Saturday 31 May 2008

Week 6

Since we already submitted our decision and revised it thoroughly last week, we didn't have much to do that day besides work on our report. The new results for Year 4 Quarter 1 were out on Sunday 4:12pm (although the estimate is Monday 9am.) I was exhausted from teaching my younger brother last night (and working really late on the blog,) so I left at 4:07pm (my driver was already waiting for me for about 15 minutes,) wish I waited five more minutes to get the results.

As I received the reports, I was relieved to know that non of the salespeople resigned; it was a busy quarter, and I expected them to be very tired and some leave in spite of the increase in salary. It must mean that they were all very satisfied with their salaries, and so we decided not to alter the salaries (except for Sereno with an increase of 500 Pesos,) and just increase the commission slightly as always. We wanted to have a total of 15 salespeople everywhere (and 16 in Merica 2, our hometown) and so we hired appropriately. Our price was already a lot more than our competition, so we didn't change it or our spending in advertising either. We were very surprised in frustrated at the fact that we didn't get a new model, even though we invested a lot in the previous quarter, so we invested $180,000 in R&D and $100,000 in training.

We were running very low on money, I was left with the choice of buying back 500 stocks and not paying any dividends or investing in CD's, or to issue $1,000,000 worth of bonds and buyback the stocks, pay dividends and invest a bit in CD. I left the decision at not issuing bonds. However, I was thinking about it all day, and the next day at college, I talked to my fellow partners, and discussed that I wanted to change the decision and issue bonds. They trusted me in whatever decision I make and so I did issue bonds (and also increased dividends to $350,000, and invested $400,000 in CD's.) We also started a 2nd shift on two lines that will start production next quarter to meet our expected sales in the 4th quarter of the year.

When our report for Year 4 Quarter 2 was out, I noticed that my projected balance and actual balance were very different. It bothered me and I wondered why. After revising it thoroughly, I noticed that I forgot to change the beginning cash balance from 1105 to 412. That was a very critical mistake, we were very lucky that we made a lot more money that expected, otherwise, we could've been on the verge of having an emergency loan. Once again, money was tight, we decided to maintain the same price, advertisements, salaries, and even commission. That is because we finally obtained the new model and started producing it and moved to Quality 3 Features 3. Our cost of production increased by a bit over $1, but due to the customers thinking we still sell the old model, we kept it under the same price tag. I decided to issue more bonds to buy back the ever increasing stock prices. This time, we only managed to buyback $300,000 worth of stocks and paid merely $50,000 dividends.

Thew 2nd shift is now ready and is oparational, and we utilized it immediately. We decreased our investment in R & D and training too due to our budget this quarter.

Saturday 24 May 2008

Week 5

Since we already finishing uploading the decision for the previous quarter last week Thursday, Mrs. Durdana gave us tips on our upcoming oral defense and helped us prepare for it. We also updated our report; we all typed down our job descriptions and duties in each department and to the organization as a whole.


I printed the new reports for the Year 3 Quarter 4 on Tuesday. Astonishingly, all our units were completely sold out in Mericas 1, Merica 3, and Sereno, and we were left with 43,000 units in Merica 2. Our Marketing managers didn't anticipate such a huge amount of sales in those areas (although we did increase sales price by $1 in all those areas, except for Sereno which remained the same.) We noticed that two of our competitors obtained model 3 this quarter, and after looking and their R& D, we noticed that both of them are the only ones that invested over $500,000 this year.

We needed a new model if we are to achieve our goals of aiming to be the very best with most up to date features and quality. In order for us to meet the assumed requirements for a new model, we invested $190,000 in R & D. A salesperson resigned in Merica 1, we debated about the cause of his resignation. We all agreed that he either left because he felt underpaid, or because he was greedy and wanted a higher pay (although this was an increase from the previous quarter.) So we decided to higher two new salespeople in Merica 1, and also increased the salaries and commission in Merica.

As always, we paid dividends, but due to us having a tighter budget this quarter, and the fact that the dividends we pay are already quite high, I was left with the choice to decrease the dividends by $50,000 or keep it at $300,000. I decided to keep it at $300,000, because if we decrease it, our shareholders may interpret it as that we aren't doing as well as we were before.
As always, we decided to buyback 500,000 shares. With our shares price soaring, depending on our cash next quarter, we may have to issue bonds to be able to buy more shares. I also decided to invest less in CD's ($700,000) because of our lower budget.

The next day, we revised our decisions and forecasts in case of any mistakes inputted or miscalculations, fortunately, everything seems alright, and we hope for everything to go smoothly.

