sales experience (at dealership)
and Brand power per model)
■ Investment in engineering
■ Production volume
■ Facility Investment

THE CORPORATE MISSION

To put the whole company into a strong financial and competitive

position by taking into account the trade-offs resulting from the
sometimes contradicting objectives:
■ High profit margin
■ High growth rate
■ High employee morale
■ Low CO2 Emissions
■ Low production cost

A team's success or failure, as the simulation progresses, will be reflected

to some extent by the rise or fall in its share price.
 THE CUSTOMER VALUE CHALLENGE

3 THE MARKETPLACE

■ The four Car Lines of Business

■ Customer purchasing criteria
■ Sales and marketing expenses
■ Engineering
■ Scheduled delivery commitment
■ The potential market
■ The market share

THE FOUR CAR LINES OF BUSINESS

In the MEGA exercise, the marketplaces of each of the 4 products are

completely independent of each other, thus any marketing expense
invested by the company in the Eco-Friendly car marketplace (for example)
will have no effect on either the market potential or share in the
marketplaces of the other products. The cornerstone of your strategy is to
deliver value to your customers while simultaneously your costs are
properly aligned to your customers purchasing criteria.
 THE CUSTOMER VALUE CHALLENGE

CUSTOMER PURCHASING CRITERIA

Customer behavior towards the car models is characterized by sensitivity

to price, marketing and engineering expense, and a company's record in
meeting its scheduled delivery commitments (availability of the car). For
each type of car, the customer sensitivity to each purchasing criteria is
presented as perceived by the automobile industry observers.

SALES AND MARKETING EXPENSES

The MEGA company marketing expenses take the following 4 dimensions

into accounts:

■ Car dealership proximity (or Dealers’ Network Density)

■ Purchasing experience (at dealership)
■ After-sales experience (at dealership)
■ Brand power per model

In the automotive industry, it is critical to understand what has value for the
customer. Some customers may want more branding while others may
prefer dealer’s proximity and others a great after-sales support. Having the
right perception of your customer in each car range will highly impact the
effectiveness of your marketing. The right decisions are even more
important because you have the multiplying effects of the number of
models and the density of the dealers’ network.

Marketing expenditure made in a period will have a direct impact on the

customer and will carry a long-term (but diminishing) effect over
subsequent periods. The effectiveness of the marketing expense at a
certain point in time is therefore not only a function of the amount spent
in that period, but also of the previous outlay.

Please, remember that a marketing effort for one type of car will have no
effect on demand for the other 3 ranges. Moreover, your production
capacity may impose a limit on the number of cars you can deliver.
 THE CUSTOMER VALUE CHALLENGE

ENGINEERING

The engineering department is the core of any car manufacturer; it is

responsible for the design of all the cars. Its first task is to establish the
customers’ requirements, always questioning the validity of the perception.
The department will then select the specifications of the cars they design
based on their perceptions of what the customer wants. Wrong perception
of the customer may lead the engineering department to design cars that
have less appeal while at the same time cost is going up far above what the
customer is ready to pay for. Such misperceptions can have a great impact
on profit and liquidity.

“Engineering” covers all the activities that contribute to the final product:
work on prototypes, painting of bodywork, the chassis, bodywork itself,
electronic systems, technical drawing and assembly, process quality
control and industrial systems performance. In addition, it covers design
of engines and gearboxes to respond to performance demands from the
customer and cost requirements, whilst still respecting technical
guidelines, more especially where the environment is concerned.

In the simulation, the car buyers will be sensitive to the following items
that will be decided by each engineering department:

■ Design, style of the car

■ Performance (motor and gearbox)
■ Comfort
■ Robustness, length of use
■ Size, available inside volume
■ Technology on board such as GPS, multi-media, electronic
systems, security and safety features, …
■ Consumption

The sensitivity of customers to the consumption of the car will be

impacted by the WW gas price index.
 THE CUSTOMER VALUE CHALLENGE

Engineering will also have to decide on the number of models available

per car range. As the average lifetime of a car model is four years, the
number of new models to commercialize every year will be equal to the
number of models available on the market divided by four. Launching a
greater number of new models on the market may improve the appeal of
the range, if the customer gives value to a large choice. On the other hand,
a large number of models increases significantly the engineering and
marketing budgets.

