Download - Industry C60304: Digby
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Katie Guiheen, James Bello, Viola Hang, Gracious Adai
Industry C60304: Digby
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The Strategy
Looking Back• Focus on 3 product groups
• Keep availability and awareness high
• Invest to increase efficiency
Looking Forward• Create new high end products to keep up with demand
• Don’t be afraid of large investments
• Use equity to finance new opportunities
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• Cutting High End and Performance products• Focusing R&D investment in three segments
• Following industry standard in general• Staying in perceptual circle• Adjust according to age and other criteria
• Age consideration• High priority for Low End
• R&D cycle time• Low End last revise longer than expected -
2years• Discontinued current Low End product
Research and Development
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Traditional Segment (DAZE) Round List Price Units Sold Market Share Promo Budget Cust. Awareness Sales Budget Cust. Access. Cust. Survey
0 $ 28.00 961 13% $ 1,000.00 55% $ 1,000.00 54% 181 $ 25.00 1416 18% $ 1,000.00 58% $ 1,000.00 50% 132 $ 24.00 1473 17% $ 1,400.00 72% $ 1,400.00 49% 413 $ 24.00 2652 28% $ 1,400.00 82% $ 1,400.00 46% 534 $ 24.00 2990 28% $ 1,400.00 88% $ 1,500.00 46% 525 $ 24.00 3547 31% $ 1,400.00 93% $ 1,500.00 46% 486 $ 24.00 3278 26% $ 1,400.00 95% $ 1,500.00 46% 457 $ 24.00 3554 26% $ 1,400.00 97% $ 2,000.00 53% 458 $ 24.00 4060 27% $ 1,400.00 99% $ 2,500.00 63% 46
Traditional Marketing
= Market Leader
= Sold Out
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Low End Segment (DELL)
Round List Price Units Sold Market Share Promo Budget Cust. Awareness Sales Budget Cust. Access. Cust. Survey0 $ 21.00 1493 17% $ 900.00 52% $ 900.00 40% 121 $ 19.50 1657 17% $ 900.00 53% $ 900.00 34% 212 $ 18.50 1733 16% $ 1,300.00 66% $ 1,300.00 46% 193 $ 18.50 1672 13% $ 1,300.00 75% $ 1,300.00 45% 274 $ 17.90 1981 14% $ 1,500.00 86% $ 1,500.00 45% 355 $ 17.50 2661 17% $ 1,500.00 94% $ 1,500.00 45% 336 $ 17.50 3387 19% $ 1,500.00 99% $ 1,500.00 45% 217 $ 17.00 2494 13% $ 1,500.00 100% $ 1,700.00 37% 68 $ 17.00 1283 6% $ 1,500.00 100% $ 1,700.00 25% 0
Low End Marketing
= Sold Out
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Size Segment (DUNE)
Round List Price Units Sold Market Share Promo Budget Cust. Awareness Sales Budget Cust. Access. Cust. Survey0 $ 33.00 307 15% $ 700.00 46% $ 700.00 42% 271 $ 32.00 423 18% $ 700.00 42% $ 700.00 35% $ 7 2 $ 32.00 527 19% $ 800.00 44% $ 800.00 28% $ 17 3 $ 32.00 743 25% $ 800.00 44% $ 800.00 24% $ 14 4 $ 32.00 1188 31% $ 900.00 48% $ 900.00 23% $ 15 5 $ 32.00 1559 34% $ 900.00 50% $ 1,200.00 26% $ 16 6 $ 32.00 1799 33% $ 900.00 52% $ 1,200.00 28% $ 16 7 $ 32.00 1210 19% $ 1,500.00 71% $ 2,000.00 38% $ 18 8 $ 32.00 961 13% $ 200.00 92% $ 2,300.00 45% $ 21
Size Marketing
= Market Leader
= Sold Out
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Production Decisions
1 2 3 4 5 6 7 80
