Marketing Decisions
Help – Explanations – Information on Rules/Procedures
Each time you make a decision entry on this screen, an assortment of on-screen calculations
will instantly show the projected effects on unit sales, revenues, market share, unit costs,
profit, earnings per share, ROI, and other factors. Where appropriate, there are separate
supporting calculations for entry-level and multi-featured cameras. All of these on-screen
calculations are there to help you evaluate the relative merits of one decision entry
versus another. They provide instant feedback on the likely outcomes and consequences of
alternative decisions and are intended to support wiser decision-making and strategizing on
your part. No decision entry is "final" until the decision deadline passes, so you can enter as
many numbers in the decision boxes and try out as many different decision combinations as
you wish in searching for a "winning" strategy and set of decision entries across all decision
screens.
The on-screen support calculations for projected unit sales, revenues, and market share are
based on (1) the entries currently showing in the marketing decision boxes (and entries on all
the other decision screens) and (2) the prior-year competitive efforts of rival companies, as
measured by the prior-year industry-averages for selling prices, advertising, tech support,
promotions, P/Q ratings, and so on. The unit sales, revenue, and market share projections are
indeed projections, because they are based on your judgments about whether the upcomingyear actions on the part of rival companies will result in stronger/weaker/or about the same
competitive condition as prevailed in each geographic region as last year. To the extent that
you are able to acutely gauge the likely strength of the competition your company will face
from rivals in each geographic region, then the on-screen projections of your company's unit
sales and market shares of entry-level and multi-featured cameras will be fairly reliable
(generally within ±5 to 10% of what is actually achieved).
Bear in mind that the unit sales, revenue, and market share projections are indeed projections,
because they are based on your judgments about whether the upcoming-year actions on the
part of rival companies will result in stronger/weaker or about the same competitive conditions
as prevailed in each geographic region as last year. To the extent that you are able to
accurately gauge the likely strength of the competition your company will face from rivals in
each geographic region, then the on-screen projections of your company's unit sales and
market shares of entry-level and multi-featured cameras will be fairly reliable (generally ±5 to
10% of what is actually achieved).
Also, bear in mind, as you make the marketing decisions and see all the revenue-cost-profit
projections, that the projections for unit sales, revenues, market share, and profit on this
screen will change (perhaps drastically) if you make decision entries that alter the company's
P/Q rating on the product design screen (this is because the P/Q rating is a major driver of unit
sales and market share) and/or unit costs (which help drive profitability).
Special Note: In making decision entries on this screen, there will be occasions when you
enter a decision for entry-level cameras and the on-screen calculations for costs and profits
change not only for entry-level cameras but also for multi-featured cameras. Conversely,
decision entries for multi-featured cameras can result in changed cost and profit projections for
entry-level cameras, as well as for multi-featured cameras. Why? How can this be? The
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reason is that costs common to both entry-level and multi-featured cameras—specifically,
advertising costs, administrative costs, depreciation, and interest costs—are allocated to entrylevel cameras and multi-featured cameras based on their share of total units sold. Thus, if the
number of entry-level cameras sold is 75% of total unit volume, then entry-level-cameras will
be allocated 75% of all common or joint costs. Many of the decision entries on this screen
affect the projected number of units sold; any time a decision entry changes the projected unit
sales of entry-level (or multi-featured cameras), then it also changes the projected cost
allocations between the two lines of digital cameras. So, it is entirely proper, indeed
necessary, from an accounting perspective for certain cost categories for entry-level and multifeatured cameras to change whenever there is a change in the percentage mix between entrylevel camera sales and multi-featured camera sales.
What's On This Help Page
The remainder of this Help page has three sections:
•
The first section is on "Understanding the Market Decisions." This section explains the ins
and outs of each of the marketing decisions that you and you co-managers have to make
on this screen.
•
The second section explains the on-screen link labeled "Adjust Market Share Projections
for Competitive Intensity." This link sends you to a dialog box that allows you to base the
on-screen projections of unit sales and market share on whether you expect the degree of
competition your company will face from rivals in each geographic region will be stronger,
weaker, or about the same as the prior year.
•
The third section concerns "Understanding the On-Screen Decision Support Calculations."
Its role is to make sure you have a strong grasp of how you can good use of these
projections to enhance the caliber of your decision-making and "strategizing."
