IDM

Learning Notes

Erie (of 238/240 fame)

Batch 9

Question 1: Strategy

- Price and promo budgets were consistently in a higher band.

 

- Product strategy was to get the parameters right and introduce new products in the early rounds.

 

- Not shy of borrowing or issuing stock in the first few rounds, issuing and borrowing was at max capacity.

 

- Not looking at making profits during early rounds.

 

- Since we had the highest market share in all segments, we were not focusing on any one segment. Still held low and trad as tentpole due to highest contribution.

 

- On production, we kept 20% buffer over demand, considering inventory holding costs were lower than stock out opportunity costs.

Question 2: Steps taken

Marketing:

- Decided our sales and promo budgets based on the awareness and accessibility

- Reduced it when these number hit 100%

- This backfired, and these numbers dropped too drastically

 

HR:

- Max training due to strong cash position.

- Decided to not be the ones to create a labour strike, so we chose to go with an average between demands and current contract.

 

Finance:

- Borrowed a lot initially and had to pay back after the 5th round.

- Also kept cash handy to avoid emergency loans

- Tried to maintain a debt:equity ratio of 60:40

- Sold capacity in the last 2 rounds and used the excess cash to settle long-term debts and pay equity dividends.

 

Production:

- Focused on automation on low & trad segments till we achieved near-total automation.

- Were quick to jettison capacity towards the end.

Question 2: Learnings

What did we learn?

- The simulation misled us into being conservative, but we constantly took risks based on our own observations.

- Projections can be misleading, demand depends on many external, dynamic factors.

- Cooperation and decision-making is greatly refined if roles and responsibilities are organically defined and taken up.

 

Three major mistakes:

- Messed up dates on product modification timelines - got the year wrong, lost on on sales.

- Sold off capacity too early and spent a lot to buy capacity to boost production and sales from the 2nd round. and underestimation of growth projections.

- Did not get the R&D right in the 6th round, compromised product quality, leading to loss of market share.

Question 3: Advice

General Advice

- Focus on tradition and low-end segments.

- Diversify products to gain market share.

- Don’t enter price wars, introduce new products in various bands.

- Keep modifying products - sales were highly dependent on ideal positions of size, performance, age metrics.

- Try and ensure that new version dates are within the first half of the year so you reap the max benefit of the new product.

- Ensure that your net profits increase year on year as well as adequate positive cash-flow.

Question 3: Advice

Brand-specific Advice

Traditional:

- Look at the growth rate, keep a buffer, expect good demand, keep capacity handy.

- Don’t compromise on price, introduce a lower priced product is necessary.

- Increase automation and invest in process excellence

 

Low-end

- Do not touch low-end with R&D, let the product mature.

 

High-end

- Don’t compromise on cost, release a new product at a higher price.

 

Size and Performance

- Don’t overreact unless you go below 3rd in market share.

Thank you