MGT 460 Neil Tocher

Meredith Ellis Lynette Wharton David Westacott Roxanne Christy

Chester Group: Capstone Strategic Plan

I. The Environment The business environment in the simulation is unique because everybody starts at the same place. Every team or company has a product in each of the five market segments with the same market share. For the purposes of this simulation, Chester has chosen a business-level strategy as a differentiator with a high-tech focus. Our team has chosen this strategy to take advantage of the high tech markets and the customers who desire higher performing products. In the rehearsal simulation, our team focused on products in the traditional, high-end, and performance segments. We believe the other companies competing in the simulation are going to choose varying strategies so it would be best to choose one that we feel fairly comfortable with. A differentiation strategy with a high-tech focus could be a competitive advantage in a market where other companies are utilizing a low-cost or low-end product focus. Likewise, it could be a liability in a market where other companies are trying a similar focus. From week to week, we will be able to view the results of the other groups. By critically examining their results, we should be able to relatively determine what business strategies these teams are trying to capitalize on. If it becomes clear that another company is directly competing with us on a hightech differentiation strategy, we can adjust the prices, sizes, and mean times between failures of our products accordingly to gain more of the market share. The strategy we have chosen should enable our company to grow quickly and realize more upfront returns on our investments. Low-cost strategies take a considerable amount of time to realize real returns on investments. As a high-tech differentiator, certain customer segments will be positively influenced by a higher price. Perceived value certainly has influence over buying decisions of customers who only want the latest and greatest products available. While it is important to stay competitive with similar companies, it is less important to minimize profit margins on high-end and performance products. We will maintain competitive price, size, and reliability measures with our competitors, and gain the most market share we can within the high-tech, size, and performance segments. II. Business-Level Strategy & Pricing Strategy As previously stated, Chesters business-level strategy will be a product differentiator with hightech focus. Therefore the primary products our company will be focusing on are Cid, Coat, and Cure which compete in the high-end, performance, and size market segments respectively. Our differentiation will be based on providing customers with cutting edge technology that is perceived by our customers as being valuable.

MGT 460 Neil Tocher

Meredith Ellis Lynette Wharton David Westacott Roxanne Christy

Since our primary focus will be on the high-end, performance, and size segments, minimal focus will be given to the traditional and low-end market segments. Monitoring the environment for new entrants and competing products will be essential as we contend for market share. By offering high quality products with a broad base of loyal customers, we hope to create high entry barriers to new entrants. Monitoring and responding to the price of competing products will diminish the threat of substitute products. We expect our associated costs to be higher as we are selling high-end products which cost more to manufacture. In response to the high production costs, our customers will be expected to pay premium prices for our products. In exchange for the premium price, our main objective will be to meet the buying criteria of our customers and satisfy their expectations which will result in customer loyalty. Based on these assumptions, we anticipate our growth in sales to be high. II. Functional Strategies The simulation consists of four functional activities: research and development, marketing, production, and finance. Research & Development (R&D): As a high-tech differentiator, Chester expects to incur high R&D costs for products in the performance, high end, and size segments. By introducing new product lines and repositioning existing products, we hope to maintain a competitive advantage against other firms in the industry and support our overall business-level strategy. Marketing: Chester plans to invest aggressively in the promotion and sales of our products. This will enable us to create maximum awareness among customers and high levels of accessibility to our products. Production: Since our products will be continually repositioned to remain competitive as a highend differentiator, our company will not be investing heavily in automation or production capacity. A minimum amount of automation will allow our firm to quickly respond to customer expectations enabling our firm to remain competitive against other products. As new products are added, capacity will be purchased in advance to ensure the product will be manufactured in a timely manner. In order to meet demand, second shifts will be scheduled as necessary to ensure an adequate supply of our products and prevent stock outs.

MGT 460 Neil Tocher

Meredith Ellis Lynette Wharton David Westacott Roxanne Christy

Finance: In order to meet the financial obligations of the other functional activities, Chester will issue stock and bonds as necessary to maintain the firms financial stability. During the initial years (rounds), Chesters financial focus will be on repositioning and marketing our products. III.Information System Chester will routinely monitor the performance measures from each round, but specifically examine the ending results of Return on Assets, Average Asset Turnover, and Average Return on Equity. Since these performance measures have been given the most weight for our businesslevel strategy, we will frequently review them to determine if changes are needed in our planning. We will also be reviewing the Analyst Report, Balanced Scorecard, and Round Analysis reports that are available on the CapSim website to provide additional insight about our companys performance and determine our industry standing. In addition, our company will also be monitoring the Awareness and Customer Survey results at the end of each year so that we can determine if more resources are needed in the advertising and promotions areas. Chester will try to limit long-term and current debt by attempting to operate the next year on available cash resources. Chester will also be monitoring the growth rate of each focus product. By doing so, this will help us determine if our resources are being placed in the appropriate areas. We will also closely monitor capacity requirements to ensure we are producing and maintaining appropriate levels of inventory. IV. Change Philosophy To maintain our business-level strategy, adjustments to the plan will likely be in order as time progresses. We will need to monitor sales on our products, especially those in the high-end, size, and performance markets. It will also be important to monitor inventory levels to ensure that we are not stocking out on any products or overproducing inventory. Capacity is another measure that needs to be closely monitored. During the practice simulation rounds, we discontinued two of our products but retained too much capacity for producing these products. Thus, we must be careful not to make these kinds of errors. Customer buying criteria will be continually monitored as well to ensure that our focus products are meeting the requirements of customers. This will involve ensuring that the perceived age, awareness and accessibility of our high-end, size, and performance products are all within acceptable parameters. We will perform analyses to determine if our products are positioned where we would want them to be on the size versus performance matrix. In addition, if any of our non-focus products (such as those in the low-end

MGT 460 Neil Tocher

Meredith Ellis Lynette Wharton David Westacott Roxanne Christy

segment) cease to be profitable, we may consider discontinuing them if the costs to reposition them are considerable. If our plan to focus on the high-end, size, and performance markets while maintaining production of products in the remaining market segments proves to not be working with our business strategy, we may need to rework our business approach. For example, if several other teams are employing a high-end focus differentiation strategy, it will be more difficult for us to compete in this market segment. Thus, it may be wise to adopt a new strategy such as an overall low cost focus. Of course if this is the case we will need to change our practices with regard to improvements to the product and be careful scheduling second shifts or accruing additional production costs. A change to a cost leader position would require that our costs are managed very attentively. We would know if such a change is needed if competitors are earning considerably more market share in the product segments than we initially focused on.

MGT 460 Neil Tocher

Meredith Ellis Lynette Wharton David Westacott Roxanne Christy

V. Proposed Performance Measures & Weights Minimum Allowable 0% 0% 0% 0% 0% 0% 0% 0% Maximum Allowable 50% 50% 50% 50% 50% 50% 50% 50%

Performance Measure 1. Cumulative Profit 2. Average Market Share 3. Average ROS 4. Average Asset Turnover 5. Average ROA 6. Average ROE 7. Ending Stock Price 8. Ending Market Capitalization

Our Choices .10 .10 .05 .20 .15 .20 .15 .05 100%