Pixel – Company Performance, Essay Example

Pixel Performance and Assessment

Throughout the Glo-Bus simulation, Pixel was consistently ranked as one of the top companies in the industry. Success was directly linked to the development, implementation, and adjustment of corporate strategies. This report analyzes Pixel’s overall performance and evaluates the strengths and weaknesses of the strategies created. The paper also includes an assessment of Glo-Bus and recommendations for the future.

Company Performance

Pixel has been able to exceed investor expectations in year seven and beyond. The best in the industry score for year seven was assessed at fifty-five. In combining these two score the overall score for the B Pixel Company was fifty-eight. See Table 1-3 for Year 7-12 results.

The annual net sales revenues in year thirteen were $206,692 and the operating profit was $68,994 delivering the highest profit margin in the industry. The net sales revenue in year 7 was $187,986, which increased in year thirteen by 7 percent. The operating profit in year 7 was $12,932, increased by more than 300 percent in year thirteen. The earnings per share in year thirteen were 6.46 while the same figure in year 7 was 0.79, providing an 800% increase from the EPS in year seven. The return on equity (ROE) in year thirteen demonstrated a three hundred percent increase over year seven. The stock price demonstrated a five hundred percent increase in year thirteen over the stock price in year seven. The annual credit rating was B- in year 7, increased to A+ in year thirteen. The image rating score of the company decreased by 35 percent, from 67 to 43 in year thirteen, and this is possibly because of the lack of corporate social responsibility investments and product feature reductions. Notwithstanding these significant improvements, Pixel had not been awarded the Bull’s EyeAward. The company did manage to attain the Leap Frog award and the Gold Star award for corporate citizenship during year twelve.

Trends and Evaluations

The graphs features in appendix four and five show the differences between anticipated and real variances of the market, revealing the level of market volatility. The year eight industry shift, shown on appendix four for entry-level pricing was predicted by the analysis. The blue line demonstrates the average which has been manifest by Pixel. The green line demonstrates the averages of all of the companies in the Glo-Bus statistical review. The vertical red bars demonstrate the variances between the performances of Pixel from year six to year thirteen.

Strategic Vision

Pixel will become the leader in the camera industry by developing, implementing, and adapting decision-making strategies. The company will focus on monitoring the market, customer demand, research and development (R&D), and pricing of competitors in order to maintain or gain competitive advantages. By sustaining the current credit and image rating while increasing EPS, ROE, and stock price, Pixel will remain in a strong market position. Company strategies also include continuing to diminish production expenses, enhancing the marketing efforts, and applying differentiation to the diverse competitive conditions of the market.

Finance Strategy

Pixel’s strategies have evolved from year seven to the present and are structured for long-term growth and sustainability. Pixel’s present strategy has proven to be successful by the 800% increase in EPS over the past six years. The company also anticipates a 90% increase in EPS for year fourteen in comparison to year thirteen, and the ROE for year fourteen will increase by 50% compared to the previous year.

The one-year increase in the stock price for year fourteen is expected to increase by over 80%. Pixel anticipates having an interest expense of $1,000. Net revenues expected from entry-level and multi-featured cameras are $98,000,000 and $59,185,000. The anticipated total revenues are $157,985,000. The cost of the units to be sent to the retailers will total to $83,110,000. The delivery costs for the units will be $10,984,000. The marketing costs are anticipated to total $18,270,000.

The administrative expenses for year fourteen are expected to be $8,559,000. The total operating profits for all of the regions are anticipated at $37,063,000 with the following breakdown by region: North America $7,893,000; Europe-Africa region $13,170,000; Asia-Pacific $8,325,000; and Latin American $7,675,000. The pretax profits are expected to be $36,063,000. The income taxes to be paid on the revenues are anticipated at $10,819,000. The expected net profits to be realized are $25,244,000.

The financial strategy of the company would need revision, as in year fourteen, it is likely that earnings per share and return on equity are likely to decline slightly. This might be an area that might make the company vulnerable to market changes and shifts, therefore, it is important to analyze the company’s performance plan and financial plans to adjust the figures and maintain not only stakeholder appreciation and credit rating. but operating profits as well.

Production Strategy for Entry-level Units

The co-managers of Pixel will continue the trends for entry-level cameras that have been established in year thirteen. The assembly expense was $49.50 per unit while the outsourced expense was $56.11 per unit. The total production was $50.07 per unit. The rate of warranty claims was 14.7%. In Year 13, shipments to all geographic markets are likely to increase, with North America’s market increasing by 11.5 percent. Even though the price of entry-level cameras has been reduced, revenues increased in Year 13 from year by 20 percent.

Production costs were still high, due to the labor costs associated with increasing the number PATs. Productivity was measured on the high end of the scale, while the number of installed workstations was average. Pixel will consider reducing the cost per PATs or increasing productivity to increase its competitiveness and allow a higher profit margin to be introduced in the products. This strategy will result in greater flexibility of pricing, and allow the management to respond to competitors’ price reduction.

Production Strategy for Multi-Featured Units

Total production costs for Pixel’s multi-featured units were extremely close to the lowest cost or were the lowest cost in the industry. The assembly expense was $114.69 per unit while the outsourced expense was $115.28 per unit. The total production expense was $114.74 per unit. The rate of warranty claims was 16.2%. The wages for the employees was above average at $31,175.00, which created another competitive advantage for Pixel by increasing employee retention and attracting talent.

