This morning I awoke well rested. I am still recovering from the New Year’s Eve Celebration of a night past, and optimistic for the future of Clipboard Tablet Company. I reminisce about my experience with the time warps, and how the occurrence had lent the opportunity to relive every moment of my life, personal and professional. I am satisfied with my adjustments – I effectively saved Clipboard Tablet Company from futility, as I accurately predicted the burgeoning market of the X7, and adjusted the tablet computing market strategies accordingly. Still, I could not help but think that other opportunities for increased capital may have remained unexplored.
However, upon further examination, namely the prevalence of Carly Rae Jepsen’s chart-topping single “Call Me Maybe”, and the fact that I am operating a brand new iPhone 4S, tip off to me that I have once again regressed into the year 2012.
I will again utilize this opportunity to review my past business strategies. With data collected over three true-life simulations, I will analyze and the results, and implement yet another revised strategy that takes advantage of the strengths of each plan, while eliminating the weaknesses, further improving upon the success of Clipboard Tablet Company.
As we have established in prior time loops, the original Vice President of Operations was a certain Joe Schmoe, a vapid waste of a six-figure salary that contributed nothing to the success of Clipboard Tablet Company. His ultra-conservative approach to clipboard sales kept Clipboard Tablet Company largely irrelevant through 2012 and beyond, never once adapting his pricing or Research and Development allocations throughout his four-year tenure.
When I arrived, I immediately took note of the weakness of a static business strategy in the rapidly changing technology sector, and sought to change it. I adopted a strategy to increase Research and Development allocation for the X6 and X7 Tablets, consequently tapering off R&D funding for the X5, which all but exhausted its potential for new sales by 2016. The X5 price was raised in 2012 and 2013, and steadily decreased to drop below Joe Schmoe’s pricing of the X5 in the years 2014 and 2015. The X6 experienced an extreme price shift in 2012 to $649, declining yearly to $499, $449, and $399 respectively. The X7 underwent a price decrease that sought to capitalize on the trend of sub- $100 dollar tablets (Abell and Long, 2010). As a result, Clipboard Tablet Company experienced a great deal of success. Raising total profits from $1.5 Billion to $1.7 Billion.
The second strategy proved successful, but still lacked sustainability. The hyper-competitive price of the X7 exhausted new sales in a way that diminished the long-term sustainability of the X7. My mission for the second revised strategy was twofold: To significantly increase Research and Development allocation to the X7, while implementing a slightly higher price point. The superior technology of the X7 at a competitive price would become the central selling point of Clipboard Tablet Company, generating customer loyalty and capitalizing on clientele that are increasingly becoming more technology aware (Yang, 2012). Research and Development allocation for the X5 was reduced to 26%, decreasing yearly. Research and Development for the X6 remained at a steady 35%, in order to remain competitive among the market of top-technology consumers, while the X7 was being developed to take on that role in the future. The X7 received the majority of Research and Development funding, starting at 39% in 2012, increasing yearly to 42% by 2015. The prices of the tablets remained largely unchanged, despite small adjustments of the X5 (2012 and 2013 swapped from $289/$299 to $299/$289, respectively).
Additionally, the X6 received a price bump in 2013 to $529 rather than $499. Thirdly, The price of the X7 remained at $119 after 2012, rather than decreasing to $99 in the prior strategy. Once again, total profits reached $1.9 Billion, with a brighter outlook for Clipboard Tablet Company due to the super-advanced and competitively priced X7, which was now a market leader which generated a significant fan base, achieving greater repeat sales by loyalty alone (Basu & Dick, 1994).
The second revised strategy was a step in the right direction in terms of sustainable business, but it was not without its faults. Analysis demonstrates that there are still salvageable profits for the X5 and X6 models that have not been fully capitalized upon. The third strategy will attempt to maximize four-year profits while maintaining the sustainability of the X7 for the future. Without upsetting the balance of research and development allocation to the X7, the third revised strategy will implement a revised sales strategy of the X5 and X6 in order to obtain all desired outcomes: profit maximization of the X5 and X6 models, with an emphasis on brand loyalty, and sustainability in the X7 model.
