1. Susan Becker Shannon Clark Stephanie Bornbach
ERIE
Susan Becker
Shannon Clark
Stephanie Bornbach

2. Overview Rounds 1 & 2- Going Great
Rounds Government: We need a Bailout!!
Rounds On Track Again
Introduction of team members: Susan Becker, Stephanie Bornbach, and Shannon Clark.
In the beginning of the simulation our company started off well in rounds one and two. Our profits were in the top two for these rounds. Eat, our low tech product, was also in the top two spots of the market share at 17.2% for round one and 15.2% in round two. Our stock price for rounds one and two were also in the top two for stock price. Overall in these two rounds we had the highest return on assets, second highest return on sales, and our return on equity was in the top two for all of the teams competing within our class. In these rounds we had a good idea of where we wanted our products to be within the high and low tech market circles. We placed Eat in the center of the circles allowing room for it to gradually move through the market. Eat did well and was one of top sellers and was also able to sell to both markets in the beginning.
In Rounds three, four, and five we took a turn for the worse as one of our products did not sell. We had a total net loss of about 13 million total for these three rounds. Our stock price also decreased drastically going from about $ down to $1.00 at the end of round five. Our return on equity was negative for these three rounds as well as our return on sales and our return on assets. Our market share also decreased down to about 10%. In round three we built capacity for our product Eli to come out in round four. However, we placed Eli out of the circle thinking that by the time the product hit the market it would be where it needed to be in the circles as they moved. However the placement of Eli is what made us take a turn for the worse. We over estimated our sales and Eli did not sell as well as we thought because it did not sell any in the first round that Eli was entering the market. This is what made us have a large amount of debt and our decrease in profits.
In rounds six, seven, and eight things started to get better. We started to make profits instead of losing money and started digging ourselves out of the hole with profits totaling about 28 million combined for all three rounds. Our stock price jumped up in rounds six through eight with a total increase of about $ Our return on equity also increased and was the highest in round six at 101.7% compared to the other teams 22%. Within this we also received a return on equity at number one out of all of the two year schools. Erie’s return on sales also returned to positive number compared to the negative ones we had from the previous three rounds. Our return on assets was average in these rounds compared to other teams. Also our market share increased back to the top two spots of our class teams. We did better in these rounds as Eli started selling and we researched and developed our products to keep up with the demand of the market. This helped our profits grow and got us out of the hole because we were able to sell our left over inventory without taking a bigger loss on Eli.
Overall our team had some major highs and lows which allowed us in the end to make a profit.

3. Original Strategy Differentiator
The definition of the differentiator strategy is to seek to create maximum awareness and brand equity. This means Erie needs products well known as makers of high quality and highly desirable products.
To maintain Erie products as differentiators we produced products in both the low tech and high tech segments. We started out with Eat, which began in the high tech segment, but sold to both high and low tech markets. This product then moved through the circles to end in the low tech segment. When it moved out of the high tech market and resided only in the low tech segment we had reached the desirable age for low tech market and were able to keep it at low production costs because of the levels of automation. This was our money maker product because we continuously had contribution margin around 40% for this product round after round. Also this product sold in each round and was desired.
Eli came out with product requirements that were ahead of the high tech market wants and then became on the leading edge of the high tech market. This product remained in the top products for the high tech market because we continuously did research and development to make the requirements on the leading edge and to keep the product highly desirable in the market.
Every round we researched and developed Eli to keep it on the leading edge of the high tech market and ahead of other products. Eli was continuously ahead of the other products in the high tech market in product as far as product requirements go, but because it was too far ahead of the requirements of consumers, Eli was continuously ranked number two in the market from the customer satisfaction surveys.

4. Mission Statement
Erie is going to have the most well-known product in the low-tech market segment that is also reliable and meets the customer’s needs.
How well did we stick to this?
Erie developed the first product, Eat, to start in the high tech market and move through the preference circles to lie in the low tech market. Once Eat had reached the low tech market we researched and developed just enough to keep it in the circle and around the right age for customer wants. Each round we had good accessibility and customer awareness for Eat. Eat sold out in most of the rounds, or had very little inventory left.
In addition to this we added Eli, our high tech market product, and within the second round of having both products on the market we had 100% customer awareness.
Eat continuously met the customer’s needs, as well as being a reliable product. Eli took a few rounds to meet the customer’s needs, but once it did Eli was among the top products for high tech market.

