Maximizing IT Profits & Minimizing Debt - A Simulation

Computers & TechnologyTechnology

  • Author Paul Guenther
  • Published September 16, 2010
  • Word count 716

In an effort to maximize sales in the information technology realm (as well as not compete with ourselves), we believe that is makes most sense to include only one product per segment. As of this moment, we only have products in the traditional, high-end, low-end, size and performance segments. We have, however, agreed to switch out our old performance unit with a new one, which will be cutting edge, and will generate more revenue. By the end, we plan to have changed one or more products in each of the segments, rather than over flooding the market with multiple technology options per segment. We believe that this will give us a competitive advantage.

Capacity and automation levels, will of course, change every year in each segment. We think it's important to increase automation year over year in an effort to reduce long term debt and costs. We will continue to make adjustments to the automation process as each new year approaches, with the goal of becoming almost fully automated in the future. Capacity is something else that needs to be increased if we truly want to sell in volume, which we also feel is extremely important to the bottom line (especially in the information technology sector). We will continue to work in increasing capacity over the next few rounds. Increasing capacity and automation levels, in the long haul, should work in our favor with regards to total revenue.

Investments to this point have not been as great as they could have been, in my estimation. I think it will be important to invest a little more each year to keep everything up to date and running efficiently. We have been having issues with plant utilization and employee productivity, and I believe that increasing our investments might help in aiding these problems. All in all, I'd expect to have at least 5-10% of our total revenue re-invested by the time the final round approaches. I also believe that these investments will help to improve our R&D and long term profits.

The final financial structure will probably look much different than it does now. For one, we will likely have more stock issued, as we will continue to increase the stock year over year to obtain capital for future innovation and design. We have hopes that our debt, long-term especially, will continue to decrease year over year. We believe that future profits will make it possible to us to payoff current debts and avoid future loans. With this said, retained profits will also increase over the next four years. I would anticipate that by the end of the simulation, our debt will be lessened significantly, with our stock and retained profits at a level much higher than they currently are. Paying off our debt will help to reduce interest costs, and of course, add to our bottom line. Keeping the vast majority of the profits is crucial for operations and R&D, but we will certainly pay a portion to the share holders as well - in the form of dividends. Keeping the shareholders happy will keep them onboard, which will ultimately help the stock price consistently rise as demand increases.

I wouldn't argue that we are necessarily biased towards either, but if one of the two, it would be differentiation. Costs and price-point have not been a big issue to us thus far, as we have kept our prices fairly high within the range of acceptable designations. We believe that we should make as much of a profit as we can up front, especially given the inevitable $.50 decrease in price per product, which comes about each year. Differentiation will continue to become more important for us with each passing round, as we remove some of our older units from specific segments, and replace them with more specialized and advanced units that we are currently brainstorming for. While some products can last for decades, we believe that information technologically dependant products, such as sensors, need to be continuously updated and improved. Much like the original high-cost MP3 players of the early 2000's, price will not be an issue if we show true differentiation and take a completely unique approach. We believe that most people will buy on value; when given the option in the information technology segment.

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