Cumulative Net Income and Final Stock Price

Cumulative Net Income and Final Stock Price
From the initial strategy, our team goal was to exceed $ 800 million dollars in cumulative
net income by the end of period eight. In order to accomplish this goal, it was necessary to have
an increase of 35.8% in net income during the eight periods. Strong growth during the first three
periods in the introductory stage of Allround averaging 71.3% growth helped to support the less
attractive periods where investments in period 4 and 6 due to necessary increases in plant
capacity affected Allstar s ability to turn sales into net income. A conservative pricing strategy
that took into consideration inflation, competition and that disregarded brand recognition and
information from growthshare matrix in the initial periods also contributed to the slow growth
cumulative net income. (Insert Graph).
An average growth of 45.5% in the manufacturers sales also helped Allstar to increase its
net income throughout the eight periods. Stronger growth in the introductory stages of the
product that flattens out during the maturity stages supports the thesis that plant capacity
increases affected Allstar cumulative net income. (Insert Graph) As part of our initial strategy,
Allstar heavily increased its Sales Force in the first 2 periods and then again during period six.
Although in the end it proved to be effective, a more conservative hiring approach might have
helped Allstar to increase its cumulative net income. Moreover, Allstar disregarded the
importance of brand recognition and awareness and offered high levels of discounts, although
this strategy helped with sales volumes, it affected the increases in Allstar cumulative net income
(Insert Graph).
Allstar stock price showed an average growth of 20.4% during the eight periods, which
are well above our initial strategy projections of 13.5% growth in each period. Stock prices for
Allround are an indication of the overall strength of the organization and the decisions that
management is making for the organization. Therefore, during period 4 and period 7, Allstar
experienced the highest increases in stock value due to the introduction of a line extension
product for children, Allround+, and a correction in the strategy regarding the comparative
product in the newest line extension Allright.
Although Cumulative Net Income and Stock Price for Allstar was above our projections
and surpassed our goals, overspending in Sales Force in the initial periods, as well as in
Promotions Allowances and capital investments to keep up with capacity concerns, represented a
hurdle to the Net Income and Stock Price.
Period nine
For Period 9, Allstar should continue to spending and cutting strategies. Spending trends
in advertising and promotions should continue for all brands, with more emphasis in newer
brands such as Allround+ and Allright as well as with introductions of new line extensions that
address the other symptoms that consumers report. As sales units for Allround, tend to flatten
over time, there are no plans to discontinuing until the product enters into the decline stage.
Moreover, since the product is still showing signals of a high market share according to the
growthshare matrix, Allstar should continue to increase its price around 3.5% annual. This price
increase will still generate cash for the organization even though sales volume will diminish over
time. Furthermore, the cutting trend for Allround promotions should continue, and only product
display promotion should remain. Since Allround counts with brand and product awareness, this
reduction in the promotion will not affect sales numbers for the organization.
A more aggressive pricing strategy for Allround+ and Allright it is necessary and will
lead to continuing to increase prices for these products at least 6.63% per period as well as an
increase in the advertising budget for this two line extensions. Our forecast for period 9 will be
that Allround+ and Allright will contribute with at least $ 200 million dollars in sales while,
Allround should be around $ 600 million dollars.
Reflection on your initial strategy to your results
Our team established a very conservative strategy regarding prices from the very
beginning, that hindered our overall performance in the later periods of the simulation. This
strategy in part based in the fact that we did not know how the market will react to price
increases. Looking back, only during the introductory stages of the product we should price
conservatively as time passes and the product enters into a more mature stage, the brand
awareness and effectivity of the product should help to support price increases. Another
important factor to consider in our initial strategy was sales force. The sales force is one of the
highest expenses for Allstar, therefore increasing sales force numbers in the early stages, perhaps
put an unnecessary weight on the budget. In retrospective, a more gradual approach to increasing
the sales force might have a better impact on the budget in early stages of the simulation.
There is plenty of information available on the simulation, from statistical data,
marketing theory, general and technical information about the products as well as customer
perception about them. Balancing all this information becomes a task on its on, however, the
more experience and feedback our team gained with the simulation, the easier to incorporate all
the information available into a period decision, whether it was price, promotions or advertising.
Understanding all this information was key for our team overall performance, however,
in our initial strategy this information was not interpreted or used correctly to formulate a more
accurate and specific initial strategy which will include some changes in pricing strategy, sales
force allocation, better promotion numbers, and more efficient promotion allowances.
In all likelihood and although our team initial strategy could have some improvement as
well as our periodic decisions, especially during period 2 and 3 where Allstar did not have any
growth in net income, we consider that our team decisions throughout the eight periods proved to
be appropriate and our stock price progression and cumulative net income confirms that we were
on the right path to achieve and surpass our goals for the Allstar organization.

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