5. Market Segments Low Tech High Tech
Throughout the simulation we had consumers from the low tech market buying our product every round. Although Eat started out in the high tech market, it was still within both circles of customer preferences and able to sell to both markets. As the simulation advanced Eat did move through the circles and sold primarily to the low tech market. To manage the low tech market segment we kept the product specifications of Eat around what the low tech customers wanted, as well as doing very little research and development so that Eat would be around three years of age as well.
To maintain the high tech market Erie developed Eli and planned for it to come out on the leading edge of the high tech circle. Unfortunately, the circles did not move as we had planned and Eli was actually out of the circle when it was developed. To fix this error Erie changed the product specifications and made it directly on the leading edge of the high tech market. From this point on Erie has stayed on the leading edges of high tech and sold to consumers. Research and development was done every round to keep the age down as well as maintain customer wants and preferences on product specification.

6. Critical Rounds Round 3 Round 4
In round 3 we had planned to have a high-tech product, which was Eli, come out. This round was critical because we had made Eli too advanced for what the customers wanted and it was outside the bold circle of customer preferences. Because of this Eli didn’t sell and Erie took a huge loss, the money invested was wasted, resulting in a $15,382,701 EMERGENCY loan.
That was the beginning of a downward spin for us. That got us in a deep hole that we had to dig ourselves out of.
Round 4 was another bad round for us, because Eli was still too advanced for what the customers wanted. At the beginning of the round Eli was just outside of the circles for high-tech. Since the circles gradually move throughout the round we though that by June Eli would be what the customers wanted. To our disadvantage the customers didn’t buy our product because since Eli wasn’t in the circles when the round started it couldn’t be sold during the round at all. That was a risk that we shouldn’t have taken. Because of this we needed another EMERGENCY loan of $16,466,521.
But because of these rounds we learned that you need to make sure that your product is what the customer wants or you will end up needing emergency loans.

7. 4 Year Projection
2018
2019
2020
2021
2018: We would buy 100 units of capacity for Eli so that we can manufacture more and thus sell more. Also Eli will be ahead of the other products in the high tech market. Research and development is also made in Eli to decrease the age of the product and increase sales. Mainly we are looking at increasing the mean time before failure to Eli will be about .8 years old when the changes are made and since it will come out around May, Eli will be about 1.5 years at the end of the year. We will also start the research and development of a new product, Ebenezer. This product will also be a high tech product and will come out in Since we have decreased the research and development cycle time by 40% due to investing in total quality management, there will be less of a cost to develop Ebenezer because less time will be spent on research and development. Also material costs have been reduced by over ten percent as have labor costs. Over the rounds demand increase has risen by 13% so we believe that a new product by Erie will be a hot commodity. We will continue to invest in total quality management to maintain reducing costs. To fund the development of Ebenezer we will continue selling Eat and Eli, as well as take out a long term loan. Also 50 units of capacity will be sold on Eat to raise funds for the purchase of more capacity for Eli. Eat will be 4.3 years of age.
2019: Since Ebenezer will be coming out next year we will buy 300 units of capacity for this product. We expect that the decisions for 2018 will have raised stock prices as well as the demand for our products will have decreased and more products were sold. There is no remaining inventory in Eat or Eli, and both products have stocked out. Again research and development will be made for Eli to keep consumers wanting the product. This will reduce the age to .7 years old when it comes out and about 1.4 years old at the end of the year. A little research and development will be made for Eat, so that we do not lose the age. The new age for Eat will be around 2.1 years of age, while on the market and be 3 years old at the end of We will invest more money in total quality management to continue reducing material and labor costs, reducing research and development cycle time and increasing demand. Money will also be spent on training employees and recruiting costs to keep high employee productivity and low employee turnover. During this round 100 shares of stock will also be bought back, which will be financed through profits.
2020: During this year Ebenezer will come out in the high tech market with an age of zero! Ebenezer will also have a product price of $45 and product specifications within the high tech circle. Ebenezer will be a success and sell out, both customers will most likely be disappointed that there was not enough manufactured. Since we only had 300 units of capacity for Ebenezer we were only able to produce 600 units. To obtain more sales for Ebenezer we will purchase a capacity of 200 units. To fund the capacity purchase we are obtaining a small long term loan. Also, money will be spent in the promotion and sales budgets of marketing to obtain high customer awareness and accessibility. We will not need to invest a large amount because we do have two other products that we are spending money on for marketing. Again we expect stock prices to continue to rise, and with the money made from sales, we will reduce some of our debt, as well as buying back 150 shares of stock. Since we are both obtaining a long term loan and retiring some of the older loans we expect our leverage will stay around the same amount. Eat will begin this year with an age of 3.1 and be in the perfect position for low tech consumers to desire the product. Eli will be .7 years old once the research and development is complete and up to 1.5 years at the end of the year.
2021: During this round research and development will be done on both of the high tech products. We expect to produce 1200 units of Eat, 1600 units of Eli, and 1000 units of Ebenezer. Since research and development will be done on Eli and Ebenezer the ages will also be shortened. Eat will begin the year with an age of 4. Eli will begin with .6 years of age and Ebenezer will only be .5 years old. The profits from sales will cover all research and development costs. Erie will invest in total quality management, and the savings from reduction in material and labor costs, reduction in research and development life cycle, reduction in selling and administrative costs, and the increase in demand will cover the cost of investing. Erie will also buy back 124 shares of stock during this year. This purchase will also be financed by profits from sales.

