Promoted to President

1

• Promoted to President
• Year 4 2005

2

• Production Capacity Review
• What is a standard capacity unit (SCU)?
• Its a way of measuring capacity for different
  products made using the same machinery and staff.
• Example
• If a road bike takes 2 SCU to build, a mountain
  bike takes 1 SCU to build and a kids bikes takes
  0.5 SCU to build,
• Then if you have 20,000 SCU of production
  capacity, how many bikes can you build?

3

• Production Capacity Review (cont)
• If you have 20,000 SCU of production capacity
  then the first question is how much wastage do
  you have?
• If you have 20 wastage then you only have 0.85 x
  20,000 SCU 16000 SCU
• With 16000 SCU then you could produce
• 8,000 Road bikes, or 16,000 Mountain bikes or
  32,000 Kids bikes.
• Alternatively you could make some of each type of
  bike, e.g. 4000 Road Bikes (8000 SCU), 5000
  Mountain Bikes (5000 SCU) and 6000 Kids Bikes
  (3000 SCU)

4

• Production Capacity Targets
• What is a reasonable amount of wastage?
• In many manufacturing industries a target of 80
  production efficiency is considered to be very
  good. Achieving more than 90 efficiency is
  often more expensive than purchasing more
  capacity.
• How much idle time should we aim for?
• The ultimate target is 0 idle time. However in
  the simulation you should consider reducing
  capacity if your idle time is ever greater than
  10. The 10 leeway is to allow for a gradual
  growth in sales.

5

• Market Analysis

• Two new market segments are now available Road
  and Kids bikes.
• What stage is each segment at now in its product
  life cycle, e.g. growth or maturity?
• How will this change over the next two years
  (decisions)?

6

• Road Bike Segment

• Estimated size 6,000 units
• Price range of 1000 to 2500 with an RRP of
  1300
• Not particularly sensitive to advertising (0.20
  recommended for awareness) but highly sensitive
  to PR (0.6) and Quality (0.95)
• Make sure that you check which media channels to
  target with your PR expenditure

7

• Kids Bike Segment

• Estimated size 48,000 units
• Price range of 200 to 400 with an RRP of 260
• Highly sensitive to advertising (aim for 0.60)
  and distribution (0.50)
• Not particularly sensitive to PR (0.20) and
  prepared to accept lower quality materials (0.50)
• Make sure that you check your distribution
  decisions are targeting the right channels for
  this segment

8

• Mountain Bike Segment

• Estimated size 40,000 units
• Price range of 400 to 800 with an RRP of 550
• This segment is mature and you should be aiming
  to reduce costs.
• Check your advertising (0.50) and PR (0.20)
  results on the all product details report. You
  may want to consider reducing your promotion
  expenditure for your mountain bike(s).

9

• Written Assignment 2 New Presidents Memo
• Prepare a 1-2 page memorandum to the employees of
  your firm. (It should be typed, double spaced in
  a font of 10 or 11. One page is the minimum
  length acceptable two pages is the maximum.)
• Readiness for the Position Now that you have
  three years of experience under your belt, which
  functional areas (Marketing, Operations,
  Accounting, Information Technology) of the
  business were you the most confident in? Which
  areas were you the least confident in? How will
  this affect your performance as President?
• Lessons Learned Over the past three years, what
  have you learned about the coordination required
  among the functional areas? Has your firm
  experienced good cross-functional coordination,
  or not? How have decisions made in one area
  affected the other area(s)? As President, what
  policies will you initiate to ensure that your
  firm is successful as it grows to become a
  multi-product company?
• Reports After you have rolled over to 2005,
  print out the Industry Benchmark Report, the
  Decisions Report, and the Income Statement for
  your firm for 2004. Staple these and attach them
  to the back of your memo.

10
Youre now ready to take over the Presidents
role at your firm