Analysis 1

Running Head: TEAM DISTINGUISHED IMAGES ANALYSIS

Strategic Analysis

MBA 6190- Dr. Stephen Tvorik

Team Distinguished Images

September 24, 2009

Amber
Belinda
Michael
Andrea
Myra Roldan

Introduction
 Analysis 2

The Glo-Bus application was a very challenging and intriguing exercise.

Starting out in the simulation, our team was positioned well with a good

strategy and several strengths in our first couple of years. Despite this

strong start, we struggled to adapt to the changing market conditions and

adapting our strategy accordingly. Ultimately, we gained several new

insights that should help us each in our future strategy formation and

execution efforts.

Strategy

As a co-management team we quickly formulated our plan of attack.

We decided to plan weekly phone conference with all the managers of

Distinguished Images. We felt that this would be the most effective

opportunity for our management team to talk through our strategies and

collaborate on a plan of attack. By doing this, we were able to voice our

intentions for the company and give our input as individuals to reach toward

the vision of the company as the weeks progressed. We also adopted our

company vision statement:

“Distinguished Imaging strives to be the global market leader in

reliable and technologically advanced digital cameras. We are focused

on meeting our customer’s needs for advanced technology products

and seek to be the 1st choice in digital imaging technology.”

By having our vision statement early on, we were working to “be unified into

a coordinated, cohesive effort” (Thompson, Strickland & Gamble, 2008,

p.15).
 Analysis 3

From a strategic perspective, Distinguished Images initially sought to

offer quality products at a value price point. Our goal was to use the “best-

cost provider” strategy where we would provide good-to-excellent product

qualities at a low price point (Thompson, Strickland and Gamble, 2008).

Our goal was offer a quality entry-level camera at a low price point and a

higher quality multi feature camera at a value price point. Later we would

adjust this strategy to be a combination of “low-cost” and a “focused market

niche differentiation” strategy.

Strengths

Distinguished Images then began to collaborate in order to form our

initial action plan. We saw the quickest way to achieve our best-cost

provider strategy this goal was to invest in a high quality workforce and

focus on employee productivity. We sought to pay our employees at the

high end of the pay scale and reward them in exchange for reaching a higher

level of productivity. Higher productivity would improve product production

and quality expecting to contribute to a lower warranty claim rates.

As a result of this logic, for the three years we did not invest a lot in

our warranty periods as we expected the quality of our products maintain

lower warranty claims. In hindsight, we may have missed a great

opportunity to offer an extensive warranty programs with a lower claim rate

as a result of our quality products. Additionally, we implemented a corporate

citizenship program by increasing our employee conditions and community

efforts in a year by year basis.

 Analysis 4

As part of our initial product strategy, we sought to first focus on

offering a strong number of camera models and invested initially in

developing the features of our entry level cameras. We believed that this

would help us gain a strong market share. We chose not enter our multi-

feature cameras in the Asian market and instead focus our efforts on

markets where we had greater market share. We expected that would help

prevent spreading our resources to thin. In hindsight, we may have

benefited from investing in the multi-feature cameras more aggressively up

front and fully participating in the Asian market from the start. We could

have leveraged the development needs over a few years to help us produce

a high quality multi-feature camera with strong profit margins.

Weaknesses

In our second year, we made strides in creating a better differentiated,

stronger quality multi-feature camera. However, we also lost ground in our

entry level camera, no longer having the lowest price point. We continued to

see that our competitors had stronger warranty programs. In Year 7 we

chose not to increase our warranty programs, adhering to the strategy we

outlined in Year 6.

Years 8 & 9 was the beginning of our downward trend. We tried to

continue our action plan to be the high quality, low cost provider of digital

cameras. However, especially after Year 9, we had to begin to be reactive to

the market conditions. We were losing ground and needed to find a way to

re-gain it. We decided that “a sound way to deal with turbulent market
 Analysis 5

conditions is to try to lead change with proactive strategic moves while at

the same time trying to anticipate and prepare for upcoming changes and

being quick to react to unexpected developments” (Thompson, Strickland &

Gamble, 2008, p.242).

We recognized in Years 8 & 9 that we were lacking in our warranty

period for both models and our tech support wasn’t sufficient as compared to

that of our rivals. This caused us to extend our warranty periods and bolster

tech support in these years. Our competitors were also trying to provide a

differentiated product in order to increase their market share.

We started to see our competitors increase their products PQ ratings,

specifically in the multi-level cameras, as well as, continuing to strengthen

their warranties. Thinking back, it seems that we have violated one of

Thompson, Strickland and Gamble’s “10 Commandments for Crafting

Successful Business Strategies”. With our early years successes, we may

have “underestimated the reactions and the commitment of the rival firms”

(2008, p. 262).

Opportunities

Although we started out strong in the early years, but began to lose

ground. As a result, we needed to react to the changing market conditions.

As the exercise progressed, we found ourselves needing to take a mostly

reactive approach. Through our experience, we learned that we shouldn’t

necessarily stick to our original action plan, but that we desperately needed
 Analysis 6

to respond to the actions of our competitors. We saw an opportunity to react

to our competition and evolve our strategy. As a result of our new insight,

we adjusted our strategy half-way through the simulation moving to a low-

cost and niche differentiation strategy. Our goal was to try to maintain our

market share while minimizing costs and maximizing profits. We found it was

important to have a blend of “proactive actions to improve the company’s

financial performance and secure a competitive edge and as-needed

reactions to unanticipated developments and fresh market conditions”

(Thompson, Strickland & Gamble, 2008, p. 9). Although we feel that our

team’s strategic plan was superior, in the end it did not prove to be as

successful as we had hoped for.

