Strategy Implementation and Strategic Controls SLP 4

Introduction

            In every organization, managers hold the obligation for making informed strategic choices that seek to maximize the gains of the firm. After taking over the position from Thomas Joe, it is thus my responsibility to carefully strategize and develop cognitive changes concerning pricing and funds allocation about product R&D which is dependent on the existing situation and performance of each product. The products that the firm develops, the involved technology and position in the respective markets represents one of the most critical operations that necessitate thorough analysis on often basis so that awareness and familiarity can be sourced for informed choices along strategies adjustment. According to Hill & Jones (2010) such decisions are hazardous since they might lead to the downfall of the organization and in this case, much strategic participation is needed to establish the most suitable approach of meeting the demands in the market and for product development.

Strategic Choices Review

            The overall utilization of CVP analysis is essential given that it improves the general capability to establish the number of units that a corporation necessitates selling for profit to be obtained. It is a crucial strategic instrument that permits managers to know the precisely fixed expense that is needed to acquire the expected profit. The price of W2 was increased up to 450 dollars with the R&D investment at 40 percent for the year 2013 which led to higher revenue gain when equated to the past year. Since the product was characterized with high demand given that the consumers worried less of the price and needed a high performing product, it means that a little R&D investment would lead to high sales with the inclusion of high performing features to gain more consumers. Related strategies that seek to gain equal outcome might incorporate higher investment in marketing which is to increase the sales.

            Wonder Company is focused on gaining highly from the cumulative revenue of all the three tablets for the following four years. Even with the rapid changes that are taking place in the electronic market, Joe remained dormant, and he did not alter the prices. Even with more changes in preferences, taste, and sensitivity no change was made. The R&D was 33, 34 and 33 percent for the three products respectively over the years. The situation can be described as the absence of strategic choices. In that, the company needed to establish the expected profit first and establish the needed alternative by adjusting its prices and budgeting. The products demand mainly determines the pricing decision. With high demand, this illustrates that an improvement on the product is likely to attract more sales with high profit even with minimal development investment. 

Strategy Implementation 2013

            The pricing for the three tablets for 2013 will be as illustrated. W1 will be sold at $2170 while the R&D allocation will be increased to 40 percent which will seek to create more features for better performance. W2 will be sold at 4440 with R&D at 40 percent while W3 will be 170 which will be lower than the previous price with an R&D of 37 percent. The strategic choice will create more sales opportunity by attracting more buyers. The decision additionally aims to increase the company’s profitability gain past 26 percent from the 16 percent that was acquired in 2013. The overall profit score for 2013 accounts to 352, 243,200. However, since W3 is new in the market and much marketing is needed to drive its sales the company will need to make the higher investment in 352, 243,200 so that the demand for the product can increase simultaneously with its profit rates. It is evident that W1 has acquired a significant share in the market given that it is already in the growth phase. However, since the product will lose the demand over the years, there is a necessity to create more efficient features which will, in turn, make it more attractive.

Products	Prices	R&D	Percent increase
W1	270	40	10
W2	440	40	10
W3	170	37	5
Profitability score	352, 243,200

 

Implementation Strategy 2014

            In the financial year 2014, the pricing rates for the products will not be subjected to changes since this might affect their establishments and sales in the market. W1 will be sold at the price of 270, W2 440 and W3 170. However, the R&D investment will be changed. In that, for this year W1 R&D allocation will be lowered slightly up to 30 percent to reduce the operating expenses and to create more opportunities for developing the other products to increase traffic. The price for W2 will be retained given that the demand for the product is high and thus with the need for an excellent product concerning performance much development needs to take place to retain the current consumers and attract new ones. That of W3 will be increased up to 40 percent even though the product has higher pricing when equated to the competing products in the market. In this context, the product needs to be highly developed so that it becomes highly competitive and acquire a significant share in the market as it approaches the growth state as W2 continues to experience excellent performance in the respective market. In this context, it is likely that the profitability will increase to approximately 30 percent when equated to the previous year. The year 2014 makes a significant transition for the company, and thus such pricing and investment allocation strategies are necessary for aggressive growth.

