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4/4/2013

INTERNATIONAL MARKETING

FINAL REPORT

Submitted By: M. Rayhan Sheikh Waqar Mahmood Ayan Syed Sahar Fatima M. Saad Shams Fahad Masood Hijab Qamar Section: A MBA II (2012-13)

Submitted to: Sir. Dr. Irfan Butt

Lahore School of Economics

Table of Contents

Introduction....03 Performance Review......06 Assessment of Strategy and Execution.11 Assessment of Current Situation...12 Investments in Future.13 Lessons Learned..18

Introduction: The world isnt static. And a changing world creates a different environment for our business. We are facing rapidly changing market place conditions, major shifts in customer needs and increasing stakeholders expectations. Innovative approaches are needed to enable 21st Century challenges. Izone has been considered as one of the good international companies in the computer industry and has been operational for the last two years. Its manufacturing plant is situated in Shanghai. Belief of the company is to be the best competitor in the market. Company associates strong marketing, brand management, sales force management and workload management skills to the firm productivity and towards the stakeholders equity. The company aims to be successful by diversity of opinions, leadership and team work. The company focuses on the highly competitive segments and also targets those geographic markets which are in the middle of the cost/size continuum and which minimizes the distribution costs. The company has been facing good and bad times but has survived in both the times tackling with the threats from the competitors as well as the external environment. The major competitors of Izone included e-sac, flash and phoenix. Competitors have been targeting the same segments and were capturing the market share of Izone in the race to be the market leader. However through low cost leadership as well as with the scope of becoming a market leader in the industry differentiated strategies have been incorporated in their mission and vision accompanied with innovation and reliability to capture market share of high profit margin generating segments such as Mercedes and Innovators. Mission Statement: To provide high quality, affordable and technologically advanced products and services and deliver high value to customers to earn their respect and loyalty while increasing the profitability of the company and gaining market share with competitive advantage. Key Positions: The profile of the key position holders of the companys management is given below: Name: M. Rayhan Sheikh Designation: CEO

Secondary: Director Marketing, Sales & Manufacturing

Responsibility: To plan, approve and achieve the strategic goals of the organization in order to provide better services to its customers and gain profitability. In addition CEO would be supervising and assisting all the departments in the company on both the strategic as well as the functional level. Name: Waqar Mahmood Designation: VP (Finance)

Primary Responsibility: Managing the income statement and the balance sheet and other financial issues and taking all the financial decisions for growth of the organization. Secondary Responsibility: Sales management: Distribution (location and timing of sales offices and web centers), selection and funding of web traffic and productivity tactics, and sales force management (number, targeting and training) in case if the sales head is busy or is unavailable. Name: Fahad Masood, Ateeb Ijaz Designation: VP (Marketing)

Primary Responsibility: Delivery of customer needs through brand design, pricing, ad copy design and media placement. Creating demand of our product, following up with the competitors strategies, and forming our own marketing strategies. Then advertisement, managing 4p.While in addition all the marketing strategic and functional decisions would be made under this position, while keeping co-ordination with the CEO and other executives in order to efficiently analyze the marketing research and operational data. Secondary Responsibility: Helping and providing backup if in case the HR head is not available in due to any issue. Name: Ayan Syed Designation: VP (Manufacturing)

Primary Responsibility: Responsibilities include scheduling, Capacity Building, increase in operating capacity of the factory and Maintaining Good Quality products and also fulfilling orders on time. Secondary Responsibility: Responsibilities of operations and R&D head would be fulfilled, in case the head of that department is not available when required.