Understanding the Marketing Decisions
Retail Dealer Decisions
In the space out to the right of the 3 decision entries for retailers, you will see the number of
retail chains, online retailers, and local camera shops in each geographic area that are willing
to stock and display your brand of digital cameras in the upcoming year—these numbers are
based on the prior-year's appeal of your company's camera models and there's nothing you
can do in the upcoming year to attract additional retailers. In upcoming years, a greater
or lesser number of retailers may want to handle your company's camera line in upcoming
periods, depending on how attractive your cameras are to camera buyers and the extent to
which you have special promotions for your cameras that retailers believe will help draw in
shopper traffic.
Note: A dramatic decrease in the P/Q rating of your cameras will result in a reduction of the
retailers willing to stock your brand. Maintaining a low P/Q rating for another year could result
in further erosion of retail dealers.
Normally, you will want to supply all of the available retailers with cameras, since having more
retailers stock and merchandise your cameras gives your brand more exposure in the
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marketplace than having fewer retailers display and merchandise your brand. If so, simply
enter the number of retailers available in each of the decision boxes. However, these entries
are not cost-free. The company's four regional sales offices (Milan, Singapore, Sao Paulo, and
Toronto) incur costs of $10,000 annually in recruiting and supporting the digital camera sales
efforts of the chain retailers handling the company's brands; support costs for each online
retailer stocking the company's cameras are $4,000 annually and support costs for each local
camera shop that carries the company's cameras is $200 annually). Worldwide retailer
support costs to support the 8,288 dealers stocking the company's cameras in Year 5 were
almost $3.2 million.
If, for any reason (perhaps to cut back on retailer support costs or to shift your companies
emphasis to other geographic areas), you do not want to ship cameras to all of the retailers in
a particular geographic area who currently are willing to merchandise your cameras, then you
can enter lesser numbers than those available. If you want to withdraw entirely from selling
cameras in a particular geographic area, then simply enter a 0 in each of the retailer decision
boxes. Later, when you get to assembly and shipping, you must also remember not to ship
camera to this region.
All retailers that elect to stock your company's brand will display and merchandise both entrylevel and multi-featured camera models.
Technical Support Budget Decisions
Decisions on how much to spend on technical support have to be made for each geographic
area. The size of your company's technical support budget in each geographic region affects
the caliber of technical support provided to people owning your brand of cameras. The more
cameras your company sells in a given year, the bigger the technical support budget will need
to be (in order to handle the likely rise in requests for technical support). To preserve or
enhance the caliber of technical support provided to camera owners, the company's technical
support expenditures per camera sold will need to remain constant or else rise slightly.
If you leave the tech support budget fixed and then make decisions in other areas that raise
unit sales, you will have diluted tech support per camera sold and thus may notice some slight
erosion in the on-screen projections for market share; you can restore the tech spending per
camera sold by increasing the tech support budget slightly.
You and your co-managers have the discretion to vary the emphasis placed on technical
support from geographic market to geographic market. Keep in mind that technical support
per camera sold in a geographic region is one of the factors that affect unit sales and market
share. If your company's technical support budget (per camera sold) exceeds industryaverage expenditures for technical support (on a per camera sold basis) in a geographic
region, then your company will enjoy a competitive edge over rivals on technical support in that
region—a condition that boosts unit sales and market share. Below-average spending
weakens your company's competitiveness vis-á-vis rivals in that region, several of whom are
providing greater technical support for people owning their camera brand.
However, you can't go overboard on tech support spending because of the effect on costs (you
can see how much costs per camera change by entering several different values for tech
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support and observing the on-screen changes that result in the marketing costs per camera for
both entry-level and multi-featured cameras.
Special Note: Each time you make alternative decision entries for the tech support budget,
there are on-screen calculations showing the projected impact on retail demand and market
share for both entry-level and multi-featured cameras, as well as revenue-cost-profit
projections by geographic region. At the bottom of each decision screen, you will always be
able to see companywide projections for net revenues, net profit, earnings per share, ROI
(return on investment), credit rating, image rating, and change in cash position. Each time you
make a new decision entry, these numbers are recalculated, thereby showing you the
incremental impacts of that decision. This feature of GLO-BUS provides you with powerful
what-iffing capability that makes it much easier to identify what you and your co-managers
consider to be an "optimal" or at least "acceptable" decision entry.