Our toughest challenge continued to be how to reduce cost in our

product, while still maintaining a 3 ½ star PQ rating on entry level cameras

and growing our multi feature line to a 4 to 4 ½ star PQ rating. One way we

sought to improve our PQ rating was to increase our R&D expenditures. As it

became increasingly clear that we did not want to cut cost using staffing

reductions; therefore, we chose to increase our price point for the multi-

featured models. Our capital structure continued to be a source of success,

as our debt to equity ratio was better than industry average

Distinguished Images continued to strive for a low cost entry-level

product, while maintaining or improving upon our 3-star PQ rating. We

sought to reduce our advertising expenditures in Latin America and North

America. We redistributed these monies for improved R&D on our multi-

 Analysis 7

feature products. We also added features to the multi-feature line in order to

enhance that line’s PQ rating, which we continued to pursue as its

differentiator. “The key to successful strategy making is to come up with

one or more differentiating strategy elements that act as a magnet to draw

customers and yield a lasting competitive edge”(Thompson, Strickland &

Gamble, 2008, pg. 7).

In years 11 and 12, the organization, for the first time, chose to utilize

outsourcing, overtime, and additional employees to meet our production

goals. Up to this point, Distinguished Images did not employ sourcing as

part of its production model. This strategy led to some incremental

improvements in our return on equity as well as our earnings per share. We

also achieved some cost reduction in our product line. In year 12, we also

decided we needed to raise capital by issuing stock.

We then decided it was time for a small strategy revision of

“retrenching into a reduced core of products” (Thompson, Strickland &

Gamble, 2008, p. 258). We decided to increase our P/Q rating in the multi-

feature segment by gradually lowering our number of models but drastically

increasing our quality and features. Beginning in Year 10, we decided to

increase our R&D expenditures and use camera quality as a differentiator.

According to Thompson, et al, (2008), there are a number of ways to

differentiate your product from your competitors, including, higher quality,

wider product selection, and added services. Distinguished Images chose to

employ wider product, and higher quality. We continued to offer a strong

 Analysis 8

number of entry level and multi-level cameras. In order to combat our low

number of stores, we increased the number of wholesalers that would sell

our product. We increased our advertising in some regions, while decreasing

our administrative/technical support. We redistributed our expenditures for

our technical support to put financial emphasis in the proper region. Our

warranty claims were a strong point; however, we continued to lag behind

industry indices in the warranty period per offering.

Threats

Reflecting back on our first two years, our team was initially was well

positioned. We had several areas of strength which forced our competitors

to rapidly adapt. The challenges started to arise when our competitors were

able to out execute our plan. Specifically, in later years we saw a strong

competition from team C who had the strongest multi-feature camera at a

value price point. For our product strategy, we offered more models in the

multi-feature camera at a lower price and slightly lower quality. However

our rivals took the stance of offering less multi-feature models at a better

quality. This strategy proved to be successful for our competition and

detrimental to us. Thompson, Strickland and Gamble (2008) outlined one

strong offensive strategy as “offering an equally good or better product at a

lower price (p. 178).” Although this was a strategy we were striving to

execute, we were ultimately out executed by Team C.

Recommendations (some initial thoughts)

 Analysis 9

Distinguished Images closed year 12, with a very low EPS, very low

ROE, but a credit score of A- and an image rating of 77. If we were to

continue the exercise, Distinguished Images would need to engage in one

more year of raising capital by issuing stock. As a team we had also decided

that we would need to enter into a strong recovery mode, taking it back to

basics.

In year 12, we cut back on our number of models in both the entry-

level and multi-featured camera, in year 13 we would have to concentrate on

improving the rating of our entry-level camera from a PQ rating of 3 to a PQ

rating of 4. We would also need to maintain our PQ rating of 5 in our multi-

featured cameras. In year 14, we would need to begin investing more in

advertising to gain market share and continue to closely monitor our price

point. We would also need to ensure we kept our labor costs and our

administrative costs low , as high labor costs and administrative costs have a

negative impact on our overall profitability and rating.

• Still like the generic strategy we changed to-low cost entry level,

differentiated multi-feature

• Suggest reduce number of models to invest in quality for multi-feature

camera features

• Maintain quality entry level camera and low price point

• Control our costs paying attention to our internal metrics vs.

comparing mostly to external. Each company is different and we need

 Analysis 10

to “mind our own business” to ensure our ratios make sense for our

cost structures. We may also want to leverage lower cost outsourcing

to build our products and minimize expensive overtime.

• Infuse additional capital investment through stock offering to develop

multi-feature models.

• Once we are in a stronger cash flow position, I would then seek to

slowly re-invest in corporate citizenship efforts.

Reference
 Analysis 11

Distinguished Images closed year 12, with a very low EPS, very low

ROE, but a credit score of A- and an image rating of 77. If we were to

continue the exercise, Distinguished Images would need to engage in one

more year of raising capital by issuing stock. As a team we had also decided

that we would need to enter into a strong recovery mode, taking it back to

basics.

In year 12, we cut back on our number of models in both the entry-

level and multi-featured camera, in year 13 we would have to concentrate on

improving the rating of our entry-level camera from a PQ rating of 3 to a PQ

rating of 4. We would also need to maintain our PQ rating of 5 in our multi-

featured cameras. In year 14, we would need to begin investing more in

advertising to gain market share and continue to closely monitor our price

point. We would also need to ensure we kept our labor costs and our

administrative costs low , as high labor costs and administrative costs have a

negative impact on our overall profitability and rating.

References

Thompson, Jr., A.A., Strickland III, A.J., & Gamble, J.E. (2008). Crafting and

executing strategy: The Quest for Competitive Advantage: Concepts

and

Cases (16th ed.). New York: McGraw-Hill.