Mission Statement
Our company is proud to have long been recognized as a leader in the dinnerware industry and offers many different kinds of products. Quality and great design are synonymous with our brand. The nation’s finest dinnerware designers, working with the best factories, and using the most advanced technology in the industry, create products that are not only beautiful and well-made, but suitably priced for everyone’s lifestyle. Our Mission is to supply people with a quality product that makes it more convenient to eat enjoyable and healthy. Our company, like many other companies, is the result of typical American success story and has plans to continue the growth of its retail division throughout North America.
Stakeholder Identification
There are many stakeholders in our company. They are customers, stockholders, debt holders, suppliers, government, and society.
Customers – We make sure that they receive quality services from our firm.
Stockholders – They are not necessary the people who buy our products, but who are interested in our potential performances for the future. We make sure to increase equity values for the firm.
Debt holders – We make sure to pay back loans, bonds, and any debt on time.
Suppliers – The Company guaranteed the payment for them.
Government – They ensures the legal business practice.
Society – The interest from the firm will not harm the society. For instances, protect our environment by disposing the waste into the right place.
We believe that these stakeholders have a great impact on our strategy formulation. Pricing our products is effected by the suppliers in one situation. It depends on the price of the materials that suppliers offer to our company
External Analysis
Porter’s 5 Forces determines the competitive intensity and therefore attractiveness of an industry, in this case is the dinnerware industry.
The Threat of the Entry of New Competitors – HIGH
Even though we have seven main competitors in our industry, it is still easy for new entrants to enter. They have scale merit because under a certain production range, as the production increases, the average cost decreases. Unless cell phone and airline industries, dinnerware industry has less restrictive government policies.
The Threat of Substitute Products – HIGH
If substitute products have low price and good quality, buyers switching cost is low, so that competition pressure of production is strong. In our case, there are many different types of materials that make up of the dishware, for example, china or plastic, but there is not really a direct substitute for it. This brings an opportunity for new entrants to entry to the market.
The Bargaining Power of Customers – HIGH
Buyers switching costs for dinnerware are low. Customers are willing to buy any dinnerware that has good quality and good price. It is lack of loyalty in this industry. Thus, new entrants will have more chances to enter into this market with a well-organized strategy.
The Bargaining Power of Suppliers – HIGH
Switching costs of suppliers are relatively low in dinnerware industry because there are many factories that provide clays and glazes. In addition, markets sell these materials at a reasonable price. Hence, new entrants don’t need to worry about the suppliers.
The Intensity of Competitive Rivalry – HIGH
A lot of competitions among companies are shown on its price, level of advertising expenses, product descriptions, economies of scales, after-sale services and quality of the products. The barriers to enter into the dinnerware industry are relatively low even there are many competitors.
All of the five forces rate high level of attractiveness. In conclusion of this analysis, we believe it is a very attractive business to stay in and enter.
Internal Analysis
As a leading company in dinnerware industry, we try our best to maintain our competitive advantages. In the first two quarters, our competitors lower the price, yet we still keep our price high that is because the costs are high. Product differentiation becomes our competitive advantages. We start to produce second products that might boost the net income and stock price. Our sales grow very smoothly since then. At the same time, we invest a lot of money on quality control and engineering because we know good products will attract more costumers and increase the market shares which will benefits the shareholders. As a potential company that many investors might invest in us, we want to keep our price steadily. We think in a real business, it is not good to always change the prices by substantial amounts. Later on, we decided setting a reasonably price on our products when comparing with our competitors. For some quarters, we slightly adjust the prices based the changing cost of the labor hours, raw materials and the industry. There are some barriers to growing the distinctive competencies of our company. For the last quarter of 2006, we want to increase earnings and capture more market shares by lowering our prices to product one. It doesn’t work out the way we planned. We assume that is because our country has a recession in the late 2006, or as President Bush has said, “an economy slow down period.” This affects the sales volume.