Quarterly Advertising Decisions
It is normal to spend different amounts on quarterly advertising in different geographic areas
since unit sales and market share differ widely across each region. You can either pursue a
similar marketing strategy for each region or have moderately or radically different marketing
strategies for each region.
If your company's quarterly advertising exceeds the industry-average amount of quarterly
advertising in a geographic region, then your company will enjoy a competitive edge over rivals
on advertising in that region—a condition that boosts unit sales and market share. If your
company's quarterly ad expenditures are below the industry-average in a geographic region,
then your company is at a competitive disadvantage on advertising and will sell fewer units
than would be the case at higher advertising levels (other competitive factors remaining equal).
Thus decisions of how much to spending on advertising in each area have to be made with an
eye toward how much rivals are likely to spend on advertising in the upcoming year. It is very
risky to arbitrarily decide to spend only so many dollars on advertising when rivals companies
are spending double or triple your amounts. But this does not mean that you have to be drawn
into a contest with rivals on who-can-outspend-whom on advertising—rather it means you
have to be alert to the effect of advertising expenditures on your company's overall
competitiveness vis-a-vis rivals.
Furthermore, it is critical that you understand there is no set value of how many more entrylevel and multi-featured cameras your company can expect to sell in the Asian-Pacific market if
advertising is increased, for example, by $1 million annually. There is no pre-determined value
(say, 1,000 cameras) that has been programmed into GLO-BUS specifying that if a company
increases its advertising by $1 million annually then its camera sales will rise by x units.
Rather, the size of the impact of a $1 million increase in ad spending "all depends" on the
actions of competitors. Here's why "it all depends" is perfectly logical and realistic in a
competitive marketplace. Suppose, all other things remaining equal, your company increases
its advertising in the Asian-Pacific market by $1 million and your rivals change none of their
prior year's decisions. Then, indeed, your company's unit sales will rise by, say, x units (based
on algorithms contained in the GLO-BUS software). But, if in the same year when your
company increases advertising by $1 million several rivals decide to raise their advertising by
$500,000 in the Asian-Pacific market (all other competitive factors remaining the same), then
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your company's sales will rise by a lesser amount, say, only y units. And, should all rivals
elect to boost their adverting in the Asian-Pacific by $2 million (all other things remaining
equal), your company's $1 million advertising increase would be accompanied by a decline in
unit sales (albeit a smaller decline than if you had failed to increase advertising at all). So, just
how many extra units your company will sell as a result of increasing advertising by $1 million
in the Asian-Pacific market "all depends" on the full range of competitive efforts of rivals and
this includes actions not only with respect to their advertising levels but also with respect to
price, number of models, technical support, promotional activities, and so on. The "Well, it all
depends" answer also applies to the impacts on unit sales and market share for all other
moves you and your co-mangers might make—raising/lowering prices, adding/deleting
models, lengthening/shortening warranties, getting a higher/lower P/Q rating, and so forth.
Pricing Decisions
You have the flexibility to charge identical prices to retailers in all geographic regions or to set
different prices for each region as part of a larger management effort to stake out different
market positions in each regions and craft different competitive strategies for each region.
Alternatively, you may elect to pursue a mostly global strategy since the cameras your
company ships and sells the same cameras carrying the same P/Q ratings in all parts of the
world.
How the wholesale prices of your company's entry-level and multi-featured cameras in a given
region compare to the industry-average price in that region have a major bearing on unit sales
and market share at retail. You can see the projected effect on unit sales of a change in
wholesale price by watching how much the sales forecast changes when you enter a higher or
lower price. A higher/lower wholesale price translates into a higher/lower retail price, since
retailers try to maintain a fairly constant markup over the wholesale prices they have to pay
digital camera makers.
While lower prices tend to boost retail sales volumes (assuming you and your co-mangers do
not undercut the effects of a lower price by reducing your company's competitiveness in other
areas and further assuming the competitive efforts of rivals are not much different from the
prior year), lower prices can narrow profit margins and lead to a decline in total profit (because
the gain in revenue attributable to a higher unit volume is insufficient to overcome the revenue
erosion associated with a lower price on all units sold). So anytime you alter the decision
entries for price, you need to watch the projected effects on revenues, profits, EPS, and ROI,
as well as the projected effects on unit sales and market share.
