This is the presentation from the capstone simulation competition conducted at Kelley School of Business towards the completion of our MBA. The simulation involved decision on various business functions including Marketing, Operations, Finance and Investor relations. We worked in a team of 5-6 students to run a company making decisions on these functions as a team.

1. Board of Directors Meeting
Team Baldwin
World 4
Ben Pileggi
Dev Anumolu
Tom Qi
Mickey Lee
Colleen Powers
March 6, 2009
I have neither given or received unauthorized aid on this deliverable.

2. May 27, 2009
Agenda
1. Review of Business Strategy
2. Overall Performance Snapshot
3. Functional Performance Assessment
• Product Market
• Volume Products
• Margin Products
• Productivity and Operations
• Financial Management
4. Pro-forma Projections
2

3. May 27, 2009
Business Strategy - Key Decision Points
Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7 Round 8 Next 3
Differentiation –
Product Lifecycle
Product Portfolio
(3 segments)
Introduce New
Product in High
End
Differentiation in 4
segments
Portfolio
Rationalization
(Cut 2 products)
Focus on Market
Metrics
Share
Focus on Margin
3

4. May 27, 2009
Performance Snapshot – Return on Equity
Baldwin ROE
30%
Growing ROE since year 4
28%
20% 18%
10% 9% 9% 11%
10%
6% 2%
0%
-4%
R0 R1 R2 R3 R4 R5 R6 R7 R8 ROE for Industry in 2017
-10%
Ferris Andrews
11% 29%
Erie
22%
Second highest ROE in the
Industry
Digby
28% Baldwin
Chester 28%
10%
4

5. May 27, 2009
Performance Snapshot – Market Share
Market Share Comparison
120%
100%
80%
60%
40%
20%
16.7% 18.1% 17.6% 19.3% 14.6% 15.9% 14.5% 14.8% 15.3%
0%
R0 R1 R2 R3 R4 R5 R6 R7 R8
Baldwin Andrews Chester Digby Erie Ferris
After growing for the first 4 years, market share leveled off near
15% in latter years as focus shifted to profit margins
5

6. May 27, 2009
Performance Snapshot – Market Capitalization
Market Capitalization
(in millions)
450
400
350
300 Baldwin
221 Andrews
250
186
Chester
200 120
81 Digby
150
69 75 79 64 Erie
100 71
Ferris
50
0
R0 R1 R2 R3 R4 R5 R6 R7 R8
Market capitalization ranked second among all competitors due
to increasing stock price and capital structure
6

7. May 27, 2009
Balanced Scorecard
Weighted Average Market Cap 13.6/20
Customer Survey Sales 18.3/20
Score 20 /20 Customer Financial Emergency Loan 0/20
Perspective
Market Share 23.2 /40 Subtotal 31.9/60
Subtotal 43.2 /60
Balanced
Scorecard
Learning Internal
and Growth Business
Sales/Employee 10.4 20 Process
Assets/Employee 8.2 20 Operating Profit 32.660
Profits/Employee 7 20 TOTAL 133 240
Subtotal 25.6 60
Score
55% of metrics
7

8. May 27, 2009
Keys to success
Strategy Effect
Portfolio Diversification Well positioned to compete in
both high volume and high
margin product segments
Rationalizing Portfolio - to Adequate resources to grow
focus on 4 products in 4 each of the focus areas in a
segments competitive environment
Controlling expenses - after Investing only what we needed to
early years of heavy investing maintain and grow our market
share in targeted segments
Early investment in Lower production, materials and
automation, productivity and labor costs fueling higher
HR margins
8

9. May 27, 2009
Diagnosis of failures
Issue Effect
Reacted too much to Changed strategy after the first
competitors round.
Spread resources to thin in early
rounds
Over looked cost control in Lower profitability in middle years
rounds 3 and 4 resulting in due to high interest costs, large
back-to-back emergency loans inventory expenses
Delayed in devising plan for Failed to meet sales projections
optimal production and
capacity mix in the early years
Risk averse in later years and Slower growth in competition and
underestimated the potential of large amounts of cash on hand
the market
9

