Uh Scm 4380 Annual Report

2802 words - 12 pages

Company NN

December 4, 2013
Company NN

December 4, 2013
Annual Report

Letter to Stockholders
Annual Report

Letter to Stockholders

Letter to Stockholders
To our Stockholders,
Thank you for supporting Company NN. The last four quarters has definitely been a challenging one for the Cereal industry where many cereal companies compete in the same market. Company NN has been striving to become the first choice in cereal that provides customers with the best quality and the best price. In order to achieve this, it requires a long-term strategy that will be executed fully over the next few years. In the last four quarters, we have successfully launched the six customer tailored ...view middle of the document...

Although our 4th quarter net income dropped quite a bit, we believe that once our new corporate strategy is fully realized, we will become the benchmark for the Cereal industry.   Along with our credit rating, our constant increase in stock prices is one of our strongest points that reflects our stockholders’ confidence in company’s performance level, which ties back to our AAA credit rating.

The Initial Strategy
Prior to the simulation starting, our team decided to produce 1 kg of Nut, Blueberry, and Raisin; and 500 g of Strawberry, Original, and Mixed Fruit. The 1 kg of Nut, Blueberry, and Raisin were our highest selling products in the practice round whereas the 500 g of Strawberry, Original and Mixed didn’t sell as much unless the prices were cheap. We decided to keep product designs at the minimum requirement because it will keep our costs low while hopefully leading to a higher profit with our products sold. As for our production strategy, we decided to reduce batch size and lower setup times to be able to have more products available to market. With more products available, we were hoping to be able to get it out to the market the fastest, which would lead us to have most profit out of the rest of the companies. Our team decided not to start out marketing any products in the first quarter just to see how it would affect our sales. Based on the products selling after the first quarter, we decided to market on products that took a long time to sell, such as Nuts and Blueberries. Our pricing strategy initially was to look at the average price of the raw materials and priced the product according to the data. We thought the average prices would give us a better idea of how to price the products rather than using the forecast method because of the fact that we were lack of sales data at the beginning. Our pricing strategy worked for the first three quarters, but by quarter four, competitors drastically cut prices way below cost of production to clear all inventory . In order to gain market share in fierce competition, we followed market price, and this led to our drastic decrease in our net profit from 44% in quarter 3 to 17% in quarter 4. However, our market share increased from 11.2% in quarter 3 to 13.8% in quarter 4, which justified our pricing strategy.

We set our quarterly profit goal to 1.4 million because we believed this would allow us to maintain the highest profit margin while still maintaining higher-than-average market share. In the beginning of the last fiscal year, an aggressive gross profit margin goal had been set; according to 95% of the confident level, our gross profit margin was 40%. By the end of the fourth quarter, we over achieved our goal with 55.3% yearly gross profit margin, and recorded highest gross profit margin of 66.7% in the first quarter.

Initially, we set our market share goal at 15%, which we believed that 4% above the average market share of 11% would be a reasonable goal for our company. By the...

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