Once again, bear in mind as you make decisions regarding prices (and the other marketing
factors on this screen) and see all the revenue-cost-profit projections, that the projections for
unit sales, revenues, market share, and profit on this screen will change (perhaps drastically) if
on the product design screen you make decision entries that alter the company's P/Q rating
(which is a major driver of unit sales and market share) and/or unit costs (which, along with
prices, drive profitability).
Should at some point you want to withdraw entirely from selling cameras in a particular
geographic market, you should zero out the decision entry price for the area, as well as the
decision entries for advertising, technical support, and retail dealers.
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Quarterly Promotion Decisions
You have the option of 0 to 3 special promotions each quarter, with promotion periods ranging
in length from 1 week to 4 weeks. Since there are 13 weeks in a quarter, having 3 promotions
of 4 weeks each amounts to having your cameras on sale 12 out of every 13 weeks—a
potentially excessive amount since the resulting promotional price in effect becomes the everyday price. However, such a promotional strategy is allowed, should you desire.
The effects of the promotional discounts are automatically taken into account in calculating the
projections of revenues and profits. So the revenues numbers are really net revenues, after
any and all price discounts are taken into account.
You'll quickly see (by trying out different decision entries for number and length of promotions
and promotional discounts) that these decisions can have a sizable impact on the projections
of unit sales, market share, revenues, profits, and ROI. As a consequence, they are very
important marketing decisions.
Warranty Period Decisions
Lengthening the warranty period for either entry-level or multi-featured cameras, while making
your camera models more appealing to digital camera buyers, also has the effect of boosting
warranty costs because of having warranty claims come in over a longer period.
•
On-screen calculations of the warranty claim rate and projected changes in warranty costs
associated with a change in the warranty period are shown just under the warranty period
entry for both entry-level and multi-featured cameras. Both the warranty claim rate and the
warranty cost projections are annual, not quarterly, numbers. The costs of handling a
warranty claim are $50 per claim for entry-level cameras and $100 per claim for multifeatured cameras.
•
Warranty claim rates go down as the P/Q rating rises. There are separate warranty claim
rates for entry-level cameras and multi-featured cameras whenever the respective P/Q
ratings differ.
•
As you can see from making different entries for the warranty period and observing the onscreen projections for warranty claim costs, longer warranty periods can increase future
warranty costs significantly. For example, warranty costs for 6 months will be essentially
double those for 90 days; warranty costs for a 1-year warranty period will be more than
double the costs for 6 months because of much higher sales in Q3; warranty costs for a 2year warranty period will be more than double those for a 1-year period if your company
sells more cameras in the second year than in the first year. Keep in mind that the
projected warranty claims are indeed projections, since the actual number of cameras sold
can turn out to be higher/lower than projected.
•
You can have different warranty periods for entry-level and multi-featured cameras and
also for different geographic markets if you wish, thereby allowing you the flexibility to
employ different marketing strategies both for entry-level and multi-featured cameras and
for different regions.
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Adjusting the Projected Outcomes for Anticipated
Changes in Competitive Intensity
On the left side of the screen just under the P/Q Rating "buttons" for both entry-level and multifeatured cameras, you will see links entitled "Click here to Improve Accuracy of Projections."
The purpose of these two links is to allow you to incorporate your expectations about whether
the competitive efforts of rival companies will, on average, intensify or weaken somewhat in
the upcoming year and thereby improve the accuracy of the projections of retailer demand,
market share, net revenues, and operating profits in each geographic region.
When you click on either link, a dialog box will pop up that allows you to make upward or
downward adjustments in the anticipated average industry price, P/Q rating, and all other
marketing variables for both entry-level and multi-featured cameras. In deciding what
adjustments to make, here are five important things to consider:
1. Absent any adjustments on your part, all of the projected outcomes shown on the
Market Decisions screen are calculated using the prior-year industry averages for
prices, P/Q rating, advertising, promotional efforts, and so on. The GLO-BUS system
cannot use upcoming-year industry averages to calculate your company’s upcoming
year projections because the upcoming-year industry averages are not knowable until
after the decision entry deadline passes.
2. Using prior-year industry averages to calculate upcoming-year projections of unit
camera sales, revenues, costs, and profits is flawed because it is highly probable that,
on average, rival companies will make some kind of upward or downward changes in
(1) the prices they charge for their cameras, (2) the P/Q ratings of their cameras, (3)
expenditures for advertising, (4) sales promotion efforts, and so on in the upcoming
year. In other words, the intensity of competition your company faces from rival
companies in the upcoming year is likely to be different from the prior year.