Name: Sahar Fatima

Designation: VP (Hr & Leadership)

Primary Responsibility: Human Resources: compensation plans, worker productivity, rewards, and hiring. In addition HR would be assisting all the departments in order to cope up with their need of human capital as well as the training of employees preceding their recruitment process and resolving issues of employees. Secondary Responsibility: Marketing: Concept/ copywriting, pricing, media selection, and design. Replacement of marketing head in case he is not available or due to any reason is not able to complete his duties in a certain period of time. Name: Hijab Qamer Designation: VP (Sales & Distribution)

Primary Responsibility: Sales management: Distribution (location and timing of sales offices and web centers), selection and funding of web traffic and productivity tactics, and sales force management (number, targeting and training). In addition all the decisions regarding the sales and sales force management would be made under this position. Secondary Responsibility: Backing up the Manufacturing processes and decisions in case the head of manufacturing is not available at the time. Name: M. Saad Shams Designation: VP (Operations and R&D)

Primary Responsibility: To improve the operational systems, policies and processes in line with the organizations mission and also to support better management reporting, information flow and management, business process, organizational planning, to oversee all the scientific aspects of research and also coordinate the strategic goals an enterprise is working towards. In addition it plays a significant role in long-term planning, including an initiative geared toward operational excellence and oversee overall financial management, planning, systems, controls and allocation of funds for research projects towards growth of the organization giving it an edge over the competitors through use of advanced technology compliant with the goals of the company. Secondary Responsibility: Taking responsibilities and resolving accounting and financial issues of the organization in case the finance head is not available.

Performance Review The financial performance of our company varied in every quarter, however our aim from the start was to maintain a positive cash balance at the end of each quarter so that we can avoid the risk of emergency loan. We will discuss the performance in detail of every quarter. Starting from quarter 1 we only invested 88000 in ordering marketing research to know about the consumers and the different places in which we can operate. The rest of the amount was invested to buy a deposit so that we can use the interest income in the future. In the Second quarter when we found about the market and consumers from the research ordered we invested $390512 in opening 2 sales offices and 1 web center after going through the future quarters we realized that we did a mistake we should have only opened one sales office as compared to two as this would have saved us money and would have helped us to spend this money on other useful areas. Some of the money invested in the 3 month deposit was taken out as we were able to see that in the future we would require money as in the initial stages we were building up our company. There was major expense of fixed plant capacity which was necessary to produce the products that we need to sell. In Quarter 3 we were able to generate revenue of 683000 but the major problem was that our expenses were too much and which lead to problems of cash management. In the initial year the cost of production was also very high as we invested less amount in the research and development, however when we look back we thought that if the remaining money in the 3 month deposit would have been used the investment in research and development would have really helped us to gain economies of scale in the future. Our cost of production was approximately 80% of the total revenue which left us with a very small amount of money to invest in the future. There was a lot of money spend on the marketing of our product we wanted to create awareness of our brands and wanted to tell consumers that we were delivering the best product as compared to the competitors. We again made the mistake of opening 1 more sales and web centers we were thinking of the future we thought that once we are able to open more offices later we could cash from them. However if that money was spent on production we could have increased our capacity from the start which would have been really beneficial in the future. There were 10 sales people appointed for the sales office and less people were employed at the web center which were 4 because we thought that the sales offices are more effective at selling the product however we were wrong in the future as well as our web

centers were more effective and the money or expenses spent on them was very less as compared to the sales offices. We were spending too much money and we did not realize and calculate that the revenue we would receive would be very less as compared to the money spent on the expenses. Therefore our company took an emergency loan of 358,533. At this point we should have made a rough estimate of the revenues and the expenses in order to avoid the loan. In this quarter we realized that the emergency loan was due to the cost of the excess capacity because when we ran the simulation the excess capacity cost did not come in it and that was the major reason why we faced the emergency loan. In quarter 4 our main aim before starting the game was to pay off the emergency loan as quickly as possible. This aim was achieved by improving our brands we reduced the number of brands in order to sell whatever we are producing we focused totally on the needs of the consumers and designed the brands accordingly. Our sales revenue increased by almost 135% and the investment made in excess capacity helped us to reduce our production cost. So our production cost only increased by 51% this was really helpful as it helped us to generate enough profit and cover our costs. We reduced our sales offices expenses and the mistake that we made in the last quarter of excess capacity was also catered in this quarter. This quarter helped us to revive our company financially. In Quarter 5 the money from common stock was 5M in this quarter we bought the most expensive research however the problem with it was that this research was not useful for our primary and secondary segment. We thought that it was the most expensive research so every segment would like it but this in reality was not true and we had to face a lot of fall in the number of units sold. In this quarter there was large amount of money spent to increase the plant capacity as we thought that it would be useful for the upcoming quarters and the market leader was also investing large amounts to increase their capacity. In this quarter we increased our advertising, sales force and web marketing expenses by almost 3 times, our ad judgment was very high in most segments so we thought that if we could advertise heavily we would be able to sell all of our units. We were implying an aggressive strategy to gain higher market share and become the market leader but this strategy back fired and led to a rapid increase in our expenses. We also borrowed a conventional loan in this quarter because we thought that if our units are not sold the emergency loan would really affect the performance of our company. If we could have properly invested in

