As a group we look very carefully to the Generic Business Strategy, the Business Model and the Financial Objectives for our Company (Andrews)

1. STRATEGIC PLAN
PROJECTIONS
CREATED BY: ADNAN ALQARNI,FAVIOLA CARDENAS,
JUAN SANCHEZ AND SARAH TINOCO
BAD 490/BUSINESS POLICIES
NOVEMBER 6, 2016

2. 1.1 Generic Business Strategy: Scope
• Claim your strategy: Broad Cost Leader
• Scope
• Andrews offer five products in five different market segments:
• Traditional: Able
• Low End: Acre
• High End: Adam
• Performance: Aft
• Size: Agape
• As a cost leader, Andrews focuses on low price markets, Traditional and
Low End, to satisfy customers with below average prices made possible
by low costs
1-PERFORMANCE & PLANNING MEASUREMENT

3. 1.1 Generic Business Strategy: Competitive
Advantage
• Competitive Advantage
• Andrews maintains low costs in:
• Research & Development
• Production
• Materials
• Automation
• Andrews competes in the market with below
average prices

4. 1.2 Business Model
• To generate revenue
• Andrews operates in all five market segments (later four segments) to
reach the maximum amount of customers to sell to
• Andrews maximizes its promotion and sales budgets to continue to
reach full awareness and accessibility of its products and each segment
by designated customers
• To reduce costs
• each year, Andrews increases automation for each product in their
respective segments
• in Year 3, Andrews exited the High End market, eliminating Adam – its
most costly product

5. 1.3 Financial Objectives
Objectives Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7 Round 8
Sales $100,000,000 $105,000,000 $120,000,000 $130,000,000 $145,000,000 $160,000,000 $180,000,000 $200,000,000
Profits $6 Million $8 Million $10 Million $10 Million $12 Million $15 Million $20 Million $30 Million
Leverage 2.0 2.3 2.5 2.5 2.5 2.5 2.5 2.5
Stock Price $3.00 $1.00 $1.00 $1.00 $1.25 $1.75 $2.15 $2.50
Contribution
Margin
27.5% 28.5% 30.0% 32% 33.50% 35% 37.50% 40.0%

6. Objectives Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7 Round 8
Capacity
No
Change
Sell Capacity
for 3
products
No Change No Change Buy Capacity
(if needed)
No Change No Change No Change
Number of
Products
5
Trad, Low,
High, Pfm, Size
5
Trad, Low,
High, Pfm,
Size
4
Trad, Low,
Pfm, Size
4
Trad, Low,
Pfm, Size
4
Trad, Low,
Pfm, Size
4
Trad, Low,
Pfm, Size
4
Trad, Low,
Pfm, Size
4
Trad, Low,
Pfm, Size
Positioning
Ideal Spots for
each except
Low-end
Ideal Spots
for each
except Low-
end
Ideal Spots
for each
except Low-
end
Ideal Spots
for each
Ideal Spots
for each
except Low-
end
Ideal Spots
for each
except Low-
end
Ideal Spots
for each
except Low-
end
Ideal Spots
for each
except Low-
end
Customer
Awareness
(Promo
Budget)
50% 70% 80% 85% 90% 95% 100% 100%
Customer
Accessibility
(Sales Budget)
50% 60% 70% 80% 85% 90% 95% 100%
1.4 Strategic Objectives:

7. 1.5 Projected Income Statements
Column1 Round 0 Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7 Round 8
Sales ($)
101,073.00 106,555.00 101,483.00
117,883.00
133,843.00 149,803.00 165,763.00
181,723.00
197,683.00
Cost of Goods Sold
(COGS) 72,513.00 76,485.00
76,917.00
76,280.00 83,055.00 89,830.00 96,605.00 103,380.00
110,155.00
Depreciation
7,587.00 8,160.00 8,847.00 9,069.00 9,690.00
10,311.00
10,932.00
11,553.00 12,174.00
SGA
8,978.00 16,868.00 20,133.00 20,101.00 24,742.00 29,383.00 37,024.00 44,665.00 52,306.00
EBIT
11,996,365.00 3,788.00
3,774.00
(3,297.00) 3,638.00 3,979.00 4,320.00
4,661.00
5,002.00
Interest
5,421.00
7,567.00 9,132.00 12,435.00 13,549.00
14,663.00
15,777.00 16,891.00
18,005.00
Taxes
2,301.00 (1,323.00) (1,875.00) 5,506.00 (3,469.00) (1,432.00) 605.00 2,642.00 4,679.00
Net Income
4,189.00 (2,456.00) (3,482.00) (10,225.00) (6,442.00) (2,659.00)
1,124.00
4,907.00 8,690.00

8. 1.6 Projected Free Cash Flow Drivers
Equations used:
• Contribution Margin-[(Sales-Variable Expenses)/Sales]
• Net Working Capital / Sales- [(CA-CL)/Sales]
• WACC (Weighted Average Cost of Capital)- rD (1- Tc )*( D / V )+ rE *( E / V )
Round 0 Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7 Round 8
Sales Growth Rate 9.2% 9.2% 9.2% 9.2% 10% 10.2% 10.4% 10.6% 10.8%
Contribution Margin 28.3% 28.2% 30.4% 35.3% 37.9% 39% 41% 43% 45%
Cash Tax Rate 25% 25% 25% 25% 27% 29% 31% 33% 35%
Net Working Capital /
Sales
-28% -34% -40% -47% -54% -61% -68% -75% -82%
Fixed Assets / Sales 75% 77% 80% 75% 77% 80% 75% 77% 80%
WACC 7% 7% 7% 7% 7% 7.5% 7.7% 7.9% 7.11%