3. Since assuming no change in competitive intensity from last year to this year is likely to
prove false and cause the projected outcomes to differ from the actual outcomes by a
little or a lot (depending on how much rival companies on average actually alter their
prices, P/Q ratings, advertising, promotional efforts, and so on in the upcoming year),
we have provided you with a means of improving the accuracy of the projections by
using the slides on the dialog box to indicate whatever changes in competitive intensity
you believe are likely to occur in the upcoming period.
TIP: Always use the column of industry-averages in the Competitive Intelligence Reports to
look for trends in the movement of the various industry-averages for price, P/Q rating, number
of models, advertising, warranties, and so on in each region over the past couple of years to
get a clue as to which direction the industry-averages may be headed in the upcoming year.
The industry-averages in the last column of the Competitive Intelligence Reports reflect
the degree/intensity of competition your company was up against, competitive factor by
competitive factor. The Competitive Intelligence Report is absolutely the best data source for
clues about how the industry averages might change in the upcoming year and thus for making
judgments about any changes in competitive intensity in the upcoming year.
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In the first several decision rounds of the GLO-BUS exercise, there's always considerable
uncertainty regarding whether certain of the industry-averages will rise or fall and by how much
because there's little or no track record to go on in judging what kinds of changes in
competitive effort that rivals, on average, will make. But even early on, you may have strong
reason to suspect that a majority of your company's rivals are likely to increase/decrease their
prices or raise/lower their P/Q ratings or spend more/less on advertising and so on.
As you have more and more years of information to go on—and a pattern of change emerges
for some or most of the industry averages (which you can spot by monitoring the year-to-year
changes in the industry-averages shown in the Competitive Intelligence Reports), you'll find
that the accuracy of your "guestimates" about the direction of change in the upcoming year's
industry averages improves and that you can have more confidence in deciding whether to
base the projections of sales and market share on about the same or stronger/weaker
competition from rivals.
Tip: Your judgments about whether competitive conditions will be "about the same" or grow
stronger/weaker should be based on what has been happening to the industry-average prices,
P/Q ratings, warranties, advertising, promotional activity, and so on in each region and in each
market segment (entry-level and multi-featured)—this information is, of course, in the
Competitive Intelligence Reports and is your very best source of information about what rival
companies have been up to.
Any time you have a basis for suspecting in what direction the industry average will move for
price or P/Q ratings or warranties or promotional efforts or advertising, then you have a basis
for judging whether competition in the entry-level or multi-featured segments in a region is
probably going to grow stronger or weaker. After all, if you and your co-managers are tempted
to raise/lower your prices or raise/lower your company's P/Q ratings or spend more/less on
advertising, then other companies may be thinking of doing much the same thing for much the
same reasons.
TIP: If you have real doubts about whether competition from rivals is likely to grow stronger or
weaker in the upcoming year, probably the safest or most conservative assumption is that
competition will be "a little stronger" or "slightly stronger." However, when a price war breaks
out or if several companies are aggressively stepping up their competitive efforts, then
"somewhat stronger" or "much stronger" assumptions may be reasonable, particularly in entrylevel cameras. If competition has been especially brutal, such that profits have plunged and
companies seem to be backing off very aggressive and costly marketing efforts to pursue
"profitless" gains in unit camera sales and market shares, then adjusting the sliders to weaker
degrees of competitive intensity (higher prices, lower P/Q stars, weaker marketing efforts) may
be in order.
Using your best judgment of what is likely to occur is better than relying on the weak
assumption that last prior-year industry-average measures of competitive intensity will
carry over unchanged to the upcoming year.
Observation: Over-estimating the likely strength of competition from rivals is better
than under-estimating the likely competitive efforts of rivals. Should the competitive
efforts of rivals turn out to be weaker than expected, your company’s actual
performance will likely be better than what was projected (because unit sales and
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market shares should be higher than projected)—you can live happily with the good
surprise of better-than-expected results. But should the competitive efforts of rivals turn
out to be stronger than you anticipated, then your company’s performance is likely to be
worse than you projected because rivals captured some of the sales and market shares
you were expected to get. The bad surprise of weaker-than-expected results is
obviously something your company should try to avoid.