research and development and bought the right technology it would have really benefitted us in the upcoming quarters. When we talk about the cumulative balance scorecard in our group at the top was e-sac and the gap between our company and them was very wide. In the initial quarters due to high investment and less sales we were not able to generate a positive scorecard. When we compare our balance scorecard results with the other competitors we see that our balance scorecard was zero for the first 5 quarters and the same result was occurring for the rest of the competitors as well. In the 6th quarter we had a positive scorecard of 0.642 however in that quarter E-sac had the highest score of 37.83 and our score in this quarter increased a little bit due to high sales turnover. In the next quarter our score increased to 1.166 and this was mainly because we were able to control our costs and secondly we made some changes and improved our brands in this quarter however esac had the highest score and they got a score of 109 the gap was increasing by a wide amount and it seemed to us that it was really hard to catch them up, whereas the rest of the competitors were also getting a higher positive scorecard value than us and we were lagging behind them. At this point we called a meeting and studied in detailed the factors that lead to a positive high value and in the last quarter our score card value came to be 85.588 and this really helped us a lot and we were able to cover up all the losses and low scorecard result that we got in the previous quarters. In the last quarters we were close to the scorecard value of the top team and if there would have been one more quarter we would have surely work hard to bring them down as well. The scorecard results improved significantly by improving financial performance, asset management, by improving brands and their reliability, return on equity, marketing effectiveness by changing the primary and secondary segment and many more factors were analyzed and improved in the last quarter. When we talk about the market share of our company we can see that there was very high volatility in every quarter in the fourth quarter our total market share was 23% and this was due to the proper design and efficient pricing. However in the next quarter our share went to 15% and this was mainly due to the improvement made by the other competitors and because we trying to capture new segments which in fact destroyed the share of the existing segment s as well as the competitors were able to offer those better products. In the next quarter our market share again went back to 23% and this was due to the new brands that we introduced we focused towards our

primary and secondary segments and designed the brands accordingly. We decreased our prices as we thought that competitors might increase the prices as they had been successful in the last quarter and the things went according to what we thought the competitors might do. The next quarter again bought us to the lowest point and this was mainly due to one of the competitors which was Ir-solutions which had been almost close to death but in that quarter they introduced too many brands and penetrated in many markets they were successfully able to capture much of the market and secondly in this quarter our CEO also decided to only go with two brands which he thought would be really successful and would help us to reduce our change over cost. He thought that the technology that we have bought would be regarded by customers as something unique but this all went in the wrong direction and we came back to almost the last position in our group. In the last quarter our market share was 15% even though this share was less as compared to the competitors but this time we were targeting the segment who could pay higher prices and this really helped us out as a few sales in this segment helps you to generate large amount of revenue which can be earned by selling large number of units when you target the other segments. However in the last quarter we were able to design the product according to the needs of the consumers and generate very high sales. Secondly the segments that we were targeting in the first 7 quarters were not much satisfied with our brand our main aim should be to maximize sales revenue so that we can cover our cost and make a profit therefore we changed our primary and secondary segments in the last quarter this was a very aggressive strategy and if this strategy would have been used in the previous quarters it would have really helped our company to move to the top. Our competitors in the 6th and 7th quarter invested in research and development in for the segments which were also our primary and secondary segment. However we made the mistake and ordered the research which was not required by our consumers. Secondly we made another mistake by giving the new research and development in our brands but our primary segments did not require those features. The last quarter really helped to improve the overall score card performance of our company. We also focused towards the regions that had the maximum potential and this was done by reducing the number of sales people in the regions which were not that much attractive. The other mistake that we did was we were trying to capture on the entire segment rather than focusing specifically on two or

