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.