10. May 27, 2009
LOW PERF
Product market: Volume Products
TRAD
SIZE HIGH
Traditional - Baker Low End - Bead
Focus on price, keeping operating costs low
Strategy
giving the customers what they want
Deliver on customer needs Meet customer demand for
(Focus on Position, MTBF and age and ideal position (size
R&D
Age) and performance)
Tactics
Marketing
- Price at the highest - Hold price to maintain
- Maintained 100% awareness contribution margin and meet
- Increased our spending over customer needs
the years to increase - Spend in marketing and
accessibility sales to maintain leadership
10

11. May 27, 2009
Volume Products - Execution
Traditional - Baker Low End - Bead
Sales in Traditional Sales in Low
600,000 60,000
500,000 50,000
400,000 40,000
300,000 30,000
200,000 20,000
100,000
10,000
0
0
R0 R1 R2 R3 R4 R5 R6 R7 R8
R0 R1 R2 R3 R4 R5 R6 R7 R8
Average among major players Baker Average among major players Bead
Baker performed above average Bead performed above average in
early years then dropped
CAGR: 44% CAGR: 5%
11

12. May 27, 2009
LOW PERF
Product market: Margin Products
TRAD
SIZE HIGH
High End - Brave Size - Buddy
Strategy Meet top 2 customer specifications and maintain
maximum spending on R&D and marketing
Tactics -Annual product updates to Annual product updates to
maintain ideal position and low maintain ideal position and
R&D
age MTBF
- MTBF at highest level
Marketing
- Match competitor price each - Maintain upper end price
year by lowering $.50 per year - Maintain max awareness
- Maintain max awareness - Incremental gains in sales
- Improve distribution each
year
12

13. May 27, 2009
Margin Products - Execution
High End - Brave Size - Buddy
Sales in High Segment Sales in Size Segment
60,000
300,000
50,000
250,000
40,000
200,000
30,000
150,000
20,000
100,000
10,000
50,000
0
0
R0 R1 R2 R3 R4 R5 R6 R7 R8
R0 R1 R2 R3 R4 R5 R6 R7 R8
Average among major players Brave Average among major players Buddy
Brave performed with the Buddy performed above average
average in a competitive market in a rapidly growing market
CAGR: 38% CAGR: 48%
13

14. May 27, 2009
Production and Operations
Strategy Automate low end and invest in capacity in each round
Maintain the lowest inventory to reduce inventory
Inventory
carrying costs and avoiding emergency loans
Focus on quality for employees – higher wage rate
Labor/
Tactics and gradual investments in recruitment and training
HR Mgmt
• Invest in moderates increases in capacity
PPE/ TQM • Sell excess capacity in obsolete segments
• Invest continuously in TQM initiatives
14

15. May 27, 2009
Production and Operations - Execution
TQM Summary
16%
14%
Percentage Change
12%
10%
8%
6%
4%
2%
0%
R3 R4 R5 R6 R7 R8
Demand Increase 0.0% 3.7% 3.7% 9.2% 14.0% 14.3%
Labor Cost Reduction 0.0% 6.2% 9.1% 9.1% 12.5% 13.3%
Material Cost Reduction 0.0% 3.4% 8.1% 8.7% 9.4% 10.5%
Gradual TQM investments made significant impacts on labor and
material cost reduction
15

16. May 27, 2009
Production and Operations - Execution
Contribution Margin
60%
50%
40%
30%
20%
10%
0%
R0 R1 R2 R3 R4 R5 R6 R7 R8
Baker Bead Brave Buddy
Contribution margin remained stable and strong between 20%
and 50% during the last four years
16

17. May 27, 2009
Financial Management
Target Meeting operational need for capital while maximizing return of
value to shareholders
Tactics • Monitor and value marketing projections
Capital • Evaluate expense and optimizing cost control
Budgeting • Estimate cash flow from operations and buffer
Capital • Use leverage to avoid to financing directly from
Structure and stock market
leverage • Protect interest of current shareholders
Maintain constant dividends yield and sharing profits
Dividend
with shareholders
Policy
17