maximum three segments; this caused a lot of problem as our sales were not constant and varied in each quarter. This also led to a lot of confusion and we had to design the brand in each quarter because our customers were not satisfied with our brands. When we compare the total sales of our company as compared to our 4 competitors we see that our sales were 18.2% of the total sales of all competitors even though these sales are very less as compared to the others but we could have significantly improved if our brands were improved in the 7th quarter. Our cost of goods sold as percentage of sales were 50% which was very high and this was due to very less money invested in the changeover cost and the research and development. The capacity was also not increased that much as compared to the competitors who also caused a problem as we were not able to experience economies of scale. Our gross profit margin to sales was lowest as compared to our competitors which were 46% which showed that we were not able to effectively control our expenses and due to high production cost. When we consider the rating our brands in the different segment our primary and secondary segment was Mercedes and innovators and the rating of innovator was 95 only phoenix had the same rating as our brand which was the highest and the rating in Mercedes brand was 81 our brand had the highest rating in the group and only flashs brand had the same rating as ours. We did not target the travelers and workhorse but our rating was also one of the highest in these two segments as well. So this meant that almost in the last quarter 4 of the segments were highly satisfied with our brand. The product reliability was not high of our brands in all of the quarters even though we invested a lot of money in the quality control however our competitors invested more than us and had a high rating as compared to us. Our operating capacity as percentage of fixed capacity was almost 88% but the main problem was that our fixed capacity was one of the lowest as compared to our competitors. The major problem was the lost sales due to stock out our company had one of the highest lost sales and this was due to the reason that we did not increase our capacity due to which many of our customers were not able to find our stock as it was sold. We realized this problem in quarter 7 and increased our capacity but the cost was too high so we just increased the fixed capacity by a small amount because of the fear of emergency loan always hanging on our heads. Our sales force as compared to our competitors was the lowest this was a good sign as it helped our company to reduce the cost and secondly our sales per person was the highest as compared to our competitors and this was basically achieved by giving good salaries and by

increasing the productivity of workers by constantly motivating them through financial and non financial rewards. Assessment of Strategy and its Execution Computer industry is one of the major industries which have a lot of opportunities and if one follows a proactive approach he or she can become market leader. The opportunities which are available for us include investment in R&D, expansion into new territories, catering to new segments, specializing in the existing segments by providing better and improved products which are more reliable. The success or failure of a company often depends on its ability to monitor changes in the environment and meet the needs of its customers and prospective customers. IZONE from Q1 to Q5 has significant smoothness in operations and meeting the consumer needs, and almost doubling the revenue in each quarter but Q6 was a downturn. In Q6 the biggest mistake was to follow the strategy of marketing in general. In quarter 6 and 7 one of the reasons of losses was due to the betterment of competitors more than they were expected in all areas including their manufacturing, marketing, operations, expansion strategies etc. From Q8 cash flows became positive in the quarter as well as there was a positive score on the balance scorecard observed and strategy used was hybrid of low cost leadership and differentiated marketing, by providing comparatively low priced, better products, designing more effective and advertisements with good score on their judgments by the target customers. Also one of the reasons of good performance was the increase in productivity of employees both in the selling as well as manufacturing of products to maximum utilization of the capacity and also by highly motivated sales people. This was done by providing incentives to the sales people as well as with enormous increase in their salary packages. Later on we realized, that we could expand into North America that is not really harmful than giving the competitive advantage or core competency to the other companies. Because there was high potential demand, but there was a big disadvantage as well, that the costs were increasing and hence were the expenses. Many competitors were present over there and it was very difficult to use the differentiated strategy as almost every company had the same amount of R&D present. But it is right decision was made in Q6 that was investment in R&D. Costs of R&D were minimized by contracting with other companies, while selling our R&D product to those in