Performance Assessment
To run a business, it consists of a lot of assessments on its performance. Just to mention some important ones:
Debt to equity ratio and stock price: Debt to equity ratio is a measure of a company’s financial leverage. It is important to realize that if the ratio is close to or greater than 1. That means the majority of assets are financed through debt. If it is less than 1 or close to 0, assts are primarily financed through equity. In the second quarter of 2005, our ratio is only 0.3. To increase that ratio to 1, we borrow a lot of long-term bonds since then. Even though we still have some cashes on hands, we use the borrowed money to buy back shares for two reasons. First, our stock price $3.68 is low at that time. We know that if we don’t buy back now, our stock price will increase in the future, which we would have to pay more for it. Second, buying back shares increases our stock price a little. By the third quarter of 2005, our stock price rises to $3.71/share. By the 4th quarter of 2006, our stock price rises to $5.33/share and debt to equity ratio is improving to 0.72.
Unit Manufacturing Costs: In the second quarter of 2005, the unit manufacturing costs is $39.314 for product. This is relatively high. To lower these costs, we continue expanding our factories almost every quarter thereafter. In addition, we also invest on R&D and engineering. Few quarters later, our unit manufacturing costs has lowered. By 4th quarter of 2006, the unit manufacturing costs for product one in area 1 is $26.398.
Commissions and Salaries: We never change the base salary throughout these two years. $3,000 is very reasonable. However, we lower the sales’ commissions. Commissions are based on sales volumes. The more products we sell, the more commissions we have to pay. We spend so much money on it in the first few quarters. As of the 1st quarter, we pay a commission of 6% for P1 A1, 6.5% for P1 A2, and 7% for P2 A1. The reason to pay these high commissions is because we just produce new products and sell our products in a new area. We want to attract new sales representatives and retained those old reps. To reduce costs, we lower it to 5% for product 1 in both area 1 and 2, 4% to product 2 in both area 1 and 2. These save us a lot of costs.
Implementation of Strategic Change
If simulation continues, we would target on the premiums, continues with the high prices strategy. One problem about our company is that we don’t have a very good credit rating. Credit rating closes to 1 is the best and 5 is the worst. However, our credit rating is in the middle, 2.5. We will have to increase the credit limitation to a higher level. Overall, it is very good business strategic practice for our class, our team and me. Thanks, all!!!
Our company is proud to have long been recognized as a leader in the dinnerware industry and offers many different kinds of products. Quality and great design are synonymous with our brand. The nation’s finest dinnerware designers, working with the best factories, and using the most advanced technology in the industry, create products that are not only beautiful and well-made, but suitably priced for everyone’s lifestyle. Our Mission is to supply people with a quality product that makes it more convenient to eat enjoyable and healthy. Our company, like many other companies, is the result of typical American success story and has plans to continue the growth of its retail division throughout North America.
Stakeholder Identification
There are many stakeholders in our company. They are customers, stockholders, debt holders, suppliers, government, and society.
Customers – We make sure that they receive quality services from our firm.
Stockholders – They are not necessary the people who buy our products, but who are interested in our potential performances for the future. We make sure to increase equity values for the firm.
Debt holders – We make sure to pay back loans, bonds, and any debt on time.
Suppliers – The Company guaranteed the payment for them.
Government – They ensures the legal business practice.
Society – The interest from the firm will not harm the society. For instances, protect our environment by disposing the waste into the right place.
We believe that these stakeholders have a great impact on our strategy formulation. Pricing our products is effected by the suppliers in one situation. It depends on the price of the materials that suppliers offer to our company
External Analysis
Porter’s 5 Forces determines the competitive intensity and therefore attractiveness of an industry, in this case is the dinnerware industry.
The Threat of the Entry of New Competitors – HIGH
Even though we have seven main competitors in our industry, it is still easy for new entrants to enter. They have scale merit because under a certain production range, as the production increases, the average cost decreases. Unless cell phone and airline industries, dinnerware industry has less restrictive government policies.
The Threat of Substitute Products – HIGH
If substitute products have low price and good quality, buyers switching cost is low, so that competition pressure of production is strong. In our case, there are many different types of materials that make up of the dishware, for example, china or plastic, but there is not really a direct substitute for it. This brings an opportunity for new entrants to entry to the market.
