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INITIAL STRATEGY
BROAD DIFFERENTIATION
Maintain strong presence in every market segment Distinguish products with excellent design, high awareness, and easy accessibility Keep products fresh and exciting by offering improved size and performance Keep prices competitive Expand capacity as needed and monitor inventory levels
DRIFT IN STRATEGY
Create new products for high end market segment Spend less on promo/sales budgets Forecast sales using market segment growth rate Set production to avoid second shift/overtime Finance capacity for new products with loans
High
Round 0 Eat @ 16%, Ebb @ 20%, Echo@ 17%, Edge@ 20%, and Egg@ 19% Round 3 Emu@ 31% Round 7 Emu@ 24%
Low Low
Our Ability to Develop Superior Products
High
High
Round 0 Acre@ 20% Round 1 Coat@ 27% Round 2 - Acre@ 28% Round 6 Cedar@ 26%
Round 2 Cid@ 28% Round 5 Bevis@ 26% Round 7 Buzzcu@ 28% Round 8 Bevis@ 27%
Low Low
No Results competitors performed well in the High-end, Performance, & Size market segment
No Results competitors performed well in the High-end, Performance, & Size market segment
High
5 market segments 2 make up largest percentage of total industry Performance correlated to what percentage of these we captured Focus should have been on 2 pivotal segments Products should have been revised for these segments New products should have been created to appeal to these segments Production should have been carefully analyzed for these segments Promo/sales budgets should have been spent primarily on these segments
Percentage of Erie Sales in Traditional and Low Segments Compared to Total Market Share
MH1
Sales forecasts were based on total industry growth rate instead of actual sales in each segment
Led to overly optimistic production forecasts excess inventory carried from year to year without changing production levels Reaction was to cut forecasts and production drastically Initial production cuts were through sale of just acquired manufacturing capacity and automation Later direct cuts to production led to stock outs in almost every product, which lost market share
Slide 8 MH1 Need to explain the implications of the sales forecast and the production forecast variations (two separate bullets)
Hackett, Meredith , 12/15/2010
PERCEPTUAL MAP
Segments have sweet spots that are not all in the center Products overlapped due to R&D specs and pricing Market share was split, products cannibalized sales of other products Ideal new product placement is high end and then allow drift into traditional and low end
Round 6
PLAN STRATEGICALLY
Round 3 was Eries most successful round After Round 3, decisions were made primarily as reactions to competitors R&D specs, prices and promo/sales budgets were adjusted to match competitors Not a good long term strategy Our unified strategy, built on market and competitor analysis, was essentially abandoned, and playing reactively led to declining results
MH2
Promo/sales budgets, pricing, and production mimicked competitors Production increased and decreased in reaction to results and competitors Failed to recognize signs and plan for recession which led to reactionary actions
FUTURE OUTLOOK
Going forward, Erie management has created a unified strategy for R&D, production, marketing, and finance R&D
Existing products will be revised to appeal to target segments and capture greatest market share Products will be allowed to drift from high end to traditional to low end New products will be developed to appeal to two main segments (traditional/low end) to capture most sales Make proactive rather than reactive decisions
FUTURE OUTLOOK
MARKETING
Conduct cost benefit analysis of marketing expenditures on the introduction or repositioning of every product Work closely with R&D and production to ensure that all new products have a market and can be produced at a profit Create a marketing budget Make proactive rather than reactive decisions
FUTURE OUTLOOK
PRODUCTION
Forecasts will be developed based on actual product sales Inventory levels will be maintained to avoid carrying costs and stock outs Production capacity will be purchased for new products Conduct cost benefit analysis of every production decision and expenditure Work closely with R&D and marketing to ensure that all new products have a market and can be produced at a profit Make proactive rather than reactive decisions
FUTURE OUTLOOK
FINANCE
Require cost estimates, budgets, and detailed cost benefit analysis of all decisions from all departments and verify figures/actively challenge soundness of the numbers Participate in all decisions which require funding or impact finance Pursue a more conservative financing strategy Work with each department to learn their budgeting needs and determine what can and cant be met Make proactive rather than reactive decisions Finance needs to lead the company not follow it
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