8. Pro forma Stock Price
This slide shows that over the course of the next four years we expect our stock prices to grow a little less than $40, which is an average of about $10 per year. In 2017 our stock price rose over $26 and in 2018 our stock price rose over ten dollars so we believe that this chart is realistic. The decisions we are making in adding a new product, amongst other company decisions, will increase stock prices.
While we expect our stock prices to continuously raise, we will attempt to refrain from selling stocks unless we are in desperate need of the extra money, which we do not expect to occur. However, we will pay out dividends (a reasonable amount) so that stockholders will be satisfied they are making a return on the investment they made since they stuck by us when Erie was taking a downfall in most areas. As the earnings per share increases we will also increase the amount we are paying in dividends, and since we are buying back stock within the next four years, we will not have to pay out to many different shareholders. Dividends of no more than 10% of the earnings per share will be paid out each year. Currently Erie is paying more than the 10% maximum, but it is also the first year that Erie has paid dividends in several years. We expect that once the shares are bought back (100 in 2019, 150 in 2020, and 124 in 2021), Erie will have 2,075,550 shares of stock outstanding, which will help the cost of paying dividends to shareholders low, thus allowing us to invest more in the company and increase profits.
The majority of the company will be financed through debt rather than equity, which will help the leverage of Erie.

9. Pro forma Net Profit
This slide shows our expected net profit over the next four years. With the addition of a new product our sales and profits will increase. We believe we will have profits from Ebenezer because of the investing we have done in previous rounds and in the next four as well. Costs will be minimized and efforts taken to keep them low, thus increasing profits and contribution margin.

10. 5 things we learned Price versus costs Product customer wants
High employee turnover
Capacity to match demands
Stay one step ahead
We need to make sure that the price we are charging for our products is always higher than the costs of making the product. In round five we were losing over $2 for every unit of Eli that we sold.
Another thing we learned was that we need to make sure that we had products the customer wanted. When Eli first came out on the market it was too advanced for the consumer preferences and thus did not sell at all.
Overworking employees leads to a high turnover rate, thus costing more in separation costs and the hiring and training of new employees to fill those positions. It also led us to low productivity indexes because our employees were unhappy with the working conditions.
In several of the rounds we were unable to sell to our potential because we did not have the capacity to produce as much as what was demanded of us. This resulted in lower customer satisfaction ratings because we were stocking out constantly.
In the future Erie will stay aware of what the competitors are doing and continue analyzing them to stay one step ahead of them and keep highly desired products.

11. To do differently in the future…
Positioning of Eli
In the future we would make sure that Eli is positioned well within the circles upon first entering the market so that it would sell and make a profit, rather than having large amounts of inventory left over. Having such large amounts of inventory cost us not only in the warehousing of the inventory, but we were losing money we had spent to research and develop it and get Eli where customers wanted it.

