DIGBY INDUSTRY 1

Member Names:
Akriti Jain
Ishpreet Virdi
Piyush Lakhmani
Pooja Ganatra
Function Managers

Marketing Production
Ishpreet Virdi Akriti Jain

Digby
Finance HR and TQM
Piyush Lakhmani Pooja Ganatra
Decision Making Process
Roles: Roles were assigned formally to take into account
ownership of the decisions taken, but decisions were taken
in consensus with all the members after discussions

Communication pattern: informal communication based

on discussions among members. Probable pros and cons
of each decision was anticipated before going further with
any decision

Dynamics differential : We did not have a good mix from

various backgrounds and therefore faced some challenges
as far as decisions related to Finance were concerned
Initial Strategy
We started as a cost leader with product lifecycle focus.
Minimum presence in specialty segments (Size & Performance)
Low R&D spending (very little repositioning & new product every 2-
3 years)
Invests in automation early in the products life-cycle
Spends moderately on promotion and sales

What went wrong ?

Stocked out in the three segments where we focused
Huge Loss , ROA -6.3%
Initial Strategy
Initial Focus Traditional , Low-end and High End segment ; due to
high contribution margins
Change in Strategy Round 3 onwards : Planned for superior R&D
and trade-offs
New Product Launch Round 3 (high end segment), Round 5 (Size
and High End)
Maintained presence in all segments
Segment Analysis
 Production Strategy

Investment in automation for traditional and Low end to reduce labor cost
Bought capacity for low end segment (500 units) looking at high demand and
growth rate
Sold capacity for DOT looking at sales pattern in the segment
Sold capacity for Dixie to compensate for two other products launched in same
segment
 Production Forecasts

(Customer Survey # of the

product / Total Customer
Survey # of the segment) *
(This year's total sale *
[1+(Segment's Growth Rate)]

Higher than expected price

reductions by competitors
led to high inventory in Round
3 and 6
Strategy RnD
Meet Customer Criteria as per the importance assigned to
each factor
Shift all current products to place within fine cut circles as
far as possible
Produce new products in High end and size segment to
gain market share
Unexpected Events
High Promo and sales budget spends by Andrews in initial
rounds
Emergency loan in Round 6
Higher Prices set by Baldwin for renewal of labor contract
 Promotion and Sales

Investments in the traditional segment for sales has been made to gain more
accessibility from Round 3 onwards after the specifications for the segment was
matched precisely to customer expectation
Investment in the low end segment has been consistent to maintain customer
awareness and accessibility. Initially Dell had not been able to match competitor
specifications, which was rectified Round 4 onwards and sales and promotion
budget was increased accordingly
 Promotion and Sales

High End segment area of focus for Digby. Initial investment in both promotion
and sales was high and maintained to reach ~ 90% accessibility and 100%
awareness
Performance segment not focused on due to low contribution margins. Initial
investments were low, but later increased to match competitor products
 Promotion and Sales

Size Segment Owing to low margins, this product was not focused on initially.
Round 2 saw a spike in production budget since there was inventory left over from
the previous round and had to sold.
HR & TQM
Round 4 Round 5 Round 5

Recruitment Spend $2500 $2500 $2500

Training Hours 10 10 10

Productivity Index 100% 100% 101%

TQM investments decreased production costs and increased separation

costs. (Separation cost increased to $1900 in Round 3 from 0 due to
TQM Investments)
Initial investments in TQM during Round 3 and 4 were diversified
Gradually focused on Reducing the Cycle time since the specifications
were lagging behind
 Effect of Product Launch in Various
Segment

In the Size segment, a product was launched in Round 5 which led to almost
10% increase in market share
Whereas in the high end segment, the product launch during Round 5 led to ~3%
decrease in market share
Decisions you would not make if you were
to run this business all over again

Invest more
on employee
training
More focus hours
on TQM

More focused
towards R&D
specifications
Division Of Work

Allocation of roles with respect to departments

Discussion of strategy before working on the roles

Taking decision based on previous results

Owning up the responsibility of the decisions made

Finance Strategy
Funding of automation through both long term and short
term capital
Prefer raising equity, as long term debt is approximately
60% of total liabilities and equity. And measures are
being taken to bring it down between 30-40%
Leverage is -20.7. And efforts are being made to improve
the same.
Conservative approach to cash flow management - avoid
emergency loans.
Raising current debt to fund immediate needs (working
capital).
In near term, plan to raise equity shares as much as
possible due to high debt-equity ratio.
Contribution and Profit Trends
50

40
37.3 37.4 38.2
34.3
31.2 32.5
30
25.5
20

10

0 -0.8
Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7
-6.2 -6.4 -6.2 -5.5
-7.3
-10
-13.2

-20
Contribution Margins (%) Profit Margins (%)
Emergency Loans
Emergency loan of $6,561,832 in Round 2 and an
emergency loan of $12,309,000 in Round 6.
The emergency loans in the two years were pertaining to
unexpected stock pile up.
Effective measures have been taken to avoid emergency
loans although the rounds
Risk & Mitigation
Risk Mitigation
Loss of sales due to Stay diversified in multiple
unexpected moves by segments of the industry
competition
Mounting losses restrict Launch of new products
investments in attractive as well as updating the
areas current portfolio of
products
Loss of competitive Continuous investment in
advantage in the mid term R&D, automation, HR &
TQM
Strongest Competitor - Chester
Highest cumulative profit in the market
Most consistent in terms of contribution
margin
Highest market capitalization of $180
million
Most valued share in the market at $64.17
along with the highest P/E ratio at 15.5.
Consistent profits over the years
The only firm to declare dividends
Competitor Analysis
Competitor
Segment Reason
name
Low prices and good spend on Sales
Traditional Chester, Andrews
and promotions
Maintained the age age was the
Low End Chester
most important factor
Completely fragmented due to too
High end None
many products
Flooding the market with new
Performance Ferris
products

Launched new product in the

Size Ferris
segment. Competitive pricing
Learning
Team management skills
Good financial planning is critical for long term success
Importance of inter-linkages between different functional
areas
Price is not everything. Different customers look for
different things
Strategy takes time to payoff
THANK YOU