exchange of some amount of money with their R&D feature. We invested heavily in opening of sales offices and web centers as per our strategy to expand in all regions in the very start of the simulation, which later on turned out to be a wrong execution as its always better to get a large share of the existing market in the start and generate profits from there and later on through the generated profits expansion could be done further into new regions. Investment was done in several sectors like in R&D to improve changeovers, cumulative quality improvements and marketing efforts. As we modified our products in regard to the demand of the market potential in future Izone would have performed much better and had a tendency to become a market leader as synergies were created in the end among several different operations of the company. Our brand ratings were improved as well as the costs were decreasing due to investments made in improvement of the production processes like changeover costs, quality, and reliability etc. Utilization of our plant can be improved because of which we are not able to fulfill the demand of the consumers. This is affecting are changeover time as well in the plant and we are losing sales and customers due to this fact. Full production utilization has to be availed to fulfill customers demand Assessment of Current Situation: Currently the company is standing at the second position, after e-sac. Izone has been struggling in the previous quarters due to negative income as well as continuous loss faced in the market due to small market share and less expansion as compared to the competitors. While on the same time the cost of production of products was very high. Currently due to continuous improvement in the changeovers as well as investments made in R&D to improve the technology, quality as well as ratings of the brand judgments of brands produced, Izone has been able to cover the losses and generate sales at its maximum. The current brand judgment ratings of the products have been maximum up till now in the last quarter due to detailed analysis of the needs and usage patterns of the target customers and careful analysis of the past has enabled us to learn from our mistakes in the past and turn them into our strengths for the current as well as future endeavors. Weaknesses: Currently the weakness as well as threat for Izone was the future investments of the strongest competitor e-sac in the R&D to capture the market share of cost-cutters segment. Due to this factor Izone was unable to capture the share in that particular segment but when the

management decided that it is impossible to gain market share in the primarily targeted segment of cost cutters, we changed our focus from that segment towards the Mercedes and Innovators segment. The main reason being that these segments did not have strong competition and was not even targeted by e-sac the major competitor in the industry. The marketing personnel along with the CEO as well as the rest of the management team, decided to target the segments that could allow greater profit margins as well as generate sales for the company. Currently the major weakness, which is also a threat for Izone is the rapid expansion of competitors in the market. One of the weakness of Izone is that it has not expanded much as compared to its competitors, having less no. of sales offices and web centers and also comparatively less investment in future R&D, due to which there is a risk of losing the current market share of the industry. Strengths: While on the positive side currently the companys overall market appeal is 51, which is a good symbol for the company. However the company managed to capture market share of 20%, which was previously near to 14 percent in Q7. This depicts a good performance in the last quarter. Izone managed to get a share of 20 percent by changing the primary segments from cost cutters to Mercedes and Innovators. Due to investments in R&D that were of interest for the particular segments, it was an advantage over others in gaining share from other competitors mainly being Flash and Phoenix. Moreover the market growth was seen from 40 in quarter 6 to 120 in quarter 8. At the end of quarter 8 the company has well established brands and advertisements which are highly rated by customers. So now expansion and further improvement through investment in R&D is required to provide customers with better and reliable products and also fulfilling the mission to be the technical leader in the industry. Computer industry has a major threat of high competition which lowers the sales. For this we have to develop a brand name which shows credibility and reliability by investing in quality inspection and quality improvement. Another threat which we have faced is that the seasonal changes in the economic conditions of the market are volatile. These factors cannot be controlled but building a brand loyal customer can help to reduce the effect of these unpredictable conditions. Investment in Future: Investment in sales person; Sales are the heart of the company. Without sales, no companies can grow and expand in the future. Sales are the essential task of workforce. We have not done investment in R&D. The score is always greater or equal to 1.0 and a good score would be