18. May 27, 2009
Financial Management - Execution
35,000,000 2.50
Dividend in Dollars Leverage
30,000,000
2.00
25,000,000
1.50
20,000,000
15,000,000 1.00
10,000,000
0.50
5,000,000
0 0.00
R1 R2 R3 R4 R5 R6 R7 R8 R1 R2 R3 R4 R5 R6 R7 R8
• Predicted the increasing demand for capital and avoided frequent use of emergency
loan as revenue stabilized
• Cash flow from operations allowed for less dependence on debt and equity from
capital markets
• Effectively used leverage and managed to balance benefit and impact from interest
expense
• Successfully maintained the increase of dividends yield
18

19. May 27, 2009
Future Strategy
Overall Maintain existing strategy – harvest Traditional & Low
Strategy segments and continue to investment in Size and High
End segments
• Aggressively invest in Size and High End
R&D • Modest investments in Traditional
Functional Areas
Maintain current (max) awareness levels and
Marketing continue to build distribution for increase satisfaction
Modest capacity investments on par with expected
Production sales
19

20. May 27, 2009
Pro Forma Statement Summary
Maturing industry still offers growth opportunities for company’s
poised well for success
Anticipate $368M Revenues by Year 11
Modest capacity investments to keep up with demand
Utilize leverage as necessary
Continue to pay dividends
See appendix for full detail
20

21. May 27, 2009
Appendix
• Business Strategy
• Sales Projections
• Capacity Worksheet
21

22. May 27, 2009
Business Strategy – Guiding Principles
DIFFERENTIATON
ACROSS 4 SEGMENTS
FOCUS ON RETURNS TO BALANCE
SHAREHOLDERS LOW PERF VOLUME WITH MARGIN
TRAD
SIZE HIGH
PRACTICE CONSERVATIVE INVEST REGULARLY IN
FINANCIAL MANAGEMENT TECHNOLOGY AND
EMPLOYEE DEVELOPMENT
22

23. May 27, 2009
Sales Projections
Segment Period 0 1 2 3 4 5 6 7 8
Low End 8,960 10008 11179 12487 13948 15580 17403 19439 21714
growth 12%
price 21 20.50 20.00 19.50 19.00 18.50 18.00 17.50 17.00
High End 2,554 2968 3449 4007 4656 5411 6287 7306 8489
growth 16%
price 38 37.50 37.0 36.50 36.0 35.50 35.0 34.50 34.0
Performance 1,915 2294 2748 3293 3945 4726 5661 6782 8125
growth 20%
price 33 32.50 32.0 31.50 31.0 30.50 30.0 29.50 29.0
Size 1,984 2347 2777 3285 3886 4597 5438 6433 7611
growth 18%
price 33 32.50 32.0 31.50 31.0 30.50 30.0 29.50 29.0
Traditional 7,387 8067 8809 9619 10504 11470 12526 13678 14937
growth 9%
price 28 27.50 27.0 26.50 26.0 25.50 25.0 24.50 24.0
Assumptions
Growth per segment consistent over time
Price decreases by .5 per year
Margin stays the same
23