200
400
600
800
1000
1200
1400
1600
Traditional Low End Size
Units Produced vs. Units Sold• Units produced was based
off a calculation of our current market share increased by 2-3% with the new market forecast
• Invested in automation early• Exceeded competitors by 0.5
• Mitigated labor problems
• Invested in benchmarking
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• Capacity didn’t follow industry demand or production• Low end was a constant
guessing game
• Focused on high ROA in traditional and size
• Looking forward:• Traditional largest success
• Increase investment in size and high end
The Margin ProblemTraditional
Low End
Size
1 2 3 4 5 6 7 80
1000
2000
3000
4000
5000
CapacityIndustry AvgProduced
1 2 3 4 5 6 7 80
1000
2000
3000
4000
5000
CapacityIndustry AvgProduced
1 2 3 4 5 6 7 80
500
1000
1500
2000
2500
CapacityIndustry AvgInventory
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58%
42%
Capital Structure Round 8
DebtEquity
• Issuance of more Debt than Equity resulted in high interest costs
• Stock price hurt badly in early rounds, factor for issuing debt instead of equity
• Retired old debt with new debt, never tried to pay debt off early
• Repurchased 3.6M shares in round 8
Capital Structure
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1 2 3 4 5 6 7 8
(5,000.00)
-
5,000.00
10,000.00
15,000.00
20,000.00
25,000.00
30,000.00
EBIT
Interest
Profit
• High Int costs in the later rounds hampered profits in combination with low contribution margins and less sales• Round 7: 9.5M Int Exp
• Decision in round 5 to raise 40M in debt drastically increased interest expenses
EBIT, Profit, Interest Expense
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Thank you for your time.
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Round Digby Industry Average Customer ExpectationTraditional pfm size age pfm size age pfm (21%) size age (47%)
0 5.5 14.5 3.1 5.5 14.5 3.1 5 15 21 5.5 14.53 4.1 5.6 14.4 3.6 5.7 14.3 22 6.5 13.6 2.7 6.2 13.7 3 6.4 13.6 23 7.1 12.9 2.1 6.6 13.3 3.1 7.1 12.9 24 7.8 12.2 1.8 7.3 12.7 2.2 7.8 12.2 25 8.5 11.5 1.6 8.9 11.1 2.3 8.5 11.5 26 9.2 10.8 1.5 9.1 10.7 2.8 9.2 10.8 27 9.9 10.1 1.4 9.7 10.3 3 9.9 10.1 28 10.6 9.4 1.4 10.2 9.8 3.1 10.6 9.4 2
Low End pfm size age pfm size age pfm (16%) size age (24%)0 3 17 4.6 3 17 4.6 1.7 18.3 71 3 17 5.6 3 17 5.6 2.2 17.8 72 3.5 16.5 3.5 3.1 16.9 6.1 2.7 17.3 73 3.5 16.5 4.5 3.2 16.8 6.5 3.2 16.8 74 3.5 16.5 5.5 3.5 16.5 7.4 3.7 16.3 75 3.5 16.5 6.5 3.9 16 5.7 4.2 15.8 76 3.5 16.5 7.5 4.5 15.5 5.4 4.7 15.3 77 3.5 16.5 8.5 4.7 15.3 5.5 5.2 14.8 78 3.5 16.5 9.5 4.1 15.3 6.5 5.7 14.3 7
Appendix A
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Appendix B
Size pfm size age pfm size age pfm (43%) size age (29%)0 4 11 2.6 4 11 2.6 4 10.6 1.51 4 11 3.6 4 10.97 3.4 4.7 9.6 1.52 4.7 9.6 2.4 4.3 10.5 3.5 5.4 8.6 1.53 5.1 9 2 4.34 10.3 3.9 6.1 7.6 1.54 5.8 8 1.7 4.9 9.3 3.4 6.8 6.6 1.55 6.5 7 1.5 6.2 7.59 3 7.5 5.6 1.56 7.2 6 1.5 6.9 6.5 2.9 8.2 4.6 1.57 7.9 5 1.4 7.7 4.8 1.9 8.9 3.6 1.58 8.6 3.8 1.3 7.2 3.8 1.9 9.6 2.6 1.5