9. 1.7 Projected Free Cash Flow
Column1 Round 0 Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7 Round 8
Profits 4,189.00 (2,456.00) (3,482.00) (10,225.00) (6,442.00) (2,659.00) 1,124.00 4,907.00 8,690.00
Taxes 2,301.00 (1,323.00) (1,875.00) (5,506.00) (3,469.00) (1,432.00) 605.00 2,642.00 4,679.00
After Tax profits 1,888.00 (1,133.00) (1,607.00) (4,719.00) (2,973.00) (1,227.00) 519.00 2,265.00 4,011.00
Depreciation 7,587.00 8,160.00 8,847.00 9,069.00 9,690.00 10,311.00 10,932.00 11,553.00 12,174.00
Free Cash Flows 9,475.00 7,027.00 7,240.00 4,350.00 6,717.00 9,084.00 11,451.00 13,818.00 16,185.00
*FCF = (After-Tax Profits) + (Depreciation)

10. 2-EXTERNAL ANALYSIS
Customer Buying
Criteria
Traditional Low-End High-End Performance Size
Age 47% 24% 29% 9% 29%
Price 23% 53% 9% 19% 9%
Ideal Position 21% 16% 43% 29% 43%
Reliability/MTBF 9% 7% 19% 43% 19%
2.1-Customer Segments & Motivations

11. 2.2 Project Market Sizes
Traditional Low End High End Performance Size
7,387 8960 2554 1915 1984
8,067 10,008 2,968 2,294 2,347
8,809 11,179 3,449 2,748 2,777
9,619 12,487 4,007 3,293 3,285
10,504 13,948 4,656 3,945 3,886
11,470 15,580 5,411 4,726 4,597
12,526 17,403 6,287 5,661 5,438
13,678 19,439 7,306 6,782 6,433
14,937 21,714 8,489 8,125 7,611

12. 2.3 INDUSTRY – Wide Capacity
1st Shift INDUSTRY CAPACITY
(assume constant capacity)
2nd Shift INDUSTRY CAPACITY
(assume constant capacity)
Year
Trad, 1st
Shift
Low, 1st
Shift
High, 1st
Shift
Perf, 1st
Shift
Size, 1st Shift
Trad, 2nd
Shift
Low, 2nd
Shift
High, 2nd
Shift
Perf, 2nd
Shift
Size,
2nd Shift
0 10800 8400 5400 3600 3600 21600 16800 10800 7200 7200
1 10800 8400 5400 3600 3600 21600 16800 10800 7200 7200
2 10800 8400 5400 3600 3600 21600 16800 10800 7200 7200
3 10800 8400 5400 3600 3600 21600 16800 10800 7200 7200
4 10800 8400 5400 3600 3600 21600 16800 10800 7200 7200
5 10800 8400 5400 3600 3600 21600 16800 10800 7200 7200
6 10800 8400 5400 3600 3600 21600 16800 10800 7200 7200
7 10800 8400 5400 3600 3600 21600 16800 10800 7200 7200
8 10800 8400 5400 3600 3600 21600 16800 10800 7200 7200

13. INDUSTRY DEMAND
Trad. Demand Low Demand High Demand Perf. Demand Size Demand
7387 8960 2554 1915 1984
8067 10009 2967 2294 2347
8809 11180 3448 2749 2776
9619 12488 4007 3293 3284
10504 13949 4656 3945 3885
11471 15581 5410 4726 4596
12526 17404 6286 5662 5437
13678 19440 7305 6783 6432
14937 21715 8488 8126 7609
2.3 INDUSTRY – Wide Capacity Cont..

14. 2.4 Chart of Supply & Demand

15. 3.3 Resources & Capabilities
Tangible Resources Intangible Resources
Capabilities
Financial:
• We were able to raise money by obtaining
long term debt on every round.
• We had money on hand from round 0 – 2.
• We had an emergency loan on round
three.
• We bought and sold capacity to raise
money.
Physical:
• We have invested a lot of money on
machinery.
Technological:
• We increased our automation level in the
first two rounds.
Organizational:
• We work according to our strategic plan,
which is low cost.
• We have an excellent evaluation for some
of our products.
Human:
• All our employees are capable and well trained
to do their job.
• All our headcount are trustworthy, which
helps the success of the company.
• Every employee in the organization can share
any idea that can benefit our company.
Innovation & Creativity:
• We are looking for ways to create and establish
products that can differentiate us from our
competitors.
Reputation:
• Our brand name is known for the quality of
our products and the low prices that we offer
to our customers.
• We are focused on giving our customers what
they want.
Leadership:
• Our leadership team works hard on motivating
the individuals to achieve the company’s goals.
• We try to keep our employees happy; giving
them great benefits.
• We have outstanding customer service for all our
customers.
• We have great communication within the
company in every area of performance.
• Our human resource team does a great job
hiring, motivating and retaining human capital.
3- INTERNAL ANALYSIS

16. 3.4 Testing for Core Competence
Potential Source
of SCA
Valuable? Rare?
Difficult to
Imitate?
Difficult to
Substitute?
Effect on
Perform.?
Brand Image
    Parity, No
Advantage
Innovation
    Competitive
Advantage
High Quality
Products     Parity, no
advantage
Financial
    Temporary
Advantage
Human Skills     Parity, no
advantage
Competitive advantage
rendered unsustainable
No advantage. Must be Valuable
AND Rare for advantage