The Bargaining Power of Customers – HIGH
Buyers switching costs for dinnerware are low. Customers are willing to buy any dinnerware that has good quality and good price. It is lack of loyalty in this industry. Thus, new entrants will have more chances to enter into this market with a well-organized strategy.
The Bargaining Power of Suppliers – HIGH
Switching costs of suppliers are relatively low in dinnerware industry because there are many factories that provide clays and glazes. In addition, markets sell these materials at a reasonable price. Hence, new entrants don’t need to worry about the suppliers.
The Intensity of Competitive Rivalry – HIGH
A lot of competitions among companies are shown on its price, level of advertising expenses, product descriptions, economies of scales, after-sale services and quality of the products. The barriers to enter into the dinnerware industry are relatively low even there are many competitors.
All of the five forces rate high level of attractiveness. In conclusion of this analysis, we believe it is a very attractive business to stay in and enter.
Internal Analysis
As a leading company in dinnerware industry, we try our best to maintain our competitive advantages. In the first two quarters, our competitors lower the price, yet we still keep our price high that is because the costs are high. Product differentiation becomes our competitive advantages. We start to produce second products that might boost the net income and stock price. Our sales grow very smoothly since then. At the same time, we invest a lot of money on quality control and engineering because we know good products will attract more costumers and increase the market shares which will benefits the shareholders. As a potential company that many investors might invest in us, we want to keep our price steadily. We think in a real business, it is not good to always change the prices by substantial amounts. Later on, we decided setting a reasonably price on our products when comparing with our competitors. For some quarters, we slightly adjust the prices based the changing cost of the labor hours, raw materials and the industry. There are some barriers to growing the distinctive competencies of our company. For the last quarter of 2006, we want to increase earnings and capture more market shares by lowering our prices to product one. It doesn’t work out the way we planned. We assume that is because our country has a recession in the late 2006, or as President Bush has said, “an economy slow down period.” This affects the sales volume.
Performance Assessment
To run a business, it consists of a lot of assessments on its performance. Just to mention some important ones:
Debt to equity ratio and stock price: Debt to equity ratio is a measure of a company’s financial leverage. It is important to realize that if the ratio is close to or greater than 1. That means the majority of assets are financed through debt. If it is less than 1 or close to 0, assts are primarily financed through equity. In the second quarter of 2005, our ratio is only 0.3. To increase that ratio to 1, we borrow a lot of long-term bonds since then. Even though we still have some cashes on hands, we use the borrowed money to buy back shares for two reasons. First, our stock price $3.68 is low at that time. We know that if we don’t buy back now, our stock price will increase in the future, which we would have to pay more for it. Second, buying back shares increases our stock price a little. By the third quarter of 2005, our stock price rises to $3.71/share. By the 4th quarter of 2006, our stock price rises to $5.33/share and debt to equity ratio is improving to 0.72.
Unit Manufacturing Costs: In the second quarter of 2005, the unit manufacturing costs is $39.314 for product. This is relatively high. To lower these costs, we continue expanding our factories almost every quarter thereafter. In addition, we also invest on R&D and engineering. Few quarters later, our unit manufacturing costs has lowered. By 4th quarter of 2006, the unit manufacturing costs for product one in area 1 is $26.398.
Commissions and Salaries: We never change the base salary throughout these two years. $3,000 is very reasonable. However, we lower the sales’ commissions. Commissions are based on sales volumes. The more products we sell, the more commissions we have to pay. We spend so much money on it in the first few quarters. As of the 1st quarter, we pay a commission of 6% for P1 A1, 6.5% for P1 A2, and 7% for P2 A1. The reason to pay these high commissions is because we just produce new products and sell our products in a new area. We want to attract new sales representatives and retained those old reps. To reduce costs, we lower it to 5% for product 1 in both area 1 and 2, 4% to product 2 in both area 1 and 2. These save us a lot of costs.
Implementation of Strategic Change
If simulation continues, we would target on the premiums, continues with the high prices strategy. One problem about our company is that we don’t have a very good credit rating. Credit rating closes to 1 is the best and 5 is the worst. However, our credit rating is in the middle, 2.5. We will have to increase the credit limitation to a higher level. Overall, it is very good business strategic practice for our class, our team and me. Thanks, all!!!