TIP: You and your co-managers should try out various assumptions about the likely direction
and degree of change in competitive intensity and check out the resulting impact on your
company's projected unit camera sales, market share, revenues, and profitability in each
region for both entry-level and multi-featured cameras. What you will see is that, for any given
level of competitive marketing effort on your company's part (i.e., price, P/Q rating, advertising
level, warranty period, promotional effort, number of models, etc.), your company's projected
sales and market shares will be lower when the competitive efforts of rivals (as
measured by the various industry averages) are expected to be stronger and the
projections will be higher when the competitive efforts of rivals are, on average,
expected to be weaker.
The whole point of trying to correctly anticipate changes in the degree of competition
your company can expect to face is to improve the accuracy of your company’s onscreen projections of unit camera sales, market shares, revenues, and profitability.
What you will discover is that to achieve increased unit sales and market shares in an industry
environment where competitive conditions are growing stronger, it will take a stronger
competitive effort on your company's part (in the form of lower price, higher P/Q rating, more
advertising, and so on) than would be the case if competitive intensity remains about the same
or grows weaker. The stronger the competitive efforts of rivals (as measured by the various
industry averages), the stronger the competitive marketing effort your company will have to
exert to achieve gains in unit camera sales and market shares.
TIP: Avoid making rosy assumptions about competitive intensity just because assuming the
competitive efforts of rivals will become weaker causes more appealing on-screen projections
of unit camera sales and market shares. To base your company's strategy and decisions on
"best-case" (unrealistic?) competitive scenarios when the chances are that your company will
face significantly stronger competition from rivals simply sets your company up to underperform and fall short of meeting investor expectations.
The purpose of making
adjustments in the anticipated degree of competitive intensity is to make on-screen
projections of unit camera sales, market shares, revenues, and profitability more
accurate. Indeed, the closer the on-screen projected outcomes are to the actual outcomes
when the decision results appear, the more that your company's projected performance will
approximate its actual performance and the less likely you will encounter bad surprises and
wonder “what happened?” Moreover, accurate projections result in bonus point awards!!!
Understanding the On-Screen Decision Support Calculations
It is worth re-emphasizing that the on-screen calculations on the marketing decisions screen
are mostly all projections, not the actual outcomes.
Projected Retail Sales and Market Share
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These projections are based on (1) the entries currently showing in the marketing decision
boxes (and entries on all the other decision screens) and (2) the prior-year competitive efforts
of rival companies, as measured by the prior-year industry-averages for selling prices,
advertising, tech support, promotions, P/Q ratings, and so on. The retail sales and market
share projections can turn out to be different from the actual outcomes the more that your
judgments about whether competition in each geographic region will prove to be about the
same, a little stronger/weaker, slightly stronger/weaker, somewhat stronger/weaker, or much
stronger/weaker prove to be off-the-mark.
Moreover, you and your co-mangers will almost certainly make entries on other decision
screens that alter unit costs or the P/Q rating or warranty claim rates or other factors. Then
when you come back to this screen, you are almost certainly going to see changes in the
onscreen calculations that will prompt you to revisit and alter some of the earlier-made
decisions on this screen. It is normal in GLO-BUS to cycle back-and-forth among the different
decision screens (and also consult some of the various Reports available in other parts of the
menu) in arriving at what your and you co-managers consider to be an internally consistent set
of decisions that hold promise for producing good overall company performance.
Revenue-Cost-Profit Projections by Geographic Region
In addition to retail sales and market share projections for both entry-level and multi-featured
cameras for each of the four geographic regions, there are also on-screen projections for net
revenues (both total dollars and per camera), marketing costs and operating profits for each of
the four regions. These are defined as follows:
•
Net revenue per unit — this number equals net revenues divided by the projected number
of cameras shipped to retailers. It is, in effect, the net price received on entry-level
cameras and multi-featured cameras.
•
Marketing costs per unit — this number shows what marketing-related costs your
company will incur as a direct consequence of the decisions entered on this screen. The
$/unit number equals all marketing costs incurred in the region divided by projected
shipments to retailers in the region.
•
Operating profit per unit — this number equals net revenues per unit less all operating
expenses per unit. Interest payments and taxes are not part of operating expenses, as per
general accounting principles. The $/unit number is calculated by dividing operating profits
in the region by projected shipments to retailers in the region; it represents the operating
profit margin per camera shipped.