greater than 3.0.izone scores 5.87 which is relatively an effective score to think of the future. This score reflect the willingness of the executive team to spend current revenues on future business opportunities. They are necessary but risky. In the short-term, these expenditures can cause large negative profits on the income statement. We have faced negative cash flows in last 7 quarters but we were investing for the long term benefit so that is the reason that we are in positive cash flow in quarter 8 and hence a good score in the future investment. Investment in Future = (Cumulative Expenses that Benefit Firm's Future / Cumulative Net Revenues) * 10 + 1 = (7,679,373 / 15,783,305) * 10 + 1 = 5.87 Cumulative benefit expense includes cumulative cost to open new sales offices and web centers, cumulative R&D investment in brand features and new brands, cumulative R&D to improve changeovers, cumulative quality improvements and cumulative depreciation. We are heavily investing in these features to secure our future. Out of these cumulative R&Ds investment and cumulative R&Ds to improve new changeover and investment in the quality are of importance because these categories should be look forward to save and direct the future of the company in terms of monetary benefits as well as image building. Cumulative Expenses that Benefit Firm's Future = Cumulative Cost to Open New Sales Offices and Web Centers + Cumulative R&D Investment in New Brand Features and New brands + Cumulative R&D to Improve Changeover + Cumulative Quality Improvements + Cumulative R&D Licenses + Cumulative Depreciation = 896,388 + 4,989,577 + 1,000,000 + 564,323 + 0 + 229,084 = 7,679,373 Cumulative Cost to Open New Sales Offices and Web Centers: 896,388 This cost is related to open new sales office. Opening new sales office in potential markets would increase your sales and ones could acquire a market before its competitor would gain the market share. Cumulative R&D Investment in New Brand Features and New brands: 4,989,577 Cumulative R&D to Improve Changeover: 1,000,000 Improve changeover time leads to reduced cycle time, reduced inventory, increased capacity, increase productivity and improved quality Cumulative Quality Improvements: 564,323

Quality Improvement reflects the commitment by the company to meet the organizational values of: Excellence & Quality; Responsible Partnership; Respect; Teamwork; Resource Optimization

Cumulative R&D Licenses: 0 Cumulative Depreciation: 229,084 Cumulative Net Revenues= Cumulative Sales Revenue - Cumulative Rebates = 16,310,080 526,775 = 15,783,305 Cumulative Sales Revenue: 16,310,080 Cumulative Rebates: 526,775 Our cumulative net revenues explains that Positive net income for a particular accounting period increases Retained Earnings, which is a cumulative amount that includes (among other things) all cumulative earnings and losses from the date of the firm's inception. A net loss for any given accounting period decreases Retained Earnings. Our cumulative net revenue score is 15,783,305 which is we believe a worth good score. In order to be competitive in future and sustain its position in the market Izone has a tactical plan which entails investments in future so that expansion can be geared up. The obvious factor for IZONE in terms of future investment is in R & D in terms of existing brand features, new brands and to improve changeovers. This would increase the brand rating and allow the sustainability of competitive edge to Izone. The product specs will be matched with the desired customer benefits. We will invest to improve our changeover time & cost which is a main concern to Izone right now Another obvious factor for investment is that we have a room to target the untapped segments (Mercedes and travelers) which will be again by investment in R & D. This can only be done by matching the specifications according to these particular segments; what they desire.

We have web centers in three regions but we have a room to expand our sales offices in untapped regions. This will help us get more market share and will be a benefit for the company.