Products	Prices	R&D	Percent increase
W1	270	30%	10
W2	440	40%	10
W3	170	40%	6
Profitability score	352, 243,200		26%

 

            Once the R&D allocation for W1 is decreased from 40 to 30 percent of the fixed cost for its manufacturing also decreases thus leading to an increase in its general profitability. Besides, the rise of the R&D investment for W3 shows that developing the product’s features will be useful in increasing its demand while rising the profits rates in general.

Strategy Implementation 2015

            For the year 2015, I will have to focus on some specific strategy changes. The price for W1 will be reduced further by 5 dollars up to 265. Making significant pricing decrease for all the needed products is essential in increasing the particular demand for this products thus raising the sales volume (Kaplan & Atkinson, 2015). However, given that W2 has demonstrated notable growth the price will be retained at 440 while that of W3 will be lowered further to $160. For product, the W3 price reduction will stir its general demand in the market as a whole. The R&D expenses for these products need to be changed as well to guard the profitability while ensuring that the firm operates under the least expenses. In that as W1 approaches the maturity stage it is without a doubt that its demand and profitability will be lower when equated to other products. In this context, the R&D will be decreased up to 20 percent to decrease its fixed expense. The R&D for W2 and W3 will be 30 percent and 42 percent respectively. It is noted that the consumers pay similar prices for Wonder company products to those offered by the competing firms. For 2015 the profit score accounts to 1,281,927,788 as noted by the simulation while it is evident that the profit will not move so far from the 30 percent margin given that it accounts to approximately 31 percent. Besides, the decrease in R&D for W1 as it approaches the shakeout period will lead to lower operating expenses. In this context, there is no need to discontinue the sales of the product for this year given that even though its revenue continues to decrease this does not necessarily mean that the product has lost the demand in the market. With a low concentration on the product, however, this will create more opportunities for the other products as a whole which will lead to stability and increased demand for the same as a whole without fail. The intention is to increase sales volume and revenue gain and therefore this strategic change is a necessity.

Products	Prices	R&D	Percent increase
W1	265	20%	10
W2	440	30%	10
W3	160	42%	11
Profitability score	$860,241, 149		31%

 

Strategy Implementation 2016

            During 2016 fiscal year pricing and investment allocation changes will be a necessity. W1 prices will be reduced to $260 while the allocation for R&D might be decreased further to zero given that the product has no profit. In that even with its sales, the revenue is rather low thus will low investment the product can be sold at the least price without experiencing any losses. It is worth noting that the higher the expense, the lower the profit (Warren, 2008). In that, the company cannot continue to invest in a product that is slowly losing its stability in the market. The price for W2 as it reaches the growth phase will be reduced by 10 dollars up to 430 with its R&D allocation being 20 percent. In that, as the price decreases, the allocation also reduces to create more opportunities for sales. The reduction will create opportunities for the investment of W3 in general which will mainly account for up to 40 percent. For this period the objective is to minimize the overall investment for all the affected products to maximize the profit rate as a whole.

Products	Prices	R&D	Percent increase
W1	265	0%	10
W2	440	20%	10
W3	160	40%	12
Profitability score	1,281,927,788		32%

 

Performance Analysis

            At the end of the four years plan, it is more likely that the company will acquire more revenue when compared to the period under Joe’s leadership. The fact that the strategy seeks to make pricing and R&D allocation changes by focusing on cost leadership best illustrate that the approach can increase sales in general. In this context even with the discontinuity of W1 shortly, the demand for the other two products will increase. The profit will reduce for the third and fourth year, but that does not imply that the products are not competitively located in the market.

Conclusion

            In summing up, it is evident that the three products have available opportunities in the market. With the rapid changes in the market about price and preferences, the company will be required to adjust the pricing and investment strategies as a whole. In that cost, leadership is the best approach for W1 and W3 across the period while differentiation in performance works well for W2 where the consumers are less price sensitive. Thus the adoption of these approaches will lead to competitive positioning.

 

 

 

 

References

Hill, C. W. L., & Jones, G. R. (2010). Strategic management theory: An integrated approach.

            Boston, MA: Houghton Mifflin.

Kaplan, R. S., & Atkinson, A. A. (2015). Advanced management accounting. PHI Learning.

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Warren, K. (2008). Strategic management dynamics. Chichester, West Sussex, England: J. Wiley & Sons.

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