Projections of Companywide Performance (at the middle-left of each decision screen)
On the left side of every GLO-BUS decision screen there is a box containing projections of the
company’s overall performance for the upcoming year on the following measures:
•
•
Revenues—defined as worldwide revenues (after taking into account all exchange rate
adjustments and promotional discounts) from the combined sales of both entry-level and
multi-featured cameras in all four geographic regions. Revenues are booked at the time of
shipment, not when the company receives the cash payments from camera retailers (which
occurs the quarter following shipment).
Net profit—defined as worldwide profit after all expenses and taxes.
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•
Earnings per share—defined as net profit divided by the number of shares of common
stock outstanding at the end of the year. Earnings per share is one of your company’s five
annual performance targets.
•
ROE—defined as net profit for the year divided by total shareholders’ equity investment at
the end of the year. An annual ROE of 15% or higher is one of your company’s annual
performance targets.
•
Credit rating—Your company’s credit rating is established by credit analysts using four
measures: the percentages of debt and equity that comprise your company’s total capital
investment, times-interest-earned ratio, debt payoff capability (in years), and the % of the
line of credit which you have used (loans outstanding divided by the total line of credit your
company has established with its bank). The credit rating shown at the bottom of the
screen is the projected credit rating for next year, given the company’s projected
performance—it is not the current credit rating (which is reported in each issue of the
GLO-BUS Statistical Review).
The company’s Board of Directors and
investors/shareholders expect that your company will achieve a credit rating of B+ each
year.
•
Image rating—Your company’s image rating is based on (1) its P/Q ratings for both entrylevel cameras and multi-featured cameras, (2) its market shares for both entry-level and
multi-featured cameras in each of the four geographic regions, and (3) your company’s
actions to display corporate citizenship and conduct operations in a socially responsible
manner over the past 4-5 years.
The company’s Board of Directors and
investors/shareholders have established a target image rating of 70 or higher for your
company to achieve each year.
•
Revenues—defined as worldwide revenues (after taking into account all exchange rate
adjustments and promotional discounts) from the combined sales of both entry-level and
multi-featured cameras in all four geographic regions. Revenues are booked at the time of
shipment, not when the company receives the cash payments from camera retailers (which
occurs the quarter following shipment).
•
Net profit—defined as worldwide profit after all expenses and taxes.
Why These On-Screen Projections Are So Important and How to Use Them Properly.
Each time you make a new decision entry, all of the above companywide performance
projections are instantly recalculated, thereby showing you the incremental impacts of that
decision entry. It is easy enough then to simply enter a “trial” decision and determine whether
the resulting projections look better or worse than before. By entering several different “trial”
decisions, you can quickly and readily compare the projected outcomes of “what if we do this”
against “what if we do that.” After entering a number of different trial decisions, you’ll be able
to identify which decision entry seems “best” or “most acceptable,” given all the different onscreen calculations that are provided. This GLO-BUS feature provides you with powerful
capability to explore all kinds of “what if” scenarios and make wise numbers-based decisions.
Always bear in mind that the projections do not represent a “valid” indication of your
company’s projected performance until you and your co-managers have made a
complete set of decisions (covering all decision screens) for the upcoming year. In
other words, while you are working your way through the early decision screens the projections
will be updated with each entry, but the numbers shown will only be “a rough approximation”
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Marketing Decisions Help
and lack finality because the projections are not yet based on all the decision entries you
plan to make for the upcoming year.
Once you have gone through all the decision screens and entered what you think are
reasonable decisions for all the boxes, then it is time to really scrutinize all the various
company performance projections and determine whether the projected outcomes of your
strategy and decision-making look acceptable. If not, then you need to tour back through the
decision screens, make different trial decisions here and there as seem appropriate, and not
stop tweaking and fine-tuning until you arrive at a set of company projections that appears to
be the best you can come up with. But even then, then projections are still only projections—
they do not represent guaranteed outcomes. Why? Because there remain a host of
uncertainties about what competitors will actually do (what prices will they charge, how much
they will spend on advertising, how many different camera models they will offer, what
warranties they will offer, and so on). These will not be known until the deadline for the
decision round arrives, at which time the GLO-BUS server will process the decision entries of
all companies and determine the actual outcomes of competition in the marketplace for digital
cameras.
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