In addition, each engineering department of a MEGA company decides

the level of “Novelty / New Parts” by creating new items rather than using
existing industrial components from previous models (“carry over”).
Decreasing the “% New Parts” is a good way of optimizing the car’s
reliability and its cost, and of reusing previous industrial investments. Of
course, too low levels of “New Parts” will kill creativity and will diminish the
“Appeal” of the model for customers who want novelty.

Investments in engineering made during a period have an important

residual effect on the following periods. Again, like marketing expense,
engineering effort in one specific production area has no effect on the
other 3 areas.

A good engineering department starts with a good perception of the

customer values. It continues with a roadmap to develop, step by step,
what the customer wants, considering the multiple constraints of
profitability, production capacity and liquidity available. It may take years
to build a market large enough to justify the engineering department
needed to deliver the ideal car the customer wants.

The speed of developing the car the customer wants has multiple
consequences:

■ The impact on the engineering expense is much too high,

producing unacceptable losses at the beginning, with its
consequences on cash-flow
■ The impact on appeal is much too high compared with the capacity
available. Building more capacity takes time.
 THE CUSTOMER VALUE CHALLENGE

■ The consequences on quality, cost and Capex are not acceptable for
your company:
■ Quality is too low to build complex cars
■ Cost are too high as long as volume and capacities are small

Never forget that some customers give more importance to the price you
charge and less to the other components of your value proposition.

CO² EMISSIONS

Minimizing the pollution of the cars you produce and deliver is one of the
winning criteria’s (with Sales Revenue, ROCE, ARE, Employee Morale and
Share Value). Each line of business has its own CO² Emission level, which
represents the total carbon footprint associated with using the car sold in
that business unit. You can’t directly define this level but you do influence
it when making decisions in:

 Performance
 Consumption
 Size
 Technology
 Novelty

Increasing your investment in these dimensions has an impact on the

CO² emission rate of a business unit, as presented in the table below:

Performance Consumption Size Technology Novelty

CO²
Negative Very Positive Negative Negative Positive
Emissions

CO² emissions are computed by range of car but the computation at the
company level is:

∑ . .𝑠𝑜𝑙𝑑 𝑣𝑜𝑙𝑢𝑚𝑒 𝐶𝑂 𝐸𝑚𝑖𝑠𝑠𝑖𝑜𝑛𝑠 . .

𝐶𝑂 𝐸𝑚𝑖𝑠𝑠𝑖𝑜𝑛𝑠
𝑇𝑜𝑡𝑎𝑙 𝑆𝑜𝑙𝑑 𝑉𝑜𝑙𝑢𝑚𝑒 𝑏𝑦 𝑡ℎ𝑒 𝐶𝑜𝑚𝑝𝑎𝑛𝑦
 THE CUSTOMER VALUE CHALLENGE

Should you give more to the customer?

In some very competitive circumstances, you may decide to differentiate

from competitors by going beyond customer expectations. This will
decrease your ROCE. In real life, many companies are increasing the
number of models on the market beyond the expectations of the
customers because of its impact on volume.

Should you give less to the customer?

It may be justified in some circumstance, but it opens the door to

competition. Such decisions should be limited in time.

In summary, engineering will have to constantly find the difficult

balance between, on the one hand, the desire to attract more
customers by driving up the value of the car, thus increasing the car’s
“Appeal”, and, on the other hand, the willingness to optimize the
quality, and to drive down cost, Capex and delay.

SCHEDULED DELIVERY COMMITMENT

Failure to meet scheduled commitments to deliver cars that the customer

has ordered during an operation period will result in a total loss of the
unfilled orders. These orders are NOT CARRIED FORWARD into the next
period, nor are they distributed to the company’s competitors, meaning
that part of the expense involved in generating these orders has been
wasted

Moreover, failure to deliver cars that the customer has ordered will result
in losing customers; these customers will be unhappy and will respond
less to marketing and engineering actions in the following period. The
customer’s sensitivity to your failure to deliver will vary from one type of
car to another.

