Implementation of Strategies

Implementationof Strategies

Implementationof Strategies

Fromthe cost-volume-profit analysis carried out in SLP 3, it is importantto implement the strategic choices made in order to produceperformance and achieve the desired results. Also, after thesestrategies are implemented, there will be effectiveness of methods ofoperations in relation to cost, volume and profitability which inturn determines the level of competitiveness and survival in thefuture. According to Prihadyanti (2011), to implement any givenstrategy, you should use organizational structure, people, andculture and control systems.&nbsp An organization should also havehigh level of decision making in order to implement and establish newstrategies. The organization should also carry out an analysis of theeffectiveness of new strategies and the method of operationsregarding cost, volume, and profitability. This helps theorganization to forecast about its future sales, competitiveness andexistence in the market. In order to increase profitability, theorganization must also consider its ability to meet the needs ofconsumers. The consumers contribute to highest percentage of anorganization’s performance. The organization can use severalsystems to control strategy implementation such as account budgetingsystems, information system and also measurement and reward systems.

Product

Thetables presented below indicate the changes in cost, volume of salesand profit for the year 2012, 2013, 2014 and 2015 after the proposedstrategies were implemented. As Zeithaml,Bitner and Gremler (2010) explain, anydecisions made by an organization towards price are important sincethey affect the revenue generated by the business and also thebehavior of consumers towards buying the product. The informationprovides guidance for pricing as well as the R&ampD funding for thethree products X5, X6 and X7 produced by the company. The decisionsmade on price are significant because they affect both the revenuegenerated by the company and the buying behavior of consumers.

Table1: Financial Summary for the year 2012

Thetable below shows the marketing and financial information forproducts X5, X6 and X7 in the year 2012 after the proposed strategieshave been implemented.

X5

X6

X7

TOTAL

SALES

968,979

562,961

0

1,531,940

REVENUE

276,159,075

242,073,200

0

518,232,275

COST

VARIABLE COST

145,346,882

154,814,256

0

300,161,138

FIXED COST

75,000,000

37,500,000

37,500,000

150,000,000

R &amp D COSTS

16,549,254

17,537,910

0

34,087,164

TOTAL COSTS

236,896,136

209,852,166

37,500,000

484,248,302

PROFIT

39,262,939

32,221,034

-37,500,000

352,243,200

PROFITABILITY

14%

13%

-1%

26%

PERFORMANCE

1

1

1

Table1:Thefinancial summary of the year 2012 after the strategies have beenimplemented.

Thetable above shows the effectiveness of implementing the strategiesproposed for each product since the volume of profits has increasedfrom 81,571,138 in 2011 to 352,243,200 in 2012. The improvement inprofit volume was mainly contributed by product X7.This shows that areduction of its price to $180 has attracted the customers towardsthe product. The increase in the R&ampD costs for product X5 and X6by 40% and 44% respectively contributed to increase in volume ofprofit although their profitability decreased by 2% for X5 and 3% forX6. Tan(2014)elaborates that the products are capable of increasing their salessince none of them has reached saturation level.

Thefinancial summary for the year 2013

&nbsp Thetable below shows the marketing and financial information for theyear 2013 based on the year 2012 and after the proposed strategiesfor the year have been put in place. The volume of profit during thisyear was 860,241,149 indicating that all the proposed strategies wereeffective after implementation since this amount equals to theexpected value at the end of the year. This shows the positive effectof differentiating product X5 from other similar products in themarket. Also, reduction in its cost contributed to this achievement.

X5

X6

X7

TOTAL

SALES

968,979

562,961

0

1,531,940

REVENUE COST

276,159,075

242,073,200

0

518,232,275

VARIABLE COST

145,346,882

154,814,256

0

300,161,138

FIXED COST

75,000,000

37,500,000

37,500,000

150,000,000

R &amp D COSTS

23,499,941

36,366,610

352,243,200

412,109,751

TOTAL COSTS

243,846,823

228,680,866

389,743,200

862,270,889

PROFIT

32,312,252

13,392,334

814,536,563

860,241,149

PROFITABILITY

12%

6%

8%

26%

PERFORMANCE

1

1

1

Table2: The financial summary for the year 2013

Thefinancial summary for the year 2014

Thetable shown below is based on the results achieved in the year 2013indicates that that X5 was capable of generating more sales althoughthe expectation according to the strategy given was that it wouldreach saturation level. This unexpected change was probably as resultof reducing its price to $267. A decrease in price can lead toincrease in sales since some customers are insensitive to productquality but rather sensitive to product price. Steward (2014)observes that instead X6 has a constant reduction in volume and it’sno longer generating more sales irrespective of the improvement inR$D costs to 47%. The decrease in volume of sales was likely led bythe increase in price to $450.X7 has reached its break-even point andis no longer generating losses but profit. Its profitability hasincreased to 24% and its now in the profitability phase. The expectedvalue of 1,281,927,788 was not achieved. This is an indication thatimplementing the strategies put across was not effective andtherefore gave negative results. Only some of the strategies wereeffective. The company should make quick decisions towards increasingits volume of sales or come up with a new strategy which is capableof ensuring high sales and profitability. Similarly they can create anew product that will take over after the saturation of X6 to ensuresurvival in the market.