Saturday 17 May 2008

Week 4

On Sunday, we reviewed our reports for Year 3 quarter 2. We also started working much better as a team. Our marketing manager decided to increase the price of our products by $1.01 (to $12,) and we all immediately agreed to the price and implemented it; the price in Sereno was also slightly increased to 85 Pesos. Even with the increase in salespeople salaries two people still resigned, and so we decided to recruit more salespeople everywhere by 1 (except for Merica 1, we decided to hire 3 more there.) We also decided to increase their salaries to $4000 in Mericas and to 12000 Pesos in Sereno. Commissions were increased slightly to adjust with the rising inflation.

The next day, our marketing manager made a sales forecast and decided to order less units everywhere due to the increase in price. The production managers also decided to slightly increase investment in the R&D department and invest heavily in training. By the time they were done with their projections and calculations, I, the CEO and Financial manager, worked on the estimated cash flow and income statement. Once again, we decided to buy back 500 stocks (and will continue to do so in every quarter) and paid $250,000 worth of dividends. After everything was sorted, I suggested that we invest $1,500,000 in dividends, but hesitated and decided to invest $1,100,00 in case of calculation errors and/or wrong projections.


On Tuesday and Wednesday, we worked on all worked on our parts of the report and reviewed everything one last time before submitting the decision.

On Thursday, the new results were in, and so we immediately started working on our parts of the decision making process. After much debate, we decided to increase by $0.50 only in Merica 1 and 3. Advertisements were increased by $5,000 and by 20,000 in Sereno (since this is the busiest season.) More salespeople were hired everywhere except for Sereno and salaries were increased by $250 in Mericas and by 2000 in Sereno. We also increased the commission by 5 cents and 10 in Sereno. Heavily invested in training and R&D, and sales orders were adjusted to better suit the season. I also found a mistake in a formula used in the income statement from the previous quarter and so I amended the error and surely will achieve a more accurate result. Bought back 500 shares and paid 50 more dividends than the previous quarter. Due to a more accurate projection, I also decided to take the risk and invest $1,400,000 in CD's.

Saturday 10 May 2008

Week 3

Our next decision had to be made and uploaded exactly a week after our first decision. We started looking at the results from the previous quarter on Tuesday because there was an event in our college on Sunday and Monday.

Thanks to our investment in the R&D department, we managed to obtain a new model. We decided to produce the new model with features "2" and features "3" in Merica 1-3, and quality and features "2" for Sereno. While the GDP in Sereno is increasing, the income of the people there is lower than that of Merica, and so we decided not to increase the features (which will cost them more.)

At first, Majid, the Marketing Manager, decided to sell our products for $11.50 in Merica, and 86 in Sereno. But after reviewing and finding out that the customers do not know that we are goign to sell a new model, and are actually expecting to receive the older ones, we decided to decrease the price to $10.99 and 82 in Sereno.

I, as the Financial Manager and C.E.O., decided to buyback $500,000 worth of stocks (the maximum limit of buyback in a quarter) and paid $290,000 dividends. I decided to do that to increase our shareholder's wealth, which is the organization's main objective. Later, I created this quarter's expected cash flow and income statement.

I made a big mistake in one of the formula's in the income statement, which caused us to panic because it showed that we will actually lose money this quarter which would have ruined our entire plan. But after carefully rechecking all the formula, we found the mistake and managed to amend it. Also, because of the high costs of producing a new model and increasing the features of our products, the production costs increased tremendously and so I had to decrease the dividends issued to $150,000 and decreased CD's to $1,100,000.

In the long run, we shall go for top quality and features, because the consumers we are targeting is a niche group. With that, our sales won't be as high as lower costing products, but our price will be much more elastic, and our profit margin shall increase. Another advantage is that we won't have to create a new plant to keep up with the production, but we will have to invest heavily in salespeople.

Speaking of salespeople, two resigned in the last quarter, and so we decided to increase their salaries to $3,300 in Mericas and to 10,000 in Sereno, as well as increase their commisions to keep up with the inflation, and hired two more salespeople. We also decided to increase our advertising by $5,000 in Mericas, and increased the advertising in Sereno to 140,000.

Thursday 1 May 2008

Week 2

Over the weekend, Mrs' Durdana has been tirelessly thinking about the decisions me made last week. As she came in class she advised us to reconsider creating a plant at this stage. So we calculated the costs of developing a plant, the training and time involved, and also took into consideration that it will take it three quarters to start manufacturing. Mishal argued that we should stick with the decision and build one now, in that way, we will be able to produce more units. Yaser objected; he said we could that one plant, and the two lines in production should last the year, and if they don't we can order an expansion and maybe even imply a second shift which will both be operational in the very next quarter. The rest of the group agreed with Yaser, and we added that in doing so, we will be able to use the money by investing in CD's and issuing dividends instead, which will ultimately increase the wealth of our stockholders (which is the main goal of this company.)