NOTE – As is the case in any real-life business situation, the marketing and
engineering policies take a certain amount of time before they achieve an
optimum return on investment even if the impact is partly immediate.
This is even truer when you try to reach new markets as may be the case
after the merger.
 THE CUSTOMER VALUE CHALLENGE

THE POTENTIAL MARKET

The potential size of the market that can be created is not decided in
advance but is a function of:
■ The current economic conditions (represented by the Business
Index in section 7).
■ The natural growth of demand for the car (see MEGA forecast in
section 7).
■ Decisions taken by all companies, which, by their combined actions,
will generate a demand for the cars they are selling, and which will
depend on:
■ The level of the prices charged.
■ The total amount of marketing expense and its
effectiveness
■ The total amount of funds invested in engineering and its
effectiveness

THE MARKET SHARE

The market share of your company will be decided by the customers, who
will compare your offer with that of your competitors, according to their
criteria, in the following areas:
■ The prices you are asking.
■ The total and effectiveness of your decisions in engineering
■ The total and effectiveness of your marketing effort
■ Your reputation as a reliable deliverer.

Your market share is therefore determined by the ability of your company

to meet customer purchasing criteria better than your competitors,
customer purchasing criteria being different for each type of car. It often
means you have a better perception of your customers’ values.

AT THE START OF THE SIMULATION, ALL COMPETING COMPANIES HAVE

AN EQUIVALENT FINANCIAL POSITION, AND EQUAL MARKET SHARE IN
EACH OF THE FOUR CAR RANGES.
 THE CUSTOMER VALUE CHALLENGE

4 MANUFACTURING OPERATIONS

■ Impacts of engineering decisions

■ Size of a facility
■ Manufacturing cost
■ Production budget
■ Non-use of a facility

IMPACTS OF ENGINEERING DECISIONS

The cornerstone of the simulation is the ability of the engineering

department to select the characteristics of the car that deliver high value
to the customer while optimizing the consequence of these decisions. The
right balance between value and cost is the key. It is only possible if they
understand the needs of their customers.

The decisions taken by the engineering department have an impact on:

■ The engineering budget

■ Manufacturing Cost
■ CAPEX
■ Field Failure Rate (% cars to recall)
 THE CUSTOMER VALUE CHALLENGE

SIZE OF A FACILITY

In MEGA, each competing company runs 4 facilities, each facility devoted

to manufacturing only one of the 4 product ranges produced by the
company (Low Cost, Family, Eco-Friendly and Image).

Investment in plant capacity is very critical for a “heavy” industry like car
manufacturing and has a strong impact on liquidity. Finding the right
balance between customer demand for new cars and capacity to deliver
is another critical success factor.

The initial capacity of the Low Cost facility is identical in all companies. The
same is true for the Family, Eco-Friendly and Image factories. The capacity
of the factory equals the investment made in the facility divided by the
Capex per Unit. By changing car specifications, the Engineering
department can modify the Capex/unit, but the change will be effective
only the next period. This capacity is depleted in each period by a fixed
rate of depreciation, different for each facility.

■ Maintaining a facility at its initial capacity requires an investment in

each period equal to the amount of depreciation, to compensate
for the reduced value resulting from this depreciation (physical
deterioration of the facility).

■ Should a company wish to decrease the capacity of any of its

facilities, it can only be done by depreciation per period, with no
investment whatsoever.

■ To increase the capacity of any of its facilities, the company must

make a facility investment that covers both the depreciation of the
existing facility, and the expected capacity increase. To obtain the
capacity investment needed, you must multiply the Capex per Unit
by the number of additional new units you intend to produce. The
investment needed to increase the facility capacity varies
according to the type of car and depends on the decisions taken by
the engineering department. The increased capacity will not be
available until the following period.
 THE CUSTOMER VALUE CHALLENGE

CAUTION
Maximum increase in capacity depends on what you can afford BUT
decrease of capacity is only by depreciation per period.

MANUFACTURING COST

The manufacturing cost of a car covers the fixed and variable costs,
different for each type of car.
The following factors impact manufacturing costs:
■ Increasing capacity and using it fully will have a positive impact on
manufacturing cost, as production overhead does not rise in
proportion to direct costs and can therefore be shared by a greater
number of units: it is called “economy of scale”.
■ The costs of labor and raw materials, expressed historically by the
Production Cost Index published each period, will impact
manufacturing costs.
■ Operating facilities at less than full capacity.
■ Engineering decisions will have considerable impact on
manufacturing cost.
■ Production lines must be adapted to correspond to Design,
Performance, Consumption, Comfort, Size, Robustness and
Technology specifications.
■ The number of models decided upon.
■ The “Novelty / New Parts”.
■ The improvement in HR & quality.
■ Manufacturing costs tend to decrease because of improved
productivity acquired through experience (cumulative volume of
cars manufactured in one plant).
 THE CUSTOMER VALUE CHALLENGE

PRODUCTION BUDGET
The number of cars produced in any of a company’s 4 facilities is decided
by each team each period and is obviously limited by the production
capacity. Therefore, when it has been decided to produce a given quantity
of cars, the required budget is forecasted based on the available historic
cost data for that type of car, the projection of the Production Cost Index,
and the effect of engineering decisions.

