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Work Sample. Company Strategic Analysis.TRANSCRIPT
InnovaTen Year Review
Simply Innovation ®
Innova In The News…
InnovaInno
va
InnovaSimply Innovation ®
Global Operations Summary Year 15
North America
Retailer DemandEL: 875,000MF: 135,000
Market ShareEL: 32.9%MF: 21.8%
Latin America
Units SoldEL: 801,000MF: 95,000
Market ShareEL: 34.4%MF: 20.6%
Europe/Africa
Retailer DemandEL: 933,000MF: 93,000
Market ShareEL: 31.5%MF: 16.6%
Asia Pacific
Retailer DemandEL: 737,000MF: 76,000
Market ShareEL: 29.6%MF: 14.6%Plant Assembly
Entry Level: 3,220,000Multi Level: 399,000
In-house: 3,604,000Outsourced: 15,000
InnovaSimply Innovation ®
Net Revenues
5 6 7 8 9 10 11 12 13 14 15 $-
$100
$200
$300
$400
$500
$600
$700
$200 $168
$218 $208
$303
$388
$490 $543
$595 $587 $538
($ thousands)
Simply Innovation ®Innova
Earnings Per Share
6 7 8 9 10 11 12 13 14 15 $-
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
Actual EPSInvestor Expectation
InnovaSimply Innovation ®
Return on Equity
6 7 8 9 10 11 12 13 14 150.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
18.5%
28.3%
22.4%
35.7% 36.3%
55.9%
47.0%
39.4%
48.7%
40.9%
Actual ROEInvestor Expectation
Simply Innovation ®Innova
Stock Price
5 6 7 8 9 10 11 12 13 14 15 $-
$50.00
$100.00
$150.00
$200.00
$250.00
$30.00 $31.20 $45.68 $41.75
$61.13
$89.50
$131.04
$191.85
$160.11
$201.40
$157.24
Stock PriceInvestor Expectation
Simply Innovation ®Innova
Credit Rating
Simply Innovation ®Innova
Image Rating
6 7 8 9 10 11 12 13 14 1560
65
70
75
80
85
90
95
100
105
InnovaInvestor Expectation
Simply Innovation ®Innova
Strategic Vision
Innova will build a loyal customer base in two strategic target markets by providing a good-quality entry-level camera at a price lower than competitors. We will provide an excellent-quality multi-feature camera for consumers who are looking for nothing but the best.
Our overriding goal is to maximize shareholder value.
We believe that Innova will perform its best if its employees are highly valued and appreciated. Innova will generate sustained competitive advantage through long-term investments in above-average employee compensation, productivity increases, and research & development.
InnovaSimply Innovation ®
Performance Targets
10 11 12 13 14 15 16* 17* $-
$50
$100
$150
$200
$250
$5.74 $10.19 $10.85 $8.90 $10.60 $8.75 $10.00 $11.50
$89.50
$131.04
$191.85
$160.11
$201.40
$157.24
$167.00 $180.00
EPSStock Price
*Years 16-17 estimated
Innova Forecasts: Stock Price and EPS
Innova Forecasts: Return on Equity Innova Forecasts: Image Rating
10 11 12 13 14 15 16* 17*30%
35%
40%
45%
50%
55%
60%
36.3%
55.9%
47.0%
39.4%
48.7%
40.9%
40.0% 40.0%
*Years 16-17 estimated
10 11 12 13 14 15 16* 17*75
80
85
90
95
100
105
83
88
95
100
95
91
95 95
*Years 16-17 estimated
InnovaSimply Innovation ®
Entry Level Strategy
Vision
Goal
Strategy
Foundation
Continue to be the LOWEST cost digital
camera in every market we serve
Low Cost EfficiencyGlobal
PresenceStrong
Cash flow
High Margins Sustainable Growth
SIMPLICITY COMPETITIVE QUALITY
MODEST DESIGN
LOW MARKET PRICING
Year 6-9• Best cost strategy
Strategy Evolution-Year 10-15• Low cost strategy
InnovaSimply Innovation ®
Multi Level Strategy
Vision
Goal
Strategy
Foundation
InnovaSimply Innovation ®
Production Strategy- Workstation Capacity
• We committed to assembling as many units as possible in-house
• We maintained above-average workforce compensation for most of the simulation (through year 13)
• Utilized temporary employees during the peak production season, Quarter 3
Number of Installed Workstations
Workstation Utilization Rates
6 7 8 9 10 11 12 13 14 15100
150
200
250
300
350
400
Innova
Industry Average
6 7 8 9 10 11 12 13 14 150%
20%
40%
60%
80%
100%
120%
Off-Peak Seasons (Quarters 1,2,4)Peak Season (Quarter 3)
Wor
ksta
tion
Utiliz
ation
Per
cent
InnovaSimply Innovation ®
Production Strategy- Labor & Workforce
• Prioritized in-house production over outsourcing
• Completed permanent hiring at the beginning of each year
• Outsourcing was only necessary in rare instances when actual demand outperformed management’s projected demand
• Maintained accurate forecasting
Total PAT Compensation
Production Costs, In-House vs. Outsourced
6 7 8 9 10 11 12 13 14 15 $-
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
Entry-Level In-House Produc-tionEntry-Level OutsourcingMulti-Feature In-House ProductionMulti-Feature Outsourcing
InnovaSimply Innovation ®
6 7 8 9 10 11 12 13 14 15$20,000
$25,000
$30,000
$35,000
$40,000
$45,000
$50,000
$55,000