New sales offices; investment has been made in opening new sales office one in NORAM specifically (Mexico City) and another in EUROPE being specific in (London). If we look at the total cost for opening these new sales offices that is; total sales offices costs: 896,388. It was mandatory to invest in more sales offices because market is growing; competitors are going and reaching to every customer segment to serve their needs. More sales office with more sales force will eventually increase the sales of the company. Our sales force productivity is 90 and if with the same stat we considers the same productivity we will be in better position that to our competitors in the future. In the third quarter, Research was bought to better understand the future potential of the NORAM, LATAM, EUROPE, APAC markets. The expenses of this research were total expenses $92,000. Seeing the increasing trend of online sales, a new web centre in Latin America was also proposed and invested on. Another $96,000 was spent on the improvement of web traffic. $100,000 was spent on R&D to improve changeover. In quarter four, the company made heavy investment in research and Development and bought marketing research worth $115,000, for North America, Middle East, Latin America, Europe and Asia Pacific as there were still untapped markets, which presumably had a great potential, investment in the research was compulsory to investigate the future in new prospective areas. Also, there were quality issues in the products, which were deteriorating the brand reliability rating of Izone, in order to improve the reliability of company few Investments were also made in inspection and variance studies, the quality investment was mandatory to avoid any set backs on the sales of brands in the future. Moreover it was intended to facilitate the increase in the brand rating. In view the growing fierce competition, quarter saw the heaviest investments in future. $115, 000 were invested in research for NORAM, MEA, LATAM, EUROPE, APAC. New sales offices in Cairo and Shanghai were proposed to be opened in the next quarter and $405,503 was spent for this purpose. Middle east happened to be an untapped market, the results from the research bought indicated an open market, due to which a sales office was opened in Cairo, While in APAC Izone was already doing well, but in order to keep the performance on-going, the

shanghai sales office was opened, the primary reason in opening up offices in both the areas was low shipping cost, Cairo happened to be nearer as compared to other existing markets, while shanghai was more favorable as we tried to tap the local market which could be easily served by the plant located in Shanghai. The company also invested $38, 000 in a Study to Find Error Sources and Actions to Improve Performance, specifically in reference to case, hard drive and monitor, this was done to make sure that defects are increased in the coming time. All of the investment was preplanned keeping in mind the given conditions. In quarter 5, investment in the most expensive R&D feature available was done keeping in mind the contracts for exchange with other R&D features bought by other companies in the group and also recovering costs of our R&D through licensing. The main reason behind this investment was to be the first mover in capturing the market share of Mercedes and Innovators segment and generating licensing income through selling to other companies in quarter 7. Licenses were given to Flash & Phoenix and in return their R&D and an additional amount of $600,000 were charged from them. The entire investment was done as per our strategic planning. In the sixth quarter, the company invested in changeover time once again in order to continuously improve on this aspect, keeping in view future performance. with new modified brand every quarter, and high changeover cost was resulting in high production costs, the idea was to reduce the production expenses therefore increasing the gross margin of the company, this was intended by spend in the changeover. An amount of $185,970 was spent on inspection and defect repair to avoid any future problems relating to the quality of the products. In quarter seven, Izone again made investment in buying research for: NORAM, MEA, LATAM, EUROPE, APAC, spending an amount of $115,000, as the competition on this stage was fierce therefore to devise a strategy to move up the market share ladder in future, research was very important, and company being in all the regions, required research for all the regions. A web Centre opening in NORAM was also paid for during this quarter. Moreover, the growing trend in the purchase of computers in the market led Izone to further enhance their production units, company invested in improving its fixed capacity by 50 units in the coming quarter, in order to cater to the demand as the industry was growing. $300, 000 was spent on changeover improvement, while another $264,863 was invested into inspection. there was a consistent

investment in changeover to reduce the production cost each quarter which had stayed high during the simulation. In the last quarter, updated research was bought for NORAM, MEA, LATAM, EUROPE, and APAC. As sales are the most integral part of a business that ensures going concern, $121, 750 was invested into the improvement of the sales program. R&D Expenditure to Improve Changeover was $400,000 while that on inspection was $431,632. This shows the companys outlook towards the future and its efforts in the growth of the company to better equip it with knowledge about markets, which will help it not only to survive in future, but perform well and serve its customers according to their needs and expectations. The company has also maintained emphasis on changeover and quality improvement and invested into these aspects to enhance performance in the coming quarters.