24. May 27, 2009
Capacity Decisions
Period 0 1 2 3 4 5 6 7 8
8960 10008.32 11179.29 12487.27 13948.28 15580.23 17403.12 19439.28 21713.68
growth 0.117
price 21 19 18.5 18 17.5 17 16.5 16 15.5
Mkt share 0.17 0.17 0.17 0.17 0.17 0.17 0.17 0.17 0.17
Volume 1523.2 1701.414 1900.48 1027 1214.941 1357.089 1515.869 1693.225 1891.332
1st shift Production 500 500 500 500 500 500 500 500 500
2nd shift 500 500 500 500 500 500 500 500 500
2nd shift extra cost 1780 1780 1780 1780 1780 1780 1780 1780 1780
Total 2nd shift cost 16020
Loss of opportunity volume 523.2 701.4144 900.4799 27 214.941 357.0891 515.8685 693.2251 891.3325
Lost Margin 3175.824 2854.757 3214.713 82.89 552.3984 739.1744 809.9136 741.7509 508.0595
Total lost margin 12679.48
Cost to Increase capacity at
current auto level 13000
If the 2nd shift cost and total lost margin was more we tried
==> Increase capacity ? Yes to increase capacity
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25. May 27, 2009
Balance Sheet - Projection
Actuals Forecasts
6 7 8 Year +1 Year +2 Year +3
ASSETS:
Cash 12,355 18,496 26,970 33,413 41,395 51,284
Accounts Receivable - Trade 14,681 16,425 19,134 21,765 24,757 28,161
Inventories 13,032 8,973 830 842 855 868
CURRENT ASSETS 40,068 43,894 46,934 56,020 67,007 80,313
Property, Plant & Equipment - at cost 183,600 168,130 168,130 181,691 191,170 191,170
Accumulated Depreciation -86,856 -90,960 -102,168 -114,281 -127,026 -139,771
TOTAL ASSETS 136,812 121,064 112,896 123,430 131,151 131,711
LIABILITIES:
Accounts Payable - Trade 9,170 10,568 12,432 13,800 15,317 17,002
Notes Payable and Short Term Debt 15,977 0 0 0 0 0
CURRENT LIABILITIES 25,147 10,568 12,432 13,800 15,317 17,002
Long Term Debt 11,895 16,895 16,895 19,749 15,296 2,391
TOTAL LIABILITIES 37,042 27,463 29,327 33,548 30,613 19,393
SHAREHOLDERS' EQUITY
Common Stock + Paid in Capital 54,360 54,360 54,360 54,360 54,360 54,360
Retained Earnings 45,410 39,241 29,209 35,521 46,178 57,958
SHAREHOLDERS' EQUITY 99,770 93,601 83,569 89,881 100,538 112,318
TOTAL LIABILITIES AND EQUITIES 136,812 121,064 112,896 123,430 131,151 131,711
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26. May 27, 2009
Cash Flow Statement - Projection
Actuals Forecasts
IMPLIED STATEMENT OF CASH FLOWS 7 8 Year +1 Year +2 Year +3 Year +4
NET INCOME 17,312 23,488 35,014 45,312 54,562 0
Add back Depreciation Expense 4,104 11,208 12,113 12,745 12,745 -139,771
(Incr.) Decrease in Receivables - Trade -1,744 -2,709 -2,631 -2,992 -3,404 28,161
(Incr.) Decrease in Inventories 4,059 8,143 -12 -13 -13 868
Incr. (Decr.) in Acct. Payable - Trade 1,398 1,864 1,368 1,518 1,685 -17,002
NET CF FROM OPERATIONS 25,129 41,994 45,851 56,570 65,575 -127,745
(Incr.) Decrease in Prop., Plant, & Equip. at cost 15,470 0 -13,561 -9,479 0 191,170
NET CF FROM INVESTING 15,470 0 -13,561 -9,479 0 191,170
Incr. (Decr.) in ST Debt -15,977 0 0 0 0 0
Incr. (Decr.) in LT Debt 5,000 0 2,854 -4,453 -12,905 -2,391
Dividends -23,481 -33,520 -28,701 -34,656 -42,781 -57,958
NET CF FROM FINANCING -34,458 -33,520 -25,848 -39,109 -55,686 -114,709
NET CHANGE IN CASH 6,141 8,474 6,443 7,982 9,889 -51,284
26

27. May 27, 2009
Income Statement - Projection
Actuals Forecasts
Year 6 7 8 Year +1 Year +2 Year +3
INCOME STATEMENT
Revenues 178,625 199,838 232,803 271,215 315,966 368,100
Cost of Goods Sold -119,868 -133,728 -159,507 -184,427 -214,857 -250,308
Gross Profit 58,757 66,110 73,296 86,789 101,109 117,792
Selling, General and Admin. Expense -34,073 -34,500 -33,246 -27,205 -22,262 -18,217
Other Operating Expenses (1) -4,136 -3,060 -2,000 -3,800 -7,220 -13,718
Operating Profit 20,548 28,550 38,050 55,784 71,627 85,857
Interest Expense -2,891 -1,916 -1,916 -1,916 -1,916 -1,916
Income before Tax 17,657 26,634 36,134 53,868 69,711 83,941
Income Tax Expense -6,180 -9,322 -12,646 -18,854 -24,399 -29,379
NET INCOME 11,477 17,312 23,488 35,014 45,312 54,562
Other Comprehensive Income Items -252 -381 -517 -518 -517 -518
COMPREHENSIVE INCOME 11,225 16,931 22,971 34,496 44,795 54,043
27