In short, I want to maximize X6 profits without harming the current of future sales of the X7. In order to achieve this goal, we should ask, “What do the customers want?” Market research tells us these facts: The price-driven consumer demographic is declining, particularly in the technology sector (Tian, 2013). Alternatively, the performance-conscious consumer is on the rise, placing a premium on performance-driven technology products (Dudas, 2014). In light of these facts, it will be beneficial to take the following actions: Further increase funding of the X6, by decreasing funding of the X5, to ensure that the X6 maintains the competitive advantage of being the premiere performance tablet in the industry. The research and development decreases of the X5 are negligible, given that price-driven consumers are on the decline. The X7 remains untouched, as the current low cost, high research and development funding plan maximizes short term profit while securing long-term sustainability through brand loyalty and continued cutting-edge research and development.
In terms of cost-volume-profit analysis, the plan to increase funding for the X6 will prove beneficial, as proven by the Cost-volume-profit analysis formula. The logic behind this statement are as follows: We assume that the cost of each tablet (per unit) is directly associated with the research and development costs of the product. The volume of sales can be attributed to the combination of strategic, competitive pricing and the performance of the product relative to its counterparts. The success of the product being sold can be directly attributed to how the product “stacks up” against the competition, by both price and by quality. Thirdly, Profits can be measured by the total amount of product sales multiplied by the sum of the sale price minus the item cost per unit.
In this instance, X5 product sales waned, as the X5 was entering its maturity phase through 2012, and into its declining phase by 2014. As such, we know that a product in the declining phase of sales will simply sell less than a newer product entering the prime of its shakeout phase. From this point, simple math proves that the action taken was a simple but effective business strategy to maximize profits of the X5 and the X6. Research and development funds will be re-allocated from the X5 to the X6 by 2%. In terms of the CVP analysis equation, we reduced the unit cost of X5 to compensate for the projected decrease in total sales, therefore A) preserving profits for the X5, and B) allowing the X6 to retain an advantage over its market competition. As a result, the total sales of the X6 increased exponentially with the slightly increased cost per unit, therefore exponentially increasing profits on the whole.
In terms of projected results, the increased efficiency should be readily noticeable by 2014. Since there is a delay between the time funding is spent, and the time that the research and development team provide results, there will be a time lapse between the initial increase in X6 funding and an increase in product performance. However, once the product has been objectively certified as the superior tablet on the market, sales should show an obvious and marked improvement. X7 sales should remain the same as in the previous simulation, since the strategy of the X7 remains unchanged. However, it will be interesting to observe whether or not this adjustment in research and development allocation for the X5 and X6 has any effect on the sales of the X7, by way of any sort of market crossover. In my estimation, sales for the X7 will actually increase due to the re-allocation of research and development funds. By 2015, the X7 should actually be outperforming and out-pricing the X5, effectively absorbing the client base formerly known as the X5 Market.
After experiencing two time warps, I felt very confident that my revised plan was an effective strategy to maximize short and long-term profits. We certainly experienced our fair share of success, as I, the Vice President of Clipboard Tablet Company, was given opportunity after opportunity to rectify mistakes made between 2012 and 2016, to improve upon the existing strategies previously implemented. After all, the analysis and adjustments made are not simply shots in the dark, but calculated decisions based on tried, mathematical principles. I have no doubt that the third revision to Clipboard Tablet Company’s sales strategy will yet again yield positive results.
Abell, T. and Long, T. (2010). eLearning in Africa: Transforming Education through Enabling Technologies. Accenture: High performance. Delivered.
Basu, K. & Dick, A. (1994). Customer loyalty: Toward an integrated conceptual framework. Journal of Marketing Science, 22(2), 99-113. Retrieved from http://link.springer.com/article/10.1177/0092070394222001
Dudas, M. (2014, January 26). New technology products and "promise-driven" sales. PandoDaily New technology products and promise driven sales Comments. Retrieved from http://pando.com/2014/01/06/new-technology-products-and-promise-driven-sales/
Tian, W. (2013, August 22). Consumer behavior changing. chinadaily.com. Retrieved from http://www.chinadaily.com.cn/bizchina/2013-08/22/content_16912758.htm
Yang, M. (2012, July 17). Tech savvy senior citizens on the rise. Retrieved from http://www.govdelivery.com/blog/2012/07/tech-savvy-senior-citizens-on-the-rise/