Innova Industry AverageIndustry High Industry Low
Financial Strategy
• Utilized positive cash flows – Reinvest in the business – Reward our shareholders
6 7 8 9 10 11 12 13 14 15 $-
$1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00 $9.00
Annual Dividend (per share)
6 7 8 9 10 11 12 13 14 150%
10%20%30%40%50%60%70%80%90%
100%
Payout Ratio
Perc
ent o
f EPS
InnovaSimply Innovation ®
Financial Strategy• Use of debt paralleled policy on dividends
– Long Run: Pay down debt in order to better reward shareholders
– Short Run: Early years carried debt on books in order to better invest in the company’s future
6 7 8 9 10 11 12 13 14 150%
20%
40%
60%
80%
100%
120%Debt : Equity Ratios
Debt %Equity %
6 7 8 9 10 11 12 13 14 150
2
4
6
8
Debt Payoff Capability
InnovaIndustry Average
InnovaSimply Innovation ®
Entry Level Competition• Strongest competitor during the last two
years was Company C– Changed their strategy in year fourteen
to become a low-cost provider, placing themselves in direct fierce competition with Innova.
• Our second closest competitor was Company E – Had a best cost strategy – In certain years, Company E threatened to
steal demand and market share – Never threatened to surpass Innova’s
performance as a whole
InnovaSimply Innovation ®
Multi Level Competition
• Companies C and E were our strongest competitors– Pursued a differentiation strategy
• Innova stayed ahead of the competition – Quality– Set standard as the industry leader
• Successfully reached its strategic goal of designing a camera for consumers who are looking for “nothing but the best,” – Companies C and E became market
followers and provided a camera for people who were looking for “almost the best” quality at a slightly lower cost.
InnovaSimply Innovation ®
Actions To Take- Entry Level
• Continue to reduce our costs to keep competitive edge
• Strive to offer the lowest-price entry-level camera and be the low-cost leader– Investors expect an image rating of 70 or
above• Will not lower the quality of our cameras below 2
stars• Will not jeopardize our brand reputation to win a
cutthroat rivalry– Constant fierce price wars can result in the
destruction of the entire industry– Not willing to sacrifice long-term viability in
order to achieve by destruction
InnovaSimply Innovation ®
Actions To Take- Multi Featured Level
• “Stay the course” • Continue to assemble the highest level
quality cameras• Maintain the position of industry leader
though continuous investment in research & development– Remaining flexible and innovative
“These investments will give us a first-mover advantage in whatever changes affect the industry’s shifts in demand.”
-Dan Wesolowski CEO
InnovaSimply Innovation ®
Lessons Learned
• Demand and Market Share– In year eight we realized how important it was
to focus on decisions that would increase our demand
– Found that the elasticity of demand in the entry-level segment is above 1.0, which means that total revenues increase when price is lower and that consumers in our target markets were fairly sensitive to price
• Technical Support– The more money we would invest in tech
support, up to a certain extent, communicated to customers how much Innova stands behind its products.
– This made a great impact in our product demand
– From Year 9 forward, we concentrated meticulously on the precise amount to invest in tech support
– Over time, we increased quarterly tech support per unit from $3.00 to around $5.00
InnovaSimply Innovation ®
Lessons Learned
• The Human Factor– Above-average employee compensation resulted
in a higher quality of work • Contributed to our profit margin by lowering the
warranty claim rates and production costs • Savings allowed us to maintain the lowest price in
the entry-level segment– Improved employee dependability
• Lowering absenteeism• Delivering their best work quality on a consistent
basis. – Innova’s human resource policies indirectly
resulted in high customer loyalty and a high company image
InnovaSimply Innovation ®
Lessons Learned
• Production Capacity– Took a risk by expanding production capacity
• But if successful – like Innova’s was – the rewards can be high
– Recommendation to other companies is that they should outsource processes that they perform at an average or below-average level.
• Those processes which they do well – their core competencies – should remain in-house.
• Foreign Exchange Rates– Affected our company’s profits more than we
expected• We underestimated the sizable amount of the
effect
InnovaSimply Innovation ®
Questions?
Simply Innovation ®Innova