An estimation of the next period’s capacity, cost and production budget

is given at each period. These estimates are impacted by changes decided
by the engineering department.

NON-USE OF A FACILITY

Companies may decide not to utilize a facility in any period, if they so wish.

However, an extraordinary charge called ‘Non-operating Results’ will be

made against profit for that period to cover for the fixed cost of that
facility. Such extraordinary charge will be repeated in future periods each
time companies decide not to utilize the facility.
 THE CUSTOMER VALUE CHALLENGE

5 EMPLOYEE MORALE – ‘HR & QUALITY’ PROGRAM

EMPLOYEE MORALE

A high Employee morale is a critical success factor. The main factors

impacting morale are the level of security, confidence and pride:

■ Security – The discontinuity of employment by decreasing budget

will have a high negative impact on employee morale.

■ Confidence – Investment in HR & Quality will have a positive impact

on employee morale as it helps to provide the education and the
training necessary for the required level of skills required from
employees to do their present and future jobs as they advance.
Quality provides also employees with the right tools and process to
do a good job. All signals that the company trusts its employees and
therefore invest in them to make them able to take appropriate
responsibilities have a positive impact on employee morale.

■ Pride – The performance of the company and its ability to develop

better products, at lower costs, to achieve better market share and
better profit will develop pride of employees to contribute to the
success of their company. This will again impact positively the
employee morale.

An employee morale index is published with the results of each

decision. This index will vary between 40% and 90%. Below 50%, you
should be careful to maintain some full employment policies to avoid a
very low motivation, and a very low efficiency of the people working for
your company.
 THE CUSTOMER VALUE CHALLENGE

HR & QUALITY PROGRAM

When you take over the management of your MEGA Company, you will see
that the outgoing management team has already put in place an HR &
QUALITY PROGRAM.

This program has been started to improve the company's present poor
level of competitiveness by improving the key following functions:
marketing, engineering and production. A successful HR & Quality
Program will improve the level of customer satisfaction and of employee
morale and therefore the company market share, revenue growth and
financial return.

Investment in a quality program has also a direct impact on the two

following aspects:

■ Field Failure Rate – Products are delivered to the customer and

revenue is collected, but the companies are forced to spend large
sums on warranty coverage (Cost of Non-Quality), i.e. equal to one
third of the collected revenue for this unsatisfactory product.
Because these failures occur after product delivery, the resulting
customer dissatisfaction will only impact market share in later
periods.

■ Downtime – Lack of quality prevents the full use (100%) of the

available production capacity, increasing the assets needed to
produce and deliver the ordered products.

CAUTION
It takes one period for the investment made in HR & quality to have an
impact on the company’s processes.
 THE CUSTOMER VALUE CHALLENGE

6 THE FINANCE AND FUNDING STRUCTURE

■ Liquidity Concepts
■ Loans
■ Share Price and Dividends
■ Liquidity Constraints

LIQUIDITY CONCEPTS
Simplifications have been made in MEGA to compress the actual time scale
of a real business situation into one that can be handled on an accelerated
time scale. One of these is that the funding requirements for each decision
period must be financed from cash in hand (initial cash). This is admittedly
unrealistic, and results in a much larger ratio of cash to total assets than
would normally be the case. However, these simplifications strengthen the
learning process resulting from the liquidity constraint that would
otherwise be masked by the complexity of “Accounts Payable” and
“Accounts Receivable”.

LOANS

The corporation can finance itself by taking loans on the financial market.
 THE CUSTOMER VALUE CHALLENGE

A loan may be taken in each period, but it will be limited to 5 times the
previous N.A.T., or $2000, whichever is the greater.

The loan may be paid back at any time from the cash flow of the operating
period in which it is decided to repay all or part of the loan. There is no
obligation to pay back the loan.

An interest rate will be automatically deducted from cash generated

during the current operating period. The interest rate is a function of the
leverage (Total Loans/Shareholders’ Equity):

■ Below 40% 2%
■ From 40% to <60% 4%
■ From 60% to <80% 6%
■ From 80% to 100% 8%

When a loan is taken, the cash is only available in the following period.
Nevertheless, interest is charged in the period the loan is taken - this
covers the cost of issuing the loan.