Pixel’s operating profits in year 13 were above average for the multi-featured units and the highest for the entry-level units. Revenues rose by close to four percent from year 12 to year 13. The cost of company-assembled units for multi-featured cameras was the lowest in the industry; however, labor costs were still high. The company could then modify the strategy to decrease the cost of labor in the total cost of production.

Performance Targets for Upcoming Years

If the simulation continued further and Pixel maintained their strategies with minor adjustments as necessary, the following performance targets are expected. EPS would increase to seven dollars; ROE would remain in the 25% range; and stock price would reach a company all-time high of $120 per share. With no long-term debt, Pixel will consistently maintain their A+ credit rating. As the image rating is not a company focus, it will remain below investor expectation and be evaluated at 49. Year after year, Pixel would continuously exceed expectations with positive changes in net revenues and net profit.

Closest Competitor

Pixel management identified EZ Money as their closest competitor from the beginning of the simulation. After every decision year, it was EZ Money that continuously ranked the closest and slightly higher than Pixel. Their decisions changed the industry and forced companies to lower camera prices in order to remain competitive. Responding to competitors’ decision was one of the main strengths of Pixel that allowed the company to maintain its overall competitiveness. Pixel had to react to EZ Money’s decisions and adjust their strategies so that they could continue to be ranked among the top in the industry.

Winning Out Over the Competition

Pixel is in right position to beat out the competition in the long run. First, they have the most cash-on-hand in the industry (91 million versus their closest competitor at 18 million) and no long-term debt. This has allowed them to operate without having to borrow money in years 13-15 and will continue to be the case in years to come. EZ Money has largely increased their number of PATs and has significantly added to their production costs to where they would only be sustainable with a large market share. As companies in the industry make gains in the market, EZ Money’s share will decrease. Pixel will take advantage of their situation by continuing to lower camera prices and increase marketing to gain market share while simultaneously reducing production costs. Pixel will become the highest ranked company in the industry by maintaining the outlined strategy.

Decision Making Process

The co-managers of Pixel developed a process for making decisions that proved to be successful. When the company was first formed, the managers discussed at length the various strategies to which they could implement. Each strategy was given careful consideration and entered into the simulation to see how the year’s outcomes may change. The co-managers would analyze the effects of the potential decisions and try to determine the inter-relationships with decisions to outcomes. The co-managers came to a consensus on the strategies to implement and final decisions submitted were based on those intended strategies and will review the results to make adjustments on a weekly, monthly, quarterly and yearly meetings.

Lessons Learned

The most vital lessons learned during the simulation were the necessity of clear, on-going communication among team members and that collaboration was essential in making decisions. Every co-manager added a different perspective to the decisions and results, and it was important to listen and discuss each viewpoint. If the processes were applied in the real world, company environments would incorporate open communication, collaboration among team members, and have a positive impact on the culture.

The simulation also taught team members that understanding the inter-relationships of departments is crucial in running a company. All decisions had an impact on the financials. This taught team members that the success of a company-wide strategy is contingent upon departments working together. Leaders should understand how decisions in each department affect others and then make adjustments to improve upon overall company outcomes.

What the Team Would Do Differently

Team Pixel worked well together in making company decisions. However, the team could make improvements in completing the three-year strategic plans in the simulation. The strategic plans were not discussed or worked on as a team, and it lead to low projections and poor results. If done differently, the co-managers of Pixel would have made time to collaboratively work on the strategic plans in more depth to fully understand the purpose and scoring, and have everyone involved in completing the entries.

Dealing with Conflict

There was no conflict to report because of the open communication and collaborative nature of team. Members were flexible and willing to try new ideas. Co-managers did not always agree but further explanations and discussion lead to group consensus.

Feedback on Simulation Experience

The co-managers of Pixel enjoyed Glo-Bus for the challenging, competitive experience it created. Mirroring the real world, the team believed that the biggest challenge in the simulation was anticipating competitors’ decisions and adjusting company strategies based on projections. The team underestimated the time commitment required for discussion and decision-making and appreciated the in-classroom opportunities to analyze results and create a strategy based on the company’s upcoming decisions. Overall, team members thought Glo-Bus was a unique opportunity to apply what they had learned throughout their MBA curriculum, and they felt more confident implementing and modifying strategies over the course of the simulation.

Recommendations for Glo-Bus

Glo-Bus was the highlight of the course on decision-making and strategic management. The textbook and additional books were insightful readings, but they were not connected to the simulation. One recommendation would be to correlate the books to possible strategies and decisions in Glo-Bus along with their real world applications. Another recommendation would be to incorporate the three-year strategic plan in the simulation with the initial strategy paper. That would force teams to identify the strategies that are working or the modified strategies the companies plan to implement and then make projections based on those impending decisions.

Conclusion

Glo-Bus revealed how important it is for companies to constantly monitor the business environment – market demand, consumer expectations, investor expectations, and stakeholder preferences. The simulation allowed the co-managers of Pixel to understand the competitiveness of the industry and analyze outcomes of short-term and long-term strategies. It was also made clear that adjusting strategies was necessary to respond to market trend changes and actions of competitors. Anticipating competitors’ strategies was just as important as building the company’s own business plan. Maintaining competitive advantages in a changing market is a complex task that needs a strategic systematic approach with constant monitoring.