Lessons Learned: Nothing is more important than a customer. Customer is the boss. If customer is not satisfied then you are out of the business, as customer is the one and only source of generating funds. And it is important to provide them with the product and service which is according to their needs. This simulation has provided us with a complete set of information that how a business could be run. It actually enlightens us with the experience of tackling the main aspects of any manufacturing business. We learned that how different factors could affect any business. The most important lesson we learned is that never underestimate any factor, because smallest thing could also affect your business a lot. Talking about technical learning, then we would specify that we have learnt that it is very important to manufacture that product which any specific segment wants. This means if cost cutter wants basic features in their product at the lowest cost then it is important to manufacture product which have only those features which cost cutter wants nothing more nor less and at the lowest possible price. This is an important aspect because in start we believed that if we could provide customers with those products which have more features than what they required, they will definitely like it and will purchase it. But this was not the case as we have then modified our product specifically according to their need nothing more nothing less and at the same price we

had quoted before, the sales boomed up wards. This was actually the most important lesson we learned. Customers are very specific about their needs and they want the product which fulfills those needs, and nothing extra is required by them. One of the important elements we learned from this simulation is the maintaining equilibrium between supply and demand. Excess supply or less supply both is harmful for an organization. In the first quarters we were unable to generate much demand and we were producing more, which ultimately incurred us huge cost in the form selling at scrap value, and huge inventory cost. On the other hand, we had experienced that when we were able to create demand more than our capacity we were again incurring cost in the form of lost sales due to stock outs. This was a crucial time for us as we had to balance our supply and demand of our product. We never thought that advertising is of so much importance. This we realized when was unable to create demand of our products. Advertising is one of the sector on which we spent a lot of our money. This is important because if there is no awareness of product among people then there is no use of producing product. And in the competitive environment it is important that we allocate large budget of this sector because this is the only source by which we could stand by with other brands and maintain or gain our competitive position. Secondly according to this specific segment which is advertising, it is important to plan such strategy that the message could be conveyed to the specific targeted segment. And advertising should be done at those areas where the firm is present otherwise whole advertisement would be gone waste. One of the factors which were important for any firm to survive in this competitive environment is to manage your sales force. We in the start believed that more sales force will create more sales. It is correct but this isnt totally right, because it includes one main element of productivity. The game here is all about productivity. In the last few quarters this was our competitive edge of having very high productivity of our labor force and a good percentage of productivity of sales force. This we were able to attain by paying a handsome amount of salaries to our labor and sales force. It was basically the monetary motivation which we utilized and successfully achieved our targets. Secondly it is important to strategically align our sales force according to the demand of each geographical area.

Now coming to the science of economies of scale at which we were unable to attain for a long period of time. This is because we always thought that a firm providing variety of products to different segment are always better than other firms. But we were wrong at this too, because it is important to target less customer segments and maintain a portfolio of less brands, because it helps to maintain an image of specialization and secondly in some time period specially when we increase the capacity of our manufacturing plant it helps to achieve economies of scale which ultimately helps the organization to have an competitive advantage upon competitors and we can play on prices. This is very important to understand that in manufacturing firm we always tries to attain economies of scale, and this is what we learned from this simulation. If in case we fail to achieve economies of scale, we will ultimately be drowned off from the competition and will face heavy losses. Especially in price competition it plays an important role. In the start we believed that we should expand more and more in the start, but it wasnt a good strategy, it is important to stay at one segment and focus totally upon them because we were unable to completely target any of the segments. We were vulnerable in the starting quarters. We were unable to realized that targeting more segments and geographical expansion requires more investment done on advertisement as done at different geographical locations and secondly more brands are require to cater different customer segments, as different customer segments have different requirements. Hence we realized that each department in the business is equally important and never over emphasize upon one sector or never under estimate the power and importance of any sector, because everything is linked to each other and any wrong step could lead to failure of the business. The linkage between each sector is very important to understand as it will provide you with the knowledge of what affect will be there on the whole business if one sector/ department has done different. Statement of conclusion is that it is important to have integration among all the departments of the organization, and each department should work on the same goal and same strategy should be followed by each department, while each one pursuing its departmental goals in the same direction as the overall strategy of the organization as a whole.