X5

X6

X7

TOTAL

SALES

968,979

562,961

0

1,531,940

REVENUE COST

276,159,075

242,073,200

0

518,232,275

VARIABLE COST

145,346,882

154,814,256

0

300,161,138

FIXED COST

75,000,000

37,500,000

37,500,000

150,000,000

R &amp D COSTS

34,074,914

53,458,917

521,319,936

608,853,767

TOTAL COSTS

254,421,796

245,773,173

558,819,936

1,059,014,905

PROFIT

21,737,279

-3,699,973

842,203,843

860,241,149

PROFITABILITY

8%

-2%

24%

30%

PERFORMANCE

1

1

1

Table3: The financial summary for the year 2014

Thefinancial summary for the year 2015

Thetable below shows the marketing information for the year 2015 afterthe suggested strategies were put in place and based on the resultsin 2014. Despite the implementation of the X5 product strategy ofreducing price to $260, there was a reduction in profit volume from21,737,279 to 5,381,320. This indicates that the negative results ofthe implemented strategies in the year 2014 also affected the year2015. Despite the price of X6 remaining constant, $450, andimprovement in its R$D costs, it is not generating any more profitsbut rather losses. This is contrary to the expected results accordingto the strategies put across. Its profitability is decreasingfurther. X7 has increased its profit volume from 842,203,843 to858,559,802. This is an indication that it’s still at the profitphase. Most of the strategies put across did not give the expectedresults. Growth is only with respect to X7 meaning that it is theonly product capable of generating new sales and enhancingprofitability. Therefore, discontinuation of X5 and X6 during theother years is significant to direct all the revenue to thedevelopment of X7, which is capable of ensuring high sales andprofitability use it to create a new product.

X5

X6

X7

TOTAL

SALES

968,979

562,961

0

1,531,940

REVENUE

276,159,075

242,073,200

0

518,232,275

COST

VARIABLE COST

145,346,882

154,814,256

0

300,161,138

FIXED COST

75,000,000

37,500,000

37,500,000

150,000,000

R &amp D COSTS

50,430,873

53,458,917

797,619,502

901,509,292

TOTAL COSTS

270,777,755

245,773,173

835,119,502

1,351,670,430

PROFIT

5,381,320

-3,699,973

858,559,802

860,241,149

PROFITABILITY

2%

-2%

24%

30%

PERFORMANCE

1

1

1

&nbspTable4: The financial summary for the year 2015

Priceof Products

PRODUCT

2012

2013

2014

2015

X5

40%

42%

45%

48%

X6

40%

44%

47%

52%

X7

37%

41%

48%

53%

Conclusion

Theability of the company to acquire competitiveness in the marketdepends on its ability to meet the desires and demands of consumers.For a company to be successful in the market, it should have theability to innovate continuously to meet the changing interests ofconsumers. There should be high differentiation of products to helpin reducing the price elasticity of the products supplied by thecompany. The company should also consider the R&ampD costs in orderto enhance production of high quality products that will define themuniquely in the market. It will also help to earn consumer loyaltyand commitment responsible for ensuring growth in sales. In addition,this will enable the invention of improved production methods thatwill lower the cost of production, which in turn will enable thecompany to lower its prices to increase its sales. The company needsto focus on what it can produce efficiently and target the high-classconsumers that make purchase decisions based on the product qualityrather than price to earn higher profitability. The strategiesproposed will be difficult for competitors to imitate, meaning thatthe company will be in a better position to increase its productivityand profitability to become the most dominant. The organization hasto come up with better recommendations than those that lead to poorperformance of the business. At the end of each year, there should bean analysis of effectiveness of the methods of operations in relationto cost, volume, and profitability that determines the level ofcompetitiveness and sustainability of the business in future.

References

Prihadyanti,D. (2011). CVP Analysis Incorporating the Cost of Capital on R&ampD.International

Journalof Engineering Science and Technology,3(4), 3446-3448.

Steward,R. (2004). Simulation: the Practice of Model Development and Use.Hoboken: John Wiley &amp Sons.

Tan,H. (2014). Simulation and Modelling Methodologies, Technologies andApplications. UK: WIT Press.

Zeithaml,V. A., Bitner, M. J. and Gremler, D. D. (2010). Servicesmarketing strategy. Hoboken: John Wiley &amp Sons.