Total loan must not exceed shareholders' equity, i.e. capital plus
accumulated retained earnings.

SHARE PRICE AND DIVIDENDS

The capital stock of the company is made up of 1000 shares issued, at a face
value of $48 per share. The share price of each company will change during
the exercise. The changes in price will be influenced by the company's
performance in terms of:

■ The shareholders' equity, i.e. capital plus accumulated retained

earnings.
■ The return on equity, i.e. profit per share.
■ The revenue growth.
■ Dividend payments.

No dividend can be paid if accumulated retained earnings are negative.

 THE CUSTOMER VALUE CHALLENGE

LIQUIDITY CONSTRAINTS

INITIAL CASH AVAILABLE

At the beginning of each period, MEGA defines the cash available as the
cash at the end of the previous period. This is the amount shown at the
end of the cash flow statement as “Current Cash”.
Remember – Loans are not available for use during the period in which
they are taken.
The total sum of the following must not exceed the initial cash available:
■ total marketing expense
■ total production budget
■ total engineering expense
■ total facility investment
■ HR & Quality investment
■ Shareholders' dividend (if desired)
■ And repayment of Loans

CAUTION
If a team were to try to spend more than it has in initial cash, the system
will automatically reduce its Facility Investment and if necessary its HR &
Quality spending and Production Budget in this order.
The following expenses are paid out of operating cash:
■ Interest payments
■ Taxes (corporate tax rate 50%)
■ Inventory charges

They will be automatically deducted from cash generated during the

current operating period. They are not to be deducted from the cash
available at the start of the period.
 THE CUSTOMER VALUE CHALLENGE

7 ECONOMIC FORECASTS

■ Business Index
■ Production Cost Index
■ WW Gas Price Index
■ Merger Rumors
■ Industry Growth Rates – Region 1

BUSINESS INDEX

According to many economic experts, the economic environment looks

quite healthy in the short term, with higher growth expected in Region 2
and slightly lower growth in Region 1. However, reliable sources forecast a
change in the periods ahead with the probability of a downturn that could
mean difficulties in the four business lines.

The Financial Times correspondent believes such a downturn could

threaten companies that enter the recession with an unsound financial
structure. The FT said that those who failed to optimize their return on
assets and, most importantly, had not wisely evaluated their investment
decisions during the “good times” at the start of the year, might have
difficulties handling a recession. Nevertheless, economists are optimistic
that the length of the recession will be short.

Please remember that if the index is the same for 2 consecutive periods,
it means that there was no increase or decrease between the 2 periods.

PRODUCTION COST INDEX

The Financial Times reported today that the new Production Cost Index
that they are about to publish for the MEGA industry will normally follow
any increase in the Business Index. There will however be the usual time
lag. Such an increase will of course have implications of increased cost.

Should the economic environment suffer any setback, it is felt that costs
will do little more than level off at the ceiling reached when the industry
entered the recession.
 THE CUSTOMER VALUE CHALLENGE

WORLDWIDE GAS PRICE INDEX

The WW Gas Price Index illustrates the evolution of gas price during the
simulation. Economists predict a steady increase in gas price during the
coming periods. Recessions may result in a decrease in the consumption
of gas, with a time lag, resulting in a decrease of gas price. The gas price
will impact the customer sensitivity to consumption.

MERGER RUMORS

Currently, your company is operating in Region 1, but many rumors

circulate about a merger with a company operating in Region 2. This
company operates only on the Low Cost and Family markets locally, at the
moment.

The more forward-thinking companies know that there are tremendous

global optimization opportunities available when merging with a
company operating in another part of the world.

All eyes are now on the press, and observers are optimistic that the current
talks could reach an agreement in the coming years.

INDUSTRY GROWTH RATES – REGION 1

Economic forecasts for the car lines may be summarized as follows:

■ The Low-Cost car will probably record an increase of 10% per period.
■ The demand for the Family car, which is at the end of its life cycle,
could face a decrease of 5% per period.
■ The Eco-Friendly car is at the beginning of its life cycle, and sales
seem to be increasing at a normal rate of 15% per period.
■ The Image car, even though mature, is growing at a rate of 5% per
period.
Analysts say that their forecasts do not include any change in the
Economic situation. The activity of all the competing teams in terms of
pricing, marketing and engineering may also modify their forecasts.