12. Team Performance Strengths Financial Production R&D Marketing
We performed well as a group because we all have worked together on group projects in the past. Our schedules, both academic and outside of school, lined up well. We were able to set aside time every round to work on the simulation and make decisions, that worked around all of our schedules and didn’t leave anyone left out.
Also we worked well because as a team, we discussed all of our decisions. When there was disagreement we were able to challenge each others ideas, and not afraid to make new suggestions. This helped us lead to better performance overall because we were able to get different perspectives on things we may have missed when making decisions.
Also we all respect each other and worked together to evaluate ideas to see which ones were the best decisions to make. We also worked together and when things did not go as planned, which occurred in many rounds, we did not get upset with each other and point fingers to place the blame. We moved on in a new direction and worked to fix our mistakes and do better the next round.
Susan was good at determining how all of our financial decisions impacted our company’s performance. She was very helpful at knowing were to spend our money and how to get us out of debt in rounds 4, 5 and 6.
Steph was great at determining how much capacity we needed and also how much we needed of our products we needed to produce. She made sure we had enough capacity each round to satisfy production requirements. Also she was able to see where it was important to invest money on employee training and recruiting for better employee productivity. Steph is also the one that started the investment in total quality management, which helped Erie a lot because towards the end of the simulation the cost of investing in total quality management was more than covered by the savings we received in those areas.
I (Shannon) did the estimation of how many units of each of our products we were going to be able to sell. I also dealt with how much to spend on promotion and sales budgets to maximize customer awareness and accessibility.

13. Weaknesses Key employee taking leave of absence
Unexpected leave of absence.
Difficulty explaining decisions to each other
Susan had prior commitments in Florida so she was gone for two weeks. Although we knew she was not going to be here we did not plan out our decisions very well before she left, which resulted in a huge financial distress.
I was gone also for the same week due to an unexpected illness which left Steph all by herself. Unfortunately, Steph plays better with others so she did not have a good experience during this round.
We all had an understanding of the game from a different perspective and it was hard to explain our thought processes to each other. As we were making decisions it was hard for each of us to understand all aspects of the game. It would have been helpful if we all understood the decisions we were making in the beginning of the game instead of the middle or end.

14. Critical Situations Eli- rounds 3, 4, and 5 Missing Team Members
Round Six –Losing Money
One of our critical problems we faced as a team was the decisions we made surrounding our high tech product, Eli. In round two we started the research and development and we planned for Eli to enter the market in round four. However we did not place Eli in the correct place in the circles so Eli did not sell in this first round (round four). As a team we had to decide whether or not to keep the product or to research and develop it. We did not always agree on this product and had to discuss it as a group and also ask for advice from Kim before we made decision of whether or not to keep the product. We used our class time and also called each other if any new ideas came up. In the end we all agreed to keep the product and make it better so that it would sell in future rounds. To do this we again research and developed Eli, putting it within the bold circle and on the leading edge. This made Eli off to a slow start since there was still a large amount of inventory left. In the end Eli did end up selling well and we brought ourselves close to being out of the hole, which we were able to completely come out of the hole in the next round (round 7). Overall this product was ahead of its time and our original idea to introduce it outside of the circles to slowly move through the market did not pan out as well as we wanted it to.
Our second critical situation we faced was in rounds three and four. In round three one of our team members was on vacation and two of us made decisions which were critical because this is where the simulation started to go bad for our team. This was the round that Eli did not sell and entered the market being outside of the circles. Then in round four two of our team members where not here which made it very difficult for Stephanie because we were not there to contribute our knowledge to help her make decisions on the financial and marketing which was not anything she expected to do. As a team we handled when we returned by all investing extra time to dig ourselves out of the hole.
Our third critical situation was in round seven on the decisions we needed to make for round eight. We needed to do well in all areas to be able to place at least 4th in the simulation. We had to make a lot of decisions as a team and agree on them because there was no room for mistakes. This round was critical because it set us up to do well in round eight, and in round seven we were able to fully come out of the hole and place in the top ten in many areas throughout the different two year schools.

15. Thanks!
In conclusion, we would like to thank our stockholders for investing in Erie and showing continual support through the ups and downs that the company has had. We are working hard to earn our stockholders a return on their investment and appreciate the support we have had.