On Monday, we created a Cash Flow. I, as one of the Finance managers, decided to create it on Microsoft Excel, where it is easier to edit the data in case we need to make changes or amend errors. We saw that in the previous quarter, the company invested $700,000 in CD and they matured at $1,000,000 (which we're receiving.) We decided to invest the million dollars again in CD's and give our shareholders $50,000 worth of dividends. We also took into consideration that Merica is suffering from inflation, and so we decided to increase the salespeople's commission by $0.01 and in Sereno from Lc 70 to Lc 74.

On Tuesday, in Mrs' Susan's class and Mrs. Nickie's class, we were told to create a mission statement and vision for the company. At first, Yaser and I came up with "Wear Audio Art anywhere anytime" the teachers told us that it wasn't a suitable vision, but will make a good slogan. After much debating, Mishal came with the idea of including of the use of technology in the vision, and I came up with it having to be fashionable, and Yaser said it should be comfortable at the same time. In the end, we managed to include them together and created our vision which is: “Our vision is to take headphones to a higher level by combining technology, comfort and fashion.” The order was different at first (fashion, comfort, and technology) but in the end, we decided to list them by order of importance. Our mission statement didn't take long to create, after all, it is simply what our company aims for:“We want to produce a new generation of headphones that reach our customers wants and needs at a reasonable price.”

On Wednesday we inputed our decision at the start of the class. We checked the cash flow and decisions one last time and decided to change a few things. We changed our CD's from $1,000,000 to $1,700,000, and then we saw that if we chose to invest that much, then it will take too much money, and we won't have much left in case of emergency, and so we decreased it eyt again to $1,500,000. We also decided to increase our dividends to $100,000. Later that night, I worked on the financial goals/strategies of the company (without counseling Mohammed, the Financial manager.) I decided that we should always have a minimum of $500,000 in cash, not invested or used in case of emergencies (having more isn't a problem either.) I also decided by the end of year 4, we will have bought back $500,000 worth of bonds (to decrease our expenses) and if we ever need to make a loan, we should issue bonds due to the interest being 2,5% a quarter (10% a year.) I also decided that we should issue dividends ($100,000) every quarter.

However, the next day, after consulting with Mohammed, we decided to change our dividends policy and decided to give away $100,000 worth of dividends semi annually. He also suggested that if our rivaling companies decide to issue shares, then the stock prices will go down, and that will be the right time to buy them (that will also increase our shareholder's wealth.) I also came up with the idea of decreasing the price of our products in Merica from $10.00 per unit to $9.99. That is the "99 cents" strategy that has a psychological effect on consumers. The group agreed and thought it was a great idea, but to be on the safe side, we consulted Mrs. Durdana which told us that the BDS doesn't take into account such psychological factors, and so we decided not to make the change.

Sunday 27 April 2008

Week 1

On Monday, we downloaded the programs "BPG5" and "SmartFTP Client" for the BDS. Mrs. Durdana Rizvi taught us how how to download the files from SmartFTP Client and how to upload the decisions. She also told us how critical it is to upload the right files to the right quarters/area. If we, for any reason mess up, the decision will made will not be taken, and the decision from the previous quarter shall be taken instead.


The following days, we focused on the decisions that we will imply in the Marketing and Production fields.

In the Marketing perspective, we decided increase our advertising in Merica 1 and 3 from $40-$45, in Merica 2 from $46-$50, and finally in Sereno from Lc105-Lc125. By doing that, we are creating more awareness of the existence of our brand, which will in turn boost the sales of our products in those markets.

To further increase our sales in Sereno (because we gain more profit per unit there than in any of the three Merica's) we decided to increase the commission of the salespeople from Lc60-Lc70. We also decided to increase our investment in the R&D from the previous quarter from $72-$80, and increased the amount invested in training new staff from $68-$75.

In the production perspective, we had many arguments regarding how many lines to operate, whether to open a new line, or a new plant, or not (as well as deciding workign the workers overtime or hiring new staff for a second shift.) After discussing the advantages and disadvantages of each, we decided that for this quarter, we will produce 312,000 units, utilizing the six lines provided in Merica 2 and working the staff 42 hours a week (2 hours overtime a week.)

We also decided to construct two new lines in Merica 2, and a new plant with four lines, with two of them being active.

Tuesday 22 April 2008

Our First Meeting

On Sunday, the 20th of April, my group's first meeting was established. It was held in during Mrs. Susan's class. On that occasion, we decided on our brand/group's name. After much discussion, we decided to pick the name "Sound Art" that Majid came up with. We then moved on to creating our mission statement and vision. The group had varied opinions on the subjects, with multiple minds, it's very hard to make a statement that everyone's satisfied with. Hopefully in our next meeting, we will be able to agree on a definite mission statement and vision. This is only the first week after returning from work placement, and each of us is now reading up on his part of the BDS.